Live Oak Bancshares, Inc.

Previous wording

For the three months ended March 31, 2026, the Company reported net income attributable to common shareholders of $27.9 million, or $0.60 per diluted share, compared to net income attributable to common shareholders of $9.7 million, or $0.21 per diluted share, for the three months ended March 31, 2025.

Current wording

For the three months ended June 30, 2026, the Company reported net income attributable to common shareholders of $34.7 million, or $0.74 per diluted share, compared to net income attributable to common shareholders of $23.4 million, or $0.51 per diluted share, for the three months ended June 30, 2025.

Previous wording

Key factors largely offsetting the increase in net income are increased levels of salaries and employee benefits of $3.8 million and income tax expense of $6.7 million.

Current wording

Key factors offsetting the increase in net income are increased levels of provision for credit losses of $2.5 million and salaries and employee benefits of $2.8 million.

Previous wording

•Provision for credit losses decreased by $8.9 million, or 30.6%, to $20.1 million, compared to $29.0 million for the first quarter of 2025;

Current wording

•Provision for credit losses decreased by $6.3 million, or 12.1%, to $45.9 million, compared to $52.2 million for the first half of 2025;

Previous wording

For the three months ended March 31, 2026, net interest income increased $18.9 million, or 18.8%, to $119.4 million compared to $100.5 million for the three months ended March 31, 2025. This increase was principally due to the growth in the held for investment loan and lease portfolio outpacing growth in interest-bearing liabilities, offset by the decrease in average yield on interest-earning assets outpacing the decrease in average cost of funds. Average interest-earning assets increased by $2.06 billion, or 16.1%, to $14.82 billion for the first quarter of 2026, compared to $12.76 billion for the first quarter of 2025, while the yield on average interest-earning assets decreased 37 basis points to 6.40%. The cost of funds on interest-bearing liabilities for the first quarter of 2026 decreased 42 basis points to 3.48% and the average balance of interest-bearing liabilities increased by $1.63 billion, or 13.9%, over the first quarter of 2025.

Current wording

For the three months ended June 30, 2026, net interest income increased $16.1 million, or 14.8%, to $125.3 million compared to $109.2 million for the three months ended June 30, 2025. This increase was principally due to the growth in the held for investment loan and lease portfolio outpacing growth in interest-bearing liabilities. Average interest-earning assets increased by $1.72 billion, or 12.9%, to $15.08 billion for the second quarter of 2026, compared to $13.36 billion for the second quarter of 2025, while the yield on average interest-earning assets decreased 30 basis points to 6.43%. The cost of funds on interest-bearing liabilities for the second quarter of 2026 decreased 33 basis points to 3.45% and the average balance of interest-bearing liabilities increased by $1.31 billion, or 10.7%, over the second quarter of 2025.

Previous wording

The increase in average interest-bearing liabilities was largely driven by funding for significant loan originations and growth as well as maintenance of the Company's target liquidity profile. As indicated in the rate/volume analysis below, the overall increase discussed above is reflected in increased interest income of $20.8 million outpacing growth in interest expense of $1.9 million for the first quarter of 2026 compared to the first quarter of 2025. The net interest margin increased from 3.20% for the first quarter of 2025 to 3.27% for the first quarter of 2026.

Current wording

The increase in average interest-bearing liabilities was largely driven by funding for significant loan originations and growth as well as maintenance of the Company's target liquidity profile. As indicated in the rate/volume analysis below, the overall increase discussed above is reflected in increased interest income of $38.2 million outpacing growth in interest expense of $3.2 million for the six months ended June 30, 2026 compared to the six months ended June 30, 2025. The net interest margin increased from 3.24% for the six months ended June 30, 2025 to 3.30% for the six months ended June 30, 2026.

Previous wording

Loans and leases held for investment at historical cost were $11.91 billion as of March 31, 2026, increasing by $1.54 billion, or 14.8%, compared to March 31, 2025.

Current wording

Loans and leases held for investment at historical cost were $12.40 billion as of June 30, 2026, increasing by $1.69 billion, or 15.8%, compared to June 30, 2025.

Previous wording

Net charge-offs for loans and leases carried at historical cost were$18.6 million, or 0.63% of average quarterly loans and leases held for investment, carried at historical cost, on an annualized basis, for the three months ended March 31, 2026, compared to net charge-offs of $6.8 million, or 0.27%, for the three months ended March 31, 2025, an increase of $11.8 million, or 174.4%. The increase in net charge-offs in the first quarter of 2026 was largely concentrated to individually evaluated loans with specific reserves recorded in prior periods. Net charge-offs are a key element of historical experience in the Company's estimation of the allowance for credit losses on loans and leases.

Current wording

Net charge-offs for loans and leases carried at historical cost were $24.2 million, or 0.80% of average quarterly loans and leases held for investment, carried at historical cost, on an annualized basis, for the three months ended June 30, 2026, compared to net charge-offs of $31.4 million, or 1.19%, for the three months ended June 30, 2025, a decrease of $7.2 million, or 23.2%. For the six months ended June 30, 2026, net charge-offs totaled $42.7 million compared to $38.2 million for the six months ended June 30, 2025, an increase of $4.5 million, or 11.8%.

Previous wording

In addition, nonperforming loans and leases not guaranteed by the SBA or USDA, excluding $6.9 million and $9.9 million accounted for under the fair value option at March 31, 2026 and 2025, respectively, totaled $116.8 million, which was 0.98% of the held for investment loan and lease portfolio carried at historical cost at March 31, 2026, compared to $99.9 million, or 0.96% of loans and leases held for investment carried at historical cost at March 31, 2025.

Current wording

In addition, nonperforming loans and leases not guaranteed by the SBA or USDA, excluding $6.6 million and $8.9 million accounted for under the fair value option at June 30, 2026 and 2025, respectively, totaled $124.3 million, which was 1.00% of the held for investment loan and lease portfolio carried at historical cost at June 30, 2026, compared to $59.6 million, or 0.56% of loans and leases held for investment carried at historical cost at June 30, 2025.

Previous wording

Noninterest income is principally comprised of net gains from the sale of SBA and USDA-guaranteed loans along with loan servicing revenue and related revaluation of the servicing asset. Revenue from the sale of loans depends upon the volume, maturity structure and rates of underlying loans as well as the pricing and availability of funds in the secondary markets prevailing in the period between completed loan funding and closing of sale. In addition, the loan servicing revaluation is significantly impacted by changes in market rates and other underlying assumptions such as prepayment speeds and default rates. Net loss on loans accounted for under the fair value option is also significantly impacted by changes in market rates, prepayment speeds and inherent credit risk. Other less consistent elements of noninterest income include gains and losses on investments.

Current wording

Noninterest income is principally comprised of net gains from the sale of SBA and USDA-guaranteed loans along with loan servicing revenue and related revaluation of the servicing asset. Revenue from the sale of loans depends upon the volume, maturity structure and rates of underlying loans as well as the pricing and availability of funds in the secondary markets prevailing in the period between completed loan funding and closing of sale. In addition, the loan servicing revaluation is significantly impacted by changes in market rates and other underlying assumptions such as prepayment speeds and default rates. Net gain (loss) on loans accounted for under the fair value option is also significantly impacted by changes in market rates, prepayment speeds and inherent credit risk. Other less consistent elements of noninterest income include gains and losses on investments.

Previous wording

For the three months ended March 31, 2026, noninterest income increased by $3.7 million, or 16.6%, compared to the three months ended March 31, 2025. Principal changes when compared with the first quarter of 2025 are a $1.2 million decrease in loss related to the servicing asset revaluation combined with a $1.4 million decrease in equity method investment losses, principally associated with cessation of flow-through losses from Apiture, Inc. which was sold in the fourth quarter of 2025.

Current wording

For the three and six months ended June 30, 2026, noninterest income increased by $352 thousand and $4.1 million, or 1.2% and 7.7% respectively, compared to the prior three and six month periods in 2025. This increase for both periods was due to the decrease in equity method investment losses associated with cessation of flow-through losses from Apiture, Inc. which was sold in the fourth quarter of 2025. This transaction increased noninterest income in the second quarter and first half of 2026 by $2.8 million and $4.2 million, respectively, when compared with the prior three and six month periods of 2025.

Previous wording

The following tables reflects loan and lease production, sales of guaranteed loans and the aggregate balance in guaranteed loans sold. These components are key drivers of the Company's noninterest income.

Current wording

The following tables reflect loan and lease production, sales of guaranteed loans and the aggregate balance in guaranteed loans sold. These components are key drivers of the Company's noninterest income.

Previous wording

Total noninterest expense for the three months ended March 31, 2026, increased $4.5 million, or 5.6%, compared to the same period in 2025. The changes within noninterest expense for the comparable three month periods was largely driven by components, discussed below.

Current wording

Total noninterest expense for the three and six months ended June 30, 2026, decreased $697 thousand, or 0.8%, and increased $3.8 million, or 2.3%, compared to the same periods in 2025. The changes within noninterest expense for the comparable three and six month periods was largely driven by components discussed below.

Previous wording

Salaries and employee benefits: Total personnel expense for the three months ended March 31, 2026 increased by $3.8 million, or 8.4%, compared to the same period in 2025. The increase over the first three months of 2025 is principally related to investment in human resources to support strategic and growth initiatives. Salaries and employee benefits expense included $6.9 million of stock-based compensation for the three months ended March 31, 2026, compared to $6.8 million for the three months ended March 30, 2025, respectively. Expenses related to the employee stock purchase program, stock grants, stock option compensation and restricted stock expense are all considered stock-based compensation.

Current wording

Salaries and employee benefits: Total personnel expense for the three and six months ended June 30, 2026 increased by $2.8 million, or 6.0%, and $6.6 million, or 7.2%, compared to the same periods in 2025, respectively. The increase over both comparative periods of 2025 is principally related to investment in human resources to support strategic and growth initiatives. Salaries and employee benefits expense included $7.4 million and $14.2 million of stock-based compensation for the three and six months ended June 30, 2026, respectively, compared to $6.9 million and $13.7 million for the three and six months ended June 30, 2025, respectively. Expenses related to the employee stock purchase program, stock grants, stock option compensation and restricted stock expense are all considered stock-based compensation.

Previous wording

Other loan origination and maintenance expense: For the three months ended March 31, 2026, other loan origination and maintenance expense increased $1.3 million, or 29.1%, compared to the same period in 2025. This increase was primarily related to maintenance of the Company's ongoing growth in the guaranteed loan portfolio.

Current wording

Other loan origination and maintenance expense: For the three and six months ended June 30, 2026, other loan origination and maintenance expense increased $674 thousand, or 16.1%, and $2.0 million, or 22.9%, compared to the same periods in 2025. This increase was primarily related to maintenance of the Company's ongoing growth in the guaranteed loan portfolio.

Previous wording

For the three months ended March 31, 2026, income tax expense was $10.1 million compared to income tax expense of $3.5 million in the first quarter of 2025, and the Company’s effective tax rates were 25.3% and 26.4%, respectively. The higher level of income tax expense for the first quarter of 2026 as compared to the first quarter of 2025 was largely the result of heightened pretax income during the current period.

Current wording

For the three months ended June 30, 2026, income tax expense was $9.1 million compared to income tax expense of $7.8 million in the second quarter of 2025, and the Company’s effective tax rates were 19.9% and 25.0%, respectively. For the six months ended June 30, 2026, income tax expense was $19.3 million compared to $11.3 million for the six months ended June 30, 2025, and the Company’s effective tax rates were 22.4% and 25.4%, respectively. The higher level of income tax expense over both comparative periods was largely the result of heightened pretax income during the current year, partially offset by a $2.1 million benefit associated with tax credit purchases during the second quarter of 2026.

Previous wording

Total assets at March 31, 2026 were $15.30 billion, an increase of $165.3 million, or 1.1%, compared to total assets of $15.13 billion at December 31, 2025. The growth in total assets was principally driven by total loans and leases held for investment and held for sale increasing by $199.9 million, or 1.6%, in 2026, from $12.39 billion at December 31, 2025 to $12.59 billion at March 31, 2026. This growth was a result of strong origination activity during the first quarter of 2026 of $1.37 billion.

Current wording

Total assets at June 30, 2026 were $16.04 billion, an increase of $903.4 million, or 6.0%, compared to total assets of $15.13 billion at December 31, 2025. The growth in total assets was principally driven by total loans and leases held for investment and held for sale increasing by $749.0 million, or 6.0%, in 2026, from $12.39 billion at December 31, 2025 to $13.14 billion at June 30, 2026. This growth was a result of strong origination activity during the first half of 2026 of $2.92 billion.

Previous wording

Total deposits were $13.84 billion at March 31, 2026, an increase of $146.4 million, or 1.1%, from $13.69 billion at December 31, 2025. The increase in total deposits from the prior period was to support growth in the loan and lease portfolio as well as the Company's targeted liquidity levels. At March 31, 2026, the Bank’s total uninsured deposits were approximately $2.38 billion, or 17.0%, of total deposits.

Current wording

Total deposits were $14.55 billion at June 30, 2026, an increase of $858.9 million, or 6.3%, from $13.69 billion at December 31, 2025. The increase in total deposits from the prior period was to support growth in the loan and lease portfolio as well as the Company's targeted liquidity levels. At June 30, 2026, the Bank’s total uninsured deposits were approximately $2.44 billion, or 16.6%, of total deposits.

Previous wording

Total shareholders' equity was $1.28 billion at March 31, 2026, an increase of $27.7 million, or 2.2%, from $1.25 billion at December 31, 2025. The increase in total shareholders' equity from the prior period was largely due to net income of $29.9 million combined with net share-based compensation activity of $3.9 million, offset by other comprehensive loss of $2.7 million and cash dividends of $2.1 million and $1.4 million related to preferred and common stock shares, respectively.

Current wording

Total shareholders' equity was $1.32 billion at June 30, 2026, an increase of $62.8 million, or 5.0%, from $1.25 billion at December 31, 2025. The increase in total shareholders' equity from the prior period was largely due to net income of $66.7 million.

Previous wording

Total nonperforming assets, including loans measured at fair value, at March 31, 2026 were $519.0 million, which represented a $53.1 million, or 9.3%, decrease from December 31, 2025. These nonperforming assets at March 31, 2026 were comprised of $507.0 million in nonaccrual loans and leases and $12.0 million in foreclosed assets. Of the $519.0 million of nonperforming assets, $391.0 million carried a government guarantee, leaving an unguaranteed exposure of $128.0 million in total nonperforming assets at March 31, 2026. This represents an increase of $16.8 million, or 15.1%, from an unguaranteed exposure of $111.2 million at December 31, 2025.

Current wording

Total nonperforming assets, including loans measured at fair value, at June 30, 2026 were $542.5 million, which represented a $29.7 million, or 5.2%, decrease from December 31, 2025. These nonperforming assets at June 30, 2026 were comprised of $531.5 million in nonaccrual loans and leases and $11.0 million in foreclosed assets. Of the $542.5 million of nonperforming assets, $407.2 million carried a government guarantee, leaving an unguaranteed exposure of $135.3 million in total nonperforming assets at June 30, 2026. This represents an increase of $24.1 million, or 21.6%, from an unguaranteed exposure of $111.2 million at December 31, 2025.

Previous wording

Nonperforming assets, excluding loans measured at fair value, at March 31, 2026 were $456.2 million, which represented a $53.2 million, or 10.4%, decrease from December 31, 2025. These nonperforming assets at March 31, 2026 were comprised of $444.2 million in nonaccrual loans and leases and $12.0 million in foreclosed assets. Of the $456.2 million of nonperforming assets, $336.1 million carried a government guarantee, leaving an unguaranteed exposure of $120.1 million in total nonperforming assets at March 31, 2026. This represents an increase of $17.3 million, or 16.9%, from an unguaranteed exposure of $102.8 million at December 31, 2025.

Current wording

Nonperforming assets, excluding loans measured at fair value, at June 30, 2026 were $481.8 million, which represented a $27.6 million, or 5.4%, decrease from December 31, 2025. These nonperforming assets at June 30, 2026 were comprised of $470.8 million in nonaccrual loans and leases and $11.0 million in foreclosed assets. Of the $481.8 million of nonperforming assets, $354.4 million carried a government guarantee, leaving an unguaranteed exposure of $127.4 million in total nonperforming assets at June 30, 2026. This represents an increase of $24.6 million, or 23.9%, from an unguaranteed exposure of $102.8 million at December 31, 2025.

Previous wording

As a percentage of the Bank’s total capital, nonperforming loans and leases, excluding loans measured at fair value, represented 33.6% at March 31, 2026, compared to 39.0% at December 31, 2025. Adjusting the ratio to include only the unguaranteed portion of nonperforming loans and leases at historical cost to reflect management’s belief that the greater magnitude of risk resides in this portion, the ratios at March 31, 2026 and December 31, 2025 were 8.8% and 7.9%, respectively.

Current wording

As a percentage of the Bank’s total capital, nonperforming loans and leases, excluding loans measured at fair value, represented 34.2% at June 30, 2026, compared to 39.0% at December 31, 2025. Adjusting the ratio to include only the unguaranteed portion of nonperforming loans and leases at historical cost to reflect management’s belief that the greater magnitude of risk resides in this portion, the ratios at June 30, 2026 and December 31, 2025 were 9.0% and 7.9%, respectively.

Previous wording

As of March 31, 2026, and December 31, 2025, potential problem (also referred to as criticized or Risk Grade 50) and classified loans and leases, excluding loans measured at fair value, totaled $1.33 billion and $1.39 billion, respectively. The following is a discussion of these loans and leases. Risk Grades 50 through 80 represent the spectrum of criticized and classified loans and leases. For a complete description of the risk grading system, see “Credit Quality Indicators” in Note 3 in the notes to consolidated financial statements in the Company’s 2025 Form 10-K. At March 31, 2026, the portion of criticized and classified loans and leases guaranteed by the SBA or USDA totaled$653.4 million and total portfolio unguaranteed exposure risk was$680.8 million, or 7.9% of total held for investment unguaranteed exposure carried at historical cost. This compares to the December 31, 2025 portion of criticized and classified loans and leases guaranteed by the SBA or USDA which totaled$669.8 million and total portfolio unguaranteed exposure risk was$719.9 million, or 8.6% of total held for investment unguaranteed exposure carried at historical cost.

Current wording

As of June 30, 2026, and December 31, 2025, potential problem (also referred to as criticized or Risk Grade 50) and classified loans and leases, excluding loans measured at fair value, totaled $1.23 billion and $1.39 billion, respectively. The following is a discussion of these loans and leases. Risk Grades 50 through 80 represent the spectrum of criticized and classified loans and leases. For a complete description of the risk grading system, see “Credit Quality Indicators” in Note 3 in the notes to consolidated financial statements in the Company’s 2025 Form 10-K. At June 30, 2026, the portion of criticized and classified loans and leases guaranteed by the SBA or USDA totaled$628.9 million and total portfolio unguaranteed exposure risk was$601.6 million, or 6.5% of total held for investment unguaranteed exposure carried at historical cost. This compares to the December 31, 2025 portion of criticized and classified loans and leases guaranteed by the SBA or USDA which totaled$669.8 million and total portfolio unguaranteed exposure risk was$719.9 million, or 8.6% of total held for investment unguaranteed exposure carried at historical cost.

Previous wording

Of the above listed verticals, Senior Housing, Sponsor Finance, Bioenergy, and Solar Energyare within the Company’s Commercial Banking division, the remainder of the above listed verticals are within the Small Business Banking division. The total $55.4 million decrease in potential problem and classified loans and leases in the first three months of 2026 was comprised of $15.5 million in increased levels of Risk Grade 50 loans and leases, as discussed below and $70.9 million in decreased levels of classified loans. The overall decrease in classified loans in the first quarter of 2026 was primarily driven by one $84.9 million Renewable Energy relationship that was moved out of loans resulting in no losses in the quarter due to the combination of a sale and related government guarantee. The remainder of the change (increase) is due to isolated borrower-specific credit migrations, including movement of several larger individual exposures and isolated industries into classified status based on performance trends identified through ongoing credit reviews. These changes largely reflect the effects of normal growth and isolated borrower performance migrations rather than any systemic credit deterioration. The Company believes that its underwriting and credit quality standards have remained high and continues to consider changing economic conditions as well as the current interest rate environment.

Current wording

Of the above listed verticals, Senior Housing, Sponsor Finance, Bioenergy, ABL General, and Solar Energyare within the Company’s Commercial Banking division, the remainder of the above listed verticals are within the Small Business Banking division. The total $159.1 million decrease in potential problem and classified loans and leases in the first six months of 2026 was comprised of $82.8 million in decreased levels of Risk Grade 50 loans and leases, as discussed below, and $76.4 million in decreased levels of classified loans. The overall decrease in classified loans in the first half of 2026 was largely driven by one $84.9 million Renewable Energy relationship that was moved out of loans resulting in no losses in the first quarter due to the combination of a sale and related government guarantee. The remainder of the overall decrease is due to isolated borrower-specific credit migrations, including movement of several larger individual exposures and isolated industries into classified status based on performance trends identified through ongoing credit reviews. These changes largely reflect the effects of normal growth and isolated borrower performance migrations rather than any systemic credit deterioration. The Company believes that its underwriting and credit quality standards have remained high and continues to consider changing economic conditions as well as the current interest rate environment.

Previous wording

Loans and leases that experience insignificant payment delays and payment shortfalls are generally not individually evaluated for the purpose of estimating the allowance for credit losses. The Bank generally considers an “insignificant period of time” from payment delays to be a period of 90 days or less. The Bank would consider a modification for a customer experiencing what is expected to be a short-term event that has temporarily impacted cash flow. This could be due, among other reasons, to illness, weather, impact from a one-time expense, slower than expected start-up, construction issues or other short-term issues. Credit personnel will review the request to determine if the customer is experiencing financial stress and how the event has impacted the ability of the customer to repay the loan or lease long term. At March 31, 2026, the Company had a total of $43.2 million in loans modified in 2026 to borrowers experiencing financial difficulty, excluding loans measured at fair value, $42.8 million of which remained current and $30.1 million of which are for an other-than-insignificant payment delay or term extension.

Current wording

Loans and leases that experience insignificant payment delays and payment shortfalls are generally not individually evaluated for the purpose of estimating the allowance for credit losses. The Bank considers an “insignificant period of time” from payment deferrals to be a period of 90 days or less. The Bank would consider a modification for a customer experiencing what is expected to be a short-term event that has temporarily impacted cash flow. This could be due, among other reasons, to illness, weather, impact from a one-time expense, slower than expected start-up, construction issues or other short-term issues. Credit personnel will review the request to determine if the customer is experiencing financial stress and how the event has impacted the ability of the customer to repay the loan or lease long term. These types of deferrals are generally granted 90 days at a time. Collection efforts are typically escalated if, after two or three deferral periods, the cash flow event has not been resolved. At June 30, 2026, the Company had a total of $78.3 million in loans modified in 2026 to borrowers experiencing financial difficulty, excluding loans measured at fair value, $71.2 million of which remained current and $63.2 million of which are for an other-than-insignificant payment delay or term extension.

Previous wording

Management endeavors to be proactive in its approach to identify and resolve problem loans and leases and is focused on working with the borrowers and guarantors of these loans and leases to provide loan and lease modifications when warranted. Management implements a proactive approach to identifying and classifying loans and leases as special mention (also referred to as criticized), Risk Grade 50. At March 31, 2026, and December 31, 2025, Risk Grade 50 loans and leases, excluding loans measured at fair value, totaled $742.7 million and $727.2 million, respectively, for an increase of $15.5 million. Relative to total held for investment unguaranteed exposure carried at historical cost at December 31, 2025 and March 31, 2026, unguaranteed Risk Grade 50 loans and leases decreased from $465.7 million, or 5.5%, to $462.3 million, or 5.3%, respectively.

Current wording

Management endeavors to be proactive in its approach to identify and resolve problem loans and leases and is focused on working with the borrowers and guarantors of these loans and leases to provide loan and lease modifications when warranted. Management implements a proactive approach to identifying and classifying loans and leases as special mention (also referred to as criticized), Risk Grade 50. At June 30, 2026, and December 31, 2025, Risk Grade 50 loans and leases, excluding loans measured at fair value, totaled $644.5 million and $727.2 million, respectively, for a decrease of $82.8 million. Relative to total held for investment unguaranteed loan exposure carried at historical cost at December 31, 2025 and June 30, 2026, unguaranteed Risk Grade 50 loans and leases decreased from $465.7 million, or 5.5%, to $401.7 million, or 4.3%, respectively.

Previous wording

The change in Risk Grade 50 loans and leases, exclusive of loans measured at fair value, during the first three months of 2026 was principally confined to 13 verticals, as reflected above. Of the above listed verticals Sponsor Finance, Government Contractors, Senior Housing and Hotels are within the Company’s Commercial Banking division and the remainder of the above listed verticals are within the Small Business Banking division.

Current wording

The change in Risk Grade 50 loans and leases, exclusive of loans measured at fair value, during the first six months of 2026 was principally confined to 13 verticals, as reflected above. Of the above listed verticals, ABL General, Venture Banking, Emerging Markets, Government Contract, Senior Housing, and Solar Energy are within the Company’s Commercial Banking division and the remainder of the above listed verticals are within the Small Business Banking division.

Previous wording

At March 31, 2026, approximately 99.6% of loans and leases classified as Risk Grade 50 are performing with no relationships having payments past due more than 30 days. While the level of nonperforming assets fluctuates in response to changing economic and market conditions, in light of the relative size and composition of the loan and lease portfolio and management’s degree of success in resolving problem assets, management believes that a proactive approach to early identification and intervention is critical to successfully managing a small business loan portfolio.

Current wording

At June 30, 2026, approximately 97.3% of loans and leases classified as Risk Grade 50 are performing with no relationships having payments past due more than 30 days. While the level of nonperforming assets fluctuates in response to changing economic and market conditions, in light of the relative size and composition of the loan and lease portfolio and management’s degree of success in resolving problem assets, management believes that a proactive approach to early identification and intervention is critical to successfully managing a small business loan portfolio.

Previous wording

The ACL of $192.3 million at December 31, 2025, increased by $1.0 million, or 0.5%, to $193.3 million at March 31, 2026. The ACL as a percentage of loans and leases held for investment at historical cost amounted to 1.6% at both December 31, 2025 and March 31, 2026. The increase in the ACL during the first three months of 2026 was primarily the result of loan growth and charge off impacts amid a challenging macroeconomic environment, where elevated interest rates and inflationary pressures have placed financial strain on some small business and commercial borrowers. See also the above section captioned “Provision for Credit Losses” in “Results of Operations” for related information.

Current wording

The ACL of $192.3 million at December 31, 2025, increased by $1.2 million, or 0.6%, to $193.4 million at June 30, 2026. The ACL as a percentage of loans and leases held for investment at historical cost amounted to 1.6% at both December 31, 2025 and June 30, 2026. The increase in the ACL during the first six months of 2026 was primarily the result of loan growth, partially offset by improving credit migration. See also the above section captioned “Provision for Credit Losses” in “Results of Operations” for related information.

Previous wording

Actual past due held for investment loans and leases, inclusive of loans measured at fair value, have decreased by $40.2 million since December 31, 2025. Total loans and leases 90 or more days past due decreased $63.4 million, or 15.8%, compared to December 31, 2025. This decrease was comprised of a $4.2 million increase in unguaranteed exposure combined with a $67.7 million decrease in the guaranteed portion of past due loans compared to December 31, 2025. At March 31, 2026 and December 31, 2025, total held for investment unguaranteed loans and leases past due as a percentage of total held for investment unguaranteed loans and leases, inclusive of loans measured at fair value, was 1.1% and 0.9%, respectively. Total unguaranteed loans and leases past due were comprised of $89.0 million carried at historical cost, an increase of $19.8 million, and $7.6 million measured at fair value, a decrease of $266 thousand, as of March 31, 2026 compared to December 31, 2025. Management continues to actively monitor and work to improve asset quality. Management believes the ACL of $193.3 million at March 31, 2026 is appropriate in light of the risk inherent in the loan and lease portfolio. Management’s judgments are based on numerous assumptions about current and expected events that it believes to be reasonable, but which may or may not be valid. Accordingly, no assurance can be given that management’s ongoing evaluation of the loan and lease portfolio in light of changing economic conditions and other relevant circumstances will not require significant future additions to the ACL, thus adversely affecting the Company’s operating results. Additional information on the ACL is presented in Note 5. Loans and Leases Held for Investment and Credit Quality of the Unaudited Condensed Consolidated Financial Statements in this report.

Current wording

Actual past due held for investment loans and leases, inclusive of loans measured at fair value, have increased by $2.3 million since December 31, 2025. Total loans and leases 90 or more days past due decreased $35.3 million, or 8.8%, compared to December 31, 2025. This decrease was comprised of a $22.6 million increase in unguaranteed exposure combined with a $58.0 million decrease in the guaranteed portion of past due loans compared to December 31, 2025. At June 30, 2026 and December 31, 2025, total held for investment unguaranteed loans and leases past due as a percentage of total held for investment unguaranteed loans and leases, inclusive of loans measured at fair value, was 1.3% and 0.9%, respectively. Total unguaranteed loans and leases past due, inclusive of loans measured at fair value, were $117.4 million, an increase of $40.3 million, as of June 30, 2026 compared to December 31, 2025. Management continues to actively monitor and work to improve asset quality. Management believes the ACL of $193.4 million at June 30, 2026 is appropriate in light of the risk inherent in the loan and lease portfolio. Management’s judgments are based on numerous assumptions about current and expected events that it believes to be reasonable, but which may or may not be valid. Accordingly, no assurance can be given that management’s ongoing evaluation of the loan and lease portfolio in light of changing economic conditions and other relevant circumstances will not require significant future additions to the ACL, thus adversely affecting the Company’s operating results. Additional information on the ACL is presented in Note 5. Loans and Leases Held for Investment and Credit Quality of the Unaudited Condensed Consolidated Financial Statements in this report.

Previous wording

Liquidity management refers to the ability to meet day-to-day cash flow requirements based primarily on activity in loan and deposit accounts of the Company’s customers. Liquidity is immediately available from four major sources: (a) cash on hand and on deposit at other banks; (b) the outstanding balance of federal funds sold; (c) the fair value of unpledged investment securities; and (d) availability under lines of credit, FHLB advances and the Federal Reserve Discount Window. A primary tool in the Company's liquidity management process is the utilization of an Outflow Coverage Ratio (“OCR”) model to stress outflows in various scenarios with targeted days of liquidity coverage. The OCR model output is then used by management to ensure adequate liquidity sources are available during those future periods. At March 31, 2026, the total amount of these four liquidity source items was $4.96 billion, or 32.4% of total assets, an increase of 0.1% of total assets from $4.89 billion, or 32.3% of total assets, at December 31, 2025.

Current wording

Liquidity management refers to the ability to meet day-to-day cash flow requirements based primarily on activity in loan and deposit accounts of the Company’s customers. Liquidity is immediately available from four major sources: (a) cash on hand and on deposit at other banks; (b) the outstanding balance of federal funds sold; (c) the fair value of unpledged investment securities; and (d) availability under lines of credit, FHLB advances and the Federal Reserve Discount Window. A primary tool in the Company's liquidity management process is the utilization of an Outflow Coverage Ratio (“OCR”) model to stress outflows in various scenarios with targeted days of liquidity coverage. The OCR model output is then used by management to ensure adequate liquidity sources are available during those future periods. At June 30, 2026, the total amount of these four liquidity source items was $5.07 billion, or 31.6% of total assets, a decrease of 0.7% of total assets from $4.89 billion, or 32.3% of total assets, at December 31, 2025.

Previous wording

As of March 31, 2026 and December 31, 2025, the Company’s unused borrowing capacity was $4.09 billion and $3.97 billion, respectively, based upon securities and loans identified as available for collateral. Unused borrowing capacity consists of access through the Federal Reserve Bank's discount window, available lines of credit with the Federal Home Loan Bank and other correspondent banks, and access to a repurchase agreement. If additional collateral is available, the Company's aggregate borrowing capacity with all of the above sources is $7.77 billion and $7.54 billion as of March 31, 2026 and December 31, 2025, respectively.

Current wording

As of June 30, 2026 and December 31, 2025, the Company’s unused borrowing capacity was $4.08 billion and $3.97 billion, respectively, based upon securities and loans identified as available for collateral. Unused borrowing capacity consists of access through the Federal Reserve Bank's discount window, available lines of credit with the Federal Home Loan Bank and other correspondent banks, and access to a repurchase agreement. If additional collateral is available, the Company's aggregate borrowing capacity with all of the above sources is $7.75 billion and $7.54 billion as of June 30, 2026 and December 31, 2025, respectively.

Previous wording

At March 31, 2026, $540.0 million of the investment securities portfolio were pledged for unused borrowing capacity, leaving $894.5 million available to be pledged as collateral.

Current wording

At June 30, 2026, $508.4 million of the investment securities portfolio were pledged for unused borrowing capacity, leaving $959.5 million available to be pledged as collateral.

Previous wording

One of the primary objectives of asset/liability management is to maximize the net interest margin while minimizing the earnings risk associated with changes in interest rates. One method used to manage interest rate sensitivity is to measure the repricing differences, or interest rate gaps, between interest-earning assets and interest-bearing liabilities, across various time periods. As of March 31, 2026, the balance sheet’s total cumulative gap position was 6.7%, meaning that over the entire life of the Company's assets and liabilities, more assets will reprice than liabilities. For further information, see Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Current wording

One of the primary objectives of asset/liability management is to maximize the net interest margin while minimizing the earnings risk associated with changes in interest rates. One method used to manage interest rate sensitivity is to measure the repricing differences, or interest rate gaps, between interest-earning assets and interest-bearing liabilities, across various time periods. As of June 30, 2026, the balance sheet’s total cumulative gap position was 6.4%, meaning that over the entire life of the Company's assets and liabilities, more assets will reprice than liabilities. For further information, see Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Previous wording

Accounting policies, including those for the Company's critical accounting policies, as described in detail in the Notes to the Company’s Unaudited Condensed Consolidated Financial Statements in this report and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, are an integral part of the Company’s consolidated financial statements. A thorough understanding of these accounting policies is essential when reviewing the Company’s reported results of operations and financial position. The Company’s most critical accounting policy and estimate is the ACL. This estimate requires the Company to make difficult, subjective or complex judgments about matters that are inherently uncertain. Except as described in Note 1. Basis of Presentation, there were no changes related to critical accounting policies and estimates during the first quarter of 2026.

Current wording

Accounting policies, including those for the Company's critical accounting policies, as described in detail in the Notes to the Company’s Unaudited Condensed Consolidated Financial Statements in this report and in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025, are an integral part of the Company’s consolidated financial statements. A thorough understanding of these accounting policies is essential when reviewing the Company’s reported results of operations and financial position. The Company’s most critical accounting policy and estimate is the ACL. This estimate requires the Company to make difficult, subjective or complex judgments about matters that are inherently uncertain. Except as described in Note 1. Basis of Presentation, there were no changes related to critical accounting policies and estimates during 2026.