Loans and Allowance for Credit Losses

9 Months Ended

Sep. 30, 2026

Receivables [Abstract]

Loans and Allowance for Credit Losses

Note 4 – Loans and Allowance for Credit Losses

The Bank makes loans to customers primarily in the Washington, D.C. metropolitan area and surrounding communities. The Bank’s loan portfolio primarily consists of loans to businesses secured by real estate and other business assets, as evidenced by the table below.

The table below presents HFI Loans, net of unamortized net deferred fees, summarized by portfolio segment.

	As of
	September 30, 2026				December 31, 2025
(dollars in thousands)	Amount		%		Amount		%
Commercial	$	1,544,426	24	%	$	1,338,486	18	%
Income producing - commercial real estate	2,587,587		39	%	3,350,718		46	%
Owner occupied - commercial real estate	1,641,411		25	%	1,602,124		22	%
Real estate mortgage - residential	134,529		2	%	37,100		1	%
Construction - commercial and residential	516,565		8	%	795,400		11	%
Construction - C&I (owner occupied)	96,509		1	%	108,468		1	%
Home equity	41,265		1	%	47,448		1	%
Other consumer	1,062		—	%	715		—	%
Total loans	6,563,354		100	%	7,280,459		100	%
Less: allowance for credit losses	(120,781)				(159,604)
Net loans (1)	$	6,442,573			$	7,120,855

(1)Excludes accrued interest receivable of $30.3 million and $35.9 million as of September 30, 2026 and December 31, 2025, respectively, which were recorded in other assets on the Consolidated Balance Sheets.

Unamortized net deferred fees and costs were $17.62 million and $17.63 million as of September 30, 2026 and December 31, 2025, respectively.

During the nine months ended September 30, 2026, certain loans, primarily income producing - commercial real estate loans, were reclassified from HFI to HFS loans with the lower of cost or fair value of $238.5 million. As of September 30, 2026 and December 31, 2025, the outstanding balance of all HFS loans were $13.5 million and $90.7 million, respectively, as reported on the Consolidated Balance Sheets, of which $13.5 million and $90.7 million, respectively, were on nonaccrual status.

As of September 30, 2026 and December 31, 2025, the Bank serviced $293.6 million and $81.5 million, respectively, of loan participations and SBA loans, which are not reflected as loan balances on the Consolidated Balance Sheets.

Real estate loans are secured primarily by duly recorded first deeds of trust or mortgages. In some cases, the Bank may accept a recorded junior trust position. In general, borrowers will have a proven ability to build, lease, manage and/or sell a commercial or residential project and demonstrate satisfactory financial condition. Additionally, an equity contribution toward the project is customarily required.

Construction loans require that the financial condition and experience of the general contractor and major subcontractors be satisfactory to the Bank. Guaranteed, fixed price contracts are required whenever appropriate, along with payment and performance bonds or completion bonds for larger scale projects.

Loans intended for residential land acquisition, lot development and construction are made on the premise that the land: 1) is or will be developed for building sites for residential structures; and 2) will ultimately be utilized for construction or improvement of residential zoned real properties, including the creation of housing. Residential development and construction loans will finance projects such as single family subdivisions, planned unit developments, townhouses and condominiums. Residential land acquisition, development and construction ("ADC") loans generally are underwritten with a maximum term of 36 months, including extensions approved at origination.

Commercial land acquisition and construction loans are secured by real property where loan funds will be used to acquire land and to construct or improve appropriately zoned real property for the creation of income producing or owner-occupied commercial properties. Borrowers are generally required to put equity into each project at levels determined by the appropriate approval authority. Commercial land acquisition and construction loans generally are underwritten with a maximum term of 24 months.

Substantially all construction draw requests must be presented in writing on American Institute of Architects documents and certified either by the contractor, the borrower and/or the borrower’s architect. Each draw request shall also include the borrower’s soft cost breakdown certified by the borrower or their Chief Financial Officer. Prior to an advance, the Bank or its contractor inspects the project to determine that the work has been completed, to justify the draw requisition.

Commercial permanent loans are generally secured by improved real property which is generating income in the normal course of operation. Debt service coverage, assuming stabilized occupancy, must be satisfactory to support a permanent loan. The debt service coverage ratio ("DSCR") is ordinarily at least 1.15 to 1.0. As part of the underwriting process, DSCRs are stress tested assuming a 200 basis point increase in interest rates from their current levels. Commercial permanent loans generally are underwritten with a term not greater than 10 years or the remaining useful life of the property, whichever is less. The preferred term is between 5 to 7 years, with amortization to a maximum of 25 years.

The Company’s loan portfolio includes ADC real estate loans including both investment and owner occupied projects. ADC loans amounted to $831.3 million as of September 30, 2026. A portion of the ADC portfolio, both speculative and non-speculative, includes loan-funded interest reserves at origination. ADC loans that provide for the use of interest reserves represent approximately 31% of the outstanding ADC loan portfolio as of September 30, 2026. The decision to establish a loan-funded interest reserve is made upon origination of the ADC loan and is based upon a number of factors considered during underwriting of the credit including: (1) the feasibility of the project; (2) the experience of the sponsor; (3) the creditworthiness of the borrower and guarantors; (4) borrower equity contribution; and (5) the level of collateral protection. When appropriate, an interest reserve provides an effective means of addressing the cash flow characteristics of a properly underwritten ADC loan. The Company does not significantly utilize interest reserves in other loan products.

The Company recognizes that one of the risks inherent in the use of interest reserves is the potential masking of underlying problems with the project and/or the borrower’s ability to repay the loan. In order to mitigate this inherent risk, the Company employs a series of reporting and monitoring mechanisms on all ADC loans, whether or not an interest reserve is provided, including: (1) construction and development timelines which are monitored on an ongoing basis which track the progress of a given project to the timeline projected at origination; (2) a construction loan administration department independent of the lending function; (3) third party independent construction loan inspection reports; (4) monthly interest reserve monitoring reports detailing the balance of the interest reserves approved at origination and the days of interest carry represented by the reserve balances as compared to the then current anticipated time to completion and/or sale of speculative projects; and (5) quarterly commercial real estate construction meetings among senior Company management, which includes monitoring of current and projected real estate market conditions. If a project has not performed as expected, it is not the customary practice of the Company to increase loan funded interest reserves.

The table below details activity in the ACL by portfolio segment of HFI Loans. The Company has updated its allocation methodology to better reflect the ACL attributable to loan categories and collateral types. Conforming changes have been made to prior period amounts. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

(dollars in thousands)	Commercial		Income  Producing - Commercial Real Estate		Owner  Occupied - Commercial Real Estate		Real Estate Mortgage - Residential		Construction -Commercial  and Residential		Construction - C&I (Owner Occupied)		Home Equity		Other Consumer		Total
For the Three Months Ended September 30, 2026
Allowance for credit losses:
Balance at beginning of quarter	$	28,673	$	68,824	$	17,186	$	305	$	4,407	$	1,112	$	605	$	29	$	121,141
Loans charged-off	(3,471)		(2,937)		—		—		—		—		—		—		(6,408)
Recoveries of loans previously charged-off	801		—		1,441		10		—		—		—		—		2,252
Net loans (charged-off) and recovered	(2,670)		(2,937)		1,441		10		—		—		—		—		(4,156)
Provision for (reversal of) credit losses	515		3,665		(1,906)		547		(273)		348		(42)		—		2,854
Initial allowance on purchased seasoned loans	—		—		—		942		—		—		—		—		942
Ending balance	$	26,518	$	69,552	$	16,721	$	1,804	$	4,134	$	1,460	$	563	$	29	$	120,781
For the Three Months Ended September 30, 2025
Allowance for credit losses:
Balance at beginning of quarter	$	16,171	$	135,211	$	14,634	$	382	$	13,756	$	3,101	$	510	$	32	$	183,797
Loans charged-off	(529)		(123,388)		(10,000)		—		(7,134)		—		—		—		(141,051)
Recoveries of loans previously charged-off	221		—		16		—		—		—		—		—		237
Net loans (charged-off) and recovered	(308)		(123,388)		(9,984)		—		(7,134)		—		—		—		(140,814)
Provision for (reversal of) credit losses	8,379		83,572		15,499		(25)		7,361		(1,540)		5		(6)		113,245
Ending balance	$	24,242	$	95,395	$	20,149	$	357	$	13,983	$	1,561	$	515	$	26	$	156,228
For the Nine Months Ended September 30, 2026
Allowance for credit losses:
Balance at beginning of period	$	26,607	$	98,707	$	20,719	$	339	$	11,171	$	1,515	$	519	$	27	$	159,604
Loans charged-off	(17,391)		(52,464)		(2,926)		(80)		(8,703)		—		—		—		(81,564)
Recoveries of loans previously charged-off	923		1,122		1,478		9		6		—		—		1		3,539
Net loans (charged-off) and recovered	(16,468)		(51,342)		(1,448)		(71)		(8,697)		—		—		1		(78,025)
Provision for (reversal of) credit losses	16,379		22,187		(2,550)		594		1,660		(55)		44		1		38,260
Initial allowance on purchased seasoned loans	—		—		—		942		—		—		—		—		942
Ending balance	$	26,518	$	69,552	$	16,721	$	1,804	$	4,134	$	1,460	$	563	$	29	$	120,781
For the Nine Months Ended September 30, 2025
Allowance for credit losses:
Balance at beginning of year	$	16,293	$	65,375	$	19,295	$	472	$	11,333	$	1,079	$	515	$	28	$	114,390
Loans charged-off	(1,497)		(197,582)		(19,797)		—		(17,837)		—		—		(35)		(236,748)
Recoveries of loans previously charged-off	436		329		63		—		—		—		—		—		828
Net loans (charged-off) and recovered	(1,061)		(197,253)		(19,734)		—		(17,837)		—		—		(35)		(235,920)
Provision for (reversal of) credit losses	9,010		227,273		20,588		(115)		20,487		482		—		33		277,758
Ending balance	$	24,242	$	95,395	$	20,149	$	357	$	13,983	$	1,561	$	515	$	26	$	156,228

The table below presents the amortized cost basis of collateral-dependent HFI loans by portfolio segment.

	As of
	September 30, 2026				December 31, 2025
(dollars in thousands)	Business/Other Assets		Real Estate		Business/Other Assets		Real Estate
Commercial	$	13,820	$	6,752	$	15,285	$	2,813
Income producing-commercial real estate	15,493		121,415		880		61,657
Owner occupied - commercial real estate	838		2,392		—		7,938
Real estate mortgage- residential	283		258		—		579
Construction - commercial and residential	683		3,865		—		17,394
Home equity	28		589		—		351
Total	$	31,145	$	135,271	$	16,165	$	90,732

Credit Quality Indicators

The Company uses several credit quality indicators to manage credit risk in an ongoing manner. The Company’s primary credit quality indicator is an internal credit risk rating system that categorizes loans into pass, special mention or classified categories. Credit risk ratings are applied individually to those classes of loans that have significant or unique credit characteristics that benefit from a case-by-case evaluation. These are typically loans to businesses or individuals in the classes which comprise the commercial portfolio segment. Groups of loans that are underwritten and structured using standardized criteria and characteristics, such as statistical models (e.g., credit scoring or payment performance), are typically risk rated and monitored collectively. These are typically loans to individuals in the classes which comprise the consumer portfolio segment.

The following are the definitions of the Company’s credit quality indicators:

Pass:	Loans in all classes that comprise the commercial and consumer portfolio segments that are not adversely rated, are contractually current as to principal and interest and are otherwise in compliance with the contractual terms of the loan agreement. Management believes that there is a low likelihood of loss related to those loans that are considered pass. We have several pass credit grades that are assigned to loans based on varying levels of risk, ranging from credits that are secured by cash or marketable securities, to watch credits, which have all the characteristics of an acceptable credit risk but warrant more than the normal level of monitoring.
Special Mention:	Loans in the classes that comprise the commercial portfolio segment that have potential weaknesses that deserve management’s close attention. If not addressed, these potential weaknesses may result in deterioration of the repayment prospects for the loan. The special mention credit quality indicator is not used for classes of loans that comprise the consumer portfolio segment. Management believes that there is a moderate likelihood of some loss related to those loans that are considered special mention.
Classified (a) Substandard:	Loans inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the company will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard loans, does not have to exist in individual loans classified substandard.
Classified (b) Doubtful:	Loans that have all the weaknesses inherent in a loan classified substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors, which may work to the advantage and strengthening of the assets, its classification as an estimated loss is deferred until its more exact status may be determined.

The Company's credit quality indicators are generally updated annually, however, credits rated "Special Mention" or below are reviewed more frequently. The table below presents the amortized cost basis of HFI loans by risk

category, class and year of origination, along with any charge-offs that were recorded in the applicable loan segment, if applicable. The table below excludes $36.7 million and $176.5 million of gross charge-offs associated with loans that were reclassified to HFS or sold as of September 30, 2026 and December 31, 2025, respectively.

	As of September 30, 2026
(dollars in thousands)	Prior		2022		2023		2024		2025		2026		Revolving Loans Amort. Cost Basis		Revolving Loans Convert. to Term		Total
Commercial:
Pass	$	75,108	$	19,500	$	47,030	$	78,731	$	326,441	$	412,766	$	472,764	$	28,035	$	1,460,375
Special Mention	3,247		12,937		5,700		—		—		—		5,219		—		27,103
Substandard	12,004		6,626		1,632		6,675		—		3,598		25,982		431		56,948
Total	90,359		39,063		54,362		85,406		326,441		416,364		503,965		28,466		1,544,426
YTD gross charge-offs	(12,380)		(53)		—		—		—		—		(50)		(2,706)		(15,189)
Income producing - commercial real estate:
Pass	948,164		339,824		388,656		68,346		119,346		143,077		120,223		19,386		2,147,022
Special Mention	55,197		56,033		—		—		—		—		—		—		111,230
Substandard	231,897		90,889		—		—		—		5,941		608		—		329,335
Total	1,235,258		486,746		388,656		68,346		119,346		149,018		120,831		19,386		2,587,587
YTD gross charge-offs	(26,187)		—		—		—		(494)		—		—		—		(26,681)
Owner occupied - commercial real estate:
Pass	713,655		89,921		128,672		76,699		334,605		224,031		713		—		1,568,296
Special Mention	27,372		—		—		—		1,660		—		—		—		29,032
Substandard	27,634		—		—		—		16,449		—		—		—		44,083
Total	768,661		89,921		128,672		76,699		352,714		224,031		713		—		1,641,411
YTD gross charge-offs	(2,926)		—		—		—		—		—		—		—		(2,926)
Real estate mortgage - residential:
Pass	17,982		9,946		3,927		—		—		102,134		—		—		133,989
Substandard	540		—		—		—		—		—		—		—		540
Total	18,522		9,946		3,927		—		—		102,134		—		—		134,529
YTD gross charge-offs	—		—		—		—		—		—		—		—		—
Construction - commercial and residential:
Pass	97,599		181,938		75,000		11,672		54,090		8,910		41,615		11,064		481,888
Special Mention	—		—		—		—		—		—		27,722		—		27,722
Substandard	6,140		—		132		—		—		—		683		—		6,955
Total	103,739		181,938		75,132		11,672		54,090		8,910		70,020		11,064		516,565
YTD gross charge-offs	—		—		—		—		—		—		(29)		—		(29)
Construction - C&I (owner occupied):
Pass	2,696		—		9,936		45,739		34,896		1,553		760		—		95,580
Substandard	929		—		—		—		—		—		—		—		929
Total	3,625		—		9,936		45,739		34,896		1,553		760		—		96,509
Home equity:
Pass	1,644		112		—		—		—		—		38,061		477		40,294
Substandard	397		—		—		—		—		34		375		165		971
Total	2,041		112		—		—		—		34		38,436		642		41,265
Other consumer:
Pass	—		—		—		—		91		141		830		—		1,062
Total Recorded Investment	$	2,222,205	$	807,726	$	660,685	$	287,862	$	887,578	$	902,185	$	735,555	$	59,558	$	6,563,354
Total YTD gross charge-offs	$	(41,493)	$	(53)	$	—	$	—	$	(494)	$	—	$	(79)	$	(2,706)	$	(44,825)

	As of December 31, 2025
(dollars in thousands)	Prior		2021		2022		2023		2024		2025		Revolving Loans Amort. Cost Basis		Revolving Loans Convert. to Term		Total
Commercial:
Pass	$	92,082	$	18,390	$	35,098	$	66,402	$	83,098	$	357,934	$	593,711	$	3,815	$	1,250,530
Special Mention	524		309		11,264		994		10,360		—		7,018		—		30,469
Substandard	22,721		433		18,134		406		—		—		13,102		2,691		57,487
Total	115,327		19,132		64,496		67,802		93,458		357,934		613,831		6,506		1,338,486
YTD gross charge-offs	(1,208)		(525)		(304)		—		(57)		—		(296)		—		(2,390)
Income producing - commercial real estate:
Pass	1,087,720		435,579		533,070		364,692		88,823		123,114		145,256		13,381		2,791,635
Special Mention	86,600		43,104		56,157		—		—		—		—		—		185,861
Substandard	167,878		90,035		114,451		—		—		—		858		—		373,222
Total	1,342,198		568,718		703,678		364,692		88,823		123,114		146,114		13,381		3,350,718
YTD gross charge-offs	(35,833)		—		—		—		—		—		(10,500)		—		(46,333)
Owner occupied - commercial real estate:
Pass	667,233		209,803		89,580		132,719		126,792		356,437		636		—		1,583,200
Substandard	14,263		3,137		1,072		452		—		—		—		—		18,924
Total	681,496		212,940		90,652		133,171		126,792		356,437		636		—		1,602,124
YTD gross charge-offs	(22,238)		—		—		—				—		—		—		(22,238)
Real estate mortgage - residential:
Pass	13,331		6,411		10,941		5,838		—		—		—		—		36,521
Substandard	579		—		—		—		—		—		—		—		579
Total	13,910		6,411		10,941		5,838		—		—		—		—		37,100
Construction - commercial and residential:
Pass	10,095		106,241		307,223		120,558		10,228		23,415		92,900		8,294		678,954
Special Mention	—		—		25,082		—		—		—		27,469		—		52,551
Substandard	35,517		11,618		15,320		—		—		—		1,440		—		63,895
Total	45,612		117,859		347,625		120,558		10,228		23,415		121,809		8,294		795,400
YTD gross charge-offs	(1,579)		—		—		—		—		—		—		—		(1,579)
Construction - C&I (owner occupied):
Pass	3,737		—		—		10,199		43,484		18,945		791		31,312		108,468
Home equity:
Pass	1,282		35		114		—		—		—		44,822		805		47,058
Substandard	248		—		—		—		—		—		82		60		390
Total	1,530		35		114		—		—		—		44,904		865		47,448
YTD gross charge-offs	—		(206)		—		—		—		—		—		—		(206)
Other consumer:
Pass	—		—		—		—		—		156		559		—		715
YTD gross charge-offs	(3)		—		—		—		—		—		—		(32)		(35)
Total Recorded Investment	$	2,203,810	$	925,095	$	1,217,506	$	702,260	$	362,785	$	880,001	$	928,644	$	60,358	$	7,280,459
Total YTD gross charge-offs	$	(60,861)	$	(731)	$	(304)	$	—	$	(57)	$	—	$	(10,796)	$	(32)	$	(72,781)

The Company individually evaluates nonaccrual loans when performing its CECL estimate to calculate the ACL. Additionally, the Company utilizes historical internal and third-party service provider sourced loss data in the determination of its PD/LGD rates applied in the calculation of its CECL estimate. Upon determination that a modified loan (or a portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the ACL is adjusted by the same amount.

Nonaccrual and Past Due Loans

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed on nonaccrual status whether or not such loans are considered past due. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

The table below presents, by portfolio segment, information related to the amortized cost basis of nonaccrual HFI loans.

	As of
	September 30, 2026						December 31, 2025
(dollars in thousands)	Nonaccrual with No Allowance for Credit Loss		Nonaccrual with an Allowance for Credit Losses		Total Nonaccrual Loans		Nonaccrual with No Allowance for Credit Loss		Nonaccrual with an Allowance for Credit Losses		Total Nonaccrual Loans
Commercial	$	1,277	$	18,900	$	20,177	$	3,397	$	14,702	$	18,099
Income producing - commercial real estate	35,830		101,077		136,907		38,275		24,262		62,537
Owner occupied - commercial real estate	2,894		337		3,231		3,199		4,738		7,937
Real estate mortgage - residential	540		—		540		579		—		579
Construction- commercial and residential	3,865		683		4,548		2,074		15,320		17,394
Home equity	447		171		618		333		18		351
Total (1)	$	44,853	$	121,168	$	166,021	$	47,857	$	59,040	$	106,897

(1)Gross coupon interest income of $10.2 million, and $19.0 million would have been recorded for the nine months ended September 30, 2026 and 2025, respectively, if nonaccrual loans shown above had been current and in accordance with their original terms. Interest income recognized on loans on nonaccrual status was $7.4 million and $13.6 million for the nine months ended September 30, 2026 and 2025, respectively. See "Note 1 – Summary of Significant Accounting Policies" to the Consolidated Financial Statements for a description of the Company’s policy for placing loans on nonaccrual status.

The table below presents, by portfolio segment, an aging analysis and the recorded investments in HFI loans past due.

	As of September 30, 2026
(dollars in thousands)	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 Days or More Past  Due		Total Past Due Loans		Current Loans		Nonaccrual Loans		Total Recorded Investment in Loans
Commercial	$	297	$	60	$	—	$	357	$	1,523,892	$	20,177	$	1,544,426
Income producing - commercial real estate	—		—		—		—		2,450,680		136,907		2,587,587
Owner occupied - commercial real estate	—		—		—		—		1,638,180		3,231		1,641,411
Real estate mortgage – residential	—		—		—		—		133,989		540		134,529
Construction - commercial and residential	—		—		—		—		512,017		4,548		516,565
Construction - C&I (owner occupied)	—		—		—		—		96,509		—		96,509
Home equity	—		—		—		—		40,647		618		41,265
Other consumer	—		—		—		—		1,062		—		1,062
Total	$	297	$	60	$	—	$	357	$	6,396,976	$	166,021	$	6,563,354
	As of December 31, 2025
(dollars in thousands)	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 Days or More Past  Due		Total Past Due Loans		Current Loans		Nonaccrual Loans		Total Recorded Investment in Loans
Commercial	$	2,942	$	44	$	—	$	2,986	$	1,317,401	$	18,099	$	1,338,486
Income producing - commercial real estate	2,688		—		—		2,688		3,285,493		62,537		3,350,718
Owner occupied - commercial real estate	167		12,573		—		12,740		1,581,447		7,937		1,602,124
Real estate mortgage – residential	4,544		—		—		4,544		31,977		579		37,100
Construction - commercial and residential	26,942		—		—		26,942		751,064		17,394		795,400
Construction - C&I (owner occupied)	—		—		—		—		108,468		—		108,468
Home equity	—		39		—		39		47,058		351		47,448
Other consumer	—		—		—		—		715		—		715
Total	$	37,283	$	12,656	$	—	$	49,939	$	7,123,623	$	106,897	$	7,280,459

Purchased Loans

During the third quarter of 2026, the Company acquired approximately $102 million of residential mortgages, a portion of which qualified as purchased seasoned loans, and recorded an initial ACL of $942 thousand through an adjustment to the underlying loans’ initial amortized cost basis, rather than through an immediate charge to credit loss expense.

Loan Modifications for Borrowers Experiencing Financial Difficulty

The Company evaluates all loan modifications according to the accounting guidance to determine if the modification results in a new loan or a continuation of the existing loan. Loan modifications to borrowers experiencing financial difficulties that result in a direct change in the timing or amount of contractual cash flows include situations where there is principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, and combinations of the listed modifications. Modifications with terms not as favorable to the Company as the terms for comparable loans to other customers with similar collection risk who are not refinancing or restructuring a loan with the Company and which have a direct impact on cash flows are considered modified loans to borrowers experiencing financial difficulty.

The Company may offer various types of modifications when restructuring a loan. Commercial and industrial loans modified in a loan restructuring often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans. Additional collateral, a co-borrower, or a guarantor is often requested.

Commercial mortgage and construction loans modified in a loan restructuring often involve reducing the interest rate for the remaining term of the loan, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk, or substituting or adding a new borrower or guarantor. Construction loans modified in a loan restructuring may also involve extending the interest-only payment period.

Loans modified in a loan restructuring for the Company may have the financial effect of increasing the specific allowance associated with the loan. An allowance for consumer and commercial loans that have been modified in a loan restructuring is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's observable market price, or the estimated fair value of the collateral, less any selling costs, if the loan is collateral dependent. Management exercises significant judgment in developing these estimates.

Commercial and consumer loans modified in a loan restructuring are closely monitored for delinquency as an early indicator of possible future default. If loans modified in a loan restructuring subsequently default, the Company evaluates the loan for possible further loss. The allowance may be increased, adjustments may be made in the allocation of the allowance, or partial charge-offs may be taken to further write-down the carrying value of the loan.

The table below presents the amortized cost basis and the financial effect of HFI loans modified for borrowers experiencing financial difficulty.

(dollars in thousands)	Term Extension		Combination - Term Extension and Principal Payment Delay		Combination - Term Extension, Principal Payment Delay and Interest Rate Reduction		Total		Percentage of Total Loan Type		Weighted Average Term and Principal Payment Extension(1)	Weighted Average Interest Rate Reduction(2)
For the Three Months Ended September 30, 2026
Commercial	$	800	$	—	$	—	$	800	0.1	%	12 months	—	%
Income producing - commercial real estate	—		55,963		7,687		63,650		2.5	%	6 months	0.04	%
Owner occupied - commercial real estate	1,529		—		—		1,529		0.1	%	3 months	—	%
Construction - commercial and residential	—		—		506		506		0.1	%	18 months	1.00	%
Total	$	2,329	$	55,963	$	8,193	$	66,485
For the Three Months Ended September 30, 2025
Commercial	$	8,529	$	—	$	—	$	8,529	0.7	%	6 months	—	%
Income producing - commercial real estate	1,814		40,815		—		42,629		1.2	%	5 months	—	%
Construction - commercial and residential	1,821		—		—		1,821		0.2	%	9 months	—	%
Total	$	12,164	$	40,815	$	—	$	52,979
For the Nine Months Ended September 30, 2026
Commercial	$	11,430	$	6,438	$	—	$	17,868	1.2	%	17 months	—	%
Income producing - commercial real estate	17,320		73,558		7,687		98,565		3.8	%	7 months	0.03	%
Owner occupied - commercial real estate	1,529		—		—		1,529		0.1	%	6 months	—	%
Real estate mortgage - residential	4,500		—		—		4,500		3.3	%	14 months	—	%
Construction - commercial and residential	—		—		506		506		0.1	%	18 months	1.00	%
Total	$	34,779	$	79,996	$	8,193	$	122,968
For the Nine Months Ended September 30, 2025
Commercial	$	19,835	$	9,867	$	—	$	29,702	2.4	%	17 months	—	%
Income producing - commercial real estate	5,886		131,897		—		137,783		4.0	%	22 months	—	%
Owner occupied - commercial real estate	12,674		—		—		12,674		0.8	%	4 months	—	%
Real estate mortgage - residential	—		5,736		—		5,736		12.8	%	6 months	—	%
Construction - commercial and residential	1,821		11,486		—		13,307		1.3	%	22 months	—	%
Total	$	40,216	$	158,986	$	—	$	199,202

(1)For loans that received multiple modifications during the year, weighted average term and principal payment extensions were calculated based on the aggregate impact of the extensions received during the period.

(2)The weighted average is calculated based on the total amortized cost of loans, at the year-end, that received interest rate reduction modifications during the year.

The table below presents the performance of HFI loans modified during the prior twelve months for borrowers experiencing financial difficulty.

	Payment Status (Amortized Cost Basis)
(dollars in thousands)	Current		30-89 Days Past Due		90 Days or More Past Due		Nonaccrual
September 30, 2026
Commercial	$	10,331	$	—	$	—	$	9,432
Income producing - commercial real estate	76,727		—		—		84,977
Owner occupied - commercial real estate	1,529		—		—		—
Real estate mortgage - residential	4,500		—		—		—
Construction - commercial and residential	—		—		—		506
Total	$	93,087	$	—	$	—	$	94,915
September 30, 2025
Commercial	$	32,161	$	—	$	—	$	4,982
Income producing - commercial real estate	109,661		2,819		—		27,202
Owner occupied - commercial real estate	12,674		—		—		—
Real estate mortgage - residential	—		—		—		5,736
Construction - commercial and residential	16,509		—		—		6,418
Total	$	171,005	$	2,819	$	—	$	44,338

The Company monitors loan payments on performing and nonperforming loans on an on-going basis to determine if a loan is considered to have a payment default. To determine the existence of a payment default, the Company analyzes the economic conditions that exist for each borrower and their ability to generate positive cash flow during a given loan's term.

The table below presents the amortized cost basis of HFI loans that were experiencing payment default and were modified in the twelve months prior to that default for borrowers experiencing financial difficulty.

	Amortized Cost Basis
(dollars in thousands)	Term Extension		Combination - Term Extension and Principal Payment Delay		Combination - Term Extension, Principal Payment Delay and Interest Rate Reduction
September 30, 2026
Commercial	$	2,994	$	6,438	$	—
Income producing - commercial real estate	9,823		67,467		7,687
Construction - commercial and residential	—		—		506
Total	$	12,817	$	73,905	$	8,193
September 30, 2025
Commercial	$	4,546	$	436	$	—
Income producing - commercial real estate	—		30,021		—
Real estate mortgages - residential	—		5,736		—
Construction - commercial and residential	1,821		4,597		—
Total	$	6,367	$	40,790	$	—

The Company individually evaluates nonaccrual loans when performing its CECL estimate to calculate the ACL. Additionally, the Company utilizes historical internal and third-party service provider sourced loss data in the determination of its PD/LGD rates applied in the calculation of its CECL estimate. Upon determination that a modified loan (or a portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the ACL is adjusted by the same amount.