Loans and Allowance for Credit Losses

3 Months Ended

Mar. 31, 2026

The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables. For further discussion on the most significant accounting policies that the Company follows, see Note 1 – “Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements” included in Part II, Item 8 of the 2025 Annual Report.

The following table provides information about the principal classes of the loan portfolio at March 31, 2026 and December 31, 2025.


($ in thousands)	March 31, 2026		% of Total Loans		December 31, 2025		% of Total Loans
Commercial real estate	$	2,599,815	53.62	%	$	2,643,996	53.95	%
Residential real estate	1,425,733		29.41		1,414,964		28.88
Construction	342,835		7.07		344,903		7.04
Commercial	220,833		4.56		226,006		4.61
Consumer	254,478		5.25		265,912		5.43
Credit cards	4,336		0.09		4,521		0.09
Total loans	4,848,030		100.00	%	4,900,302		100.00	%
Less: allowance for credit losses	(58,481)				(58,836)
Total loans, net	$	4,789,549			$	4,841,466

Loans are stated at their principal amount outstanding, net of any purchase premiums or discounts, deferred fees, and costs. Included in loans were deferred costs, net of fees, of $3.0 million and $3.1 million at March 31, 2026 and December 31, 2025, respectively. At March 31, 2026 and December 31, 2025, loans included $1.42 billion and $1.49 billion, respectively, of aggregate loans that were acquired as part of the acquisitions of Severn Bancorp, Inc. (“Severn”) and The Community Financial Corporation (“TCFC”). These balances are

presented net of the related aggregate discounts, which totaled $73.9 million and $78.2 million at March 31, 2026 and December 31, 2025, respectively.

The following tables provide information on the amortized cost basis of nonaccrual loans by loan class as of March 31, 2026 and December 31, 2025.


($ in thousands)	Nonaccrual With No Allowance For Credit Losses		Nonaccrual With An Allowance For Credit Losses		Total Nonaccrual Loans
March 31, 2026
Nonaccrual loans:
Commercial real estate	$	40,989	$	11,292	$	52,281
Residential real estate	8,116		961		9,077
Construction	161		—		161
Commercial	256		2,586		2,842
Consumer	475		59		534
Credit cards	—		63		63
Total	$	49,997	$	14,961	$	64,958

Interest income	$	655	$	295	$	950


($ in thousands)	Nonaccrual With No Allowance For Credit Losses		Nonaccrual With An Allowance For Credit Losses		Total Nonaccrual Loans
December 31, 2025
Nonaccrual loans:
Commercial real estate	$	6,135	$	19,498	$	25,633
Residential real estate	9,594		544		10,138
Construction	88		—		88
Commercial	2,297		784		3,081
Consumer	898		74		972
Credit cards	—		48		48
Total	$	19,012	$	20,948	$	39,960

Interest income	$	285	$	363	$	648


($ in thousands)	Nonaccrual Delinquent Loans		Nonaccrual Current Loans		Total Nonaccrual Loans
March 31, 2026
Nonaccrual loans:
Commercial real estate	$	1,838	$	50,443	$	52,281
Residential real estate	4,651		4,426		9,077
Construction	161		—		161
Commercial	—		2,842		2,842
Consumer	75		459		534
Credit cards	63		—		63
Total	$	6,788	$	58,170	$	64,958


($ in thousands)	Nonaccrual Delinquent Loans		Nonaccrual Current Loans		Total Nonaccrual Loans
December 31, 2025
Nonaccrual loans:
Commercial real estate	$	2,809	$	22,824	$	25,633
Residential real estate	3,808		6,330		10,138
Construction	88		—		88
Commercial	196		2,885		3,081
Consumer	491		481		972
Credit cards	32		16		48
Total	$	7,424	$	32,536	$	39,960

The overall quality of the Company’s loan portfolio is primarily assessed using the Company’s risk-grading scale. This review process is assisted by frequent internal reporting of loan production, loan quality, concentrations of credit, loan delinquencies and nonperforming and potential problem loans. Credit quality indicators are adjusted based on management’s judgment during the quarterly review process.

Consumer credit cards are monitored based on a borrower’s payment history. Credit card loans are classified as performing and are typically charged-off no later than 180 days or when, in the opinion of management, the collection of principal or interest is considered doubtful. As of March 31, 2026, there were five credit cards that were evaluated based on economic conditions specific to the loans or borrowers, and were downgraded to substandard and nonperforming.

Loans subject to risk rating are graded on a scale of one to ten.

Ratings 1 through 6 – Pass – Ratings 1 through 6 have asset risks ranging from excellent-low to adequate. The specific rating assigned considers customer history of earnings, cash flows, liquidity, leverage, capitalization, consistency of debt service coverage, the nature and extent of customer relationship and other relevant specific business factors such as the stability of the industry or market area, changes to management, litigation or unexpected events that could have an impact on risks.

Rating 7 – Special Mention – These credits have potential weaknesses due to economic conditions, less than adequate earnings performance or other factors which require the lending officer to direct more than normal attention to the credit. Financing alternatives may be limited and/or command higher risk interest rates. Special mention loan relationships are reviewed at least quarterly.

Rating 8 – Substandard – Substandard assets are assets that are inadequately protected by the sound worth or paying capacity of the borrower or of the collateral pledged. Substandard loans are the first adversely classified loans on the Bank’s watchlist. These assets have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the possibility that the Company will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified substandard. The loans may have a delinquent history or combination of weak collateral, weak guarantor or operating losses. When a loan is assigned to this category, the Company may estimate a specific reserve in the credit loss allowance analysis and/or place the loan on nonaccrual. These assets listed may include assets with histories of repossessions or some that are nonperforming bankruptcies. Substandard loan relationships are reviewed at least quarterly.

Rating 9 – Doubtful – Doubtful assets have many of the same characteristics of substandard assets, with the exception that the Company has determined that loss is not only possible but is probable. The amount of loss is not discernible due to factors such as merger, acquisition, or liquidation; a capital injection; a pledge of additional collateral; the sale of assets; or alternative refinancing plans. Credits receiving a doubtful classification are required to be on nonaccrual. Doubtful loan relationships are reviewed at least quarterly.

Rating 10 – Loss – Loss assets are uncollectible or of little value.

The following table provides information on loan risk ratings as of March 31, 2026 and gross charge-offs during the three months ended March 31, 2026.


	Term Loans by Origination Year												Revolving loans		Revolving converted to term loans		Total
($ in thousands)	Prior		2022		2023		2024		2025		2026
March 31, 2026
Commercial real estate
Pass	$	1,263,079	$	522,428	$	218,721	$	150,567	$	262,491	$	19,074	$	19,093	$	150	$	2,455,603
Special mention	28,222		50,924		341		272		—		—		—		—		79,759
Substandard	26,233		16,287		19,723		1,239		621		—		350		—		64,453
Total	$	1,317,534	$	589,639	$	238,785	$	152,078	$	263,112	$	19,074	$	19,443	$	150	$	2,599,815
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Residential real estate
Pass	$	484,287	$	272,211	$	199,154	$	157,905	$	123,083	$	25,120	$	136,107	$	40	$	1,397,907
Special mention	16,841		191		504		—		—		—		65		—		17,601
Substandard	7,965		715		316		—		110		—		1,119		—		10,225
Total	$	509,093	$	273,117	$	199,974	$	157,905	$	123,193	$	25,120	$	137,291	$	40	$	1,425,733
Gross charge-offs	$	(138)	$	—	$	—	$	—	$	—	$	—	$	(4)	$	—	$	(142)

Construction
Pass	$	32,869	$	6,929	$	27,791	$	90,705	$	151,703	$	17,237	$	14,252	$	946	$	342,432
Special mentions	—		—		—		—		—		—		—		—		—
Substandard	161		—		—		—		242		—		—		—		403
Total	$	33,030	$	6,929	$	27,791	$	90,705	$	151,945	$	17,237	$	14,252	$	946	$	342,835
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial
Pass	$	48,218	$	17,998	$	14,055	$	26,743	$	34,088	$	5,557	$	65,685	$	1,419	$	213,763
Special mention	22		89		95		70		52		—		83		—		411
Substandard	920		661		484		577		18		290		3,709		—		6,659
Total	$	49,160	$	18,748	$	14,634	$	27,390	$	34,158	$	5,847	$	69,477	$	1,419	$	220,833
Gross charge-offs	$	(2)	$	(37)	$	(149)	$	—	$	—	$	—	$	(15)	$	—	$	(203)

Consumer
Pass	$	49,914	$	83,717	$	35,458	$	27,786	$	44,744	$	11,598	$	727	$	—	$	253,944
Special mention	—		—		—		—		—		—		—		—		—
Substandard	8		60		407		—		59		—		—		—		534
Total	$	49,922	$	83,777	$	35,865	$	27,786	$	44,803	$	11,598	$	727	$	—	$	254,478
Gross charge-offs	$	(437)	$	(362)	$	—	$	(17)	$	(15)	$	—	$	—	$	—	$	(831)

Total
Pass	$	1,878,367	$	903,283	$	495,179	$	453,706	$	616,109	$	78,586	$	235,864	$	2,555	$	4,663,649
Special mention	45,085		51,204		940		342		52		—		148		—		97,771
Substandard	35,287		17,723		20,930		1,816		1,050		290		5,178		—		82,274
Total loans by risk category	$	1,958,739	$	972,210	$	517,049	$	455,864	$	617,211	$	78,876	$	241,190	$	2,555	$	4,843,694

Total gross charge-offs	$	(577)	$	(399)	$	(149)	$	(17)	$	(15)	$	—	$	(19)	$	—	$	(1,176)

The following table presents the amortized cost of credit card loans based on performing status and gross charge-offs during the three months ended March 31, 2026. Nonperforming loans consisted of nonaccrual loans and loans past due 90 days or more and still accruing.


	Term Loans by Origination Year												Revolving Loans		Revolving Converted to Term Loans		Total
($ in thousands)	Prior		2022		2023		2024		2025		2026
March 31, 2026
Credit cards
Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	4,273	$	—	$	4,273
Nonperforming	—		—		—		—		—		—		63		—		63
Total	$	—	$	—	$	—	$	—	$	—	$	—	$	4,336	$	—	$	4,336
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	(80)	$	—	$	(80)

Total loans evaluated by performing status	$	—	$	—	$	—	$	—	$	—	$	—	$	4,336	$	—	$	4,336

Total gross charge-offs	$	(577)	$	(399)	$	(149)	$	(17)	$	(15)	$	—	$	(99)	$	—	$	(1,256)

Total recorded investment	$	1,958,739	$	972,210	$	517,049	$	455,864	$	617,211	$	78,876	$	245,526	$	2,555	$	4,848,030

The following table provides information on loan risk ratings as of December 31, 2025 and gross charge-offs during the year ended December 31, 2025.


	Term Loans by Origination Year												Revolving Loans		Revolving Converted to Term Loans		Total
($ in thousands)	Prior		2021		2022		2023		2024		2025
December 31, 2025
Commercial real estate
Pass	$	939,986	$	364,719	$	556,924	$	242,170	$	139,929	$	265,405	$	14,703	$	27,136	$	2,550,972
Special mention	15,105		2,884		34,014		344		—		—		—		—		52,347
Substandard	20,056		16,806		2,840		—		283		—		692		—		40,677
Total	$	975,147	$	384,409	$	593,778	$	242,514	$	140,212	$	265,405	$	15,395	$	27,136	$	2,643,996
Gross charge-offs	$	(109)	$	(2,640)	$	—	$	—	$	—	$	—	$	—	$	—	$	(2,749)

Residential real estate
Pass	$	317,764	$	182,198	$	275,869	$	215,397	$	147,517	$	114,300	$	131,075	$	695	$	1,384,815
Special mention	3,719		14,777		—		504		—		—		65		—		19,065
Substandard	6,990		2,012		267		330		—		112		1,373		—		11,084
Total	$	328,473	$	198,987	$	276,136	$	216,231	$	147,517	$	114,412	$	132,513	$	695	$	1,414,964
Gross charge-offs	$	(5)	$	—	$	—	$	—	$	—	$	—	$	(45)	$	—	$	(50)

Construction
Pass	$	27,094	$	7,238	$	7,047	$	28,868	$	108,885	$	151,738	$	13,070	$	632	$	344,572
Special mentions	—		—		—		—		—		—		—		—		—
Substandard	88		—		—		—		—		243		—		—		331
Total	$	27,182	$	7,238	$	7,047	$	28,868	$	108,885	$	151,981	$	13,070	$	632	$	344,903
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial
Pass	$	23,379	$	25,518	$	19,739	$	14,925	$	29,307	$	35,202	$	70,493	$	1,870	$	220,433
Special mention	104		27		107		105		76		54		845		—		1,318
Substandard	424		1,055		758		527		—		—		1,318		173		4,255
Total	$	23,907	$	26,600	$	20,604	$	15,557	$	29,383	$	35,256	$	72,656	$	2,043	$	226,006
Gross charge-offs	$	(71)	$	—	$	—	$	(329)	$	—	$	—	$	(381)	$	(31)	$	(812)

Consumer
Pass	$	7,954	$	45,750	$	88,990	$	39,576	$	31,597	$	49,634	$	769	$	—	$	264,270
Special mention	—		—		671		—		—		—		—		—		671
Substandard	1		29		396		445		41		59		—		—		971
Total	$	7,955	$	45,779	$	90,057	$	40,021	$	31,638	$	49,693	$	769	$	—	$	265,912
Gross charge-offs	$	(451)	$	(99)	$	(1,595)	$	(646)	$	(324)	$	—	$	(18)	$	—	$	(3,133)

Total
Pass	$	1,316,177	$	625,423	$	948,569	$	540,936	$	457,235	$	616,279	$	230,110	$	30,333	$	4,765,062
Special mention	18,928		17,688		34,792		953		76		54		910		—		73,401
Substandard	27,559		19,902		4,261		1,302		324		414		3,383		173		57,318
Total loans by risk category	$	1,362,664	$	663,013	$	987,622	$	543,191	$	457,635	$	616,747	$	234,403	$	30,506	$	4,895,781

Total gross charge-offs	$	(636)	$	(2,739)	$	(1,595)	$	(975)	$	(324)	$	—	$	(444)	$	(31)	$	(6,744)

The following table presents the amortized cost of credit card loans based on performing status and gross charge-offs during the year ended December 31, 2025. Nonperforming loans consisted of nonaccrual loans and loans past due 90 days or more and still accruing.


	Term Loans by Origination Year												Revolving Loans		Revolving Converted to Term Loans		Total
($ in thousands)	Prior		2021		2022		2023		2024		2025
December 31, 2025
Credit cards
Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	4,473	$	—	$	4,473
Nonperforming	—		—		—		—		—		—		48		—		48
Total	$	—	$	—	$	—	$	—	$	—	$	—	$	4,521	$	—	$	4,521
Gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	(535)	$	—	$	(535)

Total loans evaluated by performing status	$	—	$	—	$	—	$	—	$	—	$	—	$	4,521	$	—	$	4,521

Total gross charge-offs	$	(636)	$	(2,739)	$	(1,595)	$	(975)	$	(324)	$	—	$	(979)	$	(31)	$	(7,279)

Total recorded investment	$	1,362,664	$	663,013	$	987,622	$	543,191	$	457,635	$	616,747	$	238,924	$	30,506	$	4,900,302

The following tables provide information on the aging of the Company’s loan portfolio as of March 31, 2026 and December 31, 2025.


($ in thousands)	30‑59 Days Past Due			60‑89 Days Past Due			90 Days Past Due and Still Accruing			30-89 Days Past Due and Not Accruing			90 Days Past Due and Not Accruing			Total Past Due			Current Accrual Loans			Current Nonaccrual Loans			Total
March 31, 2026
Commercial real estate	$	761		$	881		$	—		$	1,183		$	655		$	3,480		$	2,545,892		$	50,443		$	2,599,815
Residential real estate	2,272			8			—			3,444			1,207			6,931			1,414,376			4,426			1,425,733
Construction	42			—			—			35			126			203			342,632			—			342,835
Commercial	45			—			—			—			—			45			217,946			2,842			220,833
Consumer	239			136			—			—			75			450			253,569			459			254,478
Credit cards	71			11			—			17			46			145			4,191			—			4,336
Total	$	3,430		$	1,036		$	—		$	4,679		$	2,109		$	11,254		$	4,778,606		$	58,170		$	4,848,030
Percent of total loans	0.07		%	0.02		%	0.00		%	0.10		%	0.04		%	0.23		%	98.57		%	1.20		%	100.00		%


($ in thousands)	30‑59 days Past Due			60‑89 Days Past Due			90 Days Past Due and Still Accruing			30-89 Days Past Due and Not Accruing			90 Days Past Due and Not Accruing			Total Past Due			Current Accrual Loans			Current Nonaccrual Loans			Total
December 31, 2025
Commercial real estate	$	1,684		$	—		$	—		$	68		$	2,741		$	4,493		$	2,616,679		$	22,824		$	2,643,996
Residential real estate	1,663			397			71			1,225			2,583			5,939			1,402,695			6,330			1,414,964
Construction	—			43			79			—			88			210			344,693			—			344,903
Commercial	—			4			—			46			150			200			222,921			2,885			226,006
Consumer	390			690			—			43			448			1,571			263,860			481			265,912
Credit cards	14			19			105			32			—			170			4,335			16			4,521
Total	$	3,751		$	1,153		$	255		$	1,414		$	6,010		$	12,583		$	4,855,183		$	32,536		$	4,900,302
Percent of total loans	0.08		%	0.02		%	0.01		%	0.03		%	0.12		%	0.26		%	99.08		%	0.66		%	100.00		%

The following tables provide a summary of the activity in the ACL allocated by loan class for the three months ended March 31, 2026 and 2025. Allocation of a portion of the allowance to one loan class does not preclude its availability to absorb losses from other loan classes.


($ in thousands)	Beginning Balance		Charge-offs		Recoveries		Provisions		Ending Balance
Three Months Ended March 31, 2026
Commercial real estate	$	21,387	$	—	$	—	$	285	$	21,672
Residential real estate	22,510		(142)		23		602		22,993
Construction	5,968		—		—		(1,162)		4,806
Commercial	3,005		(203)		27		668		3,497
Consumer	5,767		(831)		356		123		5,415
Credit cards	199		(80)		3		(24)		98
Total	$	58,836	$	(1,256)	$	409	$	492	$	58,481


($ in thousands)	Beginning Balance		Charge-offs		Recoveries		Provisions		Ending Balance
Three Months Ended March 31, 2025
Commercial real estate	$	22,846	$	—	$	78	$	(936)	$	21,988
Residential real estate	21,776		—		1		616		22,393
Construction	2,854		—		1		987		3,842
Commercial	3,138		(2)		6		(287)		2,855
Consumer	6,889		(482)		86		81		6,574
Credit cards	407		(242)		—		225		390
Total	$	57,910	$	(726)	$	172	$	686	$	58,042

The following tables present the amortized cost basis of collateral-dependent loans by loan portfolio segment as of March 31, 2026 and December 31, 2025.


	March 31, 2026
($ in thousands)	Real Estate Collateral		Other Collateral		Total
Commercial real estate	$	64,453	$	—	$	64,453
Residential real estate	10,225		—		10,225
Construction	404		—		404
Commercial(1)	—		6,658		6,658
Consumer(2)	—		533		533
Total	$	75,082	$	7,191	$	82,273


	December 31, 2025
($ in thousands)	Real Estate Collateral		Other Collateral		Total
Commercial real estate	$	40,676	$	—	$	40,676
Residential real estate	11,084		—		11,084
Construction	332		—		332
Commercial(1)	—		4,164		4,164
Consumer(2)	—		971		971
Total	$	52,092	$	5,135	$	57,227

____________________________________

(1)Commercial loans are primarily secured by underlying business assets of the borrower.

(2)Consumer loans are primarily secured by automobiles and boats of the borrower.

Loan Modifications to Borrowers Experiencing Financial Difficulty

Loan modifications to borrowers experiencing financial difficulty may include interest rate reduction, principal or interest forgiveness, forbearance, term extensions and other combinations of actions intended to minimize economic loss and avoid foreclosure or repossession of collateral.

During the three months ended March 31, 2026 and 2025, no loan modifications were made to borrowers experiencing financial difficulty.

As of March 31, 2026, of the loans with borrowers experiencing financial difficulty that were modified during the preceding 12 months, $5.3 million and $164 thousand were classified as current accrual and current nonaccrual, respectively. As of December 31, 2025, of the loans with borrowers experiencing financial difficulty that were modified during the preceding 12 months, $5.3 million and $170 thousand were classified as current accrual and current nonaccrual, respectively.

During the three months ended March 31, 2026 and 2025, there were no defaults on loan modifications made to borrowers experiencing financial difficulty in the preceding 12 months.

Foreclosure Proceedings

The Company had $124 thousand and $124 thousand of consumer mortgage loans collateralized by residential real estate property that were in the process of foreclosure as of March 31, 2026 and December 31, 2025, respectively. The Company had $151 thousand and $95 thousand of commercial real estate loans collateralized by commercial real estate that were in the process of foreclosure as of March 31, 2026 and December 31, 2025, respectively.

Other Real Estate Owned (“OREO”) and Repossessed Assets

OREO and repossessed assets are adjusted for fair value upon transfer from loans to foreclosed assets, establishing a new cost basis. Subsequently, foreclosed assets are carried at the lower of carrying value or fair value. The Company had OREO and repossessed asset balances of $69 thousand and $3.3 million as of March 31, 2026 and $113 thousand and $2.9 million as of December 31, 2025, respectively.

Mortgage Servicing Rights (“MSRs”)

Mortgage loans are sold with servicing retained and the MSRs are initially recorded at fair value with the income statement effect recorded in mortgage banking revenue in the consolidated statements of income. Subsequently, the MSRs are amortized to the income statement in proportion to, and over the period of, the estimated future net servicing income of the underlying loans. Servicing rights are evaluated for impairment based upon fair value of the rights as compared to carrying amount. No impairments of MSRs were recognized for the three months ended March 31, 2026 or 2025. The Company recognized net servicing income of $139 thousand and a net servicing loss of $65 thousand for the three months ended March 31, 2026 and 2025, respectively. At March 31, 2026, the Company was servicing $334.0 million in loans for the Federal National Mortgage Association and $101.8 million in loans for Federal Home Loan Mortgage Corporation.

The following table presents activity in MSRs for the three months ended March 31, 2026 and 2025.


	Three Months Ended March 31,
($ in thousands)	2026		2025
Beginning balance	$	5,142	$	5,874
Net additions	—		43
Amortization expense	(159)		(52)
Other	—		(330)
Ending balance	$	4,983	$	5,535

The fair value of MSRs were determined using discount rates ranging from 9.0% to 9.0% at March 31, 2026 and 9.0% to 10.0% at December 31, 2025. The valuation on MSRs was not material at March 31, 2026 and December 31, 2025. Depending on the stratification of the specific mortgage servicing right, prepayment speeds ranged from 5.88% to 8.60% for the three months ended March 31, 2026. The associated weighted-average default rate was 0.20% for the three months ended March 31, 2026.