​ Interest Rate Risk ​ We are subject to interest rate risk arising from changes in rates affecting assets (loans and securities), liabilities (deposits and borrowings), and off-balance sheet derivative instruments (interest rate swaps). Changes in interest rates may materially affect the fair value of financial instruments, cash flows, and net interest income. Like most financial institutions, we are exposed to changes in both short- and long-term interest rates. ​ We manage interest rate risk within limits established by our asset-liability policy to reduce the impact of interest rate changes on earnings. We are exposed to credit, liquidity, and interest rate risk, but are not subject to significant foreign currency or commodity price risk. Our Asset and Liability Committee (“ALCO”) manages interest rate risk by structuring on- and off-balance sheet positions, including the use of interest rate swaps, as discussed in Note 18 to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025. The ALCO reviews asset-liability modeling and interest rate risk analyses and reports to the Board of Directors at least quarterly. We also maintain a Risk Committee, chaired by our Chief Risk Officer, which reports at least quarterly to senior management and the Board of Directors on compliance with established risk tolerance limits and significant changes in risk exposures. The Risk Committee oversees our enterprise risk management framework. Our interest rate risk exposures at June 30, 2026, and December 31, 2025, are summarized in the table below. ​ As of June 30, 2026, the balance sheet remained moderately asset-sensitive, as variable-rate assets generally reprice more quickly than our longer-duration, lower-beta deposit base. Changes in interest rates and yield curve dynamics may affect net interest income, funding costs, and the value of interest-sensitive financial instruments. The Bank continues to possess a strong liquidity position. ​ The Federal Open Market Committee maintained the target range for the federal funds rate at 3.50% to 3.75% during the second quarter of 2026. Forward market rates increased during the quarter and the yield curve shifted as market expectations for monetary policy evolved. Following the appointment of Chairman Kevin Warsh in May 2026, the Federal Reserve placed less emphasis on forward guidance, increasing the importance of economic data and policy communications in shaping market expectations. As of June 30, 2026, the current forward curve implies one rate hike in the fourth quarter of 2026. ​ Net interest income is influenced by economic conditions, regulatory actions, asset and liability repricing characteristics, customer behavior, competitive pricing pressures, yield curve dynamics, basis risk between indices such as SOFR and Prime, and changes in balance sheet composition. ​ We utilize simulation analysis to estimate the impact of interest rate scenarios on net interest income. The model incorporates expected cash flows, repricing characteristics, and embedded options within assets and liabilities. Earnings at risk are calculated by comparing net interest income under a stable-rate scenario to net interest income under alternative rate scenarios. ​ As of June 30, 2026, our net interest income profile remained positioned to benefit from rising interest rates. Compared to December 31, 2025, sensitivity to rising rate scenarios increased modestly, primarily due to growth in cash balances from earnings and principal repayments, including amortization, maturities, calls, and prepayments. Consistent with our moderately asset-sensitive balance sheet position, modeled earnings are expected to benefit from rising rates and decline under falling rate scenarios, although actual results may vary based on customer behavior, deposit pricing, prepayment activity, and market conditions. ​ ​ 68 Table of Contents ​ The following analysis assumes an instantaneous and parallel shift in interest rates of 0.5%, 1.0%, and 2.0% and does not reflect potential changes in customer behavior, balance sheet composition, or management actions that may occur in response to changing market conditions. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Analysis of Net Interest Income Sensitivity ​ ​ Immediate Changes in Rates (Dollars in thousands) ​ ​ ​ ​ (2.0) % ​ ​ ​ ​ (1.0) % ​ ​ ​ ​ (0.5) % ​ ​ ​ ​ 0.5 % ​ ​ ​ ​ 1.0 % ​ ​ ​ ​ 2.0 % June 30, 2026 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dollar change ​ $ (35,163) ​ ​ $ (19,471) ​ ​ $ (9,942) ​ ​ $ 9,513 ​ ​ $ 19,046 ​ ​ $ 34,634 ​ Percent change ​ ​ (10.5) % ​ ​ (5.8) % ​ ​ (3.0) % ​ ​ 2.8 % ​ ​ 5.7 % ​ ​ 10.3 % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2025 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Dollar change ​ $ (35,505) ​ ​ $ (18,190) ​ ​ $ (9,026) ​ ​ $ 8,817 ​ ​ $ 17,732 ​ ​ $ 31,490 ​ Percent change ​ ​ (10.6) % ​ ​ (5.4) % ​ ​ (2.7) % ​ ​ 2.6 % ​ ​ 5.3 % ​ ​ 9.4 % ​ The amounts and assumptions used in the simulation model are not intended to be indicative of actual future results. Actual results may differ materially from simulated outcomes due to differences in the timing, frequency, and magnitude of interest rate changes, changes in balance sheet composition, evolving market conditions, and management actions taken in response to those conditions. Interest rate sensitivity estimates also incorporate assumptions regarding deposit repricing characteristics and customer behavior that may differ from actual experience, particularly in changing competitive and interest rate environments. In addition, the simulated results do not reflect the impact of any potential management actions that could be implemented to mitigate interest rate risk. ​ Effects of Inflation ​ In management's opinion, changes in interest rates have a greater impact on our financial condition than inflation; however, we monitor both. The annual U.S. inflation rate increased to 3.5% in June 2026, compared to 3.3% in March 2026, while core CPI remained unchanged at 2.6%. Recent inflation trends have been influenced by volatility in energy prices and broader geopolitical developments. Elevated inflation may contribute to higher funding costs, increased operating expenses, changes in customer borrowing behavior, and pressure on the financial condition of certain borrowers. Inflation at current levels has not had a material impact on our financial results. ​