[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents 89bio's unaudited condensed consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents 89bio's unaudited condensed consolidated financial statements, covering balance sheets, operations, equity, cash flows, and notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity Condensed Consolidated Balance Sheets (In thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | **Assets** | | | | Cash and cash equivalents | $129,076 | $126,060 | | Marketable securities | $432,088 | $313,895 | | Total current assets | $601,520 | $476,450 | | Total assets | $603,485 | $478,685 | | **Liabilities** | | | | Total current liabilities | $39,611 | $36,129 | | Warrant liability | $— | $516 | | Term loan, noncurrent, net | $36,156 | $35,732 | | Total liabilities | $81,752 | $77,896 | | **Stockholders' Equity** | | | | Total stockholders' equity | $521,733 | $400,789 | | Total liabilities and stockholders' equity | $603,485 | $478,685 | [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) This section details the company's financial performance, including revenues, expenses, and net loss over specific periods Condensed Consolidated Statements of Operations and Comprehensive Loss (In thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $103,902 | $44,865 | $168,296 | $92,293 | | General and administrative | $11,922 | $8,571 | $23,437 | $18,420 | | Total operating expenses | $115,824 | $53,436 | $191,733 | $110,713 | | Loss from operations | $(115,824) | $(53,436) | $(191,733) | $(110,713) | | Interest expense | $(1,137) | $(874) | $(2,404) | $(1,737) | | Interest income and other, net | $6,210 | $6,473 | $12,248 | $13,029 | | Net loss | $(111,504) | $(47,971) | $(182,779) | $(99,652) | | Comprehensive loss | $(111,767) | $(48,135) | $(183,220) | $(100,525) | | Net loss per share, basic and diluted | $(0.71) | $(0.48) | $(1.20) | $(1.02) | | Weighted-average shares (basic and diluted) | 157,880,203 | 99,831,111 | 152,154,469 | 97,838,926 | [Condensed Consolidated Statements of Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity) This section outlines changes in the company's equity, reflecting stock issuances, net losses, and stock-based compensation - Total stockholders' equity increased from **$400,789 thousand** as of December 31, 2024, to **$521,733 thousand** as of June 30, 2025, primarily driven by **$269,903 thousand** from a public offering and stock-based compensation of **$7,216 thousand** and **$7,315 thousand**, partially offset by net losses of **$(71,275) thousand** and **$(111,504) thousand**[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section presents the company's cash inflows and outflows from operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (In thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(172,162) | $(100,884) | | Net cash used in investing activities | $(114,455) | $(52,049) | | Net cash provided by financing activities | $289,633 | $48,990 | | Net change in cash and cash equivalents | $3,016 | $(103,943) | | Cash and cash equivalents at end of period | $129,076 | $212,218 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the unaudited condensed consolidated financial statements [1. Organization and Liquidity](index=8&type=section&id=1.%20Organization%20and%20Liquidity) 89bio, a clinical-stage biopharmaceutical company, has an accumulated deficit of **$1,007.3 million** but sufficient liquidity for at least one year - 89bio, Inc. is a clinical-stage biopharmaceutical company developing pegozafermin for MASH and SHTG[24](index=24&type=chunk) - The company has an accumulated deficit of **$1,007.3 million** as of June 30, 2025, and expects continued operating losses[26](index=26&type=chunk) - Existing cash, cash equivalents, and marketable securities (**$561.2 million** as of June 30, 2025) are projected to fund operations for at least one year[27](index=27&type=chunk) [2. Summary of Significant Accounting Policies](index=8&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines 89bio's accounting principles, including U.S. GAAP conformity, fair value measurements, and new FASB ASUs - Financial statements are prepared in conformity with U.S. GAAP and SEC rules for interim reporting, reflecting normal recurring adjustments[28](index=28&type=chunk)[29](index=29&type=chunk) - The company manages its business as a single reportable segment, with the CEO as the Chief Operating Decision Maker (CODM)[43](index=43&type=chunk) - New FASB ASUs (2023-09 on Income Tax Disclosures and 2024-03 on Expense Disaggregation) are expected to result in expanded disclosures upon adoption in 2025 and 2027/2028, respectively[45](index=45&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk) [3. Fair Value Measurements](index=14&type=section&id=3.%20Fair%20Value%20Measurements) This section details fair value measurements for financial assets and liabilities, including cash equivalents, marketable securities, and warrant liability Fair Value of Cash Equivalents and Marketable Securities (In thousands) | Asset Category | June 30, 2025 Fair Value | December 31, 2024 Fair Value | | :-------------------------- | :----------------------- | :------------------------- | | Money market funds (Level 1) | $5,535 | $22,645 | | Commercial paper (Level 2) | $101,633 | $51,991 | | U.S. government bonds (Level 2) | $212,381 | $170,270 | | Agency bonds (Level 2) | $56,724 | $63,859 | | Corporate debt securities (Level 2) | $9,103 | $6,166 | | U.S. Treasury securities (Level 2) | $111,149 | $44,509 | | Agency discount securities (Level 2) | $— | $18,942 | | **Total** | **$496,525** | **$378,382** | | Classified as: Cash equivalents | $64,437 | $64,487 | | Classified as: Marketable securities | $432,088 | $313,895 | - The warrant liability, previously **$516 thousand** as of December 31, 2024, was reduced to zero as of June 30, 2025, due to the expiration of Tranche 1 and the remote probability of exercise for Tranches 2 and 3 of the Term Loan Facility[53](index=53&type=chunk)[54](index=54&type=chunk) [4. Balance Sheet Components](index=15&type=section&id=4.%20Balance%20Sheet%20Components) This section breaks down prepaid and other current assets, and accrued expenses, reflecting increased clinical trial activity Prepaid and Other Current Assets (In thousands) | Asset Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Prepaid research and development | $37,802 | $32,550 | | Prepaid taxes | $52 | $368 | | Prepaid other | $2,502 | $3,577 | | **Total** | **$40,356** | **$36,495** | Accrued Expenses (In thousands) | Expense Category | June 30, 2025 | December 31, 2024 | | :------------------------------- | :------------ | :---------------- | | Accrued research and development expenses | $17,363 | $11,426 | | Accrued employee and related expenses | $5,016 | $6,872 | | Accrued professional and legal fees | $1,749 | $1,680 | | Accrued other expenses | $42 | $42 | | **Total** | **$24,170** | **$20,020** | [5. Commitments and Contingencies](index=17&type=section&id=5.%20Commitments%20and%20Contingencies) This section details commitments under the Teva agreement and BiBo collaboration, plus an Israeli Tax Authority assessment - Under the FGF21 Agreement with Teva, 89bio is obligated to make up to **$65.0 million** in commercial milestone payments and tiered royalties on net sales of pegozafermin[57](index=57&type=chunk) - The BiBo Collaboration Agreement for a commercial manufacturing facility was amended in June 2025, increasing the total contractual obligation to **$175.0 million** (exclusive of VAT), with an additional **$40.0 million** paid in June 2025 and a final **$13.5 million** milestone payment due upon facility completion[61](index=61&type=chunk)[62](index=62&type=chunk) - The Israeli Tax Authority (ITA) issued a formal assessment seeking to recharacterize an intercompany IP transfer as a taxable sale, leading to a recorded liability of **$5.3 million** for unrecognized tax benefit, which 89bio is appealing[64](index=64&type=chunk)[65](index=65&type=chunk)[67](index=67&type=chunk) [6. Term Loan Facility](index=19&type=section&id=6.%20Term%20Loan%20Facility) This section describes the **$150.0 million** Term Loan Facility, its tranches, maturity, interest rate, and warrant reclassification - The Term Loan Facility provides for a maximum aggregate principal amount of **$150.0 million**, secured by substantially all assets excluding intellectual property[69](index=69&type=chunk) - Tranche 1's remaining **$35.0 million** commitment expired undrawn on June 30, 2025; Tranche 2's **$30.0 million** is not expected to be achieved by the December 31, 2025, milestone due to revised ENTRUST data reporting in Q1 2026; Tranche 3 is available at lenders' sole discretion[73](index=73&type=chunk) - The loan matures on October 1, 2028, with interest-only payments until January 1, 2027, and the stated interest rate was **9.25%** as of June 30, 2025[70](index=70&type=chunk) [7. Stockholders' Equity](index=20&type=section&id=7.%20Stockholders'%20Equity) This section details changes in stockholders' equity, including public offerings, ATM program activity, and warrant issuances Common Stock Reserved for Issuance (As of June 30, 2025) | Category | Shares Reserved | | :------------------------------------------ | :-------------- | | Stock options outstanding | 11,698,226 | | RSUs and PSUs outstanding | 2,508,289 | | Shares available for future grants | 1,996,052 | | Shares available for ESPP | 3,246,812 | | Warrants to purchase common stock outstanding | 397,123 | | Pre-funded warrants to purchase common stock outstanding | 11,231,081 | | Conversion feature related to outstanding term loan | 1,112,546 | | **Total available for future issuance** | **32,190,129** | - In January 2025, an underwritten public offering of common stock and pre-funded warrants generated approximately **$269.9 million** in net proceeds[76](index=76&type=chunk)[128](index=128&type=chunk) - Under the 2023 ATM Facility, **$21.0 million** in net proceeds were raised from the sale of **2,160,484 shares** during the six months ended June 30, 2025, with approximately **$82.8 million** remaining available under this facility[78](index=78&type=chunk)[79](index=79&type=chunk)[125](index=125&type=chunk)[126](index=126&type=chunk) - As of June 30, 2025, **11,628,204 warrants** were outstanding, including **11,231,081 pre-funded warrants** with a nominal exercise price of **$0.001** per share[82](index=82&type=chunk) [8. Stock-Based Compensation](index=22&type=section&id=8.%20Stock-Based%20Compensation) Stock-based compensation expense increased due to headcount growth, with significant unrecognized expense for options and RSUs/PSUs Stock-Based Compensation Expense (In thousands) | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Research and development | $3,184 | $2,342 | $6,586 | $4,657 | | General and administrative | $4,131 | $2,827 | $7,945 | $5,510 | | **Total** | **$7,315** | **$5,169** | **$14,531** | **$10,167** | - Total unrecognized stock-based compensation expense for unvested stock options was **$47.9 million** as of June 30, 2025, to be recognized over a weighted-average period of **2.9 years**[83](index=83&type=chunk) - Total unrecognized stock-based compensation expense for RSUs and PSUs was **$18.0 million** as of June 30, 2025, to be recognized over a weighted-average period of **1.8 years**, with a reassessment of PSU performance conditions reducing unrecognized expense by **$7.8 million**[84](index=84&type=chunk) [9. Net Loss Per Share](index=23&type=section&id=9.%20Net%20Loss%20Per%20Share) Basic and diluted net loss per share were **$(0.71)** and **$(1.20)**, with increased weighted-average shares due to issuances Weighted-Average Shares Outstanding for Net Loss Per Share | Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Common stock | 146,649,122 | 98,495,085 | 142,028,913 | 96,230,372 | | Pre-funded warrants | 11,231,081 | 1,336,026 | 10,125,556 | 1,608,554 | | **Total** | **157,880,203** | **99,831,111** | **152,154,469** | **97,838,926** | - Potentially dilutive common stock equivalents, including stock options, RSUs, PSUs, warrants, and term loan conversion features, were excluded from diluted net loss per share calculations due to their anti-dilutive effect during periods of net loss[86](index=86&type=chunk) [10. Segment Information](index=24&type=section&id=10.%20Segment%20Information) 89bio operates as a single segment, with the CEO reviewing consolidated net loss and key expense categories for performance - 89bio operates as a single reportable segment, with the CEO serving as the Chief Operating Decision Maker (CODM)[87](index=87&type=chunk) Significant Expense Categories (In thousands) | Expense Category | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Contract manufacturing | $58,084 | $17,018 | $77,141 | $38,369 | | Clinical development | $35,299 | $18,949 | $69,094 | $36,873 | | Research and development personnel-related | $9,608 | $7,847 | $20,281 | $15,580 | | General and administrative | $11,922 | $8,571 | $23,437 | $18,420 | | Interest expense | $1,137 | $874 | $2,404 | $1,737 | | Interest income and other, net | $(6,210) | $(6,473) | $(12,248) | $(13,029) | | Income tax expense | $753 | $134 | $890 | $231 | | **Net loss** | **$(111,504)** | **$(47,971)** | **$(182,779)** | **$(99,652)** | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on 89bio's financial condition, operational results, and future funding needs [Overview](index=25&type=section&id=Overview) 89bio is a clinical-stage biopharmaceutical company focused on developing innovative therapies for liver and cardio-metabolic diseases - 89bio is a clinical-stage biopharmaceutical company focused on developing innovative therapies for liver and cardio-metabolic diseases[92](index=92&type=chunk) - Pegozafermin, the lead product candidate, is being developed for metabolic dysfunction-associated steatohepatitis (MASH) and severe hypertriglyceridemia (SHTG)[92](index=92&type=chunk) [Pegozafermin MASH Program](index=25&type=section&id=Pegozafermin%20MASH%20Program) Pegozafermin is in Phase 3 clinical development for MASH, with topline data anticipated in H1 2027 and 2028 - Pegozafermin is in Phase 3 clinical development for MASH, following positive Phase 1b/2a and Phase 2b ENLIVEN trial results[93](index=93&type=chunk) - The FDA granted Breakthrough Therapy Designation and the EMA granted Priority Medicines Designation (PRIME) for pegozafermin in MASH[94](index=94&type=chunk) - The Phase 3 ENLIGHTEN program includes two global trials: ENLIGHTEN-Fibrosis (F2-F3 MASH, topline data anticipated H1 2027) and ENLIGHTEN-Cirrhosis (compensated F4 MASH, topline data anticipated 2028)[94](index=94&type=chunk)[96](index=96&type=chunk) [Pegozafermin SHTG Program](index=25&type=section&id=Pegozafermin%20SHTG%20Program) Pegozafermin is advancing for SHTG treatment, with Phase 3 ENTRUST trial topline data expected in Q1 2026 - Pegozafermin is also advancing for SHTG treatment, based on positive Phase 2 ENTRIGUE trial results[95](index=95&type=chunk) - Enrollment in the Phase 3 ENTRUST trial for SHTG was completed in December 2024 (**369 patients**), with topline data expected in Q1 2026 after study completion at Week 52[95](index=95&type=chunk)[97](index=97&type=chunk) [Manufacturing and Commercial Supply Preparedness](index=27&type=section&id=Manufacturing%20and%20Commercial%20Supply%20Preparedness) A collaboration with BiBo Biopharma Engineering is in place for a Commercial Facility to produce pegozafermin's bulk active ingredient - A collaboration agreement with BiBo Biopharma Engineering Co., Ltd. is in place for the construction of a Commercial Facility in China to produce pegozafermin's bulk active ingredient[98](index=98&type=chunk) - The manufacturing platform is designed to provide sufficient capacity for projected commercial needs and is part of a broader global manufacturing strategy to enhance resilience and flexibility[98](index=98&type=chunk) [Components of Results of Operations](index=27&type=section&id=Components%20of%20Results%20of%20Operations) This section defines key components of operations, including R&D, G&A, interest expense, interest income, and income tax expense - Research and development expenses include costs for preclinical and clinical development, intellectual property, license agreements, contract research organizations, manufacturing, and personnel[99](index=99&type=chunk) - General and administrative expenses primarily consist of personnel costs, professional services (legal, HR, audit), consulting, and allocated facilities costs[103](index=103&type=chunk) - Interest expense includes cash interest, accretion of end of term loan fees, and amortization of deferred debt issuance costs, while interest income is mainly from marketable securities[105](index=105&type=chunk)[106](index=106&type=chunk) [Results of Operations (Three Months Ended June 30, 2025 and 2024)](index=29&type=section&id=Results%20of%20Operations%20(Three%20Months%20Ended%20June%2030%2C%202025%20and%202024)) Net loss significantly increased to **$(111.5) million**, driven by higher R&D expenses, including a **$40.0 million** BiBo payment Summary of Results of Operations (Three Months Ended June 30, In thousands) | Metric | 2025 | 2024 | Change | | :-------------------------- | :----- | :----- | :----- | | Research and development | $103,902 | $44,865 | $59,037 | | General and administrative | $11,922 | $8,571 | $3,351 | | Total operating expenses | $115,824 | $53,436 | $62,388 | | Loss from operations | $(115,824) | $(53,436) | $(62,388) | | Interest expense | $(1,137) | $(874) | $(263) | | Interest income and other, net | $6,210 | $6,473 | $(263) | | Net loss before tax | $(110,751) | $(47,837) | $(62,914) | - Research and development expenses increased by **$59.0 million**, primarily due to a **$40.0 million** non-recurring payment to BiBo for the Commercial Facility and a **$16.4 million** increase in clinical development costs for Phase 3 trials[110](index=110&type=chunk)[111](index=111&type=chunk) - General and administrative expenses increased by **$3.4 million**, mainly due to higher personnel-related expenses, including stock-based compensation, driven by increased headcount[112](index=112&type=chunk) [Results of Operations (Six Months Ended June 30, 2025 and 2024)](index=31&type=section&id=Results%20of%20Operations%20(Six%20Months%20Ended%20June%2030%2C%202025%20and%202024)) Net loss increased to **$(182.8) million**, primarily due to higher R&D expenses, including the **$40.0 million** BiBo payment Summary of Results of Operations (Six Months Ended June 30, In thousands) | Metric | 2025 | 2024 | Change | | :-------------------------- | :----- | :----- | :----- | | Research and development | $168,296 | $92,293 | $76,003 | | General and administrative | $23,437 | $18,420 | $5,017 | | Total operating expenses | $191,733 | $110,713 | $81,020 | | Loss from operations | $(191,733) | $(110,713) | $(81,020) | | Interest expense | $(2,404) | $(1,737) | $(667) | | Interest income and other, net | $12,248 | $13,029 | $(781) | | Net loss before tax | $(181,889) | $(99,421) | $(82,468) | - Research and development expenses increased by **$76.0 million**, primarily from a **$38.8 million** increase in contract manufacturing (including the **$40.0 million** BiBo payment) and a **$32.2 million** increase in clinical development costs for Phase 3 trials[117](index=117&type=chunk)[118](index=118&type=chunk) - General and administrative expenses increased by **$5.0 million**, driven by higher personnel-related costs, including a **$2.4 million** increase in stock-based compensation and a **$1.7 million** increase in payroll and benefits[119](index=119&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) 89bio had **$561.2 million** in liquidity, sufficient for one year, but will require substantial additional capital for operations - As of June 30, 2025, the company had **$561.2 million** in cash, cash equivalents, and marketable securities, and an accumulated deficit of **$1,007.3 million**[123](index=123&type=chunk) - Existing financial resources are expected to fund operations for at least one year from the filing date of the 10-Q[134](index=134&type=chunk) - Key sources of liquidity include **$269.9 million** net proceeds from a January 2025 public offering and **$21.0 million** from the 2023 ATM Facility (with **$82.8 million** remaining)[125](index=125&type=chunk)[126](index=126&type=chunk)[128](index=128&type=chunk) - The Term Loan Facility's Tranche 1 expired undrawn, and Tranche 2 is not expected to be achieved by its milestone date, limiting future debt funding from these tranches[133](index=133&type=chunk) - Future funding requirements are substantial and depend on clinical trial progress, manufacturing costs, regulatory approvals, and potential in-licensing activities[135](index=135&type=chunk) [Cash Flows](index=37&type=section&id=Cash%20Flows) Net cash used in operating activities increased, while financing activities provided **$289.6 million**, resulting in a **$3.0 million** net cash increase Summary of Cash Flows (Six Months Ended June 30, In thousands) | Cash Flow Activity | 2025 | 2024 | | :-------------------------------- | :----- | :----- | | Net cash used in operating activities | $(172,162) | $(100,884) | | Net cash used in investing activities | $(114,455) | $(52,049) | | Net cash provided by financing activities | $289,633 | $48,990 | | Net change in cash and cash equivalents | $3,016 | $(103,943) | - Net cash used in operating activities increased by **$71.3 million**, primarily due to a higher net loss and a **$4.2 million** increase in prepaid expenses and other assets[139](index=139&type=chunk) - Net cash provided by financing activities increased by **$240.6 million**, mainly from **$269.9 million** in net proceeds from the public offering and **$21.0 million** from the ATM program[143](index=143&type=chunk) [Contractual Obligations and Commitments](index=38&type=section&id=Contractual%20Obligations%20and%20Commitments) This section details debt obligations, Teva license commitments, BiBo facility payments, and the Israeli Tax Authority assessment - Outstanding principal of **$35.0 million** under the Loan Agreement matures on October 1, 2028, with interest-only payments until January 1, 2027[145](index=145&type=chunk) - Obligations under the Teva license agreement include up to **$65.0 million** in commercial milestones and tiered royalties on net sales of pegozafermin[146](index=146&type=chunk) - The BiBo collaboration for the commercial facility has a total contractual obligation of **$175.0 million** (excluding VAT), with **$161.5 million** paid as of June 30, 2025, and a remaining **$13.5 million** milestone payment due upon facility completion (estimated 2026)[148](index=148&type=chunk)[149](index=149&type=chunk) - The Israeli Tax Authority issued a formal assessment for approximately **$26.0 million** in tax liability and **$3.9 million** in penalties, which the company is appealing, having recorded a **$5.3 million** liability for unrecognized tax benefit[150](index=150&type=chunk)[152](index=152&type=chunk) [Critical Accounting Estimates](index=38&type=section&id=Critical%20Accounting%20Estimates) No significant changes in critical accounting estimates compared to the Annual Report on Form 10-K for December 31, 2024 - There have been no significant changes in critical accounting estimates compared to the Annual Report on Form 10-K for the year ended December 31, 2024[153](index=153&type=chunk) [Recent Accounting Pronouncements](index=39&type=section&id=Recent%20Accounting%20Pronouncements) Refer to Note 2, 'Summary of Significant Accounting Policies,' for information on recent accounting pronouncements - Refer to Note 2, 'Summary of Significant Accounting Policies,' for information on recent accounting pronouncements[154](index=154&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=39&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) No material changes in market risk from the information provided in the Annual Report on Form 10-K for December 31, 2024 - No material changes in market risk from the information provided in the Annual Report on Form 10-K for the year ended December 31, 2024[155](index=155&type=chunk) [Item 4. Controls and Procedures](index=39&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of June 30, 2025, with no material changes in internal control over financial reporting - Disclosure controls and procedures were effective as of June 30, 2025, providing reasonable assurance for timely and accurate financial reporting[156](index=156&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter ended June 30, 2025[157](index=157&type=chunk) [PART II. OTHER INFORMATION](index=40&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity sales, defaults, mine safety, other information, and exhibits [Item 1. Legal Proceedings](index=40&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings, though litigation could adversely impact operations - The company is not currently a party to any material legal proceedings[160](index=160&type=chunk) - Litigation, even if not material, can adversely impact the company through costs, diversion of resources, and reputational harm[160](index=160&type=chunk) [Item 1A. Risk Factors](index=40&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant risks, including dependence on pegozafermin, funding needs, manufacturing reliance, and regulatory complexities - The company is a clinical-stage biopharmaceutical company with a limited operating history, no approved products, and expects significant and increasing operating losses, making its stock a highly speculative investment[162](index=162&type=chunk)[163](index=163&type=chunk)[166](index=166&type=chunk) - Business success is highly dependent on pegozafermin, its only product candidate under clinical development, which has not completed a pivotal trial, and clinical drug development is lengthy, expensive, and uncertain, with no guarantee of regulatory approval or commercialization[162](index=162&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk) - The company will require substantial additional capital to finance operations, which may not be available on acceptable terms, potentially delaying or preventing the development and commercialization of pegozafermin[162](index=162&type=chunk)[171](index=171&type=chunk)[172](index=172&type=chunk) - Significant risks include reliance on third-party manufacturers (e.g., BiBo in China, subject to geopolitical risks like the BIOSECURE Act), potential undesirable side effects of pegozafermin, and the complex, evolving regulatory landscape for MASH and SHTG[162](index=162&type=chunk)[178](index=178&type=chunk)[179](index=179&type=chunk)[185](index=185&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk) - The biopharmaceutical industry is intensely competitive, with many companies developing competing products, some with greater resources, and unstable market and economic conditions, including inflation and geopolitical events, pose serious adverse consequences[195](index=195&type=chunk)[198](index=198&type=chunk)[199](index=199&type=chunk)[200](index=200&type=chunk) - Success depends on obtaining and maintaining intellectual property protection, which is uncertain and subject to challenges, and reliance on licenses (e.g., from Teva) and potential limitations on net operating loss carryforwards (e.g., due to Israeli Tax Authority assessment) are also significant risks[165](index=165&type=chunk)[240](index=240&type=chunk)[245](index=245&type=chunk)[249](index=249&type=chunk)[274](index=274&type=chunk)[275](index=275&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=79&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities or use of proceeds to report during the period - None[278](index=278&type=chunk) [Item 3. Default Upon Senior Securities](index=79&type=section&id=Item%203.%20Default%20Upon%20Senior%20Securities) There were no defaults upon senior securities to report during the period - None[279](index=279&type=chunk) [Item 4. Mine Safety Disclosures](index=79&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[280](index=280&type=chunk) [Item 5. Other Information](index=79&type=section&id=Item%205.%20Other%20Information) No directors or executive officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements - No directors or executive officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended June 30, 2025[281](index=281&type=chunk) [Item 6. Exhibits](index=80&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents and key agreements - The exhibits include various corporate documents such as the Second Amended and Restated Certificate of Incorporation, Third Amended and Restated Bylaws, and specimen common stock certificates[285](index=285&type=chunk) - Forms of warrants to purchase common stock for Silicon Valley Bank and K2 HealthVentures LLC, as well as pre-funded warrants, are included[285](index=285&type=chunk) - Key agreements include an Amendment to Executive Employment Offer Letter and an Amendment to Collaboration Agreement with BiBo Biopharma Engineering Co., Ltd[285](index=285&type=chunk) [SIGNATURES](index=81&type=section&id=SIGNATURES) The report is signed by Rohan Palekar, Chief Executive Officer, and Ryan Martins, Chief Financial Officer, on August 8, 2025 - The report is signed by Rohan Palekar, Chief Executive Officer, and Ryan Martins, Chief Financial Officer, on August 8, 2025[289](index=289&type=chunk)

Exhibit 99.1 Calidi Biotherapeutics Reports Second Quarter 2025 Financial Results and Recent Operational Highlights SAN DIEGO, August 8, 2025 — (Business Wire) — Calidi Biotherapeutics Inc. (NYSE American: CLDI) ("Calidi"), a clinical-stage biotechnology company pioneering the development of targeted therapies with the potential to deliver genetic medicines to distal sites of disease, today reported its second quarter 2025 operating and financial results and reviewed recent business highlights. "We are extr ...

[Calidi Biotherapeutics Second Quarter 2025 Earnings Release](index=1&type=section&id=Calidi%20Biotherapeutics%20Second%20Quarter%202025%20Financial%20Results%20and%20Recent%20Operational%20Highlights) Calidi Biotherapeutics announced its second quarter 2025 financial results, detailing significant operational progress in its clinical programs, including positive preclinical data and FDA Fast Track Designation, alongside a strengthened financial position [Operational Highlights](index=1&type=section&id=Second%20Quarter%202025%20and%20Recent%20Corporate%20Developments) Calidi Biotherapeutics achieved significant operational milestones in Q2 2025, including positive preclinical data for CLD-401, FDA Fast Track Designation for CLD-201, and a **$4.6 million** capital raise - Presented positive preclinical data for CLD-401 at the American Society of Clinical Oncology (ASCO), demonstrating enhanced biological efficacy and the ability to avoid immune clearance, enabling systemic administration for metastatic disease, with an IND filing expected by the end of **2026**[5](index=5&type=chunk)[6](index=6&type=chunk) - Received **FDA Fast Track Designation** for CLD-201, a first-in-class stem-cell loaded intratumoral viral therapy for treating soft tissue sarcoma, with an IND for a **Phase 1 study** successfully opened in Q1-2025[5](index=5&type=chunk)[6](index=6&type=chunk) - Raised **$4.6 million** in gross proceeds from a warrant inducement offering with existing investors, bringing the total gross proceeds raised in 2025 to **$15.7 million**[5](index=5&type=chunk)[6](index=6&type=chunk) [Financial Results](index=2&type=section&id=Second%20Quarter%202025%20Financial%20Results) Calidi Biotherapeutics reported a reduced net loss of **$5.7 million** in Q2 2025, with increased R&D expenses and decreased G&A expenses, and a cash position of **$5.3 million** Q2 2025 vs Q2 2024 Financial Performance | Financial Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Loss Attributable to Common Stockholders | $5.7 million | $7.4 million | Decreased Loss | | Net Loss Per Share | $1.99 | $16.75 | Decreased Loss | | Research and Development Expenses | $2.6 million | $2.2 million | Increased 18.2% | | General and Administrative Expenses | $3.1 million | $3.6 million | Decreased 13.9% | Cash Position | Date | Cash | Restricted Cash | | :--- | :--- | :--- | | June 30, 2025 | $5.3 million | $0.1 million | | December 31, 2024 | $9.6 million | $0.2 million | [Financial Statements](index=3&type=section&id=Financial%20Statements) The condensed consolidated financial statements provide a detailed overview of the company's financial position as of June 30, 2025, and operational results for the quarter, showing **$9.4 million** in total assets and **$7.3 million** in total liabilities [Condensed Consolidated Balance Sheets](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) This section details the company's financial position, presenting assets, liabilities, and equity as of June 30, 2025, and December 31, 2024 Balance Sheet Summary (in thousands) | Account | June 30, 2025 (Unaudited) | December 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$9,351** | **$14,182** | | Total Current Assets | $6,049 | $10,227 | | **Total Liabilities** | **$7,275** | **$12,214** | | Total Current Liabilities | $5,353 | $9,496 | | **Total Equity** | **$2,076** | **$1,968** | [Condensed Consolidated Statements of Operations](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) This section outlines the company's operational performance, detailing expenses and net loss for the three months ended June 30, 2025, and 2024 Statement of Operations Summary for Three Months Ended June 30 (in thousands) | Account | 2025 (Unaudited) | 2024 | | :--- | :--- | :--- | | Research and development | $(2,593) | $(2,167) | | General and administrative | $(3,071) | $(3,605) | | **Total operating expense** | **$(5,664)** | **$(5,772)** | | **Loss from operations** | **$(5,664)** | **$(5,772)** | | **Net Loss** | **$(5,761)** | **$(5,767)** | [Company Overview](index=2&type=section&id=About%20Calidi%20Biotherapeutics) Calidi Biotherapeutics is a clinical-stage immuno-oncology company leveraging its proprietary Redtail platform to develop targeted genetic medicine therapies for metastatic cancers - Calidi is a **clinical-stage immuno-oncology company** developing targeted therapies to deliver genetic medicines to distant disease sites[9](index=9&type=chunk) - The proprietary **Redtail platform** features an engineered enveloped oncolytic virus designed for systemic delivery to target metastatic sites, shielding the virus from immune clearance[9](index=9&type=chunk) - The lead candidate from the Redtail platform is in **IND-enabling studies** and targets **non-small cell lung cancer, ovarian cancer**, and other tumors with high unmet medical need[10](index=10&type=chunk)

[Cautionary Note on Forward-Looking Statements](index=4&type=section&id=Cautionary%20Note%20on%20Forward-Looking%20Statements) [Cautionary Note Regarding Forward-Looking Statements](index=4&type=section&id=Cautionary%20Note%20Regarding%20Forward-Looking%20Statements) This section highlights forward-looking statements, subject to risks and uncertainties that may cause actual results to differ materially - The report contains forward-looking statements, which are not historical facts and are based on current expectations and projections about future events[8](index=8&type=chunk) - Actual results could differ materially from projected results due to various risks and uncertainties, including cybersecurity, personnel retention, market/sociopolitical factors, and operational issues[9](index=9&type=chunk)[11](index=11&type=chunk) [Part I. FINANCIAL INFORMATION](index=6&type=section&id=Part%20I.%20FINANCIAL%20INFORMATION) [Item 1. Consolidated Financial Statements (unaudited)](index=6&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(unaudited)) This section presents unaudited consolidated financial statements, including balance sheets, income statements, cash flows, and detailed notes on accounting policies and financial components [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Data | Metric | June 30, 2025 (Thousands) | December 31, 2024 (Thousands) | |:---|:---|:---| | **Assets** ||| | Total cash and cash equivalents | $721,792 | $968,123 | | Securities available-for-sale, at fair value | $307,035 | $256,274 | | Securities held-to-maturity, at amortized cost | $561,205 | $590,016 | | Loans, net | $3,485,700 | $3,442,984 | | Total assets | $5,467,237 | $5,645,006 | | **Liabilities** ||| | Total deposits | $4,627,334 | $4,820,031 | | Total liabilities | $4,772,533 | $4,955,279 | | **Shareholders' Equity** ||| | Total shareholders' equity | $694,704 | $689,727 | | Total liabilities and shareholders' equity | $5,467,237 | $5,645,006 | - Total assets decreased by **$177.769 million (-3.15%)** from December 31, 2024, to June 30, 2025[13](index=13&type=chunk) - Total deposits decreased by **$192.697 million (-3.99%)** from December 31, 2024, to June 30, 2025[13](index=13&type=chunk) [Consolidated Statements of Income](index=7&type=section&id=Consolidated%20Statements%20of%20Income) Consolidated Income Statement Data | Metric | Three Months Ended June 30, 2025 (Thousands) | Three Months Ended June 30, 2024 (Thousands) | Six Months Ended June 30, 2025 (Thousands) | Six Months Ended June 30, 2024 (Thousands) | |:---|:---|:---|:---|:---|\ | Total interest income | $63,025 | $58,489 | $124,857 | $115,450 | | Total interest expense | $18,220 | $19,622 | $36,692 | $37,080 | | Net interest income before provision for credit losses on loans | $44,805 | $38,867 | $88,165 | $78,370 | | Provision for credit losses on loans | $516 | $471 | $790 | $655 | | Total noninterest income | $2,977 | $2,864 | $5,673 | $5,501 | | Total noninterest expense | $38,335 | $28,188 | $67,791 | $55,724 | | Net income | $6,389 | $9,234 | $18,015 | $19,400 | | Basic earnings per common share | $0.10 | $0.15 | $0.29 | $0.32 | | Diluted earnings per common share | $0.10 | $0.15 | $0.29 | $0.32 | - Net income for the three months ended June 30, 2025, decreased by **$2.845 million (-30.81%)** compared to the same period in 2024[15](index=15&type=chunk) - Diluted EPS for the three months ended June 30, 2025, decreased by **$0.05 (-33.33%)** compared to the same period in 2024[15](index=15&type=chunk) [Consolidated Statements of Comprehensive Income](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Consolidated Comprehensive Income Data | Metric | Three Months Ended June 30, 2025 (Thousands) | Three Months Ended June 30, 2024 (Thousands) | Six Months Ended June 30, 2025 (Thousands) | Six Months Ended June 30, 2024 (Thousands) | |:---|:---|:---|:---|:---|\ | Net income | $6,389 | $9,234 | $18,015 | $19,400 | | Change in unrealized gains on securities and I/O strips, net of deferred income taxes | $1,885 | $907 | $3,239 | $1,083 | | Change in pension and other benefit plan liability, net of deferred income taxes | $(56) | $(34) | $(112) | $(68) | | Other comprehensive income | $1,829 | $873 | $3,127 | $1,015 | | Total comprehensive income | $8,218 | $10,107 | $21,142 | $20,415 | - Total comprehensive income for the three months ended June 30, 2025, decreased by **$1.889 million (-18.69%)** compared to the same period in 2024[17](index=17&type=chunk) [Consolidated Statements of Changes in Shareholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Consolidated Shareholders' Equity Data | Metric | January 1, 2025 (Thousands) | June 30, 2025 (Thousands) | January 1, 2024 (Thousands) | June 30, 2024 (Thousands) | |:---|:---|:---|:---|:---|\ | Common Stock | $510,070 | $509,888 | $506,539 | $508,343 | | Retained Earnings | $187,762 | $189,794 | $179,092 | $182,571 | | Accumulated Other Comprehensive Income (Loss) | $(8,105) | $(4,978) | $(12,730) | $(11,715) | | Total Shareholders' Equity | $689,727 | $694,704 | $672,901 | $679,199 | - Total shareholders' equity increased by **$4.977 million (0.72%)** from January 1, 2025, to June 30, 2025[20](index=20&type=chunk) - Cash dividends declared were **$0.13 per share** for both the first and second quarters of 2025, totaling **$7.987 million** and **$7.996 million** respectively[20](index=20&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Cash Flow Data | Metric | Six Months Ended June 30, 2025 (Thousands) | Six Months Ended June 30, 2024 (Thousands) | |:---|:---|:---|\ | Net cash provided by operating activities | $22,836 | $17,847 | | Net cash (used in) provided by investing activities | $(59,589) | $171,610 | | Net cash (used in) provided by financing activities | $(209,578) | $50,674 | | Net (decrease) increase in cash and cash equivalents | $(246,331) | $240,131 | | Cash and cash equivalents, end of period | $721,792 | $648,260 | - Net cash used in investing activities significantly increased to **$(59.589) million** for the six months ended June 30, 2025, compared to **$171.610 million** provided in the same period of 2024, primarily due to purchases of available-for-sale securities[22](index=22&type=chunk) - Net cash used in financing activities was **$(209.578) million** for the six months ended June 30, 2025, a substantial change from **$50.674 million** provided in the same period of 2024, driven by a net decrease in deposits and common stock repurchases[22](index=22&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Unaudited%20Consolidated%

FORM 10-Q Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File No. 001-38131 Esquire Financial Holdings, Inc. (Exact Name of Registrant as Specified in Its Charter) Maryland 27-5107901 (State or O ...

PART I — FINANCIAL INFORMATION [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) Redwood Trust reported a net loss of $98.5 million for Q2 2025 and $82.3 million for the six months ended June 30, 2025, a significant downturn from prior-year periods, primarily due to negative fair value adjustments on investments and growth in total assets to $21.3 billion Consolidated Financial Performance Summary (Q2 & H1 2025 vs 2024) (In Thousands) | Financial Metric | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :--- | :--- | :--- | :--- | :--- | | **Net Interest Income** | $13,834 | $25,293 | $41,776 | $49,503 | | **Total Non-interest (Loss) Income** | ($51,937) | $42,154 | ($6,031) | $92,493 | | **Net (Loss) Income** | ($98,492) | $15,534 | ($82,345) | $45,796 | | **Net (Loss) Available to Common Stockholders** | ($100,249) | $13,777 | ($85,852) | $42,289 | | **Diluted (Loss) Earnings per Share** | ($0.76) | $0.10 | ($0.67) | $0.31 | Consolidated Balance Sheet Summary (As of June 30, 2025) (In Thousands) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | **Total Assets** | **$21,333,020** | **$18,258,344** | | Residential consumer loans | $14,201,893 | $11,077,823 | | Residential investor loans | $4,339,168 | $4,587,090 | | **Total Liabilities** | **$20,279,557** | **$17,070,481** | | Asset-backed securities issued, net | $15,985,206 | $13,270,204 | | Debt obligations, net | $3,744,868 | $3,462,880 | | **Total Equity** | **$1,053,463** | **$1,187,863** | - For the six months ended June 30, 2025, net cash used in operating activities was **$4.07 billion**, while net cash provided by investing and financing activities were **$1.64 billion** and **$2.56 billion**, respectively[25](index=25&type=chunk) [Note 4. Segment Information](index=13&type=section&id=Note%204.%20Segment%20Information) In Q2 2025, the company established a new reportable segment, "Legacy Investments," to house assets no longer aligned with core strategy, reporting a significant net loss of $104.0 million, while Sequoia and CoreVest Mortgage Banking segments remained profitable - A new reportable segment, Legacy Investments, was established in Q2 2025 to manage assets no longer aligned with core strategic objectives, intended for sale, runoff, or disposition as part of a strategic realignment[32](index=32&type=chunk)[51](index=51&type=chunk) Segment Net Income (Loss) for Q2 2025 (In Thousands) | Segment | Net Income (Loss) | | :--- | :--- | | Sequoia Mortgage Banking | $22,154 | | CoreVest Mortgage Banking | $6,135 | | Redwood Investments | $11,892 | | Legacy Investments | ($103,989) | | Corporate/Other | ($34,684) | | **Total Net Loss** | **($98,492)** | [Note 8. Residential Investor Loans](index=28&type=section&id=Note%208.%20Residential%20Investor%20Loans) The residential investor loan portfolio totaled $4.3 billion as of June 30, 2025, with $886 million of legacy unsecuritized bridge loans and $50 million of legacy term loans moved to the Legacy Investments segment and classified as held-for-sale, reflecting elevated delinquencies and fair value losses - As part of a strategic realignment, **$886 million** of legacy unsecuritized bridge loans and **$50 million** of legacy unsecuritized term loans were reported in the new Legacy Investments segment as of June 30, 2025[118](index=118&type=chunk)[121](index=121&type=chunk) - The fair value of the unsecuritized residential investor bridge loan portfolio decreased, driven by fair value losses from elevated delinquencies, particularly among 2021 and 2022 vintage loans, and strategic sales[125](index=125&type=chunk) - In Q2 2025, the company modified or placed into forbearance loans with a total aggregate unpaid principal balance of **$363 million**, involving adjustments to interest rates, maturity extensions, and covenant terms[150](index=150&type=chunk) - As of June 30, 2025, residential investor loans with an aggregate unpaid principal balance of **$718 million** were on non-accrual status, a significant increase from **$343 million** at year-end 2024[156](index=156&type=chunk)[157](index=157&type=chunk) [Note 18. Debt Obligations, Net](index=53&type=section&id=Note%2018.%20Debt%20Obligations%2C%20Net) Total debt obligations increased to $3.74 billion at June 30, 2025, from $3.46 billion at year-end 2024, utilizing a mix of short-term and long-term facilities, including the issuance of $90 million in Senior Notes in January 2025 Debt Obligations Summary (In Thousands) | Debt Category | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Short-Term Facilities | $1,825,491 | $1,545,899 | | Recourse Subordinate Securities Financing | $356,702 | $267,140 | | Long-Term Facilities | $760,472 | $992,394 | | Corporate Debt | $702,203 | $657,447 | | **Total Debt Obligations, Net** | **$3,744,868** | **$3,462,880** | - In January 2025, the company issued **$90 million** of 9.125% Senior Notes due in 2030[271](index=271&type=chunk) [Note 20. Equity](index=56&type=section&id=Note%2020.%20Equity) Total equity decreased to $1.05 billion from $1.19 billion at year-end 2024, primarily due to the net loss for the period and common stock dividends, with 1.6 million shares repurchased for $9 million in June 2025 - In June 2025, the company repurchased **1.6 million shares** of common stock for a total cost of **$9 million**, with **$92 million** remaining available under the common stock repurchase authorization as of June 30, 2025[297](index=297&type=chunk) [Note 24. Subsequent Events](index=60&type=section&id=Note%2024.%20Subsequent%20Events) Subsequent to the quarter's end, in July 2025, the Board of Directors increased the common stock repurchase authorization to $150 million, replacing the previous $125 million authorization - In July 2025, the Board of Directors approved a new authorization for the repurchase of up to **$150 million** of common stock, replacing the prior **$125 million** authorization[315](index=315&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=61&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management detailed a strategic acceleration toward a more scalable and simplified operating model, highlighted by the creation of the Legacy Investments segment to wind down non-core assets, leading to significant fair value and repositioning charges of approximately $(0.79) per share in Q2, while core mortgage banking platforms demonstrated strong growth and profitability - The company is accelerating its strategic transition to a simplified operating model by meaningfully reducing exposure to non-core holdings, now housed in a new "Legacy Investments" segment[323](index=323&type=chunk)[329](index=329&type=chunk) - The strategic wind-down of the legacy portfolio resulted in approximately **$(0.79) per share** of fair value and repositioning charges in Q2, reducing GAAP book value per share to **$7.49** from **$8.39** at the end of Q1 2025[331](index=331&type=chunk) - The company expects to free up **$200 to $250 million** in capital from legacy investments by year-end 2025 for redeployment into operating platforms and other uses[331](index=331&type=chunk) - Core mortgage banking platforms, Sequoia and CoreVest, continued to deliver strong performance with combined GAAP returns exceeding **20%** for the fourth consecutive quarter[329](index=329&type=chunk)[333](index=333&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=93&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company stated that there have been no material changes in its quantitative or qualitative exposure to market risk since December 31, 2024, other than developments already described in the MD&A section - There have been no material changes in the company's quantitative or qualitative exposure to market risk since December 31, 2024, apart from developments discussed elsewhere in the report[526](index=526&type=chunk) [Controls and Procedures](index=93&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective at a reasonable assurance level as of the end of the quarter, with no material changes to internal control over financial reporting - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of Q2 2025[528](index=528&type=chunk) - No changes in internal control over financial reporting occurred during Q2 2025 that have materially affected, or are reasonably likely to materially affect, internal controls[529](index=529&type=chunk) PART II — OTHER INFORMATION [Legal Proceedings](index=94&type=section&id=Item%201.%20Legal%20Proceedings) There were no significant updates regarding the company's legal proceedings during the quarter - Refers to Note 19 for information on legal proceedings, which indicates no significant updates from the previous Annual Report on Form 10-K[531](index=531&type=chunk) [Risk Factors](index=94&type=section&id=Item%201A.%20Risk%20Factors) The report refers to the risk factors discussed in the company's Annual Report on Form 10-K for the year ended December 31, 2024 - The company's risk factors are discussed in its Annual Report on Form 10-K for the year ended December 31, 2024[531](index=531&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=94&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During the second quarter of 2025, the company did not sell any unregistered equity securities but repurchased 1.6 million shares of its common stock for a total of $9 million, with $92 million remaining under the repurchase authorization Common Stock Repurchases (Q2 2025) | Period | Total Shares Purchased | Average Price per Share | | :--- | :--- | :--- | | April 2025 | — | $— | | May 2025 | — | $— | | June 2025 | 1,560,795 | $5.75 | | **Total** | **1,560,795** | **$5.75** | - As of June 30, 2025, **$92 million** remained available under the common stock repurchase authorization, which was subsequently increased to **$150 million** in July 2025[533](index=533&type=chunk) [Other Information](index=94&type=section&id=Item%205.%20Other%20Information) During the second quarter of 2025, no director or officer adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement - No director or officer adopted or terminated a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[537](index=537&type=chunk) [Exhibits](index=95&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications by the CEO and CFO and interactive data files

[PART I. FINANCIAL INFORMATION](index=2&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis of financial condition and results of operations [Item 1. Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including the balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial line items [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This statement provides a snapshot of the company's assets, liabilities, and stockholders' equity at specific points in time Condensed Consolidated Balance Sheets (in thousands) | ASSETS (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $13,424 | $13,145 | | Marketable securities, at fair value | $25,061 | $27,455 | | TOTAL CURRENT ASSETS | $38,665 | $40,832 | | Patents, net | $1,552 | $1,205 | | Equity investment | $2,596 | $3,337 | | TOTAL ASSETS | $42,826 | $45,414 | | | | | | LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands) | | | | Total Current Liabilities | $377 | $766 | | Deferred tax liability | $188 | $337 | | TOTAL LIABILITIES | $565 | $1,103 | | TOTAL STOCKHOLDERS' EQUITY | $42,261 | $44,311 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $42,826 | $45,414 | - Total assets decreased from **$45.414 million** at December 31, 2024, to **$42.826 million** at June 30, 2025[14](index=14&type=chunk) - Total stockholders' equity decreased from **$44.311 million** at December 31, 2024, to **$42.261 million** at June 30, 2025[14](index=14&type=chunk) [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This statement reports the company's revenues, expenses, and net loss over specific periods Condensed Consolidated Statements of Operations (in thousands, except per share data) | (in thousands, except per share data) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | REVENUE (in thousands) | $— | $100 | $150 | $100 | | TOTAL OPERATING EXPENSES (in thousands) | $720 | $724 | $1,515 | $1,642 | | OPERATING LOSS (in thousands) | $(720) | $(624) | $(1,365) | $(1,542) | | Total other income, net (in thousands) | $467 | $506 | $1,100 | $985 | | LOSS BEFORE INCOME TAXES AND SHARE OF NET LOSSES OF EQUITY METHOD INVESTEE (in thousands) | $(253) | $(118) | $(265) | $(557) | | Total income tax benefit (in thousands) | $(69) | $(137) | $(180) | $(284) | | SHARE OF NET LOSS OF EQUITY METHOD INVESTEE (in thousands) | $(279) | $(677) | $(741) | $(1,305) | | NET LOSS (in thousands) | $(463) | $(658) | $(826) | $(1,578) | | Net loss per share - Basic | $(0.02) | $(0.03) | $(0.04) | $(0.07) | | Net loss per share - Diluted | $(0.02) | $(0.03) | $(0.04) | $(0.07) | - Net loss for the three months ended June 30, 2025, decreased to **$463 thousand** from **$658 thousand** in the prior year period[16](index=16&type=chunk) - Net loss for the six months ended June 30, 2025, decreased to **$826 thousand** from **$1.578 million** in the prior year period[16](index=16&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This statement details the changes in each component of stockholders' equity over a period Condensed Consolidated Statements of Changes in Stockholders' Equity (in thousands) | (in thousands) | Balance – January 1, 2025 | Balance – June 30, 2025 | | :------------- | :------------------------ | :---------------------- | | Common Stock (in thousands) | $229 | $228 | | Additional Paid-in Capital (in thousands) | $65,455 | $64,445 | | Accumulated Deficit (in thousands) | $(21,373) | $(22,412) | | Total Stockholders' Equity (in thousands) | $44,311 | $42,261 | - Total stockholders' equity decreased by **$2.050 million** from January 1, 2025, to June 30, 2025, primarily due to dividends declared (**$1.171 million**) and net loss (**$826 thousand** for six months, split between quarters)[19](index=19&type=chunk)[16](index=16&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This statement reports the cash generated and used by operating, investing, and financing activities Condensed Consolidated Statements of Cash Flows (in thousands) | (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities (in thousands) | $(502) | $(660) | | Net cash provided by investing activities (in thousands) | $2,150 | $5,859 | | Net cash used in financing activities (in thousands) | $(1,369) | $(2,156) | | NET INCREASE IN CASH AND CASH EQUIVALENTS (in thousands) | $279 | $3,043 | | CASH AND CASH EQUIVALENTS, end of period (in thousands) | $13,424 | $19,939 | - Net cash used in operating activities decreased by **$158 thousand**, from **$660 thousand** in 2024 to **$502 thousand** in 2025[24](index=24&type=chunk) - Net cash provided by investing activities decreased significantly by **$3.709 million**, from **$5.859 million** in 2024 to **$2.150 million** in 2025[24](index=24&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations and additional information for the financial statements, clarifying accounting policies and specific line items [NOTE A – BASIS OF PRESENTATION AND NATURE OF BUSINESS](index=12&type=section&id=NOTE%20A%20%E2%80%93%20BASIS%20OF%20PRESENTATION%20AND%20NATURE%20OF%20BUSINESS) The Company's unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim financial information. The Company's primary business involves the development, licensing, and protection of its intellectual property assets, which include various patent portfolios related to M2M/IoT, HFT, Cox, Smart Home, Mirror Worlds, and Remote Power technologies. The Company also holds an equity investment in ILiAD Biotechnologies, LLC - The Company owns **115 U.S. patents** (**54 expired**) and **17 international patents** across six portfolios: M2M/IoT, HFT, Cox, Smart Home, Mirror Worlds, and Remote Power[29](index=29&type=chunk) - Current strategy focuses on licensing existing patent portfolios, acquiring new high-quality patents, and forming strategic relationships for intellectual property monetization[30](index=30&type=chunk) - The Company has invested **$7 million** in ILiAD Biotechnologies, LLC, a clinical stage biotechnology company[31](index=31&type=chunk) [NOTE B – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=13&type=section&id=NOTE%20B%20%E2%80%93%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines the Company's key accounting policies, including the use of estimates, revenue recognition under ASC 606 (primarily from litigation settlements and license agreements), equity method investments (recognized on a one-quarter lag), and income tax accounting (using the asset and liability method with a valuation allowance for deferred tax assets). It also addresses the potential classification as a Personal Holding Company and recent accounting pronouncements - Revenue is recognized when intellectual property licensing is complete, a final judgment is obtained, or a litigation settlement agreement is entered, reflecting the expected consideration[34](index=34&type=chunk) Revenue Disaggregated by Source (in thousands) | Source | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :----------------- | :----------------------------- | :----------------------------- | :------------------------------- | :------------------------------- | | Litigation settlements | $150 | $100 | $— | $100 | | Total Revenue | $150 | $100 | $— | $100 | - The Company had a deferred tax liability of **$188 thousand** as of June 30, 2025, and a valuation allowance of **$1.671 million** offsetting deferred tax assets[39](index=39&type=chunk) - The Company is evaluating the impact of new FASB ASUs on Income Statement Expense Disaggregation (ASU 2024-03) and Income Tax Disclosures (ASU 2023-09)[46](index=46&type=chunk)[47](index=47&type=chunk) [NOTE C – PATENTS](index=17&type=section&id=NOTE%20C%20%E2%80%93%20PATENTS) This note details the Company's intangible assets related to patents, including their gross carrying amounts, accumulated amortization, and remaining useful lives. It also provides a schedule of future amortization expenses and the expiration dates for various patent portfolios Patents, Net (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :------------------------ | :------------ | :---------------- | | Gross carrying amount – patents | $8,887 | $8,473 | | Accumulated amortization – patents | $(7,335) | $(7,268) | | Patents, net | $1,552 | $1,205 | - Amortization expense for the six months ended June 30, 2025, was **$67 thousand**, up from **$60 thousand** in the prior year[49](index=49&type=chunk) - The M2M/IoT, HFT, and Smart Home Patent Portfolios have expiration dates ranging from 2033 to 2040, while Mirror Worlds, Cox, and Remote Power Patents have expired[50](index=50&type=chunk) [NOTE D – STOCKHOLDERS' EQUITY](index=17&type=section&id=NOTE%20D%20%E2%80%93%20STOCKHOLDERS'%20EQUITY) This note describes the Company's stock incentive plans, including the 2022 Stock Incentive Plan, and provides a summary of restricted stock unit activity. It also details the associated compensation expense and dividend equivalent rights - As of June 30, 2025, there were **92,500 shares** subject to outstanding awards under the 2022 Plan and **2,040,000 shares** available for issuance[52](index=52&type=chunk) Restricted Stock Unit Activity (Six Months Ended June 30, 2025) | Item | Number of Shares | | :-------------------------------------- | :--------------- | | Balance at December 31, 2024 | 487,500 | | Grants of restricted stock units | 70,000 | | Vested restricted stock units | (40,000) | | Balance at June 30, 2025 | 517,500 | - Restricted stock unit compensation expense for the six months ended June 30, 2025, was **$161 thousand**, down from **$210 thousand** in the prior year[53](index=53&type=chunk) [NOTE E – LOSS PER SHARE](index=19&type=section&id=NOTE%20E%20%E2%80%93%20LOSS%20PER%20SHARE) This note explains the calculation of basic and diluted loss per share. Due to net losses, all potentially dilutive shares (restricted stock units) were anti-dilutive and thus excluded from diluted loss per share calculations Weighted Average Common Shares Outstanding | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------- | :----------------------------- | :----------------------------- | | Weighted-average common shares outstanding – basic | 22,883,729 | 23,444,145 | | Weighted-average common shares outstanding – diluted | 22,883,729 | 23,444,145 | | Restricted stock units excluded (anti-dilutive) | 517,500 | 535,000 | [NOTE F – MARKETABLE SECURITIES](index=19&type=section&id=NOTE%20F%20%E2%80%93%20MARKETABLE%20SECURITIES) This note provides a breakdown of the Company's marketable securities by type, including their cost basis, unrealized gains and losses, and fair value. These securities are primarily classified within Level 1 of the fair value hierarchy Marketable Securities at Fair Value (June 30, 2025, in thousands) | Type of Security | Cost Basis (in thousands) | Unrealized Gains (in thousands) | Unrealized Losses (in thousands) | Fair Value (in thousands) | | :------------------ | :--------- | :--------------- | :---------------- | :--------- | | Certificates of deposit | $752 | $7 | $— | $759 | | Government securities | $12,844 | $78 | $(40) | $12,882 | | Fixed income mutual funds | $9,698 | $233 | $— | $9,931 | | Corporate bonds | $1,490 | $— | $(1) | $1,489 | | Total marketable securities | $24,874 | $318 | $(41) | $25,061 | - Total marketable securities decreased from **$27.455 million** at December 31, 2024, to **$25.061 million** at June 30, 2025[59](index=59&type=chunk) [NOTE G – COMMITMENTS AND CONTINGENCIES](index=21&type=section&id=NOTE%20G%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines the Company's commitments and contingencies, including legal fees for patent litigation (often on a contingency basis), obligations related to patent acquisitions (Smart Home, HFT, Cox, M2M/IoT portfolios), and details of its operating lease for office space - Legal fees for patent litigation are typically **15-40% of net recovery**, with the Company responsible for expenses[61](index=61&type=chunk) - On March 31, 2025, the Company acquired the Smart Home Patent Portfolio for **$400 thousand cash**, with additional contingent payments and a percentage of net proceeds[62](index=62&type=chunk) - The Company extended its principal office lease for one year to April 30, 2026, with a base rent of **$5,500 per month**[66](index=66&type=chunk) [NOTE H – EMPLOYMENT ARRANGEMENTS AND OTHER AGREEMENTS](index=22&type=section&id=NOTE%20H%20%E2%80%93%20EMPLOYMENT%20ARRANGEMENTS%20AND%20OTHER%20AGREEMENTS) This note details the employment agreement with the Chairman and CEO, including his annual base salary, target bonus, and incentive compensation structure tied to royalties and payments from patent licensing activities and the ILiAD investment - The Chairman and CEO's annual base salary is **$535 thousand**, increasing by **3% per annum**, with an annual target bonus of **$175 thousand**[69](index=69&type=chunk) - Incentive compensation includes **5% of gross royalties** from the Remote Power Patent and **10% net interest** (min **6.25% gross**) from other patent portfolios and ILiAD investment[70](index=70&type=chunk) - Incentive Compensation earned by the Chairman and CEO for the six months ended June 30, 2025, was **$8 thousand**, compared to **$5 thousand** in the prior year[70](index=70&type=chunk) [NOTE I – LEGAL PROCEEDINGS](index=23&type=section&id=NOTE%20I%20%E2%80%93%20LEGAL%20PROCEEDINGS) This note provides updates on significant legal proceedings, including new patent infringement lawsuits against Samsung (M2M/IoT portfolio) and Citadel Securities/Jump Trading (HFT portfolio). It also details the ongoing appeal against Google/YouTube (Cox Patent Portfolio) and the conclusion of Remote Power Patent litigations, which generated $150,000 in revenue - On June 27, 2025, the Company commenced patent litigation against Samsung for infringement of M2M/IoT patents related to eSIM and 5G technologies[71](index=71&type=chunk) - In December 2024, HFT Solutions, LLC initiated patent litigations against Citadel Securities, LLC and Jump Trading, LLC for infringement of HFT Patent Portfolio[72](index=72&type=chunk) - The Company filed an appeal on May 14, 2024, to the U.S. Court of Appeals for the Federal Circuit regarding the dismissal of its patent infringement claims against Google and YouTube[73](index=73&type=chunk) - During the six months ended June 30, 2025, the Company received a **$150 thousand** conditional payment from a defendant in Remote Power Patent litigation, recorded as revenue[76](index=76&type=chunk) [NOTE J – INVESTMENT](index=24&type=section&id=NOTE%20J%20%E2%80%93%20INVESTMENT) This note details the Company's equity investment in ILiAD Biotechnologies, LLC, a clinical-stage biotechnology company. It outlines the Company's ownership percentage and the allocated net losses from this equity method investment - The Company has invested **$7 million** in ILiAD Biotechnologies, LLC, owning approximately **6.5%** of outstanding units on a non-fully diluted basis[77](index=77&type=chunk) - For the six months ended June 30, 2025, the Company recognized an allocated net loss of **$741 thousand** from its ILiAD investment, a decrease from **$1.305 million** in the prior year[78](index=78&type=chunk) - The carrying value of the ILiAD investment decreased from **$3.337 million** at December 31, 2024, to **$2.596 million** at June 30, 2025[78](index=78&type=chunk) [NOTE K – STOCK REPURCHASES](index=24&type=section&id=NOTE%20K%20%E2%80%93%20STOCK%20REPURCHASES) This note describes the Company's share repurchase program, including its extension and increase to $5,000,000. It provides details on shares repurchased during the period, the average price, and the remaining authorization. It also mentions the adoption of a 10b5-1 trading plan and the potential impact of the U.S. federal 1% excise tax on stock repurchases - On June 17, 2025, the Board authorized an extension and increase of the share repurchase program by **$5 million** over the next 24 months[81](index=81&type=chunk) - During the six months ended June 30, 2025, the Company repurchased **151,473 shares** at an aggregate cost of **$202,194** (average **$1.33 per share**)[82](index=82&type=chunk) - As of June 30, 2025, **$4.994853 million** remained available under the Share Repurchase Program[85](index=85&type=chunk) [NOTE L – CONCENTRATIONS OF CREDIT RISK](index=25&type=section&id=NOTE%20L%20%E2%80%93%20CONCENTRATIONS%20OF%20CREDIT%20RISK) This note addresses the Company's concentrations of credit risk, primarily related to cash and certificates of deposit held at financial institutions, noting amounts in excess of FDIC insured limits - At June 30, 2025, the Company had **$8 thousand** of cash and certificates of deposit in excess of the FDIC insured limit[86](index=86&type=chunk) - The Company held **$13.373 million** in cash equivalents in brokerage accounts at June 30, 2025[86](index=86&type=chunk) [NOTE M – DIVIDEND POLICY](index=25&type=section&id=NOTE%20M%20%E2%80%93%20DIVIDEND%20POLICY) This note outlines the Company's dividend policy of semi-annual cash dividends of $0.05 per share ($0.10 annually), typically paid in March and September, subject to Board review and financial conditions - The Company's dividend policy is semi-annual cash dividends of **$0.05 per share** (**$0.10 annually**), paid in March and September[87](index=87&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the Company's financial condition and results of operations, highlighting key business activities, financial performance drivers, liquidity, and capital resources. It discusses the Company's patent licensing strategy, ongoing litigations, and investment in ILiAD Biotechnologies [OVERVIEW](index=26&type=section&id=OVERVIEW) This section provides a high-level summary of the Company's business, strategic focus, and financial highlights for the period - The Company's core business is developing, licensing, and protecting intellectual property, holding **115 U.S. patents** (**54 expired**) and **17 international patents** across various technology sectors[89](index=89&type=chunk) - Principal liquidity sources at June 30, 2025, were cash, cash equivalents, and marketable securities totaling **$38.485 million**, with working capital of **$38.288 million**[91](index=91&type=chunk) - All revenue for 2024 and the first six months of 2025 derived from settlements involving the expired Remote Power Patent[93](index=93&type=chunk) - New patent litigations commenced against Samsung (M2M/IoT) and Citadel/Jump Trading (HFT), and an appeal is pending for the Google/YouTube (Cox) litigation[95](index=95&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk) - The Company acquired the Smart Home Patent Portfolio on March 31, 2025, consisting of **8 U.S. patents**, **1 international patent**, and pending applications[98](index=98&type=chunk) [RESULTS OF OPERATIONS](index=28&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the Company's financial performance, comparing current period results to prior periods and explaining key drivers of changes [Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024](index=28&type=section&id=Three%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Three%20Months%20Ended%20June%2030%2C%202024) This subsection compares the financial performance for the three-month periods ended June 30, 2025, and 2024 - Revenue for the three months ended June 30, 2025, was **$0**, down from **$100 thousand** in the same period of 2024[106](index=106&type=chunk) - Net loss decreased by **$195 thousand** to **$463 thousand** for the three months ended June 30, 2025, primarily due to a **$398 thousand** decrease in the share of net losses from ILiAD[109](index=109&type=chunk) - Share of net losses from equity method investee (ILiAD) decreased to **$279 thousand** in Q2 2025 from **$677 thousand** in Q2 2024[108](index=108&type=chunk) [Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024](index=29&type=section&id=Six%20Months%20Ended%20June%2030%2C%202025%20Compared%20to%20Six%20Months%20Ended%20June%2030%2C%202024) This subsection compares the financial performance for the six-month periods ended June 30, 2025, and 2024 - Revenue for the six months ended June 30, 2025, increased to **$150 thousand** from **$100 thousand** in the prior year, all from Remote Power Patent litigation settlements[110](index=110&type=chunk) - Operating expenses decreased by **$127 thousand** to **$1.515 million**, driven by lower professional fees and general and administrative expenses[111](index=111&type=chunk) - Net loss decreased by **$752 thousand** to **$826 thousand** for the six months ended June 30, 2025, primarily due to reduced ILiAD losses (**$564 thousand** decrease) and lower operating expenses[116](index=116&type=chunk) - Realized and unrealized gains on marketable securities increased to **$171 thousand** from **$102 thousand**, mainly due to timing of fixed income investment maturities[113](index=113&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=29&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section discusses the Company's ability to meet its short-term and long-term financial obligations and its sources of funding - At June 30, 2025, the Company's liquidity included **$38.485 million** in cash, cash equivalents, and marketable securities, with working capital of **$38.288 million**[117](index=117&type=chunk) - Working capital decreased by **$1.778 million** from December 31, 2024, primarily due to dividend payments (**$1.155 million**), patent acquisitions (**$414 thousand**), and stock repurchases (**$207 thousand**)[119](index=119&type=chunk) - Net cash used in operating activities decreased by **$158 thousand** to **$502 thousand** for the six months ended June 30, 2025[120](index=120&type=chunk) - Net cash provided by investing activities decreased by **$3.709 million** to **$2.150 million**, mainly due to decreased sales of marketable securities and patent acquisitions[121](index=121&type=chunk) - Net cash used in financing activities decreased by **$787 thousand** to **$1.369 million**, primarily due to a decrease in common stock repurchases[122](index=122&type=chunk) [OFF-BALANCE SHEET ARRANGEMENTS](index=30&type=section&id=OFF-BALANCE%20SHEET%20ARRANGEMENTS) This section confirms the absence of any off-balance sheet arrangements that could materially impact the Company's financial position - The Company does not have any off-balance sheet arrangements[123](index=123&type=chunk) [CONTRACTUAL OBLIGATIONS](index=30&type=section&id=CONTRACTUAL%20OBLIGATIONS) This section outlines the Company's contractual obligations, including long-term debt, capital leases, and purchase commitments - The Company has no long-term debt, capital lease obligations, purchase obligations, or other long-term liabilities[124](index=124&type=chunk) [CRITICAL ACCOUNTING ESTIMATES](index=30&type=section&id=CRITICAL%20ACCOUNTING%20ESTIMATES) This section identifies accounting estimates that require significant judgment and could materially affect financial results if underlying assumptions change - Critical accounting estimates involve assumptions about highly uncertain matters, where changes could materially impact financial condition or results of operations[126](index=126&type=chunk) - Significant estimates include costs related to litigation, valuation of patent portfolios, stock-based compensation, recoverability of deferred tax assets, and carrying value of equity method investments[32](index=32&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=31&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section states that the Company does not have significant exposure to interest rate risk due to its investments primarily being in money market funds, government securities, certificates of deposit, and short-term fixed income securities - The Company does not believe its investments have significant exposure to interest rate risk, as they are primarily in money market funds, government securities, certificates of deposit, and short-term fixed income securities[122](index=122&type=chunk)[128](index=128&type=chunk) [Item 4. Controls and Procedures](index=31&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details the evaluation of the Company's disclosure controls and procedures, concluding their effectiveness, and reports no material changes in internal control over financial reporting during the quarter [Evaluation of Disclosure Controls and Procedures](index=31&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This subsection reports on the effectiveness of the Company's disclosure controls and procedures as evaluated by management - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025[128](index=128&type=chunk) [Changes in Internal Controls](index=31&type=section&id=Changes%20in%20Internal%20Controls) This subsection reports any material changes in the Company's internal control over financial reporting during the period - No material changes in internal control over financial reporting occurred during the fiscal quarter ended June 30, 2025[129](index=129&type=chunk) [PART II. OTHER INFORMATION](index=32&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity security sales, defaults, other information, and exhibits [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) This section provides an update on legal proceedings, specifically noting the commencement of new patent litigation against Samsung Electronics Co., LTD and Samsung Electronics America, Inc. on June 27, 2025, for infringement of M2M/IoT Patent Portfolio patents - On June 27, 2025, the Company initiated patent litigation against Samsung for infringement of M2M/IoT Patent Portfolio patents related to eSIM and 5G technologies in mobile devices[131](index=131&type=chunk) [Item 1A. Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) This section advises investors to consider various risks and uncertainties that could negatively impact the Company's business, financial condition, results of operations, and stock price, referencing both the current 10-Q and the Annual Report on Form 10-K - Investors should carefully consider risks described in this Quarterly Report and the Annual Report on Form 10-K for the year ended December 31, 2024[132](index=132&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports no unregistered sales of equity securities during the quarter and details the Company's stock repurchase program, including its extension and increase, shares repurchased, and the remaining authorization [Recent Issuances of Unregistered Securities](index=32&type=section&id=Recent%20Issuances%20of%20Unregistered%20Securities) This subsection reports on any unregistered sales of equity securities during the reporting period - There were no unregistered sales of equity securities during the three months ended June 30, 2025[133](index=133&type=chunk) [Stock Repurchases](index=32&type=section&id=Stock%20Repurchases) This subsection details the Company's stock repurchase activities, including program authorizations and shares repurchased - The Board authorized an extension and increase of the Share Repurchase Program to repurchase up to **$5 million** of common stock over the subsequent 24-month period[134](index=134&type=chunk) - During the three months ended June 30, 2025, **44,811 shares** were repurchased at an aggregate cost of **$55,337** (average **$1.23 per share**)[134](index=134&type=chunk) - As of June 30, 2025, the remaining dollar value of shares that may be repurchased was **$4.994853 million**[134](index=134&type=chunk) [Item 3. Defaults Upon Senior Securities](index=33&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities - There were no defaults upon senior securities[137](index=137&type=chunk) [Item 5. Other Information](index=33&type=section&id=Item%205.%20Other%20Information) This section indicates that there is no other information to report - No other information is reported in this section[137](index=137&type=chunk) [Item 6. Exhibits](index=34&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from the CEO and CFO (pursuant to Sections 302 and 906 of Sarbanes-Oxley Act) and Interactive Data Files (XBRL) - Exhibits include CEO and CFO certifications (31.1, 31.2, 32.1, 32.2) and Interactive Data Files (XBRL) (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE)[138](index=138&type=chunk) [Signatures](index=35&type=section&id=Signatures) This section contains the signatures of the registrant's authorized officers, including the Chairman and Chief Executive Officer and the Chief Financial Officer, certifying the report - The report is signed by Corey M. Horowitz, Chairman and Chief Executive Officer, and Robert Mahan, Chief Financial Officer, on August 8, 2025[142](index=142&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____ to ______ Commission File Number 001-41505 LINKBANCORP, Inc. (Exact name of registrant as specified in its charter) Pennsylvania 82-5130531 (State or other jurisdic ...

[Glossary of Terms](index=3&type=section&id=Glossary%20of%20Terms) The glossary defines key acronyms and terms used throughout the report, including financial, regulatory, and program-specific terminology - The glossary provides definitions for key acronyms and terms used throughout the report, such as '2025 Repurchase Program', 'ACL' (Allowance for credit losses), 'Republic First Transaction', and various financial and regulatory terms[8](index=8&type=chunk)[9](index=9&type=chunk) [Forward-Looking Statements](index=6&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section highlights that forward-looking statements are subject to uncertainties and risks that could cause actual results to differ materially - The Corporation's forward-looking statements are based on current beliefs and expectations, but actual results may differ materially due to inherent uncertainties, risks, and changes in circumstances beyond its control[11](index=11&type=chunk)[12](index=12&type=chunk) - Key factors that could affect future financial results include adverse economic and financial market conditions (e.g., elevated interest rates), increased competition for deposits, regulatory changes, interest rate impacts on Net Interest Margin (NIM), credit risk in the loan portfolio, operational risks (e.g., cybersecurity), and potential impacts from acquisitions and geopolitical events[13](index=13&type=chunk)[14](index=14&type=chunk) [PART I. FINANCIAL INFORMATION](index=6&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the Corporation's unaudited consolidated financial statements and management's discussion and analysis of financial performance [Item 1. Financial Statements](index=6&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements, including balance sheets, income statements, and detailed notes [Consolidated Balance Sheets](index=9&type=section&id=%28a%29%20Consolidated%20Balance%20Sheets) This table provides a snapshot of the Corporation's assets, liabilities, and shareholders' equity at specific reporting dates Consolidated Balance Sheet Highlights (June 30, 2025 vs. December 31, 2024) | Item | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :-------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | **ASSETS** | | | | | | Cash and Cash Equivalents | $804,664 | $1,063,871 | $(259,207) | -24.4% | | Investment securities (AFS) | $3,619,869 | $3,410,899 | $208,970 | 6.1% | | Investment securities (HTM) | $1,473,158 | $1,395,569 | $77,589 | 5.6% | | Loans, Net | $23,635,202 | $23,665,763 | $(30,561) | -0.1% | | Total Assets | $32,040,448 | $32,071,810 | $(31,362) | -0.1% | | **LIABILITIES** | | | | | | Total Deposits | $26,138,067 | $26,129,433 | $8,634 | 0.0% | | Total Borrowings | $1,773,900 | $1,782,048 | $(8,148) | -0.5% | | Total Liabilities | $28,711,202 | $28,874,485 | $(163,283) | -0.6% | | **SHAREHOLDERS' EQUITY** | | | | | | Total Shareholders' Equity | $3,329,246 | $3,197,325 | $131,921 | 4.1% | | Total Liabilities and Shareholders' Equity | $32,040,448 | $32,071,810 | $(31,362) | -0.1% | [Consolidated Statements of Income](index=10&type=section&id=%28b%29%20Consolidated%20Statements%20of%20Income) This table presents the Corporation's revenues, expenses, and net income over specific reporting periods Consolidated Statements of Income Highlights (Three and Six Months Ended June 30, 2025 vs. 2024) | Item (in thousands, except per-share data) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Total Interest Income | $402,761 | $400,506 | $802,452 | $740,172 | | Total Interest Expense | $147,840 | $158,786 | $296,345 | $291,515 | | Net Interest Income | $254,921 | $241,720 | $506,107 | $448,657 | | Provision for credit losses | $8,607 | $32,056 | $22,505 | $42,981 | | Total Non-Interest Income | $69,148 | $92,994 | $136,380 | $150,133 | | Total Non-Interest Expense | $192,811 | $199,488 | $382,270 | $377,087 | | Net Income | $99,198 | $94,975 | $192,185 | $156,916 | | Net Income Available to Common Shareholders | $96,636 | $92,413 | $187,061 | $151,792 | | Basic EPS | $0.53 | $0.53 | $1.03 | $0.90 | | Diluted EPS | $0.53 | $0.52 | $1.02 | $0.89 | [Consolidated Statements of Comprehensive Income](index=11&type=section&id=%28c%29%20Consolidated%20Statements%20of%20Comprehensive%20Income) This table details the components of comprehensive income, including net income and other comprehensive income items Consolidated Statements of Comprehensive Income Highlights (Three and Six Months Ended June 30, 2025 vs. 2024) | Item (in thousands) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net Income | $99,198 | $94,975 | $192,185 | $156,916 | | Net Unrealized (Losses) Gains on AFS Investment Securities | $(4,015) | $2,892 | $7,084 | $(12,386) | | Net Unrealized Gains on Interest Rate Derivatives Used in Cash Flow Hedges | $3,999 | $6,147 | $9,278 | $14,343 | | Defined benefit pension plan and postretirement benefits | $(106) | $(105) | $(212) | $(211) | | Other Comprehensive (Loss) Income, Net of Tax | $(122) | $8,934 | $16,150 | $1,746 | | Total Comprehensive Income | $99,076 | $103,909 | $208,335 | $158,662 | [Consolidated Statements of Shareholders' Equity](index=12&type=section&id=%28d%29%20Consolidated%20Statements%20of%20Shareholders%27%20Equity) This table outlines the changes in each component of shareholders' equity over the reporting period Shareholders' Equity Changes (Six Months Ended June 30, 2025 vs. 2024) | Item (in thousands) | Balance at Dec 31, 2024 | Net Income | Other Comprehensive Income | Common Stock Issued | Dividend Reinvestment | Stock-Based Comp. (Repurchases) | Treasury Stock Acquisition | Preferred Stock Dividend | Common Stock Dividends | Balance at June 30, 2025 | | :-------------------------------- | :---------------------- | :--------- | :----------------------- | :------------------ | :-------------------- | :------------------------------ | :------------------------- | :----------------------- | :--------------------- | :----------------------- | | **Preferred Stock** | $192,878 | — | — | — | — | — | — | — | — | $192,878 | | **Common Stock** | $614,866 | — | — | $173 | — | $2,462 | — | — | — | $617,501 | | **Additional Paid-in Capital** | $1,789,214 | — | — | $1,031 | $612 | $3,052 | — | — | — | $1,793,909 | | **Retained Earnings** | $1,775,620 | $192,185 | — | — | — | — | — | $(5,124) | $(65,629) | $1,897,052 | | **Accumulated Other Comprehensive Loss** | $(287,819) | — | $16,150 | — | — | — | — | — | — | $(271,669) | | **Treasury Stock** | $(887,434) | — | — | — | $2,084 | $(6,150) | $(8,925) | — | — | $(900,425) | | **Total Shareholders' Equity** | $3,197,325 | $192,185 | $16,150 | $1,204 | $2,696 | $(636) | $(8,925) | $(5,124) | $(65,629) | $3,329,246 | [Consolidated Statements of Cash Flows](index=13&type=section&id=%28e%29%20Consolidated%20Statements%20of%20Cash%20Flows) This table summarizes cash inflows and outflows from operating, investing, and financing activities Consolidated Statements of Cash Flows Highlights (Six Months Ended June 30, 2025 vs. 2024) | Item (in thousands) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | | Net Cash Provided by Operating Activities | $92,452 | $310,658 | | Net Cash (Used in) Provided by Investing Activities | $(270,001) | $2,195,486 | | Net Cash Used in Financing Activities | $(81,658) | $(1,659,572) | | Net (decrease) increase in Cash and Cash Equivalents | $(259,207) | $846,572 | | Cash and Cash Equivalents at End of Period | $804,664 | $1,396,282 | [Notes to Consolidated Financial Statements](index=14&type=section&id=%28f%29%20Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and disclosures supporting the consolidated financial statements [NOTE 1 – Basis of Presentation](index=14&type=section&id=NOTE%201%20%E2%80%93%20Basis%20of%20Presentation) This note outlines the basis for preparing the unaudited interim financial statements, confirming GAAP and SEC conformity - The unaudited Consolidated Financial Statements are prepared in conformity with GAAP for interim financial information and SEC regulations, requiring management estimates and assumptions[20](index=20&type=chunk) - Significant accounting policies remain unchanged from the 2024 Annual Report on Form 10-K[21](index=21&type=chunk) - Recently adopted ASUs (2023-07, 2023-08, 2024-01, 2025-02) had no material impact, with ASU 2023-08 and 2025-02 having no impact as the Corporation does not own crypto assets[22](index=22&type=chunk)[23](index=23&type=chunk)[24](index=24&type=chunk)[25](index=25&type=chunk) - Recently issued ASUs (2023-09, 2024-03, 2024-04, 2025-01, 2025-03, 2025-04) are not expected to have a material impact upon adoption in future periods[26](index=26&type=chunk)[27](index=27&type=chunk)[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk)[31](index=31&type=chunk) [NOTE 2 – Business Combinations](index=15&type=section&id=NOTE%202%20%E2%80%93%20Business%20Combinations) This note details the Republic First Transaction, including acquired assets, assumed liabilities, and the resulting gain on acquisition - On the Acquisition Date (April 26, 2024), Fulton Bank acquired approximately **$4.8 billion** of assets and assumed **$5.6 billion** of liabilities from Republic First Bank, receiving **$0.8 billion** cash from the FDIC[33](index=33&type=chunk) - The Republic First Transaction enhanced the Bank's presence in Philadelphia, Pennsylvania, and New Jersey[34](index=34&type=chunk) - The transaction resulted in a preliminary gain on acquisition of **$37.0 million**, net of income taxes, with the financial settlement process concluded on April 25, 2025, without additional adjustments[36](index=36&type=chunk) Republic First Transaction: Assets Acquired and Liabilities Assumed (April 26, 2024) | Item | Estimated Fair Value (in thousands) | | :-------------------------------- | :-------------------------------- | | Cash payment received from FDIC | $809,920 | | **Assets acquired:** | | | Cash and due from banks | $208,451 | | Investment securities | $1,938,571 | | Loans | $2,495,810 | | CDI | $92,600 | | Total assets acquired | $4,799,890 | | **Liabilities assumed:** | | | Deposits | $4,112,143 | | Borrowings | $1,413,751 | | Total liabilities assumed | $5,561,979 | | Net assets acquired | $(762,089) | | Gain on acquisition, before income taxes | $47,831 | | Gain on acquisition, net of income taxes | $36,996 | - The transaction added **$78.1 million** to the ACL, including **$54.6 million** for PCD Loans and **$23.4 million** for non-PCD Loans[38](index=38&type=chunk) [NOTE 3 – Restrictions on Cash and Cash Equivalents](index=17&type=section&id=NOTE%203%20%E2%80%93%20Restrictions%20on%20Cash%20and%20Cash%20Equivalents) This note details cash collateral posted by the Corporation to secure derivatives and other contracts Cash Collateral Posted (in thousands) | Date | Amount | | :----------- | :------- | | June 30, 2025 | $23,700 | | Dec 31, 2024 | $4,000 | [NOTE 4 – Investment Securities](index=19&type=section&id=NOTE%204%20%E2%80%93%20Investment%20Securities) This note details investment securities, including AFS and HTM categories, fair values, and credit quality Investment Securities (June 30, 2025 vs. December 31, 2024, in thousands) | Category | Amortized Cost (Jun 30, 2025) | Estimated Fair Value (Jun 30, 2025) | Amortized Cost (Dec 31, 2024) | Estimated Fair Value (Dec 31, 2024) | | :-------------------------------- | :---------------------------- | :------------------------------ | :---------------------------- | :------------------------------ | | **Available for Sale** | | | | | | State and municipal securities | $956,015 | $774,749 | $960,227 | $814,887 | | Corporate debt securities | $274,981 | $264,098 | $313,681 | $300,370 | | Collateralized mortgage obligations | $1,165,014 | $1,172,238 | $798,157 | $788,885 | | Residential mortgage-backed securities | $922,074 | $896,735 | $1,029,846 | $989,875 | | Commercial mortgage-backed securities | $604,696 | $512,049 | $617,605 | $516,882 | | **Total AFS** | **$3,922,780** | **$3,619,869** | **$3,719,516** | **$3,410,899** | | **Held to Maturity** | | | | | | Residential mortgage-backed securities | $618,955 | $569,697 | $537,856 | $477,696 | | Commercial mortgage-backed securities | $854,203 | $723,304 | $857,713 | $705,753 | | **Total HTM** | **$1,473,158** | **$1,293,001** | **$1,395,569** | **$1,183,449** | | **Grand Total Investment Securities** | **$5,395,938** | **$4,912,870** | **$5,115,085** | **$4,594,348** | - In May 2024, the Corporation sold **$345.7 million** of AFS investment securities, incurring a pre-tax loss of **$20.3 million**, and reinvested the proceeds into higher-yielding securities[42](index=42&type=chunk) Gross Realized Gains and Losses on Sales of Securities (in thousands) | Period | Gross Realized Gains | Gross Realized Losses | Net Gains (Losses) | | :-------------------- | :------------------- | :-------------------- | :----------------- | | 3 Months Ended Jun 30, 2025 | $— | $— | $— | | 3 Months Ended Jun 30, 2024 | $91 | $(20,373) | $(20,282) | | 6 Months Ended Jun 30, 2025 | $663 | $(665) | $(2) | | 6 Months Ended Jun 30, 2024 | $91 | $(20,373) | $(20,282) | - No Allowance for Credit Losses (ACL) was required for collateralized mortgage obligations, residential mortgage-backed securities, commercial mortgage-backed securities, state and municipal securities, or corporate debt securities as of June 30, 2025, and December 31, 2024, due to their credit quality, guarantees, and the Corporation's intent and ability to hold them[46](index=46&type=chunk)[47](index=47&type=chunk)[48](index=48&type=chunk)[49](index=49&type=chunk) [NOTE 5 - Loans and Allowance for Credit Losses](index=22&type=section&id=NOTE%205%20-%20Loans%20and%20Allowance%20for%20Credit%20Losses) This note details the loan portfolio composition, Allowance for Credit Losses (ACL), and credit quality indicators Loans and Leases, Net of Unearned Income (in thousands) | Loan Type | June 30, 2025 | December 31, 2024 | | :------------------------------ | :-------------- | :---------------- | | Real estate - commercial mortgage | $9,678,038 | $9,601,858 | | Commercial and industrial | $4,541,765 | $4,605,589 | | Real-estate - residential mortgage | $6,511,687 | $6,349,643 | | Real-estate - home equity | $1,193,410 | $1,160,616 | | Real-estate - construction | $1,155,099 | $1,394,899 | | Consumer | $583,949 | $616,856 | | Leases and other loans | $348,591 | $315,458 | | **Net loans** | **$24,012,539** | **$24,044,919** | Allowance for Credit Losses (ACL) and Reserve for OBS Credit Exposures (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | ACL - loans | $377,337 | $379,156 | | Reserve for OBS credit exposures | $14,180 | $14,161 | ACL Activity (Six Months Ended June 30, 2025 vs. 2024, in thousands) | Item | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | | Balance at beginning of period | $379,156 | $293,404 | | CECL Day 1 Provision | — | $23,444 | | Initial PCD allowance for credit losses | — | $55,906 | | Net loans (charged off) recovered | $(24,305) | $(19,900) | | Provision for credit losses | $22,486 | $23,087 | | Balance at end of period | $377,337 | $375,941 | Non-Accrual Loans by Class Segment (in thousands) | Loan Class | June 30, 2025 | December 31, 2024 | | :------------------------------ | :-------------- | :---------------- | | Real estate - commercial mortgage | $84,035 | $99,497 | | Commercial and industrial | $39,115 | $42,217 | | Real estate - residential mortgage | $25,817 | $25,400 | | Real estate - home equity | $7,079 | $8,591 | | Real estate - construction | $24,852 | $1,746 | | Consumer | $6 | $8 | | Leases and other loans | $2,038 | $11,834 | | **Total Non-Accrual Loans** | **$182,942** | **$189,293** | - Loan modifications for borrowers experiencing financial difficulty primarily involved term extensions, with no principal forgiveness granted during the three and six months ended June 30, 2025 and 2024[70](index=70&type=chunk)[72](index=72&type=chunk) [NOTE 6 – Mortgage Servicing Rights](index=33&type=section&id=NOTE%206%20%E2%80%93%20Mortgage%20Servicing%20Rights) This note summarizes changes in Mortgage Servicing Rights (MSRs), their fair value, and the serviced mortgage loan portfolio Mortgage Servicing Rights (MSRs) (in thousands) | Item | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Amortized cost: Beginning Balance | $30,298 | $31,057 | $30,691 | $31,602 | | Originations of MSRs | $924 | $883 | $1,625 | $1,465 | | Amortization | $(1,089) | $(1,294) | $(2,183) | $(2,421) | | Amortized cost: Ending Balance | $30,133 | $30,646 | $30,133 | $30,646 | | Estimated fair value of MSRs at end of period | $51,629 | $51,724 | $51,629 | $51,724 | - The total portfolio of mortgage loans serviced by the Corporation for unrelated third parties was **$4.0 billion** as of June 30, 2025, down from **$4.1 billion** as of December 31, 2024[76](index=76&type=chunk) - No valuation allowance was required for MSRs as of June 30, 2025, based on fair value analysis[77](index=77&type=chunk) [NOTE 7 – Derivative Financial Instruments](index=33&type=section&id=NOTE%207%20%E2%80%93%20Derivative%20Financial%20Instruments) This note details the Corporation's use of derivatives to manage market risks, including interest rate and foreign currency exposures - The Corporation uses derivatives to manage interest rate and foreign currency risks and for customer risk management, not for speculative purposes[78](index=78&type=chunk) Summary of Notional Amounts and Fair Values of Derivative Financial Instruments (in thousands) | Derivative Type | Notional Amount (Jun 30, 2025) | Asset (Liability) Fair Value (Jun 30, 2025) | Notional Amount (Dec 31, 2024) | Asset (Liability) Fair Value (Dec 31, 2024) | | :------------------------------------------ | :----------------------------- | :------------------------------------------ | :----------------------------- | :------------------------------------------ | | Interest Rate Locks with Customers (Positive) | $214,495 | $987 | $171,933 | $389 | | Interest Rate Locks with Customers (Negative) | $511 | $(4) | $3,888 | $(58) | | Interest Rate Derivatives with Customers (Positive) | $1,657,239 | $37,670 | $767,905 | $8,480 | | Interest Rate Derivatives with Customers (Negative) | $3,146,966 | $(150,482) | $3,976,294 | $(239,058) | | Interest Rate Derivatives with Dealer Counterparties (Positive) | $3,146,966 | $88,725 | $3,976,294 | $150,480 | | Interest Rate Derivatives with Dealer Counterparties (Negative) | $1,657,239 | $(38,036) | $767,905 | $(10,734) | | Interest Rate Derivatives used in Cash Flow Hedges (Positive) | $3,300,000 | $7,415 | $2,500,000 | $227 | | Interest Rate Derivatives used in Cash Flow Hedges (Negative) | $1,100,000 | $(550) | $1,400,000 | $(2,971) | - For the six months ended June 30, 2025, **$9.5 million** in gains/losses from interest rate products were recognized in OCI and reclassified into interest income, and **$0.1 million** into interest expense[82](index=82&type=chunk) - The Corporation estimates an additional **$13.9 million** will be reclassified as a decrease to net interest income over the next twelve months from cash flow hedges[83](index=83&type=chunk) Net Fair Value Gains (Losses) on Derivative Financial Instruments (in thousands) | Item | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Mortgage banking derivatives | $181 | $(45) | $(134) | $1,122 | | Interest rate derivatives | $9 | $137 | $131 | $288 | | Foreign exchange contracts | $31 | $84 | $142 | $123 | | **Net fair value gains (losses)** | **$221** | **$176** | **$139** | **$1,533** | - Mortgage loans held for sale are measured at fair value, with gains of **$0.2 million** and **$0.3 million** for the three and six months ended June 30, 2025, respectively[85](index=85&type=chunk) - In January 2023, the Corporation terminated **$1.0 billion** in cash flow hedges, with **$6.5 million** of unrealized losses reclassified as a reduction to interest income on loans for the six months ended June 30, 2025[88](index=88&type=chunk) [NOTE 8 – Accumulated Other Comprehensive (Loss) Income](index=44&type=section&id=NOTE%208%20%E2%80%93%20Accumulated%20Other%20Comprehensive%20%28Loss%29%20Income) This note details components of Other Comprehensive Income (OCI) and changes in Accumulated Other Comprehensive (Loss) Income (AOCI) Components of OCI (Six Months Ended June 30, 2025 vs. 2024, Net of Tax, in thousands) | Item | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :---------------------------------------------------------------- | :--------------------------- | :--------------------------- | | Net unrealized gains (losses) on investment securities | $4,412 | $(30,864) | | Reclassification adjustment for securities net change included in net income | $2 | $15,688 | | Amortization of net unrealized gains on AFS investment securities transferred to HTM | $2,670 | $2,790 | | Net unrealized holding gains arising during the period on interest rate derivatives used in cash flow hedges | $1,808 | $6,553 | | Reclassification adjustment for net change realized in net income on interest rate swaps used in cash flow hedges | $7,470 | $7,790 | | Amortization of net unrecognized pension and postretirement item | $(212) | $(211) | | **Total Other Comprehensive Income** | **$16,150** | **$1,746** | Changes in AOCI, Net of Tax (Six Months Ended June 30, 2025 vs. 2024, in thousands) | Item | Balance at Dec 31, 2024 | OCI before Reclassifications | Amounts Reclassified from AOCI | Amortization of Net Unrealized Gains on AFS Transferred to HTM | Balance at June 30, 2025 | | :---------------------------------------------------------------- | :---------------------- | :--------------------------- | :----------------------------- | :------------------------------------------------------------ | :----------------------- | | Unrealized Gains (Losses) on Investment Securities | $(275,989) | $4,412 | $2 | $2,670 | $(268,905) | | Net Unrealized Gain (Loss) on Interest Rate Derivatives used in Cash Flow Hedges | $(16,052) | $1,808 | $7,470 | — | $(6,774) | | Unrecognized Pension and Postretirement Plan Income (Costs) | $4,222 | — | $(212) | — | $4,010 | | **Total** | **$(287,819)** | **$6,220** | **$7,260** | **$2,670** | **$(271,669)** | [NOTE 9 – Fair Value Measurements](index=46&type=section&id=NOTE%209%20%E2%80%93%20Fair%20Value%20Measurements) This note describes the fair value hierarchy and presents assets and liabilities measured at fair value - Fair value measurements are categorized into a three-level hierarchy: Level 1 (quoted prices in active markets), Level 2 (observable market data other than quoted prices), and Level 3 (unobservable inputs)[93](index=93&type=chunk)[94](index=94&type=chunk) Assets and Liabilities Measured at Fair Value on a Recurring Basis (June 30, 2025, in thousands) | Item | Level 1 | Level 2 | Level 3 | Total | | :-------------------------------- | :------ | :-------- | :------ | :------ | | **Assets:** | | | | | | Loans held for sale | $— | $23,281 | $— | $23,281 | | AFS investment securities | $— | $3,619,869 | $— | $3,619,869 | | Investments held in Rabbi Trust | $37,571 | $— | $— | $37,571 | | Derivative assets | $1,867 | $134,797 | $— | $136,664 | | **Total Assets** | **$39,438** | **$3,777,947** | **$—** | **$3,817,385** | | **Liabilities:** | | | | | | Deferred compensation liabilities | $37,571 | $— | $— | $37,571 | | Derivative liabilities | $1,638 | $189,496 | $— | $191,134 | | **Total Liabilities** | **$39,209** | **$189,496** | **$—** | **$228,705** | - Valuation techniques for AFS investment securities rely on third-party pricing services using models that incorporate market information like benchmark yield curves and quoted prices of similar securities[96](index=96&type=chunk)[97](index=97&type=chunk) Level 3 Financial Assets Measured at Fair Value on a Nonrecurring Basis (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :------------------ | :-------------- | :---------------- | | Loans, Net | $160,009 | $168,668 | | OREO | $2,706 | $2,621 | | MSRs | $51,629 | $53,972 | | SBA servicing asset | $2,801 | $3,120 | | **Total assets** | **$217,145** | **$228,381** | - Fair values for loans and time deposits are estimated by discounting future cash flows using current rates, adjusted for liquidity and estimated credit losses[110](index=110&type=chunk) [NOTE 10 – Net Income Per Share](index=51&type=section&id=NOTE%2010%20%E2%80%93%20Net%20Income%20Per%20Share) This note provides the calculation of basic and diluted net income per share, including weighted average shares outstanding Net Income Per Share (Three and Six Months Ended June 30, 2025 vs. 2024) | Item (in thousands, except per share data) | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :----------------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Weighted average shares outstanding (basic) | 182,261 | 175,305 | 182,220 | 169,006 | | Impact of common stock equivalents | 1,552 | 1,629 | 1,779 | 1,763 | | Weighted average shares outstanding (diluted) | 183,813 | 176,934 | 183,999 | 170,769 | | Basic EPS | $0.53 | $0.53 | $1.03 | $0.90 | | Diluted EPS | $0.53 | $0.52 | $1.02 | $0.89 | [NOTE 11 – Stock-Based Compensation](index=51&type=section&id=NOTE%2011%20%E2%80%93%20Stock-Based%20Compensation) This note describes stock-based compensation plans for employees and directors, including expense and tax benefits - The Corporation grants equity awards (restricted stock, RSUs, PSUs) to employees and non-employee directors, recognizing compensation expense over the service period[115](index=115&type=chunk)[116](index=116&type=chunk) Stock-Based Compensation Expense and Tax Benefits (in thousands) | Item | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Compensation expense | $3,257 | $2,758 | $5,189 | $3,425 | | Tax benefit | $(742) | $(620) | $(1,173) | $(764) | | **Total stock-based compensation, net of tax** | **$2,515** | **$2,138** | **$4,016** | **$2,661** | [NOTE 12 – Employee Benefit Plans](index=53&type=section&id=NOTE%2012%20%E2%80%93%20Employee%20Benefit%20Plans) This note details the Corporation's 401(k), Pension, and Postretirement Benefits Plans, including associated expenses Employee Benefit Plan Expenses (in thousands) | Plan | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :-------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | 401(k) Retirement Plan expense | $3,600 | $3,400 | $7,100 | $6,600 | | Net periodic pension cost | $(211) | $(186) | $(421) | $(372) | | Net periodic postretirement benefit | $(127) | $(127) | $(254) | $(252) | - The Corporation recognizes the funded status of its Pension Plan and Postretirement Plan on the Consolidated Balance Sheets, with changes recognized through OCI[120](index=120&type=chunk) [NOTE 13 - Segment Reporting](index=53&type=section&id=NOTE%2013%20-%20Segment%20Reporting) This note clarifies the Corporation operates as a single reportable segment, with performance assessed on consolidated net income - The Corporation has one reportable segment, generating revenue primarily from interest income on loans and investments, and fee income[121](index=121&type=chunk) - The Chief Operating Decision Maker assesses segment performance based on net income available to common shareholders and diluted EPS[123](index=123&type=chunk) [NOTE 14 – Commitments and Contingencies](index=55&type=section&id=NOTE%2014%20%E2%80%93%20Commitments%20and%20Contingencies) This note outlines the Corporation's commitments, including credit extensions, letters of credit, and legal proceedings Commitments to Extend Credit and Letters of Credit (in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------- | :-------------- | :---------------- | | Commitments to extend credit | $8,861,986 | $8,828,595 | | Standby letters of credit | $295,973 | $279,309 | | Commercial letters of credit | $36,449 | $48,993 | - The Corporation maintains a reserve for estimated losses related to residential mortgage loans sold to investors, totaling **$1.4 million** as of June 30, 2025[131](index=131&type=chunk) - The Corporation is involved in various legal proceedings and regulatory inquiries, but believes any resulting liabilities will not have a material adverse effect on its financial condition, though outcomes are unpredictable[132](index=132&type=chunk)[135](index=135&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=57&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial condition and results, including key performance indicators and the Republic First Bank acquisition [Overview](index=57&type=section&id=OVERVIEW) This overview describes Fulton Financial Corporation as a financial holding company providing consumer and commercial services - Fulton Financial Corporation is a financial holding company providing consumer and commercial financial services in Pennsylvania, Delaware, Maryland, New Jersey, and Virginia through its banking subsidiary[138](index=138&type=chunk) - The majority of revenue is generated through net interest income, supplemented by fee income and gains on asset sales, offset by credit loss provisions, non-interest expenses, and income taxes[139](index=139&type=chunk) [H.R. 1 (Tax Law Impact)](index=57&type=section&id=H.R.%201) This section addresses the impact of H.R. 1 (Tax Law) on the Corporation's financial statements - President Trump signed H.R. 1 into law on July 4, 2025, extending or reinstating certain tax provisions, but the Corporation does not expect a material impact on its Consolidated Financial Statements[140](index=140&type=chunk) [Financial Highlights](index=57&type=section&id=Financial%20Highlights) This section summarizes key earnings and performance ratios, including net income, EPS, and return on assets Summary of Earnings and Selected Performance Ratios | Item | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income | $99,198 | $94,975 | $192,185 | $156,916 | | Net income available to common shareholders | $96,636 | $92,413 | $187,061 | $151,792 | | Diluted EPS | $0.53 | $0.52 | $1.02 | $0.89 | | Return on average assets, annualized | 1.25% | 1.24% | 1.21% | 1.08% | | Net interest margin (FTE) | 3.47% | 3.43% | 3.45% | 3.37% | | Efficiency ratio | 57.1% | 62.6% | 56.9% | 62.9% | | Non-performing assets to total assets | 0.67% | 0.55% | 0.67% | 0.55% | | Net charge-offs to average loans, annualized | 0.20% | 0.19% | 0.20% | 0.18% | - Net income available to common shareholders increased by **$4.2 million** to **$96.6 million** for the three months ended June 30, 2025, and by **$35.3 million** to **$187.1 million** for the six months ended June 30, 2025, compared to the same periods in 2024[143](index=143&type=chunk)[144](index=144&type=chunk) - For the six months ended June 30, 2025, NIM increased by **8 bps** to **3.45%**, net interest income increased by **$57.5 million** to **$506.1 million**, and the provision for credit losses was **$22.5 million**[148](index=148&type=chunk) [Acquisition of Republic First Bank](index=58&type=section&id=Acquisition%20of%20Substantially%20all%20of%20the%20Assets%20and%20Assumption%20of%20Substantially%20all%20of%20the%20Deposits%20and%20Certain%20Liabilities%20of%20Republic%20First%20Bank%20from%20the%20FDIC) This section details the acquisition of Republic First Bank's assets and liabilities by Fulton Bank - Fulton Bank completed the Republic First Transaction on the Acquisition Date, acquiring approximately **$4.8 billion** in assets and assuming **$5.6 billion** in liabilities from Republic First Bank, with **$0.8 billion** cash received from the FDIC[142](index=142&type=chunk) [Critical Accounting Policies](index=58&type=section&id=Critical%20Accounting%20Policies) This section refers to the Corporation's critical accounting policies detailed in its Annual Report on Form 10-K - The Corporation's critical accounting policies, which involve significant management judgments and estimates, are detailed in its Annual Report on Form 10-K for the year ended December 31, 2024[145](index=145&type=chunk)[146](index=146&type=chunk) [Supplemental Reporting of Non-GAAP Based Financial Measures](index=58&type=section&id=Supplemental%20Reporting%20of%20Non-GAAP%20Based%20Financial%20Measures) This section provides non-GAAP financial measures to offer additional insights into performance and trends - The report includes non-GAAP financial measures to provide useful comparative information and assess trends, consistent with internal evaluations and industry practices, but these should not substitute GAAP measures[147](index=147&type=chunk)[149](index=149&type=chunk) Reconciliation of Non-GAAP Financial Measures (Six Months Ended June 30, 2025 vs. 2024) | Item (in thousands, except per share data) | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------------ | :--------------------------- | :--------------------------- | | Operating net income available to common shareholders | $196,093 | $147,857 | | Operating net income available to common shareholders, per share (diluted) | $1.07 | $0.87 | | Operating net income | $201,217 | $152,981 | | Operating return on average assets | 1.27% | 1.06% | | Adjusted net income available to common shareholders | $196,273 | $148,066 | | Operating return on average common shareholders' equity (tangible) | 16.11% | 14.40% | | Operating non-interest expense | $370,478 | $364,681 | | Total revenue | $651,088 | $579,969 | | Efficiency ratio | 56.9% | 62.9% | [Results of Operations (Three months ended June 30, 2025 vs. 2024)](index=61&type=section&id=RESULTS%20OF%20OPERATIONS%20%28Three%20months%20ended%20June%2030%2C%202025%20compared%20to%20the%20three%20months%20ended%20June%2030%2C%202024%29) This section analyzes the Corporation's financial performance for the three months ended June 30, 2025, across key income and expense categories [Net Interest Income](index=61&type=section&id=Net%20Interest%20Income%20%28Three%20months%20ended%20June%2030%2C%202025%20vs.%202024%29) This section analyzes the changes in net interest income, interest income, and interest expense for the three-month period - FTE net interest income increased by **$13.0 million** to **$259.3 million** for the three months ended June 30, 2025, with NIM increasing by **4 bps** to **3.47%**[152](index=152&type=chunk) - Total interest income increased by **$2.1 million**, driven by a **$175.2 million** increase from volume changes (largely average net loans from Republic First Transaction), partially offset by a **$173.1 million** decrease from lower yields[155](index=155&type=chunk) - Interest expense decreased by **$10.9 million**, primarily due to a **$139.4 million** decrease from lower interest rates, partially offset by a **$128.4 million** increase from volume changes (average time and savings deposits from Republic First Transaction)[157](index=157&type=chunk) - Average net loans increased by **$553.8 million (2.4%)** to **$23.9 billion**, partly due to the Republic First Transaction, while the yield on total loans decreased by **26 bps** to **5.86%**[159](index=159&type=chunk)[160](index=160&type=chunk) - Average total deposits increased by **$1.5 billion (6.0%)** to **$26.1 billion**, primarily from savings, interest-bearing demand, and time deposits, partly due to the Republic First Transaction. The cost of deposits decreased by **16 bps** to **1.98%**[161](index=161&type=chunk)[162](index=162&type=chunk) - Average total borrowings and other interest-bearing liabilities decreased by **$685.4 million (28.1%)** to **$1.8 billion**, mainly due to decreases across various borrowing types, including the retirement of **$168.8 million** in subordinated notes in November 2024[163](index=163&type=chunk)[164](index=164&type=chunk) [Provision for Credit Losses](index=64&type=section&id=Provision%20for%20Credit%20Losses%20%28Three%20months%20ended%20June%2030%2C%202025%20vs.%202024%29) This section details the provision for credit losses and the Allowance for Credit Losses (ACL) for the three-month period - The provision for credit losses was **$8.6 million** for the three months ended June 30, 2025, down from **$32.1 million** in the same period of 2024. The ACL attributable to net loans was **$377.3 million (1.57% of total net loans)** as of June 30, 2025[165](index=165&type=chunk) [Non-Interest Income](index=66&type=section&id=Non-Interest%20Income%20%28Three%20months%20ended%20June%2030%2C%202025%20vs.%202024%29) This section analyzes changes in non-interest income, highlighting key drivers and contributing factors - Total non-interest income decreased by **$23.8 million (25.6%)** to **$69.1 million**, primarily due to the absence of a **$47.4 million** gain on acquisition and a **$20.3 million** investment securities loss in the prior year[167](index=167&type=chunk) - Excluding these items, non-interest income increased by **$3.3 million (5.0%)**, driven by a **$1.4 million** increase in cash management fees and a **$1.3 million** increase in wealth management revenues[167](index=167&type=chunk) [Non-Interest Expense](index=67&type=section&id=Non-Interest%20Expense%20%28Three%20months%20ended%20June%2030%2C%202025%20vs.%202024%29) This section analyzes changes in non-interest expense, focusing on cost savings and contributing factors - Total non-interest expense decreased by **$6.7 million (3.3%)** to **$192.8 million**[169](index=169&type=chunk) - Excluding the gain on Sale-Leaseback Transaction, FultonFirst implementation, and acquisition-related expenses, non-interest expense decreased by **$6.5 million (3.3%)**, mainly due to decreases in salaries and employee benefits (**$2.1 million**), data processing and software (**$2.1 million**), FDIC insurance (**$1.7 million**), and net occupancy (**$1.4 million**), largely from cost savings related to the Republic First Transaction and FultonFirst initiative[169](index=169&type=chunk) [Income Taxes](index=67&type=section&id=Income%20Taxes%20%28Three%20months%20ended%20June%2030%2C%202025%20vs.%202024%29) This section details the income tax expense and effective tax rate for the three-month period - Income tax expense increased by **$15.3 million** to **$23.5 million**, with the effective tax rate (ETR) rising to **19.1%** from **7.9%** in the prior year (**14.7%** excluding the gain on acquisition)[170](index=170&type=chunk) [Results of Operations (Six months ended June 30, 2025 vs. 2024)](index=68&type=section&id=RESULTS%20OF%20OPERATIONS%20%28Six%20months%20ended%20June%2030%2C%202025%20compared%20to%20the%20six%20months%20ended%20June%2030%2C%202024%29) This section analyzes the Corporation's financial performance for the six months ended June 30, 2025, across key income and expense categories [Net Interest Income](index=68&type=section&id=Net%20Interest%20Income%20%28Six%20months%20ended%20June%2030%2C%202025%20vs.%202024%29) This section analyzes the changes in net interest income, interest income, and interest expense for the six-month period - FTE net interest income increased by **$57.0 million** to **$514.8 million** for the six months ended June 30, 2025, with NIM increasing by **8 bps** to **3.45%**[171](index=171&type=chunk) - Total interest income increased by **$61.9 million (8.3%)**, driven by a **$148.9 million** increase from volume changes (primarily average net loans from Republic First Transaction), partially offset by an **$87.0 million** decrease from lower yields[174](index=174&type=chunk) - Interest expense increased by **$4.8 million**, driven by a **$51.5 million** increase from volume changes (average savings, money market, and time deposits from Republic First Transaction), partially offset by a **$46.7 million** decrease from lower interest rates[176](index=176&type=chunk) - Average net loans increased by **$1.6 billion (7.1%)** to **$24.0 billion**, largely due to the Republic First Transaction, while the yield on total loans decreased by **16 bps** to **5.86%**[178](index=178&type=chunk)[179](index=179&type=chunk) - Average total deposits increased by **$3.1 billion (13.6%)** to **$26.1 billion**, primarily from interest-bearing demand, savings, and money market deposits, partly due to the Republic First Transaction. The cost of deposits decreased by **4 bps** to **2.01%**[180](index=180&type=chunk)[181](index=181&type=chunk) - Average total borrowings and other interest-bearing liabilities decreased by **$769.5 million (30.5%)** to **$1.8 billion**, mainly due to decreases across various borrowing types, including the retirement of **$168.8 million** in subordinated notes in November 2024[182](index=182&type=chunk)[183](index=183&type=chunk) [Provision for Credit Losses](index=71&type=section&id=Provision%20for%20Credit%20Losses%20%28Six%20months%20ended%20June%2030%2C%202025%20vs.%202024%29) This section details the provision for credit losses for the six-month period, highlighting the Republic First Transaction impact - The provision for credit losses was **$22.5 million** for the six months ended June 30, 2025, a **$20.5 million** decrease from **$43.0 million** in the same period of 2024, primarily due to a **$23.4 million** provision for non-PCD loans from the Republic First Transaction in Q2 2024[184](index=184&type=chunk) [Non-Interest Income](index=73&type=section&id=Non-Interest%20Income%20%28Six%20months%20ended%20June%2030%2C%202025%20vs.%202024%29) This section analyzes changes in non-interest income, highlighting key drivers and contributing factors - Total non-interest income decreased by **$13.8 million (9.2%)** to **$136.4 million**, primarily due to the absence of a **$47.4 million** gain on acquisition and a **$20.3 million** investment securities loss in the prior year[186](index=186&type=chunk) - Excluding these items, non-interest income increased by **$13.4 million (10.9%)**, driven by increases in wealth management revenues (**$2.9 million**), cash management fees (**$2.9 million**), and income from equity method investments (**$4.5 million**)[186](index=186&type=chunk) [Non-Interest Expense](index=74&type=section&id=Non-Interest%20Expense%20%28Six%20months%20ended%20June%2030%2C%202025%20vs.%202024%29) This section analyzes changes in non-interest expense, focusing on intangible amortization and employee benefits - Total non-interest expense increased by **$5.2 million (1.4%)** to **$382.3 million**[188](index=188&type=chunk) - Excluding the gain on Sale-Leaseback Transaction, FultonFirst implementation, and acquisition-related expenses, non-interest expense increased by **$11.3 million (3.0%)**, largely due to increases in intangible amortization (**$6.5 million** from CDI amortization related to Republic First Transaction) and salaries and employee benefits (**$6.2 million** from incentive compensation and merit increases)[188](index=188&type=chunk) [Income Taxes](index=74&type=section&id=Income%20Taxes%20%28Six%20months%20ended%20June%2030%2C%202025%20vs.%202024%29) This section details the income tax expense and effective tax rate for the six-month period - The effective tax rate (ETR) was **19.2%** for the six months ended June 30, 2025, up from **12.2%** in the prior year (**16.6%** excluding the gain on acquisition)[189](index=189&type=chunk) [Financial Condition (June 30, 2025 vs. December 31, 2024)](index=75&type=section&id=FINANCIAL%20CONDITION%20%28June%2030%2C%202025%20compared%20to%20December%2031%2C%202024%29) This section analyzes the Corporation's financial position, covering investment securities, loans, deposits, borrowings, and regulatory capital [Investment Securities](index=75&type=section&id=Investment%20Securities%20%28Financial%20Condition%29) This section details changes in the Corporation's investment securities portfolio, including AFS and HTM categories Investment Securities Carrying Amount (June 30, 2025 vs. December 31, 2024, in thousands) | Item | June 30, 2025 | December 31, 2024 | Change | % Change | | :-------------------------------- | :-------------- | :---------------- | :----- | :------- | | Total AFS investment securities | $3,619,869 | $3,410,899 | $208,970 | 6.1% | | Total HTM securities | $1,473,158 | $1,395,569 | $77,589 | 5.6% | | **Total Investment Securities** | **$5,093,027** | **$4,806,468** | **$286,559** | **6.0%** | - The increase in AFS securities was primarily due to a **$383.4 million** increase in collateralized mortgage obligations, partially offset by decreases in residential mortgage-backed, state and municipal, and corporate debt securities[191](index=191&type=chunk) - The increase in HTM securities was driven by an **$81.1 million** increase in residential mortgage-backed securities[192](index=192&type=chunk) [Loans](index=76&type=section&id=Loans%20%28Financial%20Condition%29) This section analyzes the loan portfolio composition, non-accrual loans, and non-performing assets Ending Net Loans Outstanding by Type (June 30, 2025 vs. December 31, 2024, in thousands) | Loan Type | June 30, 2025 | December 31, 2024 | Change | % Change | | :------------------------------ | :-------------- | :---------------- | :----- | :------- | | Real estate - commercial mortgage | $9,678,038 | $9,601,858 | $76,180 | 0.8% | | Commercial and industrial | $4,541,765 | $4,605,589 | $(63,824) | -1.4% | | Real estate - residential mortgage | $6,511,687 | $6,349,643 | $162,044 | 2.6% | | Real estate - home equity | $1,193,410 | $1,160,616 | $32,794 | 2.8% | | Real estate - construction | $1,155,099 | $1,394,899 | $(239,800) | -17.2% | | Consumer | $583,949 | $616,856 | $(32,907) | -5.3% | | Leases and other loans | $348,591 | $315,458 | $33,133 | 10.5% | | **Net loans** | **$24,012,539** | **$24,044,919** | **$(32,380)** | **-0.1%** | - Net loans decreased by **$32.4 million (0.1%)**, primarily due to decreases in construction loans (**$239.8 million**) and commercial and industrial loans (**$63.8 million**), partially offset by increases in residential mortgage loans (**$162.0 million**) and commercial mortgage loans (**$76.2 million**)[193](index=193&type=chunk) - Commercial mortgage and construction loans comprised approximately **$10.8 billion (45.1%)** of the loan portfolio as of June 30, 2025[194](index=194&type=chunk) Non-Accrual Loans Activity (Six Months Ended June 30, 2025, in thousands) | Item | Commercial and Industrial | Real Estate - Commercial Mortgage | Real Estate - Construction | Real Estate - Residential Mortgage | Real Estate - Home Equity | Leases and Other Loans | Total | | :-------------------------- | :------------------------ | :-------------------------------- | :------------------------- | :--------------------------------- | :------------------------ | :--------------------- | :------ | | Balance at Dec 31, 2024 | $42,217 | $99,497 | $1,746 | $25,400 | $8,599 | $11,834 | $189,293 | | Additions | $25,695 | $85,360 | $25,980 | $5,217 | $3,917 | $1,925 | $148,094 | | Payments | $(19,107) | $(77,423) | $(2,534) | $(3,173) | $(1,818) | $(9,797) | $(113,852) | | Charge-offs | $(9,645) | $(18,508) | $(100) | $(601) | $(3,309) | $(1,924) | $(34,087) | | Transfers to accrual status | $(45) | $(4,891) | $— | $(82) | $(304) | $— | $(5,322) | | Transfers to OREO | $— | $— | $(240) | $(944) | $— | $— | $(1,184) | | **Balance at June 30, 2025** | **$39,115** | **$84,035** | **$24,852** | **$25,817** | **$7,085** | **$2,038** | **$182,942** | - Non-accrual loans decreased by **$6.4 million (3.4%)** to **$182.9 million**, representing **0.76%** of total net loans as of June 30, 2025[200](index=200&type=chunk) Non-Performing Assets (June 30, 2025 vs. December 31, 2024, in thousands) | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :-------------- | :---------------- | | Non-accrual loans | $182,942 | $189,293 | | Loans 90 days or more past due and still accruing | $29,949 | $30,781 | | **Total non-performing loans** | **$212,891** | **$220,074** | | OREO | $2,706 | $2,621 | | **Total non-performing assets** | **$215,597** | **$222,695** | | Non-accrual loans to total net loans | 0.76% | 0.79% | | Non-performing loans to total net loans | 0.89% | 0.92% | | Non-performing assets to total assets | 0.67% | 0.69% | | ACL - loans to non-performing loans | 177% | 172% | - Total criticized and classified loans decreased by **$149.1 million** to **$1.69 billion**, driven by a **$190.1 million** decrease in special mention loans, partially offset by a **$41.0 million** increase in substandard or lower loans[205](index=205&type=chunk) [Deposits and Borrowings](index=85&type=section&id=Deposits%20and%20Borrowings%20%28Financial%20Condition%29) This section details changes in the Corporation's deposit base and borrowing activities Ending Deposits by Type (June 30, 2025 vs. December 31, 2024, in thousands) | Deposit Type | June 30, 2025 | December 31, 2024 | Change | % Change | | :-------------------------- | :-------------- | :---------------- | :----- | :------- | | Noninterest-bearing demand | $5,337,771 | $5,499,760 | $(161,989) | -2.9% | | Interest-bearing demand | $7,593,083 | $7,843,604 | $(250,521) | -3.2% | | Savings and money market deposits | $8,271,925 | $7,792,114 | $479,811 | 6.2% | | Brokered deposits | $817,398 | $843,857 | $(26,459) | -3.1% | | Time deposits | $4,117,890 | $4,150,098 | $(32,208) | -0.8% | | **Total deposits** | **$26,138,067** | **$26,129,433** | **$8,634** | **0.0%** | - Total deposits increased by **$8.6 million**, driven by a **$479.8 million** increase in savings and money market deposits, partially offset by decreases in interest-bearing demand, noninterest-bearing demand, and time deposits[211](index=211&type=chunk) - Total uninsured deposits were estimated at **$9.2 billion** as of June 30, 2025, down from **$9.4 billion** at December 31, 2024[212](index=212&type=chunk) Ending Borrowings by Type (June 30, 2025 vs. December 31, 2024, in thousands) | Borrowing Type | June 30, 2025 | December 31, 2024 | Change | % Change | | :------------------------------ | :-------------- | :---------------- | :----- | :------- | | FHLB advances | $800,000 | $850,000 | $(50,000) | -5.9% | | Senior debt and subordinated debt | $367,476 | $367,316 | $160 | 0.0% | | Other borrowings | $606,424 | $564,732 | $41,692 | 7.4% | | **Total borrowings** | **$1,773,900** | **$1,782,048** | **$(8,148)** | **-0.5%** | - Total borrowings decreased by **$8.1 million (0.5%)**, primarily due to a **$50.0 million** decrease in FHLB advances, partially offset by a **$41.7 million** increase in other borrowings[214](index=214&type=chunk) [Shareholders' Equity](index=86&type=section&id=Shareholders%27%20Equity%20%28Financial%20Condition%29) This section discusses changes in shareholders' equity, including share repurchase programs and public offerings - The Board approved a 2025 Repurchase Program authorizing up to **$125.0 million** for common stock repurchases, with up to **$25.0 million** also available for preferred stock and Subordinated Notes due 2030[215](index=215&type=chunk)[216](index=216&type=chunk) - During the six months ended June 30, 2025, **553,767 shares** of common stock were repurchased under the program at a total cost of **$9.0 million ($16.28 per share)**[217](index=217&type=chunk) - In May 2024, the Corporation completed a public offering of **19,166,667 common shares**, generating approximately **$272.6 million** in net proceeds[218](index=218&type=chunk) [Regulatory Capital](index=86&type=section&id=Regulatory%20Capital) This section outlines the Corporation's regulatory capital ratios and compliance with minimum requirements - The Corporation and Fulton Bank are subject to Capital Rules requiring minimum Common Equity Tier 1, Tier 1 Leverage, and Total capital ratios, along with a **2.50%** capital conservation buffer[219](index=219&type=chunk)[220](index=220&type=chunk) - As of June 30, 2025, the Corporation's capital levels met all minimum regulatory requirements, including capital conservation buffers[221](index=221&type=chunk) Corporation's Capital Ratios vs. Regulatory Requirements (June 30, 2025 vs. December 31, 2024) | Capital Ratio | June 30, 2025 | December 31, 2024 | Regulatory Minimum for Capital Adequacy | With Capital Conservation Buffer | | :------------------------------------------ | :-------------- | :---------------- | :------------------------------------ | :------------------------------- | | Total Risk-Based Capital (to Risk-Weighted Assets) | 14.7% | 14.3% | 8.0% | 10.5% | | Tier I Risk-Based Capital (to Risk-Weighted Assets) | 12.1% | 11.5% | 6.0% | 8.5% | | Common Equity Tier I (to Risk-Weighted Assets) | 11.3% | 10.8% | 4.5% | 7.0% | | Tier I Leverage Capital (to Average Assets) | 9.4% | 9.0% | 4.0% | 4.0% | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=88&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section details the Corporation's management of market risk, focusing on interest rate risk, liquidity, and debt security price risk [Interest Rate Risk, Asset/Liability Management and Liquidity](index=88&type=section&id=Interest%20Rate%20Risk%2C%20Asset%2FLiability%20Management%20and%20Liquidity) This section discusses interest rate risk management through simulations and ALCO's role in balance sheet strategies - Interest rate risk impacts the Corporation's liquidity and can cause fluctuations in net interest income and economic value of equity[225](index=225&type=chunk) - The Asset/Liability Management Committee (ALCO) reviews interest rate sensitivity and liquidity, approves policies, and oversees balance sheet strategies[226](index=226&type=chunk) - The Corporation uses net interest income simulations (12-month period) and economic value of equity estimates to measure and manage interest rate risk, with policy limits for potential exposure[227](index=227&type=chunk)[228](index=228&type=chunk)[229](index=229&type=chunk)[231](index=231&type=chunk) Expected Impact of Rate-Ramp Scenarios on Net Interest Income (June 30, 2025) | Rate Ramp | Annual change in net interest income | % change in net interest income | | :-------- | :--------------------------------- | :------------------------------ | | +400 bp | +$33.5 million | +3.0% | | +300 bp | +$27.1 million | +2.4% | | +200 bp | +$20.3 million | +1.8% | | +100 bp | +$12.3 million | +1.1% | | –100 bp | -$7.9 million | -0.7% | | –200 bp | -$15.3 million | -1.4% | | –300 bp | -$22.6 million | -2.0% | | –400 bp | -$30.6 million | -2.7% | Expected Impact of Parallel Instantaneous Rate Shocks on Net Interest Income (June 30, 2025) | Rate Shock | Annual change in net interest income | % change in net interest income | | :--------- | :--------------------------------- | :------------------------------ | | +400 bp | +$60.4 million | +5.4% | | +300 bp | +$51.0 million | +4.6% | | +200 bp | +$40.6 million | +3.6% | | +100 bp | +$27.2 million | +2.4% | | –100 bp | -$19.5 million | -1.7% | | –200 bp | -$37.1 million | -3.3% | | –300 bp | -$55.7 million | -5.0% | | –400 bp | -$88.6 million | -7.9% | [Interest Rate Derivatives](index=90&type=section&id=Interest%20Rate%20Derivatives) This section explains the Corporation's use of interest rate derivatives to manage risk with customers and dealers - The Corporation uses interest rate derivatives with commercial loan customers and simultaneously with dealer counterparties to manage interest rate risk, resulting in customers paying a fixed rate and the Corporation receiving a floating rate[232](index=232&type=chunk) [Cash Flow Hedges](index=90&type=section&id=Cash%20Flow%20Hedges) This section describes how cash flow hedges reduce volatility in net interest income and expense, with unrealized gains/losses in AOCI - Interest rate derivatives designated as cash flow hedges reduce volatility in net interest income and expense, with unrealized gains/losses recorded in AOCI and reclassified to interest income/expense as hedged transactions affect earnings[233](index=233&type=chunk)[234](index=234&type=chunk) - Following the termination of **$1.0 billion** in cash flow hedges in January 2023, **$6.5 million** of unrealized losses were reclassified as a reduction to interest income on loans for the six months ended June 30, 2025[235](index=235&type=chunk) [Liquidity](index=90&type=section&id=Liquidity) This section outlines the Corporation's liquidity management strategies, including primary and secondary funding sources - The Corporation maintains liquidity through scheduled payments, deposits, and borrowings, supplemented by secondary sources like FHLB and FRB credit facilities, and federal funds lines[236](index=236&type=chunk)[237](index=237&type=chunk) - As of June 30, 2025, Fulton Bank had approximately **$6.3 billion** in available borrowing capacity with the FHLB, **$2.6 billion** in federal funds lines (no amounts outstanding), and **$3.9 billion** in collateralized borrowing capacity at the FRB discount window (no amounts outstanding)[238](index=238&type=chunk)[239](index=239&type=chunk) - Operating activities generated **$92.5 million** in cash for the six months ended June 30, 2025, while investing and financing activities used **$270.0 million** and **$81.7 million**, respectively[243](index=243&type=chunk) [Debt Security Market Price Risk](index=91&type=section&id=Debt%20Security%20Market%20Price%20Risk) This section addresses debt security market price risk, focusing on U.S. government-sponsored agency mortgage-backed securities - Debt security market price risk arises from changes in debt security values unrelated to interest rates. The Corporation's investments are primarily U.S. government-sponsored agency mortgage-backed securities and collateralized mortgage obligations, state and municipal securities, and corporate debt securities[244](index=244&type=chunk) - All mortgage-backed securities and collateralized mortgage obligations have principal payments guaranteed by U.S. government-sponsored agencies[244](index=244&type=chunk) [State and Municipal Securities](index=91&type=section&id=State%20and%20Municipal%20Securities) This section details the Corporation's holdings in state and municipal securities, emphasizing their credit support - As of June 30, 2025, the Corporation held **$774.7 million** in state and municipal securities, with approximately **100%** supported by the general obligation of the issuing states or municipalities, and **75%** being school district issuances[245](index=245&type=chunk) [Item 4. Controls and Procedures](index=91&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the Corporation's disclosure controls and procedures as evaluated by management - The Corporation's Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective as of June 30, 2025[246](index=246&type=chunk) [PART II. OTHER INFORMATION](index=92&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part includes disclosures on legal proceedings, risk factors, equity sales, and other relevant information [Item 1. Legal Proceedings](index=92&type=section&id=Item%201.%20Legal%20Proceedings) This section incorporates legal proceedings information by reference from Note 14 of the financial statements - Information on legal proceedings is incorporated by reference from Note 14 'Commitments and Contingencies' in the Notes to Consolidated Financial Statements[247](index=247&type=chunk) [Item 1A. Risk Factors](index=92&type=section&id=Item%201A.%20Risk%20Factors) This section states that there have been no material changes to previously disclosed risk factors - No material changes to the risk factors previously disclosed in the Corporation's Annual Report on Form 10-K for the year ended December 31, 2024[248](index=248&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=92&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the 2025 Repurchase Program, including authorization limits and shares repurchased Share Repurchase Activity (April 1, 2025 to June 30, 2025) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | | :------------------------------ | :----------------------------- | :--------------------------- | :----------------------------------------------------------------------------- | :----------------------------------------------------------------------------- | | April 1, 2025 to April 30, 2025 | 500,000 | $16.15 | 500,000 | $116,368,940 | | May 1, 2025 to May 31, 2025 | — | — | — | $116,368,940 | | June 1, 2025 to June 30, 2025 | 22,300 | $17.17 | 22,300 | $115,986,150 | - The 2025 Repurchase Program authorizes repurchases of up to **$125.0 million** of common stock, with up to **$25.0 million** also available for preferred stock and Subordinated Notes due 2030[249](index=249&type=chunk)[250](index=250&type=chunk) - During the six months ended June 30, 2025, **553,767 common shares** were repurchased for **$9.0 million ($16.28 per share)**[252](index=252&type=chunk) [Item 3. Defaults Upon Senior Securities](index=92&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is marked as not applicable [Item 4. Mine Safety Disclosures](index=92&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is marked as not applicable [Item 5. Other Information](index=92&type=section&id=Item%205.%20Other%20Information) This section discloses a director's Rule 10b5-1 trading arrangement for common stock sales - On June 13, 2025, E. Philip Wenger, a director, adopted a Rule 10b5-1 trading arrangement to sell up

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 20-F ☐ REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 OR ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended March 31, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to _____________. OR ☐ SHELL COMPANY REPORT PURSUANT TO SECTION 13 ...