(MARK ONE) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended June 30, 2025 ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Address of principal executive offices) (347) 316-8312 (Issuer's telephone number) For the transition period from to Securities registered pursuant to Section 12(b) of the Act: Commission file number: ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (MARK ONE) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarter ended June 30, 2025 ☐ 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: 001-42578 SIDDHI ACQUISITION CORP (Exact Name of Registrant as Specified in Its Charter) Cayman Islands N/A (State or other jurisdiction of inco ...

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) This section presents the unaudited interim financial statements and management's analysis for Yorkville Acquisition Corp [Item 1. Interim Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Interim%20Financial%20Statements%20(unaudited).) Presents unaudited condensed financial statements and explanatory notes for Yorkville Acquisition Corp. from inception through March 31, 2025 [Unaudited Condensed Balance Sheet as of March 31, 2025](index=4&type=section&id=Unaudited%20Condensed%20Balance%20Sheet%20as%20of%20March%2031%2C%202025) Presents the company's financial position, including assets, liabilities, and shareholder's deficit, as of March 31, 2025 | ASSETS | | | :--- | :--- | | Current asset – prepaid expenses | $12,238 | | Deferred offering costs | $142,376 | | **TOTAL ASSETS** | **$154,614** | | LIABILITIES AND SHAREHOLDER'S DEFICIT | | | Current liabilities: | | | Accrued offering costs | $142,376 | | Accrued expenses | $14,387 | | Accounts payable | $3,275 | | **Total Liabilities** | **$160,038** | | Shareholder's Deficit: | | | Class B ordinary shares | $575 | | Additional paid-in capital | $24,425 | | Accumulated deficit | $(30,424) | | **Total Shareholder's Deficit** | **$(5,424)** | | **Total Liabilities and Shareholder's Equity** | **$154,614** | [Unaudited Condensed Statement of Operations for the period from March 3, 2025 (inception) through March 31, 2025](index=5&type=section&id=Unaudited%20Condensed%20Statement%20of%20Operations%20for%20the%20period%20from%20March%203%2C%202025%20(inception)%20through%20March%2031%2C%202025) Details the company's net loss and loss per share for the period from inception through March 31, 2025 | Item | Amount | | :--- | :--- | | Formation, general and administrative expenses | $30,424 | | **Net loss** | **$(30,424)** | | Weighted average shares outstanding, basic and diluted | 5,000,000 | | Basic and diluted net loss per ordinary share | $(0.01) | [Unaudited Condensed Statement of Changes in Shareholder's Deficit for the period from March 3, 2025 (inception) through March 31, 2025](index=6&type=section&id=Unaudited%20Condensed%20Statement%20of%20Changes%20in%20Shareholder%27s%20Deficit%20for%20the%20period%20from%20March%203%2C%202025%20(inception)%20through%20March%2031%2C%202025) Outlines changes in shareholder's deficit, including share issuance and net loss, from inception through March 31, 2025 | Item | Class B Shares | Amount | Additional Paid-In Capital | Accumulated Deficit | Total Shareholder's Deficit | | :--- | :--- | :--- | :--- | :--- | :--- | | Balance as of March 3, 2025 (inception) | — | $— | $— | $— | $— | | Issuance of Class B ordinary shares to Sponsor | 5,750,000 | $575 | $24,425 | — | $25,000 | | Net loss | — | — | — | $(30,424) | $(30,424) | | **Balance as of March 31, 2025** | **5,750,000** | **$575** | **$24,425** | **$(30,424)** | **$(5,424)** | [Unaudited Condensed Statement of Cash Flows for the period from March 3, 2025 (inception) through March 31, 2025](index=7&type=section&id=Unaudited%20Condensed%20Statement%20of%20Cash%20Flows%20for%20the%20period%20from%20March%203%2C%202025%20(inception)%20through%20March%2031%2C%202025) Presents cash flows from operating activities and non-cash transactions from inception through March 31, 2025 | Cash Flows from Operating Activities: | | | :--- | :--- | | Net loss | $(30,424) | | Adjustments to reconcile net loss to net cash used in operating activities: | | | Formation, general and administrative costs paid by Sponsor in exchange for issuance of Class B ordinary shares | $12,762 | | Changes in operating assets and liabilities: | | | Accrued expenses | $14,387 | | Accounts payable | $3,275 | | **Net cash used in operating activities** | **$—** | | Net change in cash | $— | | Cash – beginning of period | $— | | **Cash – end of period** | **$—** | | Supplemental disclosure of non-cash investing and financing activities: | | | Prepaid expenses paid by Sponsor in exchange for issuance of Class B ordinary shares | $12,238 | | Deferred offering costs included in accrued offering costs | $142,376 | [Notes to Unaudited Condensed Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Financial%20Statements) Provides detailed explanations of the company's accounting policies, IPO, private placement, and related party transactions [Note 1 — Organization and Business Operations](index=8&type=section&id=Note%201%20%E2%80%94%20Organization%20and%20Business%20Operations) Describes the company's formation, purpose as a blank check company, and post-IPO trust account details - Yorkville Acquisition Corp. is a blank check company incorporated on March 3, 2025, for the purpose of effecting a business combination, and had not commenced operations as of March 31, 2025[26](index=26&type=chunk)[27](index=27&type=chunk) - On June 30, 2025, the company consummated its Initial Public Offering (IPO) of **17,250,000 units at $10.00 per unit**, generating gross proceeds of **$172,500,000**, including the full exercise of the over-allotment option, and simultaneously sold **351,825 private placement units** to the Sponsor for **$3,518,250**[28](index=28&type=chunk)[29](index=29&type=chunk) - Following the IPO, **$173,362,500 ($10.05 per unit)** was placed in a Trust Account, to be invested in U.S. government treasury obligations or money market funds, and will not be released until a business combination or redemption of public shares[32](index=32&type=chunk) - The company had **no cash** and a working capital deficit of **$147,800** as of March 31, 2025, with liquidity needs prior to the IPO met by **$25,000** from the Sponsor and a promissory note of up to **$300,000**, which was repaid on July 2, 2025[36](index=36&type=chunk) [Note 2 — Significant Accounting Policies](index=10&type=section&id=Note%202%20%E2%80%94%20Significant%20Accounting%20Policies) Outlines the accounting principles and policies applied in preparing the interim financial statements - The unaudited condensed financial statements are prepared in accordance with GAAP for interim financial information and SEC rules, with certain disclosures condensed or omitted[37](index=37&type=chunk) - The Company is an 'emerging growth company' and has elected not to opt out of the extended transition period for complying with new or revised financial accounting standards, which may affect comparability with other public companies[40](index=40&type=chunk)[42](index=42&type=chunk) - Deferred offering costs, primarily professional and registration fees related to the IPO, amounted to **$142,376** as of March 31, 2025[46](index=46&type=chunk) - The Company adopted ASU 2023-07, 'Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,' on March 3, 2025, its inception date[56](index=56&type=chunk) [Note 3 — Initial Public Offering](index=14&type=section&id=Note%203%20%E2%80%94%20Initial%20Public%20Offering) Details the terms and structure of the company's Initial Public Offering, including units, shares, and warrants - The IPO involved the sale of **17,250,000 units at $10.00 each**, with each unit consisting of one Class A ordinary share and one-third of one redeemable warrant, exercisable at **$11.50 per share**[58](index=58&type=chunk) - Public Warrants cannot be exercised until the later of 12 months from the IPO closing or 30 days after the initial Business Combination, and expire five years after the Business Combination[59](index=59&type=chunk) - The Company may redeem outstanding Public Warrants if the Class A ordinary share price equals or exceeds **$18.00** for 20 trading days within a 30-trading day period, subject to a 30-day prior written notice[63](index=63&type=chunk)[67](index=67&type=chunk) [Note 4 — Private Placement](index=16&type=section&id=Note%204%20%E2%80%94%20Private%20Placement) Describes the private placement of units to the Sponsor, including terms for shares and warrants - The Sponsor purchased **351,825 Private Placement Units at $10.00 per unit**, totaling **$3,518,250**, with each unit including one Private Placement Share and one-third of one Private Placement Warrant[64](index=64&type=chunk) - Private Placement Warrants are non-redeemable and subject to transfer restrictions, but may be exercised on a cashless basis by the Sponsor or permitted transferees[65](index=65&type=chunk) - The Sponsor, officers, and directors have waived redemption rights for their shares in connection with a business combination and liquidating distributions from the Trust Account if a business combination is not completed within the Completion Window[66](index=66&type=chunk) [Note 5 — Segment Information](index=17&type=section&id=Note%205%20%E2%80%94%20Segment%20Information) States that the company operates as a single reporting segment, with the CFO as the Chief Operating Decision Maker - The Company has determined it has only one reporting segment, with the Chief Financial Officer identified as the Chief Operating Decision Maker (CODM)[69](index=69&type=chunk) - The CODM reviews total assets, net income or loss, and formation, general and administrative expenses to assess performance and allocate resources[70](index=70&type=chunk) [Note 6 — Related Party Transactions](index=17&type=section&id=Note%206%20%E2%80%94%20Related%20Party%20Transactions) Details transactions with the Sponsor, including issuance of Founder Shares and promissory notes - On March 5, 2025, the Company issued **5,750,000 Class B ordinary shares (Founder Shares)** to the Sponsor for **$25,000**, which were subject to forfeiture if the over-allotment option was not fully exercised, which it was on June 30, 2025[71](index=71&type=chunk) - Founder Shares automatically convert into Class A ordinary shares upon the initial Business Combination and are subject to certain transfer restrictions[72](index=72&type=chunk)[73](index=73&type=chunk) - The Sponsor agreed to loan the Company up to **$300,000** via a non-interest bearing promissory note to cover IPO expenses, which was repaid on July 2, 2025, with no borrowings made as of March 31, 2025[74](index=74&type=chunk) - The Sponsor or affiliates may provide Working Capital Loans or Extension Loans, which may be convertible into private placement-equivalent units[75](index=75&type=chunk)[76](index=76&type=chunk) [Note 7 — Commitments and Contingencies](index=19&type=section&id=Note%207%20%E2%80%94%20Commitments%20and%20Contingencies) Addresses potential impacts of geopolitical instability, registration rights, and underwriting fees - Geopolitical instability from ongoing wars (Russia-Ukraine, Israel-Hamas) could lead to market disruptions and adversely affect the Company's search for a business combination[77](index=77&type=chunk)[78](index=78&type=chunk) - Holders of Founder Shares, placement units, Working Capital Units, and Extension Units have registration rights for their securities[79](index=79&type=chunk) - Underwriters were paid a cash underwriting discount of **$1,155,750** and are entitled to a deferred fee of **$5,175,000**, payable upon completion of a Business Combination[81](index=81&type=chunk) - The Company issued **229,425 Class A ordinary shares (Representative Shares)** to Clear Street and/or its designees as an IPO expense, subject to transfer restrictions and waiver of redemption/liquidation rights[82](index=82&type=chunk) [Note 8 — Shareholder's Deficit](index=20&type=section&id=Note%208%20%E2%80%94%20Shareholder%27s%20Deficit) Outlines the authorized and issued share capital, including Class A and Class B ordinary shares - The Company is authorized to issue **1,000,000 preference shares** and **200,000,000 Class A ordinary shares**, with none issued or outstanding as of March 31, 2025[83](index=83&type=chunk) - **5,750,000 Class B ordinary shares** were issued to the Sponsor, which will automatically convert to Class A ordinary shares upon the initial Business Combination, subject to adjustment[84](index=84&type=chunk)[85](index=85&type=chunk) - Prior to a business combination, only Class B ordinary shareholders have voting rights on director appointments/removals and continuation in other jurisdictions[86](index=86&type=chunk) [Note 9 — Subsequent Events](index=21&type=section&id=Note%209%20%E2%80%94%20Subsequent%20Events) Reports significant events occurring after the balance sheet date, including IPO and private placement completion - On June 30, 2025, the Company completed its IPO, raising **$172,500,000** gross proceeds, and a private placement, raising **$3,518,250** gross proceeds[88](index=88&type=chunk) - A cash underwriting discount of **$1,155,750** was paid on June 30, 2025[89](index=89&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's analysis of financial condition and operations, covering blank check status, IPO, private placement, liquidity, and going concern [Special Note Regarding Forward-Looking Statements](index=22&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) Warns that the report contains forward-looking statements subject to risks and uncertainties - The report contains forward-looking statements that involve risks and uncertainties, and actual results may differ materially from expectations[91](index=91&type=chunk) [Overview](index=22&type=section&id=Overview) Provides a brief introduction to Yorkville Acquisition Corp. as a blank check company and its recent IPO activities - Yorkville Acquisition Corp. is a blank check company formed on March 3, 2025, to effect a business combination[92](index=92&type=chunk) - The company consummated its IPO of **17,250,000 units** and a private placement of **351,825 units** on June 30, 2025, generating gross proceeds of **$172,500,000** and **$3,518,250**, respectively[93](index=93&type=chunk) - Following the IPO and private placement, **$173,362,500** was placed in a U.S.-based Trust Account[94](index=94&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Summarizes the company's operational activities and net loss for the period from inception through March 31, 2025 - As of March 31, 2025, the company had not commenced operations, with all activity related to its formation and IPO preparation[95](index=95&type=chunk) | Item | Amount | | :--- | :--- | | Net loss (March 3, 2025 - March 31, 2025) | $(30,424) | | Comprised of | Formation, general and administrative expenses | [Liquidity, Capital Resources and Going Concern](index=23&type=section&id=Liquidity%2C%20Capital%20Resources%20and%20Going%20Concern) Discusses the company's cash position, capital resources, and assessment of its ability to continue as a going concern - As of March 31, 2025, the company had **no cash** and a working capital deficit of **$147,800**[97](index=97&type=chunk) - Post-IPO, **$173,362,500** was placed in the Trust Account, intended for the initial business combination, with funds outside the Trust Account used for identifying and evaluating target businesses[99](index=99&type=chunk)[100](index=100&type=chunk)[101](index=101&type=chunk) - The company expects to incur significant costs related to identifying and negotiating a target business, raising substantial doubt about its ability to continue as a going concern within one year[103](index=103&type=chunk) [Contractual Obligations](index=24&type=section&id=Contractual%20Obligations) Identifies the company's contractual obligations, primarily deferred underwriting discounts - The company has no long-term debt, capital lease obligations, operating lease obligations, or long-term liabilities as of March 1, 2025[104](index=104&type=chunk) - Underwriters are entitled to a deferred underwriting discount of **$5,175,000**, payable upon completion of an initial business combination[104](index=104&type=chunk) [Critical Accounting Estimates](index=24&type=section&id=Critical%20Accounting%20Estimates) States that no critical accounting estimates were identified as of March 31, 2025 - No critical accounting estimates were identified as of March 31, 2025[105](index=105&type=chunk) [Recent Accounting Pronouncements](index=24&type=section&id=Recent%20Accounting%20Pronouncements) Notes the adoption of ASU 2023-07 and its immaterial impact on financial statements - The company adopted ASU 2023-07, 'Segment Reporting (Topic 280),' on March 3, 2025, which did not have a material impact on its financial statements[106](index=106&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not required for smaller reporting companies, and thus no disclosures are provided - Disclosures about market risk are not required for smaller reporting companies[109](index=109&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated the effectiveness of the company's disclosure controls and procedures as of March 31, 2025, concluding they were effective, and reported no material changes in internal control over financial reporting during the quarter [Evaluation of Disclosure Controls and Procedures](index=25&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management assessed the effectiveness of disclosure controls and procedures as of March 31, 2025 - Management concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2025[111](index=111&type=chunk) [Changes in Internal Control over Financial Reporting](index=25&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) Reports no material changes in internal control over financial reporting during the quarter ended March 31, 2025 - There were no changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting during the quarter ended March 31, 2025[112](index=112&type=chunk) [PART II - OTHER INFORMATION](index=26&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section provides additional information including legal proceedings, risk factors, equity sales, and exhibits [Item 1. Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings - There are no legal proceedings to report[114](index=114&type=chunk) [Item 1A. Risk Factors](index=26&type=section&id=Item%201A.%20Risk%20Factors) The company refers to the Risk Factors section of its final prospectus for the Initial Public Offering and states that there have been no material changes to these factors during the 2025 fiscal year - No material changes occurred during the 2025 fiscal year to the risk factors included in the final prospectus for the Initial Public Offering[114](index=114&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) The company reported no unregistered sales of equity securities or use of proceeds - There were no unregistered sales of equity securities or use of proceeds[115](index=115&type=chunk) [Item 3. Defaults Upon Senior Securities](index=26&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - There were no defaults upon senior securities[115](index=115&type=chunk) [Item 4. Mine Safety Disclosures](index=26&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine safety disclosures are not applicable to the company - Mine safety disclosures are not applicable[116](index=116&type=chunk) [Item 5. Other Information](index=26&type=section&id=Item%205.%20Other%20Information) The company reported no other information - There is no other information to report[117](index=117&type=chunk) [Item 6. Exhibits](index=27&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications from the principal executive and financial officers and XBRL-related documents | Exhibit No. | Description | | :--- | :--- | | 31.1 | Certification of Principal Executive Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | 31.2 | Certification of Principal Financial Officer Pursuant to Securities Exchange Act Rules 13a-14(a), as adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 | | 32 | Certification Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 | | 101.INS | Inline XBRL Instance Document | | 101.SCH | Inline XBRL Taxonomy Extension Schema Document | | 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | | 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | | 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) | [PART III - SIGNATURES](index=28&type=section&id=PART%20III%20-%20SIGNATURES) This section contains the official signatures for the report [SIGNATURES](index=28&type=section&id=SIGNATURES) The report is duly signed on behalf of Yorkville Acquisition Corp. by Michael Rosselli, Chief Financial Officer, on August 8, 2025 - The report was signed by Michael Rosselli, Chief Financial Officer, on August 8, 2025[121](index=121&type=chunk)

[PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Interim Financial Statements (unaudited).](index=4&type=section&id=Item%201.%20Interim%20Financial%20Statements%20(unaudited).) This section presents Yorkville Acquisition Corp.'s unaudited condensed financial statements from inception to March 31, 2025 [Unaudited Condensed Balance Sheet as of March 31, 2025](index=4&type=section&id=Unaudited%20Condensed%20Balance%20Sheet%20as%20of%20March%2031%2C%202025) Presents the company's financial position as of March 31, 2025, detailing assets, liabilities, and a shareholder's deficit Unaudited Condensed Balance Sheet as of March 31, 2025 | ASSETS | | | :--- | :--- | | Current asset – prepaid expenses | $ 12,238 | | Deferred offering costs | 142,376 | | **TOTAL ASSETS** | **$ 154,614** | | LIABILITIES AND SHAREHOLDER'S DEFICIT | | | Current liabilities: | | | Accrued offering costs | $ 142,376 | | Accrued expenses | 14,387 | | Accounts payable | 3,275 | | **Total Liabilities** | **160,038** | | Shareholder's Deficit | | | Class B ordinary shares | 575 | | Additional paid-in capital | 24,425 | | Accumulated deficit | (30,424) | | **Total Shareholder's Deficit** | **(5,424)** | | **Total Liabilities and Shareholder's Equity** | **$ 154,614** | [Unaudited Condensed Statement of Operations for the period from March 3, 2025 (inception) through March 31, 2025](index=5&type=section&id=Unaudited%20Condensed%20Statement%20of%20Operations%20for%20the%20period%20from%20March%203%2C%202025%20(inception)%20through%20March%2031%2C%202025) Details financial performance from inception to March 31, 2025, reporting a net loss of $(30,424) and $(0.01) per share Net Loss (Inception through March 31, 2025) | Metric | Amount | | :--- | :--- | | Formation, general and administrative expenses | $ 30,424 | | Net loss | (30,424) | | Weighted average shares outstanding, basic and diluted | 5,000,000 | | Basic and diluted net loss per ordinary share | $ (0.01) | [Unaudited Condensed Statement of Changes in Shareholder's Deficit for the period from March 3, 2025 (inception) through March 31, 2025](index=6&type=section&id=Unaudited%20Condensed%20Statement%20of%20Changes%20in%20Shareholder%27s%20Deficit%20for%20the%20period%20from%20March%203%2C%202025%20(inception)%20through%20March%2031%2C%202025) Outlines changes in shareholder's deficit from inception to March 31, 2025, resulting in a total deficit of $(5,424) Unaudited Condensed Statement of Changes in Shareholder's Deficit for the period from March 3, 2025 (inception) through March 31, 2025 | Item | Class B Shares | Amount | Additional Paid-In Capital | Accumulated Deficit | Total Shareholder's Deficit | | :--- | :--- | :--- | :--- | :--- | :--- | | Balance as of March 3, 2025 (inception) | — | $ — | $ — | $ — | $ — | | Issuance of Class B ordinary shares to Sponsor | 5,750,000 | 575 | 24,425 | — | 25,000 | | Net loss | — | — | — | (30,424) | (30,424) | | Balance as of March 31, 2025 | 5,750,000 | $ 575 | $ 24,425 | $ (30,424) | $ (5,424) | [Unaudited Condensed Statement of Cash Flows for the period from March 3, 2025 (inception) through March 31, 2025](index=7&type=section&id=Unaudited%20Condensed%20Statement%20of%20Cash%20Flows%20for%20the%20period%20from%20March%203%2C%202025%20(inception)%20through%20March%2031%2C%202025) Reports cash flow activities from inception to March 31, 2025, showing no net cash used in operations and zero cash balance Unaudited Condensed Statement of Cash Flows for the period from March 3, 2025 (inception) through March 31, 2025 | Cash Flows from Operating Activities: | | | :--- | :--- | | Net loss | $ (30,424) | | Adjustments to reconcile net loss to net cash used in operating activities: | | | Formation, general and administrative costs paid by Sponsor in exchange for issuance of Class B ordinary shares | 12,762 | | Changes in operating assets and liabilities: | | | Accrued expenses | 14,387 | | Accounts payable | 3,275 | | Net cash used in operating activities | — | | Net change in cash | — | | Cash – beginning of period | — | | Cash – end of period | $ — | | Supplemental disclosure of non-cash investing and financing activities: | | | Prepaid expenses paid by Sponsor in exchange for issuance of Class B ordinary shares | $ 12,238 | | Deferred offering costs included in accrued offering costs | $ 142,376 | [Notes to Unaudited Condensed Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Condensed%20Financial%20Statements) Provides detailed explanations for the unaudited condensed financial statements, covering organization, policies, IPO, and related notes [Note 1 — Organization and Business Operations](index=8&type=section&id=Note%201%20%E2%80%94%20Organization%20and%20Business%20Operations) Yorkville Acquisition Corp. is a blank check company incorporated on March 3, 2025, for a business combination - Yorkville Acquisition Corp. is a blank check company incorporated on March 3, 2025, to effect a merger, share exchange, asset acquisition, share purchase, reorganization or similar business combination[26](index=26&type=chunk) Initial Public Offering and Private Placement Details | Event | Date | Units Sold | Price Per Unit | Gross Proceeds | | :--- | :--- | :--- | :--- | :--- | | Initial Public Offering | June 30, 2025 | 17,250,000 | $10.00 | $172,500,000 | | Private Placement | June 30, 2025 | 351,825 | $10.00 | $3,518,250 | - Following the IPO and private placement, **$173,362,500** ($10.05 per Unit) was placed in a Trust Account[32](index=32&type=chunk) [Note 2 — Significant Accounting Policies](index=10&type=section&id=Note%202%20%E2%80%94%20Significant%20Accounting%20Policies) Outlines accounting principles, including GAAP compliance, emerging growth company status, estimates, and fair value measurements - The unaudited condensed financial statements are prepared in accordance with GAAP for interim financial information and SEC rules[37](index=37&type=chunk) - The Company is an 'emerging growth company' and has elected not to opt out of the extended transition period for complying with new or revised financial accounting standards[40](index=40&type=chunk)[42](index=42&type=chunk) Key Financial Policy Data | Item | Value (as of March 31, 2025) | | :--- | :--- | | Cash and Cash Equivalents | $0 | | Deferred Offering Costs | $142,376 | | Net Loss Per Ordinary Share (Basic and Diluted) | Same, as no dilutive securities | | Income Tax Provision | $0 (Cayman Islands exempted company) | - The Company adopted ASU 2023-07, 'Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,' on March 3, 2025, its inception date[56](index=56&type=chunk) [Note 3 — Initial Public Offering](index=14&type=section&id=Note%203%20%E2%80%94%20Initial%20Public%20Offering) Details IPO terms, including sale of 17,250,000 units at $10.00 each, warrant structure, and redemption conditions - The Company sold **17,250,000 Units** at **$10.00 per Unit** in its Initial Public Offering, including the full exercise of the underwriters' over-allotment option[58](index=58&type=chunk) - Each Unit consists of one Class A ordinary share and one-third of one redeemable warrant, with each whole warrant entitling the holder to purchase one Class A ordinary share at **$11.50**[58](index=58&type=chunk)[59](index=59&type=chunk) - Public Warrants become exercisable at the later of 12 months from closing or 30 days after the initial Business Combination, and expire five years after the Business Combination, or earlier upon redemption or liquidation[58](index=58&type=chunk)[59](index=59&type=chunk) - The Company may redeem outstanding Public Warrants if the closing price of Class A ordinary shares equals or exceeds **$18.00 per share** for any 20 trading days within a 30-trading day period, commencing at least 30 days after the Business Combination[63](index=63&type=chunk)[67](index=67&type=chunk) [Note 4 — Private Placement](index=16&type=section&id=Note%204%20%E2%80%94%20Private%20Placement) Describes private placement where Sponsor purchased 351,825 units at $10.00 each, with specific warrant restrictions - The Sponsor purchased **351,825 Private Placement Units** at **$10.00 per unit**, totaling **$3,518,250**[64](index=64&type=chunk) - Private Placement Warrants are non-redeemable, subject to transfer restrictions, may be exercised on a cashless basis, and are entitled to registration rights, as long as held by the Sponsor or permitted transferees[65](index=65&type=chunk) - The Sponsor, officers, and directors waived redemption rights for their shares in connection with a business combination and rights to liquidating distributions from the Trust Account for Founder Shares and Private Placement Shares if a business combination is not completed within the Completion Window[66](index=66&type=chunk) [Note 5 — Segment Information](index=17&type=section&id=Note%205%20%E2%80%94%20Segment%20Information) States the company operates as a single reporting segment, with the CFO as CODM, focusing on administrative expenses - The Company has only one reporting segment, and its Chief Financial Officer is identified as the Chief Operating Decision Maker (CODM)[69](index=69&type=chunk) - The CODM assesses performance and allocates resources based on net income or loss and total assets, with a focus on formation, general, and administrative expenses[70](index=70&type=chunk) Key Segment Metrics Reviewed by CODM (as of March 31, 2025) | Metric | Amount | | :--- | :--- | | Deferred offering costs | $142,376 | | Formation, general and administrative expenses | $30,424 | | Net Loss | $(30,424) | [Note 6 — Related Party Transactions](index=17&type=section&id=Note%206%20%E2%80%94%20Related%20Party%20Transactions) Details related party transactions, including Founder Shares issuance to Sponsor and potential future loans - On March 5, 2025, the Company issued **5,750,000 Class B ordinary shares** (Founder Shares) to the Sponsor for **$25,000**[71](index=71&type=chunk) - The Founder Shares were subject to forfeiture if the underwriters' over-allotment option was not fully exercised; the option was fully exercised on June 30, 2025, so no shares were forfeited[71](index=71&type=chunk)[11](index=11&type=chunk) - The Sponsor agreed to loan the Company up to **$300,000** under a non-interest bearing, unsecured promissory note to cover IPO expenses[74](index=74&type=chunk) - Potential future Working Capital Loans and Extension Loans from the Sponsor or affiliates may be convertible into private placement-equivalent units[75](index=75&type=chunk)[76](index=76&type=chunk) [Note 7 — Commitments and Contingencies](index=19&type=section&id=Note%207%20%E2%80%94%20Commitments%20and%20Contingencies) Discusses geopolitical risks, registration rights, and deferred underwriting fees related to the IPO - Geopolitical instability from ongoing wars (Russia-Ukraine, Israel-Hamas) could adversely affect the Company's search for an initial Business Combination[77](index=77&type=chunk)[78](index=78&type=chunk) - Holders of Founder Shares, placement units, Working Capital Units, and Extension Units have registration rights for their securities[79](index=79&type=chunk) - The underwriters are entitled to a deferred fee of **$5,175,000**, payable from the Trust Account upon completion of a Business Combination[81](index=81&type=chunk) - The Company issued **229,425 Class A ordinary shares** (Representative Shares) to Clear Street and/or its designees as an IPO expense, subject to transfer restrictions and waiver of redemption/liquidation rights[82](index=82&type=chunk) [Note 8 — Shareholder's Deficit](index=20&type=section&id=Note%208%20%E2%80%94%20Shareholder%27s%20Deficit) Details authorized and outstanding share capital, including Class B shares issued to Sponsor and conversion mechanisms Authorized and Issued Share Capital (as of March 31, 2025) | Share Class | Authorized Shares | Issued/Outstanding Shares | | :--- | :--- | :--- | | Preference Shares | 1,000,000 | None | | Class A Ordinary Shares | 200,000,000 | None | | Class B Ordinary Shares | 20,000,000 | 5,750,000 | - Class B ordinary shares automatically convert into Class A ordinary shares upon the consummation of the initial Business Combination, subject to adjustment to maintain **25% ownership** of outstanding ordinary shares post-IPO[85](index=85&type=chunk) - Prior to the initial Business Combination, only holders of Class B ordinary shares have the right to vote on the appointment and removal of directors and on continuing the Company in a jurisdiction outside the Cayman Islands[86](index=86&type=chunk) [Note 9 — Subsequent Events](index=21&type=section&id=Note%209%20%E2%80%94%20Subsequent%20Events) Discloses post-March 31, 2025 events, including IPO consummation, private placement, and underwriting discount payment - On June 30, 2025, the Company consummated its Initial Public Offering, selling **17,250,000 Units** at **$10.00 per Unit**, generating gross proceeds of **$172,500,000**[88](index=88&type=chunk) - Simultaneously, the Company completed a private placement of **351,825 units** at **$10.00 per unit**, generating gross proceeds of **$3,518,250**[88](index=88&type=chunk) - A cash underwriting discount of **$1,155,750** was paid on June 30, 2025[89](index=89&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management's perspective on financial condition and results, detailing IPO proceeds, net loss, liquidity, and going concern [Special Note Regarding Forward-Looking Statements](index=22&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) Warns that the report contains forward-looking statements subject to risks, advising reference to the Risk Factors section - This Quarterly Report includes forward-looking statements that involve risks and uncertainties, which could cause actual results to differ materially[91](index=91&type=chunk) - Readers should refer to the Risk Factors section of the Company's final prospectus for its Initial Public Offering for information identifying important factors[91](index=91&type=chunk) [Overview](index=22&type=section&id=Overview) Reaffirms the company's purpose as a blank check company, outlining funding sources and amounts placed in the Trust Account - Yorkville Acquisition Corp. is a blank check company formed to effect a business combination[92](index=92&type=chunk) IPO and Private Placement Proceeds | Event | Gross Proceeds | | :--- | :--- | | Initial Public Offering | $172,500,000 | | Private Placement | $3,518,250 | - Upon closing, **$173,362,500** ($10.05 per Unit) from the net proceeds was placed in a U.S.-based Trust Account[94](index=94&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) States no operations as of March 31, 2025, reporting a net loss of $30,424 from formation and administrative expenses - As of March 31, 2025, the Company had not commenced any operations; all activity related to formation and IPO preparation[95](index=95&type=chunk) Net Loss (Inception through March 31, 2025) | Metric | Amount | | :--- | :--- | | Net loss | $(30,424) | | Consisted of | Formation, general and administrative expenses | [Liquidity, Capital Resources and Going Concern](index=23&type=section&id=Liquidity%2C%20Capital%20Resources%20and%20Going%20Concern) Discusses liquidity, working capital deficit, Trust Account use, and substantial doubt about going concern prior to a business combination Liquidity and Capital Resources (as of March 31, 2025) | Metric | Amount | | :--- | :--- | | Cash | $0 | | Working Capital Deficit | $(147,800) | - Following the IPO and private placement, **$173,362,500** was placed in the Trust Account, primarily for the initial business combination[99](index=99&type=chunk)[100](index=100&type=chunk) - The Company expects to incur significant costs for identifying and negotiating a target business, raising substantial doubt about its ability to continue as a going concern prior to an initial business combination[103](index=103&type=chunk) [Contractual Obligations](index=24&type=section&id=Contractual%20Obligations) States no long-term debt or liabilities, with a primary obligation being a $5,175,000 deferred underwriting discount - The Company has no long-term debt, capital lease obligations, operating lease obligations, or long-term liabilities as of March 1, 2025[104](index=104&type=chunk) - The underwriters are entitled to a deferred underwriting discount of **$5,175,000**, payable upon completion of an initial business combination[104](index=104&type=chunk) [Critical Accounting Estimates](index=24&type=section&id=Critical%20Accounting%20Estimates) Management has not identified any critical accounting estimates as of March 31, 2025 - The Company has not identified any critical accounting estimates as of March 31, 2025[105](index=105&type=chunk) [Recent Accounting Pronouncements](index=24&type=section&id=Recent%20Accounting%20Pronouncements) Company adopted ASU 2023-07 with no material impact; other pronouncements are not expected to have a material effect - The Company adopted ASU 2023-07 on March 3, 2025, which did not have a material impact on its financial statements[106](index=106&type=chunk) - Management does not believe any other recently issued, but not yet effective, accounting pronouncements would have a material effect[108](index=108&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=25&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section is not required for smaller reporting companies, thus no disclosures are provided - This item is not required for smaller reporting companies[109](index=109&type=chunk) [Item 4. Controls and Procedures](index=25&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated disclosure controls and procedures as effective; no material changes in internal control over financial reporting [Evaluation of Disclosure Controls and Procedures](index=25&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2025 - Management concluded that the Company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2025[111](index=111&type=chunk) [Changes in Internal Control over Financial Reporting](index=25&type=section&id=Changes%20in%20Internal%20Control%20over%20Financial%20Reporting) No material changes in internal control over financial reporting occurred during the quarter ended March 31, 2025 - There were no changes in internal control over financial reporting that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting during the quarter ended March 31, 2025[112](index=112&type=chunk) [PART II - OTHER INFORMATION](index=26&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=26&type=section&id=Item%201.%20Legal%20Proceedings) The company reported no legal proceedings - The Company reported no legal proceedings[114](index=114&type=chunk) [Item 1.A. Risk Factors](index=26&type=section&id=Item%201.A.%20Risk%20Factors) Refers to the Risk Factors section in the final prospectus, noting no material changes during the 2025 fiscal year - Readers should carefully consider the factors discussed in the Risk Factors section of the final prospectus for the Initial Public Offering[114](index=114&type=chunk) - There have been no material changes during the 2025 fiscal year to the risk factors included in the final prospectus[114](index=114&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.](index=26&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) The company reported no unregistered sales of equity securities or use of proceeds - The Company reported no unregistered sales of equity securities and no use of proceeds[115](index=115&type=chunk) [Item 3. Defaults Upon Senior Securities](index=26&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities - The Company reported no defaults upon senior securities[115](index=115&type=chunk) [Item 4. Mine Safety Disclosures](index=26&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - This item is not applicable to the Company[116](index=116&type=chunk) [Item 5. Other Information](index=26&type=section&id=Item%205.%20Other%20Information) The company reported no other information - The Company reported no other information[117](index=117&type=chunk) [Item 6. Exhibits](index=27&type=section&id=Item%206.%20Exhibits) Lists the exhibits filed with the Form 10-Q, including certifications, XBRL documents, and the interactive data file Exhibits Filed | Exhibit No. | Description | | :--- | :--- | | 31.1 | Certification of Principal Executive Officer | | 31.2 | Certification of Principal Financial Officer | | 32 | Certification Pursuant to 18 U.S.C. Section 1350 | | 101.INS | Inline XBRL Instance Document | | 101.SCH | Inline XBRL Taxonomy Extension Schema Document | | 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | | 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | | 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | | 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | | 104 | Cover Page Interactive Data File | [PART III - SIGNATURES](index=28&type=section&id=PART%20III%20-%20SIGNATURES) [SIGNATURES](index=28&type=section&id=SIGNATURES) The report is duly signed by Michael Rosselli, CFO of Yorkville Acquisition Corp., on August 8, 2025 - The report was signed by Michael Rosselli, Chief Financial Officer (Principal Financial and Accounting Officer) of Yorkville Acquisition Corp[121](index=121&type=chunk) - The report was dated August 8, 2025[121](index=121&type=chunk)

[Executive Summary](index=1&type=section&id=Executive%20Summary) Red Violet achieved strong Q2 2025 financial results, marked by significant revenue growth, improved profitability, and robust customer acquisition across its key platforms [Q2 2025 Financial and Operational Highlights](index=1&type=section&id=Q2%202025%20Financial%20and%20Operational%20Highlights) Red Violet achieved strong Q2 2025 financial results, marked by significant revenue growth, improved profitability, and robust customer acquisition across its key platforms Financial Highlights (in thousands) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | | Total Revenue | $21,774 | $19,056 | +14% | | Gross Profit | $15,678 | $13,279 | +18% | | Gross Margin | 72% | 70% | +2 pp | | Adjusted Gross Profit | $18,238 | $15,601 | +17% | | Adjusted Gross Margin | 84% | 82% | +2 pp | | Net Income | $2,686 | $2,637 | +2% | | Net Income Margin | 12% | 14% | -2 pp | | Basic EPS | $0.19 | $0.19 | 0% | | Diluted EPS | $0.18 | $0.19 | -5% | | Adjusted EBITDA | $7,600 | $6,811 | +12% | | Adjusted EBITDA Margin | 35% | 36% | -1 pp | | Adjusted Net Income | $4,117 | $3,891 | +6% | | Adjusted Basic EPS | $0.29 | $0.28 | +4% | | Adjusted Diluted EPS | $0.28 | $0.28 | 0% | | Net Cash from Operations | $7,487 | $5,717 | +31% | | Cash & Cash Equivalents (as of June 30) | $38,848 | $30,943 | +25.5% | - Added **308 customers** to IDI™ during Q2 2025, ending the quarter with **9,549 customers**[5](index=5&type=chunk) - Added **21,335 users** to FOREWARN® during Q2 2025, ending the quarter with **346,671 users**[5](index=5&type=chunk) - Continued to win higher-tier customers at an accelerated pace, with total customer spend outpacing prior-year levels across key revenue cohorts ($10,000 to $25,000, $25,000 to $100,000, and over $100,000 in trailing twelve-month revenue)[5](index=5&type=chunk) [CEO Commentary](index=1&type=section&id=CEO%20Commentary) CEO Derek Dubner highlighted solid revenue growth and profitability, noting strong customer onboarding and broad-based demand despite a challenging prior-year comparison - Reported another strong quarter, delivering solid revenue growth and profitability[2](index=2&type=chunk) - Achieved strong customer onboarding and broad-based demand, evidenced by volume expansion across the existing customer base[2](index=2&type=chunk) - Confident in the ability to build on this performance, drive continued revenue growth, and capitalize on significant opportunities ahead, despite a challenging comparison to last year which included **$1.0 million** in one-time transactional revenue[2](index=2&type=chunk) [About Red Violet](index=1&type=section&id=About%20red%20violet) Red Violet is a leading analytics and information solutions provider, leveraging proprietary technologies to deliver identity intelligence for verification, risk mitigation, and fraud detection [Company Overview](index=1&type=section&id=Company%20Overview) Red Violet provides identity intelligence through proprietary technologies, enabling real-time identification and location for verification, risk mitigation, and compliance - Red Violet is a leading analytics and information solutions provider[4](index=4&type=chunk) - Builds proprietary technologies and applies analytical capabilities to deliver identity intelligence[4](index=4&type=chunk) - Solutions enable real-time identification and location of people, businesses, assets, and their interrelationships for purposes including identity verification, risk mitigation, due diligence, fraud detection and prevention, regulatory compliance, and customer acquisition[4](index=4&type=chunk) [Condensed Consolidated Financial Statements](index=4&type=section&id=Condensed%20Consolidated%20Financial%20Statements) This section provides Red Violet's condensed consolidated financial statements, detailing the company's balance sheet, income statement, and cash flow performance [Condensed Consolidated Balance Sheets](index=4&type=section&id=CONDENSED%20CONSOLIDATED%20BALANCE%20SHEETS) As of June 30, 2025, Red Violet's total assets increased to **$104,834 thousand**, driven by cash, receivables, and intangibles, while liabilities decreased, boosting shareholders' equity Balance Sheet (in thousands) | Balance Sheet Item | June 30, 2025 (in thousands) | Dec 31, 2024 (in thousands) | Change | | :-------------------------------- | :--------------------------- | :-------------------------- | :----- | | Cash and cash equivalents | $38,848 | $36,504 | +$2,344 | | Accounts receivable, net | $9,811 | $8,061 | +$1,750 | | Total current assets | $50,796 | $46,192 | +$4,604 | | Intangible assets, net | $37,677 | $35,997 | +$1,680 | | Total assets | $104,834 | $98,531 | +$6,303 | | Total current liabilities | $5,569 | $10,307 | -$4,738 | | Total liabilities | $8,628 | $11,899 | -$3,271 | | Total shareholders' equity | $96,206 | $86,632 | +$9,574 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) Q2 2025 revenue increased 14% to **$21,774 thousand**, with net income up 2% to **$2,686 thousand**, though operating income declined due to higher expenses Income Statement (in thousands) | Income Statement Item | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | | Revenue | $21,774 | $19,056 | +14% | | Cost of revenue | $3,501 | $3,455 | +1% | | Sales and marketing expenses | $5,622 | $4,406 | +28% | | General and administrative expenses | $7,253 | $5,750 | +26% | | Income from operations | $2,751 | $3,068 | -10% | | Net income | $2,686 | $2,637 | +2% | | Basic EPS | $0.19 | $0.19 | 0% | | Diluted EPS | $0.18 | $0.19 | -5% | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) For the six months ended June 30, 2025, operating cash flow rose 24.6% to **$12,488 thousand**, with investing and financing activities using cash, resulting in an overall increase in cash and cash equivalents Cash Flow Statement (in thousands) | Cash Flow Item | 6 Months Ended June 30, 2025 (in thousands) | 6 Months Ended June 30, 2024 (in thousands) | Change | | :-------------------------------- | :------------------------------------------ | :------------------------------------------ | :----- | | Net cash provided by operating activities | $12,488 | $10,022 | +$2,466 | | Net cash used in investing activities | $(5,236) | $(4,855) | -$381 | | Net cash used in financing activities | $(4,908) | $(6,256) | +$1,348 | | Net increase (decrease) in cash and cash equivalents | $2,344 | $(1,089) | +$3,433 | | Cash and cash equivalents at end of period | $38,848 | $30,943 | +$7,905 | [Non-GAAP Financial Measures and Reconciliations](index=3&type=section&id=Use%20of%20Non-GAAP%20Financial%20Measures) This section defines Red Violet's non-GAAP financial measures, including Adjusted EBITDA and Free Cash Flow, and provides their reconciliations to GAAP metrics [Definitions of Non-GAAP Measures](index=3&type=section&id=Definitions%20of%20Non-GAAP%20Measures) Red Violet uses non-GAAP measures like Adjusted EBITDA, Adjusted Net Income, and Free Cash Flow to offer additional insights into operating performance by excluding non-cash or non-recurring items - **Adjusted EBITDA:** Net income excluding interest income, income tax expense, depreciation and amortization, share-based compensation expense, litigation costs, acquisition-related costs, and write-off of long-lived assets[6](index=6&type=chunk) - **Adjusted Net Income:** Net income adjusted to exclude share-based compensation expense and amortization of share-based compensation capitalized in intangible assets, and to include the tax effect of adjustments[6](index=6&type=chunk) - **Free Cash Flow (FCF):** Net cash provided by operating activities reduced by purchase of property and equipment, and capitalized costs included in intangible assets[17](index=17&type=chunk) [Reconciliation of Adjusted EBITDA](index=7&type=section&id=Reconciliation%20of%20Adjusted%20EBITDA) Q2 2025 Adjusted EBITDA increased 12% to **$7,600 thousand**, reflecting improved operational performance, though the margin slightly decreased to **35%** Adjusted EBITDA Reconciliation (in thousands) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change (%) | | :---------------- | :--------------------- | :--------------------- | :--------- | | Net income | $2,686 | $2,637 | +2% | | Adjusted EBITDA | $7,600 | $6,811 | +12% | | Revenue | $21,774 | $19,056 | +14% | | Net income margin | 12% | 14% | -2 pp | | Adjusted EBITDA margin | 35% | 36% | -1 pp | [Reconciliation of Adjusted Net Income](index=7&type=section&id=Reconciliation%20of%20Adjusted%20Net%20Income) Q2 2025 Adjusted Net Income increased 6% to **$4,117 thousand**, indicating stronger underlying profitability, with Adjusted diluted EPS stable at **$0.28** Adjusted Net Income Reconciliation (in thousands) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change (%) | | :--------------------- | :--------------------- | :--------------------- | :--------- | | Net income | $2,686 | $2,637 | +2% | | Adjusted net income | $4,117 | $3,891 | +6% | | Basic EPS | $0.19 | $0.19 | 0% | | Diluted EPS | $0.18 | $0.19 | -5% | | Adjusted Basic EPS | $0.29 | $0.28 | +4% | | Adjusted Diluted EPS | $0.28 | $0.28 | 0% | [Reconciliation of Adjusted Gross Profit](index=8&type=section&id=Reconciliation%20of%20Adjusted%20Gross%20Profit) Q2 2025 Adjusted Gross Profit rose 17% to **$18,238 thousand**, with Adjusted Gross Margin improving to **84%**, reflecting enhanced revenue generation efficiency Adjusted Gross Profit Reconciliation (in thousands) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change (%) | | :--------------------- | :--------------------- | :--------------------- | :--------- | | Gross profit | $15,678 | $13,279 | +18% | | Adjusted gross profit | $18,238 | $15,601 | +17% | | Gross margin | 72% | 70% | +2 pp | | Adjusted gross margin | 84% | 82% | +2 pp | [Reconciliation of Free Cash Flow (FCF)](index=8&type=section&id=Reconciliation%20of%20Free%20Cash%20Flow%20%28FCF%29) Q2 2025 Free Cash Flow (FCF) significantly increased by 46.6% to **$4,770 thousand**, demonstrating strong cash generation after capital expenditures Free Cash Flow Reconciliation (in thousands) | Metric | Q2 2025 (in thousands) | Q2 2024 (in thousands) | Change (%) | | :-------------------------------- | :--------------------- | :--------------------- | :--------- | | Net cash provided by operating activities | $7,487 | $5,717 | +31% | | Free cash flow | $4,770 | $3,254 | +46.6% | [Purpose and Limitations of Non-GAAP Measures](index=8&type=section&id=Purpose%20and%20Limitations%20of%20Non-GAAP%20Financial%20Measures) Non-GAAP measures are used by management for performance evaluation and investor information, excluding non-cash or non-recurring items, but are not GAAP alternatives and may not be comparable - Non-GAAP measures provide useful information by eliminating the impact of certain items not indicative of cash operations and ongoing operating performance[20](index=20&type=chunk) - Used by management as an integral part of internal reporting to measure business performance and operating strength[21](index=21&type=chunk) - Not intended to be performance measures that should be regarded as an alternative to, or more meaningful than, financial measures presented in accordance with US GAAP, and may not be comparable to similarly titled measures presented by other companies[22](index=22&type=chunk) [Supplemental Metrics](index=10&type=section&id=SUPPLEMENTAL%20METRICS) This section presents Red Violet's key supplemental metrics, including customer growth, revenue retention, and employee headcount, reflecting operational performance and strategic investments [Customer Metrics](index=10&type=section&id=Customer%20metrics) Red Violet expanded its customer base in Q2 2025, showing significant growth in both IDI™ billable customers and FOREWARN® users Customer Metrics | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :-------------------- | :------ | :------ | :------ | | IDI - billable customers | 9,549 | 9,241 | 8,477 | | FOREWARN - users | 346,671 | 325,336 | 263,876 | [Revenue Metrics](index=10&type=section&id=Revenue%20metrics) Q2 2025 contractual revenue remained strong at **77%**, with gross revenue retention improving to **97%**, indicating high customer loyalty and recurring revenue Revenue Metrics | Metric | Q2 2025 | Q1 2025 | Q2 2024 | | :---------------------- | :------ | :------ | :------ | | Contractual revenue % | 77% | 74% | 74% | | Gross revenue retention % | 97% | 96% | 94% | [Employee Metrics](index=10&type=section&id=Other%20metrics) As of Q2 2025, Red Violet's employee count increased across most departments, particularly in sales, marketing, and engineering, reflecting growth investments Employee Headcount | Department | Q2 2025 | Q1 2025 | Q2 2024 | | :-------------------- | :------ | :------ | :------ | | Sales and marketing | 92 | 90 | 86 | | Support | 11 | 11 | 10 | | Infrastructure | 29 | 29 | 27 | | Engineering | 63 | 62 | 56 | | Administration | 28 | 24 | 25 | [Forward-Looking Statements](index=3&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section contains forward-looking statements, subject to risks and uncertainties that may cause actual results to differ materially from expectations [Disclaimer on Forward-Looking Statements](index=3&type=section&id=Disclaimer%20on%20Forward-Looking%20Statements) Forward-looking statements are subject to risks and uncertainties, and readers are cautioned against undue reliance and advised to review SEC filings for risk factors - Statements are subject to risks and uncertainties that may cause results to differ materially from expectations[7](index=7&type=chunk) - Readers are cautioned not to place undue reliance on these forward-looking statements[7](index=7&type=chunk) - Company undertakes no obligation to publicly update or revise any forward-looking statement, except as required by law[7](index=7&type=chunk) [Company Information](index=3&type=section&id=Company%20Information) This section provides Red Violet's contact information and details regarding the quarterly conference call and webcast [Contact Information](index=3&type=section&id=Company%20Contact) Provides contact details for Red Violet's company and investor relations departments - **Company Contact:** Camilo Ramirez, Red Violet, Inc., 561-757-4500, ir@redviolet.com[6](index=6&type=chunk) - **Investor Relations Contact:** Steven Hooser, Three Part Advisors, 214-872-2710, ir@redviolet.com[6](index=6&type=chunk) [Conference Call Details](index=1&type=section&id=Conference%20Call) Red Violet hosted a conference call and webcast on August 6, 2025, to discuss quarterly results and provide a business update - Conference call and webcast held on August 6, 2025, at 4:30 PM ET[3](index=3&type=chunk) - Purpose: Discuss quarterly results and provide a business update[3](index=3&type=chunk) - Pre-registration and live audio webcast access details available on www.redviolet.com[3](index=3&type=chunk)

[PART I – FINANCIAL INFORMATION (UNAUDITED)](index=3&type=section&id=PART%20I%20%E2%80%93%20FINANCIAL%20INFORMATION%20%28UNAUDITED%29) This section presents the unaudited consolidated financial statements and related notes of RBB Bancorp and its subsidiaries [ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)](index=3&type=section&id=ITEM%201.%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%20%28UNAUDITED%29) This section presents the unaudited consolidated financial statements of RBB Bancorp and its subsidiaries, including balance sheets, statements of income, comprehensive income, changes in shareholders' equity, and cash flows. It also includes detailed notes explaining business operations, significant accounting policies, investment securities, loans and credit losses, loan servicing, goodwill and intangibles, deposits, debt, borrowing arrangements, income taxes, commitments, leases, related party transactions, stock-based compensation, regulatory matters, fair value measurements, earnings per share, revenue from customer contracts, segment information, affordable housing investments, stock repurchases, and subsequent events [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This statement presents the company's financial position, including assets, liabilities, and equity, at specific reporting dates | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Total assets | $4,090,040 | $3,992,477 | | Loans held for investment, net | $3,183,681 | $3,005,501 | | Total deposits | $3,188,231 | $3,083,789 | | Total liabilities | $3,572,387 | $3,484,600 | | Total shareholders' equity | $517,653 | $507,877 | [Consolidated Statements of Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income) This statement details the company's revenues, expenses, and net income over specific reporting periods | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :--------------------------------------- | :------------------------------------ | :----------------------------------- | :------------------------------------ | :----------------------------------- | :----------------------------------- | | Total interest and dividend income | $54,205 | $52,336 | $52,886 | $106,541 | $107,681 | | Total interest expense | $26,871 | $26,173 | $28,921 | $53,044 | $58,839 | | Net interest income | $27,334 | $26,163 | $23,965 | $53,497 | $48,842 | | Provision for credit losses | $2,387 | $6,746 | $557 | $9,133 | $557 | | Total noninterest income | $8,478 | $2,295 | $3,488 | $10,773 | $6,860 | | Total noninterest expense | $20,493 | $18,522 | $17,124 | $39,015 | $34,093 | | Net income | $9,333 | $2,290 | $7,245 | $11,623 | $15,281 | | Basic Net income per share | $0.53 | $0.13 | $0.39 | $0.66 | $0.83 | | Diluted Net income per share | $0.52 | $0.13 | $0.39 | $0.65 | $0.82 | [Consolidated Statements of Comprehensive Income](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) This statement reports net income and other comprehensive income components, reflecting total changes in equity from non-owner sources | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :------------------------------------ | :----------------------------------- | :------------------------------------ | :----------------------------------- | :----------------------------------- | | Net income | $9,333 | $2,290 | $7,245 | $11,623 | $15,281 | | Total other comprehensive income/(loss) | $1,282 | $2,962 | $67 | $4,244 | $(1,403) | | Total comprehensive income | $10,615 | $5,252 | $7,312 | $15,867 | $13,878 | [Consolidated Statements of Changes in Shareholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Shareholders%27%20Equity) This statement outlines the changes in shareholders' equity resulting from net income, dividends, stock transactions, and other comprehensive income - Shareholders' equity at **June 30, 2025**, was **$517,653 thousand**, increasing from **$510,306 thousand** at March 31, 2025, primarily due to net income of **$9,333 thousand** and other comprehensive income of **$1,282 thousand**, partially offset by cash dividends and stock repurchases[17](index=17&type=chunk) - For the six months ended **June 30, 2025**, shareholders' equity increased to **$517,653 thousand** from **$507,877 thousand** at January 1, 2025, driven by net income of **$11,623 thousand** and other comprehensive income of **$4,244 thousand**, despite cash dividends of **$5,719 thousand** and stock repurchases of **$1,499 thousand**[17](index=17&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement categorizes cash inflows and outflows from operating, investing, and financing activities over specific periods | Cash Flow Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | | :---------------------------------- | :------------------------------------ | :------------------------------------ | | Net cash provided by operating activities | $29,430 | $16,521 | | Net cash used in investing activities | $(172,441) | $(29,238) | | Net cash provided by (used in) financing activities | $77,118 | $(165,887) | | Net decrease in cash and cash equivalents | $(65,893) | $(178,604) | | Cash and cash equivalents at end of period | $191,852 | $252,769 | [NOTE 1 - BUSINESS DESCRIPTION](index=12&type=section&id=NOTE%201%20-%20BUSINESS%20DESCRIPTION) This note describes RBB Bancorp's operations, primary business, and strategic focus within Asian-centric communities - RBB Bancorp operates as a bank holding company with total assets of **$4.1 billion**, total loans of **$3.2 billion**, total deposits of **$3.2 billion**, and total shareholders' equity of **$517.7 million** as of **June 30, 2025**[23](index=23&type=chunk) - The Company's primary business is providing business-banking products and services to Asian-centric communities through **24 full-service branches** across California, Nevada, New York, Illinois, New Jersey, and Hawaii[24](index=24&type=chunk) - RBB Bancorp holds both Minority Depository Institution (MDI) and Community Development Financial Institution (CDFI) designations, which provide access to federal support and funding programs[25](index=25&type=chunk)[26](index=26&type=chunk) [NOTE 2 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=12&type=section&id=NOTE%202%20-%20BASIS%20OF%20PRESENTATION%20AND%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note explains the basis for preparing the unaudited financial statements and summarizes the company's key accounting policies - The unaudited consolidated financial statements are prepared in accordance with SEC rules for Form 10-Q and GAAP for interim financial reporting, reflecting normal recurring adjustments[29](index=29&type=chunk) - The Company recognized **$5.2 million (pre-tax)** in Employee Retention Credit (ERC) refunds from the IRS in Q2 2025, included in other income, with associated professional and tax advisory costs of **$1.2 million** recognized in legal and professional expense[35](index=35&type=chunk)[36](index=36&type=chunk) - **ASU 2023-07**, Segment Reporting, was adopted on **December 31, 2024**, with no material impact. Other ASUs (2023-06, 2023-09, 2024-03) are not yet effective and are not expected to have a material impact[37](index=37&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) [NOTE 3 - INVESTMENT SECURITIES](index=16&type=section&id=NOTE%203%20-%20INVESTMENT%20SECURITIES) This note provides details on the composition, fair value, and unrealized gains or losses of the company's investment securities portfolio | Security Type | June 30, 2025 Fair Value (in thousands) | December 31, 2024 Fair Value (in thousands) | | :------------------------------------ | :------------------------------------ | :------------------------------------ | | Total available for sale | $413,142 | $420,190 | | Total held to maturity | $3,995 | $4,948 | | Total Investment Securities | $417,137 | $425,138 | - As of **June 30, 2025**, total available for sale securities had gross unrealized losses of **$24,687 thousand**, primarily attributed to yield curve movement rather than credit loss, with no ACL recorded[41](index=41&type=chunk)[46](index=46&type=chunk)[47](index=47&type=chunk) - The weighted-average life of the total investment portfolio increased to **5.2 years** at **June 30, 2025**, from **5.0 years** at December 31, 2024, mainly due to a decrease in commercial paper[248](index=248&type=chunk) [NOTE 4 - LOANS AND ALLOWANCE FOR CREDIT LOSSES](index=20&type=section&id=NOTE%204%20-%20LOANS%20AND%20ALLOWANCE%20FOR%20CREDIT%20LOSSES) This note presents a detailed breakdown of the loan portfolio and the methodology for the allowance for credit losses | Loan Type (HFI) | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Real Estate: Construction and land development | $157,970 | $173,290 | | Real Estate: Commercial real estate | $1,273,442 | $1,201,420 | | Real Estate: Single-family residential mortgages | $1,603,114 | $1,494,022 | | Commercial: Commercial and industrial | $138,263 | $129,585 | | Commercial: SBA | $55,984 | $47,263 | | Other | $5,922 | $7,650 | | Total loans HFI | $3,234,695 | $3,053,230 | | Allowance for loan losses | $(51,014) | $(47,729) | | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :------------------------------------ | :----------------------------------- | :------------------------------------ | | Provision for credit losses | $2,387 | $6,846 | $604 | | Charge-offs | $(3,339) | $(2,727) | $(567) | | Recoveries | $34 | $84 | $16 | | Ending allowance balance | $51,014 | $51,932 | $41,741 | - Nonaccrual loans totaled **$56.8 million** at **June 30, 2025**, a decrease from **$81.0 million** at December 31, 2024. Loans modified due to financial difficulty totaled **$8.4 million** in Q2 2025, with **$35.5 million** of Construction and Land Development loans remaining on nonaccrual and having defaulted on modified terms[66](index=66&type=chunk)[71](index=71&type=chunk)[74](index=74&type=chunk)[281](index=281&type=chunk) [NOTE 5 - LOAN SERVICING](index=28&type=section&id=NOTE%205%20-%20LOAN%20SERVICING) This note describes the company's loan servicing activities, including the fair value of servicing assets and related income | Loan Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------- | :----------------------------- | :----------------------------- | | Mortgage loans | $877,300 | $922,183 | | SBA loans | $91,866 | $92,678 | | Commercial real estate loans | $2,438 | $3,761 | | Construction loans | $8,276 | $7,315 | | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended March 31, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | | :------------------------------------ | :------------------------------------ | :----------------------------------- | :------------------------------------ | | Loan servicing income, net of amortization | $541 | $588 | $579 | - Fair value of mortgage loan servicing assets was **$10.3 million** at **June 30, 2025**, using a **10.63%** discount rate, **7.57%** prepayment speed, and **0.13%** default rate. SBA loan servicing assets fair value was **$2.2 million**, using an **8.5%** discount rate, **20.42%** prepayment speed, and **1.66%** default rate[80](index=80&type=chunk) [NOTE 6 - GOODWILL AND INTANGIBLES](index=30&type=section&id=NOTE%206%20-%20GOODWILL%20AND%20INTANGIBLES) This note details the company's goodwill and other intangible assets, including amortization and impairment assessments - Goodwill remained stable at **$71.5 million** at both **June 30, 2025**, and December 31, 2024, with no impairment identified[81](index=81&type=chunk) - Core deposit intangible (CDI) assets decreased to **$1.7 million** at **June 30, 2025**, from **$2.0 million** at December 31, 2024, with amortization expense of **$172 thousand** for Q2 2025[82](index=82&type=chunk)[83](index=83&type=chunk) | Year | CDI Amortization Expense (in thousands) | | :---------------- | :------------------------------------ | | Remainder of 2025 | $328 | | 2026 | $501 | | 2027 | $417 | | 2028 | $297 | | 2029 | $64 | | Thereafter | $60 | | Total | $1,667 | [NOTE 7 - DEPOSITS](index=32&type=section&id=NOTE%207%20-%20DEPOSITS) This note provides a breakdown of the company's deposit base by type and maturity, including wholesale and uninsured deposits | Time Deposits Maturities Periods | $250,000 and under (in thousands) | Greater than $250,000 (in thousands) | Total (in thousands) | | :------------------------------- | :-------------------------------- | :----------------------------------- | :------------------- | | One year or less | $1,003,896 | $940,868 | $1,944,764 | | One year to three years | $6,304 | $1,125 | $7,429 | | Over three years | $474 | — | $474 | | Total | $1,010,674 | $941,993 | $1,952,667 | - Wholesale time deposits increased to **$183.8 million** at **June 30, 2025**, from **$147.5 million** at December 31, 2024, including brokered deposits of **$133.0 million**[85](index=85&type=chunk) - Time deposits held through CDARS and ICS programs totaled **$120.4 million** and **$142.8 million**, respectively, at **June 30, 2025**[86](index=86&type=chunk) [NOTE 8 - LONG-TERM DEBT](index=32&type=section&id=NOTE%208%20-%20LONG-TERM%20DEBT) This note outlines the company's long-term debt obligations, including subordinated notes and their interest terms - The Company has **$120.0 million** of **4.00%** fixed-to-floating rate subordinated notes, maturing **April 1, 2031**, with interest fixed until **April 1, 2026**, then floating at three-month SOFR plus **329 basis points**[87](index=87&type=chunk) - Interest expense on these notes was **$1.2 million** for Q2 2025 and **$2.4 million** for the six months ended **June 30, 2025**[88](index=88&type=chunk) | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Principal | $120,000 | $120,000 | | Unamortized debt issuance costs | $(280) | $(471) | | Long-term debt, net | $119,720 | $119,529 | [NOTE 9 - SUBORDINATED DEBENTURES](index=33&type=section&id=NOTE%209%20-%20SUBORDINATED%20DEBENTURES) This note describes the company's subordinated debentures, their interest rates, and their qualification as Tier 1 capital - Subordinated debentures totaled **$15.3 million** at **June 30, 2025**, consisting of TFC Trust, FAIC Trust, and PGBH Trust, all with variable interest rates based on three-month CME Term SOFR plus applicable spreads[90](index=90&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk) - These debentures qualify as Tier 1 capital for regulatory reporting purposes, subject to limitations[95](index=95&type=chunk) - Interest expense on subordinated debentures was **$283 thousand** for Q2 2025 and **$565 thousand** for the six months ended **June 30, 2025**[94](index=94&type=chunk) [NOTE 10 - BORROWING ARRANGEMENTS](index=33&type=section&id=NOTE%2010%20-%20BORROWING%20ARRANGEMENTS) This note details the company's available and utilized borrowing capacities with the FHLB, FRB, and other financial institutions - At **June 30, 2025**, the Company had a secured borrowing capacity of **$1.1 billion** with the FHLB, with **$180.0 million** in outstanding putable term advances at a weighted average rate of **3.51%**[97](index=97&type=chunk)[99](index=99&type=chunk) - The Company also had a secured borrowing capacity of **$62.5 million** with the FRB and could borrow up to **$97.0 million** on an unsecured basis from other financial institutions, with no amounts outstanding on these lines at **June 30, 2025**[99](index=99&type=chunk)[100](index=100&type=chunk) [NOTE 11 - INCOME TAXES](index=35&type=section&id=NOTE%2011%20-%20INCOME%20TAXES) This note presents information on the company's income tax provision and effective tax rates | Period | Income Tax Provision (in thousands) | Effective Tax Rate | | :------------------------------------ | :-------------------------------- | :----------------- | | Three Months Ended June 30, 2025 | $3,599 | 27.8% | | Three Months Ended March 31, 2025 | $900 | 28.2% | | Three Months Ended June 30, 2024 | $2,527 | 25.9% | | Six Months Ended June 30, 2025 | $4,499 | 27.9% | | Six Months Ended June 30, 2024 | $5,771 | 27.4% | - The Q2 2025 income tax provision included a discrete adjustment of **$379 thousand** due to a change in California tax law, expected to reduce the annual effective tax rate in future periods[237](index=237&type=chunk) [NOTE 12 - COMMITMENTS AND CONTINGENCIES](index=35&type=section&id=NOTE%2012%20-%20COMMITMENTS%20AND%20CONTINGENCIES) This note discloses the company's off-balance sheet commitments and potential liabilities | Commitment Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Commitments to make loans | $56,927 | $84,241 | | Unused lines of credit | $89,876 | $85,580 | | Commercial and similar letters of credit | $2,213 | $2,393 | | Standby letters of credit | $5,187 | $3,293 | | Total | $154,203 | $175,507 | - The reserve for off-balance sheet commitments was **$629 thousand** at **June 30, 2025**, a decrease from **$729 thousand** at December 31, 2024[107](index=107&type=chunk) - Unfunded commitments for affordable housing partnerships and Small Business Investment Company funds totaled **$10.7 million** at **June 30, 2025**, up from **$5.7 million** at December 31, 2024[108](index=108&type=chunk) [NOTE 13 - LEASES](index=37&type=section&id=NOTE%2013%20-%20LEASES) This note provides information on the company's lease agreements, right-of-use assets, and lease liabilities | Period | Total future minimum lease payments (in thousands) | | :---------------- | :--------------------------------------- | | Remainder of 2025 | $2,476 | | 2026 | $5,854 | | 2027 | $5,758 | | 2028 | $4,841 | | 2029 | $2,674 | | Thereafter | $8,289 | | Total | $29,892 | | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :------------------------------------ | :----------------------------- | :----------------------------- | | ROU assets | $25,554 | $28,048 | | Lease liabilities | $27,294 | $29,705 | | Weighted-average remaining lease term (in years) | 6.28 | 6.65 | | Weighted-average discount rate | 2.89% | 2.83% | [NOTE 14 - RELATED PARTY TRANSACTIONS](index=37&type=section&id=NOTE%2014%20-%20RELATED%20PARTY%20TRANSACTIONS) This note reports on financial transactions and balances with principal officers, directors, and their affiliates - Deposits from principal officers, directors, and their affiliates increased to **$44.1 million** at **June 30, 2025**, from **$32.5 million** at December 31, 2024[113](index=113&type=chunk) - Certain directors and their affiliates own **$6.0 million** of RBB's subordinated debentures at both **June 30, 2025**, and December 31, 2024[113](index=113&type=chunk) [NOTE 15 - STOCK-BASED COMPENSATION](index=37&type=section&id=NOTE%2015%20-%20STOCK-BASED%20COMPENSATION) This note details the company's stock-based compensation plans, including stock options and restricted stock units - Stock-based compensation expense for stock options was **$12 thousand** for Q2 2025 and **$26 thousand** for the six months ended **June 30, 2025**. Unrecognized expense was **$91 thousand** at **June 30, 2025**, to be recognized over **1.8 years**[117](index=117&type=chunk) - Compensation expense for Restricted Stock Units (RSUs) was **$537 thousand** for Q2 2025 and **$779 thousand** for the six months ended **June 30, 2025**. Unrecognized expense was **$2.8 million** at **June 30, 2025**, to be recognized over **2.6 years**[125](index=125&type=chunk) - As of **June 30, 2025**, **868,747 shares** of common stock were available for issuance under the Amended OSIP, representing **4.9%** of outstanding shares[116](index=116&type=chunk) [NOTE 16 - REGULATORY MATTERS](index=41&type=section&id=NOTE%2016%20-%20REGULATORY%20MATTERS) This note summarizes the company's compliance with regulatory capital requirements and its 'well-capitalized' status - The Company and the Bank were in compliance with all Basel III capital adequacy requirements and the capital conservation buffer at **June 30, 2025**, and December 31, 2024, and were considered 'well-capitalized'[129](index=129&type=chunk)[130](index=130&type=chunk)[313](index=313&type=chunk) | Capital Ratio | Consolidated June 30, 2025 | Bank June 30, 2025 | Minimum Required for Capital Adequacy Purposes | To Be Well-Capitalized Under Prompt Corrective Provisions | | :------------------------------------ | :------------------------- | :----------------- | :--------------------------------------------- | :---------------------------------------------------- | | Tier 1 Leverage Ratio | 12.04% | 13.20% | 4.0% | 5.0% | | Common Equity Tier 1 Risk-Based Capital Ratio | 17.61% | 19.96% | 4.5% | 6.5% | | Tier 1 Risk-Based Capital Ratio | 18.17% | 19.96% | 6.0% | 8.0% | | Total Risk-Based Capital Ratio | 24.00% | 21.21% | 8.0% | 10.0% | - Dividend payments are subject to restrictions under California Financial Code, California General Corporation Law, and Federal Reserve guidance[134](index=134&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk) [NOTE 17 - FAIR VALUE MEASUREMENTS AND FAIR VALUE OF FINANCIAL INSTRUMENTS](index=43&type=section&id=NOTE%2017%20-%20FAIR%20VALUE%20MEASUREMENTS%20AND%20FAIR%20VALUE%20OF%20FINANCIAL%20INSTRUMENTS) This note explains the fair value hierarchy and provides fair value measurements for the company's financial instruments - The Company categorizes financial assets and liabilities into Level 1 (quoted prices in active markets), Level 2 (observable inputs other than quoted prices), and Level 3 (unobservable inputs) based on the fair value hierarchy[137](index=137&type=chunk)[138](index=138&type=chunk)[139](index=139&type=chunk)[140](index=140&type=chunk) - Securities available for sale are primarily Level 2, while interest rate lock contracts are Level 3. Collateral-dependent individually evaluated loans and OREO are measured on a non-recurring basis using Level 3 inputs (third-party appraisals with management adjustments)[141](index=141&type=chunk)[142](index=142&type=chunk)[143](index=143&type=chunk)[145](index=145&type=chunk)[146](index=146&type=chunk) | Financial Instrument | Fair Value Hierarchy | June 30, 2025 Fair Value (in thousands) | December 31, 2024 Fair Value (in thousands) | | :------------------------------------ | :------------------- | :------------------------------------ | :------------------------------------ | | Investment securities – AFS | Level 2 | $413,142 | $420,190 | | Loans, net | Level 3 | $3,127,634 | $2,942,026 | | Deposits | Level 2 | $3,185,653 | $3,078,409 | | FHLB advances | Level 3 | $173,205 | $198,783 | | Long-term debt | Level 3 | $111,978 | $109,463 | | Subordinated debentures | Level 3 | $15,118 | $14,975 | [NOTE 18 - EARNINGS PER SHARE](index=48&type=section&id=NOTE%2018%20-%20EARNINGS%20PER%20SHARE) This note presents the calculation of basic and diluted earnings per common share for various periods | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :------------------------------------ | :------------------------------- | :----------------------------- | | Net income (in thousands) | $9,333 | $11,623 | | Basic earnings per common share | $0.53 | $0.66 | | Diluted earnings per common share | $0.52 | $0.65 | | Weighted-average common shares outstanding (Basic) | 17,746,607 | 17,737,212 | | Weighted-average common shares outstanding (Diluted) | 17,797,735 | 17,784,237 | - Options to purchase **155,500 shares** and **106,771 shares** were excluded from diluted EPS calculations for the three and six months ended **June 30, 2025**, respectively, due to their anti-dilutive effect[155](index=155&type=chunk) [NOTE 19 – REVENUE FROM CONTRACTS WITH CUSTOMERS](index=48&type=section&id=NOTE%2019%20%E2%80%93%20REVENUE%20FROM%20CONTRACTS%20WITH%20CUSTOMERS) This note details the components of revenue from customer contracts and other noninterest income sources | Revenue Type | Three Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2025 (in thousands) | | :------------------------------------ | :------------------------------------ | :------------------------------------ | | Total in-scope noninterest income | $1,381 | $2,494 | | Noninterest income, not in scope | $7,097 | $8,279 | | Total Noninterest Income | $8,478 | $10,773 | - Major in-scope revenue streams include fees and service charges on deposit accounts, wealth management fees, and gain/loss on sales of OREO. Noninterest income outside ASC 606 primarily includes net loan servicing income, BOLI income, and the ERC refund[157](index=157&type=chunk)[158](index=158&type=chunk)[159](index=159&type=chunk)[160](index=160&type=chunk)[161](index=161&type=chunk) [NOTE 20 - SEGMENT INFORMATION](index=50&type=section&id=NOTE%2020%20-%20SEGMENT%20INFORMATION) This note describes the company's operating segments and how performance is evaluated by management - The Company's reportable segments are determined by the Chief Executive Officer and Chief Financial Officer, who evaluate performance using consolidated net income, total assets, total loans, and total deposits[162](index=162&type=chunk)[163](index=163&type=chunk) | Metric | June 30, 2025 (in thousands) | | :-------------------- | :----------------------------- | | Total Assets | $4,090,040 | | Total Loans | $3,234,695 | | Total Deposits | $3,188,231 | | Consolidated net income | $9,333 | [NOTE 21 - QUALIFIED AFFORDABLE HOUSING PROJECT INVESTMENTS](index=52&type=section&id=NOTE%2021%20-%20QUALIFIED%20AFFORDABLE%20HOUSING%20PROJECT%20INVESTMENTS) This note reports on the company's investments in affordable housing projects and associated tax credits - Investments in qualified affordable housing projects totaled **$15.6 million** at **June 30, 2025**, with unfunded commitments of **$9.8 million**[166](index=166&type=chunk) - Tax credits recognized from these investments were **$515 thousand** for Q2 2025 and **$912 thousand** for the six months ended **June 30, 2025**[167](index=167&type=chunk) [NOTE 22 - REPURCHASE OF COMMON STOCK](index=52&type=section&id=NOTE%2022%20-%20REPURCHASE%20OF%20COMMON%20STOCK) This note details the company's common stock repurchase programs and shares repurchased during the period - The Board authorized a new **$18.0 million** stock repurchase program through **June 30, 2026**, with **$16.5 million** available at **June 30, 2025**[168](index=168&type=chunk) - The Company repurchased **87,731 shares** at a weighted average price of **$17.04** during Q2 2025[168](index=168&type=chunk) [NOTE 23 - SUBSEQUENT EVENTS](index=52&type=section&id=NOTE%2023%20-%20SUBSEQUENT%20EVENTS) This note discloses significant events that occurred after the balance sheet date but before the financial statements were issued - On **July 21, 2025**, the Board declared a common stock cash dividend of **$0.16 per share**, payable **August 12, 2025**[169](index=169&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=52&type=section&id=ITEM%202.%20MANAGEMENT%27S%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, including a cautionary note on forward-looking statements, critical accounting policies, and an overview of financial performance. It details the analysis of results of operations, covering net interest income, provision for credit losses, noninterest income, noninterest expense, and income tax expense. Furthermore, it analyzes the financial condition by examining total assets, cash and cash equivalents, investment securities, loans, allowance for credit losses, goodwill and intangibles, liabilities, deposits, borrowings, capital resources, liquidity management, regulatory capital requirements, contractual obligations, and off-balance sheet arrangements. The section concludes with a discussion of non-GAAP financial measures [CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS](index=52&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section warns that the report contains forward-looking statements subject to various risks and uncertainties - The report contains forward-looking statements subject to risks and uncertainties, including business and economic conditions, credit risks, regulatory compliance, interest rate fluctuations, and geopolitical conditions[170](index=170&type=chunk)[171](index=171&type=chunk)[178](index=178&type=chunk) - Actual results may differ materially from expectations, and the Company does not undertake to update any forward-looking statements[170](index=170&type=chunk)[174](index=174&type=chunk) [CRITICAL ACCOUNTING POLICIES](index=54&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES) This section identifies key accounting policies that involve significant management estimates and judgments - Critical accounting policies include the allowance for credit losses (ACL) on loans held for investment, goodwill, and income taxes, which involve significant management estimates and assumptions[176](index=176&type=chunk) - A sensitivity analysis of the ACL at **June 30, 2025**, showed a **25% decrease** in prepayment speed would increase ACL by **$1.8 million** (**3.58%**), and a **one percentage point increase** in unemployment rate would increase ACL by **$1.2 million** (**2.42%**)[177](index=177&type=chunk) - Under a Moderate Stress scenario, the ACL would increase by **$9.3 million** (**18.03%**), and under a Major Stress scenario, it would increase by **$25.3 million** (**49.07%**) at **June 30, 2025**, with the Company projected to remain well-capitalized[179](index=179&type=chunk) [GENERAL](index=56&type=section&id=GENERAL) This section provides a general overview of RBB Bancorp's business, financial position, and market focus - RBB Bancorp, a bank holding company, had total assets of **$4.1 billion**, gross loans HFI of **$3.2 billion**, total deposits of **$3.2 billion**, and total shareholders' equity of **$517.7 million** at **June 30, 2025**[182](index=182&type=chunk) - The Bank serves Asian-centric communities through 24 branches across multiple states, offering commercial and investor real estate loans, business loans, SBA loans, mortgage loans, and a full range of depository services[182](index=182&type=chunk)[184](index=184&type=chunk) - The Company maintains its Minority Depository Institution (MDI) designation, which provides support from federal regulatory agencies[183](index=183&type=chunk) [OVERVIEW](index=56&type=section&id=OVERVIEW) This section provides a summary of the company's financial performance and key changes in financial condition for the reporting period | Metric | Q2 2025 (in thousands) | Q1 2025 (in thousands) | Q2 2024 (in thousands) | | :-------------------------- | :--------------------- | :--------------------- | :--------------------- | | Net income | $9,333 | $2,290 | $7,245 | | Diluted EPS | $0.52 | $0.13 | $0.39 | | Provision for credit losses | $2,387 | $6,746 | $557 | - Net income for Q2 2025 included a **$5.2 million (pre-tax) Employee Retention Credit (ERC) refund**, partially offset by **$1.2 million (pre-tax)** in associated professional and advisory costs[188](index=188&type=chunk) - Total assets increased by **$97.6 million** to **$4.1 billion** at **June 30, 2025**, driven by a **$181.5 million** increase in gross loans HFI, partially offset by a **$65.9 million** decrease in cash and cash equivalents[190](index=190&type=chunk) - Total deposits increased by **$104.4 million** to **$3.2 billion** at **June 30, 2025**, while FHLB advances decreased by **$20.0 million**. The all-in average spot rate for total deposits was **2.95%** at **June 30, 2025**[192](index=192&type=chunk) - Nonperforming assets decreased by **$3.6 million** to **$61.0 million (1.49% of total assets)** at **June 30, 2025**. The Allowance for Loan Losses (ALL) as a percentage of loans HFI decreased to **1.58%** at **June 30, 2025**, from **1.65%** at March 31, 2025[193](index=193&type=chunk)[194](index=194&type=chunk) - Shareholders' equity increased to **$517.7 million** (**$29.25** book value per share) at **June 30, 2025**, due to net income, lower unrealized losses on AFS securities, and equity compensation, partially offset by dividends and stock repurchases[195](index=195&type=chunk) [ANALYSIS OF RESULTS OF OPERATIONS](index=58&type=section&id=ANALYSIS%20OF%20RESULTS%20OF%20OPERATIONS) [Financial Performance](index=58&type=section&id=Financial%20Performance) This section summarizes key financial performance metrics, including net interest income, net income, and efficiency ratio | Metric | Q2 2025 | Q1 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :------------------------------------ | :------ | :------ | :------ | :------- | :------- | | Net interest income (in thousands) | $27,334 | $26,163 | $23,965 | $53,497 | $48,842 | | Net income (in thousands) | $9,333 | $2,290 | $7,245 | $11,623 | $15,281 | | Diluted EPS | $0.52 | $0.13 | $0.39 | $0.65 | $0.82 | | Return on average assets, annualized | 0.93% | 0.24% | 0.76% | 0.59% | 0.79% | | Return on average shareholders' equity, annualized | 7.29% | 1.81% | 5.69% | 4.57% | 6.00% | | Efficiency ratio | 57.22% | 65.09% | 62.38% | 60.70% | 61.21% | [Net Interest Income/Average Balance Sheet](index=60&type=section&id=Net%20Interest%20Income%2FAverage%20Balance%20Sheet) This section analyzes changes in net interest income and net interest margin based on average balance sheet components and interest rates - Net interest income increased by **$1.2 million** to **$27.3 million** in Q2 2025 compared to Q1 2025, driven by a **$1.9 million** increase in interest income (mostly from loans) offset by a **$698 thousand** increase in interest expense[208](index=208&type=chunk) - Net Interest Margin (NIM) expanded by **4 basis points** to **2.92%** in Q2 2025 from **2.88%** in Q1 2025, due to a **3 basis point increase** in asset yield and a **1 basis point decrease** in the overall cost of funds[209](index=209&type=chunk) - Compared to Q2 2024, net interest income increased by **$3.4 million** to **$27.3 million** in Q2 2025, primarily due to lower interest expense (**$2.1 million decrease**) and higher interest income (**$1.3 million increase**). NIM increased by **25 basis points** to **2.92%** from **2.67%**[212](index=212&type=chunk)[215](index=215&type=chunk) - For the six months ended **June 30, 2025**, net interest income increased by **$4.7 million** to **$53.5 million** compared to the same period in 2024, mainly due to a **$5.8 million decrease** in interest expense, partially offset by a **$1.1 million decrease** in interest income. NIM increased by **22 basis points** to **2.90%**[216](index=216&type=chunk)[219](index=219&type=chunk) [Provision for Credit Losses](index=66&type=section&id=Provision%20for%20Credit%20Losses) This section discusses the provision for credit losses, net charge-offs, and their impact on the allowance for credit losses - The provision for credit losses decreased to **$2.4 million** in Q2 2025 from **$6.7 million** in Q1 2025, reflecting a **$1.5 million increase** in general reserves due to net loan growth and a **$924 thousand increase** in specific reserves for one lending relationship[220](index=220&type=chunk) - Net charge-offs were **$3.3 million** in Q2 2025, compared to **$551 thousand** in Q2 2024, and **$5.9 million** for the six months ended **June 30, 2025**, compared to **$735 thousand** for the same period in 2024[221](index=221&type=chunk)[222](index=222&type=chunk) - The provision for the first six months of 2025 was **$9.1 million**, significantly higher than **$557 thousand** in the prior year, primarily due to increased net charge-offs and specific reserves[222](index=222&type=chunk) [Noninterest Income](index=66&type=section&id=Noninterest%20Income) This section details the components and drivers of the company's noninterest income, including significant one-time items | Noninterest Income Component | Q2 2025 (in thousands) | Q1 2025 (in thousands) | Q2 2024 (in thousands) | YTD 2025 (in thousands) | YTD 2024 (in thousands) | | :--------------------------------------- | :--------------------- | :--------------------- | :--------------------- | :---------------------- | :---------------------- | | Service charges and fees | $1,060 | $1,017 | $1,064 | $2,077 | $2,056 | | Gain on sale of loans | $358 | $81 | $451 | $439 | $763 | | Loan servicing income, net of amortization | $541 | $588 | $579 | $1,129 | $1,168 | | Increase in cash surrender value of life insurance | $411 | $403 | $385 | $814 | $767 | | Gain on OREO | — | — | $292 | — | $1,016 | | Other income | $6,108 | $206 | $717 | $6,314 | $1,090 | | Total noninterest income | $8,478 | $2,295 | $3,488 | $10,773 | $6,860 | - Noninterest income significantly increased by **$6.2 million** to **$8.5 million** in Q2 2025 compared to Q1 2025, primarily due to a **$5.2 million Employee Retention Credit (ERC) refund**[224](index=224&type=chunk) - Compared to Q2 2024, noninterest income increased by **$5.0 million**, mainly due to the ERC refund, partially offset by a **$292 thousand decrease** in gain on OREO[226](index=226&type=chunk)[227](index=227&type=chunk) - For the six months ended **June 30, 2025**, noninterest income increased by **$3.9 million** to **$10.8 million**, driven by the ERC refund, partially offset by decreases in gain on sale of loans and OREO-related gains[228](index=228&type=chunk) [Noninterest Expense](index=68&type=section&id=Noninterest%20Expense) This section analyzes the components and changes in the company's noninterest expenses, including salaries and professional fees | Noninterest Expense Component | Q2 2025 (in thousands) | Q1 2025 (in thousands) | Q2 2024 (in thousands) | YTD 2025 (in thousands) | YTD 2024 (in thousands) | | :------------------------------------ | :--------------------- | :--------------------- | :--------------------- | :---------------------- | :---------------------- | | Salaries and employee benefits | $11,080 | $10,643 | $9,533 | $21,723 | $19,460 | | Legal and professional | $2,904 | $1,515 | $1,260 | $4,419 | $2,140 | | Total noninterest expense | $20,493 | $18,522 | $17,124 | $39,015 | $34,093 | - Noninterest expense increased by **$2.0 million** to **$20.5 million** in Q2 2025 compared to Q1 2025, mainly due to a **$1.4 million increase** in legal and professional expense (including **$1.2 million for ERC advisory costs**) and a **$437 thousand increase** in salaries and employee benefits[234](index=234&type=chunk) - The efficiency ratio decreased to **57.22%** in Q2 2025 from **65.09%** in Q1 2025, primarily due to higher noninterest income from the ERC refund, partially offset by increased noninterest expense from ERC advisory costs[234](index=234&type=chunk) - For the six months ended **June 30, 2025**, noninterest expense increased by **$4.9 million** to **$39.0 million** compared to the same period in 2024, driven by increases in salaries and employee benefits (**$2.3 million**) and legal and professional fees (**$2.3 million**)[236](index=236&type=chunk) [Income Tax Expense](index=70&type=section&id=Income%20Tax%20Expense) This section provides an analysis of the company's income tax provision and effective tax rates for the reporting periods | Period | Income Tax Provision (in thousands) | Effective Tax Rate | | :------------------------------------ | :-------------------------------- | :----------------- | | Three Months Ended June 30, 2025 | $3,599 | 27.8% | | Three Months Ended March 31, 2025 | $900 | 28.2% | | Three Months Ended June 30, 2024 | $2,527 | 25.9% | | Six Months Ended June 30, 2025 | $4,499 | 27.9% | | Six Months Ended June 30, 2024 | $5,771 | 27.4% | - The Q2 2025 income tax provision included a discrete adjustment of **$379 thousand** resulting from a change in California tax law, which is expected to reduce the annual effective tax rate in future periods[237](index=237&type=chunk) [ANALYSIS OF FINANCIAL CONDITION](index=71&type=section&id=ANALYSIS%20OF%20FINANCIAL%20CONDITION) [Total Assets](index=71&type=section&id=Total%20Assets) This section discusses the primary drivers of changes in the company's total assets over the reporting period - Total assets increased by **$97.6 million** to **$4.1 billion** at **June 30, 2025**, from **$4.0 billion** at December 31, 2024, primarily due to a **$181.5 million** increase in gross loans HFI, partially offset by a **$65.9 million** decrease in cash and cash equivalents[240](index=240&type=chunk) [Cash and Cash Equivalents](index=71&type=section&id=Cash%20and%20Cash%20Equivalents) This section analyzes the changes in cash and cash equivalents resulting from operating, investing, and financing activities - Cash and cash equivalents decreased by **$65.9 million (25.6%)** to **$191.9 million** at **June 30, 2025**, from **$257.8 million** at December 31, 2024[241](index=241&type=chunk) - This decrease was due to **$172.4 million** used in investing activities (net increase in loans, AFS securities decrease, loan/OREO sales), partially offset by **$29.4 million** from operating activities and **$77.1 million** from financing activities (deposit growth, FHLB advances decrease)[241](index=241&type=chunk) [Investment Securities](index=71&type=section&id=Investment%20Securities) This section details the composition, fair value, and unrealized gains or losses within the company's investment securities portfolio | Security Type | June 30, 2025 Fair Value (in thousands) | December 31, 2024 Fair Value (in thousands) | | :------------------------------------ | :------------------------------------ | :------------------------------------ | | Total securities, available for sale | $413,142 | $420,190 | | Total securities, held to maturity | $3,995 | $4,948 | | Total securities | $417,137 | $425,138 | - The weighted-average life of the total investment portfolio increased to **5.2 years** at **June 30, 2025**, from **5.0 years** at December 31, 2024, due to a decrease in commercial paper[248](index=248&type=chunk) - Unrealized losses on investment securities were primarily attributed to changes in interest rates, with no Allowance for Credit Losses (ACL) recorded on AFS or HTM securities as of **June 30, 2025**, or December 31, 2024[252](index=252&type=chunk) [Loans](index=74&type=section&id=Loans) This section provides a detailed breakdown and analysis of the loan portfolio - Loans HFI increased by **$181.5 million (12.0% annualized)** to **$3.2 billion** at **June 30, 2025**, driven by increases in SFR mortgages (**$109.1 million**), CRE loans (**$72.0 million**), C&I loans (**$8.7 million**), and SBA loans (**$8.7 million**)[254](index=254&type=chunk) | Loan Type (HFI) | June 30, 2025 % of Total | December 31, 2024 % of Total | | :-------------------------------- | :----------------------- | :----------------------- | | Single-family residential mortgages | 49.6% | 48.9% | | Commercial real estate | 39.4% | 39.3% | | Construction and land development | 4.9% | 5.7% | | Commercial and industrial | 4.3% | 4.2% | | SBA | 1.7% | 1.5% | | Other loans | 0.1% | 0.4% | - The majority of the loan portfolio (**88.3%**) is based on collateral or businesses located in California and New York[256](index=256&type=chunk) - SFR loans had a weighted-average LTV of **55.2%** and a weighted average FICO score of **764** at **June 30, 2025**[263](index=263&type=chunk) [Analysis of the Allowance for Loan Losses](index=80&type=section&id=Analysis%20of%20the%20Allowance%20for%20Loan%20Losses) This section examines the allowance for loan losses, nonperforming assets, and credit quality trends within the loan portfolio | Loan Type (HFI) | ALL as a % of Loan Type (June 30, 2025) | ALL as a % of Loan Type (December 31, 2024) | | :-------------------------------- | :-------------------------------------- | :------------------------------------------ | | Construction and land development | 5.05% | 3.49% | | Commercial real estate | 1.68% | 1.82% | | Single-family residential mortgages | 1.19% | 1.17% | | Commercial and industrial | 1.08% | 1.03% | | SBA | 1.41% | 1.38% | | Other | 3.88% | 3.74% | | Total Allowance for Loan Losses | 1.58% | 1.56% | - The Allowance for Credit Losses (ACL) totaled **$51.6 million** at **June 30, 2025**, an increase of **$3.2 million** from **$48.5 million** at December 31, 2024, due to a **$9.1 million** provision for credit losses offset by **$5.9 million** in net charge-offs[276](index=276&type=chunk) - Nonperforming assets decreased to **$61.0 million (1.49% of total assets)** at **June 30, 2025**, from **$81.0 million (2.03% of total assets)** at December 31, 2024[282](index=282&type=chunk) - Special mention loans increased by **$26.0 million** to **$91.3 million (2.82% of total loans)** at **June 30, 2025**, and substandard loans increased by **$1.9 million** to **$91.0 million**[287](index=287&type=chunk)[288](index=288&type=chunk) [Goodwill and Other Intangible Assets](index=83&type=section&id=Goodwill%20and%20Other%20Intangible%20Assets) This section reports on the carrying value and changes in the company's goodwill and other intangible assets - Goodwill remained at **$71.5 million** at **June 30, 2025**, and December 31, 2024. Other intangible assets (core deposit intangibles) were **$1.7 million** at **June 30, 2025**, down from **$2.0 million** at December 31, 2024[289](index=289&type=chunk) [Liabilities](index=83&type=section&id=Liabilities) This section discusses the primary drivers of changes in the company's total liabilities over the reporting period - Total liabilities increased by **$87.8 million** to **$3.6 billion** at **June 30, 2025**, from **$3.5 billion** at December 31, 2024, primarily due to a **$104.4 million** increase in deposits, offset by a **$20.0 million** decrease in FHLB advances[290](index=290&type=chunk) [Deposits](index=83&type=section&id=Deposits) This section analyzes the composition, growth, and cost of the company's deposit base - Total deposits increased by **$104.4 million (6.8% annualized)** to **$3.2 billion** at **June 30, 2025**, with interest-bearing deposits increasing by **$123.6 million** and noninterest-bearing deposits decreasing by **$19.1 million**[291](index=291&type=chunk) | Deposit Type | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :-------------------------------- | :----------------------------- | :----------------------------- | | Noninterest-bearing demand deposits | $543,885 | $563,012 | | Total interest-bearing deposits | $2,644,346 | $2,520,777 | | Total deposits | $3,188,231 | $3,083,789 | - Wholesale deposits increased to **$183.8 million** at **June 30, 2025**, from **$147.5 million** at December 31, 2024. Estimated uninsured deposits were **$1.5 billion** at **June 30, 2025**[291](index=291&type=chunk)[296](index=296&type=chunk) [FHLB Borrowings](index=86&type=section&id=FHLB%20Borrowings) This section details the company's Federal Home Loan Bank borrowings, outstanding advances, and remaining borrowing capacity - FHLB advances decreased to **$180.0 million** at **June 30, 2025**, from **$200.0 million** at December 31, 2024, consisting entirely of putable term advances with a weighted average interest rate of **3.51%**[297](index=297&type=chunk)[298](index=298&type=chunk) - The Company had **$918.4 million** of remaining secured borrowing capacity with the FHLB as of **June 30, 2025**[310](index=310&type=chunk) [Long-term Debt](index=86&type=section&id=Long-term%20Debt) This section describes the company's long-term debt obligations, including subordinated notes and their terms - Long-term debt, consisting of **4.00%** fixed-to-floating rate subordinated notes due **April 1, 2031**, was **$119.7 million** outstanding at **June 30, 2025**[299](index=299&type=chunk) [Subordinated Debentures](index=86&type=section&id=Subordinated%20Debentures) This section provides details on the company's subordinated debentures, their interest rates, and regulatory capital treatment - Subordinated debentures totaled **$15.3 million** at **June 30, 2025**, comprising TFC Trust, FAIC Trust, and PGBH Trust, all with variable interest rates tied to three-month CME Term SOFR[300](index=300&type=chunk)[302](index=302&type=chunk)[303](index=303&type=chunk)[304](index=304&type=chunk) - The Company was in compliance with all covenants under its long-term debt agreements and subordinated debt at **June 30, 2025**[301](index=301&type=chunk) [Capital Resources and Liquidity Management](index=88&type=section&id=Capital%20Resources%20and%20Liquidity%20Management) This section discusses the company's strategies for maintaining adequate capital and managing liquidity through various funding sources - Shareholders' equity increased by **$9.8 million (1.9%)** to **$517.7 million** at **June 30, 2025**, driven by net income, lower unrealized losses on AFS securities, and equity compensation, offset by dividends and repurchases[306](index=306&type=chunk) - Book value per share increased to **$29.25** and tangible book value per share increased to **$25.11** at **June 30, 2025**[306](index=306&type=chunk) - The Company maintains liquidity through liquid assets, liabilities, and access to alternative funding sources, with a wholesale funding ratio of **10.8%** at **June 30, 2025**[307](index=307&type=chunk)[308](index=308&type=chunk) - RBB Bancorp's main source of funding is dividends from the Bank, which paid **$45.0 million** in dividends to Bancorp during the six months ended **June 30, 2025**[311](index=311&type=chunk) [Regulatory Capital Requirements](index=89&type=section&id=Regulatory%20Capital%20Requirements) This section summarizes the company's compliance with all applicable regulatory capital requirements and its 'well-capitalized' status - The Company and the Bank exceeded all regulatory capital requirements under Basel III and were considered 'well-capitalized' at **June 30, 2025**, and December 31, 2024[313](index=313&type=chunk) | Capital Ratio | Consolidated June 30, 2025 | Bank June 30, 2025 | Minimum Requirement for "Well Capitalized" Depository Institution | | :------------------------------------ | :------------------------- | :----------------- | :---------------------------------------------------- | | Tier 1 Leverage Ratio | 12.04% | 13.20% | 5.00% | | Common Equity Tier 1 Risk-Based Capital Ratio | 17.61% | 19.96% | 6.50% | | Tier 1 Risk-Based Capital Ratio | 18.17% | 19.96% | 8.00% | | Total Risk-Based Capital Ratio | 24.00% | 21.21% | 10.00% | [Contractual Obligations](index=90&type=section&id=Contractual%20Obligations) This section details the company's future contractual payment obligations across various categories | Obligation Type | Within One Year (in thousands) | One to Three Years (in thousands) | Over Three to Five Years (in thousands) | After Five Years (in thousands) | Total (in thousands) | | :-------------------------------- | :----------------------------- | :-------------------------------- | :------------------------------------ | :------------------------------ | :------------------- | | Deposits without a stated maturity | $1,235,564 | — | — | — | $1,235,564 | | Time deposits | $1,944,764 | $7,429 | $474 | — | $1,952,667 | | FHLB advances | $180,000 | — | — | — | $180,000 | | Long-term debt | — | — | — | $119,720 | $119,720 | | Subordinated debentures | — | — | — | $15,265 | $15,265 | | Leases | $5,411 | $11,367 | $6,068 | $7,046 | $29,892 | | Total contractual obligations | $3,365,739 | $18,796 | $6,542 | $142,031 | $3,533,108 | [Off-Balance Sheet Arrangements](index=90&type=section&id=Off-Balance%20Sheet%20Arrangements) This section discloses the company's significant off-balance sheet financial commitments and arrangements - Off-balance sheet financial commitments, including commitments to extend credit, unused lines of credit, and letters of credit, totaled **$154.2 million** at **June 30, 2025**, down from **$175.5 million** at December 31, 2024[318](index=318&type=chunk) - Unfunded commitments for affordable housing partnerships and Small Business Investment Company funds totaled **$10.7 million** at **June 30, 2025**[321](index=321&type=chunk) [Non-GAAP Financial Measures](index=92&type=section&id=Non-GAAP%20Financial%20Measures) This section explains and reconciles the non-GAAP financial measures used by management to evaluate performance and capital adequacy - The Company uses non-GAAP financial measures such as 'tangible common equity to tangible assets ratio,' 'tangible book value per share,' and 'return on average tangible common equity' to evaluate capital adequacy and performance[322](index=322&type=chunk)[323](index=323&type=chunk)[324](index=324&type=chunk) | Metric | June 30, 2025 | December 31, 2024 | | :------------------------------------ | :------------ | :---------------- | | Tangible common equity (in thousands) | $444,488 | $434,368 | | Tangible assets (in thousands) | $4,016,875 | $3,918,968 | | Tangible common equity to tangible assets ratio | 11.07% | 11.08% | | Tangible book value per share | $25.11 | $24.51 | | Metric | Q2 2025 | Q1 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :------------------------------------ | :------ | :------ | :------ | :------- | :------- | | Return on average tangible common equity, annualized | 8.50% | 2.12% | 6.65% | 5.33% | 7.01% | [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=57&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) This section outlines the Company's exposure to market risk, primarily focusing on interest rate risk, price risk, and basis risk. It describes how the Asset Liability Committee (ALCO) establishes and monitors policy limits to manage these risks. The Company uses income simulation (Net Interest Income at Risk) and economic value analysis (Economic Value of Equity) to measure interest rate risk, indicating a liability-sensitive NII at Risk profile and a generally decreasing EVE position in both down and up rate scenarios, all within board policy limits [Market Risk](index=94&type=section&id=Market%20Risk) This section describes the company's exposure to market risks, particularly interest rate risk, and its management strategies - The Company's primary sources of market risk are interest rate risk (repricing, option, yield curve, basis risk), price risk (AFS securities), and basis risk (SFR, multifamily, and securities portfolios)[326](index=326&type=chunk)[327](index=327&type=chunk)[328](index=328&type=chunk)[329](index=329&type=chunk) - The Asset Liability Committee (ALCO) establishes and monitors policy limits for interest rate risk, aiming to minimize the impact of changing interest rates on net interest income and economic values[330](index=330&type=chunk) - At **June 30, 2025**, the Net Interest Income (NII) at Risk profile is liability sensitive, with a projected dollar change of **$(2,100) thousand** for a +100 basis point rate change and **$3,455 thousand** for a -100 basis point rate change[335](index=335&type=chunk)[336](index=336&type=chunk) - The Economic Value of Equity (EVE) position at **June 30, 2025**, is projected to generally decrease in both down and up rate scenarios, with a dollar change of **$(20,896) thousand** for a +100 basis point rate change and **$13,712 thousand** for a -100 basis point rate change[337](index=337&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=58&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) This section confirms the effectiveness of the Company's disclosure controls and procedures and reports no material changes in internal controls over financial reporting during the quarter [Evaluation of Disclosure Controls and Procedures](index=95&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures as of the reporting date - Management, including the principal executive officer and principal financial officer, concluded that the Company's disclosure controls and procedures were effective as of **June 30, 2025**[338](index=338&type=chunk) [Changes in Internal Controls Over Financial Reporting](index=95&type=section&id=Changes%20in%20Internal%20Controls%20Over%20Financial%20Reporting) This section reports on any material changes in the company's internal controls over financial reporting during the period - There have been no material changes in the Company's internal control over financial reporting during the fiscal quarter ended **June 30, 2025**[339](index=339&type=chunk) [PART II - OTHER INFORMATION](index=59&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) This section covers additional required disclosures not included in the financial statements, such as legal proceedings and risk factors [ITEM 1. LEGAL PROCEEDINGS](index=59&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) This section states that there are no material pending legal proceedings beyond ordinary routine litigation incidental to the Company's business, and management believes such proceedings will not materially affect financial statements - There are no material pending legal proceedings, and management believes existing litigation will not have a material adverse impact on the Company's financial condition or results of operations[342](index=342&type=chunk) [ITEM 1A. RISK FACTORS](index=59&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section confirms that there have been no material changes to the risk factors previously disclosed in the Company's 2024 Annual Report, reiterating that unforeseen risks could significantly impact financial performance - No material changes to the risk factors previously disclosed in the 2024 Annual Report have occurred[343](index=343&type=chunk) - Unforeseen risks or uncertainties could still result in significant adverse effects on the Company's financial condition, results of operations, and cash flows[343](index=343&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=59&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) This section details the Company's stock repurchase program, including the authorization of a new program and the shares repurchased during the second quarter of 2025 - On **May 29, 2025**, the Board authorized a new stock repurchase program for up to **$18.0 million** of common stock through **June 30, 2026**[344](index=344&type=chunk) - During Q2 2025, the Company repurchased **87,731 shares** of common stock at an average price of **$17.04** per share[345](index=345&type=chunk)[346](index=346&type=chunk) - As of **June 30, 2025**, **912,269 shares** remained available for repurchase under the program[346](index=346&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=59&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) This section confirms whether there were any defaults on senior securities during the reporting period - There were no defaults upon senior securities[347](index=347&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=59&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This section states the applicability of mine safety disclosures to the company's operations - Mine safety disclosures are not applicable to the Company[348](index=348&type=chunk) [ITEM 5. OTHER INFORMATION](index=59&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section reports on any other material information not otherwise disclosed, such as Rule 10b5-1 trading plans - No officer or director adopted or terminated any Rule 10b5-1 trading plans for the purchase or sale of common stock during the quarter ended **June 30, 2025**[349](index=349&type=chunk) [ITEM 6. EXHIBITS](index=60&type=section&id=ITEM%206.%20EXHIBITS) This section lists all documents filed as exhibits to the Form 10-Q, including corporate governance and certification documents - The exhibits include corporate governance documents (Articles of Incorporation, Bylaws), specimen common stock certificate, RBB Bancorp Award Agreement for Employees, CEO and CFO certifications (Sections 302 and 906 of Sarbanes-Oxley Act), and Inline XBRL documents[350](index=350&type=chunk) [SIGNATURES](index=61&type=section&id=SIGNATURES) This section contains the official certifications and signatures of the company's principal executive and financial officers - The report is duly signed by Johnny Lee, President and Chief Executive Officer, and Lynn Hopkins, Executive Vice President and Chief Financial Officer, on **August 8, 2025**[353](index=353&type=chunk)

PART I - CONSOLIDATED FINANCIAL INFORMATION This section presents the unaudited consolidated financial statements and management's discussion and analysis of Capital Bancorp, Inc. [Item 1. Consolidated Financial Statements (Unaudited)](index=2&type=section&id=Item%201.%20Consolidated%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements of Capital Bancorp, Inc. and its subsidiaries, including balance sheets, income statements, comprehensive income statements, statements of changes in stockholders' equity, cash flow statements, and accompanying notes, providing a detailed view of the Company's financial performance and position for the periods ended June 30, 2025 [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) The Consolidated Balance Sheets provide a snapshot of the Company's financial position, showing a notable increase in total assets, portfolio loans, deposits, and stockholders' equity from December 31, 2024, to June 30, 2025 | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | Change (in thousands) | % Change | | :--------------------------------- | :----------------------------- | :------------------------------- | :-------------------- | :------- | | Total assets | $3,388,662 | $3,206,911 | $181,751 | 5.7% | | Portfolio loans receivable, net | $2,692,361 | $2,581,511 | $110,850 | 4.3% | | Total deposits | $2,940,738 | $2,761,939 | $178,799 | 6.5% | | Total stockholders' equity | $380,035 | $355,139 | $24,896 | 7.0% | | Allowance for credit losses | $47,447 | $48,652 | $(1,205) | (2.5%) | [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) The Consolidated Statements of Income reveal significant growth in net income for both the three and six months ended June 30, 2025, driven by increased interest and noninterest income, despite higher noninterest expenses | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | % Change | | :--------------------------------- | :------------------------------------------ | :------------------------------------------ | :------- | | Net income | $13,136 | $8,205 | 60.1% | | Total interest income | $64,586 | $50,615 | 27.6% | | Total noninterest income | $13,106 | $6,890 | 90.2% | | Total noninterest expenses | $39,572 | $29,493 | 34.2% | | Basic earnings per share | $0.79 | $0.59 | 33.9% | | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | % Change | | :--------------------------------- | :------------------------------------------ | :------------------------------------------ | :------- | | Net income | $27,068 | $14,767 | 83.3% | | Basic earnings per share | $1.63 | $1.06 | 53.8% | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) The Consolidated Statements of Comprehensive Income show a substantial increase in comprehensive income for both the three and six months ended June 30, 2025, primarily due to higher net income and an increase in unrealized gains on available-for-sale investment securities | Metric | Three Months Ended June 30, 2025 (in thousands) | Three Months Ended June 30, 2024 (in thousands) | % Change | | :--------------------------------- | :------------------------------------------ | :------------------------------------------ | :------- | | Comprehensive income | $14,231 | $8,725 | 63.1% | | Unrealized gain on investment securities available-for-sale (net of tax) | $1,095 | $520 | 110.6% | | Metric | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | % Change | | :--------------------------------- | :------------------------------------------ | :------------------------------------------ | :------- | | Comprehensive income | $30,425 | $14,750 | 106.3% | | Unrealized gain on investment securities available-for-sale (net of tax) | $3,357 | $(17) | N/A | [Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This statement details the movements in stockholders' equity, reflecting increases from net income and unrealized gains on investment securities, partially offset by cash dividends and share repurchases, leading to an overall increase in total stockholders' equity | Metric | June 30, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--------------------------------- | :----------------------------- | :------------------------------- | | Total stockholders' equity | $380,035 | $355,139 | | Retained earnings | $261,093 | $237,843 | | Accumulated other comprehensive loss | $(8,112) | $(11,469) | - Cash dividends to stockholders were **$0.10 per share** for both the three months ended March 31, 2025, and June 30, 2025[10](index=10&type=chunk) - Shares repurchased and retired totaled **93,170 shares** during the three months ended June 30, 2025, and **22,185 shares** during the three months ended March 31, 2025[10](index=10&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) The Consolidated Statements of Cash Flows illustrate the Company's cash generation and usage across operating, investing, and financing activities, showing an overall increase in cash and cash equivalents for the six months ended June 30, 2025 | Cash Flow Activity | Six Months Ended June 30, 2025 (in thousands) | Six Months Ended June 30, 2024 (in thousands) | % Change | | :--------------------------------- | :------------------------------------------ | :------------------------------------------ | :------- | | Net cash provided by operating activities | $18,368 | $9,486 | 93.6% | | Net cash used in investing activities | $(121,361) | $(123,145) | (1.4%) | | Net cash provided by financing activities | $172,267 | $196,206 | (12.3%) | | Net increase in cash and cash equivalents | $69,274 | $82,547 | (16.1%) | | Cash and cash equivalents, end of period | $274,606 | $136,511 | 101.2% | [Notes to Unaudited Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) These notes provide essential details and explanations for the unaudited consolidated financial statements, covering the Company's business nature, recent acquisition, investment securities, loan servicing, portfolio loans, leases, goodwill, fair value measurements, segment reporting, and subsequent events [Note 1 - Nature of Business and Basis of Presentation](index=9&type=section&id=Note%201%20-%20Nature%20of%20Business%20and%20Basis%20of%20Presentation) This note describes Capital Bancorp, Inc. as a Maryland corporation and bank holding company for Capital Bank, N.A., operating through four divisions: Commercial Banking, OpenSky™, Windsor Advantage, LLC, and Capital Bank Home Loans. It outlines the basis of presentation for the unaudited interim consolidated financial statements, adherence to GAAP, and recent accounting standard adoptions - Capital Bancorp, Inc. operates through four divisions: Commercial Banking, OpenSky™, Windsor Advantage, LLC, and Capital Bank Home Loans (CBHL)[13](index=13&type=chunk)[15](index=15&type=chunk)[17](index=17&type=chunk) - The Company adopted ASU 2023-07, 'Segment Reporting,' effective December 31, 2024, requiring enhanced segment disclosures[19](index=19&type=chunk) - Future accounting pronouncements include ASU 2023-09 (Income Taxes) for fiscal years beginning after December 15, 2024, and ASU 2024-03 (Expense Disaggregation) for fiscal years beginning after December 15, 2026[20](index=20&type=chunk)[21](index=21&type=chunk) [Note 2 - Acquisition](index=11&type=section&id=Note%202%20-%20Acquisition) This note details the acquisition of Integrated Financial Holdings, Inc. (IFH) on October 1, 2024, including the consideration paid, assets acquired, and liabilities assumed, and the subsequent integration of banking systems. A measurement period adjustment increased goodwill - The Company completed its acquisition of Integrated Financial Holdings, Inc. (IFH) on October 1, 2024, and successfully converted IFH's banking systems and operations onto Capital Bank's platforms during the first quarter of 2025[25](index=25&type=chunk) - A **$1.4 million** increase in goodwill at June 30, 2025, resulted from a revised estimate of adjusted servicing assets and other liabilities post-acquisition[26](index=26&type=chunk) | Merger-Related Expenses (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------------- | :------------------------------- | :------------------------------- | | Merger-related expenses | $1,398 | $83 | | Merger-Related Expenses (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------- | :------------------------------- | :------------------------------- | | Merger-related expenses | $2,664 | $795 | [Note 3 - Investment Securities](index=13&type=section&id=Note%203%20-%20Investment%20Securities) This note provides a breakdown of investment securities available-for-sale by type, amortized cost, fair value, and unrealized gains/losses, along with maturity profiles and credit quality assessments. Management determined no allowance for credit losses was required for securities in an unrealized loss position | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Total Investment securities available-for-sale (Amortized Cost) | $239,598 | $238,969 | | Total Investment securities available-for-sale (Fair Value) | $228,923 | $223,630 | | Gross Unrealized Gains | $366 | $74 | | Gross Unrealized Losses | $(11,041) | $(15,413) | - Management determined no allowance for credit losses was required on available-for-sale debt securities in an unrealized loss position at June 30, 2025, as there was no intent to sell, nor was it more likely than not that the Company would be required to sell before recovering the amortized cost basis, and no credit-related declines in fair value were identified[28](index=28&type=chunk)[34](index=34&type=chunk) | Contractual Maturity (June 30, 2025) | Amortized Cost (in thousands) | Fair Value (in thousands) | | :----------------------------------- | :---------------------------- | :------------------------ | | Within one year | $53,783 | $52,945 | | One to five years | $68,916 | $65,438 | | Five to ten years | $35,857 | $31,924 | | Beyond ten years | $4,517 | $3,430 | [Note 4 - Loan Servicing](index=15&type=section&id=Note%204%20-%20Loan%20Servicing) This note details the activity and fair value changes of loan servicing rights, which saw a decrease primarily due to the refinement of valuation assumptions post-acquisition | Loan Servicing Rights (in thousands) | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Balance at end of period | $2,221 | $5,511 | | Additions | $968 | $5,096 | | Other changes in fair value | $(4,258) | $415 | - The decrease in loan servicing rights was primarily due to the refinement of assumptions used in the valuation of servicing assets post-acquisition[35](index=35&type=chunk) - Fair value at June 30, 2025, was determined using a discount rate of **13.5%**, a weighted average prepayment speed of **16.4%**, and a weighted average default rate of **0.8%**[35](index=35&type=chunk) [Note 5 - Portfolio Loans Receivable and Allowance for Credit Losses](index=16&type=section&id=Note%205%20-%20Portfolio%20Loans%20Receivable%20and%20Allowance%20for%20Credit%20Losses) This note provides a detailed breakdown of portfolio loans by major categories, changes in the Allowance for Credit Losses (ACL), loan delinquency status, nonaccrual loans, and credit quality indicators. It also covers loan modifications and outstanding loan commitments, highlighting an increase in nonaccrual loans and net charge-offs | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Portfolio loans receivable, gross | $2,748,063 | $2,637,228 | | Allowance for credit losses | $47,447 | $48,652 | | Total nonaccrual loans | $36,167 | $30,241 | | Provision for Credit Losses (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :----------------------------------------- | :------------------------------- | :------------------------------- | | Provision for credit losses | $4,081 | $3,417 | | Provision for Credit Losses (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------------- | :------------------------------- | :------------------------------- | | Provision for credit losses | $6,327 | $6,144 | | Net Charge-Offs (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :------------------------------- | :------------------------------- | :------------------------------- | | Total net charge-offs | $5,088 | $1,935 | | Net Charge-Offs (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------- | :------------------------------- | :------------------------------- | | Total net charge-offs | $7,532 | $3,922 | - The Company made **9 loan modifications** totaling **$1,974 thousand** in amortized cost basis during the six months ended June 30, 2025, for borrowers experiencing financial difficulty[42](index=42&type=chunk) | Outstanding Loan Commitments (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------------ | :------------ | :---------------- | | Unused lines of credit | $394,352 | $403,029 | | Letters of credit | $3,122 | $3,122 | | Total credit extension commitments | $400,188 | $408,865 | [Note 6 - Leases](index=26&type=section&id=Note%206%20-%20Leases) This note outlines the Company's operating lease activities for branch and back-office operations, detailing Right of Use (ROU) assets and lease liabilities, and future minimum lease payments. Net lease assets and liabilities decreased from December 31, 2024, to June 30, 2025 | Lease Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :---------------- | | Net lease ROU asset | $4,420 | $5,268 | | Net lease liability | $5,033 | $5,872 | - The Company's operating leases have remaining terms ranging from **one to eight years**, including extension options[62](index=62&type=chunk) - The historical weighted average discount rate used for lease calculations was **5.11%** at June 30, 2025[61](index=61&type=chunk) [Note 7 - Goodwill and Intangible Assets](index=28&type=section&id=Note%207%20-%20Goodwill%20and%20Intangible%20Assets) This note details the changes in goodwill, primarily due to a measurement period adjustment related to the IFH acquisition, and provides a summary of acquired amortizing intangible assets and their scheduled amortization | Metric (in thousands) | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :---------------- | | Goodwill | $22,478 | $21,126 | | Total amortized intangible assets (Net Carrying Amount) | $15,295 | $15,817 | - Goodwill increased by **$1.352 million** due to a measurement period adjustment related to the IFH acquisition[64](index=64&type=chunk) - Amortization expense was **$261 thousand** for the three months ended June 30, 2025, and **$522 thousand** for the six months ended June 30, 2025[67](index=67&type=chunk) [Note 8 - Fair Value](index=30&type=section&id=Note%208%20-%20Fair%20Value) This note explains the Company's fair value measurement hierarchy (Level 1, 2, 3) and methods used for various financial instruments, including investment securities, loans held for sale, loan servicing assets, and individually evaluated loans for credit loss. Most recurring fair value measurements are categorized as Level 1 or Level 2 - The Company categorizes financial instruments measured at fair value into Level 1 (quoted prices in active markets), Level 2 (significant other observable inputs), and Level 3 (significant unobservable inputs)[70](index=70&type=chunk)[71](index=71&type=chunk) | Recurring Fair Value Measurements (June 30, 2025, in thousands) | Total | Level 1 | Level 2 | Level 3 | | :------------------------------------------------- | :---- | :------ | :------ | :------ | | Investment securities available-for-sale | $228,923 | $135,501 | $93,422 | $0 | | Loans held for sale | $20,925 | $0 | $20,925 | $0 | | Loan servicing assets | $2,221 | $0 | $2,221 | $0 | - Individually evaluated loans for credit loss, measured on a nonrecurring basis, totaled **$33.366 million** at June 30, 2025, and are categorized as Level 3 fair values[80](index=80&type=chunk)[82](index=82&type=chunk) [Note 9 - Segments](index=34&type=section&id=Note%209%20-%20Segments) This note identifies the Company's four reportable segments—Commercial Banking, OpenSky™, Windsor Advantage™, and Capital Bank Home Loans (CBHL)—and provides detailed financial performance and asset information for each segment, highlighting the impact of the IFH acquisition on segment reporting - The Company's four reportable segments are Commercial Banking, OpenSky™, Windsor Advantage™, and Capital Bank Home Loans (CBHL)[94](index=94&type=chunk) | Segment Performance (Three Months Ended June 30, 2025, in thousands) | Net Income (Loss) Before Taxes | Total Assets | | :---------------------------------------------------- | :----------------------------- | :----------- | | Commercial Bank | $13,821 | $3,211,421 | | OpenSky™ | $2,790 | $129,397 | | Windsor Advantage™ | $1,166 | $25,936 | | CBHL | $(678) | $21,908 | | Segment Performance (Six Months Ended June 30, 2025, in thousands) | Net Income (Loss) Before Taxes | Total Assets | | :---------------------------------------------------- | :----------------------------- | :----------- | | Commercial Bank | $28,804 | $3,211,421 | | OpenSky™ | $5,865 | $129,397 | | Windsor Advantage™ | $2,112 | $25,936 | | CBHL | $(1,385) | $21,908 | - The Corporate reportable segment was restructured prior to January 1, 2025, with its activities now associated with the Commercial Bank for comparability[99](index=99&type=chunk) [Note 10 - Subsequent Events](index=40&type=section&id=Note%2010%20-%20Subsequent%20Events) This note reports the Board of Directors' declaration of a $0.12 per share dividend in July 2025, representing a 20% increase from the prior quarterly dividend - In July 2025, the Board of Directors declared a **$0.12 per share dividend**, a **20% increase** from the prior quarterly dividend, payable on August 27, 2025[112](index=112&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&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, offering insights into net income drivers, interest income and margin analysis, credit loss provisions, noninterest income and expenses, income tax, and overall financial health. It also includes reconciliations of non-GAAP financial measures [PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT](index=41&type=section&id=PRIVATE%20SECURITIES%20LITIGATION%20REFORM%20ACT%20SAFE%20HARBOR%20STATEMENT) This statement serves as a cautionary note regarding forward-looking statements within the report, emphasizing that such statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from projections - The report contains forward-looking statements that are subject to risks and uncertainties, including general economic conditions, geopolitical events, regulatory changes, and operational risks[115](index=115&type=chunk)[116](index=116&type=chunk)[121](index=121&type=chunk) - Readers are advised to consider risk factors detailed in Item 1A of the Annual Report on Form 10-K for December 31, 2024, and other SEC filings[119](index=119&type=chunk) [Critical Accounting Estimates](index=44&type=section&id=Critical%20Accounting%20Estimates) This section states that the Company's financial statements are prepared in accordance with GAAP, requiring management estimates and judgments that can materially affect reported amounts. Critical accounting policies are discussed in the Annual Report on Form 10-K - The Company's financial position and results of operations are affected by management's application of GAAP, including estimates, assumptions, and judgments[122](index=122&type=chunk) - Significant accounting policies are discussed in detail in Note 1 of the Company's Annual Report on Form 10-K for the year ended December 31, 2024[123](index=123&type=chunk) [Overview](index=44&type=section&id=Overview) This overview reaffirms Capital Bancorp, Inc. as a Maryland-based bank holding company operating through Capital Bank, N.A., with four divisions: Commercial Banking, OpenSky™, Windsor Advantage™, and Capital Bank Home Loans (CBHL). It also mentions the recent IFH acquisition and the Bank's 'well capitalized' status - Capital Bancorp, Inc. operates primarily through Capital Bank, N.A., with four divisions: Commercial Banking, OpenSky™, Windsor Advantage™, and Capital Bank Home Loans (CBHL)[124](index=124&type=chunk)[125](index=125&type=chunk) - The Company completed its acquisition of Integrated Financial Holdings, Inc. (IFH) on October 1, 2024[125](index=125&type=chunk) - As of June 30, 2025, the Company and the Bank were in compliance with all applicable regulatory capital requirements, and the Bank was classified as 'well capitalized'[128](index=128&type=chunk) [Results of Operations](index=45&type=section&id=Results%20of%20Operations) This section analyzes the Company's operational performance, highlighting significant increases in net income, net interest income, and noninterest income, largely driven by organic growth and the IFH acquisition. It also details changes in credit loss provisions and noninterest expenses [Non-GAAP Financial Measures](index=45&type=section&id=Non-GAAP%20Financial%20Measures) This sub-section explains that non-GAAP financial measures are used by management to evaluate operating performance and enhance comparability, while cautioning investors to consider them alongside GAAP results due to potential calculation differences - Non-GAAP financial measures are used by management to evaluate operating performance and increase comparability of period-to-period results[129](index=129&type=chunk) - Investors are cautioned not to place undue reliance on non-GAAP measures but to consider them with the most directly comparable GAAP measures[130](index=130&type=chunk) [Net Income](index=46&type=section&id=Net%20Income) Net income saw substantial growth for both the three and six months ended June 30, 2025, primarily due to organic growth and the IFH acquisition, with significant increases in net interest income and noninterest income | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | | Net income | $13,136 | $8,205 | 60.1% | | Net interest income | $47,646 | $37,057 | 28.6% | | Noninterest income | $13,106 | $6,890 | 90.2% | | Noninterest expenses | $39,572 | $29,493 | 34.2% | | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | | Net income | $27,068 | $14,767 | 83.3% | | Net interest income | $93,693 | $72,065 | 30.0% | | Noninterest income | $25,655 | $12,862 | 99.5% | | Noninterest expenses | $77,625 | $58,980 | 31.6% | - Net income, adjusted to exclude merger-related expenses (non-GAAP), was **$14.2 million** for Q2 2025, up from **$8.3 million** in Q2 2024[133](index=133&type=chunk) [Net Interest Income and Net Margin Analysis](index=47&type=section&id=Net%20Interest%20Income%20and%20Net%20Margin%20Analysis) This analysis focuses on the Company's net interest income, net interest margin, and net interest spread. While the overall net interest margin decreased due to the IFH acquisition, the Commercial Bank's net interest margin improved, and interest income benefited significantly from volume growth in earning assets | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Change (bps) | | :-------------------- | :------------------------------- | :------------------------------- | :----------- | | Net interest margin | 6.04% | 6.46% | (42) | | Commercial Bank net interest margin (non-GAAP) | 4.36% | 3.90% | 46 | | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | Change (bps) | | :-------------------- | :------------------------------- | :------------------------------- | :----------- | | Net interest margin | 6.04% | 6.35% | (31) | | Commercial Bank net interest margin (non-GAAP) | 4.33% | 3.84% | 49 | - Average interest earning assets increased by **$856.4 million (37.1%)** to **$3.2 billion** for the three months ended June 30, 2025, compared to the same period in 2024[148](index=148&type=chunk) - Volume growth in the loan portfolio (excluding credit card loans) contributed **$13.1 million** to the increase in interest income for Q2 2025[154](index=154&type=chunk) [Provision for Credit Losses](index=51&type=section&id=Provision%20for%20Credit%20Losses) The provision for credit losses increased for both the three and six months ended June 30, 2025, primarily due to higher OpenSky™ volumes and specific reserves for collateral-dependent loans. Net charge-offs also rose significantly | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | | Provision for credit losses | $4,081 | $3,417 | 19.4% | | Net charge-offs (annualized % of average portfolio loans) | 0.75% | 0.39% | 92.3% | | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | | Provision for credit losses | $6,327 | $6,144 | 3.0% | | Net charge-offs (annualized % of average portfolio loans) | 0.57% | 0.40% | 42.5% | - The increase in provision for credit losses for Q2 2025 was primarily driven by **$0.6 million** higher provision from OpenSky™ due to higher volumes in the secured and unsecured portfolio[157](index=157&type=chunk) - The Allowance for Credit Losses (ACL) as a percent of portfolio loans decreased to **1.73%** at June 30, 2025, from **1.85%** at December 31, 2024[158](index=158&type=chunk) [Noninterest Income](index=51&type=section&id=Noninterest%20Income) Noninterest income significantly increased for both the three and six months ended June 30, 2025, primarily due to contributions from the IFH acquisition, particularly in government loan servicing and lending revenue. Credit card fees remained stable, while mortgage banking revenue saw a slight decline | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | | Total noninterest income | $13,106 | $6,890 | 90.2% | | Government loan servicing and packaging revenue | $3,644 | $0 | 100.0% | | Government lending revenue | $3,112 | $0 | 100.0% | | Credit card fees | $4,298 | $4,330 | (0.7%) | | Mortgage banking revenue | $1,754 | $1,990 | (11.9%) | | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | | Total noninterest income | $25,655 | $12,862 | 99.5% | | Government loan servicing and packaging revenue | $7,212 | $0 | 100.0% | | Government lending revenue | $4,208 | $0 | 100.0% | | Credit card fees | $8,020 | $8,211 | (2.3%) | | Mortgage banking revenue | $3,585 | $3,443 | 4.1% | - The increase in noninterest income was primarily due to contributions from the businesses acquired through the IFH acquisition[160](index=160&type=chunk) - The reserve for potential losses on mortgage loans sold was **$2.3 million** at June 30, 2025, with no repurchases during the six months ended June 30, 2025[164](index=164&type=chunk)[165](index=165&type=chunk) [Noninterest Expense](index=53&type=section&id=Noninterest%20Expense) Noninterest expenses increased substantially for both the three and six months ended June 30, 2025, driven mainly by higher salaries and employee benefits, merger-related expenses, and occupancy costs, partially offset by a decrease in advertising expenses | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | | Total noninterest expense | $39,572 | $29,493 | 34.2% | | Salaries and employee benefits | $18,460 | $13,272 | 39.1% | | Merger-related expenses | $1,398 | $83 | 1584.3% | | Occupancy and equipment | $2,995 | $1,864 | 60.7% | | Advertising | $1,371 | $2,072 | (33.8%) | | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | | Total noninterest expense | $77,625 | $58,980 | 31.6% | | Salaries and employee benefits | $36,527 | $26,179 | 39.5% | | Merger-related expenses | $2,664 | $795 | 235.1% | | Occupancy and equipment | $5,905 | $3,477 | 69.8% | | Advertising | $3,150 | $4,104 | (23.2%) | [Income Tax Expense](index=53&type=section&id=Income%20Tax%20Expense) Income tax expense increased for both the three and six months ended June 30, 2025, but the effective tax rate decreased. This reduction was attributed to lower non-deductible merger and equity compensation costs, coupled with increased benefits from tax optimization strategies | Metric (in thousands) | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | | Income tax expense | $3,963 | $2,728 | 45.3% | | Effective tax rate | 23.2% | 25.0% | (1.8 pp) | | Metric (in thousands) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | % Change | | :-------------------- | :------------------------------- | :------------------------------- | :------- | | Income tax expense | $8,328 | $4,790 | 73.9% | | Effective tax rate | 23.5% | 24.5% | (1.0 pp) | - The decrease in the effective tax rate was due to a reduction in non-deductible merger and equity compensation costs, along with an increase in benefits from tax optimization strategies, including investments eligible for Low Income Housing Tax Credits[171](index=171&type=chunk) [Financial Condition](index=54&type=section&id=Financial%20Condition) This section provides a comprehensive review of the Company's financial condition, detailing changes in assets, liabilities, and equity. It covers investment securities, the loan portfolio, nonperforming assets, allowance for credit losses, deposits, borrowings, liquidity, and capital resources [Summary of Financial Condition](index=54&type=section&id=Summary%20of%20Financial%20Condition) A high-level overview of the Company's financial position shows increases in total assets, portfolio loans, deposits, and stockholders' equity from December 31, 2024, to June 30, 2025, alongside an increase in tangible book value per share | Metric (in thousands, except per share data) | June 30, 2025 | December 31, 2024 | $ Change | % Change | | :----------------------------------------- | :------------ | :---------------- | :------- | :------- | | Total assets | $3,388,662 | $3,206,911 | $181,751 | 5.7% | | Portfolio loans receivable, net of deferred fees and costs | $2,739,808 | $2,630,163 | $109,645 | 4.2% | | Deposits | $2,940,738 | $2,761,939 | $178,799 | 6.5% | | Total stockholders' equity | $380,035 | $355,139 | $24,896 | 7.0% | | Tangible book value per share | $20.64 | $19.10 | N/A | 8.1% | [Investment Securities](index=54&type=section&id=Investment%20Securities) The Company's investment strategy focuses on U.S. Treasuries, MBS, government agency bonds, asset-backed securities, and high-quality municipal and corporate bonds to manage liquidity and supplement interest income. Management confirmed no credit-related declines in fair value for these securities - The Company invests in U.S. Treasuries, high-quality mortgage-backed securities (MBS), government agency bonds, asset-backed securities, and high-quality municipal and corporate bonds[174](index=174&type=chunk) - Management determined there were no credit-related declines in fair value for available-for-sale debt securities in an unrealized loss position at June 30, 2025[177](index=177&type=chunk)[179](index=179&type=chunk) - All municipal bonds held by the Company were investment grade at June 30, 2025 (**AAA - 76%**, **AA+ - 24%**)[178](index=178&type=chunk) [Portfolio Loans Receivable](index=55&type=section&id=Portfolio%20Loans%20Receivable) The Company's loan portfolio consists primarily of real estate, commercial and industrial, and credit card loans. It provides details on the contractual maturities and rate characteristics of these loans, along with LTV ratios for commercial real estate segments - The loan portfolio includes residential, commercial, and construction real estate loans, commercial and industrial loans, and credit card loans[180](index=180&type=chunk) - Credit card loans are offered nationwide through the OpenSky™ division, with approximately **$86.4 million** in secured and partially secured balances protected by savings deposits at June 30, 2025[187](index=187&type=chunk) | Contractual Maturities of Portfolio Loans (June 30, 2025, in thousands) | Amount | | :----------------------------------------------------- | :----- | | One Year or Less | $1,031,795 | | One to Five Years | $828,602 | | Five Years to Fifteen Years | $490,563 | | After Fifteen Years | $397,103 | | **Total portfolio loans, gross** | **$2,748,063** | - Non-owner-occupied commercial real estate loans totaled **$495.341 million** with a weighted average LTV of **54.3%** at June 30, 2025. Owner-occupied commercial real estate loans totaled **$436.421 million** with a weighted average LTV of **59.9%**[193](index=193&type=chunk)[195](index=195&type=chunk) [Nonperforming Assets](index=60&type=section&id=Nonperforming%20Assets) This section outlines the Company's policies for classifying nonaccrual loans and charge-offs, along with its credit quality indicators (pass/watch, special mention, substandard, doubtful, loss). It emphasizes proactive credit review and risk management to maintain asset quality - Loans are generally placed on nonaccrual status when **90 days past due** or earlier if collection of principal or interest is in doubt[197](index=197&type=chunk) - Loans are charged off when determined to be uncollectible, typically after **180 days past due** (or **120 days for credit cards**), unless well-secured and in the process of collection[198](index=198&type=chunk) - The Company uses a risk grading matrix to assign credit quality indicators: pass/watch, special mention, substandard, doubtful, or loss[200](index=200&type=chunk) - At June 30, 2025, the recorded investment in individually assessed loans was **$39.8 million**, requiring a specific reserve of **$6.5 million**[204](index=204&type=chunk) [Allowance for Credit Losses](index=61&type=section&id=Allowance%20for%20Credit%20Losses) This section discusses the methodology for maintaining the Allowance for Credit Losses (ACL), which reflects management's estimate of expected credit losses. It presents key ACL ratios and its allocation by loan category, noting a decrease in the overall ACL coverage ratio - The ACL is management's estimate of expected credit losses and risks inherent in the loan portfolio, based on risk classifications, historical loss rates, portfolio changes, and economic factors[205](index=205&type=chunk) | ACL Ratios | June 30, 2025 | December 31, 2024 | | :--------------------------------- | :------------ | :---------------- | | Allowance for credit losses to period end portfolio loans | 1.73% | 1.85% | | Nonaccrual loans to total portfolio loans | 1.32% | 1.15% | | Allowance for credit losses to nonaccrual loans | 131% | 161% | - Total charge-offs for the six months ended June 30, 2025, were primarily comprised of credit card charge-offs, resulting from portfolio aging and the shift to partially secured and unsecured exposures[209](index=209&type=chunk) | ACL Allocation (June 30, 2025, in thousands) | Amount | Percent of Total ACL | | :------------------------------------------- | :----- | :------------------- | | Residential Real Estate | $6,772 | 14% | | Commercial Real Estate | $14,262 | 30% | | Construction | $3,410 | 7% | | Commercial and Industrial | $16,249 | 35% | | Credit Card | $6,749 | 14% | | Other Consumer | $5 | 0% | [Total Liabilities](index=63&type=section&id=Total%20Liabilities) Total liabilities increased from December 31, 2024, to June 30, 2025, primarily driven by growth in the deposit portfolio - Total liabilities increased by **$156.9 million** from December 31, 2024, to June 30, 2025, primarily due to a **$178.8 million** growth in the deposit portfolio[213](index=213&type=chunk) [Deposits](index=63&type=section&id=Deposits) Deposits are a major funding source, with a variety of products offered. Credit card customers contribute significantly to low-cost deposits, and a large portion of deposits are insured or protected | Deposit Category (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------ | :------------ | :---------------- | | Total deposits | $2,940,738 | $2,761,939 | | Noninterest-bearing demand accounts | $836,979 | $810,928 | | Total Interest-bearing deposits | $2,103,759 | $1,951,011 | - Noninterest-bearing deposits represented **28.5%** of total deposits at June 30, 2025[217](index=217&type=chunk) - Credit card customers accounted for **$168.9 million (20.2%)** of total noninterest-bearing deposit balances at June 30, 2025[214](index=214&type=chunk) - Insured and protected deposits were approximately **$2.1 billion (69.9% of the portfolio)** as of June 30, 2025[217](index=217&type=chunk) [Borrowings](index=65&type=section&id=Borrowings) The Company utilizes various short-term and long-term borrowings, including FHLB advances, junior subordinated debentures, and subordinated notes, to supplement deposits and fund its lending and investment activities. Total borrowings remained stable - Total borrowings of **$34.1 million** at June 30, 2025, remained consistent with December 31, 2024[220](index=220&type=chunk) - Outstanding FHLB advances were **$22.0 million** at June 30, 2025, with an available borrowing capacity of **$628.0 million**[221](index=221&type=chunk) - Other borrowed funds amounted to **$12.1 million**, consisting of Floating Rate Junior Subordinated Deferrable Interest Debentures (**$2.1 million**) and subordinated notes (**$10.0 million**)[222](index=222&type=chunk)[223](index=223&type=chunk)[224](index=224&type=chunk) [Liquidity](index=66&type=section&id=Liquidity) Liquidity is managed through a robust risk management process, ensuring the Bank can meet its cash and collateral obligations. Key funding sources include core deposits and various borrowing capacities from FHLB, Federal Reserve, and correspondent banks - The Company maintains an adequate level of liquidity through a risk management process that identifies, measures, monitors, and controls liquidity risk[227](index=227&type=chunk)[228](index=228&type=chunk) - Available borrowing capacity at June 30, 2025, included **$628.0 million** from the FHLB, **$122.6 million** from the Federal Reserve Bank of Richmond, and **$76.0 million** from other correspondent banks[230](index=230&type=chunk) - Cash and cash equivalents totaled **$274.6 million** at June 30, 2025[230](index=230&type=chunk) [Capital Resources](index=66&type=section&id=Capital%20Resources) Stockholders' equity increased due to net income, despite share repurchases. The Company and Bank remain in compliance with all regulatory capital requirements, with the Bank classified as 'well capitalized,' although unrealized losses on investment securities impact accumulated other comprehensive loss - Stockholders' equity increased by **$24.9 million** for the period ended June 30, 2025, primarily due to net income of **$27.1 million**[231](index=231&type=chunk) - The Company repurchased **93,170 shares** in Q2 2025 for **$2.5 million**, with **$11.9 million** remaining under the authorized stock repurchase plan[231](index=231&type=chunk) - Accumulated other comprehensive loss related to unrealized losses on available-for-sale debt securities (net of deferred income tax) amounted to **$8.1 million** at June 30, 2025[232](index=232&type=chunk) - Both the Company and the Bank were in compliance with all applicable regulatory capital requirements and the Bank was classified as 'well capitalized' at June 30, 2025[237](index=237&type=chunk) | Company Regulatory Capital Ratios (June 30, 2025) | Actual Ratio | Minimum Capital Adequacy | To Be Well Capitalized | | :------------------------------------------------ | :----------- | :----------------------- | :--------------------- | | Tier 1 leverage ratio | 10.90% | 4.00% | 5.00% | | Tier 1 capital ratio | 13.66% | 6.00% | 8.00% | | Common equity tier 1 capital ratio | 13.58% | 4.50% | 6.50% | | Total capital ratio | 15.30% | 8.00% | 10.00% | [Contractual Obligations](index=68&type=section&id=Contractual%20Obligations) The Company has contractual obligations related to debt and lease agreements, which are continuously monitored and managed as part of its liquidity strategy - The Company has contractual obligations to make future payments on debt and lease agreements[241](index=241&type=chunk) - These obligations are considered in the Company's liquidity monitoring and management[241](index=241&type=chunk) [Off-Balance Sheet Items](index=68&type=section&id=Off-Balance%20Sheet%20Items) The Company engages in off-balance sheet transactions, primarily commitments to extend credit and issue letters of credit, which involve credit and interest rate risks. These are managed with the same rigorous credit policies as on-balance sheet instruments - Off-balance sheet items include commitments to extend credit and issue letters of credit, which carry elements of credit risk and interest rate risk[242](index=242&type=chunk) - The Company's exposure to credit loss is represented by the contractual amounts of these commitments, which are subject to the same credit policies as on-balance sheet instruments[242](index=242&type=chunk)[245](index=245&type=chunk) | Total Credit Extension Commitments (in thousands) | June 30, 2025 | December 31, 2024 | | :------------------------------------------------ | :------------ | :---------------- | | Unfunded lines of credit | $394,352 | $403,029 | | Letters of credit | $3,122 | $3,122 | | Commitment to fund other investments | $2,714 | $2,714 | | **Total** | **$400,188** | **$408,865** | [Impact of Inflation](index=69&type=section&id=Impact%20of%20Inflation) Given that most of the Company's assets and liabilities are monetary, interest rates have a more significant impact on its performance than general inflation, although operating expenses are sensitive to inflationary changes - Interest rates have a more significant impact on the Company's performance than the effects of general levels of inflation, as substantially all assets and liabilities are monetary in nature[249](index=249&type=chunk) - Most other operating expenses are sensitive to changes in levels of inflation[249](index=249&type=chunk) [Non-GAAP Financial Measures and Reconciliations](index=69&type=section&id=Non-GAAP%20Financial%20Measures%20and%20Reconciliations) This section provides detailed reconciliations of various non-GAAP financial measures, including Core Net Income, Core EPS, Core Return on Average Assets/Equity, Core Efficiency Ratio, Commercial Bank Net Interest Margin/Loan Yield, PPNR, and Tangible Book Value per Share, to their most directly comparable GAAP measures | Core Earnings Metrics (in thousands, except per share data) | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------------------------------- | :----------------------------- | :----------------------------- | | Net Income | $27,068 | $14,767 | | Add: Merger-Related Expenses, net of tax | $2,034 | $600 | | **Core Net Income** | **$29,102** | **$15,367** | | Earnings per share - Diluted | $1.60 | $1.06 | | **Core Earnings per share - Diluted** | **$1.72** | **$1.10** | | Return on Average Assets | 1.68% | 1.28% | | **Core Return on Average Assets** | **1.80%** | **1.33%** | | Efficiency Ratio | 65.04% | 69.45% | | **Core Efficiency Ratio** | **62.81%** | **68.51%** | | Commercial Bank Net Interest Margin | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :----------------------------- | :----------------------------- | | Commercial Bank Net Interest Margin | 4.33% | 3.84% | | Commercial Bank Portfolio Loans Receivable Yield | 7.14% | 7.00% | | Tangible Book Value per Share (in thousands, except share and per share data) | June 30, 2025 | December 31, 2024 | | :-------------------------------------------------------------------------- | :------------ | :---------------- | | Tangible Common Equity | $342,262 | $318,196 | | Period End Shares Outstanding | 16,581,990 | 16,662,626 | | **Tangible Book Value per Share** | **$20.64** | **$19.10** | | Return on Average Tangible Common Equity (Six Months Ended June 30, 2025) | 16.82% | 11.37% | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=73&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section addresses the Company's primary market risk, interest rate volatility, and how it is managed through balance sheet structuring and oversight by the Asset/Liability Management Committee (ALCO). It presents results from Earnings at Risk (EAR) and Economic Value of Equity (EVE) simulations under various interest rate shock scenarios - The Company's primary component of market risk is interest rate volatility, managed by the Bank's Asset/Liability Management Committee (ALCO) through balance sheet structuring[264](index=264&type=chunk)[267](index=267&type=chunk) - The Company does not enter into leveraged derivatives, financial options, or financial futures contracts for the purpose of reducing interest rate risk[266](index=266&type=chunk) - At June 30, 2025, the Company was in an asset-sensitive position for periods less than one year, with rate-sensitive assets exceeding rate-sensitive liabilities[268](index=268&type=chunk)[271](index=271&type=chunk) | Earnings at Risk (June 30, 2025) | -400 bps | -300 bps | -200 bps | -100 bps | Flat | +100 bps | +200 bps | +300 bps | +400 bps | | :------------------------------- | :------- | :------- | :------- | :------- | :--- | :------- | :------- | :------- | :------- | | Impact on Net Interest Income (12-month horizon) | (13.6)% | (10.3)% | (7.3)% | (3.8)% | 0.0% | 4.1% | 8.2% | 12.1% | 16.1% | | Economic Value of Equity (June 30, 2025) | -400 bps | -300 bps | -200 bps | -100 bps | Flat | +100 bps | +200 bps | +300 bps | +400 bps | | :--------------------------------------- | :------- | :------- | :------- | :------- | :--- | :------- | :------- | :------- | :------- | | Impact on Economic Value of Equity | (25.3)% | (15.4)% | (8.0)% | (3.2)% | 0.0% | 2.0% | 3.1% | 4.6% | 5.7% | [Item 4. Controls and Procedures](index=76&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of the Company's disclosure controls and procedures, concluding they were effective as of June 30, 2025. No material changes to internal control over financial reporting were reported during the quarter - The Principal Executive Officer and Principal Financial Officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2025[277](index=277&type=chunk) - There have been no material changes in the Company's internal control over financial reporting during the fiscal quarter ended June 30, 2025[278](index=278&type=chunk) PART II - OTHER INFORMATION This section provides additional information including legal proceedings, risk factors, equity sales, defaults, mine safety, other disclosures, and a list of exhibits [Item 1. LEGAL PROCEEDINGS.](index=77&type=section&id=Item%201.%20LEGAL%20PROCEEDINGS.) The Company is not currently involved in any legal proceedings that are expected to have a material adverse impact on its results of operations or financial condition - The Company is not presently a party to any legal proceedings which are believed to have a material adverse impact on its results of operations or financial condition[279](index=279&type=chunk) [Item 1A. RISK FACTORS.](index=77&type=section&id=Item%201A.%20RISK%20FACTORS.) There are no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 - There are no material changes to the risk factors as previously disclosed under Item 1A in the Annual Report on Form 10-K for the year ended December 31, 2024[280](index=280&type=chunk) [Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.](index=78&type=section&id=Item%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS.) This section reports no unregistered sales of equity securities and details the Company's stock repurchase program, including shares repurchased during the quarter and the remaining authorization - There were no unregistered sales of the Company's stock during the year-to-date period ended June 30, 2025[281](index=281&type=chunk) - The Company is authorized to repurchase up to **$15 million** (or **483,559 shares**) of its Common Stock under a program expiring on February 28, 2026[282](index=282&type=chunk) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | | :------------------------------ | :----------------------------- | :--------------------------- | | April 1, 2025 to April 30, 2025 | 93,170 | $26.66 | - As of June 30, 2025, **$11.9 million** remained authorized for repurchase under the stock repurchase program[284](index=284&type=chunk) [Item 3. DEFAULTS UPON SENIOR SECURITIES.](index=79&type=section&id=Item%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES.) The Company reported no defaults upon senior securities during the period - There were no defaults upon senior securities[285](index=285&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's operations - Mine Safety Disclosures are not applicable to the Company[286](index=286&type=chunk) [Item 5. OTHER INFORMATION.](index=79&type=section&id=Item%205.%20OTHER%20INFORMATION.) During the quarter ended June 30, 2025, no officer or director of the Company adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements - No officer or director adopted or terminated any Rule 10b5-1 trading plans or non-Rule 10b5-1 trading arrangements during the quarter ended June 30, 2025[287](index=287&type=chunk) [Item 6. EXHIBITS.](index=79&type=section&id=Item%206.%20EXHIBITS.) This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including merger agreements, organizational documents, employment agreements, and various certifications - Exhibits include the Agreement and Plan of Merger and Reorganization (2.1), Amended and Restated Articles of Incorporation (3.1), Amended and Restated Bylaws (3.2), Employment Agreements (10.1, 10.2), Rule 13a-14(a) Certifications (31.1, 31.2), Section 1350 Certification (32.1), and XBRL financial statements (101, 104)[288](index=288&type=chunk)

Interpace Biosciences Q2 2025 Financial and Business Results [Business & Financial Highlights](index=1&type=section&id=Business%20%26%20Financial%20Highlights) The company is transitioning to a thyroid testing focus, with Q2 2025 revenue impacted by PancraGEN wind-down, but showing strong July 2025 growth - The company is transitioning to a business focused solely on **Thyroid testing** following the loss of reimbursement for its PancraGEN test[2](index=2&type=chunk)[3](index=3&type=chunk) - The reported loss includes **$1.2 million** in one-time charges associated with the wind-down of the PancraGEN business[2](index=2&type=chunk)[5](index=5&type=chunk) - The core Thyroid testing business demonstrated significant year-over-year growth in Q2, with **double-digit increases** in both volume and revenue[3](index=3&type=chunk)[4](index=4&type=chunk) - Positive momentum continued into Q3, with preliminary revenue for July 2025 reaching **$3.3 million**, a **54% increase** compared to July 2024[2](index=2&type=chunk) [Second Quarter 2025 Financial Performance](index=1&type=section&id=Second%20Quarter%202025%20Financial%20Performance) Q2 2025 net revenue decreased to $9.2 million, resulting in an operating loss, primarily due to PancraGEN reimbursement loss, despite strong Thyroid segment growth Q2 2025 vs. Q2 2024 Financial Comparison | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $9.2 million | $12.0 million | -23% | | Thyroid Revenue | $8.7 million | Not specified | +25% | | Thyroid Test Volume | Record levels | Not specified | +16% | | Gross Profit % | 57% | 65% | -8 p.p. | | Operating (Loss) Income | ($0.5 million) | $2.6 million | - | | Loss from Continuing Ops | ($0.5 million) | $2.5 million (Income) | - | | Adjusted EBITDA | $0.4 million | $2.8 million | -85.7% | | Cash Collections | $10.8 million | $11.0 million | -1.8% | - Excluding the one-time impact from the PancraGEN reimbursement loss, the Gross Profit percentage would have been **65%**, consistent with the prior year quarter[5](index=5&type=chunk) [Financial Statements](index=3&type=section&id=Financial%20Statements) The consolidated financial statements show a Q2 2025 net loss, reduced assets and liabilities, and positive operating cash flow offset by financing activities [Condensed Consolidated Statements of Operations](index=3&type=section&id=CONDENSED%20CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) Interpace reported a Q2 2025 net loss of $640,000, a reversal from prior year income, driven by revenue decline and increased operating expenses Statement of Operations Highlights (in thousands) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenue, net | $9,232 | $12,042 | $20,747 | $22,219 | | Gross Profit | $5,276 | $7,806 | $12,646 | $14,117 | | Operating (loss) income | $(468) | $2,632 | $1,362 | $3,746 | | (Loss) income from continuing operations | $(533) | $2,511 | $1,221 | $3,323 | | Net (loss) income | $(640) | $2,437 | $1,007 | $3,145 | [Selected Balance Sheet Data](index=4&type=section&id=Selected%20Balance%20Sheet%20Data) As of June 30, 2025, cash and cash equivalents decreased to $502 thousand, with total assets and liabilities also reduced, while the stockholders' deficit improved Balance Sheet Highlights (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $502 | $1,461 | | Total current assets | $9,504 | $11,773 | | Total assets | $12,335 | $14,792 | | Total current liabilities | $7,149 | $10,615 | | Total liabilities | $13,548 | $17,009 | | Total stockholders' deficit | $(1,213) | $(2,217) | [Selected Cash Flow Data](index=4&type=section&id=Selected%20Cash%20Flow%20Data) For the six months ended June 30, 2025, net cash provided by operating activities was $1,755 thousand, offset by financing activities, resulting in a net decrease in cash Cash Flow Highlights for Six Months Ended June 30 (in thousands) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,755 | $1,346 | | Net cash used in investing activities | $(201) | $(225) | | Net cash used in financing activities | $(2,513) | $(2,600) | | Change in cash and cash equivalents | $(959) | $(1,479) | [Non-GAAP Financial Measures](index=5&type=section&id=Non-GAAP%20Financial%20Measures) Adjusted EBITDA, a non-GAAP measure, significantly decreased to $365 thousand in Q2 2025, reflecting adjustments for severance and asset impairment related to the PancraGEN wind-down - Adjusted EBITDA is used by management to measure the cash flow of the ongoing business, defined as income/loss from continuing operations adjusted for specific non-cash and non-recurring items[21](index=21&type=chunk) Reconciliation of Adjusted EBITDA (in thousands) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | (Loss) income from continuing operations (GAAP) | $(533) | $2,511 | $1,221 | $3,323 | | Severance & related expense | $524 | $ - | $692 | $ - | | Asset impairment - lab supplies | $198 | $ - | $198 | $ - | | Adjusted EBITDA (Non-GAAP) | $365 | $2,752 | $2,472 | $3,997 | [Company Overview](index=2&type=section&id=About%20Interpace%20Biosciences) Interpace Biosciences specializes in personalized medicine, offering molecular diagnostic tests and pathology services for cancer risk assessment, including commercialized tests for thyroid and lung cancer - Interpace offers specialized services in **personalized medicine**, focusing on diagnosis and prognostic planning for cancer[6](index=6&type=chunk) - The company has three commercialized molecular tests: **ThyGeNEXT**, **ThyraMIRv2** (for thyroid cancer), and **RespriDX** (for lung cancer)[7](index=7&type=chunk) [Forward-Looking Statements](index=2&type=section&id=Forward-looking%20Statements) This section contains forward-looking statements subject to risks and uncertainties, including the company's history of losses, financing needs, and dependence on clinical service reimbursements - The press release contains forward-looking statements regarding future financial and operating performance, which are subject to significant risks and uncertainties[9](index=9&type=chunk) - Key risks include the company's history of operating losses, ability to finance its business, dependence on clinical service reimbursements, and the impact of the PancraGEN product reimbursement loss[9](index=9&type=chunk)

[Special Note Regarding Forward-Looking Statements](index=4&type=section&id=Special%20Note%20Regarding%20Forward-Looking%20Statements) Forward-looking statements are subject to numerous risks and uncertainties that may cause actual results to differ materially - Forward-looking statements in this report are subject to numerous known and unknown risks, uncertainties, assumptions, and changes in circumstances that may cause actual results to differ materially from those expressed. There are no guarantees that described transactions or events will occur as anticipated[10](index=10&type=chunk)[12](index=12&type=chunk) - Key factors that could cause actual results to differ include the ability to retain and add users, regulatory compliance, cybersecurity, strategic transactions, talent retention, economic conditions, competition, technology adaptation, adoption of AI/ML, dependence on third-party systems, intellectual property protection, stock ownership concentration, share repurchases, and macroeconomic/geopolitical events[13](index=13&type=chunk) [PART I. FINANCIAL INFORMATION](index=7&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements and related disclosures [Item 1. Financial Statements (Unaudited)](index=7&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents Grindr Inc.'s unaudited condensed consolidated financial statements and detailed notes [Condensed Consolidated Balance Sheets](index=7&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This section details the company's financial position, presenting assets, liabilities, and equity at specific dates Condensed Consolidated Balance Sheets (in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Cash and cash equivalents | $120,825 | $59,152 | | Accounts receivable, net | $57,085 | $49,599 | | Total current assets | $189,345 | $116,984 | | Total assets | $547,620 | $479,090 | | Accounts payable | $1,769 | $3,261 | | Accrued expenses and other current liabilities | $37,886 | $29,578 | | Deferred revenue | $21,769 | $19,970 | | Total current liabilities | $76,424 | $67,809 | | Long-term debt, net | $268,463 | $275,580 | | Warrant liability | $— | $252,178 | | Total liabilities | $359,930 | $610,660 | | Total stockholders' equity (deficit)| $187,690 | $(131,570) | [Condensed Consolidated Statements of Operations](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This section details the company's financial performance, including revenues, expenses, and net income or loss Condensed Consolidated Statements of Operations (in thousands, except per share data) | 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 | | :-------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $104,220 | $82,345 | $198,158 | $157,690 | | Cost of revenue | $27,408 | $20,999 | $51,950 | $40,619 | | Selling, general and administrative expense | $36,457 | $24,802 | $66,697 | $51,411 | | Product development expense | $12,941 | $7,754 | $23,228 | $13,495 | | Depreciation and amortization | $3,068 | $4,235 | $6,545 | $8,354 | | Total operating expenses | $79,874 | $57,790 | $148,420 | $113,879 | | Income from operations | $24,346 | $24,555 | $49,738 | $43,811 | | Interest expense, net | $(3,564) | $(6,669) | $(7,439) | $(13,854) | | Other income (expense), net | $510 | $(227) | $658 | $(344) | | Gain (loss) in fair value of warrant liability | $— | $(35,118) | $9,905 | $(53,798) | | Net income (loss) before income tax | $21,292 | $(17,459) | $52,862 | $(24,185) | | Income tax provision | $4,654 | $4,965 | $9,205 | $7,645 | | Net income (loss) | $16,638 | $(22,424) | $43,657 | $(31,830) | | Basic EPS | $0.08 | $(0.13) | $0.23 | $(0.18) | | Diluted EPS | $0.08 | $(0.13) | $0.17 | $(0.18) | [Condensed Consolidated Statements of Stockholders' Equity (Deficit)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Deficit)) This section tracks changes in the company's equity, reflecting net income, stock compensation, and share transactions Condensed Consolidated Statements of Stockholders' Equity (Deficit) (in thousands, except share data) | Metric | Balance at December 31, 2024 | Net Income | Stock-based Compensation | Exercise of Warrants | Repurchase and Retirement of Common Stock | Balance at June 30, 2025 | | :-------------------------------- | :--------------------------- | :--------- | :----------------------- | :------------------- | :---------------------------------------- | :----------------------- | | Common Stock (shares) | 178,567,403 | — | 770,713 (vested RSUs) | 30,733,623 | (15,995,957) | 195,498,498 | | Common Stock (amount) | $18 | — | — | $3 | $(2) | $19 | | Treasury Stock (amount) | $(14,295) | — | — | — | $(15,473) | $(29,768) | | Additional paid-in capital | $74,519 | — | $14,689 | $556,337 | $(294,125) | $365,594 | | Accumulated deficit | $(191,812) | $43,657 | — | — | — | $(148,155) | | Total stockholders' equity (deficit)| $(131,570) | $43,657 | $14,689 | $556,340 | $(309,598) | $187,690 | [Condensed Consolidated Statements of Cash Flows](index=11&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This section details cash flows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net income (loss) | $43,657 | $(31,830) | | Stock-based compensation | $27,476 | $15,590 | | (Gain) loss in fair value of warrant liability | $(9,905) | $53,798 | | Depreciation and amortization | $6,545 | $8,354 | | Net cash provided by operating activities | $61,311 | $36,299 | | Net cash used in investing activities | $(1,508) | $(2,844) | | Proceeds from the exercise of warrants | $314,124 | $— | | Repurchases of common stock under the stock repurchase program | $(290,667) | $— | | Principal payments on debt | $(7,500) | $(43,300) | | Net cash provided by (used in) financing activities | $1,870 | $(45,503) | | Net increase (decrease) in cash, cash equivalents and restricted cash | $61,673 | $(12,048) | | Cash, cash equivalents and restricted cash, end of the period | $121,430 | $16,950 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed explanations of accounting policies and specific line items in the financial statements [Note 1. Nature of Business](index=13&type=section&id

[Part I. Financial Information](index=7&type=section&id=Part%20I.%20Financial%20Information) Presents the company's unaudited financial statements and management's analysis of financial condition and operational results [Item 1. Financial Statements](index=7&type=section&id=Item%201.%20Financial%20Statements) Presents unaudited condensed consolidated financial statements for the periods ended June 30, 2025, and December 31, 2024 [Condensed Consolidated Balance Sheets (Unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) Shows significant growth in total assets and liabilities, driven by increases in digital assets and property, plant, and equipment Condensed Consolidated Balance Sheets (in thousands): | Metric | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------------- | :------------ | :---------------- | :--------- | :--------- | | Total Current Assets | $1,004,760 | $903,962 | $100,798 | 11.15% | | Property, plant and equipment, net | $828,603 | $556,342 | $272,261 | 48.94% | | Total Assets | $1,978,052 | $1,598,815 | $379,237 | 23.72% | | Total Current Liabilities | $562,722 | $134,562 | $428,160 | 318.20% | | Total Liabilities | $3,042,728 | $2,418,995 | $623,733 | 25.79% | | Total Stockholders' Deficit | $(1,064,676) | $(820,180) | $(244,496) | 29.81% | - The company's digital assets significantly increased from **$23.9 million** at December 31, 2024, to **$172.8 million** at June 30, 2025, reflecting a substantial increase in holdings[20](index=20&type=chunk) - Customer funding receivable and other current assets saw a large increase from **$43.1 million** to **$250.6 million**, indicating increased activity or prepayments from customers[20](index=20&type=chunk) [Condensed Consolidated Statements of Operations (Unaudited)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20(Unaudited)) Reports a significant year-over-year decline in revenue and gross profit, resulting in a substantial operating loss Condensed Consolidated Statements of Operations (in thousands): | Metric | 3 Months Ended June 30, 2025 | 3 Months Ended June 30, 2024 | Change ($) | Change (%) | | :------------------------------------------ | :--------------------------- | :--------------------------- | :--------- | :--------- | | Total revenue | $78,628 | $141,102 | $(62,474) | -44.28% | | Gross profit | $5,025 | $38,817 | $(33,792) | -87.05% | | Operating (loss) income | $(26,284) | $6,579 | $(32,863) | -499.51% | | Net loss | $(936,799) | $(804,896) | $(131,903) | 16.39% | | Net loss per share (basic and diluted) | $(0.04) | $(4.51) | $4.47 | -99.11% | | Metric | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :------------------------------------------ | :--------------------------- | :--------------------------- | :--------- | :--------- | | Total revenue | $158,153 | $320,393 | $(162,240) | -50.64% | | Gross profit | $13,238 | $116,463 | $(103,225) | -88.64% | | Operating (loss) income | $(68,880) | $61,806 | $(130,686) | -211.45% | | Net loss | $(356,106) | $(594,205) | $238,099 | -40.07% | | Net loss per share (basic and diluted) | $(0.21) | $(2.87) | $2.66 | -92.68% | - Digital asset self-mining revenue decreased significantly by **44%** for the three months ended June 30, 2025, and **50%** for the six months ended June 30, 2025, compared to the prior year periods[23](index=23&type=chunk) - Colocation revenue showed strong growth, increasing by **91%** for the three months and **147%** for the six months ended June 30, 2025, reflecting the company's strategic shift[23](index=23&type=chunk) - A substantial increase in the change in fair value of warrants and contingent value rights contributed significantly to the net loss for both periods, reaching **$909.9 million** for the three months and **$288.5 million** for the six months ended June 30, 2025[23](index=23&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Deficit (Unaudited)](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Deficit%20(Unaudited)) Details the increase in stockholders' deficit due to net loss, partially offset by stock-based compensation and warrant exercises Changes in Stockholders' Deficit (in thousands): | Metric | Balance at Dec 31, 2024 | Net Loss (6M 2025) | Stock-Based Comp (6M 2025) | Exercise of Warrants (6M 2025) | Balance at June 30, 2025 | | :---------------------- | :---------------------- | :----------------- | :--------------------------- | :----------------------------- | :----------------------- | | Additional Paid-In Capital | $2,915,035 | — | $40,751 | $70,930 | $3,026,645 | | Accumulated Deficit | $(3,735,218) | $(356,106) | — | — | $(4,091,324) | | Total Stockholders' Deficit | $(820,180) | $(356,106) | $40,751 | $70,930 | $(1,064,676) | - The total stockholders' deficit increased from **$(820.2) million** at December 31, 2024, to **$(1,064.7) million** at June 30, 2025, primarily due to the net loss incurred during the period[25](index=25&type=chunk) - Stock-based compensation and the exercise of warrants contributed to an increase in additional paid-in capital, partially offsetting the accumulated deficit[25](index=25&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=13&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Highlights a shift to negative operating cash flow and significantly increased cash usage in investing activities Condensed Consolidated Statements of Cash Flows (in thousands): | Cash Flow Activity | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | Change ($) | Change (%) | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------- | :--------- | | Net cash (used in) provided by operating activities | $(6,599) | $23,378 | $(29,977) | -128.23% | | Net cash used in investing activities | $(213,066) | $(35,154) | $(177,912) | 506.12% | | Net cash (used in) provided by financing activities | $(35,970) | $39,172 | $(75,142) | -191.84% | | Net (decrease) increase in cash, cash equivalents and restricted cash | $(255,635) | $27,396 | $(283,031) | -1033.16% | | Cash, cash equivalents and restricted cash—end of period | $581,345 | $97,105 | $484,240 | 498.68% | - Operating activities shifted from providing **$23.4 million** in cash in H1 2024 to using **$6.6 million** in H1 2025, primarily due to a decrease from the bitcoin holding strategy and lower net income before non-cash adjustments[32](index=32&type=chunk)[285](index=285&type=chunk) - Investing activities saw a significant increase in cash usage, from **$35.2 million** in H1 2024 to **$213.1 million** in H1 2025, largely driven by **$180.5 million** in property, plant, and equipment purchases for the Colocation segment[32](index=32&type=chunk)[286](index=286&type=chunk) - Financing activities moved from providing **$39.2 million** in cash in H1 2024 to using **$36.0 million** in H1 2025, mainly due to debt extinguishment payments and the absence of proceeds from common stock issuance and exit facility draws seen in the prior year[32](index=32&type=chunk)[288](index=288&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=16&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Provides detailed explanations of accounting policies and specific financial components supporting the consolidated statements [1 — Organization and Description of Business](index=16&type=section&id=1%20%E2%80%94%20Organization%20and%20Description%20of%20Business) Details the company's business as a digital infrastructure leader transitioning from bitcoin mining to HPC colocation services - Core Scientific is a leader in digital infrastructure for high-density colocation and digital asset mining, with a strategic shift towards **HPC colocation services for AI workloads**[36](index=36&type=chunk)[37](index=37&type=chunk)[152](index=152&type=chunk) - The company operates in three segments: Digital Asset Self-Mining, Digital Asset Hosted Mining, and Colocation (formerly HPC Hosting), with the **Colocation segment being a new focus** since April 1, 2024[38](index=38&type=chunk)[165](index=165&type=chunk) - The strategic transition involves converting most of its ten facilities to support AI workloads and next-generation colocation services, aiming for **more stable and predictable revenue streams**[36](index=36&type=chunk)[153](index=153&type=chunk)[154](index=154&type=chunk) [2 — Summary of Significant Accounting Policies](index=16&type=section&id=2%20%E2%80%94%20Summary%20of%20Significant%20Accounting%20Policies) Outlines significant accounting policies for revenue recognition, digital assets, leases, and stock-based compensation Digital Assets Roll-Forward (in thousands): | Metric | June 30, 2025 | June 30, 2024 | | :------------------------------------------ | :------------ | :------------ | | Digital assets, beginning of period | $23,893 | $2,284 | | Digital asset self-mining revenue, net of receivables | $129,770 | $261,566 | | Mining revenue from shared hosting | — | $13,818 | | Proceeds from sales of digital assets and shared hosting | — | $(277,562) | | Increase (decrease) in fair value of digital assets | $19,109 | $(41) | | Digital assets, end of period | $172,772 | — | Bitcoin Holdings (in thousands, except quantity): | Date | Quantity | Cost Basis | Fair Value | | :--------------- | :------- | :--------- | :--------- | | June 30, 2025 | 1,612 | $154,755 | $172,772 | | December 31, 2024 | 256 | $24,991 | $23,893 | - Deferred revenue significantly increased from **$18.1 million** at December 31, 2024, to **$150.1 million** at June 30, 2025, reflecting advanced payments for colocation services, typically recognized within 30 months[48](index=48&type=chunk)[50](index=50&type=chunk) - The company adopted ASU 2023-09 (Income Taxes) as of January 1, 2025, which affects annual income tax disclosures but not interim reporting[70](index=70&type=chunk) [3 — Property, Plant, and Equipment](index=23&type=section&id=3%20%E2%80%94%20Property%2C%20Plant%2C%20and%20Equipment) Details the composition of property, plant, and equipment, highlighting a significant increase in construction in progress Property, Plant and Equipment, Net (in thousands): | Category | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------- | :------------ | :---------------- | :--------- | :--------- | | Total (excluding CIP) | $351,098 | $393,486 | $(42,388) | -10.77% | | Construction in progress | $477,505 | $162,856 | $314,649 | 193.20% | | Property, plant and equipment, net | $828,603 | $556,342 | $272,261 | 48.94% | Depreciation Expense (in thousands): | Period | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :--- | :--- | :--------- | :--------- | | Three months ended June 30 | $18,600 | $29,300 | $(10,700) | -36.52% | | Six months ended June 30 | $38,100 | $58,100 | $(20,000) | -34.42% | - Construction in progress more than doubled, increasing by **$314.6 million (193.2%)** from December 31, 2024, to June 30, 2025, indicating substantial ongoing capital investments[74](index=74&type=chunk) [4 — Balance Sheet Components](index=23&type=section&id=4%20%E2%80%94%20Balance%20Sheet%20Components) Provides a breakdown of customer funding receivable and accrued expenses, highlighting a surge in customer-funded construction Customer Funding Receivable and Other Current Assets (in thousands): | Category | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :------------------------------------------ | :------------ | :---------------- | :--------- | :--------- | | Customer funding receivable | $230,672 | $7,442 | $223,230 | 2999.60% | | Other | $19,971 | $35,647 | $(15,676) | -44.00% | | Total customer funding receivable and other current assets | $250,643 | $43,089 | $207,554 | 481.60% | Accrued Expenses (in thousands): | Category | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :-------------------------- | :------------ | :---------------- | :--------- | :--------- | | Accrued customer funded construction | $80,618 | — | $80,618 | N/A | | Accrued capital expenditures | $67,643 | $12,106 | $55,537 | 458.76% | | Other | $32,380 | $52,564 | $(20,184) | -38.40% | | Total accrued expenses | $180,641 | $64,670 | $115,971 | 179.33% | - Customer funding receivable increased dramatically by nearly **3000%** to **$230.7 million**, primarily representing amounts due from customers for construction-related payables incurred on their behalf[75](index=75&type=chunk) [5 — Leases](index=24&type=section&id=5%20%E2%80%94%20Leases) Details lessee and lessor accounting for leases, highlighting significant growth in colocation lease revenue Lease Components on Balance Sheet (in thousands): | Item | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Operating lease right-of-use assets | $108,584 | $114,472 | | Finance lease right-of-use assets | $5,019 | $5,873 | | Operating lease liabilities, current portion | $10,438 | $9,974 | | Operating lease liabilities, net of current portion | $92,229 | $97,843 | | Finance lease liabilities, current portion | $547 | $1,669 | Total Lease Expense (in thousands): | Period | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :--- | :--- | :--------- | :--------- | | Three months ended June 30 | $5,547 | $4,996 | $551 | 11.03% | | Six months ended June 30 | $11,081 | $7,771 | $3,310 | 42.59% | Total Lease Revenue (in thousands): | Period | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :--- | :--- | :--------- | :--------- | | Three months ended June 30 | $10,560 | $5,519 | $5,041 | 91.33% | | Six months ended June 30 | $19,133 | $5,519 | $13,614 | 246.67% | - Operating lease revenue significantly increased by **91%** for the three months and **247%** for the six months ended June 30, 2025, driven by colocation licensing agreements[83](index=83&type=chunk) - The company has substantial future noncancellable minimum operating lease payments expected to be received, totaling **$269.8 million**, excluding **$9.83 billion** from leases not yet commenced[83](index=83&type=chunk) [6 — Convertible and Other Notes Payable](index=27&type=section&id=6%20%E2%80%94%20Convertible%20and%20Other%20Notes%20Payable) Details the company's debt structure, highlighting the repayment of several higher-interest debt facilities during the quarter Notes Payable (in thousands): | Category | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :------------------------------------------ | :------------ | :---------------- | :--------- | :--------- | | 2031 Convertible Notes | $625,000 | $625,000 | $0 | 0.00% | | 2029 Convertible Notes | $460,000 | $460,000 | $0 | 0.00% | | Equipment and Settlement Notes | — | $33,857 | $(33,857) | -100.00% | | Other Notes | $1,550 | $3,152 | $(1,602) | -50.82% | | Total notes payable, net | $1,059,246 | $1,090,280 | $(31,034) | -2.85% | | Current portion | $1,550 | $16,290 | $(14,740) | -90.49% | - During the three months ended June 30, 2025, the company repaid five higher-interest debt facilities totaling approximately **$26.6 million** in principal, leading to a **$1.4 million** loss on debt extinguishment[85](index=85&type=chunk) Interest Expense on Convertible Notes (in thousands): | Period | 2025 | Change ($) | Change (%) | | :-------------------------------- | :--- | :--------- | :--------- | | Three months ended June 30 | $4,754 | N/A | N/A | | Six months ended June 30 | $9,501 | N/A | N/A | [7 — Warrant Liabilities](index=28&type=section&id=7%20%E2%80%94%20Warrant%20Liabilities) Describes the company's warrant agreements and details the number of warrants exercised and remaining during the period - The company has two tranches of warrants: **Tranche 1 Warrants** (98.3 million, $6.81 exercise price, expire Jan 2027) and **Tranche 2 Warrants** (81.9 million, $0.01 exercise price, expire Jan 2029)[88](index=88&type=chunk) Warrant Exercise Activity (June 30, 2025): | Warrant Type | Exercised (3 Months) | Exercised (6 Months) | Cash Receipts (3 Months) | Cash Receipts (6 Months) | Unexercised (June 30, 2025) | | :----------- | :------------------- | :------------------- | :----------------------- | :----------------------- | :-------------------------- | | Tranche 1 | 0.1 million | 0.1 million | $0.3 million | $0.6 million | 97.5 million | | Tranche 2 | 2.5 million | 5.9 million | Immaterial | Immaterial | 15.1 million | [8 — Fair Value Measurements](index=28&type=section&id=8%20%E2%80%94%20Fair%20Value%20Measurements) Provides information on recurring fair value measurements for assets and liabilities, including digital assets and warrants Fair Value Hierarchy (June 30, 2025, in thousands): | Item | Level 1 | Level 2 | Level 3 | Fair Value | | :------------------------------------------ | :-------- | :------ | :------ | :--------- | | Money market funds | $576,361 | — | — | $576,361 | | Digital assets | $172,772 | — | — | $172,772 | | Contingent value rights | $3,366 | — | — | $3,366 | | Warrants | $1,316,690 | — | — | $1,316,690 | - An increase in the fair value of Warrants of **$923.7 million** for the three months and **$289.4 million** for the six months ended June 30, 2025, was recognized in the Condensed Consolidated Statements of Operations[92](index=92&type=chunk) Fair Value of Convertible Notes (June 30, 2025, in thousands): | Note Type | Carrying Amount | Fair Value | Fair Value Hierarchy | | :-------------------------------- | :-------------- | :--------- | :------------------- | | 3.00% Convertible Senior Notes due 2029 | $460,000 | $795,101 | Level 1 | | 0.00% Convertible Senior Notes due 2031 | $625,000 | $679,666 | Level 1 | [9 — Commitments and Contingencies](index=30&type=section&id=9%20%E2%80%94%20Commitments%20and%20Contingencies) Outlines significant contractual commitments for capital expenditures and details ongoing legal proceedings - As of June 30, 2025, the company was contractually committed for approximately **$1.71 billion** in capital expenditures for high-density colocation conversions, with **$1.26 billion** to be passed through to customers and **$427.9 million** funded by prepaid license fees[102](index=102&type=chunk) - The company is involved in several legal proceedings, including purported shareholder class actions (Pang and Ihle), an employment claim, and contract claims, with some resolved through settlements involving common stock issuance[103](index=103&type=chunk)[104](index=104&type=chunk)[109](index=109&type=chunk)[110](index=110&type=chunk)[112](index=112&type=chunk) - A patent infringement claim was filed against the company in July 2025, alleging infringement in its bitcoin mining business, with motions to dismiss and transfer pending[114](index=114&type=chunk) [10 — Income Taxes](index=32&type=section&id=10%20%E2%80%94%20Income%20Taxes) Details the company's income tax expense, which remained near zero due to a full valuation allowance on deferred tax assets Income Tax Expense (in thousands): | Period | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :--- | :--- | :--------- | :--------- | | Three months ended June 30 | $158 | $144 | $14 | 9.72% | | Six months ended June 30 | $363 | $350 | $13 | 3.71% | - The effective income tax rate for both three and six months ended June 30, 2025 and 2024, was approximately **0.0% or (0.1)%**, primarily due to a full valuation allowance on net deferred tax assets[120](index=120&type=chunk)[121](index=121&type=chunk) - The 'One Big Beautiful Bill Act' was signed into law on July 4, 2025, and the company is analyzing its tax impacts but does not expect a material effect on its financial statements[119](index=119&type=chunk) [11 — Stock-Based Compensation](index=32&type=section&id=11%20%E2%80%94%20Stock-Based%20Compensation) Describes the company's equity-based incentive plan, including vesting conditions and total compensation expense recognized - The Incentive Plan was amended to increase authorized shares from **40 million to 48 million**, granting MSUs with market-based share price goals and PSUs with service, market (RTSR), and performance (MW growth, customer acquisition) conditions[122](index=122&type=chunk)[124](index=124&type=chunk) Unrecognized Compensation Cost (June 30, 2025, in thousands): | Award Type | Unrecognized Compensation Cost | Weighted-Average Recognition Period (Years) | | :--------- | :----------------------------- | :------------------------------------------ | | RSUs | $115,323 | 2.3 | | PSUs | $50,261 | 2.8 | | MSUs | $4,693 | 1.5 | | Total | $170,277 | | Stock-Based Compensation Expense (in thousands): | Period | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :--- | :--- | :--------- | :--------- | | Three months ended June 30 | $24,346 | $8,494 | $15,852 | 186.63% | | Six months ended June 30 | $40,751 | $7,434 | $33,317 | 448.17% | [12 — Net Loss Per Share](index=35&type=section&id=12%20%E2%80%94%20Net%20Loss%20Per%20Share) Provides the reconciliation for basic and diluted net loss per share and lists potentially dilutive securities Net Loss Per Share Reconciliation (in thousands, except per share amounts): | Metric | 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 loss | $(936,799) | $(804,896) | $(356,106) | $(594,205) | | Basic and diluted net loss | $(13,274) | $(804,896) | $(67,002) | $(594,205) | | Weighted average shares outstanding - basic and diluted | 317,985 | 178,505 | 316,593 | 207,092 | | Net loss per share - basic and diluted | $(0.04) | $(4.51) | $(0.21) | $(2.87) | - Basic and diluted net loss per share significantly improved from **$(4.51) to $(0.04)** for the three months and from **$(2.87) to $(0.21)** for the six months ended June 30, 2025, despite an increase in net loss, due to adjustments for warrant fair value and increased weighted average shares outstanding[132](index=132&type=chunk) Potentially Dilutive Securities (in thousands): | Security Type | June 30, 2025 | June 30, 2024 | | :------------------------------------------ | :------------ | :------------ | | Convertible Notes | 69,611 | 40,059 | | RSUs, PSUs, and MSUs | 25,204 | 18,778 | | Stock options | 344 | 369 | | Tranche 1 Warrants | 97,542 | 98,259 | | Total shares issuable from potentially dilutive securities | 192,701 | 157,465 | [13 — Segment Reporting](index=36&type=section&id=13%20%E2%80%94%20Segment%20Reporting) Provides a breakdown of revenue and gross profit for each of the company's three reportable segments - The company operates in three segments: Digital Asset Self-Mining, Digital Asset Hosted Mining, and Colocation, with **Colocation becoming a new segment in Q2 2024**[134](index=134&type=chunk) Segment Revenue and Gross Profit (3 Months Ended June 30, in thousands): | Segment | 2025 Revenue | 2024 Revenue | Revenue Change ($) | Revenue Change (%) | 2025 Gross Profit | 2024 Gross Profit | Gross Profit Change ($) | Gross Profit Change (%) | | :-------------------------- | :----------- | :----------- | :----------------- | :----------------- | :---------------- | :---------------- | :---------------------- | :---------------------- | | Digital Asset Self-Mining | $62,424 | $110,743 | $(48,319) | -43.63% | $2,835 | $30,742 | $(27,907) | -90.77% | | Digital Asset Hosted Mining | $5,644 | $24,840 | $(19,196) | -77.28% | $1,060 | $7,447 | $(6,387) | -85.77% | | Colocation | $10,560 | $5,519 | $5,041 | 91.33% | $1,130 | $628 | $502 | 79.94% | | Consolidated | $78,628 | $141,102 | $(62,474) | -44.28% | $5,025 | $38,817 | $(33,792) | -87.05% | Segment Revenue and Gross Profit (6 Months Ended June 30, in thousands): | Segment | 2025 Revenue | 2024 Revenue | Revenue Change ($) | Revenue Change (%) | 2025 Gross Profit | 2024 Gross Profit | Gross Profit Change ($) | Gross Profit Change (%) | | :-------------------------- | :----------- | :----------- | :----------------- | :----------------- | :---------------- | :---------------- | :---------------------- | :---------------------- | | Digital Asset Self-Mining | $129,603 | $260,702 | $(131,099) | -50.29% | $8,844 | $99,137 | $(90,293) | -91.08% | | Digital Asset Hosted Mining | $9,417 | $54,172 | $(44,755) | -82.62% | $2,797 | $16,698 | $(13,901) | -83.25% | | Colocation | $19,133 | $5,519 | $13,614 | 246.67% | $1,597 | $628 | $969 | 154.30% | | Consolidated | $158,153 | $320,393 | $(162,240) | -50.64% | $13,238 | $116,463 | $(103,225) | -88.64% | - For the three and six months ended June 30, 2025, **79% and 82% of total revenue**, respectively, was generated from digital asset mining of bitcoin from one customer (Customer G)[142](index=142&type=chunk)[143](index=143&type=chunk)[145](index=145&type=chunk) [14 — Supplemental Cash Flow and Noncash Information](index=40&type=section&id=14%20%E2%80%94%20Supplemental%20Cash%20Flow%20and%20Noncash%20Information) Provides additional details on cash paid for interest and taxes, and a list of noncash investing and financing activities Supplemental Cash Flow Information (in thousands): | Item | 6 Months Ended June 30, 2025 | 6 Months Ended June 30, 2024 | | :------------------------------------------ | :--------------------------- | :--------------------------- | | Cash paid for interest | $8,386 | $18,074 | | Income tax payments (refunds) | $457 | $(1,288) | | Cash paid for reorganization items | — | $53,835 | - Noncash investing activities for H1 2025 included **$129.9 million** in purchases of PP&E in accounts payable and accrued expense, and **$19.6 million** from noncash exercise of warrants[146](index=146&type=chunk) - Noncash financing activities in H1 2024 included significant issuances of new common stock, contingent value rights, and warrants related to the company's emergence from bankruptcy[146](index=146&type=chunk) [15 — Subsequent Events](index=41&type=section&id=15%20%E2%80%94%20Subsequent%20Events) Discloses the significant subsequent event of entering into a merger agreement with CoreWeave, Inc - On July 7, 2025, Core Scientific entered into a Merger Agreement with CoreWeave, Inc for an **all-stock acquisition**[148](index=148&type=chunk) - Each outstanding share of Core Scientific common stock will be converted into **0.1235 shares** of CoreWeave Class A common stock[148](index=148&type=chunk) - The transaction is contingent upon approval from Core Scientific's stockholders and customary regulatory approvals[148](index=148&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=42&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Provides management's analysis of financial results, strategic shifts, and key performance factors [Overview](index=42&type=section&id=Overview) Details the strategic shift from bitcoin mining to high-density colocation services for HPC and AI applications - Core Scientific is transitioning from bitcoin mining to high-density colocation services for HPC, particularly AI-related applications, to achieve **more stable and predictable revenue**[152](index=152&type=chunk)[153](index=153&type=chunk) - The company is converting most of its ten facilities across the US to support AI workloads, primarily for an existing HPC customer, while continuing to self-mine digital assets profitably until alternative opportunities arise[154](index=154&type=chunk)[155](index=155&type=chunk) Key Financial and Operational Metrics (6 Months Ended June 30, in millions): | Metric | 2025 | 2024 | Change ($) | Change (%) | | :---------------- | :--- | :--- | :--------- | :--------- | | Total revenue | $158.2 | $320.4 | $(162.2) | -50.6% | | Operating (loss) income | $(68.9) | $61.8 | $(130.7) | -211.5% | | Net loss | $(356.1) | $(594.2) | $238.1 | -40.1% | | Adjusted EBITDA | $15.4 | $134.0 | $(118.6) | -88.5% | [Recent Developments](index=44&type=section&id=Recent%20Developments) Highlights the definitive merger agreement with CoreWeave, recent debt repayments, and new colocation agreements - On July 7, 2025, Core Scientific entered into a definitive merger agreement to be acquired by CoreWeave, Inc in an all-stock transaction, with each share converting to **0.1235 shares** of CoreWeave Class A common stock[158](index=158&type=chunk) - During Q2 2025, the company repaid five higher-interest debt facilities totaling approximately **$26.6 million** in principal, resulting in a **$1.4 million** loss on debt extinguishment[159](index=159&type=chunk) - A new agreement with CoreWeave was announced on February 26, 2025, to deliver an additional approximately **70 MW** of gross power at the company's Denton, Texas facility[159](index=159&type=chunk) [Our Business Model](index=44&type=section&id=Our%20Business%20Model) Describes the shift to a business model focused on contracting digital infrastructure for high-density colocation services - The business model is shifting to focus primarily on contracting digital infrastructure for high-density colocation services, including HPC operations for cloud computing, machine learning, and AI[161](index=161&type=chunk)[162](index=162&type=chunk) - The company will continue digital asset mining only as long as it remains profitable, with a strategy to expand its data center infrastructure for high-density colocation and maximize contracted infrastructure[161](index=161&type=chunk)[162](index=162&type=chunk) Bitcoin Miners in Operation (Hash rate in EH/s, Number of Miners in thousands): | Mining Equipment | June 30, 2025 | Dec 31, 2024 | June 30, 2024 | | :--------------- | :------------ | :----------- | :------------ | | Self-miners (Hash rate) | 17.6 | 19.1 | 19.4 | | Self-miners (Number) | 151.4 | 164.0 | 163.5 | | Hosted miners (Hash rate) | 3.0 | 1.0 | 5.2 | | Hosted miners (Number) | 21.7 | 7.1 | 41.8 | | Total (Hash rate) | 20.6 | 20.1 | 24.6 | | Total (Number) | 173.1 | 171.1 | 205.3 | [Summary of Digital Asset Activity](index=47&type=section&id=Summary%20of%20Digital%20Asset%20Activity) Summarizes the change in digital asset holdings, highlighting a shift from selling to holding self-mined assets Digital Asset Activity (6 Months Ended June 30, in thousands): | Metric | 2025 | 2024 | | :------------------------------------------ | :--- | :--- | | Digital assets, beginning of period | $23,893 | $2,284 | | Digital asset self-mining revenue, net of receivables | $129,770 | $261,566 | | Mining proceeds from shared hosting | — | $13,818 | | Proceeds from sales of digital assets | — | $(277,562) | | Change in fair value of digital assets | $19,109 | $(41) | | Digital assets, end of period | $172,772 | — | - The company's digital asset holdings increased significantly from **$23.9 million** at the beginning of 2025 to **$172.8 million** by June 30, 2025, primarily due to self-mining revenue and an increase in the fair value of digital assets[172](index=172&type=chunk) - In H1 2024, the company sold digital assets for **$277.6 million**, while in H1 2025, there were no reported sales, indicating a shift in digital asset management strategy[172](index=172&type=chunk) [Performance Metrics](index=47&type=section&id=Performance%20Metrics) Presents key business operating metrics, including hash rate, cost per bitcoin, and Adjusted EBITDA Key Business Operating Metrics: | Metric | June 30, 2025 | June 30, 2024 | Change (%) | | :-------------------------------- | :------------ | :------------ | :--------- | | Self-Mining Hash rate (EH/s) | 17.6 | 19.4 | -9% | **Cash Costs per Bitcoin (3 Months Ended June 30):** | Metric | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :--- | :--- | :--------- | :--------- | | Power cost per bitcoin self-mined | $48,407 | $24,533 | $23,874 | 97.31% | | Operational costs per bitcoin self-mined | $15,962 | $5,346 | $10,616 | 198.59% | | Total cost to self-mine one bitcoin | $64,369 | $29,879 | $34,490 | 115.43% | **Cash Costs per Bitcoin (6 Months Ended June 30):** | Metric | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :--- | :--- | :--------- | :--------- | | Power cost per bitcoin self-mined | $45,099 | $19,136 | $25,963 | 135.68% | | Operational costs per bitcoin self-mined | $15,158 | $3,830 | $11,328 | 295.77% | | Total cost to self-mine one bitcoin | $60,257 | $22,966 | $37,291 | 162.30% | **Cash-Based Hash Cost (3 Months Ended June 30):** | Metric | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :--- | :--- | :--------- | :--------- | | Power cost per terahash | $0.025 | $0.025 | $0.000 | 0.00% | | Operational costs per terahash | $0.008 | $0.005 | $0.003 | 60.00% | | Total cash-based hash cost | $0.033 | $0.030 | $0.003 | 10.00% | **Cash-Based Hash Cost (6 Months Ended June 30):** | Metric | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :--- | :--- | :--------- | :--------- | | Power cost per terahash | $0.025 | $0.026 | $(0.001) | -3.85% | | Operational costs per terahash | $0.008 | $0.005 | $0.003 | 60.00% | | Total cash-based hash cost | $0.033 | $0.031 | $0.002 | 6.45% | - Self-mining hash rate decreased by **9%** year-over-year to **17.6 EH/s** as of June 30, 2025, from 19.4 EH/s in the prior year, reflecting the strategic shift to colocation[210](index=210&type=chunk) - The total cost to self-mine one bitcoin significantly increased by **115.4%** for the three months and **162.3%** for the six months ended June 30, 2025, primarily due to higher power and operational costs per bitcoin[207](index=207&type=chunk) Adjusted EBITDA (in thousands): | Period | 2025 | 2024 | Change ($) | Change (%) | | :-------------------------------- | :--- | :--- | :--------- | :--------- | | Three months ended June 30 | $21,503 | $46,036 | $(24,533) | -53.29% | | Six months ended June 30 | $15,432 | $134,032 | $(118,600) | -88.49% | [Key Factors Affecting Our Financial Performance](index=47&type=section&id=Key%20Factors%20Affecting%20Our%20Financial%20Performance) Discusses the impact of bitcoin price volatility, network difficulty, the halving event, and regulatory changes on performance - Financial performance is heavily influenced by the volatile market price of digital assets, particularly bitcoin, and increases in network hash rate and difficulty, which reduce mining proceeds[176](index=176&type=chunk)[179](index=179&type=chunk)[180](index=180&type=chunk) Impact to Revenue from Key Drivers: | Driver | Increase in Driver | Decrease in Driver | | :-------------------- | :----------------- | :----------------- | | Market Price of Bitcoin | Favorable | Unfavorable | | Core Scientific Hash Rate | Favorable | Unfavorable | | Difficulty | Unfavorable | Favorable | | Transaction Fees | Favorable | Unfavorable | - The **April 2024 bitcoin halving** reduced block rewards by 50%, impacting self-mining revenue, though historically, network hash rate tends to decline post-halving as less efficient miners become unprofitable[186](index=186&type=chunk)[187](index=187&type=chunk) - The planned growth of the Colocation operation is expected to **reduce exposure to bitcoin price volatility**, as colocation contracts are long-term and provide stable, predictable revenue[188](index=188&type=chunk) - New tariffs on imported goods, particularly for data center conversions and mining equipment, could lead to material price inflation and delivery delays, though the largest colocation customer funds most related capital expenditures[184](index=184&type=chunk) - Regulation of blockchain and digital assets is evolving, with new US federal and state initiatives (e.g, 'Clarity Act', Texas SB 6) potentially impacting operations, particularly large electric loads in ERCOT[202](index=202&type=chunk)[204](index=204&type=chunk) [Results of Operations for the Three Months Ended June 30, 2025 and 2024](index=59&type=section&id=Results%20of%20Operations%20for%20the%20Three%20Months%20Ended%20June%2030%2C%202025%20and%202024) Analyzes the significant decrease in revenue and shift to operating loss for the second quarter of 2025 Revenue Breakdown (3 Months Ended June 30, in thousands): | Revenue Type | 2025 | 2024 | Change ($) | Change (%) | % of Total 2025 | % of Total 2024 | | :------------------------------------------ | :--- | :--- | :--------- | :--------- | :-------------- | :-------------- | | Digital asset self-mining revenue | $62,424 | $110,743 | $(48,319) | -43.63% | 80% | 78% | | Digital asset hosted mining revenue from customers | $5,644 | $24,840 | $(19,196) | -77.28% | 7% | 18% | | Colocation revenue | $10,560 | $5,519 | $5,041 | 91.33% | 13% | 4% | | Total revenue | $78,628 | $141,102 | $(62,474) | -44.28% | 100% | 100% | - Total revenue decreased by **44%** to **$78.6 million**, primarily due to a **44%** decrease in digital asset self-mining revenue and a **77%** decrease in hosted mining revenue, partially offset by a **91%** increase in colocation revenue[230](index=230&type=chunk) - Self-mining revenue decline was driven by a **62% decrease in bitcoin mined** (due to fewer deployed units, lower hash rate, and increased network difficulty), partially offset by a **50% increase in average bitcoin price**[231](index=231&type=chunk)[236](index=236&type=chunk) - Selling, general and administrative expenses increased by **81%** to **$56.9 million**, mainly due to higher stock-based compensation, colocation segment site startup costs, payroll, and professional services[242](index=242&type=chunk)[244](index=244&type=chunk) - Non-operating expense, net, increased by **$99.0 million** to **$910.4 million**, primarily driven by a **$113.9 million** increase in the change in fair value of warrants and contingent value rights, partially offset by a **$16.0 million** decrease in net interest expense[243](index=243&type=chunk)[245](index=245&type=chunk) [Results of Operations for the Six Months Ended June 30, 2025 and 2024](index=67&type=section&id=Results%20of%20Operations%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202025%20and%202024) Analyzes the significant decrease in revenue and shift to operating loss for the first half of 2025 Revenue Breakdown (6 Months Ended June 30, in thousands): | Revenue Type | 2025 | 2024 | Change ($) | Change (%) | % of Total 2025 | % of Total 2024 | | :------------------------------------------ | :--- | :--- | :--------- | :--------- | :-------------- | :-------------- | | Digital asset self-mining revenue | $129,603 | $260,702 | $(131,099) | -50.29% | 82% | 81% | | Digital asset hosted mining revenue from customers | $9,417 | $54,172 | $(44,755) | -82.62% | 6% | 17% | | Colocation revenue | $19,133 | $5,519 | $13,614 | 246.67% | 12% | 2% | | Total revenue | $158,153 | $320,393 | $(162,240) | -50.64% | 100% | 100% | - Total revenue decreased by **51%** to **$158.2 million**, driven by a **50%** decrease in digital asset self-mining revenue and an **83%** decrease in hosted mining revenue, partially offset by a **247%** increase in colocation revenue[256](index=256&type=chunk) - Self-mining revenue decline was primarily due to a **70% decrease in bitcoin mined** (influenced by fewer deployed units, the April 2024 halving, lower hash rate, and increased network difficulty), partially offset by a **61% increase in average bitcoin price**[257](index=257&type=chunk)[260](index=260&type=chunk) - Selling, general and administrative expenses increased by **101%** to **$97.1 million**, mainly due to higher stock-based compensation, colocation segment site startup costs, payroll, and professional services[265](index=265&type=chunk)[268](index=268&type=chunk) - Non-operating expense, net, decreased by **$368.8 million** to **$286.9 million**, primarily due to a **$447.4 million** decrease in the change in fair value of warrants and contingent value rights and a **$32.2 million** decrease in net interest expense, partially offset by the absence of **$111.4 million** in reorganization items from the prior year[266](index=266&type=chunk)[267](index=267&type=chunk)[269](index=269&type=chunk) [Liquidity and Capital Resources](index=73&type=section&id=Liquidity%20and%20Capital%20Resources) Details the company's sources of liquidity, capital allocation strategy, and analysis of cash flow activities - The company finances operations through debt, cash from operations (including bitcoin sales and colocation fees), equipment financing, and equity sales[278](index=278&type=chunk) - Management believes current liquidity sources (operating cash flows, existing cash, and debt market access) are sufficient to meet cash requirements for the next twelve months and beyond[279](index=279&type=chunk) Cash, Cash Equivalents and Restricted Cash (in thousands): | Metric | June 30, 2025 | December 31, 2024 | Change ($) | Change (%) | | :------------------------------------------ | :------------ | :---------------- | :--------- | :--------- | | Cash and cash equivalents | $581,345 | $836,197 | $(254,852) | -30.48% | | Restricted cash | — | $783 | $(783) | -100.00% | | Total cash, cash equivalents and restricted cash | $581,345 | $836,980 | $(255,635) | -30.54% | - Net cash used in operating activities was **$6.6 million** for H1 2025, a decrease from **$23.4 million** provided in H1 2024, primarily due to a shift in bitcoin holding strategy and lower net income, partially offset by increased deferred revenue from colocation services[285](index=285&type=chunk) - Net cash used in investing activities significantly increased to **$213.1 million** in H1 2025 (from $35.2 million in H1 2024), driven by **$209.7 million** in property, plant, and equipment purchases, with **$180.5 million** allocated to the Colocation segment[286](index=286&type=chunk) - Net cash used in financing activities was **$36.0 million** in H1 2025 (compared to $39.2 million provided in H1 2024), mainly due to **$26.9 million** in debt extinguishment payments and the absence of prior-year stock issuance and exit facility proceeds[288](index=288&type=chunk) [Critical Accounting Estimates](index=75&type=section&id=Critical%20Accounting%20Estimates) Confirms no material changes to critical accounting estimates since the last annual report - There have been no material changes to the company's critical accounting estimates since the Annual Report on Form 10-K for the year ended December 31, 2024[291](index=291&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=75&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Discusses the company's exposure to market risks, including bitcoin price volatility and commodity price fluctuations - The company's business is significantly exposed to the market price of bitcoin, with a hypothetical **10%** increase or decrease in bitcoin price impacting net income by approximately **$6.2 million** for three months and **$13.0 million** for six months ended June 30, 2025[295](index=295&type=chunk)[296](index=296&type=chunk)[297](index=297&type=chunk) - As of June 30, 2025, the company held **1,612 bitcoin** with a carrying value of **$172.8 million**[295](index=295&type=chunk) - Commodity price risk, particularly for electricity, is managed through derivative instruments like energy forward purchase contracts to mitigate future cash flow variability[298](index=298&type=chunk) [Item 4. Controls and Procedures](index=76&type=section&id=Item%204.%20Controls%20and%20Procedures) Confirms the effectiveness of disclosure controls and procedures and notes no material changes in internal control - The company's disclosure controls and procedures were evaluated and deemed **effective** as of June 30, 2025[301](index=301&type=chunk) - There were **no material changes** in the company's internal control over financial reporting from January 1, 2025, through June 30, 2025[302](index=302&type=chunk) [Part II. Other Information](index=76&type=section&id=Part%20II.%20Other%20Information) Contains disclosures on legal proceedings, risk factors, equity sales, and other required information [Item 1. Legal Proceedings](index=76&type=section&id=Item%201.%20Legal%20Proceedings) Discloses the company's involvement in various legal proceedings arising in the ordinary course of business - The company is subject to legal proceedings in the ordinary course of business, with potential losses accrued when probable and estimable[304](index=304&type=chunk) - Further details on material pending legal proceedings are provided in Note 9 — Commitments and Contingencies[304](index=304&type=chunk) [Item 1A. Risk Factors](index=78&type=section&id=Item%201A.%20Risk%20Factors) Outlines significant risks related to the proposed merger with CoreWeave, including closing conditions and integration challenges - The proposed merger with CoreWeave is contingent on various conditions, including stockholder and regulatory approvals, and may face delays or abandonment, potentially requiring a **$270 million termination fee**[306](index=306&type=chunk)[307](index=307&type=chunk) - Uncertainty surrounding the merger could adversely affect relationships with customers, suppliers, and employees, potentially leading to loss of key personnel or changes in business terms[314](index=314&type=chunk)[318](index=318&type=chunk) - The consideration for Core Scientific stockholders will be a fixed number of CoreWeave Class A common stock shares, whose value will fluctuate with CoreWeave's market price, and stockholders will not be entitled to appraisal rights under Delaware law[320](index=320&type=chunk)[321](index=321&type=chunk)[325](index=325&type=chunk) - CoreWeave's multi-class stock structure concentrates voting power with its co-founders, potentially allowing them to significantly influence corporate decisions and delay or prevent changes in control[329](index=329&type=chunk)[330](index=330&type=chunk)[332](index=332&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=85&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) Reports the issuance of common stock from the exercise of Tranche 1 and Tranche 2 Warrants during the quarter - **0.1 million shares** of New Common Stock were issued from Tranche 1 Warrants, generating **$0.3 million** in cash proceeds[335](index=335&type=chunk) - **2.5 million shares** of New Common Stock were issued from Tranche 2 Warrants, resulting in minimal cash proceeds[336](index=336&type=chunk) [Item 3. Defaults Upon Senior Securities](index=85&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) States that no defaults upon senior securities were reported for the period - No defaults upon senior securities were reported[337](index=337&type=chunk) [Item 4. Mine Safety Disclosures](index=85&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) States that this item is not applicable to the company's operations - This item is not applicable[338](index=338&type=chunk) [Item 5. Other Information](index=86&type=section&id=Item%205.%20Other%20Information) Discloses trading plan activities by directors and officers during the quarter - No new Rule 10b5-1 or non-Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during the quarter ended June 30, 2025[340](index=340&type=chunk) - The company's Chief Legal and Administrative Officer terminated their 10b5 Plan on June 24, 2025[340](index=340&type=chunk) [Item 6. Exhibits](index=86&type=section&id=Item%206.%20Exhibits) Lists all exhibits filed with the Form 10-Q, including merger agreements, organizational documents, and certifications - The exhibits include the Agreement and Plan of Merger with CoreWeave, Inc (dated July 7, 2025), the Fourth Amended and Restated Certificate of Incorporation, and the Third Amended and Restated Bylaws[341](index=341&type=chunk) - Certifications of the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are also filed[341](index=341&type=chunk)