MainStreet Bancshares, Inc. (MNSB)

CIK: 0001693577. SIC: 6022 State Commercial Banks. Latest 10-K as of: 2026-03-13.

SIC breadcrumb: Finance, Insurance, And Real Estate > Depository Institutions > SIC 6022 State Commercial Banks

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1693577. Latest filing source: 0001437749-26-008073.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-03-13. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001693577.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Free cash flow = operating cash flow - capital expenditures. Missing metrics are omitted rather than fabricated.

Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-08. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001693577.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001437749-26-015780.

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Confidence: high. Filing date: 2026-05-08. Report date: 2026-03-31.

Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis is intended as a review of significant factors affecting the Company’s consolidated financial condition and results of operations for the periods indicated. This discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and the related notes and the Company’s Annual Report on Form 10-K, which contains audited consolidated financial statements of the Company as of and for the year ended December 31, 2025, previously filed with the SEC on March 13, 2026. Results for the three months ended March 31, 2026 are not necessarily indicative of results for the year ending December 31, 2026 or any future period.

Forward-Looking Statements

This Quarterly Report on Form 10-Q contains certain forward-looking statements and information relating to the Company within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on the beliefs of management as well as assumptions made by and information currently available to management. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words like “believe,” “expect,” “anticipate,” “estimate,” and “intend” or future or conditional verbs such as “will,” “should,” “could,” or “may” and similar expressions or the negative thereof. Important factors that could cause actual results to differ materially from those in the forward–looking statements included herein include, but are not limited to:

●

general economic conditions, either nationally or in our market area, that are worse than expected;

●

competition among depository and other financial institutions, particularly intensified competition for deposits;

●

inflation and an interest rate environment that may reduce our margins or reduce the fair value of certain of our financial instruments;

●

adverse changes in the securities markets;

●

changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory structure and in regulatory fees and capital requirements;

●

the impact of significant changes in accounting procedures or requirements on our financial condition or results of operations;

●

our ability to enter new markets successfully and capitalize on growth opportunities;

●

our ability to successfully integrate acquired and newly organized entities;

●

changes in consumer spending, borrowing and savings habits;

●

changes in accounting policies and practices;

●

changes in our organization, compensation and benefit plans;

●

our ability to attract and retain key employees;

●

changes in our financial condition or results of operations that reduce capital;

●

changes in the financial condition or future prospects of issuers of securities that we own;

●

the concentration of our business in the Northern Virginia as well as the greater Washington, DC metropolitan area and the effect of changes in the economic, political and environmental conditions on those markets;

●

adequacy of or increases in the allowance for credit losses;

●

cyber threats, attacks or other data security events;

●

fraud or misconduct by internal or external parties;

●

reliance on third parties for key services;

29

●

deterioration of our asset quality, including an increase in loan delinquencies, problem assets and foreclosures;

●

future performance of our loan portfolio with respect to recently originated loans;

●

additional risks related to new lines of business, products, product enhancements or services;

●

results of examination of us by our regulators, including the possibility that our regulators may require us to increase our allowance for credit losses or to write-down assets or take other supervisory action;

●

the effectiveness of our internal controls over financial reporting and our ability to remediate any future material weakness in our internal controls over financial reporting;

●

liquidity, interest rate and operational risks associated with our business;

●

implications of our status as a smaller reporting company; 

●

a work stoppage, forced quarantine, or other interruption or the unavailability of key employees; 

●

volatility in the financial institution industry, including failures and/or rumors of possible failures of other financial institutions and actions by regulatory authorities in response thereto;

●

litigation or governmental actions;

●

impairment of a material asset; 

●

federal layoffs and shut downs, and potential government contract terminations or non-renewals;

●

possible income tax and accounting effects of recently enacted legislation; and

●

"Risk Factors" and other information included in our Annual Report on Form 10-K for the year ended December 31, 2025 and this Quarterly Report on Form 10-Q.

Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary materially from those described herein. We caution readers not to place undue reliance on forward-looking statements. The Company disclaims any obligation to revise or update any forward-looking statements contained in this Form 10-Q to reflect future events or developments.

Overview

As used herein, the “Company,” “we,” “our,” and “us” refer to MainStreet Bancshares, Inc. and its subsidiaries, and the “Bank” refers to MainStreet Bank.

MainStreet Bancshares, Inc.

MainStreet Bancshares, Inc. is a financial holding company that owns 100% of MainStreet Bank and MainStreet Community Capital, LLC. 

The Company and its subsidiaries are incorporated in and chartered by the Commonwealth of Virginia. The Company’s executive offices are located at 10089 Fairfax Boulevard, Fairfax, Virginia. Our telephone number is (703) 481-4567, and our internet address is www.mstreetbank.com. The information contained on our website shall not be considered part of this Quarterly Report on Form 10-Q, and the reference to our website does not constitute incorporation by reference of the information contained on the website.

30

MainStreet Bank

MainStreet Bank is a community commercial bank incorporated in and chartered by the Commonwealth of Virginia. The Bank is a member of the Federal Reserve Bank of Richmond, and its deposits are insured by the FDIC. The Bank opened for business on May 26, 2004, and is headquartered in Fairfax, Virginia. We currently operate seven Bank branches; located in Herndon, Fairfax, McLean, Clarendon, Leesburg, and Middleburg in Virginia, and one in Washington D.C. The Bank has two subsidiaries, both limited liability companies, that it uses to hold real estate acquired through foreclosure. 

We emphasize providing responsive and personalized services to our clients. Due to the consolidation of financial institutions in our primary market area, we believe there is a significant opportunity for a local bank to provide a full range of financial services. By offering highly professional, personalized banking products and service delivery methods and employing advanced banking technologies, we seek to distinguish ourselves from larger, regional banks operating in our market area and believe we are able to compete effectively with other community banks.

We believe we have a solid franchise that meets the financial needs of our clients and communities by providing an array of personalized products and services delivered by seasoned banking professionals with decisions made at the local level. We believe a significant customer base in our market prefers to do business with a local institution that has a local management team, a local Board of Directors and local founders and that this customer base may not be satisfied with the responsiveness of larger regional banks. By providing quality services, coupled with the opportunities provided by the economies in our market area, we have generated and expect to continue to generate organic growth.

We service Northern Virginia as well as the greater Washington, D.C. metropolitan area. Our goal is to deliver a customized and targeted mix of products and services that meets or exceeds customer expectations. To accomplish this goal, we have deployed a premium operating system that gives customers access to up-to-date banking technology. These systems and our highly skilled staff have allowed us to compete with larger financial institutions. The combination of sophisticated technology and personal service sets us apart from our competition. We strive to be the leading community bank in our market.

The Company's business is focused core banking where we offer a full range of banking services to individuals, small to medium-sized businesses and professionals through both traditional and electronic delivery. 

We were the first community bank in the Washington, D.C. metropolitan area to offer a full online business banking solution, including remote check scanners on a business customer’s desktop. We offer mobile banking apps for iPhones, iPads and Android devices that provide for remote deposit of checks. In addition, we were the first bank headquartered in the Commonwealth of Virginia to offer CDARS, the Certificate of Deposit Account Registry Service. We offer our customers a suite of reciprocal deposit options through IntraFI, an innovative reciprocal deposit placement service that offers FDIC insurance on deposits up to $265 million. We believe that enhanced electronic delivery systems and technology increase profitability through greater productivity and cost control and allow us to offer new and better products and services.

Our products and services include: business and consumer checking, premium interest-bearing checking, business account analysis, savings, certificates of deposit and other depository services, as well as a broad array of commercial, real estate and consumer loans. Internet account access is available for all personal and business accounts, internet bill payment services are available on most accounts, and a robust online cash management system is available for business customers.

MainStreet Community Capital, LLC

In September 2021, the Company created a community development entity (“CDE”) subsidiary, MainStreet Community Capital, LLC, a Virginia limited liability company, to apply for New Market Tax Credit (“NMTC”) allocations from the U.S. Department of Treasury’s Community Development Financial Institutions Fund. To promote development in economically distressed areas, the NMTC program was established under the Community Renewal Tax Relief Act of 2000 to provide tax incentives for capital investment in disadvantaged market areas that have not experienced economic expansion. The program establishes a tax credit for investment in a CDE and ongoing compliance with the program is accomplished through a governing board and an advisory board which maintains accountability to residents and businesses in the aforementioned disadvantaged areas. This CDE will be an intermediary vehicle for the provision of loans and investments in Low-Income Communities (“LICs”). In January 2022, the Community Development Financial Institutions Fund (“CDFI”) of the United States Department of the Treasury certified MainStreet Community Capital, LLC as a registered CDE. The One Big Beautiful Bill signed into law on July 4, 2025, permanently extended the new market tax credit program.

31

Critical Accounting Policies

The accounting and financial reporting policies of the Company conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry. Accordingly, the financial statements require certain estimates, judgments, and assumptions, which are believed to be reasonable, based upon the information available. These estimates and assumptions

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high. Filing date: 2026-03-13. Report date: 2025-12-31.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The purpose of this discussion is to focus on significant changes in the financial condition and results of operations of the Company during the years ended December 31, 2025 and 2024. The following discussion supplements and provides information about the major components of the results of operations, financial condition, liquidity and capital resources of the Company. This discussion and analysis should be read in conjunction with the accompanying consolidated financial statements.

33

Forward-Looking Statements

This Annual Report on Form 10-K contains certain forward-looking statements and information relating to the Company within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on the beliefs of management as well as assumptions made by and information currently available to management. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words like “believe,” “expect,” “anticipate,” “estimate,” and “intend” or future or conditional verbs such as “will,” “should,” “could,” or “may” and similar expressions or the negative thereof. Important factors that could cause actual results to differ materially from those in the forward–looking statements included herein include, but are not limited to:

•

general economic conditions, either nationally or in our market area, that are worse than expected;

•

competition among depository and other financial institutions, particularly intensified competition for deposits;

•

inflation and an interest rate environment that may reduce our margins or reduce the fair value of financial instruments;

•

adverse changes in the securities markets;

•

changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory structure and in regulatory fees and capital requirements;

•

our ability to enter new markets successfully and capitalize on growth opportunities;

•

our ability to successfully integrate acquired entities;

•

changes in consumer spending, borrowing and savings habits;

•

changes in accounting policies and practices;

•

changes in our organization, compensation and benefit plans;

•

our ability to attract and retain key employees;

•

changes in our financial condition or results of operations that reduce capital;

•

changes in the financial condition or future prospects of issuers of securities that we own;

•

the concentration of our business in the Northern Virginia as well as the greater Washington, DC metropolitan area and the effect of changes in the economic, political and environmental conditions on this market;

•

adequacy of our allowance for credit losses;

•

deterioration of our asset quality;

•

cyber threats, attacks or events;

•

reliance on third parties for key services;

•

future performance of our loan portfolio with respect to recently originated loans;

•

additional risks related to new lines of business, products, product enhancements or services;

•

results of examination of us by our regulators, including the possibility that our regulators may require us to increase our allowance for credit losses or to write-down assets or take other supervisory action;

•

the effectiveness of our internal controls over financial reporting and our ability to remediate any future material weakness in our internal controls over financial reporting;

•

liquidity, interest rate and operational risks associated with our business;

•

a work stoppage, forced quarantine, or other interruption or the unavailability of key employees;

•

volatility in the financial institution industry, including failures and/or rumors of possible failures of other financial institutions and actions by regulatory authorities in response thereto;

•

litigation or governmental actions;

•

impairment of a material asset; and

•

other factors beyond our knowledge or control.

34

Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary materially from those described herein. We caution readers not to place undue reliance on forward-looking statements. The Company disclaims any obligation to revise or update any forward-looking statements contained in this Form 10-K to reflect future events or developments. Additional information on risk factors that may affect forward-looking statements is included under “Risk Factors” in this Form 10-K.

Critical Accounting Policies

The discussion of the critical accounting policies and analysis set forth below is intended to supplement and highlight information contained in the accompanying Consolidated Financial Statements and the selected financial data presented elsewhere in this Form 10-K.

The accounting and financial reporting policies of the Company conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry. Accordingly, the financial statements require certain estimates, judgments, and assumptions, which are believed to be reasonable, based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the periods presented. Critical accounting policies comprise those that management believes are the most critical to aid in fully understanding and evaluating our reported financial results. These policies require numerous estimates or economic assumptions that may prove inaccurate or may be subject to variations which may significantly affect our reported results and financial condition for the current period or in future periods.

The Company’s critical accounting policy relates to the allowance for credit losses. This critical accounting policy requires the use of estimates, assumptions and judgments which are based on information available as of the date of the financial statements. Accordingly, as this information changes, future financial statements could reflect the use of different estimates, assumptions and judgments. Certain determinations inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported.

Allowance for Credit Losses: On January 1, 2023, the Company adopted ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASC 326). This standard replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts and generally applies to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities, and some off-balance sheet credit exposures such as unfunded commitments to extend credit. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. The determination of the appropriate level of the ACL on loans inherently involves a high degree of subjectivity and requires the Company to make significant judgments concerning credit risks and trends using quantitative and qualitative information, as well as reasonable and supportable forecasts of future economic conditions, all of which may undergo frequent and significant changes. Changes in conditions, including unforeseen events, changes in asset-specific risk characteristics, and other economic factors, both within and outside the Company’s control, may indicate the need for an increase or decrease in the ACL on loans. While management makes every effort to utilize the best information available in making its assessment of the ACL estimate, the estimation process is inherently challenging as potential changes in any one factor or input may occur at different rates and/or impact pools of loans in different ways. Further, changes in factors and inputs may also be directionally inconsistent, such that improvement in one factor may offset deterioration in others. See Note 1. Organization, Basis of Presentation, and Impact of Recently Issued Accounting Pronouncements for a more detailed description of methodology and impact of adoption.

35

Selected Financial Data

The following table sets forth summarized historical consolidated financial information for each of the periods indicated. This information should be read together with the accompanying consolidated financial statements included in this Form 10-K. The historical information indicated as of December 31, 2025 and 2024 and for the years ended December 31, 2025, 2024, and 2023, has been derived from the Company's audited consolidated financial statements for the years ended December 31, 2025, 2024, and 2023. Historical results set forth below and elsewhere in this Form 10-K are not necessarily indicative of future performance.

At December 31,

2025

2024

(In thousands)

Selected Financial Condition Data:

Total assets

$

2,212,669

$

2,228,098

Total cash and cash equivalents

162,756

207,708

Total investment securities

71,752

71,825

Loans receivable, net

1,841,833

1,810,556

Bank owned life insurance

40,752

39,507

Premises and equipment, net, including property held for sale at fair value

16,336

13,287

Total deposits

1,899,184

1,907,794

Subordinated debt, net

69,936

73,039

Total stockholders’ equity

218,591

207,991

36

For the year ended December 31,

2025

2024

2023

(In thousands)

Selected Operating Data:

Interest income

$

131,588

$

134,615

$

124,421

Interest expense

62,043

72,041

47,679

Net interest income

69,545

62,574

76,742

Provision for credit losses

(70

)

6,763

1,642

Net interest income after provision for credit losses

69,615

55,811

75,100

Total non-interest income

4,027

3,252

3,340

Total non-interest expenses

54,551

72,967

45,616

Income (loss) before income taxes

19,091

(13,904

)

32,824

Income tax expense (benefit)

3,478

(3,924

)

6,239

Net income (loss)

15,613

(9,980

)

26,585

Less: Preferred stock dividends

2,156

2,156

2,156

Net income (loss) available to common shareholders

$

13,457

$

(12,136

)

$

24,429

Basic and diluted earnings (loss) per common share

$

1.76

$

(1.60

)

$

3.25

At or For the Years Ended December 31,

2025

2024

2023

Performance Ratios:

Return on average assets

0.73

%

(0.47

)%

1.36

%

Return on average equity

7.33

%

(4.44

)%

12.66

%

Interest rate spread (1)(3)

2.58

%

2.01

%

3.05

%

Net interest margin (1)(3)

3.46

%

3.13

%

4.15

%

Efficiency ratio (2)(3)

74.15

%

110.85

%

56.96

%

Non-interest expense to average assets

2.55

%

3.42

%

2.33

%

Average interest-earning assets to average interest-bearing liabilities

128.69

%

131.19

%

142.48

%

Per share Data and Shares Outstanding:

Earnings (loss) per common share (basic and diluted)

$

1.76

$

(1.60

)

$

3.25

Book value per common share

$

25.52

$

23.77

$

25.81

Dividends per common share

$

0.40

$

0.40

$

0.40

Tangible book value per common share (1)

$

25.52

$

23.77

$

23.86

Market value per common share

$

20.36

$

18.10

$

24.81

Weighted average common shares (basic and diluted)

7,652,504

7,606,391

7,522,913

Common shares outstanding at end of period

7,496,571

7,603,765

7,527,415

Capital Ratios (Bank):

Common equity tier 1 (CET1) capital to risk-weighted assets

15.05

%

14.64

%

16.22

%

Total risk-based capital to risk-weighted assets

16.08

%

15.69

%

17.18

%

Tier 1 capital to risk-weighted assets

15.05

%

14.64

%

16.22

%

Tier 1 capital to average assets

13.28

%

12.08

%

14.66

%

Asset Quality Ratios:

Allowance for credit losses on loans as a percentage of total loans

1.04

%

1.06

%

0.96

%

Allowance for credit losses on loans as a percentage of non-performing loans

61.33

%

89.84

%

16.44X

Net charge-offs to average outstanding loans during the period

0.00

%

0.25

%

0.03

%

Non-performing loans as a percentage of total loans

1.69

%

1.18

%

0.06

%

Non-performing assets as a percentage of total assets

1.50

%

0.97

%

0.05

%

Other Data:

Common equity / total assets

8.65

%

8.11

%

9.54

%

Tangible equity / tangible assets (1)

9.88

%

9.33

%

10.24

%

Average tangible equity to average tangible assets

9.95

%

9.80

%

10.31

%

Number of offices

6

6

6

Number of full-time equivalent employees

171

204

186

(1)

Non-GAAP; refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section “Non-GAAP Measures” of this Form 10-K.

(2)

Efficiency ratio is calculated as non-interest expense as a percentage of net interest income and non-interest income.

(3)

Calculated on a fully tax equivalent (FTE) basis.

37

Analysis of Results of Operations for the Years Ended December 31, 2025, 2024, and 2023

Net Income

The following table sets forth the principal components of net income (loss) for the periods indicated.

For the Year Ended December 31,

2025

2024

% Change

2024

2023

% Change

(In thousands)

(In thousands)

Interest income

$

131,588

$

134,615

(2.25

)%

$

134,615

$

124,421

8.19

%

Interest expense

62,043

72,041

(13.88

)%

72,041

47,679

51.10

%

Net interest income

69,545

62,574

11.14

%

62,574

76,742

(18.46

)%

Provision for credit losses

(70

)

6,763

(101.04

)%

6,763

1,642

311.88

%

Net interest income after provision for credit losses

69,615

55,811

24.73

%

55,811

75,100

(25.68

)%

Non-interest income

4,027

3,252

23.83

%

3,252

3,340

(2.63

)%

Non-interest expense

54,551

72,967

(25.24

)%

72,967

45,616

59.96

%

Net income (loss) before income taxes

19,091

(13,904

)

237.31

%

(13,904

)

32,824

(142.36

)%

Income tax expense (benefit)

3,478

(3,924

)

188.63

%

(3,924

)

6,239

(162.89

)%

Net income (loss)

15,613

(9,980

)

256.44

%

(9,980

)

26,585

(137.54

)%

Less: Preferred stock dividends

2,156

2,156

0.00

%

2,156

2,156

0.00

%

Net income (loss) available to common shareholders

$

13,457

$

(12,136

)

210.88

%

$

(12,136

)

$

24,429

(149.68

)%

Net income for the year ended December 31, 2025, was $15.6 million, an increase of $25.6 million, compared to a net loss of $10.0 million for the year ended December 31, 2024. The increase in net income was due to a decrease in interest expense of $10.0 million and a decrease of non-interest expenses of $18.4 million compared to the same period in the prior year. 

Net Interest Income and Net Interest Margin

Net interest income is the principal component of the Company’s income stream and represents the difference, or spread, between interest and fee income generated from earning assets and the interest expense paid on deposits and borrowed funds. Net interest margin, stated as a percentage, is the yield obtained by dividing the difference between interest income generated on earning assets and the interest expense paid on all funding sources by average earning assets. Fluctuations in interest rates as well as changes in the volume and mix of earning assets and interest-bearing liabilities can impact net interest income and net interest margin.

Net interest income before provision for credit losses totaled $69.5 million for the year ended December 31, 2025, compared to $62.6 million for the year ended December 31, 2024. The increase in net interest income was driven by a decrease in deposit interest expense discussed below, for the year ended December 31, 2025.

The net interest margin was 3.46% for the year ended December 31, 2025, compared to 3.13% for the year ended December 31, 2024, on a fully tax equivalent basis. The increase in net interest margin primarily resulted from a decrease of interest expense on our interest-bearing liabilities. The primary drivers of decreased interest expense came from cost management on demand, money market, and time deposits during 2025. Additionally, the federal funds target rate decreasing by 75 basis points in 2025 impacted our maturing wholesale deposits that repriced in a lower interest rate environment. 

The yield for the year ended December 31, 2025 for the loan portfolio was 6.82% compared to 7.02% for the year ended December 31, 2024. The decreasing yield primarily reflects the repricing of variable rate loans at lower rates in 2025 compared to higher rates in prior years. The Federal Reserve's targeted benchmark interest rate range was 525 - 550 basis points through September 2024. The range was lowered to 425 - 450 by December 2024 and lowered again starting in September 2025 to a range of 350 - 375 by December 2025. 

For the year ended December 31, 2025, the yield on the taxable investment securities portfolio was 3.26% compared to 3.08% for the year ended December 31, 2024. For the year ended December 31, 2025, the yield on the tax-exempt investment securities portfolio was 3.85% compared to 3.80% for the year ended December 31, 2024. The increase in yield on the tax-exempt investment securities was primarily due to lower yields on investment securities maturing during the period.

The rate paid on interest-bearing deposits decreased to 3.92% during the year ended December 31, 2025, from 4.70% during the year ended December 31, 2024. This decrease was a result of lower rates paid on all outstanding deposits in conjunction with the decreasing rate environment throughout the year.

38

The rate paid on FHLB borrowings and federal funds purchased for the year ended December 31, 2025 was 0.00% and 4.71%, respectively, compared to the prior year of 5.61% for FHLB borrowings and 5.78% for federal funds purchased. This decrease was a result of lower rates paid on all outstanding borrowings in conjunction with the decreasing rate environment throughout the year.

Discussion of net interest income and net interest margin for the year ended December 31, 2023 has been omitted as such discussion was provided in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Net Interest Income and Net Interest Margin” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 20, 2024, and is incorporated herein by reference.

The following table sets forth the major components of net interest income and the related yields and rates for the year ended December 31, 2025, compared to the years ended December 31, 2024 and December 31, 2023.

Average Balances, Net Interest Income, Yields Earned and Rates Paid

The following table shows for the periods indicated the total dollar amount of interest from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. All average balances are based on daily balances.

For the Year Ended December 31,

2025

2024

2023

Average Balance

Interest Income/ Expense (5)

Yield/ Cost (5)

Average Balance

Interest Income/ Expense (5)

Yield/ Cost (5)

Average Balance

Interest Income/ Expense (5)

Yield/ Cost (5)

(Dollars in thousands)

Interest-earning assets:

Loans (1)

$

1,820,481

$

124,211

6.82

%

$

1,782,061

$

125,177

7.02

%

$

1,659,179

$

116,482

7.02

%

Investment securities

Taxable

52,401

1,707

3.26

%

54,935

1,693

3.08

%

57,386

1,836

3.20

%

Tax-exempt

35,382

1,362

3.85

%

36,379

1,384

3.80

%

37,810

1,348

3.57

%

Interest-bearing deposits at other financial institutions

1,216

54

4.44

%

815

41

5.03

%

1,207

61

5.05

%

Federal funds sold

111,144

4,540

4.08

%

136,258

6,611

4.85

%

101,682

4,977

4.89

%

Total interest-earning assets

$

2,020,624

$

131,874

6.53

%

$

2,010,448

$

134,906

6.71

%

$

1,857,264

$

124,704

6.71

%

Non-interest-earning assets

120,810

126,138

97,923

Total assets

$

2,141,434

$

2,136,586

$

1,955,187

Interest-bearing liabilities:

Interest-bearing demand deposits

$

117,493

$

4,187

3.56

%

$

181,109

$

8,661

4.78

%

$

83,087

$

1,786

2.15

%

Money market deposits

486,945

18,852

3.87

%

464,400

21,386

4.61

%

365,815

13,631

3.73

%

Savings and NOW deposits

107,151

1,469

1.37

%

54,385

754

1.39

%

49,565

546

1.10

%

Time deposits

785,378

34,239

4.36

%

748,938

37,364

4.99

%

702,034

26,905

3.83

%

Total interest-bearing deposits

$

1,496,967

$

58,747

3.92

%

$

1,448,832

$

68,165

4.70

%

$

1,200,501

$

42,868

3.57

%

Federal funds purchased

1,973

93

4.71

%

9,941

575

5.78

%

5,583

299

5.36

%

Federal Home Loan Bank advances

—

—

—

820

46

5.61

%

24,959

1,224

4.90

%

Subordinated debt

71,223

3,203

4.50

%

72,852

3,255

4.47

%

72,455

3,288

4.54

%

Total interest-bearing liabilities

$

1,570,163

$

62,043

3.95

%

$

1,532,445

$

72,041

4.70

%

$

1,303,498

$

47,679

3.66

%

Non-interest-bearing liabilities:

Demand deposits and other liabilities

358,157

379,510

441,768

Total liabilities

$

1,928,320

$

1,911,955

$

1,745,266

Stockholders’ Equity

213,114

224,631

209,921

Total liabilities and Stockholders’ equity

$

2,141,434

$

2,136,586

$

1,955,187

Net interest income

$

69,831

$

62,865

$

77,025

Interest rate spread (2)

2.58

%

2.01

%

3.05

%

Net interest-earning assets (3)

$

450,461

$

478,003

$

553,766

Net interest margin (4)

3.46

%

3.13

%

4.15

%

Average interest-earning assets to average interest-bearing liabilities

128.69

%

131.19

%

142.48

%

(1)

Includes loans classified as non-accrual.

(2)

Interest rate spread represents the difference between the average yield on average interest–earning assets and the average cost of average interest-bearing liabilities.

(3)

Net interest earning assets represent total average interest–earning assets less total average interest–bearing liabilities.

(4)

Net interest margin represents net interest income divided by total average interest-earning assets.

(5)

Income and yields for all periods are reported on a tax-equivalent basis using the federal statutory rate of 21%. Non-GAAP; refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section “Non-GAAP Measures” of this Form 10-K.

39

Rate/ Volume Analysis

The following table presents the effects of changing rates and volumes on net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume.

For the Twelve Months Ended

For the Twelve Months Ended

December 31, 2025 and 2024

December 31, 2024 and 2023

Increase (Decrease) Due to

Total Increase

Increase (Decrease) Due to

Total Increase

Volume

Rate

(Decrease)

Volume

Rate

(Decrease)

(In thousands)

(In thousands)

Interest-earning assets:

Loans

$

2,654

$

(3,620

)

$

(966

)

$

8,695

$

—

$

8,695

Investment securities

(121

)

113

(8

)

(98

)

(9

)

(107

)

Interest-bearing deposits at other financial institutions

18

(5

)

$

13

(20

)

—

(20

)

Federal funds

(1,112

)

(959

)

(2,071

)

1,675

(41

)

1,634

Total interest-bearing assets

$

1,439

$

(4,471

)

$

(3,032

)

$

10,252

$

(50

)

$

10,202

Interest-bearing liabilities:

Interest-bearing demand deposits

$

(2,591

)

$

(1,883

)

$

(4,474

)

$

3,375

$

3,500

$

6,875

Money market deposit accounts

1,007

(3,541

)

(2,534

)

4,135

3,620

7,755

Savings and NOW deposits

726

(11

)

715

56

152

208

Time deposits

1,755

(4,880

)

(3,125

)

1,873

8,586

10,459

Total deposits

$

897

$

(10,315

)

$

(9,418

)

$

9,439

$

15,858

$

25,297

Federal funds purchased

(392

)

(90

)

(482

)

251

25

276

Federal Home Loan Bank advances

(46

)

—

(46

)

(1,333

)

155

(1,178

)

Subordinated debt

(74

)

22

(52

)

18

(51

)

(33

)

Total interest-bearing liabilities

385

(10,383

)

(9,998

)

8,375

15,987

24,362

Change in net interest income

$

1,054

$

5,912

$

6,966

$

1,877

$

(16,037

)

$

(14,160

)

Provision for Credit Losses

We establish a provision for credit losses, which is charged to operations, in order to maintain the allowance for credit losses at a level we consider necessary to absorb expected credit losses that are reasonably estimated at the balance sheet date. In determining the level of the allowance for credit and off-balance sheet losses, we consider past and current loss experience, evaluations of real estate collateral, current and future economic conditions, volume and type of lending, adverse situations that may affect a borrower’s ability to repay a loan and the levels of non-performing loans. The amount of the allowance is based on estimates, and actual losses may vary from such estimates as more information becomes available or economic conditions change.

This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as circumstances change as more information becomes available. The allowance for credit losses on loans is assessed on a monthly basis and provisions are made for credit losses on loans as required in order to maintain the allowance at the required level determined by our analysis. The allowance for off-balance sheet credit is assessed quarterly and provisions are made to maintain the allowance at the required level determined by our analysis.

The provision for credit losses on loans decreased to a recovery of credit loss of $0.1 million for the year ended December 31, 2025, compared to the prior year which ended at a credit loss provision of $7.5 million. The provision for credit losses on off-balance sheet exposure was a net provision of $48,000 compared to the prior year which ended with a net recovery of $0.7 million. The decrease in provision for credit losses on loans was primarily driven by less charge offs taken in 2025 compared to 2024. The recovery of credit losses for off-balance sheet exposure was driven by fluctuations in our revolving credit line utilization rates as of December 31, 2025. Loan originations decreased $21.6 million, which totaled $374.0 million for the year ended December 31, 2024 compared to loan originations of $352.5 million for the year ended December 31, 2025. Non-performing loans were $21.7 million at December 31, 2024 and $31.5 million at December 31, 2025.

During the year ended December 31, 2025, classified loans increased $26.8 million for a balance of $84.2 million. During the year ended December 31, 2025, criticized loans increased $25.2 million to $110.5 million. During the year ended December 31, 2025, watch list loans increased $46.1 million to $168.7 million. Management does not believe any significant loss exposure currently exists in these loans. All classified loans are considered individually evaluated and have strong collateral positions, with satisfactory loan-to-value (LTVs) ratios. Criticized loans continue to perform, are well collateralized, and show improving trends. During the year ended December 31, 2025, there was $0.9 million in charge-offs recorded and recoveries of $0.8 million were received. During the year ended December 31, 2024, there was $4.6 million in charge-offs recorded and recoveries received of $28,000.

Discussion of provision for credit losses for the year ended December 31, 2023 has been omitted as such discussion was provided in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading "Provision for Credit Losses” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 20, 2024, and is incorporated herein by reference.

40

Non-Interest Income

Our primary sources of non-interest income are service charges on deposit accounts, such as interchange fees and statement fees, and income earned on bank owned life insurance. The following table presents, for the periods indicated, the major categories of non-interest income:

For the Year Ended December 31,

2025

2024

% Change

(In thousands)

Non-interest income

Deposit account service charges

$

2,184

$

1,996

9.42

%

Bank owned life insurance income

1,245

1,189

4.71

%

Gain on retirement of subordinated debt

273

—

100.00

%

Net loss on securities called or matured

—

(48

)

(100.00

)%

Gain on equity securities

103

—

100.00

%

Other fee income

222

115

93.04

%

Total non-interest income

$

4,027

$

3,252

23.83

%

Non-interest income increased $0.8 million, or 23.8%, to $4.0 million for the year ended December 31, 2025 from $3.3 million for the year ended December 31, 2024. The increase in non-interest income was primarily due to a $0.3 million gain on retirement of subordinated debt and an increase in deposit account service charges and other fee income of $0.2 million for the year ended December 31, 2025. Bank owned life insurance income increased $0.1 million for the year ended December 31, 2025, compared to the year ended December 31, 2024, due to the elevated rate environment throughout 2025. 

Discussion of non-interest income for the year ended December 31, 2023 has been omitted as such discussion was provided in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Non-Interest Income” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 20, 2024, and is incorporated herein by reference.

Non-Interest Expense

Generally, non-interest expense is composed of all employee expenses and costs associated with operating our facilities, obtaining and retaining customer relationships and providing bank services. The largest component of non-interest expense is salaries and employee benefits. Non-interest expense also includes operational expenses, such as occupancy and equipment expenses, professional fees, advertising expenses and other general and administrative expenses, including FDIC assessments, communications, travel, meals, training, supplies and postage. The following table presents, for the periods indicated, the major categories of non-interest expense:

For the Year Ended December 31,

2025

2024

% Change

(In thousands)

Non-interest expense

Salaries and employee benefits

$

31,587

$

30,475

3.65

%

Furniture and equipment expenses

3,840

3,636

5.61

%

Advertising and marketing

2,051

2,199

(6.73

)%

Occupancy expenses

1,407

1,614

(12.83

)%

Outside services

3,776

3,627

4.11

%

Franchise tax

2,098

2,226

(5.75

)%

FDIC insurance

2,135

1,342

59.09

%

Data processing

1,471

1,354

8.64

%

Administrative expenses

996

929

7.21

%

Computer software intangible impairment

—

19,721

(100.00

)%

Other operating expenses

5,190

5,844

(11.19

)%

Total non-interest expense

$

54,551

$

72,967

(25.24

)%

41

Non-interest expense decreased $18.4 million or 25.2% to $54.6 million for the year ended December 31, 2025 from $73.0 million for the year ended December 31, 2024 primarily as a result of the impairment of the computer software intangible of $19.7 million recognized during the year ended December 31, 2024. Salaries and employee benefits expense increased by $1.1 million to $31.6 million for the year ended December 31, 2025 from $30.5 million for the year ended December 31, 2024. FDIC insurance expense increased $0.8 million to $2.1 million for the year ended December 31, 2025, from $1.3 million for the year ended December 31, 2024 due to significant deposit growth earlier in the year, as those deposits were temporary, we expect this expense to return to previous levels. Other operating expenses decreased $0.7 million from $5.8 million for the year ended December 31, 2024 to $5.2 million for the year ended December 31, 2025 due to expense management. Furniture and equipment expenses increased $0.2 million to $3.8 million for the year ended December 31, 2025 from $3.6 million for the year ended December 31, 2024.  Many of the non-interest expense categories remain consistent for the year ended December 31, 2025 compared to the year ended December 31, 2024 as management continues to exercise judicious expense controls. 

Discussion of non-interest expense for the year ended December 31, 2023 has been omitted as such discussion was provided in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Non-Interest Expense” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 20, 2024, and is incorporated herein by reference.

Income Tax Expense

Income tax expense increased $7.4 million or 188.6%, to a tax expense of $3.5 million for the year ended December 31, 2025 from a tax benefit of $3.9 million for the year ended December 31, 2024. The increase in income tax expense for the year ended December 31, 2025 compared to the same period a year earlier was driven by the return to net income for the year ended December 31, 2025  from a net loss recorded for the year ended December 31, 2024.  For the year ended December 31, 2025, the Bank had an effective tax rate of 18.2%, compared to effective benefit rate of 28.2% for the year ended December 31, 2024.

Discussion of income tax expense for the year ended December 31, 2023 has been omitted as such discussion was provided in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Income Tax Expense” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on March 20, 2024, and is incorporated herein by reference.

Comparison of Statements of Financial Condition at December 31, 2025 and at December 31, 2024

Total Assets

Total assets decreased $15.4 million, or 0.7%, to $2.21 billion at December 31, 2025 from $2.23 billion at December 31, 2024. The decrease was primarily the result of decreases of $45.0 million in cash and cash equivalents offset by an increase of $31.3 million in net loans receivable. 

42

Investment Securities

We use our securities portfolio to provide a source of liquidity, provide an appropriate return on funds invested, manage interest rate risk, meet collateral requirements, assist in achieving Community Reinvestment Act (CRA) objectives, and meet regulatory capital and liquidity requirements. Our investment policy is established and reviewed annually by the Board of Directors. We are permitted under federal law to invest in various types of liquid assets, including United States Government obligations, securities of various federal agencies and of state and municipal governments, mortgage-backed securities, time deposits of federally insured institutions, subordinated debt of other financial institutions, equity securities, certain bankers’ acceptances and federal funds.

Our investment objectives are to maintain high asset quality, to provide and maintain liquidity, to establish an acceptable level of interest rate and credit risk, to provide an alternate source of low-risk investments when demand for loans is weak and to generate a favorable return. The Board of Directors has the overall responsibility for the investment portfolio, including approval of our investment policy. The Board of Directors is also responsible for implementation of the investment policy and monitoring investment performance. The Board of Directors reviews the status of the investment portfolio on a quarterly basis, or more frequently if warranted.

Generally accepted accounting principles require that, at the time of purchase, we designate a security as held-to-maturity, available-for-sale, or trading, depending on our ability and intent to hold such security. Debt securities available-for-sale are reported at fair value, while debt securities held-to-maturity are reported at amortized cost. We do not maintain a trading portfolio. Establishing a trading portfolio would require specific authorization by the Board of Directors.

The total investment securities portfolio, including both investment securities available-for-sale and investment securities held-to-maturity, was $71.8 million at December 31, 2025, a decrease of $0.1 million compared with December 31, 2024. At December 31, 2025, the investment securities portfolio includes $58.0 million of investment securities available-for-sale and $13.8 million of investment securities held-to-maturity compared to $55.7 million of investment securities available-for-sale and $16.1 million of investment securities held-to-maturity at December 31, 2024.

The Company did not sell any securities within the investment portfolio during the year ended December 31, 2025 or 2024.

For available-for-sale securities, management evaluates all investments in an unrealized loss position on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. If the Company has the intent to sell the security, or it is more likely than not that the Company will be required to sell the security, the security is written down to fair value, and the entire loss is recorded in earnings.

Portfolio Maturities and Yields. The composition and maturities of the investment securities portfolio at December 31, 2025, are summarized in the following table. Maturities are based on the final contractual payment date, and do not reflect the effect of scheduled principal repayments, prepayments, or early redemptions that may occur. Adjustable-rate mortgage-backed securities are included in the period in which interest rates are next scheduled to adjust. The Company does invest in both taxable and non-taxable municipal securities. No material changes occurred in the non-taxable security portfolio for the year ended December 31, 2025.

More than One Year

More than Five Years

More than

One Year or Less

through Five Years

through Ten Years

Ten Years

Total

Weighted

Weighted

Weighted

Weighted

Weighted

Amortized

Average

Amortized

Average

Amortized

Average

Amortized

Average

Amortized

Fair

Average

Cost

Yield (1)

Cost

Yield (1)

Cost

Yield (1)

Cost

Yield (1)

Cost

Value

Yield (1)

(Dollars in thousands)

Securities available-for-sale:

Collateralized Mortgage Securities

$

—

—

$

—

—

$

511

2.71

%

$

18,516

1.56

%

$

19,027

$

16,053

1.59

%

Subordinated Debt

—

—

750

7.75

%

11,122

4.34

%

—

—

11,872

11,206

4.07

%

Preferred Stock

—

—

—

—

—

—

468

8.11

%

468

468

8.11

%

Municipal Securities

Taxable

—

—

720

1.50

%

1,727

2.03

%

7,150

2.47

%

9,597

7,689

2.32

%

Tax-exempt

—

—

—

—

4,230

4.17

%

18,153

3.53

%

22,383

20,451

3.65

%

U.S. Government Agencies

—

—

—

—

55

6.07

%

2,043

6.09

%

2,098

2,087

6.09

%

Total

$

—

—

$

1,470

—

$

17,645

4.03

%

$

46,330

2.74

%

$

65,445

$

57,954

3.04

%

Securities held-to-maturity:

Municipal Securities

Tax-exempt

$

399

4.13

%

$

3,140

4.14

%

$

3,606

4.63

%

$

6,653

4.70

%

$

13,798

$

13,754

4.54

%

Total

$

399

4.13

%

$

3,140

4.14

%

$

3,606

4.63

%

$

6,653

4.70

%

$

13,798

$

13,754

4.54

%

(1)

Weighted average yields are a non-GAAP measure and are reported on a taxable equivalent basis using the statutory federal corporate tax rate of 21%. Weighted average yield is calculated as the tax-equivalent yield on a pro rata basis for each security based on its relative amortized cost.

43

Loan Portfolio

Our primary source of income is derived from interest earned on loans. Our loan portfolio consists of loans secured by real estate as well as commercial business loans and consumer loans. Our loan customers primarily consist of small- to medium-sized businesses, professionals, real estate investors, small residential builders and individuals. Our owner occupied and investment commercial real estate loans, residential construction loans and commercial business loans provide us with higher risk-adjusted returns, shorter maturities and more sensitivity to interest rate fluctuations, and are complemented by our relatively lower risk residential real estate loans to individuals. Our lending activities are principally directed to our market area consisting of the Washington, D.C. and Northern Virginia metropolitan areas.

Loan Portfolio Maturities and Yields. The following table summarizes the scheduled repayments of our loan portfolio at December 31, 2025. Demand loans, having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less. Maturities are based on the final contractual payment date and do not reflect the impact of prepayments and scheduled principal amortization.

As of December 31, 2025

Single-Family

Multi-Family

Farmland

Owner Occupied

Non-Owner Occupied

(In thousands)

Amounts due in:

One year or less

$

27,481

$

30,768

$

—

$

31,485

$

118,995

After one year through two years

25,361

63,478

—

12,125

69,476

After two years through three years

23,952

45,977

—

60,200

96,305

After three years through five years

58,761

44,534

—

78,448

103,685

After five years through ten years

69,126

39,416

116

249,497

164,600

After ten years through fifteen years

666

1,247

63

12,557

13,332

After fifteen years

10,632

—

—

4,227

—

Total

$

215,979

$

225,420

$

179

$

448,539

$

566,393

Construction & Land Development

Commercial & Industrial

Consumer

Total Loan Portfolio Maturities

Amounts due in:

(In thousands)

One year or less

$

143,886

$

39,653

$

582

$

392,850

After one year through two years

30,087

17,467

202

218,196

After two years through three years

31,282

3,690

99

261,505

After three years through five years

11,013

27,465

232

324,138

After five years through ten years

71,025

8,539

33

602,352

After ten years through fifteen years

13,373

8,128

—

49,366

After fifteen years

—

2,049

—

16,908

Total

$

300,666

$

106,991

$

1,148

$

1,865,315

The following table sets forth our fixed and adjustable-rate loans at December 31, 2025, that are contractually due after December 31, 2025.

Due After December 31, 2025

Fixed

Adjustable

Rates

Rates

Total

(In thousands)

Residential Real Estate:

Single Family

$

102,911

$

113,068

$

215,979

Multifamily

158,177

67,243

225,420

Farmland

179

—

179

Commercial Real Estate:

Owner Occupied

219,088

229,451

448,539

Non-Owner Occupied

299,352

267,041

566,393

Construction & Land Development

72,225

228,441

300,666

Commercial – Non-Real Estate:

Commercial & Industrial

48,041

58,950

106,991

Consumer – Non-Real Estate:

Unsecured

210

—

210

Secured

845

93

938

Totals

$

901,028

$

964,287

$

1,865,315

44

The following table shows our loan originations, participations, purchases, sales and repayment activities for the periods indicated.

Years Ended December 31,

2025

2024

(In thousands)

Total loans at beginning of year:

$

1,834,998

$

1,727,091

Loans originated:

Real Estate Loans:

Residential Real Estate:

Single Family

41,354

28,067

Multifamily

44,030

15,032

Farmland

—

106

Commercial Real Estate:

Owner Occupied

101,879

39,131

Non-Owner Occupied

22,023

104,372

Construction & Land Development

95,023

158,831

Commercial – Non-Real Estate:

Commercial & Industrial

47,542

27,957

Consumer – Non-Real Estate:

Unsecured

210

343

Secured

410

209

Total loans originated:

352,471

374,048

Loan principal repayments:

Principal repayments

320,457

266,141

Loans transferred to other real estate owned:

Transfers to other real estate owned

1,697

—

Net loan activity

30,317

107,907

Total loans at the end of year

$

1,865,315

$

1,834,998

Loans, net of unearned income, totaled $1.9 billion at December 31, 2025, an increase of $30.3 million from December 31, 2024. The increase in total loans was primarily driven by growth in the overall loan portfolio, with increases in commercial real estate for owner occupied and non-owner occupied segments as well as in commercial and industrial credits. Owner occupied loans had a balance of $448.5 million at December 31, 2025 compared to $372.4 million at December 31, 2024, for a net increase of $76.1 million. Non-owner occupied loans had a balance of $566.4 million at December 31, 2025 compared to $525.8 million at December 31, 2024, for a net increase of $40.6 million. Commercial and industrial loans had a balance of $107.0 million at December 31, 2025 compared to $102.4 million at December 31, 2024, for a net increase of $4.6 million. 

A significant portion of the loan portfolio consists of commercial, construction and commercial real estate loans, primarily made in the Washington, D.C. metropolitan area and secured by real estate or other collateral in that market. Although these loans are made to a diversified pool of unrelated borrowers across numerous businesses, adverse developments in the Washington, D.C. metropolitan real estate market could have an adverse impact on this portfolio of loans and the Company’s income and financial position. While our basic market area is the Washington, D.C. metropolitan area, the Bank has made loans outside that market area where the applicant is an existing customer, and the nature and quality of such loans was consistent with the Company's lending policies.

The Company has a limited amount of credit exposure to government contractors in the Washington, D.C. metropolitan area. Below is a schedule that outlines the credit exposure to businesses with government contracts by structure type as of December 31, 2025. The line of credit balances consist of asset based lines of credits on billed receivables, which are receivables for work that has been completed and invoiced to the government or the prime contractor. Ongoing monitoring of the lines of credit include receiving borrowing base certificates monthly on the billed receivables amount. Since December 31, 2024, we have strengthened the monitoring of these lines of credit to fully verify the billed receivables amount each time funds are advanced. Term debt is secured by a combination of business assets and additional real estate collateral.

December 31, 2025

Government Contracting Credit Exposures

(Dollars in thousands)

Principal Balance

Line/Term Commitment

Availability

Number of Relationships

Number of Relationships with Balances

Line of Credit

$

12,316

$

79,650

$

67,334

30

12

Term Debt Exposure

1,374

1,374

—

3

3

Total Exposure

$

13,690

$

81,024

$

67,334

33

15

December 31, 2024

Government Contracting Credit Exposures

(Dollars in thousands)

Principal Balance

Line/Term Commitment

Availability

Number of Relationships

Number of Relationships with Balances

Line of Credit

$

16,733

$

76,038

$

59,305

30

13

Term Debt Exposure

1,445

1,445

—

2

2

Total Exposure

$

18,178

$

77,483

$

59,305

32

15

The federal banking Agencies issued guidance in 2006 which addresses institutions’ with increased concentrations of commercial real estate (CRE) loans.  The guidance does not establish specific CRE lending limits; rather, it promotes sound risk management practices and appropriate levels of capital that will enable institutions to continue to pursue CRE lending in a safe and sound manner.  In developing this guidance, the Agencies recognized that different types of CRE lending present different levels of risk, and that consideration should be given to the lower risk profiles and historically superior performance of certain types of CRE, such as well-structured multifamily housing finance, when compared to others, such as speculative office space construction. As discussed under “CRE Concentration Assessments,” institutions are encouraged to segment their CRE portfolios to acknowledge these distinctions for risk management purposes. The guidance focuses on those CRE loans for which the cash flow from the real estate is the primary source of repayment rather than loans to a borrower for which real estate collateral is taken as a secondary source of repayment or through an abundance of caution. Thus, for the purposes of the guidance, CRE loans include those loans with risk profiles sensitive to the condition of the general CRE market (for example, market demand, changes in capitalization rates, vacancy rates, or rents). CRE loans are land development and construction loans (including 1- to 4-family residential and commercial construction loans) and other land loans. CRE loans also include loans secured by multifamily property, and nonfarm nonresidential property where the primary source of repayment is derived from rental income associated with the property (that is, loans for which 50 percent or more of the source of repayment comes from third party, nonaffiliated, rental income) or the proceeds of the sale, refinancing, or permanent financing of the property. Excluded from the scope of this Guidance are loans secured by nonfarm nonresidential properties where the primary source of repayment is the cash flow from the ongoing operations and activities conducted by the party, or affiliate of the party, who owns the property.

As part of their ongoing supervisory monitoring processes, the Agencies use certain criteria to identify institutions that are potentially exposed to significant CRE concentration risk. An institution that has experienced rapid growth in CRE lending, has notable exposure to a specific type of CRE, or is approaching or exceeds the following supervisory criteria may be identified for further supervisory analysis of the level and nature of its CRE concentration risk:

1.

Total reported loans for construction, land development, and other land represent 100 percent or more of the institution’s total risk-based capital; or

2.

Total commercial real estate loans as defined in this guidance represent 300 percent or more of the institution’s total risk-based capital, and the outstanding balance of the institution’s commercial real estate loan portfolio has increased by 50 percent or more during the prior 36 months.

The Agencies use the criteria as a preliminary step to identify institutions that may have CRE concentration risk. Because regulatory reports capture a broad range of CRE loans with varying risk characteristics, the supervisory monitoring criteria do not constitute limits on an institution’s lending activity but rather serve as high-level indicators to identify institutions potentially exposed to CRE concentration risk.

The Company holds a concentration in commercial real estate loans. The Board has set a risk tolerance level of 150% and 375% of consolidated risk-based capital for construction, land development and other land loans and commercial real estate loans. As of December 31, 2025, construction, land development and other land loans represented 97.6% of consolidated risk-based capital. Total commercial real estate loans as defined by the Agency guidance represented 354.6% of consolidated risk-based capital. During the prior 36 months, the Company has experienced an increase in its commercial real estate portfolio by 45%. 

The management team has extensive experience in underwriting commercial real estate loans and has implemented and continues to maintain heightened risk management procedures and strong underwriting criteria with respect to its commercial real estate portfolio. The Board of Directors has established internal maximum limits on CRE as an asset class overall as well as sub limits within CRE by property class, to better manage and control the exposure to property classes during periods of changing economic conditions. The Board of Directors also has minimum targets for regulatory capital ratios that are in excess of well capitalized ratios.

Our risk management process begins with a robust underwriting program. The underwriting and risk rating of all loans is completed by an underwriting team that is independent of the originating lender(s). The underwriting analysis of commercial real estate loans includes pre-origination stress testing utilizing the portfolio stress testing methods to fully understand the potential exposure before we originate the credit. Once originated, each loan receives ongoing quarterly stress tests to evaluate the risk profile over the life of the credit.

We stress test earning assets using a worst-case methodology on a quarterly basis and measure the results against the Bank's risk-based capital. For commercial loans, residential real estate loans, owner-occupied commercial real estate loans and consumer installment loans, we multiply the total outstanding amount for each loan category by our highest quarter historical loss for that category as a surrogate in order to calculate a stressed loss.

45

For our non-owner occupied commercial real estate loans, we use three separate methodologies in our stress test. If a property fails more than one of the three tests, we extend the test with the highest exposure value and add an additional 10% for selling costs.

•

An immediate and sustained 3.0% increase in interest rates,

•

An immediate and sustained 5.0% increase in vacancy rates, and

•

An immediate and sustained 2.0% change in the capitalization rate, or “cap rate.” 

We stress test the construction lending portfolio by applying exponential discounting (using a "k factor" of 2) to each project based upon its percentage of completion. The project is stressed using the as-is and as-complete appraised values and assumes 10% selling costs.

 For all other loans, we utilize the Bank's historic loss rates or if not available, the average loss rates of UBPR Group 4 banks, for bank owned life insurance we utilize default rates from S&P Global ratings, and for securities we obtain an independent fair market value and if it is less than the book value, we subtract the fair market value from the book value to determine the stress loss. The following table shows the Company's earning assets and the results of the stress test performed for the periods indicated. 

December 31, 2025

Outstanding Balance

Stress Test Results (1)

Stressed Loss Percent

(Dollars in thousands)

Earning Asset Component

Construction

$

300,666

$

(5,294

)

(1.76

)%

Non-Owner Occupied CRE

791,813

(29,160

)

(3.68

)%

All Other Loans

772,836

(22,702

)

(2.94

)%

HTM Securities

13,798

(35

)

(0.25

)%

AFS Securities

65,445

(5,768

)

(8.81

)%

Bank Owned Life Insurance

40,752

(19

)

(0.05

)%

Total

$

1,985,310

$

(62,978

)

(3.17

)%

(1) Net tax effective loss at the statutory rate of 21%

December 31, 2024

Outstanding Balance

Stress Test Results (1)

Stressed Loss Percent

(Dollars in thousands)

Earning Asset Component

Construction

$

393,385

$

(5,625

)

(1.43

)%

Non-Owner Occupied CRE

760,676

(10,793

)

(1.42

)%

All Other Loans

680,937

(20,766

)

(3.05

)%

HTM Securities

16,078

(169

)

(1.05

)%

AFS Securities

65,761

(7,711

)

(11.73

)%

Bank Owned Life Insurance

39,507

(39

)

(0.10

)%

Total

$

1,956,344

$

(45,103

)

(2.31

)%

(1) Net tax effective loss at the statutory rate of 21%

The total estimated stress test loss is deducted from capital and we recalculate the capital ratios. As shown in the tables below, as of December 31, 2025, and 2024 the post-stress capital ratios well exceed our Board target ratios as well as Agency minimums (with buffer).

December 31, 2025

Bank Capital Adequacy Ratios Pre- and Post-Stress (Tax-Effective)

Well Capitalized with Buffer

Bank Minimum Target

As of December 31, 2025

Post Stress, Low Estimate

Post Stress, High Estimate

Leverage Ratio

5.00

%

9.50

%

13.28

%

11.11

%

10.63

%

Total Risk-Based Capital

10.00

%

11.50

%

16.08

%

13.62

%

13.08

%

Tier 1 Risk-Based Capital

8.00

%

9.50

%

15.05

%

12.59

%

12.05

%

Common Equity Tier 1 Risk-Based Capital

6.50

%

8.00

%

15.05

%

12.29

%

11.75

%

December 31, 2024

Bank Capital Adequacy Ratios Pre- and Post-Stress (Tax-Effective)

Well Capitalized with Buffer

Bank Minimum Target

As of December 31, 2024

Post Stress, Low Estimate

Post Stress, High Estimate

Leverage Ratio

5.00

%

9.50

%

12.08

%

10.62

%

10.44

%

Total Risk-Based Capital

10.00

%

11.50

%

15.69

%

13.92

%

13.71

%

Tier 1 Risk-Based Capital

8.00

%

9.50

%

14.64

%

12.87

%

12.66

%

Common Equity Tier 1 Risk-Based Capital

6.50

%

8.00

%

14.64

%

12.47

%

12.26

%

The Company employs an external loan review firm to conduct ongoing reviews of the loan portfolio. During the year ended December 31, 2025, the independent external loan review firm reviewed approximately 78% of the entire portfolio by outstanding dollar balance. The external review did not identify any material underwriting or ongoing portfolio management concerns.

46

The following two tables break down the December 31, 2025 and December 31, 2024 non-owner occupied CRE portfolio balances by showing the current balance in each sub-category and location. The tables also display very favorable weighted average interest rates and weighted average loan-to-values for both periods. The weighted average occupancy percentages are also broadly favorable for both periods.

December 31, 2025

(Dollars in thousands)

Non-Owner Occupied CRE (2)

Location

Weighted Average Rate

Weighted Average Loan-to-Value (1)

Weighted Average Occupancy %

DC

MD

VA

Other

Total

Multifamily

$

217,556

$

2,996

$

4,868

$

—

$

225,420

5.89

%

70

%

67

%

Office:

Mixed use

590

2,620

2,715

—

5,925

6.47

%

48

%

91

%

Medical

—

22,150

19,277

359

41,786

5.84

%

62

%

81

%

Office

—

1,887

3,008

—

4,895

6.61

%

49

%

91

%

Office to Residential Conversion

—

—

32,136

—

32,136

9.50

%

39

%

-- (4

)

Hospitality

60,059

74,143

83,893

—

218,095

5.66

%

62

%

-- (3

)

Retail/Commercial

63,584

39,160

77,507

24,021

204,272

6.21

%

60

%

76

%

Industrial

36,805

15,257

2,425

4,797

59,284

6.27

%

56

%

90

%

Total Non-Owner Occupied CRE

$

378,594

$

158,213

$

225,829

$

29,177

$

791,813

6.12

%

62

%

54

%

Construction & Land Development

Multifamily

$

79,008

$

—

$

—

$

—

$

79,008

6.86

%

62

%

N/A

1-4 family

65,320

2,733

65,942

—

133,995

7.68

%

68

%

N/A

Retail/Commercial

19,944

—

—

—

19,944

6.75

%

55

%

N/A

Industrial

—

—

4,632

—

4,632

6.88

%

66

%

N/A

Mixed use

4,962

—

—

—

4,962

8.40

%

29

%

N/A

Other

565

18,527

28,903

10,130

58,125

7.78

%

52

%

N/A

Total Construction & Land Development

$

169,799

$

21,260

$

99,477

$

10,130

$

300,666

7.46

%

62

%

N/A

Total Construction, Land Development, and Non-Owner Occupied CRE

$

548,393

$

179,473

$

325,306

$

39,307

$

1,092,479

6.52

%

62

%

N/A

(1)

Loan-to-value is based on maximum potential outstanding at time of origination.

(2)

Non-owner occupied includes multifamily call code 1D.

(3)

Hospitality occupancy rates rely on individual STR data. An STR report is the industry standard, monthly benchmarking report for the hospitality industry.

(4)

The underlying properties for office to residential conversion loans generally are not occupied during the conversion period.

47

December 31, 2024

(Dollars in thousands)

Non-Owner Occupied CRE (2)

Location

Weighted Average Rate

Weighted Average Loan-to-Value (1)

Weighted Average Occupancy %

DC

MD

VA

Other

Total

Multifamily

$

224,848

$

3,025

$

7,011

$

—

$

234,884

6.06

%

66

%

73

%

Office:

Mixed use

605

2,676

2,909

—

6,190

5.41

%

64

%

81

%

Medical

—

22,169

15,395

431

37,995

5.61

%

63

%

69

%

Office

—

1,892

3,451

—

5,343

6.37

%

61

%

89

%

Office to Residential Conversion

11,160

—

32,136

—

43,296

10.83

%

58

%

-- (4

)

Hospitality

28,797

75,504

98,352

—

202,653

5.93

%

64

%

-- (3

)

Retail/Commercial

60,194

41,892

92,917

9,156

204,159

6.06

%

57

%

78

%

Industrial

—

14,801

5,521

5,834

26,156

6.29

%

59

%

87

%

Total Non-Owner Occupied CRE

$

325,604

$

161,959

$

257,692

$

15,421

$

760,676

6.14

%

62

%

67

%

Construction & Land Development

Multifamily

$

91,424

$

—

$

13,386

$

15,000

$

119,810

7.32

%

64

%

N/A

1-4 family

71,234

—

63,430

—

134,664

8.32

%

57

%

N/A

Retail/Commercial

19,534

—

—

—

19,534

7.15

%

63

%

N/A

Industrial

37,467

—

980

—

38,447

5.85

%

57

%

N/A

Mixed use

12,705

—

—

—

12,705

7.95

%

58

%

N/A

Other

247

21,135

23,815

23,028

68,225

7.90

%

37

%

N/A

Total Construction & Land Development

$

232,611

$

21,135

$

101,611

$

38,028

$

393,385

7.73

%

56

%

N/A

Total Construction, Land Development, and Non-Owner Occupied CRE

$

558,215

$

183,094

$

359,303

$

53,449

$

1,154,061

6.71

%

60

%

N/A

(1)

Loan-to-value is based on maximum potential outstanding at time of origination.

(2)

Non-owner occupied includes multifamily call code 1D.

(3)

Hospitality occupancy rates rely on individual STR data.

(4)

The underlying properties for office to residential conversion loans generally are not occupied during the conversion period.

The Company also underwrites and originates owner-occupied commercial real estate loans. These loans are typically term loans made to support properties that rely upon the operations of the business occupying the property for repayment. The Agencies specifically excluded owner-occupied commercial real estate from their concentration guidance, as the primary source of repayment is the cash flow from the ongoing operations and activities conducted by the party, or affiliate of the party, who owns the property. 

48

The following two tables depict a well-diversified portfolio of owner-occupied commercial real estate as of December 31, 2025 and December 31, 2024.  The properties are distributed nicely among the Company's footprint. This loan segment continues to perform very well and is supported by strong loan-to-values (LTVs). The following table sets forth our owner-occupied CRE portfolio by the business industry groups that occupy the properties for the periods indicated.

December 31, 2025

(Dollars in thousands)

Owner Occupied CRE

Location

Weighted Average Rate

Weighted Average Loan-to-Value (1)

DC

MD

VA

Other

Total

Accommodation and food services

$

22,593

$

2,834

$

11,167

$

5,362

$

41,956

5.65

%

73

%

Administrative and support

—

4,500

2,105

—

6,605

6.25

%

59

%

Arts and recreation

—

—

36,572

—

36,572

5.91

%

57

%

Construction services

27,876

10,018

15,691

—

53,585

5.98

%

75

%

Education services

26,336

894

4,875

—

32,105

6.10

%

49

%

Health care

4,577

17,050

14,819

4,131

40,577

6.80

%

57

%

Information

—

—

4,430

—

4,430

4.43

%

43

%

Manufacturing

—

—

4,665

—

4,665

4.20

%

46

%

Religious and other

9,593

17,808

75,492

915

103,808

6.31

%

61

%

Professional, scientific, tech services

2,816

—

5,200

—

8,016

5.13

%

59

%

Real estate and rental leasing

4,221

25,295

4,788

—

34,304

6.25

%

61

%

Retail trade

3,155

35,695

34,899

239

73,988

6.54

%

66

%

Wholesale trade

—

151

883

6,894

7,928

6.07

%

68

%

Total Owner Occupied CRE

$

101,167

$

114,245

$

215,586

$

17,541

$

448,539

6.18

%

63

%

(1)

Loan-to-value is based on maximum potential outstanding at time of origination

December 31, 2024

(Dollars in thousands)

Owner Occupied CRE

Location

Weighted Average Rate

Weighted Average Loan-to-Value (1)

DC

MD

VA

Other

Total

Accommodation and food services

$

18,669

$

2,921

$

10,775

$

10,853

$

43,218

5.89

%

72

%

Administrative and support

—

4,500

4,716

—

9,216

5.53

%

56

%

Arts and recreation

—

—

36,517

—

36,517

5.73

%

62

%

Construction services

14,947

4,003

15,688

37

34,675

5.39

%

76

%

Education services

27,856

—

5,660

—

33,516

5.98

%

59

%

Health care

4,697

17,488

15,275

135

37,595

6.92

%

65

%

Information

—

—

4,365

—

4,365

4.36

%

50

%

Manufacturing

—

—

4,701

—

4,701

4.02

%

53

%

Religious and other

6,027

16,646

66,173

931

89,777

6.18

%

69

%

Professional, scientific, tech services

2,845

—

5,577

—

8,422

6.31

%

73

%

Real estate and rental leasing

738

3,701

3,705

—

8,144

6.27

%

70

%

Retail trade

866

10,564

40,127

2,604

54,161

6.03

%

67

%

Wholesale trade

—

165

915

7,025

8,105

5.94

%

73

%

Total Owner Occupied CRE

$

76,645

$

59,988

$

214,194

$

21,585

$

372,412

5.98

%

67

%

(1)

Loan-to-value is based on maximum potential outstanding at time of origination

The risk profile of real estate properties within our market can vary depending upon location. Therefore, we have disaggregated our stress testing of construction projects further by segmenting the loans into two groupings, those inside a 15-mile radius of Washington, D.C. and those outside that radius. For example, during the 2009 recession, the peak-to-trough drop in property values inside the beltway was less than 10% (CoreLogic, 2019).  The Board determined that loans made inside a 15-mile radius of Washington, D.C. carry less geographic risk than those made outside of that radius.   

49

The graphic below is a geopoint map that depicts all construction loans, non-owner occupied CRE loans, and owner-occupied CRE loans, with a majority of all loan types concentrated within a 15-mile radius of Washington, D.C.

Asset Quality

The Company’s asset quality remained resilient during the year ended December 31, 2025. Non-performing assets, which includes non-accrual loans, accruing loans 90 days past due, and other real estate owned totaled $33.2 million at December 31, 2025, and $21.7 million at December 31, 2024.

A loan’s past due status is based on the contractual due date of the most delinquent payment due. All loans which are 30 or more days past due at the end of the month are reported to the Board of Directors. Commercial loans are generally placed on non-accrual status when the collection of principal or interest is 90 days or more past due, or earlier, if collection is uncertain based on an evaluation of the net realizable value of the collateral and the financial strength of the borrower. Consumer loans are generally placed on non-accrual status when the collection of principal or interest is 120 days or more past due, or earlier, if collection is uncertain based on an evaluation of the net realizable value of the collateral and the financial strength of the borrower. Loans greater than 90 days past due may remain on accrual status if management determines it has adequate collateral to cover the principal and interest. For those loans that are carried on non-accrual status, payments are first applied to principal outstanding. A loan may be returned to accrual status if the borrower has demonstrated a sustained period of repayment performance in accordance with the contractual terms of the loan and there is reasonable assurance the borrower will continue to make payments as agreed.

The Company may identify loans for potential restructure primarily through direct communication with the borrower and evaluation of the borrower’s financial statements, revenue projections, tax returns, and credit reports. Even if the borrower is not presently in default, management will consider the likelihood that cash flow shortages, adverse economic conditions and negative trends may result in a payment default in the near future.

50

As a percentage of total assets, non-performing assets were 1.50% at December 31, 2025, compared with 0.97% at December 31, 2024. As of December 31, 2025, the Company had $31.5 million in loans on non-accrual status and $1.7 million in other real estate owned. 

See Note 1, Organization, Basis of Presentation, and Impact of Recently Issued Accounting Pronouncements and Note 5, Allowance for Credit Losses, in Notes to Consolidated Financial Statements for further information on the Company’s credit grade categories, which are derived from standard regulatory rating definitions.

The following table summarizes asset quality information at December 31, 2025, and December 31, 2024.

December 31,

December 31,

2025

2024

(Dollars in thousands)

Non-accrual loans:

Residential Real Estate

Single Family

$

5,316

$

1,162

Commercial Real Estate

Non-Owner Occupied

314

11,160

Construction & Land Development

25,467

4,235

Commercial Non-Real Estate

Commercial & Industrial

385

5,093

Total non-accrual loans

31,482

21,650

Other Real Estate Owned

1,697

—

Total non-performing assets

$

33,179

$

21,650

Ratios:

Total non-performing loans to total assets

1.42

%

0.97

%

Total non-performing assets to total assets

1.50

%

0.97

%

Total non-accrual loans to gross loans receivable

1.69

%

1.18

%

Interest income that would have been recorded for the years ended December 31, 2025 and 2024 had non-accruing loans been current according to their original terms was $1.4 million and $1.9 million, respectively. 

Occasionally, the Company modifies loans by providing principal forgiveness on certain of its real estate loans. When principal forgiveness is provided, the amortized cost basis of the asset is written off against the allowance for credit losses. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses.

In some cases, the Company will modify a certain loan by providing multiple types of concessions. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. 

The Company further describes loans that were modified during the year ended December 31, 2025 and 2024 in Note 5 of Notes to Consolidated Financial Statements.

Analysis and Determination of the Allowance for Credit Loss on Loans. The allowance for credit losses on loans is maintained at a level which, in management’s judgment, is adequate to absorb probable and estimable future credit losses in the loan portfolio. The amount of the allowance is based on management’s evaluation of the collectability of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specific individually evaluated loans, and current and future economic conditions. Allowances for individually evaluated loans are generally determined based on collateral values. Because of uncertainties associated with regional economic conditions, collateral values, and future cash flows on individually evaluated loans, it is reasonably possible that management’s estimate of probable credit losses inherent in the loan portfolio and the related allowance may change materially in the near-term. The allowance is increased by a provision for credit losses on loans which is charged to expense and reduced by full and partial charge-offs, net of recoveries. Changes in the allowance relating to individually evaluated loans are charged or credited to the provision for credit losses on loans. Management’s periodic evaluation of the adequacy of the allowance is based on various factors, including, but not limited to, management’s ongoing review and grading of loans, facts and issues related to specific loans, historical loan losses on loan pools, the fair value of the underlying collateral, current and future economic conditions and other qualitative and quantitative factors which could affect potential credit losses. An integral part of their examination process, the Federal Reserve Board will periodically review our allowance for credit losses, and as a result of such reviews, we may have to adjust our allowance for credit losses.

On January 1, 2023, the Company adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (CECL) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by the lessor in accordance with Topic 842 on leases. In addition, ASC 326 made changes to the accounting for available-for-sale debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities management does not intend to sell or believes that is not more likely than not they will be required to sell.

The Company adopted ASC 326 and all the subsequent amendments there to effective January 1, 2023 using the modified retrospective method for all financial assets measured at amortized cost, and off-balance-sheet credit exposures. Results for reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior periods amounts continue to be reported in accordance with previously applicable GAAP. The Company recorded a net decrease to retained earnings of $1.7 million, net of taxes, as of January 1, 2023 for the cumulative effect of adopting ASC 326. The transition adjustment includes an increase in allowance for credit losses of $2.2 million and an increase in net deferred tax assets of $506,000.

See Note 1, Organization, Basis of Presentation, and Impact of Recently Issued Accounting Pronouncements and Note 5, Allowance for Credit Losses, in Notes to Consolidated Financial Statements for further information on the Company’s adoption of ASC 326.

51

The following table sets forth activity in our allowance for credit losses on loans for the periods indicated.

For the Year Ended December 31,

For the Year Ended December 31,

2025

2024

(Dollars in thousands)

Balance at beginning of year

$

19,450

$

16,506

Charge-offs:

Residential Real Estate

(200

)

(132

)

Commercial Real Estate

—

(740

)

Construction

(35

)

(3,684

)

Commercial & Industrial

(623

)

(4

)

Consumer

—

(9

)

Total charge-offs

(858

)

(4,569

)

Recoveries:

Residential Real Estate

7

—

Commercial Real Estate

740

—

Commercial & Industrial

86

19

Consumer

1

9

Total recoveries

834

28

Net charge-offs

(24

)

(4,541

)

Provision for credit losses - loans

(118

)

7,485

Balance at end of period

$

19,308

$

19,450

Ratios:

Net charge offs to average loans outstanding

0.00

%

0.25

%

Allowance for credit losses on loans to non-performing loans at end of period

61.33

%

89.84

%

Allowance for credit losses on loans to gross loans at end of period

1.04

%

1.06

%

The following table summarizes our net charge-off activity by loan segment for the periods indicated.

At December 31,

2025

2024

2023

(Dollars in thousands)

Charge-offs

Recoveries

Net charge-offs

Net charge-offs to average loans

Charge-offs

Recoveries

Net charge-offs

Net charge-offs to average loans

Charge-offs

Recoveries

Net charge-offs

Net charge-offs to average loans

Real Estate:

Residential

$

(200

)

$

7

$

(193

)

(0.1

)%

$

(132

)

$

—

$

(132

)

0.0

%

$

—

$

7

$

7

0.0

%

Commercial

—

740

740

0.1

%

(740

)

—

(740

)

(0.1

)%

—

—

—

0.0

%

Construction

(35

)

—

(35

)

0.0

%

(3,684

)

—

(3,684

)

(0.9

)%

—

—

—

0.0

%

Commercial & Industrial

(623

)

86

(537

)

(0.5

)%

(4

)

19

15

—

(462

)

—

(462

)

(0.5

)%

Consumer

—

1

1

0.1

%

(9

)

9

—

—

(6

)

15

9

0.1

%

Total

$

(858

)

$

834

$

(24

)

0.0

%

$

(4,569

)

$

28

$

(4,541

)

(0.3

)%

$

(468

)

$

22

$

(446

)

(0.0

)%

At December 31, 2025, our allowance for credit losses on loans represented 1.04% of total loans and we had $31.5 million in non-performing loans. The allowance for credit losses on loans decreased to $19.3 million at December 31, 2025 from $19.5 million at December 31, 2024 due to the increase in collateral dependent loans during the year ended December 31, 2025, all of which are fully collateralized and do not require specific reserves. There were $24,000 and $4.5 million in net loan charge-offs during the years ended December 31, 2025 and December 31, 2024, respectively.

52

Allocation of Allowance for Credit Losses on Loans. The following table sets forth the allowance for credit losses on loans allocated by loan category and the percent of the allowance in each category to the total allocated allowance on credit losses for loans at the dates indicated. The allowance for credit losses on loans allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.

At December 31,

2025

2024

(Dollars in thousands)

Allowance for Credit Losses - Loans

Percent of Allowance in Each Category to Total Allocated Allowance

Percent of Loans in Each Category to Total Loans

Allowance for Credit Losses - Loans

Percent of Allowance in Each Category to Total Allocated Allowance

Percent of Loans in Each Category to Total Loans

Residential Real Estate:

Single Family

$

1,504

7.8

%

11.6

%

$

1,433

7.4

%

11.1

%

Multifamily

932

4.8

%

12.1

%

1,045

5.4

%

12.8

%

Commercial Real Estate:

Owner Occupied

4,675

24.2

%

24.0

%

4,154

21.3

%

19.5

%

Non-Owner Occupied

7,208

37.4

%

30.4

%

7,167

36.8

%

30.6

%

Construction & Land Development

3,527

18.3

%

16.1

%

4,648

23.9

%

21.4

%

Commercial – Non Real Estate:

Commercial & Industrial

1,456

7.5

%

5.7

%

993

5.1

%

4.5

%

Consumer – Non Real Estate:

Secured

6

—

0.1

%

10

0.1

%

0.1

%

Total

$

19,308

100

%

100

%

$

19,450

100

%

100

%

Funding Activities

Deposits are the primary source of funds for lending and investing activities and their cost is the largest category of interest expense. The Company also utilizes wholesale deposits as a funding source in addition to customer deposits. Scheduled payments, as well as prepayments, and maturities from portfolios of loans and investment securities also provide a stable source of funds. FHLB advances, other secured borrowings, federal funds purchased, and other short-term borrowed funds, as well as longer-term debt issued through the capital markets, all provide supplemental liquidity sources. The Company’s funding activities are monitored and governed through the Company’s asset/liability management process

Deposits

Total deposits decreased by $8.6 million from December 31, 2024 to December 31, 2025. Wholesale deposits, which are included in the table below, totaled $498.5 million and $468.1 million at December 31, 2025, and December 31, 2024, respectively. The following table presents the Company’s average deposits segregated by major category for the years ended December 31, 2025 and December 31, 2024:

At December 31,

2025

2024

Average Balance

Percent

Weighted Average Rate

Average Balance

Percent

Weighted Average Rate

(Dollars in thousands)

Deposit type:

Interest-bearing demand

$

117,493

6.4

%

3.56

%

$

181,109

10.1

%

4.78

%

Money market

486,945

26.7

%

3.87

%

464,400

26.0

%

4.61

%

Savings and NOW

107,151

5.9

%

1.37

%

54,385

3.0

%

1.39

%

Time deposits

785,378

43.0

%

4.36

%

748,938

41.9

%

4.99

%

Interest-bearing deposits

1,496,967

82.0

%

3.92

%

1,448,832

81.0

%

4.70

%

Non-interest-bearing demand

327,632

18.0

%

340,005

19.0

%

Total deposits

$

1,824,599

100.0

%

3.22

%

$

1,788,837

100.0

%

3.81

%

The shift from non-interest-bearing demand deposits into money market demand and time deposits was driven by market conditions emanating from the large-bank failures in the first half of 2023.  In order for us to maintain the customer relationships, we needed to shift the deposits into accounts where we could provide excess FDIC insurance coverage.  We also gained in money market demand and time deposits as customers brought additional funds into the Company.

The Company uses wholesale deposits as a funding source in addition to customer deposits. Wholesale deposits provide a diversified and stable source of funding that generally has stated maturities. As of December 31, 2025, the Company had $498.5 million of total wholesale deposit funding sources, an increase of $30.4 million compared to December 31, 2024, which totaled $468.1 million.

Given the interest rate environment and strategic initiatives, the Company replaced maturing higher yielding wholesale CDs with lower market rate CDs. The Company also utilized additional wholesale demand deposits to provide liquidity and more effectively balance our interest rate sensitivity. During the year ended December 31, 2025, total wholesale deposit funding accounted for approximately 35% of our interest expense.

The following table presents the Company's total wholesale deposit composition, concentrations, current rate and remaining duration, if applicable as of December 31, 2025 and December 31, 2024.

As of December 31,

2025

2024

(Dollars in thousands)

Wholesale Money Market Deposits Accounts (MMDA)

Balance

Percent %

Weighted Average Rate

Weighted Remaining Maturity (in months)

Balance

Percent %

Weighted Average Rate

Weighted Remaining Maturity (in months)

Wholesale MMDAs

$ 170,575

34.2%

3.80%

N/A

$ 100,334

21.4%

4.50%

N/A

Wholesale Time Deposits

Listing Service CDs (1)

18,534

3.7%

4.81%

5

25,231

5.4%

4.79%

13

Wholesale CDs:

Term

283,397

56.9%

4.16%

7

220,357

47.1%

4.56%

7

Term with Call Option (2)

26,000

5.2%

3.83%

33

122,216

26.1%

5.12%

30

Total Wholesale CDs

309,397

342,573

Total wholesale deposits

$

498,506

100.0

%

$

468,138

100.0

%

(1)

Listing service CDs are excluded from being classified as wholesale deposits, per FDIC call report instructions

(2)

All of the CDs as of December 31, 2025 can be called starting in 2026

Regulatory Defined Wholesale Deposits

Each quarter the Bank files a bank call report with the FDIC, which has a specific way it defines wholesale brokered deposits. As of December 31, 2025, the Company had $480.0 million of wholesale deposits outstanding, as defined by FDIC, an increase of $37.1 million from December 31, 2024. In addition, pursuant to rule 12 CFR 337.6(e), well-capitalized and well-rated institutions are not required to treat reciprocal deposits as wholesale deposits up to the lesser of 20 percent of their total liabilities or $5 billion. Reciprocal core deposits exceeding this threshold must be reported additionally as wholesale deposits for call report purposes only. As of December 31, 2025, the Company additionally reported $145.2 million in reciprocal deposits considered wholesale for call report purposes only, bringing regulatory defined wholesale deposits to $625.2 million as of December 31, 2025. As of December 31, 2025, all of the Company's reciprocal deposits were core deposits from customers who placed their deposits in the reciprocal network for additional FDIC insurance coverage.

53

At December 31, 2025, the Company had $911.8 million in total deposits in excess of the FDIC insurance limit of $250,000.

Certificates of deposit in amounts in excess of the FDIC insurance limit of $250,000 totaled approximately $416.8 million. The following table sets forth the maturity of these certificates as of December 31, 2025.

December 31, 2025

(In thousands)

Maturity period:

Three months or less

$

126,705

Over three through six months

72,188

Over six through twelve months

144,736

Over twelve months through three years

72,853

Over three years

362

Total

$

416,844

54

The following table sets forth all of our time deposits classified by interest rate as of the dates indicated.

At December 31,

2025

2024

(In thousands)

Interest Rate Range:

0.01 – 0.99%

$

34

$

1,324

1.00 – 1.99%

2,375

1,073

2.00 – 2.99%

3,332

4,451

3.00 – 3.99%

363,851

59,296

4.00 – 4.99%

409,531

463,571

5.00 and greater

721

289,573

Total

$

779,844

$

819,288

The following table sets forth by interest rate ranges, information concerning the maturities of our certificates of deposit as of December 31, 2025.

Period to Maturity

Less Than or Equal to One Year

More Than One to Two Years

More Than Two to Three Years

More Than Three Years

Total

Percent of Total Certificate Accounts

(Dollars in thousands)

Interest Rate Range:

0.01 – 0.99%

$

34

$

—

$

—

$

—

$

34

0.0

%

1.00 – 1.99%

2,064

311

—

—

2,375

0.3

%

2.00 – 2.99%

1,364

1,064

417

487

3,332

0.4

%

3.00 – 3.99%

319,809

18,232

23,317

2,493

363,851

46.7

%

4.00 – 4.99%

357,801

51,222

—

508

409,531

52.5

%

5.00 and greater

721

—

—

—

721

0.1

%

Total

$

681,793

$

70,829

$

23,734

$

3,488

$

779,844

100.0

%

Borrowed Funds

We may obtain advances from the Federal Home Loan Bank of Atlanta upon the security of the common stock we own in that bank and certain of our residential and commercial mortgage loans, provided certain standards related to creditworthiness have been met. These advances are made pursuant to several credit programs, each of which has its own interest rate and range of maturities. Federal Home Loan Bank advances are generally available to meet seasonal and other withdrawals of deposit accounts and to permit increased lending.

At December 31, 2025 and 2024, we were permitted to borrow up to an aggregate total of $587.8 million and $544.8 million, respectively, from the Federal Home Loan Bank of Atlanta. There were Federal Home Loan Bank borrowings outstanding of $0 at December 31, 2025, and December 31, 2024, respectively. Additionally, as of December 31, 2025 and 2024 we had credit availability of $144.0 million and $144.0 million with correspondent banks for short-term liquidity needs, if necessary. Borrowings were $0 outstanding at December 31, 2025 and 2024, respectively, under this facility.

Liquidity and Capital Resources

Liquidity is the ability of the Company to convert assets into cash or cash equivalents without significant loss and to raise additional funds by increasing liabilities. Liquidity management involves maintaining the Company’s ability to meet the day-to-day cash flow requirements of its customers, whether they are depositors wishing to withdraw funds or borrowers requiring funds to meet their credit needs. Without proper liquidity management, the Company would not be able to perform the primary function of a financial intermediary and would, therefore, not be able to meet the needs of the communities it serves.

The Company assesses liquidity needs on a daily basis using a sophisticated monitoring system that identifies daily sources and uses for a rolling 30-day period. The Company also assesses liquidity needs under various scenarios of market conditions, asset growth and changes in credit ratings. The assessment includes liquidity stress testing which measures various sources and uses of funds under the different scenarios. The assessment provides regular monitoring of unused borrowing capacity and available sources of contingent liquidity to prepare for unexpected liquidity needs and to cover unanticipated events that could affect liquidity.

The asset portion of the balance sheet provides liquidity primarily through unencumbered debt securities available-for-sale, loan principal and interest payments, maturities and prepayments of investment securities held-to-maturity and, to a lesser extent, sales of investment debt securities available-for-sale. Other short-term investments such as federal funds sold and maturing interest-bearing deposits with other banks, are additional sources of liquidity.

55

The liability portion of the balance sheet provides liquidity through various customers’ interest-bearing and non-interest-bearing deposit accounts and through FHLB and other borrowings. Wholesale deposits, federal funds purchased, and other short-term borrowings are additional sources of liquidity and, basically, represent the Company’s incremental borrowing capacity. These sources of liquidity are used as necessary to fund asset growth and meet short-term liquidity needs.

In addition to the Company’s financial performance and condition, liquidity may be impacted by the Company’s structure as a bank holding company that is a separate legal entity from the Bank. The Company requires cash for various operating needs that could include payment of dividends to its stockholders, the servicing of debt, and the payment of general corporate expenses. The primary source of liquidity for the Company is dividends paid by the Bank. Applicable federal and state statutes and regulations impose restrictions on the amount of dividends that may be paid by the Bank. In addition to the formal statutes and regulations, regulatory authorities also consider the adequacy of the Bank’s total capital in relation to its assets, deposits and other such items. Any future dividends must be set forth in the Company's capital plans before any dividends can be paid.

The Company’s ability to raise funding at competitive prices is affected by the rating agencies’ views of the Company’s credit quality, liquidity, capital and earnings. Management is rated by an independent rating agency annually and is provided with independent current outlook for the Company.

The Board of Director's and the Asset Liability Committee (ALCO) are responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies. We believe that we have enough sources of liquidity to satisfy our short and long-term liquidity needs as of December 31, 2025.

We monitor and adjust our investments in liquid assets based upon our assessment of: (1) expected loan demand; (2) expected deposit flows; (3) yields available on interest-earning deposits and securities; and (4) the objectives of our asset/liability management program. Excess liquid assets are invested generally in interest-earning deposits and short-and intermediate-term securities.

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and cash equivalents, which include federal funds sold and interest-earning deposits in other banks. The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period. At December 31, 2025, cash and cash equivalents totaled $162.8 million. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $58.0 million at December 31, 2025.

Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $14.8 million, $14.7 million, and $31.6 million for the twelve months ended December 31, 2025, December 31, 2024, and December 31, 2023, respectively. Net cash used in investing activities, which consists primarily of disbursements for loan originations and the purchase of securities, offset by principal collections on loans and proceeds from maturing securities, was $38.4 million, $122.3 million, and $130.7 million for the twelve months ended December 31, 2025, December 31, 2024, and December 31, 2023, respectively. There were no sales of available-for-sale debt securities in 2025,  2024, or 2023. Net cash used in financing activities was $21.4 million for the twelve months ended December 31, 2025 and net cash provided by financing activities was $200.7 million and $83.0 million, for the twelve months ended December 31, 2024 and 2023, respectively, which consisted primarily of decreases in interest-bearing deposits and repurchase of common stock for the twelve months ended December 31, 2025. 

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Certificates of deposit due within one year of December 31, 2025, totaled $681.8 million of total deposits. If these deposits do not remain with us, we will be required to seek other sources of funds in the normal course of business, including other deposits and Federal Home Loan Bank advances. Depending on market conditions, we may be required to pay higher rates on such deposits or borrowings than we currently pay. We believe, however, based on past experience that a significant portion of such deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered. Management believes that the current sources of liquidity are adequate to meet the Company’s requirements and plans for continued growth.

Regulatory Capital

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

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The federal regulatory capital rules apply to all depository institutions as well as to bank holding companies with consolidated assets of $3 billion or more. However, the regulatory capital requirements generally do not apply on a consolidated basis to a bank holding company with total consolidated assets of less than $3 billion unless the holding company: (1) is engaged in significant nonbanking activities either directly or through a nonbank subsidiary; (2) conducts significant off-balance sheet activities (including securitization and asset management or administration) either directly or through a nonbank subsidiary; or (3) has a material amount of debt or equity securities outstanding (other than trust preferred securities) that are registered with the Securities and Exchange Commission. The Federal Reserve may apply the regulatory capital standards at its discretion to any bank holding company, regardless of asset size, if such action is warranted for supervisory purposes.

Because the Company has total consolidated assets of less than $3 billion and does not engage in activities that would trigger application of the federal regulatory capital rules, it is not at present subject to consolidated capital requirements under such rules.

The Basel III Capital Rules, a comprehensive capital framework for U.S. banking organizations, became effective for the Bank on January 1, 2015 (subject to a phase-in period for certain provisions). Under the Basel III rules, the Bank must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer was phased in from 0.0% for 2015 to 2.50% by 2019. The capital conservation buffer for 2025 and 2024 is 2.50%. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of Total capital, Common Equity Tier 1 capital, and Tier 1 capital (as defined in the regulations) to risk weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 2025, the Bank meets all capital adequacy requirements to which it is subject.

As of December 31, 2025 and 2024, the most recent notification from the Federal Reserve Bank of Richmond categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Common Equity Tier 1 risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since that notification that management believes have changed the Bank’s category.

The Bank’s actual regulatory capital amounts and ratios as of December 31, 2025 and 2024 are presented in the table below.

Actual

Capital Adequacy Purposes

To Be Well Capitalized Under the Prompt Corrective Action Provision

(Dollars in thousands)

Amount

Ratio

Amount

Ratio

Amount

Ratio

As of December 31, 2025

Total capital (to risk-weighted assets)

$

306,631

16.08

%

$

152,541

≥ 8.0%

$

190,677

≥ 10.0%

Common equity tier 1 capital (to risk-weighted assets)

$

286,987

15.05

%

$

85,805

≥ 4.5%

$

123,940

≥ 6.5%

Tier 1 capital (to risk-weighted assets)

$

286,987

15.05

%

$

114,406

≥ 6.0%

$

152,541

≥ 8.0%

Tier 1 capital (to average assets)

$

286,987

13.28

%

$

86,467

≥ 4.0%

$

108,083

≥ 5.0%

As of December 31, 2024

Total capital (to risk-weighted assets)

$

296,584

15.69

%

$

151,269

≥ 8.0%

$

189,086

≥ 10.0%

Common equity tier 1 capital (to risk-weighted assets)

$

276,847

14.64

%

$

85,089

≥ 4.5%

$

122,906

≥ 6.5%

Tier 1 capital (to risk-weighted assets)

$

276,847

14.64

%

$

113,451

≥ 6.0%

$

151,269

≥ 8.0%

Tier 1 capital (to average assets)

$

276,847

12.08

%

$

91,708

≥ 4.0%

$

114,635

≥ 5.0%

Non-GAAP Measures

In reporting the results as of and for the year ended December 31, 2025, the Company has provided supplemental performance measures on an operating basis. These measures are a supplement to GAAP used to prepare the Company’s financial statements and should not be considered in isolation or as a substitute for comparable measures calculated in accordance with GAAP. In addition, the Company’s non-GAAP measures may not be comparable to non-GAAP measures of other companies. The Company uses the non-GAAP measures discussed herein in its analysis of the Company’s performance.

Net interest margin on a fully tax equivalent (FTE) basis, provides valuable additional insight into the net interest margin and the impact that investments in tax-exempt securities have on our financial metrics. The entire FTE adjustment is attributable to the income tax effect on tax-exempt securities, using the statutory federal income tax rate of 21%.

The Company believes that tangible common stockholders' equity, excluding intangible assets, is a meaningful supplement to GAAP financial measures and useful to investors because it provides an additional measure to calculate the book value of our common shares by removing the value of a subjective portion of our balance sheet.

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The following table reconciles these non-GAAP measures from their respective GAAP basis measures for the years ended December 31,

For the year ended December 31,

(Dollars in thousands)

2025

2024

2023

Net interest margin (FTE)

Net interest income (GAAP)

$

69,545

$

62,574

$

76,742

FTE adjustment on tax-exempt securities

286

291

283

Net interest income (FTE) (non-GAAP)

69,831

62,865

77,025

Average interest earning assets

2,020,624

2,010,448

1,857,264

Net interest margin (GAAP)

3.44

%

3.11

%

4.13

%

Net interest margin (FTE) (non-GAAP)

3.46

%

3.13

%

4.15

%

Yield on earning assets (FTE)

Total interest income (GAAP)

$

131,588

$

134,615

$

124,421

FTE adjustment on tax-exempt securities

286

291

283

Total interest income (FTE) (non-GAAP)

131,874

134,906

124,704

Average interest earning assets

2,020,624

2,010,448

1,857,264

Yield on earning assets (GAAP)

6.51

%

6.70

%

6.70

%

Yield on earning assets (FTE) (non-GAAP)

6.53

%

6.71

%

6.71

%

Net interest spread (FTE)

Yield on earning assets (GAAP)

6.51

%

6.70

%

6.70

%

Yield on earning assets (FTE) (non-GAAP)

6.53

%

6.71

%

6.71

%

Yield on interest-bearing liabilities

3.95

%

4.70

%

3.66

%

Net interest spread (GAAP)

2.56

%

1.99

%

3.04

%

Net interest spread (FTE) (non-GAAP)

2.58

%

2.01

%

3.05

%

Average tangible stockholders' equity

Total average stockholders' equity (GAAP)

$

213,114

$

224,631

$

209,921

Less: average intangible assets

—

(16,989

)

(11,996

)

Total average tangible stockholders' equity (non-GAAP)

213,114

207,642

197,925

Average tangible assets

Total average assets (GAAP)

$

2,141,434

$

2,136,586

$

1,955,187

Less: average intangible assets

—

(16,989

)

(11,996

)

Total average tangible assets (non-GAAP)

2,141,434

2,119,597

1,943,191

58