Earnings climb at FVCBankcorp (NASDAQ: FVCB) as Q1 2026 profits rise
Filing Impact
Filing Sentiment
Form Type
10-Q
FVCBankcorp, Inc. reported higher profitability for the quarter ended March 31, 2026. Net income rose to $6.4 million from $5.2 million a year earlier, with diluted earnings per share increasing to $0.35 from $0.28.
Net interest income grew to $17.4 million from $15.1 million as loan and securities yields outpaced funding costs. Total assets reached $2.34 billion, with loans of $1.90 billion and deposits of $2.03 billion. Credit quality remained controlled, with an allowance for credit losses of $19.1 million and nonaccrual loans of $10.9 million. The bank also highlighted cannabis-related balances of $183.5 million in loans and $144.8 million in deposits, noting ongoing federal legal and regulatory risk around this niche.
Positive
- Strong earnings growth: Net income increased to $6.4 million from $5.2 million, with diluted EPS rising to $0.35 from $0.28, supported by a $2.4 million, or 16%, increase in net interest income.
- Stable credit profile: Allowance for credit losses was $19.1 million with minimal charge-offs of $5 thousand in the quarter, while special mention loans declined slightly and nonaccrual balances were well identified and reserved.
Negative
- Cannabis-industry exposure risk: Cannabis-related balances totaled approximately $183.5 million of loans (9.5% of total loans) and $144.8 million of deposits (7.1% of total deposits), and the company notes that continued federal illegality could lead to service disruption or legal action.
- Large unrealized losses in securities: Available-for-sale securities carried gross unrealized losses of $25.2 million as of March 31, 2026, reflecting interest rate-driven valuation pressure on the investment portfolio.
Insights
FVCBankcorp delivered solid earnings growth with stable credit, offset by niche regulatory risk.
FVCBankcorp’s quarterly net income increased to $6.4 million, with diluted EPS of $0.35 versus $0.28 a year earlier. Net interest income rose to $17.4 million, helped by higher interest and fees on loans and lower deposit interest expense compared with the prior year period.
Credit metrics appear contained: the allowance for credit losses stood at $19.1 million on $1.92 billion of loans at amortized cost, with charge-offs de minimis and nonaccrual loans of $10.9 million. Special mention loans were $47.3 million, slightly lower than year-end, while substandard loans edged up but carried specific reserves.
A notable feature is banking relationships with cannabis businesses, totaling $183.5 million of loans and $144.8 million of deposits as of March 31, 2026. The company explicitly acknowledges that these activities remain illegal under federal law and that strict enforcement could disrupt these relationships, introducing concentrated regulatory and operational risk despite current performance.
Key Figures
Net income: $6.4M
Diluted EPS: $0.35
Net interest income: $17.4M
+5 more
8 metrics
Net income
$6.4M
Three months ended March 31, 2026
Diluted EPS
$0.35
Three months ended March 31, 2026 vs $0.28 in 2025
Net interest income
$17.4M
Q1 2026 vs $15.1M in Q1 2025
Total assets
$2.34B
As of March 31, 2026
Total deposits
$2.03B
As of March 31, 2026
Loans at amortized cost
$1.92B
Gross loans as of March 31, 2026
Allowance for credit losses
$19.1M
Loans ACL as of March 31, 2026
Cannabis-related loans
$183.5M (9.5%)
Of total loans at March 31, 2026
Key Terms
allowance for credit losses, nonaccrual loans, special mention, collateral-dependent loans, +2 more
6 terms
allowance for credit losses financial
"We maintain the allowance for credit losses ("ACL") at a level that represents management’s best estimate of expected losses"
Allowance for credit losses is a reserve set aside by a financial institution to cover potential losses from borrowers who may not repay their loans. It acts like a safety net, helping the institution prepare for loans that might turn sour. For investors, it signals how cautious the institution is about the quality of its loans and potential risks to its financial health.
nonaccrual loans financial
"The following presents nonaccrual loans as of March 31, 2026 and December 31, 2025 and interest income recognized"
Nonaccrual loans are loans a lender has stopped counting toward interest income because the borrower is overdue or unlikely to pay; the lender only records cash payments received and may set aside extra funds to cover potential losses. For investors, a rising number or amount of nonaccrual loans signals weaker credit quality, lower future interest revenue and larger potential write-downs — similar to pausing expected subscription income when many customers stop paying.
special mention financial
"At March 31, 2026, the Company had $47.3 million in loans identified as special mention"
collateral-dependent loans financial
"The following table presents the amortized cost basis of collateral-dependent loans by class of loans"
cash flow hedge financial
"Interest Rate Risk Management—Cash Flow Hedging Instruments"
A cash flow hedge is an accounting label for a contract or arrangement used to offset expected future swings in a company’s cash payments or receipts — for example from variable-rate interest, foreign currency sales, or forecasted purchases. It matters to investors because it aims to smooth future cash and earnings volatility: gains or losses on the hedge are held out of current profit and reported separately until the underlying transaction affects results, much like buying insurance to steady future bills.
accumulated other comprehensive income financial
"Changes in accumulated other comprehensive income (loss) ("AOCI") for the three months ended March 31, 2026"
Accumulated other comprehensive income is a running total on a company’s balance sheet that records certain gains and losses not included in reported profit, such as unrealized gains or losses on some investments, currency translation differences, and pension plan adjustments. Think of it like items in a shopping cart you haven’t paid for yet: it doesn’t affect current profit but changes the company’s overall equity and signals potential future swings in value that investors should watch.
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Table of Contents
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
For the quarterly period ended March 31, 2026
or
For the transition period from _______ to _________
Commission File Number: 001-38647
(Exact name of registrant as specified in its charter)
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |||||||
| | |||||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||
(703 ) 436-3800
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered | ||||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Non-accelerated filer o | |||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Table of Contents
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☒
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date:
Table of Contents
FVCBankcorp, Inc.
INDEX TO FORM 10-Q
PART I — FINANCIAL INFORMATION | 4 | ||||
Item 1. Financial Statements: | 4 | ||||
Consolidated Statements of Condition at March 31, 2026 (unaudited) and December 31, 2025 | 4 | ||||
Consolidated Statements of Income For the Three Months Ended March 31, 2026 and 2025 (unaudited) | 5 | ||||
Consolidated Statements of Comprehensive Income For the Three Months Ended March 31, 2026 and 2025 (unaudited) | 6 | ||||
Consolidated Statements of Cash Flows For the Three Months Ended March 31, 2026 and 2025 (unaudited) | 7 | ||||
Consolidated Statements of Changes in Stockholders’ Equity For the Three Months Ended March 31, 2026 and 2025 (unaudited) | 8 | ||||
Notes to Unaudited Consolidated Financial Statements | 9 | ||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 33 | ||||
Item 3. Quantitative and Qualitative Disclosures About Market Risk | 58 | ||||
Item 4. Controls and Procedures | 58 | ||||
PART II — OTHER INFORMATION | 63 | ||||
Item 1. Legal Proceedings | 63 | ||||
Item 1A. Risk Factors | 63 | ||||
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 63 | ||||
Item 3. Defaults Upon Senior Securities | 63 | ||||
Item 4. Mine Safety Disclosures | 63 | ||||
Item 5. Other Information | 63 | ||||
Item 6. Exhibits | 65 | ||||
SIGNATURES | 66 | ||||
3
Table of Contents
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
FVCBankcorp, Inc. and Subsidiary
Consolidated Statements of Condition
March 31, 2026 and December 31, 2025
(In thousands, except share and per share data)
| March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Cash and due from banks | $ | $ | |||||||||||||||||||||
| Interest-bearing deposits at other financial institutions | |||||||||||||||||||||||
Securities held-to-maturity (fair value of $ | |||||||||||||||||||||||
| Securities available-for-sale, at fair value | |||||||||||||||||||||||
| Restricted stock, at cost | |||||||||||||||||||||||
Loans, net of allowance for credit losses of $ | |||||||||||||||||||||||
| Premises and equipment, net | |||||||||||||||||||||||
| Accrued interest receivable | |||||||||||||||||||||||
| Prepaid expenses | |||||||||||||||||||||||
| Deferred tax assets, net | |||||||||||||||||||||||
| Goodwill and intangibles, net | |||||||||||||||||||||||
| Bank owned life insurance | |||||||||||||||||||||||
| Operating lease right-of-use assets | |||||||||||||||||||||||
| Other assets | |||||||||||||||||||||||
| Total assets | $ | $ | |||||||||||||||||||||
| Liabilities and Shareholders' Equity | |||||||||||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Deposits: | |||||||||||||||||||||||
| Nonnterest-bearing | $ | $ | |||||||||||||||||||||
| Interest-bearing checking | |||||||||||||||||||||||
| Savings and money market | |||||||||||||||||||||||
| Time deposits | |||||||||||||||||||||||
| Wholesale deposits | |||||||||||||||||||||||
| Total deposits | $ | $ | |||||||||||||||||||||
| Long-term debt, net of issuance costs | $ | $ | |||||||||||||||||||||
| Accrued interest payable | |||||||||||||||||||||||
| Operating lease liabilities | |||||||||||||||||||||||
| Reserves for unfunded commitments | |||||||||||||||||||||||
| Accrued expenses and other liabilities | |||||||||||||||||||||||
| Total liabilities | $ | $ | |||||||||||||||||||||
| Shareholders' Equity | 2026 | 2025 | |||||||||||||||||||||
Preferred stock, $ | |||||||||||||||||||||||
| Shares authorized | |||||||||||||||||||||||
| Shares issued and outstanding | $ | $ | |||||||||||||||||||||
Common stock, $ | |||||||||||||||||||||||
| Shares authorized | |||||||||||||||||||||||
| Shares issued and outstanding | |||||||||||||||||||||||
| Additional paid-in capital | |||||||||||||||||||||||
| Retained earnings | |||||||||||||||||||||||
| Accumulated other comprehensive (loss), net | ( | ( | |||||||||||||||||||||
| Total shareholders' equity | $ | $ | |||||||||||||||||||||
| Total liabilities and shareholders' equity | $ | $ | |||||||||||||||||||||
See Notes to Consolidated Financial Statements.
4
Table of Contents
FVCBankcorp, Inc. and Subsidiary
Consolidated Statements of Income
For the Three Months Ended March 31, 2026 and 2025
(In thousands, except per share data)
(Unaudited)
| For the Three Months Ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Interest and Dividend Income | |||||||||||||||||||||||
| Interest and fees on loans | $ | $ | |||||||||||||||||||||
| Interest and dividends on securities held-to-maturity | |||||||||||||||||||||||
| Interest and dividends on securities available-for-sale | |||||||||||||||||||||||
| Dividends on restricted stock | |||||||||||||||||||||||
| Interest on deposits at other financial institutions | |||||||||||||||||||||||
| Total interest and dividend income | $ | $ | |||||||||||||||||||||
| Interest Expense | |||||||||||||||||||||||
| Interest on deposits | $ | $ | |||||||||||||||||||||
| Interest on short-term debt | |||||||||||||||||||||||
| Interest on long-term debt | |||||||||||||||||||||||
| Total interest expense | $ | $ | |||||||||||||||||||||
| Net Interest Income | $ | $ | |||||||||||||||||||||
| Provision for credit losses | |||||||||||||||||||||||
| Net interest income after provision for credit losses | $ | $ | |||||||||||||||||||||
| Noninterest Income | |||||||||||||||||||||||
| Service charges on deposit accounts | $ | $ | |||||||||||||||||||||
| Bank owned life insurance income | |||||||||||||||||||||||
| Income from minority membership interests | |||||||||||||||||||||||
| Other income | |||||||||||||||||||||||
| Total noninterest income | $ | $ | |||||||||||||||||||||
| Noninterest Expenses | |||||||||||||||||||||||
| Salaries and employee benefits | $ | $ | |||||||||||||||||||||
| Occupancy and equipment expense | |||||||||||||||||||||||
| Data processing and network administration | |||||||||||||||||||||||
| Internet banking and software expense | |||||||||||||||||||||||
| State franchise taxes | |||||||||||||||||||||||
| FDIC insurance | |||||||||||||||||||||||
| Marketing, business development and advertising | |||||||||||||||||||||||
| Loan related expenses | |||||||||||||||||||||||
| Director's fees | |||||||||||||||||||||||
| Core deposit intangible amortization | |||||||||||||||||||||||
| Other operating expenses | |||||||||||||||||||||||
| Total noninterest expenses | $ | $ | |||||||||||||||||||||
| Net income before income tax expense | $ | $ | |||||||||||||||||||||
| Income tax expense | |||||||||||||||||||||||
| Net income | $ | $ | |||||||||||||||||||||
| Earnings per share, basic | $ | $ | |||||||||||||||||||||
| Earnings per share, diluted | $ | $ | |||||||||||||||||||||
See Notes to Consolidated Financial Statements.
5
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FVCBankcorp, Inc. and Subsidiary
Consolidated Statements of Comprehensive Income
For the Three Months Ended March 31, 2026 and 2025
(In thousands)
(Unaudited)
| For the Three Months Ended March 31, | ||||||||||||||||||||||||||
| 2026 | 2025 | |||||||||||||||||||||||||
| Net income | $ | $ | ||||||||||||||||||||||||
| Other comprehensive income: | ||||||||||||||||||||||||||
Unrealized gain (loss) on securities available for sale, net of tax benefit of $ | ||||||||||||||||||||||||||
Unrealized (loss) gain on interest rate swaps, net of tax benefit of $ | ( | |||||||||||||||||||||||||
| Total other comprehensive income | $ | $ | ||||||||||||||||||||||||
| Total comprehensive income | $ | $ | ||||||||||||||||||||||||
See Notes to Consolidated Financial Statements.
6
Table of Contents
FVCBankcorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the Three Months Ended March 31, 2026 and 2025
(In thousands)
(Unaudited)
For the Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Cash Flows From Operating Activities | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation | |||||||||||
| Provision for credit losses | |||||||||||
| Net amortization of premium of securities | |||||||||||
| Net accretion of deferred loan costs, fees, and other acquisition accounting adjustments | ( | ( | |||||||||
| Income from minority membership interest | ( | ( | |||||||||
| Amortization of debt issuance costs | |||||||||||
| Core deposits intangible amortization | |||||||||||
| Equity-based compensation expense | |||||||||||
| Bank owned life insurance income | ( | ( | |||||||||
| Changes in assets and liabilities: | |||||||||||
| Increase in accrued interest receivable, prepaid expenses and other assets | |||||||||||
| Increase (decrease) in accrued interest payable, accrued expenses and other liabilities | ( | ||||||||||
| Net cash provided by operating activities | $ | $ | |||||||||
| Cash Flows From Investing Activities | |||||||||||
| Increase in interest-bearing deposits at other financial institutions | $ | ( | $ | ( | |||||||
| Purchases of available-for-sale securities | ( | ||||||||||
| Proceeds from repayments, calls and maturities of securities available-for-sale | |||||||||||
| Net (purchase) redemption of restricted stock | ( | ||||||||||
| Net decrease (increase) in loans | ( | ||||||||||
| Purchases of premises and equipment, net | ( | ( | |||||||||
| Net cash used in investing activities | $ | ( | $ | ( | |||||||
| Cash Flows From Financing Activities | |||||||||||
| Net (decrease) increase in non-maturing deposits | $ | ( | $ | ||||||||
| Net increase in time deposits | |||||||||||
| Redemption of subordinated debt, net | ( | ||||||||||
| Issuance of senior debt, net | |||||||||||
| Repurchase of shares to satisfy tax withholding for stock-based compensation | ( | ( | |||||||||
| Cash dividends paid on common stock | ( | ||||||||||
| Common stock issuance | |||||||||||
| Net cash provided by (used in) financing activities | $ | $ | |||||||||
| Net increase (decrease) in cash and cash equivalents | $ | $ | |||||||||
| Cash and cash equivalents, beginning of year | |||||||||||
| Cash and cash equivalents, end of period | $ | $ | |||||||||
See Notes to Consolidated Financial Statements.
7
Table of Contents
FVCBankcorp, Inc. and Subsidiary
Consolidated Statements of Changes in Stockholders' Equity
For the Three Months Ended March 31, 2026 and 2025
(In thousands)
| Shares | Common Stock | Additional Paid-in Capital | Retained Earnings | Accumulated Other Comprehensive Income (Loss) | Total | ||||||||||||||||||||||||||||||
Beginning Balance | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Net income | — | — | — | — | |||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||||||||
| Common stock issuance for options exercised, net | — | — | |||||||||||||||||||||||||||||||||
| Vesting of restricted stock grants, net | — | ( | — | — | ( | ||||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
Balance at March 31, 2025 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
Beginning Balance | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
| Net income | — | — | — | ||||||||||||||||||||||||||||||||
| Other comprehensive income | — | — | — | — | |||||||||||||||||||||||||||||||
| Common stock issuance for options exercised, net | — | — | |||||||||||||||||||||||||||||||||
| Vesting of restricted stock grants, net | ( | — | — | ( | |||||||||||||||||||||||||||||||
| Cash Dividends paid on common stock | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||
| Stock dividends compensation expense | — | — | — | — | |||||||||||||||||||||||||||||||
Balance at March 31, 2026 | $ | $ | $ | $ | ( | $ | |||||||||||||||||||||||||||||
See Notes to Consolidated Financial Statements.
8
Table of Contents
Notes to Consolidated Financial Statements
($ in thousands, except per share data)
Note 1. Organization and Summary of Significant Accounting Policies
Organization
FVCBankcorp, Inc. (the "Company"), a Virginia corporation, was formed in 2015 and is registered as a bank holding company under the Bank Holding Company Act of 1956, as amended. The Company is headquartered in Fairfax, Virginia. The Company conducts its business activities through the branch offices of its wholly owned subsidiary bank, FVCbank (the "Bank"). The Company exists primarily for the purposes of holding the stock of its subsidiary, the Bank.
The Bank was organized under the laws of the Commonwealth of Virginia to engage in a general banking business serving the Washington, D.C. and Baltimore metropolitan areas. The Bank commenced operations on November 27, 2007 and is a member of the Federal Reserve System. It is supervised and regulated by the Board of Governors of the Federal Reserve System (the "Federal Reserve") and the Bureau of Financial Institutions of the Virginia State Corporation Commission. Consequently, it undergoes periodic examinations by these regulatory authorities.
Basis of Presentation
The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and follow general practice within the banking industry. Accordingly, the unaudited consolidated financial statements do not include all the information and footnotes required by GAAP for complete financial statements; however, in the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of the interim periods presented have been made. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year. These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s audited financial statements for the year ended December 31, 2025. Certain prior period amounts have been reclassified to conform to current period presentation. There was no impact to Shareholder's Equity or Net Income from these adjustments.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and the Bank. All material intercompany balances and transactions have been eliminated in consolidation.
Significant Accounting Policies
The accounting and reporting policies of the Company are in accordance with GAAP and conform to general practices within the banking industry.
Recent Accounting Pronouncements
In November 2025, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2025-08, “Financial Instruments—Credit Losses (Topic 326): Purchased Loans.” The amendments in this ASU expand the population of acquired financial assets accounted for using the gross-up approach. Acquired loans (excluding credit cards) are deemed purchased seasoned loans and accounted for using the gross-up approach upon acquisition if criteria established by the new guidance are met. This change aims to enhance comparability, consistency, and better reflect the economics of acquiring financial assets. This ASU is effective for annual reporting periods beginning after December 15, 2026, and for interim reporting periods within those annual reporting periods. Early adoption is permitted in an interim or annual reporting period in which financial statements have not yet been issued or made available for issuance. If an entity adopts this ASU in an interim reporting period, it should apply it as of the beginning of that interim reporting period or the beginning of the annual reporting period that includes that interim reporting period. The Company does not expect the adoption of ASU 2025-08 to have a material impact on its consolidated financial statements at the time of adoption.
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Notes to Consolidated Financial Statements
($ in thousands, except per share data)
Note 2. Securities
Amortized cost and fair values of securities held-to-maturity and securities available-for-sale as of March 31, 2026 and December 31, 2025, were as follows:
| March 31, 2026 | |||||||||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized (Losses) | Fair Value | ||||||||||||||||||||
| Held-to-maturity | |||||||||||||||||||||||
| Securities of state and local municipalities tax-exempt | $ | $ | $ | ( | $ | ||||||||||||||||||
| Total Held-to-maturity Securities | $ | $ | $ | ( | $ | ||||||||||||||||||
| Available-for-sale | |||||||||||||||||||||||
Securities of U.S. government and federal agencies | $ | $ | $ | ( | $ | ||||||||||||||||||
| Securities of state and local municipalities | ( | ||||||||||||||||||||||
| Corporate bonds | ( | ||||||||||||||||||||||
| SBA pass-through securities | ( | ||||||||||||||||||||||
| Mortgage-backed securities | ( | ||||||||||||||||||||||
| Collateralized mortgage obligations | ( | ||||||||||||||||||||||
| Total Available-for-sale Securities | $ | $ | $ | ( | $ | ||||||||||||||||||
| December 31, 2025 | |||||||||||||||||||||||
Amortized Cost | Gross Unrealized Gains | Gross Unrealized (Losses) | Fair Value | ||||||||||||||||||||
| Held-to-maturity | |||||||||||||||||||||||
| Securities of state and local municipalities tax-exempt | $ | $ | $ | ( | $ | ||||||||||||||||||
| Total Held-to-maturity Securities | $ | $ | $ | ( | $ | ||||||||||||||||||
| Available-for-sale | |||||||||||||||||||||||
| Securities of U.S. government and federal agencies | $ | $ | $ | ( | $ | ||||||||||||||||||
| Securities of state and local municipalities | ( | ||||||||||||||||||||||
| Corporate bonds | ( | ||||||||||||||||||||||
| SBA pass-through securities | ( | ||||||||||||||||||||||
| Mortgage-backed securities | ( | ||||||||||||||||||||||
| Collateralized mortgage obligations | ( | ||||||||||||||||||||||
| Total Available-for-sale Securities | $ | $ | $ | ( | $ | ||||||||||||||||||
There were no 18.8 million and $19.4 million pledged to secure public deposits at March 31, 2026 and December 31, 2025, respectively.
The Company monitors the credit quality of held-to-maturity securities through the use of credit ratings. The Company monitors credit ratings on a periodic basis. The following table summarizes the amortized cost of held-to-maturity securities at March 31, 2026 and December 31, 2025, aggregated by credit quality indicator:
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Notes to Consolidated Financial Statements
($ in thousands, except per share data)
| Held-to-Maturity: State maturity municipal and tax exempt | March 31, 2026 | December 31, 2025 | |||||||||
| Aa3 | $ | $ | |||||||||
| Total | $ | $ | |||||||||
The following tables show the fair value and gross unrealized losses, aggregated by investment category and length of time that individual available-for-sale securities have been in a continuous unrealized loss position, at March 31, 2026 and December 31, 2025, respectively. The reference point for determining when securities are in an unrealized loss position is month-end. Therefore, it is possible that a security’s market value exceeded its amortized cost on other days during the past twelve-month period. Available-for-sale securities that have been in a continuous unrealized loss position as of March 31, 2026 are as follows:
| Less Than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||||||||||||||||
At March 31, 2026 | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||||||||||||||||
| Securities of U.S. government and federal agencies | $ | $ | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||
| Securities of state and local municipalities | ( | ( | ||||||||||||||||||||||||||||||||||||
| Corporate bonds | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| SBA pass-through securities | ( | ( | ||||||||||||||||||||||||||||||||||||
| Mortgage-backed securities | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Collateralized mortgage obligations | ( | ( | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||
Available-for-sale securities that have been in a continuous unrealized loss position as of December 31, 2025 are as follows:
| Less Than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||||||||||||||||
At December 31, 2025 | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | Fair Value | Unrealized Losses | ||||||||||||||||||||||||||||||||
| Securities of U.S. government and federal agencies | $ | $ | $ | $ | ( | $ | $ | ( | ||||||||||||||||||||||||||||||
| Securities of state and local municipalities | ( | ( | ||||||||||||||||||||||||||||||||||||
| Corporate bonds | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| SBA pass-through securities | ( | ( | ||||||||||||||||||||||||||||||||||||
| Mortgage-backed securities | ( | ( | ||||||||||||||||||||||||||||||||||||
| Collateralized mortgage obligations | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Total | $ | $ | ( | $ | $ | ( | $ | $ | ( | |||||||||||||||||||||||||||||
Securities of U.S. government and federal agencies: The unrealized losses on two available-for-sale securities were caused by interest rate increases. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments.
Securities of state and local municipalities: The unrealized loss on one of the investments in securities of state and local municipalities was caused by interest rate increases. The contractual terms of this investment does not permit the issuer to settle the securities at a price less than the amortized cost basis of the investment. The investment carries an S&P investment grade rating of AAA.
Corporate bonds: The unrealized losses on 11 of the investments in corporate bonds were caused by interest rate increases. The contractual terms of these investments do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments. Some of these investments do not carry a rating.
11
Table of Contents
Notes to Consolidated Financial Statements
($ in thousands, except per share data)
SBA pass-through securities: The unrealized losses on one available-for-sale security was caused by interest rate increases. The contractual terms of this investment do not permit the issuer to settle the securities at a price less than the amortized cost basis of the investments.
Mortgage-backed securities: The unrealized losses on the Company’s investment on 38 mortgage-backed securities were caused by interest rate increases. The contractual cash flows of those investments are guaranteed by an agency of the U.S. Government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost basis of the Company’s investments.
Collateralized mortgage obligations ("CMOs"): The unrealized loss associated with 11 CMOs were caused by interest rate increases. The contractual cash flows of these investments are guaranteed by an agency of the U.S. Government. Accordingly, it is expected that the securities would not be settled at a price less than the amortized cost basis of the Company’s investments.
The Company has evaluated its available-for-sale investments securities in an unrealized loss position for credit related impairment at March 31, 2026 and December 31, 2025 and concluded no impairment existed based on several factors which included: (1) the majority of these securities are of high credit quality, (2) unrealized losses are primarily the result of market volatility and increases in market interest rates, (3) issuers continue to make timely principal and interest payments, and (4) the Company does not intend to sell any of the investments and the accounting standard of “more likely than not” has not been met for the Company to be required to sell any of the investments before recovery of its amortized cost basis. Additionally, the Company’s mortgage-backed investment securities are primarily guaranteed by the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, or the Government National Mortgage Association and do not have credit risk given the implicit and explicit government guarantees associated with these agencies.
The amortized cost and fair value of securities at March 31, 2026, by contractual maturity, are shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without penalties.
| March 31, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Held-to-maturity | Available-for-sale | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amortized Cost | Fair Value | Amortized Cost | Fair Value | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| One year or less | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| After 1 year through 5 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| After 5 years through 10 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| After 10 years | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
12
Table of Contents
Notes to Consolidated Financial Statements
($ in thousands, except per share data)
Note 3. Loans and Allowance for Credit Losses
| March 31, 2026 | December 31, 2025 | |||||||||||||
| Commercial real estate | $ | $ | ||||||||||||
| Commercial and industrial | ||||||||||||||
| Commercial construction | ||||||||||||||
| Consumer real estate | ||||||||||||||
| Consumer nonresidential | ||||||||||||||
| $ | $ | |||||||||||||
| Less: | ||||||||||||||
| Allowance for credit losses | ||||||||||||||
| Loans, net | $ | $ | ||||||||||||
13
Table of Contents
Notes to Consolidated Financial Statements
($ in thousands, except per share data)
An analysis of the allowance for credit losses for the three months ended March 31, 2026 and 2025, and for the year ended December 31, 2025 follows:
| Commercial Real Estate | Commercial and Industrial | Commercial Construction | Consumer Real Estate | Consumer Nonresidential | Total | |||||||||||||||||||||||||||||||||
| March 31, 2026 | ||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses: | ||||||||||||||||||||||||||||||||||||||
| Beginning Balance, January 1 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ||||||||||||||||||||||||||||||||||||
| Recoveries | ||||||||||||||||||||||||||||||||||||||
| Provision (reversal) | ( | ( | ( | ( | ||||||||||||||||||||||||||||||||||
| Ending Balance, March 31, | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Commercial Real Estate | Commercial and Industrial | Commercial Construction | Consumer Real Estate | Consumer Nonresidential | Total | |||||||||||||||||||||||||||||||||
| March 31, 2025 | ||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses: | ||||||||||||||||||||||||||||||||||||||
| Beginning Balance, January 1 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ||||||||||||||||||||||||||||||||||||
| Recoveries | ||||||||||||||||||||||||||||||||||||||
| Provision (reversal) | ( | ( | ||||||||||||||||||||||||||||||||||||
| Ending Balance, March 31, | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Commercial Real Estate | Commercial and Industrial | Commercial Construction | Consumer Real Estate | Consumer Nonresidential | Total | |||||||||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||||||||||||||
| Allowance for credit losses: | ||||||||||||||||||||||||||||||||||||||
| Beginning Balance, January 1, | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
| Charge-offs | ( | ( | ( | |||||||||||||||||||||||||||||||||||
| Recoveries | ||||||||||||||||||||||||||||||||||||||
| Provision (reversal) | ( | ( | ||||||||||||||||||||||||||||||||||||
| Ending Balance, December 31, | $ | $ | $ | $ | $ | $ | ||||||||||||||||||||||||||||||||
The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of March 31, 2026 and December 31, 2025:
| March 31, 2026 | December 31, 2025 | |||||||||||||||||||||||||
| Real Estate | Business / Other Assets | Real Estate | Business / Other Assets | |||||||||||||||||||||||
| Collateral-Dependent Loans | ||||||||||||||||||||||||||
| Commercial real estate | $ | $ | $ | $ | ||||||||||||||||||||||
| Commercial and industrial | ||||||||||||||||||||||||||
| Commercial construction | ||||||||||||||||||||||||||
| Consumer real estate | ||||||||||||||||||||||||||
| Consumer nonresidential | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, collateral adequacy, credit documentation, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis typically includes larger, non-homogeneous loans such as commercial real estate
14
Table of Contents
Notes to Consolidated Financial Statements
($ in thousands, except per share data)
and commercial and industrial loans. This analysis is performed on an ongoing basis as new information is obtained. The Company uses the following definitions for risk ratings:
Pass — Loans listed as pass include larger non-homogeneous loans not meeting the risk rating definitions below and smaller, homogeneous loans not assessed on an individual basis.
Special Mention — Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the Company’s credit position at some future date.
Substandard — Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the enhanced possibility that the Company will sustain some loss if the deficiencies are not corrected.
Doubtful — Loans classified as doubtful include those loans which have all the weaknesses inherent in those classified as "Substandard," with the added characteristic that the weaknesses make collection or liquidation in full, based on currently known facts, conditions and values, improbable.
Loss — Loans classified as loss include those loans which are considered uncollectible and of such little value that their continuance as loans is not warranted. Even though partial recovery may be achieved in the future, it is neither practical nor desirable to defer writing off these loans.
15
Table of Contents
Notes to Consolidated Financial Statements
($ in thousands, except per share data)
Based on the most recent analysis performed, amortized cost basis of loans by risk category, class, and year of origination and gross charge-offs by year of origination as of and for the three months ended March 31, 2026, were as follows:
| Prior | 2022 | 2023 | 2024 | 2025 | 2026 | Revolving Loans Amort. Cost Basis | Revolving Loans Convert. to Term | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial Real Estate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Grade: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Gross Charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and Industrial | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Grade: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Gross Charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial Construction | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Grade: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Gross Charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Consumer Real Estate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Grade: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Gross Charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Consumer Nonresidential | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Grade: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Gross Charge-offs | $ | $ | $ | $ | $ | ( | $ | $ | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Total Recorded Investment | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Total Gross Charge-Offs | $ | $ | $ | $ | $ | ( | $ | $ | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||||||
16
Table of Contents
Notes to Consolidated Financial Statements
($ in thousands, except per share data)
Based on the most recent analysis performed, amortized cost basis of loans by risk category, class, and year of origination and gross charge-offs by year of origination as of and for the year ended December 31, 2025, were as follows:
| Prior | 2021 | 2022 | 2023 | 2024 | 2025 | Revolving Loans Amort. Cost Basis | Revolving Loans Convert. to Term | Total | ||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial Real Estate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Grade: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Gross Charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial and Industrial | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Grade: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Gross Charge-offs | $ | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||||
| Commercial Construction | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Grade: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Gross Charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Consumer Real Estate | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Grade: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Gross Charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Consumer Nonresidential | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Grade: | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Special mention | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Substandard | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Doubtful | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Gross Charge-offs | $ | ( | $ | $ | $ | $ | $ | $ | $ | $ | ( | |||||||||||||||||||||||||||||||||||||||||||||
| Total Recorded Investment | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||||||||||
| Total Gross Charge-Offs | $ | ( | $ | $ | $ | ( | $ | ( | $ | ( | $ | $ | $ | ( | ||||||||||||||||||||||||||||||||||||||||||
17
Table of Contents
Notes to Consolidated Financial Statements
($ in thousands, except per share data)
Total Loan Portfolio - As of and for the Three Months Ended March 31, 2026 and As of and for the Year Ended December 31, 2025
| March 31, 2026 | December 31, 2025 | |||||||||||||
| Grade: | ||||||||||||||
| Pass | $ | $ | ||||||||||||
| Special mention | ||||||||||||||
| Substandard | ||||||||||||||
| Doubtful | ||||||||||||||
| Total Recorded Investment | ||||||||||||||
| Charge-offs | ( | ( | ||||||||||||
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, collateral adequacy, credit documentation, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes larger non-homogeneous loans such as commercial real estate and commercial and industrial loans. This analysis is performed on an ongoing basis as new information is obtained. At March 31, 2026, the Company had $47.3 million in loans identified as special mention, a decrease from $47.7 million at December 31, 2025. Special mention rated loans are loans that have a potential weakness that deserves management’s close attention, however, the borrower continues to pay in accordance with their contract. Loans rated as special mention do not have a specific reserve and are considered well-secured.
At March 31, 2026, the Company had $10.9 million in loans identified as substandard, an increase of $760 thousand from $10.2 million at December 31, 2025. Substandard rated loans are loans that are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans are individually evaluated, typically on the basis of the underlying collateral. At March 31, 2026, an individually assessed allowance for credit losses totaling $1.6 million has been estimated to supplement any shortfall of collateral.
18
Table of Contents
Notes to Consolidated Financial Statements
($ in thousands, except per share data)
Past due and nonaccrual loans presented by loan class were as follows at March 31, 2026 and December 31, 2025:
| Accruing | ||||||||||||||||||||||||||||||||||||||||||||
| As of March 31, 2026 | 30-59 days past due | 60-89 days past due | 90 days or more past due | Total past due loans | Current | Nonaccruals | Total Recorded Investment in Loans | |||||||||||||||||||||||||||||||||||||
| Commercial real estate | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Commercial and industrial | ||||||||||||||||||||||||||||||||||||||||||||
| Commercial construction | ||||||||||||||||||||||||||||||||||||||||||||
| Consumer real estate | ||||||||||||||||||||||||||||||||||||||||||||
| Consumer nonresidential | ||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Accruing | ||||||||||||||||||||||||||||||||||||||||||||
| As of December 31, 2025 | 30-59 days past due | 60-89 days past due | 90 days or more past due | Total past due loans | Current | Nonaccruals | Total Recorded Investment in Loans | |||||||||||||||||||||||||||||||||||||
| Commercial real estate | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
| Commercial and industrial | ||||||||||||||||||||||||||||||||||||||||||||
| Commercial construction | ||||||||||||||||||||||||||||||||||||||||||||
| Consumer real estate | ||||||||||||||||||||||||||||||||||||||||||||
| Consumer nonresidential | ||||||||||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||
The following presents nonaccrual loans as of March 31, 2026 and December 31, 2025 and interest income recognized for those year to date periods:
| As of March 31, 2026 | Nonaccrual with No Allowance for Credit Losses | Nonaccrual with an Allowance for Credit Losses | Total Nonaccrual Loans | Interest Income Recognized | ||||||||||||||||||||||
| Nonaccrual Loans | ||||||||||||||||||||||||||
| Commercial real estate | $ | $ | $ | $ | ||||||||||||||||||||||
| Commercial and industrial | ||||||||||||||||||||||||||
| Commercial construction | ||||||||||||||||||||||||||
| Consumer real estate | ||||||||||||||||||||||||||
| Consumer nonresidential | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
| As of December 31, 2025 | Nonaccrual with No Allowance for Credit Losses | Nonaccrual with an Allowance for Credit Losses | Total Nonaccrual Loans | Interest Income Recognized | ||||||||||||||||||||||
| Nonaccrual Loans | ||||||||||||||||||||||||||
| Commercial real estate | $ | $ | $ | $ | ||||||||||||||||||||||
| Commercial and industrial | ||||||||||||||||||||||||||
| Commercial construction | ||||||||||||||||||||||||||
| Consumer real estate | ||||||||||||||||||||||||||
| Consumer nonresidential | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
There was one 60
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Notes to Consolidated Financial Statements
($ in thousands, except per share data)
There were overdrafts of $430 thousand and $103 thousand at March 31, 2026 and December 31, 2025, respectively, which have been reclassified from deposits to loans. At March 31, 2026 and December 31, 2025, loans with a carrying value of $434.4 million and $444.2 million, respectively, were pledged to the Federal Home Loan Bank of Atlanta ("FHLB").
Modifications with Borrowers Experiencing Financial Difficulty
Loan modifications when a borrower is experiencing financial difficulty ("FDMs") occur as a result of loss mitigation activities. A variety of solutions are offered to borrowers, including loan modifications that may result in principal forgiveness, interest rate reductions, term extensions, payment delays, repayment plans or combinations thereof. FDMs exclude loans held for sale and loans accounted for under the fair value option. Loans with guarantor support, or guaranteed loans, are included in the Company's disclosed population of FDMs when those loan modifications are granted to a borrower experiencing financial difficulty.
There was one loan for $147 thousand designated as a modification for borrowers who were experiencing financial difficulty at March 31, 2026. This loan modification was a term extension of twelve months. This modified loan is performing based on the modified terms at March 31, 2026. There were no loans designated as modifications for borrowers who were experiencing financial difficulty at March 31, 2025.
At March 31, 2026, the reserve for unfunded commitments decreased to $374 thousand from $471 thousand at December 31, 2025.
The following table presents a breakdown of the provision for credit losses included in the Consolidated Statements of Income for the applicable periods:
| For the Three Months Ended | ||||||||||||||||||||||||||
| March 31, 2026 | March 31, 2025 | |||||||||||||||||||||||||
| Provision for credit losses - loans | $ | $ | ||||||||||||||||||||||||
| Provision for (reversal of) credit losses - unfunded commitments | ( | |||||||||||||||||||||||||
| Total provision for credit losses | $ | $ | ||||||||||||||||||||||||
Note 4. Derivative Financial Instruments
The Company enters into interest rate swap agreements ("swap agreements") to facilitate the risk management strategies necessary in order to accommodate the needs of its banking customers. The Company mitigates the risk of entering into these loan agreements by entering into equal and offsetting swap agreements with highly-rated third party financial institutions. These back-to-back swap agreements are free-standing derivatives and are recorded at fair value in the Company's Consolidated Statements of Condition (asset positions are included in other assets and liability positions are included in other liabilities) as of March 31, 2026 and December 31, 2025. The Company is party to master netting arrangements with its financial institution counterparties; however, the Company does not offset assets and liabilities under these arrangements for financial statement presentation purposes. The master netting arrangements provide for a single net settlement of all swap agreements, as well as collateral, in the event of default on, or termination of, any one contract. Parties to a centrally cleared over-the-counter derivative exchange daily payments that reflect the daily change in value of the derivative. These payments, commonly referred to as variation margin, are recorded as settlements of the derivatives' mark-to-market exposure rather than collateral against the exposures, which effectively results in any centrally cleared derivative having a Level 2 fair value that approximates zero on a daily basis, and therefore, these swap agreements were not included in the offsetting table in the Fair Value Measurement section below. As of March 31, 2026 and December 31, 2025, the Company had entered into 14 and 15 interest rate swap agreements, respectively, which were collateralized by $30
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Notes to Consolidated Financial Statements
($ in thousands, except per share data)
The notional amount and fair value of the Company's derivative financial instruments as of March 31, 2026 and December 31, 2025 were as follows:
| March 31, 2026 | |||||||||||
| Notional Amount | Fair Value | ||||||||||
| Interest Rate Swap Agreements | |||||||||||
| Receive Fixed/Pay Variable Swaps | $ | $ | |||||||||
| Pay Fixed/Receive Variable Swaps | ( | ||||||||||
| December 31, 2025 | |||||||||||
| Notional Amount | Fair Value | ||||||||||
| Interest Rate Swap Agreements | |||||||||||
| Receive Fixed/Pay Variable Swaps | $ | $ | |||||||||
| Pay Fixed/Receive Variable Swaps | ( | ||||||||||
Interest Rate Risk Management—Cash Flow Hedging Instruments
The Company uses wholesale funding (in the form of FHLB advances and brokered certificates of deposit) from time to time as a source of funds for use in the Company's lending and investment activities and other general business purposes. This wholesale funding exposes the Company to increased interest rate risk as a result of the variability in cash flows (future interest payments). The Company believes it is prudent to reduce this interest rate risk. To meet this objective, the Company entered into interest rate swap agreements whereby the Company reduces the interest rate risk associated with the Company's variable rate wholesale funding from the designation date and going through the maturity date.
At March 31, 2026 and December 31, 2025, the information pertaining to outstanding interest rate swap agreements used to hedge variability in cash flows was as follows:
| March 31, 2026 | December 31, 2025 | |||||||||||||
| Notional amount | $ | $ | ||||||||||||
| Weighted average pay rate | % | % | ||||||||||||
| Weighted average receive rate | % | % | ||||||||||||
| Weighted average maturity in years | ||||||||||||||
| Unrealized gain relating to interest rate swaps | $ | $ | ||||||||||||
These agreements provided for the Company to receive payments determined by a specific index in exchange for making payments at a fixed rate. At March 31, 2026 and December 31, 2025, the unrealized gain or loss relating to interest rate swaps designated as hedging instruments of the variability of cash flows associated with wholesale funding are reported in other comprehensive income. These amounts are subsequently reclassified into interest expense as a yield adjustment in the same period in which the related interest on wholesale funding affects earnings. The Company measures cash flow hedging relationships for effectiveness on a monthly basis, and at March 31, 2026 and December 31, 2025, the hedges were highly effective and the amount of ineffectiveness reflected in earnings was de minimis.
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Notes to Consolidated Financial Statements
($ in thousands, except per share data)
Note 5. Financial Instruments with Off-Balance Sheet Risk and Other Contingencies
The Company is party to credit-related financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet.
The Company's exposure to credit loss is represented by the contractual amount of these commitments. The Company follows the same credit policies in making commitments as it does for on-balance sheet instruments.
At March 31, 2026 and December 31, 2025, the following financial instruments were outstanding, which contract amounts represent credit risk:
| March 31, 2026 | December 31, 2025 | ||||||||||
| Commitments to grant loans | $ | $ | |||||||||
| Unused commitments to fund loans and lines of credit | |||||||||||
| Commercial and standby letters of credit | |||||||||||
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for equity lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements. The amount of collateral obtained, if it is deemed necessary by the Company, is based on management's credit evaluation of the customer.
Unfunded commitments under commercial lines of credit, revolving credit lines, and overdraft protection agreements are commitments for possible future extensions of credit to existing customers. These lines of credit usually do not contain a specified maturity date and may not be drawn upon to the total extent to which the Company is committed. The amount of collateral obtained, if it is deemed necessary by the Company, is based on management's credit evaluation of the customer.
Commercial and standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. Those letters of credit are primarily issued to support public and private borrowing arrangements. Substantially all letters of credit issued have expiration dates within one year . The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Company generally holds collateral supporting those commitments, if deemed necessary.
The Company enters into rate lock commitments to finance residential mortgage loans with its customers. These commitments offer the borrower an interest rate guarantee provided the loan meets underwriting guidelines and closes within the timeframe established by the Company.
The Company maintains its cash accounts with the Federal Reserve Bank of Richmond ("FRB") and correspondent banks. The total amount of cash on deposit in correspondent banks exceeding the federally insured limits was $4.4 million and $288 thousand at March 31, 2026 and December 31, 2025, respectively.
The Bank provides banking services to customers that are licensed to do business in the cannabis industry, primarily in Virginia, Maryland and the District of Columbia. These customers include multi-state operators, fully integrated state-wide operators, independent dispensary/cultivation licensees, as well as provisional cannabis licensees. The Bank maintains stringent written policies and procedures related to the on-boarding of such businesses and to the monitoring and maintenance of such business accounts.
In accordance with federal regulatory guidance and industry best practices, the Bank's cannabis banking business is conducted through a comprehensive, defined, and multi-department process, which includes extensive compliance and on-boarding due diligence with subsequent involvement by bank experts in cannabis within the Bank's operations, branch, treasury management, lending, and credit departments. The Bank performs a multilayered due diligence review of a cannabis business before the business is on-boarded, including site visits and confirmation that the business is properly licensed by the state in which it is conducting business. Throughout the relationship, the Bank continues to monitor the
22
Table of Contents
Notes to Consolidated Financial Statements
($ in thousands, except per share data)
business, including additional site visits, to ensure that the cannabis business continues to meet strict requirements, including maintenance of required licenses. The Bank performs periodic financial reviews of the business and monitors the business in accordance with the Bank Secrecy Act of 1970 and other state requirements.
While the Bank provides banking services to customers that are engaged in growing, processing, and sales of both medical and adult-use cannabis in a manner that complies with applicable state law, such customers engaged in those activities currently violate federal law. While the Bank is not aware of any instance of a federally-insured financial institution being subject to such liability, the strict enforcement of federal laws regarding cannabis could result in the Bank's inability to continue to provide banking services to these customers and legal action taken against the Bank by the federal government. There is uncertainty with respect to the potential impact to the consolidated financial statements if the federal government should take action against the Bank. As of March 31, 2026, the Bank has not accrued an amount for the potential impact of any such actions.
The following is a summary of the level of business activities with cannabis customers: deposit and loan balances at March 31, 2026 were approximately $144.8 million, or 7.1 % of total deposits, and $183.5 million, or 9.5 % of total loans, respectively. Deposit and loan balances at December 31, 2025 were approximately $129.5 million, or 6.0 % of total deposits, and $193.5 million, or 10.0 % of total loans, respectively.
Note 6. Stock-Based Compensation Plan
The Company’s Amended and Restated 2008 Option Plan (the "Plan"), which is stockholder-approved, was adopted to advance the interests of the Company by providing selected key employees of the Company, their affiliates, and directors with the opportunity to acquire shares of common stock in connection with their service to the Company. In May 2022, the stockholders approved an amendment to the Plan to extend the term and increase the number of shares authorized for issuance under the Plan by 200,000 shares. The Company has granted stock options and restricted stock units under the Plan.
The maximum number of shares with respect to which awards may be made is 2,929,296 shares of common stock, subject to adjustment for certain corporate events. Option awards are granted with an exercise price equal to the market price of the Company's stock at the date of grant, generally vest annually over four years of continuous service and have contractual terms of ten years . At March 31, 2026, 168,173 shares were available to grant under the Plan.
A summary of option activity under the Plan as of March 31, 2026, and changes during the three months ended March 31, 2026 is presented below:
| Options | Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | Aggregate Intrinsic Value (1) | ||||||||||||||||||||||
| Outstanding at January 1, 2026 | $ | |||||||||||||||||||||||||
| Granted | ||||||||||||||||||||||||||
| Exercised | ( | |||||||||||||||||||||||||
| Forfeited or expired | ||||||||||||||||||||||||||
Outstanding and Exercisable at March 31, 2026 | $ | $ | ||||||||||||||||||||||||
________________________
(1)The aggregate intrinsic value of stock options represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) that would have been received by the option holders had all option holders exercised their options on March 31, 2026. This amount changes based on changes in the market value of the Company's stock.
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Notes to Consolidated Financial Statements
($ in thousands, except per share data)
As of March 31, 2026, all outstanding options of the Plan were fully vested. Tax benefits recognized for non-qualified stock option exercises during the three months ended March 31, 2026 and 2025 totaled $50 thousand and $294 thousand, respectively.
A summary of the Company's restricted stock unit activity as of March 31, 2026, and during the three months ended March 31, 2026 is presented below.
| Number of Restricted Stock Units | Weighted Average Grant Date Fair Value | ||||||||||
| Nonvested at January 1, 2026 | $ | ||||||||||
| Granted | |||||||||||
| Vested | ( | ||||||||||
| Forfeited | |||||||||||
Balance at March 31, 2026 | $ | ||||||||||
The compensation cost that has been charged to income for the Plan was $215 thousand and $219 thousand for the three months ended March 31, 2026 and 2025, respectively. For the three months ended March 31, 2026 and 2025, 1,061 shares and 2,544 shares, respectively, were withheld from issuance upon vesting of restricted stock units for income tax withholding by the participants. As of March 31, 2026, there was $1.2 million of total unrecognized compensation cost related to nonvested restricted stock units granted under the Plan. The cost is expected to be recognized over a weighted-average period of 34 months.
Note 7. Fair Value Measurements
Determination of Fair Value
The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with fair value measurements and disclosures topic of FASB Accounitng Standards Codification ("ASC") 820, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date (exit price). Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.
The fair value guidance provides a consistent definition of fair value, which focuses on exit price in an orderly transaction (that is, not a forced liquidation or distressed sale) between market participants at the measurement date under current market conditions. If there has been a significant decrease in the volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions.
Fair Value Hierarchy
In accordance with this guidance, the Company groups its financial assets and financial liabilities generally measured at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value.
Level 1 — Valuation is based on quoted prices in active markets for identical assets and liabilities.
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Notes to Consolidated Financial Statements
($ in thousands, except per share data)
Level 2 — Valuation is based on observable inputs including quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in less active markets, and model-based valuation techniques for which significant assumptions can be derived primarily from or corroborated by observable data in the market.
Level 3 — Valuation is based on model-based techniques that use one or more significant inputs or assumptions that are unobservable in the market.
The following describes the valuation techniques used by the Company to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the financial statements:
Securities available-for-sale: Securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that considers observable market data (Level 2).
Derivatives: The Company has interest rate swap derivatives on certain loans and interest rate swap derivatives on certain time deposits and borrowings, which the latter are designated as cash flow hedges. These derivatives are recorded at fair value using published yield curve rates from a national valuation service. These observable rates and inputs are applied to a third party industry-wide valuation model, and therefore, the valuations fall into a Level 2 category.
The following tables present the balances of financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2026 and December 31, 2025:
Fair Value Measurements at March 31, 2026 Using | ||||||||||||||||||||||||||
Balance as of March 31, 2026 | Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | |||||||||||||||||||||||
| Description | (Level 1) | (Level 2) | (Level 3) | |||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||
| Available-for-sale | ||||||||||||||||||||||||||
| Securities of U.S. government and federal agencies | $ | $ | $ | $ | ||||||||||||||||||||||
| Securities of state and local municipalities taxable | ||||||||||||||||||||||||||
| Corporate bonds | ||||||||||||||||||||||||||
| SBA pass-through securities | ||||||||||||||||||||||||||
| Mortgage-backed securities | ||||||||||||||||||||||||||
| Collateralized mortgage obligations | ||||||||||||||||||||||||||
| Total Available-for-Sale Securities | $ | $ | $ | $ | ||||||||||||||||||||||
| Derivative assets - interest rate swaps | $ | $ | $ | $ | ||||||||||||||||||||||
| Derivative assets - cash flow hedge | ||||||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||
| Derivative liabilities - interest rate swaps | $ | $ | $ | $ | ||||||||||||||||||||||
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Notes to Consolidated Financial Statements
($ in thousands, except per share data)
Fair Value Measurements at December 31, 2025 Using | ||||||||||||||||||||||||||
Balance as of December 31, 2025 | Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | |||||||||||||||||||||||
| Description | (Level 1) | (Level 2) | (Level 3) | |||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||
| Available-for-sale | ||||||||||||||||||||||||||
Securities of U.S. government and federal agencies | $ | $ | $ | $ | ||||||||||||||||||||||
| Securities of state and local municipalities taxable | ||||||||||||||||||||||||||
| Corporate bonds | ||||||||||||||||||||||||||
| SBA pass-through securities | ||||||||||||||||||||||||||
| Mortgage-backed securities | ||||||||||||||||||||||||||
| Collateralized mortgage obligations | ||||||||||||||||||||||||||
| Total Available-for-Sale Securities | $ | $ | $ | $ | ||||||||||||||||||||||
| Derivative assets - interest rate swaps | $ | $ | $ | $ | ||||||||||||||||||||||
| Derivative assets - cash flow hedge | ||||||||||||||||||||||||||
| Liabilities | ||||||||||||||||||||||||||
| Derivative liabilties - interest rate swaps | $ | $ | $ | $ | ||||||||||||||||||||||
Certain financial assets are measured at fair value on a nonrecurring basis in accordance with GAAP. Adjustments to the fair value of these assets usually result from the application of lower of cost or market accounting or write-downs of individual assets.
The following describes the valuation techniques used by the Company to measure certain financial assets recorded at fair value on a nonrecurring basis in the financial statements:
At March 31, 2026 and December 31, 2025, all of the Company's individually evaluated loans were evaluated based upon the fair value of the collateral. In accordance with ASC 820, individually evaluated loans where an allowance is established based on the fair value of collateral (i.e., those loans that are collateral dependent) require classification in the fair value hierarchy. Fair value is measured based on the value of the collateral securing the loans. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is determined utilizing a market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using observable market data (Level 2). However, if the collateral is a house or building in the process of construction, has the value derived by discounting comparable sales due to lack of similar properties, or is discounted by the Company due to marketability, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable business’s financial statements if not considered significant using observable market data. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). Any fair value adjustments are recorded in the period incurred as provision for credit losses on the Consolidated Statements of Income.
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Notes to Consolidated Financial Statements
($ in thousands, except per share data)
The following tables summarize the Company's assets that were measured at fair value on a nonrecurring basis at March 31, 2026 and December 31, 2025:
Fair Value Measurements Using | ||||||||||||||||||||||||||
Balance as of March 31, 2026 | Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | |||||||||||||||||||||||
| Description | (Level 1) | (Level 2) | (Level 3) | |||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||
| Collateral-dependent loans: | ||||||||||||||||||||||||||
| Commercial real estate | $ | $ | $ | $ | ||||||||||||||||||||||
| Total collateral-dependent loans | $ | $ | $ | $ | ||||||||||||||||||||||
Fair Value Measurements Using | ||||||||||||||||||||||||||
Balance as of December 31, 2025 | Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | |||||||||||||||||||||||
| Description | (Level 1) | (Level 2) | (Level 3) | |||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||
| Collateral-dependent loans: | ||||||||||||||||||||||||||
| Commercial real estate | $ | $ | $ | $ | ||||||||||||||||||||||
| Total collateral-dependent loans | $ | $ | $ | $ | ||||||||||||||||||||||
The following tables display quantitative information about Level 3 Fair Value Measurements at March 31, 2026 and December 31, 2025:
Quantitative information about Level 3 Fair Value Measurements at March 31, 2026 | ||||||||||||||||||||||||||||||||
| Assets | Fair Value | Valuation Technique(s) | Unobservable input | Range | (Avg.) | |||||||||||||||||||||||||||
| Collateral-dependent loans: | ||||||||||||||||||||||||||||||||
| Commercial real estate | $ | Discounted appraised value | Marketability/Selling costs | % | ||||||||||||||||||||||||||||
Quantitative information about Level 3 Fair Value Measurements at December 31, 2025 | ||||||||||||||||||||||||||||||||
| Assets | Fair Value | Valuation Technique(s) | Unobservable input | Range | (Avg.) | |||||||||||||||||||||||||||
| Collateral-dependent loans: | ||||||||||||||||||||||||||||||||
| Commercial real estate | $ | Discounted appraised value | Marketability/Selling costs | % | ||||||||||||||||||||||||||||
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Notes to Consolidated Financial Statements
($ in thousands, except per share data)
The following presents the carrying amount, fair value, and placement in the fair value hierarchy of the Company's financial instruments as of March 31, 2026 and December 31, 2025.
Fair Value Measurements as of March 31, 2026 using | ||||||||||||||||||||||||||
Carrying Amount | Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | |||||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | ||||||||||||||||||||||||
| Financial assets: | ||||||||||||||||||||||||||
| Cash and due from banks | $ | $ | $ | $ | ||||||||||||||||||||||
| Interest-bearing deposits at other institutions | ||||||||||||||||||||||||||
| Securities held-to-maturity | ||||||||||||||||||||||||||
| Securities available-for-sale | ||||||||||||||||||||||||||
| Restricted stock | ||||||||||||||||||||||||||
| Loans, net | ||||||||||||||||||||||||||
| Bank owned life insurance | ||||||||||||||||||||||||||
| Accrued interest receivable | ||||||||||||||||||||||||||
| Derivative assets - interest rate swaps | ||||||||||||||||||||||||||
| Derivative assets - cash flow hedge | ||||||||||||||||||||||||||
| Financial liabilities: | ||||||||||||||||||||||||||
| Checking | $ | $ | $ | $ | ||||||||||||||||||||||
| Savings and money market | ||||||||||||||||||||||||||
| Time deposits | ||||||||||||||||||||||||||
| Wholesale deposits | ||||||||||||||||||||||||||
| Long-term debt, net of issuance costs | ||||||||||||||||||||||||||
| Accrued interest payable | ||||||||||||||||||||||||||
| Derivative liabilities - interest rate swaps | ||||||||||||||||||||||||||
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Notes to Consolidated Financial Statements
($ in thousands, except per share data)
Fair Value Measurements as of December 31, 2025 using | |||||||||||||||||||||||
Carrying Amount | Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | ||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | |||||||||||||||||||||
| Financial assets: | |||||||||||||||||||||||
| Cash and due from banks | $ | $ | $ | $ | |||||||||||||||||||
| Interest-bearing deposits at other institutions | |||||||||||||||||||||||
| Securities held-to-maturity | |||||||||||||||||||||||
| Securities available-for-sale | |||||||||||||||||||||||
| Restricted stock | |||||||||||||||||||||||
| Loans, net | |||||||||||||||||||||||
| Bank owned life insurance | |||||||||||||||||||||||
| Accrued interest receivable | |||||||||||||||||||||||
| Derivative assets - interest rate swaps | |||||||||||||||||||||||
| Derivative assets - cash flow hedge | |||||||||||||||||||||||
| Financial liabilities: | |||||||||||||||||||||||
| Checking | $ | $ | $ | $ | |||||||||||||||||||
| Savings and money market | |||||||||||||||||||||||
| Time deposits | |||||||||||||||||||||||
| Wholesale deposits | |||||||||||||||||||||||
| Long-term debt, net of issuance costs | |||||||||||||||||||||||
| Accrued interest payable | |||||||||||||||||||||||
| Derivative liabilities - interest rate swaps | |||||||||||||||||||||||
Note 8. Earnings Per Share
Basic earnings per share ("EPS") excludes dilution and is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if contracts to issue common stock were exercised or converted into common stock, or resulted in the issuance of stock which then shared in the earnings of the Company. Weighted average shares – diluted includes only the potential dilution of stock options and unvested restricted stock units for the three months ended March 31, 2026 and 2025, respectively.
The following shows the weighted average number of shares used in computing EPS and the effect of weighted average number of shares of dilutive potential common stock. Dilutive potential common stock has no effect on income available to common shareholders. There were no
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Notes to Consolidated Financial Statements
($ in thousands, except per share data)
The holders of restricted stock units do not share in dividends and do not have voting rights during the vesting period.
| Three months ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Net income | $ | $ | |||||||||||||||||||||
| Weighted average - basic shares | |||||||||||||||||||||||
Effect of dilutive securities, restricted stock units and options | |||||||||||||||||||||||
| Weighted average - diluted shares | |||||||||||||||||||||||
| Basic EPS | $ | $ | |||||||||||||||||||||
| Diluted EPS | $ | $ | |||||||||||||||||||||
Note 9. Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss) ("AOCI") for the three months ended March 31, 2026 and 2025 are shown in the following tables. The Company has two
| March 31, 2026 | |||||||||||||||||
| Three Months Ended March 31, 2026 | Available-for- Sale Securities | Cash Flow Hedges | Total | ||||||||||||||
| Balance, beginning of period | $ | ( | $ | $ | ( | ||||||||||||
| Net unrealized gains during the period | |||||||||||||||||
| Other comprehensive income (loss), net of tax | |||||||||||||||||
| Balance, end of period | $ | ( | $ | $ | ( | ||||||||||||
| March 31, 2025 | |||||||||||||||||
| Three Months Ended March 31, 2025 | Available-for- Sale Securities | Cash Flow Hedges | Total | ||||||||||||||
| Balance, beginning of period | $ | ( | $ | $ | ( | ||||||||||||
| Net unrealized gains (losses) during the period | ( | ||||||||||||||||
| Other comprehensive income (loss), net of tax | ( | ||||||||||||||||
| Balance, end of period | $ | ( | $ | $ | ( | ||||||||||||
There were no
Note 10. Revenue Recognition
The Company recognizes revenue in accordance with ASC 606 ‘‘Revenue from Contracts with Customers’’ ("Topic 606"). Topic 606 does not apply to revenue associated with financial instruments, including revenue from loans and securities. In addition, certain noninterest income streams such as fees associated with mortgage servicing rights, gain on sale of securities, bank-owned life insurance income, financial guarantees, derivatives, and certain credit card fees are also not in scope of the new guidance. Topic 606 is applicable to noninterest revenue streams such as trust and asset management income, deposit related fees, interchange fees, merchant income, and insurance commissions. However, the recognition of these revenue streams did not change significantly upon adoption of Topic 606. Substantially all of the Company’s revenue is generated from contracts with customers. Noninterest revenue streams in-scope of Topic 606 are discussed below.
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Notes to Consolidated Financial Statements
($ in thousands, except per share data)
Service Charges on Deposit Accounts
Service charges on deposit accounts consist of account analysis fees (i.e., net fees earned on analyzed business and personal checking accounts), monthly service fees, check orders, and other deposit account related fees. The Company’s performance obligation for account analysis fees and monthly service fees is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Check orders and other deposit account related fees are largely transactional based, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time. Payment for service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to customers’ accounts.
Fees, Exchange and Other Service Charges
Fees, exchange, and other service charges are primarily comprised of debit and credit card income, ATM fees, merchant services income, and other service charges and are included in other income on the Company’s consolidated statements of income. Debit and credit card income is primarily comprised of interchange fees earned whenever the Company’s debit and credit cards are processed through card payment networks such as Visa. ATM fees are primarily generated when a Company cardholder uses a non-Company ATM. Merchant services income mainly represents fees charged to merchants to process their debit and credit card transactions, in addition to account management fees. Other service charges include revenue from processing wire transfers, bill pay service, cashier’s checks, and other services. The Company’s performance obligation for fees, exchange, and other service charges are largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is typically received immediately or in the following month. This income is reflected in other income on the Company’s Consolidated Statements of Income.
Other Income
Other noninterest income consists of loan swap fees, insurance commissions, and other miscellaneous revenue streams not meeting the criteria above. When the Company enters into an interest rate swap agreement, the Company may receive a one-time payment fee which is recognized as income when received. The Company receives monthly recurring commissions based on a percentage of premiums issued and revenue is recognized when received. Any residual miscellaneous fees are recognized as they occur, and therefore, the Company determined this consistent practice satisfies the obligation for performance.
The following table presents noninterest income, segregated by revenue streams in-scope and out-of-scope of Topic 606, for the three months ended March 31, 2026 and 2025:
| Three months ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Noninterest income | |||||||||||||||||||||||
| In-scope of Topic 606 | |||||||||||||||||||||||
| Service charges on deposit accounts | $ | $ | |||||||||||||||||||||
| Fees, exchange, and other service charges | |||||||||||||||||||||||
| Other income | |||||||||||||||||||||||
| Noninterest income (in-scope of Topic 606) | |||||||||||||||||||||||
| Noninterest income (out-scope of Topic 606) | |||||||||||||||||||||||
| Total noninterest income | $ | $ | |||||||||||||||||||||
Contract Balances
A contract asset balance occurs when an entity performs a service for a customer before the customer pays consideration (resulting in a contract receivable) or before payment is due (resulting in a contract asset). A contract liability balance is an entity’s obligation to transfer a service to a customer for which the entity has already received payment (or payment is due) from the customer. The Company’s noninterest revenue streams are largely based on transactional activity. Consideration is often received immediately or shortly after the Company satisfies its performance obligation and revenue is recognized. The Company does not typically enter into long-term revenue contracts with customers, and therefore, does
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Notes to Consolidated Financial Statements
($ in thousands, except per share data)
not experience significant contract balances. As of March 31, 2026 and December 31, 2025, the Company did not have any significant contract balances.
Contract Acquisition Costs
Under Topic 606, an entity is required to capitalize, and subsequently amortize into expense, certain incremental costs of obtaining a contract with a customer if these costs are expected to be recovered. The incremental costs of obtaining a contract are those costs that an entity incurs to obtain a contract with a customer that it would not have incurred if the contract had not been obtained (for example, sales commission). The Company utilizes the practical expedient which allows entities to immediately expense contract acquisition costs when the asset that would have resulted from capitalizing these costs would have been amortized in one year or less. The Company did not capitalize any contract acquisition costs during the three months ended March 31, 2026 or the year ended December 31, 2025.
Note 11. Supplemental Cash Flow Information
Below is additional information regarding the Company’s cash flows for the three months ended March 31, 2026 and 2025.
| Three months ended March 31, | ||||||||||||||
| 2026 | 2025 | |||||||||||||
| Supplemental Disclosure of Cash Flow Information: | ||||||||||||||
| Cash paid for: | ||||||||||||||
| Interest on deposits and borrowed funds | $ | $ | ||||||||||||
| Income taxes | ||||||||||||||
| Noncash investing and financing activities: | ||||||||||||||
| Unrealized gains on securities available-for-sale | ||||||||||||||
| Unrealized gains/(losses) on interest rate swaps | ( | |||||||||||||
Note 12. Subsequent Events
Effective May 1, 2026, the Company completed the sale (the “Transaction”) of the Bank’s interest in Bearing Insurance Group, LLC to an unaffiliated third party. Based solely on information available to the Company, the Company estimates a pre-tax gain of approximately $845 thousand will be recognized on the Transaction, which will be included in the Company’s financial results for the second quarter of 2026.
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
The following presents management’s discussion and analysis of our consolidated financial condition at March 31, 2026 and December 31, 2025 and the results of our operations for the three months ended March 31, 2026 and 2025. This discussion should be read in conjunction with our unaudited consolidated financial statements and the notes thereto appearing elsewhere in this report and the audited consolidated financial statements and the notes to consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025. Results of operations for the three months ended March 31, 2026 are not necessarily indicative of the results of operations for the balance of 2026, or for any other period. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause results to differ materially from management’s expectations.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-Q, as well as other periodic reports filed with the U.S. Securities and Exchange Commission (the "SEC"), and written or oral communications made from time to time by or on behalf of FVCBankcorp, Inc. and our subsidiary (the “Company”), may contain statements relating to future events or our future results that are considered “forward-looking statements” under the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections and statements of our beliefs concerning future events, business plans, objectives, expected operating results and the assumptions upon which those statements are based. Forward-looking statements include without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “aim,” “intend,” “plan,” or words or phases of similar meaning. We caution that the forward-looking statements are based largely on our expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond our control. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements.
The following factors, among others, could cause the financial performance of the Company to differ materially from that expressed in such forward-looking statements:
•general business and economic conditions, including higher inflation and its impacts, nationally or in the markets that the Company serves could adversely affect, among other things, real estate valuations, unemployment levels, the ability of businesses to remain viable, consumer and business confidence, and consumer or business spending, which could lead to decreases in demand for loans, deposits, and other financial services that the Company provides and increases in loan delinquencies and defaults;
•the concentration of the Company's business in and around the Washington, D.C. metropolitan area and the effects of changes in the economic, political, and environmental conditions on this market, including shutdowns of the U.S. government and potential reductions in spending by the U.S. government and related reductions in the federal workforce;
•the impact of the interest rate environment on the Company's business, financial condition and results of operation, and its impact on the composition and costs of deposits, loan demand, and the values and liquidity of loan collateral, securities, and interest sensitive assets and liabilities;
•changes in the Company's liquidity requirements could be adversely affected by changes in its assets and liabilities;
•changes in the assumptions underlying the establishment of reserves for possible credit losses and the possibility that future credit losses may be higher than currently expected;
•the management of risks inherent in the Company's real estate loan portfolio, and the risk of a prolonged downturn in the real estate market, which could impair the value of loan collateral and the ability to sell collateral upon any foreclosure;
•changes in market conditions, specifically declines in the commercial and residential real estate market, volatility and disruption of the capital and credit markets, and soundness of other financial institutions that the Company does business with;
•the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System (the "Federal Reserve"), inflation, interest rate, market and monetary fluctuations;
•the Company's investment securities portfolio is subject to credit risk, market risk, and liquidity risk as well as changes in the estimates used to value the securities in the portfolio;
•declines in the Company's common stock price or the occurrence of what management would deem to be a triggering event that could, under certain circumstances, cause us to record a noncash impairment charge to earnings in future periods;
•the effect of any change in federal government enforcement of federal laws affecting the cannabis industry;
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•potential exposure to fraud, negligence, computer theft and cyber-crime, and the Company's ability to maintain the security of its data processing and information technology systems;
•the impact of changes in bank regulatory conditions, including laws, regulations and policies concerning capital requirements, deposit insurance premiums, taxes, securities, and the application thereof by regulatory bodies;
•the effect of changes in accounting policies and practices, as may be adopted from time to time by bank regulatory agencies, the SEC, the Public Company Accounting Oversight Board, the Financial Accounting Standards Board ("FASB") or other accounting standards setting bodies;
•competitive pressures among financial services companies, including the timely development of competitive new products and services and the acceptance of these products and services by new and existing customers;
•the effect of acquisitions and partnerships the Company may make, including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions;
•the Company's involvement, from time to time, in legal proceedings and examination and remedial actions by regulators;
•geopolitical conditions, including trade restrictions and tariffs, and acts or threats of terrorism and/or military conflicts, or actions taken by the United States or other governments in response to trade restrictions and tariffs, and acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the United States and abroad; and
•the occurrence of significant natural disasters, including severe weather conditions, floods, health related issues or emergencies, and other catastrophic events.
The foregoing factors should not be considered exhaustive and should be read together with other cautionary statements that are included in our Annual Report on Form 10-K for the year ended December 31, 2025, including those discussed in the section entitled “Risk Factors”. If one or more of the factors affecting our forward-looking information and statements proves incorrect, then our actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this Form 10-Q. Therefore, we caution you not to place undue reliance on our forward-looking information and statements. We will not update the forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking statements. New risks and uncertainties may emerge from time to time, and it is not possible for us to predict their occurrence or how they will affect our operations, financial condition, or results of operations.
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Overview
We are a bank holding company headquartered in Fairfax County, Virginia. Our sole subsidiary, FVCbank (the "Bank"), was formed in November 2007 as a community-oriented, locally-owned and managed commercial bank under the laws of the Commonwealth of Virginia. The Bank offers a wide range of traditional bank loan and deposit products and services to both our commercial and retail customers. Our commercial relationship officers focus on attracting small and medium sized businesses, commercial real estate developers and builders, including government contractors, non-profit organizations, and professionals. Our approach to our market features competitive customized financial services offered to customers and prospects in a personal relationship context by seasoned professionals.
Net interest income is our primary source of revenue. We define revenue as net interest income plus noninterest income. We manage our balance sheet and interest rate risk exposure to maximize, and concurrently stabilize, net interest income. We do this by monitoring our liquidity position and the spread between the interest rates earned on interest-earning assets and the interest rates paid on interest-bearing liabilities. We attempt to minimize our exposure to interest rate risk, but are unable to eliminate it entirely. In addition to managing interest rate risk, we also analyze our loan portfolio for exposure to credit risk. Loan defaults and foreclosures are inherent risks in the banking industry, and we attempt to limit our exposure to these risks by carefully underwriting and then monitoring our extensions of credit. In addition to net interest income, noninterest income is a complementary source of revenue for us and includes, among other things, service charges on deposits and loans, income from our minority membership interest in Atlantic Coast Mortgage ("ACM"), merchant services fee income, insurance commission income, income from bank-owned life insurance ("BOLI"), and gains and losses on sales of investment securities available-for-sale.
Critical Accounting Estimates
General
The accounting principles we apply under the accounting principles generally accepted in the United States of America ("GAAP") are complex and require management to apply significant judgment to various accounting, reporting, and disclosure matters. Management must use assumptions, judgments, and estimates when applying these principles where precise measurements are not possible or practical. These policies are critical because they are highly dependent upon subjective or complex judgments, assumptions, and estimates. Changes in such judgments, assumptions, and estimates may have a significant impact on the consolidated financial statements. Actual results, in fact, could differ from initial estimates.
The accounting policies we view as critical are those relating to judgments, assumptions, and estimates regarding the determination of the allowance for credit losses on our loan portfolio.
Allowance for Credit Losses - Loans
We maintain the allowance for credit losses ("ACL") at a level that represents management’s best estimate of expected losses in our loan portfolio.
Accounting Standards Codification ("ASC") 326 requires that an estimate of expected credit losses be immediately recognized and reevaluated over the contractual life of the financial asset. The ACL is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loan portfolio. Loans, or portions thereof, are charged off against the ACL when they are deemed uncollectible. Recoveries are recorded to the extent they do not exceed the aggregate of amounts previously charged-off.
Reserves on loans that do not share risk characteristics are evaluated on an individual basis. Nonaccrual loans are specifically reviewed for loss potential and when deemed appropriate are assigned a reserve based on an individual evaluation. The remainder of the portfolio, representing all loans not evaluated individually, is segmented based on call report code and processed through a non-discounted cash flow valuation model. In particular, loan-level probability of default ("PD") and severity (also referred to as loss given default ("LGD")) is applied to derive a baseline expected loss as of the valuation date. These expected default and severity rates, which are regression-derived and based on peer historical loan-level performance data, are calibrated to incorporate our reasonable and supportable forecast of future losses as well as any necessary qualitative adjustments.
Typically, financial institutions use their historical loss experience and trends in losses for each loan segment which are then adjusted for portfolio trends and economic and environmental factors in determining the ACL. Since the
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Bank’s inception in 2007, we have experienced minimal loss history within our loan portfolio. Due to the fact that limited internal loss history exists to generate statistical significance, we determined it was most prudent to rely on peer data when deriving our best estimate of PD and LGD. As part of our estimation process, we will continue to assess the reasonableness of the data, assumptions, and model methodology utilized to derive our allowance for credit losses.
For each of the modeled loan segments, we generate cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speeds, PD rates, and LGD rates. The modeling of expected prepayment speeds is based on internal loan-level historical data. For our cash flow model, we utilize national unemployment for reasonable and supportable forecasting of expected default. To further adjust the ACL for expected losses not already within the quantitative component of the calculation, we may consider qualitative factors as prescribed in ASC 326.
While our methodology in establishing the ACL attributes portions of a combined reserve to multiple elements, we believe that the combined allowance for credit losses (which is inclusive of the reserve for unfunded commitments) represents the most appropriate coverage metric for loss absorption purposes.
The determination of the appropriate level of the ACL on loans inherently involves a high degree of subjectivity and requires us 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 our control, may indicate the need for an increase or decrease in the ACL on loans. While we make every effort to utilize the best information available in making our 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. Our methodology utilized in the estimation of the ACL, which is performed at least quarterly, is designed to be dynamic and responsive to changes in our loan portfolio credit quality, composition, and forecasted economic conditions. The review of the reasonableness and appropriateness of the ACL is reviewed by the ACL Committee for approval as of the valuation date. Additionally, information is provided to the Board of Directors on a quarterly basis along with our consolidated financial statements.
Credit losses are an inherent part of our business and, although we believe the methodologies for determining the ACL and the current level of the allowance are appropriate, it is possible that there may be unidentified losses in the portfolio at any particular time that may become evident at a future date pursuant to additional internal analysis or regulatory comment. Additional provisions for such losses, if necessary, would be recorded, and would negatively impact earnings.
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Results of Operations— Three Months Ended March 31, 2026 and 2025
Overview
We recorded net income of $6.4 million, or $0.35 diluted earnings per share, for the three months ended March 31, 2026, compared to net income of $5.2 million, or $0.28 diluted earnings per share, for the three months ended March 31, 2025, an increase of $1.2 million, or 24%.
Net interest income increased $2.4 million, or 16%, to $17.4 million for the three months ended March 31, 2026, compared to $15.1 million for the same period of 2025. Provision for credit losses totaled $168 thousand for the three months ended March 31, 2026 compared to $200 thousand for the three months ended March 31, 2025.
Noninterest income was $883 thousand and $671 thousand for the three months ended March 31, 2026 and 2025, respectively, an increase of $212 thousand, or 32%. Noninterest expense was $9.9 million for the three months ended March 31, 2026 compared to $9.1 million for the three months ended March 31, 2025, an increase of $739 thousand, or 8%.
The annualized return on average assets for the three months ended March 31, 2026 and 2025 was 1.17% and 0.94%, respectively. The annualized return on average equity for the three months ended March 31, 2026 and 2025 was 10.04% and 8.61%, respectively.
Core operating earnings (non-GAAP) for the three months ended March 31, 2026 and 2025 were $6.6 million and $5.2 million, respectively, an increase of $1.4 million, or 27%. Diluted core operating earnings per share (non-GAAP) for the three months ended March 31, 2026 and 2025 were $0.36 and $0.28, respectively.
We consider core operating earnings a useful financial measure of our operating performance. Core operating earnings is determined by methods other than in accordance with GAAP. A reconciliation of non-GAAP financial measures to their most comparable financial measure in accordance with GAAP can be found in the tables below.
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Reconciliation of Net Income (GAAP) to Core Operating Earnings (Non-GAAP)
For the Three Months Ended March 31, 2026 and 2025
(Dollars in thousands, except per share data)
| For the Three Months Ended March 31, | |||||||||||
| 2026 | 2025 | ||||||||||
| Net income (as reported) | $ | 6,386 | $ | 5,165 | |||||||
| Accelerated debt issuance costs on sub debt redemption | 244 | $ | — | ||||||||
| Provision for income taxes associated with non-GAAP adjustments | (55) | — | |||||||||
| Non-GAAP Core Operating Earnings | $ | 6,575 | $ | 5,165 | |||||||
| Earnings per share - basic (GAAP net income) | $ | 0.36 | $ | 0.28 | |||||||
| Adjusted Earnings per share - Non-GAAP expenses including provision for income taxes | $ | 0.01 | $ | — | |||||||
| Earnings per share - basic (non-GAAP core operating earnings) | $ | 0.37 | $ | 0.28 | |||||||
| Earnings per share - diluted (GAAP net income) | $ | 0.35 | $ | 0.28 | |||||||
| Adjusted Earnings per share - Non-GAAP expenses including provision for income taxes | $ | 0.01 | $ | — | |||||||
| Adjustments to earnings per share - diluted (non-GAAP core operating earnings) | $ | 0.36 | $ | 0.28 | |||||||
| Return on average assets (GAAP net income) | 1.17 | % | 0.94 | % | |||||||
| Adjusted Non-GAAP expenses including provision for income taxes | 0.03 | % | — | % | |||||||
| Adjusted return on average assets (non‑GAAP core operating earnings) | 1.20 | % | 0.94 | % | |||||||
| Return on average equity (GAAP net income) | 10.04 | % | 8.61 | % | |||||||
| Adjusted Non-GAAP expenses including provision for income taxes | 0.30 | % | — | % | |||||||
| Adjusted return on average equity (non‑GAAP core operating earnings) | 10.34 | % | 8.61 | % | |||||||
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Net Interest Income/Margin
The following table presents average balance information, interest income, interest expense and the corresponding average yields earned and rates paid for the three months ended March 31, 2026 and 2025.
Average Balance Sheets and Interest Rates on Interest-Earning Assets and Interest-Bearing Liabilities
For the Three Months Ended March 31, 2026 and 2025
(Dollars in thousands)
| 2026 | 2025 | |||||||||||||||||||||||||||||||||||||
| Average Balance | Interest Income/ Expense | Average Yield/ Rate | Average Balance | Interest Income/ Expense | Average Yield/ Rate | |||||||||||||||||||||||||||||||||
| Assets | ||||||||||||||||||||||||||||||||||||||
| Interest‑earning assets: | ||||||||||||||||||||||||||||||||||||||
| Loans receivable, net of fees | ||||||||||||||||||||||||||||||||||||||
| Commercial real estate | $ | 1,044,642 | $ | 14,017 | 5.37 | % | $ | 1,027,564 | $ | 12,885 | 5.02 | % | ||||||||||||||||||||||||||
| Commercial and industrial | 409,903 | 7,969 | 7.78 | % | 324,023 | 6,369 | 7.86 | % | ||||||||||||||||||||||||||||||
| Commercial construction | 154,755 | 2,521 | 6.52 | % | 165,111 | 2,969 | 7.19 | % | ||||||||||||||||||||||||||||||
| Consumer real estate | 293,264 | 3,443 | 4.70 | % | 319,946 | 3,822 | 4.78 | % | ||||||||||||||||||||||||||||||
| Warehouse facilities | 23,816 | 346 | 5.81 | % | 21,847 | 347 | 6.35 | % | ||||||||||||||||||||||||||||||
| Consumer nonresidential | 5,173 | 92 | 7.11 | % | 8,102 | 161 | 7.95 | % | ||||||||||||||||||||||||||||||
Total loans(1) | 1,931,553 | 28,388 | 5.88 | % | 1,866,593 | 26,553 | 5.69 | % | ||||||||||||||||||||||||||||||
Investment securities(2) | 183,478 | 958 | 2.09 | % | 198,776 | 1,041 | 2.09 | % | ||||||||||||||||||||||||||||||
| Interest-bearing deposits at other financial institutions | 52,209 | 475 | 3.69 | % | 87,840 | 963 | 4.39 | % | ||||||||||||||||||||||||||||||
| Total interest‑earning assets and interest income | $ | 2,167,240 | $ | 29,821 | 5.50 | % | $ | 2,153,209 | $ | 28,557 | 5.31 | % | ||||||||||||||||||||||||||
| Noninterest‑earning assets: | ||||||||||||||||||||||||||||||||||||||
| Cash and due from banks | 7,703 | 11,138 | ||||||||||||||||||||||||||||||||||||
| Premises and equipment, net | 685 | 849 | ||||||||||||||||||||||||||||||||||||
| Accrued interest and other assets | 57,270 | 54,981 | ||||||||||||||||||||||||||||||||||||
| Allowance for credit losses | (18,889) | (18,195) | ||||||||||||||||||||||||||||||||||||
| Total assets | $ | 2,214,009 | $ | 2,201,982 | ||||||||||||||||||||||||||||||||||
| Liabilities and Stockholders' Equity | ||||||||||||||||||||||||||||||||||||||
| Interest ‑ bearing liabilities: | ||||||||||||||||||||||||||||||||||||||
| Interest ‑ bearing deposits: | ||||||||||||||||||||||||||||||||||||||
| Interest checking | $ | 680,550 | $ | 4,441 | 2.65 | % | $ | 617,141 | $ | 4,821 | 3.17 | % | ||||||||||||||||||||||||||
| Savings and money markets | 333,331 | 2,408 | 2.93 | % | 390,467 | 3,141 | 3.26 | % | ||||||||||||||||||||||||||||||
| Time deposits | 293,200 | 2,742 | 3.79 | % | 256,389 | 2,680 | 4.24 | % | ||||||||||||||||||||||||||||||
| Wholesale deposits | 238,789 | 2,112 | 3.59 | % | 249,888 | 2,150 | 3.49 | % | ||||||||||||||||||||||||||||||
| Total interest ‑ bearing deposits | 1,545,870 | 11,703 | 3.07 | % | 1,513,885 | 12,792 | 3.43 | % | ||||||||||||||||||||||||||||||
| Other borrowed funds | 15,245 | 148 | 3.93 | % | 50,000 | 468 | 3.80 | % | ||||||||||||||||||||||||||||||
| Long-term debt, net of issuance costs | 16,220 | 566 | 14.14 | % | 18,699 | 245 | 5.32 | % | ||||||||||||||||||||||||||||||
| Total interest‑bearing liabilities and interest expense | $ | 1,577,335 | $ | 12,417 | 3.19 | % | $ | 1,582,584 | $ | 13,505 | 3.46 | % | ||||||||||||||||||||||||||
| Noninterest‑bearing liabilities: | ||||||||||||||||||||||||||||||||||||||
| Demand deposits | 355,456 | 354,629 | ||||||||||||||||||||||||||||||||||||
| Other liabilities | 23,196 | 24,747 | ||||||||||||||||||||||||||||||||||||
| Common stockholders' equity | 258,022 | 240,022 | ||||||||||||||||||||||||||||||||||||
| Total liabilities and stockholders' equity | $ | 2,214,009 | $ | 2,201,982 | ||||||||||||||||||||||||||||||||||
| Net interest income and net interest margin | $ | 17,404 | 3.26 | % | $ | 15,052 | 2.83 | % | ||||||||||||||||||||||||||||||
________________________
(1)Nonaccrual loans are included in average balances and do not have a material effect on the average yield. Interest income on non-accruing loans was not material for the quarters presented. Net loan fees and late charges included in interest income on loans totaled $331 thousand and $670 thousand for the quarters ended March 31, 2026 and 2025, respectively.
(2)The average balances for investment securities includes restricted stock.
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The following table shows the effect that these factors had on the interest earned from our interest-earning assets and interest incurred on our interest-bearing liabilities for the three months ended March 31, 2026 as compared to the three months ended March 31, 2025.
Rate and Volume Analysis
For the Three Months Ended March 31, 2026 and 2025
(Dollars in thousands)
| 2026 Compared to 2025 | ||||||||||||||||||||
Average Volume | Average Rate | Increase (Decrease) | ||||||||||||||||||
| Interest income: | ||||||||||||||||||||
Loans(1): | ||||||||||||||||||||
| Commercial real estate | $ | 214 | $ | 918 | $ | 1,132 | ||||||||||||||
| Commercial and industrial | 1,688 | (88) | 1,600 | |||||||||||||||||
| Commercial construction | (186) | (262) | (448) | |||||||||||||||||
| Consumer residential | (319) | (60) | (379) | |||||||||||||||||
| Warehouse facilities | 31 | (32) | (1) | |||||||||||||||||
| Consumer nonresidential | (58) | (11) | (69) | |||||||||||||||||
| Total loans | 1,370 | 465 | 1,835 | |||||||||||||||||
Investment securities(2) | (80) | (3) | (83) | |||||||||||||||||
| Deposits at other financial institutions and federal funds sold | (389) | (99) | (488) | |||||||||||||||||
| Total interest income | 901 | 363 | 1,264 | |||||||||||||||||
| Interest expense: | ||||||||||||||||||||
| Interest - bearing deposits: | ||||||||||||||||||||
| Interest checking | 495 | (875) | (380) | |||||||||||||||||
| Savings and money markets | (460) | (273) | (733) | |||||||||||||||||
| Time deposits | 385 | (323) | 62 | |||||||||||||||||
| Wholesale deposits | (95) | 57 | (38) | |||||||||||||||||
| Total interest - bearing deposits | 325 | (1,414) | (1,089) | |||||||||||||||||
| Other borrowed funds | (325) | 5 | (320) | |||||||||||||||||
| Long-term debt, net of issuance costs | (32) | 353 | 321 | |||||||||||||||||
| Total interest expense | (32) | (1,056) | (1,088) | |||||||||||||||||
| Net interest income | $ | 933 | $ | 1,419 | $ | 2,352 | ||||||||||||||
_________________________
(1)Nonaccrual loans are included in average balances and do not have a material effect on the average yield. Interest income on non-accruing loans was not material for the periods presented.
(2)The average balances for investment securities includes restricted stock.
.
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Net interest income totaled $17.4 million for the three months ended March 31, 2026 compared to $15.1 million for the three months ended March 31, 2025, an increase of $2.4 million, or 16%. The increase in net interest income is primarily due to an increase in loan interest income from both increased yields on and the level of average loans receivable.
Our net interest margin for the three months ended March 31, 2026 and 2025 was 3.26% and 2.83%, respectively, an increase of 43 basis points, or 15%. The increase in our net interest margin was a result of continued repricing of our loan renewals and newly originated loans to current market interest rates over the past year. We also reduced the cost of our non-maturity funding sources simultaneously with federal funds rate decisions during 2025. The yield on interest-earning assets increased 19 basis points to 5.50% for the three months ended March 31, 2026, compared to 5.31% for the same period of 2025. Our cost of interest-bearing liabilities decreased 27 basis points to 3.19% for the three months ended March 31, 2026, compared to 3.46% for the same period of 2025. During the first quarter of 2026, we recorded $244 thousand in accelerated debt issuance costs associated with the redemption of our subordinated debt in January 2026, which decreased net interest margin by 2 basis points for the three months ended March 31, 2026.
Average interest-earning assets for the three months ended March 31, 2026 increased $14.0 million to $2.17 billion compared to $2.15 billion for the three months ended March 31, 2025. This increase was primarily related to an increase in loans receivable, which increased $65.0 million, or 3%, offset by a decrease in interest-bearing deposits at other financial institutions of $35.6 million, or 41%. Total interest income increased $1.3 million, or 4%, to $29.8 million for the three months ended March 31, 2026 compared to $28.6 million for the three months ended March 31, 2025. The increase in our average volume of interest earning assets was the main driver to the increase in our interest income, contributing $901 thousand of the increase for the three months ended March 31, 2026 compared to the year ago quarter, in addition to the average rate which increased interest income by $363 thousand.
Average loans receivable increased $65.0 million to $1.93 billion for the three months ended March 31, 2026, compared to $1.87 billion for the three months ended March 31, 2025. The yield on average loans increased 19 basis points to 5.88% for the three months ended March 31, 2026, compared to 5.69% for the three months ended March 31, 2025. The increase in our average loan yields was primarily a result of new loan originations and loans repricing to current market interest rates and the increase in the volume of commercial and industrial loans. Average balances of nonperforming loans, which consist of nonaccrual loans, are included in the net interest margin calculation and did not have a material impact on our net interest margin in 2026 and 2025.
Average interest-earning deposits at other financial institutions, consisting primarily of excess cash reserves maintained at the Federal Reserve, decreased $35.6 million to $52.2 million for the quarter ended March 31, 2026, compared to $87.8 million for the quarter ended March 31, 2025. The decrease in our excess cash reserves is primarily due to an increase in loan originations, as average loans receivable increased $65.0 million year-over-year. The yield on average interest-earning deposits at other financial institutions decreased 70 basis points to 3.69% for the quarter ended March 31, 2026 compared to 4.39% for the same period of 2025, primarily as a result of the Federal Open Market Committee's decision to decrease its targeted federal funds rate 75 basis points during the course of 2025.
Total average interest-bearing liabilities was $1.58 billion for each of the three months ended March 31, 2026 and March 31, 2025.
Interest expense decreased $1.1 million to $12.4 million for the three months ended March 31, 2026, compared to $13.5 million for the three months ended March 31, 2025. The cost of interest-bearing liabilities decreased 27 basis points to 3.19% for the three months ended March 31, 2026 compared to 3.46% for the three months ended March 31, 2025. The decrease in the average rate was the primary driver of the decrease in interest expense for the first quarter of 2026 compared to the same period of 2025.
Total average interest-bearing deposits increased $32.0 million to $1.55 billion for the three months ended March 31, 2026 compared to $1.51 billion for the three months ended March 31, 2025. Interest expense on deposits decreased $1.1 million to $11.7 million for the three months ended March 31, 2026 compared to $12.8 million for the three months ended March 31, 2025, primarily as a result of the decrease in interest rates on interest-bearing deposits for the three months ended March 31, 2026. The cost of interest-bearing deposits decreased 36 basis points to 3.07% for the three months ended March 31, 2026 compared to 3.43% for the same period of 2025. Average noninterest-bearing deposits increased $827 thousand to $355.5 million for the three months ended March 31, 2026, compared to $354.6 million for the three months ended March 31, 2025. Average wholesale deposits decreased $11.1 million to $238.8 million for the three
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months ended March 31, 2026 compared to $249.9 million for the three months ended March 31, 2025. Cost of deposits (which includes noninterest-bearing deposits) was 2.50% for the three months ended March 31, 2026 compared to 2.78% for the same three month period of 2025, a decrease of 28 basis points, or 10%.
Average other borrowed funds decreased $34.8 million to $15.2 million for the quarter ended March 31, 2026, compared to $50.0 million for the quarter ended March 31, 2025. Interest expense on other borrowed funds decreased $320 thousand, or 68%, for the quarter ended March 31, 2026 to $148 thousand compared to $468 thousand for the same period of 2025. The cost of other borrowed funds increased 13 basis points to 3.93% for the three months ended March 31, 2026 compared to 3.80% for the three months ended March 31, 2025.
Average long-term debt, net of issuance costs, includes our subordinated debt issued in October 2020 until it was redeemed on January 15, 2026 and our unsecured senior notes since their issuance on February 11, 2026. Upon redemption of our subordinated debt on January, 15, 2026, we recognized $244 thousand in unamortized issuance costs associated with that debt issuance, which increased interest expense to $566 thousand for the three months ended March 31, 2026. Excluding these debt issuance costs, interest expense would have been $322 thousand, an increase of $77 thousand from the year ago quarter ended March 31, 2025, which was primarily due to the subordinated debt reverting from a fixed rate of 4.77% to a floating rate paying 3-month Secured Overnight Funding Rate ("SOFR") plus 471 basis points, or 8.59%, in October 2025. In addition, excluding the recognition of the unamortized debt issuance costs, the cost of long-term debt for the quarter ended March 31, 2026 was 8.05%, an increase of 273 basis points from 5.32% for the quarter ended March 31, 2025. The unsecured senior notes pay a fixed rate of 6.75%, a decrease of 184 basis points from 8.59% on the floating rate subordinated debt.
Provision Expense and Allowance for Credit Losses on Loans
Our policy is to maintain the ACL at a level that represents our best estimate of expected losses in the loan portfolio as of the valuation date. Both the amount of the provision and the level of the allowance for credit losses are impacted by many factors, including general and industry-specific economic conditions, actual and expected credit losses, historical trends and specific conditions of individual borrowers.
We recorded a provision for credit losses of $168 thousand for the three months ended March 31, 2026 and $200 thousand for the three months ended March 31, 2025. The allowance for credit losses was $19.1 million and $18.9 million at March 31, 2026 and December 31, 2025, respectively. Our allowance for credit losses as a percent of total loans, net of deferred fees and costs, was 1.00% and 0.97% for March 31, 2026 and December 31, 2025, respectively. The increase in the allowance for credit losses percentage at March 31, 2026 as compared to December 31, 2025 was due to an increase in our individually evaluated reserves and a slight increase in qualitative factors.
We lend to well-established and relationship-driven borrowers, which has contributed to our track record of low historical credit losses. We continue to maintain our disciplined credit guidelines during the current rate environment. We proactively monitor the impact of changes in economic conditions, such as inflation and recessionary conditions, changes in market interest rates, and changes in government policy. Nonperforming loans, net of fees, at March 31, 2026 totaled $12.2 million, or 0.52% of total assets, compared to $10.7 million, or 0.47% of total assets at December 31, 2025. We had no other real estate owned at March 31, 2026 and December 31, 2025. We recorded net charge-offs of $3 thousand and net recoveries of $139 thousand for the quarters ended March 31, 2026 and 2025, respectively.
See “Asset Quality” below for additional information on the credit quality of the loan portfolio.
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Noninterest Income
The following table provides detail for noninterest income for the three months ended March 31, 2026 and 2025.
Noninterest Income
For the Three Months Ended March 31, 2026 and 2025
(Dollars in thousands)
| For the Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Change from Prior Year | |||||||||||||||||||||||||||||||||||||||||||||
| Amount | Percent | ||||||||||||||||||||||||||||||||||||||||||||||
| Service charges on deposit accounts | $ | 361 | $ | 270 | $ | 91 | 33.7 | % | |||||||||||||||||||||||||||||||||||||||
| Fees on loans | 111 | 77 | 34 | 44.2 | % | ||||||||||||||||||||||||||||||||||||||||||
| BOLI income | 73 | 70 | 3 | 4.3 | % | ||||||||||||||||||||||||||||||||||||||||||
| Income from minority membership interest | 240 | 141 | 99 | 70.2 | % | ||||||||||||||||||||||||||||||||||||||||||
| Other fee income | 98 | 113 | (15) | (13.3) | % | ||||||||||||||||||||||||||||||||||||||||||
| Total noninterest income | $ | 883 | $ | 671 | $ | 212 | 31.6 | % | |||||||||||||||||||||||||||||||||||||||
Noninterest income includes service charges on deposits and loans, loan swap fee income, income from our membership interest in ACM and other investments, income from our bank-owned life insurance ("BOLI") policies, and other fee income, and continues to supplement our operating results. For the three months ended March 31, 2026 and 2025, we recorded noninterest income of $883 thousand and $671 thousand, respectively, an increase of $212 thousand, or 32%.
We recorded income from our minority membership interest in ACM totaling $240 thousand for the three months ended March 31, 2026, compared to $141 thousand for same period of 2025, which increased due to the volume of originations.
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Noninterest Expense
The following table reflects the components of noninterest expense for the three months ended March 31, 2026 and 2025.
Noninterest Expense
For the Three Months Ended March 31, 2026 and 2025
(Dollars in thousands)
| For the Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Change from Prior Year | |||||||||||||||||||||||||||||||||||||||||||||
| Amount | Percent | ||||||||||||||||||||||||||||||||||||||||||||||
| Salaries and employee benefits | $ | 5,442 | $ | 4,783 | $ | 659 | 13.8 | % | |||||||||||||||||||||||||||||||||||||||
| Occupancy expense | 538 | 529 | 9 | 1.7 | % | ||||||||||||||||||||||||||||||||||||||||||
| Internet banking and software expense | 884 | 825 | 59 | 7.2 | % | ||||||||||||||||||||||||||||||||||||||||||
| Data processing and network administration | 618 | 619 | (1) | (0.2) | % | ||||||||||||||||||||||||||||||||||||||||||
| State franchise taxes | 568 | 596 | (28) | (4.7) | % | ||||||||||||||||||||||||||||||||||||||||||
| Audit, legal and consulting fees | 273 | 242 | 31 | 12.8 | % | ||||||||||||||||||||||||||||||||||||||||||
| Loan related expenses | 244 | 279 | (35) | (12.5) | % | ||||||||||||||||||||||||||||||||||||||||||
| FDIC insurance | 330 | 330 | — | — | % | ||||||||||||||||||||||||||||||||||||||||||
| Marketing, business development and advertising | 155 | 169 | (14) | (8.3) | % | ||||||||||||||||||||||||||||||||||||||||||
| Director fees | 165 | 150 | 15 | 10.0 | % | ||||||||||||||||||||||||||||||||||||||||||
| Postage, courier and telephone | 40 | 18 | 22 | 122.2 | % | ||||||||||||||||||||||||||||||||||||||||||
| Core deposit intangible amortization | 25 | 35 | (10) | (28.6) | % | ||||||||||||||||||||||||||||||||||||||||||
| Other operating expenses | 590 | 558 | 32 | 5.7 | % | ||||||||||||||||||||||||||||||||||||||||||
| Total noninterest expense | $ | 9,872 | $ | 9,133 | $ | 739 | 8.1 | % | |||||||||||||||||||||||||||||||||||||||
Noninterest expense includes, among other things, salaries and benefits, occupancy and equipment costs, professional fees, data processing, insurance and miscellaneous expenses. Noninterest expense was $9.9 million and $9.1 million for the three months ended March 31, 2026 and 2025, respectively, an increase of $739 thousand, or 8%.
Salaries and benefits expense increased $659 thousand to $5.4 million for the three months ended March 31, 2026 compared to $4.8 million for the same period in 2025. The increase in salaries and benefits expense when compared to the year ago quarter ended March 31, 2025 was primarily due to the filling of open positions that were vacant during 2025, along with an increase in payroll taxes and other incentive accruals during the first quarter of 2026. Internet banking and software expense increased $59 thousand for the three months ended March 31, 2026 to $884 thousand, compared to $825 thousand for the same period in 2025, primarily as we continue to enhance our customer digital solutions.
Income Taxes
We recorded a provision for income tax expense of $1.9 million and $1.2 million for the three months ended March 31, 2026 and 2025, respectively. The effective tax rate for the three months ended March 31, 2026 and 2025 was 22.6% and 19.2%, respectively. In 2026, the Company recorded fewer tax benefits associated with the exercise or vesting of share based compensation.
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Discussion and Analysis of Financial Condition
Overview
At March 31, 2026, total assets were $2.34 billion, an increase of $43.2 million, from $2.29 billion at December 31, 2025. Total loans, net of fees, decreased $18.0 million, or 1%, to $1.92 billion at March 31, 2026 from $1.94 billion at December 31, 2025. Investment securities were $150.6 million at March 31, 2026, a decrease of $2.8 million, from $153.4 million at December 31, 2025. Total deposits increased $30.5 million, or 2%, to $2.03 billion at March 31, 2026, from $2.00 billion at December 31, 2025. From time to time, we may utilize funding sources such as federal funds purchased and Federal Home Loan Bank ("FHLB") advances as an additional funding source for the Bank. We had no federal funds purchased at March 31, 2026 or December 31, 2025. The Bank had no FHLB advances outstanding at March 31, 2026 or December 31, 2025. Long-term debt, net of issuance costs, totaled $24.5 million and $18.8 million at March 31, 2026 and December 31, 2025, respectively.
Loans Receivable, Net
Loans receivable, net of deferred fees, were $1.92 billion at March 31, 2026 and $1.94 billion at December 31, 2025, a decrease of $18.0 million, or 1%.
Commercial real estate loans totaled $1.00 billion and $1.03 billion at March 31, 2026 and 2025, respectively, and were approximately 52% and 53% of the total loans receivable at such dates, respectively. Owner-occupied commercial real estate loans were $241.8 million at March 31, 2026 compared to $266.3 million at December 31, 2025. Nonowner-occupied commercial real estate loans were $759.8 million at March 31, 2026 compared to $766.3 million at December 31, 2025. Commercial construction loans totaled $157.3 million at March 31, 2026, compared to $153.0 million at December 31, 2025 and comprised 8% of total loans receivable at such dates, respectively. Our regulatory commercial real estate concentration (which includes nonowner-occupied real estate and construction loans) was 306% of our total risk-based capital at March 31, 2026. Our commercial real estate portfolio, including construction loans, is diversified by asset type and geographic concentration. We manage this portion of our portfolio in a disciplined manner. We have comprehensive policies to monitor, measure, and mitigate our loan concentrations within this portfolio segment, including rigorous credit approval, monitoring and administrative practices. Additional information on the stratification of these portfolio segments can be found below under "Asset Quality".
Commercial and industrial loans increased $19.0 million to $472.4 million at March 31, 2026, an increase of 4%, from $453.4 million at December 31, 2025. The increase in commercial and industrial loans was a result of a continued increase in loan originations during 2026 in addition to an increase in the our warehouse lending facility which totaled $34.1 million at March 31, 2025 compared to $30.0 million at December 31, 2025. Consumer residential loans decreased $6.8 million to $290.2 million at March 31, 2026, from $297.0 million at December 31, 2025. The decrease in residential loans was primarily a result of principal repayments during 2026.
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The following table presents the composition of our loans receivable portfolio at March 31, 2026 and December 31, 2025.
Loans Receivable
At March 31, 2026 and December 31, 2025
(Dollars in thousands)
| March 31, 2026 | December 31, 2025 | ||||||||||
| Commercial real estate | $ | 1,001,612 | $ | 1,032,649 | |||||||
| Commercial and industrial | 472,405 | 453,393 | |||||||||
| Commercial construction | 157,250 | 153,006 | |||||||||
| Consumer real estate | 290,221 | 297,018 | |||||||||
| Consumer nonresidential | 1,817 | 5,217 | |||||||||
| Total loans, net of fees | 1,923,305 | 1,941,283 | |||||||||
| Less: | |||||||||||
| Allowance for credit losses on loans | 19,149 | 18,886 | |||||||||
| Loans receivable, net | $ | 1,904,156 | $ | 1,922,397 | |||||||
Asset Quality
Nonperforming loans, defined as nonaccrual loans and loans contractually past due 90 days or more as to principal or interest and still accruing, were $12.2 million and $10.7 million at March 31, 2026 and December 31, 2025, respectively, an increase of $1.5 million, or 14%. The increase in nonperforming loans at March 31, 2026 is primarily due to an increase in loans past due over 90 days at March 31, 2026, which increased $746 thousand. Loans that we have classified as nonperforming are a result of customer specific deterioration, mostly financial in nature, that are not a result of economic, industry, or environmental causes that we might see as a pattern for possible future losses within our loan portfolio. We individually evaluate each of our criticized loans, generally through the performance of a collateral analysis to determine the amount of allowance required. As a result of the analysis completed, we had a reserve for individually assessed loans totaling $1.6 million and $1.1 million at March 31, 2026 and December 31, 2025, respectively. Our ratio of nonperforming loans to total assets was 0.52% and 0.47% at March 31, 2026 and December 31, 2025, respectively. We had no other real estate owned at March 31, 2026 and December 31, 2025. Loan modifications for borrowers who were experiencing financial difficulty at March 31, 2026 totaled $147 thousand compared to none at December 31, 2025.
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We categorize loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, collateral adequacy, credit documentation, and current economic trends, among other factors. We analyze loans individually by classifying the loans as to credit risk. This analysis includes larger, non-homogeneous loans such as commercial real estate and commercial and industrial loans, and is performed on an ongoing basis as new information is obtained. At March 31, 2026, we had $47.3 million in loans identified as special mention, an increase of $893 thousand from December 31, 2025. Special mention rated loans have a potential weakness that deserves our close attention; however, the borrower continues to pay in accordance with their contractual terms, unless modified and disclosed. Loans rated as special mention are generally considered to be well-secured, and are not individually evaluated. The increase from December 31, 2025 was a result of two loans downgraded to special mention totaling $1.4 million while one loan totaling $534 thousand, which was previously rated as special mention was upgraded during 2026. Six of the special mention loans are commercial real estate loans, with collateral in retail, mixed-use and multifamily, five of which are located in Washington, D.C. Of the loans located in Washington, D.C., four of the five loans have executed listing agreements and are currently either listed for sale or are in the process thereof. The Company expects that the sale of some of these properties will close prior to the end of the third quarter of 2026. These loans are well-secured with updated valuations and are not individually impaired. We believe there will be satisfactory resolution to each of these loans.
At March 31, 2026, we had $10.9 million in loans identified as substandard, an increase of $760 thousand from December 31, 2025. The increase in substandard loans was a result of the addition of one consumer mortgage loan that is in the process of foreclosure. Substandard rated loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. For each of these substandard loans, an individual analysis is completed. At March 31, 2026, reserves for individually assessed loans totaled $1.6 million and were allocated within the allowance for credit losses to supplement any shortfall of collateral.
The following table provides additional information on our asset quality for the dates presented.
Nonperforming Loans and Assets
At March 31, 2026 and December 31, 2025
(Dollars in thousands)
| March 31, 2026 | December 31, 2025 | |||||||||||||
| Nonperforming assets: | ||||||||||||||
| Nonaccrual loans, gross | $ | 10,927 | $ | 10,168 | ||||||||||
| Loans contractually past‑due 90 days or more and still accruing | 1,280 | 545 | ||||||||||||
| Total nonperforming loans (NPLs) | $ | 12,207 | $ | 10,713 | ||||||||||
| Total nonperforming assets (NPAs) | $ | 12,207 | $ | 10,713 | ||||||||||
| NPLs/Total Assets | 0.52 | % | 0.47 | % | ||||||||||
| NPAs/Total Assets | 0.52 | % | 0.47 | % | ||||||||||
| Allowance for credit losses on loans/NPLs | 156.87 | % | 172.86 | % | ||||||||||
The concentration of commercial real estate loans to total risk-based capital was 306% and construction
loans to total risk-based capital was 52%, at March 31, 2026. The reduction in commercial real estate concentration reflects our long-term strategic objective to diversify our loan portfolio mix.
We closely and proactively monitor the effects of recent market activity. As mentioned above, our commercial real estate loan portfolio totaled $1.00 billion, or 52% of total loans, at March 31, 2026 and $1.04 billion, or 56% of total loans, at December 31, 2025. The commercial real estate portfolio, including construction loans, is diversified by asset type and geographic concentration. We manage this portion of the portfolio in a disciplined manner, and have comprehensive policies to monitor, measure, and mitigate our loan concentrations within this portfolio segment, including rigorous credit approval, monitoring, and administrative practices. Included in commercial real estate are loans secured by office properties totaling $160.9 million, or 8% of total loans, which are primarily located in the Virginia and Maryland suburbs
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of our market area, with only $1.0 million, or 0.05% of total loans, located in Washington, D.C. Loans secured by retail properties totaled $212.0 million, or 11% of total loans, at March 31, 2026, with $9.1 million, or less than 1% of total loans, located in Washington, D.C. Loans secured by multi-family commercial properties totaled $178.7 million, or 9% of total loans, at March 31, 2026, with $81.3 million, or 4% of total loans, located in Washington, D.C. (a decrease from $98.7 million at December 31, 2025).
The following table provides further stratification of these and additional classes of commercial real estate and construction loans at March 31, 2026 (dollars in thousands).
Owner Occupied CRE (1) | Non-Owner Occupied CRE (1) | Construction | Total CRE | ||||||||||||||||||||||||||||||||
| Asset Class | Average Loan-to-Value (2) | Number of Total Loans | Bank Owned Principal (3) | Average Loan-to-Value (2) | Number of Total Loans | Bank Owned Principal (3) | Top 3 Geographic Concentration | Number of Total Loans | Bank Owned Principal (3) | Total Bank Owned Principal (3) | % of Total Loans | ||||||||||||||||||||||||
| Office, Class A | 63% | 7 | $ | 40,477 | 40% | 2 | $ | 14,951 | Counties of Fairfax and Loudoun, VA and Montgomery County, MD | — | $ | — | $ | 55,428 | |||||||||||||||||||||
| Office, Class B | 48% | 23 | 8,165 | 44% | 22 | 44,383 | — | — | 52,548 | ||||||||||||||||||||||||||
| Office, Class C | 45% | 9 | 5,015 | 30% | 7 | 7,499 | 3 | 1,068 | 13,582 | ||||||||||||||||||||||||||
| Office, Medical | 37% | 6 | 946 | 43% | 5 | 24,578 | 1 | 13,792 | 39,316 | ||||||||||||||||||||||||||
| Subtotal | 45 | $ | 54,603 | 36 | $ | 91,411 | 4 | $ | 14,860 | $ | 160,874 | 8% | |||||||||||||||||||||||
| Retail- Neighborhood/Community Shop | — | $ | — | 43% | 32 | $ | 91,208 | Counties of Prince George's and Baltimore, MD and Fairfax County, VA | — | $ | — | $ | 91,208 | ||||||||||||||||||||||
| Retail- Restaurant | 52% | 4 | 4,314 | 37% | 11 | 20,153 | — | — | 24,467 | ||||||||||||||||||||||||||
| Retail- Single Tenant | 53% | 5 | 1,794 | 40% | 14 | 26,133 | — | — | 27,927 | ||||||||||||||||||||||||||
| Retail- Anchored,Other | —% | — | — | 49% | 12 | 32,265 | — | — | 32,265 | ||||||||||||||||||||||||||
| Retail- Grocery-anchored | — | — | 40% | 6 | 36,151 | — | — | 36,151 | |||||||||||||||||||||||||||
| Subtotal | 9 | $ | 6,108 | 75 | $ | 205,910 | — | $ | — | $ | 212,018 | 11% | |||||||||||||||||||||||
| Multi-family, Class A | — | $ | — | 41% | 2 | $ | 1,421 | Washington, D.C., Baltimore City, MD and Richmond City, VA | 2 | $ | 33,111 | $ | 34,532 | ||||||||||||||||||||||
| Multi-family, Class B | — | — | 60% | 18 | 62,912 | — | — | 62,912 | |||||||||||||||||||||||||||
| Multi-family, Class C | — | — | 53% | 58 | 70,965 | 1 | 977 | 71,942 | |||||||||||||||||||||||||||
| Multi-Family-Affordable Housing | — | — | 52% | 2 | 9,297 | — | — | 9,297 | |||||||||||||||||||||||||||
| Subtotal | — | $ | — | 80 | $ | 144,595 | 3 | $ | 34,088 | $ | 178,683 | 9% | |||||||||||||||||||||||
| Industrial | 46% | 37 | $ | 100,851 | 53% | 26 | $ | 110,121 | Counties of Prince William and Fairfax, VA and Howard County, MD | — | $ | — | $ | 210,972 | |||||||||||||||||||||
| Warehouse | 46% | 8 | 6,894 | 21% | 6 | 5,215 | — | — | 12,109 | ||||||||||||||||||||||||||
| Flex | 49% | 12 | 10,267 | 52% | 13 | 54,611 | 2 | — | 64,878 | ||||||||||||||||||||||||||
| Subtotal | 57 | $ | 118,012 | 45 | $ | 169,947 | 2 | $ | — | $ | 287,959 | 15% | |||||||||||||||||||||||
| Hotels | — | $ | — | 40% | 7 | $ | 35,102 | 1 | $ | 7,589 | $ | 42,691 | 2% | ||||||||||||||||||||||
| Mixed Use | 43% | 8 | 6,611 | 59% | 27 | 44,662 | — | — | 51,273 | 3% | |||||||||||||||||||||||||
| Land | 66% | — | —% | 0 | — | 20 | 31,695 | 31,695 | 2% | ||||||||||||||||||||||||||
| 1- 4 family construction | — | — | 14 | 48,456 | 48,456 | 2% | |||||||||||||||||||||||||||||
Other (including net deferred fees) | 56,496 | 68,155 | 20,562 | 145,213 | 8% | ||||||||||||||||||||||||||||||
| Total commercial real estate and construction loans, net of fees, at March 31, 2026 | $ | 241,830 | $ | 759,782 | $ | 157,250 | $ | 1,158,862 | 60% | ||||||||||||||||||||||||||
| Total commercial real estate and construction loans, net of fees, at December 31, 2025 | $ | 266,317 | $ | 766,332 | $ | 153,006 | $ | 1,185,655 | 61% | ||||||||||||||||||||||||||
_________________________
(1).Minimum debt service coverage policy is 1.30x for owner occupied and 1.25x for non-owner occupied at origination.
(2).Loan-to-value is based on collateral valuation at origination date against current bank owned principal.
(3).Bank-owned principal is not adjusted for deferred fees and costs.
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The loans shown in the above table exhibit strong credit quality, with one nonaccrual loan at March 31, 2026 totaling $10.1 million, which has a specific reserve of $1.6 million. During our assessment of the allowance for credit losses on loans, we addressed the credit risks associated with these portfolio segments and believe that as a result of our conservative underwriting discipline at loan origination and our ongoing loan monitoring procedures, we have appropriately reserved for possible credit concerns in the event of a downturn in economic activity.
Unexpected changes in economic growth could adversely affect our loan portfolio, including causing increases in delinquencies and default rates, which would adversely impact our charge-offs, allowance for credit losses, and provision for credit losses. Deterioration in real estate values, employment data and household incomes may also result in higher credit losses for us. Also, in the ordinary course of business, we may be subject to a concentration of credit risk to a particular industry, counterparty, borrower or issuer. A deterioration in the financial condition or prospects of a particular industry or a failure or downgrade of, or default by, any particular entity or group of entities could negatively impact our business, perhaps materially, and the systems by which we set limits and monitor the level of our credit exposure to individual entities and industries, may not function as we have anticipated.
See “Critical Accounting Policies” above for more information on our allowance for credit losses methodology.
The following tables present additional information pertaining to the activity in and allocation of the allowance for credit losses on loans by loan type and the percentage of the loan type to the total loan portfolio for the periods and at the dates presented. The allocation of the allowance for credit losses on loans to a category of loans is not necessarily indicative of future losses or charge-offs, and does not restrict the use of the allowance to any specific category of loans.
Allowance for Credit Losses on Loans
For the Three Months Ended March 31, 2026 and 2025
(Dollars in thousands)
| 2026 | 2025 | ||||||||||||||||||||||
| Net (charge-offs) recoveries | Percentage of net charge-offs to average loans outstanding during the year | Net (charge-offs) recoveries | Percentage of net recoveries to average loans outstanding during the year | ||||||||||||||||||||
| Commercial real estate | $ | — | — | % | $ | — | — | % | |||||||||||||||
| Commercial and industrial | — | — | % | 136 | 0.01 | % | |||||||||||||||||
| Consumer residential | — | — | % | — | — | % | |||||||||||||||||
| Consumer nonresidential | (3) | — | % | 3 | — | % | |||||||||||||||||
| Total | $ | (3) | — | % | $ | 139 | 0.01 | % | |||||||||||||||
| Average loans outstanding during the period | $ | 1,931,553 | $ | 1,866,593 | |||||||||||||||||||
| At March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
| Allowance for credit losses on loans receivable, net of fees | 1.00 | % | 0.98 | % | |||||||||||||||||||
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Allocation of the Allowance for Credit Losses on Loans
At March 31, 2026 and December 31, 2025
(Dollars in thousands)
| 2026 | 2025 | ||||||||||||||||||||||
| Allocation | % of Total* | Allocation | % of Total* | ||||||||||||||||||||
| Commercial real estate | $ | 9,782 | 51.09 | % | $ | 9,236 | 48.90 | % | |||||||||||||||
| Commercial and industrial | 4,512 | 23.56 | % | 4,523 | 23.95 | % | |||||||||||||||||
| Commercial construction | 1,896 | 9.90 | % | 1,940 | 10.27 | % | |||||||||||||||||
| Consumer residential | 2,859 | 14.93 | % | 3,054 | 16.17 | % | |||||||||||||||||
| Consumer nonresidential | 100 | 0.52 | % | 133 | 0.70 | % | |||||||||||||||||
| Total allowance for credit losses | $ | 19,149 | 100.00 | % | $ | 18,886 | 100.00 | % | |||||||||||||||
___________________
*Percentage of loan type to the total loan portfolio.
Investment Securities
Our investment securities portfolio is used as a source of income and liquidity. The investment portfolio consists of investment securities available-for-sale and investment securities held-to-maturity. Investment securities available-for-sale are those securities that we intend to hold for an indefinite period of time, but not necessarily until maturity. These securities are carried at fair value and may be sold as part of an asset/liability strategy, liquidity management, or regulatory capital management. Investment securities held-to-maturity at each of March 31, 2026 and December 31, 2025 totaled $265 thousand, and are those securities that we have the intent and ability to hold to maturity and are carried at amortized cost. The fair value of our investment securities available-for-sale was $150.4 million at March 31, 2026, a decrease of $2.8 million, or 2%, from $153.2 million at December 31, 2025, primarily due to principal repayments of $3.0 million, offset by an increase in the market value of the investment securities portfolio totaling $165 thousand at March 31, 2026.
At March 31, 2026 and December 31, 2025, the majority of the investment securities portfolio consisted of securities rated AAA by a leading rating agency. Investment securities which carry a AAA rating are judged to be of the best quality and carry the smallest degree of investment risk. All of our mortgage-backed securities are guaranteed by either the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, or the Government National Mortgage Association. The effective duration of the investment securities portfolio is 5.21 years, which is within the industry average. Investment securities that were pledged to secure public deposits totaled $18.8 million and $19.4 million at March 31, 2026 and December 31, 2025, respectively. There were no investment securities that were pledged to secure Federal Reserve Bank of Richmond ("FRB") borrowings at March 31, 2026 and December 31, 2025, respectively.
In accordance with ASC 326, we complete periodic assessments on at least a quarterly basis to determine if credit deterioration exists within our investment securities portfolio and if an allowance for credit losses would be required as of a valuation date. As a result of the assessment performed as of March 31, 2026, the investment securities with unrealized losses are a result of pricing changes due to recent rising interest rate conditions in the current market environment and not as a result of credit deterioration. Contractual cash flows for agency-backed portfolios are guaranteed and funded by the U.S. government. Municipal securities have third party protective elements and there are no negative indications that the contractual cash flows will not be received when due. We do not intend to sell nor do we believe we will be required to sell any of our investment securities portfolio prior to the recovery of the amortized cost as of the valuation date. As such, no allowance for credit losses was recognized for our investment securities portfolio as of March 31, 2026.
We hold restricted investments in equities of the FRB and FHLB. At each of March 31, 2026 and December 31, 2025, we owned $3.6 million in FRB stock and $1.7 million in FHLB stock.
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The following table presents the weighted average yields of our investment portfolio for each of the maturity ranges at March 31, 2026 and December 31, 2025.
Investment Securities by Stated Yields
At March 31, 2026 and December 31, 2025
| At March 31, 2026 | ||||||||||||||||||||||||||||||||
| Within One Year | One to Five Years | Five to Ten Years | Over Ten Years | Total | ||||||||||||||||||||||||||||
| Weighted Average Yield | Weighted Average Yield | Weighted Average Yield | Weighted Average Yield | Weighted Average Yield | ||||||||||||||||||||||||||||
| Held‑to‑maturity | ||||||||||||||||||||||||||||||||
| Securities of state and local municipalities tax exempt | — | % | 2.32 | % | — | % | — | % | 2.32 | % | ||||||||||||||||||||||
| Total held‑to‑maturity securities | — | % | 2.32 | % | — | % | — | % | 2.32 | % | ||||||||||||||||||||||
| Available‑for‑sale | ||||||||||||||||||||||||||||||||
| Securities of U.S. government and federal agencies | — | % | 1.59 | % | — | % | — | % | 1.59 | % | ||||||||||||||||||||||
| Securities of state and local municipalities | — | — | — | 2.92 | 2.92 | |||||||||||||||||||||||||||
| Corporate bonds | — | 8.93 | 3.60 | — | 4.51 | |||||||||||||||||||||||||||
| Mortgaged‑backed securities | — | 4.42 | 4.58 | 1.62 | 1.71 | |||||||||||||||||||||||||||
| Total available‑for‑sale securities | — | % | 3.27 | % | 3.79 | % | 1.63 | % | 1.96 | % | ||||||||||||||||||||||
| Total investment securities | — | % | 3.25 | % | 3.79 | % | 1.63 | % | 1.96 | % | ||||||||||||||||||||||
| At December 31, 2025 | ||||||||||||||||||||||||||||||||
| Within One Year | One to Five Years | Five to Ten Years | Over Ten Years | Total | ||||||||||||||||||||||||||||
| Weighted Average Yield | Weighted Average Yield | Weighted Average Yield | Weighted Average Yield | Weighted Average Yield | ||||||||||||||||||||||||||||
| Held‑to‑maturity | ||||||||||||||||||||||||||||||||
| Securities of state and local municipalities tax exempt | — | % | 2.32 | % | — | % | — | % | 2.32 | % | ||||||||||||||||||||||
| Total held‑to‑maturity securities | — | % | 2.32 | % | — | % | — | % | 2.32 | % | ||||||||||||||||||||||
| Available‑for‑sale | ||||||||||||||||||||||||||||||||
| Securities of U.S. government and federal agencies | — | % | 1.59 | % | — | % | — | % | 1.59 | % | ||||||||||||||||||||||
| Securities of state and local municipalities | — | — | — | 2.92 | 2.92 | |||||||||||||||||||||||||||
| Corporate bonds | — | 9.12 | 3.60 | — | 4.55 | |||||||||||||||||||||||||||
| Mortgaged‑backed securities | — | 4.41 | 4.52 | 1.61 | 1.70 | |||||||||||||||||||||||||||
| Total available‑for‑sale securities | — | % | 3.30 | % | 3.79 | % | 1.62 | % | 1.95 | % | ||||||||||||||||||||||
| Total investment securities | — | % | 3.29 | % | 3.79 | % | 1.62 | % | 1.95 | % | ||||||||||||||||||||||
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Deposits and Other Borrowed Funds
The following table sets forth the balances of deposits and the percentage of each category to total deposits for the three months ended March 31, 2026 and March 31, 2025:
Average Deposit Balances
For the three Months Ended March 31, 2026 and 2025
| (Dollars in thousands) | March 31, 2026 | March 31, 2025 | |||||||||||||||||||||
| Noninterest-bearing demand | $ | 355,456 | 18.70 | % | $ | 354,629 | 18.98 | % | |||||||||||||||
| Interest-bearing deposits | |||||||||||||||||||||||
| Interest checking | 680,550 | 35.79 | % | 617,141 | 33.03 | % | |||||||||||||||||
| Savings and money markets | 333,331 | 17.53 | % | 390,467 | 20.90 | % | |||||||||||||||||
| Certificate of deposits, $100,000 to $249,999 | 115,927 | 6.10 | % | 67,063 | 3.59 | % | |||||||||||||||||
| Certificate of deposits, $250,000 or more | 177,273 | 9.32 | % | 189,326 | 10.13 | % | |||||||||||||||||
| Wholesale deposits | 238,789 | 12.56 | % | 249,888 | 13.37 | % | |||||||||||||||||
| Total | $ | 1,901,326 | 100.00 | % | $ | 1,868,514 | 100.00 | % | |||||||||||||||
Total deposits increased $30.5 million, or 2%, to $2.03 billion at March 31, 2026 from $2.00 billion at December 31, 2025. Noninterest-bearing deposits were $369.3 million at March 31, 2026, or 18.2% of total deposits. Core deposits, which exclude wholesale deposits, increased $55.5 million, or 3%, to $1.77 billion at March 31, 2026, compared to $1.71 billion at December 31, 2025. Interest checking decreased $58.6 million, or 8%, to $682.5 million at March 31, 2026 compared to $741.0 million at December 31, 2025. Savings and money market deposits increased $48.9 million, or 15%, to $379.9 million at March 31, 2026 compared to $331.0 million at December 31, 2025. Time deposits increased $59.1 million, or 21%, to $336.1 million at March 31, 2026 from $277.0 million at December 31, 2025.
Wholesale deposits were $260.0 million at March 31, 2026 compared to $285.0 million at December 31, 2025, a decrease of $25.0 million, or 9%. Wholesale deposits decreased during 2026 as a direct result of an increase in our core deposit base. Wholesale deposits are partially fixed with a weighted average rate of 3.59%, as we have previously executed $170 million in pay-fixed/receive-floating interest rate swaps to reduce funding costs. In addition, we are a member of the IntraFi Network (“IntraFi”), which gives us the ability to offer Certificates of Deposit Account Registry Service (“CDARS”) and Insured Cash Sweep (“ICS”) products to our customers who seek to maximize Federal Deposit Insurance Corporation ("FDIC") insurance protection. When a customer places a large deposit with us for IntraFi, funds are placed into certificates of deposit or other deposit products with other banks in the CDARS and ICS networks in increments of less than $250 thousand so that principal and interest are eligible for FDIC insurance protection. These deposits are part of our core deposit base. At March 31, 2026 and December 31, 2025, we had $214.7 million and $291.9 million, respectively, in CDARS reciprocal and ICS reciprocal products.
As of March 31, 2026, the estimated amount of total uninsured deposits (including collateralized deposits) was $936.0 million, or 46.2%, of total deposits. The estimate of uninsured deposits generally represents the portion of deposit accounts that exceed the FDIC insurance limit of $250,000 and is calculated based on the same methodologies and assumptions used for purposes of the Bank's regulatory reporting requirements. When excluding collateralized deposits, our estimate of uninsured deposits decreases to $736.8 million, or 36.3% of total deposits, at March 31, 2026.
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The following table reports maturities of the estimated amount of uninsured certificates of deposit at March 31, 2026.
Certificates of Deposit Greater than $250,000
At March 31, 2026
(Dollars in thousands)
| March 31, 2026 | |||||
| Three months or less | $ | 53,771 | |||
| Over three months through six months | 29,242 | ||||
| Over six months through twelve months | 33,880 | ||||
| Over twelve months | 50,657 | ||||
| $ | 167,550 | ||||
We had no other borrowed funds at March 31, 2026 and December 31, 2025. Long-term debt, net of issuance costs, totaled $24.5 million and $18.8 million at March 31, 2026 and December 31, 2025, respectively. At March 31, 2026 and December 31, 2025, we did not have any federal funds purchased.
During the first quarter of 2026, we redeemed in full our $18.8 million in outstanding subordinated debt, which had converted from fixed rate to floating rate paying 3-month SOFR plus 471 basis points, or 8.59%. This funding source was replaced by a private placement of $25 million in senior unsecured notes (the “Senior Notes”) which have a fixed rate of 6.75%. The Senior Notes were rated BBB (low) by Morningstar DBRS and have a three-year term maturing on March 1, 2029.
Capital Resources
Capital adequacy is an important measure of financial stability and performance. Our objectives are to maintain a level of capitalization that is sufficient to sustain asset growth and promote depositor and investor confidence.
Regulatory agencies measure capital adequacy utilizing a formula that takes into account the individual risk profile of the financial institution. The minimum capital requirements for the Bank are: (i) Common Equity Tier 1 ("CET1") capital ratio of 4.5%; (ii) a Tier 1 to risk-based assets capital ratio of 6%; (iii) a total risk-based capital ratio of 8%; and (iv) a Tier 1 leverage ratio of 4%. Additionally, a capital conservation buffer requirement of 2.5% of risk-weighted assets is designed to absorb losses during periods of economic stress and is applicable to the Bank’s CET1 capital, Tier 1 capital and total capital ratios. Including the conservation buffer, we currently consider the Bank’s minimum capital ratios to be as follows: 7.00% for CET1; 8.50% for Tier 1 capital; and 10.50% for total capital. Banking institutions with a ratio of common equity Tier 1 to risk-weighted assets above the minimum but below the minimum plus the conservation buffer will face constraints on dividends, equity repurchases, and compensation.
We believe that the Bank met all capital adequacy requirements to which it was subject at March 31, 2026 and December 31, 2025.
Shareholders' equity at March 31, 2026 was $260.3 million, an increase of $6.7 million, compared to $253.6 million at December 31, 2025. Net income recorded for the three months ended March 31, 2026 contributed $6.4 million to the increase in shareholders' equity. Accumulated other comprehensive loss decreased $873 thousand for the quarter ended March 31, 2026, primarily as a result of the increase in the market value of our investment securities portfolio.
Total shareholders' equity to total assets for each of March 31, 2026 and December 31, 2025 was 11.1%. Tangible book value per share (a non-GAAP financial measure which is defined in the table below) at March 31, 2026 and December 31, 2025 was $14.06 and $13.74, respectively.
As noted above, regulatory capital levels for the Bank meets those established for "well capitalized" institutions. While we are currently considered "well capitalized," we may from time to time find it necessary to access the capital markets to meet our growth objectives or capitalize on specific business opportunities.
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As the Company is a bank holding company with less than $3 billion in assets, and which does not (i) conduct significant off-balance sheet activities, (ii) engage in significant non-banking activities, or (iii) have a material amount of securities registered under the Securities Exchange Act of 1934, as amended, (the "Exchange Act"), it is not currently subject to risk-based capital requirements adopted by the Federal Reserve, pursuant to the small bank holding company policy statement. The Federal Reserve has not historically deemed a bank holding company ineligible for application of the small bank holding company policy statement solely because its common stock is registered under the Exchange Act. There can be no assurance that the Federal Reserve will continue this practice.
The following tables shows the minimum capital requirements and the Bank's capital position at March 31, 2026 and December 31, 2025.
Bank Capital Components
At March 31, 2026 and December 31, 2025
(Dollars in thousands)
| Actual | Minimum Capital Requirement (1) | Minimum to be Well Capitalized Under Prompt Corrective Action | |||||||||||||||||||||||||||||||||
| Amount | Ratio | Amount | Ratio | Amount | Ratio | ||||||||||||||||||||||||||||||
| At March 31, 2026 | |||||||||||||||||||||||||||||||||||
| Total risk-based capital | $ | 299,996 | 15.86 | % | $ | 198,634 | > | 10.50 | % | $ | 189,175 | > | 10.00 | % | |||||||||||||||||||||
| Tier 1 risk-based capital | 280,473 | 14.83 | % | 160,799 | > | 8.50 | % | 151,340 | > | 8.00 | % | ||||||||||||||||||||||||
| Common equity tier 1 capital | 280,473 | 14.83 | % | 132,423 | > | 7.00 | % | 122,964 | > | 6.50 | % | ||||||||||||||||||||||||
| Leverage capital ratio | 280,473 | 12.61 | % | 88,993 | > | 4.00 | % | 111,242 | > | 5.00 | % | ||||||||||||||||||||||||
| At December 31, 2025 | |||||||||||||||||||||||||||||||||||
| Total risk-based capital | $ | 296,612 | 15.38 | % | $ | 202,553 | > | 10.50 | % | $ | 192,908 | > | 10.00 | % | |||||||||||||||||||||
| Tier 1 risk-based capital | 277,254 | 14.37 | % | 163,972 | > | 8.50 | % | 154,326 | > | 8.00 | % | ||||||||||||||||||||||||
| Common equity tier 1 capital | 277,254 | 14.37 | % | 135,036 | > | 7.00 | % | 125,390 | > | 6.50 | % | ||||||||||||||||||||||||
| Leverage capital ratio | 277,254 | 12.23 | % | 90,659 | > | 4.00 | % | 113,324 | > | 5.00 | % | ||||||||||||||||||||||||
________________________
(1).Includes capital conservation buffer.
Reconciliation of Book Value (GAAP) to Tangible Book Value (non-GAAP)
At March 31, 2026 and December 31, 2025
(Dollars in thousands, except per share data)
| 2026 | 2025 | ||||||||||
| Total stockholders' equity (GAAP) | $ | 260,331 | $ | 253,600 | |||||||
| Less: goodwill and intangibles, net | (7,270) | (7,295) | |||||||||
| Tangible Common Equity (non-GAAP) | $ | 253,061 | $ | 246,305 | |||||||
| Book value per common share (GAAP) | $ | 14.47 | $ | 14.15 | |||||||
| Less: intangible book value per common share | (0.41) | (0.41) | |||||||||
| Tangible book value per common share (non-GAAP) | $ | 14.06 | $ | 13.74 | |||||||
Liquidity
Liquidity in the banking industry is defined as the ability to meet the demand for funds of both depositors and borrowers. We must be able to meet these needs by obtaining funding from depositors or other lenders or by converting non-cash items into cash. The objective of our liquidity management program is to ensure that we always have sufficient resources to meet the demands of our depositors and borrowers. Stable core deposits and a strong capital position provide
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the base for our liquidity position. We believe we have demonstrated our ability to attract deposits because of our convenient branch locations, personal service, technology and pricing. As of March 31, 2026 and December 31, 2025, estimated uninsured deposits (excluding collateralized deposits) for the Bank were 46% and 45% of total deposits, respectively.
In addition to deposits, we have access to the various wholesale funding markets. These markets include the brokered certificate of deposit market and the federal funds market. We are a member of the IntraFi Network, which allows banking customers to access FDIC insurance protection on deposits through the Bank which exceed FDIC insurance limits. As part of our membership with the IntraFi Network, we have one-way authority for both their CDARs and ICS products which provides the Bank the ability to access additional wholesale funding as needed. We also maintain secured lines of credit with the FRB and the FHLB for which we can borrow up to the allowable amount for the collateral pledged. Having diverse funding alternatives reduces our reliance on any one source for funding.
Liquid assets, which include cash and due from banks, federal funds sold and investment securities available for sale, totaled $342.0 million at March 31, 2026, or 15% of total assets, an increase from $280.8 million, or 12% of total assets, at December 31, 2025. At March 31, 2026 and December 31, 2025, investment securities available-for-sale that were pledged as collateral for municipal deposits totaled $18.8 million and $19.4 million, respectively.
Cash flow from amortizing assets or maturing assets also provides funding to meet the needs of depositors and borrowers.
Secondary Liquidity Available and In Use
At March 31, 2026
(Dollars in thousands)
| Liquidity in Use | Liquidity Available | ||||||||||
FHLB secured borrowings (1) | $ | 130,000 | $ | 453,263 | |||||||
FRB discount window secured borrowings (2) | — | 268,676 | |||||||||
| Unsecured federal fund purchase lines | — | 212,196 | |||||||||
| Total | $ | 130,000 | $ | 934,135 | |||||||
________________________
(1) The Bank has pledged a portion of the commercial real estate and residential loan portfolio to the FHLB to obtain a letter of credit to secure public funds in addition to the collateral in use for FHLB advances.
(2) The Bank has pledged a portion of the commercial and industrial loan portfolio to the FRB to secure the line of the credit.
We have established a formal liquidity contingency plan which establishes a liquidity management team and provides guidelines for liquidity management. For our liquidity management program, we first determine our current liquidity position and then forecast liquidity based on anticipated changes in the balance sheet. In this forecast, we expect to maintain a liquidity cushion. We also stress test our liquidity position under several different stress scenarios, from moderate to severe. Guidelines for the forecasted liquidity cushion and for liquidity cushions for each stress scenario have been established. We believe that we have sufficient resources to meet our liquidity needs.
Liquidity is essential to our business. Our liquidity could be impaired by an inability to access the capital markets or by unforeseen outflows of cash, including deposits. This situation may arise due to circumstances that we may be unable to control, such as general market disruption, negative views about the financial services industry generally, or an operational problem that affects a third party or us. Our ability to borrow from other financial institutions on favorable terms or at all could be adversely affected by disruptions in the capital markets or other events. While we believe we have a healthy liquidity position and do not anticipate the loss of deposits of any of the significant deposit customers, any of the factors discussed above could materially impact our liquidity position in the future.
Financial Instruments with Off-Balance-Sheet Risk and Other Contingencies
We are a party to financial instruments with off-balance-sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit and standby letters of
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credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet.
The Bank’s maximum exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. We evaluate each customer’s credit worthiness on a case-by-case basis and require collateral to support financial instruments when deemed necessary. The amount of collateral obtained upon extension of credit is based on our evaluation of the counterparty. Collateral held varies but may include deposits held by us, marketable securities, accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates of up to one year or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. These instruments represent obligations to extend credit or guarantee borrowings and are not recorded on the consolidated statements of financial condition. The rates and terms of these instruments are competitive with others in the market in which we do business.
Unfunded commitments under lines of credit are commitments for possible future extensions of credit to existing customers. Those lines of credit may not be drawn upon to the total extent to which we have committed.
Standby letters of credit are conditional commitments we issued to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. We hold certificates of deposit, deposit accounts, and real estate as collateral supporting those commitments for which collateral is deemed necessary.
With the exception of these off-balance sheet arrangements, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, results of operations, changes in financial condition, revenue, expenses, capital expenditures, or capital resources, that is material to our business.
At March 31, 2026 and 2025, unused commitments to fund loans and lines of credit totaled $196.2 million and $225.1 million, respectively. Commercial and standby letters of credit totaled $9.2 million at March 31, 2026 and $9.4 million at December 31, 2025. We record a reserve for unfunded commitments based on an estimate of future draws and applying our expected loss rates on those draws. At March 31, 2026 and December 31, 2025, our reserve for unfunded commitments totaled $374 thousand and $471 thousand, respectively.
We provide banking services to customers that are licensed to do business in the cannabis industry, primarily in Virginia, Maryland and the District of Columbia. These customers include multi-state operators, fully integrated state-wide operators, independent dispensary/cultivation licensees, as well as provisional cannabis licensees. We maintain stringent written policies and procedures related to the on-boarding of such businesses and to the monitoring and maintenance of such business accounts.
In accordance with federal regulatory guidance and industry best practices, our cannabis banking business is conducted through a comprehensive, defined, and multi-department process, which includes extensive compliance and onboarding due diligence with subsequent involvement by bank experts in cannabis in our operations, branch, treasury management, lending, and credit departments. We perform a multilayered due diligence review of a cannabis business before the business is on-boarded, including site visits and confirmation that the business is properly licensed by the state in which it is conducting business. Throughout the relationship, we continue to monitor the business, including additional site visits, to ensure that the cannabis business continues to meet strict requirements, including maintenance of required licenses. We perform periodic financial reviews of the business and monitor the business in accordance with the Bank Secrecy Act of 1970 and other state requirements.
While we are providing banking services to customers that are engaged in growing, processing, and sales of both medical and adult use cannabis in a manner that complies with applicable state law, such customers engaged in those activities currently violate federal law. While we are not aware of any instance of a federally-insured financial institution being subject to such liability, the strict enforcement of federal laws regarding cannabis could result in our inability to
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continue to provide banking services to these customers and we could have legal action taken against us by the federal government. There is an uncertainty of the potential impact to our consolidated financial statements if the federal government should take action against us. As of March 31, 2026, we have not accrued an amount for the potential impact of any such actions.
The following is a summary of the level of business activities with our cannabis customers: Deposit and loan balances at March 31, 2026 were approximately $144.8 million, or 7.1% of total deposits, and $183.5 million, or 9.5% of total loans, respectively. Deposit and loan balances at December 31, 2025 were approximately $129.5 million, or 6.0% of total deposits, and $193.6 million, or 10.0% of total loans, respectively.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not required.
Item 4. Controls and Procedures
The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act). As of the end of the period covered by this report, an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures was carried out under the supervision and with the participation of the Company’s management, including its chief executive officer and chief financial officer. Based on and as of the date of such evaluation, these officers concluded that the Company’s disclosure controls and procedures were effective.
The Company also maintains a system of internal accounting controls that is designed to provide assurance that assets are safeguarded and that transactions are executed in accordance with management’s authorization and are properly recorded. This system is continually reviewed and is augmented by written policies and procedures, the careful selection and training of qualified personnel, and an internal audit program to monitor its effectiveness. There were no changes in our internal controls over financial reporting that occurred during our last fiscal quarter that materially affected, or are likely to materially affect, our internal controls over financial reporting.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings
In the ordinary course of our operations, we become party to various legal proceedings. Currently, we are not party to any material legal proceedings, and no such proceedings are, to management’s knowledge, threatened against us.
Item 1A. Risk Factors
There have been no material changes in the risk factors from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
(a)Not applicable.
(b)Not applicable.
(c)On March 17, 2026, we publicly announced that the Company's Board of Directors had renewed the share repurchase program (the "Repurchase Program") that was initiated in 2020. Under the renewed Repurchase Program, we may purchase up to 1,400,000 shares of our common stock, or approximately 8% of our outstanding shares of common stock at December 31, 2025. The Repurchase Program will expire on March 31, 2027, subject to earlier termination of the program by the Board of Directors.
No shares were repurchased during the three months ended March 31, 2026.
Item 3. Defaults Upon Senior Securities
(a)None.
(b)None.
Item 4. Mine Safety Disclosures
None.
Item 5. Other Information
(a)None.
(b)None.
(c)During the fiscal quarter ended March 31, 2026, none of the Company’s directors or officers (as defined in Rule 16a-1(f) of the Exchange Act, adopted or terminated a Rule 10b5-1 trading arrangement or non-Rule 10b5-1 trading arrangement (as such terms are defined in Item 408(a) of Regulation S-K).
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Item 6. Exhibits
| 4.1 | Form of Senior Unsecured Note due March 1, 2029 (incorporated by reference to Exhibit 4.1 of the Current Report on Form 8-K filed on February 12, 2026). | ||||
| 10.1 | Form of Senior Unsecured Note Purchase Agreement dated February 11, 2026 (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed on February 12, 2026). | ||||
| 31.1 | Rule 13a-14(a) Certification of Principal Executive Officer | ||||
| 31.2 | Rule 13a-14(a) Certification of Principal Financial Officer | ||||
| 32.1 | Statement of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350 | ||||
| 32.2 | Statement of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350 | ||||
| 101 | The following materials from the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, formatted in Extensible Business Reporting Language (XBRL), include: (i) the Consolidated Statements of Condition, (ii) the Consolidated Statements of Income, (iii) the Consolidated Statements of Comprehensive Income, (iv) the Consolidated Statements of Cash Flows, (v) the Consolidated Statements of Changes in Stockholders’ Equity, and (vi) related notes. | ||||
| 104 | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2026, formatted in Inline Extensible Business Reporting Language (included with Exhibit 101). | ||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized.
| FVCBankcorp, Inc. | |||||
| (Registrant) | |||||
Date: May 7, 2026 | /s/ David W. Pijor | ||||
| David W. Pijor | |||||
| Chairman and Chief Executive Officer | |||||
| (Principal Executive Officer) | |||||
Date: May 7, 2026 | /s/ Jennifer L. Deacon | ||||
| Jennifer L. Deacon | |||||
| Sr. Executive Vice President and Chief Financial Officer | |||||
| (Principal Financial Officer and Principal Accounting Officer) | |||||
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FAQ
How did FVCBankcorp (FVCB) perform financially in Q1 2026?
FVCBankcorp’s Q1 2026 net income was $6.4 million, up from $5.2 million a year earlier. Diluted EPS rose to $0.35 from $0.28, driven mainly by higher net interest income and modest noninterest income growth, while expenses increased at a slower pace.
What were FVCBankcorp (FVCB)’s key revenue drivers in Q1 2026?
Revenue was led by net interest income of $17.4 million, up from $15.1 million in Q1 2025, as interest and fees on loans reached $28.4 million. Noninterest income contributed $0.9 million, helped by service charges, bank-owned life insurance income, and minority membership interest income.
How strong is FVCBankcorp (FVCB)’s balance sheet and loan portfolio?
Total assets were $2.34 billion, with loans of $1.90 billion and deposits of $2.03 billion at March 31, 2026. The allowance for credit losses was $19.1 million, and nonaccrual loans totaled $10.9 million, indicating a generally manageable risk profile with identified problem credits.
What credit quality trends did FVCBankcorp (FVCB) report?
Special mention loans were $47.3 million, slightly below year-end, while substandard loans increased to $10.9 million. Net charge-offs were only $3 thousand after recoveries. The company holds $1.6 million of individually assessed allowance to cover collateral shortfalls on certain substandard loans.
How exposed is FVCBankcorp (FVCB) to the cannabis industry?
At March 31, 2026, cannabis-related customers accounted for about $183.5 million of loans (9.5% of total) and $144.8 million of deposits (7.1% of total). The company stresses that these activities remain illegal under federal law, creating ongoing legal and regulatory uncertainty.
What did FVCBankcorp (FVCB) disclose about its investment securities in Q1 2026?
Available-for-sale securities had an amortized cost of $175.5 million and fair value of $150.4 million, with $25.2 million of gross unrealized losses mainly from higher interest rates. Management concluded there was no credit-related impairment and did not record an allowance on the portfolio.
Did FVCBankcorp (FVCB) announce any notable subsequent events after Q1 2026?
Yes. Effective May 1, 2026, the company completed the sale of its interest in Bearing Insurance Group, LLC to an unaffiliated third party. It estimates recognizing a pre-tax gain of approximately $845 thousand in its second-quarter 2026 financial results from this transaction.