MainStreet Bancshares Q3 profit falls to $3.60M
At September 30, net loans were $1.931 billion, deposits were $1.924 billion, and non-accrual loans were $91.996 million.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
MainStreet Bancshares, Inc. (MNSB) reported third-quarter 2026 net income of $3.603 million, versus $4.517 million a year earlier, while net interest income rose to $18.776 million from $17.102 million. Net income available to common shareholders was $3.064 million, or $0.43 per diluted share, compared with $3.978 million, or $0.52. The provision for loan credit losses was $2.323 million, versus a $66,000 reversal a year earlier.
For the first nine months, net income was $12.371 million, compared with $11.560 million; operating cash flow was $17.472 million, compared with $8.234 million. At September 30, net loans were $1.931 billion and deposits were $1.924 billion. Non-accrual loans totaled $91.996 million, versus $31.482 million at December 31, 2025. The company said it identified deterioration in a $28.8 million commercial real estate loan after September 30; the loan was placed on non-accrual as of September 30. It was obtaining updated collateral valuation information and could not reasonably estimate the financial impact.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointQuarterly net interest income rose to $18.776 million from $17.102 million.
- Moderate pointNine-month net income was $12.371 million, compared with $11.560 million.
- Moderate pointNine-month operating cash flow was $17.472 million, compared with $8.234 million.
Negative
- Major pointNon-accrual loans totaled $91.996 million at September 30, versus $31.482 million at December 31.
- Moderate pointThird-quarter net income was $3.603 million, versus $4.517 million a year earlier.
Filing Explained
Cash at quarter-end was below year-end even as operations provided cash; investing activities used cash during the nine-month period.
Common shares outstanding were 7,115,994 at that date, down from 7,496,571 at
For holders whose own share counts stayed unchanged, the lower reported share count means a larger fraction of the common shares, all else equal.
Key Figures
Key Terms
Net Interest Income financial
Provision for credit losses financial
Non-accrual financial
Collateral dependent loans financial
Fair value hierarchy financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How much did MNSB earn in the third quarter of 2026?
How much were MNSB's non-accrual loans at September 30, 2026?
Did MNSB pay a common dividend in the third quarter of 2026?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from to
Commission file number:
MainStreet Bancshares, Inc.
(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 and Zip Code)
(
(Registrant’s Telephone Number, Including Area Code)
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act.
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| | | The | ||
| | The |
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. ☒
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). ☒
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 | ☐ | | ☒ | |||
| Non-accelerated filer | ☐ | Smaller reporting company | ||||
| Emerging growth company | | |||||
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: As of October 31, 2026, there were
INDEX
| PART I – FINANCIAL INFORMATION |
3 |
| Item 1 – Consolidated Financial Statements |
3 |
| Notes to Consolidated Financial Statements |
8 |
| Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations |
29 |
| Item 3 – Quantitative and Qualitative Disclosures about Market Risk |
53 |
| Item 4 – Controls and Procedures |
53 |
| PART II – OTHER INFORMATION |
54 |
| Item 1 – Legal Proceedings |
54 |
| Item 1A – Risk Factors |
54 |
| Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds |
54 |
| Item 5 – Other Information | 54 |
| Item 6 – Exhibits |
55 |
| SIGNATURES |
56 |
PART I – FINANCIAL INFORMATION
Item 1 – Consolidated Financial Statements – Unaudited
MAINSTREET BANCSHARES, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Financial Condition as of September 30, 2026 and December 31, 2025 (Dollars in thousands, except per share data)
| At September 30, 2026 (unaudited) | At December 31, 2025 (*) | |||||||
| Assets | ||||||||
| Cash and due from banks | $ | $ | ||||||
| Interest-bearing deposits at other financial institutions | ||||||||
| Federal funds sold | ||||||||
| Cash and cash equivalents | ||||||||
| Investment securities available-for-sale (AFS), at fair value | ||||||||
| Investment securities held-to-maturity (HTM), at amortized cost, net of allowance for credit losses of $0 and $0, respectively | ||||||||
| Restricted securities, at amortized cost | ||||||||
| Loans, net of allowance for credit losses of $19,946 and $19,308, respectively | ||||||||
| Premises and equipment, net | ||||||||
| Property held for sale, at fair value | ||||||||
| Other real estate owned, net | ||||||||
| Accrued interest and other receivables | ||||||||
| Bank owned life insurance | ||||||||
| Other assets | ||||||||
| Total Assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Liabilities | ||||||||
| Non-interest bearing demand deposits | $ | $ | ||||||
| Interest-bearing demand deposits | ||||||||
| Savings and NOW deposits | ||||||||
| Money market deposits | ||||||||
| Time deposits | ||||||||
| Total deposits | ||||||||
| Subordinated debt, net | ||||||||
| Allowance for credit losses on off-balance sheet credit exposure | ||||||||
| Other liabilities | ||||||||
| Total Liabilities | ||||||||
| Stockholders’ Equity | ||||||||
| Preferred stock, $1.00 par value, 2,000,000 shares authorized; 28,750 shares issued and outstanding at September 30, 2026 and December 31, 2025 | ||||||||
| Common stock, $4.00 par value, 15,000,000 shares authorized; issued and outstanding 7,115,994 shares (including 254,841 nonvested shares) at September 30, 2026 and 7,496,571 shares (including 244,964 nonvested shares) at December 31, 2025 | ||||||||
| Capital surplus | ||||||||
| Retained earnings | ||||||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total Stockholders’ Equity | ||||||||
| Total Liabilities and Stockholders’ Equity | $ | $ | ||||||
* Derived from audited consolidated financial statements.
See Notes to the Unaudited Consolidated Financial Statements
MAINSTREET BANCSHARES, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Income for the three and nine months ended September 30, 2026 and 2025 (Dollars in thousands, except per share data)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Interest Income | ||||||||||||||||
| Interest and fees on loans | $ | $ | $ | $ | ||||||||||||
| Interest and dividends on investment securities | ||||||||||||||||
| U.S. government agencies | ||||||||||||||||
| Mortgage-backed securities | ||||||||||||||||
| Tax-exempt obligations of states and political subdivisions | ||||||||||||||||
| Taxable obligations of states and political subdivisions | ||||||||||||||||
| Other | ||||||||||||||||
| Interest on interest-bearing deposits at other financial institutions | ||||||||||||||||
| Interest on federal funds sold | ||||||||||||||||
| Total Interest Income | ||||||||||||||||
| Interest Expense | ||||||||||||||||
| Interest on interest-bearing demand deposits | ||||||||||||||||
| Interest on savings and NOW deposits | ||||||||||||||||
| Interest on money market deposits | ||||||||||||||||
| Interest on time deposits | ||||||||||||||||
| Interest on federal funds purchased | ||||||||||||||||
| Interest on subordinated debt | ||||||||||||||||
| Total Interest Expense | ||||||||||||||||
| Net Interest Income | ||||||||||||||||
| Provision For Credit Losses - Loans | ( | ) | ( | ) | ||||||||||||
| Provision For Credit Losses - Off-Balance Sheet Credit Exposure | ( | ) | ( | ) | ||||||||||||
| Net Interest Income After Provision For Credit Losses | ||||||||||||||||
| Non-Interest Income | ||||||||||||||||
| Deposit account service charges | ||||||||||||||||
| Bank owned life insurance income | ||||||||||||||||
| Gain on retirement of subordinated debt | ||||||||||||||||
| Loss on sale of other real estate owned | ( | ) | ( | ) | ||||||||||||
| Gain on equity securities | ||||||||||||||||
| Other non-interest income | ||||||||||||||||
| Total Non-Interest Income | ||||||||||||||||
| Non-Interest Expense | ||||||||||||||||
| Salaries and employee benefits | ||||||||||||||||
| Furniture and equipment expenses | ||||||||||||||||
| Advertising and marketing | ||||||||||||||||
| Occupancy expenses | ||||||||||||||||
| Outside services | ||||||||||||||||
| Franchise tax | ||||||||||||||||
| FDIC insurance | ||||||||||||||||
| Data processing | ||||||||||||||||
| Administrative expenses | ||||||||||||||||
| Other real estate owned expenses | ||||||||||||||||
| Other operating expenses | ||||||||||||||||
| Total Non-Interest Expense | ||||||||||||||||
| Income Before Income Taxes | ||||||||||||||||
| Income Tax Expense | ||||||||||||||||
| Net Income | $ | $ | $ | $ | ||||||||||||
| Preferred Stock Dividends | ||||||||||||||||
| Net Income Available to Common Shareholders | $ | $ | $ | $ | ||||||||||||
| Earnings Per Common Share: | ||||||||||||||||
| Basic | $ | $ | $ | $ | ||||||||||||
| Diluted | $ | $ | $ | $ | ||||||||||||
See Notes to the Unaudited Consolidated Financial Statements
MAINSTREET BANCSHARES, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2026 and 2025 (Dollars in thousands)
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Comprehensive Income, net of taxes | ||||||||||||||||
| Net Income | $ | $ | $ | $ | ||||||||||||
| Other comprehensive income (loss), net of tax expense (benefit): | ||||||||||||||||
| Unrealized (loss) gain on available for sale securities arising during the period (net of tax (benefit) expense, ($774) and $308, respectively, for the three months ended September 30, and ($699) and $382, respectively for the nine months ended September 30). | ( | ) | ( | ) | ||||||||||||
| Comprehensive Income | $ | $ | $ | $ | ||||||||||||
See Notes to the Unaudited Consolidated Financial Statements
MAINSTREET BANCSHARES, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2026 and 2025 (Dollars in thousands, except per share data)
| Accumulated Other | ||||||||||||||||||||||||
| Preferred | Common | Capital | Retained | Comprehensive | ||||||||||||||||||||
| Stock | Stock | Surplus | Earnings | Income (Loss) | Total | |||||||||||||||||||
| Balance, June 30, 2026 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||
| Vesting of restricted stock, net of stock surrendered | ( | ) | ( | ) | ||||||||||||||||||||
| Stock-based compensation expense | ||||||||||||||||||||||||
| Dividends on preferred stock - ($0.47 per depositary share) | ( | ) | ( | ) | ||||||||||||||||||||
| Dividends on common stock - ($0.10 per share) | ( | ) | ( | ) | ||||||||||||||||||||
| Net income | ||||||||||||||||||||||||
| Other comprehensive loss | ( | ) | ( | ) | ||||||||||||||||||||
| Balance, September 30, 2026 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||
| Accumulated Other | ||||||||||||||||||||||||
| Preferred | Common | Capital | Retained | Comprehensive | ||||||||||||||||||||
| Stock | Stock | Surplus | Earnings | Income (Loss) | Total | |||||||||||||||||||
| Balance, December 31, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||
| Vesting of restricted stock, net of stock surrendered | ( | ) | ( | ) | ||||||||||||||||||||
| Stock based compensation expense | ||||||||||||||||||||||||
| Common stock repurchased | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Dividends on preferred stock - ($1.41 per depositary share) | ( | ) | ( | ) | ||||||||||||||||||||
| Dividends on common stock - ($0.30 per share) | ( | ) | ( | ) | ||||||||||||||||||||
| Net income | ||||||||||||||||||||||||
| Other comprehensive loss | ( | ) | ( | ) | ||||||||||||||||||||
| Balance, September 30, 2026 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||
| Accumulated Other | ||||||||||||||||||||||||
| Preferred | Common | Capital | Retained | Comprehensive | ||||||||||||||||||||
| Stock | Stock | Surplus | Earnings | Income (Loss) | Total | |||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||
| Vesting of restricted stock | ( | ) | ||||||||||||||||||||||
| Stock-based compensation expense | ||||||||||||||||||||||||
| Dividends on preferred stock - ($0.47 per depositary share) | ( | ) | ( | ) | ||||||||||||||||||||
| Dividends on common stock - ($0.10 per share) | ( | ) | ( | ) | ||||||||||||||||||||
| Net income | ||||||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||
| Balance, September 30, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||
| Accumulated Other | ||||||||||||||||||||||||
| Preferred | Common | Capital | Retained | Comprehensive | ||||||||||||||||||||
| Stock | Stock | Surplus | Earnings | Income (Loss) | Total | |||||||||||||||||||
| Balance, December 31, 2024 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||
| Vesting of restricted stock | ( | ) | ||||||||||||||||||||||
| Stock based compensation expense | ||||||||||||||||||||||||
| Common stock repurchased | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Dividends on preferred stock - ($1.41 per depositary share) | ( | ) | ( | ) | ||||||||||||||||||||
| Dividends on common stock - ($0.30 per share) | ( | ) | ( | ) | ||||||||||||||||||||
| Net income | ||||||||||||||||||||||||
| Other comprehensive income | ||||||||||||||||||||||||
| Balance, September 30, 2025 | $ | $ | $ | $ | $ | ( | ) | $ | ||||||||||||||||
See Notes to the Unaudited Consolidated Financial Statements
MAINSTREET BANCSHARES, INC. AND SUBSIDIARIES
Unaudited Consolidated Statements of Cash Flows (Dollars in thousands)
| For the nine months ended September 30, | 2026 | 2025 | ||||||
| Cash Flows from Operating Activities | ||||||||
| Net income | $ | $ | ||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation, amortization, and accretion, net | ||||||||
| Amortization of right-of-use assets | ||||||||
| Deferred income tax expense | ||||||||
| Gain on retirement of subordinated debt | ( | ) | ||||||
| Loss on sale of other real estate owned | ||||||||
| Loss (gain) on disposal of premises and equipment | ( | ) | ||||||
| Provision for credit losses, net | ( | ) | ||||||
| Stock-based compensation expense | ||||||||
| Income from bank owned life insurance | ( | ) | ( | ) | ||||
| Subordinated debt amortization expense | ||||||||
| Change in: | ||||||||
| Accrued interest receivable and other receivables | ( | ) | ( | ) | ||||
| Other assets | ( | ) | ||||||
| Other liabilities | ( | ) | ||||||
| Net cash provided by operating activities | ||||||||
| Cash Flows from Investing Activities | ||||||||
| Activity in available-for-sale securities: | ||||||||
| Payments | ||||||||
| Maturities, sales, called, refunded | ||||||||
| Purchases | ( | ) | ( | ) | ||||
| Activity in held-to-maturity securities: | ||||||||
| Maturities, called, refunded | ||||||||
| Purchases | ( | ) | ||||||
| Purchases of equity securities | ( | ) | ||||||
| Purchases of restricted investment in bank stock | ( | ) | ||||||
| Redemption of restricted investment in bank stock | ||||||||
| Net change in loan portfolio | ( | ) | ||||||
| Proceeds from sale of loans | ||||||||
| Proceeds from sale of other real estate owned | ||||||||
| Proceeds from sale of premises and equipment | ||||||||
| Purchase of premises and equipment, including property held for sale | ( | ) | ( | ) | ||||
| Net cash (used in) provided by investing activities | ( | ) | ||||||
| Cash Flows from Financing Activities | ||||||||
| Net (decrease) increase in non-interest bearing demand deposits | ( | ) | ||||||
| Net increase (decrease) in interest-bearing demand, savings, NOW, money market and time deposits | ( | ) | ||||||
| Net decrease in subordinated debt | ( | ) | ||||||
| Cash dividends paid on preferred stock | ( | ) | ( | ) | ||||
| Cash dividends paid on common stock | ( | ) | ( | ) | ||||
| Repurchase of common stock for tax withholding on stock-based compensation | ( | ) | ||||||
| Repurchases of common stock | ( | ) | ( | ) | ||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Decrease in Cash and Cash Equivalents | ( | ) | ( | ) | ||||
| Cash and Cash Equivalents, beginning of period | ||||||||
| Cash and Cash Equivalents, end of period | $ | $ | ||||||
| Supplementary Disclosure of Cash Flow Information | ||||||||
| Cash paid during the period for interest | $ | $ | ||||||
| Cash paid during the period for income taxes | $ | $ | ||||||
| Supplemental Noncash Disclosures | ||||||||
| Net unrealized (loss) gain on securities available-for-sale | $ | ( | ) | $ | ||||
| Transfers from loans to other real estate owned | $ | $ | ||||||
See Notes to the Unaudited Consolidated Financial Statements
MAINSTREET BANCSHARES, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Financial Statements
Note 1. Organization, Basis of Presentation and Impact of Recently Issued Accounting Pronouncements
Organization
MainStreet Bancshares, Inc. (the “Company”) is a financial holding company incorporated under the laws of the Commonwealth of Virginia whose primary activity is the ownership and management of MainStreet Bank (the “Bank”). On October 12, 2021, the Company filed an election with the Federal Reserve Board to be a financial holding company in order to engage in a broader range of financial activities than are permitted for bank holding companies generally. The Company is authorized to issue
On April 18, 2019, the Company completed the registration of its common stock with the Securities and Exchange Commission (the “SEC”) through its filing of a General Form for Registration of Securities on Form 10 (“Form 10”), pursuant to Section 12(b) of the Securities Exchange Act of 1934. The Company is considered an accelerated filer effective with the filing of the December 31, 2024 Annual Report on Form 10-K. We are also a “smaller reporting company” as defined in Exchange Act Rule 12b-2. As such, we may elect to comply with certain reduced public company reporting requirements in reports that we file with the SEC.
The Company was approved to list shares of our common stock on the Nasdaq Capital Market under our current symbol “MNSB” as of April 22, 2019. We were approved to list depositary shares of preferred stock on the Nasdaq Capital Market under the symbol “MNSBP” as of September 16, 2020. Each depositary share represents a 1/40th ownership interest in a share of
In September 2021, MainStreet Bancshares, Inc. established MainStreet Community Capital, LLC, a wholly owned subsidiary, to be a community development entity (“CDE”). This CDE will be an intermediary vehicle for the provision of loans and investments in Low-Income Communities (“LICs”). In January 2022, the Community Development Financial Institutions Fund (“CDFI”) of the United States Department of the Treasury certified MainStreet Community Capital, LLC as a registered CDE. MainStreet Community Capital's primary business objective is to apply for and receive New Market Tax Credit ("NMTC") allocations that are awarded and distributed annually.
The Bank is headquartered in Fairfax, Virginia where it also operates a branch. The Bank was incorporated on March 28, 2003, and received its charter from the Bureau of Financial Institutions of the Commonwealth of Virginia (the “Bureau”) on March 16, 2004. The Bank commenced regular operations on May 26, 2004, and is supervised by the Bureau and the Federal Reserve. The Bank is a member of the Federal Reserve System and the Federal Deposit Insurance Corporation. The Bank places special emphasis on serving the needs of retail customers, small and medium-sized businesses and professionals in the Washington, D.C. metropolitan area.
Basis of Presentation
The accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“US GAAP”) for interim information and with the instructions to the Quarterly Report on Form 10-Q, as applicable to a smaller reporting company. Accordingly, they do not include all the information and notes required by US GAAP for complete financial statements.
The financial statements are unaudited; but in the opinion of management include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation thereof. The balances as of December 31, 2025 have been derived from the audited consolidated financial statements. These interim period financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes thereto contained in the Form 10-K for the year ended December 31, 2025, filed by the Company with the SEC on March 13, 2026. The results of operations for the three and nine months ended September 30, 2026 are not necessarily indicative of the results that may be expected for the year ending December 31, 2026, or any other period. The Company’s significant accounting policies followed in preparation of the unaudited consolidated financial statements, are disclosed in Note 1 of the Notes to Consolidated Financial Statements in the 2025 Form 10-K. There have been no significant changes to the application of significant accounting policies since December 31, 2025.
Principles of Consolidation – The consolidated financial statements include accounts of the Company and its wholly-owned subsidiaries, the Bank and MainStreet Community Capital, LLC. All significant intercompany transactions and balances have been eliminated in consolidation.
Use of estimates – The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from the estimates.
Recently Adopted Accounting Developments
There were no accounting standard updates adopted in the nine months ended September 30, 2026.
Impact of Recently Issued Accounting Pronouncements
In November 2024, the Financial Accounting Standards Board (FASB) issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03 requires public companies to disclose, in the notes to the financial statements, specific information about certain costs and expenses at each interim and annual reporting period. This includes disclosing amounts related to employee compensation, depreciation, and intangible asset amortization. In addition, public companies will need to provide qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. The FASB subsequently issued ASU 2025-01, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date”, which amends the effective date of ASU 2024-03 to clarify that all public business entities are required to adopt the guidance in ASU 2024-03 in annual reporting periods beginning after December 15, 2026, and interim periods within annual reporting periods beginning after December 15, 2027. Early adoption of ASU 2024-03 is permitted. Implementation of ASU 2024-03 may be applied prospectively or retrospectively. The Company does not expect the adoption of ASU 2024-03 to have a material impact on its consolidated financial statements.
In November 2025, the Financial Accounting Standards Board (FASB) issued 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.
Note 2. Investment Securities
The following tables summarize the amortized cost and fair value of securities available-for-sale and securities held-to-maturity at September 30, 2026 and December 31, 2025 and the corresponding amounts of gross unrealized gains and losses, which are recognized in accumulated other comprehensive income (loss) for securities available-for-sale. The Company did not record an allowance for credit losses ("ACL") on its securities available-for-sale or held-to-maturity portfolio as of September 30, 2026 and December 31, 2025.
Investment securities available-for-sale was comprised of the following:
| September 30, 2026 | ||||||||||||||||
| (Dollars in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
| Collateralized Mortgage Backed | $ | $ | $ | ( | ) | $ | ||||||||||
| Subordinated Debt | ( | ) | ||||||||||||||
| Preferred Stock | ||||||||||||||||
| Municipal Securities: | ||||||||||||||||
| Taxable | ( | ) | ||||||||||||||
| Tax-exempt | ( | ) | ||||||||||||||
| U.S. Governmental Agencies | ( | ) | ||||||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
Investment securities held-to-maturity was comprised of the following:
| September 30, 2026 | ||||||||||||||||
| (Dollars in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
| Municipal Securities: | ||||||||||||||||
| Tax-exempt | $ | $ | $ | ( | ) | $ | ||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
Investment securities available-for-sale was comprised of the following:
| December 31, 2025 | ||||||||||||||||
| (Dollars in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
| Collateralized Mortgage Backed | $ | $ | $ | ( | ) | $ | ||||||||||
| Subordinated Debt | ( | ) | ||||||||||||||
| Preferred Stock | ||||||||||||||||
| Municipal Securities: | ||||||||||||||||
| Taxable | ( | ) | ||||||||||||||
| Tax-exempt | ( | ) | ||||||||||||||
| U.S. Governmental Agencies | ( | ) | ||||||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
Investment securities held-to-maturity was comprised of the following:
| December 31, 2025 | ||||||||||||||||
| (Dollars in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
| Municipal Securities: | ||||||||||||||||
| Tax-exempt | $ | $ | $ | ( | ) | $ | ||||||||||
| Total | $ | $ | $ | ( | ) | $ | ||||||||||
For HTM securities, the Company evaluates the credit risk of its securities on at least a quarterly basis. The primary indicators of credit quality for the Company’s HTM portfolio are security type and credit rating, which is influenced by a number of factors including obligor cash flow, geography, seniority, and others. All of the Company’s HTM securities with credit risk are obligations of states and political subdivisions. For HTM securities that are not rated, the Company evaluates the capital levels of the bond issuers on a quarterly basis. The Company’s HTM securities ACL was immaterial at September 30, 2026 and December 31, 2025.
The following table presents the amortized cost of HTM securities as of September 30, 2026 and December 31, 2025 by security type and credit rating:
| (Dollars in thousands) | Municipal Securities | Total HTM Securities | ||||||
| September 30, 2026 | ||||||||
| Credit Rating: | ||||||||
| AAA/AA/A | $ | $ | ||||||
| Total | $ | $ | ||||||
| December 31, 2025 | ||||||||
| Credit Rating: | ||||||||
| AAA/AA/A | $ | $ | ||||||
| Total | $ | $ | ||||||
As of September 30, 2026 and December 31, 2025, the Company had
The scheduled maturities of securities available-for-sale and held-to-maturity at September 30, 2026 were as follows:
| September 30, 2026 | ||||||||||||||||
| Available-for-Sale | Held-to-Maturity | |||||||||||||||
| (Dollars in thousands) | Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||
| Due in one year or less | $ | $ | $ | $ | ||||||||||||
| Due from one to five years | ||||||||||||||||
| Due from after five to ten years | ||||||||||||||||
| Due after ten years | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
The scheduled maturities of securities available-for-sale and held-to-maturity at December 31, 2025 were as follows:
| December 31, 2025 | ||||||||||||||||
| Available-for-Sale | Held-to-Maturity | |||||||||||||||
| (Dollars in thousands) | Amortized Cost | Fair Value | Amortized Cost | Fair Value | ||||||||||||
| Due in one year or less | $ | $ | $ | $ | ||||||||||||
| Due from one to five years | ||||||||||||||||
| Due from after five to ten years | ||||||||||||||||
| Due after ten years | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
One security with a fair value of $
The following tables summarize the fair value and unrealized loss positions of securities available-for-sale as of September 30, 2026 and December 31, 2025, aggregated by security type and length of time that individual securities have been in a continuous loss position:
| September 30, 2026 | ||||||||||||||||||||||||
| Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||
| (Dollars in thousands) | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | ||||||||||||||||||
| Available-for-sale: | ||||||||||||||||||||||||
| Collateralized Mortgage Backed | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||
| Subordinated Debt | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Municipal securities: | ||||||||||||||||||||||||
| Taxable | ( | ) | ( | ) | ||||||||||||||||||||
| Tax-exempt | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| U.S. Governmental Agencies | ( | ) | ( | ) | ||||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||
| Less than 12 Months | 12 Months or Longer | Total | ||||||||||||||||||||||
| (Dollars in thousands) | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | Fair Value | Unrealized Loss | ||||||||||||||||||
| Available-for-sale: | ||||||||||||||||||||||||
| Collateralized Mortgage Backed | $ | $ | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||
| Subordinated Debt | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Municipal Securities: | ||||||||||||||||||||||||
| Taxable | ( | ) | ( | ) | ||||||||||||||||||||
| Tax-exempt | ( | ) | ( | ) | ||||||||||||||||||||
| U.S. Government Agencies | ( | ) | ( | ) | ||||||||||||||||||||
| Total | $ | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||
The factors considered in evaluating securities for impairment include whether the Bank intends to sell the security, whether it is more likely than not that the Bank will be required to sell the security before recovery of its amortized cost basis, and whether the Bank expects to recover the security’s entire amortized cost basis. These unrealized losses are primarily attributable to current financial market conditions for these types of investments, particularly changes in interest rates, causing bond prices to decline, and are not attributable to credit deterioration. Additionally, the issuers continue to make timely principal and interest payments. As such, there was
At September 30, 2026, there were sixteen tax-exempt municipal securities with a fair value totaling $
The Company periodically invests in New Market Tax Credit (NMTC) opportunities, related primarily to certain community development projects. The Company receives tax credits related to these investments, for which the Company typically acts as a limited partner and therefore does not exert control over the operating or financial policies of the partnerships. These tax credits are subject to recapture by taxing authorities based on compliance features required to be met at the project level. On January 1, 2024, the Company transitioned from the equity method of accounting and began applying the proportional amortization method of accounting to its qualifying new markets tax credit investments in addition to its low income housing tax credit partnerships already subject to the proportional amortization method. At September 30, 2026 and December 31, 2025, the balance of the investments in new market tax credits was $
The restricted securities line on the Consolidated Statements of Financial Condition consist of the Federal Reserve Bank and Federal Home Loan Bank of Atlanta (“FHLB”) stock in the amount of $
Note 3. Loans Receivable
Loans receivable were comprised of the following:
| (Dollars in thousands) | September 30, 2026 | December 31, 2025 | ||||||
| Residential Real Estate: | ||||||||
| Single Family | $ | $ | ||||||
| Multifamily | ||||||||
| Farmland | ||||||||
| Commercial Real Estate: | ||||||||
| Owner Occupied | ||||||||
| Non-Owner Occupied | ||||||||
| Construction & Land Development | ||||||||
| Commercial – Non-Real Estate: | ||||||||
| Commercial & Industrial | ||||||||
| Consumer – Non-Real Estate: | ||||||||
| Unsecured | ||||||||
| Secured | ||||||||
| Total Gross Loans | ||||||||
| Less: Unearned Fees, net | ( | ) | ( | ) | ||||
| Less: Allowance for Credit Losses - Loans | ( | ) | ( | ) | ||||
| Net Loans | $ | $ | ||||||
The unsecured consumer loans above include $
The following tables present the amortized cost basis by segments of the loan portfolio summarized by aging categories as of September 30, 2026 and December 31, 2025:
| September 30, 2026 | ||||||||||||||||||||||||
| (Dollars in thousands) | 30-59 Days Past Due | 60-89 Days Past Due | Greater than 90 Days Past Due and Still Accruing | Non-accrual | Current | Total Loans Receivable | ||||||||||||||||||
| Residential Real Estate: | ||||||||||||||||||||||||
| Single Family | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Multifamily | ||||||||||||||||||||||||
| Farmland | ||||||||||||||||||||||||
| Commercial Real Estate: | ||||||||||||||||||||||||
| Owner Occupied | ||||||||||||||||||||||||
| Non-Owner Occupied | ||||||||||||||||||||||||
| Construction & Land Development | ||||||||||||||||||||||||
| Commercial – Non-Real Estate: | ||||||||||||||||||||||||
| Commercial & Industrial | ||||||||||||||||||||||||
| Consumer – Non-Real Estate: | ||||||||||||||||||||||||
| Unsecured | ||||||||||||||||||||||||
| Secured | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||
| (Dollars in thousands) | 30-59 Days Past Due | 60-89 Days Past Due | Greater than 90 Days Past Due and Still Accruing | Non-accrual | Current | Total Loans Receivable | ||||||||||||||||||
| Residential Real Estate: | ||||||||||||||||||||||||
| Single Family | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Multifamily | ||||||||||||||||||||||||
| Farmland | ||||||||||||||||||||||||
| Commercial Real Estate: | ||||||||||||||||||||||||
| Owner Occupied | ||||||||||||||||||||||||
| Non-Owner Occupied | ||||||||||||||||||||||||
| Construction & Land Development | ||||||||||||||||||||||||
| Commercial – Non-Real Estate: | ||||||||||||||||||||||||
| Commercial & Industrial | ||||||||||||||||||||||||
| Consumer – Non-Real Estate: | ||||||||||||||||||||||||
| Unsecured | ||||||||||||||||||||||||
| Secured | ||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
The following tables summarize the activity in the allowance for credit losses on loans by loan class for the three and nine months ended September 30, 2026 and 2025.
Allowance for Credit Losses By Portfolio Segment
| Real Estate | ||||||||||||||||||||||||
| For the three months ended September 30, 2026 | Residential | Commercial | Construction | Commercial | Consumer | Total | ||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
| Beginning Balance | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Charge-offs | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Recoveries | ||||||||||||||||||||||||
| Provision for credit losses | ( | ) | ( | ) | ||||||||||||||||||||
| Ending Balance | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| For the nine months ended September 30, 2026 | ||||||||||||||||||||||||
| Beginning Balance | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Charge-offs | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Recoveries | ||||||||||||||||||||||||
| Provision for credit losses | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Ending Balance | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Real Estate | ||||||||||||||||||||||||
| For the three months ended September 30, 2025 | Residential | Commercial | Construction | Commercial | Consumer | Total | ||||||||||||||||||
| (Dollars in thousands) | ||||||||||||||||||||||||
| Beginning Balance | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Charge-offs | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Recoveries | ||||||||||||||||||||||||
| Provision for credit losses | ( | ) | ( | ) | ( | ) | ||||||||||||||||||
| Ending Balance | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| For the nine months ended September 30, 2025 | ||||||||||||||||||||||||
| Beginning Balance | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
| Charge-offs | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Recoveries | ||||||||||||||||||||||||
| Provision for credit losses | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||||||||||
| Ending Balance | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
The following table is a summary of the Company's non-accrual loans by major categories for the periods indicated.
| September 30, 2026 | ||||||||||||
| (Dollars in thousands) | Non-accrual Loans with no Allowance | Non-accrual Loans with an Allowance | Total Non-accrual Loans | |||||||||
| Residential Real Estate: | ||||||||||||
| Single Family | $ | $ | $ | |||||||||
| Multifamily | ||||||||||||
| Commercial Real Estate: | ||||||||||||
| Owner Occupied | ||||||||||||
| Non-Owner Occupied | ||||||||||||
| Construction & Land Development | ||||||||||||
| Total | $ | $ | $ | |||||||||
| December 31, 2025 | ||||||||||||
| (Dollars in thousands) | Non-accrual Loans with no Allowance | Non-accrual Loans with an Allowance | Total Non-accrual Loans | |||||||||
| Residential Real Estate: | ||||||||||||
| Single Family | $ | $ | $ | |||||||||
| Commercial Real Estate: | ||||||||||||
| Non-Owner Occupied | ||||||||||||
| Construction & Land Development | ||||||||||||
| Commercial & Industrial | ||||||||||||
| Total | $ | $ | $ | |||||||||
The following table represents the accrued interest receivables written off by reversing interest income during the three and nine months ended September 30, 2026 and 2025.
| For the Three Months Ended September 30, | For the Three Months Ended September 30, | |||||||
| 2026 | 2025 | |||||||
| (Dollars in thousands) | ||||||||
| Residential Real Estate: | ||||||||
| Single Family | $ | $ | ||||||
| Multifamily | ||||||||
| Construction & Land Development | ||||||||
| Total | $ | $ | ||||||
| For the Nine Months Ended September 30, | For the Nine Months Ended September 30, | |||||||
| 2026 | 2025 | |||||||
| (Dollars in thousands) | ||||||||
| Residential Real Estate: | ||||||||
| Single Family | $ | $ | ||||||
| Multifamily | ||||||||
| Construction & Land Development | ||||||||
| Commercial Real Estate: | ||||||||
| Owner Occupied | ||||||||
| Non-Owner Occupied | ||||||||
| Total | $ | $ | ||||||
During the nine months ended September 30, 2026, $
The Company has certain loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty. The underlying collateral can vary based upon the type of loan. The following provides more detail about the types of collateral that secure collateral dependent loans:
| ● | Residential real estate loans, including equity lines of credit, are typically secured by first mortgages, and in some cases could be secured by a second mortgage. |
| ● | Commercial real estate loans can be secured by either owner-occupied commercial real estate or non-owner-occupied investment commercial real estate. Typically, owner-occupied commercial real estate loans are secured by office buildings, warehouses, manufacturing facilities and other commercial and industrial properties occupied by operating companies. Non-owner-occupied commercial real estate loans are generally secured by office buildings and complexes, retail facilities, multifamily complexes, land under development, industrial properties, as well as other commercial or industrial real estate where our borrower is the lessor. |
| ● | Construction and land development loans are secured by real property where loan funds will be used to acquire land and to construct or improve appropriately zoned real property for the creation of income producing or owner-user commercial properties. |
| ● | Commercial and industrial loans are generally secured by equipment, inventory, accounts receivable, and other commercial property. |
| ● | Consumer loans are generally secured by automobiles, motorcycles, recreational vehicles and other personal property. Some consumer loans are unsecured and have no underlying collateral. |
The following table details the amortized cost of collateral dependent loans for the periods indicated:
| (Dollars in thousands) | September 30, 2026 | December 31, 2025 | ||||||
| Residential Real Estate: | ||||||||
| Single Family | $ | $ | ||||||
| Multifamily | ||||||||
| Commercial Real Estate: | ||||||||
| Owner Occupied | ||||||||
| Non-Owner Occupied | ||||||||
| Construction & Land Development | ||||||||
| Commercial & Industrial | ||||||||
| Total | $ | $ | ||||||
Subsequent to September 30, 2026, the Company identified deterioration in the credit quality of a commercial real estate loan with a balance of $
As of September 30, 2026, there were
The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon asset origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Company uses a weighted average remaining life model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.
The effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses, given the measurement methodologies used to estimate the allowance; therefore, a change to the allowance for credit losses is generally not recorded upon modification. Occasionally, the Company modifies certain loans by providing principal forgiveness. When principal forgiveness is provided, the amortized cost basis of the asset is written off against the allowance for credit losses. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses.
In some cases, the Company will modify a loan by providing multiple types of concessions. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another type of concession, such as principal forgiveness, may be granted.
The following tables show the amortized cost basis of the loans modified to borrowers experiencing financial difficulty, disaggregated by class of loans and type of concession granted and describes the financial effect of the modifications made to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2026 and 2025.
| Three and Nine months ended September 30, 2026 | ||||||||||||
| (Dollars in thousands) | Amortized Cost Basis | % of Total Loan Type | Financial Effect | |||||||||
| Residential Real Estate: | ||||||||||||
| Multifamily | $ | % | Deferred interest payments for 8 months and provided 12 months of interest only payments; decreased interest rate | |||||||||
| Total | $ | |||||||||||
| Three months ended September 30, 2025 | ||||||||||||
| (Dollars in thousands) | Amortized Cost Basis | % of Total Loan Type | Financial Effect | |||||||||
| Residential Real Estate: | ||||||||||||
| Multifamily | $ | % | Interest rate decrease with a fixed rate | |||||||||
| Commercial Real Estate: | ||||||||||||
| Non-Owner Occupied | % | Interest rate decrease and interest only for 12 months; interest only for 24 months | ||||||||||
| Total | $ | |||||||||||
| Nine months ended September 30, 2025 | ||||||||||||
| (Dollars in thousands) | Amortized Cost Basis | % of Total Loan Type | Financial Effect | |||||||||
| Residential Real Estate: | ||||||||||||
| Single Family | $ | % | Extended term on interest only payments for six months | |||||||||
| Multifamily | % | Interest rate decrease for three months | ||||||||||
| Commercial Real Estate: | ||||||||||||
| Non-Owner Occupied | % | Interest rate decrease and interest only for 12 months; interest only for 24 months | ||||||||||
| Commercial & Industrial | % | Interest rate decrease; extended term for eight months | ||||||||||
| Total | $ | |||||||||||
The Company monitors loan payments on modified loans on an ongoing basis to determine how the loan is performing under the modification and if the loan is considered to have a payment default. Of the loans modified during the 12 months prior to September 30, 2026 to borrowers experiencing financial difficulties, four loan relationships totaling $
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, credit documentation, public information, and current economic trends, among other factors. Credit quality risk ratings include regulatory classifications of Pass, Watch, Criticized (Special Mention), Classified (Substandard), Doubtful, and Loss. Loans classified as Pass have quality metrics to support that the loan will be repaid according to the terms established. Loans classified as Watch have similar characteristics as Pass loans with some emerging signs of financial weaknesses that should be monitored closer. Loans classified as Watch are included in the Pass totals in the following tables. Loans classified as Criticized have potential weaknesses that deserve management’s close attention. If uncorrected, the potential weaknesses may result in deterioration of prospects for repayment. Loans classified as Classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They include loans that are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified Doubtful have all the weaknesses inherent in Classified loans with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as a Loss are considered uncollectible and are charged to the allowance for credit losses.
The following tables summarize the recorded investment in the Company's loans by aggregate Pass and categories of Criticized and Classified within the Company’s internal risk rating system by year of origination as of September 30, 2026 and December 31, 2025. The following tables also summarize gross charge-offs, by year of origination as of and for the nine months ended September 30, 2026 and as of and for the year ended December 31, 2025.
| Term Loans Amortized Cost Basis by Origination Year | ||||||||||||||||||||||||||||||||||||
| September 30, 2026 | ||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2026 | 2025 | 2024 | 2023 | 2022 | Prior | Revolving Loans | Revolving Loans converted to term | Total | |||||||||||||||||||||||||||
| Residential Real Estate - Single Family | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Criticized | ||||||||||||||||||||||||||||||||||||
| Classified | ||||||||||||||||||||||||||||||||||||
| Total Residential Real Estate - Single Family | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Residential Real Estate - Multifamily | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Criticized | ||||||||||||||||||||||||||||||||||||
| Classified | ||||||||||||||||||||||||||||||||||||
| Total Residential Real Estate - Multifamily | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Residential Real Estate - Farmland | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Total Residential Real Estate - Farmland | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Commercial Real Estate - Owner Occupied | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Criticized | ||||||||||||||||||||||||||||||||||||
| Classified | ||||||||||||||||||||||||||||||||||||
| Total Commercial Real Estate - Owner Occupied | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Commercial Real Estate - Non-Owner Occupied | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Criticized | ||||||||||||||||||||||||||||||||||||
| Classified | ||||||||||||||||||||||||||||||||||||
| Total Commercial Real Estate - Non-Owner Occupied | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Construction & Land Development | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Criticized | ||||||||||||||||||||||||||||||||||||
| Classified | ||||||||||||||||||||||||||||||||||||
| Total Construction & Land Development | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Commercial & Industrial | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Classified | ||||||||||||||||||||||||||||||||||||
| Total Commercial & Industrial | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Consumer - Unsecured | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Total Consumer - Unsecured | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Consumer - Secured | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Total Consumer - Secured | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Criticized | ||||||||||||||||||||||||||||||||||||
| Classified | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Term Loans Amortized Cost Basis by Origination Year | ||||||||||||||||||||||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||||||||||||||||||
| (Dollars in thousands) | 2025 | 2024 | 2023 | 2022 | 2021 | Prior | Revolving Loans | Revolving Loans converted to term | Total | |||||||||||||||||||||||||||
| Residential Real Estate - Single Family | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Criticized | ||||||||||||||||||||||||||||||||||||
| Classified | ||||||||||||||||||||||||||||||||||||
| Total Residential Real Estate - Single Family | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Residential Real Estate - Multifamily | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Criticized | ||||||||||||||||||||||||||||||||||||
| Classified | ||||||||||||||||||||||||||||||||||||
| Total Residential Real Estate - Multifamily | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Residential Real Estate - Farmland | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Total Residential Real Estate - Farmland | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Commercial Real Estate - Owner Occupied | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Criticized | ||||||||||||||||||||||||||||||||||||
| Classified | ||||||||||||||||||||||||||||||||||||
| Total Commercial Real Estate - Owner Occupied | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Commercial Real Estate - Non-Owner Occupied | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Criticized | ||||||||||||||||||||||||||||||||||||
| Classified | ||||||||||||||||||||||||||||||||||||
| Total Commercial Real Estate - Non-Owner Occupied | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Construction & Land Development | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Criticized | ||||||||||||||||||||||||||||||||||||
| Classified | ||||||||||||||||||||||||||||||||||||
| Total Construction & Land Development | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Commercial & Industrial | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Classified | ||||||||||||||||||||||||||||||||||||
| Total Commercial & Industrial | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Consumer - Unsecured | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Total Consumer - Unsecured | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Consumer - Secured | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Total Consumer - Secured | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Total | ||||||||||||||||||||||||||||||||||||
| Pass | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Criticized | ||||||||||||||||||||||||||||||||||||
| Classified | ||||||||||||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
| Current period gross charge-offs | $ | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||
Unfunded Commitments
The Company maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, as well as both standby and commercial letters of credit when there is a contractual obligation to extend credit and when this extension of credit is not unconditionally cancellable (i.e., the commitment cannot be canceled at any time). The allowance for off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the allowance for credit losses on loans. The allowance for credit losses for unfunded loan commitments of $
The following table presents the balance and activity in the allowance for credit losses for off-balance sheet credit exposure for the three and nine months ended September 30, 2026 and 2025, respectively.
| Three months ended September 30, 2026 | Total Allowance for Credit Losses on Off-Balance Sheet Credit Exposure | |||
| (Dollars in thousands) | ||||
| Balance, June 30, 2026 | $ | |||
| Provision for off-balance sheet credit losses, net | ( | ) | ||
| Balance, September 30, 2026 | $ | |||
| Nine months ended September 30, 2026 | Total Allowance for Credit Losses on Off-Balance Sheet Credit Exposure | |||
| (Dollars in thousands) | ||||
| Balance, December 31, 2025 | $ | |||
| Provision for off-balance sheet credit losses, net | ( | ) | ||
| Balance, September 30, 2026 | $ | |||
| Three months ended September 30, 2025 | Total Allowance for Credit Losses on Off-Balance Sheet Credit Exposure | |||
| (Dollars in thousands) | ||||
| Balance, June 30, 2025 | $ | |||
| Provision for off-balance sheet credit losses, net | ||||
| Balance, September 30, 2025 | $ | |||
| Nine months ended September 30, 2025 | Total Allowance for Credit Losses on Off-Balance Sheet Credit Exposure | |||
| (Dollars in thousands) | ||||
| Balance, December 31, 2024 | $ | |||
| Provision for off-balance sheet credit losses, net | ||||
| Balance, September 30, 2025 | $ | |||
Note 4. Derivatives and Risk Management Activities
The Company uses derivative financial instruments (“derivatives”) primarily to assist customers with their interest rate risk management objectives. The Company classifies these items as free standing derivatives consisting of customer accommodation interest rate loan swaps (“interest rate loan swaps”). The Company enters into interest rate swaps with certain qualifying commercial loan customers to meet their interest rate risk management needs. The Company simultaneously enters into interest rate swaps with dealer counterparties, with identical notional amounts and terms. The net result of these interest rate swaps is that the customer pays a fixed rate of interest and the Company receives a floating rate. These back-to-back interest rate loan swaps qualify as financial derivatives with fair values reported in “Other assets” and “Other liabilities” in the Consolidated Statements of Financial Condition. Changes in fair value are recorded in other non-interest expense and net to zero because of the identical amounts and terms of the interest rate loan swaps.
The following tables summarize key elements of the Company’s derivative instruments as of September 30, 2026 and December 31, 2025.
| September 30, 2026 | ||||||||||||||||||||
| Customer-related interest rate contracts | ||||||||||||||||||||
| (Dollars in thousands) | Notional Amount | Number of Positions | Assets | Liabilities | Collateral Pledges | |||||||||||||||
| Matched interest rate swap with borrower | $ | $ | $ | $ | ||||||||||||||||
| Matched interest rate swap with counterparty | $ | $ | $ | $ | ||||||||||||||||
| December 31, 2025 | ||||||||||||||||||||
| Customer-related interest rate contracts | ||||||||||||||||||||
| (Dollars in thousands) | Notional Amount | Number of Positions | Assets | Liabilities | Collateral Pledges | |||||||||||||||
| Matched interest rate swap with borrower | $ | $ | $ | $ | ||||||||||||||||
| Matched interest rate swap with counterparty | $ | $ | $ | $ | ||||||||||||||||
The Company is able to recognize fee income upon execution of the interest rate swap contract. The Company did not record any interest rate swap fee income for the three and nine months ended September 30, 2026 or 2025.
Note 5. Fair Value Presentation
In accordance with FASB ASC 820, “Fair Value Measurements and Disclosure”, the Bank uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability (“an exit price”) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are no quoted market prices for the Bank’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 the principal or most advantageous market for the asset or liability 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 the most representative of fair value under current market conditions.
In accordance with the guidance, a hierarchy of valuation techniques is based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Bank’s market assumptions. The three levels of the fair value hierarchy under FASB ASC 820 based on these two types of inputs are as follows:
Level 1 –Valuation is based on quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.
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.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following describes the valuation techniques used by the Bank 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 consider observable market data (Level 2). In certain cases where there is limited activity or less transparency around inputs to the valuation, securities are classified within Level 3 of the valuation hierarchy. As of September 30, 2026, and December 31, 2025, the Bank’s entire portfolio of available-for-sale securities are considered to be Level 2 securities, with the exception of two subordinated debt securities and one preferred stock security which are considered Level 3. The securities are classified as Level 3 because their fair values are determined using significant unobservable inputs. Due to limited market activity, management’s fair-value estimates approximate the securities’ amortized cost.
Derivative asset (liability) – interest rate swaps on loans
As discussed in “Note 4: “Derivatives and Risk Management Activities”, the Bank recognizes interest rate swaps at fair value on a recurring basis. The Bank has contracted with a third party vendor to provide valuations for these interest rate swaps using standard valuation techniques and therefore classifies such interest rate swaps as Level 2.
The following tables provide the fair value for assets required to be measured and reported at fair value on a recurring basis as of September 30, 2026 and December 31, 2025:
| September 30, 2026 | ||||||||||||||||
| (Dollars in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Assets: | ||||||||||||||||
| Investment securities available-for-sale: | ||||||||||||||||
| Collateralized Mortgage Backed | $ | $ | $ | $ | ||||||||||||
| Subordinated Debt | ||||||||||||||||
| Preferred Stock | ||||||||||||||||
| Municipal Securities: | ||||||||||||||||
| Taxable | ||||||||||||||||
| Tax-exempt | ||||||||||||||||
| U.S. Government Agencies | ||||||||||||||||
| Derivative asset – interest rate swap on loans | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative liability – interest rate swap on loans | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| December 31, 2025 | ||||||||||||||||
| (Dollars in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Assets: | ||||||||||||||||
| Investment securities available-for-sale: | ||||||||||||||||
| Collateralized Mortgage Backed | $ | $ | $ | $ | ||||||||||||
| Subordinated Debt | ||||||||||||||||
| Preferred Stock | ||||||||||||||||
| Municipal Securities: | ||||||||||||||||
| Taxable | ||||||||||||||||
| Tax-exempt | ||||||||||||||||
| U.S. Government Agencies | ||||||||||||||||
| Derivative asset – interest rate swap on loans | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
| Liabilities: | ||||||||||||||||
| Derivative liability – interest rate swap on loans | $ | $ | $ | $ | ||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
The table below shows the activity to the fair value of level three instruments during the nine months ended September 30, 2026.
| Reconciliation of Level 3 Inputs | ||||
| (Dollars in thousands) | ||||
| December 31, 2025 fair value | $ | |||
| Change in fair value (1) | ||||
| September 30, 2026 fair value | $ | |||
(1) The change in fair value from December 31, 2025 to September 30, 2026 is due to accretion of the underlying preferred stock security given that it was purchased at a discount. The change in fair value is not due to fluctuating market conditions.
Assets and Liabilities Measured at Fair Value on a Nonrecurring Basis
Certain 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.
Other real estate owned
Other real estate owned is measured at fair value less cost to sell, based on an appraisal conducted by an independent, licensed appraiser outside of the Bank. If the collateral value is significantly adjusted due to differences in the comparable properties, or is discounted by the Bank because of marketability, then the fair value is considered Level 3. OREO is measured at fair value on a nonrecurring basis. Any initial fair value adjustment is charged against the Allowance for Credit Losses. Subsequent fair value adjustments are recorded in the period incurred and included in other non-interest expense on the Consolidated Statements of Income. During the three months ended September 30, 2026, sales contracts for two OREO properties were executed and the sales price was used to adjust the fair value as of September 30, 2026.
Property held for sale
This real estate property is carried in the property held for sale line item on the Consolidated Statements of Financial Condition as of September 30, 2026 at fair value, based upon the transactional price if available, or the appraised value of the property. Refer to Note 8 for additional information on the property held for sale.
The following table summarizes the value of the Bank's assets as of September 30, 2026 and December 31, 2025 that were measured at fair value on a nonrecurring basis during the period:
| September 30, 2026 | |||||||||||||||||
| (Dollars in thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | |||||||||||||||||
| Other real estate owned | $ | $ | $ | $ | |||||||||||||
| Property held for sale | |||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||
| December 31, 2025 | |||||||||||||||||
| (Dollars in thousands) | Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets: | |||||||||||||||||
| Other real estate owned | $ | $ | $ | $ | |||||||||||||
| Property held for sale | |||||||||||||||||
| Total | $ | $ | $ | $ | |||||||||||||
| Fair Value Measurements at September 30, 2026 | |||||||||||
| (Dollars in thousands) | Fair Value | Valuation Technique(s) | Unobservable Inputs | Range of Inputs | |||||||
| Other real estate owned | Appraisals, sales price | Discount to reflect current market conditions and estimated selling costs | |||||||||
| Property held for sale | Transaction price | Estimated selling costs | |||||||||
| Total | $ | ||||||||||
| Fair Value Measurements at December 31, 2025 | |||||||||||
| (Dollars in thousands) | Fair Value | Valuation Technique(s) | Unobservable Inputs | Range of Inputs | |||||||
| Other real estate owned | $ | Appraisals | Discount to reflect current market conditions and estimated selling costs | ||||||||
| Property held for sale | Transaction price | Estimated selling costs | |||||||||
| Total | $ | ||||||||||
Fair Value of Financial Instruments
FASB ASC 825, Financial Instruments, requires disclosure about fair value of financial instruments, including those financial assets and financial liabilities that are not required to be measured and reported at fair value on a recurring or nonrecurring basis. ASC 825 excludes certain financial instruments and all nonfinancial instruments from its disclosure requirements. Accordingly, the aggregate fair value amounts presented may not necessarily represent the underlying fair value of the Company. In accordance with ASC 825, the Company uses the exit price notion, rather than the entry price notion, in calculating the fair values of financial instruments not measured at fair value on a recurring basis.
The following tables reflect the carrying amounts and estimated fair values of the Company’s financial instruments whether or not recognized on the Consolidated Statement of Financial Condition at fair value.
| September 30, 2026 | Carrying | Estimated | Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | |||||||||||||||
| (Dollars in thousands) | Amount | Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||
| Assets: | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | |||||||||||||||
| Securities: | ||||||||||||||||||||
| Available-for-sale | ||||||||||||||||||||
| Held-to-maturity | ||||||||||||||||||||
| Restricted securities | ||||||||||||||||||||
| Loans, net | ||||||||||||||||||||
| Derivative asset – interest rate swap on loans | ||||||||||||||||||||
| Bank owned life insurance | ||||||||||||||||||||
| Accrued interest receivable | ||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||
| Deposits | $ | $ | $ | $ | $ | |||||||||||||||
| Subordinated debt, net | ||||||||||||||||||||
| Derivative liability – interest rate swaps on loans | ||||||||||||||||||||
| Accrued interest payable | ||||||||||||||||||||
| December 31, 2025 | Carrying | Estimated | Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs | |||||||||||||||
| (Dollars in thousands) | Amount | Fair Value | Level 1 | Level 2 | Level 3 | |||||||||||||||
| Assets: | ||||||||||||||||||||
| Cash and cash equivalents | $ | $ | $ | $ | $ | |||||||||||||||
| Securities: | ||||||||||||||||||||
| Available-for-sale | ||||||||||||||||||||
| Held-to-maturity | ||||||||||||||||||||
| Restricted securities | ||||||||||||||||||||
| Loans, net | ||||||||||||||||||||
| Derivative asset – interest rate swap on loans | ||||||||||||||||||||
| Bank owned life insurance | ||||||||||||||||||||
| Accrued interest receivable | ||||||||||||||||||||
| Liabilities: | ||||||||||||||||||||
| Deposits | $ | $ | $ | $ | $ | |||||||||||||||
| Subordinated debt, net | ||||||||||||||||||||
| Derivative liability – interest rate swaps on loans | ||||||||||||||||||||
| Accrued interest payable | ||||||||||||||||||||
The above information should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only provided for a limited portion of the Company’s assets and liabilities. Due to a wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company’s disclosures and those of other companies may not be meaningful. Assumptions utilized in the aggregation of fair value of our loan portfolio include prepayment rates, probability of default and loss given default, and discount rates on cash flows. Our third party valuation utilizes average data by homogenous loan segments nationwide and may not properly reflect the characteristics of our specific portfolio. There were no changes in methodologies or transfers between levels during the periods ended September 30, 2026 and December 31, 2025.
Note 6. Earnings Per Common Share
Basic earnings per common share 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 earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock which then shared in the earnings of the Company. There were
The weighted average number of shares used in the calculation of basic and diluted earnings per common share includes nonvested restricted shares of the Company’s common stock outstanding. Applicable guidance requires that outstanding nonvested share-based payment awards that contain voting rights and rights to non-forfeitable dividends participate in undistributed earnings with common shareholders.
| For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
| (Dollars in thousands, except for per share data) | 2026 | 2025 | 2026 | 2025 | ||||||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Preferred stock dividends | ( | ) | $ | ( | ) | ( | ) | $ | ( | ) | ||||||
| Net income available to common shareholders | $ | $ | $ | $ | ||||||||||||
| Weighted average number of common shares issued, basic and diluted | ||||||||||||||||
| Earnings per common share: | ||||||||||||||||
| Basic and diluted earnings per common share | $ | $ | $ | $ | ||||||||||||
Note 7. Accumulated Other Comprehensive Loss
The following table presents the cumulative balances of the components of accumulated other comprehensive loss, net of deferred taxes, as of September 30, 2026, December 31, 2025, and September 30, 2025.
| (Dollars in thousands) | September 30, 2026 | December 31, 2025 | September 30, 2025 | |||||||||
| Unrealized loss on investment securities available-for-sale | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
| Tax effect | ||||||||||||
| Total accumulated other comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
There were no reclassifications during the periods ending September 30, 2026, December 31, 2025, and September 30, 2025.
Note 8: Property Held For Sale
During the three months ended June 30, 2025, the Company acquired a building complex for possible future bank premises. The complex consisted of
Note 9: Segment Reporting
The Company conducts its operations through a single reportable business segment. The Company’s reportable segment is determined by the CFO, who is the designated chief operating decision maker, based upon information provided about the Company’s products and services offered, primarily banking operations. The segment is also distinguished by the level of information provided to the chief operating decision maker, who uses such information to review performance of various components of the business, which are then aggregated given that operating performance, products/services, and customers are similar. The chief operating decision maker evaluates the financial performance of the Company’s business components by evaluating revenue streams, significant expenses, and budget to actual results in assessing the performance and in the determination of allocating resources. The chief operating decision maker uses revenue streams to evaluate product pricing and significant expenses to assess performance and evaluate return on assets. The chief operating decision maker uses consolidated net income to benchmark the Company against its competitors. The benchmarking analysis coupled with monitoring of budget to actual results, are used in assessing performance and establishing compensation. Interest on loans and investments and fees from deposit accounts, provide the revenues in the core banking operation. Interest expense, provision for credit losses, and salaries provide the significant expenses in the core banking operation. All operations are domestic. The results of operations for the Company’s single reporting segment are shown on the Consolidated Statements of Income and Consolidated Statements of Financial Condition.
Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis is intended as a review of significant factors affecting the Company’s consolidated financial condition and results of operations for the periods indicated. This discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and the related notes and the Company’s Annual Report on Form 10-K, which contains audited consolidated financial statements of the Company as of and for the year ended December 31, 2025, previously filed with the SEC on March 13, 2026. Results for the three and nine months ended September 30, 2026 are not necessarily indicative of results for the year ending December 31, 2026 or any future period.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains certain forward-looking statements and information relating to the Company within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on the beliefs of management as well as assumptions made by and information currently available to management. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words like “believe,” “expect,” “anticipate,” “estimate,” and “intend” or future or conditional verbs such as “will,” “should,” “could,” or “may” and similar expressions or the negative thereof. Important factors that could cause actual results to differ materially from those in the forward–looking statements included herein include, but are not limited to:
| ● |
general economic conditions, either nationally or in our market area, that are different than expected; |
| ● |
competition among depository and other financial institutions, particularly intensified competition for deposits; |
| ● |
inflation and an interest rate environment that may reduce our margins or reduce the fair value of certain of our financial instruments; |
| ● |
changes in the securities markets; |
| ● |
changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory structure and in regulatory fees and capital requirements; |
| ● |
the impact of significant changes in accounting procedures or requirements on our financial condition or results of operations; |
| ● |
our ability to enter new markets successfully and capitalize on growth opportunities; |
| ● |
our ability to successfully integrate acquired and newly organized entities; |
| ● |
changes in consumer spending, borrowing and savings habits; |
| ● |
changes in accounting policies and practices; |
| ● |
changes in our organization, compensation and benefit plans; |
| ● |
our ability to attract and retain key employees; |
| ● |
changes in our financial condition or results of operations that reduce capital; |
| ● |
changes in the financial condition or future prospects of issuers of securities that we own; |
| ● |
the concentration of our business in the Northern Virginia and greater Washington, DC metropolitan area and the effect of changes in the economic, political and environmental conditions on those markets; |
| ● |
adequacy of or increases in the allowance for credit losses; |
| ● |
cyber threats, attacks or other data security events; |
| ● |
fraud or misconduct by internal or external parties; |
| ● |
reliance on third parties for key services; |
| ● |
changes in our asset quality, including changes in loan delinquencies, problem assets and foreclosures; |
| ● |
future performance of our loan portfolio with respect to recently originated loans; |
| ● |
additional risks related to new lines of business, products, product enhancements or services; |
| ● |
results of examination of us by our regulators, including the possibility that our regulators may require us to change our allowance for credit losses or to adjust assets or take other supervisory action; |
| ● |
the effectiveness of our internal controls over financial reporting and our ability to remediate any future material change in our internal controls over financial reporting; |
| ● |
liquidity, interest rate and operational risks associated with our business; |
| ● |
implications of our status as a smaller reporting company; |
| ● |
a work disruption, forced quarantine, or other interruption or the unavailability of key employees; |
|
| ● | volatility in the financial institution industry and actions by regulatory authorities in response thereto; | |
| ● | litigation or governmental actions; | |
| ● | change in a material asset; | |
| ● | federal layoffs and shut downs, and potential government contract terminations or non-renewals; | |
| ● | possible income tax and accounting effects of recently enacted legislation; and | |
| ● | "Risk Factors" and other information included in our Annual Report on Form 10-K for the year ended December 31, 2025 and this Quarterly Report on Form 10-Q. |
Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary materially from those described herein. We caution readers not to place undue reliance on forward-looking statements. The Company disclaims any obligation to revise or update any forward-looking statements contained in this Form 10-Q to reflect future events or developments.
Overview
As used herein, the “Company,” “we,” “our,” and “us” refer to MainStreet Bancshares, Inc. and its subsidiaries, and the “Bank” refers to MainStreet Bank.
MainStreet Bancshares, Inc.
MainStreet Bancshares, Inc. is a financial holding company that owns 100% of MainStreet Bank and MainStreet Community Capital, LLC.
The Company and its subsidiaries are incorporated in and chartered by the Commonwealth of Virginia. The Company’s executive offices are located at 10089 Fairfax Boulevard, Fairfax, Virginia. Our telephone number is (703) 481-4567, and our internet address is www.mstreetbank.com. The information contained on our website shall not be considered part of this Quarterly Report on Form 10-Q, and the reference to our website does not constitute incorporation by reference of the information contained on the website.
MainStreet Bank
MainStreet Bank is a community commercial bank incorporated in and chartered by the Commonwealth of Virginia. The Bank is a member of the Federal Reserve Bank of Richmond, and its deposits are insured by the FDIC. The Bank opened for business on May 26, 2004, and is headquartered in Fairfax, Virginia. We currently operate seven Bank branches; located in Herndon, Fairfax, McLean, Clarendon, Leesburg, and Middleburg in Virginia, and one in Washington D.C. The Bank has five subsidiaries, which are limited liability companies, that it uses to hold real estate acquired through foreclosure.
We emphasize providing responsive and personalized services to our clients. Due to the consolidation of financial institutions in our primary market area, we believe there is a significant opportunity for a local bank to provide a full range of financial services. By offering highly professional, personalized banking products and service delivery methods and employing advanced banking technologies, we seek to distinguish ourselves from larger, regional banks operating in our market area and believe we are able to compete effectively with other community banks.
We believe we have a solid franchise that meets the financial needs of our clients and communities by providing an array of personalized products and services delivered by seasoned banking professionals with decisions made at the local level. We believe a significant customer base in our market prefers to do business with a local institution that has a local management team, a local Board of Directors and local founders and that this customer base may not be satisfied with the responsiveness of larger regional banks. By providing quality services, coupled with the opportunities provided by the economies in our market area, we have generated and expect to continue to generate organic growth.
We service Northern Virginia as well as the greater Washington, D.C. metropolitan area. Our goal is to deliver a customized and targeted mix of products and services that meets or exceeds customer expectations. To accomplish this goal, we have deployed a premium operating system that gives customers access to up-to-date banking technology. These systems and our highly skilled staff have allowed us to compete with larger financial institutions. The combination of sophisticated technology and personal service sets us apart from our competition. We strive to be the leading community bank in our market.
The Company's business is focused on core banking where we offer a full range of banking services to individuals, small to medium-sized businesses, and professionals through both traditional and electronic delivery.
We were the first community bank in the Washington, D.C. metropolitan area to offer a full online business banking solution, including remote check scanners on a business customer’s desktop. We offer mobile banking apps for iPhones, iPads and Android devices that provide for remote deposit of checks. In addition, we were the first bank headquartered in the Commonwealth of Virginia to offer CDARS, the Certificate of Deposit Account Registry Service. We offer our customers a suite of reciprocal deposit options through placement services that offer additional FDIC insurance on deposits. We believe that enhanced electronic delivery systems and technology increase profitability through greater productivity and cost control and allow us to offer new and better products and services.
Our products and services include: business and consumer checking, premium interest-bearing checking, business account analysis, savings, certificates of deposit and other depository services, as well as a broad array of commercial, real estate and consumer loans. Internet account access is available for all personal and business accounts, internet bill payment services are available on most accounts, and a robust online cash management system is available for business customers.
MainStreet Community Capital, LLC
In September 2021, the Company created a community development entity (“CDE”) subsidiary, MainStreet Community Capital, LLC, a Virginia limited liability company, to apply for New Market Tax Credit (“NMTC”) allocations from the U.S. Department of Treasury’s Community Development Financial Institutions Fund. To promote development in economically distressed areas, the NMTC program was established under the Community Renewal Tax Relief Act of 2000 to provide tax incentives for capital investment in disadvantaged market areas that have not experienced economic expansion. The program establishes a tax credit for investment in a CDE and ongoing compliance with the program is accomplished through a governing board and an advisory board which maintains accountability to residents and businesses in the aforementioned disadvantaged areas. This CDE will be an intermediary vehicle for the provision of loans and investments in Low-Income Communities (“LICs”). In January 2022, the Community Development Financial Institutions Fund (“CDFI”) of the United States Department of the Treasury certified MainStreet Community Capital, LLC as a registered CDE. The One Big Beautiful Bill signed into law on July 4, 2025, permanently extended the new market tax credit program.
Critical Accounting Policies
The accounting and financial reporting policies of the Company conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry. Accordingly, the financial statements require certain estimates, judgments, and assumptions, which are believed to be reasonable, based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the periods presented. Critical accounting policies comprise those that management believes are the most critical to aid in fully understanding and evaluating our reported financial results. These policies require numerous estimates or economic assumptions that may prove inaccurate or may be subject to variations which may significantly affect our reported results and financial condition for the current period or in future periods.
Our critical accounting policies involving significant judgments and assumptions used in the preparation of the consolidated financial statements as of September 30, 2026, have remained unchanged since our Annual Report on Form 10-K for the year ended December 31, 2025 was filed.
Comparison of Statements of Income for the Three Months Ended September 30, 2026 and 2025
General
Total interest income increased $0.7 million for the three months ended September 30, 2026 from the same period in 2025. The increase was primarily the result of an increase in interest and fees on loans of $1.2 million. Total interest expense decreased $0.9 million for the three months ended September 30, 2026 from the same period in 2025 due to decreases in deposit interest expense described below. Net interest income increased $1.7 million for the three months ended September 30, 2026 from the same period in 2025. The provision for credit losses was $1.9 million for the three months ended September 30, 2026 compared to provision for credit losses of $0.1 million for the three months ended September 30, 2025. Non-interest income decreased $0.5 million for the three months ended September 30, 2026 from the same period in 2025. Non-interest expense increased by $0.2 million for the three months ended September 30, 2026 compared to the same period in 2025. Net income decreased $0.9 million to $3.6 million for the three months ended September 30, 2026 from $4.5 million for the three months ended September 30, 2025.
Interest Income
Total interest income increased $0.7 million or 2.3%, to $33.3 million for the three months ended September 30, 2026 from $32.5 million for the three months ended September 30, 2025, on a tax equivalent basis. The increase was primarily the result of an increase in interest and fees on loans of $1.2 million. Total average interest-earning assets increased $112.6 million, to $2.11 billion for the three months ended September 30, 2026 from $1.99 billion for the same period in 2025 primarily because of an increase of $145.6 million in the average balance of loans offset by a decrease of $29.8 million in the average balance of federal funds sold and interest bearing deposits at other financial institutions and a $3.3 million decrease in the average balance of investment securities. The average yield on our interest-earning assets decreased 20 basis points to 6.27% for the three months ended September 30, 2026 as compared to 6.47% for the three months ended September 30, 2025. For the three months ended September 30, 2026, the Company reversed $0.2 million in accrued interest income in relation to loans placed on non-accrual, as compared to $0.6 million for the three months ended September 30, 2025.
Interest and fees on loans increased $1.2 million, to $31.8 million for the three months ended September 30, 2026 from $30.7 million for the same period in 2025. There was a 27 basis point decrease in the average loans yields, which was 6.48% for the three months ended September 30, 2026 compared to 6.75% for the three months ended September 30, 2025. The Company is targeting loan growth in the Commercial Real Estate Owner Occupied and Commercial & Industrial segments, which are more competitive than other loan segments and can come with tighter spreads. The average balance of loans increased $145.6 million for the three months ended September 30, 2026 as compared to the three months ended September 30, 2025.
Interest income on federal funds sold and interest-earning deposits decreased by $0.4 million to $0.6 million for the three months ended September 30, 2026, from $1.1 million for the three months ended September 30, 2025. The average balance of interest-earning deposits and federal funds sold decreased $29.8 million to $71.2 million for the three months ended September 30, 2026 from $100.9 million for the same period in 2025. Portions of the loan growth during the three months ended September 30, 2026 were funded with available cash. The average yield on federal funds sold and interest-earning deposits decreased to 3.50% for the three months ended September 30, 2026 from 4.21% for the same period in 2025.
Interest on investment securities was $0.8 million for the three months ended September 30, 2026 and $0.8 million for the three months ended September 30, 2025 on a fully tax-equivalent basis. Interest on investments in U.S. Government Agencies and U.S. Municipals was $0.4 million for the three months ended September 30, 2026 and September 30, 2025. Interest on mortgage-backed securities was $0.1 million for the three months ended September 30, 2026 and September 30, 2025. Subordinated debt interest income was $0.2 million for the three months ended September 30, 2026, and $0.1 million for the three months ended September 30, 2025. The average yield on taxable securities increased 29 basis points, to 3.57% and the average yield on tax-exempt securities increased 22 basis points, to 4.07% on a tax equivalent basis for the three months ended September 30, 2026, compared to the same period in 2025. Due to the increase in average yield, interest on investment securities increased slightly despite the average balance of investment securities decreasing by $3.3 million, to $84.7 million for the three months ended September 30, 2026, from $87.9 million for the three months ended September 30, 2025.
Interest Expense
Total interest expense decreased $0.9 million to $14.4 million for the three months ended September 30, 2026 from $15.4 million for the three months ended September 30, 2025, primarily due to a $1.1 million decrease in interest expense on interest bearing deposits and offset by a $0.2 million increase in total interest expense paid on borrowings.
Interest expense on deposits decreased $1.1 million to $13.4 million for the three months ended September 30, 2026 from $14.5 million for the three months ended September 30, 2025 primarily as a result of a decrease in yields on cost of funds. The average balance of interest-bearing deposits increased by $99.3 million to $1.58 billion during the three months ended September 30, 2026 as compared to $1.48 billion for the three months ended September 30, 2025. The increase in the average balance of interest-bearing deposits was primarily a result of an $83.7 million increase in the average balance of money market deposit accounts and a $25.8 million increase in the average balance of savings and NOW deposits, offset by an $8.0 million decrease in the average balance of interest bearing demand deposits and a $2.2 million decrease in the average balance of time deposits, during the three months ended September 30, 2026 as compared to the three months ended September 30, 2025. The average cost of interest-bearing deposits was 3.37% for the three months ended September 30, 2026, compared to 3.91% for the three months ended September 30, 2025. The average rate paid on money market deposits decreased 61 basis points to 3.34% for the three months ended September 30, 2026 from 3.95% for the three months ended September 30, 2025. The average rate paid on interest-bearing demand deposits decreased 63 basis points to 2.91% for the three months ended September 30, 2026 from 3.54% for the three months ended September 30, 2025. The average rate paid on savings and NOW deposits decreased 31 basis points to 1.24% for the three months ended September 30, 2026 from 1.55% for the three months ended September 30, 2025. The average cost of time deposits decreased by 44 basis points to 3.86% for the three months ended September 30, 2026 as compared to 4.30% for the three months ended September 30, 2025. The average balance of non-interest bearing demand deposits and other liabilities increased $15.5 million to $371.1 million for the three months ended September 30, 2026, compared to $355.6 million for the three months ended September 30, 2025.
Interest expense on borrowings increased $0.2 million to $1.0 million for the three months ended September 30, 2026 compared to $0.8 million for the three months ended September 30, 2025, primarily due to $26.5 million of subordinated notes maturing in 2031 converting to a floating rate as of April 15, 2026. The floating interest rate is based on the three-month SOFR rate plus 302 basis points (3.02%) (computed on the basis of a 360-day year of twelve 30-day months) from and including April 15, 2026 to the maturity date or any early redemption date.
Net Interest Income
Net interest income increased approximately $1.7 million, or 9.8%, to $18.9 million for the three months ended September 30, 2026 from $17.2 million for the three months ended September 30, 2025, on a tax equivalent basis. Our net interest-earning assets increased $7.6 million to $452.6 million for the three months ended September 30, 2026 from $445.1 million for the three months ended September 30, 2025. The interest rate spread increased by 28 basis points to 2.81% for the three months ended September 30, 2026 from 2.53% for the three months ended September 30, 2025, on a tax equivalent basis. The net interest margin increased by 13 basis points from 3.42% for the three months ended September 30, 2025 to 3.55% for the three months ended September 30, 2026 on a tax equivalent basis. Refer to “Use of Certain Non-GAAP Financial Measures,” below, for a reconciliation of adjusted net interest margin.
Average Balances, Net Interest Income, Yields Earned and Rates Paid
The following table shows for the periods indicated the total dollar amount of interest from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. All average balances are based on daily balances.
| For the Three Months Ended September 30, |
||||||||||||||||||||||||
| 2026 |
2025 |
|||||||||||||||||||||||
| Average Balance |
Interest Income/ Expense(6) |
Yield/ Cost(5)(6) | Average Balance |
Interest Income/ Expense(6) |
Yield/ Cost(5)(6) | |||||||||||||||||||
| (Dollars in thousands) |
||||||||||||||||||||||||
| Interest-earning assets: |
||||||||||||||||||||||||
| Loans(1) |
$ | 1,950,625 | $ | 31,847 | 6.48 | % | $ | 1,805,016 | $ | 30,688 | 6.75 | % | ||||||||||||
| Investment securities: |
||||||||||||||||||||||||
| Taxable |
48,879 | 440 | 3.57 | % | 52,680 | 435 | 3.28 | % | ||||||||||||||||
| Tax-exempt |
35,777 | 367 | 4.07 | % | 35,260 | 342 | 3.85 | % | ||||||||||||||||
| Interest-bearing deposits at other financial institutions |
1,195 | 11 | 3.65 | % | 1,037 | 11 | 4.21 | % | ||||||||||||||||
| Federal funds sold |
69,978 | 617 | 3.50 | % | 99,896 | 1,060 | 4.21 | % | ||||||||||||||||
| Total interest-earning assets |
$ | 2,106,454 | $ | 33,282 | 6.27 | % | $ | 1,993,889 | $ | 32,536 | 6.47 | % | ||||||||||||
| Non-interest-earning assets |
135,102 | 125,605 | ||||||||||||||||||||||
| Total assets |
$ | 2,241,556 | $ | 2,119,494 | ||||||||||||||||||||
| Interest-bearing liabilities: |
||||||||||||||||||||||||
| Interest-bearing demand deposits |
$ | 112,106 | $ | 823 | 2.91 | % | $ | 120,112 | $ | 1,071 | 3.54 | % | ||||||||||||
| Savings and NOW deposits |
145,304 | 453 | 1.24 | % | 119,467 | 467 | 1.55 | % | ||||||||||||||||
| Money market deposits |
547,680 | 4,611 | 3.34 | % | 463,948 | 4,623 | 3.95 | % | ||||||||||||||||
| Time deposits |
769,958 | 7,498 | 3.86 | % | 772,176 | 8,369 | 4.30 | % | ||||||||||||||||
| Total interest-bearing deposits |
$ | 1,575,048 | $ | 13,385 | 3.37 | % | $ | 1,475,703 | $ | 14,530 | 3.91 | % | ||||||||||||
| Federal funds purchased |
8,641 | 89 | 4.09 | % | 2,338 | 28 | 4.75 | % | ||||||||||||||||
| Subordinated debt, net |
70,137 | 955 | 5.40 | % | 70,793 | 804 | 4.51 | % | ||||||||||||||||
| Total interest-bearing liabilities |
$ | 1,653,826 | $ | 14,429 | 3.46 | % | $ | 1,548,834 | $ | 15,362 | 3.94 | % | ||||||||||||
| Non-interest-bearing liabilities: |
||||||||||||||||||||||||
| Demand deposits and other liabilities |
371,115 | 355,621 | ||||||||||||||||||||||
| Total liabilities |
$ | 2,024,941 | $ | 1,904,455 | ||||||||||||||||||||
| Stockholders’ equity |
216,615 | 215,039 | ||||||||||||||||||||||
| Total liabilities and stockholders’ equity |
$ | 2,241,556 | $ | 2,119,494 | ||||||||||||||||||||
| Net interest income |
$ | 18,853 | $ | 17,174 | ||||||||||||||||||||
| Interest rate spread(2) |
2.81 | % | 2.53 | % | ||||||||||||||||||||
| Net interest-earning assets(3) |
$ | 452,628 | $ | 445,055 | ||||||||||||||||||||
| Net interest margin(4) |
3.55 | % | 3.42 | % | ||||||||||||||||||||
| Average interest-earning assets to average interest-bearing liabilities |
127.4 | % | 128.7 | % | ||||||||||||||||||||
| (1) |
Includes loans classified as non-accrual. |
| (2) |
Interest rate spread represents the difference between the average yield on average interest–earning assets and the average cost of average interest-bearing liabilities. |
| (3) |
Net interest earning assets represent total average interest–earning assets less average interest–bearing liabilities. |
| (4) |
Net interest margin represents net interest income divided by total average interest-earning assets. |
| (5) | Annualized. |
| (6) |
Income and yields for all periods presented are reported on a fully tax-equivalent basis using the federal statutory tax rate of 21%. Refer to “Use of Certain Non-GAAP Financial Measures.” |
Rate/ Volume Analysis
The following table presents the effects of changing rates and volumes on net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior average volume). The volume column shows the effects attributable to changes in volume (changes in average volume multiplied by prior rate). Changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately. The Total Increase (Decrease) column represents the sum of the prior columns.
| For the Three Months Ended |
||||||||||||
| September 30, 2026 and 2025 |
||||||||||||
| Increase (Decrease) Due to |
Total Increase |
|||||||||||
| Volume |
Rate |
(Decrease) |
||||||||||
| (Dollars in thousands) |
||||||||||||
| Interest-earning assets: |
||||||||||||
| Loans |
$ | 7,291 | $ | (6,132 | ) | $ | 1,159 | |||||
| Investment securities |
(154 | ) | 184 | 30 | ||||||||
| Interest-bearing deposits at other financial institutions |
6 | (6 | ) | — | ||||||||
| Federal funds sold |
(283 | ) | (160 | ) | (443 | ) | ||||||
| Total interest-earning assets |
6,860 | (6,114 | ) | 746 | ||||||||
| Interest-bearing liabilities: |
||||||||||||
| Interest-bearing demand deposits |
(67 | ) | (181 | ) | (248 | ) | ||||||
| Savings and NOW deposits |
4,995 | (5,007 | ) | (12 | ) | |||||||
| Money market deposits |
377 | (391 | ) | (14 | ) | |||||||
| Time deposits |
(24 | ) | (847 | ) | (871 | ) | ||||||
| Total interest-bearing deposits |
5,281 | (6,426 | ) | (1,145 | ) | |||||||
| Federal funds purchased |
87 | (26 | ) | 61 | ||||||||
| Subordinated debt, net |
(50 | ) | 201 | 151 | ||||||||
| Total interest-bearing liabilities |
5,318 | (6,251 | ) | (933 | ) | |||||||
| Change in net interest income |
$ | 1,542 | $ | 137 | $ | 1,679 | ||||||
Provision for Credit Losses
Management believes that the allowance for credit losses recorded for the period ended September 30, 2026 reflects a balance sufficient to provide for each allowance segment, using objective data and information available to us at this time in evaluating our standard analysis of local/national economic data, changes in underwriting quality, portfolio concentrations, experience of lending team, credit quality and supportable forecasts. We will continuously review the credit portfolio to determine the depth and breadth of potential credit losses. As we obtain additional information and to more accurately assess the full nature and extent of any elevated risk to the credit portfolio that may arise, additional provision expenses may be required.
The provision for credit losses, which is an operating expense, is maintained to ensure that the allowance for credit losses is maintained at levels we consider necessary and appropriate to absorb expected credit losses as of the balance sheet date. In determining the level of the allowance for credit losses on loans and off-balance sheet credit exposure, we consider past and current loss experience, evaluations of real estate collateral, current and future economic conditions, volume and type of lending, adverse situations that may affect a borrower’s ability to repay a loan and the levels of non-performing loans. The amount of the allowance is based on estimates, and actual losses may vary from such estimates as more information becomes available over time or economic conditions change. This evaluation is inherently subjective, as it requires estimates and assumptions that are susceptible to significant revision as circumstances change or as more information becomes available. The allowance for credit losses is assessed monthly and provisions are made for credit losses as required in order to maintain the overall allowance.
The provision for credit losses on loans was $2.3 million for the three months ended September 30, 2026, compared to a recovery of credit losses on loans of $0.1 million for the three months ended September 30, 2025. The provision for credit losses on loans increased largely due to the impact of a $1.4 million charge off in the commercial real estate portfolio tied to the sale of real property held as collateral and the resulting impact on the forecasted loss rates applied to pooled loans. During the three months ended September 30, 2026, there were $1.8 million charge-offs incurred and recoveries of $0.1 million were received. During the three months ended September 30, 2025, there were $0.2 million in charge-offs incurred and recoveries of $0.1 million were received. Loan originations, which totaled approximately $82.3 million for the three months ended September 30, 2025 decreased $36.3 million to $46.0 million for the three months ended September 30, 2026.
The recovery of credit losses on off-balance sheet credit exposure was $0.4 million for the three months ended September 30, 2026 compared to a provision for credit losses of $0.2 million for the three months ended September 30, 2025. The recovery of credit losses on off-balance sheet credit exposure for the three months ended September 30, 2026 was primarily related to decreases in unfunded commitment levels and an increase in utilization rates.
Non-Interest Income
Non-interest income decreased $0.5 million, or 40.2%, to $0.7 million for the three months ended September 30, 2026 from $1.1 million for the three months ended September 30, 2025. The decrease in non-interest income was primarily due to the losses on liquidation of OREO properties of $0.3 million that took place during the three months ended September 30, 2026.
Non-Interest Expense
Non-interest expense increased $0.2 million, or 1.7%, to $12.9 million for the three months ended September 30, 2026, from $12.7 million for the three months ended September 30, 2025. Other operating expenses increased $0.4 million to $1.6 million for the three months ended September 30, 2026, from $1.2 million primarily due to workout expenses as we work through a small number of problem credits. Salaries and employee benefits increased $0.3 million to $7.6 million for the three months ended September 30, 2026, from $7.4 million for the three months ended September 30, 2025. Other real estate owned expenses were $0.2 million for the three months ended September 30, 2026 compared to none for the three months ended September 30, 2025. Outside services, which includes professional fees for attorneys, accountants, consultants, and cloud services, decreased $0.2 million to $0.4 million for the three months ended September 30, 2026, from $0.6 million for the three months ended September 30, 2025. Advertising and marketing expense decreased $0.2 million to $0.4 million for the three months ended September 30, 2026, from $0.6 million for the three months ended September 30, 2025.
Income Tax Expense
Income tax expense increased $0.1 million or 15.8%, to $1.0 million for the three months ended September 30, 2026 from $0.9 million for the three months ended September 30, 2025. The increase in federal income tax expense for the three months ended September 30, 2026 compared to the same period a year ago was driven by increased estimated tax rates. The Company accrues taxes based on an estimated tax rate basis using inputs and assumptions about pre-tax income. As the inputs and assumptions change, the estimated tax accruals will change throughout the year. The Company also invests in projects that have tax credit benefits in order to help reduce its overall tax liability, timing of these tax credits are layered into our overall assessment. At September 30, 2026, these tax credits exceed the total tax liability and therefore, are not fully utilized, which causes the effective income tax expense rate to increase. For the three months ended September 30, 2026, the Company had an effective income tax expense rate of 22.37%, compared to 16.55% for the three months ended September 30, 2025. As earnings accelerate and the Company is able to fully utilize these tax credits, we anticipate our effective rate to decrease. The Company has included assessments in income tax expense for potential state tax liabilities which totaled $0.1 million for the three months ended September 30, 2026 and $0.1 million for the three months ended September 30, 2025.
Comparison of Statements of Income for the Nine Months Ended September 30, 2026 and 2025
General
Total interest income decreased $3.2 million for the nine months ended September 30, 2026 from the same period in 2025. The decrease was primarily the result of a decrease in interest and fees on loans of $2.1 million, which was primarily due to interest rate changes and was also impacted by the collection of $1.3 million of accrued interest on a fully repaid non-accrual loan during the nine months ended September 30, 2025. Total interest expense decreased $5.3 million for the nine months ended September 30, 2026 from the same period in 2025 due to decreases in deposit interest expense described below. Net interest income increased $2.1 million for the nine months ended September 30, 2026 from the same period in 2025. The provision for credit losses was $2.4 million for the nine months ended September 30, 2026 compared to a recovery of credit losses of $0.4 million for the nine months ended September 30, 2025. Non-interest income decreased $1.2 million for the nine months ended September 30, 2026 from the same period in 2025. Non-interest expense decreased by $3.7 million for the nine months ended September 30, 2026 compared to the same period in 2025, primarily due to decreases in salaries and employee benefits and outside services. Net income increased $0.8 million to $12.4 million for the nine months ended September 30, 2026 from $11.6 million for the nine months ended September 30, 2025.
Interest Income
Total interest income decreased $3.2 million or 3.2%, to $96.7 million for the nine months ended September 30, 2026 from $99.9 million for the nine months ended September 30, 2025, on a tax equivalent basis. The decrease was primarily the result of a decrease in interest and fees on loans of $2.1 million, which was primarily due to interest rate changes and was impacted by the collection of $1.3 million of accrued interest on a fully repaid non-accrual loan during the nine months ended September 30, 2025. Total average interest-earning assets increased $63.8 million, to $2.08 billion for the nine months ended September 30, 2026 from $2.02 billion for the same period in 2025 primarily because of an increase of $90.8 million in the average balance of loans offset by a decrease of $24.1 million in the average balance of federal funds sold and interest bearing deposits at other financial institutions and a $2.9 million decrease in the average balance of investment securities. The average yield on our interest-earning assets decreased 41 basis points to 6.22% for the nine months ended September 30, 2026 as compared to 6.63% for the nine months ended September 30, 2025, which was primarily due to interest rate changes and was also impacted by the collection of $1.3 million of accrued interest on a fully repaid non-accrual loan during the nine months ended September 30, 2025.
Interest and fees on loans decreased $2.1 million, to $92.1 million for the nine months ended September 30, 2026 from $94.2 million for the same period in 2025. There was a 48 basis point decrease in the average loans yields, which was 6.44% for the nine months ended September 30, 2026 compared to 6.92% for the nine months ended September 30, 2025. These decreases were primarily due to interest rate changes and were impacted by the collection of $1.3 million of accrued interest on a fully repaid non-accrual loan during the nine months ended September 30, 2025. Additionally, the Company is targeting loan growth in the Commercial Real Estate Owner Occupied and Commercial & Industrial segments, which are more competitive than other loan segments and can come with tighter spreads. The average balance of loans increased $90.8 million for the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025.
Interest income on federal funds sold and interest-earning deposits decreased by $1.1 million to $2.3 million for the nine months ended September 30, 2026, from $3.4 million for the nine months ended September 30, 2025. The average balance of interest-earning deposits and federal funds sold decreased $24.1 million to $82.8 million for the nine months ended September 30, 2026 from $106.9 million for the same period in 2025. The average yield on federal funds sold and interest-earning deposits decreased to 3.65% for the nine months ended September 30, 2026 from 4.23% for the same period in 2025 primarily due to federal funds effective rate changes during the three months ended December 31, 2025.
Interest on investment securities was $2.4 million for the nine months ended September 30, 2026 and $2.3 million for the nine months ended September 30, 2025 on a fully tax-equivalent basis. Interest on investments in U.S. Government Agencies and U.S. Municipals was $1.1 million for the nine months ended September 30, 2026 and September 30, 2025. Interest on mortgage-backed securities was $0.2 million and $0.3 million for the nine months ended September 30, 2026 and September 30, 2025. Subordinated debt interest income was $0.5 million for the nine months ended September 30, 2026, and $0.4 million for the nine months ended September 30, 2025, respectively. The average yield on taxable securities increased 23 basis points, to 3.48% and the average yield on tax-exempt securities increased 23 basis points, to 4.07% on a tax equivalent basis for the nine months ended September 30, 2026, compared to the same period in 2025. Due to the increase in average yield, interest on investment securities increased despite the average balance of investment securities decreasing by $2.9 million, to $85.3 million for the nine months ended September 30, 2026, from $88.2 million for the nine months ended September 30, 2025.
Interest Expense
Total interest expense decreased $5.3 million to $42.0 million for the nine months ended September 30, 2026 from $47.3 million for the nine months ended September 30, 2025, primarily due to a $5.6 million decrease in interest expense on interest bearing deposits offset by a $0.3 million increase in total interest expense paid on borrowings.
Interest expense on deposits decreased $5.6 million to $39.2 million for the nine months ended September 30, 2026 from $44.8 million for the nine months ended September 30, 2025 primarily as a result of a decrease in yields on cost of funds. The average balance of interest-bearing deposits increased by $48.4 million to $1.54 billion during the nine months ended September 30, 2026 as compared to $1.50 billion for the nine months ended September 30, 2025. The increase in the average balance of interest-bearing deposits was primarily a result of a $38.2 million increase in the average balance of savings and NOW deposits, a $32.9 million increase in the average balance of money market deposit accounts, and a $1.3 million increase in interest-bearing demand deposits, offset by a $23.9 million decrease in the average balance of time deposits, during the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025. The average cost of interest-bearing deposits was 3.40% for the nine months ended September 30, 2026, compared to 4.01% for the nine months ended September 30, 2025. The average rate paid on money market deposits was 3.33% for the nine months ended September 30, 2026 compared to 3.96% for the nine months ended September 30, 2025. The average rate paid on interest-bearing demand deposits was 2.99% for the nine months ended September 30, 2026 compared to 3.66% for the nine months ended September 30, 2025. The average rate paid on savings and NOW deposits was 1.20% for the nine months ended September 30, 2026 compared to 1.41% for the nine months ended September 30, 2025. The average cost of time deposits was 3.92% for the nine months ended September 30, 2026 compared to 4.42% for the nine months ended September 30, 2025. The average balance of non-interest bearing demand deposits and other liabilities increased $18.5 million to $373.2 million for the nine months ended September 30, 2026, compared to $354.6 million for the nine months ended September 30, 2025.
Net Interest Income
Net interest income increased approximately $2.1 million, or 4.0%, to $54.7 million for the nine months ended September 30, 2026 from $52.6 million for the nine months ended September 30, 2025, on a tax equivalent basis. Our net interest-earning assets increased $12.9 million to $459.2 million for the nine months ended September 30, 2026 from $446.3 million for the nine months ended September 30, 2025. The interest rate spread increased by 15 basis points to 2.75% for the nine months ended September 30, 2026 from 2.60% for the nine months ended September 30, 2025, on a tax equivalent basis. The net interest margin increased by 3 basis points from 3.49% for the nine months ended September 30, 2025 to 3.52% for the nine months ended September 30, 2026 on a tax equivalent basis. Refer to “Use of Certain Non-GAAP Financial Measures,” below, for a reconciliation of adjusted net interest margin.
Average Balances, Net Interest Income, Yields Earned and Rates Paid
The following table shows for the periods indicated the total dollar amount of interest from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. All average balances are based on daily balances.
| For the Nine Months Ended September 30, |
||||||||||||||||||||||||
| 2026 |
2025 |
|||||||||||||||||||||||
| Average Balance |
Interest Income/ Expense (6) |
Yield/ Cost(5)(6) |
Average Balance |
Interest Income/ Expense(6) |
Yield/ Cost(5)(6) |
|||||||||||||||||||
| (Dollars in thousands) |
||||||||||||||||||||||||
| Interest-earning assets: |
||||||||||||||||||||||||
| Loans(1) |
$ | 1,911,558 | $ | 92,103 | 6.44 | % | $ | 1,820,771 | $ | 94,242 | 6.92 | % | ||||||||||||
| Investment securities: |
||||||||||||||||||||||||
| Taxable |
49,277 | 1,281 | 3.48 | % | 52,926 | 1,285 | 3.25 | % | ||||||||||||||||
| Tax-exempt |
36,020 | 1,096 | 4.07 | % | 35,298 | 1,013 | 3.84 | % | ||||||||||||||||
| Interest-bearing deposits at other financial institutions |
1,151 | 31 | 3.60 | % | 1,274 | 44 | 4.62 | % | ||||||||||||||||
| Federal funds sold |
81,694 | 2,232 | 3.65 | % | 105,674 | 3,342 | 4.23 | % | ||||||||||||||||
| Total interest-earning assets |
$ | 2,079,700 | $ | 96,743 | 6.22 | % | $ | 2,015,943 | $ | 99,926 | 6.63 | % | ||||||||||||
| Non-interest-earning assets |
130,059 | 119,819 | ||||||||||||||||||||||
| Total assets |
$ | 2,209,759 | $ | 2,135,762 | ||||||||||||||||||||
| Interest-bearing liabilities: |
||||||||||||||||||||||||
| Interest-bearing demand deposits |
$ | 115,246 | $ | 2,575 | 2.99 | % | $ | 113,969 | $ | 3,123 | 3.66 | % | ||||||||||||
| Savings and NOW deposits |
140,508 | 1,263 | 1.20 | % | 102,349 | 1,079 | 1.41 | % | ||||||||||||||||
| Money market deposits |
526,294 | 13,089 | 3.33 | % | 493,366 | 14,606 | 3.96 | % | ||||||||||||||||
| Time deposits |
761,752 | 22,306 | 3.92 | % | 785,685 | 25,994 | 4.42 | % | ||||||||||||||||
| Total interest-bearing deposits |
$ | 1,543,800 | $ | 39,233 | 3.40 | % | $ | 1,495,369 | $ | 44,802 | 4.01 | % | ||||||||||||
| Federal funds purchased |
6,612 | 198 | 4.00 | % | 2,638 | 93 | 4.71 | % | ||||||||||||||||
| Subordinated debt |
70,073 | 2,580 | 4.92 | % | 71,670 | 2,415 | 4.51 | % | ||||||||||||||||
| Total interest-bearing liabilities |
$ | 1,620,485 | $ | 42,011 | 3.47 | % | $ | 1,569,677 | $ | 47,310 | 4.03 | % | ||||||||||||
| Non-interest-bearing liabilities: |
||||||||||||||||||||||||
| Demand deposits and other liabilities |
373,183 | 354,635 | ||||||||||||||||||||||
| Total liabilities |
$ | 1,993,668 | $ | 1,924,312 | ||||||||||||||||||||
| Stockholders’ Equity |
216,091 | 211,450 | ||||||||||||||||||||||
| Total liabilities and stockholders’ equity |
$ | 2,209,759 | $ | 2,135,762 | ||||||||||||||||||||
| Net interest income |
$ | 54,732 | $ | 52,616 | ||||||||||||||||||||
| Interest rate spread(2) |
2.75 | % | 2.60 | % | ||||||||||||||||||||
| Net interest-earning assets(3) |
$ | 459,215 | $ | 446,266 | ||||||||||||||||||||
| Net interest margin(4) |
3.52 | % | 3.49 | % | ||||||||||||||||||||
| Average interest-earning assets to average interest-bearing liabilities |
128.34 | % | 128.43 | % | ||||||||||||||||||||
| (1) |
Includes loans classified as non-accrual. |
| (2) |
Interest rate spread represents the difference between the average yield on average interest–earning assets and the average cost of average interest-bearing liabilities. |
| (3) |
Net interest earning assets represent total average interest–earning assets less average interest–bearing liabilities. |
| (4) |
Net interest margin represents net interest income divided by total average interest-earning assets. |
| (5) | Annualized. |
| (6) |
Income and yields for all periods presented are reported on a fully tax-equivalent basis using the federal statutory tax rate of 21%. Refer to “Use of Certain Non-GAAP Financial Measures.” |
Rate/ Volume Analysis
The following table presents the effects of changing rates and volumes on net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior average volume). The volume column shows the effects attributable to changes in volume (changes in average volume multiplied by prior rate). Changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately. The Total Increase (Decrease) column represents the sum of the prior columns.
| For the Nine Months Ended |
||||||||||||
| September 30, 2026 and 2025 |
||||||||||||
| Increase (Decrease) Due to |
Total Increase |
|||||||||||
| Volume |
Rate |
(Decrease) |
||||||||||
| (In thousands) |
||||||||||||
| Interest-earning assets: |
||||||||||||
| Loans |
$ | 6,415 | $ | (8,554 | ) | $ | (2,139 | ) | ||||
| Investment securities |
(113 | ) | 193 | 80 | ||||||||
| Interest-bearing deposits at other financial institutions |
(4 | ) | (9 | ) | (13 | ) | ||||||
| Federal funds sold |
(692 | ) | (418 | ) | (1,110 | ) | ||||||
| Total interest-earning assets |
5,606 | (8,788 | ) | (3,182 | ) | |||||||
| Interest-bearing liabilities: |
||||||||||||
| Interest-bearing demand deposits |
57 | (605 | ) | (548 | ) | |||||||
| Savings and NOW deposits |
439 | (255 | ) | 184 | ||||||||
| Money market deposit accounts |
1,389 | (2,906 | ) | (1,517 | ) | |||||||
| Time deposits |
(783 | ) | (2,905 | ) | (3,688 | ) | ||||||
| Total interest-bearing deposits |
1,102 | (6,671 | ) | (5,569 | ) | |||||||
| Federal funds purchased |
130 | (25 | ) | 105 | ||||||||
| Subordinated debt |
(83 | ) | 248 | 165 | ||||||||
| Total interest-bearing liabilities |
1,149 | (6,448 | ) | (5,299 | ) | |||||||
| Change in net interest income |
$ | 4,457 | $ | (2,340 | ) | $ | 2,117 | |||||
Provision for Credit Losses
Management believes that the allowance for credit losses recorded for the period ended September 30, 2026 reflects a balance sufficient to provide for each allowance segment, using objective data and information available to us at this time in evaluating our standard analysis of local/national economic data, changes in underwriting quality, portfolio concentrations, experience of lending team, credit quality and supportable forecasts. We will continuously review the credit portfolio to determine the depth and breadth of potential credit losses. As we obtain additional information and to more accurately assess the full nature and extent of any elevated risk to the credit portfolio that may arise, additional provision expenses may be required.
The provision for credit losses, which is an operating expense, is maintained to ensure that the allowance for credit losses is maintained at levels we consider necessary and appropriate to absorb expected credit losses as of the balance sheet date. In determining the level of the allowance for credit losses on loans and off-balance sheet credit exposure, we consider past and current loss experience, evaluations of real estate collateral, current and future economic conditions, volume and type of lending, adverse situations that may affect a borrower’s ability to repay a loan and the levels of non-performing loans. The amount of the allowance is based on estimates, and actual losses may vary from such estimates as more information becomes available over time or economic conditions change. This evaluation is inherently subjective, as it requires estimates and assumptions that are susceptible to significant revision as circumstances change or as more information becomes available. The allowance for credit losses is assessed monthly and provisions are made for credit losses as required in order to maintain the overall allowance.
The provision for credit losses on loans was $2.6 million for the nine months ended September 30, 2026, compared to a recovery of credit losses on loans of $0.6 million for the nine months ended September 30, 2025. The provision for credit losses on loans increased largely due to the impact of a $1.4 million charge off in the commercial real estate portfolio tied to the sale of real property held as collateral and the resulting impact on the forecasted loss rates applied to pooled loans, as well as due to loan growth during the nine months ended September 30, 2026. During the nine months ended September 30, 2026, there were $2.1 million charge-offs incurred and recoveries of $0.2 million were received. During the nine months ended September 30, 2025, there were $0.9 million charge-offs incurred and recoveries of $0.8 million were received. Loan originations, which totaled approximately $169.8 million for the nine months ended September 30, 2025 increased $37.4 million to $207.2 million for the nine months ended September 30, 2026.
The recovery of credit losses on off-balance sheet credit exposure was $0.2 million for the nine months ended September 30, 2026 compared to a provision for credit losses of $0.2 million for the nine months ended September 30, 2025. The recovery of credit losses on off-balance sheet credit exposure for the nine months ended September 30, 2026 was primarily related to decreases in unfunded commitment levels and an increase in in utilization rates.
Non-Interest Income
Non-interest income decreased $1.2 million, or 36.9%, to $2.0 million for the nine months ended September 30, 2026 from $3.1 million for the nine months ended September 30, 2025. The decrease in non-interest income was primarily due to $1.0 million in losses on the liquidation of other real estate owned during the nine months ended September 30, 2026. This decrease is offset by an increase of $0.1 million in other non-interest income due to prepayment fees recognized during the nine months ended September 30, 2026. Additionally, the gain on retirement of subordinated debt of $273,000 and gain on equity securities of $103,000 that took place during the nine months ended September 30, 2025 were not recurring in the nine months ended September 30, 2026. The Company continues to focus on increasing non-interest income as it continues to add services that strategically benefit our customers.
Non-Interest Expense
Non-interest expense decreased $3.7 million, or 8.8%, to $38.1 million for the nine months ended September 30, 2026, from $41.7 million for the nine months ended September 30, 2025 primarily because of continued expense management efforts across the Company. Outside services, which includes professional fees for attorneys, accountants, consultants, and cloud services, decreased $1.8 million to $1.3 million for the nine months ended September 30, 2026, from $3.1 million for the nine months ended September 30, 2025. Salaries and employee benefits decreased $1.3 million to $22.7 million for the nine months ended September 30, 2026, from $24.0 million for the nine months ended September 30, 2025 due to a decrease in full time employees compared to last year. Furniture and equipment expenses decreased approximately $0.8 million to $2.2 million for the nine months ended September 30, 2026, from $3.0 million for the nine months ended September 30, 2025. Advertising and marketing decreased approximately $0.5 million to $1.0 million for the nine months ended September 30, 2026, from $1.6 million for the nine months ended September 30, 2025. These decreases were offset by an increase in other real estate owned expenses of $0.4 million for the nine months ended September 30, 2026, compared to none for the nine months ended September 30, 2025. Other operating expenses increased $0.8 million to $4.6 million for the nine months ended September 30, 2026, from $3.8 million for the nine months ended September 30, 2025 primarily due to workout expenses as we work through a small number of problem credits.
Income Tax Expense
Income tax expense increased $1.0 million or 38.3%, to $3.7 million for the nine months ended September 30, 2026 from $2.6 million for the nine months ended September 30, 2025. The increase in federal income tax expense for the nine months ended September 30, 2026 compared to the same period a year ago was driven by increased estimated tax rates and the increase in income before income taxes of $1.8 million, to $16.0 million for the nine months ended September 30, 2026 compared to $14.2 million for the same period in the prior year. The Company accrues taxes based on an estimated tax rate basis using inputs and assumptions about pre-tax income. As the inputs and assumptions change, the estimated tax accruals will change throughout the year. The Company also invests in projects that have tax credit benefits in order to help reduce its overall tax liability, timing of these tax credits are layered into our overall assessment. At September 30, 2026, these tax credits exceed the total tax liability and therefore, are not fully utilized, which causes the effective income tax expense rate to increase. For the nine months ended September 30, 2026, the Company had an effective income tax expense rate of 22.80%, compared to 18.60% for the nine months ended September 30, 2025. As earnings accelerate and the Company is able to fully utilize these tax credits, we anticipate our effective rate to decrease. The Company has included assessments in income tax expense for potential state tax liabilities which totaled $0.5 million for the nine months ended September 30, 2026 and $0.4 million for the nine months ended September 30, 2025.
Comparison of Statements of Financial Condition at September 30, 2026 and December 31, 2025
Total Assets
Total assets increased $22.2 million, or 1.0%, to $2.23 billion at September 30, 2026 from $2.21 billion at December 31, 2025. The increase was primarily the result of an increase in net loans of $89.3 million as of September 30, 2026, offset by a decrease in cash and cash equivalents of $64.4 million to fund the loan growth during the period, and a decrease of $5.4 million in investment securities discussed below.
Investment Securities
Investment securities decreased $5.4 million, or 7.5%, from $71.8 million at December 31, 2025 to $66.4 million at September 30, 2026. The decrease was primarily due to calls, maturities, and scheduled paydowns on available-for-sale securities. At September 30, 2026 and December 31, 2025, our held-to-maturity portion of the securities portfolio, at amortized cost, was $13.3 million and $13.8 million. At September 30, 2026, the available-for-sale portion of the securities portfolio, at fair value, was $53.1 million compared to $58.0 million at December 31, 2025.
Net Loans
Net loans increased $89.3 million, or 4.8%, to $1.93 billion at September 30, 2026 from $1.84 billion at December 31, 2025. Residential real estate loans increased $34.2 million to $475.8 million at September 30, 2026 from $441.6 million at December 31, 2025. Commercial real estate loans increased by $59.5 million from $1.01 billion at December 31, 2025 to $1.07 billion at September 30, 2026. Commercial and industrial loans decreased by $13.2 million from $107.0 million at December 31, 2025 to $93.8 million at September 30, 2026. Construction and land development loans increased $9.7 million to $310.4 million at September 30, 2026 from $300.7 million at December 31, 2025. Consumer loans decreased by $0.5 million from $1.1 million at December 31, 2025 to $0.7 million at September 30, 2026.
A significant portion of the loan portfolio consists of commercial, construction, and commercial real estate loans, primarily made in the Washington, D.C. metropolitan area and secured by real estate or other collateral in that market. Although these loans are made to a diversified pool of unrelated borrowers across numerous businesses, adverse developments in the Washington, D.C. metropolitan real estate market could have an adverse impact on this portfolio of loans and the Company’s income and financial position. While our basic market area is the Washington, D.C. metropolitan area, the Bank has made loans outside that market area where the applicant is an existing customer, and the nature and quality of such loans was consistent with the Company's lending policies.
The federal banking Agencies issued guidance in 2006 which addresses institutions with increased concentrations of commercial real estate (CRE) loans. The guidance does not establish specific CRE lending limits; rather, it promotes sound risk management practices and appropriate levels of capital that will enable institutions to continue to pursue CRE lending in a safe and sound manner. In developing this guidance, the Agencies recognized that different types of CRE lending present different levels of risk, and that consideration should be given to the lower risk profiles and historically superior performance of certain types of CRE, such as well-structured multifamily housing finance, when compared to others, such as speculative office space construction. Institutions are encouraged to segment their CRE portfolios to acknowledge these distinctions for risk management purposes. The guidance focuses on those CRE loans for which the cash flow from the real estate is the primary source of repayment rather than loans to a borrower for which real estate collateral is taken as a secondary source of repayment or through an abundance of caution. Thus, for the purposes of the guidance, CRE loans include those loans with risk profiles sensitive to the condition of the general CRE market (for example, market demand, changes in capitalization rates, vacancy rates, or rents). CRE loans are land development and construction loans (including 1- to 4-family residential and commercial construction loans) and other land loans. CRE loans also include loans secured by multifamily property, and nonfarm nonresidential property where the primary source of repayment is derived from rental income associated with the property (that is, loans for which 50 percent or more of the source of repayment comes from third party, nonaffiliated, rental income) or the proceeds of the sale, refinancing, or permanent financing of the property. Excluded from the scope of this Guidance are loans secured by nonfarm nonresidential properties where the primary source of repayment is the cash flow from the ongoing operations and activities conducted by the party, or affiliate of the party, who owns the property.
As part of their ongoing supervisory monitoring processes, the Agencies use certain criteria to identify institutions that are potentially exposed to significant CRE concentration risk. An institution that has experienced rapid growth in CRE lending, has notable exposure to a specific type of CRE, or is approaching or exceeds the following supervisory criteria may be identified for further supervisory analysis of the level and nature of its CRE concentration risk:
| 1. |
Total reported loans for construction, land development, and other land represent 100 percent or more of the institution’s total risk-based capital; or |
| 2. |
Total commercial real estate loans as defined in this guidance represent 300 percent or more of the institution’s total risk-based capital, and the outstanding balance of the institution’s commercial real estate loan portfolio has increased by 50 percent or more during the prior 36 months. |
The Agencies use the criteria as a preliminary step to identify institutions that may have CRE concentration risk. Because regulatory reports capture a broad range of CRE loans with varying risk characteristics, the supervisory monitoring criteria do not constitute limits on an institution’s lending activity but rather serve as high-level indicators to identify institutions potentially exposed to CRE concentration risk.
The Company holds a concentration in commercial real estate loans. As of September 30, 2026, construction, land development and other land loans represented 102.1% of consolidated risk-based capital. Total commercial real estate loans as defined by the Agency guidance represented 374.9% of consolidated risk-based capital. During the prior 36 months, the Company has experienced an increase in its commercial real estate portfolio by 48%.
The management team has extensive experience in underwriting commercial real estate loans and has implemented and continues to maintain heightened risk management procedures and strong underwriting criteria with respect to its commercial real estate portfolio. The Board of Directors has established internal maximum limits on CRE to better manage and control the exposure to property classes during periods of changing economic conditions. The Board of Directors also has minimum targets for regulatory capital ratios that are in excess of well capitalized ratios.
Our risk management process begins with a robust underwriting program. The underwriting and risk rating of all loans is completed by an underwriting team that is independent of the originating lender(s). The underwriting analysis of commercial real estate loans includes pre-origination stress testing utilizing the portfolio stress testing methods to fully understand the potential exposure before we originate the credit. Once originated, management actively monitors concentration, and each loan receives ongoing quarterly stress tests to evaluate the risk profile over the life of the credit.
We stress test earning assets on a quarterly basis and measure the results against the Bank's risk-based capital. For commercial loans, residential real estate loans, owner-occupied commercial real estate loans and consumer installment loans, we multiply the total outstanding amount for each loan category by our highest quarter historical loss for that category as a surrogate in order to calculate a stressed loss.
For our non-owner occupied commercial real estate loans, we use three separate methodologies in our stress test. If a property fails more than one of the three tests, we extend the test with the highest exposure value and add an additional 10% for selling costs.
| • |
An immediate and sustained 3.0% increase in interest rates, |
| • |
An immediate and sustained 5.0% increase in vacancy rates, and |
| • |
An immediate and sustained 2.0% change in the capitalization rate, or “cap rate.” |
We stress test the construction lending portfolio by applying exponential discounting (using a "k factor" of 2) to each project based upon its percentage of completion. The project is stressed using the as-is and as-complete appraised values and assumes 10% selling costs.
For all other loans, we utilize the Bank's historic loss rates or if not available, the average loss rates of FFIEC Uniform Bank Performance Report Group 4 banks, for bank owned life insurance we utilize default rates from S&P Global ratings, and for securities we obtain an independent fair market value and if it is less than the book value, we subtract the fair market value from the book value to determine the stress loss. The following table shows the Company's earning assets and the results of the stress test performed for the periods indicated.
| September 30, 2026 |
||||||||||||
| Outstanding Balance |
Stress Test Results (1) |
Stressed Loss Percent |
||||||||||
| (Dollars in thousands) |
||||||||||||
| Earning Asset Component |
||||||||||||
| Construction & Land Development |
$ | 310,375 | $ | (6,371 | ) | (2.05 | )% | |||||
| Non-Owner Occupied CRE (2) |
828,768 | (46,413 | ) | (5.60 | )% | |||||||
| All Other Loans |
815,980 | (24,469 | ) | (3.00 | )% | |||||||
| AFS Securities, at amortized cost |
63,597 | (8,109 | ) | (12.75 | )% | |||||||
| HTM Securities |
13,303 | (675 | ) | (5.07 | )% | |||||||
| Bank Owned Life Insurance |
41,726 | (9 | ) | (0.02 | )% | |||||||
| Total |
$ | 2,073,749 | $ | (86,046 | ) | (4.15 | )% | |||||
| (1) Net tax effective loss at the statutory rate of 21% |
| (2) Non-Owner Occupied CRE includes call codes 1E2 and 1D |
| December 31, 2025 |
||||||||||||
| Outstanding Balance |
Stress Test Results (1) |
Stressed Loss Percent |
||||||||||
| (Dollars in thousands) |
||||||||||||
| Earning Asset Component |
||||||||||||
| Construction & Land Development |
$ | 300,666 | $ | (5,294 | ) | (1.76 | )% | |||||
| Non-Owner Occupied CRE (2) |
791,813 | (29,160 | ) | (3.68 | )% | |||||||
| All Other Loans |
772,836 | (22,702 | ) | (2.94 | )% | |||||||
| AFS Securities, at amortized cost |
65,445 | (5,768 | ) | (8.81 | )% | |||||||
| HTM Securities |
13,798 | (35 | ) | (0.25 | )% | |||||||
| Bank Owned Life Insurance |
40,752 | (19 | ) | (0.05 | )% | |||||||
| Total |
$ | 1,985,310 | $ | (62,978 | ) | (3.17 | )% | |||||
| (1) Net tax effective loss at the statutory rate of 21% |
| (2) Non-Owner Occupied CRE includes call codes 1E2 and 1D |
The total estimated stress test loss is deducted from capital and we recalculate the capital ratios. As shown in the tables below, as of September 30, 2026 and December 31, 2025, the post-stress capital ratios well exceed Agency minimums (with buffer). For Non-Owner Occupied CRE & Multifamily the stress test is bifurcated with a low-end loss estimate and high-end estimate. The Low Estimate produces loss amounts for loans that are flagged for default (per the model) and floors the loss amount at zero. The High Estimate executes similar to the low estimate but floors the Loss-Given-Default rate at 10%, per Basel Committee on Banking Supervision rules. It also has a collective loss held on all loans regardless of if the loan is flagged for default.
| September 30, 2026 Bank Capital Adequacy Ratios Pre- and Post-Stress (Tax-Effected) |
||||||||||||||||||||
| Well Capitalized with Buffer |
Bank Minimum Target |
September 30, 2026 |
Post Stress, Low Estimate |
Post Stress, High Estimate |
||||||||||||||||
| Leverage Ratio |
5.00 | % | 9.50 | % | 12.66 | % | 9.90 | % | 9.19 | % | ||||||||||
| Total Risk-Based Capital |
10.00 | % | 11.50 | % | 15.10 | % | 12.03 | % | 11.23 | % | ||||||||||
| Tier 1 Risk-Based Capital |
8.00 | % | 9.50 | % | 14.10 | % | 11.03 | % | 10.23 | % | ||||||||||
| Common Equity Tier 1 Risk-Based Capital |
6.50 | % | 8.00 | % | 14.10 | % | 10.63 | % | 9.83 | % | ||||||||||
| December 31, 2025 Bank Capital Adequacy Ratios Pre- and Post-Stress (Tax-Effected) |
||||||||||||||||||||
| Well Capitalized with Buffer |
Bank Minimum Target |
December 31, 2025 |
Post Stress, Low Estimate |
Post Stress, High Estimate |
||||||||||||||||
| Leverage Ratio |
5.00 | % | 9.50 | % | 13.28 | % | 11.11 | % | 10.63 | % | ||||||||||
| Total Risk-Based Capital |
10.00 | % | 11.50 | % | 16.08 | % | 13.62 | % | 13.08 | % | ||||||||||
| Tier 1 Risk-Based Capital |
8.00 | % | 9.50 | % | 15.05 | % | 12.59 | % | 12.05 | % | ||||||||||
| Common Equity Tier 1 Risk-Based Capital |
6.50 | % | 8.00 | % | 15.05 | % | 12.29 | % | 11.75 | % | ||||||||||
The following two tables break down the September 30, 2026 and December 31, 2025 non-owner occupied CRE portfolio balances by showing the current balance in each sub-category and location. The tables also display very favorable weighted average interest rates and weighted average loan-to-values for both periods. The weighted average occupancy percentages are also broadly favorable for both periods.
| September 30, 2026 |
||||||||||||||||||||||||||||||||
| (Dollars in thousands) |
||||||||||||||||||||||||||||||||
| Non-Owner Occupied CRE (2) |
Location |
Weighted Average Rate |
Weighted Average Loan-to-Value (1) |
Weighted Average Occupancy % |
||||||||||||||||||||||||||||
| DC |
MD |
VA |
Other |
Total |
||||||||||||||||||||||||||||
| Multifamily |
$ | 231,151 | $ | 1,227 | $ | 9,596 | $ | — | $ | 241,974 | 5.91 | % | 72 | % | 62 | % | ||||||||||||||||
| Office |
||||||||||||||||||||||||||||||||
| Mixed use |
579 | 2,575 | 2,596 | — | 5,750 | 6.46 | % | 47 | % | 92 | % | |||||||||||||||||||||
| Medical |
— | 21,722 | 18,747 | 303 | 40,772 | 5.84 | % | 53 | % | 79 | % | |||||||||||||||||||||
| Office |
— | 1,857 | 6,421 | — | 8,278 | 6.87 | % | 50 | % | 89 | % | |||||||||||||||||||||
| Office to Residential Conversion |
— | — | 32,136 | — | 32,136 | 9.50 | % | 39 | % | -- | (4) | |||||||||||||||||||||
| Hospitality |
60,059 | 76,843 | 82,364 | — | 219,266 | 5.90 | % | 62 | % | -- | (3) | |||||||||||||||||||||
| Retail/Commercial |
76,335 | 43,219 | 72,953 | 16,034 | 208,541 | 6.48 | % | 62 | % | 72 | % | |||||||||||||||||||||
| Industrial |
36,285 | 27,372 | 3,726 | 4,668 | 72,051 | 6.45 | % | 53 | % | 90 | % | |||||||||||||||||||||
| Total Non-Owner Occupied CRE (5) |
404,409 | 174,815 | 228,539 | 21,005 | 828,768 | 6.23 | % | 63 | % | 70 | % | |||||||||||||||||||||
| Construction and Land Development |
||||||||||||||||||||||||||||||||
| Multifamily |
103,461 | — | — | — | 103,461 | 7.27 | % | 59 | % | N/A | ||||||||||||||||||||||
| 1-4 family |
55,582 | 3,222 | 61,488 | — | 120,292 | 7.50 | % | 61 | % | N/A | ||||||||||||||||||||||
| Retail/Commercial |
14,088 | — | — | — | 14,088 | 6.79 | % | 46 | % | N/A | ||||||||||||||||||||||
| Industrial |
— | — | 6,989 | — | 6,989 | 7.03 | % | 55 | % | N/A | ||||||||||||||||||||||
| Mixed use |
1,190 | — | — | — | 1,190 | 8.36 | % | 33 | % | N/A | ||||||||||||||||||||||
| Other |
240 | 19,127 | 35,673 | 9,315 | 64,355 | 7.29 | % | 51 | % | N/A | ||||||||||||||||||||||
| Total Construction and Land Development |
174,561 | 22,349 | 104,150 | 9,315 | 310,375 | 7.35 | % | 58 | % | N/A | ||||||||||||||||||||||
| Total Construction, Land Development, and Non-Owner Occupied CRE |
$ | 578,970 | $ | 197,164 | $ | 332,689 | $ | 30,320 | $ | 1,139,143 | 6.56 | % | 61 | % | N/A | |||||||||||||||||
| (1) Loan-to-value is based on maximum potential outstanding at time of origination |
| (2) Non-Owner Occupied CRE includes call codes 1E2 and 1D |
| (3) Hospitality relies upon individual STR data |
| (4) The underlying properties for office to residential conversion loans generally are not occupied during the conversion period |
| (5) The total weighted average occupancy percentage excludes Office to Residential Conversion and Hospitality loans. |
| December 31, 2025 |
||||||||||||||||||||||||||||||||
| (Dollars in thousands) |
||||||||||||||||||||||||||||||||
| Non-Owner Occupied CRE (2) |
Location |
Weighted Average Rate |
Weighted Average Loan-to-Value (1) |
Weighted Average Occupancy % |
||||||||||||||||||||||||||||
| DC |
MD |
VA |
Other |
Total |
||||||||||||||||||||||||||||
| Multifamily |
$ | 217,556 | $ | 2,996 | $ | 4,868 | $ | — | $ | 225,420 | 5.89 | % | 70 | % | 67 | % | ||||||||||||||||
| Office: |
||||||||||||||||||||||||||||||||
| Mixed use |
590 | 2,620 | 2,715 | — | 5,925 | 6.47 | % | 48 | % | 91 | % | |||||||||||||||||||||
| Medical |
— | 22,150 | 19,277 | 359 | 41,786 | 5.84 | % | 62 | % | 81 | % | |||||||||||||||||||||
| Office |
— | 1,887 | 3,008 | — | 4,895 | 6.61 | % | 49 | % | 91 | % | |||||||||||||||||||||
| Office to Residential Conversion |
— | — | 32,136 | — | 32,136 | 9.50 | % | 39 | % | -- (4 | ) | |||||||||||||||||||||
| Hospitality |
60,059 | 74,143 | 83,893 | — | 218,095 | 5.66 | % | 62 | % | -- (3 | ) | |||||||||||||||||||||
| Retail/Commercial |
63,584 | 39,160 | 77,507 | 24,021 | 204,272 | 6.21 | % | 60 | % | 76 | % | |||||||||||||||||||||
| Industrial |
36,805 | 15,257 | 2,425 | 4,797 | 59,284 | 6.27 | % | 56 | % | 90 | % | |||||||||||||||||||||
| Total Non-Owner Occupied CRE (5) |
378,594 | 158,213 | 225,829 | 29,177 | 791,813 | 6.12 | % | 62 | % | 71 | % | |||||||||||||||||||||
| Construction and Land Development |
||||||||||||||||||||||||||||||||
| Multifamily |
79,008 | — | — | — | 79,008 | 6.86 | % | 62 | % | N/A | ||||||||||||||||||||||
| 1-4 family |
65,320 | 2,733 | 65,942 | — | 133,995 | 7.68 | % | 68 | % | N/A | ||||||||||||||||||||||
| Retail/Commercial |
19,944 | — | — | — | 19,944 | 6.75 | % | 55 | % | N/A | ||||||||||||||||||||||
| Industrial |
— | — | 4,632 | — | 4,632 | 6.88 | % | 66 | % | N/A | ||||||||||||||||||||||
| Mixed use |
4,962 | — | — | — | 4,962 | 8.40 | % | 29 | % | N/A | ||||||||||||||||||||||
| Other |
565 | 18,527 | 28,903 | 10,130 | 58,125 | 7.78 | % | 52 | % | N/A | ||||||||||||||||||||||
| Total Construction and Land Development |
169,799 | 21,260 | 99,477 | 10,130 | 300,666 | 7.46 | % | 62 | % | N/A | ||||||||||||||||||||||
| Total Construction, Land Development, and Non-Owner Occupied CRE |
$ | 548,393 | $ | 179,473 | $ | 325,306 | $ | 39,307 | $ | 1,092,479 | 6.52 | % | 62 | % | N/A | |||||||||||||||||
| (1) Loan-to-value is based on maximum potential outstanding at time of origination |
| (2) Non-Owner Occupied CRE includes call codes 1E2 and 1D |
| (3) Hospitality relies upon individual STR data |
| (4) The underlying properties for office to residential conversion loans generally are not occupied during the conversion period |
| (5) The total weighted average occupancy percentage excludes Office to Residential Conversion and Hospitality loans. |
The Company also underwrites and originates owner-occupied commercial real estate loans. These loans are typically term loans made to support properties that rely upon the operations of the business occupying the property for repayment. The Agencies specifically excluded owner-occupied commercial real estate from their concentration guidance, as the primary source of repayment is the cash flow from the ongoing operations and activities conducted by the party, or affiliate of the party, who owns the property.
The following two tables depict a well-diversified portfolio of owner-occupied commercial real estate as of September 30, 2026 and December 31, 2025. The properties are distributed nicely among the Company's footprint. This loan segment continues to perform very well and is supported by strong loan-to-values (LTVs). The following table sets forth our owner-occupied CRE portfolio by the business industry groups that occupy the properties for the periods indicated.
| September 30, 2026 |
||||||||||||||||||||||||||||
| (Dollars in thousands) |
||||||||||||||||||||||||||||
| Owner Occupied CRE |
Location |
Weighted Average Rate |
Weighted Average Loan-to-Value (1) |
|||||||||||||||||||||||||
| DC |
MD |
VA |
Other |
Total |
||||||||||||||||||||||||
| Accommodation and food services |
$ | 22,488 | $ | 2,770 | $ | 11,409 | $ | 5,280 | $ | 41,947 | 6.00 | % | 61 | % | ||||||||||||||
| Administrative and support |
— | 2,295 | 4,732 | — | 7,027 | 6.54 | % | 54 | % | |||||||||||||||||||
| Arts and recreation |
— | — | 35,840 | — | 35,840 | 5.86 | % | 56 | % | |||||||||||||||||||
| Construction services |
27,402 | 9,832 | 15,104 | 4,739 | 57,077 | 6.07 | % | 71 | % | |||||||||||||||||||
| Education services |
25,349 | 883 | 4,808 | — | 31,040 | 6.10 | % | 47 | % | |||||||||||||||||||
| Health care |
4,491 | 16,871 | 14,182 | 4,086 | 39,630 | 6.73 | % | 56 | % | |||||||||||||||||||
| Information |
— | — | 4,331 | — | 4,331 | 4.43 | % | 42 | % | |||||||||||||||||||
| Manufacturing |
— | — | 4,449 | — | 4,449 | 4.16 | % | 46 | % | |||||||||||||||||||
| Other services |
11,951 | 16,057 | 76,991 | 901 | 105,900 | 6.59 | % | 60 | % | |||||||||||||||||||
| Professional, scientific, tech services |
2,762 | — | 4,999 | — | 7,761 | 5.71 | % | 58 | % | |||||||||||||||||||
| Real estate and rental leasing |
8,350 | 21,810 | 9,639 | — | 39,799 | 6.44 | % | 66 | % | |||||||||||||||||||
| Retail trade |
3,085 | 40,028 | 39,382 | 236 | 82,731 | 6.62 | % | 64 | % | |||||||||||||||||||
| Transportation and warehousing |
5,185 | — | 17,100 | — | 22,285 | 7.27 | % | 75 | % | |||||||||||||||||||
| Wholesale trade |
— | 130 | 852 | 6,791 | 7,773 | 6.03 | % | 67 | % | |||||||||||||||||||
| Total Owner Occupied CRE |
$ | 111,063 | $ | 110,676 | $ | 243,818 | $ | 22,033 | $ | 487,590 | 6.37 | % | 62 | % | ||||||||||||||
| (1) Loan-to-value is based on maximum potential outstanding at time of origination. |
| December 31, 2025 |
||||||||||||||||||||||||||||
| (Dollars in thousands) |
||||||||||||||||||||||||||||
| Owner Occupied CRE |
Location |
Weighted Average Rate |
Weighted Average Loan-to-Value (1) |
|||||||||||||||||||||||||
| DC |
MD |
VA |
Other |
Total |
||||||||||||||||||||||||
| Accommodation and food services |
$ | 22,593 | $ | 2,834 | $ | 11,167 | $ | 5,362 | $ | 41,956 | 5.65 | % | 73 | % | ||||||||||||||
| Administrative and support |
— | 4,500 | 2,105 | — | 6,605 | 6.25 | % | 59 | % | |||||||||||||||||||
| Arts and recreation |
— | — | 36,572 | — | 36,572 | 5.91 | % | 57 | % | |||||||||||||||||||
| Construction services |
27,876 | 10,018 | 15,691 | — | 53,585 | 5.98 | % | 75 | % | |||||||||||||||||||
| Education services |
26,336 | 894 | 4,875 | — | 32,105 | 6.10 | % | 49 | % | |||||||||||||||||||
| Health care |
4,577 | 17,050 | 14,819 | 4,131 | 40,577 | 6.80 | % | 57 | % | |||||||||||||||||||
| Information |
— | — | 4,430 | — | 4,430 | 4.43 | % | 43 | % | |||||||||||||||||||
| Manufacturing |
— | — | 4,665 | — | 4,665 | 4.20 | % | 46 | % | |||||||||||||||||||
| Other services |
9,593 | 17,808 | 75,492 | 915 | 103,808 | 6.31 | % | 61 | % | |||||||||||||||||||
| Professional, scientific, tech services |
2,816 | — | 5,200 | — | 8,016 | 5.13 | % | 59 | % | |||||||||||||||||||
| Real estate and rental leasing |
4,221 | 25,295 | 4,788 | — | 34,304 | 6.25 | % | 61 | % | |||||||||||||||||||
| Retail trade |
3,155 | 35,695 | 34,899 | 239 | 73,988 | 6.54 | % | 66 | % | |||||||||||||||||||
| Wholesale trade |
— | 151 | 883 | 6,894 | 7,928 | 6.07 | % | 68 | % | |||||||||||||||||||
| Total Owner Occupied CRE |
$ | 101,167 | $ | 114,245 | $ | 215,586 | $ | 17,541 | $ | 448,539 | 6.18 | % | 63 | % | ||||||||||||||
| (1) Loan-to-value is based on maximum potential outstanding at time of origination. |
Allowance for Credit Losses - Loans
The allowance for credit losses on loans represents an amount that, in our judgment, will be adequate to absorb current and expected losses in the loan portfolio. The provision for credit losses on loans increases the allowance, and loans charged off, net of recoveries, reduce the allowance. The table below summarizes the allowance activity for the periods indicated:
| For the Nine Months Ended September 30, |
For the Year Ended December 31, |
|||||||
| 2026 |
2025 |
|||||||
| (Dollars in thousands) |
||||||||
| Balance at beginning of year |
$ | 19,308 | $ | 19,450 | ||||
| Charge-offs: |
||||||||
| Residential Real Estate |
(626 | ) | (200 | ) | ||||
| Commercial Real Estate |
(1,405 | ) | — | |||||
| Construction & Land Development |
(73 | ) | (35 | ) | ||||
| Commercial & Industrial |
— | (623 | ) | |||||
| Total charge-offs |
(2,104 | ) | (858 | ) | ||||
| Recoveries: |
||||||||
| Residential Real Estate |
32 | 7 | ||||||
| Commercial Real Estate |
— | 740 | ||||||
| Commercial & Industrial |
144 | 86 | ||||||
| Consumer |
— | 1 | ||||||
| Total recoveries |
176 | 834 | ||||||
| Net charge-offs |
(1,928 | ) | (24 | ) | ||||
| Provision for credit losses - loans |
2,566 | (118 | ) | |||||
| Balance at end of period |
$ | 19,946 | $ | 19,308 | ||||
| Ratios: |
||||||||
| Net charge-offs to average loans outstanding (1) |
0.13 | % | 0.00 | % | ||||
| Allowance for credit losses on loans to non-performing loans |
21.68 | % | 61.33 | % | ||||
| Allowance for credit losses on loans to gross loans at end of period |
1.02 | % | 1.04 | % | ||||
(1) Annualized
Non-performing Assets
The following table presents information regarding non-performing assets at the dates indicated:
| September 30, |
December 31, |
|||||||
| 2026 |
2025 |
|||||||
| (Dollars in thousands) |
||||||||
| Non-accrual loans: |
||||||||
| Residential Real Estate: |
||||||||
| Single Family |
$ | 7,027 | $ | 5,316 | ||||
| Multifamily |
7,072 | — | ||||||
| Construction & Land Development |
31,601 | 25,467 | ||||||
| Commercial Real Estate: |
||||||||
| Owner Occupied |
2,531 | — | ||||||
| Non-Owner Occupied |
43,765 | 314 | ||||||
| Commercial & Industrial |
— | 385 | ||||||
| Total non-accrual loans |
91,996 | 31,482 | ||||||
| Other real estate owned |
1,799 | 1,697 | ||||||
| Total non-performing assets |
$ | 93,795 | $ | 33,179 | ||||
| Ratios: |
||||||||
| Total non-performing loans to gross loans receivable |
4.71 | % | 1.69 | % | ||||
| Total non-performing loans to total assets |
4.12 | % | 1.42 | % | ||||
| Total non-performing assets to total assets |
4.20 | % | 1.50 | % | ||||
Past due loans excluding non-performing loans, were $62.7 million as of September 30, 2026 compared to $33.3 million as of December 31, 2025. Of the loans past due as of September 30, 2026, 35% have subsequently made a payment. 41% of loans past due as of September 30, 2026 are multifamily loans experiencing temporary liquidity constraints related to the reduction in emergency rental subsidies in Washington D.C. The remaining 24% are a handful of loans that are being closely monitored.
As of September 30, 2026, criticized loans increased $5.7 million and classified loans increased $54.2 million when compared to December 31, 2025, to a balance of $116.2 million and $138.4 million, respectively. $46.4 million of classified loans as of September 30, 2026 are performing loans. These borrowers experienced liquidity tightening as a result of the reductions in emergency rental subsidies in Washington D.C., and are working diligently to fully stabilize their properties.
The remaining $92.0 million of classified loans are non-performing at September 30, 2026, an increase of $60.5 million compared to $31.5 million of non-performing loans at December 31, 2025. Of these non-performing loans, 84% experienced liquidity tightening as a result of the prolonged impacts of the federal government shut down, reductions in emergency rental subsidies in Washington D.C., and sustained elevated interest rates. One non-performing relationship totaling $20.9 million is in process of foreclosure with nominal principal losses anticipated. One non-performing loan with a balance of $28.8 million is actively being evaluated to determine the probable outcome.
The remaining 16% of non-performing loans is related to one relationship that is pursuing collateral liquidation. Management believes in taking a proactive approach to risk management in the loan portfolio, particularly as credits are due to reprice in a new rate environment. The Company routinely charges off potential exposure as identified and analyzed, and executes the best course of action expected to minimize any further loss exposure. All classified loans and non-performing loans are considered individually evaluated and are recourse loans backed by collateral, with good loan-to-value (LTV) ratios, and as such no reserves were required as of September 30, 2026. While non-performing loans increased since December 31, 2025, the levels remain manageable and management is diligently working towards positive resolutions.
Deposits
Deposits increased $24.8 million, or 1.3% to $1.92 billion at September 30, 2026 from $1.90 billion at December 31, 2025. Our core deposits increased $174.1 million, or 12.4%, to $1.57 billion at September 30, 2026 from $1.40 billion at December 31, 2025, which is impacted by a change in the law discussed below. Non-interest bearing demand deposits decreased $34.9 million, or 9.2%, to $343.8 million at September 30, 2026 from $378.7 million at December 31, 2025, as demands for our business customers' liquidity fluctuate throughout the year. Interest-bearing demand deposits decreased $17.8 million, or 14.9%, to $101.6 million at September 30, 2026 from $119.4 million at December 31, 2025. Time deposits increased $9.1 million, or 1.2%, to $788.9 million at September 30, 2026 from $779.8 million at December 31, 2025. Money market deposits increased $43.5 million, or 8.7%, to $542.8 million at September 30, 2026 from $499.3 million at December 31, 2025, as rate competition continues to drive customers to higher yielding products. Savings and NOW deposits increased $25.1 million or 20.6% from $121.9 million at December 31, 2025 to $147.0 million at September 30, 2026.
The following table presents the Company’s deposits segregated by major category as of September 30, 2026 and December 31, 2025:
| September 30, 2026 |
December 31, 2025 |
|||||||||||||||
| (Dollars in thousands) |
||||||||||||||||
| Deposit type: |
Balance | Percent % | Balance | Percent % | ||||||||||||
| Interest-bearing demand deposits |
$ | 101,584 | 5.3 | % | $ | 119,407 | 6.3 | % | ||||||||
| Savings and NOW deposits |
146,990 | 7.6 | % | 121,905 | 6.4 | % | ||||||||||
| Money market deposits |
542,766 | 28.2 | % | 499,334 | 26.3 | % | ||||||||||
| Time deposits |
788,891 | 41.0 | % | 779,844 | 41.1 | % | ||||||||||
| Interest-bearing deposits |
1,580,231 | 82.1 | % | 1,520,490 | 80.1 | % | ||||||||||
| Non-interest bearing demand deposits |
343,769 | 17.9 | % | 378,694 | 19.9 | % | ||||||||||
| Total deposits |
$ | 1,924,000 | 100.0 | % | $ | 1,899,184 | 100.0 | % | ||||||||
The Company uses wholesale deposits as a funding source in addition to customer deposits. Wholesale deposits provide a diversified and stable source of funding during times of market volatility. As of September 30, 2026, the Company had $349.2 million of total wholesale deposit balances, a decrease of $149.3 million compared to December 31, 2025, which totaled $498.5 million. This decrease is impacted by the 21st Century ROAD to Housing Act (H.R. 6644) becoming law in the three months ended September 30, 2026, which modernized the limitations on reciprocal and custodial deposits to be included as core deposits for qualifying financial institutions.
During the nine months ended September 30, 2026 and 2025, total wholesale deposit funding accounted for approximately 31.3% and 35.7% of our interest expense.
The following table presents the Company's total wholesale deposit composition, concentrations, current rate and remaining duration, if applicable as of September 30, 2026.
| September 30, 2026 |
December 31, 2025 |
|||||||||||||||||||||||||||||||
| (Dollars in thousands) |
Balance | Percent % | Weighted Average Rate | Weighted Remaining Maturity (in months) | Balance | Percent % | Weighted Average Rate | Weighted Remaining Maturity (in months) | ||||||||||||||||||||||||
| Wholesale Money Market Deposits Accounts (MMDA) |
||||||||||||||||||||||||||||||||
| Wholesale MMDAs |
$ | — | 0.0 | % | 0.00 | % | N/A | $ | 170,575 | 34.2 | % | 3.80 | % | N/A | ||||||||||||||||||
| Wholesale Time Deposits |
||||||||||||||||||||||||||||||||
| Listing Service CDs (1) |
5,612 | 1.6 | % | 4.14 | % | 14 | 18,534 | 3.7 | % | 4.81 | % | 5 | ||||||||||||||||||||
| Wholesale CDs: |
||||||||||||||||||||||||||||||||
| Term |
314,618 | 90.1 | % | 4.02 | % | 11 | 283,397 | 56.9 | % | 4.16 | % | 7 | ||||||||||||||||||||
| Term with Call Option |
28,977 | 8.3 | % | 3.83 | % | 24 | 26,000 | 5.2 | % | 3.83 | % | 33 | ||||||||||||||||||||
| Total Wholesale CDs |
343,595 | 309,397 | ||||||||||||||||||||||||||||||
| Total Wholesale Deposits |
$ | 349,207 | 100.0 | % | $ | 498,506 | 100 | % | ||||||||||||||||||||||||
| (1) Listing service CDs are excluded from being classified as wholesale deposits, per FDIC call report instructions |
Regulatory Defined Wholesale Deposits
Each quarter the Bank files a bank call report with the FDIC, which has a specific way it defines wholesale brokered deposits. As of September 30, 2026, the Company had $343.6 million of wholesale deposits outstanding, as defined by FDIC, a decrease of $136.4 million from $480.0 million at December 31, 2025. Up until July 11, 2026, pursuant to rule 12 CFR 337.6(e), well-capitalized and well-rated institutions were not required to treat reciprocal deposits as wholesale deposits up to the lesser of 20 percent of their total liabilities or $5 billion. Reciprocal core deposits exceeding this threshold were reported additionally as wholesale deposits for call report purposes only. On July 11, 2026, the 21st Century ROAD to Housing Act (H.R. 6644) became law. This act changed the threshold from 20 percent of total liabilities to 50 percent of the first $1 billion of total liabilities, 40 percent of the next $1 billion to $10 billion of total liabilities, and 30 percent of total liabilities in excess of $10 billion. As of September 30, 2026, the Company reported no additional reciprocal deposits considered to be wholesale deposits for call report purposes only. As of December 31, 2025, the Company additionally reported $145.2 million in reciprocal deposits considered wholesale for call report purposes only, bringing regulatory defined wholesale deposits to $625.2 million as of December 31, 2025. As of September 30, 2026 and December 31, 2025, all of the Company's reciprocal deposits were core deposits from customers who placed their deposits in the reciprocal network for additional FDIC insurance coverage. Additionally, under this new legislation, custodial deposits of eligible insured depository institutions with less than $10 billion in total assets are not considered brokered deposits up to a capped amount of 20% of total liabilities. As of September 30, 2026, all of the Company's custodial deposits are not considered brokered deposits.
Liquidity and Capital Resources
Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Deposits are the primary source of funds for lending and investing activities. The Company uses wholesale deposits in addition to customer deposits, as funding sources. Scheduled payments, as well as prepayments, and maturities from portfolios of loans and investment securities also provide a stable source of funds. FHLB secured advances, other secured borrowings, federal funds purchased, and other short-term unsecured borrowed funds, as well as longer-term debt issued through the capital markets, all provide supplemental liquidity sources. Additional liquidity can be obtained through the Federal Reserve Bank discount window. The Company’s funding activities are monitored and governed through the Company’s asset/liability management process. MainStreet Bank had no federal funds purchased outstanding and had an additional secured borrowing capacity of $671.5 million as of September 30, 2026. Additionally, at September 30, 2026, we had the ability to borrow up to $144.0 million from other financial institutions.
The Board of Directors, management, and the Asset Liability Committee (ALCO) are responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies. We believe that we have a variety of sufficient sources of liquidity to satisfy our short and long-term liquidity needs as of September 30, 2026.
We monitor and adjust our investments in liquid assets based upon our assessment of expected loan demand; expected deposit flows; yields available on interest-earning deposits and securities; and the objectives of our asset/liability management program. Excess liquid assets are invested generally in interest-earning deposits and short-and intermediate-term securities.
While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and cash equivalents, which include federal funds sold, interest-earning deposits in other banks, and other cash due from banks. The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period. At September 30, 2026, cash and cash equivalents totaled $98.4 million. Finally, securities classified as available-for-sale, which provide additional sources of liquidity, totaled $53.1 million at September 30, 2026.
Our cash flows are provided by and used in three primary activities: operating activities, investing activities, and financing activities. Net cash provided by operating activities was $17.5 million and $8.2 million for the nine months ended September 30, 2026 and September 30, 2025, respectively. There were no sales of securities in the nine months ended September 30, 2026 or for nine months ended September 30, 2025. Net cash used in investing activities was $91.0 million and net cash provided by investing activities was $15.9 million for the nine months ended September 30, 2026 and September 30, 2025, respectively. Net cash provided by financing activities was $9.2 million and used in financing activities was $104.5 million for the nine months ended September 30, 2026 and 2025, respectively.
We are committed to maintaining a strong liquidity position. We monitor our liquidity position daily. We anticipate that we have sufficient funds to meet our current funding commitments. Certificates of deposit due within one year of September 30, 2026, totaled $639.1 million of total deposits. If these deposits do not remain with us, we will be required to seek other sources of funds, including other deposits, Federal Home Loan Bank advances and commitments from other financial institutions. Depending on market conditions, we may be required to pay higher rates on such deposits or borrowings than we currently pay. We believe, however, based on experience that a significant portion of such deposits will remain with us. We can attract and retain deposits by adjusting the interest rates offered.
Regulatory Capital
Under the Basel III Capital Rules and the related framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk- weightings and other factors.
Under the Basel III Capital Rules, a comprehensive capital framework for U.S. banking organizations, the Bank must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer is 2.50%. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of Total capital, Common Equity Tier 1 capital, and Tier 1 capital (as defined in the regulations) to risk weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). As of September 30, 2026, the Bank met all capital adequacy requirements to which it is subject.
The Bank’s actual capital amounts and ratios are presented in the table:
| Actual |
Capital Adequacy Purposes |
To Be Well Capitalized Under the Prompt Corrective Action Provision |
||||||||||||||||||||||
| (Dollars in thousands) |
Amount |
Ratio |
Amount |
Ratio |
Amount |
Ratio |
||||||||||||||||||
| As of September 30, 2026 |
||||||||||||||||||||||||
| Total capital (to risk-weighted assets) |
$ | 304,224 | 15.10 | % | $ | 161,163 | ≥ 8.0% | $ | 201,454 | ≥ 10.0% | ||||||||||||||
| Common equity tier 1 capital (to risk-weighted assets) |
$ | 284,125 | 14.10 | % | $ | 90,654 | ≥ 4.5% | $ | 130,945 | ≥ 6.5% | ||||||||||||||
| Tier 1 capital (to risk-weighted assets) |
$ | 284,125 | 14.10 | % | $ | 120,873 | ≥ 6.0% | $ | 161,163 | ≥ 8.0% | ||||||||||||||
| Tier 1 capital (to average assets) |
$ | 284,125 | 12.66 | % | $ | 89,759 | ≥ 4.0% | $ | 112,199 | ≥ 5.0% | ||||||||||||||
| As of December 31, 2025 |
||||||||||||||||||||||||
| Total capital (to risk-weighted assets) |
$ | 306,631 | 16.08 | % | $ | 152,541 | ≥ 8.0% | $ | 190,677 | ≥ 10.0% | ||||||||||||||
| Common equity tier 1 capital (to risk-weighted assets) |
$ | 286,987 | 15.05 | % | $ | 85,805 | ≥ 4.5% | $ | 123,940 | ≥ 6.5% | ||||||||||||||
| Tier 1 capital (to risk-weighted assets) |
$ | 286,987 | 15.05 | % | $ | 114,406 | ≥ 6.0% | $ | 152,541 | ≥ 8.0% | ||||||||||||||
| Tier 1 capital (to average assets) |
$ | 286,987 | 13.28 | % | $ | 86,467 | ≥ 4.0% | $ | 108,083 | ≥ 5.0% | ||||||||||||||
Off-Balance Sheet Arrangements and Contractual Obligations
Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. At September 30, 2026, we had outstanding loan commitments of $248.6 million and $0.2 million in outstanding stand-by letters of credit. We anticipate that we will have sufficient funds available to meet our current lending commitments.
Use of Certain Non-GAAP Financial Measures
The accounting and reporting policies of the Company conform to U.S. GAAP and prevailing practices in the banking industry. However, certain non-GAAP measures are used by management to supplement the evaluation of the Company’s performance. These measures include adjusted net interest income and net interest margin.
Management believes that the use of these non-GAAP measures provides meaningful information about operating performance by enhancing comparability with other financial periods and other financial institutions. The non-GAAP measures used by management enhance comparability by excluding the effects of items that do not reflect ongoing operating performance, including nonrecurring gains or charges. These non-GAAP financial measures should not be considered an alternative to, or more important than, U.S. GAAP-basis financial measures, and other bank holding companies may define or calculate these or similar measures differently. A reconciliation of the non-GAAP financial measures used by the Company to evaluate and measure the Company’s performance to the most directly comparable U.S. GAAP financial measures is presented below.
| For the three months ended September 30, |
For the nine months ended September 30, |
|||||||||||||||
| (Dollars in thousands) |
2026 |
2025 |
2026 |
2025 |
||||||||||||
| Net interest margin, fully-taxable equivalent (FTE) |
||||||||||||||||
| Net interest income (GAAP) |
$ | 18,776 | $ | 17,102 | $ | 54,502 | $ | 52,403 | ||||||||
| FTE adjustment on tax-exempt securities |
77 | 72 | 230 | 213 | ||||||||||||
| Net interest income (FTE) (non-GAAP) |
$ | 18,853 | $ | 17,174 | $ | 54,732 | $ | 52,616 | ||||||||
| Average interest-earning assets |
2,106,454 | 1,993,889 | 2,079,700 | 2,015,943 | ||||||||||||
| Net interest margin (GAAP) |
3.54 | % | 3.40 | % | 3.50 | % | 3.48 | % | ||||||||
| Net interest margin (FTE) (non-GAAP) |
3.55 | % | 3.42 | % | 3.52 | % | 3.49 | % | ||||||||
| For the three months ended September 30, |
For the nine months ended September 30, |
|||||||||||||||
| 2026 |
2025 |
2026 |
2025 |
|||||||||||||
| Yield on earning assets (FTE) |
||||||||||||||||
| Total interest income (GAAP) |
$ | 33,205 | $ | 32,464 | $ | 96,513 | $ | 99,713 | ||||||||
| FTE adjustment on tax-exempt securities |
77 | 72 | 230 | 213 | ||||||||||||
| Total interest income (FTE) (non-GAAP) |
$ | 33,282 | $ | 32,536 | $ | 96,743 | $ | 99,926 | ||||||||
| Average interest-earning assets |
2,106,454 | 1,993,889 | 2,079,700 | 2,015,943 | ||||||||||||
| Yield on earning assets (GAAP) |
6.25 | % | 6.46 | % | 6.20 | % | 6.61 | % | ||||||||
| Yield on earning assets (FTE) (non-GAAP) |
6.27 | % | 6.47 | % | 6.22 | % | 6.63 | % | ||||||||
| For the three months ended September 30, |
For the nine months ended September 30, |
|||||||||||||||
| 2026 |
2025 |
2026 |
2025 |
|||||||||||||
| Net interest spread (FTE) |
||||||||||||||||
| Yield on earning assets (GAAP) |
6.25 | % | 6.46 | % | 6.20 | % | 6.61 | % | ||||||||
| Yield on earning assets (FTE) (non-GAAP) |
6.27 | % | 6.47 | % | 6.22 | % | 6.63 | % | ||||||||
| Yield on interest-bearing liabilities (GAAP) |
3.46 | % | 3.94 | % | 3.47 | % | 4.03 | % | ||||||||
| Net interest spread (GAAP) |
2.79 | % | 2.52 | % | 2.73 | % | 2.58 | % | ||||||||
| Net interest spread (FTE) (non-GAAP) |
2.81 | % | 2.54 | % | 2.75 | % | 2.60 | % | ||||||||
Item 3 – Quantitative and Qualitative Disclosures about Market Risk
Market Risk Management
The effective management of market risk is essential to achieving the Company’s strategic financial objectives. As a financial institution, the Company’s most significant market risk exposure is interest rate risk in its balance sheet; however, market risk also includes product liquidity risk, price risk and volatility risk in the Company’s lines of business. The primary objectives of market risk management are to minimize any adverse effect that changes in market risk factors may have on net interest income, and to offset the risk of price changes for certain assets recorded at fair value.
Interest Rate Market Risk
The Company’s net interest income and the fair value of its financial instruments are influenced by changes in the level of interest rates. The Company manages its exposure to fluctuations in interest rates through policies established by its Asset/Liability Committee. The Asset/Liability Committee meets regularly and has responsibility for approving asset/liability management policies, formulating strategies to improve balance sheet positioning and/or earnings and reviewing the interest rate sensitivity of the Company.
We estimate what our net interest income would be for a 12-month period. We then calculate what the net interest income would be for the same period under different interest rate assumptions. These estimates require certain assumptions to be made, including loan and mortgage-related investment prepayment speeds, reinvestment rates, and deposit maturity and decay rates. These assumptions are inherently uncertain. As a result, no simulation model can precisely predict the impact of changes in interest rates on our net interest income.
The table below sets forth, as of September 30, 2026, the calculation of the estimated changes in our net interest income that would result from changes in market interest rates over one year if we take no action from our current plan.
| Net Interest Income Stress Simulation |
|||||
| September 30, 2026 |
|||||
| Basis Point Change in |
Year 1 Change |
||||
| Interest Rates (1) |
From Level |
||||
| +400 |
5.79 |
% | |||
| +300 |
4.08 |
% | |||
| +200 |
2.27 |
% | |||
| +100 |
0.72 |
% | |||
| Level |
— |
||||
| -100 |
0.54 |
% | |||
| -200 |
4.96 |
% | |||
| -300 |
11.55 |
% | |||
| -400 |
19.45 |
% | |||
(1) Interest rate changes are immediate and sustained for the entire 12-month period.
Item 4 – Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)) as of September 30, 2026. Based on their evaluation of the Company’s disclosure controls and procedures, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and regulations are designed and operating in an effective manner.
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the third fiscal quarter of 2026 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
PART II – OTHER INFORMATION
Item 1 – Legal Proceedings
At September 30, 2026, the Company was not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business which involve amounts in the aggregate believed by management to be immaterial to the financial condition and operating results of the Company. In addition, no material proceedings are pending or known to be threatened or contemplated against the Company or its subsidiary by governmental authorities.
Item 1A – Risk Factors
Not required for smaller reporting companies. Reference is made to “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 13, 2026. For a discussion of certain risk factors affecting the Company, see our disclosure under “Forward-Looking Statements” in Part I, Item 2 in this Form 10-Q.
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds
The following table summarizes the common shares repurchased during the three months ended September 30, 2026.
| (Dollars in thousands, except for per share amounts) |
Total Number of Shares Purchased |
Average Price Paid per Share |
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plans or Programs |
||||||||||||
| July 1, 2026 - July 31, 2026 |
— | $ | — | — | $ | 5,013 | ||||||||||
| August 1, 2026 - August 31, 2026 |
— | $ | — | — | $ | 5,013 | ||||||||||
| September 1, 2026 - September 30, 2026 |
— | $ | — | — | $ | 5,013 | ||||||||||
| Total |
— | $ | — | — | $ | 5,013 | ||||||||||
Item 5 – Other Information
During the fiscal quarter ended September 30, 2026, none of the Company's directors or executive officers informed the Company of the adoption, modification, or termination of any contract, instruction, or written plan for the purchase or sale of Company securities that was intended to satisfy the affirmative defense conditions of Rule 10b5-1(c) or any non-Rule 10b5-1 trading arrangement.
Item 6 – Exhibits
| 31.1 |
Rule 13a-14(a) Certification of the Chief Executive Officer * |
|
| 31.2 |
Rule 13a-14(a) Certification of the Chief Financial Officer * |
|
| 32.0 |
Section 1350 Certification * |
|
| 101.INS |
Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document | |
| 101.SCH |
Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL |
Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF |
Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB |
Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE |
Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 101 |
The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2026 formatted in Inline XBRL, filed herewith: (i) the Consolidated Statements of Financial Condition (unaudited), (ii) the Consolidated Statements of Income (unaudited), (iii) the Consolidated Statements of Comprehensive Income (unaudited), (iv) the Consolidated Statements of Stockholders’ Equity (unaudited), (v) the Consolidated Statements of Cash Flows (unaudited) and (vi) the Notes to Consolidated Financial Statements (unaudited) |
|
| 104 |
The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2026, formatted in Inline XBRL (included with Exhibit 101) |
* Filed herewith
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.
| MAINSTREET BANCSHARES, INC. |
||||
| (Registrant) |
||||
| Date: November 9, 2026 |
By: |
/s/ Jeff W. Dick |
||
| Jeff W. Dick |
||||
| Chairman & Chief Executive Officer |
||||
| (Principal Executive Officer) |
||||
| Date: November 9, 2026 | By: |
/s/ Richard A. Vari |
||
| Richard A. Vari | ||||
| Executive Vice President and |
||||
| Chief Financial Officer |
||||
| (Principal Financial Officer and Principal Accounting Officer) |