CoastalSouth Bancshares, Inc.
For the period ended Jun 30, 2026. Filed Aug 7, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2026 · Filed Aug 7, 2026
COSO$28.15-0.4%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2026-03-31; filed 2026-05-08.
0001193125-26-214695
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-08-07.
0001297107-26-000014
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 267 previous paragraphs and 305 current paragraphs.
193 unchanged; 72 reworded; 26 added; 2 removed; 0 previous and 14 current paragraphs rearranged.
Tables are not compared: 34 previous and 37 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (26)
Current report
risks and costs related to the development and use of artificial intelligence in our industry and generally;
Current report
Noninterest income for the three months ended June 30, 2026 was approximately $2.2 million, an increase of $407 thousand or 22.7%, compared to approximately $1.8 million for the three months ended June 30, 2025. This increase was principally across the board, but mostly in other noninterest income.
Current report
Other professional services expense for the three months ended June 30, 2026 was $632 thousand compared to $973 thousand for the three months ended June 30, 2025, a decrease of $341 thousand, or 35.0%. This decrease was across multiple categories, primarily due to lower recruiting fees, loan collection related expense, and consultant fees; offset by a net increase in other categories, primarily legal fees expense.
Current report
The following discussion of our results of operations compares the six months ended June 30, 2026 and 2025. We reported net income for the six months ended June 30, 2026 of $13.7 million compared to net income of $11.0 million for the six months ended June 30, 2025. The increase of $2.6 million was primarily due to growth of our net interest income as a result of an overall better performance during the six months ended June 30, 2026; offset by an increase in noninterest expense that was commensurate with our strategic growth.
Current report
Net Interest Income
Current report
Total interest income for the six months ended June 30, 2026 was $66.1 million compared to $61.8 million for the six months ended June 30, 2025, an increase of $4.3 million, or 7.0%. This increase was primarily due to growth in our average total earning assets by $194.2 million principally in the average loans portfolio, notwithstanding a decrease in yields by 14 basis points from the comparable period.
Current report
Interest and fees on LHFI were $51.1 million for the six months ended June 30, 2026 compared to $46.1 million for the six months ended June 30, 2025, an increase of approximately $5.0 million, or 10.8%. This increase was primarily attributable to growth of average LHFI which grew by $175.8 million, notwithstanding the yield decrease by 7 basis points compared to the same period last year. Interest and fees on LHFS remained flat at approximately $6.1 million for the six months ended June 30, 2026 and 2025, notwithstanding a decrease in yields by 65 basis points.
Current report
Interest income on investment securities was $7.5 million for the six months ended June 30, 2026 compared to $7.7 million for the six months ended June 30, 2025, a decrease of $172 thousand, or 2.2%. This decrease was primarily driven by the yield on investment securities decreasing by 28 basis points, notwithstanding an increase in the average balance by $14.3 million.
Current report
Interest expense for the six months ended June 30, 2026 was $25.7 million compared to approximately $27.0 million for the six months ended June 30, 2025, a decrease of approximately $1.3 million, or 4.7%. This decrease was primarily attributable to a 35 basis point decrease in the average yield on overall total interest-bearing liabilities, primarily in money market and time deposits accounts, due to rates adjustments, coupled with a decrease in yield for the borrowings. Average borrowings outstanding increased from June 30, 2025 to June 30, 2026 by $2.3 million, or 8.4%, while the yield decreased by 261 basis points, primarily due to the repayment of the Company's subordinated debt during the third quarter of 2025.
Current report
Provision for Credit Losses
Current report
Provision for credit losses for the six months ended June 30, 2026 was $1.0 million compared to $1.4 million for the six months ended June 30, 2025, a decrease of $341 thousand. This decrease was primarily attributable to higher loan volume during the six months ended June 30, 2025 and an increase in reserves of individually analyzed collateral-dependent loans, offset by other changes in loss rates for the six months ended June 30, 2025. Our allowance for credit losses as a percentage of gross LHFI at June 30, 2026 and 2025 was 1.16% and 1.15%, respectively.
Current report
Noninterest Income
Current report
Noninterest income for the six months ended June 30, 2026 was $4.2 million, an increase of $493 thousand or 13.4%, compared to $3.7 million for the six months ended June 30, 2025. This increase was across multiple categories, primarily gain on sale of GGL and income from mortgage originations, offset by a decrease in other noninterest income.
Current report
Other noninterest income decreased by $217 thousand to $809 thousand for the six months ended June 30, 2026 compared to approximately $1.0 million for the six months ended June 30, 2025. This decrease was primarily due to a previously disclosed nonrecurring $438 thousand of income recognized from a Small Business Investment Company ("SBIC") partnership investment related to the sale of one of the fund's underlying investments during 2025; offset by a net increase in other noninterest income, primarily gain on sale of other loans. Apart from this SBIC partnership related income, the largest component of other non-interest income generally consists of SBA loan servicing fees. SBA loan servicing fees increased by $43 thousand during the six months ended June 30, 2026 compared to the same period in 2025.
Current report
Noninterest Expense
Current report
Noninterest expense for the six months ended June 30, 2026 was $26.4 million compared to $23.5 million for the six months ended June 30, 2025, an increase of $2.9 million, or 12.4%. This increase was across multiple noninterest expense categories but primarily in salaries and employee benefits, due to Company's growth and compensation adjustments; offset by a net decrease in other categories, primarily other professional services.
Current report
Software and technology expense for the six months ended June 30, 2026 was $1.7 million compared to $1.4 million for the six months ended June 30, 2025, an increase of $265 thousand, or 18.6%. This expense primarily comprised information technology services, software licenses and maintenance and was generally commensurate with the Company's growth.
Current report
Other professional services expense for the six months ended June 30, 2026 was $1.2 million compared to $1.7 million for the six months ended June 30, 2025, a decrease of $439 thousand, or 26.4%. This decrease was primarily in loan-collection-related expenses and employees recruiting fees; offset by a net increase in other categories, principally legal fees.
Current report
Data processing expense for the six months ended June 30, 2026 was approximately $1.3 million similar to approximately $1.3 million for the six months ended June 30, 2025, an increase of $60 thousand, or 4.7%. The increase in data processing expense was in line with the Company's increased wire and account processing volumes and other processing costs that were commensurate with growth, generally.
Current report
FDIC insurance and regulatory assessment expense for the six months ended June 30, 2026 was $679 thousand compared to $705 thousand for the six months ended June 30, 2025, a decrease of $26 thousand, or 3.7%. This decrease was primarily attributable to changes in asset mix and asset growth rates from 2025 to 2026.
Current report
Marketing and advertising expense for the six months ended June 30, 2026 was $555 thousand compared to $502 thousand for the six months ended June 30, 2025, an increase of $53 thousand, or 10.6%. This increase was primarily attributable to higher marketing and advertising costs associated with increased digital advertising, mailings, and sponsorships during 2026. Marketing and advertising expense is included in other noninterest expenses in our Company’s Consolidated Statements of Income.
Current report
Other noninterest expense, excluding marketing and advertising expense, for the six months ended June 30, 2026 were $2.8 million compared to $2.6 million for the six months ended June 30, 2025, an increase of $166 thousand, or 6.3%. This increase was across multiple categories but primarily was attributable to increases in general and administrative expense and other loan expense; offset by a net decrease in other noninterest categories, primarily board of directors fees and OREO writedowns. Included in other noninterest expenses for the six months ended June 30, 2026 and 2025 were directors’ fees paid in cash of $269 thousand and $351 thousand, respectively.
Current report
Income Tax Expense
Current report
Income tax expense for the six months ended June 30, 2026 and 2025 was $3.5 million and $2.6 million, respectively. Effective tax rates were 20.2% and 19.1% for the six months ended June 30, 2026 and 2025, respectively. The increase in effective tax rate was primarily due to varying amounts of tax credits recognized in the comparative periods. We carried a net deferred tax asset of $15.7 million and $17.2 million at June 30, 2026 and 2025, respectively.
Current report
Nonperforming loans were approximately $18.3 million at June 30, 2026 and December 31, 2025 and remained relatively flat.
Current report
Dividends — The sole source of funds available to pay shareholders' dividends is from the Company’s earnings. As of June 30, 2026, $1.2 million in common stock dividends were declared by the Company as of year-to-date. There were no common stock dividends declared or paid as of December 31, 2025. Any future determination to pay dividends to holders of our common stock will depend on our results of operations, financial condition, capital requirements, banking regulations, contractual restrictions and any other factors that our Board of Directors may deem relevant.
Removed paragraphs (2)
Previous report
Noninterest income for the three months ended March 31, 2026 was approximately $2.0 million, an increase of $86 thousand or 4.6%, compared to approximately $1.9 million for the three months ended March 31, 2025. This increase was primarily in gain on sale of government guaranteed loans ("GGL") and mortgage related income, offset by a net decrease in other categories of noninterest income, primarily in other noninterest income.
Previous report
Nonperforming loans were approximately $18.2 million and $18.3 million at March 31, 2026 and December 31, 2025, respectively. The slight decrease in nonperforming loans from December 31, 2025 to March 31, 2026 was primarily due to payments collected on nonaccrual loans during the period, offset by loans transferred to nonaccrual status.
Reworded paragraphs (72)
Previous wording
The purpose of this discussion and analysis of financial condition and results of operations, also referred to hereafter as this MD&A, is to aid in understanding significant changes in the financial condition of CoastalSouth Bancshares, Inc. and our wholly owned subsidiary, Coastal States Bank, from December 31, 2025 through March 31, 2026 and on our results of operations for the three months ended March 31, 2026 and 2025. This discussion and analysis should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2025 included on the Company’s 2025 Form 10-K and information presented elsewhere in this Quarterly Report on Form 10‑Q, particularly the unaudited consolidated financial statements and related notes appearing in Item 1.
Current wording
The purpose of this discussion and analysis of financial condition and results of operations, also referred to hereafter as this MD&A, is to aid in understanding significant changes in the financial condition of CoastalSouth Bancshares, Inc. and our wholly owned subsidiary, Coastal States Bank, as of December 31, 2025 and June 30, 2026, and on our results of operations for the three and six months ended June 30, 2026 and 2025. This discussion and analysis should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2025 included on the Company’s 2025 Form 10-K and information presented elsewhere in this Quarterly Report on Form 10‑Q, particularly the unaudited consolidated financial statements and related notes appearing in Item 1.
Previous wording
the impact of adverse developments in the banking industry, on client confidence, liquidity, and regulatory responses to these developments (including increases in the cost of our deposit insurance assessments and increased regulatory scrutiny), our ability to effectively manage our liquidity risk and any growth plans, and the availability of capital and funding;
Current wording
the impact of adverse developments, or actual or perceived instability, in the banking industry, on client confidence, liquidity, and regulatory responses to these developments (including increases in the cost of our deposit insurance assessments and increased regulatory scrutiny), our ability to effectively manage our liquidity risk and any growth plans, and the availability of capital and funding;
Previous wording
a breach in security of our information systems, including the occurrence of cyber-attack incidents or a deficiencies in cyber security;
Current wording
a breach in security of our information systems, including the occurrence of cyber-attack incidents or deficiencies in cyber security;
Previous wording
The following table sets forth unaudited selected financial data for the most recent five quarters and the three months ended March 31, 2026 and 2025. This data should be read in conjunction with the unaudited consolidated financial statements and accompanying notes included in Item 1 and the information contained in this Item 2.
Current wording
The following table sets forth unaudited selected financial data for the most recent five quarters and the six months ended June 30, 2026 and 2025. This data should be read in conjunction with the unaudited consolidated financial statements and accompanying notes included in Item 1 and the information contained in this Item 2.
Previous wording
The following discussion of our results of operations compares the three months ended March 31, 2026 and 2025. We reported net income for the three months ended March 31, 2026 of $6.3 million compared to net income of approximately $5.1 million for the three months ended March 31, 2025. The increase of approximately $1.3 million was principally attributable to a higher net interest income, offset by higher noninterest expense, primarily salaries and employee benefits.
Current wording
The following discussion of our results of operations compares the three months ended June 30, 2026 and 2025. We reported net income for the three months ended June 30, 2026 of $7.3 million compared to net income of approximately $6.0 million for the three months ended June 30, 2025. The increase of approximately $1.4 million was principally attributable to a higher net interest income, offset by higher noninterest expense, primarily salaries and employee benefits.
Previous wording
Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following tables set forth the effects of changing interest rates and volumes on our net interest income during the periods indicated. The information is provided with respect to (i) effects on interest income attributable to changes in volume (change in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Change applicable to both volumes and rate have been allocated to volume.
Current wording
Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following tables set forth the effects of changing interest rates and volumes on our net interest income during the periods indicated. The information is provided with respect to (i) effects on interest income attributable to changes in volume (change in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Changes applicable to both volumes and rate have been allocated to volume.
Previous wording
Net interest income for the three months ended March 31, 2026 was $19.7 million compared to $16.8 million for the three months ended March 31, 2025, an increase of $3.0 million, or 17.8%. This increase was primarily due to an increase in the average balance of our total interest-earning assets coupled with a decrease in the average rate paid on interest-bearing liabilities. The increase in the average balance for the interest-earning assets was primarily due to an increase in average federal funds sold and a net increase in average loans outstanding. The yield on total earning assets and interest-bearing liabilities decreased by 13 and 36 basis points, respectively, during the same period.
Current wording
Net interest income for the three months ended June 30, 2026 was $20.7 million compared to $18.1 million for the three months ended June 30, 2025, an increase of $2.6 million, or 14.3%. This increase was primarily due to an increase in the average balance of our total interest-earning assets coupled with a decrease in the average rate paid on interest-bearing liabilities. The increase in the average balance for the interest-earning assets was primarily due to an increase in average loans outstanding and investment securities; offset by a net decrease in other categories, primarily federal funds sold. The yield on total earning assets and interest-bearing liabilities decreased by 14 and 35 basis points, respectively, during the same period.
Previous wording
Total interest income for the three months ended March 31, 2026 was $32.6 million compared to $30.0 million for the three months ended March 31, 2025, an increase of $2.5 million, or 8.5%. This increase was primarily due to growth in our loan portfolios notwithstanding with lower yields.
Current wording
Total interest income for the three months ended June 30, 2026 was $33.6 million compared to $31.8 million for the three months ended June 30, 2025, an increase of $1.8 million, or 5.6%. This increase was primarily due to growth in our loan portfolios, notwithstanding lower yields; offset by a modest net decrease in other categories, primarily federal funds sold.
Previous wording
Interest and fees on LHFI were $25.1 million for the three months ended March 31, 2026 compared to $22.3 million for the three months ended March 31, 2025, an increase of $2.8 million, or 12.6%. This increase was primarily attributable to an increase in average LHFI of $189.9 million, or 13.3%, despite a decrease in yield. The yield on gross LHFI decreased by 3 basis points compared to the same period in 2025. Interest and fees on LHFS were $2.9 million for the three months ended March 31, 2026 compared to $2.8 million for the three months ended March 31, 2025. This increase was primarily due to an increase in the average balance of LHFS outstanding whereas the yield decreased by 90 basis points compared to the same period in 2025.
Current wording
Interest and fees on LHFI were $26.0 million for the three months ended June 30, 2026 compared to $23.8 million for the three months ended June 30, 2025, an increase of $2.2 million, or 9.1%. This increase was primarily attributable to an increase in average LHFI of $161.8 million, or 10.7%, despite a decrease in yield. The yield on gross LHFI decreased by 9 basis points compared to the same period in 2025. Interest and fees on LHFS were $3.2 million for the three months ended June 30, 2026 compared to $3.3 million for the three months ended June 30, 2025. This decrease was primarily due to a decreased yield by 43 basis points, notwithstanding an increase in the average balance of LHFS outstanding compared to the same period in 2025.
Previous wording
Interest income on investment securities was $3.6 million for the three months ended March 31, 2026 compared to $3.8 million for the three months ended March 31, 2025. This decrease was primarily due to the fact that the average balance increased by $8.5 million coupled with a 34 basis points decrease in yield on investment securities during the period.
Current wording
Interest income on investment securities remained flat at $3.9 million for the three months ended June 30, 2026 and 2025. Investment securities average balance increased by $20.0 million, notwithstanding a 24 basis points decrease in yield during the period.
Previous wording
Interest expense for the three months ended March 31, 2026 was $12.8 million compared to $13.3 million for the three months ended March 31, 2025. This decrease was primarily driven by lower average time deposits and borrowings, coupled with a 36 basis point decrease in the average cost of overall total interest-bearing liabilities, primarily in borrowings, due to the payoff of the Company's subordinated debt during the third quarter of 2025, and money market and time deposit accounts, as the rates were adjusted to align with the market.
Current wording
Interest expense for the three months ended June 30, 2026 was $12.9 million compared to $13.7 million for the three months ended June 30, 2025, a decrease of $822 thousand, or 6.0%. This decrease was primarily driven by lower average time deposits, coupled with a 35 basis point decrease in the average cost of overall total interest-bearing liabilities, primarily in borrowings, due to the payoff of the Company's subordinated debt during the third quarter of 2025, and money market and time deposit accounts, as rates continues to align with the market.
Previous wording
Net interest margin for the three months ended March 31, 2026 and 2025 was 3.59% and 3.38%, respectively. Net interest margin and net interest income are influenced by internal and external factors. Internal factors include balance sheet changes on both volume and mix and pricing decisions, and external factors include changes in market interest rates, competition and the shape of the interest rate yield curve. This increase in our net interest margin was primarily due to a combination of average total earning assets growth and a decrease in yield for average total interest-bearing liabilities. Average earning assets for the three months ended March 31, 2026 increased by $219.7 million compared to the three months ended March 31, 2025, principally due to growth of our loan portfolios. Average interest-bearing liabilities for the three months ended March 31, 2026 increased by $129.1 million compared to the three months ended March 31, 2025, driven by growth in average interest-bearing deposits, primarily money market and demand deposits accounts.
Current wording
Net interest margin for the three months ended June 30, 2026 and 2025 was 3.66% and 3.46%, respectively. Net interest margin and net interest income are influenced by internal and external factors. Internal factors include balance sheet changes on both volume and mix and pricing decisions, and external factors include changes in market interest rates, competition and the shape of the interest rate yield curve. This increase in our net interest margin was primarily due to a combination of average total earning assets growth and a decrease in yield for average total interest-bearing liabilities. Average earning assets for the three months ended June 30, 2026 increased by $169.0 million compared to the three months ended June 30, 2025, principally due to growth of our loan portfolios. Average interest-bearing liabilities for the three months ended June 30, 2026 increased by $83.4 million compared to the three months ended June 30, 2025, driven by growth in average interest-bearing deposits, primarily money market and demand deposits accounts; offset by a net decrease in other interest-bearing liabilities categories, primarily time deposits.
Previous wording
Provision for credit losses for the three months ended March 31, 2026 was $382 thousand compared to $629 thousand for the three months ended March 31, 2025, a decrease of $247 thousand or 39.3%. This decrease was primarily due to changes in loss rates and economic conditions, and higher loan production during the three months ended March 31, 2025, compared to the three months ended March 31, 2026, offset by a change to individual loan reserves between the comparative periods. Our allowance for credit losses as a percentage of gross LHFI was 1.16% at March 31, 2026 and 2025.
Current wording
Provision for credit losses for the three months ended June 30, 2026 was $658 thousand compared to $752 thousand for the three months ended June 30, 2025, a decrease of $94 thousand or 12.5%. This decrease was primarily due to higher loan production during the three months ended June 30, 2025, compared to the three months ended June 30, 2026, offset by a change to individual loan reserves and updates to loss rates and economic scenarios between the comparative periods. Our allowance for credit losses as a percentage of gross LHFI was 1.16% and 1.15% at June 30, 2026 and 2025, respectively.
Previous wording
Mortgage banking related income increased by $173 thousand to $394 thousand for the three months ended March 31, 2026 compared to $221 thousand for the three months ended March 31, 2025. This increase was primarily due to higher secondary market mortgage production which is comprised primarily of activity related to the sale of consumer mortgage loans as well as loan origination fees such as closing charges, document review fees, application fees, other loan origination fees, and loan processing fees.
Current wording
Mortgage banking related income increased by $77 thousand to $403 thousand for the three months ended June 30, 2026 compared to $326 thousand for the three months ended June 30, 2025. This increase was primarily due to higher secondary market mortgage production which is comprised primarily of activity related to the sale of consumer mortgage loans as well as loan origination fees such as closing charges, document review fees, application fees, other loan origination fees, and loan processing fees.
Previous wording
Gain on sale of GGL increased by $337 thousand for the three months ended March 31, 2026. There were no GGL sales during the three months ended March 31, 2025. The Company's gain on the sale of GGL volume increases or decreases based on the attractiveness of market premiums and the amount of inventory of loans that are saleable.
Current wording
Gain on sale of GGL increased by $42 thousand for the three months ended June 30, 2026 compared to $265 thousand for the three months ended June 30, 2025. The Company's gain on the sale of GGL volume increases or decreases based on the attractiveness of market premiums and the amount of inventory of loans that are saleable.
Previous wording
Other noninterest income decreased by $468 thousand to $275 thousand for the three months ended March 31, 2026 compared to $743 thousand for the three months ended March 31, 2025. This decrease was primarily due to nonrecurring $438 thousand recognized income from a Small Business Investment Companies ("SBIC") partnership investment recognized during three months ended March 31, 2025 related to the sale of one of the underlying fund investments, coupled with a net decrease in other categories within other noninterest income.
Current wording
Other noninterest income increased by $251 thousand to $534 thousand for the three months ended June 30, 2026 compared to $283 thousand for the three months ended June 30, 2025. This increase was primarily due to gain on sale of other loans, coupled with a net increase in other categories within other noninterest income.
Previous wording
Changes to income from bank-owned life insurance policies ("BOLI"), interchange and card fee income, and service charges on deposit accounts remained comparable between three months ended March 31, 2026 and three months ended March 31, 2025.
Current wording
Changes to income from bank-owned life insurance policies ("BOLI"), interchange and card fee income, and service charges on deposit accounts remained fairly comparable between three months ended June 30, 2026 and three months ended June 30, 2025.
Previous wording
Noninterest expense for the three months ended March 31, 2026 was $13.0 million compared to $11.4 million for the three months ended March 31, 2025, an increase of $1.6 million, or 14.2%. This increase was across multiple noninterest expense categories primarily in salaries and employee benefits, occupancy and equipment, and software and other technology expense, coupled with a net increase in all other noninterest expense categories.
Current wording
Noninterest expense for the three months ended June 30, 2026 was $13.4 million compared to $12.1 million for the three months ended June 30, 2025, an increase of $1.3 million, or 10.6%. This increase was primarily in salaries and employee benefits, offset by a net decrease in all other noninterest expense categories, primarily other professional services.
Previous wording
Salaries and employee benefits expense for the three months ended March 31, 2026 was $8.0 million compared to $6.7 million for the three months ended March 31, 2025, an increase of $1.4 million, or 20.2%. This increase was attributable to hiring new employees with skills and experience necessary to support our strategic goals coupled with annual merit increases. The average number of full-time equivalent employees was 201 for the three months ended March 31, 2026 compared to 180 for three months ended March 31, 2025.
Current wording
Salaries and employee benefits expense for the three months ended June 30, 2026 was $8.3 million compared to $7.0 million for the three months ended June 30, 2025, an increase of $1.3 million, or 18.8%. This increase was attributable to hiring new employees with skills and experience necessary to support our strategic goals coupled with annual merit increases. The average number of full-time equivalent employees was 201 for the three months ended June 30, 2026 compared to 188 for three months ended June 30, 2025.
Previous wording
Occupancy and equipment expense for the three months ended March 31, 2026 was $886 thousand compared to $788 thousand for the three months ended March 31, 2025, an increase of $98 thousand, or 12.4%. This increase was primarily due to new leases and rental increases, property taxes and depreciation, and upkeep related to the properties.
Current wording
Occupancy and equipment expense for the three months ended June 30, 2026 was $875 thousand compared to $814 thousand for the three months ended June 30, 2025, an increase of $61 thousand, or 7.5%. This increase was primarily due to new leases and rental increases, property taxes and depreciation, and upkeep related to the properties.
Previous wording
Software and technology expense for the three months ended March 31, 2026 was $826 thousand compared to $703 thousand for the three months ended March 31, 2025, an increase of $123 thousand, or 17.5%. This expense was primarily comprised of our information technology services, software licenses and maintenance and commensurate with the Company growth.
Current wording
Software and technology expense for the three months ended June 30, 2026 was $861 thousand compared to $719 thousand for the three months ended June 30, 2025, an increase of $142 thousand, or 19.7%. This expense was primarily comprised of our information technology services, software licenses and maintenance and commensurate with the Company's growth.
Previous wording
Marketing and advertising expense for the three months ended March 31, 2026 was $279 thousand compared to $233 thousand for the three months ended March 31, 2025. Marketing and advertising costs are associated with digital advertising, mailings, and sponsorship. Marketing and advertising expense is included in Other noninterest expenses in our Company’s Consolidated Statements of Operations.
Current wording
Marketing and advertising expense for the three months ended June 30, 2026 was $276 thousand compared to $269 thousand for the three months ended June 30, 2025. Marketing and advertising costs are associated with digital advertising, mailings, and sponsorship. Marketing and advertising expense is included in Other noninterest expenses in our Company’s Consolidated Statements of Income.
Previous wording
Other noninterest expenses, excluding marketing and advertising expense, for the three months ended March 31, 2026 were $1.4 million compared to $1.3 million for the three months ended March 31, 2025, an increase of $63 thousand, or 4.8%. This increase was primarily attributable to increases in other noninterest expense and general and administrative expense, offset by decreases in Board of Directors fees and OREO write-downs as there were no write-downs during the current period. Included in other noninterest expense for the three months ended March 31, 2026 and 2025 were directors’ fees of $156 thousand and $176 thousand, respectively.
Current wording
Other noninterest expense, excluding marketing and advertising expense, for the three months ended June 30, 2026 were $1.4 million compared to $1.3 million for the three months ended June 30, 2025, an increase of $102 thousand, or 7.7%. This increase was primarily attributable to increases in general administrative expense and other loan expense; offset primarily by decreases in Board of Directors fees, coupled with a net decrease in other noninterest expense categories. Included in other noninterest expense for the three months ended June 30, 2026 and 2025 were directors’ fees of $113 thousand and $176 thousand, respectively.
Previous wording
Changes to other professional services expense, data processing expense, and FDIC insurance and regulatory assessment expense remained comparable between three months ended March 31, 2026 and three months ended March 31, 2025.
Current wording
Changes to data processing expense, and FDIC insurance and regulatory assessment expense remained relatively comparable between the three months ended June 30, 2026 and 2025.
Previous wording
Income tax expense for the three months ended March 31, 2026 and 2025 was $2.0 million and $1.5 million, respectively. Effective tax rates were 23.6% and 23.4% for the three months ended March 31, 2026 and 2025, respectively. The increase in effective tax rate compared to the three months ended March 31, 2025 was due to a lower recognition of low income housing tax credits during the three months ended March 31, 2026.
Current wording
Income tax expense for the three months ended June 30, 2026 and 2025 was $1.5 million and $1.1 million, respectively. Effective tax rates were 17.0% and 15.1% for the three months ended June 30, 2026 and 2025, respectively. The increase in effective tax rate was primarily due to varying amounts of tax credits recognized in the comparative periods.
Previous wording
Total assets increased $42.0 million, or 1.8%, to $2.35 billion at March 31, 2026 compared to $2.31 billion at December 31, 2025. The increasing trend in total assets was primarily attributable to continued growth of our loan portfolio.
Current wording
Total assets increased $114.4 million, or 5.0%, to $2.42 billion at June 30, 2026 compared to $2.31 billion at December 31, 2025. The increasing trend in total assets was primarily attributable to continued growth of our loan portfolio.
Previous wording
Average loans, including both LHFI and LHFS, were 79.6% and 79.8% of average earning assets as of March 31, 2026 and December 31, 2025, respectively. Therefore, the quality and diversification of our loan portfolio is an important consideration when reviewing our financial condition. The Company has established systematic procedures for approving and monitoring loans that vary depending on the size and nature of the loan and applies these procedures in a disciplined manner. Total gross loans of $1.83 billion at March 31, 2026 represent an increase of $41.6 million or 2.3% as compared to December 31, 2025.
Current wording
Average loans, including both LHFI and LHFS, were 80.4% and 79.8% of average earning assets as of June 30, 2026 and December 31, 2025, respectively. Therefore, the quality and diversification of our loan portfolio is an important consideration when reviewing our financial condition. The Company has established systematic procedures for approving and monitoring loans that vary depending on the size and nature of the loan and applies these procedures in a disciplined manner. Total gross loans of $1.93 billion at June 30, 2026 represent an increase of $140.2 million or 7.8% as compared to December 31, 2025.
Previous wording
LHFS are primarily comprised of loans acquired through mortgage warehouse lending activities through our MBF division. We act as a warehouse lender by purchasing loans originated by third-party mortgage originators and selling these loans to other third-party investors. Additionally, we sell other types of loans, such as GGL or marine loans, through the normal course of business; when the Company has the intent to sell these loans, they are transferred from LHFI to LHFS. LHFS at March 31, 2026 were $202.6 million compared to $170.9 million at December 31, 2025. At March 31, 2026, LHFS from MBF were $202.2 million and other LHFS were $415 thousand; at December 31, 2025 all LHFS were from MBF. The growth in LHFS was due to increased mortgage refinance volume and growth in MBF customers that originate higher volumes of loans.
Current wording
LHFS are primarily comprised of loans acquired through mortgage warehouse lending activities through our MBF division. We act as a warehouse lender by purchasing loans originated by third-party mortgage originators and selling these loans to other third-party investors. Additionally, we sell other types of loans, such as GGL or marine loans, through the normal course of business; when the Company has the intent to sell these loans, they are transferred from LHFI to LHFS. LHFS at June 30, 2026 were $223.1 million compared to $170.9 million at December 31, 2025. The growth in LHFS was due to increased mortgage refinance volume and growth in MBF customers that originate higher volumes of loans.
Previous wording
Gross LHFI increased $9.9 million, or 0.6%, to approximately $1.63 billion as of March 31, 2026 compared to $1.62 billion at December 31, 2025. There was a higher market demand for our ADC and owner-occupied CRE loans during the three months ended March 31, 2026 from December 31, 2025 as the Company experienced strong loan demand and continues to close many deals in the pipeline.
Current wording
Gross LHFI increased $88.1 million, or 5.4%, to approximately $1.71 billion as of June 30, 2026 compared to $1.62 billion at December 31, 2025. There was a higher market demand for our ADC and owner-occupied CRE loans during the six months ended June 30, 2026 from December 31, 2025 as the Company experienced strong loan demand and continues to close many deals in the pipeline.
Previous wording
The Company engages in a full complement of lending activities, including CRE loans, construction loans, C&I, and consumer purpose loans. Our loan portfolio has concentrations of over 10% of LHFI in income producing CRE, senior housing, marine vessels loans, and residential mortgages with the remaining balance in other categories within commercial and retail loans categories. The Bank's ratio of commercial real estate loans, excluding owner-occupied loans, to total regulatory capital was 222.0% and 230.0% as of March 31, 2026 and December 31, 2025, respectively.
Current wording
The Company engages in a full complement of lending activities, including CRE loans, construction loans, C&I, and consumer purpose loans. Our loan portfolio has concentrations of over 10% of LHFI in income producing CRE, senior housing, marine vessels loans, and residential mortgages with the remaining balance in other categories within commercial and retail loans categories. The Bank's ratio of commercial real estate loans, excluding owner-occupied loans, to total regulatory capital was 238.0% and 230.0% as of June 30, 2026 and December 31, 2025, respectively.
Previous wording
The following tables present the maturity distribution of our loans as of March 31, 2026 and December 31, 2025. The tables show the distribution of such loans between those loans with predetermined (fixed) interest rates and those with variable (floating) interest rates:
Current wording
The following table present the maturity distribution of our loans as of June 30, 2026. The tables show the distribution of such loans between those loans with predetermined (fixed) interest rates and those with variable (floating) interest rates:
Previous wording
As of March 31, 2026, our total commercial loans comprised of approximately $1.01 billion or 61.9%, of loans, compared to $995.2 million, or 61.5% of loans, as of December 31, 2025. Our total commercial loans balances increased by $12.2 million, or 1.2% at March 31, 2026 compared to December 31, 2025.
Current wording
As of June 30, 2026, our commercial loan portfolio comprised of approximately $1.08 billion or 63.1%, of loans, compared to $995.2 million, or 61.5% of loans, as of December 31, 2025. Our total commercial loan balances increased by $81.1 million, or 8.1% at June 30, 2026 compared to December 31, 2025.
Previous wording
As of March 31, 2026, our ADC loans comprised of $130.4 million, or 8.0%, of loans, compared to $119.4 million, or 7.4% of loans, as of December 31, 2025. Our ADC loans balances increased $11.0 million or 9.3% since December 31, 2025 due to continued demand of the ADC loans in our markets.
Current wording
As of June 30, 2026, our ADC loans comprised of $144.4 million, or 8.5%, of loans, compared to $119.4 million, or 7.4% of loans, as of December 31, 2025. Our ADC loans balances increased $25.1 million or 21.0% since December 31, 2025 due to continued demand of the ADC loans in our markets.
Previous wording
As of March 31, 2026, our income producing CRE loans comprised of $376.3 million, or 23.1%, of loans, compared to $378.2 million, or 23.4% of loans, as of December 31, 2025. The weighted average original or renewal loan-to-value ("LTV") of income producing CRE loans with an outstanding balance of greater than $500 thousand, which makes up 97.0% and 96.8% of the income producing CRE balances was 62.0% and 59.7% as of March 31, 2026 and December 31, 2025, respectively. Our income producing CRE loans balances, which remained relatively flat, decreased $1.9 million, or 0.5% since December 31, 2025.
Current wording
As of June 30, 2026, our income producing CRE loans comprised of $417.0 million, or 24.5%, of loans, compared to $378.2 million, or 23.4% of loans, as of December 31, 2025. The weighted average original or renewal loan-to-value ("LTV") of income producing CRE loans with an outstanding balance of greater than $500 thousand, which makes up 97.4% and 96.8% of the income producing CRE balances was 60.1% and 59.7% as of June 30, 2026 and December 31, 2025, respectively. Our income producing CRE loans balances increased $38.8 million, or 10.3% since December 31, 2025 as the demand improved for this loan type.
Previous wording
As of March 31, 2026, our owner-occupied CRE loans comprised of $107.3 million, or 6.6%, of loans, compared to $92.8 million, or 5.7% of loans, as of December 31, 2025. The weighted average original or renewal LTV of owner-occupied CRE loans with an outstanding balance of greater than $500 thousand, which makes up 78.1% and 74.0% of the owner-occupied CRE loans was 72.4% and 74.9% as of March 31, 2026 and December 31, 2025, respectively. Our owner-occupied CRE loans balances increased $14.6 million or 15.7% since December 31, 2025 but the competition remains fierce for this loan type.
Current wording
As of June 30, 2026, our owner-occupied CRE loans comprised of $127.3 million, or 7.5%, of loans, compared to $92.8 million, or 5.7% of loans, as of December 31, 2025. The weighted average original or renewal LTV of owner-occupied CRE loans with an outstanding balance of greater than $500 thousand, which makes up 81.9% and 74.0% of the owner-occupied CRE loans was 70.3% and 74.9% as of June 30, 2026 and December 31, 2025, respectively. Our owner-occupied CRE loans balances increased $34.5 million or 37.2% since December 31, 2025 but the competition remains fierce for this loan type.
Previous wording
As of March 31, 2026, our senior housing loans comprised of $254.4 million or 15.6%, of loans, compared to $259.5 million, or 16.0% of loans as of December 31, 2025. The weighted average original or renewal LTV of senior housing loans was 61.1% and 52.8% as of March 31, 2026 and December 31, 2025, respectively. Our senior housing loans were comprised of 56.6% owner-occupied CRE, 41.7% non-owner occupied CRE and 1.7% construction loans as of March 31, 2026, and were comprised of 50.4% owner-occupied CRE, 41.9% non-owner occupied CRE and 7.7% construction loans at December 31, 2025. Our senior housing loans balances decreased $5.1 million or 2.0% since December 31, 2025 as the Company continues monitoring its concentration of senior housing loans.
Current wording
As of June 30, 2026, our senior housing loans comprised of $248.3 million or 14.5%, of loans, compared to $259.5 million, or 16.0% of loans as of December 31, 2025. The weighted average original or renewal LTV of senior housing loans was 61.6% and 52.8% as of June 30, 2026 and December 31, 2025, respectively. Our senior housing loans were comprised of 56.0% owner-occupied CRE, 42.2% non-owner occupied CRE and 1.8% construction loans as of June 30, 2026, and were comprised of 50.4% owner-occupied CRE, 41.9% non-owner occupied CRE and 7.7% construction loans at December 31, 2025. Our senior housing loans balances decreased $11.2 million or 4.3% since December 31, 2025 as the Company continues monitoring its concentration of senior housing loans.
Previous wording
As of March 31, 2026, our C&I loans comprised of $139.0 million, or 8.6% of loans, compared to $145.4 million, or 9.0% of loans, as of December 31, 2025. Our C&I loans balances decreased by $6.4 million or 4.4% since December 31, 2025 due to lower production.
Current wording
As of June 30, 2026, our C&I loans comprised of $139.3 million, or 8.1% of loans, compared to $145.4 million, or 9.0% of loans, as of December 31, 2025. Our C&I loans balances decreased by $6.1 million or 4.2% since December 31, 2025 due to lower production.
Previous wording
As of March 31, 2026, our total retail loans comprised of $619.9 million, or 38.1% of loans, compared to $622.1 million, or 38.5% of loans, as of December 31, 2025. Our total retail loans balances decreased $2.2 million or 0.4% since December 31, 2025 due to a lower production and demand for our retail products, primarily marine vessels; offset by an increase in residential mortgages loans.
Current wording
As of June 30, 2026, our total retail loans comprised of $629.1 million, or 36.9% of loans, compared to $622.1 million, or 38.5% of loans, as of December 31, 2025. Our total retail loans balances increased $7.0 million or 1.1% since December 31, 2025 due to a modest increase in production and demand across the board for our retail products.
Previous wording
As of March 31, 2026, our residential mortgage loans comprised of $202.5 million, or 12.5% of loans, compared to $200.0 million, or 12.4% of loans, as of December 31, 2025. Our residential mortgage loans balances increased $2.5 million or 1.3% since December 31, 2025 due to continued demand for our residential mortgage products.
Current wording
As of June 30, 2026, our residential mortgage loans comprised of $202.8 million, or 11.9% of loans, compared to $200.0 million, or 12.4% of loans, as of December 31, 2025. Our residential mortgage loans balances increased modestly by $2.8 million or 1.4% since December 31, 2025 due to continued demand for our residential mortgage products.
Previous wording
During the three months ended March 31, 2026, we originated $25.1 million and sold $14.9 million in home mortgage loans. During the year ended December 31, 2025, we originated $93.3 million and sold $46.6 million in home mortgage loans.
Current wording
During the six months ended June 30, 2026, we originated $28.0 million and sold $17.7 million in home mortgage loans. During the year ended December 31, 2025, we originated $93.3 million and sold $46.6 million in home mortgage loans.
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Current report — wording carried from elsewhere
Results of Operations — Comparison of Results of Operations for the Six Months Ended June 30, 2026 and 2025
Current report — wording carried from elsewhere
The following table presents, for the periods indicated, information about: (i) weighted average balances, the total dollar amount of interest income from interest-earning assets and the resultant average yields; (ii) average balances, the total dollar amount of interest expense on interest-bearing liabilities and the resultant average rates; (iii) net interest income; (iv) interest rate spread; and (v) net interest margin. The income and yield from non-taxable investment securities was not adjusted for tax equivalency.
Current report — wording carried from elsewhere
Increases and decreases in interest income and interest expense result from changes in average balances (volume) of interest-earning assets and interest-bearing liabilities, as well as changes in average interest rates. The following tables set forth the effects of changing interest rates and volumes on our net interest income during the periods indicated. The information is provided with respect to (i) effects on interest income attributable to changes in volume (change in volume multiplied by prior rate) and (ii) effects on interest income attributable to changes in rate (changes in rate multiplied by prior volume). Changes applicable to both volumes and rate have been allocated to volume.
Current report — wording carried from elsewhere
Net interest income for the six months ended June 30, 2026 was $40.4 million compared to $34.8 million for the six months ended June 30, 2025, an increase of $5.6 million, or 16.0%. This increase was primarily due to an increase in the average balance of our total interest-earning assets while the yield decreased at a lower rate compared with the decrease in the average rate paid on interest-bearing liabilities despite growth in average interest-bearing liabilities. The increase in the average balance for the total interest-earning assets was primarily due to an increase in average loans outstanding. The yield on total earning assets and interest-bearing liabilities decreased by 14 and 35 basis points, respectively, during the same period.
Current report — wording carried from elsewhere
Net interest margin for the six months ended June 30, 2026 and 2025 was 3.62% and 3.42%, respectively. Net interest margin and net interest income are influenced by internal and external factors. Internal factors include balance sheet changes on both volume and mix and pricing decisions, and external factors include changes in market interest rates, competition and the shape of the interest rate yield curve. This increase in our net interest margin was primarily due to a 35 basis points decrease in the rate on interest-bearing liabilities, partially offset by a 14 basis points decrease in total earning yield.
Current report — wording carried from elsewhere
The following table sets forth the various components of our noninterest income for the periods indicated:
Current report — wording carried from elsewhere
Mortgage banking related income increased by $250 thousand to $797 thousand for the six months ended June 30, 2026 compared to $547 thousand for the six months ended June 30, 2025. This increase was primarily due to higher revenue from mortgage production which is comprised primarily of activity related to the sale of consumer mortgage loans as well as loan origination fees such as closing charges, document review fees, application fees, other loan origination fees, and loan processing fees, albeit slightly lower secondary market volume.
Current report — wording carried from elsewhere
Gain on sale of GGL increased by $379 thousand to $644 thousand for the six months ended June 30, 2026 compared to $265 thousand for the same period during 2025. The Company's gain on the sale of GGL volume increases or decreases based on the attractiveness of market premiums and the amount of inventory of loans that are saleable.
Current report — wording carried from elsewhere
Changes to BOLI income, interchange and card fee income, and Service charges on deposit accounts remained relatively comparable between the six months ended June 30, 2026 and 2025.
Current report — wording carried from elsewhere
The following table sets forth the major components of our noninterest expense for the six months ended June 30, 2026 and 2025:
Current report — wording carried from elsewhere
Salaries and employee benefits expense for the six months ended June 30, 2026 was $16.4 million compared to $13.7 million for the six months ended June 30, 2025, an increase of approximately $2.7 million, or 19.5%. This increase was attributable to hiring new employees with skills and experience necessary to support our strategic goals and annual salary adjustments. The average number of full-time equivalent employees was 201 for the six months ended June 30, 2026 compared to 183 for the six months ended June 30, 2025.
Current report — wording carried from elsewhere
Occupancy and equipment expense for the six months ended June 30, 2026 was $1.8 million compared to $1.6 million for the six months ended June 30, 2025, an increase of approximately $159 thousand, or 9.9%. This increase was primarily due to new leases and rental increases, property taxes and depreciation, and upkeep related to the properties.
Current report — wording carried from elsewhere
as portfolio loans, taking into consideration the likelihood that funding will occur. The ACL for unfunded commitments is included in Other liabilities on the Company’s Consolidated Balance Sheets.
Current report — wording carried from elsewhere
(1) $75 million due within one year represents FHLBA advance outstanding.