MainStreet Bancshares, Inc.

Previous wording

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, 2024, previously filed with the SEC on March 14, 2025. Results for the three months ended March 31, 2025 are not necessarily indicative of results for the year ending December 31, 2025 or any future period.

Current wording

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, 2024, previously filed with the SEC on March 14, 2025. Results for the three and six months ended June 30, 2025 are not necessarily indicative of results for the year ending December 31, 2025 or any future period.

Previous wording

Economic Impact of Federal Spending Reductions

Current wording

Economic Impact of Federal Spending Reductions and New Legislation

Previous wording

The Company recognizes that the economic impact of federal spending reductions, including dismissals of federal employees in the Company’s primary market areas, may have an adverse effect on the Company, particularly after severance payments to terminated federal employees have expired. In addition, consumer confidence and the strength of the US dollar may have been negatively affected by uncertainty associated with proposed tariffs on many imports. We cannot assure you that the economic impacts of these actions would not be material and adverse to our business, financial condition, or results of operations.

Current wording

The Company recognizes that the impact of federal spending reductions, hiring freezes, and layoffs, including dismissals of employees and termination or non-renewal of government contracts in the Company’s primary market areas, may have an adverse economic effect, particularly after severance payments to permanently terminated federal employees expire later in 2025. In addition, consumer confidence and the strength of the US dollar may be negatively affected by uncertainty associated with proposed tariffs on many imports. We cannot assure you that the economic impacts of these actions would not be material and adverse to our business, financial condition, results of operations, or prospects.

Previous wording

The Company's business is conducted through two reportable segments; Core Banking and Financial Technology. Core Banking encompasses the community bank where we offer a full range of banking services to individuals, small to medium-sized businesses and professionals through both traditional and electronic delivery. The Financial Technology segment provides services to money service business, payment processors, and Banking as a Service ("BaaS") for fintechs, social media solutions, application developers, money movers and entrepreneurs who want to embed financials services into their solutions. As of March 31, 2025, the Company has pivoted away from operating BaaS services. Activity resulting from this business line for the quarters ended March 31, 2025 and March 31, 2024 are reported in Note 9 in the Notes to the Consolidated Financial Statements.

Current wording

The Company's business is focused core banking where we offer a full range of banking services to individuals, small to medium-sized businesses and professionals through both traditional and electronic delivery. During the quarter ended March 31, 2025, the Company pivoted away from certain operating BaaS services. Activities resulting from this business line for the quarters ended June 30, 2025 and June 30, 2024 are reported in Note 9 in the Notes to the Consolidated Financial Statements.

Previous wording

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. In December 2024, MainStreet Community Capital submitted an application to apply for the 2024 NMTC program allocation. Allocation awards are expected to be announced during the fourth quarter of 2025.

Current wording

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. In December 2024, MainStreet Community Capital submitted an application to apply for the 2024 NMTC program allocation. Allocation awards are expected to be announced during the fourth quarter of 2025. The One Big Beautiful Bill signed into law on July 4, 2025, permanently extended the new market tax credit program.

Previous wording

Our critical accounting policies involving significant judgments and assumptions used in the preparation of the consolidated financial statements as of March 31, 2025, have remained unchanged since our Annual Report on Form 10-K for the year ended December 31, 2024 was filed, unless noted herein. Any changes are discussed in our Recently Issued Accounting Pronouncements.

Current wording

Our critical accounting policies involving significant judgments and assumptions used in the preparation of the consolidated financial statements as of June 30, 2025, have remained unchanged since our Annual Report on Form 10-K for the year ended December 31, 2024 was filed, unless noted herein. Any changes are discussed under "Recently Adopted Accounting Developments" in Note 1 of the Notes to Consolidated Financial Statements.

Previous wording

Total interest income increased$0.5 million for the three months ended March 31, 2025 from the same period in 2024. The increase was primarily the result of an increase in interest and fees on loans of$0.5 million. Total interest expense decreased $0.4 million for the three months ended March 31, 2025 from the same period in 2024 due to fluctuations in deposit interest expense described below. Net interest income increased $0.9 million for the three months ended March 31, 2025 from the same period in 2024. The provision for credit losses was $0 for the three months ended March 31, 2025 compared to a recovery of credit losses of $195,000 for the three months ended March 31, 2024. Non-interest income increased $143,000 for the three months ended March 31, 2025 from the same period in 2024. The increase in non-interest income was primarily due to a $61,000 increase in deposit account service charges and a $60,000 gain on retirement of subordinated debt. Non-interest expense increased by$1.8 million for the three months ended March 31, 2025 compared to the same period in 2024, primarily due to increases in salaries and employee benefits, other operating expenses, and outside services. Net income decreased $0.9 million to$2.5 million for the three months ended March 31, 2025 from$3.3 million for the three months ended March 31, 2024. The decrease in net income was primarily impacted by the increase in non-interest expense.

Current wording

Total interest income increased$850,000 for the three months ended June 30, 2025 from the same period in 2024. The increase was primarily the result of an increase in interest and fees on loans of$788,000 due to collection of accrued interest on a fully repaid nonaccrual loan. Total interest expense decreased $2.4 million for thethree months ended June 30, 2025 from the same period in 2024 due to fluctuations in deposit interest expense described below. Net interest income increased $3.2 million for the three months ended June 30, 2025 from the same period in 2024. The recovery of credit losses was $543,000 for the three months ended June 30, 2025 compared to a provision for credit losses of $638,000 for the three months ended June 30, 2024. Non-interest income increased $302,000 for the three months ended June 30, 2025 from the same period in 2024. The increase in non-interest income was primarily due to a $68,000 gain on retirement of subordinated debt and a $103,000 gain on equity securities during thethree months ended June 30, 2025. Non-interest expense increased by$1.9 million for the three months ended June 30, 2025 compared to the same period in 2024, primarily due to increases in salaries and employee benefits, outside services, and FDIC insurance. Of these expenses, $1.8 million were not incurred in the comparable quarter and were primarily related to the Company's decision to pivot away from certain operating BaaS services. Excluding these expenses, non-interest expense was $12.96 million for the three months ended June 30, 2025, an increase of $127,000 from $12.8 million for the three months ended June 30, 2024. Net income increased $2.0 million to$4.6 million for the three months ended June 30, 2025 from$2.6 million for the three months ended June 30, 2024. The increase in net income was primarily driven by the decrease in total interest expense.

Previous wording

Total interest income increased $0.5 million, or 1.5%, to$33 million for the three months ended March 31, 2025 from$32.5 million for the three months ended March 31, 2024, on a tax equivalent basis. The increase was primarily the result of an increase in interest and fees on loans of$0.5 million. Total average interest-earning assets increased$124.2 million, to$2.04 billion for the three months ended March 31, 2025 from$1.91 billion for the same period in 2024 primarily because of an increase of$109.6 million in the average balance of loans and by an increase of $20.5 million in the average balance of interest bearing deposits at other financial institutions. These increases were offset by a$5.1 million decrease in the average balance of investment securities. The average yield on our interest-earning assets decreased 25 basis points to 6.57% for the three months ended March 31, 2025 as compared to 6.82% for the three months ended March 31, 2024 primarily due to market conditions. For the three months ended March 31, 2025, the Company reversed $104,000 in accrued interest income in relation to loans placed on nonaccrual, as compared to $399,000 for the three months ended March 31, 2024.

Current wording

Total interest income increased $850,000, or 2.5%, to $34.4 million for the three months ended June 30, 2025 from $33.5 million for the three months ended June 30, 2024, on a tax equivalent basis. The increase was primarily the result of an increase in interest and fees on loans of$788,000. Total average interest-earning assets increased $57.1 million, to$2.02 billion for the three months ended June 30, 2025 from$1.96 billion for the same period in 2024 primarily because of an increase of$37.2 million in the average balance of loans and by an increase of $23.6 million in the average balance of federal funds sold and interest bearing deposits at other financial institutions. These increases were offset by a$3.7 million decrease in the average balance of investment securities. The average yield on our interest-earning assets decreased 2 basis points to 6.84% for the three months ended June 30, 2025 as compared to 6.86% for the three months ended June 30, 2024 primarily due to market conditions. For the three months ended June 30, 2025, the Company reversed $128,000 in accrued interest income in relation to loans placed on nonaccrual, as compared to $659,000 for the three months ended June 30, 2024.

Previous wording

Interest and fees on loans increased $0.5 million, to $31.1 million for the three months ended March 31, 2025 from $30.6 million for the same period in 2024. This was primarily due to an increase in the average loans outstanding increasing $109.6 million, which increased to $1.84 billion for the three months ended March 31, 2025 from $1.73 billion for the three months ended March 31, 2024. The average yield on loans decreased 24 basis points, or 3.3%, for the three months ended March 31, 2025 as compared to the three months ended March 31, 2024.

Current wording

Interest and fees on loans increased $788,000, to$32.4 million for the three months ended June 30, 2025 from$31.7 million for the same period in 2024. This was primarily due to the collection of accrued interest on a fully repaid nonaccrual loan and due to anincrease in the average loans outstanding of$37.2 million, which was$1.82 billion for the three months ended June 30, 2025 compared to$1.78 billion for thethree months ended June 30, 2024. The average yield on loans increased 3 basis points, or 0.4%, for the three months ended June 30, 2025 as compared to thethree months ended June 30, 2024.

Previous wording

Interest income on federal funds sold and interest-earning deposits decreased by $13,000 to $1.17 million for the three months ended March 31, 2025, from $1.18 million for the three months ended March 31, 2024. The decrease was primarily due to the reduction in yield of 91 basis points. The average balance of interest-earning deposits and federal funds sold increased $19.7 million to $111.7 million for the three months ended March 31, 2025 from $92.0 million for the same period in 2024. The average yield decreased to 4.24% for the three months ended March 31, 2025 from 5.15% for the same period in 2024.

Current wording

Interest income on federal funds sold and interest-earning deposits increased by $62,000 to $1.15 million for the three months ended June 30, 2025, from $1.08 million for the three months ended June 30, 2024. The average balance of interest-earning deposits and federal funds sold increased $23.6 million to $108.3 million for the three months ended June 30, 2025 from $84.7 million for the same period in 2024. The average yield decreased to 4.24% for the three months ended June 30, 2025 from 5.13% for the same period in 2024.

Previous wording

Interest on investment securities decreased by $24,000 to $753,000 for the three months ended March 31, 2025 from $777,000 for the three months ended March 31, 2024 on a fully tax-equivalent basis. Interest on investments in U.S. Government Agencies and U.S. Municipals was $364,000 for the three months ended March 31, 2025 and March 31, 2024. Interest on mortgage-backed securities decreased by $16,000, or 15.7%, to $86,000 for the three months ended March 31, 2025, from $102,000 for the three months ended March 31, 2024. Subordinated debt interest income decreased by $4,000, or 2.9%, to $132,000 for the three months ended March 31, 2025, from $136,000 for the three months ended March 31, 2024. The average yield on taxable securities increased 9 basis points, to 3.21% and the average yield on tax-exempt securities increased 18 basis points, to 3.84% on a tax equivalent basis for the three months ended March 31, 2025, from 3.12% and 3.66%, respectively, for the same period in 2024. Despite the increase in average yield, interest on investment securities decreased given that the average balance of investment securities decreased by $5.1 million, to $88.3 million for the three months ended March 31, 2025, from $93.4 million for the three months ended March 31, 2024.

Current wording

Interest on investment securities was$769,000 for the three months ended June 30, 2025 and June 30, 2024 on a fully tax-equivalent basis. Interest on investments in U.S. Government Agencies and U.S. Municipals was $365,000 for the three months ended June 30, 2025 and $369,000 for the three months ended June 30, 2024. Interest on mortgage-backed securities was $94,000 for the three months ended June 30, 2025 and June 30, 2024. Subordinated debt interest income increased by $6,000, or 4.7%, to $134,000 for the three months ended June 30, 2025, from $128,000 for the three months ended June 30, 2024. The average yield on taxable securities increased 15 basis points, to 3.27% and the average yield on tax-exempt securities increased 12 basis points, to 3.83% on a tax equivalent basis for the three months ended June 30, 2025, from 3.12% and 3.71%, respectively, for the same period in 2024. Despite the increase in average yield, interest on investment securities decreased given that the average balance of investment securities decreased by $3.7 million, to $88.3 million for the three months ended June 30, 2025, from $92.0 million for the three months ended June 30, 2024.

Previous wording

Total interest expense decreased $391,000, to $16.5 million for the three months ended March 31, 2025 from $16.8 million for the three months ended March 31, 2024, primarily due to a $766,000 decrease in interest expense on interest bearing demand deposits and a $96,000 decrease in total interest expense paid on borrowings. These decreases were offset by a $223,000 increase in interest expense on time deposits and a $184,000 increase in interest expense on money market deposits.

Current wording

Total interest expense decreased $2.4 million to $15.5 million for the three months ended June 30, 2025 from $17.9 million for the three months ended June 30, 2024, primarily due to a $2.2 million decrease in interest expense on interest bearing deposits and a $212,000 decrease in total interest expense paid on borrowings.

Previous wording

Interest expense on deposits decreased $295,000 to $15.6 million for the three months ended March 31, 2025 from $15.9 million for the three months ended March 31, 2024 primarily as a result of a decrease in cost of funds. The increase in average balance of interest-bearing deposits was $180.9 million to $1.52 billion during the three months ended March 31, 2025 as compared to $1.33 billion for the three months ended March 31, 2024. The increase in the average balance of interest-bearing deposits was primarily a result of a $104.1 million increase in the average balance of money market deposit accounts and by a $88 million increase in the average balance of time deposits. The average cost of interest-bearing deposits was 417 basis points for the three months ended March 31, 2025, compared to 477 basis points for the three months ended March 31, 2024. The average rate paid on money market deposits decreased 73 basis points to 3.98% for the three months ended March 31, 2025 from 4.71% for the three months ended March 31, 2024. The average rate paid on interest-bearing demand deposits decreased 117 basis points to 3.81% for the three months ended March 31, 2025 from 4.98% for the three months ended March 31, 2024 primarily due to market competition and the interest rate environment. The average cost of certificates of deposit decreased by 39 basis points to 4.59% for the three months ended March 31, 2025 as compared to 4.98% for the three months ended March 31, 2024. The average balance of non-interest bearing demand deposits and other liabilities decreased $44.1 million to $353.7 million for the three months ended March 31, 2025, compared to $397.8 million for the three months ended March 31, 2024. The decrease was primarily the result of depositors looking for higher yielding products and market competition.

Current wording

Interest expense on deposits decreased $2.2 million to $14.7 million for the three months ended June 30, 2025 from $16.9 million for the three months ended June 30, 2024 primarily as a result of a decrease in cost of funds. The increase in average balance of interest-bearing deposits was $96.4 million to $1.50 billion during the three months ended June 30, 2025 as compared to $1.40 billion for the three months ended June 30, 2024. The increase in the average balance of interest-bearing deposits was primarily a result of a $15.6 million increase in the average balance of money market deposit accounts, by a $69.0 million increase in the average balance of time deposits, and by a $71.4 million increase in the average balance of savings and NOW deposits. These increases were partially offset by a $59.6 million decrease in interest bearing demand deposits during the three months ended June 30, 2025 as compared to the three months ended June 30, 2024. The average cost of interest-bearing deposits was 3.94% for the three months ended June 30, 2025, compared to 4.83% for the three months ended June 30, 2024. The average rate paid on money market deposits decreased 85 basis points to 3.94% for the three months ended June 30, 2025 from 4.79% for the three months ended June 30, 2024. The average rate paid on interest-bearing demand deposits decreased 135 basis points to 3.58% for the three months ended June 30, 2025 from 4.93% for the three months ended June 30, 2024 primarily due to the interest rate environment and our ability to reprice these deposits. The average rate paid on savings and NOW deposits decreased 28 basis points to 1.32% for the three months ended June 30, 2025 from 1.60% for the three months ended June 30, 2024. The average cost of certificates of deposit decreased by 66 basis points to 4.39% for the three months ended June 30, 2025 as compared to 5.05% for the three months ended June 30, 2024. The average balance of non-interest bearing demand deposits and other liabilities decreased $27.2 million to$354.6 million for the three months ended June 30, 2025, compared to$381.8 million for thethree months ended June 30, 2024. The decrease was primarily the result of depositors looking for higher yielding products and market competition.

Previous wording

Net interest income increased approximately $0.9 million, or 5.6%, to $16.6 million for the three months ended March 31, 2025 from $15.7 million for the three months ended March 31, 2024, on a tax equivalent basis, despite our net interest-earning assets decreasing $51.8 million to $444.7 million for the three months ended March 31, 2025 from $496.6 million for the three months ended March 31, 2024. The interest rate spread increased by 33 basis points to 2.38% for the three months ended March 31, 2025 from 2.05% for the three months ended March 31, 2024, on a tax equivalent basis. The net interest margin increased slightly by 1 basis point from 3.29% for the three months ended March 31, 2024 to 3.30% for the three months ended March 31, 2025 on a tax equivalent basis. Refer to “Use of Certain Non-GAAP Financial Measures,” below, for a reconciliation of adjusted net interest margin.

Current wording

Net interest income increased approximately $3.2 million, or 20.6%, to $18.9 million for the three months ended June 30, 2025 from $15.6 million for the three months ended June 30, 2024, on a tax equivalent basis, despite our net interest-earning assets decreasing $24.4 million to $449.0 million for the three months ended June 30, 2025 from $473.4 million for the three months ended June 30, 2024. The interest rate spread increased by 84 basis points to 2.87% for the three months ended June 30, 2025 from 2.03% for the three months ended June 30, 2024, on a tax equivalent basis. The net interest margin increased by 55 basis point from 3.20% for the three months ended June 30, 2024 to 3.75% for the three months ended June 30, 2025 on a tax equivalent basis. Refer to “Use of Certain Non-GAAP Financial Measures,” below, for a reconciliation of adjusted net interest margin.

Previous wording

The provision for credit losses on loans was $0 for the three months ended March 31, 2025 compared to a provision of credit losses on loans of $164,000 for the three months ended March 31, 2024. The Company had no charge offs during the quarter, which are normally replaced through provision expense. Loan growth for the quarter was not significant and therefore, did not impact the allowance for credit losses on loans significantly. Loan originations, which totaled approximately $34.0 million for the three months ended March 31, 2024 decreased $0.8 million to $33.2 million for the three months ended March 31, 2025. Non-performing loans at March 31, 2025 remained stable with a balance of $21.7 million compared to December 31, 2024 but increased $12.4 million from $9.3 million at March 31, 2024. 52% of this balance is attributable to one relationship and the remaining 48% are confined to eight relationships that experienced liquidity constraints. The Company is proactive in identifying any potential issues and acts decisively when prudent. Past due loans excluding non-performing loans, increased to $40.1 million as of March 31, 2025 compared to $62,000 as of December 31, 2024. The increase in past due loans was isolated to a limited number of borrowers and was due to timing of payments received rather than deteriorating credit, and therefore, did not significantly impact the allowance for credit losses on loans as of March 31, 2025.

Current wording

The recovery of credit losses on loans was $528,000 for the three months ended June 30, 2025 compared to a provision for credit losses on loans of $931,000 for the three months ended June 30, 2024. This is primarily due to adecrease in total gross loans of$43.9 million from$1.83 billion as of December 31, 2024 to$1.79 billion as of June 30, 2025 due to loan paydowns in the normal course of business and management of concentrations. Loan originations, which totaled appr oximately$44.5 million for the three months ended June 30, 2024 increased $6.4 million to $50.9 millionfor the three months ended June 30, 2025. Non-performing loans were $7.2 million at June 30, 2025. 52% of this balance is attributable to one relationship and the remaining 48% are confined to five relationships that experienced liquidity constraints. The Company is proactive in identifying any potential issues and acts decisively when prudent. Past due loans excluding non-performing loans, increased to$37.8 million as of June 30, 2025 compared to$62,000 as of December 31, 2024. The increase in past due loans was isolated to a limited number of borrowers and was due to timing of payments received rather than deteriorating credit, and therefore, did not significantly impact the allowance for credit losses on loans as of June 30, 2025.

Previous wording

The provision of credit losses on off-balance sheet credit exposure was $0 for the three months ended March 31, 2025 compared to a recovery of credit losses of $359,000 for the three months ended March 31, 2024. The stabilization of the provision for off-balance sheet credit exposure was primarily related to the utilization of revolving lines of credit.

Current wording

The recovery of credit losses on off-balance sheet credit exposure was $15,000 for the three months ended June 30, 2025 compared to arecovery of credit losses of$293,000 for thethree months ended June 30, 2024. The stabilization of the provision for off-balance sheet credit exposure was primarily related to the utilization of revolving lines of credit.

Previous wording

Non-interest income increased $143,000, or 18%, to $939,000 for the three months ended March 31, 2025 from $796,000 for the three months ended March 31, 2024. The increase in non-interest income was primarily due to a $60,000 gain on retirement of subordinated debt. Additionally, deposit account service charges increased $61,000 in the three months ended March 31, 2025 compared to the same period in 2024. The increase in account service charges was in addition to an increase of $10,000 in bank owned life insurance income for the three months ended March 31, 2025. The Company continues to focus on increasing non-interest income as it continues to add services that strategically benefit our customers.

Current wording

Non-interest income increased $302,000, or 39.5%, to$1.1 million for the three months ended June 30, 2025 from $764,000 for the three months ended June 30, 2024. The increase in non-interest income was primarily due to a $68,000 gain on retirement of subordinated debt and a $103,000 gain on equity securities during thethree months ended June 30, 2025. The Company continues to focus on increasing non-interest income as it continues to add services that strategically benefit our customers.

Previous wording

Non-interest expense increased $1.8 million, or 15%, to $14.3 million for the three months ended March 31, 2025, from $12.5 million for the three months ended March 31, 2024 primarily because of increases in salaries and employee benefits of $897,000. The Company incurred higher payroll costs for the three months ended March 31, 2025 compared to the same period in 2024 given a higher number of employees for most of the quarter and non-recurring severance costs incurred as reductions were made during the end of the quarter. Other operating expenses increased $434,000, or 45%, to $1.4 millionfor the three months ended March 31, 2025, from $954,000 for the three months ended March 31, 2024 primarily due to increases in loan workout expenses as the Company has resolved some of the non-performing loans. Outside services, which includes professional fees for attorneys, accountants, consultants, and cloud services, increased $399,000 to $1.2 million for the three months ended March 31, 2025, from $774,000 for the three months ended March 31, 2024. This increase is driven by regulatory requirements in audits, routine legal assistance as the Company grows, and from increased cloud services costs. Information security tools, a subset of furniture and equipment expenses, increased approximately $37,000 to $164,000 for the three months ended March 31, 2025, from $127,000 for the three months ended March 31, 2024. Data processing increased approximately $50,000 to $362,000 for the three months ended March 31, 2025, from $312,000 for the three months ended March 31, 2024. Offsetting these increases was a decrease in occupancy expenses of $39,000, or 9%, to $396,000 for the three months ended March 31, 2025 from $435,000 for the three months ended March 31, 2024 due to expense management.

Current wording

Non-interest expense increased $1.9 million, or 14.9%, to$14.7 million for the three months ended June 30, 2025, from $12.8 million for the three months ended June 30, 2024 primarily because of anincrease in salaries and employee benefits of$795,000. The Company had an increase in salaries due to one time severance costs as we reduced headcount, as well as realigning certain incentive accruals. FDIC insurance expense increased $520,000 to $850,000 for the three months ended June 30, 2025, from $330,000 for the three months ended June 30, 2024. This increase was due to the significant deposit growth the Company experienced at the beginning of the year. Outside services, which includes professional fees for attorneys, accountants, consultants, and cloud services, increased $451,000 to $1.3 million for the three months ended June 30, 2025, from $839,000 for the three months ended June 30, 2024. This increase is driven by the acceleration of costs related to contract cancelation from the Company's decision to pivot away from certain operating BaaS services and from consulting costs to execute our strategic plan. Furniture and equipment expenses increased approximately $201,000 to $1.1 million for the three months ended June 30, 2025, from $940,000 for the three months ended June 30, 2024. Data processing increased approximately $43,000 to $357,000 for the three months ended June 30, 2025, from $314,000 for the three months ended June 30, 2024. Offsetting these increases was a decrease in occupancy expenses of $97,000, or 23.4%, to $318,000 for the three months ended June 30, 2025 from $415,000 for the three months ended June 30, 2024 due to expense management. Of these expenses, $1.8 million were not incurred in the comparable quarter and were primarily related to the Company's decision to pivot away from certain operating BaaS services. Excluding these expenses, non-interest expense was $12.96 million for the three months ended June 30, 2025, an increase of $127,000 from $12.8 million for the three months ended June 30, 2024.

Previous wording

Income tax expense decreased $148,000, or 18%, to $682,000 for the three months ended March 31, 2025 from $830,000 for the three months ended March 31, 2024. The decrease in federal income tax expense for the three months ended March 31, 2025 compared to the same period a year ago was driven by the decrease in income before income taxes of $1 million, to income before income tax of $3.1 million for the three months ended March 31, 2025 compared to income before income tax expense of $4.1 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. As a result of expanding its footprint, the Company has included assessments in income tax expense for potential state tax liabilities which totaled $79,000 for the three months ended March 31, 2025. For the three months ended March 31, 2025, the Company had an effective income tax expense rate of 21.8%, compared to an effective income tax expense rate of 20.1% for the three months ended March 31, 2024.

Current wording

Income tax expense increased $826,000, or 347.1%, to$1.1 million for the three months ended June 30, 2025 from$238,000 for the three months ended June 30, 2024. Theincrease in federal income tax expense for the three months ended June 30, 2025 compared to the same period a year ago was driven by theincrease in income before income taxes of$2.8 million, to income before income tax of$5.7 million for the three months ended June 30, 2025 compared to income before income tax expense of$2.9 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. As a result of expanding its footprint, the Company has included assessments in income tax expense for potential state tax liabilities which totaled$145,000 for the three months ended June 30, 2025 and $76,000 for the three months ended June 30, 2024. For the three months ended June 30, 2025, the Company had an effective income tax expense rate of 18.82%, compared to an effective income tax expense rate of 8.33% for the three months ended June 30, 2024. The effective tax rate for the three months ended June 30, 2024 was largely impacted by a tax credit investment during the quarter with immediate credit claim components.

Previous wording

During the three months ended March 31, 2025, criticized loans decreased$2.7 million and classified loans increased$1.8 million when compared to December 31, 2024, to a balance of$82.6 million and$59.2 million, respectively.

Current wording

As of June 30, 2025, criticized loans increased$3.6 million and classified loans decreased$18.1 million when compared to December 31, 2024, to a balance of$88.9 million and$39.3 million, respectively.

Previous wording

Criticized loans and classified loans have increased by$66.6 million and$38.1 million respectively as of March 31, 2025 compared to the same period in 2024. The majority of the criticized loan increases consist of two multi-family relationships impacted by rising interest rates and Washington D.C. government policies. Approximately 44% of the classified loan balances are related to a segment of loans that share similar characteristics. The majority of this segment that is rated classified originated during 2021 and experienced increases in operating costs, permit delays, and liquidity tightening as a result of the sharp increase in interest rates. Approximately 36% of classified loans are made up of smaller credits that have been either placed on nonaccrual or the Company is monitoring closely to be able to assess repayment. The remaining 20% is expected to be repaid at par upon successful court-approved resolution. As interest rates have risen significantly over the last two years, 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 identifies and executes the best course of action to minimize any further loss exposure. During the three months ended March 31, 2025, there were $0 charge-offs incurred and recoveries of $10,000 were received.

Current wording

Criticized loans and classified loans have increased by$73.0 million and$5.9 million respectively as of June 30, 2025 compared to the same period in 2024. The majority of the criticized loan increases consist of two multi-family relationships impacted by rising interest rates and Washington D.C. government policies. Approximately 63% of the classified loan balances are related to a segment of loans that share similar characteristics. The majority of this segment that is rated classified originated during 2021 and 2022 and experienced increases in operating costs, permit delays, and liquidity tightening as a result of the sharp increase in interest rates. Approximately 37% of classified loans are made up of smaller credits that have been either placed on nonaccrual or the Company is monitoring closely to be able to assess repayment. The increase in criticized and classified loans since June 30, 2024 was considered in the determination of the allowance for credit losses as of June 30, 2025. As interest rates have risen significantly since March 2022, 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 identifies and executes the best course of action to minimize any further loss exposure. During thesix months ended June 30, 2025, there were$622,000 charge-offs incurred and recoveries of$757,000 were received. During thesix months ended June 30, 2024, there were $511,000 charge-offs incurred and recoveries of $8,000 were received.

Previous wording

Total assets decreased $5.3 million, or 0.2%, to $2.22 billion at March 31, 2025 from $2.23 billion at December 31, 2024. The decrease was primarily the result of decreases in cash and cash equivalents of $5.1 million as of March 31, 2025 as well as decreases of $2.5 million in other assets, due to a decline in the fair value of the interest rate loan swaps discussed in Note 4, and $1.7 million in accrued interest and other receivables. These decreases were offset by an increase in restricted securities of $3 million and an increase in net loans of $1.2 million.

Current wording

Total assets decreased $113.3 million, or 5.1%, to$2.11 billion at June 30, 2025 from$2.23 billion at December 31, 2024. Thedecrease was primarily the result of adecrease in cash and cash equivalents of$74.4 million as of June 30, 2025, adecrease in net loans of$43.1 million as of June 30, 2025, and adecrease of$2.6 million in other assets, due to a decline in the fair value of the interest rate loan swaps discussed in Note 4 of the Notes to Consolidated Financial Statements. These decreases were offset by anincrease of$3.7 million in other receivables and an increase of $3.2 million property held for sale asdiscussed in Note 8.

Previous wording

Investment securities increased $2.8 million, or 2.7%, from $102.4 million at December 31, 2024 to $105.2 million at March 31, 2025. The increase was primarily due to new investments of restricted equities of $3.5 million which was offset by paydowns on the available-for-sale investment securities and calls on the held-to-maturity securities as well as amortization of the restricted equities. At March 31, 2025, our held-to-maturity portion of the securities portfolio, at amortized cost, was $15.7 million, and our available-for-sale portion of the securities portfolio, at fair value, was $55.9 million compared to our held-to-maturity portion of the securities portfolio of $16.1 million and our available-for-sale portion of the securities portfolio of $55.7 million at December 31, 2024.

Current wording

Investment securities decreased $841,000, or 1.2%, from$71.8 million at December 31, 2024 to$71.0 million at June 30, 2025. Thedecrease was primarily due to calls and maturities of the held-to-maturity securities. At June 30, 2025, our held-to-maturity portion of the securities portfolio, at amortized cost, was$14.8 million, and our available-for-sale portion of the securities portfolio, at fair value, was$56.1 million compared to our held-to-maturity portion of the securities portfolio of$16.1 million and our available-for-sale portion of the securities portfolio of$55.7 million at December 31, 2024.

Previous wording

Net loans increased $1.2 million, or 0.1%, to $1.81 billion at March 31, 2025 from $1.81 billion at December 31, 2024. Residential real estate loans increased $11.8 million, or 2.7%, to $451.3 million at March 31, 2025 from $439.5 million at December 31, 2024. Commercial real estate loans increased by $35.1 million from $898.2 million at December 31, 2024 to $933.3 million at March 31, 2025. Commercial and industrial loans increased by $2.8 million from $102.4 million at December 31, 2024 to $105.2 million at March 31, 2025. Construction and land development loans decreased $48.6 million to $344.8 million at March 31, 2025 from $393.4 million at December 31, 2024. Consumer loans decreased by $242,000 from $1.6 million at December 31, 2024 to $1.3 million at March 31, 2025. The decrease in consumer loans is primarily a result of management’s decision to let the indirect lending portfolio amortize off the balance sheet.

Current wording

Net loans decreased $43.1 million, or 2.4%, to$1.77 billion at June 30, 2025 from$1.81 billion at December 31, 2024. Residential real estate loans increased $13.0 million, or 3.0%, to$452.5 million at June 30, 2025 from$439.5 million at December 31, 2024. Commercial real estate loans increased by$13.2 million from$898.2 million at December 31, 2024 to$911.4 million at June 30, 2025. Commercial and industrial loans decreased by$4.7 million from$102.4 million at December 31, 2024 to$97.7 million at June 30, 2025. Construction and land development loans decreased $64.9 million to$328.5 million at June 30, 2025 from$393.4 million at December 31, 2024. Consumer loans decreased by$500,000 from$1.6 million at December 31, 2024 to$1.1 million at June 30, 2025. The decrease in consumer loans is believed to be primarily a result of management’s decision to let the indirect lending portfolio amortize off the balance sheet.

Previous wording

The Company holds a concentration in commercial real estate loans. As of March 31, 2025, construction, land development and other land loans represented 115.6% of consolidated risk-based capital. Total commercial real estate loans as defined by the Agency guidance represented 388.2% of consolidated risk-based capital. During the prior 36 months, the Company has experienced an increase in its commercial real estate portfolio by 59%.

Current wording

The Company holds a concentration in commercial real estate loans. As of June 30, 2025, construction, land development and other land loans represented 108.8% of consolidated risk-based capital. Total commercial real estate loans as defined by the Agency guidance represented 365.9% of consolidated risk-based capital. During the prior 36 months, the Company has experienced an increase in its commercial real estate portfolio by 52.0%.

Previous wording

Deposits increased $531,000, or 0.03% to $1.91 billion at March 31, 2025 from $1.91 billion at December 31, 2024. Our core deposits decreased $109.3 million, or 7.6%, to $1.33 billion at March 31, 2025 from $1.44 billion at December 31, 2024. Non-interest bearing demand deposits increased $21 million, or 6.5%, to $345.3 million at March 31, 2025 from $324.3 million at December 31, 2024. Interest-bearing demand deposits decreased $33.7 million, or 24.1%, to $106 million at March 31, 2025 from $139.8 million at December 31, 2024. Time deposits increased $1.7 million, or 0.2%, to $821 million at March 31, 2025 from $819.3 million at December 31, 2024. Money market demand deposits decreased $48.2 million, or 8.6%, to $511.9 million at March 31, 2025 from $560.1 million at December 31, 2024. Savings and NOW deposits increased $59.7 million or 92.8% from $64.3 million at December 31, 2024 to $124 million at March 31, 2025.

Current wording

Deposits decreased $109.2 million, or 5.7% to$1.80 billion at June 30, 2025 from$1.91 billion at December 31, 2024. Our core deposits decreased $109.9 million, or 7.6%, to$1.33 billion at June 30, 2025 from$1.44 billion at December 31, 2024. Non-interest bearing demand deposits increased $5.7 million, or 1.8%, to$330.0 million at June 30, 2025 from$324.3 million at December 31, 2024. Interest-bearing demand deposits decreased $15.7 million, or 11.2%, to$124.1 million at June 30, 2025 from$139.8 million at December 31, 2024. Time deposits decreased $54.9 million, or 6.7%, to$764.4 million at June 30, 2025 from$819.3 million at December 31, 2024. Money market demand deposits decreased $96.2 million, or 17.2%, to$463.9 million at June 30, 2025 from$560.1 million at December 31, 2024. Savings and NOW deposits increased $51.7 million or 80.4% from$64.3 million at December 31, 2024 to$116.1 million at June 30, 2025.

Previous wording

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 March 31, 2025, the Company had $577.9 million of total wholesale deposit balances, an increase of $109.8 million compared to December 31, 2024, which totaled $468.1 million.

Current wording

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 June 30, 2025, the Company had$468.7 million of total wholesale deposit balances, anincrease of$605,000 compared to December 31, 2024, which totaled$468.1 million.

Previous wording

Given the interest rate environment and strategic initiatives in 2024, the Company replaced maturing lower yielding wholesale CDs with higher market rate CDs that included call options at our discretion if economic conditions changed. The Company began exercising these call options in order to lower funding costs as market conditions shifted. The Company also utilized additional wholesale demand deposits to provide liquidity and more effectively balance our interest rate sensitivity. During the three months ended March 31, 2025, total wholesale deposit funding accounted for approximately 36.8% of our interest expense.

Current wording

Given the interest rate environment and strategic initiatives in 2024, the Company replaced maturing lower yielding wholesale CDs with higher market rate CDs that included call options at our discretion if economic conditions changed. The Company exercised these call options in order to lower funding costs as market conditions shifted. The Company also utilized additional wholesale demand deposits to provide liquidity and more effectively balance our interest rate sensitivity. During the six months ended June 30, 2025 and 2024, total wholesale deposit funding accounted for approximately 36.3% and 31% of our interest expense.

Previous wording

Each quarter the Bank files a bank call report with the FDIC, which has a specific way it defines wholesale brokered deposits. As of March 31, 2025, the Company had $553.4 million of wholesale deposits outstanding, as defined by FDIC, an increase of $110.5 million from December 31, 2024. In addition, pursuant to rule 12 CFR 337.6(e), well-capitalized and well-rated institutions are not required to treat reciprocal deposits as wholesale deposits up to the lesser of 20 percent of their total liabilities or $5 billion. Reciprocal core deposits exceeding this threshold must be reported additionally as wholesale deposits for call report purposes only. As of March 31, 2025, the Company additionally reported $87.8 million in reciprocal deposits considered wholesale for call report purposes only, bringing regulatory defined wholesale deposits to $641.1 million as of March 31, 2025. As of December 31, 2024, the Company additionally reported $259.9 million in reciprocal deposits considered wholesale for call report purposes only, bringing regulatory defined wholesale deposits to $702.8 million as of December 31, 2024. As of March 31, 2025 and December 31, 2024, 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.

Current wording

Each quarter the Bank files a bank call report with the FDIC, which has a specific way it defines wholesale brokered deposits. As of June 30, 2025, the Company had$449.8 million of wholesale deposits outstanding, as defined by FDIC, anincrease of$6.9 million from$442.9 at December 31, 2024. In addition, pursuant to rule 12 CFR 337.6(e), well-capitalized and well-rated institutions are not required to treat reciprocal deposits as wholesale deposits up to the lesser of 20 percent of their total liabilities or $5 billion. Reciprocal core deposits exceeding this threshold must be reported additionally as wholesale deposits for call report purposes only. As of June 30, 2025, the Company additionally reported$151.3 million in reciprocal deposits considered wholesale for call report purposes only, bringing regulatory defined wholesale deposits to$601.1 million as of June 30, 2025. As of December 31, 2024, the Company additionally reported$259.9 million in reciprocal deposits considered wholesale for call report purposes only, bringing regulatory defined wholesale deposits to$702.8 million as of December 31, 2024. As of June 30, 2025 and December 31, 2024, 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.

Previous wording

Liquidity Management. 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 an additional secured borrowing capacity of $554.8 million as of March 31, 2025. Additionally, at March 31, 2025, we had the ability to borrow up to $144.0 million from other financial institutions.

Current wording

Liquidity Management. 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 an additional secured borrowing capacity of$551.5 million as of June 30, 2025. Additionally, at June 30, 2025, we had the ability to borrow up to$144.0 million from other financial institutions.

Previous wording

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 March 31, 2025, cash and cash equivalents totaled $202.6 million. Finally, securities classified as available-for-sale, which provide additional sources of liquidity, totaled $55.9 million at March 31, 2025.

Current wording

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 June 30, 2025, cash and cash equivalents totaled$133.3 million. Finally, securities classified as available-for-sale, which provide additional sources of liquidity, totaled$56.1 million at June 30, 2025.

Previous wording

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$1.5 million and$3.6 million for thethree months ended March 31, 2025 and March 31, 2024, respectively. There were no sales of securities in thethree months ended March 31, 2025 or forthree months ended March 31, 2024. Net cash used in investing activities, which consist primarily of disbursements for loan originations and the purchase of securities, offset by principal collections on loans and proceeds from maturing securities, was$4.4 million and$23.3 million for thethree months ended March 31, 2025 and March 31, 2024, respectively. Net cash used in financing activities was$2.2 million and provided by financing activities was$29.9 million for thethree months ended March 31, 2025 and 2024, respectively.

Current wording

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$2.6 million and$4.8 million for thesix months ended June 30, 2025 and June 30, 2024, respectively. There were no sales of securities in thesix months ended June 30, 2025 or forsix months ended June 30, 2024. Net cash provided by investing activities was$37.1 million and used in investing activities was$78.8 million for thesix months ended June 30, 2025 and June 30, 2024, respectively. Net cash used in financing activities was$114.2 million and provided by financing activities was$50.9 million for thesix months ended June 30, 2025 and 2024, respectively.

Previous wording

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 March 31, 2025, totaled $645.7 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.

Current wording

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 June 30, 2025, totaled$622.4 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.

Previous wording

Information presented for March 31, 2025 and December 31, 2024, reflects the Basel III capital requirements that became effective January 1, 2015 for the Bank. Under these capital requirements and the regulatory 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.

Current wording

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.

Previous wording

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

Current wording

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 for 2025 and 2024 is 2.50%. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of Total capital, Common Equity Tier 1 capital, and Tier 1 capital (as defined in the regulations) to risk weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of June 30, 2025, the Bank meet all capital adequacy requirements to which it is subject.

Previous wording

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 March 31, 2025, we had outstanding loan commitments of $186.4 million and $241,500 in outstanding stand-by letters of credit. We anticipate that we will have sufficient funds available to meet our current lending commitments.

Current wording

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 June 30, 2025, we had outstanding loan commitments of$233.5 million and$241,500 in outstanding stand-by letters of credit. We anticipate that we will have sufficient funds available to meet our current lending commitments.