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 and six months ended June 30, 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 nine months ended September 30, 2025 are not necessarily indicative of results for the year ending December 31, 2025 or any future period.

Previous 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.

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 as severance payments to permanently terminated federal employees expire. In addition, consumer confidence and the strength of the US dollar may be negatively affected by uncertainty associated with 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

MainStreet Bank is a community commercial bank incorporated in and chartered by the Commonwealth of Virginia. The Bank is a member of the Federal Reserve Bank of Richmond, and its deposits are insured by the FDIC. The Bank opened for business on May 26, 2004, and is headquartered in Fairfax, Virginia. We currently operate six Bank branches; located in Herndon, Fairfax, McLean, Clarendon, and Leesburg in Virginia, and one in Washington D.C.

Current wording

MainStreet Bank is a community commercial bank incorporated in and chartered by the Commonwealth of Virginia. The Bank is a member of the Federal Reserve Bank of Richmond, and its deposits are insured by the FDIC. The Bank opened for business on May 26, 2004, and is headquartered in Fairfax, Virginia. We currently operate six Bank branches; located in Herndon, Fairfax, McLean, Clarendon, and Leesburg in Virginia, and one in Washington D.C. We have applied for and received regulatory approval to open a new branch in Middleburg, Virginia. We anticipate this location to be open in 2026.

Previous 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.

Current wording

Total interest income decreased$1.1 million for the three months ended September 30, 2025 from the same period in 2024. The decrease was primarily the result of a decrease in interest and fees on loans of$927,000 partly due to reversing accrued interest on a few non-accrual loans as well as changes in interest rates. Total interest expense decreased $2.9 million for thethree months ended September 30, 2025 from the same period in 2024 due to fluctuations in deposit interest expense described below. Net interest income increased $1.8 million for the three months ended September 30, 2025 from the same period in 2024. The provision for credit losses was $144,000 for the three months ended September 30, 2025 compared to a provision for credit losses of $2.9 million for the three months ended September 30, 2024. Non-interest income increased $236,000 for the three months ended September 30, 2025 from the same period in 2024. The increase in non-interest income was primarily due to a $145,000 gain on retirement of subordinated debt and a $77,000 increase in other fee income during thethree months ended September 30, 2025. Non-interest expense decreased by$0.6 million for the three months ended September 30, 2025 compared to the same period in 2024, primarily due to decreases in furniture and equipment, outside services, and other operating expenses. Net income increased $4.3 million to$4.5 million for the three months ended September 30, 2025 from$0.3 million for the three months ended September 30, 2024. The increase in net income was primarily driven by the increase in net interest income after provision for credit losses as well as a decrease in total non-interest expense.

Previous 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.

Current wording

Total interest income decreased $1.1 million or 3.4%, to $32.5 million for the three months ended September 30, 2025 from $33.7 million for the three months ended September 30, 2024, on a tax equivalent basis. The decrease was primarily the result of a decrease in interest and fees on loans of$927,000. Total average interest-earning assets decreased $11.0 million, to$1.99 billion for the three months ended September 30, 2025 from$2.00 billion for the same period in 2024 primarily because of a decrease of$2.9 million in the average balance of loans and by a decrease of $5.7 million in the average balance of federal funds sold and interest bearing deposits at other financial institutions. These decreases were in addition to a$2.5 million decrease in the average balance of investment securities. The average yield on our interest-earning assets decreased 19 basis points to 6.47% for the three months ended September 30, 2025 as compared to 6.66% for the three months ended September 30, 2024 primarily due to market conditions. For the three months ended September 30, 2025, the Company reversed $595,000 in accrued interest income in relation to loans placed on non-accrual, as compared to $984,000 for the three months ended September 30, 2024.

Previous 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.

Current wording

Interest income on federal funds sold and interest-earning deposits decreased by $214,000 to $1.07 million for the three months ended September 30, 2025, from $1.29 million for the three months ended September 30, 2024. The average balance of interest-earning deposits and federal funds sold decreased $5.7 million to $100.9 million for the three months ended September 30, 2025 from $106.6 million for the same period in 2024. The average yield on federal funds sold and interest-earning deposits decreased to 4.21% for the three months ended September 30, 2025 from 4.78% for the same period in 2024.

Previous 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.

Current wording

Interest on investment securities was$777,000 for the three months ended September 30, 2025 and $769,000 for the three months ended September 30, 2024 on a fully tax-equivalent basis. Interest on investments in U.S. Government Agencies and U.S. Municipals was $334,000 for the three months ended September 30, 2025 and $358,000 for the three months ended September 30, 2024. Interest on mortgage-backed securities was $85,000 for the three months ended September 30, 2025 and September 30, 2024. Subordinated debt interest income increased by $45,000, or 44.6%, to $146,000 for the three months ended September 30, 2025, from $101,000 for the three months ended September 30, 2024. The average yield on taxable securities increased 39 basis points, to 3.28% and the average yield on tax-exempt securities decreased 26 basis points, to 3.85% on a tax equivalent basis for the three months ended September 30, 2025, from 2.89% and 4.11%, respectively, for the same period in 2024. Due to the increase in average yield, interest on investment securities increased despite the average balance of investment securities decreasing by $2.5 million, to $87.9 million for the three months ended September 30, 2025, from $90.4 million for the three months ended September 30, 2024.

Previous 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.

Current wording

Total interest expense decreased $2.9 million to $15.4 million for the three months ended September 30, 2025 from $18.2 million for the three months ended September 30, 2024, primarily due to a $2.6 million decrease in interest expense on interest bearing deposits and a $273,000 decrease in total interest expense paid on borrowings.

Previous 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.

Current wording

Interest expense on deposits decreased $2.6 million to $14.5 million for the three months ended September 30, 2025 from $17.1 million for the three months ended September 30, 2024 primarily as a result of a decrease in cost of funds. The increase in average balance of interest-bearing deposits was $35.5 million to $1.48 billion during the three months ended September 30, 2025 as compared to $1.44 billion for the three months ended September 30, 2024. The increase in the average balance of interest-bearing deposits was primarily a result of a $18.2 million increase in the average balance of money market deposit accounts, by a $12.9 million increase in the average balance of time deposits, and by a $58.2 million increase in the average balance of savings and NOW deposits. These increases were partially offset by a $53.9 million decrease in interest bearing demand deposits during the three months ended September 30, 2025 as compared to the three months ended September 30, 2024. The average cost of interest-bearing deposits was 3.91% for the three months ended September 30, 2025, compared to 4.72% for the three months ended September 30, 2024. The average rate paid on money market deposits decreased 75 basis points to 3.95% for the three months ended September 30, 2025 from 4.70% for the three months ended September 30, 2024. The average rate paid on interest-bearing demand deposits decreased 129 basis points to 3.54% for the three months ended September 30, 2025 from 4.83% for the three months ended September 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 increased 22 basis points to 1.55% for the three months ended September 30, 2025 from 1.33% for the three months ended September 30, 2024. The average cost of time deposits decreased by 69 basis points to 4.30% for the three months ended September 30, 2025 as compared to 4.99% for the three months ended September 30, 2024. The average balance of non-interest bearing demand deposits and other liabilities decreased $12.7 million to$355.6 million for the three months ended September 30, 2025, compared to$368.3 million for thethree months ended September 30, 2024. The decrease was primarily the result of a decrease in the market value of our back-back loan swaps that are held in other liabilities. These swaps are more fully described in Note 4 of the consolidated financial statements.

Previous 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.

Current wording

Net interest income increased approximately $1.8 million, or 11.4%, to $17.2 million for the three months ended September 30, 2025 from $15.4 million for the three months ended September 30, 2024, on a tax equivalent basis, despite our net interest-earning assets decreasing $27.7 million to $445.1 million for the three months ended September 30, 2025 from $472.8 million for the three months ended September 30, 2024. The interest rate spread increased by 59 basis points to 2.53% for the three months ended September 30, 2025 from 1.94% for the three months ended September 30, 2024, on a tax equivalent basis. The net interest margin increased by 37 basis point from 3.05% for the three months ended September 30, 2024 to 3.42% for the three months ended September 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

Management believes that the allowance for credit losses recorded for the period ended June 30, 2025 reflects a balance sufficient to provide for each allowance segment, using objective data and information available to us at this time in evaluating our standard analysis of local/national economic data, changes in underwriting quality, portfolio concentrations, experience of lending team, credit quality and supportable forecasts. We will continuously review the credit portfolio to determine the depth and breadth of potential credit losses. As we obtain additional information and to more accurately assess the full nature and extent of elevated risk to the credit portfolio that may arise, additional provision expenses may be required.

Current wording

Management believes that the allowance for credit losses recorded for the period ended September 30, 2025 reflects a balance sufficient to provide for each allowance segment, using objective data and information available to us at this time in evaluating our standard analysis of local/national economic data, changes in underwriting quality, portfolio concentrations, experience of lending team, credit quality and supportable forecasts. We will continuously review the credit portfolio to determine the depth and breadth of potential credit losses. As we obtain additional information and to more accurately assess the full nature and extent of any elevated risk to the credit portfolio that may arise, additional provision expenses may be required.

Previous 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.

Current wording

The recovery of credit losses on loans was $66,000 for the three months ended September 30, 2025 compared to a provision for credit losses on loans of $3,125,000 for the three months ended September 30, 2024. This is primarily due to a decrease in loans charged off during thethree months ended September 30, 2025 which equated to $235,000, compared to the three months ended September 30, 2024 of $1.9 million. Additionally, the loan portfolio mix impacted the calculation of the provision for credit losses as the Company focused on diversifying its concentrations. Loan originations, which totaled appr oximately$60.0 million for the three months ended September 30, 2024 increased $22.3 million to $82.3 millionfor the three months ended September 30, 2025. Non-performing loans were$23.4 million at September 30, 2025. 60% of this balance is attributable to two relationships and the remaining 40% are confined to six relationships that experienced liquidity constraints. The Company is proactive in identifying any potential issues and acts decisively when believed to be prudent. Past due loans excluding non-performing loans, increased to$25.4 million as of September 30, 2025 compared to$11,000 as of September 30, 2024. The increase in past due loans was isolated to a limited number of borrowers and was primarily 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 September 30, 2025. We continue to proactively work with our borrowers to find positive solutions.

Previous wording

Therecovery of credit losses on off-balance sheet credit exposure was$15,000 for thesix months ended June 30, 2025 compared to arecovery of credit losses of$652,000 for thesix 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.

Current wording

The provision for credit losses on off-balance sheet credit exposure was $210,000 for the three months ended September 30, 2025 compared to arecovery of credit losses of$212,000 for thethree months ended September 30, 2024. The increase in the provision for off-balance sheet credit exposure was primarily related to the decrease in outstanding balances of our revolving lines of credit. As revolving lines of credit were paid down by borrowers, the total unfunded commitments increased causing an increase in the provision for credit losses on off-balance sheet credit exposure.

Previous 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. Approximately $7.7 million of classified loans were sold at par during thethree months ended June 30, 2025. The sale of these loans did not have a significant impact on the allowance for credit losses on loans. Additionally, 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 the three months ended June 30, 2025, there were$622,000 charge-offs incurred and recoveries of$747,000 were received. During the three months ended June 30, 2024, there were $370,000 charge-offs incurred and recoveries of $6,000 were received.

Current wording

As of September 30, 2025, criticized loans increased$47.4 million and classified loans decreased$22.9 million when compared to September 30, 2024, to a balance of$93.2 million and$54.7 million, respectively. Approximately $35.4 million of loans were sold at par during thethree months ended September 30, 2025. The increase in criticized loans and the sale of these loans did not have a significant impact on the allowance for credit losses on loans. Additionally, as interest rates have risen significantly since March 2022 and largely sustained despite recent rate cuts, 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 September 30, 2025, there were$235,000 charge-offs incurred and recoveries of$75,000 were received. During the three months ended September 30, 2024, there were $1,907,000 charge-offs incurred and recoveries of $11,000 were received.

Previous 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.

Current wording

Non-interest income increased $236,000, or 26.6%, to$1.1 million for the three months ended September 30, 2025 from $886,000 for the three months ended September 30, 2024. The increase in non-interest income was primarily due to a $145,000 gain on retirement of subordinated debt and a $77,000 increase in other fee income during thethree months ended September 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 $1.9 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.

Current wording

Non-interest expense decreased $0.6 million, or 4.2%, to$12.7 million for the three months ended September 30, 2025, from $13.2 million for the three months ended September 30, 2024 primarily because of continued expense management efforts across the Company. Furniture and equipment expenses decreased approximately $132,000 to $0.8 million for the three months ended September 30, 2025, from $931,000 for the three months ended September 30, 2024. Outside services, which includes professional fees for attorneys, accountants, consultants, and cloud services, increased $0.2 to $0.6 million for the three months ended September 30, 2025, from $0.8 for the three months ended September 30, 2024. Other operating expenses decreased approximately $589,000 to $1.2 millionfor the three months ended September 30, 2025, from $1.8 for the three months ended September 30, 2024, due to diligent cost cutting measures. Offsetting these decreases, FDIC insurance expense increased $230,000 to $560,000 for the three months ended September 30, 2025, from $330,000 for the three months ended September 30, 2024. This increase was due to the significant deposit growth the Company experienced at the beginning of the year. Data processing increased approximately $47,000 to $375,000 for the three months ended September 30, 2025, from $328,000 for the three months ended September 30, 2024.

Previous 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.

Current wording

Income tax expense increased $1.1 million or 633.3%, to$0.9 million for the three months ended September 30, 2025 from a tax benefit of$168,000 for the three months ended September 30, 2024. Theincrease in federal income tax expense for the three months ended September 30, 2025 compared to the same period a year ago was driven by theincrease in income before income taxes of$5.3 million, to income before income tax of$5.4 million for the three months ended September 30, 2025 compared to income before income tax expense of$0.1 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$137,000 for the three months ended September 30, 2025 and $4,000 for the three months ended September 30, 2024. For the three months ended September 30, 2025, the Company had an effective income tax expense rate of 16.55%, compared to an effective income tax benefitfor the three months ended September 30, 2024.

Previous wording

Comparison of Statements of Income for the Six Months Ended June 30, 2025 and 2024

Current wording

Comparison of Statements of Income for the Nine Months Ended September 30, 2025 and 2024

Previous wording

Total interest income increased $1.3 million for thesix months ended June 30, 2025 from the same period in 2024. Theincrease was primarily the result of anincrease in interest and fees on loans of$1.3 million due to collection of accrued interest on a fully repaid nonaccrual loan. Total interest expense decreased $2.8 million for thesix months ended June 30, 2025 from the same period in 2024 due to fluctuations in deposit interest expense described below. Net interest income increased $4.1 million for thesix months ended June 30, 2025 from the same period in 2024. The recovery of credit losses was$543,000 for thesix months ended June 30, 2025 compared to a provision for credit losses of$443,000 for thesix months ended June 30, 2024. Non-interest income increased $445,000 for thesix months ended June 30, 2025 from the same period in 2024. The increase in non-interest income was primarily due to a $128,000 gain on retirement of subordinated debt, a $109,000 increase in deposit account service charges, and a $103,000 gain on equity securities. Non-interest expense increased by$3.7 million for thesix months ended June 30, 2025 compared to the same period in 2024, primarily due to expenses related to employee downsizing in 2025. Net income increased $1.1 million to$7.0 million for thesix months ended June 30, 2025 from$5.9 million for thesix months ended June 30, 2024. Theincrease in net income was primarily impacted by the decrease in total interest expense.

Current wording

Total interest income increased $0.2 million for thenine months ended September 30, 2025 from the same period in 2024. Theincrease was primarily the result of anincrease in interest and fees on loans of$0.4 million, which increased overall despite $827,000 of non-recurring interest reversed for loans placed on non-accrual throughout the year. Total interest expense decreased $5.7 million for thenine months ended September 30, 2025 from the same period in 2024 due to fluctuations in deposit interest expense described below. Net interest income increased $5.9 million for thenine months ended September 30, 2025 from the same period in 2024. The recovery of credit losses was$398,000 for thenine months ended September 30, 2025 compared to a provision for credit losses of$3,356,000 for thenine months ended September 30, 2024. This decrease in provision for credit losses was primarily attributable to the minimal amount of loans charged off during 2025 and its corresponding impact on our credit for loan loss allowance. Non-interest income increased $680,000 for thenine months ended September 30, 2025 from the same period in 2024. The increase in non-interest income was primarily due to a $273,000 gain on retirement of subordinated debt and a $109,000 increase in deposit account service charges. Non-interest expense increased by$3.2 million for thenine months ended September 30, 2025 compared to the same period in 2024, primarily due to normal growth, an increase of $780,000 in FDIC insurance expense and costs associated with exiting the BaaS line of business. Net income increased $5.4 million to$11.6 million for thenine months ended September 30, 2025 from$6.2 million for thenine months ended September 30, 2024. Theincrease in net income was primarily impacted by the increase in net interest income after provision for credit losses.

Previous wording

Total interest income increased $1.4 million, or 2.1%, to$67.4 million for thesix months ended June 30, 2025 from$66.0 million for thesix months ended June 30, 2024, on a tax equivalent basis. Theincrease was primarily the result of anincrease in interest and fees on loans of$1.3 million. Total average interest-earning assets increased $96.1 million, to$2.03 billion for thesix months ended June 30, 2025 from$1.94 billion for the same period in 2024 primarily because of anincrease of$78.9 million in the average balance of loans and by anincrease of$21.7 million in the average balance of federal funds sold and interest bearing deposits at other financial institutions. These increases were offset by a$4.4 million decrease in the average balance of investment securities. The average yield on our interest-earning assets decreased 15 basis points to 6.69% for thesix months ended June 30, 2025 as compared to 6.84% for thesix months ended June 30, 2024 primarily due to market conditions. For thesix months ended June 30, 2025, the Company reversed$232,000 in accrued interest income in relation to loans placed on nonaccrual, as compared to$1.1 million for thesix months ended June 30, 2024.

Current wording

Total interest income increased $0.2 million, or 0.2%, to$99.9 million for thenine months ended September 30, 2025 from$99.7 million for thenine months ended September 30, 2024, on a tax equivalent basis. Theincrease was primarily the result of anincrease in interest and fees on loans of$0.4 million. Total average interest-earning assets increased $56.2 million, to$2.02 billion for thenine months ended September 30, 2025 from$1.96 billion for the same period in 2024 primarily because of anincrease of$47.7 million in the average balance of loans and by anincrease of$12.4 million in the average balance of federal funds sold and interest bearing deposits at other financial institutions. These increases were offset by a$3.9 million decrease in the average balance of investment securities. The average yield on our interest-earning assets decreased 17 basis points to 6.63% for thenine months ended September 30, 2025 as compared to 6.80% for thenine months ended September 30, 2024 primarily due to market conditions.

Previous wording

Interest and fees on loans increased $1.3 million, to$63.6 million for thesix months ended June 30, 2025 from$62.2 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$78.9 million, which increased to$1.83 billion for thesix months ended June 30, 2025 from$1.76 billion for thesix months ended June 30, 2024. The average yield on loans decreased 12 basis points, or 1.7%, for thesix months ended June 30, 2025 as compared to thesix months ended June 30, 2024.

Current wording

Interest and fees on loans increased $0.4 million, to$94.2 million for thenine months ended September 30, 2025 from$93.9 million for the same period in 2024. This was primarily due to anincrease in the average loans outstanding of$47.7 million, which increased to$1.82 billion for thenine months ended September 30, 2025 from$1.77 billion for thenine months ended September 30, 2024. Offsetting the growth in average loan balances, the average yield on loans decreased 16 basis points, or 2.2%, for thenine months ended September 30, 2025 as compared to thenine months ended September 30, 2024.

Previous wording

Interest income on federal funds sold and interest-earning deposits increased by$50,000 to$2.31 million for thesix months ended June 30, 2025, from$2.26 million for thesix months ended June 30, 2024. The average balance of interest-earning deposits and federal funds sold increased $21.7 million to$110.0 million for thesix months ended June 30, 2025 from$88.3 million for the same period in 2024. The average yield decreased to 4.24% for thesix months ended June 30, 2025 from 5.14% for the same period in 2024.

Current wording

Interest income on federal funds sold and interest-earning deposits decreased by$164,000 to$3.39 million for thenine months ended September 30, 2025, from$3.55 million for thenine months ended September 30, 2024. The average balance of interest-earning deposits and federal funds sold increased $12.4 million to$106.9 million for thenine months ended September 30, 2025 from$94.6 million for the same period in 2024. The average yield decreased to 4.23% for thenine months ended September 30, 2025 from 5.02% for the same period in 2024.

Previous wording

Interest on investment securities decreased by$30,000 to$1.52 million for thesix months ended June 30, 2025 from$1.55 million for thesix months ended June 30, 2024 on a fully tax-equivalent basis. Interest on investments in U.S. Government Agencies and U.S. Municipals was$729,000 for thesix months ended June 30, 2025 and$733,000 for the six months ended June 30, 2024. Interest on mortgage-backed securities decreased by$16,000 or 8.2%, to$180,000 for thesix months ended June 30, 2025, from$196,000 for thesix months ended June 30, 2024. Subordinated debt interest income increased by$2,000, or 0.8%, to$266,000 for thesix months ended June 30, 2025, from$264,000 for thesix months ended June 30, 2024. The average yield on taxable securities increased 12 basis points, to 3.23% and the average yield on tax-exempt securities increased 15 basis points, to 3.83% on a tax equivalent basis for thesix months ended June 30, 2025, from 3.11% and 3.68%, 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$4.4 million, to$88.4 million for thesix months ended June 30, 2025, from$92.8 million for thesix months ended June 30, 2024.

Current wording

Interest on investment securities decreased by$10,000 to$2.30 million for thenine months ended September 30, 2025 from$2.31 million for thenine months ended September 30, 2024 on a fully tax-equivalent basis. Interest on investments in U.S. Government Agencies and U.S. Municipals was$992,000 for thenine months ended September 30, 2025 and$1,024,000 for the six months ended September 30, 2024. Interest on mortgage-backed securities decreased by$16,000 or 5.7%, to$265,000 for thenine months ended September 30, 2025, from$281,000 for thenine months ended September 30, 2024. Subordinated debt interest income increased by$47,000, or 12.9%, to$412,000 for thenine months ended September 30, 2025, from$365,000 for thenine months ended September 30, 2024. The average yield on taxable securities increased 21 basis points, to 3.25% and the average yield on tax-exempt securities remained consistent at 3.84% on a tax equivalent basis for thenine months ended September 30, 2025 when compared to 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$3.9 million, to$88.2 million for thenine months ended September 30, 2025, from$92.1 million for thenine months ended September 30, 2024.

Previous wording

Total interest expense decreased $2.8 million, to$31.9 million for thesix months ended June 30, 2025 from$34.7 million for thesix months ended June 30, 2024, primarily due to a$2.4 million decrease in interest expense on interest bearing deposits and a$308,000 decrease in total interest expense paid on borrowings.

Current wording

Total interest expense decreased $5.7 million, to$47.3 million for thenine months ended September 30, 2025 from$53.0 million for thenine months ended September 30, 2024, primarily due to a$5.1 million decrease in interest expense on interest bearing deposits and a$581,000 decrease in total interest expense paid on borrowings.

Previous wording

Interest expense on deposits decreased $2.4 million to$30.3 million for thesix months ended June 30, 2025 from$32.7 million for thesix months ended June 30, 2024 primarily as a result of a decrease in cost of funds. The average balance of interest-bearing deposits increased$138.6 million to$1.51 billion during thesix months ended June 30, 2025 as compared to$1.37 billion for thesix months ended June 30, 2024. Theincrease in the average balance of interest-bearing deposits was primarily a result of a$59.7 million increase in the average balance of money market deposit accounts, a$78.5 million increase in the average balance of time deposits, and a $47.7 million increase in the average balance of savings and NOW deposits. These increases were partially offset by a $47.2 million decrease in interest bearing demand deposits during the six months ended June 30, 2025 as compared to the six months ended June 30, 2024. The average cost of interest-bearing deposits was 4.06% for thesix months ended June 30, 2025, compared to 4.80% for thesix months ended June 30, 2024. The average rate paid on money market deposits decreased 79 basis points to 3.96% for thesix months ended June 30, 2025 from 4.75% for thesix months ended June 30, 2024. The average rate paid on interest-bearing demand deposits decreased 126 basis points to 3.69% for thesix months ended June 30, 2025 from 4.95% for thesix months ended June 30, 2024 primarily due to the interest rate environment. The average cost of certificates of deposit decreased by 52 basis points to 4.49% for thesix months ended June 30, 2025 as compared to 5.01% for thesix months ended June 30, 2024. The average balance of non-interest bearing demand deposits and other liabilities decreased $35.7 million to$354.1 million for thesix months ended June 30, 2025, compared to$389.8 million for thesix months ended June 30, 2024. The decrease was primarily the result of depositors looking for higher yielding products and market competition.

Current wording

Interest expense on deposits decreased $5.1 million to$44.8 million for thenine months ended September 30, 2025 from$49.9 million for thenine months ended September 30, 2024 primarily as a result of a decrease in cost of funds. The average balance of interest-bearing deposits increased$103.9 million to$1.50 billion during thenine months ended September 30, 2025 as compared to$1.39 billion for thenine months ended September 30, 2024. Theincrease in the average balance of interest-bearing deposits was primarily a result of a$45.7 million increase in the average balance of money market deposit accounts, a$57.2 million increase in the average balance of time deposits, and a $51.2 million increase in the average balance of savings and NOW deposits. These increases were partially offset by a $50.2 million decrease in interest bearing demand deposits during the nine months ended September 30, 2025 as compared to the nine months ended September 30, 2024. The average cost of interest-bearing deposits was 4.01% for thenine months ended September 30, 2025, compared to 4.79% for thenine months ended September 30, 2024. The average rate paid on money market deposits decreased 79 basis points to 3.96% for thenine months ended September 30, 2025 from 4.75% for thenine months ended September 30, 2024. The average rate paid on interest-bearing demand deposits decreased 127 basis points to 3.66% for thenine months ended September 30, 2025 from 4.93% for thenine months ended September 30, 2024 primarily due to the interest rate environment. The average cost of time deposits decreased by 60 basis points to 4.42% for thenine months ended September 30, 2025 as compared to 5.02% for thenine months ended September 30, 2024. The average balance of non-interest bearing demand deposits and other liabilities decreased $28.0 million to$354.6 million for thenine months ended September 30, 2025, compared to$382.6 million for thenine months ended September 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$4.1 million, or 13.1%, to$35.4 million for thesix months ended June 30, 2025 from$31.3 million for thesix months ended June 30, 2024, on a tax equivalent basis, despite adecrease in our net interest-earning assets of$32.6 million to$452.4 million for thesix months ended June 30, 2025 from$485.0 million for thesix months ended June 30, 2024. The interest rate spread increased by 57 basis points to 2.61% for thesix months ended June 30, 2025 from 2.04% for thesix months ended June 30, 2024, on a tax equivalent basis. The net interest margin increased by 28 basis point from 3.24% for thesix months ended June 30, 2024 to 3.52% for thesix 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.

Current wording

Net interest income increased approximately$5.9 million, or 12.5%, to$52.6 million for thenine months ended September 30, 2025 from$46.8 million for thenine months ended September 30, 2024, on a tax equivalent basis, despite adecrease in our net interest-earning assets of$34.9 million to$446.3 million for thenine months ended September 30, 2025 from$481.2 million for thenine months ended September 30, 2024. The interest rate spread increased by 59 basis points to 2.60% for thenine months ended September 30, 2025 from 2.01% for thenine months ended September 30, 2024, on a tax equivalent basis. The net interest margin increased by 30 basis point from 3.19% for thenine months ended September 30, 2024 to 3.49% for thenine months ended September 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

Therecovery of credit losses on loans was$528,000 for thesix months ended June 30, 2025 compared to aprovision for credit losses on loans of$1.1 million for thesix 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. Loan originations, which totaled approximately $80.5 million for thesix months ended June 30, 2024 increased $16.3 million to $96.8 million for thesix months ended June 30, 2025.

Current wording

Therecovery of credit losses on loans was$593,000 for thenine months ended September 30, 2025 compared to aprovision for credit losses on loans of$4.2 million for thenine months ended September 30, 2024. This is primarily due to reduction in net charge-offs of $2.4 million for thenine months ended September 30, 2025 compared to the similar period in 2024. Loan originations, which totaled approximately $147.6 million for thenine months ended September 30, 2024 increased $22.2 million to $169.8 million for thenine months ended September 30, 2025. The loan growth is diversified within the portfolio, which had a positive impact on the allowance for credit losses.

Previous 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.

Current wording

Theprovision for credit losses on off-balance sheet credit exposure was$195,000 for thenine months ended September 30, 2025 compared to arecovery of credit losses of$864,000 for thenine months ended September 30, 2024. The provision for off-balance sheet credit exposure was primarily related to the utilization of revolving lines of credit. As revolving lines of credit were paid down by borrowers, the total unfunded commitments increased causing an increase in the provision for credit losses on off-balance sheet credit exposure.

Previous 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.

Current wording

As of September 30, 2025, criticized loans increased $7.9 million and classified loans decreased $2.7 million when compared to December 31, 2024, to a balance of$93.2 million and$54.7 million, respectively.

Previous 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.

Current wording

Criticized loans have increased by $47.4 million and classified loans decreased $22.9 million respectively as of September 30, 2025 compared to the same period in 2024. Approximately 75% of the classified loan balances are related to two relationships. Both of these relationships are included in our individually analyzed credits quarterly and show that they are well collateralized. We continue to work proactively with our borrowers for positive resolutions. Approximately 25% of classified loans are made up of smaller credits that have been either placed on non-accrual or the Company is monitoring closely to be able to assess repayment. The increase in criticized loans since September 30, 2024 was considered in the determination of the allowance for credit losses as of September 30, 2025. As interest rates have risen significantly since March 2022 and largely been sustained despite recent rate cuts, 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 thenine months ended September 30, 2025, there were$857,000 charge-offs incurred and recoveries of$831,000 were received. During thenine months ended September 30, 2024, there were $2.4 million in charge-offs incurred and recoveries of $19,000 were received.

Previous wording

Non-interest income increased $445,000, or 28.5%, to$2.0 million for thesix months ended June 30, 2025 from$1.6 million for thesix months ended June 30, 2024. Theincrease in non-interest income was primarily due to a$128,000 gain on retirement of subordinated debt, a$109,000 increase in deposit account service charges, and a$103,000 gain on equity securities. 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 $680,000, or 27.8%, to$3.1 million for thenine months ended September 30, 2025 from$2.4 million for thenine months ended September 30, 2024. Theincrease in non-interest income was primarily due to a$273,000 gain on retirement of subordinated debt and a$109,000 increase in deposit account service charges. 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 $3.7 million, or 14.8%, to$29.1 million for thesix months ended June 30, 2025, from$25.3 million for thesix months ended June 30, 2024 primarily because of anincrease in salaries and employee benefits of$1.7 million. Non-recurring severance costs were incurred as reductions were made during thesix months ended June 30, 2025 related to the Company's decision to pivot away from certain operating BaaS services, causing salaries and benefits to increase. FDIC insurance expense increased $550,000 to $1.2 million for the six months ended June 30, 2025, from $660,000 for the six months ended June 30, 2024 due to significant deposit growth earlier in the year. Other operating expenses increased $458,000, or 21.7%, to$2.6 million for thesix months ended June 30, 2025, from$2.1 million for thesix months ended June 30, 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 $849,000 to$2.5 million for thesix months ended June 30, 2025, from$1.6 million for thesix 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. Furniture and equipment expenses increased approximately$282,000 to$2.2 million for thesix months ended June 30, 2025, from$1.9 million for thesix months ended June 30, 2024. Data processing increased approximately$92,000 to$719,000 for thesix months ended June 30, 2025, from$627,000 for thesix months ended June 30, 2024. Offsetting these increases was adecrease in occupancy expenses of$135,000, or 15.9%, to$714,000 for thesix months ended June 30, 2025 from$849,000 for thesix months ended June 30, 2024 due to expense management. Of these expenses, $1.8 million were not incurred in the comparable six month period and were primarily related to the Company's decision to pivot away from certain operating BaaS services. Excluding these expenses, non-interest expense was $27.3 million for thesix months ended June 30, 2025, an increase of $2 million from$25.3 million for thesix months ended June 30, 2024.

Current wording

Non-interest expense increased $3.2 million, or 8.3%, to$41.7 million for thenine months ended September 30, 2025, from$38.5 million for thenine months ended September 30, 2024 primarily because of anincrease in salaries and employee benefits of$1.8 million. Non-recurring severance costs were incurred as reductions were made during thenine months ended September 30, 2025 related to the Company's decision to pivot away from certain operating BaaS services, causing salaries and benefits to increase. Furniture and equipment expenses increased approximately$151,000 to$3.0 million for thenine months ended September 30, 2025, from$2.8 million for thenine months ended September 30, 2024. Outside services, which includes professional fees for attorneys, accountants, consultants, and cloud services, increased $630,000 to$3.1 million for thenine months ended September 30, 2025, from$2.5 million for thenine months ended September 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. FDIC insurance expense increased $780,000 to $1.8 million for the nine months ended September 30, 2025, from $990,000 for the nine months ended September 30, 2024 due to significant deposit growth earlier in the year, as those deposits were temporary, we expect this expense to return to previous levels. Data processing increased approximately$140,000 to$1,094,000 for thenine months ended September 30, 2025, from$954,000 for thenine months ended September 30, 2024. Offsetting these increases, other operating expenses decreased $133,000, or 3.4%, to$3.8 million for thenine months ended September 30, 2025, from$3.9 million for thenine months ended September 30, 2024 primarily due to expense management controls executed by the Company. Additionally there was adecrease in occupancy expenses of$143,000, or 11.4%, to$1,114,000 for thenine months ended September 30, 2025 from$1,257,000 for thenine months ended September 30, 2024.

Previous wording

Income tax expense increased $678,000 or 63.5%, to$1.7 million for thesix months ended June 30, 2025 from$1.1 million for thesix months ended June 30, 2024. Theincrease in federal income tax expense for thesix months ended June 30, 2025 compared to the same period a year ago was driven by theincrease in income before income taxes of$1.8 million, to income before income tax of$8.8 million for thesix months ended June 30, 2025 compared to income before income tax expense of$7.0 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$224,000 for thesix months ended June 30, 2025 and $181,000 for the six months ended June 30, 2024. For thesix months ended June 30, 2025, the Company had an effective income tax expense rate of 19.87%, compared to an effective income tax expense rate of 15.28% for thesix months ended June 30, 2024.

Current wording

Income tax expense increased $1,741,000 or 193.4%, to$2.6 million for thenine months ended September 30, 2025 from$0.9 million for thenine months ended September 30, 2024. Theincrease in federal income tax expense for thenine months ended September 30, 2025 compared to the same period a year ago was driven by theincrease in income before income taxes of$7.1 million, to income before income tax of$14.2 million for thenine months ended September 30, 2025 compared to income before income tax expense of$7.1 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$361,000 for thenine months ended September 30, 2025 and $185,000 for the nine months ended September 30, 2024. For thenine months ended September 30, 2025, the Company had an effective income tax expense rate of 18.60%, compared to an effective income tax expense rate of 12.70% for thenine months ended September 30, 2024.

Previous 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.

Current wording

Total assets decreased $103.3 million, or 4.6%, to$2.12 billion at September 30, 2025 from$2.23 billion at December 31, 2024. Thedecrease was primarily the result of adecrease in cash and cash equivalents of$80.4 million as of September 30, 2025, adecrease in net loans of$22.3 million as of September 30, 2025, and adecrease of$7.9 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 the Consolidated Financial Statements. These decreases were offset by anincrease of$2.3 million in other receivables and an increase of $3.2 million property held for sale asdiscussed in Note 8.

Previous 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.

Current wording

Investment securities increased $806,000, or 1.1%, from$71.8 million at December 31, 2024 to$72.6 million at September 30, 2025. Theincrease was primarily due to purchases of $3.7 million available-for-sale securities and were offset by calls and maturities of the held-to-maturity securities. At September 30, 2025, our held-to-maturity portion of the securities portfolio, at amortized cost, was$14.3 million, and our available-for-sale portion of the securities portfolio, at fair value, was$58.3 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 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.

Current wording

Net loans decreased $22.3 million, or 1.2%, to$1.79 billion at September 30, 2025 from$1.81 billion at December 31, 2024. Residential real estate loans decreased $27.9 million, or 6.3%, to$411.6 million at September 30, 2025 from$439.5 million at December 31, 2024. Commercial real estate loans increased by$82.9 million from$898.2 million at December 31, 2024 to$981.1 million at September 30, 2025. Commercial and industrial loans increased by$2.8 million from$102.4 million at December 31, 2024 to$105.2 million at September 30, 2025. Construction and land development loans decreased $81.1 million to$312.3 million at September 30, 2025 from$393.4 million at December 31, 2024. Consumer loans decreased by$370,000 from$1.6 million at December 31, 2024 to$1.2 million at September 30, 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.

Previous 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%.

Current wording

The Company holds a concentration in commercial real estate loans. As of September 30, 2025, construction, land development and other land loans represented 102.6% of consolidated risk-based capital. Total commercial real estate loans as defined by the Agency guidance represented 356.0% of consolidated risk-based capital. During the prior 36 months, the Company has experienced an increase in its commercial real estate portfolio by 63.6%.

Previous wording

The following table presents information regarding nonperforming assets at the dates indicated:

Current wording

The following table presents information regarding non-performing assets at the dates indicated:

Previous 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.

Current wording

Deposits decreased $97.0 million, or 5.1% to$1.81 billion at September 30, 2025 from$1.91 billion at December 31, 2024. Our core deposits decreased $149.7 million, or 10.4%, to$1.29 billion at September 30, 2025 from$1.44 billion at December 31, 2024. Non-interest bearing demand deposits increased $0.4 million, or 0.1%, to$324.7 million at September 30, 2025 from$324.3 million at December 31, 2024. Interest-bearing demand deposits decreased $16.6 million, or 11.9%, to$123.2 million at September 30, 2025 from$139.8 million at December 31, 2024. Time deposits decreased $40.6 million, or 5.0%, to$778.7 million at September 30, 2025 from$819.3 million at December 31, 2024. Money market demand deposits decreased $101.2 million, or 18.1%, to$458.9 million at September 30, 2025 from$560.1 million at December 31, 2024. Savings and NOW deposits increased $60.9 million or 94.6% from$64.3 million at December 31, 2024 to$125.2 million at September 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 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.

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 September 30, 2025, the Company had$520.9 million of total wholesale deposit balances, anincrease of$52.7 million compared to December 31, 2024, which totaled$468.1 million.