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 nine months ended September 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, 2025, previously filed with the SEC on March 13, 2026. Results for the three months ended March 31, 2026 are not necessarily indicative of results for the year ending December 31, 2026 or any future period.

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. 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.

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 seven Bank branches; located in Herndon, Fairfax, McLean, Clarendon, Leesburg, and Middleburg in Virginia, and one in Washington D.C. The Bank has two subsidiaries, both limited liability companies, that it uses to hold real estate acquired through foreclosure.

Previous 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 September 30, 2025 and September 30, 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.

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. The One Big Beautiful Bill signed into law on July 4, 2025, permanently extended the new market tax credit program.

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. The One Big Beautiful Bill signed into law on July 4, 2025, permanently extended the new market tax credit program.

Previous 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.

Current wording

Total interest income decreased$1.7 million for the three months ended March 31, 2026 from the same period in 2025. The decrease was primarily the result of a decrease in interest and fees on loans of$1.6 million due to changes in interest rates. Total interest expense decreased $2.7 million for thethree months ended March 31, 2026 from the same period in 2025 due to fluctuations in deposit interest expense described below. Net interest income increased $1.0 million for the three months ended March 31, 2026 from the same period in 2025. The recovery of credit losses was $0.1 million for the three months ended March 31, 2026 compared to no provision for credit losses for the three months ended March 31, 2025. Non-interest income decreased $0.5 million for the three months ended March 31, 2026 from the same period in 2025. The decrease in non-interest income was primarily due to a $0.7 million loss on sale of other real estate owned. Non-interest expense decreased by$1.6 million for the three months ended March 31, 2026 compared to the same period in 2025, primarily due to decreases in salaries and employee benefits, outside services, furniture and equipment, and advertising and marketing expenses. Net income increased $1.6 million to$4.1 million for the three months ended March 31, 2026 from$2.5 million for the three months ended March 31, 2025. The increase in net income was primarily driven by the decrease in deposit interest expense as well as a decrease in non-interest expense.

Previous 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.

Current wording

Total interest income decreased $1.7 million or 5.3%, to $31.3 million for the three months ended March 31, 2026 from $33.0 million for the three months ended March 31, 2025, on a tax equivalent basis. The decrease was primarily the result of a decrease in interest and fees on loans of$1.6 million. Total average interest-earning assets increased $13.3 million, to$2.05 billion for the three months ended March 31, 2026 from$2.04 billion for the same period in 2025 primarily because of an increase of$25.3 million in the average balance of loans offset by a decrease of $9.5 million in the average balance of federal funds sold and interest bearing deposits at other financial institutions and a$2.4 million decrease in the average balance of investment securities. The average yield on our interest-earning assets decreased 38 basis points to 6.19% for the three months ended March 31, 2026 as compared to 6.57% for the three months ended March 31, 2025 primarily due to market conditions. For the three months ended March 31, 2026, the Company reversed $610,000 in accrued interest income in relation to loans placed on non-accrual, as compared to $104,000 for the three months ended March 31, 2025. During the three months ended March 31, 2026, $206,000 of accrued interest reversed in 2025 was recovered and $80,000 of interest was received related to a refund of federal income taxes, for a net adjustment of $324,000 to interest income.

Previous wording

Interest and fees on loans decreased $927,000, to$30.7 million for the three months ended September 30, 2025 from$31.6 million for the same period in 2024. This was primarily due to the reversal of accrued interest of $595,000 on a small number of non-accrual loans as well as a 19 basis point decrease in the average loans yields, which was 6.75% for the three months ended September 30, 2025 compared to 6.94% for thethree months ended September 30, 2024. The average balance on loans was consistent for the three months ended September 30, 2025 as compared to thethree months ended September 30, 2024.

Current wording

Interest and fees on loans decreased $1.6 million, to$29.5 million for the three months ended March 31, 2026 from$31.1 million for the same period in 2025. There was a 44 basis point decrease in the average loans yields, which was 6.42% for the three months ended March 31, 2026 compared to 6.86% for thethree months ended March 31, 2025. The average balance of loans increased$25.3 million for the three months ended March 31, 2026 as compared to thethree months ended March 31, 2025.

Previous 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.

Current wording

Interest income on federal funds sold and interest-earning deposits decreased by $0.17 million to $1.00 million for the three months ended March 31, 2026, from $1.17 million for the three months ended March 31, 2025. The average balance of interest-earning deposits and federal funds sold decreased $9.5 million to $102.2 million for the three months ended March 31, 2026 from $111.7 million for the same period in 2025. The average yield on federal funds sold and interest-earning deposits decreased to 3.95% for the three months ended March 31, 2026 from 4.24% for the same period in 2025.

Previous 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.

Current wording

Interest on investment securities was$0.8 million for the three months ended March 31, 2026 and $0.8 million for the three months ended March 31, 2025 on a fully tax-equivalent basis. Interest on investments in U.S. Government Agencies and U.S. Municipals was $0.4 million for the three months ended March 31, 2026 and $0.4 million for the three months ended March 31, 2025. Interest on mortgage-backed securities was $0.1 million and $0.1 million for the three months ended March 31, 2026 and March 31, 2025. Subordinated debt interest income was $0.2 million for the three months ended March 31, 2026, and $0.1 million for the three months ended March 31, 2025. The average yield on taxable securities increased 20 basis points, to 3.41% and the average yield on tax-exempt securities increased 23 basis points, to 4.07% on a tax equivalent basis for the three months ended March 31, 2026, from 3.84%, respectively, for the same period in 2025. Due to the increase in average yield, interest on investment securities increased despite the average balance of investment securities decreasing by$2.4 million, to$85.9 million for the three months ended March 31, 2026, from$88.3 million for thethree months ended March 31, 2025.

Previous 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.

Current wording

Total interest expense decreased $2.7 million to$13.7 million for the three months ended March 31, 2026 from$16.5 million for thethree months ended March 31, 2025, primarily due to a$2.7 million decrease in interest expense on interest bearing deposits and a$0.1 million decrease in total interest expense paid on borrowings.

Previous 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.

Current wording

Interest expense on deposits decreased $2.7 million to$12.9 million for the three months ended March 31, 2026 from$15.6 million for thethree months ended March 31, 2025 primarily as a result of a decrease in yields on cost of funds. Theincrease in average balance of interest-bearing deposits was$4.9 million to$1.52 billion during the three months ended March 31, 2026 as compared to$1.52 billion for thethree months ended March 31, 2025. Theincrease in the average balance of interest-bearing deposits was primarily a result of a$67.1 million increase in the average balance of savings and NOW deposits and a$8.2 million increase in interest-bearing demand deposits, offset by a$46.0 million decrease in the average balance of money market deposit accounts and a$24.4 million decrease in the average balance of time deposits, during the three months ended March 31, 2026 as compared to thethree months ended March 31, 2025. The average cost of interest-bearing deposits was 3.45% for the three months ended March 31, 2026, compared to 4.17% for thethree months ended March 31, 2025. The average rate paid on money market deposits decreased 69 basis points to 3.29% for the three months ended March 31, 2026 from 3.98% for thethree months ended March 31, 2025. The average rate paid on interest-bearing demand deposits decreased 79 basis points to 3.02% for the three months ended March 31, 2026 from 3.81% for thethree months ended March 31, 2025 primarily due to the interest rate environment and our ability to reprice these deposits. The average rate paid on savings and NOW deposits decreased 15 basis points to 1.17% for the three months ended March 31, 2026 from 1.32% for thethree months ended March 31, 2025. The average cost of time deposits decreased by 58 basis points to 4.01% for the three months ended March 31, 2026 as compared to 4.59% for thethree months ended March 31, 2025. The average balance of non-interest bearing demand deposits and other liabilities increased $15.8 million to$369.5 million for the three months ended March 31, 2026, compared to$353.7 million for thethree months ended March 31, 2025. Theincrease was primarily the result of an increase non-interest bearing demand deposits.

Previous 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.

Current wording

Net interest income increased approximately$1.0 million, or 6.0%, to$17.6 million for the three months ended March 31, 2026 from$16.6 million for thethree months ended March 31, 2025, on a tax equivalent basis. Our net interest-earning assets increased $14.5 million to$459.2 million for the three months ended March 31, 2026 from$444.7 million for thethree months ended March 31, 2025. The interest rate spread increased by 31 basis points to 2.69% for the three months ended March 31, 2026 from 2.38% for thethree months ended March 31, 2025, on a tax equivalent basis. The net interest margin increased by 17 basis point from 3.30% for thethree months ended March 31, 2025 to 3.47% for the three months ended March 31, 2026 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, which is an operating expense, is maintained to ensure that the allowance for credit losses is maintained at levels we consider necessary and appropriate to absorb expected credit losses as of the balance sheet date. In determining the level of the allowance for credit losses on loans and off-balance sheet credit exposure, we consider past and current loss experience, evaluations of real estate collateral, current and future economic conditions, volume and type of lending, adverse situations that may affect a borrower’s ability to repay a loan and the levels of non-performing loans. The amount of the allowance is based on estimates, and actual losses may vary from such estimates as more information becomes available over time or economic conditions change. This evaluation is inherently subjective, as it requires estimates and assumptions that are susceptible to significant revision as circumstances change or as more information becomes available. The allowance for credit losses is assessed monthly and provisions are made for credit losses as required in order to maintain the overall allowance.

Current wording

The provision for credit losses, which is an operating expense, is maintained to ensure that the allowance for credit losses is maintained at levels we consider necessary and appropriate to absorb expected credit losses as of the balance sheet date. In determining the level of the allowance for credit losses on loans and off-balance sheet credit exposure, we consider past and current loss experience, evaluations of real estate collateral, current and future economic conditions, volume and type of lending, adverse situations that may affect a borrower’s ability to repay a loan and the levels of non-performing loans. The amount of the allowance is based on estimates, and actual losses may vary from such estimates as more information becomes available over time or economic conditions change. This evaluation is inherently subjective, as it requires estimates and assumptions that are susceptible to signif icant revision as circumstances change or as more information becomes available. The allowance for credit losses is assessed monthly and provisions are made for credit losses as required in order to maintain the overall allowance.

Previous 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.

Current wording

Therecovery of credit losses on off-balance sheet credit exposure was$0.1 million for the three months ended March 31, 2026 compared to arecovery of credit losses of$0.0 for thethree months ended March 31, 2025. Therecovery of credit losses on off-balance sheet credit exposure for the three months ended March 31, 2026 was primarily related to decreases in expected utilization rates.

Previous 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.

Current wording

Non-interest income decreased $0.5 million, or 56.7%, to$0.4 million for the three months ended March 31, 2026 from$0.9 million for the three months ended March 31, 2025. Thedecrease in non-interest income was primarily due to a$0.7 million loss on the sale of other real estate owned during thethree months ended March 31, 2026. This is offset by an increase of $0.2 million in other non-interest income due to a prepayment fee recognized during the three months ended March 31, 2026. 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 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.

Current wording

Non-interest expense decreased $1.6 million, or 11.5%, to$12.7 million for the three months ended March 31, 2026, from$14.3 million for the three months ended March 31, 2025 primarily because of continued expense management efforts across the Company. Salaries and employee benefits decreased$0.8 million to$7.6 million for the three months ended March 31, 2026, from$8.4 million for the three months ended March 31, 2025 due to less full time employees compared to last year. Outside services, which includes professional fees for attorneys, accountants, consultants, and cloud services, decreased $0.7 million to$0.5 million for the three months ended March 31, 2026, from$1.2 million for the three months ended March 31, 2025. Furniture and equipment expenses decreased approximately$0.3 million to$0.8 million for the three months ended March 31, 2026, from$1.0 million for the three months ended March 31, 2025. Advertising and marketing decreased approximately $0.2 million to $0.3 million for the three months ended March 31, 2026, from $0.5 million for the three months ended March 31, 2025. These decreases were offset by an increase in other real estate owned expenses of $0.2 million for the three months ended March 31, 2026, compared to $0 for the three months ended March 31, 2025.

Previous 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.

Current wording

Income tax expense increased $0.6 million or 84.5%, to$1.3 million for the three months ended March 31, 2026 from$0.7 million for the three months ended March 31, 2025. Theincrease in federal income tax expense for the three months ended March 31, 2026 compared to the same period a year ago was driven by theincrease in income before income taxes of$2.3 million, to income before income tax of$5.4 million for the three months ended March 31, 2026 compared to income before income tax expense of$3.1 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. The Company has included assessments in income tax expense for potential state tax liabilities which totaled$149,000 for the three months ended March 31, 2026 and$79,000 for thethree months ended March 31, 2025. For the three months ended March 31, 2026, the Company had an effective income tax expense rate of 23.48%, compared to 21.75% for the three months ended March 31, 2025.

Previous 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.

Current wording

Investment securities decreased $0.9 million, or 1.3%, from$71.8 million at December 31, 2025 to$70.8 million at March 31, 2026. Thedecrease was primarily due to one call and scheduled paydowns on available-for-sale securities. At March 31, 2026, our held-to-maturity portion of the securities portfolio, at amortized cost, was$13.8 million, and our available-for-sale portion of the securities portfolio, at fair value, was$57.0 million compared to our held-to-maturity portion of the securities portfolio of$13.8 million and our available-for-sale portion of the securities portfolio of$58.0 million at December 31, 2025.

Previous 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.

Current wording

Net loans increased $9.1 million, or 0.5%, to$1.85 billion at March 31, 2026 from$1.84 billion at December 31, 2025. Residential real estate loans increased $6.7 million, or 1.5%, to$448.3 million at March 31, 2026 from$441.6 million at December 31, 2025. Commercial real estate loans increased by$9.8 million from$1.01 billion at December 31, 2025 to$1.02 billion at March 31, 2026. Commercial and industrial loans decreased by$6.2 million from$107.0 million at December 31, 2025 to$100.8 million at March 31, 2026. Construction and land development loans decreased $1.7 million to$299.0 million at March 31, 2026 from$300.7 million at December 31, 2025. Consumer loans increased by$84,000 from$1.1 million at December 31, 2025 to$1.2 million at March 31, 2026.

Previous 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%.

Current wording

The Company holds a concentration in commercial real estate loans. As of March 31, 2026, construction, land development and other land loans represented 100.1% of consolidated risk-based capital. Total commercial real estate loans as defined by the Agency guidance represented 367.6% of consolidated risk-based capital. During the prior 36 months, the Company has experienced an increase in its commercial real estate portfolio by 39.0%.

Previous 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.

Current wording

Past due loans excluding non-performing loans, were$17.8 million as of March 31, 2026 compared to $33.3 million as of December 31, 2025. As of March 31, 2026, criticized loans increased $0.5 million and classified loans increased $27.1 million when compared to December 31, 2025, to a balance of$111.0 million and$111.3 million, respectively. The majority of classified loans is made up of 7 relationships that experienced increases in operating costs, vacancies, and liquidity tightening as a result of the prolonged impacts of the federal government shut down, Washington D.C. government policies, and sustained elevated interest rates. Non-performing loans were$53.8 million at March 31, 2026, an increase of $22.3 million compared to $31.5 million at December 31, 2025. Approximately 46% of this balance is attributable to two relationships and the remaining 54% is confined to eight relationships that experienced liquidity constraints. Additionally, as interest rates rose significantly starting 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 analyzed, and executes the best course of action expected to minimize any further loss exposure. All classified loans andnon-performing loans are considered individually evaluated and have strong collateral positions, with satisfactory loan-to-value (LTVs) ratios. As such, the increase in classified loans and non-performing loans resulted in a decrease to the allowance for credit losses which was offset by loan growth during the three months ended March 31, 2026.

Previous 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.

Current wording

Deposits increased $15.5 million, or 0.8% to$1.91 billion at March 31, 2026 from$1.90 billion at December 31, 2025. Our core deposits decreased $1.1 million, or 0.1%, to$1.40 billion at March 31, 2026 from$1.40 billion at December 31, 2025. Non-interest bearing demand deposits decreased $19.6 million, or 5.2%, to$359.1 million at March 31, 2026 from$378.7 million at December 31, 2025. Interest-bearing demand deposits increased $1.3 million, or 1.1%, to$120.7 million at March 31, 2026 from$119.4 million at December 31, 2025. Time deposits decreased $29.4 million, or 3.8%, to$750.4 million at March 31, 2026 from$779.8 million at December 31, 2025. Money market deposits increased $46.5 million, or 9.3%, to$545.8 million at March 31, 2026 from$499.3 million at December 31, 2025. Savings and NOW deposits increased $16.8 million or 13.8% from$121.9 million at December 31, 2025 to$138.7 million at March 31, 2026.

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 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.

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 March 31, 2026, the Company had$515.1 million of total wholesale deposit balances, anincrease of$16.6 million compared to December 31, 2025, which totaled$498.5 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 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 nine months ended September 30, 2025 and 2024, total wholesale deposit funding accounted for approximately 35.7% and 32% of our interest expense.

Current wording

The Company utilizes additional wholesale demand deposits to provide liquidity and more effectively balance our interest rate sensitivity. During the three months ended March 31, 2026 and 2025, total wholesale deposit funding accounted for approximately 35.7% and 36.8% 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 September 30, 2025, the Company had$502.8 million of wholesale deposits outstanding, as defined by FDIC, anincrease of$59.9 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 September 30, 2025, the Company additionally reported$114.9 million in reciprocal deposits considered wholesale for call report purposes only, bringing regulatory defined wholesale deposits to$617.7 million as of September 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 September 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.

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 March 31, 2026, the Company had$497.3 million of wholesale deposits outstanding, as defined by FDIC, anincrease of$17.3 million from$480.0 at December 31, 2025. 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, 2026, the Company additionally reported$138.5 million in reciprocal deposits considered wholesale for call report purposes only, bringing regulatory defined wholesale deposits to$635.8 million as of March 31, 2026. As of December 31, 2025, the Company additionally reported$145.2 million in reciprocal deposits considered wholesale for call report purposes only, bringing regulatory defined wholesale deposits to$625.2 million as of December 31, 2025. As of March 31, 2026 and December 31, 2025, all of the Company's reciprocal deposits were core deposits from customers who placed their deposits in the reciprocal network for additional FDIC insurance coverage.

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$527.1 million as of September 30, 2025. Additionally, at September 30, 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$682.4 million as of March 31, 2026. Additionally, at March 31, 2026, 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 September 30, 2025, cash and cash equivalents totaled$127.3 million. Finally, securities classified as available-for-sale, which provide additional sources of liquidity, totaled$58.3 million at September 30, 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 March 31, 2026, cash and cash equivalents totaled$168.1 million. Finally, securities classified as available-for-sale, which provide additional sources of liquidity, totaled$57.0 million at March 31, 2026.

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$8.2 million and$9.3 million for thenine months ended September 30, 2025 and September 30, 2024, respectively. There were no sales of securities in thenine months ended September 30, 2025 or fornine months ended September 30, 2024. Net cash provided by investing activities was$15.9 million and used in investing activities was$79.6 million for thenine months ended September 30, 2025 and September 30, 2024, respectively. Net cash used in financing activities was$104.5 million and provided by financing activities was$187.9 million for thenine months ended September 30, 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$6.6 million and$1.5 million for thethree months ended March 31, 2026 and March 31, 2025, respectively. There were no sales of securities in thethree months ended March 31, 2026 or forthree months ended March 31, 2025. Net cash used in investing activities was$8.6 million and$4.4 million for thethree months ended March 31, 2026 and March 31, 2025, respectively. Net cash provided by financing activities was$7.4 million and used in financing activities was$2.2 million for thethree months ended March 31, 2026 and 2025, 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 September 30, 2025, totaled$688.4 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.

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 March 31, 2026, totaled$658.0 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

Commitments. As a financial services provider, we routinely are a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. While these contractual obligations represent our future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans we make. At September 30, 2025, we had outstanding loan commitments of$233.2 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 March 31, 2026, we had outstanding loan commitments of$186.8 million and$391,000 in outstanding stand-by letters of credit. We anticipate that we will have sufficient funds available to meet our current lending commitments.