MainStreet Bancshares, Inc. 10-K

Item 5. Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Common Stock Our common stock is traded on the Nasdaq Capital Market under the symbol “MNSB.” At December 31, 2024, the Company had approximately 228 shareholders of record. This total does not reflect shares held in nominee or “street name” accounts through various firms. Dividends Holders of our common stock are only entitled to receive dividends when, as and if declared by the Board of Directors out of funds legally available for dividends. As the Company is a financial holding company and does not engage directly in business activities of a material nature, its ability to pay dividends on its common stock will depend, in large part, upon the receipt of dividends from the Bank. Any future determination relating to our dividend policy will be made by the Board of Directors and will depend on a number of factors, including general and economic conditions, industry standards, our financial condition and operating results, our available cash and current and anticipated cash needs, capital requirements, our ability to service debt obligations senior to our common stock, banking regulations, contractual, legal, tax and regulatory restrictions, and limitations on the payment of dividends by the Company to its shareholders or by the Bank, and such other factors as the Board of Directors may deem relevant. During the fiscal year ended December 31, 2024, the Company declared and paid four cash dividends. Holders of the common stock are subject to priority dividend rights of any holders of preferred stock then outstanding. There were 28,750 shares of preferred stock outstanding at December 31, 2024. A discussion of applicable regulatory restrictions on dividends by the Company and the Bank is provided in Item 1 (“Business”) under “Dividends, Capital Distributions, and Other Payments.” Securities Authorized For Issuance Under Equity Compensation Plans The following table provides information concerning securities authorized for issuance under equity compensation plans, the weighted average price of such securities and the number of securities remaining available for future issuance, as of December 31, 2024. Equity Compensation Plan Category Number of securities to be issued upon exercise of outstanding options, warrants and rights Weighted- average exercise price of outstanding options, warrants and rights (1) Number of securities remaining and available for future issuance (2) Plans approved by shareholders 237,717 $ — 570,462 Plans not approved by shareholders — — — Total 237,717 $ — 570,462 (1) Restricted stock shares were not included when calculating the weighted-average exercise price. (2) Remaining shares available for issuance include 570,462 shares under the 2019 Equity Incentive Plan (“2019 Plan”). Shares remaining to be issued subsequent to December 31, 2024 under the 2019 Plan can be issued either as a restricted stock grant or upon grant and exercise of stock options. Unregistered Sales and Issuer Repurchases of Common Stock Unregistered Sales of Common Stock Set forth below is information concerning sales of common stock by the Company during the past 3 years that were not registered under the Securities Act. 34 In 2019, the Board of Directors of the Bank and the Bank’s shareholders approved the MainStreet Bank 2019 Equity Incentive Plan (the “2019 Plan”), to provide officers, other selected employees and directors with additional incentives to promote growth and performance. The terms and conditions of the 2019 Plan were subsequently converted into and deemed to be the terms and conditions of a substantially identical Company incentive compensation plan. To date, a total of 605,553 shares of restricted common stock have been awarded under the 2019 Plan and 26,015 shares have been forfeited, for a net of 579,538 shares of restricted common stock issued and outstanding under the 2019 Plan. As of December 31, 2023, a total of 485,872 shares of restricted common stock had been awarded under the 2019 Plan and 24,269 shares had been forfeited, for a net of 461,603 shares of restricted common stock issued and outstanding under the 2019 Plan. During 2024, (108,518) shares of restricted common stock vested from shares issued under both the 2019 Plan and the Bank's 2016 Equity Incentive Plan ("2016 Plan"). See Note 18 of Notes to Consolidated Financial Statements. In August 2019, the Company registered with the SEC, on Form S-8, the shares of common stock that would then be issuable under the 2019 Plan. As a result of the stockholders’ approval of the 2019 Plan, no additional awards were made under the 2016 Plan. All awards that were then outstanding under the 2016 Plan remained outstanding in accordance with their terms. At the Annual Meeting of shareholders held on May 15, 2024, the Company's common shareholders approved a proposal to increase the number of shares of authorized common stock from 650,000 to 1,150,000 shares. Repurchases of Common Stock On May 18, 2022, the Company announced that the Board of Directors had authorized a plan to repurchase up to $7.5 million of the Company’s outstanding common stock in open market transactions or privately negotiated transactions, including pursuant to a trading plan in accordance with Rule 10b-18 under the Securities Exchange Act of 1934. The new stock repurchase program replaces the Company’s previous program. During the year ended December 31, 2024, the Company repurchased 166,000 shares under this plan. The Company did not repurchase common stock during the fourth quarter of 2024. (Dollars in thousands, except for per share amounts) Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Number (or Approximate Dollar Value) of Shares that May Yet be Purchased Under the Plans or Programs October 1, 2024 - October 31, 2024 — $ — — $ 3,538 November 1, 2024 - November 30, 2024 — $ — — $ 3,538 December 1, 2024 - December 31, 2024 — $ — — $ 3,538 Total — — $ 3,538 Preferred Stock and Depositary Shares On September 15, 2020, the Company closed its underwritten public offering of 1,000,000 depositary shares, each representing 1/40th of a share of 7.50% Series A Fixed-Rate Non-Cumulative Perpetual Preferred Stock, par value $1.00 per share (the “Series A Preferred Stock”). On September 25, 2020, the Company completed the sale of an additional 150,000 depositary shares pursuant to the underwriters’ full exercise of their over-allotment option to purchase additional depositary shares. Trading the depositary shares on the Nasdaq Capital Market commenced on September 16, 2020, under the symbol “MNSBP.” The Board of Directors declared a quarterly cash dividend on the outstanding shares of the Series A Preferred Stock each quarter in agreement with the depositary share offering. Each declared cash dividend equated to approximately $0.47 per depositary share, or $18.75 per share of Series A Preferred Stock outstanding. Item 6. [Reserved] Item 7. Management ’ s Discussion and Analysis of Financial Condition and Results of Operations The purpose of this discussion is to focus on significant changes in the financial condition and results of operations of the Company during the years ended December 31, 2024 and 2023. The following discussion supplements and provides information about the major components of the results of operations, financial condition, liquidity and capital resources of the Company. This discussion and analysis should be read in conjunction with the accompanying consolidated financial statements. 35 Forward-Looking Statements This Annual Report on Form 10-K contains certain forward-looking statements and information relating to the Company within the meaning of the Private Securities Litigation Reform Act of 1995 that are based on the beliefs of management as well as assumptions made by and information currently available to management. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words like “believe,” “expect,” “anticipate,” “estimate,” and “intend” or future or conditional verbs such as “will,” “should,” “could,” or “may” and similar expressions or the negative thereof. Important factors that could cause actual results to differ materially from those in the forward–looking statements included herein include, but are not limited to: • general economic conditions, either nationally or in our market area, that are worse than expected; • competition among depository and other financial institutions, particularly intensified competition for deposits; • inflation and an interest rate environment that may reduce our margins or reduce the fair value of financial instruments; • adverse changes in the securities markets; • changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory structure and in regulatory fees and capital requirements; • our ability to enter new markets successfully and capitalize on growth opportunities; • our ability to successfully integrate acquired entities; • changes in consumer spending, borrowing and savings habits; • changes in accounting policies and practices; • changes in our organization, compensation and benefit plans; • our ability to attract and retain key employees; • changes in our financial condition or results of operations that reduce capital; • changes in the financial condition or future prospects of issuers of securities that we own; • the concentration of our business in the Northern Virginia as well as the greater Washington, DC metropolitan area and the effect of changes in the economic, political and environmental conditions on this market; • adequacy of our allowance for credit losses; • deterioration of our asset quality; • cyber threats, attacks or events; • reliance on third parties for key services; • future performance of our loan portfolio with respect to recently originated loans; • additional risks related to new lines of business, products, product enhancements or services; • results of examination of us by our regulators, including the possibility that our regulators may require us to increase our allowance for credit losses or to write-down assets or take other supervisory action; • the effectiveness of our internal controls over financial reporting and our ability to remediate any future material weakness in our internal controls over financial reporting; • liquidity, interest rate and operational risks associated with our business; • a work stoppage, forced quarantine, or other interruption or the unavailability of key employees; • volatility in the financial institution industry, including failures and/or rumors of possible failures of other financial institutions and actions by regulatory authorities in response thereto; • litigation or governmental actions; • impairment of a material asset; and • other factors beyond our knowledge or control. 36 Should one or more of these risks or uncertainties materialize or should underlying assumptions prove incorrect, actual results may vary materially from those described herein. We caution readers not to place undue reliance on forward-looking statements. The Company disclaims any obligation to revise or update any forward-looking statements contained in this Form 10-K to reflect future events or developments. Additional information on risk factors that may affect forward-looking statements is included under “Risk Factors” in this Form 10-K. Critical Accounting Policies The discussion of the critical accounting policies and analysis set forth below is intended to supplement and highlight information contained in the accompanying Consolidated Financial Statements and the selected financial data presented elsewhere in this Form 10-K. The accounting and financial reporting policies of the Company conform to accounting principles generally accepted in the United States of America and to general practices within the banking industry. Accordingly, the financial statements require certain estimates, judgments, and assumptions, which are believed to be reasonable, based upon the information available. These estimates and assumptions affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the periods presented. Critical accounting policies comprise those that management believes are the most critical to aid in fully understanding and evaluating our reported financial results. These policies require numerous estimates or economic assumptions that may prove inaccurate or may be subject to variations which may significantly affect our reported results and financial condition for the current period or in future periods. The accounting principles followed by the Company and the methods of applying these principles conform with accounting principles generally accepted in the United States of America and with general practices within the banking industry. The Company’s critical accounting policies relate to (1) the allowance for credit losses, (2) fair value of financial instruments, and (3) derivative financial instruments. These critical accounting policies require the use of estimates, assumptions and judgments which are based on information available as of the date of the financial statements. Accordingly, as this information changes, future financial statements could reflect the use of different estimates, assumptions and judgments. Certain determinations inherently have a greater reliance on the use of estimates, assumptions and judgments and, as such, have a greater possibility of producing results that could be materially different than originally reported. Allowance for Credit Losses : On January 1, 2023, the Company adopted ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (ASC 326). This standard replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (“CECL”) methodology. CECL requires an estimate of credit losses for the remaining estimated life of the financial asset using historical experience, current conditions, and reasonable and supportable forecasts and generally applies to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities, and some off-balance sheet credit exposures such as unfunded commitments to extend credit. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. See Note 1. Organization, Basis of Presentation, and Impact of Recently Issued Accounting Pronouncements for a more detailed description of methodology and impact of adoption. Fair Value of Financial Instruments : A portion of the Company’s assets and liabilities are carried at fair value, with changes in fair value recorded either in earnings or accumulated other comprehensive income (loss). These include investment securities available-for-sale and interest rate loan swaps on qualifying commercial loans. Periodically, the estimation of fair value also affects investment securities held-to-maturity when it is determined that the Company should record an allowance for credit losses on a security. Fair value determination is also relevant for certain other assets such as other real estate owned, which is recorded at the lower of the recorded balance or fair value, less estimated costs to sell. The determination of fair value also impacts certain other assets that are periodically evaluated for impairment using fair value estimates, including individually evaluated loans. Fair value is generally based upon quoted market prices, when available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use observable market-based parameters as inputs. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the Company’s creditworthiness, among other things, as well as other unobservable parameters. Any such valuation adjustments are applied consistently over time. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. 37 See Note 20, Fair Value Presentation, in Notes to Consolidated Financial Statements for a detailed discussion of determining fair value, including pricing validation processes. Derivative Financial Instruments: The Bank recognizes derivative financial instruments at fair value as either other assets or other liabilities in the consolidated statement of financial condition. The Bank’s derivative financial instruments include interest rate swaps with certain qualifying commercial loan customers and dealer counterparties. Because the interest rate swaps with loan customers and dealer counterparties are not designated as hedging instruments, adjustments to reflect unrealized gains and losses resulting from changes in fair value of these instruments are reported as non-interest income or non-interest expense, as applicable. The Bank’s interest rate swaps with loan customers and dealer counterparties are described more fully in Note 19 in the December 31, 2024, Consolidated Financial Statements. Selected Financial Data The following table sets forth summarized historical consolidated financial information for each of the periods indicated. This information should be read together with the accompanying consolidated financial statements included in this Form 10-K. The historical information indicated as of December 31, 2024 and 2023 and for the years ended December 31, 2024, 2023, and 2022, has been derived from the Company's audited consolidated financial statements for the years ended December 31, 2024, 2023, and 2022. Historical results set forth below and elsewhere in this Form 10-K are not necessarily indicative of future performance. At December 31, 2024 2023 (In thousands) Selected Financial Condition Data: Total assets $ 2,228,098 $ 2,035,432 Total cash and cash equivalents 207,708 114,513 Total investment securities 71,825 77,203 Loans receivable, net 1,810,556 1,705,137 Bank-owned life insurance 39,507 38,318 Premises and equipment, net 13,287 13,944 Computer software, net of amortization — 14,657 Total deposits 1,907,794 1,686,127 Federal funds purchased — 15,000 Subordinated debt 73,039 72,642 Allowance for credit losses on off-balance sheet credit exposure 287 1,009 Total stockholders’ equity 207,991 221,517 38 For the year ended December 31, 2024 2023 2022 (In thousands) Selected Operating Data: Interest income $ 134,615 $ 124,421 $ 84,018 Interest expense 72,041 47,679 13,369 Net interest income 62,574 76,742 70,649 Provision for credit losses 6,763 1,642 2,398 Net interest income after provision for credit losses 55,811 75,100 68,251 Total non-interest income 3,252 3,340 4,661 Total non-interest expenses 72,967 45,616 39,524 Income (loss) before income taxes (13,904 ) 32,824 33,388 Income tax expense (benefit) (3,924 ) 6,239 6,714 Net income (loss) (9,980 ) 26,585 26,674 Less: Preferred stock dividends 2,156 2,156 2,156 Net income (loss) available to common shareholders $ (12,136 ) $ 24,429 $ 24,518 Basic and diluted earnings (loss) per common share $ (1.60 ) $ 3.25 $ 3.26 At or For the Years Ended December 31, 2024 2023 2022 Performance Ratios: Return on average assets (0.47 )% 1.38 % 1.53 % Return on average equity (4.44 )% 12.66 % 13.98 % Interest rate spread (1) 2.01 % 3.05 % 3.71 % Net interest margin (1) 3.13 % 4.15 % 4.23 % Efficiency ratio (2) 110.85 % 56.69 % 52.19 % Non-interest expense to average assets 3.42 % 2.34 % 2.24 % Average interest-earning assets to average interest-bearing liabilities 131.19 % 143.43 % 164.68 % Per share Data and Shares Outstanding: Earnings (loss) per common share (basic and diluted) $ (1.60 ) $ 3.25 $ 3.26 Book value per common share $ 23.77 $ 25.81 $ 22.98 Dividends per common share $ 0.40 $ 0.40 $ 0.25 Tangible book value per common share (1) $ 23.77 $ 23.86 $ 21.75 Market value per common share $ 18.10 $ 24.81 $ 27.49 Weighted average common shares (basic and diluted) 7,606,391 7,522,913 7,529,382 Common shares outstanding at end of period 7,603,765 7,527,415 7,442,743 Capital Ratios (Bank): Common equity tier 1(CET1) capital to risk-weighted assets 14.64 % 16.22 % 15.47 % Total risk-based capital to risk-weighted assets 15.69 % 17.18 % 16.27 % Tier 1 capital to risk-weighted assets 14.64 % 16.22 % 15.47 % Tier 1 capital to average assets 12.08 % 14.66 % 15.05 % Asset Quality Ratios: Allowance for credit losses on loans as a percentage of total loans 1.06 % 0.96 % 0.88 % Allowance for credit losses on loans as a percentage of non-performing loans 89.84 % 16.44X N/A Net charge-offs to average outstanding loans during the period 0.25 % 0.03 % 0.00 % Non-performing loans as a percentage of total loans 1.18 % 0.06 % 0.00 % Non-performing assets as a percentage of total assets 0.97 % 0.05 % 0.00 % Other Data: Common equity / total assets 8.11 % 9.54 % 8.88 % Tangible equity / tangible assets (1) 9.33 % 10.24 % 9.87 % Average tangible equity to average tangible assets 9.80 % 10.31 % 10.66 % Number of offices 6 6 6 Number of full-time equivalent employees 204 186 168 (1) Non-GAAP; refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section “Non-GAAP Measures” of this Form 10-K. (2) Efficiency ratio is calculated as non-interest expense as a percentage of net interest income and non-interest income. 39 Analysis of Results of Operations for the Years Ended December 31, 2024, 2023 , and 2022 Net Income The following table sets forth the principal components of net income (loss) for the periods indicated. For the Year Ended December 31, 2024 2023 % Change 2023 2022 % Change (In thousands) (In thousands) Interest income $ 134,615 $ 124,421 8.19 % $ 124,421 $ 84,018 48.09 % Interest expense 72,041 47,679 51.10 % 47,679 13,369 256.64 % Net interest income 62,574 76,742 (18.46 )% 76,742 70,649 8.62 % Provision for credit losses 6,763 1,642 311.88 % 1,642 2,398 (31.53 )% Net interest income after provision 55,811 75,100 (25.68 )% 75,100 68,251 10.04 % Non-interest income 3,252 3,340 (2.63 )% 3,340 4,661 (28.34 )% Non-interest expense 72,967 45,616 59.96 % 45,616 39,524 15.41 % Net income (loss) before income taxes (13,904 ) 32,824 (142.36 )% 32,824 33,388 (1.69 )% Income tax expense (benefit) (3,924 ) 6,239 (162.89 )% 6,239 6,714 (7.07 )% Net income (loss) (9,980 ) 26,585 (137.54 )% 26,585 26,674 (0.33 )% Less: Preferred stock dividends 2,156 2,156 0.00 % 2,156 2,156 0.00 % Net income (loss) available to common shareholders $ (12,136 ) $ 24,429 (149.68 )% $ 24,429 $ 24,518 (0.36 )% Net loss for the year ended December 31, 2024, was $10.0 million, a decrease of $36.6 million, or 137.5% compared to net income of $26.6 million earned during the year ended December 31, 2023. The decrease in net income was due to increases in interest expense of $24.4 million and an increase of non-interest expenses of $27.4 million compared to the same period in the prior year. Net Interest Income and Net Interest Margin Net interest income is the principal component of the Company’s income stream and represents the difference, or spread, between interest and fee income generated from earning assets and the interest expense paid on deposits and borrowed funds. Net interest margin, stated as a percentage, is the yield obtained by dividing the difference between interest income generated on earning assets and the interest expense paid on all funding sources by average earning assets. Fluctuations in interest rates as well as changes in the volume and mix of earning assets and interest-bearing liabilities can impact net interest income and net interest margin. Net interest income before provision for credit losses totaled $62.6 million for the year ended December 31, 2024, compared to $76.7 million for the year ended December 31, 2023. The decrease in net interest income was driven by an increase in deposit interest expense discussed below, for the year ended December 31, 2024. The net interest margin was 3.13% for the year ended December 31, 2024, compared to 4.15% for the year ended December 31, 2023, on a fully tax equival ent basis. The decrease in net interest margin primarily resulted from an increase of interest expense on our interest bearing liabilities that outpaced the increase in interest income. The primary drivers of increased interest expense came from demand, money market, and time deposits. The federal funds target rate remaining high in 2024 impacted our maturing wholesale deposits that had to reprice in a higher interest rate environment, which increased margin pressure on our loan portfolio and other interest earning assets. Management made efforts to replace these deposits with callable wholesale deposits, allowing more optionality for future rate movements. Th e yield for the year ended December 31, 2024 for the loan portfolio was 7.02% compared to 7.02% for the year ended December 31, 2023 . The unchanging yield primarily reflects the maturity of lower yielding loans and higher yields on new and variable rate loans based on higher interest rates during the year. The Federal Reserve maintained its targeted benchmark interest rate at the range of 525 - 550 basis points through September 2024. The ranged was lowered to 425 - 450 by December 2024. Maintaining higher rates in 2024 with a slight rate decrease in the last quarter of 2024 impacted yields obtained on new loans throughout the year. For the year ended December 31, 2024, the yield on the taxable investment securities portfolio was 3.08% compared to 3.20% for the year ended December 31, 2023. For the year ended December 31, 2024, the yield on the tax-exempt investment securities portfolio was 3.80% compared to 3.57% for the year ended December 31, 2023. The increase in yield on the tax-exempt investment securities was primarily due to rates on variable securities remaining high with the current rate environment and lower yields on investment securities maturing during the period. The rate paid on interest bearing deposits increased to 4.70% during the year ended December 31, 2024, from 3.57% during the year ended December 31, 2023. This increase was a result of higher rates paid on all outstanding deposits in conjunction with the higher rate environment throughout the year. 40 The rate paid on FHLB borrowings and federal funds purchased for the year ended December 31, 2024 was 5.61% and 5.78%, respectively, compared to the prior year of 4.90% for FHLB borrowings and 5.36% for federal funds purchased. This increase was a result of higher rates paid on all outstanding borrowings in conjunction with the higher rate environment throughout the year. Discussion of net interest income and net interest margin for the year ended December 31, 2022 has been omitted as such discussion was provided in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Net Interest Income and Net Interest Margin” in the Company’s Annual Report on Form 10-K for the year ended December 31, 202 2 , which was filed with the SEC on March 23, 2023, and is incorporated herein by reference. The following table sets forth the major components of net interest income and the related yields and rates for the year ended December 31, 2024, compared to the years ended December 31, 2023 and December 31, 2022. Average Balances, Net Interest Income, Yields Earned and Rates Paid The following table shows for the periods indicated the total dollar amount of interest from average interest-earning assets and the resulting yields, as well as the interest expense on average interest-bearing liabilities, expressed both in dollars and rates, and the net interest margin. All average balances are based on daily balances. For the Year Ended December 31, 2024 2023 2022 Average Balance Interest Income/ Expense (5) Yield/ Cost (5) Average Balance Interest Income/ Expense (5) Yield/ Cost (5) Average Balance Interest Income/ Expense (5) Yield/ Cost (5) (Dollars in thousands) Interest-earning assets: Loans (1) $ 1,782,061 $ 125,177 7.02 % $ 1,659,179 $ 116,482 7.02 % $ 1,442,716 $ 79,045 5.48 % Investment securities Taxable 54,935 1,693 3.08 % 57,386 1,836 3.20 % 72,809 1,603 2.20 % Tax-exempt 36,379 1,384 3.80 % 37,810 1,348 3.57 % 38,528 1,339 3.48 % Federal funds and interest-bearing deposits 137,073 6,652 4.85 % 103,840 5,038 4.85 % 122,596 2,312 1.89 % Total interest-earning assets $ 2,010,448 $ 134,906 6.71 % $ 1,858,215 $ 124,704 6.71 % $ 1,676,649 $ 84,299 5.03 % Non-interest-earning assets 126,138 96,972 82,213 Total assets $ 2,136,586 $ 1,955,187 $ 1,758,862 Interest-bearing liabilities: Interest-bearing demand deposits $ 181,109 $ 8,661 4.78 % $ 83,087 $ 1,786 2.15 % $ 85,566 $ 494 0.58 % Money market deposits 464,400 21,386 4.61 % 365,815 13,631 3.73 % 137,066 1,380 1.01 % Savings and NOW deposits 54,385 754 1.39 % 49,565 546 1.10 % 63,401 203 0.32 % Time deposits 748,938 37,364 4.99 % 702,034 26,905 3.83 % 642,918 8,009 1.25 % Total interest-bearing deposits $ 1,448,832 $ 68,165 4.70 % $ 1,200,501 $ 42,868 3.57 % $ 928,951 $ 10,086 1.09 % Federal funds purchased 9,941 575 5.78 % 5,583 299 5.36 % 2 — 1.59 % Federal Home Loan Bank advances 820 46 5.61 % 24,959 1,224 4.90 % 23,986 347 1.45 % Subordinated debt 72,852 3,255 4.47 % 72,455 3,288 4.54 % 65,176 2,936 4.50 % Total interest-bearing liabilities $ 1,532,445 $ 72,041 4.70 % $ 1,303,498 $ 47,679 3.66 % $ 1,018,115 $ 13,369 1.31 % Non-interest-bearing liabilities: Demand deposits and other liabilities 379,510 441,768 549,908 Total liabilities $ 1,911,955 $ 1,745,266 $ 1,568,023 Stockholders’ Equity 224,631 209,921 190,839 Total liabilities and Stockholders’ equity $ 2,136,586 $ 1,955,187 $ 1,758,862 Net interest income $ 62,865 $ 77,025 $ 70,930 Interest rate spread (2) 2.01 % 3.05 % 3.71 % Net interest-earning assets (3) $ 478,003 $ 566,146 $ 658,534 Net interest margin (4) 3.13 % 4.15 % 4.23 % Average interest-earning assets to average interest-bearing liabilities 131.19 % 143.43 % 164.68 % (1) Includes loans classified as non-accrual. (2) Interest rate spread represents the difference between the average yield on average interest–earning assets and the average cost of average interest-bearing liabilities. (3) Net interest earning assets represent total average interest–earning assets less total average interest–bearing liabilities. (4) Net interest margin represents net interest income divided by total average interest-earning assets. (5) Income and yields for all periods are reported on a tax-equivalent basis using the federal statutory rate of 21%. Non-GAAP; refer to Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section “Non-GAAP Measures” of this Form 10-K. 41 Rate/ Volume Analysis The following table presents the effects of changing rates and volumes on net interest income for the periods indicated. The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The net column represents the sum of the prior columns. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately, based on the changes due to rate and the changes due to volume. For the Twelve Months Ended For the Twelve Months Ended December 31, 2024 and 2023 December 31, 2023 and 2022 Increase (Decrease) Due to Total Increase Increase (Decrease) Due to Total Increase Volume Rate (Decrease) Volume Rate (Decrease) (In thousands) (In thousands) Interest-earning assets: Loans $ 8,695 $ — $ 8,695 $ 13,071 $ 24,366 $ 37,437 Investment securities (98 ) (9 ) (107 ) (129 ) 371 242 Federal funds and interest-bearing deposits 1,614 — 1,614 (402 ) 3,128 2,726 Total interest-bearing assets $ 10,211 $ (9 ) $ 10,202 $ 12,540 $ 27,865 $ 40,405 Interest-bearing liabilities: Interest-bearing demand deposits $ 3,375 $ 3,500 $ 6,875 $ (18 ) $ 1,310 $ 1,292 Money market deposit accounts 4,135 3,620 7,755 5,061 7,190 12,251 Savings and NOW deposits 56 152 208 (53 ) 396 343 Time deposits 1,873 8,586 10,459 828 18,068 18,896 Total deposits $ 9,439 $ 15,858 $ 25,297 $ 5,818 $ 26,964 $ 32,782 Federal funds purchased 251 25 276 299 — 299 Federal Home Loan Bank advances (1,333 ) 155 (1,178 ) 15 862 877 Subordinated debt 18 (51 ) (33 ) 326 26 352 Total interest-bearing liabilities 8,375 15,987 24,362 6,458 27,852 34,310 Change in net interest income $ 1,836 $ (15,996 ) $ (14,160 ) $ 6,082 $ 13 $ 6,095 Provision for Credit Losses We establish a provision for credit losses, which is charged to operations, in order to maintain the allowance for credit losses at a level we consider necessary to absorb expected credit losses that are both probable and reasonably estimated at the balance sheet date. In determining the level of the allowance for credit and off-balance sheet losses, 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 or economic conditions change. This evaluation is inherently subjective, as it requires estimates that are susceptible to significant revision as circumstances change as more information becomes available. The allowance for credit losses on loans is assessed on a monthly basis and provisions are made for credit losses on loans as required in order to maintain the allowance at the required level determined by our analysis. The allowance for off-balance sheet credit is assessed quarterly and provisions are made to maintain the allowance at the required level determined by our analysis. The provision for credit losses on loans increased to a credit loss provision of $7.5 million for the year ended December 31, 2024, compared to the prior year which ended at credit loss provision of $1.9 million. The provision for credit losses on off-balance sheet exposure was a net recovery of $722,000 compared to the prior year which ended with a net recovery of $301,000. The increase in provision for credit losses on loans was primarily driven by loan growth and charge offs taken in 2024 as well as increasing qualitative factors within our model assumptions for increased levels of past dues, higher levels of nonperforming loans as of December 31, 2024 compared to December 31, 2023, and potential weaknesses in underlying collateral for certain asset classes. The recovery of credit losses for off-balance sheet exposure was driven by fluctuations in our revolving credit line utilization rates as of December 31, 2024. Loan originations decreased $73.6 million, which totaled $447.6 million for the year ended December 31, 2023 compared to loan originations of $374.0 million for the year ended December 31, 2024. Non-performing loans were $1.0 million at December 31, 2023 and $21.7 million at December 31, 2024. During the year ended December 31, 2024, classified loans increased $36.2 million for a balance of $57.4 million. During the year ended December 31, 2024, criticized loans increased $66.3 million to $85.3 million. During the year ended December 31, 2024, watch list loans increased $63.9 million to $122.6 million. Management does not believe any significant loss exposure currently exists in these loans. During the year ended December 31, 2024, there was $4.6 million in charge-offs recorded and recoveries of $28,000 were received. During the year ended December 31, 2023, there was $468,000 in charge-offs recorded and recoveries received of $22,000. Discussion of provision for loan losses for the year ended December 31, 2022 has been omitted as such discussion was provided in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Provision for Loan Losses” in the Company’s Annual Report on Form 10-K for the year ended December 31, 202 2 , which was filed with the SEC on March 23, 2023, and is incorporated herein by reference. 42 Non-Interest Income Our primary sources of non-interest income are service charges on deposit accounts, such as interchange fees and statement fees, income earned on bank owned life insurance, fees earned from executing interest rate swaps on commercial loans, and gains realized on the sale of the guaranteed portion of Small Business Administration (“SBA”) loans. The following table presents, for the periods indicated, the major categories of non-interest income: For the Year Ended December 31, 2024 2023 % Change (In thousands) Non-interest income Deposit account service charges $ 1,996 $ 2,149 (7.12 )% Bank owned life insurance income 1,189 1,069 11.23 % Net loss on securities called or matured (48 ) — (100.00 )% Other fee income 115 122 (5.74 )% Total non-interest income $ 3,252 $ 3,340 (2.63 )% Non-interest inco me decreased $0.1 million, or 2.6%, to $3.3 million for the year ended December 31, 2024 from $3.3 million for the year ended December 31, 2023. The decrease in non-interest income was primarily due to a decrease in deposit account service charges and other fee income for the year ended December 31, 2024. The Company did not recognize any fees on interest rate swaps for commercial loans for the year ended December 31, 2024 or December 31, 2023. The Company also recognized $251,000 in planned operating losses in other fee income related to two New Market Tax Credit investments during the year ended December 31, 2023. Bank owned life insurance income increased $120,000 for the year ended December 31, 2024, compared to the year ended December 31, 2023, due to the high rate environment throughout 2024. The deposit service fees decreased $153,000 for the year ended December 31, 2024, as compared to the same period in 2023, due to a decrease in customer activity. Discussion of non-interest income for the year ended December 31, 2022 has been omitted as such discussion was provided in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Non-Interest Income” in the Company’s Annual Report on Form 10-K for the year ended December 31, 202 2 , which was filed with the SEC on March 23, 2023, and is incorporated herein by reference. Non-Interest Expense Generally, non-interest expense is composed of all employee expenses and costs associated with operating our facilities, obtaining and retaining customer relationships and providing bank services. The largest component of non-interest expense is salaries and employee benefits. Non-interest expense also includes operational expenses, such as occupancy and equipment expenses, professional fees, advertising expenses and other general and administrative expenses, including FDIC assessments, communications, travel, meals, training, supplies and postage. The following table presents, for the periods indicated, the major categories of non-interest expense: For the Year Ended December 31, 2024 2023 % Change (In thousands) Non-interest expense Salaries and employee benefits $ 30,475 $ 28,267 7.81 % Furniture and equipment expenses 3,636 2,787 30.46 % Advertising and marketing 2,199 2,343 (6.15 )% Occupancy expenses 1,614 1,684 (4.16 )% Outside services 3,627 2,044 77.45 % Franchise tax 2,226 1,835 21.31 % FDIC insurance 1,342 1,131 18.66 % Data processing 1,354 1,328 1.96 % Administrative expenses 929 922 0.76 % Computer software intangible impairment 19,721 — 100.00 % Other operating expenses 5,844 3,275 78.44 % Total non-interest expense $ 72,967 $ 45,616 59.96 % 43 Non-interest expense increased $27.4 million or 60.0% to $73.0 million for the year ended December 31, 2024 from $45.6 million for the year ended December 31, 2023 primarily as a result of the impairment of the computer software intangible of $19.7 million, increases in salary and employee benefits of $2.2 mil lion, outside services of $1.6 mi llion, and furniture and equipment expenses of $849,000. Management performed an impairment analysis on the computer software intangible asset during the three months ended December 31, 2024 and determined that the intangible had become fully impaired, which led to a charge of $19.7 million to the income statement. Salaries and employee benefits expense increased by $2.2 million to $30.5 million for the year ended December 31, 2024 from $28.3 million for the year ended December 31, 2023 primarily as a result of increasing our personnel team members by 18 employees. Outside services increase d $1.6 million, or 77.4% , to $3.6 million fo r the year ended December 31, 2024 from $2.0 million for the year ended December 31, 2023. Furniture and equipment expenses incre ased $849,000 , or 30% , to $3.6 million f or the year ended December 31, 2024 from $2.8 million for the year ended December 31, 2023. Many of the non-interest expense categories remain consistent for the year ended December 31, 2024 compared to the year ended December 31, 2023 as management continues to exercise judicious expense controls. Discussion of non-interest expense for the year ended December 31, 2022 has been omitted as such discussion was provided in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Non-Interest Expense” in the Company’s Annual Report on Form 10-K for the year ended December 31, 202 2 , which was filed with the SEC on March 23, 2023, and is incorporated herein by reference. Income Tax Expense Income tax expense decreased $10.2 million or 162.9%, to a tax benefit of $3.9 million for the year ended December 31, 2024 from a tax expense of $6.2 million for the year ended December 31, 2023. The decrease in federal income tax expense for the year ended December 31, 2024 compared to the same period a year earlier was driven by a net loss recorded for the year ended December 31, 2024 due to the decline in net interest income given the impact of the highly competitive deposit interest rate environment and the impairment of the computer software intangible asset. For the year ended December 31, 2024, the Bank had an effective tax benefit rate of 28.2%, compared to effective federal tax rate of 19.0% for the year ended December 31, 2023. Discussion of income tax expense for the year ended December 31, 2022 has been omitted as such discussion was provided in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Income Tax Expense” in the Company’s Annual Report on Form 10-K for the year ended December 31, 202 2 , which was filed with the SEC on March 23, 2023, and is incorporated herein by reference. Avenu, a division of MainStreet Bank Analysis of Results of Operations for the Year Ended December 31, 2024 Net Income Refer to Note 26 for detailed segment reporting tables for the Financial Technology division of MainStreet Bank for the periods indicated. All amounts set forth are included in the Results of Operations for the Year Ended December 31, 2024 and 2023 for MainStreet Bancshares, Inc. unless indicated otherwise. Comparison of Statements of Financial Condition at December 31, 2024 and at December 31, 2023 Total Assets Total assets increased $192.7 million, or 9.5%, to $2.2 billion at December 31, 2024 from $2.0 billion at December 31, 2023. The increase was primarily the result of increases of $107.9 million in gross loans receivable, $93.2 million in cash and cash equivalents, $8.4 million in other assets, and $6.3 million in restricted securities. These increases were offset by a decrease in available-for-sale and held-to-maturity securities of $5.4 million and a decrease of $19.7 million in computer software, due to the impairment charges taken on the computer software intangible asset. 44 Investment Securities We use our securities portfolio to provide a source of liquidity, provide an appropriate return on funds invested, manage interest rate risk, meet collateral requirements, assist in achieving Community Reinvestment Act (CRA) objectives, and meet regulatory capital and liquidity requirements. Our investment policy is established and reviewed annually by the Board of Directors. We are permitted under federal law to invest in various types of liquid assets, including United States Government obligations, securities of various federal agencies and of state and municipal governments, mortgage-backed securities, time deposits of federally insured institutions, subordinated debt of other financial institutions, equity securities, certain bankers’ acceptances and federal funds. Our investment objectives are to maintain high asset quality, to provide and maintain liquidity, to establish an acceptable level of interest rate and credit risk, to provide an alternate source of low-risk investments when demand for loans is weak and to generate a favorable return. The Board of Directors has the overall responsibility for the investment portfolio, including approval of our investment policy. The Board of Directors is also responsible for implementation of the investment policy and monitoring investment performance. The Board of Directors reviews the status of the investment portfolio on a quarterly basis, or more frequently if warranted. Generally accepted accounting principles require that, at the time of purchase, we designate a security as held-to-maturity, available-for-sale, or trading, depending on our ability and intent to hold such security. Debt securities available-for-sale are reported at fair value, while debt securities held-to-maturity are reported at amortized cost. We do not maintain a trading portfolio. Establishing a trading portfolio would require specific authorization by the Board of Directors. The total investment securities portfolio, including both investment securities available-for-sale and investment securities held-to-maturity, was $71.8 million at December 31, 2024, a decrease of $5.4 million compared with December 31, 2023. At December 31, 2024, the investment securities portfolio includes $55.7 million of investment securities available-for-sale and $16.1 million of investment securities held-to-maturity compared to $59.9 million of investment securities available-for-sale and $17.3 million of investment securities held-to-maturity at December 31, 2023. The Company did not sell any securities within the investment portfolio during the year ended December 31, 2024 or 2023. For available-for-sale securities, management evaluates all investments in an unrealized loss position on a quarterly basis, and more frequently when economic or market conditions warrant such evaluation. If the Company has the intent to sell the security, or it is more likely than not that the Company will be required to sell the security, the security is written down to fair value, and the entire loss is recorded in earnings. Portfolio Maturities and Yields . The composition and maturities of the investment securities portfolio at December 31, 2024, are summarized in the following table. Maturities are based on the final contractual payment date, and do not reflect the effect of scheduled principal repayments, prepayments, or early redemptions that may occur. Adjustable-rate mortgage-backed securities are included in the period in which interest rates are next scheduled to adjust. The Company does invest in both taxable and non-taxable municipal securities. No material changes occurred in the non-taxable security portfolio for the year ended December 31, 2024. More than One Year More than Five Years More than One Year or Less through Five Years through Ten Years Ten Years Total Weighted Weighted Weighted Weighted Weighted Amortized Average Amortized Average Amortized Average Amortized Average Amortized Fair Average Cost Yield (1) Cost Yield (1) Cost Yield (1) Cost Yield (1) Cost Value Yield (1) (Dollars in thousands) Securities available-for-sale: Collateralized Mortgage Securities $ — — $ — — $ 630 2.70 % $ 20,668 1.75 % $ 21,298 $ 17,193 1.78 % Subordinated Debt — — — — 8,971 3.74 % — — 8,971 7,907 3.74 % Preferred Stock — — — — — — 453 8.25 % 453 453 8.25 % Municipal Securities Taxable 1,000 3.42 % — — 1,425 1.55 % 8,198 2.45 % 10,623 8,201 2.42 % Tax-exempt — — — — 3,404 4.52 % 18,620 3.39 % 22,024 19,621 3.57 % U.S. Government Agencies — — — — — — 2,392 6.81 % 2,392 2,372 6.81 % Total $ 1,000 3.42 % $ — — $ 14,430 3.66 % $ 50,331 2.77 % $ 65,761 $ 55,747 2.98 % Securities held-to-maturity: Municipal Securities Tax-exempt $ 370 3.16 % $ 3,517 4.12 % $ 3,945 4.22 % $ 5,746 4.15 % $ 13,578 $ 13,379 4.14 % Subordinated Debt — — 500 9.10 % 2,000 5.38 % — — 2,500 2,486 6.12 % Total $ 370 3.16 % $ 4,017 4.74 % $ 5,945 4.61 % $ 5,746 4.15 % $ 16,078 $ 15,865 4.44 % (1) Weighted average yields are reported on a taxable equivalent basis using the statutory federal corporate tax rate of 21%. Weighted average yield is calculated as the tax-equivalent yield on a pro rata basis for each security based on its relative amortized cost. 45 Loan Portfolio Our primary source of income is derived from interest earned on loans. Our loan portfolio consists of loans secured by real estate as well as commercial business loans and consumer loans, substantially all of which are secured by corresponding deposits at the Bank. Our loan customers primarily consist of small- to medium-sized businesses, professionals, real estate investors, small residential builders and individuals. Our owner occupied and investment commercial real estate loans, residential construction loans and commercial business loans provide us with higher risk-adjusted returns, shorter maturities and more sensitivity to interest rate fluctuations, and are complemented by our relatively lower risk residential real estate loans to individuals. Our lending activities are principally directed to our market area consisting of the Washington, D.C. and Northern Virginia metropolitan areas. Loan Portfolio Maturities and Yields . The following table summarizes the scheduled repayments of our loan portfolio at December 31, 2024. Demand loans, having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less. Maturities are based on the final contractual payment date and do not reflect the impact of prepayments and scheduled principal amortization. As of December 31, 2024 Single-Family Multi-Family Farmland Owner Occupied Non-owner Occupied (In thousands) Amounts due in: One year or less $ 23,947 $ 57,804 $ — $ 1,836 $ 113,413 After one year through two years 16,175 466 — 30,179 49,342 After two years through three years 12,853 36,397 — 16,123 64,707 After three years through five years 40,634 77,686 — 87,978 119,955 After five years through ten years 98,987 61,254 71 213,346 193,094 After ten years through fifteen years 887 1,277 169 7,118 19,545 After fifteen years 10,874 — — 1,144 — Total $ 204,357 $ 234,884 $ 240 $ 357,724 $ 560,056 Construction and Land Development Commercial and Industrial Consumer Total Loan Portfolio Maturities Amounts due in: (In thousands) One year or less $ 153,695 $ 27,918 $ 667 $ 379,280 After one year through two years 37,603 5,924 483 140,172 After two years through three years 17,641 5,092 134 152,947 After three years through five years 100,708 12,977 184 440,122 After five years through ten years 43,835 16,947 106 627,640 After ten years through fifteen years 39,903 8,081 — 76,980 After fifteen years — 5,839 — 17,857 Total $ 393,385 $ 82,778 $ 1,574 $ 1,834,998 The following table sets forth our fixed and adjustable-rate loans at December 31, 2024, that are contractually due after December 31, 2024. Due After December 31, 2024 Fixed Adjustable Rates Rates Total (In thousands) Residential real estate: Single family $ 103,983 $ 100,374 $ 204,357 Multifamily 134,676 100,208 234,884 Farmland 240 — 240 Commercial real estate: Owner occupied 161,055 196,669 357,724 Non-owner occupied 217,037 343,019 560,056 Construction and land development 94,806 298,579 393,385 Commercial – non-real estate: Commercial and industrial 47,476 35,302 82,778 Consumer – non-real estate: Unsecured 343 — 343 Secured 1,151 80 1,231 Totals $ 760,767 $ 1,074,231 $ 1,834,998 46 The following table shows our loan originations, participations, purchases, sales and repayment activities for the periods indicated. Years Ended December 31, 2024 2023 (In thousands) Total loans at beginning of year: $ 1,727,091 $ 1,599,592 Loans originated: Real estate loans: Residential real estate: Single family 28,067 63,096 Multifamily 15,032 43,884 Farmland 106 — Commercial real estate: Owner occupied 39,131 70,900 Non-owner occupied 104,372 56,385 Construction and land development 158,831 189,132 Commercial – non-real estate: Commercial and industrial 27,957 23,879 Consumer – non-real estate: Unsecured 343 271 Secured 209 81 Total loans originated: 374,048 447,628 Loan principal repayments: Principal repayments 266,141 320,129 Net loan activity 107,907 127,499 Total loans at the end of year $ 1,834,998 $ 1,727,091 Loans, net of unearned income, totaled $1.8 billion at December 31, 2024, an increase of $107.9 million from December 31, 2023. The increase in total loans was primarily driven by growth in the overall loan portfolio, with increases in commercial real estate for owner occupied and non-owner occupied segments as well as in commercial and industrial credits. Owner occupied loans had a balance of $357.7 million at December 31, 2024 compared to $282.1 million at December 31, 2023, for a net increase of $75.7 million. Non-owner occupied loans had a balance of $560.1 million at December 31, 2024 compared to $461.8 million at December 31, 2023, for a net increase of $98.3 million. Commercial and industrial loans had a balance of $82.8 million at December 31, 2024 compared to $75.4 million at December 31, 2023, for a net increase of $7.4 million. A significant portion of the loan portfolio consists of commercial, construction and commercial real estate loans, primarily made in the Washington, D.C. metropolitan area and secured by real estate or other collateral in that market. Although these loans are made to a diversified pool of unrelated borrowers across numerous businesses, adverse developments in the Washington, D.C. metropolitan real estate market could have an adverse impact on this portfolio of loans and the Company’s income and financial position. While our basic market area is the Washington, D.C. metropolitan area, the Bank has made loans outside that market area where the applicant is an existing customer, and the nature and quality of such loans was consistent with the Company's lending policies. The Company has a limited amount of credit exposure to government contractors in the Washington, D.C. metropolitan area. Below is a schedule that outlines the credit exposure to businesses with government contracts by structure type as of December 31, 2024. The line of credit balances consist of asset based lines of credits on billed receivables, which are receivables for work that has been completed and invoiced to the government or the prime contractor. Ongoing monitoring of the lines of credit include receiving borrowing base certificates monthly on the billed receivables amount. Since December 31, 2024, we have strengthened the monitoring of these lines of credit to fully verify the billed receivables amount each time funds are advanced. Term debt is secured by a combination of business assets and additional real estate collateral. Government Contracting Credit Exposures as of December 31, 2024 (Dollars in thousands) Principal Balance Line/Term Commitment Availability Number of Relationships Number of Relationships with Balances Line of Credit $ 16,733 $ 76,038 $ 59,305 30 13 Term Debt Exposure 1,445 1,445 — 2 2 Total Exposure $ 18,178 $ 77,483 $ 59,305 32 15 The federal banking Agencies issued guidance in 2006 which addresses institutions’ with increased concentrations of commercial real estate (CRE) loans. The guidance does not establish specific CRE lending limits; rather, it promotes sound risk management practices and appropriate levels of capital that will enable institutions to continue to pursue CRE lending in a safe and sound manner. In developing this guidance, the Agencies recognized that different types of CRE lending present different levels of risk, and that consideration should be given to the lower risk profiles and historically superior performance of certain types of CRE, such as well-structured multifamily housing finance, when compared to others, such as speculative office space construction. As discussed under “CRE Concentration Assessments,” institutions are encouraged to segment their CRE portfolios to acknowledge these distinctions for risk management purposes. The guidance focuses on those CRE loans for which the cash flow from the real estate is the primary source of repayment rather than loans to a borrower for which real estate collateral is taken as a secondary source of repayment or through an abundance of caution. Thus, for the purposes of the guidance, CRE loans include those loans with risk profiles sensitive to the condition of the general CRE market (for example, market demand, changes in capitalization rates, vacancy rates, or rents). CRE loans are land development and construction loans (including 1- to 4-family residential and commercial construction loans) and other land loans. CRE loans also include loans secured by multifamily property, and nonfarm nonresidential property where the primary source of repayment is derived from rental income associated with the property (that is, loans for which 50 percent or more of the source of repayment comes from third party, nonaffiliated, rental income) or the proceeds of the sale, refinancing, or permanent financing of the property. Excluded from the scope of this Guidance are loans secured by nonfarm nonresidential properties where the primary source of repayment is the cash flow from the ongoing operations and activities conducted by the party, or affiliate of the party, who owns the property. As part of their ongoing supervisory monitoring processes, the Agencies use certain criteria to identify institutions that are potentially exposed to significant CRE concentration risk. An institution that has experienced rapid growth in CRE lending, has notable exposure to a specific type of CRE, or is approaching or exceeds the following supervisory criteria may be identified for further supervisory analysis of the level and nature of its CRE concentration risk: 1. Total reported loans for construction, land development, and other land represent 100 percent or more of the institution’s total risk-based capital; or 2. Total commercial real estate loans as defined in this guidance represent 300 percent or more of the institution’s total risk-based capital, and the outstanding balance of the institution’s commercial real estate loan portfolio has increased by 50 percent or more during the prior 36 months. The Agencies use the criteria as a preliminary step to identify institutions that may have CRE concentration risk. Because regulatory reports capture a broad range of CRE loans with varying risk characteristics, the supervisory monitoring criteria do not constitute limits on an institution’s lending activity but rather serve as high-level indicators to identify institutions potentially exposed to CRE concentration risk. The Company holds a concentration in commercial real estate loans. The Board has set a risk tolerance level of 150% and 375% of consolidated risk-based capital for construction, land development and other land l oans and commercial real estate loans. As of December 31, 2024, construction, land development and other land l oans represented 131.9% of consolidated risk-based capital. Total commercial real estate loans as defined by the Agency guidance represented 393.8% of consolidated risk-based capital. During the prior 36 months, the Company has experienced an increase in its commercial real estate portfolio by 72% . The Company has temporarily exceeded the target level for the commercial real estate segment and is working quickly to bring this segment back within the Board tolerance level. The management team has extensive experience in underwriting commercial real estate loans and has implemented and continues to maintain heightened risk management procedures and strong underwriting criteria with respect to its commercial real estate portfolio. The Board of Directors has established internal maximum limits on CRE as an asset class overall as well as sub limits within CRE by property class, to better manage and control the exposure to property classes during periods of changing economic conditions. The Board of Directors also has minimum targets for regulatory capital ratios that are in excess of well capitalized ratios. Our risk management process begins with a robust underwriting program. The underwriting and risk rating of all loans is completed by an underwriting team that is independent of the originating lender(s). The underwriting analysis of commercial real estate loans includes pre-origination stress testing utilizing the portfolio stress testing methods to fully understand the potential exposure before we originate the credit. Once originated, each loan receives ongoing quarterly stress tests to evaluate the risk profile over the life of the credit. We stress test earning assets on a quarterly basis and measure the results against the Bank's risk-based capital. For commercial loans, residential real estate loans, owner-occupied commercial real estate loans and consumer installment loans, we multiply the total outstanding amount for each loan category by our highest quarter historical loss for that category as a surrogate in order to calculate a stressed loss. 47 For our non-owner occupied commercial real estate loans, we use three separate methodologies in our stress test. If a property fails more than one of the three tests, we extend the test with the highest exposure value and add an additional 10% for selling costs. • An immediate and sustained 3.0% increase in interest rates, • An immediate and sustained 5.0% increase in vacancy rates, and • An immediate and sustained 2.0% change in the capitalization rate, or “cap rate.” We stress test the construction lending portfolio by applying exponential discounting (using a "k factor" of 2) to each project based upon its percentage of completion. The project is stressed using the as-is and as-complete appraised values and assumes 10% selling costs. For all other loans, we utilize the Bank's historic loss rates or if not available, the average loss rates of UBPR Group 4 banks, for bank owned life insurance we utilize default rates from S&P Global ratings, and for securities we obtain an independent fair market value and if it is less than the book value, we subtract the fair market value from the book value to determine the stress loss. The following table shows the Company's earning assets and the results of the stress test performed for the periods indicated. December 31, 2024 Outstanding Balance Stress Test Results (1) Stressed Loss Percent (Dollars in thousands) Earning Asset Component Construction $ 393,385 $ (5,625 ) (1.43 )% Non-Owner Occupied CRE 794,940 (10,793 ) (1.36 )% All Other Loans 646,673 (20,766 ) (3.21 )% HTM Securities $ 16,078 (169 ) (1.05 )% AFS Securities 65,761 (7,711 ) (11.73 )% Swap Portfolio — — — Bank Owned Life Insurance 39,507 (39 ) (0.10 )% Total $ 1,956,344 $ (45,103 ) (2.31 )% (1) Net tax effective loss at the statutory rate of 21% December 31, 2023 Outstanding Balance Stress Test Results (1) Stressed Loss Percent (Dollars in thousands) Earning Asset Component Construction $ 429,637 $ (4,606 ) (1.07 )% Non-Owner Occupied CRE 732,815 (7,635 ) (1.04 )% All Other Loans 564,639 (11,994 ) (2.12 )% HTM Securities $ 17,275 (88 ) (0.51 )% AFS Securities 69,665 (7,478 ) (10.73 )% Swap Portfolio — — — Bank Owned Life Insurance 38,318 (39 ) (0.10 )% Total $ 1,852,349 $ (31,840 ) (1.72 )% (1) Net tax effective loss at the statutory rate of 21% The total estimated stress test loss is deducted from capital and we recalculate the capital ratios. As shown in the tables below, as of December 31, 2024, and 2023 the post-stress capital ratios well exceed our Board target ratios as well as Agency minimums (with buffer). December 31, 2024 Bank Capital Adequacy Ratios Pre- and Post-Stress (Tax-Effective) Well Capitalized with Buffer Bank Minimum Target As of December 31, 2024 Post Stress, Low Estimate Post Stress, High Estimate Leverage Ratio 5.00 % 7.50 % 12.08 % 10.62 % 10.44 % Total Risk-Based Capital 10.00 % 11.50 % 15.69 % 13.92 % 13.71 % Tier 1 Risk-Based Capital 8.00 % 9.50 % 14.64 % 12.87 % 12.66 % Common Equity Tier 1 Risk-Based Capital 6.50 % 8.00 % 14.64 % 12.47 % 12.26 % December 31, 2023 Bank Capital Adequacy Ratios Pre- and Post-Stress (Tax-Effective) Well Capitalized with Buffer Bank Minimum Target As of December 31, 2023 Post Stress, Low Estimate Post Stress, High Estimate Leverage Ratio 5.00 % 7.50 % 14.66 % 13.74 % 13.59 % Total Risk-Based Capital 10.00 % 11.50 % 17.18 % 16.17 % 16.00 % Tier 1 Risk-Based Capital 8.00 % 9.50 % 16.22 % 15.20 % 15.04 % Common Equity Tier 1 Risk-Based Capital 6.50 % 8.00 % 16.22 % 14.79 % 14.62 % The Company employs an external loan review firm to conduct ongoing reviews of the loan portfolio. During the year ended December 31, 2024, the independent external loan review firm reviewed approximately 70% of the entire portfolio by outstanding dollar balance. The external review did not identify any material underwriting or ongoing portfolio management concerns. 48 The following two tables break down the December 31, 2024 and December 31, 2023 non-owner occupied CRE portfolio balances by showing the current balance in each sub-category and location. The tables also display very favorable weighted average interest rates and weighted average loan-to-values for both periods. The weighted average occupancy percentages are also broadly favorable for both periods. December 31, 2024 (Dollars in thousands) Non-Owner Occupied CRE (2) Location Weighted Average Rate Weighted Average Loan-to-Value (1) Weighted Average Occupancy % DC MD VA Other Total Multifamily $ 224,848 $ 3,025 $ 7,011 $ — $ 234,884 6.06 % 66 % 73 % Office: Mixed use 11,766 2,676 3,581 — 18,023 9.97 % 68 % 35 % Medical — 22,169 15,395 431 37,995 5.61 % 63 % 69 % Office — 1,892 2,778 — 4,670 5.57 % 59 % 94 % Office to Residential Conversion — — 32,136 — 32,136 9.50 % 52 % 85 % Hospitality 28,797 75,504 98,352 — 202,653 5.93 % 64 % -- (3 ) Retail/Commercial 79,770 41,892 107,605 9,156 238,423 6.13 % 60 % 75 % Industrial — 14,801 5,521 5,834 26,156 6.29 % 59 % 87 % Total Non-Owner Occupied CRE $ 345,181 $ 161,959 $ 272,379 $ 15,421 $ 794,940 6.19 % 62 % 67 % Construction and Land Development Multifamily $ 91,424 $ — $ 13,386 $ 15,000 $ 119,810 7.32 % 64 % N/A 1-4 family 71,234 — 63,430 — 134,664 8.32 % 57 % N/A Retail/Commercial 19,534 — — — 19,534 7.15 % 63 % N/A Industrial 37,467 — 980 — 38,447 5.85 % 57 % N/A Mixed use 12,705 — — — 12,705 7.95 % 58 % N/A Other 247 21,135 23,815 23,028 68,225 7.90 % 37 % N/A Total Construction and Land Development 232,611 21,135 101,611 38,028 393,385 7.73 % 56 % N/A Total Construction, Land Development, and Non-Owner Occupied CRE $ 577,792 $ 183,094 $ 373,990 $ 53,449 $ 1,188,325 6.73 % 60 % N/A (1) Loan-to-value is based on maximum potential outstanding at time of origination (2) Non-owner occupied includes multifamily call code 1D (3) Hospitality occupancy rates rely on individual STR data 49 December 31, 2023 (Dollars in thousands) Non-Owner Occupied CRE (2) Location Weighted Average Rate Weighted Average Loan-to-Value (1) Weighted Average Occupancy % DC MD VA Other Total Multifamily $ 246,153 $ 7,357 $ 17,530 $ — $ 271,040 6.27 % 64 % 81 % Office: Mixed use 9,445 2,729 4,395 — 16,569 6.65 % 36 % 87 % Medical — 22,428 15,297 499 38,224 5.61 % 43 % 69 % Office — 1,892 6,386 — 8,278 6.64 % 43 % 87 % Office to Residential Conversion — — 21,550 — 21,550 9.50 % 48 % 85 % Hospitality — 60,530 73,677 — 134,207 6.77 % 60 % -- (3 ) Retail/Commercial 60,133 42,084 94,400 11,977 208,594 6.06 % 44 % 80 % Industrial 753 14,007 7,809 6,015 28,584 7.29 % 63 % 96 % Other — — — 5,769 5,769 6.00 % 60 % 0 % Total Non-Owner Occupied CRE $ 316,484 $ 151,027 $ 241,044 $ 24,260 $ 732,815 6.46 % 57 % 71 % Construction and Land Development Multifamily $ 103,608 $ — $ 11,060 $ 14,563 $ 129,231 8.44 % 62 % N/A 1-4 family 95,764 — 54,947 — 150,711 8.99 % 63 % N/A Office 1,328 — — — 1,328 5 % 79 % N/A Retail/Commercial 17,798 — — — 17,798 9.13 % 72 % N/A Raw land — 3,690 15,457 8,000 27,147 8.00 % 36 % N/A Hospitality — 7,070 — — 7,070 9.50 % 63 % N/A Industrial 25,110 — 1,477 7,458 34,045 7.27 % 51 % N/A Mixed use 9,511 — 15,730 — 25,241 9.17 % 68 % N/A Other 1,757 23,081 12,228 — 37,066 9.00 % 54 % N/A Total Construction and Land Development 254,876 33,841 110,899 30,021 429,637 8.66 % 60 % N/A Total Construction, Land Development, and Non-Owner Occupied CRE $ 571,360 $ 184,868 $ 351,943 $ 54,281 $ 1,162,452 7.39 % 60 % N/A (1) Loan-to-value is based on maximum potential outstanding at time of origination (2) Non-owner occupied includes multifamily call code 1D (3) Hospitality occupancy rates rely on individual STR data The Company also underwrites and originates owner-occupied commercial real estate loans. These loans are typically term loans made to support properties that rely upon the operations of the business occupying the property for repayment. The Agencies specifically excluded owner-occupied commercial real estate from their concentration guidance, as the primary source of repayment is the cash flow from the ongoing operations and activities conducted by the party, or affiliate of the party, who owns the property. 50 The following two tables depict a well-diversified portfolio of owner-occupied commercial real estate as of December 31, 2024 and December 31, 2023. The properties are distributed nicely among the Company's footprint. This loan segment continues to perform very well and is supported by strong loan-to-values (LTVs). The following table sets forth our owner-occupied CRE portfolio by the business industry groups that occupy the properties for the periods indicated. December 31, 2024 (Dollars in thousands) Owner Occupied CRE Location Weighted Average Rate Weighted Average Loan-to-Value (1) DC MD VA Other Total Accommodation and food services $ 18,669 $ 2,921 $ 10,775 $ 10,853 $ 43,218 5.89 % 72 % Administrative and support — 4,500 4,716 — 9,216 5.53 % 56 % Arts and recreation — — 36,517 — 36,517 5.73 % 62 % Construction services 14,947 4,003 15,688 37 34,675 5.39 % 76 % Education services 27,856 — 5,660 — 33,516 5.98 % 59 % Health care 4,697 17,488 15,275 135 37,595 6.92 % 65 % Information — — 4,365 — 4,365 4.36 % 50 % Manufacturing — — 4,701 — 4,701 4.02 % 53 % Religious and other 6,027 16,646 66,173 931 89,777 6.18 % 69 % Professional, scientific, tech services 2,845 — 5,577 — 8,422 6.31 % 73 % Real estate and rental leasing 738 3,701 3,705 — 8,144 6.27 % 70 % Retail trade 866 10,564 25,439 2,604 39,473 5.85 % 69 % Wholesale trade — 165 915 7,025 8,105 5.94 % 73 % Total Owner Occupied CRE $ 76,645 $ 59,988 $ 199,506 $ 21,585 $ 357,724 5.95 % 68 % (1) Loan-to-value is based on maximum potential outstanding at time of origination December 31, 2023 (Dollars in thousands) Owner Occupied CRE Location Weighted Average Rate Weighted Average Loan-to-Value (1) DC MD VA Other Total Accommodation and food services $ 17,925 $ 2,995 $ 12,186 $ 5,605 $ 38,711 5.68 % 69 % Administrative and support — 4,500 4,557 — 9,057 5.49 % 56 % Arts and recreation — — 37,127 — 37,127 6.14 % 62 % Construction services 5,173 4,035 16,278 — 25,486 5.23 % 73 % Education services 29,169 — 5,581 — 34,750 5.86 % 61 % Health care 4,810 993 16,836 139 22,778 5.43 % 76 % Manufacturing — — 6,218 — 6,218 5.33 % 91 % Religious and other 6,141 8,047 32,305 946 47,439 5.78 % 66 % Professional, scientific, tech services 2,908 — 10,474 — 13,382 5.06 % 75 % Real estate and rental leasing — 2,281 1,168 — 3,449 6.55 % 62 % Retail trade 894 6,692 25,249 2,670 35,505 5.83 % 69 % Wholesale trade — 184 837 7,129 8,150 5.98 % 73 % Total Owner Occupied CRE $ 67,020 $ 29,727 $ 168,816 $ 16,489 $ 282,052 5.73 % 68 % (1) Loan-to-value is based on maximum potential outstanding at time of origination The risk profile of real estate properties within our market can vary depending upon location. Therefore, we have disaggregated our stress testing of construction projects further by segmenting the loans into two groupings, those inside a 15-mile radius of Washington, D.C. and those outside that radius. For example, during the 2009 recession, the peak-to-trough drop in property values inside the beltway was less than 10% (CoreLogic, 2019). The Board determined that loans made inside a 15-mile radius of Washington, D.C. carry less geographic risk than those made outside of that radius. 51 The graphic below is a geopoint map that depicts all construction loans, non-owner occupied CRE loans, and owner-occupied CRE loans, with a majority of all loan types concentrated within a 15-mile radius of Washington, D.C. Asset Quality The Company’s asset quality remained strong during the year ended December 31, 2024. Nonperforming assets, which includes nonaccrual loans, accruing loans 90 days past due, and other real estate owned totaled $21.7 million at December 31, 2024, and $1.0 million at December 31, 2023. A loan’s past due status is based on the contractual due date of the most delinquent payment due. All loans which are 30 or more days past due at the end of the month are reported to the Board of Directors. Commercial loans are generally placed on nonaccrual status when the collection of principal or interest is 90 days or more past due, or earlier, if collection is uncertain based on an evaluation of the net realizable value of the collateral and the financial strength of the borrower. Consumer loans are generally placed on nonaccrual status when the collection of principal or interest is 120 days or more past due, or earlier, if collection is uncertain based on an evaluation of the net realizable value of the collateral and the financial strength of the borrower. Loans greater than 90 days past due may remain on accrual status if management determines it has adequate collateral to cover the principal and interest. For those loans that are carried on nonaccrual status, payments are first applied to principal outstanding. A loan may be returned to accrual status if the borrower has demonstrated a sustained period of repayment performance in accordance with the contractual terms of the loan and there is reasonable assurance the borrower will continue to make payments as agreed. The Company may identify loans for potential restructure primarily through direct communication with the borrower and evaluation of the borrower’s financial statements, revenue projections, tax returns, and credit reports. Even if the borrower is not presently in default, management will consider the likelihood that cash flow shortages, adverse economic conditions and negative trends may result in a payment default in the near future. 52 As a percentage of total assets, nonperforming assets were 0.97% at December 31, 2024, compared with 0.05% at December 31, 2023. As of December 31, 2024, the Company had $21.7 million in loans on nonaccrual status. During the last quarter of the year ended December 31, 2024, nonperforming assets trended positively with loans on nonaccrual status decreasing by $6.7 million or 23.5%. See Note 1, Organization, Basis of Presentation, and Impact of Recently Issued Accounting Pronouncements and Note 5, Allowance for Credit Losses, in Notes to Consolidated Financial Statements for further information on the Company’s credit grade categories, which are derived from standard regulatory rating definitions. The following table summarizes asset quality information at December 31, 2024, and December 31, 2023. December 31, December 31, 2024 2023 (Dollars in thousands) Non-accrual loans: Residential real estate Single family $ 1,162 $ 851 Commercial real estate Non-owner occupied 11,160 — Construction & Land Development 4,235 — Commercial non-real estate Commercial and industrial 5,093 149 Total non-accrual loans 21,650 1,000 Loans greater than 90 days past due and still accruing: Consumer non real estate - secured — 4 Total non-performing loans 21,650 1,004 Total non-performing assets $ 21,650 $ 1,004 Ratios: Total non-performing loans to gross loans receivable 1.18 % 0.06 % Total non-performing loans to total assets 0.97 % 0.05 % Total non-accrual loans to gross loans receivable 1.18 % 0.05 % Interest income that would have been recorded for the years ended December 31, 2024 and 2023 had non-accruing loans been current according to their original terms was $1.9 million and $133,092, respectively. Occasionally, the Company modifies loans by providing principal forgiveness on certain of its real estate loans. When principal forgiveness is provided, the amortized cost basis of the asset is written off against the allowance for credit losses. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses. In some cases, the Company will modify a certain loan by providing multiple types of concessions. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. The Company further describes loans that were modified during the year ended December 31, 2024 in Note 5 of Notes to Consolidated Financial Statements. Analysis and Determination of the Allowance for Credit Loss on Loans. The allowance for credit losses on loans is maintained at a level which, in management’s judgment, is adequate to absorb probable and estimable future credit losses in the loan portfolio. The amount of the allowance is based on management’s evaluation of the collectability of the loan portfolio, including the nature of the portfolio, credit concentrations, trends in historical loss experience, specific individually evaluated loans, and current and future economic conditions. Allowances for individually evaluated loans are generally determined based on collateral values. Because of uncertainties associated with regional economic conditions, collateral values, and future cash flows on individually evaluated loans, it is reasonably possible that management’s estimate of probable credit losses inherent in the loan portfolio and the related allowance may change materially in the near-term. The allowance is increased by a provision for credit losses on loans which is charged to expense and reduced by full and partial charge-offs, net of recoveries. Changes in the allowance relating to individually evaluated loans are charged or credited to the provision for credit losses on loans. Management’s periodic evaluation of the adequacy of the allowance is based on various factors, including, but not limited to, management’s ongoing review and grading of loans, facts and issues related to specific loans, historical loan losses on loan pools, the fair value of the underlying collateral, current and future economic conditions and other qualitative and quantitative factors which could affect potential credit losses. An integral part of their examination process, the Federal Reserve Board will periodically review our allowance for credit losses, and as a result of such reviews, we may have to adjust our allowance for credit losses. On January 1, 2023, the Company adopted ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (CECL) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held-to-maturity debt securities. It also applies to off-balance sheet credit exposures not accounted for as insurance (loan commitments, standby letters of credit, financial guarantees, and other similar instruments) and net investments in leases recognized by the lessor in accordance with Topic 842 on leases. In addition, ASC 326 made changes to the accounting for available-for-sale debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities management does not intend to sell or believes that is not more likely than not they will be required to sell. The Company adopted ASC 326 and all the subsequent amendments there to effective January 1, 2023 using the modified retrospective method for all financial assets measured at amortized cost, and off-balance-sheet credit exposures. Results for reporting periods beginning after January 1, 2023 are presented under ASC 326 while prior periods amounts continue to be reported in accordance with previously applicable GAAP. The Company recorded a net decrease to retained earnings of $1.7 million, net of taxes, as of January 1, 2023 for the cumulative effect of adopting ASC 326. The transition adjustment includes an increase in allowance for credit losses of $2.2 million and an increase in net deferred tax assets of $506,000. See Note 1, Organization, Basis of Presentation, and Impact of Recently Issued Accounting Pronouncements and Note 5, Allowance for Credit Losses, in Notes to Consolidated Financial Statements for further information on the Company’s adoption of ASC 326. 53 The following table sets forth activity in our allowance for credit losses on loans for the periods indicated. For the Year Ended December 31, For the Year Ended December 31, 2024 2023 (Dollars in thousands) Balance at beginning of year $ 16,506 $ 14,114 Current expected credit losses, nonrecurring adoption — 895 Charge-offs: Residential real estate (132 ) — Commercial real estate (740 ) — Construction (3,684 ) — Commercial and industrial (4 ) (462 ) Consumer (9 ) (6 ) Total charge-offs (4,569 ) (468 ) Recoveries: Residential real estate — 7 Commercial and industrial 19 — Consumer 9 15 Total recoveries 28 22 Net charge-offs (4,541 ) (446 ) Provision for credit losses - loans 7,485 1,943 Balance at end of period $ 19,450 $ 16,506 Ratios: Net charge offs to average loans outstanding 0.25 % 0.03 % Allowance for credit losses on loans to non-performing loans at end of period 89.84 % 16.44X Allowance for credit losses on loans to gross loans at end of period 1.06 % 0.96 % The following table summarizes our net charge-off activity by loan segment for the periods indicated. At December 31, 2024 2023 2022 (Dollars in thousands) Charge-offs Recoveries Net charge-offs Net charge-offs to average loans Charge-offs Recoveries Net charge-offs Net charge-offs to average loans Charge-offs Recoveries Net charge-offs Net charge-offs to average loans Real Estate: Residential $ (132 ) $ — $ (132 ) 0.0 % $ — $ 7 $ 7 0.0 % $ — $ — $ — 0.0 % Commercial (740 ) — (740 ) (0.1 )% — — — 0.0 % — — — 0.0 % Construction (3,684 ) — (3,684 ) (0.9 )% — — — 0.0 % — — — 0.0 % Commercial and industrial (4 ) 19 15 0.0 % (462 ) — (462 ) (0.5 )% — — — 0.0 % Consumer (9 ) 9 — 0.0 % (6 ) 15 9 0.1 % (19 ) — (19 ) (0.1 )% Total $ (4,569 ) $ 28 $ (4,541 ) (0.3 )% $ (468 ) $ 22 $ (446 ) (0.0 )% $ (19 ) $ — $ (19 ) (0.0 )% At December 31, 2024, our allowance for credit losses on loans represented 1.06% of total loans and we had $21.7 million in non-performing loans. The allowance for credit losses on loans increased to $19.5 million at December 31, 2024 from $16.5 million at December 31, 2023 as a direct result of loan growth and charge offs taken in 2024 as well as increasing qualitative factors within our model assumptions for increased levels of past dues and potential weaknesses in underlying collateral for certain asset classes. There were $4.5 million in net loan charge-offs and $446,000 in net loan charge-offs during the years ended December 31, 2024 and December 31, 2023, respectively. 54 Allocation of Allowance for Credit Losses on Loans . The following table sets forth the allowance for credit losses on loans allocated by loan category and the percent of the allowance in each category to the total allocated allowance on credit losses for loans at the dates indicated. The allowance for credit losses on loans allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories. At December 31, 2024 2023 (Dollars in thousands) Allowance for Credit Losses - Loans Percent of Allowance in Each Category to Total Allocated Allowance Percent of Loans in Each Category to Total Loans Allowance for Credit Losses - Loans Percent of Allowance in Each Category to Total Allocated Allowance Percent of Loans in Each Category to Total Loans Residential Real Estate: Single family $ 1,433 7.4 % 11.1 % $ 1,510 9.1 % 11.8 % Multifamily 1,045 5.4 % 12.8 % 1,084 6.6 % 15.7 % Commercial Real Estate: Owner occupied 4,154 21.3 % 19.5 % 3,393 20.5 % 16.3 % Non-owner occupied 7,167 36.8 % 30.5 % 5,495 33.3 % 26.7 % Construction and Land Development 4,648 23.9 % 21.4 % 3,575 21.7 % 24.9 % Commercial – Non Real Estate: Commercial and industrial 993 5.1 % 4.5 % 1,435 8.7 % 4.4 % Consumer – Non Real Estate: Secured 10 0.1 % 0.1 % 14 0.1 % 0.2 % Total $ 19,450 100.0 % 100.0 % $ 16,506 100.0 % 100.0 % Funding Activities Deposits are the primary source of funds for lending and investing activities and their cost is the largest category of interest expense. The Company also utilizes wholesale deposits as a funding source in addition to customer deposits. Scheduled payments, as well as prepayments, and maturities from portfolios of loans and investment securities also provide a stable source of funds. FHLB advances, other secured borrowings, federal funds purchased, and other short-term borrowed funds, as well as longer-term debt issued through the capital markets, all provide supplemental liquidity sources. The Company’s funding activities are monitored and governed through the Company’s asset/liability management process Deposits Total deposits increased by $221.7 million from December 31, 2023 to December 31, 2024. Wholesale deposits, which are included in the table below, totaled $468.1 million and $433.0 million at December 31, 2024, and December 31, 2023, respectively. The following table presents the Company’s average deposits segregated by major category for the years ended December 31, 2024 and December 31, 2023: At December 31, 2024 2023 Average Balance Percent Weighted Average Rate Average Balance Percent Weighted Average Rate (Dollars in thousands) Deposit type: Interest-bearing demand $ 181,109 10.1 % 4.78 % $ 83,087 5.1 % 2.15 % Money market 464,400 26.0 % 4.61 % 365,815 22.6 % 3.73 % Savings and NOW 54,385 3.0 % 1.39 % 49,565 3.0 % 1.10 % Time deposits 748,938 41.9 % 4.99 % 702,034 43.3 % 3.83 % Interest-bearing deposits 1,448,832 81.0 % 4.70 % 1,200,501 74.0 % 3.57 % Non-interest bearing demand 340,005 19.0 % 421,177 26.0 % Total deposits $ 1,788,837 100.0 % 3.81 % $ 1,621,678 100.0 % 2.67 % The pronounced shift from non-interest bearing demand deposits into money market demand and time deposits was driven by market conditions emanating from the large-bank failures in the first half of 2023. In order for us to maintain the customer relationships, we needed to shift the deposits into accounts where we could provide excess FDIC insurance coverage. We also gained in money market demand and time deposits as customers brought additional funds into the Company. 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 December 31, 2024, the Company had $468.1 million of total wholesale deposit funding sources, an increase of $35.1 million compared to December 31, 2023, which totaled $433.0 million. Given the interest rate environment and strategic initiatives, the Company replaced maturing lower yielding wholesale CDs with higher market rate CDs. Many replacement CDs include call options at our discretion if economic conditions change. The Company also utilized additional wholesale demand deposits to provide liquidity and more effectively balance our interest rate sensitivity. During the year ended December 31, 2024 , total wholesale deposit funding accounted for approximately 28% of our interest expense. The following table presents the Company's total wholesale deposit composition, concentrations, current rate and remaining duration, if applicable as of December 31, 2024 and December 31, 2023. As of December 31, 2024 2023 (Dollars in thousands) Wholesale Money Market Deposits Accounts (MMDA) Balance Percent % Weighted Average Rate Weighted Remaining Maturity (in months) Balance Percent % Weighted Average Rate Weighted Remaining Maturity (in months) Wholesale MMDAs $ 100,334 21.4 % 4.50 % N/A $ 120,536 27.8 % 5.75 % N/A Wholesale Time Deposits Listing Service CDs (1) 25,231 5.4 % 4.79 % 13 34,481 8.0 % 4.86 % 5 Wholesale CDs: Term 220,357 47.1 % 4.56 % 7 148,906 34.4 % 4.32 % 7 Term with Call Option (2) 122,216 26.1 % 5.12 % 30 129,083 29.8 % 5.22 % 30 Total Wholesale CDs 342,573 277,989 Total wholesale deposits $ 468,138 100.0 % $ 433,006 100.0 % (1) Listing service CDs are excluded from being classified as wholesale deposits, per FDIC call report instructions (2) 80% of the CDs in this balance can be called as of December 31, 2024 Regulatory Defined Wholesale Deposits Each quarter the Bank files a bank call report with the FDIC, which has a specific way it defines wholesale brokered deposits. As of December 31, 2024, the Company had $442.9 million of wholesale deposits outstanding, as defined by FDIC, an increase of $44.41 million from December 31, 2023. In addition, p ursuant 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 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 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. 55 At December 31, 2024, the Company had $779.6 million in total deposits in excess of the FDIC insurance limit of $250,000. Certificates of deposit in amounts in excess of the FDIC insurance limit of $250,000 totaled approximately $457.4 million. The following table sets forth the maturity of these certificates as of December 31, 2024. December 31, 2024 (In thousands) Maturity period: Three months or less $ 86,550 Over three through six months 102,470 Over six through twelve months 111,452 Over twelve months through three years 106,577 Over three years 50,377 Total $ 457,426 56 The following table sets forth all of our time deposits classified by interest rate as of the dates indicated. At December 31, 2024 2023 (In thousands) Interest Rate Range: 0.01 – 0.99% $ 1,324 $ 6,354 1.00 – 1.99% 1,073 71,544 2.00 – 2.99% 4,451 74,245 3.00 – 3.99% 59,296 40,392 4.00 – 4.99% 463,571 123,178 5.00 and greater 289,573 380,623 Total $ 819,288 $ 696,336 The following table sets forth by interest rate ranges information concerning the maturities of our certificates of deposit as of December 31, 2024. Period to Maturity Less Than or Equal to One Year More Than One to Two Years More Than Two to Three Years More Than Three Years Total Percent of Total Certificate Accounts (Dollars in thousands) Interest Rate Range: 0.01 – 0.99% $ 1,290 $ 34 $ — $ — $ 1,324 0.2 % 1.00 – 1.99% 882 152 39 — 1,073 0.1 % 2.00 – 2.99% 3,573 710 138 30 4,451 0.5 % 3.00 – 3.99% 22,712 32,793 464 3,327 59,296 7.2 % 4.00 – 4.99% 399,875 53,204 — 10,492 463,571 56.6 % 5.00 and greater 187,377 33,752 27,439 41,005 289,573 35.4 % Total $ 615,709 $ 120,645 $ 28,080 $ 54,854 $ 819,288 100.0 % Borrowed Funds We may obtain advances from the Federal Home Loan Bank of Richmond upon the security of the common stock we own in that bank and certain of our residential and commercial mortgage loans, provided certain standards related to creditworthiness have been met. These advances are made pursuant to several credit programs, each of which has its own interest rate and range of maturities. Federal Home Loan Bank advances are generally available to meet seasonal and other withdrawals of deposit accounts and to permit increased lending. At December 31, 2024 and 2023, we were permitted to borrow up to an aggregate total of $544.8 million and $504.8 million, re spectively, from the Federal Home Loan Bank of Richmond. There were Federal Home Loan Bank borrowings outstanding of $0 at December 31, 2024, and December 31, 2023, respectively. Additionally, as of December 31, 2024 and 2023 we had credit availabilit y of $144.0 mill ion and $114.0 million with correspondent banks for short-term liquidity needs, if necessary. Borrowings were $0 million and $15.0 out standing at December 31, 2024 and 2023, respectively, under this facility. Liquidity and Capital Resources Liquidity is the ability of the Company to convert assets into cash or cash equivalents without significant loss and to raise additional funds by increasing liabilities. Liquidity management involves maintaining the Company’s ability to meet the day-to-day cash flow requirements of its customers, whether they are depositors wishing to withdraw funds or borrowers requiring funds to meet their credit needs. Without proper liquidity management, the Company would not be able to perform the primary function of a financial intermediary and would, therefore, not be able to meet the needs of the communities it serves. The Company assesses liquidity needs on a daily basis using a sophisticated monitoring system that identifies daily sources and uses for a rolling 30-day period. The Company also assesses liquidity needs under various scenarios of market conditions, asset growth and changes in credit ratings. The assessment includes liquidity stress testing which measures various sources and uses of funds under the different scenarios. The assessment provides regular monitoring of unused borrowing capacity and available sources of contingent liquidity to prepare for unexpected liquidity needs and to cover unanticipated events that could affect liquidity. The asset portion of the balance sheet provides liquidity primarily through unencumbered debt securities available-for-sale, loan principal and interest payments, maturities and prepayments of investment securities held-to-maturity and, to a lesser extent, sales of investment debt securities available-for-sale. Other short-term investments such as federal funds sold and maturing interest-bearing deposits with other banks, are additional sources of liquidity. 57 The liability portion of the balance sheet provides liquidity through various customers’ interest-bearing and noninterest-bearing deposit accounts and through FHLB and other borrowings. Wholesale deposits, federal funds purchased, and other short-term borrowings are additional sources of liquidity and, basically, represent the Company’s incremental borrowing capacity. These sources of liquidity are used as necessary to fund asset growth and meet short-term liquidity needs. In addition to the Company’s financial performance and condition, liquidity may be impacted by the Company’s structure as a bank holding company that is a separate legal entity from the Bank. The Company requires cash for various operating needs that could include payment of dividends to its stockholders, the servicing of debt, and the payment of general corporate expenses. The primary source of liquidity for the Company is dividends paid by the Bank. Applicable federal and state statutes and regulations impose restrictions on the amount of dividends that may be paid by the Bank. In addition to the formal statutes and regulations, regulatory authorities also consider the adequacy of the Bank’s total capital in relation to its assets, deposits and other such items. Any future dividends must be set forth in the Company's capital plans before any dividends can be paid. The Company’s ability to raise funding at competitive prices is affected by the rating agencies’ views of the Company’s credit quality, liquidity, capital and earnings. Management is rated by an independent rating agency annually and is provided with independent current outlook for the Company. The Board of Director's and the Asset Liability Committee (ALCO) are responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies. We believe that we have enough sources of liquidity to satisfy our short and long-term liquidity needs as of December 31, 2024. We monitor and adjust our investments in liquid assets based upon our assessment of: (1) expected loan demand; (2) expected deposit flows; (3) yields available on interest-earning deposits and securities; and (4) the objectives of our asset/liability management program. Excess liquid assets are invested generally in interest-earning deposits and short-and intermediate-term securities. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and cash equivalents, which include federal funds sold and interest-earning deposits in other banks. The levels of these assets are dependent on our operating, financing, lending and investing activities during any given period. At December 31, 2024, cash and cash equivalents totaled $207.7 million. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $55.7 million at December 31, 2024. Our cash flows are comprised of three primary classifications: cash flows from operating activities, investing activities, and financing activities. Net cash provided by operating activities was $14.7 million, $31.6 million, and $33.5 million for the twelve months ended December 31, 2024, December 31, 2023, and December 31, 2022, respectively. Net cash used in investing activities, which consists primarily of disbursements for loan originations and the purchase of securities, offset by principal collections on loans and proceeds from maturing securities, was $122.3 million, $130.7 million, and $228.7 million for the twelve months ended December 31, 2024, December 31, 2023, and December 31, 2022, respectively. There were no sales of available-for-sale debt securities in 2024, 2023, or 2022. Net cash provided by financing activities was $200.7 million, $83.0 million, and $232.6 million, for the twelve months ended December 31, 2024, 2023, and 2022, respectively, which consisted primarily of increases in interest bearing deposits and federal funds purchased for the twelve months ended December 31, 2024. There were repayments of $15.0 million in federal funds purchased for year ended 2024 and repayments of $100.0 million in FHLB advances for the year ended 2023. We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Certificates of deposit due within one year of December 31, 2024, totaled $615.7 million of total deposits. If these deposits do not remain with us, we will be required to seek other sources of funds in the normal course of business, including other deposits and Federal Home Loan Bank advances. 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 past experience that a significant portion of such deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered. Management believes that the current sources of liquidity are adequate to meet the Company’s requirements and plans for continued growth. Regulatory Capital The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possible additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. 58 The federal regulatory capital rules apply to all depository institutions as well as to bank holding companies with consolidated assets of $3 billion or more. However, the regulatory capital requirements generally do not apply on a consolidated basis to a bank holding company with total consolidated assets of less than $3 billion unless the holding company: (1) is engaged in significant nonbanking activities either directly or through a nonbank subsidiary; (2) conducts significant off-balance sheet activities (including securitization and asset management or administration) either directly or through a nonbank subsidiary; or (3) has a material amount of debt or equity securities outstanding (other than trust preferred securities) that are registered with the Securities and Exchange Commission. The Federal Reserve may apply the regulatory capital standards at its discretion to any bank holding company, regardless of asset size, if such action is warranted for supervisory purposes. Because the Company has total consolidated assets of less than $3 billion and does not engage in activities that would trigger application of the federal regulatory capital rules, it is not at present subject to consolidated capital requirements under such rules. The Basel III Capital Rules, a comprehensive capital framework for U.S. banking organizations, became effective for the Bank on January 1, 2015 (subject to a phase-in period for certain provisions). Under the Basel III rules, the Bank must hold a capital conservation buffer above the adequately capitalized risk-based capital ratios. The capital conservation buffer was phased in from 0.0% for 2015 to 2.50% by 2019. The capital conservation buffer for 2024 and 2023 is 2.50%. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios of Total capital, Common Equity Tier 1 capital, and Tier 1 capital (as defined in the regulations) to risk weighted assets (as defined), and of Tier 1 capital (as defined) to average assets (as defined). Management believes, as of December 31, 2024, the Bank meets all capital adequacy requirements to which it is subject. As of December 31, 2024 and 2023, the most recent notification from the Federal Reserve Bank of Richmond categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Common Equity Tier 1 risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the following table. There are no conditions or events since that notification that management believes have changed the Bank’s category. The Bank’s actual regulatory capital amounts and ratios as of December 31, 2024 and 2023 are presented in the table below. Actual Capital Adequacy Purposes To Be Well Capitalized Under the Prompt Corrective Action Provision (Dollars in thousands) Amount Ratio Amount Ratio Amount Ratio As of December 31, 2024 Total capital (to risk-weighted assets) $ 296,584 15.69 % $ 151,269 ≥ 8.0% $ 189,086 ≥ 10.0% Common equity tier 1 capital (to risk-weighted assets) $ 276,847 14.64 % $ 85,089 ≥ 4.5% $ 122,906 ≥ 6.5% Tier 1 capital (to risk-weighted assets) $ 276,847 14.64 % $ 113,451 ≥ 6.0% $ 151,269 ≥ 8.0% Tier 1 capital (to average assets) $ 276,847 12.08 % $ 91,708 ≥ 4.0% $ 114,635 ≥ 5.0% As of December 31, 2023 Total capital (to risk-weighted assets) $ 312,069 17.18 % $ 145,300 ≥ 8.0% $ 181,625 ≥ 10.0% Common equity tier 1 capital (to risk-weighted assets) $ 294,553 16.22 % $ 81,731 ≥ 4.5% $ 118,056 ≥ 6.5% Tier 1 capital (to risk-weighted assets) $ 294,553 16.22 % $ 108,975 ≥ 6.0% $ 145,300 ≥ 8.0% Tier 1 capital (to average assets) $ 294,553 14.66 % $ 80,375 ≥ 4.0% $ 100,469 ≥ 5.0% Non-GAAP Measures In reporting the results as of and for the year ended December 31, 2024, the Company has provided supplemental performance measures on an operating basis. These measures are a supplement to GAAP used to prepare the Company’s financial statements and should not be considered in isolation or as a substitute for comparable measures calculated in accordance with GAAP. In addition, the Company’s non-GAAP measures may not be comparable to non-GAAP measures of other companies. The Company uses the non-GAAP measures discussed herein in its analysis of the Company’s performance. Net interest margin on a fully tax equivalent (FTE) basis, provides valuable additional insight into the net interest margin and the impact that investments in tax-exempt securities have on our financial metrics. The entire FTE adjustment is attributable to the income tax effect on tax-exempt securities, using the statutory federal income tax rate of 21%. The Company believes that tangible common stockholders' equity, excluding intangible assets, is a meaningful supplement to GAAP financial measures and useful to investors because it provides an additional measure to calculate the book value of our common shares by removing the value of a subjective portion of our balance sheet. 59 The following table reconciles these non-GAAP measures from their respective GAAP basis measures for the years ended December 31, For the year ended December 31, (Dollars in thousands) 2024 2023 2022 Net interest margin (FTE) Net interest income (GAAP) $ 62,574 $ 76,742 $ 70,649 FTE adjustment on tax-exempt securities 291 283 281 Net interest income (FTE) (non-GAAP) 62,865 77,025 70,930 Average interest earning assets 2,010,448 1,858,215 1,676,649 Net interest margin (GAAP) 3.11 % 4.13 % 4.21 % Net interest margin (FTE) (non-GAAP) 3.13 % 4.15 % 4.23 % Yield on earning assets (FTE) Total interest income (GAAP) $ 134,615 $ 124,421 $ 84,018 FTE adjustment on tax-exempt securities 291 283 281 Total interest income (FTE) (non-GAAP) 134,906 124,704 84,299 Average interest earning assets 2,010,448 1,858,215 1,676,649 Yield on earning assets (GAAP) 6.70 % 6.70 % 5.01 % Yield on earning assets (FTE) (non-GAAP) 6.71 % 6.71 % 5.03 % Net interest spread (FTE) Yield on earning assets (GAAP) 6.70 % 6.70 % 5.01 % Yield on earning assets (FTE) (non-GAAP) 6.71 % 6.71 % 5.03 % Yield on interest-bearing liabilities 4.70 % 3.66 % 1.31 % Net interest spread (GAAP) 1.99 % 3.04 % 3.70 % Net interest spread (FTE) (non-GAAP) 2.01 % 3.05 % 3.71 % Net Income and earnings per share, adjusted Net Income (loss), as reported $ (9,980 ) $ 26,585 $ 26,674 Less: nonrecurring intangible impairment (19,721 ) — — Less: nonrecurring restructuring expenses (430 ) — — Less: nonrecurring other expenses (890 ) — — Related income tax benefit 4,763 — — Net income (loss), adjusted 6,298 26,585 26,674 Preferred stock dividends 2,156 2,156 2,156 Net income (loss) available to common shareholders, adjusted 4,142 24,429 24,518 Weighted average shares - basic and diluted 7,606,391 7,522,913 7,529,382 Earnings (loss) per common share, basic and diluted, adjusted Earnings (loss) per common share, basic and diluted, as reported $ (1.60 ) $ 3.25 $ 3.26 Nonrecurring expenses per share, net of taxes 2.14 — — Earnings (loss) per common share, basic and diluted, adjusted $ 0.54 $ 3.25 $ 3.26 Adjusted Return (loss) on Average Assets (ROAA) Average assets, as reported $ 2,136,586 $ 1,955,187 $ 1,758,862 Annualized ROAA, as reported (0.47 )% 1.38 % 1.53 % Annualized ROAA, as adjusted 0.29 % 1.38 % 1.53 % Adjusted Return (loss) on Average Equity (ROAE) Average equity, as reported $ 224,631 $ 209,921 $ 190,839 Annualized ROAE, as reported (4.44 )% 12.66 % 13.98 % Annualized ROAE, as adjusted 2.80 % 12.66 % 13.98 % Efficiency Ratio, adjusted Noninterest expenses, as reported $ 72,967 $ 45,616 $ 39,524 Less: nonrecurring intangible impairment (19,721 ) — — Less: nonrecurring restructuring expenses (430 ) — — Less: nonrecurring other expenses (890 ) — — Noninterest expenses, adjusted for nonrecurring expenses 51,926 45,616 39,524 Efficiency ratio, as reported 110.85 % 56.69 % 52.19 % Efficiency ratio, as adjusted 78.88 % 56.69 % 52.19 % Tangible common stockholders' equity Total stockholders' equity (GAAP) $ 207,991 $ 221,517 $ 198,282 Less: intangible assets — (14,657 ) (9,149 ) Tangible stockholders' equity (non-GAAP) 207,991 206,860 189,133 Less: preferred stock (27,263 ) (27,263 ) (27,263 ) Tangible common stockholders' equity (non-GAAP) 180,728 179,597 161,870 Common shares outstanding 7,603,765 7,527,415 7,442,743 Tangible book value per common share (non-GAAP) $ 23.77 $ 23.86 $ 21.75 Stockholders equity, adjusted Total stockholders equity (GAAP) $ 207,991 $ 221,517 $ 198,282 Less: intangible assets — (14,657 ) (9,149 ) Total tangible stockholders equity (non-GAAP) 207,991 206,860 189,133 Total tangible assets Total assets (GAAP) $ 2,228,098 $ 2,035,432 $ 1,925,751 Less: intangible assets — (14,657 ) (9,149 ) Total tangible assets (non-GAAP) 2,228,098 2,020,775 1,916,602 Average tangible stockholders' equity Total average stockholders' equity (GAAP) $ 224,631 $ 209,921 $ 190,839 Less: average intangible assets (16,989 ) (11,996 ) (5,471 ) Total average tangible stockholders' equity (non-GAAP) 207,642 197,925 185,368 Average tangible assets Total average assets (GAAP) $ 2,136,586 $ 1,955,187 $ 1,758,862 Less: average intangible assets (16,989 ) (11,996 ) (5,471 ) Total average tangible assets (non-GAAP) 2,119,597 1,943,191 1,753,391 60