What changed in this filing

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Item 5. Market for Registrant’s Common Equity

2026-03-13 compared with 2025-03-14 · 129 added, 188 removed, 903 unchanged (26% of the section changed)

Market for Registrant ’ s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

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.

Our common stock is traded on the Nasdaq Capital Market under the symbol “MNSB.” At December 31, 2025, the Company had app roximately 222 sharehol ders of record.

This total does not reflect shares held in nominee or “street name” accounts through various firms.

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There were 28,750 shares of preferred stock outstanding at December 31, 2025.

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.”

A discussion of applicable regulatory restrictions on dividends by the Company and the Bank is provided in Item 1 (“Business”) under “Regulatory Restrictions on Dividends;

Source of Strength.”

Securities Authorized For Issuance Under Equity Compensation Plans

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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.

The terms and conditions of the 2019 Plan were subsequently converted into and deemed to be the terms and conditions of a substantially id entical Company incentive compensation plan.

As of December 31, 2025 , a total of 742,421 shares of restricted common stock have been awarded under the 2019 Plan and 36,168 shares have been forfeited, for a net of 706,253 shares of restricted common stock issued and outstanding under the 2019 Plan.

As of December 31, 2024 , a total of 605,553 shares of restricted common stock had been awarded under the 2019 Plan and 26,015 shares had been forfeited, for a net of 579,538 shares of restricted common stock issued and outstanding under the 2019 Plan.

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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.

At the Annual Meeting of shareholders held on May 15, 2024, th e Company's common shareholders approved a proposal to increase the number of shares of common stock authorized from the 2019 Plan 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.

On October 16, 2025, the Company announced that the Board of Directors had authorized a plan to repurchase up to $10.0 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, 2025 , the Company repurchased 209,000 shares under this plan.

The Company did not repurchase common stock during the fourth quarter of 2024.

Additionally, 24,909 shares were repurchased during the year ended December 31, 2025 under the previous common stock repurchase plan.

(Dollars in thousands, except for per share amounts)

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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.

The Company’s critical accounting policy relates to the allowance for credit losses.

This critical accounting policy requires 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.

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Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses.

The determination of the appropriate level of the ACL on loans inherently involves a high degree of subjectivity and requires the Company to make significant judgments concerning credit risks and trends using quantitative and qualitative information, as well as reasonable and supportable forecasts of future economic conditions, all of which may undergo frequent and significant changes.

Changes in conditions, including unforeseen events, changes in asset-specific risk characteristics, and other economic factors, both within and outside the Company’s control, may indicate the need for an increase or decrease in the ACL on loans.

While management makes every effort to utilize the best information available in making its assessment of the ACL estimate, the estimation process is inherently challenging as potential changes in any one factor or input may occur at different rates and/or impact pools of loans in different ways.

Further, changes in factors and inputs may also be directionally inconsistent, such that improvement in one factor may offset deterioration in others.

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.

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

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Bank owned life insurance

Premises and equipment, net

Computer software, net of amortization

Premises and equipment, net, including property held for sale at fair value

Total deposits

Federal funds purchased

Subordinated debt

Allowance for credit losses on off-balance sheet credit exposure

Subordinated debt, net

Total stockholders’ equity

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Efficiency ratio is calculated as non-interest expense as a percentage of net interest income and non-interest income.

Calculated on a fully tax equivalent (FTE) basis.

Analysis of Results of Operations for the Years Ended December 31, 2025, 2024 , and 2023

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Provision for credit losses

Net interest income after provision

Net interest income after provision for credit losses

Non-interest income

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Net income (loss) available to common shareholders

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 income for the year ended December 31, 2025, w as $15.6 million, an increase of $ 25.6 million, compared to a net loss of $10.0 million for the year ended December 31, 2024 .

The increase in net income was due to a decrease in interest expense of $10.0 million and a decrease of non-interest expenses of $18.4 million compared to the same period in the prior year.

Net Interest Income and Net Interest Margin

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Net interest income before provision for credit losses totaled $69.5 million for the year ended December 31, 2025, compared to $62.6 million for the year ended December 31, 2024.

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 increase in net interest income was driven by a decrease in deposit interest expense discussed below, for the year ended December 31, 2025.

The net interest margin was 3.46% for the year ended December 31, 2025, compared to 3.13% for the year ended December 31, 2024, 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.

The increase in net interest margin primarily resulted from a decrease of interest expense on our interest-bearing liabilities.

The primary drivers of decreased interest expense came from cost management on demand, money market, and time deposits during 2025.

Additionally, the federal funds target rate decreasing by 75 basis points in 2025 impacted our maturing wholesale deposits that repriced in a lower interest rate environment.

Th e yield for the year ended December 31, 2025 for the loan portfolio was 6.82% compared to 7.02% for the year ended December 31, 2024 .

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.

The decreasing yield primarily reflects the repricing of variable rate loans at lower rates in 2025 compared to higher rates in prior years.

The Federal Reserve's targeted benchmark interest rate range was 525 - 550 basis points through September 2024.

The range was lowered to 425 - 450 by December 2024 and lowered again starting in September 2025 to a range of 350 - 375 by December 2025.

For the year ended December 31, 2025, the yield on the taxable investment securities portfolio was 3.26% compared to 3.08% for the year ended December 31, 2024.

For the year ended December 31, 2025, the yield on the tax-exempt investment securities portfolio was 3.85% compared to 3.80% for the year ended December 31, 2024.

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.

The increase in yield on the tax-exempt investment securities was primarily due to lower yields on investment securities maturing during the period.

The rate paid on interest-bearing deposits decreased to 3.92% during the year ended December 31, 2025, from 4.70% during the year ended December 31, 2024.

This decrease was a result of lower rates paid on all outstanding deposits in conjunction with the decreasing rate environment throughout the year.

The rate paid on FHLB borrowings and federal funds purchased for the year ended December 31, 2025 was 0.00% and 4.71%, respectively, compared to the prior year of 5.61% for FHLB borrowings and 5.78% 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.

This decrease was a result of lower rates paid on all outstanding b orrowings in conjunction with the decreasing rate environment throughout the year.

Discussion of net interest income and net interest margin for the year ended December 31, 2023 has been omitted as such discussion was provided in Part II, Item 7.

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Investment securities

Federal funds and interest-bearing deposits

Interest-bearing deposits at other financial institutions

Federal funds sold

Total interest-earning assets

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Investment securities

Federal funds and interest-bearing deposits

Interest-bearing deposits at other financial institutions

Federal funds

Total interest-bearing assets

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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.

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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.

The provision for credit losses on loans decreased to a recovery of credit loss of $0.1 million for the year ended December 31, 2025, compared to the prior year which ended at a credit loss provision of $7.5 million.

The provision for credit losses on off-balance sheet exposure was a net provision of $48,000 compared to the prior year which ended with a net recovery of $0.7 million.

The decrease in provision for credit losses on loans was primarily driven by less charge offs taken in 2025 compared to 2024.

T he recovery of credit losses for off-balance sheet exposure was driven by fluctuations in our revolving credit line utilization rates as of December 31, 2025.

Loan originations decreased $21.6 million, which totaled $374.0 million for the year ended December 31, 2024 compared to loan originations of $352.5 million for the year ended December 31, 2025.

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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.

All classified loans are considered individually evaluated and have strong collateral positions, with satisfactory loan-to-value (LTVs) ratios.

Criticized loans continue to perform, are well collateralized, and show improving trends.

During the year ended December 31, 2025, there was $0.9 million in charge-offs recorded and recoveries of $0.8 million were received.

During the year ended December 31, 2024, there was $4.6 million in charge-offs recorded and recoveries received of $28,000.

Discussion of provision for credit losses for the year ended December 31, 2023 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 Credit Losses ” in the Company’s Annual Report on Form 10-K for the year ended December 31, 202 3 , which was filed with the SEC on March 20, 2024, and is incorporated herein by reference.

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.

Our primary sources of non-interest income are service charges on deposit accounts, such as interchange fees and statement fees, and income earned on bank owned life insurance.

The following table presents, for the periods indicated, the major categories of non-interest income:

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Bank owned life insurance income

Gain on retirement of subordinated debt

Net loss on securities called or matured

Gain on equity securities

Other fee income

Total non-interest income

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.

Non-interest inco me increased $0.8 million, or 23.8%, to $4.0 million for the year ended December 31, 2025 from $3.3 million for the year ended December 31, 2024.

The increase in non-interest income was primarily due to a $0.3 million gain on retirement of subordinated debt and an increase in deposit account service charges and other fee income of $0.2 million for the year ended December 31, 2025.

Bank owned life insurance income increased $0.1 million for the year ended December 31, 2025, compared to the year ended December 31, 2024, due to the elevated rate environment throughout 2025.

Discussion of non-interest income for the year ended December 31, 2023 has been omitted as such discussion was provided in Part II, Item 7.

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Total non-interest expense

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.

Non-interest expense decreased $18.4 million or 25.2% to $54.6 million for the year ended December 31, 2025 from $73.0 million for the year ended December 31, 2024 primarily as a result of the impairment of the computer software intangible of $19.7 million recognized during the year ended December 31, 2024.

Salaries and employee benefits expense increased by $1.1 million to $31.6 million for the year ended December 31, 2025 from $30.5 million for the year ended December 31, 2024.

FDIC insurance expense increased $0.8 million to $2.1 million for the year ended December 31, 2025, from $1.3 million for the year ended December 31, 2024 due to significant deposit growth earlier in the year, as those deposits were temporary, we expect this expense to return to previous levels.

Other operating expenses decreased $0.7 million from $5.8 million for the year ended December 31, 2024 to $5.2 million for the year ended December 31, 2025 due to expense management.

Furniture and equipment expenses incre ased $0.2 million to $3.8 million f or the year ended December 31, 2025 from $3.6 million for the year ended December 31, 2024.

Many of the non-interest expense categories remain consistent for the year ended December 31, 2025 compared to the year ended December 31, 2024 as management continues to exercise judicious expense controls.

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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.

Income tax expense increased $7.4 million or 188.6%, to a tax expense of $3.5 million for the year ended December 31, 2025 from a tax benefit of $3.9 million for the year ended December 31, 2024.

The increase in income tax expense for the year ended December 31, 2025 compared to the same period a year earlier was driven by the return to net income for the year ended December 31, 2025 from a net loss recorded for the year ended December 31, 2024.

For the year ended December 31, 2025, the Bank had an effective tax rate of 18.2%, compared to effective benefit rate of 28.2% for the year ended December 31, 2024.

Discussion of income tax expense for the year ended December 31, 2023 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 3 , which was filed with the SEC on March 20, 2024, and is incorporated herein by reference.

Avenu, a division of MainStreet Bank

Analysis of Results of Operations for the Year Ended December 31, 2024

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, 2025 and at December 31, 2024

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.

Total assets decreased $ 15.4 million, or 0.7% , to $2.21 billion at December 31, 2025 from $2.23 billion at December 31, 2024 .

The decrease was primarily the result of decreases of $45.0 million in cash and cash equivalents offset by an increase of $31.3 million in net loans receivable.

Investment Securities

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Municipal Securities

Subordinated Debt

Weighted average yields are reported on a taxable equivalent basis using the statutory federal corporate tax rate of 21%.

Weighted average yields are a non-GAAP measure and 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.

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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 portfolio consists of loans secured by real estate as well as commercial business loans and consumer loans.

Our loan customers primarily consist of small- to medium-sized businesses, professionals, real estate investors, small residential builders and individuals.

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After fifteen years

Construction and Land Development

Commercial and Industrial

Construction & Land Development

Commercial & Industrial

Total Loan Portfolio Maturities

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Non-Owner Occupied

Construction and land development

Construction & Land Development

Commercial – Non-Real Estate:

Commercial and industrial

Commercial & Industrial

Consumer – Non-Real Estate:

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Non-Owner Occupied

Construction and land development

Construction & Land Development

Commercial – Non-Real Estate:

Commercial and industrial

Commercial & Industrial

Consumer – Non-Real Estate:

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Principal repayments

Loans transferred to other real estate owned:

Transfers to other real estate owned

Net loan activity

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Term debt is secured by a combination of business assets and additional real estate collateral.

Government Contracting Credit Exposures as of December 31, 2024

December 31, 2025

Government Contracting Credit Exposures

(Dollars in thousands)

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Total Exposure

December 31, 2024

Government Contracting Credit Exposures

(Dollars in thousands)

Principal Balance

Line/Term Commitment

Number of Relationships

Number of Relationships with Balances

Line of Credit

Term Debt Exposure

Total Exposure

The federal banking Agencies issued guidance in 2006 which addresses institutions’ with increased concentrations of commercial real estate (CRE) loans.

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During the prior 36 months, the Company has experienced an increase in its commercial real estate portfolio by 45% .

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.

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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.

We stress test earning assets using a worst-case methodology 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.

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AFS Securities

Swap Portfolio

Bank Owned Life Insurance

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AFS Securities

Swap Portfolio

Bank Owned Life Insurance

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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,

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)

As shown in the tables below, as of December 31, 2025, and 2024 the post-stress capital ratios well exceed our Board target ratios as well as Agency minimums (with buffer).

December 31, 2025

Bank Capital Adequacy Ratios Pre- and Post-Stress (Tax-Effective)

Well Capitalized with Buffer

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Common Equity Tier 1 Risk-Based Capital

December 31, 2023 Bank Capital Adequacy Ratios Pre- and Post-Stress (Tax-Effective)

December 31, 2024

Bank Capital Adequacy Ratios Pre- and Post-Stress (Tax-Effective)

Well Capitalized with Buffer

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Total Non-Owner Occupied CRE

Construction and Land Development

Construction & Land Development

Retail/Commercial

Total Construction and Land Development

Total Construction & Land Development

Total Construction, Land Development, and Non-Owner Occupied CRE

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Hospitality occupancy rates rely on individual STR data.

An STR report is the industry standard, monthly benchmarking report for the hospitality industry.

The underlying properties for office to residential conversion loans generally are not occupied during the conversion period.

December 31, 2024

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Total Non-Owner Occupied CRE

Construction and Land Development

Construction & Land Development

Retail/Commercial

Total Construction and Land Development

Total Construction & Land Development

Total Construction, Land Development, and Non-Owner Occupied CRE

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Hospitality occupancy rates rely on individual STR data.

The underlying properties for office to residential conversion loans generally are not occupied during the conversion period.

The Company also underwrites and originates owner-occupied commercial real estate loans.

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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.

The Company’s asset quality remained resilient during the year ended December 31, 2025.

Non-performing assets, which includes non-accrual loans, accruing loans 90 days past due, and other real estate owned totaled $33.2 million at December 31, 2025, and $21.7 million at December 31, 2024.

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.

Commercial loans are generally placed on non-accrual 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 non-accrual 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.

For those loans that are carried on non-accrual 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.

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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.

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%.

As a percentage of total assets, non-performing assets were 1.50% at December 31, 2025, compared with 0.97% at December 31, 2024.

As of December 31, 2025, the Company had $31.5 million in loans on non-accrual status and $1.7 million in other real estate owned.

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.

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Commercial Non-Real Estate

Commercial and industrial

Commercial & Industrial

Total non-accrual loans

Loans greater than 90 days past due and still accruing:

Consumer non real estate - secured

Total non-performing loans

Other Real Estate Owned

Total non-performing assets

Total non-performing loans to gross loans receivable

Total non-performing loans to total assets

Total non-performing assets to total assets

Total non-accrual loans to gross loans receivable

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.

Interest income that would have been recorded for the years ended December 31, 2025 and 2024 had non-accruing loans been current according to their original terms was $1.4 million and $1.9 million, respectively.

Occasionally, the Company modifies loans by providing principal forgiveness on certain of its real estate loans.

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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.

The Company further describes loans that were modified during the year ended December 31, 2025 and 2024 in Note 5 of Notes to Consolidated Financial Statements.

Analysis and Determination of the Allowance for Credit Loss on Loans.

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Balance at beginning of year

Current expected credit losses, nonrecurring adoption

Residential Real Estate

Commercial Real Estate

Commercial and industrial

Commercial & Industrial

Total charge-offs

Residential Real Estate

Commercial and industrial

Commercial Real Estate

Commercial & Industrial

Total recoveries

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Net charge-offs to average loans

Commercial and industrial

Commercial & Industrial

At December 31, 2025, our allowance for credit losses on loans represented 1.04% of total loans and we had $31.5 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.

The allowance for credit losses on loans decreased to $19.3 million at December 31, 2025 from $19.5 million at December 31, 2024 due to the increase in collateral dependent loans during the year ended December 31, 2025, all of which are fully collateralized and do not require specific reserves.

There were $24,000 and $4.5 million in net loan charge-offs during the years ended December 31, 2025 and December 31, 2024, respectively.

Allocation of Allowance for Credit Losses on Loans .

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Non-Owner Occupied

Construction and Land Development

Construction & Land Development

Commercial – Non Real Estate:

Commercial and industrial

Commercial & Industrial

Consumer – Non Real Estate:

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The Company’s funding activities are monitored and governed through the Company’s asset/liability management process

Total deposits increased by $221.7 million from December 31, 2023 to December 31, 2024.

Total deposits decreased by $8.6 million from December 31, 2024 to December 31, 2025.

Wholesale deposits, which are included in the table below, totaled $498.5 million and $468.1 million at December 31, 2025, and December 31, 2024, respectively.

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Total deposits

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.

The 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.

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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.

Wholesale deposits provide a diversified and stable source of funding that generally has stated maturities.

As of December 31, 2025, the Company had $498.5 million of total wholesale deposit funding sources, an increase of $30.4 million compared to December 31, 2024, which totaled $468.1 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.

Given the interest rate environment and strategic initiatives, the Company replaced maturing higher yielding wholesale CDs with lower market rate CDs.

The Company also utilized additional wholesale demand deposits to provide liquidity and more effectively balance our interest rate sensitivity.

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Listing service CDs are excluded from being classified as wholesale deposits, per FDIC call report instructions

80% of the CDs in this balance can be called as of December 31, 2024

All of the CDs as of December 31, 2025 can be called starting in 2026

Regulatory Defined Wholesale Deposits

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As of December 31, 2025, all of the Company's reciprocal deposits were core deposits from customers who placed their deposits in the reciprocal network for additional FDIC insurance coverage.

At December 31, 2024, the Company had $779.6 million in total deposits in excess of the FDIC insurance limit of $250,000.

At December 31, 2025, the Comp any had $911.8 million in total deposits i n 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 $416.8 million.

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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.

We may obtain advances from the Federal Home Loan Bank of Atlanta 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.

At December 31, 2025 and 2024 , we were permitted to borrow up to an aggregate total of $587.8 million and $544.8 million, respectively, from the Federal Home Loan Bank of Atlanta.

There were Federal Home Loan Bank borrowings outstanding of $0 at December 31, 2025 , and December 31, 2024 , 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.

Additionally, as of December 31, 2025 and 2024 we had credit availability of $144.0 million and $144.0 million with correspondent banks for short-term liquidity needs, if necessary.

Borrowings were $0 outstanding at December 31, 2025 and 2024 , respectively, under this facility.

Liquidity and Capital Resources

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Other short-term investments such as federal funds sold and maturing interest-bearing deposits with other banks, are additional sources of liquidity.

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.

The liability portion of the balance sheet provides liquidity through various customers’ interest-bearing and non-interest-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.

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There were no sales of available-for-sale debt securities in 2025, 2024, or 2023.

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.

Net cash used in financing activities was $21.4 million for the twelve months ended December 31, 2025 and net cash provided by financing activities was $200.7 million and $83.0 million, for the twelve months ended December 31, 2024 and 2023, respectively, which consisted primarily of decreases in interest-bearing deposits and repurchase of common stock for the twelve months ended December 31, 2025.

We are committed to maintaining a strong liquidity position.

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Net interest spread (FTE) (non-GAAP)

Net Income and earnings per share, adjusted

Net Income (loss), as reported

nonrecurring intangible impairment

nonrecurring restructuring expenses

nonrecurring other expenses

Related income tax benefit

Net income (loss), adjusted

Preferred stock dividends

Net income (loss) available to common shareholders, adjusted

Weighted average shares - basic and diluted

Earnings (loss) per common share, basic and diluted, adjusted

Earnings (loss) per common share, basic and diluted, as reported

Nonrecurring expenses per share, net of taxes

Earnings (loss) per common share, basic and diluted, adjusted

Adjusted Return (loss) on Average Assets (ROAA)

Average assets, as reported

Annualized ROAA, as reported

Annualized ROAA, as adjusted

Adjusted Return (loss) on Average Equity (ROAE)

Average equity, as reported

Annualized ROAE, as reported

Annualized ROAE, as adjusted

Efficiency Ratio, adjusted

Noninterest expenses, as reported

nonrecurring intangible impairment

nonrecurring restructuring expenses

nonrecurring other expenses

Noninterest expenses, adjusted for nonrecurring expenses

Efficiency ratio, as reported

Efficiency ratio, as adjusted

Tangible common stockholders' equity

Total stockholders' equity (GAAP)

intangible assets

Tangible stockholders' equity (non-GAAP)

preferred stock

Tangible common stockholders' equity (non-GAAP)

Common shares outstanding

Tangible book value per common share (non-GAAP)

Stockholders equity, adjusted

Total stockholders equity (GAAP)

intangible assets

Total tangible stockholders equity (non-GAAP)

Total tangible assets

Total assets (GAAP)

intangible assets

Total tangible assets (non-GAAP)

Average tangible stockholders' equity

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity