FVCBankcorp Inc.

11/05/2026 | Press release | Distributed by Public on 11/05/2026 10:37

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
The following presents management's discussion and analysis of our consolidated financial condition at September 30, 2026 and December 31, 2025 and the results of our operations for the three and nine months ended September 30, 2026 and 2025. This discussion should be read in conjunction with our unaudited consolidated financial statements and the notes thereto appearing elsewhere in this report and the audited consolidated financial statements and the notes to consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025. Results of operations for the three and nine months ended September 30, 2026 are not necessarily indicative of the results of operations for the balance of 2026, or for any other period. In addition to historical information, this discussion contains forward-looking statements that involve risks, uncertainties and assumptions that could cause results to differ materially from management's expectations.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-Q, as well as other periodic reports filed with the U.S. Securities and Exchange Commission (the "SEC"), and written or oral communications made from time to time by or on behalf of FVCBankcorp, Inc. and our subsidiary (the "Company"), may contain statements relating to future events or our future results that are considered "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections and statements of our beliefs concerning future events, business plans, objectives, expected operating results and the assumptions upon which those statements are based. Forward-looking statements include without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and are typically identified with words such as "may," "could," "should," "will," "would," "believe," "anticipate," "estimate," "expect," "aim," "intend," "plan," or words or phrases of similar meaning. We caution that the forward-looking statements are based largely on our expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond our control. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements.
The following factors, among others, could cause our financial performance to differ materially from that expressed in such forward-looking statements:
•general business and economic conditions, including higher inflation and its impacts, nationally or in the markets that we serve could adversely affect, among other things, real estate valuations, unemployment levels, the ability of businesses to remain viable, consumer and business confidence, and consumer or business spending, which could lead to decreases in demand for loans, deposits, and other financial services that we provide and increases in loan delinquencies and defaults;
•the concentration of our business in and around the Washington, D.C. metropolitan area and the effects of changes in the economic, political, and environmental conditions on this market, including shutdowns of the U.S. government and potential reductions in spending by the U.S. government and related reductions in the federal workforce;
•the impact of the interest rate environment on our business, financial condition and results of operations, and its impact on the composition and costs of deposits, loan demand, and the values and liquidity of loan collateral, securities, and interest sensitive assets and liabilities;
•changes in our liquidity requirements could be adversely affected by changes in our assets and liabilities;
•changes in the assumptions underlying the establishment of reserves for possible credit losses and the possibility that future credit losses may be higher than currently expected;
•the management of risks inherent in our real estate loan portfolio, and the risk of a prolonged downturn in the real estate market, which could impair the value of loan collateral and the ability to sell collateral upon any foreclosure;
•changes in market conditions, specifically declines in the commercial and residential real estate market, volatility and disruption of the capital and credit markets, and soundness of other financial institutions that we do business with;
•the effects of, and changes in, trade, monetary and fiscal policies and laws, including interest rate policies of the Board of Governors of the Federal Reserve System (the "Federal Reserve"), inflation, interest rate, market and monetary fluctuations;
•our investment securities portfolio is subject to credit risk, market risk, and liquidity risk as well as changes in the estimates used to value the securities in the portfolio;
•declines in our common stock price or the occurrence of what management would deem to be a triggering event that could, under certain circumstances, cause us to record a noncash impairment charge to earnings in future periods;
•the effect of any change in federal government enforcement of federal laws affecting the cannabis industry;
•potential exposure to fraud, negligence, computer theft and cyber-crime, and our ability to maintain the security of our data processing and information technology systems;
•the impact of changes in bank regulatory conditions, including laws, regulations and policies concerning capital requirements, deposit insurance premiums, taxes, securities, and the application thereof by regulatory bodies;
•the effect of changes in accounting policies and practices, as may be adopted from time to time by bank regulatory agencies, the SEC, the Public Company Accounting Oversight Board, the Financial Accounting Standards Board ("FASB") or other accounting standards setting bodies;
•competitive pressures among financial services companies, including the timely development of competitive new products and services and the acceptance of these products and services by new and existing customers;
•the effect of acquisitions and partnerships we may make, including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions;
•our involvement, from time to time, in legal proceedings and examination and remedial actions by regulators;
•geopolitical conditions, including trade restrictions and tariffs, and acts or threats of terrorism and/or military conflicts, or actions taken by the United States or other governments in response to trade restrictions and tariffs, and acts or threats of terrorism and/or military conflicts, which could impact business and economic conditions in the United States and abroad; and
•the occurrence of significant natural disasters, including severe weather conditions, floods, health related issues or emergencies, and other catastrophic events.
The foregoing factors should not be considered exhaustive and should be read together with other cautionary statements that are included in our Annual Report on Form 10-K for the year ended December 31, 2025, including those discussed in the section entitled "Risk Factors". If one or more of the factors affecting our forward-looking information and statements proves incorrect, then our actual results, performance or achievements could differ materially from those expressed in, or implied by, forward-looking information and statements contained in this Form 10-Q. Therefore, we caution you not to place undue reliance on our forward-looking information and statements. We will not update the forward-looking statements to reflect actual results or changes in the factors affecting the forward-looking statements. New risks and uncertainties may emerge from time to time, and it is not possible for us to predict their occurrence or how they will affect our operations, financial condition, or results of operations.
Overview
We are a bank holding company headquartered in Fairfax County, Virginia. Our sole subsidiary, FVCbank (the "Bank"), was formed in November 2007 as a community-oriented, locally-owned and managed commercial bank under the laws of the Commonwealth of Virginia. The Bank offers a wide range of traditional bank loan and deposit products and services to both our commercial and retail customers. Our commercial relationship officers focus on attracting small and medium sized businesses, commercial real estate developers and builders, including government contractors, non-profit organizations, and professionals. Our approach to our market features competitive customized financial services offered to customers and prospects in a personal relationship context by seasoned professionals.
Net interest income is our primary source of revenue. We define revenue as net interest income plus noninterest income. We manage our balance sheet and interest rate risk exposure to maximize, and concurrently stabilize, net interest income. We do this by monitoring our liquidity position and the spread between the interest rates earned on interest-earning assets and the interest rates paid on interest-bearing liabilities. We attempt to minimize our exposure to interest rate risk, but are unable to eliminate it entirely. In addition to managing interest rate risk, we also analyze our loan portfolio for exposure to credit risk. Loan defaults and foreclosures are inherent risks in the banking industry, and we attempt to limit our exposure to these risks by carefully underwriting and then monitoring our extensions of credit. In addition to net interest income, noninterest income is a complementary source of revenue for us and includes, among other things, service charges on deposits and loans, income from our minority membership interest in Atlantic Coast Mortgage, LLC ("ACM"), merchant services fee income, income from bank-owned life insurance ("BOLI"), and gains and losses on sales of investment securities available-for-sale.
Critical Accounting Estimates
General
The accounting principles we apply under the accounting principles generally accepted in the United States of America ("GAAP") are complex and require management to apply significant judgment to various accounting, reporting, and disclosure matters. Management must use assumptions, judgments, and estimates when applying these principles where precise measurements are not possible or practical. These policies are critical because they are highly dependent upon subjective or complex judgments, assumptions, and estimates. Changes in such judgments, assumptions, and estimates may have a significant impact on the consolidated financial statements. Actual results, in fact, could differ from initial estimates.
The accounting policies we view as critical are those relating to judgments, assumptions, and estimates regarding the determination of the allowance for credit losses on our loan portfolio.
Allowance for Credit Losses - Loans
We maintain the allowance for credit losses ("ACL") at a level that represents management's best estimate of expected losses in our loan portfolio.
Accounting Standards Codification ("ASC") 326 requires that an estimate of expected credit losses be immediately recognized and reevaluated over the contractual life of the financial asset. The ACL is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loan portfolio. Loans, or portions thereof, are charged off against the ACL when they are deemed uncollectible. Recoveries are recorded to the extent they do not exceed the aggregate of amounts previously charged-off.
Reserves on loans that do not share risk characteristics are evaluated on an individual basis. Nonaccrual loans are specifically reviewed for loss potential and when deemed appropriate are assigned a reserve based on an individual evaluation. The remainder of the portfolio, representing all loans not evaluated individually, is segmented based on call report code and processed through a non-discounted cash flow valuation model. In particular, loan-level probability of default ("PD") and severity (also referred to as loss given default ("LGD")) is applied to derive a baseline expected loss as of the valuation date. These expected default and severity rates, which are regression-derived and based on peer historical loan-level performance data, are calibrated to incorporate our reasonable and supportable forecast of future losses as well as any necessary qualitative adjustments.
Typically, financial institutions use their historical loss experience and trends in losses for each loan segment which are then adjusted for portfolio trends and economic and environmental factors in determining the ACL. Since the
Bank's inception in 2007, we have experienced minimal loss history within our loan portfolio. Due to the fact that limited internal loss history exists to generate statistical significance, we determined it was most prudent to rely on peer data when deriving our best estimate of PD and LGD. As part of our estimation process, we will continue to assess the reasonableness of the data, assumptions, and model methodology utilized to derive our allowance for credit losses.
For each of the modeled loan segments, we generate cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speeds, PD rates, and LGD rates. The modeling of expected prepayment speeds is based on internal loan-level historical data. For our cash flow model, we utilize national unemployment for reasonable and supportable forecasting of expected default. To further adjust the ACL for expected losses not already within the quantitative component of the calculation, we may consider qualitative factors as prescribed in ASC 326.
While our methodology in establishing the ACL attributes portions of a combined reserve to multiple elements, we believe that the combined allowance for credit losses (which is inclusive of the reserve for unfunded commitments) represents the most appropriate coverage metric for loss absorption purposes.
The determination of the appropriate level of the ACL on loans inherently involves a high degree of subjectivity and requires us 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 our control, may indicate the need for an increase or decrease in the ACL on loans. While we make every effort to utilize the best information available in making our 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. Our methodology utilized in the estimation of the ACL, which is performed at least quarterly, is designed to be dynamic and responsive to changes in our loan portfolio credit quality, composition, and forecasted economic conditions. The reasonableness and appropriateness of the ACL is reviewed by the ACL Committee for approval as of the valuation date. Additionally, information is provided to the Board of Directors on a quarterly basis along with our consolidated financial statements.
Credit losses are an inherent part of our business and, although we believe the methodologies for determining the ACL and the current level of the allowance are appropriate, it is possible that there may be unidentified losses in the portfolio at any particular time that may become evident at a future date pursuant to additional internal analysis or regulatory comment. Additional provisions for such losses, if necessary, would be recorded, and would negatively impact earnings.
Results of Operations- Three and Nine Months Ended September 30, 2026 and 2025
Overview
We recorded net income of $6.6 million, or $0.37 diluted earnings per share, for the three months ended September 30, 2026, compared to net income of $5.6 million, or $0.31 diluted earnings per share, for the three months ended September 30, 2025, an increase of $1.1 million, or 19%.
Net interest income increased $2.4 million, or 15%, to $18.4 million for the three months ended September 30, 2026, compared to $16.0 million for the same period of 2025. Provision for credit losses totaled $186 thousand for the three months ended September 30, 2026 compared to $375 thousand for the three months ended September 30, 2025.
Noninterest income was $303 thousand and $1.0 million for the three months ended September 30, 2026 and 2025, respectively. Noninterest expense was $10.0 million for the three months ended September 30, 2026 compared to $9.5 million for the three months ended September 30, 2025, an increase of $514 thousand, or 5%.
The annualized return on average assets for the three months ended September 30, 2026 and 2025 was 1.17% and 1.00%, respectively. The annualized return on average equity for the three months ended September 30, 2026 and 2025 was 9.77% and 9.05%, respectively.
For the nine months ended September 30, 2026, we recorded net income of $21.2 million, or $1.17 diluted earnings per share, compared to net income of $16.4 million, or $0.90 diluted earnings per share for the nine months ended September 30, 2025. Net interest income for the nine months ended September 30, 2026 was $55.0 million, compared to $46.8 million for the same period of 2025, an increase of $8.1 million, or 17%.
Provision for credit losses was $596 thousand and $680 thousand for the nine months ended September 30, 2026 and 2025, respectively. Noninterest income was $3.3 million and $2.7 million for the nine months ended September 30, 2026 and 2025, respectively, an increase of $627 thousand, or 23%. Noninterest expense was $30.4 million and $28.0 million for the nine months ended September 30, 2026 and 2025, respectively, an increase of $2.4 million, or 9%.
Core operating earnings (non-GAAP) for the three months ended September 30, 2026 and 2025 were $6.6 million and $5.6 million, respectively, an increase of $1.1 million, or 19%. For the nine months ended September 30, 2026 and 2025, core operating earnings were $20.8 million and $16.3 million, respectively, an increase of $4.5 million, or 28%. See table below for additional information on core operating earnings.
Diluted core operating earnings per share (non-GAAP) for the three months ended September 30, 2026 and 2025 were $0.37 and $0.31, respectively. For the nine months ended September 30, 2026 and 2025, diluted core operating earnings per share were $1.15 and $0.89, respectively.
We consider core operating earnings a useful financial measure of our operating performance. Core operating earnings is determined by methods other than in accordance with GAAP. A reconciliation of non-GAAP financial measures to their most comparable financial measure in accordance with GAAP can be found in the tables below.
Reconciliation of Net Income (GAAP) to Core Operating Earnings (Non-GAAP)
For the Nine Months Ended September 30, 2026 and 2025
(Dollars in thousands, except per share data)
For the Nine Months Ended September 30,
2026 2025
Net income (as reported) $ 21,249 $ 16,411
Gain on termination of derivative instruments - (154)
Accelerated debt issuance costs on long-term debt 244 -
Gain on sale of minority interest (847) -
Provision for income taxes associated with non-GAAP adjustments 139 35
Non-GAAP core operating earnings, excluding above items $ 20,785 $ 16,292
Earnings per share - basic (GAAP net income) $ 1.18 $ 0.90
Non-GAAP adjustments, including provision for income taxes (0.02) -
Adjusted earnings per share - basic (non-GAAP core operating earnings) $ 1.16 $ 0.90
Earnings per share - diluted (GAAP net income) $ 1.17 $ 0.90
Non-GAAP adjustments, including provision for income taxes (0.02) (0.01)
Adjusted earnings per share - diluted (non-GAAP core operating earnings) $ 1.15 $ 0.89
Return on average assets (GAAP net income) 1.27 % 0.98 %
Non-GAAP adjustments, including provision for income taxes (0.02) % - %
Adjusted return on average assets (non-GAAP core operating earnings) 1.25 % 0.98 %
Return on average equity (GAAP net income) 10.77 % 9.01 %
Non-GAAP adjustments, including provision for income taxes (0.24) % (0.07) %
Adjusted return on average equity (non-GAAP core operating earnings) 10.53 % 8.94 %
Net Interest Income/Margin
The following table presents average balance information, interest income, interest expense and the corresponding average yields earned and rates paid for the three months ended September 30, 2026 and 2025. Average balances presented are based on daily averages for each of the periods presented.
Average Balance Sheets and Interest Rates on Interest-Earning Assets and Interest-Bearing Liabilities
For the Three Months Ended September 30, 2026 and 2025
(Dollars in thousands)
2026 2025
Average
Balance 		Interest
Income/
Expense 		Average
Yield/
Rate 		Average
Balance 		Interest
Income/
Expense 		Average
Yield/
Rate
Assets
Interest-earning assets:
Loans receivable, net of fees
Commercial real estate $ 954,732 $ 12,904 5.41 % $ 965,153 $ 12,425 5.15 %
Commercial and industrial 450,506 8,702 7.72 % 340,510 6,906 8.11 %
Commercial construction 135,352 2,323 6.86 % 177,620 3,310 7.45 %
Consumer real estate 276,739 3,290 4.76 % 301,687 3,618 4.80 %
Warehouse facilities 52,790 761 5.76 % 39,104 617 6.31 %
Consumer nonresidential 1,193 20 6.71 % 5,513 108 7.83 %
Total loans(1)
1,871,312 28,000 5.99 % 1,829,587 26,984 5.90 %
Investment securities(2)
176,006 925 2.10 % 193,262 1,026 2.12 %
Interest-bearing deposits at other financial institutions 156,168 1,485 3.77 % 163,878 1,817 4.40 %
Total interest-earning assets and interest income $ 2,203,486 $ 30,410 5.52 % $ 2,186,727 $ 29,827 5.46 %
Noninterest-earning assets:
Cash and due from banks 12,997 14,265
Premises and equipment, net 633 755
Accrued interest and other assets 55,943 55,379
Allowance for credit losses (19,148) (17,988)
Total assets $ 2,253,911 $ 2,239,138
Liabilities and Stockholders' Equity
Interest - bearing liabilities:
Interest - bearing deposits:
Interest checking $ 685,040 $ 4,286 2.48 % $ 702,037 $ 5,496 3.11 %
Savings and money markets 351,989 2,630 2.96 % 321,399 2,755 3.40 %
Time deposits 307,850 2,841 3.66 % 277,760 2,783 3.97 %
Wholesale deposits 195,148 1,734 3.53 % 234,925 2,037 3.44 %
Total interest - bearing deposits 1,540,027 11,491 2.96 % 1,536,121 13,071 3.38 %
Other borrowed funds 369 3 3.23 % 50,011 478 3.78 %
Long-term debt, net of issuance costs 24,498 482 7.80 % 18,728 245 5.20 %
Total interest-bearing liabilities and interest expense $ 1,564,894 $ 11,976 3.04 % $ 1,604,860 $ 13,794 3.41 %
Noninterest-bearing liabilities:
Demand deposits 394,589 364,614
Other liabilities 24,697 23,121
Common stockholders' equity 269,731 246,543
Total liabilities and stockholders' equity $ 2,253,911 $ 2,239,138
Net interest income and net interest margin $ 18,434 3.32 % $ 16,033 2.91 %
________________________
(1)Nonaccrual loans are included in average balances and do not have a material effect on the average yield. Interest income on non-accruing loans was not material for the quarters presented. Net loan fees and late charges included in interest income on loans totaled $420 thousand and $478 thousand for the quarters ended September 30, 2026 and 2025, respectively.
(2)The average balances for investment securities includes restricted stock.
The following table shows the effect that these factors had on the interest earned from our interest-earning assets and interest incurred on our interest-bearing liabilities for the three months ended September 30, 2026 as compared to the three months ended September 30, 2025.
Rate and Volume Analysis
For the Three Months Ended September 30, 2026 and 2025
(Dollars in thousands)
2026 Compared to 2025
Average
Volume
Average
Rate 		Increase
(Decrease)
Interest income:
Loans(1):
Commercial real estate $ (134) $ 613 $ 479
Commercial and industrial 2,230 (434) 1,796
Commercial construction (787) (200) (987)
Consumer real estate (299) (29) (328)
Warehouse facilities 216 (72) 144
Consumer nonresidential (85) (3) (88)
Total loans 1,141 (125) 1,016
Investment securities(2)
(91) (10) (101)
Deposits at other financial institutions and federal funds sold (85) (247) (332)
Total interest income 965 (382) 583
Interest expense:
Interest - bearing deposits:
Interest checking (133) (1,077) (1,210)
Savings and money markets 262 (387) (125)
Time deposits 301 (243) 58
Wholesale deposits (345) 42 (303)
Total interest - bearing deposits 85 (1,665) (1,580)
Other borrowed funds (473) (2) (475)
Long-term debt, net of issuance costs 76 161 237
Total interest expense (312) (1,506) (1,818)
Net interest income $ 1,277 $ 1,124 $ 2,401
_________________________
(1)Nonaccrual loans are included in average balances and do not have a material effect on the average yield. Interest income on non-accruing loans was not material for the periods presented.
(2)The average balances for investment securities includes restricted stock.
Net interest income totaled $18.4 million for the three months ended September 30, 2026 compared to $16.0 million for the three months ended September 30, 2025, an increase of $2.4 million, or 15%. The increase in net interest income for the third quarter of 2026 compared to the year ago quarter was primarily due to an increase in interest income from both increased yields and average loans receivable combined with a decrease in interest expense on deposits.
Our net interest margin for the three months ended September 30, 2026 and 2025 was 3.32% and 2.91%, respectively, an increase of 41 basis points, or 14%. The increase in net interest margin is a result of continued repricing of our loans receivable portfolio along with improvement in the cost of funding sources.
Average interest-earning assets for the three month periods ended September 30, 2026 and September 30, 2025 was $2.20 billion and $2.19 billion, respectively. The yield on interest-earning assets increased 6 basis points to 5.52% for the three months ended September 30, 2026, compared to 5.46% for the same period of 2025. Total interest income increased $583 thousand, or 2%, to $30.4 million for the three months ended September 30, 2026 compared to $29.8 million for the three months ended September 30, 2025.
Average loans receivable increased $41.7 million to $1.87 billion for the three months ended September 30, 2026, compared to $1.83 billion for the three months ended September 30, 2025. The yield on average loans increased 9 basis points to 5.99% for the three months ended September 30, 2026, compared to 5.90% for the three months ended September 30, 2025. Included in loan interest income are net loan fees related to the net accretion of origination fees and collection of prepayment penalties. Average balances of nonperforming loans, which consist of nonaccrual loans, are included in the net interest margin calculation and did not have a material impact on our net interest margin in 2026 and 2025.
Average interest-bearing deposits at other financial institutions, consisting primarily of excess cash reserves, decreased $7.7 million to $156.2 million for the quarter ended September 30, 2026, compared to $163.9 million for the quarter ended September 30, 2025. The decrease in our excess cash reserves is primarily due to an increase in loan originations, as average loans receivable increased $41.7 million year-over-year. The yield on average interest-bearing deposits at other financial institutions decreased 63 basis points to 3.77% for the quarter ended September 30, 2026 compared to 4.40% for the same period of 2025, primarily as a result of the Federal Open Market Committee's decision to decrease its targeted federal funds rate 75 basis points during the course of 2025.
Total average interest-bearing liabilities was $1.56 billion and $1.60 billion for the three months ended September 30, 2026 and 2025, respectively, a decrease of $40.0 million. Our cost of interest-bearing liabilities decreased 37 basis points to 3.04% for the three months ended September 30, 2026, compared to 3.41% for the same period of 2025. Interest expense decreased $1.8 million to $12.0 million for the three months ended September 30, 2026, compared to $13.8 million for the three months ended September 30, 2025. The decrease in the average rate was the primary driver of the decrease in interest expense for the third quarter of 2026 compared to the same period of 2025, a result of the aforementioned decrease in the targeted federal funds rate during 2025.
Total average interest-bearing deposits increased $3.9 million to $1.54 billion for the three months ended September 30, 2026 compared to the three months ended September 30, 2025. Interest expense on deposits decreased $1.6 million to $11.5 million for the three months ended September 30, 2026 compared to $13.1 million for the three months ended September 30, 2025, primarily as a result of the decrease in interest rates on interest-bearing deposits. The cost of interest-bearing deposits decreased 42 basis points to 2.96% for the three months ended September 30, 2026 compared to 3.38% for the same period of 2025. Average noninterest-bearing deposits increased $30.0 million to $394.6 million for the three months ended September 30, 2026, compared to $364.6 million for the three months ended September 30, 2025. Average wholesale deposits decreased $39.8 million to $195.1 million for the three months ended September 30, 2026 compared to $234.9 million for the three months ended September 30, 2025. Cost of deposits (which includes noninterest-bearing deposits) was 2.36% for the three months ended September 30, 2026 compared to 2.73% for the same three month period of 2025, a decrease of 37 basis points, or 14%.
Average other borrowed funds decreased $49.6 million to $369 thousand for the quarter ended September 30, 2026, compared to $50.0 million for the quarter ended September 30, 2025. Interest expense on other borrowed funds decreased $475 thousand to $3 thousand for the quarter ended September 30, 2026, compared to $478 thousand for the same period of 2025. The cost of other borrowed funds decreased 55 basis points to 3.23% for the three months ended September 30, 2026 compared to 3.78% for the three months ended September 30, 2025.
Average long-term debt, net of issuance costs, includes our unsecured senior notes since their issuance on February 11, 2026 and our subordinated debt issued in October 2020 until it was redeemed on January 15, 2026. For the third quarter of 2025, our subordinated debt paid a fixed rate of 4.77%. The unsecured senior notes pay a fixed rate of 6.75%, an increase of 198 basis points when compared to the rate on the subordinated debt from the year ago quarter. The change in both our average volume, which increased $5.8 million for the quarter ended September 30, 2026 compared to the same period of 2025, and the 260 basis point increase in average rate for our long-term debt during that same period, is primarily a result of the abovementioned change in debt instruments during 2026. Interest expense on long-term debt, net of issuance costs, increased $237 thousand to $482 thousand for the quarter ended September 30, 2026 compared to $245 thousand for the quarter ended September 30, 2025.
The following table presents average balance information, interest income, interest expense and the corresponding average yields earned and rates paid for the nine months ended September 30, 2026 and 2025. Average balance presented are based on daily average for each of the periods presented.
Average Balance Sheets and Interest Rates on Interest-Earning Assets and Interest-Bearing Liabilities
For the Nine Months Ended September 30, 2026 and 2025
(Dollars in thousands)
2026 2025
Average
Balance 		Interest
Income/
Expense 		Average
Yield/
Rate 		Average
Balance 		Interest
Income/
Expense 		Average
Yield/
Rate
Assets
Interest-earning assets:
Loans receivable, net of fees
Commercial real estate $ 998,758 $ 41,377 5.52 % $ 996,337 $ 37,935 5.08 %
Commercial and industrial 435,191 25,235 7.73 % 334,858 20,122 8.01 %
Commercial construction 144,031 7,134 6.60 % 171,434 9,454 7.35 %
Consumer real estate 285,550 10,167 4.75 % 310,921 11,103 4.76 %
Warehouse facilities 41,731 1,797 5.74 % 32,248 1,533 6.34 %
Consumer nonresidential 2,795 155 7.39 % 6,956 419 8.02 %
Total loans(1)
1,908,056 85,865 6.00 % 1,852,754 80,566 5.80 %
Investment securities(2)
179,924 2,820 2.09 % 196,223 3,103 2.11 %
Interest-bearing deposits at other financial institutions 94,081 2,628 3.74 % 125,184 4,144 4.43 %
Total interest-earning assets and interest income $ 2,182,061 $ 91,313 5.58 % $ 2,174,161 $ 87,813 5.39 %
Noninterest-earning assets:
Cash and due from banks 10,555 11,269
Premises and equipment, net 658 801
Accrued interest and other assets 56,504 55,617
Allowance for credit losses (19,063) (18,195)
Total assets $ 2,230,715 $ 2,223,653
Liabilities and Stockholders' Equity
Interest - bearing liabilities:
Interest - bearing deposits:
Interest checking $ 677,077 $ 12,982 2.56 % $ 655,651 $ 15,342 3.13 %
Savings and money markets 341,052 7,510 2.94 % 358,003 8,907 3.33 %
Time deposits 307,005 8,524 3.71 % 270,565 8,286 4.09 %
Wholesale deposits 210,932 5,539 3.51 % 244,084 6,286 3.44 %
Total interest - bearing deposits 1,536,066 34,555 3.01 % 1,528,303 38,821 3.38 %
Other borrowed funds 8,393 247 3.93 % 50,007 1,412 3.78 %
Long-term debt, net of issuance costs 21,755 1,523 9.36 % 18,714 736 5.26 %
Total interest-bearing liabilities and interest expense $ 1,566,214 $ 36,325 3.10 % $ 1,597,024 $ 40,969 3.41 %
Noninterest-bearing liabilities:
Demand deposits 376,587 360,318
Other liabilities 24,018 23,429
Common stockholders' equity 263,896 242,882
Total liabilities and stockholders' equity $ 2,230,715 $ 2,223,653
Net interest income and net interest margin $ 54,988 3.37 % $ 46,844 2.88 %
________________________
(1)Nonaccrual loans are included in average balances and do not have a material effect on the average yield. Interest income on non-accruing loans was not material for the periods presented. Net loan fees and late charges included in interest income on loans totaled $2.6 million and $1.5 million for the nine months ended September 30, 2026 and 2025, respectively.
(2)The average balances for investment securities includes restricted stock.
The following table shows the effect of variations in the volume and mix of our assets and liabilities, as well as the changes in interest rates, had on the interest earned from our interest-earning assets and interest incurred on our interest-bearing liabilities for the nine months ended September 30, 2026 as compared to the same period of 2025.
Rate and Volume Analysis
For the Nine Months Ended September 30, 2026 and 2025
(Dollars in thousands)
2026 Compared to 2025
Average
Volume
Average
Rate 		Increase
(Decrease)
Interest income:
Loans(1):
Commercial real estate $ 92 $ 3,350 $ 3,442
Commercial and industrial 6,028 (915) 5,113
Commercial construction (1,511) (809) (2,320)
Consumer real estate (906) (30) (936)
Warehouse facilities 451 (187) 264
Consumer nonresidential (250) (14) (264)
Total loans(1)
$ 3,904 $ 1,395 $ 5,299
Investment securities(2)
$ (258) $ (25) $ (283)
Deposits at other financial institutions and federal funds sold (1,033) (483) (1,516)
Total interest income $ 2,613 $ 887 $ 3,500
Interest expense:
Interest - bearing deposits:
Interest checking $ 502 $ (2,862) (2,360)
Savings and money markets (422) (975) (1,397)
Time deposits 1,115 (877) 238
Wholesale deposits (853) 106 (747)
Total interest - bearing deposits $ 342 $ (4,608) $ (4,266)
Other borrowed funds (1,177) 12 (1,165)
Long-term debt, net of issuance costs 120 667 787
Total interest expense $ (715) $ (3,929) $ (4,644)
Net interest income $ 3,328 $ 4,816 $ 8,144
_________________________
(1)Nonaccrual loans are included in average balances and do not have a material effect on the average yield. Interest income on non-accruing loans was not material for the periods presented.
(2)The average balances for investment securities includes restricted stock.
Net interest income for the nine months ended September 30, 2026 and 2025, was $55.0 million and $46.8 million, respectively, an increase of $8.1 million, or 17%. The increase in net interest income was primarily due to an increase in interest income of $3.5 million and a decrease in interest expense of $4.6 million for the nine months ended September 30, 2026 compared to the same period of 2025.
Our net interest margin for the nine months ended September 30, 2026 and 2025 was 3.37% and 2.88%, respectively, an increase of 49 basis points, or 17%. The increase in our net interest margin was a result of continued repricing of our loan renewals and newly originated loans to current market interest rates over the past year along with the increase in loan fees, primarily related to the prepayment of a commercial real estate loan during the second quarter of 2026. When excluding these loan fees, net interest margin was 3.31% for the nine months ended September 30, 2026, an increase of 43 basis points from the nine months ended September 30, 2025.
Average interest-earning assets increased $7.9 million to $2.18 billion for the nine months ended September 30, 2026 as compared to $2.17 billion for the same period of 2025. The yield on interest-earning assets increased 19 basis points to 5.58% for the nine months ended September 30, 2026, compared to 5.39% for the same period of 2025. Total interest income increased $3.5 million, or 4%, to $91.3 million for the nine months ended September 30, 2026 compared to $87.8 million for the nine months ended September 30, 2025. The increase in average volume was the main driver of the increase to our interest income, contributing $2.6 million of the increase for the nine months ended September 30, 2026, compared to the same nine month period of 2025, along with an increase in the average rate which increased interest income by $887 thousand.
Average loans receivable increased $55.3 million to $1.91 billion for the nine months ended September 30, 2026 compared to $1.85 billion for the nine months ended September 30, 2025. Loan interest income for the nine months ended September 30, 2026 increased $5.3 million compared to the same nine month period of 2025, primarily as a result of the change in our loan mix towards commercial and industrial loans, which earn a higher yield than other portions of our loan portfolio. The yield on average loans increased 20 basis points to 6.00% for the nine months ended September 30, 2026, compared to 5.80% for the nine months ended September 30, 2025.
For the nine months ended September 30, 2026, net loan fees included in interest income increased $1.1 million to $2.6 million compared to $1.5 million for the nine months ended September 30, 2025, primarily due to the aforementioned early prepayment of a commercial real estate loan during the second quarter of 2026. When excluding this early prepayment fee, the yield on loans for the nine months ended September 30, 2026 was 5.95%, an increase of 15 basis points when compared to the nine months ended September 30, 2025. Average balances of nonperforming loans, which consist of nonaccrual loans, are included in the net interest margin calculation and did not have a material impact on our net interest margin in 2026 and 2025.
Average interest-bearing deposits at other financial institutions, consisting primarily of excess cash reserves, decreased $31.1 million to $94.1 million for the nine months ended September 30, 2026, compared to $125.2 million for the same nine month period of 2025. The decrease in our cash reserves is primarily a result of the $55.3 million increase in average loans receivable year-over-year. The yield on average interest-bearing deposits at other financial institutions decreased 69 basis points to 3.74% for the nine months ended September 30, 2026 compared to 4.43% for the same period of 2025, primarily as a result of the decreases in the targeted federal funds rate during 2025. Interest income earned on average deposits at other financial institutions decreased $1.5 million to $2.6 million for the nine months ended September 30, 2026 compared to $4.1 million for the same period of 2025.
Average interest-bearing liabilities decreased $30.8 million to $1.57 billion for the nine months ended September 30, 2026 compared to $1.60 billion for the same period of 2025. Our cost of interest-bearing liabilities decreased 31 basis points to 3.10% for the nine months ended September 30, 2026, compared to 3.41% for the same period of 2025. Interest expense decreased $4.6 million to $36.3 million for the nine months ended September 30, 2026, compared to $41.0 million for the nine months ended September 30, 2025. The decrease in interest expense was primarily a result of the decrease in short-term interest rates, decreasing interest expense $3.9 million for the nine month period of 2026 as compared to the same period of 2025.
Average interest-bearing deposits increased $7.8 million to $1.54 billion for the nine months ended September 30, 2026 compared to $1.53 billion for the nine months ended September 30, 2025. Interest expense on average interest-bearing deposits decreased $4.3 million to $34.6 million for the nine months ended September 30, 2026, compared to $38.8 million for the nine months ended September 30, 2025, primarily as a result of the decrease in short-term interest rates year-over-year. The cost of interest-bearing deposits decreased 37 basis points to 3.01% for the nine months ended September 30, 2026, compared to 3.38% for the same period of 2025, which was primarily attributable to the repricing of our interest-bearing deposits to lower interest rates. Cost of deposits (which includes noninterest-bearing deposits) was
2.42% for the nine months ended September 30, 2026 compared to 2.75% for the same nine month period of 2025, a decrease of 33 basis points. Average noninterest-bearing deposits increased $16.3 million to $376.6 million for the nine months ended September 30, 2026 compared to $360.3 million for the same period of 2025.
Average other borrowed funds decreased $41.6 million to $8.4 million for the nine months ended September 30, 2026, compared to $50.0 million for the nine months ended September 30, 2025. Interest expense on other borrowed funds decreased $1.2 million to $247 thousand for the nine months ended September 30, 2026 compared to $1.4 million for the same period of 2025. The cost of other borrowed funds increased 15 basis points to 3.93% for the nine months ended September 30, 2026 compared to 3.78% for the nine months ended September 30, 2025, as other borrowed funds for the nine months ended September 30, 2026 were comprised of short-term federal funds purchased versus longer-term Federal Home Loan Bank of Atlanta ("FHLB") advances that were part of a cash flow hedge during 2025.
As mentioned earlier in this discussion, average long-term debt, net of issuance costs, included our subordinated debt issued in October 2020 until it was redeemed on January 15, 2026 and our unsecured senior notes since their issuance on February 11, 2026. For the nine months ended September 30, 2025, our subordinated debt paid a fixed rate of 4.77%. The unsecured senior notes pay a fixed rate of 6.75%. Upon redemption of our subordinated debt on January 15, 2026, we recognized $244 thousand in unamortized issuance costs associated with that debt issuance, which contributed to the increase in interest expense for the nine months ended September 30, 2026. Interest expense on long-term debt, net of issuance costs, increased $787 thousand to $1.5 million for the nine months ended September 30, 2026 compared to $736 thousand for the nine months ended September 30, 2025.
Provision Expense and Allowance for Credit Losses on Loans
Our policy is to maintain the ACL at a level that represents our best estimate of expected losses in the loan portfolio as of the valuation date. Both the amount of the provision and the level of the allowance for credit losses are impacted by many factors, including general and industry-specific economic conditions, actual and expected credit losses, historical trends and specific conditions of individual borrowers.
We recorded a provision for credit losses (including provisions for unfunded commitments) of $186 thousand and $596 thousand for the three and nine months ended September 30, 2026, respectively, compared to provision for credit losses of $375 thousand and $680 thousand for the three and nine months ended September 30, 2025, respectively. The allowance for credit losses was $18.8 million and $18.9 million at September 30, 2026 and December 31, 2025, respectively. Our allowance for credit losses as a percent of total loans, net of deferred fees and costs, was 0.98% and 0.97% for September 30, 2026 and December 31, 2025, respectively.
We lend to well-established and relationship-driven borrowers, which has contributed to our track record of low historical credit losses. We continue to maintain our disciplined credit guidelines during the current rate environment. We proactively monitor the impact of changes in economic conditions, such as inflation and recessionary conditions, changes in market interest rates, and changes in government policy. Nonperforming loans, net of fees, at September 30, 2026 totaled $11.0 million, or 0.48% of total assets, compared to $10.7 million, or 0.47% of total assets at December 31, 2025. We had no other real estate owned at September 30, 2026 and December 31, 2025.
We recorded net charge-offs of $498 thousand for each of the three months ended September 30, 2026 and 2025. For the nine months ended September 30, 2026 and 2025, we recorded net charge-offs of $499 thousand and $876 thousand, respectively.
See "Asset Quality" below for additional information on the credit quality of the loan portfolio.
Noninterest Income
The following table provides detail for noninterest income for the three and nine months ended September 30, 2026 and 2025.
Noninterest Income
For the Three and Nine Months Ended September 30, 2026 and 2025
(Dollars in thousands)
For the Three Months Ended September 30, For the Nine Months Ended September 30,
2026 2025 Change from Prior Year 2026 2025 Change from Prior Year
Amount Percent Amount Percent
Service charges on deposit accounts $ 475 $ 321 $ 154 48 % $ 1,264 $ 873 $ 391 45 %
Fees on loans 51 35 16 46 % 238 145 93 64 %
Gain on termination of derivative instruments - - - - % - 154 (154) (100) %
BOLI income 75 73 2 3 % 222 215 7 3 %
(Loss) Income from minority membership interest (403) 508 (911) (179) % 437 1,000 (563) (56) %
Gain on sale of minority interest - - - - % 847 - 847 100 %
Other fee income 105 96 9 9 % 330 324 6 2 %
Total noninterest income $ 303 $ 1,033 $ (730) (71) % $ 3,338 $ 2,711 $ 627 23 %
Noninterest income includes service charges on deposits and loans, loan swap fee income, income from our membership interest in ACM and other investments, income from our bank-owned life insurance ("BOLI") policies, and other fee income, and continues to supplement our operating results.
For the three months ended September 30, 2026 and 2025, we recorded noninterest income of $303 thousand and $1.0 million, respectively.
Service charges on deposit accounts totaled $475 thousand for the third quarter of 2026, an increase of $154 thousand, or 48%, compared to $321 thousand for the year ago quarter. The increase in service charges for the most recent quarter is a result of an increase in the Bank's fees during 2026 in addition to an increase in transactional activity from new and existing customers. Income from the minority interest in ACM for the quarter ended September 30, 2026 was recorded as a loss of $403 thousand, a decrease of $911 thousand compared to income of $508 thousand for the year ago quarter ended September 30, 2025, primarily as a result of the recent increase in mortgage interest rates.
For the nine months ended September 30, 2026 and 2025, we recorded noninterest income of $3.3 million and $2.7 million, respectively, an increase of $627 thousand, or 23%. The nine month period of 2026 includes a one-time pre-tax gain of $847 thousand for the completed sale of our interest in Bearing Insurance Group, LLC to an unaffiliated third party during the second quarter of 2026. Fee income from loans was $238 thousand for the nine months ended September 30, 2026, compared to $145 thousand for the same period of 2025. Service charges on deposit accounts totaled $1.3 million for the nine months ended September 30, 2026, compared to $873 thousand for the nine months ended September 30, 2025, an increase of $391 thousand, or 45%. Income from the minority interest in ACM was $437 thousand for the nine months ended September 30, 2026, compared to $1.0 million for the same period of 2025. During the nine months ended September 30, 2025, we unwound $15 million of our pay-fixed/receive floating interest rate swaps and the funding associated with that hedge, resulting in a gain of $154 thousand. No such gain was recorded during 2026.
Noninterest Expense
The following table reflects the components of noninterest expense for the three and nine months ended September 30, 2026 and 2025.
Noninterest Expense
For the Three and Nine Months Ended September 30, 2026 and 2025
(Dollars in thousands)
For the Three Months Ended September 30, For the Nine Months Ended September 30,
2026 2025 Change from Prior Year 2026 2025 Change from Prior Year
Amount Percent Amount Percent
Salaries and employee benefits $ 5,534 $ 5,115 $ 419 8 % $ 16,903 $ 14,933 $ 1,970 13 %
Occupancy expense 524 520 4 1 % 1,572 1,588 (16) (1) %
Internet banking and software expense 925 890 35 4 % 2,693 2,580 113 4 %
Data processing and network administration 561 559 2 - % 1,875 1,728 147 9 %
State franchise taxes 577 583 (6) (1) % 1,723 1,761 (38) (2) %
Audit, legal and consulting fees 241 294 (53) (18) % 844 864 (20) (2) %
Loan related expenses 270 280 (10) (4) % 771 763 8 1 %
FDIC insurance 240 238 2 1 % 760 858 (98) (11) %
Marketing, business development and advertising 240 211 29 14 % 698 628 70 11 %
Directors' fees 166 150 16 11 % 496 450 46 10 %
Postage, courier and telephone 11 44 (33) (75) % 111 141 (30) (21) %
Core deposit intangible amortization 20 30 (10) (33) % 67 97 (30) (31) %
Other operating expenses 677 558 119 21 % 1,935 1,641 294 18 %
Total noninterest expense $ 9,986 $ 9,472 $ 514 5 % $ 30,448 $ 28,032 $ 2,416 9 %
Noninterest expense includes, among other things, salaries and benefits, occupancy and equipment costs, professional fees, data processing, insurance and miscellaneous expenses. Noninterest expense was $10.0 million and $9.5 million for the three months ended September 30, 2026 and 2025, respectively, an increase of $514 thousand, or 5%.
Compared to the year ago quarter, salaries and benefits expense increased $419 thousand, or 8%, for the three months ended September 30, 2026. The increase in salaries and benefits expense when compared to the year ago quarter was primarily a result of the addition of lending and business development personnel, the filling of vacant positions, along with an increase in other incentive accruals and equity compensation vesting during the third quarter of 2026. Full-time equivalent employees have increased from 118 at September 30, 2025, and 122 at December 31, 2025, to 134 at September 30, 2026. Internet banking and software expense increased $35 thousand to $925 thousand for the third quarter of 2026 compared to $890 thousand for the year ago quarter ended September 30, 2025. We continue to remain focused on operating efficiencies and diligently identifying opportunities to reduce expenses.
Noninterest expense was $30.4 million and $28.0 million for the nine months ended September 30, 2026 and 2025, respectively, an increase of $2.4 million, or 9%. For the nine months ended September 30, 2026 and 2025, salaries and benefits expense was $16.9 million and $14.9 million, respectively, an increase of $2.0 million, or 13%, which was primarily related to the aforementioned increase in personnel along with an increase in incentive accruals and equity compensation vesting during 2026. Internet banking and software expense increased $113 thousand to $2.7 million for the nine months ended September 30, 2026, compared to $2.6 million for the same period of 2025, a result of the enhanced customer service solutions we have implemented over the past year. Data processing and network administration expense increased $147 thousand to $1.9 million for the nine months ended September 30, 2026 when compared to the same period of 2025, primarily as a result of an increase in customer banking transactions.
Income Taxes
We recorded a provision for income tax expense of $1.9 million and $1.6 million for the three months ended September 30, 2026 and 2025, respectively. The effective tax rate for the three months ended September 30, 2026 and 2025 was 22.5% and 22.7%, respectively.
For the nine months ended September 30, 2026 and 2025, the provision for income taxes was $6.0 million and $4.4 million, respectively. The effective tax rate for the nine months ended September 30, 2026 and 2025 was 22.1% and 21.3%, respectively.
Discussion and Analysis of Financial Condition
Overview
At September 30, 2026, total assets were $2.31 billion, an increase of $20.9 million, from $2.29 billion at December 31, 2025. Total loans, net of fees, decreased $27.3 million, or 1%, to $1.91 billion at September 30, 2026 from $1.94 billion at December 31, 2025. Investment securities were $138.9 million at September 30, 2026, a decrease of $14.5 million, from $153.4 million at December 31, 2025. Total deposits were $2.00 billion at each of September 30, 2026, and December 31, 2025. From time to time, we may utilize funding sources such as federal funds purchased and FHLB advances as an additional funding source for the Bank. We had no federal funds purchased at September 30, 2026 or December 31, 2025. The Bank had no FHLB advances outstanding at September 30, 2026 or December 31, 2025. Long-term debt, net of issuance costs, totaled $24.5 million and $18.8 million at September 30, 2026 and December 31, 2025, respectively.
Loans Receivable, Net
Loans receivable, net of deferred fees, were $1.91 billion at September 30, 2026 and $1.94 billion at December 31, 2025, a decrease of $27.3 million, or 1%.
Commercial real estate loans totaled $935.3 million and $1.03 billion at September 30, 2026 and December 31, 2025, respectively, and were approximately 49% and 53% of the total loans receivable at such dates, respectively. Owner-occupied commercial real estate loans were $216.9 million at September 30, 2026 compared to $266.3 million at December 31, 2025. Nonowner-occupied commercial real estate loans were $718.4 million at September 30, 2026 compared to $766.3 million at December 31, 2025. Commercial construction loans totaled $143.8 million at September 30, 2026, compared to $153.0 million at December 31, 2025 and comprised 8% of total loans receivable at such dates. Our regulatory commercial real estate concentration (which includes nonowner-occupied real estate and construction loans) was 275% of our total risk-based capital at September 30, 2026. Our commercial real estate portfolio, including construction loans, is diversified by asset type and geographic concentration. We manage this portion of our portfolio in a disciplined manner. We have comprehensive policies to monitor, measure, and mitigate our loan concentrations within this portfolio segment, including rigorous credit approval, monitoring and administrative practices. Additional information on the stratification of these portfolio segments can be found below under "Asset Quality".
Commercial and industrial loans increased $108.8 million to $562.2 million at September 30, 2026, an increase of 24%, from $453.4 million at December 31, 2025. The increase in commercial and industrial loans was a result of a continued increase in loan originations during 2026 in addition to an increase in the warehouse lending facility which totaled $71.0 million at September 30, 2026 compared to $30.0 million at December 31, 2025. Consumer real estate loans decreased $25.0 million to $272.0 million at September 30, 2026, from $297.0 million at December 31, 2025. The decrease in residential loans was primarily a result of principal repayments during 2026.
The following table presents the composition of our loans receivable portfolio at September 30, 2026 and December 31, 2025.
Loans Receivable
At September 30, 2026 and December 31, 2025
(Dollars in thousands)
September 30, 2026 December 31, 2025
Commercial real estate $ 935,251 $ 1,032,649
Commercial and industrial 562,209 453,393
Commercial construction 143,771 153,006
Consumer real estate 272,014 297,018
Consumer nonresidential 693 5,217
Total loans, net of fees 1,913,938 1,941,283
Less:
Allowance for credit losses on loans 18,796 18,886
Loans receivable, net $ 1,895,142 $ 1,922,397
Asset Quality
Nonperforming loans, defined as nonaccrual loans and loans contractually past due 90 days or more as to principal or interest and still accruing, were $11.0 million and $10.7 million at September 30, 2026 and December 31, 2025, respectively, an increase of $280 thousand. The increase in nonperforming loans at September 30, 2026 is due to one consumer real estate loan being placed on nonaccrual during 2026. Loans that we have classified as nonperforming are a result of customer specific deterioration, mostly financial in nature, that are not a result of economic, industry, or environmental causes that we might see as a pattern for possible future losses within our loan portfolio. We individually evaluate each of our criticized loans, generally through the performance of a collateral analysis to determine the amount of allowance required. As a result of the analysis completed, we had a reserve for individually assessed loans totaling $1.3 million and $1.1 million at September 30, 2026 and December 31, 2025, respectively. Our ratio of nonperforming loans to total assets was 0.48% and 0.47% at September 30, 2026 and December 31, 2025, respectively. We had no other real estate owned at September 30, 2026 and December 31, 2025. Loan modifications for borrowers who were experiencing financial difficulty for the nine months ended September 30, 2026 totaled $8.3 million compared to none for the comparable nine month period of 2025.
We categorize loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, collateral adequacy, credit documentation, and current economic trends, among other factors. We analyze loans individually by classifying the loans as to credit risk. This analysis includes larger, non-homogeneous loans such as commercial real estate and commercial and industrial loans, and is performed on an ongoing basis as new information is obtained. At September 30, 2026, we had $14.7 million in loans identified as special mention, a decrease of $33.0 million from December 31, 2025. Special mention rated loans have a potential weakness that deserves our close attention; however, the borrower continues to pay in accordance with their contractual terms, unless modified and disclosed. Loans rated as special mention are generally considered to be well-secured, and are not individually evaluated. The decrease from December 31, 2025 was primarily due to one loan totaling $31.3 million being upgraded to pass during 2026. Three of our special mention loans are commercial real estate loans, with collateral in retail, mixed-use and multifamily, and are located in Washington, D.C. These loans are well-secured with updated valuations and are not individually impaired. We believe there will be satisfactory resolution to each of these loans.
At September 30, 2026, we had $10.8 million in loans identified as substandard, an increase of $621 thousand from December 31, 2025. The increase in substandard loans was a result of the consumer real estate loan placed on nonaccrual during the second quarter of 2026. Substandard rated loans are inadequately protected by the current net worth
and paying capacity of the obligor or of the collateral pledged, if any. For each of these substandard loans, an individual analysis is completed. At September 30, 2026, reserves for individually assessed loans totaled $1.3 million and were allocated within the allowance for credit losses to supplement any shortfall of collateral.
For each of the three months ended September 30, 2026 and 2025, we recorded net charge-offs of $498 thousand. We recorded net charge-offs of $499 thousand and $875 thousand for the nine months ended September 30, 2026 and 2025, respectively. The following table provides additional information on our asset quality for the dates presented.
Nonperforming Loans and Assets
At September 30, 2026 and December 31, 2025
(Dollars in thousands)
September 30, 2026 December 31, 2025
Nonperforming assets:
Nonaccrual loans, gross $ 10,789 $ 10,168
Loans contractually past-due 90 days or more and still accruing 204 545
Total nonperforming loans (NPLs) $ 10,993 $ 10,713
Total nonperforming assets (NPAs) $ 10,993 $ 10,713
NPLs/Total Assets 0.48 % 0.47 %
NPAs/Total Assets 0.48 % 0.47 %
Allowance for credit losses on loans/NPLs 170.97 % 172.86 %
The concentration of commercial real estate loans to total risk-based capital was 275% and construction loans to total risk-based capital was 45%, at September 30, 2026.
We closely and proactively monitor the effects of recent market activity. As mentioned above, our commercial real estate loan portfolio totaled $935.3 million, or 49% of total loans, at September 30, 2026 and $1.03 billion, or 53% of total loans, at December 31, 2025. The commercial real estate portfolio, including construction loans, is diversified by asset type and geographic concentration. We manage this portion of the portfolio in a disciplined manner, and have comprehensive policies to monitor, measure, and mitigate our loan concentrations within this portfolio segment, including rigorous credit approval, monitoring, and administrative practices. Included in commercial real estate are loans secured by office properties totaling $126.9 million, or 7% of total loans, which are primarily located in the Virginia and Maryland suburbs of our market area, with only $959 thousand, or 0.05% of total loans, located in Washington, D.C. Loans secured by retail properties totaled $206.8 million, or 11% of total loans, at September 30, 2026, with $8.5 million, or 0.45% of total loans, located in Washington, D.C. Loans secured by multi-family commercial properties totaled $176.7 million, or 9% of total loans, at September 30, 2026, with $76.2 million, or 4% of total loans, located in Washington, D.C. (a decrease from $98.7 million at December 31, 2025).
The following table provides further stratification of these and additional classes of commercial real estate and construction loans at September 30, 2026 (dollars in thousands).
Owner Occupied CRE (1)
Non-Owner Occupied CRE (1)
Construction Total CRE
Asset Class
Average Loan-to-Value (2)
Number of Total Loans
Bank Owned Principal (3)
Average Loan-to-Value (2)
Number of Total Loans
Bank Owned Principal (3)
Top 3 Geographic Concentration Number of Total Loans
Bank Owned Principal (3)
Total Bank Owned Principal (3)
% of Total Loans
Office, Class A 66% 6 $ 7,627 40% 2 $ 14,906 Counties of Fairfax and Loudoun, VA and Montgomery County, MD - $ - $ 22,533
Office, Class B 54% 26 11,015 44% 20 36,354 - - 47,369
Office, Class C 41% 9 4,928 27% 6 7,286 3 1,779 13,993
Office, Medical 36% 6 893 56% 5 27,542 1 14,591 43,026
Subtotal 47 $ 24,463 33 $ 86,088 4 $ 16,370 $ 126,921 7%
Retail- Neighborhood/Community Shop - $ - 41% 30 $ 84,793 Counties of Prince George's and Baltimore, MD and Fairfax County, VA - $ - $ 84,793
Retail- Restaurant 48% 3 3,713 33% 12 19,603 - - 23,316
Retail- Single Tenant 55% 6 3,739 40% 16 27,490 - - 31,229
Retail- Anchored,Other - - 50% 12 31,872 - - 31,872
Retail- Grocery-anchored - - 40% 6 35,566 1 55 35,621
Subtotal 9 $ 7,452 76 $ 199,324 1 $ 55 $ 206,831 11%
Multi-family, Class A - $ - 29% 2 $ 1,414 Washington, D.C., Baltimore City, MD and Richmond City, VA 2 $ 33,110 $ 34,524
Multi-family, Class B - - 59% 17 61,596 - - 61,596
Multi-family, Class C - - 51% 56 70,943 1 966 71,909
Multi-Family-Affordable Housing - - 54% 2 8,658 - - 8,658
Subtotal - $ - 77 $ 142,611 3 $ 34,076 $ 176,687 9%
Industrial 45% 36 $ 104,942 53% 24 $ 104,695 Counties of Prince William and Fairfax, VA and Howard County, MD - $ - $ 209,637
Warehouse 42% 9 7,174 20% 6 5,131 - - 12,305
Flex 44% 13 10,265 49% 13 53,991 1 - 64,256
Subtotal 58 $ 122,381 43 $ 163,817 1 $ - $ 286,198 15%
Hotels $ - 38% 6 $ 27,639 1 $ 7,501 $ 35,140 2%
Mixed Use 42% 8 6,418 57% 24 41,978 - - 48,396 3%
Land -% - -% - - 16 28,332 28,332 1%
1- 4 family construction - - 43 36,867 36,867 2%
Other (including net deferred fees)
56,137 56,943 20,570 133,650 7%
Total commercial real estate and construction loans, net of fees, at September 30, 2026 $ 216,851 $ 718,400 $ 143,771 $ 1,079,022 57%
Total commercial real estate and construction loans, net of fees, at December 31, 2025 $ 266,317 $ 766,332 $ 153,006 $ 1,185,655 61%
_________________________
(1).Minimum debt service coverage policy is 1.30x for owner occupied and 1.25x for non-owner occupied at origination.
(2).Loan-to-value is based on collateral valuation at origination date against current bank owned principal.
(3).Bank-owned principal is not adjusted for deferred fees and costs.
The loans shown in the above table exhibit strong credit quality, with one nonaccrual loan at September 30, 2026 totaling $10.0 million, which has a specific reserve of $1.3 million. During our assessment of the allowance for credit losses on loans, we addressed the credit risks associated with these portfolio segments and believe that as a result of our conservative underwriting discipline at loan origination and our ongoing loan monitoring procedures, we have appropriately reserved for possible credit concerns in the event of a downturn in economic activity.
Unexpected changes in economic growth could adversely affect our loan portfolio, including causing increases in delinquencies and default rates, which would adversely impact our charge-offs, allowance for credit losses, and provision for credit losses. Deterioration in real estate values, employment data and household incomes may also result in higher credit losses for us. Also, in the ordinary course of business, we may be subject to a concentration of credit risk to a particular industry, counterparty, borrower or issuer. A deterioration in the financial condition or prospects of a particular industry or a failure or downgrade of, or default by, any particular entity or group of entities could negatively impact our business, perhaps materially, and the systems by which we set limits and monitor the level of our credit exposure to individual entities and industries, may not function as we have anticipated.
See "Critical Accounting Estimates" above for more information on our allowance for credit losses methodology.
The following tables present additional information pertaining to the activity in and allocation of the allowance for credit losses on loans by loan type and the percentage of the loan type to the total loan portfolio for the periods and at the dates presented. The allocation of the allowance for credit losses on loans to a category of loans is not necessarily indicative of future losses or charge-offs, and does not restrict the use of the allowance to any specific category of loans.
Allowance for Credit Losses on Loans
For the Three and Nine Months Ended September 30, 2026 and 2025
(Dollars in thousands)
For the Three Months Ended September 30,
2026 2025
Net (charge-offs) recoveries Percentage of net charge-offs to average loans outstanding during the year Net (charge-offs) recoveries Percentage of net charge-offs to average loans outstanding during the year
Commercial real estate $ - - % $ - - %
Commercial and industrial (499) (0.11) % (500) (0.11) %
Consumer real estate - - % - - %
Consumer nonresidential 1 - % 2 - %
Total $ (498) (0.11) % $ (498) (0.11) %
Average loans outstanding during the period $ 1,871,312 $ 1,829,587
For the Nine Months Ended September 30,
2026 2025
Net (charge-offs) recoveries Percentage of net charge-offs to average loans outstanding during the year Net (charge-offs) recoveries Percentage of net charge-offs to average loans outstanding during the year
Commercial real estate $ - - % $ - - %
Commercial and industrial (499) (0.03) % (873) (0.03) %
Consumer real estate - - % - - %
Consumer nonresidential - - % (3) - %
Total $ (499) (0.03) % $ (876) (0.03) %
Average loans outstanding during the period $ 1,908,056 $ 1,852,754
September 30, December 31,
2026 2025
Allowance for credit losses on loans receivable, net of fees 0.98 % 0.97 %
Allocation of the Allowance for Credit Losses on Loans
At September 30, 2026 and December 31, 2025
(Dollars in thousands)
September 30, 2026 December 31, 2025
Allocation
% of Total*
Allocation
% of Total*
Commercial real estate $ 8,659 46.06 % $ 9,236 48.91 %
Commercial and industrial 5,569 29.63 % 4,523 23.95 %
Commercial construction 1,628 8.66 % 1,940 10.27 %
Consumer real estate 2,835 15.09 % 3,054 16.17 %
Consumer nonresidential 105 0.55 % 133 0.70 %
Total allowance for credit losses $ 18,796 100.00 % $ 18,886 100.00 %
___________________
*Percentage of loan type to the total loan portfolio.
Investment Securities
Our investment securities portfolio is used as a source of income and liquidity. The investment portfolio consists of investment securities available-for-sale and investment securities held-to-maturity. Investment securities available-for-sale are those securities that we intend to hold for an indefinite period of time, but not necessarily until maturity. These securities are carried at fair value and may be sold as part of an asset/liability strategy, liquidity management, or regulatory capital management. Investment securities held-to-maturity at each of September 30, 2026 and December 31, 2025 totaled $265 thousand and are those securities that we have the intent and ability to hold to maturity and are carried at amortized cost. The fair value of our investment securities available-for-sale was $138.6 million at September 30, 2026, a decrease of $14.5 million, or 9.5%, from $153.2 million at December 31, 2025, primarily due to principal repayments of $11.0 million, offset by purchases of $1.0 million, and a decrease in the market value of the investment securities portfolio totaling $4.5 million at September 30, 2026.
At September 30, 2026 and December 31, 2025, the majority of the investment securities portfolio consisted of securities rated AAA by a leading rating agency. Investment securities which carry a AAA rating are judged to be of the best quality and carry the smallest degree of investment risk. All of our mortgage-backed securities are guaranteed by either the Federal National Mortgage Association, the Federal Home Loan Mortgage Corporation, or the Government National Mortgage Association. The effective duration of the investment securities portfolio is just less than 5 years, which is within the industry average. Investment securities that were pledged to secure public deposits totaled $17.1 million and $19.4 million at September 30, 2026 and December 31, 2025, respectively. There were no investment securities that were pledged to secure Federal Reserve Bank of Richmond ("FRB") borrowings at September 30, 2026 and December 31, 2025.
In accordance with ASC 326, we complete periodic assessments on at least a quarterly basis to determine if credit deterioration exists within our investment securities portfolio and if an allowance for credit losses would be required as of a valuation date. As a result of the assessment performed as of September 30, 2026, the investment securities with unrealized losses are a result of pricing changes due to recent rising interest rate conditions in the current market environment and not as a result of credit deterioration. Contractual cash flows for agency-backed portfolios are guaranteed and funded by the U.S. government. Municipal securities have third party protective elements and there are no negative indications that the contractual cash flows will not be received when due. We do not intend to sell nor do we believe we will be required to sell any of our investment securities portfolio prior to the recovery of the amortized cost as of the valuation date. As such, no allowance for credit losses was recognized for our investment securities portfolio at September 30, 2026.
We hold restricted investments in equities of the FRB and FHLB. At each of September 30, 2026 and December 31, 2025, we owned $3.6 million in FRB stock and $1.7 million in FHLB stock.
The following table presents the weighted average yields of our investment portfolio for each of the maturity ranges at September 30, 2026 and December 31, 2025.
Investment Securities by Stated Yields
At September 30, 2026 and December 31, 2025
At September 30, 2026
Within One Year One to Five Years Five to Ten Years Over Ten Years Total
Weighted
Average
Yield 		Weighted
Average
Yield 		Weighted
Average
Yield 		Weighted
Average
Yield 		Weighted
Average
Yield
Held-to-maturity
Securities of state and local municipalities tax exempt 2.32 % - % - % - % 2.32 %
Total held-to-maturity securities 2.32 % - % - % - % 2.32 %
Available-for-sale
Securities of U.S. government and federal agencies - % 1.59 % - % - % 1.59 %
Securities of state and local municipalities - % - % - % 2.92 % 2.92 %
Corporate bonds - % 8.46 % 3.83 % - % 4.91 %
Mortgage-backed securities - % 4.39 % 2.51 % 1.63 % 1.70 %
Total available-for-sale securities - % 3.53 % 3.31 % 1.63 % 2.00 %
Total investment securities 2.32 % 3.53 % 3.31 % 1.63 % 2.00 %
At December 31, 2025
Within One Year One to Five Years Five to Ten Years Over Ten Years Total
Weighted
Average
Yield 		Weighted
Average
Yield 		Weighted
Average
Yield 		Weighted
Average
Yield 		Weighted
Average
Yield
Held-to-maturity
Securities of state and local municipalities tax exempt - % 2.32 % - % - % 2.32 %
Total held-to-maturity securities - % 2.32 % - % - % 2.32 %
Available-for-sale
Securities of U.S. government and federal agencies - % 1.59 % - % - % 1.59 %
Securities of state and local municipalities - % - % - % 2.92 % 2.92 %
Corporate bonds - % 9.12 % 3.60 % - % 4.55 %
Mortgage-backed securities - % 4.41 % 4.52 % 1.61 % 1.70 %
Total available-for-sale securities - % 3.30 % 3.79 % 1.62 % 1.95 %
Total investment securities - % 3.29 % 3.79 % 1.62 % 1.95 %
Deposits and Other Borrowed Funds
The following table sets forth the balances of deposits and the percentage of each category to total deposits for the nine months ended September 30, 2026 and September 30, 2025:
Average Deposit Balances
For the Nine Months Ended September 30, 2026 and 2025
(Dollars in thousands) September 30, 2026 September 30, 2025
Noninterest-bearing demand $ 376,587 19.69 % $ 360,318 19.08 %
Interest-bearing deposits
Interest checking 677,077 35.40 % 655,651 34.72 %
Savings and money markets 341,052 17.83 % 358,003 18.96 %
Certificates of deposit, $100,000 to $249,999 144,233 7.54 % 99,502 5.27 %
Certificates of deposit, $250,000 or more 162,772 8.51 % 171,063 9.06 %
Wholesale deposits 210,932 11.03 % 244,084 12.91 %
Total $ 1,912,653 100.00 % $ 1,888,621 100.00 %
Total deposits were $2.00 billion at September 30, 2026 and at December 31, 2025. Noninterest-bearing deposits were $427.3 million at September 30, 2026, an increase of $64.1 million, or 18%, compared to $363.2 million at December 31, 2025, and represented 21.4% of total deposits at September 30, 2026. Core deposits, which exclude wholesale deposits, increased $53.1 million, to $1.77 billion at September 30, 2026, compared to $1.71 billion at December 31, 2025. Interest checking decreased $91.0 million, or 12%, to $650.1 million at September 30, 2026 compared to $741.0 million at December 31, 2025. Savings and money market deposits increased $6.8 million, or 2%, to $337.9 million at September 30, 2026 compared to $331.0 million at December 31, 2025. Time deposits increased $73.2 million, or 26%, to $350.2 million at September 30, 2026 from $277.0 million at December 31, 2025.
Wholesale deposits were $231.1 million at September 30, 2026 compared to $285.0 million at December 31, 2025, a decrease of $53.8 million, or 19%, primarily due to the increase in our core deposit base. Wholesale deposits are fixed with a weighted average rate of 3.51%. During the second quarter of 2026, the Company unwound $170 million in pay-fixed/receive-floating interest rate swaps that had an average rate of 3.27%. The gain associated with this unwind totaled $1.7 million and will be accreted over the remaining term of the cash flow hedges into interest expense, as the funding associated with these cash flow hedges is still in place.
We are a member of the IntraFi Network ("IntraFi"), which gives us the ability to offer Certificates of Deposit Account Registry Service ("CDARS") and Insured Cash Sweep ("ICS") products to our customers who seek to maximize Federal Deposit Insurance Corporation ("FDIC") insurance protection. When a customer places a large deposit with us for IntraFi, funds are placed into certificates of deposit or other deposit products with other banks in the CDARS and ICS networks in increments of less than $250 thousand so that principal and interest are eligible for FDIC insurance protection. These deposits are part of our core deposit base. At September 30, 2026 and December 31, 2025, we had $210.6 million and $291.9 million in CDARS reciprocal and ICS reciprocal products, respectively.
At September 30, 2026, the estimated amount of total uninsured deposits (including collateralized deposits) was $985.0 million, or 49.2%, of total deposits. The estimate of uninsured deposits generally represents the portion of deposit accounts that exceed the FDIC insurance limit of $250,000 and is calculated based on the same methodologies and assumptions used for purposes of the Bank's regulatory reporting requirements. When excluding collateralized deposits, our estimate of uninsured deposits was $809.6 million, or 40.5% of total deposits, at September 30, 2026.
The following table reports maturities of the estimated amount of uninsured certificates of deposit at September 30, 2026.
Certificates of Deposit Greater than $250,000
At September 30, 2026
(Dollars in thousands)
September 30, 2026
Three months or less $ 23,014
Over three months through six months 51,755
Over six months through twelve months 37,764
Over twelve months 50,862
$ 163,395
We had no other borrowed funds at September 30, 2026 and December 31, 2025. Long-term debt, net of issuance costs, totaled $24.5 million and $18.8 million at September 30, 2026 and December 31, 2025, respectively. At September 30, 2026 and December 31, 2025, we did not have any federal funds purchased.
During the first quarter of 2026, we redeemed in full our $18.8 million in outstanding subordinated debt, which had converted from fixed rate to floating rate paying 3-month SOFR plus 471 basis points, or 8.59%. This funding source was replaced by a private placement of $25 million in senior unsecured notes (the "Senior Notes") which have a fixed rate of 6.75%. The Senior Notes were rated BBB (low) by Morningstar DBRS and have a three-year term maturing on March 1, 2029.
Capital Resources
Capital adequacy is an important measure of financial stability and performance. Our objectives are to maintain a level of capitalization that is sufficient to sustain asset growth and promote depositor and investor confidence.
Regulatory agencies measure capital adequacy utilizing a formula that takes into account the individual risk profile of the financial institution. The minimum capital requirements for the Bank are: (i) Common Equity Tier 1 ("CET1") capital ratio of 4.5%; (ii) a Tier 1 to risk-based assets capital ratio of 6%; (iii) a total risk-based capital ratio of 8%; and (iv) a Tier 1 leverage ratio of 4%. Additionally, a capital conservation buffer requirement of 2.5% of risk-weighted assets is designed to absorb losses during periods of economic stress and is applicable to the Bank's CET1 capital, Tier 1 capital and total capital ratios. Including the conservation buffer, we currently consider the Bank's minimum capital ratios to be as follows: 7.00% for CET1; 8.50% for Tier 1 capital; and 10.50% for total capital. Banking institutions with a ratio of common equity Tier 1 to risk-weighted assets above the minimum but below the minimum plus the conservation buffer will face constraints on dividends, equity repurchases, and compensation.
We believe that the Bank met all capital adequacy requirements to which it was subject at September 30, 2026 and December 31, 2025.
Stockholders' equity at September 30, 2026 was $268.5 million, an increase of $14.9 million, or 6%, compared to $253.6 million at December 31, 2025. Net income recorded for the nine months ended September 30, 2026 less dividends paid to shareholders contributed $17.6 million to the increase in stockholders' equity. During the first nine months of 2026, the Company repurchased 131,517 shares of our common stock at a total cost of $2.1 million. We issued 184,000 shares of common stock pursuant to the exercise of stock options which contributed $1.2 million in additional capital during 2026. Accumulated other comprehensive loss increased $2.6 million during the nine months ended September 30, 2026, primarily as a result of the decrease in the market value of available-for-sale investment securities.
Total stockholders' equity to total assets at September 30, 2026 and December 31, 2025 was 11.6% and 11.1%, respectively. Tangible book value per share (a non-GAAP financial measure which is defined in the table below) at September 30, 2026 and December 31, 2025 was $14.49 and $13.74, respectively.
As noted above, regulatory capital levels for the Bank meet those established for "well capitalized" institutions. While we are currently considered "well capitalized," we may from time to time find it necessary to access the capital markets to meet our growth objectives or capitalize on specific business opportunities.
As the Company is a bank holding company with less than $3 billion in assets, and which does not (i) conduct significant off-balance sheet activities, (ii) engage in significant non-banking activities, or (iii) have a material amount of securities registered under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), it is not currently subject to risk-based capital requirements adopted by the Federal Reserve, pursuant to the small bank holding company policy statement. The Federal Reserve has not historically deemed a bank holding company ineligible for application of the small bank holding company policy statement solely because its common stock is registered under the Exchange Act. There can be no assurance that the Federal Reserve will continue this practice.
The following table shows the minimum capital requirements and the Bank's capital position at September 30, 2026 and December 31, 2025.
Bank Capital Components
At September 30, 2026 and December 31, 2025
(Dollars in thousands)
Actual
Minimum Capital Requirement (1)
Minimum to be Well Capitalized Under Prompt Corrective Action
Amount Ratio Amount
Ratio
Amount Ratio
At September 30, 2026
Total risk-based capital $ 316,033 16.66 % $ 199,129 > 10.50 % $ 189,647 > 10.00 %
Tier 1 risk-based capital 296,579 15.64 % 161,200 > 8.50 % 151,718 > 8.00 %
Common equity tier 1 capital 296,579 15.64 % 132,753 > 7.00 % 123,270 > 6.50 %
Leverage capital ratio 296,579 13.08 % 90,672 > 4.00 % 113,339 > 5.00 %
At December 31, 2025
Total risk-based capital $ 296,612 15.38 % $ 202,553 > 10.50 % $ 192,908 > 10.00 %
Tier 1 risk-based capital 277,254 14.37 % 163,972 > 8.50 % 154,326 > 8.00 %
Common equity tier 1 capital 277,254 14.37 % 135,036 > 7.00 % 125,390 > 6.50 %
Leverage capital ratio 277,254 12.23 % 90,659 > 4.00 % 113,324 > 5.00 %
________________________
(1).Includes capital conservation buffer.
Reconciliation of Book Value (GAAP) to Tangible Book Value (non-GAAP)
At September 30, 2026 and December 31, 2025
(Dollars in thousands, except per share data)
2026 2025
Total stockholders' equity (GAAP) $ 268,501 $ 253,600
Less: goodwill and intangibles, net (7,227) (7,295)
Tangible Common Equity (non-GAAP) $ 261,274 $ 246,305
Book value per common share (GAAP) $ 14.89 $ 14.15
Less: intangible book value per common share (0.40) (0.41)
Tangible book value per common share (non-GAAP) $ 14.49 $ 13.74
Liquidity
Liquidity in the banking industry is defined as the ability to meet the demand for funds of both depositors and borrowers. We must be able to meet these needs by obtaining funding from depositors or other lenders or by converting non-cash items into cash. The objective of our liquidity management program is to ensure that we always have sufficient resources to meet the demands of our depositors and borrowers. Stable core deposits and a strong capital position provide
the base for our liquidity position. We believe we have demonstrated our ability to attract deposits because of our convenient branch locations, personal service, technology and pricing. At September 30, 2026 and December 31, 2025, estimated uninsured deposits (excluding collateralized deposits) for the Bank were 49% and 35% of total deposits, respectively.
In addition to deposits, we have access to the various wholesale funding markets. These markets include the brokered certificate of deposit market and the federal funds market. We are a member of the IntraFi Network, which allows banking customers to access FDIC insurance protection on deposits through the Bank which exceed FDIC insurance limits. As part of our membership with the IntraFi Network, we have one-way authority for both their CDARs and ICS products which provides the Bank the ability to access additional wholesale funding as needed. We also maintain secured lines of credit with the FRB and the FHLB for which we can borrow up to the allowable amount for the collateral pledged. Having diverse funding alternatives reduces our reliance on any one source for funding.
Liquid assets, which include cash and due from banks, federal funds sold and investment securities available for sale, totaled $328.5 million at September 30, 2026, or 14% of total assets, an increase from $280.8 million, or 12% of total assets, at December 31, 2025. At September 30, 2026 and December 31, 2025, investment securities available-for-sale that were pledged as collateral for municipal deposits totaled $17.1 million and $19.4 million, respectively.
Cash flow from amortizing assets or maturing assets also provides funding to meet the needs of depositors and borrowers.
Secondary Liquidity Available and In Use
At September 30, 2026
(Dollars in thousands)
Liquidity in Use Liquidity Available
FHLB secured borrowings (1)
$ 130,000 $ 437,522
FRB discount window secured borrowings (2)
- 261,300
Unsecured federal fund purchase lines - 287,196
Total $ 130,000 $ 986,018
________________________
(1) The Bank has pledged a portion of its commercial real estate and residential loan portfolio to the FHLB to obtain a letter of credit to secure public funds.
(2) The Bank has pledged a portion of the commercial and industrial loan portfolio to the FRB to secure the line of credit.
We have established a formal liquidity contingency plan which establishes a liquidity management team and provides guidelines for liquidity management. For our liquidity management program, we first determine our current liquidity position and then forecast liquidity based on anticipated changes in the balance sheet. In this forecast, we expect to maintain a liquidity cushion. We also stress test our liquidity position under several different stress scenarios, from moderate to severe. Guidelines for the forecasted liquidity cushion and for liquidity cushions for each stress scenario have been established. We believe that we have sufficient resources to meet our liquidity needs.
Liquidity is essential to our business. Our liquidity could be impaired by an inability to access the capital markets or by unforeseen outflows of cash, including deposits. This situation may arise due to circumstances that we may be unable to control, such as general market disruption, negative views about the financial services industry generally, or an operational problem that affects a third party or us. Our ability to borrow from other financial institutions on favorable terms or at all could be adversely affected by disruptions in the capital markets or other events. While we believe we have a healthy liquidity position and do not anticipate the loss of deposits of any of the significant deposit customers, any of the factors discussed above could materially impact our liquidity position in the future.
Financial Instruments with Off-Balance Sheet Risk and Other Contingencies
We are a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the balance sheet.
The Bank's maximum exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amount of those instruments. The Bank uses the same credit policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. We evaluate each customer's credit worthiness on a case-by-case basis and require collateral to support financial instruments when deemed necessary. The amount of collateral obtained upon extension of credit is based on our evaluation of the counterparty. Collateral held varies but may include deposits held by us, marketable securities, accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates of up to one year or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. These instruments represent obligations to extend credit or guarantee borrowings and are not recorded on the consolidated statements of financial condition. The rates and terms of these instruments are competitive with others in the market in which we do business.
Unfunded commitments under lines of credit are commitments for possible future extensions of credit to existing customers. Those lines of credit may not be drawn upon to the total extent to which we have committed.
Standby letters of credit are conditional commitments we issued to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements, including commercial paper, bond financing, and similar transactions. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. We hold certificates of deposit, deposit accounts, and real estate as collateral supporting those commitments for which collateral is deemed necessary.
With the exception of these off-balance sheet arrangements, we do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, results of operations, changes in financial condition, revenue, expenses, capital expenditures, or capital resources, that is material to our business.
At September 30, 2026 and December 31, 2025, unused commitments to fund loans and lines of credit totaled $226.8 million and $225.1 million, respectively. Commercial and standby letters of credit totaled $4.2 million at September 30, 2026 and $9.4 million at December 31, 2025. We record a reserve for unfunded commitments based on an estimate of future draws and applying our expected loss rates on those draws. At September 30, 2026 and December 31, 2025, our reserve for unfunded commitments totaled $658 thousand and $471 thousand, respectively.
We provide banking services to customers that are licensed to do business in the cannabis industry, primarily in Virginia, Maryland and the District of Columbia. These customers include multi-state operators, fully integrated state-wide operators, independent dispensary/cultivation licensees, as well as provisional cannabis licensees. We maintain stringent written policies and procedures related to the onboarding of such businesses and to the monitoring and maintenance of such business accounts.
In accordance with federal regulatory guidance and industry best practices, our cannabis banking business is conducted through a comprehensive, defined, and multi-department process, which includes extensive compliance and onboarding due diligence with subsequent involvement by bank experts in cannabis in our operations, branch, treasury management, lending, and credit departments. We perform a multilayered due diligence review of a cannabis business before the business is onboarded, including site visits and confirmation that the business is properly licensed by the state in which it is conducting business. Throughout the relationship, we continue to monitor the business, including additional site visits, to ensure that the cannabis business continues to meet strict requirements, including maintenance of required licenses. We perform periodic financial reviews of the business and monitor the business in accordance with the Bank Secrecy Act of 1970 and other state requirements.
While we are providing banking services to customers that are engaged in growing, processing, and sales of both medical and adult use cannabis in a manner that complies with applicable state law, such customers engaged in those activities currently violate federal law. While we are not aware of any instance of a federally-insured financial institution being subject to such liability, the strict enforcement of federal laws regarding cannabis could result in our inability to continue to provide banking services to these customers and we could have legal action taken against us by the federal government. There is uncertainty with respect to the potential impact to our consolidated financial statements if the federal
government should take action against us. As of September 30, 2026, we have not accrued an amount for the potential impact of any such actions.
The following is a summary of the level of business activities with our cannabis customers: Deposit and loan balances at September 30, 2026 were approximately $148.1 million, or 7% of total deposits, and $226.5 million, or 12% of total loans, respectively. Deposit and loan balances at December 31, 2025 were approximately $129.5 million, or 6% of total deposits, and $193.6 million, or 10% of total loans, respectively.
FVCBankcorp Inc. published this content on November 05, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 05, 2026 at 16:37 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]