JMSB 10-K & 10-Q changes, risk factors and insider trading

In addition to the other information set forth in this Annual Report on Form 10-K, including the information addressed under “Cautionary Note Regarding Forward-Looking Statements” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our consolidated financial statements and the related notes, you should carefully consider the factors discussed below. These factors could adversely affect our future business, financial condition, liquidity and results of operations, and could cause our actual results to differ materially from our historical results or the results contemplated by the forward-looking statements contained in this Annual Report on Form 10-K, in which case the trading price of our common stock could decline. Our business, financial condition, liquidity or results of operations could also be harmed by risks and uncertainties not currently known to us or that we currently do not believe are material. References to past events in these risk factors are provided by way of example only and are not intended to be a complete listing or a representation as to whether or not such factors have occurred in the past or their likelihood of occurring in the future.

At December 31, 2024,2025, we had one non-performing loan that was 90 days past due and still accruing interest. The loan was paid off, in full, on January 7, 2025. We had no non-accrual loans and no OREO at December 31, 20242025 or 2023.2024. Non-performing assets held by the Company adversely affect our net income in various ways:

We make loans primarily to borrowers in the Washington, D.C. MSA, focusing on the Virginia counties of Arlington, Fairfax, Loudoun and Prince William and the independent cities located within those counties, and Washington D.C. and its Maryland suburbs, and have a substantial portion of our loans secured by real estate. These concentrations expose us to the risk that adverse developments in the real estate market, or in the general economic conditions in such areas, or the continuation of such adverse developments, could increase the levels of nonperforming loans and charge-offs, and reduce loan demand and deposit growth. ActualProlonged or repeated shutdowns and actual and proposed spending cuts by the U.S. Government, particularly those resulting in job losses in the Washington, D.C. MSA, could have a negative impact on the markets we serve, which could adversely affect our business, financial condition, and results of operations. Additionally, if economic conditions in the area deteriorate, or there is significant volatility or weakness in the economy or any significant sector of the area’s economy, our ability to develop our business relationships may be diminished, the quality and collectability of our loans may be adversely affected, our provision for loan credit losses may increase, the value of collateral may decline and loan demand may be reduced.

Commercial real estate, commercial and industrial and construction and development based lending usually involve higher credit risks than 1-4 family residential real estate lending. While we observed a decrease in exposure year-over-year, asAs of December 31, 2024,2025, the following loan types accounted for the stated percentages of our loan portfolio: commercial real estate (both owner-occupied and non-owner occupied) -– 63.2%59.6%; commercial and industrial -– 2.6%2.5%; and construction and land -– 8.8%.11.3%. These types of loans also involve larger loan balances to a single borrower or groups of related borrowers. These higher credit risks are further heightened when the loans are concentrated in a small number of larger borrowers leading to relationship exposure. As of December 31, 2024,2025, we had 3929 relationships with over $10 million of outstanding borrowingsloan principal balances with us. While we are not dependent on any of these relationships and while none of these large relationships have directly impacted our allowance for loan credit losses, a deterioration of any of these large credits could require us to increase our allowance for loan credit losses or result in significant losses to us.

Our 10 largest borrowing relationships by outstanding borrowings accounted for approximately 9.3%11.7% of our loans at December 31, 2024.2025. Our largest single borrowing relationship accounted for approximately 1.8%1.5% of our loans at December 31, 2024.2025. The loss of any combination of these borrowers, or a significant decline in their borrowings due to fluctuations related to their business needs, could adversely affect our results of operations if we are unable to replace their borrowings with similarly priced new loans or investments. In addition, with this concentration of credit risk among a limited number of borrowers, we may face a greater risk of material credits losses if any one or several of these borrowers fail to perform in accordance with their loans, compared to a bank with a more diversified loan portfolio.

As a result of our organic growth over the past several years, as of December 31, 2024,2025, approximately $0.9$738.6 billion,million, or 48.1%,37.5%, of the loans in our loan portfolio were first originated during the past three years. The average age by loan type for loans originated in the past three years is: commercial real estate loans—1.76 1.23 years; commercial and industrial loans—1.31 1.26 years; commercial construction loans—0.86 0.97 years; and consumerresidential residentialmortgage loans—1.84 1.33 years. In general, loans do not begin to show signs of credit deterioration or default until they have been outstanding for some period of time, a process referred to as “seasoning.” As a result, a portfolio of older loans will usually behave more predictably than a newer portfolio. Therefore, the recent and current level of delinquencies and defaults may not represent the level that may prevail as the portfolio becomes more seasoned and may not serve as a reliable basis for predicting the health and nature of our loan portfolio, including net charge-offs and the ratio of nonperforming assets in the future. Our limited experience with these loans may not provide us with a significant history with which to judge future collectability or performance. However, we believe that our stringent credit underwriting process, our ongoing credit review processes, and our history of successful management of our loan portfolio, mitigate these risks. Nevertheless, if delinquencies and defaults increase, we may be required to increase our provision for loan credit losses, which could have an adverse effect on our business, financial condition and results of operations.

A “brokered deposit” is any deposit that is obtained from, or through the mediation or assistance of, a deposit broker. These deposit brokers attract deposits from individuals and companies throughout the country and internationally whose deposit decisions are based almost exclusively on obtaining the highest interest rates. Legislation excludes reciprocal deposits of up to the lesser of $5 billion or 20.0% of an institution’s total liabilities from the definition of brokered deposits, where the institution is well capitalized and has a composite supervisory rating of 1 or 2. We have used brokered deposits in the past, and we may continue to use brokered deposits as one of our funding sources to support future growth. As of December 31, 2024,2025, brokered deposits represented approximately 14.6%15.3% of our total deposits. Reciprocal deposits represented an additional 17.3%18.3% of total liabilitiesdeposits at December 31, 2024.2025.

Liquidity is essential to our business and we monitor our liquidity and manage our liquidity risk at the holding company and bank level. We require sufficient liquidity to fund asset growth, meet customer loan requests, customer deposit maturities and withdrawals, payments on our debt obligations as they come due and other cash commitments under both normal operating conditions and other unpredictable circumstances, including events causing industry or general financial market stress. Liquidity risk can increase due to a number of factors, which include, but are not limited to, an over-reliance on a particular source of funding, changes in the liquidity needs of our depositors, an increase in borrowing by our customers, adverse regulatory actions against us, or a downturn in the markets in which our loans are concentrated. Our inability to raise funds through deposits, borrowings, the sale of loans, and other sources could have an adverse effect on our business, financial condition and results of operations, and could result in the closure of the Bank.

Other primary sources of funds consist of cash flows from operations, maturities and sales of investment securities and proceeds from issuance and sale of our equity and debt securities. Additional liquidity is provided by the ability to borrow from the FHLB, and the Federal Reserve Bank of Richmond (“Reserve Bank”) to fund our operations. We may also borrow funds from third-party lenders, such as other financial institutions. Our access to funding sources in amounts adequate to finance our activities or on acceptable terms could be impaired by factors that affect our organization specifically or the financial services industry or economy in general. Our access to funding sources could also be affected by a decrease in the level of our business activity as a result of a downturn in our primary market or by one or more adverse regulatory actions against us.

Deposits that were not insured or not collateralized by securities represented 34.7%35.1% of our total deposits as of December 31, 2024.2025. If a significant portion of our deposits were to be withdrawn within a short period of time such that additional sources of funding would be required to meet withdrawal demands, we may be unable to obtain funding at favorable terms, which may have an adverse effect on our net interest margin. Moreover, obtaining adequate funding to meet our deposit obligations may be more challenging during periods of elevated prevailing interest rates, such as the present period. Our ability to attract depositors during a time of actual or perceived distress or instability in the marketplace may be limited. Further, interest rates paid for borrowings generally exceed the interest rates paid on deposits. This spread may be exacerbated by higher prevailing interest rates. In addition, because our available-for-sale investment securities lose value when interest rates rise, after-tax proceeds resulting from the sale of such assets may be diminished during periods when interest rates are elevated. Under such circumstances, we may be required to access funding from sources such as the Federal Reserve’s discount window in order to manage our liquidity risk.

As market interest rates increased in 2022 and 2023,increase, we experiencedmay experience significant unrealized losses on our available for saleavailable-for-sale securities portfolio. Unrealized losses related to available for saleavailable-for-sale securities are reflected in accumulated other comprehensive income in our consolidated balance sheets and reduce the level of our book capital and tangible common equity. However, such unrealized losses do not affect our regulatory capital ratios. We actively monitor our available for saleavailable-for-sale securities portfolio and we do not currently anticipate the need to sell securities for liquidity purposes. Furthermore, we believe it is unlikely that we would be required to sell any such securities before recovery of their amortized cost bases, which may be at maturity. Nonetheless, our access to liquidity sources could be affected by unrealized losses if securities must be sold at a loss; tangible capital ratios continue to decline from an increase in unrealized losses or realized credit losses; the FHLB or other funding sources reduce capacity; or bank regulators impose restrictions on us that impact the level of interest rates we may pay on deposits or our ability to access brokered deposits. Additionally, significant unrealized losses could negatively impact market and/or customer perceptions of our company, which could lead to a loss of depositor confidence and an increase in deposit withdrawals, particularly among those with uninsured deposits.

We maintain an investment portfolio consisting of various high-quality liquid fixed-income securities. The total carrying value of the AFSavailable-for-sale securities portfolio as of December 31, 20242025 was $130.3$123.9 million and the estimated duration of the portfolio was approximately 3.1 years. The nature of fixed-income securities is such that changes in market interest rates impact the value of these assets. Based on the duration of our AFS securities portfolio, a one percent increase or decrease in market rates is projected to negatively or positively impact the market value of the AFS securities portfolio by approximately $3.4$3.2 million andin $3.4either million, respectively.instance. Other factors beyond our control including, but are not limited to, rating agency actions in respect of the securities, defaults by the issuer or with respect to the underlying securities, and instability in the capital markets can also significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities. Any of these factors, among others, could cause expected credit losses and realized and/or unrealized losses in future periods and declines in other comprehensive income, which could materially and adversely affect our business, financial condition or results of operations. The process for determining whether expected credit losses exist usually requires complex, subjective judgments about the future financial performance and liquidity of the issuer and collateral underlying the security. Our failure to correctly and timely assess any expected credit losses with respect to our securities could have an adverse effect on our business, financial condition or results of operations.

The Bank is under continuous threat of loss due to hacking and cyber-attacks especially as we continue to expand customer capabilities to utilize internet and other remote channels to transact business. Two of the most significant cyber-attack risks that we face are e-fraud and loss of sensitive customer data. Loss from e-fraud occurs when cybercriminals breach and extract funds directly from customer or our accounts. Attempts to breach sensitive customer data, such as account numbers and social security numbers, present significant reputational, legal and/or regulatory costs to us if successful. Our risk and exposure to these matters remains heightened because of the evolving nature and complexity of these threats from cybercriminals and hackers, our plans to continue to provide internet banking and mobile banking channels, and our plans to develop additional remote connectivity solutions to serve our customers. We cannot assure that we will not be the victim of successful hacking or cyberattacks in the future that could cause us to suffer material losses. The occurrence of any cyber-attack or information security breach could result in potential liability to customers, reputational damage and the disruption of our operations, and regulatory concerns, all of which could adversely affect our business, financial condition or results of operations.

The use of statistical and quantitative models and other quantitatively-based analyses is endemic to bank decision making and regulatory compliance processes, and the employment of such analyses is becoming increasingly widespread in our operations. Liquidity stress testing, interest rate sensitivity analysis, allowance for loan credit losslosses measurement, portfolio stress testing and the identification of possible violations of anti-money laundering regulations are examples of areas in which we are dependent on models and the data that underlie them. We anticipate that model-derived insights will be used more widely in our decision making in the future. While these quantitative techniques and approaches improve our decision making, they also create the possibility that faulty data or flawed quantitative approaches could yield adverse outcomes or regulatory scrutiny. Secondarily, because of the complexity inherent in these approaches, misunderstanding or misuse of their outputs could similarly result in suboptimal decision making, which could have an adverse effect on our business, financial condition and results of operations.

The banking industry is highly regulated and supervised under both federal and state laws and regulations that are intended primarily for the protection of depositors, customers, the public, the banking system as a whole or the DIF, not for the protection of our shareholders and creditors. We are subject to regulation and supervision by the Federal Reserve, and our Bank is subject to regulation and supervision by the FDICFederal Reserve, the FDIC, and the Virginia BFI. These regulatory agencies periodically examine our business, including our compliance with laws and regulations, and have the power take a number of different remedial actions if they discover violations of law or regulations, or they determine that our financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of our operations have become unsatisfactory.

From time to time, FASBthe Financial Accounting Standards Board or the SEC may change the financial accounting and reporting standards that govern the preparation of our financial statements. Such changes may result in us being subject to new or changing accounting and reporting standards. In addition, the bodies that interpret the accounting standards (such as banking regulators or outside auditors) may change their interpretations or positions on how these standards should be applied. These changes may be beyond our control, can be hard to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply a new or revised standard retrospectively, or apply an existing standard differently, also retrospectively, in each case resulting in our needing to revise or restate prior period financial statements.

We are an “emerging growth company,” as defined in the federal securities laws, and we intend to take advantage of certain exemptions from various reporting requirements that apply to other public companies that are not emerging growth companies. These exemptions include not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, less extensive disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements to hold non-binding advisory votes on executive compensation and stockholder approval of any golden parachute payments not previously approved. We will remain an emerging growth company for up to five years, though we may cease to be an emerging growth company earlier if our gross revenues exceed $1.07 billion, if we issue more than $1.0 billion in non-convertible debt in a three-year period, or if the market value of our common stock held by non-affiliates exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31.

We are also a “smaller reporting company,” as defined in the federal securities laws, and will remain a smaller reporting company until the fiscal year following the determination that the market value of our common stock held by non-affiliates is more than $250 million measured on the last business day of our second fiscal quarter, or our annual revenues are less than $100 million during the most recently completed fiscal year and the market value of our common stock held by non-affiliates is more than $700 million measured on the last business day of our second fiscal quarter.laws. Similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations, such as an exemption from providing selected financial data and an ability to provide simplified executive compensation information and only two years of audited financial statements. If we qualify as a smaller reporting company at the time we cease to qualify as an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies.

Moreover, the overall market and the price of our common stock may experience volatility due to this lack of liquidity. The market price for our common stock has fluctuated significantly, ranging between $26.52 and $15.00 per share during the 12twelve months ended December 31, 2024.2025, ranging between $21.37 and $14.19 per share.

This discussion and analysis contains financial information determined by methods other than in accordance with GAAP. Management believes that the supplemental non-GAAP information provides a better comparison of period-to-period operating performance. Additionally, the Company believes this information is utilized by regulators and market analysts to evaluate a company’s financial condition and therefore, such information is useful to investors. Non-GAAP measures used in this report consist of tax-equivalent net interest income,income coreand net income,interest core earnings per share (diluted), core return on average assets, core return on average equity and core income tax expense.margin.

WeJohn areMarshall Bancorp, Inc. is a bank holding company headquartered in Reston, Virginia primarily serving the Washington, D.C. metropolitan area. The material business operations of ourthe organizationCompany are performed through theits only subsidiary, John Marshall Bank. As a result, the discussion and analysis within this section primarily relate to activities conducted at the Bank.

As with most community banks, the Bank derives a significant portion of its income from interest received on loans and investments. The Bank’s primary source of funding is deposits, both interest-bearing and non-interest-bearing. To account for credit risk inherent in all loans, the Bank maintains an allowance for loan credit losses to absorb lifetime losses on existing loans. The Bank establishes and maintains this allowance by recording a provision for loan credit losses against earnings. In addition to net interest income, the Bank also generates income through service charges on deposits, insurance commission income, merchant services fee income, swap fee income and gain on sale of the guaranteed portion of U.S. Small Business Administration (“SBA”) 7(a) loans. In order to maintain its operations, the Bank incurs various operating expenses which are further described within the “Results of Operations” later in this section.

The following is a discussion of thea critical accounting policy and significant estimate that require us to make complex and subjective judgments. Additional information about this policy can be found in Note 1 of our consolidated financial statements included in Item 8 of this Form 10-K.

The allowance for loan credit losses represents an amount which, in management's judgment, is adequate to absorb the lifetime expected losses that may be sustained on outstanding loans at the balance sheet date based on the evaluation of the size and current risk characteristics of the loan portfolio, past events, current conditions, reasonable and supportable forecasts of future economic conditions, and prepayment experience. The allowance for loan credit losses is measured and recorded upon the initial recognition of a financial asset. The allowance for loan credit losses is reduced by charge-offs, net of recoveries of previous losses,charge-offs, and is increased or decreased by a provision for (or recovery of) credit losses, which is recorded in the Consolidated Statements of Income.

The Company utilizes a discounted cash flow model to estimate its current expected credit losses. For the purposes of calculating its quantitative reserves, the Company has segmented its loan portfolio based on loans which share similar risk characteristics. Within the quantitative portion of the calculation, the Company utilizes at least one or a combination of losseconomic drivers,variables, whichsuch may includeas unemployment rates, home price indices, and/or gross domestic product, to adjust its loss rates over a reasonable and supportable forecast period of one year. A straight-line reversion technique is used for the following four quarters, at which time the Company reverts to historical averages. To further adjust the allowance for credit losses for expected losses not already included within the quantitative component of the calculation, the Company may consider qualitative factors, including but not limited to: variability in the economic forecast, changes in volume and severity of adversely classified loans, changes in concentrations of credit,loan portfolio, changes in the nature and volume of the loan segments, factors related to credit administration, and other idiosyncratic risks not embedded in the data used in the model.

Loans that do not share similar risk characteristics are evaluated on an individual basis. The Company designates individually evaluated loans on nonaccrual status as collateral dependent loans, as well as other loans that management of the Company designates as having higher risk and loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the allowance for credit losses. Under the current expected credit loss model (“CECL,”) for collateral dependent loans, the Company has adopted the practical expedient to measure the allowance for credit losses based on the fair value of collateral. The allowance for credit losses is calculated on an individual loan basis based on the shortfall between the fair value of the loan's collateral, which is adjusted for liquidation costs/discounts, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required.

Net interest income is the excess of interest earned on loans and investments over the interest paid on deposits and borrowings, and is the Company’s primary revenue source. Net interest income is affected by overall balance sheet growth, changes in interest rates and changes in the mix of investments, loans, deposits and borrowings. The Company’s interest-earning assets include loans, investment securities and interest-bearing deposits in other banks, while our interest-bearing liabilities include interest-bearing deposits and borrowings. Net interest margin represents the difference between interest received and interest paid as a percentage of average total interest-earning assets. Management seeks to maximize net interest income without exposing the Company to an excessive level of interest rate risk through management’s asset and liability management policies. Interest rate risk is managed by monitoring the pricing, maturity, and repricing options of all classes of interest-bearinginterest-earning assets and interest-bearing liabilities. Management expects net interest income and net interest margin to fluctuate based on changes in interest rates and changes in the amount and composition of the Company’s interest-earning assets and interest-bearing liabilities.

Net interest income increased $0.5$9.5 million or 0.9%18.6% on a fully tax-equivalent basis for the year ended December 31, 2024.2025. The increasenet interest margin for the year ended December 31, 2025 was 2.68% as compared to 2.28% for the same period in the prior year. These increases in net interest income wasand net interest margin were driven primarily by the increasedecrease in the yield of interest-earning assets and the reduction in the average balancerates of interest-bearing liabilitiesdeposits outpacingcoupled with increases in average balances and yields of the increaseloan in the cost on interest-bearing liabilities.portfolio.

The cost of interest-bearing liabilities increasedwas 0.70% from 3.08%3.37% for the year ended December 31, 20232025 compared to 3.78% for the year ended December 31, 2024. The increase in the cost of interest-bearing liabilities was primarily due to higher interest expense on deposits and other borrowings. The increasedecrease in the cost of interest-bearing liabilities was primarily due to a 7140 basis pointpoints increasedecrease in the cost of interest-bearing deposits as a result of the repricing of the Company’s time deposits coupled with ana increasedecrease in rates offered on money market, NOWinterest-bearing demand deposits and savings deposit accounts since the fourth quarter of 2023.2024.

Interest income increased by $9.3$3.1 million or 9.2%2.8% to $110.3$113.4 million on a fully tax-equivalent basis for the year ended December 31, 20242025 compared to $101.0$110.3 million for the year ended December 31, 2023,2024, driven by an increase in volume and rates which was partially offset by decrease in volume on interest-earning assets. The increase in raterates and volume on interest-earning assets was primarily attributable to the Company’s loan portfolio.portfolio, Thewhich was partially offset by the decrease in rate and volume of averageinterest-bearing interest-earningdeposits assetsin wasother primarily attributable to the Company’s securities portfolio.banks.

Fully tax-equivalent interest income on loans increased by approximately $9.9$6.3 million or 11.5%6.6% primarily as a result of rate.higher volume and rates. Average loans increased approximately $33.4$73.1 millionmillion, primarily attributable to growth in the construction & development and residential loan portfolios, while loan yields increased 13 basis points between the years ended December 31, 20242025 and December 31, 2023, which was primarily attributable to growth in the investor real estate and residential loan portfolios.2024.

Fully tax-equivalent interest income on investment securities decreased by approximately $2.4$0.4 million. TheThis decrease was primarily the result of volume decreasing from the Restructuring and to a lesser extent, the amortization and maturities of securities. Average investment securities decreased approximately $116.5$29.1 million between the years ended December 31, 20242025 and December 31, 2023.2024.

The Company recorded a $0.4$1.7 million recovery of provision for credit losses for the year ended December 31, 20242025 compared to a $3.3$0.4 million recovery of provision for the year ended December 31, 2023.2024. The decreased recovery of provision for credit losses during 2024the year ended December 31, 2025 was primarily a result of changes in the composition and volumegrowth of the loan portfolio, considerations of qualitative factorsportfolio and the continuedrelated strongchanges creditin performancethe portfolio mix, coupled with the impact of ourthe charge-off of the unguaranteed portion of one commercial business SBA 7(a) loan portfolioduring segments.the fourth quarter of 2025 and management’s assessment of the qualitative adjustments reflecting changing local economic conditions monitored throughout the year.

Income tax expense increased $1.9$1.4 million or 68.5%29.3% to $6.2 million for the year ended December 31, 2025 compared to $4.8 million for the year ended December 31, 2024 compared to $2.8 million for the year ended December 31, 2023.2024. Our effective tax rate for the year ended December 31, 20242025 was 21.7%22.5% compared to 35.4%21.7% for the year ended December 31, 2023 or 21.2% for the year ended December 31, 2023, when excluding the impact of the Restructuring (Non-GAAP).2024. The increase in the effective tax rate between the adjusted comparative periods was dueprimarily todriven changesby inhigher temporarypermanent differences. Income tax fordifferences, the twelvemost monthssignificant endedcomponent Decemberof 31,which 2024 represents a $0.6 million or 10.5% decrease when compared towas the Company’sincreased core income tax expense (Non-GAAP) for the twelve months ended December 31, 2023disallowance of $5.3compensation million.under Internal Revenue Code Section 162(m).

The Company’s total assets decreasedincreased $7.6$97.6 million or 0.3%4.4% to $2.33 billion at December 31, 2025 compared to $2.23 billion at December 31, 2024 compared to $2.24 billion at December 31, 2023.2024. The decreaseincrease in total assets is primarily attributable to athe decrease in available-for-sale securitiesgrowth of $39.7the million,loan partiallyportfolio, offsetwhich byincreased increases in interest-bearing deposits in banks and loans, net of unearned income of $24.9$103.2 million andor $12.25.5% million,since respectively.December 31, 2024.

The Company’s total liabilities decreasedincreased $24.3$78.6 million or 1.2%4.0% to $2.07 billion at December 31, 2025 compared to $1.99 billion at December 31, 20242024, compared to $2.01 billion at December 31, 2023. The decrease in total liabilitieswhich was primarilydriven attributableby tothe a decrease in time deposits of $125.5$49.9 million and a$40.2 decreasemillion of Federal Reserve Bank borrowings of $54.0 million. The decreases were partially offset by an increaseincreases in non-interest bearing demandtime deposits and interest-bearing demand deposits of $21.9 million and $97.1 million,deposits, respectively.

Shareholders’ equity increased $16.7$19.0 million or 7.3%7.7% to $265.6 million at December 31, 2025 compared to $246.6 million at December 31, 20242024. Book value per share was $18.69 as of December 31, 2025 compared to $229.9$17.28 millionas atof December 31, 2023.2024, an increase of 8.2%. The increaseyear-over-year change in shareholders’book equityvalue per share was primarily attributabledue to the Company’s earnings over the previous twelve months and a decrease in accumulated other comprehensive loss, whichresulting wasfrom duean to decreasesincrease in unrealizedthe lossesmarket onvalue of our available-for-sale investment portfolio from market value increases.portfolio. This increase was partially offset by increasedthe cash dividendsdividend paid.paid Bookand valuethe perincreased share wascount $17.28from asshareholder ofoption Decemberexercises 31,and 2024restricted comparedshare toaward $16.25issuances. asThe ofshare Decemberissuances 31,were 2023.partially offset by the Company’s share repurchases during the period.

The Company maintains a primarily fixed income investment securities portfolio that had a total carrying value of $212.3 million at December 31, 2025 and $222.3 million at December 31, 2024 and $265.5 million at December 31, 2023.2024. The investment portfolio is used as a source of liquidity, interest income, and credit risk diversification, as well as to manage rate sensitivity and provide collateral for secured public funds and secured credit lines. Investment securities are classified as available-for-sale or held-to-maturity based on management’s investment strategy and management’s assessment of the intent and ability to hold the securities until maturity. Investment securities that we may sell prior to maturity in response to changes in management’s investment strategy, liquidity needs, interest rate risk profile or for other reasons are classified as available-for-sale. The Company also had restricted stock and equity securities within its investment securities portfolio with total carrying values of $7.6 million and $2.8 million, respectively, asat ofboth December 31, 20242025 and $5.0 million and $2.8 million, respectively, as of December 31, 2023.2024.

The Company purchased $32.3 million of investment securities during the year ended December 31, 2025, which were comprised of $30.3 million of mortgage-backed securities, $1.0 million of collateralized mortgage obligation securities and $1.0 million of U.S. agency securities. The Company did not purchase or sell any investment securities during the year ended December 31, 2024.2025. The Company had $45.6$47.0 million in maturities and principal repayments on securities during the year ended December 31, 2024.2025. Maturities consisted of $17.0$14.8 million in U.S. treasuries, $3.0$5.0 million in U.S. agency,agency securities, and $0.3 million in municipalmunicipal-taxable -taxable.securities. Principal repayments consisted of $18.8$19.3 million of mortgage-backed securities and $6.4$7.6 million of collateralized mortgage obligation securities.

In the prevailing rate environments as of both December 31, 20242025 and December 31, 2023,2024, the Company’s investment portfolio had an estimated weighted average remaining life of approximately 3.9 years and 4.2 years.years, respectively. The Company’s available-for-sale investment portfolio had an estimated weighted average remaining life of approximately 3.1 years and 3.0 years in the prevailing rate environments asat ofboth December 31, 20242025 and December 31, 2023, respectively.2024. The held-to-maturity investment portfolio had an estimated weighted average remaining life of approximately 6.05.2 years and 6.76.0 years as of December 31, 20242025 and December 31, 2023,2024, respectively.

The following table summarizes the maturity composition of our investment securities as of December 31, 2024,2025, including the weighted average yield of each maturity band.range. Maturities are based on the final contractual payment date, and do not reflect the effect of scheduled principal repayments, prepayments, or early redemptions that may occur. The weighted-average yield below represents the effective yield for the investment securities and is calculated based on the amortized cost of each security.

Gross loans net of unearned income increased $12.7$103.2 million or 0.7%5.5% to $1.98 billion as of December 31, 2025 compared to $1.87 billion as of December 31, 20242024. comparedThe toincrease $1.85in billionloans as offrom December 31, 2023.2025, was primarily attributable to growth in construction & development loans and residential mortgage loans, partially offset by a decline in commercial owner-occupied real estate loans. All other portfolios remained relatively unchanged during 2025. The Company continues to maintain its disciplined underwriting standards while prudently pursuing loan growth opportunities that provide acceptable risk-adjusted returns.

The Company’s asset quality remained strong during the year ended December 31, 2024.2025. The Company had no non accrual loans and OREO as of December 31, 20242025 and December 31, 2023.2024. During the twelve months ended December 31, 2025, the Company charged-off one commercial business SBA 7(a) loan in the total amount of $361 thousand. The charged-off amount represented the unguaranteed portion of the loan. The Company has submitted a reimbursement claim to the SBA for the guaranteed portion of the loan in the amount of $1.1 million and expects to be paid in full by the end of the first quarter of 2026. The guaranteed portion of the loan was 90 days past due and still accruing interest as of December 31, 2025. The Company had one loan that was 90 days past due and still accruing interest as of December 31, 2024. The loan paid off, in full, on January 7, 2025.

The Company recorded net recoveriescharge-offs of $2$359 thousand during the year ended December 31, 20242025 compared to net recoveries of $2 thousand during the year ended December 31, 2023.2024. At December 31, 2024,2025, the allowance for loan credit losses was $18.7$19.8 million, or 1.00% of outstanding loans, net of unearned income, compared to $19.5$18.7 million, or 1.05%1.00% of outstanding loans, net of unearned income, at December 31, 2023.2024. The decreaseincrease in the allowance asfor aloan percentagecredit oflosses outstanding loans, net of unearned income, was primarily a result of changes induring the Company’scurrent lossyear driveris analysispredominantly andattributable assumptions, changes into the compositiongrowth of the loan portfolio,portfolio improvedalong economic forecasts used inwith the quantitativeimpact portionof management’s assessment of qualitative factors, mainly related to the evaluation of the modelexisting andlocal economic conditions, as well as considerations of qualitativethe concentrations of the Company’s loan segments. These factors combinedcontributing withto an increase in allowance for credit losses were partially offset by the continuedpreviously strongmentioned credit performancecharge-off of ourthe loancommercial portfoliobusiness segments.SBA 7(a) loan.

Total deposits decreasedincreased $14.2$79.9 million or 0.7%4.2% to $1.97 billion as of December 31, 2025 compared to $1.89 billion as of December 31, 2024 compared to $1.91 billion as of December 31, 2023.2024.

Non-interest bearing demand deposits increaseddecreased $21.9$0.6 million or 5.3%0.1% to $433.3$432.7 million as of December 31, 20242025 compared to $411.4$433.3 million at December 31, 2023.2024. Non-interest bearing demand deposits represented 22.9%21.9% and 21.6%22.9% of total deposits at December 31, 20242025 and December 31, 2023,2024, respectively.

As of MarchJune 31,30, 2026, the Company had total consolidated assets of $2.35$2.40 billion, total loans net of unearned income of $1.97$2.01 billion, total deposits of $1.99 billion and total shareholders’ equity of $268.1$273.8 million.

The following table contains selected historical consolidated financial data as of the dates and for the periods shown. The selected balance sheet data as of MarchJune 31,30, 2026 and 2025 and the selected income statement data for the three and six months ended MarchJune 31,30, 2026 and MarchJune 31,30, 2025 have been derived from our consolidated financial statements.

Results of Operations –- ThreeSix Monthsmonths Endedended MarchJune 31,30, 2026 and MarchJune 31,30, 2025

The Company reported net income of $6.1$13.1 million for the threesix months ended MarchJune 31,30, 2026, an increase of $1.3$3.2 million or 26.8%32.4% when compared to $4.8 million for the threesix months ended MarchJune 31,30, 2025. Diluted earnings per common share were $0.43$0.93 for the threesix months ended MarchJune 31,30, 2026, compared to diluted earnings per common share of $0.34$0.69 for the threesix months ended MarchJune 31,30, 2025, anrepresenting increasea of34.8% 26.5%.increase.

The Company recorded a $23$281 thousand provision for credit losses for the threesix months ended MarchJune 31,30, 2026 compared to a $707 thousand provision for credit losses of $170 thousand for the threesix months ended MarchJune 31,30, 2025. Additional discussion of the provision for credit losses is included below under the heading Provision for Credit Losses.

Non-interest income decreasedincreased $221$716 thousand during the threesix months ended MarchJune 31,30, 2026 compared to the threesame monthsperiod ended March 31,of 2025. ThisThe decreaseincrease was primarily attributabledriven toby a $149$835 thousand decreasegain as a result of the sale of an unaffiliated company in insurancewhich commissions,the Company held an equity investment unit, in combination with a $37$51 thousand decreaseincrease in other income, driven by the receipt of a class action settlement claim from a health insurance carrier, and a $43 thousand increase in mark-to-market adjustments on investments related to the Company’s nonqualifiednon-qualified deferred compensation (“NQDC”)plan. planThese andincreases were partially offset by a $30$153 thousand decrease in bankers insurance commission coupled with a $91 thousand decline in gains recordedgain on salessale of the guaranteed portions of the SBA 7(a) loans.loans, due to lower sales volumes.

Non-interest expense increased $0.7$1.9 million or 8.2%11.2% duringfor the threesix months ended MarchJune 31,30, 2026 compared to the threesix months ended MarchJune 31,30, 2025,2025 primarilypredominantly due to a $522$1.5 thousandmillion or 10.2%14.6% increase in salaries and employee benefits, as a result of increases in employeeincentive headcountcompensation, coupledhigher withmark-to-market adjustments on the Company’s non-qualified deferred compensation plan and the impact of the annual salary merit increases.increase. Other expenses grewincreased $124$302 thousand dueor 6.2% for the six months ended June 30, 2026 compared to athe combinationsix ofmonths higherended June 30, 2025. Increases were primarily in state franchise taxestax and Federal Deposit Insurance Corporation (“FDIC”) insurance, due to higher assessment bases, partiallyand offsetan byincrease lowerin marketing expense. Furniture and equipment expenses increased $62 thousand or 9.8% for the six months ended June 30, 2026 compared to the same period in 2025. The increase was due to investment and maintenance in technology.

The ROAA for the threesix months ended MarchJune 31,30, 2026 and March 31, 2025 werewas 1.06%1.13% and 0.87%,0.89%, respectively. The ROAE for the threesix months ended MarchJune 31,30, 2026 and March 31, 2025 werewas 9.19%9.77% and 7.76%,7.91%, respectively.

The following table presents the average balance for each principal balance sheet category, and the amount of interest income or expense associated with that category, as well as corresponding average yields earned and rates paid for the threesix months ended MarchJune 31,30, 2026 and March 31, 2025.

Tax-equivalent net interest income increased $2.4 million or 17.2%16.1% for the three months ended MarchJune 31,30, 2026, compared to the three months ended MarchJune 31,30, 2025, driven primarily by higher average balances and yields of the loan portfolio coupled with the lower rates on interest-bearing deposits.

The net interest margin was 2.87%2.99% for the three months ended MarchJune 31,30, 2026, compared to 2.58%2.69% for the three months ended MarchJune 31,30, 2025. The 2930 basis point increase in net interest margin was primarily due to a 3426 basis point reduction in rates on interest-bearing deposits and an eight11 basis point increase in yields on the Company’s loans. In addition, average loans increased $105.9$110.5 million between the three months ended MarchJune 31,30, 2025 and the three months ended MarchJune 31,30, 2026, which was primarily attributable to origination volume in the construction and& development,development and residential mortgage loan portfolios subsequent to MarchJune 31,30, 2025.

The loan portfolio’s yield for the three months ended MarchJune 31,30, 2026 was 5.47%5.53% compared to 5.39%5.42% for the three months ended MarchJune 31,30, 2025. The increase of eight11 basis points was primarily attributable to an increase in yield on the Company’s residentialcommercial mortgagereal estate portfolio along with higher average loan balances.

The yield on interest-bearing deposits due from banks for the three months ended MarchJune 31,30, 2026 was 3.71%3.73% compared to 4.47%4.48% for the three months ended MarchJune 31,30, 2025. The decrease of 7675 basis points was directly attributable to three fed funds rate cuts totaling 75 basis points over the preceding twelve months.

The cost of interest-bearing liabilities was 3.15%3.13% for the three months ended MarchJune 31,30, 2026 compared to 3.48%3.38% for the three months ended MarchJune 31,30, 2025. Rates declined across all deposit categories, most notably in time deposits, money market accounts, time deposits and interest-bearingsavings demand deposits,accounts, which declined by 3735 basis points, 3628 basis points, and 3118 basis points, respectively.

Interest income increased $1.8$1.9 million or 6.6%6.9% to $29.1$29.8 million on a fully tax-equivalent basis for the three months ended MarchJune 31,30, 2026 compared to $27.3$27.9 million for the three months ended MarchJune 31,30, 2025, driven primarily by higher average balances and yields on the Company’s loan portfolio.

Fully tax-equivalent interest income on loans increased $1.8$2.0 million or 7.2%8.0% as a result of volume and rates increases. Average loans increased $105.9$110.5 million between the three months ended MarchJune 31,30, 20252026 and the three months ended MarchJune 31,30, 2026,2025, which was primarily attributable to origination volume in the construction and& development and residential mortgage loan portfolios subsequent to MarchJune 31,30, 2025.

Fully tax-equivalent interest income on investment securities increased $126$195 thousand or 10.8%16.2% primarily as a result of an increase in rates. The yield on investment securities increased to 2.32%2.46% at MarchJune 31,30, 2026 from 2.04%2.11% at MarchJune 31,30, 2025.