Forbright Inc.

11/13/2026 | Press release | Distributed by Public on 11/13/2026 15:35

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

Management's Discussion and Analysis of Results of Operation and Financial Condition
The following discussion and analysis of our results of operations and financial condition should be read in conjunction with Forbright, Inc.'s consolidated financial statements and the related notes appearing elsewhere in this Report and the "Management's Discussion and Analysis of Results of Operations and Financial Condition" section included in Forbright, Inc's Registration Statement on Form S-1 with the Securities and Exchange Commission. This discussion and analysis contain forward-looking statements that are subject to certain risks and uncertainties and are based on certain assumptions that we believe are reasonable but may not be realized. Certain risks, uncertainties and other factors, including those set forth under "Risk Factors" and "Cautionary Note Regarding Forward-Looking Statements" in this Report, may cause actual results to differ materially from those forward-looking statements appearing in this discussion and analysis. We assume no obligation to update any of these forward-looking statements.
The following discussion presents management's perspective on our historical results of operations and financial condition on a consolidated basis. Because we conduct all our material business and business operations through the Bank, and its subsidiaries, the discussion and analysis primarily focus on activities conducted at the Bank subsidiary level.
OVERVIEW
Forbright, Inc., along with its subsidiaries, operates at the intersection of two powerful, structural forces reshaping the U.S. banking sector: the rapidly evolving needs of the $10 trillion national middle market and the broadly accelerating shift toward digital-first banking. Together, these trends have created a distinctive opportunity for the establishment and growth of a category-defining bank of the future, combining modern technology, differentiated lending and deposit products, and scaled fee-based businesses to serve dynamic middle-market companies and consumers.
Forbright offers a modern financial services platform spanning nationwide middle-market lending, digital consumer banking, strategic advisory and asset management services. We trace our history back to Congressional Bank, established in 2003, but our period of growth and modernization began in 2020 when John Delaney returned from public service to the private sector to lead a $369 million capital infusion in 2021 as well as the reimagining and rebranding of the Company to support our new growth strategy. A key to our success in building Forbright has been management's differentiated ability to leverage its experience and relationships to attract and retain world-class talent aligned with our mission.
We believe our business model represents a significant evolution of the traditional commercial banking paradigm, which is often largely limited by geographic footprint and relies on non-interest-bearing deposit funding that has come under structural pressure as depositors have increasingly sought yield-bearing alternatives in the recent high interest-rate environment. We function as a precision-guided platform designed to deliver substantial value to customers across both the asset and liability sides of our balance sheet, while maximizing returns for our stockholders. From December 31, 2020 to December 31, 2025, consolidated assets grew from $1.9 billion to $7.9 billion and net income grew from $12.2 million to $87.9 million. As of September 30, 2026, consolidated assets were $9.6 billion and for the nine months ended September 30, 2026 net income attributable to the Company was $36.4 million.
During the periods presented, our business strategy focused on balance sheet growth, managing credit risk, expansion of lending activities on a national basis, diversifying our funding sources, and maintaining capital and liquidity levels that support these objectives.
Our discussion and analysis of results of operations and financial condition is intended to provide the reader with information that will assist in the understanding of our business, results of operations, financial condition, changes in key items in our financial statements from period to period, and the primary factors that we use to evaluate our business.
CRITICAL ACCOUNTING ESTIMATES
We prepare our Consolidated Financial Statements according to GAAP. Preparing these statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities on the balance sheet and the reported amounts of revenues and expenses during the reporting period on the statement of income. Our most significant critical accounting estimate relates to the ACL, which represents management's estimate of expected lifetime credit losses on loans held for investment at amortized cost, held-to-maturity securities, and financing receivables held for investment at amortized cost, and is determined using historical loss experience, current conditions, and reasonable and supportable forecasts, with accrued interest receivable excluded from the measurement. We also apply significant judgment in assessing the realizability of the net operating loss portion of our deferred tax assets, which depend primarily on our ability to generate sufficient future taxable income and may be affected by changes in operating results, tax laws, or other assumptions.
Our critical accounting estimates are described in Management's Discussion and Analysis of Financial Condition and Results of Operations included in our Registration Statement on Form S-1.
SELECTED FINANCIAL DATA
(dollars in thousands, except share and per share data)
September 30, 2026 December 31, 2025 September 30, 2025
Selected Balance Sheet Data:
Cash, cash equivalents and restricted cash 848,959 648,715 630,216
Investment securities available-for-sale, at fair value 1,014,605 1,254,887 1,257,175
Loans held-for-sale 476,036 379,662 370,512
Loans held for investment, at fair value 2,855 4,645 5,105
Loans held for investment, at amortized cost 6,163,716 5,222,234 4,987,894
Allowance for credit losses - loans (55,833) (52,986) (51,430)
Deferred tax asset, net 138,276 153,314 178,205
Goodwill and other intangible assets, net 35,452 31,685 32,026
Total assets 9,624,350 7,889,306 7,688,577
Total deposits 7,610,670 6,777,915 6,501,517
Subordinated debt, net 151,270 151,003 150,914
Other borrowings - - 90,000
Other liabilities 118,641 137,945 156,373
Total stockholders' equity 991,749 822,443 789,773
Total liabilities, redeemable noncontrolling interest, and stockholders' equity 9,624,350 7,889,306 7,688,577
Per Share Data
Stockholders' equity per total common share outstanding $ 19.54 $ 20.22 $ 19.43
Tangible common equity per total common share outstanding (Non-GAAP)(1)
$ 18.84 $ 19.44 $ 18.64
Capital Ratios(2):
Company:
Tier 1 leverage ratio 9.80% 9.79% 8.82%
Common Equity Tier 1 to risk-weighted assets ratio 12.87% 12.72% 10.15%
For the Three Months Ended For the Nine Months Ended
(dollars in thousands, except share and per share data)
September 30, 2026 June 30, 2026 September 30, 2026 September 30, 2025
Selected Statements of Income Data:
Interest income
$ 147,338 $ 129,064 $ 400,157 $ 383,963
Interest expense
75,386 65,919 205,502 187,989
Net interest income
71,952 63,145 194,655 195,974
Provision for credit losses 1,499 5,899 10,871 17,311
Non-interest income
29,100 21,846 66,530 49,428
Non-interest expense
70,380 65,776 194,613 150,417
Income before income taxes
29,173 13,316 55,701 77,674
Income tax expense 8,465 9,194 19,239 19,342
Net income
20,708 4,122 36,462 58,332
Net income attributable to noncontrolling interest
85 - 85 -
Net income attributable to the Company
$ 20,623 $ 4,122 $ 36,377 $ 58,332
Per Share Data:
Basic earnings attributable to the Company per voting common share $ 0.42 $ 0.10 $ 0.86 $ 1.45
Basic earnings attributable to the Company per non-voting common share $ 0.42 $ 0.10 $ 0.79 $ 1.45
Diluted earnings attributable to the Company per voting common share $ 0.41 $ 0.09 $ 0.83 $ 1.41
Diluted earnings attributable to the Company per non-voting common share $ 0.41 $ 0.09 $ 0.76 $ 1.41
Performance Ratios:
Return on average total assets(3)
0.89 % 0.20 % 0.57 % 1.11 %
Return on average stockholders' equity(3)
8.20 % 1.89 % 5.38 % 10.31 %
Return on average tangible common equity(1), (3)
8.68 % 2.19 % 5.76 % 10.91 %
Yield on interest-earning assets(3)
6.51 % 6.52 % 6.49 % 7.51 %
Yield on interest-bearing liabilities(3)
3.88 % 3.87 % 3.88 % 4.25 %
Spread(4)
2.63 % 2.65 % 2.61 % 3.26 %
Net interest margin(5)
3.18 % 3.19 % 3.16 % 3.83 %
Efficiency ratio(6)
69.65 % 77.39 % 74.51 % 61.29 %
Credit Quality Ratios:
Non-performing assets to total assets
0.78 % 1.10 % 0.78 % 0.55 %
Non-performing loans to total loans held for investment at amortized cost 0.91 % 1.30 % 0.91 % 0.60 %
ACL - Loans to total loans at amortized cost at period end 0.91 % 0.98 % 0.91 % 1.03 %
Net loan charge-offs to average total loans held for investment at amortized cost(3)
(0.08) % (0.20) % (0.19) % (0.23) %
__________________
(1)See definitions of our non-GAAP measures and reconciliations to their most comparable GAAP metrics in "Non-GAAP Financial Measures."
(2)See "Management's Discussion and Analysis of Results of Operations and Financial Condition-Liquidity and Capital Resources-Capital Resources" for discussion on an interpretation of the capital ratios.
(3)Annualized.
(4) Spread represents the difference between the annualized weighted average yield on interest-earning assets and the annualized weighted average rate paid on interest-bearing liabilities.
(5) Net interest margin is computed by dividing annualized net interest income by total average intrerest-earning assets.
(6) Efficiency ratio is calculated by dividing non-interest expense by total revenue, which equals the sum of net interest income and non-interest income.
RESULTS OF OPERATIONS
Comparison for the Three Months Ended September 30, 2026 and June 30, 2026 and the Nine Months Ended September 30, 2026 and September 30, 2025
Average Balance Sheets
The following table shows the average outstanding balance of each major category of asset, liability and stockholders' equity, along with the associated interest income or expense and the yield on average interest-earning asset or rate on interest-bearing liability. The associated yield or cost is calculated by dividing the interest income or interest expense by the corresponding daily average balance over the same period.
For the Three Months Ended
September 30, 2026
June 30, 2026
Change Due To:
(dollars in thousands) Average Balance Interest Income/Expense
Average Yields Earned/
Rates Paid(1)
Average Balance Interest Income/Expense
Average Yields Earned/
Rates Paid(1)
Volume Yield/Rate Total Change
Assets:
Total loans held for investment $ 5,915,470 $ 110,628 7.42 % $ 5,409,608 $ 98,522 7.30 % $ 10,397 $ 1,709 $ 12,106
Total loans held-for-sale 478,158 10,016 8.31 % 427,940 8,484 7.95 % 1,102 430 1,532
Total loans 6,393,628 120,644 7.49 % 5,837,548 107,006 7.35 % 11,499 2,139 13,638
Total investment securities 1,150,488 13,052 4.50 % 1,263,848 14,158 4.49 % (1,128) 22 (1,106)
Interest-bearing deposits with banks(2)
1,380,609 12,991 3.73 % 787,320 7,252 3.69 % 5,603 136 5,739
Other earnings assets 50,570 651 5.11 % 50,661 648 5.13 % 6 (3) 3
Total interest-earning assets 8,975,295 147,338 6.51 % 7,939,377 129,064 6.52 % 15,980 2,294 18,274
ACL (54,165) (53,328)
Other assets 322,604 336,948
Total assets $ 9,243,734 $ 8,222,997
Liabilities, redeemable noncontrolling interest, and stockholders' equity
Interest-bearing demand deposits(2)
$ 279,995 $ 2,459 3.48 % $ 283,305 $ 2,442 3.46 % $ (2) $ 19 $ 17
Money market deposits(2)
1,397,681 13,271 3.77 % 1,403,392 13,138 3.75 % 90 43 133
Savings deposits(2)
4,594,382 44,597 3.85 % 3,680,352 34,725 3.78 % 9,100 772 9,872
Time deposits(2)
1,276,449 13,150 4.09 % 1,310,156 13,719 4.20 % (205) (364) (569)
Total interest-bearing deposits(2)
7,548,507 73,477 3.86 % 6,677,205 64,024 3.85 % 8,983 470 9,453
Subordinated debt, net 151,211 1,909 5.01 % 151,123 1,895 5.03 % 21 (7) 14
Total interest-bearing liabilities 7,699,718 75,386 3.88 % 6,828,328 65,919 3.87 % 9,004 463 9,467
Non-interest-bearing demand deposits(2)
435,418 408,649
Other liabilities 110,733 113,261
Total liabilities 8,245,869 7,350,238
Redeemable noncontrolling interest 65 -
Stockholders' equity 997,800 872,759
Total liabilities redeemable noncontrolling interest, and stockholders' equity $ 9,243,734 $ 8,222,997
Net interest income and spread(3)
$ 71,952 2.63 % $ 63,145 2.65 % $ 6,976 $ 1,831 $ 8,807
Net interest margin(4)
3.18 % 3.19 %
Total deposits(5)
$ 7,983,925 $ 73,477 3.65 % $ 7,085,854 $ 64,024 3.62 %
Total funds(6)
$ 8,135,136 $ 75,386 3.68 % $ 7,236,977 $ 65,919 3.65 %
__________________
(1) Annualized.
(2) Includes balances held-for-sale.
(3) Spread represents the difference between the annualized weighted average yield on interest-earning assets and the annualized weighted average rate paid on interest-bearing liabilities.
(4) Net interest margin is computed by dividing annualized net interest income by total average interest-earning assets.
(5) Total deposits is the sum of interest-bearing deposits and non-interest-bearing demand deposits. Cost of total deposits is calculated as annualized interest expense on total deposits divided by average total deposits.
(6) Total funds is the sum of total interest-bearing liabilities and non-interest-bearing demand deposits. Cost of total funds is calculated as annualized total interest expense divided by average total funds.
Net interest margin for the three months ended September 30, 2026 was 3.18%, a decrease of one basis point compared with 3.19% for the three months ended June 30, 2026, primarily due to an unfavorable change in asset mix associated with the build-up of excess liquidity in anticipation of the Branch Sale, and a three basis point increase in total cost of funds, which was offset by a 14 basis point increase in the yield on loans.
Average loans increased 9.5% for the three months ended September 30, 2026, primarily due to originations net of sales, paydowns, and pay-offs of $194.4 million in Healthcare Finance loans, $147.8 million in Lender Finance loans, $112.0 million in Real Estate Finance loans, $60.3 million in Fund Finance loans, and $47.4 million in Corporate Finance loans. Average interest-bearing deposits increased 13.0% during the three months ended September 30, 2026, primarily related to an increase in Digital Banking savings deposits.
The following table shows the average outstanding balance of each major category of asset, liability and stockholders' equity, along with the associated interest income or expense and the yield on average interest-earning asset or rate on interest-bearing liability. The associated yield or cost is calculated by dividing the interest income or interest expense by the corresponding daily average balance over the same period.
For the Nine Months Ended
September 30, 2026 September 30, 2025 Change Due To:
(dollars in thousands) Average Balance Interest Income/Expense
Average Yields Earned/
Rates Paid(1)
Average Balance Interest Income/Expense
Average Yields Earned/
Rates Paid(1)
Volume Yield/Rate Total Change
Assets:
Total loans held for investment $ 5,515,747 $ 302,314 7.33 % $ 4,399,127 $ 283,584 8.62 % $ 71,981 $ (53,251) $ 18,730
Total loans held-for-sale 436,071 26,694 8.18 % 331,859 28,274 11.39 % 8,879 (10,459) (1,580)
Total loans 5,951,818 329,008 7.39 % 4,730,986 311,858 8.81 % 80,860 (63,710) 17,150
Total investment securities 1,234,738 41,309 4.47 % 1,382,032 47,359 4.58 % (5,047) (1,003) (6,050)
Interest-bearing deposits with banks(2)
1,003,361 27,825 3.71 % 669,160 22,182 4.43 % 11,079 (5,436) 5,643
Other earnings assets 52,066 2,015 5.17 % 57,639 2,564 5.95 % (248) (301) (549)
Total interest-earning assets 8,241,983 400,157 6.49 % 6,839,817 383,963 7.51 % 86,644 (70,450) 16,194
ACL (53,399) (45,149)
Other assets 312,281 225,901
Total assets $ 8,500,865 $ 7,020,569
Liabilities, redeemable noncontrolling interest, and stockholders' equity
Interest-bearing demand deposits(2)
$ 281,426 $ 7,334 3.48 % $ 296,158 $ 8,306 3.75 % $ (413) $ (559) $ (972)
Money market deposits(2)
1,374,655 38,598 3.75 % 862,578 25,019 3.88 % 14,853 (1,274) 13,579
Savings deposits(2)
3,941,829 112,430 3.81 % 2,787,657 87,607 4.20 % 36,272 (11,449) 24,823
Time deposits(2)
1,327,777 41,434 4.17 % 1,765,116 58,776 4.45 % (14,563) (2,779) (17,342)
Total interest-bearing deposits(2)
6,925,687 199,796 3.86 % 5,711,509 179,708 4.21 % 36,149 (16,061) 20,088
Subordinated debt, net 151,123 5,706 5.05 % 166,524 6,893 5.53 % (637) (550) (1,187)
Other borrowings - - - % 41,342 1,388 4.49 % (1,388) - (1,388)
Total interest-bearing liabilities 7,076,810 205,502 3.88 % 5,919,375 187,989 4.25 % 34,124 (16,611) 17,513
Non-interest-bearing demand deposits(2)
405,776 269,594
Other liabilities 114,499 74,919
Total liabilities 7,597,085 6,263,888
Redeemable noncontrolling interest 22 -
Stockholders' equity 903,758 756,681
Total liabilities, redeemable noncontrolling interest, and stockholders' equity $ 8,500,865 $ 7,020,569
Net interest income and spread(3)
$ 194,655 2.61 % $ 195,974 3.26 % $ 52,520 $ (53,839) $ (1,319)
Net interest margin(4)
3.16 % 3.83 %
Total deposits(5)
$ 7,331,463 $ 199,796 3.64 % $ 5,981,103 $ 179,708 4.02 %
Total funds(6)
$ 7,482,586 $ 205,502 3.67 % $ 6,188,969 $ 187,989 4.06 %
__________________
(1) Annualized.
(2) Includes balances held-for-sale.
(3) Spread represents the difference between the annualized weighted average yield on interest-earning assets and the annualized weighted average rate paid on interest-bearing liabilities.
(4) Net interest margin is computed by dividing annualized net interest income by total average interest-earning assets.
(5) Total deposits is the sum of interest-bearing deposits and non-interest-bearing demand deposits. Cost of total deposits is calculated as annualized interest expense on total deposits divided by average total deposits.
(6) Total funds is the sum of total interest-bearing liabilities and non-interest-bearing demand deposits. Cost of total funds is calculated as annualized total interest expense divided by average total funds.
Net interest margin for the nine months ended September 30, 2026 was 3.16%, a decrease of 67 basis points compared with 3.83% for the nine months ended September 30, 2025, primarily due to a 142 basis point decrease in the yield on loans partially offset by a positive change in asset mix with loan growth exceeding growth in other earning asset categories, and a 39 basis point decrease in total cost of funds.
Average loans increased 25.8% for the nine months ended September 30, 2026, primarily due to originations net of sales, paydowns, and pay-offs of in $530.4 million Healthcare Finance loans, in $377.0 million Real Estate Finance loans, in $338.4 million, Fund Finance loans, and in $130.5 million Corporate Finance loans, offset by net paydowns and pay-offs of in $132.2 million in legacy in-market loans. Average interest-bearing deposits increased 21.3% during the nine months ended September 30, 2026, primarily related to increased Digital Banking deposits and third-party sweep accounts, partially offset by a $121.2 million decrease in brokered certificates of deposit.
Net Interest Income
The following table discloses the components of net interest income for three months ended September 30, 2026 and June 30, 2026 and for the nine months ended September 30, 2026 and 2025:
For the Three Months Ended For the Nine Months Ended
September 30, 2026 June 30, 2026 Change September 30, 2026 September 30, 2025 Change
(dollars in thousands) $ % $ %
Interest income:
Loans held for investment $ 110,628 $ 98,522 $ 12,106 12.3 % $ 302,314 $ 283,584 $ 18,730 6.6 %
Loans held-for-sale 10,016 8,484 1,532 18.1 % 26,694 28,274 (1,580) (5.6) %
Deposits with banks 12,991 7,252 5,739 79.1 % 27,825 22,182 5,643 25.4 %
Investment securities 13,052 14,158 (1,106) (7.8) % 41,309 47,359 (6,050) (12.8) %
Other earning assets 651 648 3 0.5 % 2,015 2,564 (549) (21.4) %
Total interest income 147,338 129,064 18,274 14.2 % 400,157 383,963 16,194 4.2 %
Interest expense:
Deposits 73,477 64,024 9,453 14.8 % 199,796 179,708 20,088 11.2 %
Subordinated debt, net
1,909 1,895 14 0.7 % 5,706 6,893 (1,187) (17.2) %
Other borrowings - - - N/M - 1,388 (1,388) (100.0) %
Total interest expense 75,386 65,919 9,467 14.4 % 205,502 187,989 17,513 9.3 %
Net interest income
$ 71,952 $ 63,145 $ 8,807 13.9 % $ 194,655 $ 195,974 $ (1,319) (0.7) %
Net interest income for the three months ended September 30, 2026, was $72.0 million compared with $63.1 million for the three months ended June 30, 2026, an increase of $8.8 million, or 13.9%, was primarily related to an increase in interest income of $18.3 million offset by an increase in interest expense of $9.5 million.
Net interest income for the nine months ended September 30, 2026, was $194.7 million compared with $196.0 million for the nine months ended September 30, 2025, a decrease of $1.3 million, or 0.7%, was primarily related to an increase in interest expense of $17.5 million marginally exceeding an increase in interest income of $16.2 million.
Interest Income
Interest income for the three months ended September 30, 2026, was $147.3 million compared to $129.1 million for the three months ended June 30, 2026, an increase of $18.3 million, or 14.2%, was primarily related to growth in average loans which increased 9.5% compared to the prior quarter. The remaining increase was largely due to a 14 basis point increase in loan yields and the benefit of one additional day in the quarter. The increase in loan yields was largely due to a recovery of prior non-accrual interest.
Interest income for the nine months ended September 30, 2026, was $400.2 million compared to $384.0 million for the nine months ended September 30, 2025, an increase of $16.2 million, or 4.2%, was primarily related to increases in average loan balances and interest-earning deposits with banks, largely offset by a 142 basis point decrease in yield earned on loans, as well as lower average balances and yields on investment securities. The 142 basis point decrease in yield earned on loans was primarily driven by a 68 basis point decrease in average SOFR, lower average spreads reflecting changes in market pricing, and a mix shift in the loan portfolio toward lower-yielding categories, and higher relative levels of amortization of deferred fees during the nine months ended September 30, 2025, which included $9.8 million for restructured loans.
Interest Expense
Interest expense for the three months ended September 30, 2026, was $75.4 million compared to $65.9 million for the three months ended June 30, 2026, an increase of $9.5 million, or 14.4%, was primarily related to an increase in Digital Banking deposits, an additional day in the quarter, and a one basis point increase in the cost of interest-bearing liabilities.
Interest expense for the nine months ended September 30, 2026, was $205.5 million compared to $188.0 million for the nine months ended September 30, 2025, an increase of $17.5 million, or 9.3%, was primarily related to an increase in average balances of $879.8 million in Digital Banking deposits and $526.1 million in third-party sweep deposits largely offset by a 35 basis point decrease in the average rate paid on interest-bearing deposits and a decrease in average balance of $121.2 million in brokered deposits.
Provision for (recovery of) Credit Losses
Our provisions for, or recoveries of, credit losses arising from the loan, unfunded loan commitments, investment securities, and financing receivables portfolios were as follows:
For the Three Months Ended
For the Nine Months Ended
(dollars in thousands) September 30, 2026 June 30, 2026 $ Change % Change September 30, 2026 September 30, 2025 $ Change % Change
Provision for credit losses:
Provision for credit losses on loans $ 2,458 $ 4,521 $ (2,063) (45.6) % $ 10,863 $ 16,666 $ (5,803) (34.8) %
(Recovery of)/provision for credit losses on financing receivables - - - N/M (15) 34 (49) N/M
(Recovery of)/provision for credit losses on unfunded commitments (959) 1,378 (2,337) N/M 23 611 (588) (96.2) %
Total provision for credit losses $ 1,499 $ 5,899 $ (4,400) (74.6) % $ 10,871 $ 17,311 $ (6,440) (37.2) %
__________________
N/M - not meaningful
The provision for credit losses was $1.5 million for the three months ended September 30, 2026, compared to a provision for credit losses of $5.9 million for the three months ended June 30, 2026. The provision for credit losses for the quarter was driven by an increase in the ACL - Loans of $1.2 million, net charge-offs of $1.2 million, and a decrease in the ACL - Unfunded of $1.0 million. The provision for credit losses in the prior quarter was driven by an increase in the ACL - Loans of $1.8 million, net charge-offs of $2.7 million, and an increase in the ACL - Unfunded of $1.4 million. Net charge-offs for the quarterly periods that relate to legacy Consumer and Commercial and Industrial forward flow loans were $0.8 million and $1.7 million, respectively for the three months ended September 30, 2026 and June 30, 2026.
The provision for credit losses was $10.9 million for the nine months ended September 30, 2026, compared to a provision for credit losses of $17.3 million for the nine months ended September 30, 2025. The provision for credit losses for the nine months ended September 30, 2026, was driven by an increase in the ACL - Loans of $2.8 million and net charge-offs of $8.0 million. The provision for credit losses for the nine months ended September 30, 2025, was driven by an increase in the ACL - Loans of $9.1 million, $7.5 million in net charge-offs, and an increase of $0.6 million in the ACL - Unfunded. Net charge-offs for the year-to-date periods that relate to legacy Consumer and Commercial and Industrial forward flow loans were $5.6 million and $7.4 million, respectively for the nine months ended September 30, 2026 and 2025.
See below in "-Financial Condition-ACL-Loans" and "-Financial Condition-ACL-Investment Securities" for additional discussion regarding our ACL.
Non-interest Income
The following table presents non-interest income for the three months ended September 30, 2026 and June 30, 2026 and for the nine months ended September 30, 2026 and 2025 and the change between periods, by major component:
For the Three Months Ended For the Nine Months Ended
(dollars in thousands) September 30, 2026 June 30, 2026 $ Change % Change September 30, 2026 September 30, 2025 $ Change % Change
Servicing income $ 6,592 $ 6,876 $ (284) (4.1) % $ 20,555 $ 805 $ 19,750 2453.4 %
Investment advisory fees 3,194 3,090 104 3.4 % 9,477 12,415 (2,938) (23.7) %
Fee income on loans 2,116 2,252 (136) (6.0) % 6,371 5,837 534 9.1 %
Gains on sales of loans and investment securities, net 1,946 252 1,694 672.2 % 2,164 12,860 (10,696) (83.2) %
Unrealized gains/(losses) on loans and financing receivables, net 1,263 (963) 2,226 N/M (1,035) 7,189 (8,224) N/M
Other non-interest income 13,989 10,339 3,650 35.3 % 28,998 10,322 18,676 180.9 %
Total non-interest income $ 29,100 $ 21,846 $ 7,254 33.2 % $ 66,530 $ 49,428 $ 17,102 34.6 %
__________________
N/M - not meaningful
Total non-interest income was $29.1 million for the three months ended September 30, 2026, an increase of $7.3 million, or 33.2%, compared with the three months ended June 30, 2026, was primarily due to realized and unrealized gains on loans, an increase in FHA/HUD originations, solar loan administration fees related to the solar servicing business, and one additional month of rental income from other tenants in our headquarters building, following our acquisition in April 2026.
Total non-interest income was $66.5 million for the nine months ended September 30, 2026, an increase of $17.1 million, or 34.6%, compared with the nine months ended September 30, 2025, was primarily due to servicing fees and trust administration income related to the Solar Servicing business. The increase was offset by less gains on loan sales and fair value marks, lower investment advisory fees, and a decrease in income related to lower volume of FHA/HUD originations.
Servicing Income
Servicing income was $6.6 million for the three months ended September 30, 2026, a decrease of $0.3 million, or 4.1%, compared to the three months ended June 30, 2026. This decrease was attributable to run-off in the underlying loan portfolios.
Servicing income was $20.6 million for the nine months ended September 30, 2026, related to the Solar Servicing business acquisition during the third quarter of 2025.
Investment Advisory Fees
Investment advisory fees were $3.2 million for the three months ended September 30, 2026, an increase of $0.1 million, or 3.4%, compared to the three months ended June 30, 2026. This increase was primarily due to higher client advisory balances offset partially by the recovery of fees related to accounts previously on non-accrual.
Investment advisory fees were $9.5 million for the nine months ended September 30, 2026, a decrease of $2.9 million, or 23.7%, compared to the nine months ended September 30, 2025. This decrease was primarily due to lower client advisory balances and a decrease in the rate charged on advisory client balances. Advisory loan payoffs exceeded new distributions to advisory clients during 2025 and 2026, which resulted in a net reduction in total fee-generating assets held by advisory clients during the nine months ended September 30, 2026.
Fee Income on Loans
Fee income on loans was $2.1 million for the three months ended September 30, 2026, a decrease of $0.1 million, or 6.0%, compared to the three months ended June 30, 2026, was primarily due to a decrease in non-recurring income related to the management of portfolio loans, partially offset by an increase in unused line of credit fees.
Fee income on loans was $6.4 million for the nine months ended September 30, 2026, an increase of $0.5 million, or 9.1%, compared to the nine months ended September 30, 2025, primarily due to an increase in unused line of credit fees.
Gains/(Losses) on Sales of Loans and Investment Securities, Net
Gains on sales of loans and investment securities, net increased $1.7 million compared to the three months ended June 30, 2026, was primarily due to gains recognized related to a Project Finance loan.
Gains on sales of loans and investment securities, net for the nine months ended September 30, 2026, decreased $10.7 million compared to the nine months ended September 30, 2025, was primarily due to $11.7 million related to the recognition of unamortized deferred fees upon the full satisfaction of a loan during the nine months ended September 30, 2025, that was previously on non-accrual status, in exchange for certain of the borrower's assets in September 2025.
Unrealized Gains/(Losses) on Loans and Financing Receivables, Net
Unrealized gains/(losses) on loans and financing receivables, net increased $2.2 million for the three months ended September 30, 2026, compared to the three months ended June 30, 2026, was primarily due to the reversal of unrealized losses associated with loan sales and restructurings in the prior quarter.
Unrealized gains/(losses) on loans and financing receivables, net decreased $8.2 million for the nine months ended September 30, 2026, compared to the nine months ended September 30, 2025. The nine months ended September 30, 2026 was negatively impacted by fair value adjustments on the held-for-sale loan portfolio. The nine months ended September 30, 2025 was positively impacted by fair value adjustments as well as the reversal of unrealized losses associated with paid-off loans in the held-for-sale loan portfolio.
Other Non-interest Income
Other non-interest income was $14.0 million for the three months ended September 30, 2026, an increase of $3.7 million, or 35.3%, compared to the three months ended June 30, 2026, primarily due to an increase in FHA/HUD originations of $1.6 million, an increase in solar loan trust administration fees of $1.2 million, and $0.8 million related to one additional month of rental income from other tenants in our headquarters building, following our acquisition in April 2026.
Other non-interest income was $29.0 million for the nine months ended September 30, 2026, an increase of $18.7 million, or 180.9%, compared to the nine months ended September 30, 2025, primarily due to $19.4 million for solar loan trust administration fees related to the Solar Servicing business acquired during the third quarter of 2025 and $3.3 million for rental income from other tenants in our headquarters building, following our acquisition in April 2026. Those increases were offset by a decrease in FHA/HUD originations of $1.7 million, and a decrease in program fees earned on solar loan fundings of $1.9 million.
Core Non-interest Income (non-GAAP)
The following table shows our core non-interest income, a non-GAAP metric, by strategy for the three months ended September 30, 2026 and June 30, 2026 and for the nine months ended September 30, 2026 and 2025 and the change between periods, by major component:
For the Three Months Ended For the Nine Months Ended
(dollars in thousands) September 30, 2026 June 30, 2026 $ Change % Change September 30, 2026 September 30, 2025 $ Change % Change
Alliance Partners $ 3,552 $ 3,342 $ 210 6.3 % $ 10,340 $ 13,935 $ (3,595) (25.8) %
Solar Services 8,359 8,695 (336) (3.9) % 26,153 3,018 23,135 766.6 %
FHA/HUD lending 2,556 996 1,560 156.6 % 3,818 5,506 (1,688) (30.7) %
Loan and deposit fees 2,638 2,691 (53) (2.0) % 7,636 6,644 992 14.9 %
Total core non-interest income (non-GAAP) $ 17,105 $ 15,724 $ 1,381 8.8 % $ 47,947 $ 29,103 $ 18,844 64.7 %
Core non-interest income was $17.1 million for the three months ended September 30, 2026, compared to $15.7 million for the three months ended June 30, 2026. The increase of $1.4 million was primarily due to the items noted for total non-interest income related to FHA/HUD originations. Core non-interest income as a percentage of adjusted total revenue was 19.2% for the three months ended September 30, 2026 compared to 19.9% for the three months ended June 30, 2026.
Core non-interest income was $47.9 million for the nine months ended September 30, 2026, compared to $29.1 million for the nine months ended September 30, 2025. The increase of $18.8 million was primarily due to the items noted for total non-interest income related to solar servicing income, partially offset by lower investment advisory fees and lower FHA/HUD originations. Core non-interest income as a percentage of adjusted total revenue was 19.8% for the nine months ended September 30, 2026 compared to 12.9% for the nine months ended September 30, 2025.
Non-interest Expense
The following table presents non-interest expense for three months ended September 30, 2026 and June 30, 2026 and for the nine months ended September 30, 2026 and 2025 and the change between periods, by major component:
For the Three Months Ended For the Nine Months Ended
(dollars in thousands) September 30, 2026 June 30, 2026 $ Change % Change September 30, 2026 September 30, 2025 $ Change % Change
Compensation and benefits $ 36,422 $ 33,407 $ 3,015 9.0 % $ 101,471 $ 93,695 $ 7,776 8.3 %
Information technology 7,705 7,581 124 1.6 % 22,826 19,469 3,357 17.2 %
Professional fees 11,422 9,777 1,645 16.8 % 29,022 9,764 19,258 197.2 %
Loan administration and servicing 6,917 5,500 1,417 25.8 % 16,542 4,119 12,423 301.6 %
Advertising and marketing 1,688 2,720 (1,032) (37.9) % 6,712 5,313 1,399 26.3 %
FDIC insurance 1,033 1,111 (78) (7.0) % 3,046 4,166 (1,120) (26.9) %
Occupancy expense 1,812 1,466 346 23.6 % 4,400 3,576 824 23.0 %
Other non-interest expense 3,381 4,214 (833) (19.8) % 10,594 10,315 279 2.7 %
Total non-interest expense $ 70,380 $ 65,776 $ 4,604 7.0 % $ 194,613 $ 150,417 $ 44,196 29.4 %
Total non-interest expense was $70.4 million for the three months ended September 30, 2026, an increase of $4.6 million, or 7.0%, compared with the three months ended June 30, 2026, primarily due to the combination of (i) an increase in incentive bonus compensation, (ii) legal and sub-servicer fees related to the Solar Servicing business, which are largely reimbursed by counterparties to the loans and recognized in other non-interest income and other corporate legal fees, and (iii) one additional month of expenses related to the ownership of the Company's headquarters following the building acquisition in April 2026. Those increases were partially offset by a decrease in advertising expense related to Digital Banking deposit promotions.
Total non-interest expense was $194.6 million for the nine months ended September 30, 2026, an increase of $44.2 million, or 29.4%, compared with the nine months ended September 30, 2025, primarily due to (i) the acquisition of the Solar Servicing business, (ii) the personnel retention compensation program implemented in connection with our initial public offering, (iii) professional fees associated with the initial public offering, and (iv) expenses related to the ownership of the Company's headquarters following the building acquisition in April 2026.
Compensation and Benefits
Compensation and benefits expenses were $36.4 million for the three months ended September 30, 2026, an increase of $3.0 million, or 9.0%, compared to $33.4 million for three months ended June 30, 2026, primarily due to an increase in the annual incentive bonus accrual.
Compensation and benefits expenses were $101.5 million for the nine months ended September 30, 2026, an increase of $7.8 million, or 8.3%, compared to $93.7 million for the nine months ended September 30, 2025, primarily due to a $5.2 million increase in base compensation related to a full year of compensation paid to employees added in the Solar Servicing business acquisition and from expanding our Digital Banking, Asset Finance and Fund Finance teams, a $5.0 million increase in stock-based compensation, and $2.0 million from the personnel retention compensation program implemented in connection with our initial public offering. Those increases were partially offset by a $3.1 million decrease in the annual bonus accrual and $2.9 million from an increase in deferred compensation recognized related to higher loan originations during the nine months ended September 30, 2026.
Information Technology
Information technology expenses were $7.7 million and $7.6 million for the three months ended September 30, 2026 and June 30, 2026, respectively. Expenses for the category remained relatively flat with increases of $0.5 million in software expense largely offset by decreases of $0.2 million in services costs in the prior period.
Information technology expenses were $22.8 million and $19.5 million for the nine months ended September 30, 2026 and 2025, respectively. The increase of $3.4 million, or 17.2%, was primarily due to $1.5 million related to Digital Banking platform costs, $1.9 million of corporate level technology spend, which includes expense related to the Solar Servicing business acquisition.
Professional Fees
Professional fees were $11.4 million and $9.8 million for the three months ended September 30, 2026 and June 30, 2026, respectively. The increase of $1.6 million, or 16.8%, was primarily due to $1.1 million higher legal fees related to the Solar Servicing business, which are largely reimbursed by loan owners and recognized in other non-interest income and a $0.5 million increase in corporate related legal fees.
Professional fees were $29.0 million and $9.8 million for the nine months ended September 30, 2026 and 2025, respectively. The increase of $19.3 million, or 197.2%, was primarily due to an increase of $10.6 million for Solar Servicing legal fees associated with trust administration, which are largely reimbursed by loan owners and recognized in other non-interest income, $4.4 million of costs associated with our initial public offering, and an increase of $1.8 million in other corporate professional fees, including audit and audit related fees.
Loan Administration and Servicing Expenses
Loan administration and servicing expenses were $6.9 million and $5.5 million for the three months ended September 30, 2026 and June 30, 2026, respectively. The increase of $1.4 million, or 25.8%, was due to sub-servicer
fees related to the Solar Servicing business, which are largely reimbursed by loan owners and recognized in other non-interest income.
Loan administration and servicing expenses were $16.5 million and $4.1 million for the nine months ended September 30, 2026 and 2025, respectively. The increase of $12.4 million, or 301.6%, was due to sub-servicer fees following the Solar Servicing business acquisition, which are largely reimbursed by loan owners and recognized in other non-interest income.
Advertising and Marketing Expenses
Advertising and marketing expenses were $1.7 million and $2.7 million for the three months ended September 30, 2026 and June 30, 2026, respectively. The decrease of $1.0 million, or 37.9%, was primarily due to advertising for interest rate promotions on Digital Banking products during the second quarter, which was not repeated in the third quarter.
Advertising and marketing expenses were $6.7 million and $5.3 million for the nine months ended September 30, 2026 and 2025, respectively. The increase of $1.4 million, or 26.3%, was primarily due to advertising for interest rate promotions on Digital Banking products during the second quarter of 2026.
FDIC Insurance Expenses
FDIC insurance expenses were $1.0 million and $1.1 million for the three months ended September 30, 2026 and June 30, 2026, respectively. The decrease of $0.1 million, or 7.0%, was primarily due to an accrual adjustment related to the impact of a decrease in the assessment rate slightly offsetting the increase in total average assets at the Bank during the period.
FDIC insurance expenses were $3.0 million and $4.2 million for the nine months ended September 30, 2026 and 2025, respectively. The decrease of $1.1 million, or 26.9%, was primarily due to a decrease in the assessment rate in the beginning of the second quarter of 2025, offset by an increase in total average assets at the Bank.
Occupancy Expenses
Occupancy expenses were $1.8 million and $1.5 million for the three months ended September 30, 2026 and June 30, 2026, respectively. The increase of $0.3 million, or 23.6%, was primarily due to one additional month of expenses related to the ownership of the Company's headquarters building following the building acquisition in April 2026.
Occupancy expenses were $4.4 million and $3.6 million for the nine months ended September 30, 2026 and 2025, respectively, which increased due to expenses related to the ownership of the Company's headquarters building following the building acquisition in April 2026 being partially offset by decreases in the overall cost of leased space.
Other Non-interest Expenses
Other non-interest expense, which consists of referral fees, travel and meals, dues and subscriptions, directors' compensation, and other miscellaneous expenses, were $3.4 million and $4.2 million for the three months ended September 30, 2026 and June 30, 2026, respectively. The decrease of $0.8 million, or 19.8%, primarily due to decreases of $0.4 million in donations and $0.3 million in travel and meals expenses.
Other non-interest expense increased slightly by $0.3 million to $10.6 million for the nine months ended September 30, 2026 compared to $10.3 million for the nine months ended September 30, 2025, primarily due to an increase of $0.4 million in intangible amortization related to our headquarters building acquisition and $0.4 million of insurance expense, offset partially by a decrease of $0.5 million in dues and subscriptions.
Income Taxes
For the three months ended September 30, 2026, income tax expense and the effective tax rate were $8.5 million and 29.0%, respectively, compared to $9.2 million and 69.0%, respectively for the three months ended June 30, 2026. Income tax expense for the three months ended September 30, 2026 reflects the recognition of $2.7 million of deferred credit amortization that was offset by a purchase accounting adjustment of $2.7 million for previously recognized amortization, resulting in no net impact from the deferred credit in the quarter. The purchase accounting adjustment was related to the completion of the final tax return for the acquired entity. Income tax expense for the three months ended June 30, 2026, included (i) a $5.6 million write-down of deferred tax assets as of December 31, 2025, for stock compensation in connection with the initial public offering, which is due to tax rules that limit executive compensation deductions for public companies, and (ii) a $1.1 million benefit for amortization of the deferred credit.
The effective tax rate for the three months ended September 30, 2026 was 29.0%, compared to 69.0% for the three months ended June 30, 2026. For the three months ended September 30, 2026, the effective tax rate was equally impacted by the increase from the purchase accounting adjustment and the decrease related to recognizing amortization on the deferred credit. The effective tax rate for the three months ended June 30, 2026 was increased by 42.3% related to the one-time deferred tax asset adjustment for stock compensation, offset by a reduction of 8.6% related to amortization of the deferred credit.
For the nine months ended September 30, 2026, income tax expense and the effective tax rate were $19.2 million and 34.5%, respectively, compared to $19.3 million and 24.9%, respectively for the nine months ended September 30, 2025. Income tax expense for the nine months ended September 30, 2026 included (i) a $5.6 million write-down of deferred tax assets as of December 31, 2025, for stock compensation in connection with the initial public offering, which is due to tax rules that limit executive compensation deductions for companies with publicly traded securities, and (ii) a $5.5 million benefit for amortization of the deferred credit, partially offset by the effect of the $2.7 million purchase accounting adjustment recorded in the third quarter.
The effective tax rate for the nine months ended September 30, 2026 was 34.5%, compared to 24.9% for the nine months ended September 30, 2025. For the nine months ended September 30, 2026, the effective tax rate was (i) increased by 10.1% for the one-time deferred tax asset adjustment for stock compensation in the second quarter, (ii) increased by 4.8% for the purchase accounting adjustment in the third quarter, and (iii) reduced by 9.9% for amortization of the deferred credit.
During the three months ended September 30, 2026, the deferred credit balance decreased by $13.1 million, due to purchase accounting adjustments related to finalizing the tax return for the acquired company. During the nine months ended September 30, 2026, the deferred credit balance decreased by $18.4 million, comprised of a decrease of $12.9 million related to purchase accounting adjustments and a decrease of $5.5 million related to accretion, which was recognized in income tax expense. The ending balance of the deferred credit as of September 30, 2026 was $36.0 million, which is included in Other liabilities in the Consolidated Balance Sheets.
NON-GAAP FINANCIAL MEASURES
This Report contains "non-GAAP financial measures" within the meaning of Item 10(e) of Regulation S-K. Non-GAAP financial measures are financial measures that are not presented in accordance with GAAP. We use these non-GAAP financial measures in the internal evaluation of our performance and management of our business as well as to explain our results of operations to stockholders and the wider investment community. The following non-GAAP financial measures appear in this Report:
•Tangible common equity - We calculate tangible common equity by deducting goodwill and other intangible assets from stockholders' equity.
•Tangible common equity per common share - We calculate tangible common equity per common share by dividing tangible common equity, as defined above, by our total common shares outstanding for the period, excluding the dilutive effect of outstanding stock options and restricted stock units, and including the effect of outstanding shares from restricted stock awards.
•Return on average tangible common equity - We calculate return on average tangible common equity by dividing adjusted net income for the period by average tangible common equity over the same period. Adjusted net income, used for the calculation of return on average tangible common equity, is calculated by adding back the tax effected amount of intangible asset amortization to net income.
•Non-core trust administration - We calculate non-core trust administration by deducting fixed monthly trust administration fees from trust administration, a component of other non-interest income as reported in the footnotes to the Consolidated Financial Statements. Non-core trust administration represents the reimbursements we receive for various expenses incurred in administration of the trusts.
•Non-core gains/(losses) on sales of loans and investment securities, net - We calculate non-core gains/(losses) on sales of loans and investment securities, net by deducting gains from sales of loans to Alliance Partners from gains/(losses) on sales of loans and investment securities, net, as reported on the Consolidated Statements of Income.
•Core and non-core non-interest income - Core non-interest income equals total non-interest income less (a) non-core trust administration, (b) non-core gains/(losses) on sales of loan and investment securities, net, (c) unrealized gains on loans and financing receivables, net, (d) rental income and (e) other income. Non-core non-interest income equals total non-interest income less core non-interest income.
•Adjusted total revenue - We calculate adjusted total revenue by deducting non-core non-interest income from total revenue.
•Pre provision net revenue - We calculate pre provision net revenue by adding provision for credit losses to income before income taxes.
We believe that these non-GAAP financial measures and the information they provide are useful to investors because these measures allow investors to view our performance in the same manner our management evaluates performance. Although we believe these non-GAAP financial measures are useful in evaluating our performance, these non-GAAP financial measures should not be considered in isolation or as a substitution for the most directly comparable or other financial measures presented in this Report under GAAP. Additionally, the manner in which we calculate these non-GAAP financial measures may be different from how other companies calculate financial measures with similar names.
As of and
For the Three Months Ended
As of and
For the Nine Months Ended
(dollars in thousands, except per share data) September 30, 2026 June 30, 2026 September 30, 2026 September 30, 2025
Tangible common equity
Stockholders' equity (GAAP) $ 991,749 $ 967,163 $ 991,749 $ 789,773
Less:
Goodwill 18,519 18,519 18,519 18,519
Other intangible assets 16,933 17,445 16,933 13,507
Tangible common equity (non-GAAP) $ 956,297 $ 931,199 $ 956,297 $ 757,747
Total common shares outstanding 50,764,380 49,697,208 50,764,380 40,653,612
Stockholders' equity per total common share outstanding (GAAP) $ 19.54 $ 19.46 $ 19.54 $ 19.43
Tangible common equity per total common share outstanding (non-GAAP) $ 18.84 $ 18.74 $ 18.84 $ 18.64
As of and
For the Three Months Ended
As of and
For the Nine Months Ended
(dollars in thousands, except per share data) September 30, 2026 June 30, 2026 September 30, 2026 September 30, 2025
Return on average tangible common equity
Average stockholders' equity (GAAP) $ 997,800 $ 872,759 $ 903,758 $ 756,681
Less:
Average goodwill 18,519 18,519 18,519 18,519
Average other intangible assets 15,713 12,839 13,883 14,068
Average tangible common equity (non-GAAP) $ 963,568 $ 841,401 $ 871,356 $ 724,094
Net income attributable to the Company (GAAP) $ 20,623 $ 4,122 $ 36,377 $ 58,332
Add:
Intangible asset amortization, net of tax 448 476 1,134 757
Adjusted net income attributable to the Company (non-GAAP) $ 21,071 $ 4,598 $ 37,511 $ 59,089
Return on average stockholders' equity (GAAP) 8.20 % 1.89 % 5.38 % 10.31 %
Return on average tangible common equity (non-GAAP) 8.68 % 2.19 % 5.76 % 10.91 %
Non-core trust administration (non-GAAP)
Trust administration (GAAP) $ 8,544 $ 7,324 $ 20,132 $ 697
Less:
Fixed monthly trust administration fees 1,345 1,327 4,092 (1,237)
Non-core trust administration (non-GAAP) $ 7,199 $ 5,997 $ 16,040 $ 1,934
Non-core gains on sales of loans and investment securities, net (non-GAAP)
Gains on sales of loans and investment securities, net (GAAP) $ 1,946 $ 252 $ 2,164 $ 12,860
Less:
Gains on sales of loans by Alliance Partners 358 252 863 1,520
Non-core gains on sales of loans and investment securities, net (non-GAAP) $ 1,588 $ - $ 1,301 $ 11,340
Core and non-core non-interest income
Non-interest income (GAAP) $ 29,100 $ 21,846 $ 66,530 $ 49,428
Less:
Non-core trust administration (non-GAAP) 7,199 5,997 16,040 1,934
Non-core gains on sales of loans and investment securities, net (non-GAAP) 1,588 - 1,301 11,340
Unrealized gains/(losses) on loans and financing receivables, net 1,263 (963) (1,035) 7,189
Rental income 2,050 1,225 3,275 -
Other (included in other non-interest income) (105) (137) (998) (138)
Core non-interest income (non-GAAP) $ 17,105 $ 15,724 $ 47,947 $ 29,103
Non-core non-interest income (non-GAAP) $ 11,995 $ 6,122 $ 18,583 $ 20,325
As of and
For the Three Months Ended
As of and
For the Nine Months Ended
(dollars in thousands, except per share data) September 30, 2026 June 30, 2026 September 30, 2026 September 30, 2025
Adjusted total revenue
Net interest income $ 71,952 $ 63,145 $ 194,655 $ 195,974
Non-interest income 29,100 21,846 66,530 49,428
Total Revenue (GAAP) 101,052 84,991 261,185 245,402
Less:
Non-core non-interest income (non-GAAP) 11,995 6,122 18,583 20,325
Adjusted total revenue (non-GAAP) $ 89,057 $ 78,869 $ 242,602 $ 225,077
Non-interest income to total revenue (GAAP) 28.8 % 25.7 % 25.5 % 20.1 %
Core non-interest income to adjusted total revenue (non-GAAP) 19.2 % 19.9 % 19.8 % 12.9 %
Pre provision net revenue
Income before income taxes (GAAP) $ 29,173 $ 13,316 $ 55,701 $ 77,674
Add:
Provision for credit losses 1,499 5,899 10,871 17,311
Pre provision net revenue (non-GAAP) $ 30,672 $ 19,215 $ 66,572 $ 94,985
FINANCIAL CONDITION
Loan Portfolio
Our loan portfolio consists primarily of commercial loans to small and medium-sized, privately owned businesses in a variety of industries and markets including on a national scale and across multiple lending strategies. As of September 30, 2026 and December 31, 2025, the single largest industry concentration in the Company's loan portfolio was Healthcare. We do not believe that it is reasonably possible that loss events could occur in the near term to cause any concentrations to result in a severe impact on our results of operations or liquidity. We do not have concentrations of the terms of certain loan products such as loans with negative amortization schedules, significant payment increases, or high loan-to-value ratios. Additionally, due to the national operating footprint of our borrowers, we believe that we do not have a significant geographic concentration of credit exposure.
Total loans were $6.6 billion as of September 30, 2026, an increase of $1.0 billion, or approximately 18.5%, compared with $5.6 billion as of December 31, 2025. Loans as of September 30, 2026 and December 31, 2025, included $476.0 million and $379.7 million of loans held-for-sale, respectively. As of September 30, 2026 and December 31, 2025, total loans were 87.3% and 82.7% of deposits, respectively, and 69.0% and 71.1% of total assets, respectively.
We manage our exposure to credit losses by evaluating credit risk in the following loan categories. Descriptions of the loan categories, which provide detail on the levels at which we develop and document our systematic methodology to determine the allowance for credit losses, are:
•Commercial Real Estate - CRE loans are primarily secured by various types of real estate including healthcare facilities, hospitality, office, retail, warehouse, industrial, multi-family properties, residential real estate (for commercial purposes), and other CRE properties, and are made to owners of such properties. The category also includes loans for the construction of those property types. Within this category, loans are further bifurcated between loans secured by owner-occupied properties and investment (non-owner-occupied) properties. As of September 30, 2026, 54% of CRE loans were owner-occupied and 46% were non-owner-occupied. The repayment of loans secured by owner-occupied properties is dependent on cash flow from the successful operation of the business which owns the property. The repayment of loans secured by investment properties is dependent upon the operation (net operating income) or sale of the property. Both property types may be subject to adverse conditions in the CRE market or in the general economy. Loans secured by healthcare facilities are primarily owner-occupied properties and loans secured by other property types are primarily non-owner-occupied properties. Loans secured by healthcare facilities represent our largest concentration and represented approximately 60% of CRE loans and approximately 28% of our total loan portfolio as of September 30, 2026. No single CRE loan category secured by any other property type represented greater than 11% of CRE loans and 5% of our total loan portfolio as of September 30, 2026.
•Commercial and Industrial - Within this category, there is further distinction among Lender finance loans, Fund finance loans, Healthcare asset-based loans, corporate loans (which are typically cash flow loans), and asset finance leases and loans (typically related to equipment financing). The market area for these loans is national with geographic diversification. The loan category also includes asset-secured energy project loans and small business loans and commercial solar loans purchased through fintech platforms. Of primary concern in commercial lending is the borrower's creditworthiness and ability to successfully generate cash flow from their business to service the debt. No single commercial and industrial loan collateral type, industry, or infrastructure project type represented greater than 22% of commercial and industrial loans and 11% of our total loan portfolio as of September 30, 2026.
•Consumer - These loans consist primarily of loans made to individuals for personal, solar, family, and residential real estate purposes (including closed end mortgages and home equity lines of credit), with the majority of the portfolio comprised of loans purchased through fintech lender platforms. The vast majority of our consumer loans were purchased or originated before 2024, and a significant portion of the portfolio was sold during 2024. Outside of loans purchased under forward flow purchase agreements, the remaining
consumer and residential real estate purpose loans represent less than 1% of the total loan portfolio as of September 30, 2026 and December 31, 2025. We no longer originate residential real estate loans to consumers.
Our Healthcare Finance loan portfolio represented approximately 31% of our total loan portfolio as of September 30, 2026. Approximately 90% of the portfolio is classified as CRE and approximately 10% of the portfolio is classified as Commercial and Industrial. This portfolio is diversified through a broad range of facility types, such as skilled nursing, assisted living, memory care, and behavioral health, where none of the facility types represented greater than 18% of total loans as of September 30, 2026.
Our Lender Finance loan portfolio represented approximately 21% of our total loan portfolio as of September 30, 2026. The portfolio is entirely classified as Commercial and Industrial. This portfolio is diversified across different collateral types, such as consumer finance, small business, and real estate, where none of the collateral types represented greater than 8% of total loans as of September 30, 2026.
Our Real Estate Finance loan portfolio represented approximately 19% of our total loan portfolio as of September 30, 2026. Approximately 97% of the portfolio is classified as CRE and approximately 3% of the portfolio is classified as Commercial and Industrial. This portfolio is diversified across different collateral types, such as hospitality, multifamily, and office, where none of the collateral types represented greater than 5% of our total loan portfolio as of September 30, 2026.
Our Fund Finance loan portfolio represented approximately 13% of our total loan portfolio as of September 30, 2026. The portfolio is entirely classified as Commercial and Industrial. This portfolio is diversified across different collateral types, such as specialty finance (primarily consisting of asset based and/or real estate backed collateral), private credit, and private equity where none of the collateral types represented greater than 11% of total loans as of September 30, 2026. As of September 30, 2026, we had six loans to private credit funds and business development corporations that are collateralized by loans. Our private credit loan portfolio had total commitments and outstanding balances of $167 million and $125 million, respectively, and a weighted average effective advance rate of 49% on eligible collateral as of September 30, 2026. The majority of the loan collateral within this private credit portfolio is leveraged lending and other forms of enterprise value lending.
Our Corporate Finance loan portfolio represented approximately 12% of our total loan portfolio as of September 30, 2026. Approximately 100% of the portfolio is classified as Commercial and Industrial. This portfolio is diversified across different industries, such as manufacturing, business services, and healthcare as well as infrastructure projects, where none of the industry or the infrastructure project types represented greater than 1% of total loans as of September 30, 2026.
The following table presents loans held for investment at amortized cost, by loan type, as of September 30, 2026 and December 31, 2025:
September 30, 2026 December 31, 2025 Change
(dollars in thousands) Amount % of total loans Amount % of total loans $ %
Commercial Real Estate $ 3,055,047 49.6 % $ 2,528,996 48.4 % $ 526,051 20.8 %
Commercial and Industrial 2,911,601 47.2 % 2,475,549 47.4 % 436,052 17.6 %
Consumer 197,068 3.2 % 217,689 4.2 % (20,621) (9.5) %
Total loans held for investment at amortized cost $ 6,163,716 100.0 % $ 5,222,234 100.0 % $ 941,482 18.0 %
As of September 30, 2026, total loans held for investment at amortized cost were $6.2 billion, an increase of $941.5 million, or 18.0%, compared to $5.2 billion as of December 31, 2025, due in part to a $526.1 million increase in Commercial Real Estate loans, primarily due to net loan originations of $325.0 million in Healthcare Finance loans and $278.7 million in Real Estate Finance loans, offset by a $77.7 million decrease in legacy in-market loans. Commercial and Industrial loans increased $436.1 million, primarily due to net loan originations of $295.8 million in Lender Finance loans, $99.1 million in Fund Finance loans, and $42.9 million in Asset Finance loans.
The contractual maturity ranges of total loans held for investment in our loan portfolio and the amount of such loans with fixed interest rates and floating rates in each maturity range as of September 30, 2026, are summarized in the following table. Contractual maturities are based on contractual amounts outstanding and do not include deferred fees and costs or purchase discounts.
September 30, 2026
One Year Through Through Through After
(in thousands) or Less Five Years Ten Years Fifteen Years Fifteen Years Total
Variable rate loans:
Commercial Real Estate $ 755,793 $ 2,196,891 $ 3,885 $ - $ - $ 2,956,569
Commercial and Industrial 387,455 2,340,917 52,691 - - 2,781,063
Consumer 4 197 819 3,200 12,299 16,519
Total variable rate loans $ 1,143,252 $ 4,538,005 $ 57,395 $ 3,200 $ 12,299 $ 5,754,151
Fixed rate loans:
Commercial Real Estate $ 87,047 $ 29,579 $ 850 $ - $ - $ 117,476
Commercial and Industrial 17,114 69,337 33,551 1,785 21,713 143,500
Consumer 1 1,286 4,164 34,627 168,791 208,869
Total fixed rate loans $ 104,162 $ 100,202 $ 38,565 $ 36,412 $ 190,504 $ 469,845
Total loans held for investment $ 1,247,414 $ 4,638,207 $ 95,960 $ 39,612 $ 202,803 $ 6,223,996
ACL - Loans
The following table provides detail activity in the ACL - Loans held for investment carried at amortized cost as of and for the three months ended September 30, 2026 and June 30, 2026 and as of and for the nine months ended September 30, 2026 and 2025. Allocation of a portion of the ACL - Loans to one category of loans does not preclude its availability to absorb losses in other categories:
As of and
For the Three Months Ended
As of and
For the Nine Months Ended
(dollars in thousands)
September 30, 2026 June 30, 2026 September 30, 2026 September 30, 2025
Average loans held for investment outstanding, at amortized cost $5,912,148 $5,405,685 $ 5,511,752 $ 4,392,511
Total loans held for investment outstanding, at amortized cost at end of period $6,163,716 $5,595,872 $ 6,163,716 $ 4,987,894
ACL - Loans:
Beginning of period $ 54,621 $ 52,794 $ 52,986 $ 42,294
Provision for credit losses on loans 879 4,521 9,267 16,569
Provision for credit losses on loan transfers from loans held-for-sale 1,579 - 1,596 97
Loan charge-offs:
Commercial Real Estate (472) - (472) -
Commercial and Industrial - (1,736) (4,566) (4,252)
Consumer (1,444) (1,353) (4,854) (5,409)
Total charge-offs (1,916) (3,089) (9,892) (9,661)
Loan recoveries:
Commercial Real Estate - - - -
Commercial and Industrial 339 131 1,012 1,105
Consumer 331 264 864 1,026
Total recoveries 670 395 1,876 2,131
Net charge-offs (1,246) (2,694) (8,016) (7,530)
End of period $ 55,833 $ 54,621 $ 55,833 $ 51,430
Ratio of ACL - Loans to total loans at amortized cost at period end 0.91 % 0.98 % 0.91 % 1.03 %
Ratio of net charge-offs to average total loans at amortized cost (0.08) % (0.20) % (0.19) % (0.23) %
We maintain an ACL - Loans that represents management's best estimate of the loan losses in our loan portfolio.
As of September 30, 2026, the ACL - Loans was $55.8 million, or 0.91% of total loans held for investment at amortized cost. As of June 30, 2026, the ACL - Loans was $54.6 million, or 0.98% of total loans held for investment at amortized cost. The increase in the allowance for September 30, 2026 compared to June 30, 2026, was primarily due to loan growth during the quarter while the reduction in the ratio of ACL - Loans to total loans held for investment at amortized cost was primarily driven by a mix shift within the portfolio toward portfolios with lower ACL - Loans to loans held for investment at amortized cost ratios.
The following tables present activity in the ACL - Loans by loan category, for the three months ended September 30, 2026 and June 30, 2026. Allocation of a portion of the ACL - Loans to one category of loans does not preclude its availability to absorb losses in other categories.
For the Three Months Ended September 30, 2026
(dollars in thousands)
Commercial Real Estate
Commercial and Industrial
Consumer Total
Total loans outstanding at end of period, at amortized cost $ 3,055,047 $ 2,911,601 $ 197,068 $ 6,163,716
ACL - Loans:
Beginning of period $ 19,895 $ 25,397 $ 9,329 $ 54,621
(Recovery of)/provision for credit losses on loans (258) (120) 1,257 879
Provision for credit losses on loan transfers from loans held-for-sale 656 923 - 1,579
Loan charge-offs (472) - (1,444) (1,916)
Loan recoveries - 339 331 670
Net (charge-offs)/recoveries (472) 339 (1,113) (1,246)
End of period $ 19,821 $ 26,539 $ 9,473 $ 55,833
ACL - Loans to loan type ratio 0.65 % 0.91 % 4.81 % 0.91 %
For the Three Months Ended June 30, 2026
(dollars in thousands) Commercial Real Estate Commercial and Industrial Consumer Total
Total loans outstanding at end of period, at amortized cost $ 2,849,478 $ 2,541,275 $ 205,119 $ 5,595,872
ACL - Loans:
Beginning of period $ 19,566 $ 25,535 $ 7,693 $ 52,794
Provision for credit losses on loans 329 1,467 2,725 4,521
Loan charge-offs - (1,736) (1,353) (3,089)
Loan recoveries - 131 264 395
Net charge-offs - (1,605) (1,089) (2,694)
End of period $ 19,895 $ 25,397 $ 9,329 $ 54,621
ACL - Loans to loan type ratio 0.70 % 1.00 % 4.55 % 0.98 %
The following tables present activity in the ACL - Loans by loan category, for the nine months ended September 30, 2026 and 2025. Allocation of a portion of the ACL - Loans to one category of loans does not preclude its availability to absorb losses in other categories.
For the Nine Months Ended September 30, 2026
(dollars in thousands)
Commercial Real Estate
Commercial and Industrial
Consumer Total
Total loans outstanding at end of period, at amortized cost $ 3,055,047 $ 2,911,601 $ 197,068 $ 6,163,716
ACL - Loans:
Beginning of period $ 18,639 $ 26,023 $ 8,324 $ 52,986
Provision for credit losses on loans 998 3,130 5,139 9,267
Provision for credit losses on loan transfers from loans held-for-sale 656 940 - 1,596
Loan charge-offs (472) (4,566) (4,854) (9,892)
Loan recoveries - 1,012 864 1,876
Net charge-offs (472) (3,554) (3,990) (8,016)
End of period $ 19,821 $ 26,539 $ 9,473 $ 55,833
ACL - Loans to loan type ratio 0.65 % 0.91 % 4.81 % 0.91 %
For the Nine Months Ended September 30, 2025
(dollars in thousands)
Commercial Real Estate
Commercial and Industrial
Consumer Total
Total loans outstanding at end of period, at amortized cost $ 2,375,993 $ 2,386,758 $ 225,143 $ 4,987,894
ACL - Loans:
Beginning of period $ 12,078 $ 19,380 $ 10,836 $ 42,294
Provision for credit losses on loans 4,485 9,729 2,355 16,569
Provision for credit losses on loan transfers from loans held-for-sale 92 5 - 97
Loan charge-offs - (4,252) (5,409) (9,661)
Loan recoveries - 1,105 1,026 2,131
Net charge-offs - (3,147) (4,383) (7,530)
End of period $ 16,655 $ 25,967 $ 8,808 $ 51,430
ACL - Loans to loan type ratio 0.70 % 1.09 % 3.91 % 1.03 %
The following table shows the allocation of the ACL - Loans by loan type as of September 30, 2026 and December 31, 2025.
September 30, 2026 December 31, 2025
(dollars in thousands) Amount % of Total
ACL - Loans 		Amount % of Total
ACL - Loans
Balance of ACL - Loans:
Commercial Real Estate $ 19,821 35.5 % $ 18,640 35.2 %
Commercial and Industrial 26,539 47.5 % 26,022 49.1 %
Consumer 9,473 17.0 % 8,324 15.7 %
Total ACL - Loans $ 55,833 100.0 % $ 52,986 100.0 %
The total ACL - Loans disclosed in the table above is available to absorb losses from any loan category. We believe that the ACL - Loans as of September 30, 2026 and December 31, 2025, is adequate to cover estimated losses in the loan portfolio as of such date. There can be no assurance, however, that our loan portfolio will not sustain losses in future periods, which could be substantial in relation to the size of the allowance as of September 30, 2026 or December 31, 2025.
Non-performing Assets
Non-performing assets consist of non-performing loans, non-performing financing receivables, accruing loans and financing receivables 90 or more days past due, and OREO.
Assets acquired through, or in lieu of, loan foreclosure are held for sale as OREO and are initially recorded at fair value less estimated selling costs. Any write-down to fair value at the time of transfer to OREO is charged to the ACL - Loans. Subsequent to foreclosure, valuations are periodically performed by management, and the assets are carried at the lower of carrying amount or fair value, less estimated costs to sell. Costs of improvements are capitalized, whereas costs related to holding OREO and subsequent write-downs to the value are expensed. Any gains and losses realized at the time of disposal are reflected in income.
Non-performing assets consisted of the following as of September 30, 2026 and December 31, 2025:
(dollars in thousands)
September 30, 2026 December 31, 2025
Non-accrual loans:
Commercial Real Estate
$ 52,544 $ 60,360
Commercial and Industrial 12,368 11,798
Consumer 1,189 1,857
Total non-accrual loans 66,101 74,015
Accruing loans 90 days or more past due - -
Non-performing investment securities 839 839
Non-performing financing receivables - -
OREO 7,934 8,729
Total non-performing assets $ 74,874 $ 83,583
Total non-accrual loans as a percentage of total loans 1.00 % 1.32 %
Total non-performing investment securities as a percentage of total investment securities 0.08 % 0.06 %
Total non-performing financing receivables as a percentage of total financing receivables - % - %
Total non-performing assets as a percentage of total assets 0.78 % 1.06 %
Total non-performing assets were $74.9 million as of September 30, 2026, a decrease of 10.4% compared to $83.6 million as of December 31, 2025. The decrease was primarily due to a decrease in non-accrual loans. Non-accrual loans decreased by $7.9 million, or 10.7%, as of September 30, 2026, compared to December 31, 2025, primarily due to nine Corporate Finance, legacy in-market and Healthcare Finance loans paying off, charging off, or being removed from non-accrual status, offset partially by nine Corporate Finance and legacy in-market loans being placed on non-accrual.
OREO assets decreased by $0.8 million, or 9.1%, as of September 30, 2026, compared to December 31, 2025, due to the sale of one OREO property and four units within one other OREO property, and partial write-downs to remaining OREO fair values. During the nine months ended September 30, 2026, one loan was transferred to OREO. As of September 30, 2026, there remained three OREO properties, with an aggregate value of $7.9 million.
OREO is recognized in Other assets on the Consolidated Balance Sheets.
Non-performing Loans
A loan for which the accrual of interest has been discontinued is designated as a non-accrual loan. When loans are placed on non-accrual status, all interest previously accrued but not collected is reversed against current period interest income. Income on non-accrual loans is subsequently recognized only to the extent that cash is received, and the loan's principal balance is deemed collectible. Loans are restored to accrual status when loans are once again current with regards to payment status, become well-secured, and management believes full collectability of future principal and interest is probable.
A loan is evaluated for individual impairment when we determine that it no longer exhibits similar risk characteristics in line with the rest of the related loan category. Individually evaluated loans include loans on non-accrual status. Depending on a particular loan's circumstances, we measure impairment of a loan based upon the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's observable market price, or the fair value of the collateral less estimated costs to sell if the loan is collateral dependent. A loan is considered collateral dependent when repayment of the loan is based solely on the liquidation of the collateral. Fair value, where possible, is determined by independent appraisals, typically on an annual basis. Between appraisal periods, the fair value may be adjusted based on specific events, such as if deterioration of quality of the collateral comes to our attention as part of our problem loan monitoring process, or if discussions with the borrower lead us to believe the last appraised value no longer reflects the actual market for the collateral. The impairment amount on a collateral-dependent loan is charged-off to the allowance if deemed not collectible and the impairment amount on a loan that is not collateral-dependent is set up as a specific reserve.
The following tables present non-performing loans held for investment at amortized cost, by loan category, as of September 30, 2026 and December 31, 2025:
September 30, 2026
(dollars in thousands)
Commercial Real Estate Commercial and Industrial Consumer Total
Non-accruing $ 52,544 $ 2,473 $ 1,189 $ 56,206
Accruing loans 90 days or more past due - - - -
Total non-performing loans held for investment at amortized cost
$ 52,544 $ 2,473 $ 1,189 $ 56,206
Total loans held for investment at amortized cost
$ 3,055,047 $ 2,911,601 $ 197,068 $ 6,163,716
Non-accrual loans to total loans held for investment at amortized cost ratio
1.72 % 0.08 % 0.60 % 0.91 %
ACL - Loans to non-accrual loans held for investment at amortized cost ratio 37.72 % 1073.15 % 796.72 % 99.34 %
Non-performing loans to total loans held for investment at amortized cost ratio
1.72 % 0.08 % 0.60 % 0.91 %
December 31, 2025
(dollars in thousands)
Commercial Real Estate Commercial and Industrial Consumer Total
Non-accruing $ 60,361 $ 5,484 $ 1,857 $ 67,702
Accruing loans 90 days or more past due - - - -
Total non-performing loans held for investment at amortized cost
$ 60,361 $ 5,484 $ 1,857 $ 67,702
Total loans held for investment at amortized cost
$ 2,528,996 $ 2,475,549 $ 217,689 $ 5,222,234
Non-accrual loans to total loans held for investment at amortized cost ratio
2.39 % 0.22 % 0.85 % 1.30 %
ACL - Loans to non-accrual loans held for investment at amortized cost ratio 30.88 % 474.51 % 448.25 % 78.26 %
Non-performing loans to total loans held for investment at amortized cost ratio
2.39 % 0.22 % 0.85 % 1.30 %
Total non-performing loans held for investment at amortized cost were $56.2 million as of September 30, 2026, a decrease of 17.0% compared to $67.7 million as of December 31, 2025. The decrease was due to a decrease in non-accrual loans, primarily related to eight Corporate Finance, legacy in-market and Healthcare Finance loans paying off, charging off, or being removed from non-accrual status, offset partially by six Corporate Finance and legacy in-market loans being placed on non-accrual.
Modifications to Borrowers Experiencing Financial Difficulty
As needed, we will modify the terms of loans, such as but not limited to extending the maturity date, delaying scheduled payments, reducing interest rates, and/or forgiving principal with borrowers experiencing financial difficulty to preserve the net investment made in the loan. See Note 5 - Credit Quality Assessment to our Consolidated Financial Statements included elsewhere in this Report for more information on loan modifications to borrowers experiencing financial difficulty.
Asset Quality Trends
Management monitors trends in delinquencies, non-performing assets, and criticized loans to identify areas of potential credit deterioration or improvement. While overall credit quality remains consistent with management's
expectations, certain loan segments may be more sensitive to changes in interest rates, borrower cash flows, or economic conditions. Management continues to closely monitor these segments and adjust credit oversight and risk management practices as appropriate.
Asset quality metrics during the nine months ended September 30, 2026 reflect the performance of our loan portfolio and broader economic conditions. We generally experienced improving asset quality metrics during 2026, while criticized assets increased, classified loans were flat, non-accrual loans decreased, and OREO decreased slightly. Overall, non-performing assets decreased by 10.4% while total assets grew at a higher rate, leading non-performing assets to decrease to 0.78% as of September 30, 2026 from 1.06% as of December 31, 2025 as a percentage of total assets.
Credit Quality
We use several credit quality indicators to manage credit risk in an ongoing manner. The risk rating system is central to the overall credit risk management discipline and the important first step in effectively monitoring the credit quality of the portfolio. Credit risk ratings are applied individually to those classes of assets that have significant or unique credit characteristics that benefit from a case-by-case evaluation. Groups of assets that are underwritten and structured using standardized criteria and characteristics, such as statistical models (e.g., credit scoring or payment performance), are typically risk rated and monitored collectively. These are typically assets to individuals in the classes which comprise the consumer and solar portfolio categories.
During the nine months ended September 30, 2026, credit metric trends were stable to improving due to criticized loans increasing, relatively flat classified loans, and a decrease in non-accrual loans. Overall, non-performing loans held for investment at amortized cost decreased by 17.0% while loans held for investment at amortized cost grew at a higher rate, leading non-performing loans to decrease significantly as a percentage of total held for investment at amortized cost loans. Delinquencies were significantly lower on both a dollar and percentage bases. The weighted average risk rating of the portfolio improved with new loans originating at acceptable risk ratings and year to date loan upgrades exceeding downgrades during the nine months ended September 30, 2026.
The following are the definitions of our credit quality indicators:
•Acceptable Risk (or better) - Assets in all classes that comprise the commercial and consumer portfolio categories that are not adversely rated, are contractually current as to principal and interest, and are otherwise in compliance with the contractual terms of the asset agreement. Management believes that there is a low likelihood of loss related to those assets that are considered Acceptable Risk or better.
•Higher Risk - Assets in this category may demonstrate weaker credit fundamentals with an above-average chance of resulting in a default combined with a lower risk of loss to create an overall risk profile which requires appropriate monitoring but does not present potential weaknesses or warrant a lower rating.
•Special Mention - Assets in this category exhibit potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may, at some future date, result in deterioration of the repayment prospects for the asset. Special Mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. While potentially weak, the asset is currently marginally acceptable, and no loss of principal or interest is envisioned.
•Substandard - A substandard asset is inadequately protected by the current sound worth and paying capacity of the borrower or the collateral pledged, if any. Assets classified in this category must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. Loss potential, which exists in the aggregate amount of Substandard assets, does not have to exist in individual assets classified as Substandard.
•Doubtful - Assets in this category have all the weaknesses inherent in one classified as Substandard with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values, highly questionable and improbable. The possibility of loss is
extremely high, but because of certain important and reasonably specific pending factors which may work to the advantage and strengthening of the asset, its classification as an estimated loss is deferred until its more exact status may be determined.
We periodically review and, if necessary, update the credit quality indicator assigned to each of the loans on a case-by-case basis.
The following tables summarize our held for investment at amortized cost loan portfolio by credit quality indicator as of September 30, 2026 and December 31, 2025:
September 30, 2026
(in thousands) Acceptable Risk Higher Risk Special Mention Substandard Doubtful Total
Commercial Real Estate $ 2,723,719 $ 240,961 $ 20,527 $ 69,840 $ - $ 3,055,047
Commercial and Industrial 2,858,982 17,866 16,933 15,494 2,326 2,911,601
Consumer 195,878 - - 1,190 - 197,068
Total loans held for investment at amortized cost $ 5,778,579 $ 258,827 $ 37,460 $ 86,524 $ 2,326 $ 6,163,716
December 31, 2025
(in thousands) Acceptable Risk Higher Risk Special Mention Substandard Doubtful Total
Commercial Real Estate
$ 2,075,215 $ 386,499 $ - $ 67,282 $ - $ 2,528,996
Commercial and Industrial 2,399,907 55,114 1 17,987 2,540 2,475,549
Consumer 210,504 5,328 - 1,857 - 217,689
Total loans held for investment at amortized cost
$ 4,685,626 $ 446,941 $ 1 $ 87,126 $ 2,540 $ 5,222,234
The change in allocation between credit quality indicators in our held for investment at amortized cost loan portfolio as of September 30, 2026, compared to December 31, 2025, was primarily due to one Real Estate Finance loan and one Lender Finance loan being downgraded from higher risk to special mention, and one Healthcare Finance loan and one Real Estate Finance loan being downgraded from higher risk to substandard, partially offset by the upgrade of two substandard Healthcare Finance loans from higher risk during the nine months ended September 30, 2026.
A loan is considered delinquent when principal or interest payments are 30 days or more past due. Typically, the accrual of interest on loans is discontinued when principal or interest payments are 90 days or more past due, or when, in the opinion of management, there is a reasonable doubt as to collectability in the normal course of business. See Note 5 - Credit Quality Assessment to our Consolidated Financial Statements included elsewhere in this Report for more information on our past due loan aging schedule.
Investment Securities
We use our investment securities portfolio to manage interest rate risk and as a source of income and liquidity for cash requirements. As of September 30, 2026, the carrying amount of investment securities totaled $1.1 billion, a decrease of $240.6 million, or 18.5%, compared with $1.3 billion as of December 31, 2025. As of September 30, 2026 and December 31, 2025, investment securities represented 11.0% and 16.5% of total assets, respectively.
At the date of purchase, we are required to classify investment securities into one of two categories: held-to-maturity or available-for-sale. We primarily acquire investment securities as available-for-sale, however, we may elect certain investment securities that are acquired as held-to-maturity based on our strategy given the particular investment security acquired and current market conditions and expectation.
The following table summarizes the carrying value by classification of securities as of September 30, 2026 and December 31, 2025:
September 30, 2026 December 31, 2025 Change
(dollars in thousands)
Amount(1)
% of total securities
Amount(1)
% of total securities $ %
Available-for-sale securities:
U.S. Treasury and government agencies $ 515,996 48.6 % $ 958,347 73.4 % $ (442,351) (46.2) %
Residential agency mortgage-backed
294,559 27.7 % 139,077 10.7 % 155,482 111.8 %
Commercial agency mortgage-backed
186,180 17.5 % 136,070 10.4 % 50,110 36.8 %
Municipal bonds 7,937 0.7 % 8,635 0.7 % (698) (8.1) %
Other
9,933 0.9 % 12,758 1.0 % (2,825) (22.1) %
Total investment securities available-for-sale $ 1,014,605 95.4 % $ 1,254,887 96.2 % $ (240,282) (19.1) %
Held-to-maturity securities:
Municipal bonds $ 31,000 2.9 % $ 31,200 2.4 % $ (200) (0.6) %
Other
17,599 1.7 % 17,744 1.4 % (145) (0.8) %
Total investment securities held-to-maturity $ 48,599 4.6 % $ 48,944 3.8 % $ (345) (0.7) %
Total investment securities $ 1,063,204 100.0 % $ 1,303,831 100.0 % $ (240,627) (18.5) %
__________________
(1)Available-for-sale investment securities are reported at fair value and held-to-maturity investment securities are reported at amortized cost.
Total available-for-sale investment securities decreased $240.3 million, or 19.1%, from $1.3 billion as of December 31, 2025 to $1.0 billion as of September 30, 2026, primarily due to maturities of approximately $440 million of U.S. Treasury and government agencies securities and unrealized losses of approximately $40 million, partially offset by the purchase of residential and commercial agency mortgage-backed securities of approximately $280 million.
Held-to-maturity investment securities, before ACL - investment securities, remained relatively flat at $48.6 million as of September 30, 2026 compared to $48.9 million as of December 31, 2025.
The following table summarizes the amortized cost and their weighted average yields as of September 30, 2026, by contractual maturity. The contractual maturity of a mortgage-backed security is the date at which the last underlying mortgage matures.
September 30, 2026
Available-for-sale Held-to-maturity
(dollars in thousands) Amortized Cost Yield Amortized Cost Yield
U.S. Treasury and government agencies:
One year or less $ 517,082 4.05 % $ - - %
One to five years - - % - - %
Five to ten years - - % - - %
After ten years - - % - - %
$ 517,082 4.05 % $ - - %
Residential agency mortgage-backed:
One year or less $ - - % $ - - %
One to five years 54 1.58 % - - %
Five to ten years - - % - - %
After ten years 309,229 4.34 % - - %
$ 309,283 4.34 % $ - - %
Commercial agency mortgage-backed:
One year or less $ - - % $ - - %
One to five years 18,812 4.72 % - - %
Five to ten years 8,456 4.62 % - - %
After ten years 172,734 5.06 % - - %
$ 200,002 5.01 % $ - - %
Municipal bonds:
One year or less $ - - % $ - - %
One to five years 3,074 3.24 % 31,000 9.00 %
Five to ten years 1,899 2.05 % - - %
After ten years 4,506 3.29 % - - %
$ 9,479 3.03 % $ 31,000 9.00 %
Other:
One year or less $ - - % $ - - %
One to five years - - % - - %
Five to ten years 5,000 3.87 % - - %
After ten years 5,555 6.11 % 17,599 5.63 %
$ 10,555 5.05 % $ 17,599 5.63 %
Total investment securities $ 1,046,401 4.32 % $ 48,599 7.78 %
ACL - Investment Securities
The following table presents an analysis of the ACL on held-to-maturity investment securities as of and for the three months ended September 30, 2026 and June 30, 2026 and as of and for the nine months ended September 30, 2026 and 2025:
As of and
For the Three Months Ended
As of and
For the Nine Months Ended
(dollars in thousands)
September 30, 2026 June 30, 2026 September 30, 2026 September 30, 2025
Held-to-maturity:
Average held-to-maturity investment securities outstanding $ 48,719 $ 48,942 $ 48,868 $ 52,609
Total held-to-maturity investment securities outstanding at end of period $ 48,599 $ 48,744 $ 48,599 $ 52,242
ACL - investment securities:
Balance at beginning of period $ 110 $ 110 $ 110 $ 161
Balance at end of period $ 110 $ 110 $ 110 $ 161
Ratio of allowance to total held-to-maturity investment securities at period end 0.23 % 0.23 % 0.23 % 0.31 %
Ratio of net charge-offs to average held-to-maturity investment securities - % - % - % - %
As of September 30, 2026, the ACL - held-to-maturity investment securities totaled $0.1 million, or 0.23% of held-to-maturity investment securities. As of June 30, 2026, the ACL - held-to-maturity investment securities totaled $0.1 million, or 0.23% of held-to-maturity investment securities.
The following table presents the allocation of the ACL on held-to-maturity investment securities by investment type:
September 30, 2026 December 31, 2025
(dollars in thousands) Amount % of Total
ACL - Investment Securities 		Amount
% of Total
ACL - Investment Securities
Municipal bonds $ 66 60.0 % $ 66 60.0 %
Other
44 40.0 % 44 40.0 %
Total $ 110 100.0 % $ 110 100.0 %
See Note 1 - Significant Accounting Policies to our Consolidated Financial Statements included in the Company's Registration Statement on Form S-1 for further discussion of CPACE exposures.
Financing Receivables
Our financing receivables are comprised of CPACE-funded projects, which were categorized as financing receivables, based on the contract structure requirements of the municipality where the project is located. At the time of financing, CPACE financing receivables are classified as either held for investment at amortized cost or held-for-sale at lower of cost or fair value.
As of September 30, 2026, financing receivables, before ACL - financing receivables, totaled $37.0 million, a decrease of $5.9 million, or 13.9%, compared with $42.9 million as of December 31, 2025. As of September 30, 2026 and December 31, 2025, financing receivables represented 0.4% and 0.5% of total assets, respectively.
The following table summarizes our investment in financing receivables held for investment as of and for the three months ended September 30, 2026 and June 30, 2026, and as of and for the nine months ended September 30, 2026 and 2025:
As of and
For the Three Months Ended
As of and
For the Nine Months Ended
(dollars in thousands)
September 30, 2026 June 30, 2026 September 30, 2026 September 30, 2025
Held for investment:
Average financing receivables held for investment outstanding $ 36,963 $ 37,054 $ 38,595 $ 30,126
Total financing receivables held for investment outstanding at end of period $ 36,957 $ 36,965 $ 36,957 $ 42,988
ACL - financing receivables:
Balance at beginning of period $ 93 $ 93 $ 108 $ 74
Recovery of credit losses on financing receivables - - (15) -
Provision for credit losses on transfers from financing receivables held-for-sale - - - 34
Balance at end of period $ 93 $ 93 $ 93 $ 108
Ratio of allowance to total financing receivables held for investment at period end 0.25 % 0.25 % 0.25 % 0.25 %
Ratio of net charge-offs to average financing receivables held for investment - % - % - % - %
All our financing receivables held-for-sale were transferred to financing receivables held for investment during the third quarter of 2025 due to a change in strategy related to our financing receivables portfolio. Average financing receivables held-for-sale outstanding during the nine months ended September 30, 2025 was $12.8 million.
As of September 30, 2026, all our financing receivables had contractual maturities of greater than ten years with a weighted-average yield of 6.09%. As of September 30, 2026 and December 31, 2025, no financing receivables were on non-accrual status or deemed non-performing assets.
See Note 1 - Significant Accounting Policies to our Consolidated Financial Statements included in the Company's Registration Statement on Form S-1 for further discussion of CPACE exposures.
Deposits
Our lending and investing activities are primarily funded by deposits. We offer a variety of deposit accounts having a wide range of interest rates and terms including demand, savings, money market and time accounts. We rely primarily on competitive pricing policies and customer service to attract and retain these deposits. We primarily source our deposits through our Digital Banking platform underpinned by a modern core banking system that leverages advanced technology to provide a robust, scalable, and API-driven architecture that supports efficient operations and differentiated customer experience. We believe that digital deposits serve as our growth engine, providing scalable access to a vast national market beyond the reach of a legacy branch network and aligning with our lending capacity as consumer preferences shift to digital.
Deposits represent our primary source of funding and are an important component of our financial condition. Changes in deposit balances and mix are influenced by customer behavior, pricing strategies, interest rate movements, and competitive conditions. During periods of rising interest rates, customers may shift balances from non-interest-bearing deposits to interest-bearing or time deposit products, which can increase funding costs. We evaluate the stability, cost, and composition of deposits in managing liquidity and interest rate risk. Future deposit trends may affect our funding mix and could increase reliance on wholesale funding sources if deposit growth does not keep pace with asset growth.
The following table summarizes our deposit balances as of September 30, 2026 and December 31, 2025:
September 30, 2026 December 31, 2025 Change
(dollars in thousands) Balance % of total Balance % of total $ %
Non-interest-bearing deposits $ 362,080 4.8 % $ 372,444 5.5 % $ (10,364) (2.8) %
Interest-bearing deposits:
Demand 108,987 1.4 % 275,259 4.1 % (166,272) (60.4) %
Money market 1,146,396 15.1 % 1,206,544 17.8 % (60,148) (5.0) %
Savings 4,914,624 64.5 % 3,500,532 51.6 % 1,414,092 40.4 %
Time deposits 1,078,583 14.2 % 1,423,136 21.0 % (344,553) (24.2) %
Total interest-bearing deposits 7,248,590 95.2 % 6,405,471 94.5 % 843,119 13.2 %
Total deposits $ 7,610,670 100.0 % $ 6,777,915 100.0 % $ 832,755 12.3 %
Total deposits as of September 30, 2026 were $7.6 billion, an increase of $832.8 million, or 12.3%, compared with $6.8 billion as of December 31, 2025, primarily due to a $1.5 billion increase in Digital Banking deposits driven by promotions during the third quarter, partially offset by the reclassification of $743.9 million of deposits to held-for-sale liabilities in connection with the Branch Sale.
Wholesale time deposits, included in time deposits in the table above, decreased to $543.0 million as of September 30, 2026 from $692.2 million as of December 31, 2025, primarily due to maturing balances. Institutional sweep deposits, included in each of money market and savings in the table above, increased to $1.3 billion as of September 30, 2026, compared to $1.1 billion as of December 31, 2025, primarily due to the addition of a new relationship and the expansion of one existing relationship. All brokered time deposits, which are considered wholesale time deposits, and institutional sweep deposits are fully FDIC insured.
Non-interest-bearing deposits as of September 30, 2026, were $362.1 million, a decrease of $10.4 million, or 2.8%, compared with $372.4 million as of December 31, 2025. Interest-bearing deposits were $7.2 billion as of September 30, 2026, an increase of $843.1 million, or 13.2%, compared with $6.4 billion as of December 31, 2025.
As of September 30, 2026, the estimated aggregate amount of uninsured deposits (deposits in amounts greater than $250 thousand per depositor, per account ownership category, which is the maximum amount for federal deposit insurance) was $1.2 billion, which is 14.4% of total Bank deposits, including deposits held-for-sale.
The following table sets forth the amount of time deposits that are $250 thousand or greater, by time remaining until maturity as of September 30, 2026:
(in thousands) Time Deposits Greater than $250 Thousand Held-for-Sale Time Deposits Greater than $250 Thousand Total
Three months or less $ 21,621 $ 17,719 $ 39,340
Over three months through six months 82,309 19,875 102,184
Over six months through twelve months 24,629 16,415 41,044
Over twelve months 868 1,476 2,344
Total time deposits $ 129,427 $ 55,485 $ 184,912
The daily average balances and weighted average rates paid on deposits for each of the three months ended September 30, 2026 and June 30, 2026, are presented below:
For the Three Months Ended
September 30, 2026
For the Three Months Ended
June 30, 2026
(dollars in thousands)
Average Balance(1)
Interest Expense(1)
Average Rate(1)
Average Balance Interest Expense Average Rate
Non-interest-bearing deposits $ 435,418 $ - - % $ 408,649 $ - - %
Interest-bearing deposits:
Demand 279,995 2,459 3.48 % 283,305 2,442 3.46 %
Money market 1,397,681 13,271 3.77 % 1,403,392 13,138 3.75 %
Savings 4,594,382 44,597 3.85 % 3,680,352 34,725 3.78 %
Time deposits 1,276,449 13,150 4.09 % 1,310,156 13,719 4.20 %
Total interest-bearing deposits 7,548,507 73,477 3.86 % 6,677,205 64,024 3.85 %
Total deposits $ 7,983,925 $ 73,477 3.65 % $ 7,085,854 $ 64,024 3.62 %
__________________
(1) Includes deposits held-for-sale.
The ratio of average non-interest-bearing deposits to average total deposits for the three months ended September 30, 2026 and June 30, 2026, was 5.5%, and 5.8%, respectively.
The daily average balances and weighted average rates paid on deposits for each of the nine months ended September 30, 2026 and 2025, are presented below:
For the Nine Months Ended
September 30, 2026
For the Nine Months Ended
September 30, 2025
(dollars in thousands)
Average Balance(1)
Interest Expense(1)
Average Rate(1)
Average Balance Interest Expense Average Rate
Non-interest-bearing deposits $ 405,776 $ - - % $ 269,594 $ - - %
Interest-bearing deposits:
Demand 281,426 7,334 3.48 % 296,158 8,306 3.75 %
Money market 1,374,655 38,598 3.75 % 862,578 25,019 3.88 %
Savings 3,941,829 112,430 3.81 % 2,787,657 87,607 4.20 %
Time deposits 1,327,777 41,434 4.17 % 1,765,116 58,776 4.45 %
Total interest-bearing deposits 6,925,687 199,796 3.86 % 5,711,509 179,708 4.21 %
Total deposits $ 7,331,463 $ 199,796 3.64 % $ 5,981,103 $ 179,708 4.02 %
__________________
(1) Includes deposits held-for-sale.
The ratio of average non-interest-bearing deposits to average total deposits for the nine months ended September 30, 2026 and 2025, was 5.5%, and 4.5%, respectively.
Borrowed Funds
Subordinated Debt
The following table provides information on subordinated debt as of September 30, 2026 and December 31, 2025:
(dollars in thousands) September 30, 2026 December 31, 2025
2019 Notes, due in 2029 (1)
25,000 25,000
2021 Notes, due in 2032, 4.00%
125,000 125,000
Other subordinated debt, due in 2033 (2)
3,000 3,000
Less: debt issuance costs and discounts
(1,730) (1,997)
Total subordinated debt
$ 151,270 $ 151,003
__________________
(1)Borrowings bore interest at an effective rate of 8.15% and 8.18% as of September 30, 2026 and December 31, 2025, respectively.
(2)Borrowings bore interest at an effective rate of 7.31% and 7.47% as of September 30, 2026 and December 31, 2025, respectively.
We use subordinated debt as a supplemental source of funding to support balance sheet growth, liquidity management, and funding diversification. We evaluate the use of wholesale funding sources based on cost, maturity structure, and overall liquidity needs. Increased reliance on borrowings may result in higher interest expense and could impact net interest margin, particularly in a rising interest rate environment. Management seeks to balance the use of wholesale funding with deposit growth and other liquidity sources to maintain an appropriate funding profile.
In 2019, we issued $25.0 million of 2019 Notes. The 2019 Notes are unsecured, mature on December 1, 2029, and paid an initial interest of 5.75% semi-annually, in arrears. Beginning on December 1, 2024, the 2019 Notes interest rate resets quarterly to an interest rate per annum equal to the three-month SOFR plus 439 basis points, paid quarterly in arrears. If the three-month SOFR is less than zero, the three-month SOFR shall be deemed to be zero. On October 21, 2026, we sent notice to holders of the 2019 Notes of our intent to redeem the full aggregate principal amount, plus any accrued and unpaid interest to, but excluding, the redemption date of December 1, 2026. We expect the redemption of the 2019 Notes to result in a non-material amount of loss related to the write-off of unamortized debt issuance costs.
In 2021, we issued $125.0 million of 2021 Notes. The 2021 Notes are unsecured, mature on January 1, 2032 and pay an initial interest of 4.00% semi-annually through January 1, 2027, in arrears. Beginning on January 1, 2027, through the earlier of maturity date or the early redemption date, the interest rate will adjust quarterly equal to the three-month term SOFR plus 289 basis points, paid quarterly in arrears. The 2021 Notes are non-callable for the first five years; we have the option to redeem the 2021 Notes at par value, after five years from the date of issuance. The 2021 Notes are classified as Green Bonds in alignment with the International Capital Markets Association's Green Bond Principles (2021).
We also have $3.0 million of other subordinated debt that has a 30-year term (matures on April 7, 2033), has no principal amortization and is guaranteed by us. As of September 30, 2026 and December 31, 2025, the other subordinated debt paid interest at the rate of SOFR plus 3.3%, which resets on a quarterly basis.
Our subordinated debt requires us to comply with specific covenants related to capitalization adequacy, regulatory enforcement actions, non-performing asset metrics, changes in key executive positions, and material changes in ownership. Additionally, in the event of default, our subordinated debt contains certain restrictions and limitations on dividend payments and our ability to repurchase our common stock. We were in compliance with all relevant covenants as of September 30, 2026 and December 31, 2025.
Other Borrowed Funds
On January 1, 2019, we entered into an Advances and Security Agreement with the FHLB of Atlanta, of which we are a member. Under the Advances and Security Agreement, availability to borrow funds from the FHLB must be secured with eligible collateral approved by the FHLB. As of September 30, 2026 and December 31, 2025, there
was $422.2 million and $5.9 million, respectively, of stated potential borrowing capacity available based on $701.0 million and $8.8 million, respectively, of loans pledged as collateral under the Advances and Security Agreement. There were no borrowings outstanding under the Advances and Security Agreement as of September 30, 2026 or December 31, 2025.
We may also borrow funds through the Federal Reserve Bank's discount window. As of September 30, 2026 and December 31, 2025, we had approximately $2.1 billion and $3.5 billion, respectively, in borrowing capacity available under these arrangements with no outstanding balance as of September 30, 2026 and December 31, 2025. The availability of the borrowings were secured by qualifying loans and investment securities with a balance of $2.4 billion and $3.9 billion as of September 30, 2026 and December 31, 2025, respectively.
We maintain unsecured Fed Funds facilities with other financial institutions. As of September 30, 2026, the Company had unsecured Fed Funds facilities with four other financial institutions in the aggregate amount of $110.0 million with no borrowings outstanding. As of December 31, 2025, the Company had unsecured Fed Funds facilities with three other financial institutions in the aggregate amount of $90.0 million with no borrowings outstanding. We periodically borrow on the Fed Funds facilities in order to test the borrowing availability.
LIQUIDITY AND CAPITAL RESOURCES
Liquidity
Liquidity involves our ability to raise funds to support asset growth or reduce assets to meet deposit withdrawals and other payment obligations, to maintain reserve requirements and otherwise to operate the business on an ongoing basis and manage unexpected events. In connection with managing our liquidity levels, we utilize a stress test framework that considers severely adverse economic conditions and assumptions. Our largest sources of liquidity include deposits, payments and maturities of outstanding loans, sales of loans, and maturities or sales of available-for-sale securities. We believe these sources will be sufficient to meet our liquidity needs over the next twelve months; however, our long-term liquidity position is dependent on our ability to sustain deposit growth and our ability to continue to source digital deposits as our balance sheet continues to grow. While scheduled loan payments and maturing available-for-sale securities are relatively predictable sources of liquidity, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition. We generally hold excess funds as reserve deposits with the Federal Reserve Bank. We use cash generated through online deposits, our largest funding source, business customer deposits, and wholesale funds, to offset the cash utilized in lending and investing activities. Our short-term interest-earning available-for-sale securities are used to provide liquidity for lending and other operational requirements. During the three months ended September 30, 2026 and June 30, 2026, and during the nine months ended September 30, 2026 and September 30, 2025, our liquidity needs have primarily been met through strong deposit growth, and from loan principal paydowns and interest payments received. Management expects deposits to remain the primary source of liquidity, however, future deposit growth may be affected by changes in interest rates, competitive pressures, or shifts in customer preferences, which could increase our reliance on wholesale funding sources in the future.
The following table presents cash flows for the nine months ended September 30, 2026 and 2025:
For the Nine Months Ended
(dollars in thousands)
September 30, 2026
September 30, 2025
Net cash used in operating activities
$
(44,813)
$
(61,014)
Net cash used in investing activities
(763,775)
(791,166)
Net cash provided by financing activities
1,729,702
302,414
Net increase/(decrease) in cash, cash held-for-sale, cash equivalents and restricted cash
$
921,114
$
(549,766)
Net cash used in operating activities
Cash used in operating activities of $44.8 million for the nine months ended September 30, 2026, was primarily driven by originations of loans held-for-sale and the amortization of deferred loan fees and costs, offset by net income for the period, changes in deferred income taxes, and changes in interest receivable.
Cash used in operating activities of $61.0 million for the nine months ended September 30, 2025, was primarily driven by changes in other assets, originations of loans held-for-sale, the amortization of deferred loan fees and costs, and changes in interest receivable, offset by net income for the period.
Net cash used in investing activities
Cash used in investing activities of $763.8 million for the nine months ended September 30, 2026, was primarily due to originations of loans held for investment and the acquisition of our corporate headquarters partially offset by net proceeds from sales and payments of investment securities.
Cash used in investing activities of $791.2 million for the nine months ended September 30, 2025, was primarily due to originations of loans held for investment partially offset by net proceeds from sales and payments of investment securities and sales of FHLB stock.
Net cash provided in financing activities
Cash provided by financing activities of $1.7 billion for the nine months ended September 30, 2026, was primarily due to an increase in deposits and the issuance of 8,912,085 shares of common stock, net of issuance costs, in connection with the overallotment option associated with our IPO and the subsequent exercise of the overallotment option.
Cash provided by financing activities of $302.4 million for the nine months ended September 30, 2025, was primarily due to an increase in deposits partially offset by the net repayment of other borrowings, and the repayment of subordinated debt.
As of September 30, 2026, we had a combined maximum available borrowing capacity of $2.6 billion under Advances and Security Agreement, Federal Reserve Bank's discount window, and our Fed Funds facilities. See Note 11 - Borrowed Funds for more information.
Additionally, we may sell investment securities available-for-sale from our portfolio as a source of liquidity, if necessary. As of September 30, 2026, we had investment securities available-for-sale with a fair value of $1.0 billion, of which there are investment securities maturing within the next twelve months with a fair value of $516.0 million. As of September 30, 2026, 50.9% of our investment securities available-for-sale portfolio was invested in U.S. Treasury securities. Our investment securities available-for-sale portfolio had an expected weighted average life, assuming current prepayment speed assumptions, of 3.9 years as of September 30, 2026.
As of September 30, 2026 and December 31, 2025, we had outstanding $1.3 billion and $787.0 million, respectively, in commitments to extend credit and $9.9 million and $20.2 million, respectively, in commitments associated with outstanding standby letters of credit. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the total outstanding may not necessarily reflect the actual future cash funding requirements. A significant portion of our outstanding commitments could be drawn upon in periods of economic stress, which could require us to obtain additional funding from deposits or wholesale funding sources.
As of September 30, 2026 and December 31, 2025, we had no capital expenditure commitments that we currently expect to have a material impact on liquidity; however, future loan growth, changes in funding costs, or adverse economic conditions could increase our cash requirements.
On October 21, 2026, we sent notice to holders of the 2019 Notes of our intent to redeem the full aggregate principal amount, plus any accrued and unpaid interest to, but excluding, the redemption date of December 1, 2026.
Off-balance Sheet Arrangements
In the normal course of business, we will enter into various transactions, which, in accordance with GAAP, are not included in our Consolidated Balance Sheets. We enter into these transactions to meet the financing needs of our customers. These transactions include commitments to extend credit and standby commercial letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in the Consolidated Balance Sheets.
Commitments associated with letters of credit and commitments to extend credit may expire unused, therefore, the amounts shown do not necessarily reflect the actual future cash funding requirements. A summary of financial instruments with off-balance sheet credit risk as of September 30, 2026 and December 31, 2025 are as follows:
(in thousands) September 30, 2026 December 31, 2025
Commercial real estate development and construction $ 264,338 $ 179,439
Residential real estate development and construction - 682
Lines of credit, primarily business lines 992,742 606,921
Standby letters of credit 9,942 20,195
Total commitments to extend credit and available lines of credit $ 1,267,022 $ 807,237
As of both September 30, 2026 and December 31, 2025, the total reserve for unfunded commitments was $2.7 million, which is included in Other liabilities in the Consolidated Balance Sheets.
The following table summarizes the (recovery of)/provision for credit losses on unfunded commitments for the three and nine months ended September 30, 2026 and 2025:
For the Three Months Ended For the Nine Months Ended
(in thousands) September 30, 2026 September 30, 2025 September 30, 2026 September 30, 2025
(Recovery of)/provision for credit losses on unfunded commitments $ (959) $ (322) $ 23 $ 611
The recovery for credit losses on unfunded commitments was $1.0 million for the three months ended September 30, 2026, and was primarily driven by a lower loss factor utilized for certain unfunded commitments.
The (recovery of)/provision for credit losses on unfunded commitments is included in Provision for credit losses in the Consolidated Statements of Income.
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 or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being fully drawn upon, the total commitment amounts disclosed above do not necessarily represent future cash requirements. We evaluate each customer's creditworthiness on a case-by-case basis. The amount of collateral obtained, if considered necessary by management, upon extension of credit, is based on management's credit evaluation of the customer.
Standby letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third-party. In the event of nonperformance by the customer, we have rights to the underlying collateral, which can include CRE, physical plant and property, inventory, receivables, cash and marketable securities. The credit risk to us in issuing letters of credit is essentially the same as that involved in extending loan facilities to our customers.
Capital Resources
Capital management consists of providing equity to support our current and future operations. The federal bank regulators view capital levels as important indicators of an institution's financial soundness. As a general matter, FDIC-insured depository institutions and their holding companies are required to maintain minimum qualifying regulatory capital relative to the amount and types of assets they hold. As a bank holding company and an FDIC-insured state non-member bank, the Company and the Bank (respectively) are subject to regulatory capital requirements.
Banks and bank holding companies are subject to various regulatory capital requirements administered by state and federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about qualifying capital components, risk weighting (where applicable) and other factors. Management believes that current capital levels are sufficient to support anticipated growth, absorb potential losses, and comply with regulatory requirements. Future capital needs will depend on earnings performance, asset growth, credit quality trends, and regulatory developments. In connection with managing our capital levels, we utilize a stress test framework that considers severely adverse economic conditions and assumptions.
In 2019, the federal banking agencies jointly issued a final rule to provide a simple measure of capital adequacy, the CBLR framework, for qualifying community banking organizations, consistent with Section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. The CBLR framework is optional and is available to depository institutions and depository institution holding companies that have less than $10 billion in average total consolidated assets and meet other qualifying criteria.
The CBLR framework removes the requirement for qualifying community banking organizations to calculate and report risk-based capital, instead requiring only that qualifying community banking organizations calculate and report a Tier 1 leverage ratio. Qualifying community banking organizations that elect to use the CBLR framework and that maintain a leverage ratio of greater than 8% (or 9% prior to July 1, 2026, as described below) will be considered to have satisfied the generally applicable risk based and leverage capital requirements in the agencies' capital rules (generally applicable rule) and, if applicable, will be considered to have met the capital ratio requirements to be considered "well capitalized" for purposes of the applicable "prompt corrective action" rules under the FDI Act. The CBLR rules allow for a four-quarter grace period (or two-quarter grace period prior to July 1, 2026, as described below) to correct a ratio that falls below the required amount, provided that the bank or bank holding company maintains a leverage ratio of greater than 7% (or 8% prior to July 1, 2026, as described below).
In April 2026, the federal banking agencies jointly finalized changes to the CBLR framework that, became effective July 1, 2026. The new rule lowered the minimum Tier 1 leverage ratio requirement for qualifying community banking organizations from greater than 9% to greater than 8%, and revised the "grace period" for a bank that elects to use the CBLR framework but temporarily fails to meet all of the qualifying criteria, including the leverage ratio requirement, to provide that the community bank will have a four-quarter grace period (an increase from the two-quarter grace period under the CBLR rules prior to such amendments) to return to compliance, provided the community bank maintains a leverage ratio greater than 7% (down from an 8% grace-period requirement under the CBLR rules prior to such amendments).
Under the CBLR rules, a qualifying community banking organization can opt out of the CBLR framework and revert back to the risk-based framework without restriction. As of September 30, 2026 and December 31, 2025, each of the Company and Bank was a qualifying community banking organization as defined by applicable regulations of the federal banking agencies and elected to measure capital adequacy under the CBLR framework. Management regularly evaluates whether continued use of the CBLR framework remains appropriate based on asset growth, balance sheet composition, and strategic objectives.
Total stockholders' equity increased to $991.7 million as of September 30, 2026, compared to $822.4 million as of December 31, 2025, an increase of $169.3 million, or 20.6%. The increase from December 31, 2025 to September 30, 2026, was primarily due to the issuance of 8,912,085 shares of Voting Common Stock for net proceeds of $147.2 million during the nine months ended September 30, 2026, stock-based compensation, and total comprehensive income for the nine months ended September 30, 2026.
The following table presents as of September 30, 2026 and December 31, 2025, the Company's and the Bank's actual and required capital amounts and leverage ratios. The table also includes the actual amounts and risk-weighted ratios which we are opting to disclose as of September 30, 2026 and December 31, 2025:
Actual To Be Well Capitalized Under Prompt Corrective Action Provisions
(CBLR Framework)
(dollars in thousands) Amount Ratio Amount Ratio
As of September 30, 2026:
Required under CBLR framework:
Tier 1 leverage ratio:
Company $ 896,273 9.80 % $ 731,999 8.00 %
Bank $ 950,096 10.41 % $ 729,963 8.00 %
Optional under CBLR framework:
Total capital to risk-weighted assets ratio:
Company $ 1,096,369 15.74 %
N/A
N/A
Bank $ 1,008,823 14.52 % N/A N/A
Tier 1 capital to risk-weighted assets ratio:
Company $ 896,273 12.87 % N/A N/A
Bank $ 950,096 13.68 % N/A N/A
Common Equity Tier 1 to risk weighted-assets ratio:
Company $ 896,273 12.87 % N/A N/A
Bank $ 950,096 13.68 % N/A N/A
As of December 31, 2025:
Required under CBLR framework:
Tier 1 leverage ratio:
Company $ 748,650 9.79 % $ 688,367 9.00 %
Bank $ 848,960 11.11 % $ 687,907 9.00 %
Optional under CBLR framework:
Total capital to risk-weighted assets ratio:
Company $ 934,965 15.89 % N/A N/A
Bank $ 894,305 15.14 % N/A N/A
Tier 1 capital to risk-weighted assets ratio:
Company $ 748,650 12.72 % N/A N/A
Bank $ 848,960 14.37 % N/A N/A
Common Equity Tier 1 to risk weighted-assets ratio:
Company $ 748,650 12.72 % N/A N/A
Bank $ 848,960 14.37 % N/A N/A
The Company's regulatory capital ratios were relatively flat as of September 30, 2026 compared to December 31, 2025, while the Bank's regulatory capital ratios were modestly lower over the same period.
The Company's regulatory capital ratios from December 31, 2025 to September 30, 2026 reflect largely offsetting impacts of increases in regulatory capital and increases in risk-weighted assets and total assets. Regulatory capital increased primarily due to the $147.2 million of net proceeds combined from the IPO during the second quarter of 2026 and over allotment option during the third quarter of 2026, and the impact of earnings for the nine months ended September 30, 2026. Increases in regulatory capital were largely offset by the significant increase in both risk-weighted and total assets over the same period. The Bank's regulatory capital ratios were reduced due to the significant increase in both risk-weighted and total assets during the period, partially offset by $90.0 million of investment from the Parent during the second quarter of 2026 and the impact of earnings for the nine months ended September 30, 2026. The regulatory capital ratios for both the Company and the Bank were also reduced by our decision to not reduce the tax carry-forward deduction in regulatory capital by the amount of the deferred credit liability established in connection with the Solar Servicing business acquisition completed during the third quarter of 2025. We made this decision in April 2026 based on a revised interpretation of the regulatory capital instructions subsequent to the completion of the audit of our Consolidated Financial Statements for the period ended December 31, 2025, and the change was applied beginning with our March 31, 2026 regulatory reporting. If we had applied this interpretation as of December 31, 2025, our Tier 1 leverage ratio, Total capital to risk-weighted assets ratio, Tier 1 capital to risk-weighted assets ratio and Common Equity Tier 1 to risk-weighted asset ratio as of such date would have been 9.08%, 14.97%, 11.80%, and 11.80% for the Company, and 10.40%, 14.22%, 13.45% and 13.45% for the Bank, respectively.
INTEREST RATE SENSITIVITY AND MARKET RISK
Interest Rate Sensitivity
As a financial institution, the primary component of our market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on our assets and liabilities, and the market value of assets and liabilities. Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair market values. Our objective in managing interest rate risk is to maintain a balance between optimizing net interest income and limiting volatility in earnings and capital across a range of interest rate environments. We seek to manage interest rate risk in a manner consistent with our overall risk appetite, liquidity needs, and capital objectives.
We manage our exposure to interest rates by structuring the balance sheet in the ordinary course of business. Though we have not historically entered into instruments such as leveraged derivatives, interest rate swaps, financial options, financial future contracts or forward delivery contracts for the purpose of reducing interest rate risk, we may enter into such instruments in the future. Based upon the nature of our operations, we are not subject to foreign exchange or commodity price risk. We do not own any trading assets.
While the Company and Bank boards of directors are ultimately responsible for ensuring interest rate risk is managed safely, and for monitoring the Company's financial position and performance, the Company and Bank boards of directors have delegated oversight of interest rate risk to their respective Risk Committees. The day-to-day management of interest rate risk has been delegated to the Bank's Management Asset Liability Committee, which is composed of senior management and operates under policies approved by the Company and Bank boards of directors. The Management Asset Liability Committee meets regularly to review interest rate risk metrics, balance sheet composition, model results and compliance with internal risk limits. In determining appropriate interest rate risk positions, the Management Asset Liability Committee considers, among other factors:
•Current and projected interest rate environments
•Loan and deposit growth assumptions
•Deposit pricing behavior and competitive dynamics
•Prepayment speeds and loan repricing characteristics
•Liquidity and capital levels
•Stress and sensitivity analysis results
The Management Asset Liability Committee formulates strategies based on appropriate levels of interest rate risk which are primarily measured based on measuring the impact of changes in interest rates on net interest income and Economic Value of Equity.
At least quarterly, we measure our interest rate risk position using net interest income and Economic Value of Equity sensitivities. Net interest income sensitivity is based on an earnings simulation that compares net interest income under non-baseline interest rate scenarios to the baseline net interest income earnings simulation and is measured as a percentage variance to baseline net interest income. Economic Value of Equity is a net present value ("economic value") simulation that compares the economic value of assets and liabilities-economic value of equity results by subtracting economic value of liabilities from economic value of assets-under various non-baseline interest rate scenarios to the baseline Economic Value of Equity and is measured as a percentage variance to baseline Economic Value of Equity. Net interest income sensitivity is generally considered a short-term measure of interest rate risk as it is based on earnings sensitivity over a defined period of time whereas Economic Value of Equity is a long-term measure of interest rate risk as it is a net present value which considers the present value of all future cash flows on assets and liabilities through their lives.
The Management Asset Liability Committee manages interest rate risk in accordance with the Interest Rate Risk Policy which is a board-approved policy that is reviewed at least annually. The Interest Rate Risk Policy establishes thresholds for managing and reporting interest rate risk, including limits for net interest income and Economic Value of Equity sensitivity for interest rate changes of different magnitude, direction, or speed.
Modeling of net interest income and Economic Value of Equity uses both actual instrument-level data as well as assumptions. These assumptions include deposit decays, deposit betas, deposit floors, prepayment speeds, new volume pricing, and discount rates. These assumptions are based on historical observations, relevant third-party data, and management judgment. Most assumptions vary by interest rate scenario based on historical observations, relevant third-party data, and management judgment. Given the use of assumptions and management judgment, the net interest income and Economic Value of Equity models and processes are subject to independent review by both internal and external parties.
The Interest Rate Risk Policy requires net interest income simulations to be conducted using both a static balance sheet and a strategy balance sheet. Under a static balance sheet, balance sheet categories are kept flat across the horizon except for cash and retained earnings which are dynamic based on cash flows and earnings in the scenario. Under a strategy balance sheet, management projects dynamic balances based on its forecasted path of the balance sheet which may involve some balance sheet categories increasing and some categories decreasing. The net interest income sensitivity table below uses a static balance sheet. Interest rates in the baseline are kept constant with their values at the balance sheet date and for the non-baseline scenarios, all interest rates are shocked immediately up or down by the amounts shown in the table. Resulting twelve-month net interest income in each of the shock scenarios is then compared to the baseline twelve-month net interest income to establish net interest income sensitivity. Market interest rates do not go below zero in any of the shocks.
For Economic Value of Equity simulations, existing assets and liabilities run off over their modeled lives without inclusion of any new volume. The cash flows on assets and liabilities are discounted to present value to generate net present values of cash flows from assets and liabilities for the baseline scenario. Interest rates are then shocked up and down according to the Economic Value of Equity sensitivity table below and cash flows on assets and liabilities are discounted to present value to generate net present value of cash flows from assets and liabilities for each of the shock scenarios. The resulting Economic Value of Equity in each shock scenario is then compared to the baseline Economic Value of Equity to establish sensitivities.
The following table summarizes the simulated change in net interest income over a 12-month horizon as of September 30, 2026 and December 31, 2025:
Change in interest rates: + 200bp + 100bp - 100bp - 200bp
September 30, 2026 6 % 3 % (2) % 0 %
December 31, 2025 8 % 4 % (4) % (9) %
The table above indicates for the periods presented that our static balance sheet net interest income is asset-sensitive which means that we benefit from rising rates as assets reprice faster than liabilities. This is primarily due to the variable rate nature of the loan portfolio and a relatively short investment portfolio duration as well as the impact of funding from non-interest-bearing sources and deposit betas that do not move to the same degree as market rates. Actual results will differ from the model's simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and the application and timing of various strategies. We were less asset-sensitive as of September 30, 2026, compared to December 31, 2025, given increased duration in the investment portfolio, a more variable rate funding mix, and a larger impact from contractual loan floors.
The following table summarizes the simulated change in Economic Value of Equity over a 12-month horizon as of September 30, 2026 and December 31, 2025:
Change in interest rates: + 200bp + 100bp - 100bp - 200bp
September 30, 2026 (4) % (2) % 0 % 1 %
December 31, 2025 (2) % (1) % (1) % (1) %
The table indicates that our Economic Value of Equity for the periods presented is not materially impacted by changes in interest rates, which is primarily due to the short and matched duration of our assets and liabilities.
Beginning with September 30, 2026, sensitivity analysis for Net interest income and Economic Value of Equity exclude $720.9 million of cash held-for-sale and $743.9 million of deposits held-for-sale associated with the Branch Sale given that the transaction is expected to close in the first quarter of 2027.
Forbright Inc. published this content on November 13, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 13, 2026 at 21:35 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]