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YoY shift: Neutral
Year-over-year tone shift - average net-tone change across Risk Factors and MD&A vs the prior 10-K. This filing is 0.03pp more bullish than last year's.
Why YoY instead of absolute: the LM lexicon has ~6.6× more negative words than positive (legal/risk-disclosure language is heavy on hedging), so every 10-K reads bearish on raw tone. Year-over-year change strips that bias and surfaces the actual shift in management's framing.
Tone shift by section
The two components the gauge averages: how Risk Factors and MD&A each shifted in net tone versus last year's 10-K. The headline above is their average, so a green needle over a soft section just means the other section carried it.
Risk Factors
+0.01pp
Flat
Net-tone change vs last year's 10-K.
MD&A
+0.05pp
Flat
Net-tone change vs last year's 10-K.
Per-snippet highlights
Sentence-level sentiment highlighting with category and subcategory filters is coming once the snippet-scoring pipeline lands. For now, dig into the actual section text on the Sections tab.
Language change vs prior 10-K
Risk Factors (Item 1A) - words with the biggest YoY frequency increase
Negative rising
adversely+3
fail+3
scrutiny+2
expose+2
inaccurate+2
Positive rising
greater+1
favorable+1
best+1
assure+1
enabled+1
Risk Factors (Item 1A)
29,024 words
ITEM 1A. RISK FACTORS
The material risks and uncertainties that management currently believes may have a material adverse effect on us are described below. These risk factors are not guarantees of future outcomes and should be read carefully, as they could, individually or collectively, materially adversely affect our business, financial condition, results of operations, liquidity, cash flows, and the market price, trading volume, or liquidity of our equity securities, including our Class A Common Stock, depending on circumstances that may evolve over time.
Additionally, these risks and uncertainties are not exhaustive, and new or unforeseen risks may emerge, or existing risks may become more significant, due to changes in our business, financial condition, or external conditions, including but not limited to the economic, regulatory, political, technological, and market environment. Any of the risks described below, as well as additional risks that are not currently known to us, that we presently do not deem material, or that may later become material, could potentially, individually or in the aggregate, have a material adverse effect on our business, financial condition, results of operations, cash flows, and the trading price, volatility, or liquidity of our Class A Common Stock, though the occurrence, timing, or impact of such effects cannot be predicted with certainty.
Language change vs prior 10-K
MD&A (Item 7) - words with the biggest YoY frequency increase
Negative rising
decline+3
shutdown+3
losses+2
curtailments+2
negative+1
Positive rising
leading+2
greater+2
benefit+2
enhanced+2
strong+1
MD&A (Item 7)
17,439 words
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions that could cause actual results to differ materially from our expectations. Factors that could cause or contribute to such differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in the section entitled “Cautionary Note Regarding Forward-Looking Statements” as well as the section entitled “Risk Factors.” We assume no obligation to update any of these forward-looking statements except to the extent required by law.
The following discussion relates to our historical results, on a consolidated basis. Because we conduct all our material business operations through our wholly owned subsidiary, Chain Bridge Bank, N.A., the discussion and analysis primarily focus on activities conducted at the subsidiary level.
Introduction
Chain Bridge Bancorp, Inc. (the “Company”) is a Delaware-chartered bank holding company and a publicly traded bank holding company whose Class A common stock is listed on the New York Stock Exchange under the symbol “CBNA”. The Company was incorporated on May 26, 2006, and is subject to supervision and regulation by the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956, as amended. The Company serves as the registered bank holding company for Chain Bank, National Association (the “Bank”), its wholly-owned subsidiary. The Company does not own or control any other subsidiaries and conducts substantially all of its business through the Bank.
Further, to the extent that any information in this Annual Report on Form 10-K constitutes forward-looking statements, the risk factors below are intended to serve as cautionary statements within the meaning of the Private Securities Litigation Reform Act of 1995 (“PSLRA”), Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, identifying certain key factors that could cause actual results to differ materially from those expressed in any forward-looking statements. Forward-looking statements by their nature involve inherent risks and uncertainties, and we can provide no assurance that our expectations, projections, or assumptions will prove to be accurate or that any specific outcome will occur. Investors are cautioned not to place undue reliance on any forward-looking statements, as actual results may vary significantly due to factors within or beyond our control. See “Cautionary Note Regarding Forward-Looking Statements” for additional details on these limitations.
Summary Risk Factors
Some of the more significant challenges and risks relating to an investment in our Company include, among other things, the following:
• Changes in interest rates may adversely affect our earnings and financial condition.
• Increases in interest rates have in the past resulted in, and could in the future result in, unrealized losses on our investment securities portfolio.
• If the average interest rate we pay on our deposits increases, our cost of funds would rise.
• Increases in interest rates could result in a decrease in the market value of our loans.
• Liquidity risks could adversely affect our business, financial condition and results of operations.
• Loss of deposits could increase our funding costs or require us to sell assets or borrow.
• Our deposits are concentrated in political organizations, which can vary significantly in volume due to seasonality or changes in political activity or campaign finance laws.
• Our deposit base is concentrated among a small number of clients.
• Our deposit base is highly concentrated among entities affiliated with the U.S. Republican Party.
• Our deposits are concentrated in uninsured deposits.
• Chain Bridge Bancorp, Inc.’s liquidity is dependent on dividends from the Bank.
• We may need to raise additional capital in the future, and such capital may not be available when needed or at all.
• Our results of operations and financial condition would be adversely affected if the Bank’s allowance for credit losses is insufficient to absorb actual losses or needs to be increased.
• Losses related to a single large loan could have a significant impact on the Bank’s financial condition and results of operations.
• The Bank relies upon independent appraisals to determine the value of the real estate that secures a significant portion of its loans, and the values indicated by such appraisals may not be realizable if the Bank is compelled to foreclose upon such loans.
• Our business may be adversely affected by conditions in the financial markets and economic conditions generally.
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• The geographic concentration of our business in the Washington, D.C. metropolitan area makes our business highly susceptible to local economic conditions and reductions or changes in government spending.
• Our investment securities portfolio exposes us to risks beyond our market area.
• Our significant investment in securities held to maturity exposes us to risks that may adversely affect our business, financial condition or results of operations.
• There can be no assurance that we will be able to maintain or increase our current levels of transaction accounts, noninterest-bearing demand deposits, and level of profitability or growth.
• The use or support of stablecoins by us, or broader market adoption of stablecoins, may expose us to legal, regulatory, operational, and competitive risks.
• We place a significant portion of our clients’ deposits with other banks through the ICS ® network, which exposes us to risks that may adversely affect our business, financial condition or results of operations.
• Participation in additional or newer reciprocal deposit networks, including NBID, may introduce operational and regulatory risks.
• Our Trust & Wealth Department exposes us to certain risks and there can be no assurance the department will contribute meaningfully to our revenues or become profitable on a standalone basis.
• We may be adversely affected by changes in the actual or perceived soundness or condition of other financial institutions.
• There is no assurance that the Bank will be able to compete successfully with others for its business.
• We could fail to attract, retain or motivate skilled and qualified personnel, including our senior management, other key employees or directors, which could adversely affect our business.
• Certain clients, including our political organization clients, may be subject to, and are particularly sensitive to, negative publicity, which may subject us to enhanced reputational risk.
• Compliance with public company reporting and regulatory requirements is costly and resource-intensive and has placed, and will continue to place, additional demands on our personnel and systems.
• We are subject to operational risk, which could adversely affect our business and reputation and create material legal and financial exposure.
• Operational risks associated with funds transfer activities could materially and adversely affect our business, financial condition, and results of operations.
• The occurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity-related incidents could have a material adverse effect on our business, financial condition, results of operations, and reputation.
• We also face risks related to cyberattacks and other security breaches involving external, third-party vendors and counterparties.
• Our operations rely on certain external vendors, and our use of these vendors is subject to increasing regulatory requirements and attention.
• The development and use of artificial intelligence present risks and challenges that may adversely impact our business.
• We depend on the accuracy and completeness of information about clients and counterparties.
• Our reliance on estimates and risk management activities may not always prevent or mitigate risks effectively, leading to potential differences between actual results and our forecasts.
• Government regulation significantly affects our business and may result in higher costs and lower stockholder returns.
• Litigation and regulatory actions, including possible enforcement actions, could subject us to significant fines, penalties, judgments, restrictions on our business activities or reputational harm.
• The Bank’s primary regulator has broad powers to place limitations on the conduct of a bank’s business, or to close an institution.
• The Bank is subject to extensive and evolving requirements under anti-money laundering and sanctions laws.
• The Bank is subject to numerous “fair and responsible banking” laws and regulations designed to protect consumers, which increase our compliance costs and subject us to potential legal liability or reputational damage.
• We engage in lending secured by real estate and may be forced to foreclose on the collateral and own the underlying real estate, subjecting us to potential costs, risks and consumer protection laws.
• Any violation of laws regarding, or incidents involving, the privacy, information security and protection of personal, confidential or proprietary information could damage our reputation and otherwise adversely affect our business.
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• Increases in FDIC insurance premiums could adversely affect our earnings and results of operations.
• The Federal Reserve may require the Company to commit capital resources to support the Bank at a time when our resources are limited, which may require us to borrow funds or raise capital on unfavorable terms.
• Changes in our accounting policies or in accounting standards could materially affect how we report our financial results and condition.
• The dual-class structure of our common stock has the effect of limiting your ability to influence corporate matters and may adversely affect the market for our Class A common stock.
• Members of the Fitzgerald Family and other holders of Class B common stock could aggregate their holdings and sell a controlling interest in us to a third party in a private transaction.
• Conflicts of interest and other disputes may arise between the members of the Fitzgerald Family and us that may be resolved in a manner unfavorable to us and our other stockholders.
• An acquisition of another banking institution could increase operational and regulatory risks, and adversely affect our financial condition and stock price and, if paid for with our Class A Common Stock, could dilute existing stockholders.
• An investment in our common stock is not an insured deposit.
• If the Bank fails or is put into receivership or conservatorship by the FDIC and its primary regulator, investors will likely lose their entire investment in the Company.
In addition, an investment in shares of our common stock involves certain risks related to our common stock, including related to the market price, dilution, our ability to issue preferred stock, our dividend policy, our status as an “emerging growth company” and “smaller reporting company,” analyst research and recommendations, factors that may discourage or delay acquisition attempts for us, and the exclusive forum provisions in our Charter and Bylaws.
Interest Rate Risk
Changes in interest rates may adversely affect our earnings and financial condition.
Changes in interest rates may adversely affect our earnings and financial condition in ways that cannot be predicted with certainty. Interest rates are highly sensitive to numerous factors beyond our control, including inflation, unemployment, changes in the money supply, international events, events in world financial markets, competition, general economic conditions, tariffs, and monetary and fiscal policies of various governmental and regulatory authorities, including the Federal Reserve.
Our operating income and net income depend to a great extent on net interest margin (i.e., the difference between the interest yields earned on cash, loans, securities and other interest-bearing assets and the interest rates paid on interest-bearing deposits, borrowings and other liabilities). Net interest margin is affected by changes in market interest rates because different types of assets and liabilities may react differently, and at different times, to market interest rate changes. For example, when interest-bearing liabilities mature or reprice more quickly than interest-earning assets in a period, an increase in market rates of interest could reduce net interest income. Similarly, when interest-earning assets mature or reprice more quickly than interest-bearing liabilities, falling interest rates could reduce net interest income. Additionally, because a significant majority of our funding consists of noninterest-bearing deposits and a substantial amount of our assets are invested in cash and cash equivalents, a decrease in short-term interest rates would be expected to immediately reduce our interest income without a corresponding reduction in our interest expense, which would reduce our net interest income. Declines in the Interest on Reserve Balances (IORB) rate would be expected to adversely affect our net interest income unless offset by other factors. These conditions would be expected to adversely affect our business, results of operations and financial condition.
A substantial portion of our assets is invested in interest-bearing reserves at the Federal Reserve. If the Federal Reserve decreases the interest it pays on these reserves, or ceases to pay interest on these reserves entirely, our net interest income could be adversely affected. This risk may potentially be exacerbated if the Federal Reserve requires banks to maintain minimum levels of reserves. Further, a reduction in the interest rate paid on these reserves or in the accessibility of these reserves could compel us to seek alternative, potentially higher-risk investments to generate interest income, which might adversely affect our business, results of operations, or financial condition if such investments underperform or increase our risk exposure.
Increases in interest rates will likely also adversely affect the market value of our investment and loan portfolios. If we are required to sell securities at a discount prior to their maturity, our unrealized losses would then turn into realized losses. See “Interest rates have in the past resulted in, and could in the future result in, unrealized losses on our investment
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securities portfolio.” Decreases in the market value of our loan portfolio could potentially become realized losses if we were to sell loans or if our bank were to be acquired. See “Increases in interest rates could result in a decrease in the market value of our loans.”
We attempt to manage risk from changes in market interest rates by adjusting the rates, maturities, repricing schedules, and balances of various types of interest-earning assets and interest-bearing liabilities. However, interest rate risk management techniques are imprecise and may not effectively mitigate these risks or align with depositor preferences. Moreover, we currently do not employ interest rate derivatives to hedge this risk, relying exclusively on portfolio adjustments, which may prove insufficientagainst rapid or significant rate fluctuations. As a result, a rapid increase or decrease in interest rates could potentially have an adverse effect on our net interest margin and results of operations. Market interest rates for types of products and services in our market may also fluctuate significantly over time due to competition and local or regional economic conditions. Our interest rate risk management process relies on numerous assumptions, including projections of interest rate trends, assumptions regarding deposit balances, mix and pricing sensitivity, and asset-liability repricing behaviors, which may be inaccurate due to unforeseen market shifts or external factors beyond our control. Furthermore, should we employ derivatives in the future, their implementation costs or ineffective hedging could potentially further complicate risk management. Consequently, there can be no assurance that we will successfully manage our interest rate risk exposure, and actual outcomes may differ materially from our expectations due to factors within or beyond our control.
Increases in interest rates have in the past resulted in, and could in the future result in, unrealized losses on our investment securities portfolio.
We allocate a substantial portion of our assets in investment securities. As of December 31, 2025, approximately 49% of our total assets were held in an investment securities portfolio consisting primarily of U.S. Treasury securities, municipal bonds, and investment-grade corporate bonds—asset classes that are inherently sensitive to changes in interest rates. When interest rates rise, the fair value of fixed-income securities typically declines due to the inverse relationship between interest rates and bond prices. As a result, interest rate increases have previously led to, and could in the future lead to, greater unrealized losses in our investment portfolio. We recognize changes in the estimated fair value of AFS securities through other comprehensive income, whereas HTM securities are reported at amortized cost and changes in estimated fair value are not reported on the balance sheet. When a security is sold, any realized gain or loss is recorded in net income. As of December 31, 2025, our net unrealized losses on available-for-sale securities, after tax, totaled $1.7 million, while net unrealized losses on held-to-maturity securities, after tax, amounted to $9.0 million—a combined total representing 6.2% of our Tier 1 capital. If we were required to liquidate a substantial portion of our investment securities portfolio, we could be forced to sell securities at a loss, which could materially reduce our earnings, adversely affect our regulatory capital ratios, and negatively impact our business and financial condition.
If the average interest rate we pay on our deposits increases, our cost of funds would rise.
A significant majority of our funding consists of noninterest-bearing deposits. As of December 31, 2025, over 75% of our liabilities consisted of noninterest-bearing deposits. During periods of high or increasing interest rates, our clients have in the past shifted, and may in the future shift, their funds to accounts or financial institutions that offer higher interest rates. Further, we estimate that there are periods when a majority of our deposit balances are sourced from political organizations, which cause our deposit balances to fluctuate due to the seasonality of fundraising and spending around elections, and following elections our political organization clients have in the past shifted, and may in the future shift, their funds from noninterest-bearing accounts to interest bearing accounts. See “Our deposits are concentrated in political organizations, which can vary significantly in volume due to seasonality or changes in political activity or campaign finance laws.” Such movements increase our cost of funds and adversely affect our business, financial condition or results of operations and could cause our current business strategy to become unprofitable. Further, to the extent clients withdraw their deposits and move their funds to competitors or alternative investments, we would lose a lower-cost source of funding, which would be expected to adversely affect our business, financial condition or results of operations. See “— Liquidity Risk — Loss of deposits could increase our funding costs or require us to sell assets or borrow.”
Increases in interest rates could result in a decrease in the market value of our loans.
As of December 31, 2025, variable rate loans, which include floating and adjustable rate structures, comprised 69.7% of our loan portfolio. Our variable rate loans primarily consist of adjustable-rate residential real estate loans with initial fixed-rate periods of three, five, seven, or ten years, which, depending on the loan program, reprice every one, three, or five
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years after the initial fixed-rate period ends, and so a substantial part of our loan portfolio remains sensitive to interest rate changes for extended periods.
When interest rates rise, the market value of loans with longer fixed-rate periods decreases. Unlike our available-for-sale investment securities, our loans are carried at amortized cost on our balance sheet. As a result, increases in interest rates create unrealized losses in our loan portfolio that are not immediately reflected in our financial statements.
These unrealized losses could become realized if we were to sell loans or if the Bank were to be acquired. Additionally, the reduced market value of our loan portfolio in a rising rate environment could negatively impact the economic value of our equity, even if not immediately apparent from our reported financial results. This could potentially affect our ability to raise capital or impact our valuation in a merger or acquisition. See Note 12, “Fair Value Measurements” to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further information regarding the estimated fair value of our loan portfolio as of December 31, 2025.
Liquidity Risk
Liquidity risks could adversely affect our business, financial condition and results of operations.
Liquidity risk is the risk that we will not be able to meet our obligations, including financial and loan commitments, as they come due and is inherent in our operations. An inability to raise funds through deposits, borrowings, the sale of investment securities and from other sources could have a substantial negative effect on our liquidity.
Our most important source of funds consists of our clients’ deposits. Deposit balances can decrease for a variety of reasons, and if clients move money out of deposits for any reason, we could lose a relatively low-cost source of funds, or we may need to sell assets or borrow for liquidity. See “Loss of deposits could increase our funding costs or require us to sell assets or borrow.” Further, we estimate that there are periods when a majority of our deposit balances are sourced from political organizations, which cause our deposit balances to fluctuate due to the seasonality of fundraising and spending around elections. See “Our deposits are concentrated in political organizations, which can vary significantly in volume due to seasonality or changes in political activity or campaign finance laws.”
Our primary source of liquidity is our account at the Federal Reserve, which held $580.9 million at December 31, 2025, which supports our daily and ongoing activities. We also maintain secured lines of credit with the Federal Home Loan Bank (the “FHLB”) and the Federal Reserve’s discount window, which require us to pledge collateral to establish credit availability. Because we have no collateral pledged to support borrowings under our secured line of credit with the FHLB or the Federal Reserve’s discount window, we would need to identify and pledge collateral before we could use the FHLB or the Federal Reserve’s discount window as a source of additional liquidity, and our access to additional liquidity may be delayed or unavailable when needed. In February 2026, we entered into a $15.0 million unsecured revolving credit facility at the holding company level that may provide an additional source of contingent liquidity, subject to its terms and conditions. Another source of liquidity is the principal and interest payments we receive on our loans and investment securities. Cash on hand, cash at third-party banks and available-for-sale debt securities are our most liquid assets. Our investment portfolio is composed of investment-grade securities. Our access to funding sources in amounts adequate to finance or capitalize our activities or on terms that are acceptable to us could be impaired by factors that affect us directly or the financial services industry or economy in general, such as disruptions in the financial markets or negative views and expectations about the prospects for the financial services industry. Economic conditions and a loss of confidence in financial institutions may increase our cost of funding and limit access to certain customary sources of capital, including inter-bank borrowings and borrowings from the discount window of the Federal Reserve.
Any decline in available funding, or inability to access our available funding in a timely manner, could adversely impact our ability to continue to implement our business plan, including originating loans, investing in securities, meeting our expenses or fulfilling obligations such as repaying our borrowings and meeting deposit withdrawal demands, any of which could have a material adverse effect on our business, financial condition and results of operations.
Loss of deposits could increase our funding costs or require us to sell assets or borrow.
Like many banking companies, we rely on client deposits to provide a considerable portion of our funding, and we continue to seek client deposits to maintain this funding base. We accept deposits directly from consumer and commercial clients and, as of December 31, 2025, we had $1.6 billion in total deposits. If we are unable to sufficiently maintain or
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grow our deposits to meet liquidity objectives, we may be subject to paying higher funding costs or unable to satisfy our funding needs.
Our deposits may be subject to dramatic fluctuations in availability or price due to certain factors outside our control, such as a loss of confidence by clients in us or the banking sector generally, client perceptions of our financial health and general reputation, increasing competitive pressures from other financial services firms for consumer or commercial client deposits, changes in interest rates and returns on other investment classes, which could result in significant outflows of deposits within short periods of time or significant changes in pricing necessary to maintain current client deposits or attract additional deposits. Notably, we estimate that there are periods when our deposits received from political organizations constitute at least a majority of our total deposits, and these deposits are generally more seasonal than typical commercial or consumer deposits, aligning with the cycle of federal election campaigns. See “Our deposits are concentrated in political organizations, which can vary significantly in volume due to seasonality or changes in political activity or campaign finance laws.” Further, as of December 31, 2025, we estimate that approximately 75.0% of our total deposits were not insured by the FDIC, and these uninsured deposits may be more likely to be withdrawn if we experience, or are perceived to experience, financial distress or during periods of real or perceived stress or instability in financial markets more generally. See “Our deposits are concentrated in uninsured deposits.” In addition, if our competitors raise the rates they pay on deposits, our funding costs may increase, either because we raise our rates to avoid losing deposits or because we lose deposits and must rely on more expensive sources of funding. Also, clients typically move money from bank deposits to alternative investments during high or rising interest rate environments. Checking and savings account balances and other forms of client deposits may decrease when clients perceive alternative investments as providing a better risk/return trade-off. Our clients could take their money out of the Bank and put it in alternative investments, causing us to lose a lower-cost source of funding. Indeed, interest rate shifts in either direction could influence clients’ behavior, priorities, and decision-making towards withdrawing their deposits with us. Clients may also move noninterest-bearing deposits to interest-bearing accounts, increasing the cost of those deposits. Obtaining adequate funding to meet our deposit obligations may be more challenging during periods of elevated prevailing interest rates, such as the present, and our ability to attract depositors during a time of actual or perceived distress or instability in the marketplace may be limited. Higher funding costs could reduce our net interest margin and net interest income and could have a material adverse effect on our business, financial condition and results of operations.
Our deposits are concentrated in political organizations, which can vary significantly in volume due to seasonality or changes in political activity or campaign finance laws.
As of December 31, 2025, we estimate that five of our 11 clients with individual deposit balances exceeding 1.0% of our total deposits were political organization clients, representing 15.4% of our total deposits. These deposits exhibit more seasonality than typical commercial or consumer deposits. Federal election cycles influence our deposit levels, liquidity, and revenues. In the quarters leading up to federal elections, especially presidential elections, our deposits, net interest income, and noninterest income generally increase. Conversely, in the quarters immediately before, during, and after a federal election, we usually experience an outflow of political organization deposits, causing revenue to decline until clients resume fundraising for the next election cycle. Election outcomes may also impact the timing and scale of deposit inflows or outflows from political organizations. The precise amount and timing of these outflows remain uncertain and may differ from historical patterns. Even within our classification of political organizations, some types may exhibit more seasonality. For instance, certain party committee accounts may maintain funds throughout election cycles, while some campaign committees may have accounts that are only established for a single campaign. During periods of high interest rates this seasonality may be exacerbated. We may underestimate the proportion of our deposits subject to seasonality, potentially leading to higher than expected deposit outflows. If our deposit levels decline due to seasonality and we replace them with higher-cost deposits or borrowings, sell investment securities at a discount before maturity, or reduce our interest-bearing assets, our net interest margin, earnings, and earnings per share could be adversely affected.
Given our concentration in political organizations deposits, which exhibit pronounced seasonality, we often maintain a higher proportion of assets in highly liquid investments, such as interest-bearing reserve balances at the Federal Reserve or short term U.S. Treasury securities, to fund anticipated withdrawals and mitigate liquidity risk. However, these highly liquid, zero-risk-weighted investments generally yield lower returns than fully risk-weighted, less liquid assets, such as commercial or consumer loans.
During periods of seasonal deposit growth, our balance sheet may expand to a level that requires us to actively manage the Bank’s Tier 1 leverage ratio. In the past, we have managed our Tier 1 leverage ratio by placing certain deposits at other financial institutions as One-Way Sell ® deposits through the ICS ® network, thereby keeping them off our balance sheet. However, there is no assurance that this strategy will continue to be available or effective in the future. See “—
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Other Risks Related to Our Business — We place a significant portion of our clients’ deposits with other banks through the ICS ® network, which exposes us to risks that may adversely affect our business, financial condition, or results of operations.” If we are unable to manage our Tier 1 leverage ratio by using the ICS ® network, we may need to restrict our growth or raise additional capital.
Our ability to raise additional capital will depend on market conditions, economic factors, and other external factors, many of which are outside our control. Consequently, there can be no assurance that we will be able to raise additional capital, whether through equity issuance or by debt financing, on acceptable terms. See “— We may need to raise additional capital in the future, and such capital may not be available when needed or at all.” If we are required to curtail our growth, or if we cannot raise additional capital when needed or on acceptable terms, our results of operations and long-term strategic objectives could be adversely impacted. See “— Legal, Regulatory and Compliance Risks — Government regulation significantly affects our business and may result in higher costs and lower stockholder returns.” As of December 31, 2025, the Bank’s Tier 1 leverage ratio was 9.61% and our One-Way Sell ® deposits totaled $359.9 million. If these deposits were included on our balance sheet as of December 31, 2025, we estimate that the Bank’s Tier 1 leverage ratio would have been approximately 8.95%, which exceeds the 5.00% Tier 1 leverage ratio required to be considered “well capitalized” under applicable federal banking regulations.
The level of political organization deposits may also be adversely affected by changes in political activity or campaign finance laws. For example, following the U.S. Supreme Court’s decision in Citizens United v. Federal Election Commission in 2010, we experienced significant deposit inflows from Super PACs, which are permitted to accept unlimited contributions for the purpose of making independent expenditures. Any changes in political contributions or spending, including as a result of a change in campaign finance laws that restrict our clients’ ability to accept contributions or spend funds, could reduce our deposit inflows and adversely affect our business, financial condition, or results of operations.
Our deposit base is concentrated among a small number of clients.
A significant portion of our total deposits are attributable to a fraction of our deposit accounts, particularly during periods of high deposits due to seasonality. As of December 31, 2025, there were 11 clients with individual deposit balances exceeding 1.0% of our total deposits, accounting for 31.0% of our total deposits. We estimate that five of these 11 clients were political organization clients, representing 15.4% of our total deposits, and five of 11 clients were social welfare organizations organized under Section 501(c)(4) of the Internal Revenue Code, representing 14.5% of our total deposits.
Approximately 87% of our total deposit balances were from commercial entities, including businesses, political organizations, trade associations, and nonprofit organizations. These deposit clients are typically intermediated by personal relationships between Bank officers and the commercial client account signers, and therefore can require significant investments of time and resources to maintain. Any deterioration in such relationships, particularly those associated with significant deposit size, could lead to an outflow of deposits and compel us to liquidate interest-earning assets, which could lead to a decline in our earnings. Changes in personnel in these relationships, whether at the Bank or on the part of the client, could cause the relationship to deteriorate and the depositor to leave the Bank.
Further, a concentrated number of firms provide treasury, legal or regulatory compliance services for political organizations. As part of their advisory services, these firms often open deposit accounts with the Bank on behalf of their client or recommend that their clients open up their deposit account with the Bank. These firms are a significant source of our deposits, including through deposit referrals. As of December 31, 2025, of our 11 clients with individual deposit balances exceeding 1.0% of our total deposits, five clients representing 15.4% of our total deposits opened their deposit accounts through firms that provide these services for political organizations. The concentration of deposits associated with these firms may be higher than the figures provided suggest, as our method of tracking these relationships may not capture all relevant connections. If our relationships with these firms deteriorate or if our reputation among these firms suffers and they no longer recommend us, we could experience a reduction in new clients from these firms, potentially leading to an outflow of deposits from existing clients and a failure to acquire new clients through these firms in the future. Additionally, we are not very well known outside of the commercial sectors we primarily serve, especially political organizations, and have little consumer brand recognition in the Washington, D.C. metropolitan area market and no consumer brand recognition in other markets. As a result, our deposit base and earnings may continue to be heavily dependent on our commercial deposit clients for the foreseeable future. The loss of even one of these key relationships could have a material adverse effect on our deposit base and financial condition.
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Our deposit base is highly concentrated among entities affiliated with the U.S. Republican Party.
Our deposit base is highly concentrated among organizations affiliated with the U.S. Republican Party. We have been the depository bank for every Republican presidential nominee since the 2008 federal election cycle, and substantially all of our political organization deposits, come from entities affiliated with the Republican Party. This concentration exposes us to certain risks that could adversely affect business, financial condition, or reputation.
Our deposit base is vulnerable to changes in the Republican Party’s candidates, political fortunes, strategies, or fundraising. Any event that negatively impacts the Republican Party, including its ability to raise funds or its popular support, could lead to significant deposit outflows or impact future deposit inflows. For example, controversies, leadership changes, or shifts in party strategy or donor behavior affecting the Republican Party could adversely affect our deposit levels. Changes in campaign finance laws or regulations that affect the Republican Party or its fundraising methods could also adversely impact our deposit levels. Further, our political organization deposits exhibit seasonality based on election cycles, and our concentration in Republican-affiliated organizations, particularly our involvement with presidential campaigns, may exacerbate this effect, as we may experience more pronounced deposit inflows and outflows based on Republican primary and general election timelines or outcomes. In addition, while we have previously provided banking services to certain key Republican political organizations during election cycles in the past, there is no assurance that we will be selected to provide such services in the future. Any significant reduction in deposits from Republican-affiliated organizations could materially and adversely affect our liquidity, financial condition, and results of operations. Our ability to replace these deposits with alternative sources, if necessary, may be limited and could result in higher funding costs or require us to sell securities prior to maturity, potentially at a loss.
Our association with Republican-affiliated organizations may impact our ability to attract or retain clients with different political affiliations. It could also expose us to public relations challenges, including negative media coverage, social media criticism or potential boycotts from supporters of other political viewpoints. Our focus on serving Republican-affiliated organizations may also limit our ability to diversify our political organization deposit base, as Democratic-affiliated organizations have generally established, and may in the future establish, banking relationships elsewhere. Our high concentration of deposits from Republican-affiliated organizations may also attract increased regulatory scrutiny, potentially leading to additional compliance burdens or restrictions on our activities.
Under campaign finance laws and regulations, including Federal Election Commission (“FEC”) regulations, our political organization clients that are registered with the FEC must regularly disclose their financial activities, including details of their deposits and loans with us. This mandated transparency means that our banking relationships with these clients, including deposit levels, loan amounts, and transaction patterns, may be publicly accessible. Such visibility could make our deposit base more susceptible to fluctuations based on public scrutiny, political events, or changes in campaign finance laws. Competitors, journalists, watchdog groups, and opposing political entities can easily monitor and analyze these disclosures, potentially using this information to our disadvantage. Given our concentration in Republican-affiliated organizations, we may become a particular target for activist groups or politically motivated campaigns. These groups may use the publicly available information to pressure us, our clients, or our business partners, potentially through boycotts, negative publicity campaigns, or other means. Sudden changes in deposit levels could signal shifts in political fortunes or campaign strategies, attracting unwanted attention or speculation.
As a public company, we may also face a heightened risk of being targeted by politically motivated groups or activist investors seeking to influence our business practices or client relationships. Such groups or activists may attempt to use stockholder resolutions, proxy contests, public campaigns, media pressure, or other means to force changes in our operations or governance. For example, they may pressure us to alter our business model, sever relationships with certain Republican candidates or committees, adopt specific political stances, or increase disclosures beyond regulatory requirements. While our dual-class stock structure is designed in part to mitigate certain risks, there can be no assurances that our dual-class stock structure will provide complete protection against potential pressures by such groups or activists. Further, even if these efforts are not successful, they could still result in significant legal expenses, consume management’s time and attention, and potentially alienate some of our depositors, employees, or business partners, and could result in negative publicity or reputational damage.
Our deposits are concentrated in uninsured deposits.
As of December 31, 2025, we estimate that approximately $1.2 billion, or approximately 75.0% of our total deposits, were not insured by the FDIC. These uninsured deposits may be more likely to be withdrawn if we experience, or are perceived to experience, financial distress or during periods of real or perceived stress or instability in financial markets
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more generally. For example, bank failures have caused ongoing concerns about the liquidity of the financial services industry, which could increase deposit outflows due to concerns that deposits held at the Bank exceed the FDIC’s $250,000 per client insurance limit. These concerns may be exacerbated by negative media attention and the rapid spread of rumors, concerns and information, including misinformation on social media, that could cause panic among investors, depositors, clients and the general public. If many clients withdraw their deposits, it could have a material adverse effect on our business, financial condition and results of operations, including by forcing us to seek alternative funding sources, requiring us to sell securities at a loss and limiting our ability to make new investments or loans. See “Loss of deposits could increase our funding costs or require us to sell assets or borrow.”
We do not maintain policies or internal limits regarding our concentration in uninsured deposits. Our estimated uninsured deposits increased to approximately $1.2 billion, or 75.0% of our total deposits, as of December 31, 2025 from approximately $857.8 million, or approximately 68.6% of our total deposits, as of December 31, 2024. Although we have implemented policies and employ strategies to manage our liquidity, as discussed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Management — Liquidity Management,” there can be no assurances that we will be able to successfully manage our liquidity risk, including the risk that our concentration in uninsured deposits may expose us to an increased risk of deposit outflows.
We participate in the ICS® network to provide our clients with additional FDIC insurance coverage for their uninsured balances. For our clients that opt into the ICS® network, this service allows us to place their deposits in increments up to the FDIC insurance limits at other banks within the ICS® network. Participation in any deposit placement network involves operational, counterparty and liquidity risks, and there can be no assurance that the availability of such networks will limit outflows of uninsured deposits or that such networks will remain available on the same terms or at all. Clients may still withdraw funds despite additional coverage, particularly in times of heightened market uncertainty. See “— We place a significant portion of our clients’ deposits with other banks through the ICS® network, which exposes us to risks that may adversely affect our business, financial condition or results of operations.”
Chain Bridge Bancorp, Inc.’s liquidity is dependent on dividends from the Bank.
Chain Bridge Bancorp, Inc. is a legal entity separate and distinct from our bank subsidiary, Chain Bridge Bank, N.A. Dividends from the Bank provide virtually all of Chain Bridge Bancorp, Inc.’s operating cash flow. Various federal and state laws and regulations limit the amount of dividends that our Bank may pay to Chain Bridge Bancorp, Inc. For example, under applicable regulations, the Bank may not, without prior regulatory approval, declare dividends in excess of the sum of the current year’s net profits plus the retained net profits from the prior two years or in excess of the sum of the Bank’s retained earnings and current period net income. See “— Risks Related to Our Common Stock — We do not intend to pay dividends on our common stock for the foreseeable future, and our future ability to pay dividends is subject to restrictions.” Also, Chain Bridge Bancorp, Inc.’s right to participate in a distribution of assets upon a subsidiary’s liquidation or reorganization is subject to the prior claims of the subsidiary’s creditors. In the event the Bank is unable to pay dividends to Chain Bridge Bancorp, Inc., we may not be able to service any debt we may incur, pay obligations or pay dividends on our common stock. The inability to receive dividends from the Bank could affect Chain Bridge Bancorp, Inc.’s liquidity and have a material adverse effect on our business, financial condition and results of operations.
We may need to raise additional capital in the future, and such capital may not be available when needed or at all.
We are currently well-capitalized and have no holding company debt, but we may still require additional capital to support our Bank’s future growth. If deposit growth or other factors increase our Bank’s deposit and asset levels, including due to seasonality, we may need additional capital to maintain a Tier 1 leverage ratio at levels we consider appropriate.
We have previously borrowed from an unsecured revolving line of credit with a third-party commercial bank and used the proceeds to purchase stock in the Bank to increase its regulatory capital. In October 2024, we used a portion of the net proceeds of our initial public offering to repay that $10.0 million line of credit in full, after which the line of credit was closed. In February 2026, we entered into a new $15.0 million unsecured revolving credit facility at the holding company level.
The new facility contains customary financial and other covenants, including requirements related to the regulatory capital levels of the Bank, and restrictions on additional indebtedness. If we fail to comply with these covenants or experience an event of default, amounts outstanding under the facility could become immediately due and payable. In addition, the facility has a stated maturity date in February 2027, subject to extension at our option if we remain in compliance with its terms. We may not be able to extend or refinance this facility on favorable terms, or at all.
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Any inability to access, extend, or refinance this line of credit could limit our financial flexibility, restrict our ability to provide additional capital to the Bank, or adversely affect our liquidity and financial condition.
Issuing additional common stock could dilute our existing stockholders’ earnings per share (“EPS”) and potentially reduce book value per share (“BVPS”), particularly if the issuance price is below our then-current book value. By contrast, issuing subordinated debt or preferred stock would add interest or dividend obligations that we do not currently have. Holders of preferred stock may also have preferences senior to our common stockholders, which could affect dividends or liquidation proceeds. These potential obligations and preferences could adversely affect our future earnings and the value of our common stock.
Our ability to raise additional capital, if needed, will depend on, among other things, conditions in the capital markets at that time, which are outside of our control, and on our financial condition. Unfavorable economic conditions or diminished confidence in financial institutions could limit our access to traditional capital markets sources, such as public offerings of equity or debt securities or private placements with institutional investors. Any event that limits our access to these markets—such as general market disruptions—may increase our capital costs or restrict the amount of capital available to us. This risk may be amplified if we must seek additional capital at a time when multiple financial institutions are doing the same.
If we incur debt at the holding company level, we would introduce leverage, which could make our financial position more vulnerable to adverse changes in market conditions. We could also potentially be required to pledge the Bank’s stock as collateral to secure such borrowings. While this approach might lessen the need to issue additional shares (and thereby temper EPS or BVPS dilution), the associated interest expense could lower our net interest margin and reduce our earnings. If we default on secured debt, creditors could foreclose on the pledged Bank stock.
An inability to raise capital on acceptable terms could have a material adverse effect on our business, financial condition, and results of operations. It could cause us to limit the Bank’s deposit growth or reduce the Bank’s deposit and corresponding asset size to maintain a Tier 1 leverage ratio satisfactory to us. It could also subject us to heightened regulatory scrutiny and restrictions on growth, including limits on our ability to expand our loan portfolio or pursue acquisitions. These constraints could increase operating expenses or decrease revenues, thereby negatively affecting our financial condition and results of operations.
Credit Risk
Our results of operations and financial condition would be adversely affected if the Bank’s allowance for credit losses is insufficient to absorb actual losses or needs to be increased.
Our financial results and condition could be negatively impacted if our allowance for credit losses is insufficient to cover actual losses or if we need to increase this allowance. While we have historically maintained low levels of non-performing loans and net loan charge-offs, there is no guarantee this trend will continue. Banking regulations, specifically those set forth by the OCC and the FDIC, require that the securities we hold must be investment grade. However, no similar regulation applies to our loan portfolio. Risks associated with our loan portfolio include: (1) the geographic concentration of our loans in the Washington, D.C. area; (2) our exposure to certain categories of loans with relatively higher credit risk, including commercial real estate and commercial and industrial loans; (3) the relatively large size of some residential mortgage loans; (4) the newness of certain loans made later in the economic cycle; and (5) the continued fundraising efforts by party committees to repay election-related borrowings. Even though we believe that our allowance for credit losses is reasonably sufficient to cover expected losses, estimating loan losses involves judgment and inherent uncertainties. Despite our efforts to monitor credit quality and identify problem loans early, we may not always succeed in detecting deteriorating loans before they become non-performing, nor can we guarantee that we will be able to limit losses. As a result, we may need to significantly and unexpectedly increase our allowance for credit losses in the future, which could materially affect our financial performance and condition.
Losses related to a single large loan could have a significant impact on the Bank’s financial condition and results of operations.
As a result of the Bank’s concentrations of single-family residential jumbo mortgage loans and large commercial loans, a loss on any single large loan or multiple loans could negatively impact our results of operations. As of December 31, 2025, the Bank held 44 non-conforming single-family residential jumbo mortgage loans with an aggregate balance of $82.0 million, representing 42.0% of the Bank’s total single-family residential mortgage portfolio. Additionally,
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commercial and industrial loans not primarily secured by real estate are typically made based on the ability of the borrower to make payment on the loan from the cash flow of the business, and are collateralized primarily by business assets such as equipment and accounts receivable. These assets are often subject to depreciation over time and may be more difficult than real estate collateral to evaluate, and the value of such assets may be more difficult to realize upon liquidation. As a result, the availability of funds for repayment of such loans is often contingent on the success of the business itself.
Although the Bank officers strive to rigorously underwrite and structure loans and diligently monitor the financial condition of borrowers in an effort to avoid or minimize losses, unexpected reversals in the business of an individual borrower can occur, and the resulting decline in the quality of loans to such borrowers, and related provisions for credit losses, could have a material adverse effect on our results of operations and financial condition. Despite our best efforts, it is not always possible to predict or prevent every potential financial issue that borrowers may face.
The Bank relies upon independent appraisals to determine the value of the real estate that secures a significant portion of its loans, and the values indicated by such appraisals may not be realizable if the Bank is compelled to foreclose upon such loans.
A significant portion of our Bank’s loan portfolio is secured by residential and commercial real estate. To determine the value of the real estate that secures these loans, we rely on independent appraisals. These appraisals are estimates of value at a specific point in time, and while they are an important tool in our lending process, they are not guarantees of future market value. The independent appraisers we use may make errors in judgment or overlook factors that could affect the reliability of the appraisals, despite our efforts to mitigate such risks.
While the Bank utilizes appraisal management companies to order appraisals and employs a third-party appraisal review process to evaluate the accuracy and reliability of the appraisals before they are used in our lending decisions, there can be no assurances that these practices will prevent losses if the Bank is compelled to foreclose on loans secured by residential and commercial real estate. Even with these measures in place, the value of real estate can change due to market conditions or events that occur after the appraisal, which are beyond our control. If we are compelled to foreclose on a property, there is a risk that the real estate may be worth less than the appraised value, which could result in the Bank not recovering the full amount of the loan. In such cases, we could incur losses that may adversely affect our financial condition.
Other Risks Related to Our Business
Our business may be adversely affected by conditions in the financial markets and economic conditions generally.
Our financial performance generally is dependent upon the business environment in the markets in which we operate and in the United States as a whole, and may be adversely affected by conditions in the financial markets and economic conditions. Unfavorable or uncertain economic and market conditions can be caused by, among other factors, declines in economic growth, business activity or investor or business confidence; limitations on the availability or increases in the cost of credit and capital; changes in inflation, interest rates monetary policy or fiscal policy; concerns regarding the ability of Congress to reach agreement on federal budget matters (including the debt ceiling), or total or partial government shutdowns; changes in trade policy, including changes in tariffs, or immigration policy; increases in real estate and other state and local taxes; high unemployment; natural disasters; geopolitical issues, conflicts and uncertainty; public health emergencies or pandemics; and other external factors or a combination of these or other factors.
Unfavorable economic or market conditions can result in a deterioration in the credit quality of our borrowers, the value of collateral securing our loans and leases and the demand for our products and services, an increase in the number of loan delinquencies, defaults and charge-offs, additional provisions for credit losses and an overall material adverse effect on the quality of our loan portfolio, each of which could adversely affect our business, results of operations or financial condition. Our deposit balances and earning assets may also be impacted by economic and market factors such as output, inflation, interest rates, wages, asset values, and government spending. In addition to any impact on our balance sheet, inflation can increase our operating costs primarily through labor and technology overhead. Political fundraising comprises a large share of our deposit base and is dependent on contributions from high-net-worth and small-dollar donors across the United States, which may decline during periods of unfavorable economic or market conditions. High-earning professionals in fields such as public affairs, law, government contracting, and consulting are a substantial source of our deposits and loans, and to the extent such professionals are adversely affected by unfavorable economic or market conditions, they may withdraw some or all of their deposits or become unable to repay their loans. We also have a
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significant portion of our assets in an investment securities portfolio containing U.S. government, municipal, and corporate bonds that are sensitive to broad economic conditions, especially interest rates.
The geographic concentration of our business in the Washington, D.C. metropolitan area makes our business highly susceptible to local economic conditions and reductions or changes in government spending.
Our operations are primarily concentrated in the Washington, D.C. metropolitan area market, where our banking office is located. As of December 31, 2025, our loan portfolio had a total balance of $274.8 million in gross loans, consisting primarily of $219.4 million of single-family mortgage loans, home equity lines of credit, and residential construction loans, approximately $48.3 million in commercial real estate (“CRE”) loans secured by properties, $4.5 million of commercial loans to businesses, and approximately $2.6 million of consumer loans. Based on data available, we estimate that approximately 83.4% of our loans are tied to properties or borrowers located in the Washington, DC metropolitan area. Additionally, a majority of our consumer deposit clients also reside in the Washington, D.C. metropolitan area. Because we employ a branch-less business model, our ability to expand our retail lending and deposit businesses beyond this market is limited, which could increase our exposure to local economic disruptions, including potential impacts from changes in federal policies or government spending.
The Washington, D.C. metropolitan area’s economy is heavily dependent on federal government spending, as a significant number of businesses in the area are federal government contractors or subcontractors, or depend on such businesses for a significant portion of their revenues. The U.S. federal government has implemented reductions in federal spending, workforce levels, government contracts, and office space utilization. Additional federal budget reductions, reallocations of spending, or workforce adjustments may occur in future periods. Such measures, as implemented or as may be implemented in the future, could materially weaken the Washington, D.C. metropolitan area economy and, in turn, pose direct risks to our loan portfolio’s credit quality and our overall financial condition. If regional economic conditions deteriorate as a result of federal spending reductions, workforce adjustments, contract terminations, or changes in government office utilization, we may experience: reduced opportunities to maintain or grow business relationships; heightened risks to loan collectability (particularly within our CRE portfolio); declines in collateral values for residential and commercial real estate; decreased loan demand; and possible consumer or business deposit outflows. Any of these developments could have a material adverse effect on our business, results of operations, and financial condition.
Although we do not presently hold a significant amount of loans to federal government contractors or their subcontractors, broader economic repercussions from the federal budgetary policy changes, including reductions in spending, reallocations across industries or geographic regions, or further workforce adjustments, may indirectly impair the financial condition of our borrowers. Permanent or temporary staffing reductions, salary cuts, or furloughs of government employees and contractors could adversely affect other businesses in our market, including property owners leasing to government agencies, vendors, and various commercial and retail enterprises. Such conditions could reduce CRE property values and rental income, which may increase the risk of delinquencies or defaults in our CRE portfolio (including owner-occupied and non-owner occupied properties) and lead to higher provisions for credit losses. As a result, we could face elevated loan delinquencies, defaults, and charge-offs, which would reduce earnings, impair capital and potentially decrease liquidity.
The scope, timing and implementation details of any future federal budgetary actions and workforce adjustments remain uncertain as of the date of this Annual Report on Form 10-K, and their ultimate economic impact on our market area cannot be predicted with certainty. Broader economic weakness resulting from such actions may adversely affect deposit levels if our clients’ financial conditions worsen. There can be no assurance that our historical performance or our risk management practices will insulate us from the adverse effects of federal spending reductions or related policy changes.
Our investment securities portfolio exposes us to risks beyond our market area.
As of December 31, 2025, 49.4% of our assets were invested in securities. The size and composition of the investment securities portfolio depends on the seasonality of deposits from political organization depositors, the concomitant need to maintain a higher degree of liquidity to meet the withdrawal needs of these depositors, and the demand for loans that meet our underwriting criteria.
We invest in a wide variety of securities, including U.S. government and agency obligations, taxable and non-taxable municipal bonds, including general obligation and revenue bonds, and investment grade corporate bonds. Under national banking laws, all bank-owned securities must be investment grade at the time of purchase. Investments in municipal and
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corporate bonds, in particular, expose us to the economic risks of communities and businesses across the country. If the economy were to enter a recession, the financial condition of many states and municipalities and of many corporations would likely weaken. Lower tax revenues could impair the ability of states and localities to repay their bond indebtedness. Similarly, lower corporate sales could impair the ability even of investment grade corporations to repay their indebtedness. Furthermore, although the Bank only purchases investment grade securities, it is possible that some of the corporate bonds it has purchased could be downgraded to below investment grade after the bank purchases them. The Bank seeks to broadly diversify its investment securities and to limit its exposure to any one bond issue, issuer or project, but there can be no assurance that we will not incur losses related to its investment activities.
Our significant investment in securities held to maturity exposes us to risks that may adversely affect our business, financial condition or results of operations.
As of December 31, 2025, 14.7% of our assets were invested in securities held to maturity (measured at amortized cost, net of allowance for credit losses), which subject us to certain risks that may adversely affect our business, financial condition or results of operations, including the following:
• Securities held to maturity are carried at amortized cost, and their fair value is not adjusted for changes in interest rates. Consequently, if interest rates rise, the fair value of our securities held to maturity would be expected to decline, but this decrease would not be immediately reflected in our net income or stockholders’ equity. However, this could result in significant unrealized losses. Further, if we were required to sell all or a material portion of our securities held to maturity, we may recognize significant losses that would adversely affect our business, results of operations or financial condition. See “— Interest Rate Risk — Interest rates have in the past resulted in, and could in the future result in, unrealized losses on our investment securities portfolio.” As of December 31, 2025, the carrying value (net of allowance for credit losses) of our securities held to maturity was $256.6 million, compared to a fair value of $245.3 million.
• In general, we cannot sell any of our securities held to maturity without potentially triggering a reclassification of our entire held to maturity securities portfolio to available for sale, except under specific circumstances permitted by accounting standards, causing all unrealized losses, marked to market and net of taxes, to be reflected in the accumulated other comprehensive loss component of our total stockholders’ equity and a decline in our tangible book value. This constraint would limit our ability to quickly reallocate our investment portfolio in response to changes in market conditions or liquidity needs. If we are required to sell securities held to maturity, including to meet liquidity needs, we may realize significant losses that would adversely affect our business, results of operations or financial condition.
• Changes in accounting standards or regulatory guidance could require us to reclassify our securities held to maturity, which would adversely affect our stockholders’ equity and could lead to increased volatility in our reported earnings and capital ratios. Additionally, future regulatory requirements may impose higher capital charges on securities held to maturity.
Any of these risks related to our securities held to maturity may be exacerbated by negative market perceptions or investor confidence. In particular, adverse changes, or perceptions of adverse changes, in market conditions or the financial health of the issuers of our securities held to maturity could lead to concerns about our financial condition or risk management practices.
There can be no assurance that we will be able to maintain or increase our current levels of transaction accounts, noninterest-bearing demand deposits, and levels of profitability or growth.
As of December 31, 2025, a substantial portion of our deposits were held in transaction accounts, most of which are noninterest-bearing accounts that offer an earnings credit to offset service charges in lieu of interest. Transaction accounts have comprised over 50% of the Bank’s total deposits at each year-end since 2014. As of December 31, 2025, 95.3% and 79.8% of the Company’s deposits were in transaction accounts and noninterest-bearing accounts, respectively. There can be no assurance that the high levels of transaction accounts or noninterest-bearing demand deposits will continue to be held by the Bank, or that they will not decline, and there can be no assurance that the Bank will be able to replace any such deposits at a similar cost, or increase its lending business on a profitable basis. There can be no assurance that we will be able to maintain profitability, continue to grow in a profitable manner, or increase our book value per share, which is one of the metrics we use to measure our performance.
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The use or support of stablecoins may expose us to legal, regulatory, operational, and competitive risks.
We do not currently engage in activities relating to stablecoins. If we were to support stablecoin-related services in the future, including facilitating payments using stablecoins, holding stablecoins in a custodial capacity on behalf of clients, holding deposits of stablecoin issuers or holding other reserve assets in a custodial capacity on behalf of stablecoin issuers, we could be exposed to legal, regulatory and operational risks. Although the Guiding and Establishing National Innovation for U.S. Stablecoins (“GENIUS”) Act establishes a federal regulatory framework for payment stablecoins and their issuers, many aspects of its implementation remain in development. In February 2026, the OCC proposed rules to implement certain aspects of the GENIUS Act, including requirements applicable to national banks that hold reserve assets for payment stablecoin issuers. These rules have not been finalized, and rules of other agencies required to issue rules to implement aspects of the GENIUS Act have not been proposed. Future changes in applicable laws, supervisory expectations or interpretive guidance could increase compliance obligations or limit permissible activities.
Any stablecoin-related activity that we might undertake would require implementation of appropriate operational, technological and compliance capabilities. Implementing such capabilities could require reliance on third-party service providers, which would introduce additional vendor-management, integration and oversight risks. Broader market adoption of stablecoins by commercial or nonprofit entities or retail clients could also, over time, affect demand for certain traditional banking services such as those that we offer. Future developments in this area, including regulatory or market changes, could adversely affect our operations, our ability to comply with regulatory requirements, or our ability to attract and retain clients.
We place a significant portion of our clients’ deposits with other banks through the ICS ® network, which exposes us to risks that may adversely affect our business, financial condition or results of operations.
We participate in the ICS ® network to provide our clients with additional FDIC insurance coverage for their uninsured balances. For our clients that opt into the ICS ® network, this service allows us to place their deposits in increments up to the FDIC insurance limits at other banks within the ICS ® network. In exchange, we may elect to either receive reciprocal deposits from other banks within the ICS ® network or place the deposits at other banks as One-Way Sell ® deposits and receive a deposit placement fee. If we elect to receive reciprocal deposits from other banks, the amount of deposits on our balance sheet does not decrease and we earn interest income on these reciprocal balances. Conversely, if we elect to receive a deposit placement fee instead of receiving reciprocal deposits, the deposits are placed at other banks as One-Way Sell ® deposits, which reduces the amount of deposits on our balance sheet. This reduction allows us to better manage the size of our balance sheet, and the deposit placement fee increases our noninterest income. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Financial Condition — Deposits” for more information on ICS ® deposits.
As of December 31, 2025, we placed $466.6 million of deposits at other banks through the ICS ® network, of which $359.9 million were placed as One-Way Sell ® deposits and $106.7 million were retained as reciprocal deposits. Our deposit placement services income totaled $838 thousand for the year ended December 31, 2025. If we were to convert some or all of these One-Way Sell ® deposits into reciprocal deposits, bringing them back onto our balance sheet, we would likely gain interest income by investing these deposits, which could increase our net interest income. However, this conversion would result in the loss of deposit placement services income, reducing our noninterest income. Furthermore, we would likely incur interest expense on the reciprocal deposits, which could increase our cost of interest-bearing liabilities and overall cost of funds, and could lower our net interest margin. Additionally, bringing these deposits onto our balance sheet would lead to higher regulatory assessments from both the OCC and the FDIC. The increase in our total assets would raise the base on which these assessments are calculated, and the additional deposits could also impact our risk profile, potentially resulting in higher FDIC risk-based assessments. Additionally, we would be required to pay IntraFi’s fee for the reciprocal feature, which as of December 31, 2025 was 0.125% annualized on the reciprocal deposits balance. While increased interest expense might reduce our net interest margin, the additional interest income could still lead to higher net interest income. Despite this potential benefit, there remains a risk of pressure on our margins and regulatory capital ratios, which could impact our business, financial condition, or results of operations. Additionally, if more than 20% of our total liabilities are classified as reciprocal deposits, the FDIC may categorize the excess over 20% as “brokered deposits.” As a result of the foregoing, our use of the ICS ® network exposes us to potential costs and risks that are not incurred with traditional deposit accounts, and if we fail to adequately manage these costs and risks, our business, financial condition, or results of operations could be adversely affected.
If we or our clients are no longer able to participate in the ICS ® network, including because IntraFi terminates our participation in the ICS ® network, the ICS ® network ceases or because of regulatory changes, we may experience deposit
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withdrawals, lose revenue from deposit placement fees, or experience a sudden increase in our balance sheet that could adversely affect our regulatory capital ratios. In order to sell a client’s deposits through the ICS ® network, the client must first opt into the ICS ® network, and not all of our clients have opted into the ICS ® network, nor can all of our clients be expected to opt into the ICS ® network in the future. Further, our ability to provide our clients with deposit placement services through the ICS ® network depends on the participation of other banks within the ICS ® network, and any issues affecting these banks, including concerns related to participating banks’ financial stability, could disrupt our ability to provide these services to our clients. Participation in the ICS ® network is also subject to certain terms and conditions, which include limitations on the amount of each participating client’s ICS ® deposits that may be placed at other banks within the ICS ® network, on the maximum amount of deposits that a bank may place at other banks as reciprocal deposits, on the maximum amount of deposits that a bank may place at other banks as One-Way Sell ® deposits, and limitations on a bank’s ability to receive reciprocal deposits, place One-Way Sell ® deposits, or receive One-Way Buy ® deposits if the bank is not “well capitalized” under the applicable federal banking regulations. In addition, our ability to move additional deposits from existing accounts off our balance sheet by converting reciprocal deposits into One-Way Sell ® deposits is limited to the amount of such deposits that are placed at other banks as reciprocal deposits. As of December 31, 2025, we held $106.7 million in reciprocal deposits that could be converted into One-Way Sell ® deposits, compared to the $359.9 million that had already been placed at other participating banks as One-Way Sell ® deposits. Any of these conditions could adversely affect our business, financial condition or results of operations.
Our participation in new reciprocal deposit networks, such as NBID, may introduce operational and regulatory risks.
From time to time, we may evaluate or participate in additional reciprocal deposit programs or deposit placement networks as part of our broader deposit and liquidity management framework. We have joined NBID, a reciprocal deposit platform operated by ModernFi that is similar in function to the IntraFi Cash Service ® network, and we are assessing how best to implement NBID within our deposit and liquidity management strategy.
Newer or alternative reciprocal deposit programs, including NBID, may involve operational, counterparty, integration, or supervisory risks that differ from, or exceed, those associated with more established networks. These risks may include greater operational complexity, increased reliance on third-party technology platforms, third-party and counterparty dependencies, and heightened regulatory or supervisory review. There can be no assurance that any deposit placement program—whether currently utilized, including NBID, or adopted in the future—will function as expected or remain available on the same terms, or at all, and our participation in such programs may adversely affect our operations, regulatory compliance obligations, or ability to effectively manage client relationships.
Our Trust & Wealth Department exposes us to certain risks and there can be no assurance the department will contribute meaningfully to our revenues or become profitable on a standalone basis.
Our Trust & Wealth Department exposes us to certain risks. The department, which began operations in the third quarter of 2020 after receiving approval from the OCC for fiduciary powers, manages a variety of trusts, including special needs trusts. The products and services provided by the department include trustee services, investment management, financial planning, estate administration, and custody. Risks specifically related to our Trust & Wealth Department include:
• Fiduciary Duty Compliance : We have a legal obligation to act in the best interests of our clients, which includes the duty to manage trust assets prudently. Failure to comply with these fiduciary duties can result in legal claims and significant financial liability.
• Litigation Risks : Trust and estate matters often involve disputes among beneficiaries or between beneficiaries and trustees. These disputes can lead to litigation, which can be costly and time-consuming, potentially resulting in substantial legal expenses and damages.
• Regulatory Compliance : The Trust & Wealth Department is subject to stringent regulatory oversight by federal and state authorities. Non-compliance with fiduciary regulations can lead to enforcement actions, fines, and other regulatory sanctions that could adversely affect our operations and reputation.
• Market Risks : Investment management services provided by the Trust & Wealth Department are exposed to market risks. Poor investment performance can result in claims of mismanagement or breach of fiduciary duty, leading to potential legal liabilities.
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• Personnel Risks : The success of our Trust & Wealth Department heavily relies on retaining specialized trust and wealth management personnel. The market for such skilled professionals is highly competitive. Losing key personnel could adversely impact our ability to manage trust accounts effectively and meet client expectations.
• Risks Specific to Special Needs Trusts : Managing special needs trusts exposes us to additional risks. These trusts are designed to provide financial support to individuals with disabilities without affecting their eligibility for government benefits like Medicaid and Supplemental Security Income (SSI). However, the rules governing these trusts are complex and state-specific. Failure to adhere to these rules can disqualify the trust, leading to the loss of benefits for the beneficiary and potential legal liabilities for the trustee.
In addition, the service charges we receive for assets under management are subject to fluctuations in the value of the underlying assets. These values can vary with changes in the stock market and bond yields. Consequently, any significant market volatility or changes in interest rates could impact the valuation of the assets we manage, thereby affecting the service charges we collect and potentially influencing our overall revenue from these accounts. Further, the growth in assets under custody during recent periods has been largely driven by clients seeking higher interest rates. If interest rates were to decline materially, we may experience a corresponding decline in custody balances, which would negatively impact our revenue from these accounts. In addition, a substantial portion of these custody accounts balances are related to political organizations, and these balances are considered to be seasonal and are likely to decline as a result of the spending around federal elections. Any of these conditions could adversely affect our business, financial condition or results of operations.
Our Trust & Wealth Department’s assets under management are concentrated among a small number of clients. As of December 31, 2025, we had four clients with accounts that each exceeded 5.0% of our total assets under administration, all within the custody segment. These four clients collectively accounted for 32.2% of our total assets under administration. If we experience outflows of our assets under management, particularly those associated with significant account sizes, our services charges would decline, which would negatively impact our Trust & Wealth Department revenue.
Our Trust & Wealth Department generated revenues of approximately $1.3 million for the year ended December 31, 2025 and $907 thousand for the year ended December 31, 2024, but has not achieved standalone profitability. There can be no assurance that the Trust & Wealth Department will contribute meaningfully to our revenues or become profitable on a standalone basis. The unpredictability of assets under management and associated revenue further complicates our financial planning. Additionally, the highly competitive and commoditized nature of the wealth management industry poses ongoing challenges to our trust and asset management business.
We may be adversely affected by changes in the actual or perceived soundness or condition of other financial institutions.
Financial services institutions may be interconnected as a result of trading, investment, liquidity management, clearing, counterparty and other relationships. Within the financial services industry, loss of public confidence, including through default by any one institution, could lead to liquidity challenges or to defaults by other institutions. Concerns about, or a default by or failure of, one institution could lead to significant liquidity problems and losses or defaults by other institutions, as the commercial and financial soundness of many financial institutions is closely related as a result of these credit, trading, clearing and other relationships. Even the perceived lack of creditworthiness of, or questions about, a counterparty may lead to market-wide liquidity problems and losses or defaults by various institutions. This systemic risk may adversely affect financial intermediaries, such as clearing agencies, banks and exchanges with which we interact on a daily basis or key funding providers such as the FHLB, any of which could have a material adverse effect on our access to liquidity or otherwise have a material adverse effect on our business, financial condition and results of operations.
In addition, our securities portfolio includes investments in other financial institutions. As of December 31, 2025, we held $4.5 million principal amount of subordinated debt issued by other bank holding companies. Any changes to the actual or perceived soundness of other financial institutions could adversely affect the value of these securities, which could cause us to incur losses.
There is no assurance that the Bank will be able to compete successfully with others for its business.
The Bank competes for loans, deposits, fiduciary services and capital with other banks and other kinds of financial institutions and enterprises, such as securities firms, insurance companies, savings and loan associations, credit unions, mortgage brokers, private lenders, and fintech companies, many of which have substantially greater resources or are
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subject to less stringent regulations. The differences in resources and regulations may make it more difficult for the Bank to compete profitably, including because the Bank may be required to reduce the rates that it charges on loans and investments or increase the rates it offers on deposits in order to compete, which would adversely affect the Bank’s business, financial condition and results of operations. In addition, the emergence, adoption and evolution of new technologies that do not require intermediation, including stablecoins, digital assets, blockchains, and other technologies based on distributed ledgers, could significantly affect the competition for financial services. Further, the Bank’s profitability, in large part, results from its ability to maintain high levels of noninterest-bearing demand deposits, which are provided by campaigns and elections industry clients. There can be no assurance that the Bank will be able to effectively compete to maintain or grow its current share of deposits from these businesses and organizations.
We could fail to attract, retain or motivate skilled and qualified personnel, including our senior management, other key employees or directors, which could adversely affect our business.
Our ability to implement our strategic plan depends on our ability to attract, retain and motivate skilled and qualified personnel, including our senior management and other key employees and directors. The marketplace for skilled personnel is becoming more competitive, and the cost of hiring, incentivizing and retaining skilled personnel may continue to increase, which may be exacerbated by government policies, including immigration policy. The failure to attract or retain, including as a result of an untimely death or illness of key personnel, or replace a sufficient number of appropriately skilled and key personnel could place us at a competitive disadvantage and prevent us from successfully implementing our strategy. In addition, high employee turnover rates or inadequate training could lead to operational inefficiencies, loss of critical knowledge, and increased susceptibility to errors and misconduct. The ongoing shortage of skilled cybersecurity professionals poses a risk to our ability to effectively defendagainst and respond to cyber threats. Difficulty in attracting or retaining skilled cybersecurity professionals could also weaken our ability to defendagainst and respond to cyber threats, increasing the likelihood of successfulcyberattacks. Any of the foregoing could have a material adverse effect on our business, financial condition and results of operations.
In addition, our business is service-oriented and depends to a large extent upon the client relationships that our senior officers, relationship officers, and operations department team members develop and maintain, particularly with clients that maintain high levels of transaction account deposits. Any deterioration in such relationships, particularly those associated with significant deposit size, could lead to an outflow of deposits. See “— Liquidity Risk — Our deposit base is concentrated among a small number of clients.”
Accordingly, if we are unable to retain any of our executive officers, including our Chairman, Peter G. Fitzgerald, our Chief Executive Officer John J. Brough, our President, David M. Evinger, our Chief Financial Officer, Joanna R. Williamson, other senior officers, relationship officers, or operations department team members, our business, results of operations, and financial condition could be adversely affected.
Certain clients, including our political organization clients, may be subject to, and are particularly sensitive to, negative publicity, which may subject us to enhanced reputational risk.
Certain clients, including political organizations may be sensitive to public opinion and if we are not able to effectively manage negative publicity regarding the Bank or our client relationships, our relationships with these clients could suffer, which could lead to deposit withdrawals. As a public company, we and our relationships with our clients may be subject to increased public scrutiny, and certain of our clients may move their deposit accounts to other nonpublic institutions that they perceive as providing greater privacy. Further, if our clients are subject to negative publicity, our association with such clients may, in turn, cause us to be subject to negative publicity, which could harm our reputation and the public perception of our business. Any of these conditions could adversely affect our business, financial condition and results of operations.
Compliance with public company reporting and regulatory requirements is costly and resource-intensive and has placed, and will continue to place, additional demands on our personnel and systems.
As a public company, we are subject to the reporting requirements of the Exchange Act and are required to implement specific corporate governance practices and adhere to a variety of reporting requirements under the Sarbanes-Oxley Act and the related rules and regulations of the SEC, as well as the rules of NYSE. The Exchange Act requires us to file annual, quarterly and current reports with respect to our business and financial condition. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. Compliance with these requirements places additional demands on our legal, accounting, finance,
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operations and investor relations staff and on our accounting, financial and information systems, and increases our legal and accounting compliance costs as well as our compensation expense as we have hired and expect to continue to hire additional legal, accounting, tax, finance and investor relations staff.
In accordance with Section 404 of the Sarbanes-Oxley Act, our management is required to conduct an annual assessment of the effectiveness of our internal control over financial reporting and include a report on these internal controls in the annual reports we will file with the SEC on Form 10-K. Our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal controls until we are no longer an emerging growth company and no longer a non-accelerated filer. When required, this process will require significant documentation of policies, procedures and systems, review of that documentation by our accounting staff and our outside independent registered public accounting firm and testing of our internal control over financial reporting by our accounting staff and our outside independent registered public accounting firm. This process will involve considerable time and attention, may strain our internal resources and will increase our operating costs. We may experience higher than anticipated operating expenses and outside auditor fees during the implementation of these changes and thereafter. If our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Class A common stock could be negatively affected, and we could become subject to investigations by NYSE, the SEC or other regulatory authorities, which could require additional financial and management resources.
We have not engaged our independent registered public accounting firm to perform an audit of our internal control over financial reporting, as contemplated by Section 404 of the Sarbanes-Oxley Act, as of any balance sheet date reported in our financial statements. Had our independent registered public accounting firm performed an audit of our internal control over financial reporting, control deficiencies, including material weaknesses and significant deficiencies, may have been identified.
If we are unable to continue to meet the demands that will be placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act, we may be unable to accurately report our financial results, or report them within the time frames required by law or stock exchange regulations. Failure to comply with the Sarbanes-Oxley Act, when and as applicable, could also potentially subject us to sanctions or investigations by the SEC or other regulatory authorities. If material weaknesses or other deficiencies occur, our ability to accurately and timely report our financial position could be impaired, which could result in late filings of our annual and quarterly reports under the Exchange Act, restatements of our consolidated financial statements, a decline in our stock price, or suspension or delisting of our Class A common stock from NYSE and could have a material adverse effect on our business, results of operations and financial condition. Even if we are able to report our financial statements accurately and in a timely manner, any failure in our efforts to implement the improvements or disclosure of material weaknesses in our future filings with the SEC could cause our reputation to be harmed and our stock price to decline significantly.
Operational Risks
We are subject to operational risk, which could adversely affect our business and reputation and create material legal and financial exposure.
Like all businesses, we are subject to operational risk, which represents the risk of loss resulting from human error or misconduct, inadequate or failed internal processes and systems, and external events, including the risk of loss resulting from fraud by employees or persons outside the Bank, and breaches in data security. For example, because the Bank engages in a high volume of funds transfer activity, we may be subject to a greater degree of payment risk than other similarly-sized banks.
See “Operational risks associated with funds transfer activities could adversely affect our business and financial condition.” We are also exposed to operational risks through outsourcing arrangements, as such outsourcing vendors, which are exposed to operational risks themselves, as well as the effects that changes in circumstances or capabilities of our outsourcing vendors can have on our ability to continue to perform operational functions necessary to our business. Prolonged or significant failures or disruptions in our information technology systems, including due to hardware malfunctions, software or coding errors, or natural disasters, could disrupt our business operations and impact customer service which could lead to a loss of business, reduced customer satisfaction, damage to our reputation and regulatory scrutiny.
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Although we seek to mitigate operational risk through a system of internal controls and risk management practices that are reviewed and updated, no system of controls or practices, however well designed and maintained, are infallible. Control weaknesses or failures or other operational risks could result in charges, increased operational costs, business continuity deficiencies, harm to our reputation or foregone business opportunities.
Operational risks associated with funds transfer activities could materially and adversely affect our business, financial condition, and results of operations.
We process a high volume of funds transfers, which expose us to significant operational, regulatory, and financial risks. Clients, third parties, or external actors may also engage in conduct that creates funds transfer risk, including through credential compromise, social-engineering schemes, or other unpermitted access attempts that could result in improperly initiated or executed transfers. Our most substantial exposure arises from our use of the Fedwire ® Funds Service. We frequently process high-value Fedwire ® transfers, including transactions representing a significant percentage of our total capital, and have, at times, sent or received transfers exceeding our total capitalization. We expect to continue processing similarly large transfers, which may significantly increase our financial exposure.
We also offer funds transfers through the Automated Clearing House (“ACH”), real-time funds transfer networks, and peer-to-peer services such as Zelle ® . We are currently configured as “receive-only” for FedNow ® and RTP ® , but we may enable outbound transfers in the future. We may join additional transfer networks or enable other types of funds transfers, which could introduce further operational, compliance, and financial risks. Any expansion of these services may increase our operational and compliance exposure, particularly through participation in new or emerging funds transfer networks whose risks we cannot fully assess. Our funds transfer operations involve the following principal risks:
• Processing Errors: Errors in executing or settling transfers, particularly within real-time gross settlement systems such as Fedwire ® , could result in misdirected, delayed, or improperly returned transfers, creating financial exposure potentially exceeding our liquidity or capitalization.
• Credential Compromise and Social-Engineering Risks : Erroneous transfers can and do result from credential compromise, including clients’ inadvertent disclosure of access credentials or authentication codes in response to impersonation or spoofing attempts, which may continue to occur despite security warnings and controls.
• Customer Security Configuration and Credential-Management Risk s: Some clients elect security configurations or authorization settings, including the number of required authorizers for certain payment orders, that differ from the configurations recommended by us. Client choices regarding these settings, along with client safeguarding of their access credentials and authentication codes, may affect the risk of erroneous transfers and could increase the financial and operational risks associated with funds transfer activities.
• Regulatory and Network Compliance Risks : Failure to comply with federal and state laws and regulations governing funds transfers—including Federal Reserve Regulation J (covering Fedwire ® and FedNow ® ), Regulation E (consumer electronic funds transfers), and UCC Article 4A (certain payment systems)—may result in regulatory enforcement actions, monetary fines, litigation, or reputational harm. Additionally, failure to comply with rules or contractual obligations of payment networks, such as those for FedNow ® , RTP ® , Same-Day ACH, or Zelle ® , may lead to penalties, restricted system access, or reputational damage.
• Funds Transfer Cancellation Risks: Attempts to cancel transfer orders or honor a sender’s cancellation request after the transfer order has been executed or accepted may expose us to liability under Regulation J, UCC Article 4A, and OC 6. Such cancellations could result in disputes, litigation, or financial losses arising from miscommunications or timing errors.
• Litigation Risks from Funds Transfers: We have previously been involved in litigation related to Fedwire ® transfers. See “Litigation and regulatory actions, including possible enforcement actions, could subject us to significant fines, penalties, judgments, restrictions on our business activities, or reputational harm.” Future litigation may arise, particularly concerning high-value transfers, transfer holds, or cancellationdisputes. Expanding into additional funds transfer services may further increase legal risks related to new transfer platforms, transaction disputes, or compliance failures.
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• System Disruption Risks: Cyberattacks or system failures could disrupt our ability to process funds transfers, especially time-sensitive transfers, and expose us to operational disruptions, liability, or regulatory non-compliance.
• Liquidity Management Risks: Faster funds transfer systems such as RTP and FedNow ® operate on instant gross settlement, eliminating settlement risk but requiring immediate funding availability. We typically maintain a significant portion of our assets in cash reserves at the Federal Reserve. However, RTP requires participants to pre-fund accounts at The Clearing House, where the interest earned may be lower than the Interest on Reserve Balances (“IORB”) rate paid on reserves held at the Federal Reserve. This difference in yield could affect our net interest income if we must maintain larger balances at The Clearing House. By contrast, FedNow ® operates on real-time settlement but does not require pre-funding, and Same-Day ACH follows a net settlement model, which increases credit risk but reduces liquidity demands. Introducing additional funds transfer services with similar funding requirements could necessitate adjustments to our liquidity management strategy to optimize returns while maintaining sufficient reserves.
• Reliance on External Providers: Our reliance on external service providers increases our exposure to operational and vendor-related risks, particularly concerning funds transfer connectivity, international wire transfers, and the introduction of new funds transfer services.
• Fraud and Cybersecurity Risks: Cybersecurity breaches or fraudulent activities could cause unauthorized transfers, regulatory sanctions, financial loss, or reputational harm.
Although we maintain security controls, monitoring protocols, employee training, and compliance oversight, these measures may not fully mitigate the inherent risks associated with funds transfer activities. Expanding or modifying our funds transfer services could introduce unforeseen risks that could materially and adversely affect our business, financial condition, and results of operations.
The occurrence of fraudulent activity, breaches or failures of our information security controls or cybersecurity-related incidents could have a material adverse effect on our business, financial condition, results of operations, and reputation.
As a financial institution, we are susceptible to evolving cybersecurity threats, including attacks by cybercriminals, nation-state actors, insiders, and risks associated with rapid advancements in technology including developments in AI, machine learning, quantum computing, and other emerging technologies, which may compromise existing security measures. Fraudulent activity, information security breaches, and cyberattacks may target us, our service providers, or our clients, potentially resulting in financial losses, operational disruptions, unauthorized disclosure of sensitive or confidential information, misappropriation of assets, regulatory scrutiny, litigation, or significant reputational harm.
Fraudulent activity may manifest in numerous forms, including check fraud, electronic fraud, wire fraud, phishing, smishing, business email compromise, social engineering, identity theft, and other dishonest activities. Information security breaches and cybersecurity incidents may involve unauthorized access or compromise of systems used by us, our service providers, or our clients; denial-of-service or distributed denial-of-service attacks; ransomware; malware; insider-threats; exploitation of third-party vulnerabilities (such as cloud services, web browsers, or operating systems); attacks leveraging vulnerabilities in vendor supply chains or third-party software dependencies; AI-enhanced or deepfake-enabled impersonation techniques; quantum-enabled attacks on encrypted communications or stored data; physical damage to critical infrastructure; or human errors resulting in data leaks or system compromises. Several major corporations, including financial institutions, have experienced significant data breaches that exposed proprietary corporate information as well as sensitive financial and personal data of their clients and employees, heightening their vulnerability to fraud.
Our clients are also subject to growing risks related to identity theft, credit and debit card fraud, account takeover attempts, and unauthorized account access, including as threat actors increasingly deploy AI-automated or technologically sophisticated social-engineering schemes, particularly as technological advancements, such as quantum computing, threaten conventional encryption standards and protocols before quantum-resistant cryptographic solutions become widely adopted. We and our service providers have in the past been, and may in the future be, the target of electronic fraudulent activity, security breaches, and cyberattacks. Our extensive reliance on mobile and cloud technologies, as well as remote work arrangements, significantly expands our attack surface, increasing the risk of unauthorized access, data breaches, and cybersecurity incidents. Additionally, because we operate without a traditional branch network and instead rely heavily on digital channels, security breaches may disproportionately affect us compared to banks with multiple physical locations.
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Rapid technological advancements — including quantum computing, AI, machine learning, and other advanced technologies — significantly increase cybersecurity threats by potentially enablingthreat actors to more effectively decrypt sensitive information, circumvent authentication mechanisms, exploitvulnerabilities within our security infrastructure, or otherwise compromise our systems and these risks may be heightened until quantum-resistant standards are broadly implemented across the industry. Failure to promptly adapt to and effectively implement security measures in response to rapidly evolving technological threats could significantly heighten our risks of data breaches, financial fraud, operational disruptions, regulatory scrutiny, reputational harm, and financial losses.
Additionally, the rising sophistication of cyberattacks by criminal groups, state-sponsored entities, and vulnerabilities within third-party technologies could underminecritical security processes relied upon by us, our service providers, and our clients. Increasingly sophisticated AI-driven attacks could enablethreat actors to more effectively predict and circumvent security protocols and detection systems, significantly escalating our cybersecurity risk.
Because our clients include high-profile political organizations, we face an elevated risk of targeted cyberattacks aimed at compromising client data, disrupting operations, or conducting cyber espionage, disinformation campaigns, or targeted data leaks. Such successful attacks could damage client relationships, deter future business, and severelyharm our reputation, financial condition, and overall business prospects.
Although we have implemented cybersecurity defenses, including multi-factor authentication, monitoring, penetration testing, employee cybersecurity awareness training, incident response protocols, vendor risk management practices, and ongoing assessments of industry best practices, we cannot assure complete protection against sophisticated cybersecurity threats. Our inability to anticipate, prevent, detect, or promptly respond to cybersecurity incidents could result in substantial financial losses, regulatory actions, litigation, reputational harm, and operational disruptions. Additionally, our cybersecurity insurance coverage may contain limitations, exclusions, or coverage gaps that could leave us liable for significant uncoveredlosses resulting from cybersecurity incidents.
Moreover, widespread publicity surrounding cybersecurity breaches in the financial sector and increased frequency of high-profile attacks on financial institutions and technology providers could erode consumer confidence in digital banking services and online financial transactions, potentially deterring adoption of our services and adversely impacting our business operations.
All these factors could materially and adversely affect our business, financial condition, results of operations, and reputation.
We also face risks related to cyberattacks and other security breaches involving external, third-party vendors and counterparties.
Information pertaining to us and our clients is maintained, and transactions are executed, on networks and systems maintained by us, our clients and certain of our third-party vendors, such as our online banking or reporting systems. The secure maintenance and transmission of confidential information, as well as execution of transactions over these systems, are essential to protect us and our clients againstfraud and security breaches and to maintain our clients’ confidence. Our use of cloud computing services and associated reliance on third-party cloud providers could limit our ability to control or effectively audit our data and systems, potentially leading to operational vulnerabilities, including exposure to service outages, degraded system performance, or disruptions beyond our control. There have been a number of widely publicized cases of outages in connection with access to cloud computing providers, such as an incident in October 2025 that affected many businesses worldwide, including us. Some of these parties have in the past been, and may in the future be, the target of security breaches and cyberattacks, and because the transactions involve third parties and environments such as the point of sale that we do not control or secure, future security breaches or cyberattacks affecting any of these third parties could impact us through no fault of our own, and in some cases we may have exposure and sufferlosses for material breaches or attacks relating to them. Supply chain or software vendor vulnerabilities, including vulnerabilities involving commonly used third-party applications or cloud-service components, may also be exploited by threat actors in ways that affect our systems or data, even if our own controls have not been compromised. Although we are not aware of any material losses relating to cybersecurity incidents, there can be no assurance that unauthorized access or cybersecurity incidents will not become known or occur or that we will not suffer such losses in the future.
Additionally, we may not be able to ensure that our third-party vendors have appropriate controls in place to protect the confidentiality of the information they receive from us and our business, financial condition and results of operations could be adversely affected by a material breach of, or disruption to, the security of any of our or our vendors’ systems. As
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third-party service arrangements become more technologically complex and interconnected, weaknesses, failures, or cyber incidents involving a vendor’s systems, personnel, or subcontractors may pose risks to us notwithstanding our own security measures.
Our operations rely on certain external vendors, and our use of these vendors is subject to increasing regulatory requirements and attention.
Our business model of a single banking office serving a nationwide client base is dependent on relationships with third-party service providers that provide services, primarily information technology services, that are critical to our operations. We use external vendors to provide products and services necessary to maintain our day-to-day operations, including core banking services such as online banking, loan servicing, debit and credit card services, mortgage origination, trust accounting and wealth management and other key components of our business infrastructure, including data processing and storage, internet connection and network access and various information technology services and services complementary to our banking products. In particular, we rely on a core technology provider for the banking software used by our clients and operations personnel. Accordingly, our operations are exposed to the risk that these vendors, including our core technology provider, may fail to perform in accordance with the contracted arrangements or applicable service-level agreements. We are also subject to the risk that these vendors, including our core technology provider, may become unable or unwilling to provide the same products or services on terms that are acceptable to us.
We are also exposed to the risk that a cyberattack, security breach, other information technology incident or other operational disruption at a common vendor to our third-party service providers, including our core technology provider, could impede their ability to provide services to us. See “We also face risks related to cyberattacks and other security breaches involving external, third-party vendors and counterparties.”
We may not be able to effectively monitor or mitigate operational risks relating to the use of common vendors by third-party service providers, including our core technology provider. If any of our third-party service providers experience difficulties in providing services or terminate their services and we are unable to replace our service providers with other service providers, our operations could be interrupted. It may be difficult for us to replace some of our third-party vendors, particularly vendors providing our core banking, mortgage-servicing, debit and credit card services, and information services, in a timely manner if they are unwilling or unable to provide us with these services in the future for any reason. If an interruption were to continue for a significant period, it could have a material adverse effect on our business, financial condition and results of operations. Even if we are able to replace them, it may be at higher cost to us, which could have a material adverse effect on our business, financial condition and results of operations. In addition, if a third-party provider fails to provide the services we require, fails to meet contractual requirements, such as compliance with applicable laws and regulations, or suffers a cyberattack or other security breach, our business could suffer economic and reputational harm that could have a material adverse effect on our business, financial condition and results of operations.
Furthermore, supervisory guidance and regulatory expectations require us to enhance our due diligence, ongoing monitoring and control over our third-party vendors and other ongoing third-party business relationships. In certain cases, we may be required to renegotiate our agreements with these vendors to meet these enhanced requirements, which could increase our costs. We expect that our regulators would hold us responsible for deficiencies in our oversight and control of our third-party relationships and in the performance of the parties with which we have these relationships, including in connection with the improper use or disclosure of confidential information, which could also harm our reputation, financial position and current and future business relationships. As a result, if our regulators conclude that we have not exercised adequate oversight and control over our third-party vendors or other ongoing third-party business relationships or that such third parties have not performed appropriately, we could be subject to enforcement actions, including civil money penalties or other administrative or judicial penalties or fines, as well as requirements for client remediation, any of which could have a material adverse effect our business, financial condition and results of operations. In June 2023, the U.S. federal banking agencies issued an interagency guidance, which requires banks, such as us, to analyze the risk associated with each third-party relationship and to calibrate its risk management processes. Any future changes in requirements or standards applicable to our third-party relationships could negatively affect us in substantial and unpredictable ways, and increase our costs. All of which could have a material adverse effect on our business, financial condition and results of operations.
The development and use of artificial intelligence present risks and challenges that may adversely impact our business.
We have incorporated, and may in the future further incorporate, AI technology in certain business processes, services, and products, including technologies that process sensitive financial and/or personal data. We currently rely on AI tools and models provided by third-party vendors, including through enterprise platforms that allow the creation of custom
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configurations, prompts, or projects (such as custom GPTS or similar tools), and we do not currently develop proprietary foundational AI models for deployment in our operations, although we may configure or use approved tools in accordance with internal policies and controls. These AI technologies assist in drafting documents and communications, conducting research, and enhancing operational efficiency. Additionally, certain third-party vendors, clients, and counterparties may integrate AI technology into their own business processes, services, or products, which may directly or indirectly impact us.
The development and use of AI present a number of legal, regulatory, and operational risks to our business. The legal and regulatory landscape governing AI is highly dynamic, with evolving laws and regulations that include both AI-specific mandates and provisions within existing frameworks such as intellectual property, privacy, consumer protection, employment, and financial services laws. These changes could require modifications to our use of AI technologies, impose additional compliance burdens, and increase our exposure to regulatory scrutiny, enforcement actions, or litigation. For example, data privacy and security requirements under laws such as the Gramm-Leach-Bliley Act (“GLBA”) impose stringent obligations to safeguard consumer financial information, and the use of AI in processing such data may raise compliance challenges or expose us to legal liability, regulatory penalties, or other enforcement actions.
AI models, particularly generative AI models, may produce inaccurate, misleading, or unreliable outputs, inadvertentlydisclose private, confidential, or proprietary information, reflect biases embedded in training data, or generate content that is perceived as discriminatory, defamatory, or in violation of intellectual property rights. If AI-assisted or AI-generated outputs, including those from custom-configured tools, are relied upon in ways that are inaccurate, misleading, or inconsistent with applicable policies or legal requirements, we could face significant legal, financial, and reputational risks. Even where AI-assisted outputs are subject to human review, such review may not identify all errors or compliance concerns, particularly where outputs appear facially reasonable but are incomplete, biased, or contextually inaccurate.
Consistent with our internal policies, certain uses of AI, including custom-configured tools, may involve nonpublic personal information (“NPI”) or material nonpublic information (“MNPI”) for authorized roles and approved tools, subject to specified controls and human review requirements. Although we require human review of certain AI-assisted outputs and have implemented policies governing the appropriate use of AI and restrictions on the use of sensitive data, human review may not detect all inaccuracies, biases, inappropriate outputs, or compliance deficiencies. Employees could inadvertently or intentionally use AI tools in a manner inconsistent with applicable policies, controls, or legal requirements, and supervisory review processes may fail to identify such misuse in a timely manner or at all. Such misuse could result in the unauthorized disclosure of confidential information, regulatory penalties, legal liability, or reputational harm. We cannot assure that these policies and procedures will prevent all AI-related risks.
To the extent we rely exclusively on third-party AI providers and enterprise AI platforms, we may have limited visibility into how underlying AI models are developed, trained, or maintained. The proprietary nature of such models may restrict our ability to fully assess data sources, methodologies, and risk mitigation strategies employed by third-party AI providers. If an AI model incorporates unauthorized material, improperly sources training data, or fails to implement adequate controls against bias, discrimination, or intellectual property infringement, we may nonetheless be exposed to liability, regulatory scrutiny, or reputational harm arising for the model’s outputs, even where we lack visibility into or control over its development or training processes.
Additionally, AI-generated content could lead to regulatory and legal concerns if the outputs result in inaccurate, misleading, or deceptive communications. Regulations governing financial institutions may require institutions to provide accurate, non-misleading information in customer interactions, and if AI-generated outputs violate these standards, we could face regulatory scrutiny, penalties, or legal action.
Advancements in AI capabilities, including potential interactions with other emerging technologies, may further compound these risks. Such developments could accelerate data processing or automation while also increasing concerns regarding data privacy, security bias, or the misuse of synthetic or manipulated content for fraudulent or deceptive purposes.
Any of these risks could expose us to regulatory enforcement actions, civil liability, reputational damage, and erosion of client trust. Additionally, adverse public perception regarding AI risks, including concerns about bias, fairness, and privacy, could negatively affect our relationships with clients, vendors, regulators, and other stakeholders. If AI-related risks materialize, our business, results of operations, and financial condition could be materially and adversely affected.
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Our governance framework for AI remains evolving, and regulatory expectations regarding financial institutions use of AI continue to develop, which may require further changes to our controls, monitoring processes, and documentation practices.
We depend on the accuracy and completeness of information about clients and counterparties.
In deciding whether to extend credit or enter into other transactions, and in evaluating and monitoring our loan and lease portfolio on an ongoing basis, we typically rely on information furnished by or on behalf of clients and counterparties, including financial statements, credit reports and other financial information. We may also rely on representations of those clients or counterparties, or of other third parties, such as independent auditors, as to the accuracy and completeness of that information. Reliance on inaccurate, incomplete, unaudited, fraudulent or misleading financial statements, credit reports or other financial or business information, or the failure to receive such information on a timely basis, could result in loan and lease losses, reputational damage or other effects that could have a material adverse effect on our business, financial condition and results of operations.
Our reliance on estimates and risk management activities may not always prevent or mitigate risks effectively, leading to potential differences between actual results and our forecasts.
Our accounting policies and methods are fundamental to how we record and report our financial condition and results of operations. Our management must exercise judgment in selecting and applying many of these accounting policies and methods so they comply with GAAP and reflect management’s judgment of the most appropriate manner to report our financial condition and results. In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which may be reasonable under the circumstances, yet which may result in our reporting materially different results than would have been reported under a different alternative.
Certain accounting policies are critical to presenting our financial condition and results of operations. They require management to make difficult, subjective or complex judgments about matters that are uncertain. Materially different amounts could be reported under different conditions or using different assumptions or estimates. These critical accounting policies include the allowance for credit losses and fair value measurements related to investment securities. Because of the uncertainty of estimates involved in these matters, we may be required to significantly increase the allowance for credit losses or sustain losses that are significantly higher than the reserve provided or reduce the carrying value of an asset measured at fair value. Any of these could have a material adverse effect on our business, financial condition and results of operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates.”
Our internal controls, disclosure controls, processes and procedures and corporate governance policies and procedures are based in part on certain assumptions and can provide only reasonable (not absolute) assurances that the objectives of the system are met. Any failure or circumvention of our controls, processes and procedures or failure to comply with regulations related to controls, processes and procedures could necessitate changes in those controls, processes and procedures, which may increase our compliance costs, divert management attention from our business or subject us to regulatory actions and increased regulatory scrutiny.
We have established policies and procedures intended to identify and manage the types of risk to which we are subject, including credit risk, interest rate risk, liquidity risk, price risk, operational risk, cyber risk, compliance risk, fiduciary risk, strategic risk and reputation risk. There are inherent limitations to our risk management strategies as there may exist, or develop in the future, risks that were not appropriately anticipated or identified. In addition, we rely on both qualitative and quantitative factors, including models, to monitor, measure and analyze certain risks and to estimate certain financial values, which are subject to error. For example, we estimate the proportion of our deposits that are represented by political organizations, in part to manage the risks related to such deposits. See “— Liquidity Risk — Our deposits are concentrated in political organizations, which can vary significantly in volume due to seasonality or changes in political activity or campaign finance laws.” Our estimates of the proportion of our deposits that are represented by political organizations are subject to data limitations and identifying a client as a political organization sometimes requires judgment. If our risk management activities prove ineffective, including due to inaccurate estimates, we could sufferunexpectedlosses or become subject to litigation or negative regulatory action, any of which could affect our business, financial condition, results of operations, or reputation.
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Legal, Regulatory and Compliance Risks
Government regulation significantly affects our business and may result in increased compliance costs, operational restrictions, and reduced stockholder returns.
The banking industry is subject to extensive regulation. Banking laws and regulations are primarily intended to safeguard the federal deposit insurance fund (“DIF”), depositors, and consumers, rather than stockholders or other investors. The Bank is regulated and supervised by the OCC and the FDIC, while the Company is regulated by the Federal Reserve. This regulatory framework imposes a significant compliance burden that may place banks at a competitive disadvantage relative to less-regulated nonbank financial institutions, including finance companies, mortgage-banking companies, private credit lenders, broker-dealers, business development companies, technology-driven nonbank lenders, money transmitters, leasing companies, and credit unions. Credit unions, while overseen by the National Credit Union Administration (“NCUA”), benefit from a tax-exempt status under federal law, providing them with a competitive cost advantage over taxable banking institutions like the Bank. The rapid emergence of financial technology (“fintech”) firms and digital banking platforms further intensifies competition by expanding the range of nonbank alternatives, placing additional pressure on traditional banking models. Changes in laws, regulations, or interpretations thereof may increase our compliance costs, restrict our operational flexibility, and adversely impact profitability. Additionally, amendments to non-banking laws, such as tax laws, could disproportionately affect us due to their application to banks, our corporate structure, or our specific service offerings, potentially exacerbating these competitive and financial pressures.
New or revised regulations, such as those enacted under the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), and updates to capital and liquidity standards, including the 2013 Basel III Capital Rules (the “Basel III Rules”) as implemented by federal banking agencies, may produce unforeseen or unintended consequences for the banking industry. The Dodd-Frank Act introduced sweeping reforms to the U.S. financial system, including the creation of the Financial Stability Oversight Council (“FSOC”) to monitor systemic risk and the Consumer Financial Protection Bureau (“CFPB”) to oversee consumer financial products and enforce related regulations, as well as modifications to retail banking rules and FDIC deposit insurance assessment methodologies.
The Basel III Rules established stringent risk-based capital and leverage requirements and impose a “capital conservation buffer,” which, if not fully maintained, restricts capital distributions (e.g., dividends or stock repurchases) and certain discretionary bonus payments. See “Supervision and Regulation — Capital Requirements” for additional details on our regulatory capital obligations. Although the Company, as a bank holding company with less than $3 billion in total consolidated assets, currently qualifies as a “small bank holding company” under Federal Reserve policy and is exempt from the Federal Reserve’s consolidated risk-based capital and leverage rules at the holding company level, the Bank remains fully subject to the Basel III Rules’ capital requirements. Compliance with these standards increases the Bank’s operational costs and may limit growth opportunities or necessitate additional capital infusions from the Company to the Bank. For instance, during periods of seasonal deposit growth, our total assets could approach thresholds that require the Bank to actively manage its deposit levels to maintain a satisfactory Tier 1 leverage ratio. Historically, we have managed our deposit levels to maintain a satisfactory Tier 1 leverage ratio by transferring certain deposit accounts off our balance sheet through the ICS ® network as One-Way Sell ® deposits placed at other financial institutions. However, there can be no assurance that this strategy will remain available or effective in the future, particularly if market conditions, counterparty availability, or regulatory interpretations change. See “— Other Risks Related to Our Business — We place a significant portion of our clients’ deposits with other banks through the ICS ® network, which exposes us to risks that may materially adversely affect our business, financial condition, or results of operations.”
If the Bank’s capital needs exceed internal resources, the Company may need to raise additional capital. Our ability to do so depends on numerous factors, including our financial performance, market conditions, investor appetite, and broader economic circumstances, many of which are beyond our control. There is no guarantee that we could raise additional capital when required, or on terms favorable to us, and a failure to do so could materially impair our financial condition, limit our growth prospects, and reduce stockholder returns. Moreover, if the Company’s total consolidated assets exceed $3 billion or if regulatory policy changes, the Company could become subject to the Federal Reserve’s consolidated capital rules, further increasing compliance costs and potentially constraining our operational flexibility or capital management strategies.
The potential exists for new federal or state laws, regulations, or changes in regulatory policy or interpretation to materially affect our operations, including capital requirements, lending practices, funding strategies, deposit insurance assessments, and liquidity standards. Political and regulatory developments may introduce additional uncertainty regarding the direction, scope, or timing of regulatory reforms or supervisory initiatives. Moreover, litigationchallenging actions or
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regulations by federal or state authorities could reshape the supervisory framework governing our operations, with outcomes that are difficult to predict. Such changes could increase our cost of doing business, restrict our ability to compete effectively, or materially alter the markets in which we operate, potentially resulting in a material adverse effect on our financial condition and stockholder value.
In response to recent bank failures and declining public confidence in the banking sector, regulators have intensified oversight of financial institutions. State and federal authorities have proposed or implemented measures addressing capital adequacy, deposit concentration risk, liquidity management, and deposit insurance coverage. These developments could result in stricter requirements for the Bank, increasing compliance costs and potentially limiting our ability to pursue growth opportunities. Additionally, the FDIC assesses premiums on insured institutions like the Bank to maintain the DIF at a statutory minimum of 2% of total estimated insured deposits, pursuant to the Federal Deposit Insurance Act, as amended. Increases in these premiums—whether to achieve this target, reflect revised risk metrics, or cover depositors of failed institutions—could materially erode our profitability and financial condition.
Failure to comply fully with banking laws and regulations—particularly those governing consumer protection, fair lending, and anti-money laundering—could result in heightened regulatory scrutiny, informal or formal enforcement actions (e.g., memoranda of understanding, consent orders, or cease-and-desist orders), or the imposition of civil money penalties on the Company, the Bank, or their officers and directors. Even absent formal enforcement, the costs of remediating compliance deficiencies, maintaining ongoing compliance, and defendingagainst potential regulatory actions could divert management resources, reduce earnings, and negatively impact stockholder returns.
Litigation and regulatory actions, including possible enforcement actions, could subject us to significant fines, penalties, judgments, restrictions on our business activities or reputational harm.
We have in the past been, are from time to time, and may in the future be, named as a defendant in legal actions in connection with our activities. Legal actions could include claims for substantial compensatory or punitivedamages or claims for indeterminate amounts of damages. For example, in 2020, Blue Flame Medical LLC (“Blue Flame”) filed a lawsuit alleging that the Bank improperly returned a wire transfer in the amount of $456.9 million and remained obligated to pay that sum to Blue Flame. While the lawsuit was dismissed in our favor, we incurred significant legal expenses in connection with the lawsuit. In addition, we can be subject to reputational harm resulting from legal actions or related activities arising therefrom.
The Bank’s Trust & Wealth Department is particularly subject to the risk that clients or others may sue us, claiming that we or third parties for whom they say we are responsible have failed to perform under a contract or otherwise failed to carry out a duty perceived to be owed to them. This risk is heightened when we act as a fiduciary for our clients and may be further heightened during periods when credit, equity or other financial markets are deteriorating in value or are particularly volatile, or when clients or investors are experiencing losses. Further, our Trust & Wealth Department offers certain specialized trust services, such as special needs trusts, that may subject us to an increased risk of legal liability. See “— Risks Related to Our Business — Our Trust & Wealth Department exposes us to certain risks and there can be no assurances the department will contribute meaningfully to our revenues or become profitable on a standalone basis.”
Further, our regulators may impose consent orders, civil money penalties, matters requiring attention, or similar types of supervisory criticism. We may also, from time to time, be the subject of subpoenas, requests for information, reviews, investigations and proceedings (both formal and informal) by governmental agencies regarding our activities.
Any such legal or regulatory actions may subject us to substantial compensatory or punitivedamages, significant fines, penalties, obligations to change our business practices or other requirements, resulting in increased expenses, diminished income and damage to our reputation. Our involvement in any such matters, whether tangential or otherwise and even if the matters are ultimately determined in our favor, could also cause significant harm to our reputation and divert management attention from the operation of our business. Further, any settlement, consent order or adverse judgment in connection with any formal or informal proceeding or investigation by government agencies may result in litigation, investigations or proceedings as other litigants and government agencies begin independent reviews of the same activities. As a result, the outcome of legal and regulatory actions could have an adverse effect on our business, results of operations or financial condition.
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The Bank’s primary regulator has broad powers to place limitations on the conduct of a bank’s business, or to close an institution.
The OCC has broad supervisory powers to limit a bank’s conduct of its business in the event that its capital position or financial condition decline, or if it engages in unsafe or unsound practices. Such powers include the ability to limit distributions of dividends. As a result of capital insufficiency, including but not limited to if a bank’s level of Tier 1 capital falls below 2.0%, becoming undercapitalized with no reasonable prospect of becoming adequately capitalized, liquidity issues or other regulatory concerns, including engaging in unsafe or unsound banking practices or being in an unsafe or unsound condition, a bank could be subject to the imposition of additional restrictions or conditions on its operation, or to being closed by its regulators without compensation to the bank’s stockholders, including its bank holding company. Furthermore, the OCC’s regulatory expectations may exceed these minimum capital requirements, which could result in higher compliance costs or require additional capital resources to be committed to a bank. If the OCC were to require us to commit additional capital resources to support the Bank, we could be required to borrow funds or raise capital on unfavorable terms. If the Bank were to be closed by its regulators, there can be no assurance that the Company would be able to find a buyer for the Company or the Bank in the event that it is unable to continue as an independent entity.
Generally, a conservator or receiver may be appointed for an insured depository institution where: (1) its obligations exceed its assets; (2) there is substantial dissipation of the institution’s assets or earnings as a result of any violation of law or any unsafe or unsound practice; (3) the institution is in an unsafe or unsound condition; (4) there is a willful violation of a cease-and-desist order; (5) the institution is unable to pay its obligations in the ordinary course of business; (6) losses or threatenedlossesdeplete all or substantially all of an institution’s capital, and there is no reasonable prospect of becoming “adequately capitalized” without assistance; (7) there is any violation of law or unsafe or unsound practice or condition that is likely to cause insolvency or substantial dissipation of assets or earnings, weaken the institution’s condition, or otherwise seriouslyprejudice the interests of depositors or the insurance fund; (8) an institution ceases to be insured; (9) the institution is undercapitalized and has no reasonable prospect that it will become adequately capitalized, fails to become adequately capitalized when required to do so, or fails to submit or materially implement a capital restoration plan; or (10) the institution is criticallyundercapitalized or otherwise has substantially insufficient capital.
The Bank is subject to extensive and evolving requirements under anti-money laundering and sanctions laws.
The Bank is subject to stringent regulations under the Bank Secrecy Act of 1970 (“BSA”), the USA PATRIOT Act of 2001, the Anti-Money Laundering Act of 2020, and regulations administered by the Office of Foreign Assets Control (“OFAC”). These laws require us to maintain a comprehensive anti-money laundering (“AML”) and sanctions compliance program, which includes client due diligence, enhanced due diligence for high-risk clients, ongoing monitoring of transactions, and the timely filing of Suspicious Activity Reports (SARs) and Currency Transaction Reports (CTRs).
The Financial Crimes Enforcement Network, established by the U.S. Treasury Department to administer the BSA, is authorized to impose significant civil money penalties for violations of those requirements and has recently engaged in coordinated enforcement efforts with the individual federal banking regulators, as well as the U.S. Department of Justice, Drug Enforcement Administration and the Internal Revenue Service. There is also increased scrutiny of compliance with the sanctions programs and rules administered and enforced by OFAC. Further, OFAC may impose civil penalties for sanctions violations based on strict liability, meaning we could be held liable for sanctions violations even if we did not know or have reason to know we were engaging in a violation.
Anti-money laundering and sanctions laws and regulations are complex, and regulatory expectations are constantly evolving. The complexity of our operations, particularly with respect to our concentration in political organization deposits and our participation in IntraFi’s ICS ® program, may increase our exposure to regulatory scrutiny. Accordingly, maintaining compliance with anti-money laundering and sanctions laws and regulations involves significant investments in technology, personnel, and internal processes, and as regulatory requirements evolve and regulatory expectations heighten, we have in the past incurred, and may in the future incur, increased costs, and may face operational challenges to maintain and improve our compliance programs. Further, there can be no assurances that we will identify all suspicious activity or high-risk transactions our clients engage in or prevent all instances of fraud or other financial crimes that our clients may commit. Additionally, our compliance program is reliant on the accuracy of information provided to us by our clients and other external sources, and, although we take steps that we believe are reasonably designed to verify and monitor client activities, we may not always detect or prevent fraudulent activities or non-compliance by clients. Failure to comply with anti-money laundering and sanctions laws or regulations, or to meet evolving regulatory expectations, may expose us to penalties, fines, operational restrictions, or reputational damage, which could adversely affect our business, financial condition, or results of operations.
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The Bank is subject to numerous “fair and responsible banking” laws and regulations designed to protect consumers, which increase our compliance costs and subject us to potential legal liability or reputational damage.
The Bank is subject to numerous “fair and responsible banking” laws and regulations designed to protect consumers. For example, the Community Reinvestment Act (“CRA”), the Equal Credit Opportunity Act (“ECOA”), the Fair Housing Act (“FHA”), the Truth in Lending Act (“TILA”), the Fair Credit Reporting Act (“FCRA”) and other fair lending laws and regulations, including state laws and regulations, prohibit discriminatory lending practices by financial institutions. The Federal Trade Commission Act and the Dodd-Frank Act prohibit unfair, deceptive, or abusive acts or practices by financial institutions. These laws and regulations increase our compliance costs and a failure to comply with these laws and regulations could result in a wide variety of sanctions. The U.S. Department of Justice, federal banking agencies, and other federal and state agencies are responsible for enforcing these fair and responsible banking laws and regulations. A challenge to an institution’s compliance with fair and responsible banking laws and regulations could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, restrictions on expansion, and restrictions on entering new business lines. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private class action litigation. Such actions could have a material adverse effect on the Bank’s reputation, business, financial condition and results of operations.
On October 24, 2023, the federal bank regulatory agencies issued a final rule to modernize their respective CRA regulations. The revised rules substantially alter the methodology for assessing compliance with the CRA, with material aspects taking effect January 1, 2026 and revised data reporting requirements taking effect January 1, 2027. The final rule is currently enjoined while a federal court considers a lawsuit challenging the rule, and on July 16, 2025, the agencies proposed to rescind the rule and reinstate the prior framework. The final rules, if implemented, would likely make it more challenging or costly for the Bank to maintain its current rating of “outstanding” or receive a rating of at least “satisfactory” on its CRA evaluation. For example, the revised rules may require the Bank to increase its lending and investment activities in areas where it does not currently have branches or significant operations, which could lead to higher compliance costs and operational complexities. A failure to maintain a rating of “outstanding” or “satisfactory” could limit our ability to expand through acquisitions or new branch openings and could subject us to increased scrutiny from regulators and community groups. Additionally, a lower CRA rating could damage our reputation, making it more difficult to attract and retain clients who value our community commitment. These factors could materially and adversely affect our business, financial condition, and results of operations. See “Supervision and Regulation — Community Reinvestment Act” for more information about the CRA.
We engage in lending secured by real estate and may be forced to foreclose on the collateral and own the underlying real estate, subjecting us to potential costs, risks and consumer protection laws.
Since we originate loans secured by real estate, we may have to foreclose on the collateral property to protect our investment and may thereafter own and operate such property. The amount that we, as a mortgagee, may realize after a foreclosure may depend on a variety of factors, including, but not limited to, general or local economic conditions, assessments, interest rates, real estate tax rates, condition of the collateral property, operating expenses of the mortgaged properties, our ability to effectively operate the properties, our ability to obtain and maintain adequate occupancy of the properties, zoning laws, environmental cleanup liabilities, governmental and regulatory rules and natural disasters. Our inability to manage the amount of costs or size of the risks associated with the ownership of real estate, or write-downs in the value of our other real estate owned, could have a material adverse effect on our business, financial condition and results of operations.
Consumer protection initiatives or changes in state or federal law may substantially increase the time and expenses associated with the foreclosure process or prevent us from foreclosing at all. A number of states in recent years have either considered or adopted foreclosure reform laws that make it substantially more difficult and expensive for lenders to foreclose on properties in default. Additionally, federal and state regulators have prosecuted or pursued enforcement action against a number of mortgage-servicing companies for alleged consumer law violations. If new federal or state laws or regulations are ultimately enacted that significantly raise the cost of foreclosure or raise outright barriers to foreclosure, they could have a material adverse effect on our business, financial condition and results of operations.
Additionally, if the Bank forecloses on, and takes title to, real estate, it may become subject to environmental liabilities associated with such properties, which could adversely affect our business, financial condition and results of operations. We may be liable for remediation costs, as well as for personal injury and property damage, civil fines and criminalpenalties regardless of when the hazardous conditions or toxic substances first affected the property.
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Environmental laws may require us to incur substantial expenses to address unknown liabilities and may materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability, and we may not have adequate remedies against the prior owner or other responsible parties and could find it difficult or impossible to sell the affected properties.
Any violation of laws regarding, or incidents involving, the privacy, information security and protection of personal, confidential or proprietary information could damage our reputation and otherwise adversely affect our business.
The Bank’s business requires the collection and retention of large volumes of client data, including personally identifiable information (“PII”) in various information systems that it maintains and in those maintained by third-party service providers. It also maintains important internal company data such as PII about employees and information relating to operations. The Bank is subject to complex and evolving laws and regulations governing the privacy and protection of PII of individuals (including clients, employees, and other third parties). These include the Gramm-Leach-Bliley Act, which, among other things: (1) imposes certain limitations on the Bank’s ability to share nonpublic PII about clients with nonaffiliated third parties; (2) requires that it provide certain disclosures to clients about its information collection, sharing and security practices and afford clients the right to “opt out” of any information sharing by us with nonaffiliated third parties (with certain exceptions); and (3) requires that it develop, implement, and maintain a written comprehensive information security program containing appropriate safeguards based on size and complexity, the nature and scope of activities, and the sensitivity of client information the Bank processes, as well as plans for responding to data security breaches. Various federal and state banking regulators and states have also enacted data breach notification requirements with varying levels of individual, consumer, regulatory or law enforcement notification in the event of a security breach. Ensuring that the collection, use, transfer, and storage of PII complies with all applicable laws and regulations can increase costs. Furthermore, the Bank may not be able to ensure that clients and other third parties have appropriate controls in place to protect the confidentiality of the information that they exchange, particularly where such information is transmitted by electronic means. If personal, confidential or proprietary information of clients or others were to be mishandled or misused (in situations where, for example, such information was erroneously provided to parties who are not permitted to have the information, or where such information was intercepted or otherwise compromised by third parties), the Bank could be exposed to litigation or regulatory sanctions under privacy and data protection laws and regulations. Concerns regarding the effectiveness of measures to safeguard PII, or even the perception that such measures are inadequate, could cause the Bank to lose clients or potential clients and thereby reduce revenues. Accordingly, any failure, or perceived failure to comply with applicable privacy or data protection laws and regulations may subject the Bank to inquiries, examinations and investigations that could result in requirements to modify or cease certain operations or practices or in significant liabilities, fines or penalties, and could damage its reputation and otherwise adversely affect its operations, financial condition and results of operations.
Increases in FDIC insurance premiums could adversely affect our earnings and results of operations.
The Bank is a member of the FDIC and the deposits of each of its depositors are insured to the maximum amount provided by the FDIA, subject to the Bank’s payment of deposit insurance premiums to the FDIC. The FDIC calculates assessment rates applicable to the Bank based on a variety of factors, including capital adequacy, asset quality, management practices, earnings performance, liquidity, and sensitivity to market risk. Any deterioration of these factors could result in an increase in the Bank’s FDIC assessment rate. In addition, to maintain a strong funding position and restore the reserve ratios of the DIF following the financial crisis, the FDIC increased deposit insurance assessment rates generally and, in response to recent bank failures, charged special assessments applicable to certain FDIC-insured financial institutions. Further increases in assessment rates or special assessments may occur in the future, especially if there are significant additional financial institution failures. Any future special assessments, increases in assessment rates or required prepayments in FDIC insurance premiums could reduce our profitability or limit our ability to pursue certain business opportunities, which could have a material adverse effect on our business, financial condition and results of operations.
The Federal Reserve may require the Company to commit capital resources to support the Bank at a time when our resources are limited, which may require us to borrow funds or raise capital on unfavorable terms.
The Company is required by the Federal Reserve to act as a source of financial and managerial strength to the Bank and may be required to commit capital and financial resources to support the Bank. Such support may be required at times when, absent this requirement, the Company otherwise might determine not to provide it, including situations where our resources may be limited, and we may be required to borrow funds or raise capital to make the required capital injection. Any loan by the Company to the Bank would be subordinate in right of repayment to payments to depositors and certain
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other creditors of the Bank. In the event of the Company’s bankruptcy, the bankruptcy trustee will assume any commitment by the Company to a federal bank regulatory agency to maintain the capital of the Bank. Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the Company’s general unsecured creditors, including the holders of any note obligations. Thus, any borrowing by the Company for making a capital injection to the Bank may be more difficult and expensive relative to other corporate borrowings. Borrowing funds or raising capital on unfavorable terms for such a capital injection may have a material adverse effect on our business, financial condition and results of operations.
Changes in our accounting policies or in accounting standards could materially affect how we report our financial results and condition.
From time to time, the accounting standard setters, including the Financial Accounting Standards Board (“FASB”) and the SEC, change the financial accounting and reporting standards that govern the preparation of our financial statements. These changes can be difficult to predict and can materially impact how we record and report our financial condition and results of operations. As a result of changes to financial accounting or reporting standards, we could be required to change certain of the assumptions or estimates we have previously used in preparing our financial statements, which could negatively impact how we record and report our results of operations and financial condition generally. In some instances, we could be required to apply a new or revised standard retroactively, resulting in the restatement of prior period financial statements.
Risks Related to Our Dual-Class Common Stock Structure
The dual-class structure of our common stock has the effect of limiting your ability to influence corporate matters and may adversely affect the market for our Class A common stock.
We have two classes of common stock:
• Class A common stock, par value $0.01 per share, which is entitled to one vote per share; and
• Class B common stock, par value $0.01 per share, which is entitled to 10 votes per share.
As of December 31, 2025, holders of our outstanding shares of Class B common stock held, in the aggregate, approximately 90.8% of the combined voting power of our common stock (with members of the Fitzgerald Family beneficially owning in the aggregate approximately 70.9% of the outstanding shares of our Class B common stock, and 64.4% of the combined voting power of our common stock). The dual-class structure of our common stock has the effect of concentrating voting power with the holders of our Class B common stock, including members of the Fitzgerald Family. Accordingly, those owners, if voting in the same manner, would be able to control the election of our Board and therefore limit your ability to influence corporate matters. No member of the Fitzgerald Family or other holder of our Class B common stock is a party to any voting agreement or other arrangement or understanding regarding the voting of our shares. As a result, we do not believe we are a “controlled company” within the meaning of the NYSE corporate governance listing standards and have no present intention to be treated as a controlled company in the future. However, members of the Fitzgerald Family and other holders of our Class B common stock may in the future decide to act as a group, and could elect to be treated as a “controlled company,” in which case we would not be required to comply with certain corporate governance requirements of the NYSE unless otherwise mandated by our Charter or applicable law. A “controlled company” may elect not to comply with certain corporate governance requirements of the NYSE, including:
• the requirement that a majority of the board of directors consist of “independent directors” as defined under the rules of the NYSE;
• the requirement that each of the compensation and nominating and corporate governance committees be composed entirely of independent directors; and
• the requirement for an annual performance evaluation of the compensation and nominating and corporate governance committees.
Although our Charter requires that, so long as our Class A common stock is listed for trading on a national securities exchange, such as the NYSE, a majority of directors must be independent in accordance with and as defined by the rules and regulations of such exchange, if we were to become a “controlled company” in the future we could elect not to comply
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with the NYSE requirements to maintain independent compensation and nominating and corporate governance committees. Further, if our Charter is also amended in the future to no longer require a majority of independent directors, we could elect not to comply with the NYSE requirements to maintain a majority of independent directors. Accordingly, if we become a “controlled company,” you may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance requirements of the NYSE.
In addition, pursuant to the terms of our Charter, some holders of our Class B common stock have in the past, and may in the future, voluntarily convert shares of Class B common stock to Class A common stock and some shares of Class B common stock may automatically convert into shares of Class A common stock under certain circumstances, including upon certain transfers (such as a transfer in connection with a sale). As such conversions occur, the converted shares of Class B common stock with 10 votes per share will be converted into shares of Class A common stock carrying only one vote per share. Accordingly, stockholders who continue to hold Class B common stock will, by virtue of the reduction of the number of outstanding shares of Class B common stock and the consequent reduction in the total number of votes attributable to Class B shares, realize an increase in their relative voting power. As a result, there is a possibility that the degree of voting control of our Chairman, Peter G. Fitzgerald, and the other members of the Fitzgerald Family, may increase over time if such conversions continue, further concentrating voting power with remaining Class B stockholders.
Our dual-class structure may adversely affect the market price, trading volume, volatility, or investor perception of our Class A common stock, potentially limiting its appeal to a broad range of investors. As a relatively small company, our size, combined with our dual-class structure and the proportion of shares held by insiders, may impact our eligibility for inclusion in certain widely followed stock indices, though eligibility criteria vary across index providers and depend on factors beyond our control, such as market capitalization, public float, “free float”, liquidity, and governance policies. Although our Class A common stock is currently included in at least one such index, index providers may change their eligibility rules over time, and some could revert to policies that exclude companies with dual-class structures like ours, as certain providers have done in the past. If we are not included in such indices—or if we are included but later excluded due to such rule changes—mutual funds, exchange-traded funds (ETFs), and other investment vehicles designed to track those indices may choose not to invest in our Class A common stock or may be forced to sell existing holdings. Given the significant capital flows into passive investment strategies that track stock indices, non-inclusion or subsequent exclusion could reduce demand for our Class A common stock or trigger significant selling pressure, potentially making it less attractive to institutional and retail investors. As a result, the market price, trading volume, and liquidity of our Class A common stock could be adversely affected, and we may experience increased volatility or negative publicity related to our capital structure or market position. We can provide no assurance that we will satisfy the inclusion criteria of any index provider.
Additionally, certain stockholder advisory firms and institutional investors have expressed concerns about multi-class structures with unequal voting rights. These entities may criticize our corporate governance practices or dual-class structure through commentary, voting recommendations, or investment policies, which could discourage investors from purchasing or holding our Class A common stock. Such criticism could further reduce the appeal of our Class A common stock, potentially leading to a less active trading market and amplifying adverse effects on our stock price.
Members of the Fitzgerald Family and other holders of Class B common stock could aggregate their holdings and sell a controlling interest in us to a third party in a private transaction.
As of December 31, 2025, members of the Fitzgerald Family beneficially owned in the aggregate shares of our common stock representing a majority, of the voting power with respect to all of the outstanding shares of our common stock. Currently, the members of the Fitzgerald Family are not party to any voting agreement or other arrangement or understanding regarding the voting of our shares and have no present intention to act together for any purpose. However, in the future, should they choose to do so, the members of the Fitzgerald Family and other holders of Class B common stock could aggregate their holdings, subject to the limitations set forth in the Change in Bank Control Act of 1978 (the “CIBC Act”) and the Charter, to sell some or all of their shares of our common stock, including our Class A common stock, in a privately negotiated transaction, which, if sufficient in size, could result in a change of control of our company. However, subject to certain exceptions, any transfer of Class B common stock to a third party would cause, or require the optional conversion, of such shares into Class A common stock. Shares of Class A common stock are entitled to one vote per share, compared to 10 votes per share of Class B common stock. Accordingly, any acquirer of our common stock from members of the Fitzgerald Family and other holders of Class B common stock may not be able to exercise the same aggregate amount of voting power with respect to such shares.
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The ability of the members of the Fitzgerald Family and other holders of Class B common stock to aggregate their shares and privately sell them, with no requirement for a concurrent offer to be made to acquire all of the shares of our outstanding common stock that will be publicly traded hereafter, could prevent you from realizing any change-of-control premium on your shares of our common stock that may accrue to members of the Fitzgerald Family and other holders of Class B common stock in such private sale of our common stock. In addition, if the members of the Fitzgerald Family and other holders of Class B common stock were to privately sell a significant equity interest in our company, we may become subject to the control of a presently unknown third party. Such third party may have interests that conflict with those of other stockholders. If there were to be such a change of control, it may adversely affect our ability to run our business as described in this Annual Report on Form 10-K and could have a material adverse effect on our business, financial condition and results of operations.
Conflicts of interest and other disputes may arise between the members of the Fitzgerald Family and us that may be resolved in a manner unfavorable to us and our other stockholders.
Conflicts of interest and other disputes may arise between the members of the Fitzgerald Family and us in connection with our past and ongoing relationships, and any future relationships we may establish in a number of areas, including, but not limited to, the following:
• Competing Business Activities. Members of the Fitzgerald Family may also engage in activities where their interests conflict or are competitive with our or our other stockholders’ interests. These activities may include a Fitzgerald Family member’s interests in any transaction it may conduct with us, any sale by a Fitzgerald Family member of a substantial interest in us to a third party or any investments by the Fitzgerald Family member in, or business activities conducted by the Fitzgerald Family member for, one or more of our competitors. Any of these disputes or conflicts of interests that arise may be resolved in a manner adverse to us or to our stockholders other than the Fitzgerald Family member and their affiliates. As a result, our future competitive position and growth potential could be adversely affected.
• Business Opportunities. Members of the Fitzgerald Family or their affiliates may engage in a corporate opportunity in the same or similar lines of business in which we or our affiliates now engage or propose to engage or otherwise compete with us or our affiliates. As a result of competition, our future competitive position and growth potential could be adversely affected.
While our Charter provides certain protections for the holders of Class A common stock, these and other conflicts of interest and potential disputes could have a material adverse effect on our business, financial condition, results of operations, or the market price of our Class A common stock.
Risks Related to Our Common Stock
The market price of shares of our common stock may be volatile or may decline regardless of our operating performance, which could cause the value of your investment to decline.
The market price of our Class A common stock may be highly volatile and could be subject to wide fluctuations. In addition, the trading volume on our Class A common stock may fluctuate and cause significant price variations to occur. If the market price of our Class A common stock declines significantly, you may be unable to resell your shares of Class A common stock at or above your purchase price, if at all. We cannot assure you that the market price of our Class A common stock will not fluctuate or decline significantly in the future. Stock markets and the price of our shares of Class A common stock may experience extreme price and volume fluctuations. Some, but certainly not all, of the factors that could negatively affect the price of our Class A common stock, or result in fluctuations in the price or trading volume of our Class A common stock, include:
• general market conditions;
• domestic and international economic factors unrelated to our performance;
• variations in our quarterly operating results or failure to meet the market’s earnings expectations;
• publication of research reports about us or the financial services industry in general;
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• the failure of securities analysts to cover or continue to cover our Class A common stock;
• removal from stock indices;
• delisting from the New York Stock Exchange;
• additions to or departures of our key personnel;
• adverse market reactions to any indebtedness we may incur or securities we may issue in the future;
• actions by our stockholders;
• future sales of our Class A common stock, including upon the conversion of shares of our Class B common stock;
• the operating and securities price performance of companies that investors consider to be comparable to us;
• changes or proposed changes in laws or regulations affecting our business; and
• actual or potential litigation and governmental investigations.
An acquisition of another banking institution could increase operational and regulatory risks, and adversely affect our financial condition and stock price and, if paid for with our Class A Common Stock, could dilute existing stockholders.
We may pursue growth through the acquisition of another banking institution. The success of any acquisition would depend, in part, on our ability to integrate the acquired businesses and realize anticipated synergies, cost savings and growth opportunities. We may face numerous risks and uncertainties in combining and integrating the relevant businesses and systems, including the need to combine or separate accounting and data processing systems and management controls and to integrate relationships with clients, counterparties, regulators and others in connection with acquisitions. Integration of acquired businesses is time-consuming and could disrupt our ongoing businesses, produce unforeseen regulatory or operating difficulties, cause us to incur incremental expenses or require incremental financial, management and other resources. It is also possible that an acquisition, once announced, may not close due to the failure to satisfy applicable closing conditions, such as the receipt of necessary shareholder or regulatory approvals. There is no assurance that an acquisition would be successfully integrated or yield all of the expected benefits and synergies in the time frames that we expect, or at all. If we are not able to integrate our acquisitions successfully, our business, results of operations or financial could be adversely affected. Further, if we issue shares of Class A Common Stock as consideration for any acquisition, it would dilute the ownership of existing holder of our Class A Common Stock, and could result in a decline in the market price of our Class A Common Stock.
We may issue shares of preferred stock in the future, which adversely affect holders of our common stock and depress the price of our common stock.
Our Charter authorizes us to issue up to 10,000,000 shares of one or more series of preferred stock. Our Board has the authority to determine the preferences, limitations and relative rights of shares of preferred stock and to fix the number of shares constituting any series and the designation of such series, without any further vote or action by our stockholders. Our preferred stock could be issued with voting, liquidation, dividend and other rights superior to the rights of our common stock, including our Class A common stock. The potential issuance of preferred stock may delay or prevent a change in control of us, discouraging bids for our common stock at a premium over the market price, and materially adversely affect the market price and the voting and other rights of the holders of our Class A common stock.
We do not intend to pay dividends on our common stock for the foreseeable future, and our future ability to pay dividends is subject to restrictions.
Holders of our common stock, including our Class A common stock, are only entitled to receive dividends when, as and if declared by our Board out of funds legally available for dividends. We currently do not intend to pay dividends on our common stock, including our common stock, in the foreseeable future. Any declaration and payment of dividends on our common stock in the future will depend on regulatory restrictions, our earnings and financial condition, our liquidity
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and capital requirements, the general economic climate, contractual restrictions, our ability to service any equity or debt obligations senior to our common stock and other factors deemed relevant by our Board. Furthermore, consistent with our strategic plans, business objectives, capital availability, projected liquidity needs and other factors, we have made, and will continue to make, capital management decisions and policies that could adversely affect the amount of dividends, if any, paid to our common stockholders.
The Federal Reserve has indicated that bank holding companies should carefully review their dividend policy in relation to the organization’s overall asset quality, current and prospective earnings and level, composition and quality of capital. The guidance provides that we inform and consult with the Federal Reserve prior to declaring and paying a dividend that exceeds earnings for the period for which the dividend is being paid or that could result in an adverse change to our capital structure, including interest on the senior promissory note, the subordinated debt obligations, the subordinated debentures underlying our trust preferred securities and our other debt obligations. If required payments on our debt obligations are not made, or dividends on any preferred stock we may issue are not paid, we will be prohibited from paying dividends on our common stock. Among other considerations, our ability to pay dividends further depends on the following factors:
• Because the Company is a legal entity separate and distinct from the Bank and does not have any stand-alone operations, our ability to pay dividends depends on the ability of the Bank to pay dividends to us, and the OCC and Delaware state law may, under certain circumstances, restrict the payment of dividends to us from the Bank;
• Federal Reserve policy states that bank holding companies should not maintain cash dividends on common shares at a rate that would be in excess of net income available over the past year or that would result in prospective earnings retention being inconsistent with the organization’s expected future needs and financial condition; and
• Our Board may determine that, even though funds are available for dividend payments, retaining the funds for internal uses, such as expansion of our operations, is necessary or appropriate in light of our business plan and objectives.
An investment in our common stock is not an insured deposit.
An investment in our common stock, including our Class A common stock, is not a bank deposit and, therefore, is not insured againstloss by the FDIC, any other DIF, or any other public or private entity. Investment in our common stock is inherently risky, including for the reasons described herein, and is subject to the same market forces that affect the price of common stock in any company. As a result, if you acquire our common stock, you could lose some or all of your investment.
If the Bank fails or is put into receivership or conservatorship by the FDIC and its primary regulator, investors will likely lose their entire investment in the Company.
The common stock of the Company, including our Class A common stock, is effectively subordinate to the claims of all creditors, including depositors, of the Bank. Based on the history of the FDIC in resolving failed institutions, if the Bank fails, or is placed into receivership, it is expected that the FDIC would incur a loss on the payout of the Bank’s insured deposits, uninsured deposits and sale of assets. As such, it is extremely unlikely that there would be any remaining funds available for payment to the Company as the sole stockholder of the Bank, or to its creditors or stockholders. The common stock is an investment in the Company only, and is not a deposit, savings account, or other liability of the Bank, and is not insured by the FDIC or any other governmental agency. As the Bank is the principal asset of the Company, its receivership will likely result in the Company’s bankruptcy, and the loss of stockholders’ investments in their entirety.
We qualify as an “emerging growth company” and “smaller reporting company,” and the reduced public company reporting requirements applicable to emerging growth companies and smaller reporting companies may make our common stock less attractive to investors.
We are an “emerging growth company” as defined in Section 2(a)(19) of the Securities Act, as modified by the JOBS Act. As an emerging growth company, we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies.
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Although we are still evaluating our options under the JOBS Act, we may take advantage of some or all of the reduced regulatory and reporting obligations that will be available to us so long as we qualify as an “emerging growth company,” and thus the level of information we provide may be different from that of other public companies. If we do take advantage of any of these exemptions, some investors may find our securities less attractive, which could result in a less active trading market for our Class A common stock, and the price of our Class A common stock may be more volatile.
As an “emerging growth company” under the JOBS Act, we are permitted to delay the adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. We do not intend to take advantage of this extended transition period, which means that the financial statements included in this Annual Report on Form 10-K, as well as any financial statements that we file in the future, will be subject to all new or revised accounting standards generally applicable to public companies. The decision not to take advantage of the extended transition period is irrevocable.
We could remain an “emerging growth company” until the earliest to occur of: (1) the end of the fiscal year following the fifth anniversary of our IPO; (2) the first fiscal year after our annual gross revenues are $1.235 billion or more; (3) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (4) the date on which we are deemed to be a “large accelerated filer” under the Exchange Act. We have taken advantage of reduced disclosure regarding executive compensation arrangements and the presentation of certain historical financial information in this Annual Report on Form 10-K, and we may choose to take advantage of some but not all of these reduced disclosure obligations in future filings. If we do, the information that we provide to our stockholders may be different from what stockholders might get from other public companies in which you hold stock.
We are also a smaller reporting company, as defined in the Exchange Act. Even after we no longer qualify as an emerging growth company, we may still qualify as a smaller reporting company, which would allow us to continue taking advantage of many of the same exemptions from disclosure requirements, including reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. In addition, for so long as we continue to qualify as a non-accelerated filer, we will not be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act.
We cannot predict if investors will find our securities less attractive due to our reliance on these exemptions. If investors were to find our securities less attractive as a result of our election, we may have difficulty raising capital in future offerings and the market price of our securities may be more volatile.
If securities or industry analysts do not publish research or reports about our business, or if they downgrade their recommendations regarding our Class A common stock, our stock price and trading volume could decline.
The trading market for our Class A common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not have any control over these securities analysts, and they may not cover, or may not continue to cover, our Class A common stock. If securities analysts do not cover our Class A common stock, the lack of research coverage may adversely affect our market price. If we are covered by securities analysts and if any of the analysts who cover us downgrade our common stock or publish inaccurate or unfavorable research about our business, our Class A common stock price may decline. If analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our Class A common stock price or trading volume to decline and our Class A common stock to be less liquid.
Certain banking laws, certain provisions of our organizational documents and Delaware law may discourage or delay acquisition attempts for us that you might consider favorable.
Provisions of federal banking laws, including regulatory approval requirements, could make it difficult for a third party to acquire us, even if doing so would be perceived to be beneficial to our stockholders. Acquisition of ten percent (10%) or more of any class of voting stock of a bank holding company or depository institution, individually or as part of a group acting in concert, including shares of our Class A common stock, generally creates a rebuttable presumption that the acquirer “controls” the bank holding company or depository institution, which, unless rebutted, would require prior approval of a federal banking agency, under the CIBC Act. Also, a bank holding company must obtain the prior approval of the Federal Reserve before, among other things, acquiring direct or indirect ownership or control of more than five percent (5%) of the voting shares of any bank, including the Bank, under the BHC Act. See “Supervision and Regulation — Banking Acquisitions; Changes in Control” for more information.
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In addition, our Charter and Amended and Restated Bylaws (“Bylaws”) contain provisions that may make a merger or acquisition of the Company more difficult. These provisions include, among others:
• a dual-class common stock structure, which provides for concentrated voting power in the holders of our Class B common stock, including members of the Fitzgerald Family, which provides significant influence over matters requiring stockholder approval, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets;
• no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;
• a class vote of the holders of a majority of the outstanding shares of any affected class of common stock, voting together as a separate class, to approve any amendment to our Charter that would adversely affect the rights or preferences of the Class A common stock or the Class B common stock;
• the affirmative vote of the holders of a majority of voting power of the outstanding shares held by stockholders other than the Founders (as defined in our Charter), voting together as a separate class, to approve any amendment to our Charter that would disproportionatelybenefit the Founders relative to stockholders other than the Founders;
• authorization to issue shares of one or more series of preferred stock, the terms of which series may be established and the shares of which may be issued without stockholder approval, and which may include super voting, special approval, dividend or other rights or preferences superior to the rights of the holders of Class A common stock;
• no stockholders action by written consent;
• special stockholder meetings may be called at any time by the Board, the chairman of our Board or the chief executive officer or our secretary upon the written request of the record holders of at least fifteen percent (15%) or more of the total voting power of the then-outstanding shares of common stock;
• advance notice requirements for nominations for elections to our Board or for proposing matters that can be acted upon by stockholders at stockholder meetings; and
• a class vote of the holders of Class A common stock, voting as a separate class, to approve any merger, consolidation or business combination of us into another corporation, in which any Founder, or an affiliate thereof, is part of the purchaser group.
These anti-takeover provisions and other provisions under the DGCL could discourage, delay or prevent a transaction involving a change in control of our company, including actions that our stockholders may deem advantageous, or negatively affect the trading price of our Class A common stock. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing and to cause us to take other corporate actions you desire.
Our Charter and Bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders.
Our Charter and Bylaws provide that, unless we consent to the selection of an alternative forum, the Court of Chancery of the State of Delaware will, to the fullest extent permitted by law, be the sole and exclusive forum for: (i) any derivative action or proceeding brought on our behalf; (ii) any action asserting a breach of fiduciary duty owed by any of our directors, officers or stockholders to us or to our stockholders; (iii) any action asserting a claim against us arising under the DGCL, our Charter or our Bylaws; or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine.
Although we believe this exclusive forum provision benefits us by providing increased consistency in the application of Delaware law, the forum selection clauses that are in our Charter and our Bylaws may impose additional litigation costs on stockholders in pursuing any such claims, particularly if the stockholders do not reside in or near the State of Delaware. Additionally, this choice-of-forum provision may limit a stockholder’s ability to bring a claim in a different judicial forum,
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including one that it may find favorable or convenient for a specified class of disputes with us or our directors, officers, other stockholders or employees, which may discourage such lawsuits even though an action, if successful, might benefit our stockholders. The Court of Chancery of the State of Delaware may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than our stockholders.
Bridge
We offer a broad range of commercial and personal banking services, including deposit accounts, multiple types of loan products, trust administration, wealth management, and asset custody.
Our mission is to deliver exceptional banking and trust services nationwide, blending financial strength, personalized service, and advanced technology to offer tailored solutions to businesses, non-profit organizations, political organizations, individuals, and families. We aspire to grow responsibly by adapting our personalized service and advanced technology solutions to our clients’ evolving needs while emphasizing liquidity, asset quality, and financial strength. We aim to be recognized for our “ Strength, Service, Solutions: Your Bridge to Better Banking Nationwide .”
Reclassification
In connection with the IPO, on October 3, 2024, the Company filed an Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware, which established two new classes of common stock, Class A common stock, par value $0.01 per share (“Class A Common Stock”) and Class B common stock, par value $0.01 per share (“Class B Common Stock”), and reclassified and converted each outstanding share of the Company’s existing common stock, par value $1.00 per share (“Old Common Stock”), into 170 shares of Class B Common Stock (the “Reclassification”). Share information presented prior to the Reclassification date of October 3, 2024 gives effect to the Reclassification and attributes all earnings to Class B shares because no Class A shares were outstanding prior to the Reclassification.
Results of Operation and Financial Highlights
Highlights of our results of operations and financial condition as of and for the twelve months ended December 31, 2025 are provided below.
Financial Performance
• Consolidated net income was $20.2 million for the year ended December 31, 2025, compared to $20.9 million for 2024. Earnings per share for the year ended December 31, 2025 was $3.08, compared to $4.17 for 2024.
• Net interest income, before recapture of credit losses, was $51.5 million for the year ended December 31, 2025, compared to $44.4 million for 2024. Net interest income, after recapture of credit losses was $52.0 million for the year ended December 31, 2025, compared to $44.5 million for 2024.
• Return on average equity was 12.88% for the year ended December 31, 2025, compared to 20.05% for 2024. Return on average assets was 1.32% for the year ended December 31, 2025, compared to 1.62% for 2024.
• Return on average RWA was 5.28% for the year ended December 31, 2025, compared to 5.19% for 2024. 2
Balance Sheet
• Total assets were $1.8 billion as of December 31, 2025, compared to $1.4 billion as of December 31, 2024.
• Total deposits were $1.6 billion as of December 31, 2025, compared to $1.2 billion as of December 31, 2024. Excluded from these totals are One-Way Sell ® deposits, which were placed at other banks through the IntraFi Cash Service ® (“ICS ® ”) network. These One-Way Sell ® deposits amounted to $359.9 million as of December 31, 2025, compared to $63.3 million as of December 31, 2024.
• No non-performing assets or other real estate owned (“OREO”) were reported as of December 31, 2025 or 2024.
• Cash balances held at the Federal Reserve were $580.9 million as of December 31, 2025, compared to $406.7 million as of December 31, 2024.
• As of December 31, 2025, the total debt securities portfolio balance was $865.3 million, compared to $658.8 million as of December 31, 2024.
• Book value per share was $25.79 as of December 31, 2025, compared to $21.98 as of December 31, 2024.
• As of December 31, 2025, the Company had a total risk-based capital ratio of 47.66% and a tier 1 risk-based capital ratio of 46.52%. The Bank exceeded the minimum requirements to be well-capitalized for bank regulatory purposes, with a total risk-based capital ratio of 44.63% and a tier 1 risk-based capital ratio of 43.49%.
• As of December 31, 2025, our liquidity ratio was 91.86%, compared to 85.13% as of December 31, 2024.
Significant Factors Impacting Our Business, Financial Condition and Results of Operations
Several key factors impact our financial performance:
Short-term interest rates : The cyclical nature of our balance sheet and our focus on liquidity cause our primary revenue source, net interest income, to be highly correlated to short-term interest rates. We strive to maintain high levels of liquidity and low loan-to-deposit ratios. Higher rates generally increase our net interest income because of our high levels of liquid interest-earning assets and low levels of interest-bearing deposits and borrowings. Conversely, if short-term interest rates fall, our net interest income would likely decrease due to our high levels of cash. In 2024, the Federal Reserve lowered the target federal funds rate on three occasions, followed by additional reductions on September 18th, October 30th, and December 11th in 2025. As short-term rates decline, our net interest income will be adversely affected. This relationship between our revenue and the yield curve may differ from that of banks that have lower levels of cash and liquidity and higher loan-to-deposit ratios.
Political organizations and federal election cycles : We provide deposit services to a wide range of political organizations, including political committees registered with the Federal Election Commission (“FEC”), such as campaign committees; party committees; separate segregated funds (including trade association political action committees (“PACs”) and corporate PACs); non-connected committees (including independent expenditure-only committees (“Super PACs”)); committees maintaining separate accounts for direct contributions and independent expenditures (“Hybrid PACs”); and committees other than authorized campaign committees or those affiliated with such committees that are maintained or controlled by a candidate or federal officeholder (collectively, “Leadership PACs”)); and other tax-exempt organizations under Section 527 of the Internal Revenue Code. These accounts are often associated with firms that provide treasury, legal or regulatory compliance services to political organizations.
Federal election cycles significantly affect our deposit levels. These cycles also impact revenue-generating activities, such as wire transfers, payments, check processing, debit card usage, and treasury management services. Historically, deposits from political organizations increase in the periods leading up to federal elections followed by a decline around the elections. Election outcomes may also impact the timing and scale of deposit inflows or outflows from political organizations, and this most recent cycle was no exception.
During the first quarter of 2025, the Company experienced a material increase in deposits from certain political organization clients, primarily attributable to a post-election surge in deposits following the November 2024 federal elections. At March 31, 2025, three political organization accounts each held more than 5% of total consolidated deposits. In aggregate, those three accounts totaled $472.0 million and represented 30.1% of consolidated total deposits.
2 Return on average RWA is calculated as net income divided by average RWA. Average RWA are calculated using the last five quarter ends.
Although political organization balances have historically tended to rebuild gradually in the quarters following a federal election, the timing and concentration of deposit inflows during the first quarter of 2025 differed from prior cycles and reflected elevated, event-driven fundraising activity. The Company treated these inflows as potentially temporary and maintained the balances in cash reserves held at the Federal Reserve and short-term U.S. Treasury securities that matured during the quarter.
On April 15, 2025, the Company experienced outflows of approximately $506.5 million across six political organization accounts, including the three that exceeded the 5% threshold at March 31, 2025. Following these outflows, total consolidated deposits were $1.1 billion at the close of that day. The resulting reduction in average balances contributed to the quarter-over-quarter decrease in net interest income.
Despite the outflows, deposit levels have increased during the remainder of the year-to-date period. Total consolidated deposits rose by $471.2 million between April 15, 2025 and December 31, 2025, ending the year at $1.6 billion. As of December 31, 2025, no accounts individually exceeded 5% of total consolidated deposits.
Lending approach : Our lending policies are designed to manage credit risk. We seek borrowers with a strong capacity to repay, who have good financial habits, are generally debt averse, and prefer to repay loans quickly. We aim to mitigate credit risk on commercial loans with appropriate structuring, reasonably margined collateral, personal guarantees, a primary deposit relationship, and sometimes compensating balances. Our lending policies typically attract borrowers who may qualify for lower borrowing rates, which may result in lower yields for us.
Economic conditions : General economic conditions, particularly in the Washington, D.C. metropolitan area, and levels of government spending influence our deposit levels and earnings. At various points throughout 2024 and 2025, we estimate that at least a majority of our deposit balances were sourced from political organizations, which we believe reduces our direct exposure to broader economic trends. However, economic downturns may lead to declines in political donations, which could adversely affect our deposit levels and income. Additionally, national or regional recessions could increase the risk of loan defaults and negatively impact the credit quality of our municipal and corporate bonds, potentially leading to defaults.
Following the inauguration of President Trump on January 20, 2025, the administration introduced a series of federal fiscal reforms, culminating in the enactment of H.R.1, or the One Big Beautiful Bill Act (“BBB”), signed into law on July 4, 2025. The BBB is a budget-reconciliation statute that principally extends and modifies federal tax policy (including making permanent or expanding many provisions of the Tax Cuts and Jobs Act) and includes limited spending and revenue-adjustment measures. The BBB, together with initiatives of the Department of Government Efficiency (“DOGE”), has continued to reshape federal tax policy and prompted agencies to evaluate discretionary spending levels. During the third quarter of 2025, some federal agencies began signaling or implementing hiring delays or contract-award deferrals in response to revised fiscal guidance, which created short-term uncertainty within the Washington, D.C. metropolitan area, where the regional economy remains heavily reliant on government operations and contracting.
These measures coincided with a partial federal government shutdown from October 1 through November 12, 2025, following a lapse in federal fiscal year 2026 appropriations. Although essential services and Treasury operations continued, the shutdown contributed to slower government payments to contractors and a temporary reduction in federal payroll disbursements within the Washington, D.C. metropolitan area. A continuing resolution enacted on November 12, 2025 provided funding through January 30, 2026, and a subsequent appropriation in February 2026 allowed operations to resume.
As a result, the regional economy has experienced short-term disruptions and uncertainty, compounding the effects of the BBB and related fiscal-policy initiatives. The Company continues to view these developments, including both the BBB implementation and the federal shutdown, as known trends and uncertainties that may influence future deposit behavior, loan demand, and trust-related activity, particularly among clients whose business models or income streams are tied to federal expenditures.
These measures could have broad economic implications for the Washington, D.C. metropolitan area, given the region’s reliance on federal employment and contracting. As a known uncertainty, a reduction in federal workforce levels and agency budgets could negatively impact the financial stability of consumers and businesses dependent on government spending, increasing the credit risk of our consumer and commercial borrowers. Additionally, decreased demand for commercial office space and housing may place downward pressure on residential and commercial real estate values, which could further affect the region’s economy and the performance of our loan portfolio.
Monetary Policy : We rely on the Federal Reserve’s payment of interest on reserve balances as a source of interest income. The required reserve balance and the rate of interest paid on reserve balances are determined by the Federal Reserve, but Congress, through legislative action and followed by the Executive branch approval, has power to limit or revoke the Federal Reserve’s authority to pay interest on required or excess reserves. The Federal Reserve has historically adjusted its interest on reserves rate in conjunction with the federal funds rate. We are most exposed to monetary policy during federal election years such as in 2024 when campaign-related deposits rise and we match those liabilities with short-term assets such as Federal Reserve cash balances, which reprice immediately, and Treasury bills. Although higher interest rates decrease the value of our investment securities portfolio, they increase our interest income. While we have recently benefited from elevated short-term interest rates, the Federal Reserve lowered its target federal funds rate three times during 2024 and in September, October and December of 2025. To the extent short-term rates decline, our net interest income will be adversely affected. The Federal Reserve has additional monetary tools that can impact our interest income through changes in rates, such as the overnight reverse repo rate and open market operations.
Regulatory and Supervisory Environment : We incur significant costs due to our regulation and supervision by the federal government. As a bank holding company, we are subject to comprehensive supervision and regulatory oversight by the Federal Reserve. The Bank’s primary regulator and supervisor is the OCC, which through regular examinations oversees our operations, risk management, compliance, and corporate governance. The Bank is also subject to FDIC secondary regulatory oversight that focuses on insurance standards, risk management practices, and overall regulatory compliance. We pay assessments to the FDIC and the OCC for their insurance and supervision. In addition, we manage our balance sheet to meet regulatory standards, such as capital ratio requirements. Failure to meet these standards may result in corrective actions, restrictions, and increased scrutiny from federal regulators. By adhering to these requirements, we aim to maintain our financial health and strengthen our market position. See Item 1,“Business — Supervision and Regulation.”
Uninsured Deposits : Most of our deposits come from commercial clients rather than retail clients, resulting in a relatively high level of account balances exceeding the FDIC coverage limits. As of December 31, 2025, we estimate that approximately 75.0% of our total deposits were not insured by the FDIC. To manage the associated risks, we aim to maintain high levels of liquidity, asset quality, and financial strength.
For clients with uninsured balances, we offer access to additional FDIC insurance coverage by placing their deposits in increments within the insurance limits at other banks through the ICS ® network. We typically earn fee income from ICS ® for deposits that are placed at other banks as One-Way Sell ® deposits, or we earn interest income when we choose to receive reciprocal deposits through ICS ® . Using the ICS ® program helps us to manage the size of our balance sheet. See “— Financial Condition — Deposits” below.
Public Company Costs : Following the completion of, our IPO, we have incurred, and expect to continue to incur, additional costs associated with operating as a public company. These costs have included, and will continue to include, additional personnel, legal, consulting, regulatory, insurance, accounting, investor relations and other expenses that we did not incur as a private company. The Sarbanes-Oxley Act, as well as rules adopted by the SEC and national securities exchanges, requires public companies to implement specified corporate governance practices that are now applicable to us as a public company. These additional rules and regulations have increased our legal, regulatory and financial compliance costs and have made some activities more time consuming and costly.
Primary Factors Used to Evaluate Our Business
The most significant factors we use to evaluate our business and results of operations are net income, return on average equity, return on average assets and return on average risk-weighted assets. We also use net interest income, noninterest income and noninterest expense.
Net Income . Our net income depends substantially on net interest income, which is the difference between interest earned on interest-earning assets (usually interest-bearing cash, investment securities and loans) and the interest expense incurred in connection with interest-bearing liabilities (usually interest-bearing deposits and borrowings). Our net income also depends on noninterest income, which is income generated other than by our interest-earning assets. Other factors that influence our net income include our provisions for credit losses, income taxes, and noninterest expenses, which include our fixed and variable overhead costs and other miscellaneous operating expenses.
Return on Average Equity . We use return on average equity to assess our effectiveness in utilizing stockholders’ equity to generate net income. In determining return on average equity for a given period, net income is divided by the average stockholders’ equity for that period.
Return on Average Assets . We monitor return on average assets to measure our operating performance and to determine how efficiently our assets are being used to generate net income. In determining return on average assets for a given period, net income is divided by the average total assets for that period.
Return on Average Risk-Weighted Assets . We use return on average RWA to measure how efficiently our assets are being used to generate net income on a risk-adjusted basis. Return on average RWA is calculated as annualized net income divided by the average of quarter end RWA over the period observed.
Net Interest Income . Net interest income, representing interest income less interest expense, is the largest component of our net income. The level of net interest income is primarily a function of the average balance of interest-earning assets, the average balance of interest-bearing liabilities and the spread between the realized yield on such assets and the cost of such liabilities. Net interest income is impacted by the relative mix of interest-earning assets and interest-bearing liabilities and movements in market interest rates. Net interest income and net interest margin in any one period can be significantly affected by a variety of factors, including the mix and overall size of our earning assets portfolio and the cost of funding those assets. Management calculates the cost of funds performance indicator to monitor funding costs. Cost of funds is calculated as total interest expense divided by the sum of average total interest-bearing liabilities and average demand deposits.
Noninterest Income . Noninterest income consists primarily of service charge income earned from deposit placement services, service charges on accounts, revenue from trust and wealth management services, gains on sale of mortgage loans, net gains or losses on sales of securities and other income. The Bank records as noninterest income deposit placement services income for One-Way Sell ® deposits which are sold into the ICS ® network. See “— Financial Condition — Deposits” for more information on these deposits. Service charges on deposit accounts include fees earned from monthly service charges, account analysis charges and interchange fee income. It also includes fees charged for transaction activities such as wire transfers, cash letters and overdrafts. Trust and wealth management income represents monthly service charges due from clients for managing and administering clients’ assets. Services include investment management and advisory services, custody of assets, trust services, and financial planning. Other income primarily relates to rental income and other minor items.
Noninterest Expense . Noninterest expense relates to fixed and variable overhead costs, the largest component of which is personnel expenses, including salaries and employee benefits. Certain expenses tend to vary based on the volume of activity and other factors, including professional services, data processing and communication expenses, occupancy, equipment expense, regulatory assessments and fees, insurance expenses and other operating expenses.
Data processing and communication expenses primarily relate to expenses paid to third party providers of core processing, cloud computing and cybersecurity, a substantial component of which is paid to a core technology provider we rely on for the banking software used by our clients and back office functions. Professional services expenses include those such as internal and external audit, legal, loan review, recruiting fees, compliance audit, and compliance monitoring fees. Occupancy and equipment expenses include depreciation for buildings and improvements, fixtures and furniture, equipment, and technology related items as well as building related expenses such as utilities and maintenance costs. The Commonwealth of Virginia, where the Bank operates, levies a capital-based franchise tax on banks operating within the state, replacing the state income tax. The State of Delaware, where the Company is incorporated, levies a franchise tax based upon the number of authorized shares. FDIC and regulatory assessments represent costs incurred to cover quarterly or semi-annual payments to the FDIC or OCC for their insurance or supervision. FDIC assessments are based on a complicated matrix of factors to form an assessment rate, which is then applied to a base of quarterly average assets less quarterly tangible equity. Directors’ fees represent fees paid to our directors for board or committee meetings. Insurance expenses include costs for coverage of fidelity bond, professional liability, property and casualty, workers compensation and cyber liability policies. Other operating costs include other operating and administrative costs such as other vendor and employee costs, postage and printing, office supplies, marketing and business development costs, and subscriptions.
As discussed above, we expect our noninterest expenses to increase as a result of the additional costs associated with operational growth and functioning as a public company.
Primary Factors Used to Evaluate Our Financial Condition
The most significant factors we use to evaluate and manage our financial condition include liquidity, asset quality and capital.
Liquidity . Maintaining an adequate level of liquidity depends on our ability to efficiently meet both expected and unexpected cash flows and collateral needs without adversely affecting our daily operations or the financial condition of the Bank. Because transaction account deposits form a primary source of our funding, and generally can be withdrawn on demand, managing our liquidity is a top priority. Our account at the Federal Reserve, which held $580.9 million as of December 31, 2025, is a primary source of our liquidity for daily and ongoing activities.
Asset Quality . We monitor the quality of our assets based upon several factors, including the level and severity of deterioration in borrower cash flows and asset quality. We aim to adjust the allowance for credit losses to reflect loan volumes, identified credit and collateral conditions, economic conditions and other qualitative factors.
Capital . We manage capital to comply with our internal planning targets and regulatory capital standards. We monitor capital levels on an ongoing basis, perform periodic evaluations under stress scenarios and project capital levels in connection with our strategic goals to ensure appropriate capital levels. We evaluate a number of capital ratios, including Tier 1 capital to total quarterly average assets (the leverage ratio) and total Tier 1 capital to risk weighted assets.
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements according to GAAP. Preparing these statements requires management 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.
Our most significant accounting policies are described in the Notes to the accompanying Consolidated Financial Statements. These policies, together with the other disclosures presented in the financial statement notes and this Annual Report on Form 10-K, provide information on the valuation of significant assets and liabilities and the methodologies used in determining those values. Based on the valuation techniques applied, and the sensitivity of financial statement amounts to the underlying methods, assumptions, and estimates, we have identified the determination of the allowance for credit losses as the area that involves the most subjective or complex judgments and, as such, could be subject to revision as new information becomes available.
Allowance for Credit Losses on Loans:
The ACL on loans is determined based on management’s assessment of expected credit losses over the life of the loan portfolio, utilizing historical loss experience, current economic conditions, management’s assessment of borrower creditworthiness, and other qualitative factors, all of which may undergo frequent and significant changes. Given the uncertainty in economic conditions, changes in borrower credit quality, and fluctuations in collateral values, the estimation process is inherently subjective and could materially impact earnings if actual losses differ from those estimated. In addition, unforeseen changes in market and economic conditions, asset-specific risk characteristics, and qualitative drivers, both within and outside of the Company’s control, may indicate the need for an increase or decrease in the ACL on loans. Due to the Company’s limited historical credit losses, qualitative factors represent a significant component of the ACL estimate. GAAP requires the Company to incorporate reasonable and supportable forecasts, increasing the complexity of the estimation process and its sensitivity to changes in the economic outlook.
The effects of new accounting pronouncements are detailed in Note 1 to the Consolidated Financial Statements, “Organization and Summary of Significant Accounting Policies.”
Results of Operations
Net Income
The following table sets forth the principal components of net income for the periods indicated.
For the Year Ended December 31,
( dollars in thousands )
Change
Change
Interest and dividend income
Interest expense
Net interest income
Recapture of credit losses
Net interest income after recapture of credit losses
Noninterest income
Noninterest expense
Net income before taxes
Income tax expense
Net income
For the year ended December 31, 2025, our net income decreased by $712 thousand compared to the year ended December 31, 2024, primarily due to a $5.1 million, or 59.4%, decrease in noninterest income, attributable to a decline in deposit placement services income earned from One-Way Sell ® deposit accounts and a $3.2 million increase in noninterest expense, principally due to costs associated with operational growth and the Company’s transition to operating as a public company. These components more than offset the benefit of a $7.1 million, or 16.1% increase in net interest income driven by a rise in average interest-earning assets, primarily reflecting growth in the investment securities portfolio and related income.
Net Interest Income Analysis
Our operating results depend primarily on our net interest income, which is calculated as the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities. Interest and dividend income consists of interest and fees on loans, interest and dividends on taxable and tax-exempt securities, and interest on interest-bearing deposits in banks. Interest expense consists of interest we pay on deposits and short-term borrowings.
For the Year Ended December 31,
( dollars in thousands )
Change
Change
Interest and dividend income
Interest and fees on loans
Interest and dividends on securities, taxable
Interest on securities, tax-exempt
Interest on interest-bearing deposits in banks
Total interest and dividend income
Interest expense
Interest on deposits
Interest on short-term borrowings
Total interest expense
Net interest income
NM — Comparisons of positive and negative values or to zero values are considered not meaningful.
Interest income and expense are affected by fluctuations in interest rates, by changes in the volume of interest-earning assets and interest-bearing liabilities, and by the interaction of these rate and volume factors. The following table presents an analysis of net interest income and net interest margin for the periods indicated. We divide each asset or liability segment’s income or expense by its average daily balance to calculate the average yield or cost.
For the Year Ended December 31,
($ in thousands)
Average
balance
Interest
Average
yield/cost
Average
balance
Interest
Average
yield/cost
Assets:
Interest-earning assets:
Interest-bearing deposits in other banks
Investment securities, taxable 3
Investment securities, tax-exempt 4
Loans
Total interest-earning assets
Less allowance for credit losses
Noninterest-earning assets
Total assets
Liabilities and stockholders’ equity
Interest-bearing liabilities:
Savings, interest-bearing checking and money market
Time deposits
Short term borrowings 4
Total interest-bearing liabilities
Noninterest-bearing liabilities:
Demand deposits
Other liabilities
Total liabilities
Stockholders’ equity
Total liabilities and stockholders’ equity
Net interest income
Net interest margin
3 Average balances for securities transferred from AFS to HTM at fair value are shown at carrying value. Average balances for AFS and all other HTM bonds are shown at amortized cost.
4 The yield for short-term borrowings reflects interest expense incurred during the period. When the amount of interest expense was less than our rounding threshold, it is displayed as $0.
The rate/volume table below presents the composition of the change in net interest income for the periods indicated, as allocated between the change in net interest income due to a change in the volume of average interest-earning assets and interest-bearing liabilities, and the changes in net interest income that are due to changes in average rates. Volume and rate changes are allocated on a consistent basis using the respective percentage changes in average balances and average rates.
For the Year Ended
December 31, 2025 compared to
Increase (decrease) due to change in:
( dollars in thousands )
Average
volume
Average
rate
Total
Interest-earning assets
Interest-bearing deposits in other banks
Investment securities, taxable
Investment securities, tax-exempt
Loans
Total increase in interest income
Interest-bearing liabilities
Savings, interest-bearing checking and money market accounts
Time deposits
Short-term borrowings
Total increase (decrease) in interest expense
Increase in net interest income
For the year ended December 31, 2025, our net interest income increased by $7.1 million, or 16.1%, compared to the year ended December 31, 2024. The increase in interest income was primarily driven by higher average balances in, and yields on, taxable investment securities. The yields on interest-bearing deposits at the Federal Reserve declined compared to the twelve months ended December 31, 2025, outweighing the benefit of their higher average balance and leading to lower income from these deposits. Overall, growth in interest-earning assets outpaced the increase in net interest income, resulting in a decline in the net interest margin from 3.46% to 3.39%.
Interest Income
Interest and fees on loans . Loan interest income is comprised of fixed and adjustable-rate structures related to residential and commercial real estate loan products, commercial loans and other consumer loan products. Deferred loan origination fees, net of deferred loan origination costs, accrete to the loan’s yield over the life of the loan. For the year ended December 31, 2025, our interest and fees on loans decreased 3.6% to $13.3 million compared to the year ended December 31, 2024 primarily driven by a $13.5 million reduction of the average total loan balance, offset by a slight increase in average yield. The months following a general election, including the last months of 2024, often see elevated commercial and industrial loan balances, as political organizations typically utilize their lines of credit around election periods and may repay these balances over the subsequent six to twelve months, or as cash flows allow. In addition, elevated interest rates continue to cause a reduction in demand for consumer loans, and management has strategically allowed a decline in the commercial real estate portfolio. Elevated interest rates have increased the cost of borrowing and remote work trends continue to be a concern for the commercial real estate portfolio. These factors negatively impact the value of commercial properties, making commercial real estate loans less attractive.
See “— Financial Condition — Loan Portfolio” below for an analysis of the composition of our loan portfolio.
Interest and dividends on securities, taxable . For the year ended December 31, 2025, our interest and dividends on taxable securities increased 77.3% to $21.8 million from $12.3 million for the year ended December 31, 2024. The average balance for all taxable securities increased $196.7 million when comparing the periods, and the average yield increased 0.68%. The Bank reinvested maturing bonds and invested funds from temporarily elevated deposit levels in short term U.S. Treasury securities with maturities during 2026, which is intended to align with the timing of expected deposit outflows. As portions of maturing bonds have been reinvested in current market rates and we have continued to invest in new securities, we have observed a steady increase in the average yield for the taxable securities portfolio.
Interest on securities, tax-exempt . In recent years, the attainable yields for any new investment in this segment and the investment landscape have left tax-exempt securities less attractive than their taxable counterparts. Accordingly, as tax-exempt securities have matured, those proceeds have been invested into taxable municipal securities, leading to the decline during the period.
See “— Financial Condition — Securities” below for an analysis of the composition of the securities portfolio, including taxable and tax-exempt securities.
Interest on interest-bearing deposits in banks . Chain Bridge earns interest for accounts held at certain correspondent banks, which are primarily reserves held at the Federal Reserve. The Federal Reserve has historically adjusted its interest on reserves rate in conjunction with the federal funds rate. The interest rate paid by the Federal Reserve on reserve balances decreased three times throughout 2024, and three times in 2025 to 3.65% on December 11, 2025. For the year ended December 31, 2025, our interest on interest-bearing deposits in banks decreased by $1.2 million compared to the prior period, primarily due to a decrease in yield of 0.96%, which was partially offset by an increase in average balance of $59.2 million. The decline in the average balances of interest-bearing deposits in banks is a reflection of the the Bank’s reallocation of interest-earning assets into investment securities.
Interest Expense
Interest on deposits . The Bank pays a variable interest rate to depositors for their non-maturing savings, interest-bearing checking, and money market accounts. In addition, the Bank issues time deposits that pay a fixed rate of interest until the instrument matures. For the year ended December 31, 2025, our interest expense on deposits increased 32.6% compared to the prior period. The increase was primarily driven by a $141.1 million increase in average interest-bearing deposit balances driven by changes in political organization deposit balances as well as growth across other deposit categories, partially offset by a 0.16% decrease in the average rate. As of December 31, 2025 and December 31, 2024, approximately 79.8% and 73.1%, respectively, of our deposits were noninterest-bearing.
See “— Financial Condition — Deposits” for an analysis of the composition of the deposits portfolio, including its interest-bearing and noninterest-bearing components.
Interest on short-term borrowings . During 2025, the Company had no short-term borrowings other than routine line tests and periodic overnight draws of federal funds purchase lines of credit compared to 2024 when the Company used its $10.0 million unsecured line of credit with a correspondent bank, maintaining a $5.0 million balance from January until June, when an additional $5.0 million was drawn, bringing the outstanding total to $10.0 million. On October 10, 2024, the Company used a portion of the net proceeds from the IPO to fully repay the $10.0 million outstanding principal balance on this line of credit and closed the line on October 11, 2024. Substantially all interest on short-term borrowings reported during 2024 was related to this line of credit. The Bank currently has no borrowings, and there are no outstanding draws on its lines of credit with the FHLB, the Federal Reserve, or other third-party institutions.
Provision for Credit Losses
The allowance for credit losses (“ACL”) represents an amount which, in management’s judgment, is adequate to absorb the lifetime expected credit losses that may be sustained on outstanding loans and investments at the balance sheet date. The provision for credit losses represents the amount of expense charged to current earnings to fund an increase in the ACL. Conversely, a recapture of credit losses is recorded to earnings when the ACL is reduced. Our provisions for or recaptures of credit losses arising from within the loan and securities portfolios were as follows:
For the Year Ended December 31,
( dollars in thousands )
Change
Change
Provision for (recapture of) credit losses
Provision for (recapture of) loan credit losses
Recapture of securities credit losses
Total recapture of credit losses
NM — Comparisons of positive and negative values or to zero values are considered not meaningful.
For the year ended December 31, 2025, our provision for credit losses consisted of a recapture of $492 thousand, compared to a net recapture of $161 thousand for the year ended December 31, 2024. For 2025, the recapture was primarily attributable to the changes in the loan portfolio composition resulting from an increase in the proportion of residential real estate loans relative to total loans as well as a reduction in outstanding balances. The reduction of commercial and industrial loans balances during 2025, which were elevated in the last months of 2024, also contributed to the level of recapture. The months following a general election often experience elevated commercial and industrial loan balances, as political organizations typically utilize their lines of credit around election periods and may repay these balances over the subsequent six to twelve months, or as cash flows allow.
During 2024, we received proceeds totaling $210 thousand for a bond we wrote off in its entirety during 2023 related to a single corporate issuer whose business was ultimately closed by a regulatory authority. In addition, we recaptured provisions totaling $146 thousand during 2024 because the shortening time to maturity of our held to maturity securities portfolio resulted in a lower required reserve in accordance with our ACL methodology. This recapture of securities credit losses was partially offset by loan portfolio provisions required as a result of loan growth and an increase in the required reserve rate.
Noninterest Income
Noninterest income consists of trust and wealth management income, service charges on deposit accounts, deposit placement services income, gains on sale of mortgage loans, net gains or losses on sales of securities and other income.
For the Year Ended December 31,
( dollars in thousands )
Change
Change
Noninterest income
Trust and wealth management
Service charges on accounts
Deposit placement services
Gain on sale of mortgage loans
Loss on sale of securities
Other income
Total noninterest income
NM — Comparisons from positive to negative values or to zero values are considered not meaningful.
For the year ended December 31, 2025, our noninterest income decreased by $5.1 million, or 59.4%, to $3.5 million compared to the prior period primarily driven by a decrease in deposit placement services income from One-Way Sell ® deposits placed through the ICS ® network.
Trust and wealth management income . For the year ended December 31, 2025, our trust and wealth management income increased by 48.4%, compared to the corresponding period in the prior year. This increase was primarily due to a rise in the volume of total assets under administration, which grew to $610.7 million at December 31, 2025 from $330.3 million at December 31, 2024. The size and mix of the assets under administration drove the income growth. Assets under management, which produce a higher rate of income under our fee structure, increased 69.8% from December 31, 2024, while assets under custody increased 94.3% over the same period.
Our trust and wealth management services utilize service charge structures for AUM and AUC that are distinct with respect to the level and range of services used. Service charges for AUM are calculated as a percentage of the assets managed, with the rate varying based on the type of service provided, such as investment management or fiduciary services, and tiered based on the value of the assets under management. These service charges are not performance-based. Service charges for AUC are also tiered based on the value of the assets under custody, and are generally lower than the service charges for AUM, reflecting the more limited services provided, such as safekeeping and administrative functions.
The service charges we collect for AUM are subject to fluctuations in the total value of assets managed, which can vary with changes in market conditions, including stock prices and bond yields. Therefore, any significant market volatility
or changes in interest rates could impact the valuation of the assets we manage, thereby affecting the service fees we collect.
The growth in AUC during the period was largely driven by clients seeking higher interest rates. A material decline in interest rates could result in a reduction of custody balances, negatively impacting our revenue from these accounts. Additionally, a substantial portion of our custody account balances are related to political organizations, which are seasonal and are expected to decline following periods of high spending around federal elections.
Service charges on accounts . For the year ended December 31, 2025, our service charges on accounts decreased by $374 thousand, or 26.6%, compared to the year ended December 31, 2024, primarily driven by lower transaction volume, particularly among check processing and wire transfers. Our fee income is typically higher during the fiscal quarters prior to and during the general election as political organization deposit account activity causes an increase in bank transactions.
Deposit placement services income . For the year ended December 31, 2025, our deposit placement services income decreased by $5.4 million, or 86.5%, compared to the year ended December 31, 2024. Changes in One-Way Sell deposits can occur in response to deposit seasonality, evolving balance sheet dynamics and available capital capacity. Although One-Way Sell deposit balances at December 31, 2025 were higher than at the prior year end, the decrease in deposit placement services income is a direct result of the lower average balances throughout much of 2025 and a decline in the rate paid for those deposits by ICS ® which typically adjust in a manner parallel to federal funds rate adjustments. Accounts enrolled in the ICS ® network are further discussed under “— Financial Condition — Deposits” below.
Gain on sale of mortgage loans . For the year ended December 31, 2025, the gain on sale of mortgages increased by $33 thousand, or 122.2% compared to the year ended December 31, 2024, due to increased sales activity during the current year.
Loss on sale of securities . Because the Bank historically has not actively engaged in bond sales, gains and losses from sales of securities are irregular. For the year ended December 31, 2025, our loss on sale of securities decreased by $81 thousand, compared to 2024 due to a lack of sales activity in the current year.
Noninterest Expense
Noninterest expense consists of salaries and employee benefits, professional services, data processing and communication expenses, state franchise tax, occupancy and equipment expenses, FDIC and regulatory assessments, insurance expenses, directors’ fees, and other operating expenses.
For the Year Ended December 31,
( dollars in thousands )
Change
Change
Noninterest expenses
Salaries and employee benefits
Professional services
Data processing and communication expenses
State franchise taxes
Occupancy and equipment expenses
FDIC and regulatory assessments
Insurance expenses
Directors’ fees
Other operating expenses
Total noninterest expenses
For the year ended December 31, 2025, our noninterest expense increased by $3.2 million, or 12.0%, compared to the prior year, primarily driven by increases in salaries and employee benefits costs, reflecting higher employment costs associated the Company’s growth, increased operational capacity and expanded operations as a public company.
Salaries and employee benefits . During the year ended December 31, 2025, our salaries and employee benefits increased $1.8 million, or 11.6%, compared to the corresponding period in the prior year, reflecting higher employment costs associated with the Company’s growth, increased operational capacity and expanded operations as a public company.
Professional services . For the year ended December 31, 2025, our professional services expense was relatively unchanged compared to the year ended December 31, 2024.
Data processing and communication expenses . For the year ended December 31, 2025, our data processing and communication expenses increased $311 thousand, or 11.9%, compared to the year ended December 31, 2024, driven by higher data processing fees charged by our core provider arising from periodic rate increases, the purchase of various new products, increased costs associated with enhanced IT functionality, and an increase in core processing expenses incurred by the Trust & Wealth Department on account of growth in managed assets and custody accounts.
Occupancy and equipment expenses . For the year ended December 31, 2025, our occupancy and equipment expenses increased $90 thousand or 9.2% compared to the year ended December 31, 2024, primarily due to an increase in non-capitalized equipment costs.
State franchise taxes . For the year ended December 31, 2025, our state franchise taxes increased $405 thousand, or 45.8%, compared to the year ended December 31, 2024, primarily driven by the growth in the Bank’s capital which forms the basis for our Virginia bank franchise tax computation.
FDIC and regulatory assessments . For the year ended December 31, 2025, our FDIC and regulatory assessments expense increased $97 thousand, or 12.9%, compared to the year ended December 31, 2024, due to the growth in the Bank’s assets between the comparative periods.
Insurance expenses . For the year ended December 31, 2025, our insurance expenses increased $265 thousand, or 77.9%, compared to the year ended December 31, 2024. The increase was primarily due to increased costs associated with directors and officers insurance, as a result of our operations as, a public company.
Directors’ fees . In the year ended December 31, 2025, our directors’ fees decreased by $54 thousand, or 8.3%, compared to the year ended December 31, 2024, primarily driven by a decrease in the number of board and committee meetings, compared to the prior year when the Company prepared for its IPO and Reclassification.
Other operating costs . This segment includes other operating and administrative costs such as other vendor and employee costs, marketing and business development, postage and printing, office supplies and subscriptions. For the year ended December 31, 2025, other operating costs increased $274 thousand, or 17.6%, compared to the year ended December 31, 2024. The increase over the comparable period was driven primarily by increased ICS ® fees for placement of reciprocal deposits and increased printing costs supporting enhanced production and printing process for our Annual Report to Shareholders.
Income Tax Expense
Income tax expense is recorded based on our pre-tax financial income adjusted for nondeductible expenses and tax-exempt income. For the year ended December 31, 2025, our income tax expense was $5.2 million, representing a decrease of 2.6%, compared to $5.3 million for the year ended December 31, 2024. The decrease was driven by the decrease in pre-tax earnings, which decreased 3.2% during the comparable period.
Our effective income tax rate was 20.38% for the year ended December 31, 2025, an increase of 0.13% from 20.25% for the year ended December 31, 2024. During 2025, an increase in state income taxes drove the increase in the effective tax rate.
Financial Condition
Securities
We maintain a securities portfolio to provide liquidity, manage risk, meet capital requirements, and generate interest income. The portfolio primarily consists of U.S. Treasury securities, corporate bonds, and state and municipal securities, with smaller allocations to U.S. government agency and mortgage-backed securities. Securities that management has the
positive intent and ability to hold to maturity are classified as HTM and recorded at amortized cost. Securities not classified as HTM or trading are classified as AFS and recorded at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive loss. We do not hold trading securities.
The following table summarizes the amortized cost and weighted average yield of securities as of December 31, 2025 by contractual maturities.
Balance as of December 31, 2025
Available-for-Sale
Held-to-Maturity
( dollars in thousands )
Amortized
Cost
Weighted
Average
Yield
Amortized
Cost
Weighted
Average
Yield
U.S. government and federal agencies
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Mortgage backed securities
Due in one year or less
Due after one year through five years
Due after five through ten years
Due after ten years
Corporate bonds
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
State and municipal securities
Due in one year or less
Due after one year through five years
Due after five years through ten years
Due after ten years
Total securities
The weighted average yield is calculated using the amortized cost and yield on each security. Each security’s amortized cost is multiplied by its yield and then divided by the respective category total. The resulting values are summed to arrive at the weighted average yield. The yields on tax-exempt securities have not been calculated on a fully tax equivalent basis.
The following table summarizes our securities portfolio by security type as of the dates indicated. AFS securities are reported at fair value and HTM securities are reported at amortized cost:
As of December 31,
Change
( dollars in thousands )
Amount
total
securities
Amount
total
securities
U.S. government treasuries
U.S. federal agencies securities
Mortgage backed securities
Corporate bonds
State and municipal securities
Total securities
Total securities . As of December 31, 2025, our total debt securities, excluding the allowance for credit losses, were $865.4 million, representing an increase of $206.5 million, or 31.3%, from $659.0 million as of December 31, 2024. The increase was primarily driven by investments of excess cash into U.S. government treasuries.
U.S. government treasuries U.S. government treasuries represent debt securities backed by the U.S. Treasury and are guaranteed as to the timely payment of interest and principal when held to maturity. As of December 31, 2025, our U.S. government treasuries increased by $206.8 million, or 64.4%, compared to December 31, 2024. The segment increased because we deployed excess cash into liquid, fixed-rate instruments that do not introduce additional credit risk.
U.S. federal agencies securities . U.S. federal agency securities represent obligations issued by U.S. federal government agencies or government-sponsored enterprises, which guarantee repayment of principal at maturity. As of December 31, 2025, our U.S. federal agencies securities decreased by $929 thousand, or 11.8%, compared to December 31, 2024. As of December 31, 2025, U.S. federal agency securities decreased to 0.8% of our securities portfolio due to a security call and maturities.
Mortgage-backed securities . Our mortgage-backed securities portfolio consists of pass-through and agency-issued collateralized mortgage obligations. As of December 31, 2025, our mortgage-backed securities decreased by $2.1 million, or 24.4%, compared to December 31, 2024. At December 31, 2025, mortgage-backed securities represented 0.7% of our securities portfolio.
Corporate bonds . Corporate bonds are debt obligations issued by companies to raise capital and refinance obligations of the issuer. As of December 31, 2025, our corporate bonds increased by $5.4 million, or 5.3%, compared to December 31, 2024, due to purchases exceeding bond maturities.
State and municipal securities . State and municipal securities are debt obligations issued by state and local governments. As of December 31, 2025, our state and municipal securities decreased by $2.7 million, or 1.2% compared to December 31, 2024, because the volume of maturities and calls outpaced our bond purchases.
Allowance for Credit Losses — Securities
Management measures expected credit losses on HTM debt securities on a collective basis by major security type (U.S. government and federal agencies, agency mortgage-backed securities, corporate bonds and state and municipal securities). We estimate expected credit losses based on our historical credit loss information as adjusted for current conditions and reasonable and supportable forecasts. Securities issued by the U.S. Treasury or government agencies are not considered to be credit sensitive as they are explicitly or implicitly guaranteed by the U.S. government, and result in expectations of zero credit loss. Accordingly, management’s analysis of credit loss considers only the corporate and municipal segments. Accordingly, management’s analysis of credit loss considers only the corporate and municipal segments. Accrued interest receivable on HTM debt securities totaled $1.4 million as of December 31, 2025 and $1.6 million as of December 31, 2024, respectively, and was excluded from the estimate of credit losses.
For AFS debt securities in an unrealized loss position, management first assesses whether it intends to sell, or if it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For AFS debt securities that do not meet the aforementioned criteria, management evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the rating of the security by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists, and an allowance for credit loss is recorded for the credit loss, limited by the amount by which the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an allowance for credit loss is recognized in other comprehensive income (loss).
The following tables present an analysis of the allowance for credit losses on securities:
Held to Maturity:
As of and for the
year ended
December 31,
( dollars in thousands )
Allowance for credit losses at the beginning of period
Provision for (recapture of) for credit losses
Total charge-offs
Total recoveries
Net (charge-offs) recoveries
Allowance for credit losses at end of period
Average HTM debt securities outstanding
Total outstanding HTM debt securities at end of each period
Ratio of allowance to total HTM debt securities outstanding at period end
Ratio of nonaccrual HTM securities to total HTM securities outstanding at period end
Ratio of allowance to nonaccrual debt securities at period end
Available-for-Sale:
As of and for the
year ended
December 31,
( dollars in thousands )
Allowance for credit losses at the beginning of period
Provision for (recapture of) for credit losses
Total charge-offs
Total recoveries
Net (charge-offs) recoveries
Allowance for credit losses at end of period
Average AFS debt securities outstanding
Total outstanding AFS debt securities at end of each period
Ratio of allowance to total AFS debt securities outstanding at period end
Ratio of nonaccrual AFS securities to total AFS securities outstanding at period end
Ratio of allowance to nonaccrual debt securities at period end
During the year ended December 31, 2024, we received proceeds totaling $210 thousand for a corporate bond previously written off and recorded a recovery of credit losses. There was no further activity related to the AFS allowance for credit losses in 2024, and no activity in 2025.
The following table presents the allocation of the allowance for credit losses on our HTM securities portfolios by segment. There was no ACL established for the AFS portfolio as of the indicated period ends.
As of December 31,
( dollars in thousands )
Amount
total
HTM
bonds
Amount
total
HTM
bonds
U.S. government and federal agencies
Mortgage-backed securities
Corporate
State and municipal
Total
The following tables present the allocation of the net charge offs within the AFS securities portfolio by segment.
For the Year Ended December 31,
( dollars in thousands )
Net
(charge-offs)
recoveries
Average
AFS
securities
outstanding
Ratio of net
(charge-offs)
recoveries to
average total
bonds
outstanding
Net
(charge-offs)
recoveries
Average
AFS
securities
outstanding
Ratio of net
(charge-offs)
recoveries to
average total
bonds
outstanding
U.S. government and federal agencies
Mortgage-backed securities
Corporate
State and municipal
Loan Portfolio
Our loan portfolio consists of mortgage, commercial, and consumer loans to clients. A substantial portion of our loan portfolio is represented by residential real estate and commercial real estate loans throughout the Washington, D.C. metropolitan area. The ability of our debtors to honor their contracts is dependent upon a number of factors, including the real estate and general economic conditions in this area, as described in the “Risk Factors” section of this Annual Report on Form 10-K.
The following table summarizes our loan portfolio by the type of loans as of the dates indicated:
As of December 31,
Change
( dollars in thousands )
Amount
Total
Loans
Amount
Total
Loans
Commercial real estate
Commercial
Residential real estate, closed-end
Other consumer loans
Total
As of December 31, 2025, our total loans decreased by $38.5 or 12.3%, compared to December 31, 2024. The decrease reflects: cyclical principal curtailments in commercial loans from political organization borrowers; the strategic
reduction in our commercial real estate lending, specifically reducing our non-owner occupied office loans, to reduce our exposure to this sector; and a decrease in the consumer portfolio due to payoffs and amortization.
Commercial real estate loans . Commercial real estate loans are generally long-term loans secured by a commercial property that is either owner-occupied or investor owned. This category also includes commercial construction loans and multifamily residential property loans. Management has strategically allowed a decline in the commercial real estate portfolio, specifically within the non-owner occupied office loans sector, which decreased 51.9% from December 31, 2024. Elevated interest rates have increased the cost of borrowing and remote work trends continue to be a concern. These factors negatively impact the value of commercial properties, making commercial real estate loans less attractive. As of December 31, 2025, our commercial real estate loans decreased by $5.2 million, or 9.7%, compared to December 31, 2024.
As of December 31, 2025, our commercial real estate portfolio included owner-occupied and non-owner-occupied commercial real estate loans and were concentrated in certain sectors and in the Washington, D.C. metropolitan area:
• Owner-Occupied vs. Non-Owner-Occupied Properties: Our commercial real estate loans include both owner-occupied and non-owner-occupied properties. As of December 31, 2025 and 2024, we had $17.2 million and $18.7 million, respectively, in owner-occupied loans and $31.1 million and $34.8 million, respectively, in non-owner-occupied loans. Non-owner-occupied properties depend on rental income for repayment. Factors such as market conditions, tenant defaults, and vacancies could reduce cash flow from these properties, leading to increased delinquencies and potential losses.
• Sector Concentrati on: Our commercial real estate loan portfolio is concentrated in the office, retail, multifamily, and hotels sectors. As of December 31, 2025, our non-owner-occupied office loans totaled $3.1 million, retail loans totaled $12.2 million, multifamily loans totaled $8.9 million, and hotel loans totaled $3.7 million. At December 31, 2024, our non-owner occupied office loans totaled $6.4 million, retail loans totaled $12.8 million, multifamily loans totaled $7.4 million, and hotel loans totaled $4.0 million.
• Geographic Concentration: Our commercial real estate loan portfolio is concentrated in the Washington, D.C. metropolitan area. This exposes us to risks tied to local economic conditions, property market trends, and regulatory changes. See “Risk Factors — Other Risks Related to Our Business — The geographic concentration of our business in the Washington, D.C. metropolitan area makes our business highly susceptible to local economic conditions and reductions or changes in government spending,” in this Annual Report on Form 10-K.
Commercial . Commercial loans consisting of commercial and industrial (C&I) term loans or lines of credit exhibit cyclicality due to the involvement of political organizations in this segment. C&I loans include unsecured or UCC secured lending, accounts receivable, equipment financing loans or working capital loans. As of December 31, 2025, our commercial loans decreased by $23.4 million, or 83.8%, compared to December 31, 2024. The decline was primarily due to several large principal curtailments from political organizations, which are consistent with prior cycles, as well as a large payoff by a commercial borrower in the commercial real estate services sector late in the second quarter.
Residential real estate loans, closed-end . Single family (1-4 units) residential mortgage loans are primarily secured by owner-occupied primary and secondary residences and are “closed-end” mortgage loans, which means that the loan amount is fixed at the outset and repaid over a set term without the ability to re-borrow. While the balance at December 31, 2025, of our residential real estate loans decreased by $9.7 million, or 4.6%, compared to December 31, 2024 reflecting runoff through payoffs, amortization and limited new portfolio originations, our residential real estate loans make up a greater share of our total loans as compared to December 31, 2024, increasing from 67.2% to 73.2%.
Other consumer loans . Other consumer loans include residential construction loans, revolving loans secured by residential properties, commonly known as home equity lines of credit (“HELOCs”), and loans made directly to individuals for non-business purposes which may be secured or unsecured. As of December 31, 2025, other consumer loans decreased
by $294 thousand, or 1.4%, from December 31, 2024. The following table presents the components of other consumer loans:
December 31,
( dollars in thousands )
Residential construction loans
HELOCs
Consumer secured
Consumer unsecured
Total consumer loans
Loan Maturity and Sensitivity to Interest Rates
The information in the following table is based on the contractual maturities of individual loans, including loans that may be subject to renewal at their contractual maturity. Renewal of these loans is subject to review and credit approval, as well as modification of terms upon maturity. Actual repayments of the loans may differ from the maturities reflected below because consumer borrowers and some commercial borrowers have the right to prepay obligations with or without prepayment penalties. As of December 31, 2025, variable rate loans, which include floating and adjustable rate structures, comprised 69.7% of our loan portfolio. Our variable rate loans primarily consist of adjustable residential real estate loans with initial fixed-rate periods of three, five, seven or ten years, which, depending on the loan program, reprice every one, three, or five years after the initial fixed-rate period. Variable rate loans provide a better match against our deposit liabilities and reduce our interest rate risk.
The following table details maturities and sensitivity to interest rate changes for our loan portfolio as of December 31, 2025, and the contractual maturity and interest-rate profile of our loan portfolio:
At December 31, 2025
Remaining Contractual Maturity Held for Investment
( dollars in thousands )
One year or
less
After one
year
through five
years
After five
years and
through
fifteen years
After fifteen
years
Total
Fixed rate loans:
Commercial real estate
Commercial
Residential real estate, closed-end
Other consumer loans
Total fixed rate loans
Variable rate loans:
Commercial real estate
Commercial
Residential real estate, closed-end
Other consumer loans
Total variable rate loans
Total loans
Credit Policies and Procedures
Management employs a multi-pronged approach to address credit risk, guided by a defined risk appetite. The approach includes underwriting policies, loan risk classification grading, and an internal and external loan review process. In addition, it involves strategic portfolio management to address loan concentration and oversight by our Board. These policies and guidelines are designed with the intention of maintaining the quality of our loan portfolio while aiming to generate a return commensurate with the associated risks. However, it is important to recognize that all risk management strategies have inherent limitations.
The commercial underwriting process involves an evaluation of the borrower’s ability to repay, the quality of the available collateral (if applicable), the financial character of the borrower and the nature of the credit. It also includes an analysis of the borrower’s needs and an industry analysis to understand relevant external factors that might affect the borrower’s financial stability and repayment capacity. Commercial borrowers are often asked to maintain their primary banking relationship with the Bank to attract both loans and transaction deposits. Residential mortgage loans and consumer loans are underwritten based on an evaluation of the borrower’s repayment ability, which typically includes a review of documentation to verify income and assets. Consumers are encouraged to maintain deposit accounts with the Bank, and pricing incentives may be offered.
During the underwriting process, loans are assigned a loan risk classification grade. The risk rating scale is intended to provide a framework for analyzing risk across various credit exposures, regardless of their nature, type or location.
The internal loan review process, performed by our credit administration staff, aims to evaluate that basic requirements for loan origination have been met. Ongoing internal loan review processes monitor commercial borrower performance using a risk-based approach, which may result in grade confirmations or change recommendations. Certain scenarios such as delinquent payments, overdue taxes, overdrafts, lack of borrower cooperation, delayed financial statements, or significant changes to the borrower’s financial position may be considered potential indicators of problem loans. In such cases, the loan risk classification may be re-evaluated.
An external loan review is conducted annually by a third-party firm. This review examines a sample of the loan portfolio, focusing on areas such as underwriting practices, adherence to loan policies and banking regulations, loan documentation, watch list, and portfolio concentration.
Credit concentration policies are designed to address risk relative to our regulatory capital. Concentration limits are established for various categories including loans to individual borrowers or industries, specific loan types, collateral types, commercial real estate concentrations, and total real estate loans, among others.
We have exposures to certain categories of loans that we believe represent relatively higher credit risk, such as commercial real estate loans. To manage our exposures to these loans, we generally seek low loan-to-value ratios, strong debt service coverage ratios, and conduct borrower credit assessments in accordance with our internal policies. To manage our exposure to commercial real estate, we have set specific concentration limits for commercial real estate loans by property type, and our policy is to monitor these limits quarterly. Our risk management practices include annual internal reviews of commercial mortgages with balances over $500 thousand, focusing on early warning signs like payment delinquencies, property performance, and borrower financial condition. We also engage a third party to conduct an external loan review of the loan portfolio annually. Additionally, we perform quarterly stress tests on our loan portfolio, including the commercial real estate segment, to assess the potential impact of adverse economic conditions. In response to the inherent risks in higher-risk segments like commercial real estate, we may increase our loan loss reserves to mitigate potential losses due to changing market conditions.
Asset Quality
We seek to maintain a prudent lending approach, which has historically been associated with our asset quality performance. Our loan underwriters employ underwriting guidelines, and we assign a loan risk classification grade at origination. These practices are designed to help us evaluate potential risks throughout the life of the loan. The Bank’s risk classification system utilizes a 10-grade risk-rating scale. The four lowest grade categories (7-10) correspond to the regulatory categories special mention, substandard, doubtful and loss.
The risk classification grade is a key component of our risk management process. Certain grades may result in a loan being added to the watch list report, which is a tool used in monitoring loans or commitments that may present elevated risks. This report is overseen by our Chief Credit Officer and presented to the Board monthly. Loan officers are responsible for managing credit risk within their loan portfolios and are encouraged to be proactive in considering whether to add a loan to the watch list report.
Management uses internal and external review processes, as described under “— Credit Policies and Procedures,” to monitor adherence to loan and credit policies, evaluate the loan portfolio, and identify areas that may require additional attention.
Non-performing Assets
An asset is classified as non-performing when it ceases to yield interest or principal repayments for a specified period, usually 90 days or more. This classification includes loans that are 90 days or more past due on scheduled payments, or assets where full repayment of principal and interest is in doubt due to the borrower’s financial difficulties. Additionally, assets that have been restructured due to the borrower’s financial difficulties may also be classified as non-performing if the restructuring does not restore the asset to a performing status.
A loan is considered non-performing when the borrower is 90 days or more past due on the scheduled payment of principal and interest, or if the loan’s terms have been restricted due to the borrower’s financial difficulties. Additionally, a loan may be classified as non-performing even if it is less than 90 days past due if there is a reasonable doubt about the collectability of the loan’s principal or interest.
Loans are generally considered delinquent when the required principal and interest payments have not been received by the assigned due date. Loans are typically placed on non-accrual status when a loan becomes 90 days delinquent, unless the credit is well-secured and in the process of collection. Management may, at its discretion, place loans on non-accrual status prior to 90 days delinquency if it determines that interest may be uncollectible. Loans determined to be non-performing or potentially uncollectible may be placed in non-accrual status pending further collection efforts or charged off if collection of principal or interest is deemed doubtful.
For loans placed in non-accrual status, all interest previously accrued but not collected is generally reversed against interest income. The interest on loans in non-accrual status is typically accounted for on the cash basis or cost recovery method until qualifying for return to accrual. Loans may be returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured .
As of December 31, 2025 and 2024, based on our internal classifications, we did not identify any assets that met our criteria for classification as non-performing assets or OREO.
Allowance for Credit Losses — Loans
The ACL represents an amount that is intended to absorb the lifetime expected credit losses that may be sustained on outstanding loans at the balance sheet date. Additional information regarding the ACL evaluation can be found in Note 1 and Note 4 to our audited consolidated financial statements and the notes thereto included elsewhere in this Form 10-K.
The estimate for expected credit losses is based on an evaluation of the various factors, including, but not limited to, size and current risk characteristics of the loan portfolio, past events, current conditions, reasonable and supportable forecasts of future economic conditions, and prepayment experience as related to credit contractual term information. The ACL is generally measured on a collective (pool) basis when similar risk characteristics exist and is typically recorded upon the initial recognition of a financial asset.
The ACL may be adjusted by charge-offs, net of recoveries of previous losses, and may be increased or decreased by a provision for or recapture of credit losses, which is recorded in the consolidated statements of income. Management estimates the allowance balance using various information sources, both internal and external, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience typically provides a basis for the estimation of expected credit losses. Adjustments to historical loss information may be made for differences in current loan-specific risk characteristics and changes in environmental conditions. Expected credit losses are typically estimated over the contractual term of the loans, adjusted for expected prepayments, when appropriate. The contractual term generally excludes expected extensions, renewals, and modifications.
For loans that do not share risk characteristics with a pool of other loans, expected credit losses are measured on an individual loan basis. Management individually evaluates the expected credit loss for certain loans, such as those that are graded doubtful, or are identified as having risk characteristics dissimilar to those of the established loan pools, including loans that are collateral-dependent.
For loans considered collateral-dependent, the Company has adopted a practical expedient to the ACL, which allows for recording an ACL based on the fair value of the collateral rather than by estimating expected losses over the life of the loan.
While the ACL on loans follows these guidelines, and management believes the allowance is appropriate based on current information, the judgmental nature of the calculation could lead to fluctuations due to ongoing evaluations of the loan portfolio. These evaluations may be influenced by economic conditions in the Washington, D.C. metropolitan area, changes in asset quality, or loan portfolio growth, among other factors, which could potentially require additional provisions for the allowance for credit losses.
The quality of the loan portfolio and the adequacy of the allowance are subject to review by our internal and external auditors as well as our regulators.
The following table presents an analysis of the allowance for credit losses:
As of and for the
Year Ended
December 31,
( dollars in thousands )
Allowance for credit losses at the beginning of period
Provision for (recapture of) credit losses
Charge-offs
Recoveries
Allowance for credit losses at end of period
Average loans held for investment outstanding
Total loans outstanding at end of each period
Ratio of allowance to total loans outstanding at period end
Ratio of nonaccrual loans to total loans outstanding at period end
Ratio of allowance to nonaccrual loans at period end
The following table presents the allocation of the allowance for credit losses:
As of December 31,
( dollars in thousands )
Amount
total
loans
Amount
total
loans
Commercial real estate
Commercial
Residential real estate
Other consumer loans
Total
The allocations of the allowance between loan segments did not vary significantly during the periods presented. However, we note a migration of applied allowances from the commercial non-real estate segment as of December 31, 2024 to the commercial real estate segment as of December 31, 2025. This migration was caused by a decline in the commercial portfolio’s outstanding balance and an increase in the qualitative risk assessment applicable to the commercial real estate segment.
There were no loan charge-offs for the years ended December 31, 2025 or 2024. As a result, the ratio of loan charge-offs to average loans outstanding is 0.00% for all reported periods.
Deposits
We provide a wide range of commercial and personal deposit services. The deposit products we offer include noninterest-bearing and interest-bearing checking accounts, savings accounts, and money market accounts. We aim to
attract transaction account deposits, particularly from commercial clients. Our deposit base is largely composed of funds from commercial entities, specifically federal political organizations, trade associations, non-profit organizations and business enterprises. Deposits from political organizations generally exhibit more seasonality than typical commercial or consumer deposits as federal election cycles often influence deposit levels of political organizations.
We are a member of the IntraFi ® Cash Services network, which allows our deposit clients to enroll in the ICS ® program. This program is designed to provide our clients with access to FDIC insurance beyond the standard maximum deposit insurance amount at a single insured depository institution. For accounts enrolled in this service, we select whether each account should be in a reciprocal position or a one-way sell position. A reciprocal position means that we receive an equal amount of network deposits for our enrolled accounts, and those deposits are reflected on our balance sheet. If we elect to receive reciprocal deposits, we are required to pay a fee to IntraFi ® equal to our reciprocal deposits balances multiplied by an annualized rate of 0.125% as of December 31, 2025. Conversely, we do not receive reciprocal network funding when accounts are positioned as One-Way Sell ® , and therefore the deposits are not reported on the balance sheet. For deposits placed at other participating banks as One-Way Sell ® deposits, we receive deposit placement services income, which is inversely related to the interest rate on the deposit account, meaning that we receive less deposit placement services income for placing deposits with a higher interest rate.
During periods of increased political organization deposits, which typically occur in connection with election cycles, we may adjust the positioning of certain accounts enrolled in the ICS ® program. These adjustments can include changing some accounts from a reciprocal position to a One-Way Sell ® position, which affects whether and how these deposits are reflected on our balance sheet. These adjustments are part of our overall asset and liability management strategy, which aims to maintain appropriate balance sheet metrics in accordance with regulatory guidelines and our risk management policies. As of December 31, 2025, our balance sheet reflected $106.7 million of reciprocal ICS ® deposits. Excess deposits totaling $359.9 million as of December 31, 2025 were placed at other participating banks as One-Way Sell ® deposits. Our deposit placement services income was $838 thousand for the year ended December 31, 2025. If we were to convert some or all of the One-Way Sell ® deposits into reciprocal deposits, bringing them back onto our balance sheet, we would expect to receive interest income by investing these deposits, but our deposit placement services income would decline and our interest on deposits, FDIC and regulatory assessments and the fee we pay to IntraFi ® would increase. Deposit placement services income levels are also a function of the average One-Way Sell ® deposit balance throughout a year. Although One-Way Sell ® deposit balances at December 31, 2025 were higher than at the prior year end, lower deposit placement services income is a result of lower average balances throughout much of 2025.
Our participation in the ICS ® network is subject to certain terms and conditions, and there can be no assurances that we will be able to participate in the ICS ® network in the future. As of December 31, 2025, the terms and conditions for participation in the ICS ® network include a $285.0 million limit on the amount of each participating client’s ICS ® deposits that may be placed at other banks within the ICS ® network, a $3.5 billion and $6.5 billion limit on the maximum amount of savings account deposits and demand account deposits, respectively, that a bank may place at other banks as reciprocal deposits, and a $10.0 billion limit on the maximum amount of deposits that a bank may place at other banks as One-Way Sell® deposits. The terms and conditions also include limitations on a bank’s ability to receive reciprocal deposits, place One-Way Sell ® deposits, or receive One-Way Buy ® deposits if the bank is not “well capitalized” under the applicable federal banking regulations.
We are subject to various fees associated with the placement and management of deposits within the ICS ® network, as outlined in the IntraFi ® Participating Institution Agreement. When we elect to receive reciprocal deposits, which are network deposits that are matched with equivalent funds placed by other participating institutions, we incur an “IntraFi Placement Fee.” As of December 31, 2025, the annualized rate for this fee was 0.125%, which is applied to the reciprocal deposits balance to determine the amount of the fee incurred. This fee increases our overall operating expenses, impacting our net income.
The fees associated with our participation in the ICS ® network require careful management. The IntraFi Placement Fee represents an additional cost that is not incurred with traditional deposit accounts. As such, this fee is factored into our overall asset and liability management strategy with the aim of ensuring that our participation in the ICS ® network remains financially advantageous. These fees, together with our interest expense on deposits and other operational costs, contribute to the overall cost structure associated with our deposit services.
Historically, deposits from political organizations have typically increased in the periods leading up to federal elections, declined in the quarters around federal elections, and tended to rebuild gradually in the quarters following federal elections. Deposit balances during early 2025 were affected by sizable political organization account movements,
beginning with first-quarter inflows that were more concentrated and differently timed than in prior election cycles. These inflows were the result of a post-election surge in deposits following the November 2024 federal elections. This was followed by a significant outflow from certain political organization accounts early in the second quarter, which began to rebuild by mid-year, with growth continuing thereafter, ending the year at $1.6 billion. In 2025, political organization deposit inflows partially contributed to the $323.3 million year-over-year increase in total consolidated deposits and the $213.5 million increase in One Way Sell ® deposits.
As of December 31, 2025, no accounts individually exceeded 5% of total consolidated deposits. As of December 31, 2024, two political organization accounts individually exceeded 5% of total consolidated deposits. The total deposit balance related to these clients was $202.6 million, accounting for 16.2% of total deposits.
The following table presents the types of deposits compared to total deposits for the periods indicated:
As of December 31,
Change
( dollars in thousands )
Amount
total
deposits
Amount
total
deposits
Noninterest-bearing
Savings, interest-bearing and money market accounts
Time, $250 and over
Other time
Total
The $341.3 million, or 37.4% increase in noninterest-bearing accounts from December 31, 2024 to December 31, 2025 was driven by changes in political organization deposit balances as well as growth across other deposit categories. Our political depositors typically exhibit heightened activity during the quarters leading up to a federal election contributing to the increase in the balance sheet deposits. The ICS ® reciprocal deposits decreased from $130.3 million at December 31, 2024 to $106.7 million at December 31, 2025.
The following table presents the average balances and average rates paid for the periods indicated:
Year Ended December 31,
( dollars in thousands )
Average
Balance
Average
Rate
Average
Balance
Average
Rate
Noninterest-bearing
Savings, interest-bearing checking and money market accounts
Time, $250 and over
Other time
Total average deposits
FDIC deposit insurance covers $250 thousand per depositor, per FDIC-insured bank, for each account ownership category. We estimate total uninsured deposits were $1.2 billion and $857.8 million as of December 31, 2025 and December 31, 2024, respectively, representing approximately 75.0% and 68.6% of our deposit portfolio as of December 31, 2025 and December 31, 2024, respectively.
The maturity profiles of our uninsured time deposits, those deposits that exceed the FDIC insurance limit, as of December 31, 2025 are as follows:
( dollars in thousands )
Three
Months or
Less
More than
Three
Months to
Twelve
Months
More than
Twelve
Months to
Three Years
More than
Three years
Total
Time deposits, uninsured
Borrowings
The Bank has several supplementary funding sources, including a secured line of credit with the FHLB and various available secured and unsecured lines of credit with correspondent banks.
Federal Home Loan Bank Advance . The Bank has a secured line of credit with the FHLB, which is renewed annually in December, and which requires the Bank to pledge collateral to establish credit availability. The Bank has historically pledged single-family residential real estate loans within the Bank’s loan portfolio to establish credit availability. As of December 31, 2025 and 2024, the secured line of credit had no collateral pledged and therefore no available or outstanding balance.
Federal Reserve Bank Discount Window. The Bank also maintains eligibility for a secured line of credit with the FRB. To establish credit availability, the Bank will typically pledge securities. December 31, 2025 and December 31, 2024, the Bank had not pledged any collateral to the FRB. Consequently, no credit availability was established, and no outstanding borrowings were recorded.
Short-Term Borrowings . As of December 31, 2025, the Company had no outstanding short-term borrowings. The Company fully repaid its previously outstanding balance on an unsecured line of credit from a correspondent bank. The line of credit, which had a total commitment of $10.0 million and an outstanding balance of $5.0 million as of December 31, 2023, was fully repaid on October 10, 2024, using a portion of the net proceeds from the IPO. The Company formally closed the line of credit on October 11, 2024.
On February 20, 2026, the Company entered into a $15.0 million unsecured revolving credit facility with a correspondent bank. The facility matures on February 20, 2027 and may be extended for up to two additional one-year periods at the Company’s option, subject to compliance with the agreement’s terms. Borrowings under the facility bear interest at a variable rate based on 1.30% plus the greater of 1-Month Term SOFR or 1.00%. The agreement includes customary financial and negative covenants applicable to the Company and its bank subsidiary. Because the facility was executed after December 31, 2025, no amounts related to this agreement are reflected in the accompanying consolidated financial statements. As of the date of issuance of these consolidated financial statements, no amounts were outstanding under the facility.
Federal Funds Lines of Credit. The Bank also maintains access to unsecured federal funds purchase lines of credit with:
• First National Bankers’ Bank: $10.0 million, maturing June 30, 2026, and
• Community Bankers’ Bank: $8.0 million, matured March 4, 2026, and subsequently renewed for a one year period to March 2, 2027
These federal funds lines renew annually, and balances may remain outstanding for periods ranging from 10 to 90 consecutive days. The use of these credit facilities is contingent upon compliance with specified financial conditions and covenants.
As of December 31, 2025 and December 31, 2024, the Bank had no outstanding balances under these federal funds purchase lines.
Off-Balance Sheet Arrangements
We are party to credit-related financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our clients. These financial instruments include commitments to extend credit and standby
letters of credit. Such commitments involve, in varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.
Our exposure to credit loss is represented by the contractual amount of these commitments. We follow the same credit policies in making commitments as we do for on-balance sheet instruments.
The contractual amounts of financial instruments with off-balance sheet commitments are as follows:
As of December 31,
(dollars in thousands)
Commitments to grant loans
Credit card lines
Unfunded commitments under lines of credit
Standby letters of credit
Commitments to grant loans increased from December 31, 2024 to December 31, 2025, due to two loans which was in the process of origination at December 31, 2025. Credit card lines increased by $635 thousand, or 83.3% during the year, due to growth in the business credit card program. Unfunded commitments under lines of credit decreased $840 thousand, or 3.8% from December 31, 2024 to December 31, 2025, staying relatively consistent. Standby letters of credit decreased $1.4 million, or 31.1%, due to decrease in volume, primarily related to cyclical political client activity.
For information regarding the arrangement related to the ICS ® network and related One-Way Sell ® deposits, see “— Deposits” above.
Liquidity and Capital Management
Liquidity Management
Liquidity refers to our capacity to meet cash and collateral obligations in a timely manner. Maintaining appropriate levels of liquidity depends on our ability to address both expected and unexpected cash flows and collateral needs while aiming to avoid adverse effects on our daily operations or the financial condition of the Bank. Effective liquidity management is considered essential to our business model, as deposits, which can generally be withdrawn on demand, form a primary source of our funding. See “— Financial Condition — Deposits” for more information regarding fluctuations in our deposit base. We employ various strategies intended to manage liquidity. Our account at the Federal Reserve, which held approximately $580.9 million as of December 31, 2025, serves as a primary source of liquidity for daily and ongoing activities. We also maintain additional supplemental sources of liquidity, as discussed below. For regulatory reporting purposes, the liquidity ratio is typically calculated as the sum of our cash and cash equivalents plus unpledged securities classified as investment grade divided by total liabilities. Based on this calculation method, as of December 31, 2025 and 2024, our reported liquidity ratios were 91.86% and 85.13%, respectively. As of December 31, 2025, we had $359.9 million in One-Way Sell ® deposit accounts through the ICS ® platform that could be converted to a reciprocal position in order to provide additional near-term liquidity. It is important to note that these ratios and amounts are point-in-time measurements and may not be indicative of future liquidity positions.
In addition to traditional sources of liquidity, such as reciprocal deposits and lines of credit, we also utilize the ICS ® network for both One-Way Buy ® deposits and One-Way Sell ® deposits, each serving distinct roles in our liquidity management strategy. One-Way Sell ® deposits and reciprocal deposits involve placing deposits from our own clients with other participating banks through the ICS ® network. One-Way Sell ® deposits help us manage excess deposits by moving them off our balance sheet, while reciprocal deposits allow us to exchange deposit balances with other banks, ensuring those deposits remain insured. Both strategies help us to optimize our liquidity position while earning deposit placement fees, which contribute to our noninterest income. Conversely, One-Way Buy ® deposits involve receiving deposits from other banks’ customers through the ICS ® network. This mechanism can provide an additional source of liquidity by allowing us to increase our deposits without reciprocating. These transactions involve certain expenses, which include interest on the deposits and any associated fees, which we consider within our broader liquidity planning.
Management estimates that up to 75.0% of deposits were uninsured as of December 31, 2025. To obtain FDIC insurance for deposits exceeding the $250 thousand threshold, some clients enroll in the ICS ® , which is described in greater detail under “— Deposits” above. As of December 31, 2025, deposit balances totaling $466.6 million were enrolled in the
ICS ® program. $359.9 million of these deposits were positioned as One-Way Sell ® deposits and are therefore not reflected on the balance sheet. The Bank has the flexibility to convert these One-Way Sell ® deposits into reciprocal deposits, which would then appear on the balance sheet. To fund the outflow of deposits during phases of the federal election cycle when campaigns and committees are actively spending, management will rely on the Bank’s cash balances at the Federal Reserve and conversion of One-Way Sell ® accounts to reciprocal as its primary sources of liquidity. Similar to other deposits, depositors may withdraw their One-Way Sell ® deposits at any time, which could impact the volume of One-Way Sell ® deposits available for conversion to reciprocal.
In addition to the primary sources of liquidity discussed above, we maintain secured lines of credit with the FHLB and the Federal Reserve Discount Window, for which we can borrow up to the allowable amount of pledged collateral. The Bank can advance FHLB funds of up to 25% of assets as reported in its latest Call Report, which the Bank files with the FFIEC on a quarterly basis, using pledged collateral such as qualifying mortgages and investment securities. Based on the December 31, 2025 Call Report, 25% of total assets equates to credit availability of $396.2 million. As of December 31, 2025, we had no collateral pledged or outstanding balance with the FHLB or Federal Reserve.
The Bank has access to additional unsecured funding through its account with ICS ® . The Bank can request funding of up to 10% of total assets, which equates to $158.5 million as of the Bank’s December 31, 2025 Call Report, in a One-Way Buy ® of daily maturing or term deposit products. Requesting One-Way Buy ® deposits requires us to submit a bid including the rate we are willing to pay for the deposits, and such request may be fulfilled in whole, in part, or not at all. If demand for One-Way Buy ® deposits is high, then the rate required to successfully bid for One-Way Buy ® deposits would be expected to increase, and so One-Way Buy ® deposits may be a less reliable source of liquidity. As of December 31, 2025, there was no outstanding balance.
The Bank maintains unsecured lines of credit with three correspondent banks that provide combined availability of $68.0 million. There were no outstanding balances as of December 31, 2025 or December 31, 2024.
As an intermediate source of liquidity, we may sell AFS securities or allow AFS and HTM securities to mature without reinvestment in the securities portfolio. As of December 31, 2025, our AFS securities portfolio had a fair value of $608.8 million and our total AFS and HTM debt securities portfolio had an amortized cost of $867.5 million, including $393.7 million of bonds maturing within a year and $404.7 million of bonds maturing between one and five years. Our bond portfolio is structured to provide liquidity when management anticipates it will be needed, and a portion of our AFS bonds are invested in liquid investments like U.S. Treasury securities. In the event liquidity is needed from the bond portfolio, management will take into consideration a number of factors when determining which investments to sell. Variables include the marketability of the bonds, current prices and estimated losses, and other factors.
Liquidity Risk Management
Liquidity risk refers to the potential that the Bank’s financial condition or overall safety and soundness could be adversely affected by a real or perceived inability to meet contractual obligations. This risk category includes potential challenges in managing unplanned decreases or changes in funding sources. Liquidity risk management involves efforts to identify, measure, monitor and control liquidity events.
The ALCO typically reviews current and projected liquidity scenarios, including stressed scenarios, at its quarterly meetings. The ALCO seeks to ensure that measurement systems are designed to identify and quantify the Bank’s liquidity exposure, and that reporting systems and practices are intended to communicate relevant information about the level and sources of that exposure. Management is responsible for implementing board-approved policies, strategies, and procedures, and for monitoring liquidity on both a daily and long-term basis.
Capital Resources
Capital adequacy is generally considered an important indicator of financial stability and performance. Our objectives include maintaining capitalization at levels that we believe are sufficient to support asset growth and to promote confidence among our depositors, investors, and regulators. We recognize that robust capital management practices are integral to addressing various financial and operational challenges, which may include managing credit risk, liquidity risk, balance sheet growth, new products, regulatory changes and competitive pressures.
Stockholders’ equity as of December 31, 2025 was $169.2 million, an increase of $25.0 million compared to $144.2 million as of December 31, 2024. Net income for the year ended December 31, 2025 contributed $20.2 million to the, increase stockholders’ equity. The remaining change was due to a $4.7 million decrease in accumulated other
comprehensive loss during the 2025, primarily reflecting an improvement in the market value of the AFS securities portfolio.
In February 2026, we entered into a $15.0 million unsecured revolving credit facility at the holding company level, which the Company could use to provide capital to the Bank. The facility matures in February 2027, subject to extension at our option if we remain in compliance with its terms.
Book value per share as of and December 31, 2025 and 2024 was $25.79 and $21.98, respectively. The increase between periods is primarily the result of earnings, which were $3.08 per share during the year ended December 31, 2025. The remaining increase is due to the improvement in the market value of the AFS securities portfolio which caused the accumulated other comprehensive loss to decline.
Because total assets on a consolidated basis are less than $3.0 billion, we are not subject to the consolidated capital requirements imposed by federal regulations. However, the Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Certain regulatory measurements of capital adequacy are “risk based,” meaning they utilize a formula that considers the individual risk profile of the financial institution’s assets. For example, certain assets, such as cash at the Federal Reserve and investments in U.S. Treasury securities, are deemed to carry zero risk by the regulators because of explicit or implied federal government guarantees. As of December 31, 2025 and 2024, respectively, 63.8% and 52.4% of the Bank’s total assets were invested in such zero-risk assets. The tier 1 leverage ratio, another regulatory capital measurement, does not consider the riskiness of assets. The leverage ratio is computed as tier 1 capital divided by total average assets for the quarter.
The Bank’s capital level is characterized as “well capitalized” under the Basel III Capital Rules. A summary of the Bank’s regulatory capital ratios, and minimum requirement to be considered “well capitalized” are presented below:
December 31,
Well-
capitalized
requirement
($ in thousands)
Amount
Ratio
Amount
Ratio
Ratio
Total risk-based capital
Tier 1 risk-based capital
Common equity tier one risk-based capital
Tier 1 leverage
During periods of growth in deposits due to seasonality, our assets could reach a level that would require the Bank to control the level of these deposits or require the Company to obtain additional capital to maintain a Tier 1 leverage ratio that exceeds our internal regulatory capital policies or targets and satisfies regulatory requirements. We use the ICS ® network to help manage our Tier 1 leverage ratio by moving certain deposit accounts off our balance sheet by placing the deposits at other banks as One-Way Sell ® deposits. As of December 31, 2025, our deposits enrolled in the ICS ® program which were in a One-Way Sell ® position totaled $359.9 million.
