Chain Bridge Bancorp Inc.
05/12/2026 | Press release | Distributed by Public on 05/12/2026 13:25
10-Q Q1 2026
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Class A common stock, par value $0.01 per share
CBNA
NYSE
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
x
Smaller reporting company
x
Emerging growth company
x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes o No x
As of May 11, 2026, the registrant had outstanding 3,366,667 shares of Class A Common Stock, par value $0.01 per share and 3,195,150 shares of the registrant's Class B Common Stock, par value $0.01 per share.
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TABLE OF CONTENTS
Page
Index of Defined Terms and Acronyms
4
Cautionary Note Regarding Forward-Looking Statements
5
Part I - Financial Information
7
Item 1. Financial Statements
7
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
28
Item 3. Quantitative and Qualitative Disclosures About Market Risk
54
Item 4. Controls and Procedures
55
Part II - Other Information
56
Item 1. Legal Proceedings
56
Item 1A. Risk Factors
56
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
56
Item 3. Defaults Upon Senior Securities
56
Item 4. Mine Safety Disclosures
56
Item 5. Other Information
56
Item 6. Exhibits
57
Signatures
58
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INDEX OF DEFINED TERMS AND ACRONYMS
ACL Allowance for Credit Losses
AFS Available for Sale
AI Artificial Intelligence
ALCO Asset Liability Investment Committee of the Board of Directors of Chain Bridge Bank, N.A.
AOCI Accumulated Other Comprehensive Income (Loss)
ASU Accounting Standards Update
AUM
Assets under management
AUC
Assets under custody
Bank Chain Bridge Bank, N.A.
BHC Bank Holding Company
BHC Act U.S. Bank Holding Company Act of 1956, as amended
Board or Board of Directors The Board of Directors of Chain Bridge Bancorp, Inc.
bps Basis points, defined as one hundredth of one percentage point
Bylaws Our amended and restated bylaws, which have been adopted by our Board
Call Report The Federal Financial Institutions Examination Council ("FFIEC") Consolidated Reports of Condition and Income, which the Bank files with the FFIEC on a quarterly basis
CECL Current Expected Credit Losses (ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments)
Chain Bridge, CBNA, the Company, we, us, our Chain Bridge Bancorp, Inc., and its Subsidiaries
Charter Our amended and restated certificate of incorporation, which became effective on October 3, 2024. The Charter authorizes the establishment of our Class A common stock and Class B common stock and effected the reclassification of each outstanding share of our common stock into 170 shares of Class B common stock
Class A common stock Our Class A common stock, par value $0.01 per share
Class B common stock Our Class B common stock, par value $0.01 per share
Common stock Our Class A common stock and our Class B common stock
CRE Commercial real estate
DGCL Delaware General Corporation Law
EPS Earnings per share
EVE Economic value of equity
FASB Financial Accounting Standard Board
FDIC Federal Deposit Insurance Corporation
Federal Reserve Federal Reserve System, the Board of Governors of the Federal Reserve System, or the Federal Reserve Bank of Richmond, Virginia
FFIEC Federal Financial Institutions Examination Council
FHLB Federal Home Loan Bank
Fitzgerald Family Collectively, the lineal descendants of Gerald Francis Fitzgerald, deceased, and Marjorie Gosselin Fitzgerald, their spouses or surviving spouses, children, and grandchildren, and the spouses of their children and grandchildren. These persons include, but are not limited to, Peter Gosselin Fitzgerald, Gerald Francis Fitzgerald, Jr., James Gosselin Fitzgerald, Thomas Gosselin Fitzgerald, Julie Fitzgerald Schauer, Thomas Gosselin Fitzgerald, Jr., Andrew James Fitzgerald, and Lauren Fitzgerald Peterson
Form 10-K Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on March 20, 2026
FRB Federal Reserve Bank of Richmond
GAAP Generally Accepted Accounting Principles
HTM Held to Maturity
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ICS®
IntraFi Cash Service®
IPO Initial public offering
N/A Not Applicable
NM Not Meaningful (Comparisons of positive and negative values or to zero values are considered not meaningful)
OCC Office of the Comptroller of the Currency
OREO
Other real estate owned
Political organizations 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
Return on average risk-weighted assets Return on average risk-weighted assets is calculated as net income divided by average risk-weighted assets. Average risk-weighted assets are calculated using the last five quarter ends.
RWA Risk-weighted assets
SEC United States Securities and Exchange Commission
Tier 1 capital ratio Tier 1 capital, which includes Common Equity Tier 1 capital plus non-cumulative perpetual preferred equity that qualifies as additional tier 1 capital, divided by total risk-weighted assets as defined under the U.S. Basel III Standardized approach
Tier 1 leverage ratio Tier 1 capital, which includes Common Equity Tier 1 capital plus non-cumulative perpetual preferred equity that qualifies as additional tier 1 capital, divided by quarterly adjusted average assets as defined under the U.S. Basel III Standardized approach
Total capital ratio Total capital, which includes Common Equity Tier 1 capital, tier 1 capital, and allowance for credit losses and qualifying subordinated debt that qualifies as tier 2 capital, divided by total risk-weighted assets as defined under the U.S. Basel III Standardized approach
Transaction accounts As defined in the instructions for the Call Report
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Unless we state otherwise or the context otherwise requires, "we," "us," "our," "Chain Bridge," "our Company," and "the Company," refer to Chain Bridge Bancorp, Inc., a Delaware corporation, and its consolidated subsidiary, Chain Bridge Bank, National Association. The "Bank" and "Chain Bridge Bank, N.A" refer to Chain Bridge Bank, National Association, a nationally chartered bank.
This Quarterly Report on Form 10-Q contains forward-looking statements, which involve risks and uncertainties. You should not place undue reliance on forward-looking statements because they are subject to numerous uncertainties and factors relating to our operations and business, all of which are difficult to predict and many of which are beyond our control. Forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business strategy. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," "target," "will," "would" and, in each case, their negative or other variations or comparable terminology and expressions. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategies, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements. The forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements relating to:
•Changes in trade, monetary and fiscal policies of, and other activities undertaken by, governments, agencies, central banks and similar organizations, including the effects of United States federal government spending;
•The level of, or changes in the level of, interest rates and inflation, including the effects on our net interest income, noninterest income, and the market value of our investment and loan portfolios;
•The level and composition of our deposits, including our ability to attract and retain, and the seasonality of, client deposits, including those in the ICS® network, as well as the amount and timing of deposit inflows and outflows and the concentration of our deposits;
•Our future net interest margin, net interest income, net income, and return on equity;
•Our political organization clients' fundraising and disbursement activities;
•The level and composition of our loan portfolio, including our ability to maintain the credit quality of our loan portfolio;
•Current and future business, economic and market conditions in the United States generally or in the Washington, D.C. metropolitan area in particular;
•The effects of disruptions or instability in the financial system, including as a result of the failure of a financial institution or other participants in it, or geopolitical instability, including war, terrorist attacks, pandemics and man-made and natural disasters;
•The impact of, and changes, in applicable laws, regulations, regulatory expectations and accounting standards and policies;
•Our likelihood of success in, and the impact of, legal, regulatory or other actions, investigations or proceedings related to our business;
•Adverse publicity or reputational harm to us, our senior officers, directors, employees or clients;
•Our ability to effectively execute our growth plans or other initiatives;
•Changes in demand for our products and services;
•Our levels of, and access to, sources of liquidity and capital;
•The ability to attract and retain essential personnel or changes in our essential personnel;
•Our ability to effectively compete with banks, non-bank financial institutions, and financial technology firms and the effects of competition in the financial services industry on our business;
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•The effectiveness of our risk management and internal disclosure controls and procedures;
•Any failure or interruption of our information and technology systems, including any components provided by a third party;
•Our ability to identify and address cybersecurity threats and breaches;
•Our ability to keep pace with technological changes;
•Our ability to receive dividends from the Bank and satisfy our obligations as they become due;
•The one-time and incremental costs of operating as a public company;
•Our ability to meet our obligations as a public company, including our obligation under Section 404 of Sarbanes-Oxley; and
•The effect of our dual-class structure and the concentrated ownership of our Class B common stock, including beneficial ownership of our shares by members of the Fitzgerald Family.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled "Risk Factors" included in our Annual Report on Form 10-K dated December 31, 2025 (our "Form 10-K"), as filed with the U.S. Securities and Exchange Commission in accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, on March 20, 2026. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.
In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q. And while we believe such information provides a reasonable basis for such statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements. Past performance is not a guarantee of future results or returns and no representation or warranty is made regarding future performance.
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Part I - Financial Information
Item 1. Financial Statements
Page
Item 1 - Financial Statements
7
Consolidated Balance Sheets
8
Consolidated Statements of Income
9
Consolidated Statements of Comprehensive Income
10
Consolidated Statements of Changes in Stockholders' Equity
11
Consolidated Statements of Cash Flows
12
Notes to Unaudited Consolidated Financial Statements
13
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Chain Bridge Bancorp, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
(unaudited)
March 31, 2026 December 31, 20251
Assets
Cash and due from banks $ 7,605 $ 4,882
Interest-bearing deposits in other banks 604,222 581,748
Total cash and cash equivalents 611,827 586,630
Securities available for sale, at fair value 758,289 608,804
Securities held to maturity, at carrying value, net of allowance for credit losses of $113 and $128, respectively (fair value of $234,817 and $245,276, respectively)
246,319 256,510
Equity securities, at fair value 549 547
Restricted securities, at cost 3,627 3,383
Loans, net of allowance for credit losses of $3,732 and $4,096, respectively
269,766 270,663
Premises and equipment, net of accumulated depreciation of $7,899 and $7,755, respectively
13,837 13,229
Accrued interest receivable 10,065 7,108
Other assets 4,395 3,525
Total assets $ 1,918,674 $ 1,750,399
Liabilities and stockholders' equity
Liabilities
Deposits:
Noninterest-bearing $ 1,399,037 $ 1,254,695
Savings, interest-bearing checking and money market accounts 326,893 309,352
Time, $250 and over
4,804 4,787
Other time 4,289 4,446
Total deposits 1,735,023 1,573,280
Accrued interest payable 42 32
Accrued expenses and other liabilities 8,734 7,868
Total liabilities 1,743,799 1,581,180
Commitments and contingencies
Stockholders' equity
Preferred Stock:
No par value, 10,000,000 shares authorized, no shares issued and outstanding
- -
Class A Common Stock:
$0.01 par value, 20,000,000 shares authorized, 3,328,927 and 3,297,137 shares issued and outstanding, respectively
33 33
Class B Common Stock:
$0.01 par value, 10,000,000 shares authorized, 3,232,890 and 3,264,680 shares issued and outstanding, respectively
32 32
Additional paid-in capital 74,785 74,785
Retained earnings 104,950 97,878
Accumulated other comprehensive loss (4,925) (3,509)
Total stockholders' equity 174,875 169,219
Total liabilities and stockholders' equity $ 1,918,674 $ 1,750,399
See Notes to Consolidated Financial Statements.
1 Derived from audited consolidated financial statements.
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Chain Bridge Bancorp, Inc. and Subsidiary
Consolidated Statements of Income
(Dollars in thousands, except per share data)
(unaudited)
Three Months Ended March 31,
2026 2025
Interest and dividend income
Interest and fees on loans $ 3,000 $ 3,589
Interest and dividends on securities, taxable 7,490 4,607
Interest on securities, tax-exempt 284 282
Interest on interest-bearing deposits in banks 4,770 6,263
Total interest and dividend income 15,544 14,741
Interest expense
Interest on deposits 595 893
Total interest expense 595 893
Net interest income 14,949 13,848
Recapture of credit losses
Recapture of loan credit losses (364) (38)
Recapture of securities credit losses (15) (27)
Total recapture of credit losses (379) (65)
Net interest income after recapture of credit losses 15,328 13,913
Noninterest income
Deposit placement services 1,651 133
Trust and wealth management 434 270
Service charges on accounts 301 240
Gain on sale of mortgage loans - 13
Other income32 39
Total noninterest income 2,418 695
Noninterest expenses
Salaries and employee benefits 4,798 4,408
Professional services 1,389 893
Data processing and communication expenses 805 666
State franchise taxes 353 351
Occupancy and equipment expenses 326 251
FDIC and regulatory assessments 242 228
Directors' fees 231 146
Insurance expenses169 149
Other operating expenses 535 479
Total noninterest expenses8,848 7,571
Net income before taxes 8,898 7,037
Income tax expense1,826 1,430
Net income $ 7,072 $ 5,607
Earnings per common share, basic and diluted2 $ 1.08 $ 0.85
See Notes to Consolidated Financial Statements.
2 The number of basic and diluted shares are the same because there are no potentially dilutive instruments
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Chain Bridge Bancorp, Inc. and Subsidiary
Consolidated Statements of Comprehensive Income
(Dollars in thousands)
(unaudited)
Three Months Ended March 31,
2026 2025
Net income $ 7,072 $ 5,607
Other comprehensive income (loss):
Unrealized holding gains (losses) on securities available for sale (2,018) 1,809
Income tax benefit (expense) related to above unrealized gain (loss) item 424 (380)
Amortization of unrealized holding losses on securities available for sale, transferred to held to maturity 225 282
Income tax expense related to the above amortization (47) (59)
Other comprehensive income (loss), net of tax (1,416) 1,652
Comprehensive income $ 5,656 $ 7,259
See Notes to Consolidated Financial Statements.
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Chain Bridge Bancorp, Inc. and Subsidiary
Consolidated Statements of Changes in Stockholders' Equity
(Dollars in thousands)
(unaudited)
Common
Stock
Class A Shares Outstanding Class B Shares Outstanding Total Amount Additional
Paid-In
Capital Retained
Earnings Accumulated
Other
Comprehensive
Loss Total
Balance at December 31, 2024 $ 30 $ 35 $ 65 $ 74,785 $ 77,641 $ (8,245) $ 144,246
Conversion of Class B to Class A Common Stock 1 (1) - - - - -
Net income - - - - 5,607 - 5,607
Other comprehensive income - - - - - 1,652 1,652
Balance at March 31, 2025$ 31 $ 34 $ 65 $ 74,785 $ 83,248 $ (6,593) $ 151,505
Balance at December 31, 2025 $ 33 $ 32 $ 65 $ 74,785 $ 97,878 $ (3,509) $ 169,219
Net income - - - - 7,072 - 7,072
Other comprehensive loss - - - - - (1,416) (1,416)
Balance at March 31, 20263 $ 33 $ 32 $ 65 $ 74,785 $ 104,950 $ (4,925) $ 174,875
See Notes to Consolidated Financial Statements.
3 During the three months ended March 31, 2026, 31,790 shares of Class B Common Stock were converted into an equal number of shares of Class A Common Stock. The aggregate par-value effect rounded to zero and is not separately reflected as a line item above.
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Chain Bridge Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows
(Dollars in thousands)
(unaudited)
Three Months Ended March 31,
2026 2025
Cash flows from operating activities
Net income $ 7,072 $ 5,607
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization of premises and equipment 144 120
Discount accretion on investment securities, net (623) (1,163)
Fair value adjustment (gain) loss on equity security 3 (9)
Recapture of loan credit losses (364) (38)
Recapture of securities credit losses (15) (27)
Gain on sale of mortgage loans - (13)
Origination of loans held for sale - (515)
Proceeds from sale of loans - 844
Deferred income tax expense
2 -
Changes in assets and liabilities:
Net increase in accrued interest receivable and other assets (3,453) (1,717)
Net increase in accrued interest payable, accrued expenses and other liabilities 876 20
Net cash provided by operating activities3,642 3,109
Cash flows from investing activities
Securities available for sale:
Purchases of securities (212,430) (288,006)
Proceeds from calls, maturities, and paydowns 61,830 170,458
Securities held to maturity:
Proceeds from calls, maturities and paydowns 10,152 5,005
Purchase of restricted securities, net (245) (137)
Reinvestment of dividends on equity security (4) (4)
Net decrease in loans 1,261 11,285
Purchases of premises and equipment (752) (1,689)
Net cash used in investing activities (140,188) (103,088)
Cash flows from financing activities
Net increase in noninterest-bearing, savings, interest-bearing checking and money market deposits 161,883 318,915
Net decrease in time deposits (140) (458)
Net cash provided by financing activities 161,743 318,457
Net increase in cash and cash equivalents 25,197 218,478
Cash and cash equivalents, beginning of period 586,630 410,739
Cash and cash equivalents, end of period $ 611,827 $ 629,217
Supplemental disclosures of cash flow information
Cash payments for interest$ 585 $ 878
Cash payments for taxes $ - $ -
Supplemental disclosures of noncash investing activities
Fair value adjustment for available for sale securities $ (2,018) $ 1,809
See Notes to Consolidated Financial Statements.
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Chain Bridge Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
Note 1. Organization and Summary of Significant Accounting Policies
Organization and Nature of Operations
Chain Bridge Bancorp, Inc. (the "Company") is a Delaware corporation 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 serves as the registered bank holding company for Chain Bridge 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. Both the Company and Bank have their headquarters and sole executive office in McLean, Virginia.
The Bank is a national banking association chartered by the OCC under the National Bank Act. The Bank commenced operations on August 6, 2007, following receipt of its Charter No. 24755 from the OCC. The Bank is a member of the FDIC under Certificate No. 58595 and is also a Federal Reserve member bank, as required of national banks. In 2020, the Bank opened its Trust & Wealth department following authorization from the OCC to exercise full fiduciary powers in accordance with 12 U.S.C. § 92a.
The Bank uses a branchless operating model that integrates digital banking channels with in-person services at its headquarters in McLean, Virginia. It offers a broad range of commercial and personal banking services, including deposit accounts, multiple types of loan products, trust administration, wealth management, and asset custody. The Bank's core deposit products include noninterest-bearing and interest-bearing checking accounts, as well as savings accounts. Its lending portfolio currently consists primarily of real-estate secured loans, with a significant portion being loans secured by first liens on single family residential properties in the Washington, D.C. area.
The Bank offers tailored financial solutions to individuals, families, businesses, non-profit organizations, and political organizations nationwide. The term "political organizations" refers to: 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.
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information. The statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of the Company's management, all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the consolidated financial statements, have been included. These unaudited interim consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 2025 and the accompanying notes thereto, included in the Company's Form 10-K.
The results of operations for the three months ended March 31, 2026 are not necessarily indicative of the results to be expected for any other interim period or for the full year.
Principles of Consolidation
The consolidated financial statements include the accounts of Chain Bridge Bancorp, Inc. and its wholly-owned subsidiary, Chain Bridge Bank, National Association. All significant intercompany balances and transactions have been eliminated in consolidation.
Reclassification
Certain amounts reported in the prior year may be reclassified to conform to the current year's presentation. Certain expenses, previously included in the "marketing and business development costs" component of noninterest expense on the consolidated statements of income, have been reclassified to the "other operating expenses" component of noninterest
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Notes to Unaudited Consolidated Financial Statements
expense to provide comparability between periods. None of these reclassifications had an impact to stockholders' equity or net income. There were no other reclassifications for the periods reported.
Segment Reporting
The Company operates as a single reportable segment. The Company's Chairman of the Board of Directors, Chief Executive Officer, President, and Chief Financial Officer serve as the chief operating decision-makers, and evaluate financial performance and allocates resources on a consolidated basis. Although the Company offers a variety of financial products and services, including deposit accounts, loans, treasury management, and trust and wealth management services, management considers these activities to be components of a single business unit. Individual financial results of specific product lines or services are not separately reviewed by the chief operating decision makers for the purpose of making operating decisions. The Board of Directors reviews consolidated financial results as part of its oversight responsibilities. Accordingly, the Company has determined that it operates in one reportable segment under applicable accounting guidance.
Significant Accounting Policies
The accounting and reporting policies of the Company are in accordance with GAAP and conform to general practices within the banking industry. The Company's significant accounting policies are described in Note 1 of the "Notes to the Consolidated Financial Statements" included in the audited consolidated financial statements for the fiscal year ended December 31, 2025, contained within the Company's Form 10-K. There have been no significant changes to the application of significant accounting policies since December 31, 2025.
In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Estimates are evaluated on an ongoing basis. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the ACL on loans.
Recent Accounting Pronouncements
In November 2024, the FASB issued ASU 2024-03, "Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses." ASU 2024-03 requires public companies to disclose, in the notes to the financial statements, specific information about certain costs and expenses at each interim and annual reporting period. This includes disclosing amounts related to employee compensation, depreciation, and intangible asset amortization. In addition, public companies will need to provide a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. The FASB subsequently issued ASU 2025-01, "Income Statement - Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date." which amends the effective date of ASU 2024 that all public business entities are required to adopt the guidance in ASU 2024-03 in annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Implementation of ASU 2024-03 may be applied prospectively or retrospectively. The Company does not expect the adoption of ASU 2024-03 to have a material impact on its consolidated financial statements.
Other accounting standards that have been issued by the FASB or other standard setting bodies are not currently expected to have material effect on the Company's financial position, results of operations or cash flows.
Note 2. Securities & Allowance for Securities Credit Losses
The Company invests in a variety of debt securities, principally obligations of the U.S. government and federal agencies, mortgage-backed securities, state and municipal agencies, and corporations. As of March 31, 2026 and December 31, 2025, all debt securities were classified as held to maturity ("HTM") or available for sale ("AFS").
Management considers the appropriateness of the accounting treatment applied to the Company's debt securities portfolio on an ongoing basis. During a prior year, certain AFS bonds were transferred to the HTM portfolio. Bonds selected for transfer included U.S. government and federal agencies, corporate bonds, and state and municipal bonds. The unrealized loss at the time of transfer is being amortized monthly over the remaining lives of the debt securities with an increase to the
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Notes to Unaudited Consolidated Financial Statements
carrying value of the debt securities and a decrease to the related accumulated other comprehensive loss, which is included in the stockholders' equity section of the consolidated balance sheets.
The following tables summarize the amortized cost, gross unrealized gains and losses, fair value and allowance for credit losses of AFS and HTM debt securities at March 31, 2026 and December 31, 2025 (dollars in thousands):
March 31, 2026
Amortized
Cost Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value Allowance
for Credit
Losses
Securities available for sale:
U.S. government and federal agencies $ 579,698 $ 233 $ (1,710) $ 578,221 $ -
Mortgage-backed securities 3,970 1 (354) 3,617 -
Corporate bonds 70,631 63 (371) 70,323 -
State and municipal securities 108,103 104 (2,079) 106,128 -
Total securities available for sale $ 762,402 $ 401 $ (4,514) $ 758,289 $ -
Securities held to maturity:
U.S. government and federal agencies $ 91,903 $ 1 $ (5,043) $ 86,861 $ -
Mortgage-backed securities 875 - (16) 859 -
Corporate bonds 39,483 33 (373) 39,143 (85)
State and municipal securities 114,171 7 (6,224) 107,954 (28)
Total securities held to maturity $ 246,432 $ 41 $ (11,656) $ 234,817 $ (113)
Total securities $ 1,008,834 $ 442 $ (16,170) $ 993,106 $ (113)
December 31, 2025
Amortized
Cost Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair
Value Allowance
for Credit
Losses
Securities available for sale:
U.S. government and federal agencies $ 438,351 $ 805 $ (833) $ 438,323 $ -
Mortgage-backed securities 5,670 1 (344) 5,327 -
Corporate bonds 62,796 283 (171) 62,908 -
State and municipal securities 104,082 191 (2,027) 102,246 -
Total securities available for sale $ 610,899 $ 1,280 $ (3,375) $ 608,804 $ -
Securities held to maturity:
U.S. government and federal agencies $ 96,440 $ 2 $ (4,887) $ 91,555 $ -
Mortgage-backed securities 1,150 - (3) 1,147 -
Corporate bonds 43,891 65 (429) 43,527 (99)
State and municipal securities 115,157 11 (6,121) 109,047 (29)
Total securities held to maturity $ 256,638 $ 78 $ (11,440) $ 245,276 $ (128)
Total securities $ 867,537 $ 1,358 $ (14,815) $ 854,080 $ (128)
There were no holdings of municipal or corporate debt securities that equaled or exceeded 10.0% of stockholders' equity at March 31, 2026 and December 31, 2025.
There were no securities pledged to secure any borrowing source at March 31, 2026 and December 31, 2025.
Proceeds from calls, maturities, and paydowns of debt securities available for sale totaled $61.8 million for the three months ended March 31, 2026 and $170.5 million for the three months ended March 31, 2025. Proceeds from calls, maturities, and paydowns of debt securities held to maturity totaled $10.2 million and $5.0 million for the three month periods ended March 31, 2026 and 2025, respectively.
During the three months ended March 31, 2026 and March 31, 2025, the Bank did not sell any AFS securities.
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Notes to Unaudited Consolidated Financial Statements
Management classifies bonds as HTM only when the Company has the ability and intent to hold the bond to maturity, and certain sales or transfers of HTM could call into question management's ability or intent to hold the remaining HTM bond portfolio to maturity, thereby "tainting" the entire portfolio and triggering a reclassification of the entire portfolio to available for sale. However, there are limited situations, including evidence of deterioration in the issuer's creditworthiness, in which the Company could sell an HTM bond without tainting the remaining HTM portfolio. During the three months ended March 31, 2026 and March 31, 2025, the Company did not sell any HTM bonds.
The amortized cost and fair value of debt securities by contractual maturity at March 31, 2026 is as follows (dollars in thousands):
Available for Sale Held to Maturity
Amortized
Cost Fair
Value Amortized
Cost Fair
Value
Within one year $ 475,716 $ 475,459 $ 61,201 $ 60,740
After one year through five years 272,645 269,703 152,471 144,471
After five years through ten years 9,380 8,836 31,885 28,747
Over ten years 4,661 4,291 875 859
Total $ 762,402 $ 758,289 $ 246,432 $ 234,817
Expected maturities may differ from contractual maturities if issuers have the right to call or repay obligations with or without prepayment penalties.
The following table shows the gross unrealized losses and fair value of the Company's AFS debt securities with unrealized losses aggregated by investment category and length of time that individual debt securities have been in a continuous unrealized loss position at March 31, 2026 and December 31, 2025 (dollars in thousands):
March 31, 2026
Less Than Twelve
Months Over Twelve Months Total
Gross
Unrealized
Loss Fair
Value Gross
Unrealized
Loss Fair
Value Gross
Unrealized
Loss Fair
Value
Securities available for sale:
U.S. government and federal agencies $ (883) $ 384,767 $ (827) $ 12,105 $ (1,710) $ 396,872
Mortgage-backed securities - - (354) 3,573 (354) 3,573
Corporate bonds (244) 39,894 (127) 8,146 (371) 48,040
State and municipal securities (143) 27,828 (1,936) 48,704 (2,079) 76,532
Total securities available for sale $ (1,270) $ 452,489 $ (3,244) $ 72,528 $ (4,514) $ 525,017
December 31, 2025
Less Than Twelve
Months Over Twelve Months Total
Gross
Unrealized
Loss Fair
Value Gross
Unrealized
Loss Fair
Value Gross
Unrealized
Loss Fair
Value
Securities available for sale:
U.S. government and federal agencies $ (6) $ 10,108 $ (827) $ 14,599 $ (833) $ 24,707
Mortgage-backed securities - - (344) 5,283 (344) 5,283
Corporate bonds (25) 9,501 (146) 8,646 (171) 18,147
State and municipal securities (18) 9,491 (2,009) 54,317 (2,027) 63,808
Total securities available for sale $ (49) $ 29,100 $ (3,326) $ 82,845 $ (3,375) $ 111,945
In the AFS portfolio at March 31, 2026, 50 out of 75 debt securities of the U.S. government and federal agencies, 7 out of 12 mortgage-backed securities, 98 out of 143 corporate bonds, and 232 out of 320 state and municipal securities were in an unrealized loss position. All of the Company's investment portfolio was evaluated under the monitoring process described in Note 1 of the audited consolidated financial statements for the year ended December 31, 2025, contained within the
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Notes to Unaudited Consolidated Financial Statements
Form 10-K, and all investments were deemed investment grade. All of the unrealized losses are attributed to changes in market interest rates, and are not a result of deterioration of creditworthiness among any of the issuers.
Of the total AFS and HTM portfolio at March 31, 2026 and December 31, 2025, 704 and 595 debt securities had unrealized losses with aggregate impairment of 1.6% and 1.7%, respectively, of the Company's amortized cost basis. These unrealized losses related principally to interest rate movements and not the creditworthiness of the issuer. In analyzing an issuer's financial condition, management considers whether the debt securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, and industry analysts' reports. Credit loss allowances for the AFS and HTM portfolios are described in the following sections.
Allowance for Credit Losses-AFS Securities
Management evaluates debt securities to determine whether the unrealized loss is due to credit-related factors or non-credit-related factors. This analysis occurs on a quarterly basis. Consideration is given to the extent to which fair value is less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the security for a period of time sufficient to allow for full recovery of its amortized cost. If the assessment reveals that a credit loss exists, the present value of the expected cash flows of the security is compared to the amortized cost basis of the security. If the present value of future cash flows expected to be collected is less than the amortized cost, an allowance for the credit loss is recorded. The loss is limited by the amount that the amortized cost exceeds fair value.
As of the reporting date, the Company did not intend to sell any of the AFS debt securities, did not expect to be required to sell these debt securities, and expected to recover the entire amortized cost basis of all of the debt securities.
The Company did not record an ACL on the AFS debt securities at March 31, 2026 and December 31, 2025. The Company has evaluated these debt securities for credit-related impairment at the reporting date and concluded that no impairment existed. In analyzing an issuer's financial condition, management considers whether the debt securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, industry analysts' reports, and correlations between fair value changes and interest rate changes among instruments that are not credit sensitive. All AFS debt securities were current with no debt securities past due or on non-accrual as of March 31, 2026 and December 31, 2025. The Company considers the unrealized losses on the debt securities as of March 31, 2026 and December 31, 2025 to be related to fluctuations in market conditions, primarily interest rates, and is not reflective of deterioration in credit.
At March 31, 2026 and March 31, 2025, there was no allowance for credit losses, and there were no provisions, write offs, or recoveries on AFS debt securities recorded during the three months ended March 31, 2026 and 2025.
Credit Quality Indicators and Allowance for Credit Losses - HTM Securities
The Company evaluates the credit risk of its HTM debt securities on a quarterly basis. The Company estimates expected credit losses on HTM debt securities using an instrument-level process described in the Notes to the Consolidated Financial Statements in our Form 10-K. The primary indicators of credit quality for the Company's HTM portfolio are security type, time remaining to maturity, and credit rating. Credit ratings may be influenced by a number of factors including obligor cash flows, geography, seniority and others. The HTM portfolio includes debt securities issued by the U.S. Treasury and agencies of the federal government, and mortgage-backed securities issued by government agencies. These types of investments carry implicit or explicit backing of the U.S. Treasury, and therefore are deemed to carry no credit risk for purposes of the ACL evaluation.
The following table presents the amortized cost of HTM debt securities as of March 31, 2026 and December 31, 2025 by security type and credit rating (dollars in thousands):
March 31, 2026
U.S.
Government
and Federal
Agencies Mortgage
Backed
Securities Corporate
Bonds State and
Municipal
Securities Total HTM
Securities
AAA / AA / A $ 91,903 $ 875 $ 11,515 $ 114,171 $ 218,464
BBB / BB / B - - 27,968 - 27,968
Total $ 91,903 $ 875 $ 39,483 $ 114,171 $ 246,432
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Notes to Unaudited Consolidated Financial Statements
December 31, 2025
U.S.
Government
and Federal
Agencies Mortgage
Backed
Securities Corporate
Bonds State and
Municipal
Securities Total HTM
Securities
AAA / AA / A $ 96,440 $ 1,150 $ 14,025 $ 115,157 $ 226,772
BBB / BB / B - - 29,866 - 29,866
Total $ 96,440 $ 1,150 $ 43,891 $ 115,157 $ 256,638
The following tables summarize the change in the allowance for credit losses on HTM debt securities for the three months ended March 31, 2026 and 2025 (dollars in thousands):
March 31, 2026
For the three months ended U.S.
Government
and Federal
Agencies Mortgage
Backed
Securities Corporate
Bonds State and
Municipal
Securities Total HTM
Securities
Allowance for credit losses:
Beginning balance, December 31, 2025 $ - $ - $ 99 $ 29 $ 128
Recapture of credit losses - - (14) (1) (15)
Write offs charged against the allowance- - - - -
Recoveries of amounts previously written off - - - - -
Ending balance, March 31, 2026 $ - $ - $ 85 $ - $ 28 $ - $ 113
March 31, 2025
For the three months ended U.S.
Government
and Federal
Agencies Mortgage
Backed
Securities Corporate
Bonds State and
Municipal
Securities Total HTM
Securities
Allowance for credit losses:
Beginning balance, December 31, 2024 $ - $ - $ 171 $ 31 $ 202
Recapture of credit losses - - (26) (1) (27)
Write offs charged against the allowance- - - - -
Recoveries of amounts previously written off - - - - -
Ending balance, March 31, 2025 $ - $ - $ 145 $ 30 $ 175
At March 31, 2026 and December 31, 2025, the Company had no HTM debt securities that were 30 days or more past due as to principal and interest payments. The Company had no debt securities held to maturity classified as non-accrual as of March 31, 2026 and December 31, 2025.
Equity Securities
The Company reported a fair value loss of $3 thousand in its equity security holding during the three month period ended March 31, 2026 and fair value gain of $9 thousand for the three month period ended March 31, 2025. The gains and losses were reflected in the "other income" component of noninterest income on the consolidated statements of income.
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Notes to Unaudited Consolidated Financial Statements
Note 3. Loans and Allowance for Loan Credit Losses
A summary of the composition of the loan portfolio at March 31, 2026 and December 31, 2025 is presented below (dollars in thousands):
March 31, 2026 December 31, 2025
Commercial real estate $ 48,201 $ 48,278
Commercial 3,781 4,521
Residential real estate closed-end 199,403 201,060
Other consumer loans 22,113 20,900
273,498 274,759
Less allowance for credit losses (3,732) (4,096)
Loans, net $ 269,766 $ 270,663
Overdrafts totaling $5 thousand and $58 thousand at March 31, 2026 and December 31, 2025, respectively, were reclassified from deposits to loans.
The totals above include deferred costs (net of deferred fees) of $505 thousand at March 31, 2026 and $518 thousand at December 31, 2025.
The following tables present the activity in the allowance for credit losses by portfolio segment for the three months ended March 31, 2026 and 2025 (dollars in thousands):
March 31, 2026
Commercial
Real Estate Commercial Residential
Real Estate
Closed-End Other
Consumer
Loans Total
For the three months ended
Allowance for credit losses:
Beginning balance, December 31, 2025 $ 1,468 $ 73 $ 2,324 $ 231 $ 4,096
Provision for (recapture of) credit losses (230) (13) (150) 29 (364)
Loans charged-off - - - - -
Recoveries collected - - - - -
Ending balance, March 31, 2026 $ 1,238 $ 60 $ 2,174 $ 260 $ 3,732
March 31, 2025
Commercial
Real Estate Commercial Residential
Real Estate
Closed-End Other
Consumer
Loans Total
For the three months ended
Allowance for credit losses:
Beginning balance, December 31, 2024 $ 1,140 $ 483 $ 2,644 $ 247 $ 4,514
Provision for (recapture of) credit losses 164 (224) 31 (9) (38)
Loans charged-off - - - - -
Recoveries collected - - - - -
Ending balance, March 31, 2025 $ 1,304 $ 259 $ 2,675 $ 238 $ 4,476
There were no nonaccrual loans, loans 90 days past due and still accruing, or past due for 30 or more days as of March 31, 2026 and December 31, 2025.
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The Company's loan risk grading system and ongoing monitoring process is discussed in the Notes to the Consolidated Financial Statements in our Form 10-K. The following table presents
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Notes to Unaudited Consolidated Financial Statements
the outstanding balance of the loan portfolio, by year of origination, loan classification, and credit quality, as of March 31, 2026 and December 31, 2025 (dollars in thousands):
March 31, 2026 Term Loans by Year of Origination Revolving Loans Revolving to Term Loans Total
2026 2025 2024 2023 2022 Prior
Commercial real estate
Pass $ 423 $ 4,492 $ 2,393 $ 2,468 $ 3,057 $ 30,110 $ - $ - $ 42,943
Special Mention - - - - - 1,442 - - 1,442
Substandard - - - - 1,625 2,191 - - 3,816
Doubtful - - - - - - - - -
Loss - - - - - - - - -
Total $ 423 $ 4,492 $ 2,393 $ 2,468 $ 4,682 $ 33,743 $ - $ - $ 48,201
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ -
Commercial
Pass $ 100 $ 27 $ 25 $ - $ 500 $ 881 $ 2,248 $ - $ 3,781
Special Mention - - - - - - - - -
Substandard - - - - - - - - -
Doubtful - - - - - - - - -
Loss - - - - - - - - -
Total $ 100 $ 27 $ 25 $ - $ 500 $ 881 $ 2,248 $ - $ 3,781
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ -
Residential real estate closed-end
Pass $ 5,970 $ 12,363 $ 10,473 $ 11,041 $ 44,822 $ 114,410 $ - $ - $ 199,079
Special Mention - - - - - - - - -
Substandard - - - - - 324 - - 324
Doubtful - - - - - - - - -
Loss - - - - - - - - -
Total $ 5,970 $ 12,363 $ 10,473 $ 11,041 $ 44,822 $ 114,734 $ - $ - $ 199,403
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ -
Other consumer loans
Pass $ 50 $ 36 $ 9 $ - $ - $ 5 $ 22,013 $ - $ 22,113
Special Mention - - - - - - - - -
Substandard - - - - - - - - -
Doubtful - - - - - - - - -
Loss - - - - - - - - -
Total $ 50 $ 36 $ 9 $ - $ - $ 5 $ 22,013 $ - $ 22,113
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ -
Total Portfolio Loans
Pass $ 6,543 $ 16,918 $ 12,900 $ 13,509 $ 48,379 $ 145,406 $ 24,261 $ - $ 267,916
Special Mention - - - - - 1,442 - - 1,442
Substandard - - - - 1,625 2,515 - - 4,140
Doubtful - - - - - - - - -
Loss - - - - - - - - -
Total Portfolio Loans $ 6,543 $ 16,918 $ 12,900 $ 13,509 $ 50,004 $ 149,363 $ 24,261 $ - $ 273,498
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ -
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Notes to Unaudited Consolidated Financial Statements
December 31, 2025 Term Loans by Year of Origination Revolving Loans Revolving to Term Loans Total
2025 2024 2023 2022 2021 Prior
Commercial real estate
Pass $ 4,492 $ 2,808 $ 2,480 $ 3,074 $ 6,311 $ 23,778 $ - $ - $ 42,943
Special Mention - - - - 1,469 - - - 1,469
Substandard - - - 1,635 494 1,737 - - 3,866
Doubtful - - - - - - - - -
Loss - - - - - - - - -
Total $ 4,492 $ 2,808 $ 2,480 $ 4,709 $ 8,274 $ 25,515 $ - $ - $ 48,278
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ -
Commercial
Pass $ 211 $ 322 $ - $ 500 $ 4 $ 933 $ 2,551 $ - $ 4,521
Special Mention - - - - - - - - -
Substandard - - - - - - - - -
Doubtful - - - - - - - - -
Loss - - - - - - - - -
Total $ 211 $ 322 $ - $ 500 $ 4 $ 933 $ 2,551 $ - $ 4,521
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ -
Residential real estate closed-end
Pass $ 12,901 $ 13,961 $ 12,398 $ 45,177 $ 40,709 $ 75,587 $ - $ - $ 200,733
Special Mention - - - - - - - - -
Substandard - - - - - 327 - - 327
Doubtful - - - - - - - - -
Loss - - - - - - - - -
Total $ 12,901 $ 13,961 $ 12,398 $ 45,177 $ 40,709 $ 75,914 $ - $ - $ 201,060
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ -
Other consumer loans
Pass $ 42 $ 11 $ - $ - $ 8 $ - $ 20,839 $ - $ 20,900
Special Mention - - - - - - - - -
Substandard - - - - - - - - -
Doubtful - - - - - - - - -
Loss - - - - - - - - -
Total $ 42 $ 11 $ - $ - $ 8 $ - $ 20,839 $ - $ 20,900
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ -
Total Portfolio Loans
Pass $ 17,646 $ 17,102 $ 14,878 $ 48,751 $ 47,032 $ 100,298 $ 23,390 $ - $ 269,097
Special Mention - - - - 1,469 - - - 1,469
Substandard - - - 1,635 494 2,064 - - 4,193
Doubtful - - - - - - - - -
Loss - - - - - - - - -
Total Portfolio Loans $ 17,646 $ 17,102 $ 14,878 $ 50,386 $ 48,995 $ 102,362 $ 23,390 $ - $ 274,759
Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ - $ -
Collateral Dependent Loans
FASB ASC Topic 326 describes a collateral-dependent asset as a financial asset for which the repayment is expected to be provided substantially through the operation or sale of the collateral when the borrower, based on management's assessment, is experiencing financial difficulty as of the reporting date. Whether the underlying collateral is expected to be a substantial source of repayment for an asset depends on the availability, reliability, and capacity of sources other than the collateral to repay the debt. Collateral-dependent loans are individually evaluated for expected credit losses as of the
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Notes to Unaudited Consolidated Financial Statements
reporting date, and they are removed from their respective pools of collectively evaluated assets. Expected credit losses for these types of assets are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs. There were no collateral-dependent loans that were individually evaluated for purposes of determining the allowance for credit losses under FASB ASC Topic 326 as of March 31, 2026 and December 31, 2025.
Modifications to Borrowers Experiencing Financial Difficulty
The Company may modify loans to borrowers in financial distress by providing principal forgiveness, term extension, and other-than-insignificant payment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses. There were no loan modifications provided to borrowers exhibiting financial distress during the three months ended March 31, 2026 and 2025, and there were no such prior modifications in existence during the periods reported. During the reported periods, there were no payment defaults from any such loans during the twelve months preceding the modification because no such modifications were in existence during the periods.
Related Party Loan Transactions
Officers, directors and their affiliates had loans outstanding with the Company of $8.3 million and $8.4 million as of March 31, 2026 and December 31, 2025, respectively. The decrease in loans outstanding relates to principal payments. These transactions occurred in the ordinary course of business on substantially the same terms as those prevailing at the time for comparable transactions with unrelated persons.
Note 4. Deposits
The Bank held no deposits classified as brokered as of March 31, 2026 and December 31, 2025. To achieve full insurance from the FDIC, some of the Bank's depositors have enrolled in the ICS® program offered by the Bank through the IntraFi® network. When accounts are enrolled in this service, the Bank must elect, for each account, whether it will receive a reciprocal deposit balance or sell the deposit balance. Reciprocal deposits through ICS® held on the consolidated balance sheets were $80.1 million and $106.7 million as of March 31, 2026 and December 31, 2025, respectively. Total ICS® One-Way Sell® deposits of $595.0 million and $359.9 million as of March 31, 2026, and December 31, 2025, respectively, were sold to the network and excluded from the Company's consolidated balance sheets. The Company receives fee income for deposits that are sold, which is reported under deposit placement services income on the consolidated statements of income.
As of March 31, 2026, there were three clients with an individual deposit balance exceeding 5.0% of total deposits. The total deposit balance related to these clients was $284.9 million or 16.4% of total deposits. As of December 31, 2025, there were no clients whose individual deposit balances exceeded 5.0% of total deposits.
Note 5. Borrowings
Available Lines of Credit
The Bank maintains eligibility for a secured line of credit with the FHLB. To establish credit availability, the Bank will typically pledge eligible 1-4 family residential real estate loans from its loan portfolio as collateral. At March 31, 2026 and December 31, 2025, the Bank had not pledged any collateral to the FHLB. Consequently, no credit availability was established, and no outstanding borrowings were recorded.
The Bank also maintains eligibility for a secured line of credit with the FRB, and will typically pledge investment securities to establish credit availability. At March 31, 2026 and December 31, 2025, the Bank had not pledged any collateral to the FRB. Consequently, no credit availability was established, and no outstanding borrowings were recorded.
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, none of which were in violation as of March 31, 2026. As of March 31, 2026, no amounts were outstanding under the facility.
Short-Term Borrowing Facilities
As of March 31, 2026 and December 31, 2025, the Company had no outstanding short-term borrowings. The Bank maintains access to unsecured federal funds purchase lines of credit with:
•Pacific Coast Bankers' Bank: $50.0 million, maturing June 30, 2026
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Notes to Unaudited Consolidated Financial Statements
•First National Bankers' Bank: $10.0 million, maturing June 30, 2027, and
•Community Bankers' Bank: $8.0 million, maturing 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 March 31, 2026 and December 31, 2025, the Bank had no outstanding balances under these federal funds purchase lines.
Note 6. Fair Value Measurements
Determination of Fair Value
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value measurements and disclosure topic specifies a hierarchy of valuation techniques based on whether the inputs to these valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company's market assumptions. U.S. GAAP requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs.
Fair Value Hierarchy
U.S. GAAP establishes a fair value hierarchy which categorizes the valuation inputs into three broad levels. Based on the underlying inputs, each fair value measurement in its entirety is reported in one of the three levels. These levels are:
Level 1 - Valuation is based on quoted prices in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date. Level 1 assets and liabilities generally include debt and equity securities that are traded in an active exchange market. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.
Level 2 - Valuation is based on inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. The valuation may be based on quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the asset or liability.
Level 3 - Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. Level 3 assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which determination of fair value requires significant management judgment or estimation.
An asset or liability's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
The following describes the valuation techniques used by the Company to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the financial statements:
Securities Available for Sale & Equity Securities
Debt securities available for sale and equity securities are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data (Level 2). If the inputs used to provide the evaluation for certain securities are unobservable and/or there is little, if any, market activity then the security would fall to the lowest level of the hierarchy (Level 3).
The Company's investment portfolio is valued using fair value measurements that are considered to be Level 1 or Level 2 but may also use Level 3 measurements if required by the composition of the portfolio. The Bank has contracted with a securities portfolio accounting service provider for valuation of its securities portfolio. Most security types are priced using the securities accounting provider's internally developed pricing software which appraises securities from an online real-time database. Subscription pricing services such as ICE Data Services and Bloomberg Valuation Services may be used to supplement the internal pricing system for security types where the underlying collateral, cash flow projections or trade
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Notes to Unaudited Consolidated Financial Statements
data is not readily available. If Level 1 or Level 2 inputs are not available, the software may rely upon a discounted cash flow analysis based on the net present value of a security's projected cash flow to arrive at fair market value. Valuations for direct obligations of the U.S. Treasury, exchange listed stock and preferred stock are obtained from online real-time databases.
The securities accounting service provider utilizes proprietary valuation matrices for valuing all municipal securities. The initial curves for determining the price, movement, and yield relationships within the municipal matrices are derived from industry benchmark curves or sourced from a municipal trading desk. The securities are further broken down according to issuer, credit support, state of issuance and rating to incorporate additional spreads to the industry benchmark curves.
The following table presents the balances of financial assets measured at fair value on a recurring basis (dollars in thousands):
Fair Value Measurements Using
Financial Assets Balances Level 1 Level 2 Level 3
As of March 31, 2026:
Available for sale securities:
U.S. government and federal agencies $ 578,221 $ 577,734 $ 487 $ -
Mortgage-backed securities 3,617 - 3,617 -
Corporate bonds 70,323 487 69,836 -
State and municipal securities 106,128 - 106,128 -
Total available for sale securities $ 758,289 $ 578,221 $ 180,068 $ -
Equity securities 549 549 - -
Total $ 758,838 $ 578,770 $ 180,068 $ -
As of December 31, 2025:
Available for sale securities:
U.S. government and federal agencies $ 438,323 $ 437,339 $ 984 $ -
Mortgage-backed securities 5,327 - 5,327 -
Corporate bonds 62,908 489 62,419 -
State and municipal securities 102,246 - 102,246 -
Total available for sale securities $ 608,804 $ 437,828 $ 170,976 $ -
Equity securities 547 547 - -
Total $ 609,351 $ 438,375 $ 170,976 $ -
Assets Measured at Fair Value on a Non-recurring Basis
Certain assets are measured at fair value on a nonrecurring basis in accordance with generally accepted accounting principles. Adjustments to the fair value of these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets.
Collateral Dependent Loans
Individually evaluated loans are analyzed to determine whether they are collateral dependent. Any individually evaluated loans, which are deemed to be collateral dependent, with an allocation to the ACL are measured at fair value on a non-recurring basis. Any fair value adjustments are recorded in the period incurred as provision for credit losses on the consolidated statements of income.
The measurement of loss associated with collateral dependent loans can be based on either the observable market price of the loan or fair value of the collateral. Fair value is measured based on the value of the collateral securing the loans. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The vast majority of the collateral is real estate. The value of real estate collateral is determined utilizing a market valuation approach based on an appraisal conducted by an independent, licensed appraiser outside of the Company using observable market data (Level 2). However, if the collateral is a house or building in the process of construction or if an appraisal of the real estate property using an income approach or is over two years old, then the fair value is considered Level 3. The value of business equipment is based upon an outside appraisal if deemed significant, or the net book value on the applicable business's financial statements if not considered significant using observable market data. Likewise, values for
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Notes to Unaudited Consolidated Financial Statements
inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). Any fair value adjustments are recorded in the period incurred as a provision for loan credit losses on the consolidated statements of income. There were no collateral dependent loans, and therefore no recorded reserve as of March 31, 2026 and December 31, 2025.
Other Real Estate Owned
OREO is measured at fair value less costs to sell. Valuation of OREO is determined using current appraisals from independent parties, a Level 2 input. If current appraisals cannot be obtained, or if declines in value are identified after a recent appraisal is received, appraisal values may be discounted, resulting in a Level 3 estimate. If the Company markets the property with a realtor, estimated selling costs reduce the fair value, resulting in a valuation based on Level 3 inputs. Fair value adjustments are recorded in the period incurred and expensed against current earnings. The Bank held no OREO at March 31, 2026 and December 31, 2025.
Loans Held for Sale
Loans held for sale are carried at the lower of cost or fair value. These loans currently consist of 1-4 family residential loans originated for sale in the secondary market. Fair value is based on the price secondary markets are currently offering for similar loans using observable market data which is not materially different than cost due to the short duration between origination and sale (Level 2). As such, the Company records any fair value adjustments on a nonrecurring basis. No nonrecurring fair value adjustments were recorded on loans held for sale at March 31, 2026 or December 31, 2025.
There were no assets measured at fair value on a nonrecurring basis at March 31, 2026 and December 31, 2025.
Fair Value of Financial Instruments
The following tables present the carrying value and estimated fair value including the level within the fair value hierarchy of the Company's financial instruments as of March 31, 2026 and December 31, 2025 (dollars in thousands):
Carrying
Amount Fair Value Measurements Using Total
Fair Value
Level 1 Level 2 Level 3
As of March 31, 2026:
Financial assets:
Cash and due from banks $ 611,827 $ 611,827 $ - $ - $ 611,827
Securities available for sale 758,289 578,221 180,068 - 758,289
Securities held to maturity, net 246,319 80,967 153,850 - 234,817
Equity securities 549 549 - - 549
Restricted securities3,627 - 3,627 - 3,627
Loans, net 269,766 - - 267,629 267,629
Accrued interest receivable 10,065 - 10,065 - 10,065
Financial liabilities:
Time deposits 9,093 - - 9,037 9,037
Accrued interest payable 42 - 42 - 42
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Notes to Unaudited Consolidated Financial Statements
Carrying
Amount Fair Value Measurements Using Total
Fair Value
Level 1 Level 2 Level 3
As of December 31, 2025:
Financial assets:
Cash and due from banks $ 586,630 $ 586,630 $ - $ - $ 586,630
Securities available for sale 608,804 437,828 170,976 - 608,804
Securities held to maturity, net 256,510 85,681 159,595 - 245,276
Equity securities 547 547 - - 547
Restricted securities3,383 - 3,383 - 3,383
Loans, net 270,663 - - 265,971 265,971
Accrued interest receivable 7,108 - 7,108 - 7,108
Financial liabilities:
Time deposits 9,233 - - 9,204 9,204
Accrued interest payable 32 - 32 - 32
Note 7. Accumulated Other Comprehensive Loss
The following table presents the changes in each component in accumulated other comprehensive loss, net of tax for the three months ended March 31, 2026 and 2025 (dollars in thousands):
Unrealized Loss
on Available for
Sale Securities
Unrealized Loss
on Securities Transferred
from Available for Sale
to Held to Maturity
Accumulated
Other
Comprehensive
Loss
Balance at December 31, 2024 $ (5,525) $ (2,720) $ (8,245)
Unrealized holding gains, net of tax of $380
1,429 - 1,429
Amortization of unrealized holding losses, net of tax of $59
- 223 223
Balance at March 31, 2025$ (4,096) $ (2,497) $ (6,593)
Balance at December 31, 2025 $ (1,656) $ (1,853) $ (3,509)
Unrealized holding losses, net of tax of $424
(1,594) - (1,594)
Amortization of unrealized holding losses, net of tax of $47
- 178 178
Balance at March 31, 2026$ (3,250) $ (1,675) $ (4,925)
There were no amounts reclassified out of accumulated other comprehensive loss for the three months ending March 31, 2026 and 2025.
Note 8. Earnings Per Share
The Company's stock is comprised of two classes: Class A Common Stock and Class B Common Stock. Except in regard to voting and conversion rights, the rights of Class A Common Stock and Class B Common Stock are identical, and the classes rank equally and share ratably with regard to all other matters. Each share of Class B Common Stock is convertible at any time into one share of Class A Common Stock. Because Class A Common Stock and Class B Common Stock share in earnings equally, any potential conversions of Class B Common Stock to Class A Common Stock do not have a dilutive impact.
When declared by the Company's Board of Directors, holders of Class A Common Stock and Class B Common Stock are entitled to receive dividends equally and ratably on a per-share basis. The Company did not pay dividends to any stockholder during the three month periods ended March 31, 2026 and 2025.
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Notes to Unaudited Consolidated Financial Statements
Under the two-class method, earnings available to common stockholders are allocated ratably on a per-share basis between Class A Common Stock and Class B Common Stock. The table below provides a reconciliation of the combined Class A and Class B Common Stock numerators and denominators of the earnings per share computations (dollars in thousands, except per share data). The number of basic and diluted shares are the same because there are no potentially dilutive instruments.
Three Months Ended March 31,
2026 2025
Net Income $ 7,072 $ 5,607
Dividends declared on common stock
Class A Common Stock - -
Class B Common Stock - -
Undistributed net income for basic and diluted earnings per share $ 7,072 $ 5,607
Weighted average shares outstanding
Class A Common Stock 3,313,644 3,088,810
Class B Common Stock 3,248,173 3,473,007
Weighted average shares outstanding, basic and dilutive 6,561,817 6,561,817
Three Months Ended March 31,
2026 2025
Earnings per common share, basic and diluted
Class A Common Stock
Per share dividends distributed $ - $ -
Undistributed earnings per share4 1.08 0.85
Total basic and diluted earnings per share - Class A Common Stock $ 1.08 $ 0.85
Class B Common Stock
Per share dividends distributed $ - $ -
Undistributed earnings per share3
1.08 0.85
Total basic and diluted earnings per share - Class B Common Stock $ 1.08 $ 0.85
4 To arrive at undistributed earnings per share, undistributed net income is first pro rated between Class A and Class B Common shares. The resulting pro-rated, undistributed net income for each class is then divided by the weighted average shares for each class.
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Item 2. 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 unaudited consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the related notes and the discussion under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" for the year ended December 31, 2025 included in our 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 Quarterly Report on Form 10-Q, particularly in the section entitled "Cautionary Note Regarding Forward-Looking Statements" as well as the section entitled "Risk Factors" in our Form 10-K. 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 Bridge 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.
We offer a broad range of commercial and personal banking services, including deposit accounts, multiple types of loan products, trusts 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."
Three Months Ended March 31, 2026 Highlights
Highlights of our results of operations and financial condition as of and for the three months ended March 31, 2026 are provided below.
Financial Performance
•Consolidated net income was $7.1 million for the three months ended March 31, 2026, compared to $5.6 million for the three months ended March 31, 2025. Earnings per share for the three months ended March 31, 2026 was $1.08, compared to $0.85 for the three months ended March 31, 2025.
•Net interest income, before recapture of credit losses, was $14.9 million for the three months ended March 31, 2026, compared to $13.8 million for the three months ended March 31, 2025. Net interest income, after recapture of credit losses, was $15.3 million for the three months ended March 31, 2026, compared to $13.9 million for the three months ended March 31, 2025.
•Return on average equity was 16.56% for the three months ended March 31, 2026, compared to 15.39% for the three months ended March 31, 2025.
•Return on average assets for the three months ended March 31, 2026 was 1.59%, compared to 1.43% for the three months ended March 31, 2025.
•Return on average RWA was 7.66% for the three months ended March 31, 2026, compared to 5.74% for the three months ended March 31, 2025.5
5 Return on average RWA is calculated as net income divided by average RWA. Average RWA are calculated using the last two quarter ends.
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Balance Sheet
•Total assets were $1.9 billion as of March 31, 2026, compared to $1.8 billion as of December 31, 2025.
•Total deposits were $1.7 billion as of March 31, 2026, compared to $1.6 billion as of December 31, 2025. Excluded from these totals are One-Way Sell® deposits, which are sold to the ICS® network. These One-Way Sell® deposits amounted to $595.0 million as of March 31, 2026, compared to $359.9 million as of December 31, 2025.
•No non-performing assets or OREO were reported as of March 31, 2026 or December 31, 2025.
•Cash balances held at the Federal Reserve were $603.6 million as of March 31, 2026, compared to $580.9 million as of December 31, 2025.
•As of March 31, 2026, the total debt securities portfolio balance was $1.0 billion, compared to $865.3 million as of December 31, 2025.
•Book value per share was $26.65 as of March 31, 2026, compared to $25.79 as of December 31, 2025.
•As of March 31, 2026, the Company had a total risk-based capital ratio of 48.65% and a tier 1 risk-based capital ratio of 47.63%. The Bank exceeded the minimum requirements to be well-capitalized for bank regulatory purposes, with a total risk-based capital ratio of 47.14% and a tier 1 risk-based capital ratio of 46.12%.
•As of March 31, 2026, our liquidity ratio was 92.73%, compared to 91.86% as of December 31, 2025.
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 2025, the Federal Reserve lowered the target federal funds rate on three occasions, on September 18th, October 30th, and December 11th. There have been no changes to the target federal funds rate in 2026. 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 the most recent cycle was no exception.
In addition, certain clients organized under Section 501(c)(4) of the Internal Revenue Code as social welfare organizations may experience fluctuations in deposit balances and transaction activity in connection with issue advocacy or public policy initiatives, which may occur during election cycles. These organizations are not considered "political organizations" under the Company's definition.
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.
Despite subsequent outflows during the second quarter of 2025 related to this post-election surge, deposit levels have increased during the year-over-year period, with total consolidated deposits totaling $1.7 billion at March 31, 2026. As of
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March 31, 2026, there were three clients with an individual deposit balance exceeding 5.0% of total deposits. The total deposit balance related to these clients was $284.9 million or 16.4% of total 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 2025 and first quarter of 2026, 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 2025, some federal agencies began signaling or implementing hiring delays or contract-award deferrals in response to revised fiscal guidance, 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 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 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.
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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" in our Form 10-K.
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 March 31, 2026, we estimate that approximately 75.8% 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.
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, annualized 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, annualized 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.
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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.
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 $603.6 million as of March 31, 2026, is a primary source of our liquidity for daily and ongoing activities. Additionally, our bond portfolio is structured to provide liquidity when management anticipates it will be needed, with maturities aligned to expected cash flow requirements.
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.
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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 Consolidated Financial Statements in our Form 10-K. These policies, together with the other disclosures presented in the financial statement notes and this Quarterly Report on Form 10-Q, 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. We describe this policy in detail within the "Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates" section of our Form 10-K. There have been no material changes to our critical accounting policies from those disclosed in the Form 10-K.
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.
Three Months Ended March 31,
(dollars in thousands)
2026 2025 $
Change %
Change
Interest and dividend income $ 15,544 $ 14,741 $ 803 5.4 %
Interest expense 595 893 (298) (33.4 %)
Net interest income 14,949 13,848 1,101 8.0 %
Recapture of credit losses (379) (65) (314) 483.1 %
Net interest income after recapture of credit losses 15,328 13,913 1,415 10.2 %
Noninterest income 2,418 695 1,723 247.9 %
Noninterest expense 8,848 7,571 1,277 16.9 %
Net income before taxes 8,898 7,037 1,861 26.4 %
Income tax expense1,826 1,430 396 27.7 %
Net income $ 7,072 $ 5,607 $ 1,465 26.1 %
For the three months ended March 31, 2026, our net income increased by $1.5 million compared to the three months ended March 31, 2025. This improvement was attributed to a $1.7 million, or 247.9%, increase in noninterest income driven by an increase in deposit placement services income following the increase in One-Way Sell® balances. Additionally, net interest income increased by $1.1 million, or 8.0%, further contributing to the overall growth in net income. However, these components were partially offset by a $1.3 million increase in noninterest expense, driven most notably by increases in employment and professional services costs.
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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.
Three Months Ended March 31,
(dollars in thousands)
2026 2025 $
Change %
Change
Interest and dividend income
Interest and fees on loans $ 3,000 $ 3,589 $ (589) (16.4 %)
Interest and dividends on securities, taxable 7,490 4,607 2,883 62.6 %
Interest on securities, tax-exempt 284 282 2 0.7 %
Interest on interest-bearing deposits in banks 4,770 6,263 (1,493) (23.8 %)
Total interest and dividend income 15,544 14,741 803 5.4 %
Interest expense
Interest on deposits 595 893 (298) (33.4 %)
Total interest expense 595 893 (298) (33.4 %)
Net interest income $ 14,949 $ 13,848 $ 1,101 8.0 %
Interest income and expense are affected by fluctuations in interest rates, by changes in the volume of 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.
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Three Months Ended March 31,
2026 2025
(dollars in thousands) Average
Balance Interest Average
Yield/Cost Average
Balance Interest Average
Yield/Cost
Assets
Interest-earning assets:
Interest-bearing deposits in other banks $ 520,219 $ 4,770 3.72 % $ 566,675 $ 6,263 4.48 %
Investment securities, taxable1
927,203 7,490 3.28 % 639,825 4,607 2.92 %
Investment securities, tax-exempt1
57,633 284 2.00 % 62,235 282 1.84 %
Loans 274,034 3,000 4.44 % 308,741 3,589 4.71 %
Total interest-earning assets 1,779,089 $ 15,544 3.54 % 1,577,476 $ 14,741 3.79 %
Less allowance for credit losses (4,219) (4,715)
Noninterest-earning assets30,230 19,097
Total assets $ 1,805,100 $ 1,591,858
Liabilities and Stockholders' Equity
Interest-bearing liabilities:
Savings, interest-bearing checking and money market $ 257,181 $ 544 0.86 % $ 325,018 $ 817 1.02 %
Time deposits 9,277 51 2.23 % 11,438 76 2.69 %
Total interest-bearing liabilities 266,458 $ 595 0.91 % 336,456 $ 893 1.08 %
Noninterest-bearing liabilities
Demand deposits 1,357,226 1,100,966
Other liabilities 8,223 6,642
Total liabilities 1,631,907 1,444,064
Stockholders' equity173,193 147,794
Total liabilities and stockholders' equity $ 1,805,100 $ 1,591,858
Net interest income $ 14,949 $ 13,848
Net interest margin 3.41 % 3.56 %
__________
1Average 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.
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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 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 three months ended
March 31, 2026 compared to
2025
Increase (decrease) due to change in:
(dollars in thousands)
Average
volume Average
rate Total
Interest-earning assets
Interest-bearing deposits in other banks $ (513) $ (980) $ (1,493)
Taxable investment securities 2,070 813 2,883
Non-taxable investment securities(21) 23 2
Loans (403) (186) (589)
Total increase (decrease) in interest income $ 1,133 $ (330) $ 803
Interest-bearing liabilities
Savings, interest-bearing checking and money market accounts $ (170) $ (103) $ (273)
Time deposits (14) (11) (25)
Total increase (decrease) in interest expense $ (184) $ (114) $ (298)
Increase (decrease) in net interest income $ 1,317 $ (216) $ 1,101
-
For the three months ended March 31, 2026, our net interest income increased by $1.1 million, or 8.0%, compared to the three months ended March 31, 2025. The increase in interest income was primarily driven by higher average balances in, and yields on, taxable investment securities. Partially offsetting this earning component, the average balances in, and yields on loans and deposits at the Federal Reserve declined compared to the three months ended March 31, 2025. However, due to increased asset base, and lower yield earned by interest bearing deposits in other banks and loans, our net interest margin decreased to 3.41% for the three months ended March 31, 2026, from 3.56% for the three months ended March 31, 2025.
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 three months ended March 31, 2026, our interest and fees on loans decreased 16.4% to $3.0 million compared to the three months ended March 31, 2025 primarily driven by a 27 basis point decrease in average yield and decrease of the average total loan balance of $34.7 million. The months following a general election, including the early months of 2025, 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.
See "- Financial Condition - Loan Portfolio" below for an analysis of the composition of our loan portfolio.
Interest and dividends on securities, taxable. For the three months ended March 31, 2026, our interest and dividends on taxable securities increased 62.6% to $7.5 million from $4.6 million for the three months ended March 31, 2025. The average balance for all taxable securities increased $287.4 million when comparing the periods, and the yield improved 36 basis points. As portions of maturing bonds have been reinvested, we have observed a steady increase in the average yield for the taxable securities portfolio. The Company 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.
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, causing balances and income to remain stable or slightly decline over time.
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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 Federal Reserve started 2025 with an interest rate of 4.40% on reserve balances. During 2025, the rate was reduced by 25 basis points on three occasions-September 18th, October 30th, and December 11th-bringing it down to 3.65%. This final rate stayed in effect through the first quarter of 2026. For the three months ended March 31, 2026, our interest on interest-bearing deposits in banks decreased by $1.5 million compared to the prior period, driven by both a $46.5 million decrease in average balances and a decrease in yield of 76 basis points. The decline in the average balances of interest-bearing deposits in banks is a reflection of 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 three months ended March 31, 2026, our interest expense on deposits decreased 33.4% compared to the three months ended March 31, 2025. The decrease was driven by both a $70.0 million decrease in average interest-bearing deposit balances due to a larger volume of ICS® deposits being positioned as One-Way Sell®, and a 17 basis point decrease in the average rate. As of March 31, 2026 and March 31, 2025, approximately 80.6% and 79.3%, 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.
Provision for Credit Losses
The 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 loss is recorded to earnings when the ACL is reduced. Our recaptures of credit losses arising from within the loan and securities portfolios were as follows:
Three Months Ended March 31,
(dollars in thousands)
2026 2025 $
Change %
Change
Recapture of credit losses
Recapture of loan credit losses $ (364) $ (38) $ (326) 857.9 %
Recapture of securities credit losses (15) (27) 12 (44.4 %)
Total recapture of credit losses $ (379) $ (65) $ (314) 483.1 %
For the three months ended March 31, 2026, we recorded a net recapture of credit losses of $379 thousand. Within the loan portfolio, the $364 thousand recapture resulted from a reduction in outstanding balances, coupled with a decrease in the overall reserve rate for loan credit losses due to improving peer credit indicators utilized in our evaluation of qualitative factors and modest changes in the composition of the loan portfolio. Within our securities portfolio, the shortening time to maturity of our held to maturity securities portfolio resulted in a lower required reserve in accordance with our ACL methodology.
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Noninterest Income
Noninterest income consists of deposit placement services income, service charges on deposit accounts, trust and wealth management income, gains on sale of mortgage loans, net gains or losses on sales of securities and other income.
Three Months Ended March 31,
(dollars in thousands)
2026 2025 $
Change %
Change
Noninterest income
Deposit placement services $ 1,651 $ 133 $ 1,518 1,141.4 %
Trust and wealth management 434 270 164 60.7 %
Service charges on accounts 301 240 61 25.4 %
Gain on sale of mortgage loans - 13 (13) NM
Other income32 39 (7) (17.9 %)
Total noninterest income $ 2,418 $ 695 $ 1,723 247.9 %
__________
NM - Comparisons from positive to negative values or to zero values are considered not meaningful.
For the three months ended March 31, 2026, our noninterest income increased by $1.7 million, or 247.9%, to $2.4 million compared to the three months ended March 31, 2025 primarily driven by an increase in deposit placement services income, which is fee income we earn on One-Way Sell® deposits sold through the ICS® network.
Deposit placement services income. For the three months ended March 31, 2026, our deposit placement services income increased by $1.5 million compared to the three months ended March 31, 2025 on account of higher One-Way Sell® deposit balances. As of March 31, 2026 and March 31, 2025, One-Way Sell® deposits totaled $595.0 million and $93.2 million, respectively. For the three months ended March 31, 2026, our average One-Way Sell® deposits were significantly higher than the average balance during the three months ended March 31, 2025. Income from deposit placement services is influenced by changes in the rate paid by ICS® for One Way Sell® deposits, which generally moves in line with federal funds rate adjustments. Additionally, income is affected by shifts in the composition of our deposits allocated to One Way Sell® positions. Accounts enrolled in the ICS® network are further discussed under "- Financial Condition - Deposits" below.
Trust and wealth management income. For the three months ended March 31, 2026, our trust and wealth management income increased by $164 thousand, or 60.7%, compared to the three months ended March 31, 2025. This increase was primarily due to a rise in the volume of total assets under administration, which grew to $711.7 million at March 31, 2026 from $409.4 million at March 31, 2025. The size and mix of the assets under administration drove the income growth. AUM, which produce a higher rate of income under our fee structure, increased 60.8% from March 31, 2025, while AUC increased 80.5% 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 periods 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.
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Service charges on accounts. For the three months ended March 31, 2026, our service charges on accounts increased by $61 thousand, or 25.4%, compared to the three months ended March 31, 2025 primarily driven by higher transaction volume, particularly among ACH originations, check processing, and wire transfers. Our fee income is typically higher during the fiscal quarters leading up to and during the general election as political organization deposit account activity causes an increase in bank transactions.
Gain on sale of mortgage loans. For the three months ended March 31, 2026, the gain on sale of mortgages decreased by $13 thousand compared to the three months ended March 31, 2025, due to no sales activity or any related gains.
Noninterest Expense
Noninterest expense consists of salaries and employee benefits, data processing and communication expenses, professional services, occupancy and equipment expenses, state franchise taxes, FDIC and regulatory assessments, directors' fees, marketing and business development costs, insurance expenses, and other operating expenses.
Three Months Ended March 31,
(dollars in thousands)
2026 2025 $
Change %
Change
Noninterest expenses
Salaries and employee benefits $ 4,798 $ 4,408 $ 390 8.8 %
Professional services 1,389 893 496 55.5 %
Data processing and communication expenses 805 666 139 20.9 %
State franchise taxes 353 351 2 0.6 %
Occupancy and equipment expenses 326 251 75 29.9 %
FDIC and regulatory assessments 242 228 14 6.1 %
Directors' fees 231 146 85 58.2 %
Insurance expenses169 149 20 13.4 %
Other operating expenses 535 479 56 11.7 %
Total noninterest expenses$ 8,848 $ 7,571 $ 1,277 16.9 %
For the three months ended March 31, 2026 our noninterest expense increased by $1.3 million, or 16.9%, compared to the three months ended March 31, 2025, primarily driven by increases in salaries and employee benefits and professional service expenses.
Salaries and employee benefits. For the three months ended March 31, 2026, our salaries and employee benefits increased by $390 thousand, or 8.8%, compared to the three months ended March 31, 2025, resulting from higher headcount and salary increases.
Professional services. For the three months ended March 31, 2026, our professional services expense increased $496 thousand, or 55.5%, compared to the three months ended March 31, 2025, primarily driven by legal expenses and partially offset by a decline in recruiting costs.
Data processing and communication expenses. For the three months ended March 31, 2026, our data processing and communication expenses increased $139 thousand or 20.9%, compared to the three months ended March 31, 2025, driven by increased costs associated with enhanced information technology functionality.
State franchise taxes. For the three months ended March 31, 2026, our state franchise taxes remained relatively unchanged compared to the three months ended March 31, 2025.
Occupancy and equipment expenses. For the three months ended March 31, 2026, our occupancy and equipment expenses increased by $75 thousand or 29.9%, compared to the three months ended March 31, 2025, primarily driven by increased building maintenance costs and additional office space.
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FDIC and regulatory assessments. For the three months ended March 31, 2026, our FDIC and regulatory assessments expense increased $14 thousand, or 6.1%, due to the growth in the Bank's assets between the comparative periods.
Directors' fees. In the three months ended March 31, 2026, our directors' fees increased $85 thousand compared to the three months ended March 31, 2025, driven by increased compensation for directors and a higher volume of Board and Committee meetings.
Insurance expenses. For the three months ended March 31, 2026, our insurance expenses increased $20 thousand or 13.4%, compared to the three months ended March 31, 2025. The increase was primarily due to higher directors and officers insurance premiums, which are subject to periodic review and renewal.
Other operating costs. This segment includes other operating and administrative costs such as other vendor and employee costs, marketing and development costs, postage and printing, office supplies, and subscriptions. For the three months ended March 31, 2026, the increase in our other operating costs during the period was attributable to modest offsetting fluctuations across the various expense categories comprising this segment compared to the three months ended March 31, 2025.
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 three months ended March 31, 2026, our income tax expense was $1.8 million, representing an increase of 27.7%, compared to $1.4 million for the three months ended March 31, 2025. The increase was driven by the increase in pre-tax earnings, which increased 26.4% during the comparable period.
Our effective income tax rate was 20.52% for the three months ended March 31, 2026, an increase of 0.20% from 20.32% for the three months ended March 31, 2025. During 2026, the effective income tax rate increased compared to the corresponding prior period because pre-tax income increased while tax-exempt income decreased, causing tax-exempt income to comprise a lower proportion of income before taxes.
Financial Condition
Securities
Our securities portfolio is used to provide liquidity, manage risk, meet capital requirements, and generate interest income. Our securities portfolio 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 held to maturity 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.
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The following table summarizes the amortized cost and weighted average yield of securities as of March 31, 2026 by contractual maturities.
Balance as of March 31, 2026
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 $ 436,481 3.79 % $ 19,492 1.74 %
Due after one year through five years 143,217 3.37 % 65,918 1.74 %
Due after five years through ten years - - % 6,493 2.04 %
Due after ten years - - % - - %
579,698 3.69 % 91,903 1.76 %
Mortgage-backed securities
Due in one year or less - - % - - %
Due after one year through five years - - % - - %
Due after five through ten years 555 3.05 % - - %
Due after ten years 3,415 2.91 % 875 5.47 %
3,970 2.93 % 875 5.47 %
Corporate bonds
Due in one year or less 14,133 3.22 % 28,038 2.39 %
Due after one year through five years 56,002 4.26 % 10,942 3.37 %
Due after five years through ten years - - % 503 2.83 %
Due after ten years 496 6.72 % - - %
70,631 4.07 % 39,483 2.67 %
State and municipal securities
Due in one year or less 25,102 2.66 % 13,671 2.24 %
Due after one year through five years 73,426 3.15 % 75,611 2.23 %
Due after five years through ten years 8,825 2.57 % 24,889 2.41 %
Due after ten years 750 3.48 % - - %
108,103 2.99 % 114,171 2.27 %
Total securities $ 762,402 3.62 % $ 246,432 2.16 %
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.
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The following table summarizes our securities portfolio by the type of securities as of the dates indicated. Available for sale securities are reported at fair value and held to maturity securities are reported at amortized cost:
As of March 31, As of December 31,
2026 2025 Change
(dollars in thousands)
$ % of
total
securities $ % of
total
securities $ %
U.S. government treasuries $ 663,662 66.1 % $ 527,813 61.0 % $ 135,849 25.7 %
U.S. federal agencies securities 6,462 0.6 % 6,950 0.8 % (488) (7.0 %)
Mortgage-backed securities 4,492 0.5 % 6,477 0.7 % (1,985) (30.6 %)
Corporate bonds 109,806 10.9 % 106,799 12.4 % 3,007 2.8 %
State and municipal securities 220,299 21.9 % 217,403 25.1 % 2,896 1.3 %
Total securities $ 1,004,721 100.0 % $ 865,442 100.0 % $ 139,279 16.1 %
Total securities. As of March 31, 2026, the carrying value of our debt securities before the allowance for credit losses was $1.0 billion, representing an increase of $139.3 million, or 16.1%, compared to $865.4 million as of December 31, 2025. The increase was primarily driven by the Bank's reallocation of interest-earning assets into short-term U.S. government treasuries.
U.S. government treasuries. U.S. government treasuries represent debt securities backed by the U.S. Treasury or the full faith and credit of the U.S. government and are guaranteed as to the timely payment of interest and principal when held to maturity. As of March 31, 2026, our U.S. government treasuries increased by $135.8 million or 25.7%, compared to December 31, 2025. During the quarter, we invested a portion of our excess cash reserves into short term U.S. Treasury securities that mature during 2026.
U.S. federal agencies securities. U.S. federal agencies securities represent obligations issued by U.S. federal government agencies or government-sponsored enterprises that guarantee repayment of principal at maturity. As of March 31, 2026, our U.S. federal agencies securities remained substantially unchanged compared to December 31, 2025.
Mortgage-backed securities. Our mortgage-backed securities portfolio consists of pass through and agency-issued collateralized mortgage obligations. As of March 31, 2026, our mortgage-backed securities decreased by $2.0 million, or 30.6%, compared to December 31, 2025. During the period, mortgage-backed securities represented 0.5% 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 March 31, 2026, our corporate bonds increased by $3.0 million, or 2.8%, compared to December 31, 2025, due to purchases with two- to three-year maturities.
State and municipal securities. State and municipal securities are debt obligations issued by state and local governments. As of March 31, 2026, our state and municipal securities increased by $2.9 million or 1.3%, compared to December 31, 2025, due to purchases with two- to three-year maturities.
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. Accrued interest receivable on HTM debt securities totaled $1.5 million as of March 31, 2026 and $1.4 million as of December 31, 2025, 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
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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 table presents an analysis of the allowance for credit losses on our HTM securities portfolio. There was no ACL established, charge-offs, recoveries, or nonaccrual debt securities for the AFS portfolio as of the indicated period ends.
Held to Maturity: As of and for the three
months ended
March 31,
(dollars in thousands)
2026 2025
Allowance for credit losses at the beginning of period $ 128 $ 202
Recapture of credit losses (15) (27)
Total charge-offs - -
Total recoveries - -
Net (charge-offs) recoveries - -
Allowance for credit losses at end of period $ 113 $ 175
Average HTM debt securities outstanding $ 251,650 $ 297,422
Total outstanding HTM debt securities at end of each period 246,432 295,575
Ratio of allowance to total HTM debt securities outstanding at period end 0.05 % 0.06 %
Ratio of nonaccrual HTM securities to total HTM securities outstanding at period end - % - %
Ratio of allowance to nonaccrual debt securities at period end - % - %
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 March 31, As of December 31,
2026 2025
Balance at the end of each period
(dollars in thousands)
Amount % to
total
HTM
bonds Amount % to
total
HTM
bonds
U.S. government and federal agencies $ - - % $ - - %
Mortgage-backed securities - - % - - %
Corporate 85 0.04 % 99 0.04 %
State and municipal 28 0.01 % 29 0.01 %
Total $ 113 0.05 % $ 128 0.05 %
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 our Form 10-K.
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The following table summarizes our loan portfolio by the type of loans as of the dates indicated:
As of March 31,
As of December 31,
2026 2025 Change
(dollars in thousands)
Amount % of
Total
Loans Amount % of
Total
Loans $ %
Commercial real estate $ 48,201 17.6 % $ 48,278 17.6 % $ (77) (0.2 %)
Commercial 3,781 1.4 % 4,521 1.6 % (740) (16.4 %)
Residential real estate, closed-end 199,403 72.9 % 201,060 73.2 % (1,657) (0.8 %)
Other consumer loans 22,113 8.1 % 20,900 7.6 % 1,213 5.8 %
Total $ 273,498 100.0 % $ 274,759 100.0 % $ (1,261) (0.5 %)
As of March 31, 2026, our total loans decreased by $1.3 million or 0.5%, compared to December 31, 2025. The reduction is attributable to declines in both the commercial non-real estate and residential real estate portfolios.
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. 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 March 31, 2026, our commercial real estate loans decreased by $77 thousand, or 0.2%, compared to December 31, 2025.
As of March 31, 2026, 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 March 31, 2026 and December 31, 2025, we had $17.7 million and $17.2 million, respectively, in owner-occupied loans and $30.5 million and $31.1 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 Concentration: Our commercial real estate loan portfolio is concentrated in the office, retail, multifamily, and hotels sectors. As of March 31, 2026, our non-owner-occupied office loans totaled $3.0 million, retail loans totaled $12.0 million, multifamily loans totaled $8.8 million, and hotel loans totaled $3.7 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 the 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 March 31, 2026, our commercial loans decreased by $740 thousand, or 16.4%, compared to December 31, 2025.
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. As of March 31, 2026, our residential real estate loans decreased by $1.7 million, or 0.8%, compared to December 31, 2025
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 March 31, 2026, other consumer loans increased by
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$1.2 million, or 5.8%, from December 31, 2025, driven primarily by increased utilization of HELOCs by borrowers and increased residential construction. The following table presents the components of other consumer loans:
As of
March 31, As of
December 31,
(dollars in thousands)
2026 2025
Residential construction loans $ 3,706 $ 2,954
HELOCs 15,896 15,382
Consumer secured 2,091 2,099
Consumer unsecured 420 465
Total consumer loans $ 22,113 $ 20,900
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 March 31, 2026, variable rate loans, which include floating and adjustable rate structures, comprised 70.3% 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 March 31, 2026, and the contractual maturity and interest-rate profile of our loan portfolio:
At March 31, 2026
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 $ 4,414 $ 15,877 $ 18,692 $ - $ 38,983
Commercial 3 1,095 468 - 1,566
Residential real estate, closed-end 32 1,380 31,128 5,991 38,531
Other consumer loans 55 2,055 50 - 2,160
Total fixed rate loans $ 4,504 $ 20,407 $ 50,338 $ 5,991 $ 81,240
Variable rate loans:
Commercial real estate $ - $ 190 $ 8,855 $ 173 $ 9,218
Commercial 1,515 154 546 - 2,215
Residential real estate, closed-end - 48 4,848 155,976 160,872
Other consumer loans 419 6,632 7,847 5,055 19,953
Total variable rate loans $ 1,934 $ 7,024 $ 22,096 $ 161,204 $ 192,258
Total loans $ 6,438 $ 27,431 $ 72,434 $ 167,195 $ 273,498
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
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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.
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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 March 31, 2026 and December 31, 2025, 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 for the year ended December 31, 2025.
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 collateral-dependent, are graded substandard or doubtful, or are identified as having risk characteristics dissimilar to those of the established loan pools.
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.
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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 Three
Months Ended
March 31,
(dollars in thousands)
2026 2025
Allowance for credit losses at the beginning of period $ 4,096 $ 4,514
Recapture of credit losses (364) (38)
Charge-offs - -
Recoveries - -
Allowance for credit losses at end of period $ 3,732 $ 4,476
Average loans held for investment outstanding $ 274,036 $ 308,741
Total loans outstanding at end of each period 273,498 302,002
Ratio of allowance to total loans outstanding at period end 1.36 % 1.48 %
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 March 31, As of December 31,
2026 2025
(dollars in thousands)
Amount % of
total
loans Amount % of
total
loans
Commercial real estate $ 1,238 0.45 % $ 1,468 0.53 %
Commercial 60 0.02 % 73 0.03 %
Residential real estate 2,174 0.79 % 2,324 0.85 %
Other consumer loans 260 0.10 % 231 0.08 %
Total $ 3,732 1.36 % $ 4,096 1.49 %
The reduction in the ratio of allowance to total loans outstanding at period end was a reflection of improving credit quality indicators within the qualitative component of our allowance calculation, combined with modest changes in our portfolio composition.
There were no loan charge-offs for the interim period ended March 31, 2026 or the year ended December 31, 2025. As a result, the ratio of loan charge-offs to average loans outstanding was 0.00% for all reported period
Chain Bridge Bancorp Inc. published this content on May 12, 2026, and is solely responsible for the information contained herein. Distributed via Public Technologies (PUBT), unedited and unaltered, on May 12, 2026 at 19:26 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]