Chain Bridge Bancorp Inc.
05/12/2026 | Press release | Distributed by Public on 05/12/2026 13:08
Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)
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.
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
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.
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.
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.
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.
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Three Months Ended March 31,
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(dollars in thousands)
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2026 | 2025 |
$ Change |
% Change |
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| 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 expense | 1,826 | 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.
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.
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Three Months Ended March 31,
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(dollars in thousands)
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2026 | 2025 |
$ Change |
% Change |
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| 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.
| Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||||||||
| (dollars in thousands) |
Average Balance |
Interest |
Average Yield/Cost |
Average Balance |
Interest |
Average Yield/Cost |
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| Assets | |||||||||||||||||||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||||||||||||||||||
| Interest-bearing deposits in other banks | $ | 520,219 | $ | 4,770 | 3.72 | % | $ | 566,675 | $ | 6,263 | 4.48 | % | |||||||||||||||||||||||
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Investment securities, taxable1
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927,203 | 7,490 | 3.28 | % | 639,825 | 4,607 | 2.92 | % | |||||||||||||||||||||||||||
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Investment securities, tax-exempt1
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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 assets | 30,230 | 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 | % | |||||||||||||||||||||||||
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Noninterest-bearing liabilities
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| Demand deposits | 1,357,226 | 1,100,966 | |||||||||||||||||||||||||||||||||
| Other liabilities | 8,223 | 6,642 | |||||||||||||||||||||||||||||||||
| Total liabilities | 1,631,907 | 1,444,064 | |||||||||||||||||||||||||||||||||
| Stockholders' equity | 173,193 | 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.
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.
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For the three months ended
March 31, 2026 compared to
2025
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| Increase (decrease) due to change in: | |||||||||||||||||
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(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.
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.
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 income | 32 | 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.
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 expenses | 169 | 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.
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.
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.
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
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.
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
$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
analysis of the borrower's needs and an industry analysis to understand relevant external factors that might affect the borrower's financial stability and repayment capacity. Commercial borrowers are often asked to maintain their primary banking relationship with the Bank to attract both loans and transaction deposits. Residential mortgage loans and consumer loans are underwritten based on an evaluation of the borrower's repayment ability, which typically includes a review of documentation to verify income and assets. Consumers are encouraged to maintain deposit accounts with the Bank, and pricing incentives may be offered.
During the underwriting process, loans are assigned a loan risk classification grade. The risk rating scale is intended to provide a framework for analyzing risk across various credit exposures, regardless of their nature, type or location.
The internal loan review process, performed by our credit administration staff, aims to evaluate that basic requirements for loan origination have been met. Ongoing internal loan review processes monitor commercial borrower performance using a risk-based approach, which may result in grade confirmations or change recommendations. Certain scenarios such as delinquent payments, overdue taxes, overdrafts, lack of borrower cooperation, delayed financial statements, or significant changes to the borrower's financial position may be considered potential indicators of problem loans. In such cases, the loan risk classification may be re-evaluated.
An external loan review is conducted annually by a third-party firm. This review examines a sample of the loan portfolio, focusing on areas such as underwriting practices, adherence to loan policies and banking regulations, loan documentation, watch list, and portfolio concentration.
Credit concentration policies are designed to address risk relative to our regulatory capital. Concentration limits are established for various categories including loans to individual borrowers or industries, specific loan types, collateral types, commercial real estate concentrations, and total real estate loans, among others.
We have exposures to certain categories of loans that we believe represent relatively higher credit risk, such as commercial real estate loans. To manage our exposures to these loans,we generally seek low loan-to-value ratios, strong debt service coverage ratios, and conduct borrower credit assessments in accordance with our internal policies. To manage our exposure to commercial real estate, we have set specific concentration limits for commercial real estate loans by property type, and our policy is to monitor these limits quarterly. Our risk management practices include annual internal reviews of commercial mortgages with balances over $500 thousand, focusing on early warning signs like payment delinquencies, property performance, and borrower financial condition. We also engage a third party to conduct an external loan review of the loan portfolio annually. Additionally, we perform quarterly stress tests on our loan portfolio, including the commercial real estate segment, to assess the potential impact of adverse economic conditions. In response to the inherent risks in higher-risk segments like commercial real estate, we may increase our loan loss reserves to mitigate potential losses due to changing market conditions.
Asset Quality
We seek to maintain a prudent lending approach, which has historically been associated with our asset quality performance. Our loan underwriters employ underwriting guidelines, and we assign a loan risk classification grade at origination. These practices are designed to help us evaluate potential risks throughout the life of the loan. The Bank's risk classification system utilizes a 10-grade risk-rating scale. The four lowest grade categories (7-10) correspond to the regulatory categories special mention, substandard, doubtful and loss.
The risk classification grade is a key component of our risk management process. Certain grades may result in a loan being added to the watch list report, which is a tool used in monitoring loans or commitments that may present elevated risks. This report is overseen by our Chief Credit Officer and presented to the Board monthly. Loan officers are responsible for managing credit risk within their loan portfolios and are encouraged to be proactive in considering whether to add a loan to the watch list report.
Management uses internal and external review processes, as described under "- Credit Policies and Procedures," to monitor adherence to loan and credit policies, evaluate the loan portfolio, and identify areas that may require additional attention.
Non-performing Assets
An asset is classified as non-performing when it ceases to yield interest or principal repayments for a specified period, usually 90 days or more. This classification includes loans that are 90 days or more past due on scheduled payments, or assets where full repayment of principal and interest is in doubt due to the borrower's financial difficulties. Additionally, assets that have been restructured due to the borrower's financial difficulties may also be classified as non-performing if the restructuring does not restore the asset to a performing status.
A loan is considered non-performing when the borrower is 90 days or more past due on the scheduled payment of principal and interest, or if the loan's terms have been restricted due to the borrower's financial difficulties. Additionally, a loan may be classified as non-performing even if it is less than 90 days past due if there is a reasonable doubt about the collectability of the loan's principal or interest.
Loans are generally considered delinquent when the required principal and interest payments have not been received by the assigned due date. Loans are typically placed on non-accrual status when a loan becomes 90 days delinquent, unless the credit is well-secured and in the process of collection. Management may, at its discretion, place loans on non-accrual status prior to 90 days delinquency if it determines that interest may be uncollectible. Loans determined to be non-performing or potentially uncollectible may be placed in non-accrual status pending further collection efforts or charged off if collection of principal or interest is deemed doubtful.
For loans placed in non-accrual status, all interest previously accrued but not collected is generally reversed against interest income. The interest on loans in non-accrual status is typically accounted for on the cash basis or cost recovery method until qualifying for return to accrual. Loans may be returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
As of 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.
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 periods.
Deposits
We provide a wide range of commercial and consumer deposit services. The deposit products we offer include noninterest-bearing and interest-bearing checking accounts, savings accounts, and money market accounts. We aim to attract transaction account deposits, particularly from commercial clients. Our deposit base is largely composed of funds from commercial entities, specifically federal political organizations, trade associations, non-profit organizations and
business enterprises. Deposits from political organizations generally exhibit more seasonality than typical commercial or consumer deposits as federal election cycles often influence deposit levels of political organizations.
We are a member of the IntraFi® Cash Services network, which allows our deposit clients to enroll in the ICS® program. This program is designed to provide our clients with access to FDIC insurance beyond the standard maximum deposit insurance amount at a single insured depository institution. For accounts enrolled in this service, we select whether each account should be in a reciprocal position or a one-way sell position. A reciprocal position means that we receive an equal amount of network deposits for our enrolled accounts, and those deposits are reflected on our balance sheet. If we elect to receive reciprocal deposits, we are required to pay a fee to IntraFi® equal to our reciprocal deposits balances multiplied by an annualized rate of 0.125% as of March 31, 2026. Conversely, we do not receive reciprocal network funding when accounts are positioned as One-Way Sell®, and therefore the deposits are not reported on the balance sheet. For deposits placed at other participating banks as One-Way Sell® deposits, we receive deposit placement services income, which is inversely related to the interest rate on the deposit account, meaning that we receive less deposit placement services income for placing deposits with a higher interest rate.
During periods of increased political organization deposits, which typically occur in connection with election cycles, we may adjust the positioning of certain accounts enrolled in the ICS® program. These adjustments can include changing some accounts from a reciprocal position to a One-Way Sell® position, which affects whether and how these deposits are reflected on our balance sheet. These adjustments are part of our overall asset and liability management strategy, which aims to maintain appropriate balance sheet metrics in accordance with regulatory guidelines and our risk management policies. As of March 31, 2026, our balance sheet reflected $80.1 million of reciprocal ICS® deposits. Deposits totaling $595.0 million as of March 31, 2026 were placed at other participating banks as One-Way Sell® deposits. Our deposit placement services income was $1.7 million for the three months ended March 31, 2026. If we were to convert some or all of these deposits into reciprocal deposits, bringing them back onto our balance sheet, we would expect to receive interest income by investing these deposits, but our deposit placement services income would decline and our interest on deposits, FDIC and regulatory assessments and the fee we pay to IntraFi® would increase.
Our participation in the ICS® network is subject to certain terms and conditions, and there can be no assurances that we will be able to participate in the ICS® network in the future. As of March 31, 2026, the terms and conditions for participation in the ICS® network include a $285.0 million limit on the amount of each participating client's ICS® deposits that may be placed at other banks within the ICS® network, a $3.5 billion and $6.5 billion limit on the maximum amount of savings account deposits and demand account deposits, respectively, that a bank may place at other banks as reciprocal deposits, and a $10.0 billion limit on the maximum amount of deposits that a bank may place at other banks as One-Way Sell® deposits. The terms and conditions also include limitations on a bank's ability to receive reciprocal deposits, place One-Way Sell® deposits, or receive One-Way Buy® deposits if the bank is not "well capitalized" under the applicable federal banking regulations.
We are subject to various fees associated with the placement and management of deposits within the ICS® network, as outlined in the IntraFi® Participating Institution Agreement. When we elect to receive reciprocal deposits, which are network deposits that are matched with equivalent funds placed by other participating institutions, we incur an "IntraFi Placement Fee." As of March 31, 2026, the annualized rate for this fee was 0.125%, which is applied to the reciprocal deposits balance to determine the amount of the fee incurred. This fee increases our overall operating expenses, impacting our net income.
The fees associated with our participation in the ICS® network require careful management. The IntraFi Placement Fee represents an additional cost that is not incurred with traditional deposit accounts. As such, this fee is factored into our overall asset and liability management strategy with the aim of ensuring that our participation in the ICS® network remains financially advantageous. These fees, together with our interest expense on deposits and other operational costs, contribute to the overall cost structure associated with our deposit services.
The following table presents the types of deposits compared to total deposits for the periods indicated:
|
As of March 31, 2026
|
As of December 31, 2025 | Change | |||||||||||||||||||||||||||||||||
|
(dollars in thousands)
|
Amount |
% of total deposits |
Amount |
% of total deposits |
$ | % | |||||||||||||||||||||||||||||
| Noninterest-bearing | $ | 1,399,037 | 80.6 | % | $ | 1,254,695 | 79.8 | % | $ | 144,342 | 11.5 | % | |||||||||||||||||||||||
| Savings, interest-bearing and money market accounts | 326,893 | 18.9 | % | 309,352 | 19.6 | % | 17,541 | 5.7 | % | ||||||||||||||||||||||||||
| Time, $250 and over | 4,804 | 0.3 | % | 4,787 | 0.3 | % | 17 | 0.4 | % | ||||||||||||||||||||||||||
| Other time | 4,289 | 0.2 | % | 4,446 | 0.3 | % | (157) | (3.5 | %) | ||||||||||||||||||||||||||
| Total | $ | 1,735,023 | 100.0 | % | $ | 1,573,280 | 100.0 | % | $ | 161,743 | 10.3 | % | |||||||||||||||||||||||
The following table presents the average balances and average rates paid for the periods indicated:
| Three months ended March 31, | |||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||
|
(dollars in thousands)
|
Average Balance |
Average Rate |
Average Balance |
Average Rate |
|||||||||||||||||||
| Noninterest-bearing | $ | 1,357,226 | 0.00 | % | $ | 1,100,966 | 0.00 | % | |||||||||||||||
| Savings, interest-bearing checking and money market accounts | 257,181 | 0.86 | % | 325,018 | 1.02 | % | |||||||||||||||||
| Time, $250 and over | 4,797 | 2.31 | % | 6,233 | 2.76 | % | |||||||||||||||||
| Other time | 4,480 | 2.11 | % | 5,205 | 2.61 | % | |||||||||||||||||
| Total average deposits | $ | 1,623,684 | 0.15 | % | $ | 1,437,422 | 0.25 | % | |||||||||||||||
FDIC deposit insurance covers $250 thousand per depositor, per FDIC-insured bank, for each account ownership category. We estimate total uninsured deposits were $1.3 billion and $1.2 billion as of March 31, 2026 and December 31, 2025, respectively, representing approximately 75.8% and 75.0% of our deposit portfolio as of March 31, 2026 and December 31, 2025, respectively.
The maturity profiles of our uninsured time deposits, those deposits that exceed the FDIC insurance limit, as of March 31, 2026 are as follows:
|
(dollars in thousands)
|
Three Months or Less |
More than Three Months to Twelve Months |
More than Twelve Months to Three Years |
More than Three years |
Total | ||||||||||||||||||||||||
| Time deposits, uninsured | $ | 1,423 | $ | 3,381 | $ | - | $ | - | $ | 4,804 | |||||||||||||||||||
Borrowings
The Bank has several supplementary funding sources, including a secured line of credit with the FHLB and various available secured and unsecured lines of credit with correspondent banks.
Federal Home Loan Bank Advance. The Bank has a secured line of credit with the FHLB, which is renewed annually in December, and which requires the Bank to pledge collateral to establish credit availability. The Bank has historically pledged single-family residential real estate loans within the Bank's loan portfolio to establish credit availability. As of March 31, 2026 and December 31, 2025, the secured line of credit had no collateral pledged and therefore no available or outstanding balance.
Federal Reserve Bank Discount Window. The Bank also maintains eligibility for a secured line of credit with the FRB. To establish credit availability, the Bank will typically pledge securities. 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.
Short-Term Borrowings. 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.
Federal Funds Lines of Credit. The Bank also maintains access to unsecured federal funds purchase lines of credit with:
•Pacific Coast Bankers' Bank: $50.0 million, maturing June 30, 2026
•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.
Off-Balance Sheet Arrangements
We are party to credit-related financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of our clients. These financial instruments include commitments to extend credit and standby letters of credit. Such commitments involve, in varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the consolidated balance sheets.
Our exposure to credit loss is represented by the contractual amount of these commitments. We follow the same credit policies in making commitments as we do for on-balance sheet instruments.
The contractual amounts of financial instruments with off-balance sheet commitments are as follows:
| As of March 31, | As of December 31, | |||||||
| (dollars in thousands) | 2026 | 2025 | ||||||
| Commitments to grant loans | $ | 3,729 | $ | 1,000 | ||||
| Credit card lines | 1,508 | 1,397 | ||||||
| Unfunded commitments under lines of credit | 20,131 | 21,390 | ||||||
| Standby letters of credit | 3,062 | 3,094 | ||||||
Commitments to grant loans increased by $2.7 million, or 272.9% from December 31, 2025 to March 31, 2026, due to both commercial and residential real estate loans which were in the process of origination at March 31, 2026. Credit card lines increased by $111 thousand, or 7.9% during the period, due to growth in the business credit card program. Unfunded commitments under lines of credit decreased $1.3 million, or 5.9% from December 31, 2025 to March 31, 2026. Standby letters of credit were relatively stable, decreasing $32 thousand, or 1.0%.
For information regarding the arrangement related to the ICS® network and related One-Way Sell® deposits, see "- Deposits" above.
Liquidity and Capital Management
Liquidity Management
Liquidity refers to our capacity to meet cash and collateral obligations in a timely manner. Maintaining appropriate levels of liquidity depends on our ability to address both expected and unexpected cash flows and collateral needs while
aiming to avoid adverse effects on our daily operations or the financial condition of the Bank. Effective liquidity management is considered essential to our business model, as deposits, which can generally be withdrawn on demand, form a primary source of our funding. See "- Financial Condition - Deposits" for more information regarding fluctuations in our deposit base. We employ various strategies intended to manage liquidity. Our account at the Federal Reserve, which held approximately $603.6 million as of March 31, 2026, serves as a primary source of liquidity for daily and ongoing activities. We also maintain additional supplemental sources of liquidity, as discussed below. For regulatory reporting purposes, the liquidity ratio is typically calculated as the sum of our cash and cash equivalents plus unpledged securities classified as investment grade divided by total liabilities. Based on this calculation method, as of March 31, 2026 and December 31, 2025, our reported liquidity ratios were 92.73% and 91.86%, respectively. As of March 31, 2026, we had $595.0 million in One-Way Sell® deposit accounts through the ICS® platform that could be converted to a reciprocal position in order to provide additional near-term liquidity. It is important to note that these ratios and amounts are point-in-time measurements and may not be indicative of future liquidity positions.
In addition to traditional sources of liquidity, such as reciprocal deposits and lines of credit, we also utilize the ICS® network for both One-Way Buy® deposits and One-Way Sell® deposits, each serving distinct roles in our liquidity management strategy. One-Way Sell® deposits and reciprocal deposits involve placing deposits from our own clients with other participating banks through the ICS® network. One-Way Sell® deposits help us manage excess deposits by moving them off our balance sheet, while reciprocal deposits allow us to exchange deposit balances with other banks, ensuring those deposits remain insured. Both strategies help us to optimize our liquidity position while earning deposit placement fees, which contribute to our noninterest income. Conversely, One-Way Buy® deposits involve receiving deposits from other banks' customers through the ICS® network. This mechanism can provide an additional source of liquidity by allowing us to increase our deposits without reciprocating. These transactions involve certain expenses, which include interest on the deposits and any associated fees, which we consider within our broader liquidity planning.
Management estimates that approximately 75.8% of deposits were uninsured as of March 31, 2026. To obtain FDIC insurance for deposits exceeding the $250 thousand threshold, some clients enroll in the ICS®, which is described in greater detail under "- Financial Condition - Deposits" above. As of March 31, 2026, deposit balances totaling $675.0 million were enrolled in the ICS® program. $595.0 million of these deposits were positioned as One-Way Sell® deposits and are therefore not reflected on the balance sheet. The Bank has the flexibility to convert these One-Way Sell® deposits into reciprocal deposits, which would then appear on the balance sheet. To fund the outflow of deposits during phases of the federal election cycle when campaigns and committees are actively spending, management will rely on the Bank's cash balances at the Federal Reserve and conversion of One-Way Sell® accounts to reciprocal as its primary sources of liquidity. Similar to other deposits, depositors may withdraw their One-Way Sell® deposits at any time, which could impact the volume of One-Way Sell® deposits available for conversion to reciprocal.
In addition to the primary sources of liquidity discussed above, we maintain secured lines of credit with the FHLB and the Federal Reserve Discount Window, for which we can borrow up to the allowable amount of pledged collateral. The Bank can advance FHLB funds of up to 25% of assets as reported in its latest Call Report, which the Bank files with the FFIEC on a quarterly basis, using pledged collateral such as qualifying mortgages and investment securities. Based on the March 31, 2026 Call Report, 25% of total assets equates to credit availability of $479.6 million. As of March 31, 2026, we had no collateral pledged or outstanding balance with the FHLB or Federal Reserve.
The Bank has access to additional unsecured funding through its account with ICS®. The Bank can request funding of up to 10% of total assets, which equates to $191.9 million as of the Bank's March 31, 2026 Call Report, in a One-Way Buy® of daily maturing or term deposit products. Requesting One-Way Buy® deposits requires us to submit a bid including the rate we are willing to pay for the deposits, and such request may be fulfilled in whole, in part, or not at all. If demand for One-Way Buy® deposits is high, then the rate required to successfully bid for One-Way Buy® deposits would be expected to increase, and so One-Way Buy® deposits may be a less reliable source of liquidity. As of March 31, 2026, there was no outstanding balance for One-Way Buy® deposits.
The Bank maintains unsecured lines of credit with three correspondent banks that provide combined availability of $68.0 million. There were no outstanding balances as of March 31, 2026 or December 31, 2025.
As an intermediate source of liquidity, we may sell AFS securities or allow AFS and HTM securities to mature without reinvestment in the securities portfolio. As of March 31, 2026, our AFS securities portfolio had a fair value of $758.3 million, and our total AFS and HTM debt securities portfolio had an amortized cost of $1.0 billion, including $536.9 million of bonds maturing within a year and $425.1 million of bonds maturing between one and five years. Our bond portfolio is structured to provide liquidity when management anticipates it will be needed, and a portion of our AFS
bonds are invested in liquid investments like U.S. Treasury securities. In the event liquidity is needed from the bond portfolio, management will take into consideration a number of factors when determining which investments to sell. Variables include the marketability of the bonds, current prices and estimated losses, and other factors.
Liquidity Risk Management
Liquidity risk refers to the potential that the Bank's financial condition or overall safety and soundness could be adversely affected by a real or perceived inability to meet contractual obligations. This risk category includes potential challenges in managing unplanned decreases or changes in funding sources. Liquidity risk management involves efforts to identify, measure, monitor and control liquidity events.
The ALCO typically reviews current and projected liquidity scenarios, including stressed scenarios, at its quarterly meetings. The ALCO seeks to ensure that measurement systems are designed to identify and quantify the Bank's liquidity exposure, and that reporting systems and practices are intended to communicate relevant information about the level and sources of that exposure. Management is responsible for implementing board-approved policies, strategies, and procedures, and for monitoring liquidity on both a daily and long-term basis.
Capital Resources
Capital adequacy is generally considered an important indicator of financial stability and performance. Our objectives include maintaining capitalization at levels that we believe are sufficient to support asset growth and to promote confidence among our depositors, investors, and regulators. We recognize that robust capital management practices are integral to addressing various financial and operational challenges, which may include managing credit risk, liquidity risk, balance sheet growth, new products, regulatory changes and competitive pressures.
Stockholders' equity as of March 31, 2026 was $174.9 million, an increase of $5.7 million compared to $169.2 million as of December 31, 2025. Net income for the three months ended March 31, 2026 contributed $7.1 million to the increase in stockholders' equity, but was partially offset by a $1.4 million increase in accumulated other comprehensive loss during the three months ended March 31, 2026, which is primarily related to changes in the market value of the AFS securities portfolio.
In February 2026, we entered into a $15.0 million unsecured revolving credit facility at the holding company level, which the Company could use to provide capital to the Bank. The facility matures in February 2027, subject to extension at our option if we remain in compliance with its terms. As of March 31, 2026, no amounts were outstanding under the facility.
Book value per share as of March 31, 2026 and December 31, 2025 was $26.65 and $25.79, respectively. The increase between periods is primarily the result of earnings retained.
Because total assets on a consolidated basis are less than $3.0 billion, we are not subject to the consolidated capital requirements imposed by federal regulations. However, the Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Certain regulatory measurements of capital adequacy are "risk based," meaning they utilize a formula that considers the individual risk profile of the financial institution's assets. For example, certain assets, such as cash at the Federal Reserve and investments in U.S. Treasury securities, are deemed to carry zero risk by the regulators because of explicit or implied federal government guarantees. As of March 31, 2026 and December 31, 2025, respectively, 66.7% and 63.8% of the Bank's total assets were invested in such zero-risk assets. The Tier 1 leverage ratio, another regulatory capital measurement, does not consider the riskiness of assets. The leverage ratio is computed as Tier 1 capital divided by total average assets for the quarter.
The Bank's capital level is characterized as "well capitalized" under the Basel III Capital Rules. A summary of the Bank's regulatory capital ratios, and minimum requirement to be considered "well capitalized" are presented below:
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Well- capitalized requirement |
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| March 31, 2026 | December 31, 2025 | ||||||||||||||||||||||||||||||||||
| ($ in thousands) | Amount | Ratio | Amount | Ratio | Ratio | ||||||||||||||||||||||||||||||
| Total risk-based capital ratio | $ | 177,887 | 47.14 | % | $ | 165,665 | 44.63 | % | 10.00 | % | |||||||||||||||||||||||||
| Tier 1 risk-based capital ratio | 174,042 | 46.12 | % | 161,442 | 43.49 | % | 8.00 | % | |||||||||||||||||||||||||||
| Common equity tier one risk-based capital ratio | 174,042 | 46.12 | % | 161,442 | 43.49 | % | 6.50 | % | |||||||||||||||||||||||||||
| Tier 1 leverage ratio | 174,042 | 9.62 | % | 161,442 | 9.61 | % | 5.00 | % | |||||||||||||||||||||||||||
During periods of growth in deposits due to seasonality, our assets could reach a level that would require the Bank to control the level of these deposits or require the Company to obtain additional capital to maintain a Tier 1 leverage ratio that exceeds our internal regulatory capital policies or targets and satisfies regulatory requirements. We use the ICS® network to help manage our Tier 1 leverage ratio by moving certain deposit accounts off our balance sheet by placing the deposits at other banks as One-Way Sell® deposits. As of March 31, 2026, our deposits enrolled in the ICS® program in a One-Way Sell® position totaled $595.0 million.
Chain Bridge Bancorp Inc. published this content on May 12, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 12, 2026 at 19:09 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]