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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, ~~2024~~2025

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from to

Commission file number 001-38671

CAPITAL BANCORP, INC.

(Exact name of registrant as specified in its charter)


Maryland						52-2083046
(State or other jurisdiction of incorporation or organization)						(IRS Employer Identification No.)
2275 Research Boulevard, Suite 600, Rockville, Maryland 20850						20850
(Address of principal executive offices)						(Zip Code)

(301) 468-8848

Registrant’s telephone number, including area code

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of Each Exchange on Which Registered

Common Stock, par value $0.01 per share

CBNK

The NASDAQ Stock Market, LLC

Securities registered pursuant to Section 12(g) of the Act: None.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ý

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ý No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

Non-accelerated filer

☐

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ý

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of June 30, ~~2024~~2025 was $~~178~~374.96 million.

As of March 1312, ~~2025~~2026, the registrant had 16,~~654~~369,~~041~~844 shares of common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The information required by Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K will be found in the Company’s definitive proxy statement for its ~~2025~~2026 Annual Meeting of Stockholders, to be filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended, and such information is incorporated herein by this reference.


Capital Bancorp, Inc. and Subsidiaries
Annual Report on Form 10-K
Index

PART I		Page
Item 1.	Business	56
Item 1A.	Risk Factors	1921
Item 1B.	Unresolved Staff Comments	3336
Item 1C.	Cybersecurity	3336
Item 2.	Properties	3538
Item 3.	Legal Proceedings	3639
Item 4.	Mine Safety Disclosures	3639
PART II
Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	3740
Item 6	[Reserved]	3841
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3941
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	6672
Item 8.	Financial Statements and Supplementary Data	6975
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	~~132~~143
Item 9A.	Controls and Procedures	~~132~~143
Item 9B.	Other Information	~~134~~146
Item 9C.	Disclosure Regarding Foreign Jurisdictions that Prevent Inspections	~~134~~146
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	~~135~~147
Item 11.	Executive Compensation	~~135~~147
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	~~135~~147
Item 13.	Certain Relationships and Related Transactions and Director Independence	~~135~~147
Item 14.	Principal Accountant Fees and Services	~~135~~147
PART IV
Item 15.	Exhibits and Financial Statement Schedules	~~136~~148
Item 16.	Form 10-K Summary	~~136~~148
SIGNATURES		~~139~~151


			2

PRIVATE SECURITIES LITIGATION REFORM ACT SAFE HARBOR STATEMENT

This Annual Report on Form 10-K and oral statements made from time-to-time by our representatives contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to risks and uncertainties. You should not place undue reliance on such statements because they are subject to numerous risks and uncertainties relating to our operations and the business environment in which we operate, all of which are difficult to predict and many of which are beyond our control. Forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business strategy, expectations, beliefs, projections, anticipated events or trends, growth prospects, financial performance, and similar expressions concerning matters that are not historical facts. These statements often include words such as “may,” “believe,” “expect,” “anticipate,” “potential,” “opportunity,” “intend,” “endeavor,” “plan,” “estimate,” “could,” “project,” “seek,” “should,” “will,” or “would,” or the negative of these words and phrases or similar words and phrases.

These forward-looking statements are subject to risks and uncertainties that could cause actual results, performance or achievements to differ materially from those projected. These risks and uncertainties, some of which are beyond our control, include, but are not limited to:

General Economic, Macro and External Conditions

•the strength of the United States (“U.S.”) economy and general economic conditions (including the interest rate environment, government economic and monetary policies, the strength of global financial markets, ~~and~~ inflation/deflation and the overall strength of the consumer) that impact the financial services industry as a whole and/or our business;

•~~adverse~~the ~~developments~~concentration inof ~~the~~our ~~banking~~business ~~industry~~in ~~such~~certain ~~as,~~geographies ~~for~~and ~~example,~~the ~~high-profile~~effect ~~bank~~of ~~failures~~changes in economic, political and ~~the~~environmental ~~potential~~conditions ~~impact~~in ofthose ~~such~~markets, ~~developments~~including onproposed ~~customer~~reductions ~~confidence,~~in ~~liquidity,~~the federal workforce and ~~regulatory~~a ~~responses~~decline toin ~~those~~federal ~~developments~~government spending;

•the concentration of our business in certain geographies and the effect of changes in economic, political and environmental conditions on those markets, including proposed reductions in the federal workforce and a decline in federal government spending;

•interest rate risk associated with our business, including sensitivity of our interest earning assets and interest-bearing liabilities to changes in interest rates, and the impact to our earnings from changes in interest rates;

•geopolitical conditions, including acts or threats of terrorism, actions taken by the U.S. or other governments in response to acts or threats of terrorism and/or military conflicts, including the ongoing ~~wars~~war in Ukraine ~~and the Middle East~~, which could impact business and economic conditions in the U.S. and abroad;

•climate change, and other catastrophic events or disasters, acts of terrorism, an outbreak of hostilities or other international or domestic calamities, and other matters beyond our control;

•natural disasters and adverse weather, acts of terrorism, an outbreak of hostilities or other international or domestic calamities, and other matters beyond our control;

•the impact of changes in the Federal Deposit Insurance Corporation (“FDIC”) insurance assessment rate or the rules and regulations related to the calculation of the FDIC insurance assessment amount, including any special assessments;

•changes in U.S. trade policies, including the implementation of tariffs and other protectionist trade policies;

•the effects of federal government shutdowns, debt ceiling standoff, or other fiscal policy uncertainty;

•volatility in our stock price due to investor sentiment and perception of the banking industry;

•the impact of governmental efforts to restructure or adjust the U.S. financial regulatory system;


			3

•changes in the laws, rules, regulations, interpretations or policies relating to financial ~~institution~~institutions, accounting, tax, trade, monetary and fiscal matters;

•the financial soundness of other financial institutions;

General Business Operations

•our ability to prudently manage our growth and execute our strategy;

•the effect of acquisitions we have undertaken, such as our ~~recent~~ acquisition of Integrated Financial Holdings, Inc. (“IFH”), including, without limitation, the failure to achieve the expected revenue growth and/or expense savings from such acquisitions, and/or the failure to effectively integrate an acquisition target into our operations, including with regard to the planned growth of Windsor ~~Advantage, LLC~~AdvantageTM;

•strategic acquisitions we may undertake to achieve our goals;

•our dependence on our management team and board of directors and changes in management and board composition;

•increased competition in the financial services industry, particularly from regional and national ~~institutions~~banks, financial holding companies, and other traditional and non-traditional financial services providers;

•our plans to grow our commercial real estate and commercial business loan portfolios which may carry material risks of non-payment or other unfavorable consequences;

•changes in the mix of loan sectors, or types, and the level of non-performing assets, charge-offs, and delinquencies;

•adequacy of reserves, including our allowance for credit losses (“ACL”);

•deterioration of our asset quality;

•results of examinations of us by our regulators, including the possibility that our regulators may, among other things, require us to increase our ACL or to write-down assets;

•risks associated with our residential mortgage banking business;

•risks associated with our OpenSky™ credit card division, including compliance with applicable consumer finance and fraud prevention regulations;

•changes in Small Business Administration ("SBA") and U.S. Department of Agriculture ("USDA") U.S. government guaranteed lending rules, regulations, loan and lease products and funding limits, ~~including specifically the SBA Section 7(a) program,~~ as well as changes in SBA or USDA standard operating procedures, all of which could impact our ability to originate these types of loans within Capital Bank, N.A. or the servicing, processing and packaging by Windsor ~~Advantage,~~AdvantageTM ~~LLC~~ of such loans on behalf of others;

•changes in the value of the collateral securing our loans;

•operational risks associated with our business;

•the adequacy of our risk management framework;

•our dependence on our information technology and telecommunications systems, including third party vendors, and the potential for any data privacy incidents or other systems failures, ~~interruptions, or security breaches and risk related to the development and use of artificial intelligence;~~

•our ability to develop and use technologies to provide products and services that will satisfy customer demands;


			4

~~•potential~~interruptions, ~~exposure~~or tosecurity ~~fraud,~~breaches ~~negligence,~~and ~~computer~~risks ~~theft~~related to the development and ~~cyber-crime~~use of artificial intelligence (“AI”);

•our ability to develop and use technologies to provide products and services that will satisfy customer demands;

•potential exposure to fraud, negligence, computer theft and cyber crime;

•the sufficiency of our capital, including sources of capital and the extent to which we may be required to raise additional capital to meet our goals;

•liquidity and funding risks associated with our business;

•our ability to maintain important customer deposit relationships and our reputation;

•our ability to attract, develop, motivate and retain skilled employees;

•fluctuations in the fair value of our investment securities;

•our engagement in derivative transactions;

•volatility and direction of market interest rates;

•our dependence upon outside third parties for the processing and handling of our records and data;

•changes to local rent control laws, which may impact the credit quality of multifamily housing loans;

•our involvement from time to time in legal proceedings, examinations and remedial actions by regulators; ~~and~~

•our ability to assess the effect of and incorporate the evolving uses of AI on our business

•the effectiveness of the Company’s internal control over financial reporting and disclosure controls and procedures;

•our ability to remediate the material weakness in the Company’s internal control over financial reporting; and

•other factors that are discussed in Item 1A. Risk Factors.

As you read and consider forward-looking statements, you should understand that these statements are not guarantees of performance or results. They involve risks, uncertainties and assumptions and can change as a result of many possible events or factors, not all of which are known to us or in our control. Although we believe that these forward-looking statements are based on reasonable assumptions, beliefs, and expectations, if a change occurs or our beliefs, assumptions or expectations were incorrect, our business, financial condition, liquidity and/or results of operations may vary materially from those expressed in our forward-looking statements. You should be aware that many factors could affect our actual financial results or results of operations and could cause actual results to differ materially from those in the forward-looking statements. These factors include those described under Item 1A. hereunder.

You should keep in mind that any forward-looking statement made by us speaks only as of the date on which we make it. New risks and uncertainties arise from time to time, and it is impossible for us to predict these events or how they may affect us. We have no duty to, and do not intend to, and disclaim any obligation to, update or revise any industry information or forward-looking statements after the date on which they are made. In light of these risks and uncertainties, you should keep in mind that any ~~forward-looking statement made in this document or elsewhere might not reflect actual results and may prove unreliable.~~

PART I

In this Annual Report on Form 10-K, unless we state otherwise or the context otherwise requires, references to “we,” “our,” “us,” “the Company” and “Capital” refer to Capital Bancorp, Inc. and its wholly owned subsidiaries, Capital Bank, N.A., which we sometimes refer to as “Capital Bank,” “the Bank” or “our Bank,” Church Street Capital, LLC. “Church Street Capital” or “CSC” refers to our wholly owned subsidiary, Church Street Capital, LLC and “Windsor Advantage” or “Windsor” refers to our wholly owned subsidiary, Windsor Advantage, LLC.


			5

forward-looking statement made in this report or elsewhere might not reflect actual results and may prove unreliable.

PART I

In this Annual Report on Form 10-K, unless we state otherwise or the context otherwise requires, references to “we,” “our,” “us,” “the Company” and “Capital” refer to Capital Bancorp, Inc. and its wholly owned subsidiaries, Capital Bank, N.A., which we sometimes refer to as “Capital Bank,” “the Bank” or “our Bank,” Church Street Capital, LLC, which we sometimes refer to as “Church Street Capital” or “CSC”, and Windsor Advantage, LLC™, which we sometimes refer to as “Windsor Advantage™” or “Windsor™.”

ITEM 1. BUSINESS

We are Capital Bancorp, Inc., a bank holding company and a Maryland corporation incorporated in 1998, operating primarily through our wholly-owned subsidiary, Capital Bank, N.A., a commercial-focused community bank based in the Washington, D.C. and Baltimore metropolitan areas. The Bank is headquartered in Rockville, Maryland, received its charter in 1999 and began operations the same year. We serve businesses, not-for-profit associations, entrepreneurs and others throughout the Washington, D.C., Baltimore, other Maryland ~~metropolitan~~markets, ~~areas~~Delaware, Florida, Illinois, and ~~Illinois~~North Carolina through ~~six~~seven commercial bank branches, one mortgage banking office, ~~two~~three loan production offices, three government loan servicing offices, and one credit card operations office.

On October 1, 2024, the Company completed its ~~previously~~acquisition ~~announced merger (the “Merger”) with Integrated Financial Holdings, Inc., a North Carolina corporation (“IFH”) pursuant to an Agreement and Plan~~ of ~~Merger and Reorganization (the “Merger Agreement”), dated as of March 27, 2024~~IFH. At the effective time of the merger, IFH merged with and into the Company, with the Company continuing as the surviving corporation in the ~~merger~~acquisition. IFH was the holding company of West Town Bank & Trust, an Illinois state-chartered bank which provides banking services through its full-service office located in the greater Chicago area and is a nationwide originator of U.S. Department of Agriculture (“USDA”) and SBA government guaranteed loans. IFH was also the parent company of Windsor Advantage, LLC (“Windsor Advantage”), a loan service provider that offers community banks and credit unions with a comprehensive outsourced SBA 7(a) and USDA lending platform. Immediately following the ~~Merger~~acquisition, West Town Bank & Trust, merged with and into Capital Bank, with Capital Bank as the surviving bank. Windsor Advantage ~~now operates as~~ ™, a wholly owned subsidiary of ~~Capital~~the ~~Bancorp~~Company, ~~Inc~~was acquired in connection with the IFH acquisition.

The Company currently operates four divisions and reporting segments: Commercial Banking, ~~Capital Bank Home Loans,~~ OpenSky™, ~~and~~ Windsor Advantage.™, ~~The~~and ~~Company~~Capital ~~reports~~Bank ~~its~~Home ~~activities~~Loans ~~in five business segments: commercial banking; mortgage banking; credit cards; government loan servicing; and corporate activities~~(“CBHL”). In determining the appropriateness of segment definition, the Company considers components of the business about which financial information is available and regularly evaluated relative to resource allocation and performance assessment. The accompanying consolidated financial statements have been prepared in accordance with GAAP, and conform to general practices within the banking industry.

Our Commercial Banking division ~~operates~~ primarily inoperates ~~the~~within ~~Washington,~~a ~~D.C.~~corridor ~~and~~extending ~~Baltimore~~from ~~metropolitan~~Raleigh, ~~areas~~North ~~and~~Carolina ~~focuses~~to onDelaware, ~~providing~~with ~~personalized~~significant ~~service~~activity toin ~~commercial~~the ~~clients~~Washington, ~~throughout~~D.C. ~~our~~and ~~area~~Baltimore ofmetropolitan ~~operations~~statistical ~~supplemented~~areas. byThe ~~lending~~Commercial ~~outside~~Bank ofalso ~~our~~maintains ~~primary~~offices ~~market~~in Chicago, Illinois and ~~nationwide~~Fort ~~deposit~~Lauderdale, ~~verticals~~Florida. ~~Additionally,~~In ~~the~~addition ~~commercial~~to ~~bank~~providing ~~engages in government~~relationship-~~guaranteed~~driven ~~lending~~banking onservices awithin ~~national~~its ~~basis.~~primary ~~Capital~~geographic ~~Bank~~markets, ~~Home~~the ~~Loans~~Commercial ~~and OpenSky™ both leverage Capital~~ Bank’s ~~national~~conducts ~~banking~~certain ~~charter~~lending toand ~~operate~~deposit ~~national~~activities ~~consumer~~on ~~business~~a ~~lines;~~nationwide ~~Capital~~basis ~~Bank~~through ~~Home~~specialized ~~Loans~~verticals. ~~acts~~These aslending ~~our~~verticals ~~residential~~include ~~mortgage~~lender ~~origination platform and OpenSky™ provides nationwide~~finance, ~~digitally-originated~~government ~~and~~guaranteed ~~served,~~lending ~~secured, partially-secured,~~ and ~~unsecured~~other ~~credit~~forms ~~cards~~of tocommercial ~~under-banked populations~~ and ~~those~~industrial ~~looking~~(“C&I”) tolending. ~~rebuild~~The ~~their~~Commercial ~~credit~~Bank ~~scores.~~also ~~Windsor~~operates ~~Advantage~~national ~~generates~~deposit ~~fee~~verticals ~~income~~serving ~~for~~homeowners ~~the~~associations ~~Company~~(“HOAs”), ~~through~~title ~~its servicing~~companies, ~~processing~~political ~~and~~action ~~packaging~~committees of(“PACs”), ~~SBA and USDA loans~~ not-for-profit ~~its~~organizations, ~~financial~~and ~~institution~~other commercial clients.

InOpenSky™ ~~addition~~and toCBHL ~~the~~both ~~four~~leverage ~~divisions of~~ Capital Bank,’s ~~Church~~national ~~Street~~banking ~~Capital~~charter ~~also~~to ~~operates~~operate asnational aconsumer ~~wholly~~business ~~owned~~lines. ~~subsidiary~~OpenSky™ ofprovides ~~Capital~~nationwide, ~~Bancorp~~digitally-originated and served, ~~Inc.~~secured, ~~CSC~~partially-secured, ~~originates~~and unsecured credit cards to under-banked populations and ~~services~~those alooking ~~portfolio~~to ofrebuild ~~primarily~~their ~~mezzanine~~credit ~~loans~~scores. ~~with~~CBHL ~~certain~~acts ~~characteristics~~as ~~that~~our doresidential ~~not~~mortgage ~~meet~~origination ~~Capital~~platform. ~~Bank’s~~Windsor ~~general~~Advantage™ ~~underwriting~~generates ~~standards,~~fee ~~but~~revenue ~~command~~for athe ~~higher~~Company ~~rate~~through its servicing, processing and packaging of ~~return~~SBA and USDA loans for its financial institution clients.

In addition to its subsidiaries discussed above, Capital Bank, N.A. and Church Street Capital, Capital Bancorp, Inc. owns all of the stock of Capital Bancorp (MD) Statutory Trust I (the “Trust”). The Trust is a special purpose, non-consolidated entity organized for the sole purpose of issuing trust preferred securities.


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In addition to its subsidiaries discussed above, Capital Bancorp, Inc. owns all of the stock of Capital Bancorp (MD) Statutory Trust I (the “Trust”). The Trust is a special purpose, non-consolidated entity organized for the sole purpose of issuing trust preferred securities.

Commercial Banking Division

The Commercial Banking division operates out of ~~six~~seven full service banking locations, three of which are in the Washington, D.C. Metropolitan Statistical Area (“MSA”), and its full service banking locations in Columbia, Maryland in the Baltimore, Maryland MSA, in Ft. Lauderdale, Florida in the Miami Metro Area MSA, ~~and~~ in Chicago, Illinois in the Chicago MSA, and in Raleigh, North Carolina in the Raleigh MSA. Additionally, we have ~~two~~three loan production offices, one located in the Washington, D.C. area, one in Columbia, Maryland, and one in ~~Columbia~~Towson, Maryland. Our Commercial Banking division’s commercial loan officers and commercial real estate loan officers provide ~~commercial and industrial, or~~ C&I, commercial real estate, including lender finance loans, and construction lending solutions to business clients in Capital Bank’s operating markets.

Government guaranteed lending serves customers throughout the country in need of, and qualifying for, USDA and SBA loans. We generally sell the government guaranteed portion of USDA and SBA loans into the secondary market while retaining the non-guaranteed portion of the loan and the servicing rights. This allows us to realize one time gain on sale income along with a recurring servicing and interest revenue stream. In addition to the business development officers upon whom we rely to generate new business, we also have a dedicated servicing, portfolio management and workout staff with specialized expertise in U.S. government guaranteed loans.

Construction lending is a core competency of our Commercial Banking division. Our construction loan portfolio provides Capital Bank with short duration, higher yield loans. Our construction lending is focused on commercial and residential construction projects within the Washington, D.C. and Baltimore-Columbia-Towson, Maryland metropolitan operating areas, with limited exposure to suburban subdivision tract development.

Lender finance loans are loans to companies used to purchase finance receivables or extend finance receivables to the underlying obligors and are secured primarily by the finance receivables held by our borrowers.

In addition to its loan officers, who have incentives and goals to drive core deposit growth, our Commercial Banking division currently has a team of business development officers concentrating on continuing to diversify and grow Capital Bank’s core deposit funding and lessen the dependency on wholesale funding. These officers seek to grow deposits generally across the commercial client customer base and through several specialized deposit channels serving multiple sectors nationwide including the homeowner’s association sector, the title insurance sector, political action committees and not-for-profits.

Capital Bank Home Loans Division

Capital Bank Home Loans (“CBHL”) originates conventional and government- guaranteed residential mortgage loans on a nationwide basis primarily for sale into the secondary market and, in certain circumstances, for our loan portfolio. Loans sold into the secondary market are sold servicing released. Our residential loan portfolio aims to retain high-quality, lower risk loans which support the Company’s business strategies. A portion of the retained residential portfolio is represented by mortgage loans on primary residences within Capital Bank’s operating markets to individuals who own businesses where Capital Bank may also pursue a commercial lending relationship and has a vested interest in maintaining the fullest possible banking relationship.

InApproximately ~~2024,~~78.5% asof ~~the~~CBHL ~~mortgage~~loan ~~refinance~~originations ~~market~~by ~~continued~~volume tooccur ~~contract~~within inMaryland, ~~response~~Virginia, toDelaware ~~elevated~~and ~~market interest rates~~Washington, ~~CBHL~~D.C. ~~continued~~The toremainder ~~focus~~of ~~on purchase~~ originations. ~~Purchase~~are ~~origination~~national ~~volume~~in ~~was~~scope ~~93.5%~~and ~~for~~originate ~~the~~primarily ~~year~~through ~~ended~~a ~~December 31, 2024, compared~~ direct-to-consumer ~~91.7%~~model ~~for~~that ~~the~~utilizes ~~year~~consumer ~~ended~~marketing ~~December~~and ~~31,~~social ~~2023~~media applications.


			7

Approximately 62.8% of CBHL loan originations by volume occur within Maryland, Virginia and Washington, D.C. The remainder of originations are national in scope and originate primarily through a consumer direct-to-consumer model that utilizes consumer marketing, and social media applications.

OpenSky™ Secured Credit Card Division

The OpenSky™ Division provides secured, partially secured and unsecured credit cards on a nationwide basis.

The secured credit cards require a minimum initial deposit of $100 and permit maximum initial deposits of $3,000 per card and $10,000 per individual. OpenSky™ focuses on under-banked populations and those looking to rebuild their credit scores. In order to obtain a secured credit card from us, the customer must select a credit line amount that the customer secures with a matching deposit amount. A deposit equal to the full credit limit of the card is made into a noninterest-bearing demand account with the Bank. Once the account is opened, the deposit is required to be maintained throughout the life of the card. The customer’s funding of the deposit account is collateral and while it is not a consideration in the credit card approval process, it is a prerequisite to activating the credit line. Once the customer’s deposit account has been funded, the credit line is activated and the collateral funds are generally available to absorb potential losses on the account that may occur. Given the secured nature of the cards, credit history inquiries are not required at the time of application.

The partially secured credit card uses our proprietary scoring model, which considers among other things, credit score and repayment history (typically a minimum of six months of on-time repayments, but ultimately determined on a case-by-case basis), to offer certain existing customers an unsecured line supplementary to their secured line of credit. As each customer’s secured account ages, we obtain credit scores to baseline the customer’s improvement as an input into any decision to extend unsecured credit.

The unsecured credit card was added, for qualifying existing customers, in the fourth quarter of 2021 to expand the OpenSky™ product offering. The addition of the unsecured card allows for an uninterrupted experience for OpenSky™ customers who can now more easily transition from a secured to unsecured credit card and continue their relationship with the Bank. At December 31, 2025, 31% of our credit card customers had a FICO score in excess of 660 and were considered prime and 33% of outstanding credit card balances were unsecured.

OpenSky™ cards operate on a digital and mobile enabled platform with almost all marketing and application procedures being conducted through website and mobile applications. OpenSky™ credit cards have variable interest rates, which are beneficial to us in a rising rate environment. We believe the OpenSky™ secured credit card product may provide a counter-cyclical benefit as more people may enter our target segment of credit rebuilders during an economic downturn. Credit card eligibility for all product offerings is based on identity and income verification. Our prior experience has shown that approximately 30% of our secured credit cards will experience a charge-off within the first year of issuance primarily due to the relative inexperience of this under-banked population in effectively managing credit card debt.

Capital Bank ~~evaluates~~uses ~~OpenSky™~~data ~~customers using~~ analytics, ~~that~~including ~~track~~AI ~~consumer~~and ~~behaviors~~proprietary ~~and~~models, ~~score~~throughout ~~each~~the OpenSky™ customer onlifecycle ~~risk~~to support fraud prevention and ~~behavior~~credit ~~metrics~~decisioning. ~~These~~During ~~real-time~~onboarding, ~~monitoring~~these ~~capabilities~~tools ~~give~~are ~~management~~used ~~insight~~to ~~into~~help ~~the~~validate ~~credit~~identity, ~~trends~~verify ofeligibility ~~the~~and ~~portfolio~~income, onand ainform ~~consumer-by-consumer~~which ~~basis~~customers may receive offers for additional credit. After account opening, ~~enabling~~credit uscard totransactions ~~identify~~are ~~many~~evaluated ~~potential~~in ~~fraud~~real-time ~~situations~~to help assess transaction legitimacy and ~~mitigate~~detect ~~associated~~potentially ~~losses,~~fraudulent asactivity. ~~well~~The asBank also uses portfolio monitoring and behavioral models to ~~obtain~~provide ~~insights~~management with insight into ~~how~~credit totrends, ~~optimize~~identify ~~the~~emerging ~~profitability~~risk, mitigate potential losses, and ~~life~~inform ~~cycle~~actions ofintended ~~each~~to optimize account. ~~The~~profitability ~~model~~over ~~utilizes~~the ~~data~~life ~~proprietary~~of tothe ~~Capital Bank~~relationship.

Windsor Advantage™ Division

Windsor Advantage™ is a loan service provider that offers community banks and credit unions a comprehensive outsourced SBA and USDA lending platform. Windsor Advantage™ generates fee income for the Company in through its servicing, processing and packaging of such loans for its financial institution clients, including Capital Bank. Gross government loan servicing revenue totaled $419.6 million, including $4.1 million of Capital Bank related servicing fees, for the year ended December 31, 2025. Windsor


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~~including $0.6 million of Capital Bank related servicing fees, during the fourth quarter 2024. Windsor~~ Advantage's™ total servicing portfolio was $23.51 billion, including $1.1 3 billion attributable to Capital Bank at December 31, ~~2024~~2025.

Our Business Strategy

We believe that by using technology-enabled strategies and advice-based solutions, we can deliver attractive shareholder returns in excess of our cost of capital. While regulations, technology and competition have fundamentally impacted the economics of the banking sector, we continue to adopt strategies that we believe will drive growth while maintaining consistent profitability and enhancing shareholder value, including:

Deliver premium advice-based solutions that drive organic loan and core deposit growth with corresponding net interest income and fee revenues

•Serve as financial partners to our customers, helping them to grow their businesses through advice-based financial solutions;

•Endeavor to provide comprehensive loan and deposit solutions to our customers that are tailored to their needs, and leverage data, analytics and financial technology to improve the customer experience;

•Scale our consumer fee-based platforms by investing in fintech and other capabilities, while leveraging digital marketing to deliver high impact products and services and differentiated customer experience;

•Grow new loan and deposit verticals and products where we have a competitive advantage;

•Capitalize on market dislocation from recent in-market acquisitions to attract top sales talent, and acquire new commercial banking relationships from local competitors; and

•Selectively add banking centers where sales teams have already proved an ability to capture market share and leverage customer relationships.

Leverage technology to improve the customer experience and loyalty and deliver operational efficiencies

•Use solution structuring and customized technology implementation as differentiators to add value to clients with complex needs and enhance our relationships within our existing customer base;

•Deploy technologies that better support our lending associates and simplify our processes;

•Maximize the potential of web-based and mobile banking applications to drive core funding while maintaining our branch-lite business model; and

•Enhance cross-selling capabilities among our OpenSky™, Capital Bank Home Loans and Commercial Banking division customers.

Increase scale in our fee-based platforms through delivery of high value products and services

•Utilize our customer acquisition capabilities, and leverage our investment in our core processing systems, together with our expertise in data, analytics and marketing, to deliver new products and services and grow our secured credit card business;

•Retain OpenSky™ customers that “graduate” from our secured credit product through the limited use of partially and fully unsecured credit products;


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•Expand our purchase-oriented mortgage loan sales both in-market and in adjacent markets through the hiring of qualified mortgage originators and continue to enhance our direct to consumer marketing channels; and

•Utilize the systems, processes and technology within Windsor Advantage™ to participate in the processing and packaging of SBA and USDA loans originated by our financial institution clients and to grow associated servicing balances.

Pursue acquisitions opportunistically

•Seek strategic acquisitions that complement or supplement our existing product offerings and geographic footprint, advance our business strategies and diversify our revenue and balance sheet mix;

•Evaluate specialty finance and non-bank financial company opportunities where we can add value through increasing interest and fee income and leveraging our management’s expertise and existing strategic assets; and

•Use our management’s and Board’s expertise to structure transactions in ways that minimize the integration and execution risk for the Bank.

Sustainability

We aspire to be the most valued and trusted community bank within the markets we serve. We understand our obligation to both our shareholders and the communities we serve -- to be an institution that achieves superior financial performance, while contributing to the communities we serve by delivering products and services to our customers that enhance and strengthen access, equity and opportunity.

We focus our ~~environmental,~~sustainability ~~social, and governance (“ESG”)~~ efforts on issues that are important to our business and to our key stakeholders. Our mission is to support businesses, help people and strengthen communities, as well as to grow our operations and revenue. Essential to this mission is our commitment to provide long-term, ~~sustainable~~ financial and social value to our stakeholders, including the communities we serve, our shareholders and our employees.

Employees and Human Capital Resources

At December 31, ~~2024~~2025, we employed ~~407~~459 persons, of which ~~389~~434 were employed on a full-time basis. None of our employees are represented by any collective bargaining unit or are a party to a collective bargaining agreement. We believe the relationship with our employees to be excellent and we have been named a Best Bank to Work For by American Banker for ~~five~~six of the past ~~six~~seven years. Our ability to attract and retain employees is a key topillar of our success. We believe we offer a competitive total compensation and benefits program and a congenial work environment to our employees.

The Company prides itself on being a values-driven organization, where employees are empowered to share ideas that keep the organization moving forward. Our company ~~Core~~core ~~Values~~values guide each team member to:

•Act as an Owner

•Practice Balanced Risk Management

•Challenge the Norm

•Leverage the Team


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We believe that these values enable our success with our customers and have helped us build a fun, vibrant and accountability driven culture. In addition, we are committed to developing our staff through internal/external training programs, including the use of online training resources and by affording all levels of leadership within the organization an opportunity to participate in leadership development programs.

Available Information

The Company provides access to its SEC filings through its website at www.capitalbankmd.com. After accessing the website, the filings are available upon selecting “Investor Relations.” Reports available include the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports as soon as reasonably practicable after the reports are electronically filed with or furnished to the SEC. Further, the SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. The information on, or accessible through, our website or any other website cited in this Annual Report on Form 10-K is not part of, or incorporated by reference into, this Annual Report on Form 10-K and should not be relied upon in determining whether to make an investment decision.

SUPERVISION AND REGULATION

General

We are extensively regulated under both federal and state law. These laws restrict permissible activities and investments and require compliance with various consumer protection provisions applicable to lending, deposit, brokerage and fiduciary activities. They also impose capital adequacy requirements and conditions on a bank holding company’s (“BHC”) ability to repurchase stock or to receive dividends from its subsidiary banks. We are subject to examination and supervision by the Board of Governors of the Federal Reserve (“Federal Reserve”), and the Bank is subject to comprehensive examination and supervision by the Office of the Comptroller of the Currency (“OCC”). We are required to file with the Federal Reserve quarterly and annual reports and such additional information as the Federal Reserve may require pursuant to the Bank Holding Company Act of 1956 (“BHC Act”). The Federal Reserve may conduct examinations of BHCs and their subsidiaries. The Bank’s deposits are insured by the FDIC, through the Deposit Insurance Fund (“DIF”). As a result of this deposit insurance function, the FDIC also has certain supervisory authority and powers over the Bank as well as all other FDIC insured institutions. The Company’s and the Bank’s regulators generally have broad discretion to impose restrictions and limitations on our operations. Bank regulation is intended to protect depositors and consumers and not shareholders. This supervisory framework could materially and adversely impact the conduct and profitability of our activities.

To the extent that the following information describes statutory and regulatory provisions, it is qualified in its entirety by reference to the text of the applicable statutory and regulatory provisions. Legislative and regulatory initiatives, which necessarily impact the regulation of the financial services industry, are introduced from time to time. We cannot predict whether or when potential legislation or new regulations will be enacted, and if enacted, the effect that new legislation or any implemented regulations and supervisory policies would have on our financial condition and results of operations. The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”), by way of example, contains a comprehensive set of provisions designed to govern the practices and oversight of financial institutions and other participants in the financial markets. The Dodd-Frank Act made extensive changes in the regulation of financial institutions and their holding companies. Some of the changes brought about by the Dodd-Frank Act were modified by the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (the “Regulatory Relief Act”), signed into law on May 24, 2018. The Dodd-Frank Act has increased the regulatory burden and compliance costs borne by the Company. The Dodd-Frank Act also modified the standard by which state consumer financial laws may be applied to national banking associations, such as the Bank. The application of that standard by state regulators and the courts may


			11

~~The~~cause ~~Company~~the Bank’s compliance burden and ~~the~~costs ~~Bank’s~~to ~~regulators~~increase. ~~generally~~Moreover, ~~have~~bank ~~broad~~regulatory ~~discretion~~agencies appear to ~~impose~~be ~~restrictions~~increasingly aggressive in responding to concerns and ~~limitations~~trends onidentified ~~our~~in ~~operations.~~examinations, ~~Bank~~which ~~regulation~~could isresult ~~intended~~in tohigher ~~protect~~frequency ~~depositors~~initiation ~~and~~of ~~consumers~~enforcement ~~and~~actions ~~not~~against ~~shareholders.~~financial ~~This~~institutions ~~supervisory~~to ~~framework~~address ~~could~~credit ~~materially~~quality, liquidity, risk management and ~~adversely~~capital ~~impact~~adequacy, ~~the~~as ~~conduct~~well ~~and~~as ~~profitability~~other ofsafety ~~our~~and ~~activities~~soundness concerns.

Regulation of Capital Bancorp, Inc.

We are registered as a BHC under the BHC Act and are subject to regulation and supervision by the Federal Reserve. The BHC Act requires us to secure the prior approval of the Federal Reserve before we own or control, directly or indirectly, more than 5% of the voting shares or substantially all of the assets of any bank or thrift, or merge or consolidate with another bank or thrift holding company. Further, under the BHC Act, our activities and those of any nonbank subsidiary are limited to: (i) those activities that the Federal Reserve determines to be so closely related to banking as to be a proper incident thereto, and (ii) investments in companies not engaged in activities closely related to banking, subject to quantitative limitations on the value of such investments. Prior approval of the Federal Reserve may be required before engaging in certain activities. In making such determinations, the Federal Reserve is required to weigh the expected benefits to the public, such as greater convenience, increased competition and gains in efficiency, against the possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interest and unsound banking practices.

Regulation of Capital Bank

The operations and investments of our Bank are subject to the supervision, examination and reporting requirements of the National Bank Act and the regulations of the OCC as well as other federal banking statutes and regulations, including with respect to the level of reserves that our Bank must maintain against deposits, restrictions on the types, amount, and terms and conditions of loans it may originate, and limits on the types of other activities in which our Bank may engage and the investments that it may make. The OCC also has the power to prevent the continuance or development of unsafe or unsound banking practices and other violations of law. Because our Bank’s deposits are insured by the FDIC to the maximum extent provided by law, it is also subject to certain FDIC regulations, and the FDIC has backup examination authority and some enforcement powers over our Bank. If, as a result of an examination of our Bank, the regulators should determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of the Bank’s operations are unsatisfactory or that the Bank or our management is violating or has violated any law or regulation, various remedies are available to the regulators. Such remedies include the power to enjoin unsafe or unsound practices, require affirmative action to correct any conditions resulting from any violation or practice, issue an administrative order that can be judicially enforced, direct an increase in capital, restrict growth, assess civil monetary penalties and remove officers and directors. The regulators also may request the FDIC to terminate the Bank’s deposit insurance.

that the Bank or our management is violating or has violated any law or regulation, various remedies are available to the regulators. Such remedies include the power to enjoin unsafe or unsound practices, require affirmative action to correct any conditions resulting from any violation or practice, issue an administrative order that can be judicially enforced, direct an increase in capital, restrict growth, assess civil monetary penalties and remove officers and directors. The regulators also may request the FDIC to terminate the Bank’s deposit insurance.

Capital Adequacy Guidelines

Bank holding companies and banks are subject to various regulatory capital requirements administered by state and federal agencies. See “Part II, Item 8. Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 14, Regulatory Capital ~~Standards~~Matters” for additional regulatory capital information, including the Bank’s and Company’s ~~Leverage~~leverage ~~Ratio~~ratio as of December 31, ~~2024~~2025.

Community Reinvestment Act

The CRA requires the federal banking regulatory agencies to assess all financial institutions that they regulate to determine whether these institutions are meeting the credit needs of the communities they serve, including their assessment area(s) (as established for these purposes in accordance with applicable regulations based principally on the location of branch offices). In addition to substantial penalties and corrective measures that may be required for a violation of certain fair lending laws, the federal banking agencies may take compliance with such laws and CRA into account when regulating and supervising other activities. Under the CRA, institutions are assigned a rating of “outstanding,” “satisfactory,” “needs to improve,” or “unsatisfactory.” A rating that is less than “satisfactory” may substantially inhibit the Bank’s opportunities for future growth. An institution’s record in meeting the requirements of the CRA is based on a performance-based evaluation system, and is made publicly available and is taken into consideration in evaluating any applications it files with federal regulators to engage in certain activities, including approval of a branch or other deposit facility, mergers and acquisitions, office relocations, and expansions into non-banking activities. Our Bank received an “outstanding” rating in its most recent CRA evaluation which was in 2024.

In October 2023, the OCC, together with the Federal Reserve and FDIC, issued a joint final rule to modernize the CRA regulatory framework. On March 29, 2024, a federal district court in Texas granted a preliminary injunction barring implementation of the final rule in response to a lawsuit filed by several trade groups. We will continue to monitor the litigation until resolved. We have also begun efforts to evaluate the impact of the new rule and to develop a strategy to ensure compliance.12

applicable regulations based principally on the location of branch offices). In addition to substantial penalties and corrective measures that may be required for a violation of certain fair lending laws, the federal banking agencies may take compliance with such laws and CRA into account when regulating and supervising other activities. Under the CRA, institutions are assigned a rating of “outstanding,” “satisfactory,” “needs to improve,” or “unsatisfactory.” A rating that is less than “satisfactory” may substantially inhibit the Bank’s opportunities for future growth. An institution’s record in meeting the requirements of the CRA is based on a performance-based evaluation system, and is made publicly available and is taken into consideration in evaluating any applications it files with federal regulators to engage in certain activities, including approval of a branch or other deposit facility, mergers and acquisitions, office relocations, and expansions into non-banking activities. Our Bank received an “outstanding” rating in its most recent CRA evaluation dated April 30, 2024, which was performed under the intermediate small bank requirements. Due to its asset size, our Bank will be evaluated under the “large bank” requirements in future CRA evaluations.

In October 2023, the OCC, together with the Federal Reserve and FDIC, issued a joint final rule to modernize the CRA regulatory framework. However, in July 2025, due to litigation, such agencies issued a joint notice of proposed rulemaking to rescind the 2023 final rule and replace it with the CRA framework that existed prior to the 2023 final rule.

Anti-Terrorism, Money Laundering Legislation and OFAC

The Bank is subject to the Bank Secrecy Act and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “USA PATRIOT Act”). These statutes and related rules and regulations impose requirements and limitations on specified financial transactions and accounts and other relationships intended to guard against money laundering and terrorism financing. The principal requirements for an insured depository institution include (i) establishment of an anti-money laundering program that includes training and audit components, (ii) establishment of a “know your customer” program involving due diligence to confirm the identities of persons seeking to open accounts and to decline to open accounts for those persons unable to demonstrate their identities, (iii) the filing of currency transaction reports for deposits and withdrawals of large amounts of cash and suspicious activities reports for activity that might signify money laundering, tax evasion or other criminal activities, (iv) additional precautions for accounts sought and managed for non-U.S. persons and (v) verification and certification of money laundering risk with respect to private banking and foreign correspondent banking relationships. For many of these tasks, a bank must keep records to be made available to its primary federal regulator. Anti-money laundering rules and policies are developed by a bureau within the Financial Crimes Enforcement Network, but compliance by individual institutions is overseen by its primary federal regulator.

developed by a bureau within the Financial Crimes Enforcement Network, but compliance by individual institutions is overseen by its primary federal regulator.

The Bank has established anti-money laundering and customer identification programs and it maintains records of cash purchases of negotiable instruments, files reports of certain cash transactions exceeding $10,000 (daily aggregate amount), and reports suspicious activity that might signify money laundering, tax evasion or other criminal activities pursuant to the Bank Secrecy Act.

The Treasury Department’s Office of Foreign Assets Control (“OFAC”) administers and enforces economic and trade sanctions against targeted foreign countries, persons, non-governmental organizations, associations, and criminal networks, among others, as defined by various Executive Orders and Acts of Congress. OFAC publishes lists of persons that are the target of sanctions, including the List of Specially Designated Nationals and Blocked Persons. Financial institutions are responsible for, among other things, blocking accounts of and transactions with sanctioned persons and countries, prohibiting unlicensed trade and financial transactions with them and reporting blocked and rejected transactions after their occurrence. If the Company or the Bank finds a name or other information on any transaction, account or wire transfer that is on an OFAC list or that otherwise indicates that the transaction involves a target of an OFAC-administered sanctions program, the Company or the Bank generally must freeze or block such account or transaction, file a suspicious activity report, and notify the appropriate ~~authorities. Banking regulators examine banks for compliance with the economic sanctions regulations administered by OFAC.~~


			13

authorities. Banking regulators examine banks for compliance with the economic sanctions regulations administered by OFAC.

The Bank has implemented policies and procedures to comply with the foregoing requirements.

Federal Home Loan Bank Membership

The Bank is a member of the FHLB. Each member of the FHLB is required to maintain a minimum investment in the Class B stock of the FHLB. The Board of Directors of the FHLB can increase the minimum investment requirements in the event it has concluded that additional capital is required to allow it to meet its own regulatory capital requirements. Any increase in the minimum investment requirements outside of specified ranges requires the approval of the Federal Housing Finance Agency. Because the extent of any obligation to increase the level of investment in the FHLB depends entirely upon the occurrence of a future event, the Company is unable to determine the extent of future required potential payments to the FHLB. Additionally, if a member financial institution fails, the right of the FHLB to seek repayment of funds loaned to that institution will take priority (a super lien) over the rights of all other creditors.

Dividends and Share Repurchases

The ability of the Company to pay dividends or to repurchase its common stock, and the ability of the Bank to pay dividends to the Company, may be restricted due to several factors including: (a) the Maryland General Corporate Law ("MGCL," in the case of the Company), (b) covenants contained in any subordinated debentures and borrowing agreements in existence now or that may exist in the future, (c) restrictions on the ability of the Bank to declare dividends under the National Bank Act and OCC regulations (in the case of the Bank), and (d) the general supervisory authority of the Federal Reserve and the OCC. Our ability to pay dividends to our stockholders or to repurchase shares of our common stock is subject to the restrictions set forth in the MGCL.

Notification to the Federal Reserve is required prior to our declaring and paying a cash dividend to our stockholders during any period in which our quarterly and/or cumulative twelve‑month net earnings are insufficient to fund the dividend amount, among other requirements. Under such circumstances, we may not pay a dividend should the Federal Reserve object until such time as we receive approval from the Federal Reserve or no longer need to provide notice under applicable regulations. In addition, prior approval of the Federal Reserve may be required in certain circumstances prior to our repurchasing shares of our common stock.

approval of the Federal Reserve may be required in certain circumstances prior to our repurchasing shares of our common stock.

In connection with the decision regarding dividends and share repurchase programs, our Board will take into account general business conditions, our financial results, projected cash flows, capital requirements, contractual, legal and regulatory restrictions on the payment of dividends by the Bank to the Company and such other factors as may be deemed relevant. We can provide no assurance that we will continue to declare dividends on a quarterly basis or otherwise or to repurchase shares of our common stock. The declaration of dividends by the Company is subject to the discretion of our Board.

Mergers and Acquisitions

Under the BHC Act, prior approval from the Federal Reserve System is required in order for any bank holding company to (i) acquire direct or indirect ownership or control of more than 5% of the voting shares of any bank, (ii) acquire all or substantially all of the assets of a bank, or (iii) merge or consolidate with any other bank holding company. Generally, the Company is not required to obtain prior approval from the Federal Reserve System to acquire a non-bank that engages in activities that are financial in nature or incidental to activities that are financial in nature, as long as the Company meets the capital, managerial, and CRA requirements to qualify as a financial holding company. Pursuant to Section 18(c) of the Federal Deposit Insurance Act, more commonly known as the Bank Merger Act, and for national banks relying on certain other sources of merger authority, prior written approval from a bank's primary federal regulator is required before any insured depository institution may consummate a merger transaction, which includes a merger, consolidation, assumption of deposit liabilities, and certain asset transfers between or among two or more institutions. Prior written approval of a bank's primary federal regulator is also required for merger transactions between or among affiliated institutions, as well as for merger transactions between or among non-affiliated institutions. Transactions that do not involve a transfer of deposit liabilities typically do not require prior approval under the Bank Merger Act, unless the transaction involves the acquisition of all or substantially all of an institution's assets. When evaluating and acting on proposed merger transactions, regulators consider the extent of existing competition between and among the merging institutions, other depository institutions, and other providers of similar or equivalent services in the relevant product and geographic markets, the convenience and needs of the community to be served, capital adequacy and earnings prospects, and the effectiveness of the merger institutions in combating money-laundering activities, among other factors. Further, the Change in Bank Control Act of 1978 generally prohibits any person, acting directly or indirectly or in concert with other persons, from acquiring control of a covered institution without providing at least 60 days prior written notice to the FDIC or upon receipt of written notice that the FDIC does not disapprove of the acquisition.


			14

certain other sources of merger authority, prior written approval from a bank's primary federal regulator is required before any insured depository institution may consummate a merger transaction, which includes a merger, consolidation, assumption of deposit liabilities, and certain asset transfers between or among two or more institutions. Prior written approval of a bank's primary federal regulator is also required for merger transactions between or among affiliated institutions, as well as for merger transactions between or among non-affiliated institutions. Transactions that do not involve a transfer of deposit liabilities typically do not require prior approval under the Bank Merger Act, unless the transaction involves the acquisition of all or substantially all of an institution's assets. When evaluating and acting on proposed merger transactions, regulators consider the extent of existing competition between and among the merging institutions, other depository institutions, and other providers of similar or equivalent services in the relevant product and geographic markets, the convenience and needs of the community to be served, capital adequacy and earnings prospects, and the effectiveness of the merger institutions in combating money-laundering activities, among other factors. Further, the Change in Bank Control Act of 1978 generally prohibits any person, acting directly or indirectly or in concert with other persons, from acquiring control of a covered institution without providing at least 60 days prior written notice to the FDIC or upon receipt of written notice that the FDIC does not disapprove of the acquisition.

On September 17, 2024, the FDIC, the OCC and the U.S. Department of Justice ("DOJ"), each announced new rules and policy statements impacting their bank merger review processes.

Among these actions, the FDIC approved a final statement of policy on bank merger transactions (the “2024 Statement”) and the OCC approved a final rule updating the agency’s regulations for business combinations involving national banks and federal savings associations. The OCC’s final rule modifies its procedures for reviewing bank merger applications under the Bank Merger Act, including the elimination of the expedited bank merger review and the streamlined application procedures. The OCC’s final rule also includes a new policy statement that addresses the substantive standards that it will use to evaluate bank merger applications, including indicators that point in favor of likely approval or rejection.

Concurrent with the FDIC and OCC announcements, the DOJ withdrew ~~from~~ its 1995 Bank Merger Guidelines and announced that it would consider bank mergers under its 2023 Merger Guidelines, which are not industry specific, as well as under a separate, recently adopted bank merger addendum.

OnIn ~~March~~May 3, 2025, the ~~FDIC~~OCC ~~approved~~adopted aan ~~proposal~~interim final rule amending the 2024 final rule to ~~rescind~~restore the expedited review and the use of the streamlined business combination. The OCC also rescinded its 2024 policy statement. Additionally, in July 2025, the FDIC rescinded the 2024 Statement and ~~reinstate~~reinstated, on an interim basis, the statement of policy on bank merger transactions that was in effect prior to the 2024 Statement.

Statement. It remains unclear whether the OCC under anticipated new leadership will also reconsider its recent regulation and policy statement.

Customer Information Privacy and Cybersecurity

The Federal Reserve and other bank regulatory agencies have adopted guidelines for safeguarding confidential, personal, non‑public customer information. These guidelines require each financial institution, under the supervision and ongoing oversight of its board of directors or an appropriate committee thereof, to create, implement, and maintain a comprehensive written information security program designed to ensure the security and confidentiality of customer information, protect against any anticipated threats or hazard to the security or integrity of such information, and protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer. We have adopted a customer information security program to comply with these requirements.

The Gramm‑Leach‑Bliley Act of 1999 (the “GLBA”) requires financial institutions to implement policies and procedures regarding the disclosure of non-public personal information about consumers to non‑affiliated third parties. The GLBA requires disclosures to consumers on policies and procedures regarding the disclosure of such non-public personal information and, except as otherwise required by law, prohibits disclosing such information except as provided in the Bank’s policies and procedures. We have implemented privacy policies addressing these restrictions that are distributed regularly to all existing and new customers of the Bank.


			15

law, prohibits disclosing such information except as provided in the Bank’s policies and procedures. We have implemented privacy policies addressing these restrictions that are distributed regularly to all existing and new customers of the Bank.

In March 2015, federal regulators issued two related statements regarding cybersecurity. One statement indicates that financial institutions should design multiple layers of security controls to establish lines of defense and to ensure that their risk management processes also address the risk posed by compromised customer credentials, including security measures to reliably authenticate customers accessing Internet-based services of the financial institution. The other statement indicates that a financial institution’s management is expected to maintain sufficient business continuity planning processes to ensure the rapid recovery, resumption and maintenance of the institution’s operations after a cyber-attack involving destructive malware. A financial institution is also expected to develop appropriate processes to enable recovery of data and business operations and address rebuilding network capabilities and restoring data if the institution or its critical service providers fall victim to this type of cyber-attack. If we fail to observe the regulatory guidance, we could be subject to various regulatory sanctions, including financial penalties.

In November 2021, the federal bank regulatory agencies issued a joint rule establishing computer-security incident notification requirements for banking organizations and their service providers. This rule requires new notification requirements when a banking organization experiences a computer-security incident.

State regulators have been increasingly active in implementing privacy and cybersecurity standards and regulations. Recently, several states have adopted regulations requiring certain financial institutions to implement cybersecurity programs and providing detailed requirements with respect to these programs, including data encryption requirements. Many states have also recently implemented or modified their data breach notification and data privacy requirements.

In July 2023, the SEC adopted rules requiring registrants to disclose material cybersecurity incidents experienced and describe the material aspects of their nature, scope and timing. The rules, which supersede previously issued guidance published in February 2018, also require annual disclosures describing a company’s cybersecurity risk management, strategy and governance. These SEC rules, and any other regulatory guidance, are in addition to notification and disclosure requirements under state and federal banking law and regulations. See Item 1A. Risk Factors for a further discussion of risks related to cybersecurity and Item 1C. Cybersecurity for a further discussion of the Company’s risk management strategies and governance processes related to cybersecurity.

cybersecurity and Item 1C. Cybersecurity for a further discussion of the Company’s risk management strategies and governance processes related to cybersecurity.

Interchange Fees

Under the Durbin Amendment to the Dodd-Frank Act, the Federal Reserve adopted rules establishing standards for assessing whether the interchange fees that may be charged with respect to certain electronic debit transactions are “reasonable and proportional” to the costs incurred by issuers for processing such transactions. Interchange fees or “swipe” fees are charges that merchants pay to the Company and other card-issuing banks for processing electronic payment transactions. The Federal Reserve has ruled that for financial institutions with assets of $10 billion or more the maximum permissible interchange fee for an electronic debit transaction is the sum of 21 cents per transaction and 5 basis points multiplied by the value of the transaction. The Federal Reserve also has rules governing routing and exclusivity that require issuers to offer two unaffiliated networks for routing transactions on each debit or prepaid product. In October 2023, the Federal Reserve issued a proposal under which the maximum permissible interchange fee for an electronic debit transaction would be the sum of 14.4 cents per transaction and 4 basis points multiplied by the value of the transaction. While financial institutions with less than $10 billion in assets, like the Company, are exempt, there is concern that these requirements will eventually be pushed down to all financial institutions, which would negatively impact the Company’s non-interest income.


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Consumer Financial Protection Bureau

The Dodd-Frank Act created a new, independent federal agency called the Consumer Financial Protection Bureau (“CFPB”), which is granted broad rulemaking, supervisory and enforcement powers under various federal consumer financial protection laws, including the Equal Credit Opportunity Act, Truth in Lending Act, Real Estate Settlement Procedures Act, Fair Credit Reporting Act, Fair Debt Collection Act, the Consumer Financial Privacy Provisions of the Gramm-Leach-Bliley Act, and certain other statutes. The CFPB has examination and primary enforcement authority with respect to depository institutions with $10 billion or more in assets. Smaller institutions are subject to rules promulgated by the CFPB but continue to be examined and supervised by federal banking regulators for consumer compliance purposes. The CFPB has authority to prevent unfair, deceptive, or abusive practices in connection with the offering of consumer financial products. On March 5, 2024, the CFPB issued a final rule amending provisions in Regulation Z that govern credit card late fee charges to lower the safe harbor amount for past due fees that a credit card issuer can charge on consumer credit card accounts from up to $41 to $8 and eliminates a higher safe harbor dollar amount for late fees for subsequent violations of the same type. This rule only applies to card issuers, that together with their affiliates, have one million or more open credit card accounts. Smaller card issuers, like the Bank, may continue to charge a higher safe harbor threshold for credit card late fees and automatically increase the safe harbor dollar amount based on the Consumer Price Index. Although the final rule exempts smaller card issuers, the Company will continue to monitor penalty fee policies, particularly as the CFPB and other regulators have demonstrated a focus on regulating so-called junk fees. In December 2024, the CFPB issued a final rule that subjects (with certain exceptions) overdraft services provided by financial institutions with more than $10 billion in assets to the provisions of the Truth in Lending Act and other consumer financial protection laws. Although the CFPB excluded banks with under $10 billion in assets from this rule, the Company is currently evaluating this rule and assessing its potential impact on the Company and the Bank.

~~With~~On March 5, 2024, the ~~recent~~CFPB ~~change~~issued a final rule amending provisions in ~~presidential~~Regulation ~~administration~~Z ~~and~~that ~~control~~govern ofcredit ~~Congress,~~card ~~the~~late ~~scope~~fee ofcharges ~~regulation~~to bylower the ~~CFPB~~safe ~~and~~harbor ~~other~~amount ~~federal~~for ~~agencies~~past ~~remains~~due ~~uncertain.~~fees Inthat ~~February~~a ~~2025,~~credit ~~the~~card ~~acting~~issuer ~~director~~can ofcharge ~~the~~on ~~CFPB~~consumer ~~directed~~credit ~~the~~card ~~CFPB’s~~accounts ~~staff~~from up to ~~cease~~$41 ~~all~~to ~~supervision~~$8 and ~~examination~~eliminates ~~activity~~a ~~and~~higher ~~stakeholder~~safe ~~engagement,~~harbor ~~stop~~dollar ~~all~~amount ~~work~~for onlate ~~proposed~~fees ~~rulemaking,~~for ~~suspend~~subsequent ~~the~~violations ~~effective~~of ~~dates~~the ofsame ~~any~~type. ~~finalized~~This ~~but~~rule ~~not~~only ~~yet~~applies ~~effective~~to ~~rules~~card issuers, ~~and~~that ~~halt~~together ~~other~~with ~~actions~~their ~~relating~~affiliates, tohave ~~investigations,~~one ~~enforcement,~~million ~~and~~or ~~litigation.~~more ~~The~~open ~~extent~~credit tocard ~~which~~accounts. ~~these~~In ~~recent~~April or2025, ~~other~~the ~~future~~final ~~developments~~rule ~~will~~was ~~ultimately~~vacated ~~impact~~by the ~~CFPB’s~~U.S. ~~regulation~~District ofCourt for the ~~Bank’s~~Northern ~~business~~District ~~remains~~of ~~uncertain~~Texas.

17In December 2024, the CFPB issued a final rule that subjects (with certain exceptions) overdraft services provided by financial institutions with more than $10 billion in assets to the provisions of the Truth in Lending Act and other consumer financial protection laws. In May 2025, President Trump signed a Congressional Review Act resolution that overturned the CFPB’s December 2024 final rule, which would have taken effect October 1, 2025.

In February 2025, the acting director of the CFPB directed the CFPB’s staff to cease all supervision and examination activity and stakeholder engagement, stop all work on proposed rulemaking, suspend the effective dates of any finalized but not yet effective rules, and halt other actions relating to investigations, enforcement, and litigation. Beyond the initial halt, the CFPB moved toward a more deregulatory stance in 2025, significantly reducing the volume of final rules and enforcement actions compared to 2024. Under the current U.S. administration, a level of heightened uncertainty exists with respect to the future of the CFPB, including its structure, staffing, and responsibilities. It remains uncertain whether, or to what extent, changes at the CFPB will impact our business and the overall regulatory environment.

Deposit Insurance

The Bank is a national banking association, regulated by the OCC. The Bank accepts deposits, and those deposits have the benefit of FDIC insurance up to the applicable limits established by law. The applicable statutory limit for FDIC insurance for most types of accounts is $250,000.

Under the FDIC's risk-based deposit premium assessment system, the assessment rates for an insured depository institution are determined by an assessment rate calculator, which is based on a number of elements that measure the risk each institution poses to the Deposit Insurance Fund. The calculated assessment rate is applied to average consolidated assets less the average tangible equity of the insured depository institution during the assessment period to determine the dollar amount of the quarterly assessment. Under the current system, premiums are assessed quarterly and could increase if, for example, criticized loans and leases and/or other higher risk assets increase or balance sheet liquidity decreases.

Under the Federal Deposit Insurance Act, the FDIC may terminate deposit insurance upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC. In the event any insured depository institution, such as the Bank, is placed into FDIC receivership due to the termination of deposit insurance, or for any other reason, and the institution is sold or liquidated, the chances of the institution's parent BHC's shareholders recovering any value is very unlikely.


			17

FDIC. In the event any insured depository institution, such as the Bank, is placed into FDIC receivership due to the termination of deposit insurance, or for any other reason, and the institution is sold or liquidated, the chances of the institution's parent BHC's shareholders recovering any value is very unlikely.

Future Legislative Developments

Various legislative acts are from time to time introduced in Congress. This legislation may change banking statutes and the environment in which we operate in substantial and unpredictable ways. We cannot determine the ultimate effect that potential legislation, if enacted, or implementing regulations and interpretations with respect thereto, would have on our financial condition or results of operations.

The ~~new~~current presidential administration and many members of Congress have advocated for changes in financial services regulation, potentially including amendments to the Dodd-Frank Act and other federal banking laws, and structural changes to the CFPB. ItWe iscannot ~~possible,~~predict ~~though~~whether ~~uncertain,~~or ~~that~~in ~~Congress~~what ~~and/~~form any other proposed regulations or statutes will be adopted or the ~~relevant~~extent ~~federal~~to ~~agencies~~which our business may ~~seek~~be toaffected ~~roll~~by ~~back~~any new regulation or ~~modify~~statute. ~~some~~These orchanges ~~much~~become ofless ~~the~~predictable, ~~rulemaking~~yet ~~and~~more ~~regulatory~~likely ~~guidance~~to ~~issued~~occur, ~~under~~following the ~~previous~~transition of power from one presidential administration. ~~Additionally~~to another, ~~the~~especially ~~full~~as ~~impact~~occurred ofin 2025, when it involves a change in the ~~leadership~~governing ~~changes~~political atparty. ~~banking~~New ~~regulatory~~agency ~~agencies~~leaders onhave ~~the~~different ~~enforcement~~priorities and, ~~supervisory~~as ~~priorities~~a result, there have been and will be a number of ~~each~~proposed ~~agency~~changes isto ~~not~~regulations, ~~fully~~guidance ~~known~~and atsupervisory ~~this~~tactics ~~time~~that impact our business. It is therefore unclear at the present time what effect the aforementioned changes will have on the banking industry as a whole or the Company specifically.


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RISK FACTOR SUMMARY

The following provides an overview of the significant risks discussed more fully in Item 1A.

Risks Related to Our Business

•Adverse economic conditions could negatively affect us, our customers, or counterparties, leading to reduced loan demand and higher credit losses.

•Adverse developments in the financial services industry could weaken customer confidence and materially impact our liquidity and stock.

•Geographic concentration increases sensitivity to adverse changes in the local economy.

•Government shutdowns and federal spending reductions may impair borrowers’ ability to repay and pressure liquidity.

•Lending is inherently risky and we may be unable to measure or limit credit risk, resulting in unexpected losses.

•Our allowance for credit losses may be insufficient under CECL methodologies, requiring additional provisions or charge-offs in stressed environments.

•Small and medium-sized business exposure heightens loss susceptibility because those borrowers often have fewer resources to withstand economic stress.

•Commercial real estate and construction lending risks arise from sensitivity to market conditions, construction cost overruns, and challenges recovering collateral value.

•Real estate value and appraisal risks can lead to inaccurate collateral valuations, higher losses, or insufficient ACL levels.

•Foreclosure-related risks may increase costs or delay recoveries.

•Liquidity risk could arise from deposit attrition or limited market liquidity that restricts lending and weakens financial performance.

•Large depositor concentration poses the risk that major withdrawals could force reliance on more expensive or volatile funding sources, pressuring net interest margin.

•Mortgage banking volatility may reduce noninterest income due to interest rate shifts, market disruptions, or lower loan officer productivity.

•Secondary market and repurchase risk could lower operating income if market disruptions occur or loan repurchases are required.

•OpenSky™ credit card portfolio risks include fraud, credit losses, ACH issues, and delinquency trends that could materially affect performance and reduce earnings if losses exceed the ACL.

•Government-guaranteed lending risks stem from borrower defaults, processing deficiencies, or potential changes to federal programs.

•Renewable energy tax credit risks may reduce financing opportunities if federal tax incentives or program structures change.


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•Interest rate risk may negatively affect the value of securities and loans as rates fluctuate.

•Changes to interest rates or the economic environment could force us to recognize losses on our investment securities portfolio.

•Competitive pressures from banks and nonbank providers may limit our ability to grow loans, deposits, and fee income.

•Cybersecurity and technology risks involve potential system failures or cyberattacks that could cause operational disruption, financial loss, legal exposure and reputational harm.

Risks Related to Our Operations and Industry Regulation

•Extensive regulatory requirements may increase operational and compliance burdens or restrict business activities.

•Regulatory examinations and enforcement could result in penalties, restrictions, or other adverse impacts if we fail to meet expectations or comply with requirements.

•Elevated levels of CRE or construction concentration may require enhanced risk management policies or higher capital levels, as well as limit our ability to lend.

•External events and climate-related risks could disrupt operations or impair collateral.

•AI risks may arise from model errors, data issues, operational failures, regulatory scrutiny, or reputational concerns tied to AI use.

Risks Related to Strategic Growth

•A merger or acquisition requires us to make estimates which impact presentation of our financial condition and are subject to revision.

•If goodwill were determined to be impaired, it could have a negative impact on our profitability.

•Acquisitions may disrupt our business.

Risks Related to Ownership of Our Common Stock

•Market volatility may cause significant fluctuations in our stock price.

•Future equity offerings or issuances of convertible instruments could result in substantial dilution.

•Insider ownership and control may influence shareholder votes and elections.

•Subordination to debt and preferred stock means common shareholders face lower priority relative to senior instruments, affecting value and rights.

•Anti-takeover protections under corporate governance provisions and applicable law may deter or delay change-of-control transactions.


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ITEM 1A. RISK FACTORS.

Ownership of our common stock involves certain risks. The risks and uncertainties described below are not the only ones we face. You should carefully consider the risks described below, as well as all other information contained in this Annual Report on Form 10-K. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations. If any of these risks actually occurs, our business, financial condition or results of operations could be materially and adversely affected.

Risks Related to Our Business

As a business operating in the financial services industry, our business and operations may be adversely affected in numerous and complex ways by weak economic conditions.

Our performance could be negatively impacted to the extent there is deterioration in business, and/or economic conditions, including persistent inflation, supply chain issues or labor shortages, which have direct or indirect impacts on us, our customers and/or our counterparties. All of these factors can individually or in the aggregate be detrimental to our business, and the interplay between these factors can be complex and unpredictable. Adverse economic conditions could have a material, adverse effect on our business, and/or the ~~the~~ financial condition of our customers and our results of operations.

Adverse developments affecting financial institutions or the financial services industry generally, such as actual events or concerns involving liquidity, defaults or non-performance, could adversely affect our operations and liquidity.

Actual events involving limited funding liquidity, customer defaults, non-performance or other adverse developments that affect financial institutions or the financial services industry generally, or concerns or rumors about similar events, including the potential negative media coverage, have in the past and may in the future lead to market-wide liquidity problems and erode customer confidence in the banking system. For example, the high-profile bank failures in the first half of 2023 led to volatility and declines in the market for bank stocks and questions about depositor confidence in depository institutions.

Such high-profile bank failures also highlighted the speed at which deposits can be moved in the digital economy, as well as the speed and reach of media attention, including social media, and its ability to disseminate concerns or rumors, in each case potentially exacerbating liquidity concerns. In addition, the banking operating environment and public trading prices of banking institutions can be highly correlated, in particular during times of stress, which could materially and adversely impact the trading ~~prices~~price of our common stock and potentially our results of operations.

Additionally, negative news about us or the banking industry in general could negatively impact market and/or customer perceptions of the Company, which could lead to a loss of depositor confidence and an increase in deposit withdrawals, particularly among those with uninsured deposits. Furthermore, the failure of other financial institutions may cause deposit outflows as customers spread deposits among several different banks so as to maximize their amount of FDIC insurance, move deposits to banks deemed “too big to fail” or remove deposits from the banking system entirely. As of December 31, ~~2024~~2025, approximately 5740.19% of our deposits were ~~insured~~uninsured and ~~protected and 42~~59.91% of our deposits were ~~uninsured and unprotected~~insured. We rely on these deposits for liquidity. A failure to maintain adequate liquidity could have a material, adverse effect on our business, financial condition and results of operations.

Our commercial business and operations are concentrated in the greater Washington, D.C. and Baltimore metropolitan areas and we are sensitive to adverse changes in the local economy.

Our success depends upon the general economic conditions in the areas in which we operate, which we cannot predict with any degree of certainty. The presidential administration and certain governmental

1921

agencies have announced and begun to implement plans to reduce government spending and the size of the federal government workforce. The Washington, D.C. metropolitan area is characterized by a significant number of businesses that are federal government contractors or subcontractors, or which depend on such businesses for a significant portion of their revenues. In addition, federal government employees make up a significant proportion of the population of the Washington, D.C. metropolitan area. Reductions in the federal workforce through layoffs and buyouts, furloughs of government employees or government contractors as well as cancelling government contracts and other impacts from declining government spending, lapses in appropriations, or changes in fiscal appropriations could have adverse impacts on other businesses in the Company’s market and the general economy of the greater Washington, D.C. metropolitan area. Such a downturn in the local economy generally could make it more difficult for our borrowers to repay their loans and may lead to loan losses that would not be offset by operations in other markets; it may also reduce the ability of our depositors to make or maintain deposits with us. For these reasons, any regional or local economic downturn that affects the Washington, D.C. and Baltimore metropolitan areas, or existing or prospective borrowers or depositors in the Washington, D.C. and Baltimore metropolitan areas could have a material, adverse effect on our business, financial condition and results of operations.

Our customers and businesses in the Washington, D.C. metropolitan area may be adversely impacted as a result of ~~changes~~the in government ~~spending~~shutdown orand changes in government ~~shutdown~~spending.

~~The~~Disagreement ~~presidential~~over ~~administration~~the U.S. federal budget, specifically regarding expiring tax credits and ~~certain~~spending ~~governmental~~priorities, ~~agencies~~caused ~~have~~the ~~announced~~U.S. ~~plans~~federal government to ~~reduce~~shut down from October 1, 2025 to November 12, 2025. The government ~~spending~~shutdown resulted in furloughs and ~~the~~layoffs ~~size~~for hundreds of ~~the~~thousands of federal ~~government workforce~~employees. ~~These~~Recently, ~~announcements~~there ~~could~~ have anbeen ~~adverse~~several ~~effect~~additional oninstances where there has been uncertainty regarding the ~~economy~~ability of Congress and the ~~Washington,~~President Dto collectively reach agreement on federal budgetary and spending matters.C. ~~metropolitan~~A ~~area~~period of failure to reach agreement on these matters, ~~which~~particularly inif ~~turn~~accompanied ~~could~~by ~~adversely~~another ~~affect~~government shutdown, may have an adverse impact on the ~~Company~~U.S. economy.

The Washington, D.C. metropolitan area is characterized by a significant number of businesses that are federal government contractors or subcontractors, or which depend on such businesses for a significant portion of their revenues. In addition, federal government employees make up a significant proportion of the population of the Washington, D.C. metropolitan area. The impact of a decline in federal government spending, a reallocation of government spending to different industries or different areas of the country or a delay in payments to such contractors could have a ripple effect. Temporary layoffs, staffing freezes, salary reductions and/or furloughs of government employees or government contractors could have adverse impacts on other businesses in the Company’s market and the general economy of the greater Washington, D.C. metropolitan area, and may indirectly lead to a loss of revenues by the Company’s customers, including vendors and lessors to the federal government and government contractors or to their employees, as well as to a wide variety of commercial and retail businesses and the local housing market. Accordingly, such potential federal government activities could lead to increases in past due loans, nonperforming loans, loan loss reserves and charge-offs, and could adversely affect our liquidity position.

In addition, a significant portion of our loan portfolio is secured by real estate, including construction and land development loans, all of which are in greater demand when interest rates are low and economic conditions are good. Accordingly, a decline in local economic conditions would likely have an adverse impact on our financial condition and results of operations, and the impact on us would likely be greater than the impact felt by larger financial institutions whose loan portfolios are more geographically diverse. We cannot guarantee that any risk management practices that we implement to address our geographic and loan concentrations will be effective in preventing losses relating to our loan portfolio.


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We may not be able to measure and limit our credit risk adequately, which could lead to unexpected losses.

A primary component of our business involves making loans to customers. The business of lending is inherently risky, including risks that the principal of or interest on any loan will not be repaid in a timely manner or at all or that the value of any collateral supporting the loan will be insufficient to cover our outstanding exposure. A failure to measure and limit the credit risk associated with our loan portfolio effectively could lead to unexpected losses and have a materially adverse effect on our business, financial condition and results of operations.

20Our ACL may prove to be insufficient to absorb life-time losses in our loan portfolio, which may adversely affect our business, financial condition and results of operations.

outstanding exposure. A failure to measure and limit the credit risk associated with our loan portfolio effectively could lead to unexpected losses and have a materially adverse effect on our business, financial condition and results of operations.

Our Allowance for Credit Losses (“ACL”) may prove to be insufficient to absorb life-time losses in our loan portfolio, which may adversely affect our business, financial condition and results of operations.

Under the current expected credit loss model (“CECL”), the ACL on loans is a valuation allowance estimated at each balance sheet date in accordance with U.S. generally accepted accounting principles (“GAAP”) that is deducted from the loans’ amortized cost basis to present the net amount expected to be collected on the loans. We estimate the ACL on loans based on the underlying assets’ amortized cost basis, which is the amount at which the financing receivable is originated or acquired, adjusted for applicable accretion or amortization of premium, discount, and net deferred fees or costs, collection of cash, and charge-offs. Expected credit losses are reflected in the ACL through a charge to the provision for credit loss expense. When we deem all or a portion of a financial asset to be uncollectible the appropriate amount is written off and the ACL is reduced by the same amount. We apply judgment to determine when a financial asset is deemed uncollectible; however, generally speaking, an asset will be considered uncollectible no later than when all efforts at collection have been exhausted. Subsequent recoveries, if any, are credited to the ACL when received.

We measure expected credit losses of financial assets on a collective (pool) basis, when the financial assets share similar risk characteristics. Depending on the nature of the pool of financial assets with similar risk characteristics, we use a discounted cash flow method or a loss-rate method to estimate expected credit losses. Our methodologies for estimating the ACL consider available relevant information about the collectability of cash flows, including information about past events, current conditions, and reasonable and supportable forecasts. The methodologies apply historical loss information, adjusted for asset-specific characteristics, economic conditions at the measurement date, and forecasts about future economic conditions expected to exist through the contractual lives of the financial assets that are reasonable and supportable, to the identified pools of financial assets with similar risk characteristics for which the historical loss experience was observed. Our methodologies revert back to historical loss information on a straight-line basis over eight quarters when the methodology can no longer develop reasonable and supportable forecasts.

Loans that do not share risk characteristics are evaluated on an individual basis. For collateral dependent financial assets where we have determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and we expect repayment of the financial asset to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the asset as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the financial asset exceeds the present value of expected cash flows from the operation of the collateral. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized costs basis of the financial asset exceeds the fair value of the underlying collateral less estimated cost to sell. The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset.

Additional credit losses will ~~likely~~ occur in the future and may occur at a rate greater than we have previously experienced. We may be required to take additional provisions for credit losses in the future to further supplement our ACL, either due to management’s decision to do so or requirements by our banking regulators. In addition, bank regulatory agencies will periodically review our ACL and the value attributed to nonaccrual loans or to real estate acquired through foreclosure. Such regulatory agencies may require us to recognize future charge-offs. These adjustments could have an adverse effect on our business, financial condition and results of operations.

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further supplement our ACL, either due to management’s decision to do so or requirements by our banking regulators. In addition, bank regulatory agencies will periodically review our ACL and the value attributed to nonaccrual loans or to real estate acquired through foreclosure. Such regulatory agencies may require us to recognize future charge-offs. These adjustments could have a material, adverse effect on our business, financial condition and results of operations.

The small- to medium-sized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair our borrowers’ ability to repay loans.

Small- to medium-sized businesses frequently have smaller market shares than their competition, may be more vulnerable to economic downturns, often need substantial additional capital to expand or compete and may experience substantial volatility in operating results, any of which may impair a borrower’s ability to repay a loan. If our borrowers are unable to repay their loans, our business, financial condition and results of operations could be materially and adversely affected.

Our commercial real estate and real estate construction loan portfolio exposes us to credit risks that may be greater than the risks related to other types of loans.

These loans typically involve repayment that depends upon income generated, or expected to be generated, by the property securing the loan in amounts sufficient to cover operating expenses and debt service. Unexpected deterioration in the credit quality of our commercial real estate loan portfolio could require us to increase our ACL, which would reduce our profitability and could have a material, adverse effect on our business, financial condition and results of operations.

Construction loans also involve risks because loan funds are secured by a project under construction and the project is of uncertain value prior to its completion. It can be difficult to accurately evaluate the total funds required to complete a project, and construction lending often involves the disbursement of substantial funds with repayment dependent, in part, on the success of the ultimate project rather than the ability of a borrower or guarantor to repay the loan. If we are forced to foreclose on a project prior to completion, we may be unable to recover the entire unpaid portion of the loan. In addition, we may be required to fund additional amounts to complete a project and, incur taxes, maintenance and compliance costs for a foreclosed property, and we may have to hold the property for an indeterminate period of time, any of which could materially and adversely affect our business, financial condition and results of operations.

Because a significant portion of our loan portfolio held for investment is comprised of real estate loans, negative changes in the economy affecting real estate values and liquidity could impair the value of collateral securing our real estate loans and result in loan and other losses.

Adverse developments affecting real estate values and the liquidity of real estate in our primary markets could increase the credit risk associated with our loan portfolio, and could result in losses that adversely affect credit quality, financial condition and results of operations. If real estate values decline, it is likely that we would be required to increase our ACL, which would adversely affect our business, financial condition and results of operations.

A portion of our loan portfolio is comprised of commercial loans secured by receivables, inventory, equipment or other commercial collateral, the deterioration in value of which could expose us to credit losses.

In general, these loans are collateralized by general business assets, including, among other things, accounts receivable, inventory and equipment, and most are backed by a personal guaranty of the borrower or principal. Significant adverse changes in the economy or local market conditions in which our commercial lending customers operate could cause rapid declines in loan collectability and the values associated with general business assets resulting in inadequate collateral coverage that may expose us ~~to credit losses and could materially and adversely affect our business, financial condition and results of operations.~~

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to credit losses and could materially and adversely affect our business, financial condition and results of operations.

Appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property, other real estate owned and repossessed personal property may not accurately describe the net value of the asset.

In considering whether to make a loan secured by real property, we generally require an appraisal of the property. However, an appraisal is only an estimate of the value of the property at the time the appraisal is made and, inasmuch as real estate values may change significantly in value in relatively short periods of time (especially in periods of heightened economic uncertainty), this estimate may not accurately describe the net value of the real property collateral after the loan is made. As a result, we may not be able to recover the full amount of any remaining indebtedness when we foreclose on and sell the relevant property. In addition, we rely on appraisals and other valuation techniques to establish the value of our other real estate owned (“OREO”) and personal property that we acquire through foreclosure proceedings and to determine certain loan impairments. If any of these valuations are inaccurate, our combined and consolidated financial statements may not reflect the correct value of our OREO, and our allowance for credit losses may not reflect accurate loan impairments. This could have a material, adverse effect on our business, financial condition and/or results of operations.

We engage in lending secured by real estate and may be forced to foreclose on the collateral and own the underlying real estate, subjecting us to the costs and potential risks associated with the ownership of the real property, or consumer protection initiatives or changes in state or federal law may substantially raise the cost of foreclosure or prevent us from foreclosing at all.

Since we originate loans secured by real estate, we may have to foreclose on the collateral property to protect our investment and may thereafter own and operate such property, in which case we would be exposed to the risks inherent in the ownership of real estate. Our inability to manage the amount of costs or the risks associated with the ownership of real estate, or write-downs in the value of OREO, could have a material, adverse effect on our business, financial condition and results of operations.

Additionally, consumer protection initiatives or changes in state or federal law may substantially increase the time and expense associated with the foreclosure process or prevent us from foreclosing at all. If new state or federal laws or regulations are ultimately enacted that ~~significantly~~ raise the cost of foreclosure or impose outright barriers, such could have a materially adverse effect on our business, financial condition and results of operation.

A lack of liquidity could impair our ability to fund operations and adversely impact our business, financial condition and results of operations.

Liquidity is essential to our business. We rely on our ability to generate deposits and effectively manage the repayment and maturity schedules of our loans and investment securities, respectively, to ensure that we have adequate liquidity to fund our operations. An inability to raise funds through deposits, borrowings, sales of our investment securities, sales of loans or other sources could materially and adversely impact our ability to originate loans, invest in securities, meet our expenses or fulfill obligations such as repaying our borrowings or meeting deposit withdrawal demands, any of which could, in turn, have a material, adverse effect on our business, financial condition and results of operations.

We have several large depositor relationships, the loss of which could force us to fund our business through more expensive and less stable sources.

Withdrawals of deposits by any one of our largest depositors could force us to rely more heavily on borrowings and other sources of funding for our business, adversely affecting our net interest margin and results of operations. We may also be forced, as a result of any withdrawal of deposits, to rely more heavily on other, potentially more expensive and less stable funding sources. Consequently, the occurrence of any of these events could have a material adverse effect on our business, financial condition and results of operations.

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heavily on other, potentially more expensive and less stable funding sources. Consequently, the occurrence of any of these events could have a material, adverse effect on our business, financial condition and results of operations.

Our mortgage banking division may not meaningfully contribute to noninterest income.

The residential mortgage banking business is highly competitive and highly susceptible to changes in market interest rates, consumer confidence levels, employment statistics, the capacity and willingness of secondary market purchasers to acquire and hold or securitize loans, and other factors beyond our control. Additionally, in many respects, the traditional mortgage origination business is relationship-based, and dependent on the services of individual mortgage loan officers. The loss of services of one or more loan officers could have the effect of reducing the level of our mortgage production, or the rate of growth of production. As a result of these various factors, we cannot be certain that we will be able to maintain or increase the volume or percentage of revenue or net income produced by our residential mortgage business.

We earn income by originating residential mortgage loans for resale in the secondary mortgage market, and disruptions in that market could reduce our operating income.

Historically, as part of our focus on loan origination and sales activities, we enter into formal commitments and informal agreements with larger banking companies and mortgage investors earning the Bank income from these sales. Under these arrangements, we originate single-family mortgages that are priced and underwritten to conform to previously agreed upon criteria before loan funding and are delivered to the investor shortly after funding.

Disruptions in the secondary market may not only affect us but also the ability and desire of mortgage investors and other banks to purchase residential mortgage loans that we originate. As a result, we may not be able to maintain or grow the income we receive from originating and reselling residential mortgage loans. Additionally, we hold certain mortgage loans that we originated for sale, increasing our exposure to interest rate risk and adverse changes in the value of the residential real estate that serves as collateral for the mortgage loan prior to sale.

Our financial condition, earnings and asset quality could be adversely affected if we are required to repurchase loans originated for sale by our mortgage banking division.

The Bank originates residential mortgage loans for sale to secondary market investors, subject to contractually specified recourse provisions. Because the loans are intended to be originated within investor guidelines, using designated automated underwriting and product-specific requirements as part of the loan application, the loans sold have a limited recourse provision. Should loan repurchases become a material issue, our earnings and asset quality could be adversely impacted, which could materially and adversely impact our business, financial condition and results of operations.

Delinquencies and credit losses from our OpenSky™ credit card division could adversely affect our business, financial condition and results of operations.

Our OpenSky™ Division provides secured, partially secured, and unsecured credit cards on a nationwide basis to under-banked populations and those looking to rebuild their credit scores. Although some OpenSky™ credit cards are fully or partially secured, losses may occur as a result of fraud, or when the account exceeds its established limit or if a cardholder ceases to maintain the account in good standing. Fraud, such as identity fraud, payment fraud and funding fraud (where, for example, an individual funds a card using information from someone they know well, such as a relative or roommate) can result in substantial losses. In the case of an OpenSky™ account that is funded through fraud on the part of an applicant, we are required by applicable laws to refund the amount of the original deposit, and we charge off balances which were subsequently charged on the card. Account balances in excess of established credit limits happen as a result of certain VISA membership policies that allow cardholders to incur certain charges even if they exceed their card limits, which include, but are not limited to, rental car charges, gas station charges and hotel deposits. If an OpenSky™ cardholder exceeds his or her credit limit as a result of purchases in one of these categories, we may incur losses for amounts in excess of the

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established credit limits happen as a result of certain VISA membership policies that allow cardholders to incur certain charges even if they exceed their card limits, which include, but are not limited to, rental car charges, gas station charges and hotel deposits. If an OpenSky™ cardholder exceeds his or her credit limit as a result of purchases in one of these categories, we may incur losses for amounts in excess of the collateral deposited if the borrower fails to repay such excess amounts. Customers can also exceed their credit limit by making intra-period payments to replenish their available lines. If the payments are made via the Automated Clearing House (“ACH”) and were fraudulent, we could incur the cost of the payment. Losses to our credit card portfolio also arise when cardholders cease to maintain the account in good standing with timely payments. For example, in the event a secured card becomes more than 90 days past due, or an unsecured card becomes more than 150 days past due, the credit card balance is recovered against any corresponding deposit account and athe account becomes eligible for charge-off. A charge-off is recorded for any related fees, accrued interest or other charges in excess of the deposit account balance no later than 120 days for secured and 180 days for unsecured. We have invested in technology and systems designed to detect fraudulent behavior and somewhat mitigate losses but such investments may not be adequate, and our systems may not adequately monitor or mitigate potential losses arising from these risks.

A high credit loss rate (the rate at which we charge off uncollectible loans) on either our secured, partially secured, or unsecured portfolio could materially and adversely impact our overall financial performance. We maintain an ACL, which we believe to be adequate to cover credit losses inherent in our OpenSky™ portfolio, but we cannot be certain that the allowance will be sufficient to cover actual credit losses. If credit losses from our OpenSky™ portfolio exceed our ACL, our net income will be reduced by the excess of such credit losses.

The inability of our OpenSky™ credit card division to continue its growth rate could adversely affect our earnings.

We do not know if we will be able to retain existing customers or attract new customers, or that we will be able to increase account balances for new or existing customers.

We hope the development and expansion of new credit card products and related cardholder service products will be an important contributor to our growth and earnings in the future; however, if we are unable to implement new cardholder products and features, our ability to grow will be negatively impacted. Declining sales of cardholder service products would likely result in reduced income from fees and interest.

Our participation in government guaranteed lending activities subjects us to additional risks.

As an approved participant in the SBA Preferred Lender Program, we are able to facilitate SBA loans for our customers without subjecting them to the potentially burdensome SBA approval process required for lenders that are not part of the program. The loss of our status as an SBA Preferred Lender could result in a loss of customers to other lenders who maintain this designation. Such a loss could materially and adversely affect our business and financial results.

In situations where we sell the government guaranteed portion of SBA or USDA loans, we remain exposed to credit risk on the unguaranteed portion of the loan. Furthermore, if a bank sells a government guaranteed loan in the secondary market and the borrower subsequently defaults, the SBA or USDA may seek to recover the loss associated with the loan if it is determined that the default arose due to a significant technical deficiency in the origination, funding or servicing of the loan.

This creates a potential credit risk for us with respect to the guaranteed portion of SBA or USDA loans to the extent that we originated the loan in a manner that was not in compliance with applicable standard operating procedures. Additionally, technical defaults could lead to potential liability for Windsor™ if it assisted in the origination or servicing of the loan on behalf of another bank. Such technical defaults and associated losses could materially adversely affect our business. Furthermore, increased instances of technical defaults, particularly where Windsor Advantage acted as a lender service provider, could result in reputational damage to us.

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associated losses could materially adversely affect our business. Furthermore, increased instances of technical defaults, particularly where Windsor Advantage™ acted as a lender service provider, could result in reputational damage to us.

Any modification or reduction in the level of government support for government guaranteed loan programs could result in a significant impact to our results of operations.

A material part of our business consists of originating and servicing government guaranteed loans, in particular those guaranteed by the SBA and the USDA. Our government guaranteed lending program is substantially dependent on the continued support of the U.S. federal government. Under established and long-standing SBA and USDA programs, the federal government guarantees a portion of the loans originated by us or by clients we service through Windsor Advantage™.

Any changes to the laws, regulations, procedures, or funding levels governing the SBA or USDA programs could impair our ability, as well as the ability of our clients through Windsor Advantage™, to originate, process, and sell these loans in the secondary market. Such changes could have a material, adverse impact on our business, including through a reduction in sales income and decreased revenue within Windsor Advantage™.

~~Additionally,~~Changes ~~a substantial portion of our government guaranteed loan program is tied~~ to ~~the financing of~~ renewable energy ~~projects, including, but not limited to commercial solar farms. A significant portion of the committed equity in these projects is derived from investment~~ tax credits and ~~other forms of financial incentives provided through~~ federal incentive programs, ~~legislative~~could ~~measures,~~adversely ~~and~~affect ~~governmental~~certain ~~support~~lending opportunities.

~~However,~~A ~~the~~portion ~~availability~~of ~~and~~our ~~terms~~lending ofactivities ~~these~~is ~~tax~~tied ~~credits,~~to ~~and~~ the ~~continuation~~financing of ~~other~~renewable ~~federal~~energy ~~support~~projects, ~~programs~~including, ~~are~~but ~~subject~~not limited to, ~~the~~commercial ~~actions~~solar farms. A portion of the ~~U.S.~~committed ~~federal~~equity ~~government,~~in ~~which~~some ~~may~~of ~~evolve~~these ~~under~~projects ~~the~~is ~~current~~derived ~~administration~~from investment tax credits and other financial incentives provided through federal programs, legislative measures, and governmental support.

IfThe ~~the~~U.S. ~~new~~federal ~~administration~~government ~~implements~~has orpreviously ~~advocates~~enacted ~~for~~changes ~~reductions~~affecting inthe ~~renewable~~availability ~~energy~~ and ~~related~~terms ~~incentives,~~of ~~government~~certain ~~guaranteed~~renewable ~~lending~~energy ~~opportunities~~tax ~~could~~credits ~~be materially~~ and ~~adversely~~related ~~affected~~incentives. ~~Further,~~These ~~any~~programs ~~expiration,~~remain ~~phase-down,~~subject orto ~~reduction~~further oflegislative, ~~key~~regulatory, ~~tax incentives~~ or ~~other~~administrative ~~federal~~modification, ~~programs~~reinterpretation, or ~~delays~~repeal. inAny ~~reauthorization~~additional orchanges ~~expansion~~to ofthe ~~these~~structure, ~~programs~~availability, ~~could~~transferability, ~~materially~~monetization, ~~and~~or ~~adversely~~timing ~~impact the volume~~ of ~~government~~these ~~guaranteed~~tax ~~lending~~credits ~~opportunities~~or ~~within~~related ~~our~~support ~~USDA~~programs ~~business~~could ~~and~~affect the ~~renewable~~economics ~~energy~~or ~~sector~~viability ~~more~~of ~~broadly~~projects seeking financing.

AsReductions ain ~~result,~~renewable ~~any~~energy ~~adverse~~incentives, ~~changes~~expiration, inphase-down, ~~the regulatory framework~~ or ~~governmental~~modification ~~support~~of ~~for~~key ~~renewable~~tax ~~energy~~benefits, ~~could~~or ~~have~~delays ain ~~material~~reauthorization ~~and~~or ~~adverse~~expansion ~~impact~~of onrelated ~~our~~programs ~~financial~~could ~~performance,~~materially ~~particularly~~impact in the volume of renewable energy lending ~~space,~~opportunities. ~~where~~In ~~government~~addition ~~incentives~~uncertainty ~~are~~regarding afuture ~~critical~~federal ~~element~~policy ofmay delay project ~~viability~~development, financing decisions or capital commitments.

Accordingly, adverse changes in the regulatory framework or governmental support for renewable energy projects could materially and adversely affect our financial performance.

We are subject to interest rate risk as fluctuations in interest rates may adversely affect our earnings.

The majority of our banking assets and liabilities are monetary in nature and subject to risk from changes in interest rates. Like most financial institutions, our earnings are significantly dependent on our net interest income, the principal component of our earnings, which is the difference between interest earned by us from our interest earning assets, such as loans and investment securities, and interest paid by us on our interest-bearing liabilities, such as deposits and borrowings. We expect that we will periodically experience “gaps” in the interest rate sensitivities of our assets and liabilities, meaning that either our interest-bearing liabilities will be more sensitive to changes in market interest rates than our interest earning assets, or vice versa. In either case, if market interest rates move contrary to our position, this gap will negatively impact our earnings. The impact on earnings is more adverse when short-term interest rates increase more than long-term interest rates or when long-term interest rates decrease more than short-term interest rates, or in circumstances of a flattened or inverted yield curve. Many factors impact interest rates, including governmental monetary policies, inflation, recession, changes in unemployment, the money supply, international economic weakness and disorder and instability in domestic and foreign financial markets.

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~~Interest~~than rate increases often result in larger payment requirements for our borrowers, which increases the potential for default and could result in a decrease in the demand for loans. At the same time, the marketability of the property securing a loan may be adversely affected by any reduced demand resulting from a higher interest rate environment. In a declining interest rate environment, there may be an increase in prepayments on loans as borrowers refinance their loans at lower rates. In addition, in a low interest rate environment, loan customers often pursue longshort-term ~~fixed rate credits, which could adversely affect our earnings and net~~ interest ~~margin if~~ rates ~~later increase. Changes in interest rates also can affect the value of loans~~, ~~securities and other assets. An increase in interest rates that adversely affects the ability of borrowers to pay the principal~~ or ~~interest on loans may lead to an increase~~ in ~~nonperforming~~circumstances ~~assets and a reduction~~ of ~~income recognized, which could have~~ a ~~material~~flattened ~~adverse~~or ~~effect~~inverted onyield ~~our results of operations and cash flows~~curve. ~~Further,~~Many ~~when~~factors weimpact ~~place~~interest ~~a loan on nonaccrual status~~rates, weincluding ~~reverse~~governmental ~~any~~monetary ~~accrued but unpaid interest receivable~~policies, ~~which decreases interest income. At the same time~~inflation, ~~we continue to incur costs to fund the loan~~recession, ~~which~~changes isin ~~reflected as interest expense~~unemployment, ~~without any interest income to offset~~ the ~~associated~~money ~~funding expense. Thus~~supply, aninternational ~~increase~~economic inweakness ~~the~~and ~~amount~~disorder ofand ~~nonperforming~~instability ~~assets~~in ~~would~~domestic ~~have~~and aforeign ~~material~~financial ~~adverse impact on net interest income~~markets.

Interest rate increases often result in larger payment requirements for our borrowers, which increases the potential for default and could result in a decrease in the demand for loans. At the same time, the marketability of the property securing a loan may be adversely affected by any reduced demand resulting from a higher interest rate environment. In a declining interest rate environment, there may be an increase in prepayments on loans as borrowers refinance their loans at lower rates. In addition, in a low interest rate environment, loan customers often pursue long-term fixed rate credits, which could adversely affect our earnings and net interest margin if rates later increase. Changes in interest rates also can affect the value of loans, securities and other assets. An increase in interest rates that adversely affects the ability of borrowers to pay the principal or interest on loans may lead to an increase in nonperforming assets and a reduction of income recognized, which could have a material, adverse effect on our results of operations and cash flows. Further, when we place a loan on nonaccrual status, we reverse any accrued but unpaid interest receivable, which decreases interest income. At the same time, we continue to incur costs to fund the loan, which is reflected as interest expense, without any interest income to offset the associated funding expense. Thus, an increase in the amount of nonperforming assets would have a material, adverse impact on net interest income.

We could recognize losses on investment securities held in our securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate.

We invest a portion of our total assets in investment securities with the primary objectives of providing a source of liquidity, providing an appropriate return on funds invested and managing interest rate risk. Factors beyond our control can significantly and adversely influence the fair value of securities in our portfolio. Because of changing economic and market conditions affecting interest rates, the financial condition of issuers of the securities and the performance of the underlying collateral, we may recognize realized and/or unrealized losses in future periods, which could have a material, adverse effect on our business, financial condition and results of operations. Net unrealized losses related to available-for-sale investment securities are reflected in Accumulated Other Comprehensive Loss in our Consolidated Balance Sheets and reduce the level of our tangible common equity. Such unrealized losses do not affect our regulatory capital ratios.

We face strong competition from financial services companies and other companies that offer banking services.

We operate in the highly competitive financial services industry and face significant competition for customers from financial institutions located both within and beyond our principal markets. We compete with commercial banks, savings banks, credit unions, ~~nonbank~~non-bank financial services companies and other financial institutions operating within or near the areas we serve. In addition, many of our non-bank competitors are not subject to the same extensive regulations that govern our activities and may have greater flexibility in competing for business. Our inability to compete successfully in the markets in which we operate could have a material, adverse effect on our business, financial condition or results of operations.

System failure or cybersecurity breaches of our network security could subject us to increased operating costs as well as litigation and other potential losses and regulatory implications.

Our computer systems and network infrastructure could be vulnerable to hardware and cybersecurity issues. Any damage or failure that causes an interruption in our operations could have a material, adverse effect on our financial condition and results of operations.

Our operations are also dependent upon our ability to protect our computer systems and network infrastructure, including our digital, mobile and internet banking activities, against damage from physical break-ins, cybersecurity breaches and other disruptive problems. Such computer break-ins and other disruptions would jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability, damage our reputation and 29

27Our operations are also dependent upon our ability to protect our computer systems and network infrastructure, including our digital, mobile and internet banking activities, against damage from physical break-ins, cybersecurity breaches and other disruptive problems. Such computer break-ins and other disruptions would jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability, damage our reputation and inhibit the use of our internet banking services by current and potential customers. A breach of our security that results in unauthorized access to our data could expose us to a disruption or challenges relating to our daily operations, as well as to data loss, litigation, damages, fines and penalties, significant increases in compliance costs and reputational damage, any of which could have a material, adverse effect on our business, financial condition and results of operations. In addition, we may need to take our systems off-line if they become infected with malware or a computer virus or as a result of another form of cyber-attack. In the event that backup systems are utilized, they may not process data as quickly as our primary systems and some data might not have been saved to backup systems, potentially resulting in a temporary or permanent loss of such data. In addition, our ability to implement backup systems and other safeguards with respect to third-party systems is more limited than with respect to our own systems. We frequently update our systems to support our operations and growth and to remain compliant with applicable laws, rules and regulations. These updates entail significant costs and create risks associated with implementing new systems and integrating them with existing ones, including business interruptions. Implementation and testing of controls related to our computer systems, security monitoring, and retaining and training personnel required to operate our systems also entail significant costs.

inhibit the use of our internet banking services by current and potential customers. A breach of our security that results in unauthorized access to our data could expose us to a disruption or challenges relating to our daily operations, as well as to data loss, litigation, damages, fines and penalties, significant increases in compliance costs and reputational damage, any of which could have a material adverse effect on our business, financial condition and results of operations. In addition, we may need to take our systems off-line if they become infected with malware or a computer virus or as a result of another form of cyber-attack. In the event that backup systems are utilized, they may not process data as quickly as our primary systems and some data might not have been saved to backup systems, potentially resulting in a temporary or permanent loss of such data. In addition, our ability to implement backup systems and other safeguards with respect to third-party systems is more limited than with respect to our own systems. We frequently update our systems to support our operations and growth and to remain compliant with applicable laws, rules and regulations. These updates entail significant costs and create risks associated with implementing new systems and integrating them with existing ones, including business interruptions. Implementation and testing of controls related to our computer systems, security monitoring, and retaining and training personnel required to operate our systems also entail significant costs.

We face security risks, including denial of service attacks, hacking, malware intrusion and data corruption attempts, and identity theft that could result in the disclosure of confidential information, materially and adversely affect our business or reputation, and create significant legal and financial exposure.

Our business relies on the secure processing, transmission, storage and retrieval of confidential, proprietary, and other information in our computer and data management systems and networks, and in the computer and data management systems and networks of third parties. In addition, to access our network, products and services, our customers and other third parties may use personal mobile devices or computing devices that are outside of our network environment and are subject to their own cybersecurity risks.

We, our customers, regulators, and other third parties, including other financial services institutions and companies engaged in data processing, have been subject to, and are likely to continue to be the target of, cyber-attacks. These cyber-attacks include computer viruses, malicious or destructive code, phishing attacks, denial of service or information, ransomware, improper access by employees or vendors, attacks on personal email of employees, ransom demands to not exploit security vulnerabilities in our systems or the systems of third parties, and other security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of confidential, proprietary and other information of ours, our employees, our customers, or of third parties, and damage to our systems that could otherwise materially disrupt our or our customers’ or other third parties’ network access or business operations. As cyber-threats continue to evolve, we may be required to expend significant additional resources to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities or incidents. Despite efforts to ensure the integrity of our systems and implement controls, processes, policies and other protective measures, we may not be able to anticipate all security breaches, nor may we be able to implement sufficient preventive measures against such security breaches, which may expose us to material losses and other material, adverse consequences.

Cybersecurity risks for banking organizations have significantly increased in recent years in part because of the proliferation of new technologies, including artificial intelligence, and the use of the internet and telecommunications technologies to conduct financial transactions. Even the most advanced internal control environment may be vulnerable to compromise. The techniques used by cyber criminals change frequently, may not be recognized until launched, and may not be recognized until well after a breach has occurred. The speed at which new vulnerabilities are discovered and exploited, often before security patches are published, continues to rise. The risk of a security breach caused by a cyber-attack on a vendor or by unauthorized vendor access has also increased in recent years.

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~~Cyber-attacks~~occurred. orThe ~~other~~speed ~~security breaches, whether directed~~ at uswhich ornew ~~third~~vulnerabilities ~~parties,~~are ~~may~~discovered ~~result~~and ~~in a material loss or have other material adverse consequences. Furthermore~~exploited, ~~the~~often ~~public~~before ~~perception~~security ~~that~~patches aare ~~cyber-attack on our systems has been successful~~published, ~~whether~~continues orto ~~not this perception is correct, may damage our reputation with customers and third parties with whom we do business~~rise. ~~Hacking~~The ofrisk ~~personal information and identity theft risks, in particular, could cause serious reputational harm. A successful penetration or circumvention~~ of ~~system~~a security ~~could~~breach ~~cause~~caused usby ~~serious negative consequences, including~~ a ~~loss of customers and business opportunities, costs associated with maintaining business relationships after an~~ cyber-attack oron ~~breach,~~a ~~significant~~vendor ~~business disruption to our operations and business, misappropriation, exposure~~ or ~~destruction~~by ofunauthorized ~~our~~vendor ~~confidential~~access ~~information,~~has ~~intellectual~~also ~~property,~~increased ~~funds and/or those of our customers; or damage to our or our customers’ and/or third parties’ computers or systems, and could result~~ in arecent violation of applicable privacy and other laws, litigation exposure, regulatory fines, penalties or intervention, loss of confidence in our security measures, reputational damage, reimbursement or other compensatory costs, and additional compliance costs, and could materially and adversely impact our results of operations, liquidity and financial conditionyears. ~~In addition, we may not have adequate insurance coverage to compensate for losses from a cybersecurity event.~~

Cyber-attacks or other security breaches, whether directed at us or third parties, may result in a material loss or have other material, adverse consequences. Furthermore, the public perception that a cyber-attack on our systems has been successful, whether or not this perception is correct, may damage our reputation with customers and third parties with whom we do business. Hacking of personal information and identity theft risks, in particular, could cause serious reputational harm. A successful penetration or circumvention of system security could cause us serious negative consequences, including a loss of customers and business opportunities, costs associated with maintaining business relationships after an attack or breach, significant business disruption to our operations and business, misappropriation, exposure or destruction of our confidential information, intellectual property, funds and/or those of our customers; or damage to our or our customers’ and/or third parties’ computers or systems, and could result in a violation of applicable privacy and other laws, litigation exposure, regulatory fines, penalties or intervention, loss of confidence in our security measures, reputational damage, reimbursement or other compensatory costs, and additional compliance costs, and could materially and adversely impact our results of operations, liquidity and financial condition. In addition, we may not have adequate insurance coverage to compensate for losses from a cybersecurity event.

Failure to maintain an effective system of internal control and disclosure controls and procedures could have a material adverse effect on our results of operations, financial condition and stock price.

As disclosed in Part II - Item 9A. Controls and Procedures, management has identified a material weakness in our internal control over financial reporting and, as a result, concluded that our internal control over financial reporting and our disclosure controls and procedures were not effective as of December 31, 2025. We are currently working to remediate the material weakness. However, there can be no assurance that these remediation efforts will be successful. In addition, these remediation efforts will place a burden on management and may result in additional expenses.

If we are unable to remediate this material weakness, or are otherwise unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods, could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, result in violations of applicable securities laws, prejudice our ability to meet NASDAQ listing requirements, negatively affect investor confidence in the accuracy and completeness of our financial statements, and adversely impact the trading price of our securities.

Risks Related to Our Operations and the Regulation of Our Industry

We operate in a highly regulated environment and the laws and regulations that govern our operations, corporate governance, executive compensation and accounting principles, or changes in them, or our failure to comply with them, could adversely affect us.

Banking is highly regulated under federal and state law. ~~As such~~Accordingly, we are subject to extensive regulation, supervision and legal requirements that govern almost all aspects of our operations. Compliance with applicable laws and regulations can be ~~difficult~~complex and costly, and changes to laws and regulations, including ~~potential~~ changes in federal policy and at regulatory ~~agencies~~priorities asassociated awith ~~result~~transitions ~~of changes~~ in U.S. Presidential administrations ~~that~~frequently ~~have different regulatory agendas than their predecessors, often~~ impose additional operating costs. WeRecent ~~expect~~administrations ~~the~~have ~~Trump~~pursued ~~administration will seek to implement a~~ regulatory ~~reform~~agendas ~~agenda~~ that isdiffer ~~significantly~~in ~~different~~approach ~~than~~and ~~that~~emphasis, ofand ~~the~~we ~~Biden administration. We~~ expect ~~there~~that ~~will be changes in~~ rulemaking, supervision, examination, and enforcement priorities of the federal banking agencies. ~~Our~~will ~~failure~~continue to ~~comply~~evolve. ~~with~~Such ~~these~~changes ~~laws~~may ~~and~~affect ~~regulations, even if~~ the ~~failure~~manner ~~follows good faith efforts or reflects a difference~~ in ~~interpretation,~~which ~~could~~we ~~subject~~conduct ~~us to restrictions on~~ our business ~~activities~~, ~~enforcement actions and fines and other penalties, any of which could adversely affect our results of operations, regulatory capital levels and~~ the ~~price~~products ~~of our securities. Further, any new laws, rules~~ and ~~regulations could make compliance more difficult or expensive or otherwise materially and adversely affect our business, financial condition and results of operations.~~


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services we offer, and the costs associated with compliance. Our failure to comply with applicable laws and regulations, even where such failure reflects good faith efforts or differences in interpretation, could subject us to restrictions on our business activities, enforcement actions, fines, or other penalties, any of which could adversely affect our results of operations, regulatory capital levels, and the price of our securities. In addition, new or amended laws, rules or regulations could increase compliance costs, limit business opportunities, or otherwise materially and adversely affect our business, financial condition, and results of operations.

Federal banking agencies periodically conduct examinations of our business, including compliance with laws and regulations, and our failure to comply with any supervisory actions to which we are or become subject as a result of such examinations could adversely affect us.

As part of the bank regulatory process, the OCC and the Federal Reserve, periodically conduct examinations of our business, including compliance with laws and regulations. If, as a result of an examination, one of these federal banking agencies were to determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity, asset sensitivity, risk management or other aspects of any of our operations have become unsatisfactory, or that the Company, the Bank or their respective management were in violation of any law or regulation, it may take a number of different remedial actions as it deems appropriate. These actions include the power to enjoin “unsafe or unsound” practices, to require affirmative actions to correct any conditions resulting from any violation or practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital levels, to restrict our growth, to assess civil monetary penalties against us, the Bank or their respective officers or directors, to remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is an imminent risk of loss to depositors, to terminate the Bank’s deposit insurance. If we become subject to such regulatory actions, our business, financial condition, results of operations and reputation would be materially and adversely affected.

subject to such regulatory actions, our business, financial condition, results of operations and reputation would be materially and adversely affected.

Regulatory requirements affecting our loans secured by commercial real estate could limit our ability to leverage our capital and adversely affect our growth and profitability.

The federal bank regulatory agencies have indicated their view that banks with high concentrations of loans secured by commercial real estate are subject to increased risk and should implement robust risk management policies and maintain higher capital than regulatory minimums to maintain an appropriate cushion against loss that is commensurate with the perceived risk. Federal bank regulatory guidelines identify institutions potentially exposed to commercial real estate concentration risk as those that have (i) experienced rapid growth in commercial real estate lending, (ii) notable exposure to a specific type of commercial real estate, (iii) total reported loans for construction, land development and other land loans representing 100% or more of the institution’s capital, or (iv) total non-owner-occupied commercial real estate (including construction) loans representing 300% or more of the institution’s capital if the outstanding balance of the institution’s non-owner-occupied commercial real estate (including construction) loan portfolio has increased 50% or more during the prior 36 months. At December 31, ~~2024~~2025, the Bank’s construction to total capital ratio was 99100% and the Bank’s non-owner-occupied commercial real estate (including construction) loans to total capital ratio was ~~298~~302%, which exceeded the 300% regulatory guideline threshold set forth in clause (iv) above. As a result, we are deemed to have a concentration in commercial real estate lending under applicable regulatory guidelines. Additionally, at December 31, 2025, the Company’s construction to total capital ratio was 88.1% and the Company’s non-owner-occupied commercial real estate (including construction) loans to total capital ratio was 270.8%. Because a significant portion of our loan portfolio depends on commercial real estate, a change in the regulatory capital requirements applicable to us or a decline in our regulatory capital could limit our ability to leverage our capital as a result of these policies, which could have a material, adverse effect on our business, financial condition and results of operations.


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Further, management has implemented controls to monitor our commercial real estate lending concentrations, but we cannot predict the extent to which regulatory guidelines will impact our operations or capital requirements.

Severe weather, earthquakes, other natural disasters, climate change, pandemics, acts of war or terrorism and other external and geopolitical events could significantly impact the business.

Severe weather, earthquakes, other natural disasters, pandemics, climate change, acts of war or terrorism and other adverse external events could have a significant impact on the Company’s ability to conduct business. Such events could affect the stability of ~~its~~our deposit base, impair the ability of our borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue, cause us to incur additional expenses or disrupt the Company’s operations. Climate change has the potential to increase the frequency and severity of severe weather events in the future. Although management has established disaster recovery policies and procedures, the occurrence of any such events could have a material, adverse effect on our business, financial condition, results of operations or profitability.

The development and use of AI presents risks that may adversely impact our business.

We are evaluating and may continue to expand our use of AI, and other emerging technologies in various aspects of our operations, including customer service, internal processes, risk management, and data analytics. Furthermore, our vendors or third parties may develop or incorporate AI technology in certain business processes, services or products. While these technologies may enhance efficiency and decision-making, their adoption presents risks and challenges.

AI systems may produce inaccurate, biased or inconsistent outputs, including as a result of flawed data, model limitations or inadequate oversight. Reliance on such outputs could lead to operational errors, customer harm, regulatory scrutiny or legal liability. In addition, the use of AI may raise concerns related to data privacy, intellectual property, cybersecurity and model governance, particularly where third-party vendors or externally developed tools are involved. The legal and regulatory environment governing AI remains rapidly evolving. Federal and state regulators may introduce new rules, supervisory expectations or guidance regarding transparency, consumer protection, fair lending, model risk management, data usage or vendor oversight. Compliance with these evolving requirements could increase costs, restrict our use of certain technologies or require modifications to existing processes or systems. Further, failures or perceived misuse of AI technologies could result in reputational harm, loss of customer confidence or competitive disadvantage. Operational disruptions, technology failures or security vulnerabilities associated with AI tools or service providers could adversely affect our business continuity or information security posture. We maintain governance, risk management and oversight processes designed to manage the risks associated with AI, but there can be no assurance that such processes will be effective in identifying or mitigating all risks. As a result, the use of AI and similar technologies could materially and adversely affect our business and results of operations.

Risks Related to Strategic Growth

A merger or acquisition requires us to make estimates, including the fair value of acquired assets and assumed liabilities.

GAAP requires us to record the assets and liabilities of an acquired business to their fair values at the time of the acquisition. With ~~larger~~ transactions, such as our ~~recent~~ merger with IFH, fair value and other estimates can take up to one year to finalize. These estimates, and their revisions, can have a substantial effect on the presentation of our financial condition and operating results after the transaction closes. In addition, the excess of the purchase price over the fair value of the assets acquired, net of liabilities assumed, is recorded as goodwill. If the estimates that we have used at any financial statement date are significantly

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~~significantly~~ revised in the future, there could be a negative impact to our goodwill or other acquisition-related intangibles and our results of operations for the period in which the revisions are made.

If our goodwill were determined to be impaired, it could have a negative impact on our profitability.

GAAP requires that goodwill be tested for impairment at the unit level on at least an annual basis or more frequently upon the occurrence of a triggering event. An impairment loss is to be recognized if the carrying value of the net assets assigned to the reporting unit exceeds the fair value of the reporting unit. A significant decline in our expected future cash flows, a continued period of economic disruption, changes to financial markets, slower growth rates, or other external factors, all of which can be highly unpredictable, may impact fair value calculations and require us to recognize an impairment loss in the future. While goodwill is excluded from regulatory capital, such an impairment may have a material, adverse effect on our financial condition and results of our operations.

Acquisitions may disrupt our business.

The success of our ~~recent~~ merger with IFH or any future acquisition we may consummate will depend on, among other things, our ability to realize anticipated revenue enhancements and efficiencies and to combine our business with the business of the target institution in a manner that does not materially disrupt the existing customer relationships of either institution, or result in decreased revenues resulting from any loss of customers, and that permits growth opportunities to occur. If we are not able to successfully achieve these objectives, the anticipated benefits of the subject acquisition may not be realized fully or at all or may take longer to realize than expected.

It is possible that the integration process associated with any pending or future acquisition could result in the loss of key employees, the disruption of ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits of the ~~acquisitions~~acquisition. Integration efforts could also divert management attention and resources. These integration matters could have ana material and adverse effect on the combined Company.

Risks Related to Ownership of Our Common Stock

The market price of our common stock may be subject to substantial fluctuations, which may make it difficult for you to sell your shares at the volume, prices and times desired.

The market price of our common stock may be highly volatile, which may make it difficult for you to resell your shares at the volume, prices and times desired. There are many factors that may affect the market price and trading volume of our common stock, most of which are outside of our control.

The stock market and the market for financial institution stocks has experienced substantial fluctuations in recent years, which in some cases have been unrelated to the operating performance and prospects of particular companies. In addition, significant fluctuations in the trading volume in our common stock may cause significant price variations to occur. Increased market volatility may materially and adversely affect the market price of our common stock, which could make it difficult for you to sell your shares in the volume and at prices and times desired.

The market price of our common stock could decline significantly and you may experience future dilution due to actual or anticipated issuances or sales of our common stock in the future.

Our board of directors may determine from time to time that we need to raise additional capital by issuing additional shares of our common stock or other securities. We cannot predict the size of future issuances of our common stock or the effect, if any, that future issuances and sales of our common stock

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will have on the market price of our common stock. To the extent we raise additional capital by issuing additional shares of our common stock or other securities convertible into, or exchangeable for, our common stock, you may experience substantial dilution.

Our management and board of directors have significant control over our business.

As of December 31, ~~2024~~2025, our directors, directors of the Bank, our named executive officers and their respective family members and affiliated entities beneficially owned an aggregate of 5,~~452~~438,~~014~~261 shares, or approximately 3233.72% of our issued and outstanding common stock. Consequently, our management and board of directors may be able to significantly affect the outcome of the election of directors and the potential outcome of other matters submitted to a vote of our shareholders, such as mergers, the sale of substantially all of our assets and other extraordinary corporate matters. The interests of these insiders could conflict with the interests of our other shareholders.

Our common stock is subordinate to our existing and future indebtedness and preferred stock.

Our common stock ranks junior to all of our existing and future indebtedness and other non-equity claims with respect to assets available to satisfy claims against us, including claims in the event of our liquidation. As of December 31, ~~2024~~2025, we had ~~outstanding approximately~~ $102.0 1 million in aggregate principal amount of junior subordinated ~~notes~~debentures and ~~$2.1 million~~we inhad no aggregate principal amount of ~~junior~~ subordinated ~~debentures~~notes outstanding. We may incur additional indebtedness in the future to increase our capital resources or if our total capital ratio or the total capital ratio of the Bank falls below the required minimums. Furthermore, our common stock is subordinate to any series of preferred stock we may issue in the future.

Provisions in our governing documents and Maryland law may have an anti-takeover effect, and there are substantial regulatory limitations on changes of control of bank holding companies.

Our corporate organizational documents and provisions of federal and state law to which we are subject contain certain provisions that could have an anti-takeover effect and may delay, make more difficult or prevent an attempted acquisition that you may favor or an attempted replacement of our board of directors or management.

In addition, certain provisions of Maryland law may delay, discourage or prevent an attempted acquisition or change in control. Furthermore, banking laws impose notice, approval, and ongoing regulatory requirements on any shareholder or other party that seeks to acquire direct or indirect “control” of an FDIC-insured depository institution or its holding company. These laws include the BHC Act and the Change in Bank Control Act (“CBCA”). These laws could delay or prevent an acquisition.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 1C. CYBERSECURITY

As a publicly-traded financial institution, we are subject to various cybersecurity risks that could adversely affect our business, financial condition, results of operations, and reputation, including, ~~but not limited to,~~ cyber-attacks against us or our critical third-party service providers. ~~These cyber~~Cyber-attackers ~~can~~may attempt to gain unauthorized access to our ~~digital~~ systems for ~~malicious~~ purposes ~~including,~~such ~~but~~as ~~not limited to:~~ misappropriation of ~~company~~Company assets, accessing ~~Company~~ confidential or sensitive customer non-public information, corrupting or destroying data, ~~causing~~disrupting ~~operational disruptions~~operations, or asmaking ~~part of a~~ ransom ~~demand for payment~~demands. As described below, we believe we have appropriate risk management processes, governance policies, standards, and procedures, a system of internal controls designed to address and mitigate these risks, and experienced internal resources to execute our information security and cybersecurity risk management programs.

InCybersecurity ~~2024,~~threats ~~the~~continue ~~Company’s~~to ~~Board~~evolve ofin ~~Directors~~both ~~approved~~frequency ~~the~~and ~~hiring~~sophistication ofas afinancial ~~full~~institutions ~~time~~increasingly ~~Chief~~rely ~~Information~~on ~~Security~~digital ~~Officer~~channels, ~~(“CISO”)~~remote ~~reporting~~connectivity, tocloud-based ~~the~~services, ~~Company’s Chief Information Officer (“CIO”) to support a focus on information security~~ and ~~support~~third-party ~~the~~technology ~~three~~providers. ~~lines~~While ofwe ~~defense~~devote ~~enterprise~~significant ~~risk~~resources ~~management~~to ~~framework.~~managing ~~Our~~these ~~defense~~risks, ~~enterprise~~no ~~risk~~cybersecurity ~~management~~controls ~~framework~~or ~~includes processes and~~ procedures ~~used~~can toprovide ~~identify,~~absolute ~~assess,~~assurance ~~mitigate,~~that ~~and~~a ~~monitor~~cybersecurity ~~the~~incident ~~risks~~will ~~faced~~not ~~by the Company, including cybersecurity risk~~occur.

~~Within~~Our information security program is designed to preserve the ~~three~~confidentiality, ~~lines~~integrity, and availability of ~~defense~~Company ~~framework~~confidential ~~for~~information, ~~cybersecurity~~customer ~~risk~~non-public personal information, ~~the~~and ~~first~~other ~~line~~data ofmaintained ~~defense~~on isour ~~provided~~systems, byas ~~the~~well ~~Information~~as ~~Technology~~to ~~department~~secure our interfaces with critical third-party service providers. The program is risk-based and ~~business~~tailored ~~lines~~to the size, ~~which~~complexity, ~~are~~and ~~responsible~~risk ~~for~~profile of the ~~design~~Company and ~~execution~~is ofintegrated ~~information~~into ~~security~~the ~~practices~~Company’s ~~and~~broader enterprise risk ~~mitigation~~management framework.

The ~~second~~cybersecurity ~~line~~program ofincludes ~~defense~~administrative, istechnical, ~~provided~~and byphysical ~~the~~safeguards ~~Enterprise~~intended ~~Risk~~to ~~Management~~identify, ~~department~~assess, ~~(led~~manage, ~~by the Company’s Independent Chief Risk Officer (“CRO”))~~ and ~~the~~monitor ~~CISO~~cybersecurity ~~(reporting~~risks toacross the ~~CIO)~~organization. ~~The~~Risk ~~second~~assessments ~~line~~are ofconducted ~~defense~~periodically ~~seeks to identify, assess,~~ and ~~monitor cyber risk,~~ in ~~collaboration~~connection with ~~our~~material ~~first~~technology ~~line~~changes, ~~while~~new ~~maintaining~~products, ~~independence~~and inthird-party ~~the oversight of our information security program~~relationships. ~~The~~Identified ~~CISO~~risks ~~has~~are ~~dotted-line~~prioritized ~~reporting~~and toaddressed ~~the~~through ~~CRO.~~remediation ~~The~~activities, ~~CRO~~risk isacceptance, ~~independent~~or ofother ~~management~~mitigation ~~and~~strategies ~~reports~~consistent towith the ~~Board~~Company’s ~~Risk~~risk ~~Committee Chair~~appetite.

~~The third line of defense is independent Internal Audit~~Additionally, ~~led by our Head of Internal Audit, who is responsible for ensuring that~~ the ~~first~~Company ~~and~~continually ~~second~~works ~~lines~~to ofalign ~~defense~~its ~~are~~policies ~~both designed~~ and ~~operationally~~practices ~~effective~~with inindustry-accepted ~~mitigating~~information ~~cybersecurity~~security ~~risk~~practices ~~through~~as ~~internal~~provided ~~audits~~by ofthe ~~including~~Cyber ~~but~~Risk ~~not limited to: cybersecurity~~Institute, ~~electronic~~Payment ~~banking,~~Card ~~GLBA/Privacy,~~Industry ~~information~~Data ~~security,~~Security ~~information technology~~Standards, and ~~vendor~~other ~~risk~~applicable ~~management.~~standards, ~~The~~laws, ~~Head of Internal Audit is independent of management~~ and ~~reports to the Board Audit Committee Chair~~regulations.

~~Our~~Cybersecurity ~~CISO,~~risk ~~CRO~~considerations are incorporated into strategic planning, ~~CIO~~technology initiatives, and ~~Head~~day-to-day ofbusiness ~~Internal~~operations. ~~Audit~~The ~~have~~Company ~~nearly~~maintains ~~seven~~written ~~decades~~policies, ofstandards, ~~combined~~and ~~work~~procedures ~~experience,~~designed ~~including~~to ~~six~~address ~~decades~~evolving incybersecurity ~~banking~~threats and ~~financial~~regulatory ~~services~~expectations. ~~risk~~These ~~management~~policies define roles and ~~information~~responsibilities ~~security~~for ~~roles,~~employees and ~~maintain~~contractors ~~several~~and ~~industry~~are ~~licenses~~supported ~~and~~by ~~certifications~~ongoing ~~through~~training ~~continuing~~and ~~professional~~awareness ~~education~~activities.

The Company’s ~~information~~utilizes ~~security~~a ~~program~~combination ~~is designed to preserve the confidentiality, integrity, and availability~~ of ~~Company~~internal ~~confidential~~resources ~~information, customer non-public personal information,~~ and ~~other~~external ~~data on our systems as well as securing our interfaces with our critical third-party~~ service providers. ~~Our~~to ~~information~~support ~~security~~elements ~~program~~of ~~takes~~its acybersecurity ~~risk-based~~program, ~~approach~~including tosecurity ~~identifying~~monitoring, ~~and~~threat ~~assessing~~intelligence, ~~the~~vulnerability ~~cybersecurity~~management, ~~risks~~penetration ~~that~~testing, ~~exist~~social ~~within~~engineering ~~our~~testing, ~~business~~ and ~~information~~incident ~~technology~~response ~~systems~~preparedness. ~~The~~These ~~program~~activities ~~addresses~~are ~~the~~designed ~~roles~~to ~~and~~enhance ~~responsibilities of~~ the ~~Board,~~Company’s ~~its~~ability ~~committees~~to prevent, ~~management~~detect, ~~management’s~~and ~~committees,~~respond asto ~~well~~cybersecurity asthreats ~~each~~in ~~individual~~a ~~Company~~timely ~~employee~~manner.

33The Board of Directors is ultimately responsible for the oversight of cybersecurity risk management. The Board, primarily through its Risk Committee, receives periodic updates from management regarding the status and effectiveness of the Company’s information security program, key risk indicators, emerging cybersecurity threats, and significant risk management initiatives. The Board also receives cybersecurity education to support informed oversight.

~~The~~Management ~~Board of Directors~~ is ~~ultimately~~ responsible for ~~the~~implementing ~~oversight~~and ofmaintaining ~~cybersecurity risk management, with~~ the ~~Board Risk Committee assisting the Board with oversight of the~~ Company’s cybersecurity risk ~~program~~management ~~and reporting~~program. ~~The~~Cybersecurity ~~Board~~oversight ~~of Directors appoints the CISO, and the CISO~~ is ~~given~~conducted ~~the~~through ~~full~~established ~~authority~~management of the Board for administering and executing the Company’s written information security program. The CRO and CISO deliver reports to the full Board of Directors on the status and effectiveness of the Company’s written information security program, and reports to the Board Risk Committee any emerging threats or cyber risks on a periodic basis throughout the year. The Board Risk Committee has also approved an Information Security and Cybersecurity Risk Appetite Statement.

At the management level, the Enterprise Risk Management Committee (“ERMC”) is primarily responsible for cybersecurity risk management. The Committee is comprised of senior executives with risk management and information security expertise. The Information Technology Steering Committee (“ITSC”) is a sub-committee of ERMC and is also comprised of senior executives and staff with risk management and information security expertise. ITSC governs the first line of defense cybersecurity risk management activities and furnishes approval items, status reports, and approved Committee minutes to ERMC following a meeting. ERMC governs the second line of defense cybersecurity risk management activities and furnishes key risk indicators, risk assessments, reports, issues and committee minutes to the Board Risk Committee. The CISO assigns quarterly cyber security training to all Company employees and ERMC reviews and approves the training curriculum on an annual basis. Additionally, the CISO ensures the Board receives annual cyber security training.36

Wecommittees ~~strive~~comprised ~~to minimize the occurrence~~ of ~~cybersecurity~~senior ~~incidents~~executives ~~and~~with ~~the~~risk ~~risks resulting from such incidents. However~~management, ~~when a cybersecurity incident does occur~~technology, ~~the Company has in place an incident response program to guide our assessment of~~ and ~~response~~information tosecurity ~~the incident~~expertise. ~~The~~These ~~CISO~~committees ~~coordinates~~provide ~~the Company’s response to a cybersecurity incident~~direction, ~~including~~review ~~investigating,~~program ~~recording~~performance and ~~evaluating~~risk ~~any potential~~metrics, ~~suspected~~approve orkey ~~confirmed~~initiatives, ~~incidents~~and ~~involving~~escalate ~~non-public~~significant ~~customer~~matters ~~information~~to ~~or Company confidential information. The CRO informs~~ senior management and the Board, ~~Risk Chair and Board Audit Committee Chair~~ as ~~soon as practical if a significant security incident occurs~~appropriate. ~~Formal incident reports, if/when applicable, are reviewed by ITSC, ERMC, and the Board Risk Committee.~~

The Company employs ~~third~~a ~~parties~~Chief inInformation ~~fulfilling~~Security ~~certain~~Officer ~~aspects~~who ofis ~~its~~responsible ~~information~~for ~~security~~administering and ~~cybersecurity~~executing ~~programs.~~the ~~For~~Company’s ~~example,~~written weinformation ~~engage third parties to: monitor our network 24/7/365, escalate~~ security ~~alerts,~~program ~~when~~and ~~applicable,~~coordinating ~~perform~~cybersecurity ~~penetration~~risk ~~testing, conduct social engineering tests and assist~~ management ~~with~~activities ~~technology~~across ~~upgrades/installations~~the organization. The ~~CISO~~Chief ~~monitors~~Information ~~information~~Security ~~risks~~Officer ~~posed~~works byclosely ~~third parties and any non-compliance~~ with ~~the~~other ~~controls~~members ~~created~~of tomanagement ~~address such risks. With respect~~ to align cybersecurity ~~incidents~~practices ~~affecting our third-party service providers, the CISO, CRO, and their respective teams, work~~ with ~~our~~business ~~service~~objectives ~~providers to understand~~ and ~~document~~regulatory ~~any incidents, along with managing the impact to us and reporting such significant incidents to senior management, ITSC, ERMC, and the Board Risk Committee~~requirements.

~~While~~The weCompany ~~believe~~maintains ~~that~~a ~~our~~ cybersecurity ~~programs~~incident ~~are~~response ~~appropriate~~program designed to ~~our~~guide ~~risks,~~the ~~cybersecurity~~assessment ~~threats~~of ~~are~~and ~~expected~~response to ~~remain~~cybersecurity ~~high~~incidents. ~~for~~The ~~the~~program ~~foreseeable~~includes ~~future~~defined ~~due~~procedures tofor ~~the~~incident ~~rapidly~~identification, ~~evolving~~investigation, ~~nature~~documentation, ~~and sophistication of these threats~~escalation, asand ~~well~~communication. asIncident ~~due~~response toplans ~~the~~are ~~expanding~~periodically ~~use~~reviewed ofand ~~Internet~~tested ~~banking,~~to ~~mobile~~promote ~~banking~~preparedness and ~~other~~coordination ~~technology-based~~across ~~products~~the ~~and services by us and our customers~~organization.

~~Notwithstanding~~In the ~~investments~~event ~~made~~of ina ~~mitigating~~significant ~~our~~ cybersecurity ~~risks~~incident, wesenior ~~may~~management ~~not~~and bethe ~~successful~~Board inare ~~preventing~~informed orin ~~mitigating~~accordance awith ~~cybersecurity~~established ~~incident~~escalation ~~that could have a material adverse effect on the Company~~protocols. AsThe ~~of the date of this filing, the~~ Company isalso ~~not~~evaluates ~~aware~~whether ~~of any cybersecurity threats or~~ incidents ~~that~~require ~~have~~notification ~~materially affected or are reasonably likely~~ to ~~materially~~customers, ~~affect the Company~~regulators, ~~including~~or ~~its~~other ~~business strategy~~stakeholders, ~~results~~as ~~of operations~~applicable, orbased ~~financial~~on ~~condition.~~the ~~For~~nature ~~further~~and ~~discussion,~~severity ~~please~~of ~~see~~the ~~Item~~incident ~~1A.~~and ~~“Risk~~applicable ~~Factors”~~legal ~~for~~and aregulatory ~~discussion of cybersecurity risks~~requirements.

34The Company manages cybersecurity risks associated with third-party service providers through a third-party risk management program that includes risk-based due diligence, contractual security requirements, and ongoing monitoring. The Company seeks to obtain appropriate assurances regarding third-party security controls and incident notification obligations and monitors third-party performance throughout the lifecycle of the relationship.

While the Company believes that its cybersecurity risk management practices are appropriate for its business and risk profile, cybersecurity threats remain a persistent and evolving risk. The increasing reliance on technology, interconnected systems, and third-party providers heightens the potential impact of a cybersecurity incident.

As of the date of this filing, the Company is not aware of any cybersecurity incidents that have materially affected, or are reasonably likely to materially affect, the Company's business strategy, results of operations, or financial condition. For additional discussion of cybersecurity-related risks, see Item 1A. “Risk Factors.”


			37

ITEM 2. PROPERTIES

Our headquarters are currently located at 2275 Research Boulevard, Suite 600, Rockville, Maryland 20850. The following table summarizes pertinent details of our commercial bank branch locations, mortgage banking offices, loan production offices (“LPO”), government loan servicing offices, and our credit card operations office. Our mortgage offices typically contain both origination and operations professionals.

Location

Owned/Leased

Lease Expiration

Type of office

One Church StreetSuite 100Rockville, MD 20850

Leased

12/31/2026

Commercial Branch

2275 Research Blvd.Suites 600 & 700Rockville, MD 20850

Leased

125/31/~~2026~~2030

Corporate

6711 Columbia Gateway DriveSuite 170Columbia, MD 21046

Leased

11/30/2027

Commercial Branch/LPO

110 Gibraltar RoadSuite 130Horsham, PA 19044

Leased

810/31/~~2026~~2029

OpenSky™ Operations

185 Harry S. Truman ParkwaySuite 100Annapolis, MD 21401

Leased

11/30/2026

Mortgage Office

1400 W Street, NWSuite 170 Washington, DC 20009

Leased

2/28/2033

Commercial Branch

1900 Campus Commons DriveSuite 130Reston, VA 20191

Leased

1/31/2032

Commercial Branch, ~~Mortgage Office~~LPO, and OpenSky™ Headquarters

1104 Kenilworth DriveSuite 210 Towson, MD 21204

Leased

1/31/2027

LPO

550 South Andrews AvenueSuite 640Fort Lauderdale, FL 33301

Leased

8/31/2029

Commercial Branch

8450 Falls of Neuse RoadSuite 204 Raleigh, NC 27615

Owned

~~West~~Commercial ~~Town~~Branch ~~Bank~~and ~~& Trust Operations Headquarters~~Office

7820 West 26th StreetNorth Riverside, IL 60546

Owned

Commercial Branch

320 North Meridian StreetSuite 212Indianapolis, IN 46204

Leased

6/30/~~2026~~2029

Windsor ~~Advantage~~AdvantageTM Office

444 North Wells StreetSuites 205 & 206Chicago, IL 60654

Leased

7/31/2030

Windsor ~~Advantage~~AdvantageTM Office

997 Morrison DriveSuite 503Charleston, SC 29403

Leased

6/30/2027

Windsor ~~Advantage~~AdvantageTM Office

3538

ITEM 3. LEGAL PROCEEDINGS.

From time to time, we are a party to various litigation matters incidental to the ordinary conduct of our business. We are not presently a party to any legal proceedings likely to result in a material, adverse effect on our financial statements.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

3639

PART II

ITEM 5. MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Shareholder Information

The common stock of the Company has been publicly traded since September 2018 and is currently traded on the Nasdaq Global Select Market under the symbol CBNK. As of March 1312, ~~2025~~2026, there were approximately ~~244~~314 holders of record of our common stock.

Dividends

Commencing with the third quarter of 2021, shareholders have received quarterly cash dividends on shares of common stock. Dividends paid in ~~2024~~2025 totaled $57.3 million. As a general matter, the payment of dividends is at the discretion of the Company’s board of directors, based on such factors as operating results, financial condition, capital adequacy and regulatory requirements. Although we have no obligation to pay dividends and we may change our dividend policy at any time without notice to shareholders, the Company anticipates continuing a regular quarterly cash dividend. Any future determination to pay dividends to holders of our common stock will depend on our results of operations, financial condition, capital requirements, banking regulations, contractual restrictions and any other factors that our board of directors may deem relevant.

Our ability to pay dividends on our common stock is dependent on the Bank’s ability to pay dividends to the Company. Various statutory provisions restrict the amount of dividends that the Bank can pay without regulatory approval.

Repurchases of Common Stock

On ~~July~~February 2521, ~~2022~~2025, the Company announced a stock repurchase program. ~~Under~~under ~~the~~which ~~program,~~ the Company iswas authorized to repurchase up to $~~10.0~~15 million of its ~~outstanding common stock, or 500,000 shares of~~ Common Stock, par value $0.01 per share (“Common Stock”)., Onor ~~April~~an ~~13,~~aggregate ~~2023~~of 483,559 ~~the~~shares ~~Company~~of ~~announced~~Common ~~approval~~Stock. ofThe upstock torepurchase anprogram ~~additional~~expired ~~$5.0~~on ~~million~~February ~~or 175~~28,~~000~~ ~~shares~~2026. ofAlthough ~~Common~~the ~~Stock~~Company’s ~~incremental~~stock torepurchase ~~the~~program ~~July~~expired ~~2022~~on ~~announcement.~~February In28, ~~connection~~2026, ~~with~~ the ~~acquisition~~board of ~~IFH~~directors may, ~~the~~from ~~Company~~time ~~temporarily~~to ~~suspended~~time, ~~repurchases~~consider ~~under~~the ~~its~~adoption of additional stock ~~program~~repurchase ~~during~~programs. ~~the~~Any ~~first~~such ~~quarter~~program ofwould ~~2024.~~be ~~The~~dependent ~~Company~~on ~~repurchased~~market ~~543~~conditions,~~215~~ ~~shares~~the ofCompany’s ~~Common~~financial ~~Stock~~condition, ~~under~~capital ~~the~~levels, ~~stock~~regulatory ~~repurchase program~~restrictions, ~~which~~and ~~expired~~other onfactors ~~December~~deemed ~~31,~~appropriate ~~2024~~by the board.

During the ~~three~~year ~~months~~ ended December 31, ~~2024~~2025, the Company ~~did~~repurchased ~~not~~419,643 ~~repurchase~~shares ~~any~~of Common Stock under the stock repurchase program at a weighted-average price of $27.79 per share, totaling $11.7 million.

OnDuring ~~February 21, 2025,~~ the ~~Company~~three ~~announced~~months aended ~~new~~December ~~stock~~31, ~~repurchase program. Under the new stock repurchase program~~2025, the Company isrepurchased ~~authorized to repurchase up to $15 million of its~~ Common Stock, orunder anthe ~~aggregate of 483,559 shares of Common Stock. The new~~ stock repurchase program ~~will~~as ~~expire~~reflected onin ~~February~~the ~~28,~~following ~~2026, but may be limited or terminated at any time without prior notice~~table.


Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
October 1, 2025 to October 31, 2025	64,358	$	28.59	179,713	$	10,058,066
November 1, 2025 to November 30, 2025	132,872	27.56		312,585	6,395,732
December 1, 2025 to December 31, 2025	107,058	28.54		419,643	3,340,197


			40

Equity Compensation Plan Information

The following table provides information as of December 31, ~~2024~~2025, with respect to non-qualified and incentive stock options and restricted stock units (“RSUs”) outstanding and shares available for future awards under the Company’s active equity incentive plans.


Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights	Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights1		Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (excluding securities reflected in column (a))
	(a)	(b)		(c)
Equity compensation plans approved by security holders:

Capital Bancorp, Inc. Amended and Restated 2017 Stock and Incentive Compensation Plan	609,828	$	22.40	810,829
Equity compensation plans not approved by security holders	—	—		—
Total	609,828	$	22.40	810,829

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights	Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (excluding securities reflected in column (a))
	(a)	(b)		(c)
Equity compensation plans approved by security holders:
Capital Bancorp, Inc. Amended and Restated 2017 Stock and Incentive Compensation Plan	614,360	$	21.02	446,794
Equity compensation plans not approved by security holders	—	—		—
Total	614,360	$	21.02	446,794

_______________

(1) Column (b) includes RSUs that can be exercised for no consideration. Excluding RSUs, the weighted-average exercise price would have been $25.21.

Unregistered Sales of Common Stock

There were no unregistered sales of the Company’s stock during the year ended December 31, ~~2024~~2025.

ITEM 6. [Reserved]

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is intended as a review of significant factors affecting the Company’s financial condition and results of operations for the periods indicated. This discussion and analysis should be read in conjunction with the accompanying consolidated financial statements and the related notes.

Non-GAAP Financial Measures

This ~~document~~report contains non-GAAP financial measures denoted throughout our MD&A by reference to “non-GAAP.” We believe these non-GAAP financial measures provide useful information to investors because they are used by management to evaluate our operating performance and to make day-to-day operating decisions. In addition, we believe our non-GAAP results in any given reporting period reflect our on-going financial performance in that period and, accordingly, are useful to consider in addition to our GAAP financial results. We further believe the presentation of non-GAAP results increases comparability of period-to-period results.

Other companies may use similarly titled non-GAAP financial measures that may be calculated differently from the way we calculate such measures. Accordingly, our non-GAAP financial measures may not be comparable to similar measures used by such companies. We caution investors not to place undue reliance on such non-GAAP financial measures, but to consider them with the most directly comparable GAAP measures. Non-GAAP financial measures have limitations as analytical tools and should not be considered in isolation or as a substitute for our results reported under GAAP.


			41

For more information on the computation of non-GAAP financial measures, see “Non-GAAP Financial Measures and Reconciliations.”

Financial Performance

The following summary should be read in conjunction with the MD&A section in its entirety.

Net income of $3157.02 million for the year ended December 31, ~~2024~~2025 ~~decreased~~increased $426.92 million, or 1384.76% when compared to the prior year., ~~Net~~augmented ~~income~~in part by the acquisition of ~~$40~~IFH and strong organic growth.1 ~~million~~Net income as adjusted ~~excludes~~for the ~~impact~~year ended December 31, 2025 of $356.3 million ~~after-tax~~excludes ~~merger-related~~the ~~expenses,~~impact of $3.25 million after-tax impact from ~~the~~issuing ~~Initial~~a ~~IFH~~call ~~ACL~~of ~~Provision~~brokered ontime ~~non-PCD~~deposits ~~loans~~acquired ~~and~~from athe ~~$2.6~~IFH ~~million~~transaction ~~non-recurring~~(“Call ~~equity~~of ~~and~~Brokered ~~debt~~Time ~~investment~~Deposits”) ~~write-down~~and ~~that~~$2.6 ~~was~~million ~~nondeductible for~~ after-tax ~~purposes (non~~merger-~~GAAP)~~related ~~for the year ended December 31, 2024~~expenses. ~~There~~Net ~~were~~income noas ~~adjustments~~adjusted ~~made to net income~~ for the year ended December 31, ~~2023.~~2024 ~~Net~~included ~~interest~~$3.3 ~~income~~million of ~~$154.7~~after-tax ~~million~~merger-related ~~increased~~expenses, $133.2 ~~million~~ from the ~~prior~~Initial ~~year~~IFH ~~primarily~~ACL ~~due~~Provision toon ~~increased~~non-purchased ~~average~~credit ~~balances~~deteriorated ofloans, and $~~325~~2.76 million inof ~~portfolio~~non-recurring ~~loans,~~equity ~~partially~~and ~~offset~~debt byinvestment ~~higher~~write-down ~~funding~~that ~~costs~~was ~~primarily~~nondeductible ~~resulting~~for ~~from~~tax ~~the~~purposes ~~additional average deposit volume funding the loan growth~~(non-GAAP). ~~Interest~~Net interest income ~~included~~of $0196.70 million ~~and~~increased ~~interest expense included~~ $141.42 million from ~~net~~the ~~purchase~~prior ~~accounting~~year ~~amortization~~primarily ~~resulting~~driven ~~from~~by ~~the~~organic ~~IFH~~growth and the acquisition of IFH. For more information on the computation of non-GAAP financial measures, see “Non-GAAP Financial Measures and Reconciliations.”

The net interest margin decreased 3812 basis points to 6.2210% for the year ended December 31, ~~2024~~2025 compared to 6.6022% for the prior year. The ~~elevated~~decrease ~~interest~~was ~~rate~~primarily ~~environment~~driven ~~increased~~by the ~~yield~~acquisition onof ~~cash,~~commercial ~~investments~~loans from IFH, ~~and~~which ~~commercial~~diluted ~~bank~~the ~~loan~~impact ~~yields~~from ~~but~~OpenSky™. ~~was~~For ~~offset~~the byyear aended ~~slightly~~December ~~lower~~31, ~~loan~~2025, ~~yield~~average ~~from~~interest ~~OpenSky~~earning ~~credit~~assets ~~card~~increased ~~loans~~$727.9 ~~The~~million, ~~overall~~or ~~cost~~29.3%, ofto $3.2 billion as compared to the same period in 2024, and the average yield on interest~~-bearing~~ ~~liabilities~~earning assets decreased 46 basis points as a result of the acquisition of commercial loans from IFH, diluting the impact from OpenSkyTM. The Commercial Bank net interest ~~spread~~margin towas 4.8138% for the year ended December 31, ~~2024~~2025, which included 15 basis points related to the Call of Brokered Time Deposits, compared to 53.2593% for the prior year. ~~Core~~For ~~net~~the year ended December 31, 2025, the Commercial Bank average interest ~~margin~~earning assets increased $713.4 million, ~~excluding~~or ~~credit~~30.2%, ~~card~~to ~~loans~~$3.1 (billion as ~~adjusted~~compared to the same period in 2024, driven by the acquired interest-earning assets from IFH and strong organic growth during 2025. The Commercial Bank yield on portfolio loans (non-GAAP), excluding credit card loans) was 46.0099% for the year ended December 31, ~~2024~~2025, which included 4 basis points of purchase accounting accretion, compared to 37.9603% for the prior year, which included 3 basis points of purchase accounting amortization. ~~For~~Excluding purchase accounting, the Commercial Bank loan yield decreased 11 basis points primarily due to changes in the rate environment. Compared to the same period in the prior year, ~~ended~~average ~~December~~interest-bearing 31liabilities increased $548.7 million, ~~2024~~or 35.2%, while the average cost of interest-bearing ~~earning~~liabilities decreased 68 basis points to 3.1% from 3.8%. For additional details, see “Non-GAAP Financial Measures and Reconciliations.”

39For the year ended December 31, 2025, the provision for credit losses was $15.0 million, a decrease of $2.8 million from the prior year. The provision for credit losses for the year-ended December 31, 2024 included the initial IFH ACL provision of $4.2 million. Excluding this, the provision for credit losses increased $1.2 million which was primarily due to increased provision expense for OpenSky™ due to growth in the unsecured credit card portfolio. Net charge-offs for the year ended December 31, 2025 were $12.4 million, or 0.45% of average portfolio loans, compared to $9.0 million, or 0.42% of average portfolio loans, for the same period in 2024. The $12.4 million in net charge-offs during the year ended December 31, 2025 were comprised, in part, of OpenSky™ credit card portfolio net charge-offs, with $5.4 million related to unsecured cards and $1.6 million related to secured and partially secured cards. Further, $3.4 million of net charge-offs were related to commercial and industrial loans, $1.9 million were related to owner-occupied commercial real estate loans, and $0.3 million were related to construction loans.

~~assets~~For ~~increased~~the ~~$342.4~~year ~~million,~~ended orDecember ~~16.0%~~31, ~~to $2.5 billion as compared to the same period in 2023~~2025, ~~and~~noninterest ~~the~~income ~~average~~of ~~yield~~$49.2 onmillion ~~interest earning assets~~ increased ~~3 basis points~~$17.8 ~~The yield on portfolio loans~~million, asor ~~adjusted (non-GAAP, excluding credit card loans) was 7~~56.036%, ~~for~~from the ~~year~~same ~~ended~~period ~~December~~in ~~31,~~ 2024,. ~~compared~~This toincrease ~~6.65%~~was ~~for~~primarily ~~the~~driven ~~prior~~by ~~year.~~reporting ~~Compared~~results tofrom the ~~same~~IFH ~~period~~acquisition infor ~~the~~a ~~prior~~full year, ~~average~~in ~~interest-bearing~~2025 ~~liabilities~~compared ~~increased~~to ~~$288.5 million,~~only orthree ~~22.7%,~~months ~~while~~in ~~the~~2024. ~~average~~Activity ~~cost~~from ofIFH ~~interest-bearing~~included ~~liabilities~~ increased 47government ~~basis~~loan ~~points~~servicing torevenue ~~3.76%~~(Windsor™) ~~from~~of 3$11.~~29%.~~5 ~~For additional details~~million, ~~see~~increased ~~“Non-GAAP~~government ~~Financial~~lending ~~Measures and Reconciliations.”~~

For the year ended December 31, 2024, the provision for credit losses was $17.7 million, an increase of $8.1 million from the prior year. The variance included the Initial IFH non-PCD ACL Provision of $4.2 million and $4.5 million from organic commercial portfolio loan growth, partially offset by a $0.6 million reduction from the OpenSkyTM credit card portfolio. Net charge-offs for the year ended December 31, 2024 were $9.0 million, or 0.42% of average portfolio loans, compared to $8.5 million, or 0.47% of average portfolio loans, for the same period in 2023. The $9.0 million in net charge-offs during the year ended December 31, 2024 was comprised primarily of credit card portfolio net charge-offs, with $3.6 million related to secured and partially secured cards while $3.4 million was related to unsecured cards.

~~For~~revenue ~~the year ended December 31, 2024, noninterest income~~ of $311.49 million ~~increased $6.4 million~~, oroffset ~~25.8%, from the same period in 2023. This increase was primarily driven~~ by ~~contributions~~decreased ~~from the IFH acquisition, including government~~ loan servicing ~~revenue~~rights ~~(Windsor)~~ of $4.0.5 million,. ~~government~~The ~~lending~~noninterest ~~revenue~~income ~~(gain~~also onincreased ~~sale) of~~ $2.36 million ~~and~~as ~~revenue~~a ~~from~~result ~~loan servicing rights~~ of ~~$1.0~~2024 ~~million,~~including ~~offset by a~~ non-recurring equity and debt write-down ~~of $2.6 million~~ related to an IFH investment. ~~Other income increased $0.9 million primarily related to a previous investment in an SBIC, while credit card fees declined $1.3 million.~~

For the year ended December 31, ~~2024~~2025, noninterest expense of $~~126~~155.21 million increased $1528.5 9 million, or 1422.09%, from the same period in ~~2023~~2024, largely due to the IFH acquisition. The increase was primarily driven by a $716.3 1 million, or 1428.98%, increase in salaries and employee benefits, a $3.91 million increase in ~~merger-related~~occupancy ~~expenses~~and equipment, a $23.61 million, ~~or 45.3%,~~ increase in ~~occupancy~~professional ~~and equipment primarily related to increased contract expense from the IFH acquisition~~fees, and a $2.01 million, or 7.86%, increase in data processing expense~~, partially offset by a $1~~.~~4 million, or 15.4%, decrease in professional fees due to a reduction in third party consulting fees.~~

OnTotal ~~October~~assets 1,at ~~2024~~December 31, in2025 ~~connection~~were ~~with the IFH acquisition~~$3.6 billion, ~~the~~an ~~Company~~increase ~~acquired total assets~~ of $~~559~~399.4 3 million, ~~net~~or of12.5%, ~~purchase~~from ~~accounting~~the ~~adjustments~~balance at December 31, ~~including~~2024. ~~gross~~Net portfolio loans, ofwhich ~~$373.5~~exclude ~~million,~~mortgage loans held for sale, oftotaled $413.70 billion ~~million~~at ~~and~~December ~~goodwill~~31, ~~and~~2025, ~~intangible~~an ~~assets~~increase of $37329.2 3 million, ~~while~~or ~~liabilities~~12.5%, ~~assumed~~compared ~~totaled~~to $~~475~~2.96 billion ~~million~~at ~~including~~December ~~total~~31, ~~deposits~~2024. ofTotal liabilities at December 31, 2025 were $~~459~~3.02 billion, an increase of $352.7 million, or 12.4%, ~~For~~from the ~~year~~balance ~~ended~~at December 31, 2024,. ~~the~~Total ~~acquisition~~liability ofgrowth ~~IFH~~was ~~resulted~~primarily indue anto a $331.3 million increase in ~~average~~deposits ~~assets~~and ofa $~~134~~28.3 0 million, an increase in ~~average~~FHLB ~~interest~~advances, ~~earning~~partially ~~assets~~offset ofby ~~$121.8~~a ~~million,~~decrease ~~an increase~~ in ~~average~~other ~~gross~~borrowed ~~loans~~funds of $~~105~~10.0 million when comparing December 31, ~~and~~2025 anto ~~increase~~December in31, ~~average~~2024. ~~total~~Stockholders’ ~~deposits~~equity ofincreased to $~~117~~401.48 million as of December 31, 2025, compared to $355.1 million at December 31, 2024, or 13.1%.

~~Total~~Deposits ~~assets~~were $3.1 billion at December 31, ~~2024 were $3.2 billion~~2025, an increase of $~~980~~331.73 million, or 4412.10%, from the balance at December 31, ~~2023~~2024. ~~Net~~Average ~~portfolio~~deposits ~~loans,~~of ~~which exclude mortgage loans held for sale, totaled~~ $2.69 billion atfor the year ended December 31, ~~2024,~~2025 anincreased ~~increase of~~ $~~726~~711.96 million, or 3832.28%, as compared to ~~$1.9 billion~~the atprior ~~December 31, 2023~~year. ~~Total~~Average ~~liabilities~~noninterest-bearing atdeposit ~~December~~balances ~~31,~~increased ~~2024 were~~ $2136.94 ~~billion,~~million anto ~~increase of~~ $~~880~~811.58 million, orand 44represented 28.72%, ~~from~~of ~~the~~total ~~balance~~average ~~at December 31, 2023. Total liability growth was primarily due to a $865.9 million increase in~~ deposits ~~partially~~for ~~offset~~the byyear aended ~~decrease in other borrowed funds of $15.0 million when comparing~~ December 31, ~~2024 to December 31~~2025, ~~2023.~~as ~~Stockholders’~~compared ~~equity increased~~ to $~~355~~675.14 million, aswhich ofrepresented ~~December~~ 31,.1% ~~2024,~~of ~~compared~~total toaverage ~~$254.9 million~~deposits atfor ~~December~~the ~~31,~~prior ~~2023~~year.

~~Deposits~~The ~~were~~Bank’s OpenSky™ Division, including shared service and corporate allocations contributed $14.6 million of income before taxes for the year ended December 31, 2025, a decrease of $2.7 million for the segment from the prior year. The $2.7 million decrease was primarily attributable to $1.5 million of increased provision for credit losses, $0.8 million of decreased interest income, and $1.3 million of increased data processing expense related to investments in OpenSky™ initiatives and other investments in technology, partially offset by $1.4 million of increased fee revenue from higher credit card fees. Average OpenSky™ loan balances, net of reserves and deferred fees of $125.8 ~~billion~~million atfor the year ended December 31, ~~2024~~2025 increased $10.2 million, anor ~~increase~~8.9%, as compared to the prior year. OpenSky™ loan balances, net of reserves, of $~~865~~142.94 million at December 31, 2025 increased by $14.6 million, or 4511.75%, ~~from~~compared ~~the~~to ~~balance~~$127.8 million at December 31, ~~2023~~2024. ~~Average~~Corresponding ~~deposits~~non-interest bearing deposit balances of $163.2 million at December 31, 2025 decreased $3.2 ~~billion~~million, ~~for~~or ~~the~~4.3%, ~~year~~compared ~~ended~~to $166.4 million at December 31, 2024. ~~increased~~Gross unsecured loan balances of $~~304~~61.4 million at December 31, 2025 increased $18.9 million, or 1644.37%, as compared to ~~the~~$42.4 million ~~prior~~at ~~year~~December 31, 2024. ~~Average~~For the year ended December 31, 2025, noninterest income of $17.4 million increased $1.3 million due primarily to higher credit-~~bearing~~card ~~deposit~~related fees.

40The Bank’s Capital Bank Home Loans division including shared service and corporate allocations contributed a net loss before taxes of $2.6 million for the year ended December 31, 2025 as compared to a net loss before taxes of $2.5 million in the prior year. The Bank’s Capital Bank Home Loans division saw an increase in mortgage originations during the year ended December 31, 2025 when compared to the prior year. The lower interest rate environment increased home loan sales and home loan refinances. Gain on sale margins were up from 2.59% for the year ended December 31, 2024 to 2.70% for the year ended December 31, 2025.

~~balances~~The ~~increased~~Bank’s ~~$20.3 million~~Windsor toAdvantage™ ~~$675.4 million~~division, orincluding ~~31.1%~~shared ofservice ~~total~~and ~~average~~corporate ~~deposits~~allocations, contributed net income before taxes of $5.1 million for the year ended December 31, ~~2024,~~2025 as compared to $~~655~~1.09 million, orfor 35the year ended December 31, 2024.1% ofThe ~~total~~increase ~~average~~was ~~deposits~~primarily ~~for~~driven ~~the~~by ~~prior~~reporting ~~year.~~results

The Bank’s OpenSky™ Division, including shared service and corporate allocations contributed $17.3 million of income before taxes for the year ended December 31, 2024, a decrease of $1.8 million for the segment from the prior year. Average OpenSky™ loan balances, net of reserves and deferred fees of $115.6 million for the year ended December 31, 2024 increased $1.1 million, or 1.0%, as compared to the prior year. OpenSky™ loan balances, net of reserves, of $127.8 million at December 31, 2024 increased by $4.4 million, or 3.6%, compared to $123.3 million at December 31, 2023. Corresponding non-interest bearing deposit balances of $166.4 million at December 31, 2024 decreased $7.5 million, or 4.3%, compared to $173.9 million at December 31, 2023. Gross unsecured loan balances of $42.4 million at December 31, 2024 increased $11.6 million, or 37.7%, compared to $30.8 million at December 31, 2023. For the year ended December 31, 2024, noninterest income of $16.1 million decreased $1.2 million due primarily to a decline in credit card fees as compared to the prior year.43

~~The~~from ~~Bank’s~~the ~~Capital~~IFH ~~Bank~~acquisition ~~Home~~for ~~Loans~~a ~~division~~full ~~including~~year ~~shared~~in ~~service~~2025 ~~and~~compared ~~corporate~~to ~~allocations~~only ~~contributed~~three amonths ~~net~~in ~~loss~~2024. ~~before~~Gross ~~taxes~~government ofloan servicing revenue (Windsor™) totaled $219.6 million, as compared to $4.5 million for the year ended December 31, 2024. asGross ~~compared~~government toloan aservicing ~~net~~revenue ~~loss~~included ~~before~~Capital ~~taxes~~Bank related servicing fees of $34.01 million inand ~~the prior year~~$0.5 million ~~The~~in ~~Bank’s~~2025 ~~Capital~~and ~~Bank~~2024, ~~Home~~respectively. ~~Loans~~When ~~division~~the ~~saw~~gross angovernment ~~increase~~loan inservicing ~~mortgage~~revenue ~~originations~~from ~~during the year ended December 31,~~ 2024 ~~when~~is ~~compared~~annualized to ~~the prior year~~$18.1 million Anthis ~~elevated~~represents ~~interest~~an ~~rate~~increase ~~environment~~of ~~dampened~~$1.5 million, ~~home~~or ~~loan~~8.2%. ~~sales~~from ~~and home loan refinances~~2024. ~~Gain~~Windsor's™ ontotal ~~sale~~servicing ~~margins~~portfolio ~~were~~was ~~down from 2~~$3.~~76%~~1 ~~for~~billion ~~the~~at ~~twelve months ended~~ December 31, ~~2023~~2025, compared to $2.~~59%~~5 ~~for~~billion ~~the~~at ~~twelve months ended~~ December 31, 2024.

The Bank’s Windsor Advantage division, including shared service and corporate allocations, contributed net income before taxes of $1.9 million for the year ended December 31, 2024 following the acquisition of IFH on October 1, 2024. Gross government loan servicing revenue (Windsor) totaled $4.6 million, including $0.6 million of Capital Bank related servicing fees, during the fourth quarter 2024. Windsor's total servicing portfolio was $2.5 billion at December 31, 2024.

Critical Accounting Estimates

The accounting and reporting policies of the Company are in accordance with GAAP and conform to general practices within the banking industry. The Company’s financial position and results of operations are affected by management’s application of accounting policies, including estimates, assumptions, and judgments made to arrive at the carrying value of assets and liabilities and amounts reported for revenues, expenses, and related disclosures. Different assumptions in the application of these policies could result in material changes in the Company’s consolidated financial position and/or results of operations. The Company evaluates its critical accounting estimates and assumptions on an ongoing basis and updates them, as deemed necessary. Management has discussed the Company’s critical accounting policies and estimates with the Audit Committee of the Board of Directors of the Company.

The Company’s accounting policies are fundamental to understanding the Company’s consolidated financial position and consolidated results of operations. Accordingly, the Company’s significant accounting policies are discussed in detail in “Note 1 - Nature of Business and Basis of Presentation” in the “Notes to the Consolidated Financial Statements” contained in Part II, Item 8 "Financial Statements and Supplementary Data.”

The critical accounting and reporting estimates include the Company’s accounting for the ACL. The Company provides additional information on its ACL in “Note 1 - Nature of Business and Basis of Presentation” in the “Notes to the Consolidated Financial Statements” contained in Part II, Item 8 "Financial Statements and Supplementary Data.”

We account for business combinations under ASC 805, Business Combinations using the acquisition method of accounting and record the identifiable assets acquired, liabilities assumed and consideration paid at fair value at the acquisition date. The excess of consideration paid over the fair value of the net assets acquired is recorded as goodwill. The fair values are preliminary estimates subject to adjustments during the measurement period, which does not exceed one year after acquisition. As of December 31, 2025, the measurement period for the acquisition has closed and the acquisition accounting is finalized. The application of business combination principles, including the determination of the fair value of net assets acquired, requires the use of significant estimates and assumptions under ASC 820, Fair Value Measurement. See Note 2 - Business Combination in the “Notes to the Consolidated Financial Statements” to the Consolidated Financial Statements. Determining estimated fair value requires a significant amount of judgment and estimates. As of December 31, 2025, the Company believes that the fair value of the assets acquired, liabilities assumed and consideration paid at fair value at the acquisition date was appropriately determined in accordance with GAAP.

paid at fair value at the acquisition date. The excess of consideration paid over the fair value of the net assets acquired is recorded as goodwill. The fair values are preliminary estimates subject to adjustments during the measurement period, which does not exceed one year after acquisition. The application of business combination principles, including the determination of the fair value of net assets acquired, requires the use of significant estimates and assumptions under ASC 820, Fair Value Measurement. See Note 2 - Business Combination in the “Notes to the Consolidated Financial Statements” to the Consolidated Financial Statements. Determining estimated fair value requires a significant amount of judgment and estimates. If our assumptions change, or errors are determined in its calculations, the fair value could materially change resulting in an adjustment to our goodwill or identifiable net assets acquired, including identified intangible assets. As of December 31, 2024, the Company believes that the fair value of the assets acquired, liabilities assumed and consideration paid at fair value at the acquisition date was appropriately determined in accordance with GAAP.

Recent Accounting Pronouncements

For a discussion of Recent Accounting Pronouncements, see “Part II, Item 8. Financial Statements and Supplementary Data - Notes to Financial Statements - Note 1. Summary of Significant Accounting Policies.”

~~Results of Operations for the Years Ended December 31, 2024 and 2023~~ 44

Results of Operations for the Years Ended December 31, 2025 and 2024

Net Income

The following table sets forth the principal components of net income for the periods indicated.

	Years Ended December 31,
(in thousands)	~~2024~~2025		~~2023~~2024		% Change
Interest income	$	~~213~~260,~~301~~871	$	~~183~~213,~~206~~301	1622.43	%
Interest expense	5864,~~555~~879		4158,~~680~~555		4010.58	%
Net interest income	~~154~~195,~~746~~992		~~141~~154,~~526~~746		926.37	%
Provision for credit losses	1714,~~720~~965		917,~~610~~720		84(15.45)	%
Provision for (release of) credit losses on unfunded commitments	385		(101)		(481.2)	%
Provision for credit losses on unfunded commitments	188		385		(51.2)	%
Net interest income after provision for credit losses	~~136~~180,~~641~~839		~~132~~136,~~017~~641		332.53	%
Noninterest income	3149,~~410~~187		2431,~~975~~410		2556.86	%
Noninterest expense	~~126~~155,~~219~~082		~~110~~126,~~767~~219		1422.09	%
Net income before income taxes	4174,~~832~~944		4641,~~225~~832		-979.52	%
Income tax expense	1017,~~860~~774		10,~~354~~860		463.97	%
Net income	$	3057,~~972~~170	$	3530,~~871~~972	~~-13~~84.76	%

Net income for the year ended December 31, ~~2024~~2025 was $3157.02 million compared to net income of $3531.90 million for the same period in ~~2023~~2024, a 1384.76% ~~decrease.~~increase, ~~Net~~augmented ~~income~~in ~~was~~part ~~$40~~by the IFH acquisition.1 ~~million~~During asthe ~~adjusted~~year, tothe ~~exclude~~Bank issued a call of brokered time deposits acquired from the ~~impact~~IFH transaction (“Call of Brokered Time Deposits”), resulting in the accelerated accretion of $34.36 million, or $3.5 million after-tax ~~merger-related~~income. ~~expenses,~~The Bank also incurred $3.2 .6 million of after-tax ~~impact~~related ~~from~~merger ~~the~~expenses. ~~Initial~~Net ~~IFH~~income, ~~ACL~~as ~~Provision~~adjusted on (non-~~PCD~~GAAP) ~~loans~~to ~~and~~exclude athe after-tax impact of $23.6 5 million ~~non-recurring~~for ~~equity~~the ~~and~~Call ~~debt~~of ~~investment~~Brokered ~~write-down~~Time ~~that~~Deposits ~~was~~and ~~nondeductible~~$2.6 million ~~for~~of after-tax ~~purposes~~related ~~(non-GAAP)~~merger expenses, was $56.3 million for the year ended December 31, ~~2024~~2025. Net interest income increased $1341.2 million, or 926.37%, to $~~154~~196.70 million when comparing the year ended December 31, ~~2024~~2025 to the year ended December 31, ~~2023~~2024, primarily due to ~~increased~~the average balances of portfolio loans increasing by $~~325~~623.71 million ~~in portfolio loans~~, partially offset by higher funding costs primarily resulting from the additional average deposit volume funding loan growth. For more information on the computation of non-GAAP financial measures, see “Non-GAAP Financial Measures and Reconciliations.”

The provision for credit losses for the year ended December 31, ~~2024~~2025 was $1715.70 million, ana ~~increase~~decrease of $82.18 million, or 8415.45%, from the provision for credit losses for the year ended December 31, ~~2023~~2024. The decrease was driven by $4.2 million of lower provisions in the commercial loan portfolio, primarily driven by 2024 including the initial IFH ACL provision of $4.2 million, partially offset by $1.5 million of additional OpenSky™ provisions during the year. Net charge-offs for the year ended December 31, 2025 were $12.4 million, or 0.45% of average portfolio loans, compared to $9.0 million, or 0.42% of average loans for the same period in 2024. Net charge-offs were comprised, in part, of net charge-offs related to OpenSky™ credit card portfolio loans, specifically $5.4 million of net charge-offs were related to unsecured cards and $1.6 million were related to secured and partially secured cards. During the year, there were $2.0 million of recoveries resulting from the sale of charged-off OpenSky™ credit card receivables. Further, $3.4 million of net charge-offs were related to commercial and industrial loans and $1.9 million were related to owner-occupied commercial real estate loans. The $3.4 million of net charge-offs for commercial and industrial loans were primarily attributable to unguaranteed portions of SBA loans. One purchased credit deteriorated (“PCD”) loan represented $1.5 million of the $1.9 million net charge-offs for owner-occupied commercial real estate loans. A specific reserve of $2.8 million was originally recorded for the loan, which was then sold to a third party allowing for $1.3 million of the reserve to be released and the remaining $1.5 million to be charged off.

42For the year ended December 31, 2025, noninterest income was $49.2 million, an increase of $17.8 million, or 56.6%, from $31.4 million in the prior year period, primarily driven by contributions from

variance included the initial IFH ACL provision of $4.2 million on non-PCD loans and $4.5 million from organic commercial portfolio loan growth, partially offset by $0.6 million from OpenSky credit card portfolio. Net charge-offs for the year ended December 31, 2024 were $9.0 million, or 0.42% of average portfolio loans, compared to $8.5 million, or 0.47% of average loans for the same period in 2023. Net charge-offs were comprised, in part, of OpenSky credit card portfolio loans of $3.6 million related to secured and partially secured while $3.4 million was related to unsecured cards.45

~~For~~ the ~~year~~IFH ~~ended December 31, 2024, noninterest income was $31~~acquisition.~~4 million,~~ anActivity ~~increase of $6.4 million, or 25.8%,~~ from ~~$25.0 million in the prior year period primarily driven by contributions from the~~ IFH ~~acquisition.~~included ~~Government~~increased government loan servicing revenue (Windsor™) ~~totaled~~of $411.05 million, increased government lending revenue ~~totaled~~of $21.39 million, ~~and~~offset by decreased loan servicing rights ~~totaled~~of $1.0.5 million,. ~~offset~~Noninterest byincome awas also higher due to 2024 including the non-recurring equity and debt write-down of $2.6 million related to an IFH investment. ~~Mortgage~~Credit ~~banking~~card ~~revenue~~fees of $717.14 million increased $21.34 million, primarily ~~due~~from toother ancredit-card ~~increase~~related infees ~~home~~associated ~~loan~~with ~~sales~~the unsecured product, while ~~credit~~mortgage ~~card~~banking ~~fees~~revenue of $167.05 million ~~declined~~increased $10.3 million ~~from~~as ~~lower~~home ~~interchange~~loan ~~and~~sales ~~other~~remained ~~fee~~stable ~~income recognized~~ compared to the prior year.

Noninterest expense was $~~126~~155.21 million for the year ended December 31, ~~2024~~2025, as compared to $~~110~~126.82 million for the year ended December 31, ~~2023~~2024, an increase of $1528.59 million, or 1422.09% largely due to the IFH acquisition. The change includes increases in salaries and employee benefits expenses of $716.31 million, or 1428.98%, ~~merger-related~~occupancy ~~expenses~~and equipment of $3.91 million, ~~advertising~~professional ~~expenses~~fees of $03.21 million, other operating expenses of $02.83 million, ~~and~~ data processing expense of $2.01 million, loan processing of $1.6 million and regulatory assessment expenses of $1.4 million, partially offset by decreases in ~~professional~~merger-related ~~fees~~expenses of $10.4 6 million, operational and other ~~operational~~card fraud related losses of $0.92 million and advertising expenses of $0.1 million.

Net Interest Income and Net Margin Analysis

Net interest income is our largest component of revenue and driver of net income. Net interest income is the difference between interest income on earning assets and the cost of funds supporting those assets.

We analyze our ability to maximize income generated from interest earning assets and control the interest expenses associated with our liabilities, measured as net interest income, through our net interest margin and net interest spread. Net interest margin is a ratio calculated as net interest income divided by average interest earning assets for the same period. Net interest spread is the difference between average interest rates earned on interest earning assets and average interest rates paid on interest-bearing liabilities.

The table below presents the average balances and weighted average rates of the major categories of the Company’s assets, liabilities and stockholders’ equity for the years ended December 31, ~~2024~~2025 and ~~2023~~2024. Weighted average yields are derived by dividing income by the average balance of the related assets, and weighted average rates are derived by dividing expense by the average balance of the related liabilities, for the periods shown. Average outstanding balances are derived by utilizing average daily balances for the time periods shown. The weighted average yields and rates include amortization of fees, costs, premiums and discounts, which are considered adjustments to yield/rates. Weighted average yields on tax-exempt securities are not calculated on a fully taxable equivalent basis.

4346

AVERAGE BALANCE SHEET AND NET INTEREST ANALYSIS

Years Ended December 31,

2024

2023

2025

2024

($ in thousands)

Average Outstanding Balance

Interest Income/ Expense

Average Yield/ Rate

Average Outstanding Balance

Interest Income/ Expense

Average Yield/ Rate

Assets

Interest earning assets:

Interest-bearing deposits

98194,~~319~~080

48,~~569~~211

4.6523

7098,~~407~~319

34,~~211~~569

4.5665

Federal funds sold

5759

53.2639

~~1,597~~57

743

45.6326

Investment securities available-for-sale

~~228~~236,~~909~~346

56,~~441~~976

2.3895

~~245~~228,~~466~~909

45,~~815~~441

12.9638

Restricted investments

56,~~563~~648

~~373~~410

6.7117

5,~~016~~563

~~346~~373

6.9071

Loans held for sale

12,~~121~~576

~~569~~892

47.6909

512,~~755~~121

~~382~~569

64.6469

Portfolio loans receivable(1)(2)

2,~~142~~765,~~638~~758

~~202~~244,~~346~~380

98.4484

12,~~816~~142,~~968~~638

~~174~~202,~~378~~346

9.6044

Total interest earning assets

23,~~487~~215,~~607~~467

~~213~~260,~~301~~871

8.5711

2,~~145~~487,~~209~~607

~~183~~213,~~206~~301

8.5457

Noninterest earning assets

66133,~~442~~207

4366,~~090~~442

Total assets

23,~~554~~348,~~049~~674

2,~~188~~554,~~299~~049

Liabilities and Stockholders’ Equity

Interest-bearing liabilities:

Interest-bearing demand accounts

~~221~~269,~~437~~224

1,~~003~~513

0.4556

~~201~~221,~~194~~437

~~298~~1,003

0.1545

Savings

612,~~732~~789

2760

0.4047

56,~~768~~732

827

0.1440

Money market accounts

~~704~~960,~~002~~882

2833,~~741~~195

43.0845

~~642~~704,~~013~~002

2328,~~510~~741

34.6608

Time deposits

~~561~~825,~~369~~847

2629,~~399~~003

43.7051

~~360~~561,~~464~~369

1526,~~809~~399

4.3970

Borrowed funds

6337,~~686~~196

21,~~385~~108

32.7498

5963,~~302~~686

2,~~055~~385

3.4774

Total interest-bearing liabilities

12,~~557~~105,~~226~~938

5864,~~555~~879

3.7608

1,~~268~~557,~~741~~226

4158,~~680~~555

3.2976

Noninterest-bearing liabilities:

Noninterest-bearing liabilities

3453,~~043~~197

2434,~~026~~043

Noninterest-bearing deposits

~~675~~811,~~360~~798

~~655~~675,~~013~~360

Stockholders’ equity

~~287~~377,~~420~~741

~~240~~287,~~519~~420

Total liabilities and stockholders’ equity

23,~~554~~348,~~049~~674

2,~~188~~554,~~299~~049

Net interest spread

45.8103

54.2581

Net interest income

~~154~~195,~~746~~992

~~141~~154,~~526~~746

Net interest margin (3)

6.2210

6.6022

_______________

(1)Includes nonaccrual loans.

(2)For the years ended December 31, ~~2024~~2025 and ~~2023~~2024, ~~portfolio~~collectively, ~~loans~~Commercial ~~yield~~Bank ~~excluding~~Loan ~~credit~~Yield ~~card loans~~ was 76.0399% and 67.6503%, respectively.

(3)For the years ended December 31, ~~2024~~2025 and ~~2023~~2024, ~~credit~~collectively, ~~card~~Commercial ~~loans~~Bank ~~accounted~~Net ~~for~~Interest ~~222~~Margin ~~and~~was ~~264~~4.38% ~~basis~~and ~~points of the reported net interest margin~~3.93%, respectively.

The net interest margin decreased 3812 basis points to 6.2210% for the year ended December 31, ~~2024~~2025 from the same period in ~~2023.~~2024, ~~Net~~primarily ~~interest~~driven ~~margin~~by the commercial loans acquired from IFH, ~~excluding~~for ~~credit~~a ~~card~~full ~~loans~~year in 2025 compared to only one quarter in 2024, ~~was~~and 4strong organic growth in the Commercial Bank loan portfolio which further diluted the impact from OpenSky™.~~00%~~ Commercial ~~and~~Bank 3net interest margin increased to 4.9638%, ~~respectively,~~ for ~~years~~the year ended December 31, ~~2024~~2025, ~~and~~which ~~2023~~included 15 basis points from the Call of Brokered Time Deposits, compared to 3.93% for the same period in 2024. For more information on the computation of non-GAAP financial measures, see “Non-GAAP Financial Measures and Reconciliations.”

4447

For the year ended December 31, ~~2024~~2025, average interest earning assets increased $~~342~~727.4 9 million, or 1629.03%, to $23.5 2 billion as compared to the same period in ~~2023~~2024, and the average yield on interest earning assets ~~increased~~decreased 346 basis points. Compared to the same period in the prior year, average interest-bearing liabilities increased $~~288~~548.5 7 million, or 2235.72%, while the average cost of interest-bearing liabilities ~~increased~~decreased 4768 basis points to 3.7608% from 3.2976%.

Rate/Volume Analysis of Net Interest Income

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 changes in the volume of average earning assets and interest-bearing liabilities, and the changes in net interest income due to changes in interest rates.

Year Ended December 31, 2024

Year Ended December 31, 2023

Year Ended December 31, 2025

Year Ended December 31, 2024

Compared to

December 31, 2023

December 31, 2022

December 31, 2024

December 31, 2023

Change Due To

Interest Variance

Change Due To

Interest Variance

(In thousands)

Volume

Rate

Volume

Rate

Interest Income:

Interest-bearing deposits

14,~~295~~054

63(412)

13,~~358~~642

(31,~~937)~~295

~~5,141~~63

1,~~204~~358

Federal funds sold

~~(81)~~—

10(1)

(711)

(6381)

9310

30(71)

Investment securities available-for-sale

~~(394)~~219

1,~~020~~316

~~626~~1,535

(67394)

~~970~~1,020

~~903~~626

Restricted investments

3767

(1030)

2737

~~(32)~~37

~~103~~(10)

7127

Loans held for sale

~~299~~32

~~(112)~~291

~~187~~323

~~(261)~~299

~~208~~(112)

~~(53)~~187

Portfolio loans receivable excluding credit card loans

2242,~~773~~816

~~6,470~~(809)

2942,~~243~~007

1422,~~597~~773

186,~~060~~470

3229,~~657~~243

Credit card loans

~~585~~4,858

(14,~~860~~831)

~~(1,275)~~27

~~(6,413)~~585

4(1,~~161~~860)

(21,~~252~~275)

Total interest income

2452,~~514~~046

5(4,~~581~~476)

3047,~~095~~570

324,~~824~~514

285,~~736~~581

3230,~~560~~095

Interest Expense:

Interest-bearing demand accounts

91267

~~614~~243

~~705~~510

~~(79)~~91

~~203~~614

~~124~~705

Savings

428

155

1933

(4)

715

319

Money market accounts

28,~~529~~862

2(4,~~702~~408)

54,~~231~~454

32,~~244~~529

152,~~737~~702

185,~~981~~231

Time deposits

9,~~473~~266

1(6,~~117~~662)

102,~~590~~604

89,~~527~~473

41,~~379~~117

1210,~~906~~590

Borrowed funds

~~170~~(787)

~~160~~(490)

~~330~~(1,277)

~~(637)~~170

~~264~~160

~~(373)~~330

Total interest expense

1217,~~267~~636

4(11,~~608~~312)

166,~~875~~324

1112,~~051~~267

204,~~590~~608

3116,~~641~~875

Net interest income

1234,~~247~~410

~~973~~6,836

1341,~~220~~246

(712,~~227)~~247

~~8,146~~973

~~919~~13,220

When comparing the years ended December 31, ~~2024~~2025 to ~~2023~~2024, the largest positive impact to total interest income was the growth in interest earning assets, strengthened in part by the IFH acquisition. Growth (change due to volume) in the loan portfolio, excluding credit cards, contributed $2242.8 million and growth in credit card loans contributed $4.9 million to the increase in interest income,. ~~while~~Growth ~~elevated~~in ~~interest~~the ~~rates~~loan onand ~~portfolio~~credit ~~loans~~card ~~contributed~~portfolios ~~$6.5~~were ~~million~~both partially offset by decreased interest rates for the year ended December 31, ~~2024~~2025 compared to the prior year. On a standalone basis, interest income attributable to the ~~credit~~interest-bearing ~~card~~deposits ~~portfolio~~contributed ~~declined by~~ $1.3.6 million ~~year over year primarily due~~ to athe ~~reduction~~increase in ~~yield~~interest income. The variance in interest expense year over year was primarily impacted by growth in interest-bearing liabilities, augmented in part by the IFH acquisition. Growth in interest bearing liabilities contributed $1217.36 million to increased interest expense, including $9.53 million from growth in time deposits and $8.9 million from growth in money market accounts, partially ~~offsetting~~offset ~~the~~by ~~increase~~rate insavings ~~total~~of ~~interest~~$6.7 ~~income~~million for time deposits and $4.4 million for money market accounts.


			48

Provision for Credit Losses

The provision for credit losses represents the amount of expense charged to current earnings to fund the ACL. For a description of the factors taken into account by our management in determining the ACL, see “Financial Condition— Allowance for Credit Losses.”

For the year ended December 31, ~~2024~~2025, the provision for credit losses was $1715.7 0 million, ana ~~increase~~decrease of $82.1 8 million from the recorded provision for credit losses of $917.6 7 million for the year ended December 31, ~~2023~~2024. The ~~variance~~decrease ~~included~~was driven by $4.2 million of lower provisions in the ~~Initial~~commercial ~~IFH~~loan ~~ACL~~portfolio, ~~provision~~primarily ondriven ~~non-PCD~~by ~~loans~~the ofinitial ~~$4.2~~IFH ~~million~~ACL ~~and~~provision of $4.52 million ~~from~~recognized ~~organic~~in ~~commercial portfolio loan growth~~2024, partially offset by a $01.6 5 million ~~reduction~~of ~~from~~additional ~~the~~OpenSky™ ~~OpenSkyTM~~provisions ~~credit~~during ~~card~~the ~~portfolio~~year. Net charge-offs for the year ended December 31, ~~2024~~2025 were $912.04 million, or 0.4245% of average portfolio loans, compared to $89.50 million, or 0.4742% of average ~~portfolio~~ loans, for the same period in ~~2023~~2024. The $912.04 million in net charge-offs during the year ended December 31, ~~2024~~2025 was comprised primarily of credit card portfolio net charge-offs, with $31.6 million related to secured and partially secured cards while $35.4 million was related to unsecured cards. During the year, there was $2.0 million of recoveries resulting from the sale of charged off OpenSky™ credit card receivables included within net charge-offs. The sale of charged off OpenSky™ credit card receivables reduced the reserve required for OpenSky™, resulting in a $1.3 million reduction to the provision. Further, $3.4 million of net charge-offs were related to commercial and industrial loans and $1.9 million were related to owner-occupied commercial real estate loans. The $3.4 million of net charge-offs for commercial and industrial loans were primarily attributable to unguaranteed portions of SBA loans. One PCD loan represented $1.5 million of the $1.9 million net charge-offs for owner-occupied commercial real estate loans. A specific reserve of $2.8 million was originally recorded for the loan, which was then sold to a third party resulting in the release of $1.3 million from the reserve, with the remaining $1.5 million to be charged off.

The ACL as a percent of portfolio loans was 1.85% at December 31, ~~2024~~2025 asand ~~compared to 1.50% at~~ December 31, ~~2023~~2024. While the legacy Capital Bank portfolio credit metrics are relatively consistent with prior year, the increase in the ACL provision year-over-year is attributable to the IFH acquisition, most notably a few PCD loans that required elevated ACL coverage and are not consistent with the current product offering and stronger underwriting at IFH at the time of the acquisition. The maintenance of a high-quality loan portfolio, with an adequate allowance for expected credit losses, will continue to be a primary objective for the Company. See additional discussion regarding the Company’s ACL and reserve for unfunded commitments credit exposures at December 31, ~~2024~~2025 in “Financial Condition - Allowance for Credit Losses.”

Noninterest Income

A primary source of recurring noninterest income are credit card fees, such as interchange fees and statement fees, ~~mortgage banking revenue and~~ Windsor Advantage™ fee income in connection with its servicing, processing and packaging of SBA and USDA loans for its financial institution clients, and mortgage banking revenue. Noninterest income does not include (i) loan origination fees to the extent they exceed the direct loan origination costs, which are generally recognized over the life of the related loan as an adjustment to yield using the interest method or (ii) annual, renewal and late fees related to our credit card portfolio, which are generally recognized over the twelve month life of the related loan as an adjustment to yield using the interest method.


			49

The following table presents, for the periods indicated, the major categories of noninterest income:

	Years Ended December 31,
(in thousands)	~~2024~~2025		~~2023~~2024		% Change
Noninterest income:
Service charges on deposit accounts	$	~~883~~1,316	$	~~964~~883	(849.4)0	%
Credit card fees	1517,~~999~~366		1715,~~273~~999		(78.4)5
Mortgage banking revenue	7,~~146~~472		47,~~896~~146		464.06
Government lending revenue	24,~~301~~222		—2,301		83.5
Government loan servicing and packaging revenue	315,~~993~~513		—3,993		288.5
Loan servicing rights (government guaranteed)	1,013		—
Loan servicing rights	545		1,013		(46.2)
Non-recurring equity and debt investment write-down	~~(2,620)~~—		—(2,620)		(100.0)
Other income	2,~~695~~753		12,~~842~~695		462.32
Total noninterest income	$	3149,~~410~~187	$	2431,~~975~~410	2556.86	%

46For the year ended December 31, 2025, noninterest income of $49.2 million increased $17.8 million, or 56.6%, from the same period in 2024. This increase was primarily due to the contributions from the IFH acquisition for a full year in 2025 compared to only three months in 2024. Noninterest income for the year-ended December 31, 2024 included a $2.6 million non-recurring equity and debt write-down related to an IFH investment. Excluding this, non-interest income increased $15.2 million, which was driven by an increase in government loan servicing revenue (Windsor™) of $11.5 million, an increase in government lending revenue of $1.9 million, an increase in credit card fees of $1.4 million, and an increase in mortgage banking revenue of $0.3 million.

~~For~~Mortgage banking revenue of $7.5 million for the year ended December 31, ~~2024~~2025, ~~noninterest income of $31.4 million~~ increased $60.43 million, oras ~~25.8%,~~home ~~from~~loan ~~the~~sales ~~same~~remained ~~period~~stable incompared ~~2023 primarily due~~ to ~~contributions from~~ the ~~IFH~~prior ~~acquisition~~year. ~~Government~~For ~~loan~~the ~~servicing~~year ~~revenue~~ended ~~(Windsor~~December ~~Advantage)~~31, ~~totaled $4.0 million~~2025, ~~government~~credit ~~lending~~card ~~revenue~~fees ~~totaled~~of $217.3 4 million ~~and~~increased ~~revenue from loan servicing rights totaled~~ $1.0 4 million, ~~offset~~primarily byas a ~~non-recurring~~result ~~equity~~of ~~and debt write~~credit-~~down~~card ~~of $2.6 million~~ related tofees a legacy IFH investment. In December of 2024 the Company became aware of certain financial conditions at a legacy IFH investment which indicated the need to evaluate the investment for impairment. Based upon the Company’s financial evaluation of a legacy IFH investment it was determined that the value of the Company’s investment in a legacy IFH investment was impaired and a write-down of the investment value was required. The Company does not hold any additional equity securities nor does the Company plan to enter into equity security arrangements in the future, therefore the Company does not expect any future deferred tax benefits associated with the ~~impairment.~~unsecured product.

~~Mortgage~~The ~~banking~~Bank’s ~~revenue~~Capital Bank Home Loans division experienced an increase of $711.~~1 million,~~7% ~~for~~in mortgage originations during the year ended December 31, ~~2024,~~2025 ~~increased~~when ~~$2.3 million~~compared ~~due~~ to anthe ~~increase~~prior inyear. ~~home~~Origination ~~loan~~volumes ~~sales~~increased as$35.0 million, ~~compared~~ to ~~the prior year~~$334.1 million, ~~For~~for the year ended December 31, ~~2024~~2025, ~~credit~~when ~~card~~compared ~~fees~~to of $16299.01 million ~~declined~~for the $1same period in the prior year.~~3 million~~ asGain aon ~~result~~sale ofmargins ~~lower~~were ~~interchange~~up ~~and~~from ~~other~~2.59% ~~fee~~for ~~income~~the ~~recognized~~year ~~compared~~ended December 31, 2024 to ~~the~~2.70% ~~prior~~for the year ended December 31, 2025.

~~The~~ ~~Bank’s~~Mortgage ~~Capital~~loans ~~Bank~~sold ~~Home~~are ~~Loans~~subject ~~division~~to ~~experienced~~repurchase anin ~~increase~~circumstances ofwhere ~~48.7%~~documentation inis ~~mortgage~~deficient ~~originations~~or ~~during~~ the ~~year~~underlying ~~ended~~loan ~~December~~becomes ~~31,~~delinquent ~~2024~~or ~~when~~pays ~~compared~~off towithin ~~the~~a ~~same~~specified period infollowing ~~the~~loan ~~prior~~funding ~~year~~and sale. ~~Origination~~The ~~volumes~~Bank ~~increased~~has ~~$98~~established a reserve for possible repurchases.~~0 million,~~ toThe reserve was $~~299~~2.13 million, ~~for~~at ~~the year ended~~ December 31, ~~2024,~~2025 ~~when~~and ~~compared to~~ $~~201~~2.13 million ~~for the~~at ~~same~~December ~~period~~31, ~~in the prior year~~2024. ~~Gain~~The onBank ~~sale~~did ~~margins~~not ~~were~~repurchase ~~down~~any ~~from~~loans ~~2.76%~~during ~~for~~ the ~~twelve~~year ~~months~~ ended December 31, ~~2023~~2025. toThe ~~2.59%~~Bank ~~for~~repurchased one loan totaling $296 thousand during the year ended December 31, 2024. The Bank does not originate “sub-prime” mortgage loans and has no exposure to this market segment.

Mortgage loans sold are subject to repurchase in circumstances where documentation is deficient or the underlying loan becomes delinquent or pays off within a specified period following loan funding and sale. The Bank has established a reserve under generally accepted accounting principles for possible repurchases. The reserve was $2.3 million at December 31, 2024 and $1.0 million at December 31, 2023. The Bank repurchased one loan totaling $296 thousand during the year ended December 31, 2024. The Bank repurchased one loan totaling $597 thousand during the year ended December 31, 2023. The Bank does not originate “sub-prime” mortgage loans and has no exposure to this market segment.

Noninterest Expense

Generally, noninterest expense is comprised of all employee expenses and costs associated with operating our facilities, obtaining and retaining customer relationships and providing bank services, with the largest component being salaries and employee benefits expenses. Noninterest expense also includes operational expenses, such as occupancy and equipment expenses, professional fees, advertising expenses, loan processing expenses and other general and administrative expenses, including FDIC assessments, communications, travel, meals, training, supplies and postage.

4750

The following table presents, for the periods indicated, the major categories of noninterest expense:

	Years Ended December 31,
(in thousands)	~~2024~~2025		~~2023~~2024		% Change
Noninterest expense:
Salaries and employee benefits	$	5672,~~037~~169	$	4856,~~754~~037	1428.98	%
Occupancy and equipment	811,~~244~~392		58,~~673~~244		4538.32
Professional fees	710,~~846~~959		97,~~270~~846		~~(15~~39.4)7
Data processing	2729,~~689~~788		2527,~~686~~689		7.86
Advertising	6,~~359~~262		6,~~161~~359		3(1.25)
Loan processing	23,~~431~~988		12,~~633~~431		4864.90
Foreclosed real estate expenses, net	2		7		(71.4)
Merger-related expenses	3,361		3,930		(14.5)
Merger-related expenses	3,930		—
Operational and other card fraud related losses	3,509		3,714		(5.5)
Operational losses	3,714		4,613		(19.5)
Regulatory assessment expenses	3,371		1,937		74.0
Outside service providers	1,878		1,932		(2.8)
Other operating	10,283		8,032		28.0
Regulatory assessment expenses	1,937		1,649		17.5
Total noninterest expense	$	155,082	$	126,219	22.9	%
Other operating	6,152		5,389		14.2
Total noninterest expense	$	126,219	$	110,767	14.0	%

For the year ended December 31, ~~2024~~2025, noninterest expense of $~~126~~155.21 million increased $1528.59 million, or 1422.09%, from the same period in ~~2023~~2024, primarily from the IFH acquisition. The increase was primarily driven by a $716.31 million, or 1428.98%, increase in salaries and employee benefits due largely to the acquisition of IFH. ~~Merger-related~~and ~~expenses~~headcount ~~were $3~~growth.~~9 million.~~ ~~Occupancy~~Professional ~~and~~fees ~~equipment expense~~ increased $23.61 million, or 4539.37%, ~~primarily~~most ~~related~~of towhich ~~increased~~is ~~contract~~comprised ~~expense~~of ~~from~~professional ~~the~~fees ~~IFH~~associated ~~acquisition~~with ofinvestments $0in shared service areas.5 ~~million~~Occupancy and ~~software~~equipment ~~depreciation~~expense ofincreased $03.4 1 million, or 38.2%, ~~Other~~other operating expenses increased $02.83 million, ~~including~~or ~~an increase in insurance related expenses and other miscellaneous expenses~~28.0%, ~~Data~~data processing expense increased $2.01 million, or 7.86%, ~~outside~~and ~~service~~loan ~~providers~~processing ~~expense~~fees ~~decreased~~increased $0.1.6 million, or 264.80%. ~~and~~Regulatory ~~professional~~assessment ~~fees~~expenses ~~decreased~~increased $1.4 million, orprimarily 15in consequence of the acquisition of IFH. Merger-related expenses of $3.4 million decreased $0.6 million, or 14.5%, from the same period due to athe ~~reduction~~acquisition inaccounting ~~third~~being ~~party~~finalized ~~consulting~~on ~~fees.~~September 30, 2025.

Income Tax Expense

The amount of income tax expense we incur is influenced by our pre-tax income, our tax exempt revenue and our nondeductible expenses. Deferred tax assets and liabilities are reflected at enacted tax rates in effect for the period in which the deferred tax assets and liabilities are expected to be realized or settled. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.

Income tax expense was $1017.98 million for ~~2024~~2025 compared to $10.49 million for ~~2023~~2024. Our effective tax rates for those periods were 2623.07% and 2226.40%, respectively. The elevated tax rate in 2024 resulted from the non-deductibility of a non-recurring equity and debt investment write down, inassociated with a legacy IFH investment, along with certain merger-related expenses. In December of 2024, the Company became aware of certain financial conditions in a legacy IFH investment which indicated the need to evaluate the investment for impairment. Based upon the Company’s financial evaluation of athat ~~legacy IFH~~ investment, it was determined that ~~the value of the Company’s investment in~~ a ~~legacy IFH investment was impaired and a~~ write-down of the investment value was required. The Company does not hold any additional equity securities,; therefore, the Company does not expect any future deferred tax benefits associated with ~~the~~such ~~impairment~~investment.

4851

Financial Condition

The following table summarizes the Company’s financial condition at the dates indicated.

	December 31,						Change expressed in:
(in thousands, except per share data)	~~2024~~2025			~~2023~~2024			Dollars		Percent
Total assets	$	3,~~206~~606,~~911~~207		$	23,~~226~~206,~~176~~911		$	~~980~~399,~~735~~296	4412.15	%
Investment securities available-for-sale	~~223~~230,~~630~~083			~~208~~223,~~329~~630			156,~~301~~453		72.39
Mortgage loans held for sale	2125,~~270~~828			717,~~481~~063			138,~~789~~765		~~184~~51.34
Portfolio loans receivable, net of deferred fees and costs	2,~~630~~959,~~163~~457			12,~~903~~630,~~288~~163			~~726~~329,~~875~~294		3812.25
Allowance for credit losses	4854,~~652~~660			2848,~~610~~652			206,~~042~~008		7012.13
Deposits	23,~~761~~093,~~939~~200			12,~~895~~761,~~996~~939			~~865~~331,~~943~~261		4512.70
FHLB borrowings	2250,000			22,000			—28,000		—127.3
Other borrowed funds	122,062			2712,062			(1510,000)		(5582.49)
Total stockholders’ equity	~~355~~401,~~139~~757			~~254~~355,~~860~~139			~~100~~46,~~279~~618		3913.31
Tangible common equity(1)	~~312~~361,~~685~~017			~~254~~318,~~860~~196			5742,~~825~~821		2213.75
Equity to total assets at end of period	11.0714		%	11.4507		%			(30.3)6
Weighted average number of basic shares outstanding	1416,~~584~~582			14,~~003~~584					413.17
Weighted average number of diluted shares outstanding	1416,~~640~~768			14,~~081~~640					414.05
Common shares outstanding	16,~~663~~373			1316,~~923~~663					19(1.7)
Book value per share	$	2124.3154		$	1821.31				1615.42
Tangible book value per share(1)	$	1822.7705		$	1819.3110				215.54
Dividends per share	$	0.3644		$	0.2836				2822.62

_______________

(1) See “Non-GAAP Financial Measures and Reconciliations” for a reconciliation of non-GAAP measures.

Total assets at December 31, ~~2024~~2025 increased $~~980~~399.73 million from the balance at December 31, ~~2023~~2024. OnNet ~~October~~portfolio 1loans, ~~2024,~~which inexclude ~~connection~~mortgage ~~with~~loans ~~the~~held ~~IFH~~for ~~acquisition~~sale, ~~the~~totaled ~~Company acquired total assets of~~ $~~559~~3.40 ~~million,~~billion ~~net~~as of ~~purchase~~December ~~accounting~~31, ~~adjustments~~2025, ~~including~~an ~~gross~~increase ~~loans~~ of $~~373~~329.53 million, ~~loans~~or ~~held for sale of $41~~12.752%, ~~million~~from ~~and goodwill and intangible assets of~~ $~~37.~~2 ~~million while liabilities assumed totaled $475~~.96 ~~million~~billion ~~including~~at ~~total~~December ~~deposits~~31, ~~of $459~~2024.0 ~~million.~~Deposits ~~Net portfolio loans, which exclude mortgage loans held for sale,~~ totaled $23.6 1 billion asat of December 31, ~~2024~~2025, an increase of $~~726~~331.93 million, ~~or 38.2%,~~ from $12.9 8 billion at December 31, ~~2023~~2024.

Investment Securities

To manage liquidity and supplement interest income earned on our loan portfolio, the Company invests in U.S. Treasuries, high-quality mortgage-backed securities (“MBS”), government agency bonds, asset-backed securities and high-quality municipal and corporate bonds. The asset-backed securities are comprised of student loan collateral issued by the Federal Family Education Loan Program, which includes a minimum of a 97% government repayment guarantee, as well as additional support in excess of the government guaranteed portion.

The following tables summarize the contractual maturities, without consideration of call features or pre-refunding dates, and weighted-average yields, of investment securities at December 31, ~~2024~~2025 and the amortized cost and carrying value of those securities as of the indicated dates. The weighted average yields were calculated by multiplying the amortized cost of each individual security by its yield, dividing that figure by the portfolio total, and then summing the value of these results. toYields ~~arrive~~on attax-exempt ~~the~~investments ~~weighted~~are not calculated on a fully tax equivalent basis.

4952

average yield. Yields on tax-exempt investments are not calculated on a fully tax equivalent basis.


	One Year or Less				More Than One Year Through Five Years				More Than Five Years Through Ten Years				More Than Ten Years				Total
At December 31, 2025	Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Fair Value		Weighted Average Yield
(in thousands)
Securities Available-for-Sale:
U.S Treasuries	$	53,772	2.19	%	$	67,956	1.90	%	$	20,653	1.48	%	$	—	—	%	$	142,381	$	137,236	1.95	%
Municipal	338		4.78		578		4.81		12,193		6.70		2,506		2.09		15,615		13,897		5.85
Corporate	—		—		2,000		8.00		1,500		3.75		—		—		3,500		3,404		6.18
Asset-backed securities	—		—		—		—		—		—		5,013		5.59		5,013		5,026		5.59
Mortgage-backed securities	—		—		36,739		3.96		3,770		4.41		30,636		4.82		71,145		70,520		4.35
Total	$	54,110	2.21	%	$	107,273	2.73	%	$	38,116	3.53	%	$	38,155	4.74	%	$	237,654	$	230,083	3.06	%

	One Year or Less				More Than One Year Through Five Years				More Than Five Years Through Ten Years				More Than Ten Years				Total
At December 31, 2024	Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Fair Value		Weighted Average Yield
(in thousands)
Securities Available-for-Sale:
U.S Treasuries	$	20,003	1.60	%	$	96,147	1.56	%	$	20,681	1.47	%	$	—	—	%	$	136,831	$	126,835	1.55	%
Municipal	—		—		905		4.85		4,104		4.47		6,689		1.91		11,698		9,283		3.04
Corporate	—		—		—		—		5,000		4.31		—		—		5,000		4,711		4.31
Asset-backed securities	—		—		—		—		—		—		5,501		6.35		5,501		5,526		6.35
Mortgage-backed securities	5,908		4.96		38,835		4.14		1,890		4.49		33,306		4.15		79,939		77,275		4.21
Total	$	25,911	2.37	%	$	135,887	2.32	%	$	31,675	2.49	%	$	45,496	4.09	%	$	238,969	$	223,630	2.71	%

As described in “Note 3 - Investment Securities” in the “Notes to the Consolidated Financial Statements” at December 31, 2025, management determined the Company does not have the intent to sell, nor is it more likely than not that it will be required to sell, available-for-sale debt securities in an unrealized loss position at December 31, 2025 before it is able to recover the amortized cost basis. Further, management reviewed the Company’s holdings as of December 31, 2025 and concluded that there were no credit-related declines in fair value. Additional information related to the types of securities held at December 31, 2025, other than securities issued or guaranteed by U.S. Government entities or agencies, is as follows:

AsCorporate ~~described in “Note 3 - Investment~~ Securities” in– ~~the~~There ~~“Notes to the Consolidated Financial Statements” at December 31, 2024, management determined the Company does not~~ have ~~the~~been ~~intent~~no topayment ~~sell,~~defaults ~~nor~~on isany itof ~~more likely than not that it will be required to sell, available-for-sale debt securities in an unrealized loss position at December 31, 2024 before it is able to recover~~ the ~~amortized cost basis. Further, management reviewed the~~ Company’s holdings as of ~~December~~corporate ~~31,~~debt ~~2024 and concluded there were no credit-related declines in fair value~~securities. ~~Additional~~There ~~information~~are ~~related~~three tosecurities ~~the~~all ~~types~~ of ~~securities~~which ~~held~~are atsubordinated ~~December~~debt ~~31,~~of ~~2024,~~ other ~~than~~financial ~~securities~~institutions ~~issued~~with orface ~~guaranteed~~amounts byranging Ufrom $0.S.5 million ~~Government~~to ~~entities or agencies, is as follows:~~$2 million.

~~Corporate~~Municipal Securities – ~~There~~All of the Company’s holdings of municipal bonds were investment grade and there have been no payment defaults. onSummary ~~any~~ratings ofinformation at December 31, 2025, based on the ~~Company’s~~amortized ~~holdings~~cost ofbasis ~~corporate~~and ~~debt~~reflecting ~~securities.~~the ~~There~~lowest ~~are~~enhanced 5or ~~securities~~underlying ~~all~~rating ofby ~~which~~Moody’s, ~~are~~Standard ~~subordinated~~& ~~debt~~Poor’s ofor ~~other~~Fitch, ~~financial~~is ~~institutions~~as ~~with~~follows: ~~face~~AAA ~~amounts~~– ~~ranging~~76% ~~from~~of ~~$0.5~~the ~~million~~portfolio; toAA+ $2– ~~million~~24%.

~~Municipal~~Asset-backed Securities – ~~All~~There ofare ~~the~~three ~~Company’s holdings of municipal bonds were~~ investment grade asset-backed securities, and there have been no payment defaults. ~~Summary ratings information at December 31, 2024, based~~ on ~~the~~these ~~amortized cost basis and reflecting the lowest enhanced or underlying rating by Moody’s, Standard & Poors or Fitch, is as follows: AAA – 82% of the portfolio; AA+ – 8%; AA – 10%~~securities.

~~Asset-backed~~As ~~Securities~~such, –it ~~There~~is ~~were~~deemed 3the ~~investment~~above ~~grade~~listed ~~asset~~securities are not in an unrealized loss position due to credit-~~backed~~related ~~securities,~~issues and ~~there~~no ~~have~~further ~~been~~analysis nois ~~payment~~warranted ~~defaults~~as onof ~~these~~December ~~securities.~~31, 2025.

As such, it is deemed the above listed securities are not in an unrealized loss position due to credit-related issues and no further analysis is warranted as of December 31, 2024.

Portfolio Loans Receivable

Our primary source of income is derived from interest earned on loans. Our portfolio loans consist of loans secured by real estate as well as commercial business loans, credit card loans secured by corresponding deposits at the Bank and, to a limited extent, other consumer loans. Our loan customers primarily consist of small- to medium-sized businesses, professionals, real estate investors, small residential builders and individuals. Our owner-occupied commercial real estate loans, residential construction loans and commercial business and investment loans provide us with higher risk-adjusted returns, shorter maturities and more sensitivity to interest rate fluctuations, and are complemented by our relatively lower risk residential real estate loans to individuals. Our credit card portfolio supplements our traditional lending products with enhanced yields. Our lending activities, outside of credit cards, are principally directed to our market area consisting of the Washington, D.C. and Baltimore, Maryland metropolitan areas.

5053

Residential Real Estate Loans. One-to-four family mortgage loans are primarily secured by owner-occupied primary and secondary residences and, to a lesser extent, investor-owned residences. Residential loans are originated through the commercial sales teams and Capital Bank Home Loans division. Residential loans also include home equity lines of credit. Owner-occupied residential real estate loans usually have fixed rates for five or seven years and adjust on an annual basis after the initial term based on a typical maturity of 30 years. Investor residential real estate loans are generally based on 25-year terms with a balloon payment due after five years. Generally, the required minimum debt service coverage ratio is 115%.

Commercial Real Estate Loans. Commercial real estate loans are originated on owner-occupied and non-owner-occupied properties. These loans may be adversely affected by conditions in the real estate markets or in the general economy. Business equity lines of credit totaling $3.1 8 million as of December 31, ~~2024~~2025 and $143.1 million as of December 31, ~~2023~~2024, are included in the commercial real estate loan category. Business equity lines of credit are commercial purpose lines of credit primarily secured by the business owners residential properties. Lender finance loans totaling $41.4 million as of December 31, 2025 and $28.6 million as of December 31, 2024 are also included in the commercial real estate loan category. Lender finance loans are loans to companies used to purchase finance receivables or extend finance receivables to the underlying obligors and are secured primarily by the finance receivables held by our borrowers. The primary sources of repayment are the operating incomes of the borrowers and the collection of the finance receivables securing the loans. Commercial loans that are secured by owner-occupied commercial real estate and primarily collateralized by operating cash flows are included in the commercial real estate loan category. Commercial real estate loan terms are generally extended for 10 years or less and amortize generally over 25 years or less. The interest rates on commercial real estate loans generally have initial fixed rate terms that adjust typically at five years. Origination fees are routinely charged for services. Personal guarantees from the principal owners of the business are generally required, supported by a review of the principal owners’ personal financial statements and global debt service obligations. The properties securing the portfolio are diverse in type. This diversity may help reduce the exposure to adverse economic events that affect any single industry.

Construction Loans. Construction loans are offered primarily within the Company’s Washington, D.C. and Baltimore, Maryland metropolitan operating areas to builders, primarily for the construction of single-family homes and condominium and townhouse conversions or renovations and, to a lesser extent, to individuals. Construction loans typically have terms of 12 to 18 months. The Company frequently transitions the end purchaser to permanent financing or re-underwriting and sale into the secondary market through Capital Bank Home Loans. According to underwriting standards, the ratio of loan principal to collateral value, as established by an independent appraisal, cannot exceed 75% for investor-owned and 80% for owner-occupied properties, although exceptions are sometimes made. The Company performs a stress test of the construction loan portfolio at least once a year, and underlying real estate conditions are monitored as well as trends in sales outcomes versus underwriting valuations as part of ongoing risk management efforts. The borrowers’ progress in construction buildout is monitored against the original underwriting guidelines for construction milestones and completion timelines.

Commercial and Industrial. In addition to other loan products, general commercial loans, including commercial lines of credit, working capital loans, term loans, equipment financing, letters of credit, government guaranteed loans and solar energy related loans and other loan products, are offered, primarily in target markets, and underwritten based on each borrower’s ability to service debt from income. These loans are primarily made based on the identified cash flows of the borrower and secondarily, on the underlying collateral provided by the borrower. Most commercial business loans are secured by a lien on general business assets including, among other things, available real estate, accounts receivable, promissory notes, inventory and/or equipment. Personal guaranties from the borrower or other principal are generally obtained.

Credit Cards. Through the OpenSky™ credit card division, the Company offers secured, partially secured, and unsecured credit cards on a nationwide basis to under-banked populations and those

5154

looking to rebuild their credit scores through a fully digital and mobile platform. The secured lines of credit are secured by a noninterest-bearing demand account at the Bank in an amount equal to the full credit limit of the credit card. For the partially secured lines of credit, the Bank offers certain customers an unsecured line in excess of their secured line of credit by using a proprietary scoring model, which considers credit score and repayment history (typically a minimum of six months of on-time payments, but ultimately determined on a case-by-case basis). Partially secured and unsecured credit cards are only extended to existing secured card customers who have demonstrated sound credit behaviors. Approximately $8783.21 million and $9587.32 million in secured and partially secured credit card balances were protected by savings deposits held by the Company as of December 31, ~~2024~~2025 and December 31, ~~2023~~2024, respectively. Unsecured balances were $4261.4 million and $3042.84 million, respectively, at the same dates.

Other Consumer Loans. To a limited extent and typically as an accommodation to existing customers, personal consumer loans, such as term loans, car loans and boat loans are offered.

Purchased Credit Deterioration. Acquired loans, including those acquired in a business combination, are evaluated to determine if they have experienced more-than-insignificant deterioration in credit quality since origination. When the condition exists, these loans are referred to as ~~purchased credit deteriorated, or~~ PCD. An allowance is recognized for a PCD loan by adding it to the purchase price or fair value in a business combination. There is no provision for credit losses recognized upon acquisition of a PCD loan since the initial allowance is established through purchase accounting. ~~After initial recognition, the accounting for a~~ PCD ~~loan~~loans ~~follows~~are ~~the~~grouped ~~credit~~with ~~loss~~organically ~~model~~created ~~that~~loans ~~applies~~in totheir ~~the~~applicable loan category. ~~Purchased~~After ~~financial~~initial ~~loans~~recognition, ~~that~~the doaccounting ~~not have a more-than-significant deterioration in credit quality since origination are accounted~~ for in a ~~manner~~PCD ~~consistent~~loan ~~with~~follows ~~originated~~the ~~loans. An allowance for~~ credit ~~losses~~loss ismodel ~~recorded~~that ~~with~~applies ~~a corresponding charge~~ to ~~provision for credit losses. Subsequent to~~ the ~~acquisition~~loan ~~date, the methods utilized to estimate the required ACL for these loans is similar to the method used for organically originated loans~~category.

Purchased financial loans that do not have a more-than-insignificant deterioration in credit quality since origination are accounted for in a manner consistent with originated loans. An allowance for credit losses is recorded with a corresponding charge to provision for credit losses. Subsequent to the acquisition date, the methods utilized to estimate the required ACL for these loans is similar to the method used for organically originated loans. It was identified during the twelve months ended December 31, 2025 that one of the loans acquired from IFH should have been assigned as a PCD loan based on facts and circumstances that existed as of the acquisition date. The loan was reclassified as a PCD loan and a specific ACL reserve of $3.4 million was established as a measurement period adjustment to the Day-1 purchase accounting.


			55

The repayment of loans is a source of additional liquidity for the Company. The following table details contractual maturities of our portfolio loans, along with an analysis of loans maturing after one year categorized by rate characteristics. Loans with adjustable interest rates are shown as maturing in the period during which the contract is due. The table does not reflect the effects of possible prepayments.


	As of December 31, 2025
	One Year or Less		One to Five Years	Over Five Years to Fifteen Years		After Fifteen Years
(in thousands)	Amount			Amount			Amount				Amount		Total

Real estate:
Residential	$	177,824		$	292,318		$	71,908			$	223,758	$	765,808
Commercial	219,221			444,973			301,973				30,914		997,081
Construction	290,286			59,683			9,597				—		359,566
Commercial and industrial	254,361			162,263			139,626				142,039		698,289
Credit card	142,397			—			—				—		142,397
Other consumer	528			117			1,285				—		1,930
Total portfolio loans, gross	$	1,084,617		$	959,354		$	524,389			$	396,711	$	2,965,071

Loans above maturing after one year categorized by rate characteristic:						Predetermined Interest Rates	Floating or Variable Rates		Total
Real estate:
Residential							$	370,152	$	217,832	$	587,984
Commercial							410,228		367,632		777,860
Construction							34,731		34,549		69,280
Commercial and industrial							157,729		286,199		443,928

Other consumer							1,402		—		1,402
Total portfolio loans, gross							$	974,242	$	906,212	$	1,880,454

The following tables present non owner-occupied and owner-occupied commercial real estate loans and multi-family loans and the weighted average loan-to-value (“LTV”) and fixed rate maturities by year and loan type:

Non-owner-occupied commercial real estate loans, including multi-family



	As of December 31, 2025
(in thousands)	Amount		Average Loan Size		Weighted Average LTV(1)		% of Non Owner-Occupied Commercial Real Estate Loans		% of Total Portfolio Loans, Gross
Loan type:
Multi-family	$	213,239	$	1,657	53.9	%	Not Applicable		7.2	%

Retail	$	182,847	$	1,792	53.7	%	34.3	%	6.2	%
Mixed use	152,956		2,010		53.6	%	28.7	%	5.2	%
Industrial	59,447		1,050		43.4	%	11.2	%	2.0	%
Hotel	70,906		5,065		47.3	%	13.3	%	2.4	%
Office	25,123		1,004		50.5	%	4.7	%	0.8	%
Other(2)	41,862		1,412		52.6	%	7.8	%	1.4	%


Total non-owner-occupied commercial real estate loans	$	533,141	$	1,758	51.0	%	100.0	%	18.0	%
Total portfolio loans, gross	$	2,965.071


			56

Scheduled maturities of fixed rate non-owner-occupied commercial real estate loans, including multi-family



	As of December 31, 2025
(in thousands)	2026		2027		2028		2029		2030 and Onwards		Total
Loan type:
Multi-family	$	45,002	$	23,729	$	46,324	$	34,566	$	64,072	$	213,693

Retail	$	23,058	$	38,081	$	2,053	$	25,338	$	94,288	$	182,818
Mixed use	71,775		30,783		4,624		25,248		22,318		154,748
Industrial	19,095		9,361		3,248		5,476		23,724		60,904
Hotel	15,142		—		—		1,443		54,321		70,906
Office	3,683		5,878		155		8,673		6,711		25,100
Other	20,290		6,660		8,280		2,140		3,751		41,121


Total fixed rate non owner-occupied commercial real estate loans	$	153,043	$	90,763	$	18,360	$	68,318	$	205,113	$	535,597

Owner-occupied commercial real estate loans



	As of December 31, 2025
(in thousands)	Amount		Average Loan Size		Weighted Average LTV(1)		% of Owner-Occupied Commercial Real Estate Loans		% of Total Portfolio Loans, Gross
Loan type:
Industrial	$	110,303	$	1,216	50.5	%	26.3	%	3.7	%


Office	55,171		712		57.1	%	13.2	%	1.9	%
Retail	66,864		867		57.8	%	16.0	%	2.3	%
Mixed use	16,826		893		46.3	%	4.0	%	0.6	%
Other(3)	169,537		1,139		53.8	%	40.5	%	5.7	%


Total owner-occupied commercial real estate loans	$	418,701	$	1,096	53.5	%	100.0	%	14.1	%
Total portfolio loans, gross	$	2,965,071

Scheduled maturities of fixed rate owner-occupied commercial real estate loans



	As of December 31, 2025
(in thousands)	2026		2027		2028		2029		2030 and Onwards		Total
Loan type:
Industrial	$	11,091	$	9,989	$	6,719	$	22,771	$	60,054	$	110,624
Office	3,485		2,447		2,795		9,360		37,442		55,529
Retail	5,518		8,606		7,939		8,746		35,965		66,774
Mixed use	2,576		873		907		6,353		6,261		16,970
Other	39,003		7,562		1,946		8,507		114,895		171,913


Total fixed rate owner-occupied commercial real estate loans	$	61,673	$	29,477	$	20,306	$	55,737	$	254,617	$	421,810

_______________

(1) Weighted average LTV is calculated by reference to the most recent available appraisal of the property securing each loan.

(2) Other non-owner-occupied commercial real estate loans include land loans of $13.7 million, special purpose loans of $8.7 million, skilled nursing home loans of $8.5 million, and other loans of $10.9 million.

(3) Other owner-occupied commercial real estate loans include special purpose loans of $94.6 million, skilled nursing home loans of $30.2 million, religious facility loans of $25.1 million, and other loans of $19.6 million.


			57

Nonperforming Assets

Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. In general, we place loans on nonaccrual status when they become 90 days past due. We also place loans on nonaccrual status if they are less than 90 days past due if the collection of principal or interest is in doubt. When the interest accrual is discontinued, all unpaid accrued interest is reversed from income. Loans are returned to accrual status when all of the principal and interest amounts contractually due are brought current and future payments are, in management’s opinion, reasonably assured.

Loans are generally charged-off in part or in full when management determines the loan to be uncollectible. Factors for charge-off that may be considered include: repayments deemed to be extended out beyond reasonable time frames, customer bankruptcy and lack of assets, and/or collateral deficiencies. ~~Consumer~~Secured consumer credit card balances are ~~moved~~eligible ~~into~~for ~~the~~ charge -off ~~queue~~ after they become more than 90 days past due. Unsecured consumer credit card balances are eligible for charge-off after they become more than 150 days past due and are charged off not later than ~~120~~180 days after they become past due. Otherwise, loans that are past due for 180 days or more are charged off unless the loan is well-secured and in the process of collection.

The Company believes its approach to lending and the management of nonperforming assets has resulted in sound asset quality and timely resolution of problem assets. The Company has established underwriting guidelines to be followed by our bankers, and routinely monitors our delinquency levels for any negative or adverse trends. There can be no assurance, however, that our loan portfolio will not become subject to increasing pressures from deteriorating borrower credit.

From a credit risk standpoint, we grade watchlist and problem loans into one of five credit quality indicators: pass/watch, special mention, substandard, doubtful or loss. The classifications of loans reflect a judgment about the risks of default and loss associated with each loan. Credit ratings are reviewed regularly and then adjusted regularly to reflect the degree of risk and loss that our management believes to be appropriate for each credit. Our lending policy requires the routine monitoring of past due reports, daily overdraft reports, monthly maturing loans, monthly risk rating reports and internal loan review reports. The lending and credit management of the Bank meet periodically to review loans rated pass/watch. The focus of each meeting is to identify and promptly determine any necessary required action within this loan population, which consists of loans that, although considered satisfactory and performing to terms, may exhibit special risk features that warrant management’s attention.

52Management is intent on maintaining a strong credit review function and risk rating process. The Company has an experienced credit administration function, which provides independent analysis of credit requests and the management of problem credits. The credit department has developed and implemented analytical procedures for evaluating credit requests, administers the Company’s risk rating system, and endeavors to adapt and enhance the monitoring of the loan portfolio. The loan portfolio analysis process is intended to contribute to the identification of weaknesses before they become more severe.

a judgment about the risks of default and loss associated with each loan. Credit ratings are reviewed regularly and then adjusted regularly to reflect the degree of risk and loss that our management believes to be appropriate for each credit. Our lending policy requires the routine monitoring of past due reports, daily overdraft reports, monthly maturing loans, monthly risk rating reports and internal loan review reports. The lending and credit management of the Bank meet periodically to review loans rated pass/watch. The focus of each meeting is to identify and promptly determine any necessary required action within this loan population, which consists of loans that, although considered satisfactory and performing to terms, may exhibit special risk features that warrant management’s attention.

Management is intent on maintaining a strong credit review function and risk rating process. The Company has an experienced credit administration function, which provides independent analysis of credit requests and the management of problem credits. The credit department has developed and implemented analytical procedures for evaluating credit requests, has refined the Company’s risk rating system, and continually endeavors to adapt and enhance the monitoring of the loan portfolio. The loan portfolio analysis process is intended to contribute to the identification of weaknesses before they become more severe.

A special mention loan has potential weaknesses deserving of management’s attention. If uncorrected, such weaknesses may, at a future date, impair the repayment prospects for the asset or our credit position.

Loans that are deemed special mention, substandard, doubtful or loss are listed in the Bank’s Problem Loan Status Report. The Problem Loan Status Report provides a detailed summary of the borrower and guarantor status, loan accrual status, collateral evaluation and includes a description of the planned collection and administration program designed to mitigate the Bank’s risk of loss and remove ~~the loan from problem status. The Special Asset Committee reviews the Problem Loan Status Report on a quarterly basis for borrowers with an overall loan exposure in excess of $250,000.~~

At December 31, 2024, the recorded investment in individually assessed loans was $34.9 million, requiring a specific reserve of $9.3 million. At December 31, 2023, the recorded investment in individually assessed loans was $16.0 million, requiring a specific reserve of $0.4 million. The $34.9 million of individually assessed loans at December 31, 2024 included a single multi-unit residential real estate loan secured by four properties with a balance of $7.6 million at December 31, 2024.58

the loan from problem status. The Special Asset Committee reviews the Problem Loan Status Report on a quarterly basis for borrowers with an overall loan exposure in excess of $250,000.

At December 31, 2025, the recorded investment in individually assessed loans was $52.8 million, requiring a specific reserve of $9.9 million, whereas at December 31, 2024 the recorded investment in individually assessed loans was $34.9 million, requiring a specific reserve of $9.3 million. The $52.8 million of individually assessed loans at December 31, 2025 included two loan relationships totaling $15.9 million, with a combined reserve of $7.2 million as of December 31, 2025. The $34.9 million of individually assessed loans at December 31, 2024 included a single multi-unit residential real estate loan secured by four properties with a balance of $7.6 million at December 31, 2024.

At December 31, 2025, nonperforming assets were $58.3 million, an increase of $28.0 million from December 31, 2024. Nonperforming assets consisted of nonperforming loans of $54.4 million and other real-estate owned of $3.9 million. The nonperforming loans of $54.4 million represented a $24.2 million increase from December 31, 2024. Credit metrics were impacted by the two loan relationships previously mentioned, both of which were acquired as part of the IFH transactions. These two loan relationships accounted for a combined $15.9 million increase to nonperforming assets.

One relationship across three loans accounted for an $8.8 million increase to nonperforming assets. One loan of $5.0 million was previously identified as a PCD loan, which had a specific ACL reserve of $3.8 million established from Day-1 purchase accounting of the IFH acquisition. The other two are USDA loans with an unguaranteed balance of $3.8 million secured by underlying assets, which have no ACL reserve recorded.

The other relationship accounted for a $7.1 million increase to nonperforming assets. As previously mentioned, the loan was recharacterized as a PCD loan as a measurement period adjustment to the Day-1 purchase accounting from the IFH acquisition. The measurement period adjustment for this loan resulted in recording a specific ACL reserve of $3.4 million during the year, or a 12 basis points impact to the ACL Coverage Ratio.

Past Due Loans

The past due loans balance increased $26.7 million, from $66.8 million or 2.5% of gross loans as of December 31, 2024 to $93.5 million or 3.2% of gross loans as of December 31, 2025. As described above, there were two loan relationships acquired from IFH, which amounted to $15.9 million and were identified as nonperforming assets as of December 31, 2025. When the $15.9 million of loan relationships acquired from IFH are excluded from the balances as of December 31, 2025, the adjusted past due loan balance of $77.6 million represents 2.6% of adjusted gross loans, which is generally consistent with the 2.5% ratio at December 31, 2024.

Allowance for Credit Losses

We maintain an ACL that represents management’s estimate of expected credit losses and risks inherent in our loan portfolio. The balance of the ACL is based on internally assigned risk classifications of loans, historical loss rates, changes in the nature of our loan portfolio, overall portfolio quality, industry concentrations, delinquency trends, current economic factors and the estimated impact of current economic conditions on certain historical loss rates.

A major consideration in the determination of the allowance for credit loss on the credit card portfolio is based on historical loss experience in that portfolio. The Company calculates the credit card ACL collectively, applying segmentation based on collateral positions: secured, partially secured and unsecured.

5359

The following table presents key ratios for the ACL and nonaccrual loans for the periods indicated:

	For the Years Ended December 31,
	2024		2023		2024		2023		2024		2023
	2025		2024		2025		2024		2025		2024
(in thousands)	Allowance for credit losses to period end portfolio loans				Nonaccrual loans to total portfolio loans				Allowance for credit losses to nonaccrual loans
Real estate:
Residential	10.0197	%	01.9601	%	1.2601	%	1.9926	%	8096	%	4880	%
Commercial	1.7050		1.5170		1.5257		01.0952		~~112~~95		~~1,773~~112
Construction	01.9318		0.7893		1.3431		1.1334		6990		69
Commercial and Industrial	2.9584		12.8495		03.5477		0.3254		~~552~~75		~~569~~552
Credit card	45.9378		4.9493		—		—		—		—
Other consumer	0.7226		10.2672		—		—		—		—
Total	1.85	%	1.5085	%	1.1584	%	01.8415	%	~~161~~100	%	~~178~~161	%

~~Total~~At ~~charge-offs~~December ~~for~~31, 2025, the ~~year~~ACL ~~ended~~coverage ~~December~~ratio ~~31,~~was ~~2024~~1.85% and remained flat when compared to December 31, ~~2023~~2024. ~~were~~It ~~primarily~~was ~~comprised~~identified ofduring ~~credit~~the ~~card~~year ~~charge-offs~~ended ~~resulting~~December ~~both~~31, ~~from~~2025 ~~the~~that ~~aging~~one of the ~~portfolio~~loans ~~and~~acquired ~~the~~from ~~shift~~IFH ~~from~~should anhave ~~almost~~been ~~exclusively~~assigned ~~secured~~as ~~card~~a ~~portfolio~~PCD toloan abased ~~portfolio~~on ~~that~~facts ~~also~~and ~~includes~~circumstances ~~partially~~that ~~secured~~existed ~~and~~as ~~unsecured~~of ~~exposures~~the acquisition date. The ~~following~~loan ~~table~~was ~~presents~~reclassified as a ~~summary~~PCD ofloan ~~the~~and ~~net~~a ~~charge-offs~~specific ~~(recovery)~~ACL reserve of ~~loans~~$3.4 million was established as a ~~percentage~~measurement ofperiod ~~average~~adjustment ~~loans~~to ~~for~~ the ~~periods~~Day-1 ~~indicated:~~purchase accounting.

	For the Years Ended December 31,
	2024						2023
(in thousands)	Net Charge-offs		Average Loans		Percent of average portfolio loans		Net Charge-offs		Average Loans		Percent of average portfolio loans
Real estate:
Residential	$	907	$	616,739	0.15	%	$	670	$	544,552	0.12	%
Commercial	559		756,662		0.07		841		665,535		0.13
Construction	—		299,282		—		—		266,274		—
Commercial and Industrial	513		352,606		0.15		77		224,229		0.03
Credit card	7,024		115,581		6.08		6,885		114,450		6.02
Other consumer	—		1,768		—		—		1,928		—
Total	$	9,003	$	2,142,638	0.42	%	$	8,473	$	1,816,968	0.47	%

Total charge-offs for the year ended December 31, 2025 and December 31, 2024 were primarily comprised of credit card charge-offs resulting both from the aging of the portfolio and the shift from an almost exclusively secured card portfolio to a portfolio that also includes partially secured and unsecured exposures. The following table presents a summary of the net charge-offs (recovery) of loans as a percentage of average loans for the periods indicated:

As the loan portfolio and ACL review processes continue to evolve, there may be changes to elements of the allowance and this may influence the overall level of the allowance maintained. Historically, the Bank has enjoyed a high-quality loan portfolio with relatively low levels of net charge-offs and low delinquency rates. The maintenance of a high-quality portfolio will continue to be a priority.


	For the Years Ended December 31,
	2025						2024
(in thousands)	Net Charge-offs (Recoveries)		Average Loans		Percent of average portfolio loans		Net Charge-offs		Average Loans		Percent of average portfolio loans
Real estate:
Residential	$	(109)	$	720,871	(0.02)	%	$	907	$	616,739	0.15	%
Commercial	1,892		959,324		0.20		559		756,662		0.07
Construction	264		338,872		0.08		—		299,282		—
Commercial and Industrial	3,371		618,451		0.55		513		352,606		0.15
Credit card	6,963		125,824		5.53		7,024		115,581		6.08
Other consumer	—		2,416		—		—		1,768		—
Total	$	12,381	$	2,765,758	0.45	%	$	9,003	$	2,142,638	0.42	%

As the loan portfolio and ACL review processes continue to evolve, there may be changes to elements of the allowance and this may influence the overall level of the allowance maintained. Historically, the Bank has experienced a high-quality loan portfolio with relatively low levels of net charge-offs and delinquency rates. The maintenance of a high-quality portfolio will continue to be a priority.

Although we believe we have established our ACL in accordance with GAAP and that the ACL is currently adequate to provide for known and inherent losses in the portfolio at all times shown above, future provisions for credit losses will be subject to ongoing evaluations of the risks in our loan portfolio.

5460

The following table shows the allocation of the ACL among loan categories as of the dates indicated. The total allowance is available to absorb losses from any loan category.

	December 31,
	2024				2023
	2025				2024
(in thousands)	Amount		Percent(1)		Amount		Percent(1)
Real estate:
Residential	$	67,~~945~~444	14	%	$	56,~~518~~945	1914	%
Commercial	1614,~~041~~917		3327		1016,~~316~~041		3633
Construction	24,~~973~~250		68		2,~~271~~973		86
Commercial and Industrial	1619,~~377~~818		3336		416,~~406~~377		1633
Credit card	68,~~301~~226		1415		6,~~087~~301		2114
Other consumer	155		—		1215		—
Total allowance for credit losses	$	4854,~~652~~660	100	%	$	2848,~~610~~652	100	%

_______________

(1) Loan category as a percentage of total portfolio loans.

Total Liabilities

Total liabilities at December 31, ~~2024~~2025 increased $~~880~~352.57 million, from December 31, ~~2023,~~2024 ~~primarily~~ due to growth in the ~~IFH~~deposit ~~acquisition~~portfolio of $331.0 million.

Deposits

Deposits are a major source of funding for the Company. We offer a variety of deposit products including interest-bearing demand, savings, money market and time accounts, all of which we actively market at competitive pricing. We generate deposits from our customers on a relationship basis and through the efforts of our commercial and business banking officers. Our credit card customers are a significant source of low -cost deposits. As of December 31, ~~2024~~2025 and December 31, ~~2023~~2024, our credit card customers accounted for $~~166~~163.42 million and $~~173~~166.94 million, or 2019.51% and 2820.25%, respectively, of our total noninterest-bearing deposit balances.

Major categories of interest-bearing deposits are as follows:

Interest-Bearing Deposits

At December 31,

(in thousands)

~~2024~~2025

~~2023~~2024

Interest-bearing demand accounts

~~238~~257,~~881~~233

~~199~~238,~~308~~881

Savings

1311,~~488~~679

513,~~211~~488

Money market accounts

~~816~~1,~~708~~105,183

~~663~~816,~~129~~708

Customer time deposits

~~548~~489,~~901~~687

~~268~~548,~~619~~901

Brokered time deposits

~~333~~376,~~033~~677

~~142~~333,~~356~~033

Total Interest-bearing deposits

12,~~951~~240,~~011~~459

1,~~278~~951,~~623~~011

The Company had $~~333~~376.0 7 million in brokered deposits at December 31, ~~2024~~2025 compared to $~~142~~333.4 0 million at December 31, ~~2023~~2024.

Deposits securing our OpenSky™ card lines of credit and deposits from title companies represent the largest concentrations in the deposit portfolio. As of December 31, ~~2024~~2025, these concentrations represented 65% and 1110% of deposits, respectively. As of December 31, ~~2023~~2024, these deposits represented 96% and 1211% of deposits, respectively.

5561

The following table presents the average balances and average rates paid on deposits for the periods indicated:

	For the years Ended December 31,
	2024				2023
	2025				2024
(in thousands)	Average Balance		Average Rate		Average Balance		Average Rate
Interest-bearing demand accounts	$	~~221~~269,~~437~~224	0.4556	%	$	~~201~~221,~~194~~437	0.1545	%
Savings	612,~~732~~789		0.4047		56,~~768~~732		0.1440
Money market accounts	~~704~~960,~~002~~882		43.0845		~~642~~704,~~013~~002		34.6608
Time deposits	~~561~~825,~~369~~847		43.7051		~~360~~561,~~464~~369		4.3970
Total Interest-bearing deposits	12,~~493~~068,~~540~~742		3.7608	%	1,~~209~~493,~~439~~540		3.2876	%
Noninterest-bearing demand accounts	~~675~~811,~~360~~798				~~655~~675,~~013~~360
Total deposits	$	2,~~168~~880,~~900~~540	2.5921	%	$	12,~~864~~168,~~452~~900	2.1359	%

Deposit costs ~~increased~~decreased 4638 basis points during the year ended December 31, ~~2024~~2025 ~~due,~~as incompared ~~large part,~~ to athe ~~series~~year ofended ~~interest~~December ~~rate~~31, ~~increases~~2024, ~~implemented~~primarily driven by ~~the~~a ~~Federal~~15 ~~Reserve~~basis ~~beginning~~points inreduction ~~early~~related ~~2022~~to ~~and continuing into 2023 and~~ the ~~corresponding~~Call ~~mix~~of ~~shift~~Brokered ~~from~~Time ~~low~~Deposits, ~~and~~as nowell ~~interest~~as ~~bearing~~growth ~~deposits~~in tocustomer ~~higher rate~~ money market ~~accounts~~deposits and ~~time~~a ~~deposits.~~shift ~~However,~~in ~~average~~product ~~noninterest-bearing deposit balances increased $20.3 million when compared to December 31~~mix, ~~2023, as growth in the number of customer accounts~~ and ~~corresponding balances outpaced~~ the ~~decision~~Bank’s byability ~~some depositors~~ to ~~move~~reduce ~~balances~~deposit ~~from~~pricing ~~noninterest-bearing~~in ~~deposit~~response ~~accounts~~ to a declining interest~~-bearing~~ ~~deposit~~rate ~~accounts~~environment.

Noninterest-bearing deposits represented 2927.46% of total deposits at December 31, ~~2024~~2025 compared to 3229.64% at December 31, ~~2023~~2024. Uninsured deposits were approximately $~~703~~1.~~2 million~~3 billion as of December 31, ~~2024~~2025, representing 2540.59% of the Company's deposit portfolio, compared to $~~789~~979.4 3 million, or 4135.65%, at December 31, ~~2023~~2024. The uninsured amounts are estimates based on the methodologies and assumptions used for the Bank’s regulatory reporting requirements.

The following table presents the maturities of our certificates of deposit as of December 31, ~~2024~~2025.

(in thousands)

Three Months or Less

OverThreeThroughSixMonths

Over SixThroughTwelveMonths

OverTwelveMonths

Total

$250,000 or more

3641,~~888~~879

5566,~~085~~688

~~150~~65,~~059~~176

83,~~808~~563

~~250~~177,~~840~~306

Less than $250,000

~~142~~204,~~933~~915

~~218~~204,~~241~~940

~~123~~160,~~786~~754

~~146~~118,~~134~~450

~~631~~689,~~094~~059

Total

~~179~~246,~~821~~794

~~273~~271,~~326~~628

~~273~~225,~~845~~930

~~154~~122,~~942~~013

~~881~~866,~~934~~365

Borrowings

We utilize short-term and long-term borrowings to supplement deposits to fund our lending and investment activities, each of which is discussed below. Total borrowings ~~decreased~~increased during the year ended December 31, ~~2024~~2025 to $3452.1 million from $4934.1 million at December 31, ~~2023~~2024.

FHLB Advances. The FHLB allows us to borrow up to 25% of our assets on a blanket floating lien status collateralized by certain securities and loans. As of December 31, ~~2024~~2025, approximately $~~625~~874.01 million in real estate loans and $124.3 million of investment securities were pledged as collateral to the FHLB and our total borrowing capacity from the FHLB was $~~507~~656.53 million. ~~As of December 31, 2024, no investment securities were pledged with the FHLB.~~ We utilize these borrowings to meet liquidity needs and to fund certain fixed rate loans in our portfolio. As of December 31, ~~2024~~2025, we had $2250.0 million in outstanding advances and $~~485~~606.53 million in available borrowing capacity from the FHLB.

5662

Other borrowed funds. The Company has also issued junior subordinated debentures ~~and other subordinated notes~~. At December 31, ~~2024~~2025, these other borrowings amounted to $122.1 million, consisting of Floating Rate Junior Subordinated Deferrable Interest Debentures (the “Floating Rate Debentures”). The Floating Rate Debentures were issued in June of 2006, mature on June 15, 2036, and ~~subordinated~~may ~~notes~~be redeemed prior to that date under certain circumstances. The principal amount of the Floating Rate Debentures has not changed since issuance, and they accrue interest at a floating rate equal to the three-month CME Term SOFR plus a spread adjustment of 0.26161% (or 26.161 basis points) plus 187 basis points, payable quarterly. As of December 31, 2025, the rate for the Floating Rate Debentures was 5.85%.

AtFederal ~~December~~Reserve ~~31,~~Bank ~~2024,~~of ~~our~~Richmond. ~~Floating~~The ~~Rate~~Federal ~~Junior~~Reserve ~~Subordinated~~Bank ~~Deferrable~~of ~~Interest~~Richmond ~~Debentures~~provides ~~amounted~~access to ~~$2.1~~liquidity ~~million.~~under ~~The~~the ~~Floating~~Federal ~~Rate~~Reserve’s ~~Junior~~discount ~~Subordinated~~window ~~Deferrable~~through ~~Interest~~borrower-in-custody ~~Debentures~~ (~~the~~ “~~Floating Rate Debentures~~BIC”) ~~were~~and ~~issued~~national inbook-entry ~~June~~(“NBE”) ~~of 2006~~arrangements, ~~mature~~which onallow ~~June~~us ~~15,~~to ~~2036,~~borrow ~~and~~on ~~may~~a becollateralized ~~redeemed~~basis ~~prior~~using todifferent ~~that~~types ~~date~~of ~~under certain circumstances~~collateral. The ~~principal~~Company’s ~~amount~~total ofborrowing ~~the~~capacity ~~Floating~~under ~~Rate Debentures has not changed since issuance, and they accrue interest at a floating rate equal to~~ the ~~three-month~~Federal ~~CME~~Reserve’s ~~Term~~discount ~~SOFR~~window ~~plus~~was ~~a spread adjustment of 0~~$125.~~26161%~~3 million ~~(or~~as ~~26.161 basis points) plus 187 basis points, payable quarterly. As~~ of December 31, ~~2024, the rate for the Floating Rate Debentures was 6~~2025.~~49%.~~

OnOther ~~November 30, 2020, the Company issued $10~~Borrowings.0 ~~million in subordinated notes due in 2030 (the “Notes”).~~ The ~~Notes~~Company ~~have~~also ahas ~~ten~~available ~~year~~lines ~~term~~of ~~and~~credit ~~have a fixed rate~~ of 5$76.~~00%~~0 million ~~for~~with ~~the~~other ~~first~~correspondent ~~five~~banks ~~years;~~at ~~thereafter~~December 31, ~~the rate resets quarterly to a benchmark rate~~2025, ~~which~~as iswell ~~expected~~as access to becertificate ~~the~~of ~~three-month~~deposit ~~SOFR,~~funding ~~plus~~through ~~490~~financial ~~basis points~~intermediaries. ~~The~~There ~~Notes~~were ~~may~~no beoutstanding ~~redeemed~~balances inon ~~part~~the orlines inof ~~whole,~~credit ~~upon~~from ~~the~~correspondent ~~occurrence~~banks ofat ~~certain~~December ~~events~~31, 2025.

Federal Reserve Bank of Richmond. The Federal Reserve Bank of Richmond has an available borrower in custody arrangement which allows us to borrow on a collateralized basis. The Company’s borrowing capacity under the Federal Reserve’s discount window program was $110.2 million as of December 31, 2024. Certain commercial loans are pledged under this arrangement. During the first quarter of 2023, we established a line of credit under the Federal Reserve Bank’s Bank Term Funding Program (“BTFP”). As of March 31, 2024, participation in the BTFP had concluded and the Company had no outstanding balances under the BTFP at December 31, 2024.

Other Borrowings. The Company also has available lines of credit of $76.0 million with other correspondent banks at December 31, 2024, as well as access to certificate of deposit funding through financial intermediaries. There were no outstanding balances on the lines of credit from correspondent banks at December 31, 2024.

Liquidity

Liquidity is defined as the Bank’s capacity to meet its cash and collateral obligations at a reasonable cost. Maintaining an adequate level of liquidity depends on the Bank’s ability to meet both expected and unexpected cash flows and collateral needs efficiently and without adversely affecting either daily operations or the financial condition of the Bank. Liquidity risk is the risk that we will be unable to meet our obligations as they become due because of an inability to liquidate assets or obtain adequate funding. The Bank’s obligations, and the funding sources used to meet them, depend significantly on our business mix, balance sheet structure and the cash flow profiles of our on- and off-balance sheet obligations. In managing our cash flows, management endeavors to anticipate situations that can give rise to increased liquidity risk. These include funding mismatches, market constraints on the ability to convert assets into cash or in accessing sources of funds (i.e., market liquidity) and contingent liquidity events. Changes in economic conditions or exposure to credit, market, operational, legal and reputational risks also could affect the Bank’s liquidity risk profile and are considered in the assessment of liquidity and asset/liability management.

Management has established a risk management process for identifying, measuring, monitoring and controlling liquidity risk. Because of its critical importance to the viability of the Bank, liquidity risk management is integrated into our risk management processes. Critical elements of our liquidity risk management include: corporate governance consisting of oversight by the board of directors and active involvement by management; strategies, policies, procedures, and limits used to manage and mitigate liquidity risk; liquidity risk measurement and monitoring systems (including assessments of the current and prospective cash flows or sources and uses of funds) that are believed to be commensurate with the complexity and business activities of the Bank; active management of intraday liquidity and collateral; a diverse mix of existing and potential future funding sources; holding liquid marketable securities that can be used to meet liquidity needs in situations of stress; contingency funding plans that address potential adverse liquidity events and emergency cash flow requirements; and internal controls and internal audit processes believed to be sufficient to assure the adequacy of the institution’s liquidity risk management process.

complexity and business activities of the Bank; active management of intraday liquidity and collateral; a diverse mix of existing and potential future funding sources; holding liquid marketable securities that can be used to meet liquidity needs in situations of stress; contingency funding plans that address potential adverse liquidity events and emergency cash flow requirements; and internal controls and internal audit processes believed to be sufficient to assure the adequacy of the institution’s liquidity risk management process.

We expect funds to be available from a number of basic banking activity sources, including the core deposit base, the repayment and maturity of loans and investment security cash flows. Other potential funding sources include brokered certificates of deposit, deposit listing services, CDARS, borrowings from the FHLB and other lines of credit.

As of December 31, 2024, we had $485.5 million of available borrowing capacity from the FHLB, $20.6 million of available borrowing capacity from the Federal Reserve Bank of Richmond Borrower in Custody program and available lines of credit of $76.0 million with other correspondent banks. Further, unpledged investment securities available as collateral for potential additional borrowings totaled $131.4 million at December 31, 2024. Cash and cash equivalents were $205.3 million at December 31, 2024.63

As of December 31, 2025, we had $606.3 million of available borrowing capacity from the FHLB, $31.1 million of available borrowing capacity from the Federal Reserve Bank of Richmond BIC arrangement secured by pledged commercial loans and available lines of credit of $76.0 million with other correspondent banks. The Company’s borrowing capacity under the Federal Reserve’s discount window program through the NBE arrangement was $94.2 million as of December 31, 2025. Unpledged investment securities available as collateral for potential additional borrowings totaled $9.3 million at December 31, 2025. Cash and cash equivalents were $255.6 million at December 31, 2025.

Capital Resources

Stockholders’ equity increased $~~100~~46.36 million for the year ended December 31, ~~2024~~2025 compared to December 31, ~~2023~~2024 largely due to ~~the common stock issued in connection with the IFH acquisition of $70.9 million and~~ net income of $3157.02 million for the year ended December 31, ~~2024~~2025. In ~~connection with the acquisition of IFH, the Company temporarily suspended repurchases under its stock repurchase program during the first quarter of 2024.~~ Shares repurchased and retired for the year ended December 31, ~~2024~~2025, as part of the Company's stock repurchase program, totaled 67419,~~869~~643 shares at an average price of $2027.6279, for a total cost of $111.4 7 million including commissions.

The Company’s total stockholders’ equity is affected by fluctuations in the fair values of investment securities available-for-sale. The difference between amortized cost and fair value of investment securities, net of deferred income tax, is included in accumulated other comprehensive loss within stockholders’ equity. Accumulated other comprehensive loss is excluded from the Bank’s and Company’s regulatory capital ratios. The balance in accumulated other comprehensive loss related to unrealized losses on available-for-sale debt securities, net of deferred income tax, amounted to $~~11.~~5 .8 million at December 31, ~~2024~~2025 and $1311.1 5 million at December 31, ~~2023~~2024. Changes in accumulated other comprehensive loss are excluded from earnings and directly increase or decrease stockholders’ equity. To the extent unrealized losses on investment securities available-for-sale result from credit losses, unrealized losses are recorded as a charge against earnings. The investment securities section of the MD&A and Notes 1 and 3 to the consolidated financial statements provide additional information concerning management’s evaluation of investment securities available-for-sale ~~for credit losses~~ at December 31, ~~2024~~2025.

The Company uses several indicators of capital strength. The most commonly used measure is common equity to total assets (computed as equity divided by total assets), which was 11.0714% at December 31, ~~2024~~2025 and 11.4507% at December 31, ~~2023~~2024.

The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can precipitate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a material effect on the Company’s financial condition. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators.

accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators.

Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum ratios of common equity Tier 1, Tier 1, and total capital as a percentage of assets and off-balance sheet exposures, adjusted for risk weights ranging from 0% to 1,250%. The Bank is also required to maintain capital at a minimum level based on quarterly average assets, which is known as the leverage ratio.

The ability of the Company to continue to grow is dependent on its earnings and those of the Bank, and the ability to obtain additional funds for contribution to the Bank’s capital, through additional borrowings, through the sale of additional common stock or preferred stock, or through the issuance of additional qualifying capital instruments, such as subordinated debt. The capital levels required to be maintained by the Company and Bank may be impacted as a result of the Bank’s concentrations in ~~commercial real estate loans. See “Risks Related to Our Operations and the Regulation of Our Industry” in Part I, Item 1A - Risk Factors.~~

As of December 31, 2024, the Company and the Bank were in compliance with all applicable regulatory capital requirements to which it was subject, and the Bank was classified as “well capitalized” for purposes of the prompt corrective action regulations. As we deploy our capital and continue to grow our operations, our regulatory capital levels may decrease depending on our level of earnings. However, we intend to monitor and control our growth relative to our earnings in order to remain in compliance with all regulatory capital standards applicable to us.64

59commercial real estate loans. See “Risks Related to Our Operations and the Regulation of Our Industry” in Part I, Item 1A. - Risk Factors.

As of December 31, 2025, the Company and the Bank were in compliance with all applicable regulatory capital requirements to which it was subject, and the Bank was classified as “well capitalized” for purposes of the prompt corrective action regulations. As we deploy our capital and continue to grow our operations, our regulatory capital levels may decrease depending on our level of earnings. However, we intend to monitor and control our growth relative to our earnings in order to remain in compliance with all regulatory capital standards applicable to us.

The following table presents the regulatory capital ratios for the Company and the Bank as of the dates indicated.

(in thousands)	Actual				Minimum CapitalAdequacy				To Be WellCapitalized
December 31, 2024	Amount		Ratio		Amount		Ratio		Amount		Ratio
December 31, 2025	Amount		Ratio		Amount		Ratio		Amount		Ratio
The Company
Tier 1 leverage ratio (to average assets)	$	371,638	10.71	%	$	138,757	4.00	%	$	173,446	5.00	%
Tier 1 capital (to risk-weighted assets)	371,638		13.05		170,835		6.00		227,780		8.00
Common equity tier 1 capital ratio (to risk-weighted assets)	369,576		12.98		128,126		4.50		185,071		6.50
Total capital ratio (to risk-weighted assets)	407,481		14.31		227,780		8.00		284,725		10.00
The Bank
Tier 1 leverage ratio (to average assets)	$	316,082	9.24	%	$	136,858	4.00	%	$	171,073	5.00	%
Tier 1 capital (to risk-weighted assets)	316,082		11.34		167,207		6.00		222,942		8.00
Common equity tier 1 capital ratio (to risk-weighted assets)	316,082		11.34		125,405		4.50		181,141		6.50
Total capital ratio (to risk-weighted assets)	351,170		12.60		222,942		8.00		278,678		10.00
December 31, 2024
The Company
Tier 1 leverage ratio (to average assets)	$	346,840	11.07	%	$	125,348	4.00	%	$	156,685	5.00	%
Tier 1 capital (to risk-weighted assets)	346,840		13.83		150,512		6.00		200,683		8.00
Common equity tier 1 capital ratio (to risk-weighted assets)	344,778		13.74		112,884		4.50		163,055		6.50
Total capital ratio (to risk-weighted assets)	388,425		15.48		200,683		8.00		250,853		10.00
The Bank
Tier 1 leverage ratio (to average assets)	$	283,828	9.17	%	$	123,818	4.00	%	$	154,772	5.00	%
Tier 1 capital (to risk-weighted assets)	281,563		11.54		146,451		6.00		195,268		8.00
Common equity tier 1 capital ratio (to risk-weighted assets)	281,563		11.54		109,838		4.50		158,655		6.50
Total capital ratio (to risk-weighted assets)	312,304		12.79		195,268		8.00		244,085		10.00
December 31, 2023
The Company
Tier 1 leverage ratio (to average assets)	$	270,019	12.14	%	$	89,004	4.00	%	N/A		N/A
Tier 1 capital (to risk-weighted assets)	270,019		15.55		104,175		6.00		N/A		N/A
Common equity tier 1 capital ratio (to risk-weighted assets)	267,957		15.43		78,132		4.50		N/A		N/A
Total capital ratio (to risk-weighted assets)	301,817		17.38		138,900		8.00		N/A		N/A
The Bank
Tier 1 leverage ratio (to average assets)	$	228,794	10.51	%	$	87,068	4.00	%	$	108,835	5.00	%
Tier 1 capital (to risk-weighted assets)	228,794		13.56		101,251		6.00		135,001		8.00
Common equity tier 1 capital ratio (to risk-weighted assets)	228,794		13.56		75,938		4.50		109,688		6.50
Total capital ratio (to risk-weighted assets)	249,984		14.81		135,001		8.00		168,751		10.00

6065

Contractual Obligations

We have contractual obligations to make future payments on debt and lease agreements. Our liquidity monitoring and management consider both present and future demands for and sources of liquidity. The following table of contractual commitments focuses only on future obligations and summarizes our contractual obligations as of December 31, ~~2024~~2025.

(in thousands)	Due in One Year or Less		Due After One Through Three Years		Due After Three Through Five Years		Due After 5 Years		Total
FHLB advances	$	2250,000	$	—	$	—	$	—	$	2250,000
Certificates of deposit $250,000 or more	~~265~~173,~~073~~743		93,~~144~~563		—		—		~~274~~177,~~217~~306
Certificates of deposit less than $250,000	~~461~~570,~~919~~609		~~116~~117,~~430~~785		~~29,348~~618		2047		~~607~~689,~~717~~059
Lease payments	21,~~030~~969		21,~~559~~417		~~890~~997		~~1,188~~777		65,~~667~~160
Subordinated debt	—		—		—		122,062		122,062
Total	$	~~751~~796,~~022~~321	$	~~128~~122,~~133~~765	$	301,~~238~~615	$	132,~~270~~886	$	~~922~~923,~~663~~587

Off-Balance Sheet Items

In the normal course of business, we enter into various transactions that, in accordance with GAAP, are not included in our consolidated balance sheets. We enter into these transactions to meet the financing needs of our customers. These transactions include commitments to extend credit and issue letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in our consolidated balance sheets. Our exposure to credit loss is represented by the contractual amounts of these commitments. The same credit policies and procedures are generally used in making these commitments as for on-balance sheet instruments. We are not aware of any accounting loss to be incurred by funding these commitments; however, we maintain a reserve for unfunded commitments and certain off-balance sheet credit risks, which is recorded in other liabilities on the consolidated balance sheet.

Our commitments associated with outstanding letters of credit and commitments to extend credit expiring by period as of the date indicated are summarized below. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the amounts shown do not necessarily reflect actual future cash funding requirements.

December 31,

(in thousands)

~~2024~~2025

~~2023~~2024

Unfunded lines of credit

~~403~~455,~~029~~666

~~336~~403,~~472~~029

Letters of credit

31,~~122~~633

43,~~641~~122

Commitment to fund other investments

2,714

32,~~874~~714

Total credit extension commitments

~~408~~460,~~865~~013

~~344~~408,~~987~~865

Unfunded lines of credit represent unused credit facilities to our current borrowers. Lines of credit generally have variable interest rates. Letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third party. In the event of nonperformance by the customer in accordance with the terms of the agreement with the third party, we would be required to fund the commitment. The maximum potential amount of future payments we could be required to make is represented by the contractual amount of the commitment. If the commitment is funded, we would be entitled to seek recovery from the customer from the underlying collateral, which can include commercial real estate, physical plant and property, inventory, receivables, cash and/or marketable securities. Our policies generally require that letter of credit arrangements contain security and debt covenants similar to those contained in loan agreements. We believe the credit risk associated with issuing letters of credit is substantially the same as the risk involved in extending loan facilities to our customers.

6166

We seek to minimize our exposure to loss under letters of credit and credit commitments by subjecting them to the same credit approval and monitoring procedures as we do for on-balance sheet instruments. The effect on our revenue, expenses, cash flows and liquidity of the unused portions of these letters of credit commitments cannot be precisely predicted because we do not control the extent to which the lines of credit may be used.

Commitments to extend credit are agreements to lend funds to a customer, as long as there is no violation of any condition established in the contract. Commitments generally have variable interest rates, fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being fully drawn, the total commitment amounts disclosed above do not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if considered necessary by us, upon extension of credit, is based on management’s credit evaluation of the customer.

The commitment to fund other investments reflects an obligation to make an investment in a Small Business Investment Company.

Impact of Inflation

The consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K have been prepared in accordance with GAAP. GAAP requires the measurement of financial position and operating results in terms of historical dollars, without considering changes in the relative value of money over time due to inflation or recession.

Unlike many industrial companies, substantially all of the Company’s assets and liabilities are monetary in nature. As a result, interest rates have a more significant impact on our performance than the effects of general levels of inflation. Interest rates may not necessarily move in the same direction or in the same magnitude as the prices of goods and services. However, most other operating expenses are sensitive to changes in levels of inflation.

Non-GAAP Financial Measures and Reconciliations

The Company has presented the following non-GAAP financial measures because it believes that these non-GAAP financial measures provide useful information to investors because they are used by management to evaluate our operating performance and make day-to-day operating decisions. In addition, we believe our non-GAAP results in any given reporting period reflect our on-going financial performance in that period and, accordingly, are useful to consider in addition to our GAAP financial results. We further believe the presentation of non-GAAP results increases comparability of period-to-period results.

Earnings Metrics, as Adjusted	Year Ended
(in thousands, except per share data)	December 31, 2024			December 31, 2023
Net Income	$	30,972		$	35,871
Add: Merger-Related Expenses, net of tax	3,308			—
Add: Non-Recurring Equity and Debt Investment Write-Down	2,620			—
Add: IFH Non-PCD ACL Provision, Net of Tax	3,169			—
Net Income, as Adjusted	$	40,069		$	35,871
Weighted Average Common Shares - Diluted	14,640			14,081
Earnings per Share - Diluted	$	2.12		$	2.55
Earnings per share - Diluted, as Adjusted	$	2.74		$	2.55
Average Assets	$	2,554,049		$	2,188,299
Return on Average Assets	1.21		%	1.64		%
Return on Average Assets, as Adjusted	1.57		%	1.64		%
Average Equity	$	287,420		$	240,519
Return on Average Equity	10.78		%	14.91		%
Return on Average Equity, as Adjusted	13.94		%	14.91		%
Net Interest Income (a)	$	154,746		$	141,526
Noninterest Income	31,410			24,975
Total Revenue	$	186,156		$	166,501
Noninterest Expense	$	126,219		$	110,767
Efficiency Ratio(1)	67.80		%	66.53		%
Noninterest Income	$	31,410		$	24,975
Add: Non-Recurring Equity and Debt Investment Write-Down	2,620			—
Noninterest Income, as Adjusted (b)	$	34,030		$	24,975
Total Revenue, as Adjusted (a) + (b)	$	188,776		$	166,501
Noninterest Expense	$	126,219		$	110,767
Less: Merger-Related Expenses	3,930			—
Noninterest Expense, as Adjusted	$	122,289		$	110,767
Efficiency Ratio, as Adjusted(1)	64.78		%	66.53		%


			67


Core Earnings Metrics	Year Ended
(in thousands, except per share data)	December 31, 2025			December 31, 2024

Net Income	$	57,170		$	30,972
Deduct: Income from the Call of Brokered Time Deposits, Net of Tax	(3,489)			—
Add: Merger-Related Expenses, Net of Tax	2,609			3,308
Add: Non-Recurring Equity and Debt Investment Write-Down	—			2,620
Add: IFH Non-PCD ACL Provision, Net of Tax	—			3,169
Core Net Income	$	56,290		$	40,069

Weighted Average Common Shares - Diluted	16,768			14,640
Earnings per Share - Diluted	$	3.41		$	2.12
Core Earnings per Share - Diluted	$	3.36		$	2.74

Average Assets	$	3,348,674		$	2,554,049
Return on Average Assets	1.71		%	1.21		%
Core Return on Average Assets	1.68		%	1.57		%

Average Equity	$	377,741		$	287,420
Return on Average Equity	15.13		%	10.78		%
Core Return on Average Equity	14.90		%	13.94		%

Net Interest Income	$	195,992		$	154,746
Noninterest Income	49,187			31,410
Total Revenue	$	245,179		$	186,156
Noninterest Expense	$	155,082		$	126,219
Efficiency Ratio(1)	63.25		%	67.80		%

Net Interest Income	$	195,992		$	154,746
Less: Call of Brokered Time Deposits	4,618			—
Core Net Interest Income (a)	$	191,374		$	154,746
Noninterest Income	49,187			31,410
Add: Non-Recurring Equity and Debt Investment Write-Down	—			2,620
Core Fee Revenue (b)	$	49,187		$	34,030
Core Revenue (a) + (b)	$	240,561		$	188,776

Noninterest Expense	$	155,082		$	126,219
Less: Merger-Related Expenses	3,361			3,930
Core Noninterest Expense	$	151,721		$	122,289
Core Efficiency Ratio(1)	63.07		%	64.78		%

_______________

(1)The efficiency ratio is calculated by dividing noninterest expense by total revenue (net interest income plus noninterest income).


Commercial Bank Net Interest Margin	Year Ended
(in thousands)	December 31, 2025		December 31, 2024

Commercial Bank Net Interest Income	$	134,619	$	92,756
Average Interest Earning Assets	3,215,483		2,487,607
Less: Average Credit Card Loans	139,344		124,863
Average Commercial Bank Interest Earning Assets	$	3,076,139	$	2,362,744
Commercial Bank Net Interest Margin	4.38%		3.93%

Net Interest Margin, as Adjusted	Year Ended
(in thousands)	December 31, 2024		December 31, 2023
Net Interest Income	$	154,746	$	141,526
Less: Credit Card Loan Income	59,821		61,096
Net Interest Income, as Adjusted	$	94,925	$	80,430
Average Interest Earning Assets	2,487,607		2,145,209
Less: Average Credit Card Loans	115,581		114,450
Total Average Interest Earning Assets, as Adjusted	$	2,372,026	$	2,030,759
Net Interest Margin, as Adjusted	4.00%		3.96%


			68

Portfolio Loans Receivable Yield, as Adjusted	Year Ended
Commercial Bank Portfolio Loans Receivable Yield	Year Ended
(in thousands)	December 31, ~~2024~~2025		December 31, ~~2023~~2024
Portfolio Loans Receivable Interest Income	$	~~202~~244,~~346~~380	$	~~174~~202,~~378~~346
Less: Credit Card Loan Income	59,~~821~~848		6159,~~096~~821
Portfolio Loans Receivable Interest Income, as Adjusted	$	142,525	$	113,282
Commercial Bank Portfolio Loans Receivable Interest Income	$	184,532	$	142,525
Average Portfolio Loans Receivable	2,~~142~~765,~~638~~758		12,~~816~~142,~~968~~638
Less: Average Credit Card Loans	~~115~~125,~~581~~824		~~114~~115,~~450~~581
Total Average Portfolio Loans Receivable, as Adjusted	$	2,027,057	$	1,702,518
Total Commercial Bank Average Portfolio Loans Receivable	$	2,639,934	$	2,027,057
Portfolio Loans Receivable Yield, as Adjusted	7.03%		6.65%
Commercial Bank Portfolio Loans Receivable Yield	6.99%		7.03%

Pre-tax, Pre-Provision Net Revenue ("PPNR")	Year Ended
(in thousands)	December 31, ~~2024~~2025		December 31, ~~2023~~2024
Net Income	$	3057,~~972~~170	$	3530,~~871~~972
Add: Income Tax Expense	1017,~~860~~774		10,~~354~~860
Add: Provision for Credit Losses	1714,~~720~~965		917,~~610~~720
Add: Provision for (Release of) Credit Losses on Unfunded Commitments	385		(101)
Add: Provision for Credit Losses on Unfunded Commitments	188		385
PPNR	$	5990,~~937~~097	$	5559,~~734~~937

PPNR, as Adjusted	Year Ended
Core PPNR	Year Ended
(in thousands)	December 31, ~~2024~~2025		December 31, ~~2023~~2024
Net Income	$	3057,~~972~~170	$	3530,~~871~~972
Add: Income Tax Expense	1017,~~860~~774		10,~~354~~860
Add: Provision for Credit Losses	1714,~~720~~965		917,~~610~~720
Add: Provision for (Release of) Credit Losses on Unfunded Commitments	385		(101)
Add: Provision for Credit Losses on Unfunded Commitments	188		385
Add: Merger-Related Expenses	3,930		—
Deduct: Income from the Call of Brokered Time Deposits	(4,618)		—
Add: Non-Recurring Equity and Debt Investment Write-Down	2,620		—
Add: Merger-Related Expenses	3,361		3,930
PPNR, as Adjusted	$	66,487	$	55,734
Add: Non-Recurring Equity and Debt Investment Write-Down	—		2,620
Core PPNR	$	88,840	$	66,487

Allowance for Credit Losses to Total Portfolio Loans

~~Year Ended~~

(in thousands)

December 31, ~~2024~~2025

December 31, ~~2023~~2024

Allowance for Credit Losses

4854,~~652~~660

2848,~~610~~652

Total Portfolio Loans

2,~~630~~959,~~163~~457

12,~~903~~630,~~288~~163

Allowance for Credit Losses to Total Portfolio Loans

1.85%

1.5085%

6469

Nonperforming Assets to Total Assets	Year Ended
Commercial Bank Allowance for Credit Losses to Commercial Bank Portfolio Loans
(in thousands)	December 31, ~~2024~~2025		December 31, ~~2023~~2024
Total Nonperforming Assets	$	30,241	$	16,042
Allowance for Credit Losses	$	54,660	$	48,652
Total Assets	$	3,206,911	$	2,226,176
Less: Credit Card Allowance for Credit Losses	8,232		6,402
Nonperforming Assets to Total Assets	0.94%		0.72%
Commercial Bank Allowance for Credit Losses	$	46,428	42,250
Total Portfolio Loans	2,959,457		2,630,163
Less: Gross Credit Card Loans	137,905		122,928
Commercial Bank Portfolio Loans	$	2,821,552	2,507,235
Commercial Bank Allowance for Credit Losses to Total Portfolio Loans	1.65%		1.70%

Nonperforming Loans to Total Portfolio Loans	Year Ended
Nonperforming Assets to Total Assets
(in thousands)	December 31, ~~2024~~2025		December 31, ~~2023~~2024
Total Nonperforming Loans	$	30,241	$	16,042
Total Nonperforming Assets	$	58,276	$	30,241
Total Portfolio Loans	$	2,630,163	$	1,903,288
Total Assets	$	3,606,207	$	3,206,911
Nonperforming Loans to Total Portfolio Loans	1.15%		0.84%
Nonperforming Assets to Total Assets	1.62%		0.94%

Net Charge-Offs to Average Portfolio Loans	Year Ended
Nonperforming Loans to Total Portfolio Loans
(in thousands)	December 31, ~~2024~~2025		December 31, ~~2023~~2024
Total Net Charge-Offs	$	9,003	$	8,473
Total Nonperforming Loans	$	54,421	$	30,241
Total Average Portfolio Loans	$	2,142,638	$	1,816,968
Total Portfolio Loans	$	2,959,457	$	2,630,163
Net Charge-Offs to Average Portfolio Loans	0.42%		0.47%
Nonperforming Loans to Total Portfolio Loans	1.84%		1.15%

Tangible Book Value per Share	Year Ended
Net Charge-Offs to Average Portfolio Loans	Year Ended
(in thousands, except share and per share data)	December 31, 2024		December 31, 2023
(in thousands)	December 31, 2025		December 31, 2024
Total Stockholders' Equity	$	355,139	$	254,860
Total Net Charge-Offs	$	12,381	$	9,003
Less: Preferred Equity	—		—
Total Average Portfolio Loans	$	2,765,758	$	2,142,638
Less: Intangible Assets	42,454		—
Net Charge-Offs to Average Portfolio Loans	0.45%		0.42%
Tangible Common Equity	$	312,685	$	254,860
Period End Shares Outstanding	16,662,626		13,922,532
Tangible Book Value per Share	$	18.77	$	18.31

Return on Average Tangible Common Equity	Year Ended
Tangible Book Value per Share
(in thousands)	December 31, 2024			December 31, 2023
(in thousands, except share and per share data)	December 31, 2025			December 31, 2024
Net Income	$	30,972		$	35,871
Total Stockholders' Equity	$	401,757		$	355,139
Add: Intangible Amortization, Net of Tax	198			—
Less: Intangible Assets	40,740			36,943
Net Tangible Income	$	31,170		$	35,871
Tangible Common Equity	$	361,017		$	318,196
Average Equity	287,420			240,519
Period End Shares Outstanding	16,373,288			16,662,626
Less: Average Intangible Assets	6,951			—
Tangible Book Value per Share	$	22.05		$	19.10
Net Average Tangible Common Equity	$	280,469		$	240,519
Return on Average Equity	10.78		%	14.91		%
Return on Average Tangible Common Equity	11.11		%	14.91		%

Core Return on Average Tangible Common Equity	Year Ended
(in thousands)	December 31, 2024			December 31, 2023
Net Income, as Adjusted	$	40,069		$	35,871
Add: Intangible Amortization, Net of Tax	198			—
Net Tangible Income, as Adjusted	$	40,267		$	35,871
Core Return on Average Equity, as Adjusted	14.01		%	14.91		%
Core Return on Average Tangible Common Equity, as Adjusted	14.36		%	14.91		%


			70


Return on Average Tangible Common Equity	Year Ended
(in thousands)	December 31, 2025			December 31, 2024

Net Income	$	57,170		$	30,972
Add: Intangible Amortization, Net of Tax	798			198
Net Tangible Income	$	57,968		$	31,170
Average Equity	377,741			287,420
Less: Average Intangible Assets	38,763			5,754
Net Average Tangible Common Equity	$	338,978		$	281,666
Return on Average Equity	15.13		%	10.78		%
Return on Average Tangible Common Equity	17.10		%	11.07		%


Core Return on Average Tangible Common Equity	Year Ended
(in thousands)	December 31, 2025			December 31, 2024

Core Net Income	$	56,290		$	40,069
Add: Intangible Amortization, Net of Tax	798			198
Core Net Tangible Income	$	57,088		$	40,267

Core Return on Average Tangible Common Equity	16.84		%	14.30		%


			71

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Many assumptions are used to calculate the impact of interest rate fluctuations on our net interest income, such as asset prepayments, non-maturity deposit price sensitivity and decay rates, and key rate drivers. Because of the inherent use of these estimates and assumptions in the model, our actual results may, and very likely will, differ from our static earnings at risk (“EAR”) results. In addition, static EAR results do not include actions that our management may undertake to manage the risks in response to anticipated changes in interest rates or client behavior. For example, as part of our asset/liability management strategy, management has the ability to increase asset duration and decrease liability duration in order to reduce asset sensitivity, or to decrease asset duration and increase liability duration in order to increase asset sensitivity.

The following table summarizes the results of our EAR analysis in simulating the change in net interest income and fair value of equity over a 12-month horizon as of December 31, ~~2024~~2025:

IMPACT ON NET INTEREST INCOME UNDER A STATIC BALANCE SHEET, PARALLEL INTEREST RATE SHOCK

Earnings at Risk	-400 bps		-300 bps		-200 bps		-100 bps		Flat		+100 bps		+200 bps		+300 bps		+400 bps
December 31, 2024	(7.8)	%	(7.1)	%	(5.4)	%	(2.8)	%	0.0	%	3.0	%	5.9	%	8.7	%	11.5	%
December 31, 2025	(11.9)	%	(8.8)	%	(6.2)	%	(3.5)	%	0.0	%	3.9	%	7.9	%	11.8	%	15.6	%

Utilizing an economic value of equity (“EVE”) approach, we analyze the risk to capital from the effects of various interest rate scenarios through a long-term discounted cash flow model. This measures the difference between the economic value of our assets and the economic value of our liabilities, which is a proxy for our liquidation value. While this provides some value as a risk measurement tool, management believes EAR is more appropriate in accordance with the going concern principle.

The following table illustrates the results of our EVE analysis as of December 31, ~~2024~~2025.

ECONOMIC VALUE OF EQUITY ANALYSIS UNDER A STATIC BALANCE SHEET, PARALLEL INTEREST RATE SHOCK

Economic Value of Equity	-400 bps		-300 bps		-200 bps		-100 bps		Flat		+100 bps		+200 bps		+300 bps		+400 bps
December 31, 2024	(14.8)	%	(7.7)	%	(3.1)	%	(0.9)	%	0.0	%	(0.2)	%	(1.3)	%	(1.8)	%	(2.5)	%
December 31, 2025	(21.8)	%	(14.2)	%	(6.8)	%	(2.3)	%	0.0	%	1.4	%	1.9	%	2.7	%	3.1	%

Interest Rate Sensitivity and Market Risk

As a financial institution, our primary component of market risk is interest rate volatility. Our asset liability and funds management policy provides management with the guidelines for funds management, and we have established a measurement system for monitoring our net interest rate sensitivity position. We endeavor to manage our sensitivity position within our established guidelines.

Fluctuations in interest rates will ultimately impact both the level of income and the market value of all interest earning assets and interest-bearing liabilities, other than those that have a short term to maturity. Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair market values. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income.


			72

We endeavor to manage our exposure to interest rates by structuring our balance sheet in the ordinary course of business. We do not enter into instruments such as leveraged derivatives, financial options or financial futures contracts for the purpose of reducing interest rate risk. We endeavor to hedge the interest rate risks of our available-for-sale mortgage pipeline by using MBS, and short positions. Based on the nature of our operations, we are not subject to foreign exchange or commodity price risk. We do not own any trading assets.

Our exposure to interest rate risk is managed by the Bank’s Asset/Liability Management Committee (“ALCO”) in accordance with policies approved by our board of directors. The ALCO formulates strategies based on perceived levels of interest rate risk. In determining the appropriate level of interest rate risk, the committee considers the impact on earnings and capital of the current outlook for interest rates, potential changes in interest rates, regional economies, liquidity, business strategies and other factors. The ALCO meets regularly to review, among other things, the sensitivity of assets and liabilities to interest rate changes, the book and market values of assets and liabilities, unrealized gains and losses, purchase and sale activities, commitments to originate loans and the maturities of investments and borrowings. Additionally, the ALCO reviews liquidity, cash flow flexibility, maturities of deposits and consumer and commercial deposit activity. Management employs methodologies to manage interest rate risk, which include an analysis of relationships between interest earning assets and interest-bearing liabilities and an interest rate shock simulation model.

The following table indicates that, for periods less than one year, rate-sensitive assets exceeded rate-sensitive liabilities, resulting in an asset-sensitive position. For a bank with an asset-sensitive position, or positive gap, rising interest rates would generally be expected to have a positive effect on net interest income, and falling interest rates would generally be expected to have the opposite effect.

6773

INTEREST SENSITIVITY GAP

December 31, 2024	Within One Month			After One Month Through Three Months			After Three Through Twelve Months			Within One Year			Greater Than One Year or Non-Sensitive			Total
December 31, 2025	Within One Month			After One Month Through Three Months			After Three Through Twelve Months			Within One Year			Greater Than One Year or Non-Sensitive			Total
(in thousands)
Assets
Interest earning assets
Loans (1)	$	~~497~~1,~~272~~067,655		$	~~624~~241,~~734~~775		$	~~486~~526,~~389~~038		$	1,~~608~~835,~~395~~468		$	1,~~043~~149,~~038~~817		$	2,~~651~~985,~~433~~285
Securities	117,~~183~~975			2813,~~283~~060			4968,~~212~~854			8889,~~678~~889			~~139~~148,~~431~~591			~~228~~238,~~109~~480
Interest-bearing deposits at other financial institutions	~~179~~224,~~841~~611			—			—			~~179~~224,~~841~~611			—			~~179~~224,~~841~~611
Federal funds sold	5860			—			—			5860			—			5860
Total earning assets	$	~~688~~1,~~354~~300,301		$	~~653~~254,~~017~~835		$	~~535~~594,~~601~~892		$	12,~~876~~150,~~972~~028		$	1,~~182~~298,~~469~~408		$	3,~~059~~448,~~441~~436
Liabilities
Interest-bearing liabilities
Interest-bearing deposits	$	1623,~~144~~182		$	3246,~~288~~363		$	~~145~~208,~~296~~635		$	~~193~~278,~~728~~180		$	~~875~~1,~~349~~095,915		$	1,~~069~~374,~~077~~095
Time deposits	94110,~~797~~173			85139,~~458~~657			~~546~~493,~~751~~931			~~727~~743,~~006~~761			~~154~~122,~~928~~603			~~881~~866,~~934~~364
Total Interest-bearing deposits	~~110~~133,~~941~~355			~~117~~186,~~746~~020			~~692~~702,~~047~~566			~~920~~1,~~734~~021,941			1,~~030~~218,~~277~~518			12,~~951~~240,~~011~~459
FHLB Advances	—			—			2250,000			2250,000			—			2250,000
Other borrowed funds	—			—2,062			~~10,000~~—			102,~~000~~062			~~2,062~~—			122,062
Total Interest-bearing liabilities	$	~~110~~133,~~941~~355		$	~~117~~188,~~746~~082		$	~~724~~752,~~047~~566		$	~~952~~1,~~734~~074,003		$	1,~~032~~218,~~339~~518		$	12,~~985~~292,~~073~~521
Period gap	$	~~577~~1,~~413~~166,946		$	~~535~~66,~~271~~753		$	(~~188~~157,~~446~~674)		$	~~924~~1,~~238~~076,025		$	~~150~~79,~~130~~890		$	1,~~074~~155,~~368~~915
Cumulative gap	$	~~577~~1,~~413~~166,946		$	1,~~112~~233,~~684~~699		$	~~924~~1,~~238~~076,025		$	~~924~~1,~~238~~076,025		$	1,~~074~~155,~~368~~915
Ratio of cumulative gap to total earning assets	1833.8784		%	3635.3778		%	3031.2120		%	3031.2120		%	3533.1252		%

_______________

(1)Includes loans held for sale.

We use quarterly EAR simulations to assess the impact of changing interest rates on our earnings under a variety of scenarios and time horizons. These simulations utilize both instantaneous and parallel changes in the level of interest rates, as well as non-parallel changes such as changing slopes and twists of the yield curve. Static simulation models are based on current exposures and assume a constant balance sheet with no new growth. Dynamic simulation models are also utilized that rely on assumptions regarding changes in existing lines of business, new business, and changes in management and client behavior.

We also use economic value-based methodologies to measure the degree to which the economic values of the Bank’s positions change under different interest rate scenarios. The economic-value approach focuses on a longer-term time horizon and endeavors to capture all future cash flows expected from existing assets and liabilities. The economic value model utilizes a static approach in that the analysis does not incorporate new business; rather, the analysis shows a snapshot in time of the risk inherent in the balance sheet.

6874

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

6975

Report of Independent Registered Public Accounting Firm

To the Stockholders and the Board of Directors of

Capital Bancorp, Inc. and Subsidiaries

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Capital Bancorp, Inc. and Subsidiaries (the “Company”) as of December 31, ~~2024~~2025 and ~~2023~~2024, the related consolidated statements of income, comprehensive income, changes in stockholders' equity and cash flows for ~~each of~~ the ~~two~~ years inthen ~~the period~~ ended ~~December 31~~, ~~2024,~~ and the related notes to the consolidated financial statements (collectively, the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, ~~2024~~2025 and ~~2023~~2024, and the results of its operations and its cash flows for each of the two years in the period ended December 31, ~~2024~~2025, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, ~~2024~~2025, based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013,. ~~and~~Our ~~our~~ report dated March 1716, ~~2025,~~2026 expressed an ~~unqualified~~ opinion onthat the ~~effectiveness~~Company ofhad ~~the~~not ~~Company's~~maintained effective internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

7076

Critical Audit Matters, Continued

Allowance for Credit Losses

As described in Note 5 to the Company’s financial statements, the Company has a gross loan portfolio of $23.60 billion and related allowance for credit losses (“ACL”) of $4854.7 million as of December 31, ~~2024~~2025. As described by the Company in Note 1, in order to measure expected credit losses on a collective basis, the Company utilizes a discounted cash flow methodology for all segments, except for the credit card and other consumer portfolio segments, which apply a simplified, non‐discounted cash flow calculation. Loans not sharing similar risk characteristics are evaluated on an individual basis.

Management also collectively evaluates purchased credit deteriorated (“PCD”) loans that do not meet the individually evaluated criteria. For these loans, management uses an adverse “through-the-cycle” (“TTC”) ~~probably~~probability of default and loss given default to reflect the “greater-than-insignificant” credit deterioration. These loans are separated from the non-PCD and originated pools to ensure that these loans receive a reserve that is calculated based on unpaid principal balance (“UPB”) and not amortized cost.

Within the collectively evaluated component, the Company uses regression analysis of historical internal and peer data to determine suitable loss drivers in order to incorporate a reasonable and supportable forecast of losses within the modeled future expected credit loss.

Additionally, a qualitative scorecard is used by management to assess the need for adjustments to expected credit loss estimates for information not already captured in the quantitative loss estimation process. The qualitative scorecard evaluates certain risks such as lending policies and procedures, economic conditions, changes in the nature and volume of portfolios, changes in experience, depth, and ability of lending management, changes in volume and severity of past due loans, quality of loan review system, changes in the value of underlying collateral, concentrations of credit, and other external factors.

We identified the Company’s estimate of the allowance for credit losses as a critical audit matter. The principal considerations for our determination of the ACL as a critical audit matter relate to the high degree of complexity and judgment in the determination of significant model assumptions, specifically, the qualitative factor adjustments to quantitative loss rates. Auditing these complex judgments and assumptions made by the Company involves challenging auditor judgment due to the nature and extent of audit evidence and effort required to address these matters, including the extent of specialized skill or knowledge needed.

The primary procedures we performed to address the critical audit matter include the following:

■We tested the design and operating effectiveness of controls relating to the Company’s determination of the allowance for credit losses, including controls over management’s review and approval of qualitative factors.

■We evaluated the relevance and the reasonableness of assumptions related to the evaluation of the loan portfolio, current and forecasted economic conditions, and other risk factors used within the qualitative factors.

■We tested the completeness and accuracy of significant inputs to the model including the underlying data used to develop the qualitative factors.

■We validated the mathematical accuracy of the calculation.

■We evaluated the reasonableness of assumptions and data used by the Company in developing the qualitative factors by comparing these data points to internally developed and third‐party sources, and other audit evidence gathered.

■We performed analytical procedures to evaluate the directional consistency of changes that occurred in the allowance for credit losses for loans.

Critical Audit Matters, Continued

Business Combination - Valuation of Acquired Loan Portfolio

As described in Note 2 to the Company’s financial statements, on October 1, 2024, the Company acquired Integrated Financial Holdings, Inc. (“IFH”). The transaction has been accounted for as a business combination and accordingly, the assets acquired and liabilities assumed from IFH were recorded at fair value as of the acquisition date. The fair value of acquired loans held for investments was $362.2 million. Determining the fair value of acquired loans involves estimating the amount and timing of principal and interest cash flows expected to be collected on the loans and discounting those cash flows at a market rate of interest. The market rate adjustment represents the movement in market interest rates, irrespective of credit adjustments, compared to the contractual rates of the acquired loans. The credit adjustment made on pools of homogeneous loans represents the changes in credit quality of the underlying borrowers from loan inception to the merger date.

We identified the fair value of acquired loans held for investment as a critical audit matter due to the high degree of complexity and auditor judgment involved and the extent of effort involved, including the use of professionals with specialized skill and knowledge, in testing the Company’s estimates and assumptions, including the discount rates and prepayment rates used in the discounted cash flow methodology.

The primary procedures we performed to address the critical audit matter include the following:

■We tested the design and operating effectiveness of the Company’s process for estimating the acquired loans fair value, including management’s controls over establishing the discount rate used in the discounted cash flow methodology; and evaluating the completeness and accuracy of key inputs and assumptions used in the discounted cash flow methodology, including loan data.

■We tested the completeness and accuracy of certain underlying loan data provided by management that was signif

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