Form: 10-Q

Quarterly report pursuant to Section 13 or 15(d)

November 13, 2024

Documents

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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_________________________
FORM 10-Q
_________________________
(Mark One)
x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2024
OR
o 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 001-42302
_________________________
Chain Bridge Bancorp, Inc.
(Exact name of registrant as specified in its charter)
_________________________
Delaware
20-4957796
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
1445-A Laughlin Avenue, McLean, VA
22101
(Address of Principal Executive Offices) (Zip Code)
(703) 748-2005
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Class A common stock, par value $0.01 per share
CBNA
 NYSE
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes o No x
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,”and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
 Accelerated filer
o
Non-accelerated filer
x
 Smaller reporting company
x
Emerging growth company
x
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
x
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes o No x
As of November 12, 2024, the registrant had outstanding 2,701,887 shares of Class A Common Stock, par value $0.01 per share and 3,859,930 shares of the registrant's Class B Common Stock, par value $0.01 per share.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Unless we state otherwise or the context otherwise requires, “we,” “us,” “our,” “Chain Bridge,” “our Company,” and “the Company,” refer to Chain Bridge Bancorp, Inc., a Delaware corporation, and its consolidated subsidiary, Chain Bridge Bank, National Association. The “Bank” and “Chain Bridge Bank, N.A” refer to Chain Bridge Bank, National Association, a nationally chartered bank.

This Quarterly Report on Form 10-Q contains forward-looking statements, which involve risks and uncertainties. You should not place undue reliance on forward-looking statements because they are subject to numerous uncertainties and factors relating to our operations and business, all of which are difficult to predict and many of which are beyond our control. Forward-looking statements include information concerning our possible or assumed future results of operations, including descriptions of our business strategy. These forward-looking statements are generally identified by the use of forward-looking terminology, including the terms “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and, in each case, their negative or other variations or comparable terminology and expressions. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our strategies, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements. The forward-looking statements are contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements relating to:

• Changes in trade, monetary and fiscal policies of, and other activities undertaken by, governments, agencies, central banks and similar organizations, including the effects of United States federal government spending;
• The level of, or changes in the level of, interest rates and inflation, including the effects on our net interest income and the market value of our investment and loan portfolios;
• The level and composition of our deposits, including our ability to attract and retain, and the seasonality of, client deposits, including those in the IntraFi Cash Service (“ICS®”) network, as well as the amount and timing of deposit outflows through the end of the fourth quarter of 2024 and into early 2025;
• The level and composition of our loan portfolio, including our ability to maintain the credit quality of our loan portfolio;
• Current and future business, economic and market conditions in the United States generally or in the Washington, D.C. metropolitan area in particular;
• The effects of disruptions or instability in the financial system, including as a result of the failure of a financial institution or other participants in it, or geopolitical instability, including war, terrorist attacks, pandemics and man-made and natural disasters;
• The impact of, and changes, in applicable laws, regulations, regulatory expectations and accounting standards and policies;
• Our likelihood of success in, and the impact of, legal, regulatory or other actions, investigations or proceedings related to our business;
• Adverse publicity or reputational harm to us, our senior officers, directors, employees or clients;
• Our ability to effectively execute our growth plans or other initiatives;
• Changes in demand for our products and services;
• Our levels of, and access to, sources of liquidity and capital;
• The ability to attract and retain essential personnel or changes in our essential personnel;
• Our ability to effectively compete with banks, non-bank financial institutions, and financial technology firms and the effects of competition in the financial services industry on our business;
• The effectiveness of our risk management and internal disclosure controls and procedures;
• Any failure or interruption of our information and technology systems, including any components provided by a third party;
• Our ability to identify and address cybersecurity threats and breaches;
• Our ability to keep pace with technological changes;
• Our ability to receive dividends from the Bank and satisfy our obligations as they become due;
• The one-time and incremental costs of operating as a public company;
• Our ability to meet our obligations as a public company, including our obligation under Section 404 of Sarbanes-Oxley; and
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• The effect of our dual-class structure and the concentrated ownership of our Class B common stock, including beneficial ownership of our shares by the lineal descendants of Gerald Francis Fitzgerald, deceased, and Marjorie Gosselin Fitzgerald, their spouses or surviving spouses, children, and grandchildren, and the spouses of their children and grandchildren (the “Fitzgerald Family”).

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” included in our prospectus dated October 3, 2024, as filed with the U.S. Securities and Exchange Commission in accordance with Rule 424(b) of the Securities Act of 1933, as amended, on October 7, 2024 (the “Prospectus”). Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q. And while we believe such information provides a reasonable basis for such statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and you are cautioned not to unduly rely upon these statements. Past performance is not a guarantee of future results or returns and no representation or warranty is made regarding future performance.


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Part I - Financial Information
Item 1. Financial Statements
Page
Item 1 - Financial Statements
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Chain Bridge Bancorp, Inc. and Subsidiary
Consolidated Balance Sheets
(Dollars in thousands, except per share data)
(unaudited)
September 30,
2024		 December 31,
20231
Assets
Cash and due from banks $ 11,732  $ 6,035 
Interest-bearing deposits in other banks 628,035  310,732 
Total cash and cash equivalents 639,767  316,767 
Securities available for sale, at fair value 294,754  258,114 
Securities held to maturity, at carrying value, net of allowance for credit losses of $261 and $348, respectively (fair value of $285,780 and $283,916, respectively)
 302,348  308,058 
Equity securities, at fair value 527  505 
Restricted securities, at cost 2,886  2,613 
Loans, net of allowance for credit losses of $4,206 and $4,319, respectively
 295,826  299,825 
Premises and equipment, net of accumulated depreciation of $7,163 and $6,791, respectively
 9,613  9,858 
Accrued interest receivable 5,360  4,354 
Other assets 4,201  5,108 
Total assets $ 1,555,282  $ 1,205,202 
Liabilities and stockholders’ equity
Liabilities
Deposits:
Noninterest-bearing $ 1,249,724  $ 766,933 
Savings, interest-bearing checking and money market accounts 172,275  328,350 
Time, $250 and over
 6,589  9,385 
Other time 5,280  7,357 
Total deposits 1,433,868  1,112,025 
Short-term borrowings 10,000  5,000 
Accrued interest payable 25  61 
Accrued expenses and other liabilities 6,546  4,679 
Total liabilities 1,450,439  1,121,765 
Commitments and contingencies
Stockholders’ equity
Preferred Stock: 2
No par value, 10,000,000 shares authorized, no shares issued and outstanding
 —  — 
Class A Common Stock: 2
$0.01 par value, 20,000,000 shares authorized, 0 shares issued and outstanding
 —  — 
Class B Common Stock: 2
$0.01 par value, 10,000,000 shares authorized, 4,568,920 and 4,568,240 shares issued and outstanding, respectively
 46  46 
Additional paid-in capital 38,276  38,264 
Retained earnings 73,901  56,692 
Accumulated other comprehensive loss (7,380) (11,565)
Total stockholders’ equity 104,843  83,437 
Total liabilities and stockholders’ equity $ 1,555,282  $ 1,205,202 
See Notes to Consolidated Financial Statements.
1 Derived from audited financial statements.
2 On October 3, 2024, the Company filed an Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware, which reclassified and converted each outstanding share of the Company’s existing common stock, par value $1.00 per share (“Old Common Stock”), into 170 shares of Class B Common Stock, par value $0.01 per share (the “Reclassification”). The Reclassification also authorized 20,000,000 shares of Class A Common Stock, and 10,000,000 shares of Preferred Stock. Share information is presented on an as adjusted basis giving effect to the Reclassification. Accordingly, all shares and balances relating to Old Common Stock are reflected in Class B Common Stock. See Note 2—Capital Structure in the Notes to Unaudited Consolidated Financial Statements contained within this Form 10-Q.
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Chain Bridge Bancorp, Inc. and Subsidiary
Consolidated Statements of Income
(Dollars in thousands, except per share data)
(unaudited)
Three Months Ended
September 30,		 Nine Months Ended
September 30,
2024 2023 2024 2023
Interest and dividend income
Interest and fees on loans $ 3,445  $ 3,417  $ 10,115  $ 10,124 
Interest and dividends on securities, taxable 3,573  2,741  9,312  8,360 
Interest on securities, tax-exempt 284  304  863  918 
Interest on interest-bearing deposits in banks 7,366  1,681  15,568  3,680 
Total interest and dividend income 14,668  8,143  35,858  23,082 
Interest expense
Interest on deposits 813  861  2,437  2,822 
Interest on short-term borrowings 209  96  409  284 
Total interest expense 1,022  957  2,846  3,106 
Net interest income 13,646  7,186  33,012  19,976 
(Recapture of) provision for credit losses
Provision for (recapture of) loan credit losses (131) 1  (113) (82)
Provision for (recapture of) securities credit losses 13  6  (297) 804 
Total provision for (recapture of) credit losses (118) 7  (410) 722 
Net interest income after provision for (recapture of) credit losses 13,764  7,179  33,422  19,254 
Noninterest income
Deposit placement services 2,464  859  5,617  1,106 
Service charges on accounts 376  227  1,008  651 
Trust and wealth management 243  149  669  407 
Gain on sale of mortgage loans 13  —  25  — 
Loss on sale of securities (65) (30) (65) (312)
Other income 49  16  104  89 
Total noninterest income 3,080  1,221  7,358  1,941 
Noninterest expenses
Salaries and employee benefits 4,280  3,116  11,553  9,237 
Professional services 1,206  207  2,154  623 
Data processing and communication expenses 669  570  1,928  1,683 
Virginia bank franchise tax 253  188  604  564 
Occupancy and equipment expenses 236  232  748  695 
FDIC and regulatory assessments 212  159  560  443 
Directors fees 191  100  523  286 
Insurance expenses 61  54  181  166 
Marketing and business development costs 47  48  169  170 
Other operating expenses 277  207  758  574 
Total noninterest expenses 7,432  4,881  19,178  14,441 
Net income before taxes 9,412  3,519  21,602  6,754 
Income tax expense 1,925  676  4,393  1,237 
Net income $ 7,487  $ 2,843  $ 17,209  $ 5,517 
Earnings per common share, basic and diluted3 $ 1.64  $ 0.62  $ 3.77  $ 1.21 

3 Share information for all periods presented gives effect to the Reclassification. All earnings are attributed to Class B shares because no Class A shares were outstanding during the periods presented. The number of basic and diluted shares are the same because there are no potentially dilutive instruments. See Note 2—Capital Structure and Note 9—Earnings Per Share in the Notes to Unaudited Consolidated Financial Statements contained within this Form 10-Q.
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See Notes to Consolidated Financial Statements.
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Chain Bridge Bancorp, Inc. and Subsidiary
Consolidated Statements of Comprehensive Income
(Dollars in thousands)
(unaudited)
Three Months Ended
September 30,		 Nine Months Ended
September 30,
2024 2023 2024 2023
Net income $ 7,487  $ 2,843  $ 17,209  $ 5,517 
Other comprehensive income (loss):
Unrealized holding gain (loss) on securities available for sale 3,972  (1,240) 4,439  354 
Income tax (expense) benefit related to above unrealized gain (loss) item (834) 261  (932) (74)
Amortization of unrealized holding loss on securities available for sale, transferred to held to maturity 220  280  793  830 
Income tax expense related to above amortization item (46) (59) (166) (174)
Reclassification adjustment for losses included in net income 65  30  65  312 
Income tax expense related to above reclassification item (14) (6) (14) (66)
Other comprehensive income (loss), net of tax 3,363  (734) 4,185  1,182 
Comprehensive income $ 10,850  $ 2,109  $ 21,394  $ 6,699 

See Notes to Consolidated Financial Statements.
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Chain Bridge Bancorp, Inc. and Subsidiary
Consolidated Statements of Cash Flows
For the Nine Months Ended September 30, 2024 and 2023
(Dollars in thousands)
(unaudited)
September 30,
2024		 September 30,
2023
Cash flows from operating activities
Net income $ 17,209  $ 5,517 
Reconciliation of net income to net cash provided by operating activities:
Depreciation and amortization of premises and equipment 372  243 
Premium amortization (discount accretion) and on investment securities, net (325) 1,263 
Recapture of impairment loss on securities previously recognized in earnings (3) (12)
Fair value adjustment (gain) loss on equity security (11) 15 
Provision for (recapture of) loan credit losses (113) (82)
Provision for (recapture of) securities credit losses (297) 804 
Loss on sale of securities 65  312 
Gain on sale of mortgage loans (25) — 
Origination of loans held for sale (2,537) (415)
Proceeds from sale of loans 2,562  — 
Changes in assets and liabilities:
Increase in accrued interest receivable and other assets (1,211) (585)
Decrease in accrued interest payable, accrued expenses and other liabilities 1,831  244 
Net cash provided by operating activities 17,517  7,304 
Cash flows from investing activities
Securities available for sale:
Purchases of securities (111,508) (3,474)
Proceeds from calls, maturities, paydowns and sales 80,964  28,378 
Securities held to maturity:
Proceeds from calls, maturities and paydowns 5,471  248 
Purchase of restricted securities, net (273) (112)
Reinvestment of dividends on equity security (11) (9)
Net decrease in loans 4,112  9,679 
Purchases of premises and equipment (127) (48)
Net cash (used in) provided by investing activities (21,372) 34,662 
Cash flows from financing activities
Net increase in noninterest-bearing, savings, interest-bearing checking and money market deposits 326,716  109,142 
Net (decrease) increase in time deposits (4,873) 4,673 
Increase in short-term borrowings 5,000  — 
Proceeds from stock issuance 12  — 
Net cash provided by financing activities 326,855  113,815 
Net increase in cash and cash equivalents 323,000  155,781 
Cash and cash equivalents, beginning of period 316,767  98,663 
Cash and cash equivalents, end of period $ 639,767  $ 254,444 
Supplemental disclosures of cash flow information
Cash payments for interest $ 2,882  $ 3,087 
Cash payments for taxes $ 2,551  $ 1,047 
Supplemental disclosures of noncash investing activities
Fair value adjustment for available for sale securities $ 4,439  $ 666 
See Notes to Consolidated Financial Statements.
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Chain Bridge Bancorp, Inc. and Subsidiary
Consolidated Statements of Changes in Stockholders’ Equity
For the Nine Months Ended September 30, 2024 and 2023
(Dollars in thousands)
(unaudited)
Common
Stock		 Additional
Paid-In
Capital		 Retained
Earnings		 Accumulated
Other
Comprehensive
Loss		 Total
Balance at December 31, 2022 $ 46  $ 38,264  $ 48,121  $ (17,648) $ 68,783 
Adjustment for adoption of ASC 326 —  —  (329) —  (329)
Net income —  —  1,048  —  1,048 
Other comprehensive income —  —  —  3,067  3,067 
Balance at March 31, 2023 $ 46  $ 38,264  $ 48,840  $ (14,581) $ 72,569 
Adjustment for adoption of ASC 326 —  —  —  —  — 
Net income —  —  1,626  —  1,626 
Other comprehensive income —  —  —  (1,151) (1,151)
Balance at June 30, 2023 46  38,264  50,466  (15,732) 73,044 
Adjustment for adoption of ASC 326 —  —  —  —  — 
Net income —  —  2,843  —  2,843 
Other comprehensive income —  —  —  (734) (734)
Balance at September 30, 2023 $ 46  $ 38,264  $ 53,309  $ (16,466) $ 75,153 
Balance at December 31, 2023 $ 46  $ 38,264  $ 56,692  $ (11,565) $ 83,437 
Net income —  —  3,917  —  3,917 
Other comprehensive income —  —  —  235  235 
Issuance of common stock —  12  —  —  12 
Balance at March 30, 2024 $ 46  $ 38,276  $ 60,609  $ (11,330) $ 87,601 
Net income —  —  5,805  —  5,805 
Other comprehensive income —  —  —  587  587 
Balance at June 30, 2024 46  38,276  66,414  (10,743) 93,993 
Net income —  —  7,487  —  7,487 
Other comprehensive income —  —  —  3,363  3,363 
Balance at September 30, 2024 $ 46  $ 38,276  $ 73,901  $ (7,380) $ 104,843 
See Notes to Consolidated Financial Statements.
* Share information for all periods presented gives effect to the Company’s share Reclassification. Accordingly, all shares and balances relating to Old Common Stock are reflected in Class B Common Stock. See Note 2—Capital Structure in the Notes to Unaudited Consolidated Financial Statements contained within this Form 10-Q.
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Chain Bridge Bancorp, Inc. and Subsidiary
Notes to Consolidated Financial Statements
(unaudited)
Note 1. Organization and Summary of Significant Accounting Policies
Organization and Nature of Operations
Chain Bridge Bancorp, Inc. (the “Company”) is a Delaware corporation and is the registered bank holding company for Chain Bridge Bank, National Association (the “Bank”). Both the Company and Bank have their headquarters and sole executive office in McLean, Virginia.
The Bank operates a model that combines electronic banking channels with its physical banking headquarters in McLean, Virginia, allowing it to serve clients nationally.
The Bank provides a wide range of commercial and personal banking services, including deposit accounts, mortgage financing, various loan products, trust administration, wealth management, and asset custody. The core deposit products offered by the Bank include noninterest-bearing and interest-bearing checking accounts, along with savings accounts. The Bank’s lending portfolio is comprised primarily of mortgage-related loans, with the majority being consumer residential mortgages in the Washington, D.C. area. The Bank offers tailored solutions to individuals, families, businesses, non-profit organizations, and political organizations. The term “political organizations” refers to campaign committees, party committees, separate segregated funds (including trade association political action committees (“PACs”) and corporate PACs), non-connected committees (including independent expenditure-only committees (“Super PACs”), committees maintaining separate accounts for direct contributions and independent expenditures (“Hybrid PACs”), and committees other than authorized campaign committees, or those affiliated therewith, maintained or controlled by a candidate or federal officeholder (“Leadership PACs”)), and other tax-exempt 527 organizations.
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. The statements do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of the Company’s management, all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the consolidated financial statements, have been included. These unaudited interim consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2023 and the notes thereto.
The results of operations for the nine months ended September 30, 2024 are not necessarily indicative of the results to be expected for any other interim period or for the full year.
Principles of Consolidation
The consolidated financial statements include the accounts of Chain Bridge Bancorp, Inc. and its wholly-owned subsidiary, Chain Bridge Bank, National Association. All significant intercompany balances and transactions have been eliminated in consolidation.
Reclassification
Certain amounts reported in prior years may be reclassified to conform to the current year’s presentation. There were no reclassifications for the periods reported.
Significant Accounting Policies
The accounting and reporting policies of the Company are in accordance with GAAP and conform to general practices within the banking industry. The Company’s significant accounting policies are described in the Note 1 of the “Notes to the Consolidated Financial Statements” included in the audited consolidated financial statements for the fiscal year ended December 31, 2023. There have been no significant changes to the application of significant accounting policies since December 31, 2023.
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Notes to Unaudited Consolidated Financial Statements



In preparing financial statements in conformity with GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Estimates are evaluated on an ongoing basis. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses (“ACL”) on loans and held to maturity debt securities.
Recent Accounting Pronouncements
In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The amendments in this ASU require an entity to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, which is greater than five percent of the amount computed by multiplying pretax income by the entity’s applicable statutory rate, on an annual basis. Additionally, the amendments in this ASU require an entity to disclose the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions that are equal to or greater than five percent of total income taxes paid (net of refunds received). Lastly, the amendments in this ASU require an entity to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign. This ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied on a prospective basis; however, retrospective application is permitted. The Company does not expect the adoption of ASU 2023-09 to have a material impact on its consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03 requires public companies to disclose, in the notes to the financial statements, specific information about certain costs and expenses at each interim and annual reporting period. This includes disclosing amounts related to employee compensation, depreciation, and intangible asset amortization. In addition, public companies will need to provide qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. ASU 2024-03 is effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Implementation of ASU 2024-03 may be applied prospectively or retrospectively. The Company does not expect the adoption of ASU 2024-03 to have a material impact on its consolidated financial statements.
Other accounting standards that have been issued by the FASB or other standard setting bodies are not currently expected to have material effect on the Company’s financial position, results of operations or cash flows.
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Notes to Unaudited Consolidated Financial Statements




Note 2. Capital Structure

On September 13, 2024, the Company filed a Registration Statement on Form S-1 with the U.S. Securities and Exchange Commission (“SEC”) in connection with its initial public offering (“IPO”), as amended on September 30, 2024, and declared effective by the SEC on October 3, 2024 (the “Registration Statement”). On October 7, 2024, the Company issued 1,850,000 shares of Class A common stock, par value of $0.01 (“Class A Common Stock”), at a public offering price of $22.00 per share. On October 7, 2024, the Company completed its IPO and received total net proceeds of $37.1 million, after deducting the underwriters’ discount and reimbursements for the underwriters’ legal and other out of pocket expenditures. The net proceeds less other related expenses, including audit fees, legal fees, listing fees, and other expenses, totaled $33.6 million.

On October 10, 2024, the Company used a portion of the net proceeds to fully repay $10.0 million in short-term borrowings. The Company subsequently closed the line of credit on October 11, 2024.

On November 1, 2024, the Company issued an additional 142,897 shares of Class A Common Stock as a result of the underwriters' exercise of their 30-day option to purchase up to an additional 277,500 shares of its Class A Common Stock. The issuance resulted in net proceeds to the Company of approximately $2.9 million, after deducting underwriting discounts and commissions.

In connection with the IPO, on October 3, 2024, the Company filed an Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware, which established two new classes of common stock, the Class A Common Stock and Class B common stock, par value $0.01 per share (“Class B Common Stock”), and reclassified and converted each outstanding share of the Company’s existing common stock, par value $1.00 per share (“Old Common Stock”), into 170 shares of Class B Common Stock (the “Reclassification”). The Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware also changed the number of authorized shares of Preferred Stock from 100,000 to 10,000,000.

As of September 30, 2024, the Company had 26,876 shares of Old Common Stock issued and outstanding and no shares of Class A Common Stock and Class B Common Stock issued and outstanding. After giving effect to the Reclassification, which was retroactively applied to the financial statements, the Company had no shares of Old Common Stock and Class A Common Stock issued and outstanding and 4,568,920 shares of Class B Common Stock issued and outstanding. Because the Reclassification was applied retroactively to all periods presented, a share that was previously reported as Old Common stock at $1.00 par value and Additional Paid in Capital, is now reported as 170 shares of Class B Common Stock at $0.01 par value and Additional Paid in Capital. The following table sets forth selected balance sheet components as of September 30, 2024:
•On an unadjusted basis, giving no effect to the Reclassification;
•On an as adjusted basis, giving effect to the Reclassification transactions described above; and
•On an as further adjusted basis after giving effect to (1) the Reclassification, (2) the Company’s receipt of     
the net proceeds from the IPO, after deducting underwriting discounts and commission and other direct expenses of the offering, and (3) the use of a portion of the net proceeds to repay the outstanding principal balance of $10.0 million of borrowings under the Company’s unsecured line of credit with a correspondent bank.















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Notes to Unaudited Consolidated Financial Statements




As of September 30, 2024
Unadjusted As adjusted for Reclassification As Further Adjusted for IPO
(dollars in thousands, except per share data)
Cash and cash equivalents $ 639,767  $ 639,767  $ 666,293 
Debt: Short-term borrowings $ 10,000  $ 10,000  $ — 
Stockholders’ equity:
Preferred Stock, no par value; 100,000 shares authorized, none issued and outstanding, unadjusted; no par value, 10,000,000 shares authorized, none issued and outstanding, as adjusted for Reclassification and as further adjusted for IPO
$ —  $ —  $ — 
Old Common Stock, $1.00 par value; 200,000 shares authorized, 26,876 shares issued and outstanding, unadjusted; no shares authorized, no shares issued and outstanding, as adjusted for Reclassification and as further adjusted for IPO
$ 27  $ —  $ — 
Class A Common Stock, $0.01 par value; no shares authorized, no shares issued and outstanding, unadjusted; 20,000,000 shares authorized, no shares issued and outstanding, as adjusted for Reclassification; 20,000,000 shares authorized, 1,992,897 shares issued and outstanding, as further adjusted for IPO
$ —  $ —  $ 20 
Class B Common Stock, $0.01 par value; no shares authorized, no shares issued and outstanding, unadjusted; 10,000,000 shares authorized, 4,568,920 shares issued and outstanding, as adjusted for Reclassification and as further adjusted for IPO
$ —  $ 46  $ 46 
Additional paid-in capital $ 38,295  $ 38,276  $ 74,782 
Retained earnings $ 73,901  $ 73,901  $ 73,901 
Accumulated other comprehensive loss $ (7,380) $ (7,380) $ (7,380)
Total stockholders’ equity $ 104,843  $ 104,843  $ 141,369 



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Notes to Unaudited Consolidated Financial Statements



Note 3. Securities & Allowance for Securities Credit Losses
The Company invests in a variety of debt securities, principally obligations of the U.S. government and federal agencies, mortgage backed securities, state and municipal agencies, and corporations. As of September 30, 2024 and December 31, 2023, all debt securities were classified as held to maturity (“HTM”) or available for sale (“AFS”).
Management considers the appropriateness of the accounting treatment applied to the Company’s debt securities portfolio on an ongoing basis. During a prior year, certain AFS bonds were transferred to the HTM portfolio. Bonds selected for transfer included U.S. government and federal agencies, corporate bonds, and state and municipal bonds. The unrealized loss at the time of transfer is being amortized monthly over the remaining lives of the debt securities with an increase to the carrying value of the debt securities and a decrease to the related accumulated other comprehensive loss, which is included in the stockholders’ equity section of the consolidated balance sheets.
The following tables summarize the amortized cost, gross unrealized gains and losses, fair value and allowance for credit losses of AFS and HTM debt securities at September 30, 2024 and December 31, 2023 (dollars in thousands):
September 30, 2024
Amortized
Cost		 Gross
Unrealized
Gains		 Gross
Unrealized
(Losses)		 Fair
Value		 Allowance
for Credit
Losses
Securities available for sale:
U.S. government and federal agencies $ 131,089  $ 52  $ (1,416) $ 129,725  $ — 
Mortgage backed securities 8,658  —  (429) 8,229  — 
Corporate bonds 53,283  62  (750) 52,595  — 
State and municipal securities 107,323  88  (3,206) 104,205  — 
Total securities available for sale $ 300,353  $ 202  $ (5,801) $ 294,754  $ — 
Securities held to maturity:
U.S. government and federal agencies $ 122,447  $ 6  $ (7,236) $ 115,217  $ — 
Mortgage backed securities 1,173  —  (1) 1,172  — 
Corporate bonds 58,409  90  (1,545) 56,954  (230)
State and municipal securities 120,580  23  (8,166) 112,437  (31)
Total securities held to maturity $ 302,609  $ 119  $ (16,948) $ 285,780  $ (261)
Total securities $ 602,962  $ 321  $ (22,749) $ 580,534  $ (261)
December 31, 2023
Amortized
Cost		 Gross
Unrealized
Gains		 Gross
Unrealized
(Losses)		 Fair
Value		 Allowance
for Credit
Losses
Securities available for sale:
U.S. government and federal agencies $ 95,129  $ 32  $ (2,864) $ 92,297  $ — 
Mortgage backed securities 9,247  11  (609) 8,649  — 
Corporate bonds 57,304  5  (1,837) 55,472  — 
State and municipal securities 106,472  34  (4,810) 101,696  — 
Total securities available for sale $ 268,152  $ 82  $ (10,120) $ 258,114  $ — 
Securities held to maturity:
U.S. government and federal agencies $ 123,938  $ —  $ (10,069) $ 113,869  $ — 
Mortgage backed securities 1,190  —  (17) 1,173  — 
Corporate bonds 59,629  59  (3,027) 56,661  (322)
State and municipal securities 123,649  6  (11,442) 112,213  (26)
Total securities held to maturity $ 308,406  $ 65  $ (24,555) $ 283,916  $ (348)
Total securities $ 576,558  $ 147  $ (34,675) $ 542,030  $ (348)
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Notes to Unaudited Consolidated Financial Statements



There were no holdings of municipal or corporate debt that equaled or exceeded 10.0% of stockholders’ equity at September 30, 2024 and December 31, 2023.
There were no securities pledged to secure a line of credit with the Federal Reserve Bank of Richmond, Virginia at September 30, 2024 and December 31, 2023.
Proceeds from calls, maturities, paydowns and sales of debt securities available for sale totaled $81.0 million for the nine months ended September 30, 2024 and $28.4 million for the nine months ended September 30, 2023. Proceeds from calls, maturities, and paydowns of debt securities held to maturity totaled $5.5 million and $248 thousand for the nine month periods ended September 30, 2024 and 2023, respectively.
During the nine months ended September 30, 2024, the Bank sold an AFS bond that was charged off during a prior year for $210 thousand. The proceeds were recorded as a recapture of credit loss. Because this sale did not result in a realized gain or loss on sale of securities, it is excluded from the related tables below.
The proceeds, gross realized gains and losses from sales of debt securities during the three and nine months ended September 30, 2024 and 2023 were as follows (dollars in thousands):
Three Months Ended September 30, 2024 Nine Months Ended September 30, 2024
Available for Sale Held to Maturity Available for Sale Held to Maturity
Proceeds from sales of securities $ —  $ 953  $ —  $ 953 
Gross gains —  —  —  — 
Gross losses —  (65) —  (65)
Net losses on sale of a securities $ —  $ (65) $ —  $ (65)
Income tax benefit attributable to realized net losses on sale of securities $ —  $ 14  $ —  $ 14 
Three Months Ended
September 30, 2023		 Nine Months Ended
September 30, 2023
Available for Sale Held to Maturity Available for Sale Held to Maturity
Proceeds from sales of securities $ 977  $ —  $ 1,929  $ — 
Gross gains —  —  —  — 
Gross losses (30) —  (312) — 
Net losses on sale of a securities $ (30) $ —  $ (312) $ — 
Income tax benefit attributable to realized net losses on sale of securities $ 6  $ —  $ 66  $ — 

Management classifies bonds as HTM only when the Company has the ability and intent to hold the bond to maturity, and certain sales or transfers of HTM could call into question management’s ability or intent to hold the remaining HTM bond portfolio to maturity, thereby “tainting” the entire portfolio and triggering a reclassification of the entire portfolio to available for sale. However, there are limited situations, including evidence of deterioration in the issuer’s creditworthiness, in which the Company could sell an HTM bond without tainting the remaining HTM portfolio. During the third quarter of 2024, the Company sold two HTM bonds from a single issuer due to significant documented deterioration of the issuer’s creditworthiness evidenced by the downgrading of the issuer’s public credit rating. The sales are included in the tables above. Under these circumstances, the sale did not taint the HTM portfolio.
The amortized cost and fair value of debt securities by contractual maturity at September 30, 2024 is as follows (dollars in thousands):
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Available for Sale Held to Maturity
Amortized
Cost		 Fair
Value		 Amortized
Cost		 Fair
Value
Within one year $ 166,593  $ 166,033  $ 16,873  $ 16,668 
After one year through five years 98,391  95,808  189,090  181,392 
After five years through ten years 29,950  27,843  92,329  83,923 
Over ten years 5,419  5,070  4,317  3,797 
Total $ 300,353  $ 294,754  $ 302,609  $ 285,780 
Expected maturities may differ from contractual maturities if issuers have the right to call or repay obligations with or without prepayment penalties.
The following table shows the gross unrealized losses and fair value of the Company’s AFS debt securities with unrealized losses aggregated by investment category and length of time that individual debt securities have been in a continuous unrealized loss position at September 30, 2024 and December 31, 2023 (dollars in thousands):
September 30, 2024
Less Than Twelve
Months		 Over Twelve Months Total
Gross
Unrealized
Loss		 Fair
Value		 Gross
Unrealized
Loss		 Fair
Value		 Gross
Unrealized
Loss		 Fair
Value
Securities available for sale:
U.S. government and federal agencies $ (1) $ 10,997  $ (1,415) $ 46,445  $ (1,416) $ 57,442 
Mortgage backed securities —  27  (429) 8,170  (429) 8,197 
Corporate bonds (17) 5,454  (733) 37,865  (750) 43,319 
State and municipal securities (27) 6,061  (3,179) 83,089  (3,206) 89,150 
Total securities available for sale $ (45) $ 22,539  $ (5,756) $ 175,569  $ (5,801) $ 198,108 
December 31, 2023
Less Than Twelve
Months		 Over Twelve Months Total
Gross
Unrealized
Loss		 Fair
Value		 Gross
Unrealized
Loss		 Fair
Value		 Gross
Unrealized
Loss		 Fair
Value
Securities available for sale:
U.S. government and federal agencies $ (16) $ 5,860  $ (2,848) $ 70,906  $ (2,864) $ 76,766 
Mortgage backed securities —  —  (609) 8,604  (609) 8,604 
Corporate bonds (3) 2,482  (1,834) 51,987  (1,837) 54,469 
State and municipal securities (31) 3,675  (4,779) 89,828  (4,810) 93,503 
Total securities available for sale $ (50) $ 12,017  $ (10,070) $ 221,325  $ (10,120) $ 233,342 
In the AFS portfolio at September 30, 2024, 46 out of 61 debt securities of the U.S. government and federal agencies, 15 out of 20 mortgage backed securities, 89 out of 108 corporate bonds, and 269 out of 306 state and municipal securities were in an unrealized loss position. All of the Company’s investment portfolio was evaluated under the monitoring process described in Note 1 of the audited consolidated financial statements for the year ended December 31, 2023, and all investments were deemed investment grade. All of the unrealized losses are attributed to changes in market interest rates, and are not a result of deterioration of creditworthiness among any of the issuers.
Of the total AFS and HTM portfolio at September 30, 2024 and December 31, 2023, 792 and 880 debt securities had unrealized losses with aggregate impairment of 3.8% and 6.0%, respectively, of the Company’s amortized cost basis. These unrealized losses related principally to interest rate movements and not the creditworthiness of the issuer. In analyzing an issuer’s financial condition, management considers whether the debt securities are issued by the federal government or its
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agencies, whether downgrades by bond rating agencies have occurred, and industry analysts’ reports. Credit loss allowances for the AFS and HTM portfolios are described in the following sections.
Allowance for Credit Losses—AFS Securities
Management evaluates debt securities to determine whether the unrealized loss is due to credit-related factors or non-credit-related factors. This analysis occurs on a quarterly basis. Consideration is given to the extent to which fair value is less than cost, the financial condition and near-term prospects of the issuer, and the intent and ability of the Company to retain its investment in the security for a period of time sufficient to allow for full recovery of its amortized cost. If the assessment reveals that a credit loss exists, the present value of the expected cash flows of the security is compared to the amortized cost basis of the security. If the present value of future cash flows expected to be collected is less than the amortized cost, an allowance for the credit loss is recorded. The loss is limited by the amount that the amortized cost exceeds fair value.
As of the reporting date, the Company did not intend to sell any of the AFS debt securities, did not expect to be required to sell these debt securities, and expected to recover the entire amortized cost basis of all of the debt securities.
The Company did not record an ACL on the AFS debt securities at September 30, 2024 and December 31, 2023. The Company has evaluated these debt securities for credit-related impairment at the reporting date and concluded that no impairment existed. In analyzing an issuer’s financial condition, management considers whether the debt securities are issued by the federal government or its agencies, whether downgrades by bond rating agencies have occurred, industry analysts’ reports, and correlations between fair value changes and interest rate changes among instruments that are not credit sensitive. All AFS debt securities were current with no debt securities past due or on non-accrual as of September 30, 2024 and December 31, 2023. The Company considers the unrealized losses on the debt securities as of September 30, 2024 and December 31, 2023 to be related to fluctuations in market conditions, primarily interest rates, and is not reflective of deterioration in credit.
The table below presents a rollforward by major security type of the allowance for credit losses on AFS debt securities for the nine months ended September 30, 2024 and 2023 (dollars in thousands):
September 30, 2024
For the nine months ended U.S.
Government
and Federal
Agencies		 Mortgage
Backed
Securities		 Corporate
Bonds		 State and
Municipal
Securities		 Total AFS
Securities
Allowance for credit losses:
Beginning balance, December 31, 2023 $ —  $ —  $ —  $ —  $ — 
Provision for (recapture of) credit losses —  —  (210) —  (210)
Write offs charged against the allowance —  —  —  —  — 
Recoveries of amounts previously written off —  —  210  —  210 
Ending balance, September 30, 2024 $ —  $ —  $ —  $ —  $ — 
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Notes to Unaudited Consolidated Financial Statements




At September 30, 2024, there was no allowance for credit losses on AFS debt securities recorded. During the nine months ended September 30, 2024, the Bank received proceeds totaling $210 thousand for a bond that was fully charged off during 2023, and recorded a recovery of credit loss. The entire ACL recovery during 2024 was recorded in the first quarter.
September 30, 2023
For the nine months ended U.S.
Government
and Federal
Agencies		 Mortgage
Backed
Securities		 Corporate
Bonds		 State and
Municipal
Securities		 Total AFS
Securities
Allowance for credit losses:
Beginning balance, December 31, 2022 $ —  $ —  $ —  $ —  $ — 
Impact of adopting ASC 326 —  —  —  —  — 
Provision for credit losses —  —  785  —  785 
Write offs charged against the allowance —  —  (785) —  (785)
Recoveries of amounts previously written off —  —  —  —  — 
Ending balance, September 30, 2023 $ —  $ —  $ —  $ —  $ — 
At September 30, 2023 and December 31, 2023, there was no allowance for credit losses on AFS debt securities recorded. The entire ACL provision recorded for the AFS portfolio during 2023 was recorded in the first quarter and pertained to a holding from a single corporate issuer whose business was ultimately closed by a regulatory authority. The bond, initially classified as HTM, was transferred to the AFS portfolio based on the unlikely collectability of the unsecured bond and significant documented credit deterioration. A portion of the bond was subsequently sold at a loss, and the remaining unsold portion was written off entirely.
Credit Quality Indicators and Allowance for Credit Losses - HTM Securities
The Company evaluates the credit risk of its HTM debt securities on a quarterly basis. The Company estimates expected credit losses on HTM debt securities using an instrument -level process described in Note 1 of the audited consolidated financial statements for the year ended December 31, 2023. The primary indicators of credit quality for the Company’s HTM portfolio are security type, time remaining to maturity, and credit rating. Credit ratings may be influenced by a number of factors including obligor cash flows, geography, seniority and others. The HTM portfolio includes debt securities issued by the U.S. Treasury and agencies of the federal government, and mortgage-backed securities issued by government agencies. These types of investments carry implicit or explicit backing of the U.S. Treasury, and therefore are deemed to carry no credit risk for purposes of the ACL evaluation.
The following table presents the amortized cost of HTM debt securities as of September 30, 2024 and December 31, 2023 by security type and credit rating (dollars in thousands):
September 30, 2024
U.S.
Government
and Federal
Agencies		 Mortgage
Backed
Securities		 Corporate
Bonds		 State and
Municipal
Securities		 Total HTM
Securities
AAA / AA / A $ 122,447  $ 1,173  $ 18,447  $ 120,580  $ 262,647 
BBB / BB / B —  —  39,962  —  39,962 
Total $ 122,447  $ 1,173  $ 58,409  $ 120,580  $ 302,609 
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December 31, 2023
U.S.
Government
and Federal
Agencies		 Mortgage
Backed
Securities		 Corporate
Bonds		 State and
Municipal
Securities		 Total HTM
Securities
AAA / AA / A $ 123,938  $ 1,190  $ 20,091  $ 123,168  $ 268,387 
BBB / BB / B —  —  39,538  481  40,019 
Total $ 123,938  $ 1,190  $ 59,629  $ 123,649  $ 308,406 
The following tables summarize the change in the allowance for credit losses on HTM debt securities for the three and nine months ended September 30, 2024 and 2023 and the twelve months ended December 31, 2023 (dollars in thousands):
September 30, 2024
For the three months ended U.S.
Government
and Federal
Agencies		 Mortgage
Backed
Securities		 Corporate
Bonds		 State and
Municipal
Securities		 Total HTM
Securities
Allowance for credit losses:
Beginning balance, June 30, 2024 $ —  $ —  $ 215  $ 33  $ 248 
Provision for (recapture of) credit losses —  —  15  (2) 13 
Write offs charged against the allowance —  —  —  —  — 
Recoveries of amounts previously written off —  —  —  —  — 
Ending balance, September 30, 2024 $ —  $ —  $ 230  $ —  $ 31  $ —  $ 261 
September 30, 2023
For the three months ended U.S.
Government
and Federal
Agencies		 Mortgage
Backed
Securities		 Corporate
Bonds		 State and
Municipal
Securities		 Total HTM
Securities
Allowance for credit losses:
Beginning balance, June 30, 2023 $ —  $ —  $ 316  $ 26  $ 342 
Provision for (recapture of) credit losses —  —  (8) 14  6 
Write offs charged against the allowance —  —  —  —  — 
Recoveries of amounts previously written off —  —  —  —  — 
Ending balance, September 30, 2023 —  —  308  40  348 
September 30, 2024
For the nine months ended U.S.
Government
and Federal
Agencies		 Mortgage
Backed
Securities		 Corporate
Bonds		 State and
Municipal
Securities		 Total HTM
Securities
Allowance for credit losses:
Beginning balance, December 31, 2023 $ —  $ —  $ 322  $ 26  $ 348 
Provision for (recapture of) credit losses —  —  (92) 5  (87)
Write offs charged against the allowance —  —  —  —  — 
Recoveries of amounts previously written off —