Financial Position - As of September 30, 2024, the Company had total consolidated assets of $2.27 billion, total loans net of unearned income of $1.82 billion, total deposits of $1.94 billion, and total shareholders' equity of $243.1 million[163]. - Total assets increased by $31.8 million or 1.4% to $2.27 billion at September 30, 2024, compared to $2.24 billion at December 31, 2023[234]. - Total liabilities increased by $18.6 million or 0.9% to $2.03 billion at September 30, 2024, compared to $2.01 billion at December 31, 2023[235]. - Shareholders' equity increased by $13.2 million or 5.7% to $243.1 million at September 30, 2024, compared to $229.9 million at December 31, 2023[235]. - Book value per share was $17.07 as of September 30, 2024, compared to $16.25 as of December 31, 2023[235]. Income and Earnings - Net income for the nine months ended September 30, 2024 increased by $11.7 million to $12.3 million compared to $0.7 million for the same period of 2023[169]. - Diluted earnings per share for the nine months ended September 30, 2024 were $0.87, an increase from $0.05 reported for the same period in 2023[169]. - Core net income for the nine months ended September 30, 2024, was $12,344,000, compared to $15,277,000 for the same period in 2023, reflecting a decrease of 19.0%[176]. - Earnings per share (diluted) for the nine months ended September 30, 2024, was $0.87, compared to $1.08 for the same period in 2023, a decrease of 19.4%[176]. - Net income for the three months ended September 30, 2024, increased by $14.3 million to $4.2 million, reversing a net loss of $10.1 million in the same quarter of 2023[203]. - Diluted earnings per share for the three months ended September 30, 2024, were $0.30, an increase of $1.02 from $(0.72) reported for the same period in 2023[203]. Interest Income and Expenses - Net interest income for the nine months ended September 30, 2024 decreased by $1.5 million or 3.8% compared to the same period of 2023[170]. - Interest income increased by $7.9 million or 10.6% to $82.3 million for the nine months ended September 30, 2024, compared to $74.4 million for the same period in 2023[189]. - Interest expense increased by $9.4 million to $45.2 million for the nine months ended September 30, 2024, compared to $35.7 million for the same period in 2023[193]. - Net interest income for the three months ended September 30, 2024, increased by $1.2 million or 9.8% compared to the same period in 2023, driven by higher yields on interest-earning assets[204]. - The net interest margin was 2.30% for the three months ended September 30, 2024, up from 2.08% for the same period in 2023, primarily due to higher yields on interest-earning assets[215]. Non-Interest Income and Expenses - Non-interest income was $2.0 million for the nine months ended September 30, 2024 compared to a loss of $15.6 million for the same period in 2023[172]. - Non-interest income increased by $17.5 million during the nine months ended September 30, 2024, compared to the same period in 2023, marking a 28.3% increase compared to core non-interest income[197]. - Non-interest expense increased by $602 thousand or 2.6% during the nine months ended September 30, 2024 compared to the same period in 2023[173]. - Non-interest expense increased by $371 thousand or 4.8% during the three months ended September 30, 2024, primarily due to a $322 thousand non-recurring litigation reserve reversal[207]. Loan Portfolio and Credit Losses - The Company maintains an allowance for loan credit losses to absorb lifetime losses on existing loans, which is established by recording a provision for credit losses against earnings[162]. - The Company faces risks related to the adequacy of its allowance for loan credit losses and the performance of its loan portfolio[159]. - The recovery of provision for credit losses was $0.7 million for the nine months ended September 30, 2024, compared to a recovery of $2.5 million for the same period in 2023[194]. - The company recorded a $400 thousand provision for credit losses for the three months ended September 30, 2024, compared to a recovery of $829 thousand in the same quarter of 2023[205]. - The allowance for loan credit losses decreased to $18.5 million or 1.00% of outstanding loans as of September 30, 2024, down from $19.5 million or 1.05% at December 31, 2023[254]. Deposits and Liquidity - Total deposits increased by $29.5 million or 1.5% to $1.94 billion as of September 30, 2024, compared to $1.91 billion at December 31, 2023[262]. - Non-interest bearing demand deposits rose by $61.0 million or 14.8% to $472.4 million as of September 30, 2024, representing 24.4% of total deposits[262]. - Core deposits totaled $1.65 billion or 85.5% of total deposits as of September 30, 2024, up from $1.58 billion or 82.7% at December 31, 2023[264]. - The Company has a total liquidity of $775.5 million as of September 30, 2024, up from $638.9 million at December 31, 2023[278]. Regulatory and Economic Environment - The Company is subject to regulatory risks, including changes in laws or government regulations affecting financial institutions[159]. - The Company’s financial condition may be impacted by changes in consumer spending, borrowing, and savings habits, as well as inflation and interest rate fluctuations[159]. - The Company’s financial results may be influenced by geopolitical conditions and public health events, such as the COVID-19 pandemic[159]. - The Company operates primarily in the Washington, D.C. metropolitan area, which may be affected by economic, political, and environmental conditions[159].

Financial Performance - Net income for Q3 2024 was $4.2 million ($0.30 per diluted share), an 11.1% increase from Q2 2024 and a recovery from a net loss of $10.1 million in Q3 2023[1] - The Company reported a net income of $4.2 million for Q3 2024, an increase of $14.3 million compared to a net loss of $10.1 million in Q3 2023[9] - For the nine months ended September 30, 2024, net income was $12.3 million, an increase of $11.7 million compared to $656 thousand in the same period of 2023[12] - Net income for the quarter was $4,235,000, compared to a loss of $10,137,000 in the prior year, indicating a 141.8% improvement[19] Earnings and Income Metrics - Pre-tax, pre-provision earnings (Non-GAAP) rose to $5.7 million, reflecting a 21.5% increase from $4.7 million in Q2 2024[2] - Non-interest income was $617 thousand for Q3 2024, compared to a loss of $16.8 million in Q3 2023[10] - Non-interest income for the nine months ended September 30, 2024 was $2.0 million, compared to a loss of $15.6 million in the same period of 2023[13] - Core earnings per share for the three months ended September 30, 2024, was $0.30, compared to $0.32 in the same period of 2023[17] Asset and Loan Growth - Total assets were $2.27 billion as of September 30, 2024, a decrease of $23.8 million or 1.0% from September 30, 2023[3] - Total loans increased by $22.5 million or 1.2% to $1.84 billion compared to $1.82 billion at September 30, 2023[3] - The loan pipeline showed strong growth with $128.1 million in new commitments in Q3 2024, a 44.9% increase from $88.4 million in Q2 2024[2] - Total loans, net of unearned income, reached $1,842,598,000, an increase from $1,820,132,000 year-over-year[21] Capital and Equity - Shareholders' equity rose by $22.5 million or 10.2% to $243.1 million at September 30, 2024, with book value per share increasing by 9.4% to $17.07[3] - The total risk-based capital ratio was 16.3% as of September 30, 2024, well above the regulatory threshold of 10.0%[5] - Total risk-based capital (GAAP) increased to $291,881 from $280,891 year-over-year, reflecting a growth of 3.6%[26] - Shareholders' equity increased to $240,609 thousand as of September 30, 2024, compared to $220,473 thousand in 2023[25] Interest and Margin Analysis - Net interest margin expanded by 11 basis points from Q2 2024 and 23 basis points from Q3 2023, with expectations for continued growth if the Federal Reserve lowers rates[2] - Net interest income for Q3 2024 increased by $1.2 million or 9.8% year-over-year, driven by higher yields on interest-earning assets[9] - The yield on interest-earning assets was 4.97% for Q3 2024, up from 4.54% in Q3 2023[9] - The net interest margin for the three months ended September 30, 2024, was 2.30%, an increase from 2.07% in the same period of 2023[25] Efficiency and Expense Management - The annualized efficiency ratio improved to 58.3% in Q3 2024 from 62.4% in Q3 2023[11] - Non-interest expense increased by $371 thousand or 4.8% in Q3 2024 compared to Q3 2023[11] - The efficiency ratio improved to 58.3%, down from 158.4% a year ago, indicating better cost management[21] Credit Quality and Loss Provisions - The allowance for loan credit losses was $18.4 million or 1.00% of outstanding loans, down from 1.05% at December 31, 2023, reflecting improved credit performance[6] - The provision for credit losses for the three months ended September 30, 2024, was $400,000, compared to a recovery of $829,000 in the same period of 2023[17] - The company reported no loans on non-accrual status as of September 30, 2024, and September 30, 2023[24] Deposits and Funding Sources - Core customer funding sources increased by $40.0 million or 6.8% annualized since June 30, 2024, driven by a 32.1% annualized growth in non-interest bearing demand deposits[2] - Total deposits as of September 30, 2024, were $1,936,150,000, a decrease of approximately 2.3% from $1,981,623,000 in the same period of 2023[17] - Non-interest bearing demand deposits rose by 14.8% to $472,422 million compared to the previous year[18] - Total deposits grew by 1.5% year-over-year to $1,936,150 million[18]

Financial Performance - John Marshall Bancorp reported net income of $3.9 million ($0.27 per diluted common share) for Q2 2024, and $8.1 million ($0.57 per diluted common share) for the first half of 2024[1]. - Pre-tax, pre-provision earnings (Non-GAAP) for Q2 2024 were $4.7 million, slightly up from $4.6 million in Q1 2024[1]. - The company reported a strong loan pipeline, indicating positive growth opportunities for the remainder of the year[28]. - Net income decreased by 13.0% to $3,905 million for the three months ended June 30, 2024, compared to $4,490 million for the same period in 2023[42]. - Earnings per share (diluted) for the quarter was $0.27, down from $0.32, representing a decline of approximately 16%[40]. - Earnings per share decreased by 24.9% to $8,109 million for the six months ended June 30, 2024, compared to $10,794 million for the same period in 2023[42]. Asset and Deposit Trends - Total assets decreased by 4.0% year-over-year to $2.27 billion as of June 30, 2024[14]. - Total deposits remained relatively stable at $1.91 billion, a slight increase of 0.3% from the previous quarter but a decrease of 6.5% year-over-year[14]. - Total deposits decreased to $1,912,840 million from $2,046,309 million, a decline of about 6.5%[40]. - Total deposits increased to $2,088,642 million, up from $2,046,309 million, reflecting a growth of 2.1%[18]. - Total assets were $2.27 billion as of June 30, 2024, compared to $2.36 billion a year earlier, reflecting a decrease of 3.8%[30]. Capital and Liquidity - Adjusted total risk-based capital ratio was 15.3% as of June 30, 2024, compared to 14.7% at December 31, 2023, and 14.3% at June 30, 2023[4]. - The total risk-based capital ratio was 16.4% as of June 30, 2024, well above the regulatory threshold of 10.0%[31]. - The Company’s liquidity position totaled $796.0 million, representing 35.1% of total assets, an increase from 28.5% at the end of 2023[30]. - The total risk-based capital ratio (GAAP) improved to 16.4% as of June 30, 2024, compared to 15.7% as of December 31, 2023[49]. Interest Income and Expenses - Net interest margin decreased to 2.14% from 2.32% year-over-year, indicating a tightening in interest income[19]. - Net interest income decreased by $2.7 million or 10.0% year-over-year, attributed to rising costs of interest-bearing liabilities outpacing yield increases[35]. - Total interest and dividend income increased by 9.6% to $26,791 million for the three months ended June 30, 2024, compared to $24,455 million for the same period in 2023[42]. - Interest expense increased by 18.2% to $14,710 million for the three months ended June 30, 2024, compared to $12,446 million for the same period in 2023[42]. - The average rate on taxable loans increased to 5.21%, up from 4.74%, indicating improved loan pricing[19]. Non-Interest Income and Expenses - Non-interest income initiatives are contributing an increasing percentage of total revenue, reflecting diversification in income sources[28]. - Non-interest income was $555 million, down from $685 million, reflecting a decrease of approximately 19%[40]. - Non-interest expense increased by $232 thousand or 1.5% year-over-year, primarily due to non-recurring expenses related to a strategic opportunity that did not materialize[35]. - Non-interest income decreased by $130 thousand in Q2 2024, with core non-interest income (Non-GAAP) increasing to $520 thousand from $501 thousand in Q2 2023[57]. Credit Quality - The Company maintained pristine asset quality with no loans on non-accrual as of June 30, 2024[20]. - The allowance for credit losses decreased by 5.7% from the previous quarter to $18.43 million[14]. - The allowance for loan credit losses was $18.4 million or 1.01% of outstanding loans as of June 30, 2024, down from 1.02% at March 31, 2024[55]. - The Company reported no loans on non-accrual as of June 30, 2024, maintaining a strong credit quality[70]. Operational Efficiency - The annualized efficiency ratio increased to 62.6% in Q2 2024 from 61.7% in Q2 2023, attributed to a decrease in non-interest income and an increase in non-interest expense[7]. - The efficiency ratio improved to 62.6% from 63.1% in the previous quarter[67]. - The annualized non-interest expense to average assets was 1.42% for Q2 2024, compared to 1.34% for Q2 2023, attributed to lower average assets[57]. Employee Metrics - The number of full-time equivalent employees decreased to 140 from 144, a reduction of about 2.8%[40].

Financial Position - As of March 31, 2024, the Company reported total consolidated assets of $2.25 billion, total loans of $1.82 billion, total deposits of $1.90 billion, and total shareholders' equity of $234.5 million[157]. - Total assets increased by $9.3 million or 0.4% to $2.25 billion at March 31, 2024, primarily due to increases in interest-bearing deposits[196]. - Total liabilities increased by $4.7 million or 0.2% to $2.02 billion at March 31, 2024, driven by net increases in borrowings[197]. - Shareholders' equity rose by $4.6 million or 2.0% to $234.6 million at March 31, 2024, attributed to increased net income and additional paid-in capital[198]. - Book value per share increased to $16.51 as of March 31, 2024, compared to $16.25 as of December 31, 2023[233]. Income and Earnings - For the three months ended March 31, 2024, net income was $4.2 million, a decrease of $2.1 million compared to $6.3 million for the same period in 2023, with diluted earnings per share of $0.30 compared to $0.44[165]. - Non-interest income increased to $818,000 for the three months ended March 31, 2024, compared to $566,000 for the same period in 2023[162]. - Interest income increased by $3.4 million or 14.7% to $27.0 million for the three months ended March 31, 2024, compared to $23.5 million for the same period in 2023[179]. - Income tax expense decreased by $525 thousand or 30.3% to $1.2 million for the three months ended March 31, 2024, with an effective tax rate of 22.3% compared to 21.6% for the same period in 2023[195]. Interest Income and Expenses - The net interest income for the three months ended March 31, 2024, was $11.7 million, down from $14.5 million in the same period of 2023[162]. - The tax-equivalent net interest income for the three months ended March 31, 2024, was $11,790 thousand, down from $14,535 thousand in the same period of 2023[170]. - Interest expense increased by $6.2 million to $15.2 million for the three months ended March 31, 2024, compared to $9.0 million for the same period in 2023, primarily due to higher rates on deposits and increased borrowings[185]. - The cost of interest-bearing liabilities rose to 3.81% for the first quarter of 2024, compared to 2.25% for the same quarter of the prior year, largely due to Federal Reserve rate increases[172]. Loan and Deposit Trends - The Company’s total deposits decreased from $2.09 billion as of March 31, 2023, to $1.90 billion as of March 31, 2024, reflecting a decline of approximately 9.5%[162]. - Total deposits decreased from $2,066,139 thousand as of March 31, 2023 to $1,914,173 thousand as of March 31, 2024, representing a decline of approximately 7.35%[229]. - Non-interest bearing demand deposits decreased by $6.7 million or 1.6% to $404.7 million as of March 31, 2024, representing 21.3% of total deposits[225]. - Interest-bearing deposits increased by $1.1 million or 0.1% to $1.50 billion as of March 31, 2024, representing 78.7% of total deposits[226]. - Core deposits totaled $1.59 billion or 83.6% of total deposits as of March 31, 2024, up from $1.58 billion or 82.7% at December 31, 2023[227]. Asset Quality and Risk - The allowance for loan credit losses decreased to $18.7 million as of March 31, 2024, from $21.6 million as of March 31, 2023[162]. - The company maintained strong asset quality with no nonperforming assets as of March 31, 2024[213]. - The company recorded net recoveries of $1 thousand during the three months ended March 31, 2024, consistent with the same period in 2023[219]. - The allowance for loan credit losses was $18.7 million or 1.02% of outstanding loans as of March 31, 2024, down from $19.5 million or 1.05% at December 31, 2023[219]. Capital and Liquidity - The Company maintains a strong capital position with a total risk-based capital ratio of 16.1% as of March 31, 2024, consistent with the previous year[162]. - Total liquidity increased to $788.7 million at March 31, 2024, up from $638.9 million at December 31, 2023, reflecting a strong liquidity position[240]. - The Company has authorized a stock repurchase program allowing for the repurchase of up to 700,000 shares, representing 5.0% of outstanding shares as of March 31, 2024[234]. - The Company has a total FHLB available borrowing capacity of $452.8 million as of March 31, 2024, supplemented by additional borrowing capacity with the Reserve Bank of approximately $111.9 million[238]. Operational Efficiency - The efficiency ratio for the three months ended March 31, 2024, was 63.1%, compared to 51.7% for the same period in 2023, indicating increased operational costs relative to income[162]. - Total non-interest expense increased by $154 thousand or 2.0% to $7.924 million for the first quarter of 2024 compared to the same period in 2023, mainly due to non-recurring professional fees and increased data processing expenses[194]. Investment Portfolio - The investment securities portfolio had a total carrying value of $253.4 million at March 31, 2024, down from $265.5 million at December 31, 2023[199]. - The company did not purchase or sell investment securities during the three months ended March 31, 2024, but had $11.6 million in maturities and principal repayments[200]. - The weighted average remaining life of the investment portfolio was approximately 4.3 years as of March 31, 2024[204].

Financial Performance - The Company reported net income of $4.2 million for Q1 2024, a decrease of $2.1 million from $6.3 million in Q1 2023[22]. - Net income for the quarter was $4,204,000, a decline of 33.3% compared to $6,304,000 in the same period last year[37]. - Earnings per share (diluted) decreased to $0.30 from $0.44, representing a decline of 31.8%[37]. - The return on average assets (annualized) decreased to 0.75% from 1.10% year-over-year, indicating a decline in profitability[37]. - Income before income taxes decreased by 32.7% to $5,414,000 from $8,039,000 year-over-year[43]. Asset and Loan Performance - The Company reported total assets of $2.25 billion as of March 31, 2024, compared to $2.35 billion a year earlier, reflecting a decrease in total loans by $34.0 million or 1.8% from December 31, 2023[7]. - Total assets decreased by 4.2% year-over-year to $2,251,837,000 as of March 31, 2024[40]. - Total loans, net of unearned income, decreased to $1,825,931 million from $1,859,967 million, a decline of 1.8%[45]. - Total loans as of March 31, 2024, amounted to $1,820,882 million, a decrease of 1.4% from $1,854,984 million as of December 31, 2023[47]. - Commercial real estate loans represented 51.5% of total loans, totaling $938,613 million as of March 31, 2024, compared to 52.1% and $966,936 million as of December 31, 2023[47]. Income and Expense Analysis - Net interest income decreased by $2.7 million or 18.8% year-over-year, primarily due to rising costs of interest-bearing liabilities outpacing yield increases on interest-earning assets[23]. - Net interest income after provision for credit losses was $12,520,000, down from $15,243,000 in the previous year, reflecting a decrease of 17.9%[37]. - Total interest expense surged by 68.9% to $15,175,000, up from $8,984,000 in the previous year[43]. - Non-interest expense rose by $154 thousand or 2.0% year-over-year, influenced by non-recurring expenses of $138 thousand related to a strategic opportunity that did not materialize[28]. - The efficiency ratio increased to 63.1% in Q1 2024 from 51.7% in Q1 2023, primarily due to higher non-interest expenses[30]. Dividend and Shareholder Equity - The Company declared an annual cash dividend of $0.25 per share, representing a 13.6% increase from the previous year and a 25% increase from 2022[4]. - Shareholders' equity increased by 6.2% year-over-year to $234,550,000, up from $220,823,000[40]. Deposits and Funding Sources - Total deposits fell by 9.0% year-over-year to $1,900,990,000, down from $2,088,642,000[40]. - Non-interest bearing demand deposits decreased to $404,669 million, representing 21.3% of total deposits, down from 21.6% in the previous quarter[47]. - Core customer funding sources accounted for 80.4% of total funding sources, totaling $1,589,816 million as of March 31, 2024[47]. Credit Quality and Allowance for Loan Losses - The allowance for loan credit losses was $18.7 million, or 1.02% of outstanding loans, down from 1.05% at the end of 2023[17]. - The allowance for loan credit losses to total loans ratio improved to 1.02% from 1.22% year-over-year[37]. - The allowance for loan credit losses decreased to $18,671 million as of March 31, 2024, from $19,543 million as of December 31, 2023[47]. Interest Margin and Rates - The net interest margin was stable at 2.11% for the first quarter of 2024, maintaining a range of 2.08% to 2.12% over the past four quarters[4]. - The annualized net interest margin for Q1 2024 was 2.11%, down from 2.57% in Q1 2023, largely due to increased costs of interest-bearing deposits[23]. - The yield on interest-earning assets was 4.83% in Q1 2024, up from 4.15% in Q1 2023, while the cost of interest-bearing liabilities rose to 3.81% from 2.25%[23]. Growth and Strategic Initiatives - The Company hired four experienced business development professionals in 2024 to support growth in loans, deposits, and non-interest income[4]. - The Company expects to accelerate SBA loan sale revenue and has a growing pipeline of borrowers evaluating swaps[27].

Loan Portfolio Composition - As of December 31, 2023, the Bank's loan portfolio included approximately 19.4% owner-occupied commercial real estate loans and 37.2% managed investment commercial real estate loans[51]. - Construction and development loans constituted about 9.7% of the Bank's loan portfolio as of December 31, 2023[55]. - Commercial term loans and lines of credit together represented approximately 2.4% of the Bank's loan portfolio as of December 31, 2023[60]. - Bank-originated 1-4 family residential mortgage loans accounted for 7.5% of the loan portfolio as of December 31, 2023[61]. - Purchased adjustable-rate mortgages made up approximately 16.4% of the loan portfolio as of December 31, 2023[62]. - Commercial real estate loans constituted 56.6% of the loan portfolio, with commercial and industrial loans at 2.4% and construction and land loans at 9.7% as of December 31, 2023[164]. - Approximately $1.11 billion, or 59.7%, of the loans in the loan portfolio were first originated during the past three years, indicating a lack of seasoning[173]. - The company's 10 largest borrowing relationships accounted for approximately 9.1% of total loans, with the largest single relationship accounting for about 1.4%[172]. - The company may face higher credit risk due to its focus on lending to small to medium-sized businesses, which are generally more vulnerable to economic downturns[159]. - The company had no non-performing assets as of December 31, 2023, which consist of non-accrual loans and loans 90 days or more past due[158]. - Deterioration in economic conditions could lead to higher levels of nonperforming assets and charge-offs, adversely affecting financial results[156]. - The company’s credit risk is heightened by the concentration of loans in the Washington, D.C. metropolitan area, particularly in real estate-related loans[160]. Risk Management and Compliance - The company adheres to a disciplined and conservative underwriting approach, focusing on maintaining strong asset quality and managing credit risk through well-defined criteria[81]. - The company’s risk management processes are overseen by its board of directors, with senior management responsible for day-to-day risk assessments and reporting[79][80]. - The company has established risk appetite metrics to balance risks necessary for achieving strategic goals while ensuring they remain within defined limits[81]. - The company is subject to supervision and regulation by the Federal Reserve and the Virginia BFI, ensuring compliance with banking laws and regulations[95][96]. - The Bank's compliance with anti-money laundering laws includes implementing policies and controls to detect and report suspicious activities[126]. - The Bank actively checks for transactions involving individuals or organizations on OFAC lists to ensure compliance with U.S. regulations[129]. - The Bank is subject to numerous federal and state consumer protection laws, which mandate compliance to avoid penalties and regulatory approval issues for mergers or acquisitions[130]. - The Consumer Financial Protection Bureau (CFPB) oversees compliance with federal consumer protection laws for institutions with over $10 billion in assets, while the Bank, with total consolidated assets of less than $10 billion, is primarily overseen by the Federal Reserve[131]. - The company is exposed to risks from the financial soundness of other institutions, which could lead to liquidity problems and operational losses[212]. - Regulatory compliance is costly and complex, with potential changes in laws that could adversely affect the company's operations and financial condition[225]. Capital and Financial Condition - The Bank's capital ratios as of December 31, 2023, exceeded the fully phased-in requirements, with a common equity Tier 1 ratio of 7.0%, Tier 1 capital ratio of 8.5%, and total risk-based capital ratio of 10.5%[109]. - The company is not subject to consolidated regulatory capital requirements due to its total consolidated assets being less than $3 billion[103]. - The company may be required to maintain higher levels of capital due to its commercial real estate concentration, which could limit growth and adversely affect financial condition and results of operations[234]. - The company is subject to stringent capital requirements, which could adversely affect operations[229]. - The company must obtain prior approval from the Federal Reserve for cash dividends declared by the Bank that exceed net income for the year plus retained net profits of the two preceding years[104]. - The company is prohibited from making capital distributions if it would become "undercapitalized" after such distributions[105]. - The Bank implemented the CECL model on January 1, 2023, which estimates credit losses over the lifetime of financial assets, with the impact on regulatory capital ratios being not significant[114]. - The company may not be able to raise additional capital on acceptable terms, which could adversely affect business and financial condition[231]. Employee and Operational Information - As of December 31, 2023, the company had 133 full-time employees and 2 part-time employees, with no employees covered by collective bargaining agreements[88]. - The company provides a competitive compensation and benefits program, including annual bonuses, a 401(k) plan with employer matching, and healthcare benefits[89]. - The company maintains internal controls and insurance to mitigate operational risks, but failures in these systems could adversely affect its financial condition[204]. - The company is subject to operational risks, including employee fraud and data processing failures, which could lead to financial losses and regulatory sanctions[203]. - The company relies on third-party information for loan origination poses risks; misrepresentation of data could lead to significant financial losses[205]. - The company faces risks from external vendors that provide essential services; disruptions or failures from these vendors could negatively impact operations[208]. Market and Economic Conditions - The Federal Reserve raised the federal funds target rate to 5.25% to 5.50% by December 31, 2023, marking four increases throughout the year[198]. - The company's operations are influenced by Federal Reserve monetary policies, which significantly affect loan growth, investments, and deposit distributions[147]. - Future legislation may impact the regulatory structure for the Company and the Bank, potentially increasing costs and limiting business opportunities[148]. - The company may face challenges in attracting deposits due to higher interest rates making alternative investments more attractive[200]. - Interest rate shifts could compress net interest margins, adversely affecting net interest income and overall financial performance[195]. - The company has experienced significant unrealized losses in its securities portfolio due to rising market interest rates, impacting book capital[189]. - Liquidity risk is heightened by reliance on a small number of large deposit customers, which could lead to increased funding costs if deposits fluctuate[179]. - Uninsured deposits represented 33.0% of total deposits as of December 31, 2023, increasing liquidity risk during financial distress[187]. Community Engagement and Social Responsibility - The Company is committed to the Community Reinvestment Act, providing no-fee checking accounts and small business loans to support local communities[75]. - The Bank received a "satisfactory" rating in its most recent Community Reinvestment Act examination, which assesses the bank's record in meeting credit needs[124]. - The final rule issued on October 24, 2023, will modernize CRA regulations, with material aspects taking effect January 1, 2026, potentially making it more challenging for the Bank to achieve a satisfactory rating[125]. Cybersecurity and Technology Risks - The company has not experienced significant cybersecurity incidents to date, but risks remain high due to evolving threats and increased technology use[140]. - Cybersecurity threats, including e-fraud and data breaches, present significant risks that could result in reputational damage and financial liabilities[219]. - The federal bank regulatory agencies have established guidelines for cybersecurity standards, expecting financial institutions to maintain robust risk management processes and business continuity plans[137]. - The company must continuously adapt to rapid technological changes in the financial services industry to maintain competitiveness and profitability[191]. - The Nasdaq Stock Market enacted a listing rule in 2023 requiring listed companies to adopt clawback policies for excess incentive compensation, which the Company has complied with[145]. Regulatory Changes and Impact - Changes in accounting standards may materially impact the company's financial statements and reporting practices[237]. - The SEC adopted rules requiring public companies to provide climate-related disclosures, which are expected to increase costs[240]. - The company may face increased compliance costs and operational changes due to climate change-related legislative and regulatory initiatives[238]. - The company relies on third-party vendors for critical functions, and increasing regulatory scrutiny could lead to administrative penalties or fines if oversight is deemed inadequate[232].

Financial Position - As of September 30, 2023, the Company reported total consolidated assets of $2.30 billion, total loans net of unearned income of $1.82 billion, total deposits of $1.98 billion, and total shareholders' equity of $220.6 million[192]. - Total assets as of September 30, 2023, were $2,298,202 thousand, slightly down from $2,305,540 thousand a year earlier[200]. - Shareholders' equity increased to $220,567 thousand as of September 30, 2023, compared to $202,212 thousand in 2022[200]. - The Company's total assets decreased by $50.0 million or 2.1% to $2.30 billion at September 30, 2023, compared to $2.35 billion at December 31, 2022[267]. - Total liabilities decreased by $57.8 million or 2.7% to $2.08 billion at September 30, 2023, primarily due to an $86.1 million decrease in deposits[268]. - Shareholders' equity increased by $7.8 million or 3.6% to $220.6 million at September 30, 2023, compared to $212.8 million at December 31, 2022[269]. - Book value per share was $15.61 as of September 30, 2023, compared to $15.09 as of December 31, 2022[269]. Income and Earnings - The company reported a net income of $656 thousand for the nine months ended September 30, 2023, a decrease of $22.9 million compared to the same period in 2022[200]. - Core net income (Non-GAAP) for the same period was $15.3 million, down $8.3 million from the previous year[200]. - The company incurred a non-recurring after-tax loss of $14.6 million due to the sale of lower-yielding investment securities and the surrender of BOLI contracts[200]. - Diluted earnings per share (GAAP) for the nine months ended September 30, 2023, was $0.05, compared to $1.67 in 2022[200]. - The return on average assets (annualized) (GAAP) was 0.04% for the nine months ended September 30, 2023, down from 1.40% in 2022[200]. - The return on average equity (annualized) (GAAP) was 0.40% for the same period, compared to 15.03% in 2022[200]. - The Company reported a net loss of $10.1 million for the three months ended September 30, 2023, a decrease of $18.2 million compared to the same period in 2022[233]. - Core net income (Non-GAAP) for the three months ended September 30, 2023, was $4.5 million, a decrease of $3.6 million compared to the same period in 2022[235]. - Reported diluted earnings per share (GAAP) was $(0.72) for the three months ended September 30, 2023, compared to $0.57 for the same period in 2022[235]. Interest Income and Expense - Net interest income for the three months ended September 30, 2023, was $11,979 thousand, a decrease from $17,692 thousand in the same period last year[200]. - The net interest margin for the nine months ended September 30, 2023, was 2.25%, down from 3.19% in 2022[200]. - For the nine months ended September 30, 2023, net interest income decreased by $14.4 million or 27.2% on a fully tax-equivalent basis compared to the same period in 2022[211]. - Interest income increased by $13.7 million or 22.6% to $74.4 million for the nine months ended September 30, 2023, driven by increases in rates and volume on interest-earning assets[219]. - Interest expense rose by $28.1 million to $35.7 million for the nine months ended September 30, 2023, compared to $7.6 million for the same period in 2022, mainly due to increased rates[223]. - The yield on loans for the nine months ended September 30, 2023, was 4.78%, up from 4.37% for the same period in 2022[213]. - The yield on investment securities for the nine months ended September 30, 2023, was 2.04%, compared to 1.80% for the same period in 2022[214]. - The yield on interest-bearing deposits due from banks increased to 5.23% for the nine months ended September 30, 2023, from 0.89% for the same period in 2022[215]. - The cost of interest-bearing liabilities increased to 2.89% for the nine months ended September 30, 2023, from 0.67% for the same period in 2022[212]. - The total tax-equivalent net interest income for the nine months ended September 30, 2023, was $38.651 million, down from $53.086 million for the same period in 2022[210]. - For the three months ended September 30, 2023, net interest income decreased by $5.7 million or 32.2% on a fully tax-equivalent basis compared to the same period in 2022[244]. - The net interest margin for the third quarter of 2023 was 2.08%, down from 3.10% in the same quarter of the prior year, primarily due to increased costs of interest-bearing liabilities[245]. - The yield on the loan portfolio increased to 4.87% for the three months ended September 30, 2023, compared to 4.31% for the same period in 2022, driven by higher rates on variable rate loans[246]. - Interest income increased by $5.0 million or 23.7% to $26.3 million for the three months ended September 30, 2023, compared to $21.3 million in the same period of 2022[252]. - Interest expense increased by $10.8 million to $14.3 million for the three months ended September 30, 2023, compared to $3.5 million for the same period in 2022, primarily due to an increase in rates[257]. Loan and Deposit Activity - Average loans increased by approximately $127.9 million between September 30, 2022, and September 30, 2023, primarily due to origination volume in commercial and residential real estate portfolios[220]. - The total net loans as of September 30, 2023, were $1.80 billion, compared to $1.77 billion as of December 31, 2022[278]. - Gross loans increased by $30.6 million or 1.7% to $1.82 billion as of September 30, 2023, compared to $1.79 billion as of December 31, 2022[276]. - The composition of loans held for investment as of September 30, 2023, includes commercial real estate loans at $1.13 billion (62.41%), construction and land development loans at $179.6 million (9.89%), and residential loans at $464.5 million (25.58%)[278]. - The allowance for loan credit losses was $20.0 million or 1.10% of outstanding loans as of September 30, 2023, down from $20.2 million or 1.13% at December 31, 2022[288]. - The company recorded no charge-offs or recoveries during the three months ended September 30, 2023, and net recoveries of $2 thousand during the nine months ended September 30, 2023[288]. - The company maintained strong asset quality with no nonperforming assets as of September 30, 2023, and December 31, 2022[282]. - The loan pipeline heading into Q4 2023 is robust, with increased lending opportunities and fewer competitors in the market[276]. - The company did not make any loan modifications for borrowers experiencing financial difficulty during the three or nine months ended September 30, 2023[284]. - Total deposits decreased by $86.1 million or 4.2% to $1.98 billion as of September 30, 2023, compared to $2.07 billion at December 31, 2022[298]. - Non-interest bearing demand deposits decreased by $38.8 million or 8.1% to $437.9 million as of September 30, 2023[298]. - Interest-bearing deposits decreased by $47.3 million or 3.0% to $1.54 billion as of September 30, 2023[299]. - Core deposits totaled $1.68 billion or 84.8% of total deposits as of September 30, 2023, compared to $1.69 billion or 81.9% at December 31, 2022[300]. Risk Management and Compliance - The Company maintains an allowance for loan credit losses to absorb lifetime losses on existing loans, which is established by recording a provision for credit losses against earnings[191]. - The Company emphasizes the importance of maintaining existing deposit relationships and attracting new ones to support its funding needs[187]. - The Company is focused on maintaining an effective risk management framework and compliance with regulatory requirements to mitigate potential risks[193]. - The Company faces risks including economic conditions in the Washington, D.C. area, asset quality deterioration, and competition from other financial institutions and fintech companies[187]. - The Company’s financial condition may be affected by changes in consumer spending, inflation, and interest rates, which could impact margins and the fair value of financial instruments[187]. - The Company’s operations are significantly influenced by the economic environment, including factors such as unemployment rates and real estate values in its market area[193]. - Forward-looking statements indicate potential growth opportunities, but actual results may differ due to known and unknown risks[186]. Non-Interest Income and Expenses - Non-interest income decreased by $16.5 million during the nine months ended September 30, 2023, primarily due to a $17.1 million loss from Restructuring[227]. - Core non-interest income (Non-GAAP) increased by $577 thousand, excluding the loss from the bond sale portion of the Restructuring[227]. - Total non-interest expense decreased by $1.2 million or 4.8% during the nine months ended September 30, 2023, primarily due to reductions in salaries and employee benefits[230]. - Non-interest income decreased by $17.3 million during Q3 2023, primarily due to a restructuring loss of $17.1 million[262]. - Total non-interest expense decreased by $298 thousand or 3.7% during Q3 2023 compared to Q3 2022, primarily due to a decrease in professional fees and occupancy expenses[264]. - The Company experienced a decrease in occupancy expense due to renegotiation of certain leases, contributing to the overall reduction in non-interest expenses[231]. Liquidity and Capital Management - Total liquidity was $742.5 million at September 30, 2023, down from $763.5 million at December 31, 2022[314]. - The total amount of uninsured deposits was estimated at $864.8 million at September 30, 2023, compared to $963.9 million at December 31, 2022[305]. - The Company has a total FHLB available borrowing capacity of $444.7 million as of September 30, 2023[312]. - The Company obtained a $54.0 million BTFP advance on May 15, 2023, with a fixed interest rate of 4.80%[313]. - The stock repurchase program allows the Company to repurchase up to 700,000 shares, or 5.0% of outstanding shares, expiring on August 31, 2024[309].

Financial Performance - Net income for the six months ended June 30, 2023, decreased by $4.8 million or 30.6% to $10.8 million compared to $15.6 million for the same period in 2022[200]. - Diluted earnings per share for the six months ended June 30, 2023, were $0.76, a 31.3% decrease from $1.10 reported for the same period in 2022[200]. - Return on Average Assets (ROAA) decreased to 0.93% for the six months ended June 30, 2023, down from 1.41% in the same period of 2022[205]. - Net income for the three months ended June 30, 2023, decreased by $3.4 million or 43.0% to $4.5 million compared to $7.9 million for the same period in 2022[239]. - The effective tax rate for the six months ended June 30, 2023, was 21.6%, compared to 19.3% for the same period in 2022[238]. Asset and Liability Management - As of June 30, 2023, the Company reported total consolidated assets of $2.36 billion, total loans net of unearned income of $1.77 billion, total deposits of $2.05 billion, and total shareholders' equity of $219.0 million[194]. - Total assets increased by $16.0 million or 0.7% to $2.36 billion at June 30, 2023, primarily due to a $60.6 million increase in interest-bearing deposits[273]. - Total liabilities rose by $9.8 million or 0.5% to $2.15 billion at June 30, 2023, mainly due to a $54.0 million increase in borrowings[274]. - Shareholders' equity increased by $6.2 million or 2.9% to $219.0 million at June 30, 2023, attributed to net income and a decrease in other comprehensive loss[277]. Income and Expense Analysis - Net interest income for the six months ended June 30, 2023, decreased by $8.7 million or 24.8% compared to the same period in 2022, primarily due to rising costs of interest-bearing liabilities[201]. - Non-interest income increased by $728 thousand for the six months ended June 30, 2023, compared to the same period in 2022, primarily due to mark-to-market adjustments and increased service charges[203]. - Non-interest expense decreased by $866 thousand or 5.3% for the six months ended June 30, 2023, mainly due to reductions in salaries, professional fees, and occupancy expenses[204]. - Interest expense rose by $17.3 million to $21.4 million for the six months ended June 30, 2023, primarily due to an increase in rates[225]. Credit Quality and Loan Portfolio - The allowance for loan credit losses as of June 30, 2023, was $20.6 million, compared to $20.0 million as of June 30, 2022[197]. - The Company recorded a $1.6 million recovery of provision for credit losses for the six months ended June 30, 2023, compared to no provision for the same period in 2022[202]. - The Company recorded net recoveries of $1 thousand during the three months ended June 30, 2023, compared to no charge-offs or recoveries during the same period in 2022[298]. - The loan pipeline heading into Q3 2023 is robust, with increased lending opportunities and fewer competitors[284]. Interest Rate and Yield Analysis - The net interest margin was 2.33% for the six months ended June 30, 2023, down from 3.25% for the same period in 2022, primarily due to rising costs of interest-bearing liabilities[214]. - The yield on the loan portfolio increased to 4.73% for the six months ended June 30, 2023, compared to 4.40% for the same period in 2022[215]. - The yield on investment securities increased to 2.04% for the six months ended June 30, 2023, compared to 1.70% for the same period in 2022[216]. - The cost of interest-bearing liabilities was 2.99% for the second quarter of 2023, compared to 0.60% for the same quarter of the prior year[251]. Regulatory and Risk Management - The Company maintains a focus on risk management and is aware of various economic and regulatory risks that could impact future performance[188]. - The total risk-based capital ratio increased to 16.1% as of June 30, 2023, from 15.1% as of June 30, 2022[197]. - The Company's asset quality remained strong with no nonperforming assets as of June 30, 2023[290]. Deposits and Liquidity - Total deposits decreased by $21.4 million or 1.0% to $2.05 billion as of June 30, 2023, compared to $2.07 billion at December 31, 2022[308]. - Non-interest bearing demand deposits decreased by $42.8 million or 9.0% to $433.9 million as of June 30, 2023, representing 21.2% of total deposits[308]. - Interest-bearing deposits increased by $21.3 million or 1.3% to $1.61 billion as of June 30, 2023, representing 78.8% of total deposits[309]. - Total liquidity was $839.4 million at June 30, 2023, compared to $763.5 million at December 31, 2022, representing 120% of uninsured, non-collateralized deposits[324].

Financial Performance - Net income for the three months ended March 31, 2023, decreased by $1.4 million or 17.9% to $6.3 million compared to $7.7 million for the same period in 2022[197] - Diluted earnings per share decreased by $0.11 or 20.0% to $0.44 for the three months ended March 31, 2023, compared to $0.55 for the same period in 2022[197] - Net interest income for the first quarter of 2023 decreased by $3.5 million or 19.2% compared to the first quarter of 2022, primarily due to rising costs of interest-bearing liabilities[198] - Non-interest income increased by $152 thousand or 36.7% during the first quarter of 2023 compared to the first quarter of 2022, driven by mark-to-market adjustments and increased customer activity[200] - Non-interest expense decreased by $1.0 million or 11.6% for the three months ended March 31, 2023, primarily due to reductions in salaries and employee benefits, professional fees, and occupancy expenses[201] Asset and Liability Management - As of March 31, 2023, the Company had total consolidated assets of $2.35 billion, total loans of $1.77 billion, total deposits of $2.09 billion, and total shareholders' equity of $220.8 million[192] - The Company's total assets increased by $3.0 million or 0.1% to $2.35 billion as of March 31, 2023, primarily due to a $40.3 million increase in interest-bearing deposits[232] - Total liabilities decreased by $5.0 million or 0.2% to $2.13 billion at March 31, 2023, mainly due to a $25.5 million decrease in federal funds purchased[233] - Shareholders' equity increased by $15.9 million or 7.8% to $220.8 million at March 31, 2023, with book value per share rising to $15.63[234] - Total deposits increased by $20.9 million or 1.0% to $2.09 billion as of March 31, 2023, compared to $2.07 billion at December 31, 2022[260] Capital Ratios and Returns - The return on average assets (ROAA) for the three months ended March 31, 2023, was 1.10%, down from 1.40% in the same period of 2022[202] - The return on average equity (ROAE) for the three months ended March 31, 2023, was 11.83%, compared to 14.76% for the same period in 2022[202] - The equity-to-total assets ratio was 10.3% as of March 31, 2023, compared to 10.2% as of March 31, 2022[195] - The total risk-based capital ratio increased to 16.1% as of March 31, 2023, from 15.4% as of March 31, 2022[195] Interest Income and Expense - Interest income increased by $3.7 million or 18.8% to $23.5 million for the three months ended March 31, 2023, compared to $19.8 million for the same period in 2022[216] - Interest expense increased by $7.2 million to $9.0 million for the three months ended March 31, 2023, compared to $1.8 million for the same period in 2022[220] - The net interest margin was 2.57% for the three months ended March 31, 2023, down from 3.34% for the same period in 2022, primarily due to increased costs of interest-bearing liabilities[209] - The average interest rate on total interest-bearing deposits increased to 2.18% for the three months ended March 31, 2023, compared to 0.37% for the same period in 2022[264] Loan and Deposit Trends - Average loans increased approximately $152.4 million between the three months ended March 31, 2023, and March 31, 2022, driven by growth in investor real estate, residential mortgage, and commercial owner-occupied real estate loan portfolios[217] - Total gross loans decreased by $18.2 million or 1.0% to $1.77 billion as of March 31, 2023, compared to $1.79 billion as of December 31, 2022[242] - Non-interest bearing demand deposits decreased by $29.2 million or 6.1% to $447.5 million as of March 31, 2023[260] - Interest-bearing deposits increased by $50.1 million or 3.2% to $1.64 billion as of March 31, 2023[261] Credit Quality - The Company recorded a $774 thousand recovery of provision for credit losses for the first quarter of 2023, compared to no provision for the first quarter of 2022[221] - The recovery of provision for credit losses in Q1 2023 was due to an $18.2 million decrease in gross loan balances and changes in qualitative factors in the CECL model[222] - The allowance for loan credit losses increased to $21.6 million or 1.22% of outstanding loans as of March 31, 2023, up from $20.2 million or 1.13% at December 31, 2022[255] - The company maintained no nonperforming assets as of March 31, 2023, indicating strong asset quality[247] - The company did not record any net charge-offs during the three months ended March 31, 2023[255] Investment Portfolio - The investment securities portfolio had a total carrying value of $438.7 million at March 31, 2023, down from $457.0 million at December 31, 2022[235] - Total held-to-maturity securities amounted to $98.5 million with a weighted-average yield of 1.31% as of March 31, 2023[241] - Total available-for-sale securities were $372.3 million with a weighted-average yield of 1.96% as of March 31, 2023[241] - The weighted average remaining life of the investment portfolio was approximately 4.4 years as of March 31, 2023[240] Liquidity and Borrowing Capacity - Total liquidity reached $852.6 million at March 31, 2023, an increase from $763.5 million at December 31, 2022, representing a growth of approximately 11.7%[274] - Uninsured deposits were estimated at $916.1 million as of March 31, 2023, down from $963.9 million at December 31, 2022, indicating a decrease of about 5.0%[265] - The Company has a total FHLB available borrowing capacity of $423.1 million as of March 31, 2023[273] - The Company has not utilized the BTFP program, which could potentially increase liquidity by approximately $35.2 million if accessed[274] Stock and Shareholder Information - The stock repurchase program allows for the repurchase of up to 700,000 shares, or 5.0% of outstanding shares, with no shares repurchased as of March 31, 2023[271] - Shareholders' equity increased by $8.0 million or 3.8% to $220.8 million at March 31, 2023, compared to $212.8 million at December 31, 2022[268]

Loan Portfolio Composition - As of December 31, 2022, the Bank's loan portfolio included approximately 20.5% related to owner-occupied commercial real estate loans and 37.1% related to managed investment commercial real estate[50]. - Construction and development loans constituted about 11.0% of the Bank's loan portfolio as of December 31, 2022[56]. - Commercial term loans and lines of credit combined represented approximately 2.5% of the Bank's loan portfolio as of December 31, 2022[59]. - Bank originated 1-4 family residential mortgage loans accounted for 6.2% of the loan portfolio as of December 31, 2022[60]. - Purchased mortgages made up approximately 14.4% of the loan portfolio as of December 31, 2022[61]. - The loan portfolio is heavily concentrated in commercial real estate, with 57.6% of loans categorized as commercial real estate[165]. - Approximately $1.20 billion, or 67.1%, of the loans in the loan portfolio were first originated during the past three years[175]. - The average age of loans originated in the past three years is 1.43 years for commercial real estate loans[175]. - The 10 largest borrowing relationships accounted for approximately 11.3% of total loans as of December 31, 2022[174]. - The company had no non-performing assets as of December 31, 2022[160]. - The company is exposed to higher credit risk due to its focus on lending to small to medium-sized businesses[161]. - The concentration of loans in the Washington, D.C. metropolitan area increases vulnerability to adverse economic conditions[164]. Risk Management - The company emphasizes the importance of effective risk management, overseeing various risk exposures including liquidity, interest rate, credit, operational, and cybersecurity risks[74]. - Senior management implements risk management processes and reports to the board, focusing on strategic, operational, and regulatory risks[76]. - The company maintains a disciplined underwriting approach, managing credit risk through well-defined criteria and portfolio diversification[78]. - Interest rate and liquidity risk management is overseen by the Asset and Liability Committee, which reviews financial performance and compliance with risk limits[81]. - The company's risk management practices may not adequately reduce credit risk, potentially leading to increased loan defaults and necessitating higher provisions for loan losses[154]. - The company is subject to operational risks, including employee fraud and data processing failures, which could lead to financial losses[204]. - The company’s risk management framework may not effectively mitigate risks, potentially leading to unexpected losses[212]. Capital and Regulatory Compliance - The company must maintain capital above regulatory guidelines to avoid restrictions on dividend payments[103]. - The company is not subject to consolidated regulatory capital requirements due to its total consolidated assets being less than $3 billion[102]. - The Bank's capital ratios as of December 31, 2022, and 2021, were in excess of the fully phased-in requirements, indicating strong capital adequacy[108]. - The minimum common equity Tier 1 capital ratio required is 7.0%, with a capital conservation buffer of 2.5%[108]. - The Bank is classified as "well capitalized" as of December 31, 2022, and 2021, meeting all capital requirements[116]. - The Company implemented the CECL model on January 1, 2023, with the impact on regulatory capital ratios being not significant[114]. - The minimum leverage ratio required for well-capitalized status is 4.0%[108]. - The company is required to maintain minimum risk-based capital and leverage ratios as established by federal regulations[220]. - The company could be required to provide financial assistance to its subsidiary bank during financial distress, which may limit its resources[222]. - The company is subject to various regulatory requirements, including prior approval from the Federal Reserve for significant acquisitions and changes in control[94]. Deposits and Funding - The Bank's deposits are insured up to $250,000 per depositor under the FDIC[117]. - The company’s 10 largest depositor relationships accounted for approximately 17.6% of total deposits as of December 31, 2022, with the largest depositor representing about 3.3%[179]. - Brokered deposits constituted approximately 17.0% of total deposits, with reciprocal deposits adding another 10.8% as of December 31, 2022[180]. - The company may need to pay higher interest rates to maintain brokered deposits, potentially adversely affecting net interest margin[181]. - Liquidity risk is critical, as it is essential for funding asset growth and meeting obligations; reliance on specific funding sources can increase this risk[184]. - Access to funding sources may be impaired by adverse regulatory actions or economic downturns, affecting the company's growth and operations[186]. Economic and Market Conditions - The Federal Reserve raised the federal funds target rate seven times in 2022, reaching 4.25% to 4.50% by year-end, impacting market interest rates[197]. - Interest rate shifts can negatively impact net interest income, with potential gaps in interest rate sensitivities affecting earnings[192]. - Inflation during 2022 has raised operational costs and could affect clients' ability to repay loans, impacting the company's financial condition[197]. - The company faces significant competition from larger financial institutions, which may lead to increased rates on deposits or lower loan rates, affecting profitability[188]. Cybersecurity and Data Protection - The federal bank regulatory agencies expect financial institutions to establish sufficient business continuity planning processes to ensure rapid recovery after a cyberattack[137]. - The Company has not experienced significant data loss or material financial losses related to cybersecurity attacks to date[139]. - The Company must comply with new notification requirements for cybersecurity incidents, requiring notification within 36 hours of determining a significant incident[138]. - The company is subject to inquiries and investigations related to privacy and data protection laws, which could result in significant liabilities or penalties[229]. - Concerns regarding the effectiveness of measures to safeguard personal information could lead to loss of customers and reduced revenues[229]. - The company faces increasing regulatory requirements regarding third-party vendor relationships, which could lead to administrative penalties or fines if oversight is deemed inadequate[230]. Miscellaneous - The Company is committed to serving low and moderate-income areas through various initiatives, including no-fee checking accounts and small business loans[72]. - The Audit Committee is responsible for financial reporting risks, while the Compensation Committee ensures that compensation policies do not encourage excessive risk-taking[75]. - The company qualifies as an "emerging growth company" under the JOBS Act, allowing it to take advantage of certain reporting exemptions[82]. - The company qualifies as an "emerging growth company" and a "smaller reporting company," which allows it to take advantage of reduced disclosure obligations[236][237]. - The market price for the company's common stock has fluctuated between $29.65 and $19.09 per share during the 12 months ended December 31, 2022, indicating potential volatility[240]. - The company is subject to a 15% minimum tax on corporations earning more than $1 billion per year, as per the Inflation Reduction Act of 2022[218]. - The company may face significant civil money penalties for violations of anti-money laundering requirements, which could adversely affect its operations[224]. - The Bank approved 1,096 PPP loans totaling $229.2 million during the first and second rounds of the SBA's PPP[145]. - The fair value of the company's investment in debt securities was approximately $438.7 million as of December 31, 2022[214]. - The Adjustable Interest Rate (LIBOR) Act provides a framework to replace LIBOR with SOFR, but uncertainty remains regarding the transition's ultimate effects[232]. - The company may experience operational problems due to inconsistent approaches to the LIBOR transition among market participants[233].