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What changed in Capital Bancorp Inc's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Capital Bancorp Inc's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+363 added−342 removedSource: 10-K (2026-03-16) vs 10-K (2025-03-17)

Top changes in Capital Bancorp Inc's 2025 10-K

363 paragraphs added · 342 removed · 263 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

43 edited+18 added−15 removed95 unchanged
Biggest changeOur Bank received an “outstanding” rating in its most recent CRA evaluation which was in 2024. In October 2023, the OCC, together with the Federal Reserve and FDIC, issued a joint final rule to modernize the CRA regulatory framework.
Biggest changeIn October 2023, the OCC, together with the Federal Reserve and FDIC, issued a joint final rule to modernize the CRA regulatory framework. However, in July 2025, due to litigation, such agencies issued a joint notice of proposed rulemaking to rescind the 2023 final rule and replace it with the CRA framework that existed prior to the 2023 final rule.
Increase scale in our fee-based platforms through delivery of high value products and services • Utilize our customer acquisition capabilities, and leverage our investment in our core processing systems, together with our expertise in data, analytics and marketing, to deliver new products and services and grow our secured credit card business; 9 • Retain OpenSky ™ customers that “graduate” from our secured credit product through the limited use of partially and fully unsecured credit products; • Expand our purchase-oriented mortgage loan sales both in-market and in adjacent markets through the hiring of qualified mortgage originators and continue to enhance our direct to consumer marketing channels; and • Utilize the systems, processes and technology within Windsor Advantage to participate in the processing and packaging of SBA and USDA loans originated by our financial institution clients and to grow associated servicing balances.
Increase scale in our fee-based platforms through delivery of high value products and services • Utilize our customer acquisition capabilities, and leverage our investment in our core processing systems, together with our expertise in data, analytics and marketing, to deliver new products and services and grow our secured credit card business; • Retain OpenSky ™ customers that “graduate” from our secured credit product through the limited use of partially and fully unsecured credit products; 9 • Expand our purchase-oriented mortgage loan sales both in-market and in adjacent markets through the hiring of qualified mortgage originators and continue to enhance our direct to consumer marketing channels; and • Utilize the systems, processes and technology within Windsor Advantage™ to participate in the processing and packaging of SBA and USDA loans originated by our financial institution clients and to grow associated servicing balances.
Pursuant to Section 18(c) of the Federal Deposit Insurance Act, more commonly known as the Bank Merger Act, and for national banks relying on certain other sources of merger authority, prior written approval from a bank's primary federal regulator is required before any insured depository institution may consummate a merger transaction, which includes a merger, consolidation, assumption of deposit liabilities, and certain asset transfers between or among two or more institutions.
Pursuant to Section 18(c) of the Federal Deposit Insurance Act, more commonly known as the Bank Merger Act, and for national banks relying on 14 certain other sources of merger authority, prior written approval from a bank's primary federal regulator is required before any insured depository institution may consummate a merger transaction, which includes a merger, consolidation, assumption of deposit liabilities, and certain asset transfers between or among two or more institutions.
Community Reinvestment Act The CRA requires the federal banking regulatory agencies to assess all financial institutions that they regulate to determine whether these institutions are meeting the credit needs of the communities they serve, including their assessment area(s) (as established for these purposes in accordance with applicable regulations based principally on the location of branch offices).
Community Reinvestment Act The CRA requires the federal banking regulatory agencies to assess all financial institutions that they regulate to determine whether these institutions are meeting the credit needs of the communities they serve, including their assessment area(s) (as established for these purposes in accordance with 12 applicable regulations based principally on the location of branch offices).
As a result of this deposit insurance function, the FDIC also has certain supervisory authority and powers over the Bank as well as all other FDIC insured institutions. 11 The Company’s and the Bank’s regulators generally have broad discretion to impose restrictions and limitations on our operations. Bank regulation is intended to protect depositors and consumers and not shareholders.
As a result of this deposit insurance function, the FDIC also has certain supervisory authority and powers over the Bank as well as all other FDIC insured institutions. The Company’s and the Bank’s regulators generally have broad discretion to impose restrictions and limitations on our operations. Bank regulation is intended to protect depositors and consumers and not shareholders.
The GLBA requires disclosures to consumers on policies and procedures regarding the disclosure of such non-public personal information and, except as otherwise required by law, prohibits disclosing such information except as provided in the Bank’s policies and procedures. We have implemented privacy policies addressing these restrictions that are distributed regularly to all existing and new customers of the Bank.
The GLBA requires disclosures to consumers on policies and procedures regarding the disclosure of such non-public personal information and, except as otherwise required by 15 law, prohibits disclosing such information except as provided in the Bank’s policies and procedures. We have implemented privacy policies addressing these restrictions that are distributed regularly to all existing and new customers of the Bank.
If, as a result of an examination of our Bank, the regulators should determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of the Bank’s operations are unsatisfactory or 12 that the Bank or our management is violating or has violated any law or regulation, various remedies are available to the regulators.
If, as a result of an examination of our Bank, the regulators should determine that the financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of the Bank’s operations are unsatisfactory or that the Bank or our management is violating or has violated any law or regulation, various remedies are available to the regulators.
If the Company or the Bank finds a name or other information on any transaction, account or wire transfer that is on an OFAC list or that otherwise indicates that the transaction involves a target of an OFAC-administered sanctions program, the Company or the Bank generally must freeze or block such account or transaction, file a suspicious activity report, and notify the appropriate authorities.
If the Company or the Bank finds a name or other information on any transaction, account or wire transfer that is on an OFAC list or that otherwise indicates that the transaction involves a target of an OFAC-administered sanctions program, the Company or the Bank generally must freeze or block such account or transaction, file a suspicious activity report, and notify the appropriate 13 authorities.
Windsor Advantage Division Windsor Advantage is a loan service provider that offers community banks and credit unions a comprehensive outsourced SBA and USDA lending platform. Windsor Advantage generates fee income for the Company in through its servicing, processing and packaging of such loans for its financial institution clients, including Capital Bank.
Windsor Advantage™ Division Windsor Advantage™ is a loan service provider that offers community banks and credit unions a comprehensive outsourced SBA and USDA lending platform. Windsor Advantage™ generates fee income for the Company through its servicing, processing and packaging of such loans for its financial institution clients, including Capital Bank.
Under such circumstances, we may not pay a dividend should the Federal Reserve object until such time as we receive approval from the Federal Reserve or no longer need to provide notice under applicable regulations. In addition, prior 14 approval of the Federal Reserve may be required in certain circumstances prior to our repurchasing shares of our common stock.
Under such circumstances, we may not pay a dividend should the Federal Reserve object until such time as we receive approval from the Federal Reserve or no longer need to provide notice under applicable regulations. In addition, prior approval of the Federal Reserve may be required in certain circumstances prior to our repurchasing shares of our common stock.
These SEC rules, and any other regulatory guidance, are in addition to notification and disclosure requirements under state and federal banking law and regulations. See Item 1A. Risk Factors for a further discussion of risks related to 16 cybersecurity and Item 1C. Cybersecurity for a further discussion of the Company’s risk management strategies and governance processes related to cybersecurity.
These SEC rules, and any other regulatory guidance, are in addition to notification and disclosure requirements under state and federal banking law and regulations. See Item 1A. Risk Factors for a further discussion of risks related to cybersecurity and Item 1C. Cybersecurity for a further discussion of the Company’s risk management strategies and governance processes related to cybersecurity.
Our company Core Values guide each team member to: • Act as an Owner • Practice Balanced Risk Management • Challenge the Norm • Leverage the Team We believe that these values enable our success with our customers and have helped us build a fun, vibrant and accountability driven culture.
Our company core values guide each team member to: • Act as an Owner • Practice Balanced Risk Management • Challenge the Norm • Leverage the Team 10 We believe that these values enable our success with our customers and have helped us build a fun, vibrant and accountability driven culture.
For many of these tasks, a bank must keep records to be made available to its primary federal regulator. Anti-money laundering rules and policies are 13 developed by a bureau within the Financial Crimes Enforcement Network, but compliance by individual institutions is overseen by its primary federal regulator.
For many of these tasks, a bank must keep records to be made available to its primary federal regulator. Anti-money laundering rules and policies are developed by a bureau within the Financial Crimes Enforcement Network, but compliance by individual institutions is overseen by its primary federal regulator.
Under the Federal Deposit Insurance Act, the FDIC may terminate deposit insurance upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the FDIC.
Under the Federal Deposit Insurance Act, the FDIC may terminate deposit insurance upon a finding that the institution has engaged in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order or condition imposed by the 17 FDIC.
As each customer’s secured account ages, we obtain credit scores to baseline the customer’s improvement as an input into any decision to extend unsecured credit. The unsecured credit card was added, for qualifying customers, in the fourth quarter of 2021 to expand the OpenSky ™ product offering.
As each customer’s secured account ages, we obtain credit scores to baseline the customer’s improvement as an input into any decision to extend unsecured credit. The unsecured credit card was added, for qualifying existing customers, in the fourth quarter of 2021 to expand the OpenSky ™ product offering.
The remainder of originations are national in scope and originate primarily through a consumer direct-to-consumer model that utilizes consumer marketing, and social media applications. OpenSky ™ Secured Credit Card Division The OpenSky ™ Division provides secured, partially secured and unsecured credit cards on a nationwide basis.
The remainder of originations are national in scope and originate primarily through a direct-to-consumer model that utilizes consumer marketing and social media applications. 7 OpenSky ™ Secured Credit Card Division The OpenSky ™ Division provides secured, partially secured and unsecured credit cards on a nationwide basis.
The Dodd-Frank Act also modified the standard by which state consumer financial laws may be applied to national banking associations, such as the Bank. The application of that standard by state regulators and the courts may cause the Bank’s compliance burden and costs to increase.
The Dodd-Frank Act also modified the standard by which state consumer financial laws may be applied to national banking associations, such as the Bank. The application of that standard by state regulators and the courts may 11 cause the Bank’s compliance burden and costs to increase.
Concurrent with the FDIC and OCC announcements, the DOJ withdrew from its 1995 Bank Merger Guidelines and announced that it would consider bank mergers under its 2023 Merger Guidelines, which are not industry specific, as well as under a separate, recently adopted bank merger addendum.
Concurrent with the FDIC and OCC announcements, the DOJ withdrew its 1995 Bank Merger Guidelines and announced that it would consider bank mergers under its 2023 Merger Guidelines, which are not industry specific, as well as under a separate, recently adopted bank merger addendum.
Our ability to attract and retain employees is a key to our success. We believe we offer a competitive total compensation and benefits program and a congenial work environment to our employees. The Company prides itself on being a values-driven organization, where employees are empowered to share ideas that keep the organization moving forward.
Our ability to attract and retain employees is a key pillar of our success. We believe we offer a competitive total compensation and benefits program and a congenial work environment to our employees. The Company prides itself on being a values-driven organization, where employees are empowered to share ideas that keep the organization moving forward.
None of our employees are represented by any collective bargaining unit or are a party to a collective bargaining agreement. We believe the relationship with our employees to be excellent and we have been named a Best Bank to Work For by American Banker for five of the past six years.
None of our employees are represented by any collective bargaining unit or are a party to a collective bargaining agreement. We believe the relationship with our employees to be excellent and we have been named a Best Bank to Work For by American Banker for six of the past seven years.
The new presidential administration and many members of Congress have advocated for changes in financial services regulation, potentially including amendments to the Dodd-Frank Act and other federal banking laws, and structural changes to the CFPB.
The current presidential administration and many members of Congress have advocated for changes in financial services regulation, potentially including amendments to the Dodd-Frank Act and other federal banking laws, and structural changes to the CFPB.
The Trust is a special purpose, non-consolidated entity organized for the sole purpose of issuing trust preferred securities. 6 Commercial Banking Division The Commercial Banking division operates out of six full service banking locations, three of which are in the Washington, D.C.
The Trust is a special purpose, non-consolidated entity organized for the sole purpose of issuing trust preferred securities. Commercial Banking Division The Commercial Banking division operates out of seven full service banking locations, three of which are in the Washington, D.C.
Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 14, Capital Standards” for additional regulatory capital information, including the Bank’s and Company’s Leverage Ratio as of December 31, 2024.
Financial Statements and Supplementary Data - Notes to Consolidated Financial Statements - Note 14, Regulatory Capital Matters” for additional regulatory capital information, including the Bank’s and Company’s leverage ratio as of December 31, 2025.
We focus our environmental, social, and governance (“ESG”) efforts on issues that are important to our business and to our key stakeholders. Our mission is to support businesses, help people and strengthen communities, as well as to grow our operations and revenue.
We focus our sustainability efforts on issues that are important to our business and to our key stakeholders. Our mission is to support businesses, help people and strengthen communities, as well as to grow our operations and revenue.
Essential to this mission is our commitment to provide long-term, sustainable financial and social value to our stakeholders, including the communities we serve, our shareholders and our employees. 10 Employees and Human Capital Resources At December 31, 2024, we employed 407 persons, of which 389 were employed on a full-time basis.
Essential to this mission is our commitment to provide long-term, financial and social value to our stakeholders, including the communities we serve, our shareholders and our employees. Employees and Human Capital Resources At December 31, 2025, we employed 459 persons, of which 434 were employed on a full-time basis.
Gross government loan servicing revenue totaled $4.6 million, 8 including $0.6 million of Capital Bank related servicing fees, during the fourth quarter 2024. Windsor Advantage's total servicing portfolio was $2.5 billion, including $1.1 billion attributable to Capital Bank at December 31, 2024.
Gross government loan servicing revenue totaled $19.6 million, including $4.1 million of Capital Bank related servicing fees, for the year ended December 31, 2025. Windsor 8 Advantage's™ total servicing portfolio was $3.1 billion, including $1.3 billion attributable to Capital Bank at December 31, 2025.
At the effective time of the merger, IFH merged with and into the Company, with the Company continuing as the surviving corporation in the merger.
At the effective time of the merger, IFH merged with and into the Company, with the Company continuing as the surviving corporation in the acquisition. Immediately following the acquisition, West Town Bank & Trust, merged with and into Capital Bank, with Capital Bank as the surviving bank.
We serve businesses, not-for-profit associations, entrepreneurs and others throughout the Washington, D.C. Baltimore, other Maryland metropolitan areas, Florida, and Illinois through six commercial bank branches, one mortgage banking office, two loan production offices, three government loan servicing offices, and one credit card operations office.
We serve businesses, not-for-profit associations, entrepreneurs and others throughout the Washington, D.C., Baltimore, other Maryland markets, Delaware, Florida, Illinois, and North Carolina through seven commercial bank branches, one mortgage banking office, three loan production offices, three government loan servicing offices, and one credit card operations office. On October 1, 2024, the Company completed its acquisition of IFH.
Our construction lending is focused on commercial and residential construction projects within the Washington, D.C. and Baltimore-Columbia-Towson, Maryland metropolitan operating areas, with limited exposure to suburban subdivision tract development.
Construction lending is a core competency of our Commercial Banking division. Our construction loan portfolio provides Capital Bank with short duration, higher yield loans. Our construction lending is focused on commercial and residential construction projects within the Washington, D.C. and Baltimore-Columbia-Towson, Maryland metropolitan operating areas, with limited exposure to suburban subdivision tract development.
Capital Bank Home Loans and OpenSky ™ both leverage Capital Bank’s national banking charter to operate national consumer business lines; Capital Bank Home Loans acts as our residential mortgage origination platform and OpenSky ™ provides nationwide, digitally-originated and served, secured, partially-secured, and unsecured credit cards to under-banked populations and those looking to rebuild their credit scores.
OpenSky ™ provides nationwide, digitally-originated and served, secured, partially-secured, and unsecured credit cards to under-banked populations and those looking to rebuild their credit scores. CBHL acts as our residential mortgage origination platform.
Consumer Financial Protection Bureau The Dodd-Frank Act created a new, independent federal agency called the Consumer Financial Protection Bureau (“CFPB”), which is granted broad rulemaking, supervisory and enforcement powers under various federal consumer financial protection laws, including the Equal Credit Opportunity Act, Truth in Lending Act, Real Estate Settlement Procedures Act, Fair Credit Reporting Act, Fair Debt Collection Act, the Consumer Financial Privacy Provisions of the Gramm-Leach-Bliley Act, and certain other statutes.
While financial institutions with less than $10 billion in assets, like the Company, are exempt, there is concern that these requirements will eventually be pushed down to all financial institutions, which would negatively impact the Company’s non-interest income. 16 Consumer Financial Protection Bureau The Dodd-Frank Act created a new, independent federal agency called the Consumer Financial Protection Bureau (“CFPB”), which is granted broad rulemaking, supervisory and enforcement powers under various federal consumer financial protection laws, including the Equal Credit Opportunity Act, Truth in Lending Act, Real Estate Settlement Procedures Act, Fair Credit Reporting Act, Fair Debt Collection Act, the Consumer Financial Privacy Provisions of the Gramm-Leach-Bliley Act, and certain other statutes.
The extent to which these recent or other future developments will ultimately impact the CFPB’s regulation of the Bank’s business remains uncertain. 17 Deposit Insurance The Bank is a national banking association, regulated by the OCC. The Bank accepts deposits, and those deposits have the benefit of FDIC insurance up to the applicable limits established by law.
It remains uncertain whether, or to what extent, changes at the CFPB will impact our business and the overall regulatory environment. Deposit Insurance The Bank is a national banking association, regulated by the OCC. The Bank accepts deposits, and those deposits have the benefit of FDIC insurance up to the applicable limits established by law.
Metropolitan Statistical Area (“MSA”), and its full service banking locations in Columbia, Maryland in the Baltimore, Maryland MSA, in Ft. Lauderdale, Florida in the Miami Metro Area MSA, and in Chicago, Illinois in the Chicago MSA. Additionally, we have two loan production offices, one located in the Washington, D.C. area and one in Columbia, Maryland.
Metropolitan Statistical Area (“MSA”), and its full service banking locations in Columbia, Maryland in the Baltimore, Maryland MSA, in Ft. Lauderdale, Florida in the Miami Metro Area MSA, in Chicago, Illinois in the Chicago MSA, and in Raleigh, North Carolina in the Raleigh MSA.
The addition of the unsecured card allows for an uninterrupted experience for OpenSky ™ customers who can now more easily transition from a secured to unsecured credit card. OpenSky ™ cards operate on a digital and mobile enabled platform with almost all marketing and application procedures being conducted through website and mobile applications.
The addition of the unsecured card allows for an uninterrupted experience for OpenSky ™ customers who can now more easily transition from a secured to unsecured credit card and continue their relationship with the Bank.
Windsor Advantage generates fee income for the Company through its servicing, processing and packaging of SBA and USDA loans for its financial institution clients. In addition to the four divisions of Capital Bank, Church Street Capital also operates as a wholly owned subsidiary of Capital Bancorp, Inc.
Windsor Advantage ™ generates fee revenue for the Company through its servicing, processing and packaging of SBA and USDA loans for its financial institution clients. 6 In addition to its subsidiaries discussed above, Capital Bancorp, Inc. owns all of the stock of Capital Bancorp (MD) Statutory Trust I (the “Trust”).
Our Commercial Banking division’s commercial loan officers and commercial real estate loan officers provide commercial and industrial, or C&I, commercial real estate, including lender finance loans, and construction lending solutions to business clients in Capital Bank’s operating markets. Government guaranteed lending serves customers throughout the country in need of, and qualifying for, USDA and SBA loans.
Additionally, we have three loan production offices, one located in the Washington, D.C. area, one in Columbia, Maryland, and one in Towson, Maryland. Our Commercial Banking division’s commercial loan officers and commercial real estate loan officers provide C&I, commercial real estate, including lender finance loans, and construction lending solutions to business clients in Capital Bank’s operating markets.
Windsor Advantage now operates as a wholly owned subsidiary of Capital Bancorp, Inc. The Company currently operates four divisions: Commercial Banking, Capital Bank Home Loans, OpenSky ™ , and Windsor Advantage. The Company reports its activities in five business segments: commercial banking; mortgage banking; credit cards; government loan servicing; and corporate activities.
Windsor Advantage ™ , a wholly owned subsidiary of the Company, was acquired in connection with the IFH acquisition. The Company currently operates four divisions and reporting segments: Commercial Banking, OpenSky ™ , Windsor Advantage ™ , and Capital Bank Home Loans (“CBHL”).
Customer Information Privacy and Cybersecurity The Federal Reserve and other bank regulatory agencies have adopted guidelines for safeguarding confidential, personal, non‑public customer information.
Additionally, in July 2025, the FDIC rescinded the 2024 Statement and reinstated, on an interim basis, the statement of policy on bank merger transactions that was in effect prior to the 2024 Statement. Customer Information Privacy and Cybersecurity The Federal Reserve and other bank regulatory agencies have adopted guidelines for safeguarding confidential, personal, non‑public customer information.
In addition to the business development officers upon whom we rely to generate new business, we also have a dedicated servicing, portfolio management and workout staff with specialized expertise in U.S. government guaranteed loans. Construction lending is a core competency of our Commercial Banking division. Our construction loan portfolio provides Capital Bank with short duration, higher yield loans.
This allows us to realize one time gain on sale income along with a recurring servicing and interest revenue stream. In addition to the business development officers upon whom we rely to generate new business, we also have a dedicated servicing, portfolio management and workout staff with specialized expertise in U.S. government guaranteed loans.
Additionally, the full impact of the leadership changes at banking regulatory agencies on the enforcement and supervisory priorities of each agency is not fully known at this time. It is therefore unclear at the present time what effect the aforementioned changes will have on the banking industry as a whole or the Company specifically. 18
It is therefore unclear at the present time what effect the aforementioned changes will have on the banking industry as a whole or the Company specifically. 18 RISK FACTOR SUMMARY The following provides an overview of the significant risks discussed more fully in Item 1A.
Purchase origination volume was 93.5% for the year ended December 31, 2024, compared to 91.7% for the year ended December 31, 2023. 7 Approximately 62.8% of CBHL loan originations by volume occur within Maryland, Virginia and Washington, D.C.
Approximately 78.5% of CBHL loan originations by volume occur within Maryland, Virginia, Delaware and Washington, D.C.
We generally sell the government guaranteed portion of USDA and SBA loans into the secondary market while retaining the non-guaranteed portion of the loan and the servicing rights. This allows us to realize one time gain on sale income along with a recurring servicing and interest revenue stream.
Government guaranteed lending serves customers throughout the country in need of, and qualifying for, USDA and SBA loans. We generally sell the government guaranteed portion of USDA and SBA loans into the secondary market while retaining the non-guaranteed portion of the loan and the servicing rights.
This rule only applies to card issuers, that together with their affiliates, have one million or more open credit card accounts. Smaller card issuers, like the Bank, may continue to charge a higher safe harbor threshold for credit card late fees and automatically increase the safe harbor dollar amount based on the Consumer Price Index.
This rule only applies to card issuers, that together with their affiliates, have one million or more open credit card accounts. In April 2025, the final rule was vacated by the U.S. District Court for the Northern District of Texas.
Removed
On October 1, 2024, the Company completed its previously announced merger (the “Merger”) with Integrated Financial Holdings, Inc., a North Carolina corporation (“IFH”) pursuant to an Agreement and Plan of Merger and Reorganization (the “Merger Agreement”), dated as of March 27, 2024.
Added
Our Commercial Banking division primarily operates within a corridor extending from Raleigh, North Carolina to Delaware, with significant activity in the Washington, D.C. and Baltimore metropolitan statistical areas. The Commercial Bank also maintains offices in Chicago, Illinois and Fort Lauderdale, Florida.
Removed
IFH was the holding company of West Town Bank & Trust, an Illinois state-chartered bank which provides banking services through its full-service office located in the greater Chicago area and is a nationwide originator of U.S. Department of Agriculture (“USDA”) and SBA government guaranteed loans.
Added
In addition to providing relationship-driven banking services within its primary geographic markets, the Commercial Bank conducts certain lending and deposit activities on a nationwide basis through specialized verticals. These lending verticals include lender finance, government guaranteed lending and other forms of commercial and industrial (“C&I”) lending.
Removed
IFH was also the parent company of Windsor Advantage, LLC (“Windsor Advantage”), a loan service provider that offers community banks and credit unions with a comprehensive outsourced SBA 7(a) and USDA lending platform. Immediately following the Merger, West Town Bank & Trust, merged with and into Capital Bank, with Capital Bank as the surviving bank.
Added
The Commercial Bank also operates national deposit verticals serving homeowners associations (“HOAs”), title companies, political action committees (“PACs”), not-for-profit organizations, and other commercial clients. OpenSky ™ and CBHL both leverage Capital Bank’s national banking charter to operate national consumer business lines.
Removed
Our Commercial Banking division operates primarily in the Washington, D.C. and Baltimore metropolitan areas and focuses on providing personalized service to commercial clients throughout our area of operations supplemented by lending outside of our primary market, and nationwide deposit verticals. Additionally, the commercial bank engages in government-guaranteed lending on a national basis.
Added
At December 31, 2025, 31% of our credit card customers had a FICO score in excess of 660 and were considered prime and 33% of outstanding credit card balances were unsecured. OpenSky ™ cards operate on a digital and mobile enabled platform with almost all marketing and application procedures being conducted through website and mobile applications.
Removed
CSC originates and services a portfolio of primarily mezzanine loans with certain characteristics that do not meet Capital Bank’s general underwriting standards, but command a higher rate of return. In addition to its subsidiaries discussed above, Capital Bank, N.A. and Church Street Capital, Capital Bancorp, Inc. owns all of the stock of Capital Bancorp (MD) Statutory Trust I (the “Trust”).
Added
Credit card eligibility for all product offerings is based on identity and income verification. Capital Bank uses data analytics, including AI and proprietary models, throughout the OpenSky ™ customer lifecycle to support fraud prevention and credit decisioning.
Removed
In 2024, as the mortgage refinance market continued to contract in response to elevated market interest rates, CBHL continued to focus on purchase originations.
Added
During onboarding, these tools are used to help validate identity, verify eligibility and income, and inform which customers may receive offers for additional credit. After account opening, credit card transactions are evaluated in real-time to help assess transaction legitimacy and detect potentially fraudulent activity.
Removed
Credit card eligibility for all product offerings is based on identity and income verification. Our prior experience has shown that approximately 30% of our secured credit cards will experience a charge-off within the first year of issuance primarily due to the relative inexperience of this under-banked population in effectively managing credit card debt.
Added
The Bank also uses portfolio monitoring and behavioral models to provide management with insight into credit trends, identify emerging risk, mitigate potential losses, and inform actions intended to optimize account profitability over the life of the relationship.
Removed
Capital Bank evaluates OpenSky ™ customers using analytics that track consumer behaviors and score each customer on risk and behavior metrics.
Added
Our Bank received an “outstanding” rating in its most recent CRA evaluation dated April 30, 2024, which was performed under the intermediate small bank requirements. Due to its asset size, our Bank will be evaluated under the “large bank” requirements in future CRA evaluations.
Removed
These real-time monitoring capabilities give management insight into the credit trends of the portfolio on a consumer-by-consumer basis, enabling us to identify many potential fraud situations and mitigate associated losses, as well as to obtain insights into how to optimize the profitability and life cycle of each account. The model utilizes data proprietary to Capital Bank.
Added
In May 2025, the OCC adopted an interim final rule amending the 2024 final rule to restore the expedited review and the use of the streamlined business combination. The OCC also rescinded its 2024 policy statement.
Removed
On March 29, 2024, a federal district court in Texas granted a preliminary injunction barring implementation of the final rule in response to a lawsuit filed by several trade groups. We will continue to monitor the litigation until resolved. We have also begun efforts to evaluate the impact of the new rule and to develop a strategy to ensure compliance.
Added
In May 2025, President Trump signed a Congressional Review Act resolution that overturned the CFPB’s December 2024 final rule, which would have taken effect October 1, 2025.
Removed
On March 3, 2025, the FDIC approved a proposal to rescind the 2024 Statement and reinstate, on an interim basis, the statement of policy on bank merger transactions that was in effect prior to the 2024 15 Statement. It remains unclear whether the OCC under anticipated new leadership will also reconsider its recent regulation and policy statement.
Added
Beyond the initial halt, the CFPB moved toward a more deregulatory stance in 2025, significantly reducing the volume of final rules and enforcement actions compared to 2024. Under the current U.S. administration, a level of heightened uncertainty exists with respect to the future of the CFPB, including its structure, staffing, and responsibilities.
Removed
While financial institutions with less than $10 billion in assets, like the Company, are exempt, there is concern that these requirements will eventually be pushed down to all financial institutions, which would negatively impact the Company’s non-interest income.
Added
We cannot predict whether or in what form any other proposed regulations or statutes will be adopted or the extent to which our business may be affected by any new regulation or statute.
Removed
Although the final rule exempts smaller card issuers, the Company will continue to monitor penalty fee policies, particularly as the CFPB and other regulators have demonstrated a focus on regulating so-called junk fees.
Added
These changes become less predictable, yet more likely to occur, following the transition of power from one presidential administration to another, especially as occurred in 2025, when it involves a change in the governing political party.
Removed
Although the CFPB excluded banks with under $10 billion in assets from this rule, the Company is currently evaluating this rule and assessing its potential impact on the Company and the Bank. With the recent change in presidential administration and control of Congress, the scope of regulation by the CFPB and other federal agencies remains uncertain.
Added
New agency leaders have different priorities and, as a result, there have been and will be a number of proposed changes to regulations, guidance and supervisory tactics that impact our business.
Removed
It is possible, though uncertain, that Congress and/or the relevant federal agencies may seek to roll back or modify some or much of the rulemaking and regulatory guidance issued under the previous presidential administration.
Added
Risks Related to Our Business • Adverse economic conditions could negatively affect us, our customers, or counterparties, leading to reduced loan demand and higher credit losses. • Adverse developments in the financial services industry could weaken customer confidence and materially impact our liquidity and stock. • Geographic concentration increases sensitivity to adverse changes in the local economy. • Government shutdowns and federal spending reductions may impair borrowers’ ability to repay and pressure liquidity. • Lending is inherently risky and we may be unable to measure or limit credit risk, resulting in unexpected losses. • Our allowance for credit losses may be insufficient under CECL methodologies, requiring additional provisions or charge-offs in stressed environments. • Small and medium-sized business exposure heightens loss susceptibility because those borrowers often have fewer resources to withstand economic stress. • Commercial real estate and construction lending risks arise from sensitivity to market conditions, construction cost overruns, and challenges recovering collateral value. • Real estate value and appraisal risks can lead to inaccurate collateral valuations, higher losses, or insufficient ACL levels. • Foreclosure-related risks may increase costs or delay recoveries. • Liquidity risk could arise from deposit attrition or limited market liquidity that restricts lending and weakens financial performance. • Large depositor concentration poses the risk that major withdrawals could force reliance on more expensive or volatile funding sources, pressuring net interest margin. • Mortgage banking volatility may reduce noninterest income due to interest rate shifts, market disruptions, or lower loan officer productivity. • Secondary market and repurchase risk could lower operating income if market disruptions occur or loan repurchases are required. • OpenSky ™ credit card portfolio risks include fraud, credit losses, ACH issues, and delinquency trends that could materially affect performance and reduce earnings if losses exceed the ACL. • Government-guaranteed lending risks stem from borrower defaults, processing deficiencies, or potential changes to federal programs. • Renewable energy tax credit risks may reduce financing opportunities if federal tax incentives or program structures change. 19 • Interest rate risk may negatively affect the value of securities and loans as rates fluctuate. • Changes to interest rates or the economic environment could force us to recognize losses on our investment securities portfolio. • Competitive pressures from banks and nonbank providers may limit our ability to grow loans, deposits, and fee income. • Cybersecurity and technology risks involve potential system failures or cyberattacks that could cause operational disruption, financial loss, legal exposure and reputational harm.
Added
Risks Related to Our Operations and Industry Regulation • Extensive regulatory requirements may increase operational and compliance burdens or restrict business activities. • Regulatory examinations and enforcement could result in penalties, restrictions, or other adverse impacts if we fail to meet expectations or comply with requirements. • Elevated levels of CRE or construction concentration may require enhanced risk management policies or higher capital levels, as well as limit our ability to lend. • External events and climate-related risks could disrupt operations or impair collateral. • AI risks may arise from model errors, data issues, operational failures, regulatory scrutiny, or reputational concerns tied to AI use.
Added
Risks Related to Strategic Growth • A merger or acquisition requires us to make estimates which impact presentation of our financial condition and are subject to revision. • If goodwill were determined to be impaired, it could have a negative impact on our profitability. • Acquisitions may disrupt our business.
Added
Risks Related to Ownership of Our Common Stock • Market volatility may cause significant fluctuations in our stock price. • Future equity offerings or issuances of convertible instruments could result in substantial dilution. • Insider ownership and control may influence shareholder votes and elections. • Subordination to debt and preferred stock means common shareholders face lower priority relative to senior instruments, affecting value and rights. • Anti-takeover protections under corporate governance provisions and applicable law may deter or delay change-of-control transactions. 20

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

54 edited+16 added−31 removed135 unchanged
Biggest changeWe may incur additional indebtedness in the future to increase our capital resources or if our total capital ratio or the total capital ratio of the Bank falls below the required minimums. Furthermore, our common stock is subordinate to any series of preferred stock we may issue in the future.
Biggest changeAs of December 31, 2025, we had $2.1 million in aggregate principal amount of junior subordinated debentures and we had no aggregate principal amount of subordinated notes outstanding. We may incur additional indebtedness in the future to increase our capital resources or if our total capital ratio or the total capital ratio of the Bank falls below the required minimums.
All of these factors can individually or in the aggregate be detrimental to our business, and the interplay between these factors can be complex and unpredictable. Adverse economic conditions could have a material adverse effect on our business, and/or the the financial condition of our customers and our results of operations.
All of these factors can individually or in the aggregate be detrimental to our business, and the interplay between these factors can be complex and unpredictable. Adverse economic conditions could have a material, adverse effect on our business, and/or the financial condition of our customers and our results of operations.
The success of our recent merger with IFH or any future acquisition we may consummate will depend on, among other things, our ability to realize anticipated revenue enhancements and efficiencies and to combine our business with the business of the target institution in a manner that does not materially disrupt the existing customer relationships of either institution, or result in decreased revenues resulting from any loss of customers, and that permits growth opportunities to occur.
The success of our merger with IFH or any future acquisition we may consummate will depend on, among other things, our ability to realize anticipated revenue enhancements and efficiencies and to combine our business with the business of the target institution in a manner that does not materially disrupt the existing customer relationships of either institution, or result in decreased revenues resulting from any loss of customers, and that permits growth opportunities to occur.
Any damage or failure that causes an interruption in our operations could have a material adverse effect on our financial condition and results of operations. Our operations are also dependent upon our ability to protect our computer systems and network infrastructure, including our digital, mobile and internet banking activities, against damage from physical break-ins, cybersecurity breaches and other disruptive problems.
Any damage or failure that causes an interruption in our operations could have a material, adverse effect on our financial condition and results of operations. 29 Our operations are also dependent upon our ability to protect our computer systems and network infrastructure, including our digital, mobile and internet banking activities, against damage from physical break-ins, cybersecurity breaches and other disruptive problems.
If an OpenSky ™ cardholder exceeds his or her credit limit as a result of purchases in one of these categories, we may incur losses for amounts in excess of the 24 collateral deposited if the borrower fails to repay such excess amounts. Customers can also exceed their credit limit by making intra-period payments to replenish their available lines.
If an OpenSky ™ cardholder exceeds his or her credit limit as a result of purchases in one of these categories, we may incur losses for amounts in excess of the collateral deposited if the borrower fails to repay such excess amounts. Customers can also exceed their credit limit by making intra-period payments to replenish their available lines.
We may be required to take additional provisions for credit losses in the future to further supplement our ACL, either due to management’s decision to do so or requirements by our banking regulators. In addition, bank regulatory agencies will periodically review our ACL and the value attributed to nonaccrual loans or to real estate acquired through foreclosure.
We may be required to take additional provisions for credit losses in the future to 23 further supplement our ACL, either due to management’s decision to do so or requirements by our banking regulators. In addition, bank regulatory agencies will periodically review our ACL and the value attributed to nonaccrual loans or to real estate acquired through foreclosure.
Many factors impact interest rates, including governmental monetary policies, inflation, recession, changes in unemployment, the money supply, international economic weakness and disorder and instability in domestic and foreign financial markets. 26 Interest rate increases often result in larger payment requirements for our borrowers, which increases the potential for default and could result in a decrease in the demand for loans.
Many factors impact interest rates, including governmental monetary policies, inflation, recession, changes in unemployment, the money supply, international economic weakness and disorder and instability in domestic and foreign financial markets. Interest rate increases often result in larger payment requirements for our borrowers, which increases the potential for default and could result in a decrease in the demand for loans.
We cannot guarantee that any risk management practices that we implement to address our geographic and loan concentrations will be effective in preventing losses relating to our loan portfolio. We may not be able to measure and limit our credit risk adequately, which could lead to unexpected losses. A primary component of our business involves making loans to customers.
We cannot guarantee that any risk management practices that we implement to address our geographic and loan concentrations will be effective in preventing losses relating to our loan portfolio. 22 We may not be able to measure and limit our credit risk adequately, which could lead to unexpected losses. A primary component of our business involves making loans to customers.
If new state or federal laws or regulations are ultimately enacted that significantly raise the cost of foreclosure or impose outright barriers, such could have a materially adverse effect on our business, financial condition and results of operation. A lack of liquidity could impair our ability to fund operations and adversely impact our business, financial condition and results of operations.
If new state or federal laws or regulations are ultimately enacted that raise the cost of foreclosure or impose outright barriers, such could have a materially adverse effect on our business, financial condition and results of operation. A lack of liquidity could impair our ability to fund operations and adversely impact our business, financial condition and results of operations.
It is possible that the integration process associated with any pending or future acquisition could result in the loss of key employees, the disruption of ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits of the acquisitions.
It is possible that the integration process associated with any pending or future acquisition could result in the loss of key employees, the disruption of ongoing businesses or inconsistencies in standards, controls, procedures and policies that adversely affect our ability to maintain relationships with clients, customers, depositors and employees or to achieve the anticipated benefits of the acquisition.
Account balances in excess of established credit limits happen as a result of certain VISA membership policies that allow cardholders to incur certain charges even if they exceed their card limits, which include, but are not limited to, rental car charges, gas station charges and hotel deposits.
Account balances in excess of 26 established credit limits happen as a result of certain VISA membership policies that allow cardholders to incur certain charges even if they exceed their card limits, which include, but are not limited to, rental car charges, gas station charges and hotel deposits.
Furthermore, increased instances of technical defaults, particularly where Windsor Advantage acted as a lender service provider, could result in reputational damage to us. 25 Any modification or reduction in the level of government support for government guaranteed loan programs could result in a significant impact to our results of operations.
Furthermore, increased instances of technical defaults, particularly where Windsor Advantage™ acted as a lender service provider, could result in reputational damage to us. Any modification or reduction in the level of government support for government guaranteed loan programs could result in a significant impact to our results of operations.
In either case, if market interest rates move contrary to our position, this gap will negatively impact our earnings. The impact on earnings is more adverse when short-term interest rates increase more than long-term interest rates or when long-term interest rates decrease more than short-term interest rates, or in circumstances of a flattened or inverted yield curve.
In either case, if market interest rates move contrary to our position, this gap will negatively impact our earnings. The impact on earnings is more adverse when short-term interest rates increase more than long-term interest rates or when long-term interest rates decrease more 28 than short-term interest rates, or in circumstances of a flattened or inverted yield curve.
If we become 29 subject to such regulatory actions, our business, financial condition, results of operations and reputation would be materially and adversely affected. Regulatory requirements affecting our loans secured by commercial real estate could limit our ability to leverage our capital and adversely affect our growth and profitability.
If we become subject to such regulatory actions, our business, financial condition, results of operations and reputation would be materially and adversely affected. Regulatory requirements affecting our loans secured by commercial real estate could limit our ability to leverage our capital and adversely affect our growth and profitability.
However, an appraisal is only an estimate of the value of the property at the time the appraisal is made and, as real estate values may change significantly in value in relatively short periods of time (especially in periods of heightened economic uncertainty), this estimate may not accurately describe the net value of the real property collateral after the loan is made.
However, an appraisal is only an estimate of the value of the property at the time the appraisal is made and, inasmuch as real estate values may change significantly in value in relatively short periods of time (especially in periods of heightened economic uncertainty), this estimate may not accurately describe the net value of the real property collateral after the loan is made.
Such computer break-ins and other disruptions would jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability, damage our reputation and 27 inhibit the use of our internet banking services by current and potential customers.
Such computer break-ins and other disruptions would jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability, damage our reputation and inhibit the use of our internet banking services by current and potential customers.
The techniques used by cyber criminals change frequently, may not be recognized until launched, and may not be recognized until well after a breach has occurred. The speed at which new vulnerabilities are discovered and exploited, often before security patches are published, continues to rise.
The techniques used by cyber criminals change frequently, may not be recognized until launched, and may not be recognized until well after a breach has 30 occurred. The speed at which new vulnerabilities are discovered and exploited, often before security patches are published, continues to rise.
The risk of a security breach caused by a cyber-attack on a vendor or by unauthorized vendor access has also increased in recent years. 28 Cyber-attacks or other security breaches, whether directed at us or third parties, may result in a material loss or have other material adverse consequences.
The risk of a security breach caused by a cyber-attack on a vendor or by unauthorized vendor access has also increased in recent years. Cyber-attacks or other security breaches, whether directed at us or third parties, may result in a material loss or have other material, adverse consequences.
Accordingly, a decline in local economic conditions would likely have an adverse impact on our financial condition and results of operations, and the impact on us would likely be greater than the impact felt by larger financial institutions whose loan portfolios are geographically diverse.
Accordingly, a decline in local economic conditions would likely have an adverse impact on our financial condition and results of operations, and the impact on us would likely be greater than the impact felt by larger financial institutions whose loan portfolios are more geographically diverse.
The business of lending is inherently risky, including risks that the principal of or interest on any loan will not be repaid in a timely manner or at all or that the value of any collateral supporting the loan will be insufficient to cover our 20 outstanding exposure.
The business of lending is inherently risky, including risks that the principal of or interest on any loan will not be repaid in a timely manner or at all or that the value of any collateral supporting the loan will be insufficient to cover our outstanding exposure.
The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset. Additional credit losses will likely occur in the future and may occur at a rate greater than we have previously experienced.
The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the financial asset. Additional credit losses will occur in the future and may occur at a rate greater than we have previously experienced.
Additionally, technical defaults could lead to potential liability for Windsor if it assisted in the origination or servicing of the loan on behalf of another bank. Such technical defaults and associated losses could materially adversely affect our business.
Additionally, technical defaults could lead to potential liability for Windsor™ if it assisted in the origination or servicing of the loan on behalf of another bank. Such technical defaults and 27 associated losses could materially adversely affect our business.
In addition, the banking operating environment and public trading prices of banking institutions can be highly correlated, in particular during times of stress, which could materially and adversely impact the trading prices of our common stock and potentially our results of operations.
In addition, the banking operating environment and public trading prices of banking institutions can be highly correlated, in particular during times of stress, which could materially and adversely impact the trading price of our common stock and potentially our results of operations.
If the estimates that we have used at any financial statement date are 30 significantly revised in the future, there could be a negative impact to our goodwill or other acquisition-related intangibles and our results of operations for the period in which the revisions are made.
If the estimates that we have used at any financial statement date are significantly 33 revised in the future, there could be a negative impact to our goodwill or other acquisition-related intangibles and our results of operations for the period in which the revisions are made.
With larger transactions, such as our recent merger with IFH, fair value and other estimates can take up to one year to finalize. These estimates, and their revisions, can have a substantial effect on the presentation of our financial condition and operating results after the transaction closes.
With transactions, such as our merger with IFH, fair value and other estimates can take up to one year to finalize. These estimates, and their revisions, can have a substantial effect on the presentation of our financial condition and operating results after the transaction closes.
Such events could affect the stability of its deposit base, impair the ability of borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue, cause us to incur additional expenses or disrupt the Company’s operations.
Such events could affect the stability of our deposit base, impair the ability of our borrowers to repay outstanding loans, impair the value of collateral securing loans, cause significant property damage, result in loss of revenue, cause us to incur additional expenses or disrupt the Company’s operations.
Severe weather, earthquakes, other natural disasters, pandemics, climate change, acts of war or terrorism and other adverse external events could have a significant impact on the Company’s ability to conduct business.
Severe weather, earthquakes, other natural disasters, climate change, pandemics, acts of war or terrorism and other external and geopolitical events could significantly impact the business. Severe weather, earthquakes, other natural disasters, pandemics, climate change, acts of war or terrorism and other adverse external events could have a significant impact on the Company’s ability to conduct business.
We operate in the highly competitive financial services industry and face significant competition for customers from financial institutions located both within and beyond our principal markets. We compete with commercial banks, savings banks, credit unions, nonbank financial services companies and other financial institutions operating within or near the areas we serve.
We operate in the highly competitive financial services industry and face significant competition for customers from financial institutions located both within and beyond our principal markets. We compete with commercial banks, savings banks, credit unions, non-bank financial services companies and other financial institutions operating within or near the areas we serve.
These laws include the BHC Act and the Change in Bank Control Act (“CBCA”). These laws could delay or prevent an acquisition. 32 ITEM 1B UNRESOLVED STAFF COMMENTS None.
These laws include the BHC Act and the Change in Bank Control Act (“CBCA”). These laws could delay or prevent an acquisition. 35 ITEM 1B. UNRESOLVED STAFF COMMENTS None.
We cannot predict the size of future issuances of our common stock or the effect, if any, that future issuances and sales of our common stock 31 will have on the market price of our common stock.
We cannot predict the size of future issuances of our common stock or the effect, if any, that future issuances and sales of our common stock 34 will have on the market price of our common stock.
Such regulatory agencies may require us to recognize future charge-offs. These adjustments could have an adverse effect on our business, financial condition and results of operations. 21 The small- to medium-sized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair our borrowers’ ability to repay loans.
Such regulatory agencies may require us to recognize future charge-offs. These adjustments could have a material, adverse effect on our business, financial condition and results of operations. The small- to medium-sized businesses that we lend to may have fewer resources to weather adverse business developments, which may impair our borrowers’ ability to repay loans.
The presidential administration and certain governmental 19 agencies have announced plans to reduce government spending and the size of the federal government workforce. The Washington, D.C. metropolitan area is characterized by a significant number of businesses that are federal government contractors or subcontractors, or which depend on such businesses for a significant portion of their revenues.
The presidential administration and certain governmental 21 agencies have announced and begun to implement plans to reduce government spending and the size of the federal government workforce. The Washington, D.C. metropolitan area is characterized by a significant number of businesses that are federal government contractors or subcontractors, or which depend on such businesses for a significant portion of their revenues.
The residential mortgage banking business is highly competitive and highly susceptible to changes in market interest rates, consumer confidence levels, employment statistics, the capacity and willingness of secondary market purchasers to acquire and hold or securitize loans, and other factors beyond our control.
Our mortgage banking division may not meaningfully contribute to noninterest income. The residential mortgage banking business is highly competitive and highly susceptible to changes in market interest rates, consumer confidence levels, employment statistics, the capacity and willingness of secondary market purchasers to acquire and hold or securitize loans, and other factors beyond our control.
Our Allowance for Credit Losses (“ACL”) may prove to be insufficient to absorb life-time losses in our loan portfolio, which may adversely affect our business, financial condition and results of operations.
Our ACL may prove to be insufficient to absorb life-time losses in our loan portfolio, which may adversely affect our business, financial condition and results of operations.
Our failure to comply with these laws and regulations, even if the failure follows good faith efforts or reflects a difference in interpretation, could subject us to restrictions on our business activities, enforcement actions and fines and other penalties, any of which could adversely affect our results of operations, regulatory capital levels and the price of our securities.
Our failure to comply with applicable laws and regulations, even where such failure reflects good faith efforts or differences in interpretation, could subject us to restrictions on our business activities, enforcement actions, fines, or other penalties, any of which could adversely affect our results of operations, regulatory capital levels, and the price of our securities.
As of December 31, 2024, approximately 57.1% of our deposits were insured and protected and 42.9% of our deposits were uninsured and unprotected. We rely on these deposits for liquidity. A failure to maintain adequate liquidity could have a material adverse effect on our business, financial condition and results of operations.
As of December 31, 2025, approximately 40.9% of our deposits were uninsured and 59.1% of our deposits were insured. We rely on these deposits for liquidity. A failure to maintain adequate liquidity could have a material, adverse effect on our business, financial condition and results of operations.
For example, in the event a secured card becomes more than 90 days past due, or an unsecured card becomes more than 150 days past due, the credit card balance is recovered against any corresponding deposit account and a charge-off is recorded for any related fees, accrued interest or other charges in excess of the deposit account balance.
For example, in the event a secured card becomes more than 90 days past due, or an unsecured card becomes more than 150 days past due, the credit card balance is recovered against any corresponding deposit account and the account becomes eligible for charge-off.
As of December 31, 2024, our directors, directors of the Bank, our named executive officers and their respective family members and affiliated entities beneficially owned an aggregate of 5,452,014 shares, or approximately 32.7% of our issued and outstanding common stock.
As of December 31, 2025, our directors, directors of the Bank, our named executive officers and their respective family members and affiliated entities beneficially owned an aggregate of 5,438,261 shares, or approximately 33.2% of our issued and outstanding common stock.
Because a significant portion of our loan portfolio depends on commercial real estate, a change in the regulatory capital requirements applicable to us or a decline in our regulatory capital could limit our ability to leverage our capital as a result of these policies, which could have a material adverse effect on our business, financial condition and results of operations.
Because a significant portion of our loan portfolio depends on commercial real estate, a change in the regulatory capital requirements applicable to us or a decline in our regulatory capital could limit our ability to leverage our capital as a result of these policies, which could have a material, adverse effect on our business, financial condition and results of operations. 32 Further, management has implemented controls to monitor our commercial real estate lending concentrations, but we cannot predict the extent to which regulatory guidelines will impact our operations or capital requirements.
Provisions in our governing documents and Maryland law may have an anti-takeover effect, and there are substantial regulatory limitations on changes of control of bank holding companies.
Furthermore, our common stock is subordinate to any series of preferred stock we may issue in the future. Provisions in our governing documents and Maryland law may have an anti-takeover effect, and there are substantial regulatory limitations on changes of control of bank holding companies.
Significant adverse changes in the economy or local market conditions in which our commercial lending customers operate could cause rapid declines in loan collectability and the values associated with general business assets resulting in inadequate collateral coverage that may expose us to credit losses and could materially and adversely affect our business, financial condition and results of operations. 22 Appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property, other real estate owned and repossessed personal property may not accurately describe the net value of the asset.
Significant adverse changes in the economy or local market conditions in which our commercial lending customers operate could cause rapid declines in loan collectability and the values associated with general business assets resulting in inadequate collateral coverage that may expose us 24 to credit losses and could materially and adversely affect our business, financial condition and results of operations.
Integration efforts could also divert management attention and resources. These integration matters could have an adverse effect on the combined Company. Risks Related to Ownership of Our Common Stock The market price of our common stock may be subject to substantial fluctuations, which may make it difficult for you to sell your shares at the volume, prices and times desired.
Risks Related to Ownership of Our Common Stock The market price of our common stock may be subject to substantial fluctuations, which may make it difficult for you to sell your shares at the volume, prices and times desired.
We are subject to interest rate risk as fluctuations in interest rates may adversely affect our earnings. The majority of our banking assets and liabilities are monetary in nature and subject to risk from changes in interest rates.
Accordingly, adverse changes in the regulatory framework or governmental support for renewable energy projects could materially and adversely affect our financial performance. We are subject to interest rate risk as fluctuations in interest rates may adversely affect our earnings. The majority of our banking assets and liabilities are monetary in nature and subject to risk from changes in interest rates.
As such, we are subject to extensive regulation, supervision and legal requirements that govern almost all aspects of our operations. Compliance with laws and regulations can be difficult and costly, and changes to laws and regulations, including potential changes in federal policy and at regulatory agencies as a result of changes in U.S.
Accordingly, we are subject to extensive regulation, supervision and legal requirements that govern almost all aspects of our operations. Compliance with applicable laws and regulations can be complex and costly, and changes to laws and regulations, including changes in federal policy and regulatory priorities associated with transitions in U.S. Presidential administrations frequently impose additional operating costs.
A significant portion of the committed equity in these projects is derived from investment tax credits and other forms of financial incentives provided through federal programs, legislative measures, and governmental support.
A portion of our lending activities is tied to the financing of renewable energy projects, including, but not limited to, commercial solar farms. A portion of the committed equity in some of these projects is derived from investment tax credits and other financial incentives provided through federal programs, legislative measures, and governmental support.
These announcements could have an adverse effect on the economy of the Washington, D.C. metropolitan area, which in turn could adversely affect the Company. The Washington, D.C. metropolitan area is characterized by a significant number of businesses that are federal government contractors or subcontractors, or which depend on such businesses for a significant portion of their revenues.
A period of failure to reach agreement on these matters, particularly if accompanied by another government shutdown, may have an adverse impact on the U.S. economy. The Washington, D.C. metropolitan area is characterized by a significant number of businesses that are federal government contractors or subcontractors, or which depend on such businesses for a significant portion of their revenues.
We may also be forced, as a result of any withdrawal of deposits, to rely more heavily on other, potentially more expensive and less stable funding sources.
We may also be forced, as a result of any withdrawal of deposits, to rely more 25 heavily on other, potentially more expensive and less stable funding sources. Consequently, the occurrence of any of these events could have a material, adverse effect on our business, financial condition and results of operations.
Further, any new laws, rules and regulations could make compliance more difficult or expensive or otherwise materially and adversely affect our business, financial condition and results of operations.
In addition, new or amended laws, rules or regulations could increase compliance costs, limit business opportunities, or otherwise materially and adversely affect our business, financial condition, and results of operations.
At December 31, 2024, the Bank’s construction to total capital ratio was 99% and the Bank’s non-owner-occupied commercial real estate (including construction) loans to total capital ratio was 298%.
At December 31, 2025, the Bank’s construction to total capital ratio was 100% and the Bank’s non-owner-occupied commercial real estate (including construction) loans to total capital ratio was 302%, which exceeded the 300% regulatory guideline threshold set forth in clause (iv) above.
In considering whether to make a loan secured by real property, we generally require an appraisal of the property.
Appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property, other real estate owned and repossessed personal property may not accurately describe the net value of the asset. In considering whether to make a loan secured by real property, we generally require an appraisal of the property.
Such changes could have a material adverse impact on our business, including through a reduction in sales income and decreased revenue within Windsor Advantage. Additionally, a substantial portion of our government guaranteed loan program is tied to the financing of renewable energy projects, including, but not limited to commercial solar farms.
Such changes could have a material, adverse impact on our business, including through a reduction in sales income and decreased revenue within Windsor Advantage™. Changes to renewable energy tax credits and federal incentive programs could adversely affect certain lending opportunities.
Our customers and businesses in the Washington, D.C. metropolitan area may be adversely impacted as a result of changes in government spending or government shutdown. The presidential administration and certain governmental agencies have announced plans to reduce government spending and the size of the federal government workforce.
Our customers and businesses in the Washington, D.C. metropolitan area may be adversely impacted as a result of the government shutdown and changes in government spending. Disagreement over the U.S. federal budget, specifically regarding expiring tax credits and spending priorities, caused the U.S. federal government to shut down from October 1, 2025 to November 12, 2025.
Further, any expiration, phase-down, or reduction of key tax incentives or other federal programs, or delays in reauthorization or expansion of these programs, could materially and adversely impact the volume of government guaranteed lending opportunities within our USDA business and the renewable energy sector more broadly.
Reductions in renewable energy incentives, expiration, phase-down, or modification of key tax benefits, or delays in reauthorization or expansion of related programs could materially impact the volume of renewable energy lending opportunities. In addition uncertainty regarding future federal policy may delay project development, financing decisions or capital commitments.
In addition, we may not have adequate insurance coverage to compensate for losses from a cybersecurity event.
In addition, we may not have adequate insurance coverage to compensate for losses from a cybersecurity event. Failure to maintain an effective system of internal control and disclosure controls and procedures could have a material adverse effect on our results of operations, financial condition and stock price. As disclosed in Part II - Item 9A.
Removed
Consequently, the occurrence of any of these events could have a material adverse effect on our business, financial condition and results of operations. 23 Our mortgage banking division may not meaningfully contribute to noninterest income.
Added
The government shutdown resulted in furloughs and layoffs for hundreds of thousands of federal employees. Recently, there have been several additional instances where there has been uncertainty regarding the ability of Congress and the President to collectively reach agreement on federal budgetary and spending matters.
Removed
However, the availability and terms of these tax credits, and the continuation of other federal support programs, are subject to the actions of the U.S. federal government, which may evolve under the current administration. If the new administration implements or advocates for reductions in renewable energy and related incentives, government guaranteed lending opportunities could be materially and adversely affected.
Added
A charge-off is recorded for any related fees, accrued interest or other charges in excess of the deposit account balance no later than 120 days for secured and 180 days for unsecured.
Removed
As a result, any adverse changes in the regulatory framework or governmental support for renewable energy could have a material and adverse impact on our financial performance, particularly in the renewable energy lending space, where government incentives are a critical element of project viability.
Added
The U.S. federal government has previously enacted changes affecting the availability and terms of certain renewable energy tax credits and related incentives. These programs remain subject to further legislative, regulatory, or administrative modification, reinterpretation, or repeal.
Removed
Presidential administrations that have different regulatory agendas than their predecessors, often impose additional operating costs. We expect the Trump administration will seek to implement a regulatory reform agenda that is significantly different than that of the Biden administration. We expect there will be changes in rulemaking, supervision, examination, and enforcement priorities of the federal banking agencies.
Added
Any additional changes to the structure, availability, transferability, monetization, or timing of these tax credits or related support programs could affect the economics or viability of projects seeking financing.
Removed
Further, management has implemented controls to monitor our commercial real estate lending concentrations, but we cannot predict the extent to which regulatory guidelines will impact our operations or capital requirements. Severe weather, earthquakes, other natural disasters, climate change, pandemics, acts of war or terrorism and other external and geopolitical events could significantly impact the business.
Added
Controls and Procedures, management has identified a material weakness in our internal control over financial reporting and, as a result, concluded that our internal control over financial reporting and our disclosure controls and procedures were not effective as of December 31, 2025. We are currently working to remediate the material weakness.
Removed
As of December 31, 2024, we had outstanding approximately $10.0 million in aggregate principal amount of subordinated notes and $2.1 million in aggregate principal amount of junior subordinated debentures.
Added
However, there can be no assurance that these remediation efforts will be successful. In addition, these remediation efforts will place a burden on management and may result in additional expenses.
Removed
ITEM 1C CYBERSECURITY As a publicly-traded financial institution, we are subject to various cybersecurity risks that could adversely affect our business, financial condition, results of operations and reputation, including, but not limited to, cyber-attacks against us or our critical third-party service providers.
Added
If we are unable to remediate this material weakness, or are otherwise unable to maintain effective internal control over financial reporting or disclosure controls and procedures, our ability to record, process and report financial information accurately, and to prepare financial statements within required time periods, could be adversely affected, which could subject us to litigation or investigations requiring management resources and payment of legal and other expenses, result in violations of applicable securities laws, prejudice our ability to meet NASDAQ listing requirements, negatively affect investor confidence in the accuracy and completeness of our financial statements, and adversely impact the trading price of our securities.
Removed
These cyber-attackers can attempt to gain unauthorized access to our digital systems for malicious purposes including, but not limited to: misappropriation of company assets, accessing Company confidential or sensitive customer non-public information, corrupting data, causing operational disruptions, or as part of a ransom demand for payment.
Added
Recent administrations have pursued regulatory agendas that differ in approach and emphasis, and we expect that rulemaking, supervision, examination and enforcement priorities of the federal banking agencies will continue to evolve. Such changes may affect the manner in which we conduct our business, the products and 31 services we offer, and the costs associated with compliance.
Removed
As described below, we believe we have appropriate risk management processes, governance policies, standards, and procedures, a system of internal controls designed to address and mitigate these risks, and experienced internal resources to execute our information security and cybersecurity risk management programs.
Added
As a result, we are deemed to have a concentration in commercial real estate lending under applicable regulatory guidelines. Additionally, at December 31, 2025, the Company’s construction to total capital ratio was 88.1% and the Company’s non-owner-occupied commercial real estate (including construction) loans to total capital ratio was 270.8%.
Removed
In 2024, the Company’s Board of Directors approved the hiring of a full time Chief Information Security Officer (“CISO”) reporting to the Company’s Chief Information Officer (“CIO”) to support a focus on information security and support the three lines of defense enterprise risk management framework.
Added
The development and use of AI presents risks that may adversely impact our business. We are evaluating and may continue to expand our use of AI, and other emerging technologies in various aspects of our operations, including customer service, internal processes, risk management, and data analytics.
Removed
Our defense enterprise risk management framework includes processes and procedures used to identify, assess, mitigate, and monitor the risks faced by the Company, including cybersecurity risk.
Added
Furthermore, our vendors or third parties may develop or incorporate AI technology in certain business processes, services or products. While these technologies may enhance efficiency and decision-making, their adoption presents risks and challenges. AI systems may produce inaccurate, biased or inconsistent outputs, including as a result of flawed data, model limitations or inadequate oversight.
Removed
Within the three lines of defense framework for cybersecurity risk, the first line of defense is provided by the Information Technology department and business lines, which are responsible for the design and execution of information security practices and risk mitigation.
Added
Reliance on such outputs could lead to operational errors, customer harm, regulatory scrutiny or legal liability. In addition, the use of AI may raise concerns related to data privacy, intellectual property, cybersecurity and model governance, particularly where third-party vendors or externally developed tools are involved. The legal and regulatory environment governing AI remains rapidly evolving.
Removed
The second line of defense is provided by the Enterprise Risk Management department (led by the Company’s Independent Chief Risk Officer (“CRO”)) and the CISO (reporting to the CIO). The second line of defense seeks to identify, assess, and monitor cyber risk, in collaboration with our first line, while maintaining independence in the oversight of our information security program.
Added
Federal and state regulators may introduce new rules, supervisory expectations or guidance regarding transparency, consumer protection, fair lending, model risk management, data usage or vendor oversight. Compliance with these evolving requirements could increase costs, restrict our use of certain technologies or require modifications to existing processes or systems.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

0 edited+17 added−2 removed0 unchanged
Removed
Item 1C. Cybersecurity 33 Item 2. Properties 35 Item 3. Legal Proceedings 36 Item 4. Mine Safety Disclosures 36 PART II Item 5. Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 37 Item 6 [Reserved] 38 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 39 Item 7A.
Added
ITEM 1C. CYBERSECURITY As a publicly-traded financial institution, we are subject to various cybersecurity risks that could adversely affect our business, financial condition, results of operations, and reputation, including cyber-attacks against us or our critical third-party service providers.
Removed
Quantitative and Qualitative Disclosures about Market Risk 66 Item 8. Financial Statements and Supplementary Data 69
Added
Cyber-attackers may attempt to gain unauthorized access to our systems for purposes such as misappropriation of Company assets, accessing confidential or sensitive customer non-public information, corrupting or destroying data, disrupting operations, or making ransom demands.
Added
Cybersecurity threats continue to evolve in both frequency and sophistication as financial institutions increasingly rely on digital channels, remote connectivity, cloud-based services, and third-party technology providers. While we devote significant resources to managing these risks, no cybersecurity controls or procedures can provide absolute assurance that a cybersecurity incident will not occur.
Added
Our information security program is designed to preserve the confidentiality, integrity, and availability of Company confidential information, customer non-public personal information, and other data maintained on our systems, as well as to secure our interfaces with critical third-party service providers.
Added
The program is risk-based and tailored to the size, complexity, and risk profile of the Company and is integrated into the Company’s broader enterprise risk management framework. The cybersecurity program includes administrative, technical, and physical safeguards intended to identify, assess, manage, and monitor cybersecurity risks across the organization.
Added
Risk assessments are conducted periodically and in connection with material technology changes, new products, and third-party relationships. Identified risks are prioritized and addressed through remediation activities, risk acceptance, or other mitigation strategies consistent with the Company’s risk appetite.
Added
Additionally, the Company continually works to align its policies and practices with industry-accepted information security practices as provided by the Cyber Risk Institute, Payment Card Industry Data Security Standards, and other applicable standards, laws, and regulations. Cybersecurity risk considerations are incorporated into strategic planning, technology initiatives, and day-to-day business operations.
Added
The Company maintains written policies, standards, and procedures designed to address evolving cybersecurity threats and regulatory expectations. These policies define roles and responsibilities for employees and contractors and are supported by ongoing training and awareness activities.
Added
The Company utilizes a combination of internal resources and external service providers to support elements of its cybersecurity program, including security monitoring, threat intelligence, vulnerability management, penetration testing, social engineering testing, and incident response preparedness. These activities are designed to enhance the Company’s ability to prevent, detect, and respond to cybersecurity threats in a timely manner.
Added
The Board of Directors is ultimately responsible for the oversight of cybersecurity risk management. The Board, primarily through its Risk Committee, receives periodic updates from management regarding the status and effectiveness of the Company’s information security program, key risk indicators, emerging cybersecurity threats, and significant risk management initiatives. The Board also receives cybersecurity education to support informed oversight.
Added
Management is responsible for implementing and maintaining the Company’s cybersecurity risk management program. Cybersecurity oversight is conducted through established management 36 committees comprised of senior executives with risk management, technology, and information security expertise. These committees provide direction, review program performance and risk metrics, approve key initiatives, and escalate significant matters to senior management and the Board, as appropriate.
Added
The Company employs a Chief Information Security Officer who is responsible for administering and executing the Company’s written information security program and coordinating cybersecurity risk management activities across the organization. The Chief Information Security Officer works closely with other members of management to align cybersecurity practices with business objectives and regulatory requirements.
Added
The Company maintains a cybersecurity incident response program designed to guide the assessment of and response to cybersecurity incidents. The program includes defined procedures for incident identification, investigation, documentation, escalation, and communication. Incident response plans are periodically reviewed and tested to promote preparedness and coordination across the organization.
Added
In the event of a significant cybersecurity incident, senior management and the Board are informed in accordance with established escalation protocols. The Company also evaluates whether incidents require notification to customers, regulators, or other stakeholders, as applicable, based on the nature and severity of the incident and applicable legal and regulatory requirements.
Added
The Company manages cybersecurity risks associated with third-party service providers through a third-party risk management program that includes risk-based due diligence, contractual security requirements, and ongoing monitoring. The Company seeks to obtain appropriate assurances regarding third-party security controls and incident notification obligations and monitors third-party performance throughout the lifecycle of the relationship.
Added
While the Company believes that its cybersecurity risk management practices are appropriate for its business and risk profile, cybersecurity threats remain a persistent and evolving risk. The increasing reliance on technology, interconnected systems, and third-party providers heightens the potential impact of a cybersecurity incident.
Added
As of the date of this filing, the Company is not aware of any cybersecurity incidents that have materially affected, or are reasonably likely to materially affect, the Company's business strategy, results of operations, or financial condition. For additional discussion of cybersecurity-related risks, see Item 1A. “Risk Factors.” 37

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed2 unchanged
Biggest changeTruman Parkway Suite 100 Annapolis, MD 21401 Leased 11/30/2026 Mortgage Office 1400 W Street, NW Suite 170 Washington, DC 20009 Leased 2/28/2033 Commercial Branch 1900 Campus Commons Drive Suite 130 Reston, VA 20191 Leased 1/31/2032 Commercial Branch, Mortgage Office, and OpenSky ™ Headquarters 1104 Kenilworth Drive Suite 210 Towson, MD 21204 Leased 1/31/2027 LPO 550 South Andrews Avenue Suite 640 Fort Lauderdale, FL 33301 Leased 8/31/2029 Commercial Branch 8450 Falls of Neuse Road Suite 204 Raleigh, NC 27615 Owned West Town Bank & Trust Operations Headquarters 7820 West 26th Street North Riverside, IL 60546 Owned Commercial Branch 320 North Meridian Street Suite 212 Indianapolis, IN 46204 Leased 6/30/2026 Windsor Advantage Office 444 North Wells Street Suites 205 & 206 Chicago, IL 60654 Leased 7/31/2030 Windsor Advantage Office 997 Morrison Drive Suite 503 Charleston, SC 29403 Leased 6/30/2027 Windsor Advantage Office 35
Biggest changeTruman Parkway Suite 100 Annapolis, MD 21401 Leased 11/30/2026 Mortgage Office 1400 W Street, NW Suite 170 Washington, DC 20009 Leased 2/28/2033 Commercial Branch 1900 Campus Commons Drive Suite 130 Reston, VA 20191 Leased 1/31/2032 Commercial Branch, LPO, and OpenSky ™ Headquarters 1104 Kenilworth Drive Suite 210 Towson, MD 21204 Leased 1/31/2027 LPO 550 South Andrews Avenue Suite 640 Fort Lauderdale, FL 33301 Leased 8/31/2029 Commercial Branch 8450 Falls of Neuse Road Suite 204 Raleigh, NC 27615 Owned Commercial Branch and Office 7820 West 26th Street North Riverside, IL 60546 Owned Commercial Branch 320 North Meridian Street Suite 212 Indianapolis, IN 46204 Leased 6/30/2029 Windsor Advantage TM Office 444 North Wells Street Suites 205 & 206 Chicago, IL 60654 Leased 7/31/2030 Windsor Advantage TM Office 997 Morrison Drive Suite 503 Charleston, SC 29403 Leased 6/30/2027 Windsor Advantage TM Office 38
Suites 600 & 700 Rockville, MD 20850 Leased 12/31/2026 Corporate 6711 Columbia Gateway Drive Suite 170 Columbia, MD 21046 Leased 11/30/2027 Commercial Branch/LPO 110 Gibraltar Road Suite 130 Horsham, PA 19044 Leased 8/31/2026 OpenSky ™ Operations 185 Harry S.
Suites 600 & 700 Rockville, MD 20850 Leased 5/31/2030 Corporate 6711 Columbia Gateway Drive Suite 170 Columbia, MD 21046 Leased 11/30/2027 Commercial Branch/LPO 110 Gibraltar Road Suite 130 Horsham, PA 19044 Leased 10/31/2029 OpenSky ™ Operations 185 Harry S.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

5 edited+4 added−3 removed4 unchanged
Biggest changeUnder the program, the Company is authorized to repurchase up to $10.0 million of its outstanding common stock, or 500,000 shares of Common Stock, par value $0.01 per share (“Common Stock”). On April 13, 2023, the Company announced approval of up to an additional $5.0 million or 175,000 shares of Common Stock incremental to the July 2022 announcement.
Biggest changeRepurchases of Common Stock On February 21, 2025, the Company announced a stock repurchase program under which the Company was authorized to repurchase up to $15 million of its Common Stock, par value $0.01 per share (“Common Stock”), or an aggregate of 483,559 shares of Common Stock. The stock repurchase program expired on February 28, 2026.
As of March 13, 2025, there were approximately 244 holders of record of our common stock. Dividends Commencing with the third quarter of 2021, shareholders have received quarterly cash dividends on shares of common stock. Dividends paid in 2024 totaled $5.3 million.
As of March 12, 2026, there were approximately 314 holders of record of our common stock. Dividends Commencing with the third quarter of 2021, shareholders have received quarterly cash dividends on shares of common stock. Dividends paid in 2025 totaled $7.3 million.
Equity Compensation Plan Information The following table provides information as of December 31, 2024, with respect to options and restricted stock units (“RSUs”) outstanding and shares available for future awards under the Company’s active equity incentive plans. 37 Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (excluding securities reflected in column (a)) (a) (b) (c) Equity compensation plans approved by security holders: Capital Bancorp, Inc.
Plan Category Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights 1 Number of Securities Remaining Available for Future Issuance under Equity Compensation Plans (excluding securities reflected in column (a)) (a) (b) (c) Equity compensation plans approved by security holders: Capital Bancorp, Inc.
Various statutory provisions restrict the amount of dividends that the Bank can pay without regulatory approval. Repurchases of Common Stock On July 25, 2022, the Company announced a stock repurchase program.
Various statutory provisions restrict the amount of dividends that the Bank can pay without regulatory approval.
Amended and Restated 2017 Stock and Incentive Compensation Plan 614,360 $ 21.02 446,794 Equity compensation plans not approved by security holders — — — Total 614,360 $ 21.02 446,794 Unregistered Sales of Common Stock There were no unregistered sales of the Company’s stock during the year ended December 31, 2024.
Unregistered Sales of Common Stock There were no unregistered sales of the Company’s stock during the year ended December 31, 2025.
Removed
In connection with the acquisition of IFH, the Company temporarily suspended repurchases under its stock program during the first quarter of 2024. The Company repurchased 543,215 shares of Common Stock under the stock repurchase program, which expired on December 31, 2024.
Added
Although the Company’s stock repurchase program expired on February 28, 2026, the board of directors may, from time to time, consider the adoption of additional stock repurchase programs. Any such program would be dependent on market conditions, the Company’s financial condition, capital levels, regulatory restrictions, and other factors deemed appropriate by the board.
Removed
During the three months ended December 31, 2024, the Company did not repurchase any Common Stock under the stock repurchase program. On February 21, 2025, the Company announced a new stock repurchase program.
Added
During the year ended December 31, 2025, the Company repurchased 419,643 shares of Common Stock under the stock repurchase program at a weighted-average price of $27.79 per share, totaling $11.7 million. During the three months ended December 31, 2025, the Company repurchased Common Stock under the stock repurchase program as reflected in the following table.
Removed
Under the new stock repurchase program, the Company is authorized to repurchase up to $15 million of its Common Stock, or an aggregate of 483,559 shares of Common Stock. The new stock repurchase program will expire on February 28, 2026, but may be limited or terminated at any time without prior notice.
Added
Period Total Number of Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 1, 2025 to October 31, 2025 64,358 $ 28.59 179,713 $ 10,058,066 November 1, 2025 to November 30, 2025 132,872 27.56 312,585 6,395,732 December 1, 2025 to December 31, 2025 107,058 28.54 419,643 3,340,197 40 Equity Compensation Plan Information The following table provides information as of December 31, 2025, with respect to non-qualified and incentive stock options and restricted stock units (“RSUs”) outstanding and shares available for future awards under the Company’s active equity incentive plans.
Added
Amended and Restated 2017 Stock and Incentive Compensation Plan 609,828 $ 22.40 810,829 Equity compensation plans not approved by security holders — — — Total 609,828 $ 22.40 810,829 _______________ (1) Column (b) includes RSUs that can be exercised for no consideration. Excluding RSUs, the weighted-average exercise price would have been $25.21.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

151 edited+43 added−26 removed59 unchanged
Biggest changeEarnings Metrics, as Adjusted Year Ended (in thousands, except per share data) December 31, 2024 December 31, 2023 Net Income $ 30,972 $ 35,871 Add: Merger-Related Expenses, net of tax 3,308 — Add: Non-Recurring Equity and Debt Investment Write-Down 2,620 — Add: IFH Non-PCD ACL Provision, Net of Tax 3,169 — Net Income, as Adjusted $ 40,069 $ 35,871 Weighted Average Common Shares - Diluted 14,640 14,081 Earnings per Share - Diluted $ 2.12 $ 2.55 Earnings per share - Diluted, as Adjusted $ 2.74 $ 2.55 Average Assets $ 2,554,049 $ 2,188,299 Return on Average Assets 1.21 % 1.64 % Return on Average Assets, as Adjusted 1.57 % 1.64 % Average Equity $ 287,420 $ 240,519 Return on Average Equity 10.78 % 14.91 % Return on Average Equity, as Adjusted 13.94 % 14.91 % Net Interest Income (a) $ 154,746 $ 141,526 Noninterest Income 31,410 24,975 Total Revenue $ 186,156 $ 166,501 Noninterest Expense $ 126,219 $ 110,767 Efficiency Ratio (1) 67.80 % 66.53 % Noninterest Income $ 31,410 $ 24,975 Add: Non-Recurring Equity and Debt Investment Write-Down 2,620 — Noninterest Income, as Adjusted (b) $ 34,030 $ 24,975 Total Revenue, as Adjusted (a) + (b) $ 188,776 $ 166,501 Noninterest Expense $ 126,219 $ 110,767 Less: Merger-Related Expenses 3,930 — Noninterest Expense, as Adjusted $ 122,289 $ 110,767 Efficiency Ratio, as Adjusted (1) 64.78 % 66.53 % _______________ (1) The efficiency ratio is calculated by dividing noninterest expense by total revenue (net interest income plus noninterest income). 63 Net Interest Margin, as Adjusted Year Ended (in thousands) December 31, 2024 December 31, 2023 Net Interest Income $ 154,746 $ 141,526 Less: Credit Card Loan Income 59,821 61,096 Net Interest Income, as Adjusted $ 94,925 $ 80,430 Average Interest Earning Assets 2,487,607 2,145,209 Less: Average Credit Card Loans 115,581 114,450 Total Average Interest Earning Assets, as Adjusted $ 2,372,026 $ 2,030,759 Net Interest Margin, as Adjusted 4.00% 3.96% Portfolio Loans Receivable Yield, as Adjusted Year Ended (in thousands) December 31, 2024 December 31, 2023 Portfolio Loans Receivable Interest Income $ 202,346 $ 174,378 Less: Credit Card Loan Income 59,821 61,096 Portfolio Loans Receivable Interest Income, as Adjusted $ 142,525 $ 113,282 Average Portfolio Loans Receivable 2,142,638 1,816,968 Less: Average Credit Card Loans 115,581 114,450 Total Average Portfolio Loans Receivable, as Adjusted $ 2,027,057 $ 1,702,518 Portfolio Loans Receivable Yield, as Adjusted 7.03% 6.65% Pre-tax, Pre-Provision Net Revenue ("PPNR") Year Ended (in thousands) December 31, 2024 December 31, 2023 Net Income $ 30,972 $ 35,871 Add: Income Tax Expense 10,860 10,354 Add: Provision for Credit Losses 17,720 9,610 Add: Provision for (Release of) Credit Losses on Unfunded Commitments 385 (101) PPNR $ 59,937 $ 55,734 PPNR, as Adjusted Year Ended (in thousands) December 31, 2024 December 31, 2023 Net Income $ 30,972 $ 35,871 Add: Income Tax Expense 10,860 10,354 Add: Provision for Credit Losses 17,720 9,610 Add: Provision for (Release of) Credit Losses on Unfunded Commitments 385 (101) Add: Merger-Related Expenses 3,930 — Add: Non-Recurring Equity and Debt Investment Write-Down 2,620 — PPNR, as Adjusted $ 66,487 $ 55,734 Allowance for Credit Losses to Total Portfolio Loans Year Ended (in thousands) December 31, 2024 December 31, 2023 Allowance for Credit Losses $ 48,652 $ 28,610 Total Portfolio Loans $ 2,630,163 $ 1,903,288 Allowance for Credit Losses to Total Portfolio Loans 1.85% 1.50% 64 Nonperforming Assets to Total Assets Year Ended (in thousands) December 31, 2024 December 31, 2023 Total Nonperforming Assets $ 30,241 $ 16,042 Total Assets $ 3,206,911 $ 2,226,176 Nonperforming Assets to Total Assets 0.94% 0.72% Nonperforming Loans to Total Portfolio Loans Year Ended (in thousands) December 31, 2024 December 31, 2023 Total Nonperforming Loans $ 30,241 $ 16,042 Total Portfolio Loans $ 2,630,163 $ 1,903,288 Nonperforming Loans to Total Portfolio Loans 1.15% 0.84% Net Charge-Offs to Average Portfolio Loans Year Ended (in thousands) December 31, 2024 December 31, 2023 Total Net Charge-Offs $ 9,003 $ 8,473 Total Average Portfolio Loans $ 2,142,638 $ 1,816,968 Net Charge-Offs to Average Portfolio Loans 0.42% 0.47% Tangible Book Value per Share Year Ended (in thousands, except share and per share data) December 31, 2024 December 31, 2023 Total Stockholders' Equity $ 355,139 $ 254,860 Less: Preferred Equity — — Less: Intangible Assets 42,454 — Tangible Common Equity $ 312,685 $ 254,860 Period End Shares Outstanding 16,662,626 13,922,532 Tangible Book Value per Share $ 18.77 $ 18.31 Return on Average Tangible Common Equity Year Ended (in thousands) December 31, 2024 December 31, 2023 Net Income $ 30,972 $ 35,871 Add: Intangible Amortization, Net of Tax 198 — Net Tangible Income $ 31,170 $ 35,871 Average Equity 287,420 240,519 Less: Average Intangible Assets 6,951 — Net Average Tangible Common Equity $ 280,469 $ 240,519 Return on Average Equity 10.78 % 14.91 % Return on Average Tangible Common Equity 11.11 % 14.91 % Core Return on Average Tangible Common Equity Year Ended (in thousands) December 31, 2024 December 31, 2023 Net Income, as Adjusted $ 40,069 $ 35,871 Add: Intangible Amortization, Net of Tax 198 — Net Tangible Income, as Adjusted $ 40,267 $ 35,871 Core Return on Average Equity, as Adjusted 14.01 % 14.91 % Core Return on Average Tangible Common Equity, as Adjusted 14.36 % 14.91 % 65
Biggest changeCommercial Bank Net Interest Margin Year Ended (in thousands) December 31, 2025 December 31, 2024 Commercial Bank Net Interest Income $ 134,619 $ 92,756 Average Interest Earning Assets 3,215,483 2,487,607 Less: Average Credit Card Loans 139,344 124,863 Average Commercial Bank Interest Earning Assets $ 3,076,139 $ 2,362,744 Commercial Bank Net Interest Margin 4.38% 3.93% 68 Commercial Bank Portfolio Loans Receivable Yield Year Ended (in thousands) December 31, 2025 December 31, 2024 Portfolio Loans Receivable Interest Income $ 244,380 $ 202,346 Less: Credit Card Loan Income 59,848 59,821 Commercial Bank Portfolio Loans Receivable Interest Income $ 184,532 $ 142,525 Average Portfolio Loans Receivable 2,765,758 2,142,638 Less: Average Credit Card Loans 125,824 115,581 Total Commercial Bank Average Portfolio Loans Receivable $ 2,639,934 $ 2,027,057 Commercial Bank Portfolio Loans Receivable Yield 6.99% 7.03% Pre-tax, Pre-Provision Net Revenue ("PPNR") Year Ended (in thousands) December 31, 2025 December 31, 2024 Net Income $ 57,170 $ 30,972 Add: Income Tax Expense 17,774 10,860 Add: Provision for Credit Losses 14,965 17,720 Add: Provision for Credit Losses on Unfunded Commitments 188 385 PPNR $ 90,097 $ 59,937 Core PPNR Year Ended (in thousands) December 31, 2025 December 31, 2024 Net Income $ 57,170 $ 30,972 Add: Income Tax Expense 17,774 10,860 Add: Provision for Credit Losses 14,965 17,720 Add: Provision for Credit Losses on Unfunded Commitments 188 385 Deduct: Income from the Call of Brokered Time Deposits (4,618) — Add: Merger-Related Expenses 3,361 3,930 Add: Non-Recurring Equity and Debt Investment Write-Down — 2,620 Core PPNR $ 88,840 $ 66,487 Allowance for Credit Losses to Total Portfolio Loans (in thousands) December 31, 2025 December 31, 2024 Allowance for Credit Losses $ 54,660 $ 48,652 Total Portfolio Loans $ 2,959,457 $ 2,630,163 Allowance for Credit Losses to Total Portfolio Loans 1.85% 1.85% 69 Commercial Bank Allowance for Credit Losses to Commercial Bank Portfolio Loans (in thousands) December 31, 2025 December 31, 2024 Allowance for Credit Losses $ 54,660 $ 48,652 Less: Credit Card Allowance for Credit Losses 8,232 6,402 Commercial Bank Allowance for Credit Losses $ 46,428 42,250 Total Portfolio Loans 2,959,457 2,630,163 Less: Gross Credit Card Loans 137,905 122,928 Commercial Bank Portfolio Loans $ 2,821,552 2,507,235 Commercial Bank Allowance for Credit Losses to Total Portfolio Loans 1.65% 1.70% Nonperforming Assets to Total Assets (in thousands) December 31, 2025 December 31, 2024 Total Nonperforming Assets $ 58,276 $ 30,241 Total Assets $ 3,606,207 $ 3,206,911 Nonperforming Assets to Total Assets 1.62% 0.94% Nonperforming Loans to Total Portfolio Loans (in thousands) December 31, 2025 December 31, 2024 Total Nonperforming Loans $ 54,421 $ 30,241 Total Portfolio Loans $ 2,959,457 $ 2,630,163 Nonperforming Loans to Total Portfolio Loans 1.84% 1.15% Net Charge-Offs to Average Portfolio Loans Year Ended (in thousands) December 31, 2025 December 31, 2024 Total Net Charge-Offs $ 12,381 $ 9,003 Total Average Portfolio Loans $ 2,765,758 $ 2,142,638 Net Charge-Offs to Average Portfolio Loans 0.45% 0.42% Tangible Book Value per Share (in thousands, except share and per share data) December 31, 2025 December 31, 2024 Total Stockholders' Equity $ 401,757 $ 355,139 Less: Intangible Assets 40,740 36,943 Tangible Common Equity $ 361,017 $ 318,196 Period End Shares Outstanding 16,373,288 16,662,626 Tangible Book Value per Share $ 22.05 $ 19.10 70 Return on Average Tangible Common Equity Year Ended (in thousands) December 31, 2025 December 31, 2024 Net Income $ 57,170 $ 30,972 Add: Intangible Amortization, Net of Tax 798 198 Net Tangible Income $ 57,968 $ 31,170 Average Equity 377,741 287,420 Less: Average Intangible Assets 38,763 5,754 Net Average Tangible Common Equity $ 338,978 $ 281,666 Return on Average Equity 15.13 % 10.78 % Return on Average Tangible Common Equity 17.10 % 11.07 % Core Return on Average Tangible Common Equity Year Ended (in thousands) December 31, 2025 December 31, 2024 Core Net Income $ 56,290 $ 40,069 Add: Intangible Amortization, Net of Tax 798 198 Core Net Tangible Income $ 57,088 $ 40,267 Core Return on Average Tangible Common Equity 16.84 % 14.30 % 71
Construction loans are offered within the Company’s Washington, D.C. and Baltimore, Maryland metropolitan operating areas to builders, primarily for the construction of single-family homes and condominium and townhouse conversions or renovations and, to a lesser extent, to individuals. Construction loans typically have terms of 12 to 18 months.
Construction loans are offered primarily within the Company’s Washington, D.C. and Baltimore, Maryland metropolitan operating areas to builders, primarily for the construction of single-family homes and condominium and townhouse conversions or renovations and, to a lesser extent, to individuals. Construction loans typically have terms of 12 to 18 months.
In addition, we believe our non-GAAP results in any given reporting period reflect our on-going financial performance in that period and, accordingly, are useful to consider in addition to our GAAP financial results. We further believe the presentation of non-GAAP results increases comparability of period-to-period results.
In addition, we believe our non-GAAP results in any given reporting period reflect our on-going financial performance in that period and, accordingly, are useful to consider in addition to our GAAP financial results. We further believe the presentation of non-GAAP results increases comparability of period-to-period results.
Other companies may use similarly titled non-GAAP financial measures that may be calculated differently from the way we calculate such measures. Accordingly, our non-GAAP financial measures may not be comparable to similar measures used by such companies.
Other companies may use similarly titled non-GAAP financial measures that may be calculated differently from the way we calculate such measures. Accordingly, our non-GAAP financial measures may not be comparable to similar measures used by such companies.
Critical elements of our liquidity risk management include: corporate governance consisting of oversight by the board of directors and active involvement by management; strategies, policies, procedures, and limits used to manage and mitigate liquidity risk; liquidity risk measurement and monitoring systems (including assessments of the current and prospective cash flows or sources and uses of funds) that are believed to be commensurate with the 57 complexity and business activities of the Bank; active management of intraday liquidity and collateral; a diverse mix of existing and potential future funding sources; holding liquid marketable securities that can be used to meet liquidity needs in situations of stress; contingency funding plans that address potential adverse liquidity events and emergency cash flow requirements; and internal controls and internal audit processes believed to be sufficient to assure the adequacy of the institution’s liquidity risk management process.
Critical elements of our liquidity risk management include: corporate governance consisting of oversight by the board of directors and active involvement by management; strategies, policies, procedures and limits used to manage and mitigate liquidity risk; liquidity risk measurement and monitoring systems (including assessments of the current and prospective cash flows or sources and uses of funds) that are believed to be commensurate with the complexity and business activities of the Bank; active management of intraday liquidity and collateral; a diverse mix of existing and potential future funding sources; holding liquid marketable securities that can be used to meet liquidity needs in situations of stress; contingency funding plans that address potential adverse liquidity events and emergency cash flow requirements; and internal controls and internal audit processes believed to be sufficient to assure the adequacy of the institution’s liquidity risk management process.
The Company provides additional information on its ACL in “Note 1 - Nature of Business and Basis of Presentation” in the “Notes to the Consolidated Financial Statements” contained in Part II, Item 8 "Financial Statements and Supplementary Data.” We account for business combinations under ASC 805, Business Combinations using the acquisition method of accounting and record the identifiable assets acquired, liabilities assumed and consideration 41 paid at fair value at the acquisition date.
The Company provides additional information on its ACL in “Note 1 - Nature of Business and Basis of Presentation” in the “Notes to the Consolidated Financial Statements” contained in Part II, Item 8 "Financial Statements and Supplementary Data.” We account for business combinations under ASC 805, Business Combinations using the acquisition method of accounting and record the identifiable assets acquired, liabilities assumed and consideration paid at fair value at the acquisition date.
Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory 58 accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators.
Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of its assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. The capital amounts and classifications are also subject to qualitative judgments by the regulators.
These loans are primarily made based on the identified cash flows of the borrower and secondarily, on the underlying collateral provided by the borrower. Most commercial business loans are secured by a lien on general business assets including, among other things, available real estate, accounts receivable, promissory notes, inventory and equipment.
These loans are primarily made based on the identified cash flows of the borrower and secondarily, on the underlying collateral provided by the borrower. Most commercial business loans are secured by a lien on general business assets including, among other things, available real estate, accounts receivable, promissory notes, inventory and/or equipment.
Government entities or agencies, is as follows: Corporate Securities – There have been no payment defaults on any of the Company’s holdings of corporate debt securities. There are 5 securities all of which are subordinated debt of other financial institutions with face amounts ranging from $0.5 million to $2 million.
Government entities or agencies, is as follows: Corporate Securities – There have been no payment defaults on any of the Company’s holdings of corporate debt securities. There are three securities all of which are subordinated debt of other financial institutions with face amounts ranging from $0.5 million to $2 million.
The capital levels required to be maintained by the Company and Bank may be impacted as a result of the Bank’s concentrations in commercial real estate loans. See “Risks Related to Our Operations and the Regulation of Our Industry” in Part I, Item 1A - Risk Factors.
The capital levels required to be maintained by the Company and Bank may be impacted as a result of the Bank’s concentrations in 64 commercial real estate loans. See “Risks Related to Our Operations and the Regulation of Our Industry” in Part I, Item 1A. - Risk Factors.
The classifications of loans reflect 52 a judgment about the risks of default and loss associated with each loan. Credit ratings are reviewed regularly and then adjusted regularly to reflect the degree of risk and loss that our management believes to be appropriate for each credit.
The classifications of loans reflect a judgment about the risks of default and loss associated with each loan. Credit ratings are reviewed regularly and then adjusted regularly to reflect the degree of risk and loss that our management believes to be appropriate for each credit.
The Problem Loan Status Report provides a detailed summary of the borrower and guarantor status, loan accrual status, collateral evaluation and includes a description of the planned collection and administration program designed to mitigate the Bank’s risk of loss and remove the loan from problem status.
The Problem Loan Status Report provides a detailed summary of the borrower and guarantor status, loan accrual status, collateral evaluation and includes a description of the planned collection and administration program designed to mitigate the Bank’s risk of loss and remove 58 the loan from problem status.
See additional discussion regarding the Company’s ACL and reserve for unfunded commitments credit exposures at December 31, 2024 in “Financial Condition - Allowance for Credit Losses.” Noninterest Income A primary source of recurring noninterest income are credit card fees, such as interchange fees and statement fees, mortgage banking revenue and Windsor Advantage fee income in connection with its servicing, processing and packaging of SBA and USDA loans for its financial institution clients.
See additional discussion regarding the Company’s ACL and reserve for unfunded commitments credit exposures at December 31, 2025 in “Financial Condition - Allowance for Credit Losses.” Noninterest Income A primary source of recurring noninterest income are credit card fees, such as interchange fees and statement fees, Windsor Advantage™ fee income in connection with its servicing, processing and packaging of SBA and USDA loans for its financial institution clients, and mortgage banking revenue.
Although we believe we have established our ACL in accordance with GAAP and that the ACL is currently adequate to provide for known and inherent losses in the portfolio at all times shown above, future provisions for credit losses will be subject to ongoing evaluations of the risks in our loan portfolio. 54 The following table shows the allocation of the ACL among loan categories as of the dates indicated.
Although we believe we have established our ACL in accordance with GAAP and that the ACL is currently adequate to provide for known and inherent losses in the portfolio at all times shown above, future provisions for credit losses will be subject to ongoing evaluations of the risks in our loan portfolio. 60 The following table shows the allocation of the ACL among loan categories as of the dates indicated.
Our lending activities, outside of credit cards, are principally directed to our market area consisting of the Washington, D.C. and Baltimore, Maryland metropolitan areas. 50 Residential Real Estate Loans . One-to-four family mortgage loans are primarily secured by owner-occupied primary and secondary residences and, to a lesser extent, investor-owned residences.
Our lending activities, outside of credit cards, are principally directed to our market area consisting of the Washington, D.C. and Baltimore, Maryland metropolitan areas. 53 Residential Real Estate Loans . One-to-four family mortgage loans are primarily secured by owner-occupied primary and secondary residences and, to a lesser extent, investor-owned residences.
We believe the credit risk associated with issuing letters of credit is substantially the same as the risk involved in extending loan facilities to our customers. 61 We seek to minimize our exposure to loss under letters of credit and credit commitments by subjecting them to the same credit approval and monitoring procedures as we do for on-balance sheet instruments.
We believe the credit risk associated with issuing letters of credit is substantially the same as the risk involved in extending loan facilities to our customers. 66 We seek to minimize our exposure to loss under letters of credit and credit commitments by subjecting them to the same credit approval and monitoring procedures as we do for on-balance sheet instruments.
Personal guaranties from the borrower or other principal are generally obtained. Credit Cards . Through the OpenSky ™ credit card division, the Company offers secured, partially secured, and unsecured credit cards on a nationwide basis to under-banked populations and those 51 looking to rebuild their credit scores through a fully digital and mobile platform.
Personal guaranties from the borrower or other principal are generally obtained. Credit Cards . Through the OpenSky ™ credit card division, the Company offers secured, partially secured, and unsecured credit cards on a nationwide basis to under-banked populations and those 54 looking to rebuild their credit scores through a fully digital and mobile platform.
To the extent unrealized losses on investment securities available-for-sale result from credit losses, unrealized losses are recorded as a charge against earnings. The investment securities section of the MD&A and Notes 1 and 3 to the consolidated financial statements provide additional information concerning management’s evaluation of investment securities available-for-sale for credit losses at December 31, 2024.
To the extent unrealized losses on investment securities available-for-sale result from credit losses, unrealized losses are recorded as a charge against earnings. The investment securities section of the MD&A and Notes 1 and 3 to the consolidated financial statements provide additional information concerning management’s evaluation of investment securities available-for-sale at December 31, 2025.
Non-GAAP Financial Measures This document contains non-GAAP financial measures denoted throughout our MD&A by reference to “non-GAAP.” We believe these non-GAAP financial measures provide useful information to investors because they are used by management to evaluate our operating performance and to make day-to-day operating decisions.
Non-GAAP Financial Measures This report contains non-GAAP financial measures denoted throughout our MD&A by reference to “non-GAAP.” We believe these non-GAAP financial measures provide useful information to investors because they are used by management to evaluate our operating performance and to make day-to-day operating decisions.
Net interest spread is the difference between average interest rates earned on interest earning assets and average interest rates paid on interest-bearing liabilities. The table below presents the average balances and weighted average rates of the major categories of the Company’s assets, liabilities and stockholders’ equity for the years ended December 31, 2024 and 2023.
Net interest spread is the difference between average interest rates earned on interest earning assets and average interest rates paid on interest-bearing liabilities. The table below presents the average balances and weighted average rates of the major categories of the Company’s assets, liabilities and stockholders’ equity for the years ended December 31, 2025 and 2024.
There were no outstanding balances on the lines of credit from correspondent banks at December 31, 2024. Liquidity Liquidity is defined as the Bank’s capacity to meet its cash and collateral obligations at a reasonable cost.
There were no outstanding balances on the lines of credit from correspondent banks at December 31, 2025. Liquidity Liquidity is defined as the Bank’s capacity to meet its cash and collateral obligations at a reasonable cost.
The following tables summarize the contractual maturities, without consideration of call features or pre-refunding dates, and weighted-average yields of investment securities at December 31, 2024 and the amortized cost and carrying value of those securities as of the indicated dates.
The following tables summarize the contractual maturities, without consideration of call features or pre-refunding dates and weighted-average yields, of investment securities at December 31, 2025 and the amortized cost and carrying value of those securities as of the indicated dates.
As of December 31, 2024, the Company and the Bank were in compliance with all applicable regulatory capital requirements to which it was subject, and the Bank was classified as “well capitalized” for purposes of the prompt corrective action regulations.
As of December 31, 2025, the Company and the Bank were in compliance with all applicable regulatory capital requirements to which it was subject, and the Bank was classified as “well capitalized” for purposes of the prompt corrective action regulations.
Historically, the Bank has enjoyed a high-quality loan portfolio with relatively low levels of net charge-offs and low delinquency rates. The maintenance of a high-quality portfolio will continue to be a priority.
Historically, the Bank has experienced a high-quality loan portfolio with relatively low levels of net charge-offs and delinquency rates. The maintenance of a high-quality portfolio will continue to be a priority.
Our liquidity monitoring and management consider both present and future demands for and sources of liquidity. The following table of contractual commitments focuses only on future obligations and summarizes our contractual obligations as of December 31, 2024.
Our liquidity monitoring and management consider both present and future demands for and sources of liquidity. The following table of contractual commitments focuses only on future obligations and summarizes our contractual obligations as of December 31, 2025.
Further, management reviewed the Company’s holdings as of December 31, 2024 and concluded there were no credit-related declines in fair value. Additional information related to the types of securities held at December 31, 2024, other than securities issued or guaranteed by U.S.
Further, management reviewed the Company’s holdings as of December 31, 2025 and concluded that there were no credit-related declines in fair value. Additional information related to the types of securities held at December 31, 2025, other than securities issued or guaranteed by U.S.
The Company has an experienced credit administration function, which provides independent analysis of credit requests and the management of problem credits. The credit department has developed and implemented analytical procedures for evaluating credit requests, has refined the Company’s risk rating system, and continually endeavors to adapt and enhance the monitoring of the loan portfolio.
The Company has an experienced credit administration function, which provides independent analysis of credit requests and the management of problem credits. The credit department has developed and implemented analytical procedures for evaluating credit requests, administers the Company’s risk rating system, and endeavors to adapt and enhance the monitoring of the loan portfolio.
Unsecured balances were $42.4 million and $30.8 million, respectively, at the same dates. Other Consumer Loans . To a limited extent and typically as an accommodation to existing customers, personal consumer loans, such as term loans, car loans and boat loans are offered. Purchased Credit Deterioration .
Unsecured balances were $61.4 million and $42.4 million, respectively, at the same dates. Other Consumer Loans . To a limited extent and typically as an accommodation to existing customers, personal consumer loans, such as term loans, car loans and boat loans are offered. Purchased Credit Deterioration .
The Company uses several indicators of capital strength. The most commonly used measure is common equity to total assets (computed as equity divided by total assets), which was 11.07% at December 31, 2024 and 11.45% at December 31, 2023. The Bank is subject to various regulatory capital requirements administered by the federal banking agencies.
The Company uses several indicators of capital strength. The most commonly used measure is common equity to total assets (computed as equity divided by total assets), which was 11.14% at December 31, 2025 and 11.07% at December 31, 2024. The Bank is subject to various regulatory capital requirements administered by the federal banking agencies.
These loans may be adversely affected by conditions in the real estate markets or in the general economy. Business equity lines of credit totaling $3.1 million as of December 31, 2024 and $14.1 million as of December 31, 2023, are included in the commercial real estate loan category.
These loans may be adversely affected by conditions in the real estate markets or in the general economy. Business equity lines of credit totaling $3.8 million as of December 31, 2025 and $3.1 million as of December 31, 2024, are included in the commercial real estate loan category.
The balance in accumulated other comprehensive loss related to unrealized losses on available-for-sale debt securities, net of deferred income tax, amounted to $11.5 million at December 31, 2024 and $13.1 million at December 31, 2023. Changes in accumulated other comprehensive loss are excluded from earnings and directly increase or decrease stockholders’ equity.
The balance in accumulated other comprehensive loss related to unrealized losses on available-for-sale debt securities, net of deferred income tax, amounted to $5.8 million at December 31, 2025 and $11.5 million at December 31, 2024. Changes in accumulated other comprehensive loss are excluded from earnings and directly increase or decrease stockholders’ equity.
Windsor's total servicing portfolio was $2.5 billion at December 31, 2024. Critical Accounting Estimates The accounting and reporting policies of the Company are in accordance with GAAP and conform to general practices within the banking industry.
Windsor's™ total servicing portfolio was $3.1 billion at December 31, 2025, compared to $2.5 billion at December 31, 2024. Critical Accounting Estimates The accounting and reporting policies of the Company are in accordance with GAAP and conform to general practices within the banking industry.
Business equity lines of credit are commercial purpose lines of credit primarily secured by the business owners residential properties. Lender finance loans totaling $28.6 million as of December 31, 2024 are also included in the commercial real estate loan category.
Business equity lines of credit are commercial purpose lines of credit primarily secured by the business owners residential properties. Lender finance loans totaling $41.4 million as of December 31, 2025 and $28.6 million as of December 31, 2024 are also included in the commercial real estate loan category.
The principal amount of the Floating Rate Debentures has not changed since issuance, and they accrue interest at a floating rate equal to the three-month CME Term SOFR plus a spread adjustment of 0.26161% (or 26.161 basis points) plus 187 basis points, payable quarterly. As of December 31, 2024, the rate for the Floating Rate Debentures was 6.49%.
The principal amount of the Floating Rate Debentures has not changed since issuance, and they accrue interest at a floating rate equal to the three-month CME Term SOFR plus a spread adjustment of 0.26161% (or 26.161 basis points) plus 187 basis points, payable quarterly. As of December 31, 2025, the rate for the Floating Rate Debentures was 5.85%.
The Bank’s Capital Bank Home Loans division including shared service and corporate allocations contributed a net loss before taxes of $2.5 million for the year ended December 31, 2024 as compared to a net loss before taxes of $3.0 million in the prior year.
The Bank’s Capital Bank Home Loans division including shared service and corporate allocations contributed a net loss before taxes of $2.6 million for the year ended December 31, 2025 as compared to a net loss before taxes of $2.5 million in the prior year.
Partially secured and unsecured credit cards are only extended to existing secured card customers who have demonstrated sound credit behaviors. Approximately $87.2 million and $95.3 million in secured and partially secured credit card balances were protected by savings deposits held by the Company as of December 31, 2024 and December 31, 2023, respectively.
Partially secured and unsecured credit cards are only extended to existing secured card customers who have demonstrated sound credit behaviors. Approximately $83.1 million and $87.2 million in secured and partially secured credit card balances were protected by savings deposits held by the Company as of December 31, 2025 and December 31, 2024, respectively.
Total borrowings decreased during the year ended December 31, 2024 to $34.1 million from $49.1 million at December 31, 2023. FHLB Advances . The FHLB allows us to borrow up to 25% of our assets on a blanket floating lien status collateralized by certain securities and loans.
Total borrowings increased during the year ended December 31, 2025 to $52.1 million from $34.1 million at December 31, 2024. FHLB Advances . The FHLB allows us to borrow up to 25% of our assets on a blanket floating lien status collateralized by certain securities and loans.
Gain on sale margins were down from 2.76% for the twelve months ended December 31, 2023 to 2.59% for the year ended December 31, 2024. Mortgage loans sold are subject to repurchase in circumstances where documentation is deficient or the underlying loan becomes delinquent or pays off within a specified period following loan funding and sale.
Gain on sale margins were up from 2.59% for the year ended December 31, 2024 to 2.70% for the year ended December 31, 2025. Mortgage loans sold are subject to repurchase in circumstances where documentation is deficient or the underlying loan becomes delinquent or pays off within a specified period following loan funding and sale.
The Company does not hold any additional equity securities, therefore the Company does not expect any future deferred tax benefits associated with the impairment. 48 Financial Condition The following table summarizes the Company’s financial condition at the dates indicated.
The Company does not hold any additional equity securities; therefore, the Company does not expect any future deferred tax benefits associated with such investment. 51 Financial Condition The following table summarizes the Company’s financial condition at the dates indicated.
Loans are returned to accrual status when all of the principal and interest amounts contractually due are brought current and future payments are, in management’s opinion, reasonably assured. Loans are generally charged-off in part or in full when management determines the loan to be uncollectible.
When the interest accrual is discontinued, all unpaid accrued interest is reversed from income. Loans are returned to accrual status when all of the principal and interest amounts contractually due are brought current and future payments are, in management’s opinion, reasonably assured. Loans are generally charged-off in part or in full when management determines the loan to be uncollectible.
The Bank’s Capital Bank Home Loans division saw an increase in mortgage originations during the year ended December 31, 2024 when compared to the prior year. An elevated interest rate environment dampened home loan sales and home loan refinances.
The Bank’s Capital Bank Home Loans division saw an increase in mortgage originations during the year ended December 31, 2025 when compared to the prior year. The lower interest rate environment increased home loan sales and home loan refinances.
Consumer credit card balances are moved into the charge off queue after they become more than 90 days past due and are charged off not later than 120 days after they become past due. Otherwise, loans that are past due for 180 days or more are charged off unless the loan is well-secured and in the process of collection.
Unsecured consumer credit card balances are eligible for charge-off after they become more than 150 days past due and are charged off not later than 180 days after they become past due. Otherwise, loans that are past due for 180 days or more are charged off unless the loan is well-secured and in the process of collection.
The Bank’s Capital Bank Home Loans division experienced an increase of 48.7% in mortgage originations during the year ended December 31, 2024 when compared to the same period in the prior year. Origination volumes increased $98.0 million, to $299.1 million, for the year ended December 31, 2024, when compared to $201.1 million for the same period in the prior year.
The Bank’s Capital Bank Home Loans division experienced an increase of 11.7% in mortgage originations during the year ended December 31, 2025 when compared to the prior year. Origination volumes increased $35.0 million, to $334.1 million, for the year ended December 31, 2025, when compared to $299.1 million for the same period in the prior year.
Deposits securing our OpenSky ™ card lines of credit and deposits from title companies represent the largest concentrations in the deposit portfolio. As of December 31, 2024, these concentrations represented 6% and 11% of deposits, respectively.
Deposits securing our OpenSky ™ card lines of credit and deposits from title companies represent the largest concentrations in the deposit portfolio. As of December 31, 2025, these concentrations represented 5% and 10% of deposits, respectively.
The Floating Rate Junior Subordinated Deferrable Interest Debentures (the “Floating Rate Debentures”) were issued in June of 2006, mature on June 15, 2036, and may be redeemed prior to that date under certain circumstances.
The Floating Rate Debentures were issued in June of 2006, mature on June 15, 2036, and may be redeemed prior to that date under certain circumstances.
Net income of $40.1 million as adjusted excludes the impact of $3.3 million after-tax merger-related expenses, $3.2 million after-tax impact from the Initial IFH ACL Provision on non-PCD loans and a $2.6 million non-recurring equity and debt investment write-down that was nondeductible for tax purposes (non-GAAP) for the year ended December 31, 2024.
Net income as adjusted for the year ended December 31, 2024 included $3.3 million of after-tax merger-related expenses, $3.2 from the Initial IFH ACL Provision on non-purchased credit deteriorated loans, and $2.6 million of non-recurring equity and debt investment write-down that was nondeductible for tax purposes (non-GAAP).
The Company’s total stockholders’ equity is affected by fluctuations in the fair values of investment securities available-for-sale. The difference between amortized cost and fair value of investment securities, net of deferred income tax, is included in accumulated other comprehensive loss within stockholders’ equity. Accumulated other comprehensive loss is excluded from the Bank’s and Company’s regulatory capital ratios.
The difference between amortized cost and fair value of investment securities, net of deferred income tax, is included in accumulated other comprehensive loss within stockholders’ equity. Accumulated other comprehensive loss is excluded from the Bank’s and Company’s regulatory capital ratios.
The excess of consideration paid over the fair value of the net assets acquired is recorded as goodwill. The fair values are preliminary estimates subject to adjustments during the measurement period, which does not exceed one year after acquisition.
The excess of consideration paid over the fair value of the net assets acquired is recorded as goodwill. The fair values are preliminary estimates subject to adjustments during the measurement period, which does not exceed one year after acquisition. As of December 31, 2025, the measurement period for the acquisition has closed and the acquisition accounting is finalized.
The $9.0 million in net charge-offs during the year ended December 31, 2024 was comprised primarily of credit card portfolio net charge-offs, with $3.6 million related to secured and partially secured cards while $3.4 million was related to unsecured cards.
The $12.4 million in net charge-offs during the year ended December 31, 2025 was comprised primarily of credit card portfolio net charge-offs, with $1.6 million related to secured and partially secured cards while $5.4 million was related to unsecured cards.
As a result, interest rates have a more significant impact on our performance than the effects of general levels of inflation. Interest rates may not necessarily move in the same direction or in the same magnitude as the prices of goods and services.
As a result, interest rates have a more significant impact on our performance than the effects of general levels of inflation. Interest rates may not necessarily move in the same direction or in the same magnitude as the prices of goods and services. However, most other operating expenses are sensitive to changes in levels of inflation.
Treasuries, high-quality mortgage-backed securities (“MBS”), government agency bonds, asset-backed securities and high-quality municipal and corporate bonds. The asset-backed securities are comprised of student loan collateral issued by the Federal Family Education Loan Program, which includes a minimum of a 97% government repayment guarantee, as well as additional support in excess of the government guaranteed portion.
The asset-backed securities are comprised of student loan collateral issued by the Federal Family Education Loan Program, which includes a minimum of a 97% government repayment guarantee, as well as additional support in excess of the government guaranteed portion.
For a description of the factors taken into account by our management in determining the ACL, see “Financial Condition— Allowance for Credit Losses.” For the year ended December 31, 2024, the provision for credit losses was $17.7 million, an increase of $8.1 million from the recorded provision for credit losses of $9.6 million for the year ended December 31, 2023.
For a description of the factors taken into account by our management in determining the ACL, see “Financial Condition— Allowance for Credit Losses.” For the year ended December 31, 2025, the provision for credit losses was $15.0 million, a decrease of $2.8 million from the recorded provision for credit losses of $17.7 million for the year ended December 31, 2024.
Net charge-offs for the year ended December 31, 2024 were $9.0 million, or 0.42% of average portfolio loans, compared to $8.5 million, or 0.47% of average portfolio loans, for the same period in 2023.
Net charge-offs for the year ended December 31, 2025 were $12.4 million, or 0.45% of average portfolio loans, compared to $9.0 million, or 0.42% of average portfolio loans, for the same period in 2024.
Net charge-offs for the year ended December 31, 2024 were $9.0 million, or 0.42% of average portfolio loans, compared to $8.5 million, or 0.47% of average loans for the same period in 2023.
Net charge-offs for the year ended December 31, 2025 were $12.4 million, or 0.45% of average portfolio loans, compared to $9.0 million, or 0.42% of average loans for the same period in 2024.
Net charge-offs for the year ended December 31, 2024 were $9.0 million, or 0.42% of average portfolio loans, compared to $8.5 million, or 0.47% of average portfolio loans, for the same period in 2023.
Net charge-offs for the year ended December 31, 2025 were $12.4 million, or 0.45% of average portfolio loans, compared to $9.0 million, or 0.42% of average loans for the same period in 2024.
As of December 31, 2024 and December 31, 2023, our credit card customers accounted for $166.4 million and $173.9 million, or 20.5% and 28.2%, respectively, of our total noninterest-bearing deposit balances.
As of December 31, 2025 and December 31, 2024, our credit card customers accounted for $163.2 million and $166.4 million, or 19.1% and 20.5%, respectively, of our total noninterest-bearing deposit balances.
For the year ended December 31, 2024, noninterest income was $31.4 million, an increase of $6.4 million, or 25.8%, from $25.0 million in the prior year period primarily driven by contributions from the IFH acquisition.
For the year ended December 31, 2025, noninterest income was $49.2 million, an increase of $17.8 million, or 56.6%, from $31.4 million in the prior year period, primarily driven by contributions from 45 the IFH acquisition.
However, most other operating expenses are sensitive to changes in levels of inflation. 62 Non-GAAP Financial Measures and Reconciliations The Company has presented the following non-GAAP financial measures because it believes that these non-GAAP financial measures provide useful information to investors because they are used by management to evaluate our operating performance and make day-to-day operating decisions.
Non-GAAP Financial Measures and Reconciliations The Company has presented the following non-GAAP financial measures because it believes that these non-GAAP financial measures provide useful information to investors because they are used by management to evaluate our operating performance and make day-to-day operating decisions.
For more information on the computation of non-GAAP financial measures, see “Non-GAAP Financial Measures and Reconciliations.” 44 For the year ended December 31, 2024, average interest earning assets increased $342.4 million, or 16.0%, to $2.5 billion as compared to the same period in 2023, and the average yield on interest earning assets increased 3 basis points.
For more information on the computation of non-GAAP financial measures, see “Non-GAAP Financial Measures and Reconciliations.” 47 For the year ended December 31, 2025, average interest earning assets increased $727.9 million, or 29.3%, to $3.2 billion as compared to the same period in 2024, and the average yield on interest earning assets decreased 46 basis points.
The change includes increases in salaries and employee benefits expenses of $7.3 million, or 14.9%, merger-related expenses of $3.9 million, advertising expenses of $0.2 million, other operating expenses of $0.8 million and data processing expense of $2.0 million, partially offset by decreases in professional fees of $1.4 million and other operational losses of $0.9 million.
The change includes increases in salaries and employee benefits expenses of $16.1 million, or 28.8%, occupancy and equipment of $3.1 million, professional fees of $3.1 million, other operating expenses of $2.3 million, data processing expense of $2.1 million, loan processing of $1.6 million and regulatory assessment expenses of $1.4 million, partially offset by decreases in merger-related expenses of $0.6 million, operational and other card fraud related losses of $0.2 million and advertising expenses of $0.1 million.
The Bank’s OpenSky ™ Division, including shared service and corporate allocations contributed $17.3 million of income before taxes for the year ended December 31, 2024, a decrease of $1.8 million for the segment from the prior year.
The Bank’s OpenSky ™ Division, including shared service and corporate allocations contributed $14.6 million of income before taxes for the year ended December 31, 2025, a decrease of $2.7 million for the segment from the prior year.
Net interest income increased $13.2 million, or 9.3%, to $154.7 million when comparing the year ended December 31, 2024 to the year ended December 31, 2023, primarily due to increased average balances of $325.7 million in portfolio loans, partially offset by higher funding costs primarily resulting from the additional average deposit volume funding loan growth.
Net interest income increased $41.2 million, or 26.7%, to $196.0 million when comparing the year ended December 31, 2025 to the year ended December 31, 2024, primarily due to the average balances of portfolio loans increasing by $623.1 million, partially offset by higher funding costs primarily resulting from the additional average deposit volume funding loan growth.
December 31, (in thousands) 2024 2023 Unfunded lines of credit $ 403,029 $ 336,472 Letters of credit 3,122 4,641 Commitment to fund other investments 2,714 3,874 Total credit extension commitments $ 408,865 $ 344,987 Unfunded lines of credit represent unused credit facilities to our current borrowers. Lines of credit generally have variable interest rates.
December 31, (in thousands) 2025 2024 Unfunded lines of credit $ 455,666 $ 403,029 Letters of credit 1,633 3,122 Commitment to fund other investments 2,714 2,714 Total credit extension commitments $ 460,013 $ 408,865 Unfunded lines of credit represent unused credit facilities to our current borrowers. Lines of credit generally have variable interest rates.
December 31, 2024 2023 (in thousands) Amount Percent (1) Amount Percent (1) Real estate: Residential $ 6,945 14 % $ 5,518 19 % Commercial 16,041 33 10,316 36 Construction 2,973 6 2,271 8 Commercial and Industrial 16,377 33 4,406 16 Credit card 6,301 14 6,087 21 Other consumer 15 — 12 — Total allowance for credit losses $ 48,652 100 % $ 28,610 100 % _______________ (1) Loan category as a percentage of total portfolio loans.
December 31, 2025 2024 (in thousands) Amount Percent (1) Amount Percent (1) Real estate: Residential $ 7,444 14 % $ 6,945 14 % Commercial 14,917 27 16,041 33 Construction 4,250 8 2,973 6 Commercial and Industrial 19,818 36 16,377 33 Credit card 8,226 15 6,301 14 Other consumer 5 — 15 — Total allowance for credit losses $ 54,660 100 % $ 48,652 100 % _______________ (1) Loan category as a percentage of total portfolio loans.
Financial Statements and Supplementary Data - Notes to Financial Statements - Note 1. Summary of Significant Accounting Policies.” Results of Operations for the Years Ended December 31, 2024 and 2023 Net Income The following table sets forth the principal components of net income for the periods indicated.
Summary of Significant Accounting Policies.” 44 Results of Operations for the Years Ended December 31, 2025 and 2024 Net Income The following table sets forth the principal components of net income for the periods indicated.
On a standalone basis, interest income attributable to the credit card portfolio declined by $1.3 million year over year primarily due to a reduction in yield. The variance in interest expense year over year was primarily impacted by growth in interest-bearing liabilities, augmented in part by the IFH acquisition.
On a standalone basis, interest income attributable to the interest-bearing deposits contributed $3.6 million to the increase in interest income. The variance in interest expense year over year was primarily impacted by growth in interest-bearing liabilities, augmented in part by the IFH acquisition.
Total assets at December 31, 2024 were $3.2 billion, an increase of $980.7 million, or 44.1%, from the balance at December 31, 2023. Net portfolio loans, which exclude mortgage loans held for sale, totaled $2.6 billion at December 31, 2024, an increase of $726.9 million, or 38.2%, compared to $1.9 billion at December 31, 2023.
Total assets at December 31, 2025 were $3.6 billion, an increase of $399.3 million, or 12.5%, from the balance at December 31, 2024. Net portfolio loans, which exclude mortgage loans held for sale, totaled $3.0 billion at December 31, 2025, an increase of $329.3 million, or 12.5%, compared to $2.6 billion at December 31, 2024.
Acquired loans, including those acquired in a business combination, are evaluated to determine if they have experienced more-than-insignificant deterioration in credit quality since origination. When the condition exists, these loans are referred to as purchased credit deteriorated, or PCD.
Acquired loans, including those acquired in a business combination, are evaluated to determine if they have experienced more-than-insignificant deterioration in credit quality since origination. When the condition exists, these loans are referred to as PCD. An allowance is recognized for a PCD loan by adding it to the purchase price or fair value in a business combination.
Compared to the same period in the prior year, average interest-bearing liabilities increased $288.5 million, or 22.7%, while the average cost of interest-bearing liabilities increased 47 basis points to 3.76% from 3.29%.
Compared to the same period in the prior year, average interest-bearing liabilities increased $548.7 million, or 35.2%, while the average cost of interest-bearing liabilities decreased 68 basis points to 3.08% from 3.76%.
We expect funds to be available from a number of basic banking activity sources, including the core deposit base, the repayment and maturity of loans and investment security cash flows. Other potential funding sources include brokered certificates of deposit, deposit listing services, CDARS, borrowings from the FHLB and other lines of credit.
We expect funds to be available from a number of basic banking activity sources, including the core deposit base, the repayment and maturity of loans and investment security cash flows.
Average OpenSky ™ loan balances, net of reserves and deferred fees of $115.6 million for the year ended December 31, 2024 increased $1.1 million, or 1.0%, as compared to the prior year. OpenSky ™ loan balances, net of reserves, of $127.8 million at December 31, 2024 increased by $4.4 million, or 3.6%, compared to $123.3 million at December 31, 2023.
Average OpenSky ™ loan balances, net of reserves and deferred fees of $125.8 million for the year ended December 31, 2025 increased $10.2 million, or 8.9%, as compared to the prior year. OpenSky ™ loan balances, net of reserves, of $142.4 million at December 31, 2025 increased by $14.6 million, or 11.5%, compared to $127.8 million at December 31, 2024.
For more information on the computation of non-GAAP financial measures, see “Non-GAAP Financial Measures and Reconciliations.” The provision for credit losses for the year ended December 31, 2024 was $17.7 million, an increase of $8.1 million, or 84.4%, from the provision for credit losses for the year ended December 31, 2023.
For more information on the computation of non-GAAP financial measures, see “Non-GAAP Financial Measures and Reconciliations.” The provision for credit losses for the year ended December 31, 2025 was $15.0 million, a decrease of $2.8 million, or 15.5%, from the provision for credit losses for the year ended December 31, 2024.
The weighted average yields were calculated by multiplying the amortized cost of each individual security by its yield, dividing that figure by the portfolio total, and then summing the value of these results to arrive at the weighted 49 average yield. Yields on tax-exempt investments are not calculated on a fully tax equivalent basis.
The weighted average yields were calculated by multiplying the amortized cost of each individual security by its yield, dividing that figure by the portfolio total, and then summing the value of these results.
An allowance for credit losses is recorded with a corresponding charge to provision for credit losses. Subsequent to the acquisition date, the methods utilized to estimate the required ACL for these loans is similar to the method used for organically originated loans.
Subsequent to the acquisition date, the methods utilized to estimate the required ACL for these loans is similar to the method used for organically originated loans.
Corresponding non-interest bearing deposit balances of $166.4 million at December 31, 2024 decreased $7.5 million, or 4.3%, compared to $173.9 million at December 31, 2023. Gross unsecured loan balances of $42.4 million at December 31, 2024 increased $11.6 million, or 37.7%, compared to $30.8 million at December 31, 2023.
Corresponding non-interest bearing deposit balances of $163.2 million at December 31, 2025 decreased $3.2 million, or 4.3%, compared to $166.4 million at December 31, 2024. Gross unsecured loan balances of $61.4 million at December 31, 2025 increased $18.9 million, or 44.7%, compared to $42.4 million at December 31, 2024.
The $9.0 million in net charge-offs during the year ended December 31, 2024 was comprised primarily of credit card portfolio net charge-offs, with $3.6 million related to secured and partially secured cards while $3.4 million was related to unsecured cards.
The $12.4 million in net charge-offs during the year ended December 31, 2025 were comprised, in part, of OpenSky™ credit card portfolio net charge-offs, with $5.4 million related to unsecured cards and $1.6 million related to secured and partially secured cards.
Noninterest expense was $126.2 million for the year ended December 31, 2024, as compared to $110.8 million for the year ended December 31, 2023, an increase of $15.5 million, or 14.0% largely due to the IFH acquisition.
Noninterest expense was $155.1 million for the year ended December 31, 2025, as compared to $126.2 million for the year ended December 31, 2024, an increase of $28.9 million, or 22.9% largely due to the IFH acquisition.
The Bank has established a reserve under generally accepted accounting principles for possible repurchases. The reserve was $2.3 million at December 31, 2024 and $1.0 million at December 31, 2023. The Bank repurchased one loan totaling $296 thousand during the year ended December 31, 2024. The Bank repurchased one loan totaling $597 thousand during the year ended December 31, 2023.
The Bank has established a reserve for possible repurchases. The reserve was $2.3 million at December 31, 2025 and $2.3 million at December 31, 2024. The Bank did not repurchase any loans during the year ended December 31, 2025. The Bank repurchased one loan totaling $296 thousand during the year ended December 31, 2024.
The maintenance of a high-quality loan portfolio, with an adequate allowance for expected credit losses, will continue to be a primary objective for the Company.
The ACL as a percent of portfolio loans was 1.85% at December 31, 2025 and December 31, 2024. The maintenance of a high-quality loan portfolio, with an adequate allowance for expected credit losses, will continue to be a primary objective for the Company.
In general, we place loans on nonaccrual status when they become 90 days past due. We also place loans on nonaccrual status if they are less than 90 days past due if the collection of principal or interest is in doubt. When the interest accrual is discontinued, all unpaid accrued interest is reversed from income.
Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. In general, we place loans on nonaccrual status when they become 90 days past due. We also place loans on nonaccrual status if they are less than 90 days past due if the collection of principal or interest is in doubt.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+2 added−2 removed12 unchanged
Biggest changeWe endeavor to manage our exposure to interest rates by structuring our balance sheet in the ordinary course of business. We do not enter into instruments such as leveraged derivatives, financial options or financial futures contracts for the purpose of reducing interest rate risk.
Biggest changeWe do not enter into instruments such as leveraged derivatives, financial options or financial futures contracts for the purpose of reducing interest rate risk. We endeavor to hedge the interest rate risks of our available-for-sale mortgage pipeline by using MBS, and short positions.
The economic value model utilizes a static approach in that the analysis does not incorporate new business; rather, the analysis shows a snapshot in time of the risk inherent in the balance sheet. 68
The economic value model utilizes a static approach in that the analysis does not incorporate new business; rather, the analysis shows a snapshot in time of the risk inherent in the balance sheet. 74
The following table summarizes the results of our EAR analysis in simulating the change in net interest income and fair value of equity over a 12-month horizon as of December 31, 2024: IMPACT ON NET INTEREST INCOME UNDER A STATIC BALANCE SHEET, PARALLEL INTEREST RATE SHOCK Earnings at Risk -400 bps -300 bps -200 bps -100 bps Flat +100 bps +200 bps +300 bps +400 bps December 31, 2024 (7.8) % (7.1) % (5.4) % (2.8) % 0.0 % 3.0 % 5.9 % 8.7 % 11.5 % Utilizing an economic value of equity (“EVE”) approach, we analyze the risk to capital from the effects of various interest rate scenarios through a long-term discounted cash flow model.
The following table summarizes the results of our EAR analysis in simulating the change in net interest income and fair value of equity over a 12-month horizon as of December 31, 2025: IMPACT ON NET INTEREST INCOME UNDER A STATIC BALANCE SHEET, PARALLEL INTEREST RATE SHOCK Earnings at Risk -400 bps -300 bps -200 bps -100 bps Flat +100 bps +200 bps +300 bps +400 bps December 31, 2025 (11.9) % (8.8) % (6.2) % (3.5) % 0.0 % 3.9 % 7.9 % 11.8 % 15.6 % Utilizing an economic value of equity (“EVE”) approach, we analyze the risk to capital from the effects of various interest rate scenarios through a long-term discounted cash flow model.
The following table illustrates the results of our EVE analysis as of December 31, 2024.
The following table illustrates the results of our EVE analysis as of December 31, 2025.
ECONOMIC VALUE OF EQUITY ANALYSIS UNDER A STATIC BALANCE SHEET, PARALLEL INTEREST RATE SHOCK Economic Value of Equity -400 bps -300 bps -200 bps -100 bps Flat +100 bps +200 bps +300 bps +400 bps December 31, 2024 (14.8) % (7.7) % (3.1) % (0.9) % 0.0 % (0.2) % (1.3) % (1.8) % (2.5) % 66 Interest Rate Sensitivity and Market Risk As a financial institution, our primary component of market risk is interest rate volatility.
ECONOMIC VALUE OF EQUITY ANALYSIS UNDER A STATIC BALANCE SHEET, PARALLEL INTEREST RATE SHOCK Economic Value of Equity -400 bps -300 bps -200 bps -100 bps Flat +100 bps +200 bps +300 bps +400 bps December 31, 2025 (21.8) % (14.2) % (6.8) % (2.3) % 0.0 % 1.4 % 1.9 % 2.7 % 3.1 % Interest Rate Sensitivity and Market Risk As a financial institution, our primary component of market risk is interest rate volatility.
In determining the appropriate level of interest rate risk, the committee considers the impact on earnings and capital of the current outlook for interest rates, potential changes in interest rates, regional economies, liquidity, business strategies and other factors.
The ALCO formulates strategies based on perceived levels of interest rate risk. In determining the appropriate level of interest rate risk, the committee considers the impact on earnings and capital of the current outlook for interest rates, potential changes in interest rates, regional economies, liquidity, business strategies and other factors.
Our exposure to interest rate risk is managed by the Bank’s Asset/Liability Management Committee (“ALCO”) in accordance with policies approved by our board of directors. The ALCO formulates strategies based on perceived levels of interest rate risk.
Based on the nature of our operations, we are not subject to foreign exchange or commodity price risk. We do not own any trading assets. Our exposure to interest rate risk is managed by the Bank’s Asset/Liability Management Committee (“ALCO”) in accordance with policies approved by our board of directors.
These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair market values. The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income.
These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair market values.
Removed
We endeavor to hedge the interest rate risks of our available-for-sale mortgage pipeline by using MBS, and short positions. Based on the nature of our operations, we are not subject to foreign exchange or commodity price risk. We do not own any trading assets.
Added
The objective is to measure the effect on net interest income and to adjust the balance sheet to minimize the inherent risk while at the same time maximizing income. 72 We endeavor to manage our exposure to interest rates by structuring our balance sheet in the ordinary course of business.
Removed
For a bank with an asset-sensitive position, or positive gap, rising interest rates would generally be expected to have a positive effect on net interest income, and falling interest rates would generally be expected to have the opposite effect. 67 INTEREST SENSITIVITY GAP December 31, 2024 Within One Month After One Month Through Three Months After Three Through Twelve Months Within One Year Greater Than One Year or Non-Sensitive Total (in thousands) Assets Interest earning assets Loans (1) $ 497,272 $ 624,734 $ 486,389 $ 1,608,395 $ 1,043,038 $ 2,651,433 Securities 11,183 28,283 49,212 88,678 139,431 228,109 Interest-bearing deposits at other financial institutions 179,841 — — 179,841 — 179,841 Federal funds sold 58 — — 58 — 58 Total earning assets $ 688,354 $ 653,017 $ 535,601 $ 1,876,972 $ 1,182,469 $ 3,059,441 Liabilities Interest-bearing liabilities Interest-bearing deposits $ 16,144 $ 32,288 $ 145,296 $ 193,728 $ 875,349 $ 1,069,077 Time deposits 94,797 85,458 546,751 727,006 154,928 881,934 Total Interest-bearing deposits 110,941 117,746 692,047 920,734 1,030,277 1,951,011 FHLB Advances — — 22,000 22,000 — 22,000 Other borrowed funds — — 10,000 10,000 2,062 12,062 Total Interest-bearing liabilities $ 110,941 $ 117,746 $ 724,047 $ 952,734 $ 1,032,339 $ 1,985,073 Period gap $ 577,413 $ 535,271 $ (188,446) $ 924,238 $ 150,130 $ 1,074,368 Cumulative gap $ 577,413 $ 1,112,684 $ 924,238 $ 924,238 $ 1,074,368 Ratio of cumulative gap to total earning assets 18.87 % 36.37 % 30.21 % 30.21 % 35.12 % _______________ (1) Includes loans held for sale.
Added
For a bank with an asset-sensitive position, or positive gap, rising interest rates would generally be expected to have a positive effect on net interest income, and falling interest rates would generally be expected to have the opposite effect. 73 INTEREST SENSITIVITY GAP December 31, 2025 Within One Month After One Month Through Three Months After Three Through Twelve Months Within One Year Greater Than One Year or Non-Sensitive Total (in thousands) Assets Interest earning assets Loans (1) $ 1,067,655 $ 241,775 $ 526,038 $ 1,835,468 $ 1,149,817 $ 2,985,285 Securities 7,975 13,060 68,854 89,889 148,591 238,480 Interest-bearing deposits at other financial institutions 224,611 — — 224,611 — 224,611 Federal funds sold 60 — — 60 — 60 Total earning assets $ 1,300,301 $ 254,835 $ 594,892 $ 2,150,028 $ 1,298,408 $ 3,448,436 Liabilities Interest-bearing liabilities Interest-bearing deposits $ 23,182 $ 46,363 $ 208,635 $ 278,180 $ 1,095,915 $ 1,374,095 Time deposits 110,173 139,657 493,931 743,761 122,603 866,364 Total Interest-bearing deposits 133,355 186,020 702,566 1,021,941 1,218,518 2,240,459 FHLB Advances — — 50,000 50,000 — 50,000 Other borrowed funds — 2,062 — 2,062 — 2,062 Total Interest-bearing liabilities $ 133,355 $ 188,082 $ 752,566 $ 1,074,003 $ 1,218,518 $ 2,292,521 Period gap $ 1,166,946 $ 66,753 $ (157,674) $ 1,076,025 $ 79,890 $ 1,155,915 Cumulative gap $ 1,166,946 $ 1,233,699 $ 1,076,025 $ 1,076,025 $ 1,155,915 Ratio of cumulative gap to total earning assets 33.84 % 35.78 % 31.20 % 31.20 % 33.52 % _______________ (1) Includes loans held for sale.

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