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Organization and Summary of Significant Accounting Policies | 12 Months Ended
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Dec. 31, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract] |
Organization and Summary of Significant Accounting Policies | Organization and Summary of Significant Accounting Policies Organization and Nature of Operations Chain Bridge Bancorp, Inc. (the “Company”) is a Delaware corporation and a publicly traded bank holding company whose Class A common stock is listed on the New York Stock Exchange under the symbol “CBNA”. The Company was incorporated on May 26, 2006, and is subject to supervision and regulation by the Board of Governors of the Federal Reserve System under the Bank Holding Company Act of 1956, as amended. The Company serves as the registered bank holding company for Chain Bridge Bank, National Association (the “Bank”), its wholly-owned subsidiary. The Company does not own or control any other subsidiaries and conducts substantially all of its business through the Bank. The Bank is a national banking association chartered by the Office of the Comptroller of the Currency (“OCC”) under the National Bank Act. The Bank commenced operations on August 6, 2007, following receipt of its Charter No. 24755 from the OCC. The Bank is a member of the Federal Deposit Insurance Corporation (“FDIC”) under Certificate No. 58595 and is also a Federal Reserve member bank, as required of national banks. In 2020, the Bank opened its Trust & Wealth department following authorization from the OCC to exercise full fiduciary powers in accordance with 12 U.S.C. § 92a. The Bank uses a branchless operating model that integrates digital banking channels with in-person services at its headquarters in McLean, Virginia. It offers a broad range of commercial and personal banking services, including deposit accounts, multiple types of loan products, trust administration, wealth management, and asset custody. The Bank’s core deposit products include noninterest-bearing and interest-bearing checking accounts, as well as savings accounts. Its lending portfolio currently consists primarily of real-estate secured loans, with a significant portion being loans secured by first liens on single family residential properties in the Washington, D.C. area. The Bank offers tailored financial solutions to individuals, families, businesses, non-profit organizations, and political organizations nationwide. The term “political organizations” refers to: campaign committees; party committees; separate segregated funds (including trade association political action committees (“PACs”) and corporate PACs); non-connected committees (including independent expenditure-only committees (“Super PACs”), committees maintaining separate accounts for direct contributions and independent expenditures (“Hybrid PACs”), and committees other than authorized campaign committees, or those affiliated with such committees that are maintained or controlled by a candidate or federal officeholder (collectively, “Leadership PACs”)); and other tax-exempt organizations under Section 527 of the Internal Revenue Code. A substantial portion of the Bank’s deposits is derived from these political organizations, and deposit levels fluctuate based on federal election cycles. The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for annual financial information. The results of operations for the twelve months ended December 31, 2024 are not necessarily indicative of the results to be expected for any future interim period or any full fiscal year. Principles of Consolidation The consolidated financial statements include the accounts of Chain Bridge Bancorp, Inc. and its wholly-owned subsidiary, Chain Bridge Bank, National Association. All significant intercompany balances and transactions are eliminated in consolidation. Reclassification Certain amounts reported in prior years may be reclassified to conform to the current year’s presentation. Prior period common stock and additional paid-in capital were reclassified as described in Note 2, “Capital Structure.” Credit card lines, previously included in unused commitments under lines of credit, is now separately presented in Note 9, “Financial Instruments with Off-Balance Sheet Risk.” Marketing expenses, previously shown as a separate component, were combined into other expenses in the statements of income presented in Note 15, “Condensed Financial Statements of Parent Company.” None of these reclassifications had an impact to retained earnings or net income. There were no other reclassifications for the periods reported. Use of Estimates To prepare financial statements in conformity with GAAP, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided, and actual results could differ. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for credit losses and the fair value of investment securities. Cash and Cash Equivalents For purposes of the consolidated statement of cash flows, cash and cash equivalents include cash on hand, deposits with other financial institutions with maturities less than 90 days, and federal funds sold. Generally, federal funds are purchased and sold for one-day periods. Cash Concentrations and Restrictions The Bank maintains cash accounts in various correspondent banks. At December 31, 2024 and 2023 the total amount by which these deposits, combined with federal funds sold, exceeded the federally insured limits was $730 thousand and $657 thousand, respectively. Under Federal Reserve Board Regulation D (12 C.F.R. Part 204), insured depository institutions are generally required to maintain certain minimum average reserve balances. However, on March 15, 2020, the Board of Governors set the reserve requirement ratio to zero percent, effective March 26, 2020, to support lending to households and businesses in response to economic conditions. Accordingly, the Bank was not subject to any reserve requirement at December 31, 2024 or 2023. Securities The Bank invests in debt securities issued by entities across various sectors. Under 12 CFR Part 1, banks are only permitted to invest in securities that are considered “investment grade.” A security is deemed “investment grade” when the issuer has an adequate capacity to meet its financial commitments under the security for the projected life of the asset or exposure. An issuer is considered to have an adequate capacity to meet financial commitments if the risk of default by the obligor is low and the full and timely repayment of principal and interest is expected. The Bank maintains policies and procedures designed to promote compliance with these requirements, including pre-purchase and ongoing credit monitoring activities for its investments in debt securities. To determine whether a prospective or existing obligation meets investment-grade criteria, the Bank reviews the issuer’s financial statements, analyzes the issuer’s ability to repay, and, when available, considers external ratings opinions. The extent of the Bank’s assessment varies by security type and rating status, and the Bank maintains a structured policy detailing both pre-purchase and ongoing assessments. All new municipal, corporate, and non-agency structured bond purchases undergo a targeted analysis by the investment department prior to purchase. Thereafter, corporate bonds, non-agency structured assets, and non-rated municipal bonds are subject to an annual assessment by the investment department to assess the issuer’s ability to satisfy current and future debt obligations. Rated municipal securities undergo regular reviews by external parties. The results of these reviews provide data that enables the Bank to assess an issuer’s credit quality, beyond sole reliance upon third-party ratings and may include data related to the issuer’s financial condition, debt obligations, and additional factors. If an external review identifies a problematic issuer, the investment department performs further diligence. Through these practices, the Bank incorporates third-party credit ratings within broader security reviews while avoiding sole reliance on such ratings. Debt securities that the Company has the intent and ability to hold to maturity are classified as held to maturity (“HTM”) and recorded at amortized cost. Trading securities are recorded at fair value, with changes in fair value reflected in earnings. Debt securities that are not classified as HTM or trading are classified as available for sale (“AFS”) and carried at fair value, with unrealized gains and losses excluded from earnings and reported in other comprehensive income (loss). Purchase premiums and discounts are recognized in interest income using the interest method over the securities’ terms. Premiums on callable debt securities are amortized to their earliest call date, and discounts on callable debt securities are amortized to maturity. Gains and losses on the sale of debt securities are recorded on the trade date and are determined using the specific identification method. Transfers of debt securities from the AFS classification into HTM occur on the transfer date. The unrealized holding gain or loss on that date is reported in accumulated other comprehensive income (loss) and in the carrying value of the HTM securities. Such amounts are amortized over the remaining contractual lives of the securities. The net impact to income from the amortization and accretion of the unrealized loss recognized at the date of transfer is zero. Equity securities with readily determinable fair values are carried at fair value, with changes reflected in net income. Equity securities without readily determinable fair values are carried at cost, minus impairment (if any), plus or minus changes resulting from observable price changes in orderly transactions for identical or similar investments. Restricted equity securities are carried at cost and are periodically evaluated for impairment based on the ultimate recovery of par value. The entirety of any impairment on equity securities is recognized in earnings. The Bank is required to maintain an investment in the capital stock of the Federal Reserve Bank of Richmond, Virginia, as a condition of its membership in the Federal Reserve System. Additionally, as a member of the Federal Home Loan Bank of Atlanta, Georgia, the Bank holds an investment in its capital stock. The Bank also maintains investments in the capital stock of the holding companies of two correspondent banks: CBB Financial Corp., headquartered in Midlothian, Virginia, and Pacific Coast Bankers’ Bancshares, headquartered in Walnut Creek, California. The Bank records its investments in these correspondent bank stocks at cost, consistent with the redemption provisions governing these entities, and classifies them as restricted securities on the consolidated balance sheets. Allowance for Credit Losses – Held to Maturity Securities Management measures expected credit losses on HTM debt securities on a collective basis by major security type. Accrued interest receivable on HTM debt securities totaled $1.6 million at December 31, 2024 and 2023 and is excluded from the estimate of credit losses, which is a policy election made by management. The estimate of expected credit losses considers the Company’s historical credit loss information, is adjusted for current conditions and reasonable and supportable forecasts. Management classifies the HTM portfolio into the following major security types: U.S. government and federal agencies (which includes U.S. treasury securities and debt securities issued by U.S. government agencies and government-sponsored enterprises (“GSEs”)), mortgage-backed securities, corporate bonds, and state and municipal securities. Debt securities issued by the U.S. Treasury or government agencies, including GSEs such as Fannie Mae and Freddie Mac, are not considered credit-sensitive, as they are explicitly or implicitly guaranteed by the U.S. government, resulting in an expectation of zero credit loss. Accordingly, management’s analysis of credit loss considers only the corporate and municipal segments. In addition to analyzing the Company’s own historical bond credit losses, the Company employs a methodology that incorporates probability of default and loss given default calculations to estimate the expected credit loss for credit-sensitive HTM debt securities. This methodology relies on historical loss data from the investment rating agencies, sourced from the public domain, to derive cumulative default and recovery rates over time. The cumulative default rates applied to the municipal and corporate bond portfolios are stratified by time remaining to maturity and credit rating. This quantitative analysis may be adjusted, as appropriate, based on documented qualitative factors and reasonable and supportable forecasts. Allowance for Credit Losses – Available for Sale Securities For AFS debt securities in an unrealized loss position, the Company first assesses whether it intends to sell, or whether it is more likely than not that it will be required to sell, the security before recovery of its amortized cost basis. If either criterion regarding intent or requirement to sell is met, the security’s amortized costs basis is written down to fair value through income. For AFS debt securities that do not meet the aforementioned criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, management considers the extent to which fair value is less than amortized cost, any changes to the security’s rating by a rating agency, and adverse conditions specifically related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of cash flows expected to be collected is less than the amortized cost basis, a credit loss exists, and an ACL is recorded for the credit loss, limited to the amount by which the fair value is less than the amortized cost basis. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income (loss). Changes in the ACL are recorded as a credit loss provision (or reversal). Losses are charged against the allowance when management believes the uncollectibility of an AFS security is confirmed or when either criterion regarding intent or requirement to sell is met. At December 31, 2024 and 2023, there was no allowance related to the AFS securities portfolio. Accrued interest receivable on AFS debt securities totaled $1.3 million and $1.6 million at December 31, 2024 and 2023, respectively, and is excluded from the estimate of credit losses. Loans Held for Sale Loans held for sale are carried at the lower of cost or fair value, determined on an aggregate basis. Fair value is based on commitment agreements with investors and prevailing market prices. Loans originated by the Bank’s mortgage banking division and held for sale to outside investors are originated on a pre-sold basis with servicing rights released. Gains and losses on sales of mortgage loans are recognized based on the difference between the selling price and the carrying value of the related mortgage loans sold. Loans The Bank grants mortgage, commercial, and consumer loans to clients. The Bank’s loan portfolio is primarily comprised of residential and commercial loans throughout the Washington, D.C. metropolitan area. The ability of the Bank’s loan clients to honor their obligations is dependent upon the real estate market and general economic conditions in this area. Loans that the Company has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for the allowance for credit losses and any deferred fees or costs on originated loans. Interest income is accrued on the unpaid principal balance. Loan origination and commitment fees and certain direct costs are deferred and the net amount is amortized as an adjustment to the related loan yield. The accrual of interest on mortgage and commercial loans is discontinued when the loan becomes 90 days delinquent unless the credit is well-secured and in the process of collection. Management may place loans on non-accrual status prior to becoming 90 days past due if management believes interest is uncollectible. Non-performing or uncollectible loans are placed either on nonaccrual status pending further collection efforts or charged off if collection of principal or interest is considered doubtful. All interest accrued but not collected for loans that are placed on nonaccrual or charged off is reversed against interest income. Interest income on loans in nonaccrual status is accounted for on the cash basis or cost recovery method until the loan qualifies for return to accrual. Loans are returned to accrual status when all contractually due principal and interest payments are brought current and future payments are reasonably assured. Risk grading and ongoing credit monitoring of the loan portfolio During management’s review of the adequacy of the allowance for credit losses, particular risk characteristics associated with segments of the loan portfolio are also considered. These characteristics are detailed below: •Commercial and industrial loans that are not secured by real estate or other marketable collateral carry risks associated with the continued and successful operation of a business. The repayment of these loans is highly dependent on the profitability and cash flows generated by the business. Additional risks may arise from industry conditions or reliance on key individuals, which could impact the ability for the business to operate profitably or continue operations. •Commercial real estate mortgages carry risks associated with the occupancy of the property, and the repayment of these loans depends on the net operating income generated from the property. Additional risk exists regarding the value of collateral, particularly in cases of depreciation or imprecise appraisals. •Residential real estate mortgage loans carry risks associated with the borrower’s income stability, continued creditworthiness, and fluctuations in the value of the collateral. •Other consumer loans carry risks associated with the borrower’s financial condition, creditworthiness, and the depreciation of collateral (if applicable), which may decline in value more rapidly than other asset types. Additionally, these loans may be unsecured, further increasing credit risk. Compared to real estate loans, consumer loans are more susceptible to immediate adverse impacts from job loss, divorce, illness, or personal bankruptcy. All loans, regardless of type, are assigned a loan risk classification grade during the underwriting process. The Company categorizes commercial loans into risk categories based on relevant information about each borrower’s ability to service their debt, including: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. Consumer loans receive a risk rating based on the type of loan. This risk classification grade is a key factor in determining whether a loan should be added to the watch list. The primary tool for managing and controlling problem loans is the watch list report, which identifies loans or commitments considered problem loans. The report is maintained by the Chief Credit Officer and reviewed by the Board on a monthly basis. Loan officers are responsible for actively managing credit risk within their loan portfolios and are expected to act proactively in determining whether a loan should be added to the watch list. The following criteria may trigger the inclusion of a loan (other than consumer and residential mortgage loans) to the watch list report: •Loans classified as substandard, doubtful or loss by bank examiners, external loan review, the Chief Credit Officer or the Chief Executive Officer, due to adverse financial trends in the borrower’s business. •Loans placed on nonaccrual status. •Loans more than 30 days delinquent. •Loans renewed or extended despite a demonstrated inability to repay principal. •Loans identified by management as requiring heightened monitoring due to unexpected changes or events that could negatively impact the borrower’s ability to repay. The following factors are commonly used by loan officers to detect emerging credit risk. The presence of one or more of these conditions may also prompt a reevaluation of the loan’s assigned risk classification: •Financial Statement Analysis – Significant deterioration in a borrower’s financial statements may indicate increased credit risk. •Delayed Financial Statements – Failure to provide timely financial statements may signal financial distress. •Delinquent Principal or Interest – Payment delinquencies are often an early indication of credit problems. The Bank’s policy is to review each loan upon becoming past due. •Delinquent Real Estate Taxes – Late property tax payments may indicate cash flow difficulties. The Bank monitors real estate tax payments using third-party services and reviews delinquent tax notices as they become available. •Overdrafts – Frequent overdrafts in a borrower’s deposit account may suggest cash flow problems. •Lack of Cooperation – A borrower’s unwillingness to cooperate with the Bank may indicate underlying financial issues. •Other – Additional risk indicators include serious health issues or the death of a key principal, family difficulties, unexpected renewals or unanticipated new borrowing, inventory levels inconsistent with industry norms, unusual borrower behavior, rising trade payables, or lapses in required insurance coverage. In addition to a loan officer identifying the need to re-evaluate a loan’s current risk classification grade based upon the detection of potential issues with the loan or the borrower, the Bank performs both internal and external loan reviews for a significant portion of the portfolio. The external loan review function independently evaluates the Bank’s underwriting and ongoing portfolio monitoring, which includes the confirmation of the grade or alternatively the recommendation to change the risk classification grade. The Bank’s internal loan review process monitors the performance of commercial borrowers using a risk-based approach and includes the confirmation of the grade or alternatively the recommendation to change the risk classification grade. Characteristics of the Bank’s risk classification grades are as follows: •Pass – Loans to borrowers with sound financial standing, appropriate collateral, adequate cash flow to service the debt, and a prudent leverage ratio. The borrower has a history of timely payments, and future repayment ability is expected to remain strong. Guarantors, if applicable, provide additional support. •Special Mention – Loans with potential weaknesses requiring close monitoring. If left unresolved, these weaknesses could lead to deterioration in repayment prospects or collateral values. These loans are not adversely classified and do not yet pose an undue risk to the Bank. •Substandard – Loans inadequately supported by the borrower’s financial condition or collateral valuation. These loans have a well-defined weakness that could jeopardize repayment. There is a distinct possibility of loss if these deficiencies are not corrected. •Doubtful – Loans with all the weaknesses of a substandard classification, but with a heightened probability that full collection of principal and interest is unlikely. •Loss – Loans deemed uncollectible and of insufficient value to warrant retention as a bankable asset. These loans are charged off. Allowance for Credit Losses - Loans The ACL represents an amount which, in management’s judgment, is adequate to absorb the lifetime expected credit losses that may be sustained on outstanding loans at the balance sheet date. The estimate for expected credit losses is based on an evaluation of the size and current risk characteristics of the loan portfolio, past events, current conditions, reasonable and supportable forecasts of future economic conditions, and prepayment experience as related to credit contractual term information. The ACL is measured and recorded upon the initial recognition of a financial asset. The ACL is reduced by charge-offs, net of recoveries of previous losses, and is increased (or decreased) by a provision for (or recovery of) credit losses, which is recorded in the consolidated statements of income. Management estimates the allowance balance using information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, or term, as well as for changes in environmental conditions, such as changes in unemployment rates, property values, or other relevant factors. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate. The contractual term excludes expected extensions, renewals, and modifications. The ACL is measured on a collective (pool) basis when similar risk characteristics exist. Under the current expected loss (“CECL”) methodology, management uses the weighted average remaining maturity (“WARM”) method to calculate quantitative allowances for all collectively evaluated loan categories. Management generally segments loans based on their federal call codes in order to aggregate loans with similar risk characteristics. To adjust the Bank’s loss rates over a reasonable and supportable forecast period of one year, management collects and analyzes one or a combination of loss drivers which may include unemployment rates, home price indices, interest rates, gross domestic product, or other macroeconomic indicators as appropriate. Following the reasonable and supportable forecast period, expected losses immediately revert to rates that are based on the historical information baseline, plus or minus qualitative adjustments. To further adjust the allowance for credit losses for expected losses not already included within the quantitative component of the calculation, the Bank may consider the following qualitative adjustment factors: levels of and trends in delinquencies and individually evaluated loans; level of and trends in charge-off and recovery activity; trends in volume and terms of loans; effect of changes in risk selection and underwriting standards, and other changes in lending policies, procedures and practices; effect of changes in experience, ability and depth of lending management and other staff; national and local economic trends and conditions; industry conditions and other external factors; effects of changes in credit concentrations; and changes in the quality of the Bank’s loan review system and loan grading. If a loan does not share risk characteristics with a pool of other loans, expected credit losses are then measured on the individual loan basis. When a loan’s expected credit loss is measured individually, it is excluded from any collective assessment. Management will individually evaluate the expected credit loss for any loans that are collateral dependent, are graded doubtful, or are otherwise determined to have risk characteristics that are dissimilar to the established loan pools. The individual evaluation will consider collateral value, an observable market price, or the present value of future cash flows. If the measured value of the loan using one of these methods is less than the carrying value of the loan, a specific reserve is applied to the loan in the amount of the difference. When management determines that foreclosure is probable, or when the borrower is experiencing financial difficulty at the reporting date, and repayment is expected to be provided substantially through the operation or sale of the collateral, the loan is considered collateral dependent. These loans do not share common risk characteristics with other loans and are not included in any collective evaluation for determining an ACL. Under CECL, the Company has adopted the practical expedient to the ACL for collateral-dependent loans, which allows the Bank to record an ACL based on the fair value of the collateral rather than by estimating expected losses over the life of the loan. Under the practical expedient, the ACL is calculated on an individual loan basis based on the shortfall between the value of the loan’s collateral, which is adjusted for liquidation costs and discounts, and its amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required. Allowance for Credit Losses - Off-Balance Sheet Credit The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures is included in accrued expenses and other liabilities on the consolidated balance sheets and adjusted through credit loss provision (or recovery). The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over their estimated lives. The Company applies the loan segmentation practices and CECL methodology utilized for the loan portfolio to its unfunded commitments. As of December 31, 2024 and 2023, no allowance for off-balance sheet credits was required. Modifications to Borrowers Experiencing Financial Difficulty In situations where a borrower is experiencing financial difficulty, management grants a concession to the borrower that it would not otherwise consider, and the modification results in a more than insignificant change in contractual cash flows, the related loan is subject to specific disclosure requirements. Management strives to identify borrowers in financial difficulty early and work with them to modify their loans to more affordable terms before their loans reach nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. The Bank did not extend any modifications to borrowers experiencing financial difficulty that had a more than insignificant change in the contractual cash flows of a loan during the periods ending December 31, 2024 and 2023. Premises and Equipment Land is carried at cost. Premises and equipment are stated at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the assets’ estimated useful lives. The estimated useful lives range from three to eight years for furniture, fixtures and equipment, 10 years for improvements, and 40 years for buildings. Foreclosed Properties Assets acquired through, or in lieu of, foreclosure are held for sale. Foreclosed assets are initially recorded at fair market value at the date of foreclosure less estimated selling costs, thus establishing a new cost basis. Subsequent to foreclosure, valuations of the assets are periodically performed by management. Adjustments are made to the lower of the carrying amount or fair market value of the assets less selling costs. Revenue and expenses from operations and valuation changes are included in non-interest expense. The Bank had no foreclosed assets during the years ending December 31, 2024 and 2023. Rate Lock Commitments The Bank enters into commitments to originate mortgage loans whereby the interest rate on the loan is determined prior to funding (rate lock commitments). Rate lock commitments on mortgage loans that are intended to be sold are considered to be derivatives. The period of time between issuance of a loan commitment and closing and sale of the loan generally ranges from 30 to 120 days. The Bank protects itself from changes in interest rates through the use of best-efforts forward delivery commitments, whereby the Bank commits to sell a loan at the time the borrower commits to an interest rate with the intent that the buyer has assumed interest rate risk on the loan. As a result, the Bank is not exposed to losses and will not realize significant gains related to its rate lock commitments due to changes in interest rates. The correlation between the rate lock commitments and the best-efforts contracts is very high due to their similarity. The fair value of rate lock commitments and best-efforts contracts is not readily ascertainable with precision because rate lock commitments and best-efforts contracts are not actively traded in stand-alone markets. Management considers any gain or loss associated with rate lock commitments during the years ending December 31, 2024 and 2023 to be immaterial. Income Taxes Deferred income tax assets and liabilities are determined using the asset and liability (or balance sheet) method. Under this method, the net deferred tax asset or liability is determined based upon the tax effects of the temporary differences between the book and tax bases of the various balance sheet assets and liabilities and give current recognition to changes in tax rates and laws. Deferred tax assets are recognized for deductible temporary differences, operating loss carryforwards, and tax credit carryforwards. Deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheets along with any associated interest and penalties that would be payable to the taxing authorities upon examination. Interest and penalties associated with unrecognized tax benefits are classified as additional income taxes in the consolidated statements of income. The Company did not record a liability for unrecognized tax benefits at December 31, 2024 and 2023. Transfers of Financial Assets Transfers of financial assets are accounted for as sales when control over the assets has been relinquished. Control over financial assets is deemed to be surrendered when the assets have been isolated from the Company, the transferee obtains the rights (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity. Earnings Per Share Basic earnings per share represents income available to common stockholders divided by the weighted average number of common shares outstanding during the period. Diluted earnings per share reflects additional common shares that would have been outstanding if dilutive potential common shares had been issued, as well as any adjustment to income that would result from the assumed issuance. There were no potentially dilutive shares as of December 31, 2024 and 2023. Class A and Class B common stock participate equally in the allocation of earnings. Advertising Costs The Company’s policy is to charge the production costs of advertising to expense as incurred. The Bank expensed $114 thousand and $33 thousand for advertising costs for the years ended December 31, 2024 and 2023, respectively. Comprehensive Income Accounting principles generally require that recognized revenue, expenses, gains and losses be included in net income. Although certain changes in assets and liabilities, such as unrealized gains and losses on available for sale securities, are reported as a separate component of the stockholders’ equity section of the consolidated balance sheets, such items, along with net income, are components of comprehensive income. For the years ended December 31, 2024 and 2023, the Company’s other comprehensive income primarily relates to changes in unrealized gains and losses on available for sale securities and amortization of unrealized holding losses on securities transferred from available for sale to held to maturity. Items reclassified out of accumulated other comprehensive income to net income include the sale of securities in 2024 and 2023. Fair Value Measurements The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. In accordance with the Fair Value Measurements and Disclosures Topic of the Financial Accounting Standards Board’s Accounting Standards Codification, the fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in many instances, there are not quoted market prices for the Company’s various financial instruments. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument. If there has been a significant decrease in volume and level of activity for the asset or liability, a change in valuation technique or the use of multiple valuation techniques may be appropriate. In such instances, determining the price at which willing market participants would transact at the measurement date under current market conditions depends on the facts and circumstances and requires the use of significant judgment. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions. Loss Contingencies Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed. Management is not aware of any litigation, claims or legal actions during 2024, and does not believe there are now any such matters that will have a material effect on the financial statements. Revenue Recognition Accounting Standards Codification Topic 606 (“ASC 606”), “Revenue from Contracts with Customers,” creates a single framework for recognizing revenue from contracts with customers that fall within its scope and revises when it is appropriate to recognize gains or losses from the transfer of nonfinancial assets such as other real estate. The majority of the Company’s revenues come from interest income and other sources, including loans and securities that are outside the scope of ASC 606. The Company’s services that fall within the scope of ASC 606 are presented in non-interest income in the consolidated statements of income and are recognized as revenue when the Company satisfies its obligation to the customer. ASC 606 is applicable to noninterest revenue streams such as service charges on deposit accounts, other service charges and fees, credit and debit card fees, and trust and wealth management income. The primary noninterest revenue streams within the scope of ASC 606 are discussed below. Service Charges on Accounts Service charges on accounts consist primarily of income from three areas. The Company earns income from account analysis, monthly service charges, and from overdraft, nonsufficient funds, and other deposit account related services as well as income from transaction-based services such as wire transfers and debit card fee income. The Company’s performance obligation for account analysis and monthly service charges is generally satisfied, and the related revenue recognized, over the period in which the service is provided. Payment for account analysis and service charges on deposit accounts is primarily received immediately or in the following month through a direct charge to clients’ accounts. Nonsufficient funds and other deposit account related service charges are transaction-based, and therefore, the Company’s performance obligation is satisfied, and related revenue recognized, at a point in time. Other account related service charges include transaction-based charges for wire transfers, safety deposit box rentals, lockbox, and other services. Safe deposit box rentals are charged to the client on an annual basis and income is recognized upon receipt of payment. The Company has determined that since rentals and renewals occur fairly consistently over time, revenue is recognized on a basis consistent with the duration of the performance obligation. The Company’s performance obligations for wire transfer and other service charges are largely satisfied, and the related revenue recognized, upon completion of the service. Payment is typically received immediately or in the following month. Debit card income is primarily comprised of interchange fee income. Interchange fees are earned whenever debit cards issued by the Company are processed through card payment networks. The Company’s performance obligation for interchange fee income is largely satisfied, and related revenue recognized, when the services are rendered or upon completion. Payment is received immediately or in the following month. During the year ending December 31, 2023, credit card income arose from the Bank’s agency agreement with the First National Bank of Omaha. The Bank terminated this agreement as of September 30, 2023. Prior to the termination of this agreement, the Bank referred clients to this credit card provider and, in return, received a percentage of the profits earned on the referred accounts. Income was recorded on a quarterly basis as payments were received. Trust and Wealth Management Income Trust and wealth management income represents monthly service charges due from clients for managing and administering the clients’ assets. Wealth management and trust services include investment management and advisory services, custody of assets, trust services and similar fiduciary activities, and financial planning services. Revenue is recognized when the performance obligation is completed each month. Income for financial planning services is recorded when payment is received, usually in stages throughout the contract. Segment Reporting The Company operates as a single reportable segment. The Company’s chief operating decision-makers, including senior management and the Board of Directors, evaluate financial performance and allocates resources on a consolidated basis. Although the Company offers a variety of financial products and services, including deposit accounts, loans, treasury management, and trust and wealth management services, management considers these activities to be components of a single business unit. Individual financial results of specific product lines or services are not separately reviewed by senior management for the purpose of making operating decisions. Accordingly, the Company has determined that it operates in one reportable segment under applicable accounting guidance. Recent Accounting Pronouncements In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The amendments in this ASU require an entity to disclose specific categories in the rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold, which is greater than five percent of the amount computed by multiplying pretax income by the entity’s applicable statutory rate, on an annual basis. Additionally, the amendments in this ASU require an entity to disclose the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign taxes and the amount of income taxes paid (net of refunds received) disaggregated by individual jurisdictions that are equal to or greater than five percent of total income taxes paid (net of refunds received). Lastly, the amendments in this ASU require an entity to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign and income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign. This ASU is effective for annual periods beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied on a prospective basis; however, retrospective application is permitted. The Company does not expect the adoption of ASU 2023-09 to have a material impact on its consolidated financial statements. In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.” ASU 2024-03 requires public companies to disclose, in the notes to the financial statements, specific information about certain costs and expenses at each interim and annual reporting period. This includes disclosing amounts related to employee compensation, depreciation, and intangible asset amortization. In addition, public companies will need to provide qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively. ASU 2024-03 is effective for public business entities for annual reporting periods beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027. Implementation of ASU 2024-03 may be applied prospectively or retrospectively. The Company does not expect the adoption of ASU 2024-03 to have a material impact on its consolidated financial statements. Other accounting standards that have been issued by the FASB or other standard setting bodies are not currently expected to have material effect on the Company’s financial position, results of operations or cash flows.

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- Definition The entire disclosure for the organization, consolidation and basis of presentation of financial statements disclosure, and significant accounting policies of the reporting entity. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 235 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/235/tableOfContent Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 275 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/275/tableOfContent Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 810 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/810/tableOfContent Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 205 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/205/tableOfContent + Details
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