As filed with the Securities and Exchange Commission on May 15, 2026.
Registration No. 333-          
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Forbright, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware602226-3126112
(State or Other Jurisdiction of Incorporation(Primary Standard Industrial(I.R.S. Employer
or Organization)Classification Code Number)Identification Number)
4445 Willard Ave, Suite 1000
Chevy Chase, Maryland 20815
(301) 299-8810
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Kori Ogrosky
Executive Vice President, Chief Legal Officer and Corporate Secretary
c/o Forbright, Inc.
4445 Willard Ave, Suite 1000
Chevy Chase, Maryland 20815
(301) 299-8810
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
Michael P. Reed
Skadden, Arps, Slate, Meagher & Flom LLP
One Manhattan West
New York, New York 10001
(212) 735-3000
Edgar J. Lewandowski
Evan G. Zuckerman
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, New York 10017
(212) 455-2000
Approximate date of commencement of proposed sale to public: As soon as practicable after this registration statement is declared effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
☒
Smaller reporting company
o
Emerging growth company
☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.


The information in this preliminary prospectus is not complete and may be changed. We and the selling stockholders may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to Completion, dated May 15 , 2026
PRELIMINARY PROSPECTUS
          Shares
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Class A Common Stock
This prospectus relates to the initial public offering of shares of Class A common stock of Forbright, Inc., a Delaware corporation and the bank holding company for Forbright Bank, our wholly owned subsidiary and a Maryland state-chartered non-member commercial bank. We are offering           shares of our Class A common stock and the selling stockholders identified in this prospectus are offering           shares of our Class A common stock. We will not receive any proceeds from the sale of shares of Class A common stock by the selling stockholders.
We expect the initial public offering price will be between $           and $           per share. Currently, no public market exists for our Class A common stock.
We intend to use the net proceeds that we receive from this offering for general corporate purposes.
Following this offering, we will have two classes of authorized common stock: Class A common stock and Class B common stock. Holders of our Class A common stock will be entitled to one vote per share on all matters to be voted on by stockholders. Each share of Class B common stock is non-voting, with limited exceptions, and subject to certain limitations, is convertible into Class A common stock.
We have applied to list our Class A common stock on the Nasdaq Global Select Market under the symbol “FRBT.”
We are an “emerging growth company” as defined under the federal securities laws, and may take advantage of reduced public company reporting requirements and relief from certain other requirements otherwise generally applicable to public companies. See “About this Prospectus—Implications of Being an Emerging Growth Company.”
Investing in our Class A common stock involves risks. See “Risk Factors” beginning on page 26 to read about certain factors you should consider before buying our Class A common stock.
None of the United States Securities and Exchange Commission, any state securities commission, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
Per Share
Total
Initial public offering price$                     $                     
Underwriting discounts and commissions(1)
$                     $                     
Proceeds, before expenses, to us$                     $                     
Proceeds, before expenses, to the selling stockholders$                     $                     
__________________
(1)See “Underwriting” for a description of the compensation payable to the underwriters.
The underwriters have an option to purchase up to an aggregate of            additional shares of Class A common stock,            from us and            the selling stockholders, in each case, at the initial public offering price, less underwriting discounts and commissions. The underwriters can exercise this option at any time within 30 days from the date of this prospectus. In the event the underwriters do not exercise their option to purchase additional shares in full, the underwriters will first purchase shares from the selling stockholders, with any remaining shares being sold by us. We will not receive any proceeds from any sales of shares by the selling stockholders.
These securities are not deposits, savings accounts or other obligations of any bank or savings association and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency and are subject to investment risks, including the possible loss of the entire amount you invest.
The underwriters expect to deliver the shares of Class A common stock against payment on or about          , 2026.
Goldman Sachs & Co. LLCJ.P. MorganBarclays
Wells Fargo SecuritiesPiper SandlerTD SecuritiesSantanderCenterview Partners
Prospectus dated            , 2026


TABLE OF CONTENTS
Through and including           , 2026 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
We, the selling stockholders and the underwriters have not authorized anyone to provide you with different or additional information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared or that has been prepared on our behalf or which we have referred you in connection with this offering of securities. We, the selling stockholders and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you or any representation that others may make to you. This prospectus is an offer to sell only the shares of Class A common stock offered by this prospectus, and only under circumstances in which it is lawful to do so. We, the selling stockholders and the underwriters are not making an offer of these securities in any state, country or other jurisdiction where the offer is not permitted. You should not assume that the information in this prospectus or any free writing prospectus is accurate as of any date other than the date of the applicable document regardless of its time of delivery or the time of any sales of our Class A common stock. Our business, financial condition, results of operations, cash flows and prospects may have changed since the date of the applicable document.
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ABOUT THIS PROSPECTUS
Glossary
Unless otherwise indicated or the context otherwise requires, all references in this prospectus to (i) “we,” “us,” “our,” the “Company,” “Forbright” and similar terms refer to Forbright, Inc. and its consolidated subsidiaries, and (ii) our “bank,” the “Bank” and “Forbright Bank” refer to Forbright Bank, our banking subsidiary, and its consolidated subsidiaries.
Unless otherwise indicated or the context otherwise requires, all references in this prospectus to:
1940 Act
refers to the Investment Advisors Act of 1940, as amended.
ACLrefers to allowance for credit losses.
AIrefers to artificial intelligence.
AIMLrefers to artificial intelligence and machine learning.
Alliance Partnersrefers to Alliance Partners, our wholly owned subsidiary.
AMLArefers to the Anti-Money Laundering Act of 2020.
BancAlliancerefers to a Maryland non-stock corporation, representing a network of banks, governed by a member-elected Board of Directors and managed by Alliance Partners.
BHCArefers to the U.S. Bank Holding Company Act of 1956, as amended.
board of directorsrefers to our board of directors.
BSArefers to the federal Bank Secrecy Act of 1970, as amended.
CBLRrefers to the community bank leverage ratio.
CECLrefers to current expected credit loss.
CFPBrefers to the Consumer Financial Protection Bureau.
CIFrefers to customer information file.
Coderefers to the Internal Revenue Code of 1986, as amended.
Congressionalrefers to Congressional Bancshares, Inc. and its wholly-owned bank subsidiary, Congressional Bank, the predecessor entities to Forbright, Inc. and Forbright Bank, respectively, prior to our rebranding.
consumerrefers generally to individuals and other market participants that use banking services.
cost-to-serve
refers to headcount costs for front-line full time employees (contract center, deposit operations and fraud operations, excluding leadership operations roles), and third-party software variable costs.
CPACErefers to Commercial Property Assessed Clean Energy.
CRArefers to the Community Reinvestment Act of 1977, as amended.
CRErefers to commercial real estate.
customerrefers generally to our individual and business clients that use our banking services.
DIFrefers to the Deposit Insurance Fund.
digital bankingrefers to the digitization and digital platforming of traditional banking services, processes and activities.
direct banksrefers to banking institutions primarily funded through digital deposits.
Dodd-Frank Actrefers to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as amended.
Exchange Actrefers to the Securities Exchange Act of 1934, as amended.
FCRArefers to the Fair Credit Reporting Act.
FDI Actrefers to the Federal Deposit Insurance Act, as amended.
FDICrefers to the Federal Deposit Insurance Corporation.
Federal Reserverefers to the Board of Governors of the Federal Reserve System.
FFIECrefers to the Federal Financial Institutions Examination Council.
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FHArefers to the Federal Housing Administration.
FHLBrefers to the Federal Home Loan Bank.
FOMCrefers to the Federal Open Market Committee.
GAAPrefers to the U.S. Generally Accepted Accounting Principles.
GDP
refers to gross domestic product.
GLBArefers to the Gramm-Leach-Bliley Act of 1999, as amended.
HUDrefers to the federal Department of Housing and Urban Development.
IRSrefers to the Internal Revenue Service.
JOBS Actrefers to the Jumpstart Our Business Startups Act of 2012, as amended.
MBCA
refers to the Mid-Size Bank Coalition of America.
middle marketrefers to U.S. companies with annual revenues between $10 million and $1 billion, collectively generating approximately $10 trillion in annual revenue, as of December 31, 2025, according to the National Center for the Middle Market.
MOFRrefers to the Maryland Office of Financial Regulation.
NPS
refers to our net promoter score, which can range from a low of negative 100 to a high of positive 100, that we use to gauge customer satisfaction. NPS benchmarks can vary significantly by industry, but a score greater than zero represents a company having more promoters than detractors. NPS reflects client responses to the following question—"On a scale of zero to ten: How likely are you to recommend Forbright to a friend or colleague?" Responses of 9 or 10 are considered "promoters," responses of 7 or 8 are considered neutral or "passives," and responses of 6 or less are considered "detractors." We then subtract the number of respondents who are detractors from the number of respondents who are promoters and divide that number by the total number of respondents. Our methodology of calculating NPS reflects responses from all consumers who open an account with us and choose to respond to the survey question. In particular, it reflects responses given between January 1, 2025 and December 31, 2025, and reflects a sample size of 2,776 responses over that period. NPS gives no weight to customers who decline to answer the survey question. We benchmark our NPS score to the financial industry benchmark NPS provided by Qualtrics, which is derived from over 11 million responses and 720 brands across the financial industry (banks, consumer finance, insurance), over the same period.
OCCrefers to the Office of the Comptroller of the Currency.
OFACrefers to the Treasury Department’s Office of Foreign Assets Control.
OREOrefers to other real estate owned.
Sarbanes-Oxley Actrefers to Sarbanes-Oxley Act of 2002, as amended.
SBArefers to the U.S. Small Business Administration.
SECrefers to the U.S. Securities and Exchange Commission.
Securities Actrefers to the Securities Act of 1933, as amended.
SOFR
refers to Secured Overnight Financing Rate.
super-regional bank
refers to a bank with hundreds of billions of dollars in total assets, which today are generally among the top ten largest banks by current asset size.
USA PATRIOT Actrefers to USA PATRIOT Act of 2001, as amended.
Certain amounts, percentages and other figures presented in this prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals, dollars or percentage amounts of changes may not represent the arithmetic summation or calculation of the figures that precede them.
Our fiscal year ends December 31 of each year. References to any “year,” “quarter” or “month” mean “fiscal year,” “fiscal quarter” or “fiscal month,” respectively, unless the context requires otherwise. References to “fiscal year 2020,” “fiscal year 2024,” “fiscal year 2025,” “first quarter 2025” and “first quarter 2026” relate to our fiscal years ended December 31, 2020, December 31, 2024, December 31, 2025, and the three months ended March 31, 2025, and March 31, 2026, respectively.
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Market and Industry Data
Unless otherwise indicated, estimates and information contained in this prospectus concerning our industry, including our general expectations, market position, market opportunity, and market size, are based on industry publications and reports generated by third-party providers (including a third-party report prepared by a management consulting firm that was commissioned by us), other publicly available studies, and our internal sources and estimates. This information involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. The content of, or accessibility through, the below sources, except to the extent specifically set forth in this prospectus, does not constitute a portion of this prospectus and is not incorporated herein.
The sources of certain statistical data, estimates and forecasts contained elsewhere in this prospectus are from the following independent industry publications and datasets:
•The American Bankers Association (“ABA”), “How Americans Bank: Most-Used Banking Methods.” November 2025;
•The ABA Banking Journal, “Survey on Branch Transformation,” October 2015;
•The National Center for the Middle Market (“NCMM”), “Year-End 2025 Middle Market Indicator,” February 2026;
•Fort Washington Investment Advisors, Inc. (“FWIA”), “Leveraged Credit Markets: Then and Now,” 2024;
•The Federal Reserve, FEDS Notes, “Size and Survival of Entrants to Retail Banking,” September 2023.
Trademarks, Service Marks and Trade Names
We own or have rights to various trademarks, service marks and trade names that we use in connection with the operation of our business. This prospectus may contain trademarks, service marks and trade names of third parties, which are the property of their respective owners. Our use or display of third parties’ trademarks, service marks or trade names in this prospectus is not intended to and does not imply a relationship with, or endorsement or sponsorship by, us. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus may appear without the ®, TM or SM symbols, but the omission of such references is not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable owner of these trademarks, service marks and trade names.
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PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus and does not contain all the information you should consider before making an investment decision. You should read the entire prospectus carefully, including the sections entitled “Special Note Regarding Forward-Looking Statements,” “Risk Factors,” “—Summary Historical Consolidated Financial Data and Other Information,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the accompanying notes included elsewhere in this prospectus, before making an investment decision.
Forbright operates at the intersection of two powerful, structural forces reshaping the U.S. banking sector: the rapidly evolving needs of the $10 trillion national middle market and the broadly accelerating shift toward digital-first banking. Together, these trends have created a distinctive opportunity for the establishment and growth of a category-defining bank of the future, combining modern technology, differentiated lending and deposit products, and scaled fee-based businesses to serve dynamic middle-market companies and consumers.
Forbright offers a modern financial services platform spanning nationwide middle-market lending, digital consumer banking, strategic advisory and asset management services. We trace our history back to Congressional Bank, established in 2003, but our period of growth and modernization began in 2020 when John Delaney returned from public service to the private sector to lead a $369 million capital infusion in 2021 as well as the reimagining and rebranding of the Company to support our new growth strategy. A key to our success in building Forbright has been management’s differentiated ability to leverage its experience and relationships to attract and retain world-class talent aligned with our mission.
We believe our business model represents a significant evolution of the traditional commercial banking paradigm, which is often largely limited by geographic footprint and relies on non-interest-bearing deposit funding that has come under structural pressure as depositors have increasingly sought yield-bearing alternatives in the recent high interest-rate environment. We function as a precision-guided platform that is designed to deliver substantial value to customers across both the asset and liability sides of our balance sheet, while maximizing returns for our stockholders. From December 31, 2020 to December 31, 2025, consolidated assets have grown from $1.9 billion to $7.9 billion and net income has grown from $12.2 million to $87.9 million. As of March 31, 2026, consolidated assets were $8.2 billion and for the first quarter 2026 net income was $11.6 million. 
We believe the industry backdrop and trends impacting banking are favorable for our purpose-built business model.
The middle market represents approximately one-third of private sector GDP and employs approximately 48 million people, according to NCMM. Despite its scale, the sector is inherently fragmented within an increasingly nationalized economy. It encompasses nearly 200,000 companies, approximately 99.9% of which employ fewer than 500 employees, according to NCMM and research from the SBA as of 2025. In 2025, 85% of middle-market companies reported year-over-year growth, according to NCMM. Across the country, no single industry represents more than 20% of the total middle market, further highlighting both the national and fragmented nature of this sector of the U.S. economy, according to NCMM. Consequently, traditional community and regional banks, long anchored to their home geographies and relationship-driven lending models, are increasingly unable to match the scale, speed and sector specialization demanded by middle-market borrowers. 
Concurrently, digital banking has profoundly reshaped the U.S. banking landscape by shifting consumer behavior, enhancing technological integration and reducing friction in moving deposits between banks. Deposits held by direct banks increased from less than 1% in 2000 to approximately 10% as of December 31, 2025, according to the FFIEC and the Federal Reserve. Despite this, as of October 2025, approximately 76% of American consumers prefer managing their bank accounts digitally and 54% opt for mobile banking as their primary choice, according to the ABA. Consequently, traditional banks have been compelled to adopt deposit strategies that can affect their overall cost of deposits and competitive positioning. We expect the increasing impact of new technologies will reduce the friction of money movement, allowing consumers to seek higher deposit yields. This dynamic could exert pressure on non-interest bearing and other low-cost deposits, and threaten legacy bank models historically reliant upon this form of funding.
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To address these trends, we have intentionally designed our strategy and built our platform to create a virtuous cycle that we expect will lead to strong growth and returns.
This cycle begins with attracting and retaining a loyal, digitally-engaged consumer base by offering a competitive value proposition for deposits and related services. We launched our digital deposit platform in May 2024, and as of March 31, 2026, we had $3.9 billion of digital deposits consisting of both high-yield savings balances and digital time deposits. Digital deposit capabilities provide us access to vast funding markets, eliminate geographic constraints and fuel our middle-market lending growth with minimal additional overhead. In turn, our middle-market lending strategy generates strong, risk-adjusted returns and drives meaningful fee income, which enables us to offer competitive deposit rates.
For context, we believe the amount of deposits gathered by our digital deposit platform from its launch in May 2024 through March 31, 2026, would be equivalent to the amount of deposits that approximately 200 physical bank branches, employing approximately 1,200 full-time employees, would be projected to gather during the first 24 months following opening, based on analysis conducted by the Federal Reserve and the ABA Banking Journal, which found that, on average, a newly opened retail branch holds approximately $20 million in deposits after 24 months and employs six full-time employees. Looking forward, we expect our digital deposit platform will provide us with significant flexibility to raise deposits on an as-needed basis to support future growth.
The nimble and precise “as-needed” nature of the funding generated from our deposits, of which 86.4% were FDIC-insured as of March 31, 2026, reflects a platform intentionally built to scale with the needs of our expertly managed suite of middle-market lending go-to-market strategies. Our entrenched lending relationships also enable us to source loans for other financial institutions, including through a proprietary network of over 400 community banks via our Alliance Partners business, and to provide credit and asset management services to businesses and customers, generating highly attractive recurring fee-income. 
Our broader financial services platform is underpinned by modern banking systems that leverage technology to provide a robust, scalable and API-driven architecture that aims to support efficient operations and a differentiated customer experience. Significant back-office automation drives efficiency and operating leverage, enabling a lower marginal cost-to-serve of approximately 15 basis points of digital deposits for fiscal year 2025. Unlike a traditional commercial bank, we are not burdened by legacy technology systems or the operating expense and geographic constraints typically associated with a branch-based deposit and lending model. We also believe we distinguish ourselves from emerging "neobanks," which are often characterized by high customer acquisition costs and uncertain paths to sustainable profitability.
We believe we have synthesized the inherent funding advantages of a regulated bank with the innovation, agility, and technological capabilities commonly found in financial technology (“fintech”) companies. This fusion is further strengthened by a disciplined risk management culture, active balance sheet optimization and integrated fee-based businesses. The result is a digitally-native, high-growth institution delivering attractive risk-adjusted returns that we believe is uniquely positioned to lead the next generation of banking.
Leadership and History
We are led by our founder, Chairman and Chief Executive Officer, John Delaney. Mr. Delaney possesses a distinguished track record, founding, leading and ultimately selling two publicly traded financial services companies. In 1993, Mr. Delaney founded and later took public HealthCare Financial Partners, Inc., which provided loans to small- to mid-sized healthcare service companies. In 2000, he founded and later took public CapitalSource Inc. (“CapitalSource”), which provided loans to a wide range of middle-market businesses. In addition, Mr. Delaney represented the state of Maryland in the United States House of Representatives from 2013 until 2019. The combination of Mr. Delaney’s financial acumen, historical success in the industry and leadership capabilities lends considerable experience to identifying differentiated market opportunities and attracting, hiring and retaining a team that can successfully execute against an evolving opportunity set.
Mr. Delaney’s involvement with Forbright began with an investment in 2011 in Congressional, and following his service in the U.S. House of Representatives, Mr. Delaney returned from public service to the private sector in 2020, where he leveraged his decades of financial services experience and leadership capabilities to assemble and
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lead a talented and like-minded team to drive the Bank’s strategic direction and growth, beginning his service as Executive Chairman of the Bank in 2020 (then still under the Congressional banner).
In 2021, Mr. Delaney led a $369 million infusion of equity capital from a consortium of prominent institutional investors, including Centerbridge Partners, Gallatin Point Capital and Bayview Asset Management, fueling significant growth in products and services as well as continuous platform efficiency enhancements. This ultimately provided the foundation for our strategic rebranding as Forbright, Inc. in 2022, a pivotal moment in the Company’s history and growth led by Mr. Delaney as Chairman and Chief Executive Officer.
Strategic Pillars 
Our strategic framework is built upon three interconnected pillars, each designed to provide a distinct competitive advantage and drive sustainable growth. These pillars synthesize the best attributes of traditional banking, fintech, and sophisticated asset management.
•Balance Sheet Strength. As a regulated, FDIC-insured institution, Forbright Bank benefits from the inherent trust, robust regulatory framework and strong capital and liquidity position that are hallmarks of a traditional bank. This foundation provides stability, enabling us to attract and retain deposits and confidently deploy capital in our lending activities. From December 31, 2020 to March 31, 2026, we have grown our deposits from $1.4 billion to $7.1 billion. 
•Fintech Culture of Innovation. The foundation of our tech-forward approach is a fully cloud-native digital financial services platform. This architecture improves our teams’ ability to innovate faster, acquire new customers more efficiently and automate operations to minimize costs. This includes an integration layer that enables plug and play of advanced solutions and data capabilities that provide visibility into the business. This drives effective actions (for example, trigger-based customer communications and integrated fraud-prevention tools), and a third generation core with real-time processing. For our customers, this provides onboarding with rapid decisioning, personalization of services and ultimately enables us to respond quickly to evolving market demands and customer needs.
•Conservative Credit Discipline and Systematic Sourcing Strategies. Our lending, credit and portfolio management approach encompasses specialized underwriting expertise and focused middle-market origination channels, maintaining rigorous credit integrity and an execution-oriented mindset typically found in leading alternative asset managers. We believe this discipline creates ample opportunities, delivers a superior borrower experience and a meticulous evaluation of credit risk, proactive portfolio construction and active management of our lending assets, leading to superior risk-adjusted returns and robust asset quality. Our commercial loan yield and net-charge off ratio were 8.8% and 0.04% respectively for fiscal year 2025 and 7.4% and 0.08%, respectively, for first quarter 2026. 
Business Model
Our business model is intentionally designed to capitalize on the evolving needs of the $10 trillion national middle market and the accelerating shift towards digital banking, while delivering value to our depositors, borrowers and other stakeholders.
Over the last several years we have built the operational foundation to achieve the size and scale of a super-regional bank with national origination capabilities, sector-specialized origination and credit teams, and a fully integrated digital platform. Our model centers on a virtuous cycle: a superior deposit value proposition to attract loyal, digitally-engaged customers whose deposits fund our scalable middle-market lending platform while generating valuable fee income that further enhances returns on capital. 
Go-to-Market Approach: National Middle-Market Lending Strategy
Our go-to-market lending strategy is focused on expanding our market share in middle-market segments that have substantial addressable markets and strong growth profiles. Our deep sector knowledge and extensive relationships built over decades of financial services experience provide a distinct competitive advantage. We
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believe our purpose-built team is able to successfully identify, originate and manage high-quality credit opportunities, thereby building a robust and diversified portfolio that generates strong returns. 
We provide financial solutions that are national in scope and built around specialized frontline capabilities supported by centralized risk oversight. We currently operate the following go-to-market lending strategies: 
•Healthcare Finance - We provide working-capital and real-estate loans to skilled nursing, seniors housing and behavioral health facilities. We generate both lending returns through net interest income and significant fee revenue, including via FHA/HUD origination.
•Lender Finance - We serve financial services companies, providing bespoke senior-secured, asset-based loans to non-bank lenders across a broad range of asset classes and industries. 
•Real Estate Finance - Nationally, we focus on bank-eligible first-lien CRE bridge loans for acquisitions, recapitalizations, restructurings, and construction.
•Fund Finance - We provide customized asset-based lending products to credit funds and alternative asset managers backed by diversified loan portfolios and assets. This strategy works in concert with, rather than positioning us as competitors to, private capital providers.
•Corporate Finance - We provide customized senior-secured, first-lien credit solutions to strong, cash-flowing middle-market companies, often in partnership with private equity sponsors. In addition to generating lending returns via net interest income, we also earn meaningful fee revenue by distributing loans via the BancAlliance network. In addition, we provide first-lien financing for asset-secured energy projects with strong cash flows.
The following charts show the growth in our total loan portfolio balances from December 31, 2024 to March 31, 2026, as well as the diversification of our go-to-market strategies as of March 31, 2026:
ps01da.jpg
Scalable Digital Deposit Platform
In May 2024, we launched our digital deposit platform, introducing a competitive high-yield savings deposit product. The launch of our digital deposit platform has significantly reduced our reliance on other forms of wholesale funding as they have been replaced by stable and granular digital consumer deposits. More recently, we have also introduced a digital time deposit product, and have ambitions to continue to expand the product suite over time. We supplement our digital deposit platform with deposits from our legacy community bank markets in Maryland, Virginia and the District of Columbia, as well as deposits from our commercial lending customers and wholesale funds, though our shift to digital deposits has decreased our reliance on such deposits - our wholesale funding ratio has decreased from 71% of total assets in December 31, 2022 to 25% as of March 31, 2026. 
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The following charts show the growth in our deposits from December 31, 2024 to March 31, 2026, and highlight our deliberate shift in funding model:
ps02ea.jpg
Our cloud-native, API-driven, and data-powered technology infrastructure is the foundation of our digital deposit platform and is built for where we believe the industry is heading. Our digital deposit platform has led to superior results in key benchmarks, including customer acquisition and onboarding performance, fraud detection and customer experience. We have achieved the following results:
•Convert more customers: 81% of our approved digital deposit accounts are funded within seven days of account opening, as compared to only 44% for banks with similarly situated digital deposit channels to us, according to a study commissioned by us. As of March 31, 2025, 32% of deposit customers were under the age of 35 and for the three months ended March 31, 2026, the average balance per open CIF across all deposit customers was approximately $47,000 deposits per open CIF. The combination of our automated application approval decisioning and higher pull-through rates leads to lower customer acquisition costs to us, represented by 51 basis points of new deposits for fiscal year 2025 as compared to 72 basis points for banks with similarly situated lower brand awareness, top-tier rates and similar marketing channel mixes to us, according to a study commissioned by us.
•Strong Fraud Prevention Capabilities: Our purpose-built fraud loss prevention solutions and operations have resulted in immaterial booked fraud losses, totaling less than $100,000 from platform launch through December 31, 2025 (less than 0.08 basis points on total transaction volume), and we believe this is well below industry targets for deposit products of 0.41 basis points on total transaction volume, according to a 2024 study we participated in as part of the MBCA.
•Deeper customer engagement and retention: For the year ended December 31, 2025, we had an NPS of 63 (+22 above the financial industry’s average NPS, according to Qualtrics), and as of March 31, 2026, we had an Apple App store rating of 4.8 stars. Additionally, within eight months following the launch of our digital deposit platform in May 2024, we achieved 112% growth in customer deposit balances, which was approximately three times the industry average of approximately 36% during such period, according to a study commissioned by us.
High-Margin, Capital-Light Fee Businesses
Our fee-based businesses are intentionally constructed to complement and enhance our core lending capabilities. These capital-light businesses generate recurring revenue by monetizing our specialized underwriting, structuring, distribution and servicing expertise across the credit lifecycle. They leverage the same foundational assets as our lending strategies—sector expertise, centralized credit discipline and scalable technology infrastructure.
Our fee-based businesses strategically cultivate proprietary partner networks, including BancAlliance, a broad network of U.S. based community banking partners that is managed by our Bank’s wholly-owned subsidiary Alliance Partners. This network provides us with a unique distribution channel and revenue diversification, enhancing our return on equity. We invest in the network by providing differentiated value-added services such as educational and training programs as well as peer-to-peer networking opportunities, resulting in deep, sticky relationships. Alliance Partners helps the community banks in BancAlliance meet their asset and return objectives by
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utilizing our full-service lending platform with a disciplined approach to originating, screening, underwriting, managing and servicing loans.
The following charts show the growth in our core non-interest income composition from December 31, 2024 to March 31, 2026, and highlight our core non-interest income composition for fiscal year 2025:
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For first quarter 2026, our core non-interest income as a percentage of adjusted total revenue was 23.2%, an increase of approximately 630 basis points from fiscal year 2025. The following is a brief description of our fee-based businesses.
•Alliance Partners – We source, distribute, and advise on middle‑market loans on behalf of BancAlliance, generating gain-on-sale and advisory fees by providing access to high‑quality credit opportunities that these institutions could not otherwise originate. 
•FHA/HUD Lending – We originate loans eligible for refinancing into government‑guaranteed HUD products, reducing long-term balance sheet exposure while generating fees throughout the credit lifecycle.
•Solar Services – We provide sourcing, servicing and asset-administration capabilities for residential solar loan portfolios owned by financial institutions and banks, earning recurring fees without assuming fixed-rate credit exposure.
•Loan & Deposit Fee Income – We also earn additional non-interest income from traditional banking services, such as loan fees and deposit fees.
Our Competitive Strengths and Advantages
We possess a unique combination of competitive strengths that position us to capitalize on our substantial market opportunities and drive outsized growth and risk-adjusted returns.
•People and Culture: We have a highly experienced management team, led by our founder John Delaney, who has been able to attract and retain world-class talent with deep industry expertise. In aggregate, our leadership group has on average 27 years of financial services experience and has created a nimble, entrepreneurial culture that creates a platform for our high-performing teams to thrive.
•Business Model: We purpose-built Forbright to uniquely capitalize on structural forces reshaping the U.S. banking sector, while creating a virtuous cycle that we believe improves customer outcomes and delivers durable competitive advantages. We combine the vast, stable funding aspects of a digital bank with a high-growth, high-risk-adjusted return middle-market lending franchise and high-margin fee income businesses.
•Innovation Mindset: Our innovative, entrepreneurial culture is at the core of our identity. We invest for the future and create differentiated go-to-market strategies, enabling us to seize on market opportunities. Our advanced proprietary technology infrastructure underpins our entire business, enabling us to efficiently
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scale our operations while providing a differentiated customer experience. We also created a proprietary network of community banks, BancAlliance, for which we source, structure, distribute and manage loans. This drives fee income while supporting larger commitments and maintaining borrower relationships that would otherwise require a more sizable balance sheet.
Taken together, our strengths drive our ability to generate significant growth and returns and allow us to effectively compete against a range of financial institutions. 
Primary Competitors & Our Differentiation
Our competitors include traditional regional and money center banks, hybrid/digital banks, private credit funds, fintech companies and other non-bank lenders. We believe our advantage lies within strong relationships and personalized services, our commitment to technological innovation and brand recognition for our nationally-based lending strategies. We intend to continue to strengthen our product offerings to address the evolving financial landscape and broaden our services through thoughtful evolution of our middle-market lending strategies and the continued expansion of our digital deposit platform.
Highly Attractive National Middle-Market Lending Franchise
Competitors across middle-market lending range from national commercial banks to alternative and private credit asset managers. We believe our deep sector expertise allows us to identify risks and opportunities that generalist commercial competitors miss, resulting in above average credit outcomes and a disproportionate ability to structure solutions that solve problems specific to our middle-market clients.
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Alternative and private credit is not well suited for the type of collateral intensive strategies that define our middle-market lending approach. We believe that the management fees generated by private credit vehicles do not support the sourcing, due diligence and portfolio management needed for collateral-based lending and that our loan structures are generally more conservative than alternative and private credit competitors. We believe the
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combination of these factors allow us to lend at tighter spreads than alternative and private credit, providing us a competitive advantage while still maintaining attractive risk-adjusted returns.
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Our ability to provide flexible, fast, and sophisticated capital solutions allows us to directly originate loans at premium yields compared to traditional banks that have been long anchored to geographically-bounded, standardized lending models.
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In our target markets, we are not just a lender; we are a strategic partner. This role creates self-sustaining and cost-efficient deal flow and high borrower retention.
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Scalable Digital Deposit Platform
We compete with both digital and traditional banks for funding and have transformed deposit gathering from a cost center into a competitive advantage. By building and managing our digital deposit platform, we seek to liberate ourselves from the typical bureaucratic limitations and reduce our reliance on the legacy technology commonly utilized by many of our competitors. Our cloud-native technology infrastructure is purposefully designed for flexibility and speed with few administrative constraints, which we believe enables us to launch new products and features more efficiently and expeditiously than those associated with traditional development timelines, as we did with our digital high yield savings product offering.
Our technology infrastructure is intended to provide us with the freedom and flexibility to innovate with fewer constraints. Our digital deposit platform’s bespoke integration layer enables us to plug and play third-party applications with limited friction. Further, our data platform is designed to provide visibility into key aspects of our business, allowing us to utilize tools that proactively detect anomalies and mitigate potentially negative customer impact.
For example, our integration and data layers help facilitate efficient customer acquisition for new products and features and have contributed to compelling customer acquisition costs, which were 51 basis points of new deposits for fiscal year 2025. Additionally, our back-office automation drives efficiency and operating leverage with a marginal cost-to-serve of approximately 15 basis points of average digital deposits for fiscal year 2025. Our digital deposit platform is designed to integrate cutting-edge marketing technology tools with a sophisticated data infrastructure to attract, convert and retain consumers and small businesses, offering savings tools and a smooth interface. We believe that this agility has contributed to high customer satisfaction and advanced operational and fraud resiliency. We anticipate that these capabilities will enable us to attract and retain deposit balances at costs below those of our competitors.
Unlike traditional banks, our digital deposit platform is designed to scale without the geographic constraints of a physical footprint, providing us with a significant source of liquidity and abundant funding for our high-growth, high-risk-adjusted return middle-market lending franchise.
High-Margin, Capital-Light Fee Businesses
Our fee businesses enhance our balance sheet and risk management capabilities, providing the flexibility to retain assets on our balance sheet or process them to third parties, which allows us to more effectively compete with larger competitors. Further, our fee businesses leverage our credit and sourcing infrastructure, including from services related to a differentiated and proprietary network of community banks, BancAlliance, that allows us to drive fee income while supporting larger loan commitments and maintaining borrower relationships that would otherwise require a more sizable balance sheet.
•Asset Management: We advise third-party capital, including from BancAlliance, which generates management fees. Our strategic advantage versus other asset managers is in our ability to source loans with attractive risk-adjusted returns and leverage our credit and risk infrastructure to provide differentiated value to the community banks in our unique distribution channel, BancAlliance.
•Loan Advisory and Servicing: We utilize our origination, credit and portfolio management expertise, licensure and technological stack to provide services to borrowers such as FHA/HUD processed loans and master servicing capabilities to asset owners and investors.
•Other Fee Income: We also generate fees from traditional banking services including, loan fees, deposit fees and other recurring revenue streams embedded in our lending and servicing operations.
These fee businesses further enhance balance sheet and risk management, providing the flexibility to retain assets on our balance sheet or process them to third parties, which allows us to more effectively compete with larger competitors.
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Growth Strategy
We have purpose-built our business model to capitalize on the secular tailwinds behind the rapidly evolving middle market and the migration towards digital-first banking. Since 2021, we have been meaningfully investing in our franchise, including developing an advanced technology architecture, bringing in highly talented senior bankers and establishing a robust, scalable infrastructure. These investments have contributed to an approximately 620% increase in net income, from $12.2 million in fiscal year 2020 to $87.9 million in fiscal year 2025, and positioned the Company to accelerate growth and drive meaningful operating leverage, which will lead to continued profitability enhancements.
New Digital Deposit Products
We have experienced considerable growth within our digital deposit platform since launching in May 2024, as exemplified by growing this funding source to $3.9 billion across approximately 95,000 accounts as of March 31, 2026. We continue to prioritize deepening our relationships with existing customers. In addition, we are replicating our high-yield savings strategy with other products, such as launching our online certificate deposits strategy in April 2025, and we intend to offer digital checking products in the first quarter of 2027, to continue to diversify and expand our funding base. We will continue to refine our deposit strategy as the digital marketplace evolves, supported by the design and capabilities of our technology-enabled platform.
Scaling Existing Strategies
We have a successful track record of hiring and retaining talent, having added 35 commercial lenders and portfolio managers since 2021, all of whom are seasoned professionals. The management team has generally known and worked with these business leaders at prior institutions. These lenders have deep relationships and generally are able to bring their clients’ business to Forbright over time, driving attractive loan growth as they integrate with our platform. 
Our middle-market focus offers abundant opportunities for growth as evidenced by our loan balances increasing $1.3 billion, or 31%, during fiscal year 2025, and $1.3 billion in first quarter 2026, a 30% increase compared to first quarter 2025. Our trusted lending expertise and targeted focus reinforces our successful ability to win new lending opportunities. 
Extend Lending Expertise
We also have the ability to grow our lending franchise into complementary middle-market strategies. For example, in first quarter 2026, we began hiring personnel in connection with establishing our asset finance lending strategy, which will originate business-dependent equipment finance loans through primarily fixed-rate loans across a range of industries and geographies. We will continue to consider targeted expansion with new middle-market lending initiatives within our expertise, and as specialists in middle-market lending, we expect to identify and launch new strategies to deepen our market penetration.
Selective Pursuit of Strategic Investments and Acquisitions
While we are primarily focused on organic growth, our leadership team has a track-record of pursuing investments and acquisitions with complementary and accretive strategic value. Access to the public capital markets will enhance our positioning as an acquirer in mergers and acquisitions and expand our target universe.
Risk Management and Credit Discipline
Risk management is at the center of everything we do, and is embedded into the governance structure of our organization. Risk management spans asset-liability management, enterprise risk management, interest rate risk
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management and credit risk management and enables us to manage our balance sheet prudently through varied business cycles and market environments. 
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Balance Sheet Strategy
As a regulated, FDIC-insured institution, Forbright Bank benefits from the inherent trust, robust regulatory framework and balance sheet durability that are hallmarks of a traditional bank. We attract a loyal, digitally-engaged customer base by offering a superior value proposition on deposits and related services resulting in a high level of insured deposits, which in turn funds a highly profitable, expertly managed suite of national lending strategies and fee-generating businesses. No individual lending strategy comprises more than 31% of our granular loan portfolio as of March 31, 2026. Additionally, our CRE concentration ratio is well below regulatory guidelines. We also maintain a margin of safety as it relates to our regulatory capital levels. This foundation provides stability, enabling us to attract and retain deposits and confidently deploy capital in our lending strategies and support our well-defined, high-growth business strategy.
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Artificial Intelligence and Machine Learning
Embracing new technologies to improve our business processes is central to our operations and client service offerings, and as such, we are increasingly adopting and integrating AIML tools into our business to support analytics, automation, workflows, decision processes and business activities. While the application of AIML in our business processes remains at a preliminary stage, all of our employees have access to AIML tools, and we currently leverage AIML to help acquire customers at scale, retain and grow customer relationships through personalized interactions, make faster, more precise credit decisions and reduce human errors and employee hours.
AIML Use in Digital Deposits
We believe that our digital deposit platform enables us to be more adaptable to AIML than traditional banks, and we have a track record of successfully adding innovative capabilities to support the continued improvement of our business.
We currently use AIML tools to better personalize customer interactions and scale operational agility. For example, we use large language models to process and report on our semantic text datasets (customer segmentation, call center transcripts and others). We believe that leveraging AIML tools to summarize large data into actionable insights, such as bespoke customer sentiment scores and trend tracking, allows us to better predict churn rate, analyze deposit opportunities, and suggest appropriate customer responses. Our proprietary chat-style AI agent, which integrates into our data layer, monitors peer bank pricing strategies and performs real-time tracking, is designed to enable us to run analytics and access trend data without any technical skills, thus increasing data-driven decision making without the need for additional resources. We also use AI-driven marketing tools to analyze landing pages, support creation of ad assets and extensions, and identify relevant search queries to strengthen our marketing funnel.
AIML Use in Middle-Market Lending
We use, and are developing new ways of using, AIML tools in our lending business to augment underwriting, portfolio management, and origination efforts while preserving credit discipline and the role of experienced credit professionals. Our proprietary AI-enabled credit platform is designed to centralize loan agreements, credit memoranda, and amendments, which we believe facilitates more consistent analysis and faster decision-making. We leverage AI-tools to support the preparation of credit documentation, data validation, and dashboarding. These tools are designed to improve efficiency, consistency, and insight across the credit lifecycle without requiring additional human approval or oversight.
Operations and Governance
We deploy AIML tools across our operations teams to automate routine workflows (such as invoice processing), expedite software development through code-assist chatbots with context into existing applications, and
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enhance accuracy of meeting documentation. We believe these capabilities support scalable growth and improve accuracy.
We maintain an internal governance framework for AIML usage that emphasizes data security, regulatory compliance, model oversight, and responsible deployment. Our approach includes centralized governance, transparency and explainability standards, and employee training programs designed to promote appropriate and effective use of AIML tools. We deploy AIML in cases where we believe it creates or will create meaningful operational or economic benefit and avoid pursuing trends or undifferentiated adoption without strategic justification.
We believe our AIML strategy supports our ability to operate a national digital deposit platform efficiently, scale our national middle-market lending business without diluting credit standards, and allocate capital dynamically across market cycles. While AIML tools continue to evolve, we expect disciplined deployment, strategic investment, and strong governance to remain central to our approach as an enduring institution that delivers durable growth and superior returns on capital.
Risk Factor Summary
Our business is subject to a number of risks and uncertainties, as more fully described under “Risk Factors” in this prospectus. These risks could materially and adversely impact our business, financial condition, and results of operations, which could cause the trading price of our common stock to decline and could result in a loss of all or part of your investment. Some of these risks include:
•Our future success is dependent on our ability to compete effectively in a highly competitive industry.
•The middle-market businesses which we target may have fewer resources to weather adverse business developments, which may impair a borrower’s ability to repay a loan.
•We depend on the accuracy and completeness of information about clients and counterparties, which, if incorrect or incomplete, could harm our earnings.
•New lines of business, new products and services, strategic project initiatives or new partnerships may subject us to additional risks.
•We have a net deferred tax asset that may not be fully realized.
•We face significant operational risks, including fraud and loss due to execution errors, data processing and technology errors.
•Our risk management framework may not be effective in mitigating risks and/or losses to us.
•We are subject to risk arising from failure or circumvention of our controls and procedures.
•Our accounting estimates and risk management processes rely on analytical and forecasting techniques, models and judgment, which may inadequately measure risk.
•We rely heavily on our senior management team, particularly John Delaney, and other key employees.
•Managing reputational risk is important to attracting and maintaining clients, investors and employees, and damage to our reputation could have an adverse effect on us.
•Our operations could be interrupted if our third-party service providers experience difficulty, terminate their services or fail to comply with banking regulations.
•System failures in, or cybersecurity breaches of, our network security or other information technology systems could subject us to increased operating costs as well as litigation, damage to our reputation and other potential losses.
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•We may not be able to measure and manage our credit risk adequately.
•Our ACL may prove to be insufficient to cover actual credit losses.
•We are subject to interest rate risk.
•Our lender finance and fund finance lending strategies may expose us to increased credit risks.
•Our healthcare finance strategy exposes us to operational complexity and changes in government payment rates that could adversely affect our results of operations.
•Our underwriting practices may not protect us against losses in our loan portfolio.
•Our largest loan relationships make up a material percentage of our total loan portfolio and credit risks relating to these would have a disproportionate impact on our business, financial condition and results of operations.
•Repayment of our construction and development loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may not be sufficient to repay the loan in the event of default.
•We are dependent on the use of data and modeling both in our management decision-making generally and in meeting regulatory expectations in particular.
•The appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property, OREO and repossessed personal property may not accurately describe the net value of the asset.
•We engage in lending secured by real estate and may be forced to foreclose on the collateral and own the underlying real estate, subjecting us to the costs and potential risks associated with the ownership of real property, including risks related to environmental laws and enforcement thereof, or consumer protection initiatives or changes in state or federal law may substantially raise the cost of foreclosure or prevent us from foreclosing at all.
•We may not be able to develop and maintain a strong core deposit base or other low-cost funding sources.
•Liquidity needs could adversely affect our business, financial condition and results of operations.
•Problems encountered by, or adverse news concerning, other financial institutions may adversely affect financial and capital markets generally as well as the Bank.
•We are subject to capital adequacy standards and, if we fail to meet these standards, or more stringent standards in the future, we will be subject to restrictions on our ability to make capital distributions and other restrictions.
•The Federal Reserve may require us to commit capital resources to support the Bank.
•Our operations may require us to raise additional capital, which may result in dilution to our then-existing stockholders and may not be available when it is needed, or at all.
•We are subject to extensive regulation and supervision, which could limit or restrict our activities and negatively impact our financial performance.
•As a result of our expanding national presence, we operate a nationwide business and are required to comply with significantly more state laws and regulations.
•Investors in this offering will experience immediate and substantial dilution.
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Implications of Being an Emerging Growth Company
We qualify as an “emerging growth company” as defined in Section 2(a) of the Securities Act and the JOBS Act. An emerging growth company may take advantage of specified reduced reporting and other requirements that are otherwise applicable generally to public companies. These provisions include:
•we are only required to include two years of audited consolidated financial statements in this prospectus, in addition to any required interim financial statements, and are only required to provide reduced disclosure in “Management’s Discussion and Analysis of Financial Condition and Results of Operations”;
•we are not required to engage an auditor to report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
•we are not required to submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay,” “say-on-frequency,” and “say-on-golden parachutes”; and
•we are not required to disclose certain executive compensation-related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to our median employee compensation.
We may take advantage of these provisions until the last day of the fiscal year following the fifth anniversary of the completion of this offering or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company upon the earliest of (i) the last day of the first fiscal year in which our annual gross revenue is $1.235 billion or more, (ii) the date on which we have, during the previous rolling three-year period, issued more than $1.0 billion in non-convertible debt securities, and (iii) the last day of the fiscal year in which the market value of our Class A common stock held by non-affiliates exceeded $700 million as of June 30 of such fiscal year.
We have elected to adopt the reduced disclosure requirements described above regarding the number of periods for which we are providing audited financial statements and related “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure, and our executive compensation arrangements for purposes of the registration statement of which this prospectus is a part. In addition, we expect to take advantage of the reduced reporting and other requirements under the JOBS Act with respect to the periodic reports we will file with the SEC and proxy statements that we use to solicit proxies from our stockholders. Accordingly, the information contained herein may be different than the information you receive from other public companies in which you invest.
The JOBS Act also exempts emerging growth companies from compliance with new or revised financial accounting standards until private companies (that is, those that have not had a registration statement declared effective under the Securities Act), or companies that do not have a class of securities registered under the Exchange Act) are required to comply with the new or revised financial accounting standards. The JOBS Act provides that a company can elect to opt out of this extended transition period and comply with the requirements that apply to non-emerging growth companies, but any such election to opt out is irrevocable. We have elected not to opt out of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an emerging growth company, can adopt the new or revised standard at the time private companies adopt the new or revised standard. Because of the potential differences in accounting standards used, this may make our consolidated financial statements not comparable with those of other public companies that are either not emerging growth companies, or are emerging growth companies that have opted out of using the extended transition period.
We cannot predict if investors will find our Class A common stock less attractive as a result of our election to rely on these exemptions and reduced reporting obligations. If some investors find our Class A common stock less attractive as a result, there may be a less active trading market for our Class A common stock and our stock price may be more volatile.
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For risks related to our status as an emerging growth company, see “Risk Factors—Risks Related to an Investment in our Class A common stock and this offering—We are an “emerging growth company,” as defined in the JOBS Act, and will be able to avail ourselves of reduced disclosure requirements applicable to emerging growth companies, which could make our Class A common stock less attractive to investors and adversely affect the market price of our Class A common stock.”
Corporate Information
We were originally founded in 2003 as a commercial bank chartered by the State of Maryland under the name “Congressional Bank.” In 2005 we incorporated as “Congressional Bancshares, Inc.” in Maryland, and in 2021 we reincorporated as a Delaware corporation and bank holding company, finally rebranding in 2022 as “Forbright, Inc.” The address of our principal executive offices is 4445 Willard Ave, Suite 1000, Chevy Chase, Maryland 20815 and our phone number is (301) 299-8810. Our website is www.forbrightbank.com. The information contained in, or that can be accessed through, our website is not incorporated by reference in, and is not part of, this prospectus. The inclusion of our website address in this prospectus is only as an inactive textual reference.
Channels for Disclosure of Information
Following the closing of this offering, we intend to announce material information to the public through filings with the SEC, the investor relations page on our website (www.forbrightbank.com), press releases, public conference and earnings calls and public webcasts. Information contained on, or accessible through, our website and accounts is not a part of this prospectus, and the inclusion of our website and account addresses in this prospectus is only as inactive textual references.
Any updates to the list of disclosure channels through which we will announce information will be posted on the investor relations page on our website.
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THE OFFERING
Issuer
Forbright, Inc.
Class A common stock offered by us
          shares (or           shares if the underwriters exercise their option to purchase additional shares of Class A common stock in full).
Class A common stock offered by the selling stockholders
          shares
Option to purchase additional shares of Class A common stock
The underwriters have an option to purchase up to an aggregate of            additional shares of Class A common stock,            from us and           the selling stockholders, in each case, at the initial public offering price, less underwriting discounts and commissions. The underwriters can exercise this option at any time within 30 days from the date of this prospectus. In the event the underwriters do not exercise their option to purchase additional shares in full, the underwriters will first purchase shares from the selling stockholders, with any remaining shares being sold by us. We will not receive any proceeds from any sales of shares by the selling stockholders. See “Underwriting.”
Shares of Class A common stock to be outstanding after this offering
                    shares of Class A common stock (or           shares if the underwriters exercise their option to purchase additional shares of Class A common stock in full).
Shares of Class B common stock to be outstanding after this offering
                    shares of Class B common stock.
Total Class A common stock and Class B common stock to be outstanding upon the completion of this offering
                    shares (or           shares if the underwriters exercise their option to purchase additional shares of Class A common stock in full).
Use of Proceeds
Assuming an initial public offering price of $          per share (the midpoint of the price range set forth on the cover page of this prospectus), we estimate that the net proceeds to us from this offering of Class A common stock, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, will be approximately $          , or approximately $          if the underwriters’ option to purchase additional shares of Class A common stock is exercised in full. We will not receive any proceeds from the sale of shares of Class A common stock by the selling stockholders.
We intend to use the net proceeds to us from this offering for general corporate purposes.
Our management will have broad discretion in the application of the net proceeds from this offering to us, and investors will be relying on the judgment of our management regarding the application of the proceeds.
Each $1.00 increase (decrease) in the assumed initial public offering price per share would increase (decrease) our net proceeds by approximately $           million. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of Class A common stock offered by us would increase (decrease) the net proceeds to us by approximately $      million.
See “Use of Proceeds.”
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Voting
Each holder of our Class A common stock is entitled to one vote for each share on all matters submitted to a vote of stockholders, except as otherwise required by law and subject to the rights and preferences of the holders of any outstanding shares of our preferred stock. Our Class B common stock is non-voting with certain limited exceptions. See “Description of Capital Stock.”
Dividends
Holders of our common stock are only entitled to receive dividends when, as and if declared by our board of directors out of funds legally available for dividends. We do not intend to pay dividends on our Class A common stock or Class B common stock in the near term. Instead, we anticipate that all of our future earnings will be retained to support our operations and to finance the growth and development of our business. Any future determination relating to our dividend policy will be at the sole discretion of our board of directors and will depend on many factors, including the financial condition, earnings and capital and liquidity requirements applicable to us and the Bank, regulatory constraints, and any other factors that our board of directors deems relevant in making such a determination. Our ability to pay dividends is subject to restrictions under applicable banking laws and regulations. In addition, dividends from the Bank are the principal source of funds for the payment of dividends on our stock. The Bank is subject to certain restrictions under banking laws and regulations that may limit its ability to pay dividends to us. Therefore, there can be no assurance that we will pay any dividends to holders of our Class A common stock or Class B common stock, or as to the amount of any such dividends. See “Dividend Policy.”
Exchange Listing
We have applied to list our shares of Class A common stock on the Nasdaq Global Select Market under the trading symbol “FRBT.”
Risk Factors
Investing in our Class A common stock involves risks. See the sections entitled “Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” for a discussion of factors that you should carefully consider before making an investment decision with respect to the shares of our Class A common stock offered hereby.
The number of shares of our common stock to be outstanding immediately after this offering is based on                        shares of our common stock outstanding as of March 31, 2026 and reflects:
•          shares of Class A common stock issuable upon the vesting and settlement of restricted stock awards (“RSAs”) outstanding under the 2014 Plan as of              , 2026;
• shares of Class A common stock issued upon the conversion of shares of Class B common stock subsequent to March 31, 2026;
excludes:
•          shares of Class A common stock issuable upon the exercise of options outstanding under the 2014 Plan, with a weighted average strike price of $            per share; and
•          shares of Class A common stock reserved for issuance under the 2026 Plan.
Unless otherwise indicated, the information in this prospectus:
•assumes an initial public offering price of $           per share of Class A common stock, which is the midpoint of the estimated initial public offering price range set forth on the cover page of this prospectus;
•assumes no exercise by the underwriters of their option to purchase additional shares; and
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•assumes the filing and effectiveness of our amended and restated certificate of incorporation (the “Amended Certificate of Incorporation”) and the adoption of our amended and restated bylaws (the “Amended Bylaws”), each of which will occur immediately prior to the completion of this offering.
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SUMMARY HISTORICAL CONSOLIDATED FINANCIAL DATA AND OTHER INFORMATION
The following tables summarize the historical consolidated financial and operating information of the Company for the periods and as of the dates indicated.
The summary consolidated statements of operations data for the years ended December 31, 2025 and December 31, 2024 and the summary consolidated balance sheet data as of December 31, 2025 and December 31, 2024 have been derived from the audited financial statements of the Company included elsewhere in this prospectus. The summary consolidated statements of operations data for the three months ended March 31, 2026 and March 31, 2025 and the summary consolidated balance sheet data as of March 31, 2026 and March 31, 2025 have been derived from the unaudited financial statements and records of the of the Company. In the opinion of management, such information contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results for such periods. Historical results for any prior period are not necessarily indicative of results to be expected in any future period. The below summary of consolidated financial and other data presented should be read in conjunction with the information included under the heading “Management’s Discussion and Analysis of Results of Operations and Financial Condition” and the consolidated financial statements and the related notes included elsewhere in this prospectus.

As of and for the Three Months Ended
As of and for the Year Ended
(dollars in thousands, except share and per share data)
March 31, 2026March 31, 2025December 31, 2025December 31, 2024
Consolidated Statements of Operations Data


Interest income
$123,755$120,896$516,640$501,155
Interest expense
64,19759,836253,624271,599
Net interest income
59,55861,060263,016229,556
Provision for/(recovery of) credit losses3,4738,45924,011(1,688)
Net interest income after provision for/(recovery of) credit losses56,08552,601239,005231,244
Non-interest income
15,58414,05570,77623,113
Non-interest expense
58,45751,660208,624199,990
Income before income taxes
13,21214,996101,15754,367
Income tax expense1,5803,86913,23111,001
Net income
11,63211,12787,92643,366
Other comprehensive (loss)/income, net
(5,404)1,3193,4671,398
Total comprehensive income
$6,228$12,446$91,393$44,764
Consolidated Balance Sheet Data
Cash, cash equivalents and restricted cash$866,136$1,201,524$648,715$1,179,982
Investment securities available-for-sale, at fair value1,235,5991,309,7491,254,8871,471,468
Investment securities held-to-maturity, at amortized cost, net of allowance for credit losses - investment securities of $110, $161, $110 and $161, respectively48,83452,52848,83452,525
Loans held-for-sale407,594322,925379,662316,484
Loans held for investment, at fair value4,5556,6854,6457,081
Loans held for investment, at amortized cost5,376,5374,138,0425,222,2343,963,973
Allowance for credit losses - loans(52,794)(46,868)(52,986)(42,294)
Net loans held for investment, at amortized cost5,323,7434,091,1745,169,2483,921,679
Other earning assets, net
50,69082,19455,92888,009
Deferred tax asset, net152,96339,736153,31440,181
Accrued interest receivable45,36939,94655,15535,525
Goodwill and other intangible assets, net
31,40232,70631,68533,047
Other assets66,175113,71187,233104,953
Total assets $8,233,060$7,292,878$7,889,306$7,250,934
Non-interest-bearing deposits$473,153$258,340$372,444$258,242
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As of and for the Three Months Ended
As of and for the Year Ended
(dollars in thousands, except share and per share data)
March 31, 2026March 31, 2025December 31, 2025December 31, 2024
Interest-bearing deposits6,665,0555,499,6416,405,4715,307,090
Total deposits7,138,2085,757,9816,777,9155,565,332
Subordinated debt, net151,092174,630151,003174,526
Other borrowings—550,000—700,000
Total borrowed funds151,092724,630151,003874,526
Other liabilities112,56573,908137,94589,122
Total liabilities7,401,8656,556,5197,066,8636,528,980
Preferred stock, $0.001 par value per share; 5,000,000 shares authorized; no shares issued and outstanding
————
Common stock, $0.001 par value per share; 103,200,000 shares authorized; 40,847,557, 40,256,080 40,680,611 and 40,243,916 shares issued and outstanding, respectively
41404140
Additional paid-in capital493,074483,414490,550481,455
Retained earnings340,460252,029328,828240,902
Accumulated other comprehensive (loss)/income(2,380)8763,024(443)
Total stockholders’ equity831,195736,359822,443721,954
Total liabilities and stockholders’ equity$8,233,060$7,292,878$7,889,306$7,250,934
Per Share Data
Basic earnings per voting and non-voting common share
$0.29$0.28$2.18$1.08
Diluted earnings per voting and non-voting common share
$0.27$0.27$2.12$1.05
Weighted-average shares used to compute earnings per voting common share:
Basic19,063,81718,986,44719,011,26418,971,357
Diluted21,188,69220,273,87820,171,83320,001,805
Weighted-average shares used to compute earnings per non-voting common share, basic and diluted21,242,55121,242,55121,242,55121,242,551
Performance Ratios
Return on average total assets
0.59%0.67%1.22%0.65%
Return on average stockholders’ equity
5.62%6.05%11.42%6.28%
Return on average tangible common equity (1)
5.95%6.47%12.06%6.76%
Yield on earning assets6.44%7.48%7.38%7.71%
Yield on interest-bearing liabilities
3.89%4.27%4.19%4.83%
Spread
2.55%3.21%3.19%2.88%
Net interest margin
3.10%3.78%3.76%3.53%
Efficiency ratio77.80%68.77%62.50%79.15%
Credit Quality Ratios
Non-performing assets to total assets
1.11%1.73%1.05%1.21%
Non-performing loans to total loans held for investment at amortized cost1.38%2.30%1.30%1.48%
ACL - Loans to total loans at amortized cost at period end0.98%1.13%1.01%1.07%
Net loan charge-offs to average total loans held for investment at amortized cost(0.32)%(0.39)%(0.28)%(0.92)%
Capital Ratios(2)
Company:
Tier 1 leverage ratio
8.92%10.57%9.79%10.56%
Total capital to risk-weighted assets ratio:14.68%16.94%15.89%17.52%
Tier 1 capital to risk-weighted assets ratio:11.47%13.39%12.72%14.08%
Common Equity Tier 1 to risk-weighted assets ratio
11.47%13.39%12.72%14.08%
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As of and for the Three Months Ended
As of and for the Year Ended
(dollars in thousands, except share and per share data)
March 31, 2026March 31, 2025December 31, 2025December 31, 2024
Bank:
Tier 1 leverage ratio
10.19%11.95%11.11%11.92%
Total capital to risk-weighted assets ratio:14.01%15.87%15.14%16.38%
Tier 1 capital to risk-weighted assets ratio:13.11%15.15%14.37%15.91%
Common Equity Tier 1 to risk-weighted assets ratio13.11%15.15%14.37%15.91%
__________________
(1)See definitions of our non-GAAP measures and reconciliations to their most comparable GAAP metrics in “Non-GAAP Financial Measures.”
(2)See “Management’s Discussion and Analysis of Results of Operations and Financial Condition—Liquidity and Capital Resources—Capital Resources” for discussion on an interpretation of the capital ratios that you should consider before making an investment decision with respect to the shares of our Class A common stock offered hereby.
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NON-GAAP FINANCIAL MEASURES
This prospectus contains “non-GAAP financial measures” within the meaning of Item 10(e) of Regulation S-K. Non-GAAP financial measures are financial measures that are not presented in accordance with GAAP. We use these non-GAAP financial measures in the internal evaluation of our performance and management of our business as well as to explain our results of operations to stockholders and the wider investment community. The following non-GAAP financial measures appear in this prospectus:
•Tangible common equity - We calculate tangible common equity by deducting goodwill and other intangible assets from stockholder’s equity.
•Tangible common equity per common share - We calculate tangible common equity per common share by dividing tangible common equity, as defined above, by our average common shares outstanding for the period, excluding the dilutive effect of outstanding stock options, and including the effect of outstanding shares from restricted stock awards.
•Return on average tangible common equity - We calculate return on average tangible common equity by dividing net income for the period plus intangible asset amortization on an after-tax basis, by average tangible common equity over the same period. Adjusted net income, used for the calculation of return on average tangible common equity, is calculated by deducting the tax effected amount of intangible asset amortization from net income.
•Non-core gains/(losses) on sales of loans and investment securities, net - We calculate non-core gains/(losses) on sales of loans and investment securities, net by deducting gains from sales of loans to Alliance Partners from gains/(losses) on sales of loans and investment securities, net, as reported on the Consolidated Statements of Income.
•Core and non-core non-interest income - Core non-interest income equals total non-interest income less (a) non-core gains/(losses) on sales of loan and investment securities, net, (b) unrealized gains on loans and financing receivables, net, (c) charge-offs on loans carried at fair value and (d) other income. Non-core non-interest income equals total non-interest income less core non-interest income.
•Adjusted total revenue - We calculate adjusted total revenue by deducting non-core non-interest income from total revenue.
Our management believes that these non-GAAP financial measures and the information they provide are useful to investors because these measures allow investors to view our performance in the same manner our management evaluates performance. Although we believe these non-GAAP financial measures are useful in evaluating our performance, these non-GAAP financial measures should not be considered in isolation or as a substitution for the most directly comparable or other financial measures presented in this prospectus summary under GAAP. Additionally, the manner in which we calculate these non-GAAP financial measures may be different from how other companies financial measures with similar names.
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The following tables provide a reconciliation of the above non-GAAP financial measures to their most directly comparable financial measure calculated in accordance with GAAP.
Non-GAAP Financial Measures Reconciliations
As of and for the Three Months Ended
As of and for the Year Ended
(dollars in thousands, except per share data)
March 31, 2026March 31, 2025December 31, 2025December 31, 2024
Tangible common equity
Stockholders’ equity (GAAP)
$831,195 $736,359 $822,443 $721,954 
Less:
Goodwill
18,519 18,519 18,519 18,519 
Other intangible assets
12,883 14,187 13,166 14,528 
Tangible common equity (non-GAAP)
$799,793 $703,653 $790,758 $688,907 
Total common shares outstanding40,847,557 40,256,080 40,680,611 40,243,916 
Stockholders’ equity per total common shares outstanding (GAAP)$20.35 $18.29 $20.22 $17.94 
Tangible common equity per total common shares outstanding (non-GAAP)$19.58 $17.48 $19.44 $17.12 
Return on average tangible common equity
Average stockholders equity (GAAP)
$839,162 $746,169 $769,876 $690,283 
Less:
Average goodwill
18,519 18,519 18,519 18,519 
Average other intangible assets
13,069 14,410 13,897 15,237 
Average tangible common equity (non-GAAP)
$807,574 $713,240 $737,460 $656,527 
Net income (GAAP)
$11,632 $11,127 $87,926 $43,366 
Add:
Intangible asset amortization, net of tax
210 254 1,009 1,018 
Adjusted net income (non-GAAP)
$11,842 $11,381 $88,935 $44,384 
Return on average stockholders’ equity (GAAP)
5.62 %6.05 %11.42 %6.28 %
Return on average tangible common equity (non-GAAP)
5.95 %6.47 %12.06 %6.76 %
Non-core gains/(losses) on sales of loans and investment securities, net
(Losses)/gains on sales of loans and investment securities, net (GAAP)$(34)
$1,826 $12,579 
$(11,563)
Less:
Gains on sales of loans by Alliance Partners
253 
398 2,026 3,246 
Non-core (losses)/gains on sales of loans and investment securities, net (non-GAAP)$(287)
$1,428 $10,553 $(14,809)
Core and non-core non-interest income
Non-interest income (GAAP)
$15,584 
$14,055 $70,776 
$23,113 
Less:
Non-core (losses)/gains on sales of loans and investment securities, net (non-GAAP)(287)
1,428 10,553 (14,809)
Unrealized (losses)/gains on loans and financing receivables, net(1,335)
1,863 6,574 
3,012 
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As of and for the Three Months Ended
As of and for the Year Ended
(dollars in thousands, except per share data)
March 31, 2026March 31, 2025December 31, 2025December 31, 2024
Charge-offs on loans carried at fair value
— — — (3,330)
Other (included in other non-interest income)
(756)98 139 (311)
Core non-interest income (non-GAAP)
$17,962 $10,666 $53,510 $38,551 
Non-core non-interest income (non-GAAP)
$(2,378)$3,389 $17,266 $(15,438)
Adjusted Total Revenue
Net interest income
$59,558 $61,060 $263,016 $229,556 
Non-interest income
15,584 14,055 70,776 23,113 
Total Revenue (GAAP)
$75,142 $75,115 $333,792 $252,669 
Less:
Non-core non-interest income (non-GAAP)
(2,378)3,389 17,266 (15,438)
Adjusted total revenue (non-GAAP)
$77,520 $71,726 $316,526 $268,107 
Non-interest income to total revenue (GAAP)
20.7 %18.7 %21.2 %9.1 %
Core non-interest income to adjusted total revenue (non-GAAP)23.2 %14.9 %16.9 %14.4 %
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RISK FACTORS
Investing in our Class A common stock involves a high degree of risk. You should consider and read carefully all of the risks and uncertainties described below, as well as other information included in this prospectus, including our consolidated financial statements and related notes and results of operations appearing elsewhere in this prospectus, before making an investment decision with respect to the Class A common stock offered hereby. The risks described below are not the only ones we face. The occurrence of any of the following risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial conditions or results of operations. In such case, the trading price of our Class A common stock could decline, and you may lose some or all of your original investment.
Risks Related to Our Operations
Our future success is dependent on our ability to compete effectively in a highly competitive industry.
We compete for attracting deposits, making loans and conducting other financing initiatives. In addition to our many competitors in the banking sector, our principal non-bank competitors are private credit funds, credit unions, and savings and loan associations, including large national financial institutions. We also compete with fintech companies, consumer financial companies, and other non-bank providers of financial services. Many of our competitors are larger than us, have more resources, greater brand recognition, and more extensive and established footprints than we do and may be able to attract customers and consumers more effectively than we can. Because of their scale, many of these competitors can be more aggressive than we can on loan and deposit pricing, and may better afford and make broader use of media advertising, support services and technology than we do. Also, many of our non-bank competitors have fewer regulatory constraints and may have lower cost structures. We compete with these other financial institutions both in attracting deposits, making loans and other financing initiatives. We expect competition to continue to increase as a result of legislative, regulatory and technological changes, the continuing trend of consolidation in the financial services industry and the emergence of alternative providers of traditional banking products and services. Our profitability in large part depends upon our continued ability to compete successfully with traditional and new financial services providers, some of which maintain a physical presence and others of which maintain only a virtual presence. An increase in competition could require us to increase the rates we pay on deposits and/or lower the rates that we offer on loans, which could reduce our profitability.
The process of eliminating banks as intermediaries, known as “disintermediation,” could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. Consumers can maintain funds that would have historically been held as bank deposits in brokerage accounts or mutual funds. Consumers can also complete transactions such as paying bills and/or transferring funds directly without the assistance of banks. In addition, the emergence, adoption and evolution of new technologies that do not require intermediation, including distributed ledgers such as digital assets and blockchains, as well as advances in robotic process automation and AI, could significantly affect the competition for financial services. For example, growth in cryptocurrency and DeFi could reduce traditional banking deposits and income streams, challenging our ability to attract and retain consumers. A substantial shift of consumer deposits to these alternative products could adversely affect our liquidity position, funding costs, and overall financial stability. Regulatory uncertainty regarding cryptocurrency and DeFi could further complicate our strategic decisions, increase compliance costs, and potentially expose us to reputational and operational risks.
Furthermore, we operate in a highly competitive industry that could become even more competitive as a result of continued industry consolidation. This consolidation may produce larger, better capitalized and more diversified companies that are capable of offering a wider array of financial products and services at more competitive prices due to cost savings and shared resources.
Our profitability in large part depends upon our continued ability to compete successfully with traditional and new financial services providers. Our ability to compete successfully depends on a number of factors, including, among other things: (i) the ability to develop, maintain and build long-term customer relationships based on top quality service and high ethical standards; (ii) the scope, relevance and pricing of products and services offered to meet customer needs and demands; (iii) the rate at which we introduce new products and services relative to our
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competitors; and (iv) consumer satisfaction with our level of service. Failure to perform in any of these areas could significantly weaken our competitive position, which could adversely affect our growth and profitability, which, in turn, could have a material adverse effect on our business, financial condition and results of operations.
The middle-market businesses which we target may have fewer resources to weather adverse business developments, which may impair a borrower’s ability to repay a loan.
Our primary lending strategy is to serve the banking and financial services needs of middle-market businesses. These businesses generally have fewer financial resources in terms of capital or borrowing capacity than larger entities, frequently have smaller market shares than such competition, may be more vulnerable to economic downturns, often need substantial additional capital to expand or compete, and may experience substantial volatility in operating results, any of which may impair their ability as a borrower to repay a loan.
In addition, the success of middle-market businesses often depends on the management skills, talents and efforts of a smaller group of people, and the death, disability or resignation of one or more of these people could have an adverse impact on the business and its ability to repay its loan. If general economic conditions negatively impact the industries we serve or any of our borrowers otherwise are affected by adverse business developments, our middle-market borrowers may be disproportionately affected and their ability to repay outstanding loans may be negatively affected, the collateral we hold may decrease in value or become illiquid, and the level of nonperforming loans, charge-offs, and delinquencies could rise and require significant additional provisions for credit losses, resulting in an adverse effect on our business, financial condition and results of operations.
We depend on the accuracy and completeness of information about clients and counterparties, which, if incorrect or incomplete, could harm our earnings.
In deciding whether to extend credit or enter into other transactions with clients and counterparties, we may rely on information furnished to us by or on behalf of clients and counterparties, including financial statements and other financial information. We also may rely on representations of customers, counterparties or other third parties, such as independent auditors as to the accuracy and completeness of that information and, with respect to financial statements, on reports of independent auditors. For example, in deciding whether to extend credit to customers, we may assume that a customer’s audited financial statements conform to GAAP and present fairly, in all material respects, the financial condition, results of operations and cash flows of the customer. Our earnings are significantly affected by our ability to properly originate, underwrite, and service loans. Our business, financial condition and results of operations could be negatively impacted to the extent we incorrectly assess the creditworthiness of our borrowers, fail to detect or respond to deterioration in asset quality in a timely manner, or rely on information provided to us, such as financial statements that do not comply with GAAP, that is materially misleading.
New lines of business, new products and services, strategic project initiatives or new partnerships may subject us to additional risks.
Our growth strategy is primarily organic – requiring continued expansion in loan production, market penetration and product development. From time to time, we may seek to implement new lines of business or offer new products and services within existing lines of business, which exposes us to execution, operational and regulatory risks. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products and services, we may invest significant time and resources. If development or implementation efforts are delayed or unsuccessful, we may be unable to achieve pricing and profitability targets, which could materially affect our operating results. New lines of business and/or new products or services also could subject us to additional regulatory requirements, increased scrutiny by our regulators and other legal risks.
Additionally, we have undertaken, and expect to continue to undertake, strategic project initiatives, including, but not limited to, payment processing, investment in technology, process improvement, client experience and fintech partnerships and acquisitions. Significant effort and resources are necessary to manage and oversee the successful completion of these initiatives. These initiatives can place significant demands on a limited number of employees with subject matter expertise and management and may involve significant costs to implement as well as
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increase operational risk as employees learn to process transactions under new systems. The failure to properly execute on these strategic initiatives could adversely impact our business and results of operations.
We have in the past, and may in the future, partner with fintech providers to distribute or market our products and services. Bank regulators have, and may in the future, hold banks responsible for the activities of these fintech companies, including under the BSA, the CRA or in respect of anti-money laundering and consumer compliance matters, or may take the view that these relationships present safety and soundness issues.
New products and services, or entrance into new markets or lines of business, are carefully scrutinized by regulatory agencies and may require substantial time, resources and capital, and profitability targets may not be achieved or risks associated with such new services or product offerings may not be properly managed. In June 2023, the federal bank regulatory agencies issued new guidance regarding risk management associated with third-party relationships, which, among other things, offered the agencies’ views on sound risk management principles for banking organizations when developing and implementing risk management practices for all stages in the life cycle of third-party relationships. The guidance provided that the use of third parties, especially those using new technologies, may present elevated risks to banking organizations and their customers, including operational, compliance, and strategic risks. Even if we believe we have properly identified risks associated with such partnerships, and that we have an effective risk management program in place to manage and supervise such third-party relationships and associated risks, no assurances can be provided that our state and federal banking regulators will agree with our assessments or not find deficiencies in our risk management program(s) or that our risk management and compliance programs will in fact prove to be effective.
Failure to properly manage these risks, or failure of any product or service offerings to be successful and profitable, could have a material adverse effect on our business, financial condition and results of operations.
We have a net deferred tax asset that may not be fully realized.
We have a net deferred tax asset in the form of a net operating loss carryforward and cannot assure that it will be fully realized.
The ultimate realization of a deferred tax asset is dependent upon the generation of future taxable income. If we determine that we will not achieve sufficient future taxable income to realize our net deferred tax asset, we are required under GAAP to establish a full or partial valuation allowance. If we are required to establish a full or partial valuation allowance, we will incur a charge to operations, which could negatively impact our earnings. We regularly assess available positive and negative evidence to determine whether it is more likely than not that our net deferred tax asset will be realized. This determination requires us to apply significant judgment and is inherently speculative because it requires estimates and assumptions about our future taxable income that cannot be made with certainty. In addition, changes in tax laws and regulations applicable to us could result in our estimates and assumptions about our future taxable income becoming inaccurate.
Our ability to use our deferred tax asset to offset future taxable income will be limited if we experience an “ownership change” as defined in Section 382 of the Code. If we have an “ownership change” on or prior to September 22, 2027, then all unused net operating loss carryforwards would be foregone, and if such event occurs after such date, we would be subject to the general rules in connection with an “ownership change.” In general, an “ownership change” will occur if the ownership of our stock by certain stockholders or groups of stockholders increases by more than 50% over a rolling three-year period. Due to the complexity of Section 382, it is difficult to conclude with certainty at any given point in time whether an ownership change has occurred. Additionally, while there are transfer restrictions in place under our Amended Certificate of Incorporation that we believe help preserve our ability to use our deferred tax assets, each of CB(defined below), GPC(defined below) and BVA (defined below) is individually entitled to transfer up to      % of the common stock held by them notwithstanding the limitations in our Amended Certificate of Incorporation (collectively, the “Investor Transfer Exception”). Given the complexity of Section 382, we are unable to provide assurance that transfers pursuant to the Investor Transfer Exception will not adversely affect our ability to use our deferred tax assets to offset future taxable income, and the ability of certain stockholders to utilize the Investor Transfer Exception may increase the risk that we experience an “ownership change” as defined in Section 382 of the Code which adversely affects our ability to use our deferred tax assets to
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offset future taxable income. Our ability to use our deferred tax assets to reduce future taxable income and liabilities may be subject to annual limitations as a result of ownership changes that may occur in the future, including as a result of this offering, some of which may be outside of our control. Furthermore, our ability to utilize deferred tax assets of companies that we have acquired or may acquire may be subject to limitations.See “Management’s Discussion and Analysis of Results of Operations and Financial Condition—Results of Operations for the Years Ended December 31, 2025 and 2024—Income Taxes” and “—Results of Operations for the Three Months Ended March 31, 2026 and 2025—Income Taxes” for additional discussion regarding our critical accounting estimates as they relate to our deferred tax assets, and “Description of Capital Stock—Transfer Restrictions” for additional discussion on the transfer restrictions in place under our Amended Certificate of Incorporation that we believe help preserve our ability to use our deferred tax assets for the foreseeable future.
We face significant operational risks, including fraud and loss due to execution errors, data processing and technology errors.
Because we operate many different financial service functions, including an expanding slate of digital banking services, we rely on the ability of our employees, third-party vendors and information technology systems to process a significant number of transactions and manage multiple products and technologies, and therefore face significant operational risk of loss from operations, including fraud by employees or outside persons, employees’ execution of incorrect or unauthorized transactions, data processing and technology errors, or hacking and breaches of internal control systems. In particular, it is not always possible to prevent employee error or misconduct, and the precautions we take to prevent and detect this activity may not be effective in all cases.
As a financial institution, we are inherently exposed to operational risk in the form of theft and other fraudulent activity by employees, customers, consumers and other third parties targeting us, our customers, our consumers or our data (including the data we hold on behalf of our customers and consumers). Such activity may take many forms, including check fraud, electronic fraud, wire fraud, phishing, social engineering and other dishonest acts. With the advent and growth of our digital deposit platform and related services, the opportunity for, and our vulnerability to, such fraudulent activity is increased. Although we maintain policies and internal controls designed to identify and prevent such incidents, given the increasing sophistication of possible perpetrators, we may experience financial losses or reputational harm as a result of fraud.
Because the nature of the financial services business involves a high volume of transactions, certain errors may be repeated or compounded before they are discovered and successfully rectified. Our necessary dependence upon processing systems to record and process transactions and our large transaction volume may further increase the risk that employee errors, tampering or manipulation of those systems will result in losses that are difficult to detect. Employee error or misconduct could also subject us to financial claims. If our internal control systems fail to prevent or detect an occurrence, or if any resulting loss is not insured, exceeds applicable insurance limits or if insurance coverage is denied or not available, it could have an adverse effect on our business, financial condition and results of operations.
Negative publicity resulting from the realization of such risks, whether or not accurate, may damage our reputation, which could have an adverse effect on our business, financial condition and results of operations.
Our risk management framework may not be effective in mitigating risks and/or losses to us.
In order to manage the significant risks inherent in our business, we must maintain effective policies, procedures, and systems designed to identify, monitor, and control our exposure to material risks, including credit, strategic, liquidity, interest rate, operational, compliance and reputational risks. Our risk management methods may prove to be ineffective due to their design, implementation or the degree to which we adhere to them, as a result of inadequate, inaccurate, or untimely information, changes in tactics employed by external bad actors or other factors.
If our risk management efforts are ineffective or fail to mitigate our exposure in all economic or market environments, including risks that we may fail to identify or anticipate, we could suffer losses, become subject to litigation, particularly from our customers, or incur regulatory sanctions or fines, any of which could have a material adverse effect on our business, financial condition and results of operations.
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We are subject to risk arising from failure or circumvention of our controls and procedures.
Our internal controls, including fraud detection controls and procedures, disclosure controls and procedures and corporate governance processes are based in part on certain assumptions and provide only reasonable, not absolute, assurance that their objectives are achieved. Failure, circumvention, or noncompliance with our controls and procedures or applicable regulations could have a material adverse effect on our reputation, business, financial condition and results of operations, including through litigation, regulatory fines, penalties or other sanctions. Furthermore, notwithstanding advances in technology and control systems, our operations ultimately rely on people, who may make errors or engage in violations or misconduct that our controls may not always prevent or detect. Human errors, malfeasance or other misconduct, even if promptly identified and remediated, could result in reputational harm or legal risk and have a material adverse effect on our business, financial condition and results of operations.
Our accounting estimates and risk management processes rely on analytical and forecasting techniques, models and judgment, which may inadequately measure risk.
Our accounting policies and methods are critical to how we record and report our financial condition and results of operations. Management must exercise judgment in selecting and applying many of these accounting policies and methods to comply with GAAP and present our financial condition and results appropriately. In some cases, management must select among two or more alternative accounting policies or methods, any of which may be reasonable under the circumstances but which could result in materially different reported results.
Our critical accounting policies, which are included in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this prospectus, describe those significant accounting policies and methods used in the preparation of our consolidated financial statements that we consider “critical” because they require judgments, assumptions and estimates that materially affect our consolidated financial statements and related disclosures. As a result, if future events or regulatory views concerning such analysis differ significantly from the judgments, assumptions and estimates in our critical accounting policies, those events or assumptions could have a material impact on our consolidated financial statements and related disclosures, in each case resulting in our possible need to revise or, if in error, restate prior period financial statements, cause damage to our reputation and the price of our Class A common stock and adversely affect our business, financial condition and results of operations.
As noted above, our critical accounting policies require management to make difficult, subjective or complex judgments about matters that are uncertain. Materially different amounts could be reported under different conditions or using different assumptions or estimates. These critical accounting policies include ACL and the realizability of the net operating loss portion of our deferred tax assets. Because of the uncertainty of estimates involved in these matters, we may be required to do one or more of the following: significantly increase the ACL or sustain loan losses that are significantly higher than the reserve provided or significantly increase our accrued tax liability. Any of these could have a material adverse effect on our business, financial condition and results of operations.
We are subject to an extensive body of accounting rules and best practices. Periodic changes to such rules may change the treatment and recognition of critical financial line items.
The nature of our business makes us subject to an extensive body of accounting rules and best practices in the United States. From time to time, the governing bodies that oversee changes to accounting rules and reporting requirements may release new guidance for the preparation of our consolidated financial statements. These changes can materially impact how we record and report our financial condition and results of operations. In some instances, we could be required to apply a new or revised standard retroactively, resulting in the restatement of prior period financial statements. These changes could adversely affect our capital, regulatory capital ratios, ability to make larger loans, earnings and performance metrics. Any such changes could have an adverse effect on our business, financial condition and results of operations.
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We rely heavily on our senior management team, particularly John Delaney, and other key employees.
Our success depends largely on the continued service of certain members of our leadership team. In particular, we are highly dependent on the services of John Delaney, our Chief Executive Officer. Members of our leadership team, both individually and collectively, play an integral role in the development and growth of our company. We also rely on our leadership team in operating our business and identifying strategic initiatives.
While we have entered into employment agreements with certain of our senior officers and other key employees, such officers can terminate such agreements in accordance with their terms, and we cannot ensure that we will be able to retain the services of any members of our management team or other key employees. The unexpected loss of any of our key employees could have a material adverse effect on our business and operations.
Our future success also depends on our continuing ability to attract, develop, motivate and retain key employees. Qualified individuals are in high demand, and we may incur significant costs to attract and retain them. The market for qualified individuals is highly competitive and as a result, we may not be able to attract and retain key employees, including qualified officers and candidates. Failure to attract and retain a qualified management team and qualified key employees could have an adverse effect on our business, financial condition and results of operations.
Managing reputational risk is important to attracting and maintaining clients, investors and employees, and damage to our reputation could have an adverse effect on us.
A key differentiating factor for our business is our strong reputation. Maintaining a positive reputation is critical to attracting and retaining our valued customers and consumers, investors and employees. Adverse perceptions of us could impair our ability to execute our strategy.
Maintaining and developing our brand is critical to building trust with our consumer and customer bases. Brand recognition may help reduce customer acquisition costs and support customer loyalty. Maintaining and developing our brand will depend largely on our ability to continue to provide high quality products and services at cost-effective and competitive prices, as well as after-sale consumer and customer service. While we intend to continue investing in our brand, no assurance can be given as to the success of these investments. If we fail to maintain and develop our brand, incur excessive expenses in this effort, or if our reputation is otherwise tainted, it could materially impact our ability to raise deposits from consumers nationwide, which is critical to our funding, and could also otherwise materially impact our business, financial condition and results of operations.
Threats to our reputation can come from many sources, including adverse sentiment about financial institutions generally, unethical practices, employee misconduct, failure to deliver minimum standards of service or quality, compliance deficiencies, regulatory investigations, supervision deficiencies, marketplace rumors and questionable or fraudulent activities of our clients. We have policies and procedures in place to promote ethical conduct and protect our reputation. However, these policies and procedures may not be fully effective and cannot protect against all threats to our reputation. Negative publicity regarding financial institutions, our business, employees, or clients, with or without merit, may result in the loss of clients, investors and employees, costly litigation, a decline in revenues, and/or increased governmental oversight.
If the public perception of financial institutions remains negative, then our reputation and business may be adversely affected by negative publicity or information regarding our business and personnel, whether or not accurate or true. For example, negative information about financial institutions has in the past been, and may in the future be, posted on social media or other Internet forums or published by news organizations and the speed and pervasiveness with which information can be disseminated through these channels, in particular social media, may magnify risks relating to negative publicity. “—Risks Related to Funding and Liquidity—Problems encountered by, or adverse news concerning, other financial institutions may adversely affect financial and capital markets generally as well as the Bank.”
Moreover, our customers, consumers, stockholders, employees, regulators, and other stakeholders have diverse expectations, demands, and perspectives on a range of topics, including sustainability-related topics, which are continuing to evolve and, in some cases, diverge. We may not be able to meet the diverse expectations and demands
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of all of our stakeholders, which could harm our reputation, reduce customer demand for our products and services, and subject us to legal and operational risks.
Our operations could be interrupted if our third-party service providers experience difficulty, terminate their services or fail to comply with banking regulations.
We outsource some of our operational activities and accordingly depend on relationships with third-party providers for services, such as core systems support, informational website hosting, internet services, online account opening and other processing services. Our business depends on the successful and uninterrupted functioning of our information technology and telecommunications systems, many of which also depend on third-party providers. The failure of these third-party systems, a cybersecurity incident involving any of our third-party service providers, which they have experienced in the past, deterioration in the quality of their service or performance or the termination or change in terms of a third-party software license or service agreement on which any of these systems is based could interrupt our operations. Because our information technology and telecommunications systems interface with and depend on third-party systems, we could also experience service denials if demand for such services exceeds capacity or such third-party systems fail or experience interruptions. Replacing third-party service providers or addressing other issues with our third-party service providers could entail substantial delay, expense and disruption of service.
In addition, these third-party service providers may rely on subcontractors to provide services to us that face similar risks. Failures or security incidents or breaches by or of our third-party service providers or their subcontractors that result in an interruption in service, unauthorized access, misuse, loss or destruction of data or other similar occurrences that could interrupt our business, could in the future adversely affect our business. Through contractual provisions and third-party risk management processes, we take steps to require that our providers, and their subcontractors, protect our data and information, including personal data. However, due to the size and complexity of our technology infrastructure and services, the amount of data that we store and the number of consumers and customers, financial services platform clients, employees and third-party service providers with access to personal data, we, our third-party service providers and their subcontractors are potentially vulnerable to a variety of intentional and inadvertent cybersecurity breaches and other security-related incidents and threats, which could result in a material adverse effect on our business, financial condition and results of operations. Any contractual protections we may have from our third-party service providers may not be sufficient to adequately protect us against such consequences, and we may be unable to enforce any such contractual protections. As a result, if these third-party service providers experience service interruptions, are subject to cybersecurity incidents, or terminate their services, and we are unable to replace them with other service providers, particularly on a timely basis, our operations could be interrupted. If such interruption were to continue for a significant period of time, such delay could have an adverse effect on our business, financial condition and results of operations. Even if we are able to replace third-party service providers, it may be at a higher cost to us to engage such third-party service providers on short notice, which could adversely affect our business, financial condition and results of operations.
In addition, we may, from time to time, decide to modify or terminate relationships with third-party service providers and to perform certain functions and/or services internally. There is no guarantee we will be able to perform these functions. Additionally, the migration of any such functions and/or services may introduce additional risks and could cause disruption to our business.
Certain aspects of the services we provide also rely and depend upon the ability of third parties with whom we do not contract directly to perform specified tasks or execute certain functions. As a result of these impacts, we might experience consumer or customer complaints, loss of revenue or other financial loss, or we may have to respond to regulatory inquiries related to such outages.
Furthermore, third-party service providers, and banking organizations’ relationships with those providers, are subject to demanding regulatory requirements and attention by bank regulators. Our regulators may hold us responsible for any perceived deficiencies in our oversight of our third-party service providers and in the performance of the parties with which we have these relationships. As a result, if our regulators assess that we have not exercised adequate oversight and control over our third-party service providers or that such providers have not performed adequately, we could be subject to administrative penalties, fines, or other forms of regulatory
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enforcement action as well as requirements for consumer remediation, any of which could have an adverse effect on our business, financial condition and results of operations.
If a service provider fails to either provide the services required or expected or meet applicable contractual or regulatory requirements such as service levels or compliance with applicable laws, the failure could negatively impact our business. Such a failure could also adversely affect the perception of the reliability of our networks and services and the quality of our brand, which could materially adversely affect our business and results of operations. Further, if there were deficiencies in the oversight and control of our third-party relationships, and if our regulators held us responsible for those deficiencies, it could have an adverse effect on our business, reputation and results of operations.
Our success is largely dependent upon our ability to successfully execute our business strategy.
There can be no assurance that we will be able to continue to grow and to remain profitable in future periods, or, if profitable, that our overall earnings will remain consistent with our prior results of operations, or increase in the future. A downturn in economic conditions, heightened competition from other financial services providers, interest rate volatility, an inability to retain or grow our core deposit base, regulatory and legislative considerations, and failure to attract and retain high-performing talent, among other factors, could limit our ability to grow assets, or increase profitability, as rapidly as we have in the past.
Sustainable growth requires that we manage our risks by following prudent loan underwriting standards, balancing loan and deposit growth without materially increasing interest rate risk or compressing our net interest margin, maintaining adequate capital at all times, managing a growing number of consumer and customer relationships, scaling technology infrastructure, hiring and retaining qualified employees and successfully implementing our strategic initiatives. We must also successfully implement improvements to, or integrate, our management information and control systems, procedures and processes in an efficient and timely manner and identify deficiencies in existing systems and controls. In particular, our controls and procedures must be able to accommodate an increase in loan volume in various markets and the infrastructure that comes with expanding operations, including new branches.
Our growth strategy may require us to incur additional expenditures to expand our administrative and operational infrastructure. If we are unable to effectively manage and grow our banking franchise, we may experience compliance and operational problems, have to slow the pace of growth, or have to incur additional expenditures beyond current projections to support such growth. We may not have, or may not be able to develop, the knowledge or relationships necessary to be successful in new markets.
Our failure to sustain our historical rate of growth, adequately manage the factors that have contributed to our growth or successfully enter new markets could have an adverse effect on our earnings and profitability and, therefore on our business, financial condition and results of operations.
Our expansion strategy includes, in part, targeting select acquisitions of parts or all of other financial institutions or financial services companies, which exposes us to acquisition risks.
While our current strategy is centered on organic growth, we may, from time to time, evaluate and pursue opportunities to expand our business through mergers, acquisitions, or other business combination activity.
The acquisition of other financial institutions, loan servicing or other lending operations and/or financial services companies involves a number of risks, including the risks that:
•we may incur substantial costs in identifying and evaluating potential acquisitions and merger partners, including related to due diligence activities, financial modeling, and the negotiation of definitive agreements;
•our estimates and judgments used to evaluate credit, operations, management, compliance, risk management, and market risks relating to target businesses may not be accurate;
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•any institutions or businesses we acquire may have distressed assets and there can be no assurance that we will be able to realize the value we predict from those assets or that we will make sufficient provisions or have sufficient capital for future losses;
•we may be required to take write-downs or write-offs, restructuring and impairment, or other charges related to any institutions or businesses we acquire that could have a significant negative effect on our financial condition and results of operations;
•there may be substantial lag-time between completing an acquisition and generating sufficient revenue, assets and/or deposits to support costs of the expansion, including the realization of tax benefits accruing from net operating losses generated by a company we acquire;
•our management’s attention in negotiating a transaction and integrating the operations and personnel of the combining businesses may be diverted from our existing business and we may not be able to successfully integrate such operations and personnel;
•we may not be able to obtain regulatory approval for an acquisition target on the timeline we expect or at all;
•regulatory approvals for an acquisition target may be conditioned on requirements that we divest assets, liabilities or business lines, or that we commit to take certain other actions, and may include conditions, terms or requirements that are not acceptable to us;
•we may be exposed or joined as a party to litigation initiated by customers or third parties of acquired entities;
•we may introduce new products and services we are not equipped to manage or that introduce new risks to our operations, or that otherwise result in adverse effects on our results of operations; or
•we may assume liabilities in connection with an acquisition, including both unrecorded liabilities that are not discovered at the time of the transaction and known potential liabilities that are not properly evaluated or quantified, and the repayment of such liabilities may have an adverse effect on our business, financial condition and results of operations.
If we seek to expand our business through mergers, acquisitions, or other business combinations, we cannot assure you that we will be able to identify and successfully consummate any such transactions, successfully integrate any acquired financial institutions or financial services companies into our operations or retain the customers or consumers of any acquired business. If any of these risks occur in connection with our expansion efforts, it may have a material adverse effect on our business, financial condition and results of operations.
System failures in, or cybersecurity breaches of, our network security or other information technology systems could subject us to increased operating costs as well as litigation, damage to our reputation and other potential losses.
Failures in, or breaches of, our information technology systems and network infrastructure, or those of our third-party vendors or other service providers, including as a result of cybersecurity attacks, could disrupt our business, result in the disclosure or misuse of confidential, proprietary or personal information, damage our reputation, subject us to legal or regulatory proceedings, increase our costs and cause losses. Our operations are dependent upon our ability to protect our information technology systems and network infrastructure against damage from fire, power loss, telecommunications failure or a similar catastrophic event. Any such damage or failure that causes a prolonged interruption in our operations could have an adverse effect on our business, financial condition and results of operations. In addition, our operations are dependent upon our ability to protect our information technology systems and network infrastructure, including our internet banking activities, against damage from physical break-ins, cybersecurity incidents and other disruptive problems. Cybersecurity incidents and other disruptions would jeopardize the security of information (including personal information) stored in and transmitted through our information technology systems and network infrastructure, which may result in significant liability to us and
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damage to our reputation, and may discourage current and potential customers and consumers from using our internet banking services, which could in turn have an adverse effect on our business, financial condition and results of operations. Our security measures, including firewalls and penetration testing, may not prevent or detect all future system failures or cybersecurity incidents.
In the normal course of business, we collect, process, and retain sensitive, confidential and personal information of our customers and consumers. Although we devote significant resources and management focus to maintaining the integrity of our information technology systems through information security and business continuity programs, our facilities and systems, and those of our third-party service providers, could be vulnerable to cybersecurity incidents, including internal or external security incidents denial of service attacks, malware, ransomware attacks, “phishing,” other forms of social engineering attempts, misplaced or lost data, programming or human errors and other similar events. We and our third-party service providers have experienced these types of events in the past and expect to continue to experience them in the future. These events could interrupt our business or operations, result in significant legal and financial exposure, supervisory liability, regulatory enforcement action, damage to our reputation, loss of customers and consumers, loss of business or a loss of confidence in the security of our systems, products and services. Although the impact to date from these events has not had an adverse effect on us, we cannot be sure this will be the case in the future. Any of these occurrences could have an adverse effect on our business, financial condition and results of operations.
In addition to cybersecurity attacks or other security incidents involving the theft of sensitive, confidential and personal information, hackers recently have engaged in attacks against large financial institutions that are designed to disrupt key business services, such as customer- and consumer- facing websites. We are not able to anticipate or implement preventive measures that are effective against all possible cybersecurity attacks, especially given that the techniques used by hackers change frequently and such attacks can originate from a wide variety of sources. Our early detection and response mechanisms may be overpowered by sophisticated attacks and malware designed to avoid detection, which could in turn have an adverse effect on our business, financial condition and results of operations if such attacks are successful.
Technological advances, including the development and implementation of generative and agentic AI and other AIML technologies, may impact our business and our ability to successfully adopt and implement new technologies that our customers desire.
The financial services industry is continually undergoing rapid technological change with frequent introductions of new, technology-driven products and services. As a digital financial services company and a primarily direct bank with a limited branch network, we significantly depend on technology to deliver our products and services and to otherwise conduct our business and operations. Our future success depends, in part, upon our ability to address the needs of our customers by using technology to provide products and services that will satisfy consumer demands. The recent technological advances in development and use of AIML present a number of risks and challenges to our business. The legal and regulatory environment relating to AIML is uncertain, rapidly evolving and includes regulation targeted specifically at AIML as well as provisions in intellectual property, privacy, consumer protection, employment and other laws applicable to the use of AIML. These evolving laws and regulations could require changes in our implementation of AIML and increase our compliance costs and the risk of non-compliance, including in relation to data privacy and security requirements. AIML models may be more susceptible to cybersecurity threats due to risks from using external, third-party data sources and given the volume of data they utilize, which, in turn, could make us more susceptible to cybersecurity threats.
The emergence of agentic and generative AI in particular presents unique risks and challenges that may adversely impact our business, including the production of output or taking of action that is incorrect. We or our third-party vendors or counterparties may develop or utilize such AIML in certain business processes, services, or products. Particularly agentic or generative AI models, may produce output or take action that is incorrect, that reflect biases included in the data on which they are trained, or that is otherwise harmful, which would likely degrade the effectiveness of such AI and could adversely impact us to the extent that we, our affiliates and our service providers or other third parties engaged by us rely on the work product of such AI. Use of AIML models may also infringe on the intellectual property rights of others or otherwise be affected by claims of infringement, misappropriation or other violations of intellectual property, including based on the use of large datasets used to
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train AI or the use of output generated by AI, in either case which contain or are substantially similar to material protected by intellectual property, including patents, copyrights, trademarks, or trade secrets. Furthermore, the use of personal or nonpublic information in connection with agentic or generative AI by the Company could result in a violation of certain laws, including data privacy laws and the data privacy and security requirements of the GLBA, exposing us to legal liability or regulatory penalties.
Furthermore, we may be exposed to risks to the extent we use AIML developed by third parties. We may be dependent in part on the manner in which those third parties develop and train their models, including risks arising from the inclusion of any unauthorized material in the training data for their models, and the effectiveness of the steps these third parties have taken to limit the risks associated with the output of their models, matters over which we may have limited visibility. Any of these risks could expose us to liability or adverse legal or regulatory consequences and harm our reputation and the public perception of our business or the effectiveness of our security measures.
Despite our focus on leveraging AIML as a catalyst for efficiency and accuracy, we may not be able to effectively implement new, technology-driven products and services, implement them as quickly as our competitors do, or be successful in marketing these products and services to our customers and consumers. In addition, the implementation of technological changes, upgrades to maintain current systems and the integration of new systems may also cause overly complex implementation, service interruptions, transaction processing errors, and system conversion delays, and may cause us to fail to comply with applicable laws or may otherwise result in an increase in our expenses, or otherwise distract management from our core banking and lending business. Failure to successfully keep pace with technological change affecting the financial services industry and failure to avoid interruptions, errors and delays could cause us to lose customers and consumers or have a material adverse effect on our business, financial condition and results of operations.
We expect that new technologies, including AIML, and business processes applicable to the financial services industry will continue to emerge, and these new technologies and business processes may be better than those we currently use. As these technologies improve in the future, we may be required to make significant capital expenditures in order to remain competitive, which may increase our overall expenses and have a material adverse effect on our business, financial condition and results of operations. Further, given that the pace of technological change is high and our industry is intensely competitive, we may not be able to sustain our investment in new technology as critical systems and applications become obsolete or as better ones become available. A failure to maintain current technology and business processes and optimize the opportunities deriving from our strategic initiatives could cause disruptions in our operations or cause our products and services to be less competitive, all of which could have a material adverse effect on our business, financial condition and results of operations.
We may be unable to protect or enforce our intellectual property rights.
Certain of our product offerings and lines of business depend on certain registered and unregistered intellectual property rights and proprietary information. We use, and expect to continue to use, a combination of patent, copyright, trademark, service mark and trade secrets in our business. We rely on a combination of intellectual property laws and certain contractual provisions (such as confidentiality and nondisclosure agreements and intellectual property assignment agreements with employees, consultants and third parties with whom we have relationships), and technical measures (such as the password protection and encryption of our data and systems) to protect our brand, technology and intellectual property rights, including our and the Bank’s proprietary software. However, these laws and agreements afford only limited protection and may be insufficient to deter or prevent infringement of our intellectual property rights or misappropriation of our proprietary information. Intellectual property rights or registrations granted to us may provide an inadequate competitive advantage or be too narrow to protect our products and services in the relevant jurisdictions. The protections may not be sufficient to prevent unauthorized use, misappropriation or disclosure of our intellectual property or technology, and may not prevent competitors from copying, infringing, or misappropriating our products and services.
We own numerous trademarks and service marks, including but not limited to our brand name, logo and slogan. While we have invested resources in establishing and promoting our intellectual property, including our trademarked brands, we may be unable to adequately obtain trademark protections in relevant jurisdictions, such that we may not
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be able to distinguish our products and services from those of our competitors. Further, we may not timely file or successfully register our trademarks. If the validity of these marks were challenged, certain of our brands or trademarks may be damaged or we may be required to face considerable expense defending or changing our marks. Further, we have chosen not to register any copyrights, and instead rely primarily on trade secret protection to protect our proprietary software, information and technology. Given that we have chosen not to register our copyrights, the remedies and damages available to us for unauthorized use of software under copyright laws may be limited. Despite our efforts to maintain our source code and certain other technologies as trade secrets, it may still be possible for unauthorized third parties to copy our technologies, and use information that we regard as proprietary to create products and services that compete with ours.
Various events outside of our control may pose a threat to our intellectual property rights, and our related products and services. We may be unable to detect the unauthorized use of, or take appropriate steps to enforce, our intellectual property or proprietary rights and cannot be certain that others will not independently develop, design around, or otherwise acquire equivalent or superior technology or intellectual property rights to ours. Effective protection of intellectual property rights is expensive and difficult to maintain, both in terms of application and maintenance costs, as well as the costs of defending and enforcing those rights. The efforts we have taken to protect our intellectual property rights may not be sufficient or effective in protecting our intellectual property rights. Any litigation brought to enforce or challenge our intellectual property or proprietary rights may be costly and ultimately result in the loss of such rights. Failure to obtain or maintain adequate protection of our intellectual property or other proprietary rights for any reason could have a material adverse effect on our businesses, results of operations and financial condition. Additionally, intellectual property laws may change and certain agreements may not be fully enforceable, which could restrict our ability to protect our intellectual property rights. If we are unable to adequately protect our intellectual property rights, our business and growth prospects could be materially and adversely affected.
We use open-source software in our business, which could negatively affect our ability to operate our business and subject us to litigation or other actions.
We use open source software (“OSS”) in our business. While we do not use OSS in connection with our AIML initiatives, we do anticipate continuing to use OSS in our business in the future. Certain OSS licenses may give rise to requirements to disclose or license our proprietary source code or make available any derivative works or modifications of the OSS on unfavorable terms or at no cost, and we may be subject to such terms if we combine, link or otherwise integrate our proprietary software with OSS in certain ways. The terms of many OSS licenses to which we are subject have not been interpreted by U.S. or foreign courts, and there is a risk that some OSS licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to provide or distribute our products or services. In such event, we could be required to make any open source code utilized in certain of our proprietary software available to third-parties, (including competitors), to seek licenses from third-parties on terms unfavorable to us, to re-engineer or to discontinue the offering of our products or services, or we could become subject to other consequences, any of which could adversely affect our business, financial condition, and results of operations.
We operate a flexible-first workforce model, which could subject us to increased business continuity and cybersecurity risks, as well as other operational challenges and risks that could significantly harm our business and operations.
Our workforce operates under a mix of in-person, hybrid and fully remote arrangements. We increased in-office collaboration for non-remote employees, requiring a specified number of in-office days per month that varies by business team. We expect many employees to continue to work partially or fully remotely. As a result, we are subject to the challenges and risks of having a remote workforce, as well as the challenges and risks from operating with a hybrid workforce. These risks include home internet availability affecting work continuity and efficiency. We may also be exposed to risks associated with the locations of remote employees, including compliance with local laws and regulations or exposure to compromised internet infrastructure. Allowing our employees to work remotely may create intellectual property-related risks if any employee creates intellectual property on our behalf while residing in a jurisdiction with unenforced or uncertain intellectual property laws. Further, if employees fail to inform us of changes in their work location, we may be exposed to additional compliance risks without our knowledge.
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While we believe most of our operations can be performed and operated effectively remotely, there is no guarantee that our flexible-first workforce model will continue or that we will continue to be as effective while operating a flexible-first workforce model because our team is dispersed.
Operating our business with both remote and in-person workers, or workers who work in flexible locations and on flexible schedules, could have a negative impact on our corporate culture, decrease the ability of our workforce to collaborate and communicate effectively, decrease innovation and productivity, or negatively affect workforce morale. If we are unable to manage the cybersecurity and other risks of a flexible-first workforce model, and maintain our corporate culture and workforce morale, our business could be harmed or otherwise adversely impacted.
Risks Related to Credit and Interest Rate
We may not be able to measure and manage our credit risk adequately.
Our business depends on our ability to successfully measure and manage credit risk. As a lender, we are exposed to the risk that the principal of, or interest on, a loan will not be paid timely or at all or that the value of any collateral supporting a loan will be insufficient to cover our outstanding exposure. In addition, we are exposed to risks with respect to the period of time over which the loan may be repaid, risks relating to proper loan underwriting, risks resulting from changes in economic and industry conditions and risks inherent in dealing with individual loans and borrowers. The creditworthiness of a borrower is affected by many factors, including local market conditions and general economic conditions.
Evaluating credit risk involves considering a wide range of information on historical results, balance sheet items, collateral, forward-looking performance, operational fundamentals and management teams. Final decisions on appropriate credit risk reflect both analytical rigor and judgment exercised within our governance framework, which we may not perform adequately. Our risk management practices, such as monitoring the concentration of our loans within specific markets or industries and our credit approval, review and administrative practices, may not adequately manage credit risk, and our credit administration personnel, policies and procedures may not adequately adapt to changes in economic or any other conditions affecting customers and the quality of the loan portfolio. A failure to effectively measure and limit the credit risk associated with our loan portfolio may result in loan defaults, foreclosures and additional charge-offs, and may necessitate that we significantly increase our ACL, each of which could adversely affect our net income. As a result, our inability to successfully manage credit risk could have a material adverse effect on our business, financial condition and results of operations.
Our ACL may prove to be insufficient to cover actual credit losses.
Our future success depends to a significant extent upon the quality of our assets, particularly loans. In originating loans, there is a substantial likelihood that we will experience credit losses. The risk of loss will vary with, among other things, general economic conditions, including the current economic environment and real estate market, the type of loan, the creditworthiness of the borrower over the term of the loan, and, in the case of a collateralized loan, the quality of the collateral for the loan.
Our loan customers may not repay their loans according to the terms of these loans, and the collateral securing the payment of these loans may be insufficient to ensure repayment. As a result, we may experience significant credit losses, which could have a material adverse effect on our operating results. Under the CECL methodology which informs our ACL, a loan is considered to have a credit loss when the probability of default and loss given default result in the amount on the loan being less than the amount contractually required to be repaid. Accordingly, we maintain an ACL that represents judgments of expected losses and risks inherent in our loan portfolio, in an attempt to cover any credit losses that may occur. The ACL, which represents management’s estimate of expected lifetime credit losses on loans, held-to-maturity securities, and financing receivables, is determined using internal and industry historical loss experience, current conditions, and reasonable and supportable forecasts, with accrued interest receivable excluded from the measurement. The determination of the appropriate level of the ACL is inherently highly subjective and requires us to make significant estimates of and assumptions regarding current credit risk and future trends, all of which may change materially. Although we endeavor to maintain our ACL at a level adequate to absorb any current expected losses in the loan portfolio, these estimates of credit losses are
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necessarily subjective and their accuracy depends on the outcome of future events. As of March 31, 2026, the ACL was $55.3 million.
If our assumptions are wrong, or loss performance diverges from internal and industry historical data, our current ACL may not be sufficient to cover future credit losses, and we may need to make adjustments to allow for different economic conditions or adverse developments in our loan portfolio. Material additions to our ACL in the form of provisions for credit losses would materially decrease our net income.
In addition, the FDIC and the MOFR periodically review our ACL and may require us to increase our provision for credit losses or recognize further loan charge-offs, based on judgments different than those of our management. Any increase in our ACL or loan charge-offs as required by these regulators could have a material adverse effect on our business, financial condition and results of operations.
We are subject to interest rate risk.
Our profitability, like that of most financial institutions of our type, depends to a large extent on our net interest income, which is the difference between our interest income on interest-earning assets, such as loans and investment securities, and our interest expense on interest-bearing liabilities, such as deposits and borrowings.
Changes in interest rates can increase or decrease our net interest income, because different types of assets and liabilities may react differently, and at different times, to market interest rate changes. While we intend to manage the effects of changes in interest rates by adjusting the terms, maturities and pricing of our assets and liabilities, our efforts may not be effective, which could have a material effect on our business, financial condition and results of operations. Specifically, changes in interest rates or interest rate volatility may:
•Affect the difference between the interest that we earn on assets and the interest that we pay on liabilities, which impacts our overall net interest income and profitability;
•Adversely affect the ability of borrowers to meet obligations under variable or adjustable-rate loans and other debt instruments (including due to an inability to refinance loans), which, in turn, affects our loss rates on those assets;
•Decrease the demand for interest-rate based products and services, including loans and deposits;
•Affect our ability to hedge various forms of market and interest rate risk and may decrease the profitability or protection or increase the risk or cost associated with such hedges;
•Increase the unrealized losses on our available-for-sale and held-to-maturity investment portfolios; and
•Affect loan prepayment speeds and result in the impairment of capitalized loan servicing assets, reduce the value of loans held for sale and increase the volatility of loan revenues, potentially adversely affecting our results of operations.
Interest rates are highly sensitive to many factors that are beyond our control, including general economic conditions and policies of various governmental and regulatory agencies and, in particular, the Federal Reserve which, through the FOMC, may raise or lower interest rates in response to economic conditions. The FOMC increased the federal funds target range through several hikes during 2022 and 2023 and has subsequently been decreasing (and most recently holding steady) the range. Changes in monetary policy, including changes in interest rates, could influence not only the interest we receive on loans and securities and the interest we pay on deposits and borrowings, but such changes could affect our ability to originate loans and obtain deposits, the fair value of our assets and liabilities and the average duration of our assets and liabilities. Any substantial, unexpected or prolonged change in market interest rates could have an adverse effect on our business, financial condition and results of operations. As of March 31, 2026, 79.1% of our earning assets and 78.4% of our interest-bearing liabilities were variable-rate, where our variable rate liabilities reprice at a slower rate than our variable rate assets. Our interest sensitivity profile was asset sensitive as of March 31, 2026.
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Because of the differences in maturities and repricing characteristics of our interest-earning assets and interest-bearing liabilities, changes in interest rates do not produce equivalent changes in interest income earned on interest-earning assets and interest paid on interest-bearing liabilities. Accordingly, fluctuations in interest rates could adversely affect our net interest income and, in turn, our profitability. In addition, loan volumes are affected by market interest rates on loans. Rising interest rates generally are associated with a lower volume of loan originations while lower interest rates are usually associated with higher loan originations. Conversely, in rising interest rate environments, loan repayment rates will decline and in falling interest rate environments, loan repayment rates will increase. Accordingly, changes in market interest rates could materially and adversely affect our net interest income, asset quality, and loan origination volume, impacting our business, financial condition, liquidity position and results of operations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Interest Rate Sensitivity and Market Risk” for additional information around our interest rate sensitivity including simulated changes to our net interest income and Economic Value of Equity over a 12-month horizon based on +/- 100 basis point and 200 basis point changes in interest rates.
While we have experienced strong growth led by our digital deposit platform and related offerings, digital deposits are highly rate-sensitive, and elevated short-term interest rates have intensified, and may continue to intensify, deposit pricing competition. Further, customer deposits are subject to potentially dramatic fluctuations due to competitive pressures, interest rate changes, customer confidence, and other external factors. This could result in significant outflows within short periods and/or force significant pricing changes to retain or attract deposits. See “—Risks Related to Funding and Liquidity—We may not be able to develop and maintain a strong core deposit base or other low-cost funding sources” for additional discussions of these risks.
Our lender finance and fund finance lending strategies may expose us to increased credit risks.
We conduct a significant portion of our lending activities in our lender finance and fund finance businesses by offering a variety of customized asset-based products. Such asset-based products often involve bespoke structure and terms and depend on the performance of the underlying assets. The origination, structuring, and ongoing management of such products require robust operational processes and sophisticated risk models. Failures in systems, controls, or models could result in material losses. In addition, we rely on the structural features embedded in our asset-based lending to mitigate the credit risk associated with such products. We limit our lending to a percentage of the customer’s borrowing base assets that we believe can be readily liquidated in the event of financial distress of the borrower. If one or more of our customers negligently or fraudulently misrepresents the existence or value of borrowing base assets in connection with an asset-based loan, we may advance more funds than we otherwise would, which could reduce or eliminate the benefit of the structural protections of our lending products with respect to such advances. In such event we could be exposed to material additional losses with respect to such loans, which could have a material impact on our business, financial condition and results of operations.
Further, our loan portfolio is significantly concentrated in our lender finance and fund finance lending strategies and market, and regulatory or other factors negatively impacting these market spaces, or fraudulent activity, may have an outsized effect on our business, financial condition and results of operations as compared to similar impacts to our other lines of business.
Our healthcare finance lending strategy exposes us to operational complexity and changes in government payment rates that could adversely affect our results of operations.
Our healthcare finance lending strategy, which represents approximately 31% of our loan portfolio as of March 31, 2026, provides working capital and real estate bridge loans to providers of healthcare services throughout the United States, in service of supporting existing operations or financing acquisitions. The portfolio is heavily weighted toward the skilled nursing and seniors housing industries and also includes behavioral and other healthcare verticals. As such, our focus in this space increases concentration risk to sector-specific conditions and borrower operating performance. Borrowers may experience variability on occupancy, operating costs, access to capital and execution risk on acquisition or expansion plans. Further, the businesses in this sector are subject to extensive federal, state, and local regulation, including reimbursement rate changes, licensing requirements, and evolving standards of care. Changes in government reimbursement programs, such as Medicare and Medicaid, can materially impact the financial condition of our borrowers, increasing the risk of default on our loans. These contingencies can
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lead to borrower underperformance or stress, in which case our loans may require renegotiation or modification, restructuring or may result in default, which could increase our ACL and result in charge-offs, which may have a material effect on our business, financial condition and results of operations.
Concentrated exposures to certain asset classes may unfavorably impact our operations.
We have naturally developed concentrated exposures to those asset classes and industries in which we have specific knowledge or competency. Our loan portfolio consists of loans to borrowers on a national scale and across multiple lending strategies. Our healthcare finance lending strategy represents our most predominant lending strategy in our loan portfolio, representing approximately 31% of our loan portfolio as of March 31, 2026. As of March 31, 2026, no other lending strategy represented more than 20% of our loan portfolio. Additionally, due to the national operating footprint of our borrowers, we believe that we do not have a significant geographic concentration of credit exposure. We believe our extensive experience within these concentration areas, and our strategic relationships within such areas, allows us to better evaluate the associated risks and price credit accordingly. However, the presence of similar exposures concentrated in certain asset classes leaves us exposed to the risk of a focused downturn or increased competitive pressures within a concentration area. If any particular industry or market were to experience economic or financial difficulties, the overall timing and amount of collections on the Company’s loans to clients operating in those industries may differ from what is expected, which could have a material adverse impact on our business, financial condition or results of operations. Additionally, the failure to properly anticipate and address risks associated with these concentrated exposures could have a material adverse effect on our business, financial condition or results of operations.
Our underwriting practices may not protect us against losses in our loan portfolio.
In conducting business relating to our loan portfolio, we adhere to specific underwriting practices, including, but not limited to: analyzing a borrower’s credit history, financial statements, tax returns, and cash flow projections; valuing collateral based on reports of independent appraisers; and verifying liquid assets. Notwithstanding these practices, we have incurred losses on loans that have met these criteria, and may continue to experience higher than expected losses depending on economic factors and borrower behavior. In addition, our ability to assess the creditworthiness of our clients may be impaired if the models and approaches we use to select, manage, and underwrite our clients become less predictive of future behaviors, or in the case of borrower fraud. Finally, we may have higher credit risk, or experience higher credit losses, to the extent our loans are concentrated by loan type, industry segment, borrower type, or location of the borrower or collateral. Deterioration in the value of certain assets, such as CRE or trend declines in certain of our lending strategies, such as healthcare finance or our lender finance and fund finance practices, could result in significantly higher credit losses to our portfolio.
Our largest credit facilities make up a material percentage of our total loan portfolio and credit risks relating to these would have a disproportionate impact on our business, financial condition and results of operations.
As of March 31, 2026, our 25 largest credit facilities ranged from approximately $60.0 million to $85.0 million (including unfunded commitments) and totaled approximately $1.9 billion in total commitments (representing, in the aggregate, 24.7% of our total outstanding commitments as of March 31, 2026). Each of the loans associated with these relationships has been underwritten in accordance with our underwriting policies. Along with other risks inherent in these loans, such as the deterioration of the underlying businesses or property securing these loans, this concentration of borrowers presents a risk that, if one or more of these relationships were to become delinquent or suffer default, we could be exposed to material losses. The ACL may not be adequate to cover losses associated with any of these relationships, and any loss or increase in the allowance would negatively affect our earnings and capital. Even if these loans are adequately collateralized, an increase in classified assets could harm our reputation with our regulators and inhibit our ability to execute our business plan.
Repayment of our construction and development loans is often dependent on the cash flows of the borrower, which may be unpredictable, and the collateral securing these loans may not be sufficient to repay the loan in the event of default.
As of March 31, 2026, approximately 5.9% of the total dollar value of our loan portfolio, or $341.6 million, consisted of construction and development loans. We make our construction and development loans primarily based
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on the expected cash flow of the borrower and secondarily on the underlying collateral provided by the borrower. Risk of loss on a construction loan is largely dependent upon the accuracy of the initial estimate of the property’s value at completion of construction and estimated cost (including interest) of construction. If the estimate of construction costs proves to be inaccurate, we may be required to advance funds beyond the amount originally committed to permit completion of the project. If the estimate of the value proves to be inaccurate, we may be confronted, at or prior to the maturity of the loan, with a project whose value is insufficient to assure full repayment. In addition, if we foreclose on a property during construction, we may face additional difficulty realizing the value of the collateral. When lending to builders, the cost of construction breakdown is provided by the builder, as well as supported by the appraisal. Although our underwriting criteria are designed to evaluate and minimize the risks of each construction loan, there can be no guarantee that these practices will safeguard against material delinquencies and losses to our operations.
We are dependent on the use of data and modeling both in our management decision-making generally and in meeting regulatory expectations in particular.
The use of statistical and quantitative models and other quantitatively-based analyses is central to our decision-making and regulatory compliance processes, and the employment of such analyses is becoming increasingly widespread in our operations. Liquidity stress testing, interest rate sensitivity analysis, the automated extension of credit based on defined criteria and the identification of possible violations of anti-money laundering regulations are all examples of areas in which we are dependent on models and the data that underlies them.
Forecasting liquidity, capital, and interest rate risk requires modeling cash flows across assets and liabilities under multiple economic scenarios, incorporating assumptions around deposit and liability behavior, loan performance, funding costs, and balance sheet growth. Final decisions on appropriate capital, liquidity and interest rate reflect both analytical rigor and judgment exercised within our governance framework, which may not adequately measure risk and therefore inform core decisions about our business, financial condition, risk exposure and results of operations.
The appraisals and other valuation techniques we use in evaluating and monitoring loans secured by real property, OREO 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, and in determining the value of real estate collateral, we rely on external appraisals and assessment of property values by our internal staff. 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. In the case of non-real estate collateral, we rely on a variety of sources, including external estimates of value and judgments based on the experience and expertise of our internal staff. As a result, we may not be able to realize the full amount of any remaining indebtedness when we foreclose on and sell the relevant property.
In addition, we rely on appraisals and other valuation techniques, such as third-party price opinions or internally developed pricing models, to establish the value of our OREO and personal property that we acquire through foreclosure proceedings and to determine certain loan impairments. If any of these valuations are inaccurate, our consolidated financial statements may not accurately reflect the value of assets we acquire through foreclosure, and our ACL may not accurately reflect loan impairments. This could have a material adverse effect on our business, financial condition and results of operations.
We engage in lending secured by real estate and may be forced to foreclose on the collateral and own the underlying real estate, subjecting us to the costs and potential risks associated with the ownership of real property, including risks related to environmental laws and enforcement thereof, or consumer protection initiatives or changes in state or federal law may substantially raise the cost of foreclosure or prevent us from foreclosing at all.
Our loan portfolio is frequently secured by real property. In the ordinary course of our business, we may foreclose and take title to real estate, potentially becoming subject to environmental liabilities associated with the
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properties. We may be held liable to a governmental entity or to third parties for property damage, personal injury, investigation and clean-up costs, or we may be required to investigate or clean up hazardous or toxic substances or chemical releases at a property. Costs associated with investigation or remediation activities can be substantial. If we are the owner or former owner of a contaminated site, we may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from the property. These costs and claims could adversely affect our business, financial condition and results of operations.
Since we engage in lending and originate loans secured by real estate, we may be forced to foreclose on the collateral and own the underlying real estate, subjecting us to the costs and potential risks associated with the ownership of real property. Environmental laws may require us to incur substantial expenses to address unknown liabilities and may materially reduce the affected property’s value or limit our ability to use or sell the affected property. In addition, future laws or more stringent interpretations or enforcement policies with respect to existing laws may increase our exposure to environmental liability, and we may not have adequate remedies against the prior owner or other responsible parties and could find it difficult or impossible to sell the affected properties. The amount that we, as a lender, may realize after a foreclosure depends on factors outside of our control, including, but not limited to, general or local economic conditions, environmental clean-up liabilities, assessments, interest rates, real estate tax rates, operating expenses of the properties, our ability to obtain and maintain adequate occupancy of the properties, zoning laws, governmental and regulatory rules and natural disasters. Our inability to manage the amount of costs or size of the risks associated with the ownership of real estate, or write-downs in the value of real estate, could have a material adverse effect on our business, financial condition and results of operations.
Additionally, consumer protection initiatives or changes in state or federal law may substantially increase the time and expenses associated with the foreclosure process or prevent us from foreclosing at all. A number of states in recent years have either considered or adopted foreclosure reform laws that make it substantially more difficult and expensive for lenders to foreclose on properties in default. Additionally, federal and state regulators have prosecuted or pursued enforcement action against a number of mortgage servicing companies for alleged consumer law violations. If new federal or state laws or regulations are ultimately enacted that significantly raise the cost of foreclosure or raise outright barriers to foreclosure, they could have a material adverse effect on our business, financial condition and results of operations.
Our real estate finance business is significantly dependent on prevailing market conditions, which could increase our credit losses and negatively affect our financial results.
We offer a variety of secured loans, including commercial lines of credit, commercial term loans, real estate, construction, healthcare and other loans. In addition to the financial strength and cash flow characteristics of the borrower in each case, we often secure loans with real estate collateral, and as of March 31, 2026, approximately 46.8% of our loan portfolio was comprised of loans with real estate as a primary or secondary component of collateral. Real property values may be affected by a variety of factors outside of our control and the control of our borrowers, including national, regional and local economic conditions, generally. Consequently, a decline in regional or local economic conditions where we have outstanding CRE loans may have a greater effect on our earnings and capital than on the earnings and capital of larger financial institutions whose real estate loan portfolios are larger or more geographically diverse. Specifically, a decline in local or regional economic conditions may adversely affect the ability of borrowers to repay loans and the value of the collateral securing those loans with a nexus in those regions.
Further, the real estate collateral in each case provides an alternate source of repayment in the event of default by the borrower and may deteriorate in value during the time the credit is extended. As a result, declines in real property values could reduce the value of any collateral we realize following a default on these loans and could adversely affect our ability to continue to grow our loan portfolio consistent with our underwriting standards. We may have to foreclose on real estate assets if borrowers default on their loans, in which case we are required to record the related asset to the then fair market value of the collateral, which may ultimately result in a loss. An increase in the level of non-performing assets increases our risk profile and may affect the capital levels regulators believe are appropriate in light of the ensuing risk profile. Our failure to effectively mitigate these risks could have a material adverse effect on our business, financial condition and results of operations.
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We engage in lending secured by the equity interests of the borrower and, in circumstances of default, we may take possession of the equity interests of the borrower, the value of which may be volatile or the possession of which may significantly impact our operations.
We engage in lending to borrowers where equity interests of the borrower or its affiliates are collateralized as part of the security interest securing the loan. In the event of a default by the borrower under such loans, we may seek to enforce, or a bankruptcy court may recognize via bankruptcy proceedings, our security interests, leading to us taking possession of the pledged equity. However, the value of such equity may be highly volatile and subject to significant fluctuations due to market conditions, the financial performance of the underlying entity, a lack of a liquid market for disposal of the equity or other factors beyond our control. There can be no assurance that the value of the equity at the time of any enforcement action that we may take will be sufficient to allow us to fully recover the remaining balance from such defaulting borrowers.
Furthermore, if we acquire equity interests in a borrower or its affiliates as a result of enforcement or bankruptcy actions, we may become subject to additional risks and obligations, including but not limited to exposure to the financial and operational risks of the underlying entity (particularly if we choose to continue to manage the ongoing operations of the business via our equity holdings), potential regulatory or legal restrictions on ownership, and additional challenges associated with managing or disposing of such equity interests. We may also be required to consolidate the financial results of the acquired entity into our or the Bank’s financial statements, which could materially impact our reported financial condition, regulatory capital ratios and related performance indicia.
The realization of these risks could materially impact our business, financial condition, actual operations and results of operations, and there can be no assurance that we will be able to effectively mitigate these risks, operate or integrate such newly-acquired enterprises successfully or realize the full pre-default value of the original loan.
We could recognize realized or unrealized losses on investment securities held in our securities portfolio, particularly if interest rates increase or economic and market conditions deteriorate.
As of March 31, 2026, the book value of our investment securities portfolio was approximately $1.3 billion, and 60.4% of our investments were U.S. government or U.S. government agency securities. If agency mortgage backed securities are included, this ratio is 94.7%. Factors beyond our control can significantly influence the fair value of securities in our portfolio and can cause potential adverse changes to the fair value of these securities. Increases in interest rates could cause unrealized losses on investment securities which could result in accumulated other comprehensive losses. Additional factors beyond our control, include, but are not limited to, rating agency actions in respect of the securities, defaults by the issuer or with respect to the underlying securities, and instability in the capital markets. Available-for-sale securities are carried at fair value and are assessed for impairment at each reporting date. If credit-related impairment exists, we would recognize an allowance related to that security. Held-to-maturity securities are subject to the CECL standard, and therefore we are required to estimate and recognize an allowance for expected credit losses at the time of purchase and update this estimate at each reporting date. Any of these factors, among others, could require us to record an ACL if it indicates credit-related impairment or risk, which could have an adverse effect on our business, financial condition, and results of operations. The process for determining whether an ACL is required involves complex, subjective judgments about the future financial performance and liquidity of the issuer, any collateral underlying the security, and our intent and ability to hold the security for a sufficient period of time to allow for any anticipated recovery in fair value, in order to assess the probability of receiving all contractual principal and interest payments on the security. Our failure to correctly and timely assess any impairments or losses with respect to our securities could have an adverse effect on our business, financial condition and results of operations.
Inflation has negatively impacted, and may continue to negatively impact our business and our profitability.
Prolonged periods of inflation have impacted, and may continue to impact our profitability by negatively impacting our non-interest expenses, including increasing expense related to talent acquisition and retention. Additionally, inflation has led to, and may continue to lead to, a decrease in consumer purchasing power and negatively affect the need or demand for our products and services. If significant inflation continues, our business could be negatively affected by, among other things, increased default rates leading to credit losses which could
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decrease our willingness to offer new credit extensions. These inflationary pressures could adversely affect our results of operations or financial condition.
Risks Related to Funding and Liquidity
We may not be able to develop and maintain a strong core deposit base or other low-cost funding sources.
We depend on checking, savings and money market deposit account balances and other forms of deposits as our primary source of funding for our lending activities, and we continue to seek and compete for consumer deposits to maintain this funding base. Our future growth will largely depend on our ability to retain and grow our deposit base. As of March 31, 2026, we had $7.1 billion in deposits and a loan to deposit ratio of 81.1%. As of the same date, using deposit account related information such as tax identification numbers, account vesting and account size, we estimated that $975.2 million of our deposits exceeded the insurance limits established by the FDIC.
The deposit markets are competitive, and therefore it may prove difficult to grow our core deposit base. A significant portion of our digital banking deposit account balance currently depends on our high-yield savings account product, and there is no guarantee that deposit account openings and the amount on deposit in those accounts will continue to grow. Further, the elevated level of short-term interest rates in recent years have resulted in, and are expected to continue to result in, more intense competition in deposit pricing and with respect to non-deposit financial products. We face competition from similar products offered by our competitors which may offer more attractive features, including a higher interest rate on deposits, which may impact the success of the product. Changes we make to the rates offered on our deposit products may affect our finances and liquidity. Although we maintain a high deposit consumer retention rate, consumer deposits are subject to potentially dramatic fluctuations in availability or price due to certain factors outside of our control, such as increasing competitive pressures for deposits, changes in interest rates and returns on other investment classes, consumer perceptions of our financial health and general reputation, or a loss of confidence by customers and consumers in us or the banking sector generally, which could result in significant outflows of deposits within short periods of time or significant changes in pricing necessary to maintain current consumer deposits or attract additional deposits.
Furthermore, we may from time to time introduce new digital banking deposit products in an effort to diversify our funding sources and expand our services. In the event we are unable to sufficiently grow such digital products, we may be required to find alternative, higher-cost funding for our lending and other activities, or we might not be able to originate an acceptable or sustainable volume of loans. Relatedly, as the Bank continues to grow its core deposit base and seeks to reduce its exposure to high rate/high volatility accounts, it may experience a net deposit outflow, which could negatively impact our business, financial condition, and results of operations. Additionally, any such losses of funds could result in lower loan originations, which could have an adverse effect on our business, financial condition and results of operations.
Liquidity needs could adversely affect our business, financial condition and results of operations.
Liquidity is essential to our business, and we monitor our liquidity and manage our liquidity risk at the holding company and Bank level. We require sufficient liquidity to fund asset growth, meet customer loan requests, consumer deposit maturities and withdrawals, payments on our debt obligations as they come due and other cash commitments under both normal operating conditions and other unpredictable circumstances, including events causing industry or general financial market stress. Liquidity risk can increase due to a number of factors, which include, but are not limited to, an over-reliance on a particular source of funding, changes in the liquidity needs of our depositors, borrowers’ inability to make loan repayments, adverse regulatory actions against us, or a downturn in the markets in which our loans are concentrated. For example, the Bank could be subject to sudden withdrawals of deposits, including as a result of negative media coverage, which may be spread through social media, regarding us or the financial services industry generally. Online and mobile banking have made it easier for customers to withdraw their deposits or transfer funds to other accounts with short notice. This may make retaining deposits during periods of stress more difficult. In addition, depositors of certain types of deposits, such as uninsured, brokered or uncollateralized deposits, may be more likely to withdraw their deposits or do so more quickly.
Market conditions or other events could also negatively affect the level or cost of funding, affecting our ongoing ability to accommodate liability maturities and deposit withdrawals, meet contractual obligations, and fund asset
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growth and new business transactions at a reasonable cost, in a timely manner, and without adverse consequences. Our inability to raise funds through deposits, borrowings, the sale of loans, and other sources could have an adverse effect on our business, financial condition and results of operations, and could result in the closure of the Bank.
The Bank’s primary funding sources are non-wholesale deposits, wholesale deposits and loan repayments. While scheduled loan repayments are a relatively stable source of funds, they are subject to the ability of borrowers to repay the loans. The ability of borrowers to repay loans can be adversely affected by a number of factors, including changes in economic conditions, adverse trends or events affecting business industry groups, reductions in real estate values or markets, business closings or lay-offs, inclement weather, natural disasters, international instability and geopolitical conflicts. Additionally, deposit levels may be affected by a number of factors, including rates paid by competitors, general interest rate levels, regulatory capital requirements, returns available to clients on alternative investments, and general economic conditions. Accordingly, we may be required from time to time to rely on secondary sources of liquidity to meet withdrawal demands or otherwise fund operations. Such sources include sales of securities and loans and unsecured federal funds lines of credit from correspondent banks, FHLB advances, as well as other sources of wholesale funding. While we believe that these sources are adequate for our current needs, there can be no assurance they will be sufficient, or available, to meet future liquidity demands, particularly if we continue to grow and experience increasing loan demand. Any substantial, unexpected, and/or prolonged change in the level or cost of liquidity, including related to our regulatory status, could impair our ability to fund operations and meet our obligations as they become due and could have an adverse effect on our business, financial condition and results of operations. Although we have historically been able to replace maturing deposits and advances, we may not be able to replace such funds in the future if our financial condition or market conditions change. Current sources of liquidity may not be available or, if available, sufficient to provide adequate funding for operations and to support our continued growth. The unavailability of sufficient funding could have an adverse effect on our business, financial condition and results of operations. Further, the expense of borrowing funds to meet liquidity needs may adversely affect our results of operations. We may be required to slow or discontinue loan growth, capital expenditures or other investments or liquidate assets should such sources not be adequate, which could have a material adverse effect on our business, financial condition and results of operations.
Problems encountered by, or adverse news concerning, other financial institutions may adversely affect financial and capital markets generally as well as the Bank.
Financial services institutions may be interconnected as a result of trading, investment, liquidity management, clearing, counterparty and other relationships. Within the financial services industry, loss of public confidence, including through default by any one institution, could lead to liquidity challenges or to defaults by other institutions. Concerns about, or a default by, one institution could lead to significant liquidity problems and losses or defaults by other institutions, as the commercial and financial soundness of many financial institutions is closely related as a result of these credit, trading, clearing and other relationships. For example, public opinion of the financial services industry was negatively impacted following the 2023 closures of Silicon Valley Bank, Signature Bank, and First Republic Bank and generally resulted in decreases in the stock prices of financial services companies. Even the perceived lack of creditworthiness of, or questions about, a counterparty may lead to market-wide liquidity problems and losses or defaults by various institutions. This systemic risk may adversely affect financial intermediaries, such as clearing agencies, banks and exchanges with which we interact on a daily basis or key funding providers (including unsecured federal funds lines of credit), any of which could have a material adverse effect on our access to liquidity or otherwise have a material adverse effect on our business, financial condition and results of operations.
We are subject to capital adequacy standards and, if we fail to meet these standards, or more stringent standards in the future, we will be subject to restrictions on our ability to make capital distributions and other restrictions.
We and the Bank are each required to comply with applicable capital adequacy standards established by the Federal Reserve and the FDIC, respectively. From time to time, the Federal Reserve and the FDIC change these capital adequacy standards. In particular, we and the Bank are subject to a simple measure of capital adequacy, the CBLR framework, for “qualifying community banking organization.” The CBLR framework was jointly issued by the federal banking agencies in 2019, consistent with Section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. The CBLR framework is optional and is available to depository institutions and
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depository institution holding companies that have less than $10 billion in average total consolidated assets and meet other qualifying criteria. The CBLR framework removes the requirement for qualifying community banking organizations to calculate and report risk-based capital, instead requiring only that qualifying community banking organizations calculate and report a Tier 1 leverage ratio. Qualifying community banking organizations that elect to use the CBLR framework and that maintain a leverage ratio of greater than 9% will be considered to have satisfied the generally applicable risk based and leverage capital requirements in the agencies' capital rules (generally applicable rule) and, if applicable, will be considered to have met the capital ratio requirements to be considered “well capitalized” for purposes of the applicable “prompt corrective action” rules under the FDI Act. The CBLR rules also allow for a two-quarter grace period to correct a ratio that falls below the required amount, provided that the bank or bank holding company maintains a leverage ratio of greater than 8%. In April 2026, the federal banking agencies finalized changes to the CBLR framework, pursuant to which, effective July 1, 2026, qualifying community banking organizations that elect to use the CBLR framework will be required to maintain a leverage capital ratio of greater than 8% to be considered “well capitalized” with a four-quarter grace period to correct a ratio that falls below that amount, provided that the bank or bank holding company maintains a leverage ratio of greater than 7%. Under the current CBLR rule, a qualifying community banking organization can opt out of the CBLR framework and revert back to the risk-based framework without restriction. As of March 31, 2026, we and the Bank each were a “qualifying community banking organization” as defined by applicable regulations of the federal banking agencies and elected to measure our capital adequacy under the CBLR framework. But there is no guarantee that we and the Bank will continue to be a “qualifying community banking organization” or elect to measure our capital adequacy under the CBLR framework. As of March 31, 2026, the Company’s leverage ratio was below the 9% CBLR threshold and as a result, entered into the first quarter of the CBLR grace period. The Bank’s leverage ratio remains above the 9% threshold as of March 31, 2026. Furthermore, changes in capital rules are often precipitated by market events or economic conditions or events that expose perceived weaknesses or gaps in regulatory capital rules affecting banking organizations. For example, on March 19, 2026, the federal banking agencies issued a package of proposed rulemakings that would significantly amend the regulatory capital requirements applicable to most U.S. banks and bank holding companies. Because of the Company and the Bank is currently a “qualifying community banking organization” and has elected to measure its regulatory capital adequacy under the CBLR framework, these regulatory capital amendments, as currently proposed, would not apply to the Company or the Bank. However, if the Company or the Bank were to no longer measure its regulatory capital adequacy under the CBLR framework (whether by election or by a change to its eligibility status), the proposed regulatory capital amendments could, if finalized, impose additional costs on us.
The application of more stringent capital requirements for us could, among other things, result in lower returns on invested capital, require the raising of additional capital and result in additional regulatory actions if we were to be unable to comply with such requirements. Implementation of changes to asset risk weightings for risk-based capital calculations, items included or deducted in calculating regulatory capital and/or additional capital conservation buffers could result in management modifying its business strategy and could limit our ability to make distributions, including paying dividends.
Banking institutions that fail to meet the effective minimum capital ratios including the capital conservation buffer will be subject to constraints on capital distributions, including dividends and share repurchases, and certain discretionary executive compensation. The severity of the constraints depends on the amount of the shortfall and the institution’s “eligible retained income” (that is, the greater of (i) net income for the preceding four quarters, net of distributions and associated tax effects not reflected in net income and (ii) the average net income over the preceding four quarters).
The Federal Reserve may require us to commit capital resources to support the Bank.
The Federal Reserve requires a bank holding company to act as a source of financial and managerial strength to its subsidiary banks and to commit resources to support its subsidiary banks. Under the “source of strength” doctrine that was codified by the Dodd-Frank Act, the Federal Reserve may require a bank holding company to make capital injections into a subsidiary bank at times when the bank holding company may not be inclined to do so and may charge the bank holding company with engaging in unsafe and unsound practices for failure to commit resources to such a subsidiary bank. Accordingly, we could be required to provide financial assistance to the Bank if it experiences financial distress.
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A capital injection may be required at a time when our resources are limited, and we may be required to borrow the funds or raise capital to make the required capital injection. Any loan by a bank holding company to its subsidiary bank is subordinate in right of payment to deposits and certain other indebtedness of such subsidiary bank. In the event of a bank holding company’s bankruptcy, the bankruptcy trustee will assume any commitment by the holding company to a federal bank regulatory agency to maintain the capital of a subsidiary bank. Moreover, bankruptcy law provides that claims based on any such commitment will be entitled to a priority of payment over the claims of the holding company’s general unsecured creditors, including the holders of any note obligations. Thus, any borrowing by a bank holding company for the purpose of making a capital injection to a subsidiary bank may become more difficult and expensive relative to other corporate borrowings.
Our operations may require us to raise additional capital, which may result in dilution to our then-existing stockholders and may not be available when it is needed, or at all.
We are required by regulatory authorities to maintain adequate levels of capital to support our operations. We can offer no assurance that our capital resources following this offering will be adequate to satisfy our capital requirements for the foreseeable future. Accordingly, we may need to raise additional capital by issuing securities. The issuance of additional equity capital could be dilutive to the interests of our then-existing stockholders, including investors in this offering.
Our ability to raise additional capital, if needed, will depend in part on conditions in the capital markets at that time, which are outside our control, and on our financial performance. Accordingly, we may be unable to raise additional capital, if and when needed, on terms acceptable to us, or at all. If we cannot raise additional capital when needed, we may be unable to comply with regulatory capital requirements, which could cause our federal and state regulators to restrict our operations. Our inability to raise additional capital when needed could have a material adverse effect on our business, financial condition and results of operations.
Our liquidity is dependent on dividends from the Bank.
The Company is the parent company of, and a separate and distinct legal entity from, the Bank. Legal entity liquidity is an important consideration as there are legal, regulatory, contractual and other limitations on our ability to utilize liquidity from one legal entity to satisfy the liquidity requirements of another, which could result in adverse liquidity events at either Forbright and/or the Bank. Our principal source of funds to pay distributions on our Class A common stock and service our obligations, other than further issuances of securities, is dividends received from the Bank. Various federal and state laws and regulations limit the amount of dividends that our Bank may pay to us. Furthermore, the Bank is not obligated to pay dividends to us, and any dividends paid to us would depend on the earnings or financial condition of the Bank, various business considerations and applicable law and regulation. As is generally the case for banking institutions, the profitability of the Bank is subject to the fluctuating cost and availability of money, changes in interest rates and economic conditions in general. In the event our Bank is unable to pay dividends to us, we may not be able to service any debt we may incur, pay obligations or pay dividends on our stock. In addition to negatively affecting our business, a significant decrease in our liquidity could also reduce investor confidence in us, which could adversely affect our cash flow, business, financial condition or results of operations.
Our Bank’s FDIC deposit insurance premiums and assessments may increase.
Our Bank’s deposits are insured by the FDIC up to the maximum amount provided by the FDI Act subject to the Bank’s payment of deposit insurance premiums to the FDIC. Accordingly, our Bank is subject to insurance assessments based on our Bank’s average consolidated total assets less its average tangible equity. Our Bank’s regular assessments are determined by its CAMELS composite rating (a supervisory rating system developed to classify a bank’s overall condition by taking into account capital adequacy, assets, management capability, earnings, liquidity and sensitivity to market and interest rate risk), taking into account other factors and adjustments. In order to maintain a strong funding position and the reserve ratios of the DIF required by statute and FDIC estimates of projected requirements, the FDIC has the power to increase deposit insurance assessment rates and impose special assessments on all FDIC-insured financial institutions. Any future increases or special assessments could reduce our profitability and could have an adverse effect on our business, financial condition and results of operations.
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We depend in part upon wholesale and brokered certificates of deposit to satisfy funding needs.
We rely, in part, on funds provided by wholesale deposits and brokered certificates of deposit to support the growth of our loan portfolio. Wholesale and brokered certificates of deposit are highly sensitive to changes in interest rates and, accordingly, can be a more volatile source of funding. We continue to face strong competition with regard to wholesale and brokered deposits, and pricing and product changes may adversely affect our ability to attract and retain cost-effective deposit balances. Use of wholesale and brokered deposits involves the risk that growth supported by such deposits would be halted, or our total assets could contract, if the rates offered by the Bank were less than those offered by other institutions seeking such deposits, or if the depositors were to perceive a decline in the Bank’s safety and soundness, or both. In addition, if we were unable to match the maturities of the interest rates we pay for wholesale and brokered certificates of deposit to the maturities of the loans we make using those funds, increases in the interest rates we pay for such funds could decrease our consolidated net interest income. Moreover, if the Bank ceases to be categorized as “well capitalized” under banking regulations, it will be prohibited from accepting, renewing or rolling over brokered deposits without the consent of the FDIC. Additionally, our regulators can adjust applicable capital requirements at any time and have authority to place limitations on our deposit businesses. An inability to attract or maintain deposits in the future could materially adversely affect our ability to fund our business.
Legal and Compliance Risks
Our growth may place significant demands on our operational, risk management and other resources.
The rapid growth of our balance sheet and in certain areas of our business in recent years has placed significant demands on our operational, risk management, sales and marketing, technology, compliance, and finance and accounting infrastructure, and has resulted in increased expenses, a trend that we expect to continue as our business grows. In addition, we are required to continuously develop and adapt our systems and infrastructure in response to the increasing sophistication of the financial services market, changing technologies, evolving fraud, privacy and information security landscape, and regulatory developments relating to our existing and projected business activities. Our future growth will depend on, among other things, our ability to maintain an operating platform and management system able to address such growth, our ability to grow and optimize deposit balances, and our ongoing ability to demonstrate to our regulators that our risk management and compliance practices are growing and evolving in a commensurate fashion, all of which has required, and we expect will continue to require, us to incur significant additional expenses, expand our workforce and commit additional time from senior management and operational resources. We may not be able to manage supporting and expanding our operations effectively, and any failure to do so would adversely affect our ability to increase the scale of our business, generate projected revenue and control expenses.
We are subject to extensive regulation and supervision, which could limit or restrict our activities and negatively impact our financial performance.
We operate in a highly regulated industry and are subject to extensive federal and state regulation and supervision, which vests a significant amount of discretion in the various regulatory authorities that supervise us, including, at the Bank level, the MOFR and the FDIC and, at the holding company level, the Federal Reserve. Banking regulations are primarily intended to protect depositors’ funds, the DIF and the banking system as a whole, not stockholders. Our compliance with these regulations is costly and restricts certain of our activities and lines of business, our payment of dividends, mergers and acquisitions, investments, loans and interest rates charged, interest rates paid on deposits, and locations of banking offices. The cost of regulatory compliance is particularly burdensome on smaller institutions such as the Bank, which has a smaller earning asset base than our larger competitors to offset these compliance costs. If we are unsuccessful in managing our compliance costs or such costs continue to increase, it could have a material adverse effect on our business, financial condition and results of operations.
Congress and federal regulatory agencies continually review banking laws, regulations and policies for possible changes. Changes to statutes, regulations or regulatory policies or priorities, or supervisory guidance or expectations, including changes in interpretation or implementation of statutes, regulations, policies or supervisory guidance, as
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well as changes to the applicability of various laws to us as a result of changes to our size or risk profile, have and could continue to affect us in substantial and unpredictable ways. Such changes have subjected us to, and could continue to subject us to, additional costs and could limit the types of financial services and products we may offer, limit our ability to return capital to stockholders or conduct certain activities, or increase the ability of non-banks to offer competing financial services and products, among other things.
For example, on March 19, 2026, the federal banking agencies issued a package of proposed rulemakings that would significantly amend the regulatory capital requirements applicable to most U.S. banks and bank holding companies. Because each of the Company and the Bank is currently a “qualifying community banking organization” and has elected to measure its regulatory capital adequacy under the CBLR framework, these regulatory capital amendments, as currently proposed, would not apply to the Company or the Bank. However, if the Company or the Bank were to no longer measure its regulatory capital adequacy under the CBLR framework (whether by election or by a change to its eligibility status), the proposed regulatory capital amendments could, if finalized, impose additional costs on us.
Failure to comply with laws, regulations, policies or supervisory guidance could result in enforcement and other legal actions by federal or state authorities, including criminal and civil penalties, the loss of FDIC insurance, the revocation of a banking charter or registration as a broker-dealer and investment adviser, enforcement actions or sanctions by regulatory agencies, significant fines and civil money penalties and/or reputational damage. In this regard, government authorities, including the bank regulatory agencies, are pursuing and have pursued aggressive enforcement actions with respect to compliance and other legal matters involving financial activities, which heightens the risks associated with actual and perceived compliance failures. Directives issued to enforce such actions may be confidential and thus, in some instances, we are not legally permitted to publicly disclose these actions without the approval of the applicable governmental authority. Litigation challenging actions or regulations by federal or state authorities could, depending on the outcome, significantly affect the regulatory and supervisory framework affecting our operations, and could in turn have a material adverse effect on our business, financial condition and results of operations.
In addition, new regulations or increased regulatory scrutiny often occur in response to negative developments in the banking industry, which may increase our cost of doing business and reduce our profitability. Among other things, there may be increased focus by both regulators and investors on deposit composition, the level of uninsured deposits, brokered deposits, unrealized losses in securities portfolios, liquidity, CRE loan composition and any concentrations, and capital as well as general oversight and control of the foregoing. We could face increased scrutiny or be viewed as higher risk by regulators and/or the investor community, which could have a material adverse effect on our business, financial condition and results of operations.
Our Alliance Partners business also provides investment advisory services to financial institution clients through its lending platform. In connection with such investment advisory services, Alliance Partners is a registered investment adviser subject to regulation and periodic examination by the SEC under the 1940 Act. The 1940 Act imposes numerous prohibitions and obligations on registered investment advisers, including anti-fraud provisions, fiduciary duties arising out of those provisions, restrictions on certain transactions involving affiliates and regulations designed to safeguard the assets of advisory clients, among others. Failure to comply with these requirements could invite SEC scrutiny or action with respect to Alliance Partners, which could adversely impact our business, financial condition and results of operations, as well as our reputation.
We currently hold state licenses and registrations in connection with the activities of our subsidiaries, Alliance Partners and Solar Servicing LLC. Changes in licensing and registration laws may result in increased disclosure requirements, increased fees, or may impose other conditions to licensing and registration that we or our personnel are unable to meet. We may be required to pay substantial penalties imposed by those regulators due to compliance errors, or we may lose our license or our ability to do business in the jurisdiction otherwise may be impaired. Fines and penalties incurred in one jurisdiction may cause investigations or other actions by regulators in other jurisdictions. We may not be able to obtain or maintain all currently required licenses and registrations. If we change or expand our business activities, we may be required to obtain additional licenses before we can engage in those activities. If we apply for a new license, a regulator may determine that we were required to do so at an earlier point in time, and as a result, may impose penalties or refuse to issue the license, which could require us to modify or limit
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our activities in the relevant state. Based on changes to our business, we may also forfeit certain of our licenses that are no longer required. Regulators may impose conditions, requirements or penalties in connection with the forfeiture of any of our licenses. States may also expand or otherwise modify their current regulations and if such states do so, we may not be able to comply with such updated regulations or maintain all requisite licenses and registrations in such states or our costs of compliance with and maintenance of such licenses or registrations may materially increase. In addition, the states that currently do not provide extensive regulation of our business may later choose to do so, and we may not be able to obtain or maintain all requisite licenses and registrations, which could require us to modify or limit our activities in the relevant state or states. The failure to satisfy those and other regulatory requirements could have a material adverse effect on our business, financial condition and results of operations.
As a result of our expanding national presence, we operate a nationwide business and are required to comply with significantly more state laws and regulations.
As a result of the nationwide scope of our business and our expanding national presence, we have customers and consumers located across multiple states. Additionally, some of our employees and other personnel are geographically dispersed, which requires us to comply with additional state laws and regulations, including employment and tax laws and regulations. The complexity of, and cost to comply with, state laws applicable to our business has increased as a result of our increased national presence. If we are unable to successfully control such costs of compliance or if we fail to comply with applicable state laws and regulations, it could materially and adversely affect our results of operations and financial condition.
We may be subject to claims and litigation pertaining to our fiduciary responsibilities.
Some of the services we provide, such as our investment services, require us to act in a fiduciary capacity or similar role for our consumers and others. From time to time, third parties may make claims and take legal action against us pertaining to the performance of our fiduciary responsibilities. If these claims and legal actions are not resolved in a manner favorable to us, we may be exposed to significant financial liability or our reputation could be harmed. Either of these results may adversely impact demand for our products and services or otherwise have a material adverse effect on our business, financial condition and results of operations.
Stockholders may be deemed to be acting in concert or otherwise in control of us, which could impose notice, approval and ongoing regulatory requirements and result in adverse regulatory consequences for such holders.
The Company is a bank holding company regulated by the Federal Reserve. Banking laws impose various regulatory requirements on parties that may seek to acquire a significant interest in the Company or the Bank. For example, the Change in Bank Control Act would generally require that any party file a formal notice with, and obtain non-objection of, the applicable federal banking agency prior to acquiring (directly or indirectly, whether alone or acting in concert with any other party) 10% or more of any class of voting securities of the Company or the Bank. Further approval requirements and significant ongoing regulatory consequences would apply to any company that (directly or indirectly, whether alone or as part of an association with another company) seeks to acquire “control” of Forbright or the Bank for purposes of the BHCA. The determination of whether a party “controls” a depository institution or its holding company for purposes of these laws is based on all of the facts and circumstances surrounding the investment. Potential investors are advised to consult with their legal counsel regarding the applicable regulations and requirements.
Failure to effectively manage potential conflicts of interest could result in litigation and enforcement actions, as well as damage our reputation.
Alliance Partners provides investment advisory services to financial institution clients and, in that capacity, owes fiduciary duties to such clients. As a result, we may need to address potential conflicts of interest, including situations where we may be a creditor of an entity with which Alliance Partners also has an advisory relationship and where our services to a particular client conflict, or are perceived to conflict, with the interests of an Alliance Partners client. While we have instituted controls and procedures that are designed to identify and address conflicts of interest, appropriately identifying and dealing with conflicts of interest is complex and difficult. If we fail, or are perceived to fail, to properly identify, disclose, and address conflicts of interest, our reputation could suffer and
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clients may be less willing to engage in transactions with us. In addition, potential or perceived conflicts may give rise to litigation, government investigations or enforcement actions in the future, which could have an adverse effect on our business, financial condition and results of operations.
Federal and state regulators periodically examine our business and may require us to remediate adverse examination findings or may take enforcement action against us.
The Federal Reserve, the FDIC and the MOFR periodically examine our business, including our compliance with laws and regulations. If, as a result of an examination, the Federal Reserve, the FDIC, or the MOFR were to determine that our financial condition, capital resources, asset quality, earnings prospects, management, liquidity or other aspects of any of our operations (such as information technology or trust operations) had become unsatisfactory, or that we were in violation of any law or regulation, or disagree with our judgments and interpretations regarding the application of regulatory requirements to us, they may take or require us to take a number of different remedial actions as they deem appropriate. These actions have in the past resulted in, and may in the future result in, us being required to remediate or otherwise address any such adverse examination findings, such as through inclusion in reports of examination of matters requiring board attention or amending and refiling publicly available reports. If we fail to address supervisory criticism or concerns in a timely and effective manner, it can result in our regulators taking increasingly elevated regulatory actions against us, which could, among other things, increase the costs of operating our businesses, reduce the demand for our products and services, impact our ability to meet or maintain current or future goals or targets or continue initiatives, and increase our legal, operational and reputational risks. For example, in connection with resolving certain regulatory consent orders issued by the FDIC and MOFR, we developed a funds management program and capital framework and enhanced our governance, compliance, controls and management infrastructure and capabilities in order to ensure compliance with all applicable regulations, which required, and will continue to require, substantial time, monetary and human resource commitments.
In addition, these agencies have the power to take formal and informal enforcement action against us to enjoin “unsafe or unsound” practices, to require affirmative action to correct any conditions resulting from any violation of law or regulation or unsafe or unsound practice, to issue an administrative order that can be judicially enforced, to direct an increase in our capital, to direct the sale of subsidiaries or other assets, to limit dividends and distributions, to restrict our growth, to assess civil money penalties against us or our officers or directors, to remove officers and directors and, if it is concluded that such conditions cannot be corrected or there is imminent risk of loss to depositors, to terminate our deposit insurance and place our Bank into receivership or conservatorship. In some instances, we may not be permitted to publicly disclose these actions. Any regulatory enforcement action against us could have a material adverse effect on our business, financial condition and results of operations.
Litigation and regulatory actions, including possible enforcement actions, could subject us to significant fines, penalties, judgments or other requirements resulting in increased expenses or restrictions on our business activities.
In the normal course of business, from time to time, we have in the past and may in the future be named as a defendant in various legal actions, arising in connection with our current and/or prior business activities. Legal actions could include claims for substantial compensatory or punitive damages or claims for indeterminate amounts of damages. Further, in the future our regulators may impose consent orders, civil money penalties, matters requiring attention, or similar types of supervisory criticism. We may also, from time to time, be the subject of subpoenas, requests for information, reviews, investigations and proceedings (both formal and informal) by governmental agencies regarding our current and/or prior business activities. Any such legal or regulatory actions may subject us to substantial compensatory or punitive damages, significant fines, penalties, obligations to change our business practices or other requirements resulting in increased expenses, diminished income and damage to our reputation. Our involvement in any such matters, whether tangential or otherwise and even if the matters are ultimately determined in our favor, could also cause significant harm to our reputation and divert management attention from the operation of our business. Further, any settlement, consent order or adverse judgment in connection with any formal or informal proceeding or investigation by government agencies may result in litigation, investigations or proceedings as other litigants and government agencies begin independent reviews of the same activities. As a result,
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the outcome of legal and regulatory actions could have an adverse effect on our business, financial condition and results of operations.
We are subject to numerous “fair and responsible banking” laws and other laws and regulations designed to protect consumers, and failure to comply with these laws could lead to a wide variety of sanctions.
The ECOA, the Fair Housing Act and other fair lending laws and regulations, including state laws and regulations, prohibit discriminatory lending practices by financial institutions. The Federal Trade Commission Act prohibits unfair or deceptive acts or practices, and the Dodd-Frank Act prohibits unfair, deceptive, or abusive acts or practices by financial institutions. The U.S. Department of Justice, federal and state banking agencies, and other federal and state agencies, including the CFPB, are responsible for enforcing these fair and responsible banking laws and regulations. Smaller banks, including the Bank, are subject to rules promulgated by the CFPB but continue to be examined and supervised by federal banking agencies for compliance with federal consumer protection laws and regulations. Accordingly, CFPB rulemaking has the potential to have a significant impact on the operations of the Bank.
A challenge to an institution’s compliance with fair and responsible banking laws and regulations could result in a wide variety of sanctions, including damages and civil money penalties, injunctive relief, restrictions on mergers and acquisitions activity, restrictions on expansion, and restrictions on entering new business lines. Private parties may also have the ability to challenge an institution’s performance under fair lending laws in private litigation, including through class action litigation. Such actions could have an adverse effect on our business, financial condition and results of operations.
We face a risk of non-compliance and enforcement actions with the BSA and other anti-money laundering and counter terrorist financing statutes and regulations.
The BSA, USA PATRIOT Act, AMLA and other laws and regulations require financial institutions, among others, to institute and maintain an effective anti-money laundering compliance program and to file reports such as suspicious activity reports and currency transaction reports. Our products and services are subject to an increasingly strict set of legal and regulatory requirements to help detect and prevent money laundering, terrorist financing and other illicit activities. We are required to comply with these and other anti-money laundering requirements. The federal banking agencies and the U.S. Treasury Department’s Financial Crimes Enforcement Network are authorized to impose significant civil money penalties for violations of those requirements and have recently engaged in coordinated enforcement efforts against banks and other financial services providers with the U.S. Department of Justice, Drug Enforcement Administration and IRS. If we violate these laws and regulations, or our policies, procedures and systems are deemed deficient, we could face severe consequences, including sanctions, fines, regulatory actions and reputational consequences. Any of these results could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
In recent years, several banking institutions have received large fines for non-compliance with these laws and regulations. While we have developed policies and procedures designed to assist in compliance with these laws and regulations, these policies and procedures may not be effective in preventing violations of these laws and regulations. Moreover, our efforts to comply with such laws and regulations could result in increased costs related to our regulatory oversight, as we may be required to add additional compliance personnel or incur other significant compliance-related expenses. Failure to maintain and implement adequate programs to combat money laundering and terrorist financing could also have serious reputational consequences for us, which could have a material adverse effect on our business, financial condition and results of operations.
Regulations relating to privacy, information security and data protection could increase our costs or affect or limit how we collect and use personal information. Any violation of these laws or another incident involving personal, confidential or sensitive information of individuals could damage our reputation and adversely affect our business.
Our business requires the collection and retention of large volumes of personal, confidential or sensitive information regarding our customers, consumers, employees and other third parties with whom we interact. As a result, we are subject to various privacy, information security and data protection laws and regulations, including, to
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the extent applicable, requirements concerning data breach notification, and we could be adversely impacted by these laws. For example, our business is subject to the GLBA which, among other things: (i) imposes certain obligations related to sharing nonpublic personal information about our customers and consumers with nonaffiliated third parties; (ii) requires that we provide certain disclosures to customers and consumers about our information collection, sharing and security practices and afford customers and consumers the right to “opt out” of certain information sharing by us with nonaffiliated third parties (with certain exceptions) and (iii) requires that we develop, implement and maintain a written comprehensive information security program containing appropriate safeguards based on our size and complexity, the nature and scope of our activities, and the sensitivity of customer information we process, as well as maintain plans for responding to data security breaches. Various state and federal banking regulators and states have also enacted data breach notification laws and regulations with varying requirements for customers and consumer, regulator, and/or law enforcement notification in certain circumstances in the event of a security breach.
Moreover, the legal and regulatory environment surrounding data privacy and protection is constantly evolving, can be subject to significant change, and may be inconsistent between states within a country or between countries. Legislators and regulators in the United States are increasingly adopting or revising privacy, information security and data protection laws that potentially could have a significant impact on our current and planned privacy, data protection and information security-related practices, our collection, use, sharing, retention and safeguarding of customer, consumer or employee information, and some of our current or planned business activities. This could also pose complex compliance challenges, and increase our costs of compliance and business operations, require us to change our business practices and could reduce income from certain business initiatives. This includes increased privacy-related enforcement activity at the federal and state level, such as with regard to mobile applications. The impact of such laws and regulations is unclear as they continue to develop and are subject to amendments and evolving administrative and judicial interpretation. Any failure or perceived failure to comply with applicable laws and regulations could result in significant fines, penalties and legal liability.
Ensuring that our collection, use, transfer, storage and processing of personal information complies with all applicable laws and regulations can increase our costs. Furthermore, we may not be able to ensure that customers, consumers and other third parties have appropriate controls in place to protect the confidentiality of the information that they exchange with us, particularly where such information is transmitted by electronic means. If personal, confidential or sensitive information of our employees, customers, consumers or other third parties with whom we interact were to be mishandled or misused (in situations where, for example, such information was erroneously provided to parties who are not permitted to have the information, or where such information was intercepted or otherwise compromised by third parties), we could be exposed to litigation or regulatory sanctions under privacy and data protection laws and regulations. Compliance with current or future privacy, data protection and information security laws (including those regarding data breach notification) to which we are subject could result in higher compliance and technology costs and could restrict our ability to provide certain products and services, which could have an adverse effect on our business, financial condition or results of operations. Further, concerns regarding the effectiveness of our measures to safeguard personal information, or even the perception that such measures are inadequate, could cause us to lose customers and consumers or potential customers and consumers and thereby reduce our revenues. Accordingly, any actual or perceived failure to comply with applicable privacy, data protection and information security laws could result in potentially significant regulatory or governmental investigations or actions, litigation, fines, sanctions and damage to our reputation, which could have a material adverse effect on our business, financial condition and results of operations.
Adverse developments in U.S. tax laws could have a material and adverse effect on our business, financial condition and results of operations. Our effective tax rate could also change materially as a result of various evolving factors, including changes in income tax law or changes in the scope of our operations.
We are subject to income taxation at the U.S. federal level and because of the scope of our operations, by certain states and municipalities. In determining our tax liability for these jurisdictions, we must monitor changes to the applicable tax laws and related regulations. While we believe we are in compliance with current prevailing laws, one or more U.S. taxing authorities could seek to impose incremental, retroactive or new taxes on us. In addition, jurisdictions in which we operate are actively considering significant changes to current tax law. Any adverse developments in tax laws or regulations, including legislative changes, judicial holdings or administrative
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interpretations, could have a material and adverse effect on our business, financial condition and results of operations. Finally, changes in the scope of our operations, including expansion to new geographies, could increase the amount of taxes to which we are subject, and could increase our effective tax rate, which could similarly adversely affect our business, financial condition and results of operations.
We currently have no plans to pay dividends on our Class A common stock and our ability to pay dividends is subject to certain restrictions.
Holders of our Class A common stock are entitled to receive only such dividends as our board of directors may declare out of funds legally available for such payments. Our board of directors may, in its sole discretion, change the amount or frequency of dividends or discontinue the payment of dividends entirely. Also, as a bank holding company, our ability to pay dividends is affected by the policies and enforcement powers of the Federal Reserve. The terms of our debt agreements currently limit our ability to pay dividends, and our ability to pay dividends in the future may also be restricted by the terms of any debt or preferred securities we may incur or issue. In addition, our primary asset is the Bank and any future payment of dividends will depend on our Bank’s ability to make distributions and payments to the Company as our principal source of funds to pay such dividends. There are numerous laws and banking regulations that restrict the Bank’s ability to pay dividends or make other capital distributions to the Company. Further, our banking regulators have the ability to restrict the Bank’s payment of dividends through supervisory action. As a consequence of these various limitations and restrictions, we may not be able to make the payment of dividends on our Class A common stock.
Political and regulatory changes or developments could adversely affect our business.
Our business depends on maintaining stable relationships with depositors and our valued customers, as well as consistent regulatory and political policies. For example, on August 7, 2025, President Trump signed Executive Order 14331 titled “Guaranteeing Fair Banking for All Americans,” which, among other things, required federal banking agencies to conduct reviews to identify, and take remedial actions against, financial institutions that have had any policies or practices that would encourage “politicized or unlawful” debanking based on the customer’s political or religious beliefs or disfavored lawful business activities. Certain federal banking agencies have announced actions to address these practices, including conducting supervisory reviews of banks’ activities, reviewing consumer complaints from government and third-party sources to identify potential instances of, and announcing actions to consider, debanking in applicable CRA examinations and licensing applications filed by banks. In January 2026, a high-profile lawsuit was filed alleging politically motivated account closures against a major U.S. bank and its CEO, underscoring the potential for claims in this area. Regulatory, legal or political policy changes, including changes in approach to enforcement actions, regulatory or administrative policy priorities or costly litigation could adversely affect our reputation, result in increased compliance costs, restrict our ability to manage risk, or otherwise adversely impact our consumer and customer bases, our business, financial position and results of operations.
Risks Related to an Investment in Our Class A Common Stock and this Offering
No public market exists for our Class A common stock, and an active market may not develop.
Prior to this offering there has been no public market for our Class A common stock. An active trading market for shares of our Class A common stock may never develop or may not be sustained following this offering. If an active trading market does not develop, you may have difficulty selling your shares of Class A common stock. The initial public offering price for our Class A common stock will be determined by negotiations between us and the representatives of the underwriters in this offering. This price may not be indicative of the price at which our Class A common stock will trade at any given point after this offering. The market price of our Class A common stock may decline below the initial offering price, and you may not be able to sell your Class A common stock at or above the price you paid in this offering, or at all. An inactive market may also impair our ability to raise capital by selling our Class A common stock and may impair our ability to expand our business through acquisitions using our Class A common stock as consideration, should we elect to do so.
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The dual class structure of our capital stock may limit your ability to influence corporate matters if shares of our non-voting Class B common stock are converted into shares of voting Class A common stock.
The dual class structure of our capital stock may limit your ability to influence corporate matters. Holders of our Class A common stock are entitled to one vote per share, while holders of our Class B common stock are not entitled to any votes. Nonetheless, each share of our Class B common stock may convert into an equal number of shares of our Class A common stock in specific circumstances and in compliance with the specific procedures provided in our Amended Certificate of Incorporation. See “Description of Capital Stock—Conversion of Class B Common Stock” for a summary of these conditions and procedures. Upon completion of this offering, investors in this offering will have approximately      % of the voting power of our Class A common stock (or      % if underwriters exercise their option to purchase additional shares of Class A common stock in full). If, immediately following this offering, all the shares of our Class B common stock were converted into Class A common stock, investors in this offering would have approximately      % of the voting power of our Class A common stock (or      % if underwriters exercise their option to purchase additional shares of Class A common stock in full). Consequently, if a holder of our Class B common stock following this offering converts its Class B common stock to Class A common stock, this will have the effect of increasing the relative voting power of the prior holder of our Class B common stock, and correspondingly decreasing the voting power of the holders of our Class A common stock, which may limit your ability to influence corporate matters.
Investors in this offering will experience immediate and substantial dilution.
The initial public offering price of our stock is substantially higher than the net tangible book value per share of our Class A common stock immediately following this offering. Therefore, if you purchase shares in this offering, you will experience immediate and substantial dilution in net tangible book value per share in relation to the price that you paid for your shares. Based on an assumed initial public offering price of $           per share, which is the midpoint of the price range set forth on the cover of this prospectus, and our net tangible book value as of           , if you purchase our Class A common stock in this offering, you will suffer immediate dilution of approximately $          per share in net tangible book value. As a result of this dilution, investors purchasing stock in this offering may receive significantly less than the full purchase price that they paid for the shares purchased in this offering in the event of a liquidation.
Future sales of our Class A common stock in the public market could lower our stock price, and any increase in shares issued as part of our equity-based compensation plans or for other purposes may dilute your ownership in us. Our Amended Certificate of Incorporation authorizes us to issue up to                 shares of our Class A common stock,                 of which will be outstanding following the completion of this offering (or               shares if the underwriters exercise in full their option to purchase additional shares of Class A common stock) and                 shares of Class B common stock,             of which will be outstanding following the completion of this offering.               % of the shares of our Class A and Class B common stock outstanding, including the shares of Class A and Class B common stock owned by our executives, directors, selling stockholders, members of our management and other current stockholders, will be restricted from immediate resale under the federal securities laws and the lock-up agreements between our executive officers, directors, selling stockholders and certain other current stockholders and the underwriters which generally provide for a lock-up period of 180 days following this offering (unless the representatives of the underwriters waive such lock-up period), but may be sold in the near future. See “Underwriting.” Following the expiration of the applicable lock-up period, all these shares of our Class A common stock will be eligible for resale under Rule 144 of the Securities Act, subject to volume limitations and applicable holding period requirements. In addition, certain stockholders will have the ability to cause us to register the resale of their shares pursuant to a registration rights agreement. See “Shares Eligible for Future Sale” for a discussion of the shares of our Class A common stock that may be sold into the public market in the future.
We may issue shares of our Class A common stock, Class B common stock or other securities from time to time as consideration for future acquisitions and investments and pursuant to compensation and incentive plans. If any such acquisition or investment is significant, the number of shares of our Class A common stock or Class B common stock, or the number or aggregate principal amount, as the case may be, of other securities that we may issue may in turn be substantial. We may also grant registration rights covering those shares of our Class A common stock, Class B common stock or other securities in connection with any such acquisitions and investments.
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Further, from time to time, we explore and evaluate merger and acquisition opportunities as part of our ongoing business practices, and we may pursue mergers and acquisitions in the future. If we issue shares of our Class A common stock as consideration for any acquisition, it would dilute the ownership of existing holders of our Class A common stock and could result in a decline in the market price of our Class A common stock.
We also intend to file one or more registration statements on Form S-8 to register shares of our Class A common stock issued pursuant to one or more equity incentive plans. Any such Form S-8 registration statements will automatically become effective upon filing. Accordingly, shares registered under such registration statements will be available for sale in the open market. We expect that the initial registration statement on Form S-8 will cover shares of our Class A common stock.
We cannot predict the size of future issuances of our Class A common stock, or the effect, if any, that future issuances and sales of our Class A common stock will have on the market price of our Class A common stock. Sales of substantial amounts of our Class A common stock (including shares of our Class A common stock issued in connection with an acquisition or under a compensation or incentive plan), or the perception that such sales could occur, may adversely affect prevailing market prices for our Class A common stock and could impair our ability to raise capital through future sales of our securities.
Our stock price may be volatile, and you could lose part or all of your investment as a result.
Stock price volatility may negatively impact the price at which our Class A common stock may be sold and may also negatively impact the timing of any sale. Our stock price may fluctuate widely in response to a variety of factors including the risk factors described herein and, among other things:
•actual or anticipated variations in quarterly or annual operating results, financial conditions or credit quality;
•changes in business or economic conditions;
•changes in accounting standards, policies, guidance, interpretations or principles;
•changes in regulatory regimes governing other financing or investment verticals in which we are involved;
•the effects of, and changes in, trade, monetary and fiscal policies, including the interest rate policies of the Federal Reserve;
•changes in recommendations or research reports about us or the financial services industry in general published by securities analysts;
•the failure of securities analysts to cover, or to continue to cover, us after this offering;
•changes in financial estimates or publication of research reports and recommendations by financial analysts or actions taken by rating agencies with respect to us or other financial institutions;
•news reports relating to trends, concerns and other issues in the financial services industry;
•reports related to the impact of natural or manmade disasters;
•perceptions in the marketplace regarding us and or our competitors;
•sudden increases in the demand for our Class A common stock, including as a result of any “short squeezes”;
•significant acquisitions or business combinations, strategic partnerships, joint ventures or capital commitments by or involving us or our competitors;
•additions or departures of key personnel;
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•future sales or issuance of additional shares of Class A common stock or other equity securities;
•fluctuations in the stock price and operating results of our competitors;
•changes or proposed changes in laws or regulations, or differing interpretations thereof affecting our business, or enforcement of these laws or regulations;
•new technology used, or services offered, by competitors;
•additional investments from third parties;
•geopolitical conditions such as acts or threats of terrorism, pandemics or military conflicts;
•other economic, competitive, governmental, regulatory or technological factors affecting our operations, pricing, products and services;
•other news, announcements or disclosures (whether by us or others) related to us, our competitors, our core businesses or the financial services industry; or
•other events or factors, including those discussed in “—Risks Related to our Operations.”
In particular, the realization of any of the risks described in this section could have an adverse effect on the market price of our Class A common stock and cause the value of your investment to decline. In addition, the stock market in general has experienced significant volatility that has often been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our Class A common stock over the short, medium or long term, regardless of our actual performance.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, or change their recommendations regarding our Class A common stock, or if our operating results do not meet their expectations, the market price of our Class A common stock and trading volume could decline.
The trading market for our Class A common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, or our operating results do not meet their expectations, either absolutely or relative to our competitors, the market price of our Class A common stock would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we would lose visibility in the financial markets, which in turn could cause the market price of our Class A common stock or trading volume to decline. If we fail to meet the expectations of analysts for our operating results, the market price of our Class A common stock would likely decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, demand for our stock could decrease, which could cause the market price of our Class A common stock and trading volume to decline.
The holders of our debt obligations and any preferred stock we may issue will have priority over the holders of our Class A common stock with respect to payment in the event of liquidation, dissolution or winding up and with respect to the payment of interest and dividends.
In any liquidation, dissolution or winding up of the Company, our Class A common stock would rank below all claims of debt holders against us as well as any preferred stock that has been issued. As of March 31, 2026, we had outstanding an aggregate of $148.2 million of subordinated notes, net of debt issuance costs and an aggregate of $2.9 million of trust preferred securities, net of securities issuance costs. We could incur additional debt obligations or issue additional preferred stock in the future to raise additional capital. In such event, holders of our Class A common stock will not be entitled to receive any payment or other distribution of assets upon the liquidation, dissolution or winding up of the Company until after all of our obligations to holders of our debt are satisfied and holders of indebtedness and senior equity securities, including preferred shares, if any, have received any payment or distribution due to them. In addition, we will be required to pay interest on the subordinated notes and dividends on our trust preferred securities before we will be able to pay any dividends on our Class A common stock.
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Delaware law and the provisions of our Amended Certificate of Incorporation and Amended Bylaws may have an anti-takeover effect, and there are substantial regulatory limitations on changes of control of bank holding companies.
Delaware corporate law and provisions of our Amended Certificate of Incorporation, and our Amended Bylaws could make it more difficult for a third-party to acquire us, even if doing so would be perceived to be beneficial by our stockholders. In addition to these provisions, banking laws impose notice, approval, and ongoing regulatory requirements on any stockholder or other party that seeks to acquire direct or indirect “control” of an FDIC-insured depository institution. These laws include the BHCA and the Change in Bank Control Act. These laws could delay or prevent an acquisition. Accordingly, prospective investors must comply with these requirements, if applicable, in connection with any purchase of shares of our Class A common stock. Among other things, our Amended Certificate of Incorporation and Amended Bylaws include provisions regarding:
•the ability of our board of directors to issue shares of preferred stock, including “blank check” preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;
•limitations on the liability of our directors, and the indemnification of our directors and officers;
•the ability of our board of directors to amend our Amended Bylaws, which may allow our board of directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend our bylaws to facilitate an unsolicited takeover attempt;
•advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which could preclude stockholders from bringing matters before annual or special meetings of stockholders and delay changes in our board of directors and also may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of our company;
•certain transfer restrictions that restrict the ability of a person or entity or group thereof from accumulating an aggregate of      % or more of the Company’s capital stock and the ability of persons, entities or groups now owning      % or more of the Company’s capital stock from acquiring additional stock; and
•a classified board of directors with staggered, three-year terms, which could delay the ability of stockholders to change the membership of a majority of our board of directors.
Collectively, provisions of our Amended Certificate of Incorporation and Amended Bylaws and other statutory and regulatory provisions may delay, prevent or deter a merger, acquisition, tender offer, proxy contest or other transaction that might otherwise result in our stockholders receiving a premium over the market price for their Class A common stock. Moreover, the combination of these provisions effectively inhibits certain business combinations, which, in turn, could adversely affect the market price of our Class A common stock.
Our Amended Certificate of Incorporation has an exclusive forum provision, which could limit a stockholder’s ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.
Our Amended Certificate of Incorporation has an exclusive forum provision providing that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the state of Delaware or, in the event that the Court of Chancery of the state of Delaware does not have jurisdiction, any federal or state court of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of any duty owed by any director, officer or other employee to us or to our stockholders, (iii) any action asserting a claim against us or any of our directors, officers, stockholders, employees or other agents arising pursuant to any provision of the DGCL or the Amended Certificate of Incorporation or the Amended Bylaws or (iv) any action asserting a claim against us or any of our directors, officers, stockholders, employees or other agents that is governed by the internal affairs doctrine.
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Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all claims brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Our Amended Certificate of Incorporation will provide that the federal district courts of the United States will, to the fullest extent permitted by law, be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. This means that suits brought by our stockholders to enforce any duty or liability created by the Securities Act must be brought in federal court and cannot be brought in state court.
Section 27 of the Exchange Act creates exclusive federal jurisdiction over all claims brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Accordingly, our Amended Certificate of Incorporation will not apply to suits brought to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder. Accordingly, actions by our stockholders to enforce any duty or liability created by the Exchange Act or the rules and regulations thereunder must be brought in federal court.
Our Amended Certificate of Incorporation will also provide that any person or entity purchasing or otherwise acquiring any interest in shares of our Class A common stock will be deemed to have notice of and to have consented to the foregoing provisions; provided, however, that stockholders will not be deemed to have waived our compliance with the federal securities laws and the rules and regulations thereunder. We recognize that the forum selection clause in our Amended Certificate of Incorporation may impose additional litigation costs on stockholders in pursuing any such claims, particularly if the stockholders do not reside in or near the State of Delaware.
An investment in our Class A common stock is not an insured deposit.
An investment in our Class A common stock is not a bank deposit and, therefore, is not insured against loss by the FDIC, the DIF, or by any other public or private entity. Investment in our Class A common stock is inherently risky for the reasons described herein and is subject to the same market forces that affect the price of Class A common stock in any company. As a result, if you acquire our Class A common stock, you could lose some or all of your investment.
Fulfilling our public company financial reporting and other regulatory obligations and transitioning to a public company will be expensive and time consuming and may strain our resources and divert management’s attention.
As a public company, we will be subject to the reporting requirements of the Exchange Act and will be required to implement specific corporate governance practices and adhere to a variety of reporting requirements under the Sarbanes-Oxley Act and the related rules and regulations of the SEC, as well as the rules of the Nasdaq. The Exchange Act will require us to file annual, quarterly and current reports with respect to our business and financial condition which may at times differ from information in our other publicly available reports regarding our business and financial condition (including due to different regulatory requirements and standards applicable to the information required to be included in those other reports). The Sarbanes-Oxley Act will require, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. Compliance with these requirements will place additional demands on our legal, accounting, finance, operations and investor relations staff and on our accounting, financial and information systems, and will increase our legal and accounting compliance costs as well as our compensation expense as we expect to hire additional legal, accounting, tax, finance and investor relations staff. As a public company we may need to enhance our investor relations and corporate communications functions and attract additional qualified board members. These additional efforts may strain our resources and divert management’s attention from other business concerns, which could have a material adverse effect on our business, financial condition and results of operations. We expect to incur additional incremental ongoing and one-time expenses in connection with our transition to a public company. The actual amount of the incremental expenses we will incur may be higher, perhaps significantly, from our current estimates for a number of reasons, including, among others, additional costs we may incur that we have not currently anticipated.
In accordance with Section 404 of the Sarbanes-Oxley Act, our management will be required to conduct an annual assessment of the effectiveness of our internal control over financial reporting and include a report on these internal controls in the annual reports we will file with the SEC on Form 10-K. Our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal controls until we are no
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longer an emerging growth company and no longer a non-accelerated filer. When required, this process will require significant documentation of policies, procedures and systems, review of that documentation by our accounting staff and our outside independent registered public accounting firm and testing of our internal control over financial reporting by our accounting staff and our outside independent registered public accounting firm. This process will involve considerable time and attention, may strain our internal resources and will increase our operating costs. We may experience higher than anticipated operating expenses and outside auditor fees during the implementation of these changes and thereafter. If our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our Class A common stock could be negatively affected, and we could become subject to investigations by the Nasdaq, the SEC or other regulatory authorities, which could require additional financial and management resources.
We have not been required to, and we have not performed, an evaluation of our internal control over financial reporting as contemplated by Section 404 of the Sarbanes-Oxley Act, as of any balance sheet date reported in our financial statements. We have performed an evaluation of our internal control over financial reporting under the Federal Deposit Insurance Corporation Improvement Act of 1991, which is a different standard than under Section 404 of the Sarbanes-Oxley Act. Had we performed such an evaluation of our internal control over financial reporting or had our independent registered public accounting firm performed an audit of our internal control over financial reporting, control deficiencies, including material weaknesses and significant deficiencies, may have been identified.
If we are unable to meet the demands that will be placed upon us as a public company, including the requirements of the Sarbanes-Oxley Act and other public reporting and disclosure requirements, that will continue to apply to us as a bank holding company, we may be unable to accurately report our financial results, or report them within the time frames required by law or stock exchange regulations. Failure to comply with the Sarbanes-Oxley Act or other public reporting and disclosure requirements, when and as applicable, could also potentially subject us to sanctions or investigations by the SEC or other regulatory authorities, as applicable. If material weaknesses or other deficiencies occur, our ability to accurately and timely report our financial position could be impaired, which could result in late filings of our annual and quarterly reports under the Exchange Act, restatements of our consolidated financial statements, amendments or refiling of our regulatory financial statements, a decline in our stock price, or suspension or delisting of our Class A common stock from the Nasdaq and could have a material adverse effect on our business, results of operations and financial condition, along with impacts to investor confidence in our business. Even if we are able to report our financial statements accurately, consistently and in a timely manner, any failure in our efforts to implement the improvements or disclosure of material weaknesses in our future filings with the SEC could cause our reputation to be harmed and our stock price to decline significantly.
We will have broad discretion in allocating the net proceeds from this offering.
We intend to use the net proceeds from this offering for general corporate purposes. We will have significant flexibility in applying the net proceeds of this offering. Accordingly, investors will not have the opportunity to evaluate the economic, financial, and other relevant information that we may consider in the application of the net proceeds. In addition, we may not use the net proceeds from this offering effectively or in a manner that increases our market value or enhances our profitability. We have not established a timetable for the effective deployment of the net proceeds, and we cannot predict how long it will take to deploy these proceeds. Investing the net proceeds in securities until we can deploy these proceeds will provide lower yields than we generally earn on loans, which may have a material adverse effect on our profitability. Further, an investor may ultimately disagree with how we elect to utilize the net proceeds from this offering, but our management retains broad discretion on how it chooses to utilize the proceeds from this offering. Our failure to apply these funds effectively could have a material adverse effect on our business, financial condition and results of operations.
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We are an “emerging growth company” as defined in the JOBS Act and will be able to avail ourselves of reduced disclosure requirements applicable to emerging growth companies, which could make our Class A common stock less attractive to investors and adversely affect the market price of our Class A common stock.
We are an “emerging growth company,” as defined in the JOBS Act. For as long as we continue to be an emerging growth company we may take advantage of certain exemptions from various requirements generally applicable to public companies. These exemptions allow us, among other things, to present only two years of audited financial statements and discuss our results of operations for only two years in related Management’s Discussions and Analyses; not to provide an auditor attestation of our internal control over financial reporting; to take advantage of an extended transition period to comply with the new or revised accounting standards applicable to public companies; and not to seek a non-binding advisory vote on executive compensation or golden parachute arrangements.
We may take advantage of these provisions until the last day of the fiscal year following the fifth anniversary of the completion of this offering or such earlier time that we are no longer an emerging growth company. We would cease to be an emerging growth company upon the earliest of (i) the last day of the first fiscal year in which our annual gross revenue is $1.235 billion or more, (ii) the date on which we have, during the previous rolling three-year period, issued more than $1.0 billion in non-convertible debt securities, and (iii) the last day of the fiscal year in which the market value of our Class A common stock held by non-affiliates exceeded $700 million as of June 30 of such fiscal year.
We cannot predict whether investors will find our Class A common stock less attractive because we may rely on these exemptions. If some investors find our Class A common stock less attractive as a result, there may be a less active trading market for our Class A common stock, and our stock price may be more volatile or decline.
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains, and future oral and written statements by us and our management may contain, forward-looking statements. These forward-looking statements represent plans, estimates, objectives, goals, guidelines, expectations, intentions, projections and statements of our beliefs concerning future events, business plans, objectives, expected operating results and the assumptions upon which those statements are based. Forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and are typically identified with words such as “may,” “could,” “should,” “will,” “would,” “believe,” “anticipate,” “estimate,” “expect,” “aim,” “intend,” “plan” or words or phases of similar meaning. We caution that the forward-looking statements are based largely on our expectations and are subject to a number of known and unknown risks and uncertainties that are subject to change based on factors which are, in many instances, beyond our control. Such forward-looking statements are based on various assumptions (some of which may be beyond our control) and are subject to risks and uncertainties, which change over time, and other factors which could cause actual results to differ materially from those currently anticipated. Such risks and uncertainties include, but are not limited to:
•economic conditions that impact the financial services industry and/or our business;
•our ability to manage our credit risk effectively and the potential deterioration of the business and economic conditions in our primary market areas;
•the composition of our loan portfolio;
•our ability to achieve organic loan and deposit growth and the composition of such growth;
•our ability to maintain our bank’s reputation;
•our ability to attract and retain skilled employees and manage changes in our management personnel;
•risks associated with unauthorized access, cyber-crime and other threats to data security;
•our ability to effectively compete with other financial services companies and the effects of competition in the financial services industry on our business;
•our ability to successfully develop and commercialize new or enhanced products and services;
•changes in the demand for our products and services;
•the sufficiency of our capital, including sources of capital and the extent to which we may be required to raise additional capital to meet our goals;
•the effectiveness of our risk management and internal disclosure controls and procedures;
•our access to sources of liquidity and capital to address our liquidity needs;
•the effects of the failure of any component of our business infrastructure provided by a third-party;
•any failure or interruption of our information and communications systems;
•the impact of, and changes in applicable laws, regulations and accounting standards and policies;
•the effects of geopolitical instability, including war, terrorist attacks, and man-made and natural disasters;
•our ability to keep pace with technological changes;
•the effects of problems encountered by other financial institutions; and
•the other risks and uncertainties described under “Risk Factors.”
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All such factors are difficult to predict, contain uncertainties that may materially affect actual results and may be beyond our control. New factors emerge from time to time, and it is not possible for management to predict all such factors or to assess the impact of each such factor on the Company. Any forward-looking statement speaks only as of the date on which such statement is made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made except as required by the federal securities laws.
If one or more of these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, our actual results may vary materially from what we may have expressed or implied by these forward-looking statements. We caution that you should not place undue reliance on any of our forward-looking statements. You should specifically consider the factors identified in this prospectus that could cause actual results to differ before making an investment decision to purchase our Class A common stock. Furthermore, new risks and uncertainties arise from time to time, and it is impossible for us to predict those events or how they may affect us.
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USE OF PROCEEDS
We expect to receive net proceeds from this offering of approximately $          million (or approximately $           million if the underwriters exercise their option to purchase additional shares of Class A common stock in full), after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, based on an assumed initial public offering price of $           per share (the midpoint of the price range set forth on the cover of this prospectus).
We intend to use the net proceeds that we receive from this offering for general corporate purposes.
At this time, we have not identified a specific use or uses for which we intend to employ the entirety of the net proceeds and, accordingly, we intend to invest any unused proceeds in a variety of capital preservation investments, including short-term, liquid investment-grade and interest-bearing instruments.
We reserve the right to use the net proceeds that we receive from this offering in any manner we consider to be appropriate, to the benefit of our business and operations. Although we do not currently contemplate changes in the proposed use of proceeds, to the extent we find that adjustment is required for other uses, by reason of existing business conditions, we may adjust the use of proceeds and apply them in our discretion. The actual use of the proceeds of this offering could differ from those outlined above as a result of several factors including those set forth in the section entitled “Risk Factors” and elsewhere in this prospectus. Our management will have broad discretion in the application of the net proceeds accruing to us from this offering, and investors will be relying on the judgment of our management regarding the application of such proceeds.
A $1.00 increase (decrease) in the assumed initial public offering price per share would increase (decrease) the estimated net proceeds to us by approximately $           million (or approximately $           million if the underwriters exercise their option to purchase additional shares of Class A common stock in full), assuming that the number of shares of Class A common stock sold by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of Class A common stock offered by us would increase (decrease) the net proceeds to us from this offering by approximately $           million, assuming that the assumed initial public offering price remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
We will not receive any proceeds from the sale of shares of Class A common stock by the selling stockholders. The selling stockholders will bear the underwriting commissions and discounts, if any, attributable to their sale of our Class A common stock, and we will bear the remaining expenses.
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DIVIDEND POLICY
Holders of our common stock are only entitled to receive dividends when, as and if declared by our board of directors out of funds legally available for dividends. We do not intend to pay dividends on our Class A common stock or Class B common stock in the near term, or necessarily at all. Instead, we anticipate that all of our future earnings will be retained to support our operations and to finance the growth and development of our business. Any future determination relating to our dividend policy will be at the sole discretion of our board of directors and will depend on many factors, including the financial condition, earnings and capital and liquidity requirements applicable to us and the Bank, regulatory constraints, and any other factors that our board of directors deems relevant in making such a determination.
In addition, the terms of our debt agreements currently limit our ability to pay dividends and future agreements governing our indebtedness may similarly limit our ability to pay dividends.
Under Delaware law, dividends to holders of our common stock may be payable only out of surplus, which is calculated as our net assets less our liabilities and our capital, or, if we have no surplus, out of our net profits for the fiscal year in which the dividend is declared and/or the preceding fiscal year.
Our ability to pay dividends is subject to restrictions under applicable banking laws and regulations. See “Supervision and Regulation.”
Because we are a bank holding company and do not engage directly in business activities of a material nature, our ability to pay dividends to our stockholders depends, in large part, upon our receipt of dividends from the Bank, which is also subject to numerous limitations on the payment of dividends under federal and state banking laws, regulations and policies. See “Supervision and Regulation.”
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CAPITALIZATION
The following table sets forth the cash and cash equivalents and capitalization as of March 31, 2026:
•on an actual basis; and
•on an as adjusted basis after giving effect to the sale by us of           shares of Class A common stock in this offering at an assumed initial public offering price of $          per share (which is the midpoint of the price range set forth on the cover of this prospectus), and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, as if they had occurred on March 31, 2026.
The following table is derived from and should be read together with the sections of this prospectus entitled “Use of Proceeds,” “Summary Historical Consolidated Financial Data and Other Information,” “Management’s Discussion and Analysis of Results of Operations and Financial Condition” and our consolidated financial statements and accompanying notes included elsewhere in this prospectus.
As of March 31, 2026
Actual
As Adjusted(1)
(dollars in thousands)
Cash and cash equivalents
$866,136 $                     
Liabilities:
Non-interest-bearing deposits
$473,153 
Interest-bearing deposits
6,665,055 
Total deposits
7,138,208 — 
Subordinated debt, net
151,092 
Other liabilities
112,565 
Total liabilities
7,401,865 — 
Stockholders’ Equity:
Preferred stock, $0.001 par value per share,           shares authorized, no shares issued and outstanding, actual;           shares authorized, no shares issued and outstanding, as adjusted
— 
Class A common stock, $0.001 par value per share, no shares authorized, issued and outstanding, actual;           shares authorized and           shares issued and outstanding as adjusted
20 
Class B common stock, $0.001 par value per share,            shares authorized, issued and outstanding, actual;           shares authorized and            shares issued and outstanding, as adjusted
21 
Additional paid-in capital
493,074 
Retained earnings
340,460 
Accumulated other comprehensive income
(2,380)
Total stockholders’ equity
831,195 — 
Total capitalization
$8,233,060 $— 
__________________
(1)A $1.00 increase (decrease) in the assumed initial public offering price of $          per share, which is the midpoint of the estimated initial public offering price range we show on the cover of this prospectus, would increase (decrease) the as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by approximately $          million each, assuming that the number of shares offered by us, which we show on the cover of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We may also increase or decrease the number of shares of Class A common stock we are offering. Each increase (decrease) of 1,000,000 shares of Class A common stock at the assumed initial public offering price of $          per share, which is the midpoint of the estimated initial public offering price range we show on the cover of this prospectus, would increase (decrease) the as adjusted amount of each of cash and cash equivalents, additional paid-in capital, total stockholders’ equity and total capitalization by approximately $          million each, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
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DILUTION
If you invest in our Class A common stock in this offering, you will experience immediate and substantial dilution in the net tangible book value per share of our Class A common stock upon the completion of this offering.
Our net tangible book value as of March 31, 2026, was approximately $      million, or approximately $      per share. Our net tangible book value per share is determined by dividing our net tangible book value (tangible assets less total liabilities) by the total number of shares of common stock outstanding immediately prior to the closing of this offering, including shares of both our Class A common stock and Class B common stock. Our as adjusted net tangible book value per share of common stock represents our as adjusted net tangible book value, after giving further effect to our issuance and sale of Class A common stock in this offering, divided by the number of shares of common stock outstanding immediately after giving effect to the closing of this offering.
After giving effect to our sale of            shares of Class A common stock and the selling stockholders’ sale of            shares of Class A common stock in this offering at an assumed initial public offering price of $            per share (the midpoint of the price range set forth on the cover page of this prospectus), and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our as adjusted net tangible book value as of March 31, 2026, would have been approximately $          million, or approximately $          per share. This represents an immediate increase in the net tangible book value of $          per share to existing stockholders and an immediate dilution (i.e., the difference between this offering price and the as adjusted net tangible book value after this offering) to new investors participating in this offering of $          per share, which includes the number of shares of Class A common stock underlying the total number of shares of Class B common stock outstanding.
The following table illustrates the per share dilution to new investors participating in this offering:
Assumed initial public offering price per share

$                     
Net tangible book value per share as of March 31, 2026
$                     

Increase per share attributable to new investors in this offering
As adjusted net tangible book value per share
Dilution per share to new investors in this offering(1)
$                     
__________________
(1)Dilution is determined by subtracting as adjusted net tangible book value per share from the initial public offering price paid by a new investor.
The following table summarizes on an as adjusted basis as of March 31, 2026, the total number of shares of Class A common stock owned by our existing stockholders and to be owned by the new investors in this offering, the total consideration paid, and the average price per share, which includes the number of shares of Class A common stock underlying the total number of shares of Class B common stock outstanding, paid by our existing stockholders and to be paid by the new investors in this offering at the assumed initial public offering price of $           per share, the midpoint of the price range set forth on the cover page of this prospectus, calculated before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us:
Shares PurchasedTotal Consideration
Average Price
Per Share
NumberPercentageAmountPercentage
Our existing stockholders
%
$                   
%
$                   
New investors in this offering
%
$                   
%
$                   
Total
%
$                   
%
$                   
A $1.00 increase (decrease) in the assumed initial public offering price of $           per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) our as adjusted net tangible book value as of March 31, 2026, by approximately $          million, or $          per share, and the dilution in as adjusted net tangible book value per share to new investors in this offering by $          per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after
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deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of Class A common stock offered by us would increase (decrease) our as adjusted net tangible book value as of March 31, 2026, by approximately $          million, or $          per share, and the dilution in as adjusted net tangible book value per share to new investors in this offering by $          per share, assuming that the assumed initial public offering price remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.
Sales by the selling stockholders in this offering will cause the number of shares held by our existing stockholders before this offering to be reduced to            shares, or           % of the total number of shares of our common stock outstanding immediately following the completion of this offering, and will increase the number of shares held by new investors in this offering to            shares, or           % of the total number of shares of our common stock outstanding immediately following the completion of this offering (assuming that none of the shares of Class A common stock sold in this offering are purchased by our existing stockholders and including the number of shares of Class A common stock underlying our total number of shares of Class B common stock outstanding).
If the underwriters’ option to purchase additional shares of our Class A common stock is exercised in full, our existing stockholders would own           % of the total number of shares of our common stock outstanding and our new investors would own           % of the total number of shares of our common stock outstanding (assuming that none of the shares of Class A common stock sold in this offering are purchased by our existing stockholders and including the number of shares of Class A common stock underlying our total number of shares of Class B common stock outstanding).
To the extent that we issue additional shares of Class A common stock in the future, including if options are exercised or new awards are issued under the 2026 Plan (in each case with an exercise or purchase price that is less than the price per share of our Class A common stock paid by new investors in this offering), new investors in this offering will experience further dilution.
We will not receive any proceeds from the sale of shares of Class A common stock by the selling stockholders in this offering. Accordingly, there will be no dilutive impact as a result of such sales.
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATION AND FINANCIAL CONDITION
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with “Prospectus Summary—Summary Historical Consolidated Financial Data and Other Information” and our consolidated financial statements and the related notes appearing elsewhere in this prospectus. This discussion and analysis contains forward-looking statements that are subject to certain risks and uncertainties and are based on certain assumptions that we believe are reasonable but may not be realized. Certain risks, uncertainties and other factors, including those set forth under “Risk Factors,” “Cautionary Note Regarding Forward-Looking Statements” and elsewhere in this prospectus, may cause actual results to differ materially from those projected results discussed in the forward-looking statements appearing in this discussion and analysis. We assume no obligation to update any of these forward-looking statements.
The following discussion presents management’s perspective on our historical results of operations and financial condition on a consolidated basis. Because we conduct all our material business and business operations through the Bank, and its subsidiaries, the discussion and analysis primarily focus on activities conducted at the Bank subsidiary level.
Overview
Forbright operates at the intersection of two powerful, structural forces reshaping the U.S. banking sector: the rapidly evolving needs of the $10 trillion national middle market and the broadly accelerating shift toward digital-first banking. Together, these trends have created a distinctive opportunity for the establishment and growth of a category-defining bank of the future, combining modern technology, differentiated lending and deposit products, and scaled fee-based businesses to serve dynamic middle-market companies and consumers.
Forbright offers a modern financial services platform spanning nationwide middle-market lending, digital consumer banking, strategic advisory and asset management services. We trace our history back to Congressional Bank, established in 2003, but our period of growth and modernization began in 2020 when John Delaney returned from public service to the private sector to lead a $369 million capital infusion in 2021 as well as the reimagining and rebranding of the Company to support our new growth strategy. A key to our success in building Forbright has been management’s differentiated ability to leverage its experience and relationships to attract and retain world-class talent aligned with our mission.
We believe our business model represents a significant evolution of the traditional commercial banking paradigm, which is often largely limited by geographic footprint and relies on non-interest-bearing deposit funding that has come under structural pressure as depositors have increasingly sought yield-bearing alternatives in the recent high interest-rate environment. We function as a precision-guided platform that is designed to deliver substantial value to customers across both the asset and liability sides of our balance sheet, while maximizing returns for our stockholders. From December 31, 2020 to December 31, 2025, consolidated assets have grown from $1.9 billion to $7.9 billion and net income has grown from $12.2 million to $87.9 million. As of March 31, 2026, consolidated assets were $8.2 billion and for the first quarter 2026 net income was $11.6 million.
During the periods presented, our business strategy focused on balance sheet growth, managing credit risk, expansion of lending activities on a national basis, diversifying our funding sources, and maintaining capital and liquidity levels that support these objectives.
Our discussion and analysis of results of operations and financial condition is intended to provide the reader with information that will assist in the understanding of our business, results of operations, financial condition, changes in key items in our financial statements from period to period, and the primary factors that we use to evaluate our business.
Primary Factors Used to Evaluate Results of Operations
The most significant performance indicators we use to evaluate our results of operations are return on average assets, return on average equity, net interest margin and efficiency ratio. These performance indicators rely on net
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income, net interest income, non-interest income, and non-interest expense, average assets, and average equity as primary inputs. We analyze these indicators against our historical performance, our budget targets and banking industry financial condition and performance levels.
Return on Average Assets
Return on average assets measures our efficiency in profiting from the assets on our balance sheet over a period of time. It is calculated by dividing the net income for the period by the average assets over the same period. We monitor return on average assets to assess the degree to which our assets produce meaningful earnings.
Return on Average Equity
Return on average equity measures our efficiency in profiting from the equity on our balance sheet over a period of time. It is calculated by dividing the net income for the period by average equity over the same period. Similar to return on average assets, we monitor return on average equity to assess the degree to which our equity produces meaningful earnings.
Return on Average Tangible Common Equity
Return on average tangible common equity measures our efficiency in profiting from the tangible equity on our balance sheet over a period of time. It is calculated by dividing (a) the net income for the period less intangible asset amortization on an after-tax basis, by (b) average tangible common equity over the same period. Similar to return on average assets and average equity, we monitor return on average equity to assess the degree to which our tangible equity produces meaningful earnings.
Net Interest Margin
Net interest margin measures the comparison of interest earned on assets to interest paid on liabilities. Using lower cost deposits and borrowings to generate interest income will improve our interest margin and our net income. The metric is measured by dividing net interest income for a period by average earning assets for the same period. We monitor net interest margin to assess the degree to which yield on our interest-earning assets exceeds the cost of the funding sources we utilize.
Efficiency Ratio
The efficiency ratio measures how efficiently we are using our resources to generate revenue. It is calculated by dividing non-interest expense into the sum of net interest income and non-interest income. As we generate more revenue by incurring the same amount of expense, our efficiency ratio will go down. We monitor the efficiency ratio to assess the level of expenses relative to our income.
Net Interest Income
Net interest income represents our primary source of income and equals the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities. We own interest-earning assets including cash, loans, financing receivables, and investment securities. We own interest-bearing liabilities, including interest-bearing deposits, FHLB advances, and our subordinated debt issuances. Our net interest income is monitored and evaluated by comparing yields on interest-earning assets (primarily loans), the costs of interest-bearing liabilities (primarily deposits), the net interest spread, and net interest margin.
Changes in market interest rates and the interest rates we earn on interest-earning assets or pay on interest-bearing liabilities, and both the amount and mix of interest-earning assets and interest-bearing liabilities we own will have the largest impact on our net interest income.
Similar to net interest margin, tracking net interest income provides insight into our ability to generate more income from our assets than our funding costs.
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Non-interest Income
Non-interest income represents other income we earn in the course of business or ancillary to our business. Non-interest income primarily consists of servicing income, investment advisory fees, fee income on loans, gains or losses resulting from loan sales, and other miscellaneous income. Non-interest income is a meaningful metric because it provides us with an indication of our ability to generate revenue through revenue streams outside of interest income, which can provide steady revenue during volatile interest markets.
Servicing income is impacted by the balance of solar and small home improvement loans serviced. Investment advisory fee income is impacted by the balance of loans under management. Fee income on loans is related to fees charged to borrowers associated with managing our loan portfolio. Gains or losses on the sale of loans and fair value marks on loans carried under the fair value option, and loans held-for-sale are driven by both the volume of loan sales during the period, as well as market interest rates and the credit quality of loans sold. Loan program fee income is impacted by the volume of loans brokered by the business. Other miscellaneous income can represent trust administration, net fees on FHA/HUD originations, loan program fees, fees on deposit accounts, gains or losses on sales of other assets, income on the changes in value of bank owned insurance policies, and other non-recurring income.
Non-interest Expense
Non-interest expense primarily consists of compensation and benefits, information technology expense, professional fees, loan administration and servicing, advertising and marketing expense, FDIC premiums for deposit insurance coverage, and other expenses. Monitoring non-interest expense helps management identify the most meaningful costs associated with revenue generation and provides insight into areas where expense management efforts may be focused, if necessary.
Compensation and benefits is our largest component of non-interest expense and includes compensation, bonuses, employee benefits, and employer tax expenses related to our personnel. Information technology expense includes computer and software expenses and depreciation, and other related information technology expense. Professional fees include costs associated with legal, audit, tax, consulting and similar services. Advertising and marketing expense includes expenses for advertisements and marketing the business’s products and services. FDIC premium represents the cost of insuring customer deposits with the FDIC. Other expenses include costs associated with our occupancy expense, referral fees, deposit services, insurance, board compensation, intangible amortization, and other miscellaneous expenses.
Primary Factors Used to Evaluate Our Financial Condition
The most significant factors used to evaluate our financial condition are asset quality metrics, capital ratios, and liquidity measures.
Asset Quality
We monitor the quality of our assets using factors including the level and severity of deterioration in borrower cash flows and other items impacting ability to make loan payments. Assets are assessed and reported as delinquent, classified, criticized, non-performing, non-accrual, or a modified loan with a borrower experiencing financial difficulty. We also monitor credit concentrations by loan type and we may also monitor credit concentrations by industry and/or geography based on the characteristics of the individual loan portfolios. We use metrics such as non-accrual loans to total loans, non-performing assets to total assets, allowance for loan losses to total loans, net charge-offs to total average loans, and allowance for loan loss to non-performing loans to monitor trends in the quality of the loan portfolio. Management monitors asset quality to ensure that risk of loss, primarily in the loan portfolio, is mitigated as much as possible, or to the extent necessary management is aware of any near-term risk.
Capital
We use regulatory capital ratios to monitor the strength of our capital position. As of March 31, 2026 and December 31, 2025, each of the Company and the Bank was a “qualifying community banking organization” as
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defined by applicable regulations of the federal banking agencies and elected to measure its regulatory capital adequacy under the CBLR framework. Although under the CBLR framework, neither the Company nor the Bank are required to report regulatory capital ratios other than their respective leverage ratios (defined as the ratio of the organization’s Tier 1 capital to its average total consolidated assets) in applicable regulatory financial filings, we also monitor risk-based capital ratios such as the common equity Tier 1 ratio, Tier 1 capital ratio, and total capital ratio for the Company and the Bank to ensure we are continuing to maintain adequate capital levels to support our business operations. Additionally, we monitor the trends and volumes of problem assets and ACL, the level and quality of earnings, as well as our anticipated growth, for their potential impact on our capital position.
Liquidity
We manage and evaluate our liquidity using factors that include balance sheet growth, the level of cash and highly rated securities in our investment portfolio, the composition and maturity structure of our funding sources, and the availability of unused lines of credit. While scheduled loan payments and maturing investments are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition. Deposits primarily consist of individual balances through our national consumer digital deposit platform, and business account balances in our primary market. Other deposit funding sources include certificates of deposit issued through brokerage firms, sweep deposits, and reciprocal deposits placed through a third-party network. We maintain available lines of credit through the FHLB and the Federal Reserve Bank as well as federal funds borrowings with other banks. Additionally, our cash balances, investment securities, and loan principal and interest payments are available to fund liquidity needs.
General Factors Used to Evaluate Our Business
In addition to the primary factors we use to evaluate our results of operations and financial condition noted above, we also evaluate various broad economic conditions as general factors to evaluate our business.
Interest Rates
We monitor changes and expected changes in market interest rates because as they change they have an almost immediate impact on our net income, which is heavily impacted by changing interest rates due to our largely variable rate loan portfolio. Additionally, we need to monitor interest rates to make decisions on the rates we provide on our digital savings product to ensure it remains competitive so that we are able to maintain our deposit balances.
Economic Growth/Recession
The current and expected condition of the economy is a major factor in how we manage our business. While a healthy economy provides a favorable environment for businesses to borrow additional money to fund growth, as well as improves borrowers’ ability to repay existing loans, reducing risk in our portfolio, a weak or weakening economic environment could cause an abrupt tightening in businesses’ ability to open new credit making it more difficult to originate new loans and maintain a high credit quality in our loan portfolio. Depositors are also more capable of maintaining larger deposit balances in a healthier economic environment.
Regulatory Environment
The regulatory environment and changes in regulations could have a material impact on how we manage our business. Changes to the capital requirements could have an impact on the amount and type of loans that we can originate or the levels of capital that we are required to maintain.
Critical Accounting Estimates
We prepare our consolidated financial statements according to GAAP. Preparing these statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities on the balance sheet and the reported amounts of revenues and expenses during the reporting period on the statement of income. Our most significant critical accounting estimate relates to the ACL, which represents management’s estimate of expected lifetime credit losses on loans held for investment at amortized cost, held-to-maturity securities, and financing receivables held for investment at amortized cost, and is determined using historical loss experience, current
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conditions, and reasonable and supportable forecasts, with accrued interest receivable excluded from the measurement. We also apply significant judgment in assessing the realizability of the net operating loss portion of our deferred tax assets, which depends primarily on our ability to generate sufficient future taxable income and may be affected by changes in operating results, tax laws, or other assumptions.
See below in “—Results of Operations for the Years Ended December 31, 2025 and 2024—Income Taxes” and “—Results of Operations for the Three Months Ended March 31, 2026 and 2025—Income Taxes” for additional discussion regarding our critical accounting estimates as they relate to our deferred tax assets and in “—Financial Condition —ACL—Loans” and “Financial Condition—ACL—Investment Securities” for additional discussion regarding our critical accounting estimates as they relate to our ACL.
Our significant accounting policies and the effects of new accounting pronouncements are detailed in Note 1, “Significant Accounting Policies,” to our consolidated financial statements and the notes thereto included elsewhere in this prospectus.
Financial and Business Highlights:
2025 Highlights
Highlights of our results of operations and financial condition for the year ended December 31, 2025 are as follows:
•Net income increased to $87.9 million for the year ended December 31, 2025, compared to $43.4 million for the year ended December 31, 2024.
•Net interest income was $263.0 million for the year ended December 31, 2025, compared to $229.6 million for the year ended December 31, 2024.
•Return on average total assets was 1.22% and return on average tangible common equity was 12.06% for the year ended December 31, 2025, compared to 0.65% and 6.76%, respectively, for the year ended December 31, 2024.
•Yield on earning assets was 7.38% for the year ended December 31, 2025, compared to 7.71% for the year ended December 31, 2024. Yield on interest-bearing liabilities decreased to 4.19% for the year ended December 31, 2025, compared to 4.83% for the year ended December 31, 2024.
•Total assets increased to $7.9 billion as of December 31, 2025, compared to $7.3 billion as of December 31, 2024, and total loans increased to $5.6 billion as of December 31, 2025, compared to $4.3 billion as of December 31, 2024.
•In connection with a borrower's satisfaction of a previously non-performing loan, the Company acquired certain assets from the borrower, which primarily consisted of loan servicing rights and deferred tax assets. As a result of this transaction, we recognized $11.7 million in unamortized deferred loan fees as non-interest income, as well $135.3 million in deferred tax assets and a $65.6 million deferred credit liability.
•Cash balances plus investment securities available-for-sale totaled $1.9 billion as of December 31, 2025, compared to $2.7 billion as of December 31, 2024.
•Total deposits increased to $6.8 billion as of December 31, 2025, compared to $5.6 billion as of December 31, 2024.
•$24.0 million of subordinated debt was repaid during the year ended December 31, 2025.
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Q1 2026 Highlights
Highlights of our results of operations and financial condition for three months ended March 31, 2026 are as follows:
•Net income increased to $11.6 million for the three months ended March 31, 2026, compared to $11.1 million for the three months ended March 31, 2025.
•Net interest income was $59.6 million for the three months ended March 31, 2026, compared to $61.1 million for the three months ended March 31, 2025.
•Return on average total assets was 0.59% and return on average tangible common equity was 5.95% for the three months ended March 31, 2026, compared to 0.67% and 6.47%, respectively, for the three months ended March 31, 2025.
•Yield on earning assets was 6.44% for the three months ended March 31, 2026, compared to 7.48% for the three months ended March 31, 2025. Yield on interest-bearing liabilities decreased to 3.89% for the three months ended March 31, 2026, compared to 4.27% for the three months ended March 31, 2025.
•Total assets increased to $8.2 billion as of March 31, 2026, compared to $7.9 billion as of December 31, 2025, and total loans increased to $5.8 billion as of March 31, 2026, compared to $5.6 billion as of December 31, 2025.
•Cash balances plus investment securities available-for-sale totaled $2.1 billion as of March 31, 2026, compared to $1.9 billion as of December 31, 2025.
•Total deposits increased to $7.1 billion as of March 31, 2026, compared to $6.8 billion as of December 31, 2025.
•As of March 31, 2026, the Company’s and Bank’s Tier 1 leverage ratio was 8.92% and 10.19%, respectively, compared to 9.79% and 11.11%, respectively, as of December 31, 2025.
•As of March 31, 2026, the Company’s and Bank’s Common Equity Tier 1 ratio was 11.47% and 13.11%, respectively, compared to 12.72% and 14.37%, respectively, as of December 31, 2025.
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Results of Operations for the Years Ended December 31, 2025 and 2024
Average Balance Sheets
The following table shows the average outstanding balance of each major category of asset, liability and stockholders’ equity, along with the associated interest income or expense and the yield on average earning-asset or rate on interest-bearing liability. The associated yield or cost is calculated by dividing the interest income or interest expense by the corresponding daily average balance over the same period.
Year Ended December 31, 2025
Year Ended December 31, 2024
(dollars in thousands)Average balanceInterest income/expenseAverage yields earned/rates paidAverage balanceInterest income/expenseAverage yields earned/rates paid
Assets:
Total loans held for investment$4,571,214 $384,944 8.42 %$3,683,140 $332,852 9.04 %
Total loans held-for-sale349,304 38,034 10.89 %340,278 38,592 11.34 %
Total loans4,920,518 422,978 8.60 %4,023,418 371,444 9.23 %
Total investment securities1,361,317 61,723 4.53 %1,405,086 71,493 5.09 %
Interest-bearing deposits with banks662,905 28,601 4.31 %1,020,070 54,953 5.39 %
Other earnings assets57,252 3,338 5.83 %54,861 3,265 5.95 %
Total interest-earning assets
7,001,992 516,640 7.38 %6,503,435 501,155 7.71 %
ACL(46,572)(54,975)
Other assets
247,437 200,287 
Total assets$7,202,857 $6,648,747 
Liabilities and stockholders’ equity
Interest-bearing demand deposits$295,772 $10,909 3.69 %$525,478 $19,628 3.74 %
Money market deposits924,371 36,208 3.92 %915,122 38,942 4.26 %
Savings deposits2,945,069 121,669 4.13 %875,777 42,857 4.89 %
Time deposits1,690,619 74,617 4.41 %3,075,729 158,352 5.15 %
Total interest-bearing deposits5,855,831 243,403 4.16 %5,392,106 259,779 4.82 %
Subordinated debt, net
162,597 8,822 5.43 %174,319 9,029 5.18 %
Other borrowings30,922 1,399 4.52 %51,656 2,791 5.40 %
Total interest-bearing liabilities6,049,350 253,624 4.19 %5,618,081 271,599 4.83 %
Non-interest-bearing demand deposits287,741 271,796 
Other liabilities95,890 68,587 
Total liabilities6,432,981 5,958,464 
Stockholders’ equity769,876 690,283 
Total liabilities and stockholders’ equity$7,202,857 $6,648,747 
Net interest income and spread$263,016 3.19 %$229,556 2.88 %
Net interest margin3.76 %3.53 %
Net interest margin for the year ended December 31, 2025 was 3.76%, an increase of 23 basis points compared with 3.53% for the year ended December 31, 2024, primarily related to a positive change in asset mix to increase loans and decrease cash deposits with banks and investment securities, a $13.4 million recognition of the acceleration of amortization of deferred fees on loans, as well as a decrease of 66 basis points in yields on interest-
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bearing deposit balances. The 66 basis point decrease in the cost of interest-bearing deposits was driven primarily by a 94 basis point decline in the average Fed Funds rate, with the relative decline reflecting competitive positioning of digital growth savings deposits, timing of fixed rate time deposits maturities, as well as maturing balances of fixed rate institutional sweep deposits in 2025 that were originated during periods of lower interest rates.
Average loans increased for the year ended December 31, 2025, primarily due to originations net of sales, paydowns, and pay-offs in healthcare finance, real estate finance, fund finance, and lender finance. Average deposits increased during the year ended December 31, 2025, primarily related to an increase in growth savings deposits, partially offset by reductions in the level of time deposits related to our efforts to increase digital savings deposit balances.
Return on average total assets was 1.22% for the year ended December 31, 2025, compared to 0.65% for the year ended December 31, 2024. The increase was primarily due to an increase in non-interest income, primarily related to net gains on loans sales and extinguishments, an increase in net interest income, and the recognition of amortization of the deferred credit’s impact on income tax expense, offset partially by an increase in average total assets.
Return on average stockholders’ equity was 11.42% for the year ended December 31, 2025, compared to 6.28% for the year ended December 31, 2024. The increase was primarily due to an increase in non-interest income, primarily related to the recognition of net gains on loan sales and extinguishments, an increase in net interest income, and the recognition of amortization of the deferred credit’s impact on income tax expense, offset partially by an increase in average stockholders’ equity.
Return on average tangible common equity was 12.06% for the year ended December 31, 2025, compared to 6.76% for the year ended December 31, 2024. The increase was due to the factors described above for return on average assets and return on average stockholders’ equity.
Rate Volume Analysis
The following table presents the effects of changes in the average balances of interest-earning assets and interest-bearing liabilities and the corresponding yields and rates on net interest income during the period indicated.
Year Ended December 31, 2025 compared to 2024
Change due to:
(in thousands)VolumeYield/rateTotal change
Interest-earning assets:
Loans held for investment$80,257 $(28,165)$52,092 
Loans held-for-sale1,024 (1,582)(558)
Investment securities(2,227)(7,543)(9,770)
Interest-bearing deposits with banks(19,241)(7,111)(26,352)
Other earning assets142 (69)73 
Total interest-earnings assets$59,955 $(44,470)$15,485 
Interest-bearing liabilities:
Interest-bearing demand deposits$(8,580)$(139)$(8,719)
Money market deposits394 (3,128)(2,734)
Savings deposits101,262 (22,450)78,812 
Time deposits(71,311)(12,424)(83,735)
Total deposits21,765 (38,141)(16,376)
Subordinated debt, net
(607)400 (207)
Other borrowings(1,120)(272)(1,392)
Total interest-bearing liabilities$20,038 $(38,013)$(17,975)
Increase/(decrease) in net interest income$39,917 $(6,457)$33,460 
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Net Interest Income
The following table discloses the components of net interest income for the years ended December 31, 2025 and 2024:
For the Years Ended December 31,
Change
(dollars in thousands)20252024$%
Interest income:
Loans held for investment$384,944 $332,852 $52,092 15.7 %
Loans held-for-sale38,034 38,592 (558)(1.4)%
Deposits with banks28,601 54,953 (26,352)(48.0)%
Interest on investment securities61,723 71,493 (9,770)(13.7)%
Interest and dividends on other earning assets3,338 3,265 73 2.2 %
Total interest income516,640 501,155 15,485 3.1 %
Interest expense:
Deposits243,403 259,779 (16,376)(6.3)%
Subordinated debt, net
8,822 9,029 (207)(2.3)%
Other borrowings1,399 2,791 (1,392)(49.9)%
Total interest expense253,624 271,599 (17,975)(6.6)%
Net interest income
$263,016 $229,556 $33,460 14.6 %
Net interest income for the year ended December 31, 2025, was $263.0 million compared with $229.6 million for the year ended December 31, 2024, an increase of $33.5 million, or 14.6%, primarily related to an increase in loan balances of $1.3 billion, a $13.4 million recognition of the acceleration of amortization of deferred fees related to loan sales or restructurings, and a decrease of 66 basis points in yields on interest-bearing deposit balances. Those increases were partially offset by lower balances of cash deposits with banks and investment securities, and an overall decrease in yields on earning assets.
Interest Income
Interest income for the year ended December 31, 2025, was $516.6 million compared to $501.2 million for the year ended December 31, 2024, an increase of $15.5 million, or 3.1%, primarily related to a net increase in loan balances and acceleration of amortization of deferred fees related to loan sales and restructurings, offset by a decrease in balances of investment securities and interest-bearing cash balances, and a decrease in yields on interest-earning assets.
Interest Expense
Interest expense for the year ended December 31, 2025, was $253.6 million compared to $271.6 million for the year ended December 31, 2024, a decrease of $18.0 million, or 6.6%, primarily related to a decrease in rates charged on deposit balances and a decrease in time deposit balances, offset by an increase in growth savings balances.
Provision for (recovery of) Credit Losses
The ACL represents an amount which we believe is adequate to absorb the lifetime expected credit losses that may be sustained on assets carried at amortized cost as of the balance sheet date. The provision for credit losses represents the amount of expense charged to current earnings from an increase in the ACL. Conversely, a recovery of credit loss is recorded to earnings when the ACL is reduced. Our provisions for, or recoveries of, credit losses
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arising from within the loan, unfunded loan commitments, investment securities, and financing receivables portfolios were as follows:
For the Years Ended December 31,
(dollars in thousands)20252024$ Change% Change
Provision for/(recovery of) credit losses:
Provision for credit losses on loans$23,493 $1,348 $22,145 1642.8 %
Recovery of credit losses on investment securities(51)(565)514 (91.0)%
Provision for/(recovery of) credit losses on financing receivables34 (1)35 N/M
Provision for/(recovery of) credit losses on unfunded commitments535 (2,470)3,005 N/M
Total provision for/(recovery of) credit losses$24,011 $(1,688)$25,699 N/M
__________________
N/M - not meaningful
The provision for credit losses was $24.0 million for the year ended December 31, 2025, compared to a recovery of credit losses of $1.7 million for the year ended December 31, 2024. The provision for credit losses in 2025 reflects an increase of $10.7 million in the ACL – Loans, primarily due to loan growth and $12.8 million in net charge-offs; $11.2 million from forward flow loans within consumer and commercial and industrial and $1.6 million from corporate finance loans within commercial and industrial. The provision for credit losses in 2024 reflects a decrease of $32.5 million in the ACL – Loans and net charge-offs of $33.8 million; $16.4 million from forward flow loans within consumer and commercial and industrial, $9.7 million from legacy in-market loans primarily within commercial real estate, and $7.7 million from healthcare finance and corporate finance loans within commercial real estate and commercial & industrial. The decrease in the allowance for credit losses in 2024 includes a $9.3 million recovery of credit losses associated with the reclassification of forward flow loan portfolios to held-for-sale as well as other factors, including a reduction in the composition of consumer loans in the loan portfolio, improvement in portfolio credit quality, lower individually-assessed reserves, and an improved economic outlook. The provision for credit losses in 2024 includes $2.5 million of recovery of credit losses on unfunded commitments which was driven by lower loss expectations on unfunded commitments.
See below in “—Financial Condition—ACL—Loans” and “—Financial Condition—ACL—Investment Securities” for additional discussion regarding our ACL.
Non-interest Income
The following table presents non-interest income for the years ended December 31, 2025 and 2024 and the change between periods, by major component:
For the Years Ended December 31,
(dollars in thousands)20252024$ Change% Change
Investment advisory fees$16,190 $19,385 $(3,195)(16.5)%
Fee income on loans8,367 9,031 (664)(7.4)%
Gains/(losses) on sales of loans and investment securities, net12,579 (11,563)24,142 N/M
Unrealized gains on loans and financing receivables, net6,574 3,012 3,562 118.3 %
Charge-offs on loans carried at fair value— (3,330)3,330 (100.0)%
Other non-interest income27,066 6,578 20,488 311.5 %
Total non-interest income$70,776 $23,113 $47,663 206.2 %
__________________
N/M - not meaningful
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Total non-interest income was $70.8 million for the year ended December 31, 2025, an increase of $47.7 million, or 206.2%, compared with the year ended December 31, 2024, primarily due to the recognition of net gains on loan sales during 2025, compared to net losses during 2024, as well as an increase in net fees on FHA/HUD originations and solar loan servicing and administration fees related to the solar servicing business acquired during the third quarter of 2025.
Investment advisory fees were $16.2 million for the year ended December 31, 2025, a decrease of $3.2 million, or 16.5%, compared to the year ended December 31, 2024. This decrease is primarily due to advisory loan pay-offs exceeding new distributions to advisory clients during 2024 and 2025, which resulted in a net reduction in total fee-generating assets held by advisory clients. In addition, the advisory fee rates charged on loans distributed in 2025 and 2026 were generally lower than the advisory fee rates charged on loans distributed in earlier years, as the advisory fee amounts scale based on the interest rates of the loans being distributed and there were generally lower interest rates on the loans being distributed in 2025 and 2026.
Fee income on loans was $8.4 million for the year ended December 31, 2025, a decrease of $0.7 million, or 7.4%, compared to the year ended December 31, 2024, primarily due to a reduction in non-recurring income related to the management of portfolio loans.
Gains/(losses) on sales of loans and investment securities, net increased $24.1 million compared to the year ended December 31, 2024, primarily due to $11.7 million related to the recognition of unamortized deferred fees upon the full satisfaction of a loan, that was previously on non-accrual status, in exchange for certain of the borrower’s assets during 2025, and a $9.2 million loss on the sale of forward flow loan portfolios and a $2.4 million loss related to a loan extinguishment in exchange for equity during 2024.
Unrealized gains on loans and financing receivables, net increased $3.6 million, or 118.3%, compared to the year ended December 31, 2024, primarily due to the reversal of unrealized losses associated with loan sales and restructurings.
There were no charge-offs on loans carried at fair value for the year ended December 31, 2025, compared to $3.3 million of charge-offs for the year ended December 31, 2024. The portfolio that incurred the charge-offs during 2024 was subsequently sold.
Other non-interest income was $27.1 million for the year ended December 31, 2025, an increase of $20.5 million, or 311.5%, compared to the year ended December 31, 2024, primarily due to solar loan servicing and administration fees related to the solar servicing business acquired during the third quarter of 2025, net fees earned on FHA/HUD originations, and a loss on OREO during 2024.
Non-interest Expense
The following table presents non-interest expense for years ended December 31, 2025 and 2024 and the change between periods, by major component:
For the Years Ended December 31,
(dollars in thousands)20252024$ Change% Change
Compensation and benefits$127,112 $110,356 $16,756 15.2 %
Information technology26,918 22,267 4,651 20.9 %
Professional fees15,891 20,809 (4,918)(23.6)%
Loan administration and servicing8,495 6,153 2,342 38.1 %
Advertising and marketing6,244 9,913 (3,669)(37.0)%
FDIC insurance5,032 9,967 (4,935)(49.5)%
Other non-interest expense18,932 20,525 (1,593)(7.8)%
Total non-interest expense$208,624 $199,990 $8,634 4.3 %
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Total non-interest expense was $208.6 million for the year ended December 31, 2025, an increase of $8.6 million, or 4.3%, compared with the year ended December 31, 2024, primarily due to an increase in compensation and benefits and information technology expenses, partially offset by a decrease in professional fees.
Compensation and benefits expenses were $127.1 million for the year ended December 31, 2025, an increase of $16.8 million, or 15.2%, compared to $110.4 million for 2024, primarily due to an increase in the annual incentive bonus and an increase in full-time equivalent employees from 519 to 556.
Information technology expenses were $26.9 million and $22.3 million for the years ended December 31, 2025 and 2024, respectively. The increase of $4.7 million, or 20.9%, was primarily due to software costs associated with banking platforms and an increase in amortization of internally developed software, primarily related to our digital deposit platform, and the addition of software costs related to the solar servicing acquisition.
Professional fees were $15.9 million and $20.8 million for the years ended December 31, 2025 and 2024, respectively. The decrease of $4.9 million, or 23.6%, was primarily due to higher consulting costs incurred during 2024 related to implementation of the digital deposit platform. The decrease in consulting expense was partially offset by an increase in legal fees during 2025 related to the solar servicing acquisition and subsequent legal fees associated with its related administration, which are largely reimbursed by counterparties to the loans and recognized in other non-interest income.
Loan administration and servicing expenses were $8.5 million and $6.2 million for the years ended December 31, 2025 and 2024, respectively. The increase of $2.3 million, or 38.1%, was due to sub-servicer fees following the solar servicing acquisition.
Advertising and marketing expenses were $6.2 million and $9.9 million for the years ended December 31, 2025 and 2024, respectively. The decrease of $3.7 million, or 37.0%, primarily due to a reduction in advertising of the growth savings product offered on the digital deposit platform.
FDIC insurance expenses were $5.0 million and $10.0 million for the years ended December 31, 2025 and 2024, respectively. The decrease of $4.9 million, or 49.5%, was primarily due to a decrease in the assessment rate at the beginning of 2025.
Other non-interest expense, which consists of occupancy expense, referral fees, travel and meals, dues and subscriptions, directors’ compensation, and other miscellaneous expenses, were $18.9 million and $20.5 million for the years ended December 31, 2025 and 2024, respectively. The decrease of $1.6 million, or 7.8%, was primarily due to decreases in travel and meals expenses, director compensation, and occupancy expense.
Efficiency Ratio
The efficiency ratio for the year ended December 31, 2025 improved to 62.50% compared to 79.15% for the year ended December 31, 2024, primarily related to an increase in interest on loans, net gains recognized on loan sales, and a decrease in interest expense on deposits, offset in part by an increase in non-interest expense.
Income Taxes
For the year ended December 31, 2025, income tax expense and the effective tax rate were $13.2 million and 13.1%, respectively, compared to $11.0 million and 20.2%, respectively, for the year ended December 31, 2024. The increase in income tax expense for the year ended December 31, 2025, was primarily due to a $46.8 million increase in pretax income, offset largely by a benefit of $11.2 million from accretion of the deferred credit associated with the solar servicing acquisition, which is released in proportion to the use of deferred tax assets obtained through the acquisition of the solar servicing business that closed in the third quarter of 2025.
Excluding the benefit of the deferred credit accretion, income tax expense and the effective tax rate for the year ended December 31, 2025 were $24.4 million and 24.2%, respectively, compared to $11.0 million and 20.2%, respectively, for the year ended December 31, 2024. For the year ended December 31, 2025, income tax expense increased primarily due to a reduction in research and development tax credits.
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We have recorded gross deferred tax assets primarily related to federal and state net operating loss carryforwards. In accordance with ASC 740 - Income Taxes, we assess the realizability of these deferred tax assets each reporting period by evaluating all available positive and negative evidence to determine whether it is more likely than not that some or all of the deferred tax assets will be realized.
Our realizability analysis relies on several critical assumptions and management judgments:
•Profitable Earnings History: Positive three years of cumulative pre-tax income and an established loan portfolio.
•Future Taxable Income Projections: Realizability is based on using a weighted forecast based on our historical results and near-term outlook.
•Federal Utilization Limits: We assume that federal net operating losses generated after 2017 are subject to an 80% limitation against annual taxable income, as required by current tax law.
•No Ownership Change: Our projections assume no "ownership change" as defined by Section 382 of the Code occurs with respect to the Company, which would significantly limit the annual utilization of our net operating loss carryforwards.
Based on this weighted evidence, management concluded that it is more likely than not that the net operating loss carryforwards, net of valuation allowances, recorded as of December 31, 2025 will be realized. As of December 31, 2025, we maintain a valuation allowance only for the portion of state net operating loss carryforwards likely to expire unused due to shorter carryforward periods. We will continue to monitor these assumptions going forward; any significant decline in actual results versus our projections may require an increase to the valuation allowance.
The amount of net operating loss carryforwards reflected on the balance sheet as of December 31, 2025, which are related to the acquisition of the solar servicing business, remain subject to change upon completion of acquisition accounting, which is expected to occur prior to the end of the third quarter of 2026 when the final tax return of the acquired entity is completed.
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Results of Operations for the Three Months Ended March 31, 2026 and 2025
Average Balance Sheets
The following table shows the average outstanding balance of each major category of asset, liability and stockholders’ equity, along with the associated interest income or expense and the yield on average earning-asset or rate on interest-bearing liability. The associated yield or cost is calculated by dividing the interest income or interest expense by the corresponding daily average balance over the same period.
Three Months Ended March 31, 2026
Three Months Ended March 31, 2025
(dollars in thousands)Average balanceInterest income/expenseAverage yields earned/rates paidAverage balanceInterest income/expenseAverage yields earned/rates paid
Assets:
Total loans held for investment$5,214,460 $93,164 7.25 %$4,053,601 $86,158 8.62 %
Total loans held-for-sale401,269 8,194 8.28 %316,438 9,438 12.10 %
Total loans5,615,729 101,358 7.32 %4,370,039 95,596 8.87 %
Total investment securities1,291,428 14,099 4.43 %1,451,219 16,999 4.75 %
Interest-bearing deposits with banks836,173 7,582 3.68 %674,233 7,329 4.41 %
Other earnings assets55,017 716 5.28 %58,610 972 6.73 %
Total interest-earning assets7,798,347 123,755 6.44 %6,554,101 120,896 7.48 %
ACL(52,686)(40,461)
Other assets276,876 243,626 
Total assets$8,022,537 $6,757,266 
Liabilities and stockholders’ equity
Interest-bearing demand deposits$280,987 $2,433 3.51 %$283,727 $2,420 3.46 %
Money market deposits1,322,061 12,189 3.74 %864,737 7,369 3.46 %
Savings deposits3,538,759 33,108 3.79 %2,398,505 25,111 4.25 %
Time deposits1,398,063 14,565 4.23 %1,893,898 21,586 4.62 %
Total interest-bearing deposits6,539,870 62,295 3.86 %5,440,867 56,486 4.21 %
Subordinated debt, net151,034 1,902 5.11 %174,573 2,501 5.81 %
Other borrowings— — — %71,119 849 4.84 %
Total interest-bearing liabilities6,690,904 64,197 3.89 %5,686,559 59,836 4.27 %
Non-interest-bearing demand deposits372,965 239,776 
Other liabilities119,506 84,762 
Total liabilities7,183,375 6,011,097 
Stockholders’ equity839,162 746,169 
Total liabilities and stockholders’ equity$8,022,537 $6,757,266 
Net interest income and spread$59,558 2.55 %$61,060 3.21 %
Net interest margin3.10 %3.78 %
Net interest margin for the three months ended March 31, 2026 was 3.10%, a decrease of 68 basis points compared with 3.78% for the three months ended March 31, 2025, primarily related to a 155 basis point decrease in yield on loan balances, offset by a 35 basis point decrease in rate on interest-bearing deposit balances. The 155 basis point decrease in loan yields was primarily driven by a 67 basis point decrease in average SOFR, lower average
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spreads, reflecting changes in market pricing and a mix shift in the loan portfolio towards lower yielding categories, and higher relative levels of amortization of deferred fees during the three months ended March 31, 2025, which included $2.1 million for restructured loans. The 35 basis point decrease in the cost of interest-bearing deposits was primarily driven by a 75 basis point decline in the average Fed Funds rate, with the relative decline reflecting competitive positioning of digital growth savings deposits, timing of fixed rate time deposits maturities, as well as maturing balances of fixed institutional sweep deposits during 2025 that were originated during periods of lower interest rates.
Average loans increased for the three months ended March 31, 2026, primarily due to originations net of sales, paydowns, and pay-offs in healthcare finance, lender finance, and real estate finance. Average deposits increased during the three months ended March 31, 2026, primarily related to an increase in growth savings deposits and money market deposits, partially offset by reductions in the level of time deposits related to our efforts to increase the proportion of funding from variable rate sources.
Return on average total assets was 0.59% for the three months ended March 31, 2026, compared to 0.67% for the three months ended March 31, 2025. The decrease was primarily due to an increase in average total assets, increase in non-interest expense, and lower net interest income, offset partially by a decrease in the provision for credit losses, the impact of amortization of the deferred credit on income tax expense, and an increase in non-interest income, primarily related to servicing income.
Return on average stockholders’ equity was 5.62% for the three months ended March 31, 2026, compared to 6.05% for the three months ended March 31, 2025. The decrease was primarily due to an increase in average stockholders’ equity, increase in non-interest expense, and lower net interest income, offset partially by a decrease in the provision for credit losses, the impact of amortization of the deferred credit on income tax expense, and an increase in non-interest income, primarily related to servicing income.
Return on average tangible common equity was 5.95% for the three months ended March 31, 2026, compared to 6.47% for the three months ended March 31, 2025. The decrease was primarily due to an increase in average stockholders’ equity, increase in non-interest expense, and lower net interest income, offset partially by a decrease in the provision for credit losses, the impact of amortization of the deferred credit on income tax expense, and an increase in non-interest income, primarily related to servicing income.
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Rate Volume Analysis
The following table presents the effects of changes in the average balances of interest-earning assets and interest-bearing liabilities and the corresponding yields and rates on net interest income during the period indicated.
Three Months Ended March 31, 2026 compared to 2025
Change due to:
(in thousands)VolumeYield/rateTotal change
Interest-earning assets:
Loans held for investment$24,673 $(17,667)$7,006 
Loans held-for-sale2,530 (3,774)(1,244)
Investment securities(1,872)(1,028)(2,900)
Interest-bearing deposits with banks1,760 (1,507)253 
Other earning assets(60)(196)(256)
Total interest-earnings assets$27,031 $(24,172)$2,859 
Interest-bearing liabilities:
Interest-bearing demand deposits$(23)$36 $13 
Money market deposits3,897 923 4,820 
Savings deposits11,938 (3,941)7,997 
Time deposits(5,651)(1,370)(7,021)
Total deposits10,161 (4,352)5,809 
Subordinated debt, net(337)(262)(599)
Other borrowings(849)— (849)
Total interest-bearing liabilities$8,975 $(4,614)$4,361 
Increase/(decrease) in net interest income$18,056 $(19,558)$(1,502)
Net Interest Income
The following table discloses the components of net interest income for the three months ended March 31, 2026 and 2025:
For the Three Months Ended March 31,
Change
(dollars in thousands)20262025$%
Interest income:
Loans held for investment$93,164 $86,158 $7,006 8.1 %
Loans held-for-sale8,194 9,438 (1,244)(13.2)%
Deposits with banks7,582 7,329 253 3.5 %
Interest on investment securities14,099 16,999 (2,900)(17.1)%
Interest and dividends on other earning assets716 972 (256)(26.3)%
Total interest income123,755 120,896 2,859 2.4 %
Interest expense:
Deposits62,295 56,486 5,809 10.3 %
Subordinated debt, net1,902 2,501 (599)(24.0)%
Other borrowings— 849 (849)(100.0)%
Total interest expense64,197 59,836 4,361 7.3 %
Net interest income$59,558 $61,060 $(1,502)(2.5)%
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Net interest income for the three months ended March 31, 2026 was $59.6 million compared with $61.1 million for the three months ended March 31, 2025, a decrease of $1.5 million, or 2.5%, primarily related to a decrease in yield on loan balances of 155 basis points. Those impacts were partially offset by an increase in average loan balances of $1.2 billion and a decrease of 35 basis points in rates on interest-bearing deposits.
Interest Income
Interest income for the three months ended March 31, 2026 was $123.8 million compared to $120.9 million for the three months ended March 31, 2025, an increase of $2.9 million, or 2.4%, primarily related to a net increase in loan balances offset by a decrease of 155 basis points in yields on loan balances.
Interest Expense
Interest expense for the three months ended March 31, 2026 was $64.2 million compared to $59.8 million for the three months ended March 31, 2025, an increase of $4.4 million, or 7.3%, primarily related to an increase in savings and money market deposit balances, offset by a decrease in rates charged on deposit balances and a decrease in time deposit balances.
Provision for Credit Losses
The ACL represents an amount which we believe is adequate to absorb the lifetime expected credit losses that may be sustained on assets carried at amortized cost as of the balance sheet date. The provision for credit losses represents the amount of expense charged to current earnings from an increase in the ACL. Conversely, a recovery of credit loss is recorded to earnings when the ACL is reduced. Our provisions for, or recoveries of, credit losses arising from the loan, unfunded loan commitments, investment securities, and financing receivables portfolios were as follows:
For the Three Months Ended March 31,
(dollars in thousands)20262025$ Change% Change
Provision for credit losses:
Provision for credit losses on loans$3,884 $8,481 $(4,597)(54.2)%
Recovery of credit losses on financing receivables(15)— (15)N/M
Recovery of credit losses on unfunded commitments(396)(22)(374)1,700.0 %
Total provision for credit losses$3,473 $8,459 $(4,986)(58.9)%
__________________
N/M - not meaningful
The provision for credit losses of $3.5 million for the three months ended March 31, 2026 reflects a decrease of $0.2 million in the ACL – Loans, attributable to mix shift within the loan portfolio, $4.1 million in net charge-offs; $3.1 million from forward flow loans within consumer and commercial and industrial and $0.9 million from corporate finance loans within commercial and industrial, and $0.4 million of reduction to the ACL-Unfunded due to lower loss expectations on unfunded commitments. The provision for credit losses of $8.5 million for the three months ended March 31, 2025 reflects an increase of $4.6 million in the ACL – Loans, primarily due to loan growth and economic uncertainty related to the potential impact of tariffs, and $3.9 million of net charge-offs related primarily to $3.8 million of net charge-offs from forward flow loans within commercial and industrial and consumer.
See below in “—Financial Condition —ACL—Loans” and “—Financial Condition —ACL—Investment Securities” for additional discussion regarding our ACL.
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Non-interest Income
The following table presents non-interest income for the three months ended March 31, 2026 and 2025 and the change between periods, by major component:
For the Three Months Ended March 31,
(dollars in thousands)20262025$ Change% Change
Servicing income$7,087 $— $7,087 N/M
Investment advisory fees3,193 4,316 (1,123)(26.0)%
Fee income on loans2,003 1,441 562 39.0 %
(Losses)/gains on sales of loans and investment securities, net(34)1,826 (1,860)N/M
Unrealized (losses)/gains on loans and financing receivables, net(1,335)1,863 (3,198)N/M
Other non-interest income4,670 4,609 61 1.3 %
Total non-interest income$15,584 $14,055 $1,529 10.9 %
__________________
N/M - not meaningful
Total non-interest income was $15.6 million for the three months ended March 31, 2026, an increase of $1.5 million, or 10.9%, compared with the three months ended March 31, 2025, primarily due to solar loan servicing and administration fees related to the solar servicing business acquired during the third quarter of 2025, the recognition of net losses on loan sales during 2026, compared to net gains during 2025, the recognition of unrealized losses on loan fair value marks, compared to net gains during 2025, and a decrease in net fees on FHA/HUD originations in 2026 compared to 2025.
Servicing income was $7.1 million for the three months ended March 31, 2026, related to the solar servicing business acquired during the third quarter of 2025.
Investment advisory fees were $3.2 million for the three months ended March 31, 2026, a decrease of $1.1 million, or 26.0%, compared to the three months ended March 31, 2025. This decrease was primarily due to advisory loan pay-offs exceeding new distributions to advisory clients during 2025, which resulted in a net reduction in total fee-generating assets held by advisory clients during the three months ended March 31, 2026. In addition, the advisory fee rates charged on loans distributed in 2025 were generally lower than the advisory fee rates charged on loans distributed in earlier years, as the advisory fee amounts scale based on the interest rates of the loans being distributed and there were generally lower interest rates on the loans being distributed in 2025.
Fee income on loans was $2.0 million for the three months ended March 31, 2026, an increase of $0.6 million, or 39.0%, compared to the three months ended March 31, 2025, primarily due to an increase in unused line of credit fees.
(Losses)/gains on sales of loans and investment securities, net for the three months ended, March 31, 2026 decreased $1.9 million compared to the three months ended March 31, 2025, primarily due to gains related to the sale of U.S. Treasury investment securities during the first quarter 2025 and losses on corporate finance loan sales during the first quarter 2026.
Unrealized (losses)/gains on loans and financing receivables, net were a net loss of $1.3 million for the three months ended March 31, 2026, compared to a net gain of $1.9 million for the three months ended March 31, 2025, primarily due to a decline in fair values caused by changes in the prices of individual loans in the held-for-sale loan portfolio.
Other non-interest income was $4.7 million for the three months ended March 31, 2026, an increase of $0.1 million, or 1.3%, compared to the three months ended March 31, 2025, primarily due to solar loan administration fees related to the solar servicing business acquired during the third quarter of 2025, offset by a decrease in FHA/HUD originations, and write-downs on OREO values during 2026.
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Non-interest Expense
The following table presents non-interest expense for three months ended March 31, 2026 and 2025 and the change between periods, by major component:
For the Three Months Ended March 31,
(dollars in thousands)20262025$ Change% Change
Compensation and benefits$31,642 $30,102 $1,540 5.1 %
Information technology7,540 6,011 1,529 25.4 %
Professional fees7,823 3,742 4,081 109.1 %
Loan administration and servicing4,125 1,667 2,458 147.5 %
Advertising and marketing2,304 3,319 (1,015)(30.6)%
FDIC insurance902 2,662 (1,760)(66.1)%
Other non-interest expense4,121 4,157 (36)(0.9)%
Total non-interest expense$58,457 $51,660 $6,797 13.2 %
Total non-interest expense was $58.5 million for the three months ended March 31, 2026, an increase of $6.8 million, or 13.2%, compared with the three months ended March 31, 2025, primarily due to an increase in professional fees, loan administration and servicing expense, compensation and benefits, and information technology expense, partially offset by a decrease in FDIC insurance and advertising and marketing expense.
Compensation and benefits expenses were $31.6 million for the three months ended March 31, 2026, an increase of $1.5 million, or 5.1%, compared to $30.1 million for the three months ended March 31, 2025, primarily due to an increase in full-time equivalent employees from approximately 525 to approximately 545, primarily driven by the solar servicing acquisition.
Information technology expenses were $7.5 million and $6.0 million for the three months ended March 31, 2026 and 2025, respectively. The increase of $1.5 million, or 25.4%, was primarily due to the addition of software costs related to the solar servicing acquisition and an increase in information technology services and processing fees.
Professional fees were $7.8 million and $3.7 million for the three months ended March 31, 2026 and 2025, respectively. The increase of $4.1 million, or 109.1%, was primarily due to $2.0 million for solar servicing legal fees associated with its related administration, which are largely reimbursed by counterparties to the loans and recognized in other non-interest income, and $2.2 million related to estimated initial public offering costs.
Loan administration and servicing expenses were $4.1 million and $1.7 million for the three months ended March 31, 2026 and 2025, respectively. The increase of $2.5 million, or 147.5%, was due to sub-servicer fees following the solar servicing acquisition.
Advertising and marketing expenses were $2.3 million and $3.3 million for the three months ended March 31, 2026 and 2025, respectively. The decrease of $1.0 million, or 30.6%, primarily due to a reduction in advertising of the growth savings product offered on the digital deposit platform.
FDIC insurance expenses were $0.9 million and $2.7 million for the three months ended March 31, 2026 and 2025, respectively. The decrease of $1.8 million, or 66.1%, was primarily due to a decrease in the assessment rate in the beginning of the second quarter of 2025.
Other non-interest expense, which consists of occupancy expense, referral fees, travel and meals, dues and subscriptions, directors’ compensation, and other miscellaneous expenses, remained relatively flat at $4.1 million for the three months ended March 31, 2026 compared to $4.2 million for the three months ended March 31, 2025.
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Efficiency Ratio
The efficiency ratio for the three months ended March 31, 2026 increased to 77.80% compared to 68.77% for the three months ended March 31, 2025, primarily related to an increase in non-interest expense and relatively flat total revenue.
Income Taxes
For the three months ended March 31, 2026, income tax expense and the effective tax rate were $1.6 million and 12.0%, respectively, compared to $3.9 million and 25.8%, respectively for the three months ended March 31, 2025. The decrease in income tax expense for the three months ended March 31, 2026 was due primarily due to a benefit of $1.7 million from accretion of the deferred credit associated with the solar servicing acquisition, which is released in proportion to the use of deferred tax assets obtained through the acquisition of the solar servicing business that closed in the third quarter of 2025.
Excluding the benefit of the deferred credit accretion, income tax expense and the effective tax rate for the three months ended March 31, 2026 were $3.3 million and 24.9%, respectively, compared to $3.9 million and 25.8%, respectively, for the three months ended March 31, 2025. Although pretax income increased for three months ended March 31, 2026, income tax expense decreased due to the lower effective tax rate in the period, which is primarily due to a lower state effective rate resulting from the impact of interest deduction on U.S. Treasury investment securities and excess tax benefits related to restricted stock awards vesting during the quarter.
During the three months ended March 31, 2026, the deferred credit balance decreased by $4.0 million, comprised of a decrease of $1.7 million related to accretion, which was recognized in income tax expense, and a decrease of $2.3 million related to purchase accounting adjustments. The ending balance of the deferred credit as of March 31, 2026 was $50.3 million.
We have recorded gross deferred tax assets primarily related to federal and state net operating loss carryforwards. In accordance with ASC 740 - Income Taxes, we assess the realizability of these deferred tax assets each reporting period by evaluating all available positive and negative evidence to determine whether it is more likely than not that some or all of the deferred tax assets will be realized.
Based on this weighted evidence, management concluded that it is more likely than not that the net operating loss carryforwards, net of valuation allowances, recorded as of March 31, 2026 will be realized. As of March 31, 2026, we maintain a valuation allowance only for the portion of state net operating loss carryforwards likely to expire unused due to shorter carryforward periods. We will continue to monitor these assumptions going forward; any significant decline in actual results versus our projections may require an increase to the valuation allowance.
The amount of net operating loss carryforwards reflected on the balance sheet as of March 31, 2026, which are related to the acquisition of the solar servicing business, remain subject to change upon completion of acquisition accounting, which is expected to occur prior to the end of the third quarter of 2026 when the final tax return of the acquired entity is completed.
See above in “Results of Operations for the Years Ended December 31, 2025 and 2024—Income Taxes” for additional discussion regarding our deferred tax assets.
Financial Condition
Loan Portfolio
We manage our exposure to credit losses by evaluating credit risk in the following loan categories. Descriptions of the loan categories, which provide detail on the levels at which we develop and document our systematic methodology to determine the allowance for credit losses, are:
•Commercial Real Estate - CRE loans are primarily secured by various types of real estate including healthcare facilities, hospitality, office, retail, warehouse, industrial, multi-family properties, residential real estate (for commercial purposes), and other CRE properties, and are made to owners of such properties.
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The category also includes loans for the construction of those property types. Within this category, loans are further bifurcated between loans secured by owner-occupied properties and investment (non-owner-occupied) properties. As of March 31, 2026, 54% of CRE loans were owner-occupied and 46% were non-owner-occupied. The repayment of loans secured by owner-occupied properties is dependent on cash flow from the successful operation of the business which owns the property. The repayment of loans secured by investment properties is dependent upon the operation (net operating income) or sale of the property. Both property types may be subject to adverse conditions in the CRE market or in the general economy. Loans secured by healthcare facilities are primarily owner-occupied properties and loans secured by other property types are primarily non-owner-occupied properties. Loans secured by healthcare facilities represent our largest concentration and represented approximately 60% of CRE loans and approximately 28% of our total loan portfolio as of March 31, 2026. No single CRE loan category secured by any other property type represented greater than 12% of CRE loans and 6% of our total loan portfolio as of March 31, 2026.
•Commercial and Industrial - Within this category, there is further distinction among lender finance loans, fund finance loans, healthcare asset-based loans, and corporate loans (which are typically cash flow loans). The market area for these loans is national with geographic diversification. The loan category also includes asset-secured energy project loans and small business loans and commercial solar loans purchased through fintech platforms. Of primary concern in commercial lending is the borrower’s creditworthiness and ability to successfully generate cash flow from their business to service the debt. No single commercial and industrial loan collateral type, industry, or infrastructure project type represented greater than 20% of commercial and industrial loans and 10% of our total loan portfolio as of March 31, 2026.
•Consumer - These loans consist primarily of loans made to individuals for personal, solar, family, and residential real estate purposes (including closed end mortgages and home equity lines of credit), with the majority of the portfolio comprised of loans purchased through fintech lender platforms. The vast majority of our consumer loans were purchased or originated before 2024 and a significant portion of the portfolio was sold during 2024. Outside of loans purchased under forward flow purchase agreements, the remaining consumer and residential real estate purpose loans represents less than 1% of the total loan portfolio as of March 31, 2026 and December 31, 2025. We no longer originate residential real estate loans to consumers.
Our loan portfolio consists primarily of commercial loans to small and medium-sized, privately owned businesses in a variety of industries and markets including on a national scale and across multiple lending strategies. As of March 31, 2026 and December 31, 2025, the single largest industry concentration in the Company’s loan portfolio was healthcare. We do not believe that it is reasonably possible that loss events could occur in the near term to cause any concentrations to result in a severe impact to our results of operations or liquidity. We do not have any concentrations involving loan product terms, loans with negative amortization schedules, significant payment increases, or high loan-to-value ratios. Additionally, due to the national operating footprint of our borrowers, we believe that we do not have a significant geographic concentration of credit exposure.
Our healthcare finance loan portfolio represented approximately 31% of our total loan portfolio as of March 31, 2026. Approximately 90% of the portfolio is classified as commercial real estate and approximately 10% of the portfolio is classified as commercial and industrial. This portfolio is diversified through a broad range of facility types, such as skilled nursing, assisted living, memory care, and behavioral health, where none of the facility types represented greater than 17% of total loans as of March 31, 2026.
Our lender finance loan portfolio represented approximately 19% of our total loan portfolio as of March 31, 2026. The portfolio is entirely classified as commercial and industrial. This portfolio is diversified across different collateral types, such as consumer finance, small business, and real estate, where none of the collateral types represented greater than 8% of total loans as of March 31, 2026.
Our real estate finance loan portfolio represented approximately 19% of our total loan portfolio as of March 31, 2026. Approximately 99% of the portfolio is classified as commercial real estate and approximately 1% of the portfolio is classified as commercial and industrial. This portfolio is diversified across different collateral types, such
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as hospitality, multifamily, and office, where none of the collateral types represented greater than 6% of our total loan portfolio as of March 31, 2026.
Our fund finance loan portfolio represented approximately 14% of our total loan portfolio as of March 31, 2026. The portfolio is entirely classified as commercial and industrial. This portfolio is diversified across different collateral types, such as specialty finance (primarily consisting of asset based and/or real estate backed collateral), private credit, and private equity where none of the collateral types represented greater than 10% of total loans as of March 31, 2026. As of March 31, 2026, we had six loans to private credit funds and business development corporations that are collateralized by loans. Our private credit loan portfolio had total commitments and outstanding balances of $218 million and $187 million, respectively, and a weighted average effective advance rate of 61.2% on eligible collateral as of March 31, 2026. The majority of the loan collateral within this private credit portfolio is leveraged lending and other forms of enterprise value lending.
Our corporate finance loan portfolio represented approximately 12% of our total loan portfolio as of March 31, 2026. Approximately 100% of the portfolio is classified as commercial and industrial. This portfolio is diversified across different industries, such as manufacturing, business services, and healthcare as well as infrastructure projects, where none of the industry or the infrastructure project types represented greater than 2% of total loans as of March 31, 2026.
Total loans were $5.8 billion as of March 31, 2026, an increase of $182.1 million, or approximately 3.2%, compared with $5.6 billion as of December 31, 2025. Total loans were $5.6 billion as of December 31, 2025, an increase of $1.3 billion, or approximately 31%, compared with $4.3 billion as of December 31, 2024. Loans as of March 31, 2026, December 31, 2025, and December 31, 2024, included $407.6 million, $379.7 million, and $316.5 million of loans held-for-sale, respectively. As of March 31, 2026, December 31, 2025, and December 31, 2024, total loans were 81.1%, 82.7%, and 77.0% of deposits, respectively, and 70.3%, 71.1%, and 59.1% of total assets, respectively.
The following table presents loans held for investment at amortized cost, by loan type, as of March 31, 2026 and December 31, 2025:
March 31, 2026December 31, 2025Change
(dollars in thousands)Amount% of total loansAmount% of total loans$%
Commercial Real Estate$2,679,872 49.9 %$2,528,996 48.4 %$150,876 6.0 %
Commercial and Industrial2,485,418 46.2 %2,475,549 47.4 %9,869 0.4 %
Consumer211,247 3.9 %217,689 4.2 %(6,442)(3.0)%
Total loans held for investment at amortized cost$5,376,537 100.0 %$5,222,234 100.0 %$154,303 3.0 %
As of March 31, 2026, total loans held for investment at amortized cost were $5.4 billion, an increase of $154.3 million, or 3.0%, compared to $5.2 billion as of December 31, 2025, primarily due to a $150.9 million increase in CRE loans, with net loan originations in healthcare finance and real estate finance. Commercial and Industrial loans also increased by $9.9 million, with net loan originations in lender finance and corporate finance, offset by net paydowns and pay-offs in healthcare finance.
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The following table presents loans held for investment at amortized cost, by loan type, as of December 31, 2025 and 2024:
December 31,
20252024Change
(dollars in thousands)Amount% of total loansAmount% of total loans$%
Commercial Real Estate$2,528,996 48.4 %$1,730,883 43.7 %$798,113 46.1 %
Commercial and Industrial2,475,549 47.4 %1,986,457 50.1 %489,092 24.6 %
Consumer217,689 4.2 %246,633 6.2 %(28,944)(11.7)%
Total loans held for investment at amortized cost$5,222,234 100.0 %$3,963,973 100.0 %$1,258,261 31.7 %
As of December 31, 2025, total loans held for investment at amortized cost were $5.2 billion, an increase of $1.3 billion, or 31.7%, compared to $4.0 billion as of December 31, 2024, primarily due to a $798.1 million increase in CRE loans, with net loan originations in healthcare finance and real estate finance. Commercial and Industrial loans also increased by $489.1 million, with net loan originations in fund finance and lender finance. Loan growth during 2025 was driven by a strategic focus on deploying excess levels of liquidity.
The contractual maturity ranges of total loans held for investment in our loan portfolio and the amount of such loans with fixed interest rates and floating rates in each maturity range as of March 31, 2026 and December 31, 2025, are summarized in the following tables. Contractual maturities are based on contractual amounts outstanding and do not include deferred fees and costs or purchase discounts.
March 31, 2026
One YearThroughThroughThroughAfter
(in thousands)or LessFive YearsTen YearsFifteen YearsFifteen YearsTotal
Variable rate loans:
Commercial Real Estate$629,168 $1,926,797 $6,064 $— $— $2,562,029 
Commercial and Industrial467,487 1,914,907 17,568 189 — 2,400,151 
Consumer— 150 3,572 3,198 13,146 20,066 
Total variable rate loans$1,096,655 $3,841,854 $27,204 $3,387 $13,146 $4,982,246 
Fixed rate loans:
Commercial Real Estate$61,597 $45,157 $149 $— $— $106,903 
Commercial and Industrial7,739 71,242 23,023 1,600 15,508 119,112 
Consumer8 960 3,335 18,685 200,604 223,592 
Total fixed rate loans$69,344 $117,359 $26,507 $20,285 $216,112 $449,607 
Total loans held for investment$1,165,999 $3,959,213 $53,711 $23,672 $229,258 $5,431,853 
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December 31, 2025
One YearThroughThroughThroughAfter
(in thousands)or LessFive YearsTen YearsFifteen YearsFifteen YearsTotal
Variable rate loans:
Commercial Real Estate$651,129 $1,751,862 $8,537 $— $— $2,411,528 
Commercial and Industrial448,331 1,919,264 2,986 — — 2,370,581 
Consumer— 455 1,273 4,732 14,339 20,799 
Total variable rate loans$1,099,460 $3,671,581 $12,796 $4,732 $14,339 $4,802,908 
Fixed rate loans:
Commercial Real Estate$94,191 $32,451 $1,453 $— $— $128,095 
Commercial and Industrial1,860 73,381 25,867 1,692 12,772 115,572 
Consumer3 692 3,104 13,224 213,313 230,336 
Total fixed rate loans$96,054 $106,524 $30,424 $14,916 $226,085 $474,003 
Total loans held for investment$1,195,514 $3,778,105 $43,220 $19,648 $240,424 $5,276,911 
ACL - Loans
We estimate an ACL - Loans for our loan portfolio held for investment at amortized cost which represents management’s expected credit losses over the expected contractual life of its loans. The estimate is based on both quantitative and qualitative components; each of which is subject to uncertainty.
The quantitative component, including the ACL on individually assessed loans, considers historical and recent loss performance, current portfolio composition, portfolio- and/or loan-specific asset quality data, and actual and forecasted economic conditions. The quantitative estimate is subject to inherent uncertainty given potential differences between actual economic conditions and projected economic conditions including United States macroeconomic indicators like the unemployment rate, home prices, and CRE prices. Variances between actual and projected economic indicators during the reasonable and supportable period could create differences between the ACL and actual credit losses incurred over the life of the loans. The economic environment during the reasonable and supportable period is scenario-weighted and utilizes scenario forecasts from a provider of macroeconomic scenario forecasts that are commonly used within the industry. Additionally, beyond the reasonable and supportable period, economic conditions and credit losses could vary from long-term historical averages. In addition to differences between forecasted economic conditions and actual economic conditions, the quantitative estimate assumes historical loss performance and credit quality metrics inform future expected credit losses. While historical correlations are a helpful starting point for modeling future expected losses, historically observed correlations can change and idiosyncratic events for borrowers can lead to credit losses that were not properly captured by the quantitative modeling.
The qualitative component of the ACL attempts to address the inherent uncertainty in the quantitative modeling and considers quantitative data where possible. The qualitative considerations align with the Interagency Policy Statement on ACL and consider input from an internal management committee. While an experienced and highly-informed committee provides input on qualitative factors, qualitative factors are inherently judgmental and subject to uncertainty.
The quantitative estimate component is sensitive to portfolio composition, changes in the forecasted economic variables, historical loss data, credit quality metrics including risk ratings, and changes in the contractual lives of loans. Qualitative estimates are sensitive to perceived risk in the economy not fully captured in the economic scenarios as well as factors deemed to potentially cause future loss performance to differ from historically observed performance that is not fully captured in the quantitative model.
The quantitative and qualitative components are subject to frequent independent review and challenge. While management estimates the ACL on its loan portfolio based on available information, the ACL may be inadequate to cover future losses given the uncertainty in the quantitative and qualitative components.
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The following table provides detail activity in the ACL - Loans held for investment carried at amortized cost as of and for the three months ended March 31, 2026 and 2025 and as of and for the years ended December 31, 2025 and 2024. Allocation of a portion of the ACL - Loans to one category of loans does not preclude its availability to absorb losses in other categories:
As of and for the
Three Months Ended		As of and for the Years Ended
(dollars in thousands)
March 31, 2026March 31, 2025December 31, 2025December 31, 2024
Average loans held for investment outstanding, at amortized cost$5,209,705$4,046,508$4,569,708 $3,665,462
Total loans held for investment outstanding, at amortized cost at end of period$5,376,537$4,138,042$5,222,234 $3,963,973
ACL - Loans:
Beginning of period$52,986 $42,294 $42,294 $74,745
Provision for credit losses on loans3,867 8,413 23,344 10,896
Provision for/(recovery of) credit losses on loan transfers from/to loans held-for-sale17 68 148 (9,548)
Loan charge-offs:
Commercial Real Estate— — — (16,495)
Commercial and Industrial(2,830)(3,107)(7,374)(7,359)
Consumer(2,057)(1,326)(8,040)(12,378)
Total charge-offs(4,887)(4,433)(15,414)(36,232)
Loan recoveries:
Commercial Real Estate— — — 200
Commercial and Industrial542 210 1,205 359
Consumer269 316 1,409 1,874
Total recoveries811 526 2,614 2,433
Net charge-offs (4,076)(3,907)(12,800)(33,799)
End of period$52,794 $46,868 $52,986 $42,294
Ratio of ACL - Loans to total loans at amortized cost at period end0.98 %1.13 %1.01 %1.07 %
Ratio of net charge-offs to average total loans at amortized cost(0.32)%(0.39)%(0.28)%(0.92)%
We maintain an ACL - Loans that represents management’s best estimate of the loan losses in our loan portfolio.
As of March 31, 2026, the ACL - Loans totaled $52.8 million, or 0.98% of total loans held for investment at amortized cost. As of March 31, 2025, the ACL - Loans totaled $46.9 million, or 1.13% of total loans held for investment at amortized cost. The decrease in the allowance for March 31, 2026 compared to December 31, 2025 was primarily due to reductions in loan balances of high loss forward flow loans with higher ACL – Loans to loans held for investment at amortized cost ratios, partially offset by growth in portfolios with lower ACL – Loans to loans held for investment at amortized cost ratios. As of December 31, 2025, the ACL - Loans totaled $53.0 million, or 1.01% of total loans held for investment at amortized cost. As of December 31, 2024, the allowance totaled $42.3 million or 1.07% of total loans held for investment at amortized cost. The increase in the allowance for December 31, 2025 compared to December 31, 2024 was primarily due to an increase in loans held for investment at amortized cost, and an increase in collectively and individually assessed reserves.
The ACL - Loans as a percentage of total loans held for investment at amortized cost decreased by 3 basis points to 0.98% as of March 31, 2026, compared to 1.01% as of December 31, 2025. The decrease from December 31, 2025 to March 31, 2026, was primarily due to continued run-off in loan balances of high loss forward flow loans and an increase in loan balance with lower ACL – Loans to loans held for investment at amortized cost
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ratios. The ACL - Loans to total loans held for investment at amortized cost decreased by 6 basis points to 1.01% as of December 31, 2025, compared to 1.07% as of December 31, 2024. The decrease from December 31, 2024 to December 31, 2025, was primarily due to continued run-off in loan balances of high loss forward flow loans offset by an overall increase in loan balances. Economic forecast assumptions reflected in the ACL – Loans estimate were largely consistent as of March 31, 2026, December 31, 2025, and December 31, 2024.
The following tables present activity in the ACL - Loans by loan category, for the three months ended March 31, 2026 and 2025 and for the years ended December 31, 2025 and 2024. Allocation of a portion of the ACL - Loans to one category of loans does not preclude its availability to absorb losses in other categories.
For the Three Months Ended March 31, 2026
(dollars in thousands)
Commercial Real Estate
Commercial and Industrial
ConsumerTotal
Total loans outstanding at end of period, at amortized cost$2,679,872 $2,485,418 $211,247 $5,376,537 
ACL - Loans:
Beginning of period$18,639 $26,023 $8,324 $52,986 
Provision for credit losses on loans927 1,783 1,157 3,867 
Provision for credit losses on loan transfers from loans held-for-sale— 17 — 17 
Loan charge-offs— (2,830)(2,057)(4,887)
Loan recoveries— 542 269 811 
Net charge-offs— (2,288)(1,788)(4,076)
End of period$19,566 $25,535 $7,693 $52,794 
ACL - Loans to loan type ratio0.73 %1.03 %3.64 %0.98 %
For the Three Months Ended March 31, 2025
(dollars in thousands)Commercial Real EstateCommercial and IndustrialConsumerTotal
Total loans outstanding at end of period, at amortized cost$1,762,635 $2,134,258 $241,149 $4,138,042 
ACL - Loans:
Beginning of period$12,078 $19,380 $10,836 $42,294 
Provision for credit losses on loans1,679 6,064 670 8,413 
Provision for credit losses on loan transfers from loans held-for-sale62 6 — 68 
Loan charge-offs— (3,107)(1,326)(4,433)
Loan recoveries— 210 316 526 
Net charge-offs— (2,897)(1,010)(3,907)
End of period$13,819 $22,553 $10,496 $46,868 
ACL - Loans to loan type ratio0.78 %1.06 %4.35 %1.13 %
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For the Year Ended December 31, 2025
(dollars in thousands)
Commercial Real Estate
Commercial and Industrial
ConsumerTotal
Total loans outstanding at end of period, at amortized cost$2,528,996 $2,475,549 $217,689 $5,222,234 
ACL - Loans:
Beginning of period$12,078 $19,380 $10,836 $42,294 
Provision for credit losses on loans6,418 12,807 4,119 23,344 
Provision for credit losses on loan transfers from loans held-for-sale144 4 — 148 
Loan charge-offs— (7,374)(8,040)(15,414)
Loan recoveries— 1,205 1,409 2,614 
Net charge-offs— (6,169)(6,631)(12,800)
End of period$18,640 $26,022 $8,324 $52,986 
ACL - Loans to loan type ratio0.74 %1.05 %3.82 %1.01 %
For the Year Ended December 31, 2024
(dollars in thousands)
Commercial Real Estate
Commercial and Industrial
ConsumerTotal
Total loans outstanding at end of period, at amortized cost$1,730,883$1,986,457$246,633$3,963,973
ACL - Loans:
Beginning of period$23,203$26,460$25,082$74,745
Provision for credit losses on loans
5,228785,59010,896
Provision for credit losses on loan transfers to loans held-for-sale(58)(158)(9,332)(9,548)
Loan charge-offs(16,495)(7,359)(12,378)(36,232)
Loan recoveries2003591,8742,433
Net charge-offs(16,295)(7,000)(10,504)(33,799)
End of period$12,078$19,380$10,836$42,294
ACL - Loans to loan type ratio0.70 %0.98 %4.39 %1.07 %
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The following table shows the allocation of the ACL - Loans by loan type as of March 31, 2026 and 2025 and December 31, 2025 and 2024.
March 31,December 31,
2026202520252024
(dollars in thousands)Amount% of Total
ACL - Loans		Amount% of Total
ACL - Loans		Amount
% of Total
ACL - Loans
Amount
% of Total
ACL - Loans
Balance of ACL - Loans:
Commercial Real Estate$19,566 37.0 %$13,819 29.5 %$18,640 35.2 %$12,078 28.6 %
Commercial and Industrial25,535 48.4 %22,553 48.1 %26,022 49.1 %19,380 45.8 %
Consumer7,693 14.6 %10,496 22.4 %8,324 15.7 %10,836 25.6 %
Total ACL - Loans$52,794 100.0 %$46,868 100.0 %$52,986 100.0 %$42,294 100.0 %
The total ACL - Loans disclosed in the table above is available to absorb losses from any loan category. We believe that the ACL - Loans as of March 31, 2026 and December 31, 2025, is adequate to cover estimated losses in the loan portfolio as of such date. There can be no assurance, however, that our loan portfolio will not sustain losses in future periods, which could be substantial in relation to the size of the allowance as of March 31, 2026 or December 31, 2025.
Non-performing Assets
Non-performing assets consist of non-performing loans, non-performing financing receivables, and OREO.
Assets acquired through, or in lieu of, loan foreclosure are held for sale as OREO and are initially recorded at fair value less estimated selling costs. Any write-down to fair value at the time of transfer to OREO is charged to the ACL - Loans. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value, less estimated costs to sell. Costs of improvements are capitalized, whereas costs related to holding OREO and subsequent write-downs to the value are expensed. Any gains and losses realized at the time of disposal are reflected in income.
Non-performing assets consisted of the following as of March 31, 2026, December 31, 2025, and December 31, 2024:
March 31,
December 31,
(dollars in thousands)
202620252024
Non-accrual loans:
Commercial Real Estate
$66,804$60,360$44,694
Commercial and Industrial15,98411,79816,439
Consumer1,6701,8571,122
Total non-accrual loans84,45874,01562,255
Non-performing financing receivables———
Other real estate owned7,1098,72925,476
Total non-performing assets$91,567$82,744$87,731
Total non-accrual loans as a percentage of total loans1.46 %1.32 %1.45 %
Total non-performing financing receivables as a percentage of total financing receivables— %— %— %
Total non-performing assets as a percentage of total assets1.11 %1.05 %1.21 %
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Total non-performing assets were $91.6 million as of March 31, 2026, an increase of 10.7% compared to $82.7 million as of December 31, 2025. The increase was primarily due to an increase in non-accrual loans. Non-accrual loans increased by $10.4 million, or 14.1%, for March 31, 2026, compared to December 31, 2025, primarily due to one real estate finance and six corporate finance loans placed on non-accrual, offset partially by a payoff of one loan and charge-off of one loan in our corporate finance loan portfolio. OREO assets decreased by $1.6 million, or 18.6%, for March 31, 2026, compared to December 31, 2025, due to write-downs of OREO property fair values.
Total non-performing assets were $82.7 million as of December 31, 2025, a decrease of 5.7% compared to $87.7 million as of December 31, 2024. The decrease was primarily due to sales of OREO, offset partially by an increase in non-accrual loans. Non-accrual loans increased by $11.8 million, or 18.9%, for December 31, 2025, compared to December 31, 2024, primarily due to two real estate finance and five corporate finance loans placed on non-accrual, offset partially by one loan in our healthcare finance loan portfolio being placed back on accrual status and a payoff of one loan in our real estate finance loan portfolio. OREO assets decreased by $16.7 million, or 65.7%, for December 31, 2025, compared to December 31, 2024, primarily due to sales of three existing OREO assets, offset slightly by the addition of one new OREO asset.
During the three months ended March 31, 2026, there were no transfers or sales of OREO. As of March 31, 2026, there remained three OREO properties, with an aggregate value of $7.1 million.
During the year ended December 31, 2025, we transferred one real estate finance loan to OREO, with a value at the time of transfer of $1.7 million. Also during 2025, we sold three OREO properties with a carrying value of $18.7 million for proceeds of $19.1 million, resulting in a gain of $0.4 million, which was recognized in other non-interest income. As of December 31, 2025, there remained three OREO properties, with an aggregate value of $8.7 million.
During 2024, we transferred five real estate finance loans held for investment at amortized cost to OREO assets. There were no sales of OREO during 2024. As of December 31, 2024, there were five OREO properties with an aggregate value of $25.5 million.
OREO is recognized in Other assets on the Consolidated Balance Sheets.
Non-performing Loans
A loan for which the accrual of interest has been discontinued is designated as a non-accrual loan. When loans are placed on non-accrual status, all interest previously accrued but not collected is reversed against current period interest income. Income on non-accrual loans is subsequently recognized only to the extent that cash is received and the loan’s principal balance is deemed collectible. Loans are restored to accrual status when loans are once again current with regards to payment status, become well-secured, and management believes full collectability of future principal and interest is probable.
A loan is evaluated for individual impairment when we determine that it no longer exhibits similar risk characteristics inline with the rest of the related loan category. Individually evaluated loans include loans on non-accrual status. Depending on a particular loan’s circumstances, we measure impairment of a loan based upon the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral less estimated costs to sell if the loan is collateral dependent. A loan is considered collateral dependent when repayment of the loan is based solely on the liquidation of the collateral. Fair value, where possible, is determined by independent appraisals, typically on an annual basis. Between appraisal periods, the fair value may be adjusted based on specific events, such as if deterioration of quality of the collateral comes to our attention as part of our problem loan monitoring process, or if discussions with the borrower lead us to believe the last appraised value no longer reflects the actual market for the collateral. The impairment amount on a collateral-dependent loan is charged-off to the allowance if deemed not collectible and the impairment amount on a loan that is not collateral-dependent is set up as a specific reserve.
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The following tables present non-performing loans held for investment at amortized cost, by loan category, as of the dates indicated:
As of March 31, 2026
(dollars in thousands)
Commercial Real EstateCommercial and IndustrialConsumerTotal
Non-accruing$66,804 $4,112 $1,670 $72,586 
Accruing loans 90 days or more past due— 1,762 — 1,762 
Total non-performing loans held for investment at amortized cost
$66,804 $5,874 $1,670 $74,348 
Total loans held for investment at amortized cost
$2,679,872 $2,485,418 $211,247 $5,376,537 
Non-accrual loans to total loans held for investment at amortized cost ratio
2.49 %0.17 %0.79 %1.35 %
ACL - Loans to non-accrual loans held for investment at amortized cost ratio29.29 %620.99 %460.66 %72.73 %
Non-performing loans to total loans held for investment at amortized cost ratio
2.49 %0.24 %0.79 %1.38 %
As of December 31, 2025
(dollars in thousands)
Commercial Real EstateCommercial and IndustrialConsumerTotal
Non-accruing$60,361 $5,484 $1,857 $67,702 
Accruing loans 90 days or more past due— — — — 
Total non-performing loans held for investment at amortized cost
$60,361 $5,484 $1,857 $67,702 
Total loans held for investment at amortized cost
$2,528,996 $2,475,549 $217,689 $5,222,234 
Non-accrual loans to total loans held for investment at amortized cost ratio
2.39 %0.22 %0.85 %1.30 %
ACL - Loans to non-accrual loans held for investment at amortized cost ratio30.88 %474.51 %448.25 %78.26 %
Non-performing loans to total loans held for investment at amortized cost ratio
2.39 %0.22 %0.85 %1.30 %
As of December 31, 2024
(dollars in thousands)
Commercial Real EstateCommercial and IndustrialConsumerTotal
Non-accruing$44,694$12,789$1,122$58,605
Accruing loans 90 days or more past due————
Total non-performing loans held for investment at amortized cost
$44,694$12,789$1,122$58,605
Total loans held for investment at amortized cost
$1,730,883$1,986,457$246,633$3,963,973
Non-accrual loans to total loans held for investment at amortized cost ratio
2.58 %0.64 %0.45 %1.48 %
ACL - Loans to non-accrual loans ratio27.02 %151.54 %965.78 %72.17 %
Non-performing loans to total loans held for investment at amortized cost ratio
2.58 %0.64 %0.45 %1.48 %
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Total non-performing loans held for investment at amortized cost were $74.3 million as of March 31, 2026, an increase of 9.8% compared to $67.7 million as of December 31, 2025. The increase was due to an increase in non-accrual loans, primarily related to one real estate finance loan and five corporate finance loans being placed on non-accrual status, during the three months ended March 31, 2026. The increase in non-performing loans held for investment at amortized cost was partially offset by the payoff of one loan and the charge-off of one loan in our corporate finance loan portfolio.
Total non-performing held for investment loans at amortized cost were $67.7 million as of December 31, 2025, an increase of 15.5% compared to $58.6 million as of December 31, 2024. The increase was due to an increase in non-accrual loans, primarily related to two real estate finance loans and four corporate finance loans being placed on non-accrual status, during 2025. The increase in non-performing held for investment loans at amortized cost was partially offset by one loan in our healthcare finance loan portfolio being placed back onto accrual status, and two corporate finance loans on non-accrual being paid off.
Modifications to Borrowers Experiencing Financial Difficulty
There were no loans that were both modified and experiencing financial difficulty during the three months ended March 31, 2026. The following tables present by class and by type of modification, the recorded investment and financial effect of modification as of December 31, 2025, and December 31, 2024, in our loans that were both modified and experiencing financial difficulty during the years ended December 31, 2025 and 2024:
December 31, 2025
(dollars in thousands)Term ExtensionTotalModification to Loan Class RatioWeighted-Average Term Extension
Commercial and Industrial$292 $292 0.01 %12.0 months
Total$292 $292 
December 31, 2024
(dollars in thousands)Term ExtensionTotalModification to Loan Class RatioWeighted-Average Term Extension
Commercial and Industrial$1,971 $1,971 0.10 %19.2 months
Total$1,971 $1,971 
As of March 31, 2026, December 31, 2025, and December 31, 2024, there were no unfunded loan commitments on modifications for borrowers experiencing financial difficulty.
See Note 5, “Credit Quality” to our consolidated financial statements and the notes thereto included elsewhere in this prospectus for more information on loan modifications to borrowers experiencing financial difficulty.
Asset Quality Trends
Management monitors trends in delinquencies, non-performing assets, and criticized loans to identify areas of potential credit deterioration or improvement. While overall credit quality remains consistent with management’s expectations, certain loan segments may be more sensitive to changes in interest rates, borrower cash flows, or economic conditions. Management continues to closely monitor these segments and adjust credit oversight and risk management practices as appropriate.
Asset quality metrics during the year ended December 31, 2025 reflect the performance of our loan portfolio and broader economic conditions. We experienced general improvements in asset quality metrics during 2025, due to lower criticized and classified loans, non-accrual loans decreasing as a percentage of total assets, a significant reduction in OREO, and increased total assets and capital. Asset quality metrics during the three months ended March 31, 2026, were generally consistent with metrics during the year ended December 31, 2025. Non-performing assets grew at approximately the same rate as total assets, leading non-performing assets to remain relatively flat on a percentage of total loans basis despite an increase on a dollar basis.
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Credit Quality
We use several credit quality indicators to manage credit risk in an ongoing manner. The risk rating system is central to the overall credit risk management discipline and the important first step in effectively monitoring the credit quality of the portfolio. Credit risk ratings are applied individually to those classes of assets that have significant or unique credit characteristics that benefit from a case-by-case evaluation. Groups of assets that are underwritten and structured using standardized criteria and characteristics, such as statistical models (e.g., credit scoring or payment performance), are typically risk rated and monitored collectively. These are typically assets to individuals in the classes which comprise the consumer and solar portfolio categories.
During the year ended December 31, 2025, credit metric trends improved primarily due to criticized and classified loans decreasing, both overall and relative to total loans, and an increase in non-accrual loans lower than the growth in total loans, causing a decrease as a percentage of total loans. On an overall basis, credit metric trends during the three months ended March 31, 2026 were primarily the same as during the year ended December 31, 2025. Delinquencies were lower on both dollar and percentages bases. Non-accrual loans increased, driven by several large loans being placed on non-accrual during the three months ended March 31, 2026. Criticized loans grew from a low level as of December 31, 2025. The weighted average risk rating of the portfolio improved as loan growth, with new loans originating at acceptable risk ratings, more than offset the impact of loan downgrades during the three months ended March 31, 2026.
The following are the definitions of our credit quality indicators:
•Acceptable Risk (or better) - Assets in all classes that comprise the commercial and consumer portfolio categories that are not adversely rated, are contractually current as to principal and interest, and are otherwise in compliance with the contractual terms of the asset agreement. Management believes that there is a low likelihood of loss related to those assets that are considered Acceptable Risk or better.
•Higher Risk - Assets in this category may demonstrate weaker credit fundamentals with an above-average chance of resulting in a default combined with a lower risk of loss to create an overall risk, profile which requires appropriate monitoring but do not present potential weaknesses or a warrant a lower rating.
•Special Mention - Assets in this category exhibit potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may, at some future date, result in deterioration of the repayment prospects for the asset. Special Mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. While potentially weak, the asset is currently marginally acceptable, and no loss of principal or interest is envisioned.
•Substandard - A substandard asset is inadequately protected by the current sound worth and paying capacity of the borrower or the collateral pledged, if any. Assets classified in this category must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected. Loss potential, which exists in the aggregate amount of Substandard assets, does not have to exist in individual assets classified as Substandard.
•Doubtful - Assets in this category have all the weaknesses inherent in one classified as Substandard with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors which may work to the advantage and strengthening of the asset, its classification as an estimated loss is deferred until its more exact status may be determined.
We periodically review and, if necessary, update the credit quality indicator assigned to each of the loans on a case-by-case basis.
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The following tables summarize our held for investment at amortized cost loan portfolio by credit quality indicator as of March 31, 2026, December 31, 2025, and December 31, 2024:
March 31, 2026
(in thousands)Acceptable RiskHigher RiskSpecial MentionSubstandardDoubtfulTotal
Commercial Real Estate$2,224,020 $334,670 $— $121,182 $— $2,679,872 
Commercial and Industrial2,392,221 37,164 38,349 14,682 3,002 2,485,418 
Consumer201,718 7,859 — 1,670 — 211,247 
Total loans held for investment at amortized cost$4,817,959 $379,693 $38,349 $137,534 $3,002 $5,376,537 
December 31, 2025
(in thousands)Acceptable RiskHigher RiskSpecial MentionSubstandardDoubtfulTotal
Commercial Real Estate
$2,075,215 $386,499 $— $67,282 $— $2,528,996 
Commercial and Industrial2,399,907 55,114 1 17,987 2,540 2,475,549 
Consumer210,504 5,328 — 1,857 — 217,689 
Total loans held for investment at amortized cost
$4,685,626 $446,941 $1 $87,126 $2,540 $5,222,234 
December 31, 2024
(in thousands)Acceptable RiskHigher RiskSpecial MentionSubstandardDoubtfulTotal
Commercial Real Estate
$1,162,350 $413,517 $103,162 $51,854 $— $1,730,883 
Commercial and Industrial1,809,606 109,226 2,326 63,147 2,152 1,986,457 
Consumer239,980 5,531 — 1,122 — 246,633 
Total loans held for investment at amortized cost
$3,211,936 $528,274 $105,488 $116,123 $2,152 $3,963,973 
The change in allocation between credit quality indicators in our held for investment at amortized cost loan portfolio as of March 31, 2026, compared to December 31, 2025, was primarily due to two lender finance loans being downgraded to special mention, and one healthcare finance loan and one real estate finance loan being downgraded to substandard during the three months ended March 31, 2026.
The change in allocation between credit quality indicators in our held for investment at amortized cost loan portfolio as of December 31, 2025, compared to December 31, 2024, was broadly due to loan payoffs in the higher risk, special mention, and substandard categories during the year, and to a lesser extent upgrades in credit quality indicator, offset partially by downgrades.
A loan is considered delinquent when principal or interest payments are 30 days or more past due. Typically, the accrual of interest on loans is discontinued when principal or interest payments are 90 days or more past due, or when, in the opinion of management, there is a reasonable doubt as to collectability in the normal course of business. See Note 5, “Credit Quality,” to our consolidated financial statements and the notes thereto included elsewhere in this prospectus for more information on our past due loan aging schedule.
Investment Securities
We use our investment securities portfolio to manage interest rate risk and as a source of income and liquidity for cash requirements. As of March 31, 2026, the carrying amount of investment securities totaled $1.3 billion, a decrease of $19.3 million, or 1.5%, compared with $1.3 billion as of December 31, 2025. As of December 31, 2025, the carrying amount of investment securities totaled $1.3 billion, a decrease of $220.3 million, or 14.5%, compared with $1.5 billion as of December 31, 2024. As of March 31, 2026, December 31, 2025, and December 31, 2024, investment securities represented 15.6%, 16.5%, and 21.0% of total assets, respectively.
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At the date of purchase, we are required to classify investment securities into one of two categories: held-to-maturity or available-for-sale. We primarily acquire investment securities as available-for-sale, however, we may elect certain investment securities that are acquired as held-to-maturity based on our strategy given the particular investment security acquired and current market conditions and expectation.
The following table summarizes the carrying value by classification of securities as of the dates shown:
As of
March 31, 2026December 31, 2025Change
(dollars in thousands)
Amount(1)
% of total securities
Amount(1)
% of total securities$%
Available-for-sale securities:
U.S. Treasury and government agencies$776,453 60.4 %$958,347 73.4 %$(181,894)(19.0)%
Residential agency mortgage-backed
264,101 20.6 %139,077 10.7 %125,024 89.9 %
Commercial agency mortgage-backed
176,221 13.7 %136,070 10.4 %40,151 29.5 %
Municipal bonds8,498 0.7 %8,635 0.7 %(137)(1.6)%
Other
10,326 0.8 %12,758 1.0 %(2,432)(19.1)%
Total investment securities available-for-sale$1,235,599 96.2 %$1,254,887 96.2 %$(19,288)(1.5)%
Held-to-maturity securities:
Municipal bonds$31,200 2.4 %$31,200 2.4 %$— — %
Other
17,744 1.4 %17,744 1.4 %— — %
Total investment securities held-to-maturity$48,944 3.8 %$48,944 3.8 %$— — %
Total investment securities$1,284,543 100.0 %$1,303,831 100.0 %$(19,288)(1.5)%
__________________
(1)Available-for-sale investment securities are reported at fair value and held-to-maturity investment securities are reported at amortized cost.
Total available-for-sale investment securities decreased $19.3 million, or 1.5%, from $1.3 billion as of December 31, 2025 to $1.2 billion as of March 31, 2026, primarily due to a decline of $181.9 million of U.S. Treasury and government agencies securities, partially offset by an increase in residential and commercial agency mortgage-backed securities of $165.2 million.
Held-to-maturity investment securities were $48.9 million as of both December 31, 2025 and March 31, 2026.
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The following table summarizes the carrying value by classification of securities as of the dates shown:
As of
December 31, 2025December 31, 2024Change
(dollars in thousands)
Amount(1)
% of total securities
Amount(1)
% of total securities$%
Available-for-sale securities:
U.S. Treasury and government agencies$958,347 73.4 %$1,390,681 91.2 %$(432,334)(31.1)%
Residential agency mortgage-backed
139,077 10.7 %16,171 1.1 %122,906 760.0 %
Commercial agency mortgage-backed
136,070 10.4 %36,577 2.4 %99,493 272.0 %
Municipal bonds8,635 0.7 %8,292 0.5 %343 4.1 %
Other
12,758 1.0 %19,747 1.3 %(6,989)(35.4)%
Total investment securities available-for-sale$1,254,887 96.2 %$1,471,468 96.5 %$(216,581)(14.7)%
Held-to-maturity securities:
Municipal bonds$31,200 2.4 %$31,690 2.1 %$(490)(1.5)%
Other
17,744 1.4 %20,996 1.4 %(3,252)(15.5)%
Total investment securities held-to-maturity$48,944 3.8 %$52,686 3.5 %$(3,742)(7.1)%
Total investment securities$1,303,831 100.0 %$1,524,154 100.0 %$(220,323)(14.5)%
__________________
(1)Available-for-sale investment securities are reported at fair value and held-to-maturity investment securities are reported at amortized cost.
Total available-for-sale investment securities decreased $216.6 million, or 14.7%, from $1.5 billion as of December 31, 2024 to $1.3 billion as of December 31, 2025, primarily due to a decline of $432.3 million of U.S. Treasury and government agencies securities, partially offset by an increase in residential and commercial agency mortgage-backed securities of $222.4 million.
Held-to-maturity investment securities decreased $3.7 million, or 7.1%, from $52.7 million as of December 31, 2024 to $48.9 million as of December 31, 2025, due to expected paydowns.
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The following table summarizes the amortized cost and their weighted average yields as of March 31, 2026, by contractual maturities. The contractual maturity of a mortgage-backed security is the date at which the last underlying mortgage matures.
March 31, 2026
Available-for-saleHeld-to-maturity
(dollars in thousands)Amortized CostYieldAmortized CostYield
U.S. Treasury and government agencies:
One year or less$518,645 4.10 %$— — %
One to five years256,220 4.04 %— — %
Five to ten years— — %— — %
After ten years— — %— — %
$774,865 4.08 %$— — %
Residential agency mortgage-backed:
One year or less$— — %$— — %
One to five years89 1.58 %— — %
Five to ten years— — %— — %
After ten years265,955 4.47 %— — %
$266,044 4.47 %$— — %
Commercial agency mortgage-backed:
One year or less$— — %$— — %
One to five years18,799 4.76 %— — %
Five to ten years13,379 4.72 %— — %
After ten years145,285 5.04 %— — %
$177,463 4.98 %$— — %
Municipal bonds:
One year or less$— — %$— — %
One to five years3,075 3.24 %31,200 9.00 %
Five to ten years— — %— — %
After ten years6,408 2.92 %— — %
$9,483 3.03 %$31,200 9.00 %
Other:
One year or less$— — %$— — %
One to five years— — %— — %
Five to ten years5,000 3.87 %— — %
After ten years5,958 6.05 %17,744 5.62 %
$10,958 5.06 %$17,744 5.62 %
Total investment securities$1,238,813 4.29 %$48,944 7.77 %
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The following table summarizes the amortized cost and their weighted average yields as of December 31, 2025, by contractual maturities. The contractual maturity of a mortgage-backed security is the date at which the last underlying mortgage matures.
December 31, 2025
Available-for-saleHeld-to-maturity
(dollars in thousands)
Amortized CostYieldAmortized CostYield
U.S. Treasury and government agencies:
One year or less$520,293 4.16 %$—— %
One to five years433,688 4.02 %— — %
Five to ten years— — %— — %
After ten years— — %— — %
$953,981 4.10 %$— — %
Residential agency mortgage-backed:
One year or less$— — %$—— %
One to five years109 1.61 %— — %
Five to ten years— — %— — %
After ten years138,153 4.75 %— — %
$138,262 4.75 %$— — %
Commercial agency mortgage-backed:
One year or less$— — %$—— %
One to five years18,794 4.77 %— — %
Five to ten years13,396 4.73 %— — %
After ten years103,398 5.18 %— — %
$135,588 5.08 %$— — %
Municipal bonds:
One year or less$— — %$—— %
One to five years2,081 4.07 %31,200 9.00 %
Five to ten years994 1.50 %— — %
After ten years6,410 2.92 %— — %
$9,485 3.03 %$31,200 9.00 %
Other:
One year or less$— — %$—— %
One to five years— — %— — %
Five to ten years5,000 3.87 %— — %
After ten years8,496 6.40 %17,744 5.62 %
$13,496 5.46 %$17,744 5.62 %
Total investment securities$1,250,812 4.28 %$48,944 7.77 %
ACL - Investment Securities
For investment securities other than CPACE exposures, which are included in Other in the table above, the ACL - investment securities is subject to uncertainty primarily due to the assumed relationship between historical loss observations and future loss expectations. Historical obligor and credit rating loss history may differ more in the future than in the past and credit ratings of obligors may change over time.
CPACE exposures are subject to an ACL - investment securities, however, we have never experienced a credit loss on these investment securities. As such, a qualitative ACL - investment securities is estimated based on
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perceived potential risk in the asset class which is generally lower than our loan portfolio. Uncertainty with the estimate exists given the lack of observable loss data in our investment portfolio for these assets and in the industry.
See Note 1, “Significant Accounting Policies,” to our consolidated financial statements and the notes thereto included elsewhere in this prospectus for further discussion of CPACE exposures.
The following table presents an analysis of the ACL on held-to-maturity investment securities as of and for the three months ended March 31, 2026 and 2025 and as of and for the years ended December 31, 2025 and 2024:

As of and for the
Three Months Ended		As of and for the Years Ended
(dollars in thousands)
March 31, 2026March 31, 2025December 31, 2025December 31, 2024
Held-to-maturity:
Average held-to-maturity investment securities outstanding$48,944$52,689$52,376$53,136
Total held-to-maturity investment securities outstanding at end of period$48,944$52,689$48,944$52,686
ACL - investment securities:
Balance at beginning of period$110$161$161$210
Recovery of credit losses on investment securities——(51)(49)
Balance at end of period$110$161$110$161
Ratio of allowance to total held-to-maturity investment securities at period end0.22 %0.31 %0.22 %0.31 %
Ratio of net charge-offs to average held-to-maturity investment securities— %— %— %— %
As of March 31, 2026 and December 31, 2025, the ACL - held-to-maturity investment securities totaled $0.1 million, or 0.22% of held-to-maturity investment securities.
As of December 31, 2025, the ACL - held-to-maturity investment securities totaled $0.1 million, or 0.22% of held-to-maturity investment securities, a decrease of 9 basis points compared to the allowance totaled $0.2 million or 0.31% of held-to-maturity investment securities as of December 31, 2024. The decrease from December 31, 2024 to December 31, 2025, in the ACL - held-to-maturity investment securities was due to a lower remaining lifetime probability of default, as well as a decrease in outstanding balance.
The following table presents the allocation of the ACL on held-to-maturity investment securities by investment type:
March 31, 2026March 31, 2025December 31, 2025December 31, 2024
(dollars in thousands)Amount% of Total
ACL - Investment Securities		Amount
% of Total
ACL - Investment Securities
Amount
% of Total
ACL - Investment Securities
Amount
% of Total
ACL - Investment Securities
Municipal bonds$66 60.0 %$109 67.7 %$66 60.0 %$109 67.7 %
Other
44 40.0 %52 32.3 %44 40.0 %52 32.3 %
Total$110 100.0 %$161 100.0 %$110 100.0 %$161 100.0 %
Financing Receivables
Our financing receivables are comprised of CPACE-funded projects, which were categorized as financing receivables, based on the contract structure requirements of the municipality where the project is located. At the time
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of financing, CPACE financing receivables are classified as either held for investment at amortized cost or held-for-sale at lower of cost or fair value.
As of March 31, 2026, the carrying amount of financing receivables totaled $37.2 million, a decrease of $5.7 million, or 13.3%, compared with $42.9 million as of December 31, 2025. As of December 31, 2025, the carrying amount of financing receivables totaled $42.9 million, a decrease of $0.3 million, or 0.8%, compared with $43.2 million as of December 31, 2024. As of March 31, 2026, December 31, 2025, and December 31, 2024 financing receivables represented 0.5%, 0.5%, and 0.6% of total assets, respectively.
The following tables summarize our investment in financing receivables as of and for the three months ended March 31, 2026 and 2025 and as of and for the years ended December 31, 2025 and 2024:
As of and for the
Three Months Ended		As of and for the Years Ended
(dollars in thousands)
March 31, 2026March 31, 2025December 31, 2025December 31, 2024
Held for investment:
Average financing receivables held for investment outstanding$41,820$29,406$33,364$29,579
Total financing receivables held for investment outstanding at end of period$37,177$29,407$42,902$29,406
ACL - financing receivables held for investment:
Balance at beginning of period$108$74$74$75
Recovery of credit losses on financing receivables(15)——(1)
Provision for credit losses - transfer of financing receivables from held-for-sale——34—
Balance at end of period$93$74$108$74
Ratio of allowance to total financing receivables held for investment at period end0.25 %0.25 %0.25 %0.25 %
Ratio of net charge-offs to average financing receivables held for investment— %— %— %— %
CPACE exposures are subject to an ACL - financing receivables, however, we have never experienced a credit loss on these assets. As such, a qualitative ACL - financing receivables is estimated based on perceived potential risk in the asset class which is generally lower than our loan portfolio. Uncertainty with the estimate exists given the lack of observable loss data in our investment portfolio for these assets and in the industry.
As of and for the
Three Months Ended		As of and for the Years Ended
(in thousands)March 31, 2026March 31, 2025December 31, 2025December 31, 2024
Held-for-sale:
Average financing receivables held-for-sale outstanding$— $13,746 $9,557 $13,275 
Total financing receivables held-for-sale outstanding at end of period$— $13,602 $— $13,835 
All of our financing receivables held-for-sale were transferred to financing receivables held for investment during the third quarter of 2025 due to a change in strategy related to our financing receivables portfolio. As of March 31, 2026 and December 31, 2025, all of our financing receivables had contractual maturity dates of greater than ten years with a weighted-average yield of 6.06% and 6.42%, respectively. As of March 31, 2026, December 31, 2025, and December 31, 2024, no financing receivables were on non-accrual status or deemed non-performing assets.
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See Note 1, “Significant Accounting Policies,” to our consolidated financial statements and the notes thereto included elsewhere in this prospectus for further discussion of CPACE exposures.
Deposits
Our lending and investing activities are primarily funded by deposits. We offer a variety of deposit accounts having a wide range of interest rates and terms including demand, savings, money market and time accounts. We rely primarily on competitive pricing policies and customer service to attract and retain these deposits. We primarily source our deposits through our digital deposit platform underpinned by a modern core banking system that leverages advanced technology to provide a robust, scalable, and API-driven architecture that supports efficient operations and differentiated customer experience. We believe that digital deposits serve as our growth engine, providing scalable access to a vast national market beyond the reach of a legacy branch network and aligning with our lending capacity as consumer preferences shift to digital.
Deposits represent our primary source of funding and are an important component of our financial condition. Changes in deposit balances and mix are influenced by customer behavior, pricing strategies, interest rate movements, and competitive conditions. During periods of rising interest rates, customers may shift balances from non-interest-bearing deposits to interest-bearing or time deposit products, which can increase funding costs. We evaluate the stability, cost, and composition of deposits in managing liquidity and interest rate risk. Future deposit trends may affect our funding mix and could increase reliance on wholesale funding sources if deposit growth does not keep pace with asset growth.
The following table summarizes our deposit balances as of March 31, 2026 and December 31, 2025:
March 31, 2026December 31, 2025Change
(dollars in thousands)Balance% of totalBalance% of total$%
Non-interest-bearing deposits$473,153 6.6 %$372,444 5.5 %$100,709 27.0 %
Interest-bearing deposits:
Demand287,356 4.0 %275,259 4.1 %12,097 4.4 %
Money market1,424,548 20.0 %1,206,544 17.8 %218,004 18.1 %
Savings3,607,617 50.6 %3,500,532 51.6 %107,085 3.1 %
Time deposits1,345,534 18.8 %1,423,136 21.0 %(77,602)(5.5)%
Total interest-bearing deposits6,665,055 93.4 %6,405,471 94.5 %259,584 4.1 %
Total deposits$7,138,208 100.0 %$6,777,915 100.0 %$360,293 5.3 %
Total deposits as of March 31, 2026 were $7.1 billion, an increase of $360.3 million, or 5.3%, compared with $6.8 billion as of December 31, 2025, primarily due to higher deposits in money market accounts, savings accounts, and non-interest-bearing deposit accounts, partially offset by a decrease in time deposits.
Brokered time deposits, included in time deposits in the table above, increased slightly to $686.7 million as of March 31, 2026 from $686.5 million as of December 31, 2025. Institutional sweep deposits, included in each of savings and money market in the table above, increased to $1.4 billion as of March 31, 2026, compared to $1.1 billion as of December 31, 2025 due primarily to the addition of new relationships and the expansion of one existing relationship. All brokered time deposits and institutional sweep deposits are fully FDIC insured.
Non-interest-bearing deposits as of March 31, 2026, were $473.2 million, an increase of $100.7 million, or 27.0%, compared with $372.4 million as of December 31, 2025. Interest-bearing deposits were $6.7 billion as of March 31, 2026, an increase of $259.6 million, or 4.1%, compared with $6.4 billion as of December 31, 2025.
As of March 31, 2026, the estimated aggregate amount of uninsured deposits (deposits in amounts greater than $250,000 per depositor, per account ownership category, which is the maximum amount for federal deposit insurance) was $975.2 million, which is 13.6% of total Bank deposits.
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The following table summarizes our deposit balances as of December 31, 2025 and 2024:
December 31, 2025December 31, 2024Change
(dollars in thousands)Balance% of totalBalance% of total$%
Non-interest-bearing deposits$372,444 5.5 %$258,242 4.6 %$114,202 44.2 %
Interest-bearing deposits:
Demand275,259 4.1 %269,320 4.8 %5,939 2.2 %
Money market1,206,544 17.8 %895,605 16.1 %310,939 34.7 %
Savings3,500,532 51.6 %2,342,327 42.2 %1,158,205 49.4 %
Time deposits1,423,136 21.0 %1,799,838 32.3 %(376,702)(20.9)%
Total interest-bearing deposits6,405,471 94.5 %5,307,090 95.4 %1,098,381 20.7 %
Total deposits$6,777,915 100.0 %$5,565,332 100.0 %$1,212,583 21.8 %
Total deposits as of December 31, 2025 were $6.8 billion, an increase of $1.2 billion, or 21.8%, compared with $5.6 billion as of December 31, 2024, primarily due to higher deposits in the digital banking growth savings product, as well as an increase in money market deposit account balances, brokered certificates of deposit, and business checking accounts.
Brokered time deposits, included in time deposits in the table above, increased to $686.5 million as of December 31, 2025 from $514.3 million as of December 31, 2024, due to new deposit issuance. Institutional sweep deposits, included in each of savings and money market in the table above, increased to $1.1 billion as of December 31, 2025, compared to $813.7 million as of December 31, 2024 due primarily to the addition of new relationships. All brokered time deposits and institutional sweep deposits are fully FDIC insured.
Non-interest-bearing deposits as of December 31, 2025, were $372.4 million, an increase of $114.2 million, or 44.2%, compared with $258.2 million as of December 31, 2024. Interest-bearing deposits were $6.4 billion as of December 31, 2025, an increase of $1.1 billion, or 20.7%, compared with $5.3 billion as of December 31, 2024.
As of December 31, 2025, the estimated aggregate amount of uninsured deposits (deposits in amounts greater than $250,000 per depositor, per account ownership category, which is the maximum amount for federal deposit insurance) was $887.9 million, which is 13.1% of total Bank deposits.
The following table sets forth the amount of time deposits that are $250,000 or greater, by time remaining until maturity:
(in thousands)March 31, 2026December 31, 2025
Three months or less$62,908 $78,227 
Over three months through six months21,622 62,567 
Over six months through twelve months63,056 34,917 
Over twelve months3,309 4,533 
Total time deposits$150,895 $180,244 
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The daily average balances and weighted average rates paid on deposits for each of the three months ended March 31, 2026 and 2025 are presented below:
March 31, 2026March 31, 2025
(dollars in thousands)Average BalanceInterest ExpenseAverage RateAverage BalanceInterest ExpenseAverage Rate
Non-interest-bearing deposits$372,965 $— — %$239,776 $— — %
Interest-bearing deposits:
Demand280,987 2,433 3.51 %283,727 2,420 3.46 %
Money market1,322,061 12,189 3.74 %864,737 7,369 3.46 %
Savings3,538,759 33,108 3.79 %2,398,505 25,111 4.25 %
Time deposits1,398,063 14,565 4.23 %1,893,898 21,586 4.62 %
Total interest-bearing deposits6,539,870 62,295 3.86 %5,440,867 56,486 4.21 %
Total deposits$6,912,835 $62,295 3.65 %$5,680,643 $56,486 4.03 %
The ratio of average non-interest-bearing deposits to average total deposits for the three months ended March 31, 2026 and 2025 was 5.4%, and 4.2%, respectively.
The daily average balances and weighted average rates paid on deposits for each of the years ended December 31, 2025 and 2024 are presented below:
December 31, 2025December 31, 2024
(dollars in thousands)
Average BalanceInterest ExpenseAverage RateAverage BalanceInterest ExpenseAverage Rate
Non-interest-bearing deposits$287,741 $— — %$271,796 $— — %
Interest-bearing deposits:
Demand295,772 10,909 3.69 %525,478 19,628 3.74 %
Money market924,371 36,208 3.92 %915,122 38,942 4.26 %
Savings2,945,069 121,669 4.13 %875,777 42,857 4.89 %
Time deposits1,690,619 74,617 4.41 %3,075,729 158,352 5.15 %
Total interest-bearing deposits5,855,831 243,403 4.16 %5,392,106 259,779 4.82 %
Total deposits$6,143,572 $243,403 3.96 %$5,663,902 $259,779 4.59 %
The ratio of average non-interest-bearing deposits to average total deposits for the years ended December 31, 2025 and 2024 was 4.7%, and 4.8%, respectively.
Borrowed Funds
Subordinated Debt
In 2016, we issued $17.0 million of Fixed Rate Subordinated Notes (“2016 Fixed Rate Notes”). The 2016 Fixed Rate Notes are unsecured, mature on December 30, 2026 and pay interest of 7.0% semi-annually, in arrears. We redeemed the 2016 Fixed Rate Notes at par in 2025.
In 2016, we issued $7.0 million of Fixed to Floating Rate Subordinated Notes (“2016 Fixed to Floating Notes”). The 2016 Fixed to Floating Notes are unsecured, mature on December 30, 2026, and paid an initial interest of 6.5% semi-annually, in arrears. Beginning on December 30, 2021, the 2016 Fixed to Floating Notes interest rate reset quarterly to an interest rate per annum equal to the three-month LIBOR plus 469.5 basis points, paid quarterly in arrears. If the three-month LIBOR was less than zero, the three-month LIBOR was deemed to be zero. Due to the cessation of LIBOR on June 30, 2023, the 2016 Fixed to Floating Notes interest rate resets quarterly to an interest rate per annum equal to the three-month SOFR plus 495.7 basis points, paid quarterly in arrears. If the three-month SOFR is less than zero, the three-month SOFR shall be deemed to be zero. The SOFR-based interest rate became effective on October 1, 2023. We redeemed the 2016 Fixed to Floating Notes at par in 2025.
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In 2019, we issued $25.0 million of Fixed to Floating Rate Subordinated Notes (“2019 Notes”). The 2019 Notes are unsecured, mature on December 1, 2029, and paid an initial interest of 5.75% semi-annually, in arrears. Beginning on December 1, 2024, the 2019 Notes interest rate resets quarterly to an interest rate per annum equal to the three-month SOFR plus 439 basis points, paid quarterly in arrears. If the three-month SOFR is less than zero, the three-month SOFR shall be deemed to be zero. We may redeem the 2019 Notes at par.
In 2021, we issued $125.0 million of Fixed to Floating Rate Subordinated Notes (“2021 Notes”). The 2021 Notes are unsecured, mature on January 1, 2032 and pay an initial interest of 4.0% semi-annually through January 1, 2027, in arrears. Beginning on January 1, 2027, through the earlier of maturity date or the early redemption date, the interest rate will adjust quarterly equal to the three-month term SOFR plus 289 basis points, paid quarterly in arrears. The 2021 Notes are non-callable for the first five years; we have the option to redeem the 2021 Notes at par value, after five years from the date of issuance. The 2021 Notes are classified as Green Bonds in alignment with the International Capital Markets Association’s Green Bond Principles (2021).
We also have $3.0 million of other subordinated debt that has a 30-year term (matures on April 7, 2033), has no principal amortization and is guaranteed by us. As of March 31, 2026, December 31, 2025 and December 31, 2024, the other subordinated debt paid interest at the rate of SOFR plus 3.3%, which resets on a quarterly basis.
Our subordinated debt requires us to comply with specific covenants related to capitalization adequacy, regulatory enforcement actions, non-performing asset metrics, changes in key executive positions, and material changes in ownership. Additionally, in the event of default, our subordinated debt contains certain restrictions and limitations on dividend payments and our ability to repurchase our common stock. We were in compliance with all relevant covenants as of March 31, 2026 and December 31, 2025.
The following table provides information on subordinated debt as of March 31, 2026, December 31, 2025 and December 31, 2024:
(dollars in thousands)March 31, 2026December 31, 2025December 31, 2024
2016 Fixed Rate Notes, 7.00%
$— $— $17,000 
2016 Fixed to Floating Notes, 9.56%
— — 7,000 
2019 Notes, due in 2029 (1)
25,000 25,000 25,000 
2021 Notes, due in 2032, 4.00%
125,000 125,000 125,000 
Other subordinated debt, due in 2033 (2)
3,000 3,000 3,000 
Less: debt issuance costs and discounts
(1,908)(1,997)(2,474)
Total subordinated debt
$151,092 $151,003 $174,526 
__________________
(1)Borrowings bore interest at an effective rate of 8.06%, 8.18% and 8.89% as of March 31, 2026, December 31, 2025, and December 31, 2024, respectively.
(2)Borrowings bore interest at an effective rate of 7.23%, 7.47% and 8.22% as of March 31, 2026, December 31, 2025, and December 31, 2024, respectively.
We use subordinated debt as a supplemental source of funding to support balance sheet growth, liquidity management, and funding diversification. We evaluate the use of wholesale funding sources based on cost, maturity structure, and overall liquidity needs. Increased reliance on borrowings may result in higher interest expense and could impact net interest margin, particularly in a rising interest rate environment. Management seeks to balance the use of wholesale funding with deposit growth and other liquidity sources to maintain an appropriate funding profile.
Other Borrowed Funds
On January 1, 2019, we entered into an Advances and Security Agreement with the FHLB of Atlanta (the “Advances and Security Agreement”), of which we are a member. Under the Advances and Security Agreement, borrowings from the FHLB must be secured with eligible collateral approved by the FHLB. As of March 31, 2026 and December 31, 2025, there was $5.8 million and $5.9 million, respectively, of stated potential borrowing capacity available based on $8.8 million of loans pledged as collateral under the Advances and Security Agreement. There
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were no borrowings outstanding under the Advances and Security Agreement as of March 31, 2026 or December 31, 2025.
As of December 31, 2024, there was $920.4 million of stated potential borrowing capacity available based on $960.0 million of loans and investment securities pledged as collateral under the Advances and Security Agreement. As of December 31, 2024, there was approximately $700.0 million of borrowings outstanding under the Advances and Security Agreement at a floating interest rate of 4.44%.
We may also borrow funds through the Federal Reserve Bank’s discount window. These borrowings were secured by qualifying loans and investment securities with a balance of $3.9 billion, $3.9 billion, and $2.5 billion as of March 31, 2026, December 31, 2025, and December 31, 2024, respectively. As of March 31, 2026, December 31, 2025, and December 31, 2024, we had approximately $3.5 billion, $3.5 billion, and $1.8 billion, respectively, in borrowing capacity available under these arrangement with no outstanding balance as of March 31, 2026, December 31, 2025, or December 31, 2024 .
We maintain unsecured Fed Funds facilities with three other financial institutions in the aggregate amount of $90.0 million. As of March 31, 2026, December 31, 2025, and December 31, 2024, there were no borrowings outstanding under these facilities. We periodically borrow on the Fed Funds facilities in order to test the borrowing availability.
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Liquidity and Capital Resources
Liquidity
Liquidity involves our ability to raise funds to support asset growth or reduce assets to meet deposit withdrawals and other payment obligations, to maintain reserve requirements and otherwise to operate the business on an ongoing basis and manage unexpected events. Our largest sources of liquidity include deposits, payments and maturities of outstanding loans, sales of loans, and maturities or sales of available-for-sale securities. We believe these sources will be sufficient to meet our liquidity needs over the next twelve months; however, our long-term liquidity position is dependent on our ability to sustain deposit growth and our ability to continue to source digital deposits as our balance sheet continues to grow. While scheduled loan payments and maturing available-for-sale securities are relatively predictable sources of liquidity, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition. We generally hold excess funds as reserve deposits with the Federal Reserve Bank. We use cash generated through online deposits, our largest funding source, business customer deposits, and wholesale funds, to offset the cash utilized in lending and investing activities. Our short-term interest-earning available-for-sale securities are used to provide liquidity for lending and other operational requirements. During the three months ended March 31, 2026 and 2025 and the years ended December 31, 2025 and 2024, our liquidity needs have primarily been met through strong deposit growth, and from loan principal paydowns and interest payments received. Management expects deposits to remain a primary source of liquidity, however, future deposit growth may be affected by changes in interest rates, competitive pressures, or shifts in customer preferences, which could increase our reliance on wholesale funding sources in the future.
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The following table illustrates, during the periods presented, the mix of our funding sources and the average assets in which those funds are invested. Average assets totaled $8.0 billion for the three months ended March 31, 2026, compared to $6.8 billion for the three months ended March 31, 2025 and $7.2 billion for the year ended December 31, 2025 compared to $6.6 billion for the year ended December 31, 2024.
Three Months EndedYear Ended
March 31,December 31,
(dollars in thousands)2026202520252024
Sources of funds:
Deposits:
Non-interest-bearing$372,965$239,776$287,741$271,796
Interest-bearing6,539,8705,440,8675,855,8315,392,106
Subordinated debt, net
151,034174,573162,597174,319
Other borrowings
—71,11930,92251,656
Other liabilities119,50684,76295,89068,587
Stockholders’ equity839,162746,169769,876690,283
Total sources of funds$8,022,537$6,757,266$7,202,857$6,648,747
Uses of funds:
Total loans
$5,615,729$4,370,039$4,920,518$4,023,418
ACL
(52,686)(40,461)(46,572)(54,975)
Total investment securities
1,291,4281,451,2191,361,3171,405,086
Interest-bearing deposits with banks
836,173674,233662,9051,020,070
Other earning assets
55,01758,61057,25254,861
Other assets
276,876243,626247,437200,287
Total uses of funds$8,022,537$6,757,266$7,202,857$6,648,747
Average non-interest-bearing deposits to average deposits5.40 %4.22 %4.68 %4.80 %
Average loans to average deposits81.24 %76.93 %80.09 %71.04 %
Our largest source of funds is deposits, and our largest use of funds is loans. Our average deposits were $6.9 billion, an increase of 21.7%, for the three months ended March 31, 2026 compared with the three months ended March 31, 2025. Our average loans were $5.6 billion, an increase of 28.5% for the three months ended March 31, 2026 compared with the three months ended March 31, 2025. Our average deposits were $6.1 billion or an increase of 8.5% for the year ended December 31, 2025 compared with the year ended December 31, 2024. Our average loans were $4.9 billion, or an increase of 22.3% for the year ended December 31, 2025 compared with the year ended December 31, 2024. The increase in loans was larger compared to the increase in deposits which was funded primarily with the use of cash balances of interest-bearing deposits with banks. We hold excess funds in cash with the Federal Reserve Bank until the funds are needed to fund loan growth.
We had a maximum borrowing capacity of $5.8 million and $5.9 million as of March 31, 2026 and December 31, 2025, respectively, through the Advances and Securities Agreement, with no borrowings outstanding as of either date. To borrow through the Advances and Securities Agreement, we are required to pledge sufficient qualifying collateral to the FHLB. As of both March 31, 2026 and December 31, 2025, we pledged eligible 1-4 family first mortgages with a book value of $5.8 million and eligible home equity loans with a book value of $3.0 million to secure borrowings from the FHLB. The total collateral value assigned by the FHLB for these pledged investments and loans was $5.8 million and $5.9 million as of March 31, 2026 and December 31, 2025, respectively.
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We also have a maximum borrowing capacity of $3.5 billion through the Federal Reserve Bank’s discount window, and no borrowings outstanding as of both March 31, 2026 and December 31, 2025. To borrow under the Federal Reserve Bank’s discount window, we are required to pledge sufficient collateral consisting of qualifying loans and investment securities to the Federal Reserve Bank. As of March 31, 2026, we pledged CRE loans with a book value of $1.7 billion, commercial and industrial loans with a book value of $1.9 billion, construction loans with a book value of $182.9 million, and multi-family loans with a book value of $88.5 million to facilitate future transactions. As of December 31, 2025, we pledged CRE loans with a book value of $1.7 billion, commercial and industrial loans with a book value of $2.0 billion, construction loans with a book value of $184.0 million, and multi-family loans with a book value of $75.8 million to facilitate future transactions. The total collateral value assigned by the Federal Reserve Bank for these pledged loans was $3.5 billion as of both March 31, 2026 and December 31, 2025.
Our Fed Funds facilities with three other financial institutions have $90.0 million borrowing capacity as of both March 31, 2026 and December 31, 2025, and there were no borrowings outstanding under these facilities. Borrowing under these facilities are not secured by collateral.
Additionally, we may sell investment securities available-for-sale from our portfolio as a source of liquidity, if necessary. As of March 31, 2026 and December 31, 2025, we had investment securities available-for-sale with a fair value of $1.2 billion and $1.3 billion, respectively. Of these balances there are investment securities maturing within the next twelve months with a fair value of $519.6 million and $521.6 million as of March 31, 2026 and December 31, 2025, respectively. As of March 31, 2026, December 31, 2025 and December 31, 2024, a large portion of our portfolio was invested in U.S. Treasury securities. Our securities portfolio had a weighted average life of 3.3 years and 2.5 years as of March 31, 2026 and December 31, 2025, respectively.
As of March 31, 2026 and December 31, 2025, we had outstanding $1.1 billion and $787.0 million, respectively, in commitments to extend credit and $7.2 million and $20.2 million, respectively, in commitments associated with outstanding standby letters of credit. Since commitments associated with letters of credit and commitments to extend credit may expire unused, the total outstanding may not necessarily reflect the actual future cash funding requirements. A significant portion of our outstanding commitments could be drawn upon in periods of economic stress, which could require us to obtain additional funding from deposits or wholesale funding sources.
As of March 31, 2026 and December 31, 2025, we had no identified capital expenditure commitments that we currently expect to have a material impact on liquidity; however, future loan growth, changes in funding costs, or adverse economic conditions could increase our cash requirements.
Off-balance Sheet Arrangements
In the normal course of business, we will enter into various transactions, which, in accordance with GAAP, are not included in our Consolidated Balance Sheets. We enter into these transactions to meet the financing needs of our customers. These transactions include commitments to extend credit and standby commercial letters of credit, which involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized in the Consolidated Balance Sheets.
Commitments associated with letters of credit and commitments to extend credit may expire unused, therefore, the amounts shown do not necessarily reflect the actual future cash funding requirements. A summary of financial
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instruments with off-balance sheet credit risk as of March 31, 2026, December 31, 2025 and December 31, 2024 are as follows:
(in thousands)March 31, 2026December 31, 2025December 31, 2024
Commercial real estate development and construction$221,707 $179,439 $155,701 
Residential real estate development and construction— 682 2,380 
Lines of credit, primarily business lines863,360 606,921 569,143 
Standby letters of credit7,179 20,195 29,956 
Total commitments to extend credit and available lines of credit$1,092,246 $807,237 $757,180 
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being fully drawn upon, the total commitment amounts disclosed above do not necessarily represent future cash requirements. We evaluate each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if considered necessary by management, upon extension of credit, is based on management’s credit evaluation of the customer.
Standby letters of credit are conditional commitments issued by us to guarantee the performance of a customer to a third-party. In the event of nonperformance by the customer, we have rights to the underlying collateral, which can include CRE, physical plant and property, inventory, receivables, cash and marketable securities. The credit risk to us in issuing letters of credit is essentially the same as that involved in extending loan facilities to our customers.
Capital Resources
Capital management consists of providing equity to support our current and future operations. The federal bank regulators view capital levels as important indicators of an institution’s financial soundness. As a general matter, FDIC-insured depository institutions and their holding companies are required to maintain minimum qualifying regulatory capital relative to the amount and types of assets they hold. As a bank holding company and an FDIC-insured state non-member bank, the Company and the Bank (respectively) are subject to regulatory capital requirements.
Banks and bank holding companies are subject to various regulatory capital requirements administered by state and federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about qualifying capital components, risk weighting (where applicable) and other factors. Management believes that current capital levels, plus the proceeds from this offering are sufficient to support anticipated growth, absorb potential losses, and comply with regulatory requirements. Future capital needs will depend on earnings performance, asset growth, credit quality trends, and regulatory developments.
In 2019, the federal banking agencies jointly issued a final rule to provide a simple measure of capital adequacy, the CBLR framework, for qualifying community banking organizations, consistent with Section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. The CBLR framework is optional and is available to depository institutions and depository institution holding companies that have less than $10 billion in average total consolidated assets and meet other qualifying criteria.
The CBLR framework removes the requirement for qualifying community banking organizations to calculate and report risk-based capital, instead requiring only that qualifying community banking organizations calculate and report a Tier 1 leverage ratio. Qualifying community banking organizations that elect to use the CBLR framework and that maintain a leverage ratio of greater than 9% (or 8% following July 1, 2026, as described below) will be considered to have satisfied the generally applicable risk based and leverage capital requirements in the agencies' capital rules (generally applicable rule) and, if applicable, will be considered to have met the capital ratio
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requirements to be considered “well capitalized” for purposes of the applicable “prompt corrective action” rules under the FDI Act. The CBLR rules allow for a two-quarter grace period (or four-quarter grace period following July 1, 2026, as described below) to correct a ratio that falls below the required amount, provided that the bank or bank holding company maintains a leverage ratio of greater than 8% (or 7% following July 1, 2026). As of March 31, 2026, the Company's leverage ratio was below the 9% threshold and as a result, entered into the first quarter of the CBLR grace period. The Bank’s leverage ratio remains above the 9% threshold as of March 31, 2026.
In April 2026, the federal banking agencies jointly finalized changes to the CBLR framework that will, effective July 1, 2026, lower the minimum Tier 1 leverage ratio requirement for qualifying community banking organizations from greater than 9% to greater than 8%, and revise the “grace period” for a bank that elects to use the CBLR framework but temporarily fails to meet all of the qualifying criteria, including the leverage ratio requirement, to provide that the community bank will have a four-quarter grace period (up from the two-quarter grace period under the CBLR rules prior to such amendments) to return to compliance, provided the community bank maintains a leverage ratio greater than 7% (down from a 8% grace-period requirement under the CBLR rules prior to such amendments).
Under the current CBLR rules, a qualifying community banking organization can opt out of the CBLR framework and revert back to the risk-based framework without restriction. As of March 31, 2026 and December 31, 2025, each of the Company and Bank was a qualifying community banking organization as defined by applicable regulations of the federal banking agencies and elected to measure capital adequacy under the CBLR framework. Management regularly evaluates whether continued use of the CBLR framework remains appropriate based on asset growth, balance sheet composition, and strategic objectives.
Total stockholders’ equity increased to $831.2 million as of March 31, 2026, compared to $822.4 million as of December 31, 2025, and $722.0 million as of December 31, 2024, an increase of $8.8 million and $100.5 million, or 1.1% and 13.9%, respectively. The increase from December 31, 2025 to March 31, 2026 was primarily due to net comprehensive income for the quarter, and to a lesser extent stock-based compensation. The increase from December 31, 2024 to December 31, 2025 was primarily due to net comprehensive income for the year, and to a lesser extent stock-based compensation.
The following table presents as of March 31, 2026, December 31, 2025 and December 31, 2024, the Company’s and the Bank’s actual and required capital amounts and leverage ratios. The table also includes the actual amounts and risk-weighted ratios which we are opting to disclose as of March 31, 2026, December 31, 2025 and December 31, 2024:
ActualTo Be Well Capitalized Under Prompt Corrective Action Provisions
(CBLR Framework)
(dollars in thousands)AmountRatioAmountRatio
As of March 31, 2026:
Required under CBLR framework:
Tier 1 leverage ratio:
Company$702,893 8.92 %$709,386 9.00 %
Bank$805,006 10.19 %$711,015 9.00 %
Optional under CBLR framework:
Total capital to risk-weighted assets ratio:
Company$899,369 14.68 %
N/A
N/A
Bank$860,274 14.01 %N/AN/A
Tier 1 capital to risk-weighted assets ratio:
Company$702,893 11.47 %N/AN/A
Bank$805,006 13.11 %N/AN/A
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ActualTo Be Well Capitalized Under Prompt Corrective Action Provisions
(CBLR Framework)
(dollars in thousands)AmountRatioAmountRatio
Common Equity Tier 1 to risk weighted-assets ratio:
Company$702,893 11.47 %N/AN/A
Bank$805,006 13.11 %N/AN/A
As of December 31, 2025:
Required under CBLR framework:
Tier 1 leverage ratio:
Company$748,650 9.79 %$688,367 9.00 %
Bank$848,960 11.11 %$687,907 9.00 %
Optional under CBLR framework:
Total capital to risk-weighted assets ratio:
Company$934,965 15.89 %N/AN/A
Bank$894,305 15.14 %N/AN/A
Tier 1 capital to risk-weighted assets ratio:
Company$748,650 12.72 %N/AN/A
Bank$848,960 14.37 %N/AN/A
Common Equity Tier 1 to risk weighted-assets ratio:
Company$748,650 12.72 %N/AN/A
Bank$848,960 14.37 %N/AN/A
As of December 31, 2024:
Required under CBLR framework:
Tier 1 leverage ratio:
Company$706,501 10.56 %$602,390 9.00 %
Bank$796,830 11.92 %$601,511 9.00 %
Optional under CBLR framework:
Total capital to risk-weighted assets ratio:
Company$879,305 17.52 %N/AN/A
Bank$820,217 16.38 %N/AN/A
Tier 1 capital to risk-weighted assets ratio:
Company$706,501 14.08 %N/AN/A
Bank$796,830 15.91 %N/AN/A
Common Equity Tier 1 to risk weighted-assets ratio:
Company$706,501 14.08 %N/AN/A
Bank$796,830 15.91 %N/AN/A
The Company’s and the Bank’s regulatory capital ratios declined by approximately 90-125 basis points, depending on the ratio, from December 31, 2025 to March 31, 2026. Approximately 20-35 basis points of the
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decline was due to relative changes in capital and asset levels in connection with our business operations. The remaining approximately 70-90 basis points of the decline was due to our decision to not reduce the tax carry-forward deduction in regulatory capital by the amount of a deferred credit liability established in connection with the solar servicing business acquisition completed during the third quarter of 2025. We made this decision in April 2026 based on a revised interpretation of the regulatory capital instructions subsequent to the completion of the audit of our consolidated financial statements for the period ended December 31, 2025, and the change was applied to our March 31, 2026 regulatory reporting and will be applied on a prospective basis. If we had applied this interpretation as of December 31, 2025, our Tier 1 leverage ratio, Total capital to risk-weighted assets ratio, Tier 1 capital to risk-weighted assets ratio and Common Equity Tier 1 to risk-weighted asset ratio as of such date would have been 9.08%, 14.97%, 11.80%, and 11.80% for the Company, and 10.40%, 14.22%, 13.45% and 13.45% for Forbright Bank, respectively. You should consider the capital ratios that reflect the above interpretation before making an investment decision with respect to the shares of our Class A common stock offered hereby.
Interest Rate Sensitivity and Market Risk
Interest Rate Sensitivity
As a financial institution, the primary component of our market risk is interest rate volatility. Fluctuations in interest rates will ultimately impact both the level of income and expense recorded on our assets and liabilities, and the market value of assets and liabilities. Interest rate risk is the potential of economic losses due to future interest rate changes. These economic losses can be reflected as a loss of future net interest income and/or a loss of current fair market values. Our objective in managing interest rate risk is to maintain a balance between optimizing net interest income and limiting volatility in earnings and capital across a range of interest rate environments. We seek to manage interest rate risk in a manner consistent with our overall risk appetite, liquidity needs, and capital objectives.
We manage our exposure to interest rates by structuring the balance sheet in the ordinary course of business. Though we have not historically entered into instruments such as leveraged derivatives, interest rate swaps, financial options, financial future contracts or forward delivery contracts for the purpose of reducing interest rate risk, we may enter into such instruments in the future. Based upon the nature of our operations, we are not subject to foreign exchange or commodity price risk. We do not own any trading assets.
While the Company and Bank boards of directors are ultimately responsible for ensuring interest rate risk is managed in a safe and sound manner, and for monitoring the Company’s financial position and performance, the Company and Bank boards of directors have delegated oversight of interest rate risk to their respective Risk Committees. The day-to-day management of interest rate risk has been delegated to the Bank’s Management Asset Liability Committee, which is composed of senior management and operates under policies approved by the Company and Bank boards of directors. The Management Asset Liability Committee meets regularly to review interest rate risk metrics, balance sheet composition, model results and compliance with internal risk limits. In determining appropriate interest rate risk positions, the Management Asset Liability Committee considers, among other factors:
•Current and projected interest rate environments
•Loan and deposit growth assumptions
•Deposit pricing behavior and competitive dynamics
•Prepayment speeds and loan repricing characteristics
•Liquidity and capital levels
•Stress and sensitivity analysis results
The Management Asset Liability Committee formulates strategies based on appropriate levels of interest rate risk which are primarily measured based on measuring the impact of changes in interest rates on net interest income and Economic Value of Equity.
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At least quarterly, we measure our interest rate risk position using net interest income and Economic Value of Equity sensitivities. Net interest income sensitivity is based on an earnings simulation that compares net interest income under non-baseline interest rate scenarios to the baseline net interest income earnings simulation and is measured as a percentage variance to baseline net interest income. Economic Value of Equity is a net present value (“economic value”) simulation that compares the economic value of assets and liabilities—economic value of equity results by subtracting economic value of liabilities from economic value of assets—under various non-baseline interest rate scenarios to the baseline Economic Value of Equity and is measured as a percentage variance to baseline Economic Value of Equity. Net interest income sensitivity is generally considered a short-term measure of interest rate risk as it is based on earnings sensitivity over a defined period of time whereas Economic Value of Equity is a long-term measure of interest rate risk as it is a net present value which considers the present value of all future cash flows on assets and liabilities through their lives.
The Management Asset Liability Committee manages interest rate risk in accordance with the Interest Rate Risk Policy which is a board-approved policy that is reviewed at least annually. The Interest Rate Risk Policy establishes thresholds for managing and reporting interest rate risk, including limits for net interest income and Economic Value of Equity sensitivity for interest rate changes of different magnitude, direction, or speed.
Modeling of net interest income and Economic Value of Equity uses both actual instrument-level data as well as assumptions. These assumptions include deposit decays, deposit betas, deposit floors, prepayment speeds, new volume pricing, and discount rates. These assumptions are based on historical observations, relevant third-party data, and management judgment. Most assumptions vary by interest rate scenario based on historical observations, relevant third-party data, and management judgment. Given the use of assumptions and management judgment, the net interest income and Economic Value of Equity models and processes are subject to independent review by both internal and external parties.
The Interest Rate Risk Policy requires net interest income simulations to be conducted using both a static balance sheet and a strategy balance sheet. Under a static balance sheet, balance sheet categories are kept flat across the horizon except for cash and retained earnings which are dynamic based on cash flows and earnings in the scenario. Under a strategy balance sheet, management projects dynamic balances based on its forecasted path of the balance sheet which may involve some balance sheet categories increasing and some categories decreasing. The net interest income sensitivity table below uses a static balance sheet. Interest rates in the baseline are kept constant with their values at the balance sheet date and for the non-baseline scenarios, all interest rates are shocked immediately up or down by the amounts show in the table. Resulting twelve-month net interest income in each of the shock scenarios is then compared to the baseline twelve-month net interest income to establish net interest income sensitivity. Market interest rates do not go below zero in any of the shocks.
For Economic Value of Equity simulations, existing assets and liabilities run off over their modeled lives without inclusion of any new volume. The cash flows on assets and liabilities are discounted to present value to generate net present values of cash flows from assets and liabilities for the baseline scenario. Interest rates are then shocked up and down according to the Economic Value of Equity sensitivity table below and cash flows on assets and liabilities are discounted to present value to generate net present value of cash flows from assets and liabilities for each of the shock scenarios. The resulting Economic Value of Equity in each shock scenario is then compared to the baseline Economic Value of Equity to establish sensitivities.
The following table summarizes the simulated change in net interest income over a 12-month horizon as of December 31, 2025:
Change in interest rates: + 200bp + 100bp - 100bp - 200bp
March 31, 20267 %4 %(3)%(2)%
December 31, 20258 %4 %(4)%(9)%
December 31, 202413 %6 %(7)%(13)%
The table above indicates for the periods presented that our static balance sheet net interest income is asset-sensitive which means that we benefit from rising rates as assets reprice faster than liabilities. This is primarily due to the variable rate nature of the loan portfolio and a relatively short investment portfolio duration as well as the
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impact of funding from non-interest-bearing sources and deposit betas that do not move to the same degree as market rates. Actual results will differ from the model’s simulated results due to timing, magnitude and frequency of interest rate changes as well as changes in market conditions and the application and timing of various strategies. We were less asset-sensitive as of March 31, 2026, compared to December 31, 2025, given increased duration in the investment portfolio, a more variable rate funding mix, and the impact of contractual loan floors. We were less asset-sensitive as of December 31, 2025, compared to December 31, 2024, which is attributable to more duration in the investment securities portfolio and a more variable rate funding mix.
The following table summarizes the simulated change in Economic Value of Equity over a 12-month horizon as of December 31, 2025:
Change in interest rates: + 200bp + 100bp - 100bp - 200bp
March 31, 2026(3)%(1)%(1)%(1)%
December 31, 2025(2)%(1)%(1)%(1)%
December 31, 20241 %1 %(1)%(2)%
The table indicates that our Economic Value of Equity for the periods presented is not materially impacted by changes in interest rates, which is primarily due to the short and matched duration of our assets and liabilities. Economic Value of Equity for 2024 is computed at the Bank level, while 2025 and March 31, 2026 are computed at the Company level.
Qualitative and Quantitative Disclosures About Market Risk
As discussed above, the primary component of our market risk is interest rate volatility and inflationary pressures. We do not have material exposure to foreign currency exchange risk, commodity price risk, or equity price risk. For information regarding the market risk of the Company’s financial instruments, see “—Interest Rate Sensitivity and Market Risk.”
Controls and Procedures
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP. We are currently in the process of reviewing, documenting, and testing our internal control over financial reporting.
We have not performed an evaluation of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, nor have we engaged an independent registered public accounting firm to perform an audit of our internal control over financial reporting as of any balance sheet date or for any period reported in our financial statements. Our management is not presently required to perform an annual assessment of the effectiveness of our internal control over financial reporting. This requirement will first apply to our Annual Report on Form 10-K for the year ending December 31, 2027. For as long as we are an emerging growth company, our independent registered public accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting. When we lose our status as an emerging growth company, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting.
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BUSINESS
Forbright operates at the intersection of two powerful, structural forces reshaping the U.S. banking sector: the rapidly evolving needs of the $10 trillion national middle market and the broadly accelerating shift toward digital‑first banking. Together, these trends have created a distinctive opportunity for the establishment and growth of a category-defining bank of the future, combining modern technology, differentiated lending and deposit products, and scaled fee-based businesses to serve dynamic middle-market companies and consumers.
Forbright offers a modern financial services platform spanning nationwide middle-market lending, digital consumer banking, strategic advisory and asset management services. We trace our history back to Congressional Bank, established in 2003, but our period of growth and modernization began in 2020 when John Delaney returned from public service to the private sector to lead a $369 million capital infusion in 2021 as well as the reimagining and rebranding of the Company to support our new growth strategy. A key to our success in building Forbright has been management’s differentiated ability to leverage its experience and relationships to attract and retain world-class talent aligned with our mission.
We believe our business model represents a significant evolution of the traditional commercial banking paradigm, which is often largely limited by geographic footprint and relies on non-interest-bearing deposit funding that has come under structural pressure as depositors have increasingly sought yield-bearing alternatives in the recent high interest-rate environment. We function as a precision-guided platform that is designed to deliver substantial value to customers across both the asset and liability sides of our balance sheet, while maximizing returns for our stockholders. From December 31, 2020 to December 31, 2025, consolidated assets have grown from $1.9 billion to $7.9 billion and net income has grown from $12.2 million to $87.9 million. As of March 31, 2026, consolidated assets were $8.2 billion and for the first quarter 2026 net income was $11.6 million.
We believe the industry backdrop and trends impacting banking are favorable for our purpose-built business model.
The middle market represents approximately one-third of private sector GDP and employs approximately 48 million people, according to NCMM. Despite its scale, the sector is inherently fragmented within an increasingly nationalized economy. It encompasses nearly 200,000 companies, approximately 99.9% of which employ fewer than 500 employees, according to NCMM and research from the SBA as of 2025. In 2025, 85% of middle-market companies reported year-over-year growth, according to NCMM. Across the country, no single industry represents more than 20% of the total middle market, further highlighting both the national and fragmented nature of this sector of the U.S. economy, according to NCMM. Consequently, traditional community and regional banks, long anchored to their home geographies and relationship‑driven lending models, are increasingly unable to match the scale, speed and sector specialization demanded by middle-market borrowers. This has led to a steady migration of lending volume toward nationally-scaled lenders and alternative capital providers that now capture 70% of the leveraged loan market, according to FWIA.
Concurrently, digital banking has profoundly reshaped the U.S. banking landscape by shifting consumer behavior, enhancing technological integration and reducing friction in moving deposits between banks. Deposits held by direct banks increased from less than 1% in 2000 to approximately 10% as of December 31, 2025, according to the FFIEC and the Federal Reserve. Despite this, as of October 2025, approximately 76% of American consumers prefer managing their bank accounts digitally and 54% opt for mobile banking as their primary choice, according to the ABA. Consequently, traditional banks have been compelled to adopt deposit strategies that can affect their overall cost of deposits and competitive positioning. We expect the increasing impact of new technologies will reduce the friction of money movement, allowing consumers to seek higher deposit yields. This dynamic could exert pressure on non-interest bearing and other low-cost deposits, and threaten legacy bank models historically reliant upon this form of funding.
To address these trends, we have intentionally designed our strategy and built our platform to create a virtuous cycle that we expect will lead to strong growth and returns.
This cycle begins with attracting and retaining a loyal, digitally-engaged consumer base by offering a competitive value proposition for deposits and related services. We launched our digital deposit platform in May
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2024, and as of March 31, 2026, we had $3.9 billion of digital deposits consisting of both high-yield savings balances and digital time deposits. Digital deposit capabilities provide us access to vast funding markets, eliminate geographic constraints and fuel our middle-market lending growth with minimal additional overhead. In turn, our middle-market lending strategy generates strong, risk‑adjusted returns and drives meaningful fee income, which enables us to offer competitive deposit rates.
For context, we believe the amount of deposits gathered by our digital deposit platform from its launch in May 2024 through March 31, 2026, would be equivalent to the amount of deposits that approximately 200 physical bank branches, employing approximately 1,200 full-time employees, would be projected to gather during the first 24 months following opening, based on analysis conducted by the Federal Reserve and the ABA Banking Journal, which found that, on average, a newly opened retail branch holds approximately $20 million in deposits after 24 months and employs six full-time employees. Looking forward, we expect our digital deposit platform will provide us with significant flexibility to raise deposits on an as-needed basis to support future growth.
The nimble and precise “as-needed” nature of the funding generated from our deposits, of which 86.4% were FDIC‑insured as of March 31, 2026, reflects a platform intentionally built to scale with the needs of our expertly managed suite of middle-market lending go‑to‑market strategies. Our entrenched lending relationships also enable us to source loans for other financial institutions, including through a proprietary network of over 400 community banks via our Alliance Partners business, and to provide credit and asset management services to businesses and customers, generating highly attractive recurring fee-income.
Our broader financial services platform is underpinned by modern banking systems that leverage technology to provide a robust, scalable and API-driven architecture that aims to support efficient operations and a differentiated customer experience. Significant back-office automation drives efficiency and operating leverage, enabling a lower marginal cost-to-serve of approximately 15 basis points of digital deposits for fiscal year 2025. Unlike a traditional commercial bank, we are not burdened by legacy technology systems or the operating expense and geographic constraints typically associated with a branch-based deposit and lending model. We also believe we distinguish ourselves from emerging "neobanks," which are often characterized by high customer acquisition costs and uncertain paths to sustainable profitability.
We believe we have synthesized the inherent funding advantages of a regulated bank with the innovation, agility, and technological capabilities commonly found in fintech companies. This fusion is further strengthened by a disciplined risk management culture, active balance sheet optimization and integrated fee-based businesses. The result is a digitally-native, high-growth institution delivering attractive risk-adjusted returns that we believe is uniquely positioned to lead the next generation of banking.
Leadership and History
We are led by our founder, Chairman and Chief Executive Officer, John Delaney. Mr. Delaney possesses a distinguished track record, founding, leading and ultimately selling two publicly traded financial services companies. In 1993, Mr. Delaney founded and later took public HealthCare Financial Partners, Inc., which provided loans to small- to mid-sized healthcare service companies. In 2000, he founded and later took public CapitalSource Inc., which provided loans to a wide range of middle-market businesses. In the aggregate, Mr. Delaney’s companies created thousands of jobs and made over $50 billion of loans to over 5,000 predominantly middle-market companies. In addition, Mr. Delaney represented the state of Maryland in the United States House of Representatives from 2013 until 2019. The combination of Mr. Delaney’s financial acumen, historical success in the industry and leadership capabilities lends considerable experience to identifying differentiated market opportunities and attracting, hiring and retaining a team that can successfully execute against an evolving opportunity set.
Mr. Delaney’s involvement with Forbright began with an investment in 2011 in Congressional, and following his service in the U.S. House of Representatives, Mr. Delaney returned from public service to the private sector in 2020, where he leveraged his decades of financial services experience and leadership capabilities to assemble and lead a talented and like-minded team to drive the Bank’s strategic direction and growth, beginning his service as Executive Chairman of the Bank in 2020 (then still under the Congressional banner). As of December 31, 2020, Congressional Bank had $1.9 billion in consolidated assets.
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In 2021, Mr. Delaney led a $369 million infusion of equity capital from a consortium of prominent institutional investors, including Centerbridge Partners, Gallatin Point Capital and Bayview Asset Management, fueling significant growth in products and services as well as continuous platform efficiency enhancements. This ultimately provided the foundation for our strategic rebranding as Forbright, Inc. in 2022, a pivotal moment in the Company’s history and growth led by Mr. Delaney as Chairman and Chief Executive Officer.
Strategic Pillars
Our strategic framework is built upon three interconnected pillars, each designed to provide a distinct competitive advantage and drive sustainable growth. These pillars synthesize the best attributes of traditional banking, fintech, and sophisticated asset management.
•Balance Sheet Strength. As a regulated, FDIC-insured institution, Forbright Bank benefits from the inherent trust, robust regulatory framework and strong capital and liquidity position that are hallmarks of a traditional bank. This foundation provides stability, enabling us to attract and retain deposits and confidently deploy capital in our lending activities. From December 31, 2020 to March 31, 2026, we have grown our deposits from $1.4 billion to $7.1 billion. Regulatory oversight ensures sound practices and protects our depositors, reinforcing confidence in our financial stability.
•Fintech Culture of Innovation. The foundation of our tech-forward approach is a fully cloud-native digital financial services platform. This architecture improves our teams’ ability to innovate faster, acquire new customers more efficiently and automate operations to minimize costs. This includes an integration layer that enables plug and play of advanced solutions and data capabilities that provide visibility into the business. This drives effective actions (for example, trigger-based customer communications and integrated fraud‑prevention tools), and a third generation core with real-time processing. For our customers, this provides onboarding with rapid decisioning, personalization of services and ultimately enables us to respond quickly to evolving market demands and customer needs. These capabilities enabled us to scale to $3.9 billion of digital deposits and approximately 95,000 accounts by March 31, 2026, after launching our proprietary digital deposit platform in May 2024.
•Conservative Credit Discipline and Systematic Sourcing Strategies. Our lending, credit and portfolio management approach encompasses specialized underwriting expertise and focused middle-market origination channels, maintaining rigorous credit integrity and an execution-oriented mindset typically found in leading alternative asset managers. We believe this discipline creates ample opportunities, delivers a superior borrower experience and a meticulous evaluation of credit risk, proactive portfolio construction and active management of our lending assets, leading to superior risk-adjusted returns and robust asset quality. Our commercial loan yield and net-charge off ratio were 8.8% and 0.04% respectively for fiscal year 2025 and 7.4% and 0.08%, respectively, for first quarter 2026.
Market Opportunity
The $10 Trillion Middle Market
The middle market represents one of the largest, fastest‑growing, and most economically consequential segments of the American economy, with compelling long-term fundamentals. Encompassing nearly 200,000 businesses across industries, ownership structures, and geographies, the middle market collectively generates approximately one-third of private sector GDP.
Despite its importance, middle-market companies remain challenging to serve efficiently and at scale. Middle-market company financing needs are often bespoke, transaction structures vary widely, and company information is frequently non‑standardized. In a national economy undergoing rapid technological transformation, forecasting performance and credit risk for middle-market companies has required increased end-market expertise and specialization. Unlike consumer or small‑business lending, this segment does not lend itself to standardized, volume‑driven sourcing strategies. As a result, efficient access to this highly attractive segment has long been constrained, despite the segment’s demonstrated resilience through market cycles.
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Industry dynamics have further widened this structural gap. Historically, regional banks have typically been limited by geography, legacy branch‑based business models, and generalist underwriting approaches that do not translate well to specialized middle-market credit. Non‑bank private lenders often possess sector expertise but rely on episodic fundraising and potentially higher‑cost capital. Large national-scale banks have sophistication and reach but tend to prioritize larger borrowers with capital markets and cross‑sell potential. Taken together, these structural challenges leave a substantial portion of the middle market underserved.
We deliberately built Forbright to overcome these inefficiencies and moats. Forbright operates nationally and organizes around industry-focused credit verticals, which enables us to gain sourcing advantages, underwriting precision, and enhanced pricing power. Our expertise‑driven origination model integrates targeted outreach, deep vertical networks, and disciplined credit evaluation rather than relying on geographic footprint. Our capabilities and approach create a scalable, repeatable method for accessing a large, resilient and structurally underpenetrated market.
Structural Shift Toward Digital‑First Banking
The U.S. deposit and transaction banking landscape is undergoing a fundamental transformation and there is a significant and durable runway for digital growth. For example, while 76% of consumers prefer digital banking, digital‑first platforms account for only 10% of total U.S. deposits.
bus01ba.jpg
Institutions operating with fragmented technology stacks and higher cost structures face increasing difficulty delivering the competitive rates, personalization, and rapid innovation modern customers expect. Conversely, digital banking models benefit from lower acquisition costs, higher customer retention, and reduced reliance on physical infrastructure. Given competitive funding rates, we also believe these digital banking funding models, including ours, to be largely insulated from emerging risks of tokenization or stablecoin disintermediation.
By eliminating the operational drag of a branch‑based system and building a proprietary digital deposit platform, we have reduced traditional barriers to scale, created a flexible product architecture, and positioned ourselves to dynamically respond to evolving customer preferences. This structural shift aligns directly with our strategic strengths, particularly as digital funding becomes an increasingly critical input to bank competitiveness.
Business Model
Our business model is intentionally designed to capitalize on the evolving needs of the $10 trillion national middle market and the accelerating shift towards digital banking, while delivering value to our depositors, borrowers and other stakeholders.
Over the last several years we have built the operational foundation to achieve the size and scale of a super-regional bank with national origination capabilities, sector‑specialized origination and credit teams, and a fully
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integrated digital platform. Our model centers on a virtuous cycle: a superior deposit value proposition to attract loyal, digitally-engaged customers whose deposits fund our scalable middle-market lending platform while generating valuable fee income that further enhances returns on capital.
We operate with a centralized approach to portfolio construction. Management actively allocates capital across middle-market strategies based on relative risk-adjusted returns, credit cycle positioning, and liquidity considerations. This dynamic capital management enables us to pursue what we believe to be the most attractive opportunity sets and moderate exposure if returns compress or risk increases.
Go-to-Market Approach: National Middle-Market Lending Strategy
Our go-to-market lending strategy is focused on expanding our market share in middle-market segments that have substantial addressable markets and strong growth profiles. Our deep sector knowledge and extensive relationships built over decades of financial services experience provide a distinct competitive advantage. We believe our purpose-built team is able to successfully identify, originate and manage high-quality credit opportunities, thereby building a robust and diversified portfolio that generates strong returns.
Our loan portfolio has grown approximately 260% from $1.6 billion as of December 31, 2020, to $5.8 billion as of March 31, 2026. During fiscal year 2025 and first quarter 2026, we originated $3.7 billion and $1.0 billion of new loan commitments, including new and upsized commitments.
The following chart on the left shows the growth in our loan portfolio from December 31, 2024 to March 31, 2026:
ps01da.jpg
We provide financial solutions that are national in scope and built around specialized frontline capabilities supported by centralized risk oversight. This structure enables consistent sector specialization at the point of origination while ensuring uniform credit standards and enterprise‑level portfolio discipline. Across our portfolio, we maintain a focus on shorter‑duration, floating‑rate assets with higher balance‑sheet velocity and meaningful fee income opportunities at both entry and exit. We currently operate the following go-to-market lending strategies:
Healthcare Finance
Our healthcare finance strategy provides working‑capital and real‑estate loans to skilled nursing, seniors housing and behavioral health facilities. We generate both lending returns through net interest income and significant fee revenue, including via FHA/HUD origination. The growth trajectory and stability of U.S. healthcare services, combined with providers’ perpetual capital needs, create a durable, through‑the-cycle lending opportunity. For fiscal year 2025 and first quarter 2026, we originated $1.0 billion and $274 million of loans in our healthcare finance loan portfolio, respectively, and this strategy represented approximately 31% of our loan portfolio for each period.
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Lender Finance
Our lender finance strategy serves financial services companies, providing bespoke senior‑secured, asset‑based loans to non‑bank lenders across a broad range of asset classes and industries. Our ability to underwrite across diverse collateral classes and structure complex structurally senior credit facilities differentiates the platform in an environment where many banks have narrowed focus and the importance of domain experience and risk management has increased. For fiscal year 2025 and first quarter 2026, we originated $746 million and $246 million of loans in our lender finance loan portfolio, and this strategy represented approximately 19% of our loan portfolio for each period.
Fund Finance
Our Fund Finance strategy provides customized asset-based lending products to credit funds and alternative asset managers backed by diversified loan portfolios and assets. The market is highly fragmented and requires deep expertise, presenting a strong opportunity for our well-positioned platform and capabilities. This strategy works in concert with, rather than positioning us as competitors to, private capital providers. In some instances, their products substitute for ours; in others, we collaborate to deliver comprehensive solutions that serve our customers’ evolving needs. For fiscal year 2025 and first quarter 2026, we originated $553 million and $315 million of loans in our fund finance loan portfolio, respectively, and this strategy represented approximately 14% of our loan portfolio for each period.
Real Estate Finance
Our national real estate finance lending strategy focuses on bank‑eligible first‑lien CRE bridge loans for acquisitions, recapitalizations, restructurings, and construction. Market dislocations and widespread de‑risking among credit providers have created uniquely attractive opportunities for disciplined lenders with controlled CRE exposure. For fiscal year 2025 and first quarter 2026, we originated $575 million and $81 million of loans in our real estate finance loan portfolio, respectively, and this strategy represented approximately 18% and 19% of our loan portfolio as of December 31, 2025 and March 31, 2026, respectively.
Corporate Finance
Our Corporate Finance strategy provides customized senior-secured, first‑lien credit solutions to strong, cash‑flowing middle-market companies, often in partnership with private equity sponsors. In addition to generating lending returns via net interest income, we also earn meaningful fee revenue by distributing loans via the BancAlliance network, enhancing capital efficiency while maintaining and enhancing borrower relevance. BancAlliance, in the ordinary course of business enters into a master participation agreement with each of its members to provide for the sale, administration and servicing of loans that members buy participations in from BancAlliance. The terms of the master participation agreement are customary for this type of arrangement and include terms relating to how the loans will be serviced, the purchase price of the participation, the fees paid to BancAlliance and how lender decisions with respect to the loans will be made. In addition, we provide first-lien financing for asset-secured energy projects with strong cash flows. For fiscal year 2025 and first quarter 2026, we originated $760 million and $131 million of loans in our corporate finance loan portfolio, respectively, and this strategy represented approximately 12% of our loan portfolio for each period.
As of December 31, 2025 and March 31, 2026, no go-to-market lending strategy represents more than 31% of the total loan portfolio.
Scalable Digital Deposit Platform
We have carefully evolved our funding model. Historically reliant on traditional community bank deposits, we expanded into institutional sweep deposits early in our growth phase for scalable liquidity to fund our lending activities. The liquidity stresses seen across the industry in early 2023 prompted a reassessment, leading to a deliberate reduction in wholesale sweep reliance and temporary use of higher‑cost time deposits to preserve liquidity.
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In May 2024, we launched our digital deposit platform, introducing a competitive high‑yield savings deposit product. The launch of our digital deposit platform has significantly reduced our reliance on other forms of wholesale funding as they have been replaced by stable and granular digital consumer deposits. More recently, we have also introduced a digital time deposit product, and have ambitions to continue to expand the product suite over time. We supplement our digital deposit platform with deposits from our legacy community bank markets in Maryland, Virginia and the District of Columbia, as well as deposits from our commercial lending customers and wholesale funds, though our shift to digital deposits has decreased our reliance on such deposits - our wholesale funding ratio has decreased from 71% of total assets in December 31, 2022 to 25% as of March 31, 2026.
The following charts show the growth in our deposits from December 31, 2024 to March 31, 2026 and highlight our deliberate shift in funding model:
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We believe that our digital deposit platform allows us to provide flexible, precise, and accessible funding solutions, which in turn leads to strong growth uninhibited by the mores of legacy deposit platforms. For context, we believe the amount of deposits gathered by our digital deposit platform from its launch in May 2024 through March 31, 2026, would be equivalent to the amount of deposits that approximately 200 physical bank branches, employing approximately 1,200 full-time employees, would be projected to gather during the first 24 months following opening, based on analysis conducted by the Federal Reserve and the ABA Banking Journal, which found that, on average, a newly opened retail branch holds approximately $20 million in deposits after 24 months and employs six full-time employees. Looking forward, we expect our digital deposit platform will provide us with significant flexibility to raise deposits on an as-needed basis to support future growth.
Our cloud-native, API-driven, and data-powered technology infrastructure is the foundation of our digital deposit platform and is built for where we believe the industry is heading. Our digital deposit platform has led to superior results in key benchmarks, including customer acquisition and onboarding performance, fraud detection, and customer experience. Using a combination of advanced real-time attribution with visibility into performance, simplified customer onboarding, trigger-based customer engagement, automated decisioning, and strong user experience capabilities we have achieved the following results:
•Convert more customers: We have automated application approval decision-making rates consistently above 80%. Further, approximately 55% of our digital applications reached approval during the quarterly period ended September 30, 2024, according to a study commissioned by us, which is 19 percentage points higher than similarly situated banks to use with digital deposit channels, with approval rates of 41% over the same time-period. Additionally, 81% of our approved digital deposit accounts are funded within seven days of account opening, as compared to only 44% for banks with similarly situated digital deposit channels to us, according to a study commissioned by us. As of March 31, 2025, 32% of deposit customers were under the age of 35 and for the three months ended March 31, 2026, the average balance per open CIF across all deposit customers was approximately $47,000 deposits per open CIF. The combination of our automated application approval decisioning and higher pull-through rates leads to lower customer acquisition costs to us, represented by 51 basis points of new deposits for fiscal year 2025 as compared to 72 basis points for banks with similarly situated lower brand awareness, top-tier rates and similar marketing channel mixes to us, according to a study commissioned by us.
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•Strong Fraud Prevention Capabilities: Our purpose-built fraud loss prevention solutions and operations have resulted in immaterial booked fraud losses, totaling less than $100,000 from platform launch through December 31, 2025 (less than 0.08 basis points on total transaction volume), and we believe this is well below industry targets for deposit products of 0.41 basis points on total transaction volume, according to a 2024 study we participated in as part of the MBCA.
•Deeper customer engagement and retention: For the year ended December 31, 2025, we had an NPS of 63 (+22 above the financial industry’s average NPS, according to Qualtrics), and as of March 31, 2026, we had an Apple App store rating of 4.8 stars. Additionally, within eight months following the launch of our digital deposit platform in May 2024, we achieved 112% growth in customer deposit balances, which was approximately three times the industry average of approximately 36% during such period, according to a study commissioned by us.
By focusing development on integration and data layers, we have significant visibility and control over our ecosystem with the flexibility to bring best-in-class partners to enhance our digital deposit platform. This allows us to manage fixed costs while retaining a high degree of control over the platform.
While we have experienced strong growth led by our digital deposit platform and related offerings, digital deposits are highly rate-sensitive, and elevated short-term interest rates have intensified deposit pricing competition. Further, customer deposits are subject to potentially dramatic fluctuations due to competitive pressures, interest rate changes, customer confidence, and other external factors. This could result in significant outflows within short periods or force significant pricing changes to retain or attract deposits. See “Risk Factors—Risks Related to Funding and Liquidity—We may not be able to develop and maintain a strong core deposit base or other low-cost funding sources.”
High‑Margin, Capital-Light Fee Businesses
Our fee‑based businesses are intentionally constructed to complement and enhance our core lending capabilities. These capital‑light businesses generate recurring revenue by monetizing our specialized underwriting, structuring, distribution and servicing expertise across the credit lifecycle. They leverage the same foundational assets as our lending strategies—sector expertise, centralized credit discipline, and scalable technology infrastructure.
Our fee-based businesses strategically cultivate proprietary partner networks, including BancAlliance, a broad network of U.S. based community banking partners that is managed by our Bank’s wholly-owned subsidiary Alliance Partners. This network provides us with a unique distribution channel and revenue diversification, enhancing our return on equity. We invest in the network by providing differentiated value-added services such as educational and training programs as well as peer-to-peer networking opportunities, resulting in deep, sticky relationships. Alliance Partners helps the community banks in BancAlliance meet their asset and return objectives by utilizing our full-service lending platform with a disciplined approach to originating, screening, underwriting, managing and servicing loans.
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The following charts show the growth in our non-interest income and core non-interest income composition from December 31, 2024 to March 31, 2026, and highlight our non-interest income and core non-interest income composition for fiscal year 2025:
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For first quarter 2026, our core non-interest income as a percentage of adjusted total revenue was 23.2%, an increase of approximately 630 basis points from fiscal year 2025. The following is a brief description of our fee-based businesses.
Alliance Partners – Distributed Credit Origination & Asset Management
Through Alliance Partners, we source, distribute, and advise on middle‑market loans on behalf of BancAlliance, which, on a combined basis, represents approximately $2 trillion in aggregate total assets as of December 31, 2025. We generate gain-on-sale and advisory fees by providing access to high‑quality credit opportunities that these institutions could not otherwise originate. The partnership enables us to use distributed balance‑sheet capacity to support larger commitments, creating a scaled, mutually beneficial credit ecosystem.
FHA/HUD Lending
We originate loans eligible for refinancing into government‑guaranteed HUD products, reducing long-term balance sheet exposure while generating fees throughout the credit lifecycle. This reduces long‑term balance‑sheet exposure while generating fees throughout the credit lifecycle. The FHA/HUD franchise focuses on healthcare and multifamily real estate and benefits from deep specialization and decades of industry experience.
Solar Services
The Solar Services business provides sourcing, servicing and asset‑administration capabilities for residential solar loan portfolios owned by financial institutions and banks. We earn recurring fees through payment
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management, compliance, borrower engagement, and asset‑performance monitoring without assuming fixed‑rate credit exposure.
Loan & Deposit Fee Income
We also earn additional non-interest income from traditional banking services, such as loan fees and deposit fees.
Financial Metrics & Performance
Since our capital infusion in 2021, we have grown consolidated assets from $1.9 billion as of December 31, 2020, to $8.2 billion as of March 31, 2026, primarily driven by strategic deployment of capital through our middle-market lending strategies. In order to support this growth, we have grown deposits from $1.4 billion as of December 31, 2020 to $7.1 billion as of March 31, 2026. Our deposit strategies provide nimble, scalable funding that can fuel loan origination and balance-sheet expansion across all economic cycles. Notably, launched only in May 2024, deposits from our proprietary digital deposit platform were $3.9 billion as of March 31, 2026, and represent 55% of total deposit balances.
Additionally, we have demonstrated significant growth in both revenue and net income.
•Net interest income increased 14.6% from $230 million in fiscal year 2024 to $263 million in fiscal year 2025, primarily due to loan growth and reduced funding costs, offset in part by lower yields on interest earning assets.
•Non-interest income represented 21.2% of total revenue for fiscal year 2025, as compared to 9.1% for fiscal year 2024, due in part to (a) increased contribution levels from the addition of our more recent fee businesses, including FHA/HUD Lending and Solar Services, and (b) income earned from loan sales and restructurings.
•Total revenue increased 32.1% from $253 million in fiscal year 2024 to $334 million in fiscal year 2025.
•Operating expenses increased in line with business growth, rising from $200 million to $209 million from fiscal year 2024 to 2025, while non-interest expense as a percent of average assets decreased from 301 basis points to 290 basis points for fiscal year 2024 and 2025.
•The effective tax rate decreased from 20.2% in fiscal year 2024 to 13.1% in fiscal year 2025, due primarily to accretion of the deferred credit associated with the solar servicing acquisition into income tax expense.
•Net income increased from $43 million for fiscal year 2024 to $88 million for fiscal year 2025.
We have continued that growth trajectory in the first quarter 2026 with select items impacting results.
•Deposit balances increased by $360 million from December 31, 2025 to March 31, 2026 and loan balances increased $182 million in the same period driven largely by $1.0 billion of new and upsized commitments originated in the first quarter 2026
•Net interest income decreased 2.5% from $61.1 million in the first quarter 2025 to $59.6 million in the first quarter 2026, with $18.1 million of volume related growth offset by $19.6 million of yield/rate decline.
•Non-interest income increased 10.9% from $14.1 million in the first quarter 2025 to $15.6 million in the first quarter 2026, with core non-interest income increasing $7.3 million and non-core non-interest income decreasing $5.8 million.
•Total revenue was flat at $75.1 million in the first quarter 2025 and the first quarter 2026.
•Provision for credit losses decreased 58.9% from $8.5 million in the first quarter 2025 to $3.5 million in the first quarter 2026, with the first quarter 2025 higher due to economic uncertainty adjustments related to the potential impact of tariffs.
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•Operating expenses increased due to a full quarter of solar servicing operations and expenses associated with the initial public offering, rising from $51.7 million to $58.5 million from the first quarter 2025 to the first quarter 2026. Non-interest expense as a percent of average assets decreased from 310 basis points to 296 basis points for the first quarter 2025 and 2026.
•The effective tax rate decreased from 25.8% in the first quarter 2025 to 12.0% in the first quarter 2026, due primarily to accretion of the deferred credit associated with the solar servicing acquisition into income tax expense.
•Net income increased from $11.1 million for the first quarter 2025 to $11.6 million for the first quarter 2026.
See “Managements Discussion and Analysis of Results of Operations and Financial Condition for the Years Ended December 31, 2025 and 2024” and “Managements Discussion and Analysis of Results of Operations and Financial Condition for the Three Months Ended March 31, 2026 and 2025” for additional discussion of financial results.
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Our Competitive Strengths and Advantages
We possess a unique combination of competitive strengths that position us to capitalize on our substantial market opportunities and drive outsized growth and risk-adjusted returns.
People and Culture: We have a highly experienced management team, led by our founder John Delaney, who has been able to attract and retain world-class talent with deep industry expertise. In aggregate, our leadership group has on average 27 years of financial services experience and has created a nimble, entrepreneurial culture that creates a platform for our high-performing teams to thrive.
Business Model: We purpose-built Forbright to uniquely capitalize on structural forces reshaping the U.S. banking sector, while creating a virtuous cycle that we believe improves customer outcomes and delivers durable competitive advantages. We combine the vast, stable funding aspects of a digital bank with a high-growth, high risk-adjusted return middle-market lending franchise and high-margin fee income businesses.
Innovation Mindset: Our innovative, entrepreneurial culture is at the core of our identity. We invest for the future and create differentiated go-to-market strategies, enabling us to seize on market opportunities. Our advanced proprietary technology infrastructure underpins our entire business, enabling us to efficiently scale our operations while providing a differentiated customer experience. We also created a proprietary network of community banks, BancAlliance, for which we source, structure, distribute and manage loans. This drives fee income while supporting larger commitments and maintaining borrower relationships that would otherwise require a more sizable balance sheet.
Taken together, our strengths drive our ability to generate significant growth and returns and allow us to effectively compete against a range of financial institutions.
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Primary Competitors & Our Differentiation
We compete in a number of areas, including deposit banking, lending and loan administration and servicing. These industries are highly competitive, and the Bank faces strong direct competition for loans and deposits. Our competitors include traditional regional and money center banks (e.g., BMO, CIBC, First Citizens, Truist, Ally, KeyBank, Axos, Pinnacle, Flagstar, Cross River, Webster, Texas Capital, East West, Live Oak), hybrid/digital banks (e.g., Sofi, LendingClub, Marcus), private credit funds (e.g., Blue Owl Capital, Ares Management), fintech companies (e.g., Chime, Dave and Revolut) and other non-bank lenders (e.g., Atlas SP, Encina Capital Partners, Oxford Finance).
Rapid technological changes and continued consolidation within the financial services industry will likely change the nature and intensity of competition (including with respect to our middle-market lending franchise and digital deposit platform), but also will create opportunities for us to demonstrate and leverage our competitive advantages.
We believe our advantage lies within strong relationships and personalized services, our commitment to technological innovation and brand recognition for our nationally-based lending strategies. We intend to continue to strengthen our product offerings to address the evolving financial landscape and broaden our services through thoughtful evolution of our middle-market lending strategies and the continued expansion of our digital deposit platform.
Highly Attractive National Middle-Market Lending Franchise
Competitors across middle-market lending range from national commercial banks to alternative and private credit asset managers. We believe our deep sector expertise allows us to identify risks and opportunities that generalist commercial competitors miss, resulting in above average credit outcomes and a disproportionate ability to structure solutions that solve problems specific to our middle-market clients.
We believe our industry knowledge makes us experts at assessing collateral value across market cycles in our targeted sectors, leading to a well-diversified loan portfolio at attractive loan to values both portfolio wide and for each credit exposure.
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Alternative and private credit is not well suited for the type of collateral intensive strategies that define our middle-market lending approach. We believe that the management fees generated by private credit vehicles do not support the sourcing, due diligence and portfolio management needed for collateral-based lending and that our loan structures are generally more conservative than alternative and private credit competitors. We believe the
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combination of these factors allow us to lend at tighter spreads than alternative and private credit, providing us a competitive advantage while still maintaining attractive risk-adjusted returns.
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Our ability to provide flexible, fast, and sophisticated capital solutions allows us to directly originate loans at premium yields compared to traditional banks that have been long anchored to geographically-bounded, standardized lending models.
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In our target markets, we are not just a lender; we are a strategic partner. This role creates self-sustaining and cost-efficient deal flow and high borrower retention.
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Scalable Digital Deposit Platform
We compete with both digital and traditional banks for funding and have transformed deposit gathering from a cost center into a competitive advantage. By building and managing our digital deposit platform, we seek to liberate ourselves from the typical bureaucratic limitations and reduce our reliance on the legacy technology commonly utilized by many of our competitors. Our cloud-native technology infrastructure is purposefully designed for flexibility and speed with few administrative constraints, which we believe enables us to launch new products and features more efficiently and expeditiously than those associated with traditional development timelines, as we did with our digital high yield savings product offering.
Our technology infrastructure is intended to provide us with the freedom and flexibility to innovate with fewer constraints. Our digital deposit platform’s bespoke integration layer enables us to plug and play third-party applications with limited friction. Further, our data platform is designed to provide visibility into key aspects of our business, allowing us to utilize tools that proactively detect anomalies and mitigate potentially negative customer impact.
For example, our integration and data layers help facilitate efficient customer acquisition for new products and features and have contributed to compelling customer acquisition costs, which were 51 basis points of new deposits for fiscal year 2025. Additionally, our back-office automation drives efficiency and operating leverage with a marginal cost-to-serve of approximately 15 basis points of average digital deposits for fiscal year 2025. Our digital deposit platform is designed to integrate cutting-edge marketing technology tools with a sophisticated data infrastructure to attract, convert and retain consumers and small businesses, offering savings tools and a smooth interface. We believe that this agility has contributed to high customer satisfaction and advanced operational and fraud resiliency. We anticipate that these capabilities will enable us to attract and retain deposit balances at costs below those of our competitors.
Unlike traditional banks, our digital deposit platform is designed to scale without the geographic constraints of a physical footprint, providing us with a significant source of liquidity and abundant funding for our high-growth, high risk-adjusted return middle-market lending franchise.
High‑Margin, Capital-Light Fee Businesses
Our fee businesses enhance our balance sheet and risk management capabilities, providing the flexibility to retain assets on our balance sheet or process them to third parties, which allows us to more effectively compete with larger competitors. Further, our fee businesses leverage our credit and sourcing infrastructure, including from services related to a differentiated and proprietary network of community banks, BancAlliance, that allows us to drive fee income while supporting larger loan commitments and maintaining borrower relationships that would otherwise require a more sizable balance sheet. This network provides us with a unique distribution channel and revenue diversification, enhancing our return on equity. We invest in the network by providing differentiated value-added services such as educational and training programs as well peer-to-peer networking opportunities, resulting in deep, sticky relationships. Our wholly-owned subsidiary, Alliance Partners, helps the community banks in BancAlliance meet their asset and return objectives by utilizing our full-service lending platform with a disciplined approach to originating, screening, underwriting, managing and servicing loans.
Asset Management: We advise third-party capital, including from BancAlliance, which generates management fees. Our strategic advantage versus other asset managers is in our ability to source loans with attractive risk-adjusted returns and leverage our credit and risk infrastructure to provide differentiated value to the community banks in our unique distribution channel, BancAlliance.
Loan Advisory and Servicing: We utilize our origination, credit and portfolio management expertise, licensure and technological stack to provide services to borrowers such as FHA/HUD processed loans and master servicing capabilities to asset owners and investors.
Other Fee Income: We also generate fees from traditional banking services, including loan fees, deposit fees and other recurring revenue streams embedded in our lending and servicing operations.
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These fee businesses further enhance balance sheet and risk management, providing the flexibility to retain assets on our balance sheet or process them to third parties, which allows us to more effectively compete with larger competitors.
Growth Strategy
We have purpose-built our business model to capitalize on the secular tailwinds behind the rapidly evolving middle market and the migration towards digital-first banking. Since 2021, we have been meaningfully investing in our franchise, including developing an advanced technology architecture, bringing in highly talented senior bankers and establishing a robust, scalable infrastructure. These investments have contributed to an approximately 620% increase in net income, from $12.2 million in fiscal year 2020 to $87.9 million in fiscal year 2025, and positioned the Company to accelerate growth and drive meaningful operating leverage, which will lead to continued profitability enhancements.
New Digital Deposit Products
We have experienced considerable growth within our digital deposit platform since launching in May 2024, as exemplified by growing this funding source to $3.9 billion across approximately 95,000 accounts as of March 31, 2026. We continue to prioritize deepening our relationships with existing customers. In addition, we are replicating our high-yield savings strategy with other products, such as launching our online certificate deposits strategy in April 2025, and we intend to offer digital checking products in the first quarter of 2027, to continue to diversify and expand our funding base. We will continue to refine our deposit strategy as the digital marketplace evolves, supported by the design and capabilities of our technology-enabled platform.
Scaling Existing Strategies
We have a successful track record of hiring and retaining talent, having added 35 commercial lenders and portfolio managers since 2021, all of whom are seasoned professionals. The management team has generally known and worked with these business leaders at prior institutions. These lenders have deep relationships and generally are able to bring their clients’ business to Forbright over time, driving attractive loan growth as they integrate with our platform.
Our middle-market focus offers abundant opportunities for growth as evidenced by our loan balances increasing $1.3 billion, or 31%, during fiscal year 2025, and $1.3 billion in first quarter 2026, a 30% increase compared to first quarter 2025. Our trusted lending expertise and targeted focus reinforces our successful ability to win new lending opportunities.
Extend Lending Expertise
We also have the ability to grow our lending franchise into complementary middle-market strategies. For example, in first quarter 2026, we began hiring personnel in connection with establishing our asset finance lending strategy, which will originate business-dependent equipment finance loans through primarily fixed-rate loans across a range of industries and geographies. We will continue to consider targeted expansion with new middle-market lending initiatives within our expertise, and as specialists in middle-market lending, we expect to identify and launch new strategies to deepen our market penetration.
Selective Pursuit of Strategic Investments and Acquisitions
While we are primarily focused on organic growth, our leadership team has a track-record of pursuing investments and acquisitions with complementary and accretive strategic value. Access to the public capital markets will enhance our positioning as an acquirer in mergers and acquisitions and expand our target universe.
Risk Management and Credit Discipline
Risk management is at the center of everything we do, and is embedded into the governance structure of our organization. Risk management spans asset-liability management, enterprise risk management, interest rate risk
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management and credit risk management and enables us to manage our balance sheet prudently through varied business cycles and market environments.
Due to our effective asset-liability management, we focus on optimizing the balance sheet to ensure adequate liquidity and profitability through careful strategic planning of our funding sources, investment securities portfolio and loan origination to maintain a stable financial position consistent with applicable regulatory requirements, as well as the various underwriting and investment policies and loss-mitigation strategies established by the Company’s and the Bank’s boards of directors. Combined with our interest rate risk management, which monitors our exposure movements in interest rates, our active balance sheet management strategy aims to protect the durability of revenue and earnings.
Lastly, our centralized credit risk management philosophy allows us to maintain rigorous credit standards across our organization, governing risk and mitigating losses across our loan portfolio. Our credit approval process is centralized and governed by a committee structure with significant input from highly experienced leaders. As a starting place in our process, the underwriting teams clearly define the loan purpose, repayment sources, and alignment with the borrower’s needs and evaluate management quality, financial performance and collateral. They concurrently analyze historical and projected financials, stress test projections and assess primary/secondary repayment sources while reviewing collateral type, value, and lien position and assess guarantees and guarantor strength if applicable. Each product type within our strategies has defined risk parameters (e.g., maximum loan size, advance rates, coverage ratios) and the underwriting team must measure and document compliance with these criteria.
Any deviations from policy are identified as exceptions and are tracked and reported. Underwriting prepares a comprehensive credit memo summarizing analysis, risks, and recommendations and submits for committee review and approval. On the monitoring side, we require regular financial reporting and collateral verification and actively monitor credits for covenant compliance and update risk ratings as needed. Each strategy, with the exception of corporate finance, has a dedicated portfolio management team that is separate from the underwriting group.
Portfolio management teams utilize proprietary models to regularly review both large and underperforming credits, ensuring we are proactive in monitoring performance and addressing stress as early as possible. By separating our underwriting and portfolio management teams we promote an ownership mentality in both groups; this instills a credit-first culture that helps mitigate risk. Our focus on risk management has resulted in strong credit results in our core lending strategies:
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Balance Sheet Strategy
As a regulated, FDIC-insured institution, Forbright Bank benefits from the inherent trust, robust regulatory framework and balance sheet durability that are hallmarks of a traditional bank. We attract a loyal, digitally-engaged customer base by offering a superior value proposition on deposits and related services resulting in a high level of insured deposits, which in turn funds a highly profitable, expertly managed suite of national lending strategies and fee-generating businesses. No individual lending strategy comprises more than 31% of our granular loan portfolio as of March 31, 2026. Additionally, our CRE concentration ratio is well below regulatory guidelines. We also maintain a margin of safety as it relates to our regulatory capital levels. This foundation provides stability, enabling us to attract and retain deposits and confidently deploy capital in our lending strategies and support our well-defined, high-growth business strategy.
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Allowance for Credit Losses Framework
Our allowance for credit losses is determined through a combination of individual loan impairment analysis and pooled loss estimation, overseen by the allowance for credit loss committee, chaired by the Chief Accounting Officer with membership including senior financial executives, with regular review, approval, and reporting to ensure the reserve is adequate to cover expected credit losses. The allowance is estimated in accordance with GAAP.
Artificial Intelligence and Machine Learning
Embracing new technologies to improve our business processes is central to our operations and client service offerings, and as such, we are increasingly adopting and integrating AIML tools into our business to support analytics, automation, workflows, decision processes and business activities. While the application of AIML in our
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business processes remains at a preliminary stage, all of our employees have access to AIML tools, and we currently leverage AIML to help acquire customers at scale, retain and grow customer relationships through personalized interactions, make faster, more precise credit decisions and reduce human errors and employee hours.
AIML Use in Digital Deposits
We believe that our digital deposit platform enables us to be more adaptable to AIML than traditional banks, and we have a track record of successfully adding innovative capabilities to support the continued improvement of our business.
We currently use AIML tools to better personalize customer interactions and scale operational agility. For example, we use large language models to process and report on our semantic text datasets (customer segmentation, call center transcripts and others). We believe that leveraging AIML tools to summarize large data into actionable insights, such as bespoke customer sentiment scores and trend tracking, allows us to better predict churn rate, analyze deposit opportunities, and suggest appropriate customer responses. Our proprietary chat-style AI agent, which integrates into our data layer, monitors peer bank pricing strategies and performs real-time tracking, is designed to enable us to run analytics and access trend data without any technical skills, thus increasing data-driven decision making without the need for additional resources. We also use AI-driven marketing tools to analyze landing pages, support creation of ad assets and extensions, and identify relevant search queries to strengthen our marketing funnel.
AIML Use in Middle-Market Lending
We use, and are developing new ways of using, AIML tools in our lending business to augment underwriting, portfolio management, and origination efforts while preserving credit discipline and the role of experienced credit professionals. Our proprietary AI-enabled credit platform is designed to centralize loan agreements, credit memoranda, and amendments, which we believe facilitates more consistent analysis and faster decision-making. We leverage AI-tools to support the preparation of credit documentation, data validation, and dashboarding. These tools are designed to improve efficiency, consistency, and insight across the credit lifecycle without requiring additional human approval or oversight.
Operations and Governance
We deploy AIML tools across our operations teams to automate routine workflows (such as invoice processing), expedite software development through code-assist chatbots with context into existing applications, and enhance accuracy of meeting documentation. We believe these capabilities support scalable growth and improve accuracy.
We maintain an internal governance framework for AIML usage that emphasizes data security, regulatory compliance, model oversight, and responsible deployment. Our approach includes centralized governance, transparency and explainability standards, and employee training programs designed to promote appropriate and effective use of AIML tools. We deploy AIML in cases where we believe it creates or will create meaningful operational or economic benefit and avoid pursuing trends or undifferentiated adoption without strategic justification.
We believe our AIML strategy supports our ability to operate a national digital deposit platform efficiently, scale our national middle-market lending business without diluting credit standards, and allocate capital dynamically across market cycles. While AIML tools continue to evolve, we expect disciplined deployment, strategic investment, and strong governance to remain central to our approach as an enduring institution that delivers durable growth and superior returns on capital.
Human Capital
Culture
We are a dynamic, fast-paced and collaborative organization that has an exciting growth trajectory, a meaningful mission, and has embedded responsible practices into our daily interactions. We offer our team members
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a culture of collaboration, inclusion, flexibility, recognition and community engagement. We look to hire individuals that are passionate about our mission, and who are motivated, customer and results-oriented, innovative, adaptable and thoughtful.
We consider our team members to be the most valuable assets we have, and we strive to cultivate a professional ecosystem where the collective strength of our team members’ unique characteristics, life experiences, knowledge, skills, inventiveness, innovation, self‑expression, capabilities and talent is acknowledged and rewarded and contributes meaningfully to both our reputation and business success. Our meaningful business mission and embedded responsible banking practices are an enticing part of our employee experience and recruitment efforts. We strive to actively listen and respond to our employees, as exemplified by our Employee Engagement and Satisfaction surveys every eighteen months.
It is our policy to provide equal employment opportunities to all qualified individuals and to administer all aspects and conditions of pre-employment and employment without regard to protected characteristics. We are committed to a work environment in which all individuals are treated with respect and dignity and to promoting a workplace free of discrimination, harassment, and retaliation. The Bank partners with a variety of organizations to attract a broad range of candidates, including partnering with colleges, KIPP DC, and Urban Alliance to build diverse future talent pipelines.
We are guided by eight core principles: Excellence, People, Innovation, Sound Practices, Distinct Value, Clients & Customers, Stockholders, & Communities & Environment. These principles unite our team, guide our decisions, and define our purpose: to build an institution that is strong, forward-looking and committed to excellence and providence.
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Employees
As of March 31, 2026, we had approximately 545 full-time employees. None of our employees are covered by a collective bargaining agreement, and we consider relations with our employees to be strong and constructive, and we have not experienced interruptions of operations due to labor disagreements.
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Compensation and Benefits
We strive to attract and retain strong talent by providing a variety of benefits and services as well as cultivating an inclusive, safe and healthy workplace. We provide a competitive compensation and benefits program to help meet the needs of all our employees, recognizing their varying needs. In addition to salaries, these programs include bonus opportunities, a 401(k) plan with an employer matching contribution, healthcare and insurance benefits–including medical with a health savings account option, dental, vision, company-paid and voluntary life and AD&D, short- and long-term disability, an employee assistance program, and flexible spending accounts. We also provide generous leave benefits – including paid time off, parental leave, bereavement leave, and volunteer leave and offer remote or hybrid work schedules for most positions.
Learning and Development
We invest in the growth and development of our employees by providing a multi-dimensional approach to learning that empowers, intellectually grows, and professionally develops our colleagues. In particular, we facilitate the educational and professional development of our employees through support to attend conferences and obtain licenses and certifications while employed by us. We also facilitate internal educational opportunities such as our bi-monthly Brunch and Learns that range in topics from financial wellness to nutrition to presentations by department heads on recent accomplishments and upcoming goals.
Properties and Facilities
Our corporate headquarters is located at 4445 Willard Avenue, Suite 1000, Chevy Chase, Maryland. While we maintain a largely, and increasingly, digital presence, we maintain two brick-and-mortar bank branches located in Potomac, Maryland and North Bethesda, Maryland, and two deposit office locations in Chevy Chase, Maryland; and Mclean, Virginia.
The following table sets forth information regarding our corporate headquarters and our full-service banking offices:
OfficeAddress
Year
Opened
Square FootageOwned or Leased
Corporate Headquarters4445 Willard Avenue, Suite 1000 Chevy Chase, Maryland 20815202037,551Leased*
North Bethesda
11560 Old Georgetown Road, North Bethesda, Maryland 20852
20264,286Leased
Potomac
7963 Tuckerman Lane
Potomac, Maryland 20854
20031,500Leased
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*On April 30, 2026, Fletch, LLC, a wholly-owned subsidiary of Forbright Bank, completed the purchase of our corporate headquarters. We will continue to lease our headquarters from Fletch, LLC.
Legal Proceedings
From time to time, we are party to various litigation matters incidental to the conduct of our business. We do not believe that any currently pending legal proceedings will have a material adverse effect on our business, financial condition or results of operations.
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SUPERVISION AND REGULATION
The Company and the Bank are subject to extensive regulation under federal and state law. The costs of compliance with the regulatory regime and supervisory framework applicable to the Company and the Bank are significant. The level of regulation and oversight over financial services activities, including the regulatory enforcement environment applicable to banks and bank holding companies, has increased in the past and may increase in the future. The following is a brief summary of certain statutes, rules and regulations that affect or will affect the Company and the Bank, including the products and services that we may offer and the manner in which we may offer them, the risks that we may take, the ways in which we may operate, and the corporate and financial actions that we may take.
Various governmental agencies oversee our business activities and therefore supervise and periodically examine us. These agencies generally have broad authority and discretion in restricting and otherwise affecting our businesses and operations and may take formal or informal supervisory, enforcement, and other actions against us when, in the applicable agency’s or organization’s judgment, our businesses or operations fail to comply with applicable law, comport with safe and sound practices, or meet supervisory expectations. The framework under which the Company and the Bank, and certain of their subsidiaries, are supervised and examined is complex, and includes federal and state laws, regulations, policy statements, guidance and other interpretative materials that define the obligations and requirements for financial institutions. This summary contains what management believes to be the material information related to the supervision and regulation of the Company and the Bank and their respective subsidiaries, but is not intended to be an exhaustive description of the statutes or regulations applicable to their respective businesses or of the impact of such laws and regulations on the Company.
Banking laws and regulations are intended primarily for the protection of depositors and other customers, the Deposit Insurance Fund, and the stability of the U.S. banking system as a whole, rather than for the protection of stockholders. We cannot predict whether or in what form any proposed statute or regulation will be adopted or the extent to which our business may be affected by a statute or regulation, or the enforcement or interpretation of any statute or regulation.
The discussion is qualified in its entirety by reference to applicable laws and regulations. Regulations of banks and their holding companies is subject to frequent and ongoing revision, through legislative changes, regulatory revisions, and the evolving supervisory objectives of federal and state banking agency examiners and supervisory staff. It is not possible to predict the content or timing of changes to the laws and regulations that may impact the business of the Company. Changes in such laws and regulations may have a material effect on our business and prospects.
General Regulatory and Supervisory Considerations
The Company is a bank holding company within the meaning of the BHCA and is registered as such with the Federal Reserve. As a bank holding company, the Company is subject to the regulation, supervision, examination and reporting requirements of the Federal Reserve. The Bank, a Maryland state-chartered non-member commercial bank that is not a member of the Federal Reserve, is subject to the regulation, supervision, examination, and reporting requirements of the MOFR and the FDIC.
Examinations by our regulators consider compliance with applicable laws, regulations, and supervisory policies of the respective agency. In addition, examinations consider regulatory capital adequacy, asset quality, risk management effectiveness, the ability and performance of management and the board of directors, the effectiveness of internal controls, earnings, liquidity, sensitivity to market interest rates, investments and various other factors. Following examinations by banking agencies, the Company and the Bank receive supervisory findings and ultimately are assigned supervisory ratings. Examination reports, supervisory ratings, and other actions under this supervisory framework, which are considered confidential supervisory information, can impact the conduct, growth, and profitability of the Company’s consolidated operations, possibly to a significant degree. Adverse supervisory findings can affect the Company’s strategic plan and activities, restrict growth, and increase costs, whether through required corrective actions or the imposition of penalties or fines.
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The U.S. financial services industry is undergoing major regulatory changes affecting areas like capital, leverage, funding, liquidity, tax, monetary policy, and the permissibility of new activities. Considering the ongoing changes in the U.S. political, tax, and regulatory landscape, further significant reforms are expected. Their impact on our activities and revenues could result in increased compliance costs, fines, loss of revenue, additional restrictions on activities, constraints on our ability to enter into new businesses and other negative impacts. While the full extent of risks from pending or future U.S. financial services legislation and regulation is unknown, they could be substantial, and we could be materially and adversely affected by them.
Federal Bank Holding Company Regulation and Structure
The BHCA and the Federal Reserve’s applicable regulations thereunder require every bank holding company to obtain the prior approval of the Federal Reserve before, among other things:
•it may acquire direct or indirect ownership or control of any voting securities of any other bank holding company if, after the acquisition, the bank holding company will directly or indirectly own or control more than 5% of any class of voting securities of the other bank holding company;
•it may acquire direct or indirect ownership or control of any voting securities of any bank if, after the acquisition, the bank holding company will directly or indirectly own or control more than 5% of any class of voting securities of the bank;
•it may take any other action that causes a bank to become a “subsidiary” of the bank holding company, within the meaning of the BHCA;
•it or any of its subsidiaries, other than a bank, may acquire all or substantially all of the assets of any bank; or
•it may merge or consolidate with any other bank holding company, including a merger through the purchase of assets and assumptions of liabilities.
The BHCA further provides that the Federal Reserve may not approve any such transaction that would result in a monopoly or that would substantially lessen competition in the banking business, unless the public interest in meeting the needs of the communities to be served clearly outweighs the anti-competitive effects. In reviewing applications seeking approval of such merger and acquisition transactions, the Federal Reserve is also required to consider the financial and managerial resources and future prospects of the bank holding companies and banks involved, the convenience and needs of the communities to be served, the effectiveness of the parties in combatting money laundering activities, and whether the transaction would result in greater or more concentrated risks to the stability of the United States banking or financial system. Consideration of financial resources generally focuses on capital adequacy, and consideration of convenience and needs issues focuses, in part, on the performance under the CRA, both of which are discussed in more detail elsewhere in this prospectus.
Subject to various exceptions, the BHCA and the Change in Bank Control Act of 1978, together with related regulations, require a company or other person to obtain regulatory approval or non-objection prior to acquiring “control” of a bank holding company or bank. Under either statute, a person has control of a bank holding company or bank if the person owns or controls 25% or more of any class of voting securities of the bank holding company or bank. Further, under Federal Reserve regulations, a company owning less than 25% of any class of a bank holding company’s voting securities may be deemed to control a bank holding company under the BHCA based on established tiered presumptions that consider the full facts and circumstances of the relationship between a company and the subject bank holding company. Factors impacting a control determination include director and board committee representation, business relationships between the two companies, senior management interlocks, contractual limits on operational or policy decisions of the bank holding company, and total equity ownership. Different presumptions of control apply as a company’s ownership of a class of voting securities in the bank holding company increases from 0% to 5%, to 10%, and to 15%. The regulations provide a procedure for challenging rebuttable presumptions of control.
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Under the BHCA, a company with control over a bank or bank holding company generally must register as a bank holding company. The BHCA generally prohibits a bank holding company from engaging in, or acquiring control of a company engaged in, activities other than banking, managing or controlling banks or other permissible subsidiaries, and those activities that the Federal Reserve has determined to be closely related to banking or managing or controlling banks. In determining whether a particular activity is permissible, the Federal Reserve considers whether performing the activity can be expected to produce benefits to the public that outweigh possible adverse effects, such as undue concentration of resources, decreased or unfair competition, conflicts of interest or unsound banking practices.
Under the BHCA, a bank holding company may file an election with the Federal Reserve to be treated as a financial holding company and thereby engage in a broader range of financial and other activities than are permissible for traditional bank holding companies. The election must be accompanied by a certification that the company and each of the company’s insured depository institution subsidiaries is “well capitalized” and “well managed.” Additionally, for the financial holding company election to become effective, the CRA rating of each of the company’s subsidiary banks must be “Satisfactory” or better as of the bank’s most recent examination. A financial holding company generally must continue to satisfy these standards to avoid limitations on engaging in expanded financial activities. The Company has not elected to be treated as a financial holding company.
The Company is required to act as a source of financial and managerial strength for the Bank and to commit resources to support the Bank. Under the Federal Reserve’s “source of strength” doctrine that was codified by the Dodd-Frank Act, the Federal Reserve may require a bank holding company to provide financial assistance to any insured depository institution that it controls in the event of the financial distress of the insured depository institution. This support may be required at times when the Company might otherwise determine not to provide it or when doing so is not otherwise in our interest or in the interests of our stockholders or creditors. The Federal Reserve also has the power to order a bank holding company or its subsidiaries to terminate any activity or control of any subsidiary when the continuation of the activity or control constitutes a serious risk to the financial safety, soundness or stability of any bank subsidiary of that bank holding company. The Federal Reserve may require these and other actions in support of controlled banks even if such actions are not in the best interest of the bank holding company or its stockholders.
In addition, any capital loans made by the Company to the Bank will be subordinate in right of payment to deposits and various other obligations of the Bank. In the event of our bankruptcy, any commitment by us to a federal bank regulatory agency to maintain the capital of the Bank would be assumed by the bankruptcy trustee and entitled to a priority of payment.
Change in Bank Control Act
The acquisition of 10% or more of a bank holding company’s outstanding common stock may, in certain circumstances, require non-objection of the Federal Reserve under the Change in Bank Control Act of 1978. The FDIC has also adopted a regulation pursuant to the Change in Bank Control Act that generally requires persons who at any time intend to acquire control of an FDIC-insured, state-chartered non-member bank, either directly or indirectly through an acquisition of control of its holding company, to provide 60 days prior written notice and certain financial and other information to, and obtain the non-objection of, the FDIC. Under applicable regulations of both the Federal Reserve and FDIC, control for purposes of the Change in Bank Control Act is rebuttably presumed to exist if a person acquires 10% or more, but less than 25%, of any class of voting securities and either:
•the covered institution (i.e., the bank or bank holding company, as applicable) has registered securities under Section 12 of the Exchange Act; or
•no other person owns, controls, or holds the power to vote a greater percentage of that class of voting securities immediately after the transaction.
The Change in Bank Control Act regulations of both the Federal Reserve and FDIC provide a procedure for challenging rebuttable presumptions of control.
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Bank Merger Act
Section 18(c) of the FDI Act, or the Bank Merger Act, generally requires the prior written approval of the FDIC before any insured bank may (i) merge or consolidate with, (ii) purchase or otherwise acquire the assets of, or (iii) assume the deposit liabilities of, another FDIC-insured institution if the resulting institution is to be a state non-member bank. The Bank Merger Act further requires the prior written approval of the FDIC before any FDIC-insured bank may (i) merge or consolidate with, (ii) assume deposit liabilities (or similar liabilities) of, or (iii) in consideration of the assumption of deposit liabilities of the FDIC-insured bank, transfer assets to, any non-FDIC-insured institution.
The Bank Merger Act prohibits the FDIC from approving any such proposed merger or deposit assumption transaction that would result in a monopoly, or would further a combination or conspiracy to monopolize or to attempt to monopolize the business of banking in any part of the United States. Similarly, the Bank Merger Act prohibits the FDIC from approving a proposed merger or deposit assumption transaction whose effect in any section of the country may be substantially to lessen competition, or to tend to create a monopoly, or which in any other manner would be in restraint of trade. An exception may be made in the case of a merger or deposit assumption transaction whose effect would be to substantially lessen competition, tend to create a monopoly, or otherwise restrain trade, if the FDIC finds that the anti-competitive effects of the proposed transaction are clearly outweighed in the public interest by the probable effect of the transaction in meeting the convenience and needs of the community to be served.
In every proposed merger transaction, the FDIC must also consider the financial and managerial resources and future prospects of the existing and proposed institutions, the convenience and needs of the community to be served, the effectiveness of each insured depository institution involved in the proposed merger transaction in combating money-laundering activities, including in overseas branches, and the risk to the stability of the United States banking or financial system.
State Law
The Bank is subject to extensive supervision and regulation by the MOFR. The MOFR oversees state laws that set specific requirements for bank capital and that regulate deposits in, and loans and investments by, banks, including the amounts, types, and in some cases, rates. The MOFR supervises and performs periodic examinations of state-chartered banks to assure compliance with state banking statutes and regulations, and such banks are required to make regular reports to the MOFR describing in detail their resources, assets, liabilities and financial condition. Among other things, the MOFR regulates mergers and consolidations of state-chartered banks, capital requirements for banks, payment of dividends, loans to officers and directors, record keeping, types and amounts of loans and investments, and the establishment of branches.
The MOFR has extensive enforcement authority over Maryland banks. Such authority includes the ability to issue cease and desist orders and to seek civil money penalties, temporary restraining orders, temporary or permanent injunctions, declaratory judgments, orders preventing access to assets, rescission and restitution in various circumstances, including for a violation of the bank’s charter or of applicable laws, regulations, rules, and orders; unsafe and unsound operations; or as a result of an impairment of the bank’s capital.
The Bank is also subject to numerous other state and federal statutes and regulations that affect its business, activities and operations and is supervised and examined by the FDIC. As discussed above, the FDIC and the MOFR regularly examine the operations of the Bank and are given the authority to approve or disapprove mergers, consolidations, the establishment of branches, the commencement of new activities or expansionary activity and similar corporate actions.
Payment of Dividends and Other Restrictions on Distributions
The Company is a legal entity separate and distinct from the Bank, and it depends in part upon dividends received from its direct and indirect subsidiaries, including the Bank, to fund its activities, including its ability to make capital distributions, such as paying dividends or repurchasing shares. Under federal and state law there are
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various legal and regulatory limitations on the extent to which the Bank can declare and pay dividends or otherwise supply funds to the Company.
Under Maryland law, Maryland state-chartered banks, such as the Bank, may only pay cash dividends from undivided profits or, with the prior approval of the MOFR, their surplus in excess of 100% of required capital stock. In addition, if the Bank’s surplus fund were to be less than the amount of its capital stock, the Bank would be prohibited under Maryland law from paying any cash dividends that exceed 90% of its net earnings.
The FDIC also has authority to prohibit a state non-member bank, such as the Bank, from engaging in what, in the opinion of the FDIC, constitutes an unsafe or unsound practice in conducting its business. The payment of dividends could, depending upon the financial condition of a bank, be deemed to constitute an unsafe or unsound practice in conducting its business. Additionally, insured depository institutions such as the Bank are prohibited from making capital distributions, including the payment of dividends, if, after making such distribution, the institution would become “undercapitalized” (as such term is defined under applicable law).
The Company’s ability to declare and pay dividends is similarly limited by federal banking law and Federal Reserve regulations and policy. The Federal Reserve has authority to prohibit bank holding companies from making capital distributions if the Federal Reserve determines that such distributions would constitute an unsafe or unsound practice. According to guidance from the Federal Reserve, a bank holding company should pay cash dividends only to the extent that the holding company’s net income for the past year is sufficient to cover both the cash dividends and a rate of earnings retention that is consistent with the holding company’s capital needs and overall current and prospective financial condition. The Federal Reserve supervisory guidance also indicates that it would be inappropriate for a holding company experiencing serious financial problems to borrow funds to pay dividends.
In addition, the Company’s ability to make capital distributions, including paying dividends and repurchasing shares, is subject to the Federal Reserve’s automatic restrictions on capital distributions under its capital rules. The Bank’s risk-based capital and leverage ratio requirements are discussed below under “—Capital Adequacy and Risk-Based Capital Requirements.”
Generally, certain non-exempted bank holding companies are required to give the Federal Reserve prior written notice of any purchase or redemption of its outstanding equity securities if the gross consideration for the purchase or redemption, when combined with the net consideration paid for all such purchases or redemptions during the preceding twelve months, is equal to 10% or more of its consolidated net worth. The Federal Reserve may disapprove of such a purchase or redemption if it determines that the proposal would constitute an unsafe or unsound practice or would violate any law, regulation, Federal Reserve order or any condition imposed by, or written agreement with, the Federal Reserve. This prior notice requirement does not apply to any bank holding company that meets certain “well-capitalized” and “well-managed” standards and is not the subject of any unresolved supervisory issues. In addition, this prior notice requirement does not apply to bank holding companies that are otherwise subject to the Federal Reserve’s capital plan rule, which contains its own set of requirements regarding capital distributions. Pursuant to regulatory guidance, bank holding companies are also expected to consult with the Federal Reserve prior to proposed repurchases of common stock or other regulatory capital instruments, notwithstanding whether any formal prior written notice is required under applicable regulations.
Furthermore, under the prompt corrective action regulations adopted by the Federal Reserve, the Federal Reserve may prohibit a bank holding company from paying any dividends if one or more of the holding company’s bank subsidiaries are classified as undercapitalized.
Capital Adequacy and Risk-Based Capital Requirements
The Company must comply with the Federal Reserve’s established capital adequacy standards for bank holding companies, and the Bank is required to comply with the capital adequacy standards established by the FDIC for state non-member banks. Subject to certain exceptions, including for qualifying community banking organizations (as described below), these generally applicable capital adequacy standards include risk-based capital requirements, the calculation of which involves a process of assigning various risk weights to different classes of assets, then evaluating the sum of the risk-weighted balance sheet structure against the bank’s or bank holding company’s
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regulatory capital base. The regulatory capital components for banks and bank holding companies are (i) common equity Tier 1 capital, (ii) additional Tier 1 capital, and (iii) Tier 2 capital.
Under the generally applicable capital requirements of the Federal Reserve and the FDIC, bank holding companies and state non-member banks are required to maintain a minimum common equity Tier 1 capital ratio of at least 4.5%, a Tier 1 risk-weighted capital ratio of at least 6%, a total risk-based capital ratio of at least 8%, and a Tier 1 leverage ratio of at least 4%. In addition, subject to certain exceptions, banking organizations are required to maintain a common equity Tier 1 “capital conservation buffer” of 2.5% of risk-weighted assets, which is in addition to the other minimum risk-based capital standards, in order to avoid limits on capital distributions (such as dividends and equity repurchases) and certain discretionary bonus payments. The capital conservation buffer is designed to absorb losses during periods of economic stress and is comprised entirely of common equity Tier 1 capital.
Failure to meet minimum capital requirements could result in certain mandatory and discretionary actions by regulators that, if undertaken, could have an adverse material effect on our operations or financial condition. These actions could include restrictions on the Company or the Bank’s ability to pay dividends or otherwise distribute capital or to receive regulatory approval for acquisitions, enforcement remedies, including issuance of a capital directive, and certain other restrictions on its business, such as the denial of approval to acquire or establish additional banks or non-bank businesses or the opening of new facilities. In the case of the Company, such actions could also include requiring the Company to commit capital to the Bank in abnormal operating conditions which would otherwise be available to the Company’s creditors and stockholders. In the case of the Bank, such actions could also include the termination of deposit insurance by the FDIC, or a prohibition on accepting brokered deposits. As described below, the FDIC can impose substantial additional restrictions upon FDIC-insured depository institutions that fail to meet applicable capital requirements.
Effective January 1, 2020, the federal banking agencies established an optional, simplified measure of capital adequacy for qualifying community banking organizations in lieu of the generally applicable capital rules, consistent with Section 201 of the Economic Growth, Regulatory Relief and Consumer Protection Act. The CBLR framework is designed to reduce burden by removing the requirements for calculating and reporting risk-based capital ratios for qualifying community banking organizations that opt into the framework. A qualifying community banking organization is defined as having less than $10 billion in total consolidated assets, off-balance sheet exposures of 25% or less of total consolidated assets, and trading assets and liabilities of 5% or less of total consolidated assets. Qualifying community banking organizations that elect to use the CBLR framework and that maintain a leverage ratio of greater than 9% (or 8% following July 1, 2026, as described above) are considered to have satisfied the risk-based and leverage capital requirements in the generally applicable capital adequacy rules. In addition, these institutions are considered to have met the well-capitalized ratio requirements for purposes of the prompt corrective action framework of the FDI Act, which is described below. The Company and the Bank have opted into the CBLR framework, and, therefore, neither the Company nor the Bank are currently subject to the risk-based and leverage capital requirements in the generally applicable capital adequacy rules.
The FDI Act requires the federal regulatory agencies to take “prompt corrective action” if a depository institution does not meet minimum capital requirements. The prompt corrective action regulations of the FDIC are applicable to the Bank, but not the Company. The FDI Act establishes five capital tiers: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” A depository institution’s capital tier will depend upon how its capital levels compare to various relevant capital measures and certain other factors, as established by regulation. Under current regulations, an FDIC-insured bank will be:
•“well capitalized” if it has a Total Risk-Based Capital ratio of 10% or greater, a Tier 1 Risk-Based Capital ratio of 8% or greater, a common equity Tier 1 capital ratio of 6.5% or greater, and a leverage ratio of 5% or greater and is not subject to any order or written directive by the appropriate regulatory authority to meet and maintain a specific capital level for any capital measure;
•“adequately capitalized” if it has a Total Risk-Based Capital ratio of 8% or greater, a Tier 1 Risk-Based Capital ratio of 6% or greater, a common equity Tier 1 capital ratio of 4.5% or greater, and a leverage ratio of 4% or greater and is not “well capitalized”;
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•“undercapitalized” if it has a Total Risk-Based Capital ratio of less than 8%, a Tier 1 Risk-Based Capital ratio of less than 6%, a common equity Tier 1 capital ratio of less than 4.5%, or a leverage ratio of less than 4%;
•“significantly undercapitalized” if it has a Total Risk-Based Capital ratio of less than 6%, a Tier 1 Risk-Based Capital ratio of less than 4%, a common equity Tier 1 capital ratio of less than 3%, or a leverage ratio of less than 3%; and
•“critically undercapitalized” if the bank has a ratio of tangible equity to total assets that is equal to or less than 2%.
An institution may be downgraded to, or deemed to be in, a capital category that is lower than is indicated by its capital ratios if it is determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain matters.
As noted above, an institution that has opted in to the CBLR framework is considered to have met the well-capitalized ratio requirements if the institution maintains a leverage ratio of greater than 9%. An institution may be downgraded to, or deemed to be in, a capital category that is lower than is indicated by its capital ratios if it is determined to be in an unsafe or unsound condition or if it receives an unsatisfactory examination rating with respect to certain matters. As of March 31, 2026, the Bank has opted in to the CBLR framework and was well capitalized under the above capital thresholds.
Various regulatory consequences apply if an FDIC-insured bank is less than “well capitalized.” Such regulatory consequences generally increase in severity as a bank’s capital condition weakens. For instance, an insured bank that is “adequately capitalized” (but not “well capitalized”) generally may not accept brokered deposits without obtaining a waiver from the FDIC, while an insured bank that is “undercapitalized” may not accept any brokered deposits.
Additionally, the FDI Act generally prohibits an FDIC-insured bank from making a capital distribution (including payment of a dividend) or paying any management fee to its holding company if the bank would thereafter be “undercapitalized.” “Undercapitalized” banks are subject to growth limitations and are required to submit a capital restoration plan. The federal regulators may not accept a capital plan without determining, among other things, that the plan is based on realistic assumptions and is likely to succeed in restoring the bank’s capital. In addition, for a capital restoration plan to be acceptable, the bank’s parent holding company must guarantee that the institution will comply with such capital restoration plan. The aggregate liability of the parent holding company is limited to the lesser of: (i) an amount equal to 5% of the bank’s total assets at the time it became “undercapitalized”; and (ii) the amount which is necessary (or would have been necessary) to bring the institution into compliance with all capital standards applicable with respect to such institution as of the time it fails to comply with the plan. If a bank fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.”
“Significantly undercapitalized” insured banks may be subject to a number of requirements and restrictions, including orders to sell sufficient voting stock to become “adequately capitalized,” requirements to reduce total assets and the cessation of receipt of deposits from correspondent banks. “Critically undercapitalized” institutions are subject to the appointment of a receiver or conservator.
Acquisitions
The Company must comply with numerous laws related to acquisition activity should it elect to pursue a strategic acquisition or combination or other equity investment. Under the BHCA, the Company may not directly or indirectly acquire ownership or control of more than 5% of the voting shares of, or acquire substantially all of the assets of, or otherwise acquire control of, any bank or merge or consolidate with another bank holding company without the prior approval of the Federal Reserve. Further, the Bank Merger Act requires approval from the FDIC prior to the Bank, among other things, merging with or assuming the deposits of another bank. Current federal law generally authorizes interstate acquisitions of banks and bank holding companies without geographic limitation when the acquirer satisfies certain conditions, such as being well capitalized and well managed. Furthermore, a bank headquartered in one state is authorized to merge with a bank headquartered in another state, as long as neither of the states has opted out of such interstate merger authority prior to such date, and subject to any state requirement
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that the target bank shall have been in existence and operating for a minimum period of time, not to exceed five years, and to certain deposit market-share limitations.
Branching
With appropriate regulatory approvals, Maryland state-chartered commercial banks are authorized to establish branches both in Maryland and in other states. As a result of the Dodd-Frank Act, federal law generally allows de novo interstate branching and branching through mergers. A bank that establishes a branch in another state may conduct any activity at that branch office that is permitted by the law of that state to the extent that the activity is permitted either for a state-bank chartered by that state or for a branch in the state of an out-of-state national bank.
FDIC Insurance Assessments
The FDIC insures the deposits of the Bank up to prescribed limits for each depositor, and the Bank’s deposits are subject to the deposit insurance premium assessments of the Deposit Insurance Fund, or DIF. The assessment paid by each DIF member institution is calculated by multiplying an institution’s assessment rate by its assessment base. An institution’s assessment base and assessment rate are determined each quarter. Since April 2011, the FDIC has defined a bank’s assessment base as its average consolidated total assets minus its average tangible equity.
The method for determining a bank’s risk-based assessment rate differs for small banks and large banks. Small banks, such as ours, are assigned an individual rate based on a formula using financial data and CAMELS ratings. A bank’s CAMELS ratings are assigned by its state and federal banking regulators based on such regulators’ periodic evaluation and rating of six essential components of an institution’s financial condition and operations. These component factors address the adequacy of capital (C), the quality of assets (A), the capability of management (M), the quality and level of earnings (E), the adequacy of liquidity (L), and sensitivity to market risk (S). For established small banks (those insured for five or more years), initial base assessment rates currently range from five to 32 basis points, with the initial assessment rates subject to adjustments that could increase or decrease the total base assessment rates. Possible adjustment to the initial assessment rates include: (1) a decrease of up to five basis points for long-term unsecured debt, including senior unsecured debt and subordinated debt; and (2) an increase for holding long-term unsecured or subordinated debt issued by other insured depository institutions known as the Depository Institution Debt Adjustment, or the DIDA.
The FDIC may terminate insurance of deposits upon a finding that an 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.
Depositor Preference
The FDI Act provides that, in the event of the “liquidation or other resolution” of an insured depository institution, the claims of depositors of the institution (including the claims of the FDIC as subrogee of insured depositors) and certain claims for administrative expenses of the FDIC as a receiver will have priority over other general unsecured claims against the institution. If we invest in or acquire an insured depository institution that fails, insured and uninsured depositors, along with the FDIC, will have priority in payment ahead of unsecured, non-deposit creditors with respect to any extensions of credit they have made to such insured depository institution.
Community Reinvestment Act
The CRA requires that, in connection with examinations of insured depository institutions within their respective jurisdictions, the federal banking agencies must evaluate the record of each financial institution in meeting the credit needs of its local community, including low- and moderate-income neighborhoods. A bank’s CRA performance is also considered in evaluating applications seeking approval for mergers, acquisitions, and new offices or facilities, and a CRA rating of less than “Satisfactory” may adversely affect the ability of a bank or its parent company to engage in such transactions. The FDIC’s evaluation of the Bank’s record of performance under the CRA is publicly available. The Bank received a “Needs to Improve” rating in its most recent CRA examination.
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In October 2023, the FDIC, the Federal Reserve, and the OCC issued a final rule to modernize their respective CRA regulations. The revised rules substantially alter the methodology for assessing compliance with the CRA, with material aspects taking effect on January 1, 2026, and revised data reporting requirements taking effect on January 1, 2027. The final rule is currently enjoined while a federal court considers a lawsuit challenging the rule, and in July 2025, the agencies issued a joint notice of proposed rulemaking to rescind the final rule and replace it with regulations substantively identical to those in effect on March 29, 2024.
Consumer Protection Laws
The Bank is subject to a number of federal and state laws designed to protect borrowers and promote lending to various sectors of the economy and population. These laws include the ECOA, the Fair Credit Reporting Act, the Truth in Lending Act, the Home Mortgage Disclosure Act, the Real Estate Settlement Procedures Act, the Fair Debt Collection Act, the Dodd-Frank Act’s prohibition on unfair, deceptive, or abusive acts or practices, and state law counterparts. These laws, among other things, require disclosures of the cost of credit and the terms of deposit accounts, prohibit discrimination in credit transactions, regulate the use of credit report information, restrict the Bank’s ability to raise interest rates and subject the Bank to substantial regulatory oversight. Violations of these laws may expose us to liability from potential lawsuits brought by affected customers. Federal and state bank regulators, state attorneys general and state and local consumer protection agencies may also seek to enforce these consumer financial protection laws, in which case we may be subject to regulatory sanctions, civil money penalties and customer rescission rights.
Federal law currently contains extensive customer privacy protection provisions. Under these provisions, a financial institution must provide to its customers, at the inception of the customer relationship and annually thereafter, the institution’s policies and procedures regarding the handling of customers’ nonpublic personal financial information. These provisions also provide that, except for certain limited exceptions, an institution may not provide such personal information to unaffiliated third parties unless the institution discloses to the customer that such information may be so provided and the customer is given the opportunity to opt out of such disclosure. Federal law makes it a criminal offense, except in limited circumstances, to obtain or attempt to obtain customer information of a financial nature by fraudulent or deceptive means.
Dodd-Frank Act
Following the Great Recession of 2007–2009, the financial services industry experienced broad regulatory reform and a restructuring of the entire financial regulatory system. The Dodd-Frank Act was signed into law in 2010 and implemented many new changes in the way financial and banking operations are regulated in the United States, including through mandating higher capital and liquidity requirements, requiring banks to pay increased fees to regulatory agencies, and imposing numerous other provisions intended to strengthen the financial services sector. The Dodd-Frank Act also provided for the creation of the Consumer Financial Protection Bureau, or the CFPB, which has supervisory and examination authority over banking organizations with greater than $10 billion in total assets as well as various non-bank providers with respect to certain federal consumer protection laws and regulations. The CFPB also is authorized to issue regulations designed to prevent unfair, deceptive and abusive practices and ensure that consumers have access to markets for consumer financial products and services and that such markets are fair, transparent and competitive. Given that the Bank has assets of less than $10 billion, it and its affiliates are not currently subject to the CFPB’s direct supervisory authority.
Under provisions of the Dodd-Frank Act referred to as the “Volcker Rule,” certain limitations are placed on the ability of insured depository institutions and their affiliates to engage in sponsoring, investing in and transacting with certain investment funds, including hedge funds and private equity funds. The Volcker Rule also places restrictions on proprietary trading, which could impact certain hedging activities. Subsequent statutory and regulatory amendments to the Volcker Rule have exempted insured depository institutions if it has, and if every company that controls it has, total consolidated assets of $10 billion or less and total trading assets and trading liabilities, on a consolidated basis, that are 5% or less of total consolidated assets. Under these standards, the Company and the Bank are currently exempt from the Volcker Rule.
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State Loan Servicing Regulations
The Company, through Solar Servicing LLC, a subsidiary of the Bank, is engaged in loan servicing business in over 30 states, with each state having its own regulations and certain states requiring licenses and registrations. The Company is currently licensed or registered in connection with its loan servicing business in several states and may be required to seek additional licenses. The Company’s ability to service loans in any particular state is subject to that state’s laws, regulations, and licensing and registration requirements, which may differ from the laws, regulations and licensing and registration requirements of other states. The number and complexity of these laws, and vagaries in their interpretations, present compliance and litigation risks from inadvertent error and omissions which we may not be able to eliminate from our operations or activities. If the Company seeks any additional licenses, a state may impose fines, restrict activity in that state, or seek other relief for activity conducted prior to the issuance of a license. Any ambiguity under the laws and regulations to which we are subject may lead to regulatory investigations or enforcement actions and private causes of action, such as class-action lawsuits, with respect to our compliance with applicable laws and regulations.
Additional Legislative and Regulatory Matters
The BSA, and the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, or the USA PATRIOT Act, require each financial institution: (i) to establish an effective anti-money laundering program; (ii) to establish due diligence policies, procedures and controls with respect to its private banking accounts involving foreign individuals and certain foreign banks; and (iii) to avoid establishing, maintaining, administering or managing correspondent accounts in the United States for, or on behalf of, foreign banks that do not have a physical presence in any country. The USA PATRIOT Act also requires the Secretary of the Treasury to prescribe by regulation minimum standards that financial institutions must follow to verify the identity of customers, both foreign and domestic, when a customer opens an account. In addition, the USA PATRIOT Act contains a provision encouraging cooperation among financial institutions, regulatory authorities and law enforcement authorities with respect to individuals, entities and organizations engaged in, or reasonably suspected of engaging in, terrorist acts or money laundering activities.
OFAC administers and enforces economic and trade sanctions against targeted foreign countries and persons, as defined by various Executive Orders and Acts of Congress. OFAC publishes lists of persons that are the target of sanctions, including the List of Specially Designated Nationals and Blocked Persons. Financial institutions are responsible for, among other things, blocking accounts of and transactions with sanctioned persons and countries, prohibiting unlicensed trade and financial transactions with them, and reporting blocked and rejected transactions after their occurrence. If the Company or the Bank finds a name or other information on any transaction, account or wire transfer that is on an OFAC list or that otherwise indicates that the transaction involves a target of sanctions, the Company or the Bank generally must freeze or block such account or transaction, file a suspicious activity report and notify the appropriate authorities.
Banking regulators examine banks for compliance with the BSA, USA PATRIOT Act and economic sanctions regulations administered by OFAC, and failure of a financial institution to maintain and implement adequate programs to combat money laundering and terrorist financing and comply with OFAC sanctions, or to comply with relevant laws and regulations, could have serious legal, reputational and financial consequences for the institution.
The Sarbanes-Oxley Act mandated for public companies a variety of reforms intended to address corporate and accounting fraud and provided for the establishment of the Public Company Accounting Oversight Board, or the PCAOB, which enforces auditing, quality control and independence standards for firms that audit SEC-reporting companies. Sarbanes-Oxley Act imposes higher standards for auditor independence and restricts the provision of consulting services by auditing firms to companies they audit and requires that certain audit partners be rotated periodically. It also requires chief executive officers and chief financial officers, or their equivalents, to certify the accuracy of periodic reports filed with the SEC, subject to civil and criminal penalties if they knowingly or willfully violate this certification requirement and increases the oversight and authority of audit committees of publicly traded companies. As a public company, we will be subject to the periodic reporting requirements of the Exchange Act.
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Fiscal and Monetary Policy
Banking is a business that depends on interest rate differentials for success. In general, the difference between the interest paid by a bank on its deposits and its other borrowings, and the interest received by a bank on its loans and securities holdings, constitutes the major portion of a bank’s earnings. Thus, the earnings and growth of the Company and the Bank will be subject to the influence of economic conditions generally, both domestic and foreign, and also to the monetary and fiscal policies of the United States and its agencies, particularly the Federal Reserve. The Federal Reserve regulates the supply of money through various means, including open market dealings in United States government securities, the discount rate at which banks may borrow from the Federal Reserve and the reserve requirements on deposits.
Current and future legislation and the policies established by federal and state regulatory authorities will affect the future operations of the Company and the Bank. Banking legislation and regulations may limit the Company and the Bank’s growth and the return to their investors by restricting certain of their activities.
In addition, capital requirements could be changed and have the effect of restricting the activities of the Company and the Bank or requiring additional capital to be maintained. We cannot predict with certainty what changes, if any, will be made to existing federal and state legislation and regulations or the effect that such changes may have on the business of the Company or the Bank.
Federal Home Loan Bank Membership
The Bank is a member of the FHLB of Atlanta, which is one of 11 regional FHLBs subject to supervision and regulation by the Federal Housing Finance Agency. As a member of the FHLB of Atlanta, the Bank is required to acquire and hold shares of capital stock in the FHLB of Atlanta. The essential mission of the FHLBs is to provide liquidity to their members to support housing finance and community development. Each FHLB serves as a reserve or central bank for its members within its assigned region. Each FHLB is funded primarily from proceeds derived from the sale of consolidated obligations of the FHLB system and makes advances to members in accordance with policies and procedures established by the Board of Directors of the FHLB and subject to the oversight of the Federal Housing Finance Agency. All advances from an FHLB are required to be fully secured by sufficient collateral as determined by the FHLB.
Real Estate Lending Evaluations
The federal regulators have adopted uniform standards for evaluations of loans secured by real estate or made to finance improvements to real estate. Banks are required to establish and maintain written internal real estate lending policies consistent with safe and sound banking practices and appropriate to the size of the institution and the nature and scope of its operations. The regulations establish loan to value ratio limitations on real estate loans.
Commercial Real Estate Concentrations
The Company’s lending operations may be subject to enhanced scrutiny by federal banking regulators based on its concentration of commercial real estate loans. The federal banking regulators have issued final guidance to remind financial institutions of the risk posed by CRE lending concentrations. CRE loans generally include land development, construction loans, and loans secured by multifamily property, and nonfarm, nonresidential real property where the primary source of repayment is derived from rental income associated with the property. The guidance prescribes the following guidelines for its examiners to help identify institutions that are potentially exposed to significant CRE risk and may warrant greater supervisory scrutiny:
•total reported loans for construction, land development and other land, or C&D, represent 100% or more of the institution’s total capital; or
•total CRE loans (excluding loans secured by owner-occupied properties) represent 300% or more of the institution’s total capital, and the outstanding balance of the institution’s CRE loan portfolio has increased by 50% or more during the prior 36 months.
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As of March 31, 2026, the Company’s C&D concentration as a percentage of total capital totaled 39.8%, and the Bank’s CRE concentration, net of owner-occupied loans, as a percentage of total capital totaled 139.8%. The foregoing concentrations are within the approved concentration guidelines established by the Company’s and the Bank’s boards of directors in our credit policy. As of March 31, 2026, balances among our CRE loan portfolio have increased by 39.6% over the preceding 36 months.
Brokered Deposits
The Federal Deposit Insurance Act restricts the use of brokered deposits by certain depository institutions. A well-capitalized insured depository institution may solicit and accept, renew or roll over any brokered deposit without restriction. An adequately capitalized insured depository institution may not accept, renew or roll over any brokered deposit unless it has applied for and been granted a waiver of this prohibition by the FDIC. The FDIC may grant a waiver upon a finding that the acceptance of brokered deposits does not constitute an unsafe or unsound practice with respect to such institution. The rates that an adequately capitalized institution with a waiver may pay on brokered deposits may not exceed certain limits. An undercapitalized insured depository institution may not accept, renew or roll over any brokered deposit. As of March 31, 2026, the Bank is considered to be a well-capitalized insured depository institution and had total brokered deposits of $1.1 billion.
Transactions with Affiliates and Loans to Insiders
Sections 23A and 23B of the Federal Reserve Act, which the FDI Act makes applicable to a state non-member bank like the Bank in the same manner and to the same extent as if it were a member bank, establish parameters for an insured bank to conduct “covered transactions” with its affiliates, with the objective of limiting risk to the insured bank. Generally, Sections 23A and 23B (i) limit the extent to which a bank or its subsidiaries may engage in “covered transactions” with any one affiliate to an amount equal to 10% of the bank’s capital stock and surplus, and limit the aggregate of all such transactions with all affiliates to an amount equal to 20% of the bank’s capital stock and surplus, and (ii) require that all “covered transactions” and certain other affiliates transactions be on terms substantially the same, or at least as favorable, to the bank or its subsidiary as those that would be provided to a non-affiliate. The term “covered transaction” includes the making of loans to the affiliate, purchase of assets from the affiliate, issuance of a guarantee on behalf of the affiliate and several other types of transactions.
The Federal Reserve’s Regulation O, which the FDI Act and FDIC regulations similarly make applicable to a state non-member bank like the Bank in the same manner and to the same extent as if it were a member bank, imposes restrictions and procedural requirements in connection with the extension of credit by an insured depository institution to directors, executive officers, principal stockholders (including the Company) and their related interests. In addition, purchases and sales of assets between an insured depository institution and its executive officers, directors, and principal stockholders may also be limited under federal laws.
Sarbanes-Oxley Act generally prohibits loans by public companies to their executive officers and directors. However, there is a specific exception for loans by a financial institution to its executive officers and directors that are made in compliance with federal banking laws.
Limitations on Incentive Compensation
In October 2009, the Federal Reserve issued proposed guidance designed to help ensure that incentive compensation policies at banking organizations do not encourage excessive risk-taking or undermine the safety and soundness of the organization. In June 2010, the Federal Reserve issued the incentive compensation guidance in final form and was joined in by the FDIC and the OCC. The final guidance, which covers all employees that have the ability to materially affect the risk profile of an organization, either individually or as part of a group, is based upon the key principles that a banking organization’s incentive compensation arrangements should (i) provide employees incentives that appropriately balance risk and reward and, thus, do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks, (ii) be compatible with effective internal controls and risk management, and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors. Any deficiencies in compensation practices that are identified may be incorporated into the organization’s supervisory ratings, which can affect its ability to make acquisitions or perform other actions. The guidance provides that enforcement actions may be taken against a banking organization if its
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incentive compensation arrangements or related risk-management control or governance processes pose a risk to the organization’s safety and soundness and the organization is not taking prompt and effective measures to correct the deficiencies.
Section 956 of the Dodd-Frank Act requires the appropriate federal regulators (defined as the FDIC, the OCC, the Federal Reserve, the Federal Housing Finance Agency, the National Credit Union Administration, and the SEC) to jointly prescribe regulations or guidelines with respect to incentive-based compensation practices at certain financial institutions, which would include financial institutions like the Bank with more than $1 billion in assets. Proposals to implement Section 956 of the Dodd-Frank Act have been proposed in the past by the required federal regulators, but not adopted in final form. Whether or when all the required agencies will finalize rulemaking under Section 956 is uncertain, and we are unable to determine whether any proposal would materially impact our business or incentive compensation arrangements.
Privacy and Data Security
Our business requires the collection and retention of large volumes of customer data, including personal information in various information systems that we maintain and in those maintained by third-party service providers. We also maintain important internal company data such as personal information about our employees and information relating to our operations. We are subject to complex and evolving laws and regulations governing the privacy and security of personal information of consumers, prospective, current and former customers, employees and contractors, and other individuals. For example, our business is subject to the GLBA, which requires that we disclose certain information to consumers regarding our privacy and security practices with respective to personal information. The GLBA imposes additional requirements, including (i) restrictions on when and to which entities financial institutions may disclose personal information about their customers, (ii) limitations on how such personal information may be used, and (iii) additional requirements regarding information security and data protection. We are also subject to the FCRA, which imposes requirements on our use of consumer reports. The FCRA limits access to credit reports to specific, permissible purposes (e.g., credit, employment, insurance) and mandates that consumers have the right to access, dispute, and correct their information.
In addition to federal privacy and data security laws and regulations, numerous state laws and regulations govern the privacy and security of personal information, and state legislatures have been actively considering and enacting new legislation. For example, certain states have enacted financial privacy laws and regulations that resemble the GLBA’s privacy requirements. For example, the California Consumer Privacy Act (as amended by the California Privacy Rights Act) requires that companies disclose their privacy policies to consumers who reside in California, and, in some circumstances, allow such consumers to prevent disclosure of certain personal information to a nonaffiliated third-party. To the extent applicable, these laws and regulations may impose additional and/or different requirements than federal law, may present implementation challenges, could be an enforcement priority for the state regulators, and could generate increased lawsuits by consumers and other individuals.
We are also subject to laws and regulations governing how we respond to data breaches, cybersecurity incidents, and similar matters. At the federal level, the Interagency Guidance on Response Programs for Unauthorized Access to Customer Information and Customer Notice requires that financial institutions implement risk-based programs to detect, assess, and contain security breaches and notify customers and regulators when unauthorized access to sensitive customer information occurs.
The U.S. federal bank regulatory agencies have also established computer-security incident notification requirements for banking organizations and bank service providers. Under the Computer-Security Incident Notification Final Rule, a bank holding company, such as the Company, and an FDIC-supervised depository institution, such as the Bank, are required to notify the Federal Reserve or FDIC, respectively, as soon as possible and no later than 36 hours after a determination that a computer-security incident that rises to the level of a notification incident has occurred. A notification incident may include a major computer system failure, a cyber-related interruption (such as a distributed denial of service or ransomware attack) or another type of significant operational interruption.
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The SEC has also adopted rules requiring public companies to disclose (i) material cybersecurity incidents that they experience on a Current Report on Form 8-K within four business days of determining that a material cybersecurity incident has occurred and (ii) information regarding their cybersecurity risk management, strategy, and governance on an annual basis.
In addition to our obligation to address federal standards related to data breaches, cybersecurity incidents, and similar matters, all 50 states, the District of Columbia, and U.S. territories have enacted breach notification laws. State breach notification laws present additional or different notification requirements than those arising under federal law, and breaches affecting residents in multiple states often require compliance with multiple, differing state statutes. Evaluating and addressing our obligations under these laws adds complexity to our incident response process, and the nature of these laws may present compliance challenges.
The application, interpretation and enforcement of these laws and regulations are often uncertain, particularly in light of new and rapidly evolving data-driven technologies and significant increases in computing power. These laws and regulations are constantly evolving, remain a focus of regulators, and will continue to have a significant impact on our business and operations. Violations of these laws and regulations can give rise to enforcement actions by governmental agencies and to private lawsuits for damages and other forms of relief.
Investment Adviser Regulation
Alliance Partners provides investment advisory services to FDIC-insured depositary institutions (or affiliates or holding companies of such institutions) and is registered as an investment adviser with the SEC. The 1940 Act, together with the SEC’s regulations and interpretations thereunder, impose substantive and material restrictions and requirements on the operations of registered investment advisers. The SEC is authorized to institute proceedings and impose sanctions for violations of the 1940 Act, ranging from fines and censures to termination of an adviser’s registration. An investment adviser has a fiduciary duty to its clients. Registered investment advisers are subject to many requirements that cover, among other things: requirements and limitations on recommendations to clients, trading for proprietary, personal and client accounts and allocations of investment opportunities; disclosure of information about the adviser’s business to clients; maintenance of written policies and procedures including in relation to the handling of material non-public information; maintenance of extensive books and records; restrictions on the types of fees that may be charged, restrictions on transactions with affiliated entities; custody of client assets; client privacy; and marketing of investment advisory services. Compliance with the regulations and requirements under the 1940 Act may entail a substantial amount of costs and expenses on an annual basis. The SEC has authority to inspect any investment adviser and typically inspects a registered adviser periodically to determine whether the adviser is conducting its activities (i) in accordance with applicable laws, (ii) in a manner that is consistent with disclosures made to clients, and (iii) with adequate systems and procedures to ensure compliance. As required by the 1940 Act, investment advisory agreements may not be assigned without the client’s consent. The regulatory environment for investment advisers is subject to continual change, the nature of which we cannot predict. New laws or regulations, or changes in the interpretation or enforcement of existing laws or regulations, applicable to registered investment advisers and their clients may adversely affect our business. Our ability to function in this environment will depend on our ability to constantly monitor and promptly react to legislative and regulatory changes. Compliance with any new laws or regulations could be more difficult and expensive and affect the manner in which we conduct business.
Evolving Legislation and Regulatory Action
Congress may enact legislation from time to time that affects the regulation of the financial services industry, and state legislatures may enact legislation from time to time affecting the regulation of financial institutions chartered by or operating in those states. Federal and state regulatory agencies also periodically propose and adopt changes to their regulations or change the manner in which existing regulations are applied. The substance or impact of pending or future legislation or regulation, or the application thereof, cannot be predicted, although the enactment of proposed legislation could impact the regulatory structure under which the Company and the Bank operate and may significantly increase costs, impede the efficiency of internal business processes, require an increase in regulatory capital, require modifications to business strategy and limit the ability to pursue business opportunities in an efficient manner. A change in statutes, regulations or regulatory policies applicable to the Company or the Bank
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could have a material adverse effect on the business, financial condition, and results of operations of the Company and the Bank. See “Risk Factors—Legal and Compliance Risks—We are subject to extensive regulation and supervision, which could limit or restrict our activities and negatively impact our financial performance.”
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MANAGEMENT
Set forth below are the names, ages and positions of our directors and executive officers as of the date hereof.
NameAgePosition
Executive Officers
John K. Delaney63Chief Executive Officer and Chairman of the Board
Donald F. Cole55President and Chief Operating Officer
Lisa M. Cuba44Executive Vice President, Chief Risk Officer
Kenneth F. Elias53Executive Vice President
Michael A. Housley54Executive Vice President, Chief Accounting Officer
Aaron J. Juda45Executive Vice President, Chief Strategy Officer
Leanne Ladd44Executive Vice President
Christopher S. Lynch65Executive Vice President, Chief Financial Officer
Kori L. Ogrosky56Executive Vice President, Chief Legal Officer and Corporate Secretary
James H. Peterson63Executive Vice President
Non-Employee Directors
Clifford V. Brokaw IV58
Director
Nancy K. Eberhardt72
Director
Jason M. Fish68
Director
Cynthia A. Flanders72
Director
Eric B. Hoffman39
Director
Christopher T. Jones66
Director
Donald L. Kohn83
Director
Lewis A. Sachs62
Director
Steven M. Shafran66
Director
Derek Z. Walker34
Director
Executive Officers
John K. Delaney founded Forbright Bank (formerly known as Congressional Bank) and Forbright, Inc. (formerly known as Congressional Bancshares, Inc.). Following his initial investment in Congressional Bancshares, Inc. in 2011, Mr. Delaney assumed senior leadership roles, serving as Chairman and Chief Executive Officer of Forbright, Inc. since 2021 and Executive Chairman of the Bank since 2020. Prior to assuming his senior leadership roles at Forbright, Mr. Delaney served as a member of the U.S. House of Representatives and previously founded and led two New York Stock Exchange-listed companies; HealthCare Financial Partners, Inc. and CapitalSource Inc., which provided loans to mid-sized businesses. Mr. Delaney currently serves on multiple nonprofit and for-profit boards and in advisory roles. Mr. Delaney earned a B.A. degree from Columbia University and J.D. degree from Georgetown Law Center. Named by Fortune Magazine as one of the World’s 50 Greatest Leaders in 2017, we believe Mr. Delaney’s perspective and experience he brings as Forbright’s founder and as our Chief Executive Officer makes him qualified to serve on our board.
Donald F. Cole has served as the President and Chief Operating Officer of Forbright, Inc. and President and Chief Executive Officer of Forbright Bank since 2018. From 2012 to 2018, Mr. Cole served as Chief Financial Officer of Alliance Partners LLC, a wholly-owned subsidiary of Forbright Bank since 2018. From 2009 to 2011, Mr. Cole served as Chief Financial Officer of CapitalSource. From 2003 to 2009, Mr. Cole served in various senior management positions at CapitalSource including Chief Operations Officer, Chief Accounting Officer, and Chief Information Officer. Mr. Cole received his B.S. degree and M.B.A. from the State University of New York at Buffalo and his J.D. degree from the University of Virginia.
Lisa M. Cuba has served as Executive Vice President, Chief Risk Officer of Forbright, Inc. and Forbright Bank since 2022. Prior to joining Forbright, Ms. Cuba served in various roles at Atlantic Union Bank (or its predecessors) from 2002 to 2022, including tenure as Senior Vice President, Director of Enterprise Risk Management, where she led the development and implementation of the bank’s enterprise-wide risk management framework, oversaw the identification and assessment of key operational, credit, and market risks, and advised senior leadership and the
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board on risk appetite and mitigation strategies. Ms. Cuba holds an M.B.A. from the University of South Carolina and a B.B.A. from the College of William & Mary.
Kenneth F. Elias has served as the Executive Vice President of Forbright, Inc. since 2024 and the Chief Lending Officer of Forbright Bank since 2023. Mr. Elias has also served as the Chairman of the Bank’s Officers Loan Committee since 2023 and has been a member of the Officers Loan Committee since 2011. Mr. Elias previously founded and ran various national lending business units at Forbright Bank, including the cash flow and leveraged finance division, lender finance, fund finance and specialty real estate businesses. Prior to joining the Bank in 2011, Mr. Elias served various roles in leveraged finance, private equity and accounting and has origination and underwriting, portfolio management and workout experience. Mr. Elias received his B.S. degree in Accounting from the University of Delaware and his M.B.A. from the Smith School of Business at the University of Maryland.
Michael A. Housley has served as Executive Vice President, Chief Accounting Officer of Forbright, Inc. and Forbright Bank since 2018. In these roles, Mr. Housley has overseen Forbright’s Specialty Lending Loan Servicing Department, which services some of our primary loan portfolios and lending strategies. Mr. Housley also serves as the Chief Financial Officer of Alliance Partners and previously served as its Chief Compliance Officer until 2025. Mr. Housley’s past experience includes serving as a Director of Accounting Policy for Fannie Mae and leading the SEC Financial Reporting team of CapitalSource. Mr. Housley holds a B.S. from the University of Tennessee and holds an active Certified Public Accountant license from the state of Virginia with prior experience in the assurance practice of KPMG.
Aaron J. Juda has served as Executive Vice President, Chief Strategy Officer of Forbright, Inc. and Forbright Bank since 2021 and President, Consumer Banking of Forbright Bank since 2023. Previously, Mr. Juda served as EVP, Chief Financial Officer of Forbright, Inc. from October 2022 until July 2023. Prior to joining Forbright, Mr. Juda served as Business Development Officer of Alliance Partners from 2016 to 2021, prior to which he served as a Vice President in the Financial Institutions Group at Barclays Investment Bank and, prior to that, was a consultant in Accenture’s Strategy group. Mr. Juda holds a B.B.A. from the University of Pittsburgh and an M.B.A. from the NYU Stern School of Business.
Leanne Ladd has served as Executive Vice President of Forbright, Inc. and Executive Vice President, Chief Administrative Officer of Forbright Bank since 2021. Ms. Ladd has served in multiple roles since joining Forbright in 2018, including Vice President, Director of Systems Operations / Program Management of Forbright Bank and Senior Vice President, Director of Operations of Forbright Bank. Prior to joining Forbright, Ms. Ladd held multiple roles at Pacific Western Bank encompassing system operations and project management, ultimately leading the bank’s application development team. Ms. Ladd has also previously served in various legal and operations roles for CapitalSource. Ms. Ladd holds a B.A. from Brigham Young University.
Christopher S. Lynch has served as Executive Vice President, Chief Financial Officer of Forbright, Inc. and Forbright Bank since 2023. Prior to joining Forbright, Mr. Lynch served as Senior Vice President and Executive Vice President, Finance, at Pacific Western Bank from 2014 to 2023, managing the bank’s financial planning, tax and corporate insurance functions. Mr. Lynch’s other past experience includes executive roles including Senior Vice President, Finance at CapitalSource and Chief Financial Officer at Walker & Dunlop. Earlier in his career, Mr. Lynch worked in investment banking at Merrill Lynch and in finance positions at Marriott International. Mr. Lynch holds a B.S. from Cornell University and an M.B.A. from the Wharton School at the University of Pennsylvania.
Kori L. Ogrosky has served as Executive Vice President, Chief Legal Officer and Corporate Secretary of Forbright, Inc. and Forbright Bank since 2022. From 2021 to 2022, Ms. Ogrosky served as Executive Vice President, Senior Counsel, National Lending and Corporate Strategy of both Forbright, Inc. and Forbright Bank, providing strategic advisory services to executive management, primarily related to mergers and acquisitions. Prior to joining Forbright in 2021, Ms. Ogrosky served as Executive Vice President, General Counsel and Corporate Secretary for PacWest Bancorp from 2014 to 2021, prior to which she served in various legal roles at CapitalSource Inc., including tenure as Senior Vice President and General Counsel. In these roles, Ms. Ogrosky supervised and managed the legal affairs of large financial services enterprises, provided counsel to management and the boards of directors and managed regulatory compliance. Ms. Ogrosky also currently serves on the board of directors of the
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Maryland Bankers Association. Ms. Ogrosky holds a B.A. from Emory University and a J.D. from George Washington University.
James H. Peterson has served as Executive Vice President of Forbright, Inc. and Executive Vice President, Chief Credit Officer of Forbright Bank since 2014. Mr. Peterson previously served as Senior Vice President and Chief Operating Officer of Forbright Bank from 2013 to 2018. Prior to joining Forbright, Mr. Peterson worked at CapitalSource for 11 years, most recently as Senior Vice President and Director of Credit & Credit Policy, and also worked at Bank of America in various commercial lending roles over 17 years. Mr. Peterson holds a B.A. from the College of William & Mary.
Non-Employee Directors
Clifford V. Brokaw IV has served as a member of the boards of directors of Forbright, Inc. and Forbright Bank since 2021. Since 2019, Mr. Brokaw has served as a Managing Director at Bayview Asset Management, LLC, where he leads the firm’s efforts to source, structure and manage private equity and special situations investments across the financial services sector. From 2015 to 2019, Mr. Brokaw served as the Global Co-Head of Asset Management in the Financial Institutions Group at Citibank. From 2007 to 2015, Mr. Brokaw served as a Managing Director at Corsair Capital, LLC, where he served on the investment committee. From 2012 to 2015, Mr. Brokaw served on the board of directors of United Community Banks, Inc. Mr. Brokaw also previously served as a Managing Director within the Financial Institutions Group at Goldman Sachs and worked in mergers and acquisitions at J.P. Morgan Chase & Co. Mr. Brokaw earned a B.A. degree and a J.D. degree from the University of Virginia. Mr. Brokaw was selected to serve on our board of directors because of his extensive background and leadership in the financial institutions sector.
Nancy K. Eberhardt has served as a member of the boards of directors of Forbright, Inc. since 2023 and Forbright Bank since 2003. Ms. Eberhardt is the owner and has served as the Chief Executive Officer of Pathwise Partners LLC since 2003. Ms. Eberhardt is also a certified Executive Coach and a leadership development and strategic consultant. Ms. Eberhardt also served as the Chairman of Internet Inc., owner of one of the first regional ATM networks. Prior to Pathwise Partners, Ms. Eberhardt served as a Regional Bank President and led the customer product development division of Central Fidelity Banks, Inc., which was acquired by Wachovia Corporation, which is now Wells Fargo & Company. Ms. Eberhardt earned a B.A. degree from Virginia Wesleyan University, an M.S. degree from Old Dominion University and an Executive Certificate in Leadership Coaching from Georgetown University. Ms. Eberhardt was selected to serve on our board of directors because of her experience in banking and product expertise.
Jason M. Fish has served as a member of the boards of directors of Forbright, Inc. and Forbright Bank since 2011. Mr. Fish has served as President of Sebastes Capital, LLC, his family investment office, since its formation in 2013. Mr. Fish has also served on the executive advisory board of Victory Park Capital Advisors, LLC, a private capital manager, since 2014 and has served as a member of the Advisory Council of the Princeton Institute for International and Regional Studies since 2012. From 2014 to 2019, Mr. Fish served as Senior Advisor to and the Chair of the board of directors of Generate Capital, PBC, a sustainable infrastructure platform. Prior to 2016, Mr. Fish co-founded Alliance Partners LLC, a wholly owned subsidiary of Forbright Bank that serves as the asset manager for BancAlliance, and served as a member of its board of directors and as its Chief Investment Officer. Mr. Fish co-founded CapitalSource, Inc., a commercial lending firm, and served as the President, the Chief Investment Officer and the Vice Chairman of the board of directors from 2000 to 2007. Mr. Fish earned a B.A. degree from Princeton University. Mr. Fish was selected to serve on our board of directors because of his extensive background and leadership in the financial institutions sector, as well as his experience with Alliance Partners LLC and CapitalSource, Inc.
Cynthia A. Flanders has served as a member of the Board of Directors of Forbright, Inc. and Forbright Bank since 2013. Ms. Flanders is the founder and has served as the Chief Executive Officer of Skipjack Partners LLC since 2009, which provides executive, leadership and career coaching services to individuals and corporations. Ms. Flanders has also served as a senior advisor for Verit Advisors LLC, an independent investment bank and advisory firm, since 2013. Ms. Flanders also has served on the board of directors of Argan, Inc. (NYSE: AGX) since 2009, where she is the Chair of its Nominating and Governance Committee and a member of its Compensation Committee.
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Ms. Flanders also served as the interim Chief Financial Officer in 2015 while a search for a permanent CFO was found. From 1975 to 2009, Ms. Flanders served in various leadership positions at Bank of America Corporation and its predecessor organizations. Ms. Flanders earned a B.S. degree and an M.B.A. degree from the University of Maryland, Robert H. Smith School of Business. Ms. Flanders was selected to serve on our board of directors because of her significant banking expertise, as well as her long-time service on the board of a public company.
Eric B. Hoffman has served as a member of the boards of directors of Forbright, Inc. and Forbright Bank since 2021. Mr. Hoffman has worked at Centerbridge Partners, LP, a private investment firm, since 2010, and currently serves as a Senior Managing Director, as Co-Head of the Centerbridge Keystone Fund and on various investment committees across the firm. Prior to this, Mr. Hoffman served as an Analyst at The Blackstone Group. Mr. Hoffman currently serves on the boards of directors of various companies, including Fairstone Bank of Canada, First National Bank of America and Martello Re Limited, a life and annuity reinsurance company. Mr. Hoffman earned a B.S. degree from the Wharton School at the University of Pennsylvania. Mr. Hoffman was selected to serve on our board of directors because of his extensive financing and accounting experience, as well as his service on the boards of directors of financial institutions.
Christopher T. Jones has served as a member of the boards of directors of Forbright, Inc. since 2006 and Forbright Bank since 2003. Mr. Jones has served as the President of BMC Property Group, a Maryland-based real estate investment company, since 1981. Mr. Jones is also an early-stage investor and a member of the Urban Land Institute, the International Council of Shopping Centers. Mr. Jones earned a B.A. degree from the University of Pennsylvania. Mr. Jones was selected to serve on our board of directors because of his extensive background and expertise in real estate investment.
Donald L. Kohn has served as a member of the boards of directors of Forbright, Inc. since 2021 and Forbright Bank since 2023. Mr. Kohn has served as the Robert V. Roosa Chair in International Economics since 2017 and a Senior Fellow in the Economic Studies program since 2010 at the Brookings Institution. Mr. Kohn also lectures for the Washington Speakers Bureau and has provided monetary policy consulting to institutions including T. Rowe Price Group, Inc. From 2011 to 2021, Mr. Kohn served as an external member of the Financial Policy Committee at the Bank of England, the central bank of the United Kingdom. Mr. Kohn served in the Federal Reserve system for 40 years, having served as a Member and then the Vice Chair of the Board of Governors from 2002 until 2010. Mr. Kohn earned a B.A. degree from the College of Wooster and a Ph.D. degree from the University of Michigan. Mr. Kohn was selected to serve on our board of directors because of his extensive experience in economics, monetary policies and financial regulations at both the governmental and academic levels.
Lewis A. Sachs has served as a member of the board of directors of Forbright, Inc. since 2023. Mr. Sachs is Co-Founder and has served as Managing Partner of Gallatin Point Capital LLC, a private investment firm, since 2016. Prior to Gallatin Point Capital LLC, Mr. Sachs was a Co-Founder, Chairman and Chief Executive Officer of Alliance Partners LLC. During the global financial crisis, Mr. Sachs served in the Obama administration at the U.S. Treasury Department as Counselor to the Secretary of the U.S. Treasury Department and the Head of the Financial Crisis Response Team. Prior to this, Mr. Sachs served as a Partner and Chairman of the Investment Committee at Mariner Investment Group, as the Chief Executive Officer of Cornerstone Asset Management, LLC, and as Vice Chairman of Perseus, LLC, a merchant bank and private equity fund management firm. During the Clinton administration, Mr. Sachs served as Assistant Secretary of the Treasury for Financial Markets. Mr. Sachs currently serves on the board of directors of Trusted Resource Underwriters Exchange, a reciprocal property insurer. Mr. Sachs earned a B.A. degree from Denison University. Mr. Sachs was selected to serve on our board of directors because of his significant private sector expertise in finance and his governmental expertise in economic and financial policy and regulation, as well as his experience with Alliance Partners LLC.
Steven M. Shafran has served as a member of the boards of directors of Forbright, Inc. since 2021 and Forbright Bank since 2023. Mr. Shafran has served as a Senior Advisor at Centerbridge Partners, LP (“Centerbridge”) since 2018. From 2011 to 2018, Mr. Shafran served as Chairman and then as a member of the board of directors of Georgia-based Hamilton State Bancshares, Inc. until it was sold to Ameris Bancorp in 2018. From 2009 to 2011, Mr. Shafran was a professor at Georgetown University’s McDonough School of Business, where he taught courses on the banking system and financial crises. From January 2008 until June of 2009, Mr. Shafran was a Senior Advisor to U.S. Treasury Secretaries Henry Paulson and Timothy Geithner, advising the U.S.
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Treasury Department on its responses during the global financial crisis. Mr. Shafran currently serves on the board of directors of two of Centerbridge’s portfolio companies: as Executive Chairman of Cascade Financial Holdings since 2018 and as the director of Fairstone Bank of Canada since 2025. Mr. Shafran earned a B.A. degree from the University of California, Berkeley and an M.B.A. degree from the Harvard Business School. Mr. Shafran was selected to serve on our board of directors because of his leadership and board of directors’ experience in the financial services sector and his governmental and academic leadership in monetary policy and financial regulations.
Derek Z. Walker has served as a member of the boards of directors of Forbright, Inc. since 2023 and Forbright Bank since 2021. Mr. Walker has served as a Managing Director on the investment team at Gallatin Point Capital LLC since 2019. From 2015 to 2017, Mr. Walker served as an Associate at Thomas H. Lee Partners, LP, a private equity firm, focusing on investments in financial services businesses. From 2013 to 2015, Mr. Walker worked in the Financial Institutions Group in the Investment Banking Division at J.P. Morgan Chase & Co. Mr. Walker earned a B.A. degree from Yale University and an M.B.A. degree from Stanford Graduate School of Business. Mr. Walker was selected to serve on our board of directors because of his expertise and leadership in the financial services sector.
Board of Directors
In connection with this offering, we will amend and restate our certificate of incorporation and bylaws. Our Amended Certificate of Incorporation will provide that the number of directors of our board shall be established from time to time by our board. Immediately after this offering, our board of directors will initially be composed of 11 directors. John Delaney will continue to serve as Chairman of our board of directors.
Our Amended Certificate of Incorporation will continue to provide that our board of directors be divided into three classes with staggered three-year terms. Only one class of directors will be elected at each annual meeting of stockholders, with the other classes continuing for the remainder of their respective three-year terms. Our current directors will be divided among the three classes as follows:
•the Class I directors are John Delaney, Nancy Eberhardt, and Jason Fish, and their terms will expire at the annual meeting of stockholders to be held in 2028;
•the Class II directors are Clifford Brokaw, Cynthia Flanders, Lewis Sachs, and Steven Shafran, and their terms will expire at the annual meeting of stockholders to be held in 2029; and
•the Class III directors are Eric Hoffman, Christopher Jones, Donald Kohn, and Derek Walker, and their terms will expire at the annual meeting of stockholders to be held in 2027.
At each annual meeting of stockholders, upon the expiration of the term of a class of directors, the successor to each director in the class will be elected to serve from the time of election and qualification until the third annual meeting following their election and until a successor is duly elected and qualified, in accordance with our Amended Certificate of Incorporation. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of our directors.
Upon the completion of this offering, we will enter into Investor Rights Agreements with certain of our existing stockholders that will provide, among other things. certain director nomination rights. See “Description of Capital Stock—Investor Rights Agreements.”
The classification of our board of directors may have the effect of delaying or preventing changes in control of our company. See “Description of Capital Stock—Anti-Takeover Effects of Delaware Law, Our Organizational Documents and the Investor Rights Agreements.”
Director Independence
Our board of directors has determined that all of our directors except Mr. Delaney are “independent directors” as defined under the listing requirements of the Nasdaq, along with the rules of the SEC. In making these determinations, our board of directors reviewed and discussed information provided by the directors and us with
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regard to each director’s business and personal activities and relationships as they may relate to us and our management, including the beneficial ownership of our capital stock by each non-employee director and the transactions involving them described in the section entitled “Certain Relationships and Related Party Transactions” to arrive at subjective and objective determinations of independence as informed by the listing requirements of the Nasdaq and the rules of the SEC.
There are no family relationships among any of our directors or executive officers.
Lead Independent Director
Our board of directors has adopted Corporate Governance Guidelines, to be effective prior to the completion of this offering of securities, that provide that if the chairman of our board of directors is not an independent director, our independent directors shall designate a lead independent director. Our independent directors has designated Nancy Eberhardt to serve as our lead independent director. As lead independent director, Ms. Eberhardt will have the following duties and responsibilities:
•serving as a liaison between senior management and the independent directors;
•facilitating discussion and open dialogue among the independent directors during board meetings, executive sessions and outside of board meetings;
•presiding at executive sessions and calling meetings of the independent directors;
•working with the chairman to develop and approve board meeting agendas, materials and schedules, including to ensure that there is sufficient time for discussion of all agenda items; and
•ensuring availability for consultation and direct communication with our stockholders, if requested and in coordination with senior management.
Committees of the Board of Directors
Our board of directors has established standing committees to assist the discharge of its responsibilities. These committees include, among others, the audit committee, the compensation committee, the nominating and corporate governance committee and the risk committee. Our board of directors also may establish such other committees as it deems appropriate, in accordance with applicable law and regulations and our corporate governance documents. The
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following table summarizes the expected membership of each of the committees of the board of directors upon completion of this offering:
CommitteeMembers
Audit Committee
Steven M. Shafran (Chair)
Clifford V. Brokaw IV
Cynthia A. Flanders
Donald L. Kohn
Nominating and Corporate Governance Committee
Jason M. Fish (Chair)
Nancy K. Eberhardt
Eric B. Hoffman
Lewis A. Sachs
Derek Z. Walker
Compensation Committee
Derek Z. Walker (Chair)
Jason M. Fish
Eric B. Hoffman
Christopher T. Jones
Steven M. Shafran
Risk Committee
Cynthia A. Flanders (Chair)
Clifford V. Brokaw IV
Nancy K. Eberhardt
Eric B. Hoffman
Christopher T. Jones
Donald L. Kohn
Audit Committee. The audit committee assists the board of directors in fulfilling its responsibilities for general oversight of the integrity of our financial statements, our compliance with legal and regulatory requirements, our independent auditors’ qualifications and independence, the performance of our internal audit function and independent auditors and risk assessment and risk management. Among other things, upon completion of this offering, the audit committee will:
•annually review the audit committee charter and the committee’s performance;
•appoint, evaluate and determine the compensation of our independent auditors;
•review and approve the scope of the annual audit, the audit fee, the financial statements, significant accounting policy changes, material weaknesses identified by outside auditors or the internal audit function and risk management issues;
•prepare the audit committee report for inclusion in our proxy statement for our annual meeting;
•review disclosure controls and procedures, internal controls, internal audit function and corporate policies with respect to financial information;
•assist the board of directors in monitoring our compliance with applicable legal and regulatory requirements;
•oversee investigations into complaints concerning financial matters, if any; and
•review other risks that may have a significant impact on our financial statements.
Our audit committee consists of Steven Shafran, Clifford Brokaw, Cynthia Flanders, and Donald Kohn, with Steven Shafran serving as chair. Rule 10A-3 under the Exchange Act and the rules of the Nasdaq require that our audit committee have at least one independent member upon the listing of our Class A common stock, have a majority of independent members within 90 days of the date of this prospectus and be composed entirely of independent members within one year of the date of this prospectus. Our board of directors has determined that Steven Shafran, Clifford Brokaw, Cynthia Flanders and Donald Kohn each meet the definition of “independent
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director” for purposes of serving on the audit committee under Rule 10A-3 under the Exchange Act and the rules of the Nasdaq. Each member of our audit committee also meets the financial literacy requirements of the Nasdaq.
In addition, our board of directors has determined that each of Steven Shafran, Clifford Brokaw IV and Cynthia Flanders qualify as an “audit committee financial expert,” as such term is defined in Item 407(d)(5) of Regulation S-K. Our board of directors has adopted a written charter for the audit committee, which will be available on our principal corporate website at www.forbrightbank.com concurrently with the completion of this offering. The information contained on, or that can be accessed through, our website is not a part of this prospectus; we have included this website address solely as an inactive textual reference.
Compensation Committee. The compensation committee is responsible for discharging the board’s responsibilities relating to compensation of our executive officers and directors. Among other things, upon completion of this offering, the compensation committee will:
•evaluate human resources and compensation strategies;
•review and approve objectives relevant to executive officer compensation;
•evaluate performance and determine the compensation of the Chief Executive Officer in accordance with those objectives;
•approve any changes to non-equity-based benefit plans involving a material financial commitment;
•recommend to the board of directors compensation for directors;
•prepare the compensation committee report required by SEC rules to be included in our annual report; and
•evaluate performance in relation to the compensation committee charter.
Our compensation committee consists of Derek Walker, Jason Fish, Eric Hoffman, Christopher Jones and Steven Shafran, with Derek Walker serving as chair. Our board has determined that Derek Walker, Jason Fish, Eric Hoffman, Christopher Jones and Steven Shafran each meet the definition of “independent director” for purposes of serving on the compensation committee under the rules of the Nasdaq. All members of our compensation committee are “non-employee directors” as defined in Rule 16b-3 under the Exchange Act.
The compensation committee has adopted a written charter that among other things, specifies the scope of its rights and responsibilities. Before completion of this offering, the charter will be available on our website at www.forbrightbank.com.
Nominating and Corporate Governance Committee. Our nominating and corporate governance committee is responsible for, among other things:
•identifying individuals qualified to become members of our board of directors, consistent with criteria approved by our board of directors;
•evaluating the overall effectiveness of our board of directors and its committees; and
•reviewing developments in corporate governance compliance and developing and recommending to our board of directors a set of corporate governance guidelines.
Our nominating and corporate governance committee consists of Jason Fish, Nancy Eberhardt, Eric Hoffman, Lewis Sachs and Derek Walker, with Jason Fish serving as chair. Our board has determined that Jason Fish, Nancy Eberhardt, Eric Hoffman, Lewis Sachs and Derek Walker each meet the definition of “independent director” for purposes of serving on the nominating and corporate governance committee under the rules of the Nasdaq. Our board of directors will adopt a written charter for the nominating and corporate governance committee, which will be available on our principal corporate website at www.forbrightbank.com substantially concurrently with the completion of this offering.
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Risk Committee. The risk committee is responsible for overseeing our enterprise-risk management policies, commensurate with our capital structure, risk profile, complexity, size and other risk-related factors. Among other things, the risk committee will:
•monitor our overall risk profile and review risk management policies;
•monitor our process to identify, assess and manage risks that could prevent us from achieving our business objectives;
•oversee actions relating to interest rate risk and liquidity risks;
•oversee actions relating to the activities of our enterprise risk management oversight groups; and
•facilitate communication among management, the board of directors and our enterprise risk management oversight groups.
The risk committee has adopted a written charter that specifies among other things, the scope of its rights and responsibilities. Our risk committee consists of Cynthia Flanders, Clifford Brokaw, Nancy Eberhardt, Eric Hoffman, Christopher Jones, and Donald Kohn, with Cynthia Flanders serving as chair.
Compensation Committee Interlocks and Insider Participation
Upon completion of this offering, none of the members of our compensation committee will be or will have been one of our officers or employees. In addition, none of our executive officers serves or has served as a member of the compensation committee or other board committee performing equivalent functions of any entity that has one or more executive officers serving as one of our directors or on our compensation committee.
Code of Business Conduct and Ethics
Our board of directors has adopted a Code of Business Conduct and Ethics, to be effective prior to the completion of this offering of securities, that applies to all employees and each of our directors and officers, including our principal executive officer and principal financial officer. The purpose of the Code of Business Conduct and Ethics will be to promote, among other things, honest and ethical conduct, full, fair, accurate, timely and understandable disclosure in public communications and reports and documents that we file with, or submit to, the SEC, compliance with applicable governmental laws, rules and regulations, accountability for adherence to the code and the reporting of violations thereof. Our Code of Business Conduct and Ethics, upon the completion of this offering, will be available on our website at www.forbrightbank.com. We expect that any amendments to our Code of Business Conduct and Ethics, or any waivers of its requirements, will be disclosed on our website, as well as by any other means required by Nasdaq rules.
Risk Management and Oversight
Our board of directors believes that effective risk management and control processes are critical to our safety and soundness, our ability to predict and manage the challenges that we face and, ultimately, our long-term corporate success. Our board of directors, both directly and through its committees, is responsible for overseeing our risk management processes, with each of the committees of our board of directors assuming a different and important role in overseeing the management of the risks we face.
The risk committee reviews, and assesses the effectiveness of, our enterprise risk management program, which is designed to assist our board of directors, management, and our business lines in identifying and monitoring major risks to mitigate potential losses or adverse impacts to the Company’s position. The risk committee also reviews the strategies, policies, procedures, reports, models and systems established by management to identify, assess, measure, and manage the major risks facing us. The audit committee is responsible for overseeing risks associated with financial matters (particularly financial reporting, accounting practices and policies, disclosure controls and procedures and internal control over financial reporting) and, through its oversight of our internal audit function, assessing the overall effectiveness of our risk management framework.
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The compensation committee has primary responsibility for risks and exposures associated with our human resources, compensation policies, plans and practices, regarding both executive compensation and the compensation structure generally. In particular, our compensation committee reviews and approves all human resources and talent-related components of our risk metrics. Further, the compensation committee, in conjunction with our President and Chief Risk Officer and other members of our senior management as appropriate, is responsible for overseeing whether our incentive compensation arrangements are consistent with our compensation philosophy and applicable laws and regulations, including safety and soundness requirements, and do not encourage imprudent or excessive risk-taking by our employees.
The nominating and corporate governance committee oversees risks associated with the independence of our board of directors and potential conflicts of interest.
Our senior management is responsible for implementing and reporting to our board of directors regarding our risk management processes, including by assessing and managing the risks we face, including strategic, operational, regulatory, investment and execution risks, on a day-to-day basis. Our senior management is also responsible for creating and recommending to our board of directors for approval appropriate risk appetite metrics reflecting the aggregate levels and types of risk we are willing to accept in connection with the operation of our business and pursuit of our business objectives.
The role of our board of directors in our risk oversight is consistent with our leadership structure, with our senior management having responsibility for identifying, assessing, measuring and managing our risk exposure, and our board of directors and its committees providing oversight in connection with those efforts. We believe this division of risk management responsibilities presents a consistent, systemic and effective approach for identifying, managing and mitigating risks throughout our operations.
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EXECUTIVE AND DIRECTOR COMPENSATION
This section will set forth the compensation of our named executive officers (“NEOs”) prior to our initial public offering. Our NEOs for fiscal year 2025, which consist of our Chairman and Chief Executive Officer and our two other most highly compensated executive officers who were serving as executive officers as of December 31, 2025, are as follows:
•John K. Delaney, Chief Executive Officer
•Donald F. Cole, President and Chief Operating Officer
•Kenneth F. Elias, Executive Vice President
This discussion may contain forward-looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt following the completion of this offering may differ materially from the currently planned programs summarized in this discussion. As an emerging growth company, we are not required to include a Compensation Discussion and Analysis section and have elected to comply with the scaled disclosure requirements applicable to emerging growth companies.
Summary Compensation Table for 2025
The following table sets forth information concerning the compensation paid to our NEOs during fiscal year 2025.
Name and Principal PositionYear
Salary
($)(1)
Bonus
($)(2)
Stock Awards
($)(3)
All Other Compensation ($)(4)
Total
($)
John K. Delaney
Chief Executive Officer
2025
600,000 1,218,000 639,766 3,564 2,461,330 
Donald F. Cole
President and Chief Operating Officer
2025
587,000 792,000 561,209 16,322 1,956,531 
Kenneth F. Elias
Executive Vice President
2025
450,000 850,000 561,209 15,242 1,876,451 
__________________
(1)Amounts shown in this column represent the salary earned by the NEOs in 2025.
(2)Amounts shown in this column represent the performance-based cash bonus earned by the named executive officer with respect to fiscal year 2025 performance. For more information relating to these bonuses, see the section titled “Overview of Our 2025 Executive Compensation Program—Elements of Compensation—Annual Bonus.” The amount shown for Mr. Elias also includes a one-time bonus in the amount of $250,000.
(3)Amounts shown in this column represent the aggregate grant date fair value, computed in accordance with FASB ASC Topic 718, of restricted stock awards granted to each NEO under the Amended and Restated Forbright, Inc. 2014 Stock Incentive Plan (f/k/a the Congressional Bancshares, Inc. 2014 Stock Incentive Plan), as amended and restated from time to time (the “2014 Equity Plan”) in 2025. For additional information regarding assumptions used to calculate the value of such stock awards, please refer to Note 14 to our consolidated financial statements in this Registration Statement.
(4)The amounts in this column represent the following:
Named Executive Officer
Company-Paid Premiums for Group Life Insurance ($)
Company Matching Contributions under 401(k) Plan ($)
John K. Delaney
3,564 — 
Donald F. Cole
2,322 14,000 
Kenneth F. Elias
1,242 14,000 
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Overview of Our 2025 Executive Compensation Program
Elements of Compensation
Our NEOs were provided with the following primary elements of compensation in 2025:
Base Salary
Base salary represents the fixed portion of each NEO’s compensation and is intended to provide compensation for expected day-to-day performance. Our NEOs received aggregate salaries for 2025 in the amounts reported in the Summary Compensation Table.
Annual Bonus
Each of our NEOs is entitled to receive an annual incentive bonus under our Executive Incentive Plan, based on achievement of performance goals established by our board of directors, and subject to the discretion of our board of directors. In 2025, our NEOs earned cash bonuses under the Executive Incentive Plan for 2025, in the amounts reported in the Bonus column of the Summary Compensation Table, which were paid in March 2026.
In May 2026, the Company adopted the Forbright, Inc. 2026 Executive Incentive Plan (the “EIP”), effective for fiscal year 2026 following this offering, in which our NEOs and certain other senior executives are eligible to participate. Under the EIP, each participant is assigned a target bonus opportunity expressed as a percentage of such participant’s base salary. Payout of annual cash incentive awards are determined based on a combination of (i) quantitative measures, (ii) qualitative measures and (iii) individual performance. Bonuses under the EIP are expected to be paid following the compensation committee’s certification of performance results, and, unless otherwise provided in an individual agreement, a participant must remain employed with the Company through the bonus payment date to be eligible to receive a bonus. All 2026 EIP payouts will be made and delivered entirely in cash.
Equity-based compensation
A portion of the annual incentive bonus under our Executive Incentive Plan is paid in the form of restricted stock awards under the 2014 Equity Plan. In 2025, our NEOs received restricted stock awards under the 2014 Equity Plan with respect to each NEO’s annual incentive bonus for fiscal year 2024. The restricted stock awards granted in 2025 had a grant date fair value reported in the Stock Awards column of the Summary Compensation Table and vest in equal annual installments over five years. Each NEO also received a restricted stock award under the 2014 Equity Plan in 2026 with respect to each NEO’s annual incentive bonus for fiscal year 2025. The number of restricted stock awards granted in 2026 to each NEO is reflected in the table below:
Name
Number of Restricted Stock Awards Granted in 2026
John K. Delaney18,000 
Donald F. Cole17,610 
Kenneth F. Elias
13,500 
Retirement and Other Employee Benefits
Each of our NEOs is eligible to participate in our qualified defined contribution retirement plan (i.e., our 401(k) Plan), a multiple employer plan. Under the terms of the 401(k) Plan, the Company makes a matching contribution of 100% up to 4% of employee compensation contributed. Our NEOs are also eligible to participate in the health and welfare benefit plans that are generally available to our full-time employees, subject to the satisfaction of certain eligibility requirements.
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Employment Agreements with our NEOs
Prior to the completion of this offering, we expect to enter into amended employment agreements with each of our NEOs. The terms of their amended employment agreements have not yet been determined. This Registration Statement will be updated to include a summary of the employment agreements once the terms are finalized.
Amended and Restated Forbright, Inc. 2014 Stock Incentive Plan
We currently sponsor the 2014 Equity Plan. The purposes of the 2014 Equity Plan are (i) assisting the Company and its affiliates in the recruitment and retention of persons with ability and initiative, (ii) providing an incentive to such persons to contribute to the growth and success of the Company’s businesses by affording such persons equity participation in the Company, and (iii) associating the interests of such persons with those of the Company and its affiliates and stockholders.
Summary of Plan Terms
The aggregate number of shares that may be issued pursuant to awards granted under the 2014 Equity Plan will not exceed 12,500,000.
The 2014 Equity Plan is administered by the compensation committee of our board of directors (and certain authorized officers with respect to certain matters relating to the 2014 Equity Plan), as delegated by the board of directors in accordance with the 2014 Equity Plan. The administrator may interpret and make determinations with respect to the 2014 Equity Plan or any award granted thereunder. The 2014 Equity Plan permits the administrator, among other things, to designate grantees, to determine the number of shares to be covered by awards, to determine the terms and conditions of any award, to determine whether and under what circumstances, option may be settled in cash, shares or other property, to amend, cancel or accelerate the vesting of or lapse of restrictions on an outstanding award, to reduce the exercise price of any option and to make all other determinations necessary or advisable for the administration of the 2014 Equity Plan.
We may issue stock options, restricted stock awards and stock appreciation rights (“SARs”) under the 2014 Equity Plan. The exercise price of all options granted under the 2014 Equity Plan is not less than 100% of the fair market value of a share on the date of grant. The maximum term of all stock options granted under the 2014 Equity Plan will not exceed ten years. Each stock option will vest and become exercisable at such time and subject to such terms and conditions as determined by the administrator in the applicable individual option agreement.
Restricted stock awards may be granted under the 2014 Equity Plan. The administrator will determine the purchase price, vesting schedule and other terms and conditions applicable to the grant of restricted stock awards. We may also grant SARs under the 2014 Equity Plan. Each SAR will vest and become exercisable at such time and subject to such terms and conditions as determined by the administrator in the applicable individual award agreement.
If the Company is merged or consolidated with another entity or sells or otherwise disposes of substantially all of its assets to another entity while awards remain outstanding under the 2014 Equity Plan, unless continued, assumed or substituted with appropriate adjustment made, all outstanding awards which have not been continued, assumed or for which a substituted award has not been granted will, be vested and exercisable immediately prior to such merger, consolidation or sale.
The Company or an affiliate will have the right, before any award is settled, to deduct or withhold from any payment owed to a participant any amount that is necessary in order to satisfy any withholding requirement.
The 2014 Equity Plan became effective on June 25, 2014, which is the date that the board of directors adopted the 2014 Equity Plan, and was amended and restated on March 27, 2026. The 2014 Equity Plan will terminate on March 27, 2036, and no awards will be granted after that date.
Upon the adoption of the 2026 Omnibus Incentive Plan, as described below, no additional awards will be granted under the 2014 Equity Plan.
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Forbright, Inc. 2026 Omnibus Incentive Plan
Introduction
Our board of directors and stockholders approved the Forbright, Inc. 2026 Omnibus Incentive Plan (the “2026 Omnibus Incentive Plan”) which will be effective prior to the completion of this offering. The purpose of the 2026 Omnibus Incentive Plan will be to provide additional incentives to selected officers, employees, non-employee directors, independent contractors and consultants of the Company or its affiliates.
While we intend to issue stock-based awards in the future to employees as a recruiting and retention tool, we have not established specific parameters regarding future grants to our employees or other service providers. The board of directors or a committee or subcommittee that the board of directors may appoint to administer the 2026 Omnibus Incentive Plan, will determine the specific criteria surrounding other equity issuances under the 2026 Omnibus Incentive Plan. The following description summarizes the terms of the 2026 Omnibus Incentive Plan.
Summary of Plan Terms
Share Reserve. As of the completion of this offering, the number of shares of our Class A common stock reserved and available for issuance under the 2026 Omnibus Incentive Plan will be equal to 8% of the total number of outstanding shares of our common stock on a fully diluted basis as of immediately following the completion of this offering (without giving effect to any exercise by the underwriters of their option to purchase additional shares in this offering). The maximum number of shares of our Class A common stock reserved for issuance under the 2026 Omnibus Incentive Plan will be subject to an annual increase on the first day of each fiscal year during the term of the 2026 Omnibus Incentive Plan, equal to the lesser of (x) 5% of the aggregate number of shares of our common stock issued and outstanding on December 31 of the immediately preceding fiscal year and (y) such smaller number of shares of our common stock as is determined by the administrator.
Shares of our Class A common stock subject to an award under the 2026 Omnibus Incentive Plan that remain unissued upon the cancellation, termination or expiration of the award will again become available for grant under the 2026 Omnibus Incentive Plan. In addition, shares of our Class A common stock that are exchanged by a participant or withheld by us as full or partial payment in connection with any award under the 2026 Omnibus Incentive Plan, as well as any shares of our Class A common stock exchanged by a participant or withheld by us to satisfy the tax withholding obligations related to any award, will again be available for subsequent awards under the 2026 Omnibus Incentive Plan. Furthermore, to the extent an award is paid or settled in cash, the number of shares of our common stock previously subject to the award will again be available for grants pursuant to the 2026 Omnibus Incentive Plan, and to the extent that an award can only be settled in cash, such award will not be counted against the total number of shares of our Class A common stock available for grant under the 2026 Omnibus Incentive Plan.
No participant who is a non-employee director of the Company will, in respect of service as a non-employee director, be granted awards during any calendar year that, when aggregated with such non-employee director’s cash fees with respect to such calendar year, exceed $750,000 in total value (calculating the value of any such awards based on the grant date fair value of such awards), excluding compensation as approved by the board of directors in extraordinary circumstances (including but not limited to compensation paid to a non-employee director who was appointed to serve as an interim officer of the Company or its affiliate, or for the non-employee director’s service as a consultant or former employee of the Company or its affiliate). The administrator may make exceptions to increase such limit to $1,000,000 for an individual non-employee director in the non-employee director’s first year of service or in any year during which the non-employee director serves in a position of board leadership (e.g., as the non-executive chair or lead independent director of the board of directors), as the administrator may determine in its sole discretion, provided that the non-employee director receiving such additional compensation may not participate in the decision to award such compensation involving such non-employee director.
Administration. The administrator may interpret the 2026 Omnibus Incentive Plan and may prescribe, amend and rescind rules and make all other determinations necessary or desirable for the administration of the 2026 Omnibus Incentive Plan. The 2026 Omnibus Incentive Plan permits the administrator to: (i) select the officers, employees, non-employee directors, independent contractors and consultants who will receive awards; (ii) determine the terms and conditions of those awards, including but not limited to the exercise price or other purchase price of an
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award, the number of shares of our Class A common stock or cash or other property subject to an award, the term of an award and the vesting schedule applicable to an award; and (iii) amend the terms and conditions of outstanding awards.
Awards. The 2026 Omnibus Incentive Plan will provide for the issuance of options, SARs, restricted stock, restricted stock units (“RSUs”), stock bonuses, other stock-based awards and cash awards.
•RSUs and Restricted Stock. RSUs, performance-based RSUs (“PSUs”) and restricted stock may be granted under the 2026 Omnibus Incentive Plan. The administrator will determine the purchase price, vesting schedule and performance objectives, if any, applicable to the grant of RSUs, PSUs and restricted stock. If the restrictions, performance objectives or other conditions determined by the administrator are not satisfied, the RSUs, PSUs and restricted stock will be forfeited. Subject to the provisions of the 2026 Omnibus Incentive Plan and the applicable individual award agreement, the administrator may provide for the lapse of restrictions in installments or the acceleration or waiver of restrictions (in whole or part) under certain circumstances as set forth in the applicable individual award agreement, including the attainment of certain performance goals, a participant’s termination of employment or service, or a participant’s death or disability. The rights of RSU, PSU and restricted stockholders upon a termination of employment or service will be set forth in individual award agreements.
Unless the applicable award agreement provides otherwise, participants with restricted stock will generally have all of the rights of a stockholder during the restricted period, including the right to vote and receive dividends declared with respect to such restricted stock. Any dividends declared during the restricted period with respect to such restricted stock will, to the extent set forth in the applicable award agreement, be payable either currently, at the time (and to the extent) that the underlying shares of restricted stock vest, or in the form of additional shares of restricted stock that are subject to the same vesting and other terms and conditions as the underlying shares of restricted stock. During the restricted period, participants with RSUs and PSUs will generally not have any rights of a stockholder, but, if the applicable individual award agreement so provides, may be credited with dividend equivalent rights either currently, at the time (and to the extent) that the shares of our Class A common stock related to such awards are delivered to the participant, or in the form of additional awards that are subject to the same vesting and other terms and conditions as the original awards.
•Options. We may issue stock options under the 2026 Omnibus Incentive Plan. Options granted under the 2026 Omnibus Incentive Plan may be in the form of non-qualified options or “incentive stock options” within the meaning of Section 422 of the Code, as set forth in the applicable individual option award agreement. The exercise price of all options granted under the 2026 Omnibus Incentive Plan will be determined by the administrator, but in no event may the exercise price be less than 100% of the fair market value of the related shares of our Class A common stock on the date of grant. The maximum term of all stock options granted under the 2026 Omnibus Incentive Plan will be determined by the administrator but may not exceed ten years. Each stock option will vest and become exercisable (including in the event of the participant’s termination of employment or service) at such time and subject to such terms and conditions as determined by the administrator in the applicable individual option agreement.
•SARs. SARs may be granted under the 2026 Omnibus Incentive Plan either alone or in conjunction with all or part of any option granted under the 2026 Omnibus Incentive Plan. A free-standing SAR granted under the 2026 Omnibus Incentive Plan entitles its holder to receive, at the time of exercise, an amount per share equal to the excess of the fair market value (at the date of exercise) of a share of our Class A common stock over the base price of the free-standing SAR. A SAR granted in conjunction with all or part of an option under the 2026 Omnibus Incentive Plan entitles its holder to receive, at the time of exercise of the SAR and surrender of the related option, an amount per share equal to the excess of the fair market value (at the date of exercise) of a share of our Class A common stock over the exercise price of the related option. Each SAR will be granted with a base price that is not less than 100% of the fair market value of the related shares of our Class A common stock on the date of grant. The maximum term of all SARs granted under the 2026 Omnibus Incentive Plan will be determined by the administrator but may not exceed ten years. The administrator may determine to settle the exercise of a SAR in shares of our Class A common stock, cash, or any combination thereof.
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Each free-standing SAR will vest and become exercisable (including in the event of the SAR holder’s termination of employment or service) at such time and subject to such terms and conditions as determined by the administrator in the applicable individual free-standing SAR agreement. SARs granted in conjunction with all or part of an option will be exercisable at such times and subject to all of the terms and conditions applicable to the related option.
•Other Stock-Based Awards. Other stock-based awards, valued in whole or in part by reference to, or otherwise based on, shares of our Class A common stock (including dividend equivalents) may be granted under the 2026 Omnibus Incentive Plan. The administrator will determine the terms and conditions of such other stock-based awards, including the number of shares of our Class A common stock to be granted pursuant to such other stock-based awards, the manner in which such other stock-based awards will be settled (e.g., in shares of our Class A common stock or cash or other property), and the conditions to the vesting and payment of such other stock-based awards (including the achievement of performance objectives).
Bonuses payable in fully vested shares of our Class A common stock and awards that are payable solely in cash may also be granted under the 2026 Omnibus Incentive Plan.
Equitable Adjustments. In the event of a merger, consolidation, reclassification, recapitalization, spin-off, spin-out, repurchase, reorganization, corporate transaction or event, special or extraordinary dividend or other extraordinary distribution (whether in the form of shares of our Class A common stock, cash or other property), stock split, reverse stock split, subdivision or consolidation, combination, exchange of shares, or other change in corporate structure affecting the shares of our Class A common stock, an equitable substitution or proportionate adjustment shall be made, at the sole discretion of the administrator, in (i) the aggregate number of shares of our Class A common stock reserved for issuance under the 2026 Omnibus Incentive Plan, (ii) the kind and number of securities subject to, and the exercise price or base price of, any outstanding options and SARs granted under the 2026 Omnibus Incentive Plan, (iii) the kind, number and purchase price of shares of our Class A common stock, or the amount of cash or amount or type of property, subject to outstanding restricted stock, RSUs, PSUs, stock bonuses and other stock-based awards granted under the 2026 Omnibus Incentive Plan, or (iv) the performance goals and periods applicable to award granted under the 2026 Omnibus Incentive Plan. Equitable substitutions or adjustments other than those listed above may also be made as determined by the administrator.
Change in Control. In the event that a “change in control” (as defined below) occurs, each award will be treated as determined by the administrator without requiring the consent of the participant to such treatment and without any obligation to treat all awards in the same manner. Such treatment may include one or more of the following: (i) the continuation of the awards by us, with any appropriate equitable substitutions or adjustments as determined by the administrator, (ii) the assumption of the awards, or the substitution of substantially equivalent awards, by the successor or acquiring entity in the change in control, with any appropriate equitable substitutions or adjustments as determined by the administrator, and/or (iii) the cancellation of the awards in exchange for a payment in cash or in-kind consideration having an aggregate fair market value equal to the excess of the fair market value of the shares of our Class A common stock, cash or other property covered by such awards over the aggregate exercise price or base price, if any, of such awards (provided that, in the discretion of the administrator, such payment may be made in installments and may be deferred until the date or dates when the original awards would have otherwise become exercisable or vested), but if the exercise price or base price of any outstanding award is equal to or greater than the fair market value of the shares of our Class A common stock, cash or other property covered by such award, the administrator may cancel the award without the payment of any consideration to the participant.
If a change in control occurs and any award is not assumed, substituted or canceled in connection with the change in control as described above, then: (i) any unvested or exercisable portion of any award carrying a right to exercise will become fully vested and exercisable effective as of immediately prior to the consummation of the change in control and will be terminated if such award is not exercised prior to the consummation of the change in control and (ii) the restrictions, deferral limitations, payment conditions and forfeiture conditions applicable to any awards will lapse and such awards will be deemed fully vested and will be settled in full effective immediately prior to the consummation of the change in control. Except as provided in the applicable award agreement, any
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performance conditions imposed with respect to the awards shall be deemed to be achieved at the greater of target and actual performance levels as of the date of the change in control.
For purposes of any outstanding awards under the 2026 Omnibus Incentive Plan, a “change in control” means (i) any person becoming the beneficial owner of securities representing more than 50% of the combined voting power of our then outstanding securities, (ii) the directors serving on the board of directors as of the effective date of the 2026 Omnibus Incentive Plan, or directors whose appointment by the board of directors was approved or recommended by a vote of at least two-thirds of the directors then still in office who either were directors on the effective date or whose appointment was previously so approved cease to constitute a majority of the number of directors then serving on the board of directors, (iii) a merger or consolidation of the Company, other than (1) a merger or consolidation which results in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent at least 50% of the combined voting power of the securities of the Company and individuals who comprise the board of directors immediately prior to the merger or consolidation constituting at least a majority of the board of directors of the surviving entity, or (2) a merger or consolidation effected to implement a recapitalization of the Company or a similar transaction, or (iv) a liquidation or dissolution of the Company or a consummated agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets.
Withholding Taxes. With respect to any award granted under the 2026 Omnibus Incentive Plan, each participant will be required to make arrangements satisfactory to the administrator regarding payment of an amount up to the maximum statutory rates in the participant’s applicable jurisdictions, as determined by the Company. We have the right, to the extent permitted by law, to deduct any such taxes from any payment of any kind otherwise due to the participant. With the approval of the administrator, the participant may satisfy the foregoing requirement by either electing to have us withhold from delivery of shares of our Class A common stock, cash or other property, as applicable, or by delivering already owned unrestricted shares of our Class A common stock, in each case, having a value not exceeding the applicable taxes to be withheld and applied to the tax obligations. We may also use any other method of obtaining the necessary payment or proceeds, as permitted by law, to satisfy our withholding obligation with respect to any award, including, with the approval of the administrator, by allowing the participant to engage in broker-assisted cashless exercise or settlement procedures (including sales in open market transactions) to generate an amount of net proceeds (after deducting commissions) not exceeding the applicable taxes to be withheld.
Amendment and Termination. The 2026 Omnibus Incentive Plan provides the administrator with the authority to amend, alter or terminate the 2026 Omnibus Incentive Plan, but no such action may impair the rights of any participant with respect to outstanding awards without the participant’s consent, except as deemed necessary or advisable by the administrator for the purpose of complying with any applicable law, government regulation or stock exchange listing requirement. The administrator may amend an award, prospectively or retroactively, but no such amendment may impair the rights of any participant without the participant’s consent. Stockholder approval of any such action will be obtained if required to comply with applicable law.
The 2026 Omnibus Incentive Plan will terminate on the tenth anniversary of the effective date of the 2026 Omnibus Incentive Plan (although awards granted before that time will remain outstanding in accordance with their terms).
Forbright, Inc. Employee Stock Purchase Plan
Introduction
Our board of directors and stockholders approved the Forbright, Inc. Employee Stock Purchase Plan (the “ESPP”) prior to the completion of this offering, which will be effective on the date immediately preceding the date on which the registration statement on Form S-1 of this offering is declared effective by the SEC. The purpose of the ESPP is to facilitate our employees’ participation in the ownership of the company by providing our employees with an opportunity to purchase shares of our Class A common stock. To accomplish this purpose, the ESPP permits our employees to contribute between 1% and 15% of their compensation to purchase shares of our Class A common stock at a discounted purchase price. The following description summarizes the terms of the ESPP.
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Summary of Plan Terms
Share Reserve. As of the completion of this offering, the number of shares of our Class A common stock reserved and available for purchase under the ESPP will be equal to 1.5% of the total number of outstanding shares of our Class A common stock on a fully diluted basis as of immediately following the completion of this offering (without giving effect to any exercise by the underwriters of their option to purchase additional shares in this offering). The maximum number of shares of our Class A common stock reserved for issuance under the ESPP will be subject to an annual increase on the first day of each fiscal year during the term of the ESPP, equal to the lesser of (x) 1% of the aggregate number of shares of our common stock issued and outstanding on December 31 of the immediately preceding fiscal year and (y) such smaller number of shares of our common stock as is determined by the administrator. In no event will the maximum number of shares of our Class A common stock available for issuance under the ESPP exceed 11.5% of the total number of outstanding shares of our Class A common stock on a fully diluted basis as of immediately following the completion of this offering.
Administration. The board of directors or a committee or subcommittee that the board of directors may appoint to administer the ESPP, will administer the ESPP and will have full and exclusive authority to construe, interpret and apply the terms of the ESPP, determine eligibility to participate under the ESPP, and adjudicate and resolve disputes under the ESPP.
Eligibility. Employees who are employed on the first day of any offering period will generally be eligible to participate in the ESPP, except that no employee will be eligible to participate in the ESPP if, (i) they have been a regular employee of the company for less than two years prior to the offering period, (ii) they are customarily employed for 20 hours or less per week, (iii) they are customarily employed not more than five months in any calendar year, (iv) they are a “highly compensated employee” of the company within the meaning of Section 414(q) of the Code, or (v) immediately after the grant of an option to purchase shares under the ESPP, that employee would own 5% or more of the total combined voting power or value of all classes of our Class A common stock.
Participation. In order to participate in the ESPP, an employee who is eligible at the beginning of an offering period will authorize payroll deductions between 1% and 15% of compensation on an after-tax basis for each payroll date during the offering period. A participant may not make any separate cash payment into the participant’s account, but may alter the amount of the participant’s payroll deductions during an offering period and may withdraw from participation. No participant may accrue options to purchase shares of our Class A common stock at a rate that exceeds $25,000 in fair market value of our Class A common stock (determined as of the first day of the offering period during which such rights are granted) for each year in which such rights are outstanding at any time.
Offerings and Offering Periods. The ESPP may be implemented after the completion of this offering by one or more offering periods established in the discretion of the administrator. Each offering will commence at such time and be of such duration not to exceed 27 months, as determined by the administrator prior to the start of the applicable offering period, with purchases being made on the last trading day of each offering period. On the last day of an offering period, also referred to as the exercise date, a participant’s accumulated payroll deductions will be used to purchase shares of our Class A common stock. The maximum number of full shares subject to the option (but, in any event, not in excess of 10,000 shares of our Class A common stock in any offering period) will be purchased for the participant at the applicable purchase price with the accumulated payroll deductions in the participant’s account. The applicable purchase price will be established by the administrator in advance of the applicable offering period, provided that such amount may not be less than the lesser of either (i) 85% of the fair market value of a share of our Class A common stock on the first day of the offering period or (ii) 85% of the fair market value of a share of our Class A common stock on the exercise date. Participants will not be entitled to any dividends or voting rights with respect to options to purchase shares of our Class A common stock under the ESPP. Shares of our Class A common stock received upon exercise of an option will be entitled to receive dividends on the same basis as other outstanding shares of our Class A common stock.
Withdrawal or Termination of Employment. A participant may withdraw all, but not less than all, of the payroll deductions and other contributions credited to the participant’s account for the applicable offering period by delivery of notice prior to the exercise date for such offering period. If a participant’s employment is terminated for any
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reason on or before the exercise date, the participant will be deemed to have elected to withdraw from the ESPP, and the accumulated payroll deductions held in the participant’s account will be returned to the participant.
Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset Sale. In the event of a dividend or distribution, stock split, reverse stock split, spin-off or other similar transaction, or other change in corporate structure affecting shares of our Class A common stock or their value, the number of shares of our Class A common stock reserved for issuance under the ESPP, the purchase price per share, and the maximum number of shares that may be purchased on an exercise date will be equitably adjusted to reflect changes in our Class A common stock effected without consideration being paid to us. In the event of a proposed sale of all or substantially all of our assets or a merger of us with or into another corporation, the administrator may determine in its discretion to shorten the offering period then in progress and set as the new exercise date the date immediately prior to the date of any transaction or event described above and provide for necessary procedures to effectuate such actions. If no new exercise date is set under the ESPP, participant contributions in respect of an open offering period will be refunded to participants.
Amendment or Termination. The administrator may at any time or for any reason amend or terminate the ESPP. Except as necessary to comply with applicable laws or regulations, no such amendment or termination may adversely affect an option previously granted without the consent of such participant. The ESPP will continue in effect until terminated pursuant to the terms of the ESPP.
Without stockholder consent and without regard to whether any participant rights may be considered to have been adversely affected, the administrator will have the authority to change the offering periods or exercise date, change the maximum number of shares of our Class A common stock purchasable per participant on any exercise date, limit the frequency and/or number of changes in the amount withheld during offering periods, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a participant in order to adjust for delays or mistakes in our processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of our Class A common stock for each participant properly correspond with amounts withheld from the participant’s compensation, and establish such other limitations or procedures as administrator determines.
Retention Program
In connection with this offering, the Company adopted an employee retention program (the “Retention Program”) pursuant to which certain employees, including our NEOs, received retention awards consisting of cash awards and restricted stock awards. Under the Retention Program, each NEO received a cash retention award (the “Cash Award”), and a one-time award of shares of restricted stock (the “Restricted Stock Award”) granted under the 2014 Equity Plan, subject to the terms and conditions set forth in a restricted stock award agreement. The Cash Awards and Restricted Stock Awards granted to each NEO will vest in three equal installments on the first, second, and third anniversaries of April 29, 2026, subject to the NEO’s continued employment or service with the Company or one of its affiliates through the applicable vesting date, except as otherwise provided in the NEO’s applicable severance or employment arrangements or the applicable restricted stock award agreement.
The following table sets forth the Cash Awards and Restricted Stock Awards granted to each of the Company’s NEOs under the Retention Program:
Named Executive OfficerCash Awards Granted in 2026 under the Retention Program ($)Number of Restricted Stock Awards Granted in 2026 under the Retention Program
John K. Delaney812,500 121,875 
Donald F. Cole725,000 108,749 
Kenneth F. Elias500,000 75,000 
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Clawback Policy
Our board of directors has adopted, to be effective prior to the completion of this offering of securities the Forbright, Inc. Executive Compensation Clawback Policy, which is compliant with listing rules as required by the Dodd-Frank Act.
Outstanding Equity Awards at Fiscal Year-End
The following table shows all outstanding equity awards held by each of our NEOs as of December 31, 2025.
Option Awards
Stock Awards
Name
Grant Date
Number of Securities Underlying Unexercised Stock Options
(#)
Exercisable (1)
Number of Securities Underlying Unexercised Stock Options
(#)
Unexercisable (1)
Equity
Incentive
Plan Awards: Number of
Securities
Underlying
Unexercised
Unearned
Options
(#)(2)
Option Exercise Price
($)
Option Expiration Date
Number of Shares or Units of Stock That Have Not Vested
(#)(3)
Market Value of Shares or Units of Stock That Have Not Vested
($)
Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested
(#)
Equity Incentive Plan Awards: Market Value of Unearned Shares, Units or Other Rights That Have Not Vested
($)
John K. Delaney
4/15/20211,060,000 265,000 12.63 4/15/2031
4/15/20211,312,000 328,000 16.70 4/15/2031
4/15/2021420,000 12.63 4/15/2031
4/15/2021420,000 12.63 4/15/2031
3/13/202538,195 768,865 
Donald F. Cole
4/15/2021208,000 52,000 

12.63 4/15/2031



4/15/2021260,000 65,000 

16.70 4/15/2031



4/15/202188,600 12.63 4/15/2031
4/15/202188,600 12.63 4/15/2031
3/13/202533,505 674,456 
Kennth F. Elias
7/1/202180,000 20,000 12.63 7/1/2031
7/1/2021120,000 30,000 16.70 7/1/2031
7/1/202130,000 12.63 7/1/2031
7/1/202130,000 12.63 7/1/2031
2/16/202215,600 10,400 16.70 2/16/2032
2/16/20227,000 13.50 2/16/2032
2/16/20227,000 13.50 2/16/2032
3/13/202533,505 674,456 
___________________
(1)Amounts shown in these columns represent option awards issued under our 2014 Equity Plan. These option awards are subject to time-based vesting conditions and expire ten years from the date of grant. Twenty percent (20%) of the original number of shares subject to each option award vests on each of the first five anniversaries of the grant date or, in the case of those option awards granted on July, 1, 2021, on each of the first five anniversaries of April 15, 2021, generally subject to the grantee’s continued employment or service through the applicable vesting date.
(2)Amounts shown in this column represent option awards issued under our 2014 Equity Plan. These option awards are subject to both time-based vesting conditions and performance-based vesting conditions and expire ten years from the date of grant. Twenty percent (20%) of the original number of shares subject to each option award vests on each of the first five anniversaries of the grant date, subject to the grantee’s continued employment or service through the applicable vesting date. Once vested, the options only become exercisable following the achievement of specified stock price targets at the earlier of (i) the time of a sale transaction or public offering or (ii) the fifth anniversary of the date of grant.
(3)Amounts shown in this column represent stock awards issued under our 2014 Equity Plan. These stock awards are subject to time-based vesting conditions. Twenty percent (20%) of the original number of shares subject to each stock award vests on each of the first five anniversaries of the grant date, generally subject to the grantee’s continued employment or service through the applicable vesting date.
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Director Compensation
The following table sets forth information concerning the compensation paid to our non-employee directors during the fiscal year ended December 31, 2025.
Name and Principal Position
Fees Earned or Paid in Cash
($)(1)
Total ($)
Christopher T. Jones79,500 79,500 
Cynthia A. Flanders87,500 87,500 
Donald L. Kohn150,000 150,000 
Jason M. Fish64,000 64,000 
Nancy K. Eberhardt85,000 85,000 
__________________
(1)Amounts shown in this column represent all fees earned or paid in cash for services as directors in 2025.
Forbright, Inc. Non-Employee Director Compensation Policy
Introduction
In connection with the completion of this offering, we have adopted the Forbright, Inc. Non-Employee Director Compensation Policy (the “Director Compensation Policy”), pursuant to which our non-employee directors will generally be eligible to receive annual cash retainers and equity awards for service on the board of directors and committees thereof. The Director Compensation Policy will be effective on the date immediately after the registration statement on Form S-1 of this offering is declared effective by the SEC. Following the implementation of the Director Compensation Policy, its terms and conditions will remain subject to modification from time to time. The following description summarizes the terms of the Director Compensation Policy.
Cash Compensation
Each non-employee director receives an annual cash retainer of $50,000. Non-employee directors serving in the following roles receive the following additional annual cash retainers. Cash retainers are payable in equal quarterly installments in arrears and pro-rated for partial quarters of service.
•Lead Independent Director: $30,000
•Audit Committee Chair: $25,000
•Compensation Committee Chair: $15,000
•Nominating and Corporate Governance Committee Chair: $15,000
•Risk Committee Chair: $15,000
•Audit Committee Member (other than the Chair): $10,000
•Compensation Committee Member (other than the Chair): $5,000
•Nominating and Corporate Governance Committee Member (other than the Chair): $5,000
•Risk Committee Member (other than the Chair): $5,000
Non-employee directors may elect to receive cash retainers in the form of deferred stock units, in accordance with and subject to the conditions of the Company’s Non-Employee Director Deferred Compensation Plan, as amended from time to time (the “Deferred Compensation Plan”).
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Equity Compensation
On the date of each annual meeting of stockholders, each non-employee director then serving will automatically receive a grant of RSUs under the 2026 Omnibus Incentive Plan with a grant date value of $85,000, based on the closing price of our Class A common stock on Nasdaq on the last trading day preceding the grant date, subject to the 2026 Omnibus Incentive Plan and the applicable award agreements. Annual RSU grants vest on the earlier of the next annual meeting or the first anniversary of the grant date, subject to continuous service. A director’s failure to be re-elected or decision not to stand for re-election will not cause otherwise vested grants to be forfeited. Directors appointed between annual meetings will receive a pro-rated RSU grant that vests at the next annual meeting. Notwithstanding the foregoing, for the year in which this offering is completed, the annual RSU grant to directors will be made on the date of completion of this offering, will vest on the date of the first annual meeting occurring in the following fiscal year, and will be ratably increased to reflect the extended vesting period. Unvested RSUs are forfeited upon termination of service, except as provided in the applicable award agreement. Vested RSUs are settled in shares of our Class A common stock no later than March 15 of the year following the year of vesting, unless the director elects deferral under the Deferred Compensation Plan. All equity awards are subject to the Company’s Stock Ownership Guidelines and the 2026 Omnibus Incentive Plan, including, without limitation, the annual total compensation limit set forth under the 2026 Omnibus Incentive Plan.
Each non-employee director may elect to defer the settlement of RSUs in accordance with and subject to the conditions of the Deferred Compensation Plan.
Expense Reimbursement
The Company reimburses non-employee directors for ordinary, necessary, and reasonable out-of-pocket travel expenses incurred in connection with in-person attendance in Board and committee meetings, in accordance with the then effective Company’s travel and expense policy.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
In addition to the director and executive officer compensation arrangements discussed above in the section entitled “Executive and Director Compensation,” this section describes transactions, or series of related transactions, since January 1, 2023 to which we were a party or will be a party, in which:
•the amount involved exceeded or will exceed $120,000; and
•any of our directors, executive officers or beneficial owners of more than 5% of any class of our capital stock (each, a “5% Holder”), or any members of the immediate family of and any entity affiliated with any such person, had or will have a direct or indirect material interest.
Ordinary Banking Relationships
Certain of our officers, directors and principal stockholders, as well as their immediate family members and affiliates, are customers of, or have or have had transactions with, the Bank, us or our affiliates in the ordinary course of business. These transactions include deposits, accounts and other financial services-related transactions. Related party transactions are made in the ordinary course of business, on substantially the same terms, including interest rates and collateral (where applicable), as those prevailing at the time for comparable transactions with persons and customers not related to us, and do not involve more than normal risk of collectability or present other features unfavorable to us. We expect to continue to enter into such relationships and transactions in the ordinary course of business on similar terms with our directors, executive officers and beneficial holders, as well as their immediate family members and affiliates.
Other Transactions
BancAlliance
Certain of our employees, namely Lori Bettinger (President of Alliance Partners), Donald F. Cole (President and Chief Operating Officer of Forbright, Inc. and President and Chief Executive Officer of Forbright Bank) and Michael A. Housley (Forbright, Inc. and Forbright Bank’s Chief Accounting Officer), serve as officers of BancAlliance, for which Alliance Partners serves as asset manager. We source loans for our own balance sheet and make those loans available for sale through the BancAlliance program. Loans sold through BancAlliance are immediately sold to its members. The terms of these loan sales, including pricing, are governed by a master participation agreement for the program that applies uniformly to all BancAlliance members. BancAlliance, in the ordinary course of business enters into a master participation agreement with each of its members to provide for the sale, administration and servicing of loans that members buy participations in from BancAlliance. The terms of the master participation agreement are customary for this type of arrangement and include terms relating to how the loans will be serviced, the purchase price of the participation, the fees paid to BancAlliance and how lender decisions with respect to the loans will be made. BancAlliance is a pass-through participant and does not retain any economic interest or incur any accounting impact from the program.
Transactions with BancAlliance for first quarter 2026 and fiscal years 2025 and 2024, and amounts due from BancAlliance as of March 31, 2026, December 31, 2025, and December 31, 2024, are set forth in the following table:
(in thousands)
March 31, 2026December 31, 2025December 31, 2024
Loans sold through BancAlliance
$36,276 $228,275 $261,653 
Net gains realized on loans sold through BancAlliance
$226 $1,828 $3,219 
Amounts due from BancAlliance related to funding and expense advancements$1,478 $6,035 $161 
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Executive Compensation
Please see the section entitled “Executive and Director Compensation” for information regarding the compensation of our directors and executive officers. Certain of our executive officers and our directors were granted shares of the Company’s common stock during 2025. For more information, see the section entitled “Executive and Director Compensation.”
Indemnification of Directors and Officers
Our Amended Bylaws will provide that we will indemnify our directors and officers to the fullest extent permitted by the DGCL. In addition, our Amended Certificate of Incorporation will provide that our directors and officers will not be liable for monetary damages for breach of fiduciary duty to the fullest extent permitted by the DGCL. We intend to enter into new indemnification agreements with each of our directors and executive officers before the completion of this offering.
Policies and Procedures for Related Person Transactions
Transactions by us or the Bank with related parties are subject to formal written policies that are designed to ensure compliance with regulatory requirements and restrictions. These requirements and restrictions include Sections 23A and 23B of the Federal Reserve Act, which govern certain transactions between the Bank and its affiliates, and Regulation O, which governs certain extensions of credit by the Bank to directors, executive officers, principal stockholders and their related interests. Any related party transactions, other than loans, must be approved by our audit committee.
In addition, we do have a written policy governing the approval of related party transactions other than the Bank’s policy governing loans to directors, officers and principal stockholders for compliance with Regulation O and the Bank’s policy governing intercompany transactions for compliance with Sections 23A and 23B of the Federal Reserve Act. Our board of directors recognizes the fact that transactions with related persons present a heightened risk of conflicts of interest (or the perception thereof). Prior to the completion of this offering, our board of directors will adopt a written policy on transactions with related persons that is in conformity with the requirements for companies having common stock that is listed on the Nasdaq. This policy will cover any transaction, arrangement, or relationship, or any series of similar transactions, arrangements, or relationships, that meets the disclosure requirements set forth in Item 404 of Regulation S-K under the Securities Act, in which we were or are to be a participant and in which a “related person,” as defined in Item 404 of Regulation S-K, had, has, or will have a direct or indirect material interest.
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PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information with respect to the beneficial ownership of our common stock immediately prior to and following the completion of this offering by:
•each person known by us to beneficially own more than 5% of our common stock;
•each of our directors;
•each of our NEOs;
•all of our executive officers and directors as a group; and
•each of the other selling stockholders.
The number of shares of common stock outstanding before this offering and the corresponding percentage of beneficial ownership are based on the number of shares of common stock outstanding as of March 31, 2026 before this offering. The number of shares of common stock outstanding after this offering and the corresponding percentage of beneficial ownership are based on the number of shares of common stock issued and outstanding as of March 31, 2026, after giving effect to this offering.
The number of shares beneficially owned by each stockholder is determined under rules issued by the SEC and includes voting or investment power with respect to securities. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power. In computing the number of shares beneficially owned by an individual or entity and the percentage ownership of that person, shares of common stock subject to equity awards or other rights held by such person that are currently exercisable or will become exercisable within 60 days after March 31, 2026 are considered outstanding, although these shares are not considered outstanding for purposes of computing the percentage ownership of any other person. Each of the stockholders listed has sole voting and investment power with respect to the shares beneficially owned by the
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stockholder unless noted otherwise, subject to community property laws where applicable. Unless otherwise noted, the address for each stockholder listed below is 4445 Willard Ave, Suite 1000, Chevy Chase, Maryland 20815.
Securities Beneficially Owned
Before this Offering
Shares Beneficially Owned
After this Offering

Shares of Class A
Common Stock		Shares of Class B
Common Stock 		Shares of Class A Common StockShares of Class B Common Stock
Name of Beneficial Owner
NumberPercentNumberPercent
Percent
Percent
NEOs and Directors

John K. Delaney
%
%
%
%
Donald F. Cole
%
%
%
%
Kenneth F. Elias
%
%
%
%
Clifford V. Brokaw IV
%
%
%
%
Nancy K. Eberhardt
%
%
%
%
Jason M. Fish
%
%
%
%
Cynthia A. Flanders
%
%
%
%
Eric B. Hoffman
%
%
%
%
Christopher T. Jones
%
%
%
%
Donald L. Kohn
%
%
%
%
Lewis A. Sachs
%
%
%
%
Steven M. Shafran
%
%
%
%
Derek Z. Walker
%
%
%
%
All executive officers and directors as a group (20 persons)
%
%
%
%
Selling Stockholders



GPC Partners Investments (Elevate) LP
%
%
%
%
CB Elevate Aggregator
%
%
%
%
Entities affiliated with Bayview
%
%
%
%
Forbright STRT Investor LLC
%
%
%
%
Cliffwater Corporate Lending Fund
%
%
%
%
Other 5% Holders
Joseph R. Schubel Jr.
%
%
%
%
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DESCRIPTION OF CAPITAL STOCK
The following description of our capital stock gives effect to this offering and is qualified in its entirety by reference to our organizational documents, the forms of which are filed as exhibits to the registration statement of which this prospectus forms a part, and by applicable law.
Upon completion of this offering, our authorized capital stock will consist of 120,000,000 shares of voting Class A common stock, par value $0.001 per share, 25,000,000 shares of non-voting Class B common stock, par value $0.001 per share, and 5,000,000 shares of preferred stock, par value $0.001 per share. Immediately following the completion of this offering, we will have           shares of Class A common stock outstanding and           shares of Class B common stock outstanding. There will be no shares of preferred stock outstanding immediately following the completion of this offering. Unless our board of directors determines otherwise, we will issue all shares of our capital stock in uncertificated form.
As of March 31, 2026, there were            shares of our Class A common stock outstanding held by           stockholders of record,            shares of our Class B common stock outstanding held by            stockholders of record, and no shares of our preferred stock outstanding. Pursuant to our Amended Certificate of Incorporation, our board of directors will have the authority, without stockholder approval, to issue additional shares of our capital stock. Unless our board of directors determines otherwise, we will issue all shares of our capital stock in uncertificated form.
Common Stock
Voting Rights
Holders of our Class A common stock shall be entitled to one vote for each share of Class A common stock in the election of directors and on all matters on which stockholders generally are entitled to vote. Generally, all matters to be voted on by stockholders must be approved by a majority of the votes entitled to be cast by all holders of shares of Class A common stock present in person or represented by proxy.
Holders of our Class B common stock shall (i) have no voting power, (ii) not be entitled to vote on any matter, and (iii) not have the right to participate in any meeting of stockholders with respect to such shares, except (1) as otherwise required by law and (2) the affirmative vote of sixty-six and two-thirds percent (66 2/3%) of the outstanding shares of Class B common stock, voting separately as a class, shall be required to amend, alter or repeal (including by merger, consolidation or otherwise, and whether in a single transaction or a series of related transactions) any provision of our Amended Certificate of Incorporation in a manner that significantly and adversely affects the privileges, preferences or rights of the Class B common stock. In such event, each holder of Class B common stock shall be entitled to one vote for each share in any of the limited matters where they are entitled to vote.
Conversion of Class B Common Stock
Each share of our Class B common stock may only convert into an equal number of shares of our Class A common stock in the specific circumstances and in compliance with the specific procedures provided in our Amended Certificate of Incorporation. Specifically, a holder’s shares of Class B common stock (A) may convert to Class A common stock upon an issuance of Class A common stock (including, without limitation, the issuance of Class A common stock in respect of equity based compensation granted to directors or employees) or other event having a dilutive effect on such holder’s ownership of Class A common stock or (B) will automatically convert to Class A common stock, without any further action on the part of any holder, in the hands of a third-party transferee or assignee unaffiliated with the initial holder, but only if such share of Class B common stock is transferred or assigned: (i) to the Company; (ii) in a widespread public distribution of the Company’s securities; (iii) to a transferee or assignee that would control more than fifty percent (50%) of every class of the Company’s outstanding “voting securities” (as defined for the purposes of the Bank Holding Company Act of 1956, as amended, and any rules or regulations promulgated thereunder) without any transfer from the transferor; or (iv) in a transaction in which no transferee or assignee (or group of associated transferees or assignees) would receive two percent (2%) or more of any class of voting securities of the Corporation outstanding at such time. Where a holder of Class B common stock
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may convert to Class A common stock following an issuance or other dilutive event, the holder of Class B common stock will be given the opportunity to exercise that right no less than quarterly, following notice from the Company, and after which, such holder shall have ten days to exercise their right to convert their shares of Class B common stock to Class A common stock; provided, that, such holder shall not be permitted to acquire a higher percentage of the Class A common stock after exercise of its right to convert than such holder controlled immediately prior to the triggering event(s) occurring during the fiscal quarter for which they have been notified.
Dividend Rights
All shares of our Class A and Class B common stock are entitled to share equally in dividends when and if declared by our board of directors out of funds legally available therefore, subject to any statutory or contractual restrictions on the payment of dividends and to any restrictions on the payment of dividends imposed by the terms of any outstanding preferred stock. The ability of our board of directors to declare and pay dividends on our Class A common stock or Class B common stock is subject to the laws of the state of Delaware, applicable federal and state banking laws and regulations, and the terms of any senior securities (including preferred stock) we may then have outstanding. Our principal source of income is dividends that are declared and paid by our bank on its capital stock. Therefore, our ability to pay dividends is dependent upon the receipt of dividends from our bank. See “Dividend Policy.”
Right to Receive Liquidation Distributions
Upon our liquidation, dissolution or winding up and after payment in full of all amounts required to be paid to creditors and to the holders of preferred stock having liquidation preferences, if any, all shares of our common stock will be entitled to receive pro rata our remaining assets available for distribution.
No Preemptive or Similar Rights
Holders of our Class A and Class B common stock do not have preemptive, subscription or redemption rights. Other than the automatic conversion terms described above, our common stock will not be subject to further calls or assessment by us. There will be no redemption or sinking fund provisions applicable to the Class A common stock or Class B common stock. All shares of our common stock that will be outstanding at the time of the completion of this offering will be fully paid and non-assessable.
Preferred Stock
Our Amended Certificate of Incorporation will authorize our board of directors to establish one or more series of preferred stock (including convertible preferred stock).
Unless required by law or by any stock exchange, the authorized shares of preferred stock will be available for issuance without further action by you. Our board of directors may determine, with respect to any series of preferred stock, the terms and rights of that series, including:
•the distinctive serial designation of such series which shall distinguish it from other series;
•the number of shares included in such series;
•the dividend rate (or method of determining such rate) payable to the holders of the shares of such series, any conditions upon which such dividends shall be paid and the date or dates upon which such dividends shall be payable;
•whether dividends on the shares of such series shall be cumulative and, in the case of shares of any series having cumulative dividend rights, the date or dates or method of determining the date or dates from which dividends on the shares of such series shall be cumulative;
•the amount or amounts which shall be payable out of the assets of the Company to the holders of the shares of such series upon voluntary or involuntary liquidation, dissolution or winding up the Company, and the relative rights of priority, if any, of payment of the shares of such series;
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•the price or prices at which, the period or periods within which, and the terms and conditions upon which the shares of such series may be redeemed, in whole or in part, at the option of the Company or at the option of the holder or holders thereof or upon the happening of a specified event or events;
•the obligation, if any, of the Company to purchase or redeem shares of such series pursuant to a sinking fund or otherwise and the price or prices at which, the period or periods within which and the terms and conditions upon which the shares of such series shall be redeemed or purchased, in whole or in part, pursuant to such obligation;
•whether or not the shares of such series shall be convertible or exchangeable, at any time or times at the option of the holder or holders thereof or at the option of the Company or upon the happening of a specified event or events, into shares of any other class or classes or any other series of the same or any other class or classes of stock of the Company, and the price or prices or rate or rates of exchange or conversion and any adjustments applicable thereto;
•whether or not the holders of the shares of such series shall have voting rights, in addition to the voting rights provided by law, and if so the terms of such voting rights; and
•any other powers, preferences and rights and qualifications, limitations and restrictions not inconsistent with the DGCL.
We may issue a series of preferred stock that could, depending on the terms of the series, impede or discourage a takeover attempt or other transaction that a stockholder might consider to be in its best interests, including a takeover attempt that might result in a premium over the market price for holders of shares of our Class A common stock or Class B common stock.
Investor Rights Agreements
In connection with the offering, certain of our existing stockholders will enter to Investor Rights Agreements with the Company, pursuant to which, among other things, all stockholders party thereto will be entitled to “piggyback” registration rights allowing such stockholders to include their shares in such registration where certain conditions are met. As a result, whenever we propose to file a registration statement under the Securities Act, we shall, subject to certain conditions, use reasonable best efforts to cause all of the Class A common stock that a stockholder satisfying the applicable conditions has requested to be included in such registration to be registered. Certain stockholders party to Investor Rights Agreements will also be entitled to demand and shelf registration rights, subject to the terms and conditions as set forth in their Investor Rights Agreements.
The Investor Rights Agreements also provides that, following the offering, certain stockholders will have continued nomination rights with respect to our board, as set forth below, in each case, while they maintain in excess of certain ownership percentages, as determined in accordance with their Investor Rights Agreement.
Specifically, the Investor Rights Agreements with each of John Delaney, certain funds associated with Gallatin Point Capital (“GPC”), certain funds associated with Centerbridge (“CB”) and certain funds associated with Bayview Asset Management (“BVA”), provide that the board of directors of the Company shall consist of eleven directors at the time of the offering, divided into three classes serving staggered three-year terms, and the Company is required to use reasonable best efforts, including taking all necessary corporate action (subject to applicable law) to cause certain nominees to be elected to serve as directors on the board of directors of the Company as follows:
•Two persons designated as director nominees from time to time by GPC who shall meet and comply with the Company’s Director Qualifications; provided that if the ownership of GPC and its Affiliates fall below certain thresholds as proscribed in its Investor Rights Agreement, GPC shall only be entitled to designate one director nominee to serve on the Company’s board of directors or shall have no right to designate director nominees to serve on the Company’s board of directors. Specifically, upon the first to occur of (1) GPC and its Affiliates owning beneficially an amount equal to less than      % but greater than or equal to      % of            and (2) GPC and its Affiliates owning beneficially an aggregate of less than      % but greater than      % of the total Common Stock of the Company then outstanding, which numbers are subject
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to appropriate adjustment for any stock splits, stock dividends, combinations, recapitalizations and the like, GPC shall cause one of its designees to promptly, but in all events within five business days, resign from the board of directors of the Company and thereafter GPC shall only be entitled to designate one director nominee to serve and upon the first to occur of (A) GPC and its Affiliates owning beneficially an amount equal to less than      % of            and (B) GPC and its Affiliates owning beneficially an aggregate of less than      % of the total Common Stock of the Company then outstanding, which numbers are subject to appropriate adjustment for any stock splits, stock dividends, combinations, recapitalizations and the like, GPC shall cause all of its designees to promptly, but in all events within five business days, resign from the board of directors of the Company and thereafter GPC shall have no right to designate director nominees.
•Two persons designated as director nominees from time to time by CB who shall meet and comply with the Company’s Director Qualifications; provided that if the ownership of CP and its Affiliates fall below certain thresholds as proscribed in its Investor Rights Agreement, CP shall only be entitled to designate one director nominee to serve on the Company’s board of directors or shall have no right to designate director nominees to serve on the Company’s board of directors. Specifically, upon the first to occur of (1) CB and its Affiliates owning beneficially an amount equal to less than      % but greater than or equal to      % of            and (2) CB and its Affiliates owning beneficially an aggregate of less than      % but greater than      % of the total Common Stock of the Company then outstanding, which numbers are subject to appropriate adjustment for any stock splits, stock dividends, combinations, recapitalizations and the like, CB shall cause one of its designees to promptly, but in all events within five business days, resign from the board of directors of the Company and thereafter CB shall only be entitled to designate one director nominee to serve and upon the first to occur of (A) CB and its Affiliates owning beneficially an amount equal to less than      % of            and (B) CB and its Affiliates owning beneficially an aggregate of less than      % of the total Common Stock of the Company then outstanding, which numbers are subject to appropriate adjustment for any stock splits, stock dividends, combinations, recapitalizations and the like, CB shall cause all of its designees to promptly, but in all events within five business days, resign from the board of directors of the Company and thereafter CB shall have no right to designate director nominees.
•For so long as Donald Kohn serves as a director on the Company’s board of directors, one person and upon Mr. Kohn’s resignation or removal or upon the Nominating and Governance Committee’s determination not to nominate Mr. Kohn, two persons, in each case designated as director nominee(s) from time to time by BVA who shall meet and comply with the Company’s Director Qualifications; provided that if the ownership of BVA and its Affiliates fall below certain thresholds as proscribed in its Investor Rights Agreement, BVA shall only be entitled to designate one director nominee to serve on the Company’s board of directors or shall have no right to designate director nominees to serve on the Company’s board of directors. Specifically, upon the first to occur of (1) if at such time BVA is entitled to designate two director designees, BVA and its Affiliates owning beneficially an amount equal to less than      % but greater than or equal to      % of            and (2) BVA and its Affiliates owning beneficially an aggregate of less than      % but greater than      % of the total Common Stock of the Company then outstanding, which numbers are subject to appropriate adjustment for any stock splits, stock dividends, combinations, recapitalizations and the like, BVA shall cause one of its designees to promptly, but in all events within five business days, resign from the board of directors of the Company and thereafter BVA shall only be entitled to designate one director nominee to serve and upon the first to occur of (A) BVA and its Affiliates owning beneficially an amount equal to less than      % of            and (y) BVA and its Affiliates owning beneficially an aggregate of less than      % of the total Common Stock of the Company then outstanding, which numbers are subject to appropriate adjustment for any stock splits, stock dividends, combinations, recapitalizations and the like, BVA shall cause all of its designees to promptly, but in all events within five business days, resign from the board of directors of the Company and thereafter BVA shall have no right to designate director nominees.
•Two persons designated as director nominees to serve from time to time by John Delaney, who shall meet and comply with the Company’s Director Qualifications; provided that if the ownership of John Delaney and his Affiliates and permitted transferees falls below certain thresholds as proscribed in his Investor Rights Agreement (which ownership thresholds in part depend on whether John Delaney is then President
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or Chief Executive Officer), John Delaney shall only be entitled to designate one director nominee to serve on the Company’s board of directors or shall have no right to designate director nominees to serve on the Company’s board of directors. Specifically, (1) for so long as John Delaney serves as the President/Chief Executive Officer of the Company, upon the occurrence of John Delaney and his Affiliates and his and their permitted transferees owning beneficially an amount equal to less than      % but greater than or equal to      % of           , or (2) if at any time John Delaney no longer serves as the President/Chief Executive Officer of the Company, upon the first to occur of (x) John Delaney and his Affiliates and his and their permitted transferees owning beneficially an amount equal to less than      % but greater than or equal to            % of the John Delaney Threshold and (y) John Delaney and his Affiliates and his and their permitted transferees owning beneficially an aggregate of less than      % but greater than      % of the total Common Stock of the Company then outstanding, in each case which numbers are subject to the appropriate adjustment for any stock splits, stock dividends, combinations, recapitalizations and the like, John Delaney shall cause one of his designees to promptly, but in all events within five business days, resign from the board of directors of the Company and thereafter John Delaney shall only be entitled to designate one director nominee to serve and upon the first to occur of (A) for so long as John Delaney serves as the President/Chief Executive Officer of the Company, John Delaney and his Affiliates and his and their permitted transferees owning beneficially an amount equal to less than      % of            and (B) if at any time John Delaney no longer serves as the President/Chief Executive Officer of the Company, upon the first to occur of John Delaney and his Affiliates and his and their permitted transferees owning beneficially (x) an amount equal to less than      % of            or (y) an aggregate of less than      % of the total Common Stock of the Company then outstanding, which numbers are subject to appropriate adjustment for any stock splits, stock dividends, combinations, recapitalizations and the like, John Delaney, shall cause all his designees to promptly, but in all events within five business days, resign from the board of directors of the Company and thereafter John Delaney shall have no right to designate director nominees (other than where otherwise entitled pursuant to any Investor Rights Agreement).
Transfer Restrictions
To help ensure the preservation of its net operating loss carryforwards (“NOLs”), the Company’s Amended Certificate of Incorporation generally restricts any person from undertaking any direct, indirect or deemed purchase, acquisition, transaction, exchange or other action that alters their beneficial ownership of the Company’s stock to the extent that, as a result thereof, (a) any person shall become a Substantial Stockholder (as defined in the Amended Certificate of Incorporation), (b) the Percentage Stock Ownership (as defined in the Amended Certificate of Incorporation) interest of any Substantial Stockholder would be increased, or (c) the Percentage Stock Ownership interest of any Public Group (as defined in the Amended Certificate of Incorporation) shall be increased (other than due to a transfer by a Substantial Stockholder in connection with this offering) (each a “Prohibited Transfer”). Any Prohibited Transfer, other than where approved by the board of directors in the manner described in the Amended Certificate of Incorporation, will be void ab initio, provided that all such restrictions on Prohibited Transfers in the Amended Certificate of Incorporation shall terminate as of . We expect such termination to substantially increase the risk that we will experience an “ownership change” as defined in Section 382 of the Code on or after such date, which would adversely affect our ability to use our deferred tax assets to offset future taxable income.
The Company’s Amended Certificate of Incorporation further provides that any person seeking to undertake such a transaction (a “Proposed Transaction”) will be required, prior to the date of any such transaction, to request in writing that the board of directors review the Proposed Transaction and authorize or not authorize the Proposed Transaction, and comply with certain procedures related thereto. The Amended Certificate of Incorporation provides that, following certain procedures, the board of directors may authorize a Proposed Transaction if it determines in its reasonable discretion that the Proposed Transaction, considered alone or with other transactions, would not create a risk that the NOL tax benefits may be jeopardized as a result of the application of Sections 382 and 383 of the Code. Any determination by the board of directors not to authorize a Proposed Transaction shall cause such Proposed Transaction to continue to be treated as prohibited. The Amended Certificate of Incorporation provides that the board of directors may also impose any conditions that it deems reasonable and appropriate in connection with authorizing any Proposed Transaction. Notwithstanding these prohibitions, each of CB, GPC and BVA is individually entitled to transfer up to % of the common stock held by them regardless of the aforementioned
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limitations in the Company’s Amended Certificate of Incorporation and without any prior approval by the board of directors (collectively, the “Investor Transfer Exception”). The ability of certain stockholders to utilize the Investor Transfer Exception may increase the risk that we experience an “ownership change” as defined in Section 382 of the Code which would adversely affect our ability to use our deferred tax assets to offset future taxable income.
As stated above, any Prohibited Transfer attempted in violation of the foregoing will be void ab initio. Accordingly, the purported transferee of a Prohibited Transfer shall not be recognized as a stockholder of the Company for any purpose whatsoever with respect to such securities (the “Excess Securities”). Until the Excess Securities are acquired by another person in a transfer that is not a Prohibited Transfer, the purported transferee shall not be entitled with respect to such Excess Securities to any rights of stockholders of the Company, including, without limitation, the right to vote such Excess Securities and to receive dividends or distributions, whether liquidating or otherwise, in respect thereof, if any, and the Excess Securities shall be deemed to remain with the transferor unless and until the Excess Securities are transferred to an agent of the board of directors of the Company (an “Agent”) pursuant to the Amended Certificate of Incorporation or until an approval is obtained from the board of directors pursuant to the Amended Certificate of Incorporation. Once the Excess Securities have been acquired in a transfer that is not a Prohibited Transfer, such securities shall cease to be Excess Securities.
If the board of directors determines that a transfer constitutes a Prohibited Transfer that is not authorized, then, upon written demand by the Company, the purported transferee shall transfer or cause to be transferred any certificate or other evidence of ownership of the Excess Securities within their possession or control, together with certain distributions, to an Agent designated in accordance with the Amended Certificate of Incorporation. The Agent shall thereafter sell to a buyer or buyers, which may include the Company, the Excess Securities transferred to it in one or more arm’s-length transactions in a transfer that is not a Prohibited Transfer. If the purported transferee has resold the Excess Securities before receiving the Company’s demand to surrender Excess Securities to the Agent, the purported transferee shall be deemed to have sold the Excess Securities for the Agent, and shall generally be required to transfer to the Agent any prohibited distributions and proceeds of such sale. If such sale proceeds include non-cash consideration, the Agent shall sell any such non-cash consideration to a buyer or buyers in one or more arm’s-length transactions (including over a national securities exchange, if possible).
The Amended Certificate of Incorporation provides generally that the board of directors may determine in its reasonable discretion that the aforementioned restrictions shall not apply to any particular transaction or transactions, whether or not a request has been made, subject to any conditions that it deems reasonable and appropriate in connection therewith. Any such determination of the board of directors may be made prospectively or retroactively.
These transfer restrictions may result in the delay or refusal of certain requested transfers of our common stock, or prohibit ownership (thus requiring dispositions) of our common stock due to a change in the relationship between two or more persons or entities or to a transfer of an interest in an entity that, directly or indirectly, owns our common stock. These transfer restrictions may have anti-takeover effects because they will restrict the ability of a person or entity or group thereof from accumulating an aggregate of            % or more of the Company’s capital stock and the ability of persons, entities or groups now owning           % or more of the Company’s capital stock from acquiring additional stock. Although the transfer restrictions are designed as a protective measure to preserve and protect the Company’s NOLs, the transfer restrictions may have the effect of impeding or discouraging a merger, tender offer or proxy contest, even if such a transaction may be favorable to the interests of some or all of the Company’s stockholders. This might prevent stockholders from realizing an opportunity to sell all or a portion of their shares of common stock at higher than market prices. In addition, the transfer restrictions may delay the assumption of control by a holder of a large block of capital stock and the removal of incumbent directors and management, even if such removal may be beneficial to some or all of the Company’s stockholders.
The foregoing description of the transfer restrictions does not purport to be complete and is qualified in its entirety by reference to Article XI of the Company’s Amended Certificate of Incorporation, which is incorporated herein by reference.
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Anti-Takeover Effects of Delaware Law, Our Organizational Documents and the Investor Rights Agreements
The following is a summary of certain provisions of our Amended Certificate of Incorporation, Amended Bylaws and the Investors Rights Agreements that may be deemed to have an anti-takeover effect and may delay, deter or prevent a tender offer or takeover attempt that a stockholder might consider to be in its best interests, including those attempts that might result in a premium over the market price for holders of shares of common stock.
Multi-Class Structure. Our Amended Certificate of Incorporation will provide for a classified board of directors consisting of three classes of directors, with staggered three-year terms; only one class of directors will be elected at each annual meeting of our stockholders, with the other classes continuing for the remainder of their respective three-year terms, which may have the effect of delaying a change in control of the board.
Undesignated Preferred Stock. Our Amended Certificate of Incorporation and Amended Bylaws will authorize the issuance of “blank check” preferred stock, the price and other terms of which, including preferences and voting rights, may be established by us and which we may issue without stockholder approval. The issuance of our preferred stock could delay or prevent a chance in control of the Company.
Board Vacancies. Our Investor Rights Agreements will provide that any vacancies created by the removal, resignation or death of a director designated pursuant to an Investor Rights Agreement will be filled by the party entitled to designate such director under the Investors’ Rights Agreement, conditioned on the maintenance of certain ownership thresholds.
Special Meetings. Our Amended Certificate of Incorporation will provide that special meetings of the stockholders may be called by (i) the chair of our board of directors, (ii) the President/Chief Executive Officer or (iii) the majority of the board of directors. The right of stockholders to call a special meeting shall be specifically denied.
Removal of Directors. Our Amended Certificate of Incorporation and Amended Bylaws will provide that a director may be removed from office only pursuant to the provisions of the applicable Investors Rights Agreements or for cause.
Stockholder Action. Our Amended Certificate of Incorporation will provide that our stockholders may not take action by written consent, and that any action must be effected at a duly called stockholders meeting.
Advance Notice of Director Nominations and Stockholder Proposals. Our Amended Bylaws will establish advance notice procedures with which stockholders must comply to nominate candidates to the board of directors or to propose matters to be acted upon at a stockholders’ meeting. These provisions might preclude our stockholders from making nominations for directors or bringing other business before our annual or special meetings of stockholders, as the case may be, if the specified requirements are not satisfied.
Amendments to Our Organizational Documents. Our Amended Certificate of Incorporation and Amended Bylaws will provide for supermajority voting requirements for changes to certain provisions of our Amended Certificate of Incorporation and Amended Bylaws. Amendment provisions in our Amended Bylaws may make it easier for our board of directors to further amend our Amended Bylaws, which may allow the board to take additional actions to prevent unsolicited takeovers and inhibit the ability of an acquirer to amend our Amended Bylaws to facilitate such a takeover attempt.
Authorized but Unissued Shares
The authorized but unissued shares of our Class A common stock, our Class B common stock and our preferred stock will be available for future issuance without obtaining stockholder approval. These additional shares may be utilized for a variety of corporate purposes, including future public offerings to raise additional capital, corporate acquisitions and employee benefit plans. The existence of authorized but unissued shares of our common stock and preferred stock could render more difficult or discourage an attempt to obtain control over us by means of a proxy contest, tender offer, merger or otherwise.
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Choice of Forum
Our Amended Certificate of Incorporation will provide that unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the state of Delaware or, in the event that the Court of Chancery of the state of Delaware does not have jurisdiction, any federal or state court of Delaware shall be the sole and exclusive forum for: (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of any current or former duty owed by any director, officer or other employee to us or to our stockholders, (iii) any action asserting a claim against us or any of our current or former directors or officers or other employees arising pursuant to any provision of the DGCL or our Amended Certificate of Incorporation or our Amended Bylaws, or (iv) any action asserting a claim against us or any of our current or former directors or officers or other employees that is governed by the internal affairs doctrine of the State of Delaware.
Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all claims brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder. Accordingly, our Amended Certificate of Incorporation will provide that the federal district courts of the United States will, to the fullest extent permitted by law, be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. Nothing in our Amended Certificate of Incorporation will preclude stockholders that assert claims under the Exchange Act from bringing such claims in any court, subject to applicable law.
Our Amended Certificate of Incorporation will also provide that any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of and to have consented to the foregoing provisions. We recognize that the forum selection clause in our Amended Certificate of Incorporation may impose additional litigation costs on stockholders in pursuing any such claims, particularly if the stockholders do not reside in or near the State of Delaware. Additionally, the forum selection clause in our Amended Certificate of Incorporation may limit our stockholders’ ability to bring a claim in a forum that they find favorable for disputes with us or our directors, officers, employees, or agents, which may discourage such lawsuits against us and our directors, officers, employees, and agents even though an action, if successful, might benefit our stockholders. Federal or state courts in Delaware may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than to our stockholders.
The foregoing provisions of our Amended Certificate of Incorporation, Amended Bylaws and the Investors’ Rights Agreements could discourage potential acquisition proposals and could delay or prevent a change in control. These provisions are intended to enhance the likelihood of continuity and stability in the composition of our board of directors and in the policies formulated by our board of directors and to discourage certain types of transactions that may involve an actual or threatened change of control. These provisions are designed to reduce our vulnerability to an unsolicited acquisition proposal. The provisions also are intended to discourage certain tactics that may be used in proxy fights. However, such provisions could have the effect of discouraging others from making tender offers for our shares and, as a consequence, they also may inhibit fluctuations in the market price of our Class A common stock that could result from actual or rumored takeover attempts. Such provisions also may have the effect of preventing changes in our management or delaying or preventing a transaction that might benefit stockholders. For more information on the risks associated with our choice of forum provision, see “Risk Factors—Risks Related to an Investment in Our Class A Common Stock and this Offering—Our Amended Certificate of Incorporation has an exclusive forum provision, which could limit a stockholder’s ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.”
Limitations on Liability and Indemnification of Directors and Officers
Our Amended Certificate of Incorporation will provide that our directors and officers will not be personally liable to us or our stockholders for monetary damages for any breach of fiduciary duty as a director or officer, except to the extent such exemption from liability or limitation is not permitted under the DGCL (as it may be amended from time to time), or for liability:
•for any breach of the director’s or officer’s duty of loyalty to us or our stockholders;
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•for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
•in the case of a director, pursuant to Section 174 of the DGCL; or
•in the case of an officer, in any action by or in our right.
Our Amended Bylaws will provide that we must indemnify our directors and officers to the fullest extent permitted by law and advance certain expenses (including attorneys’ fees) to our directors and officers in connection therewith. We will also be expressly authorized to carry directors’ and officers’ insurance providing for indemnification of our directors and officers for claims based on acts or omissions in their capacities as directors or officers.
Prior to the completion of this offering, we will enter into indemnification agreements with each of our directors and officers that will provide for, among other things, indemnification to the fullest extent permitted by law against any and all expenses, judgments, fines, penalties, and amounts paid in settlement (with our consent) of any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative, or investigative. The indemnification agreements will also provide for the advancement or payment of all expenses to our directors and officers and for reimbursement of such advanced expenses to us if it is found that such director or officer is not entitled to such indemnification under applicable law.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to us, our directors, our officers or persons who control us pursuant to the foregoing provisions, we have been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
Transfer Agent
The registrar and transfer agent for our common stock will be Computershare Trust Company, N.A. The transfer agent’s address is 150 Royall Street, Canton, Massachusetts 02021.
Listing
We have applied to list our Class A common stock on the Nasdaq Global Select Market under the symbol “FRBT.”
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our Class A common stock, and we cannot predict the effect, if any, that sales of shares or availability of any shares for sale will have on the market price of our Class A common stock prevailing from time to time. Sales of substantial amounts of Class A common stock (including shares issued on the exercise of options, warrants or convertible securities, if any) or the perception that such sales could occur, could adversely affect the market price of our Class A common stock and our ability to raise additional capital through a future sale of securities.
Upon the completion of this offering, we will have           shares of Class A common stock issued and outstanding (or            shares of Class A common stock if the underwriters exercise their option to purchase additional shares of Class A common stock in full). All of the shares of our Class A common stock sold in this offering will be freely tradable without restriction or further registration under the Securities Act unless such shares are purchased by “affiliates” as that term is defined in Rule 144. All remaining shares of common stock that will be outstanding upon completion of this offering (other than the shares of Class A common stock sold in this offering) will be “restricted securities” as that phrase is defined in Rule 144. Subject to certain contractual restrictions, including the lock-up agreements described below, holders of restricted shares will be entitled to sell those shares in the public market only if they are registered or if they qualify for an exemption from registration under Rule 144 or any other applicable exemption under the Securities Act. Subject to the lock-up agreements described below and the provisions of Rules 144 and 701, additional shares will be available for sale as set forth below.
Lock-Up Agreements
See “Underwriting” for a description of the lock-up agreements applicable to our shares.
Rule 144
In general, under Rule 144, a person (or persons whose shares are aggregated) who is not deemed to have been an affiliate of ours at any time during the three months preceding a sale, and who has beneficially owned restricted securities within the meaning of Rule 144 for at least six months (including any period of consecutive ownership of preceding non-affiliated holders) would be entitled to sell those shares, subject only to the availability of current public information about us. A non-affiliated person who has beneficially owned restricted securities within the meaning of Rule 144 for at least one year would be entitled to sell those shares without regard to the provisions of Rule 144.
            shares of our Class A common stock and             shares of our Class B common stock outstanding after this offering will be “restricted securities” as that term is defined in Rule 144 of the Securities Act of which            of these restricted securities will be subject to lock-up agreements. A person (or persons whose shares are aggregated) who is deemed to be an affiliate of ours and who has beneficially owned restricted securities for at least six months would be entitled to sell a number of shares within any three-month period that does not exceed the greater of (1) 1% of the number of shares of our Class A common stock outstanding, which will equal approximately            shares immediately after this offering; and (2) the average weekly trading volume of our Class A common stock on the Nasdaq Global Select Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale. Such sales are also subject to certain manner of sale provisions, notice requirements and the availability of current public information about us.
Rule 701
In general, under Rule 701 of the Securities Act, most of our employees, consultants or advisors who purchased shares from us in connection with a qualified compensatory stock plan or other written agreement are eligible to resell those shares 90 days after the date of this prospectus in reliance on Rule 144, but without compliance with the holding period or certain other restrictions contained in Rule 144.
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Registration Statements on Form S-8
We intend to file one or more registration statements on Form S-8 under the Securities Act to register all shares of our Class A common stock subject to outstanding stock options and the shares of Class A common stock subject to issuance under the                  and 2026 Plan. Any such Form S-8 registration statement will automatically become effective upon filing. Accordingly shares registered under such registration statements will be available for sale in the open market. We expect that the initial registration statement on Form S-8 will cover              shares.
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U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS
The following is a summary of certain U.S. federal income tax considerations generally applicable to Non-U.S. Holders (as defined below) with respect to the ownership and disposition of shares of our Class A common stock sold pursuant to this offering and held by such Non-U.S. Holders as a capital asset (generally, property held for investment) within the meaning of the Code. References in this summary to our common stock are deemed to be references to our Class A common stock. This summary is based on the Code, Treasury Department regulations promulgated thereunder (the “Regulations”), administrative interpretations and court decisions, each as in effect as of the date of this document and all of which are subject to change, possibly with retroactive effect. This summary is not binding on the IRS, and there can be no assurance that the IRS or a court will agree with the conclusions stated herein. This summary is not a complete description of all of the U.S. federal income tax considerations that may be relevant to a particular Non-U.S. Holder. In addition, it does not address consequences relevant to Non-U.S. Holders subject to special rules, including, without limitation:
•banks, insurance companies and other financial institutions;
•brokers, dealers or traders in securities;
•certain former citizens or residents of the United States;
•taxpayers that are subject to the mark-to-market accounting rules;
•persons holding our common stock as part of a straddle, hedge, conversion or other integrated transaction;
•persons deemed to sell our common stock under the constructive sale provisions of the Code;
•persons who acquired shares of our common stock as compensation or otherwise in connection with the performance of services;
•entities or arrangements classified as partnerships or other pass-through entities for U.S. federal income tax purposes (and investors therein);
•persons that actually or constructively own more than five percent of our common stock by value;
•regulated investment companies;
•real estate investment trusts;
•controlled foreign corporations;
•passive foreign investment companies;
•tax-exempt organizations; and
•governments or agencies or instrumentalities thereof.
In addition, this discussion does not address any U.S. state or local or non-U.S. tax considerations or any U.S. federal estate, gift, alternative minimum tax or Medicare contribution tax considerations. Non-U.S. Holders should consult their tax advisors regarding the particular tax considerations to them of owning and disposing of our common stock.
For purposes of this discussion, a “Non-U.S. Holder” is a beneficial owner of our common stock that, for U.S. federal income tax purposes, is an individual, corporation, estate or trust that is not, and is not treated as, any of the following:
•an individual who is a citizen or resident of the United States;
•a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;
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•an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or
•a trust (i) the administration of which is subject to the primary supervision of a court within the United States and for which one or more “United States persons” (as defined in Section 7701(a)(30) of the Code) have the authority to control all substantial decisions, or (ii) that has otherwise validly elected to be treated as a United States person under the applicable Regulations.
If a partnership (or other entity or arrangement treated as a partnership or other pass-through entity for U.S. federal income tax purposes) holds our common stock, the tax treatment of a partner or beneficial owner of the entity or arrangement will generally depend on the status of the partner or beneficial owner and the activities of the entity or arrangement and certain determinations made at the partner or beneficial owner level. Partners in a partnership (or beneficial owners of another entity or arrangement treated as a partnership or other pass-through entity for U.S. federal income tax purposes) should consult their tax advisors regarding the tax considerations of an investment in our common stock.
THIS DISCUSSION OF U.S. FEDERAL INCOME TAX CONSIDERATIONS IS NOT INTENDED TO BE, AND SHOULD NOT BE CONSTRUED AS, TAX ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS TAX ADVISOR REGARDING THE U.S. FEDERAL, STATE, LOCAL, AND NON-U.S. INCOME AND OTHER TAX CONSEQUENCES OF THE OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK.
Distributions
As discussed under the section titled “Dividend Policy,” we do not intend to pay dividends on our common stock in the near term, or necessarily at all. If we do make distributions of cash or property (other than certain stock distributions) with respect to our common stock (or if we engage in certain redemptions that are treated as distributions with respect to our common stock), any such distributions generally will be treated as dividends to the extent paid from our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). If a distribution exceeds our current and accumulated earnings and profits (as determined under U.S. federal income tax principles), the excess will be treated first as a tax-free return of capital, which will reduce a Non-U.S. Holder’s adjusted tax basis in our common stock, but not below zero, and thereafter as capital gain from the sale, exchange or other taxable disposition of our common stock, with the tax treatment described under “—Sale, Exchange or Other Taxable Disposition of Shares of Our Common Stock.”
Subject to the discussion below on effectively connected income, distributions treated as dividends paid on our common stock to a Non-U.S. Holder will generally be subject to U.S. federal withholding tax at a 30% rate, or a reduced rate specified by an applicable income tax treaty. In order to obtain a reduced rate of withholding under an applicable income tax treaty, a Non-U.S. Holder will generally be required to (i) provide a properly executed IRS Form W-8BEN or IRS Form W-8BEN-E (or any appropriate successor or replacement forms), as applicable, certifying that it is not a United States person and that it is entitled to benefits under the treaty or (ii) if such Non-U.S. Holder’s common stock is held through certain foreign intermediaries or foreign partnerships, satisfy the relevant certification requirements of applicable Regulations, including by having the Non-U.S. Holder provide appropriate documentation to the foreign intermediary or foreign partnership, who then will be required to provide certification to the applicable withholding agent, either directly or through other intermediaries. A Non-U.S. Holder that does not timely furnish the required documentation but that is eligible for a reduced rate of U.S. federal withholding tax pursuant to an income tax treaty may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS.
Subject to the discussion below under “—Foreign Account Tax Compliance Act,” no amounts in respect of U.S. federal withholding tax will be withheld from dividends paid to a Non-U.S. Holder if the dividends are effectively connected with such Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base maintained by such Non-U.S. Holder in the United States) and the Non-U.S. Holder provides a properly executed IRS Form W-8ECI or other applicable or successor form. Instead, the effectively connected dividends will generally be subject to regular U.S. federal income tax on a net income basis as if the Non-U.S. Holder were a U.S. person. A Non-U.S. Holder that is
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treated as a corporation for U.S. federal income tax purposes receiving effectively connected dividends may also be subject to an additional “branch profits tax” imposed at a rate of 30% (or a lower treaty rate) on its effectively connected earnings and profits (subject to certain adjustments).
Sale, Exchange or Other Taxable Disposition of Shares of Our Common Stock
A Non-U.S. Holder will generally not be subject to U.S. federal income tax on gain realized on a sale, exchange or other taxable disposition of our common stock unless:
•such gain is “effectively connected” with a trade or business of the Non-U.S. Holder in the United States (and, if required by an applicable income tax treaty, is attributable to the Non-U.S. Holder’s permanent establishment or fixed base in the United States), in which case such gain will generally be subject to U.S. federal income tax (and possibly branch profits tax) in the same manner as effectively connected dividend income as described above;
•the Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of the disposition and certain other conditions are met, in which case such gain will generally be subject to U.S. federal income tax at a rate of 30% (or a lower treaty rate), which gain may be offset by certain U.S.-source capital losses, provided the Non-U.S. Holder timely files U.S. federal income tax returns with respect to such losses; or
•we are or become a United States real property holding corporation (as defined in Section 897(c) of the Code, a “USRPHC”), at any time within the shorter of the five-year period preceding the disposition or the Non-U.S. Holder’s holding period, and either (i) our common stock is not regularly traded on an established securities market at any time during the calendar year in which the disposition occurs, or (ii) the Non-U.S. Holder has owned or is deemed to have owned, at any time within the shorter of the five-year period preceding the disposition or the Non-U.S. Holder’s holding period, more than 5% of our common stock by value.
Although there can be no assurance in this regard, we believe that we are not a USRPHC, and we do not anticipate becoming a USRPHC for U.S. federal income tax purposes.
Foreign Account Tax Compliance Act
Certain rules may require withholding at a rate of 30% on dividends in respect of our common stock held by or through certain foreign financial institutions (including investment funds), unless such institution (i) enters into, and complies with, an agreement with the Treasury Department to report, on an annual basis, information with respect to interests in, and accounts maintained by, the institution to the extent such interests or accounts are held by certain U.S. persons and by certain non-U.S. entities that are wholly or partially owned by U.S. persons and to withhold on certain payments or (ii) complies with an intergovernmental agreement between the United States and an applicable foreign country to report such information to its local tax authority, which will exchange such information with the U.S. authorities. An intergovernmental agreement between the United States and an applicable foreign country may modify these requirements. Accordingly, the entity through which our common stock is held will affect the determination of whether such withholding is required. Similarly, dividends in respect of our common stock held by an investor that is a non-financial non-U.S. entity that does not qualify under certain exemptions will be subject to withholding at a rate of 30%, unless such entity either (i) certifies that such entity does not have any “substantial United States owners” or (ii) provides certain information regarding the entity’s “substantial United States owners,” which we or the applicable withholding agent will in turn provide to the Treasury Department. Non-U.S. Holders should consult their tax advisors regarding the possible implications of this withholding tax on their investment in our common stock.
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UNDERWRITING
The Company, the selling stockholders and the underwriters named below have entered into an underwriting agreement with respect to the shares being offered. Subject to certain conditions, each underwriter has severally agreed to purchase the number of shares indicated in the following table. Goldman Sachs & Co. LLC and J.P. Morgan Securities LLC are the representatives of the underwriters.
UnderwritersNumber of Shares
Goldman Sachs & Co. LLC
J.P. Morgan Securities LLC
Barclays Capital Inc.
Wells Fargo Securities, LLC
Piper Sandler & Co.
TD Securities (USA) LLC
Santander US Capital Markets LLC
Centerview Partners LLC
Total
The underwriters are committed to take and pay for all of the shares being offered, if any are taken, other than the shares covered by the option described below unless and until this option is exercised.
The underwriters have an option to purchase up to an aggregate of            additional shares of Class A common stock from us and            additional shares of Class A common stock from the selling stockholders, in each case, at the initial public offering price, less underwriting discounts and commissions. The underwriters can exercise this option at any time within 30 days from the date of this prospectus. If any shares are purchased pursuant to this option, the underwriters will severally purchase shares in approximately the same proportion as set forth in the table above.
The following tables show the per share and total underwriting discounts and commissions to be paid to the underwriters by the Company and the selling stockholders. Such amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase              additional shares from us and             additional shares from the selling stockholders.
Paid by the Company

No Exercise
Full Exercise
Per Share
$                     
$                     
Total
$                     
$                     
Paid by the Selling Stockholders

No Exercise
Full Exercise
Per Share
$                     
$                     
Total
$                     
$                     
Shares sold by the underwriters to the public will initially be offered at the initial public offering price shown on the cover page of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $             per share from the initial public offering price. After the initial offering of the shares, the representatives may change the offering price and the other selling terms. The offering of the shares by the underwriters is subject to receipt and acceptance and subject to the underwriters’ right to reject any order in whole or in part.
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We, our officers, directors, selling stockholders and certain of our holders of our currently outstanding shares of common stock, holding, in the aggregate,            share of our common stock as of March 31, 2026 (representing approximately      % of our outstanding common stock as of such date), have agreed with the underwriters, subject to certain exceptions, not to dispose of or hedge any shares of our common stock or securities convertible into or exchangeable for shares of our common stock during the period from the date of this prospectus continuing through the date that is 180 days after the date of this prospectus, except with the prior written consent of the representatives. See “Shares Eligible for Future Sale” for a discussion of certain transfer restrictions.
Prior to this offering, there has been no public market for the shares. The initial public offering price will be negotiated among the Company and the representatives. Among the factors to be considered in determining the initial public offering price of the shares, in addition to prevailing market conditions, will be the Company’s historical performance, estimates of the business potential and earnings prospects of the company, an assessment of the company’s management and the consideration of the above factors in relation to market valuation of companies in related businesses.
We have applied to list our Class A common stock on the Nasdaq Global Select Market under the symbol “FRBT.”
In connection with this offering, the underwriters may purchase and sell shares of our Class A common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in this offering, and a short position represents the amount of such sales that have not been covered by subsequent purchases. A “covered short position” is a short position that is not greater than the amount of additional shares for which the underwriters’ option described above may be exercised. The underwriters may cover any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to cover the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase additional shares pursuant to the option described above. “Naked” short sales are any short sales that create a short position greater than the amount of additional shares for which the option described above may be exercised. The underwriters must cover any such naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the Class A common stock in the open market after pricing that could adversely affect investors who purchase in this offering. Stabilizing transactions consist of various bids for or purchases of Class A common stock made by the underwriters in the open market prior to the completion of this offering.
The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.
Purchases to cover a short position and stabilizing transactions, as well as other purchases by the underwriters for their own accounts, may have the effect of preventing or retarding a decline in the market price of our common stock, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of our common stock. As a result, the price of our common stock may be higher than the price that otherwise might exist in the open market. The underwriters are not required to engage in these activities and may end any of these activities at any time. These transactions may be effected on the Nasdaq, in the over-the-counter market or otherwise.
We estimate that our share of the total expenses of this offering, excluding underwriting discounts and commissions, will be approximately $             . We have also agreed to reimburse the underwriters for certain FINRA-related expenses incurred by them in connection with the offering in an amount up to $     .
We and the selling stockholders have agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act, or to contribute to payments that the underwriters may be required to make in respect of those liabilities.
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The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services. Certain of the underwriters and their respective affiliates have provided, and may in the future provide, a variety of these services to the issuer and to persons and entities with relationships with the issuer, for which they received or will receive customary fees and expenses.
In the ordinary course of their various business activities, the underwriters and their respective affiliates, officers, directors and employees may purchase, sell or hold a broad array of investments and actively traded securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for their own account and for the accounts of their customers, and such investment and trading activities may involve or relate to our assets, securities and/or instruments (directly, as collateral securing other obligations or otherwise) and/or persons and entities with relationships with us. The underwriters and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in our assets, securities and instruments.
Selling Restrictions
Other than in the United States, no action has been taken by us, the selling stockholders, or the underwriters that would permit a public offering of the shares offered by this prospectus in any jurisdiction where action for that purpose is required. The shares offered by this prospectus may not be offered or sold, directly or indirectly, nor may this prospectus or any other offering material or advertisements in connection with the offer and sale of any such shares be distributed or published in any jurisdiction, except under circumstances that will result in compliance with the applicable rules and regulations of that jurisdiction. Persons into whose possession this prospectus comes are advised to inform themselves about and to observe any restrictions relating to the offering and the distribution of this prospectus. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy any shares offered by this prospectus in any jurisdiction in which such an offer or a solicitation is unlawful.
Notice to Prospective Investors in the European Economic Area
In relation to each Member State of the European Economic Area (each, a "Relevant Member State"), an offer to the public of any shares may not be made in that Relevant Member State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Relevant Member State or, where appropriate, approved in another Relevant Member State and notified to the competent authority in that Relevant Member State, all in accordance with the Prospectus Regulation, except that an offer to the public in that Relevant Member State of any shares may be made at any time under the following exemptions under the Prospectus Regulation:
(a)to any legal entity which is a "qualified investor" as defined under the Prospectus Regulation;
(b)to fewer than 150 natural or legal persons (other than "qualified investors" as defined under the Prospectus Regulation), subject to obtaining the prior consent of the underwriters for any such offer; or
(c)in any other circumstances falling within Article 1(4) of the Prospectus Regulation,
provided that no such offer of shares shall result in a requirement for the company or any of the underwriters to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or a supplemental prospectus pursuant to Article 23 of the Prospectus Regulation and each person who initially acquires any shares or to whom any offer is made will be deemed to have represented, warranted and agreed to and with each of the underwriters and the company that it is a qualified investor within the meaning of Article 2 of the Prospectus Regulation.
In the case of any shares being offered to a financial intermediary as that term is used in Article 1(4) of the Prospectus Regulation, each financial intermediary will also be deemed to have represented, warranted and agreed that the shares acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of
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any shares to the public, other than their offer or resale in a Relevant Member State to qualified investors as so defined or in circumstances in which the prior consent of the underwriters has been obtained to each such proposed offer or resale.
For the purposes of this provision, the expression an “offer to the public” in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase or subscribe for any shares, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129.
Notice to Prospective Investors in the United Kingdom
This prospectus has been prepared on the basis that the offering of the shares falls within one of the exceptions specified in Part 1 of Schedule 1 of the Public Offers and Admissions to Trading Regulations 2024 (the “POATRs”) and, accordingly, there will not be a prospectus prepared or published for the purposes of the POATRs. This prospectus does not constitute a prospectus for the purposes of the POATRs.
An offer to the public of any shares may not be made in the United Kingdom, except that an offer to the public in the United Kingdom of any shares may be made at any time under the following exemptions:
(a)at any time where the offer is conditional on the admission of the shares to trading on the London Stock Exchange plc’s main market (in reliance on the exception in paragraph 6(a) of Schedule 1 to the POATRs);
(b)at any time to any legal entity which is a qualified investor as defined in paragraph 15 of Schedule 1 to the POATRs;
(c)at any time to fewer than 150 persons (other than qualified investors as defined in paragraph 15 of Schedule 1 to the POATRs) in the United Kingdom subject to obtaining the prior consent of the relevant underwriters nominated by us for any such offer; or
(d)at any time in any other circumstances falling within Part 1 of Schedule 1 to the POATRs.
For the purposes of this provision, the expression an “offer to the public” in relation to any shares in the United Kingdom means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe for the shares.
Notice to Prospective Investors in Canada
The shares may be sold in Canada only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions, and Ongoing Registrant Obligations. Any resale of the shares must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.
202

Notice to Prospective Investors in Hong Kong
The shares have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571 of the laws of Hong Kong) (the “SFO”) and any rules made thereunder; or (b) in other circumstances which do not result in this prospectus being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the Laws of Hong Kong) (the “CO”) or which do not constitute an offer to the public within the meaning of the CO. No advertisement, invitation or document relating to the shares has been or may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the SFO and any rules made thereunder.
Notice to Prospective Investors in Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, the shares may not be offered or sold, or made the subject of an invitation for subscription or purchase, nor may this prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase of the shares be circulated, whether directly or indirectly, to any person in Singapore other than (i) to an institutional investor (as defined in Section 4A of the Securities and Futures Act 2001 of Singapore, as modified or amended from time to time (the “SFA”)) pursuant to Section 274 of the SFA or (ii) to an accredited investor (as defined in Section 4A of the SFA) pursuant to and in accordance with the conditions specified in Section 275 of the SFA.
Notice to Prospective Investors in Japan
The shares have not been and will not be registered pursuant to Article 4, Paragraph 1 of the Financial Instruments and Exchange Act. Accordingly, none of the shares nor any interest therein may be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any “resident” of, Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to or for the benefit of a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Act and any other applicable laws, regulations and ministerial guidelines of Japan in effect at the relevant time.
Notice to Prospective Investors in Australia
No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission in relation to this offering. This prospectus does not constitute a prospectus, product disclosure statement, or other disclosure document under Chapter 6D.2 of the Corporations Act 2001 (the “Corporations Act”), and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
Any offer in Australia of the shares may only be made to persons (the “Exempt Investors”) who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the shares without disclosure to investors under Chapter 6D of the Corporations Act.
The shares applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise, or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring shares must observe such Australian on-sale restrictions.
203

This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any shares recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances and, if necessary, seek expert advice on those matters.
Notice to Prospective Investors in the Dubai International Financial Centre
This prospectus relates to an “Exempt Offer” in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (the “DFSA”). This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The shares to which this prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares should conduct their own due diligence on the shares. If you do not understand the contents of this prospectus, you should consult an authorized financial advisor.
Notice to Prospective Investors in the United Arab Emirates
The shares have not been, and are not being, publicly offered, sold, promoted or advertised in the United Arab Emirates (including the Dubai International Financial Centre) other than in compliance with the laws of the United Arab Emirates (and the Dubai International Financial Centre) governing the issue, offering and sale of shares. Further, this prospectus does not constitute a public offer of shares in the United Arab Emirates (including the Dubai International Financial Centre) and is not intended to be a public offer. This prospectus has not been approved by or filed with the Central Bank of the United Arab Emirates, the Securities and Commodities Authority, Financial Services Regulatory Authority (FSRA) or the Dubai Financial Services Authority.
Notice to Prospective Investors in Switzerland
The shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This prospectus has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this prospectus nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this prospectus nor any other offering or marketing material relating to the offering, us or the shares has been or will be filed with or approved by any Swiss regulatory authority. In particular, this prospectus will not be filed with, and the offer of shares will not be supervised by, FINMA, and the offer of shares has not been and will not be authorized under CISA. The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of the shares.
Notice to Prospective Investors in Brazil
The offer and sale of the shares have not been and will not be registered with the Brazilian Securities Commission (Comissão de Valores Mobiliários, or “CVM”) and, therefore, will not be carried out by any means that would constitute a public offering in Brazil under CVM Resolution No. 160, dated 13 July 2022, as amended, or unauthorized distribution under Brazilian laws and regulations. The shares may only be offered to Brazilian Professional Investors (as defined by applicable CVM regulation), who may only acquire the shares through a non-Brazilian account, with settlement outside Brazil in non-Brazilian currency. The trading of these shares on regulated securities markets in Brazil is prohibited.
204

Notice to Prospective Investors in Israel
This document does not constitute a prospectus under the Israeli Securities Law, 5728-1968, or the Securities Law, and has not been filed with or approved by the Israel Securities Authority. In Israel, this prospectus is being distributed only to, and is directed only at, and any offer of the shares is directed only at, (i) a limited number of persons in accordance with the Israeli Securities Law and (ii) investors listed in the first addendum, or the Addendum, to the Israeli Securities Law, consisting primarily of joint investment in trust funds, provident funds, insurance companies, banks, portfolio managers, investment advisors, members of the Tel Aviv Stock Exchange, underwriters, venture capital funds, entities with equity in excess of NIS 50 million and “qualified individuals,” each as defined in the Addendum (as it may be amended from time to time), collectively referred to as qualified investors (in each case, purchasing for their own account or, where permitted under the Addendum, for the accounts of their clients who are investors listed in the Addendum). Qualified investors are required to submit written confirmation that they fall within the scope of the Addendum, are aware of the meaning of same and agree to it.
205

LEGAL MATTERS
Certain legal matters will be passed upon for us by Skadden, Arps, Slate, Meagher & Flom LLP, New York, New York, and for the underwriters by Simpson Thacher & Bartlett LLP, New York, New York.
EXPERTS
Ernst & Young LLP, independent registered public accounting firm, has audited our consolidated financial statements at December 31, 2025 and 2024, and for each of the two years in the period ended December 31, 2025, as set forth in their report. We’ve included our financial statements in the prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLP’s report, given on their authority as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed a registration statement on Form S-1 with the SEC with respect to the registration of the Class A common stock offered for sale with this prospectus. This prospectus does not contain all of the information set forth in the registration statement and the exhibits to the registration statement. For further information about us, the Class A common stock we are offering by this prospectus and related matters, you should review the registration statement, including the exhibits filed as a part of the registration statement. Statements contained in this prospectus about the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and we refer you to the full text of the contract or other document filed as an exhibit to the registration statement.
As a result of this offering, we will become subject to the information and periodic reporting requirements of the Securities Act, and, in accordance with such requirements, will file periodic reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information will be available for inspection and copying at the SEC’s website at www.sec.gov. We also maintain a website at www.forbrightbank.com at which, following the completion of this offering, you may access our SEC filings free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The information contained in, or that can be accessed through, our website is not incorporated by reference in, and is not part of, this prospectus. We intend to furnish our stockholders with annual reports containing consolidated financial statements audited by our independent registered accounting firm.
206


FORBRIGHT, INC. AND SUBSIDIARIES
Table of Contents
SectionPage
Consolidated Financial Statements
F-1

Report of Independent Registered Public Accounting Firm

To the Shareholders and the Board of Directors of Forbright, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Forbright, Inc. and subsidiaries (the Company) as of December 31, 2025 and 2024, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity and cash flows for the years then ended, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2025 and 2024, and the results of its operations and its cash flows for the two years in the period ended December 31, 2025, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2021.
Tysons, Virginia
April 8, 2026
F-2

FORBRIGHT, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(dollars in thousands, except per share amounts)
December 31, 2025December 31, 2024
ASSETS
Cash, due from banks and restricted cash$18,241 $28,199 
Interest-bearing deposits with banks630,474 1,151,783 
Cash, cash equivalents and restricted cash648,715 1,179,982 
Investment securities available-for-sale, at fair value1,254,887 1,471,468 
Investment securities held-to-maturity, at amortized cost, net of allowance for credit losses - investment securities of $110 and $161, respectively
48,834 52,525 
Loans held-for-sale379,662 316,484 
Loans held for investment, at fair value4,645 7,081 
Loans held for investment, at amortized cost5,222,234 3,963,973 
Allowance for credit losses - loans
(52,986)(42,294)
Net loans held for investment, at amortized cost5,169,248 3,921,679 
Other earning assets, net
55,928 88,009 
Deferred tax asset, net153,314 40,181 
Accrued interest receivable55,155 35,525 
Goodwill and other intangible assets, net31,685 33,047 
Other assets87,233 104,953 
Total assets
$7,889,306 $7,250,934 
LIABILITIES
Non-interest-bearing deposits$372,444 $258,242 
Interest-bearing deposits6,405,471 5,307,090 
Total deposits6,777,915 5,565,332 
Subordinated debt, net151,003 174,526 
Other borrowings— 700,000 
Total borrowed funds151,003 874,526 
Other liabilities137,945 89,122 
Total liabilities7,066,863 6,528,980 
Off-balance sheet commitments (Note 13)
STOCKHOLDERS’ EQUITY
Preferred stock, $0.001 par value per share; 5,000,000 shares authorized; no shares issued and outstanding
— — 
Common stock, $0.001 par value per share; 103,200,000 shares authorized:
Voting Common stock, 19,438,060 and 19,001,365 shares issued and outstanding, respectively
20 19 
Non-voting common stock, 21,242,551 shares issued and outstanding, respectively
21 21 
Additional paid-in capital490,550 481,455 
Retained earnings328,828 240,902 
Accumulated other comprehensive income/(loss)3,024 (443)
Total stockholders’ equity822,443 721,954 
Total liabilities and stockholders’ equity
$7,889,306 $7,250,934 
See notes to the consolidated financial statements
F-3

FORBRIGHT, INC. AND SUBSIDIARIES
Consolidated Statements of Income
For the Years Ended December 31,
(dollars in thousands, except per share amounts)
20252024
INTEREST INCOME
Loans held for investment$384,944 $332,852 
Loans held-for-sale38,034 38,592 
Deposits with banks28,601 54,953 
Interest on investment securities61,723 71,493 
Interest and dividends on other earning assets3,338 3,265 
Total interest income516,640 501,155 
INTEREST EXPENSE
Deposits243,403 259,779 
Subordinated debt, net
8,822 9,029 
Other borrowings1,399 2,791 
Total interest expense253,624 271,599 
Net interest income263,016 229,556 
Provision for/(recovery of) credit losses24,011 (1,688)
Net interest income after provision for/(recovery of) credit losses239,005 231,244 
NON-INTEREST INCOME
Investment advisory fees16,190 19,385 
Fee income on loans8,367 9,031 
Gains/(losses) on sales of loans and investment securities, net12,579 (11,563)
Unrealized gains on loans and financing receivables, net6,574 3,012 
Charge-offs on loans carried at fair value— (3,330)
Other non-interest income27,066 6,578 
Total non-interest income70,776 23,113 
NON-INTEREST EXPENSE
Compensation and benefits127,112 110,356 
Information technology26,918 22,267 
Professional fees15,891 20,809 
Loan administration and servicing8,495 6,153 
Advertising and marketing6,244 9,913 
FDIC insurance5,032 9,967 
Other non-interest expense18,932 20,525 
Total non-interest expense208,624 199,990 
Income before income taxes101,157 54,367 
Income tax expense13,231 11,001 
Net income$87,926 $43,366 
Basic earnings per voting and non-voting common share
$2.18 $1.08 
Diluted earnings per voting and non-voting common share
$2.12 $1.05 
Weighted-average shares used to compute earnings per voting common share:
Basic19,011,264 18,971,357 
Diluted20,171,833 20,001,805 
Weighted-average shares used to compute earnings per non-voting common share, basic and diluted21,242,551 21,242,551 
See notes to the consolidated financial statements
F-4

FORBRIGHT, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
For the Years Ended December 31,
(in thousands)20252024
Net income$87,926 $43,366 
Other comprehensive income:
Net change in unrealized gain on investment securities available-for-sale5,865 2,103 
Related income tax effect(1,511)(528)
Reclassification of gain on investment securities available-for-sale to income(1,194)(236)
Related income tax effect307 59 
Total other comprehensive income, net3,467 1,398 
Total comprehensive income$91,393 $44,764 
See notes to the consolidated financial statements
F-5

FORBRIGHT, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity
Common stockAdditional paid-in capitalRetained earningsAccumulated other comprehensive (loss)/incomeTotal
(dollars in thousands)SharesAmount
Balance as of December 31, 2023
40,217,037 $40 $473,890 $197,536 $(1,841)$669,625 
Net income— — — 43,366 — 43,366 
Other comprehensive income, net of tax— — — — 1,398 1,398 
Total other comprehensive income44,764 
Exercise of stock options63,000 — 705 — — 705 
Stock-based compensation9,000 — 7,611 — — 7,611 
Shares withheld for tax withholding and exercise of stock options and restricted shares(45,121)— (751)— — (751)
Balance as of December 31, 2024
40,243,916 $40 $481,455 $240,902 $(443)$721,954 
Net income— — — 87,926 — 87,926 
Other comprehensive income, net of tax— — — — 3,467 3,467 
Total other comprehensive income91,393 
Exercise of stock options100,700 — 1,169 — — 1,169 
Stock-based compensation383,022 1 8,741 — — 8,742 
Shares withheld for tax withholding and exercise of stock options and restricted shares(47,027)— (815)— — (815)
Balance as of December 31, 2025
40,680,611 $41 $490,550 $328,828 $3,024 $822,443 
See notes to the consolidated financial statements
F-6

FORBRIGHT, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Year Ended
(in thousands)December 31, 2025December 31, 2024
OPERATING ACTIVITIES
Net income$87,926 $43,366 
Adjustments to reconcile net income to net cash (used in)/provided by operating activities:
Depreciation and intangible asset amortization8,491 6,723 
Provision for/(recovery of) credit losses
24,011 (1,688)
Accretion of net discounts on investment securities, net
(17,710)(31,134)
Amortization of deferred fees and costs on loans, net
(32,941)(18,469)
(Increase)/decrease in loans originated for sale, net
(44,793)90,161 
(Gains)/losses on sales of loans and investment securities, net
(12,579)11,563 
Stock-based compensation8,742 7,611 
Deferred income taxes20,947 4,115 
Other329 3,330 
Net change in assets and liabilities:
Accrued interest receivable(19,630)3,492 
Other assets1,768 2,817 
Other liabilities(23,015)1,002 
Net cash (used in)/provided by operating activities
1,546 122,889 
INVESTING ACTIVITIES
Net (increase)/decrease in loans held for investment, at amortized cost
(1,311,351)1,252 
Net decrease in loans held for investment, at fair value2,305 19,426 
Purchase of investment securities available-for-sale(1,659,456)(1,689,349)
Proceeds, maturities, prepayments and calls of securities available-for-sale1,899,611 1,105,193 
Proceeds, maturities, prepayments and calls of securities held-to-maturity3,742 783 
Proceeds from sales of other real estate owned
19,105 — 
Proceeds from/(purchase of) Federal Home Loan Bank of Atlanta stock, net
32,952 (31,074)
Other(8,658)(12,379)
Net cash used in investing activities(1,021,750)(606,148)
FINANCING ACTIVITIES
Net increase/(decrease) in deposits
1,212,583 (276,653)
Repayment of subordinated debt(24,000)— 
Proceeds from other borrowings1,180,000 2,205,100 
Repayments of other borrowings(1,880,000)(1,555,100)
Proceeds from exercise of stock options under employee stock plans1,169 705 
Shares withheld for tax withholding and exercise of stock options and restricted shares(815)(751)
Net cash provided by financing activities488,937 373,301 
Net decrease in cash, cash equivalents and restricted cash(531,267)(109,958)
Beginning cash, cash equivalents and restricted cash1,179,982 1,289,940 
Ending cash, cash equivalents and restricted cash$648,715 $1,179,982 

See notes to the consolidated financial statements
F-7

FORBRIGHT, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - (continued)
Year Ended
(in thousands)December 31, 2025December 31, 2024
Supplemental cash flow disclosures:
Interest payments$254,292 $266,306 
Income tax payments, net of refunds of $730 and $2,270, respectively
$8,611 $8,929 
Noncash investing activity:
Extinguishment of loans held for investment (at amortized cost) in exchange for non-cash consideration
$68,620 $— 
Loans held for investment (at fair value) transferred to loans held-for-sale
$85 $— 
Loans held for investment (at amortized cost) transferred to loans held-for-sale, net$— $11,536 
Loans held for investment (at fair value) transferred to loans held-for-sale, net$— $8,338 
Loans held for investment (at amortized cost) transferred to other real estate owned$1,665 $27,355 
Financing receivables held-for-sale (at lower of cost or fair value) transferred to financing receivables held for investment (at amortized cost)
$13,830 $— 
Right-of-use assets obtained in exchange for lease liabilities$— $697 
See notes to the consolidated financial statements
F-8

FORBRIGHT, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Forbright, Inc. (the “Parent”), a Delaware corporation, is a bank holding company that along with its subsidiaries (collectively the “Company”), is headquartered in Chevy Chase, Maryland. Forbright Bank (with its subsidiaries, the “Bank”), a wholly owned subsidiary of the Company, is a Maryland state chartered non-member bank, which serves the needs of individuals, small and medium sized businesses, and professional concerns. Nationwide, the Bank serves deposit and retail banking customers via its digital deposit platform and offers competitive financing and lending services, originating lender finance loans, fund finance loans, healthcare finance loans, real estate loans, working capital facilities, warehouse lines of credit, and term loans.
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States of America (“GAAP”), as applicable to financial institutions, and include the accounts of the Company and its subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation. The typical condition for a controlling financial interest is ownership of a majority of the voting interests of an entity. A controlling financial interest may also exist in entities through arrangements that do not involve voting interests, such as a variable interest entity (“VIE”), when a reporting entity concludes it is the primary beneficiary of the VIE. The Company has determined that it is not the primary beneficiary of any VIEs. Certain reclassifications have been made to the prior period’s financial statements to conform to the current year presentation.
Emerging Growth Company Status
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies. The Company may elect to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that the Company (1) is no longer an emerging growth company or (2) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for credit losses, the valuation of the deferred tax assets, the valuation of stock-based compensation awards and the fair value of financial assets.
Risks and Uncertainties
In the normal course of its business, the Company primarily encounters two significant types of risk: economic and regulatory. There are three main components of economic risk: interest rate risk, credit risk, and market risk. The Company is subject to interest rate risk to the degree that its interest-bearing liabilities mature or re-price at different speeds, or on a different basis, than its interest-earning assets. Credit risk is the risk of default on the Company’s loan and investment portfolios that result from the borrowers’ or issuer’s inability or unwillingness to make contractually required payments. Market risk reflects changes in the value of loans and investments, and the underlying collateral.
F-9

The Company is subject to the regulations of various government agencies. These regulations periodically can and do change significantly. The Company will also undergo periodic examinations by the regulatory agencies, which may subject it to further changes with respect to asset valuations, amounts of required loss allowances and operating restrictions resulting from the regulators’ judgments based on information available to them at the time of their examinations.
Concentrations of Credit Risk
The Company’s portfolio consists primarily of commercial loans to small and medium-sized, privately owned businesses in a variety of industries and markets. As of December 31, 2025, the single largest industry concentration in the Company’s loan portfolio was healthcare. The Company does not have any concentrations involving loan product terms. Additionally, the Company does not have concentrations of loans with negative amortization schedules, significant payment increases, or high loan-to-value ratios. If any particular industry or market were to experience economic or financial difficulties, the overall timing and amount of collections on the Company’s loans to clients operating in those industries may differ from what is expected, which could have a material adverse impact on the Company’s financial condition or results of operations.
Our loan portfolio consists of loans to borrowers on a national scale, across multiple lending strategies, and secured by diverse types of collateral. We do not believe that it is reasonably possible that loss events could occur in the near term to cause any concentrations to result in a severe impact to our results of operations or liquidity. Additionally, we operate throughout the U.S. with no significant concentrations of loans as of December 31, 2025.
Cash, Cash Equivalents and Restricted Cash
For the purposes of reporting cash flows, cash and cash equivalents include cash and due from banks, restricted cash, and interest-bearing deposits with banks, including the Federal Reserve Bank. Cash equivalents include instruments with original maturities of three months or less. At times, cash and cash equivalent balances may exceed insured limits. The Company’s restricted cash represents funds held in escrow for Commercial Property Assessed Clean Energy (“CPACE”) and construction projects until their completion. The restriction could be short- or long-term depending on the nature and length of the project the escrow supports.
Investment Securities
Investment securities are classified as held-to-maturity when the Company has the positive intent and ability to hold the securities to maturity. Investment securities held-to-maturity are carried at amortized cost. Investment securities not classified as held-to-maturity are classified as available-for-sale and are carried at fair value, with unrealized gains and losses reported in Accumulated other comprehensive income/(loss). Investment securities classified as available-for-sale are sold if necessary to reduce the Company’s exposure to interest rate, liquidity, credit, or capital risk based on changes or expected changes in the market. Realized gains and losses on the sale of investment securities available-for-sale are included in non-interest income and, when applicable, are reported as a reclassification adjustment, net of tax, from Accumulated other comprehensive income/(loss). Gains and losses on sales of investment securities are determined using the specific-identification method. The Company determines the appropriate classification of investment securities at the time of purchase or origination based on management’s strategy at the time of origination. The amortization of premiums and accretion of discounts are recognized in interest income using methods approximating the interest method over the period to maturity.
In cases where fair value of an available-for-sale investment security is less than its amortized cost basis and the Company does not intend to sell the available-for-sale investment security and it is not more likely than not that the Company will be required to sell the security before recovery of the amortized cost basis, the difference between the fair value and the amortized cost basis is separated into (a) the amount representing a potential credit loss and (b) the amount related to all other factors. The difference between fair value and amortized cost basis attributable to changes in risk free rates which is considered non-credit related. Any remaining difference between fair value and amortized cost basis is deemed to be credit related. The Company presumes that U.S. Treasury and U.S. government agency investment securities have no credit risk and therefore does not evaluate them for an allowance for credit loss. If the Company intends to sell the security, or it is more likely than not to be required to sell the security before
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recovery of the amortized cost basis, the security is written down to fair value with the entire amount recognized in earnings.
See Note 3 – Investment Securities for more information.
Commercial Property Assessed Clean Energy Financings
The Company has provided financing for CPACE projects, which are secured by tax assessment liens on the properties in the municipality where the project is located. CPACE financings are categorized as either bonds (investment securities) or financing receivables (other earnings assets), depending on the contract structure requirements of the municipality where the project is located.
Based on the Company’s strategy, and facts and circumstances at the time of financing, the investment is classified as either held-to-maturity or available-for-sale for investment securities, or as held for investment or held-for-sale for financing receivables.
The Company accounts for CPACE financings classified as investment securities in accordance with Accounting Standard Codification (“ASC”) 320 - Investments - Debt Securities, recognizing all direct funding related costs and income in earnings in the period in which it is incurred. See Note 3 – Investment Securities for more information. The Company accounts for CPACE classified as financing receivables in accordance with ASC 310 - Receivables, deferring all direct funding related costs and income, and amortizing the net amount as an adjustment to yield over the life of the financing receivable. See Note 6 – Other Earning Assets for more information.
Loans Held-for-Sale
The Company generally carries loans held-for-sale at the lower of cost or fair value, but to the extent the fair value option offered under ASC 825 - Financial Instruments is elected for any held-for-sale loans, those loans are carried at fair value. The Company originates loans for the purpose of selling them through a third-party network set up specifically for such purpose, or the Company will change the classification to held-for-sale if management determines to no longer have the intent or ability to hold them as an investment. The Company calculates the fair value for held-for-sale loans at lower of cost or fair value and held-for-sale loans at fair value using the same method. See Note 21 – Fair Value of Financial Instruments for more information on the Company’s fair value method for these loans. Unrealized losses on the lower of cost or fair value portfolio, and unrealized gains and losses on the fair value option portfolio are recognized in Non-interest income in the Consolidated Statements of Income. Realized gains and losses on loan sales (sales proceeds minus carrying value) are recorded as Non-interest income in the Consolidated Statements of Income.
Periodically, the Company may determine it has the intent and ability to hold loans previously held-for-sale as held for investment loans, due to market conditions or changes in the Company’s strategy. Unrealized losses at the time of transfer are reversed from earnings. Loans transferred from held-for-sale to held for investment continue to be treated as held-for-sale for cash flow purposes as operating activity. Alternatively, if the Company no longer has the intent to hold loans for investment and transfers them to held-for-sale, cash flow impacts will remain as if those loans were still held for investment as investing activity. See Note 4 – Loans for more information.
Loans Held for Investment Carried at Fair Value
The Company continues to carry some held for investment loans at fair value, where the Company made an election to carry loans held-for-sale under the fair value option under the provisions in ASC 825. The Company also previously purchased commercial and consumer loans through forward flow agreements that were originated on various third-party platforms and were carried under the fair value option, however, these loans were reclassified to held for sale and sold during the year ended December 31, 2024. Due to the mostly short-term duration of these loans, the Company had elected to carry these loans under the fair value option, rather than carrying them at amortized cost. Unrealized gains and losses on changes in fair value, equal to the difference between calculated fair value and amortized cost, are recognized in Non-interest income in the Consolidated Statements of Income.
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Loans Held for Investment Carried at Amortized Cost
Loans that management has the intent and the ability to hold for the foreseeable future or until maturity or payoff, and for which management has not made a fair value option election, as discussed above, are carried at amortized cost. Loans held for investment at amortized cost are recorded at their principal balance outstanding, net of deferred loan origination fees and costs.
Non-refundable fees and certain direct costs associated with the origination of loans held for investment at amortized cost are capitalized and subsequently amortized into income over the contractual life of the related loans using the straight-line method, which approximates the effective yield method, and recognized as interest income should a payoff occur prior to maturity. Recognition of deferred fees and costs as interest income is discontinued on non-accrual loans until they return to accrual status or are completely charged-off. See Note 4 – Loans for more information.
Interest Income
Interest on loans, investment securities, and financing receivables is accrued and credited to income based on the principal amount and contract rate on the asset. Accrual of interest is discontinued when, in the opinion of management, there is an indication that the counter party may be unable to meet future payments as they become due, including when an asset is 90 or more days past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. While an asset is on non-accrual status, cash interest received is recognized to reduce the unpaid principal balance of the loan, to the extent it exceeds outstanding unpaid principal is recognized as interest income. Loans, investment securities (when applicable), or financing receivables may be returned to accrual status when the asset is brought current by the counter party and, in the judgment of management, the ability to collect the remaining principal and interest is no longer in doubt.
Allowance for Credit Losses
The Company records allowances for credit losses in accordance with ASC 326 - Financial Instruments - Credit Losses. ASC 326 requires entities to estimate and record credit losses expected to be incurred over the life of an asset carried at amortized cost. The Company elected to exclude accrued interest from the amortized cost basis, as allowed by the standard, as the Company timely reverses accrued interest receivable when the loan, investment security, or financing receivable principal or interest is deemed unlikely to be collected. Additionally, in its evaluation, the Company determined that a straight-line reversion of the reasonable and supportable forecast to the long-term mean is appropriate.
Allowance for Credit Losses – Loans
The Allowance for Credit Losses – Loans (“ACL-Loans”) is an estimate of lifetime expected credit losses on loans held at amortized cost as of the balance sheet date based on an evaluation of loans’ current risk profile, past events, current market and lending conditions, reasonable and supportable economic projections, and eventual reversion to long-term credit performance. The lifetime of loans is defined as the contractual term adjusted for expected prepayments. The estimation of the ACL-Loans is subject to high degrees of complexity and uncertainty and relies on both quantitative and qualitative considerations.
Each period, the ACL-Loans is reduced by charge-offs, increased by recoveries of previously recognized charge-offs, and increased or decreased by the provision for credit losses – loans, which is an expense in the Consolidated Statements of Income. Charge-offs are recorded when the Company believes the loan balance is uncollectible, regardless of loan status.
The ACL-Loans is based on an evaluation of collectability of both collectively assessed loans and individually assessed loans. The collectively assessed loans are subject to quantitative and qualitative evaluation. As such the final ACL-Loans is based on the summation of 1) collectively assessed quantitative reserves; 2) collectively assessed qualitative reserves; and 3) individually assessed reserves. Whether collectively assessed or individually assessed or the entire allowance for credit losses - loans balance is available to offset any actual loan loss incurred.
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Loans subject to collective assessment are deemed to share common risk characteristics with other loans within the same loan segment and loan class, such that they can be evaluated for ACL-Loans on a collective, or pooled, basis. The Company has two loan segments for allowance purposes: core and non-core. Loans in the core segment include loans that are primarily individually underwritten and individually monitored by the Company post-origination. The core segment includes loans in the commercial real estate, commercial and industrial, and consumer categories. The non-core segment includes loans primarily sourced from third-party technology enabled originators and relies on automated underwriting. The non-core segment includes loans in the consumer and commercial and industrial categories.
Loans deemed to have unique risk characteristics are excluded from the collectively assessed evaluation and are assessed individually. Loans in the core segment that are 90 or more days past due, risk-rated substandard, and/or on non-accrual status are subject to individual assessment. Loans in the non-core segment are considered homogeneous in nature, making individual credit assessment impractical and unreliable. Therefore, they are assessed collectively based on factors such as days past due and legal status applied consistently across the portfolio.
The Company conducts ongoing performance monitoring activities, which include back testing of the sufficiency of the ACL. The ACL estimate has a self-correcting mechanism that adjusts certain loss factors based on historical losses relative to assumed loss factors.
ACL-Loans Individually Assessed Methodology
Individually assessed loans are evaluated according to one of the following methods:
•Present value of expected future cash flows: The present value of expected cash flows to the Company discounted at the loan’s effective (original contractual) interest rate is used when there is an expectation of cash repayment, and the loan is not collateral dependent.
•Fair value of collateral: Is used for collateral dependent loans, which are loans where repayment or satisfaction of the loan is dependent on the sale or operation of the collateral.
•Observable market price of loan: Price of the loan from a valid third party that represents the amount a willing and able buyer would pay to acquire the loan. Observable market prices are rarely used, due to a lack of available market pricing data.
ACL-Loans Collectively Assessed Methodology
Collectively assessed loans are evaluated both quantitatively (modeled) and qualitatively (primarily using management judgment). The collectively assessed ACL-Loans is a summation of the quantitative and qualitative allowance for credit losses.
Quantitative Estimate: Loans in the core segment use an estimate of probability of default and loss given default (“PD/LGD”) model which considers loan-level information to project lifetime cash flows, defaults, and loss severity for each loan. The exposure at default (“EAD”) considers loan-level contractual payment information as well as prepayments based on the loan type. The probability of default (“PD”) considers loan-level information, such as loan type and risk rating, and the projected economic conditions during the one-year reasonable and supportable forecast period. The loss given default (“LGD”) is based on the loan type and projections of economic conditions, and asset values during the reasonable and supportable forecast period. Beyond the reasonable and supportable forecast period, EAD utilizes loan-level contractual payment information and prepayments based on the loan type, while PD and LGD immediately revert to rates deemed consistent with the long-term average performance based on loan type. For loans that have been modified, the quantitative estimate reflects post-modification contractual terms and post-modification risk ratings.
Loans in the non-core segment use a vintage or lifetime loss curve methodology to estimate lifetime losses, as provided by third-parties and based on historical performance. Loss curves are unique to each loan portfolio within the non-core segment and vary based on credit quality at origination and loan term. Losses based on application of the loss curves are adjusted quantitatively based on performance relative to the curves historically. Additionally,
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curve-based losses are adjusted for expected economic conditions during the reasonable and supportable forecast period. Beyond the reasonable and supportable forecast period, curve-based losses are adjusted to reflect credit losses deemed consistent with the long-term average performance based on loan type.
Qualitative Estimate: Loans in both the core and non-core segment are evaluated qualitatively in addition to quantitatively. Qualitative considerations are intended to account for relevant factors that may not be adequately captured in the quantitative estimate, but are expected to influence lifetime credit losses. Factors considered as part of the qualitative framework include:
•The nature and volume of the institution’s financial assets;
•The existence, growth, and effect of any concentrations of credit;
•The volume and severity of past due financial assets, the volume of non-accrual assets, and the volume and severity of adversely classified, or graded, assets;
•The uncertainty related to modeling imprecision and potential differences between historical and future correlations;
•The value of the underlying collateral for loans that are not collateral dependent;
•The institution’s lending policies and procedures, including changes in underwriting standards and practices for collections, write-offs, and recoveries;
•The quality of the institution’s credit review function;
•The experience, ability, and depth of the institution’s lending, investment, collection, and other relevant management and staff;
•Actual and expected changes in international, national, regional, and local economic and business conditions, and developments in which the institution operates that affect the collectability of financial assets; and
•The effect of other external factors such as the regulatory, legal, and technological environments; competition; and events such as natural disasters.
Factors considered as part of the qualitative framework do not necessarily result in a qualitative estimate for every portfolio. Factors may be deemed inapplicable or otherwise adequately reflected in a different qualitative factor or in the quantitative estimate for a given portfolio.
The Company may agree to grant a concession or loan modification to a borrower experiencing financial difficulty under terms it would not consider if originating a new loan. In accordance with ASC 310, the loan is accounted for as a modified loan if the borrower is experiencing financial difficulty at the time of modification and the loan was modified for one of the following reasons: 1) principal forgiveness; 2) an interest rate reduction; 3) another-than-insignificant payment delay, 4) a term extension, or 5) any combination of the aforementioned. The Company considers the following indicators in determining if a borrower is experiencing financial difficulty: 1) the borrower is currently in payment default on any of its debt or payment default is probable in the foreseeable future; 2) the borrower has declared, or is in the process of declaring bankruptcy; 3) there is substantial doubt as to whether the borrower will continue to be a going concern; 4) the borrower has securities that have been, or are in the process of being delisted; 5) the Company’s forecasts of the borrower’s entity-specific cash flows will be insufficient to service any of its debt in accordance with the contractual terms of the existing agreement for the foreseeable future; and 6) the borrower cannot obtain funds from sources other than the Company at an effective interest rate equal to the current market interest rate for similar debt for a non-troubled borrower.
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Allowance for Credit Losses – Acquired Loans
The pools of loans the Company has acquired through forward flow agreements were purchased shortly after origination, and therefore did not have any indication of more than insignificant credit deterioration at the time of acquisition.
Allowance for Credit Losses – Unfunded Commitments
For unfunded commitments that are not unconditionally cancellable, the Company establishes an Allowance for Credit Losses – Unfunded Commitments (“ACL-Unfunded”) based on estimated lifetime expected credit losses. This estimate considers the probability of the commitment funding and applies lifetime loss rates established based on the ACL-Loans methodology for comparative loan type, as described in a section above. The ACL-Unfunded is recognized as Other liabilities in the Consolidated Balance Sheet.
Allowance for Credit Losses – Investment Securities
For investment securities, excluding CPACE, the Company uses the following methodologies to estimate expected credit losses. For available-for-sale investment securities, if the security’s fair value is below its par value, the portion of the fair value adjustment that is determined to be credit-related is recognized as a reclassification from Accumulated other comprehensive income/(loss) into earnings, in the provision for credit losses in the Consolidated Statements of Income. The portion of the fair value adjustment attributable to risk-free rate movements is based on each security’s duration, discounted cash flow analysis, and changes in risk-free rates since purchase. The remaining portion of the fair value adjustment that is unrelated to changes in interest rates is deemed to be credit related. If the entire amount of the fair value adjustment is determined to be based on risk-free rate movements, no allowance for credit losses is recorded. Available-for-sale investment securities with fair values at or above par do not have an allowance for credit losses. For held-to-maturity investment securities, the allowance for credit losses is based on the lifetime expected credit losses without regard to the fair value of the security. This estimate of lifetime credit losses uses a probability of default/loss given default model based on each security’s obligor type, credit rating, and remaining maturity. United States Treasury and government agency securities, including agency mortgage-backed securities, are deemed to have no risk of credit loss, as they have the backing of the government of the United States of America. For CPACE investment securities, the Company’s evaluation of potential risk will be utilized as opposed to loss history given the lack of observable industry credit loss experience.
Allowance for Credit Losses – Financing Receivables
Lifetime credit losses are based on historical loss information, current conditions, reasonable and supportable forecasts, and other relevant information that may impact the collectability of the asset. For financing receivables, the Company’s evaluation of potential risk will be utilized as opposed to loss history given the lack of observable industry credit loss experience.
Other Real Estate Owned
Other real estate owned assets acquired through foreclosure are recorded at fair value less costs to sell. The Company reviews other real estate owned assets on an ongoing basis for evidence of impairment. If the fair value of other real estate owned assets declines subsequent to foreclosure, a fair value mark is recorded and is recognized in Other non-interest income. The Company may incur costs related to the development or improvement of other real estate owned assets. Development and improvement costs are capitalized. Costs related to holding other real estate owned assets are expensed as incurred and are included in Other non-interest expense. See Note 5 – Credit Quality Assessment for more information on the Company’s other real estate owned assets.
Leases
The Company leases its bank branches, corporate offices, and some office equipment. In accordance with ASC 842 - Leases, the Company elected to apply certain practical expedients in accounting for its leases. The Company elected the practical expedient for short-term leases, which does not require the Company to record right-of-use
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(“ROU”) assets or lease liabilities for leases with initial terms of twelve months or less. The Company also elected to exclude non-lease components in the calculation of the ROU asset and lease liability balances.
The Company recognizes ROU assets and lease liabilities for its long-term operating leases. In determining the value of lease liabilities and ROU assets, the Company uses an incremental borrowing rate based on the Federal Home Loan Bank of Atlanta (“FHLB”) fixed borrowing rate with a similar term to the lease. ROU assets and lease liabilities are included in Other assets and Other liabilities, respectively, in the accompanying Consolidated Balance Sheets. Associated lease expense is included in Occupancy expense in the accompanying Consolidated Statements of Income. See Note 8 – Leases for more information on the Company’s leases.
Off-Balance Sheet Instruments
In the ordinary course of business, the Company enters into off-balance sheet financial instruments consisting of commitments to extend credit and standby letters of credit, and to make certain equity investments. Such financial instruments are recorded in the financial statements when they are funded. See Note 13 – Financial Instruments with Off-Balance Sheet Risk, Commitments and Contingencies for more information.
Transfers of Financial Assets
Transfers of financial assets are accounted for as sales when control over the assets has been relinquished. Control over transferred assets is deemed to be surrendered when the assets have been legally isolated from the Company, the transferee obtains the right (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. In the event the Company sells an asset that does not meet the requirements of a true-sale, and therefore is not able to transfer the asset for GAAP purposes, it recognizes a secured financing liability to represent the value of the asset that did not transfer to the buyer. See Note 4 – Loans regarding sales of loans.
Segment Information
Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the Chief Operating Decision Maker (“CODM”), the Company’s Chief Executive Officer, in deciding how to allocate resources and assessing performance. During the years ended December 31, 2025 and 2024, all operations were within the United States. The CODM allocates resources and assesses performance based upon financial information at the entity-wide level. Since the CODM makes operating decisions and allocates resources on an entity-wide basis, the Company operates as one operating segment and one reportable segment.
The primary financial measure used by the CODM to evaluate performance and allocate resources is consolidated net income as shown on the Consolidated Statements of Income. Segment expenses and other segment items are provided to the CODM on the same basis as disclosed in the Consolidated Statements of Income.
Goodwill and Other Intangible Assets
Goodwill represents the excess of the purchase price over the sum of the estimated fair values of tangible and identifiable intangible assets acquired less the estimated fair value of the liabilities assumed in a business combination. Goodwill is not amortized, but is evaluated for impairment, by analyzing certain qualitative factors to determine if it is more likely than not to be impaired. If it is determined that it is more likely than not that goodwill may be impaired, then a quantitative analysis is performed to calculate the amount of the impairment, if any. To the extent an impairment is calculated, it is recognized in earnings in the period of the impairment.
Core deposit intangibles represent the estimated fair value of long-term acquired deposit relationships. Customer relationship intangibles represent the estimated fair value of acquired long-term customer relationships. The Company amortizes intangible assets over the respective intangible asset’s estimated useful life, which ranges from eight years to 20 years for the Company’s currently amortizing intangible assets. Amortization is included in Other non-interest expense in the Consolidated Statements of Income. Intangible assets are periodically reviewed for triggering events that would indicate possible impairment.
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The Company’s annual impairment test date is October 1st. As of October 1, 2025, the Company determined that goodwill and other intangible assets were not impaired. Additionally, the Company determined that from the assessment date to the end of the period, no events or circumstances have occurred that would indicate there was a more likely than not impairment of its goodwill or other intangible assets.
Comprehensive Income
Comprehensive income is comprised of net income and other comprehensive income/(loss), which includes unrealized gains and losses on available-for-sale investment securities. Realized gains and losses on available-for-sale investment securities are reclassified out of accumulated other comprehensive income/(loss) and into income in the period in which they are recognized. All components of other comprehensive income/(loss) are net of the related tax effects.
Revenue Recognition
The Company generally acts in a principal capacity, on its own behalf, in its contracts with customers. In these transactions, the Company recognizes revenues and the related costs to generate those revenues on a gross basis. Descriptions of the Company’s major non-interest revenue-generating activities are broadly segregated as follows:
•Investment advisory fees - Investment advisory fees are accrued and reported as investment advisory fees as services are performed. Such fees are based on predetermined annual percentages of the average outstanding balance of the loans during the periods for which the Company provides services.
•Fee income on loans - Fee income on loans represents income such as open line charges and loan management fees charged for the Company’s loans. Additionally, the Company is often reimbursed for certain costs that it incurs in the management of outstanding loans, such as legal or appraisal fees, which are also recognized as fee income on loans, with the associated expense recognized in the appropriate expense category. The revenue is recognized when the fee is earned, or the reimbursement is determined to be receivable.
•Program fees - Program fees, which are recognized in Other non-interest income in the Consolidated Statements of Income, are received from contractors to gain access to preferred interest rates through a portal where the relationship between the contractor installing solar panels on a residential property and the third-party lending institution that finances the project are connected. The fee is recognized when the resulting loan has funded.
•Servicing income - Servicing income, which is recognized in Other non-interest income in the Consolidated Statements of Income, consists of fees earned for performing loan servicing and collection activities on behalf of third parties for solar residential loans, including the remittance of principal and interest payments, management of escrow accounts, and other related services. Servicing income is accrued in the current period based on outstanding average serviced assets over the period.
Advertising
Advertising costs are expensed as incurred and included in
advertising and marketing in the Consolidated Statements of Income, and were $5.3 million and $9.1 million for the years ended December 31, 2025 and 2024, respectively.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740 - Income Taxes, which provides for an asset and liability approach to accounting for income taxes. Deferred tax assets and liabilities represent the future tax consequences of the differences between the financial statement carrying amounts of assets and liabilities versus the tax bases of assets and liabilities. Under this method, deferred tax assets are recognized for deductible temporary differences and net operating loss and tax credit carryforwards. Deferred tax liabilities are recognized for taxable temporary differences. In the Consolidated Balance Sheets, deferred taxes are combined to present as either a net
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deferred tax asset or liability. Deferred tax assets are reduced by a valuation allowance when in the opinion of management, it is more likely than not that some portion or all the deferred tax assets will not be realized. The impact of tax rate changes on deferred tax assets and liabilities is recognized in the year that the change is enacted.
Recognition and measurement of tax positions is based on management’s evaluation of relevant tax code provisions and appropriate industry information about audit proceedings for comparable positions at other organizations.
The income tax returns of the Company for 2022, 2023, and 2024 are subject to examination by income taxing authorities, generally for three years after they were filed. If the Company identifies an uncertain tax position, an accrual for the estimated tax is recognized in the period the potential tax is identified. The Company has elected to recognize any estimated penalties and interest expense on its income tax liabilities as a component of its provision for income taxes. See Note 17 – Income Taxes for more information on the Company’s income tax position.
Stock-based Compensation
The Company recognizes compensation expense at the grant-date fair value of stock options and other equity-based compensation. For both employees and non-employees, the Company recognizes expense over the requisite service period, which is generally the vesting period. Forfeitures of awards are recognized and accounted for when the forfeiture occurs. Stock awards are classified as either an equity award or a liability award, and this classification is dependent upon the method by which the stock-based payment is ultimately settled. Equity classified awards are valued as of the grant date using either an observable market price or a valuation methodology. Liability classified awards are valued at fair value at each reporting date. All of the Company’s stock options and other equity-based compensation arrangements are classified as equity awards as of December 31, 2025 and 2024. See Note 14 – Stock-based Compensation for information on the Company’s stock-based compensation.
Fair Value Measurements
Fair values of financial instruments are based upon quoted market prices, where available. If such quoted market prices are not available, fair value is based upon internally developed models that primarily use, as inputs, observable market-based parameters. Valuation adjustments are made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the Company’s creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. See Note 21 – Fair Value of Financial Instruments for more information on fair value measurements.
Earnings Per Common Share
The Company calculates its basic and diluted earnings per common share (“EPS”) utilizing the two-class method. Under the two-class method, both basic and diluted EPS are calculated for each class of common stock considering distributions declared and accumulated, and the rights of common shares and participating securities in any undistributed earnings. Undistributed earnings are allocated to all outstanding common shares based on the relative percentage of each class of shares to the total number of outstanding shares. Basic EPS is computed by dividing the net income by the weighted-average number of shares of common stock outstanding during the period. Diluted EPS is computed using the treasury stock method by dividing net income by the weighted-average number of shares of common stock outstanding during the period, including the additional dilutive potential common shares, such as stock options and restricted stock awards (“RSAs”). See Note 18 – Earnings Per Common Share for more information on EPS.
Subsequent Events
Management has considered material subsequent events, but determined none to exist, for disclosure and recognition through April 8, 2026, the date the Consolidated Financial Statements were available to be issued, other than the amendment, in February 2026, of the Company’s 2014 Stock Incentive Plan (the “2014 Plan”) to make available an additional 1,000,000 shares of Voting Common Stock in stock-based awards, including restricted stock
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awards and stock options, to its employees and directors. See Note 14 – Stock-based Compensation for more information on the 2014 Plan.
New Accounting Standards
Accounting Standards Adopted in 2025 and 2024
In November 2023, the Financial Accounting Standards Board (FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The amendments enhance reportable segment disclosure requirements, primarily through expanded disclosures about significant segment expenses and other segment items on an annual and interim basis. The Company adopted ASU 2023-07 effective January 1, 2024. The adoption did not change the Company’s reportable segments, nor did it have an impact on the Company’s consolidated financial position, results of operations, or cash flows.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires the disclosure of disaggregated information about an entity’s income tax rate reconciliation as well as income taxes paid and income tax expense. The Company adopted the standard on January 1, 2025, on a prospective basis. The adoption did not have a material impact on the Company’s consolidated financial statements. See Note 17 – Income Taxes for more information.
Accounting Standards Pending Adoption
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income Statement Expenses, which requires the disaggregated disclosure of certain income statement categories. The amendments are effective for fiscal years beginning after December 15, 2026, with early adoption permitted. The amendments should be applied either prospectively to financial statements issued for reporting periods after the effective date, or retrospectively to any or all prior periods presented in the financial statements. The Company is in the process of evaluating the impact of this pronouncement, but does not anticipate it having a material impact on its disclosures.
In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which modernizes the rules for capitalizing internal-use software. The amendments are effective for fiscal years beginning after December 15, 2027, with early adoption permitted. The amendments can be applied using a prospective approach, a retrospective approach, or a modified approach that bases the adoption of the amendments on the completion status of the software project as of the adoption date. The Company is in the process of evaluating the impact of this pronouncement.
In November 2025, the FASB issued ASU 2025-08, Financial Instruments-Credit Losses (Topic 326): Purchased Loans, which provides targeted improvements to the accounting for purchased loans, including clarification on the recognition and measurement of credit losses for acquired financial assets. The amendments are effective for fiscal years beginning after December 15, 2026, with early adoption permitted. The amendments should be applied prospectively to loans acquired after the initial adoption date. The Company is in the process of evaluating the impact of this pronouncement.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material, if any, impact on the Company’s consolidated financial statements.
NOTE 2 – CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Regulation D of the Federal Reserve Act requires the Company to maintain reserve balances with the Federal Reserve Bank based principally on the type and amount of the Company’s deposits, however, in March 2020, the Federal Reserve Board took action to reduce the reserve requirement percentage to zero for all balances. Balances maintained with the Federal Reserve Bank are included in Interest-bearing deposits with banks in the Consolidated Balance Sheets.
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The following schedule presents the composition of the Company’s cash, cash equivalents and restricted cash as of December 31, 2025 and 2024:
(in thousands)December 31, 2025December 31, 2024
Cash, due from banks and restricted cash:
Cash and due from banks$16,040 $26,230 
Restricted cash2,201 1,969 
Total cash, due from banks and restricted cash18,241 28,199 
Interest-bearing deposits with banks:
Interest-bearing deposits with the Federal Reserve Bank601,555 1,132,335 
Interest-bearing deposits with other banks28,919 19,448 
Total interest-bearing deposits with banks630,474 1,151,783 
Total cash, cash equivalents and restricted cash$648,715 $1,179,982 
NOTE 3 – INVESTMENT SECURITIES
Investment Securities Available-For-Sale
Investment securities available-for-sale as of December 31, 2025 and 2024, consisted of the following securities:
December 31, 2025
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesAllowance for Credit LossesFair Value
U.S. Treasury and government agencies$953,981 $4,366 $— $— $958,347 
Commercial agency mortgage-backed
135,588 1,004 (522)— 136,070 
Residential agency mortgage-backed
138,262 1,077 (262)— 139,077 
Municipal bonds9,485 46 (896)— 8,635 
Other
13,496 — (738)— 12,758 
Total investment securities available-for-sale$1,250,812 $6,493 $(2,418)$— $1,254,887 
December 31, 2024
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesAllowance for Credit LossesFair Value
U.S. Treasury and government agencies$1,388,715 $2,429 $(463)$— $1,390,681 
Commercial agency mortgage-backed
36,812 313 (548)— 36,577 
Residential agency mortgage-backed
16,540 — (369)— 16,171 
Municipal bonds9,493 33 (1,234)— 8,292 
Other
20,504 21 (778)— 19,747 
Total investment securities available-for-sale$1,472,064 $2,796 $(3,392)$— $1,471,468 
The tables above exclude accrued interest receivables of $13.4 million and $4.9 million as of December 31, 2025 and 2024, respectively.
F-20

Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without penalties. The amortized cost and fair value of investment securities available-for-sale as of December 31, 2025 and 2024, by contractual maturity are presented in the following table:
December 31, 2025December 31, 2024
(in thousands)Amortized CostFair ValueAmortized CostFair Value
U.S. Treasury and government agencies:
One year or less$520,293 $521,605 $1,388,715 $1,390,681 
One to five years433,688 436,742 — — 
Five to ten years— — — — 
After ten years— — — — 
Commercial agency mortgage-backed:
One year or less— — — — 
One to five years18,794 19,261 15,776 15,861 
Five to ten years13,396 13,612 16,352 16,283 
After ten years103,398 103,197 4,684 4,433 
Residential agency mortgage-backed:
One year or less— — — — 
One to five years109 107 205 197 
Five to ten years— — — — 
After ten years138,153 138,970 16,335 15,974 
Municipal bonds:
One year or less— — — — 
One to five years2,081 2,096 2,082 2,056 
Five to ten years994 894 995 842 
After ten years6,410 5,645 6,416 5,394 
Other:
One year or less— — — — 
One to five years— — 6,743 6,762 
Five to ten years5,000 4,537 5,000 4,484 
After ten years8,496 8,221 8,761 8,501 
$1,250,812 $1,254,887 $1,472,064 $1,471,468 
During the year ended December 31, 2025, the Company sold thirteen investment securities available-for-sale with an aggregate cost basis of $1.2 billion and sales proceeds of $1.2 billion. The Company realized gross gains of $1.1 million and no gross losses, on the sales. During the year ended December 31, 2024, the Company sold fourteen investment securities available-for-sale with an aggregate cost basis of $801.7 million and sales proceeds of $801.9 million. The Company realized gross gains and losses of $293 thousand and $57 thousand, respectively, on the sales. There were no transfers of investment securities from available-for-sale to held-to-maturity during the years ended December 31, 2025 and 2024.
As of December 31, 2025, the Company had no pledged available-for-sale U.S. Treasury and government agency securities to secure FHLB advances. There were no outstanding FHLB advances as of December 31, 2025.
As of December 31, 2024, the Company pledged $950 million of available-for-sale U.S. Treasury and government agency securities with an aggregate amortized cost and fair value of $941.1 million and $942.4 million, respectively, to secure FHLB advances. There were outstanding FHLB advances of $700 million as of December 31, 2024, related to these pledged assets.
See Note 10 – Borrowed Funds for more information on the outstanding FHLB advances.
F-21

As of December 31, 2025 and 2024, there were no holdings of investment securities available-for-sale of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.
Information pertaining to investment securities available-for-sale with gross unrealized losses as of December 31, 2025 and 2024, aggregated by investment category and length of time that individual securities have been in a continuous loss position, are presented in the following tables:
December 31, 2025
12 Months or Less12 Months or MoreTotal
(in thousands)Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
U.S. Treasury and government agencies$— $— $— $— $— $— 
Commercial agency mortgage-backed
59,754 (237)8,901 (285)68,655 (522)
Residential agency mortgage-backed
49,759 (170)719 (92)50,478 (262)
Municipal bonds1,978 (13)5,541 (883)7,519 (896)
Other
93 — 12,666 (738)12,759 (738)
Total$111,584 $(420)$27,827 $(1,998)$139,411 $(2,418)
December 31, 2024
12 Months or Less12 Months or MoreTotal
(in thousands)Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
U.S. Treasury and government agencies$494,497 $(463)$— $— $494,497 $(463)
Commercial agency mortgage-backed19,571 (548)— — 19,571 (548)
Residential agency mortgage-backed12,992 (214)3,180 (155)16,172 (369)
Municipal bonds1,929 (61)5,259 (1,173)7,188 (1,234)
Other
3,088 (99)11,489 (679)14,577 (778)
Total$532,077 $(1,385)$19,928 $(2,007)$552,005 $(3,392)
The Company individually evaluates its investment securities available-for-sale for credit losses. As of December 31, 2025 and 2024, the Company determined no portion of the unrealized losses on its investment securities available-for-sale was due to credit factors. Unrealized losses on investment securities available-for-sale due to factors other than credit are largely due to the nature of the investments. Therefore, no allowance for credit losses was recorded as of December 31, 2025 or 2024. Additionally, the Company has the intent and ability to hold its investment securities available-for-sale for a period of time sufficient to allow for any anticipated recovery. See Note 1 – Significant Accounting Policies for more information on the Company’s accounting policy for the allowance for credit losses - investment securities.
F-22

Investment Securities Held-to-Maturity
Investment securities held-to-maturity as of December 31, 2025 and 2024, consisted of the following securities:
December 31, 2025
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Municipal bonds$31,200 $3,736 $— $34,936 
Other
17,744 482 (2,687)15,539 
Total investment securities held-to-maturity$48,944 $4,218 $(2,687)$50,475 
Allowance for credit losses(110)
Total investment securities held-to-maturity, net of allowance for credit losses$48,834 
December 31, 2024
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Municipal bonds$31,690 $3,994 $— $35,684 
Other
20,996 496 (3,424)18,068 
Total investment securities held-to-maturity$52,686 $4,490 $(3,424)$53,752 
Allowance for credit losses(161)
Total investment securities held-to-maturity, net of allowance for credit losses$52,525 
The tables above exclude accrued interest receivables of $1.7 million and $168 thousand as of December 31, 2025 and 2024, respectively.
Expected maturities of investment securities held-to-maturity may differ from contractual maturities because issuers may have the right to call or prepay obligations without penalties. The amortized cost and fair value of investment securities held-to-maturity as of December 31, 2025 and 2024, by contractual maturity, are presented in the following table:
December 31, 2025December 31, 2024
(in thousands)Amortized CostFair ValueAmortized CostFair Value
Municipal bonds:
One year or less$— $— $— $— 
One to five years31,200 34,936 31,690 35,684 
Five to ten years— — — — 
After ten years— — — — 
Other:
One year or less— — — — 
One to five years— — — — 
Five to ten years— — — — 
After ten years17,744 15,539 20,996 18,068 
Total$48,944 $50,475 $52,686 $53,752 
As of December 31, 2025 and 2024, there were no investment securities held-to-maturity of any one issuer in an amount greater than 10% of stockholders’ equity.
F-23

There were no sales of investment securities held-to-maturity or transfers of investment securities available-for-sale to investment securities held-to-maturity during the year ended December 31, 2025 and 2024.
Information pertaining to investment securities held-to-maturity with gross unrealized losses as of December 31, 2025 and 2024, aggregated by investment category and length of time that individual securities have been in a continuous loss position, are presented in the following tables:
December 31, 2025
12 Months or Less
12 Months or More
Total
(in thousands)Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
Other
$— $— $14,032 $(2,687)$14,032 $(2,687)
Total$— $— $14,032 $(2,687)$14,032 $(2,687)
December 31, 2024
12 Months or Less12 Months or MoreTotal
(in thousands)Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
Other
$752 $(248)$15,794 $(3,176)$16,546 $(3,424)
Total$752 $(248)$15,794 $(3,176)$16,546 $(3,424)
The Company collectively evaluates its investment securities held-to-maturity for credit losses. As of December 31, 2025 and 2024, the Company recorded an allowance for credit losses on its investment securities held-to-maturity. See Note 1 – Significant Accounting Policies for more information on the Company’s accounting policy for the allowance for credit losses.
The following tables summarize the activity in the allowance for credit losses for investment securities held-to-maturity for the years ended December 31, 2025 and 2024:
December 31, 2025
(in thousands)Municipal bonds
Other
Total
Balance at beginning of period$109 $52 $161 
Recovery of credit losses on investment securities(43)(8)(51)
Balance at end of period$66 $44 $110 
December 31, 2024
(in thousands)Municipal bonds
Other
Total
Balance at beginning of period$155 $55 $210 
Recovery of credit losses on investment securities(46)(3)(49)
Balance at end of period$109 $52 $161 
NOTE 4 – LOANS
The Company holds loans in three separate categories: loans held-for-sale (including loans at fair value and lower of cost or fair value), loans held for investment at fair value, and loans held for investment at amortized cost. In the ordinary course of business to execute overall portfolio management strategies, when the intentions of the Company’s ability and interest with respect to loans change, the Company will transfer loans between loans held-for-sale and loans held for investment.
F-24

The Company manages its exposure to credit losses by evaluating credit risk in the loan categories described below. The Company’s ACL – Loans methodology is developed and documented based on the loan types discussed within these categories. Descriptions of the loan categories are:
•Commercial Real Estate - Commercial real estate loans are primarily secured by various types of real estate including healthcare facilities, office, retail, warehouse, industrial, multi-family properties, residential real estate (for commercial purposes), and other commercial real estate properties and are made to owners of such properties. This category includes owner-occupied and investment (non owner-occupied) properties including construction loans. The repayment of loans secured by owner-occupied properties is dependent on cash flow from the successful operation of the business which owns the property. The repayment of loans secured by investment properties is dependent upon the operation (net operating income) or sale of the property. Both property types may be subject to adverse conditions in the commercial real estate market or in the general economy.
•Commercial and Industrial - Within this category, there is further distinction among lender finance and fund finance loans, healthcare asset based-loans, and corporate loans (which are typically cash flow loans, including leveraged loans). The market area for these loans is national with geographic diversification. This loan category also includes the Company’s sustainable finance related lending products, which include nationally originated loans and commercial solar loans, and unsecured small business loans purchased through technology enabled lender platforms. Of primary concern in commercial and industrial lending is the borrower’s creditworthiness and ability to successfully generate cash flow from their business to service the debt.
•Consumer - These loans consist primarily of loans made to individuals for personal, family, and residential real estate purposes (including closed end mortgages and home equity lines of credit), with the majority of the portfolio comprised of loans purchased through technology enabled lender platforms, including consumer solar loans, that are not secured by real estate and, therefore, may entail greater risk than other types of loans. The vast majority of the Company’s consumer loans were purchased or originated before 2024 and a significant portion of the portfolio was sold during 2024. Outside of loans purchased under forward flow purchase agreements, the remaining consumer and residential real estate portfolio represents a small percentage of the loan portfolio. The Company no longer originates residential real estate loans.
Loans Held-for-Sale
As of December 31, 2025 and 2024, the Company had $379.7 million and $316.5 million of loans held-for-sale, respectively. The table below presents the proceeds received from the sales of loans held-for-sale, net realized gains and losses, and net unrealized gains related to loans-held-for sale for the years ended December 31, 2025 and 2024. Unrealized gains, net related to loans held-for-sale are included with Unrealized gains on loans and financing receivables, net in the Consolidated Statements of Income. Realized gains/(losses), net are recognized in Gains/(losses) on sales of loans and investment securities, net in the Consolidated Statements of Income.
(in thousands)December 31, 2025December 31, 2024
Proceeds from sales$280,518 $340,526 
Realized gains/(losses), net$11,385 $(11,563)
Unrealized gains, net$6,662 $3,151 
F-25

The following tables present, by loan category, the carrying amount and unpaid contractual balance of the Company’s loans held-for-sale as of December 31, 2025 and 2024:
December 31, 2025
Loans Held-for-Sale
at Fair Value		Loans Held-for-Sale
at Lower of Cost or Fair Value		Total Loans Held-for-Sale
(in thousands)Carrying AmountUnpaid Contractual BalanceCarrying AmountUnpaid Contractual BalanceCarrying AmountUnpaid Contractual Balance
Commercial and Industrial
$62,251 $65,281 $317,411 $321,295 $379,662 $386,576 
Total loans held-for-sale$62,251 $65,281 $317,411 $321,295 $379,662 $386,576 
December 31, 2024
Loans Held-for-Sale
at Fair Value		Loans Held-for-Sale
at Lower of Cost or Fair Value		Total Loans Held-for-Sale
(in thousands)Carrying AmountUnpaid Contractual BalanceCarrying AmountUnpaid Contractual BalanceCarrying AmountUnpaid Contractual Balance
Commercial and Industrial
$108,575 $116,376 $207,909 $212,082 $316,484 $328,458 
Total loans held-for-sale$108,575 $116,376 $207,909 $212,082 $316,484 $328,458 
Loans Held for Investment at Amortized Cost
Loans held for investment at amortized cost, by loan category, as of December 31, 2025 and 2024, are presented in the following table:
(in thousands)December 31, 2025December 31, 2024
Commercial Real Estate
$2,528,996 $1,730,883 
Commercial and Industrial
2,475,549 1,986,457 
Consumer217,689 246,633 
Total loans held for investment at amortized cost$5,222,234 $3,963,973 
Total outstanding loans held for investment at amortized cost are net of deferred fees and costs of $54.7 million and $57.9 million as of December 31, 2025 and 2024, respectively.
Total outstanding loans held for investment at amortized cost excludes accrued interest receivable of $32.1 million and $26.7 million as of December 31, 2025 and 2024, respectively.
Loans to Related Parties
From time to time, the Company has loan transactions with some of its officers, directors, and material investors, and their immediate family members and affiliated entities. There were no loans in the ordinary course of business due from related parties as of December 31, 2025 and 2024. See Note 19 – Related Party Transactions for more information.
NOTE 5 – CREDIT QUALITY ASSESSMENT
Allowance for Credit Losses - Loans Held for Investment at Amortized Cost
See Note 1 – Significant Accounting Policies for more information on the Company’s accounting policy for the allowance for credit losses.
F-26

The following table summarizes the activity in the allowance for credit losses for loans held for investment at amortized cost for the years ended December 31, 2025 and 2024:
(in thousands)December 31, 2025December 31, 2024
Balance at beginning of period$42,294 $74,745 
Provision for credit losses on loans23,344 10,896 
Provision for/(recovery of) credit losses on loan transfers from/to loans held-for-sale148 (9,548)
Loan charge-offs(15,414)(36,232)
Loan recoveries2,614 2,433 
Net charge-offs(12,800)(33,799)
Balance at end of period$52,986 $42,294 
Loans held-for-sale and loans held for investment at fair value do not require an allowance because they are carried at fair value and therefore any changes to the cost basis in the loan are recognized in earnings, as unrealized gains or losses in non-interest income, in the period of the change.
The following tables detail activity in the allowance for credit losses for loans held for investment carried at amortized cost, by loan category, for the years ended December 31, 2025 and 2024:
December 31, 2025
(dollars in thousands)Commercial Real Estate
Commercial and Industrial
ConsumerTotal
Allowance for credit losses:
Beginning of period$12,078$19,380$10,836$42,294
Provision for credit losses - loans6,41812,8074,11923,344
Provision for credit losses - transfers of loans1444—148
Loan charge-offs—(7,374)(8,040)(15,414)
Loan recoveries—1,2051,4092,614
Net charge-offs—(6,169)(6,631)(12,800)
End of period$18,640$26,022$8,324$52,986
Individually evaluated for credit loss$—$2,244$—$2,244
Collectively evaluated for credit loss18,64023,7788,32450,742
Total allowance for credit losses$18,640$26,022$8,324$52,986
Loans held for investment at amortized cost:
Individually evaluated for credit loss$96,807$20,667$2,495$119,969
Collectively evaluated for credit loss2,432,1892,454,882215,1945,102,265
Total loans held for investment at amortized cost$2,528,996$2,475,549$217,689$5,222,234
Allowance for loans to loan type ratio:
Individually evaluated for credit loss— %10.86 %— %1.87 %
Collectively evaluated for credit loss0.77 %0.97 %3.87 %0.99 %
Total loans held for investment at amortized cost0.74 %1.05 %3.82 %1.01 %
F-27

December 31, 2024
(dollars in thousands)Commercial Real Estate
Commercial and Industrial
ConsumerTotal
Allowance for credit losses:
Beginning of period$23,203$26,460$25,082$74,745
Provision for credit losses - loans5,228785,59010,896
Recovery of credit losses - transfers of loans(58)(158)(9,332)(9,548)
Loan charge-offs(16,495)(7,359)(12,378)(36,232)
Loan recoveries2003591,8742,433
Net charge-offs(16,295)(7,000)(10,504)(33,799)
End of period$12,078$19,380$10,836$42,294
Individually evaluated for credit loss$—$922$—$922
Collectively evaluated for credit loss12,07818,45810,83641,372
Total allowance for credit losses$12,078$19,380$10,836$42,294
Loans held for investment at amortized cost:
Individually evaluated for credit loss$83,100$67,573$1,932$152,605
Collectively evaluated for credit loss1,647,7831,918,884244,7013,811,368
Total loans held for investment at amortized cost$1,730,883$1,986,457$246,633$3,963,973
Allowance for loans to loan type ratio:
Individually evaluated for credit loss— %1.36 %— %0.60 %
Collectively evaluated for credit loss0.73 %0.96 %4.43 %1.09 %
Total loans held for investment at amortized cost0.70 %0.98 %4.39 %1.07 %
Credit Quality
The Company uses several credit quality indicators to manage credit risk in an ongoing manner. The risk rating system is central to the overall credit risk management discipline and the important first step in effectively monitoring the credit quality of the portfolio. Credit risk ratings are applied individually to those classes of assets that have significant or unique credit characteristics that benefit from a case-by-case evaluation. Groups of assets that are underwritten and structured using standardized criteria and characteristics, such as statistical models (e.g., credit scoring or payment performance), are typically risk rated and monitored collectively. These are typically assets to individuals in the classes which comprise the consumer portfolio category.
The following are the definitions of the Company’s credit quality indicators:
•Acceptable Risk (or better) - Assets in all classes that comprise the commercial real estate, commercial and industrial, and consumer portfolio categories that are not adversely rated, are contractually current as to principal and interest, and are otherwise in compliance with the contractual terms of the asset agreement. Management believes that there is a low likelihood of loss related to those assets that are considered Acceptable Risk or better.
•Higher Risk - Assets in this category may demonstrate weaker credit fundamentals with an above-average chance of resulting in a default combined with a lower risk of loss to create an overall risk profile which requires appropriate monitoring but do not present potential weaknesses or a warrant a lower rating.
•Special Mention - Assets in this category exhibit potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may, at some future date, result in deterioration of the repayment prospects for the asset. Special Mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. While potentially weak, the asset is currently marginally acceptable, and no loss of principal or interest is envisioned.
F-28

•Substandard - A Substandard asset is inadequately protected by the current sound worth and paying capacity of the borrower or the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Loss potential, which exists in the aggregate amount of Substandard assets, does not have to exist in individual assets classified Substandard.
•Doubtful - Assets in this category have all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors which may work to the advantage and strengthening of the asset, its classification as an estimated loss is deferred until its more exact status may be determined.
The Company periodically reviews and, if necessary, updates the credit quality indicator assigned to each of its loans on a case-by-case basis.
Loans Held for Investment at Amortized Cost
The following tables present by class, credit quality and year of origination, the recorded investment in the Company’s loans held for investment at amortized cost as of and for the years ended December 31, 2025 and 2024:
December 31, 2025
Loans Held for Investment at Amortized Cost by Year of Origination
(in thousands)20252024202320222021PriorRevolving LoansRevolving Loans Converted to TermTotal
Commercial Real Estate:
Acceptable risk (or better)$1,226,416 $284,180 $56,976 $238,490 $174,345 $94,808 $— $— $2,075,215 
Higher risk— 101,977 — 136,724 130,391 16,425 982 — 386,499 
Special mention— — — — — — — — — 
Substandard— — — 40,420 26,862 — — — 67,282 
Doubtful— — — — — — — — — 
Total$1,226,416 $386,157 $56,976 $415,634 $331,598 $111,233 $982 $— $2,528,996 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial and Industrial:
Acceptable risk (or better)$205,677 $173,813 $53,566 $123,425 $17,225 $888 $1,825,313 $— $2,399,907 
Higher risk144 139 — 21,312 519 — 33,000 — 55,114 
Special mention— — — — 1 — — — 1 
Substandard1,431 — 12,452 701 486 2,136 781 — 17,987 
Doubtful— 2,540 — — — — — — 2,540 
Total$207,252 $176,492 $66,018 $145,438 $18,231 $3,024 $1,859,094 $— $2,475,549 
Gross charge-offs$— $1,632 $171 $5,493 $78 $— $— $— $7,374 
Consumer:
Acceptable risk (or better)$— $1,243 $483 $60,909 $131,188 $16,681 $— $— $210,504 
Higher risk— — — 178 249 4,901 — — 5,328 
Special mention— — — — — — — — — 
Substandard— — — 665 977 215 — — 1,857 
Doubtful— — — — — — — — — 
Total$— $1,243 $483 $61,752 $132,414 $21,797 $— $— $217,689 
Gross charge-offs$— $— $— $3,063 $4,907 $70 $— $— $8,040 
Total loans$1,433,668 $563,892 $123,477 $622,824 $482,243 $136,054 $1,860,076 $— $5,222,234 
Total gross charge-offs$— $1,632 $171 $8,556 $4,985 $70 $— $— $15,414 
F-29

December 31, 2024
Loans Held for Investment at Amortized Cost by Year of Origination
(in thousands)20242023202220212020PriorRevolving LoansRevolving Loans Converted to TermTotal
Commercial Real Estate:
Acceptable risk (or better)$344,616 $55,947 $446,340 $200,407 $96,717 $16,460 $1,863 $— $1,162,350 
Higher risk53,090 — 131,739 174,673 42,394 10,623 998 — 413,517 
Special mention7,034 — — 66,847 24,744 4,537 — — 103,162 
Substandard— — 7,160 44,694 — — — — 51,854 
Doubtful— — — — — — — — — 
Total$404,740 $55,947 $585,239 $486,621 $163,855 $31,620 $2,861 $— $1,730,883 
Gross charge-offs$— $— $2,714 $13,509 $272 $— $— $— $16,495 
Commercial and Industrial:
Acceptable risk (or better)$217,395 $84,794 $295,022 $50,384 $1,440 $1,070 $1,159,501 $— $1,809,606 
Higher risk485 40,085 40,321 534 — 2,282 25,519 — 109,226 
Special mention67 — 181 302 — — 1,776 — 2,326 
Substandard63 19 19,652 26,292 — — 17,121 — 63,147 
Doubtful2,152 — — — — — — — 2,152 
Total$220,162 $124,898 $355,176 $77,512 $1,440 $3,352 $1,203,917 $— $1,986,457 
Gross charge-offs$— $378 $6,221 $750 $— $10 $— $— $7,359 
Consumer:
Acceptable risk (or better)$1,173 $1,127 $68,805 $147,667 $10,268 $10,851 $89 $— $239,980 
Higher risk— — 183 249 652 4,446 1 — 5,531 
Special mention— — — — — — — — — 
Substandard— — 275 487 — 352 8 — 1,122 
Doubtful— — — — — — — — — 
Total$1,173 $1,127 $69,263 $148,403 $10,920 $15,649 $98 $— $246,633 
Gross charge-offs$— $— $5,175 $5,928 $68 $31 $1,176 $— $12,378 
Total loans$626,075 $181,972 $1,009,678 $712,536 $176,215 $50,621 $1,206,876 $— $3,963,973 
Total gross charge-offs$— $378 $14,110 $20,187 $340 $41 $1,176 $— $36,232 
The following tables present information on loans held for investment at amortized cost on non-accrual status and loans 90 days or more past due and still accruing as of December 31, 2025 and 2024:
December 31, 2025
(in thousands)Commercial Real Estate
Commercial and Industrial
ConsumerTotal
Loans 90 days or more past due and still accruing$— $— $— $— 
Non-accrual loans with no allowance for credit losses$60,361 $116 $1,857 $62,334 
Non-accrual loans$60,361 $5,484 $1,857 $67,702 
Contractual Interest Income on Non-accrual Loans while on Non-accrual Status$4,812 $916 $1,663 $7,391 
December 31, 2024
(in thousands)Commercial Real Estate
Commercial and Industrial
ConsumerTotal
Loans 90 days or more past due and still accruing$— $— $— $— 
Non-accrual loans with no allowance for credit losses$44,694 $12,692 $— $57,386 
Non-accrual loans$44,694 $12,789 $1,122 $58,605 
Contractual Interest Income on Non-accrual Loans while on Non-accrual Status$3,555 $1,480 $1,154 $6,189 
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No interest income was recognized on non-accrual loans while on non-accrual status for the years ended December 31, 2025 and 2024. At the time a loan is designated as non-accrual, the Company reverses any related accrued interest from interest income. During the years ended December 31, 2025 and 2024, the Company reversed $341 thousand and $1.7 million, respectively, of accrued interest from interest income related to loans designated as non-accrual.
The following tables present by class, an aging analysis and the recorded investments in past due loans, excluding non-accrual loans, held for investment at amortized cost as of December 31, 2025 and 2024:
December 31, 2025
(in thousands)Commercial Real Estate
Commercial and Industrial
ConsumerTotal
Past due loans:
30 - 59 days past due$32,412 $42,487 $2,297 $77,196 
60 - 89 days past due— 122 1,092 1,214 
90 or more days past due— — — — 
Total past due loans32,412 42,609 3,389 78,410 
Current loans2,436,223 2,427,456 212,443 5,076,122 
Total$2,468,635 $2,470,065 $215,832 $5,154,532 
December 31, 2024
(in thousands)Commercial Real Estate
Commercial and Industrial
ConsumerTotal
Past due loans:
30 - 59 days past due$— $1,369 $1,851 $3,220 
60 - 89 days past due576 1,023 895 2,494 
90 or more days past due— — — — 
Total past due loans576 2,392 2,746 5,714 
Current loans1,685,613 1,971,276 242,765 3,899,654 
Total$1,686,189 $1,973,668 $245,511 $3,905,368 
The following tables present by class and by collateral type, the recorded investment of collateral-dependent loans where the borrower is experiencing financial difficulty as of December 31, 2025 and 2024, for which repayment is expected to be provided substantially through the operation or sale of the collateral:
December 31, 2025
(in thousands)Commercial Real EstateConsumerTotal
Collateral type:
Real estate$49,494 $188 $49,682 
Total$49,494 $188 $49,682 
December 31, 2024
(in thousands)Commercial Real Estate
Commercial and Industrial
ConsumerTotal
Collateral type:
Real estate$44,694 $— $352 $45,046 
Business assets— 10,252 — 10,252 
Total$44,694 $10,252 $352 $55,298 
See Note 1 – Significant Accounting Policies for more information on the Company’s accounting policy for modifications.
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The following tables present by class and by type of modification, the recorded investment and financial effect of modification as of December 31, 2025 and 2024, in the Company’s loans that were both modified and experiencing financial difficulty during the years ended December 31, 2025 and 2024:
December 31, 2025
(dollars in thousands)Term ExtensionTotalModification to Loan Class RatioWeighted-Average
Term Extension
Commercial and Industrial
$292 $292 0.01 %12.0 months
Total$292 $292 
December 31, 2024
(dollars in thousands)Term ExtensionTotalModification to Loan Class RatioWeighted-Average
Term Extension
Commercial and Industrial
$1,971 $1,971 0.10 %19.2 months
Total$1,971 $1,971 
As of December 31, 2025 and 2024, there were no unfunded loan commitments on modifications for borrowers experiencing financial difficulty.
The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. As of December 31, 2025, all loans that were modified to borrowers experiencing financial difficulty were current. As of December 31, 2024, all loans that were modified to borrowers experiencing financial difficulty were current, but on non-accrual status.
During the year ended December 31, 2025, no loans to borrowers experiencing financial difficulty had a payment default in the twelve months subsequent to modification. During the year ended December 31, 2024, $67 thousand of Commercial and Industrial loans to borrowers experiencing financial difficulty had a payment default in the twelve months subsequent to modifications made in the form of a payment delay.
Other Real Estate Owned
The following table presents by class the recorded investment in the Company’s other real estate owned assets at fair value as of December 31, 2025 and 2024:
(in thousands)December 31, 2025December 31, 2024
Balance at beginning of period$25,476 $— 
Loans held for investment (at amortized cost) transferred to other real estate owned1,665 27,355 
Improvements1,120 277 
Sales
(18,685)— 
Valuation adjustments(847)(2,156)
Balance at end of period$8,729 $25,476 
During the year ended December 31, 2025, the Company foreclosed on and transferred one Commercial Real Estate asset from loans held for investment at amortized cost to other real estate owned assets. During the year ended December 31, 2025, the Company sold three other real estate owned assets with a total carrying value of $18.7 million for proceeds of $19.1 million resulting in gains of $420 thousand, which is included in Other non-interest income in the Consolidated Statements of Income.
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During the year ended December 31, 2024, the Company foreclosed on and transferred five Commercial Real Estate assets from loans held for investment at amortized cost to other real estate owned assets. There were no sales of other real estate owned assets during the year ended December 31, 2024.
During the years ended December 31, 2025 and 2024, the Company incurred a non-material amount of expense related to holding other real estate owned assets, which is included in Other non-interest expense in the Consolidated Statements of Income. Subsequent to foreclosure, the Company determined the fair values of certain of its other real estate owned assets had declined, at which time the Company recorded a valuation adjustment, which is included in Other non-interest income in the Consolidated Statements of Income. Other real estate owned assets are included with Other assets in the Consolidated Balance Sheet.
NOTE 6 – OTHER EARNING ASSETS
Financing Receivables Held-for-Sale at Lower of Cost or Fair Value
As of December 31, 2025, the Company had no financing receivables held-for-sale. As of December 31, 2024, the Company had $13.8 million of financing receivables held-for-sale. During the year ended December 31, 2025, the Company transferred $13.8 million of financing receivables held-for-sale to financing receivables held for investment, at amortized cost, and reversed a non-material amount of previously recognized net unrealized losses as a result of the transfer. The Company recognized a recovery of previously recognized unrealized losses related to financing receivables held-for-sale of $385 thousand for the year ended December 31, 2024. Unrealized losses related to financing receivables held-for-sale are included with Unrealized gains on loans and financing receivables, net in the Consolidated Statements of Income.
There were no sales of financing receivables held-for-sale during the years ended December 31, 2025 and 2024. There were no transfers between financing receivables held-for-sale and financing receivables held for investment, at amortized cost, during the year ended December 31, 2024.
Financing Receivables Held for Investment at Amortized Cost
As of December 31, 2025 and 2024, the Company had $42.8 million and $29.3 million, respectively, of financing receivables held for investment, at amortized cost, and net of allowance for credit losses. Total outstanding financing receivables held for investment, at amortized cost, are net of direct funding related income and costs of $180 thousand and $78 thousand as of December 31, 2025 and 2024, respectively.
The following table summarizes the activity in the allowance for credit losses for financing receivables held for investment, at amortized cost, for the years ended December 31, 2025 and 2024:
(in thousands)December 31, 2025December 31, 2024
Balance at beginning of period$74 $75 
Recovery of credit losses— (1)
Provision for credit losses - transfer of financing receivables from held-for-sale
34 — 
Balance at end of period$108 $74 
Equity Investments
The Company holds equity investments for various business purposes. As of December 31, 2025 and 2024, the Company had $13.1 million and $44.8 million, respectively, of equity investments, which are included with Other earning assets in the Consolidated Balance Sheets. During the year ended December 31, 2025, the Company had net sales of $33.0 million of FHLB common stock in coordination with the net repayment of outstanding FHLB advances. As of December 31, 2024, the majority of equity investments was comprised of FHLB common stock purchased in connection with securing FHLB advances. See Note 10 – Borrowed Funds for more information on the outstanding FHLB advances.
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NOTE 7 – GOODWILL AND OTHER INTANGIBLE ASSETS
The following tables summarize the gross carrying amount and accumulated amortization, by type of amortizing other intangible asset, and the carrying amount of non-amortizing other intangible assets and goodwill, which are included in Goodwill and other intangible assets, net in the Consolidated Balance Sheets, as of December 31, 2025 and 2024:
December 31, 2025
(dollars in thousands)Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Amortizing intangible assets:
Core deposit intangible$1,491 $(1,491)$— 
Customer relationship intangibles18,742 (7,690)11,052 
Other399 (399)— 
Total amortizing intangible assets$20,632 $(9,580)$11,052 
Indefinite life intangible asset2,114 
Total intangible assets13,166 
Goodwill18,519 
Total goodwill and intangible assets, net$31,685 
December 31, 2024
(dollars in thousands)Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Amortizing intangible assets:
Core deposit intangible$1,491 $(1,342)$149 
Customer relationship intangibles18,742 (6,557)12,185 
Other399 (319)80 
Total amortizing intangible assets$20,632 $(8,218)$12,414 
Indefinite life intangible asset2,114 
Total intangible assets14,528 
Goodwill18,519 
Total goodwill and intangible assets, net$33,047 
The following table presents the estimated future amortization expense for amortizing intangible assets, which is included in Other non-interest expense in the Consolidated Statements of Income, as of December 31, 2025:
(in thousands)Amount
2026$1,132 
20271,132 
20281,132 
20291,132 
2030807 
Thereafter5,717 
Total amortizing intangible assets$11,052 
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NOTE 8 – LEASES
The Company has 10 leases, all of which are currently classified as operating. The Company’s locations are deposit production offices, branches, and corporate office space, mostly located in the Washington, DC metro area. The headquarters lease, located in Chevy Chase, Maryland is considered to be critical to the Company’s operations. Some lease agreements include one or more options to renew, with renewal terms that can extend the original lease term from two to ten years. The Company currently does not believe it is reasonably certain it will exercise the renewal options for its leases, and therefore, the lease terms do not reflect any optional periods.
The following table provides information regarding the Company’s leases as of and for the years ended December 31, 2025 and 2024:
(dollars in thousands)December 31, 2025December 31, 2024
Components of operating lease expense:
Long-term lease expense$3,248$3,335
Short-term lease expense$144$138
Supplemental cash flow information related to leases:
Operating cash flows from operating leases$3,614$3,786
Right-of-use assets obtained in exchange for lease liabilities for new leases and lease modifications$—$697
Supplemental balance sheet information related to leases:
Operating lease right-of-use assets$15,691$18,393
Operating lease liabilities$20,077$23,150
Other information related to leases:
Weighted-average remaining lease term of operating leases6.2 years7.1 years
Weighted-average discount rate of operating leases2.60 %2.60 %
The following table presents the maturities of the Company’s operating lease liabilities as of December 31, 2025, for the years indicated:
(in thousands)Amount
2026$3,441 
20273,447 
20283,535 
20293,576 
20303,634 
Thereafter4,122 
Total minimum lease payments21,755 
Less: present value discount(1,678)
Operating lease liability$20,077 
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NOTE 9 – DEPOSITS
Deposit balances as of December 31, 2025 and 2024, are presented in the following table:
(in thousands)December 31, 2025December 31, 2024
Non-interest-bearing deposits
$372,444 $258,242 
Interest-bearing deposits:
Demand275,259 269,320 
Money market1,206,544 895,605 
Savings3,500,532 2,342,327 
Time deposits less than $250 thousand1,242,892 1,484,872 
Time deposits greater than $250 thousand180,244 314,966 
Total interest-bearing deposits6,405,471 5,307,090 
Total deposits$6,777,915 $5,565,332 
As of December 31, 2025 and 2024, $14 thousand and $84 thousand, respectively, of demand deposit overdrafts were reclassified to loans. The related charge-offs and recoveries, if any, are reflected in the allowance for credit losses - loans.
The following table presents the maturities of time deposits as of December 31, 2025, for the years indicated:
(in thousands)Amount
2026$916,654 
2027261,400 
2028108,408 
2029111,370 
203025,304 
Thereafter— 
Total time deposits$1,423,136 
The Company’s time deposits of $250 thousand or greater represented 12.7% of total time deposits as of December 31, 2025, and are presented by maturity in the following table:
Months to Maturity
(in thousands)3 or LessOver 3 to 6Over 6 to 12Over 12Total
Time deposits greater than $250 thousand$78,227 $62,567 $34,917 $4,533 $180,244 
Deposits received in the ordinary course of business from related parties held as of December 31, 2025 and 2024, were $5.2 million and $7.1 million, respectively. See Note 19 – Related Party Transactions for more information.
NOTE 10 – BORROWED FUNDS
Subordinated Debt
In 2016, the Company issued $17.0 million of Fixed Rate Subordinated Notes (“2016 Fixed Rate Notes”). The 2016 Fixed Rate Notes are unsecured, mature on December 30, 2026 and pay interest of 7.0% semi-annually, in arrears. The Company redeemed the 2016 Fixed Rate Notes at par in 2025.
In 2016, the Company issued $7.0 million of Fixed to Floating Rate Subordinated Notes (“2016 Fixed to Floating Notes”). The 2016 Fixed to Floating Notes are unsecured, mature on December 30, 2026, and paid an initial interest of 6.5% semi-annually, in arrears. Beginning on December 30, 2021, the 2016 Fixed to Floating Notes
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interest rate reset quarterly to an interest rate per annum equal to the three-month LIBOR plus 469.50 basis points, paid quarterly in arrears. If the three-month LIBOR was less than zero, the three-month LIBOR was deemed to be zero. Due to the cessation of LIBOR on June 30, 2023, the 2016 Fixed to Floating Notes interest rate resets quarterly to an interest rate per annum equal to the three-month Secured Overnight Financing Rate (“SOFR”) plus 495.70 basis points, paid quarterly in arrears. If the three-month SOFR is less than zero, the three-month SOFR shall be deemed to be zero. The SOFR-based interest rate became effective on October 1, 2023. The Company redeemed the 2016 Fixed to Floating Notes at par in 2025.
In 2019, the Company issued $25.0 million of Fixed to Floating Rate Subordinated Notes (“2019 Notes”). The 2019 Notes are unsecured, mature on December 1, 2029, and paid an initial interest of 5.75% semi-annually, in arrears. Beginning on December 1, 2024, the 2019 Notes interest rate resets quarterly to an interest rate per annum equal to the three-month SOFR plus 439 basis points, paid quarterly in arrears. If the three-month SOFR is less than zero, the three-month SOFR shall be deemed to be zero. The Company may redeem the 2019 Notes at par.
On December 22, 2021, the Company issued $125.0 million of Fixed to Floating Rate Subordinated Notes (“2021 Notes”). The 2021 Notes are unsecured, mature on January 1, 2032 and pay an initial interest of 4.00% semi-annually through January 1, 2027, in arrears. Beginning on January 1, 2027, through the earlier of maturity date or the early redemption date, the interest rate will adjust quarterly equal to the three-month term SOFR plus 289 basis points, paid quarterly in arrears. The 2021 Notes are non-callable for the first five years; the Company has the option to redeem the 2021 Notes at par value, after five years from the date of issuance. The 2021 Notes are classified as Green Bonds in alignment with the International Capital Markets Association’s Green Bond Principles (2021).
The Company also has $3.0 million of other subordinated debt that has a 30-year term (matures on April 7, 2033), has no principal amortization and is guaranteed by the Company. As of December 31, 2025, the other subordinated debt paid interest at the rate of SOFR plus 3.3%, which resets on a quarterly basis.
The Company’s subordinated debt requires it to comply with specific covenants related to capitalization adequacy, regulatory enforcement actions, nonperforming asset metrics, changes in key executive positions, and material changes in ownership. Additionally, in the event of default the Company’s subordinated debt contains certain restrictions and limitations on dividend payments and the Company’s ability to repurchase its common stock. The Company was in compliance with all relevant covenants as of December 31, 2025.
The following table provides information on subordinated debt as of December 31, 2025 and 2024:
(dollars in thousands)December 31, 2025December 31, 2024
2016 Fixed Rate Notes, due in 2026, 7.00%
$— $17,000 
2016 Fixed to Floating Notes, due in 2026, 9.56%
— 7,000 
2019 Notes, due in 2029 (1)
25,000 25,000 
2021 Notes, due in 2032, 4.00%
125,000 125,000 
Other subordinated debt, due in 2033 (2)
3,000 3,000 
Less: debt issuance costs and discounts
(1,997)(2,474)
Total subordinated debt$151,003 $174,526 
__________________
(1)Borrowings bore interest at an effective rate of 8.18% and 8.89% as of December 31, 2025 and 2024, respectively.
(2)Borrowings bore interest at an effective rate of 7.47% and 8.22% as of December 31, 2025 and 2024, respectively.
Other Borrowed Funds
As of December 31, 2025, the Company had a credit line with the FHLB (“FHLB Credit Line”) with a maximum borrowing capacity of $5.9 million, with no of borrowings outstanding and a remaining borrowing capacity of $5.9 million. In order to borrow under the FHLB Credit Line, the Company must secure the borrowings with qualifying assets. Under the terms of the FHLB Credit Line, the Company is required to maintain sufficient collateral to secure these borrowings. As of December 31, 2025, the Company pledged eligible 1-4 family first mortgages with a book value of $5.8 million, and eligible home equity loans with a book value of $3.0 million to
F-37

secure borrowings under the FHLB Credit Line. The total collateral value assigned by the FHLB for these pledged investments and loans was $5.9 million.
As of December 31, 2025, the Company had a credit line with the Federal Reserve Bank (“FRB Credit Line”) with a maximum borrowing capacity of $3.5 billion. As of December 31, 2025, there were no borrowings outstanding under the FRB Credit Line. In order to borrow under the FRB Credit Line, the Company must maintain sufficient loan collateral. As of December 31, 2025, the Company pledged commercial real estate loans with a book value of $1.7 billion, commercial and industrial loans with a book value of $2.0 billion, construction loans with a book value of $184.0 million and multi-family loans with a book value of $75.8 million to facilitate future transactions. The total collateral value assigned by the Federal Reserve Bank for these pledged loans was $3.5 billion.
The Company maintains unsecured Fed Funds facilities with three other financial institutions in the aggregate amount of $90.0 million. As of December 31, 2025 and 2024, there were no borrowings outstanding under these facilities. The Company periodically borrows on its Fed Funds facilities to test its borrowing capabilities and keep the funds available.
NOTE 11 – STOCKHOLDERS' EQUITY
The Company’s Articles of Incorporation authorizes 108,200,000 shares of stock, consisting of 51,600,000 shares of Voting Common Stock, par value $0.001 per share (“Voting Common Stock”) and 51,600,000 shares of Non-Voting Common Stock, par value $0.001 per share (“Non-Voting Common Stock” and, together with the Voting Common Stock, “common stock”) 5,000,000 shares of preferred stock, par value $0.001 (“Preferred Stock”).
As of December 31, 2025, the Company had 19,438,060 shares of Voting Common Stock, 21,242,551 shares of Non-Voting Common Stock, and no shares of Preferred Stock issued and outstanding.
Certain shares of common stock issued and outstanding include unvested restricted stock awards granted to employees and directors. These restricted shares are legally issued and carry voting rights equivalent to vested shares of common stock, notwithstanding that such shares are subject to forfeiture until vesting conditions are satisfied. While these shares are considered legally outstanding and included within common stock outstanding, these shares are excluded from basic earnings per share and will be included within the diluted earnings per share calculation. See Note 14 – Stock-based Compensation and Note 18 – Earnings Per Common Share for more information.
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NOTE 12 – ACCUMULATED OTHER COMPREHENSIVE (LOSS)/INCOME
The Company’s accumulated other comprehensive (loss)/income is comprised of unrealized gains and losses associated with investment securities available for-sale. Gains and losses on investment securities available-for-sale are reclassified to earnings as the gains or losses are realized.
The following table presents the activity in accumulated other comprehensive (loss)/income for the years ended December 31, 2025 and 2024:
(in thousands)TotalTax EffectNet
Investment securities available-for-sale:
Balance as of December 31, 2023$(2,463)$622 $(1,841)
Unrealized gains, net2,103 (528)1,575 
Reclassification of net gains on investment securities available-for-sale to earnings(236)59 (177)
Balance as of December 31, 2024$(596)$153 $(443)
Unrealized gains, net5,865 (1,511)4,354 
Reclassification of net gains on investment securities available-for-sale to earnings(1,194)307 (887)
Balance as of December 31, 2025$4,075 $(1,051)$3,024 
NOTE 13 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK, COMMITMENTS AND CONTINGENCIES
The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of amounts recorded in the balance sheet. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained is based on management’s credit evaluation of the customer. Collateral held varies, but may include accounts receivable, inventory, property, plant and equipment, and income-producing commercial properties.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the commitment contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Generally, commitments to extend credit are subject to annual renewal. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company reports commitments at the lower of the amount eligible to be advanced based on the available collateral value, as of its most recent assessment date, and the contracted maximum commitment. The reported commitment amount may also be lower than the maximum contracted commitment as of the reporting date based on other contractually based limits to available funds.
A summary of the net commitment available to fund financial instruments with off-balance sheet credit risk as of December 31, 2025 and 2024 is as follows:
(in thousands)December 31, 2025December 31, 2024
Commercial real estate development and construction$179,439 $155,701 
Residential real estate development and construction682 2,380 
Lines of credit, primarily business lines606,921 569,143 
Standby letters of credit20,195 29,956 
Total commitments to extend credit and available lines of credit$807,237 $757,180 
As of December 31, 2025 and 2024, the total reserve for unfunded commitments was $2.7 million and $2.1 million, respectively, which is included in Other liabilities in the Consolidated Balance Sheets. The Company
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recognized a provision for credit losses of $535 thousand for the year ended December 31, 2025, and a recovery of credit losses of $2.5 million for the year ended December 31, 2024. The provision for and recovery of credit losses are included in Provision for/(recovery of) credit losses in the Consolidated Statements of Income.
The Company is involved in various legal actions arising in the ordinary course of business. The Company’s evaluation has resulted in none being expected to result in a loss contingency.
NOTE 14 – STOCK-BASED COMPENSATION
As of December 31, 2025, the Company had a stock-based compensation plan, the 2014 Plan, which was adopted on June 25, 2014. The 2014 Plan was amended in April 2021, in connection with the Company’s equity raise to permit the granting of up to 11,500,000 shares of Voting Common Stock in stock-based awards, including restricted stock awards and stock options, to its employees and directors, an increase from 1,200,000 shares of Voting Common Stock prior to the amendment. In February 2026, the 2014 Plan was amended to make available an additional 1,000,000 shares of Voting Common Stock in stock-based awards, including restricted stock awards and stock options, to its employees and directors. The Company believes that such awards better align the interests of its employees with those of its stockholders.
As of December 31, 2025, there were 622,189 shares remaining to be issued under the 2014 Plan. Compensation expense is recognized using the graded method over the vesting period of the stock option or restricted stock award granted. During the years ended December 31, 2025 and 2024, expense of $8.7 million and $7.6 million, respectively, was recognized associated with stock options and restricted stock awards. The Company recognized a tax benefit of $2.3 million and $1.9 million, respectively, for the years ended December 31, 2025 and 2024, related to stock-based compensation expense.
Stock Options
Stock option awards are granted with an exercise price equal to the fair value of the Company’s Voting Common Stock at the date of grant; those option awards generally vest based on five years of continuous service and have 10-year contractual terms. Certain option and share awards provide for accelerated vesting if there is a change in control. Stock options issued can require meeting certain performance criteria prior to exercise.
The fair values of options granted during the year ended December 31, 2025, were determined using the Black-Scholes option-pricing model. For option series that are subject to exercise conditions in addition to the grant date exercise price, the Black-Scholes option pricing model was used in conjunction with (i) a Monte Carlo Simulation model for determining stock price values and (ii) probability weights for scenarios where the Company either remains independent or is acquired. The description of the exercise conditions that apply to certain series of options is more fully described in the 2014 Plan. The following table presents the assumptions used to determine the fair value of the options granted during the year ended December 31, 2025:
December 31, 2025
Black-Scholes
Monte Carlo
Volatility
40%
40%
Expected dividend yield
—%
—%
Expected term
6.5 years
2.25 - 10.0 years
Risk-free rate
4.46%
4.25% - 4.58%
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The fair values of the options granted during the year ended December 31, 2024, were determined based on Black-Scholes option-pricing and Monte Carlo Simulation models using the following assumptions:
December 31, 2024
Volatility
35%
Expected dividend yield—%
Expected term
6.5 years
Risk-free rate
4.00%
An active market for the Company’s common stock does not exist, therefore the expected volatility is based on the average annual historical volatility of common stock for comparable public banks in the banking industry. The estimated option life is derived from the “simplified method” formula. The risk-free rate is based upon the U.S. Treasury note rate in effect at the time of grant. The expected dividend yield is based upon implied and historical dividend declarations.
A summary of the activity of options outstanding activity for the year ended December 31, 2025, is presented in the following table:
(dollars in thousands, except per share amounts)
SharesWeighted-Average Exercise PriceWeighted-Average Remaining Contractual Term
Aggregate Intrinsic Value
Outstanding as of December 31, 2024
9,834,392 $14.06 
6.5 years
$37,849 
Granted204,000 $18.27 
Exercised(100,700)$11.61 $561 
Forfeited or expired(128,000)$14.33 
Outstanding as of December 31, 2025
9,809,692 $14.61 
5.6 years
$54,150 
Exercisable as of December 31, 2025
5,795,496 $15.00 
5.4 years
$29,738 
Of the 9,809,692 outstanding option shares, 2,325,336 option shares with a weighted average exercise price of $12.97 are subject to conditions with respect to stock price levels that must be satisfied to exercise the options, as more fully described in the 2014 Plan.
A summary of the activity of unvested stock options activity for the period ended December 31, 2025, is presented in the following table:
SharesWeighted-Average Grant-Date Fair Value
Unvested as of December 31, 2024
3,947,580 $4.19 
Granted204,000 $7.00 
Vested(1,850,540)$4.11 
Forfeited(68,000)$4.92 
Unvested as of December 31, 2025
2,233,040 $4.49 
The total fair value of stock options vested during the years ended December 31, 2025 and 2024, was $7.6 million and $7.9 million, respectively. As of December 31, 2025, there was $3.4 million of unrecognized compensation cost related to stock options granted under the 2014 Plan, and is expected to be recognized over a weighted-average period of 1.1 years.
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Restricted Stock Awards
The Company granted 383,022 restricted stock awards during the year ended December 31, 2025. The vesting terms for restricted stock awards granted range from one to five years.
The following table summarizes the unvested restricted stock awards activity for the year ended December 31, 2025:
SharesWeighted-Average Grant-Date Fair Value
Balance as of December 31, 2024
26,000 $16.22 
Granted383,022 $16.78 
Vested(13,000)$16.22 
Balance as of December 31, 2025
396,022 $16.76 
As of December 31, 2025, there was $3.8 million of unrecognized compensation cost related to unvested restricted stock awards granted under the 2014 Plan, which is expected to be recognized over a weighted-average period of 2.3 years.
NOTE 15 – EMPLOYEE BENEFIT PLANS
As of December 31, 2025, the Company had The 401(k) Plan, Adopted by Forbright Bank (“401(k) Plan”), a multiple employer plan covering all full-time and part-time employees. Employees become eligible to participate in the 401(k) Plan on the first day of the month that is 30 days after their hire date. Under the 401(k) Plan, a participant may elect to contribute up to 80% of their compensation to the extent the total dollar amount is permitted by law. Under the terms of the 401(k) Plan, the Company will make a matching contribution of 100% up to 4% of employee compensation contributed. Both employee contributions and employer matching contributions vest immediately. During the years ended December 31, 2025 and 2024, the Company made matching contributions of $3.1 million $2.5 million, respectively. The Company may also make discretionary contributions for each participant. The amount of discretionary contribution, if any, is determined on an annual basis by the Company’s Board of Directors. No discretionary contributions were made by the Company during the years ended December 31, 2025 and 2024.
NOTE 16 – OTHER NON-INTEREST INCOME AND NON-INTEREST EXPENSE
The following tables present selected components of other non-interest income and other non-interest expense for the years ended December 31, 2025 and 2024:
(in thousands)December 31, 2025December 31, 2024
Servicing income
$8,190 $— 
Net fee on FHA/HUD originations
6,769 — 
Program fees
5,371 5,968 
Deposit fees
1,098 922 
Other non-interest income5,638 (312)
Total other non-interest income$27,066 $6,578 
In September 2025, as part of the settlement of a $68.6 million loan, the Company received certain assets, primarily net operating loss carryforwards and solar servicing rights. This transaction was accounted for as an asset
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acquisition. As the fair value of the consideration received was in excess of the $68.6 million loan balance at the date of settlement, that excess was allocated on a relative fair value basis to all qualifying assets.
(in thousands)December 31, 2025December 31, 2024
Occupancy expense
$4,687 $5,034 
Referral fees2,663 2,944 
Other non-interest expense11,582 12,547 
Total other non-interest expense$18,932 $20,525 
During the years ended December 31, 2025 and 2024, the Company recognized $1.8 million and $2.1 million, respectively, of audit and audit-related fees, and $853 thousand and $542 thousand, respectively, of other fees for services provided by its principal auditors, Ernst & Young LLP.
NOTE 17 – INCOME TAXES
The components of income tax expense for the years ended December 31, 2025 and 2024, are presented in the following table:
(in thousands)December 31, 2025December 31, 2024
Current income tax:
Federal$487 $4,121 
State1,523 2,765 
Total current income tax expense2,010 6,886 
Deferred income tax:
Federal9,919 3,916 
State1,302 199 
Total deferred income tax expense/(benefit)11,221 4,115 
Total income tax expense$13,231 $11,001 
The Company's state income tax expense is primarily attributable to California and Maryland, which together account for more than 50% of the total state income tax expense.
The reconciliations of the income tax expense computed using the federal statutory rates and income tax expense recognized for the years ended December 31, 2025 and 2024, are presented in the following table:
December 31, 2025
December 31, 2024
(dollars in thousands)AmountPercentage of
Pre-Tax Income		AmountPercentage of
Pre-Tax Income
Income tax at the federal statutory rate$21,243 21.0 %$11,417 21.0 %
State income tax, net of federal benefit3,491 3.5 %2,341 4.3 %
Adjustment of provision to tax return2 — %(2,090)(3.8)%
Change in valuation allowance— — %519 0.9 %
Permanent items(61)(0.1)%150 0.3 %
Research and development credits
(237)(0.2)%(1,090)(2.0)%
Deferred credit assumed in solar servicing business transaction
(11,221)(11.1)%— — %
Other14 — %(246)(0.5)%
Total income tax expense and rate$13,231 13.1 %$11,001 20.2 %
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A deferred credit was established as a liability, recognized as Other liabilities in the Consolidated Balance Sheets, in connection with the transaction described in Note 16. The amount of the deferred credit as of December 31, 2025 was $54.4 million, and will be amortized as a benefit in income tax expense in proportion to the recognition of the associated tax assets. During the year ended December 31, 2025, $11.2 million of the deferred credit was recognized in Income tax expense in the Consolidated Statements of Income.
The Company has uncertain income tax positions totaling $2.8 million and $1.4 million recorded as of December 31, 2025 and 2024, respectively, recognized in Other liabilities in the Consolidated Balance Sheets.
The components of net deferred tax assets and liabilities as of December 31, 2025 and 2024, are presented in the following table:
(in thousands)December 31, 2025December 31, 2024
Deferred tax assets:
Allowance for credit losses$13,061 $11,270 
Unrealized losses on investment portfolio— 153 
Net operating losses and tax credit carryforwards110,947 1,064 
Stock compensation9,392 7,534 
Loan fair value adjustments224 236 
Accrued bonuses7,444 6,296 
Deferred loan costs and fees3,359 4,746 
Other19,279 12,945 
Total deferred tax assets163,706 44,244 
Valuation allowance(6,877)(835)
Net deferred tax assets156,829 43,409 
Deferred tax liability:
Depreciation and amortization(2,464)(3,228)
Unrealized gains on investment portfolio
(1,051)— 
Total deferred tax liabilities(3,515)(3,228)
Deferred tax asset, net$153,314 $40,181 
Net operating loss, net of related valuation allowance, as of December 31, 2025, includes $104.1 million primarily related to the remaining impact of net operating losses resulting from the solar servicing business transaction during the third quarter of 2025. Pursuant to Section 382 of the Internal Revenue Code, if an “ownership change” (generally defined as a greater than 50% change by value in our stock ownership within a three-year period) occurs or has occurred, our ability to use our pre-change net capital loss carryforwards and certain other pre-change tax attributes to offset our post-change income may be limited. Similar rules and limitations may apply for state tax purposes as well.
The Company has federal net operating loss carryforwards of $374.7 million. All net operating loss carryforwards were generated in tax years beginning after December 31, 2017 and, therefore, do not expire. The utilization of these losses is generally limited to 80% of taxable income in any given tax year. The Company also has state net operating loss carryforwards of $826.8 million. Of the state net operating loss carryforwards, $530.1 million are related to jurisdictions that allow for an indefinite carryforward periods, and $296.7 million relate to jurisdictions with fixed expiration periods, which will begin to expire in 2032 and continue through 2044.
On January 1, 2025, the Company prospectively adopted ASU 2023-09, which requires the disaggregation of the disclosure of income taxes paid. See Note 1 – Significant Accounting Policies for more information.
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Income tax payments, net of refunds received, made during the year ended December 31, 2025, are presented in the following table:
(in thousands)December 31, 2025
Federal:$7,520 
State and local:
California
627 
Other464 
Total state and local income tax payments, net of refunds received1,091 
Total income tax payments, net of refunds received$8,611 
NOTE 18 – EARNINGS PER COMMON SHARE
The following table presents the calculation of basic and diluted earnings per share for the years ended December 31, 2025 and 2024:
December 31, 2025December 31, 2024
(in thousands, except share and per share data)
VotingNon-VotingVoting
Non-Voting
Basic Earnings Per Common Share:
Net income
$41,526 $46,400 $20,458 $22,908 
Weighted-average shares - basic
19,011,264 21,242,551 18,971,357 21,242,551 
Basic earnings per common share
$2.18 $2.18 $1.08 $1.08 
Diluted Earnings Per Common Share:
Net income
$42,826 $45,100 $21,031 $22,335 
Weighted-average shares - basic19,011,264 21,242,551 18,971,357 21,242,551 
Effect of dilutive securities - stock options and restricted stock awards1,160,569 — 1,030,448 — 
Weighted-average shares - diluted
20,171,833 21,242,551 20,001,805 21,242,551 
Diluted earnings per common share
$2.12 $2.12 $1.05 $1.05 
The Company has two classes of common stock, Voting and Non-voting, which are participating securities. Earnings are allocated to each class based on their respective participation rights, and basic and diluted earnings per share are presented under the two-class method in accordance with ASC 260. All potentially dilutive shares have voting rights, and net income has been reallocated to reflect the incremental dilutive voting shares.
Diluted weighted-average shares outstanding includes 1,160,569 and 1,030,448 incremental common stock equivalents related to stock options and restricted stock awards as calculated under the treasury-stock method for the years ended December 31, 2025 and 2024, respectively, as the stock options and restricted stock awards are not considered participating securities. For the years ended December 31, 2025 and 2024, 23,209 shares and 8,967 shares, respectively, of common stock equivalents were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive. Additionally, for the years ended December 31, 2025 and 2024, 2,325,336 stock options and 2,464,020 stock options, respectively, with unresolved substantive contingencies that must be satisfied before shares can be exercised and issued, and therefore do not represent potential shares of common stock, have been excluded from the weighted-average shares outstanding to calculate basic and diluted earnings per common share. As of December 31, 2025 and 2024, 396,022 shares and 26,000 shares, respectively, of unvested restricted stock awards with voting rights are included in outstanding shares of common stock on the Consolidated Balance Sheets and Consolidated Statements of Changes in Stockholders’ Equity, but are excluded from the calculation of basic earnings per share.
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NOTE 19 – RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Company may make loans to and receive deposits from related parties, which primarily includes principal officers and directors, and their affiliates. The Company had no loans outstanding to related parties as of December 31, 2025 and 2024. The aggregate amounts of deposits from related parties as of December 31, 2025 and 2024, was $5.2 million and $7.1 million, respectively. For more information on the activity of loans and deposits with related parties see Note 4 – Loans and Note 9 – Deposits, respectively.
The Company has a related party relationship with BancAlliance because certain employees of the Company also hold officer roles with BancAlliance, and a subsidiary of the Company serves as the asset manager of BancAlliance members. The Company sources loans for its own balance sheet and makes those loans available for sale through the BancAlliance program. Loans sold to BancAlliance are immediately sold to members in the program with terms of loan sales, including pricing, dictated by a Master Participation Agreement for the program that applies the same to all members of BancAlliance. BancAlliance is a pass-through participant and does not incur an economic or accounting impact from the program.
Transactions with BancAlliance for the years ended December 31, 2025 and 2024, and amounts due from BancAlliance as of December 31, 2025 and 2024, are presented in the following table:
(in thousands)December 31, 2025December 31, 2024
Loans sold to BancAlliance$228,275 $261,653 
Net gains realized on loans sold to BancAlliance$1,828 $3,219 
Amounts due from BancAlliance related to funding and expense advancements$6,035 $161 
In the ordinary course of business, the Company incurs expenses from transactions with vendors who are considered related parties. These transactions resulted in a non-material amount of expense for the years ended December 31, 2025 and 2024.
NOTE 20 – REGULATORY MATTERS
Banks and bank holding companies are subject to various regulatory capital requirements administered by state and federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about qualifying capital components, risk weighting (where applicable) and other factors.
In 2019, the federal banking agencies jointly issued a final rule to provide a simple measure of capital adequacy, the community bank leverage ratio (“CBLR”) framework, for “qualifying community banking organizations,” consistent with Section 201 of the Economic Growth, Regulatory Relief, and Consumer Protection Act. The CBLR framework is optional and is available to depository institutions and depository institution holding companies that have less than $10 billion in average total consolidated assets and meet other qualifying criteria.
The CBLR removes the requirement for qualifying community banking organizations to calculate and report risk-based capital, instead requiring only that qualifying community banking organizations calculate and report a Tier 1 leverage ratio. Qualifying community banking organizations that elect to use the CBLR framework and that maintain a leverage ratio of greater than 9% will be considered to have satisfied the generally applicable risk based and leverage capital requirements in the agencies' capital rules (generally applicable rule) and, if applicable, will be considered to have met the capital ratio requirements to be considered “well capitalized” for purposes of the applicable “prompt corrective action” rules under the Federal Deposit Insurance Act. The CBLR rules also allow for a two-quarter grace period to correct a ratio that falls below the required amount, provided that the bank or bank holding company maintains a leverage ratio of greater than 8%.
Under the current CBLR rule, a qualifying community banking organization can opt out of the CBLR framework and revert back to the risk-based framework without restriction. As of December 31, 2025 and 2024,
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each of the Company and Bank was a “qualifying community banking organization” as defined by applicable regulations of the federal banking agencies and elected to measure its capital adequacy under the CBLR framework.
The following table presents as of December 31, 2025 and 2024, the Company’s and the Bank’s actual and required capital amounts and leverage ratios. The table also includes the actual amounts and risk-weighted ratios which the Company is opting to disclose as of December 31, 2025 and 2024 even though they are not required under the CBLR framework:
ActualTo Be Well Capitalized Under Prompt Corrective Action Provisions
(CBLR Framework)
(dollars in thousands)AmountRatioAmountRatio
As of December 31, 2025:
Required under CBLR framework:
Tier 1 leverage ratio:
Company$748,650 9.79 %$688,367 9.00 %
Bank$848,960 11.11 %$687,907 9.00 %
Optional under CBLR framework:
Total capital to risk-weighted assets ratio:
Company$934,965 15.89 %
N/A
N/A
Bank$894,305 15.14 %N/AN/A
Tier 1 capital to risk-weighted assets ratio:
Company$748,650 12.72 %N/AN/A
Bank$848,960 14.37 %N/AN/A
Common Equity Tier 1 to risk weighted-assets ratio:
Company$748,650 12.72 %N/AN/A
Bank$848,960 14.37 %N/AN/A
As of December 31, 2024:
Required under CBLR framework:
Tier 1 leverage ratio:
Company$706,501 10.56 %$602,390 9.00 %
Bank$796,830 11.92 %$601,511 9.00 %
Optional under CBLR framework:
Total capital to risk-weighted assets ratio:
Company$879,305 17.52 %N/AN/A
Bank$820,217 16.38 %N/AN/A
Tier 1 capital to risk-weighted assets ratio:
Company$706,501 14.08 %N/AN/A
Bank$796,830 15.91 %N/AN/A
Common Equity Tier 1 to risk weighted-assets ratio:
Company$706,501 14.08 %N/AN/A
Bank$796,830 15.91 %N/AN/A
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NOTE 21 – FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The price in the principal (or most advantageous) market used to measure the fair value of the asset or liability shall not be adjusted for transaction costs. An orderly transaction is a transaction that assumes exposure to the market for a period prior to the measurement date to allow for marketing activities that are usual and customary for transactions involving such assets and liabilities; it is not a forced transaction. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable, (iii) able to transact and (iv) willing to transact. The Company uses valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets and liabilities. The income approach uses valuation techniques to convert future amounts, such as cash flows or earnings, to a single present amount on a discounted basis. The cost approach is based on the amount that currently would be required to replace the service capacity of an asset (replacement cost). Valuation techniques should be consistently applied. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. Inputs may be observable, meaning those that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources, or unobservable, meaning those that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. In that regard, a fair value hierarchy for valuation inputs is utilized - that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.
The fair value hierarchy levels are as follows:
•Level 1 Inputs - Unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.
•Level 2 Inputs - Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These might include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability (such as interest rates, volatilities, prepayment speeds, credit risks, etc.) or inputs that are derived principally from or corroborated by market data by correlation or other means.
•Level 3 Inputs - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity’s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities.
A description of the valuation methodologies used for instruments measured at fair value, as well as the general classification of such instruments pursuant to the valuation hierarchy, is set forth below. In general, fair value is based upon quoted market prices, where available. If such quoted market prices are not available, fair value measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Valuation adjustments may be made to ensure that financial instruments are recorded at fair value. These adjustments may include amounts to reflect counterparty credit quality and the Company’s creditworthiness, among other things, as well as unobservable parameters. Any such valuation adjustments are applied consistently over time. The Company’s valuation methodologies may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. While management believes the Company’s valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. Furthermore, the reported fair value amounts have not been comprehensively revalued since the presentation dates, and therefore, estimates of fair value after the balance sheet date may differ significantly from the amounts presented herein.
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Financial assets measured at fair value on a recurring basis include securities available-for-sale, certain loans held-for-sale, and certain loans held for investment.
Descriptions of assets and liabilities measured at fair value are as follows:
•U.S. Treasury and government agencies - The U.S. Treasury and government agency investment portfolio includes U.S. Treasury Notes, U.S. Treasury Bills and FHLB bullet advances. The Company obtains fair value measurements for these securities from independent pricing services. The fair value measurements for U.S. Treasury Note and U.S. Treasury Bill securities consider observable trades and market data. U.S. Treasury Note and U.S. Treasury Bill investment securities are categorized as Level 1. The fair value measurements for FHLB bullet advances consider observable data that may include dealer quotes, market spreads, cash flows, live trading levels, trade execution data, credit information and the bond’s terms and conditions, among other things. FHLB bullet advance investment securities are categorized as Level 2.
•Residential agency mortgage-backed and Commercial agency mortgage-backed securities - The fair value of residential mortgage-backed and commercial mortgage-backed securities consider observable data that may include dealer quotes, market spreads, prepayment speeds, cash flows, live trading levels, trade execution data, credit information and the investment securities terms and conditions, among other things These investment securities are characterized as Level 2.
•Municipal bonds - The state and municipal bonds portfolio contains investment securities that are comprised of state and local government bonds. For these investment securities, the Company obtains fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes, market spreads, prepayment speeds, cash flows, live trading levels, trade execution data, credit information and the bond's terms and conditions, among other things. These investment securities are categorized as Level 2.
•Loans held-for-sale and held for investment at fair value - The fair value of loans held-for-sale and held-for-investment is determined by using actual observable market transactions when available. In situations when market transactions are not available, the fair value of loans is estimated using bid-ask quotes on the loan in question from market sources such as third-party aggregators, agent banks, or others. Due to the illiquid nature of the market for most of the loans, there is generally no readily available Level 1 or Level 2 quotes or prices on which it can rely. The Company seeks market price indications from a variety of sources, where available. If quotes are not available, an evaluation is made to determine if there are material market or loan-specific factors that impact the estimated fair value. To the extent any material market or loan-specific factors are evident, the information is utilized to determine the best estimated fair value, typically applying observable discounts or premiums for the most logically comparable loans to those in the portfolio. If the Company is unable to use market-based premiums or discounts to estimate a fair value, then the Company will estimate fair value using a discounted cash flow analysis, key inputs include the discount for risk of non-payment as well as a discount rate. This requires the use of significant judgment surrounding current market conditions and the credit quality of the borrowers. The Company also has acquired homogeneous consumer and commercial loan pools that are carried at fair value. These loan pools are fair valued by a third-party firm using inputs such as market yield, default rate, or cumulative loss estimates, and prepayment speeds in a discounted cash flow model to estimate fair values of the loan pools. The loans are categorized as Level 3.
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The following tables summarize financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2025 and 2024, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:
December 31, 2025
(in thousands)Quoted Prices in
Active Markets for
Identical Assets/
Liabilities
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable Inputs
(Level 3)		Total
Assets
Investment securities available-for-sale:
U.S. Treasury and government agencies$958,347 $— $— $958,347 
Commercial agency mortgage-backed
— 136,070 — 136,070 
Residential agency mortgage-backed
— 139,077 — 139,077 
Municipal bonds— 8,635 — 8,635 
Other
— 7,283 5,475 12,758 
Total investment securities available-for-sale958,347 291,065 5,475 1,254,887 
Loans held-for-sale at fair value— — 62,251 62,251 
Loans held for investment at fair value— — 4,645 4,645 
Total assets$958,347 $291,065 $72,371 $1,321,783 
Liabilities
Total liabilities$— $— $— $— 
December 31, 2024
(in thousands)Quoted Prices in
Active Markets for
Identical Assets/
Liabilities
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable Inputs
(Level 3)		Total
Assets
Investment securities available-for-sale:
U.S. Treasury and government agencies$1,340,622 $50,059 $— $1,390,681 
Commercial agency mortgage-backed— 36,577 — 36,577 
Residential agency mortgage-backed— 16,171 — 16,171 
Municipal bonds— 8,292 — 8,292 
Other— 14,282 5,465 19,747 
Total investment securities available-for-sale1,340,622 125,381 5,465 1,471,468 
Loans held-for-sale at fair value— — 108,575 108,575 
Loans held for investment at fair value— — 7,081 7,081 
Total assets$1,340,622 $125,381 $121,121 $1,587,124 
Liabilities
Total liabilities$— $— $— $— 
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The following tables present a reconciliation of the assets and liabilities that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the years ended December 31, 2025 and 2024:
December 31, 2025
AdditionsSalesPay-downs/
Maturities/
Calls		TransfersRealized and Unrealized Gain/(Loss) included in:
(in thousands)
Balance as of December 31, 2024
EarningsOther
Comprehensive
Loss
Balance as of
December 31, 2025
Assets
Investment securities available-for-sale - Other
$5,465 $— $— $— $— $— $10 $5,475 
Loans held-for-sale at fair value108,575 19,033 (20,648)(47,051)85 2,257 — 62,251 
Loans held for investment at fair value7,081 — — (2,305)(85)(46)— 4,645 
Total Level 3 assets$121,121 $19,033 $(20,648)$(49,356)$— $2,211 $10 $72,371 
Liabilities
Total Level 3 liabilities$— $— $— $— $— $— $— $— 
December 31, 2024
AdditionsSalesPay-downs/
Maturities/
Calls		TransfersRealized and Unrealized Gain/(Loss) included in:
(in thousands)
Balance as of December 31, 2023
EarningsOther
Comprehensive
Loss		Balance as of December 31, 2024
Assets
Investment securities available-for-sale - Other
$5,632 $— $— $— $— $— $(167)$5,465 
Loans held-for-sale at fair value172,296 — (37,243)(40,321)8,338 5,505 — 108,575 
Loans held for investment at fair value26,947 — — (11,088)(8,338)(440)— 7,081 
Total Level 3 assets$204,875 $— $(37,243)$(51,409)$— $5,065 $(167)$121,121 
Liabilities
Total Level 3 liabilities$— $— $— $— $— $— $— $— 
See Note 4 – Loans for more information regarding realized and unrealized gains and losses on loans. Unrealized losses on investment securities available-for-sale are included in Net change in unrealized gain on investments available-for-sale in the Consolidated Statements of Comprehensive Income.
F-51

The following tables present the quantitative inputs used in determining the fair value of the Company’s Level 3 assets measured on a recurring basis as of December 31, 2025 and 2024:
(dollars in thousands)
Fair value as of December 31, 2025
Valuation TechniqueUnobservable Input
Range (Weighted Average)1
Investment securities available-for-sale - Other
$5,475 Discounted
Cash Flow		Discount Rate
7.5% - 7.6%
(7.5%)
Loans held-for-sale at fair value$58,059 Market ObservationsMarket (Premium)/Discount
(1.4)% - 7.6%
(2.3%)
Loans held-for-sale at fair value4,192 Discounted
Cash Flow		Discount for Risk of Non-Payment
10.0% - 40.0%
(30.6%)
Discount Rate
9.3% - 11.8%
(10.0%)
Total loans held-for-sale at fair value
$62,251 
Loans held for investment at fair value$3,853 Market ObservationsMarket (Premium)/Discount
(1.4)% - 7.6%
(0.8%)
Loans held for investment at fair value792 Discounted
Cash Flow		Discount for Risk of Non-Payment
10.0% - 40.0%
(28.2%)
Discount Rate
9.3% - 11.8%
(10.4%)
Total loans held for investment at fair value$4,645 
__________________
(1)Weighted averages are calculated by using the product of the inputs multiplied by the relative fair values of the instruments.
(dollars in thousands)
Fair value as of December 31, 2024
Valuation TechniqueUnobservable Input
Range (Weighted Average)1
Investment securities available-for-sale - Other
$5,465 Discounted
Cash Flow		Discount Rate7.3% - 7.8%
(7.6%)
Loans held-for-sale at fair value$107,080 Market ObservationsMarket (Premium)/Discount(1.4)% - 16.9%
(2.9%)
Loans held-for-sale at fair value1,495 Discounted
Cash Flow		Discount for Risk of Non-Payment10.0% - 84.3%
(52.2%)
Discount Rate8.9% - 11.8%
(11.3%)
Total loans held-for-sale$108,575 
Loans held for investment at fair value$6,565 Market ObservationsMarket (Premium)/Discount(1.4)% - 16.9%
(1.0%)
Loans held for investment at fair value516 Discounted
Cash Flow		Discount for Risk of Non-Payment10.0% - 84.3%
(33.4%)
Discount Rate8.9% - 11.8%
(10.7%)
Total loans held for investment at fair value$7,081 
__________________
(1)Weighted averages are calculated by using the product of the inputs multiplied by the relative fair values of the instruments.
For the years ended December 31, 2025 and 2024, the Company did not transfer any assets to or from Level 3.
Certain assets are measured at fair value on a nonrecurring basis; that is, not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence
F-52

of impairment). Financial assets measured at fair value on a non-recurring basis as of December 31, 2025 and 2024, are presented in the following tables:
December 31, 2025
(in thousands)Quoted Prices in
Active Markets for
Identical Assets/
Liabilities
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable Inputs
(Level 3)		Total
Collateral-dependent loans$— $— $49,682 $49,682 
Impaired loans— — 14,017 14,017 
Other real estate owned— — 8,729 8,729 
Total$— $— $72,428 $72,428 
December 31, 2024
(in thousands)Quoted Prices in
Active Markets for
Identical Assets/
Liabilities
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable Inputs
(Level 3)		Total
Collateral-dependent loans$— $— $55,298 $55,298 
Impaired loans— — 1,519 1,519 
Other real estate owned— — 25,476 25,476 
Total$— $— $82,293 $82,293 
As of December 31, 2025 and 2024, the Company’s investment in collateral-dependent loans included no individual credit loss allowances. As of December 31, 2025 and 2024, the Company’s investment in impaired loans included individual credit loss allowances of $2.2 million and $922 thousand, respectively. As of December 31, 2025 and 2024, the Company’s investment in other real estate owned assets included unrealized fair value adjustment losses of $847 thousand and $2.2 million, respectively, which are recognized in Other non-interest income in the Consolidated Statements of Income.
Collateral-dependent loans are reported at fair value using the fair value of collateral less estimated selling costs. Although appraisals are obtained on collateral dependent loans, the appraised values may be discounted based on management’s historical knowledge, changes in market conditions from the time of valuation and/or management’s expertise and knowledge of the borrower’s business, and therefore they are classified as Level 3.
Impaired loans are reported at fair value using the present value of expected cash flows. For impairments based on cash flow methodology, the discount rate is based on observable inputs, however the determination of cash flows requires management’s judgment, and therefore they are classified as Level 3.
Other real estate owned assets have been valued using a market approach. The values were determined using market prices or similar real estate assets based on an independent appraisal, and adjusted for estimated selling costs. These estimates require management’s judgment, and therefore they are classified as Level 3.
The Company discloses fair value information, based on the exit price notion, of financial instruments that are not measured at fair value in the financial statements. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation, and is best evidenced by a quoted market price, if one exists.
Quoted market prices, where available, are shown as estimates of fair values. Because no quoted market prices are available for a significant portion of the Company's financial instruments, the fair value of such instruments have been derived based on the amount and timing of future cash flows and estimated discount rates based on observable inputs (Level 2) or unobservable inputs (Level 3).
F-53

Present value techniques used in estimating the fair value of many of the Company's financial instruments are significantly affected by the assumptions used. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate cash settlement of the instrument. Additionally, the accompanying estimates of fair values are only representative of the fair values of the individual financial assets and liabilities and should not be considered an indication of the fair value of the Company. Management utilizes internal models used in asset liability management to determine the fair values disclosed below.
The estimated fair values of the Company’s financial instruments were as follows as of December 31, 2025 and 2024:
December 31, 2025
(in thousands)Carrying
Amount		Estimated
Fair Value		Quoted Prices in
Active Markets for
Identical Assets/
Liabilities
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Financial assets:
Cash, cash equivalents and restricted cash$648,715 $648,715 $648,715 $— $— 
Investment securities available-for-sale, at fair value1,254,887 1,254,887 958,347 291,065 5,475 
Investment securities held-to-maturity, at amortized cost48,834 50,475 — 34,936 15,539 
Loans held-for-sale, at fair value62,251 62,251 — — 62,251 
Loans held-for-sale, at lower of cost or fair value317,411 317,411 — — 317,411 
Loans held for investment, at fair value4,645 4,645 — — 4,645 
Loans held for investment, at amortized cost5,169,248 5,213,899 — — 5,213,899 
Other earning assets
55,928 54,023 — — 54,023 
Accrued interest receivable55,155 55,155 55,155 — — 
Financial liabilities:
Time deposits$1,423,136 $1,431,710 $— $1,431,710 $— 
Other deposits5,354,779 5,354,779 5,354,779 — — 
Subordinated debt, net
151,003 146,547 — 146,547 — 
F-54

December 31, 2024
(in thousands)Carrying
Amount		Estimated
Fair Value		Quoted Prices in
Active Markets for
Identical Assets/
Liabilities
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Financial assets:
Cash, cash equivalents and restricted cash$1,179,982 $1,179,982 $1,179,982 $— $— 
Investment securities available-for-sale, at fair value1,471,468 1,471,468 1,340,622 125,381 5,465 
Investment securities held-to-maturity, at amortized cost52,525 53,752 — 35,684 18,068 
Loans held-for-sale, at fair value108,575 108,575 — — 108,575 
Loans held-for-sale, at lower of cost or fair value207,909 207,909 — — 207,909 
Loans held for investment, at fair value7,081 7,081 — — 7,081 
Loans held for investment, at amortized cost3,921,679 3,924,133 — — 3,924,133 
Other earning assets
88,009 86,329 — — 86,329 
Accrued interest receivable35,525 35,525 35,525 — — 
Financial liabilities:
Time deposits$1,799,838 $1,803,848 $— $1,803,848 $— 
Other deposits3,765,494 3,765,494 3,765,494 — — 
Subordinated debt, net
174,526 154,307 — 154,307 — 
Other borrowings700,000 700,000 700,000 — — 
F-55

NOTE 22 – PARENT COMPANY FINANCIAL STATEMENTS
Financial statements for the Parent as of and for the years ended December 31, 2025 and 2024:
Balance Sheets
(in thousands, except share and per share amounts)
December 31, 2025
December 31, 2024
ASSETS
Cash, due from banks and restricted cash$— $71,414 
Interest-bearing deposits with banks24,017 742 
Cash, cash equivalents and restricted cash24,017 72,156 
Loans held for investment, at amortized cost1,555 15,415 
Allowance for credit losses - loans
— (144)
Net loans held for investment, at amortized cost1,555 15,271 
Deferred tax asset, net
— 3,607 
Accrued interest receivable— 100 
Investment in subsidiaries923,060 812,495 
Other assets29,311 21,167 
Total assets
$977,943 $924,796 
LIABILITIES
Subordinated debt, net
$151,003 $174,526 
Deferred tax liability, net
1,841 — 
Other liabilities2,656 28,316 
Total liabilities155,500 202,842 
STOCKHOLDERS’ EQUITY
Preferred stock, $0.001 par value per share; 5,000,000 shares authorized; no shares issued and outstanding
— — 
Common stock, $0.001 par value per share; 103,200,000 shares authorized; 40,680,611 and 40,243,916 shares issued and outstanding, respectively
41 40 
Additional paid-in capital490,550 481,455 
Retained earnings328,828 240,902 
Accumulated other comprehensive income/(loss)3,024 (443)
Total stockholders’ equity822,443 721,954 
Total liabilities and stockholders’ equity
$977,943 $924,796 
F-56

Statements of Income
(in thousands)
December 31, 2025
December 31, 2024
INTEREST INCOME
Interest income$1,369 $1,736 
Interest expense8,822 9,029 
Net interest expense(7,453)(7,293)
Recovery of credit losses(144)(76)
Net interest expense after recovery of credit losses(7,309)(7,217)
NON-INTEREST INCOME AND EXPENSE
Other (loss)/income, net(91)10 
Other expense5,495 6,563 
Total non-interest expense(5,586)(6,553)
Loss before income tax expense/(benefit) and equity in undistributed income of subsidiary(12,895)(13,770)
Income tax expense/(benefit)89 (2,202)
Loss before undistributed income of subsidiary(12,984)(11,568)
Equity in undistributed income of subsidiary100,910 54,934 
Net income$87,926 $43,366 
F-57

Statements of Cash Flows
(in thousands)
December 31, 2025
December 31, 2024
OPERATING ACTIVITIES
Net income$87,926 $43,366 
Adjustments to reconcile net income to net cash used in operating activities
Equity in undistributed income of subsidiary(100,910)(54,934)
Recovery of credit losses(144)(76)
Deferred income taxes, net
5,448 (564)
Stock-based compensation2,557 3,588 
Net change in assets and liabilities:
Accrued interest receivable100 75 
Other assets(5,095)(10,823)
Other liabilities(25,185)18,432 
Net cash used in operating activities(35,303)(936)
INVESTING ACTIVITIES
Net decrease in loans held for investment, at amortized cost13,872 3,736 
Other(3,063)(2,839)
Net cash provided by investing activities10,809 897 
FINANCING ACTIVITIES
Repayments of subordinated debt
(24,000)— 
Proceeds from exercise of stock options under employee stock plans1,170 705 
Shares withheld for tax withholding and exercise of stock options and restricted shares(815)(751)
Net cash used in financing activities(23,645)(46)
Net decrease in cash, cash equivalents and restricted cash(48,139)(85)
Beginning cash, cash equivalents and restricted cash72,156 72,241 
Ending cash, cash equivalents and restricted cash$24,017 $72,156 
F-58


FORBRIGHT, INC. AND SUBSIDIARIES
Table of Contents
SectionPage
Consolidated Financial Statements (Unaudited)
F-59

FORBRIGHT, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(dollars in thousands, except per share amounts)
March 31, 2026December 31, 2025
(Unaudited)
ASSETS
Cash, due from banks and restricted cash$25,280 $18,241 
Interest-bearing deposits with banks840,856 630,474 
Cash, cash equivalents and restricted cash866,136 648,715 
Investment securities available-for-sale, at fair value1,235,599 1,254,887 
Investment securities held-to-maturity, at amortized cost, net of allowance for credit losses - investment securities of $110, respectively
48,834 48,834 
Loans held-for-sale407,594 379,662 
Loans held for investment, at fair value4,555 4,645 
Loans held for investment, at amortized cost5,376,537 5,222,234 
Allowance for credit losses - loans
(52,794)(52,986)
Net loans held for investment, at amortized cost5,323,743 5,169,248 
Other earning assets, net
50,690 55,928 
Deferred tax asset, net152,963 153,314 
Accrued interest receivable45,369 55,155 
Goodwill and other intangible assets, net31,402 31,685 
Other assets66,175 87,233 
Total assets
$8,233,060 $7,889,306 
LIABILITIES
Non-interest-bearing deposits$473,153 $372,444 
Interest-bearing deposits6,665,055 6,405,471 
Total deposits7,138,208 6,777,915 
Subordinated debt, net151,092 151,003 
Other liabilities112,565 137,945 
Total liabilities7,401,865 7,066,863 
Off-balance sheet commitments (Note 13)
STOCKHOLDERS’ EQUITY
Preferred stock, $0.001 par value per share; 5,000,000 shares authorized; no shares issued and outstanding
— — 
Common stock, $0.001 par value per share; 103,200,000 shares authorized:
Voting common stock, 19,605,006 and 19,438,060 shares issued and outstanding, respectively
20 20 
Non-voting common stock, 21,242,551 shares issued and outstanding, respectively
21 21 
Additional paid-in capital493,074 490,550 
Retained earnings340,460 328,828 
Accumulated other comprehensive (loss)/income(2,380)3,024 
Total stockholders’ equity831,195 822,443 
Total liabilities and stockholders’ equity
$8,233,060 $7,889,306 
F-60

FORBRIGHT, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(Unaudited)
For the Three Months Ended
March 31,
(dollars in thousands, except per share amounts)
20262025
INTEREST INCOME
Loans held for investment$93,164 $86,158 
Loans held-for-sale8,194 9,438 
Deposits with banks7,582 7,329 
Interest on investment securities14,099 16,999 
Interest and dividends on other earning assets716 972 
Total interest income123,755 120,896 
INTEREST EXPENSE
Deposits62,295 56,486 
Subordinated debt, net
1,902 2,501 
Other borrowings— 849 
Total interest expense64,197 59,836 
Net interest income59,558 61,060 
Provision for credit losses3,473 8,459 
Net interest income after provision for credit losses56,085 52,601 
NON-INTEREST INCOME
Servicing income7,087 — 
Investment advisory fees3,193 4,316 
Fee income on loans2,003 1,441 
(Losses)/gains on sales of loans and investment securities, net(34)1,826 
Unrealized (losses)/gains on loans and financing receivables, net(1,335)1,863 
Other non-interest income4,670 4,609 
Total non-interest income15,584 14,055 
NON-INTEREST EXPENSE
Compensation and benefits31,642 30,102 
Information technology7,540 6,011 
Professional fees7,823 3,742 
Loan administration and servicing4,125 1,667 
Advertising and marketing2,304 3,319 
FDIC insurance902 2,662 
Other non-interest expense4,121 4,157 
Total non-interest expense58,457 51,660 
Income before income taxes13,212 14,996 
Income tax expense1,580 3,869 
Net income$11,632 $11,127 
Basic earnings per voting and non-voting common share
$0.29 $0.28 
Diluted earnings per voting and non-voting common share
$0.27 $0.27 
Weighted-average shares used to compute earnings per voting common share:
Basic19,063,817 18,986,447 
Diluted21,188,692 20,273,878 
Weighted-average shares used to compute earnings per non-voting common share, basic and diluted21,242,551 21,242,551 
F-61

FORBRIGHT, INC. AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income
(Unaudited)
For the Three Months Ended
March 31,
(in thousands)20262025
Net income$11,632 $11,127 
Other comprehensive income:
Net change in unrealized (loss)/gain on investment securities available-for-sale(7,289)2,959 
Related income tax effect1,885 (747)
Reclassification of gain on investment securities available-for-sale to income— (1,194)
Related income tax effect— 301 
Total other comprehensive (loss)/income, net(5,404)1,319 
Total comprehensive income$6,228 $12,446 
F-62

FORBRIGHT, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders’ Equity
(Unaudited)
Common stockAdditional paid-in capitalRetained earningsAccumulated other comprehensive income/(loss)Total
(dollars in thousands)SharesAmount
Balance as of December 31, 2025
40,680,611 $41 $490,550 $328,828 $3,024 $822,443 
Net income— — — 11,632 — 11,632 
Other comprehensive loss, net of tax— — — — (5,404)(5,404)
Total other comprehensive income6,228 
Stock-based compensation181,860 — 2,824 — — 2,824 
Shares withheld for tax withholding on vesting of restricted shares(14,914)— (300)— — (300)
Balance as of March 31, 2026
40,847,557 $41 $493,074 $340,460 $(2,380)$831,195 
Balance as of December 31, 2024
40,243,916 $40 $481,455 $240,902 $(443)$721,954 
Net income— — — 11,127 — 11,127 
Other comprehensive income, net of tax— — — — 1,319 1,319 
Total other comprehensive income12,446 
Exercise of stock options40,000 — 372 — — 372 
Stock-based compensation— — 2,081 — — 2,081 
Shares withheld for tax withholding and exercise of stock options and vesting of restricted shares(27,836)— (494)— — (494)
Balance as of March 31, 2025
40,256,080 $40 $483,414 $252,029 $876 $736,359 
F-63

FORBRIGHT, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
For the Three Months Ended
March 31,
(in thousands)20262025
OPERATING ACTIVITIES
Net income$11,632 $11,127 
Adjustments to reconcile net income to net cash provided by/(used in) operating activities:
Depreciation and intangible asset amortization2,162 2,089 
Provision for credit losses3,473 8,459 
Accretion of net discounts on investment securities, net
(1,273)(7,688)
Amortization of deferred fees and costs on loans, net
(6,034)(2,542)
Increase in loans originated for sale, net(29,021)(1,012)
Losses/(gains) on sales of loans and investment securities, net34 (1,826)
Stock-based compensation2,824 2,081 
Deferred income taxes2,236 — 
Other6,524 (186)
Net change in assets and liabilities:
Accrued interest receivable9,786 (4,421)
Other assets22,685 (13,688)
Other liabilities(24,896)(15,090)
Net cash provided by/(used in) operating activities132 (22,697)
INVESTING ACTIVITIES
Net increase in loans held for investment, at amortized cost(153,527)(176,062)
Net decrease in loans held for investment, at fair value201 326 
Purchase of investment securities available-for-sale(176,126)(1,029,857)
Proceeds, maturities, prepayments and calls of securities available-for-sale189,399 1,202,220 
Proceeds from sales of other real estate owned
810 — 
(Purchase of)/proceeds from Federal Home Loan Bank of Atlanta stock, net(473)6,827 
Other(2,988)(1,742)
Net cash (used in)/provided by investing activities(142,704)1,712 
FINANCING ACTIVITIES
Net increase in deposits360,293 192,649 
Proceeds from other borrowings— 550,000 
Repayments of other borrowings— (700,000)
Proceeds from exercise of stock options under employee stock plans— 372 
Shares withheld for tax withholding and exercise of stock options and restricted shares(300)(494)
Net cash provided by financing activities359,993 42,527 
Net increase in cash, cash equivalents and restricted cash217,421 21,542 
Beginning cash, cash equivalents and restricted cash648,715 1,179,982 
Ending cash, cash equivalents and restricted cash$866,136 $1,201,524 
F-64

FORBRIGHT, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows - (continued)
(Unaudited)
For the Three Months Ended
March 31,
(in thousands)20262025
Supplemental cash flow disclosures:
Interest payments$60,627 $57,936 
Income tax payments, net of refunds of $55 and $377, respectively
$47 $117 
Noncash investing activity:
Loans held-for-sale transferred to loans held for investment (at fair value)$151 $— 
Loans held for investment (at amortized cost) transferred to loans held-for-sale, net$48 $— 
F-65

FORBRIGHT, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
(Unaudited)
NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations
Forbright, Inc. (the “Parent”), a Delaware corporation, is a bank holding company that along with its subsidiaries (collectively the “Company”), is headquartered in Chevy Chase, Maryland. Forbright Bank (with its subsidiaries, the “Bank”), a wholly owned subsidiary of the Company, is a Maryland state chartered non-member bank, which serves the needs of individuals, small and medium sized businesses, and professional concerns. Nationwide, the Bank serves deposit and retail banking customers via its digital deposit platform and offers competitive financing and lending services, originating lender finance loans, fund finance loans, healthcare finance loans, real estate loans, working capital facilities, warehouse lines of credit, and term loans.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three months ended March 31, 2026, are not necessarily indicative of the results that may be expected for the year ending December 31, 2026. The Consolidated Balance Sheet as of December 31, 2025, has been derived from the audited Consolidated Financial Statements as of that date. For further information, refer to the Consolidated Financial Statements and footnotes thereto included in the Company’s Registration Statement on Form S-1.
Emerging Growth Company Status
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 ("JOBS Act"). Under the JOBS Act, emerging growth companies may delay adopting new or revised accounting standards until such time as those standards apply to private companies. The Company has elected to use this extended transition period for adoption of some accounting standards. As a result, these financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Significant Accounting Policies
There have been no material changes to the Company's significant accounting policies from those described in the annual consolidated financial statements and footnotes included in the Company's Registration Statement on Form S-1. The following policies are highlighted due to updates or activity during the three months ended March 31, 2026.
Concentrations of Credit Risk
The Company’s portfolio consists primarily of commercial loans to small and medium-sized, privately owned businesses in a variety of industries and markets. As of March 31, 2026, the single largest industry concentration in the Company’s loan portfolio was healthcare. The Company does not have any concentrations involving loan product terms. Additionally, the Company does not have concentrations of loans with negative amortization schedules, significant payment increases, or high loan-to-value ratios.
F-66

Segment Information
Operating segments are defined as components of an enterprise about which separate financial information is evaluated regularly by the Chief Operating Decision Maker (“CODM”), the Company’s Chief Executive Officer, in deciding how to allocate resources and assessing performance. During the three months ended March 31, 2026 and 2025, all operations were within the United States. The CODM allocates resources and assesses performance based upon financial information at the entity-wide level. Since the CODM makes operating decisions and allocates resources on an entity-wide basis, the Company operates as one operating segment and one reportable segment.
The primary financial measure used by the CODM to evaluate performance and allocate resources is consolidated net income as shown on the Consolidated Statements of Income. Segment expenses and other segment items are provided to the CODM on the same basis as disclosed in the Consolidated Statements of Income.
Advertising
Advertising costs are expensed as incurred and included in advertising and marketing in the Consolidated Statements of Income, and were $2.1 million and $2.6 million for the three months ended March 31, 2026 and 2025, respectively.
Income Taxes
The Company accounts for income taxes in accordance with ASC 740 - Income Taxes. The Company’s effective tax rate was 12.0% and 25.8% for the three months ended March 31, 2026 and 2025, respectively.
The income tax returns of the Company for 2022, 2023, and 2024 are subject to examination by income taxing authorities, generally for three years after they were filed. If the Company identifies an uncertain tax position, an accrual for the estimated tax is recognized in the period the potential tax is identified. The Company has elected to recognize any estimated penalties and interest expense on its income tax liabilities as a component of its provision for income taxes.
Stock-based Compensation
All the Company’s stock options and other equity-based compensation arrangements are classified as equity awards as of March 31, 2026 and December 31, 2025. See Note 14 – Stock-based Compensation for information on the Company’s stock-based compensation.
Subsequent Events
Management has considered material subsequent events, but determined none to exist, for disclosure and recognition through May 15, 2026, the date the Consolidated Financial Statements were available to be issued.
New Accounting Standards
Accounting Standard Adopted in 2025
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires the disclosure of disaggregated information about an entity’s income tax rate reconciliation as well as income taxes paid and income tax expense. The Company adopted the standard on January 1, 2025, on a prospective basis. The adoption did not have a material impact on the Company’s consolidated financial statements.
Accounting Standards Pending Adoption
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Topic 220): Disaggregation of Income Statement Expenses, which requires the disaggregated disclosure of certain income statement categories. The amendments are effective for fiscal years beginning after December 15, 2026, with early adoption permitted. The amendments should be applied either prospectively to financial statements issued for reporting periods after the effective date, or retrospectively to any or
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all prior periods presented in the financial statements. The Company is in the process of evaluating the impact of this pronouncement, but does not anticipate it having a material impact on its disclosures.
In September 2025, the FASB issued ASU 2025-06, Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which modernizes the rules for capitalizing internal-use software. The amendments are effective for fiscal years beginning after December 15, 2027, with early adoption permitted. The amendments can be applied using a prospective approach, a retrospective approach, or a modified approach that bases the adoption of the amendments on the completion status of the software project as of the adoption date. The Company is in the process of evaluating the impact of this pronouncement.
In November 2025, the FASB issued ASU 2025-08, Financial Instruments-Credit Losses (Topic 326): Purchased Loans, which provides targeted improvements to the accounting for purchased loans, including clarification on the recognition and measurement of credit losses for acquired financial assets. The amendments are effective for fiscal years beginning after December 15, 2026, with early adoption permitted. The amendments should be applied prospectively to loans acquired after the initial adoption date. The Company is in the process of evaluating the impact of this pronouncement.
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material, if any, impact on the Company’s consolidated financial statements.
NOTE 2 – CASH, CASH EQUIVALENTS AND RESTRICTED CASH
Regulation D of the Federal Reserve Act requires the Company to maintain reserve balances with the Federal Reserve Bank based principally on the type and amount of the Company’s deposits, however, in March 2020, the Federal Reserve Board took action to reduce the reserve requirement percentage to zero for all balances. Balances maintained with the Federal Reserve Bank are included in Interest-bearing deposits with banks in the Consolidated Balance Sheets.
The following schedule presents the composition of the Company’s cash, cash equivalents and restricted cash as of March 31, 2026 and December 31, 2025:
(in thousands)March 31, 2026December 31, 2025
Cash, due from banks and restricted cash:
Cash and due from banks$22,976 $16,040 
Restricted cash2,304 2,201 
Total cash, due from banks and restricted cash25,280 18,241 
Interest-bearing deposits with banks:
Interest-bearing deposits with the Federal Reserve Bank803,991 601,555 
Interest-bearing deposits with other banks36,865 28,919 
Total interest-bearing deposits with banks840,856 630,474 
Total cash, cash equivalents and restricted cash$866,136 $648,715 
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NOTE 3 – INVESTMENT SECURITIES
Investment Securities Available-For-Sale
Investment securities available-for-sale as of March 31, 2026 and December 31, 2025, consisted of the following securities:
March 31, 2026
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesAllowance for Credit LossesFair Value
U.S. Treasury and government agencies$774,865 $1,729 $(141)$— $776,453 
Commercial agency mortgage-backed
177,463 639 (1,881)— 176,221 
Residential agency mortgage-backed
266,044 336 (2,279)— 264,101 
Municipal bonds9,483 37 (1,022)— 8,498 
Other
10,958 — (632)— 10,326 
Total investment securities available-for-sale$1,238,813 $2,741 $(5,955)$— $1,235,599 
December 31, 2025
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesAllowance for Credit LossesFair Value
U.S. Treasury and government agencies$953,981 $4,366 $— $— $958,347 
Commercial agency mortgage-backed
135,588 1,004 (522)— 136,070 
Residential agency mortgage-backed
138,262 1,077 (262)— 139,077 
Municipal bonds9,485 46 (896)— 8,635 
Other
13,496 — (738)— 12,758 
Total investment securities available-for-sale$1,250,812 $6,493 $(2,418)$— $1,254,887 
The tables above exclude accrued interest receivables of $7.7 million and $13.4 million as of March 31, 2026 and December 31, 2025, respectively.
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Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations without penalties. The amortized cost and fair value of investment securities available-for-sale as of March 31, 2026 and December 31, 2025, by contractual maturity are presented in the following table:
March 31, 2026December 31, 2025
(in thousands)Amortized CostFair ValueAmortized CostFair Value
U.S. Treasury and government agencies:
One year or less$518,645 $519,561 $520,293 $521,605 
One to five years256,220 256,892 433,688 436,742 
Five to ten years— — — — 
After ten years— — — — 
Commercial agency mortgage-backed:
One year or less— — — — 
One to five years18,799 19,118 18,794 19,261 
Five to ten years13,379 13,539 13,396 13,612 
After ten years145,285 143,564 103,398 103,197 
Residential agency mortgage-backed:
One year or less— — — — 
One to five years89 87 109 107 
Five to ten years— — — — 
After ten years265,955 264,014 138,153 138,970 
Municipal bonds:
One year or less— — — — 
One to five years3,075 2,970 2,081 2,096 
Five to ten years— — 994 894 
After ten years6,408 5,528 6,410 5,645 
Other:
One year or less— — — — 
One to five years— — — — 
Five to ten years5,000 4,587 5,000 4,537 
After ten years5,958 5,739 8,496 8,221 
$1,238,813 $1,235,599 $1,250,812 $1,254,887 
During the three months ended March 31, 2026, the Company sold no investment securities available-for-sale. During the three months ended March 31, 2025, the Company sold thirteen investment securities available-for-sale with an aggregate cost basis of $1.2 billion and sales proceeds of $1.2 billion. The Company realized gross gains of $1.1 million and no gross losses on the sales. There were no transfers of investment securities from available-for-sale to held-to-maturity during the three months ended March 31, 2026 or 2025.
As of March 31, 2026 and December 31, 2025, the Company had no pledged available-for-sale securities to secure FHLB advances. There were no outstanding FHLB advances as of March 31, 2026 and December 31, 2025.
See Note 10 – Borrowed Funds for more information on the outstanding FHLB advances.
As of March 31, 2026 and December 31, 2025, there were no holdings of investment securities available-for-sale of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of stockholders’ equity.
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Information pertaining to investment securities available-for-sale with gross unrealized losses as of March 31, 2026 and December 31, 2025, aggregated by investment category and length of time that individual securities have been in a continuous loss position, are presented in the following tables:
March 31, 2026
12 Months or Less12 Months or MoreTotal
(in thousands)Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
U.S. Treasury and government agencies$100,680 $(141)$— $— $100,680 $(141)
Commercial agency mortgage-backed
114,661 (1,675)4,452 (206)119,113 (1,881)
Residential agency mortgage-backed
211,832 (2,184)684 (95)212,516 (2,279)
Municipal bonds1,909 (82)5,481 (940)7,390 (1,022)
Other
— — 10,295 (632)10,295 (632)
Total$429,082 $(4,082)$20,912 $(1,873)$449,994 $(5,955)
December 31, 2025
12 Months or Less12 Months or MoreTotal
(in thousands)Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
Commercial agency mortgage-backed59,754 (237)8,901 (285)68,655 (522)
Residential agency mortgage-backed49,759 (170)719 (92)50,478 (262)
Municipal bonds1,978 (13)5,541 (883)7,519 (896)
Other
93 — 12,666 (738)12,759 (738)
Total$111,584 $(420)$27,827 $(1,998)$139,411 $(2,418)
The Company individually evaluates its investment securities available-for-sale for credit losses. As of March 31, 2026 and December 31, 2025, the Company determined no portion of the unrealized losses on its investment securities available-for-sale was due to credit factors. Unrealized losses on investment securities available-for-sale due to factors other than credit are largely due to the nature of the investments. Therefore, no allowance for credit losses was recorded as of March 31, 2026 or December 31, 2025. Additionally, the Company has the intent and ability to hold its investment securities available-for-sale for a period of time sufficient to allow for any anticipated recovery.
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Investment Securities Held-to-Maturity
Investment securities held-to-maturity as of March 31, 2026 and December 31, 2025, consisted of the following securities:
March 31, 2026
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Municipal bonds$31,200 $2,817 $— $34,017 
Other
17,744 435 (3,130)15,049 
Total investment securities held-to-maturity$48,944 $3,252 $(3,130)$49,066 
Allowance for credit losses(110)
Total investment securities held-to-maturity, net of allowance for credit losses$48,834 
December 31, 2025
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Municipal bonds$31,200 $3,736 $— $34,936 
Other
17,744 482 (2,687)15,539 
Total investment securities held-to-maturity$48,944 $4,218 $(2,687)$50,475 
Allowance for credit losses(110)
Total investment securities held-to-maturity, net of allowance for credit losses$48,834 
The tables above exclude accrued interest receivables of $2.6 million and $1.7 million as of March 31, 2026 and December 31, 2025, respectively.
Expected maturities of investment securities held-to-maturity may differ from contractual maturities because issuers may have the right to call or prepay obligations without penalties. The amortized cost and fair value of investment securities held-to-maturity as of March 31, 2026 and December 31, 2025, by contractual maturity, are presented in the following table:
March 31, 2026December 31, 2025
(in thousands)Amortized CostFair ValueAmortized CostFair Value
Municipal bonds:
One year or less$— $— $— $— 
One to five years31,200 34,017 31,200 34,936 
Five to ten years— — — — 
After ten years— — — — 
Other:
One year or less— — — — 
One to five years— — — — 
Five to ten years— — — — 
After ten years17,744 15,049 17,744 15,539 
Total$48,944 $49,066 $48,944 $50,475 
As of March 31, 2026 and December 31, 2025, there were no investment securities held-to-maturity of any one issuer in an amount greater than 10% of stockholders’ equity.
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There were no sales of investment securities held-to-maturity or transfers of investment securities available-for-sale to investment securities held-to-maturity during the three months ended March 31, 2026 or 2025.
Information pertaining to investment securities held-to-maturity with gross unrealized losses as of March 31, 2026 and December 31, 2025, aggregated by investment category and length of time that individual securities have been in a continuous loss position, are presented in the following tables:
March 31, 2026
12 Months or Less
12 Months or More
Total
(in thousands)Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
Other
$109 $(1)$14,181 $(3,129)$14,290 $(3,130)
Total$109 $(1)$14,181 $(3,129)$14,290 $(3,130)
December 31, 2025
12 Months or Less12 Months or MoreTotal
(in thousands)Fair ValueGross Unrealized LossesFair ValueGross Unrealized LossesFair ValueGross Unrealized Losses
Other
$— $— $14,032 $(2,687)$14,032 $(2,687)
Total$— $— $14,032 $(2,687)$14,032 $(2,687)
The Company collectively evaluates its investment securities held-to-maturity for credit losses. As of March 31, 2026 and December 31, 2025, the Company recorded an allowance for credit losses on its investment securities held-to-maturity.
The following tables summarize the activity in the allowance for credit losses for investment securities held-to-maturity for the three months ended March 31, 2026 and 2025:
March 31, 2026
(in thousands)Municipal bonds
Other
Total
Balance at beginning of period$66 $44 $110 
Recovery of credit losses— — — 
Balance at end of period$66 $44 $110 
March 31, 2025
(in thousands)Municipal bonds
Other
Total
Balance at beginning of period$109 $52 $161 
Recovery of credit losses— — — 
Balance at end of period$109 $52 $161 
NOTE 4 – LOANS
The Company manages its exposure to credit losses by evaluating credit risk across its three loan categories: Commercial Real Estate; Commercial and Industrial; and Consumer. For descriptions of each loan category, refer to the annual Consolidated Financial Statements included in the Company’s Registration Statement on Form S-1.
Loans Held-for-Sale
As of March 31, 2026 and December 31, 2025, the Company had $407.6 million and $379.7 million of loans held-for-sale, respectively. The table below presents the proceeds received from the sales of loans held-for-sale, net realized gains and losses, and net unrealized gains and losses related to loans-held-for sale for the three months ended March 31, 2026 and 2025. Realized (losses)/gains, net are recognized in (Losses)/gains on sales of loans and
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investment securities, net in the Consolidated Statements of Income. Unrealized (losses)/gains, net related to loans held-for-sale are included with Unrealized (losses)/gains on loans and financing receivables, net in the Consolidated Statements of Income.
(in thousands)March 31, 2026March 31, 2025
Proceeds from sales$42,846 $58,773 
Realized (losses)/gains, net$(34)$632 
Unrealized (losses)/gains, net$(1,240)$1,095 
The following tables present, by loan category, the carrying amount and unpaid contractual balance of the Company’s loans held-for-sale as of March 31, 2026 and December 31, 2025:
March 31, 2026
Loans Held-for-Sale
at Fair Value		Loans Held-for-Sale
at Lower of Cost or Fair Value		Total Loans Held-for-Sale
(in thousands)Carrying AmountUnpaid Contractual BalanceCarrying AmountUnpaid Contractual BalanceCarrying AmountUnpaid Contractual Balance
Commercial and Industrial$57,817 $61,266 $349,777 $354,209 $407,594 $415,475 
Total loans held-for-sale$57,817 $61,266 $349,777 $354,209 $407,594 $415,475 
December 31, 2025
Loans Held-for-Sale
at Fair Value		Loans Held-for-Sale
at Lower of Cost or Fair Value		Total Loans Held-for-Sale
(in thousands)Carrying AmountUnpaid Contractual BalanceCarrying AmountUnpaid Contractual BalanceCarrying AmountUnpaid Contractual Balance
Commercial and Industrial$62,251 $65,281 $317,411 $321,295 $379,662 $386,576 
Total loans held-for-sale$62,251 $65,281 $317,411 $321,295 $379,662 $386,576 
Loans Held for Investment at Amortized Cost
Loans held for investment at amortized cost, by loan category, as of March 31, 2026 and December 31, 2025, are presented in the following table:
(in thousands)March 31, 2026December 31, 2025
Commercial Real Estate$2,679,872 $2,528,996 
Commercial and Industrial2,485,418 2,475,549 
Consumer211,247 217,689 
Total loans held for investment at amortized cost$5,376,537 $5,222,234 
Total outstanding loans held for investment at amortized cost are net of deferred fees and costs of $55.3 million and $54.7 million as of March 31, 2026 and December 31, 2025, respectively.
Total outstanding loans held for investment at amortized cost excludes accrued interest receivable of $32.0 million and $32.1 million as of March 31, 2026 and December 31, 2025, respectively.
Loans to Related Parties
From time to time, the Company has loan transactions with some of its officers, directors, and material investors, and their immediate family members and affiliated entities. There were no loans in the ordinary course of business due from related parties as of March 31, 2026 and December 31, 2025. See Note 18 – Related Party Transactions for more information.
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NOTE 5 – CREDIT QUALITY ASSESSMENT
Allowance for Credit Losses - Loans Held for Investment at Amortized Cost
For a description of the Company's accounting policy for the allowance for credit losses, refer to the annual Consolidated Financial Statements included in the Company's Registration Statement on Form S-1.
The following table summarizes the activity in the allowance for credit losses for loans held for investment at amortized cost for the three months ended March 31, 2026 and 2025:
(in thousands)March 31, 2026March 31, 2025
Beginning of period$52,986 $42,294 
Provision for credit losses on loans3,867 8,413 
Provision for credit losses on loan transfers from loans held-for-sale17 68 
Loan charge-offs(4,887)(4,433)
Loan recoveries811 526 
Net charge-offs(4,076)(3,907)
End of period$52,794 $46,868 
Loans held-for-sale and loans held for investment at fair value do not require an allowance because they are carried at fair value and therefore any changes to the cost basis in the loan are recognized in earnings, as unrealized gains or losses in non-interest income, in the period of the change.
The following tables detail activity in the allowance for credit losses for loans held for investment carried at amortized cost, by loan category, for the three months ended March 31, 2026 and 2025:
March 31, 2026
(dollars in thousands)Commercial Real Estate
Commercial and Industrial
ConsumerTotal
Allowance for credit losses:
Beginning of period$18,639$26,023$8,324$52,986
Provision for credit losses on loans9271,7831,1573,867
Provision for credit losses on loan transfers from loans held-for-sale—17—17
Loan charge-offs—(2,830)(2,057)(4,887)
Loan recoveries—542269811
Net charge-offs—(2,288)(1,788)(4,076)
End of period$19,566$25,535$7,693$52,794
Individually evaluated for credit loss$—$1,589$—$1,589
Collectively evaluated for credit loss19,56623,9467,69351,205
Total allowance for credit losses$19,566$25,535$7,693$52,794
Loans held for investment at amortized cost:
Individually evaluated for credit loss$150,643$17,821$2,304$170,768
Collectively evaluated for credit loss2,529,2292,467,597208,9435,205,769
Total loans held for investment at amortized cost$2,679,872$2,485,418$211,247$5,376,537
Allowance for loans to loan type ratio:
Individually evaluated for credit loss— %8.92 %— %0.93 %
Collectively evaluated for credit loss0.77 %0.97 %3.68 %0.98 %
Total loans held for investment at amortized cost0.73 %1.03 %3.64 %0.98 %
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March 31, 2025
(dollars in thousands)Commercial Real Estate
Commercial and Industrial
ConsumerTotal
Allowance for credit losses:
Beginning of period$12,078$19,380$10,836$42,294
Provision for credit losses on loans1,6796,0646708,413
Provision for credit losses on loan transfers from loans held-for-sale626—68
Loan charge-offs—(3,107)(1,326)(4,433)
Loan recoveries—210316526
Net charge-offs—(2,897)(1,010)(3,907)
End of period$13,819$22,553$10,496$46,868
Individually evaluated for credit loss$95$1,271$—$1,366
Collectively evaluated for credit loss13,72421,28210,49645,502
Total allowance for credit losses$13,819$22,553$10,496$46,868
Loans held for investment at amortized cost:
Individually evaluated for credit loss$95,138$68,890$1,900$165,928
Collectively evaluated for credit loss1,667,4972,065,368239,2493,972,114
Total loans held for investment at amortized cost$1,762,635$2,134,258$241,149$4,138,042
Allowance for loans to loan type ratio:
Individually evaluated for credit loss0.10 %1.84 %— %0.82 %
Collectively evaluated for credit loss0.82 %1.03 %4.39 %1.15 %
Total loans held for investment at amortized cost0.78 %1.06 %4.35 %1.13 %
Credit Quality
The Company uses an internal risk rating system as its primary credit quality indicator, applying ratings on a case-by-case basis for commercial loans and on a collective basis for consumer loans. For a description of the Company's credit quality indicators, refer to the annual Consolidated Financial Statements included in the Company's Registration Statement on Form S-1.
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Loans Held for Investment at Amortized Cost
The following tables present by class, credit quality and year of origination, the recorded investment in the Company’s loans held for investment at amortized cost as of and for the three months ended March 31, 2026 and as of and for the year ended December 31, 2025:
March 31, 2026
Loans Held for Investment at Amortized Cost by Year of Origination
(in thousands)20262025202420232022PriorRevolving LoansRevolving Loans Converted to TermTotal
Commercial Real Estate:
Acceptable risk (or better)$230,457 $1,159,506 $282,668 $56,724 $205,721 $287,966 $978 $— $2,224,020 
Higher risk32,825 45,601 54,692 — 124,278 77,274 — — 334,670 
Special mention— — — — — — — — — 
Substandard— — 47,524 — 46,796 26,862 — — 121,182 
Doubtful— — — — — — — — — 
Total$263,282 $1,205,107 $384,884 $56,724 $376,795 $392,102 $978 $— $2,679,872 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial and Industrial:
Acceptable risk (or better)$94,245 $139,018 $164,492 $47,739 $113,691 $17,126 $1,786,046 $29,864 $2,392,221 
Higher risk147 145 1,762 — 21,432 238 13,440 — 37,164 
Special mention— — 59 — — 1 38,289 — 38,349 
Substandard— — — 12,515 858 456 853 — 14,682 
Doubtful— 1,399 1,603 — — — — — 3,002 
Total$94,392 $140,562 $167,916 $60,254 $135,981 $17,821 $1,838,628 $29,864 $2,485,418 
Gross charge-offs$— $— $935 $— $1,825 $70 $— $— $2,830 
Consumer:
Acceptable risk (or better)$— $— $— $235 $57,624 $138,067 $5,792 $— $201,718 
Higher risk— — — — 177 4,545 3,137 — 7,859 
Special mention— — — — — — — — — 
Substandard— — — — 693 977 — — 1,670 
Doubtful— — — — — — — — — 
Total$— $— $— $235 $58,494 $143,589 $8,929 $— $211,247 
Gross charge-offs$— $— $— $— $787 $1,270 $— $— $2,057 
Total loans$357,674 $1,345,669 $552,800 $117,213 $571,270 $553,512 $1,848,535 $29,864 $5,376,537 
Total gross charge-offs$— $— $935 $— $2,612 $1,340 $— $— $4,887 
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December 31, 2025
Loans Held for Investment at Amortized Cost by Year of Origination
(in thousands)20252024202320222021PriorRevolving LoansRevolving Loans Converted to TermTotal
Commercial Real Estate:
Acceptable risk (or better)$1,226,416 $284,180 $56,976 $238,490 $174,345 $94,808 $— $— $2,075,215 
Higher risk— 101,977 — 136,724 130,391 16,425 982 — 386,499 
Special mention— — — — — — — — — 
Substandard— — — 40,420 26,862 — — — 67,282 
Doubtful— — — — — — — — — 
Total$1,226,416 $386,157 $56,976 $415,634 $331,598 $111,233 $982 $— $2,528,996 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial and Industrial:
Acceptable risk (or better)$205,677 $173,813 $53,566 $123,425 $17,225 $888 $1,825,313 $— $2,399,907 
Higher risk144 139 — 21,312 519 — 33,000 — 55,114 
Special mention— — — — 1 — — — 1 
Substandard1,431 — 12,452 701 486 2,136 781 — 17,987 
Doubtful— 2,540 — — — — — — 2,540 
Total$207,252 $176,492 $66,018 $145,438 $18,231 $3,024 $1,859,094 $— $2,475,549 
Gross charge-offs$— $1,632 $171 $5,493 $78 $— $— $— $7,374 
Consumer:
Acceptable risk (or better)$— $1,243 $483 $60,909 $131,188 $16,681 $— $— $210,504 
Higher risk— — — 178 249 4,901 — — 5,328 
Special mention— — — — — — — — — 
Substandard— — — 665 977 215 — — 1,857 
Doubtful— — — — — — — — — 
Total$— $1,243 $483 $61,752 $132,414 $21,797 $— $— $217,689 
Gross charge-offs$— $— $— $3,063 $4,907 $70 $— $— $8,040 
Total loans$1,433,668 $563,892 $123,477 $622,824 $482,243 $136,054 $1,860,076 $— $5,222,234 
Total gross charge-offs$— $1,632 $171 $8,556 $4,985 $70 $— $— $15,414 
The following tables present information on loans held for investment at amortized cost on non-accrual status and loans 90 days or more past due and still accruing as of March 31, 2026 and December 31, 2025:
March 31, 2026
(in thousands)Commercial Real EstateCommercial and IndustrialConsumerTotal
Loans 90 days or more past due and still accruing$— $1,762 $— $1,762 
Non-accrual loans with no allowance for credit losses$60,845 $466 $1,670 $62,981 
Non-accrual loans$66,804 $4,112 $1,670 $72,586 
Contractual Interest Income on Non-accrual Loans while on Non-accrual Status$3,586 $764 $1,503 $5,853 
December 31, 2025
(in thousands)Commercial Real EstateCommercial and IndustrialConsumerTotal
Loans 90 days or more past due and still accruing$— $— $— $— 
Non-accrual loans with no allowance for credit losses$60,361 $116 $1,857 $62,334 
Non-accrual loans$60,361 $5,484 $1,857 $67,702 
Contractual Interest Income on Non-accrual Loans while on Non-accrual Status$4,812 $916 $1,663 $7,391 
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No interest income was recognized on non-accrual loans while on non-accrual status for the three months ended March 31, 2026 and 2025. At the time a loan is designated as non-accrual, the Company reverses any related accrued interest from interest income. During the three months ended March 31, 2026 and 2025, the Company reversed $266 thousand and $892 thousand, respectively, of accrued interest from interest income related to loans designated as non-accrual.
The following tables present by class, an aging analysis and the recorded investments in past due loans, excluding non-accrual loans, held for investment at amortized cost as of March 31, 2026 and December 31, 2025:
March 31, 2026
(in thousands)Commercial Real EstateCommercial and IndustrialConsumerTotal
Past due loans:
30 - 59 days past due$— $19,140 $3,077 $22,217 
60 - 89 days past due9,622 238 938 10,798 
90 or more days past due— 1,762 — 1,762 
Total past due loans9,622 21,140 4,015 34,777 
Current loans2,603,446 2,460,166 205,562 5,269,174 
Total$2,613,068 $2,481,306 $209,577 $5,303,951 
December 31, 2025
(in thousands)Commercial Real EstateCommercial and IndustrialConsumerTotal
Past due loans:
30 - 59 days past due$32,412 $42,487 $2,297 $77,196 
60 - 89 days past due— 122 1,092 1,214 
90 or more days past due— — — — 
Total past due loans32,412 42,609 3,389 78,410 
Current loans2,436,223 2,427,456 212,443 5,076,122 
Total$2,468,635 $2,470,065 $215,832 $5,154,532 
The following tables present by class and by collateral type, the recorded investment of collateral-dependent loans where the borrower is experiencing financial difficulty as of March 31, 2026 and December 31, 2025, for which repayment is expected to be provided substantially through the operation or sale of the collateral:
March 31, 2026
(in thousands)Commercial Real EstateConsumerTotal
Collateral type:
Real estate$55,938 $181 $56,119 
Total$55,938 $181 $56,119 
December 31, 2025
(in thousands)Commercial Real EstateConsumerTotal
Collateral type:
Real estate$49,494 $188 $49,682 
Total$49,494 $188 $49,682 
There were no loans that were both modified and experiencing financial difficulty during the three months ended March 31, 2026. The following tables present by class and by type of modification, the recorded investment
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and financial effect of modification as of March 31, 2025, in the Company’s loans that were both modified and experiencing financial difficulty during the three months ended March 31, 2025:
March 31, 2025
(dollars in thousands)Term ExtensionTotalModification to Loan Class RatioWeighted-Average
Term Extension
Commercial and Industrial$141 $141 0.01 %12.0 months
Total$141 $141 
As of March 31, 2025, there were no unfunded loan commitments on modifications for borrowers experiencing financial difficulty.
The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. As of March 31, 2025, all loans that were modified to borrowers experiencing financial difficulty during the three months ended March 31, 2025, were current.
There were no payment defaults during the three months ended March 31, 2026 and 2025, on loans to borrowers experiencing financial difficulty which had been modified in the twelve months prior to March 31, 2026 and 2025, respectively.
Other Real Estate Owned
The following table presents by class the recorded investment in the Company’s other real estate owned assets at fair value for the three months ended March 31, 2026 and 2025:
(in thousands)March 31, 2026March 31, 2025
Balance at beginning of period$8,729 $25,476 
Improvements— 600 
Sales(876)— 
Valuation adjustments(744)— 
Balance at end of period$7,109 $26,076 
During the three months ended March 31, 2026, the Company sold a portion of one of its other real estate owned assets with a carrying value of $876 thousand for proceeds of $810 thousand resulting in a loss of $66 thousand, which is included in Other non-interest income in the Consolidated Statements of Income. There were no sales of other real estate owned assets during three months ended March 31, 2025.
There were no transfers into other real estate owned assets during the three months ended March 31, 2026 or 2025.
During the three months ended March 31, 2026 and 2025, the Company incurred a non-material amount of expense related to holding other real estate owned assets, which is included in Other non-interest expense in the Consolidated Statements of Income. Subsequent to foreclosure, the Company determined the fair values of certain of its other real estate owned assets had declined during the three months ended March 31, 2026, at which time the Company recorded a valuation adjustment, which is included in Other non-interest income in the Consolidated Statements of Income. Other real estate owned assets were $7.1 million and $8.7 million as of March 31, 2026 and December 31, 2025, respectively, and are included with Other assets in the Consolidated Balance Sheets.
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NOTE 6 – OTHER EARNING ASSETS
Financing Receivables Held for Investment at Amortized Cost
As of March 31, 2026 and December 31, 2025, the Company had $37.1 million and $42.8 million, respectively, of financing receivables held for investment, at amortized cost, and net of allowance for credit losses, which are included with Other earning assets in the Consolidated Balance Sheets. Total outstanding financing receivables held for investment, at amortized cost, are net of direct funding related income, net of costs, of $182 thousand and $180 thousand as of March 31, 2026 and December 31, 2025, respectively.
The following table summarizes the activity in the allowance for credit losses for financing receivables held for investment, at amortized cost, for the three months ended March 31, 2026 and 2025:
(in thousands)March 31, 2026March 31, 2025
Balance at beginning of period$108 $74 
Recovery of credit losses(15)— 
Balance at end of period$93 $74 
Equity Investments
The Company holds equity investments for various business purposes. As of March 31, 2026 and December 31, 2025, the Company had $13.6 million and $13.1 million, respectively, of equity investments, which are included with Other earning assets in the Consolidated Balance Sheets.
NOTE 7 – GOODWILL AND OTHER INTANGIBLE ASSETS
The following tables summarize the gross carrying amount and accumulated amortization, by type of amortizing other intangible asset, and the carrying amount of non-amortizing other intangible assets and goodwill, which are included in Goodwill and other intangible assets, net in the Consolidated Balance Sheets, as of March 31, 2026 and December 31, 2025:
March 31, 2026
(dollars in thousands)Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Amortizing intangible assets:
Core deposit intangible$1,491 $(1,491)$— 
Customer relationship intangibles18,742 (7,973)10,769 
Other399 (399)— 
Total amortizing intangible assets$20,632 $(9,863)$10,769 
Indefinite life intangible asset2,114 
Total intangible assets12,883 
Goodwill18,519 
Total goodwill and intangible assets, net$31,402 
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December 31, 2025
(dollars in thousands)Gross Carrying AmountAccumulated AmortizationNet Carrying Amount
Amortizing intangible assets:
Core deposit intangible$1,491 $(1,491)$— 
Customer relationship intangibles18,742 (7,690)11,052 
Other399 (399)— 
Total amortizing intangible assets$20,632 $(9,580)$11,052 
Indefinite life intangible asset2,114 
Total intangible assets13,166 
Goodwill18,519 
Total goodwill and intangible assets, net$31,685 
The following table presents the estimated future amortization expense for amortizing intangible assets, which is included in Other non-interest expense in the Consolidated Statements of Income, as of March 31, 2026:
(in thousands)Amount
Remaining 2026$849 
20271,132 
20281,132 
20291,132 
2030807 
Thereafter5,717 
Total amortizing intangible assets$10,769 
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NOTE 8 – LEASES
The Company has nine leases, all of which are currently classified as operating. The Company’s locations are deposit production offices, branches, and corporate office space, mostly located in the Washington, DC metro area. The headquarters lease, located in Chevy Chase, Maryland is considered to be critical to the Company’s operations. Some lease agreements include one or more options to renew, with renewal terms that can extend the original lease term from three to ten years. The Company currently does not believe it is reasonably certain it will exercise the renewal options for its leases, and therefore, the lease terms do not reflect any optional periods.
The following table provides information regarding the Company’s leases for the three months ended March 31, 2026 and 2025:
(in thousands)March 31, 2026March 31, 2025
Components of operating lease expense:
Long-term lease expense$747$941
Short-term lease expense$40$19
Supplemental cash flow information related to leases:
Operating cash flows from operating leases$882$939
The following table provides information regarding the Company’s leases as of March 31, 2026 and December 31, 2025:
(dollars in thousands)March 31, 2026December 31, 2025
Supplemental balance sheet information related to leases:
Operating lease right-of-use assets$15,067$15,691
Operating lease liabilities$19,318$20,077
Other information related to leases:
Weighted-average remaining lease term of operating leases6.0 years6.2 years
Weighted-average discount rate of operating leases2.56 %2.60 %
The following table presents the maturities of the Company’s operating lease liabilities as of March 31, 2026, for the years indicated:
(in thousands)Amount
Remaining 2026$2,559 
20273,447 
20283,535 
20293,576 
20303,634 
Thereafter4,122 
Total minimum lease payments20,873 
Less: present value discount(1,555)
Operating lease liability$19,318 
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NOTE 9 – DEPOSITS
Deposit balances as of March 31, 2026 and December 31, 2025, are presented in the following table:
(in thousands)March 31, 2026December 31, 2025
Non-interest-bearing deposits
$473,153 $372,444 
Interest-bearing deposits:
Demand287,356 275,259 
Money market1,424,548 1,206,544 
Savings3,607,617 3,500,532 
Time deposits less than $250 thousand1,194,639 1,242,892 
Time deposits greater than $250 thousand150,895 180,244 
Total interest-bearing deposits6,665,055 6,405,471 
Total deposits$7,138,208 $6,777,915 
As of March 31, 2026 and December 31, 2025, $9 thousand and $14 thousand, respectively, of demand deposit overdrafts were reclassified to loans. The related charge-offs and recoveries, if any, are reflected in the allowance for credit losses - loans.
The following table presents the maturities of time deposits as of March 31, 2026, for the years indicated:
(in thousands)Amount
Remaining 2026$752,555 
2027345,359 
2028110,325 
2029111,909 
203025,371 
Thereafter15 
Total time deposits$1,345,534 
The Company’s time deposits of $250 thousand or greater represented 11.2% of total time deposits as of March 31, 2026, and are presented by maturity in the following table:
Months to Maturity
(in thousands)3 or LessOver 3 to 6Over 6 to 12Over 12Total
Time deposits greater than $250 thousand$62,908 $21,622 $63,056 $3,309 $150,895 
Deposits received in the ordinary course of business from related parties held as of March 31, 2026 and December 31, 2025, were $6.7 million and $5.2 million, respectively. See Note 18 – Related Party Transactions for more information.
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NOTE 10 – BORROWED FUNDS
Subordinated Debt
The following table provides information on subordinated debt as of March 31, 2026 and December 31, 2025:
(dollars in thousands)March 31, 2026December 31, 2025
2019 Notes, due in 2029 (1)
25,000 25,000 
2021 Notes, due in 2032, 4.00%
125,000 125,000 
Other subordinated debt, due in 2033 (2)
3,000 3,000 
Less: debt issuance costs and discounts
(1,908)(1,997)
Total subordinated debt$151,092 $151,003 
__________________
(1)Borrowings bore interest at an effective rate of 8.06% and 8.18% as of March 31, 2026 and December 31, 2025, respectively.
(2)Borrowings bore interest at an effective rate of 7.23% and 7.47% as of March 31, 2026 and December 31, 2025, respectively.
Other Borrowed Funds
As of March 31, 2026, the Company had a credit line with the FHLB (“FHLB Credit Line”) with a maximum borrowing capacity of $5.8 million, with no of borrowings outstanding and a remaining borrowing capacity of $5.8 million. In order to borrow under the FHLB Credit Line, the Company must secure the borrowings with qualifying assets. Under the terms of the FHLB Credit Line, the Company is required to maintain sufficient collateral to secure these borrowings. As of March 31, 2026, the Company pledged eligible 1-4 family first mortgages with a book value of $5.8 million, and eligible home equity loans with a book value of $3.0 million to secure borrowings under the FHLB Credit Line. The total collateral value assigned by the FHLB for these pledged investments and loans was $5.8 million.
As of March 31, 2026, the Company had a credit line with the Federal Reserve Bank (“FRB Credit Line”) with a maximum borrowing capacity of $3.5 billion. As of March 31, 2026, there were no borrowings outstanding under the FRB Credit Line. In order to borrow under the FRB Credit Line, the Company must maintain sufficient loan collateral. As of March 31, 2026, the Company pledged commercial real estate loans with a book value of $1.7 billion, commercial and industrial loans with a book value of $1.9 billion, construction loans with a book value of $182.9 million and multi-family loans with a book value of $88.5 million to facilitate future transactions. The total collateral value assigned by the Federal Reserve Bank for these pledged loans was $3.5 billion.
The Company maintains unsecured Fed Funds facilities with three other financial institutions in the aggregate amount of $90.0 million. As of March 31, 2026 and December 31, 2025, there were no borrowings outstanding under these facilities. The Company periodically borrows on its Fed Funds facilities to test its borrowing capabilities and keep the funds available.
NOTE 11 – STOCKHOLDERS' EQUITY
The Company’s Articles of Incorporation authorizes 108,200,000 shares of stock, consisting of 51,600,000 shares of Voting Common Stock, par value $0.001 per share (“Voting Common Stock”) and 51,600,000 shares of Non-Voting Common Stock, par value $0.001 per share (“Non-Voting Common Stock” and, together with the Voting Common Stock, “common stock”) 5,000,000 shares of preferred stock, par value $0.001 (“Preferred Stock”).
As of March 31, 2026, the Company had 19,605,006 shares of Voting Common Stock, 21,242,551 shares of Non-Voting Common Stock, and no shares of Preferred Stock issued and outstanding.
Certain shares of common stock issued and outstanding include unvested restricted stock awards granted to employees and directors. These restricted shares are legally issued and carry voting rights equivalent to vested shares of common stock, notwithstanding that such shares are subject to forfeiture until vesting conditions are satisfied. While these shares are considered legally outstanding and included within common stock outstanding, these shares are excluded from basic earnings per share and will be included within the diluted earnings per share
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calculation. See Note 14 – Stock-based Compensation and Note 17 – Earnings Per Common Share for more information.
NOTE 12 – ACCUMULATED OTHER COMPREHENSIVE (LOSS)/INCOME
The Company’s Accumulated other comprehensive (loss)/income is comprised of unrealized gains and losses associated with investment securities available for-sale. Gains and losses on investment securities available-for-sale are reclassified to earnings as the gains or losses are realized.
The following table presents the activity in Accumulated other comprehensive (loss)/income for the three months ended March 31, 2026 and 2025:
(in thousands)TotalTax EffectNet
Investment securities available-for-sale:
Balance as of December 31, 2025
$4,075 $(1,051)$3,024 
Unrealized losses, net(7,289)1,885 (5,404)
Balance as of March 31, 2026
$(3,214)$834 $(2,380)
Balance as of December 31, 2024
$(596)$153 $(443)
Unrealized gains, net2,959 (747)2,212 
Reclassification of net gains on investments available-for-sale to earnings(1,194)301 (893)
Balance as of March 31, 2025
$1,169 $(293)$876 
NOTE 13 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK, COMMITMENTS AND CONTINGENCIES
In the normal course of business, the Company enters into commitments to extend credit and standby letters of credit to meet the financing needs of its customers. For a description of the Company's accounting policy for off-balance sheet instruments, refer to the annual Consolidated Financial Statements included in the Company's Registration Statement on Form S-1.
A summary of the net commitment available to fund financial instruments with off-balance sheet credit risk as of March 31, 2026 and December 31, 2025 is as follows:
(in thousands)March 31, 2026December 31, 2025
Commercial real estate development and construction$221,707 $179,439 
Residential real estate development and construction— 682 
Lines of credit, primarily business lines863,360 606,921 
Standby letters of credit7,179 20,195 
Total commitments to extend credit and available lines of credit$1,092,246 $807,237 
As of March 31, 2026 and December 31, 2025, the total reserve for unfunded commitments was $2.3 million and $2.7 million, respectively, which is included in Other liabilities in the Consolidated Balance Sheets. The Company recognized a recovery of credit losses of $396 thousand and $22 thousand for the three months ended March 31, 2026 and 2025, respectively. The recovery of credit losses is included in Provision for credit losses in the Consolidated Statements of Income.
The Company is involved in various legal actions arising in the ordinary course of business. The Company’s evaluation has resulted in none being expected to result in a loss contingency.
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NOTE 14 – STOCK-BASED COMPENSATION
As of March 31, 2026, the Company had a stock-based compensation plan, the 2014 Plan, which was adopted on June 25, 2014. In February 2026, the 2014 Plan was amended to make available an additional 1,000,000 shares of Voting Common Stock in stock-based awards, including restricted stock awards and stock options, to its employees and directors. The Company believes that such awards better align the interests of its employees with those of its stockholders. As of March 31, 2026, total shares of Voting Common Stock authorized under the 2014 Plan were 12,500,000. For a description of the 2014 Plan's terms, refer to the annual Consolidated Financial Statements included in the Company's Registration Statement on Form S-1.
As of March 31, 2026, there were 1,355,329 shares remaining to be issued under the 2014 Plan. Compensation expense is recognized using the graded method over the vesting period of the stock option or restricted stock award granted. During the three months ended March 31, 2026 and 2025, expense of $2.8 million and $2.1 million, respectively, was recognized associated with stock options and restricted stock awards.
Stock Options
Stock option awards are granted with an exercise price equal to the fair value of the Company’s Voting Common Stock at the date of grant; those option awards vest based on five years of continuous service and have 10-year contractual terms. Certain option and share awards provide for accelerated vesting if there is a change in control. Stock options issued can require meeting certain performance criteria prior to exercise.
The fair values of the options granted during the three months ended March 31, 2026, were determined based on Black-Scholes option-pricing model using the following assumptions:
March 31, 2026
Black-Scholes
Volatility
45%
Expected dividend yield
—%
Expected term
6.5 years
Risk-free rate
3.89%
The fair values of options granted during the three months ended March 31, 2025, were determined using the Black-Scholes option-pricing model. For option series that are subject to exercise conditions in addition to the grant date exercise price, the Black-Scholes option pricing model was used in conjunction with (i) a Monte Carlo Simulation model for determining stock price values and (ii) probability weights for scenarios where the Company either remains independent or is acquired. The description of the exercise conditions that apply to certain series of options is more fully described in the 2014 Plan. The following table presents the assumptions used to determine the fair value of the options granted during the three months ended March 31, 2025:
March 31, 2025
Black-ScholesMonte Carlo
Volatility
40%
40%
Expected dividend yield
—%
—%
Expected term
6.5 years
2.25 - 10.0 years
Risk-free rate
4.46%
4.25% - 4.58%
An active market for the Company’s common stock does not exist, therefore the expected volatility is based on the average annual historical volatility of common stock for comparable public banks in the banking industry. The estimated option life is derived from the “simplified method” formula. The risk-free rate is based upon the U.S. Treasury note rate in effect at the time of grant. The expected dividend yield is based upon implied and historical dividend declarations.
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A summary of the activity of options outstanding activity for the three months ended March 31, 2026, is presented in the following table:
(dollars in thousands, except per share amounts)
SharesWeighted-Average Exercise PriceWeighted-Average Remaining Contractual Term
Aggregate Intrinsic Value
Outstanding as of December 31, 2025
9,809,692 $14.61 
5.6 years
$54,150 
Granted85,000 $20.13 
Outstanding as of March 31, 2026
9,894,692 $14.82 5.4 years$52,577 
Exercisable as of March 31, 2026
5,888,126 $15.18 5.2 years$29,171 
Of the 9,894,692 outstanding option shares, 2,325,336 option shares with a weighted average exercise price of $12.97 are subject to conditions with respect to stock price levels that must be satisfied to exercise the options, as more fully described in the 2014 Plan.
A summary of the activity of unvested stock options activity for the three months ended March 31, 2026, is presented in the following table:
SharesWeighted-Average Grant-Date Fair Value
Unvested as of December 31, 2025
2,233,040 $4.49 
Granted85,000 $10.17 
Vested(135,500)$4.92 
Unvested as of March 31, 2026
2,182,540 $4.69 
The total fair value of stock options vested during the three months ended March 31, 2026 and 2025, was $716 thousand and $740 thousand, respectively. As of March 31, 2026, there was $2.5 million of unrecognized compensation cost related to stock options granted under the 2014 Plan, and is expected to be recognized over a weighted-average period of 2.1 years.
Restricted Stock Awards
The Company granted 181,860 restricted stock awards during the three months ended March 31, 2026. The restricted stock awards granted during the three months ended March 31, 2026 vest over three years.
The following table summarizes the unvested restricted stock awards activity for the three months ended March 31, 2026:
SharesWeighted-Average Grant-Date Fair Value
Balance as of December 31, 2025
396,022 $16.76 
Granted181,860 $20.13 
Vested(91,532)$16.78 
Balance as of March 31, 2026
486,350 $18.02 
As of March 31, 2026, there was $6.5 million of unrecognized compensation cost related to unvested restricted stock awards granted under the 2014 Plan, which is expected to be recognized over a weighted-average period of 2.1 years.
F-88

NOTE 15 – EMPLOYEE BENEFIT PLANS
As of March 31, 2026, the Company had The 401(k) Plan, Adopted by Forbright Bank (“401(k) Plan”), a multiple employer plan covering all full-time and part-time employees. Employees become eligible to participate in the 401(k) Plan on the first day of the month that is 30 days after their hire date. Under the 401(k) Plan, a participant may elect to contribute up to 80% of their compensation to the extent the total dollar amount is permitted by law. Under the terms of the 401(k) Plan, the Company will make a matching contribution of 100% up to 4% of employee compensation. Both employee contributions and employer matching contributions vest immediately. During the three months ended March 31, 2026 and 2025, the Company made matching contributions of $0.7 million and $0.7 million, respectively. The Company may also make discretionary contributions for each participant. The amount of discretionary contribution, if any, is determined on an annual basis by the Company’s Board of Directors. No discretionary contributions were made by the Company during the three months ended March 31, 2026 and 2025.
NOTE 16 – OTHER NON-INTEREST INCOME AND NON-INTEREST EXPENSE
The following tables present selected components of other non-interest income and other non-interest expense for the three months ended March 31, 2026 and 2025:
(in thousands)March 31, 2026March 31, 2025
Trust administration$4,264 $— 
Net fee on FHA/HUD originations
266 3,259 
Program fees
592 996 
Deposit fees
304 256 
Other non-interest income(756)98 
Total other non-interest income$4,670 $4,609 
(in thousands)March 31, 2026March 31, 2025
Occupancy expense
$1,122 $1,332 
Referral fees360 465 
Other non-interest expense2,639 2,360 
Total other non-interest expense$4,121 $4,157 
NOTE 17 – EARNINGS PER COMMON SHARE
The following table presents the calculation of basic and diluted earnings per share for the three months ended March 31, 2026 and 2025:
March 31, 2026March 31, 2025
(in thousands, except share and per share data)
VotingNon-VotingVoting
Non-Voting
Basic Earnings Per Common Share:
Net income
$5,490 $6,142 $5,251 $5,876 
Weighted-average shares - basic
19,063,817 21,242,551 18,986,447 21,242,551 
Basic earnings per common share
$0.29 $0.29 $0.28 $0.28 
Diluted Earnings Per Common Share:
Net income
$5,809 $5,823 $5,434 $5,693 
Weighted-average shares - basic19,063,817 21,242,551 18,986,447 21,242,551 
Effect of dilutive securities - stock options and restricted stock awards2,124,875 — 1,287,431 — 
Weighted-average shares - diluted
21,188,692 21,242,551 20,273,878 21,242,551 
Diluted earnings per common share
$0.27 $0.27 $0.27 $0.27 
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The Company has two classes of common stock, Voting and Non-voting, which are participating securities. Earnings are allocated to each class based on their respective participation rights, and basic and diluted earnings per share are presented under the two-class method in accordance with ASC 260. All potentially dilutive shares have voting rights, and net income has been reallocated to reflect the incremental dilutive voting shares.
Diluted weighted-average shares outstanding includes 2,124,875 and 1,287,431 incremental common stock equivalents related to stock options and restricted stock awards as calculated under the treasury-stock method for the three months ended March 31, 2026 and 2025, respectively, as the stock options and restricted stock awards are not considered participating securities. For the three months ended March 31, 2026 and 2025, 18,894 shares and 21,063 shares, respectively, of common stock equivalents were excluded from the calculation of diluted earnings per share because their inclusion would have been anti-dilutive. Additionally, for the three months ended March 31, 2026 and 2025, 2,325,336 stock options and 2,289,136 stock options, respectively, with unresolved substantive contingencies that must be satisfied before shares can be exercised and issued, and therefore do not represent potential shares of common stock, have been excluded from the weighted-average shares outstanding to calculate basic and diluted earnings per common share. As of March 31, 2026 and 2025, 486,350 shares and 386,522 shares, respectively, of unvested restricted stock awards with voting rights are included in outstanding shares of common stock on the Consolidated Statements of Changes in Stockholders’ Equity, but are excluded from the calculation of basic earnings per share.
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NOTE 18 – RELATED PARTY TRANSACTIONS
In the ordinary course of business, the Company may make loans to and receive deposits from related parties, which primarily includes principal officers and directors, and their affiliates. The Company had no loans outstanding to related parties as of March 31, 2026 and December 31, 2025. The aggregate amounts of deposits from related parties as of March 31, 2026 and December 31, 2025, was $6.7 million and $5.2 million, respectively. For more information on the activity of loans and deposits with related parties see Note 4 – Loans and Note 9 – Deposits, respectively.
The Company has a related party relationship with BancAlliance because certain employees of the Company also hold officer roles with BancAlliance, and a subsidiary of the Company serves as the asset manager of BancAlliance members. The Company sources loans for its own balance sheet and makes those loans available for sale through the BancAlliance program. Loans sold to BancAlliance are immediately sold to members in the program with terms of loan sales, including pricing, dictated by a Master Participation Agreement for the program that applies the same to all members of BancAlliance. BancAlliance is a pass-through participant and does not incur an economic or accounting impact from the program.
Transactions with BancAlliance for the three months ended March 31, 2026 and 2025, and amounts due from BancAlliance as of March 31, 2026 and December 31, 2025, are presented in the following table:
For the Three Months Ended
(in thousands)March 31, 2026March 31, 2025
Loans sold to BancAlliance$36,276 $53,273 
Net gains realized on loans sold to BancAlliance$226 $393 
As of
March 31, 2026December 31, 2025
Amounts due from BancAlliance related to funding and expense advancements$1,478 $6,035 
In the ordinary course of business, the Company incurs expenses from transactions with vendors who are considered related parties. These transactions resulted in a non-material amount of expense for the three months ended March 31, 2026 and 2025.
NOTE 19 – REGULATORY MATTERS
The Company and the Bank are subject to regulatory capital requirements administered by federal and state banking agencies. As of March 31, 2026 and December 31, 2025, each of the Company and the Bank qualified as a community banking organization under the community bank leverage ratio ("CBLR") framework and elected to measure capital adequacy under that framework. For a description of the CBLR framework and applicable capital requirements, refer to the annual Consolidated Financial Statements included in the Company's Registration Statement on Form S-1.
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The following table presents as of March 31, 2026 and December 31, 2025, the Company’s and the Bank’s actual and required capital amounts and leverage ratios. The table also includes the actual amounts and risk-weighted ratios, which the Company has opted to disclose as of March 31, 2026 and December 31, 2025, although they are not required under the CBLR framework:
ActualTo Be Well Capitalized Under Prompt Corrective Action Provisions
(CBLR Framework)
(dollars in thousands)AmountRatioAmountRatio
As of March 31, 2026:
Required under CBLR framework:
Tier 1 leverage ratio:
Company$702,893 8.92 %$709,386 9.00 %
Bank$805,006 10.19 %$711,015 9.00 %
Optional under CBLR framework:
Total capital to risk-weighted assets ratio:
Company$899,369 14.68 %N/AN/A
Bank$860,274 14.01 %N/AN/A
Tier 1 capital to risk-weighted assets ratio:
Company$702,893 11.47 %N/AN/A
Bank$805,006 13.11 %N/AN/A
Common Equity Tier 1 to risk weighted-assets ratio:
Company$702,893 11.47 %N/AN/A
Bank$805,006 13.11 %N/AN/A
As of December 31, 2025:
Required under CBLR framework:
Tier 1 leverage ratio:
Company$748,650 9.79 %$688,367 9.00 %
Bank$848,960 11.11 %$687,907 9.00 %
Optional under CBLR framework:
Total capital to risk-weighted assets ratio:
Company$934,965 15.89 %N/AN/A
Bank$894,305 15.14 %N/AN/A
Tier 1 capital to risk-weighted assets ratio:
Company$748,650 12.72 %N/AN/A
Bank$848,960 14.37 %N/AN/A
Common Equity Tier 1 to risk weighted-assets ratio:
Company$748,650 12.72 %N/AN/A
Bank$848,960 14.37 %N/AN/A
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NOTE 20 – FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company measures certain assets and liabilities at fair value using a three-level hierarchy that prioritizes observable inputs. Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 inputs are observable inputs other than Level 1 prices, such as quoted prices for similar assets, interest rates, prepayment speeds, and credit risk factors. Level 3 inputs are unobservable inputs based on the Company's own assumptions about market participant pricing. For a complete description of the Company's fair value hierarchy and valuation methodologies, refer to the annual Consolidated Financial Statements included in the Company's Registration Statement on Form S-1. There have since been no significant changes to the methodologies.
The following tables summarize financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2026 and December 31, 2025, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:
March 31, 2026
(in thousands)Quoted Prices in
Active Markets for
Identical Assets/
Liabilities
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable Inputs
(Level 3)		Total
Assets
Investment securities available-for-sale:
U.S. Treasury and government agencies$776,453 $— $— $776,453 
Commercial agency mortgage-backed— 176,221 — 176,221 
Residential agency mortgage-backed— 264,101 — 264,101 
Municipal bonds— 8,498 — 8,498 
Other— 7,298 3,028 10,326 
Total investment securities available-for-sale776,453 456,118 3,028 1,235,599 
Loans held-for-sale at fair value— — 57,817 57,817 
Loans held for investment at fair value— — 4,555 4,555 
Total assets$776,453 $456,118 $65,400 $1,297,971 
Liabilities
Total liabilities$— $— $— $— 
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December 31, 2025
(in thousands)Quoted Prices in
Active Markets for
Identical Assets/
Liabilities
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable Inputs
(Level 3)		Total
Assets
Investment securities available-for-sale:
U.S. Treasury and government agencies$958,347 $— $— $958,347 
Commercial agency mortgage-backed— 136,070 — 136,070 
Residential agency mortgage-backed— 139,077 — 139,077 
Municipal bonds— 8,635 — 8,635 
Other— 7,283 5,475 12,758 
Total investment securities available-for-sale958,347 291,065 5,475 1,254,887 
Loans held-for-sale at fair value— — 62,251 62,251 
Loans held for investment at fair value— — 4,645 4,645 
Total assets$958,347 $291,065 $72,371 $1,321,783 
Liabilities
Total liabilities$— $— $— $— 
The following tables present a reconciliation of the assets and liabilities that are measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the three months ended March 31, 2026 and 2025:
March 31, 2026
AdditionsSalesPay-downs/
Maturities/
Calls		TransfersRealized and Unrealized Gain/(Loss) included in:
(in thousands)
Balance as of December 31, 2025
EarningsOther
Comprehensive
Loss
Balance as of
March 31, 2026
Assets
Investment securities available-for-sale - Other
$5,475 $— $— $(2,473)$— $— $26 $3,028 
Loans held-for-sale at fair value62,251 2,414 (118)(6,160)(151)(419)— 57,817 
Loans held for investment at fair value4,645 504 — (704)151 (41)— 4,555 
Total Level 3 assets$72,371 $2,918 $(118)$(9,337)$— $(460)$26 $65,400 
Liabilities
Total Level 3 liabilities$— $— $— $— $— $— $— $— 
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March 31, 2025
AdditionsSalesPay-downs/
Maturities/
Calls		TransfersRealized and Unrealized Gain/(Loss) included in:
(in thousands)
Balance as of December 31, 2024
EarningsOther
Comprehensive
Income
Balance as of March 31, 2025
Assets
Investment securities available-for-sale - Other
$5,465 $— $— $— $— $— $68 $5,533 
Loans held-for-sale at fair value108,575 6,249 (3,035)(9,660)— 636 — 102,765 
Loans held for investment at fair value7,081 — — (325)— (71)— 6,685 
Total Level 3 assets$121,121 $6,249 $(3,035)$(9,985)$— $565 $68 $114,983 
Liabilities
Total Level 3 liabilities$— $— $— $— $— $— $— $— 
See Note 4 – Loans for more information regarding realized and unrealized gains and losses on loans. Unrealized losses on investment securities available-for-sale are included in Net change in unrealized gain on investments available-for-sale in the Consolidated Statements of Comprehensive Income.
During the three months ended March 31, 2026 and 2025, the Company did not transfer any assets to or from Level 3.
The following tables present the quantitative inputs used in determining the fair value of the Company’s Level 3 assets measured on a recurring basis as of March 31, 2026 and December 31, 2025:
(dollars in thousands)
Fair value as of March 31, 2026
Valuation TechniqueUnobservable Input
Range (Weighted Average)1
Investment securities available-for-sale - Other$3,028 Discounted
Cash Flow		Discount Rate
7.9% - 7.9%
(7.9%)
Loans held-for-sale at fair value$51,202 Market ObservationsMarket (Premium)/Discount
(0.1)% - 7.5%
(2.6%)
Loans held-for-sale at fair value6,615 Discounted
Cash Flow		Discount for Risk of Non-Payment
12.6% - 54.8%
(28.7%)
Discount Rate
8.8% - 11.8%
(9.4%)
Total loans held-for-sale at fair value$57,817 
Loans held for investment at fair value$3,789 Market ObservationsMarket (Premium)/Discount
(0.1)% - 8.5%
(2.0%)
Loans held for investment at fair value766 Discounted
Cash Flow		Discount for Risk of Non-Payment
12.6% - 54.8%
(30.7%)
Discount Rate
8.8% - 11.8%
(9.8%)
Total loans held for investment at fair value$4,555 
__________________
(1)Weighted averages are calculated by using the product of the inputs multiplied by the relative fair values of the instruments.
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(dollars in thousands)
Fair value as of December 31, 2025
Valuation TechniqueUnobservable Input
Range (Weighted Average)1
Investment securities available-for-sale - Other$5,475 Discounted
Cash Flow		Discount Rate
7.5% - 7.6%
(7.5%)
Loans held-for-sale at fair value$58,059 Market ObservationsMarket (Premium)/Discount
(1.4)% - 7.6%
(2.3%)
Loans held-for-sale at fair value4,192 Discounted
Cash Flow		Discount for Risk of Non-Payment
10.0% - 40.0%
(30.6%)
Discount Rate
9.3% - 11.8%
(10.0%)
Total loans held-for-sale at fair value$62,251 
Loans held for investment at fair value$3,853 Market ObservationsMarket (Premium)/Discount
(1.4)% - 7.6%
(0.8%)
Loans held for investment at fair value792 Discounted
Cash Flow		Discount for Risk of Non-Payment
10.0% - 40.0%
(28.2%)
Discount Rate
9.3% - 11.8%
(10.4%)
Total loans held for investment at fair value$4,645 
__________________
(1)Weighted averages are calculated by using the product of the inputs multiplied by the relative fair values of the instruments.
Certain assets are measured at fair value on a nonrecurring basis; that is, not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment). Financial assets measured at fair value on a non-recurring basis as of March 31, 2026 and December 31, 2025, are presented in the following tables:
March 31, 2026
(in thousands)Quoted Prices in
Active Markets for
Identical Assets/
Liabilities
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable Inputs
(Level 3)		Total
Collateral-dependent loans$— $— $55,125 $55,125 
Impaired loans— — 11,732 11,732 
Other real estate owned— — 7,109 7,109 
Total$— $— $73,966 $73,966 
December 31, 2025
(in thousands)Quoted Prices in
Active Markets for
Identical Assets/
Liabilities
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable Inputs
(Level 3)		Total
Collateral-dependent loans$— $— $49,682 $49,682 
Impaired loans— — 14,017 14,017 
Other real estate owned— — 8,729 8,729 
Total$— $— $72,428 $72,428 
As of March 31, 2026 and December 31, 2025, the Company’s investment in collateral-dependent loans included individual credit loss allowances of $994 thousand and zero, respectively. As of March 31, 2026 and December 31, 2025, the Company’s investment in impaired loans included individual credit loss allowances of $1.4 million and $2.2 million, respectively. As of March 31, 2026 and December 31, 2025, the Company’s
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investment in other real estate owned assets included cumulative unrealized fair value adjustment losses of $2.1 million and $1.8 million, respectively, which are recognized in Other non-interest income in the Consolidated Statements of Income.
Collateral-dependent loans are reported at fair value using the fair value of collateral less estimated selling costs. Although appraisals are obtained on collateral-dependent loans, the appraised values may be discounted based on management’s historical knowledge, changes in market conditions from the time of valuation and/or management’s expertise and knowledge of the borrower’s business, and therefore they are classified as Level 3.
Impaired loans are reported at fair value using the present value of expected cash flows. For impairments based on cash flow methodology, the discount rate is based on observable inputs, however the determination of cash flows requires management’s judgment, and therefore they are classified as Level 3.
Other real estate owned assets have been valued using a market approach. The values were determined using market prices or similar real estate assets based on an independent appraisal, and adjusted for estimated selling costs. These estimates require management’s judgment, and therefore they are classified as Level 3.
The Company discloses the fair value of financial instruments not measured at fair value on a recurring basis based on the exit price notion. Where quoted market prices are unavailable, fair values are estimated using discounted cash flow models based on observable inputs (Level 2) or unobservable inputs (Level 3). For further information on the Company's fair value methodology, refer to the annual Consolidated Financial Statements included in the Company's Registration Statement on Form S-1.
The estimated fair values of the Company’s financial instruments were as follows as of March 31, 2026 and December 31, 2025:
March 31, 2026
(in thousands)Carrying
Amount		Estimated
Fair Value		Quoted Prices in
Active Markets for
Identical Assets/
Liabilities
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Financial assets:
Cash, cash equivalents and restricted cash$866,136 $866,136 $866,136 $— $— 
Investment securities available-for-sale, at fair value1,235,599 1,235,599 776,453 456,118 3,028 
Investment securities held-to-maturity, at amortized cost48,834 49,066 — 34,017 15,049 
Loans held-for-sale, at fair value57,817 57,817 — — 57,817 
Loans held-for-sale, at lower of cost or fair value349,777 349,809 — — 349,809 
Loans held for investment, at fair value4,555 4,555 — — 4,555 
Loans held for investment, at amortized cost5,323,743 5,381,142 — — 5,381,142 
Other earning assets50,690 47,165 — — 47,165 
Accrued interest receivable45,369 45,369 45,369 — — 
Financial liabilities:
Time deposits$1,345,534 $1,355,067 $— $1,355,067 $— 
Other deposits5,792,674 5,792,674 5,792,674 — — 
Subordinated debt, net151,092 148,520 — 148,520 — 
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December 31, 2025
(in thousands)Carrying
Amount		Estimated
Fair Value		Quoted Prices in
Active Markets for
Identical Assets/
Liabilities
(Level 1)		Significant Other
Observable Inputs
(Level 2)		Significant
Unobservable
Inputs
(Level 3)
Financial assets:
Cash, cash equivalents and restricted cash$648,715 $648,715 $648,715 $— $— 
Investment securities available-for-sale, at fair value1,254,887 1,254,887 958,347 291,065 5,475 
Investment securities held-to-maturity, at amortized cost48,834 50,475 — 34,936 15,539 
Loans held-for-sale, at fair value62,251 62,251 — — 62,251 
Loans held-for-sale, at lower of cost or fair value317,411 317,411 — — 317,411 
Loans held for investment, at fair value4,645 4,645 — — 4,645 
Loans held for investment, at amortized cost5,169,248 5,213,899 — — 5,213,899 
Other earning assets55,928 54,023 — — 54,023 
Accrued interest receivable55,155 55,155 55,155 — — 
Financial liabilities:
Time deposits$1,423,136 $1,431,710 $— $1,431,710 $— 
Other deposits5,354,779 5,354,779 5,354,779 — — 
Subordinated debt, net151,003 146,547 — 146,547 — 
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          Shares
backcovera.jpg
Class A Common Stock
PRELIMINARY PROSPECTUS
Goldman Sachs & Co. LLCJ.P. MorganBarclays
Wells Fargo SecuritiesPiper SandlerTD SecuritiesSantanderCenterview Partners
          , 2026


PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth all costs and expenses, other than the underwriting discounts and commissions payable by us, in connection with the offer and sale of the securities being registered. All amounts shown are estimates except for the SEC registration fee and the Financial Industry Regulatory Authority, Inc. (FINRA) filing fee.
 Amount To Be Paid
Registration fee
$                   *
FINRA filing fee
    *
Listing fees
    *
Printing and engraving expenses
    *
Legal fees and expenses
    *
Accounting fees and expenses
    *
Transfer agent and registrar fees and expense
    *
Miscellaneous
    *
Total
$                   *
__________________
*To be provided by amendment.
Item 14. Indemnification of Directors and Officers.
Section 145 of the DGCL authorizes a court to award, or a corporation’s board of directors to grant, indemnity to directors and officers under certain circumstances and subject to certain limitations. The terms of Section 145 of the DGCL are sufficiently broad to permit indemnification under certain circumstances for liabilities, including reimbursement of expenses incurred, arising under the Securities Act.
The Registrant’s amended and restated certificate of incorporation will provide that its directors and officers will not be personally liable to the Registrant or its stockholders for monetary damages for any breach of fiduciary duty as a director or officer, except to the extent such exemption from liability or limitation is not permitted under the DGCL, as may be amended, or for liability:
•for any breach of the director’s or officer’s duty of loyalty to the Registrant or its stockholders;
•for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
•in the case of a director, pursuant to Section 174 of the DGCL;
•for any transaction from which the director derived an improper personal benefit; or
•in the case of an officer, in any action by or in the right of the Registrant.
The Registrant’s amended and restated bylaws will provide that the Registrant must indemnify its directors and officers to the fullest extent permitted by law. The Registrant will also be expressly authorized to advance certain expenses (including attorneys’ fees) to its directors and officers and carry directors’ and officers’ insurance providing for indemnification of its directors and officers for some liabilities.
Prior to the completion of this offering, the Registrant will enter into indemnification agreements with each of its directors and officers that will provide for, among other things, indemnification to the fullest extent permitted by law against any and all expenses, judgments, fines, penalties, and amounts paid in settlement (with the Registrant’s
II-1

consent) of any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative. The indemnification agreements will also provide for the advancement or payment of all expenses to the Registrant’s directors and officers and for reimbursement of such advanced expenses to the Registrant if it is found that such director or officer is not entitled to such indemnification under applicable law.
The Registrant will obtain a general liability insurance policy that covers certain liabilities of its directors and officers arising out of claims based on acts or omissions in their capacities as directors or officers.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to the Registrant, its directors, its officers, or persons who control the Registrant pursuant to the foregoing provisions, the Registrant has been informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
The proposed form of underwriting agreement filed as Exhibit 1.1 to this Registration Statement provides for indemnification of directors and officers of the Registrant by the underwriters against certain liabilities.
Item 15. Recent Sales of Unregistered Securities.
Set forth below is information regarding all securities issued by the Registrant without registration under the Securities Act between January 1, 2023, and the date of this Registration Statement. The Registrant believes that each of these transactions was exempt from the registration requirements of the Securities Act pursuant to Section 4(a)(2), Regulation D, Regulation S or Rule 701 of the Securities Act or as transactions not involving the sale of securities.
a) Stock Options and RSAs
Between January 1, 2023 and the date of this Registration Statement, the Registrant granted to its employees and others options to purchase an aggregate of           shares of Class A common stock under its equity incentive plans at a weighted average price of $           per share.
Between January 1, 2023 and the date of this Registration Statement, the Registrant granted to its employees and others an aggregate of            shares of Class A common stock in the form of restricted stock awards under its equity incentive plans.
Item 16. Exhibits and Financial Statement Schedules.
a.Exhibits
The exhibit index attached hereto is incorporated herein by reference.
b.Financial Statement Schedules
No financial statement schedules are provided because the information called for is not applicable or is shown in the financial statements or notes thereto.
c.A table furnishing the calculation of filing fees paid for the securities being registered hereby is set forth in Exhibit 107 to this Registration Statement in the manner required by Item 601(b)(107) of Regulation S-K.
Item 17. Undertakings.
The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the provisions referenced in Item 14 of this registration statement or otherwise, the registrant has been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for
II-2

indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered hereunder, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes that:
1)For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the registrant pursuant to Rule 424(b) (1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective; and
2)For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at the time shall be deemed to be the initial bona fide offering thereof.
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EXHIBIT INDEX
EXHIBIT
NO.
DESCRIPTION OF EXHIBIT
1.1*
Form of Underwriting Agreement
3.1
3.2*Form of Amended and Restated Certificate of Incorporation of the Registrant, to be in effect immediately prior to completion of this offering
3.3
3.4*Form of Amended and Restated Bylaws of the Registrant, to be in effect immediately prior to completion of this offering
5.1*
Opinion of Skadden, Arps, Slate, Meagher & Flom LLP
10.1
10.2
10.3
10.4†
10.5†
10.6†*
Form of Restrictive Stock Award Agreement
10.7†
10.8†
10.9†
10.10†*
Amended Employment Agreement by and between Congressional Bancshares, Inc. and John Delaney, dated February 21, 2021
10.11†*
Amended Employment Agreement by and between Congressional Bancshares, Inc. and Donald Cole, dated February 21, 2021
10.12
10.13*Form of Investor Rights Agreement
21.1
23.1*Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in Exhibit 5.1)
23.2
24.1
107
__________________
*To be filed by amendment.
†Compensatory plan or arrangement.
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SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Chevy Chase, Maryland on May 15, 2026.
Forbright, Inc.
By:/s/ John K. Delaney
Name:John K. Delaney
Title:Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL BY THESE PRESENT, that each person whose signature appears below constitutes and appoints John K. Delaney, Christopher S. Lynch and Michael A. Housley and each of them, his or her true and lawful attorney-in-fact and agent, with full power of substitution and revocation, for him or her and in his or her name, place and stead, in any and all capacities, to execute any or all amendments including any post-effective amendments and supplements to this registration statement, and any additional registration statement filed pursuant to Rule 462(b), and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorney-in-fact and agent, or his or her substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
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Pursuant to the requirements of the Securities Act, this registration statement has been signed by the following persons in the capacities indicated on the date indicated below:
SignatureTitleDate
/s/ John K. DelaneyChief Executive Officer and Director
May 15, 2026
John K. Delaney
(principal executive officer)
/s/ Christopher S. Lynch
Executive Vice President, Chief Financial Officer
May 15, 2026
Christopher S. Lynch(principal financial officer)
/s/ Michael A. Housley
Executive Vice President, Chief Accounting Officer
May 15, 2026
Michael A. Housley
(principal accounting officer)
/s/ Clifford V. Brokaw IV
Director
May 15, 2026
Clifford V. Brokaw IV
/s/ Nancy K. Eberhardt
Director
May 15, 2026
Nancy K. Eberhardt
/s/ Jason M. Fish
Director
May 15, 2026
Jason M. Fish
/s/ Cynthia A. Flanders
Director
May 15, 2026
Cynthia A. Flanders
/s/ Eric B. Hoffman
Director
May 15, 2026
Eric B. Hoffman
/s/ Christopher T. Jones
Director
May 15, 2026
Christopher T. Jones
/s/ Donald L. Kohn
Director
May 15, 2026
Donald L. Kohn
/s/ Lewis A. Sachs
Director
May 15, 2026
Lewis A. Sachs
/s/ Steven M. Shafran
Director
May 15, 2026
Steven M. Shafran
/s/ Derek Z. Walker
Director
May 15, 2026
Derek Z. Walker
II-6
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
CONGRESSIONAL BANCSHARES, INC.
The undersigned, for the purpose of creating and organizing a corporation under the provisions of and subject to the requirements of the General Corporation Law of the State of Delaware, as amended (the “DGCL”), hereby certifies as follows:
ARTICLE I
The name of the corporation is Congressional Bancshares, Inc. (the “Corporation”).
ARTICLE II
The address of the Corporation’s registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle 19801. The name of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the DGCL.
ARTICLE IV
4.1    Capitalization. The total number of shares of all classes of capital stock which the Corporation is authorized to issue is 108,200,000, consisting of 51,600,000 shares of Voting Common Stock, par value $0.001 per share (“Voting Common Stock”), 51,600,000 shares of Non-Voting Common Stock, par value $0.001 per share (“Non-Voting Common Stock”), and 5,000,000 shares of Preferred Stock, par value $0.001 per share (“Preferred Stock”).
4.2    Voting Common Stock and Non-Voting Common Stock.
(a)    Voting Rights.
(i)    Voting Common Stock. Each holder of Voting Common Stock, as such, shall be entitled to one vote for each share of Voting Common Stock held of record by such holder in the election of directors and on all matters on which stockholders generally are entitled to vote. In addition to any other vote required by law, the affirmative vote of a sixty-six and two-thirds percent (662/3%) of the outstanding shares of Voting Common Stock, voting separately as a class, shall be required to amend, alter or repeal (including by merger, consolidation or otherwise, and whether in a single transaction or a series of related transactions) any provision of this Certificate of Incorporation that adversely affects the privileges, preferences or rights of the Voting Common Stock contained in this Certificate of Incorporation in a manner that is adverse
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to the Voting Common Stock relative to the effect of such amendment, alteration or repeal on the Non-Voting Common Stock.
(ii)    Non-Voting Common Stock. Holders of Non-Voting Common Stock, as such, shall have no voting power and shall not be entitled to vote on any matter and shall not have the right to participate in any meeting of stockholders or to have notice thereat except (1) as otherwise required by law and (2) the affirmative vote of sixty-six and two-thirds percent (66½%) of the outstanding shares of Non-Voting Common Stock, voting separately as a class, shall be required to amend, alter or repeal (including by merger, consolidation or otherwise, and whether in a single transaction or a series of related transactions) any provision of this Certificate of Incorporation in a manner that significantly and adversely affects the privileges, preferences or rights of the Non-Voting Common Stock contained in this Certificate of Incorporation. Each holder of Non-Voting Common Stock, as such, shall be entitled to one vote for each share of Non-Voting Common Stock held of record by such holder on all matters on which holders of Non-Voting Common Stock are entitled to vote pursuant to this Certificate of Incorporation.
(b)    Dividends, Other Distributions and Liquidation.
(i)    Subject to the rights of the holders of any series of Preferred Stock, holders of Voting Common Stock shall be entitled to receive such dividends and distributions (whether payable in cash or otherwise) as may be declared by the board of directors of the Corporation (the “Board”) on the Voting Common Stock from time to time out of assets or funds of the Corporation legally available therefor, subject to Section 4.2(b)(ii). Subject to the rights of the holders of any series of Preferred Stock, in the event of any liquidation, dissolution or winding-up of the Corporation (whether voluntary or involuntary), the assets of the Corporation available for distribution to stockholders shall be distributed in equal amounts per share to the holders of Voting Common Stock, subject to Section 4.2(b)(ii).
(ii)    Except as provided in Section 4.2(a), this Section 4.2(b)(ii) and Section 4.2(c), Non-Voting Common Stock shall in all respects and for all purposes carry the same rights, preferences and privileges as Voting Common Stock (including in respect of dividends or other distributions declared on the Voting Common Stock and in respect of distributions to the Voting Common Stock upon any dissolution, liquidation or winding up of the Corporation) and shall be treated the same as Voting Common Stock (including in any merger, consolidation, reclassification, share exchange or other similar transaction or series of transactions); provided that, if the Corporation shall in any manner split, reclassify, subdivide or combine (including by way of a dividend payable in shares of Voting Common Stock or Non-Voting Common Stock) the outstanding shares of Voting Common Stock or Non-Voting Common Stock, the outstanding shares of such other class of stock shall likewise be split, subdivided or combined at the same time, in the same manner proportionately and on the same basis per share; provided, further, that no dividend payable in Voting Common Stock shall be declared on the Non-Voting Common Stock and no dividend payable in Non-Voting Common Stock shall be declared
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on the Voting Common Stock, but instead, in the case of a stock dividend, each class of stock shall receive such stock dividend in shares of like stock. Subject to the rights of the holders of any series of Preferred Stock and as otherwise provided in this Section 4.2(b), holders of shares of Voting Common Stock and Non-Voting Common Stock shall be entitled to receive such dividends and other distributions in cash, stock, other securities or property of the Corporation when, as and if declared thereon by the Board from time to time out of assets or funds of the Corporation legally available therefor.
(c)    Conversion of Non-Voting Common Stock.
(i)    Each share of Non-Voting Common Stock shall remain Non-Voting Common Stock for as long as it is owned or controlled by the initial holder or any other transferee or assignee of such initial holder; provided, however, that any such share of Non-Voting Common Stock may convert into an equal number of shares of Voting Common Stock (A) in the hands of the initial holder or any other transferee or assignee of such initial holder upon an issuance of Voting Common Stock by the Corporation or other event having a dilutive effect on such holder’s ownership of Voting Common Stock, subject to the restrictions set forth in Section 4.2(c)(iv), or (B) in the hands of a third -party transferee or assignee unaffiliated with the initial holder, but only if such share of Non-Voting Common Stock is transferred or assigned: (1) to the Corporation; (2) in a widespread public distribution of the Corporation’s securities; (3) to a transferee or assignee that would control more than 50% of every class of the Corporation’s outstanding “voting securities” (as defined for the purposes of the Bank Holding Company Act of 1956, as amended, and any rules or regulations promulgated thereunder) without any transfer from the transferor; or (4) in a transaction in which no transferee or assignee (or group of associated transferees or assignees) would receive 2% or more of any class of voting securities of the Corporation outstanding at such time (each of the transactions described in clauses (1) through (4), a “Convertible Transfer”). The term “Convertible Holder” means a holder of Non-Voting Common Stock, other than the initial holder of such Non-Voting Common Stock or an affiliate thereof, who acquires one or more shares of Non-Voting Common Stock in a Convertible Transfer.
(ii)    Following a Convertible Transfer, a Convertible Holder may surrender to the Corporation (at the principal office of the Corporation) a certificate or certificates representing all or part of the Convertible Holder’s shares of Non-Voting Common Stock and in such event each share of Non-Voting Common Stock represented by such certificate or certificates will convert into one share of Voting Common Stock; provided that, in connection with any transfer of shares of Non-Voting Common Stock pursuant to a transfer described in clause (2), clause (3) or clause (4) of the definition of “Convertible Transfer” above, upon the request of the transferor, the transferor shall be entitled to surrender to the Corporation shares of Non-Voting Common Stock to be so transferred, and, upon such surrender, the Corporation or its registrar and transfer agent, if any, shall issue to the transferee, in lieu of shares of Non-Voting Common Stock surrendered, an equal number of shares of Voting Common Stock. Except as otherwise provided herein, each conversion of Non-Voting Common Stock shall be deemed to have
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been effected as of the close of business on the date on which the certificate or certificates representing such shares of Non-Voting Common Stock to be converted have been surrendered for conversion at the principal office of the Corporation. Notwithstanding any other provision hereof, if a conversion of Non-Voting Common Stock is to be made in connection with a merger, reorganization, consolidation, reclassification or other transaction in which the shares of Voting Common Stock are exchanged for or changed into other stock or securities, cash and/or any other property or in any dissolution or liquidation, the conversion of any shares of Non-Voting Common Stock may, at the election of the holder thereof, be conditioned upon the consummation of such event or transaction, in which case such conversion shall not be deemed to be effective until such event or transaction has been consummated.
(iii)    Upon a conversion pursuant to subsection (c)(ii), each converted share of Non-Voting Common Stock shall be retired. The Corporation shall from time to time reserve for issuance out of its authorized but unissued shares of Voting Common Stock, or shall keep available (solely for the purposes of issuance upon conversion of shares of Non-Voting Common Stock) shares of Voting Common Stock held by the Corporation as treasury stock, the number of shares of Voting Common Stock into which all outstanding shares of Non-Voting Common Stock may be converted. The conversion of shares of Non-Voting Common Stock pursuant to this Section 4.2(c) shall be made without charge to the holder or holders of such shares for any issuance tax (except stock transfer tax) in respect thereof or other costs incurred by the Corporation in connection with such conversion.
(iv)    With respect to an occurrence under Section 4.2(c)(i)(A) above (a “Triggering Event”), the Corporation shall give written notice to all holders of Non-Voting Common Stock within ten days of the Triggering Event of their right to convert Non-Voting Common Stock into Voting Common Stock and such holder must deliver a Conversion Notice to the Corporation within ten days of the date of such notice of its intent to so convert (any such holder providing a Conversion Notice to the Corporation of its intent to convert Non-Voting Common Stock to Voting Common Stock pursuant to this paragraph, a “Converting Holder”). A Converting Holder may not exercise this right to convert Non-Voting Common Stock to Voting Common Stock pursuant to this paragraph to the extent such holder would acquire a higher percentage of the Voting Common Stock after exercise of its right to convert than such holder controlled immediately prior to the Triggering Event. For purposes of calculating such Converting Holder’s percentage of the Voting Common Stock after exercise of its right to convert with respect to a Triggering Event, the conversions by all other Converting Holders pursuant to their respective Conversion Notices with respect to such Triggering Event will be taken into account (and such Converting Holder’s Conversion Notice may specify that conversions by other Converting Holders shall be taken into account by the Corporation when calculating the number of shares of Non-Voting Common Stock to be converted by such Converting Holder in order to maintain the percentage of the Voting Common Stock such holder controlled immediately prior to the Triggering Event).
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(d)    Treatment of Non-Voting Common Stock Upon Merger. Etc. In the event of any merger, consolidation, reorganization, share exchange, reclassification or other similar transaction in which the shares of Voting Common Stock. are exchanged for or changed into other stock or securities, cash and/or any other property, each share of Non-Voting Common Stock will at the same time also be exchanged or changed for an amount per whole share equal to the aggregate amount of stock, securities, cash and/or any other property (payable in kind), as the case may be, that each share of Voting Common Stock would be entitled to receive as a result of such transaction; provided that at the election of such holder, any securities issued with respect to the Non-Voting Common Stock shall be non-voting securities under the resulting corporation’s organizational documents and the Corporation shall make appropriate provisions (in form and substance reasonably satisfactory to the holders of a majority of the Non-Voting Common Stock then outstanding) and take such actions necessary to ensure that holders of the Non-Voting Common Stock shall retain securities with substantially the same privileges, limitations and relative rights as the Non-Voting Common Stock (taking into account the terms of the securities received by the holders of the Voting Common Stock). Subject to the foregoing, in the event the holders of Voting Common Stock are provided the right to convert or exchange Voting Common Stock for stock or securities, cash and/or any other property, then the holders of the Non-Voting Common Stock shall be provided the same right based upon the number of shares of Voting Common Stock such holders would be entitled to receive if such shares of Non-Voting Common Stock were converted into shares of Voting Common Stock immediately prior to such offering. In the event that the Corporation offers to repurchase shares of Voting Common Stock from its stockholders generally, the Corporation shall offer to repurchase Non-Voting Common Stock pro rata based upon the number of shares of Voting Common Stock such holders would be entitled to receive if such shares were converted into shares of Voting Common Stock immediately prior to such repurchase. In the event of any pro rata subscription offer, rights offer or similar offer to holders of Voting Common Stock, the Corporation shall provide the holders of the Non-Voting Common Stock the right to participate based upon the number of shares of Voting Common Stock such holders would be entitled to receive if such shares were converted into shares of Voting Common Stock immediately prior to such offering; provided that any shares issued with respect to the Non-Voting Common Stock shall be issued in the form of Non-Voting Common Stock rather than Voting Common Stock.
(e)    Conversion of Voting Common Stock. Any share of Voting Common Stock may convert into an equal number of shares of Non-Voting Common Stock upon the written request of the holder and surrender to the Corporation (at the principal office of the Corporation) a certificate or certificates representing all or part of such holder’s shares of Voting Common Stock and in such event each share of Voting Common Stock represented by such certificate or certificates will convert into one share of Non-Voting Common Stock. Upon a conversion pursuant to this Section 4.2(e), each converted share of Voting Common Stock shall be retired. The Corporation shall from time to time reserve for issuance out of its authorized but unissued shares of Non-Voting Common Stock, or shall keep available (solely for the purposes of issuance upon conversion of shares of Voting Common Stock) shares of Non-Voting Common Stock held by the Corporation as treasury stock, the number of shares of Non-Voting Common Stock into which all outstanding shares of Voting Common Stock may be converted. The conversion of shares of Voting Common Stock pursuant to this Section 4.2(e) shall be made
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without charge to the holder or holders of such shares for any issuance tax (except stock transfer tax) in respect thereof or other costs incurred by the Corporation in connection with such conversion. Each conversion of Voting Common Stock. pursuant to this Section 4.2(e) shall be deemed to have been effected as of the close of business on the date on which the certificate or certificates representing such shares of Voting Common Stock to be converted have been surrendered for conversion at the principal office of the Corporation.
4.3    Preferred Stock.
(a)    Shares of Preferred Stock may be issued in one or more series from time to time by the Board, and the Board is expressly authorized to fix by resolution or resolutions the designations and the powers, preferences and rights, and the qualifications, limitations and restrictions thereof, of the shares of each series of Preferred Stock, including, without limitation, the following:
(i)    the distinctive serial designation of such series which shall distinguish it from other series;
(ii)    the number of shares included in such series;
(iii)    the dividend rate (or method of determining such rate) payable to the holders of the shares of such series, any conditions upon which such dividends shall be paid and the date or dates upon which such dividends shall be payable;
(iv)    whether dividends on the shares of such series shall be cumulative and, in the case of shares of any series having cumulative dividend rights, the date or dates or method of determining the date or dates from which dividends on the shares of such series shall be cumulative;
(v)    the amount or amounts which shall be payable out of the assets of the Corporation to the holders of the shares of such series upon voluntary or involuntary liquidation, dissolution or winding up the Corporation, and the relative rights of priority, if any, of payment of the shares of such series;
(vi)    the price or prices at which, the period or periods within which, and the terms and conditions upon which the shares of such series may be redeemed, in whole or in part, at the option of the Corporation or at the option of the holder or holders thereof or upon the happening of a specified event or events;
(vii)    the obligation, if any, of the Corporation to purchase or redeem shares of such series pursuant to a sinking fund or otherwise and the price or prices at which, the period or periods within which and the terms and conditions upon which the shares of such series shall be redeemed or purchased, in whole or in part, pursuant to such obligation;
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(viii)    whether or not the shares of such series shall be convertible or exchangeable, at any time or times at the option of the holder or holders thereof or at the option of the Corporation or upon the happening of a specified event or events, into shares of any other class or classes or any other series of the same or any other class or classes of stock of the Corporation, and the price or prices or rate or rates of exchange or conversion and any adjustments applicable thereto;
(ix)    whether or not the holders of the shares of such series shall have voting rights, in addition to the voting rights provided by law, and if so the terms of such voting rights; and
(x)    any other powers, preferences and rights and qualifications, limitations and restrictions not inconsistent with the DGCL.
(b)    Unless otherwise provided in the resolution or resolutions of the Board or a duly authorized committee thereof establishing the terms of a series of Preferred Stock, no holder of any share of Preferred Stock shall be entitled to vote on any amendment or alteration of this Certificate of Incorporation to authorize or create, or increase the authorized amount of, any other class or series of Preferred Stock or any alteration, amendment or repeal of any provision of any other series of Preferred Stock.
(c)    Except as otherwise required by the DGCL or provided in the resolution or resolutions of the Board or a duly authorized committee thereof establishing the terms of a series of Preferred Stock, no holder of Voting Common Stock or Non-Voting Common Stock, as such, shall be entitled to vote on any amendment or alteration of this Certificate of Incorporation that alters, amends or changes the powers, preferences, rights or other terms of one or more outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other series of Preferred Stock, to vote thereon pursuant to this Certificate of Incorporation or the DGCL.
(d)    Subject to the rights of the holders of any series of Preferred Stock, the number of authorized shares of any class or series of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the outstanding shares of such class or series, voting together as a single class, irrespective of the provisions of Section 242(b)(2) of the DGCL or any corresponding provision hereafter enacted.
(e)    Unless otherwise provided in the resolution or resolutions of the Board or a duly authorized committee thereof establishing the terms of a series of Preferred Stock, no holder of any share of Preferred Stock shall, in such capacity, be entitled to bring a derivative action, suit or proceeding on behalf of the Corporation.
ARTICLE V
Other than as provided in Section 4 of the Corporation’s Stockholders’ Agreement dated April 13, 2021, as amended (the “Stockholders’ Agreement”), no holder of any capital stock of
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the Corporation shall have any preemptive rights nor be entitled, as of right, to purchase or subscribe for any part of the unissued capital stock. of the Corporation or of any additional capital stock issued by reason of any increase of authorized capital stock of the Corporation or other securities whether or not convertible into capital stock of the Corporation.
ARTICLE VI
In furtherance and not in limitation of the powers conferred by the DGCL, the Board is expressly authorized to adopt, amend or repeal bylaws of the Corporation, subject to the power of the holders of Voting Common Stock of the Corporation to alter or repeal any bylaws whether adopted by them or otherwise; provided that the affirmative vote of holders of not less than eighty percent (80%) of the votes of all outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, considered for purposes hereof as a single class, shall be required for the holders of Voting Common Stock to adopt new bylaws or to alter, amend, or repeal bylaws.
ARTICLE VII
7.1    Number of Directors: Classes; Election. The number of directors of the Corporation shall be fixed from time to time pursuant to the Corporation’s bylaws. The directors of the Corporation shall be divided into three classes, as nearly equal in number as reasonably possible, as determined by the Board, with the initial term of office of the first class of such directors to expire at the 2022 annual meeting of stockholders of the Corporation, the initial term of office of the second class of such directors to expire at the 2023 annual meeting of stockholders of the Corporation and the initial term of office of the third class of such directors to expire at the 2024 annual meeting of stockholders of the Corporation, with each class of directors to hold office until their successors have been duly elected and qualified. At each annual meeting of stockholders following such initial classification and election, directors elected to succeed the directors whose terms expire at such annual meeting shall be elected to hold office for a term of three years following their election and until their successors have been duly elected and qualified. If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain or attain a number of directors in each class as nearly equal as reasonably possible, but no decrease in the number of directors may shorten the term of any incumbent director.
7.2    Removal of Directors. A director may be removed from office only (a) pursuant to Section 3.4 of the Stockholders’ Agreement or (b) for Cause (as defined in the Stockholders’ Agreement).
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7.3    Initial Directors. The name and addresses of the initial directors of the Corporation shall be as follows:
(a)    Class 1 (Term Expiry 2022)
(i) J.R. Schuble, Jr. —
c/o Congressional Bancshares, Inc.
4445 Willard Avenue, 10th Floor
Chevy Chase, Maryland 20815
(ii) Jason Fish —
c/o Congressional Bancshares, Inc.
4445 Willard Avenue, 10th Floor
Chevy Chase, Maryland 20815
(iii) John Delaney —
c/o Congressional Bancshares, Inc.
4445 Willard Avenue, 10th Floor
Chevy Chase, Maryland 20815
(b)    Class 2 (Term Expiry 2023)
(i) Jenevieve Mitchel —
c/o Congressional Bancshares, Inc.
4445 Willard Avenue, 10th Floor
Chevy Chase, Maryland 20815
(ii) Cliff Brokaw —
c/o Congressional Bancshares, Inc.
4445 Willard Avenue, 10th Floor
Chevy Chase, Maryland 20815
(iii) Cynthia Planders —
c/o Congressional Bancshares, Inc.
4445 Willard Avenue, 10th Floor
Chevy Chase, Maryland 20815
(iv) Steve Shafran —
c/o Congressional Bancshares, Inc.
4445 Willard Avenue, 10th Floor
Chevy Chase, Maryland 20815
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(c)    Class 3 (Term Expiry 2024)
(i) Pam Chan —
c/o Congressional Bancshares, Inc.
4445 Willard Avenue, 10th Floor
Chevy Chase, Maryland 20815
(ii) Eric Hoffman —
c/o Congressional Bancshares, Inc.
4445 Willard Avenue, 10th Floor
Chevy Chase, Maryland 20815
(iii) Christopher Jones —
c/o Congressional Bancshares, Inc.
4445 Willard Avenue, 10th Floor
Chevy Chase, Maryland 20815
(iv) Donald Kohn —
c/o Congressional Bancshares, Inc.
4445 Willard Avenue, 10th Floor
Chevy Chase, Maryland 20815
ARTICLE VIII
Any action required or permitted to be taken by the holders of any class or series of stock of the Corporation at a meeting, including, without limitation, the election of directors, may be taken without a meeting and prior notice, by signed written consent, delivered to the Corporation, of the holders of such class or series of stock of the Corporation having such minimum number of votes that would be necessary to take such action at a meeting at which all shares entitled to vote thereon were present and voted.
ARTICLE IX
Notwithstanding anything else in this Certificate of Incorporation to the contrary, an affirmative vote of the holders of not less than sixty-six and two thirds percent (66’3%) of the votes of all outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors shall be required to amend, alter, repeal or adopt any provision of this Certificate of Incorporation (whether by merger, consolidation or otherwise, and whether in a single transaction or a series of related transactions); provided that Article VI and Article XVI shall not be amended, altered or repealed except upon the affirmative vote of not less than 80% of the votes of all outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors.
ARTICLE X
10.1    Limited Liability of Directors. To the fullest extent authorized by the DGCL, a director of the Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except to the extent that such exemption from liability or limitation thereof is not permitted under the DGCL as currently in effect or as the same may hereafter be amended. No amendment, modification or repeal of this Section 10.1
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shall adversely affect any right or protection of a director that exists at the time of such amendment, modification or repeal.
10.2    Indemnification. To the fullest extent permitted by the DGCL, the Corporation is authorized to provide indemnification of (and advancement of expenses to) the Corporation’s directors, officers and agents (and any other persons to which the DGCL permits the Corporation to provide indemnification) through the Corporation’s bylaws, agreements with such persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the DGCL, subject only to limits created by applicable Delaware law (statutory or non-statutory), with respect to actions for breach of duty to the Corporation, its stockholders and others, and by any applicable federal or state bank holding company or bank regulatory laws or regulations. The rights to indemnification and to the advancement of expenses conferred in this Section 10.2 shall not be exclusive of any other right which any such person may have or may hereafter acquire under this Certificate of Incorporation, the Corporation’s bylaws, any statute, agreement, insurance policy, vote of stockholders or disinterested directors or otherwise. No amendment, modification or repeal of this Section 10.2 shall adversely affect any right or protection of a director, officer, agent or other person existing at the time of, or increase the liability of any person with respect to any acts or omissions of such person occurring prior to, such amendment, repeal or modification.
ARTICLE XI
11.1    Forum Selection. Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the Corporation, (b) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or employee of the Corporation to the Corporation or the Corporation’s stockholders, (c) any action asserting a claim against the Corporation, its directors, officers or employees arising pursuant to any provision of the DGCL, this Certificate of Incorporation or the Corporation’s bylaws, or (d) any action asserting a claim against the Corporation, its directors, officers or employees that is governed by the internal affairs doctrine, in each such case subject to the Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein and the claim not being one which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery or for which the Court of Chancery does not have subject matter jurisdiction. Any person purchasing or otherwise acquiring any interest in any shares of the Corporation’s capital stock shall be deemed to have notice of, and to have consented to, the provisions of this Section 11.1.
11.2    Severability. If any provision of this Certificate of Incorporation shall be held to be invalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever: (a) the validity, legality and enforceability of such provision in any other circumstance and of the remaining provisions of this Certificate of Incorporation (including, without limitation, each portion of any paragraph of this Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and (b) to the fullest extent possible, the
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provisions of this Certificate of Incorporation (including, without limitation, each such portion of any paragraph of this Certificate of Incorporation containing any such provision held to be invalid, illegal, or unenforceable) shall be construed so as to permit the Corporation to protect its directors, officers, employees and agents from personal liability in respect of their good faith service to or for the benefit of the Corporation to the fullest extent permitted by law.
ARTICLE XII
The corporation elects not to be governed by Section 203 of the DGCL, “Business Combinations with Interested Stockholders”, as permitted under and pursuant to subsection (b)(1) thereof.
ARTICLE XIII
Except with respect to “Permitted Transferees” (as defined in the Stockholders’ Agreement), prior to April 13, 2026, no Investor or Key Holder, as such terms are defined in the Stockholder’s Agreement, may sell, offer to sell, pledge, mortgage, hypothecate, encumber, dispose of or transfer any shares of capital stock. of the Corporation without the prior approval of the majority of Board (which consent, on or after April 13, 2024, shall not be unreasonably withheld, conditioned or delayed).
ARTICLE XIV
For purposes of Section 500 of the California Corporations Code (to the extent applicable), in connection with any repurchase of shares of Voting Common Stock permitted under this Certificate of Incorporation from employees, officers, directors or consultants of the Corporation in connection with a termination of employment or services pursuant to agreements or arrangements approved by the Board (in addition to any other consent required under this Certificate of Incorporation), such repurchase may be made without regard to any “preferential dividends arrears amount” or “preferential rights amount” (as those terms are defined in Section 500 of the California Corporations Code). Accordingly, for purposes of making any calculation under California Corporations Code Section 500 in connection with such repurchase, the amount of any “preferential dividends arrears amount” or “preferential rights amount” (as those terms are defined therein) shall be deemed to be zero (0).
The name and mailing address of the incorporator of the Corporation is:
NameMailing Address
Aural U. Dave. Esq.
Arent Fox LLP
1717 K Street, NW
Washington, DC 20006-5344
It is expressly acknowledged and agreed that each Investor, Investor Designee, and their Affiliates (as defined in the Stockholders’ Agreement) (collectively, the “Exempted Persons”) currently has, and will in the future have or will consider acquiring, investments in numerous
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companies with respect to which such Exempted Person may serve as an advisor, a director or in some other capacity and, in recognition that such Exempted Person may have myriad duties to various investors and partners and, in anticipation that the Corporation on the one hand, and such Exempted Person on the other hand, may engage in the same or similar activities or lines of business and have an interest in the same areas of business opportunities, it is expressly acknowledged and agreed that:(x) each Exempted Person has the right to, and shall have no duty (contractual or otherwise) not to, directly or indirectly engage in the same or similar business activities or lines of business as the Corporation or any of its subsidiaries, including those deemed to be competing with the Corporation or any of its subsidiaries; (y) in the event that any Exempted Person acquires knowledge of a potential transaction or matter that may be a business opportunity for each of the Corporation or any of its subsidiaries, on the one hand, and such Exempted Person or any other Person, on the other hand, such Exempted Person shall have no duty (contractual or otherwise) to communicate or present such business opportunity to the Corporation or any of its subsidiaries, as the case may be, and the Corporation, on behalf of itself and its subsidiaries, renounces any interest or expectancy in any such opportunity; and (z) notwithstanding anything to the contrary, no Exempted Person shall be liable to the Corporation or any of its affiliates or stockholders for breach of any duty (contractual or otherwise) by reason of the fact that such Exempted Person directly or indirectly, pursues or acquires such opportunity for itself, directs such opportunity to another person, or does not present such opportunity to the Corporation or any of its subsidiaries; provided, however, that this Article XIV shall not apply to any individual who is an officer or employee of the Corporation or any of its subsidiaries. Any business opportunity that is presented to, or conies to the attention of, any officers or employees of the Corporation or any of its subsidiaries in his or her capacity as such will remain the exclusive property of the Corporation or such subsidiary, as applicable.
[Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned, being the incorporator, for the purpose of forming a corporation pursuant to the DGCL, do make this Certificate of Incorporation, hereby acknowledging, declaring, and certifying that the foregoing Certificate of Incorporation is my act and deed and that the facts herein stated are true, and have accordingly hereunto set my hand this 12th day of April, 2021.
CONGRESSIONAL BANCSHARES, INC.
By: /s/ Amal Dave

Amal Dave, Esq., Sole Incorporator

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REVISED 8/11/98
Whenever a filing is received by the Secretary of State with the words “Bank” or “Trust” or a derivative of either word in the name, we will forward it to the State Bank Commissioner or his designee prior to filing, pursuant to Title 8, Delaware Code, Sections 126 and 395, and Title 5, Delaware Code, Section 721. After review by the Commissioner or his designee, a recommendation will be made to the Secretary of State indicating whether or not the name should be approved,
In order for the Bank Commissioner to determine whether or not to recommend approval, please answer the following questions:
IF THIS FORM IS NOT COMPLETELY FILLED OUT, IT WILL NOT BE REVIEWED BY THE BANK COMMISSIONER.
1.    The name on the filing is Congressional Bancshares, Inc.
2.    The type of filing is Certificate of Conversion
3.    Will the corporation be a bank? Yes        No X
4.    If not will it be a bank holding company? Yes    X        No     
5.    Will the corporation conduct banking business in Delaware? Yes      No    X
6.    If not, will it be conducting a banking business out of state? Yes    X     No     
7.    If yes, what type of banking business and where will the business be conducted. The Corporation will be a bank holding company and its subsidiary bank is chartered by the State of Maryland and is located in the State of Maryland.
8.    Under which federal or state regulatory authority will it operate (OCC, OTS, FRB, SEC, FOREIGN (describe), etc.)? Board of Governors of the Federal Reserve System (FRB) and Maryland Commissioner of Financial Regulation (MCFR).
9.    Has application(s) been filed with the above-mentioned agency(ies)? Yes     No     X
(If yes, which agency(ies) and when was each application filed?) No application is required by the Board of Governors of the Federal Reserve System (FRB) or the Maryland Commissioner of Financial Regulation (MCFR) but the Corporation is required to provide an after the fact notice to these agencies.
10,    If not a banking business, what type of business will it be conducting? The Corporation will be a bank holding company.

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11.    If not a banking business, will it be regulated by any federal or state agency?
Yes X        No        
11a.    If yes, which agency? FRB and MCFR which state? Maryland
12.    Is the applicant an affiliate of a regulated entity? Yes
12a.    If yes, identify which entity. Congressional Bank, a Maryland chartered bank.
13.    Contact name, address, and telephone number:
Anne M. Balcer
General Counsel
4445 Willard Avenue, 10th Floor, Chevy Chase, Maryland 20815
Direct Dial: 240-380-1224

/s/ Anne M. Balcer








(title) General Counsel
TO THE OFFICE OF THE STATE BANK COMMISSIONER
Please review and return with your recommendation as soon as possible.
APPROVAL RECOMMENDED
NAME.
APPROVAL NOT RECOMMENDED
DATE
This is a Priority Filing
Yes
No


CERTIFICATE OF AMENDMENT
OF
THE CERTIFICATE OF INCORPORATION
OF
CONGRESSIONAL BANCSHARES, INC.
Congressional Bancshares, Inc. (the “Corporation”), a corporation organized and existing under the Delaware General Corporation Law (the “General Corporation Law”)
DOES HEREBY CERTIFY:
1.    That the name of this corporation is Congressional Bancshares, Inc. and that this corporation was originally incorporated as a Maryland Corporation under than name “Congressional Bancshares, Inc.” on April 14, 2005, and was converted to a Delaware Corporation pursuant to the General Corporation Law on April 12, 2021.
2.    That this corporation filed with the Secretary of State of the State of Delaware a Certificate of Conversion and its original Certificate of Incorporation on April 12, 2021 (the “Certificate of Incorporation”),
3.    That the Certificate of Incorporation of the Corporation shall be amended as follows:
(a)    Article I is hereby amended and restated in its entirety to read as follows:
“ARTICLE I: The name of the corporation is Fortnight, Inc. (the “Corporation”).”
4.    All other provisions of the Corporation’s Certificate of Incorporation shall remain in effect.
5.    The foregoing amendment of the Corporation’s Certificate of Incorporation was adopted and approved by the Board of Directors of this Corporation in accordance with Section 242 of the General Corporation Law.
6.    The foregoing amendment of the Corporation’s Certificate of Incorporation was adopted and approved by the holders of the requisite number of shares of the Corporation in accordance with applicable requirements of Section 228 and 242 of the General Corporation Law.
7.    The foregoing amendment of the Corporation’s Certificate of Incorporation shall take effect on January 18, 2022.
* * *


\IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be signed by the Chief Executive Officer of the Corporation this le day of January, 2022.
/s/ John K. Delaney John K. Delaney
Chief Executive Officer

Exhibit 3.3
FORBRIGHT, INC.
AMENDED AND RESTATED BYLAWS
ARTICLE I
STOCKHOLDERS
1.1    Annual Meeting. The annual meeting of the stockholders of Forbright, Inc. (f/k/a Congressional Bancshares, Inc.) (the “Corporation”) shall be held on a day duly designated by the Board of Directors of the Corporation (the “Board of Directors” or “Board”), for the purpose of electing Directors to succeed those whose terms shall have expired as of the date of such annual meeting, and for the transaction of such other corporate business as may properly come before the meeting.
1.2    Special Meeting. Special meetings of the stockholders (i) may be called at any time for any purpose or purposes by the Chairman of the Board, the President/Chief Executive Officer, or by a majority of the members of the Board of Directors, and (ii) shall be called forthwith by the Chairman of the Board, the President/Chief Executive Officer, the Secretary or any Director of the Corporation upon the request in writing of the holders of at least fifty percent (50%) of all the shares outstanding and entitled to vote on the business to be transacted at such meeting. Such request shall state the purpose or purposes of the meeting and the matters proposed to be acted on thereat. The Secretary shall inform such requesting stockholders of the reasonably estimated cost of preparing and mailing the notice of the meeting, and upon payment to the Corporation of such cost, the Secretary shall give the required notice. Business transacted at all special meetings of stockholders shall be confined to the purpose or purposes stated in the notice of the meeting.
1.3    Place of Holding Meetings. All meetings of stockholders shall be held at the principal office of the Corporation or elsewhere in the United States, either within or without the State of Delaware, or may instead be held by means of remote communication, as may be designated by the Board of Directors in the notice of the meeting.
1.4    Notice of Meetings. Not less than 10 nor more than 90 days before the date of a stockholders’ meeting, the Secretary shall give each stockholder entitled to vote at or to receive notice of each stockholders’ meeting, including all holders of Voting Common Stock and/or Non-Voting Common Stock (each as defined in the Certificate of Incorporation of the Corporation (the “Charter”), notice stating the date, hour and place of the meeting, the means of remote communications, if any, by which stockholders may be deemed to be present in person and vote at such meeting, the record date for determining the stockholders entitled to vote at the meeting, if such date is different from the record date for determining stockholders entitled to notice of the meeting, and, in the case of a special meeting or a meeting at which an action proposed to be taken requires advance notice of the purpose of such action, the purpose or purposes for which the meeting is called. Notice is given to a stockholder when it is (i) personally delivered to the stockholder, (ii) left at the stockholder’s residence or usual place of business, (iii) mailed to the stockholder, postage prepaid, at the stockholder’s address as it


appears on the records of the Corporation, or (iv) transmitted to the stockholder by electronic mail to any electronic mail address of the stockholder or by any other electronic means.
1.5    Quorum. The presence in person or by proxy of the holders of record of a majority of the shares of the capital stock of the Corporation issued and outstanding and entitled to vote thereat shall constitute a quorum at all meetings of the stockholders, except as otherwise provided by law, by the Charter, or by these Bylaws. For purposes of the foregoing, where a separate vote by class or classes is required for any matter, the holders of a majority of the outstanding shares of such class or classes, present in person or represented, shall constitute a quorum to take action with respect to that vote on that matter. If less than a quorum shall be in attendance at the time for which the meeting shall have been called, the meeting may be adjourned from time to time as provided in Section 1.6 hereof by a majority vote of the stockholders entitled to vote thereat that are present or represented, without any notice other than by announcement at the meeting.
The stockholders who are entitled to vote and are present at any duly organized meeting may continue to do business for which the particular meeting was called until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. The absence from any meeting in person or by proxy of holders of the number of shares of stock of the Corporation required for action upon any given matter shall not prevent action at the meeting on any other matter or matters that may properly come before the meeting, so long as there are present, in person or by proxy, holders of the number of shares of voting stock of the Corporation required for action upon the other matter or matters.
1.6    Adjournment. Any meeting of the stockholders of the Corporation may be adjourned from time to time without notice other than announcement at the meeting at which the adjournment is taken. At any adjourned meeting at which a quorum shall be present any action may be taken that could have been taken at the meeting originally called. A meeting may not be adjourned to a date more than 120 days after the original record date without further notice of the adjourned meeting date.
1.7    Conduct of Meetings. Meetings of stockholders shall be presided over by the Chairman of the Board of Directors, or, in his absence or inability to act, by the President/Chief Executive Officer of the Corporation or if none of said persons is present or able to act, by a chairman to be elected at the meeting. The Secretary of the Corporation, or if he is not present, any Assistant Secretary shall act as secretary of such meetings; in the absence of the Secretary and any Assistant Secretary, the presiding officer may appoint a person to act as secretary of the meeting.
1.8    Conduct of Business. The chairman of any meeting of stockholders shall determine the order of business and the procedures to be taken at the meeting, including such regulation of the manner of voting and the conduct of discussion as he determines to be appropriate.
1.9    Advance Notice of Matters to be Presented at an Annual Meeting of Stockholders. At an annual meeting of the stockholders, only such business shall be conducted as shall have
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been properly brought before the meeting as set forth below. To be properly brought before an annual meeting, such business must (a) be specified in the notice of the meeting (or any supplement thereto) given by the Corporation pursuant to Section 1.4 hereof, (b) be brought before the meeting by or under the direction of the Board of Directors (or the Chairman or Vice Chairman of the Board or the President/Chief Executive Officer), or (c) be properly brought before the meeting by a stockholder entitled to vote at a meeting of stockholders. In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a stockholder (i.e., the business must be related to a proper subject matter for stockholder action), the stockholder must have given timely notice thereof in writing to the Secretary. To be timely, such stockholder’s notice must be delivered to or mailed and received by the Secretary at the principal executive offices of the Corporation, not later than 90 days nor earlier than 120 days prior to the anniversary date of the mailing of proxy materials by the Corporation in connection with the immediately preceding annual meeting of stockholders of the Corporation; provided, however, that if less than 100 days’ prior public disclosure of the date of the meeting is made by the Corporation or with respect to the Corporation’s first annual meeting, any such notice by a stockholder must be so received not later than the 10th day following the day on which such prior public disclosure of the date of the meeting is first made by the Corporation. Public disclosure by the Corporation of a meeting date or other matter contemplated by this Section 1.9 shall be deemed to have been made if communicated by notice to stockholders pursuant to Section 1.4 hereof, or by any filing with the Securities and Exchange Commission, or by any general mailing to stockholders of record, or by public announcement or by other means reasonably calculated to constitute public disclosure.
A stockholder’s notice to the Secretary shall set forth as to each matter such stockholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and address, as they appear on the Corporation’s books, of the stockholder proposing such business and, to the extent known, any other stockholders known by such stockholder to be supporting such proposal, (iii) the class and number of shares of the Corporation’s capital stock that are beneficially owned by such stockholder on the date of such stockholder notice and, to the extent known, by any other stockholders known by such stockholder to be supporting such proposal on the date of such stockholder notice, (iv) the identification of any person retained or to be compensated by the stockholder submitting the proposal, or any person acting on his or her behalf, to make solicitations or recommendations to stockholders for the purpose of assisting in the passage of such proposal and a brief description of the terms of such employment, retainer or arrangement for compensation, and (v) any material interest of the stockholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at the annual meeting except in accordance with the procedures set forth in this Section 1.9; provided, however, that nothing in this Section 1.9 shall be deemed to preclude discussion by any stockholder of any business properly brought before the annual meeting in accordance with such procedures.
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The presiding officer at the meeting shall have the authority, if the facts warrant, to determine that business was not properly brought before the meeting in accordance with the provisions of this Section 1.9, and if he should so determine, he shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted.
1.10    Advance Notice of Nominees for Directors. Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors at any meeting of stockholders; provided that, notwithstanding anything to the contrary contained herein, designations in accordance with Section 3.2 of the Corporation’s Stockholders’ Agreement dated April 13, 2021, (as may be amended or supplemented from time to time, the “Stockholders’ Agreement”) shall be deemed to be in full compliance with this Section 1.10. Nominations of persons for election to the Board of Directors may be made at an annual meeting of stockholders or at a special meeting of stockholders as to which the notice of meeting provides for election of directors, by or under the direction of the Board of Directors, or by any nominating committee or person appointed by the Board of Directors, or by any stockholder of the Corporation entitled to vote for the election of directors at the meeting who complies with the notice procedures set forth in this Section 1.10. Such nominations, other than those made by or under the direction of the Board of Directors, shall be made pursuant to timely notice in writing to the Secretary. To be timely, such stockholder’s notice shall be delivered to or mailed and received by the Secretary at the principal executive offices of the Corporation (a) with respect to an election to be held at an annual meeting, not later than 90 days nor earlier than 120 days prior to the anniversary date of the mailing of proxy materials by the Corporation in connection with the immediately preceding annual meeting of stockholders of the Corporation; provided, however, that if less than 100 days’ prior public disclosure (as “public disclosure” is contemplated by Section 1.9 hereof) of the date of the meeting is made by the Corporation or with respect to the Corporation’s first annual meeting, any such notice by a stockholder must be so received not later than the 10th day following the day on which such prior public disclosure of the date of the meeting is first made by the Corporation and (b) with respect to an election to be held at a special meeting of stockholders for the election of directors, not later than the 10th day following the day on which such prior public disclosure of the date of the meeting is first made by the Corporation.
Such stockholder’s notice shall set forth: (v) as to each person whom the stockholder proposes to nominate for election or re-election as a director and as to the stockholder giving the notice, (i) the name, age, business address and residence address of the person (and as the address appears on the Corporation’s books, if different), (ii) the principal occupation or employment of the person, (iii) the class and number of shares of stock of the Corporation which are beneficially owned by the person on the date of such stockholder notice, and (iv) any other information relating to the person that is required to be disclosed in solicitations for proxies for election of directors pursuant to the proxy rules under the Securities Exchange Act of 1934, as amended, or any successor rule thereto (to the extent such rules are applicable to the Corporation); (w) as to any person known by the stockholder giving the notice to be supporting any such nominee, (i) the name and address, as they appear on the Corporation’s books, of such persons and (ii) the class and number of shares of stock of the Corporation which are beneficially owned by such persons; (x) a representation that the stockholder giving the notice intends to
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appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (y) a description of all arrangements or understandings between the stockholder giving the notice and each nominee and any arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; and (z) the consent of each nominee to serve as a director of the Corporation if so elected.
The Corporation may require any proposed nominee to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of such proposed nominee to serve as a director of the Corporation. No person shall be eligible for election as a director of the Corporation unless nominated in accordance with the procedures set forth herein.
The presiding officer at the meeting shall have the authority, if the facts warrant, to determine that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded.
1.11    Voting. At all meetings of stockholders, every stockholder entitled to vote thereat shall have one vote for each share of Voting Common Stock standing in his name on the books of the Corporation on the date for the determination of stockholders entitled to vote at such meeting, except as otherwise provided by law, by the Charter or by these Bylaws.
Each stockholder entitled to vote at any meeting of stockholders of the Corporation may authorize another person or persons to act for him as proxy by (i) signing a writing authorizing the other person to act as proxy in the manner permitted by Delaware law or (ii) transmitting, or authorizing the transmission of, an authorization for the person to act as proxy to (a) the person authorized to act as proxy or (b) any other person authorized to receive the proxy authorization on behalf of the person authorized to act as the proxy, including a proxy solicitation or proxy support service organization. The authorization may be transmitted by a telegram, cablegram, datagram, electronic mail, or any other electronic or telephonic means. Further, to the extent permitted by Delaware law, the placing of a stockholder’s name on a proxy pursuant to telephonic or electronically transmitted instructions obtained pursuant to procedures reasonably designed to verify that such instructions have been authorized by such stockholder shall constitute execution of such proxy by or on behalf of such stockholder. No proxy shall be valid after the expiration of 11 months from the date thereof, unless otherwise provided in the proxy. Every proxy shall be revocable at the pleasure of the stockholder authorizing it, except in those cases in which the proxy states that it is irrevocable and where an irrevocable proxy is permitted by law. A proxy purporting to be by or on behalf of the stockholder authorizing it shall be deemed valid unless challenged at or prior to its exercise.
All matters presented to a vote of the stockholders of the Corporation shall be decided by the holders of a majority of the shares represented in person or by proxy at the meeting and entitled to vote, except with respect to the election of directors, which shall be decided by a plurality of the votes cast and except as otherwise provided by the Charter or applicable law. Where a separate vote by class or classes is required, the affirmative vote of the holders of a majority of the shares of such class or classes present in person or represented by proxy at the
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meeting shall be the act of such class or classes, except as otherwise provided by law or by the Charter or these Bylaws.
1.12    Fixing of Record Date. The Board of Directors may set a record date for the purpose of determining stockholders entitled to notice of and to vote at any meeting of the stockholders of the Corporation. The record date may not be prior to the close of business on the day the record date is fixed and may not be more than 90 days prior to the date of the notice or the date of the meeting (except as permitted by Section 1.6 hereof), nor fewer than 10 days before the date of the meeting. If no record date has been fixed, the record date for the determination of stockholders entitled to notice of or to vote at a meeting of stockholders of the Corporation shall be the later of the close of business on the day on which notice of the meeting is mailed or the 30th day before the meeting.
1.13    Inspectors. The Board of Directors may, in advance of any meeting of stockholders of the Corporation, appoint one or more inspectors to act at the meeting or at any adjournment of the meeting. If the inspectors shall not be so appointed or if any of them shall fail to appear or act, the chairman of the meeting may appoint inspectors. Each inspector, before entering upon the discharge of his duties, shall, if required by the Board of Directors or the chairman, as the case may be, take and sign an oath to execute faithfully the duties of inspector at the meeting with strict impartiality and according to the best of his ability. The inspectors shall determine the number of shares outstanding and the voting power of each share, the number of shares represented at the meeting, the existence of a quorum and the validity and effect of proxies, and shall receive votes, ballots or consents, hear and determine all challenges and questions arising in connection with the right to vote, count and tabulate all votes, ballots or consents, determine the result, and do those acts as are proper to conduct the election or vote with fairness to all stockholders. On request of the chairman of the meeting, the inspectors shall make a report in writing of any challenge, request or matter determined by them and shall execute a certificate of any fact found by them. No Director or candidate for the office of Director shall act as inspector of an election of Directors. Inspectors need not be stockholders of the Corporation.
1.14    Consent of Stockholders in Lieu of Meeting. Any action required or permitted to be taken by the holders of any class or series of stock of the Corporation at a meeting, including, without limitation, the election of directors, may be taken without a meeting and prior notice, by signed written consent, delivered to the Corporation, of the holders of such class or series of stock of the Corporation having such minimum number of votes that would be necessary to take such action at a meeting at which all shares entitled to vote thereon were present and voted.
1.15    Telephone Conference. The stockholders of the Corporation may participate in any meeting by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other at the same time. Participation by such means shall constitute presence in person at the meeting.
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ARTICLE II
BOARD OF DIRECTORS
2.1    General Powers. The property, business and affairs of the Corporation shall be managed under the direction of the Board of Directors. All powers of the Corporation may be exercised by or under authority of the Board of Directors except as conferred on or reserved to the stockholders by law, by the Corporation’s Charter, or by these Bylaws. All acts done at any meeting of the Directors or by any person acting as a Director, so long as his successor shall not have been duly elected or appointed, shall, notwithstanding that it be afterwards discovered that there was some defect in the election of the Directors or of such person acting as aforesaid or that they or any of them were disqualified, be as valid as if the Directors or such other person, as the case may be, had been duly elected and were or was qualified to be Directors or a Director of the Corporation.
2.2    Majority Approval. Unless delegated to a committee of the Board by a majority vote of the entire Board of Directors, the following actions shall be brought before the Board of Directors and shall require the affirmative approval of at least a majority of the entire Board of Directors:
(a)    completing the liquidation, dissolution or winding-up of the business and affairs of the Corporation, effecting any recapitalization, reorganization, merger, consolidation, change of control, sale of all or any substantial portion of the assets or consummating any equity offering;
(b)    entering into any agreement with respect to a material acquisition by the Corporation or any of its subsidiaries;
(c)     (i) increasing the authorized number of directors constituting the board of directors of Forbright Bank or appointing members of the board of directors of Forbright Bank (other than any such appointments in compliance with Section 3.9 of the Stockholders’ Agreement), (ii) prior to April 13, 2025, replacing up to three directors on the board of directors of Forbright Bank (provided, that, if the Board of Directors determines to replace directors on the board of directors of Forbright Bank pursuant to this Section 2.2(c)(ii), the directors to be replaced shall be identified by John Delaney), or (iii) following April 13, 2025, decreasing the authorized number of directors constituting the board of directors of Forbright Bank, or removing or replacing any such directors (other than any such appointments in compliance with Section 3.9 of the Stockholders’ Agreement); provided, however, that any modifications to the board of directors of Forbright Bank in accordance with this Section 2.2(c) shall comply with applicable law and regulation;
(d)    following April 13, 2025, appointing members of the board of managers or directors (or similar governing body) of any subsidiary of the Corporation other than Forbright Bank, or amending, altering or repealing any provision related to the governance structure of any such subsidiary; provided, however, that any modifications to the board of directors of any subsidiary of the Corporation other than Forbright Bank, or any amendment, altering, or
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repealing of any provision related to the governance structure of any such subsidiary in accordance with this Section 2.2(d) shall comply with applicable law and regulation;
(e)    establishing the consolidated annual budget for the Corporation and its subsidiaries, which budget shall include an operating plan and a capital expenditure budget;
(f)    entering into, or effecting a material change in, any compensatory agreements or arrangements with the Corporation’s President/Chief Executive Officer;
(g)    adopting, or effecting a material change in, any benefits or compensation plans and arrangements which are generally applicable to the employees of the Corporation and its subsidiaries;
(h)    approving any grant of Corporation capital stock, or securities convertible into Corporation capital stock, to the officers named in the Corporation’s 2014 Stock Incentive Plan, as amended;
(i)    adopting, or effecting any material change in, the credit and risk management policies and plans of the Corporation and its subsidiaries; and
(j)    appointing or removing the Chairman of the Board or any Vice-Chairman of the Board, or elect a chairman other than the Chairman of the Board to preside at any meeting of the Board.
2.3    Special Approval. The Corporation shall not, either directly or indirectly, do any of the following without (in addition to any other vote required by law, the Certificate of Incorporation or these Bylaws) the affirmative vote of directors constituting at least two-thirds (2/3rds) of the entire Board of Directors:
(a)    prior to April 13, 2025, complete the liquidation, dissolution or winding-up of the business and affairs of the Corporation, effect any recapitalization, reorganization, merger, consolidation, change of control, sale of all or any substantial portion of the assets or consummate the Corporation’s first underwritten public offering of its capital stock under the Securities Act of 1933 and any equity offering with proceeds greater than $100,000,000;
(b)    amend, alter or repeal any provision of the Certificate of Incorporation or Bylaws of the Corporation;
(c)    create, or authorize the creation of, any class or series of capital stock, including, without limitation, the designation of rights and privileges of any class or series preferred stock of the Corporation;
(d)    purchase or redeem (or permit any subsidiary to purchase or redeem) or pay or declare any dividend or make any distribution on, any shares of capital stock of the Corporation other than repurchases of stock from former employees, officers, directors, consultants or other persons who performed services for the Corporation or any subsidiary in
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connection with the cessation of such employment or service at the lower of the original purchase price or the then-current fair market value thereof;
(e)    change the principal business of the Corporation or any of its subsidiaries;
(f)    enter into or be a party to any transaction with any director, officer, affiliate or Major Investor (as defined in the Stockholders’ Agreement) or any “associate” (as defined in Rule 12b-2 promulgated under the Securities Exchange Act of 1934, as amended) of any such person;
(g)    increase or decrease the authorized number of directors constituting the Board of Directors, which is hereby authorized to consist of 11 directors;
(h)    prior to April 13, 2025, decrease the authorized number of directors constituting the board of directors of Forbright Bank, which is hereby authorized to consist of 11 directors, or remove or replace more than three of such directors (other than any such appointments in compliance with Section 3.9 of the Stockholders’ Agreement); provided, however, that any modifications to the board of directors of Forbright Bank in accordance with this Section 2.3(h) shall comply with applicable law and regulation;
(i)    hire or terminate the Corporation’s President/Chief Executive Officer prior to April 13, 2025;
(j)    prior to April 13, 2025, appoint or remove members of the board of managers or directors (or similar governing body) of any subsidiary of the Corporation other than Forbright Bank, or amend, alter or repeal any provision related to the governance structure of any such subsidiary; provided, however, that any modifications to the board of directors of any subsidiary of the Corporation other than Forbright Bank, or any amendment, altering, or repealing of any provision related to the governance structure of any such subsidiary in accordance with this Section 2.3(j) shall comply with applicable law and regulation;
(k)    amend, alter or repeal any written policies of the Corporation related to serving as a director, or other criteria or qualifications established by the Nominating, Compensation and Governance Committee (the “NCG Committee”), applicable to all members of the Board of Directors, or its equivalent, or any ethics and compliance program of the Company applicable to all members of the Board of Directors;
(l)    amend, alter or repeal any provision of the Corporation’s 2014 Stock Incentive Plan; or
(m)    revoking the resolutions of the Company’s Board of Directors dated February 11, 2021, authorizing the Company to pursue a limited repurchase of up to $50,000,000 worth of the Company’s outstanding Common Stock, as more particularly described in the Unanimous Written Consent Without A Meeting of the Board of Directors of Congressional Bancshares, Inc. dated February 11, 2021.
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2.4    Number and Term of Office. Subject to Section 2.3(g), the number of the members of the Board of Directors (the “Directors”) shall be fixed from time to time by resolution of the Board of Directors. No reduction in the number of Directors by resolution of the Board shall have the effect of removing any Director from office prior to the expiration of his term. For the avoidance of doubt, the stockholders shall not be entitled to fix the number of members of the Board of Directors.
The Directors shall be divided into three classes as nearly equal in number as possible, as determined by the Board, with the initial term of office of the first class of such Directors to expire at the 2022 annual meeting of stockholders of the Corporation, the initial term of office of the second class of such Directors to expire at the 2023 annual meeting of stockholders of the Corporation and the initial term of office of the third class of such Directors to expire at the 2024 annual meeting of stockholders of the Corporation, with each class of Directors to hold office until their successors have been duly elected and qualified. At each annual meeting of stockholders following such initial classification and election, Directors elected to succeed the Directors whose terms expire at such annual meeting shall be elected to hold office for a term of three years following their election and until their successors have been duly elected and qualified. If the number of Directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain or attain a number of Directors in each class as nearly equal as reasonably possible, but no decrease in the number of Directors may shorten the term of any incumbent Director.
2.5    Vacancies. Subject to Article III of the Stockholders Agreement, (a) newly created directorships resulting from any increase in the number of Directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal from office or other cause shall be filled by a majority of all of the votes of stockholders entitled to be cast on the matter, and the Directors so chosen shall hold office for a term expiring at the next annual meeting of stockholders at which successors shall be elected and shall qualify; (b) whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more Directors by the Charter, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the Directors elected by such class or classes or series thereof then in office, or by the sole remaining Director so elected; and (c) any Director appointed to fill a vacancy shall hold office until and his or her successor is elected and qualified, unless such Director resigns or is removed prior to such time.
2.6    Removal of Directors. A Director may be removed from office only (a) pursuant to Section 3.4 of Stockholders’ Agreement or (b) for Cause (as defined in the Stockholders’ Agreement).
2.7    Resignation. A Director of the Corporation may resign at any time by giving written notice of his resignation to the Board of Directors, the Chairman of the Board, the President/Chief Executive Officer or the Secretary of the Corporation. A resignation shall take effect on the date specified in the notice of resignation or, should an effective date not be specified, immediately upon receipt of the notice of resignation. Unless otherwise specified therein, such resignation shall take effect upon delivery.
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2.8    Place of Meeting. The Board of Directors may hold their meetings and have one or more offices, and keep the books of the Corporation, either within or outside the State of Delaware, at such place or places as they may from time to time determine. The Board of Directors may hold their meetings by conference telephone or other similar electronic communications equipment in accordance with the provisions of the Delaware General Corporation Law.
2.9    Regular Meetings. Regular meetings of the Board of Directors may be held without notice at such time and place within or without the State of Delaware as shall from time to time be determined by resolution of the Board; provided that (a) such meetings shall occur no less frequently than quarterly and (b) notice of every resolution of the Board fixing or changing the time or place for the holding of regular meetings of the Board shall be sent promptly to each Director not present at the meeting at which such change was made. Such notice shall be in the manner provided for notice of special meetings of the Board. The annual meeting of the Board of Directors shall be held immediately following the annual stockholders’ meeting. Any business may be transacted at any regular meeting of the Board.
2.10    Special Meetings. Special meetings of the Board of Directors shall be held at any time or place within or without the State of Delaware whenever called by direction of the Chairman of the Board or the President/Chief Executive Officer; provided that a special meeting must be called by the Chairman of the Board, the President/Chief Executive Officer or the Secretary upon written request of three members of the Board of Directors. Notice of each special meeting of the Board of Directors shall be given by the Secretary as hereinafter provided. Each notice shall state the date, time, place and purpose(s) of the meeting and shall be delivered or transmitted to each Director, either personally or by telephone or other standard form of telecommunication or by electronic mail to any electronic mail address of the Director, at least 48 hours before the time at which the meeting is to be held, or by first-class mail, postage prepaid, addressed to the Director at his residence or usual place of business, and mailed at least three days before the day on which the meeting is to be held, or transmitted by telegraph, cable or other communication leaving a visual record at least two days before the meeting.
Notice, when required, of any meeting of the Board of Directors or a committee of the Board need not be given to any Director who shall, either before or after the meeting, sign a written waiver of notice that is filed with the records of the meeting or who shall attend the meeting.
2.11    Quorum. Two-thirds of the entire number of Directors shall constitute a quorum for the transaction of business at all meetings of the Board of Directors; provided, however, if for two consecutive properly noticed meetings, a quorum is not present, the quorum for the next meeting of the Board of Directors shall be a majority of the entire number of Directors, so long as the only matters to be considered at such meeting are the same matters proposed to be addressed at the two prior called and properly noticed meetings. The act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by law or by the Charter or by these Bylaws.
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In the absence of a quorum at any meeting of the Board, a majority of the Directors present may adjourn the meeting to another date, time and place until a quorum shall be present. Notice of the date, time and place of any adjourned meeting shall be given to the Directors who were not present at the time of the adjournment and, unless the date, time and place were announced at the meeting at which the adjournment was taken, to the other Directors. At any adjourned meeting at which a quorum is present, any business may be transacted that might have been transacted at the meeting as originally called.
2.12    Conduct of Meetings. Meetings of Directors shall be presided over by the Chairman of the Board, or, in his absence or inability to act, the President/Chief Executive Officer, if also a Director, or, in the absence or inability of the President/Chief Executive Officer to act, another Director chosen by a majority of the Directors present, shall act as chairman of the meeting and preside at the meeting. The Secretary of the Corporation, or if he is not present, any Assistant Secretary shall act as secretary of such meetings; in the absence of the Secretary and any Assistant Secretary, the presiding officer may appoint a person to act as secretary of the meeting.
2.13    Action by Written Consent. Unless otherwise restricted by the Charter, any action required or permitted to be taken at a meeting of the Board of Directors may be taken without a meeting, if a unanimous written consent which sets forth the action is signed by each member of the Board and filed with the minutes of proceedings of the Board.
2.14    Compensation of Directors. Each Director shall be entitled to receive
compensation, if any, as may from time to time be fixed by the affirmative vote of Directors constituting at least two-thirds (2/3rds) of the entire Board of Directors, including a fee for each meeting of the Board or any committee thereof, regular or special, he attends. Directors may also be reimbursed by the Corporation for all reasonable expenses incurred in traveling to and from the place of a Board or committee meeting.
2.15    Committees. The Board of Directors may, by resolution passed by a majority of the entire Board, designate an executive and one or more other committees. Each committee shall consist of one or more of the Directors of the Corporation, which, to the extent provided in the resolution and as permitted by law, shall have and may exercise the powers of the Board of Directors. Such committee or committees shall have such names as may be determined from time to time by resolution adopted by the Board of Directors.
The Board of Directors shall appoint an NCG Committee, which shall be composed of at least three directors. The Board shall appoint to the committee (a) one of the Delaney Designees (as defined in the Stockholders’ Agreement), which such Delaney Designee shall be selected by John Delaney, (b) the most recently elected director designated pursuant to Section 3.2(e) of the Stockholders’ Agreement (who at the time of adoption of these Bylaws shall be deemed to be Christopher Jones) and (c) one Investor Designee (as defined in the Stockholders’ Agreement), rotating each year between first, a BVA Designee, second, a CBE and third a GPC Designee (in each case as defined in the Stockholders’ Agreement) (who at the time of adoption of these Bylaws shall be deemed to be Cliff Brokaw). The NCG Committee shall nominate for election or
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appointment as directors those individuals designated as director nominees pursuant to Section 3.2 of the Stockholders’ Agreement (other than the Independent Director (as defined in the Stockholders’ Agreement)).
At least thirty days prior to the expiration of each term of the Independent Director, the Board of Directors shall appoint a Special Nominating and Governance Committee, which shall be composed of four directors as follows: (a) one Delaney Designee, (b) one BVA Designee, (c) one CBE Designee and (d) one GPC Designee (in each case as defined in the Stockholders’ Agreement). Upon the expiration of the term of the Independent Director, the Special Nominating and Governance Committee shall either (x) nominate for re-election, or re-appointment, the Independent Director, or (y) nominate a director selected in accordance with Section 3.2(c) of the Stockholders’ Agreement, and after such nomination the Special Nominating and Governance Committee shall be dissolved.
The Board of Directors shall appoint an Audit Committee, which shall be composed of at least three directors, including (i) at least one Delaney Designee; provided that if no Delaney Designee is eligible to serve on the Audit Committee, the director who shall serve in place of one Delaney Designee shall be selected by John Delaney so long as that individual is eligible to serve on the Audit Committee, and (ii) at least one Investor Designee, rotating annually between first, a CBE Designee, second, a GPC Designee and third, a BVA Designee. Any Investor (as defined in the Stockholders’ Agreement) who did not designate the Investor Designee appointed to the Audit Committee, shall have the right, but not the obligation, to designate one of its respective Investor Designees as a non-voting observer to such committee.
In the event that the Board of Directors appoints any additional committees of the Board (including an executive committee), to the extent permitted by applicable regulatory requirements, at least one Investor Designee shall serve on such committee, rotating annually between a GPC Designee, a BVA Designee and a CBE Designee.
Notice of committee meetings shall be given in the same manner as notice for special meetings of directors. A majority of the members of a committee, if there are three or more members of the committee, or all of the members of the committee, if there are less than three members, shall constitute a quorum for the transaction of any business at any meeting of the committee. The act of a majority of the committee members, if there are three or more committee members present, or all of the committee members, if there are less than three committee members present, shall be the act of the committee. The Board of Directors may designate a chairman of any committee, and such chairman or any two members of the committee, if the committee has at least two members, or the sole member of the committee, if the committee has one member, may fix the time and place of its meeting unless the Board shall otherwise provide. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required. The members of a committee present at any meeting, whether or not they constitute a quorum, may appoint a Director to act in the place of an absent member.
2.16    Honorary Directors; Directors Emeritus. The Board of Directors may from time to time designate and appoint one or more qualified persons to the position of “Honorary Director” or “Director Emeritus.” Each Honorary Director or Director Emeritus shall serve for such term as
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shall be specified in the resolution of the Board of Directors appointing him or until his earlier death, resignation or removal. An Honorary Director or Director Emeritus may be removed from such position with or without cause by the vote of a majority of the Board of Directors given at any regular or special meeting. An Honorary Director or Director Emeritus may be invited to attend all meetings of the Board of Directors but shall not be present at any portion of a meeting from which the Honorary Director or Director Emeritus shall have been excluded by vote of the Directors. An Honorary Director or Director Emeritus shall not be a “Director” or “Officer” within the meaning of the Corporation’s Charter, or of these Bylaws; shall not be deemed to be a member of the Board of Directors for purposes of the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended; shall not hold himself out as any of the foregoing; and shall not be liable to any person for any act of the Corporation. Notice of regular or special meetings may be given to an Honorary Director or Director Emeritus but the failure to give such notice shall not affect the validity of any meeting or the action taken thereat. An Honorary Director or Director Emeritus shall not have the powers of a Director, may not vote at meetings of the Board of Directors, and shall not take part in the operation or governance of the Corporation. An Honorary Director or Director Emeritus shall be entitled to receive compensation, if any, as may from time to time be fixed by the Board of Directors, and may also be reimbursed for expenses incurred in attending meetings of the Board of Directors or otherwise.
ARTICLE III
OFFICERS
3.1    Election, Tenure, and Compensation. The officers of the Corporation shall be a President/Chief Executive Officer, a Secretary and a Treasurer, and also such other officers including a Chairman of the Board, a Vice Chairman of the Board and/or one or more assistants to the foregoing officers as the Board of Directors from time to time may consider necessary for the proper conduct of the business of the Corporation. The officers shall be elected annually by the Board of Directors at its first meeting following the annual meeting of the stockholders, except where a longer term is expressly provided in an employment contract duly authorized and approved by the Board of Directors. The Chairman of the Board and Vice Chairman of the Board shall be Directors and the other officers may, but need not be, Directors.
Any two or more of the above offices, except those of President/Chief Executive Officer , may be held by the same person, but no officer shall execute, acknowledge or verify any instrument in more than one capacity if such instrument is required by law or by these Bylaws to be executed, acknowledged or verified by any two or more officers. The compensation or salary paid all officers of the Corporation shall be fixed by resolutions adopted by the Board of Directors or a committee thereof, but this power may be delegated to any officer with respect to other officers under his control.
In the event that any office other than an office required by law shall not be filled by the Board of Directors, or, once filled, subsequently becomes vacant, then such office and all references thereto in these Bylaws shall be deemed inoperative unless and until such office is filled in accordance with the provisions of these Bylaws. A vacancy in any office whether arising
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from death, resignation, removal or any other cause may be filled in the manner prescribed in these Bylaws for the regular election or appointment to the office.
Any officer, agent or employee of the Corporation may be removed by the Board of Directors whenever in the Board’s judgment the best interests of the Corporation will be served thereby, and the Board may delegate the power of removal as to agents and employees not elected or appointed by the Board of Directors. Removal shall be without prejudice to the person’s contract rights, if any, but the appointment of any person as an officer, agent or employee of the Corporation shall not of itself create contract rights.
Any officer of the Corporation may resign at any time by giving written notice of his resignation to the Board of Directors, the Chairman of the Board, the President/Chief Executive Officer or the Secretary. Any resignation shall take effect at the time specified therein or, if the time when it shall become effective is not specified therein, immediately upon its receipt. Acceptance of a resignation shall not be necessary to make it effective unless the resignation states otherwise.
3.2    Powers and Duties of the Chairman of the Board. The Chairman of the Board, if one is elected, shall preside at all meetings of the Board of Directors and of the stockholders unless the Board of Directors shall by a sixty-six and two-thirds percent (66 2/3%) vote of a quorum thereof elect a chairman other than the Chairman of the Board to preside at such meetings. The Chairman of the Board shall have such other powers and perform such other duties as may be assigned to him from time to time by the Board of Directors.
3.3    Powers and Duties of the Vice Chairman of the Board. In the absence of the Chairman of the Board, the Vice Chairman of the Board, if one is elected, shall act in the place of the Chairman of the Board and shall assume his duties and shall be vested with all of his powers and authorities. The Vice Chairman of the Board shall have such other powers and perform such other duties as may be assigned to him from time to time by the Board of Directors.
3.4    Powers and Duties of the President/Chief Executive Officer. The President/Chief Executive Officer shall be the chief executive officer of the Corporation and, subject to the supervision of the Board of Directors, shall have the general direction over the business, affairs and property of the Corporation and of its officers, employees and agents. In the absence of the Chairman of the Board and Vice Chairman of the Board, or if no Chairman of the Board or Vice Chairman of the Board has been chosen, the President/Chief Executive Officer shall preside at all meetings of the stockholders and of the Board of Directors and exercise the powers and perform the duties of the Chairman of the Board. The President/Chief Executive Officer also shall exercise such other powers and perform such other duties as from time to time may be assigned to him by the Board of Directors.
3.5    Powers and Duties of the Vice Presidents. The Board of Directors may appoint one or more Vice Presidents. Each Vice President shall have such powers and shall perform such duties as may be assigned to him by the Board of Directors or the President. In case of the absence or inability to act of the President, the duties of that office shall be performed by the most senior of the Vice Presidents.
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3.6    Secretary; Assistant Secretary. The Secretary shall give, or cause to be given, notice of all meetings of stockholders and the Board of Directors and all other notices required by law or by these Bylaws, and in case of his absence or refusal or neglect to do so, any such notice may be given by any person thereunto directed by the President/Chief Executive Officer, or by the Board of Directors or stockholders upon whose written request the meeting is called as provided in these Bylaws. The Secretary shall record all the proceedings of the meetings of the stockholders and of the Board of Directors in books provided for that purpose, and he shall perform such other duties as may be assigned to him by the Board of Directors or the President/Chief Executive Officer. He shall have custody of the seal of the Corporation and shall affix the same to all instruments requiring it, when authorized by the Board of Directors or the President/Chief Executive Officer, and attest to the same. In general, the Secretary shall perform all the duties generally incident to the office of Secretary, subject to the control of the Board of Directors and the President/Chief Executive Officer.
The Board of Directors may appoint an Assistant Secretary or more than one Assistant Secretary. Each Assistant Secretary shall (except as otherwise provided by resolution of the Board of Directors) have power to perform all duties of the Secretary in the absence or inability to act of the Secretary and shall have such other powers and shall perform such other duties as may be assigned to him by the Board of Directors, the President/Chief Executive Officer or the Secretary.
3.7    Treasurer; Assistant Treasurer. The Treasurer shall have custody of all the funds and securities of the Corporation, and he shall keep full and accurate account of receipts and disbursements in books belonging to the Corporation. He shall deposit all moneys and other valuables in the name and to the credit of the Corporation in such depository or depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors or the President/Chief Executive Officer, taking proper vouchers for such disbursements. He shall render to the President/Chief Executive Officer and the Board of Directors, whenever either of them so requests, an account of all his transactions as Treasurer and of the financial condition of the Corporation. The Treasurer shall perform all the duties generally incident to the office of the Treasurer, subject to the control of the Board of Directors and the President/Chief Executive Officer.
The Board of Directors may appoint an Assistant Treasurer or more than one Assistant Treasurer. Each Assistant Treasurer shall (except as otherwise provided by resolution of the Board of Directors) have power to perform all duties of the Treasurer in the absence or inability to act of the Treasurer and shall have such other powers and shall perform such other duties as may be assigned to him by the Board of Directors, the President/Chief Executive Officer or the Treasurer.
3.8    Bonds. The Board of Directors may require any officer or agent of the Corporation to execute a bond to the Corporation in such sum and with such surety or sureties as the Board of Directors may determine.
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ARTICLE IV
CAPITAL STOCK
4.1    Stock Certificates; Uncertificated Shares. The shares the Corporation shall be represented by certificates; provided that the Board of Directors may provide by resolution or resolutions that some or all of any class or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. No certificate shall be issued for any share of stock of any class until such share is fully paid in accordance with the Delaware General Corporation Law.
Stock certificates of each class shall be in such form as shall be prepared or approved by the Board of Directors. Each certificate shall be signed by the President/Chief Executive Officer or the Chairman of the Board, and countersigned by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer. The signatures may be either manual or facsimile signatures. Such a certificate shall be valid and may be issued whether or not an officer who signed it is still an officer when it is issued. The name of the Corporation and of the person owning the shares represented thereby, with the number and class of such shares and the date of issue, shall be on the face of the certificate and entered on the Corporation’s books at the time of issuance.
4.2    Regulations. The Board of Directors shall have the power and authority to make such rules and regulations as it may deem expedient concerning the issuance, transfer and registration of certificates for shares or uncertificated shares of stock of any class of the Corporation.
4.3    Fixing of Record Date for Dividends, Distributions, etc. The Board may fix, in advance, a date not more than 90 days preceding the date fixed for the payment of any dividend or the making of any distribution with respect to, or the allotment of other rights, as the record date for the determination of the stockholders entitled to receive any such dividend, distribution or allotment, and in such case only the stockholders of record at the time so fixed shall be entitled to receive such dividend, distribution or allotment. If no record date has been fixed, the record date for determining stockholders entitled to receive dividends or an allotment of any rights shall be the close of business on the day on which the resolution of the Board of Directors declaring the dividend or allotment of rights is adopted, but the payment or allotment shall not be made more than 60 days after the date on which the resolution is adopted.
4.4    Transfer of Shares.
(a)    Transfers of shares of the stock of the Corporation shall be made on the books of the Corporation by the holder of record thereof (in person or by his attorney thereunto duly authorized by a power of attorney duly executed in writing and filed with the Secretary of the Corporation) (i) if a certificate or certificates have been issued, upon the surrender of the certificate or certificates, properly endorsed or accompanied by proper instruments of transfer, representing such shares, or (ii) as otherwise prescribed by the Board of Directors.
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(b)    The Corporation shall be entitled to treat the holder of record of any share of stock as the absolute owner thereof for all purposes, including, without limitation, the rights to receive dividends or other distributions and to vote as the owner, and the Corporation shall not be bound to recognize any legal, equitable or other claim or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise expressly provided by the laws of the State of Delaware.
(c)    Notwithstanding anything to the contrary contained in these Bylaws, the Board of Directors may adopt by resolution a procedure by which a stockholder of the Corporation may certify in writing to the Corporation that any shares of stock registered in the name of the stockholder are held for the account of a specified person other than the stockholder. The resolution shall set forth the class of stockholders who may make the certification; the purpose for which the certification may be made; the form of certification and the information to be contained in it; if the certification is with respect to a record date or closing of the stock transfer books, the time after the record date or closing of the stock transfer books within which the certification must be received by the Corporation; and any other provisions with respect to the procedure which the Board considers necessary or desirable. On receipt of a certification which complies with the requirements established by the Board’s resolution, the person specified in the certification shall be, for the purpose set forth in the certification, the holder of record of the specified stock in place of the stockholder who makes the certification.
4.5    Transfer Agent And Registrar. The Board of Directors may appoint a transfer agent and/or registrar of transfers and may require that all stock certificates representing shares of any class to bear the signatures of such transfer agent or registrar of transfers, or the signatures of both.
4.6    Lost, Stolen or Destroyed Certificates. The Board of Directors or any officer authorized by the Board of Directors may direct a new certificate or uncertificated shares to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen, or destroyed. Before issuing a new certificate or uncertificated shares for stock of the Corporation alleged to have been lost, stolen or destroyed, the Board of Directors or any officer authorized by the Board of Directors may, in its discretion, require the owner of the lost, stolen or destroyed certificate (or his legal representative) to give the Corporation a bond or other indemnity, in such form and in such amount as the Board of Directors or any such officer may direct and with such surety or sureties as may be satisfactory to the Board of Directors or any such officer, sufficient to indemnify the Corporation against any claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the issuance of such new certificate or uncertificated shares.
4.7    Stock Ledger. The Corporation shall maintain a stock ledger that contains the name and address of each stockholder and the number of shares of stock, of each class registered in the name of each stockholder. The stock ledger may be in written form or in any other form that can be converted within a reasonable time into written form for visual inspection. The original or a duplicate of the stock ledger shall be kept at the offices of a transfer agent for the
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particular class of stock, within or without the State of Delaware, or, if none, at the principal office or the principal executive offices of the Corporation in the State of Delaware.
ARTICLE V
SEAL
In the event that the President/Chief Executive Officer shall direct the Secretary to obtain a corporate seal, the corporate seal shall be in such form as may be approved from time to time by the Board. The corporate seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. Duplicate copies of the corporate seal may be provided for use in the different offices of the Corporation but each copy thereof shall be in the custody of the Secretary of the Corporation or of an Assistant Secretary of the Corporation nominated by the Secretary.
ARTICLE VI
FINANCE
6.1    Bank Accounts. Such officers or agents of the Corporation as from time to time shall be designated by the Board of Directors shall have authority to deposit any funds of the Corporation in such banks or trust companies as shall from time to time be designated by the Board of Directors and such officers or agents as from, time to time shall be authorized by the Board of Directors may withdraw any or all of the funds of the Corporation so deposited in any such bank or trust company, upon checks, drafts or other instruments or orders for the payment of money drawn against the account or in the name or behalf of this Corporation, and made or signed by such officers or agents; and each bank or trust company with which funds of the Corporation are so deposited is authorized to accept, honor, cash and pay, without limit as to amount, all checks, drafts or other instruments or orders for the payment of money, when drawn, made or signed by officers or agents so designated by the Board of Directors until written notice of the revocation of the authority of such officers or agents by the Board of Directors shall have been received by such bank or trust company. There may from time to time be certified to the banks or trust companies in which funds of the Corporation are deposited, the signature of the officers or agents of the Corporation so authorized to draw against the same. In the event that the Board of Directors shall fail to designate the persons by whom checks, drafts and other instruments or orders for the payment of money shall be signed, as hereinabove provided in this Section 6.1, all of such checks, drafts and other instruments or orders for the payment of money shall be signed by the President/Chief Executive Officer and countersigned by the Secretary or Treasurer or an Assistant Secretary or an Assistant Treasurer of the Corporation.
6.2    Annual Statement of Affairs. There shall be prepared annually a full and correct statement of the affairs of the Corporation, to include a balance sheet and a financial statement of operations for the preceding fiscal year. The statement of affairs shall be submitted at the annual meeting of the stockholders and, within 20 days after the meeting, placed on file at the Corporation’s principal office. Such statement shall be prepared or caused to be prepared by such executive officer of the Corporation as may be designated in an additional or supplementary
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bylaw adopted by the Board of Directors. If no other executive officer is so designated, it shall be the duty of the President/Chief Executive Officer to prepare or cause to be prepared such statement.
ARTICLE VII
INDEMNIFICATION
The Corporation shall indemnify and advance expenses to a director or officer of the Corporation in connection with a proceeding to the fullest extent permitted by and in accordance with Section 8-145 of the Delaware General Corporation Law, as amended from time to time, subject only to limits created by applicable Delaware law (statutory or non-statutory), with respect to actions for breach of duty to the Corporation, its stockholders, and by any applicable federal or state bank holding company or bank regulatory laws or regulations (the “Indemnification Section”).
With respect to an employee or agent, other than a director or officer of the Corporation, the Corporation may, as determined by the Board of Directors, indemnify and advance expenses to such employee or agent in connection with a proceeding to the fullest extent permitted by and in accordance with the Indemnification Section.
The indemnification and advancement of expenses provided by this Article VII or provided in the Corporation’s Charter shall not be deemed exclusive of any other right, in respect of indemnification or otherwise, to which those seeking such indemnification or advancement of expenses may be entitled under any insurance or other agreement, vote of stockholders or disinterested Directors or otherwise,
The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or while a director, officer, employee or agent of the Corporation is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, other enterprise or employee benefit plan, against any liability asserted against and incurred by such person in any such capacity or arising out of such person’s position, whether or not the Corporation would have the power to indemnify such person under Delaware law.
The Corporation acknowledges that the Investor Designees may have certain rights to indemnification, advancement of expenses and/or insurance provided by the Investors and/or certain of their respective affiliates (collectively, the “Investor Indemnitors”). The Corporation hereby agrees that it (i) that it is the indemnitor of first resort (i.e., its obligations to the Investor Designees are primary and any obligation of the Investor Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities incurred by the Investor Designees are secondary), and (ii) that it shall be required to advance the full amount of expenses incurred by the Investor Designee, as applicable, and shall be liable for the full amount of all expenses and liabilities to the extent legally permitted and as required by the terms hereof and the Charter and Stockholders’ Agreement (and any other agreement regarding indemnification between the Corporation and the Investor Designee, as the case may be), without regard to any rights an
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Investor Designee may have against the Investor Indemnitor. The Corporation further agrees that no advancement or payment by the Investor Indemnitor on behalf of an Investor Designee with respect to any claim for which the Investor Designee has sought indemnification from the Corporation shall affect the foregoing and the Investor Indemnitors shall have a right of contribution and/or be subrogated to the extent of such advancement or payment to all of the rights of recovery of the Investor Designee against the Corporation. The Corporation and each Investor Designees agree that the Investor Indemnitors are express third party beneficiaries of the terms of this Article VII.
ARTICLE VIII
MISCELLANEOUS PROVISIONS
8.1    Fiscal Year. The fiscal year of the Corporation shall end on the date determined by the Board of Directors. In the absence of any such determination, the accounts of the Corporation shall be kept on a calendar year basis.
8.2    Waiver of Notice. Whenever any notice of the date, hour, place and/or purpose of any meeting of stockholders, Directors or a committee is required to be given under the provisions of the Delaware General Corporation Law or under the provisions of the Corporation’s Charter or by these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to such notice and filed with the records of the meeting, whether before or after the holding thereof, or actual attendance at the meeting in person or, in the case of a meeting of stockholders, by proxy, shall be deemed equivalent to the giving of such notice to such person.
8.3    Offices. The principal office of the Corporation shall be located in the State of Maryland. The address of the principal office may be changed from time to time pursuant to the Delaware General Corporation Law. The Corporation may have such other offices and places of business at such places within or without the State of Delaware as the Board of Directors may determine from time to time.
8.4    Voting Stock in Other Corporations. The President/Chief Executive Officer shall have full power and authority on behalf of the Corporation to attend and vote at any meeting of the stockholders of any corporation in which the Corporation may hold stock, and at any such meeting shall possess and may exercise (in person or by proxy), any and all rights, powers and privileges incident to the ownership of such stock, and which, as the owner thereof, this Corporation might have possessed and exercised if present. The President/Chief Executive Officer may grant proxies on behalf of the Corporation to any person or persons to act in his stead at such meetings. Notwithstanding the foregoing, the Board of Directors by resolution may appoint some other person to vote such shares, in which case such person and not the President/Chief Executive Officer or his proxy shall be entitled to vote such shares upon production of a certified copy of such resolution.
8.5    Books and Records. The Corporation shall keep correct and complete books and records of its accounts and transactions and minutes of the proceedings of its stockholders and Board of Directors and of any committee thereof.
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ARTICLE IX
AMENDMENTS
The Board of Directors shall have the power and authority to amend, alter, change or repeal these Bylaws or any provision thereof, and to make from time to time any additional Bylaws, by resolution adopted by two-thirds of all of the Directors, at any regular or special meeting of the Board; provided that the affirmative vote of holders of not less than eighty percent (80%) of the votes of all outstanding shares of capital stock of the Corporation entitled to vote generally in the election of directors, considered for purposes hereof as a single class, shall be required for the stockholders to adopt new bylaws or to alter, amend, or repeal bylaws.
Originally Adopted: April 12, 2021
Amendment No. 1: October 5, 2021
Amended and Restated: May 15, 2023
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Exhibit 10.1
CONGRESSIONAL BANCSHARES, INC.
5.75% FIXED TO FLOATING RATE SUBORDINATED NOTE DUE
DECEMBER 1, 2029
THE INDEBTEDNESS EVIDENCED BY THIS SUBORDINATED NOTE IS NOT A DEPOSIT AND IS NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY OR FUND.
THE INDEBTEDNESS EVIDENCED BY THIS SUBORDINATED NOTE IS SUBORDINATED AND JUNIOR IN RIGHT OF PAYMENT TO SENIOR INDEBTEDNESS (AS DEFINED IN SECTION 3 (SUBORDINATION) OF THIS SUBORDINATED NOTE) OF CONGRESSIONAL BANCSHARES, INC. (THE “COMPANY”), INCLUDING OBLIGATIONS OF THE COMPANY TO ITS GENERAL AND SECURED CREDITORS AND IS UNSECURED. IT IS INELIGIBLE AS COLLATERAL FOR ANY EXTENSION OF CREDIT BY THE COMPANY OR ANY OF ITS SUBSIDIARIES.
IN THE EVENT OF LIQUIDATION ALL HOLDERS OF SENIOR INDEBTEDNESS OF THE COMPANY SHALL BE ENTITLED TO BE PAID IN FULL WITH SUCH INTEREST AS MAY BE PROVIDED BY LAW BEFORE ANY PAYMENT SHALL BE MADE ON ACCOUNT OF PRINCIPAL OF OR INTEREST ON THIS SUBORDINATED NOTE. AFTER PAYMENT IN FULL OF ALL SUMS OWING TO SUCH HOLDERS OF SENIOR INDEBTEDNESS, THE HOLDER OF THIS SUBORDINATED NOTE, TOGETHER WITH THE HOLDERS OF ANY OBLIGATIONS OF THE COMPANY RANKING ON A PARITY WITH THE SUBORDINATED NOTES, INCLUDING (BUT NOT LIMITED TO) THE COMPANY’S EXISTING 7.00% FIXED RATE SUBORDINATED NOTES DUE 2026 AND 6.50% FIXED-TO-FLOATING RATE SUBORDINATED NOTES DUE 2026, SHALL BE ENTITLED TO BE PAID FROM THE REMAINING ASSETS OF THE COMPANY THE UNPAID PRINCIPAL AMOUNT OF THIS SUBORDINATED NOTE PLUS ACCRUED AND UNPAID INTEREST THEREON BEFORE ANY PAYMENT OR OTHER DISTRIBUTION, WHETHER IN CASH, PROPERTY OR OTHERWISE, SHALL BE MADE (I) WITH RESPECT TO ANY OBLIGATION THAT BY ITS TERMS EXPRESSLY IS JUNIOR IN THE RIGHT OF PAYMENT TO THE SUBORDINATED NOTES, (II) WITH RESPECT TO THE EXISTING JUNIOR SUBORDINATED DEBENTURES OF THE COMPANY (UNDERLYING THE OUTSTANDING TRUST PREFERRED SECURITIES) AS OF THE DATE OF THE ISSUANCE OF THIS SUBORDINATED NOTE TO WHICH THIS SUBORDINATED NOTE SHALL BE SENIOR, (III) WITH RESPECT TO ANY INDEBTEDNESS BETWEEN THE COMPANY AND ANY OF ITS SUBSIDIARIES OR AFFILIATES OR (IV) ON ACCOUNT OF ANY SHARES OF CAPITAL STOCK OF THE COMPANY.
THIS SUBORDINATED NOTE WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN MINIMUM DENOMINATIONS OF $1,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SUBORDINATED NOTE IN A DENOMINATION OF LESS THAN $1,000 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE


DEEMED NOT TO BE THE HOLDER OF THIS SUBORDINATED NOTE FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF PAYMENTS ON THIS SUBORDINATED NOTE, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS SUBORDINATED NOTE.
THIS SUBORDINATED NOTE MAY BE SOLD ONLY IN COMPLIANCE WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS. THIS SUBORDINATED NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS, OR ANY OTHER APPLICABLE SECURITIES LAWS. NEITHER THIS SUBORDINATED NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
CERTAIN ERISA CONSIDERATIONS:
THE HOLDER OF THIS SUBORDINATED NOTE, OR ANY INTEREST HEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) (EACH, A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SUBORDINATED NOTE, OR ANY INTEREST HEREIN, ARE NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE AND HOLDING. ANY PURCHASER OR HOLDER OF THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER: (I) IT IS NOT AN EMPLOYEE BENEFIT PLAN OR OTHER PLAN TO WHICH TITLE I OF ERISA OR SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF ANY SUCH EMPLOYEE BENEFIT PLAN OR OTHER PLAN, OR ANY OTHER PERSON OR ENTITY USING THE “PLAN ASSETS” OF ANY SUCH PLAN OR OTHER PLAN TO FINANCE SUCH PURCHASE OR (II) SUCH PURCHASE OR HOLDING WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH FULL EXEMPTIVE RELIEF IS NOT AVAILABLE UNDER APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.
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ANY FIDUCIARY OF ANY PLAN WHO IS CONSIDERING THE ACQUISITION OF THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN SHOULD CONSULT WITH HIS OR HER LEGAL COUNSEL PRIOR TO ACQUIRING THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN.
No. 2029-2CUSIP Accredited Investors: 20727P AF1 / US20727PAF18
CONGRESSIONAL BANCSHARES, INC.
5.75% FIXED-TO-FLOATING RATE SUBORDINATED NOTE DUE
DECEMBER 1, 2029
1.    Subordinated Notes. This Subordinated note is one of an issue of notes of Congressional Bancshares, Inc., a Maryland corporation (the “Company”), designated as the “5.75% Fixed-to-Floating Rate Subordinated Notes due 2029” (the “Subordinated Notes”) issued pursuant to that Subordinated Note Purchase Agreement dated as of the date upon which this Subordinated Note was originally issued (the “Issue Date”) between the Company and the several purchasers of the Subordinated Notes identified in the signature pages thereto (the “Purchase Agreement”).
2.    Payment. The Company, for value received, promises to pay to Cede & Co., or its registered assigns, the principal sum of Two Hundred Fifty Thousand Dollars (U.S.) ($250,000), plus accrued but unpaid interest on December 1, 2029 (the “Maturity Date”) and to pay interest thereon (i) from and including the original issue date of the Subordinated Notes to but excluding December 1, 2024 or the earlier redemption date contemplated by Section 4 (Redemption) of this Subordinated Note (the “Fixed Rate Period”), at the rate of 5.75% per annum, computed on the basis of a 360-day year consisting of twelve 30-day months and payable semi-annually in arrears on June 1st and December 1st of each year (each payment date, a “Fixed Interest Payment Date”), beginning December 1, 2024, and (ii) from and including December 1, 2024 to but excluding the Maturity Date or earlier redemption date contemplated by Section 4 (Redemption) of this Subordinated Note (the “Floating Rate Period”), at the rate per annum, reset quarterly, equal to the Floating Interest Rate (as defined below) determined on the Floating Interest Determination Date (as defined below) of the applicable interest period plus 439 basis points, computed on the basis of a 360-day year and the actual number of days elapsed and payable quarterly in arrears (each quarterly period a “Floating Interest Period”) on March 1st, June 1st, September 1st and December 1st of each year (each payment date, a “Floating Interest Payment Date”). Dollar amounts resulting from this calculation shall be rounded to the nearest cent, with one-half cent being rounded up. The term “Floating Interest Determination Date” means the date upon which the Floating Interest Rate is determined by the Calculation Agent pursuant to the Three-Month Term SOFR Conventions.
(a)    An “Interest Payment Date” is either a Fixed Interest Payment Date or a Floating Interest Payment Date, as applicable.
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(b)    The “Floating Interest Rate” means:
(i)    initially Three-Month Term SOFR (as defined below).
(ii)    Notwithstanding the foregoing clause (i) of this Section 2(b):
(1)    If the Calculation Agent, determines prior to the relevant Floating Interest Determination Date that a Benchmark Transition Event and its related Benchmark Replacement Date (each of such terms as defined below) have occurred with respect to Three-Month Term SOFR, then the Company shall promptly provide notice of such determination to the Noteholders and Section 2(c) (Effect of Benchmark Transition Event) will thereafter apply to all determinations, calculations and quotations made or obtained for the purposes of calculating the Floating Interest Rate payable on the Subordinated Notes during a relevant Floating Interest Period.
(2)    However, if the Calculation Agent, determines that a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to Three-Month Term SOFR, but for any reason the Benchmark Replacement has not been determined as of the relevant Floating Interest Determination Date, the Floating Interest Rate for the applicable Floating Interest Period will be equal to the Floating Interest Rate on the last Floating Interest Determination Date for the Subordinated Notes, as determined by the Calculation Agent (as defined below).
(iii)    If the then-current Benchmark is Three-Month Term SOFR and any of the foregoing provisions concerning the calculation of the interest rate and the payment of interest during the Floating Rate Period are inconsistent with any of the Three-Month Term SOFR Conventions (as defined below) determined by the Company, then the relevant Three-Month Term SOFR Conventions will apply.
(c)    Effect of Benchmark Transition Event.
(i)    If the Calculation Agent determines that a Benchmark Transition Event and its related Benchmark Replacement Date have occurred prior to the Reference Time (as defined below) in respect of any determination of the Benchmark (as defined below) on any date, the Benchmark Replacement will replace the then-current Benchmark for all purposes relating to the Subordinated Notes during the relevant Floating Interest Period in respect of such determination on such date and all determinations on all subsequent dates.
(ii)    In connection with the implementation of a Benchmark Replacement, the Company will have the right to make Benchmark Replacement Conforming Changes from time to time, and such changes shall become effective without consent from the relevant Noteholders (as defined below) or any other party.
(iii)    Any determination, decision or election that may be made by the Company or by the Calculation Agent pursuant to the benchmark transition provisions set forth herein, including any determination with respect to a tenor, rate or adjustment or of the
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occurrence or non-occurrence of an event, circumstance or date, and any decision to take or refrain from taking any action or any selection:
(1)    will be conclusive and binding absent manifest error;
(2)    if made by the Company, will be made in the Company’s sole discretion;
(3)    if made by the Calculation Agent, will be made after consultation with the Company, and the Calculation Agent will not make any such determination, decision or election to which the Company reasonably objects; and
(4)    notwithstanding anything to the contrary in this Subordinated Note or the Purchase Agreement, shall become effective without consent from the relevant Noteholders (as defined below) or any other party.
(iv)    For the avoidance of doubt, after a Benchmark Transition Event and its related Benchmark Replacement Date have occurred, interest payable on this Subordinated Note for the Floating Rate Period will be an annual rate equal to the sum of the applicable Benchmark Replacement and the spread specified on the face hereof.
(v)    As used in this Subordinated Note:
(1)    “Benchmark” means, initially, Three-Month Term SOFR; provided that if a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to Three-Month Term SOFR or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement.
(2)    “Benchmark Replacement” means the Interpolated Benchmark with respect to the then-current Benchmark; provided that if (a) the Calculation Agent cannot determine the Interpolated Benchmark as of the Benchmark Replacement Date or (b) the then-current Benchmark is Three-Month Term SOFR and a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to Three-Month Term SOFR (in which event no Interpolated Benchmark with respect to Three-Month Term SOFR shall be determined), then “Benchmark Replacement” means the first alternative set forth in the order below that can be determined by the Calculation Agent, as of the Benchmark Replacement Date:
a.    The sum of (i) Compounded SOFR and (ii) the Benchmark Replacement Adjustment;
b.    the sum of: (i) the alternate rate of interest that has been selected or recommended by the Relevant Governmental Body as the replacement for the then-current Benchmark for the applicable Corresponding Tenor and (ii) the Benchmark Replacement Adjustment;
c.    the sum of: (i) the ISDA Fallback Rate and (ii) the Benchmark Replacement Adjustment;
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d.    the sum of: (i) the alternate rate of interest that has been selected by the Company as the replacement for the then-current Benchmark for the applicable Corresponding Tenor giving due consideration to any industry-accepted rate of interest as a replacement for the then-current Benchmark for U.S. dollar denominated floating rate notes at such time and (ii) the Benchmark Replacement Adjustment.
(3)    “Benchmark Replacement Adjustment” means the first alternative set forth in the order below that can be determined by the Calculation Agent, as of the Benchmark Replacement Date:
a.    the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected or recommended by the Relevant Governmental Body for the applicable Unadjusted Benchmark Replacement;
b.    if the applicable Unadjusted Benchmark Replacement is equivalent to the ISDA Fallback Rate, then the ISDA Fallback Adjustment;
c.    the spread adjustment (which may be a positive or negative value or zero) that has been selected by the Company giving due consideration to any industry-accepted spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the then-current Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. dollar denominated floating rate notes at such time.
(4)    “Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Floating Interest Period,” timing and frequency of determining rates with respect to each Floating Interest Period and making payments of interest, rounding of amounts or tenors and other administrative matters) that the Company decides may be appropriate to reflect the adoption of such Benchmark Replacement in a manner substantially consistent with market practice (or, if the Company decides that adoption of any portion of such market practice is not administratively feasible or if the Company determines that no market practice for use of the Benchmark Replacement exists, in such other manner as the Company determines is reasonably necessary).
(5)    “Benchmark Replacement Date” means the earliest to occur of the following events with respect to the then-current Benchmark:
a.    in the case of clause (a) of the definition of “Benchmark Transition Event,” the relevant Reference Time in respect of any determination;
b.    in the case of clause (b) or (c) of the definition of “Benchmark Transition Event,” the later of (i) the date of the public statement or publication of information referenced therein and (ii) the date on which the administrator of the Benchmark permanently or indefinitely ceases to provide the Benchmark; or
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c.    in the case of clause (d) of the definition of “Benchmark Transition Event,” the date of such public statement or publication of information referenced therein.
For the avoidance of doubt, if the event giving rise to the Benchmark Replacement Date occurs on the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark Replacement Date will be deemed to have occurred prior to the Reference Time for purposes of such determination.
(6)    “Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:
a.    if the Benchmark is Three-Month Term SOFR, (i) the Relevant Governmental Body has not selected or recommended a forward-looking term rate for a tenor of three months based on SOFR, (ii) the development of a forward-looking term rate for a tenor of three months based on SOFR that has been recommended or selected by the Relevant Governmental Body is not complete or (iii) the Company determines that the use of a forward-looking rate for a tenor of three months based on SOFR is not administratively feasible;
b.    a public statement or publication of information by or on behalf of the administrator of the Benchmark announcing that such administrator has ceased or will cease to provide the Benchmark, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark;
c.    a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark, the central bank for the currency of the Benchmark, an insolvency official with jurisdiction over the administrator for the Benchmark, a resolution authority with jurisdiction over the administrator for the Benchmark or a court or an entity with similar insolvency or resolution authority over the administrator for the Benchmark, which states that the administrator of the Benchmark has ceased or will cease to provide the Benchmark permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark; or
d.    a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark announcing that the Benchmark is no longer representative.
(7)    “Calculation Agent” means such bank or other entity (which may be the Company or an affiliate of the Company) as may be appointed by the Company to act as Calculation Agent for the Subordinated Notes during the Floating Rate Period.
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(8)    “Compounded SOFR” means the compounded average of SOFRs for the applicable Corresponding Tenor, with the rate, or methodology for this rate, and conventions for this rate being established by the Company or its designee in accordance with:
a.    the rate, or methodology for this rate, and conventions for this rate selected or recommended by the Relevant Governmental Body for determining compounded SOFR; provided that:
b.    if, and to the extent that, the Company or its designee determines that Compounded SOFR cannot be determined in accordance with clause (a) above, then the rate, or methodology for this rate, and conventions for this rate that have been selected by the Company or its designee giving due consideration to any industry-accepted market practice for U.S. dollar denominated floating rate notes at such time.
For the avoidance of doubt, the calculation of Compounded SOFR will exclude the Benchmark Replacement Adjustment.
(9)    “Corresponding Tenor” with respect to a Benchmark Replacement means a tenor (including overnight) having approximately the same length (disregarding Business Day adjustment) as the applicable tenor for the then-current Benchmark.
(10)    “FRBNY” means the Federal Reserve Bank of New York.
(11)    “FRBNY’s Website” means the website of the FRBNY at http://www.newyorkfed.org, or any successor source.
(12)    “Interpolated Benchmark” with respect to the Benchmark means the rate determined for the Corresponding Tenor by interpolating on a linear basis between: (1) the Benchmark for the longest period (for which the Benchmark is available) that is shorter than the Corresponding Tenor and (2) the Benchmark for the shortest period (for which the Benchmark is available) that is longer than the Corresponding Tenor.
(13)    “ISDA” means the International Swaps and Derivatives Association, Inc. or any successor thereto.
(14)    “ISDA Definitions” means the 2006 ISDA Definitions published by the ISDA or any successor thereto, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time.
(15)    “ISDA Fallback Adjustment” means the spread adjustment (which may be a positive or negative value or zero) that would apply for derivatives transactions referencing the ISDA Definitions to be determined upon the occurrence of an index cessation event with respect to the Benchmark for the applicable tenor.
(16)    “ISDA Fallback Rate” means the rate that would apply for derivatives transactions referencing the ISDA Definitions to be effective upon the occurrence of
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an index cessation date with respect to the Benchmark for the applicable tenor excluding the applicable ISDA Fallback Adjustment.
(17)    “Reference Time” with respect to any determination of a Benchmark means (1) if the Benchmark is Three-Month Term SOFR, the time determined by the Calculation Agent after giving effect to the Three-Month Term SOFR Conventions, and (2) if the Benchmark is not Three-Month Term SOFR, the time determined by the Calculation Agent after giving effect to the Benchmark Replacement Conforming Changes.
(18)    “Relevant Governmental Body” means the Board of Governors of the Federal Reserve System (the “Federal Reserve”) and/or the FRBNY, or a committee officially endorsed or convened by the Federal Reserve and/or the FRBNY or any successor thereto.
(19)    “SOFR” means the daily Secured Overnight Financing Rate provided by the FRBNY, as the administrator of the benchmark (or a successor administrator), on the FRBNY’s Website.
(20)    “Term SOFR” means the forward-looking term rate for the Corresponding Tenor based on SOFR that has been selected or recommended by the Relevant Governmental Body.
(21)    “Term SOFR Administrator” means any entity designated by the Relevant Governmental Body as the administrator of Term SOFR (or a successor administrator).
(22)    “Three-Month Term SOFR” means the rate for Term SOFR for a tenor of three months that is published by the Term SOFR Administrator at the Reference Time for any Floating Interest Period, as determined by the Calculation Agent after giving effect to the Three-Month Term SOFR Conventions.
(23)    “Three-Month Term SOFR Conventions” means any determination, decision or election with respect to any technical, administrative or operational matter (including with respect to the manner and timing of the publication of Three-Month Term SOFR, or changes to the definition of “Floating Interest Period”, timing and frequency of determining Three-Month Term SOFR with respect to each Floating Interest Period and making payments of interest, rounding of amounts or tenors, and other administrative matters) that the Company decides may be appropriate to reflect the use of Three-Month Term SOFR as the Benchmark in a manner substantially consistent with market practice (or, if the Company decides that adoption of any portion of such market practice is not administratively feasible or if the Company determines that no market practice for the use of Three-Month Term SOFR exists, in such other manner as the Company determines is reasonably necessary).
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(24)    “Unadjusted Benchmark Replacement” means the Benchmark Replacement excluding the Benchmark Replacement Adjustment.
(d)    In the event that any Fixed Interest Payment Date during the Fixed Rate Period falls on a day that is not a Business Day (as defined below), the interest payment due on that date shall be postponed to the next day that is a Business Day and no additional interest shall accrue as a result of that postponement. In the event that any Floating Interest Payment Date during the Floating Rate Period falls on a day that is not a Business Day (as defined below), the interest payment due on that date shall be postponed to the next day that is a Business Day and interest shall accrue to but excluding the date interest is paid. However, if the postponement would cause the day to fall in the next calendar month during the Floating Interest Period, the Floating Interest Payment Date shall instead be brought forward to the immediately preceding Business Day. The term “Business Day” means any day other than a Saturday or Sunday or any other day on which banking institutions in the State of Maryland are generally authorized or required by law or executive order to be closed.
3.    Subordination.
(a)    The indebtedness of the Company evidenced by this Subordinated Note, including the principal and interest on this Subordinated Note, shall be subordinate and junior in right of payment to the prior payment in full of all existing claims of creditors of the Company whether now outstanding or subsequently created, assumed, guaranteed or incurred (collectively, “Senior Indebtedness”), which shall consist of principal of (and premium, if any) and interest, if any, on: (i) all indebtedness and obligations of, or guaranteed or assumed by, the Company for money borrowed, whether or not evidenced by bonds, debentures, securities, notes or other similar instruments, and including, but not limited to all obligations to the Company’s general and secured creditors; (ii) any deferred obligations of the Company for the payment of the purchase price of property or assets acquired other than in the ordinary course of business; (iii) all obligations, contingent or otherwise, of the Company in respect of any letters of credit, bankers’ acceptances, security purchase facilities and similar direct credit substitutes; (iv) any capital lease obligations of the Company; (v) all obligations of the Company in respect of interest rate swap, cap or other agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts, commodity contracts and other similar arrangements or derivative products; (vi) all obligations that are similar to those in clauses (i) through (v) of other persons for the payment of which the Company is responsible or liable as obligor, guarantor or otherwise arising from an off-balance sheet guarantee; (vii) all obligations of the types referred to in clauses (i) through (vi) of other persons secured by a lien on any property or asset of the Company; and (viii) in the case of (i) through (vii) above, all amendments, renewals, extensions, modifications and refundings of such indebtedness and obligations; except “Senior Indebtedness” does not include (A) the Subordinated Notes, (B) any obligation that by its terms expressly is junior to, or ranks equally in right of payment with, the Subordinated Notes, (C) the existing 7.00% Fixed Rate Subordinated Notes due 2026 and the 6.50% Fixed-to-Floating Rate Notes due 2026 as of the date of the issuance of this Subordinated Note to which this Subordinated Note shall be equal in right of payment, (D) the existing junior subordinated debentures of the Company (underlying the outstanding trust preferred securities)
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as of the date of the issuance of this Subordinated Note to which this Subordinated Note shall be senior, or (E) any indebtedness between the Company and any of its subsidiaries or Affiliates. This Subordinated Note is not secured by any assets of the Company or any of its subsidiaries or Affiliates. The term “Affiliate(s)” means, with respect to any Person (as such term is defined in the Purchase Agreement), such Person’s immediate family members, partners, members or parent and subsidiary corporations, and any other Person directly or indirectly controlling, controlled by, or under common control with said Person and their respective Affiliates.
(b)    In the event of liquidation of the Company, holders of Senior Indebtedness of the Company shall be entitled to be paid in full with such interest as may be provided by law before any payment shall be made on account of principal of or interest on this Subordinated Note. Additionally, in the event of any insolvency, dissolution, assignment for the benefit of creditors or any liquidation or winding up of or relating to the Company, whether voluntary or involuntary, holders of Senior Indebtedness shall be entitled to be paid in full before any payment shall be made on account of the principal of or interest on the Subordinated Notes, including this Subordinated Note. In the event of any such proceeding, after payment in full of all sums owing with respect to the Senior Indebtedness, the registered holders of the Subordinated Notes from time to time (each a “Noteholder” and, collectively, the “Noteholders”), together with the holders of any obligations of the Company ranking on parity with the Subordinated Notes, including (but not limited to) the existing 7.00% Fixed Rate Subordinated Notes due 2026 and the 6.50% Fixed-to-Floating Rate Notes due 2026 as of the date of the issuance of this Subordinated Note to which this Subordinated Note shall be equal in right of payment, shall be entitled to be paid from the remaining assets of the Company the unpaid principal thereof, and the unpaid interest thereon before any payment or other distribution, whether in cash, property or otherwise, shall be made (i) with respect to any obligation that by its terms expressly is junior to in the right of payment to the Subordinated Notes, (ii) with respect to the existing junior subordinated debentures of the Company (underlying the outstanding trust preferred securities) as of the date of the issuance of this Subordinated Note to which this Subordinated Note shall be senior, (iii) with respect to any indebtedness between the Company and any of its subsidiaries or Affiliates or (iv) on account of any capital stock.
(c)    If there shall have occurred and be continuing (i) a default in any payment with respect to any Senior Indebtedness or (ii) an event of default with respect to any Senior Indebtedness as a result of which the maturity thereof is accelerated, unless and until such payment default or event of default shall have been cured or waived or shall have ceased to exist, no payments shall be made by the Company with respect to the Subordinated Notes. The provisions of this paragraph shall not apply to any payment with respect to which the immediately preceding paragraph of this Section 3 (Subordination) would be applicable.
(d)    Nothing herein shall act to prohibit, limit or impede the Company from issuing additional debt of the Company having the same rank as the Subordinated Notes or which may be junior or senior in rank to the Subordinated Notes. Each Noteholder, by its acceptance hereof, further acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration for each holder of any Senior Indebtedness,
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whether such Senior Indebtedness was created or acquired before or after the issuance of the Subordinated Notes, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness, and such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold or in continuing to hold such Senior Indebtedness.
4.    Redemption.
(a)    Redemption Prior to Fifth Anniversary. This Subordinated Note shall not be redeemable by the Company in whole or in part prior to December 1, 2024, except in the event of a: (i) Tier 2 Capital Event (as defined below); (ii) Tax Event (as defined below); or (iii) Investment Company Event (as defined below). Upon the occurrence of a Tier 2 Capital Event, a Tax Event or an Investment Company Event, the Company may redeem this Subordinated Note, subject to Section 4(f) (Regulatory Approvals) hereof, in whole or in part at any time, upon giving not less than 10 days’ notice to the holder of this Subordinated Note at an amount equal to 100% of the outstanding principal amount being redeemed plus accrued but unpaid interest, to but excluding the redemption date. “Tier 2 Capital Event” means the receipt by the Company of an opinion of counsel to the Company to the effect that there is a material risk that this Subordinated Note no longer qualifies as “Tier 2” Capital (as defined by the Federal Reserve) (or its then equivalent) as a result of a change in law or regulation, or interpretation or application thereof, by any judicial, legislative or regulatory authority that becomes effective after the date of issuance of this Subordinated Note. “Tax Event” means the receipt by the Company of an opinion of counsel to the Company that as a result of any amendment to, or change (including any final and adopted (or enacted) prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, there exists a material risk that interest payable by the Company on the Subordinated Notes is not, or within 120 days after the receipt of such opinion will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes. “Investment Company Event” means the receipt by the Company of an opinion of counsel to the Company to the effect that there is a material risk that the Company is or, within one hundred twenty (120) days after the receipt of such opinion will be, required to register as an investment company pursuant to the Investment Company Act of 1940, as amended.
(b)    Redemption on or after Fifth Anniversary. On or after December 1, 2024, subject to the provisions of Section 4(f) (Regulatory Approvals) hereof, this Subordinated Note shall be redeemable at the option of and by the Company, in whole or in part from time to time upon any Interest Payment Date, at an amount equal to 100% of the outstanding principal amount being redeemed plus accrued but unpaid interest, to but excluding the redemption date, but in all cases in a principal amount with integral multiples of $1,000. In addition, the Company may redeem all or a portion of the Subordinated Notes, at any time upon the occurrence of a Tier 2 Capital Event, Tax Event or an Investment Company Event. The redemption referenced in this Section 4(b) (Redemption on or after Fifth Anniversary) shall be subject to the receipt of any required regulatory approval.
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(c)    Partial Redemption. If less than the then outstanding principal amount of this Subordinated Note is redeemed, (i) a new Subordinated Note shall be issued representing the unredeemed portion without charge to the holder thereof and (ii) such redemption shall be effected on a pro rata basis as to the Noteholders. For purposes of clarity, upon a partial redemption, a like percentage of the principal amount of every Subordinated Note held by every Noteholder shall be redeemed.
(d)    No Redemption at Option of Noteholder. This Subordinated Note is not subject to redemption at the option of the holder of this Subordinated Note.
(e)    Effectiveness of Redemption. If notice of redemption has been duly given and notwithstanding that this Subordinated Note has been called for redemption but has not yet been surrendered for cancellation, on and after the date fixed for redemption interest shall cease to accrue on the portion of this Subordinated Note called for redemption, this Subordinated Note shall no longer be deemed outstanding with respect to the portion called for redemption and all rights with respect to the portion of this Subordinated Note called for redemption shall forthwith on such date fixed for redemption cease and terminate unless the Company shall default in the payment of the redemption price, except only the right of the holder hereof to receive the amount payable on such redemption, without interest. For purposes of clarity, any redemption made pursuant to the terms of this Subordinated Note shall be made on a pro rata basis, and, for purposes of a redemption processed through DTC, on a “Pro Rata Pass-Through Distribution of Principal” basis, among all of the Subordinated Notes outstanding at the time thereof.
(f)    Regulatory Approvals. Any such redemption shall be subject to receipt of any and all required federal and state regulatory approvals or non-objections, including, but not limited to, the consent of the Federal Reserve. In the case of any redemption of this Subordinated Note pursuant to paragraph (b) of this Section 4 (Redemption), the Company will give the holder hereof notice of redemption, which notice shall indicate the aggregate principal amount of Subordinated Notes to be redeemed, not less than thirty (30) nor more than forty-five (45) calendar days prior to the redemption date.
(g)    Purchase and Resale of the Subordinated Notes. Subject to any required federal and state regulatory approvals and the provisions of this Subordinated Note, the Company shall have the right to purchase any of the Subordinated Notes at any time in the open market, private transactions or otherwise. If the Company purchases any Subordinated Notes, it may, in its discretion, hold, resell or cancel any of the purchased Subordinated Notes.
5.    Global Subordinated Notes.
(a)    Provided that applicable depository eligibility requirements are met, upon the written election of any Noteholder that is either (i) a Qualified Institutional Buyer, as defined in Rule 144A under the Securities Act, or (ii) an institutional “accredited investor,” as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act, the Company shall use its commercially reasonable efforts to provide that the Subordinated Notes owned by Noteholders that are Qualified Institutional Buyers and/or institutional “accredited investors” shall be issued in the form of one or more Global Subordinated Notes (each a “Global Subordinated Note”) registered
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in the name of The Depository Trust Company or another organization registered as a clearing agency under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and designated as Depositary by the Company or any successor thereto (the “Depositary”) or a nominee thereof and delivered to such Depositary or a nominee thereof.
(b)    Notwithstanding any other provision herein, no Global Subordinated Note may be exchanged in whole or in part for Subordinated Notes registered, and no transfer of a Global Subordinated Note in whole or in part may be registered, in the name of any person other than the Depositary for such Global Subordinated Note or a nominee thereof unless (i) such Depositary advises the Company in writing that such Depositary is no longer willing or able to properly discharge its responsibilities as Depositary with respect to such Global Subordinated Note, and no qualified successor is appointed by the Company within ninety (90) days of receipt by the Company of such notice, (ii) such Depositary ceases to be a clearing agency registered under the Exchange Act and no successor is appointed by the Company within ninety (90) days after obtaining knowledge of such event, (iii) the Company elects to terminate the book-entry system through the Depositary or (iv) an Event of Default (as defined in Section 6 (Events of Default; Acceleration)) shall have occurred and be continuing. Upon the occurrence of any event specified in clause (i), (ii), (iii) or (iv) of this Section 5(b), the Company or its agent shall notify the Depositary and instruct the Depositary to notify all owners of beneficial interests in such Global Subordinated Note of the occurrence of such event and of the availability of Subordinated Notes to such owners of beneficial interests requesting the same.
(c)    If any Global Subordinated Note is to be exchanged for other Subordinated Notes or canceled in part, or if another Subordinated Note is to be exchanged in whole or in part for a beneficial interest in any Global Subordinated Note, then either (i) such Global Subordinated Note shall be so surrendered for exchange or cancellation as provided in this Section 5 or (ii) the principal amount thereof shall be reduced or increased by an amount equal to the portion thereof to be so exchanged or canceled, or equal to the principal amount of such other Subordinated Note to be so exchanged for a beneficial interest therein, as the case may be, by means of an appropriate adjustment made on the records of the Company or, if applicable, the Company’s registrar and transfer agent (“Registrar”), whereupon the Company or, if applicable, the Registrar, in accordance with the applicable rules and procedures of the Depositary (“Applicable Depositary Procedures”), shall instruct the Depositary or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender or adjustment of a Global Subordinated Note by the Depositary, accompanied by registration instructions, the Company shall execute and deliver any Subordinated Notes issuable in exchange for such Global Subordinated Note (or any portion thereof) in accordance with the instructions of the Depositary.
(d)    Every Subordinated Note executed and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Subordinated Note or any portion thereof shall be executed and delivered in the form of, and shall be, a Global Subordinated Note, unless such Subordinated Note is registered in the name of a person other than the Depositary for such Global Subordinated Note or a nominee thereof.
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(e)    The Depositary or its nominee, as the registered owner of a Global Subordinated Note, shall be the holder of such Global Subordinated Note for all purposes under this Subordinated Note, and owners of beneficial interests in a Global Subordinated Note shall hold such interests pursuant to Applicable Depositary Procedures. Accordingly, any such owner’s beneficial interest in a Global Subordinated Note shall be shown only on, and the transfer of such interest shall be effected only through, records maintained by the Depositary or its nominee or its Depositary participants. If applicable, the Registrar shall be entitled to deal with the Depositary for all purposes relating to a Global Subordinated Note (including the payment of principal and interest thereon and the giving of instructions or directions by owners of beneficial interests therein and the giving of notices) as the sole holder of the Subordinated Note and shall have no obligations to the owners of beneficial interests therein. The Registrar shall have no liability in respect of any transfers undertaken by the Depositary.
(f)    The rights of owners of beneficial interests in a Global Subordinated Note shall be exercised only through the Depositary and shall be limited to those established by law and agreements between such owners and the Depositary and/or its participants.
(g)    No holder of any beneficial interest in any Global Subordinated Note held on its behalf by a Depositary shall have any rights with respect to such Global Subordinated Note, and such Depositary may be treated by the Company and any agent of the Company as the owner of such Global Subordinated Note for all purposes whatsoever. Neither the Company nor any agent of the Company will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Subordinated Note or maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Notwithstanding the foregoing, nothing herein shall prevent the Company or any agent of the Company from giving effect to any written certification, proxy or other authorization furnished by a Depositary or impair, as between a Depositary and such holders of beneficial interests, the operation of customary practices governing the exercise of the rights of the Depositary (or its nominee) as holder of any Subordinated Note.
(h)    The Company, within thirty (30) calendar days after the receipt of written notice from the Noteholder or any other holder of the Subordinated Notes of the occurrence of an Event of Default with respect to this Subordinated Note, shall mail to all the Noteholders, at their addresses shown on the Security Register (as defined in Section 14 (Registration of Transfer, Security Register) below), such written notice of Event of Default, unless such Event of Default shall have been cured or waived before the giving of such notice as certified by Company in writing.
6.    Events of Default; Acceleration.
Each of the following events shall constitute an “Event of Default”:
(a)    the entry of a decree or order for relief in respect of the Company by a court having jurisdiction in the premises in an involuntary case or proceeding under any applicable bankruptcy, insolvency, or reorganization law, now or hereafter in effect of the United
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States or any political subdivision thereof, and such decree or order will have continued unstayed and in effect for a period of sixty (60) consecutive days;
(b)    the commencement by the Company of a voluntary case under any applicable bankruptcy, insolvency or reorganization law, now or hereafter in effect of the United States or any political subdivision thereof, or the consent by the Company to the entry of a decree or order for relief in an involuntary case or proceeding under any such law;
(c)    the Company (i) becomes insolvent or is unable to pay its debts as they mature, (ii) makes an assignment for the benefit of creditors, (iii) admits in writing its inability to pay its debts as they mature or (iv) ceases to be a bank holding company or financial holding company under the Bank Holding Company Act of 1956, as amended;
(d)    the failure of the Company to pay any installment of interest on any of the Subordinated Notes as and when the same will become due and payable, and the continuation of such failure for a period of fifteen (15) days;
(e)    the failure of the Company to pay all or any part of the principal of any of the Subordinated Notes as and when the same will become due and payable;
(f)    the liquidation of the Company (for avoidance of doubt, “liquidation” does not include any merger, consolidation, sale of equity or assets or reorganization (exclusive of a reorganization in bankruptcy) of the Company or any of its subsidiaries);
(g)    the failure of the Company to perform any other covenant or agreement on the part of the Company contained in the Subordinated Notes, and the continuation of such failure for a period of thirty (30) days after the date on which notice specifying such failure, stating that such notice is a “Notice of Default” hereunder and demanding that the Company remedy the same, will have been given, in the manner set forth in Section 22 (Notices), to the Company by a Noteholder; or
(h)    the default by the Company under any bond, debenture, note or other evidence of indebtedness for money borrowed by the Company having an aggregate principal amount outstanding of at least $5,000,000, whether such indebtedness now exists or is created or incurred in the future, which default (i) constitutes a failure to pay any portion of the principal of such indebtedness when due and payable after the expiration of any applicable grace period or (ii) results in such indebtedness becoming due or being declared due and payable prior to the date on which it otherwise would have become due and payable without, in the case of clause (i), such indebtedness having been discharged or, in the case of clause (ii), without such indebtedness having been discharged or such acceleration having been rescinded or annulled.
Unless the principal amount of this Subordinated Note already shall have become due and payable, if an Event of Default set forth in Section 6(a) or Section 6(b) above shall have occurred and be continuing, the Noteholder, by notice in writing to the Company, may declare the principal amount of this Subordinated Note to be due and payable immediately and, upon any such declaration, the same shall become and shall be immediately due and payable, and the
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Company waives demand, presentment for payment, notice of nonpayment, notice of protest, and all other notices. Notwithstanding the foregoing, because the Company will treat the Subordinated Notes as Tier 2 Capital, upon the occurrence of an Event of Default other than an Event of Default described in Section 6(a) or Section 6(b), no Noteholder may accelerate the Stated Maturity of the Subordinated Notes and make the principal of, and any accrued and unpaid interest on, the Subordinated Notes, immediately due and payable. The Company, within forty-five (45) calendar days after the receipt of written notice from any Noteholder of the occurrence of an Event of Default with respect to this Subordinated Note, shall mail to all Noteholders, at their addresses shown on the Security Register (as defined in Section 14 (Registration of Transfer, Security Register) below), such written notice of Event of Default, unless such Event of Default shall have been cured or waived before the giving of such notice as certified by the Company in writing.
7.    Failure to Make Payments. In the event of an Event of Default under Section 6(c), Section 6(d) or Section 6(e) above, the Company will, upon demand of the Noteholder, pay to the Noteholder the amount then due and payable on this Subordinated Note for principal and interest (without acceleration of the Subordinated Note in any manner), with interest on the overdue principal and interest at the per annum rate borne by this Subordinated Note, to the extent permitted by applicable law. If the Company fails to pay such amount upon such demand, the holder of this Subordinated Note may, among other things, institute a judicial proceeding for the collection of the sums so due and unpaid and such amount as shall be sufficient to cover the reasonable costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of such Noteholder, its agents and counsel, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company and collect the amounts adjudged or decreed to be payable in the manner provided by law out of the property of the Company.
Upon the occurrence of a failure by the Company to make any required payment of principal or interest on this Subordinated Note or an Event of Default, until such Event of Default is cured by the Company or waived by the Noteholders in accordance with Section 18 (Waiver and Consent) hereof, except as may be required by any federal or state bank regulatory agency, the Company shall not: (a) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company’s capital stock; (b) make any payment of principal or interest or premium, if any, on or repay, repurchase or redeem any indebtedness of the Company that ranks equal with or junior to the Subordinated Notes; or (c) make any payments under any guarantee that ranks equal with or junior to the Subordinated Notes, other than: (i) any dividends or distributions in shares of, or options, warrants or rights to subscribe for or purchase shares of, any class of the Company’s common stock; (ii) any declaration of a non-cash dividend in connection with the implementation of a shareholders’ rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto; (iii) as a result of a reclassification of the Company’s capital stock or the exchange or conversion of one class or series of the Company’s capital stock for another class or series of the Company’s capital stock; (iv) the purchase of fractional interests in shares of the Company’s capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or
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exchanged; or (v) purchases of any class of the Company’s common stock related to the issuance of common stock or rights under any benefit plans for the Company’s directors, officers or employees or any of the Company’s dividend reinvestment plans (the foregoing clauses (i) through (v) are collectively referred to as the “Permitted Dividends”).
8.    Affirmative Covenants of the Company.
(a)    Notice of Certain Events. To the extent permitted by applicable statute, rule or regulation, the Company shall provide written notice to the Noteholder of the occurrence of any of the following events as soon as practicable, but in no event later than fifteen (15) Business Days following the Company becoming aware of the occurrence of such event:
(i)    The Company becomes less than “well-capitalized” as defined under the then applicable regulatory capital standards or the Company or Congressional Bank, a Maryland chartered bank and wholly-owned subsidiary of the Company (the “Bank”) becomes less than ten percent (10.0%), eight percent (8.0%) six and one-half percent (6.5%), or five percent (5.0%), respectively, as of the end of any calendar quarter;
(ii)    The Company, or any of the Company’s subsidiaries, or any officer of the Company (in such capacity), becomes subject to any formal, written regulatory enforcement action (as defined by the applicable state or federal bank regulatory authority);
(iii)    The dollar amount of any nonperforming assets of the Company on a consolidated basis as of the end of a given fiscal quarter as a percentage of the Company’s total loan portfolio exceeds three and one-half percent (3.5%);
(iv)    The appointment, resignation, removal or termination of the chief executive officer, president, chief operating officer, chief financial officer, chief credit officer, chief lending officer or any director of the Company or the Bank; or
(v)    There is a change in ownership of 25% or more of the outstanding securities of the Company entitled to vote for the election of directors.
(b)    Payment of Principal and Interest. The Company covenants and agrees for the benefit of the Noteholder that it will duly and punctually pay the principal of, and interest on, this Subordinated Note, in accordance with the terms hereof.
(c)    Maintenance of Office. The Company will maintain an office or agency in the State of Maryland, unless the Company has provided due notice to the Noteholders of such change in office or agency location, where Subordinated Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Subordinated Notes may be served.
The Company may also from time to time designate one or more other offices or agencies where the Subordinated Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided that no such designation or rescission
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will in any manner relieve the Company of its obligation to maintain an office or agency in the State of Maryland unless the Company has provided due notice to the Noteholders of such change in office or agency location. The Company will give prompt written notice to the Noteholders of any such designation or rescission and of any change in the location of any such other office or agency.
(d)    Corporate Existence. The Company will do or cause to be done all things necessary to preserve and keep in full force and effect: (i) the corporate existence of the Company; (ii) the existence (corporate or other) of each subsidiary; and (iii) the rights (constituent governing documents and statutory), licenses and franchises of the Company and each of its subsidiaries; provided, however, that the Company will not be required to preserve the existence (corporate or other) of any of its subsidiaries or any such right, license or franchise of the Company or any of its subsidiaries if the Board of Directors of the Company determines that the preservation thereof is no longer desirable in the conduct of the business of the Company and its subsidiaries taken as a whole and that the loss thereof will not be disadvantageous in any material respect to the Noteholders.
(e)    Maintenance of Properties. The Company will, and will cause each subsidiary to, cause all its properties used or useful in the conduct of its business to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section 8(e) will prevent the Company or any subsidiary from discontinuing the operation and maintenance of any of their respective properties if such discontinuance is, in the reasonable judgment of the Board of Directors of the Company or of any subsidiary, as the case may be, desirable in the conduct of its business.
(f)    Intentionally omitted.
(g)    Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any term, provision or condition set forth in Section 8(c) (Maintenance of Office), Section 8(d) (Corporate Existence), or Section 8(e) (Maintenance of Properties) above, with respect to this Subordinated Note if before the time for such compliance the Noteholders of at least a majority in aggregate principal amount of the outstanding Subordinated Notes, by act of such Noteholders, either will waive such compliance in such instance or generally will have waived compliance with such term, provision or condition, but no such waiver will extend to or affect such term, provision or condition except to the extent so expressly waived, and, until such waiver will become effective, the obligations of the Company in respect of any such term, provision or condition will remain in full force and effect.
(h)    Tier 2 Capital. Whether or not the Company is subject to consolidated capital requirements under applicable regulations of the Federal Reserve, if all or any portion of the Subordinated Notes ceases to be deemed to be Tier 2 Capital, other than due to the limitation imposed on the capital treatment of subordinated debt during the five (5) years immediately preceding the Stated Maturity of the Subordinated Notes, the Company will promptly notify the
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Noteholders and thereafter, the Company and the Noteholders will work together in good faith to execute and deliver all agreements as reasonably necessary in order to restructure the applicable portions of the obligations evidenced by the Subordinated Notes to qualify as Tier 2 Capital; provided, however, that nothing contained in this Section 8(i) (Tier 2 Capital) shall limit the Company’s right to redeem the Subordinated Notes upon the occurrence of a Tier 2 Capital Event pursuant to Section 4(a) (Redemption Prior to Fifth Anniversary) or Section 4(b) (Redemption on or after Fifth Anniversary).
(i)    Compliance with Laws. The Company shall comply with the requirements of all laws, regulations, orders and decrees applicable to it or its properties, except for such noncompliance that would not reasonably be expected to have a Material Adverse Effect (as such term is defined in the Purchase Agreement) on the Company and its subsidiaries taken as a whole.
(j)    Taxes and Assessments. The Company shall punctually pay and discharge all material taxes, assessments, and other governmental charges or levies imposed upon it or upon its income or upon any of its properties; provided, that no such taxes, assessments or other governmental charges need be paid if they are being contested in good faith by the Company.
(k)    Financial Statements; Access to Records.
(i)    Not later than forty-five (45) days following the end of each semi-annual or quarterly period, as applicable, for which the Company has not submitted a Consolidated Financial Statements for Holding Companies Reporting Form FR Y-9C to the Federal Reserve, upon request, the Company shall provide the Noteholder with a copy of the Company’s unaudited parent company only balance sheet and statement of income (loss) for and as of the end of such immediately preceding fiscal quarter, prepared in accordance with past practice. Quarterly financial statements, if required herein, shall be unaudited and need not comply with GAAP.
(ii)    Not later than ninety (90) days from the end of each fiscal year, upon request the Company shall provide the Noteholder with copies of the Company’s audited financial statements consisting of the consolidated balance sheet of the Company as of the fiscal year end and the related statements of income (loss) and retained earnings, stockholders’ equity and cash flows for the fiscal year then ended. Such financial statements shall be prepared in accordance with GAAP applied on a consistent basis throughout the period involved.
(iii)    In addition to the foregoing Sections 8(k)(i) and (ii), if a Noteholder holds at least twenty five percent (25%) in aggregate principal amount (excluding any Subordinated Notes held by Company or any of its Affiliates) of the Subordinated Notes at the time outstanding, the Company agrees to furnish to such Noteholder, upon request, with such financial and business information of the Company and the Bank as such Noteholder may reasonably request as may be reasonably necessary or advisable to allow such Noteholder to confirm compliance by the Company with this Note.
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(l)    Company Statement as to Compliance. The Company will deliver to the Noteholders, within (i) forty-five (45) days after the end of each of the first three fiscal quarters and (ii) one hundred twenty (120) days after the end of each fiscal year, an Officer’s Certificate covering the preceding fiscal quarter or fiscal year, as applicable, stating whether or not, to the best of his or her knowledge, the Company is in default in the performance and observance of any of the terms, provisions and conditions of this Subordinated Note (without regard to notice requirements or periods of grace) and if the Company will be in default, specifying all such defaults and the nature and status thereof of which he or she may have knowledge.
9.    Negative Covenants of the Company.
(a)    Limitation on Dividends. The Company shall not declare or pay any dividend or make any distribution on capital stock or other equity securities of any kind of the Company if the Company is not “well capitalized” for regulatory purposes immediately prior to the declaration of such dividend or distribution, except for Permitted Dividends.
(b)    Merger or Sale of Assets. The Company shall not merge into another entity, effect a Change in Bank Control (as defined below) or convey, transfer or lease substantially all of its properties and assets to any person, unless:
(i)    the continuing entity into which the Company is merged or the person which acquires by conveyance or transfer or which leases substantially all of the properties and assets of the Company shall be a corporation, association or other legal entity organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and expressly assumes the due and punctual payment of the principal of and any premium and interest on the Subordinated Notes according to their terms, and the due and punctual performance of all covenants and conditions hereof on the part of the Company to be performed or observed; and
(ii)    immediately after giving effect to such transaction, no Event of Default (as defined above), and no event which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing.
“Change in Bank Control” means the sale, transfer, lease or conveyance by the Company, or an issuance of equity securities by the Bank other than to the Company, in either case resulting in ownership by the Company of less than 50% of the Bank.
(iii)    For the avoidance of doubt, the provisions of this Section 9(b) shall not prohibit the Company from pledging or granting a security interest in any or all of the Company’s assets.
10.    Denominations. The Subordinated Notes are issuable only in registered form without interest coupons in minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof.
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11.    Charges and Transfer Taxes. No service charge will be made for any registration of transfer or exchange of this Subordinated Note, or any redemption or repayment of this Subordinated Note, or any conversion or exchange of this Subordinated Note for other types of securities or property, but the Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges that may be imposed in connection with the transfer or exchange of this Subordinated Note from the Noteholder requesting such transfer or exchange.
12.    Payment Procedures. Payment of the principal and interest payable on the Maturity Date will be made by check, by wire transfer or by Automated Clearing House (ACH) transfer in immediately available funds to a bank account in the United States designated by the registered Noteholder if such Noteholder shall have previously provided wire instructions to the Company, upon presentation and surrender of this Subordinated Note at the Payment Office (as defined in Section 22 (Notices) below) or at such other place or places as the Company shall designate by notice to the registered Noteholders as the Payment Office, provided that this Subordinated Note is presented to the Company in time for the Company to make such payments in such funds in accordance with its normal procedures. Payments of interest (other than interest payable on the Maturity Date) shall be made on each Interest Payment Date by wire transfer in immediately available funds or check mailed to the registered Noteholder, as such person’s address appears on the Security Register. Interest payable on any Interest Payment Date shall be payable to the Noteholder in whose name this Subordinated Note is registered at the close of business on the fifteenth (15th) calendar day prior to the applicable Interest Payment Date, without regard to whether such date is a Business Day, except that interest not paid on the Interest Payment Date, if any, will be paid to the holder in whose name this Subordinated Note is registered at the close of business on a special record date fixed by the Company (a “Special Record Date”), notice of which shall be given to the Noteholder not less than ten (10) calendar days prior to such Special Record Date. To the extent permitted by applicable law, interest shall accrue, at the rate at which interest accrues on the principal of this Subordinated Note, on any amount of principal or interest on this Subordinated Note not paid when due. All payments on this Subordinated Note shall be applied first against costs and expenses of the Noteholder, if any, for which the Company is liable under this Subordinated Note; then against interest due hereunder; and then against principal due hereunder. The Noteholder acknowledges and agrees that the payment of all or any portion of the outstanding principal amount of this Subordinated Note and all interest hereon shall be pari passu in right of payment and in all other respects to the other Subordinated Notes. In the event that the Noteholder receives payments in excess of its pro rata share of the Company’s payments to the holders of all of the Subordinated Notes, then the Noteholder shall hold in trust all such excess payments for the benefit of the other Noteholders and shall pay such amounts held in trust to such other holders upon demand by such holders.
13.    Form of Payment. Payments of principal of and interest on this Subordinated Note shall be made in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts.
14.    Registration of Transfer, Security Register. Except as otherwise provided herein, this Subordinated Note is transferable in whole or in part, and may be exchanged for a
22

like aggregate principal amount of Subordinated Notes of other authorized denominations, by the Noteholder in person, or by its attorney duly authorized in writing, at the Payment Office or the offices of the Registrar. The Company or its agent (the “Registrar”) shall maintain a register providing for the registration of the Subordinated Notes and any exchange or transfer thereof (the “Security Register”). Upon surrender or presentation of this Subordinated Note for exchange or registration of transfer, the Company or the Registrar shall execute and deliver in exchange therefor a Subordinated Note or Subordinated Notes of like aggregate principal amount, each in a minimum denomination of $1,000 or any amount in excess thereof which is an integral multiple of $1,000 (and, in the absence of an opinion of counsel satisfactory to the Company to the contrary, bearing the restrictive legend(s) set forth hereinabove) and that is or are registered in such name or names requested by the Noteholder. Any Subordinated Note presented or surrendered for registration of transfer or for exchange shall be duly endorsed and accompanied by a written instrument of transfer in such form as is attached hereto and incorporated herein, duly executed by the Noteholder or its attorney duly authorized in writing, with such tax identification number or other information for each person in whose name a Subordinated Note is to be issued, and accompanied by evidence of compliance with any restrictive legend(s) appearing on such Subordinated Note or Subordinated Notes as the Company may reasonably request to comply with applicable law. No exchange or registration of transfer of this Subordinated Note shall be made on or after (i) the fifteenth (15th) day immediately preceding the Maturity Date or (ii) the due delivery of notice of redemption.
15.    Successors and Assigns. This Subordinated Note shall be binding upon the Company and inure to the benefit of the Noteholder and its respective successors and permitted assigns. The Noteholder may assign all, or any part of, or any interest in, the Noteholder’s rights and benefits hereunder only to the extent and in the manner permitted by the terms of this Note. To the extent of any such assignment, such assignee shall have the same rights and benefits against the Company and shall agree to be bound by and to comply with the terms and conditions of the Purchase Agreement as it would have had if it were the Noteholder hereunder.
16.    Priority. The Subordinated Notes rank pari passu among themselves and pari passu, in the event of any insolvency proceeding, dissolution, assignment for the benefit of creditors, reorganization, restructuring of debt, marshaling of assets and liabilities or similar proceeding or any liquidation or winding up of the Company, with all other present or future unsecured subordinated debt obligations of the Company, except any unsecured subordinated debt that, pursuant to its express terms, is senior or subordinate in right of payment to the Subordinated Notes.
17.    Ownership. Prior to due presentment of this Subordinated Note for registration of transfer, the Company may treat the holder in whose name this Subordinated Note is registered in the Security Register as the absolute owner of this Subordinated Note for receiving payments of principal and interest on this Subordinated Note and for all other purposes whatsoever, whether or not this Subordinated Note be overdue, and the Company shall not be affected by any notice to the contrary.
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18.    Waiver and Consent.
(a)    This Subordinated Note may be amended or waived pursuant to, and in accordance with, the provisions set forth herein and as set forth in Section 7.3 of the Purchase Agreement. Any such consent or waiver given by the Noteholder shall be conclusive and binding upon such Noteholder and upon all subsequent holders of this Subordinated Note and of any Subordinated Note issued upon the registration of transfer hereof or in exchange therefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Subordinated Note. No delay or omission of the Noteholder to exercise any right or remedy accruing upon any Event of Default shall impair such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Any insured depository institution which shall be a Noteholder or which otherwise shall have any beneficial ownership interest in this Subordinated Note shall, by its acceptance of such Subordinated Note (or beneficial interest therein), be deemed to have waived any right of offset with respect to the indebtedness evidenced thereby.
(b)    No waiver or amendment of any term, provision, condition, covenant or agreement in the Subordinated Notes shall be effective except with the consent of the Noteholders holding not less than more than fifty percent (50%) in aggregate principal amount (excluding any Subordinated Notes held by the Company or any of its Affiliates) of the Subordinated Notes at the time outstanding; provided, however, that without the consent of each Noteholder of an affected Subordinated Note, no such amendment or waiver may: (i) reduce the principal amount of any Subordinated Note; (ii) reduce the rate of or change the time for payment of interest on any Subordinated Note; (iii) extend the maturity of any Subordinated Note; (iv) change the currency in which payment of the obligations of the Company under the Subordinated Notes are to be made; (v) lower the percentage of aggregate principal amount of outstanding Subordinated Notes required to approve any amendment of the Subordinated Notes; (vi) make any changes to Section 4(c) (Partial Redemption), Section 6 (Events of Default; Acceleration), Section 7 (Failure to Make Payments), Section 16 (Priority), or Section 18 (Waiver and Consent) of the Subordinated Notes that adversely affects the rights of any Noteholder; or (vii) disproportionately affect the rights of any of the holders of the then outstanding Subordinated Notes. Notwithstanding the foregoing, the Company may amend or supplement the Subordinated Notes without the consent of the Noteholders to cure any ambiguity, defect or inconsistency or to provide for uncertificated Subordinated Notes in addition to or in place of certificated Subordinated Notes, or to make any change that does not adversely affect the rights of any Noteholder of any of the Subordinated Notes. No failure to exercise or delay in exercising, by any Noteholder of the Subordinated Notes, of any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other right or remedy provided by law, except as restricted hereby. The rights and remedies provided in this Subordinated Note are cumulative and not exclusive of any right or remedy provided by law or equity. No notice or demand on the Company in any case shall, in itself, entitle the Company to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Noteholders to any other or further action in any circumstances without notice or demand. No consent or waiver, expressed or implied, by the Noteholders to or of any breach or default by the Company in the performance of its obligations
24

hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance of the same or any other obligations of the Company hereunder. Failure on the part of the Noteholders to complain of any acts or failure to act or to declare an Event of Default, irrespective of how long such failure continues, shall not constitute a waiver by the Noteholders of their rights hereunder or impair any rights, powers or remedies on account of any breach or default by the Company.
19.    Absolute and Unconditional Obligation of the Company.
(a)    No provisions of this Subordinated Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal and interest on this Subordinated Note at the times, places and rate, and in the coin or currency, herein prescribed.
(b)    No delay or omission of the Noteholder to exercise any right or remedy accruing upon any Event of Default shall impair such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein.
(c)    Any insured depository institution which shall be a Noteholder or which otherwise shall have any beneficial ownership interest in this Subordinated Note shall, by its acceptance of such Note (or beneficial interest therein), be deemed to have waived any right of offset with respect to the indebtedness evidenced thereby.
20.    No Sinking Fund; Convertibility. This Subordinated Note is not entitled to the benefit of any sinking fund. This Subordinated Note is not convertible into or exchangeable for any of the equity securities, other securities or assets of the Company or any subsidiary of the Company.
21.    No Recourse Against Others. No recourse under or upon any obligation, covenant or agreement contained in this Subordinated Note, or for any claim based thereon or otherwise in respect thereof, will be had against any past, present or future shareholder, employee, officer, or director, as such, of the Company or of any predecessor or successor, either directly or through the Company or any predecessor or successor, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of this Subordinated Note by the Noteholder and as part of the consideration for the issuance of this Subordinated Note.
22.    Notices. All notices to the Company under this Subordinated Note shall be in writing and addressed to the Company at 6701 Democracy Boulevard, Suite 400, Bethesda, MD 20817, Attention: Anne Balcer, or to such other address as the Company may notify to the Noteholder (the “Payment Office”). All notices to the Noteholders shall be in writing and sent by first-class mail to each Noteholder at his or its address as set forth in the Security Register.
23.    Further Issues. The Company may, without the consent of the Noteholders, create and issue additional notes having the same terms and conditions of the Subordinated Notes
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(except for the Issue Date and issue price) so that such further notes shall be consolidated and form a single series with the Subordinated Notes.
24.    Governing Law; Interpretation. THIS SUBORDINATED NOTE WILL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THEREOF. THIS SUBORDINATED NOTE IS INTENDED TO MEET THE CRITERIA FOR QUALIFICATION OF THE OUTSTANDING PRINCIPAL AS TIER 2 CAPITAL UNDER THE REGULATORY GUIDELINES OF THE FEDERAL RESERVE, AND THE TERMS HEREOF SHALL BE INTERPRETED IN A MANNER TO SATISFY SUCH INTENT.
[Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned has caused this Subordinated Note to be duly executed and attested.
CONGRESSIONAL BANCSHARES, INC.
By:/s/ Donald F. Cole
Name:Donald F. Cole
Title:President and Chief Executive Officer
ATTEST:
/s/ Mark Wendel
Name: Mark Wendel
Title:Executive Vice President & Chief Financial Officer
[Signature Page to AI Global Subordinated Note]

ASSIGNMENT FORM
To assign this Subordinated Note, fill in the form below: (I) or (we) assign and transfer this Subordinated Note to:
______________________________________________________________________________
(Print or type assignee’s name, address and zip code)
______________________________________________________________________________
(Insert assignee’s social security or tax I.D. No.)
and irrevocably appoint __________________________ agent to transfer this Subordinated Note on the books of the Company. The agent may substitute another to act for him.
Date: _______________________ Your signature: ____________________________________
(Sign exactly as your name appears on the
face of this Subordinated Note)
Tax Identification No: _________________
Signature Guarantee: ____________________________________________________________
(Signatures must be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)).
The undersigned certifies that it [is / is not] an Affiliate of the Company and that, to its knowledge, the proposed transferee [is / is not] an Affiliate of the Company.
In connection with any transfer or exchange of this Subordinated Note occurring prior to the date that is one year after the later of the date of original issuance of this Subordinated Note and the last date, if any, on which this Subordinated Note was owned by the Company or any Affiliate of the Company, the undersigned confirms that this Subordinated Note is being:
CHECK ONE BOX BELOW:
☐
(1)
acquired for the undersigned’s own account, without transfer;
☐
(2)
transferred to the Company;
☐
(3)
transferred in accordance and in compliance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”);
☐
(4)
transferred under an effective registration statement under the Securities Act;
☐
(5)
transferred in accordance with and in compliance with Regulation S under the Securities Act;
☐
(6)
transferred to an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act);


☐
(7)
transferred to an “accredited investor” (as defined in Rule 501(a)(4) under the Securities Act), not referred to in item (6) that has been provided with the information designated under Section 4(d) of the Securities Act; or
☐
(8)
transferred in accordance with another available exemption from the registration requirements of the Securities Act.
Unless one of the boxes is checked, the Company will refuse to register this Subordinated Note in the name of any person other than the registered holder thereof; provided, however, that if box (5), (6), (7) or (8) is checked, the Company may require, prior to registering any such transfer of this Subordinated Note, in its sole discretion, such legal opinions, certifications and other information as the Company may reasonably request to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act such as the exemption provided by Rule 144 under such Act.
Signature: ___________________________
Signature Guarantee: ___________________________________________________________
(Signatures must be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to Exchange Act Rule 17Ad-l5).
TO BE COMPLETED BY PURCHASER IF BOX (1) OR (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Subordinated Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A

Exhibit 10.2
CONGRESSIONAL BANCSHARES, INC.
4.00% FIXED TO FLOATING RATE SUBORDINATED NOTE DUE
January 1, 2032
CONGRESSIONAL BANCSHARES, INC. (THE “COMPANY”) INTENDS TO USE THE NET PROCEEDS FROM THE ISSUANCE AND SALE OF THIS SUBORDINATED NOTE FOR GENERAL CORPORATE PURPOSES AND ALLOCATING AN AMOUNT EQUAL TO THE NET PROCEEDS FROM THE SALE OF THE SUBORDINATED NOTES FOR FINANCING OR REFINANCING PROJECTS, IN WHOLE OR IN PART, THAT ARE CONSISTENT WITH THE COMPANY’S GREEN FINANCING FRAMEWORK, AS MAY BE MODIFIED FROM TIME TO TIME. PENDING ALLOCATION TO SUCH PROJECTS, THE NET PROCEEDS MAY BE USED FOR GENERAL CORPORATE PURPOSES, INCLUDING SUPPORTING STRATEGIC AND ORGANIC GROWTH AND THE REPAYMENT OF INDEBTEDNESS.
THE INDEBTEDNESS EVIDENCED BY THIS SUBORDINATED NOTE IS NOT A SAVINGS ACCOUNT OR DEPOSIT AND IS NOT INSURED BY ANY FEDERAL AGENCY OR INSTRUMENTALITY, INCLUDING, WITHOUT LIMITATION, THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY OR FUND.
THE INDEBTEDNESS EVIDENCED BY THIS SUBORDINATED NOTE IS SUBORDINATED AND JUNIOR IN RIGHT OF PAYMENT TO SENIOR INDEBTEDNESS (AS DEFINED IN SECTION 3 (SUBORDINATION) OF THIS SUBORDINATED NOTE) OF THE COMPANY, INCLUDING OBLIGATIONS OF THE COMPANY TO ITS GENERAL AND SECURED CREDITORS AND IS UNSECURED. IT IS INELIGIBLE AS COLLATERAL FOR ANY EXTENSION OF CREDIT BY THE COMPANY OR ANY OF ITS SUBSIDIARIES.
IN THE EVENT OF LIQUIDATION ALL HOLDERS OF SENIOR INDEBTEDNESS OF THE COMPANY SHALL BE ENTITLED TO BE PAID IN FULL WITH SUCH INTEREST AS MAY BE PROVIDED BY LAW BEFORE ANY PAYMENT SHALL BE MADE ON ACCOUNT OF PRINCIPAL OF OR INTEREST ON THIS SUBORDINATED NOTE. AFTER PAYMENT IN FULL OF ALL SUMS OWING TO SUCH HOLDERS OF SENIOR INDEBTEDNESS, THE HOLDER OF THIS SUBORDINATED NOTE, TOGETHER WITH THE HOLDERS OF ANY OBLIGATIONS OF THE COMPANY RANKING ON A PARITY WITH THE SUBORDINATED NOTES, INCLUDING (BUT NOT LIMITED TO) THE COMPANY’S EXISTING 7.00% FIXED RATE SUBORDINATED NOTES DUE 2026 AND 6.50% FIXED-TO-FLOATING RATE SUBORDINATED NOTES DUE 2026, SHALL BE ENTITLED TO BE PAID FROM THE REMAINING ASSETS OF THE COMPANY THE UNPAID PRINCIPAL AMOUNT OF THIS SUBORDINATED NOTE PLUS ACCRUED AND UNPAID INTEREST THEREON BEFORE ANY PAYMENT OR OTHER DISTRIBUTION, WHETHER IN CASH, PROPERTY OR OTHERWISE, SHALL BE MADE (I) WITH RESPECT TO ANY OBLIGATION THAT BY ITS TERMS EXPRESSLY IS JUNIOR IN THE RIGHT OF PAYMENT TO THE SUBORDINATED NOTES, (II) WITH RESPECT TO THE


EXISTING JUNIOR SUBORDINATED DEBENTURES OF THE COMPANY (UNDERLYING THE OUTSTANDING TRUST PREFERRED SECURITIES) AS OF THE DATE OF THE ISSUANCE OF THIS SUBORDINATED NOTE TO WHICH THIS SUBORDINATED NOTE SHALL BE SENIOR, (III) WITH RESPECT TO ANY INDEBTEDNESS BETWEEN THE COMPANY AND ANY OF ITS SUBSIDIARIES OR AFFILIATES OR (IV) ON ACCOUNT OF ANY SHARES OF CAPITAL STOCK OF THE COMPANY.
THIS SUBORDINATED NOTE IS ISSUABLE IN A MINIMUM DENOMINATION OF $2,000 AND INTEGRAL MULTIPLES OF $1,000 IN EXCESS THEREOF AND MAY NOT BE EXCHANGED FOR SECURITIES OF THE COMPANY WITH A SMALLER DENOMINATION. EACH OWNER OF A BENEFICIAL INTEREST IN THE SUBORDINATED NOTE IS REQUIRED TO HOLD SUCH BENEFICIAL INTEREST IN A PRINCIPAL AMOUNT OF $2,000 OR AN INTEGRAL MULTIPLE OF $1,000 IN EXCESS THEREOF AT ALL TIMES.
THIS SUBORDINATED NOTE MAY BE SOLD ONLY IN COMPLIANCE WITH APPLICABLE FEDERAL AND STATE SECURITIES LAWS. THIS SUBORDINATED NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY APPLICABLE STATE SECURITIES LAWS, OR ANY OTHER APPLICABLE SECURITIES LAWS. NEITHER THIS SUBORDINATED NOTE NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.
CERTAIN ERISA CONSIDERATIONS:
THE HOLDER OF THIS SUBORDINATED NOTE, OR ANY INTEREST HEREIN, BY ITS ACCEPTANCE HEREOF OR THEREOF AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT PLAN, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED (“ERISA”), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE “CODE”) (EACH, A “PLAN”), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE “PLAN ASSETS” BY REASON OF ANY PLAN’S INVESTMENT IN THE ENTITY, AND NO PERSON INVESTING “PLAN ASSETS” OF ANY PLAN MAY ACQUIRE OR HOLD THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23, 95-60, 91-38, 90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SUBORDINATED NOTE, OR ANY INTEREST HEREIN, ARE NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE AND HOLDING.
2

ANY PURCHASER OR HOLDER OF THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER: (I) IT IS NOT AN EMPLOYEE BENEFIT PLAN OR OTHER PLAN TO WHICH TITLE I OF ERISA OR SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF ANY SUCH EMPLOYEE BENEFIT PLAN OR OTHER PLAN, OR ANY OTHER PERSON OR ENTITY USING THE “PLAN ASSETS” OF ANY SUCH PLAN OR OTHER PLAN TO FINANCE SUCH PURCHASE OR (II) SUCH PURCHASE OR HOLDING WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH FULL EXEMPTIVE RELIEF IS NOT AVAILABLE UNDER APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.
ANY FIDUCIARY OF ANY PLAN WHO IS CONSIDERING THE ACQUISITION OF THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN SHOULD CONSULT WITH HIS OR HER LEGAL COUNSEL PRIOR TO ACQUIRING THIS SUBORDINATED NOTE OR ANY INTEREST HEREIN.
3

No. 2032-1    CUSIP Accredited Investors: 20727P AH7
CONGRESSIONAL BANCSHARES, INC.
4.00% FIXED-TO-FLOATING RATE SUBORDINATED NOTE DUE
January 1, 2032
1.    Subordinated Notes. This Subordinated Note is one of an issue of notes of Congressional Bancshares, Inc., a Delaware corporation (the “Company”), designated as the “4.00% Fixed-to-Floating Rate Subordinated Notes due 2032” (the “Subordinated Notes”) issued pursuant to that Subordinated Note Purchase Agreement dated as of the date upon which this Subordinated Note was originally issued (the “Issue Date”) between the Company and the several purchasers of the Subordinated Notes identified in the signature pages thereto (the “Purchase Agreement”).
2.    Payment. The Company, for value received, promises to pay to Asian Bank, or its registered assigns, the principal sum of Five Hundred Thousand Dollars (U.S.) ($500,000), plus accrued but unpaid interest on January 1, 2032 (the “Maturity Date”) and to pay interest thereon (i) from and including the Issue Date to but excluding January 1, 2027 or the earlier redemption date contemplated by Section 4 (Redemption) of this Subordinated Note (the “Fixed Rate Period”), at the rate of 4.00% per annum, computed on the basis of a 360-day year consisting of twelve 30-day months and payable semi-annually in arrears on January 1 and July 1 of each year (each payment date, a “Fixed Interest Payment Date”), beginning January 1, 2022, and (ii) from and including January 1, 2027 to but excluding the Maturity Date or earlier redemption date contemplated by Section 4 (Redemption) of this Subordinated Note (the “Floating Rate Period”), at the rate per annum, reset quarterly, equal to the Floating Interest Rate (as defined below) determined on the Floating Interest Determination Date (as defined below) of the applicable interest period plus 289 basis points, computed on the basis of a 360-day year and the actual number of days elapsed and payable quarterly in arrears (each quarterly period a “Floating Interest Period”) on January 1, April 1, July 1, and October 1 of each year (each payment date, a “Floating Interest Payment Date”). Dollar amounts resulting from this calculation shall be rounded to the nearest cent, with one-half cent being rounded up. The term “Floating Interest Determination Date” means the date upon which the Floating Interest Rate is determined by the Calculation Agent (as defined herein) pursuant to the Three-Month Term SOFR Conventions (as defined herein). Any payment of principal of or interest on this Subordinated Note that would otherwise become due and payable on a day which is not a Business Day shall become due and payable on the next succeeding Business Day, with the same force and effect as if made on the date for payment of such principal or interest, and no interest will accrue in respect of such payment for the period after such day; provided, that in the event that any scheduled Floating Rate Interest Payment Date falls on a day that is not a Business Day and the next succeeding Business Day falls in the next succeeding calendar month, such Floating Rate Interest Payment Date will be accelerated to the immediately preceding Business Day, and, in each such case, the amounts payable on such Business Day will include interest accrued to, but excluding, such Business Day. Dollar amounts resulting from interest calculations will be rounded to the nearest cent, with one half cent being rounded upward. Notwithstanding anything
4

to the contrary, (i) in the event the Three-Month Term SOFR (as defined herein) is less than zero, the Three-Month Term SOFR shall be deemed to be zero, and (ii) if a Benchmark Transition Event (as defined herein) and its related Benchmark Replacement Date (as defined herein) have occurred and the Benchmark Replacement (as defined herein) is less than zero, then the Benchmark Replacement shall be deemed to be zero.
(a)    The Company shall take such actions as are necessary to ensure that from the commencement of the Floating Rate Period for so long as any of the Subordinated Notes remain outstanding there will at all times be a Calculation Agent appointed to calculate Three-Month Term SOFR in respect of each Floating Rate Period. The calculation of Three-Month Term SOFR for each applicable Floating Rate Period by the Calculation Agent will (in the absence of manifest error) be final and binding. The Calculation Agent’s determination of any interest rate and its calculation of interest payments for any period will be maintained on file at the Calculation Agent’s principal offices, will be made available to any Noteholder (as defined herein) upon request. The Calculation Agent may be removed by the Company at any time. If the Calculation Agent is unable or unwilling to act as Calculation Agent or is removed by the Company, the Company will promptly appoint a replacement Calculation Agent. The Calculation Agent may not resign its duties without a successor having been duly appointed; provided, that if a successor Calculation Agent has not been appointed by the Company and such successor accepted such position within thirty (30) calendar days after the giving of notice of resignation by the Calculation Agent, then the resigning Calculation Agent may petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor Calculation Agent with respect to such series. For the avoidance of doubt, if at any time there is no Calculation Agent appointed by the Company, then the Company shall be the Calculation Agent.
(b)    An “Interest Payment Date” is either a Fixed Interest Payment Date or a Floating Interest Payment Date, as applicable.
(c)    The “Floating Interest Rate” means:
(i)    initially Three-Month Term SOFR (as defined below).
(ii)    Notwithstanding the foregoing clause (i) of this Section 2(b):
(1)    If the Calculation Agent, determines prior to the relevant Floating Interest Determination Date that a Benchmark Transition Event and its related Benchmark Replacement Date (each of such terms as defined below) have occurred with respect to Three-Month Term SOFR, then the Company shall promptly provide notice of such determination to the Noteholders and Section 2(c) (Effect of Benchmark Transition Event) will thereafter apply to all determinations, calculations and quotations made or obtained for the purposes of calculating the Floating Interest Rate payable on the Subordinated Notes during a relevant Floating Interest Period.
(2)    However, if the Calculation Agent, determines that a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with
5

respect to Three-Month Term SOFR, but for any reason the Benchmark Replacement has not been determined as of the relevant Floating Interest Determination Date, the Floating Interest Rate for the applicable Floating Interest Period will be equal to the Floating Interest Rate on the last Floating Interest Determination Date for the Subordinated Notes, as determined by the Calculation Agent (as defined below).
(d)    Effect of Benchmark Transition Event.
(i)    If the Calculation Agent determines that a Benchmark Transition Event and its related Benchmark Replacement Date have occurred prior to the Reference Time (as defined below) in respect of any determination of the Benchmark (as defined below) on any date, the Benchmark Replacement will replace the then-current Benchmark for all purposes relating to the Subordinated Notes during the relevant Floating Interest Period in respect of such determination on such date and all determinations on all subsequent dates.
(ii)    In connection with the implementation of a Benchmark Replacement, the Calculation Agent will have the right to make Benchmark Replacement Conforming Changes from time to time, and such changes shall become effective without consent from the relevant Noteholders (as defined below) or any other party.
(iii)    The Calculation Agent is expressly authorized to make certain determinations, decisions and elections under the Subordinated Notes, including with respect to the use of Three-Month Term SOFR as the Benchmark under this Section 2(d). Any determination, decision or election that may be made by the Calculation Agent under the terms of the Subordinated Notes, including any determination with respect to a tenor, rate or adjustment or of the occurrence or non-occurrence of an event, circumstance or date, and any decision to take or refrain from taking any action or any selection:
(1)    will be conclusive and binding absent manifest error;
(2)    if made by the Company as the Calculation Agent, will be made in the Company’s sole discretion;
(3)    if made by the Calculation Agent (other than the Company), will be made after consultation with the Company, and the Calculation Agent will not make any such determination, decision or election to which the Company reasonably objects; and
(4)    notwithstanding anything to the contrary in this Subordinated Note or the Purchase Agreement, shall become effective without consent from the relevant Noteholders (as defined below) or any other party.
(iv)    If the Calculation Agent fails to make any determination, decision or election that it is required to make under the terms of the Subordinated Notes, then the Company will make such determination, decision or election on the same basis as described above.
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(v)    For the avoidance of doubt, after a Benchmark Transition Event and its related Benchmark Replacement Date have occurred, interest payable on this Subordinated Note for the Floating Rate Period will be an annual rate equal to the sum of the applicable Benchmark Replacement and the spread specified on the face hereof.
(vi)    If the then-current Benchmark is Three-Month Term SOFR, the Calculation Agent will have the right to establish the Three-Month Term SOFR Conventions, and if any of the foregoing provisions concerning the calculation of the interest rate and the payment of interest during the Floating Rate Period are inconsistent with any of the Three-Month Term SOFR Conventions determined by the Calculation Agent, then the relevant Three-Month Term SOFR Conventions will apply.
(vii)    As used in this Subordinated Note:
(1)    “Benchmark” means, initially, Three-Month Term SOFR; provided that if the Calculation Agent determines on or prior to the Reference Time that a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to Three-Month Term SOFR or the then-current Benchmark, then “Benchmark” means the applicable Benchmark Replacement.
(2)    “Benchmark Replacement” means the Interpolated Benchmark with respect to the then-current Benchmark for such Benchmark; provided that if (a) the Calculation Agent cannot determine the Interpolated Benchmark as of the Benchmark Replacement Date or (b) the then-current Benchmark is Three-Month Term SOFR and a Benchmark Transition Event and its related Benchmark Replacement Date have occurred with respect to Three-Month Term SOFR (in which event no Interpolated Benchmark with respect to Three-Month Term SOFR shall be determined), then “Benchmark Replacement” means the first alternative set forth in the order below that can be determined by the Calculation Agent, as of the Benchmark Replacement Date:
a.    The sum of (i) Compounded SOFR and (ii) the Benchmark Replacement Adjustment;
b.    the sum of: (i) the alternate rate of interest that has been selected or recommended by the Relevant Governmental Body as the replacement for the then-current Benchmark for the applicable Corresponding Tenor and (ii) the Benchmark Replacement Adjustment;
c.    the sum of: (i) the ISDA Fallback Rate and (ii) the Benchmark Replacement Adjustment;
d.    the sum of: (i) the alternate rate of interest that has been selected by the Calculation Agent as the replacement for the then-current Benchmark for the applicable Corresponding Tenor giving due consideration to any industry-accepted rate of interest as a replacement for the then-current Benchmark for U.S. dollar denominated floating rate notes at such time and (ii) the Benchmark Replacement Adjustment.
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(3)    “Benchmark Replacement Adjustment” means the first alternative set forth in the order below that can be determined by the Calculation Agent, as of the Benchmark Replacement Date:
a.    the spread adjustment, or method for calculating or determining such spread adjustment, (which may be a positive or negative value or zero) that has been selected or recommended by the Relevant Governmental Body for the applicable Unadjusted Benchmark Replacement;
b.    if the applicable Unadjusted Benchmark Replacement is equivalent to the ISDA Fallback Rate, then the ISDA Fallback Adjustment;
c.    the spread adjustment (which may be a positive or negative value or zero) that has been selected by the Calculation Agent giving due consideration to any industry-accepted spread adjustment, or method for calculating or determining such spread adjustment, for the replacement of the then-current Benchmark with the applicable Unadjusted Benchmark Replacement for U.S. dollar denominated floating rate notes at such time.
(4)    “Benchmark Replacement Conforming Changes” means, with respect to any Benchmark Replacement, any technical, administrative or operational changes (including changes to the definition of “Floating Interest Period,” timing and frequency of determining rates with respect to each Floating Interest Period and making payments of interest, rounding of amounts or tenors and other administrative matters) that the Calculation Agent decides may be appropriate to reflect the adoption of such Benchmark Replacement in a manner substantially consistent with market practice (or, if the Calculation Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Calculation Agent determines that no market practice for use of the Benchmark Replacement exists, in such other manner as the Calculation Agent determines is reasonably necessary).
(5)    “Benchmark Replacement Date” means the earliest to occur of the following events with respect to the then-current Benchmark:
a.    in the case of clause (a) of the definition of “Benchmark Transition Event,” the relevant Reference Time in respect of any determination;
b.    in the case of clause (b) or (c) of the definition of “Benchmark Transition Event,” the later of (i) the date of the public statement or publication of information referenced therein and (ii) the date on which the administrator of the Benchmark permanently or indefinitely ceases to provide the Benchmark; or
c.    in the case of clause (d) of the definition of “Benchmark Transition Event,” the date of such public statement or publication of information referenced therein.
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For the avoidance of doubt, for purposes of the definitions of Benchmark Replacement Date and Benchmark Transition Event, references to the Benchmark also include any reference rate underlying the Benchmark (for example, if the Benchmark becomes Compounded SOFR references to the Benchmark would include SOFR).
For the avoidance of doubt, if the event giving rise to the Benchmark Replacement Date occurs on the same day as, but earlier than, the Reference Time in respect of any determination, the Benchmark Replacement Date will be deemed to have occurred prior to the Reference Time for purposes of such determination.
(6)    “Benchmark Transition Event” means the occurrence of one or more of the following events with respect to the then-current Benchmark:
a.    if the Benchmark is Three-Month Term SOFR, (i) the Relevant Governmental Body has not selected or recommended a forward-looking term rate for a tenor of three months based on SOFR, (ii) the development of a forward-looking term rate for a tenor of three months based on SOFR that has been recommended or selected by the Relevant Governmental Body is not complete or (iii) the Company determines that the use of a forward-looking rate for a tenor of three months based on SOFR is not administratively feasible;
b.    a public statement or publication of information by or on behalf of the administrator of the Benchmark announcing that such administrator has ceased or will cease to provide the Benchmark, permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark;
c.    a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark, the central bank for the currency of the Benchmark, an insolvency official with jurisdiction over the administrator for the Benchmark, a resolution authority with jurisdiction over the administrator for the Benchmark or a court or an entity with similar insolvency or resolution authority over the administrator for the Benchmark, which states that the administrator of the Benchmark has ceased or will cease to provide the Benchmark permanently or indefinitely, provided that, at the time of such statement or publication, there is no successor administrator that will continue to provide the Benchmark; or
d.    a public statement or publication of information by the regulatory supervisor for the administrator of the Benchmark announcing that the Benchmark is no longer representative.
(7)    “Calculation Agent” means such bank or other entity (which may be the Company or an affiliate of the Company) as may be appointed by the Company to act as Calculation Agent for the Subordinated Notes during the Floating Rate Period.
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(8)    “Compounded SOFR” means the compounded average of SOFRs for the applicable Corresponding Tenor, with the rate, or methodology for this rate, and conventions for this rate being established by the Calculation Agent in accordance with:
a.    the rate, or methodology for this rate, and conventions for this rate selected or recommended by the Relevant Governmental Body for determining Compounded SOFR; provided that:
b.    if, and to the extent that, the Calculation Agent determines that Compounded SOFR cannot be determined in accordance with clause (a) above, then the rate, or methodology for this rate, and conventions for this rate that have been selected by the Calculation Agent giving due consideration to any industry-accepted market practice for U.S. dollar denominated floating rate notes at such time.
For the avoidance of doubt, the calculation of Compounded SOFR will exclude the Benchmark Replacement Adjustment and 289 basis points.
(9)    “Corresponding Tenor” with respect to a Benchmark Replacement means a tenor (including overnight) having approximately the same length (disregarding Business Day adjustment) as the applicable tenor for the then-current Benchmark.
(10)    “FRBNY” means the Federal Reserve Bank of New York.
(11)    “FRBNY’s Website” means the website of the FRBNY at http://www.newyorkfed.org, or any successor source.
(12)    “Interpolated Benchmark” with respect to the Benchmark means the rate determined for the Corresponding Tenor by interpolating on a linear basis between: (1) the Benchmark for the longest period (for which the Benchmark is available) that is shorter than the Corresponding Tenor and (2) the Benchmark for the shortest period (for which the Benchmark is available) that is longer than the Corresponding Tenor.
(13)    “ISDA” means the International Swaps and Derivatives Association, Inc. or any successor thereto.
(14)    “ISDA Definitions” means the 2006 ISDA Definitions published by the ISDA or any successor thereto, as amended or supplemented from time to time, or any successor definitional booklet for interest rate derivatives published from time to time.
(15)    “ISDA Fallback Adjustment” means the spread adjustment (which may be a positive or negative value or zero) that would apply for derivatives transactions referencing the ISDA Definitions to be determined upon the occurrence of an index cessation event with respect to the Benchmark for the applicable tenor.
(16)    “ISDA Fallback Rate” means the rate that would apply for derivatives transactions referencing the ISDA Definitions to be effective upon the occurrence of
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an index cessation date with respect to the Benchmark for the applicable tenor excluding the applicable ISDA Fallback Adjustment.
(17)    “Reference Time” with respect to any determination of a Benchmark means (1) if the Benchmark is Three-Month Term SOFR, the time determined by the Calculation Agent after giving effect to the Three-Month Term SOFR Conventions, and (2) if the Benchmark is not Three-Month Term SOFR, the time determined by the Calculation Agent after giving effect to the Benchmark Replacement Conforming Changes.
(18)    “Relevant Governmental Body” means the Board of Governors of the Federal Reserve System (the “Federal Reserve”) and/or the FRBNY, or a committee officially endorsed or convened by the Federal Reserve and/or the FRBNY or any successor thereto.
(19)    “SOFR” means the daily Secured Overnight Financing Rate provided by the FRBNY, as the administrator of the benchmark (or a successor administrator), on the FRBNY’s Website (or such successor’s website).
(20)    “Term SOFR” means the forward-looking term rate for the Corresponding Tenor based on SOFR that has been selected or recommended by the Relevant Governmental Body.
(21)    “Term SOFR Administrator” means any entity designated by the Relevant Governmental Body as the administrator of Term SOFR (or a successor administrator).
(22)    “Three-Month Term SOFR” means the rate for Term SOFR for a tenor of three months that is published by the Term SOFR Administrator at the Reference Time for any Floating Interest Period, as determined by the Calculation Agent after giving effect to the Three-Month Term SOFR Conventions. All percentages used in or resulting from any calculation of Three-Month Term SOFR shall be rounded, if necessary, to the nearest one-hundred-thousandth of a percentage point, with 0.000005% rounded up to 0.00001%.
(23)    “Three-Month Term SOFR Conventions” means any determination, decision or election with respect to any technical, administrative or operational matter (including with respect to the manner and timing of the publication of Three-Month Term SOFR, or changes to the definition of “Floating Interest Period”, timing and frequency of determining Three-Month Term SOFR with respect to each Floating Interest Period and making payments of interest, rounding of amounts or tenors, and other administrative matters) that the Calculation Agent decides may be appropriate to reflect the use of Three-Month Term SOFR as the Benchmark in a manner substantially consistent with market practice (or, if the Calculation Agent decides that adoption of any portion of such market practice is not administratively feasible or if the Calculation Agent determines that no market practice for the use of Three-Month Term SOFR exists, in such other manner as the Calculation Agent determines is reasonably necessary).
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(24)    “Unadjusted Benchmark Replacement” means the Benchmark Replacement excluding the Benchmark Replacement Adjustment.
(e)    In the event that any Fixed Interest Payment Date during the Fixed Rate Period falls on a day that is not a Business Day (as defined below), the interest payment due on that date shall be postponed to the next day that is a Business Day and no additional interest shall accrue as a result of that postponement. In the event that any Floating Interest Payment Date during the Floating Rate Period falls on a day that is not a Business Day (as defined below), the interest payment due on that date shall be postponed to the next day that is a Business Day and interest shall accrue to but excluding the date interest is paid. However, if the postponement would cause the day to fall in the next calendar month during the Floating Interest Period, the Floating Interest Payment Date shall instead be brought forward to the immediately preceding Business Day. The term “Business Day” means any day other than a Saturday or Sunday or any other day on which banking institutions in the State of Maryland are generally authorized or required by law or executive order to be closed.
3.    Subordination.
(a)    The indebtedness of the Company evidenced by this Subordinated Note, including the principal and interest on this Subordinated Note, shall be subordinate and junior in right of payment to the prior payment in full of all existing claims of creditors of the Company whether now outstanding or subsequently created, assumed, guaranteed or incurred (collectively, “Senior Indebtedness”), which shall consist of principal of (and premium, if any) and interest, if any, on: (i) all indebtedness and obligations of, or guaranteed or assumed by, the Company for money borrowed, whether or not evidenced by bonds, debentures, securities, notes or other similar instruments, and including, but not limited to all obligations to the Company’s general and secured creditors; (ii) any deferred obligations of the Company for the payment of the purchase price of property or assets acquired other than in the ordinary course of business; (iii) all obligations, contingent or otherwise, of the Company in respect of any letters of credit, bankers’ acceptances, security purchase facilities and similar direct credit substitutes; (iv) any capital lease obligations of the Company; (v) all obligations of the Company in respect of interest rate swap, cap or other agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts, commodity contracts and other similar arrangements or derivative products; (vi) any obligation of the Company to its general creditors, as defined for purposes of the capital adequacy regulations of the Federal Reserve applicable to the Company, as the same may be amended or modified from time to time; (vii) all obligations that are similar to those in clauses (i) through (v) of other persons for the payment of which the Company is responsible or liable as obligor, guarantor or otherwise arising from an off-balance sheet guarantee; (viii) all obligations of the types referred to in clauses (i) through (vi) of other persons secured by a lien on any property or asset of the Company; and (viii) in the case of (i) through (viii) above, all amendments, renewals, extensions, modifications and refundings of such indebtedness and obligations; except “Senior Indebtedness” does not include (A) the Subordinated Notes, (B) any obligation that by its terms expressly is junior to, or ranks equally in right of payment with, the Subordinated Notes, (C) the existing 7.00% Fixed Rate Subordinated Notes due 2026 and the 6.50% Fixed-to-Floating Rate Notes due 2026 as of the date of the
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issuance of this Subordinated Note to which this Subordinated Note shall be equal in right of payment, (D) the existing junior subordinated debentures of the Company (underlying the outstanding trust preferred securities) as of the date of the issuance of this Subordinated Note to which this Subordinated Note shall be senior, or (E) any indebtedness between the Company and any of its subsidiaries or Affiliates. This Subordinated Note is not secured by any assets of the Company or any of its subsidiaries or Affiliates. The term “Affiliate(s)” means, with respect to any Person (as such term is defined in the Purchase Agreement), such Person’s immediate family members, partners, members or parent and subsidiary corporations, and any other Person directly or indirectly controlling, controlled by, or under common control with said Person and their respective Affiliates.
(b)    In the event of liquidation of the Company, holders of Senior Indebtedness of the Company shall be entitled to be paid in full with such interest as may be provided by law before any payment shall be made on account of principal of or interest on this Subordinated Note. Additionally, in the event of any insolvency, dissolution, assignment for the benefit of creditors or any liquidation or winding up of or relating to the Company, whether voluntary or involuntary, holders of Senior Indebtedness shall be entitled to be paid in full before any payment shall be made on account of the principal of or interest on the Subordinated Notes, including this Subordinated Note. In the event of any such proceeding, after payment in full of all sums owing with respect to the Senior Indebtedness, the registered holders of the Subordinated Notes from time to time (each a “Noteholder” and, collectively, the “Noteholders”), together with the holders of any obligations of the Company ranking on parity with the Subordinated Notes, including (but not limited to) the existing 7.00% Fixed Rate Subordinated Notes due 2026 and the 6.50% Fixed-to-Floating Rate Notes due 2026 as of the date of the issuance of this Subordinated Note to which this Subordinated Note shall be equal in right of payment, shall be entitled to be paid from the remaining assets of the Company the unpaid principal thereof, and the unpaid interest thereon before any payment or other distribution, whether in cash, property or otherwise, shall be made (i) with respect to any obligation that by its terms expressly is junior to in the right of payment to the Subordinated Notes, (ii) with respect to the existing junior subordinated debentures of the Company (underlying the outstanding trust preferred securities) as of the date of the issuance of this Subordinated Note to which this Subordinated Note shall be senior, (iii) with respect to any indebtedness between the Company and any of its subsidiaries or Affiliates or (iv) on account of any capital stock.
(c)    If there shall have occurred and be continuing (i) a default in any payment with respect to any Senior Indebtedness or (ii) an event of default with respect to any Senior Indebtedness as a result of which the maturity thereof is accelerated, unless and until such payment default or event of default shall have been cured or waived or shall have ceased to exist, no payments shall be made by the Company with respect to the Subordinated Notes. The provisions of this paragraph shall not apply to any payment with respect to which the immediately preceding paragraph of this Section 3 (Subordination) would be applicable.
(d)    Nothing herein shall act to prohibit, limit or impede the Company from issuing additional debt of the Company having the same rank as the Subordinated Notes or which
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may be junior or senior in rank to the Subordinated Notes. Each Noteholder, by its acceptance hereof, agrees to and shall be bound by the provisions of this Section 3. Each Noteholder, by its acceptance hereof, further acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration for each holder of any Senior Indebtedness, whether such Senior Indebtedness was created or acquired before or after the issuance of the Subordinated Notes, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness, and such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold or in continuing to hold such Senior Indebtedness.
4.    Redemption.
(a)    Redemption Prior to Fifth Anniversary. This Subordinated Note shall not be redeemable by the Company in whole or in part prior to the fifth anniversary of the Issue Date, except in the event of a: (i) Tier 2 Capital Event (as defined below); (ii) Tax Event (as defined below); or (iii) Investment Company Event (as defined below). Upon the occurrence of a Tier 2 Capital Event, a Tax Event or an Investment Company Event, the Company may redeem this Subordinated Note, subject to Section 4(f) (Regulatory Approvals) hereof, in whole or in part at any time, upon giving not less than 10 days’ notice to the holder of this Subordinated Note at an amount equal to 100% of the outstanding principal amount being redeemed plus accrued but unpaid interest, to but excluding the redemption date. “Tier 2 Capital Event” means the receipt by the Company of an opinion of counsel to the Company to the effect that there is a material risk that this Subordinated Note no longer qualifies as “Tier 2” Capital (as defined by the Federal Reserve) (or its then equivalent) as a result of a change in law or regulation, or interpretation or application thereof, by any judicial, legislative or regulatory authority that becomes effective after the date of issuance of this Subordinated Note. “Tax Event” means the receipt by the Company of an opinion of counsel to the Company that as a result of any amendment to, or change (including any final and adopted (or enacted) prospective change) in, the laws (or any regulations thereunder) of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement or judicial decision interpreting or applying such laws or regulations, there exists a material risk that interest payable by the Company on the Subordinated Notes is not, or within 120 days after the receipt of such opinion will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes. “Investment Company Event” means the receipt by the Company of an opinion of counsel to the Company to the effect that there is a material risk that the Company is or, within one hundred twenty (120) days after the receipt of such opinion will be, required to register as an investment company pursuant to the Investment Company Act of 1940, as amended.
(b)    Redemption on or after Fifth Anniversary. On or after the fifth anniversary of the Issue Date, subject to the provisions of Section 4(f) (Regulatory Approvals) hereof, this Subordinated Note shall be redeemable at the option of and by the Company, in whole or in part from time to time upon any Interest Payment Date, at an amount equal to 100% of the outstanding principal amount being redeemed plus accrued but unpaid interest, to but excluding the redemption date, but in all cases in a principal amount with integral multiples of
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$1,000. In addition, on or after the fifth anniversary of the Issue Date, subject to Section 4(f), the Company may redeem all or a portion of the Subordinated Notes, at any time upon the occurrence of a Tier 2 Capital Event, Tax Event or an Investment Company Event.
(c)    Partial Redemption. If less than the then outstanding principal amount of this Subordinated Note is redeemed, (i) a new Subordinated Note shall be issued representing the unredeemed portion without charge to the holder thereof and (ii) such redemption shall be effected on a pro rata basis as to the Noteholders. For purposes of clarity, upon a partial redemption, a like percentage of the principal amount of every Subordinated Note held by every Noteholder shall be redeemed.
(d)    No Redemption at Option of Noteholder. This Subordinated Note is not subject to redemption at the option of the holder of this Subordinated Note.
(e)    Effectiveness of Redemption. If notice of redemption has been duly given and notwithstanding that this Subordinated Note has been called for redemption but has not yet been surrendered for cancellation, on and after the date fixed for redemption interest shall cease to accrue on the portion of this Subordinated Note called for redemption, this Subordinated Note shall no longer be deemed outstanding with respect to the portion called for redemption and all rights with respect to the portion of this Subordinated Note called for redemption shall forthwith on such date fixed for redemption cease and terminate unless the Company shall default in the payment of the redemption price, except only the right of the holder hereof to receive the amount payable on such redemption, without interest. For purposes of clarity, any redemption made pursuant to the terms of this Subordinated Note shall be made on a pro rata basis, and, for purposes of a redemption processed through DTC, on a “Pro Rata Pass-Through Distribution of Principal” basis, among all of the Subordinated Notes outstanding at the time thereof.
(f)    Regulatory Approvals. Any such redemption shall be subject to receipt of any and all required federal and state regulatory approvals or non-objections, including, but not limited to, the consent of the Federal Reserve. In the case of any redemption of this Subordinated Note pursuant to paragraph (b) of this Section 4 (Redemption), the Company will give the holder hereof notice of redemption, which notice shall indicate the aggregate principal amount of Subordinated Notes to be redeemed, not less than thirty (30) nor more than forty-five (45) calendar days prior to the proposed redemption date.
(g)    Purchase and Resale of the Subordinated Notes. Subject to any required federal and state regulatory approvals and the provisions of this Subordinated Note, the Company shall have the right to purchase any of the Subordinated Notes at any time in the open market, private transactions or otherwise. If the Company purchases any Subordinated Notes, it may, in its discretion, hold, resell or cancel any of the purchased Subordinated Notes.
5.    Global Subordinated Notes.
(a)    Provided that applicable depository eligibility requirements are met, upon the written election of any Noteholder that is a Qualified Institutional Buyer, as defined in Rule 144A under the Securities Act, the Company shall use its commercially reasonable efforts
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to provide that the Subordinated Notes owned by Noteholders that are Qualified Institutional Buyers shall be issued in the form of one or more Global Subordinated Notes (each a “Global Subordinated Note”) registered in the name of The Depository Trust Company or another organization registered as a clearing agency under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and designated as Depositary by the Company or any successor thereto (the “Depositary”) or a nominee thereof and delivered to such Depositary or a nominee thereof.
(b)    Notwithstanding any other provision herein, no Global Subordinated Note may be exchanged in whole or in part for Subordinated Notes registered, and no transfer of a Global Subordinated Note in whole or in part may be registered, in the name of any person other than the Depositary for such Global Subordinated Note or a nominee thereof unless (i) such Depositary advises the Company in writing that such Depositary is no longer willing or able to properly discharge its responsibilities as Depositary with respect to such Global Subordinated Note, and no qualified successor is appointed by the Company within ninety (90) days of receipt by the Company of such notice, (ii) such Depositary ceases to be a clearing agency registered under the Exchange Act and no successor is appointed by the Company within ninety (90) days after obtaining knowledge of such event, (iii) the Company elects to terminate the book-entry system through the Depositary or (iv) an Event of Default (as defined in Section 6 (Events of Default; Acceleration)) shall have occurred and be continuing. Upon the occurrence of any event specified in clause (i), (ii), (iii) or (iv) of this Section 5(b), the Company or its agent shall notify the Depositary and instruct the Depositary to notify all owners of beneficial interests in such Global Subordinated Note of the occurrence of such event and of the availability of Subordinated Notes to such owners of beneficial interests requesting the same.
(c)    If any Global Subordinated Note is to be exchanged for other Subordinated Notes or canceled in part, or if another Subordinated Note is to be exchanged in whole or in part for a beneficial interest in any Global Subordinated Note, then either (i) such Global Subordinated Note shall be so surrendered for exchange or cancellation as provided in this Section 5 or (ii) the principal amount thereof shall be reduced or increased by an amount equal to the portion thereof to be so exchanged or canceled, or equal to the principal amount of such other Subordinated Note to be so exchanged for a beneficial interest therein, as the case may be, by means of an appropriate adjustment made on the records of the Company or, if applicable, the Company’s registrar and transfer agent (“Registrar”), whereupon the Company or, if applicable, the Registrar, in accordance with the applicable rules and procedures of the Depositary (“Applicable Depositary Procedures”), shall instruct the Depositary or its authorized representative to make a corresponding adjustment to its records. Upon any such surrender or adjustment of a Global Subordinated Note by the Depositary, accompanied by registration instructions, the Company shall execute and deliver any Subordinated Notes issuable in exchange for such Global Subordinated Note (or any portion thereof) in accordance with the instructions of the Depositary.
(d)    Every Subordinated Note executed and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Subordinated Note or any portion thereof shall be executed and delivered in the form of, and shall be, a Global Subordinated Note, unless
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such Subordinated Note is registered in the name of a person other than the Depositary for such Global Subordinated Note or a nominee thereof.
(e)    The Depositary or its nominee, as the registered owner of a Global Subordinated Note, shall be the holder of such Global Subordinated Note for all purposes under this Subordinated Note, and owners of beneficial interests in a Global Subordinated Note shall hold such interests pursuant to Applicable Depositary Procedures. Accordingly, any such owner’s beneficial interest in a Global Subordinated Note shall be shown only on, and the transfer of such interest shall be effected only through, records maintained by the Depositary or its nominee or its Depositary participants. If applicable, the Registrar shall be entitled to deal with the Depositary for all purposes relating to a Global Subordinated Note (including the payment of principal and interest thereon and the giving of instructions or directions by owners of beneficial interests therein and the giving of notices) as the sole holder of the Subordinated Note and shall have no obligations to the owners of beneficial interests therein. The Registrar shall have no liability in respect of any transfers undertaken by the Depositary.
(f)    The rights of owners of beneficial interests in a Global Subordinated Note shall be exercised only through the Depositary and shall be limited to those established by law and agreements between such owners and the Depositary and/or its participants.
(g)    No holder of any beneficial interest in any Global Subordinated Note held on its behalf by a Depositary shall have any rights with respect to such Global Subordinated Note, and such Depositary may be treated by the Company and any agent of the Company as the owner of such Global Subordinated Note for all purposes whatsoever. Neither the Company nor any agent of the Company will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Subordinated Note or maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Notwithstanding the foregoing, nothing herein shall prevent the Company or any agent of the Company from giving effect to any written certification, proxy or other authorization furnished by a Depositary or impair, as between a Depositary and such holders of beneficial interests, the operation of customary practices governing the exercise of the rights of the Depositary (or its nominee) as holder of any Subordinated Note.
(h)    The Company, within thirty (30) calendar days after the receipt of written notice from the Noteholder or any other holder of the Subordinated Notes of the occurrence of an Event of Default with respect to this Subordinated Note, shall mail to all the Noteholders, at their addresses shown on the Security Register (as defined in Section 14 (Registration of Transfer, Security Register) below), such written notice of Event of Default, unless such Event of Default shall have been cured or waived before the giving of such notice as certified by Company in writing.
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6.    Events of Default; Acceleration.
Each of the following events shall constitute an “Event of Default”:
(a)    the entry of a decree or order for relief in respect of the Company by a court having jurisdiction in the premises in an involuntary case or proceeding under any applicable bankruptcy, insolvency, or reorganization law, now or hereafter in effect of the United States or any political subdivision thereof, and such decree or order will have continued unstayed and in effect for a period of sixty (60) consecutive days;
(b)    the commencement by the Company of a voluntary case under any applicable bankruptcy, insolvency or reorganization law, now or hereafter in effect of the United States or any political subdivision thereof, or the consent by the Company to the entry of a decree or order for relief in an involuntary case or proceeding under any such law;
(c)    the Company (i) becomes insolvent or is unable to pay its debts as they mature, (ii) makes an assignment for the benefit of creditors, (iii) admits in writing its inability to pay its debts as they mature or (iv) ceases to be a bank holding company or financial holding company under the Bank Holding Company Act of 1956, as amended;
(d)    the failure of the Company to pay any installment of interest on any of the Subordinated Notes as and when the same will become due and payable, and the continuation of such failure for a period of fifteen (15) days;
(e)    the failure of the Company to pay all or any part of the principal of any of the Subordinated Notes as and when the same will become due and payable;
(f)    the liquidation of the Company (for avoidance of doubt, “liquidation” does not include any merger, consolidation, sale of equity or assets or reorganization (exclusive of a reorganization in bankruptcy) of the Company or any of its subsidiaries);
(g)    the failure of the Company to perform any other covenant or agreement on the part of the Company contained in the Subordinated Notes, and the continuation of such failure for a period of thirty (30) days after the date on which notice specifying such failure, stating that such notice is a “Notice of Default” hereunder and demanding that the Company remedy the same, will have been given, in the manner set forth in Section 22 (Notices), to the Company by a Noteholder; or
(h)    the default by the Company under any bond, debenture, note or other evidence of indebtedness for money borrowed by the Company having an aggregate principal amount outstanding of at least $5,000,000, whether such indebtedness now exists or is created or incurred in the future, which default (i) constitutes a failure to pay any portion of the principal of such indebtedness when due and payable after the expiration of any applicable grace period or (ii) results in such indebtedness becoming due or being declared due and payable prior to the date on which it otherwise would have become due and payable without, in the case of clause (i),
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such indebtedness having been discharged or, in the case of clause (ii), without such indebtedness having been discharged or such acceleration having been rescinded or annulled.
Unless the principal amount of this Subordinated Note already shall have become due and payable, if an Event of Default set forth in Section 6(a) or Section 6(b) above shall have occurred and be continuing, the Noteholder, by notice in writing to the Company, may declare the principal amount of this Subordinated Note to be due and payable immediately and, upon any such declaration, the same shall become and shall be immediately due and payable, and the Company waives demand, presentment for payment, notice of nonpayment, notice of protest, and all other notices. Notwithstanding the foregoing, because the Company will treat the Subordinated Notes as Tier 2 Capital, upon the occurrence of an Event of Default other than an Event of Default described in Section 6(a) or Section 6(b), no Noteholder may accelerate the Stated Maturity of the Subordinated Notes and make the principal of, and any accrued and unpaid interest on, the Subordinated Notes, immediately due and payable. The Company, within forty-five (45) calendar days after the receipt of written notice from any Noteholder of the occurrence of an Event of Default with respect to this Subordinated Note, shall mail to all Noteholders, at their addresses shown on the Security Register (as defined in Section 14 (Registration of Transfer, Security Register) below), such written notice of Event of Default, unless such Event of Default shall have been cured or waived before the giving of such notice as certified by the Company in writing.
7.    Failure to Make Payments. In the event of an Event of Default under Section 6(c), Section 6(d) or Section 6(e) above, the Company will, upon demand of the Noteholder, pay to the Noteholder the amount then due and payable on this Subordinated Note for principal and interest (without acceleration of the Subordinated Note in any manner), with interest on the overdue principal and interest at the per annum rate borne by this Subordinated Note, to the extent permitted by applicable law. If the Company fails to pay such amount upon such demand, the holder of this Subordinated Note may, among other things, institute a judicial proceeding for the collection of the sums so due and unpaid and such amount as shall be sufficient to cover the reasonable costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of such Noteholder, its agents and counsel, may prosecute such proceeding to judgment or final decree and may enforce the same against the Company and collect the amounts adjudged or decreed to be payable in the manner provided by law out of the property of the Company.
Upon the occurrence of a failure by the Company to make any required payment of principal or interest on this Subordinated Note or an Event of Default, until such Event of Default is cured by the Company or waived by the Noteholders in accordance with Section 18 (Waiver and Consent) hereof, except as may be required by any federal or state bank regulatory agency, the Company shall not: (a) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company’s capital stock; (b) make any payment of principal or interest or premium, if any, on or repay, repurchase or redeem any indebtedness of the Company that ranks equal with or junior to the Subordinated Notes; or (c) make any payments under any guarantee that ranks equal with or junior to the Subordinated Notes, other than: (i) any dividends or distributions in shares of, or options,
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warrants or rights to subscribe for or purchase shares of, any class of the Company’s common stock; (ii) any declaration of a non-cash dividend in connection with the implementation of a shareholders’ rights plan, or the issuance of stock under any such plan in the future, or the redemption or repurchase of any such rights pursuant thereto; (iii) as a result of a reclassification of the Company’s capital stock or the exchange or conversion of one class or series of the Company’s capital stock for another class or series of the Company’s capital stock; (iv) the purchase of fractional interests in shares of the Company’s capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged; or (v) purchases of any class of the Company’s common stock related to the issuance of common stock or rights under any benefit plans for the Company’s directors, officers or employees or any of the Company’s dividend reinvestment plans (the foregoing clauses (i) through (v) are collectively referred to as the “Permitted Dividends”).
8.    Affirmative Covenants of the Company.
(a)    Notice of Certain Events. To the extent permitted by applicable statute, rule or regulation, the Company shall provide written notice to the Noteholder of the occurrence of any of the following events as soon as practicable, but in no event later than fifteen (15) Business Days following the Company becoming aware of the occurrence of such event:
(i)    The total risk-based capital ratio, Tier 1 risk-based capital ratio, common equity Tier 1 risk-based capital ratio or leverage ratio of the Company (but only to the extent the Company is required to measure and report such ratios on a consolidated basis under applicable law) or any of the Company’s banking Subsidiaries becomes less than eight percent (8.0%), six percent (6.0%), four and one-half percent (4.5%) or four percent (4.0%), respectively, as of the end of any fiscal quarter;
(ii)    The Company, or any of the Company’s subsidiaries, or any officer of the Company (in such capacity), becomes subject to any formal, written regulatory enforcement action (as defined by the applicable state or federal bank regulatory authority);
(iii)    The ratio of non-performing assets to total assets of Congressional Bank (the “Bank”), as calculated by the Company in the ordinary course of business and consistent with past practices, becomes greater than four percent (4.0%);
(iv)    The appointment, resignation, removal or termination of the principal executive officer, principal financial officer, or principal accounting officer of the Company or the Bank; or
(v)    There is a change in ownership of 25% or more of the outstanding securities of the Company entitled to vote for the election of directors.
(b)    Payment of Principal and Interest. The Company covenants and agrees for the benefit of the Noteholder that it will duly and punctually pay the principal of, and interest on, this Subordinated Note, in accordance with the terms hereof.
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(c)    Maintenance of Office. The Company will maintain an office or agency in the State of Maryland, unless the Company has provided due notice to the Noteholders of such change in office or agency location, where Subordinated Notes may be surrendered for registration of transfer or for exchange and where notices and demands to or upon the Company in respect of the Subordinated Notes may be served.
The Company may also from time to time designate one or more other offices or agencies where the Subordinated Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided that no such designation or rescission will in any manner relieve the Company of its obligation to maintain an office or agency in the State of Maryland unless the Company has provided due notice to the Noteholders of such change in office or agency location. The Company will give prompt written notice to the Noteholders of any such designation or rescission and of any change in the location of any such other office or agency.
(d)    Corporate Existence. The Company will do or cause to be done all things necessary to preserve and keep in full force and effect: (i) the corporate existence of the Company; (ii) the existence (corporate or other) of each subsidiary; and (iii) the rights (constituent governing documents and statutory), licenses and franchises of the Company and each of its subsidiaries; provided, however, that the Company will not be required to preserve the existence (corporate or other) of any of its subsidiaries or any such right, license or franchise of the Company or any of its subsidiaries if the Board of Directors of the Company determines that the preservation thereof is no longer desirable in the conduct of the business of the Company and its subsidiaries taken as a whole and that the loss thereof will not be disadvantageous in any material respect to the Noteholders.
(e)    Maintenance of Properties. The Company will, and will cause each subsidiary to, cause all its properties used or useful in the conduct of its business to be maintained and kept in good condition, repair and working order and supplied with all necessary equipment and will cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereof, all as in the judgment of the Company may be necessary so that the business carried on in connection therewith may be properly and advantageously conducted at all times; provided, however, that nothing in this Section 8(e) will prevent the Company or any subsidiary from discontinuing the operation and maintenance of any of their respective properties if such discontinuance is, in the reasonable judgment of the Board of Directors of the Company or of any subsidiary, as the case may be, desirable in the conduct of its business.
(f)    Waiver of Certain Covenants. The Company may omit in any particular instance to comply with any term, provision or condition set forth in Section 8(c) (Maintenance of Office), Section 8(d) (Corporate Existence), or Section 8(e) (Maintenance of Properties) above, with respect to this Subordinated Note if before the time for such compliance the Noteholders of at least a majority in aggregate principal amount of the outstanding Subordinated Notes, by act of such Noteholders, either will waive such compliance in such instance or generally will have waived compliance with such term, provision or condition, but no such waiver will extend to or affect such term, provision or condition except to the extent so expressly
21

waived, and, until such waiver will become effective, the obligations of the Company in respect of any such term, provision or condition will remain in full force and effect.
(g)    Tier 2 Capital. Whether or not the Company is subject to consolidated capital requirements under applicable regulations of the Federal Reserve, if all or any portion of the Subordinated Notes ceases to be eligible, or there is a material risk that the Subordinated Note will cease to be eligible, to qualify as Tier 2 Capital, other than due to the limitation imposed on the capital treatment of subordinated debt during the five (5) years immediately preceding the Stated Maturity of the Subordinated Notes, the Company will promptly notify the Noteholder and thereafter, subject to the Company’s right to redeem the Subordinated Notes under such circumstances pursuant to the terms of the Subordinated Notes, if requested by the Company, the Company and the Noteholder will work together in good faith to execute and deliver all agreements as reasonably necessary in order to restructure the applicable portions of the obligations evidenced by the Subordinated Notes to be eligible to qualify as Tier 2 Capital; provided, however, that nothing contained in this Section 8(g) (Tier 2 Capital) shall limit the Company’s right to redeem the Subordinated Notes upon the occurrence of a Tier 2 Capital Event pursuant to Section 4(a) (Redemption Prior to Fifth Anniversary) or Section 4(b) (Redemption on or after Fifth Anniversary).
(h)    Compliance with Laws. The Company shall comply with the requirements of all laws, regulations, orders and decrees applicable to it or its properties, except for such noncompliance that would not reasonably be expected to have a Material Adverse Effect (as such term is defined in the Purchase Agreement) on the Company and its subsidiaries taken as a whole.
(i)    Taxes and Assessments. The Company shall punctually pay and discharge all material taxes, assessments, and other governmental charges or levies imposed upon it or upon its income or upon any of its properties; provided, that no such taxes, assessments or other governmental charges need be paid if they are being contested in good faith by the Company.
(j)    Financial Statements; Access to Records.
(i)    Not later than forty-five (45) days following the end of each semi-annual or quarterly period, as applicable, for which the Company has not submitted a Consolidated Financial Statements for Holding Companies Reporting Form FR Y-9C to the Federal Reserve, upon request, the Company shall provide the Noteholder with a copy of the Company’s unaudited parent company only balance sheet and statement of income (loss) for and as of the end of such immediately preceding fiscal quarter, prepared in accordance with past practice. Quarterly financial statements, if required herein, shall be unaudited and need not comply with GAAP.
(ii)    Not later than ninety (90) days from the end of each fiscal year, upon request the Company shall provide the Noteholder with copies of the Company’s audited financial statements consisting of the consolidated balance sheet of the Company as of the fiscal year end and the related statements of income (loss) and retained earnings, stockholders’ equity
22

and cash flows for the fiscal year then ended. Such financial statements shall be prepared in accordance with GAAP applied on a consistent basis throughout the period involved.
(iii)    In addition to the foregoing Sections 8(k)(i) and (ii), if a Noteholder holds at least twenty five percent (25%) in aggregate principal amount (excluding any Subordinated Notes held by Company or any of its Affiliates) of the Subordinated Notes at the time outstanding, the Company agrees to furnish to such Noteholder, upon request, with such financial and business information of the Company and the Bank as such Noteholder may reasonably request as may be reasonably necessary or advisable to allow such Noteholder to confirm compliance by the Company with this Note.
(k)    Company Statement as to Compliance. The Company will deliver to the Noteholders, within (i) forty-five (45) days after the end of each of the first three fiscal quarters and (ii) one hundred twenty (120) days after the end of each fiscal year, an Officer’s Certificate covering the preceding fiscal quarter or fiscal year, as applicable, stating whether or not, to the best of his or her knowledge, the Company is in default in the performance and observance of any of the terms, provisions and conditions of this Subordinated Note (without regard to notice requirements or periods of grace) and if the Company will be in default, specifying all such defaults and the nature and status thereof of which he or she may have knowledge.
9.    Negative Covenants of the Company.
(a)    Limitation on Dividends. The Company shall not declare or pay any dividend or make any distribution on capital stock or other equity securities of any kind of the Company if the Company is not “well capitalized” for regulatory purposes immediately prior to the declaration of such dividend or distribution, except for Permitted Dividends.
(b)    Merger or Sale of Assets. The Company shall not merge into another entity, effect a Change in Bank Control (as defined below) or convey, transfer or lease substantially all of its properties and assets to any person, unless:
(i)    the continuing entity into which the Company is merged or the person which acquires by conveyance or transfer or which leases substantially all of the properties and assets of the Company shall be a corporation, association or other legal entity organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and expressly assumes the due and punctual payment of the principal of and any premium and interest on the Subordinated Notes according to their terms, and the due and punctual performance of all covenants and conditions hereof on the part of the Company to be performed or observed; and
(ii)    immediately after giving effect to such transaction, no Event of Default (as defined above), and no event which, after notice or lapse of time or both, would become an Event of Default, shall have occurred and be continuing.
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“Change in Bank Control” means the sale, transfer, lease or conveyance by the Company, or an issuance of equity securities by the Bank other than to the Company, in either case resulting in ownership by the Company of less than 50% of the Bank.
(iii)    For the avoidance of doubt, the provisions of this Section 9(b) shall not prohibit the Company from pledging or granting a security interest in any or all of the Company’s assets.
10.    Denominations. The Subordinated Notes are issuable only in registered form without interest coupons in minimum denominations of $2,000 and integral multiples of $1,000 in excess thereof.
11.    Charges and Transfer Taxes. No service charge will be made for any registration of transfer or exchange of this Subordinated Note, or any redemption or repayment of this Subordinated Note, or any conversion or exchange of this Subordinated Note for other types of securities or property, but the Company may require payment of a sum sufficient to pay all taxes, assessments or other governmental charges that may be imposed in connection with the transfer or exchange of this Subordinated Note from the Noteholder requesting such transfer or exchange.
12.    Payment Procedures. Payments of the principal and interest payable on the Stated Maturity will be made by (i) check, or (ii) wire transfer or Automated Clearing House (ACH) transfer in immediately available funds to a bank account in the United States designated by the registered Noteholder if such Noteholder shall have previously provided wire instructions to the Company, upon presentation and surrender of this Subordinated Note at the Payment Office (as defined herein) or at such other place or places as the Company shall designate by notice to the Noteholders as the Payment Office, provided that this Subordinated Note is presented to the Company in time for the Company to make such payments in such funds in accordance with its normal procedures. Payments of interest (other than interest payable on the Stated Maturity) shall be made by (x) check mailed to the registered Noteholder, as such person’s address appears on the Security Register (as defined herein) or (y) wire transfer or ACH transfer in immediately available funds to an account at an institution in the United States designated by the registered Noteholder if such Noteholder shall have previously provided wire instructions to the Company. Interest payable on any Interest Payment Date shall be payable to the Noteholder in whose name this Subordinated Note is registered at the close of business on the fifteenth (15th) calendar day prior to the applicable Interest Payment Date, without regard to whether such date is a Business Day, except that interest not paid on the Interest Payment Date, if any, will be paid to the holder in whose name this Subordinated Note is registered at the close of business on a special record date fixed by the Company (a “Special Record Date”), notice of which shall be given to the Noteholder not less than ten (10) calendar days prior to such Special Record Date. To the extent permitted by applicable law, interest shall accrue, at the rate at which interest accrues on the principal of this Subordinated Note, on any amount of principal or interest on this Subordinated Note not paid when due. All payments on this Subordinated Note shall be applied first against costs and expenses of the Noteholder, if any, for which the Company is liable under this Subordinated Note; then against interest due hereunder; and then against
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principal due hereunder. The Noteholder acknowledges and agrees that the payment of all or any portion of the outstanding principal amount of this Subordinated Note and all interest hereon shall be pari passu in right of payment and in all other respects to the other Subordinated Notes. In the event that the Noteholder receives payments in excess of its pro rata share of the Company’s payments to the holders of all of the Subordinated Notes, then the Noteholder shall hold in trust all such excess payments for the benefit of the other Noteholders and shall pay such amounts held in trust to such other holders upon demand by such holders.
13.    Form of Payment. Payments of principal of and interest on this Subordinated Note shall be made in such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts.
14.    Registration of Transfer, Security Register. Except as otherwise provided herein, this Subordinated Note is transferable in whole or in part, and may be exchanged for a like aggregate principal amount of Subordinated Notes of other authorized denominations, by the Noteholder in person, or by its attorney duly authorized in writing, at the Payment Office or the offices of the Registrar. The Company or its agent (the “Registrar”) shall maintain a register providing for the registration of the Subordinated Notes and any exchange or transfer thereof (the “Security Register”). Upon surrender or presentation of this Subordinated Note for exchange or registration of transfer, the Company or the Registrar shall execute and deliver in exchange therefor a Subordinated Note or Subordinated Notes of like aggregate principal amount, each in a minimum denomination of $2,000 or any amount in excess thereof which is an integral multiple of $1,000 (and, in the absence of an opinion of counsel satisfactory to the Company to the contrary, bearing the restrictive legend(s) set forth hereinabove) and that is or are registered in such name or names requested by the Noteholder. Any Subordinated Note presented or surrendered for registration of transfer or for exchange shall be duly endorsed and accompanied by a written instrument of transfer in such form as is attached hereto and incorporated herein, duly executed by the Noteholder or its attorney duly authorized in writing, with such tax identification number or other information for each person in whose name a Subordinated Note is to be issued, and accompanied by evidence of compliance with any restrictive legend(s) appearing on such Subordinated Note or Subordinated Notes as the Company may reasonably request to comply with applicable law. No exchange or registration of transfer of this Subordinated Note shall be made on or after (i) the fifteenth (15th) day immediately preceding the Maturity Date or (ii) the due delivery of notice of redemption.
15.    Successors and Assigns. This Subordinated Note shall be binding upon the Company and inure to the benefit of the Noteholder and its respective successors and permitted assigns. The Noteholder may assign all, or any part of, or any interest in, the Noteholder’s rights and benefits hereunder only to the extent and in the manner permitted by the terms of this Note. To the extent of any such assignment, such assignee shall have the same rights and benefits against the Company and shall agree to be bound by and to comply with the terms and conditions of the Purchase Agreement as it would have had if it were the Noteholder hereunder.
16.    Priority. The Subordinated Notes rank pari passu among themselves and pari passu, in the event of any insolvency proceeding, dissolution, assignment for the benefit of
25

creditors, reorganization, restructuring of debt, marshaling of assets and liabilities or similar proceeding or any liquidation or winding up of the Company, with all other present or future unsecured subordinated debt obligations of the Company, except all Senior Indebtedness and any unsecured subordinated debt that, pursuant to its express terms, is senior or subordinate in right of payment to the Subordinated Notes.
17.    Ownership. Prior to due presentment of this Subordinated Note for registration of transfer, the Company may treat the holder in whose name this Subordinated Note is registered in the Security Register as the absolute owner of this Subordinated Note for receiving payments of principal and interest on this Subordinated Note and for all other purposes whatsoever, whether or not this Subordinated Note be overdue, and the Company shall not be affected by any notice to the contrary.
18.    Waiver and Consent.
(a)    This Subordinated Note may be amended or waived pursuant to, and in accordance with, the provisions set forth herein and as set forth in Section 7.3 of the Purchase Agreement. Any such consent or waiver given by the Noteholder shall be conclusive and binding upon such Noteholder and upon all subsequent holders of this Subordinated Note and of any Subordinated Note issued upon the registration of transfer hereof or in exchange therefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Subordinated Note. No delay or omission of the Noteholder to exercise any right or remedy accruing upon any Event of Default shall impair such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Any insured depository institution which shall be a Noteholder or which otherwise shall have any beneficial ownership interest in this Subordinated Note shall, by its acceptance of such Subordinated Note (or beneficial interest therein), be deemed to have waived any right of offset with respect to the indebtedness evidenced thereby.
(b)    No waiver or amendment of any term, provision, condition, covenant or agreement in the Subordinated Notes shall be effective except with the consent of the Noteholders holding not less than more than fifty percent (50%) in aggregate principal amount (excluding any Subordinated Notes held by the Company or any of its Affiliates) of the Subordinated Notes at the time outstanding; provided, however, that without the consent of each Noteholder of an affected Subordinated Note, no such amendment or waiver may: (i) reduce the principal amount of any Subordinated Note; (ii) reduce the rate of or change the time for payment of interest on any Subordinated Note; (iii) extend the maturity of any Subordinated Note; (iv) change the currency in which payment of the obligations of the Company under the Subordinated Notes are to be made; (v) lower the percentage of aggregate principal amount of outstanding Subordinated Notes required to approve any amendment of the Subordinated Notes; (vi) make any changes to Section 4(c) (Partial Redemption), Section 6 (Events of Default; Acceleration), Section 7 (Failure to Make Payments), Section 16 (Priority), or Section 18 (Waiver and Consent) of the Subordinated Notes that adversely affects the rights of any Noteholder; or (vii) disproportionately affect the rights of any of the holders of the then outstanding Subordinated Notes. Notwithstanding the foregoing, the Company may amend or supplement the Subordinated Notes without the consent of the Noteholders to cure any
26

ambiguity, defect or inconsistency or to provide for uncertificated Subordinated Notes in addition to or in place of certificated Subordinated Notes, or to make any change that does not adversely affect the rights of any Noteholder of any of the Subordinated Notes. No failure to exercise or delay in exercising, by any Noteholder of the Subordinated Notes, of any right, power or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any right, power or privilege preclude any other or further exercise thereof, or the exercise of any other right or remedy provided by law, except as restricted hereby. The rights and remedies provided in this Subordinated Note are cumulative and not exclusive of any right or remedy provided by law or equity. No notice or demand on the Company in any case shall, in itself, entitle the Company to any other or further notice or demand in similar or other circumstances or constitute a waiver of the rights of the Noteholders to any other or further action in any circumstances without notice or demand. No consent or waiver, expressed or implied, by the Noteholders to or of any breach or default by the Company in the performance of its obligations hereunder shall be deemed or construed to be a consent or waiver to or of any other breach or default in the performance of the same or any other obligations of the Company hereunder. Failure on the part of the Noteholders to complain of any acts or failure to act or to declare an Event of Default, irrespective of how long such failure continues, shall not constitute a waiver by the Noteholders of their rights hereunder or impair any rights, powers or remedies on account of any breach or default by the Company.
19.    Absolute and Unconditional Obligation of the Company.
(a)    No provisions of this Subordinated Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal and interest on this Subordinated Note at the times, places and rate, and in the coin or currency, herein prescribed.
(b)    No delay or omission of the Noteholder to exercise any right or remedy accruing upon any Event of Default shall impair such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein.
(c)    Any insured depository institution which shall be a Noteholder or which otherwise shall have any beneficial ownership interest in this Subordinated Note shall, by its acceptance of such Note (or beneficial interest therein), be deemed to have waived any right of offset with respect to the indebtedness evidenced thereby.
20.    No Sinking Fund; Convertibility. This Subordinated Note is not entitled to the benefit of any sinking fund. This Subordinated Note is not convertible into or exchangeable for any of the equity securities, other securities or assets of the Company or any subsidiary of the Company.
21.    No Recourse Against Others. No recourse under or upon any obligation, covenant or agreement contained in this Subordinated Note, or for any claim based thereon or otherwise in respect thereof, will be had against any past, present or future shareholder, employee, officer, or director, as such, of the Company or of any predecessor or successor, either directly or through the Company or any predecessor or successor, under any rule of law, statute
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or constitutional provision or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, all such liability being expressly waived and released by the acceptance of this Subordinated Note by the Noteholder and as part of the consideration for the issuance of this Subordinated Note.
22.    Notices. All notices to the Company under this Subordinated Note shall be in writing and addressed to the Company at 4445 Willard Avenue, Suite 1000, Chevy Chase, MD 20815, Attention: Anne Balcer, or to such other address as the Company may notify to the Noteholder (the “Payment Office”). All notices to the Noteholders shall be in writing and sent by first-class mail to each Noteholder at his or its address as set forth in the Security Register.
23.    Further Issues. The Company may, without the consent of the Noteholders, create and issue additional notes having the same terms and conditions of the Subordinated Notes (except for the Issue Date and issue price) so that such further notes shall be consolidated and form a single series with the Subordinated Notes.
24.    Governing Law; Interpretation. THIS SUBORDINATED NOTE WILL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF NEW YORK AND WILL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES THEREOF (OTHER THAN SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW). THIS SUBORDINATED NOTE IS INTENDED TO MEET THE CRITERIA FOR QUALIFICATION OF THE OUTSTANDING PRINCIPAL AS TIER 2 CAPITAL UNDER THE REGULATORY GUIDELINES OF THE FEDERAL RESERVE, AND THE TERMS HEREOF SHALL BE INTERPRETED IN A MANNER TO SATISFY SUCH INTENT.
[Signature Page Follows]
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IN WITNESS WHEREOF, the undersigned has caused this Subordinated Note to be duly executed and attested.
CONGRESSIONAL BANCSHARES, INC.
By:/s/ Donald F. Cole
Name:Donald F. Cole
Title:Chief Operating Officer
ATTEST:
/s/ Anne M. Baker
Name:Anne M. Baker
Title:General Counsel/Secretary
[Signature Page to Subordinated Note]

PAYING AGENT’S CERTIFICATE OF AUTHENTICATION
This is a Subordinated Note for the 4.00% Fixed-to-Floating Rate Subordinated Notes due 2032 issued by Congressional Bancshares, Inc. pursuant to the Paying Agency and Registrar Agreement Dated December 22, 2021. This Certificate of Authentication must accompany any security issued pursuant to the offering in order to be a valid security.
UMB BANK NATIONAL ASSOCIATION
/s/ Mauri J Cowen
[Paying Agent's Certificate of Authentication]

ASSIGNMENT FORM
To assign this Subordinated Note, fill in the form below: (I) or (we) assign and transfer this Subordinated Note to:
_____________________________________________________________________________
(Print or type assignee’s name, address and zip code)
______________________________________________________________________________
(Insert assignee’s social security or tax I.D. No.)
and irrevocably appoint ______________________________ agent to transfer this Subordinated Note on the books of the Company. The agent may substitute another to act for him.
Date: ____________________________ Your signature: _______________________________ 
(Sign exactly as your name appears on the face of this Subordinated Note)
Tax Identification No: ___________________ 
Signature Guarantee: ____________________________________________________________ 
(Signatures must be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to Rule 17Ad-15 promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)).
The undersigned certifies that it [is / is not] an Affiliate of the Company and that, to its knowledge, the proposed transferee [is / is not] an Affiliate of the Company.
In connection with any transfer or exchange of this Subordinated Note occurring prior to the date that is one year after the later of the date of original issuance of this Subordinated Note and the last date, if any, on which this Subordinated Note was owned by the Company or any Affiliate of the Company, the undersigned confirms that this Subordinated Note is being:
CHECK ONE BOX BELOW:
☐
(1)
acquired for the undersigned’s own account, without transfer;
☐
(2)
transferred to the Company;
☐
(3)
transferred in accordance and in compliance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”);
☐
(4)
transferred under an effective registration statement under the Securities Act;
☐
(5)
transferred in accordance with and in compliance with Regulation S under the Securities Act;
☐
(6)
transferred to an institutional “accredited investor” (as defined in Rule 501(a)(1), (2), (3) or (7) under the Securities Act);


☐
(7)
transferred to an “accredited investor” (as defined in Rule 501(a)(4) under the Securities Act), not referred to in item (6) that has been provided with the information designated under Section 4(d) of the Securities Act; or
☐
(8)
transferred in accordance with another available exemption from the registration requirements of the Securities Act.
Unless one of the boxes is checked, the Company will refuse to register this Subordinated Note in the name of any person other than the registered holder thereof; provided, however, that if box (5), (6), (7) or (8) is checked, the Company may require, prior to registering any such transfer of this Subordinated Note, in its sole discretion, such legal opinions, certifications and other information as the Company may reasonably request to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act such as the exemption provided by Rule 144 under such Act.
Signature: ___________________________
Signature Guarantee: ____________________________________________________________ 
(Signatures must be guaranteed by an eligible guarantor institution (banks, stockbrokers, savings and loan associations and credit unions with membership in an approved signature guarantee medallion program), pursuant to Exchange Act Rule 17Ad-l5).
TO BE COMPLETED BY PURCHASER IF BOX (1) OR (3) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this Subordinated Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a “qualified institutional buyer” within the meaning of Rule 144A under the Securities Act and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned’s foregoing representations in order to claim the exemption from registration provided by Rule 144A

Exhibit 10.3

American Bank Holdings, Inc.
as Issuer
INDENTURE
Dated as of April 22, 2003
WELLS FARGO BANK, NATIONAL ASSOCIATION
As Trustee
JUNIOR SUBORDINATED DEBT SECURITIES
DUE April 7, 2033

TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
SECTION 1.01.Definitions1
Additional Interest1
Additional Provisions1
Authenticating Agent1
Bankruptcy Law1
Board of Directors1
Board Resolution2
Business Day2
Calculation Agent2
Capital Securities2
Capital Securities Guarantee2
Capital Treatment Event2
Certificate2
Common Securities2
Company3
Debt Security3
Debt Security Register3
Declaration3
Default3
Defaulted Interest3
Deferred Interest3
Event of Default3
Extension Period3
Indenture3
Institutional Trustee3
Interest Payment Date3
Interest Rate3
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TABLE OF CONTENTS
(CONTINUED)
Page
Investment Company Event3
LIBOR4
LIBOR Banking Day4
LIBOR Business Day4
LIBOR Determination Date4
Liquidation Amount4
Maturity Date4
Maximum Rate Increase4
Notice4
Officers' Certificate4
Opinion of Counsel4
OTS4
Outstanding4
Paying Agent5
Person5
Predecessor Security5
Principal Office of the Trustee5
Redemption Date5
Redemption Price5
Responsible Officer5
Securityholder6
Senior Indebtedness6
Special Event6
Special Redemption Date6
Special Redemption Price6
Subsidiary6
Tax Event7
Trust7
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TABLE OF CONTENTS
(CONTINUED)
Page
Trust Indenture Act7
Trust Securities7
Trustee7
United States7
U.S. Person7
ARTICLE II
DEBT SECURITIES
SECTION 2.01.Authentication and Dating8
SECTION 2.02.Form of Trustee's Certificate of Authentication8
SECTION 2.03.Form and Denomination of Debt Securities9
SECTION 2.04.Execution of Debt Securities9
SECTION 2.05.Exchange and Registration of Transfer of Debt Securities12
SECTION 2.06.Mutilated, Destroyed, Lost or Stolen Debt Securities13
SECTION 2.07.Temporary Debt Securities13
SECTION 2.08.Payment of Interest15
SECTION 2.09.Cancellation of Debt Securities Paid, etc15
SECTION 2.10.Computation of Interest15
SECTION 2.11.Extension of Interest Payment Period17
SECTION 2.12.CUSIP Numbers17
ARTICLE III
PARTICULAR COVENANTS OF THE COMPANY
SECTION 3.01.Payment of Principal, Premium and Interest; Agreed Treatment of the Debt Securities18
SECTION 3.02.Offices for Notices and Payments, etc19
SECTION 3.03.Appointments to Fill Vacancies in Trustee's Office19
SECTION 3.04.Provision as to Paying Agent19
SECTION 3.05.Certificate to Trustee20
SECTION 3.06.Additional Interest20
SECTION 3.07.Compliance with Consolidation Provisions21
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TABLE OF CONTENTS
(CONTINUED)
Page
SECTION 3.08.Limitation on Dividends21
SECTION 3.09.Covenants as to the Trust22
ARTICLE IV
LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
SECTION 4.01.Securityholders' Lists22
SECTION 4.02.Preservation and Disclosure of Lists23
ARTICLE V
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS UPON AN EVENT OF DEFAULT
SECTION 5.01.Events of Default24
SECTION 5.02.Payment of Debt Securities on Default; Suit Therefor26
SECTION 5.03.Application of Moneys Collected by Trustee27
SECTION 5.04.Proceedings by Securitvholders27
SECTION 5.05.Proceedings by Trustee28
SECTION 5.06.Remedies Cumulative and Continuing28
SECTION 5.07.Direction of Proceedings and Waiver of Defaults by Majority of Securityholders29
SECTION 5.08.Notice of Defaults29
SECTION 5.09.Undertaking to Pay Costs30
ARTICLE VI
CONCERNING THE TRUSTEE
SECTION 6.01.Duties and Responsibilities of Trustee30
SECTION 6.02.Reliance on Documents, Opinions, etc30
SECTION 6.03.No Responsibility for Recitals, etc31
SECTION 6.04.Trustee, Authenticating Agent, Paying Agents, Transfer Agents or Registrar May Own Debt Securities33
SECTION 6.05.Moneys to be Held in Trust33
SECTION 6.06.Compensation and Expenses of Trustee33
SECTION 6.07.Officers' Certificate as Evidence34
SECTION 6.08.Eligibility of Trustee34
-iv-
TABLE OF CONTENTS
(CONTINUED)
Page
SECTION 6.09.Resignation or Removal of Trustee, Calculation Agent, Paying Agent or Debt Security Register35
SECTION 6.10.Acceptance by Successor36
SECTION 6.11.Succession by Merger, etc37
SECTION 6.12.Authenticating Agents38
ARTICLE VII
CONCERNING THE SECURITYHOLDERS
SECTION 7.01.Action by Securityholders39
SECTION 7.02.Proof of Execution by Securityholders39
SECTION 7.03.Who Are Deemed Absolute Owners40
SECTION 7.04.Debt Securities Owned by Company Deemed Not Outstanding40
SECTION 7.05.Revocation of Consents; Future Holders Bound40
ARTICLE VIII
SECURITYHOLDERS' MEETINGS
SECTION 8.01.Purposes of Meetings41
SECTION 8.02.Call of Meetings by Trustee41
SECTION 8.03.Call of Meetings by Company or Securityholders42
SECTION 8.04.Qualifications for Voting42
SECTION 8.05.Regulations42
SECTION 8.06.Voting43
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01.Supplemental Indentures without Consent of Securityholders44
SECTION 9.02.Supplemental Indentures with Consent of Securityholders45
SECTION 9.03.Effect of Supplemental Indentures46
SECTION 9.04.Notation on Debt Securities47
SECTION 9.05.Evidence of Compliance of Supplemental Indenture to be Furnished to Trustee47
-v-
TABLE OF CONTENTS
(CONTINUED)
Page
ARTICLE X
REDEMPTION OF SECURITIES
SECTION 10.01.Optional Redemption47
SECTION 10.02.Special Event Redemption47
SECTION 10.03.Notice of Redemption; Selection of Debt Securities47
SECTION 10.04.Payment of Debt Securities Called for Redemption48
ARTICLE XI
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
SECTION 11.01.Company May Consolidate, etc., on Certain Terms49
SECTION 11.02.Successor Entity to be Substituted49
SECTION 11.03.Opinion of Counsel to be Given to Trustee50
ARTICLE XII
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 12.01.Discharge of Indenture50
SECTION 12.02.Deposited Moneys to be Held in Trust by Trustee51
SECTION 12.03.Paying Agent to Repay Moneys Held51
SECTION 12.04.Return of Unclaimed Moneys51
ARTICLE XIII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
SECTION 13.01.Indenture and Debt Securities Solely Corporate Obligations51
ARTICLE XIV
MISCELLANEOUS PROVISIONS
SECTION 14.01.Successors52
SECTION 14.02.Official Acts by Successor Entity52
SECTION 14.03.Surrender of Company Powers52
SECTION 14.04.Addresses for Notices, etc52
SECTION 14.05.Governing Law53
SECTION 14.06.Evidence of Compliance with Conditions Precedent53
SECTION 14.07.Non-Business Days53
SECTION 14.08.Table of Contents, Headings, etc53
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TABLE OF CONTENTS
(CONTINUED)
Page
SECTION 14.09.Execution in Counterparts54
SECTION 14.10.Separability54
SECTION 14.11.Assignment54
SECTION 14.12.Acknowledgment of Rights54
ARTICLE XV
SUBORDINATION OF DEBT SECURITIES
SECTION 15.01.Agreement to Subordinate55
SECTION 15.02.Default on Senior Indebtedness55
SECTION 15.03.Liquidation; Dissolution; Bankruptcy55
SECTION 15.04.Subrogation57
SECTION 15.05.Trustee to Effectuate Subordination58
SECTION 15.06.Notice by the Company58
SECTION 15.07.Rights of the Trustee. Holders of Senior Indebtedness59
SECTION 15.08.Subordination May Not Be Impaired59
EXHIBITS
EXHIBIT A    FORM OF DEBT SECURITY
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THIS INDENTURE, dated as of April 22, 2003, between American Bank Holdings, Inc., a savings and loan holding company incorporated in Delaware (hereinafter sometimes called the "Company"), and Wells Fargo Bank, National Association, a national banking association with its principal place of business in the State of Delaware, as trustee (hereinafter sometimes called the "Trustee").
W I T N E S S E T H:
WHEREAS, for its lawful corporate purposes, the Company has duly authorized the issuance of its FJunior Subordinated Debt Securities due April 7, 2033 (the "Debt Securities") under this Indenture and to provide, among other things, for the execution and authentication, delivery and administration thereof, the Company has duly authorized the execution of this Indenture.
NOW, THEREFORE, in consideration of the premises, and the purchase of the Debt Securities by the holders thereof, the Company covenants and agrees with the Trustee for the equal and proportionate benefit of the respective holders from time to time of the Debt Securities as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions.
The terms defined in this Section 1.01 (except as herein otherwise expressly provided or unless the context otherwise requires) for all purposes of this Indenture and of any indenture supplemental hereto shall have the respective meanings specified in this Section 1.01. All accounting terms used herein and not expressly defined shall have the meanings assigned to such terms in accordance with generally accepted accounting principles and the term "generally accepted accounting principles" means such accounting principles as are generally accepted in the United States at the time of any computation. The words "herein," "hereof' and "hereunder" and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision.
"Additional Interest" shall have the meaning set forth in Section 3.06.
"Additional Provisions" shall have the meaning set forth in Section 15.01.
"Authenticating Agent" means any agent or agents of the Trustee which at the time shall be appointed and acting pursuant to Section 6.12.
"Bankruptcy Law" means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors.
"Board of Directors" means the board of directors or the executive committee or any other duly authorized designated officers of the Company.


"Board Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company to have been duly adopted by the Board of Directors and to be in full force and effect on the date of such certification and delivered to the Trustee.
"Business Day" means any day other than a Saturday, Sunday or any other day on which banking institutions in Wilmington, Delaware, New York City or are permitted or required by any applicable law or executive order to close.
"Calculation Agent" means the Person identified as "Trustee" in the first paragraph hereof with respect to the Debt Securities and the Institutional Trustee with respect to the Trust Securities.
"Capital Securities" means undivided beneficial interests in the assets of the Trust which are designated as "TP Securities" and rank pari passu with Common Securities issued by the Trust; provided, however, that if an Event of Default (as defined in the Declaration) has occurred and is continuing, the rights of holders of such Common Securities to payment in respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of such Capital Securities.
"Capital Securities Guarantee" means the guarantee agreement that the Company will enter into with Wells Fargo Bank, National Association or other Persons that operates directly or indirectly for the benefit of holders of Capital Securities of the Trust.
"Capital Treatment Event" means the receipt by the Company and the Trust of an Opinion of Counsel experienced in such matters to the effect that, as a result of any amendment to, or change in, the laws, rules or regulations of the United States or any political subdivision thereof or therein, or as the result of any official or administrative pronouncement or action or decision interpreting or applying such laws, rules or regulations, which amendment or change is effective or which pronouncement, action or decision is announced on or after the date of original issuance of the Debt Securities, there is more than an insubstantial risk that the Company will not, within 90 days of the date of such opinion, be entitled to treat an amount equal to the aggregate Liquidation Amount of the Capital Securities as "Tier 1 Capital" (or the then equivalent thereof) for purposes of the capital adequacy guidelines of the OTS (or any successor regulatory authority with jurisdiction over savings and loan holding companies), as then in effect and applicable to the Company, provided, however, that the distribution of the Debt Securities in connection with the liquidation of the Trust by the Company shall not in and of itself constitute a Capital Treatment Event unless such liquidation shall have occurred in connection with a Tax Event or an Investment Company Event.
"Certificate" means a certificate signed by any one of the principal executive officer, the principal financial officer or the principal accounting officer of the Company.
"Common Securities" means undivided beneficial interests in the assets of the Trust which are designated as "Common Securities" and rank pari passu with Capital Securities issued by the Trust; provided, however, that if an Event of Default (as defined in the Declaration) has occurred and is continuing, the rights of holders of such Common Securities to payment in
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respect of distributions and payments upon liquidation, redemption and otherwise are subordinated to the rights of holders of such Capital Securities.
"Company" means American Bank Holdings, Inc., a incorporated in Delaware, and, subject to the provisions of Article XI, shall include its successors and assigns.
"Debt Security" or "Debt Securities" has the meaning stated in the first recital of this Indenture.
"Debt Security Register" has the meaning specified in Section 2.05.
"Declaration" means the Amended and Restated Declaration of Trust of the Trust dated as of April 22, 2003, as amended or supplemented from time to time.
"Default" means any event, act or condition that with notice or lapse of time, or both, would constitute an Event of Default.
"Defaulted Interest" has the meaning set forth in Section 2.08.
"Deferred Interest" has the meaning set forth in Section 2.11.
"Event of Default" means any event specified in Section 5.01, which has continued for the period of time, if any, and after the giving of the notice, if any, therein designated.
"Extension Period" has the meaning set forth in Section 2.11.
"Indenture" means this instrument as originally executed or, if amended or supplemented as herein provided, as so amended or supplemented, or both.
"Initial Purchaser" has the meaning set forth in the Declaration.
"Institutional Trustee" has the meaning set forth in the Declaration.
"Interest Payment Date" means January 7, April 7, July 7 and October 7 of each year, commencing on July 7, 2003, during the term of this Indenture.
"Interest Rate" means a per annum rate of interest, reset quarterly, equal to LIBOR, as determined on the LIBOR Determination Date immediately preceding each Interest Payment Date, plus 3.30% (subject to the Maximum Rate Increase); provided, that the applicable Interest Rate may not exceed 12.5% through the Interest Payment Date in April 7, 2008.
"Investment Company Event" means the receipt by the Company and the Trust of an Opinion of Counsel experienced in such matters to the effect that, as a result of a change in law or regulation or written change in interpretation or application of law or regulation by any legislative body, court, governmental agency or regulatory authority, there is more than an insubstantial risk that the Trust is or, within 90 days of the date of such opinion will be,
-3-

considered an "investment company" that is required to be registered under the Investment Company Act of 1940, as amended, which change or prospective change becomes effective or would become effective, as the case may be, on or after the date of the original issuance of the Debt Securities.
"LIBOR" means the London Interbank Offered Rate for U.S. Dollar deposits in Europe as determined by the Calculation Agent according to Section 2.10(b).
"LIBOR Banking Day" has the meaning set forth in Section 2.10(b)(1).
"LIBOR Business Day" has the meaning set forth in Section 2.10(b)(1).
"LIBOR Determination Date" has the meaning set forth in Section 2.10(b).
"Liquidation Amount" means the stated amount of $1,000 per Trust Security.
"Maturity Date" means April 7, 2033.
"Maximum Rate Increase" means that for the period of time from the date hereof to the fourth quarterly Distribution Payment Date and during each twelve-month period covering each subsequent four quarterly Distribution Payment Dates (each a "Measured Period"), up to and including the 20th quarterly Distribution Payment Date, the applicable Interest Rate shall not exceed the sum of (i)(A) for the first Measured Period, the Interest Rate in effect on the first Distribution Payment Date and (B) for each subsequent Measured Period, the Interest Rate in effect on the last quarterly Distribution Payment Date of the immediately preceding Measured Period, plus (ii) 2.75%..
"Notice" has the meaning set forth in Section 2.11.
"Officers' Certificate" means a certificate signed by the Chairman of the Board, the Vice Chairman, the President or any Vice President, and by the Chief Financial Officer, the Treasurer, an Assistant Treasurer, the Comptroller, an Assistant Comptroller, the Secretary or an Assistant Secretary of the Company, and delivered to the Trustee. Each such certificate shall include the statements provided for in Section 14.06 if and to the extent required by the provisions of such Section.
"Opinion of Counsel" means an opinion in writing signed by legal counsel, who may be an employee of or counsel to the Company, or may be other counsel reasonably satisfactory to the Trustee. Each such opinion shall include the statements provided for in Section 14.06 if and to the extent required by the provisions of such Section.
"OTS" means the Office of Thrift Supervision.
"Outstanding"" when used with reference to Debt Securities, subject to the provisions of Section 7.04, means, as of any particular time, all Debt Securities authenticated and delivered by the Trustee or the Authenticating Agent under this Indenture, except
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(a)    Debt Securities theretofore canceled by the Trustee or the Authenticating Agent or delivered to the Trustee for cancellation;
(b)    Debt Securities, or portions thereof, for the payment or redemption of which moneys in the necessary amount shall have been deposited in trust with the Trustee or with any Paying Agent (other than the Company) or shall have been set aside and segregated in trust by the Company (if the Company shall act as its own Paying Agent); provided, that, if such Debt Securities, or portions thereof, are to be redeemed prior to maturity thereof, notice of such redemption shall have been given as provided in Articles X and XIV or provision satisfactory to the Trustee shall have been made for giving such notice; and
(c)    Debt Securities paid pursuant to Section 2.06 or in lieu of or in substitution for which other Debt Securities shall have been authenticated and delivered pursuant to the terms of Section 2.06 unless proof satisfactory to the Company and the Trustee is presented that any such Debt Securities are held by bona fide holders in due course.
"Paying Agent" has the meaning set forth in Section 3.04(e).
"Person" means any individual, corporation, limited liability company, partnership, joint venture, association, joint-stock company, trust, unincorporated organization or government or any agency or political subdivision thereof.
"Predecessor Security" of any particular Debt Security means every previous Debt Security evidencing all or a portion of the same debt as that evidenced by such particular Debt Security; and, for the purposes of this definition, any Debt Security authenticated and delivered under Section 2.06 in lieu of a lost, destroyed or stolen Debt Security shall be deemed to evidence the same debt as the lost, destroyed or stolen Debt Security.
"Principal Office of the Trustee" means the office of the Trustee, at which at any particular time its corporate trust business shall be principally administered, which at all times shall be located within the United States and at the time of the execution of this Indenture shall be 919 Market Street, Suite 700, Wilmington, DE 19801.
"Redemption Date" has the meaning set forth in Section 10.01.
"Redemption Price" means 100% of the principal amount of the Debt Securities being redeemed plus accrued and unpaid interest on such Debt Securities to the Redemption Date or, in the case of a redemption due to the occurrence of a Special Event, to the Special Redemption Date if such Special Redemption Date is on or after April 7, 2008.
"Responsible Officer" means, with respect to the Trustee, any officer within the Principal Office of the Trustee with direct responsibility for the administration of the Indenture, including any vice-president, any assistant vice-president, any secretary, any assistant secretary, the treasurer, any assistant treasurer, any trust officer or other officer of the Principal Office of the Trustee customarily performing functions similar to those performed by any of the above designated officers and also means, with respect to a particular corporate trust matter, any other
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officer to whom such matter is referred because of that officer's knowledge of and familiarity with the particular subject.
"Securityholder," "holder of Debt Securities" or other similar terms, means any Person in whose name at the time a particular Debt Security is registered on the Debt Security Register.
"Senior Indebtedness" means, with respect to the Company, (i) the principal, premium, if any, and interest in respect of (A) indebtedness of the Company for money borrowed and (B) indebtedness evidenced by securities, debentures, notes, bonds or other similar instruments issued by the Company; (ii) all capital lease obligations of the Company; (iii) all obligations of the Company issued or assumed as the deferred purchase price of property, all conditional sale obligations of the Company and all obligations of the Company under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business); (iv) all obligations of the Company for the reimbursement of any letter of credit, any banker's acceptance, any security purchase facility, any repurchase agreement or similar arrangement, any interest rate swap, any other hedging arrangement, any obligation under options or any similar credit or other transaction; (v) all obligations of the type referred to in clauses (i) through (iv) above of other Persons for the payment of which the Company is responsible or liable as obligor, guarantor or otherwise; and (vi) all obligations of the type referred to in clauses (i) through (v) above of other Persons secured by any lien on any property or asset of the Company (whether or not such obligation is assumed by the Company), whether incurred on or prior to the date of this Indenture or thereafter incurred, unless, with the prior approval of the OTS if not otherwise generally approved, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are not superior or are pari passu in right of payment to the Debt Securities.
"Special Event" means any of a Tax Event, an Investment Company Event or a Capital Treatment Event.
"Special Redemption Date" has the meaning set forth in Section 10.02.
"Special Redemption Price" means (1) if the Special Redemption Date is before April 7, 2008, One Hundred Seven and One Half Percent (107.5%) of the principal amount to be redeemed plus any accrued and unpaid interest thereon to the date of such redemption and (2) if the Special Redemption Date is on or after April 7, 2008, the Redemption Price for such Special Redemption Date.
"Subsidiary" means, with respect to any Person, (i) any corporation, at least a majority of the outstanding voting stock of which is owned, directly or indirectly, by such Person or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries, (ii) any general partnership, joint venture or similar entity, at least a majority of the outstanding partnership or similar interests of which shall at the time be owned by such Person, or by one or more of its Subsidiaries, or by such Person and one or more of its Subsidiaries, and (iii) any limited partnership of which such Person or any of its Subsidiaries is a general partner. For the purposes of this definition, "voting stock" means shares, interests, participations or other
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equivalents in the equity interest (however designated) in such Person having ordinary voting power for the election of a majority of the directors (or the equivalent) of such Person, other than shares, interests, participations or other equivalents having such power only by reason of the occurrence of a contingency.
"Tax Event" means the receipt by the Company and the Trust of an Opinion of Counsel experienced in such matters to the effect that, as a result of any amendment to or change (including any announced prospective change) in the laws or any regulations thereunder of the United States or any political subdivision or taxing authority thereof or therein, or as a result of any official administrative pronouncement (including any private letter ruling, technical advice memorandum, regulatory procedure, notice or announcement (an "Administrative Action")) or judicial decision interpreting or applying such laws or regulations, regardless of whether such Administrative Action or judicial decision is issued to or in connection with a proceeding involving the Company or the Trust and whether or not subject to review or appeal, which amendment, clarification, change, Administrative Action or decision is enacted, promulgated or announced, in each case on or after the date of original issuance of the Debt Securities, there is more than an insubstantial risk that: (i) the Trust is, or will be within 90 days of the date of such opinion, subject to United States federal income tax with respect to income received or accrued on the Debt Securities; (ii) interest payable by the Company on the Debt Securities is not, or within 90 days of the date of such opinion, will not be, deductible by the Company, in whole or in part, for United States federal income tax purposes; or (iii) the Trust is, or will be within 90 days of the date of such opinion, subject to or otherwise required to pay, or required to withhold from distributions to holders of Trust Securities, more than a de minimis amount of other taxes (including withholding taxes), duties, assessments or other governmental charges.
"Trust" means American Bank Holdings Statutory Trust I, the Delaware statutory trust, or any other similar trust created for the purpose of issuing Capital Securities in connection with the issuance of Debt Securities under this Indenture, of which the Company is the sponsor.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended from time-to-time, or any successor legislation.
"Trust Securities" means Common Securities and Capital Securities of American Bank Holdings Statutory Trust I.
"Trustee" means the Person identified as "Trustee" in the first paragraph hereof, and, subject to the provisions of Article VI hereof, shall also include its successors and assigns as Trustee hereunder.
"United States" means the United States of America and the District of Columbia.
"U.S. Person" has the meaning given to United States Person as set forth in Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended.
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ARTICLE II
DEBT SECURITIES
SECTION 2.01. Authentication and Dating.
Upon the execution and delivery of this Indenture, or from time to time thereafter, Debt Securities in an aggregate principal amount not in excess of $3,093,000 may be executed and delivered by the Company to the Trustee for authentication, and the Trustee shall thereupon authenticate and make available for delivery said Debt Securities to or upon the written order of the Company, signed by its Chairman of the Board of Directors, Vice Chairman,
President or Chief Financial Officer or one of its Vice Presidents, without any further action by the Company hereunder. In authenticating such Debt Securities, and accepting the additional responsibilities under this Indenture in relation to such Debt Securities, the Trustee shall be entitled to receive, and (subject to Section 6.01) shall be fully protected in relying upon a copy of any Board Resolution or Board Resolutions relating thereto and, if applicable, an appropriate record of any action taken pursuant to such resolution, in each case certified by the Secretary or an Assistant Secretary or other officers with appropriate delegated authority of the Company as the case may be.
The Trustee shall have the right to decline to authenticate and deliver any Debt Securities under this Section if the Trustee, being advised by counsel, determines that such action may not lawfully be taken or if a Responsible Officer of the Trustee in good faith shall determine that such action would expose the Trustee to personal liability to existing Securityholders.
The definitive Debt Securities shall be typed, printed, lithographed or engraved on steel engraved borders or may be produced in any other manner, all as determined by the officers executing such Debt Securities, as evidenced by their execution of such Debt Securities.
SECTION 2.02. Form of Trustee's Certificate of Authentication.
The Trustee's certificate of authentication on all Debt Securities shall be in substantially the following form:
This is one of the Debt Securities referred to in the within-mentioned Indenture.
WELLS FARGO BANK, NATIONAL ASSOCIATION, not in its individual capacity but solely as trustee
By_________________________________
Authorized Officer
SECTION 2.03. Form and Denomination of Debt Securities.
The Debt Securities shall be substantially in the form of Exhibit A hereto. The Debt Securities shall be in registered, certificated form without coupons and in minimum
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denominations of $100,000 and any multiple of $1,000 in excess thereof. The Debt Securities shall be numbered, lettered, or otherwise distinguished in such manner or in accordance with such plans as the officers executing the same may determine with the approval of the Trustee as evidenced by the execution and authentication thereof.
SECTION 2.04. Execution of Debt Securities.
The Debt Securities shall be signed in the name and on behalf of the Company by the manual or facsimile signature of its Chairman of the Board of Directors, Vice Chairman, President or Chief Financial Officer or one of its Executive Vice Presidents, Senior Vice Presidents or Vice Presidents, under its corporate seal which may be affixed thereto or printed, engraved or otherwise reproduced thereon, by facsimile or otherwise, and which need not be attested. Only such Debt Securities as shall bear thereon a certificate of authentication substantially in the form herein before recited, executed by the Trustee or the Authenticating Agent by the manual signature of an authorized officer, shall be entitled to the benefits of this Indenture or be valid or obligatory for any purpose. Such certificate by the Trustee or the Authenticating Agent upon any Debt Security executed by the Company shall be conclusive evidence that the Debt Security so authenticated has been duly authenticated and delivered hereunder and that the holder is entitled to the benefits of this Indenture.
In case any officer of the Company who shall have signed any of the Debt Securities shall cease to be such officer before the Debt Securities so signed shall have been authenticated and delivered by the Trustee or the Authenticating Agent, or disposed of by the Company, such Debt Securities nevertheless may be authenticated and delivered or disposed of as though the Person who signed such Debt Securities had not ceased to be such officer of the Company; and any Debt Security may be signed on behalf of the Company by such Persons as, at the actual date of the execution of such Debt Security, shall be the proper officers of the Company, although at the date of the execution of this Indenture any such person was not such an officer.
Every Debt Security shall be dated the date of its authentication.
SECTION 2.05. Exchange and Registration of Transfer of Debt Securities.
The Company shall cause to be kept, at the office or agency maintained for the purpose of registration of transfer and for exchange as provided in Section 3.02, a register (the "Debt Security Register") for the Debt Securities issued hereunder in which, subject to such reasonable regulations as it may prescribe, the Company shall provide for the registration and transfer of all Debt Securities as provided in this Article II. Such register shall be in written form or in any other form capable of being converted into written form within a reasonable time.
Debt Securities to be exchanged may be surrendered at the Principal Office of the Trustee or at any office or agency to be maintained by the Company for such purpose as provided in Section 3.02, and the Company shall execute, the Company or the Trustee shall register and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in exchange therefor the Debt Security or Debt Securities which the Securityholder
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making the exchange shall be entitled to receive. Upon due presentment for registration of transfer of any Debt Security at the Principal Office of the Trustee or at any office or agency of the Company maintained for such purpose as provided in Section 3.02, the Company shall execute, the Company or the Trustee shall register and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in the name of the transferee or transferees a new Debt Security for a like aggregate principal amount. Registration or registration of transfer of any Debt Security by the Trustee or by any agent of the Company appointed pursuant to Section 3.02, and delivery of such Debt Security, shall be deemed to complete the registration or registration of transfer of such Debt Security.
All Debt Securities presented for registration of transfer or for exchange or payment shall (if so required by the Company or the Trustee or the Authenticating Agent) be duly endorsed by, or be accompanied by, a written instrument or instruments of transfer in form satisfactory to the Company and either the Trustee or the Authenticating Agent duly executed by, the holder or such holder's attorney duly authorized in writing.
No service charge shall be made for any exchange or registration of transfer of Debt Securities, but the Company or the Trustee may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in connection therewith.
The Company or the Trustee shall not be required to exchange or register a transfer of any Debt Security for a period of 15 days immediately preceding the date of selection of Debt Securities for redemption.
Notwithstanding the foregoing, Debt Securities may not be transferred except in compliance with the restricted securities legend set forth below, unless otherwise determined by the Company in accordance with applicable law, which legend shall be placed on each Debt Security:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON THE HOLDER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2),
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(3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF AN "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (C) OR (D) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, REPRESENTS AND WARRANTS THAT IT WILL NOT ENGAGE IN HEDGING TRANSACTIONS INVOLVING THIS SECURITY UNLESS SUCH TRANSACTIONS ARE IN COMPLIANCE WITH THE SECURITIES ACT.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT, INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE EXEMPTIVE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23,95-60,91-38,90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THIS SECURITY OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.
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IN CONNECTION WITH ANY TRANSFER, THE HOLDER OF THIS SECURITY WILL DELIVER TO THE COMPANY AND TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE INDENTURE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A PRINCIPAL AMOUNT OF NOT LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING A PRINCIPAL AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF THIS SECURITY FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS SECURITY, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS SECURITY.
THIS OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE CORPORATION (THE "FDIC"). THIS OBLIGATION IS SUBORDINATED TO THE CLAIMS OF DEPOSITORS AND THE CLAIMS OF GENERAL AND SECURED CREDITORS OF THE COMPANY, IS INELIGIBLE AS COLLATERAL FOR A LOAN BY THE COMPANY OR ANY OF ITS SUBSIDIARIES AND IS NOT SECURED.
SECTION 2.06. Mutilated, Destroyed, Lost or Stolen Debt Securities.
In case any Debt Security shall become mutilated or be destroyed, lost or stolen, the Company shall execute, and upon its written request the Trustee shall authenticate and deliver, a new Debt Security bearing a number not contemporaneously outstanding, in exchange and substitution for the mutilated Debt Security, or in lieu of and in substitution for the Debt Security so destroyed, lost or stolen. In every case the applicant for a substituted Debt Security shall furnish to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless, and, in every case of destruction, loss or theft, the applicant shall also furnish to the Company and the Trustee evidence to their satisfaction of the destruction, loss or theft of such Debt Security and of the ownership thereof.
The Trustee may authenticate any such substituted Debt Security and deliver the same upon the written request or authorization of any officer of the Company. Upon the issuance of any substituted Debt Security, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses connected therewith. In case any Debt Security which has matured or is about to mature or has been called for redemption in full shall become mutilated or be destroyed, lost or stolen, the Company may, instead of issuing a substitute Debt Security, pay or authorize the payment of the same (without surrender thereof except in the case of a mutilated Debt Security) if the applicant for such payment shall furnish to the Company and the Trustee such security or indemnity as may be required by them to save each of them harmless and, in case of destruction,
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loss or theft, evidence satisfactory to the Company and to the Trustee of the destruction, loss or theft of such Security and of the ownership thereof.
Every substituted Debt Security issued pursuant to the provisions of this Section 2.06 by virtue of the fact that any such Debt Security is destroyed, lost or stolen shall constitute an additional contractual obligation of the Company, whether or not the destroyed, lost or stolen Debt Security shall be found at any time, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Debt Securities duly issued hereunder. All Debt Securities shall be held and owned upon the express condition that, to the extent permitted by applicable law, the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Debt Securities and shall preclude any and all other rights or remedies notwithstanding any law or statute existing or hereafter enacted to the contrary with respect to the replacement or payment of negotiable instruments or other securities without their surrender.
SECTION 2.07. Temporary Debt Securities.
Pending the preparation of definitive Debt Securities, the Company may execute and the Trustee shall authenticate and make available for delivery temporary Debt Securities that are typed, printed or lithographed. Temporary Debt Securities shall be issuable in any authorized denomination, and substantially in the form of the definitive Debt Securities but with such omissions, insertions and variations as may be appropriate for temporary Debt Securities, all as may be determined by the Company. Every such temporary Debt Security shall be executed by the Company and be authenticated by the Trustee upon the same conditions and in substantially the same manner, and with the same effect, as the definitive Debt Securities. Without unreasonable delay, the Company will execute and deliver to the Trustee or the Authenticating Agent definitive Debt Securities and thereupon any or all temporary Debt Securities may be surrendered in exchange therefor, at the Principal Office of the Trustee or at any office or agency maintained by the Company for such purpose as provided in Section 3.02, and the Trustee or the Authenticating Agent shall authenticate and make available for delivery in exchange for such temporary Debt Securities a like aggregate principal amount of such definitive Debt Securities. Such exchange shall be made by the Company at its own expense and without any charge therefor except that in case of any such exchange involving a registration of transfer the Company may require payment of a sum sufficient to cover any tax, fee or other governmental charge that may be imposed in relation thereto. Until so exchanged, the temporary Debt Securities shall in all respects be entitled to the same benefits under this Indenture as definitive Debt Securities authenticated and delivered hereunder.
SECTION 2.08. Payment of Interest.
Each Debt Security will bear interest at the then applicable Interest Rate from and including each Interest Payment Date or, in the case of the first interest period, the original date of issuance of such Debt Security to, but excluding, the next succeeding Interest Payment Date or, in the case of the last interest period, the Redemption Date, Special Redemption Date or Maturity Date, as applicable, on the principal thereof, on any overdue principal and (to the extent that payment of such interest is enforceable under applicable law) on Deferred Interest and on
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any overdue installment of interest (including Defaulted Interest), payable (subject to the provisions of Article XII) on each Interest Payment Date commencing on July 7, 2003, 2003. Interest and any Deferred Interest on any Debt Security that is payable, and is punctually paid or duly provided for by the Company, on any Interest Payment Date shall be paid to the Person in whose name said Debt Security (or one or more Predecessor Securities) is registered at the close of business on the regular record date for such interest installment, except that interest and any Deferred Interest payable on the Maturity Date shall be paid to the Person to whom principal is paid. In the event that any Debt Security or portion thereof is called for redemption and the redemption date is subsequent to a regular record date with respect to any Interest Payment Date and prior to such Interest Payment Date, interest on such Debt Security will be paid upon presentation and surrender of such Debt Security.
Any interest on any Debt Security, other than Deferred Interest, that is payable, but is not punctually paid or duly provided for by the Company, on any Interest Payment Date (herein called "Defaulted Interest") shall forthwith cease to be payable to the registered holder on the relevant regular record date by virtue of having been such holder, and such Defaulted Interest shall be paid by the Company to the Persons in whose names such Debt Securities (or their respective Predecessor Securities) are registered at the close of business on a special record date for the payment of such Defaulted Interest, which shall be fixed in the following manner: the Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each such Debt Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements reasonably satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this clause provided. Thereupon the Trustee shall fix a special record date for the payment of such Defaulted Interest which shall not be more than fifteen nor less than ten days prior to the date of the proposed payment and not less than ten days after the receipt by the Trustee of the notice of the proposed payment. The Trustee shall promptly notify the Company of such special record date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the special record date therefor to be mailed, first class postage prepaid, to each Securityholder at his or her address as it appears in the Debt Security Register, not less than ten days prior to such special record date. Notice of the proposed payment of such Defaulted Interest and the special record date therefor having been mailed as aforesaid, such Defaulted Interest shall be paid to the Persons in whose names such Debt Securities (or their respective Predecessor Securities) are registered on such special record date and thereafter the Company shall have no further payment obligation in respect of the Defaulted Interest.
Any interest scheduled to become payable on an Interest Payment Date occurring during an Extension Period shall not be Defaulted Interest and shall be payable on such other date as may be specified in the terms of such Debt Securities.
The term "regular record date" as used in this Section shall mean the fifteenth day prior to an Interest Payment Date whether or not such date is a Business Day.
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Subject to the foregoing provisions of this Section, each Debt Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Debt Security shall carry the rights to interest accrued and unpaid, and to accrue, that were carried by such other Debt Security.
SECTION 2.09. Cancellation of Debt Securities Paid, etc.
All Debt Securities surrendered for the purpose of payment, redemption, exchange or registration of transfer, shall, if surrendered to the Company or any Paying Agent, be surrendered to the Trustee and promptly canceled by it, or, if surrendered to the Trustee or any Authenticating Agent, shall be promptly canceled by it, and no Debt Securities shall be issued in lieu thereof except as expressly permitted by any of the provisions of this Indenture. All Debt Securities canceled by any Authenticating Agent shall be delivered to the Trustee. The Trustee shall destroy all canceled Debt Securities unless the Company otherwise directs the Trustee in writing, in which case the Trustee shall dispose of such Debt Securities as directed by the Company. If the Company shall acquire any of the Debt Securities, however, such acquisition shall not operate as a redemption or satisfaction of the indebtedness represented by such Debt Securities unless and until the same are surrendered to the Trustee for cancellation.
SECTION 2.10. Computation of Interest
(a)    The amount of interest payable for any interest period will be computed on the basis of a 360-day year and the actual number of days elapsed in the relevant interest period; provided, however, that upon the occurrence of a Special Event Redemption pursuant to Section 10.02 the amounts payable pursuant to this Indenture shall be calculated as set forth in the definition of Special Redemption Price.
(b)    LIBOR shall be determined by the Calculation Agent in accordance with the following provisions:
(1)    On the second LIBOR Business Day (provided, that on such day commercial banks are open for business (including dealings in foreign currency deposits) in London (a "LIBOR Banking Day"), and otherwise the next preceding LIBOR Business Day that is also a LIBOR Banking Day) prior to January 15, April 15, July 15 and October 15 (except, with respect to the first interest payment period, on April 17, 2003), (each such day, a "LIBOR Determination Date"), LIBOR shall equal the rate, as obtained by the Calculation Agent for three-month U.S. Dollar deposits in Europe, which appears on Telerate Page 3750 (as defined in the International Swaps and Derivatives Association, Inc. 1991 Interest Rate and Currency Exchange Definitions) or such other page as may replace such Telerate Page 3750, as of 11:00 a.m. (London time) on such LIBOR Determination Date, as reported by Bloomberg Financial Markets Commodities News. "LIBOR Business Day" means any day that is not a Saturday, Sunday or other day on which commercial banking institutions in New York, New York or Wilmington, Delaware are authorized or obligated by law or executive order to be closed. If such rate is superseded on Telerate Page 3750 by a corrected rate before
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12:00 noon (London time) on the same LIBOR Determination Date, the corrected rate as so substituted will be the applicable LIBOR for that LIBOR Determination Date.
(2)    If, on any LIBOR Determination Date, such rate does not appear on Telerate Page 3750 as reported by Bloomberg Financial Markets Commodities News or such other page as may replace such Telerate Page 3750, the Calculation Agent shall determine the arithmetic mean of the offered quotations of the Reference Banks (as defined below) to leading banks in the London interbank market for three-month U.S. Dollar deposits in Europe (in an amount determined by the Calculation Agent) by reference to requests for quotations as of approximately 11:00 a.m. (London time) on the LIBOR Determination Date made by the Calculation Agent to the Reference Banks. If, on any LIBOR Determination Date, at least two of the Reference Banks provide such quotations, LIBOR shall equal the arithmetic mean of such quotations. If, on any LIBOR Determination Date, only one or none of the Reference Banks provide such a quotation, LIBOR shall be deemed to be the arithmetic mean of the offered quotations that at least two leading banks in the City of New York (as selected by the Calculation Agent) are quoting on the relevant LIBOR Determination Date for three-month U.S. Dollar deposits in Europe at approximately 11:00 a.m. (London time) (in an amount determined by the Calculation Agent). As used herein, "Reference Banks" means four major banks in the London interbank market selected by the Calculation Agent.
(3)    If the Calculation Agent is required but is unable to determine a rate in accordance with at least one of the procedures provided above, LIBOR shall be LIBOR in effect on the previous LIBOR Determination Date (whether or not LIBOR for such period was in fact determined on such LIBOR Determination Date).
(c)    All percentages resulting from any calculations on the Debt Securities will be rounded, if necessary, to the nearest one hundred-thousandth of a percentage point, with five one-millionths of a percentage point rounded upward (e.g., 9.876545% (or .09876545) being rounded to 9.87655% (or .0987655)), and all dollar amounts used in or resulting from such calculation will be rounded to the nearest cent (with one-half cent being rounded upward).
(d)    On each LIBOR Determination Date, the Calculation Agent shall notify, in writing, the Company and the Paying Agent of the applicable Interest Rate in effect for the related Interest Payment Date. The Calculation Agent shall, upon the request of the holder of any Debt Securities, provide the Interest Rate then in effect. All calculations made by the Calculation Agent in the absence of manifest error shall be conclusive for all purposes and binding on the Company and the Holders of the Debt Securities. The Paying Agent shall be entitled to rely on information received from the Calculation Agent or the Company as to the Interest Rate. The Company shall, from time to time, provide any necessary information to the Paying Agent
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relating to any original issue discount and interest on the Debt Securities that is included in any payment and reportable for taxable income calculation purposes.
SECTION 2.11. Extension of Interest Payment Period.
So long as no Event of Default has occurred and is continuing, the Company shall have the right, from time to time and without causing an Event of Default, to defer payments of interest on the Debt Securities by extending the interest payment period on the Debt Securities at any time and from time to time during the term of the Debt Securities, for up to twenty consecutive quarterly periods (each such extended interest payment period, an "Extension Period"), during which Extension Period no interest shall be due and payable (except any Additional Interest that may be due and payable). No Extension Period may end on a date other than an Interest Payment Date. During any Extension Period, interest will continue to accrue on the Debt Securities, and interest on such accrued interest (such accrued interest and interest thereon referred to herein as "Deferred Interest") will accrue at an annual rate equal to the Interest Rate in effect for such Extension Period, compounded quarterly from the date such Deferred Interest would have been payable were it not for the Extension Period, to the extent permitted by law. No interest or Deferred Interest shall be due and payable during an Extension Period, except at the end thereof. At the end of any such Extension Period the Company shall pay all Deferred Interest then accrued and unpaid on the Debt Securities; provided, however, that no Extension Period may extend beyond the Maturity Date; and provided further, however, that during any such Extension Period, the Company shall be subject to the restrictions set forth in Section 3.08 of this Indenture. Prior to the termination of any Extension Period, the Company may further extend such period, provided, that such period together with all such previous and further consecutive extensions thereof shall not exceed twenty consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all Deferred Interest, the Company may commence a new Extension Period, subject to the foregoing requirements. The Company must give the Trustee notice of its election to begin such Extension Period ("Notice") at least one Business Day prior to the earlier of (i) the next succeeding date on which interest on the Debt Securities would have been payable except for the election to begin such Extension Period or (ii) the date such interest is payable, but in any event not later than the related regular record date. The Notice shall describe, in reasonable detail, why the Company has elected to begin an Extension Period. The Notice shall acknowledge and affirm the Company's understanding that it is prohibited from issuing dividends and other distributions during the Extension Period. Upon receipt of the Notice, the Initial Purchaser has the right, at its sole discretion, to disclose the name of the Company, the fact that the Company has elected to begin an Extension Period and other information that the Initial Purchaser, at its sole discretion, deems relevant to the Company's election to begin an Extension Period. The Trustee shall give notice of the Company's election to begin a new Extension Period to the Securityholders.
SECTION 2.12. CUSIP Numbers.
The Company in issuing the Debt Securities may use a "CUSIP" number (if then generally in use), and, if so, the Trustee shall use a "CUSIP" number in notices of redemption as
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a convenience to Securityholders; provided, that any such notice may state that no representation is made as to the correctness of such number either as printed on the Debt Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Debt Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee in writing of any change in the CUSIP number.
ARTICLE III
PARTICULAR COVENANTS OF THE COMPANY
SECTION 3.01. Payment of Principal, Premium and Interest; Agreed Treatment of the Debt Securities.
(a)    The Company covenants and agrees that it will duly and punctually pay or cause to be paid all payments due on the Debt Securities at the place, at the respective times and in the manner provided in this Indenture and the Debt Securities. At the option of the Company, each installment of interest on the Debt Securities may be paid (i) by mailing checks for such interest payable to the order of the holders of Debt Securities entitled thereto as they appear on the Debt Security Register or (ii) by wire transfer to any account with a banking institution located in the United States designated by such Person to the Paying Agent no later than the related record date.
(b)    The Company will treat the Debt Securities as indebtedness, and the interest payable in respect of such Debt Securities as interest, for all U.S. federal income tax purposes. All payments in respect of such Debt Securities will be made free and clear of U.S. withholding tax to any beneficial owner thereof that has provided an Internal Revenue Service Form W-8 BEN (or any substitute or successor form) establishing its non-U.S. status for U.S. federal income tax purposes.
(c)    As of the date of this Indenture, the Company has no intention to exercise its right under Section 2.11 to defer payments of interest on the Debt Securities by commencing an Extension Period.
(d)    As of the date of this Indenture, the Company believes that the likelihood that it would exercise its right under Section 2.11 to defer payments of interest on the Debt Securities by commencing an Extension Period at any time during which the Debt Securities are outstanding is remote because of the restrictions that would be imposed on the Company's ability to declare or pay dividends or distributions on, or to redeem, purchase or make a liquidation payment with respect to, any of its outstanding equity and on the Company's ability to make any payments of principal of or interest on, or repurchase or redeem, any of its debt securities that rank pari passu in all respects with (or junior in interest to) the Debt Securities.
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SECTION 3.02. Offices for Notices and Payments, etc.
So long as any of the Debt Securities remain outstanding, the Company will maintain in Wilmington, Delaware or in an office or agency where the Debt Securities may be presented for payment, an office or agency where the Debt Securities may be presented for registration of transfer and for exchange as provided in this Indenture and an office or agency where notices and demands to or upon the Company in respect of the Debt Securities or of this Indenture may be served. The Company will give to the Trustee written notice of the location of any such office or agency and of any change of location thereof. Until otherwise designated from time to time by the Company in a notice to the Trustee, or specified as contemplated by Section 2.05, such office or agency for all of the above purposes shall be the Principal Office of the Trustee. In case the Company shall fail to maintain any such office or agency in Wilmington, Delaware or in or shall fail to give such notice of the location or of any change in the location thereof, presentations and demands may be made and notices may be served at the Principal Office of the Trustee.
In addition to any such office or agency, the Company may from time to time designate one or more offices or agencies outside Wilmington, Delaware or where the Debt Securities may be presented for registration of transfer and for exchange in the manner provided in this Indenture, and the Company may from time to time rescind such designation, as the Company may deem desirable or expedient; provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain any such office or agency in Wilmington, Delaware or in for the purposes above mentioned. The Company will give to the Trustee prompt written notice of any such designation or rescission thereof.
SECTION 3.03. Appointments to Fill Vacancies in Trustee's Office.
The Company, whenever necessary to avoid or fill a vacancy in the office of Trustee, will appoint, in the manner provided in Section 6.09, a Trustee, so that there shall at all times be a Trustee hereunder.
SECTION 3.04. Provision as to Paying Agent.
(a)    If the Company shall appoint a Paying Agent other than the Trustee, it will cause such Paying Agent to execute and deliver to the Trustee an instrument in which such agent shall agree with the Trustee, subject to the provision of this Section 3.04;
(1)    that it will hold all sums held by it as such agent for the payment of all payments due on the Debt Securities (whether such sums have been paid to it by the Company or by any other obligor on the Debt Securities) in trust for the benefit of the holders of the Debt Securities;
(2)    that it will give the Trustee prompt written notice of any failure by the Company (or by any other obligor on the Debt Securities) to make any payment on the Debt Securities when the same shall be due and payable; and
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(3)    that it will, at any time during the continuance of any Event of Default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent.
(b)    If the Company shall act as its own Paying Agent, it will, on or before each due date of the payments due on the Debt Securities, set aside, segregate and hold in trust for the benefit of the holders of the Debt Securities a sum sufficient to pay such payments so becoming due and will notify the Trustee in writing of any failure to take such action and of any failure by the Company (or by any other obligor under the Debt Securities) to make any payment on the Debt Securities when the same shall become due and payable.
Whenever the Company shall have one or more Paying Agents for the Debt Securities, it will, on or prior to each due date of the payments on the Debt Securities, deposit with a Paying Agent a sum sufficient to pay all payments so becoming due, such sum to be held in trust for the benefit of the Persons entitled thereto and (unless such Paying Agent is the Trustee) the Company shall promptly notify the Trustee in writing of its action or failure to act.
(c)    Anything in this Section 3.04 to the contrary notwithstanding, the Company may, at any time, for the purpose of obtaining a satisfaction and discharge with respect to the Debt Securities, or for any other reason, pay, or direct any Paying Agent to pay to the Trustee all sums held in trust by the Company or any such Paying Agent, such sums to be held by the Trustee upon the same terms and conditions herein contained.
(d)    Anything in this Section 3.04 to the contrary notwithstanding, the agreement to hold sums in trust as provided in this Section 3.04 is subject to Sections 12.03 and 12.04.
(e)    The Company hereby initially appoints the Trustee to act as Paying Agent (the "Paying Agent").
SECTION 3.05. Certificate to Trustee.
The Company will deliver to the Trustee on or before 120 days after the end of each fiscal year, so long as Debt Securities are outstanding hereunder, a Certificate stating that in the course of the performance by the signers of their duties as officers of the Company they would normally have knowledge of any default by the Company in the performance of any covenants of the Company contained herein, stating whether or not they have knowledge of any such default and, if so, specifying each such default of which the signers have knowledge and the nature thereof.
SECTION 3.06. Additional Interest.
If and for so long as the Trust is the holder of all Debt Securities and is subject to or otherwise required to pay, or is required to withhold from distributions to holders of Trust Securities, any additional taxes (including withholding taxes), duties, assessments or other governmental charges as a result of a Tax Event, the Company will pay such additional amounts
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(the "Additional Interest") on the Debt Securities as shall be required so that the net amounts received and retained by the Trust for distribution to holders of Trust Securities after paying all taxes (including withholding taxes on distributions to holders of Trust Securities), duties, assessments or other governmental charges will be equal to the amounts the Trust would have received and retained for distribution to holders of Trust Securities after paying all taxes (including withholding taxes on distributions to holders of Trust Securities), duties, assessments or other governmental charges if no such additional taxes, duties, assessments or other governmental charges had been imposed. Whenever in this Indenture or the Debt Securities there is a reference in any context to the payment of principal of or interest on the Debt Securities, such mention shall be deemed to include mention of payments of the Additional Interest provided for in this paragraph to the extent that, in such context, Additional Interest is, was or would be payable in respect thereof pursuant to the provisions of this paragraph and express mention of the payment of Additional Interest (if applicable) in any provisions hereof shall not be construed as excluding Additional Interest in those provisions hereof where such express mention is not made, provided, however, that the deferral of the payment of interest during an Extension Period pursuant to Section 2.11 shall not defer the payment of any Additional Interest that may be due and payable.
SECTION 3.07. Compliance with Consolidation Provisions.
The Company will not, while any of the Debt Securities remain outstanding, consolidate with, or merge into any other Person, or merge into itself, or sell or convey all or substantially all of its property to any other Person unless the provisions of Article XI hereof are complied with.
SECTION 3.08. Limitation on Dividends.
If Debt Securities are initially issued to the Trust or a trustee of such Trust in connection with the issuance of Trust Securities by the Trust (regardless of whether Debt Securities continue to be held by such Trust) and (i) there shall have occurred and be continuing an Event of Default, (ii) the Company shall be in default with respect to its payment of any obligations under the Capital Securities Guarantee or (iii) the Company shall have given notice of its election to defer payments of interest on the Debt Securities by extending the interest payment period as provided herein and such period, or any extension thereof, shall have commenced and be continuing, then the Company may not (A) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's capital stock or (B) make any payment of principal of or interest or premium, if any, on or repay, repurchase or redeem any debt securities of the Company that rank pari passu in all respects with or junior in interest to the Debt Securities (other than (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Company (I) in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, (II) in connection with a dividend reinvestment or stockholder stock purchase plan or (III) in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock), as consideration in an acquisition transaction entered into prior to the occurrence of (i),
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(ii) or (iii) above, (b) as a result of any exchange or conversion of any class or series of the Company's capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company's capital stock or of any class or series of the Company's indebtedness for any class or series of the Company's capital stock, (c) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (d) any declaration of a dividend in connection with any stockholder's rights plan, or the issuance of rights, stock or other property under any stockholder's rights plan, or the redemption or repurchase of rights pursuant thereto, or (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock).
SECTION 3.09. Covenants as to the Trust.
For so long as such Trust Securities remain outstanding, the Company shall maintain 100% ownership of the Common Securities; provided, however, that any permitted successor of the Company under this Indenture that is a U.S. Person may succeed to the Company's ownership of such Common Securities. The Company, as owner of the Common Securities, shall use commercially reasonable efforts to cause the Trust (a) to remain a statutory trust, except in connection with a distribution of Debt Securities to the holders of Trust Securities in liquidation of the Trust, the redemption of all of the Trust Securities or certain mergers, consolidations or amalgamations, each as permitted by the Declaration, (b) to otherwise continue to be classified as a grantor trust for United States federal income tax purposes and (c) to cause each holder of Trust Securities to be treated as owning an undivided beneficial interest in the Debt Securities.
ARTICLE IV
LISTS AND REPORTS BY THE COMPANY AND THE TRUSTEE
SECTION 4.01. Securityholders' Lists.
The Company covenants and agrees that it will furnish or cause to be furnished to the Trustee:
(a)    on each regular record date for an Interest Payment Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Securityholders of the Debt Securities as of such record date; and
(b)    at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished;
(c)    except that no such lists need be furnished under this Section 4.01 so long as the Trustee is in possession thereof by reason of its acting as Debt Security registrar.
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SECTION 4.02. Preservation and Disclosure of Lists.
(a)    The Trustee shall preserve, in as current a form as is reasonably practicable, all information as to the names and addresses of the holders of Debt Securities (1) contained in the most recent list furnished to it as provided in Section 4.01 or (2) received by it in the capacity of Debt Securities registrar (if so acting) hereunder. The Trustee may destroy any list furnished to it as provided in Section 4.01 upon receipt of a new list so furnished.
(b)    In case three or more holders of Debt Securities (hereinafter referred to as "applicants") apply in writing to the Trustee and furnish to the Trustee reasonable proof that each such applicant has owned a Debt Security for a period of at least six months preceding the date of such application, and such application states that the applicants desire to communicate with other holders of Debt Securities with respect to their rights under this Indenture or under such Debt Securities and is accompanied by a copy of the form of proxy or other communication which such applicants propose to transmit, then the Trustee shall within five Business Days after the receipt of such application, at its election, either:
(1)    afford such applicants access to the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.02, or
(2)    inform such applicants as to the approximate number of holders of Debt Securities whose names and addresses appear in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.02, and as to the approximate cost of mailing to such Securityholders the form of proxy or other communication, if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to such information, the Trustee shall, upon the written request of such applicants, mail to each Securityholder of Debt Securities whose name and address appear in the information preserved at the time by the Trustee in accordance with the provisions of subsection (a) of this Section 4.02 a copy of the form of proxy or other communication which is specified in such request with reasonable promptness after a tender to the Trustee of the material to be mailed and of payment, or provision for the payment, of the reasonable expenses of mailing, unless within five days after such tender, the Trustee shall mail to such applicants and file with the Securities and Exchange Commission, if permitted or required by applicable law, together with a copy of the material to be mailed, a written statement to the effect that, in the opinion of the Trustee, such mailing would be contrary to the best interests of the holders of all Debt Securities, as the case may be, or would be in violation of applicable law. Such written statement shall specify the basis of such opinion. If said Commission, as permitted or required by applicable law, after opportunity for a hearing upon the objections specified in the written statement so filed, shall enter an order refusing to sustain any of such objections or if, after the entry of an order sustaining one or more of such objections, said Commission shall find, after notice and opportunity for hearing, that all the objections so sustained have been met and shall enter an order so declaring, the Trustee shall mail copies of such material to all such Securityholders with reasonable promptness after the entry of such
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order and the renewal of such tender; otherwise the Trustee shall be relieved of any obligation or duty to such applicants respecting their application.
(c)    Each and every holder of Debt Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any Paying Agent shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the holders of Debt Securities in accordance with the provisions of subsection (b) of this Section 4.02, regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under said subsection (b).
ARTICLE V
REMEDIES OF THE TRUSTEE AND SECURITYHOLDERS UPON AN EVENT OF DEFAULT
SECTION 5.01. Events of Default.
(a)    The following events shall be "Events of Default" with respect to Debt Securities:
(b)    the Company defaults in the payment of any interest upon any Debt Security when it becomes due and payable, and continuance of such default for a period of 30 days; for the avoidance of doubt, an extension of any interest payment period by the Company in accordance with Section 2.11 of this Indenture shall not constitute a default under this clause 5.01(a); or
(c)    the Company defaults in the payment of all or any part of the principal of (or premium, if any, on) any Debt Securities as and when the same shall become due and payable either at maturity, upon redemption, by declaration of acceleration pursuant to Section 5.01 of this Indenture or otherwise; or
(d)    the Company defaults in the performance of, or breaches, any of its covenants or agreements in Sections 3.06, 3.07, 3.08 or 3.09 of this Indenture (other than a covenant or agreement a default in whose performance or whose breach is elsewhere in this Section specifically dealt with), and continuance of such default or breach for a period of 90 days after there has been given, by registered or certified mail, to the Company by the Trustee or to the Company and the Trustee by the holders of not less than 25% in aggregate principal amount of the outstanding Debt Securities, a written notice specifying such default or breach and requiring it to be remedied and stating that such notice is a "Notice of Default' hereunder; or
(e)    a court having jurisdiction in the premises shall enter a decree or order for relief in respect of the Company in an involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or appoints a receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar official) of the Company or for any substantial part of its property, or orders the winding-up or liquidation of its affairs and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days; or
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(f)    the Company shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, or shall consent to the appointment of or taking possession by a receiver, liquidator, assignee, trustee, custodian, sequestrator (or other similar official) of the Company or of any substantial part of its property, or shall make any general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due; or
the Trust shall have voluntarily or involuntarily liquidated, dissolved, wound-up its business or otherwise terminated its existence except in connection with (1) the distribution of the Debt Securities to holders of the Trust Securities in liquidation of their interests in the Trust, (2) the redemption of all of the outstanding Trust Securities or (3) certain mergers, consolidations or amalgamations, each as permitted by the Declaration.
If an Event of Default occurs and is continuing with respect to the Debt Securities, then, and in each and every such case, unless the principal of the Debt Securities shall have already become due and payable, either the Trustee or the holders of not less than 25% in aggregate principal amount of the Debt Securities then outstanding hereunder, by notice in writing to the Company (and to the Trustee if given by Securityholders), may declare the entire principal of the Debt Securities and the interest accrued, but unpaid, thereon, if any, to be due and payable immediately, and upon any such declaration the same shall become immediately due and payable.
The foregoing provisions, however, are subject to the condition that if, at any time after the principal of the Debt Securities shall have been so declared due and payable, and before any judgment or decree for the payment of the moneys due shall have been obtained or entered as hereinafter provided, (i) the Company shall pay or shall deposit with the Trustee a sum sufficient to pay all matured installments of interest upon all the Debt Securities and all payments on the Debt Securities which shall have become due otherwise than by acceleration (with interest upon all such payments and Deferred Interest, to the extent permitted by law) and such amount as shall be sufficient to cover reasonable compensation to the Trustee and each predecessor Trustee, their respective agents, attorneys and counsel, and all other amounts due to the Trustee pursuant to Section 6.06, if any, and (ii) all Events of Default under this Indenture, other than the non-payment of the payments on Debt Securities which shall have become due by acceleration, shall have been cured, waived or otherwise remedied as provided herein, then and in every such case the holders of a majority in aggregate principal amount of the Debt Securities then outstanding, by written notice to the Company and to the Trustee, may waive all defaults and rescind and annul such declaration and its consequences, but no such waiver or rescission and annulment shall extend to or shall affect any subsequent default or shall impair any right consequent thereon.
In case the Trustee shall have proceeded to enforce any right under this Indenture and such proceedings shall have been discontinued or abandoned because of such rescission or annulment or for any other reason or shall have been determined adversely to the Trustee, then and in every such case the Company, the Trustee and the holders of the Debt Securities shall be
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restored respectively to their several positions and rights hereunder, and all rights, remedies and powers of the Company, the Trustee and the holders of the Debt Securities shall continue as though no such proceeding had been taken.
SECTION 5.02. Payment of Debt Securities on Default; Suit Therefor.
The Company covenants that upon the occurrence of an Event of Default pursuant to clause 5.01(a) or 5.01(b) and upon demand of the Trustee, the Company will pay to the Trustee, for the benefit of the holders of the Debt Securities, the whole amount that then shall have become due and payable on all Debt Securities including Deferred Interest accrued on the Debt Securities; and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including a reasonable compensation to the Trustee, its agents, attorneys and counsel, and any other amounts due to the Trustee under Section 6.06. In case the Company shall fail forthwith to pay such amounts upon such demand, the Trustee, in its own name and as trustee of an express trust, shall be entitled and empowered to institute any actions or proceedings at law or in equity for the collection of the sums so due and unpaid, and may prosecute any such action or proceeding to judgment or final decree, and may enforce any such judgment or final decree against the Company or any other obligor on such Debt Securities and collect in the manner provided by law out of the property of the Company or any other obligor on such Debt Securities wherever situated the moneys adjudged or decreed to be payable.
In case there shall be pending proceedings for the bankruptcy or for the reorganization of the Company or any other obligor on the Debt Securities under Bankruptcy Law, or in case a receiver or trustee shall have been appointed for the property of the Company or such other obligor, or in the case of any other similar judicial proceedings relative to the Company or other obligor upon the Debt Securities, or to the creditors or property of the Company or such other obligor, the Trustee, irrespective of whether the principal of the Debt Securities shall then be due and payable as therein expressed or by declaration of acceleration or otherwise and irrespective of whether the Trustee shall have made any demand pursuant to the provisions of this Section 5.02, shall be entitled and empowered, by intervention in such proceedings or otherwise, to file and prove a claim or claims for the whole amount of principal and interest owing and unpaid in respect of the Debt Securities and, in case of any judicial proceedings, to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for reasonable compensation to the Trustee and each predecessor Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all other amounts due to the Trustee under Section 6.06) and of the Securityholders allowed in such judicial proceedings relative to the Company or any other obligor on the Debt Securities, or to the creditors or property of the Company or such other obligor, unless prohibited by applicable law and regulations, to vote on behalf of the holders of the Debt Securities in any election of a trustee or a standby trustee in arrangement, reorganization, liquidation or other bankruptcy or insolvency proceedings or Person performing similar functions in comparable proceedings, and to collect and receive any moneys or other property payable or deliverable on any such claims, and to distribute the same after the deduction of its charges and expenses; and any receiver, assignee or trustee in bankruptcy or reorganization is hereby authorized by each of the Securityholders to make such payments to the Trustee, and,
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in the event that the Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Trustee such amounts as shall be sufficient to cover reasonable compensation to the Trustee, each predecessor Trustee and their respective agents, attorneys and counsel, and all other amounts due to the Trustee under Section 6.06.
Nothing herein contained shall be construed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Debt Securities or the rights of any holder thereof or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding.
All rights of action and of asserting claims under this Indenture, or under any of the Debt Securities, may be enforced by the Trustee without the possession of any of the Debt Securities, or the production thereof at any trial or other proceeding relative thereto, and any such suit or proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall be for the ratable benefit of the holders of the Debt Securities.
In any proceedings brought by the Trustee (and also any proceedings involving the interpretation of any provision of this Indenture to which the Trustee shall be a party) the Trustee shall be held to represent all the holders of the Debt Securities, and it shall not be necessary to make any holders of the Debt Securities parties to any such proceedings.
SECTION 5.03. Application of Moneys Collected by Trustee.
Any moneys collected by the Trustee shall be applied in the following order, at the date or dates fixed by the Trustee for the distribution of such moneys, upon presentation of the several Debt Securities in respect of which moneys have been collected, and stamping thereon the payment, if only partially paid, and upon surrender thereof if fully paid:
First: To the payment of costs and expenses incurred by, and reasonable fees of, the Trustee, its agents, attorneys and counsel, and of all other amounts due to the Trustee under Section 6.06;
Second: To the payment of all Senior Indebtedness of the Company if and to the extent required by Article XV;
Third: To the payment of the amounts then due and unpaid upon Debt Securities, in respect of which or for the benefit of which money has been collected, ratably, without preference or priority of any kind, according to the amounts due on such Debt Securities; and
Fourth: The balance, if any, to the Company.
SECTION 5.04. Proceedings by Securitvholders.
No holder of any Debt Security shall have any right to institute any suit, action or proceeding for any remedy hereunder, unless such holder previously shall have given to the
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Trustee written notice of an Event of Default with respect to the Debt Securities and unless the holders of not less than 25% in aggregate principal amount of the Debt Securities then outstanding shall have given the Trustee a written request to institute such action, suit or proceeding and shall have offered to the Trustee such reasonable indemnity as it may require against the costs, expenses and liabilities to be incurred thereby, and the Trustee for 60 days after its receipt of such notice, request and offer of indemnity shall have failed to institute any such action, suit or proceeding; provided, that no holder of Debt Securities shall have any right to prejudice the rights of any other holder of Debt Securities, obtain priority or preference over any other such holder or enforce any right under this Indenture except in the manner herein provided and for the equal, ratable and common benefit of all holders of Debt Securities.
Notwithstanding any other provisions in this Indenture, however, the right of any holder of any Debt Security to receive payment of the principal of, premium, if any, and interest on such Debt Security when due, or to institute suit for the enforcement of any such payment, shall not be impaired or affected without the consent of such holder. For the protection and enforcement of the provisions of this Section, each and every Securityholder and the Trustee shall be entitled to such relief as can be given either at law or in equity.
SECTION 5.05. Proceedings by Trustee.
In case of an Event of Default hereunder the Trustee may in its discretion proceed to protect and enforce the rights vested in it by this Indenture by such appropriate judicial proceedings as the Trustee shall deem most effectual to protect and enforce any of such rights, either by suit in equity or by action at law or by proceeding in bankruptcy or otherwise, whether for the specific enforcement of any covenant or agreement contained in this Indenture or in aid of the exercise of any power granted in this Indenture, or to enforce any other legal or equitable right vested in the Trustee by this Indenture or by law.
SECTION 5.06. Remedies Cumulative and Continuing.
Except as otherwise provided in Section 2.06, all powers and remedies given by this Article V to the Trustee or to the Securityholders shall, to the extent permitted by law, be deemed cumulative and not exclusive of any other powers and remedies available to the Trustee or the holders of the Debt Securities, by judicial proceedings or otherwise, to enforce the performance or observance of the covenants and agreements contained in this Indenture or otherwise established with respect to the Debt Securities, and no delay or omission of the Trustee or of any holder of any of the Debt Securities to exercise any right or power accruing upon any Event of Default occurring and continuing as aforesaid shall impair any such right or power, or shall be construed to be a waiver of any such default or an acquiescence therein; and, subject to the provisions of Section 5.04, every power and remedy given by this Article V or by law to the Trustee or to the Securityholders may be exercised from time to time, and as often as shall be deemed expedient, by the Trustee or by the Securityholders.
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SECTION 5.07. Direction of Proceedings and Waiver of Defaults by Majority of Securityholders.
The holders of a majority in aggregate principal amount of the Debt Securities affected (voting as one class) at the time outstanding shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee with respect to such Debt Securities; provided, however, that (subject to the provisions of Section 6.01) the Trustee shall have the right to decline to follow any such direction if the Trustee shall determine that the action so directed would be unjustly prejudicial to the holders not taking part in such direction or if the Trustee being advised by counsel determines that the action or proceeding so directed may not lawfully be taken or if a Responsible Officer of the Trustee shall determine that the action or proceedings so directed would involve the Trustee in personal liability. Prior to any declaration accelerating the maturity of the Debt Securities, the holders of a majority in aggregate principal amount of the Debt Securities at the time outstanding may on behalf of the holders of all of the Debt Securities waive (or modify any previously granted waiver of) any past default or Event of Default and its consequences, except a default (a) in the payment of principal of, premium, if any, or interest on any of the Debt Securities, (b) in respect of covenants or provisions hereof which cannot be modified or amended without the consent of the holder of each Debt Security affected, or (c) in respect of the covenants contained in Section 3.09; provided, however, that if the Debt Securities are held by the Trust or a trustee of such trust, such waiver or modification to such waiver shall not be effective until the holders of a majority in liquidation preference of the Trust Securities of the Trust shall have consented to such waiver or modification to such waiver; provided, further, that if the consent of the holder of each outstanding Debt Security is required, such waiver shall not be effective until each holder of the Trust Securities of the Trust shall have consented to such waiver. Upon any such waiver, the default covered thereby shall be deemed to be cured for all purposes of this Indenture and the Company, the Trustee and the holders of the Debt Securities shall be restored to their former positions and rights hereunder, respectively; but no such waiver shall extend to any subsequent or other default or Event of Default or impair any right consequent thereon. Whenever any default or Event of Default hereunder shall have been waived as permitted by this Section 5.07, said default or Event of Default shall for all purposes of the Debt Securities and this Indenture be deemed to have been cured and to be not continuing.
SECTION 5.08. Notice of Defaults.
The Trustee shall, within 90 days after a Responsible Officer of the Trustee shall have actual knowledge or received written notice of the occurrence of a default with respect to the Debt Securities, mail to all Securityholders, as the names and addresses of such holders appear upon the Debt Security Register, notice of all defaults with respect to the Debt Securities known to the Trustee, unless such defaults shall have been cured before the giving of such notice (the term "defaults" for the purpose of this Section 5.08 being hereby defined to be the events specified in subsections (a), (b), (c), (d) and (e) of Section 5.01, not including periods of grace, if any, provided for therein); provided, that, except in the case of default in the payment of the principal of, premium, if any, or interest on any of the Debt Securities, the Trustee shall be protected in withholding such notice if and so long as a Responsible Officer of the Trustee in
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good faith determines that the withholding of such notice is in the interests of the Securityholders.
SECTION 5.09. Undertaking to Pay Costs.
All parties to this Indenture agree, and each holder of any Debt Security by such holder's acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees and expenses, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this Section 5.09 shall not apply to any suit instituted by the Trustee, to any suit instituted by any Securityholder, or group of Securityholders, holding in the aggregate more than 10% in principal amount of the Debt Securities outstanding, or to any suit instituted by any Securityholder for the enforcement of the payment of the principal of (or premium, if any) or interest on any Debt Security against the Company on or after the same shall have become due and payable.
ARTICLE VI
CONCERNING THE TRUSTEE
SECTION 6.01. Duties and Responsibilities of Trustee.
With respect to the holders of Debt Securities issued hereunder, the Trustee, prior to the occurrence of an Event of Default with respect to the Debt Securities and after the curing or waiving of all Events of Default which may have occurred, with respect to the Debt Securities, undertakes to perform such duties and only such duties as are specifically set forth in this Indenture. In case an Event of Default with respect to the Debt Securities has occurred (which has not been cured or waived) the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs.
No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act or its own willful misconduct, except that:
(a)    prior to the occurrence of an Event of Default with respect to the Debt Securities and after the curing or waiving of all Events of Default which may have occurred
(1)    the duties and obligations of the Trustee with respect to the Debt Securities shall be determined solely by the express provisions of this Indenture, and the Trustee shall not be liable except for the performance of such duties and obligations with respect to the Debt Securities as are specifically set forth in this
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Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and
(2)    in the absence of bad faith on the part of the Trustee, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon any certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform on their face to the requirements of this Indenture;
(b)    the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer or Officers of the Trustee, unless it shall be proved that the Trustee was negligent in ascertaining the pertinent facts;
(c)    the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith, in accordance with the direction of the Securityholders pursuant to Section 5.07, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture;
(d)    the Trustee shall not be charged with knowledge of any Default or Event of Default with respect to the Debt Securities unless either (1) a Responsible Officer shall have actual knowledge of such Default or Event of Default or (2) written notice of such Default or Event of Default shall have been given to the Trustee by the Company or any other obligor on the Debt Securities or by any holder of the Debt Securities, except with respect to an Event of Default pursuant to Sections 5.01 (a) or 5.01 (b) hereof (other than an Event of Default resulting from the default in the payment of Additional Interest or premium, if any, if the Trustee does not have actual knowledge or written notice that such payment is due and payable), of which the Trustee shall be deemed to have knowledge; and
(e)    in the absence of bad faith on the part of the Trustee, the Trustee may seek and rely on reasonable instructions from the Company.
None of the provisions contained in this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur personal financial liability in the performance of any of its duties or in the exercise of any of its rights or powers.
SECTION 6.02. Reliance on Documents, Opinions, etc.
Except as otherwise provided in Section 6.01:
(a)    the Trustee may conclusively rely and shall be fully protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report,
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notice, request, consent, order, bond, note, debenture or other paper or document believed by it in good faith to be genuine and to have been signed or presented by the proper party or parties;
(b)    any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by an Officers' Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any Board Resolution may be evidenced to the Trustee by a copy thereof certified by the Secretary or an Assistant Secretary of the Company;
(c)    the Trustee may consult with counsel of its selection and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in accordance with such advice or Opinion of Counsel;
(d)    the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Securityholders, pursuant to the provisions of this Indenture, unless such Securityholders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby;
(e)    the Trustee shall not be liable for any action taken or omitted by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture; nothing contained herein shall, however, relieve the Trustee of the obligation, upon the occurrence of an Event of Default with respect to the Debt Securities (that has not been cured or waived) to exercise with respect to the Debt Securities such of the rights and powers vested in it by this Indenture, and to use the same degree of care and skill in their exercise, as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs;
(f)    the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, bond, debenture, coupon or other paper or document, unless requested in writing to do so by the holders of not less than a majority in principal amount of the outstanding Debt Securities affected thereby; provided, however, that if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the security afforded to it by the terms of this Indenture, the Trustee may require reasonable indemnity against such expense or liability as a condition to so proceeding; and
(g)    the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents (including any Authenticating Agent) or attorneys, and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed by it with due care.
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SECTION 6.03. No Responsibility for Recitals, etc.
The recitals contained herein and in the Debt Securities (except in the certificate of authentication of the Trustee or the Authenticating Agent) shall be taken as the statements of the Company and the Trustee and the Authenticating Agent assume no responsibility for the correctness of the same. The Trustee and the Authenticating Agent make no representations as to the validity or sufficiency of this Indenture or of the Debt Securities. The Trustee and the Authenticating Agent shall not be accountable for the use or application by the Company of any Debt Securities or the proceeds of any Debt Securities authenticated and delivered by the Trustee or the Authenticating Agent in conformity with the provisions of this Indenture.
SECTION 6.04. Trustee, Authenticating Agent, Paying Agents, Transfer Agents or Registrar May Own Debt Securities.
The Trustee or any Authenticating Agent or any Paying Agent or any transfer agent or any Debt Security registrar, in its individual or any other capacity, may become the owner or pledgee of Debt Securities with the same rights it would have if it were not Trustee, Authenticating Agent, Paying Agent, transfer agent or Debt Security registrar.
SECTION 6.05. Moneys to be Held in Trust.
Subject to the provisions of Section 12.04, all moneys received by the Trustee or any Paying Agent shall, until used or applied as herein provided, be held in trust for the purpose for which they were received, but need not be segregated from other funds except to the extent required by law. The Trustee and any Paying Agent shall be under no liability for interest on any money received by it hereunder except as otherwise agreed in writing with the Company. So long as no Event of Default shall have occurred and be continuing, all interest allowed on any such moneys, if any, shall be paid from time to time to the Company upon the written order of the Company, signed by the Chairman of the Board of Directors, the President, the Chief Operating Officer, a Vice President, the Treasurer or an Assistant Treasurer of the Company.
SECTION 6.06. Compensation and Expenses of Trustee.
The Company covenants and agrees to pay to the Trustee from time to time, and the Trustee shall be entitled to, such compensation as shall be agreed to in writing between the Company and the Trustee (which shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust), and the Company will pay or reimburse the Trustee upon its written request for all documented reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any of the provisions of this Indenture (including the reasonable compensation and the reasonable expenses and disbursements of its counsel and of all Persons not regularly in its employ) except any such expense, disbursement or advance that arises from its negligence or bad faith. The Company also covenants to indemnify each of the Trustee (including in its individual capacity) and any predecessor Trustee (and its officers, agents, directors and employees) for, and to hold it harmless against, any and all loss, damage, claim, liability or expense including taxes (other than taxes based on the income of the Trustee), except to the extent such loss, damage, claim, liability
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or expense results from the negligence or bad faith of such indemnitee, arising out of or in connection with the acceptance or administration of this Trust, including the costs and expenses of defending itself against any claim or liability in the premises. The obligations of the Company under this Section 6.06 to compensate and indemnify the Trustee and to pay or reimburse the Trustee for documented expenses, disbursements and advances shall constitute additional indebtedness hereunder. Such additional indebtedness shall be secured by a lien prior to that of the Debt Securities upon all property and funds held or collected by the Trustee as such, except funds held in trust for the benefit of the holders of particular Debt Securities.
Without prejudice to any other rights available to the Trustee under applicable law, when the Trustee incurs expenses or renders services in connection with an Event of Default specified in subsections (d), (e) or (f) of Section 5.01, the expenses (including the reasonable charges and expenses of its counsel) and the compensation for the services are intended to constitute expenses of administration under any applicable federal or state bankruptcy, insolvency or other similar law.
The provisions of this Section shall survive the resignation or removal of the Trustee and the defeasance or other termination of this Indenture.
SECTION 6.07. Officers' Certificate as Evidence.
Except as otherwise provided in Sections 6.01 and 6.02, whenever in the administration of the provisions of this Indenture the Trustee shall deem it necessary or desirable that a matter be proved or established prior to taking or omitting any action hereunder, such matter (unless other evidence in respect thereof be herein specifically prescribed) may, in the absence of negligence or bad faith on the part of the Trustee, be deemed to be conclusively proved and established by an Officers' Certificate delivered to the Trustee, and such certificate, in the absence of negligence or bad faith on the part of the Trustee, shall be full warrant to the Trustee for any action taken or omitted by it under the provisions of this Indenture upon the faith thereof.
SECTION 6.08. Eligibility of Trustee.
The Trustee hereunder shall at all times be a U.S. Person that is a banking corporation or national association organized and doing business under the laws of the United States of America or any state thereof or of the District of Columbia and authorized under such laws to exercise corporate trust powers, having a combined capital and surplus of at least fifty million U.S. dollars ($50,000,000) and subject to supervision or examination by federal, state, or District of Columbia authority. If such corporation or national association publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purposes of this Section 6.08 the combined capital and surplus of such corporation or national association shall be deemed to be its combined capital and surplus as set forth in its most recent records of condition so published.
The Company may not, nor may any Person directly or indirectly controlling, controlled by, or under common control with the Company, serve as Trustee, notwithstanding
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that such corporation or national association shall be otherwise eligible and qualified under this Article.
In case at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section 6.08, the Trustee shall resign immediately in the manner and with the effect specified in Section 6.09.
If the Trustee has or shall acquire any "conflicting interest" within the meaning of § 310(b) of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to this Indenture.
SECTION 6.09. Resignation or Removal of Trustee, Calculation Agent, Paying Agent or Debt Security Register.
(a)    The Trustee, or any trustee or trustees hereafter appointed, the Calculation Agent, the Paying Agent and any Debt Security Register may at any time resign by giving written notice of such resignation to the Company and by mailing notice thereof, at the Company's expense, to the holders of the Debt Securities at their addresses as they shall appear on the Debt Security Register. Upon receiving such notice of resignation, the Company shall promptly appoint a successor or successors by written instrument, in duplicate, executed by order of its Board of Directors, one copy of which instrument shall be delivered to the resigning party and one copy to the successor. If no successor shall have been so appointed and have accepted appointment within 30 days after the mailing of such notice of resignation to the affected Securityholders, the resigning party may petition any court of competent jurisdiction for the appointment of a successor, or any Securityholder who has been a bona fide holder of a Debt Security or Debt Securities for at least six months may, subject to the provisions of Section 5.09, on behalf of himself or herself and all others similarly situated, petition any such court for the appointment of a successor. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, appoint a successor.
(b)    In case at any time any of the following shall occur -
(1)    the Trustee shall fail to comply with the provisions of the last paragraph of Section 6.08 after written request therefor by the Company or by any Securityholder who has been a bona fide holder of a Debt Security or Debt Securities for at least six months,
(2)    the Trustee shall cease to be eligible in accordance with the provisions of Section 6.08 and shall fail to resign after written request therefor by the Company or by any such Securityholder, or
(3)    the Trustee shall become incapable of acting, or shall be adjudged bankrupt or insolvent, or a receiver of the Trustee or of its property shall be appointed, or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation,
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then, in any such case, the Company may remove the Trustee and appoint a successor Trustee by written instrument, in duplicate, executed by order of the Board of Directors, one copy of which instrument shall be delivered to the Trustee so removed and one copy to the successor Trustee, or, subject to the provisions of Section 5.09, if no successor Trustee shall have been so appointed and have accepted appointment within 30 days of the occurrence of any of (1), (2) or (3) above, any Securityholder who has been a bona fide holder of a Debt Security or Debt Securities for at least six months may, on behalf of himself or herself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Such court may thereupon, after such notice, if any, as it may deem proper and prescribe, remove the Trustee and appoint a successor Trustee.
(c)    Upon prior written notice to the Company and the Trustee, the holders of a majority in aggregate principal amount of the Debt Securities at the time outstanding may at any time remove the Trustee and nominate a successor Trustee, which shall be deemed appointed as successor Trustee unless within ten Business Days after such nomination the Company objects thereto, in which case or in the case of a failure by such holders to nominate a successor Trustee, the Trustee so removed or any Securityholder, upon the terms and conditions and otherwise as in subsection (a) of this Section 6.09 provided, may petition any court of competent jurisdiction for an appointment of a successor.
(d)    Any resignation or removal of the Trustee, the Calculation Agent, the Paying Agent and any Debt Security Register and appointment of a successor pursuant to any of the provisions of this Section 6.09 shall become effective upon acceptance of appointment by the successor as provided in Section 6.10.
SECTION 6.10. Acceptance by Successor.
Any successor Trustee, Calculation Agent, Paying Agent or Debt Security Register appointed as provided in Section 6.09 shall execute, acknowledge and deliver to the Company and to its predecessor an instrument accepting such appointment hereunder, and thereupon the resignation or removal of the retiring party shall become effective and such successor, without any further act, deed or conveyance, shall become vested with all the rights, powers, duties and obligations with respect to the Debt Securities of its predecessor hereunder, with like effect as if originally named herein; but, nevertheless, on the written request of the Company or of the successor, the party ceasing to act shall, upon payment of the amounts then due it pursuant to the provisions of Section 6.06, execute and deliver an instrument transferring to such successor all the rights and powers of the party so ceasing to act and shall duly assign, transfer and deliver to such successor all property and money held by such retiring party hereunder. Upon request of any such successor, the Company shall execute any and all instruments in writing for more fully and certainly vesting in and confirming to such successor all such rights and powers. Any party ceasing to act shall, nevertheless, retain a lien upon all property or funds held or collected to secure any amounts then due it pursuant to the provisions of Section 6.06.
If a successor Trustee is appointed, the Company, the retiring Trustee and the successor Trustee shall execute and deliver an indenture supplemental hereto which shall contain
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such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Debt Securities as to which the predecessor Trustee is not retiring shall continue to be vested in the predecessor Trustee, and shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the Trust hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees co-trustees of the same trust and that each such Trustee shall be Trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee.
No successor Trustee shall accept appointment as provided in this Section 6.10 unless at the time of such acceptance such successor Trustee shall be eligible and qualified under the provisions of Section 6.08.
In no event shall a retiring Trustee, Calculation Agent, Paying Agent or Debt Security Register be liable for the acts or omissions of any successor hereunder.
Upon acceptance of appointment by a successor Trustee, Calculation Agent, Paying Agent or Debt Security Register as provided in this Section 6.10, the Company shall mail notice of the succession to the holders of Debt Securities at their addresses as they shall appear on the Debt Security Register. If the Company fails to mail such notice within ten Business Days after the acceptance of appointment by the successor, the successor shall cause such notice to be mailed at the expense of the Company.
SECTION 6.11. Succession by Merger, etc.
Any Person into which the Trustee may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder without the execution or filing of any paper or any further act on the part of any of the parties hereto; provided, that such Person shall be otherwise eligible and qualified under this Article.
In case at the time such successor to the Trustee shall succeed to the trusts created by this Indenture any of the Debt Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor Trustee, and deliver such Debt Securities so authenticated; and in case at that time any of the Debt Securities shall not have been authenticated, any successor to the Trustee may authenticate such Debt Securities either in the name of any predecessor hereunder or in the name of the successor Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Debt Securities or in this Indenture provided that the certificate of the Trustee shall have; provided, however, that the right to adopt the certificate of authentication of any predecessor Trustee or authenticate Debt Securities in the name of any predecessor Trustee shall apply only to its successor or successors by merger, conversion or consolidation.
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SECTION 6.12. Authenticating Agents.
There may be one or more Authenticating Agents appointed by the Trustee upon the request of the Company with power to act on its behalf and subject to its direction in the authentication and delivery of Debt Securities issued upon exchange or registration of transfer thereof as fully to all intents and purposes as though any such Authenticating Agent had been expressly authorized to authenticate and deliver Debt Securities; provided, that the Trustee shall have no liability to the Company for any acts or omissions of the Authenticating Agent with respect to the authentication and delivery of Debt Securities. Any such Authenticating Agent shall at all times be a Person organized and doing business under the laws of the United States or of any state or territory thereof or of the District of Columbia authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of at least $50,000,000 and being subject to supervision or examination by federal, state, territorial or District of Columbia authority. If such Person publishes reports of condition at least annually pursuant to law or the requirements of such authority, then for the purposes of this Section 6.12 the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published. If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect herein specified in this Section.
Any Person into which any Authenticating Agent may be merged or converted or with which it may be consolidated, or any Person resulting from any merger, consolidation or conversion to which any Authenticating Agent shall be a party, or any Person succeeding to all or substantially all of the corporate trust business of any Authenticating Agent, shall be the successor of such Authenticating Agent hereunder, if such successor Person is otherwise eligible under this Section 6.12 without the execution or filing of any paper or any further act on the part of the parties hereto or such Authenticating Agent.
Any Authenticating Agent may at any time resign by giving written notice of resignation to the Trustee and to the Company. The Trustee may at any time terminate the agency of any Authenticating Agent with respect to the Debt Securities by giving written notice of termination to such Authenticating Agent and to the Company. Upon receiving such a notice of resignation or upon such a termination, or in case at any time any Authenticating Agent shall cease to be eligible under this Section 6.12, the Trustee may, and upon the request of the Company shall, promptly appoint a successor Authenticating Agent eligible under this Section 6.12, shall give written notice of such appointment to the Company and shall mail notice of such appointment to all holders of Debt Securities as the names and addresses of such holders appear on the Debt Security Register. Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all rights, powers, duties and responsibilities with respect to the Debt Securities of its predecessor hereunder, with like effect as if originally named as Authenticating Agent herein.
The Company agrees to pay to any Authenticating Agent from time to time reasonable compensation for its services. Any Authenticating Agent shall have no responsibility or liability for any action taken by it as such in accordance with the directions of the Trustee and
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shall receive such reasonable indemnity as it may require against the costs, expenses and liabilities incurred in furtherance of its duties under this Section 6.12.
ARTICLE VII
CONCERNING THE SECURITYHOLDERS
SECTION 7.01. Action by Securityholders.
Whenever in this Indenture it is provided that the holders of a specified percentage in aggregate principal amount of the Debt Securities may take any action (including the making of any demand or request, the giving of any notice, consent or waiver or the taking of any other action), the fact that at the time of taking any such action the holders of such specified percentage have joined therein may be evidenced (a) by any instrument or any number of instruments of similar tenor executed by such Securityholders in person or by agent or proxy appointed in writing, or (b) by the record of such holders of Debt Securities voting in favor thereof at any meeting of such Securityholders duly called and held in accordance with the provisions of Article VIII, or (c) by a combination of such instrument or instruments and any such record of such a meeting of such Securityholders, or (d) by any other method the Trustee deems satisfactory.
If the Company shall solicit from the Securityholders any request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, the Company may, at its option, as evidenced by an Officers' Certificate, fix in advance a record date for such Debt Securities for the determination of Securityholders entitled to give such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, but the Company shall have no obligation to do so. If such a record date is fixed, such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same may be given before or after the record date, but only the Securityholders of record at the close of business on the record date shall be deemed to be Securityholders for the purposes of determining whether Securityholders of the requisite proportion of outstanding Debt Securities have authorized or agreed or consented to such request, demand, authorization, direction, notice, consent, waiver or other action or revocation of the same, and for that purpose the outstanding Debt Securities shall be computed as of the record date; provided, however, that no such authorization, agreement or consent by such Securityholders on the record date shall be deemed effective unless it shall become effective pursuant to the provisions of this Indenture not later than six months after the record date.
SECTION 7.02. Proof of Execution by Securityholders.
Subject to the provisions of Sections 6.01, 6.02 and 8.05, proof of the execution of any instrument by a Securityholder or such Securityholder's agent or proxy shall be sufficient if made in accordance with such reasonable rules and regulations as may be prescribed by the Trustee or in such manner as shall be satisfactory to the Trustee. The ownership of Debt Securities shall be proved by the Debt Security Register or by a certificate of the Debt Security
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registrar. The Trustee may require such additional proof of any matter referred to in this Section as it shall deem necessary.
The record of any Securityholders' meeting shall be proved in the manner provided in Section 8.06.
SECTION 7.03. Who Are Deemed Absolute Owners.
Prior to due presentment for registration of transfer of any Debt Security, the Company, the Trustee, any Authenticating Agent, any Paying Agent, any transfer agent and any Debt Security registrar may deem the Person in whose name such Debt Security shall be registered upon the Debt Security Register to be, and may treat such Person as, the absolute owner of such Debt Security (whether or not such Debt Security shall be overdue) for the purpose of receiving payment of or on account of the principal of, premium, if any, and interest on such Debt Security and for all other purposes; and neither the Company nor the Trustee nor any Authenticating Agent nor any Paying Agent nor any transfer agent nor any Debt Security registrar shall be affected by any notice to the contrary. All such payments so made to any holder for the time being or upon such holder's order shall be valid, and, to the extent of the sum or sums so paid, effectual to satisfy and discharge the liability for moneys payable upon any such Debt Security.
SECTION 7.04. Debt Securities Owned by Company Deemed Not Outstanding.
In determining whether the holders of the requisite aggregate principal amount of Debt Securities have concurred in any direction, consent or waiver under this Indenture, Debt Securities which are owned by the Company or any other obligor on the Debt Securities or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any other obligor on the Debt Securities shall be disregarded and deemed not to be outstanding for the purpose of any such determination; provided, that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, consent or waiver, only Debt Securities which a Responsible Officer of the Trustee actually knows are so owned shall be so disregarded. Debt Securities so owned which have been pledged in good faith may be regarded as outstanding for the purposes of this Section 7.04 if the pledgee shall establish to the satisfaction of the Trustee the pledgee's right to vote such Debt Securities and that the pledgee is not the Company or any such other obligor or Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company or any such other obligor. In the case of a dispute as to such right, any decision by the Trustee taken upon the advice of counsel shall be full protection to the Trustee.
SECTION 7.05. Revocation of Consents; Future Holders Bound.
At any time prior to (but not after) the evidencing to the Trustee, as provided in Section 7.01, of the taking of any action by the holders of the percentage in aggregate principal amount of the Debt Securities specified in this Indenture in connection with such action, any holder (in cases where no record date has been set pursuant to Section 7.01) or any holder as of an applicable record date (in cases where a record date has been set pursuant to Section 7.01) of a
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Debt Security (or any Debt Security issued in whole or in part in exchange or substitution therefor) the serial number of which is shown by the evidence to be included in the Debt Securities the holders of which have consented to such action may, by filing written notice with the Trustee at the Principal Office of the Trustee and upon proof of holding as provided in Section 7.02, revoke such action so far as concerns such Debt Security (or so far as concerns the principal amount represented by any exchanged or substituted Debt Security). Except as aforesaid any such action taken by the holder of any Debt Security shall be conclusive and binding upon such holder and upon all future holders and owners of such Debt Security, and of any Debt Security issued in exchange or substitution therefor or on registration of transfer thereof, irrespective of whether or not any notation in regard thereto is made upon such Debt Security or any Debt Security issued in exchange or substitution therefor.
ARTICLE VIII
SECURITYHOLDERS' MEETINGS
SECTION 8.01. Purposes of Meetings.
A meeting of Securityholders may be called at any time and from time to time pursuant to the provisions of this Article VIII for any of the following purposes:
(a)    to give any notice to the Company or to the Trustee, or to give any directions to the Trustee, or to consent to the waiving of any default hereunder and its consequences, or to take any other action authorized to be taken by Securityholders pursuant to any of the provisions of Article V;
(b)    to remove the Trustee and nominate a successor trustee pursuant to the provisions of Article VI;
(c)    to consent to the execution of an indenture or indentures supplemental hereto pursuant to the provisions of Section 9.02; or
(d)    to take any other action authorized to be taken by or on behalf of the holders of any specified aggregate principal amount of such Debt Securities under any other provision of this Indenture or under applicable law.
SECTION 8.02. Call of Meetings by Trustee.
The Trustee may at any time call a meeting of Securityholders to take any action specified in Section 8.01, to be held at such time and at such place in New York or Wilmington, Delaware, as the Trustee shall determine. Notice of every meeting of the Securityholders, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be mailed to holders of Debt Securities affected at their addresses as they shall appear on the Debt Securities Register. Such notice shall be mailed not less than 20 nor more than 180 days prior to the date fixed for the meeting.
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SECTION 8.03. Call of Meetings by Company or Securityholders.
In case at any time the Company pursuant to a Board Resolution, or the holders of at least 10% in aggregate principal amount of the Debt Securities, as the case may be, then outstanding, shall have requested the Trustee to call a meeting of Securityholders, by written request setting forth in reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have mailed the notice of such meeting within 20 days after receipt of such request, then the Company or such Securityholders may determine the time and the place in for such meeting and may call such meeting to take any action authorized in Section 8.01, by mailing notice thereof as provided in Section 8.02.
SECTION 8.04. Qualifications for Voting.
To be entitled to vote at any meeting of Securityholders a Person shall be (a) a holder of one or more Debt Securities with respect to which the meeting is being held or (b) a Person appointed by an instrument in writing as proxy by a holder of one or more such Debt Securities. The only Persons who shall be entitled to be present or to speak at any meeting of Securityholders shall be the Persons entitled to vote at such meeting and their counsel and any representatives of the Trustee and its counsel and any representatives of the Company and its counsel.
SECTION 8.05. Regulations.
Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Securityholders, in regard to proof of the holding of Debt Securities and of the appointment of proxies, and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate.
The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Securityholders as provided in Section 8.03, in which case the Company or the Securityholders calling the meeting, as the case may be, shall in like manner appoint a temporary chairman. A permanent chairman and a permanent secretary of the meeting shall be elected by majority vote at the meeting.
Subject to the provisions of Section 7.04, at any meeting each holder of Debt Securities with respect to which such meeting is being held or proxy therefor shall be entitled to one vote for each $1,000 principal amount of Debt Securities held or represented by such holder; provided, however, that no vote shall be cast or counted at any meeting in respect of any Debt Security challenged as not outstanding and ruled by the chairman of the meeting to be not outstanding. The chairman of the meeting shall have no right to vote other than by virtue of Debt Securities held by such chairman or instruments in writing as aforesaid duly designating such chairman as the Person to vote on behalf of other Securityholders. Any meeting of Securityholders duly called pursuant to the provisions of Section 8.02 or 8.03 may be adjourned
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from time to time by a majority of those present, whether or not constituting a quorum, and the meeting may be held as so adjourned without further notice.
SECTION 8.06. Voting.
The vote upon any resolution submitted to any meeting of holders of Debt Securities with respect to which such meeting is being held shall be by written ballots on which shall be subscribed the signatures of such holders or of their representatives by proxy and the serial number or numbers of the Debt Securities held or represented by them. The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in triplicate of all votes cast at the meeting. A record in duplicate of the proceedings of each meeting of Securityholders shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more Persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was mailed as provided in Section 8.02. The record shall show the serial numbers of the Debt Securities voting in favor of or against any resolution. The record shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one of the duplicates shall be delivered to the Company and the other to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting. Any record so signed and verified shall be conclusive evidence of the matters therein stated.
SECTION 8.07. Quorum; Actions.
The Persons entitled to vote a majority in outstanding principal amount of the Debt Securities shall constitute a quorum for a meeting of Securityholders; provided, however, that if any action is to be taken at such meeting with respect to a consent, waiver, request, demand, notice, authorization, direction or other action which may be given by the holders of not less than a specified percentage in outstanding principal amount of the Debt Securities, the Persons holding or representing such specified percentage in outstanding principal amount of the Debt Securities will constitute a quorum. In the absence of a quorum within 30 minutes of the time appointed for any such meeting, the meeting shall, if convened at the request of Securityholders, be dissolved. In any other case the meeting may be adjourned for a period of not less than 10 days as determined by the permanent chairman of the meeting prior to the adjournment of such meeting. In the absence of a quorum at any such adjourned meeting, such adjourned meeting may be further adjourned for a period of not less than 10 days as determined by the permanent chairman of the meeting prior to the adjournment of such adjourned meeting. Notice of the reconvening of any adjourned meeting shall be given as provided in Section 8.02, except that such notice need be given only once not less than five days prior to the date on which the meeting is scheduled to be reconvened. Notice of the reconvening of an adjourned meeting shall state expressly the percentage, as provided above, of the outstanding principal amount of the Debt Securities which shall constitute a quorum.
Except as limited by the proviso in the first paragraph of Section 9.02, any resolution presented to a meeting or adjourned meeting duly reconvened at which a quorum is
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present as aforesaid may be adopted by the affirmative vote of the holders of not less than a majority in outstanding principal amount of the Debt Securities; provided, however, that, except as limited by the proviso in the first paragraph of Section 9.02, any resolution with respect to any consent, waiver, request, demand, notice, authorization, direction or other action that this Indenture expressly provides may be given by the holders of not less than a specified percentage in outstanding principal amount of the Debt Securities may be adopted at a meeting or an adjourned meeting duly reconvened and at which a quorum is present as aforesaid only by the affirmative vote of the holders of not less than such specified percentage in outstanding principal amount of the Debt Securities.
Any resolution passed or decision taken at any meeting of holders of Debt Securities duly held in accordance with this Section shall be binding on all the Securityholders, whether or not present or represented at the meeting.
ARTICLE IX
SUPPLEMENTAL INDENTURES
SECTION 9.01. Supplemental Indentures without Consent of Securityholders.
The Company, when authorized by a Board Resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto, without the consent of the Securityholders, for one or more of the following purposes:
(a)    to evidence the succession of another Person to the Company, or successive successions, and the assumption by the successor Person of the covenants, agreements and obligations of the Company, pursuant to Article XI hereof;
(b)    to add to the covenants of the Company such further covenants, restrictions or conditions for the protection of the holders of Debt Securities as the Board of Directors shall consider to be for the protection of the holders of such Debt Securities, and to make the occurrence, or the occurrence and continuance, of a default in any of such additional covenants, restrictions or conditions a default or an Event of Default permitting the enforcement of all or any of the several remedies provided in this Indenture as herein set forth; provided, however, that in respect of any such additional covenant, restriction or condition such supplemental indenture may provide for a particular period of grace after default (which period may be shorter or longer than that allowed in the case of other defaults) or may provide for an immediate enforcement upon such default or may limit the remedies available to the Trustee upon such default;
(c)    to cure any ambiguity or to correct or supplement any provision contained herein or in any supplemental indenture which may be defective or inconsistent with any other provision contained herein or in any supplemental indenture, or to make such other provisions in regard to matters or questions arising under this Indenture; provided, that any such action shall not adversely affect the interests of the holders of the Debt Securities;
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(d)    to add to, delete from, or revise the terms of Debt Securities, including, without limitation, any terms relating to the issuance, exchange, registration or transfer of Debt Securities, including to provide for transfer procedures and restrictions substantially similar to those applicable to the Capital Securities, as required by Section 2.05 (for purposes of assuring that no registration of Debt Securities is required under the Securities Act of 1933, as amended); provided, that any such action shall not adversely affect the interests of the holders of the Debt Securities then outstanding (it being understood, for purposes of this proviso, that transfer restrictions on Debt Securities substantially similar to those applicable to Capital Securities shall not be deemed to adversely affect the holders of the Debt Securities);
(e)    to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Debt Securities and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 6.10;
(f)    to make any change (other than as elsewhere provided in this paragraph) that does not adversely affect the rights of any Securityholder in any material respect; or
(g)    to provide for the issuance of and establish the form and terms and conditions of the Debt Securities, to establish the form of any certifications required to be furnished pursuant to the terms of this Indenture or the Debt Securities, or to add to the rights of the holders of Debt Securities.
The Trustee is hereby authorized to join with the Company in the execution of any such supplemental indenture, to make any further appropriate agreements and stipulations which may be therein contained and to accept the conveyance, transfer and assignment of any property thereunder, but the Trustee shall not be obligated to, but may in its discretion, enter into any such supplemental indenture which affects the Trustee's own rights, duties or immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section 9.01 may be executed by the Company and the Trustee without the consent of the holders of any of the Debt Securities at the time outstanding, notwithstanding any of the provisions of Section 9.02.
SECTION 9.02. Supplemental Indentures with Consent of Securityholders.
With the consent (evidenced as provided in Section 7.01) of the holders of not less than a majority in aggregate principal amount of the Debt Securities at the time outstanding affected by such supplemental indenture (voting as a class), the Company, when authorized by a Board Resolution, and the Trustee may from time to time and at any time enter into an indenture or indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act, then in effect, applicable to indentures qualified thereunder) for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of any supplemental indenture or of modifying in any manner the rights of the holders of the Debt Securities; provided, however, that no such supplemental indenture shall without such consent of the holders of each Debt Security then outstanding and affected thereby (i) extend the
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fixed maturity of any Debt Security, or reduce the principal amount thereof or any premium thereon, or reduce the rate or extend the time of payment of interest thereon, or reduce any amount payable on redemption thereof or make the principal thereof or any interest or premium thereon payable in any coin or currency other than that provided in the Debt Securities, or impair or affect the right of any Securityholder to institute suit for payment thereof or impair the right of repayment, if any, at the option of the holder, or (ii) reduce the aforesaid percentage of Debt Securities the holders of which are required to consent to any such supplemental indenture; and provided, further, that if the Debt Securities are held by the Trust or a trustee of such trust, such supplemental indenture shall not be effective until the holders of a majority in liquidation preference of the Trust Securities shall have consented to such supplemental indenture; provided, further, that if the consent of the Securityholder of each outstanding Debt Security is required, such supplemental indenture shall not be effective until each holder of the Trust Securities shall have consented to such supplemental indenture.
Upon the request of the Company accompanied by a Board Resolution authorizing the execution of any such supplemental indenture, and upon the filing with the Trustee of evidence of the consent of Securityholders as aforesaid, the Trustee shall join with the Company in the execution of such supplemental indenture unless such supplemental indenture affects the Trustee's own rights, duties or immunities under this Indenture or otherwise, in which case the Trustee may in its discretion, but shall not be obligated to, enter into such supplemental indenture.
Promptly after the execution by the Company and the Trustee of any supplemental indenture pursuant to the provisions of this Section, the Trustee shall transmit by mail, first class postage prepaid, a notice, prepared by the Company, setting forth in general terms the substance of such supplemental indenture, to the Securityholders as their names and addresses appear upon the Debt Security Register. Any failure of the Trustee to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.
It shall not be necessary for the consent of the Securityholders under this Section 9.02 to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such consent shall approve the substance thereof.
SECTION 9.03. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture pursuant to the provisions of this Article IX, this Indenture shall be and be deemed to be modified and amended in accordance therewith and the respective rights, limitations of rights, obligations, duties and immunities under this Indenture of the Trustee, the Company and the holders of Debt Securities shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.
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SECTION 9.04. Notation on Debt Securities.
Debt Securities authenticated and delivered after the execution of any supplemental indenture pursuant to the provisions of this Article IX may bear a notation as to any matter provided for in such supplemental indenture. If the Company or the Trustee shall so determine, new Debt Securities so modified as to conform, in the opinion of the Board of Directors of the Company, to any modification of this Indenture contained in any such supplemental indenture may be prepared and executed by the Company, authenticated by the Trustee or the Authenticating Agent and delivered in exchange for the Debt Securities then outstanding.
SECTION 9.05. Evidence of Compliance of Supplemental Indenture to be Furnished to Trustee.
The Trustee, subject to the provisions of Sections 6.01 and 6.02, shall, in addition to the documents required by Section 14.06, receive an Officers' Certificate and an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant hereto complies with the requirements of this Article IX. The Trustee shall receive an Opinion of Counsel as conclusive evidence that any supplemental indenture executed pursuant to this Article IX is authorized or permitted by, and conforms to, the terms of this Article IX and that it is proper for the Trustee under the provisions of this Article IX to join in the execution thereof.
ARTICLE X
REDEMPTION OF SECURITIES
SECTION 10.01. Optional Redemption.
At any time the Company shall have the right, subject to the receipt by the Company of prior approval from the OTS, if then required under applicable capital guidelines or policies of the OTS, to redeem the Debt Securities, in whole or in part, on any January 7, April 7, July 7 or October 7 on or after April 7, 2008 (the "Redemption Date"), at the Redemption Price.
SECTION 10.02. Special Event Redemption
If a Special Event shall occur and be continuing, the Company shall have the right, subject to the receipt by the Company of prior approval from the OTS if then required under applicable capital guidelines or policies of the OTS, to redeem the Debt Securities, in whole but not in part, at any time within 90 days following the occurrence of such Special Event (the "Special Redemption Date"), at the Special Redemption Price.
SECTION 10.03. Notice of Redemption; Selection of Debt Securities.
In case the Company shall desire to exercise the right to redeem all, or, as the case may be, any part of the Debt Securities, it shall fix a date for redemption and shall mail a notice of such redemption at least 30 and not more than 60 days prior to the date fixed for redemption to the holders of Debt Securities so to be redeemed as a whole or in part at their last addresses as
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the same appear on the Debt Security Register. Such mailing shall be by first class mail. The notice if mailed in the manner herein provided shall be conclusively presumed to have been duly given, whether or not the holder receives such notice. In any case, failure to give such notice by mail or any defect in the notice to the holder of any Debt Security designated for redemption as a whole or in part shall not affect the validity of the proceedings for the redemption of any other Debt Security.
Each such notice of redemption shall specify the CUSIP number, if any, of the Debt Securities to be redeemed, the date fixed for redemption, the redemption price at which Debt Securities are to be redeemed, the place or places of payment, that payment will be made upon presentation and surrender of such Debt Securities, that interest accrued to the date fixed for redemption will be paid as specified in said notice, and that on and after said date interest thereon or on the portions thereof to be redeemed will cease to accrue. If less than all the Debt Securities are to be redeemed the notice of redemption shall specify the numbers of the Debt Securities to be redeemed. In case the Debt Securities are to be redeemed in part only, the notice of redemption shall state the portion of the principal amount thereof to be redeemed and shall state that on and after the date fixed for redemption, upon surrender of such Debt Security, a new Debt Security or Debt Securities in principal amount equal to the unredeemed portion thereof will be issued.
Prior to 10:00 a.m. New York City time on the Redemption Date or the Special Redemption Date specified in the notice of redemption given as provided in this Section, the Company will deposit with the Trustee or with one or more Paying Agents an amount of money sufficient to redeem on the redemption date all the Debt Securities so called for redemption at the appropriate redemption price, together with accrued interest to the date fixed for redemption.
The Company will give the Trustee notice not less than 45 nor more than 60 days prior to the redemption date as to the redemption price at which the Debt Securities are to be redeemed and the aggregate principal amount of Debt Securities to be redeemed and the Trustee shall select, in such manner as in its sole discretion it shall deem appropriate and fair, the Debt Securities or portions thereof (in integral multiples of $1,000) to be redeemed.
SECTION 10.04. Payment of Debt Securities Called for Redemption.
If notice of redemption has been given as provided in Section 10.03, the Debt Securities or portions of Debt Securities with respect to which such notice has been given shall become due and payable on the Redemption Date or the Special Redemption Date (as the case may be) and at the place or places stated in such notice at the applicable redemption price, together with interest accrued to the date fixed for redemption, and on and after said Redemption Date or the Special Redemption Date (unless the Company shall default in the payment of such Debt Securities at the redemption price, together with interest accrued to said date) interest on the Debt Securities or portions of Debt Securities so called for redemption shall cease to accrue. On presentation and surrender of such Debt Securities at a place of payment specified in said notice, such Debt Securities or the specified portions thereof shall be paid and redeemed by the Company at the applicable redemption price, together with interest accrued thereon to the Redemption Date or the Special Redemption Date (as the case may be).
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Upon presentation of any Debt Security redeemed in part only, the Company shall execute and the Trustee shall authenticate and make available for delivery to the holder thereof, at the expense of the Company, a new Debt Security or Debt Securities of authorized denominations in principal amount equal to the unredeemed portion of the Debt Security so presented.
ARTICLE XI
CONSOLIDATION, MERGER, SALE, CONVEYANCE AND LEASE
SECTION 11.01. Company May Consolidate, etc., on Certain Terms.
Nothing contained in this Indenture or in the Debt Securities shall prevent any consolidation or merger of the Company with or into any other Person or Persons (whether or not affiliated with the Company) or successive consolidations or mergers in which the Company or its successor or successors shall be a party or parties, or shall prevent any sale, conveyance, transfer or other disposition of the property or capital stock of the Company or its successor or successors as an entirety, or substantially as an entirety, to any otherperson (whether or not affiliated with the Company, or its successor or successors) authorized to acquire and operate the same; provided, however, that the Company hereby covenants and agrees that, upon any such consolidation, merger (where the Company is not the surviving corporation), sale, conveyance, transfer or other disposition, the due and punctual payment of all payments due on all of the Debt Securities in accordance with their terms, according to their tenor, and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be kept or performed by the Company, shall be expressly assumed by supplemental indenture reasonably satisfactory in form to the Trustee executed and delivered to the Trustee by the entity formed by such consolidation, or into which the Company shall have been merged, or by the entity which shall have acquired such property or capital stock.
SECTION 11.02. Successor Entity to be Substituted.
In case of any such consolidation, merger, sale, conveyance, transfer or other disposition and upon the assumption by the successor entity, by supplemental indenture, executed and delivered to the Trustee and reasonably satisfactory in form to the Trustee, of the due and punctual payment of the principal of and premium, if any, and interest on all of the Debt Securities and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed or observed by the Company, such successor entity shall succeed to and be substituted for the Company, with the same effect as if it had been named herein as the Company, and thereupon the predecessor entity shall be relieved of any further liability or obligation hereunder or upon the Debt Securities. Such successor entity thereupon may cause to be signed, and may issue either in its own name or in the name of the Company, any or all of the Debt Securities issuable hereunder which theretofore shall not have been signed by the Company and delivered to the Trustee or the Authenticating Agent; and, upon the order of such successor entity instead of the Company and subject to all the terms, conditions and limitations in this Indenture prescribed, the Trustee or the Authenticating Agent shall authenticate and deliver any Debt Securities which previously shall have been signed and
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delivered by the officers of the Company, to the Trustee or the Authenticating Agent for authentication, and any Debt Securities which such successor entity thereafter shall cause to be signed and delivered to the Trustee or the Authenticating Agent for that purpose. All the Debt Securities so issued shall in all respects have the same legal rank and benefit under this Indenture as the Debt Securities theretofore or thereafter issued in accordance with the terms of this Indenture as though all of such Debt Securities had been issued at the date of the execution hereof.
SECTION 11.03. Opinion of Counsel to be Given to Trustee.
The Trustee, subject to the provisions of Sections 6.01 and 6.02, shall receive, in addition to the Opinion of Counsel required by Section 9.05, an Opinion of Counsel as conclusive evidence that any consolidation, merger, sale, conveyance, transfer or other disposition, and any assumption, permitted or required by the terms of this Article XI complies with the provisions of this Article XI.
ARTICLE XII
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 12.01. Discharge of Indenture.
When (a) the Company shall deliver to the Trustee for cancellation all Debt Securities theretofore authenticated (other than any Debt Securities which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.06) and not theretofore canceled, or (b) all the Debt Securities not theretofore canceled or delivered to the Trustee for cancellation shall have become due and payable, or are by their terms to become due and payable within one year or are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption, and the Company shall deposit with the Trustee, in trust, funds, which shall be immediately due and payable, sufficient to pay at maturity or upon redemption all of the Debt Securities (other than any Debt Securities which shall have been destroyed, lost or stolen and which shall have been replaced or paid as provided in Section 2.06) not theretofore canceled or delivered to the Trustee for cancellation, including principal and premium, if any, and interest due or to become due to such date of maturity or redemption date, as the case may be, but excluding, however, the amount of any moneys for the payment of principal of, and premium, if any, or interest on the Debt Securities (1) theretofore repaid to the Company in accordance with the provisions of Section 12.04, or (2) paid to any state or to the District of Columbia pursuant to its unclaimed property or similar laws, and if in the case of either clause (a) or clause (b) the Company shall also pay or cause to be paid all other sums payable hereunder by the Company, then this Indenture shall cease to be of further effect except for the provisions of Sections 2.05, 2.06, 3.01, 3.02, 3.04, 6.06, 6.09 and 12.04 hereof, which shall survive until such Debt Securities shall mature or are redeemed, as the case may be, and are paid. Thereafter, Sections 6.06, 6.09 and 12.04 shall survive, and the Trustee, on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with, and at the cost and
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expense of the Company, shall execute proper instruments acknowledging satisfaction of and discharging this Indenture, the Company, however, hereby agreeing to reimburse the Trustee for any costs or expenses thereafter reasonably and properly incurred by the Trustee in connection with this Indenture or the Debt Securities.
SECTION 12.02. Deposited Moneys to be Held in Trust by Trustee.
Subject to the provisions of Section 12.04, all moneys deposited with the Trustee pursuant to Section 12.01 shall be held in trust and applied by it to the payment, either directly or through any Paying Agent (including the Company if acting as its own Paying Agent), to the holders of the particular Debt Securities for the payment of which such moneys have been deposited with the Trustee, of all sums due and to become due thereon for principal, and premium, if any, and interest.
SECTION 12.03. Paying Agent to Repay Moneys Held.
Upon the satisfaction and discharge of this Indenture, all moneys then held by any Paying Agent of the Debt Securities (other than the Trustee) shall, upon demand of the Company, be repaid to the Company or paid to the Trustee, and thereupon such Paying Agent shall be released from all further liability with respect to such moneys.
SECTION 12.04. Return of Unclaimed Moneys.
Any moneys deposited with or paid to the Trustee or any Paying Agent for payment of the principal of, and premium, if any, or interest on Debt Securities and not applied but remaining unclaimed by the holders of Debt Securities for two years after the date upon which the principal of, and premium, if any, or interest on such Debt Securities, as the case may be, shall have become due and payable, shall be repaid to the Company by the Trustee or such Paying Agent on written demand; and the holder of any of the Debt Securities shall thereafter look only to the Company for any payment which such holder may be entitled to collect and all liability of the Trustee or such Paying Agent with respect to such moneys shall thereupon cease.
ARTICLE XIII
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
SECTION 13.01. Indenture and Debt Securities Solely Corporate Obligations.
No recourse for the payment of the principal of or premium, if any, or interest on any Debt Security, or for any claim based thereon or otherwise in respect thereof, and no recourse under or upon any obligation, covenant or agreement of the Company in this Indenture or in any supplemental indenture, or in any such Debt Security, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, officer, director, employee or agent, as such, past, present or future, of the Company or of any predecessor or successor corporation of the Company, either directly or through the Company or any successor corporation of the Company, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise; it being expressly
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understood that all such liability is hereby expressly waived and released as a condition of, and as a consideration for, the execution of this Indenture and the issue of the Debt Securities.
ARTICLE XIV
MISCELLANEOUS PROVISIONS
SECTION 14.01. Successors.
All the covenants, stipulations, promises and agreements of the Company contained in this Indenture shall bind its successors and assigns whether so expressed or not.
SECTION 14.02. Official Acts by Successor Entity.
Any act or proceeding by any provision of this Indenture authorized or required to be done or performed by any board, committee or officer of the Company shall and may be done and performed with like force and effect by the like board, committee, officer or other authorized Person of any entity that shall at the time be the lawful successor of the Company.
SECTION 14.03. Surrender of Company Powers.
The Company by instrument in writing executed by authority of 2/3 (two-thirds) of its Board of Directors and delivered to the Trustee may surrender any of the powers reserved to the Company and thereupon such power so surrendered shall terminate both as to the Company and as to any permitted successor.
SECTION 14.04. Addresses for Notices, etc.
Any notice or demand which by any provision of this Indenture is required or permitted to be given or served by the Trustee or by the Securityholders on the Company may be given or served in writing by being deposited postage prepaid by registered or certified mail in a post office letter box addressed (until another address is filed by the Company with the Trustee for such purpose) to the Company at:
American Bank Holdings, Inc.
12211 Plum Orchard Drive, Suite 300
Silver Spring, Maryland 20904-7803
Attention: Phillip C. Bowman]
Any notice, direction, request or demand by any Securityholder or the Company to or upon the Trustee shall be deemed to have been sufficiently given or made, for all purposes, if given or made in writing at the office of Wells Fargo Bank, National Association at:
919 Market Street
Suite 700
Wilmington, DE 19801
Attention: Corporate Trust Division
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SECTION 14.05. Governing Law.
This Indenture and each Debt Security shall be deemed to be a contract made under the law of the State of New York, and for all purposes shall be governed by and construed in accordance with the law of said State, without regard to conflict of laws principles thereof.
SECTION 14.06. Evidence of Compliance with Conditions Precedent.
Upon any application or demand by the Company to the Trustee to take any action under any of the provisions of this Indenture, the Company shall furnish to the Trustee an Officers' Certificate stating that in the opinion of the signers all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with and an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with (except that no such Opinion of Counsel is required to be furnished to the Trustee in connection with the authentication and issuance of Debt Securities issued on the date of this Indenture).
Each certificate or opinion provided for in this Indenture and delivered to the Trustee with respect to compliance with a condition or covenant provided for in this Indenture (except certificates delivered pursuant to Section 3.05) shall include (a) a statement that the person making such certificate or opinion has read such covenant or condition; (b) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; (c) a statement that, in the opinion of such person, he or she has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and (d) a statement as to whether or not, in the opinion of such person, such condition or covenant has been complied with.
SECTION 14.07. Non-Business Days.
In any case where the date of payment of interest on or principal of the Debt Securities is not a Business Day, the payment of such interest on or principal of the Debt Securities need not be made on such date but may be made on the next succeeding Business Day, with the same force and effect as if made on the date of payment, except if such Business Day is in the next succeeding calendar year, such payment will be made on the immediately preceding Business Day.
SECTION 14.08. Table of Contents, Headings, etc.
The table of contents and the titles and headings of the articles and sections of this Indenture have been inserted for convenience of reference only, are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.
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SECTION 14.09. Execution in Counterparts.
This Indenture may be executed in any number of counterparts, each of which shall be an original, but such counterparts shall together constitute but one and the same instrument.
SECTION 14.10. Separability.
In case any one or more of the provisions contained in this Indenture or in the Debt Securities shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this Indenture or of such Debt Securities, but this Indenture and such Debt Securities shall be construed as if such invalid or illegal or unenforceable provision had never been contained herein or therein.
SECTION 14.11. Assignment.
Subject to Article XI, the Company will have the right at all times to assign any of its rights or obligations under this Indenture to a direct or indirect wholly owned Subsidiary of the Company, provided, that, in the event of any such assignment, the Company will remain liable for all such obligations. Subject to the foregoing, this Indenture is binding upon and inures to the benefit of the parties hereto and their respective successors and assigns. This Indenture may not otherwise be assigned by the parties thereto.
SECTION 14.12. Acknowledgment of Rights.
The Company acknowledges that, with respect to any Debt Securities held by the Trust or the Institutional Trustee of the Trust, if the Institutional Trustee of the Trust fails to enforce its rights under this Indenture as the holder of Debt Securities held as the assets of the Trust after the holders of a majority in Liquidation Amount of the Capital Securities of the Trust have so directed in writing such Institutional Trustee, a holder of record of such Capital Securities may to the fullest extent permitted by law institute legal proceedings directly against the Company to enforce such Institutional Trustee's rights under this Indenture without first instituting any legal proceedings against such Institutional Trustee or any other Person. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and such event is attributable to the failure of the Company to pay interest (or premium, if any) or principal on the Debt Securities on the date such interest (or premium, if any) or principal is otherwise due and payable (or in the case of redemption, on the redemption date), the Company acknowledges that a holder of record of Capital Securities of the Trust may directly institute a proceeding against the Company for enforcement of payment to such holder directly of the principal of (or premium, if any) or interest on the Debt Securities having an aggregate principal amount equal to the aggregate Liquidation Amount of the Capital Securities of such holder on or after the respective due date specified in the Debt Securities.
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ARTICLE XV
SUBORDINATION OF DEBT SECURITIES
SECTION 15.01. Agreement to Subordinate.
The Company covenants and agrees, and each holder of Debt Securities issued hereunder and under any supplemental indenture (the "Additional Provisions") by such Securityholder's acceptance thereof likewise covenants and agrees, that all Debt Securities shall be issued subject to the provisions of this Article XV; and each holder of a Debt Security, whether upon original issue or upon transfer or assignment thereof, accepts and agrees to be bound by such provisions.
The payment by the Company of the payments due on all Debt Securities issued hereunder and under any Additional Provisions shall, to the extent and in the manner hereinafter set forth, be subordinated and junior in right of payment to the prior payment in full of all Senior Indebtedness of the Company, whether outstanding at the date of this Indenture or thereafter incurred.
No provision of this Article XV shall prevent the occurrence of any default or Event of Default hereunder.
SECTION 15.02. Default on Senior Indebtedness.
In the event and during the continuation of any default by the Company in the payment of principal, premium, interest or any other payment due on any Senior Indebtedness of the Company following any applicable grace period, or in the event that the maturity of any Senior Indebtedness of the Company has been accelerated because of a default, and such acceleration has not been rescinded or canceled and such Senior Indebtedness has not been paid in full, then, in either case, no payment shall be made by the Company with respect to the payments due on the Debt Securities.
In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee when such payment is prohibited by the preceding paragraph of this Section 15.02, such payment shall, subject to Section 15.06, be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Indebtedness or their respective representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Indebtedness may have been issued, as their respective interests may appear, but only to the extent that the holders of the Senior Indebtedness (or their representative or representatives or a trustee) notify the Trustee in writing within 90 days of such payment of the amounts then due and owing on the Senior Indebtedness and only the amounts specified in such notice to the Trustee shall be paid to the holders of Senior Indebtedness.
SECTION 15.03. Liquidation; Dissolution; Bankruptcy.
Upon any payment by the Company or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any dissolution or
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winding- up or liquidation or reorganization of the Company, whether voluntary or involuntary or in bankruptcy, insolvency, receivership or other proceedings, all amounts due upon all Senior Indebtedness of the Company shall first be paid in full, or payment thereof provided for in money in accordance with its terms, before any payment is made by the Company on the Debt Securities; and upon any such dissolution or winding-up or liquidation or reorganization, any payment by the Company, or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Securityholders or the Trustee would be entitled to receive from the Company, except for the provisions of this Article XV, shall be paid by the Company, or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Securityholders or by the Trustee under this Indenture if received by them or it, directly to the holders of Senior Indebtedness of the Company (pro rata to such holders on the basis of the respective amounts of Senior Indebtedness held by such holders, as calculated by the Company) or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, to the extent necessary to pay such Senior Indebtedness in full, in money or money's worth, after giving effect to any concurrent payment or distribution to or for the holders of such Senior Indebtedness, before any payment or distribution is made to the Securityholders.
In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, prohibited by the foregoing, shall be received by the Trustee before all Senior Indebtedness of the Company is paid in full, or provision is made for such payment in money in accordance with its terms, such payment or distribution shall be held in trust for the benefit of and shall be paid over or delivered to the holders of such Senior Indebtedness or their representative or representatives, or to the trustee or trustees under any indenture pursuant to which any instruments evidencing such Senior Indebtedness may have been issued, as their respective interests may appear, as calculated by the Company, for application to the payment of all Senior Indebtedness of the Company remaining unpaid to the extent necessary to pay such Senior Indebtedness in full in money in accordance with its terms, after giving effect to any concurrent payment or distribution to or for the benefit of the holders of such Senior Indebtedness.
For purposes of this Article XV, the words "cash, property or securities" shall not be deemed to include shares of stock of the Company as reorganized or readjusted, or securities of the Company or any other corporation provided for by a plan of reorganization or readjustment, the payment of which is subordinated at least to the extent provided in this Article XV with respect to the Debt Securities to the payment of all Senior Indebtedness of the Company, that may at the time be outstanding, provided, that (a) such Senior Indebtedness is assumed by the new corporation, if any, resulting from any such reorganization or readjustment, and (b) the rights of the holders of such Senior Indebtedness are not, without the consent of such holders, altered by such reorganization or readjustment. The consolidation of the Company with, or the merger of the Company into, another corporation or the liquidation or dissolution of the Company following the conveyance or transfer of its property as an entirety, or substantially as an entirety, to another corporation upon the terms and conditions provided for in Article IX of this Indenture shall not be deemed a dissolution, winding-up, liquidation or reorganization for the
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purposes of this Section 15.03 if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, comply with the conditions stated in Article IX of this Indenture. Nothing in Section 15.02 or in this Section 15.03 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.06 of this Indenture.
SECTION 15.04. Subrogation.
Subject to the payment in full of all Senior Indebtedness of the Company, the Securityholders shall be subrogated to the rights of the holders of such Senior Indebtedness to receive payments or distributions of cash, property or securities of the Company applicable to such Senior Indebtedness until all payments due on the Debt Securities shall be paid in full; and, for the purposes of such subrogation, no payments or distributions to the holders of such Senior Indebtedness of any cash, property or securities to which the Securityholders or the Trustee would be entitled except for the provisions of this Article XV, and no payment over pursuant to the provisions of this Article XV to or for the benefit of the holders of such Senior Indebtedness by Securityholders or the Trustee, shall, as between the Company, its creditors other than holders of Senior Indebtedness of the Company, and the holders of the Debt Securities be deemed to be a payment or distribution by the Company to or on account of such Senior Indebtedness. It is understood that the provisions of this Article XV are and are intended solely for the purposes of defining the relative rights of the holders of the Debt Securities, on the one hand, and the holders of such Senior Indebtedness, on the other hand.
Nothing contained in this Article XV or elsewhere in this Indenture, any Additional Provisions or in the Debt Securities is intended to or shall impair, as between the Company, its creditors other than the holders of Senior Indebtedness of the Company, and the holders of the Debt Securities, the obligation of the Company, which is absolute and unconditional, to pay to the holders of the Debt Securities all payments on the Debt Securities as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the holders of the Debt Securities and creditors of the Company, other than the holders of Senior Indebtedness of the Company, nor shall anything herein or therein prevent the Trustee or the holder of any Debt Security from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article XV of the holders of such Senior Indebtedness in respect of cash, property or securities of the Company received upon the exercise of any such remedy.
Upon any payment or distribution of assets of the Company referred to in this Article XV, the Trustee, subject to the provisions of Article VI of this Indenture, and the Securityholders shall be entitled to conclusively rely upon any order or decree made by any court of competent jurisdiction in which such dissolution, winding- up, liquidation or reorganization proceedings are pending, or a certificate of the receiver, trustee in bankruptcy, liquidation trustee, agent or other Person making such payment or distribution, delivered to the Trustee or to the Securityholders, for the purposes of ascertaining the Persons entitled to participate in such distribution, the holders of Senior Indebtedness and other indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XV.
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SECTION 15.05. Trustee to Effectuate Subordination.
Each Securityholder by such Securityholder's acceptance thereof authorizes and directs the Trustee on such Securityholder's behalf to take such action as may be necessary or appropriate to effectuate the subordination provided in this Article XV and appoints the Trustee such Securityholder's attorney-in-fact for any and all such purposes.
SECTION 15.06. Notice by the Company.
The Company shall give prompt written notice to a Responsible Officer of the Trustee at the Principal Office of the Trustee of any fact known to the Company that would prohibit the making of any payment of moneys to or by the Trustee in respect of the Debt Securities pursuant to the provisions of this Article XV. Notwithstanding the provisions of this Article XV or any other provision of this Indenture or any Additional Provisions, the Trustee shall not be charged with knowledge of the existence of any facts that would prohibit the making of any payment of moneys to or by the Trustee in respect of the Debt Securities pursuant to the provisions of this Article XV, unless and until a Responsible Officer of the Trustee at the Principal Office of the Trustee shall have received written notice thereof from the Company or a holder or holders of Senior Indebtedness or from any trustee therefor; and before the receipt of any such written notice, the Trustee, subject to the provisions of Article VI of this Indenture, shall be entitled in all respects to assume that no such facts exist; provided, however, that if the Trustee shall not have received the notice provided for in this Section 15.06 at least two Business Days prior to the date upon which by the terms hereof any money may become payable for any purpose (including, without limitation, the payment of the principal of (or premium, if any) or interest on any Debt Security), then, anything herein contained to the contrary notwithstanding, the Trustee shall have full power and authority to receive such money and to apply the same to the purposes for which they were received, and shall not be affected by any notice to the contrary that may be received by it within two Business Days prior to such date.
The Trustee, subject to the provisions of Article VI of this Indenture, shall be entitled to conclusively rely on the delivery to it of a written notice by a Person representing himself or herself to be a holder of Senior Indebtedness of the Company (or a trustee or representative on behalf of such holder) to establish that such notice has been given by a holder of such Senior Indebtedness or a trustee or representative on behalf of any such holder or holders. In the event that the Trustee determines in good faith that further evidence is required with respect to the right of any Person as a holder of such Senior Indebtedness to participate in any payment or distribution pursuant to this Article XV, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and any other facts pertinent to the rights of such Person under this Article XV, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment.
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SECTION 15.07. Rights of the Trustee. Holders of Senior Indebtedness.
The Trustee in its individual capacity shall be entitled to all the rights set forth in this Article XV in respect of any Senior Indebtedness at any time held by it, to the same extent as any other holder of Senior Indebtedness, and nothing in this Indenture or any Additional Provisions shall deprive the Trustee of any of its rights as such holder.
With respect to the holders of Senior Indebtedness of the Company, the Trustee undertakes to perform or to observe only such of its covenants and obligations as are specifically set forth in this Article XV, and no implied covenants or obligations with respect to the holders
of such Senior Indebtedness shall be read into this Indenture or any Additional Provisions against the Trustee. The Trustee shall not owe or be deemed to owe any fiduciary duty to the holders of such Senior Indebtedness and, subject to the provisions of Article VI of this Indenture, the Trustee shall not be liable to any holder of such Senior Indebtedness if it shall pay over or deliver to Securityholders, the Company or any other Person money or assets to which any holder of such Senior Indebtedness shall be entitled by virtue of this Article XV or otherwise.
Nothing in this Article XV shall apply to claims of, or payments to, the Trustee under or pursuant to Section 6.06.
SECTION 15.08. Subordination May Not Be Impaired.
No right of any present or future holder of any Senior Indebtedness of the Company to enforce subordination as herein provided shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company, or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company, with the terms, provisions and covenants of this Indenture, regardless of any knowledge thereof that any such holder may have or otherwise be charged with.
Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Indebtedness of the Company may, at any time and from time to time, without the consent of or notice to the Trustee or the Securityholders, without incurring responsibility to the Securityholders and without impairing or releasing the subordination provided in this Article XV or the obligations hereunder of the holders of the Debt Securities to the holders of such Senior Indebtedness, do any one or more of the following: (a) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, such Senior Indebtedness, or otherwise amend or supplement in any manner such Senior Indebtedness or any instrument evidencing the same or any agreement under which such Senior Indebtedness is outstanding;
sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing such Senior Indebtedness; (c) release any Person liable in any manner for the collection of such Senior Indebtedness; and (d) exercise or refrain from exercising any rights against the Company, and any other Person.
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Wells Fargo Bank, National Association, in its capacity as Trustee, hereby accepts the trusts in this Indenture declared and provided, upon the terms and conditions herein above set forth.
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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed by their respective officers thereunto duly authorized, as of the day and year first above written.
American Bank Holdings, Inc.
By
Name:
Title:
Wells Fargo Bank, National Association, as Trustee
By
Name:
Title:
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EXHIBIT A
FORM OF JUNIOR SUBORDINATED DEBT SECURITY
DUE 2033
[FORM OF FACE OF SECURITY]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS OR ANY OTHER APPLICABLE SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY ONLY (A) TO THE COMPANY, (B) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), TO A PERSON THE HOLDER REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (C) PURSUANT TO AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT TO AN "ACCREDITED INVESTOR" WITHIN THE MEANING OF SUBPARAGRAPH (a) (1), (2), (3) OR (7) OF RULE 501 UNDER THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF AN "ACCREDITED INVESTOR," FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE SECURITIES ACT, OR (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSES (C) OR (D) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO IT IN ACCORDANCE WITH THE INDENTURE, A COPY OF WHICH MAY BE OBTAINED FROM THE COMPANY. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES THAT IT WILL COMPLY WITH THE FOREGOING RESTRICTIONS.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES, REPRESENTS AND WARRANTS THAT IT WILL NOT ENGAGE IN HEDGING TRANSACTIONS INVOLVING THIS SECURITY UNLESS SUCH TRANSACTIONS ARE IN COMPLIANCE WITH THE SECURITIES ACT.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF ALSO AGREES, REPRESENTS AND WARRANTS THAT IT IS NOT AN EMPLOYEE BENEFIT,
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INDIVIDUAL RETIREMENT ACCOUNT OR OTHER PLAN OR ARRANGEMENT SUBJECT TO TITLE I OF THE EMPLOYEE RETIREMENT INCOME SECURITY ACT OF 1974, AS AMENDED ("ERISA"), OR SECTION 4975 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), (EACH A "PLAN"), OR AN ENTITY WHOSE UNDERLYING ASSETS INCLUDE "PLAN ASSETS" BY REASON OF ANY PLAN'S INVESTMENT IN THE ENTITY AND NO PERSON INVESTING "PLAN ASSETS" OF ANY PLAN MAY ACQUIRE OR HOLD THIS SECURITY OR ANY INTEREST THEREIN, UNLESS SUCH PURCHASER OR HOLDER IS ELIGIBLE FOR THE RELIEF AVAILABLE UNDER U.S. DEPARTMENT OF LABOR PROHIBITED TRANSACTION CLASS EXEMPTION 96-23,95-60,91-38,90-1 OR 84-14 OR ANOTHER APPLICABLE EXEMPTION OR ITS PURCHASE AND HOLDING OF THIS SECURITY IS NOT PROHIBITED BY SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE WITH RESPECT TO SUCH PURCHASE OR HOLDING. ANY PURCHASER OR HOLDER OF THIS SECURITY OR ANY INTEREST THEREIN WILL BE DEEMED TO HAVE REPRESENTED BY ITS PURCHASE AND HOLDING THEREOF THAT EITHER (i) IT IS NOT AN EMPLOYEE BENEFIT PLAN WITHIN THE MEANING OF SECTION 3(3) OF ERISA, OR A PLAN TO WHICH SECTION 4975 OF THE CODE IS APPLICABLE, A TRUSTEE OR OTHER PERSON ACTING ON BEHALF OF AN EMPLOYEE BENEFIT PLAN OR PLAN, OR ANY OTHER PERSON OR ENTITY USING THE ASSETS OF ANY EMPLOYEE BENEFIT PLAN OR PLAN TO FINANCE SUCH PURCHASE, OR (ii) SUCH PURCHASE WILL NOT RESULT IN A PROHIBITED TRANSACTION UNDER SECTION 406 OF ERISA OR SECTION 4975 OF THE CODE FOR WHICH THERE IS NO APPLICABLE STATUTORY OR ADMINISTRATIVE EXEMPTION.
IN CONNECTION WITH ANY TRANSFER, THE HOLDER OF THIS SECURITY WILL DELIVER TO THE COMPANY AND TRUSTEE SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY THE INDENTURE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
THIS SECURITY WILL BE ISSUED AND MAY BE TRANSFERRED ONLY IN BLOCKS HAVING A PRINCIPAL AMOUNT OF NOT LESS THAN $100,000 AND MULTIPLES OF $1,000 IN EXCESS THEREOF. ANY ATTEMPTED TRANSFER OF THIS SECURITY IN A BLOCK HAVING A PRINCIPAL AMOUNT OF LESS THAN $100,000 SHALL BE DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH PURPORTED TRANSFEREE SHALL BE DEEMED NOT TO BE THE HOLDER OF THIS SECURITY FOR ANY PURPOSE, INCLUDING, BUT NOT LIMITED TO, THE RECEIPT OF DISTRIBUTIONS ON THIS SECURITY, AND SUCH PURPORTED TRANSFEREE SHALL BE DEEMED TO HAVE NO INTEREST WHATSOEVER IN THIS SECURITY.
THIS OBLIGATION IS NOT A DEPOSIT AND IS NOT INSURED BY THE UNITED STATES OR ANY AGENCY OR FUND OF THE UNITED STATES, INCLUDING THE FEDERAL DEPOSIT INSURANCE CORPORATION (THE "FDIC"). THIS OBLIGATION IS SUBORDINATED TO THE CLAIMS OF DEPOSITORS AND THE CLAIMS OF GENERAL AND SECURED CREDITORS OF THE COMPANY, IS
A-2

INELIGIBLE AS COLLATERAL FOR A LOAN BY THE COMPANY OR ANY OF ITS SUBSIDIARIES AND IS NOT SECURED.
Form of Junior Subordinated Debt Security due 2033
of
American Bank Holdings, Inc.
American Bank Holdings, Inc., a incorporated in Delaware (the "Company"), for value received promises to pay to Wells Fargo Bank, National Association, not in its individual capacity but solely as Institutional Trustee for American Bank Holdings Statutory Trust I, a Delaware statutory trust (the "Holder"), or registered assigns, the principal sum of Three Million Ninety Three Thousand Dollars on April 7, 2033 and to pay interest on said principal sum from April 22, 2003, or from the most recent interest payment date (each such date, an "Interest Payment Date") to which interest has been paid or duly provided for, quarterly (subject to deferral as set forth herein) in arrears on January 7, April 7, July 7 and October 7 of each year commencing July 7, 2003, at a variable per annum rate equal to LIBOR (as defined in the Indenture) plus 3.30% (the "Interest Rate") (subject to the Maximum Rate Increase, as defined in the Indenture) and provided, that the applicable Interest Rate may not exceed 12.5% through the Interest Payment Date on April 7, 2008) until the principal hereof shall have become due and payable, and on any overdue principal and (without duplication and to the extent that payment of such interest is enforceable under applicable law) on any overdue installment of interest at an annual rate equal to the Interest Rate in effect for each such Extension Period compounded quarterly. The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year and the actual number of days elapsed in the relevant interest period. In the event that any date on which the principal or interest is payable on this Debt Security is not a Business Day, then payment payable on such date will be made on the next succeeding day that is a Business Day, except that, if such Business Day is in the next succeeding calendar year, such payment shall be made on the immediately preceding Business Day, in each case with the same force and effect as if made on such date. The interest installment so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in the Indenture, be paid to the Person in whose name this Debt Security (or one or more Predecessor Securities, as defined in said Indenture) is registered at the close of business on the regular record date for such interest installment, except that interest and any Deferred Interest payable on the Maturity Date shall be paid to the Person to whom principal is paid. Any such interest installment not punctually paid or duly provided for shall forthwith cease to be payable to the registered holders on such regular record date and may be paid to the Person in whose name this Debt Security (or one or more Predecessor Debt Securities) is registered at the close of business on a special record date to be fixed by the Trustee for the payment of such defaulted interest, notice whereof shall be given to the registered holders of the Debt Securities not less than 10 days prior to such special record date, all as more fully provided in the Indenture. The principal of and interest on this Debt Security shall be payable at the office or agency of the Trustee (or other Paying Agent appointed by the Company) maintained for that purpose in any coin or currency of the United States of America that at the time of payment is legal tender for payment of public and private debts;
A-3

provided, however, that payment of interest may be made at the option of the Company by check mailed to the registered holder at such address as shall appear in the Debt Security Register or by wire transfer to an account appropriately designated by the holder hereof. Notwithstanding the foregoing, so long as the holder of this Debt Security is the Institutional Trustee, the payment of the principal of and interest on this Debt Security will be made in immediately available funds at such place and to such account as may be designated by the Trustee.
Upon submission of Notice (as defined in the Indenture) and so long as no Event of Default has occurred and is continuing, the Company shall have the right, from time to time and without causing an Event of Default, to defer payments of interest on the Debt Securities by extending the interest payment period on the Debt Securities at any time and from time to time during the term of the Debt Securities, for up to 20 consecutive quarterly periods (each such extended interest payment period, an "Extension Period"), during which Extension Period no interest shall be due and payable (except any Additional Interest that may be due and payable). During any Extension Period, interest will continue to accrue on the Debt Securities, and interest on such accrued interest (such accrued interest and interest thereon referred to herein as "Deferred Interest") will accrue at an annual rate equal to the Interest Rate in effect for each such Extension Period, compounded quarterly from the date such Deferred Interest would have been payable were it not for the Extension Period, to the extent permitted by law. No Extension Period may end on a date other than an Interest Payment Date. At the end of any such Extension Period the Company shall pay all Deferred Interest then accrued and unpaid on the Debt Securities; provided, however, that no Extension Period may extend beyond the Maturity Date and provided, further, however, during any such Extension Period, the Company may not (i) declare or pay any dividends or distributions on, or redeem, purchase, acquire, or make a liquidation payment with respect to, any of the Company's capital stock or (ii) make any payment on or repay, repurchase or redeem any debt securities of the Company that rank part passu in all respects with or junior in interest to the Debt Securities (other than (a) repurchases, redemptions or other acquisitions of shares of capital stock of the Company (A) in connection with any employment contract, benefit plan or other similar arrangement with or for the benefit of one or more employees, officers, directors or consultants, (B) in connection with a dividend reinvestment or stockholder stock purchase plan or (C) in connection with the issuance of capital stock of the Company (or securities convertible into or exercisable for such capital stock), as consideration in an acquisition transaction entered into prior to the applicable Extension Period, (b) as a result of any exchange or conversion of any class or series of the Company's capital stock (or any capital stock of a subsidiary of the Company) for any class or series of the Company's capital stock or of any class or series of the Company's indebtedness for any class or series of the Company's capital stock, (c) the purchase of fractional interests in shares of the Company's capital stock pursuant to the conversion or exchange provisions of such capital stock or the security being converted or exchanged, (d) any declaration of a dividend in connection with any stockholder's rights plan, or the issuance of rights, stock or other property under any stockholder's rights plan, or the redemption or repurchase of rights pursuant thereto, or (e) any dividend in the form of stock, warrants, options or other rights where the dividend stock or the stock issuable upon exercise of such warrants, options or other rights is the same stock as that on which the dividend is being paid or ranks pari passu with or junior to such stock). Prior to the termination of any Extension Period, the Company may further extend such period, provided,
A-4

that such period together with all such previous and further consecutive extensions thereof shall not exceed 20 consecutive quarterly periods, or extend beyond the Maturity Date. Upon the termination of any Extension Period and upon the payment of all Deferred Interest, the Company may commence a new Extension Period, subject to the foregoing requirements. No interest or Deferred Interest shall be due and payable during an Extension Period, except at the end thereof, but Deferred Interest shall accrue upon each installment of interest that would otherwise have been due and payable during such Extension Period until such installment is paid. The Company must give the Trustee notice of its election to begin such Extension Period at least one Business Day prior to the earlier of (i) the next succeeding date on which interest on the Debt Securities would have been payable except for the election to begin such Extension Period or (ii) the date such interest is payable, but in any event not later than the related regular record date.
The indebtedness evidenced by this Debt Security is, to the extent provided in the Indenture, subordinate and junior in right of payment to the prior payment in full of all Senior Indebtedness, and this Debt Security is issued subject to the provisions of the Indenture with respect thereto. Each holder of this Debt Security, by accepting the same, (a) agrees to and shall be bound by such provisions, (b) authorizes and directs the Trustee on such holder's behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination so provided and (c) appoints the Trustee such holder's attorney-in-fact for any and all such purposes. Each holder hereof, by such holder's acceptance hereof, hereby waives all notice of the acceptance of the subordination provisions contained herein and in the Indenture by each holder of Senior Indebtedness, whether now outstanding or hereafter incurred, and waives reliance by each such holder upon said provisions.
The Company waives demand, presentment for payment, notice of nonpayment, notice of protest, and all other notices.
This Debt Security shall not be entitled to any benefit under the Indenture hereinafter referred to and shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed by or on behalf of the Trustee.
The provisions of this Debt Security are continued on the reverse side hereof and such continued provisions shall for all purposes have the same effect as though fully set forth at this place.
A-5

IN WITNESS WHEREOF, the Company has duly executed this certificate.
American Bank Holdings, Inc.
By:
Name:
Title:
Dated:__________________, 2003
CERTIFICATE OF AUTHENTICATION
This is one of the Debt Securities referred to in the within-mentioned Indenture.
Wells Fargo Bank, National Association, not in its individual capacity but solely as the Trustee
By:
Authorized Officer
Dated:__________________, 2003
A-6

[FORM OF REVERSE OF SECURITY]
This Debt Security is one of a duly authorized series of Debt Securities of the Company, all issued or to be issued pursuant to an Indenture (the "Indenture"), dated as of April 22, 2003, duly executed and delivered between the Company and Wells Fargo Bank, National Association, as Trustee (the "Trustee"), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, limitations of rights, obligations, duties and immunities thereunder of the Trustee, the Company and the holders of the Debt Securities (referred to herein as the "Debt Securities") of which this Debt Security is a part. The summary of the terms of this Debt Security contained herein does not purport to be complete and is qualified by reference to the Indenture.
Upon the occurrence and continuation of a Tax Event, an Investment Company Event or a Capital Treatment Event (each a "Special Event"), this Debt Security may become due and payable, in whole but not in part, at any time, within 90 days following the occurrence of such Tax Event, Investment Company Event or Capital Treatment Event (the "Special Redemption Date"), as the case may be, at the Special Redemption Price. The Company shall also have the right to redeem this Debt Security at the option of the Company, in whole or in part, on any January 7, April 7, July 7 or October 7 on or after April 7, 2008 (a "Redemption Date"), at the Redemption Price.
Any redemption pursuant to the preceding paragraph will be made, subject to the receipt by the Company of prior approval from the Office of Thrift Supervision (the "OTS") if then required under applicable capital guidelines or policies of the OTS, upon not less than 30 days' nor more than 60 days' notice. If the Debt Securities are only partially redeemed by the Company, the Debt Securities will be redeemed pro rata or by lot or by any other method utilized by the Trustee.
"Redemption Price" means 100% of the principal amount of the Debt Securities being redeemed plus accrued and unpaid interest on such Debt Securities to the Redemption Date or, in the case of a redemption due to the occurrence of a Special Event, to the Special Redemption Date if such Special Redemption Date is on or after April 7, 2008.
"Special Redemption Price" means (1) if the Special Redemption Date is before April 7, 2008, One Hundred Seven and One Half Percent (107.5%) of the principal amount to be redeemed plus any accrued and unpaid interest thereon to the date of such redemption and (2) if the Special Redemption Date is on or after April 7, 2008, the Redemption Price for such Special Redemption Date.
In the event of redemption of this Debt Security in part only, a new Debt Security or Debt Securities for the unredeemed portion hereof will be issued in the name of the holder hereof upon the cancellation hereof.
In case an Event of Default, as defined in the Indenture, shall have occurred and be continuing, the principal of all of the Debt Securities may be declared due and payable, and
A-7

upon such declaration of acceleration shall become due and payable, in the manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than a majority in aggregate principal amount of the Debt Securities at the time outstanding affected thereby, as specified in the Indenture, to execute supplemental indentures for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any supplemental indenture or of modifying in any manner the rights of the holders of the Debt Securities; provided, however, that no such supplemental indenture shall, among other things, without the consent of the holders of each Debt Security then outstanding and affected thereby (i) extend the fixed maturity of the Debt Securities, or reduce the principal amount thereof or any redemption premium thereon, or reduce the rate or extend the time of payment of interest thereon, or make payments due on the Debt Securities payable in any coin or currency other than that provided in the Debt Securities, or impair or affect the right of any holder of Debt Securities to institute suit for the payment thereof, or (ii) reduce the aforesaid percentage of Debt Securities, the holders of which are required to consent to any such supplemental indenture. The Indenture also contains provisions permitting the holders of a majority in aggregate principal amount of the Debt Securities at the time outstanding, on behalf of all of the holders of the Debt Securities, to waive any past default in the performance of any of the covenants contained in the Indenture, or established pursuant to the Indenture, and its consequences, except a default in payments due on any of the Debt Securities. Any such consent or waiver by the registered holder of this Debt Security (unless revoked as provided in the Indenture) shall be conclusive and binding upon such holder and upon all future holders and owners of this Debt Security and of any Debt Security issued in exchange herefor or in place hereof (whether by registration of transfer or otherwise), irrespective of whether or not any notation of such consent or waiver is made upon this Debt Security.
No reference herein to the Indenture and no provision of this Debt Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay all payments due on this Debt Security at the time and place and at the rate and in the money herein prescribed.
As provided in the Indenture and subject to certain limitations herein and therein set forth, this Debt Security is transferable by the registered holder hereof on the Debt Security Register of the Company, upon surrender of this Debt Security for registration of transfer at the office or agency of the Trustee in Wilmington, Delaware accompanied by a written instrument or instruments of transfer in form satisfactory to the Company or the Trustee duly executed by the registered holder hereof or such holder's attorney duly authorized in writing, and thereupon one or more new Debt Securities of authorized denominations and for the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be made for any such registration of transfer, but the Company may require payment of a sum sufficient to cover any tax or other governmental charge payable in relation thereto.
Prior to due presentment for registration of transfer of this Debt Security, the Company, the Trustee, any Authenticating Agent, any Paying Agent, any transfer agent and the
A-8

Debt Security registrar may deem and treat the registered holder hereof as the absolute owner hereof (whether or not this Debt Security shall be overdue and notwithstanding any notice of ownership or writing hereon) for the purpose of receiving payment of or on account of the principal hereof and interest due hereon and for all other purposes, and neither the Company nor the Trustee nor any Authenticating Agent nor any Paying Agent nor any transfer agent nor any Debt Security registrar shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the interest on this Debt Security, or for any claim based hereon, or otherwise in respect hereof, or based on or in respect of the Indenture, against any incorporator, stockholder, officer or director, past, present or future, as such, of the Company or of any predecessor or successor corporation, whether by virtue of any constitution, statute or rule of law, or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issuance hereof, expressly waived and released.
The Debt Securities are issuable only in registered certificated form without coupons. As provided in the Indenture and subject to certain limitations herein and therein set forth, Debt Securities are exchangeable for a like aggregate principal amount of Debt Securities of a different authorized denomination, as requested by the holder surrendering the same.
All terms used in this Debt Security that are defined in the Indenture shall have the meanings assigned to them in the Indenture.
THE LAW OF THE STATE OF NEW YORK SHALL GOVERN THE INDENTURE AND THE DEBT SECURITIES, WITHOUT REGARD TO CONFLICT OF LAWS PRINCIPLES THEREOF.
A-9
Exhibit 10.4
AMENDED AND RESTATED
FORBRIGHT, INC.
2014 STOCK INCENTIVE PLAN
1.    PURPOSE
The Amended and Restated Forbright, Inc. 2014 Stock Incentive Plan (f/k/a the Congressional Bancshares, Inc. 2014 Stock Incentive Plan) is intended to promote the best interests of Forbright, Inc. and its stockholders by (i) assisting the Corporation and its Affiliates in the recruitment and retention of persons with ability and initiative, (ii) providing an incentive to such persons to contribute to the growth and success of the Corporation’s businesses by affording such persons equity participation in the Corporation and (iii) associating the interests of such persons with those of the Corporation and its affiliates and stockholders.
2.    DEFINITIONS
As used in this Plan the following definitions shall apply:
A.    “Administrator” means the Board or any party to which the Board has delegated any responsibility for the administration of the Plan pursuant to Section 3.A hereof.
B.    “Affiliate” means (i) any Subsidiary, (ii) any Parent, (iii) any entity (including, without limitation, a partnership or limited liability company) which is directly or indirectly controlled fifty percent (50%) or more (whether by ownership of stock, assets or an equivalent ownership interest or voting interest) by the Corporation or one of its Affiliates, (iv) any other entity in which the Corporation or any of its Affiliates has a material equity interest and which is designated as an “Affiliate” by resolution of the Administrator, and (v) any entity (including, without limitation, a partnership or limited liability company) which directly or indirectly controls fifty percent (50%) or more (whether by ownership of stock, assets or an equivalent ownership interest or voting interest) of the Corporation or one of its Affiliates.
C.    “Board” means the Board of Directors of the Corporation.
D.    “Cause” means (i) in the case where the Participant does not have an employment, consulting or similar agreement in effect with the Corporation or its Affiliate at the time of grant of the Option or Stock Award or where there is such an agreement but it does not define “cause” (or words of like import), conduct related to the Participant’s service to the Corporation or an Affiliate for which either criminal or civil penalties against the Participant may be sought, misconduct, insubordination, violation of Corporation or its Affiliate’s policies, disclosing or misusing any confidential information or material concerning the Corporation or any Affiliate or material breach of any employment, consulting agreement or similar agreement, or (ii) in the case where the Participant has an employment agreement, consulting agreement or similar agreement in effect with the Corporation or its Affiliate at the time of grant of the Option or Stock Award that defines a termination for “cause” (or words of like import), “cause” as defined


in such agreement; provided, however, that with regard to any agreement that defines “cause” on occurrence of or in connection with change of control, such definition of “cause” shall not apply until a change of control actually occurs and then only with regard to a termination thereafter.
E.    “Code” means the Internal Revenue Code of 1986, and any amendments thereto.
F.    “Common Stock” means the voting common stock, $0.001, of the Corporation.
G.    “Consultant” means (i) any person performing consulting or advisory services for the Corporation or any Affiliate, or (ii) a director of an Affiliate.
H.    “Continuous Service” means that the Participant’s service with the Corporation or an Affiliate, whether as an employee, Director or Consultant, is not interrupted or terminated. A Participant’s Continuous Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders service to the Corporation or an Affiliate as an employee, Consultant or Director or a change in the entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s Continuous Service. The Participant’s Continuous Service shall be deemed to have terminated either upon an actual termination or upon the entity for which the Participant is performing services ceasing to be an Affiliate of the Corporation. The Administrator shall determine whether Continuous Service shall be considered interrupted in the case of any leave of absence approved by the Corporation, including sick leave, military leave or any other personal leave.
I.    “Corporation” means Forbright, Inc., a Delaware corporation.
J.    “Corporation Law” means the Delaware General Corporation Law, as amended or supplemented from time to time.
K.    “Director” means a member of the Board.
L.    “Disability” shall have the meaning provided for in Section 22(e)(3) of the Code or any successor statute thereto.
M.    “Eligible Person” means an employee of the Corporation or an Affiliate (including an entity that becomes an Affiliate after the adoption of this Plan), a Director or a Consultant to the Corporation or an Affiliate (including an entity that becomes an Affiliate after the adoption of this Plan).
N.    “Exchange Act” means the Securities Exchange Act of 1934, as amended.
O.    “Fair Market Value” means, on any given date, the current fair market value of the shares of Common Stock as determined as follows:
(i)    If the Common Stock is traded on The Nasdaq National Market or The Nasdaq SmallCap Market or is listed on a national securities exchange, the closing price for the day of determination as quoted on such market or exchange which is the primary market or exchange for trading of the Common Stock or if no trading occurs on such


date, the last day on which trading occurred, or such other appropriate date as determined by the Administrator in its discretion, as reported in The Wall Street Journal or such other source as the Administrator deems reliable;
(ii)    If the Common Stock is regularly quoted by a recognized securities dealer but selling prices are not reported, its Fair Market Value shall be the mean between the high and the low asked prices for the Common Stock for the day of determination; or
(iii)    In the absence of an established market for the Common Stock, Fair Market Value shall be determined by the Administrator in good faith. For the avoidance of doubt, Fair Market Value may be established as a multiple (which may be equal to, greater than, or less than 1) of the book value of the Corporation if such a valuation is determined by the Administrator to be generally reflective of the fair market value of the common stock of entities comparable to the Corporation.
P.    “Non-exempt Employee” means an employee of the Corporation or an Affiliate who is a “non-exempt” employee under the Fair Labor Standards Act of 1938.
Q.    “Option” means any option to purchase shares of Common Stock granted under this Plan.
R.    “Parent” means any corporation (other than the Corporation) in an unbroken chain of corporations ending with the Corporation if each of the corporations (other than the Corporation) owns stock possessing at least fifty percent (50%) of the total combined voting power of all classes of stock in one of the other corporations in such chain.
S.    “Participant” means an Eligible Person who is selected by the Administrator to receive an Option or Stock Award and is party to any Stock Option Agreement or Stock Award Agreement required by the terms of such Option or Stock Award.
T.    “Plan” means this Amended and Restated Forbright, Inc. 2014 Stock Incentive Plan.
U.    “Restricted Stock Award” means an award of Common Stock under Section 7.A.
V.    “Securities Act” means the Securities Act of 1933 as amended.
W.    “Stock Award” means a Restricted Stock Award or Stock Appreciation Right.
X.    “Stock Appreciation Right” means an award of a right of the Participant to receive a payment in accordance with the provisions of Section 7.B.
Y.    “Stock Award Agreement” means an agreement (written or electronic) between the Corporation and a Participant setting forth the specific terms and conditions of a Stock Award granted to the Participant under Section 7. Each Stock Award Agreement shall be subject to the terms and conditions of the Plan and shall include such terms and conditions as the Administrator shall authorize.


Z.    “Stock Option Agreement” means an agreement (written or electronic) between the Corporation and a Participant setting forth the specific terms and conditions of an Option granted to the Participant. Each Stock Option Agreement shall be subject to the terms and conditions of the Plan and shall include such terms and conditions as the Administrator shall authorize.
AA.    “Subsidiary” means any corporation (other than the Corporation) in an unbroken chain of corporations beginning with the Corporation if each of the corporations (other than the last corporation in the unbroken chain) owns stock possessing at least fifty percent (50%) of the total combined voting power of all classes of stock in one of the other corporations in such chain.
3.    ADMINISTRATION
A.    Delegation of Administration. The Board shall be the sole Administrator of the Plan unless the Board delegates all or any portion of its authority to administer the Plan to another Administrator. To the extent not prohibited by the charter or bylaws of the Corporation, the Board may delegate all or a portion of its authority to administer the Plan to a committee of the Board appointed by the Board and constituted in compliance with the Corporation Law.    If permitted by the Corporation Law, and not prohibited by the charter or bylaws of the Corporation, the Board may also delegate all or a portion of its authority to administer the Plan to an officer or officers of the Corporation designated by the Board. The Plan shall be administered and interpreted in a manner consistent with the requirements of Section 409A of the Code.
B.    Powers of the Administrator. Subject to the provisions of the Plan, and, in the case of an Administrator other than the Board, subject at all times to the terms and conditions of the delegation of authority from the Board, the Administrator shall have the authority to implement, interpret and administer the Plan. Such authority shall include, without limitation, the authority:
(i)    To construe and interpret all provisions of this Plan and all Stock Option Agreements and Stock Award Agreements under this Plan.
(ii)    To determine the Fair Market Value of Common Stock.
(iii)    To select the Eligible Persons to whom Options or Stock Awards, are granted from time to time hereunder.
(iv)    To determine the number of shares of Common Stock covered by an Option or Stock Award such other terms and conditions, not inconsistent with the terms of the Plan, of each such Option or Stock Award. Such terms and conditions include, but are not limited to, the exercise price of an Option, purchase price of Common Stock subject to a Stock Award, the time or times when Options or Stock Awards may be exercised or Common Stock issued thereunder, the right of the Corporation to repurchase Common Stock issued pursuant to the exercise of an Option or a Stock Award and other restrictions or limitations (in addition to those contained in the Plan) on the forfeitability or transferability of Options, Stock Awards or Common Stock issued upon exercise of an


Option or pursuant to a Stock Award. Such terms may include conditions shall be as determined by the Administrator and need not be uniform with respect to Participants.
(v)    To determine whether and under what circumstances an Option may be settled in cash, shares of Common Stock or other property under Section 6.G instead of Common Stock.
(vi)    To amend, cancel, extend, renew, accept the surrender of, modify or accelerate the vesting of or lapse of restrictions on all or any portion of an outstanding Option or Stock Award; to determine the time at which a Stock Award or Common Stock issued under the Plan may become transferable or nonforfeitable; and to reduce the exercise price of any Option.
(vii)    To prescribe the form of Stock Option Agreements and Stock Award Agreements; to adopt policies and procedures for the exercise of Options or Stock Awards, including the satisfaction of withholding obligations; to adopt, amend, and rescind policies and procedures pertaining to the administration of the Plan; and to make all other determinations necessary or advisable for the administration of this Plan.
Any decision made, or action taken, by the Administrator or in connection with the administration of this Plan shall be final, conclusive and binding on all persons having an interest in the Plan.
4.    ELIGIBILITY
A.    Eligibility for Awards. Options and Stock Awards may be granted to any Eligible Person selected by the Administrator.
B.    Substitution Awards. The Administrator may make Stock Awards and may grant Options under the Plan by assumption, substitution or replacement of performance shares, phantom shares, stock awards, stock options, stock appreciation rights or similar awards granted by another entity (including an Affiliate), if such assumption, substitution or replacement is connection with an asset acquisition, stock acquisition, merger, consolidation or similar transaction involving the Corporation (and/or its Affiliate) and such other entity (and/or its affiliate). Notwithstanding any provision of the Plan (other than the maximum number of shares of Common Stock that may be issued under the Plan), the terms of such assumed, substituted or replaced Stock Awards or Options shall be as the Administrator, in its discretion, determines is appropriate.
5.    COMMON STOCK SUBJECT TO PLAN
A.    Share Reserve. Subject to adjustment as provided in Section 8, the maximum aggregate number of shares of Common Stock that may be (i) issued under this Plan pursuant to the exercise of Options, (ii) issued pursuant to Restricted Stock Awards, and (iii) covered by Stock Appreciation Rights is Twelve Million Five Hundred Thousand (12,500,000) shares, of which (i) 3,006,000 shall be designated as “A” Options having the terms set forth in the form of


Award Agreement attached as Exhibit A (the “Award Form”), (ii) 4,810,000 shall be designated as “B” Options having the terms set forth in the Award Form, (iii) 1,202,000 shall be designated as “C” Options having the terms set forth in the Award Form, and (iv) 1,202,000 shall be designated as “D” Options having the terms set forth in the Award Form.
B.    Reversion of Shares. If an Option is exercised, in whole or in part, by tender of shares of Common Stock or if the Corporation’s tax withholding obligation is satisfied by withholding shares of Common Stock, the number of shares of Common Stock deemed to have been issued under the Plan for purposes of the limitation set forth in this paragraph shall be the number of shares of Common Stock that were subject to the Option or portion thereof, and not the net number of shares of Common Stock actually issued.
C.    Source of Shares. Common Stock issued under the Plan may be shares of authorized and unissued Common Stock or shares of previously issued Common Stock that have been reacquired by the Corporation.
6.    Options
A.    Award. In accordance with the provisions of Section 4, the Administrator will designate each Eligible Person to whom an Option is to be granted and will specify the number of shares of Common Stock covered by such Option. The Stock Option Agreement shall specify the vesting schedule applicable to such Option and any other terms of such Option. Options under the Plan are intended to be nonqualified stock options (i.e., options that do not qualify as incentive stock options under Section 422 of the Code). All Option grants shall comply with Section 409A of the Code.
B.    Exercise Price. The exercise price per share for Common Stock subject to an Option shall be determined by the Administrator, provided that the exercise price per share for Common Stock subject to an Option shall be not less than the Fair Market Value per share on the date of grant.
C.    Maximum Option Period. No Option may be exercised after the expiration of ten years from the date the Option was granted.
D.    Nontransferability. If the Stock Option Agreement so provides or the Administrator so approves, an Option may be transferred by a Participant to the Participant’s children, stepchildren, grandchildren, spouse, one or more trusts for the benefit of such family members or a partnership in which such family members are the only partners; provided, however, that Participant may not receive any consideration for the transfer. The holder of an Option transferred pursuant to this Section 6.D shall be bound by the same terms and conditions that governed the Option during the period that it was held by the Participant. Except to the extent transferability of an Option is provided for in the Stock Option Agreement or is approved by the Administrator, Options shall be nontransferable except by will or by the laws of descent and distribution and during the lifetime of the Participant shall be exercisable by only the Participant to whom the Option is granted. No right or interest of a Participant in any Option shall be liable for, or subject to, any lien, obligation, or liability of such Participant.


E.    Vesting and Termination of Continuous Service. Except as provided in a Stock Option Agreement, the following rules shall apply:
(i)    Options will vest as provided in the Stock Option Agreement. An Option will be exercisable only to the extent that it is vested on the date of exercise. Vesting of an Option will cease on the date of the Participant’s termination of Continuous Service and the Option will be exercisable only to the extent the Option is vested on the date of termination of Continuous Service.
(ii)    If the Participant’s termination of Continuous Service is for reason of death or Disability, the right to exercise the Option (to the extent vested) will expire on the earlier of (i) one (1) year after the date of the Participant’s termination of Continuous Service, or (ii) the expiration date under the terms of the Stock Option Agreement. Until the expiration date, the Participant’s heirs, legatees or legal representative may exercise the Option, except to the extent the Option was previously transferred pursuant to Section 6.D.
(iii)    If the Participant’s termination of Continuous Service is an involuntary termination without Cause or a voluntary termination (other than a voluntary termination described in Section 6.E(iv)), the right to exercise the Option (to the extent that it is vested) will expire on the earlier of (i) thirty days (30) after the date of the Participant’s termination of Continuous Service, or (ii) the expiration date under the terms of the Stock Option Agreement. If the Participant’s termination of Continuous Service is an involuntary termination without Cause or a voluntary termination (other than a voluntary termination described in Section 6.E(iv)) and the Participant dies after his or her termination of Continuous Service but before the right to exercise the Option has expired, the right to exercise the Option (to the extent vested) shall expire on the earlier of (i) one (1) year after the date of the Participant’s termination of Continuous Service or (ii) the date the Option expires under the terms of the Stock Option Agreement, and, until expiration, the Participant’s heirs, legatees or legal representative may exercise the Option, except to the extent the Option was previously transferred pursuant to Section 6.D.
(iv)    If the Participant’s termination of Continuous Service is for Cause or is a voluntary termination at any time after an event which would be grounds for termination of the Participant’s Continuous Service for Cause, the right to exercise the Option shall expire as of the date of the Participant’s termination of Continuous Service.
F.    Exercise. An Option shall be exercised by completion, execution and delivery of notice (written or electronic) to Corporation of the Option which states (i) the Option holder’s intent to exercise the Option, (ii) the number of shares of Common Stock with respect to which the Option is being exercised, (iii) such other representations and agreements as may be required by the Corporation and (iv) the method for satisfying any applicable tax withholding as provided in Section 9. Such notice of exercise shall be provided on such form or by such method as the Administrator may designate, and payment of the exercise price shall be made in accordance with Section 6.G. Subject to the provisions of this Plan and the applicable Stock Option


Agreement, an Option may be exercised to the extent vested in whole at any time or in part from time to time at such times and in compliance with such requirements as the Administrator shall determine. A partial exercise of an Option shall not affect the right to exercise the Option from time to time in accordance with this Plan and the applicable Stock Option Agreement with respect to the remaining shares subject to the Option. An Option may not be exercised with respect to fractional shares of Common Stock.
G.    Payment. Unless otherwise provided by the Stock Option Agreement, payment of the exercise price for an Option or Options shall be made (1) in cash or a cash equivalent acceptable to the Administrator, or (2) by surrendering of Options having a Value (defined below) equal to the exercise price of the Options being exercised. With the consent of the Administrator, payment of all or a part of the exercise price of an Option may also be made (i) by surrendering shares of Common Stock to the Corporation that have been held for at least six (6) months prior to the date of exercise, (ii) with a full-recourse promissory note, or (iii) if the Common Stock is traded on an established securities market, the Administrator may approve payment of the exercise price by a broker-dealer or by the Option holder with cash advanced by the broker-dealer if the exercise notice is accompanied by the Option holder’s written irrevocable instructions to deliver the Common Stock acquired upon exercise of the Option to the broker-dealer. If Common Stock is used to pay all or part of the exercise price, the sum of the cash or cash equivalent and the Fair Market Value (determined as of the date of exercise) of the shares surrendered must not be less than the exercise price of the shares for which the Option is being exercised. If all or part of the exercise price is to be paid with a promissory note, the par value of the Common Stock, if newly issued, shall be paid in cash or cash equivalents. The shares received upon exercise of the Option shall be pledged as security for payment of the principal amount of the promissory note and interest thereon and the interest rate payable under the terms of the promissory note shall not be less than the minimum rate (if any) required to avoid the imputation of additional interest under the Code. Subject to the foregoing, the Administrator (at its sole discretion) shall specify the term, interest rate, amortization requirements (if any) and other provisions of such note. For the purposes of this Section 6.G the term “Value” as applied to any Option being surrendered shall mean the difference between the Fair Market Value (determined as of the date of exercise) of the Common Stock subject to such Option and the exercise price of the Common Stock subject to such Option.
H.    Stockholder Rights. No Participant shall have any rights as a stockholder with respect to shares subject to an Option until the date of exercise of such Option and the certificate for shares of Common Stock to be received on exercise of such Option has been issued by the Corporation.
7.    STOCK AWARDS
A.    Restricted Stock Awards. Each Stock Award Agreement for a Restricted Stock Award shall be in such form and shall contain such terms and conditions as the Administrator shall deem appropriate. The terms and conditions of the Stock Award Agreements for Restricted Stock Awards may change from time to time, and the terms and conditions of separate Restricted Stock Awards need not be identical, but each Restricted Stock Award shall include (through


incorporation of the provisions hereof by references in the agreement or otherwise) the substance of each of the following provisions.
(i)    Purchase Price. The purchase price, if any, of Common Stock acquired under a Restricted Stock Award shall be determined by the Administrator.
(ii)    Consideration. The purchase price, if any, of Common Stock acquired pursuant to the Restricted Stock Award shall be paid either: (i) in cash at the time of purchase; (ii) at the discretion of the Administrator, according to a deferred payment or other similar arrangement with the Participant; or (iii) in any other form of legal consideration that may be acceptable to the Administrator in its discretion; provided, however, that payment of the Common Stock’s “par value” shall not be made by deferred payment.
(iii)    Vesting. Shares of Common Stock acquired under a Restricted Stock Award may, but need not, be subject to a restrictions and conditions (including forfeiture or share repurchase option in favor of the Corporation) in accordance with a vesting schedule to be determined by the Administrator.
(iv)    Participant’s Termination of Service. In the event of a Participant’s termination of Continuous Service, the Participant shall forfeit shares of Common Stock which have not vested or the Corporation, if so provided in the Stock Award Agreement, may repurchase or otherwise reacquire any or all of the shares of Common Stock held by the Participant which have not vested as of the date of termination under the terms of the Stock Award Agreement for such Restricted Stock Award.
(v)    Transferability. Rights to acquire shares of Common Stock under a Restricted Stock Award shall be transferable by the Participant only upon such terms and conditions as are set forth in the Stock Award Agreement for such Restricted Stock Award, as the Administrator shall determine in its discretion, so long as Common Stock granted under the Restricted Stock Award remains subject to the terms of the Stock Award Agreement.
B.    Stock Appreciation Rights. Each Stock Award Agreement for Stock Appreciation Rights shall be in such form and shall contain such terms and conditions as the Administrator shall deem appropriate. The terms and conditions of Stock Appreciation Rights may change from time to time, and the terms and conditions of separate Stock Appreciation Rights need not be identical, but each Stock Appreciation Right shall include (through incorporation of the provisions hereof by reference in the Stock Award Agreement or otherwise) the substance of each of the following provisions:
(i)    Benefit Provided. Each Stock Appreciation Right shall provide the Participant with the right to receive payment in cash or shares of Common Stock having a Fair Market Value, as designated in the Stock Award Agreement for such Stock Appreciation Rights, of an amount equal to the difference between the base amount provided for each share of Common Stock as described in the Stock Award Agreement


(which base amount shall be not less than the Fair Market Value per share on the date of grant) and the Fair Market Value of the Common Stock on the date of exercise of such Stock Appreciation Right.
(ii)    Tandem Awards. Stock Appreciation Rights may be granted either alone or in tandem with other awards, including Options, under the Plan; provided, however, if that Stock Appreciation Rights are granted in tandem with an Option, the base amount provided for each share of Common Stock in the applicable Stock Award Agreement shall be equal to the exercise price per share provided for in such Option and the term of the Stock Appreciation Right shall not exceed the term of such Option.
(iii)    Vesting. The Stock Award Agreement for a Stock Appreciation Right shall provide the vesting schedule applicable to such award and may, but need not, provide that shares of Common Stock acquired upon exercising a Stock Appreciation Right are subject to a repurchase option in favor of the Corporation.
(iv)    Participant’s Termination of Service. In the event of a Participant’s termination of Continuous Service, the Corporation may repurchase or otherwise reacquire any or all of the shares of Common Stock held by the Participant which have not vested as of the date of termination under the terms of the Stock Appreciation Right.
(v)    Transferability. Rights to acquire cash or shares of Common Stock under a Stock Appreciation Rights shall be nontransferable except by will or by the laws of descent and distribution and during the lifetime of the Participant shall be exercisable by only the Participant to whom the Stock Appreciation Rights are granted.
8.    CHANGES IN CAPITAL STRUCTURE
A.    No Limitations of Rights. The existence of outstanding Options or Stock Awards shall not affect in any way the right or power of the Corporation or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Corporation’s capital structure or its business, or any merger or consolidation of the Corporation, or any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Corporation, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.
B.    Changes in Capitalization. If the Corporation shall effect a subdivision or consolidation of shares or other capital readjustment, the payment of a stock dividend or cash dividend, or other increase or reduction of the number of shares of the Common Stock outstanding, without receiving consideration therefore in money, services or property, then (i) the number, class, and per share price of shares of Common Stock subject to outstanding Options and Stock Awards hereunder and (ii) the number and class of shares then reserved for issuance under the Plan shall be appropriately and proportionately adjusted. The conversion of convertible securities of the Corporation shall not be treated as effected “without receiving


consideration.” The Administrator shall make such adjustments, and its determinations shall be final, binding and conclusive.
C.    Merger, Consolidation or Asset Sale. If the Corporation is merged or consolidated with another entity or sells or otherwise disposes of substantially all of its assets to another entity while Options or Stock Awards remain outstanding under the Plan, unless provisions are made in connection with such transaction for the continuance of the Plan and/or the assumption or substitution of such Options or Stock Awards with new options or stock awards covering the stock of the successor entity, or parent or subsidiary thereof, with appropriate adjustments as to the number and kind of shares and prices, then all outstanding Options and Stock Awards which have not been continued, assumed or for which a substituted award has not been granted shall, be vested and exercisable immediately prior to such merger, consolidation or sale.
D.    Limitation on Adjustment. Except as previously expressly provided, neither the issuance by the Corporation of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property, or for labor or services either upon direct sale or upon the exercise of rights or warrants to subscribe therefor, or upon conversion of shares or obligations of the Corporation convertible into such shares or other securities, nor the increase or decrease of the number of authorized shares of stock, nor the addition or deletion of classes of stock, shall affect, and no adjustment by reason thereof shall be made with respect to, the number, class or price of shares of Common Stock then subject to outstanding Options or Stock Awards.
9.    WITHHOLDING OF TAXES
The Corporation or an Affiliate shall have the right, before any certificate for any Common Stock is delivered, to deduct or withhold from any payment owed to a Participant any amount that is necessary in order to satisfy any withholding requirement that the Corporation or Affiliate in good faith believes is imposed upon it in connection with Federal, state, or local taxes, including transfer taxes, as a result of the issuance of, or lapse of restrictions on, such Common Stock, or otherwise require such Participant to make provision for payment of any such withholding amount. Subject to such conditions as may be established by the Administrator, the Administrator may permit a Participant to (i) have Common Stock otherwise issuable under an Option or Stock Award withheld to the extent necessary to comply with minimum statutory withholding rate requirements for supplemental income, (ii) tender back to the Corporation shares of Common Stock received pursuant to an Option or Stock Award to the extent necessary to comply with minimum statutory withholding rate requirements for supplemental income, (iii) deliver to the Corporation previously acquired Common Stock, (iv) have funds withheld from payments of wages, salary or other cash compensation due the Participant, or (v) pay the Corporation or its Affiliate in cash, in order to satisfy part or all of the obligations for any taxes required to be withheld or otherwise deducted and paid by the Corporation or its Affiliate with respect to the Option or Stock Award.


10.    COMPLIANCE WITH LAW AND APPROVAL OF REGULATORY BODIES
A.    General Requirements. No Option or Stock Award shall be exercisable, no Common Stock shall be issued, no certificates for shares of Common Stock shall be delivered, and no payment shall be made under this Plan except in compliance with all applicable federal and state laws and regulations (including, without limitation, withholding tax requirements), any listing agreement to which the Corporation is a party, and the rules of all domestic stock exchanges or quotation systems on which the Corporation’s shares may be listed. The Corporation shall have the right to rely on an opinion of its counsel as to such compliance. Any share certificate issued to evidence Common Stock when a Stock Award is granted or for which an Option or Stock Award is exercised may bear such legends and statements as the Administrator may deem advisable to assure compliance with federal and state laws and regulations. No Option or Stock Award shall be exercisable, no Stock Award shall be granted, no Common Stock shall be issued, no certificate for shares shall be delivered, and no payment shall be made under this Plan until the Corporation has obtained such consent or approval as the Administrator may deem advisable from regulatory bodies having jurisdiction over such matters.
B.    Participant Representations. The Administrator may require that a Participant, as a condition to receipt or exercise of a particular award, execute and deliver to the Corporation a written statement, in form satisfactory to the Administrator, in which the Participant represents and warrants that the shares are being acquired for such person’s own account, for investment only and not with a view to the resale or distribution thereof. The Participant shall, at the request of the Administrator, be required to represent and warrant in writing that any subsequent resale or distribution of shares of Common Stock by the Participant shall be made only pursuant to either (i) a registration statement on an appropriate form under the Securities Act, which registration statement has become effective and is current with regard to the shares being sold, or (ii) a specific exemption from the registration requirements of the Securities Act, but in claiming such exemption the Participant shall, prior to any offer of sale or sale of such shares, obtain a prior favorable written opinion of counsel, in form and substance satisfactory to counsel for the Corporation, as to the application of such exemption thereto.
11.    GENERAL PROVISIONS
A.    Effect on Employment and Service. Neither the adoption of this Plan, its operation, nor any documents describing or referring to this Plan (or any part thereof) shall (i) confer upon any individual any right to continue in the employ or service of the Corporation or an Affiliate, (ii) in any way affect any right and power of the Corporation or an Affiliate to change an individual’s duties or terminate the employment or service of any individual at any time with or without assigning a reason therefor or (iii) except to the extent the Administrator grants an Option or Stock Award to such individual, confer on any individual the right to participate in the benefits of the Plan.
B.    Use of Proceeds. The proceeds received by the Corporation from the sale of Common Stock pursuant to this Plan shall be used for general corporate purposes.


C.    Unfunded Plan. The Plan, insofar as it provides for grants, shall be unfunded, and the Corporation shall not be required to segregate any assets that may at any time be represented by grants under this Plan. Any liability of the Corporation to any person with respect to any grant under this Plan shall be based solely upon any contractual obligations that may be created pursuant to this Plan. No such obligation of the Corporation shall be deemed to be secured by any pledge of, or other encumbrance on, any property of the Corporation.
D.    Rules of Construction. Headings are given to the Sections of this Plan solely as a convenience to facilitate reference, and shall not be used in interpreting, construing or enforcing any provision hereof. The reference to any statute, regulation, or other provision of law shall be construed to refer to any amendment to or successor of such provision of law.
E.    Choice of Law. The Plan and all Stock Option Agreements and Stock Award Agreements entered into under the Plan (except to the extent that any such Stock Option Agreement or Stock Award Agreement otherwise provides) shall be governed by and interpreted under the laws of the jurisdiction of incorporation of the Corporation excluding (to the greatest extent permissible by law) any rule of law that would cause the application of the laws of any jurisdiction other than the laws of the jurisdiction of incorporation of the Corporation.
12.    AMENDMENT AND TERMINATION
The Board may amend or terminate this Plan from time to time; provided, however, that the Administrator may amend this Plan to clarify ambiguities or make modifications required by changes in the law. Except as specifically permitted by the Plan, Stock Option Agreement or Stock Award Agreement, or as required to comply with applicable law, regulation or rule, no amendment shall, without a Participant’s consent, adversely affect any rights of such Participant under any Option or Stock Award outstanding that the time such amendment is made.
13.    EFFECTIVE DATE AND DURATION OF PLAN
A.    The Plan became effective on June 25, 2014 (the “Effective Date”), which is the date that the Board adopted the Plan, and was amended and restated on March 27, 2026 (the “Restatement Date”).
B.    Unless earlier terminated, the Plan will terminate ten (10) years after the Restatement Date, except that Options and Stock Awards that are granted under the Plan prior to its termination will continue to be administered under the terms of the Plan until the Options and Stock Awards terminate or are exercised.

Exhibit 10.5
THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
FORBRIGHT, INC.
OPTION AWARD AGREEMENT
THIS AWARD AGREEMENT (this “Agreement”) is made and entered into this [__] day of [MONTH], [YEAR] (the “Award Date”) by and between (i) Forbright, Inc. (the “Company”), and (ii) [individual], an employee of Forbright Bank, the wholly owned subsidiary of the Company (the “Participant”).
RECITALS
A.    The Company has adopted the Congressional Bancshares, Inc. 2014 Stock Incentive Plan, as amended (the “Plan”) authorizing the Company to make awards to persons associated with the Company and to persons associated with the Company’s wholly owned subsidiary, Forbright Bank (the “Bank”).
B.    The Company, through its Board or the Nominating, Compensation and Governance Committee of its Board, has determined that, under and pursuant to the terms and conditions of the Plan, the Participant is eligible to receive awards under the Plan.
C.    The Company desires to make an award to the Participant, and the Participant, in connection therewith, is desirous of participating in the Plan and receiving an award under the Plan.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Participant hereby agree as follows:
1.    Grant of Award. The Company hereby grants to the Participant, as a separate inducement in connection with his or her employment with the Bank, and not in lieu of any salary or other compensation for his or her services, an award of the number options to purchase shares of the Company’s Common Stock (“Common Stock”) at an exercise price per share (the “Units”) set forth in Appendix A to this Agreement, pursuant to the Plan and this Agreement (the “Award”). The Participant hereby acknowledges receipt of a copy of the Plan and this Agreement. Participant has read and understands the terms and provisions thereof, and accepts the Award subject to all the terms and conditions of the Plan and this Agreement.
2.    Vesting of Award. The Units shall vest in accordance with the vesting schedule and other terms set forth in Appendix A to this Agreement (“Appendix A”).
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3.    Forfeiture of Award. Except as set forth in Appendix A, the Award shall be forfeited as provided in the Plan.
4.    Exercise, Term. Except as set forth in Appendix A, upon vesting, the Award may be exercised in accordance with the terms of the Plan. If not otherwise vested and exercised or terminated, the Award will expire 10 years from the Award Date.
5.    Voting Rights; Dividends. The Participant shall not have, with respect to any Units, any of the rights of a holder of shares, including without limitation (a) the right to vote, (b) the right to receive dividends, if any, as may be declared from time to time, and (c) the rights available to holders of shares upon any merger, consolidation, reorganization, liquidation or dissolution, stock split-up, stock dividend or recapitalization undertaken by the Company.
6.    Amendment of Award. Without the consent of the Participant, no modification or amendment of the Award shall reduce or limit, in any respect, any of the Participant’s rights under the Award.
7.    Employment/Service. The Award does not impose any independent obligation upon the Company or the Bank to retain the Participant in its employ or service for any period.
8.    Representations. The Award has been issued by the Company in reliance upon the following representations of the Participant:
(a)    The Units and the underlying shares are being acquired for investment and not with a view to the sale or distribution of any part thereof, and the Participant has no present intention of selling or engaging in any public distribution of the same except pursuant to a registration or exemption pursuant to the Securities Act.
(b)    The Participant understands (i) that neither the Units nor the underlying shares are registered under the Securities Act or qualified under applicable state securities laws on the ground that the issuance will be exempt from the registration and qualifications requirements thereof pursuant to Section 4(a)(2) of the Securities Act and/or any applicable rule under the Securities Act and any applicable state securities laws, and (ii) that the Company’s reliance on such exemption is predicated on the Participant’s representations set forth in this Section 8.
(c)    The Participant has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment and has the ability to bear the economic risks of his or her investment.
(d)    The Participant understands that the Company has no obligation to register with the Securities and Exchange Commission pursuant to Section 15(d) of the Securities Act, to file reports pursuant to Section 12 of the Exchange Act or to file a registration statement covering the Units or the underlying shares under the Securities Act. The Participant further understands that if the Company does not register pursuant to Section 15(d) of the Securities Act, file reports pursuant to Section 12 of the Exchange Act, or have a registration statement covering the Units or the underlying shares under the Securities Act in effect when the Participant desires to sell the shares, the Participant may
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be required to hold such securities for an indefinite period. The Participant also understands that any sale of the underlying shares that might be made in reliance upon Rule 144 under the Securities Act may be made only in accordance with the terms and conditions of that Rule and that the Company has no obligation to seek to make such Rule available.
(e)    Participant understands that there may be adverse tax consequences upon exercise of the Award or disposition of the underlying shares and that Participant should consult a tax adviser prior to such exercise or disposition.
9.    Agreement not to Solicit.    The Award has been issued by the Company to the Participant in consideration of the following: with the exception of any employees approved in advance by the Company in writing, Participant agrees that commencing on the Award Date and continuing through the Participant’s separation of employment with the Bank, and for twelve (12) months thereafter, Participant will not, either directly or indirectly, on the Participant's own behalf or in the service of or on behalf of any other person or entity, solicit or attempt to solicit any person who then is or who was at any time in the preceding six (6) month period an employee, independent contractor or client of the Company or its subsidiaries to cease, curtail or refrain from entering into such a relationship with the Participant or to form such a relationship with any other person or entity.  The Participant agrees and acknowledges that the restrictions contained in this Section 9 are reasonable in terms of time period and subject matter and that they protect legitimate business interests of the Company and its subsidiaries.  The Participant further agrees that in the event that the Participant breaches any provision of this Section 9, the Company and its subsidiaries will suffer irreparable injury that could not be adequately remedied by money damages and therefore the Company and its subsidiaries will be able to obtain any appropriate form of injunctive relief to enforce said provision, in addition to all other relief that a Court may deem proper.
10.    Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Maryland as such laws are applied to agreements between Maryland residents entered into and to be performed entirely within Maryland, except for those provisions required to be governed by the Delaware General Corporation Law. If any provision of this Agreement is determined by a court of law to be illegal or unenforceable, then such provision will be enforced to the maximum extent possible and the other provisions will remain fully effective and enforceable.
11.    Incorporation by Reference. All of the other terms of the Plan as currently in effect are hereby incorporated into this Agreement by reference.
12.    Defined Terms. Any terms whose definition is not specified in this Agreement shall have the meaning given to them in the Plan.
13.    Headings. The headings used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, the Award.
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14.    Dispute Resolution. Any dispute or controversy arising under or in connection with this Agreement (except for those under Section 9) shall be settled exclusively by arbitration in Bethesda, Maryland, in accordance with the applicable rules of the American Arbitration Association then in effect. In any action to enforce Section 9, the substantially prevailing party will be awarded its reasonable attorneys’ fees and costs.
15.    Counterpart. This Agreement may be executed in counterparts, each of which shall constitute an original, but all of which when taken together shall constitute a single contract.
16.    Entire Agreement. This Agreement (including Appendix A) and the Plan constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. In the event of a conflict between this Agreement and the Plan, this Agreement shall govern.
[Signatures appear on the following page]
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IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed by its authorized officer, and the Participant has hereunto set his hand, all as of the day and year first written above.
FORBRIGHT, INC.
PARTICIPANT
Name:
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APPENDIX A
1.    Number of Units subject to this Award:
a.    “A” Units Awarded: [__]
b.    “B” Units Awarded: [__]
c.    “C” Units Awarded: [__]
d.    “D” Units Awarded: [__]
2.    Exercise Price:
a.    The exercise price of any “A” Units awarded to the Participant shall be $[●] (the “Exercise Price”).
b.    The exercise price of any “B” Units awarded to the Participant shall be the greater of (i) Exercise Price and (ii) the value obtained using the following formula:
(Investment Transaction Closing Price x 1.005n)
where “n” is the number of whole months that have elapsed since the Closing Date; provided, that, upon (A) the occurrence of a Qualifying Trigger Event and (B) the achievement of a per share price of Common Stock necessary to provide the investors in the Investment Transaction a 6% internal rate of return (weighted for time and price), the value obtained pursuant to clause (ii) above shall cease to increase; and provided, further, that, in the case of a Qualifying Trigger Event as a result of a Qualifying Public Offering (as defined below), the per share price of Common Stock shall be calculated using a volume-weighted average price over any 30-day trading period following the Qualifying Public Offering; and, provided, further that if, following the fifth anniversary of the Closing Date either (x) a Qualifying Triggering Event has not occurred or (y) a Qualifying Triggering Event has occurred pursuant to Section (iii) of the definition thereof and clause (B) above has not been satisfied, then the value obtained pursuant to clause (ii) above shall cease to increase at such time as clause (B) above is satisfied based on the Target FMV computed pursuant to Section 8 hereof.
c.    The exercise price of any “C” Units awarded to the Participant shall be the Exercise Price.
d.    The exercise price of any “D” Units awarded to the Participant shall be the Exercise Price.
3.    Exercise:
a.    Limitations on Exercise:
i.    Vested “A” Units may be exercised at any time after the applicable vesting date until the termination date of the Units.
ii.    Vested “B” Units may be exercised at any time after the applicable vesting date until the termination date of the Units.
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iii.    Vested “C” Units may not be exercised until (i) the occurrence of a Qualifying Trigger Event (as defined below) and (ii) the per share price of the Common Stock upon the closing of the Qualifying Trigger Event (or thereafter, if applicable) equals or exceeds $25; provided, that in the case of a Qualifying Trigger Event as a result of a Qualifying Public Offering, the price must equal or exceed a volume-weighted average price of $25 over any 30-day trading period following the Qualifying Public Offering; provided, further that if, following the fifth anniversary of the Closing Date either (x) a Qualifying Triggering Event has not occurred or (y) a Qualifying Triggering Event has occurred pursuant to Section (iii) of the definition thereof and the Vested “C” Units did not become exercisable, then the Vested “C” Units shall become exercisable if the Target FMV computed pursuant to Section 8 hereof equals or exceeds $25.
iv.    Vested “D” Units may not be exercised until (i) the occurrence of a Qualifying Trigger Event (as defined below) and (ii) the per share price of the Common Stock upon the closing of the Qualifying Trigger Event (or thereafter, if applicable) equals or exceeds $32; provided, that in the case of a Qualifying Trigger Event as a result of a Qualifying Public Offering, the price must equal or exceed a volume-weighted average price of $32 over any 30-day trading period following the Qualifying Public Offering; provided, further that if, following the fifth anniversary of the Closing Date either (x) a Qualifying Triggering Event has not occurred or (y) a Qualifying Triggering Event has occurred pursuant to Section (iii) of the definition thereof and the Vested “D” Units did not become exercisable, then the Vested “D” Units shall become exercisable if the Target FMV computed pursuant to Section 8 hereof equals or exceeds $32.
b.    General Exercise Terms. Payment of all or part of the exercise price for the Award may be made (i) in cash or a cash equivalent acceptable to the Administrator, (ii) by surrendering shares of Common Stock to the Company, (iii) by the withholding of shares of Common Stock otherwise issuable upon the exercise of the Award (including net exercise), (iv) with a full-recourse promissory note, or (v) if the Common Stock is traded on an established securities market, with cash advanced by the broker-dealer if the exercise notice is accompanied by the Participant’s written irrevocable instructions to deliver the Common Stock acquired upon exercise of the Award to the broker-dealer. If Common Stock is used to pay all or part of the exercise price, the sum of the cash or cash equivalent and the Fair Market Value (determined as of the date of exercise) of the shares surrendered must not be less than the exercise price of the shares for which the Award is being exercised. If all or part of the exercise price is to be paid with a promissory note, the par value of the Common Stock, if newly issued, shall be paid in cash or cash equivalents. The shares received upon exercise of the Award shall be pledged as security for payment of the principal amount of the promissory note and interest thereon and the interest rate payable under the terms of the promissory note shall not be less than the minimum rate (if
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any) required to avoid the imputation of additional interest under the Code. Subject to the foregoing, the Administrator (at its sole discretion) shall specify the term, interest rate, amortization requirements (if any) and other provisions of such note.
4.    Vesting: The Units granted pursuant to the Award will vest in accordance with the following schedule:
a.    “A” Unit Vesting:
i.    Units Vesting as of first anniversary of Award Date: [__]
ii.    Units Vesting as of second anniversary of Award Date: [__]
iii.    Units Vesting as of third anniversary of Award Date: [__]
iv.    Units Vesting as of fourth anniversary of Award Date: [__]
v.    Units Vesting as of fifth anniversary of Award Date: [__]
b.    “B” Unit Vesting
i.    Units Vesting as of first anniversary of Award Date: [__]
ii.    Units Vesting as of second anniversary of Award Date: [__]
iii.    Units Vesting as of third anniversary of Award Date: [__]
iv.    Units Vesting as of fourth anniversary of Award Date: [__]
v.    Units Vesting as of fifth anniversary of Award Date: [__]
c.    “C” Unit Vesting
i.    Units Vesting as of first anniversary of Award Date: [__]
ii.    Units Vesting as of second anniversary of Award Date: [__]
iii.    Units Vesting as of third anniversary of Award Date: [__]
iv.    Units Vesting as of fourth anniversary of Award Date: [__]
v.    Units Vesting as of fifth anniversary of Award Date: [__]
d.    “D” Unit Vesting
i.    Units Vesting as of first anniversary of Award Date: [__]
ii.    Units Vesting as of second anniversary of Award Date: [__]
iii.    Units Vesting as of third anniversary of Award Date: [__]
iv.    Units Vesting as of fourth anniversary of Award Date: [__]
v.    Units Vesting as of fifth anniversary of Award Date: [__]
5.    Effect of Events on Vesting:
a.    Except as set forth in Section 5(c) below, in the event of the termination of the Participant’s employment or removal of the Participant as a director, as applicable, all further vesting shall cease upon such termination, and the Participant shall retain the previously vested portion of the Award subject to and in accordance with Sections 5(b), 5(c), 5(d) and 5(e) below.
b.    The vested portion of the “A” Units shall remain outstanding for 90 days after such termination, and to the extent not exercised during such 90-day period, shall
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be forfeited upon the expiration of such 90-day period. The unvested portion of the “A” Units shall be forfeited immediately upon such termination.
c.    The vested portion of the “B” Units shall remain outstanding until the earlier to occur of (i) the expiration date of the Units and (ii) the 91st day following a Qualifying Trigger Event (the earlier of such dates, the “Forfeiture Date”), and the Exercise Price of such vested portion of the “B” Units shall remain subject to adjustment pursuant to Section 2(b) above; provided, that, if the Participant does not exercise the “B” Units on or prior to the date which is 90 days after the termination of Participant’s employment or removal of the Participant as a director, the “B” Units may not be exercised until the occurrence of a Qualifying Trigger Event. To the extent not exercised prior to the Forfeiture Date, or to the extent such “B” Units are not, or do not become, exercisable prior to the Forfeiture Date, the vested portion of the “B” Units shall be forfeited on the Forfeiture Date. The unvested portion of the “B” Units shall be forfeited immediately upon such termination.
d.    The vested portion of the “C” Units and “D” Units shall remain outstanding until the Forfeiture Date, and such vested portion of the “C” Units and “D” Units shall remain subject to the conditions to exercisability set forth in Section 3(a) above. To the extent not exercised prior to the Forfeiture Date, or to the extent such options are not, or do not become, exercisable prior to the Forfeiture Date, the vested portion of the “C” Units and “D” Units shall be forfeited on the Forfeiture Date. The unvested portion of the “C” Units and “D” Units shall be forfeited immediately upon such termination.
e.    Notwithstanding anything to the contrary in this Section 5, in the event the termination of Participant’s employment or removal of the Participant as a director, as applicable, is by the Participant’s employer and/or service recipient for “Cause” or in the event that the Participant breaches Section 9 of this Agreement, the Participant shall forfeit the entire Award immediately, including, for the avoidance of doubt, the vested and unvested portions of the Award.
6.    Definitions. For the purposes of this Award, the following terms shall have the following meanings:
a.     “Cause” shall have the meaning set forth in the employment agreement, if applicable, by and between the Participant and the Company or Bank, as applicable, and, if no such employment agreement exists, “Cause” shall mean:
i.    the Participant is indicted for, convicted of, or enters a no contest plea to (A) a felony or (B) a misdemeanor involving moral turpitude that would render the Participant unable to perform his or her duties as an employee, officer or director of the Company, as applicable;
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ii.    the Participant engages in conduct that constitutes gross negligence or willful misconduct in carrying out his or her duties as an employee, officer or director of the Company;
iii.     the Participant’s failure or refusal to perform his or her duties, after (A) written notice to the Participant from the Board of Directors or the Participant’s supervisor, with reasonable specification of the matter(s) giving rise to the notice, including notice of the Company’s intent to terminate the Participant’s employment due to the matter(s) described in such notice and (B) ten (10) days to cure the matter described in such notice;
iv.    a material breach of the Participant’s fiduciary duty;
v.    a regulatory body with jurisdiction over the Company recommends that the Company remove the Participant as an employee, officer or director of the Company; or
vi.     any finding by the Securities and Exchange Commission pertaining to the Participant which, in the opinion of independent counsel selected by the Company, could reasonably be expected to impair or impede the Company’s ability to register, list or otherwise offer its stock to the public, or following any initial public offering, to maintain itself as a publicly traded company.
b.    “Investment Transaction Price” means the weighted average per share purchase price of Common Stock issued as part of the Investment Transaction in accordance with the terms of the SPA.
c.    “Sale Transaction” means the occurrence of any of the following:
(i)    any “person” (as the term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended and the rules and regulations of the Securities and Exchange Commission (“SEC”) promulgated thereunder as in effect on the date of this Agreement) or “group” (as defined in the Exchange Act and the rules and regulations of the SEC promulgated thereunder as in effect on the date of this Agreement) shall become, directly or indirectly, a “beneficial owner” (as such term is defined and used in Rule 13d-3 promulgated under the Exchange Act) of Common Stock representing a majority of the Common Stock of the Company on a fully diluted basis; or
(ii)    all or substantially all of the assets or business of the Company are sold or otherwise disposed of through the consummation of a merger, consolidation, sale of assets or other transaction (unless the shareholders of the Company immediately prior to such merger, consolidation or other transaction beneficially own, directly or indirectly, the Common Stock representing fifty percent (50%) or more of the voting power of the outstanding Common Stock of the entity or entities, if any, that acquire
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such assets or otherwise succeed to the business of the Company, determined on a fully diluted basis).
Notwithstanding the foregoing, a Sale Transaction shall not include (1) the initial capital raise contemplated to occur on or about the effective date of this Award or (2) an initial public offering of the Company’s Common Stock.
d.    “Qualifying Trigger Event” means:
(i)    the Company shall close on an initial public offering with a gross offering proceeds of at least $250 million (a “Qualifying Public Offering”);
(ii)    the consummation of a Sale Transaction; or
(iii)    the Company shall close on a private equity financing with gross proceeds of at least $250 million in cash.
7.    Merger, Consolidation or Asset Sale:
Notwithstanding Section 8(C) of the Plan, the merger, consolidation or sale or disposition of substantially all of the assets of the Company shall not result in the acceleration or vesting or exercise of the Units granted hereunder to the extent such event does not otherwise result in the Units becoming vested or exercisable pursuant to the terms of this Agreement.
8.    Determination of Fair Market Value.
Prior to (x) an initial public offering of the shares of Common Stock or (y) a Sales Transaction, the Board shall formally approve a Fair Market Value of a share of Common Stock at least annually (the “Board FMV”). The Board shall use commercially reasonable efforts to approve a Board FMV on or before the date which is 30 days after completion of the Company’s audited financial statements each year. Beginning on the fifth anniversary of the Closing Date, John K. Delaney (“Delaney”) may, once in any calendar year, object to the Board FMV by providing written notice, which shall also include a proposed alternative fair market value (an “FMV Notice”, and such proposed fair market value, the “Delaney FMV”), to the Board within five business days following notice of the approval of the Board FMV. Upon the Board’s receipt of an FMV Notice, the Board shall have five business days to consider and accept the Delaney FMV. If the Board accepts the Delaney FMV, the Delaney FMV shall be the fair market value used under certain circumstances hereunder to determine if a condition under the Option has been satisfied (the “Target FMV”). If the Board does not accept the Delaney FMV within five business days after delivery of the Delaney FMV, the Board shall within 30 days thereafter retain a valuation firm (other than the valuation firm that calculated the Board FMV), which valuation firm shall be subject to approval by Delaney (with such approval not to be unreasonably withheld), at the sole expense of the Corporation, to select either the Board FMV or the Delaney FMV, which shall be the Target FMV (it being understood that the valuation firm shall not be permitted to calculate a third fair market value). If Delaney is no longer CEO of the Corporation, Donald F. Cole (“Cole”) shall have the rights of Delaney under this provision, and if Cole is no longer an executive of the Bank, the then-CEO of the Corporation shall have the rights of Delaney under this provision.
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Exhibit 10.7
THE SECURITIES REPRESENTED BY THIS AGREEMENT HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES
LAWS. SUCH SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER THE
SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS.
FORBRIGHT, INC.
RESTRICTED STOCK AWARD AGREEMENT
This Award Agreement (this “Agreement”) is made and entered into this [●] day of [●], 2026 (the “Date of Grant”), by and between (i) Forbright, Inc. (the “Company”) and (ii) [●] (the “Participant”), an employee of Forbright Bank, a wholly owned subsidiary of the Company (the “Bank”).
RECITALS
A.    The Company has adopted the Congressional Bancshares, Inc. 2014 Stock Incentive Plan, as amended (the “Plan”), authorizing the Company to make awards to persons associated with the Company and the Bank (as applicable).
B.    The Company, through its Board of Directors (the “Board”) or the Compensation Committee of the Board, has determined that, under and pursuant to the terms and subject to the conditions of the Plan, the Participant is eligible to receive awards under the Plan.
C.    The Company desires to make an award to the Participant, and the Participant, in connection therewith, desires to participate in the Plan and receive an award under the Plan.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and Participant hereby agree as follows:
1.    Grant of Award. The Company hereby grants to the Participant, not in lieu of any salary or other compensation for his or her services, an award (the “Award”) of the number of restricted shares (the “Restricted Stock”) of the voting common stock, par value $0.001 per share, of the Company (“Common Stock”) set forth in Appendix A to this Agreement, pursuant to the Plan and this Agreement.
2.    Vesting of Award. Subject to accelerated vesting and forfeiture as provided in the Plan and [the Company’s severance plan, which the Company may choose to adopt in its sole discretion (the “Severance Plan”)] / [the Participant’s employment agreement with the Company or the Bank, as applicable (the “Employment Agreement”)], the Restricted Stock shall vest in accordance with the vesting schedule set forth in Appendix A to this Agreement (each such vesting date provided on Appendix A being a “Vesting Date”). Notwithstanding anything to the contrary in this Agreement, the Plan, the Participant’s employment agreement, or any other


agreement or plan, the Restricted Stock granted herein shall not vest or become payable in any manner that would cause the Restricted Stock or the granting of them herein to be treated as a golden parachute payment for purposes of 12 CFR Part 359.
3.    Forfeiture of Award. Except as otherwise provided in [Severance Plan] / [the Employment Agreement], in the event of the Participant’s termination of Continuous Service, the Participant shall forfeit any shares of Restricted Stock that have not vested in accordance with the terms of this Agreement.
4.    Evidence of Uncertificated Shares. As soon as administratively practicable following each applicable Vesting Date, the Company may, for and with respect to all shares of Restricted Stock that become vested on such date, evidence the Participant’s ownership of Common Stock in uncertificated book entry form.
5.    Voting Rights; Dividends. Prior to the Vesting Date, the Participant shall have all the rights of a shareholder of the Company with respect to the shares of Restricted Stock, including the right to vote such shares. Notwithstanding the foregoing, (i) the Participant shall not have with respect to the shares of Restricted Stock the right to transfer the shares of Restricted Stock prior to the date on which such shares of Restricted Stock become fully vested and (ii) any distributions or dividends that are declared with respect to the shares of Restricted Stock between the Date of Grant and the date on which such shares of Restricted Stock become fully vested shall be paid to the Participant at the time that such shares of Restricted Stock become fully vested pursuant to Section 2 hereof, and will not be paid to the Participant in the event that the shares of Restricted Stock do not become so vested.
6.    Amendment of Award. Without the consent of the Participant, no modification or amendment of the Award shall reduce or limit, in any respect, any of the Participant’s rights under the Award. This Agreement, and any provision hereof, may be amended, supplemented, restated, modified or waived only in signed writing by each of the Participant and the Company.
7.    Employment. The Award does not impose any independent obligation upon the Company or the Bank to retain the Participant in its employ or service for any period.
8.    Representations. The Award has been issued by the Company in reliance upon the following representations of the Participant:
(a)    The Restricted Stock is being acquired for investment and not with a view to the sale or distribution of any part thereof, and the Participant has no present intention of selling or engaging in any public distribution of the same except pursuant to a registration or exemption pursuant to the Securities Act.
(b)    The Participant understands that the (i) Restricted Stock is not registered under the Securities Act or qualified under applicable state securities laws, (ii) issuance of the Restricted Stock is exempt from the registration and qualifications requirements thereof pursuant to Section 4(a)(2) of the Securities Act, Rule 701 of the Securities Act and/or any applicable rule under the Securities Act and any applicable state securities
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laws and (iii) Company’s reliance on such exemption is predicated on the Participant’s representations set forth in this Section 8.
(c)    The Participant has such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of its investment and has the ability to bear the economic risks of his or her investment.
(d)    The Participant understands that the Company has no obligation to register with the Securities and Exchange Commission pursuant to Section 15(d) of the Securities Act, to file reports pursuant to Section 12 of the Exchange Act or to file a registration statement covering any shares of the Restricted Stock under the Securities Act. The Participant further understands that if the Company does not register pursuant to Section 15(d) of the Securities Act, file reports pursuant to Section 12 of the Exchange Act or have a registration statement covering any shares of the Restricted Stock under the Securities Act in effect when the Participant desires to sell such shares, the Participant may be required to hold such shares for an indefinite period. The Participant also understands that any sale of any shares of the Restricted Stock that might be made in reliance upon Rule 144 under the Securities Act may be made only in accordance with the terms and conditions of such Rule and that the Company has no obligation to seek to make such Rule available.
9.    Taxes. The Company shall have the right to require the Participant to remit to the Company cash sufficient to satisfy all federal, state and local withholding tax obligations (the “Withholding Tax Obligations”) prior to the applicable Vesting Date or satisfy the Withholding Tax Obligations in any manner described in Section 9 of the Plan. In the discretion of the Board, the Participant may satisfy such Withholding Tax Obligations by surrendering to the Company prior to the applicable Vesting Date shares of Restricted Stock or other Common Stock held by the Participant having a Fair Market Value on the applicable Vesting Date equal to the Withholding Tax Obligations (or such other rate that will not cause adverse accounting consequences for the Company or any of its Affiliates), provided, that, the Company is not then prohibited from purchasing or acquiring such shares of Restricted Stock or Common Stock pursuant to any loan or debt agreement to which the Company or any of its Affiliates is a party or pursuant to applicable law.
BY SIGNING THIS AGREEMENT, THE PARTICIPANT REPRESENTS THAT THE PARTICIPANT HAS REVIEWED WITH THE PARTICIPANT’S OWN TAX ADVISORS THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT AND THAT THE PARTICIPANT IS RELYING SOLELY ON SUCH ADVISORS, AND NOT ON ANY STATEMENTS OR REPRESENTATIONS OF THE COMPANY, OR ANY AFFILIATE THEREOF, OR ANY AGENT OF THE COMPANY OR ANY AFFILIATE THEREOF.
10.    Governing Law. The validity, construction and administration of the Award shall be determined under the laws of the State of Delaware, without reference to its conflict of law principles.
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11.    Incorporation by Reference. All of the other terms of the Plan as currently in effect are hereby incorporated into this Agreement by reference.
12.    Defined Terms. Any terms not defined in this Agreement shall have the same meaning as given to them in the Plan.
13.    Headings. The headings used herein are for convenience of reference only, are not part of this Agreement and shall not affect the construction of, or be taken into consideration in interpreting, the Award.
14.    Dispute Resolution. Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Bethesda, Maryland, in accordance with the rules of the American Arbitration Association.
15.    Counterpart. This Agreement may be executed in counterparts (including by electronic means such as DocuSign, “.pdf” or “.jpg” files), each of which shall constitute an original, but all of which when taken together shall constitute a single contract.
16.    Entire Agreement. This Agreement, the Plan and [the Severance Plan] / [the Employment Agreement] constitute the entire contract among the parties relating to the subject matter hereof and supersede any and all previous agreements and understandings, oral or written, relating to the subject matter hereof. In the event of a conflict between this Agreement and the Plan, the Agreement shall govern. In the event of a conflict between this Agreement and [the Severance plan] / [the Employment Agreement], other than as specified in Section 2 of this Agreement, the terms of [the Severance Plan] / [the Employment Agreement] shall control.
[Signatures appear on the following page]
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IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed on its behalf by its authorized officer, and the Participant has duly executed this Agreement, all as of the day and year first written above.
FORBRIGHT, INC.
PARTICIPANT


APPENDIX A
Vesting of this Award
Number of shares of Restricted Stock subject to this Award: [•]
Number of shares of Restricted Stock to vest as of [•] [•], 2027[•]
Number of shares of Restricted Stock to vest as of [•] [•], 2028[•]
Number of shares of Restricted Stock to vest as of [•] [•], 2029[•]

Exhibit 10.8
FORBRIGHT, INC.
2026 OMNIBUS INCENTIVE PLAN
Section 1.    Purpose of Plan.
The name of the Plan is the Forbright, Inc. 2026 Omnibus Incentive Plan. The purposes of the Plan are to provide an additional incentive to selected officers, employees, non-employee directors, independent contractors, and consultants of the Company or its Affiliates whose contributions are essential to the growth and success of the business of the Company and its Affiliates, in order to strengthen the commitment of such persons to the Company and its Affiliates, motivate such persons to faithfully and diligently perform their responsibilities, and attract and retain competent and dedicated persons whose efforts will result in the long-term growth and profitability of the Company and its Affiliates. To accomplish such purposes, the Plan provides that the Company may grant Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock Units, Stock Bonuses, Other Stock-Based Awards, Cash Awards or any combination of the foregoing.
Section 2.    Definitions.
For purposes of the Plan, the following terms shall be defined as set forth below:
(a)    “Administrator” means the Board, or, if and to the extent the Board does not administer the Plan, the Committee, which shall administer the Plan in accordance with Section 3 hereof.
(b)    “Affiliate” means a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, the Person specified.
(c)    “Award” means any Option, Stock Appreciation Right, Restricted Stock, Restricted Stock Unit, Stock Bonus, Other Stock-Based Award or Cash Award granted under the Plan.
(d)    “Award Agreement” means any written or electronic agreement, contract or other instrument or document evidencing an Award, including through electronic medium, which shall contain such terms and conditions with respect to an Award as the Administrator shall determine, consistent with the Plan. Each Participant who is granted an Award shall enter into an Award Agreement with the Company containing such terms and conditions as the Administrator shall determine in its sole discretion.
(e)    “Base Price” has the meaning set forth in Section 8(b) hereof.
(f)    “Beneficial Owner” (or any variant thereof) has the meaning defined in Rule 13d-3 under the Exchange Act.
(g)    “Board” means the Board of Directors of the Company.


(h)    “Cash Award” means an Award granted pursuant to Section 12 hereof.
(i)    “Cause” means (a) if the Participant is a party to an employment agreement or offer letter with the Company or one of its Subsidiaries, or a participant in a severance plan of the Company, in which “Cause” is defined, the occurrence of any circumstances defined as “Cause” in such employment agreement, offer letter or severance plan, or (b) if the Participant is not a party to an employment agreement or offer letter with any member of the Group in which “Cause” is defined, (i) the Participant’s indictment for, or conviction or entry of a plea of guilty or nolo contendere to (A) any felony or (B) any crime (whether or not a felony) involving moral turpitude, fraud, theft, breach of trust or other similar acts, whether under a law of the United States or any state thereof or any similar non-U.S. law to which the Participant may be subject, (ii) the Participant’s being or having been engaged in conduct constituting a material breach of fiduciary duty, willful misconduct or gross negligence relating to the Company or any of its Subsidiaries or the performance of the Participant’s duties, which, if capable of being cured, is not cured to the reasonable satisfaction of the Company within 30 days after the Participant receives from any member of the Group written notice of such willful misconduct or gross negligence, (iii) the Participant’s willful failure to (A) follow a reasonable and lawful directive of any member of the Group at which the Participant is employed or provides services, or of the Board, which is not cured to the reasonable satisfaction of the Company within 30 days after the Participant receives from any member of the Group written notice of such failure or refusal or (B) comply with any written rules, regulations, policies or procedures of the member of the Group at which the Participant is employed or to which the Participant provides services which, if not complied with, would reasonably be expected to have a material adverse effect on the business or financial condition of the Company, which in the case of a failure that is capable of being cured, is not cured to the reasonable satisfaction of the Company within 30 days after the Participant receives from any member of the Group written notice of such failure, (iv) the Participant’s material violation of the Participant’s employment agreement, offer letter, or similar agreement with the Company or any of its Subsidiaries or any non-disclosure, non-solicitation or non-competition covenant in any other agreement to which the Participant is subject or (v) the Participant’s willful and continued failure to perform the Participant’s duties to the Company or any of its Subsidiaries. However, if within 60 days following the termination of Service, the Company first discovers facts that would have established “Cause” for termination, and those facts were not known by the Company at the time of the termination, then the Administrator may provide the Participant with written notice, including the facts establishing that the purported “Cause” was not known at the time of the termination, in which case the Participant’s termination of Service will be considered a for “Cause” termination.
(j)    “Certificate of Incorporation” means the certificate of incorporation of the Company, as may be amended, modified or supplemented from time to time.
(k)    “Change in Capitalization” means any (i) merger, consolidation, reclassification, recapitalization, spin-off, spin-out, repurchase or other reorganization or corporate transaction or event; (ii) special or extraordinary dividend or other extraordinary distribution (whether in the form of cash, Common Stock, or other property), stock split, reverse stock split, subdivision or consolidation; (iii) combination or exchange of shares; or (iv) other change in corporate
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structure, which, in any such case, the Administrator determines, in its sole discretion, affects the Common Stock such that an adjustment pursuant to Section 5 hereof is appropriate.
(l)    “Change in Control” means an event set forth in any one of the following paragraphs shall have occurred:
(1)    any Person (or any group of Persons acting together which would constitute a “group” for purposes of Section 13(d) of the Exchange Act), is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its Affiliates) representing more than 50% of the combined voting power of the Company’s then outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in clause (I) of paragraph (3) below;
(2)    the following individuals cease for any reason to constitute a majority of the number of directors then serving on the Board: individuals who, on the Effective Date, constitute the Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest, including, but not limited to, a consent solicitation, relating to the election of directors of the Company) whose appointment or election by the Board or nomination for election by the Company’s stockholders was approved or recommended by a vote of at least two-thirds of the directors then still in office who either were directors on the Effective Date or whose appointment, election or nomination for election was previously so approved or recommended;
(3)    there is consummated a merger or consolidation of the Company or any direct or indirect Subsidiary with any other corporation or other entity, other than (I) a merger or consolidation (A) which results in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or any parent thereof), in combination with the ownership of any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary, at least 50% of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation and (B) immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the board of directors of the Company, the entity surviving such merger or consolidation or, if the Company or the entity surviving such merger or consolidation is then a subsidiary, the ultimate parent thereof, or (II) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company (not including in the securities Beneficially Owned by such Person any securities acquired directly from the Company or its Affiliates) representing more than 50% of the combined voting power of the Company’s then outstanding securities; or
(4)    the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets, other than (A) a sale or
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disposition by the Company of all or substantially all of the Company’s assets to an entity, at least 50% of the combined voting power of the voting securities of which are owned by stockholders of the Company following the completion of such transaction in substantially the same proportions as their ownership of the Company immediately prior to such sale or (B) a sale or disposition of all or substantially all of the Company’s assets immediately following which the individuals who comprise the Board immediately prior thereto constitute at least a majority of the board of directors of the entity to which such assets are sold or disposed or, if such entity is a subsidiary, the ultimate parent thereof.
Notwithstanding the foregoing, for each Award that constitutes deferred compensation under Section 409A of the Code, and to the extent required to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, a Change in Control shall be deemed to have occurred under the Plan with respect to such Award only if a change in the ownership or effective control of the Company or a change in ownership of a substantial portion of the assets of the Company shall also be deemed to have occurred under Section 409A of the Code.
(m)    “Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.
(n)    “Committee” means any committee or subcommittee the Board may appoint to administer the Plan. Subject to the discretion of the Board, the Committee shall be composed entirely of individuals who meet the qualifications of (i) a “non-employee director” within the meaning of Rule 16b-3 and (ii) any other qualifications required by the applicable stock exchange on which the Common Stock is traded. If at any time or to any extent the Board shall not administer the Plan, then the functions of the Administrator specified in the Plan shall be exercised by the Committee.
(o)    “Common Stock” means the Class A common stock, par value $0.001 per share, of the Company.
(p)    “Company” means Forbright, Inc., a Delaware corporation (or any successor company, except as the term “Company” is used in the definition of “Change in Control” above).
(q)    “Disability” means (a) if the Participant is a party to an employment agreement or offer letter with the Company or one of its Subsidiaries, or a participant in a severance plan of the Company, in which “Disability” is defined, the occurrence of any circumstances defined as “Disability” in such employment agreement, offer letter or severance plan, or (b) if the Participant is not a party to an employment agreement or offer letter with any member of the Group in which “Disability” is defined, “Disability” means that the Participant, as determined by the Administrator in its sole discretion, is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company or an Affiliate thereof.
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(r)    “Effective Date” has the meaning set forth in Section 20 hereof.
(s)    “Eligible Recipient” means an officer, employee, non-employee director, independent contractor or consultant of the Company or any Affiliate of the Company who has been selected as an eligible participant by the Administrator; provided, however, to the extent required to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, an Eligible Recipient of an Option or a Stock Appreciation Right means an employee, non-employee director, independent contractor or consultant of the Company or any Affiliate of the Company with respect to whom the Company is an “eligible issuer of service recipient stock” within the meaning of Section 409A of the Code.
(t)    “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time.
(u)    “Exercise Price” means, with respect to any Option, the per share price at which a holder of such Option may purchase the Shares issuable upon the exercise of such Option.
(v)    “Fair Market Value” of Common Stock or another security as of a particular date shall mean the fair market value as determined by the Administrator in its sole discretion; provided, however, that except as otherwise determined by the Administrator, (i) if the Common Stock or other security is admitted to trading on a national securities exchange, the fair market value on any date shall be the closing sale price reported on the last preceding trading day on which there was a sale of such share of Common Stock or other security on such exchange, or (ii) if the Common Stock or other security is then traded in an over-the-counter market, the fair market value on any date shall be the average of the closing bid and asked prices for such share of Common Stock or other security in such over-the-counter market for the last preceding date on which there was a sale of such share of Common Stock or other security in such market.
(w)    “Free Standing Right” has the meaning set forth in Section 8(a) hereof.
(x)    “Group” means the Company and the Company’s direct and indirect wholly-owned subsidiaries.
(y)    “Group Company” shall mean any member of the Group.
(z)    “ISO” means an Option intended to be and designated as an “incentive stock option” within the meaning of Section 422 of the Code.
(aa)    “Nonqualified Stock Option” means an Option that is not designated as an ISO.
(bb)    “Option” means an option to purchase Shares granted pursuant to Section 7 hereof. The term “Option” as used in the Plan includes the terms “Nonqualified Stock Option” and “ISO.”
(cc)    “Other Stock-Based Award” means an Award granted pursuant to Section 10 hereof.
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(dd)    “Participant” means any Eligible Recipient selected by the Administrator, pursuant to the Administrator’s authority provided for in Section 3 hereof, to receive grants of Awards, and, upon such Eligible Recipient’s death, such Eligible Recipient’s successors, heirs, executors and administrators, as the case may be.
(ee)    “Performance Conditions” means performance-based conditions based on criteria selected by the Administrator in its sole discretion. The Administrator shall have the authority to make equitable adjustments to the Performance Conditions as may be determined by the Administrator, in its sole discretion.
(ff)    “Person” has the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof.
(gg)    “Plan” means this Forbright, Inc. 2026 Omnibus Incentive Plan, as may be amended and/or restated from time to time.
(hh)    “Related Right” has the meaning set forth in Section 8(a) hereof.
(ii)    “Restricted Stock” means Shares granted pursuant to Section 9 hereof subject to certain restrictions that lapse at the end of a specified period or periods.
(jj)    “Restricted Stock Unit” means the right, granted pursuant to Section 9 hereof, to receive an amount in cash or Shares (or any combination thereof) equal to the Fair Market Value of a Share subject to certain restrictions that lapse at the end of a specified period or periods.
(kk)    “Rule 16b-3” has the meaning set forth in Section 3(a) hereof.
(ll)    “Service” means that the Participant’s service with the Company or an Affiliate, whether as an employee, non-employee director, independent contractor or consultant, is not interrupted or terminated. The Participant’s Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders service to the Company or an Affiliate as an employee, non-employee director, independent contractor or consultant, or a change in the entity for which the Participant renders such service, provided that the Administrator or its delegate determines, in its sole discretion, there is no interruption or termination of the Participant’s Service; provided further that if any Award is subject to Section 409A of the Code, this sentence shall only be given effect to the extent consistent with Section 409A of the Code. For example, a change in status from an employee of the Company to a non-employee director of an Affiliate will not constitute an interruption of Service. The Administrator or its delegate, in its sole discretion, may determine whether Service shall be considered interrupted in the case of any leave of absence, including sick leave, military leave or any other personal or family leave of absence. The Administrator or its delegate, in its sole discretion, may determine whether a Company transaction, such as a sale or spin-off of a division or subsidiary that employs a Participant, shall be deemed to result in a termination of Service for purposes of affected Awards, and such decision shall be final, conclusive and binding. In addition, to the extent required for exemption from or compliance with Section 409A of the Code, the determination of whether there has been a termination of Service will be made, and
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such term will be construed, in a manner that is consistent with the definition of “separation from service” as defined under Treasury Regulation Section 1.409A-1(h) (without regard to any alternative definition thereunder).
(mm)    “Shares” means shares of Common Stock reserved for issuance under the Plan, as adjusted pursuant to the Plan, and any successor (pursuant to a merger, consolidation or other reorganization) security.
(nn)    “Stock Appreciation Right” means the right to receive, upon exercise of the right, the applicable amounts as described in Section 8 hereof.
(oo)    “Stock Bonus” means a bonus payable in fully vested Shares granted pursuant to Section 11 hereof.
(pp)    “Subsidiary” means, with respect to any Person, as of any date of determination, any other Person as to which such first Person owns or otherwise controls, directly or indirectly, more than 50% of the voting shares or other similar interests or a sole general partner interest or managing member or similar interest of such other Person.
(qq)    “Transfer” has the meaning set forth in Section 18 hereof.
Section 3.    Administration.
(a)    The Plan shall be administered by the Administrator and shall be administered in accordance with the requirements of Rule 16b-3 under the Exchange Act (“Rule 16b-3”), to the extent applicable.
(b)    Pursuant to the terms of the Plan, the Administrator, subject, in the case of the Committee, to any restrictions on the authority delegated to it by the Board, shall have the power and authority, without limitation:
(1)    to select those Eligible Recipients who shall be Participants;
(2)    to determine whether and to what extent Awards are to be granted hereunder to Participants;
(3)    to determine the number of Shares to be covered by each Award granted hereunder;
(4)    to determine the terms and conditions, not inconsistent with the terms of the Plan, of each Award granted hereunder (including, but not limited to, (i) the restrictions applicable to Awards and the conditions under which restrictions applicable to such Awards shall lapse, (ii) the Performance Conditions and performance periods applicable to Awards, (iii) the Exercise Price of each Option and the Base Price of each Stock Appreciation Right, (iv) the vesting schedule applicable to each Award, (v) the number of Shares or amount of cash or other property subject to each Award and (vi) subject to the requirements of Section 409A of the Code (to the extent applicable), any amendments to the terms and conditions of outstanding
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Awards, including, but not limited to, extending the exercise period of such Awards and accelerating or waiving the vesting schedule or other conditions of such Awards);
(5)    to determine the terms and conditions, not inconsistent with the terms of the Plan, which shall govern all written instruments evidencing Awards;
(6)    to determine the Fair Market Value in accordance with the terms of the Plan;
(7)    to determine the duration and purpose of leaves of absence which may be granted to a Participant without constituting termination of the Participant’s Service for purposes of Awards granted under the Plan;
(8)    to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall from time to time deem advisable;
(9)    to prescribe, amend and rescind rules and regulations relating to sub-plans or addendums established for the purpose of satisfying applicable foreign laws or qualifying for favorable tax treatment under applicable foreign laws, which rules and regulations may be set forth in an appendix or appendices to the Plan or the applicable Award Agreement; and
(10)    to construe and interpret the terms and provisions of the Plan and any Award issued under the Plan (and any Award Agreement relating thereto), and to otherwise supervise the administration of the Plan and to exercise all powers and authorities either specifically granted under the Plan or necessary and advisable in the administration of the Plan.
(c)    Notwithstanding the foregoing, but subject to Section 5 hereof, the Company may not, without first obtaining the approval of the Company’s stockholders, (i) amend the terms of outstanding Options or Stock Appreciation Rights to reduce the Exercise Price or Base Price, as applicable, of such Options or Stock Appreciation Rights, (ii) cancel outstanding Options or Stock Appreciation Rights in exchange for Options or Stock Appreciation Rights with an Exercise Price or Base Price, as applicable, that is less than the Exercise Price or Base Price of the original Options or Stock Appreciation Rights or (iii) cancel outstanding Options or Stock Appreciation Rights with an Exercise Price or Base Price, as applicable, that is above the current per share stock price, in exchange for cash, property or other securities.
(d)    All decisions made by the Administrator pursuant to the provisions of the Plan shall be final, conclusive and binding on all Persons, including the Company and the Participants. The provisions and administration of each Award need not be the same with respect to each Participant. No member of the Board or the Committee, nor any officer or employee of the Company or any Subsidiary thereof acting on behalf of the Board or the Committee, shall be personally liable for any action, omission, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Committee and each and any officer or employee of the Company and of any Subsidiary thereof acting on their behalf shall, consistent with the Certificate of Incorporation and to the maximum extent permitted by
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applicable law (as it now exists or may hereafter be amended), be fully indemnified and protected by the Company in respect of any such action, omission, determination or interpretation.
(e)    The Administrator may, in its sole discretion, delegate its authority, in whole or in part, under this Section 3 (including, but not limited to, its authority to grant Awards under the Plan, other than its authority to grant Awards under the Plan to any Participant who is subject to reporting under Section 16 of the Exchange Act) to one or more officers of the Company, subject to the requirements of applicable law or any stock exchange on which the Shares are traded.
Section 4.    Shares Reserved for Issuance; Certain Limitations
(a)    The maximum number of shares of Common Stock reserved for issuance under the Plan shall be [●]1 Shares (subject to adjustment as provided in Section 5 hereof). The maximum number of shares of Common Stock reserved for issuance under the Plan shall be subject to an annual increase on the first day of each fiscal year during the term of the Plan, beginning on and including January 1, 2027, and ending on and including January 1, 2036, equal to the lesser of (x) 5% of the aggregate number of shares of Common Stock issued and outstanding on December 31 of the immediately preceding fiscal year and (y) a number of shares of Common Stock as is determined by the Administrator.
(b)    Shares issued under the Plan may, in whole or in part, be authorized but unissued Shares or Shares that shall have been or may be reacquired by the Company in the open market, in private transactions or otherwise. If any Shares subject to an Award are forfeited, cancelled, exchanged or surrendered or if an Award otherwise terminates or expires without a distribution of Shares to the Participant, the Shares with respect to such Award shall, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, again be available for Awards under the Plan. Shares that are exchanged by a Participant or withheld by the Company as full or partial payment in connection with the exercise of any Option or Stock Appreciation Right under the Plan or the payment of any purchase price with respect to any other Award under the Plan, as well as any Shares exchanged by a Participant or withheld by the Company or any Subsidiary to satisfy the tax withholding obligations related to any Award under the Plan, shall again be available for subsequent Awards under the Plan. In addition, (i) to the extent an Award is denominated in Shares, but paid or settled in cash, the number of Shares with respect to which such payment or settlement is made shall again be available for grants of Awards pursuant to the Plan and (ii) Shares underlying Awards that can only be settled in cash shall not be counted against the aggregate number of Shares available for Awards under the Plan.
(c)    No Participant who is a non-employee director of the Company shall, in respect of service as a non-employee director, be granted Awards during any calendar year that, when aggregated with such non-employee director’s cash fees with respect to such calendar year, exceed $750,000 in total value (calculating the value of any such Awards based on the grant date
1     This number to be equal to 8% of all classes of the outstanding common stock of the Company on a fully diluted basis as of immediately following the closing of the IPO, without giving effect to any exercise by the underwriters of their option to purchase additional shares in the IPO.
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fair value of such Awards for the Company’s financial reporting purposes), excluding compensation as approved by the Board in extraordinary circumstances (including but not limited to compensation paid to a Non-Employee Director who was appointed to serve as an interim officer of the Company or its Affiliate, or for the Non-Employee Director’s service as a consultant or former employee of the Company or its Affiliate). The Administrator may make exceptions to increase such limit to $1,000,000 for an individual non-employee director in the non-employee director’s first year of service or in any year during which the non-employee director serves in a position of board leadership (e.g., as the non-executive chair or lead independent director of the Board), as the Administrator may determine in its sole discretion, provided that the non-employee director receiving such additional compensation may not participate in the decision to award such compensation involving such non-employee director.
Section 5.    Equitable Adjustments.
(a)    In the event of any Change in Capitalization (including a Change in Control), an equitable substitution or proportionate adjustment shall be made, in each case, in the manner determined by the Administrator, in its sole discretion, in (i) the aggregate number of Shares reserved for issuance under the Plan pursuant to Section 4(a) hereof, (ii) the kind and number of securities subject to, and the Exercise Price or Base Price of, any outstanding Options and Stock Appreciation Rights granted under the Plan, (iii) the kind, number and purchase price of Shares, or the amount of cash or amount or type of other property, subject to outstanding Restricted Stock, Restricted Stock Units, Stock Bonuses and Other Stock-Based Awards granted under the Plan or (iv) the Performance Conditions and performance periods applicable to any Awards granted under the Plan; provided, however, that any fractional shares resulting from the adjustment shall be eliminated. Such other equitable substitutions or adjustments shall be made in the manner determined by the Administrator, in its sole discretion.
(b)    The determinations made by the Administrator pursuant to this Section 5 and Section 13 hereof shall be final, binding and conclusive.
Section 6.    Eligibility.
The Participants under the Plan shall be selected from time to time by the Administrator, in its sole discretion, from those individuals that qualify as Eligible Recipients.
Section 7.    Options.
(a)    General. Each Participant who is granted an Option shall enter into an Award Agreement with the Company, containing such terms and conditions as the Administrator shall determine, in its sole discretion, which Award Agreement shall set forth, among other things, the Exercise Price of the Option, the term of the Option and provisions regarding exercisability of the Option, and whether the Option is intended to be an ISO or a Nonqualified Stock Option (and in the event the Award Agreement has no such designation, the Option shall be by default a Nonqualified Stock Option). More than one Option may be granted to the same Participant and be outstanding concurrently hereunder. Options granted under the Plan shall be subject to the terms and conditions set forth in this Section 7 and shall contain such additional terms and
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conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable and set forth in the applicable Award Agreement.
(b)    Exercise Price. The Exercise Price of Shares purchasable under an Option shall be determined by the Administrator in its sole discretion at the time of grant, but, except as provided in the applicable Award Agreement, and subject to Section 7(f) hereof, in no event shall the exercise price of an Option be less than 100% of the Fair Market Value of the related Shares on the date of grant.
(c)    Option Term. The maximum term of each Option shall be fixed by the Administrator, but no Option shall be exercisable more than ten years after the date such Option is granted. Each Option’s term is subject to earlier expiration pursuant to the applicable provisions in the Plan and the Award Agreement. Notwithstanding the foregoing, in the event that on the last business day of the term of an Option (x) the exercise of the Option is prohibited by applicable law or (y) Shares may not be purchased or sold by the Participant due to the “black-out period” of a Company policy or a “lock-up” agreement undertaken in connection with an issuance of securities by the Company, the Administrator may provide that the term of the Option shall be extended but not beyond a period of thirty (30) days following the end of the legal prohibition, black-out period or lock-up agreement and provided further that no extension will be made if the Exercise Price of such Option at the date the initial term would otherwise expire is above the Fair Market Value.
(d)    Exercisability. Each Option shall be exercisable at such time or times and subject to such terms and conditions, including the attainment of Performance Conditions, as shall be determined by the Administrator in the applicable Award Agreement. The Administrator may also provide that any Option shall be exercisable only in installments, and the Administrator may waive such installment exercise provisions at any time, in whole or in part, based on such factors as the Administrator may determine in its sole discretion. Notwithstanding anything to the contrary contained herein, an Option may not be exercised for a fraction of a share.
(e)    Method of Exercise. Options may be exercised in whole or in part by giving written notice of exercise to the Company specifying the number of whole Shares to be purchased, accompanied by payment in full of the aggregate Exercise Price of the Shares so purchased in cash or its equivalent, as determined by the Administrator. As determined by the Administrator, in its sole discretion, with respect to any Option or category of Options, payment in whole or in part may also be made (i) by means of consideration received under any cashless exercise procedure approved by the Administrator (including the withholding of Shares otherwise issuable upon exercise), (ii) in the form of unrestricted Shares already owned by the Participant which have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which such Option shall be exercised, (iii) in any other form of consideration approved by the Administrator and permitted by applicable law or (iv) by any combination of the foregoing.
(f)    ISOs. The terms and conditions of ISOs granted hereunder shall be subject to the provisions of Section 422 of the Code and the terms, conditions, limitations and administrative procedures established by the Administrator from time to time in accordance with the Plan. At
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the discretion of the Administrator, ISOs may be granted only to an employee of the Company, its “parent corporation” (as such term is defined in Section 424(e) of the Code) or “subsidiary corporation” (as such term is defined in Section 424(f) of the Code). All of the Shares reserved for issuance under the Plan as of the Effective Date pursuant to Section 4(a) hereof (subject to adjustment as provided in Section 5 hereof) may be granted as ISOs.
(i)    ISO Grants to 10% Stockholders. Notwithstanding anything to the contrary in the Plan, if an ISO is granted to a Participant who owns shares representing more than 10% of the voting power of all classes of shares of the Company, its “parent corporation” (as such term is defined in Section 424(e) of the Code) or “subsidiary corporation” (as such term is defined in Section 424(f) of the Code), the term of the ISO shall not exceed five years from the time of grant of such ISO and the Exercise Price shall be at least 110% of the Fair Market Value of the Shares on the date of grant.
(ii)    $100,000 Per Year Limitation For ISOs. To the extent the aggregate Fair Market Value (determined on the date of grant) of the Shares for which ISOs are exercisable for the first time by any Participant during any calendar year (under all plans of the Company and its Affiliates) exceeds $100,000, such excess ISOs shall be treated as Nonqualified Stock Options.
(iii)    Disqualifying Dispositions. Each Participant awarded an ISO under the Plan shall notify the Company in writing immediately after the date the Participant makes a “disqualifying disposition” of any Share acquired pursuant to the exercise of such ISO. A “disqualifying disposition” is any disposition (including any sale) of such Shares before the later of (i) two years after the date of grant of the ISO and (ii) one year after the date the Participant acquired the Shares by exercising the ISO. The Company may, if determined by the Administrator and in accordance with procedures established by it, retain possession of any Shares acquired pursuant to the exercise of an ISO as agent for the applicable Participant until the end of the period described in the preceding sentence, subject to complying with any instructions from such Participant as to the sale of such Shares.
(iv)    No Liability. Neither the Company nor the Administrator will be liable to a Participant, or to any other party, if an ISO fails or ceases to qualify as an “incentive stock option” under Section 422 of the Code.
(g)    Rights as Stockholder. A Participant shall have no rights to dividends, dividend equivalents or distributions or any other rights of a stockholder with respect to the Shares subject to an Option until the Participant has given written notice of the exercise thereof, has paid in full for such Shares and has satisfied the requirements of Section 17 hereof.
(h)    Termination of Service. In the event of the termination of Service with the Company and all Affiliates thereof of a Participant who has been granted one or more Options, such Options shall be exercisable at such time or times and subject to such terms and conditions as set forth in the Award Agreement.
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Section 8.    Stock Appreciation Rights.
(a)    General. Stock Appreciation Rights may be granted either alone (“Free Standing Rights”) or in conjunction with all or part of any Option granted under the Plan (“Related Rights”). Related Rights may be granted either at or after the time of the grant of such Option. The Administrator shall determine the Eligible Recipients to whom, and the time or times at which, grants of Stock Appreciation Rights shall be made, the number of Shares to be awarded, the Base Price, and all other conditions of Stock Appreciation Rights. Notwithstanding the foregoing, no Related Right may be granted for more Shares than are subject to the Option to which it relates. Stock Appreciation Rights granted under the Plan shall be subject to the following terms and conditions set forth in this Section 8 and shall contain such additional terms and conditions, not inconsistent with the terms of the Plan, as the Administrator shall deem desirable, as set forth in the applicable Award Agreement.
(b)    Base Price. Except as provided in the applicable Award Agreement, each Stock Appreciation Right shall be granted with a base price that is not less than 100% of the Fair Market Value of the related Shares on the date of grant (such amount, the “Base Price”).
(c)    Rights as Stockholder. A Participant shall have no rights to dividends, dividend equivalents or distributions or any other rights of a stockholder with respect to the Shares, if any, subject to a Stock Appreciation Right until the Participant has given written notice of the exercise thereof and has satisfied the requirements of Section 17 hereof.
(d)    Exercisability.
(1)    Stock Appreciation Rights that are Free Standing Rights shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Administrator in the applicable Award Agreement.
(2)    Stock Appreciation Rights that are Related Rights shall be exercisable only at such time or times and to the extent that the Options to which they relate shall be exercisable in accordance with the provisions of Section 7 hereof and this Section 8.
(3)    Notwithstanding the foregoing, in the event that on the last business day of the term of a Stock Appreciation Right (x) the exercise of the Stock Appreciation Right is prohibited by applicable law or (y) Shares may not be purchased or sold by the Participant due to the “black-out period” of a Company policy or a “lock-up” agreement undertaken in connection with an issuance of securities by the Company, the Administrator may provide that the term of the Stock Appreciation Right shall be extended but not beyond a period of thirty (30) days following the end of the legal prohibition, black-out period or lock-up agreement and provided further that no extension will be made if the Base Price of such Stock Appreciation Right at the date the initial term would otherwise expire is above the Fair Market Value.
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(e)    Consideration Upon Exercise.
(1)    Upon the exercise of a Free Standing Right, the Participant shall be entitled to receive up to, but not more than, that number of Shares equal in value to (i) the excess of the Fair Market Value of a share of Common Stock as of the date of exercise over the Base Price per share specified in the Free Standing Right, multiplied by (ii) the number of Shares in respect of which the Free Standing Right is being exercised.
(2)    A Related Right may be exercised by a Participant by surrendering the applicable portion of the related Option. Upon such exercise and surrender, the Participant shall be entitled to receive up to, but not more than, that number of Shares equal in value to (i) the excess of the Fair Market Value of a share of Common Stock as of the date of exercise over the Exercise Price specified in the related Option, multiplied by (ii) the number of Shares in respect of which the Related Right is being exercised. Options which have been so surrendered, in whole or in part, shall no longer be exercisable to the extent the Related Rights have been so exercised.
(3)    Notwithstanding the foregoing, the Administrator may determine to settle the exercise of a Stock Appreciation Right in cash (or in any combination of Shares and cash).
(f)    Termination of Service.
(1)    In the event of the termination of Service with the Company and all Affiliates thereof of a Participant who has been granted one or more Free Standing Rights, such rights shall be exercisable at such time or times and subject to such terms and conditions as set forth in the Award Agreement.
(2)    In the event of the termination of Service with the Company and all Affiliates thereof of a Participant who has been granted one or more Related Rights, such rights shall be exercisable at such time or times and subject to such terms and conditions as set forth in the related Options.
(g)    Term.
(1)    The term of each Free Standing Right shall be fixed by the Administrator, but no Free Standing Right shall be exercisable more than ten years after the date such right is granted.
(2)    The term of each Related Right shall be the term of the Option to which it relates, but no Related Right shall be exercisable more than ten years after the date such right is granted.
Section 9.    Restricted Stock and Restricted Stock Units.
(a)    General. Restricted Stock and Restricted Stock Units may be issued under the Plan. The Administrator shall determine the Eligible Recipients to whom, and the time or times at which, Restricted Stock or Restricted Stock Units shall be made; the number of Shares to be
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awarded; the price, if any, to be paid by the Participant for the acquisition of Restricted Stock or Restricted Stock Units; the period of time prior to which Restricted Stock or Restricted Stock Units become vested and free of restrictions on Transfer (the “Restricted Period”); the Performance Conditions (if any); and all other conditions of the Restricted Stock and Restricted Stock Units. If the restrictions, Performance Conditions and/or conditions established by the Administrator are not attained, a Participant shall forfeit the Participant’s Restricted Stock or Restricted Stock Units, in accordance with the terms of the grant.
(b)    Rights as Stockholder. Except as provided in the applicable Award Agreement, the Participant shall generally have the rights of a stockholder of the Company with respect to shares of Restricted Stock during the Restricted Period, including the right to vote such shares and to receive any dividends declared with respect to such shares. Any dividends declared during the Restricted Period with respect to shares of Restricted Stock shall, to the extent set forth in an Award Agreement, be payable either currently, at the time (and to the extent) that the underlying shares of Restricted Stock vest, or in the form of additional shares of Restricted Stock that are subject to the same vesting and other terms and conditions as the underlying shares of Restricted Stock. Except as provided in the applicable Award Agreement, the Participant shall generally not have the rights of a stockholder with respect to shares of Common Stock subject to Restricted Stock Units during the Restricted Period; provided, however, that, subject to Section 409A of the Code and in the discretion of the Administrator, an amount equal to any dividends declared during the Restricted Period with respect to the number of Shares covered by Restricted Stock Units may, to the extent set forth in an Award Agreement, be provided to the Participant either currently, at the time (and to the extent) that the Shares in respect of the related Restricted Stock Units are delivered to the Participant, or in the form of additional Restricted Stock Units that are subject to the same vesting and other terms and conditions as the related Restricted Stock Units.
(c)    Termination of Service. The rights of Participants granted Restricted Stock or Restricted Stock Units upon termination of Service with the Company and all Affiliates thereof for any reason during the Restricted Period shall be set forth in the Award Agreement.
(d)    Form of Settlement. The Administrator reserves the right in its sole discretion to provide (either at or after the grant thereof) that any Restricted Stock Unit represents the right to receive the amount of cash per unit that is determined by the Administrator in connection with the Award.
Section 10.    Other Stock-Based Awards.
Other forms of Awards valued in whole or in part by reference to, or otherwise based on, Common Stock, including but not limited to dividend equivalents, may be granted either alone or in addition to other Awards (other than, in the case of dividend equivalents, in connection with Options or Stock Appreciation Rights) under the Plan. Subject to the provisions of the Plan, the Administrator shall have sole and complete authority to determine the individuals to whom and the time or times at which such Other Stock-Based Awards shall be granted, the number of Shares to be granted pursuant to such Other Stock-Based Awards, or the manner in which such Other Stock-Based Awards shall be settled (e.g., in Shares, cash or other property), or the conditions to the vesting and/or payment or settlement of such Other Stock-Based Awards
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(which may include, but not be limited to, achievement of performance criteria) and all other terms and conditions of such Other Stock-Based Awards.
Section 11.    Stock Bonuses.
In the event that the Administrator grants a Stock Bonus, the Shares constituting such Stock Bonus shall, as determined by the Administrator, be evidenced in uncertificated form or by a book entry record or a certificate issued in the name of the Participant to whom such grant was made and delivered to such Participant as soon as practicable after the date on which such Stock Bonus is payable.
Section 12.    Cash Awards.
The Administrator may grant Awards that are payable solely in cash, as deemed by the Administrator to be consistent with the purposes of the Plan, and such Cash Awards shall be subject to the terms, conditions, restrictions and limitations determined by the Administrator, in its sole discretion, from time to time. Cash Awards may be granted with value and payment contingent upon the achievement of Performance Conditions.
Section 13.    Change in Control Provisions.
(a)    In the event that a Change in Control occurs, each then-outstanding Award shall be treated as determined by the Administrator in accordance with this Section 13, without requiring the consent of the Participant to such treatment and without any obligation to treat all Awards in the same manner. Such treatment shall provide for one or more of the following (or substantially equivalent treatment, as determined by the Administrator in its sole discretion):
(1)    the continuation of such Awards by the Company (if the Company is the successor entity), with appropriate adjustments thereto in accordance with Section 5 hereof;
(2)    the assumption of such Awards, or the substitution of substantially equivalent awards with respect thereto, by the successor or acquiring entity (if any) in such Change in Control (or any parent thereof), which assumption or substitution shall be binding on all Participants, with appropriate adjustments thereto in accordance with Section 5 hereof; and/or
(3)    subject in all events to the requirements of Section 409A of the Code, the cancellation of such Awards in exchange for payment in cash or other property having an aggregate Fair Market Value equal to the Fair Market Value of the Shares, cash or other property covered by such Awards, reduced by the aggregate Exercise Price or Base Price thereof, if any; provided, however, that if the Exercise Price or Base Price of any outstanding Award is equal to or greater than the Fair Market Value of the Shares, cash or other property covered by such Award, the Administrator may cancel such Award without the payment of any consideration to the Participant. Subject to Section 409A of the Code, and in the discretion of the Administrator, such payment may be made in installments and may be deferred until the date or dates when such Awards would have otherwise become exercisable or vested.
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(b)    In the event that a Change in Control occurs and any then-outstanding Award is not assumed, substituted or cancelled in connection therewith pursuant to Section 13(a) hereof, then: (i) any unvested or unexercisable portion of any Award carrying a right to exercise shall become fully vested and exercisable effective as of immediately prior to the consummation of the Change in Control, and to the extent such Award is not exercised prior to the consummation of the Change in Control, it shall terminate and cease to be outstanding upon the consummation of the Change in Control and (ii) the restrictions, deferral limitations, payment conditions and forfeiture conditions applicable to any Awards shall lapse and such Awards shall be deemed fully vested and shall be settled in full effective immediately prior to the consummation of the Change in Control and cease to be outstanding upon the consummation of the Change in Control. Except as provided in the applicable Award Agreement, any Performance Conditions imposed with respect to such Awards shall be deemed to be achieved at the greater of target and actual performance levels as of the date of the Change of Control.
(c)    For purposes of this Section 13, an outstanding Award shall be considered to be assumed or substituted for if, following the Change in Control, the Award remains subject to the same terms and conditions that were applicable to the Award immediately prior to the Change in Control except that, if the Award related to Shares, the Award may instead confer the right to receive common equity of the acquiring entity (or cash or such other security or entity as may be determined by the Administrator, in its sole discretion, pursuant to Section 5 hereof).
Section 14.    Voting Proxy
The Company reserves the right to require the Participant, to the fullest extent permitted by applicable law, to appoint such Person as shall be determined by the Administrator in its sole discretion as the Participant’s proxy with respect to all applicable unvested Awards of which the Participant may be the record holder of from time to time to (A) attend all meetings of the holders of the shares of Common Stock, with full power to vote and act for the Participant with respect to such Awards in the same manner and extent that the Participant might were the Participant personally present at such meetings, and (B) execute and deliver, on behalf of the Participant, any written consent in lieu of a meeting of the holders of the shares of Common Stock in the same manner and extent that the Participant might but for the proxy granted pursuant to this sentence.
Section 15.    Amendment and Termination.
The Administrator may amend, alter or terminate the Plan, but no amendment, alteration, or termination shall be made that would impair the rights of a Participant under any outstanding Award without such Participant’s consent, except as deemed necessary or advisable by the Administrator for the purpose of complying with any applicable law, government regulation or stock exchange listing requirement. Unless the Board determines otherwise, the Board shall obtain approval of the Company’s stockholders for any amendment to the Plan that would require such approval in order to satisfy any rules of the stock exchange on which the Common Stock is traded or other applicable law. The Administrator may amend the terms of any outstanding Award, prospectively or retroactively, but, subject to Section 5 hereof and the immediately preceding sentence, no such amendment shall impair the rights of any Participant
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without the Participant’s consent; provided that the Administrator may amend the terms of any such Award to take effect retroactively or otherwise, as deemed necessary or advisable for the purpose of conforming the Award to any applicable law, government regulation or stock exchange listing requirement relating to such Award (including, but not limited to, Section 409A of the Code), and by accepting an Award under this Plan, the Participant thereby agrees to any amendment made pursuant to this Section 15 to such Award (as determined by the Administrator) without further consideration or action.
Section 16.    Unfunded Status of Plan.
The Plan is intended to constitute an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company.
Section 17.    Withholding Taxes.
Each Participant shall, no later than the date as of which the value of an Award first becomes includible in the gross income of such Participant for purposes of applicable taxes, pay to the Company, or make arrangements satisfactory to the Company regarding payment of, an amount in respect of such taxes up to the maximum statutory rates in the Participant’s applicable jurisdiction with respect to the Award, as determined by the Company. The obligations of the Company under the Plan shall be conditional on the making of such payments or arrangements, and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to such Participant. Whenever cash is to be paid pursuant to an Award, the Company shall have the right to deduct therefrom an amount sufficient to satisfy any applicable withholding tax requirements related thereto as determined by the Company. Whenever Shares or property other than cash are to be delivered pursuant to an Award, the Company shall have the right to require the Participant to remit to the Company in cash an amount sufficient to satisfy any related taxes to be withheld and applied to the tax obligations as determined by the Company; provided, that, with the approval of the Administrator, a Participant may satisfy the foregoing requirement by either (i) electing to have the Company withhold from such delivery Shares or other property, as applicable, or (ii) by delivering already owned unrestricted shares of Common Stock, in each case, having a value not exceeding the applicable taxes to be withheld and applied to the tax obligations as determined by the Company. Such withheld Shares or other property or already owned and unrestricted shares of Common Stock shall be valued at their Fair Market Value on the date on which the amount of tax to be withheld is determined and any fractional share amounts resulting therefrom shall be settled in cash. Such an election may be made with respect to all or any portion of the Shares to be delivered pursuant to an award. The Company may also use any other method of obtaining the necessary payment or proceeds, as permitted by law, to satisfy its withholding obligation with respect to any Award as determined by the Company, including, with the approval of the Administrator, by allowing the Participant to engage in broker-assisted cashless exercise or settlement procedures (including sales in open market transactions) to generate an amount of net proceeds (after deducting commissions) not exceeding the applicable taxes to be withheld and
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directing such proceeds to the Company to be applied to the tax obligations as determined by the Company.
Section 18.    Transfer of Awards.
Until such time as the Awards are fully vested and/or exercisable in accordance with the Plan or an Award Agreement, no purported sale, assignment, mortgage, hypothecation, transfer, charge, pledge, encumbrance, gift, transfer in trust (voting or other) or other disposition of, or creation of a security interest in or lien on, any Award or any agreement or commitment to do any of the foregoing (each, a “Transfer”) by any holder thereof in violation of the provisions of the Plan or an Award Agreement will be valid, except with the prior written consent of the Administrator, which consent may be granted or withheld in the sole discretion of the Administrator. Any purported Transfer of an Award or any economic benefit or interest therein in violation of the Plan or an Award Agreement shall be null and void ab initio, and shall not create any obligation or liability of the Company, and any Person purportedly acquiring any Award or any economic benefit or interest therein transferred in violation of the Plan or an Award Agreement shall not be entitled to be recognized as a holder of any Shares or other property underlying such Award. Unless otherwise determined by the Administrator in accordance with the provisions of the immediately preceding sentence, an Option or Stock Appreciation Right may be exercised, during the lifetime of the Participant, only by the Participant or, during any period during which the Participant is under a legal disability, by the Participant’s guardian or legal representative.
Section 19.    Continued Service.
Neither the adoption of the Plan nor the grant of an Award hereunder shall confer upon any Eligible Recipient any right to continued Service with the Company or any Affiliate thereof, as the case may be, nor shall it interfere in any way with the right of the Company or any Affiliate thereof to terminate the Service of any of its Eligible Recipients at any time.
Section 20.    Effective Date.
The Plan was adopted on March 27, 2026, subject to approval by the Company’s stockholders, and became effective immediately following such approval (the “Effective Date”).
Section 21.    Term of Plan.
No Award shall be granted pursuant to the Plan on or after the tenth anniversary of the Effective Date, but Awards theretofore granted may extend beyond that date.
Section 22.    Securities Matters and Regulations.
(a)    Notwithstanding anything herein to the contrary, the obligation of the Company to sell or deliver Common Stock with respect to any Award granted under the Plan shall be subject to all applicable laws, rules and regulations, including all applicable federal and state securities laws, the receipt of all such approvals by governmental agencies as may be deemed necessary or
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appropriate by the Administrator and the listing requirements of any securities exchange on which the Shares are traded. The Administrator may require, as a condition of the issuance and delivery of certificates evidencing shares of Common Stock pursuant to the terms hereof, that the recipient of such shares make such agreements and representations, and that such certificates bear such legends, as the Administrator, in its sole discretion, deems necessary or advisable.
(b)    Each Award is subject to the requirement that, if at any time the Administrator determines that the listing, registration or qualification of Common Stock issuable pursuant to the Plan is required by any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with, the grant of an Award or the issuance of Common Stock, no such Award shall be granted or payment made or Common Stock issued, in whole or in part, unless such listing, registration, qualification, consent or approval has been effected or obtained free of any conditions not acceptable to the Administrator.
(c)    In the event that the disposition of Common Stock acquired pursuant to the Plan is not covered by a then current registration statement under the Securities Act and is not otherwise exempt from such registration, such Common Stock shall be restricted against transfer to the extent required by the Securities Act or regulations thereunder, and the Administrator may require a Participant receiving Common Stock pursuant to the Plan, as a condition precedent to receipt of such Common Stock, to represent to the Company in writing that the Common Stock acquired by such Participant is acquired for investment only and not with a view to distribution.
Section 23.    Notification of Election Under Section 83(b) of the Code.
If any Participant shall, in connection with the acquisition of Shares under the Plan, make the election permitted under Section 83(b) of the Code, such Participant shall notify the Company of such election, and shall deliver a copy of such election to the Company, in each case, within ten days after filing notice of the election with the Internal Revenue Service.
Section 24.    No Fractional Shares.
No fractional Shares shall be issued or delivered pursuant to the Plan. The Administrator shall determine whether cash, other Awards, or other property shall be issued or paid in lieu of such fractional Shares or whether such fractional Shares or any rights thereto shall be forfeited or otherwise eliminated.
Section 25.    Paperless Administration.
In the event that the Company establishes, for itself or using the services of a third party, an automated system for the documentation, granting or exercise of Awards, such as a system using an internet website or interactive voice response, then the paperless documentation, granting or exercise of Awards by a Participant may be permitted through the use of such an automated system.
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Section 26.    Severability.
If any provision of the Plan is held to be invalid or unenforceable, the other provisions of the Plan shall not be affected but shall be applied as if the invalid or unenforceable provision had not been included in the Plan.
Section 27.    Clawback.
Notwithstanding any other provisions in this Plan, any Award, including any Shares, cash or other property subject to or purchased or received pursuant to an Award, shall be subject to any recovery, recoupment, clawback and/or other forfeiture policy maintained by the Company from time to time or otherwise required by applicable law, including, without limitation, the Forbright, Inc. and Forbright Bank Clawback Policy and the Forbright, Inc. Executive Compensation Clawback Policy, as each may be amended and/or restated from time to time, and any successor thereto.
Section 28.    Section 409A of the Code.
The Plan as well as payments and benefits under the Plan are intended to be exempt from, or to the extent subject thereto, to comply with Section 409A of the Code, and, accordingly, to the maximum extent permitted, the Plan shall be interpreted in accordance therewith. Notwithstanding anything contained herein to the contrary, to the extent required in order to avoid accelerated taxation and/or tax penalties under Section 409A of the Code, the Participant shall not be considered to have terminated employment or service with the Company for purposes of the Plan and no payment shall be due to the Participant under the Plan or any Award until the Participant would be considered to have incurred a “separation from service” from the Company and its Affiliates within the meaning of Section 409A of the Code. Any payments described in the Plan that are due within the “short term deferral period” as defined in Section 409A of the Code shall not be treated as deferred compensation unless applicable law requires otherwise. Notwithstanding anything to the contrary in the Plan, to the extent that any Awards (or any other amounts payable under any plan, program or arrangement of the Company or any of its Affiliates) are payable upon a separation from service and such payment would result in the imposition of any individual tax and penalty interest charges imposed under Section 409A of the Code, the settlement and payment of such awards (or other amounts) shall instead be made on the first business day after the date that is six (6) months following such separation from service (or upon the Participant’s death, if earlier). Each amount to be paid or benefit to be provided under this Plan shall be construed as a separate identified payment for purposes of Section 409A of the Code. The Administrator shall have the sole authority to make any accelerated distributions permissible under Treas. Reg. Section 1.409A-3(j)(4) to Participants with respect to any deferred amounts, provided that such distributions meets the requirements of Treas. Reg. Section 1.409A-3(j)(4). The Company makes no representation that any or all of the payments or benefits described in this Plan will be exempt from or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to any such payment. The Participant shall be solely responsible for the payment of any taxes and penalties incurred under Section 409A of the Code.
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Section 29.    Governing Law.
The Plan shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to the principles of conflicts of law of such state.
Section 30.    Titles and Headings.
The titles and headings of the sections in the Plan are for convenience of reference only and, in the event of any conflict, the text of the Plan, rather than such titles or headings, shall control.
Section 31.    Successors.
The obligations of the Company under the Plan shall be binding upon any successor corporation or organization resulting from the merger, consolidation or other reorganization of the Company, or upon any successor corporation or organization succeeding to substantially all of the assets and business of the Company.
Section 32.    Relationship to Other Benefits.
No payment pursuant to the Plan shall be taken into account in determining any benefits under any pension, retirement, savings, profit sharing, group insurance, welfare, or other benefit plan of the Company or any Affiliate except to the extent otherwise expressly provided in writing in such other plan or an agreement thereunder.
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Exhibit 10.9
FORBRIGHT, INC.
EMPLOYEE STOCK PURCHASE PLAN
Section 1.    Purpose of Plan.
The name of the Plan is the Forbright, Inc. Employee Stock Purchase Plan. The purpose of the Plan is to provide employees of the Company and its Designated Subsidiaries with an opportunity to purchase Common Stock of the Company through accumulated after-tax payroll deductions. It is the intention of the Company to have the Plan qualify as an “Employee Stock Purchase Plan” under Section 423 of the US Internal Revenue Code of 1986, as amended (“Code Section 423”). The provisions of the Plan, accordingly, shall be construed so as to allow participation in a manner consistent with the requirements of Code Section 423. However, the Company may grant options pursuant to one or more offerings under the Plan that are not intended to meet the requirements of Code Section 423, provided that except as expressly set forth herein, any such offering shall be operated and administered in the same manner as an offering that is intended to meet the requirements of Code Section 423.
Section 2.    Definitions.
For purposes of the Plan, the following terms shall be defined as set forth below:
(a)    “Administrator” means the Board, or, if and to the extent the Board does not administer the Plan, the Committee, which shall administer the Plan in accordance with Section 14 hereof.
(b)    “Adoption Date” has the meaning set forth in Section 25 hereof.
(c)    “Board” means the Board of Directors of the Company.
(d)    “Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor thereto.
(e)    “Committee” means any committee or subcommittee the Board may appoint to administer the Plan. Subject to the discretion of the Board, the Committee shall be composed entirely of individuals who meet the qualifications of (i) a “non-employee director” within the meaning of Rule 16b-3 under the Exchange Act and (ii) any other qualifications required by the applicable stock exchange on which the Common Stock is traded.
(f)    “Common Stock” means the Class A common stock, par value $0.001 per share, of the Company.
(g)    “Company” means Forbright, Inc., a Delaware corporation (or any successor company).
(h)    “Compensation” means the base salary, wages, overtime pay, and commissions payable to an Employee by the Company or one or more Designated Subsidiaries during such individual’s period of participation in one or more offerings under the Plan, before deduction for


any pre-tax contributions made by the Employee to any cash-or-deferred arrangement that meets the requirements of Section 401(k) of the Code or any cafeteria benefit program that meets the requirements of Section 125 of the Code, now or hereafter established by the Company or any Designated Subsidiary. The Administrator may make modifications to the definition of Compensation for one or more offerings as deemed appropriate.
(i)    “Designated Subsidiaries” means any Subsidiary (whether now existent or hereafter organized or acquired by the Company or a Subsidiary) that has been designated by the Administrator to participate in the Plan.
(j)    “Employee” means any individual who is a regular employee of the Company or a Designated Subsidiary having the status of an “employee” within the meaning of Section 3401(c) of the Code; provided that, for any specific Offering Period, the Administrator may exclude those individuals who:
(i)    have been regular employees of the Company or a Designated Subsidiary for less than two years prior to the Offering Period,
(ii)    are customarily employed for 20 hours or less per week,
(iii)    are customarily employed not more than five months in any calendar year,
(iv)    are “highly compensated employees” of the Company or any Designated Subsidiary (within the meaning of Section 414(q) of the Code), or
(v)    are “highly compensated employees” of the Company or any Designated Subsidiary (within the meaning of Section 414(q) of the Code) (x) with compensation above a specified level, (y) who are officers or (z) who are subject to the disclosure requirements of Section 16(a) of the Exchange Act;
provided further, that, any such exclusion must be applied in a uniform manner to all employees of the Company and the Designated Subsidiaries for such Offering Period.
For purposes of the Plan, the employment relationship shall be treated as continuing intact while the individual is on sick leave or other leave of absence approved by the Company. Unless otherwise determined by the Administrator and set forth in the applicable offering, where the period of leave exceeds three months and the individual’s right to reemployment is not guaranteed either by statute or by contract, the employment relationship will be deemed to have terminated on the first day immediately following the expiration of such three month period. For the avoidance of doubt, the term “Employee” shall not include any consultant, independent contractor or non-employee director of the Company or a Designated Subsidiary. Notwithstanding the foregoing, for purposes of any offering under the Plan that is not intended to meet the requirements of Code Section 423, the Administrator may make modifications to the definition of Employee as deemed appropriate.
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(k)    “Enrollment Date” means the first day of each Offering Period.
(l)    “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time, or any successor thereto.
(m)    “Exercise Date” means the last Trading Day in each Offering Period, or such other date or dates within the Offering Period as determined by the Administrator (including for purposes of establishing any interim purchase period within an Offering Period).
(n)    “Fair Market Value” of the Common Stock or another security as of a particular date means the fair market value as determined by the Administrator in its sole discretion; provided, however, that except as otherwise determined by the Administrator, (i) if the Common Stock or other security is admitted to trading on a national securities exchange, the fair market value on any date shall be the closing sale price reported on the last preceding trading day on which there was a sale of such share of Common Stock or other security on such exchange, or (ii) if the Common Stock or other security is then traded in an over-the-counter market, the fair market value on any date shall be the average of the closing bid and asked prices for such share of Common Stock or other security in such over-the-counter market for the last preceding date on which there was a sale of such share of Common Stock or other security in such market.
(o)    “Offering Period” means a period with respect to which the right to purchase Common Stock may be granted under the Plan, as set forth in Section 5 hereof.
(p)    “Plan” means this Forbright, Inc. Employee Stock Purchase Plan, as may be amended and/or restated from time to time.
(q)    “Purchase Price” means the amount established by the Administrator in its sole discretion in advance of the applicable offering under the Plan; provided that such amount shall not be less than the lesser of either (i) an amount equal to 85% of the Fair Market Value of a share of Common Stock on the Enrollment Date or (ii) an amount equal to 85% of the Fair Market Value of a share of Common Stock on the Exercise Date.
(r)    “Subsidiary” means a corporation, domestic or foreign (including any limited liability company (or other eligible entity) that has elected to be taxed for U.S. federal income tax purposes as a corporation, or any disregarded entity with respect to a corporation), of which not less than 50% of the total combined voting power of all classes of stock are held by the Company or a Subsidiary, whether or not such corporation now exists or is hereafter organized or acquired by the Company or a Subsidiary. Notwithstanding the foregoing, for purposes of any offering under the Plan that is not intended to meet the requirements of Code Section 423, “Subsidiary” may include a corporation or any other entity of which not less than 50% of the total combined voting power of all classes of stock are held by the Company or a Subsidiary.
(s)    “Trading Day” means a day on which the Nasdaq is open for trading.
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Section 3.    Eligibility; Ownership Threshold; Annual Limit.
(a)    Options may be granted only to Employees. Unless otherwise determined by the Administrator in a manner that satisfies the requirements of Code Section 423 (if applicable), any Employee employed on the Enrollment Date for an Offering Period shall be eligible to participate in the Plan for such Offering Period.
(b)    Any provisions of the Plan to the contrary notwithstanding, no Employee shall be granted an option under the Plan (i) if, immediately after the grant, such Employee (and any other person whose stock would be attributed to such Employee pursuant to Section 424(d) of the Code) would own stock and/or hold outstanding options to purchase stock possessing 5% or more of the total combined voting power or value of all classes of stock of the Company or of any Subsidiary of the Company, or (ii) which permits such Employee’s rights to purchase stock under all employee stock purchase plans (within the meaning of Code Section 423) of the Company and its Subsidiaries to accrue at a rate which exceeds $25,000 worth of shares of Common Stock (calculated based on the Fair Market Value of the shares of Common Stock on the Enrollment Date) for each calendar year in which such option is outstanding at any time.
Section 4.    Offerings.
The Plan shall be implemented through one or more offerings. Offerings may be consecutive or overlapping. Each offering shall be in such form and shall contain such terms and conditions as the Administrator shall deem appropriate. The terms of separate offerings need not be identical; provided, however, that each offering shall comply with the provisions of the Plan and the participants in each offering shall have equal rights and privileges under that offering in accordance with the requirements of Section 423(b)(5) of the Code and the applicable regulations thereunder.
Section 5.    Offering Periods.
Offerings shall be implemented by Offering Periods in the discretion of the Administrator. Each Offering Period shall commence at such time and be of such duration not to exceed 27 months, as determined by the Administrator prior to the start of the applicable Offering Period. The initial Offering Period under the Plan shall commence on the date established by the Administrator. The decision of the Administrator to implement an Offering Period shall not require the Administrator to implement any additional consecutive or overlapping Offering Period.
Section 6.    Participation.
An eligible Employee determined in accordance with Section 3 hereof may elect to become a participant in the manner specified by the Administrator from time to time, which may include accessing the website designated by the Company from time to time and electronically enrolling in an Offering Period or submitting an enrollment agreement (in such form as the Company may provide, including by electronic means) authorizing payroll deductions, in each case at least ten days prior to the applicable Enrollment Date, unless an earlier or later time for
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enrolling is set by the Administrator for all eligible Employees with respect to a given Offering Period.
Section 7.    Payroll Deductions.
(c)    At the time a participant enrolls in an Offering Period, such participant shall elect to have after-tax payroll deductions made during the Offering Period pursuant to such procedures as the Administrator may specify from time to time and, unless otherwise determined by the Administrator, in an amount between 1% and 15% of the Compensation which such participant receives during the Offering Period.
(d)    Payroll deductions shall commence with the first payroll period following the Enrollment Date and end with the last payroll period in the Offering Period, unless sooner altered or terminated as provided in the Plan.
(e)    All payroll deductions made for a participant shall be credited to the participant’s account under the Plan and shall be withheld in whole percentages only. A participant may not make any additional lump sum contributions to such account unless specifically provided for in the offering.
(f)    A participant may discontinue such participant’s participation in the Plan as provided in Section 11 hereof, or may decrease the rate of such participant’s payroll deductions during the current Offering Period by amending such participant’s enrollment agreement or by submitting a new enrollment agreement (in such form as the Company may provide, including by electronic means) authorizing a decrease in payroll deduction rate. The decrease in rate shall be effective with the first full payroll period following ten business days after the Company’s receipt of the amended enrollment or earlier to the extent administratively practicable. If permitted by the Administrator, a participant may increase the rate of such participant’s payroll deductions for an upcoming Offering Period by amending such participant’s enrollment agreement or by submitting a new enrollment agreement (in such form as the Company may provide, including by electronic means) authorizing an increase in payroll deduction rate within ten business days prior to commencement of the upcoming Offering Period. A participant’s enrollment agreement shall remain in effect for successive Offering Periods unless terminated as provided in Section 11 hereof. The Administrator shall be authorized to limit the number of participation rate changes during any Offering Period, which, unless otherwise determined by the Administrator, shall be one time during the applicable Offering Period.
(g)    Notwithstanding the foregoing, to the extent necessary to comply with the limitations of Section 423(b)(8) of the Code and Section 3(b)(ii) hereof, a participant’s payroll deductions may be decreased to 0% during any Offering Period if such participant would, as a result of such limitations, be precluded from buying any additional shares of Common Stock on the Exercise Date for that Offering Period. The suspension of such deductions shall not terminate the participant’s participation in the Plan. Payroll deductions shall recommence at the rate provided in such participant’s enrollment agreement at the beginning of the first Offering Period for which the participant is able to purchase shares of Common Stock in compliance with the
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limitations of Section 423(b)(8) of the Code and Section 3(b)(ii) hereof, unless terminated by the participant as provided in Section 11 hereof.
Section 8.    Grant of Option.
On the Enrollment Date of each Offering Period, each eligible Employee participating in such Offering Period shall be granted an option to purchase on the Exercise Date for such Offering Period (at the applicable Purchase Price) up to the lesser of (i) a number of shares of Common Stock determined by dividing such Employee’s payroll deductions (and contributions) accumulated prior to such Exercise Date and retained in the participant’s account as of the Exercise Date by the applicable Purchase Price and (ii) 10,000 shares of Common Stock; provided that such purchase shall be subject to the limitations set forth in Sections 3(b) and 13 hereof. Exercise of the option shall occur as provided in Section 9 hereof, unless the participant has withdrawn pursuant to Section 11 hereof.
Section 9.    Exercise of Option.
(a)    Unless a participant withdraws from the Plan as provided in Section 11 hereof, such participant’s option for the purchase of shares of Common Stock will be exercised automatically on each Exercise Date, and the maximum number of full shares subject to such option shall be purchased for such participant at the applicable Purchase Price with the accumulated payroll deductions (and contributions) in such participant’s account. No fractional shares will be purchased. Unless otherwise determined by the Administrator, any funds left over in a participant’s account after the Exercise Date, including any payroll deductions which are not sufficient to purchase a full share, shall be returned to the participant as soon as administratively practicable following the Exercise Date.
(b)    At the time the option is exercised, in whole or in part, or at the time some or all of the Common Stock issued under the Plan is disposed of, the participant must make adequate provision for the Company’s federal, state, local, foreign or other tax withholding obligations, if any, which arise upon the exercise of the option or the disposition of the Common Stock. At any time, the Company may, but will not be obligated to, withhold from the participant’s compensation the amount necessary for the Company to meet applicable withholding obligations, including any withholding required to make available to the Company any tax deductions or benefit attributable to sale or early disposition of Common Stock by the participant.
(c)    A participant shall have no rights to dividends, dividend equivalents or distributions or any other rights of a stockholder with respect to such participant’s option prior to the time that such option is exercised to purchase of shares of Common Stock on the Exercise Date.
Section 10.    Delivery to Broker Account.
(a)    As promptly as practicable after each Exercise Date on which a purchase of shares of Common Stock occurs, the Company shall deliver the shares purchased by the participant to a
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brokerage account established for the participant at a Company-designated brokerage firm or other third-party administrator (the “ESPP Broker Account”). The Administrator may require that, except as otherwise provided below, the deposited shares of Common Stock may not be transferred (either electronically or in certificate form) from the ESPP Broker Account until the later of the following two periods: (i) the end of the two year period measured from the Enrollment Date for the Offering Period in which the shares were purchased and (ii) the end of the one year period measured from the applicable Exercise Date. The Company may require that the participant pay any applicable account maintenance fees incurred with respect to the participant’s ESPP Broker Account, which fees may be collected in such manner as determined by the Company, including, without limitation, by implementing the sale of a sufficient number of shares of Common Stock from the participant’s ESPP Broker Account to cover such fees. The Administrator may require the participant to notify the Company before the participant sells or otherwise disposes of any shares of Common Stock acquired under the Plan.
(b)    Such limitation shall apply both to transfers to different accounts with the same broker and to transfers to other brokerage firms. Any shares of Common Stock held for the required holding period may be transferred (either electronically or in certificate form) to other accounts or to other brokerage firms.
(c)    The foregoing procedures shall apply to all shares of Common Stock purchased by the participant under the Plan, whether or not the participant continues in Employee status.
Section 11.    Withdrawal; Termination of Employment.
(a)    A participant may withdraw all but not less than all the payroll deductions, if any, credited to such participant’s account and not yet used to exercise such participant’s option under the Plan at any time in the manner specified by the Administrator from time to time, which may include accessing the website designated by the Company and electronically withdrawing from the Offering Period or giving written notice to the Company (in such form as the Company may provide). All of the participant’s payroll deductions credited to such participant’s account will be paid to such participant (without interest) as soon as practicable after receipt of notice of withdrawal and such participant’s option for the Offering Period will be automatically terminated, and no further payroll deductions for the purchase of shares will be made during the Offering Period. If a participant withdraws from an Offering Period, payroll deductions will not resume at the beginning of the succeeding Offering Period unless the participant timely enrolls in that Offering Period.
(b)    Upon a participant’s ceasing to be an Employee for any reason or upon termination of a participant’s employment relationship (as described in Section 2(j) hereof), the payroll deductions and other contributions, if any, credited to such participant’s account during the Offering Period but not yet used to exercise the option will be returned (without interest) to such participant or, in the case of such participant’s death, to the person or persons estate, and such participant’s option will be automatically terminated. A participant whose employment is deemed to have terminated under Section 2(j) hereof but in fact remains an Employee may participate in any future Offering Period in which such individual is eligible to participate by timely enrollment in that Offering Period.
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Section 12.    Interest.
No interest shall accrue on the payroll deductions credited to a participant’s account under the Plan unless otherwise determined by the Administrator or required by applicable law.
Section 13.    Shares Available for Sale.
(a)    The maximum number of shares of Common Stock which shall be made available for sale under the Plan shall be equal to [●]1 shares of Common Stock (subject to adjustment as provided in Section 18 hereof), as increased on the first day of each fiscal year of the Company beginning on and including January 1, 2027, by a number equal to the lesser of (x) 1% of the aggregate number of shares of Common Stock issued and outstanding on December 31 of the immediately preceding fiscal year and (y) a number of shares of Common Stock as is determined by the Administrator. Notwithstanding the foregoing, in no event shall the maximum number of shares of Common Stock available for issuance under the Plan exceed [●]2 shares (subject to adjustment as provided in Section 18 hereof). If on a given Exercise Date the number of shares of Common Stock with respect to which options are to be exercised exceeds the number of shares of Common Stock then available under the Plan, the Company shall make a pro rata allocation of the shares of Common Stock remaining available for purchase in as uniform a manner as shall be practicable and as it shall determine to be equitable.
(b)    The participant will have no interest or voting right in shares covered by such participant’s option until such option has been exercised and the participant has become a holder of record of the purchased shares of Common Stock.
Section 14.    Administration.
(a)    The Plan shall be administered by the Administrator. The Administrator shall have full and exclusive discretionary authority to construe, interpret and apply the terms of the Plan, to determine eligibility and to adjudicate all disputed claims under the Plan. Every finding, decision and determination made by the Administrator shall, to the fullest extent permitted by law, be final and binding upon all parties. Members of the Board who are eligible Employees are permitted to participate in the Plan, provided that members of the Board who are eligible to participate in the Plan may not vote on any matter affecting the administration of the Plan or the grant of any option pursuant to the Plan.
(b)    For purposes of any offering under the Plan that is not intended to meet the requirements of Code Section 423, the Administrator shall have the authority, in its sole discretion, to approve addenda to the Plan and any enrollment agreement pursuant to this Section
1     This number to be equal to 1.5% of all classes of the outstanding common stock of the Company on a fully diluted basis as of immediately following the closing of the IPO, without giving effect to any exercise by the underwriters of their option to purchase additional shares in the IPO.

2     This number to be equal to 11.5% of all classes of the outstanding common stock of the Company on a fully diluted basis as of immediately following the closing of the IPO, without giving effect to any exercise by the underwriters of their option to purchase additional shares in the IPO.
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14(b) with such terms and conditions as the Administrator deems necessary or appropriate to accommodate the terms of such offering, provided that except as expressly set forth herein, any such offering shall be operated and administered in the same manner as an offering that is intended to meet the requirements of Code Section 423.
(c)    The Administrator may, in its sole discretion, delegate its authority, in whole or in part, under this Section 14 to one or more officers of the Company, subject to the requirements of Code Section 423 and applicable law or any stock exchange on which the Shares are traded.
(d)    All decisions made by the Administrator pursuant to the provisions of the Plan shall be final, conclusive and binding on all persons, including the Company and the participants. No member of the Board or the Committee, nor any officer or employee of the Company or any Subsidiary thereof acting on behalf of the Board or the Committee, shall be personally liable for any action, omission, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or the Committee and each and any officer or employee of the Company and of any Subsidiary thereof acting on their behalf shall, consistent with the Certificate of Incorporation and to the maximum extent permitted by applicable law (as it now exists or may hereafter be amended), be fully indemnified and protected by the Company in respect of any such action, omission, determination or interpretation.
Section 15.    Transfer Restrictions.
Neither payroll deductions credited to a participant’s account nor any rights with regard to the exercise of an option or to receive shares of Common Stock under the Plan may be assigned, transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution). Any such attempt at assignment, transfer, pledge or other disposition shall be without effect, except that the Company may treat such act as an election to withdraw funds from an Offering Period in accordance with Section 11 hereof. During a participant’s lifetime, a participant’s option to purchase shares of Common Stock under the Plan is exercisable only by the participant.
Section 16.    Use of Funds.
All payroll deductions received or held by the Company under the Plan may be used by the Company for any corporate purpose, and the Company shall not be obligated to segregate such funds unless otherwise required by applicable law.
Section 17.    Reports.
Individual book accounts will be maintained for each participant in the Plan. Statements of account will be made available to participating Employees at least annually, which statements will set forth the amounts of payroll deductions, the Purchase Price, the number of shares of Common Stock purchased and the remaining cash balance, if any.
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Section 18.    Adjustments Upon Changes in Capitalization, Dissolution, Merger or Asset Sale.
(a)    Subject to any required action by the stockholders of the Company, the number of shares of Common Stock reserved and available for future sale under the Plan, as well as the number of shares and price per share of Common Stock covered by each option under the Plan which has not yet been exercised and the maximum number of shares that may be purchased per participant on any Exercise Date, shall be equitably adjusted for any increase or decrease in the number of issued shares of Common Stock resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of shares of Common Stock effected without receipt of consideration by the Company; provided, however, that neither the conversion of any convertible securities of the Company nor any grant of awards under any other equity compensation plan sponsored by the Company shall be deemed to have been “effected without receipt of consideration.” Such adjustment shall be made by the Administrator in the manner determined by the Administrator, in its sole discretion, and any such determination shall be final, binding and conclusive. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares of Common Stock subject to an option. The Administrator may, if it so determines in the exercise of its sole discretion, make provision for adjusting the number of shares of Common Stock reserved and available for future sale under the Plan, as well as the number of shares and price per share of Common Stock covered by each outstanding option and the maximum number of shares that may be purchased per participant on any Exercise Date, in the event the Company effects one or more reorganizations, recapitalizations, rights offerings or other increases or reductions of shares of its outstanding Common Stock.
(b)    In the event of the proposed dissolution or liquidation of the Company, the Offering Periods will terminate and all participant contributions in respect of any open Offering Period will be refunded to the participants immediately prior to the consummation of such proposed action, unless otherwise provided by the Administrator.
(c)    In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation, the Administrator may determine, in the exercise of its sole discretion, to shorten the Offering Periods then in progress by setting a new Exercise Date (the “New Exercise Date”). If the Administrator shortens the Offering Periods then in progress in lieu of assumption or substitution in the event of a merger or sale of assets, the Administrator shall notify each participant in writing, at least ten days prior to the New Exercise Date, that the Exercise Date for such participant’s option has been changed to the New Exercise Date and that such participant’s option will be exercised automatically on the New Exercise Date, unless prior to such date such participant has withdrawn from the Offering Period as provided in Section 11 hereof. If no New Exercise Date is set by the Administrator, all participant contributions in respect of an open Offering Period will be refunded to the participants immediately prior to the closing of the sale of all or substantially all of the assets of the Company, or the merger of the Company with or into another corporation.
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Section 19.    Amendment or Termination.
(a)    The Administrator may at any time and for any reason terminate or amend the Plan. Except as provided in Section 18 hereof or as necessary to comply with applicable laws or regulations, no such termination or amendment can adversely affect options previously granted without the consent of the affected participant. To the extent necessary to comply with Code Section 423 (or any successor rule or provision) or any other applicable law or regulation, the Company shall obtain stockholder approval in such a manner and to such a degree as required.
(b)    Without stockholder consent and without regard to whether any participant rights may be considered to have been “adversely affected,” the Administrator shall be entitled to change the Offering Periods or Exercise Date, change the maximum number of shares of Common Stock purchasable per participant on any Exercise Date, limit the frequency and/or number of changes in the amount withheld during Offering Periods, establish the exchange ratio applicable to amounts withheld in a currency other than U.S. dollars, permit payroll withholding in excess of the amount designated by a participant in order to adjust for delays or mistakes in the Company’s processing of properly completed withholding elections, establish reasonable waiting and adjustment periods and/or accounting and crediting procedures to ensure that amounts applied toward the purchase of Common Stock for each participant properly correspond with amounts withheld from the participant’s Compensation, and establish such other limitations or procedures as Administrator determines in its sole discretion advisable which are consistent with the Plan.
Section 20.    Notices.
All notices or other communications by a participant to the Company under or in connection with the Plan shall be deemed to have been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company for the receipt thereof.
Section 21.    Conditions Upon Issuance of Shares.
(a)    Shares of Common Stock shall not be issued with respect to an option unless the exercise of such option and the issuance and delivery of such shares pursuant thereto shall comply with all applicable provisions of law, domestic or foreign, including, without limitation, the Securities Act of 1933, as amended, the Exchange Act, the rules and regulations promulgated thereunder, and the requirements of any stock exchange upon which the shares may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. In addition, should the Plan not be registered on any Exercise Date of any Offering Period in any foreign jurisdiction in which such registration is required, then no options granted with respect to the Offering Period to participants in that foreign jurisdiction shall be exercised on such Exercise Date, and all contributions accumulated on behalf of such participants during the Offering Period in which such Exercise Date occurs shall be distributed to such participants without interest unless otherwise required by the terms of such offering or applicable law.
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(b)    As a condition to the exercise of an option, the Company may require the person exercising such option to represent and warrant at the time of any such exercise that the shares of Common Stock are being purchased only for investment and without any present intention to sell or distribute such shares if, in the opinion of counsel for the Company, such a representation is required by any of the aforementioned applicable provisions of law.
Section 22.    Certain Tax Matters.
(a)    If a participant makes a disposition, within the meaning of Section 424(c) of the Code and regulations promulgated thereunder, of any share of Common Stock issued to such participant hereunder, and such disposition occurs within the two year period commencing on the Enrollment Date or within the one year period commencing on the day of the Exercise Date, such participant shall promptly notify the Company thereof.
(b)    Purchases of shares of Common Stock by participants who are U.S. taxpayers participating in any offering under the Plan that is not intended to meet the requirements of Code Section 423 are intended to be exempt from, or to the extent subject thereto, to comply with Section 409A of the Code, and, accordingly, to the maximum extent permitted, any such offering and this Plan shall be interpreted in accordance therewith. The Company makes no representation that any or all of the payments described in this Plan will be exempt from or comply with Section 409A of the Code and makes no undertaking to preclude Section 409A of the Code from applying to any such payments. The participant shall be solely responsible for the payment of any taxes and penalties incurred under Section 409A of the Code.
(c)    Neither the Company nor the Administrator will be liable to any participant or to any other party if the Plan or any offering fails or ceases to qualify as an “Employee Stock Purchase Plan” under Code Section 423.
Section 23.    No Right to Employment.
Neither the creation of the Plan nor participation therein shall be deemed to create any right of continued employment or in any way affect the right of the Company or Designated Subsidiary to terminate the employment of an Employee.
Section 24.    Governing Law.
The Plan shall be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to the principles of conflicts of law of such state.
Section 25.    Term of Plan.
The Plan was adopted on March 27, 2026, subject to approval by the Company’s stockholders on [●], 2026 (the “Adoption Date”), and became effective on the date immediately preceding the date on which the registration statement on Form S-1 that is filed by the Company with respect to its initial public offering covering the offer and sale by the Company of its Common Stock is declared effective by the U.S. Securities and Exchange Commission. It shall
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continue in effect until the 10th anniversary of the Adoption Date or until earlier terminated pursuant to Section 19 hereof.
Section 26.    Provisions for Foreign Participants.
(a)    The Administrator may establish subplans, addenda or procedures under the Plan and any enrollment agreement or take any other necessary or appropriate action to address applicable law, including (i) differences in laws, rules, regulations or customs of such jurisdictions with respect to tax, securities, currency, employee benefit or other matters, (ii) listing and other requirements of any non-U.S. securities exchange and (iii) any necessary local governmental or regulatory exemptions or approvals.
(b)    By participating in the Plan or accepting any rights under it, each participant consents to the collection and processing of personal data relating to the participant so that the Company and its Subsidiaries can fulfill their obligations and exercise their rights under the Plan and generally administer and manage the Plan. This data will include, but may not be limited to, data about participation in the Plan and shares of Common Stock offered or received, purchased or sold under the Plan from time to time and other appropriate financial and other data about the participant and the participant’s participation in the Plan.
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Exhibit 10.12
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT (this “Agreement”) is made and effective as of [●], 2026, by and between Forbright, Inc., a Delaware corporation (the “Company”), and [●] (“Indemnitee”).
WHEREAS, it is essential to the Company to retain and attract the most capable persons available as directors and officers;
WHEREAS, Indemnitee is a director and/or executive officer of the Company;
WHEREAS, both the Company and Indemnitee recognize the increased risk of litigation and other proceedings with claims being asserted against directors and officers of public companies;
WHEREAS, the Company’s Amended Certificate of Incorporation (“Certificate of Incorporation”) and Amended Bylaws (“Bylaws”) require the Company to indemnify, and the Bylaws further require the advancement of expenses by the Company to, the Company’s directors and executive officers to the extent and subject to the conditions provided therein, and Indemnitee serves as a director and/or executive officer of the Company, in part, in reliance on such provisions in the Company’s Certificate of Incorporation and Bylaws;
WHEREAS, the Company has determined that its inability to retain and attract the most capable persons as its directors and officers available would be detrimental to the interests of the Company and that the Company therefore should provide such persons with assurances that they will be entitled in the future to indemnification and advancement of expenses and, to the extent applicable, coverage by directors’ and officers’ liability insurance; and
WHEREAS, in recognition of Indemnitee’s need for substantial protection against personal liability, and in order to enhance the likelihood of Indemnitee’s continued service to the Company, and in part to provide Indemnitee with specific contractual assurance that the rights to indemnification and advancement of expenses set forth in the Company’s Certificate of Incorporation and Bylaws will be available to Indemnitee (regardless of, among other things, any amendment to or recission of the applicable provisions of the Certificate of Incorporation or Bylaws, any change in the composition of the Board of Directors, or any Change of Control (each, as defined below)), the Company wishes to provide in this Agreement for the indemnification of, and advancement of expenses to, Indemnitee to the fullest extent (whether partial or complete) permitted by applicable law, on the terms and conditions set forth in this Agreement, and, to the extent that a directors’ and officers’ liability insurance policy is maintained with respect to the Company’s directors and officers, the Company wishes to provide Indemnitee with assurance of the continued coverage of Indemnitee under such directors’ and officers’ liability insurance policy.
NOW, THEREFORE, in consideration of the foregoing, the covenants and agreements contained in this Agreement, and of Indemnitee’s willingness to, or continue to serve


as a director, and/or executive officer, of the Company and to serve at the Company’s request as an officer, director, employee, manager, member, partner, tax matters partner, partnership representative, agent, fiduciary, or trustee of, or in any other capacity with, another Person (as defined below) or any employee benefit plan, and intending to be legally bound hereby, the parties hereto agree as follows:
1.    Certain Definitions:
(a)    Board of Directors: shall mean the Board of Directors of the Company.
(b)    Change in Control: shall be deemed to have occurred if (i) any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than (A) a trustee or other fiduciary holding securities under an employee benefit plan of the Company, (B) a Subsidiary of the Company or (C) the Company’s stockholders in substantially the same proportions as their ownership of stock of the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing twenty percent (20%) or more of the total voting power represented by the Company’s then outstanding Voting Securities, except to the extent that any repurchase or redemption of Voting Securities by the Company shall directly result in any person becoming the beneficial owner of twenty percent (20%) or more of the total voting power represented by the Company’s then outstanding Voting Securities, or (ii) during any period of two (2) consecutive years, individuals who, at the beginning of such period, constitute the Board of Directors and any new director whose appointment by the Board of Directors, or nomination for election by the Company’s stockholders, was approved by a vote of at least two-thirds (2/3) of the directors then in office who either were directors at the beginning of such two-year period or whose appointment or nomination for election by stockholders was previously so approved (such individuals, “Continuing Directors”), cease for any reason to constitute a majority of the Board of Directors, (iii) the consummation, or the approval by the Company’s stockholders, of a merger, consolidation, business combination, recapitalization, restructuring or similar transaction of or involving the Company that results in, or would result in, the Voting Securities of the Company outstanding immediately prior thereto not representing, (either by remaining outstanding or by being converted into Voting Securities of the surviving or resulting entity thereof) at least fifty percent (50%) of the total voting power represented by the outstanding Voting Securities of the Company or of such surviving or resulting entity immediately after consummation of such merger, consolidation, business combination, recapitalization, restructuring or similar transaction, (iv) the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or an agreement for the sale, lease, exchange or other disposition (in one transaction or a series of related transactions) of all or substantially all of the Company’s assets, or (v) there occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A (or a response to any similar item on any similar schedule or form) promulgated under the Exchange Act, whether or not the Company is then subject to such reporting requirement.
(c)    Claim: shall mean any threatened, asserted, pending, or completed civil, criminal, administrative, investigative, or other action, suit, or proceeding of any kind whatsoever,
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including any arbitration or other alternative dispute resolution mechanism, any appeal of any kind from any of the foregoing, any inquiry or investigation, whether instituted by the Company, any governmental agency or any other party, that Indemnitee in good faith believes could lead to the institution of any action, suit, or proceeding, whether civil, criminal, administrative, investigative, or other.
(d)    DGCL: shall mean the General Corporation Law of the State of Delaware.
(e)    ERISA: shall mean the Employee Retirement Income Security Act of 1974, as amended.
(f)    Exchange Act: shall mean the Securities Exchange Act of 1934, as amended.
(g)    Expenses: shall mean all direct and indirect costs, expenses, and other monetary obligations (including, without limitation, attorneys’ fees and disbursements, experts’ fees, court costs, retainers, appeal bond premiums, arbitration costs, arbitrators’ fees, transcript fees, duplicating, printing, and binding costs, as well as telecommunications, postage, and courier charges) paid or incurred by or on behalf of Indemnitee in connection with investigating, prosecuting, defending, being a witness in, or participating in (including on appeal), or preparing to investigate, prosecute, defend, be a witness in, or participate in, any Claim arising out of, relating to, or resulting from any Indemnifiable Event, and shall include (without limitation) all of the foregoing, including attorneys’ fees and disbursements, incurred by or on behalf of Indemnitee in connection with enforcing Indemnitee’s rights under this Agreement, including preparing and submitting any notices, requests or supporting statements for indemnification, advancement or reimbursement, or any other right provided to Indemnitee by this Agreement (including, without limitation, all such fees or expenses incurred in connection with legal proceedings contemplated by Section 2(d) hereof).
(h)    Indemnifiable Amounts: shall mean (i) any and all liabilities, Expenses, damages, judgments, fines, penalties, ERISA excise taxes, and amounts paid in settlement (including all interest, assessments, penalties and other charges paid or payable in connection with or in respect of such liabilities, Expenses, damages, judgments, fines, penalties, ERISA excise taxes, or amounts paid in settlement) incurred by or on behalf of Indemnitee in connection with any Claim arising out of, relating to, or resulting from an Indemnifiable Event, and (ii) any liability that an Indemnitee incurs that arises out of, relates to or results from Indemnitee’s acting on behalf of the Company (whether as a fiduciary or otherwise) in connection with the operation, administration, or maintenance of an employee benefit plan or any related trust or funding mechanism (whether such liability is in the form of an excise tax assessed by the United States Internal Revenue Service, a penalty assessed by the Department of Labor, restitution to such a plan or trust or other funding mechanism or to a participant or beneficiary of such plan, trust, or other funding mechanism, or otherwise).
(i)    Indemnifiable Event: shall mean any event or occurrence, whether occurring before, on, or after the date of this Agreement, arising out of, relating to, or resulting from the fact that Indemnitee is or was a director, officer, employee, agent or fiduciary of the Company, or is or was serving at the request of the Company as a director, officer, employee, manager,
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member, partner, tax matters partner, partnership representative, trustee, agent, fiduciary, or similar capacity, of a Subsidiary of the Company or another corporation, limited liability company, partnership, joint venture, employee benefit plan, trust, or other entity or enterprise, or by reason of any act or omission by Indemnitee in any such capacity (in each case, regardless of whether or not Indemnitee is acting or serving in any such capacity, or has such status, at the time any Claim is brought or any Indemnifiable Amount is incurred). The term “Company,” where the context requires when used in this Agreement, shall be construed to include each such Subsidiary or other corporation, limited liability company, partnership, joint venture, employee benefit plan, trust, or other entity or enterprise referred to in the immediately preceding sentence.
(j)    Independent Legal Counsel: shall mean an attorney or firm of attorneys, selected pursuant to and in accordance with the provisions of Section 3, who is experienced in matters of Delaware corporate law and who, at the time of any determination, shall not have performed services for the Company (or any of its Subsidiaries) or Indemnitee within the preceding three-year period (other than with respect to matters concerning the rights of Indemnitee or any other director or executive officer of the Company or its Subsidiaries under (i) this Agreement or any similar indemnification agreements, (ii) the Company’s Amended Certificate of Incorporation or Amended Bylaws, each as amended and then in effect, and (iii) the DGCL and any other applicable law.
(k)    Jointly Indemnifiable Claim: shall mean any Claim for which Indemnitee may be entitled to indemnification from the Company pursuant to this Agreement and from an Other Indemnifying Entity (as defined below) pursuant to applicable law, any indemnification agreement, or the certificate of incorporation, bylaws, partnership agreement, limited liability company agreement, or comparable organizational documents of such Other Indemnifying Entity.
(l)    Other Indemnifying Entity: shall mean any corporation, limited liability company, partnership, joint venture, trust, employee benefit plan or other entity or enterprise (other than the Company or any of its wholly owned Subsidiaries), but excluding any insurer under any insurance policy maintained by the Company, from which Indemnitee may be entitled to indemnification and/or advancement of Expenses with respect to any Indemnifiable Amounts for which, in whole or in part, the Company may also have an indemnification or advancement obligation to Indemnitee pursuant to the terms of this Agreement.
(m)    Person: shall mean any individual, corporation, firm, partnership, joint venture, limited liability company, estate, trust, business association, organization, governmental entity, or other entity.
(n)    Reviewing Party: shall mean, with respect to any Claim for which Indemnitee is seeking indemnification, (i) the Board of Directors, (ii) any duly appointed committee of the Board of Directors which has been authorized by the Board of Directors to make determinations as to indemnification hereunder and who is not a party to, or otherwise involved in (including as a witness), the particular Claim for which Indemnitee is seeking indemnification, or (iii) Independent Legal Counsel.
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(o)    Subsidiary: shall mean, with respect to any Person, any corporation, partnership, limited liability company or other entity of which such Person owns, directly or indirectly, a majority of the Voting Securities.
(p)    Voting Securities: shall mean, with respect to any Person, any securities of such Person that are entitled to vote generally in the election of directors (or members of a comparable governing body) of such Person.
2.    Basic Indemnification Arrangement; Advancement of Expenses.
(a)    In the event that Indemnitee was, is or becomes subject to, a party to, or a witness or other participant in, or is threatened to be made subject to, a party to, or a witness or other participant in, a Claim by reason of, or arising out of, relating to, or resulting from, in whole or part, an Indemnifiable Event, subject to Section 2(d), the Company shall indemnify Indemnitee, or shall cause Indemnitee to be indemnified, for all Indemnifiable Amounts incurred in connection with such Claim, to the fullest extent permitted by applicable law in effect on the date hereof, provided that, to the extent that any change in applicable law (whether by statute or judicial decision) permits greater indemnification by agreement than would be afforded currently under this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change; provided, further, that no change in applicable law after the date hereof shall have the effect of reducing the benefits available to Indemnitee hereunder based on applicable law as in effect on the date hereof or as such benefits may be expanded or otherwise improved as a result of any other changes to applicable law that become effective after the date hereof but prior to such change. Payments of Indemnifiable Amounts shall be made as soon as practicable following a determination pursuant to Section 2(d), but in any event no later than thirty (30) days after written demand for indemnification is delivered to the Company, unless (and to the extent) a determination is made pursuant to Section 2(d) that Indemnitee is not entitled to indemnification hereunder for such Indemnifiable Amounts.
(b)    If so requested in writing by Indemnitee, the Company shall advance or reimburse Indemnitee, or cause Indemnitee to be advanced or reimbursed (as soon as reasonably practicable, but in any event no later than thirty (30) days following the Company’s receipt of such written request), any and all Expenses incurred by Indemnitee (an “Expense Advance”), whether prior to or after final disposition of the Claim for which such Expense Advance is requested. The Company shall, in accordance with such written request (but without duplication), pay, or cause to be paid, such Expenses on behalf of Indemnitee, unless Indemnitee shall have elected to pay such Expenses and be reimbursed by the Company for such Expenses, in which case, the Company shall reimburse, or cause to be reimbursed, Indemnitee for such Expenses. Indemnitee’s right to an Expense Advance is absolute and shall not be subject to any prior determination by the Reviewing Party (or any other Person) that Indemnitee has satisfied any applicable standard of conduct. Indemnitee hereby undertakes to repay any and all amounts advanced or reimbursed by the Company as Expense Advances (without interest) if and to the extent it is ultimately determined in accordance with Section 2(d) that Indemnitee is not entitled under this Agreement to be indemnified by the Company in respect thereof. No other form of
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undertaking shall be required of Indemnitee other than execution of this Agreement. If Indemnitee commences legal proceedings within ninety (90) days after any determination that Indemnitee is not entitled to be indemnified hereunder in the Court of Chancery of the State of Delaware to secure a determination that Indemnitee is entitled to be indemnified pursuant to this Agreement, then Indemnitee shall not be required to reimburse the Company for any Expense Advance unless and until a final, non-appealable, judicial determination is made that Indemnitee is not entitled to indemnification hereunder.
(c)    Notwithstanding anything in this Agreement to the contrary, Indemnitee shall not be entitled to indemnification or advancement of Expenses pursuant to this Agreement in connection with any Claim initiated by Indemnitee unless (i) the Company has joined in, or the Board of Directors has authorized or consented to, the initiation of such Claim or (ii) the Claim is brought by Indemnitee to enforce Indemnitee’s rights under this Agreement (including an action pursued by Indemnitee to secure a determination that Indemnitee is entitled to be indemnified or for advancement of Expenses pursuant to the terms of this Agreement), or (iii) such Claim is initiated by Indemnitee by way of compulsory counterclaim or affirmative defense.
(d)    Notwithstanding the foregoing, (i) the obligations of the Company under Section 2(a) shall be subject to the condition that the Reviewing Party shall not have determined (in a written opinion, in any case in which the Independent Legal Counsel is the Reviewing Party pursuant to Section 3 hereof) that Indemnitee is not entitled to be indemnified under applicable law, in whole or in part, and (ii) the obligation of the Company to make an Expense Advance pursuant to Section 2(b) shall be subject to the requirement that, if, when, and to the extent that the Reviewing Party ultimately determines that Indemnitee is not entitled to be indemnified under applicable law, in whole or in part, the Company shall be entitled to be reimbursed by Indemnitee pursuant to the undertaking set forth in Section 2(b) hereof, provided that such determination, if any, is made after final disposition of the Claim for which such Expense Advance was requested; provided further that, if the Reviewing Party determines that Indemnitee is not entitled to be indemnified or to have received Expense Advances, in whole or in part, under applicable law, Indemnitee shall have the right to commence an action in the Court of Chancery of the State of Delaware to secure a determination as to whether Indemnitee is entitled to be indemnified under the terms of this Agreement or any provision of the Certificate of Incorporation or Bylaws now or hereafter in effect in connection with any Claims arising out of, relating to, or resulting from any Indemnifiable Event, or challenging any determination by the Reviewing Party (or any aspect thereof) in respect of Indemnitee’s right to indemnification hereunder, including the legal or factual bases therefor, in which case, any determination made by the Reviewing Party that Indemnitee is not entitled to be indemnified hereunder, in whole or in part, shall not be binding and Indemnitee shall not be required to reimburse the Company for any Expense Advance until a final, non-appealable, judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed). If there has not been a Change in Control, the Reviewing Party shall be, or shall be designated by, the Board of Directors, and if there has been a Change in Control (other than a transaction that would fall within the definition of Change in Control, except for the fact that it has been approved by a majority of Continuing Directors), the Reviewing Party shall be the Independent Legal Counsel referred to in Section 3. If there has been no determination by the Reviewing Party within thirty
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(30) days after a written demand for indemnification has been delivered to the Company (the “Determination Period”), Indemnitee shall have the right to commence an action in the Court of Chancery of the State of Delaware seeking a determination of Indemnitee’s right to indemnification hereunder; provided that the Determination Period may be extended for a reasonable time, not to exceed an additional thirty (30) days, if the Reviewing Party in good faith requires such additional time for obtaining or evaluating documentation and/or information relating thereto; provided, further if the Reviewing Party is the Independent Legal Counsel, no Determination Period shall apply. The Company hereby consents to service of process and to appear in any such action brought by Indemnitee pursuant to this Section 2(d). Subject to the foregoing, any determination by the Reviewing Party otherwise shall be conclusive and binding on the Company and Indemnitee.
3.    Change in Control. The Company agrees that, if there is a Change in Control of the Company (other than a Change in Control, immediately following consummation of which, a majority of the Directors then in office shall be Continuing Directors), then, with respect to all determinations and other matters relating to the rights of Indemnitee to indemnification and Expense Advances under this Agreement or under any provision of the Certificate of Incorporation or Bylaws now or hereafter in effect with respect to any Claims arising out of, relating to, or resulting from Indemnifiable Events, the Company shall seek legal advice only from Independent Legal Counsel selected by the Company and approved by Indemnitee (which approval shall not be unreasonably withheld, delayed or conditioned). Such Independent Legal Counsel, among other things, shall render its written opinion to the Company and Indemnitee as to whether and to what extent Indemnitee is entitled to be indemnified under applicable law with respect to Indemnifiable Amounts arising out of such Claims. The Company agrees to pay, and be solely responsible for, all fees and disbursements of the Independent Legal Counsel in connection with the above and to reimburse and indemnify such Independent Legal Counsel against any and all expenses (including attorneys’ fees), claims, liabilities, and damages arising out of, relating to, or resulting from this Agreement or its engagement or services pursuant to the terms hereof.
4.    Indemnification for Additional Expenses. The Company shall indemnify Indemnitee, or cause Indemnitee to be indemnified, against any and all Expenses (including all attorneys’ fees and disbursements) incurred by Indemnitee in connection with any action brought by Indemnitee pursuant to Section 2(d) hereof seeking a determination as to (a) Indemnitee’s right to indemnification or an Expense Advance pursuant to this Agreement or any provision of the Certificate of Incorporation or Bylaws now or hereafter in effect with respect to any Claims arising out of, relating to, or resulting from Indemnifiable Events and (b) recovery under any directors’ and officers’ liability insurance policies maintained by the Company, regardless of whether Indemnitee is determined to be entitled to such indemnification, Expense Advance, or insurance recovery, as the case may be, and, if requested in writing by Indemnitee, the Company shall advance such Expenses to Indemnitee, subject to and in accordance with Section 2(b) hereof.
5.    Partial Indemnity, Etc. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for a portion of the Expenses or other
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Indemnifiable Amounts in respect of a Claim but not for the entire amount thereof, the Company shall indemnify Indemnitee for the portion thereof to which Indemnitee is entitled. Moreover, notwithstanding any other provision of this Agreement, to the extent that Indemnitee has been successful on the merits or otherwise (including dismissal without prejudice) in defense of any or all Claims arising out of, relating to, or resulting from any Indemnifiable Event, or in defense of any issue or matter therein, Indemnitee shall be indemnified against all Expenses and other Indemnifiable Amounts incurred in connection therewith.
6.    Burden of Proof. In connection with any determination by the Reviewing Party or otherwise as to whether Indemnitee is entitled to be indemnified hereunder, the Reviewing Party, or the court, or other finder of fact or appropriate Person shall presume that Indemnitee has satisfied the applicable standard of conduct and is entitled to indemnification, and the burden of proof shall be on the Company to establish by clear and convincing evidence that Indemnitee is not so entitled.
7.    Reliance as Safe Harbor. For all purposes of this Agreement, and without creating any presumption as to a lack of good faith, Indemnitee shall be deemed to have acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company if Indemnitee’s actions or omissions to act are taken in good faith reliance upon the records of the Company, including its financial statements, or upon information, opinions, reports, or statements furnished to Indemnitee by the Board of Directors or officers or employees of the Company or any of its Subsidiaries in the course of their duties, or by committees of the Board of Directors, or by any other Person (including legal counsel, accountants, and financial advisors) as to matters Indemnitee reasonably believes are within such other Person’s professional or expert competence and who has been selected with reasonable care by or on behalf of the Company. In addition, the knowledge and actions, or failures to act, of any director, officer, agent, or employee of the Company shall not be imputed to Indemnitee for all purposes of determining Indemnitee’s right to indemnity hereunder.
8.    No Other Presumptions. For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval) or conviction, or upon a plea of nolo contendere or its equivalent, shall not create a presumption that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court or other tribunal has determined that indemnification is not permitted by applicable law. In addition, neither the failure of the Reviewing Party to have made a determination as to whether Indemnitee has met any particular standard of conduct or had any particular belief, nor an actual determination by the Reviewing Party that Indemnitee has not met any such standard of conduct or did not have such belief, prior to the commencement of legal proceedings by Indemnitee pursuant to Section 2(d) to secure a judicial determination that Indemnitee is entitled to indemnification under this Agreement shall be a defense to Indemnitee’s claim seeking such determination or create a presumption that Indemnitee has not met any particular standard of conduct or did not have any particular belief.
9.    Nonexclusivity, etc. The rights of Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the Certificate of Incorporation, the Bylaws, the
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DGCL, any other applicable law or otherwise. To the extent that there is a conflict or inconsistency between the terms of this Agreement and the Certificate of Incorporation or Bylaws, it is the intent of the parties hereto that Indemnitee shall enjoy the greater benefits regardless of whether contained herein or in the Certificate of Incorporation or Bylaws. No amendment or alteration of the Certificate of Incorporation or Bylaws or any other agreement or instrument shall adversely affect the rights provided to Indemnitee under this Agreement.
10.    Liability Insurance. To the extent the Company maintains an insurance policy or policies providing directors’ and officers’ liability insurance, Indemnitee shall be covered by such policy or policies, in accordance with its or their terms, to the maximum extent of the coverage available for any Company director or officer, as applicable. If the Company has such insurance in effect at the time the Company receives from Indemnitee any notice of the commencement of any Claim arising out of, relating to, or resulting from an Indemnifiable Event for which Indemnitee is entitled to be indemnified hereunder, the Company shall give prompt notice of the commencement of such Claim to the insurers in accordance with the procedures set forth in the applicable policy. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of Indemnitee, all amounts payable with respect to Indemnitee arising out of, resulting from or relating to such Claim in accordance with the terms of such policy.
11.    Amendments, etc. No supplement, modification, or amendment of this Agreement shall be binding on any party hereto unless executed in writing by or on behalf of each of the Company and Indemnitee. No waiver of any of the provisions of this Agreement shall be binding on any party hereto, unless set forth in a writing executed by such party, nor shall any waiver be deemed or constitute a waiver of any other provisions hereof (whether or not similar), nor shall any such waiver constitute a continuing waiver.
12.    Subrogation. In the event of any payment by or on behalf of the Company under this Agreement, except to the extent otherwise provided in Section 14, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents and take all other actions reasonably requested to secure such rights and to enable the Company effectively to bring suit to enforce such rights. The Company shall pay or reimburse Indemnitee for all Expenses incurred by Indemnitee in connection with such subrogation.
13.    No Duplication of Payments. Except to the extent otherwise provided in Section 14, the Company shall not be liable under this Agreement to make any payment to or on behalf of Indemnitee in connection with any Indemnifiable Amounts incurred by Indemnitee to the extent Indemnitee has otherwise received payment (under any insurance policy or any provision of the Certificate of Incorporation or Bylaws or otherwise) in respect of such Indemnifiable Amounts.
14.    Jointly Indemnifiable Claims. Given that certain Jointly Indemnifiable Claims may arise out of, relate to, or result from Indemnitee’s status as both a director or officer of the Company and as a director, officer, employee, manager, member, partner, tax matters partner, partnership representative, trustee, agent, fiduciary, or similar capacity of one or more Other
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Indemnifying Entities, or Indemnitee’s service in such capacities, the Company acknowledges and agrees that the Company shall be fully and primarily responsible for the payment to Indemnitee in respect of all Indemnifiable Amounts and advancement of Expenses in connection with any such Jointly Indemnifiable Claim, pursuant to and in accordance with the terms of this Agreement, irrespective of any right of recovery Indemnitee may have from such Other Indemnifying Entities. Under no circumstance shall the Company be entitled to any right of subrogation against, or contribution by, such Other Indemnifying Entities, and no right of recovery Indemnitee may have from such Other Indemnifying Entities shall reduce or otherwise alter the rights of Indemnitee or the obligations of the Company hereunder. In the event that any of the Other Indemnifying Entities shall make any payment to Indemnitee in respect of any Indemnifiable Amounts or advancement of Expenses with respect to any Jointly Indemnifiable Claim, the Other Indemnifying Entity making such payment shall be subrogated to the extent of such payment to all rights of recovery of Indemnitee against the Company, and Indemnitee shall execute all documents and take all other actions reasonably requested to secure such rights and to enable each of the Other Indemnifying Entities effectively to bring suit to enforce such rights. Each of the Other Indemnifying Entities shall be third-party beneficiaries with respect to this Section 14, entitled to enforce this Section 14 against the Company as though each such Other Indemnifying Entity were a party to this Agreement.
15.    Notification and Defense of Claims.
(a)    Indemnitee shall notify the Company in writing as soon as practicable of any Claim arising out of, relating to, or resulting from an Indemnifiable Event or for which Indemnitee could seek Expense Advances, including a brief description (based upon information then available to Indemnitee) of the nature of, and the facts underlying, and amount of monetary damages sought in connection with, such Claim. The failure by Indemnitee to timely notify the Company hereunder shall not relieve the Company from any liability hereunder, except to the extent of any final, non-appealable, award in respect of a Claim for which Indemnitee’s failure to provide the Company with such timely notice deprived the Company of a reasonable opportunity to participate at its expense in the defense of such Claim.
16.    The Company shall be entitled to participate in the defense of any Claim arising out of, relating to, or resulting from an Indemnifiable Event, or to assume the defense thereof, with counsel chosen by the Company; provided that, if Indemnitee believes, after consultation with counsel selected by Indemnitee, that in the event that (a) the use of the counsel chosen by the Company to represent Indemnitee would present such counsel with an actual or potential conflict of interest, (b) the named parties in any such Claim (including any impleaded parties) include the Company or any Subsidiary of the Company, on the one hand, and Indemnitee, on the other hand, and Indemnitee concludes, after consultation with counsel selected by Indemnitee, that there may be one or more legal defenses available to Indemnitee that are different from or in addition to those available to the Company or any Subsidiary of the Company, or (c) representation of Indemnitee by such counsel chosen by the Company would be precluded under the applicable standards of professional conduct then prevailing, then Indemnitee shall be entitled to retain separate counsel reasonably satisfactory to the Company (but not more than one law firm, plus, if applicable, one local counsel in any given jurisdiction in
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respect of any particular Claim) at the Company’s expense. The Company shall not be liable to Indemnitee under this Agreement for any Indemnifiable Amounts comprised of amounts paid in settlement of any Claim effected without the Company’s prior written consent. The Company shall not, without the prior written consent of Indemnitee, effect any settlement of any Claim arising out of, relating to, or resulting from an Indemnifiable Event to which Indemnitee is a party unless such settlement involves solely the payment of money (payment of which Indemnitee has no liability) and includes a complete and unconditional release of Indemnitee from all liability for all Claims arising out of, relating to, or resulting from, or based on the same underlying facts, events and circumstances that are the subject matter of such Claim and does not include any admission of fault, culpability or wrongdoing by or on behalf of the Indemnitee. Neither the Company nor Indemnitee shall unreasonably withhold, condition, or delay its consent to any proposed settlement; provided that Indemnitee may withhold consent to any settlement that does not provide for such complete and unconditional release of Indemnitee.
17.    Binding Effect, etc. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns (including any direct or indirect successor to the Company by purchase, merger, consolidation or otherwise to all or substantially all of the businesses or assets of the Company and its Subsidiaries), heirs, executors, and personal and legal representatives. This Agreement shall continue in effect with respect to all Indemnifiable Events that occur for so long as Indemnitee continues to serve as a director or officer of the Company or to serve, at the request of the Company, as a director, officer, employee, manager, member, partner, tax matters partner, partnership representative, trustee, agent, fiduciary, or similar capacity, of a Subsidiary of the Company or another corporation, limited liability company, partnership, joint venture, employee benefit plan, trust, or other entity or enterprise, or by reason of any act or omission by Indemnitee in any such capacity (in each case, regardless of whether or not Indemnitee is acting or serving in any such capacity, or has such status, at the time any Claim is brought or any Indemnifiable Amount is incurred). The Company shall take all actions necessary to require and cause any successor (whether direct or indirect by purchase, merger, consolidation, or otherwise) to all or substantially all of the businesses or assets of the Company and its Subsidiaries to assume and agree in writing to perform the Company’s obligations under this Agreement in the same manner and to the same extent that the Company would be required to perform if no such succession had taken place.
18.    Severability. The provisions of this Agreement shall be severable in the event that any of the provisions hereof (including any provision within a single section, paragraph or sentence) are held by a court of competent jurisdiction to be invalid, illegal, void, or otherwise unenforceable in any respect, and the validity and enforceability of any such provision in every other respect and of all of the other provisions hereof shall not be in any way impaired as a result thereof, and shall remain enforceable to the fullest extent permitted by applicable law.
19.    Notices. All notices, requests for indemnification or Expense Advances, consents, waivers and other communications hereunder by either party hereto shall be deemed to be sufficient if set forth in a written document executed by such party and delivered to the other party hereto in person or by a nationally recognized overnight courier or by e-mail, in each case,
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addressed to such party at the address set forth below or such other address as may hereafter be designated in writing by either party and delivered to the other party in accordance with this Section 19:
(a)    If to the Company, to the attention of the Chief Legal Officer of the Company at 4445 Willard Ave, Suite 1000, Chevy Chase, MD 20815, or at such other current address as the Company shall have furnished to Indemnitee.
(b)    If to Indemnitee, to the address set forth below Indemnitee’s signature on the signature page hereof.
All such notices, requests for indemnification or Expense Advances, consents, waivers and other communications delivered in accordance with Section 19 shall be deemed to have been given or made (i) if delivered in person, upon such delivery, (ii) if sent by overnight courier, the next business day after delivery to such overnight courier and (iii) if sent by e-mail, when sent to the e-mail addresses specified in Section 19 (or such other e-mail address as may be specified in a writing delivered to the other party in accordance with Section 19).
20.    Headings. The headings of the sections and paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction or interpretation thereof.
21.    Execution; Counterparts. This Agreement may be executed electronically (including by DocuSign) or by pdf signature and may be executed in counterparts, each of which shall for all purposes be deemed to be an original but all of which together shall constitute one and the same agreement. Only one such counterpart signed by the party against whom enforceability is sought need be produced to evidence the existence of this Agreement.
22.    Governing Law; Submission to Jurisdiction. This Agreement and all claims arising out of, relating to or resulting from this Agreement, or the parties’ rights and obligations hereunder, or either party’s compliance with the terms hereof, shall be governed by and construed and enforced in accordance with the laws of the State of Delaware, without giving effect to the principles of conflicts of laws. Each of the parties hereby agrees that any and all disputes, claims and actions arising out of, relating to or resulting from this Agreement, or the parties’ rights and obligations hereunder, or either party’s compliance with the terms hereof, shall be resolved by, and brought in, the Court of Chancery of the State of Delaware, and the parties hereto hereby irrevocably submit to the exclusive jurisdiction of such court over any such dispute, claim and action. The parties hereby irrevocably waive, to the fullest extent permitted by applicable law, any objection which they may now or hereafter have to the laying of venue of any such dispute, claim or action brought in the Court of Chancery of the State of Delaware or any defense of inconvenient forum for the maintenance of such dispute, claim or action. Each of the parties hereto agrees that a judgment in any action brought in the Court of Chancery of the State of Delaware may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.
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23.    Waiver of Jury Trial. EACH OF THE PARTIES TO THIS AGREEMENT HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION (A) ARISING UNDER, RELATING TO OR RESULTING FROM THIS AGREEMENT OR (B) THE PARTIES’ PERFORMANCE OF THEIR OBLIGATIONS HEREUNDER AND COMPLIANCE WITH THE TERMS HEREOF, IN EACH CASE, WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. THE PARTIES TO THIS AGREEMENT EACH HEREBY AGREE AND CONSENT THAT ANY SUCH CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION SHALL BE DECIDED BY THE COURT OF CHANCERY OF THE STATE OF DELAWARE WITHOUT A JURY AND THAT THE PARTIES TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH SUCH COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth above.
COMPANY:
FORBRIGHT, INC.
By
Name:
Title:
INDEMNITEE:
Name:
Address:
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Exhibit 21.1

List of Subsidiaries of Forbright, Inc.
Name of SubsidiaryJurisdiction of Incorporation/Formation
Forbright BankMaryland

Exhibit 23.2
Consent of Independent Registered Public Accounting Firm
We consent to the reference to our firm under the caption "Experts" and to the use of our report dated April 8, 2026, in the Registration Statement (Form S-1) and related Prospectus of Forbright, Inc. for the registration of shares of its Class A common stock.
/s/ Ernst & Young LLP
Tysons, Virginia
May 15, 2026