2017 ANNUAL REPORT - National Capital Bank · 2018-04-10 · To Our Stockholders, Customers and...

c o m m i t t e d t o t h e c l i e n t sa n d t h e c o m m u n i t i e s w e s e r v e

2 0 1 7 A N N U A L R E P O R T

ANNUAL RESULTSNet Income $1,971 $4,685 -57.92%Net Income per Common Share 6.83 16.27 -58.02%Common Dividends Paid per Share 1.50 1.00 50.00%

PERFORMANCE RATIOS BASED ON NET INCOMEReturn on Average Assets 0.47% 1.13% -58.52%Return on Average Common Stockholders' Equity 4.51% 11.28% -59.98%Net Interest Margin 3.24% 2.87% 13.04%Cost Efficiency Ratio 79.82% 72.07% 10.76%

SELECTED AVERAGE BALANCESTotal Assets $420,531 $412,789 1.88%Total Earning Assets 401,358 396,821 1.14%Total Gross Loans 234,382 209,931 11.65%Total Deposits 369,082 358,364 2.99% Non Interest 110,746 107,072 3.43% Interest 258,337 251,292 2.80%Total Repurchase Agreements 6,709 9,703 -30.85%Total Stockholders' Equity 43,670 41,545 5.11%

SELECTED YEAR-END BALANCESTotal Assets $429,752 $412,162 4.27%Total Earning Assets 409,551 392,014 4.47%Total Gross Loans 271,037 208,723 29.86%Allowance for Loan Losses 3,479 4,711 -26.15%Total Deposits 380,651 362,170 5.10% Non Interest 116,186 107,280 8.30% Interest 264,465 254,890 3.76%Total Repurchase Agreements 4,068 6,662 -38.94%Total Shareholders' Equity 43,628 40,986 6.44%Total Shares of Common Stock 288,777 288,033 0.26%

CAPITAL RATIOSAverage Stockholders' Equity to Average Assets at Year-end 10.38% 10.06% 3.18%Stockholders' Equity to Assets at Year-end 10.15% 9.94% 2.09%

Common Stock, Per Share: Book Value $151.08 $142.29 6.18% Tangible Book Value $151.08 $142.29 6.18% Market Price $220.49 $176.00 25.28%Average Shares Outstanding 288,632 287,893 0.26%

Financial Highlights 2017

2017 2016%

CHANGE

Year ended December 31Dollars in thousands, except per share data

About Our BankThe National Capital Bank of Washington (NCB) is a full-service community bank, founded in 1889 and is Washington’s Oldest Bank. NCB is headquartered on Capitol Hill with offices in the Friendship Heights community in Northwest D.C. and most recently the Courthouse/Clarendon community in Arlington, Virginia. NCB also operates residential mortgage and commercial lending offices and a wealth management services division, National Capital Financial Group. Founded on the principle that “customers come first,” our officers and staff are dedicated to making every transaction an exceptional and rewarding experience.

NCB product and service offerings include personal and business deposit accounts, robust online and mobile banking, sophisticated treasury management solutions, remote deposit capture, merchant processing, commercial and construction financing, equipment leasing, residential mortgage lending and financial planning, all delivered with top-rated personal service.

NCB is committed to the clients and the communities we serve.

BRANCHES AND OFFICES

EXECUTIVE OFFICES AND CAPITOL HILL BRANCH

316 Pennsylvania Avenue, SE

Washington, D.C. 20003

202.546.8000

COURTHOUSE BRANCH

2505 Wilson Boulevard

Arlington, VA 22201

571.982.5460

FRIENDSHIP HEIGHTS BRANCH

5228 44th Street, NW


202.966.2688

COMMERCIAL AND CONSTRUCTION LENDING GROUPS


Suite 400


202.546.8000

COURTHOUSE BUSINESS OFFICES

2533 Wilson Boulevard

Arlington, VA 22201

202.546.8000

**NATIONAL CAPITAL FINANCIAL GROUP


Suite 402


202.546.9310

RESIDENTIAL MORTGAGE LENDING GROUP


Mezzanine


202.546.8000

TABLE OF CONTENTS

Financial Highlights p. 1 • Letter from the President p. 2-3 • Business Banking p. 4

Construction Finance p. 5 • Commercial Lending p. 6-7 • Personal Banking p. 8 • Residential Mortgage p. 9

Financial Planning p. 10 • Banking for Nonprofit Organizations p. 11 • NCB in the Community p. 12-13

Tribute to Thomas A. Barnes p. 14 • Board of Directors p. 15 • Executive Management & Bank Officers p. 16

National Capital Financial Group's securities and advisory services offered through Registered Representatives of Cetera Advisor Networks LLC, member FINRA, SIPC.

Cetera is under separate ownership from any other named entity. Securities and insurance products are: Not FDIC/NCUSIF insured * May lose value * Not financial

institution guaranteed * Not a deposit * Not insured by a federal government agency. Cetera Advisor Networks LLC is not affiliated with the financial institution where

investment services are offered. **Denotes branches where the Financial Advisory meets with clients.

C O M M I T T E DT O S E R V E 01

To Our Stockholders, Customers and Friends For National Capital Bank, 2017 was a year of new beginnings. The Bank successfully increased its brand awareness with a new website as well as through several key strategic advertising and marketing partnerships. We substantially accelerated growth in commercial banking, increasing the portfolio of commercial real estate and construction loans. Likewise, we experienced a corresponding growth in our commercial deposit base and treasury management, online and mobile banking users. We successfully put regulatory concerns to rest by achieving complete compliance with, and release from the OCC Formal Agreement. With regulatory concerns behind us, we quickly received approval for a new branch in the Courthouse area of Arlington, Virginia, scheduled to open in the first quarter of 2018. Lastly, the Bank initiated and substantially completed a systematic plan to remodel and upgrade its Main Office building and data information systems. We are benefitting from this office modernization, as well as a new Voice over Internet Protocol (VOIP) phone system with online and remote access capability and new server configuration to improve defenses against cyber-attack and enhance disaster contingencies.

The year also included some challenges. The untimely loss of our Chairman Tom Barnes in June left a leadership void which the Bank was able to fill with veteran industry leaders. Greater volatility in markets and rising interest rates required a strategic approach to asset liability management in order to avoid losses on securities sales to meet liquidity needs and loan funding. Finally, a change in the corporate tax rate led to a one-time write down of deferred tax assets which negatively impacted earnings for 2017 but, set the stage for greater profitability in 2018 and beyond.

Here is a summary of significant events, strategic opportunities, highlights and other factors which occurred during the year.

FINANCIAL RESULTS

For the year ending December 31, 2017, NCB reported net income of $1.97 million or $6.83 per share compared to $4.68 million or $16.27 per share in 2016. Unlike 2015 and 2016 however, the reversal of loan loss provisions and gains on sale of securities represented a much smaller component of net income as core earnings improved with loan growth and the change in the mix of earning assets which resulted in an improvement in the Bank’s net interest margin from 2.87% to 3.24% increasing net interest income $1.64 million or 14% to $13.02 million. Additionally, wealth management sales income represented a more significant contributor as assets under management with National Capital Financial Group crossed the $200 million threshold. With the passage of the Tax Cuts and Jobs Act of 2017 the Bank took a one-time write-down of deferred tax assets in the amount of $842 thousand due to the reduction in the corporate tax rate. This combined with higher salary, benefit and data processing costs attributable to the buildup of lending, business development and support staff

muted the impact of this improvement. With the lower tax rate going forward and production staff now at budgeted levels, earnings are positioned to improve substantially in 2018 and going forward as the momentum to build the Bank’s commercial loan and deposit business continues.

Total assets as of December 31, 2017 ended the year at $429.7 million, a 4.3% increase. Of significance was a $62.3 million, or 29.8% increase in total loans to $271 million as efforts to expand the Bank’s commercial loan portfolio and improve the return on earning assets proved fruitful. Asset quality continued a three-year trend of improvement with non-performing loans declining to .20%. Total deposits at year-end 2017 increased $18.5 million or 5.1% to $380.6 million. Of this growth, 50% was in non-interest-bearing accounts which continue to represent 30% of total deposits, a core strength of the Bank.

Total shareholders’ equity at December 31, 2017 was $43.6 million up $2.6 million from the previous year-end and representing a ratio of shareholders’ equity to assets of 10.15%.

BUILDING THE BRAND

A key addition to the NCB Team in early 2017 was Robin Robertson, who joined the Bank as Senior Vice President, Retail Banking Director. Robin brought expertise in marketing and advertising, as well as retail management. She led successive efforts to redesign the Bank’s website with an updated look, new interactive features and greater flexibility. The layout of the annual report was enhanced to emphasize the Bank’s mission and core values, while improving its versatility as a marketing piece. A client-focused advertising and promotional campaign was developed and launched with the Washington Business Journal, Hill Rag and Northwest Current, featuring family-owned businesses, women in business and community organizations that highlighted the Bank’s capabilities in business lines such as commercial and residential mortgage lending, treasury management and wealth management. This past year the Bank also increased its engagement with organizations such as the Capitol Riverfront Business Improvement District (BID), Capitol Hill Community Foundation, Capitol Hill Village and SOME (So Others Might Eat), who is featured in this report.

EXPANDING COMMERCIAL BANKING

In May and June, two seasoned commercial bankers Kathryn (Kathy) Speakman and Richard (Rich) Sobonya joined NCB to focus on expanding lending opportunities. Kathy brought

significant experience as a longtime Washington D.C. based business banker, while Rich added greater construction lending expertise to the commercial lending team as the new Construction Lending Director. The team’s efforts led to the generation of over $96.8 million in new commercial loans and commitments during the year and a net increase in the commercial loan portfolio of $66.7 million along with the generation of $490 thousand in fee income. These new commercial relationships also contributed to the growth in deposit balances and increases in treasury management and remote deposit capture services by 200% and 65% respectively. The Bank worked diligently on refining and improving its suite of treasury management services to better serve a more sophisticated customer base. These efforts will continue to enhance the Bank’s ability to add client relationships in new markets as the Bank expands its reach in the metropolitan area.

MARKET KNOWLEDGE, EXPERIENCE AND SOUND MANAGEMENT

The sudden passing of NCB Board Chairman Tom Barnes in June left a leadership void at a critical time. Tom provided wisdom and experience from his many years as a senior regulator and later as a financial consultant and bank executive. This guidance was important in meeting the challenges of a growing company and addressing corporate governance and regulatory responsibilities. With this realization, the Bank reacted quickly to name highly respected local businessman and longtime director, Robert (Bob) Donohoe as Chairman, and form a search committee to identify new director candidates who could bring strong industry expertise to the Board. In December these efforts resulted in the election of two local and highly regarded retired banking veterans, Kathleen (Kate) Carr and Harold (Harry) Rauner as directors. Both Kate and Harry served as chief executives of local community banks and continue to be active in a number of community and business organizations. They bring a wealth of industry and local market knowledge to the Board.

It is important to note that the corporate governance initiatives Tom introduced, along with the Board and Management’s perseverance in implementing these changes, remained steadfast and the Bank was deemed to be in full compliance with the OCC Formal Agreement signed in 2015. As a result, this agreement was terminated in December.

Lastly, in addition to the strength added to the Board, we hired Patricia (Tricia) Ostrander, as Executive Vice President, Chief Administrative and Compliance Officer in January 2018. Tricia is another well-regarded banking executive with extensive experience in compliance, human resources, organizational development and corporate governance.

A NEW BRANCH OPPORTUNITY

Continued consolidation in the Washington, D.C. metro area banking market in 2017 created an opportunity to lease and open a new, cost-effective branch in a market Management believes has many economic and demographic

characteristics similar to Capitol Hill. In addition, many of our newest retail and lending team members have experience and business connections in this new market. As a result, the Bank made application and was approved to open a branch and business office in the Courthouse area of Arlington, Virginia situated in the busy Rosslyn-Ballston corridor along the Metro Orange Line. This branch is scheduled to open in March 2018. We are excited and energized by this opportunity to bring NCB’s unique brand of five generations of community banking to Arlington, and believe it will be very well received and rewarding.

KEEPING SYSTEMS, TECHNOLOGY AND FACILITIES FRESH

Important components to being competitive and profitable in the current banking environment are efficiency and accessibility. With the implementation of new mobile and online delivery channels, upgraded technology systems and refreshed and redesigned offices, our clients have better access to do their banking – all with proper protections and safeguards against fraud and cyber threats. Ensuring our branches and offices are accessible, comfortable and energy efficient is one of the drivers in the Bank’s strategic plan, which included a number of initiatives in 2017. During the year, the Bank’s Main Office and Capitol Hill branch underwent extensive remodeling that included buildout of new commercial and residential mortgage lending offices, redesign of the lower level operations, administrative and finance offices, as well as the branch lobby and teller area. System and technology upgrades included a new VOIP phone system with online and remote access capability; e-sign for deposit documentation; a consolidation and transfer of server functions to secure cloud storage; the implementation of a vendor management system; installation of updated security cameras and card readers; deployment of Xperience and OnBoard, a new core processing and account opening software system; and a new management program for disaster recovery and business continuity. Initiatives planned for 2018 include, implementation of document automation and scanning; development of an intranet; conversion to Office 365; installation of a solar panel system on the Main Office roof to generate energy savings; and continued enhancements to the Bank’s mobile banking and cash management offerings.

In summary, it was a busy, transformative and exciting year tinged with sadness over the loss of Tom Barnes but, also with thankfulness for his contributions. I believe 2018 will present abundant opportunities and challenges which the NCB Team is well-equipped to address, and I look forward to reporting our progress to you in the coming months. Thank you for your continued interest and support!

Richard B. (Randy) Anderson, Jr. President and Chief Executive OfficerMarch 17, 2018


We count on NCB to know community businesses like ours, so we can serve up our best to our friends and neighbors on Capitol Hill.

Whether your business is new to the community or expanding its reach, NCB is

ready to help you make a difference. It begins with business checking and money

market accounts perfectly tailored to your needs. Our Treasury Management

solutions then help to manage all of your banking transactions to save time and

maximize your financial returns, so you can focus on your business.

T H E S A L T L I N E O Y S T E R + A L E J D A C U S T O M H O M E S , I N C .

C I R C L E Y O G A C O O P E R A T I V E

G M E I N V E S T M E N T S

Thanks to NCB, we are able to custom design homes that add value to the neighborhoods in our communities — and that make our clients feel right at home.

NCB knows you’re committed to building a better community, and we share your

vision. So, when it’s time to transform your ideas into reality for your next project,

we have the right construction loan to make it happen. Our experienced team

understands the unique markets in our area and is ready to provide financing

for new construction, renovation or expansion for housing, offices, retail space,

warehouses and special-use buildings.

We are honored to be the first yoga cooperative in D.C. Working with NCB has helped us achieve our mission of providing neighborhood wellness for children, adults and families in our community.

Leave the banking to NCB — whether your business is large or small, new or

expanding, we will custom-design solutions that work for your short-term needs

and long-term goals. We know your time should be spent on making a difference

for your clients and the communities in which you serve.

NCB has been a part of local neighborhoods for years. They understand my commitment to the community, which allows me to create value for my investors and partners.

NCB believes in a stronger community, and recognizes

the hard work it takes to preserve the unique history of the

neighborhoods we serve. Whether it’s a renovation or new

construction, we provide builders and developers with

financing programs that work best to meet their investment

goals and objectives.

INFORMATION SERVICES

• Business Online Banking

• Mobile Banking

• Mobile Deposits

• eStatements

• Bill Pay

DEPOSIT SERVICES

• Automated Clearing House (ACH)

• Remote Deposit Capture

• Lockbox Services

• Merchant Card Processing

CONSTRUCTION FINANCING BENEFITS:

· Competitive fixed or variable interest rates

· Low points and fees

· Local market knowledge and industry expertise

DISBURSEMENT

SERVICES

• Automated Clearing House (ACH)

• Wire Transfers

• Zero Balance Accounts

CASH MANAGEMENT

SERVICES

• Sweep/Repurchase Agreements

• Account Analysis

• Daily Balance Reporting and

Transaction Export

FRAUD DETECTION AND

PREVENTION

• ACH Block and Filter

• Positive Pay Check Processing

Business Banking Construction Finance

Pictured: Students participating in a yoga class

Photo credit: Jim Vecchione

Pictured: JDA Custom Homes, Inc. Founder

Dennis Rice and Designer Jordan Rice with

National Capital Bank Senior Vice President,

Construction Lending Director Rich Sobonya

Pictured: GME Managing Principal Gary Goodweather, in front of his newest

project, an eight-unit apartment building in the heart of Dupont Circle

Pictured: National Capital Bank Vice President,

Commercial Loan Officer Kathy Speakman and

Long Shot Hospitality Partner of The Salt Line

and co-owner of The Dubliner Gavin Coleman

N A T I O N A LC A P I T A L B A N K04 C O M M I T T E D

T O S E R V E 05

L E V E L G R E E N L A N D S C A P I N G

C O M M E R C I A L L E N D I N G T E A M

Our experienced team of commercial lending specialists can

help finance your next step. Whether you need short-term

working capital to keep your business operations running

smoothly, a commercial mortgage to acquire, refinance or

renovate commercial real estate, or leasing options for new or

previously-owned equipment — we have the right solution for

your business.

N O V O P R O P E R T I E S

We value a local bank that cares and supports our community. And we take that commitment to a new level. Our work for Kim's Garden helps to preserve the living legacy of Kim Brenegar's love of community and the environment.

NCB's commitment to local businesses means we understand the

importance of having a trusted financial partner. Our experienced team

of commercial lending specialists bring years of credit experience and

a “customers come first” approach to quickly respond to your business

needs with specialized financing solutions.

Because NCB has been a pillar of the community for over 125 years, we value their experience in understanding our business. They support our commitment to enhance neighborhoods with quality restorations of multifamily properties.

COMMERCIAL LENDING SOLUTIONS

• Commercial Lines of Credit

• Term Loans

• SBA Loans (504)

• Letters of Credit

COMMERCIAL REAL ESTATE AND

INVESTMENT LOANS

• Construction Loans

• Interim Financing

• Commercial Mortgages

• Letters of Credit

Commercial Lending

NCB customers benefit from over 125 years

of experience, market expertise, competitive

terms and rates, and local-based decision

making. If you are ready to acquire or refinance

commercial real estate, or need leasing options

for new equipment, NCB is ready to help your

business grow.

Pictured L-R: Novo Properties founders Greg Selfridge, Bruce

Hurd and Brett Summers with National Capital Bank Senior

Vice President, Senior Commercial Loan Officer Renee Aldrich

Photo Credit: Eikon Photography

Pictured (L-R): Vice President Kathy Speakman, Senior Vice President Ryan

McKinley, Senior Vice President, Construction Lending Director Rich Sobonya,

and Senior Vice President Senior Commercial Loan Officer Renee Aldrich


Pictured: Level Green Landscaping Founder,

Owner and Head Gardner Doug Delano and

crew in Kim's Garden


T O S E R V E 07

H E L E N A L L E NA L E X G O L D I N G

E D W A R D S F A M I L Y V E R O N I C A P E R R Y

My family and I have been banking at NCB for 70 years! NCB was there for our family business when we first opened our doors in 1922. Generations later, we still love coming to the Bank to see Jimmy Didden and the entire team.

NCB is a family business with five generations of the Didden family serving friends

and neighbors in our community. We have always offered exceptional products

and services tailored to individual financial needs. Our customers appreciate the

fact that their money stays local and is reinvested in their neighborhood.

When I was ready to purchase my next home, NCB made it quick and easy. They helped me make the move to the community I love.

NCB has been in the neighborhood for over 125 years and has a strong

commitment to our community. We pledge to deliver customized

mortgage solutions with top-rated personal service to every customer,

every time. Our mortgage team is ready to listen and learn your story

and offer the perfect solution.

When we were ready to teach our kids to save, NCB made it fun and educational. They have all the banking services we need to make our personal lives easier.

NCB has been welcoming Washington families for over a

century and a quarter. We have accounts and services for every

stage of life — from starter savings accounts for children, home

mortgages for the first-time home buyer and financial planning

solutions for those ready to retire — all delivered with top-rated

personal service.

My community means a lot to me. So, when I had the opportunity to purchase this investment property in my neighborhood, NCB worked with me so I could help create homes for others.

A home is one of your most valuable investments. So, whether you

are a first-time home buyer, moving up, purchasing a second home

or investment property, or would like to refinance your current

mortgage, NCB's mortgage team is ready to work for you.

PRODUCTS & SERVICES

PRODUCTS & SERVICES

• Fixed Rate Mortgages

• Adjustable Rate Mortgages (ARMs)

• FHA and VA Financing

• Mortgages for first-time home buyers and

self-employed individuals

• Home Equity Lines of Credit

• Mortgages for primary residences, second homes

and investment properties• Checking, Money Market

and Savings Accounts

• Certificates of Deposit

• EMV Chip Debit Cards

• Credit Cards

• Online Banking and Bill Payment

• Mobile Banking and Mobile Deposit

• Anytime Telephone Banking

• Safe Deposit Boxes

Personal Banking Residential Mortgage

Pictured: Helen Allen and National Capital Bank Senior

Relationship Manager Jimmy Didden

Pictured: Mark, Amanda, Mary Kate and

Georgia Edwards

Pictured: Veronica Perry with National Capital Bank Vice

President and Mortgage Sales Director Chris Reddick


Pictured: Alex Golding with Ella the pup


T O S E R V E 09

Pictured: National Capital Financial Group Financial

Advisor Angela M. Beckham and Chief Investment

Services Officer R. Andrew Didden, Jr.

S O M E R S E T E L E M E N T A R Y S C H O O L P T A

N A T I O N A L A L L I A N C E F O R H I S P A N I C H E A L T H

For 20 years, our community neighbors have trusted us to be their financial partner.

National Capital Bank is committed to helping customers plan

for a successful financial future. Founded in 1998, our Wealth

Management Services division National Capital Financial Group

(NCFG), works with individuals and families, as well as nonprofit

organizations. Our clients turn to NCFG for guidance, support

and strategies for their immediate and long-term financial

goals. For over twenty years we have been proud to work with

generations of local families, and have been privileged to help

guide our clients to a financially stable future.

Our PTA supports what matters most – our kids and teachers in their classrooms. NCB is focused on our organization’s financial success, so we can concentrate on our children and their futures.

Nonprofits work hard to make a difference in our communities every day.

Public charities, local human services organizations, foundations and industry

trade groups all provide valuable and beneficial services to individuals, families

and businesses in our neighborhoods. At NCB, we understand what it takes to

deliver these community resources, so our financial services are designed to help

organizations achieve their mission.

NCB supports our mission of Best Health for All! Our work helps ensure the best of science, culture, and community are realized by communities here in D.C. and throughout the country.

Like any business, nonprofit organizations need mission-driven banking services to

help manage cash flow and maximize returns on savings and investments, as well as

financing solutions for growth and sustainability. Whether your organization is large

or small, NCB’s suite of banking services is designed to help you manage and grow

your organization, and simplify banking.

PRODUCTS & SERVICESF I N A N C I A L P L A N N I N G A N D I N V E S T M E N T M A N A G E M E N T

Our clients receive advice on topics such as:

• Maintaining sufficient financial resources for retirement

• When and how to take pension benefits

• How to invest tax efficiently, and set up a tax withdrawal plan

• Connecting with the right professionals for estate planning, insurance and tax needs

• Community Checking and

Money Market Accounts

• Treasury Management

Services

• Online and Mobile Banking

• Remote Deposit Capture

• ACH Origination

• Wire Transfer Service

• Fraud Prevention Tools

• ACH Block & Filter

• Positive Pay

• Financial Planning

• Commercial Lending/

Commercial Real Estate

Financing

Financial Planning Banking for Nonprofit Organizations

Client-centric team approach to financial planning

When our clients are approaching retirement age, a number of factors must be taken into consideration as

we work together to create a sound financial plan. Whether they have retirement accounts from previous

employers, a small balance on their mortgage or cash in their savings account, we incorporate the appropriate

risk tolerance to reach reasonable goals and expectations for a bright, financially secure future.

R. Andrew Didden, Jr. and Angela M. Beckham are registered representatives offering securities and advisory services through Cetera Advisor Network LLC member FINRA, SIPC. Cetera is under separate ownership from any other named entity. 316 Pennsylvania Avenue, SE, Suite 402, Washington, DC 20003. Securities and insurance products are: Not FDIC/NCUSIF insured * May lose value * Not financial institution guaranteed * Not a deposit * Not insured by a federal government agency. Cetera Advisor Networks LLC is not affiliated with the financial institution where investment services are offered.

Pictured: Somerset Elementary

School PTA Treasurer Jon Franklin;

National Capital Bank Assistant

Vice President, Friendship Heights

Branch Manager Fatima Fonseca;

PTA President Inga Barry and Vice

President Academic Support &

Enrichment Gillian Edick with

students W. “Culter” Franklin and

Josephine Edick

Pictured: National Alliance for Hispanic Health President and CEO

Jane L. Delgado; Chief Financial Officer Hazel E. Moss and Director

for Special Initiatives Gladys Mendoza with National Capital Bank

Senior Vice President, Commercial Loan Officer Ryan McKinleyN A T I O N A LC A P I T A L B A N K10 C O M M I T T E D

T O S E R V E 11

For 38 years NCB has helped us make a difference for The Capitol Hill Cluster School in D.C. by sponsoring the Capitol Hill Classic.

To enhance the impact of the National Capital Bank of

Washington Foundation, NCB employees donate their

time and resources to multiple local organizations as

volunteer committee members, serving as board directors,

and as supporters of various mission-driven initiatives.

In 2017, our employees donated over 1200 volunteer

hours to our community organizations. Volunteerism is

an important part of our company culture and happily

embraced by all.

NCB remains committed to supporting local organizations

in our communities and neighborhoods. We’re proud to

give back where it means the most.

C A P I T O L H I L L A R T S W O R K S H O P( C H A W ) C A P I T O L H I L L C L A S S I C

NCB's commitment and support of our arts program lets us give kids a chance to explore their creativity and individual potential while learning and playing together — this makes for a better community.

As a company that has been a part of the Washington, D.C. Capitol

Hill community for over 125 years, NCB has supported the mission and

vision of its neighborhood organizations and businesses by providing

banking services, as well as a philanthropic commitment to donate

resources, time and talent to the community.

NCB in the Community

S O M E ( S O O T H E R S M I G H T E A T )

Our partnership with NCB helps us provide services for those most in need — to break the cycle of homelessness and restore hope and dignity one person at a time!

Pictured: National Capital Bank Senior Vice President, Business Development

Director David Glaser and SOME Chief Financial Officer Scott Powell

Pictured: Capitol Hill Arts Workshop Associate Executive

Director Brian Washington; Art Instructor Adi Segal and

local students taking part in a paper mache project Pictured: The 38th running of the

Capitol Hill Classic Kids Fun Run

Photo Credit: Djenno Bacvic

Pictured: National Capital Bank

President & CEO Randy Anderson

opening the 2017 Capitol Hill Classic

Pictured: NCB employees and family members

participating in a Day of Service with SOME

Grant donations are made to local nonprofit organizations by

the National Capital Bank of Washington Foundation, a donor-

advised fund that supports three main areas of interest – youth,

education and social services. Since its inception over 21 years

ago, the fund has made over 500 donations totaling $1.7 million

dollars, supporting the mission of many local organizations. We

are featuring three organizations we have supported through our

foundation in this year's annual report – Capitol Hill Arts Workshop

(CHAW), SOME (So Others Might Eat) and Capitol Hill Classic.


T O S E R V E 13

Board of Directors

Richard B. (Randy) Anderson, Jr.President & Chief Executive Officer

National Capital Bank of Washington

Kathleen W. (Kate) CarrChair

The Chevy Chase Land Company

Donald A. Didden Executive Vice President (Retired)


James M. DiddenSenior Relationship Manager


Kathryn H. DiddenInvestor

R. Andrew Didden, Jr.Chief Investment Services Officer

National Capital Financial Group Robert B. Donohoe, Sr.Chairman of the Board

The Donohoe Companies, Inc.

William J. Durkin, Jr.Attorney at Law

Grace L. HinchmanVice President (Retired)

Financial Accounting Foundation

George T. PedasAttorney at Law

William T. PedasVice President

Circle Management

Harold C. (Harry) RaunerPresident & Chief Executive Officer (Retired)

The Business Bank

Dennis T. ScurletisManaging Member

S D Capital Partners, LLC

Stephen Venti Director

Spillane Consulting Associates, Inc.

Standing L-R: Donald A. Didden; William T. Pedas; Stephen Venti; Grace L. Hinchman; George T. Pedas; Dennis T. Scurletis; Kathryn H. Didden;

Harold C. (Harry) Rauner; James M. Didden

Seated L-R: Kathleen W. (Kate) Carr; Robert B. Donohoe; Richard B. (Randy) Anderson, Jr.; R. Andrew Didden, Jr.; William J. Durkin, Jr.

In June 2017, we were all surprised and saddened by the passing of Thomas A. Barnes,

Chairman of the Board of Directors. Tom was appointed to our board in January 2016, bringing

with him over 20 years of experience with the Office of Thrift Supervision, where he rose to the

position of Deputy Director. He concurrently served as Chairman of the Board of Directors of

The Cooperative Bank in Roslindale, Massachusetts.

During his tenure, Tom guided the Board’s corporate strategic vision and helped address the

challenges of a growing company. Under his leadership, the Board continued its commitment

to fiscal responsibility, corporate integrity and community involvement — longstanding values

that will live on in the future.

The entire National Capital Bank family will treasure the time we shared with Tom. He was a

great leader and gentleman, who was passionate about NCB and our future success. Tom’s

leadership and counsel are deeply missed, along with his kind and engaging manner.

A Tribute to Thomas A. Barnes

Tom Barnes’ passing was a sad note this past year


Executive Management & Bank Officers

Richard B. (Randy) Anderson Jr.President & Chief Executive Officer

R. Andrew Didden, Jr.Executive Vice President

Chief Investment Services Officer

Jeffrey L. KarafaExecutive Vice President

Chief Financial Officer

Debra A. Keats Executive Vice President

Chief Retail Administration Officer

Joseph Marchese Executive Vice President

Chief Lending Officer

Patricia M. OstranderExecutive Vice President

Chief Administrative &

Compliance Officer

Renee C. AldrichSenior Vice President

Senior Commercial Loan Officer

David M. GlaserSenior Vice President

Business Development Director

Ryan W. McKinleySenior Vice President

Commercial Loan Officer

Elaine B. RialSenior Vice President

Loan Operations &

Administration Director Robin P. RobertsonSenior Vice President

Retail Banking Director

Richard M. SobonyaSenior Vice President

Construction Lending Director

James H. Thompson, IIISenior Vice President

Treasurer

Paul T. YeloushanSenior Vice President

Product & Technology

Director

Robert G. ByrerVice President

Compliance Officer

William DuBose Vice President

Mortgage Loan Officer

Juan J. EliasVice President

Assistant Treasurer

Francina JonesVice President

Controller

Christopher S. ReddickVice President

Mortgage Sales Director

Kathryn R. SpeakmanVice President

Commercial Loan Officer

Elizabeth VenegasVice President

Executive Administration

Director

Amy M. WoodwardVice President

Human Resources Director

Tamara M. ZamberlanVice President

Branch Manager

Keith B. ArnoldAssistant Vice President

Loan Review Analyst

Angela M. BeckhamAssistant Vice President

Financial Advisor

Charles F. Brandon Assistant Vice President

Loan Administration Officer

Claudio W. CobianAssistant Vice President

IT Manager & Information

Security Officer

Fatima Fonseca Assistant Vice President

Branch Manager

Valerie A. GullifordAssistant Vice President

Deposit Operations Manager

Blanca GutierrezAssistant Vice President

Senior Credit Analyst

Chad W. HeigesAssistant Vice President

Senior Credit Analyst

Sharon T. PetersAssistant Vice President

Loan Administration Officer

Scott T. SchoenbornAssistant Vice President

Senior BSA Officer

Robin P. AndersonBanking Officer

Items Processing Supervisor

Kirk C. BirdsongBanking Officer

Head Teller

David A. DiddenBanking Officer

Assistant Branch Manager

Carmella ElliottBanking Officer

Customer Service Supervisor

Keith M. HowardBanking Officer

Mortage Loan Officer

Desoye M. IloriBanking Officer

Loan Operations Officer

Ian A. KilbyBanking Officer

Assistant BSA Officer

Harrison LeeBanking Officer


Daniel S. SolomonrajBanking Officer

Branch Manager

Rachel M. VladimerBanking Officer


Sherri A. WaidBanking Officer

Loan Services Supervisor

Arthur T. WilliamsonBanking Officer

Facilities Manager & Security Officer

Standing L-R: R. Andrew Didden, Jr.; Jeffrey L. Karafa; Joseph Marchese; Patricia M. Ostrander

Seated L-R: Richard B. (Randy) Anderson, Jr.; Debra A. Keats

Photo credit: Samardge Photographics,

LLC unless otherwise notedN A T I O N A LC A P I T A L B A N K16

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Independent Auditors’ Report

The Board of Directors and Stockholders The National Capital Bank of Washington Washington, DC

We have audited the accompanying financial statements of The National Capital Bank of Washington (the “Company”), which comprises the balance sheets as of December 31, 2017 and 2016, and the related statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for the years then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors’ judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Report on Supplementary Information Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The financial highlights supplementary schedule (“financial highlights”) is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The financial highlights has been subjected to the auditing procedures applied in the audits of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedure in accordance with auditing standards generally accepted in the United States of

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America. In our opinion, the financial highlights is fairly stated in all material respects in relation to the financial statements as a whole.

Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The National Capital Bank of Washington as of December 31, 2017 and 2016, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Baltimore, Maryland March 5, 2018

The National Capital Bank of WashingtonBalance SheetsDecember 31, 2017 and 2016

Assets 2017 2016Cash and due from banks 3,520,352$ 5,214,524$ Interest-bearing deposits 21,270,632 18,697,929

Total cash and cash equivalents 24,790,984 23,912,453

Investment securities:Available-for-sale, at fair value 116,817,826 164,270,625 Restricted stock, at cost 425,450 424,750

Total investment securities 117,243,276 164,695,375

Loans receivable, net of allowance for loan losses of $3,479,308 (2017) and $4,710,584 (2016) 267,557,974 204,012,679 Bank premises and equipment, net 2,782,472 2,710,295 Bank-owned life insurance 11,394,519 11,114,520 Deferred income taxes 1,952,255 4,105,137 Accrued interest and other assets 4,030,547 1,611,922

Total Assets 429,752,027$ 412,162,381$

Liabilities and Stockholders’ EquityLiabil ities:

Deposits:Non-interest-bearing 116,185,996$ 107,280,003$ Interest-bearing 264,464,692 254,889,801

Total deposits 380,650,688 362,169,804

Securities sold under agreements to repurchase 4,067,551 6,662,024 Accrued interest and other l iabil ities 1,406,252 2,345,031

Total Liabil ities 386,124,491 371,176,859

Commitments and contingent l iabil ities - -

Stockholders’ Equity:Common stock, $1.25 par value per share - 1,000,000 shares authorized,

288,777 and 288,033 issued and outstanding at December 31,2017 and 2016, respectively 359,724 359,565

Additional paid-in capital 1,508,852 1,450,909 Retained earnings 44,253,950 42,288,086 Accumulated other comprehensive loss (2,494,990) (3,113,038)

Total Stockholders’ Equity 43,627,536 40,985,522

Total Liabil ities and Stockholders’ Equity 429,752,027$ 412,162,381$

See Notes to Financial Statements.

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The National Capital Bank of WashingtonStatements of IncomeYears Ended December 31, 2017 and 2016

2017 2016Interest Income:

Loans, including fees $ 10,493,319 $ 9,005,124 Investment securities 2,817,507 2,698,883 Interest-bearing deposits 218,511 118,242

Total interest income 13,529,337 11,822,249

Interest Expense:Deposits 501,299 429,948 Securities sold under agreements to repurchase 7,050 17,331

Total interest expense 508,349 447,279

Net interest income 13,020,988 11,374,970 Reversal of loan loss provision (1,264,000) (3,662,373)

Net interest income after reversalof loan loss provision 14,284,988 15,037,343

Noninterest Income:Service charges on deposit accounts 364,080 363,285 Other service charges and fees 91,944 93,529 Rental income 1,204,861 1,162,795 Asset management fees 913,140 826,204 Net gain on sale of securities 78,316 557,246 Net gain on sale of loans 17,311 - Bank owned life insurance income 279,998 223,863 Other income 237,520 254,369

Total noninterest income 3,187,170 3,481,291

Noninterest Expense:Salaries and employee benefits expense 7,819,920 6,173,391 Occupancy expense 1,190,751 990,062 Equipment expense 246,500 243,497 Professional fees 1,202,439 1,140,347 FDIC assessments 243,679 392,418 Data processing expense 887,094 706,201 Insurance expense 102,122 106,330 Other expense 1,245,299 955,067

Total noninterest expense 12,937,804 10,707,313

Income before income taxes 4,534,354 7,811,321

Provision for Income Taxes 2,563,088 3,126,528

Net income $ 1,971,266 $ 4,684,793

Basic and Diluted Earnings Per Share of Common Stock $ 6.83 $ 16.27

Average Shares Outstanding 288,632 287,893

Dividends $ 1.50 $ 1.00


The National Capital Bank of WashingtonStatements of Comprehensive IncomeYears Ended December 31, 2017 and 2016

2017 2016Net Income 1,971,266$ 4,684,793$

Other comprehensive income (loss):

1,092,677 (1,006,474) Unrealized (losses) gains on securities available for sale, net of tax of $749,071 and $(690,723), respectively Reclassification adjustment, net of tax of $(31,279) and $(226,131), respectively (47,037) (331,115)

Total other comprehensive (loss) income 1,045,640 (1,337,589)

Total Comprehensive Income 3,016,906$ 3,347,204$


The National Capital Bank of WashingtonStatements of Changes in Stockholders’ EquityYears Ended December 31, 2017 and 2016

AccumulatedAdditional Other

Paid-In Retained ComprehensiveShares Amount Capital Earnings Income (Loss) Total

Balances, January 1, 2016 287,652 $ 359,565 $ 1,438,260 $ 37,891,326 $ (1,775,449) $ 37,913,702

Net income 4,684,793 4,684,793 Other comprehensive loss, net of tax (1,337,589) (1,337,589) Stock-Based compensation 381 12,649 12,649 Cash dividends declared ($1.00 per share) (288,033) (288,033)

Balances, December 31, 2016 288,033 359,565$ 1,450,909$ 42,288,086$ (3,113,038)$ 40,985,522$

1,971,266 1,971,266 Other comprehensive income, net of tax 1,045,640 1,045,640 Application of ASU 2018-02 427,592 (427,592) Stock-Based Compensation 744 159 57,943 58,102 Cash dividends declared ($1.50 per share) (432,994) (432,994)

Balances, December 31, 2017 288,777 359,724$ 1,508,852$ 44,253,950$ (2,494,990)$ 43,627,536$


Common Stock

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The National Capital Bank of WashingtonStatements of Cash FlowsYears Ended December 31, 2017 and 2016

2017 2016Cash Flows From Operating Activities:

Net income 1,971,266$ 4,684,793$ Adjustments to reconcile net income to net

cash (used) provided by operating activities:Depreciation 337,219 322,848Reversal of loan loss provision (1,264,000) (3,662,373)Accretion and amortization on investments, net 1,139,244 931,300Deferred income tax 1,401,048 228,848Realized gain on sales/calls of available-for-sale securities (78,316) (557,246)Residential mortgage loans originated for sale 1,106,200 - Proceeds from loans originated for sale (1,123,511) - Stock-based compensation expense 58,102 12,649Net change in: Cash surrender value of BOLI (279,999) (223,863) Accrued interest and other assets (2,418,625) 857,428 Accrued interest and other l iabil ities (938,779) 1,127,306

Net cash (used) provided by operating activities (90,151) 3,721,690

Cash Flows From Investing Activities:Loan (originations) and principal payments, net (53,666,250) 21,033,019Loan participations purchased (12,667,688) (11,622,843)Loan participations sold 2,963,754 1,390,526Residential mortgage loans sold 1,106,200 - Activity in available-for-sale securities:

Purchases (12,358,388) (151,168,052) Sales, maturities, paydowns, and calls 60,547,733 155,522,167

Net change in restricted stock (700) 21,000 Purchase of bank-owned life insurance - (2,400,000) Purchase of premises and equipment (409,396) (713,500)

Net cash (used) provided by investing activities (14,484,735) 12,062,317

Cash Flows From Financing Activities:Increase in demand deposits

and savings accounts 21,522,303 9,807,296Decrease in time deposits (3,041,419) (11,947,707)Decrease in repurchase agreements (2,594,473) (1,810,604)Dividends paid (432,994) (288,033)

Net cash provided (used) by financing activities 15,453,417 (4,239,048)

Increase in Cash and Cash Equivalents 878,531 11,544,959

Cash and Cash Equivalents, Beginning of Year 23,912,453 12,367,494

Cash and Cash Equivalents, End of Year $ 24,790,984 $ 23,912,453

Supplemental Disclosures of Cash Flow InformationCash paid during the year for:

Interest 505,966$ 449,567$ Taxes 4,117,250$ 1,158,000$


The National Capital Bank of Washington Notes to Financial Statements

Note 1. Nature of Banking Activities and Significant Accounting Policies Nature of Operations: The National Capital Bank of Washington (the “Bank”) operates under a national bank charter and provides full banking services principally to customers in the Washington, D.C. metropolitan area. As a national bank, the Bank is subject to regulations of the Office of the Comptroller of the Currency (OCC) and the Federal Deposit Insurance Corporation (FDIC). The accounting and reporting policies of the Bank conform to accounting principles generally accepted in the United States of America and prevailing practices within the banking industry. Use of Estimates: In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses and other-than-temporary impairment of securities. Investment Securities: Debt and equity securities are segregated into the following three categories: trading, held-to-maturity, and available-for-sale. Trading securities are purchased and held principally for the purpose of reselling them within a short period of time. Unrealized gains and losses on trading securities are included in earnings. As of December 31, 2017 and 2016, the Bank did not hold any trading or held-to-maturity securities. Securities classified as held-to-maturity are accounted for at amortized cost and require the Bank to have both the positive intent and ability to hold these securities to maturity. Securities not classified as either trading or held-to-maturity are considered to be available-for-sale and are carried at fair value. Unrealized gains and losses on available-for-sale securities are reported, net of taxes, in accumulated other comprehensive income until realized. Realized gains or losses on the sale of securities are reported in earnings and are determined using the adjusted cost of the specific security sold. Interest income is accrued on the investment’s face value. Purchase premium and discounts are recognized in interest income using the interest method over the term of the securities. Investment securities are impaired when fair value is less than cost. An impairment is considered “other than temporary” if any of the following conditions are met: the Bank intends to sell the security, it is more likely than not that the Bank will be required to sell the security before the recovery of its amortized cost basis, or the Bank does not expect to recover the security’s entire amortized cost basis (even if the Bank does not intend to sell). The Bank does not have any securities impairment that is considered “other than temporary” at December 31, 2017 and 2016. Due to the nature and restrictions placed on the Bank’s investment in common stock of the Federal Reserve Bank and the Federal Home Loan Bank of Atlanta, these securities are classified as restricted stock and carried at cost. Loans: Loans are reported at their recorded investment, which is the principal amount outstanding, as adjusted for net deferred fees or cost of loan originations. The balance of the allowance for loan losses is netted against the recorded investment in loans on the balance sheet. Interest income is accrued on the unpaid principal balance. Loan origination fees and certain direct origination costs are deferred and recognized as an adjustment of the yield on the related loans using the interest method. Loans on which the accrual of interest has been discontinued are designated as nonaccrual loans. Accrual of interest on all classes of loans is discontinued either when reasonable doubt exists as to the full, timely collection of interest or principal in accordance with the loan’s contractual terms, or when a loan becomes contractually past due by ninety days or more with respect to principal or interest. All interest accrued but not collected for loans placed on nonaccrual or charged off is reversed against interest income. Income on such loans is then recognized only to the extent that cash is received and where the future collection of principal is probable. Accruals are resumed on loans only when they are brought fully current with respect to interest and principal and when, in the judgment of management, the loan is estimated to be fully collectible as to both principal and interest. Loans are considered past due when the borrower is not current with their payments in accordance with the contractual terms of their loan agreement.

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Note 1. Nature of Banking Activities and Significant Accounting Policies (Continued) Allowance for Loan Losses: An allowance for loan losses is maintained at a level deemed appropriate by management to provide for known and inherent risks that are probable within the loan portfolio. The allowance is based upon management’s continuing assessment of various factors affecting the collectability of loans, including current economic conditions, past credit experience, the value of the underlying collateral, and such other factors as in management’s judgment deserve current recognition in estimating probable credit losses. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. Loans deemed uncollectible are charged off and deducted from the allowance, while subsequent recoveries are credited to the allowance. For collateral dependent loans delinquent after 180 days, the Bank obtains a new valuation. Any outstanding balance greater than the new valuation, less estimated selling costs will be charged off. Commercial, consumer, and credit card loans delinquent after 120 days will be charged off unless there is fraudulent activity or bankruptcy proceedings where loans will be charged off sooner. The allowance consists of specific, general and unallocated components. For loans that are classified as impaired, a specific allowance is established when the discounted cash flows (or collateral value or observable market price) of the impaired loan is lower than the carrying value of that loan. The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors. An unallocated component is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio. Management has an established internally developed methodology to determine the adequacy of the allowance for loan losses that assesses the risks inherent in the loan portfolio. For purposes of determining the allowance for loan losses, management has segmented certain loans in the portfolio by product type. The loan portfolio is segmented based on risk characteristics into the following segments: real estate, commercial, consumer and credit cards. Particular characteristics associated with each segment are detailed below:

• Real Estate: Loans secured by commercial real estate carry risks associated with the success of the business and ability to generate a positive cash flow sufficient to service debts and changes in the value of the collateral. Residential real estate loans carry risks associated with the continued creditworthiness of the borrower and changes in the value of the collateral. Real estate security diminishes risks only to the extent that a market exists for the subject collateral.

• Commercial: These loans not secured by real estate carry risks associated with the successful operation of a business and the repayment of these loans depends on the profitability and cash flows of the business. Additional risk relates to the value of collateral where depreciation occurs and the valuation is less precise. In addition, these loans may be unsecured.

• Consumer: These loans carry risks associated with the continued creditworthiness of the borrower and the value of the collateral, such as automobiles, which may depreciate more rapidly than other assets. In addition, these loans may be unsecured. These loans are more likely than real estate loans to be immediately affected in an adverse manner by job loss, divorce, illness or personal bankruptcy.

• Credit cards: These loans are unsecured and carry risk associated with the continued creditworthiness of the borrower. These loans are immediately affected in an adverse manner by job loss, divorce, illness or personal bankruptcy.

As the first step in determining the general component of the allowance for loan losses, management uses the average of one, two, or three-year charge-off history, whichever is highest, for each segment of the portfolio. The historical loss percentage calculated is applied to the quarter end balance of each portfolio segment. The historical component is further adjusted by management’s evaluation of various conditions per segment including the economy, concentrations of credit risk, trends in portfolio growth, changes in lending practice, changes in experience and depth of lending staff, changes in value and severity of past due loans and adversely classified loans, changes in collateral value of real estate loans and the effects of external factors including competition, legal and regulatory risks.


Note 1. Nature of Banking Activities and Significant Accounting Policies (Continued) Allowance for Loan Losses (Continued): To determine the specific reserve component of the allowance for loan losses, management evaluates all impaired loans to determine the amount of anticipated loss. The Bank evaluates all segments of loans for impairment except for consumer loans and credit card loans. Accordingly, the Bank does not separately identify consumer loans and credit card loans for impairment disclosures, unless such loans are the subject of a restructuring agreement. A loan is considered impaired when management determines that it is probable that the Bank will be unable to collect all amounts due according to the original contractual terms of the loan agreement. Impaired loans are carried at the estimated present value of total expected future cash flows, discounted at the loan’s effective rate, or the fair value of the collateral, if the loan is collateral-dependent, or if less than the recorded investment in the loan (including accrued interest, net deferred loan fees or costs and unamortized premium or discount). There were no material changes in the Bank’s allowance for loan loss methodology during 2017 or 2016. Troubled Debt Restructurings: In situations where, for economic or legal reasons related to a borrower’s financial condition, management may grant a concession to the borrower that it would not otherwise consider, the related loan is classified as a troubled debt restructuring (TDR). Management strives to identify borrowers in financial difficulty early and work with them to modify their loan to more affordable terms before their loan reaches nonaccrual status. These modified terms may include rate reductions, principal forgiveness, payment forbearance and other actions intended to minimize the economic loss and to avoid foreclosure or repossession of the collateral. In cases where borrowers are granted new terms that provide for a reduction of either interest or principal, management measures any impairment on the restructuring as noted above for impaired loans. Bank Premises and Equipment: Land is carried at cost. Property and equipment are stated at cost, less accumulated depreciation, which is computed on the straight-line method over the estimated useful lives of the assets, which range between 3 and 45 years. Maintenance and repairs of property and equipment are charged to operations, and major improvements are capitalized. Upon retirement, sale, or other disposition of premises and equipment, the cost and accumulated depreciation are eliminated from the accounts, and gain or loss is included in noninterest income and noninterest expenses, respectively. Foreclosed Assets: Assets acquired through, or in lieu of, loan foreclosure are held for sale and are initially recorded at fair value less cost to sell at the date of foreclosure, establishing a new cost basis. Subsequent to foreclosure, valuations are periodically performed by management and the assets are carried at the lower of carrying amount or fair value less cost to sell. Revenue and expenses from operations and changes in the valuation allowance are included in net expenses from foreclosed assets. As of and during the years ended December 31, 2017 and 2016, the Bank did not have any foreclosed assets. Bank-Owned Life Insurance: The Bank has purchased life insurance policies on certain officers. Bank-owned life insurance is recorded at the amount that can be realized under the insurance contract at the balance sheet date, which is the cash surrender value adjusted for other charges or other amounts due that are probable at settlement. Earnings Per Share of Common Stock: The Bank has a simple capital structure, with no potential common stock outstanding, such as stock options or warrants. Earnings per share represents income available to common stockholders divided by the weighted average number of common shares outstanding during the year. The participating unvested restricted stock awards are included in the calculated weighted average number of common shares outstanding.

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Note 1. Nature of Banking Activities and Significant Accounting Policies (Continued) Income Taxes: The Bank accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements. Under this method, the Bank determines deferred tax assets and liabilities on the basis of the differences between the financial statement and tax bases of assets and liabilities by using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. The Bank recognizes deferred tax assets to the extent that the Bank believes that these assets are more likely than not to be realized. In making such a determination, the Bank considers all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax-planning strategies, and results of recent operations. If the Bank determines that the Bank would be able to realize their deferred tax assets in the future in excess of their net recorded amount, the Bank would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes. The Bank records uncertain tax positions in accordance with Financial Accounting Standards (FAS) Accounting Standards Codification (ASC) 740 on the basis of a two-step process in which (1) the Bank determines whether it is more likely than not that the tax positions will be sustained on the basis of the technical merits of the position and (2) for those tax positions that meet the more-likely-than-not recognition threshold, the Bank recognizes the largest amount of tax benefit that is more than 50 percent likely to be realized upon ultimate settlement with the related tax authority. The Bank is not in a three-year cumulative loss position, and the Bank’s deferred tax assets are fully realizable after considering the four sources of taxable income under ASC 740-10-30-18. Advertising Costs: Advertising costs are expensed as incurred. Advertising costs were $172,116 and $104,967 for the years ended December 31, 2017 and 2016, respectively. Transfers of Financial Assets: Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Bank – put presumptively beyond reach of the transferor and its creditors, even in bankruptcy or other receivership, (2) 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 (3) the Bank does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity or the ability to unilaterally cause the holder to return specific assets. Cash and Cash Equivalents: For purposes of the statement of cash flows, cash equivalents are highly liquid investments with original maturities of three months or less and include cash and due from banks and federal funds sold. Included in cash and due from banks on the balance sheets were restricted funds on required deposit with the Federal Reserve Bank totaling $9,267,000 and $9,120,000 at December 31, 2017 and 2016, respectively. In addition, the Bank maintains cash balances in other correspondent banks that may exceed federally insured limits. The Bank has not experienced any losses in such accounts and does not believe it is exposed to any significant credit risk. Rental Income: Rental income is recognized when earned in accordance with the terms of the respective leases on a straight-line basis for the period of occupancy using the average monthly rental. Accordingly, rental income is recognized over the terms of the respective leases.


Note 1. Nature of Banking Activities and Significant Accounting Policies (Continued) Comprehensive Income: Accounting principles generally require that recognized revenue, expenses, gains, and losses be included in net income. However, certain changes in assets and liabilities, such as unrealized gains and losses on available-for-sale securities, are reported in a separate Statement of Comprehensive Income. Such items, along with net income, are components of comprehensive income. All the Bank’s other comprehensive income relates to unrealized gains and losses on available-for-sale securities for the years ended December 31, 2017 and 2016. Stock-based compensation plan: The Bank maintains a stock-based compensation plan, as described more fully in Note 17, which provides for grants of restricted stock. The plan has been presented to and approved by the Bank’s board of directors. Compensation cost for stock-based awards is measured at fair value on the date of grant and recognized over the service period for awards expected to vest. Such value is recognized as expense over the service period. Any adjustment due to the forfeiture of stock-based awards will be recorded as a cumulative adjustment in the period the awards are forfeited. Reclassifications: Certain 2016 balances have been reclassified to conform to the 2017 financial statement presentation. These reclassifications were immaterial. Recent Accounting Pronouncements: The FASB issued Accounting Standards Update (ASU) No. 2014-09, “Revenue from Contracts with Customers (Topic 606).” The amendments in ASU 2014-09 supersede the revenue recognition requirements in Topic 605, Revenue Recognition, and most industry-specific guidance. The general principle of the amendments require an entity to recognize revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance sets forth a five-step approach to be utilized for revenue recognition. As amended, the new guidance is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period. The Bank does not expect the guidance to have a material impact on its financial statements. FASB issued ASU No. 2016-01, “Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities.” The amendments in this Update make targeted improvements to generally accepted accounting principles (GAAP) as follows: (1) Require equity investments to be measured at fair value with changes in fair value recognized in net income. (2) Simplify the impairment assessment of equity investments without readily determinable fair values by requiring a qualitative assessment to identify impairment. When a qualitative assessment indicates that impairment exists, an entity is required to measure the investment at fair value. (3) Eliminate the requirement for public business entities to disclose the method(s) and significant assumptions used to estimate the fair value that is required to be disclosed for financial instruments measured at amortized cost on the balance sheet. (4) Require public business entities to use the exit price notion when measuring fair value of financial instruments for disclosure purposes. (5) Clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to available-for-sale securities in combination with the entity’s other deferred tax assets. This Update will be effective for public business entities for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Bank does not expect the guidance to have a material impact on its financial statements.

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Note 1. Nature of Banking Activities and Significant Accounting Policies (Continued) Recent Accounting Pronouncements (Continued): The FASB issued ASU No. 2016-02, “Leases (Topic 842).” The amendments in this update are to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. To meet that objective, the FASB is amending the FASB Accounting Standards Codification and creating Topic 842, Leases. Leasing is utilized by many entities. It is a means of gaining access to assets, of obtaining financing, and/or of reducing an entity’s exposure to the full risks of asset ownership. The prevalence of leasing, therefore, means that it is important that users of financial statements because it did not always provide a faithful representation of leasing transactions. In particular, it did not require lessees to recognize assets and liabilities arising from operating leases on the balance sheet. As a result, there had been long-standing requests from many users of financial statements have a complete and understandable picture of an entity’s leasing activities. Previous leases accounting was criticized for failing to meet the needs of users of financial statements because it did not always provide a faithful representation of leasing transactions. In particular, it did not require lessees to recognize assets and liabilities arising from operating leases on the balance sheet. As a result, there had been long-standing requests from many users of financial statements and others to change the accounting requirements so that lessees would be required to recognize the rights and obligations resulting from leases as assets and liabilities. This Update will be effective for public business entities for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Bank does not expect the guidance to have a material impact on its financial statements. The FASB issued ASU No. 2016-13, “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.” Current GAAP requires an “incurred loss” methodology for recognizing credit losses that delays recognition until a probable a loss has been incurred. Users of financial statements expressed concern that current GAAP restricts the ability to record credit losses that are expected, but do not yet meet the “probable” threshold. The main objective of the Update is to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. To achieve this objective, the amendments in this Update replace the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This Update will be effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. At this time, the Bank has not determined the impact on its financial statements. The FASB issued ASU No. 2017-08, “Receivables – Nonrefundable Fees and Other Costs (Subtopic 310-20) – Premium Amortization on Purchased Callable Debt Securities.” The Update shortens the amortization period for certain callable debt securities held at a premium to require such premiums to be amortized to the earliest call date unless applicable guidance related to certain pools of securities is applied to consider estimated prepayments. Under prior guidance, entities were generally required to amortized premiums on individual, non-pooled callable debt securities as a yield adjustment over the contractual life of the security. The Update does not change the accounting for callable debt securities held at a discount. This Update will be effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Bank does not expect the guidance to have a material impact on its financial statements. The FASB issued ASU No. 2017-09, “Compensation – Stock Compensation (Topic 718) – Scope of Modification Accounting.” The Update clarified when changes to the terms or conditions of a share-base payment award must be accounted for as modification. An entity will not apply modification accounting to share-based payment awards if all of the following are the same immediately before and after the change: (i) the award’s fair value, (ii) the award’s vesting conditions and (iii) the award’s classification as an equity or liability instrument. This Update will be effective for fiscal years beginning after December 15, 2017. The Bank does not expect the guidance to have a material impact on its financial statements.


Note 1. Nature of Banking Activities and Significant Accounting Policies (Continued) Recent Accounting Pronouncements (Continued): The FASB issued ASU No. 2018-02, “Income Statement – Reporting Comprehensive Income (Topic 220) – Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” The Update allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cut and Jobs Act. This Update will be effective for fiscal years beginning after December 15, 2018, with early adoption permitted. The Bank has elected to early adopt the guidance whose effects are disclosed in the statement of changes in stockholders’ equity. Note 2. Investment Securities Investment securities are summarized as follows at December 31:

Amortized Gross Unrealized Gross Unrealized FairCost Gains Losses Value

Available-for-sale:Debt securities:

U.S. Treasury & agency obligations $ 22,798,815 $ - $ (425,019) $ 22,373,796 Mortgage-backed securities 97,461,231 - (3,017,201) 94,444,030

Total securities available-for-sale $ 120,260,046 -$ (3,442,220)$ $ 116,817,826

Restricted stock, at cost $ 425,450 -$ -$ $ 425,450

Amortized Gross Unrealized Gross Unrealized FairCost Gains Losses Value

Available-for-sale:Debt securities:

U.S. Treasury & agency obligations $ 36,221,382 $ 3,520 $ (699,882) $ 35,525,020 Mortgage-backed securities 133,288,637 - (4,543,032) 128,745,605

Total securities available-for-sale $ 169,510,019 3,520$ (5,242,914)$ $ 164,270,625

Restricted stock, at cost $ 424,750 -$ -$ $ 424,750

2017

2016

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Note 2. Investment Securities (Continued) Information pertaining to securities with gross unrealized losses aggregated by investment category and length of time that individual securities have been in a continuous loss position follows at December 31:

Fair Unrealized Fair Unrealized Fair UnrealizedValue Losses Value Losses Value Losses

Debt securities:U.S. Treasury & agency obligations 2,887,622$ (60,029)$ 19,486,174$ (364,990)$ $ 22,373,796 $ (425,019)Mortgage-backed securities - - 94,444,030 (3,017,201) 94,444,030 (3,017,201)

2,887,622$ (60,029)$ 113,930,204$ (3,382,191)$ 116,817,826$ (3,442,220)$

Fair Unrealized Fair Unrealized Fair UnrealizedValue Losses Value Losses Value Losses

Debt securities:U.S. Treasury & agency obligations 16,277,978$ (372,206)$ 12,772,999$ (327,676)$ $ 29,050,977 $ (699,882)Mortgage-backed securities 128,745,605 (4,543,032) - - 128,745,605 (4,543,032)

145,023,583$ (4,915,238)$ 12,772,999$ (327,676)$ 157,796,582$ (5,242,914)$

Total12 Months or MoreLess than 12 Months2016

2017Less than 12 Months 12 Months or More Total

At December 31, 2017, sixty-one securities with a fair value of $116,817,826 had gross unrealized losses of $3,442,220. At December 31, 2016, seventy-eight securities with a fair value of $157,796,582 had gross unrealized losses of $5,242,914. As of December 31, 2017 and 2016, the Bank’s unrealized losses in debt securities are related to interest rate fluctuations. Since the Bank does not intend to sell any of the investments before recovery of its amortized cost basis and has the ability and intent to hold these investments to maturity, the Bank does not consider these investments to be other-than-temporarily impaired. Based on the Bank’s evaluation and ability and intent to hold equity securities for a reasonable period of time sufficient for a forecasted recovery of fair value, the Bank does not consider these investments to be other-than-temporarily impaired at December 31, 2017 and 2016.


Note 2. Investment Securities (Continued) The amortized cost and estimated fair value of debt securities at December 31, 2017, by contractual maturity are shown in the table that follows. Maturities may differ from contractual maturities in mortgage-backed securities because the mortgages underlying the securities may be called or prepaid without any penalties. Therefore, these securities are not included in the maturity categories in the following summary.

Amortized FairCost Value

Due less than one year 2,999,167$ 2,984,750$ Due after one year through five years 18,684,866 18,305,936 Due after five years through ten years - - Due after ten years 1,114,782 1,083,110 Mortgage-backed securities 97,461,231 94,444,030

120,260,046$ 116,817,826$

Available-for-Sale

Investment securities with an amortized cost of $4,895,631 and $7,000,000 and fair market value of $4,828,006 and $6,916,090, were pledged to secure repurchase agreements at December 31, 2017 and 2016, respectively. Investment securities with an amortized cost of $43,321,673 and $49,307,167 and fair market value of $42,057,662 and $47,554,251, were pledged for other purposes as required or permitted by law at December 31, 2017 and 2016, respectively. For the years ended December 31, 2017 and 2016, proceeds from sales of securities available-for-sale amounted to $60,547,797 and $85,660,743, respectively; gross realized gains were $167,428 and $811,582, respectively; and gross realized losses were $89,112 and $254,336, respectively. The tax expense applicable to these net realized gains and losses were $(31,279) and ($226,131), respectively. Note 3. Loans Receivable Loans receivable consisted of the following at December 31:

2017 2016Real estate loans: Residential real estate $ 129,570,045 $ 122,645,085 Commercial real estate 102,754,125 53,346,086 Commercial construction 10,745,075 1,469,403 Commercial 26,755,615 29,364,975 Consumer 606,169 895,869 Credit cards 582,357 624,941

271,013,386 208,346,359 Net deferred loan costs 23,896 376,904 Allowance for loan losses (3,479,308) (4,710,584)

Total $ 267,557,974 $ 204,012,679

The Bank is principally engaged in banking in the Washington, D.C. metropolitan area. The Bank primarily originates commercial and residential loans, the majority of which are secured by real estate. Although the Bank has a diversified portfolio, a substantial portion of its debtors’ ability to honor their contracts is dependent upon the economy of the Washington, D.C. metropolitan area.

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Note 3. Loans Receivable (Continued) A summary of transactions in the allowance for loan losses is as follows for the years ended December 31, 2017 and 2016:

Allowance for Loan Losses: Real Estate Commercial Consumer Credit Cards TotalBalance, January 1, 2017 1,504,925$ 3,183,295$ 14,177$ 8,187$ 4,710,584$

Loans charged off - - - - - Recoveries - 31,959 765 - 32,724

Net loans charged off - 31,959 765 - 32,724 (Recovery) Provision for loan losses 617,316 (1,874,423) (4,618) (2,275) (1,264,000)

Balance, December 31, 2017 $ 2,122,241 $ 1,340,831 $ 10,324 $ 5,912 $ 3,479,308

Ending balance: individually evaluated for impairment $ - $ 1,117,150 $ - $ - $ 1,117,150

Ending balance: collectively evaluated for impairment $ 2,122,241 $ 223,681 $ 10,324 $ 5,912 $ 2,362,158

Loans Receivable:Balance, December 31, 2017 $ 243,069,245 $ 26,755,615 $ 606,169 $ 582,357 $271,013,386

Ending balance: individually evaluated for impairment $ 290,800 $ 2,315,265 $ - $ - $ 2,606,065

Ending balance: collectively evaluated for impairment $ 242,778,445 $ 24,440,350 $ 606,169 $ 582,357 $268,407,321

Allowance for Loan Losses: Real Estate Commercial Consumer Credit Cards TotalBalance, January 1, 2016 665,363$ 4,174,226$ 6,509$ 8,002$ 4,854,100$

Loans charged off - (56,021) (10,335) (799) (67,155) Recoveries - 3,585,092 920 - 3,586,012

Net loans charged off - 3,529,071 (9,415) (799) 3,518,857 (Recovery) Provision for loan losses 839,562 (4,520,002) 17,083 984 (3,662,373)

Balance, December 31, 2016 $ 1,504,925 $ 3,183,295 $ 14,177 $ 8,187 $ 4,710,584

Ending balance: individually evaluated for impairment $ - $ 2,496,875 $ - $ - $ 2,496,875

Ending balance: collectively evaluated for impairment $ 1,504,925 $ 686,420 $ 14,177 $ 8,187 $ 2,213,709

Loans Receivable:Balance, December 31, 2016 $ 177,460,574 $ 29,364,975 $ 895,869 $ 624,941 $208,346,359

Ending balance: individually evaluated for impairment $ 282,080 $ 6,512,056 $ - $ - $ 6,794,136

Ending balance: collectively evaluated for impairment $ 177,178,494 $ 22,852,919 $ 895,869 $ 624,941 $201,552,223


Note 3. Loans Receivable (Continued) Management evaluates the credit quality of all loans, except credit cards, based on an internal grading system that estimates the capability of the borrower to repay the contractual terms of their loan agreement as scheduled or at all. The Bank’s internal risk grading is based on experiences with similarly graded loans. Management analyzes risk grades on an ongoing basis. In addition, risk grades are validated by an independent loan review performed on a quarterly basis. The Bank’s internally assigned grades are as follows:

• Pass – Loans are supported by adequate financial statements, adequately secured by collateral and borrower demonstrates the ability to repay from normal business operations.

• Special Mention – Loans with no immediate problem, but trends exist with the borrower or the borrower’s industry that warrant close watch. This category also includes loans that are currently performing but have experienced problems in the past.

• Substandard – Loans meeting any of the following conditions: (1) Loans where problems have arisen with the current net worth and/or paying capacity of the borrower, or the collateral pledged, if any, to cause the Bank to further protect its position; (2) Loans having a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; (3) Loans having the distinct possibility that the Bank will sustain some loss if the deficiencies are not satisfactorily corrected.

• Doubtful – Loans classified doubtful 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 therefore improbable.

• Loss – Loans classified loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though full or partial recovery may be affected in the future.

The Bank’s credit card portfolio is evaluated based on payment activity. Any of these loans over 30 days past due are considered non-performing. The following table represents the credit quality of loan by class:

Watch andDecember 31, 2017 Pass Special Mention Substandard Doubtful Loss TotalReal estate loans: Residential real estate 129,279,245$ -$ 290,800$ -$ -$ 129,570,045$ Commercial real estate 101,976,447 777,678 - - - 102,754,125 Commercial construction 10,745,075 - - - - 10,745,075 Commercial 21,684,365 2,755,985 2,315,265 - - 26,755,615 Consumer 606,169 - - - - 606,169

Total 264,291,301$ 3,533,663$ 2,606,065$ -$ -$ 270,431,029$

Performing Non-PerformingCredit cards 579,033$ 3,324$

Watch andDecember 31, 2016 Pass Special Mention Substandard Doubtful Loss TotalReal estate loans: Residential real estate 120,312,429$ 101,482$ 2,231,174$ -$ -$ 122,645,085$ Commercial real estate 51,541,119 757,474 1,047,493 - - 53,346,086 Commercial construction 1,469,403 - - - - 1,469,403 Commercial 17,817,788 4,660,974 6,886,213 - - 29,364,975 Consumer 895,869 - - - - 895,869

Total 192,036,608$ 5,519,930$ 10,164,880$ -$ -$ 207,721,418$

Performing Non-PerformingCredit cards 624,941$ -$

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Note 3. Loans Receivable (Continued) Past due loans based on contractual payment status, including loans on nonaccrual status, presented by class before unearned fees were as follows as of December 31, 2017 and 2016:

Recorded30 - 59 60-89 Greater Total Investments

Days Days Than 90 Past > 90 Days Non-AccrualDecember 31, 2017 Current Past Due Past Due Days Due Accruing Loans TotalReal estate loans: Residential real estate 129,279,245$ -$ -$ -$ -$ -$ 290,800$ 129,570,045$ Commercial real estate 102,754,125 - - - - - - 102,754,125 Commercial construction 10,745,075 - - - - - - 10,745,075 Commercial 26,494,090 - - - - - 261,525 26,755,615 Consumer 606,169 - - - - - - 606,169 Credit cards 579,033 1,095 2,229 - 3,324 - - 582,357

Total 270,457,737$ 1,095$ 2,229$ -$ 3,324$ -$ 552,325$ 271,013,386$

Recorded30 - 59 60-89 Greater Total InvestmentsDays Days Than 90 Past > 90 Days Non-Accrual

December 31, 2016 Current Past Due Past Due Days Due Accruing Loans TotalReal estate loans: Residential real estate 122,363,005$ -$ -$ -$ -$ -$ 282,080$ 122,645,085$ Commercial real estate 53,346,086 - - - - - - 53,346,086 Commercial construction 1,469,403 - - - - - - 1,469,403 Commercial 25,213,213 361,202 - - 361,202 - 3,790,560 29,364,975 Consumer 895,869 - - - - - - 895,869 Credit cards 624,941 - - - - - - 624,941

Total 203,912,517$ 361,202$ -$ -$ 361,202$ -$ 4,072,640$ 208,346,359$

The following table presents the Bank’s impaired loan balances by portfolio class at December 31:

Unpaid Average InterestRecorded Principal Related Recorded Income

Investment Balance Allowance Investment Recognized

Residential real estate 290,800$ 290,800$ -$ 306,441$ 1,707$ Commercial 2,315,265 2,315,265 1,117,150 2,698,982 136,245

2,606,065$ 2,606,065$ 1,117,150$ 3,005,423$ 137,952$

Unpaid Average InterestRecorded Principal Related Recorded Income

Investment Balance Allowance Investment Recognized

Residential real estate 282,080$ 282,080$ -$ 292,302$ 5,651$ Commercial 6,512,056 6,512,056 2,496,875 7,065,549 156,789

6,794,136$ 6,794,136$ 2,496,875$ 7,357,851$ 162,440$

2016

2017


Note 3. Loans Receivable (Continued) There were no loans modified as troubled debt restructurings (TDRs) during the years ended December 31, 2017 and 2016: Note 4. Premises and Equipment Premises and equipment are comprised of the following at December 31:

2017 2016Land and buildings $ 6,018,566 $ 5,891,995 Furniture and equipment 2,379,034 2,204,588

8,397,600 8,096,583 Accumulated depreciation (5,615,128) (5,386,288)

Premises and equipment, net 2,782,472$ 2,710,295$

Depreciation expense $ 337,219 $ 322,848

Future minimum rental payments required under non-cancelable operating leases for bank premises that have initial or remaining terms in excess of one year as of December 31, 2017 are as follows:

2018 $ 89,996 2019 91,796 2020 93,632 2021 95,504 2022 64,513 Thereafter -

435,441$

The lease contains options to extend for 2 periods of 5 years. Rental expense for 2017 and 2016 was $29,800 and $0, respectively.

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Note 5. Deposits Deposits as of December 31, are summarized as follows:

Balance BalanceNon-interest-bearing $ 116,185,996 - $ 107,280,003 - Interest-bearing:

Interest checking 89,949,372 0.05 87,686,193 0.05 Money market accounts 110,047,617 0.30 101,068,174 0.15 Savings accounts 22,563,639 0.10 21,189,951 0.10 Certificates of deposit:

Less than $250,000 25,247,275 0.51 27,093,139 0.46 $250,000 or more 16,656,789 0.50 17,852,344 0.42

Total interest-bearing 264,464,692 254,889,801

Total deposits 380,650,688$ 362,169,804$

20162017Weighted Average

Interest Rate %Weighted Average

Interest Rate %

At December 31, 2017, the scheduled maturities of certificates of deposit are as follows:

2018 39,082,405$ 2019 2,109,766 2020 711,893

41,904,064$

Note 6. Securities Sold Under Agreements to Repurchase Securities sold under agreements to repurchase of $4,067,551 and $6,662,024 mature within one to ninety days from the transaction date and are secured by U.S. Government securities with a fair value of $4,828,006 and $6,916,090 at December 31, 2017 and 2016, respectively. The weighted average interest rate on these agreements was .10 percent at December 31, 2017 and 2016. Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction. The Bank may be required to provide additional collateral based on the fair value of the underlying securities. Note 7. Borrowings During 2017, the Bank had $130,377,750 in available borrowings with other financial institutions. The interest rate on this agreement is equal to the prevailing federal funds rate. During 2017 and 2016, the Bank did not have an outstanding balance for any period of time. The Bank also has access to the Federal Reserve Bank of Richmond’s discount window. Certain investments are pledged as collateral to these borrowings, see detail in Note 2. Note 8. Defined Contribution Plan The Bank has a defined contribution plan that covers substantially all of the Bank’s full-time employees. Participants can contribute up to 15%, or the maximum amount allowable by law, of their annual compensation and receive a dollar for dollar matching employer contribution of up to 4% of their annual compensation. Related expenses were $146,218 and $103,526 for the years ended December 31, 2017 and 2016, respectively.


Note 9. Stockholders’ Equity On December 6, 2017, the Bank was released from the Formal Agreement issued by the Office of the Comptroller of the Currency previously entered into on August 25, 2015 and is no longer subject to dividend restrictions. Note 10. Regulatory Matters The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities, and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weighting, and other factors. Quantitative measures established by regulation to ensure capital adequacy require the Bank to maintain minimum amounts and ratios (set forth in the following table) of Common Equity Tier 1, Total Capital and Tier 1 Capital (as defined in the regulations) to risk-weighted assets (as defined) and of Tier 1 Capital (as defined) to average assets (as defined). Management believes, as of December 31, 2017 and 2016, that the Bank met all capital adequacy requirements to which it is subject. As of December 31, 2017, the most recent notification from the Office of the Comptroller of the Currency categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum total risk-based, Tier 1 risk-based, and Tier 1 leverage ratios as set forth in the table that follows. There are no conditions or events since that notification that management believes have changed the Bank’s category.

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Note 10. Regulatory Matters (Continued) The Bank’s required and actual capital amounts and ratios are set forth in the following table as of December 31, 2017 and 2016:

Amount Ratio Amount Ratio Amount RatioAs of December 31, 2017:Common Equity Tier 1[to Risk Weighted Assets] 46,123,000$ 18.60% $ 11,157,800 >4.5% $ 16,116,900 >6.5%

Total Capital [to RiskWeighted Assets] 49,227,000 19.85% 19,836,200 >8% 24,795,200 >10%

Tier 1 Capital [to RiskWeighted Assets] 46,123,000 18.60% 14,877,100 >6% 19,836,200 >8%

Tier 1 Capital [to Average Assets] 46,123,000 10.76% 17,152,800 >4% 21,441,100 >5%

Amount Ratio Amount Ratio Amount RatioAs of December 31, 2016:Common Equity Tier 1[to Risk Weighted Assets] 44,099,000$ 23.75% $ 8,354,600 >4.5% 12,067,800$ >6.5%

Total Capital [to RiskWeighted Assets] 46,450,000 25.02% 14,852,600 >8% 18,565,800 >10%

Tier 1 Capital [to RiskWeighted Assets] 44,099,000 23.75% 11,139,500 >6% 14,852,600 >8%

Tier 1 Capital [to Average Assets] 44,099,000 10.37% 17,012,800 >4% 21,266,100 >5%

Actual

To Be WellCapitalized Under

To Be WellCapitalized Under

Adequacy Purposes Active ProvisionsPrompt CorrectiveFor Capital

Actual Adequacy Purposes Active ProvisionsFor Capital Prompt Corrective

On December 6, 2017, the Bank was released from the Formal Agreement issued by the Office of the Comptroller of the Currency previously entered into on August 25, 2015.


Note 11. Income Taxes On December 22, 2017, the Tax Cuts and Jobs Act was passed into law (TCJA). The TCJA includes a broad range of tax reform including changes to tax rate and deductions that are effective January 1, 2018. The decrease in the enacted corporate tax rate expected to apply when the Bank’s temporary differences are realized or settled ultimately resulted in a one-time revaluation of the Bank’s net deferred tax asset of $841,632 in December 2017 with a corresponding charge to income tax expense. The Bank files income tax returns in the U.S. federal jurisdiction and the District of Columbia. With few exceptions, the Bank is no longer subject to U.S. federal and state income tax examinations by tax authorities for years prior to 2014. The provision for income taxes consists of the following for the years ended December 31:

2017 2016Current income tax expense:

Federal income tax 930,108$ 2,403,517$ Local income tax 257,732 494,163

Total current income tax expense 1,187,840 2,897,680

Deferred income tax expenseFederal income tax 1,318,836$ 122,610$ Local income tax 56,412 106,238

Total deferred income tax expense 1,375,248 228,848

Total income tax expense 2,563,088$ 3,126,528$

A reconciliation of the statutory income tax to the income tax expense included in the financial statements is as follows for the years ended December 31:

2017 2016Income before income tax $ 4,534,354 $ 7,811,321 Federal tax rate 34% 34%Tax expense at statutory rate 1,541,680 2,655,849

Differences resulting from:Impact of tax rate change 841,632 - District of Columbia franchise tax, net of federal tax effect 237,106 437,849 Bank-owned life insurance (95,199) - Nondeductible expenditures 23,121 13,972 Tax exempt income (31,062) (76,346) True ups and Other 45,810 95,204

Provision for income taxes 2,563,088$ 3,126,528$

Effective tax rate 56.53% 40.03%

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Note 11. Income Taxes (Continued) The tax effects of items comprising the Bank’s net deferred tax assets (liabilities) at December 31 are as follows:

2017 2016Deferred tax assets: Allowance for loan losses 957,419$ 1,911,743$ Stock based compensation 14,167 - Nonaccrual interest 11,338 176,032 Deferred compensation 148,053 236,655 Total deferred tax assets 1,130,977 2,324,430

Deferred tax l iabil ities: Accumulated depreciation (119,376) (192,686) Deferred loan costs (6,576) (152,963) Total deferred tax l iabil ities (125,952) (345,649)

Unrealized loss on available-for-sale securities 947,230 2,126,356

Net deferred tax assets 1,952,255$ 4,105,137$

Note 12. Fair Value Measurements The Bank follows authoritative accounting guidance to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The guidance clarifies that fair value of certain assets and liabilities is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. The guidance provides key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. Authoritative accounting guidance specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Bank’s market assumptions. The three levels of the fair value hierarchy based on these two types of inputs are as follows: Level 1 – Valuation is based on quoted prices in active markets for identical assets and liabilities.

Level 2 – Valuation is based on observable inputs including quoted prices in active markets for similar assets and liabilities, quoted prices for identical or similar assets and liabilities in less active markets, and model-based valuation techniques for which significant assumptions can be derived primarily from or corroborated by observable data in the market.

Level 3 – Valuation is based on model-based techniques that use one or more significant inputs or assumptions that are unobservable in the market.

The following describes the valuation techniques used by the Bank to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the financial statements:


Note 12. Fair Value Measurements (Continued)

The following describes the valuation techniques used by the Bank to measure certain financial assets and liabilities recorded at fair value on a recurring basis in the financial statements: Securities available-for-sale: Securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted market prices, when available (Level 1). If quoted market prices are not available, fair values are measured utilizing independent valuation techniques of identical or similar securities for which significant assumptions are derived primarily from or corroborated by observable market data. Third party vendors compile prices from various sources and may determine the fair value of identical or similar securities by using pricing models that consider observable market data (Level 2). The following table presents the balances of assets measured at fair value on a recurring basis as of December 31, 2017 and 2016:

Quoted Significant SignificantPrices in Other Other

Fair Value Active Observable Unobservableas of Markets Inputs Inputs

Description December 31, 2017 (Level 1) (Level 2) (Level 3)Assets: Available for sale securities: U.S treasury & agency obligations $ 22,373,796 -$ 22,373,796$ -$

Mortgage-backed securities 94,444,030 - 94,444,030 - Total available for sale securities 116,817,826$ -$ 116,817,826$ -$



Description December 31, 2016 (Level 1) (Level 2) (Level 3)Assets: Available for sale securities: U.S treasury & agency obligations $ 35,525,020 -$ 35,525,020$ -$

Mortgage-backed securities 128,745,605 - 128,745,605 - Total available for sale securities 164,270,625$ -$ 164,270,625$ -$

Fair Value Measurements at December 31, 2016 Using


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Note 12. Fair Value Measurements (Continued) Certain financial and nonfinancial assets are measured at fair value on a nonrecurring basis in accordance with GAAP. Adjustments to the fair value of these assets usually result from the application of lower-of-cost-or-market accounting or write-downs of individual assets. The following describes the valuation techniques used by the Bank to measure certain financial and nonfinancial assets recorded at fair value on a nonrecurring basis in the financial statements: Impaired Loans: Loans are designated as impaired when, in the judgment of management based on current information and events, it is probable that all amounts due according to the contractual terms of the loan agreements will not be collected. The measurement of loss associated with impaired loans can be based on either the observable market price of the loan or the fair value of the collateral. Collateral may be in the form of real estate or business assets including equipment, inventory, and accounts receivable. The vast majority of the Bank’s collateral is real estate. If the value of real estate collateral is determined utilizing a market valuation approach based on an appraisal, of one year or less, conducted by an independent, licensed appraiser using observable market data, then a Level 2 valuation is considered to measure the fair value. However, if the collateral is a house or building in the process of construction or if an appraisal of the property is more than one year old and not solely based on observable market comparables or management determines the fair value of the collateral is further impaired below the appraised value, then a Level 3 valuation is considered to measure the fair value. The value of business equipment is based upon an outside appraisal, of one year or less, if deemed significant, or the net book value on the applicable business’s financial statements if not considered significant using observable market data. Likewise, values for inventory and accounts receivables collateral are based on financial statement balances or aging reports (Level 3). Impaired loans allocated to the allowance for loan losses are measured at fair value on a nonrecurring basis. Any fair value adjustments are recorded in the period incurred as provision for loan losses on the Statements of Income. Foreclosed Assets: Foreclosed assets fair value measurements are the same as impaired loans which are described above. The Bank had no foreclosed assets at December 31, 2017 and 2016. The following table presents the balances of assets measured at fair value on a nonrecurring basis as of December 31, 2017 and 2016:



Description December 31, 2017 (Level 1) (Level 2) (Level 3)Assets: Impaired loans 1,488,915$ -$ -$ 1,488,915$



Description December 31, 2016. (Level 1) (Level 2) (Level 3)Assets: Impaired loans 4,297,261$ -$ -$ 4,297,261$



Note 12. Fair Value Measurements (Continued) The following table presents information about level 3 Fair Value Measurements at December 31, 2017 and 2016:

Authoritative accounting guidance requires disclosures of the estimated fair values of financial instruments, which is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties other than in a forced or liquidation sale. The assumptions used by management are more fully detailed below. It should be noted that different assumptions could significantly affect these estimates and the net realizable values could be materially different from the estimates presented below. The fair value estimates presented are based on pertinent information available as of December 31, 2017 and 2016. However, considerable judgment is required to interpret market data to develop the estimates of fair value. Accordingly, the estimates presented are not necessarily indicative of the amounts that the Bank could realize in a current market transaction. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. The Bank had determined the fair value of its financial instruments using the following assumptions: Cash and Cash Equivalents, Accrued Interest Receivable and Payable – The fair value of cash and cash equivalents and accrued interest receivable and payable was estimated to equal the carrying value due to the short-term nature of these financial instruments. Investment Securities – The fair value of securities was estimated based on quoted market prices, dealer quotes, and prices obtained from independent pricing services. The carrying value of restricted stock approximates fair value based on the redemption provisions of the respective entity. Loans – The fair value of loans receivable was estimated by discounting estimated future cash flows using current rates on loans with similar credit risks and terms. Bank-Owned Life Insurance – Bank-owned life insurance represents insurance policies on officers of the Bank. The cash value of these policies are estimates using information provided by insurance carriers. These policies are carried at their cash surrender value, which approximates the fair value. Deposits – The fair value of demand and savings deposits was estimated to equal the carrying value due to the short-term nature of the financial instruments. The fair value of time deposits was estimated by discounting estimated future cash flows using current rates on time deposits with similar maturities. Short-Term Borrowings – The carrying amounts of borrowing under repurchase agreements, and other short-term borrowings maturing within ninety days, approximate their fair values. Off-Balance-Sheet-Instruments – The estimated fair value of fee income on letters of credit at December 31, 2017 and 2016 was insignificant. Loan commitments on which the committed interest rate is less than the current market rate are also insignificant at December 31, 2017 and 2016.

Level 3 Fair Value Measurement Valuation Technique Unobservable Input AmountImpaired loans Discounted appraised value Selling expenses 8%

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Note 12. Fair Value Measurements (Continued)

Quoted Significant SignificantPrices in Other OtherActive Observable Unobservable

Carrying Markets Inputs Inputs TotalValue (Level 1) (Level 2) (Level 3) Fair Value

Financial Assets:Cash and cash equivalents 24,790,984$ 24,790,984$ -$ -$ 24,790,984$ Investment securities 117,243,276 - 117,243,276 - 117,243,276 Loans, net 267,557,974 - 267,385,894$ 1,488,915 268,874,809 Bank-owned life insurance 11,394,519 - 11,394,519 - 11,394,519 Accrued interest receivable 1,000,706 - 1,000,706 - 1,000,706

Financial Liabilities:Deposits 380,650,688 - 380,690,255 - 380,690,255 Securities sold under

agreement to repurchase 4,067,551 - 4,067,551 - 4,067,551 Accrued interest payable 14,205 - 14,205 - 14,205


Active Observable UnobservableCarrying Markets Inputs Inputs Total

Value (Level 1) (Level 2) (Level 3) Fair ValueFinancial Assets:

Cash and cash equivalents 23,912,453$ 23,912,453$ -$ -$ 23,912,453$ Investment securities 164,695,375 - 164,695,375 - 164,695,375 Loans, net 204,012,679 - 200,250,219 4,297,261 204,547,480 Bank-owned life insurance 11,114,520 - 11,114,520 - 11,114,520 Accrued interest receivable 931,147 - 931,147 - 931,147

Financial Liabil ities:Deposits 362,169,804 - 362,202,148 - 362,202,148 Securities sold under

agreement to repurchase 6,662,024 - 6,662,024 - 6,662,024 Accrued interest payable 11,822 - 11,822 - 11,822




Note 13. Financial Instruments with Off-Balance Sheet Risk The Bank is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financial needs of its customers. These financial instruments include commitments to extend credit, commitments under credit card arrangements, and commercial and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of amounts recognized in the balance sheets. The contract amounts of those instruments reflect the extent of involvement the Bank has in particular classes of financial instruments. The Bank’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for commitments to extend credit and commercial and standby letters of credit is represented by the contractual amount of those obligations. The Bank uses the same policies in making commitments and conditional obligations as it does for on-balance-sheet instruments. The contract amounts of these financial instruments at December 31 are as follows:

2017 2016Commitments to extend credit – credit cards $ 2,722,555 $ 2,817,997 Commitments to extend credit – other loans 54,803,921 36,032,862 Commercial and standby letters of credit 2,281,223 2,189,403

59,807,699$ 41,040,262$

Commitments to extend credit are agreements to lend to a customer as long as there are no violations 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 drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Bank evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Bank upon extension of credit, is based on management’s credit evaluation of the customer. Collateral held varies but may include inventory, real estate, equipment, securities, cash, and income-producing commercial properties. Credit card commitments are unsecured. Standby letters of credit are conditional commitments issued by the Bank to guarantee the performance of a customer to a third party. Those guarantees are primarily issued to support public and private borrowing arrangements and, generally, have terms of one year or less. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. The Bank generally holds collateral supporting these commitments. In the event the customer does not perform in accordance with the terms of the agreement with the third-party, the Bank would be required to fund the commitment. The maximum potential amount of future payments the Bank could be required to make is represented by the contractual amount of the commitment. If the commitment is funded, the Bank would be entitled to seek recovery from the customer. At December 31, 2017 and 2016, no amounts have been recorded as liabilities for the Bank’s potential obligations under these guarantees. Note 14. Commitments and Contingencies In the ordinary course of business, the Bank has various outstanding commitments and contingent liabilities that are not reflected in the accompanying financial statements. In the opinion of management, after consultation with legal counsel, the ultimate disposition of these matters is not expected to have a material adverse effect on the financial condition of the Bank.

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Note 15. Related Party Transactions In the normal course of banking business, loans are made to executive officers and directors. These loans were made on substantially the same terms, including interest rates and collateral, as those prevailing at the same time for comparable transactions with other persons and did not involve more than normal risks of collectability or present other unfavorable features. At December 31, 2017 and 2016, these loans totaled $2,726,000 and $2,717,000, respectively. In addition, the Bank held deposits of $11,782,000 and $11,860,000 from officers and directors at December 31, 2017 and 2016, respectively. The Bank held repurchase agreements of $1,182,000 and $2,136,000 from officers and directors at December 31, 2017 and 2016, respectively. In 2014, the Bank entered into an agreement with a management service company that is owned by one of the directors. The management service company is paid an amount equal to the greater of (i) two and one-half percent (2.5%) of rent collected on behalf of the Bank or (ii) three thousand dollars ($3,000) per month. The fees paid to the management service company for the year ended December 31, 2017 and 2016 were $37,032 and $37,365, respectively. In 2017, the Bank entered into a contract with a construction service company that is owned by one of the directors. The construction service company was awarded a $1,021,884 contract for the renovation of the Bank’s main office facility that was competitively bid against two independent contractors. Note 16. Concentrations of Credit All of the Bank’s loans, commitments, and commercial and standby letters of credit have been granted to customers in the Bank’s market area. The concentrations of credit by type of loan are set forth in Note 3. Commercial and standby letters of credit were granted primarily to commercial borrowers. Note 17. Stock-based Compensation The Bank has stock-based incentive arrangements to attract and retain key personnel. Each stock-based award is governed by a separate agreement, subject to approval by the Bank’s board of directors. As of December 31, 2017, all awards consisted of restricted stock which vest ratably over a three-year period. Compensation expense for these awards is recognized over the vesting period. Stock-based compensation expense included in the statements of income totaled $58,102 and $12,649 for the years ended December 31, 2017 and 2016, respectively. Unrecognized compensation cost expected to be recognized over the remainder of the vesting period, totaled $121,317 at December 31, 2017. The weighted average period remaining to vesting is 12 months at December 31, 2017. The following table summarizes the unvested restricted stock awards at December 31, 2017:

Number of Shares Average Grant Date Fair Value

Nonvested at January 1, 2017 381 $ 151.00 Granted 744 $ 181.64 Vested (128) $ 150.53

Nonvested at December 31, 2017 997 $ 173.74


Note 18. Subsequent Events The Bank evaluated subsequent events that have occurred after the balance sheet date, but before the financial statements are issued. There are two types of subsequent events (1) recognized, or those that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements, and (2) nonrecognized, or those that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. Subsequent events have been considered through March 5, 2018, the date financial statements were available to be issued. Based on the evaluation, the Bank did not identify any recognized or nonrecognized subsequent events that would have required adjustment to or disclosure in the audited financial statements.


T H I S P A G E I S I N T E N T I O N A L L Y L E F T B L A N K

Capitol Hill Branch316 Pennsylvania Avenue, S.E.


Courthouse Branch2505 Wilson Boulevard Arlington, VA 22201

Friendship Heights Branch5228 44th Street, N.W.


NationalCapitalBank.com202-546-8000

www.nationalcapitalbank.com

NMLS ID663128

2017 ANNUAL REPORT - National Capital Bank · 2018-04-10 · To Our Stockholders, Customers and...

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Transcript of 2017 ANNUAL REPORT - National Capital Bank · 2018-04-10 · To Our Stockholders, Customers and...