Note 4—LOANS

The following table summarizes the composition of our loan portfolio. Total loans are recorded net of deferred loan fees and costs, which totaled $2.3 million and $2.1 million as of December 31, 2025 and December 31, 2024, respectively.

Schedule of Loan Portfolio

Activity in the allowance for credit losses – loans was as follows:

Schedule of Allowance for Credit Losses

The detailed activity in the allowance for credit losses on loans by portfolio segment as of and for the years ended December 31, 2025, December 31, 2024, and December 31, 2023 follows:

The following table presents an allocation of the allowance for credit losses at the end of each of the past three years. The allocation is calculated on an approximate basis and is not necessarily indicative of future losses or allocations. The entire amount is available to absorb losses occurring in any category of loans.

The following tables show the amortized cost basis for loan modifications for borrowers experiencing financial difficulty during the 12 months ended December 31, 2025 that had a payment default, segregated by loan category and describes the financial effect of the modification made for a borrower experiencing financial difficulty.

Schedule of Amortized Cost of Loans, by Loan Category, Modified for Borrowers with Financial Difficulty

The following table depicts the performance of loans that have been modified for borrowers experiencing financial difficulty in the last 12 months.

The following table shows the amortized cost basis at December 31, 2024 of the loans modified for borrowers experiencing financial difficulty during the 12 month period ended December 31, 2024 that had a payment default segregated by loan category and describes the financial effect of the modification made for a borrower experiencing financial difficulty.

The following table depicts the performance of loans that have been modified for borrowers experiencing financial difficulty in year ended December 31, 2024.

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a monthly basis. The Company uses the following definitions for risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above-described process are considered to be “Pass” rated loans.

The following table presents the Company’s recorded investment in loans by credit quality indicators by year of origination as of December 31, 2025:

Schedule of loan category and loan by risk categories 

The following table presents the Company’s recorded investment in loans by credit quality indicators by year of origination as of December 31, 2024:

As of December 31, 2025 and December 31, 2024, no loans were classified as doubtful.

The following tables are by loan category and present loans past due and on nonaccrual status as of December 31, 2025 and December 31, 2024:

Schedule of Loan Category and Aging Analysis of Loans

The following table is a summary of the Company’s nonaccrual loans by major categories for the periods indicated.

Schedule of Nonaccrual Loans

There were no collateral dependent loans that were individually evaluated for years ended December 31, 2025 and December 31, 2024.

Related party loans are made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with unrelated persons and generally do not involve more than the normal risk of collectability. The following table presents related party loan transactions for the years ended December 31, 2025 and December 31, 2024.

Schedule of Related Party Loans

Unfunded Commitments

The Company maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, as well as both standby and commercial letters of credit when there is a contractual obligation to extend credit and when this extension of credit is not unconditionally cancellable (i.e., commitment cannot be cancelled at any time). The allowance for off-balance sheet credit exposures is adjusted as a provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the allowance for credit losses on loans. The allowance for credit losses for unfunded loan commitments of $531,000 and $480,000 at December 31, 2025 and December 31, 2024 is separately classified on the balance sheet within Other Liabilities.

The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the year ended December 31, 2025.

The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the year ended December 31, 2024.