Major categories of loans at December 31, 2025 and 2024 are as follows:

For purposes of monitoring the performance of the loan portfolio and estimating the allowance for credit losses, the Company's loans receivable portfolio is segmented as follows: commercial real estate, construction and land development, residential, commercial and industrial, and consumer. As of December 31, 2025 and 2025, overdrafts have been reclassified to loans.

Commercial real estate loans carry risks of the client’s ability to repay the loan from the cash flow derived from the underlying real estate. Risks inherent in managing a commercial real estate portfolio relate to sudden or gradual drops in property values as well as changes in the economic climate. Real estate security diminishes risks only to the extent that a market exists for the subject collateral. These risks are attempted to be mitigated by carefully underwriting loans of this type and by following appropriate loan-to-value standards. The Company generally requires personal guarantees or endorsements with respect to these loans and loan-to-value ratios for real estate-commercial loans generally do not exceed 80%.

Construction and land development real estate loans carry risks that the project will not be finished according to schedule, the project will not be finished according to budget and the value of the collateral may, at any point in time, be less than the principal amount of the loan. Construction loans also bear the risk that the general contractor, who may or may not be a loan customer, may be unable to finish the construction project as planned because of financial pressure unrelated to the project. The Company generally requires personal guarantees or endorsements with respect to these loans and loan-to-value ratios for real estate-commercial loans generally do not exceed 80%.

Residential real estate mortgage loans, including equity lines of credit, carry risks associated with the continued credit-worthiness of the borrower and the changes in the value of the collateral.

Commercial and industrial loans carry risks associated with the successful operation of a business or a real estate project, in addition to other risks associated with the ownership of real estate, because the repayment of these loans may be dependent upon the profitability and cash flows of the business or project. In addition, there is risk associated with the value of collateral other than real estate which may depreciate over time and cannot be appraised with as much precision.

Consumer loans carry risks associated with the continued credit-worthiness of the borrower and the value of the collateral. The Company's consumer loans consist primarily of installment loans made to individuals for personal, family and household purposes. These risks are attempted to be mitigated by following appropriate loan-to-value standards and an experienced management team for this type of portfolio.

The following tables present the amortized cost basis of loans on nonaccrual status and loans past 90 days or more still accruing as of December 31, 2025 and 2024:

The Company did not recognize any interest income on nonaccrual loans during the year ended December 31, 2025 or the year ended December 31, 2024.

At December 31, 2025, the Company did not have any non-accrual loans.

At December 31, 2024, the Company had three non-accrual commercial real estate loans totaling $2.4 million. Gross interest income of $25.0 thousand would have been recorded in 2024 if these non-accrual loans had been current and performing in accordance with the original terms. The Company previously allocated $360.0 thousand of its allowance for credit losses to these non-accrual loans.

An age analysis of past due loans, segregated by class of loans, as of year-end, is as follows:

The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of December 31, 2025 and 2024:

From time to time, loans to borrowers experiencing financial difficulty may be modified. Generally, the modifications we grant are extensions of terms, deferrals of payments for an extended period or interest rate reductions. Occasionally, we may modify a loan by providing principal forgiveness. In some cases, we will modify a loan by providing multiple types, or combinations, of concessions.

The following table presents the amortized cost basis of loans at December 31, 2025 that were both experiencing financial difficulty and modified during the year ended December 31, 2025, by class and type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of loans is also presented below. There was one modification to a borrower experiencing financial difficulty during the year ended December 31, 2025. The term of the loan was extended by three months. The loan was not delinquent at December 31, 2025 and was not in default.

Accrued interest receivable on loans totaled $2.0 million and $1.9 million as of December 31, 2025 and 2024, respectively, and is included accrued interest receivable on the balance sheet.

Credit Quality Indicators

As part of our portfolio risk management, the Company assigns a risk grade to each loan. The factors used to determine the grade are the payment history of the loan and the borrower, the value of the collateral and net worth of the guarantor, and cash flow projections of the borrower. Excellent, Above Average, Average and Acceptable grades are assigned to loans with limited or no delinquent payments and more than sufficient collateral and/or cash flow.

A description of the general characteristics of loans characterized as watch list or classified is as follows:

Special Mention

A special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. Special mention loans are not adversely classified and do not expose the Bank to sufficient risk to warrant adverse classification. This classification is intended to be temporary while the Bank learns more about the condition of the borrower and the collateral.

Borrowers may exhibit poor liquidity and leverage positions resulting from generally negative cash flow or negative trends in earnings. Access to alternative financing may be limited to finance companies for business borrowers and may be unavailable for commercial real estate borrowers.

Substandard

A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Borrowers may exhibit recent or unexpected unprofitable operations, an inadequate debt service coverage ratio, or marginal liquidity and capitalization. These loans require more intense supervision by Bank management.

Doubtful

A doubtful loan has all the weaknesses inherent as a substandard loan 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 by credit grade, segregated by loan type, at year-end, are as follows:

Loans by credit grade, segregated by loan type, at year-end, and gross charge offs during the year were as follows:

The following tables detail activity in the allowance for credit losses by portfolio for the years ended December 31, 2025, and 2024 and the allocation of the allowance as of December 31, 2025, and 2024. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

Loans acquired from Carroll Community Bank in the Merger were measured at fair value at the acquisition date with no carryover of any allowance for credit losses. The following table provides activity for the accretable credit discount of purchased loans:

At December 31, 2025, the remaining yield premium on purchased loans was $132 thousand. Yield premium amortization was $138 thousand and $239 thousand in 2025 and 2024, respectively. At December 31, 2025, the principal balance of purchased loans was $53.5 million.

The following table details activity in the allowance for credit losses on unfunded loan commitments for the years ended:

(Dollars in thousands)

The following table provides a summary of each allowance for credit losses established by the Company as of the balance sheet dates:

Loans having an aggregate balance of approximately $102.0 million were pledged as collateral to the FHLB as of December 31, 2025. Loans having an aggregate balance of approximately $77.4 million were pledged as collateral to the Federal Reserve Bank of Richmond (the “FRB”) as of December 31, 2025. At December 31, 2025 and 2024, the Company serviced participation loans for others totaling $15.1 million and $17.7 million, respectively.

The Company makes loans to customers located primarily in Baltimore County and Carroll County, Maryland and in surrounding areas of northern Maryland. Although management believes that the loan portfolio is diversified, many loans are secured by real estate and its performance will be influenced by the economy of the region, including local real estate markets.