LOANS

3 Months Ended

Mar. 31, 2026

LOANS

LOANS

NOTE 4 – LOANS

The Company’s loan portfolio at the dates indicated is summarized below:


		March 31,			December 31,
		2026			2025
Commercial and industrial		$	167,311		$	175,409
Construction and land			10,137			8,958
Commercial real estate			1,720,539			1,766,964
Residential			111,475			113,186
Consumer			1,292			1,175
Total loans			2,010,754			2,065,692
Net deferred loan costs			528			644
Allowance for credit losses			(20,600)			(21,210)
Net loans		$	1,990,682		$	2,045,126

Net loans exclude accrued interest receivable of $6.4 million and $6.6 million at March 31, 2026 and December 31, 2025, respectively, which is included in interest receivable and other assets in the condensed consolidated balance sheets.

The Company’s total individually evaluated loans, including collateral dependent loans, nonaccrual loans, modified loans to borrowers experiencing financial difficulty, and accreting purchase credit deteriorated (“PCD”) loans that have experienced post-acquisition declines in cash flows expected to be collected are summarized as follows:


		Commercial			Construction			Commercial
		and industrial			and land			real estate			Residential			Consumer			Total
March 31, 2026
Recorded investment in loans individually evaluated:
With no specific allowance recorded		$	—		$	—		$	10,054		$	685		$	—		$	10,739
With a specific allowance recorded			—			—			4,404			—			—			4,404
Total recorded investment in loans individually evaluated		$	—		$	—		$	14,458		$	685		$	—		$	15,143
Specific allowance on loans individually evaluated		$	—		$	—		$	1,346		$	—		$	—		$	1,346

December 31, 2025
Recorded investment in loans individually evaluated:
With no specific allowance recorded		$	—		$	—		$	9,680		$	711		$	—		$	10,391
With a specific allowance recorded			—			—			4,472			—			—			4,472
Total recorded investment in loans individually evaluated		$	—		$	—		$	14,152		$	711		$	—		$	14,863
Specific allowance on loans individually evaluated		$	—		$	—		$	1,428		$	—		$	—		$	1,428

The recorded investment in individually evaluated loans on nonaccrual were $15.1 million and $13.4 million at March 31, 2026 and December 31, 2025, respectively.

The Company may modify the contractual terms of a loan to a borrower experiencing financial difficulty as a part of ongoing loss mitigation strategies. These modifications may result in an interest rate reduction, term extension, an other-than-insignificant payment delay, or a combination thereof. The Company typically does not offer principal forgiveness. An assessment of whether a borrower is experiencing financial difficulty is made on the date of modification. The effect of most modifications made for borrowers experiencing financial difficulty is already included in the allowance for credit losses on loans because of the measurement methodologies used to estimate the allowance.

During the three months ended March 31, 2026 and 2025, there were no modifications of loans to borrowers experiencing financial difficulty.

A summary of previously modified loans to borrowers experiencing financial difficulty by type of concession and type of loan, as of the dates indicated, is set forth below:


		Number of		Rate			Term			Rate & term						% of Total
		loans		modification			modification			modification			Total			loans outstanding
March 31, 2026
Commercial and industrial		—		$	—		$	—		$	—		$	—			—	%
Construction and land		—			—			—			—			—			—	%
Commercial real estate		1			—			542			—			542			0.03	%
Residential		1			—			685			—			685			0.61	%
Consumer		—			—			—			—			—			—	%
Total		2		$	—		$	1,227		$	—		$	1,227			0.06	%


		Number of		Rate			Term			Rate & term						% of Total
		loans		modification			modification			modification			Total			loans outstanding
December 31, 2025
Commercial and industrial		1		$	—		$	73		$	—		$	73			0.04	%
Construction and land		—			—			—			—			—			—	%
Commercial real estate		1			—			554			—			554			0.03	%
Residential		1			—			711			—			711			0.63	%
Consumer		—			—			—			—			—			—	%
Total		3		$	—		$	1,338		$	—		$	1,338			0.06	%

For the three months ended March 31, 2026 and 2025, the Company recorded no charge-offs for modified loans to borrowers experiencing financial difficulty.

At both March 31, 2026 and December 31, 2025, individually evaluated modified loans to borrowers experiencing financial difficulty had no related allowance. At both dates, none of the modified loans to borrowers experiencing financial difficulty were performing in accordance with their modified terms. All accruing modified loans to borrowers experiencing financial difficulty, if any, are included in the loans individually evaluated in the calculation of the allowance for credit losses.

Risk Rating System

The Company evaluates and assigns a risk grade to each loan based on certain criteria to assess the credit quality of the loan. The assignment of a risk rating is done for each individual loan. Loans are graded from inception and on a continuing basis until the debt is repaid. Any adverse or beneficial trends will trigger a review of the loan risk rating. Each loan is assigned a risk grade based on its characteristics. Loans with low to average credit risk are assigned a lower risk grade than those with higher credit risk as determined by the individual loan characteristics.

The Company’s Pass loans include loans with acceptable business or individual credit risk where the borrower’s operations, cash flow or financial condition provides evidence of low to average levels of risk.

Loans that are assigned higher risk grades are loans that exhibit the following characteristics:

Special Mention loans have potential weaknesses that deserve close attention. If left uncorrected, these potential weaknesses may result in a deterioration of the repayment prospects for the loan or in the Company’s credit position at some future date. Special Mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification. Special Mention is a temporary rating, pending the occurrence of an event that would cause the risk rating either to improve or to be downgraded.

Loans in this category would be characterized by any of the following situations:

●

Credit that is currently protected but is potentially a weak asset;

●

Credit that is difficult to manage because of an inadequate loan agreement, the condition of and/or control over collateral, failure to obtain proper documentation, or any other deviation from product lending practices; and

●

Adverse financial trends.

Substandard loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged. Loans classified substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Substandard loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. The potential loss does not have to be recognizable in an individual credit for that credit to be risk rated Substandard. A loan can be fully and adequately secured and still be considered Substandard.

Some characteristics of Substandard loans are:

●

Inability to service debt from ordinary and recurring cash flow;

●

Chronic delinquency;

●

Reliance upon alternative sources of repayment;

●

Term loans that are granted on liberal terms because the borrower cannot service normal payments for that type of debt;

●

Repayment dependent upon the liquidation of collateral;

●

Inability to perform as agreed, but adequately protected by collateral;

●

Necessity to renegotiate payments to a non-standard level to ensure performance; and

●

The borrower is in bankruptcy, or for any other reason, future repayment is dependent on court action.

Doubtful loans have all the weaknesses inherent in loans classified as Substandard with the added characteristic that the weaknesses make collection or liquidation in full, based on currently existing facts, conditions, and value, highly questionable and improbable. Doubtful loans have a high probability of loss, yet certain important and reasonably specific pending factors may work toward the strengthening of the credit.

Losses are recognized as charges to the allowance when the loan or portion of the loan is considered uncollectible or at the time of foreclosure. Recoveries on loans previously charged off are credited to the allowance for credit losses.

Revolving loans that are converted to term loans are treated as new originations in the tables below and are presented by year of initial origination. During the three months ended March 31, 2026, and the year ended December 31, 2025, $37,000 and none, respectively, of the Company’s revolving loans were converted to term loans.

The following tables present the internally assigned risk grade by class of loans at the dates indicated:


																				Revolving
			Term loans - amortized cost by origination year																	loans
		2026			2025			2024			2023			2022			Prior			amortized cost			Total
March 31, 2026
Commercial and industrial:
Pass		$	5,492		$	30,407		$	44,472		$	13,148		$	15,660		$	34,233		$	23,070		$	166,482
Special mention			—			—			—			—			—			236			—			236
Substandard			—			—			—			152			—			402			39			593
Total commercial and industrial		$	5,492		$	30,407		$	44,472		$	13,300		$	15,660		$	34,871		$	23,109		$	167,311
YTD gross charge-offs		$	—			—			—			—			—			—			—		$	—
Construction and land:
Pass		$	—		$	340		$	9,500			—			—			297			—		$	10,137
Special mention			—			—			—			—			—			—			—			—
Substandard			—			—			—			—			—			—			—			—
Total construction and land		$	—		$	340		$	9,500		$	—		$	—		$	297		$	—		$	10,137
YTD gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Commercial real estate:
Pass		$	29,067		$	317,885		$	168,130			67,689			305,713			695,350			4,133		$	1,587,967
Special mention			—			—			8,566			—			30,473			51,187			—			90,226
Substandard			—			—			—			—			6,700			35,646			—			42,346
Total commercial real estate		$	29,067		$	317,885		$	176,696		$	67,689		$	342,886		$	782,183		$	4,133		$	1,720,539
YTD gross charge-offs		$	—			—			—			—			—			16			—		$	16
Residential:
Pass		$	3,353		$	47,620		$	18,563			—			—			36,146			4,894		$	110,576
Special mention			—			—			—			—			—			41			10			51
Substandard			—			—			—			—			—			784			64			848
Total residential		$	3,353		$	47,620		$	18,563		$	—		$	—		$	36,971		$	4,968		$	111,475
YTD gross charge-offs		$	—			—			—			—			—			—			—		$	—
Consumer:
Pass		$	158		$	254		$	369			—			14			104			393		$	1,292
Special mention			—			—			—			—			—			—			—			—
Substandard			—			—			—			—			—			—			—			—
Total consumer		$	158		$	254		$	369		$	—		$	14		$	104		$	393		$	1,292
YTD gross charge-offs		$	—			—			—			—			—			1			—		$	1
Total loans outstanding
Risk ratings
Pass		$	38,070		$	396,506		$	241,034		$	80,837		$	321,387		$	766,130		$	32,490		$	1,876,454
Special mention			—			—			8,566			—			30,473			51,464			10			90,513
Substandard			—			—			—			152			6,700			36,832			103			43,787
Total loans outstanding		$	38,070		$	396,506		$	249,600		$	80,989		$	358,560		$	854,426		$	32,603		$	2,010,754
YTD gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	17		$	—		$	17


																				Revolving
			Term loans - amortized cost by origination year																	loans
		2025			2024			2023			2022			2021			Prior			amortized cost			Total
December 31, 2025
Commercial and industrial:
Pass		$	32,969		$	48,839		$	14,375		$	16,454		$	7,202		$	27,511		$	26,011		$	173,361
Special mention			—			—			—			—			—			580			—			580
Substandard			—			—			152			—			55			980			281			1,468
Total commercial and industrial		$	32,969		$	48,839		$	14,527		$	16,454		$	7,257		$	29,071		$	26,292		$	175,409
YTD gross charge-offs		$	—			41			—			—			—			154			—		$	195
Construction and land:
Pass		$	228		$	8,412		$	—			—			115			203			—		$	8,958
Special mention			—			—			—			—			—			—			—			—
Substandard			—			—			—			—			—			—			—			—
Total construction and land		$	228		$	8,412		$	—		$	—		$	115		$	203		$	—		$	8,958
YTD gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Commercial real estate:
Pass		$	324,728		$	177,675		$	67,901			320,160			333,477			397,516			3,287		$	1,624,744
Special mention			—			—			—			32,144			23,672			39,213			—			95,029
Substandard			—			—			4,835			—			14,642			27,714			—			47,191
Total commercial real estate		$	324,728		$	177,675		$	72,736		$	352,304		$	371,791		$	464,443		$	3,287		$	1,766,964
YTD gross charge-offs		$	—			—			—			—			—			840			—		$	840
Residential:
Pass		$	47,156		$	23,536		$	—			—			30,969			6,121			4,515		$	112,297
Special mention			—			—			—			—			—			—			11			11
Substandard			—			—			—			—			20			794			64			878
Total residential		$	47,156		$	23,536		$	—		$	—		$	30,989		$	6,915		$	4,590		$	113,186
YTD gross charge-offs		$	—			—			—			—			1			—			—		$	1
Consumer:
Pass		$	273		$	119		$	260			17			10			102			394		$	1,175
Special mention			—			—			—			—			—			—			—			—
Substandard			—			—			—			—			—			—			—			—
Total consumer		$	273		$	119		$	260		$	17		$	10		$	102		$	394		$	1,175
YTD gross charge-offs		$	—			—			—			—			—			5			—		$	5
Total loans outstanding
Risk ratings
Pass		$	405,354		$	258,581		$	82,536		$	336,631		$	371,773		$	431,453		$	34,207		$	1,920,535
Special mention			—			—			—			32,144			23,672			39,793			11			95,620
Substandard			—			—			4,987			—			14,717			29,488			345			49,537
Total loans outstanding		$	405,354		$	258,581		$	87,523		$	368,775		$	410,162		$	500,734		$	34,563		$	2,065,692
YTD gross charge-offs		$	—		$	41		$	—		$	—		$	1		$	999		$	—		$	1,041

The following tables provide an aging of the Company’s loans receivable as of the dates indicated:


																							Recorded
								90 Days															investments
		30–59 Days			60–89 Days			or more			Total									Total loans			90 days or more past due
		past due			past due			past due			past due			Current			PCD loans			receivable			and still accruing
March 31, 2026
Commercial and industrial		$	380		$	392		$	704		$	1,476		$	165,835		$	—		$	167,311		$	—
Construction and land			—			—			—			—			10,137			—			10,137			—
Commercial real estate			1,636			6,851			1,951			10,438			1,697,606			12,495			1,720,539			—
Residential			57			—			685			742			110,701			32			111,475			—
Consumer			—			—			—			—			1,292			—			1,292			—
Total		$	2,073		$	7,243		$	3,340		$	12,656		$	1,985,571		$	12,527		$	2,010,754		$	—


																							Recorded
								90 Days															investments
		30–59 Days			60–89 Days			or more			Total									Total loans			90 days or more past due
		past due			past due			past due			past due			Current			PCD loans			receivable			and still accruing
December 31, 2025
Commercial and industrial		$	671		$	119		$	748		$	1,538		$	173,871		$	—		$	175,409		$	—
Construction and land			—			—			—			—			8,958			—			8,958			—
Commercial real estate			818			—			1,942			2,760			1,747,458			16,746			1,766,964			—
Residential			40			—			711			751			112,393			42			113,186			—
Consumer			1			—			—			1			1,174			—			1,175			—
Total		$	1,530		$	119		$	3,401		$	5,050		$	2,043,854		$	16,788		$	2,065,692		$	—

Nonaccrual loans totaled $16.7 million and $13.4 million at March 31, 2026 and December 31, 2025, respectively. Nonaccrual loans guaranteed by a government agency, which reduces the Company’s credit exposure, were $932,000 at March 31, 2026 compared to $1.7 million at December 31, 2025. At March 31, 2026, nonaccrual loans included $7.1 million of loans 30-89 days past due and $6.3 million of loans less than 30 days past due. At December 31, 2025, nonaccrual loans included $562,000 of loans 30-89 days past due and $9.4 million of loans less than 30 days past due. The increase from the prior quarter-end was primarily due to one $4.9 million commercial real estate loan being placed on nonaccrual during the current quarter, partially offset by payoffs of five nonaccrual loans totaling $1.6 million. The increase in nonaccrual loans reflects borrower-specific credit deterioration, primarily within the commercial and industrial and commercial real estate portfolios.

At March 31, 2026, the $7.1 million of nonaccrual loans 30-89 days past due were comprised of four loans and the $6.3 million of loans less than 30 days past due were comprised of 15 loans. All these loans were placed on nonaccrual due to concerns over the financial condition of the borrowers.

At March 31, 2026 and December 31, 2025, there were no loans 90 days or more past due and still accruing.

Interest foregone on nonaccrual loans was approximately $200,000 for the three months ended March 31, 2026, compared to $269,000 for the three months ended March 31, 2025. Interest income recognized on nonaccrual loans was approximately $140,000 for the three months ended March 31, 2026, compared to $35,000 for the three months ended March 31, 2025.

Pledged Loans

The Bank’s FHLB line of credit is secured under terms of a blanket collateral agreement by a pledge of certain qualifying loans with unpaid principal balances of $1.13 billion and $1.10 billion at March 31, 2026 and December 31,

2025, respectively. For additional information, see “Note 11 - Borrowings” of the Notes to Condensed Consolidated Financial Statements.