5.Qualified Affordable Housing Project Investment

On January 19, 2018, the Bank entered into an agreement to invest in qualified affordable housing projects through a limited liability company. At June 30, 2026 and December 31, 2025, the balance of the Bank’s investment was $1.1 million and $1.2 million, respectively, and is reflected in other assets on the consolidated balance sheets. At June 30, 2026 and December 31, 2025, the unfunded commitment related to the qualified affordable housing project investment was $72,000 and is reflected in other liabilities on the consolidated balance sheets. The Bank expects to fulfill the commitment as capital calls are made through 2029.

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(5 – continued)

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On December 16, 2025, the Bank entered into another agreement to invest in qualified affordable housing projects through a limited liability company.  At June 30, 2026 and December 31, 2025, the balance of the Bank’s investment was $4.0 million and is reflected in other assets on the consolidated balance sheets.  The unfunded commitment related to the qualified affordable housing project investment at June 30, 2026 and December 31, 2025 was $3.1 million and $3.3 million, respectively, and is reflected in other liabilities on the consolidated balance sheets.  The Bank expects to fulfill the commitment as capital calls are made through 2036.

The investments are accounted for using the proportional amortization method.  During the three month periods ended June 30, 2026 and 2025, the Bank recognized amortization expense of $97,000 and $85,000, respectively, as a component of income tax expense on the consolidated statements of income.  Additionally, during the three month periods ended June 30, 2026 and 2025, the Bank recognized income tax credits and other income tax benefits from its qualified affordable housing project investment of $117,000 and $103,000, respectively, which was included in income tax expense on the consolidated statements of income.  During the six month periods ended June 30, 2026 and 2025, the Bank recognized amortization expense of $195,000 and $169,000, respectively, as a component of income tax expense on the consolidated statements of income.  Additionally, during the six month periods ended June 30, 2026 and 2025, the Bank recognized income tax credits and other income tax benefits from its qualified affordable housing project investment of $235,000 and $206,000, respectively, which was included in income tax expense on the consolidated statements of income.

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