| LOANS AND ALLOWANCE FOR CREDIT LOSSES |
NOTE 4 – LOANS AND ALLOWANCE FOR CREDIT LOSSES A summary of loans at June 30, 2026 and December 31, 2025 is as follows (in thousands): | | | | | | | | | June 30, | | December 31, | | | 2026 | | 2025 | Residential real estate | | $ | 420,847 | | $ | 318,694 | HELOCs | | | 22,241 | | | 17,092 | Commercial real estate | | | 552,240 | | | 370,380 | Commercial and industrial | | | 43,631 | | | 32,582 | Consumer | | | 69,808 | | | 63,698 | Total gross loans | | | 1,108,767 | | | 802,446 | Unearned discount and net deferred fees and costs | | | 1,340 | | | 773 | Total loans | | | 1,110,107 | | | 803,219 | Allowance for credit losses | | | (13,138) | | | (8,749) | Net loans | | $ | 1,096,969 | | $ | 794,470 |
The allowance for credit loss (“ACL”) represents management’s best estimate of future lifetime expected losses on its held for investment loan portfolio. The Company calculates its ACL by estimating expected credit losses on a collective basis for loans that share similar risk characteristics. Loans that do not share similar risk characteristics with other loans are evaluated for credit losses on an individual basis. The following table presents the activity in the allowance for credit losses by portfolio class for the three and six months ended June 30, 2026 and 2025 (in thousands): | | | | | | | | | | | | | | | | | | | | | Residential | | | | | Commercial | | Commercial | | | | | | | | | Real Estate | | HELOCs | | Real Estate | | and Industrial | | Consumer | | Total | March 31, 2026 | | | | | | | | | | | | | | | | | | | Allowance for credit losses: | | | | | | | | | | | | | | | | | | | Beginning balance | | $ | 2,831 | | $ | 71 | | $ | 5,390 | | $ | 374 | | $ | 250 | | $ | 8,916 | Provision (credit) for credit losses | | | (433) | | | (20) | | | 402 | | | 63 | | | (12) | | | — | Loans charged-off | | | — | | | — | | | (93) | | | — | | | (23) | | | (116) | Recoveries | | | — | | | — | | | — | | | — | | | 16 | | | 16 | Acquired PCD Loans | | | 97 | | | 1 | | | 1,408 | | | 2 | | | 3 | | | 1,511 | Acquired PSL Loans | | | 1,337 | | | 41 | | | 1,278 | | | 79 | | | 76 | | | 2,811 | June 30, 2026 | | $ | 3,832 | | $ | 93 | | $ | 8,385 | | $ | 518 | | $ | 310 | | $ | 13,138 |
| | | | | | | | | | | | | | | | | | | | | Residential | | | | | Commercial | | Commercial | | | | | | | | | Real Estate | | HELOCs | | Real Estate | | and Industrial | | Consumer | | Total | December 31, 2025 | | | | | | | | | | | | | | | | | | | Allowance for credit losses: | | | | | | | | | | | | | | | | | | | Beginning balance | | $ | 2,721 | | $ | 71 | | $ | 5,355 | | $ | 375 | | $ | 227 | | $ | 8,749 | Provision (credit) for credit losses | | | (323) | | | (20) | | | 438 | | | 62 | | | 23 | | | 180 | Loans charged-off | | | — | | | — | | | (94) | | | — | | | (50) | | | (144) | Recoveries | | | — | | | — | | | — | | | — | | | 31 | | | 31 | Acquired PCD Loans | | | 97 | | | 1 | | | 1,408 | | | 2 | | | 3 | | | 1,511 | Acquired PSL Loans | | | 1,337 | | | 41 | | | 1,278 | | | 79 | | | 76 | | | 2,811 | June 30, 2026 | | $ | 3,832 | | $ | 93 | | $ | 8,385 | | $ | 518 | | $ | 310 | | $ | 13,138 | | | | | | | | | | | | | | | | | | | |
NOTE 4 – LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued) | | | | | | | | | | | | | | | | | | | | | Residential | | | | | Commercial | | Commercial | | | | | | | | | Real Estate | | HELOCs | | Real Estate | | and Industrial | | Consumer | | Total | March 31, 2025 | | | | | | | | | | | | | | | | | | | Allowance for credit losses: Beginning balance | | $ | 2,522 | | $ | 103 | | $ | 5,533 | | $ | 318 | | $ | 159 | | $ | 8,635 | Provision (credit) for credit losses | | | — | | | (1) | | | (134) | | | 255 | | | 29 | | | 149 | Loans charged-off | | | (62) | | | — | | | — | | | (201) | | | (36) | | | (299) | Recoveries | | | — | | | — | | | — | | | — | | | 3 | | | 3 | June 30, 2025 | | $ | 2,460 | | $ | 102 | | $ | 5,399 | | $ | 372 | | $ | 155 | | $ | 8,488 |
| | | | | | | | | | | | | | | | | | | | | Residential | | | | | Commercial | | Commercial | | | | | | | | | Real Estate | | HELOCs | | Real Estate | | and Industrial | | Consumer | | Total | December 31, 2024 | | | | | | | | | | | | | | | | | | | Allowance for credit losses: Beginning balance | | $ | 2,564 | | $ | 104 | | $ | 5,396 | | $ | 313 | | $ | 168 | | $ | 8,545 | Provision for credit losses | | | (41) | | | (2) | | | 3 | | | 260 | | | 80 | | | 300 | Loans charged-off | | | (63) | | | — | | | — | | | (201) | | | (103) | | | (367) | Recoveries | | | — | | | — | | | — | | | — | | | 10 | | | 10 | June 30, 2025 | | $ | 2,460 | | $ | 102 | | $ | 5,399 | | $ | 372 | | $ | 155 | | $ | 8,488 |
The following tables present the amortized cost in nonaccrual and loans past due over 89 days still on accrual by class of loans as of June 30, 2026 and December 31, 2025 (in thousands): | | | | | | | | | | | | | | | | | Loans Past Due Over | | | Nonaccrual | | 89 Days Still Accruing | | | 2026 | | 2025 | | 2026 | | 2025 | Residential real estate | | $ | 1,482 | | $ | 331 | | $ | 909 | | $ | 660 | HELOCs | | | — | | | — | | | — | | | — | Commercial real estate | | | 592 | | | 328 | | | — | | | — | Commercial and industrial | | | — | | | — | | | — | | | — | Consumer | | | 3 | | | 1 | | | 15 | | | 75 | Total | | $ | 2,077 | | $ | 660 | | $ | 924 | | $ | 735 |
Nonaccrual loans and loans past due 89 days and still accruing interest include both smaller-balance homogeneous loans that are collectively evaluated for credit losses and loans that are individually evaluated. At June 30, 2026 and December 31, 2025, the Company had no allowance for credit losses allocated to nonaccrual loans. At June 30, 2026, collateral-dependent loans consisted of $1,482 thousand of residential real estate loans and $592 thousand of commercial real estate loans. At December 31, 2025, collateral-dependent loans consisted of $331 thousand of residential real estate loans and $328 thousand of commercial real estate loans. Residential real estate loans were secured by residential real estate properties, and commercial real estate loans were secured by commercial real estate properties. NOTE 4 – LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued) The following table presents the aging of the amortized cost in past due loans by class of loans as of June 30, 2026 and December 31, 2025 (in thousands): | | | | | | | | | | | | | | | | | | | | | 30‑59 | | 60‑89 | | Greater Than | | | | | | | | | | | | Days | | Days | | 89 Days | | Total | | Loans Not | | | | | | Past Due | | Past Due | | Past Due | | Past Due | | Past Due | | Total | June 30, 2026 | | | | | | | | | | | | | | | | | | | Residential real estate | | $ | 1,784 | | $ | 1,109 | | $ | 909 | | $ | 3,802 | | $ | 417,045 | | $ | 420,847 | HELOCs | | | 111 | | | — | | | — | | | 111 | | | 22,130 | | | 22,241 | Commercial real estate | | | 3,406 | | | 95 | | | — | | | 3,501 | | | 548,739 | | | 552,240 | Commercial and industrial | | | 183 | | | — | | | — | | | 183 | | | 43,448 | | | 43,631 | Consumer | | | 245 | | | 23 | | | 15 | | | 283 | | | 69,525 | | | 69,808 | Total | | $ | 5,729 | | $ | 1,227 | | $ | 924 | | $ | 7,880 | | $ | 1,100,887 | | $ | 1,108,767 | | | | | | | | | | | | | | | | | | | | December 31, 2025 | | | | | | | | | | | | | | | | | | | Residential real estate | | $ | — | | $ | 1,260 | | $ | 992 | | $ | 2,252 | | $ | 316,442 | | $ | 318,694 | HELOCs | | | — | | | — | | | — | | | — | | | 17,092 | | | 17,092 | Commercial real estate | | | — | | | — | | | 328 | | | 328 | | | 370,052 | | | 370,380 | Commercial and industrial | | | — | | | — | | | — | | | — | | | 32,582 | | | 32,582 | Consumer | | | 227 | | | 70 | | | 75 | | | 372 | | | 63,326 | | | 63,698 | Total | | $ | 227 | | $ | 1,330 | | $ | 1,395 | | $ | 2,952 | | $ | 799,494 | | $ | 802,446 |
Loan Modification Made to Borrowers Experiencing Financial Difficulty Occasionally, the Company modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificant payment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged off against the allowance for credit losses. In some cases, the Company provides multiple types of concessions on one loan. Typically, one type of concession, such as term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. There were no loans modified to borrowers experiencing financial difficulty during the three and six months ended June 30, 2026 and 2025. NOTE 4 – LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued) Credit Quality Indicators 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. 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. 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. NOTE 4 – LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued) The Bank analyzes commercial loans individually by classifying the loans as to credit risk using standard industry classifications. Commercial loans not classified are considered to be pass-rated loans. The Bank considers the performance of the loan portfolio and its impact on the allowance for credit losses. For residential real estate, HELOC and consumer loans, the Bank evaluates credit quality based on the aging status of the loan and by payment activity. The following table presents the risk category of loans and current period gross charge-offs as of and during the six months ended June 30, 2026 and the year December 31, 2025 by loan segment and vintage year (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Revolving | | | | As of June 30, 2026 | | 2026 | | 2025 | | 2024 | | 2023 | | 2022 | | Prior | | Loans | | Total | Commercial & Industrial: | | | | | | | | | | | | | | | | | | | | | | | | | Risk rating | | | | | | | | | | | | | | | | | | | | | | | | | Pass | | $ | 10,439 | | $ | 12,763 | | $ | 6,976 | | $ | 3,003 | | $ | 3,087 | | $ | 6,626 | | $ | 506 | | $ | 43,400 | Special mention | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | Substandard | | | — | | | — | | | — | | | — | | | 27 | | | 204 | | | — | | | 231 | Doubtful | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | Total | | $ | 10,439 | | $ | 12,763 | | $ | 6,976 | | $ | 3,003 | | $ | 3,114 | | $ | 6,830 | | $ | 506 | | $ | 43,631 | Commercial & Industrial: | | | | | | | | | | | | | | | | | | | | | | | | | Current period gross write off | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | Commercial real estate | | | | | | | | | | | | | | | | | | | | | | | | | Risk rating | | | | | | | | | | | | | | | | | | | | | | | | | Pass | | $ | 32,897 | | $ | 65,560 | | $ | 51,192 | | $ | 97,877 | | $ | 102,878 | | $ | 181,541 | | $ | — | | $ | 531,945 | Special mention | | | — | | | — | | | — | | | — | | | 437 | | | 5,293 | | | — | | | 5,730 | Substandard | | | — | | | — | | | — | | | 6,970 | | | 3,542 | | | 4,053 | | | — | | | 14,565 | Doubtful | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | Total | | $ | 32,897 | | $ | 65,560 | | $ | 51,192 | | $ | 104,847 | | $ | 106,857 | | $ | 190,887 | | $ | — | | $ | 552,240 | Commercial real estate | | | | | | | | | | | | | | | | | | | | | | | | | Current period gross write off | | $ | — | | $ | — | | $ | — | | $ | 94 | | $ | — | | $ | — | | $ | — | | $ | 94 | Residential real estate | | | | | | | | | | | | | | | | | | | | | | | | | Payment Performance | | | | | | | | | | | | | | | | | | | | | | | | | Performing | | $ | 16,453 | | $ | 41,339 | | $ | 35,098 | | $ | 56,954 | | $ | 72,464 | | $ | 196,148 | | $ | — | | $ | 418,456 | Non Performing | | | — | | | — | | | — | | | 176 | | | — | | | 2,215 | | | — | | | 2,391 | Total | | $ | 16,453 | | $ | 41,339 | | $ | 35,098 | | $ | 57,130 | | $ | 72,464 | | $ | 198,363 | | $ | — | | $ | 420,847 | Residential real estate | | | | | | | | | | | | | | | | | | | | | | | | | Current period gross write off | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | HELOC | | | | | | | | | | | | | | | | | | | | | | | | | Payment Performance | | | | | | | | | | | | | | | | | | | | | | | | | Performing | | $ | 1,326 | | $ | 2,762 | | $ | 3,767 | | $ | 3,273 | | $ | 3,724 | | $ | 7,389 | | $ | — | | $ | 22,241 | Non Performing | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | Total | | $ | 1,326 | | $ | 2,762 | | $ | 3,767 | | $ | 3,273 | | $ | 3,724 | | $ | 7,389 | | $ | — | | $ | 22,241 | HELOC | | | | | | | | | | | | | | | | | | | | | | | | | Current period gross write off | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | Consumer | | | | | | | | | | | | | | | | | | | | | | | | | Payment Performance | | | | | | | | | | | | | | | | | | | | | | | | | Performing | | $ | 14,488 | | $ | 15,858 | | $ | 16,111 | | $ | 8,115 | | $ | 5,012 | | $ | 10,206 | | $ | — | | $ | 69,790 | Non Performing | | | — | | | — | | | — | | | — | | | 10 | | | 8 | | | — | | | 18 | Total | | $ | 14,488 | | $ | 15,858 | | $ | 16,111 | | $ | 8,115 | | $ | 5,022 | | $ | 10,214 | | $ | — | | $ | 69,808 | Consumer | | | | | | | | | | | | | | | | | | | | | | | | | Current period gross write off | | $ | — | | $ | 1 | | $ | 9 | | $ | 19 | | $ | 15 | | $ | 6 | | $ | — | | $ | 50 |
NOTE 4 – LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Revolving | | | | As of December 31, 2025 | | 2025 | | 2024 | | 2023 | | 2022 | | 2021 | | Prior | | Loans | | Total | Commercial & Industrial: | | | | | | | | | | | | | | | | | | | | | | | | | Risk rating | | | | | | | | | | | | | | | | | | | | | | | | | Pass | | $ | 9,528 | | $ | 9,684 | | $ | 3,143 | | $ | 2,762 | | $ | 1,827 | | $ | 4,891 | | $ | 564 | | $ | 32,399 | Special mention | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | Substandard | | | — | | | — | | | — | | | — | | | — | | | 183 | | | — | | | 183 | Doubtful | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | Total | | $ | 9,528 | | $ | 9,684 | | $ | 3,143 | | $ | 2,762 | | $ | 1,827 | | $ | 5,074 | | $ | 564 | | $ | 32,582 | Commercial & Industrial: | | | | | | | | | | | | | | | | | | | | | | | | | Current period gross write off | | $ | — | | $ | 200 | | $ | — | | $ | — | | $ | — | | $ | 1 | | $ | — | | $ | 201 | Commercial real estate | | | | | | | | | | | | | | | | | | | | | | | | | Risk rating | | | | | | | | | | | | | | | | | | | | | | | | | Pass | | $ | 39,066 | | $ | 39,227 | | $ | 56,299 | | $ | 75,765 | | $ | 50,351 | | $ | 105,002 | | $ | — | | $ | 365,710 | Special mention | | | — | | | — | | | — | | | — | | | — | | | 3,721 | | | — | | | 3,721 | Substandard | | | — | | | — | | | 327 | | | — | | | — | | | 622 | | | — | | | 949 | Doubtful | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | Total | | $ | 39,066 | | $ | 39,227 | | $ | 56,626 | | $ | 75,765 | | $ | 50,351 | | $ | 109,345 | | $ | — | | $ | 370,380 | Commercial real estate | | | | | | | | | | | | | | | | | | | | | | | | | Current period gross write off | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | Residential real estate | | | | | | | | | | | | | | | | | | | | | | | | | Payment Performance | | | | | | | | | | | | | | | | | | | | | | | | | Performing | | $ | 49,283 | | $ | 32,818 | | $ | 44,660 | | $ | 43,589 | | $ | 51,302 | | $ | 96,051 | | $ | — | | $ | 317,703 | Non Performing | | | — | | | — | | | — | | | — | | | 499 | | | 492 | | | — | | | 991 | Total | | $ | 49,283 | | $ | 32,818 | | $ | 44,660 | | $ | 43,589 | | $ | 51,801 | | $ | 96,543 | | $ | — | | $ | 318,694 | Residential real estate | | | | | | | | | | | | | | | | | | | | | | | | | Current period gross write off | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | 63 | | $ | — | | $ | 63 | HELOC | | | | | | | | | | | | | | | | | | | | | | | | | Payment Performance | | | | | | | | | | | | | | | | | | | | | | | | | Performing | | $ | 2,059 | | $ | 3,693 | | $ | 4,001 | | $ | 3,058 | | $ | 1,396 | | $ | 2,885 | | $ | — | | $ | 17,092 | Non Performing | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | Total | | $ | 2,059 | | $ | 3,693 | | $ | 4,001 | | $ | 3,058 | | $ | 1,396 | | $ | 2,885 | | $ | — | | $ | 17,092 | HELOC | | | | | | | | | | | | | | | | | | | | | | | | | Current period gross write off | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | | $ | — | Consumer | | | | | | | | | | | | | | | | | | | | | | | | | Payment Performance | | | | | | | | | | | | | | | | | | | | | | | | | Performing | | $ | 16,187 | | $ | 16,209 | | $ | 8,128 | | $ | 5,502 | | $ | 2,462 | | $ | 15,135 | | $ | — | | $ | 63,623 | Non Performing | | | — | | | 20 | | | 14 | | | 41 | | | — | | | — | | | — | | | 75 | Total | | $ | 16,187 | | $ | 16,229 | | $ | 8,142 | | $ | 5,543 | | $ | 2,462 | | $ | 15,135 | | $ | — | | $ | 63,698 | Consumer | | | | | | | | | | | | | | | | | | | | | | | | | Current period gross write off | | $ | — | | $ | 24 | | $ | 35 | | $ | 45 | | $ | 18 | | $ | 57 | | $ | — | | $ | 179 |
NOTE 4 – LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued) The Bank retains the servicing rights on certain mortgage loans sold. Total loans serviced by the Company for unrelated third parties were approximately $72.4 million and $65.4 million at June 30, 2026 and December 31, 2025, respectively. At June 30, 2026 and December 31, 2025 the unamortized balance of mortgage servicing rights on loans sold with servicing retained was approximately $145 thousand and $150 thousand, respectively. The estimated fair value of these mortgage servicing rights was in excess of their carrying value at June 30, 2026 and December 31, 2025, and therefore no impairment reserve was necessary. Fees earned for servicing loans totaled $86 thousand and $0 for the six months ended June 30, 2026 and 2025, respectively. In the ordinary course of business, the Company enters into loan transactions with certain of its directors and executive officers (“Related Parties”). All loans to Related Parties were made at substantially the same terms and conditions at the time of origination as other originated loans to borrowers that were not affiliated with the Company. The aggregate amount outstanding of such loans totaled $10.4 million at June 30, 2026, and $6.8 million at December 31, 2025.
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