LOANS AND ALLOWANCE FOR CREDIT LOSSES

12 Months Ended

Dec. 31, 2025

LOANS AND ALLOWANCE FOR CREDIT LOSSES

LOANS AND ALLOWANCE FOR CREDIT LOSSES

NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES

A summary of loans at December 31 is as follows (in thousands):


		2025			2024
Residential real estate		$	318,694		$	303,156
HELOCs			17,092			15,526
Commercial real estate			370,380			349,369
Commercial and industrial			32,582			39,596
Consumer			63,698			55,592
Total gross loans			802,446			763,239
Unearned discount and net deferred fees and costs			773			742
Total loans			803,219			763,981
Allowance for credit losses			(8,749)			(8,545)
Net loans		$	794,470		$	755,436

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 increase in ACL for the year ended December 31, 2025 compared with December 31, 2024, primarily consisted of an increase in ACL for collectively evaluated loans. The year-over-year increase in ACL was primarily driven by loan growth during the period.

The following table presents the activity in the allowance for credit losses by portfolio class for the year ended December 31, 2025 and 2024 (in thousands):


		Residential						Commercial			Commercial
		Real Estate			HELOCs			Real Estate			and Industrial			Consumer			Total
December 31, 2025
Allowance for credit losses:
Beginning balance		$	2,564		$	104		$	5,396		$	313		$	168		$	8,545
Provision (credit) for credit losses			220			(33)			(41)			264			220			630
Loans charged-off			(63)			—			—			(202)			(180)			(445)
Recoveries			—			—			—			—			19			19
Total ending allowance balance		$	2,721		$	71		$	5,355		$	375		$	227		$	8,749

NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued)


		Residential						Commercial			Commercial
		Real Estate			HELOCs			Real Estate			and Industrial			Consumer			Total
December 31, 2024
Allowance for credit losses:
Beginning balance		$	2,466		$	91		$	5,091		$	275		$	153		$	8,076
Provision for credit losses			167			13			305			39			76			600
Loans charged-off			(69)			—			—			(1)			(83)			(153)
Recoveries			—			—			—			—			22			22
Total ending allowance balance		$	2,564		$	104		$	5,396		$	313		$	168		$	8,545

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 December 31, 2025 and 2024 (in thousands):


								Loans Past Due Over
		Nonaccrual						89 Days Still Accruing
		2025			2024			2025			2024
Residential real estate		$	331		$	598		$	660		$	333
HELOCs			—			—			—			—
Commercial real estate			328			—			—			—
Commercial and industrial			—			29			—			146
Consumer			1			—			75			69
Total		$	660		$	627		$	735		$	548

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 December 31, 2025 and 2024, the Company had no allowance for credit losses allocated to nonaccrual 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. At December 31, 2024, collateral-dependent loans consisted of $598 thousand of residential real estate loans and $29 thousand of commercial industrial loans. Residential real estate loans were secured by residential real estate properties, commercial real estate loans were secured by commercial real estate properties, and commercial and industrial loans were secured by other assets.

NOTE 3 – 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 December 31, 2025 and 2024 (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
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

December 31, 2024
Residential real estate		$	—		$	564			923		$	1,487		$	301,669		$	303,156
HELOCs			149			—			8			157			15,369			15,526
Commercial real estate			—			114			175			289			349,080			349,369
Commercial and industrial			—			—			—			—			39,596			39,596
Consumer			91			93			69			253			55,339			55,592
Total		$	240		$	771		$	1,175		$	2,186		$	761,053		$	763,239

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. The following tables present (in thousands) the amortized cost basis of loans at December 31, 2025 and 2024 that were both experiencing financial difficulty and modified during the year ended December 31, 2025 and 2024, by class and by type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the book value of each class of financing receivable is also presented below:


											Total Class of
		Payment			Term						Financing
		Delay			Extension			Total			Receivable
Commercial		$	—		$	—		$	—		0	%
Residential			—			—			—		0	%
Consumer			—			—			—		0	%
Total		$	—		$	—		$	—		0	%


											Total Class of
		Payment			Term						Financing
		Delay			Extension			Total			Receivable
Commercial		$	—		$	400		$	400		0	%
Residential			—			—			—		0	%
Consumer			—			184			184		0.33	%
Total		$	—		$	584		$	584		0.33	%

NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued)

There were no commitments to lend additional funds to borrowers experiencing financial difficulty whose terms have been restructured at December 31, 2025 or 2024.

All loans to borrowers experiencing financial difficulty that have been modified during the year ended December 31, 2024 were current to their contractual payments as of December 31, 2024 with the exception of $184 thousand in consumer loans that were in the 30 to 89 days past due category at December 31, 2024. As of December 31, 2025, there were no loans that were previously modified for borrowers experiencing financial difficulty that were more than 30 days past due.

For restructured loans, a subsequent payment default is defined in terms of delinquency, when a principal or interest payment is 90 days past due or classified into non-accrual status during the reporting period.

Of the loans restructured during the year ended December 31, 2025 and 2024, there were no subsequent defaults as of December 31, 2025 and 2024, respectively.

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.

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 December 31, 2025 and 2024 by loan segment and vintage year (in thousands):

NOTE 3 – 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		$	—		$	—		$	—		$	2		$	—		$	202
Commercial real estate
Risk rating
Pass		$	39,066		$	39,227		$	56,299		$	75,765		$	50,351		$	103,839		$	—		$	364,547
Special mention			—			—			—			—			—			4,884			—			4,884
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		$	58		$	—		$	180

NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES (Continued)


																				Revolving
As of December 31, 2024		2024			2023			2022			2021			2020			Prior			Loans			Total
Commercial & Industrial:
Risk rating
Pass		$	10,218		$	9,526		$	7,123		$	2,849		$	4,851		$	3,252		$	1,323		$	39,142
Special mention			—			—			—			—			—			—			—			—
Substandard			—			—			114			—			99			241			—			454
Doubtful			—			—			—			—			—			—			—			—
Total		$	10,218		$	9,526		$	7,237		$	2,849		$	4,950		$	3,493		$	1,323		$	39,596
Commercial & Industrial:
Current period gross write off		$	—		$	—		$	—		$	—		$	—		$	1		$	—		$	1
Commercial real estate
Risk rating
Pass		$	38,844		$	50,679		$	82,151		$	57,936		$	35,595		$	83,531		$	—		$	348,736
Special mention			—			—			—			—			—			—			—			—
Substandard			—			—			—			—			—			633			—			633
Doubtful			—			—			—			—			—			—			—			—
Total		$	38,844		$	50,679		$	82,151		$	57,936		$	35,595		$	84,164		$	—		$	349,369
Commercial real estate
Current period gross write off		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Residential real estate
Payment Performance
Performing		$	41,108		$	54,289		$	49,648		$	60,945		$	29,934		$	66,077		$	—		$	302,001
Non Performing			—			—			332			—			—			823			—			1,155
Total		$	41,108		$	54,289		$	49,980		$	60,945		$	29,934		$	66,900		$	—		$	303,156
Residential real estate
Current period gross write off		$	—		$	—		$	—		$	—		$	—		$	69		$	—		$	69
HELOC
Payment Performance
Performing		$	2,893		$	3,902		$	3,291		$	1,133		$	693		$	3,614		$	—		$	15,526
Non Performing			—			—			—			—			—			—			—			—
Total		$	2,893		$	3,902		$	3,291		$	1,133		$	693		$	3,614		$	—		$	15,526
HELOC
Current period gross write off		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Consumer
Payment Performance
Performing		$	19,236		$	10,248		$	7,110		$	2,964		$	3,167		$	12,867		$	—		$	55,592
Non Performing			—			—			—			—			—			—			—			—
Total		$	19,236		$	10,248		$	7,110		$	2,964		$	3,167		$	12,867		$	—		$	55,592
Consumer
Current period gross write off		$	19		$	14		$	39		$	2		$	5		$	4		$	—		$	83

NOTE 3 – 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 $65.4 million and $60.2 million at December 31, 2025 and 2024, respectively. At December 31, 2025 and 2024 the unamortized balance of mortgage servicing rights on loans sold with servicing retained was approximately $150 thousand and $60 thousand, respectively. The estimated fair value of these mortgage servicing rights was in excess of their carrying value at December 31, 2025 and 2024, and therefore no impairment reserve was necessary. Fees earned for servicing loans totaled $153 thousand and $157 thousand for the years ended December 31, 2025 and 2024, 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 $6.8 million at December 31, 2025, and $6.4 million at December 31, 2024.