Portions of Unity Bancorp’s Proxy Statement for the Annual Meeting of Shareholders to be filed no later than 120 days from December 31, 2025 are incorporated by reference into Part III of this Annual Report on Form 10-K.

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2025	Dec. 31, 2024
ASSETS
Cash and due from banks	$ 19,841	$ 20,206
Interest-bearing deposits	196,678	160,232
Cash and cash equivalents	216,519	180,438
Securities:
Debt securities available for sale (net of valuation allowance of $0 and $2,824 as of December 31, 2025 and December 31, 2024, respectively) (amortized cost of $72,474 and $100,212 at December 31, 2025 and December 31, 2024, respectively)	70,870	93,884
Debt securities held to maturity	36,576	41,294
Equity securities with readily determinable fair values	16,569	9,850
Total securities	124,015	145,028
Loans:
Total loans	2,544,713	2,260,657
Allowance for credit losses	(32,342)	(26,788)
Net loans	2,512,371	2,233,869
Premises and equipment, net	18,022	18,778
Bank owned life insurance ("BOLI")	26,547	25,773
Deferred tax assets, net	14,640	14,106
Federal Home Loan Bank ("FHLB") stock	14,314	12,507
Accrued interest receivable	12,896	12,691
Goodwill	1,516	1,516
Other real estate owned ("OREO")	1,472
Prepaid expenses and other assets	24,340	9,311
Total assets	2,966,652	2,654,017
Deposits:
Noninterest-bearing demand	465,596	440,803
Interest-bearing demand	369,131	321,780
Savings	535,044	491,175
Brokered deposits	274,203	217,931
Time deposits	680,087	628,624
Total deposits	2,324,061	2,100,313
Borrowed funds	255,774	220,504
Subordinated debentures	10,310	10,310
Accrued interest payable	2,138	1,702
Accrued expenses and other liabilities	28,738	25,605
Total liabilities	2,621,021	2,358,434
Shareholders' equity:
Preferred stock, no par value, 500 shares authorized, no shares issued and no shares outstanding as of December 31, 2025 and December 31, 2024
Common stock, no par value, 12,000 shares authorized, 10,048 shares issued and 9,982 shares outstanding as of December 31, 2025; 12,000 shares authorized, 11,616 shares issued and 10,026 shares outstanding as of December 31, 2024	105,892	103,936
Retained earnings	243,935	227,331
Treasury stock, at cost (66 shares as of December 31, 2025 and 1,590 shares as of December 31, 2024)	(3,101)	(33,577)
Accumulated other comprehensive loss	(1,095)	(2,107)
Total shareholders' equity	345,631	295,583
Total liabilities and shareholders' equity	2,966,652	2,654,017
Financing Receivable Portfolio Segment, Loans Held-for-Sale
Loans:
Total loans	9,490	12,163
Financing Receivable Portfolio Segment, Loans Held for Investment
Loans:
Total loans	2,535,223	2,248,494
Financing Receivable Portfolio Segment, Loans Held for Investment, Small Business Administration Loans Held for Investment
Loans:
Total loans	34,259	38,309
Allowance for credit losses	(785)	(1,535)
Commercial Portfolio Segment
Loans:
Total loans		1,411,629
Allowance for credit losses	(22,148)	(17,361)
Commercial Portfolio Segment, Commercial Loans
Loans:
Total loans	1,518,032	1,281,436
Commercial Portfolio Segment, Commercial Construction Loans
Loans:
Total loans	147,215	130,193
Residential Portfolio Segment, Residential Mortgage Loans
Loans:
Total loans	677,221	630,927
Allowance for credit losses	(7,695)	(6,254)
Residential Portfolio Segment, Residential Construction Loans
Loans:
Total loans	73,277	90,918
Allowance for credit losses	(719)	(863)
Consumer Portfolio Segment
Loans:
Total loans	85,219	76,711
Allowance for credit losses	$ (995)	$ (775)

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2025	Dec. 31, 2024
Debt Securities, Available-for-Sale
Allowance for credit losses for debt securities available for sale	$ 0	$ 2,824
Debt securities available for sale at amortized cost	$ 72,474	$ 100,212
Preferred Stock
Preferred stock, no par value (in dollars per share)	$ 0	$ 0
Preferred stock, shares authorized (in shares)	500,000	500,000
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common Stock
Common stock, no par value (in dollars per share)	$ 0	$ 0
Common stock, shares authorized (in shares)	12,000,000	12,000,000
Common stock, shares issued (in shares)	10,048,000	11,616,000
Common stock, shares outstanding (in shares)	9,982,000	10,026,000
Treasury Stock
Treasury stock, common, shares (in shares)	66,000	1,590,000

Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands	12 Months Ended
	Dec. 31, 2025	Dec. 31, 2024
INTEREST INCOME
Interest-bearing deposits	$ 1,964	$ 2,033
FHLB stock	565	789
Securities:
Taxable	6,818	7,312
Tax-exempt	71	70
Total securities	6,889	7,382
Loans:
SBA loans	3,790	4,887
Commercial loans	95,144	75,699
Commercial construction loans	10,340	12,074
Residential mortgage loans	41,925	37,770
Consumer loans	5,830	5,607
Residential construction loans	7,181	9,497
Total loans	164,210	145,534
Total interest income	173,628	155,738
INTEREST EXPENSE
Interest-bearing demand deposits	7,528	7,176
Savings deposits	11,652	13,006
Brokered deposits	7,608	8,412
Time deposits	25,571	22,918
Borrowed funds and subordinated debentures	4,236	5,615
Total interest expense	56,595	57,127
Net interest income	117,033	98,611
Provision for credit losses, loans	6,699	2,407
Provision for credit losses, off-balance sheet	66	1
(Release) provision for credit losses, securities	(2,824)	1,541
Net interest income after provision for credit losses	113,092	94,662
NONINTEREST INCOME
Gain on sale of SBA loans held for sale, net	705	660
Gain on sale of mortgage loans, net	1,527	1,488
BOLI income	774	544
Net security gains	5,596	586
Other income	1,629	1,635
Total noninterest income	14,779	8,469
NONINTEREST EXPENSE
Compensation and benefits	32,186	29,749
Processing and communications	4,193	3,473
Occupancy	3,407	3,184
Furniture and equipment	3,224	3,140
Professional services	1,758	1,683
Advertising	1,682	1,611
Loan related expenses	888	1,138
Deposit insurance	1,174	1,100
Director fees	1,293	956
Other expenses	2,554	2,707
Total noninterest expense	52,359	48,741
Income before provision for income taxes	75,512	54,390
Provision for income taxes	17,561	12,940
Net income	$ 57,951	$ 41,450
Net income per common share - Basic (in dollars per share)	$ 5.78	$ 4.13
Net income per common share - Diluted (in dollars per share)	$ 5.67	$ 4.06
Weighted average common shares outstanding - Basic (in shares)	10,033	10,031
Weighted average common shares outstanding - Diluted (in shares)	10,223	10,202
Branch Fee Income
NONINTEREST INCOME
Noninterest income	$ 1,836	$ 1,391
Service and Loan Fee Income
NONINTEREST INCOME
Noninterest income	$ 2,712	$ 2,165

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2025	Dec. 31, 2024
Net income
Net income, before tax amount	$ 75,512	$ 54,390
Income tax expense (benefit)	17,561	12,940
Net Income (Loss)	57,951	41,450
Debt securities available for sale:
Unrealized holding gains on debt securities arising during the period, before tax	1,840	1,002
Unrealized holding gains on debt securities arising during the period, tax	447	247
Unrealized holding gains on debt securities arising during the period, net of tax	1,393	755
Less: reclassification adjustment on debt securities included in net income, before tax	(60)
Less: reclassification adjustment on debt securities included in net income, tax	(15)
Less: reclassification adjustment on debt securities included in net income, net of tax	(45)
Total unrealized gains on debt securities available for sale, before tax	1,900	1,002
Total unrealized gains on debt securities available for sale, tax	462	247
Total unrealized gains on debt securities available for sale, net of tax	1,438	755
Cash flow hedges:
Unrealized holding losses on cash flow hedges arising during the period, before tax	(945)	(1,097)
Unrealized holding losses on cash flow hedges arising during the period, tax	(258)	(301)
Unrealized holding losses on cash flow hedges arising during the period, net of tax	(687)	(796)
Less: reclassification adjustment for losses on cash flow hedges included in net income, before tax	(359)	(925)
Less: reclassification adjustment for losses on cash flow hedges included in net income, tax	(98)	(254)
Less: reclassification adjustment for losses on cash flow hedges included in net income, net of tax	(261)	(671)
Total unrealized losses on cash flow hedges, before tax	(586)	(172)
Total unrealized losses on cash flow hedges, tax	(160)	(47)
Total unrealized losses on cash flow hedges, net of tax	(426)	(125)
Total other comprehensive income, before tax	1,314	830
Total other comprehensive income, tax	302	200
Total other comprehensive income, net of tax	1,012	630
Total comprehensive income, before tax	76,826	55,220
Total comprehensive income, tax	17,863	13,140
Total comprehensive income, net of tax	$ 58,963	$ 42,080

Consolidated Statements of Changes in Shareholders' Equity - USD ($) shares in Thousands, $ in Thousands	Common Stock	Retained Earnings	Treasury Stock, Common	AOCI Attributable to Parent	Total
Balance, beginning of period at Dec. 31, 2023	$ 100,426	$ 191,108	$ (27,367)	$ (2,737)	$ 261,430
Balance, beginning of period (in shares) at Dec. 31, 2023	10,063
Increase (Decrease) in Stockholders' Equity
Net Income (Loss)		41,450			41,450
Other comprehensive income (loss), net of tax				630	630
Dividends on common stock	$ 206	(5,227)			(5,021)
Dividends on common stock (in shares)	7
Share-based compensation	$ 3,304				3,304
Share-based compensation (in shares)	185
Treasury stock purchased, at cost			(6,210)		(6,210)
Treasury stock purchased, at cost (in shares)	(229)
Balance, end of period at Dec. 31, 2024	$ 103,936	227,331	(33,577)	(2,107)	$ 295,583
Balance, end of period (in shares) at Dec. 31, 2024	10,026				10,026
Increase (Decrease) in Stockholders' Equity
Net Income (Loss)		57,951			$ 57,951
Other comprehensive income (loss), net of tax				1,012	1,012
Dividends on common stock	$ 223	(5,832)			(5,609)
Dividends on common stock (in shares)	4
Share-based compensation	$ 1,733				1,733
Share-based compensation (in shares)	68
Treasury stock purchased, at cost			(5,039)		(5,039)
Treasury stock purchased, at cost (in shares)	(116)
Treasury stock retirement		(35,515)	35,515
Balance, end of period at Dec. 31, 2025	$ 105,892	$ 243,935	$ (3,101)	$ (1,095)	$ 345,631
Balance, end of period (in shares) at Dec. 31, 2025	9,982				9,982

Consolidated Statements of Changes in Shareholders' Equity (Parenthetical) - $ / shares	12 Months Ended
	Dec. 31, 2025	Dec. 31, 2024
Common Stock
Common stock, dividends, per share, cash paid (in dollars per share)	$ 0.58	$ 0.52

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2025	Dec. 31, 2024
OPERATING ACTIVITIES:
Net income	$ 57,951	$ 41,450
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for credit losses, loans	6,699	2,407
(Release) Provision for credit losses, AFS securities	(2,824)	1,541
Net accretion of purchase premiums and discounts on securities	(85)	(256)
Depreciation and amortization, net	2,807	2,568
Deferred income tax benefit	(840)	(1,747)
Net securities gains	(5,596)	(586)
Stock compensation expense	2,092	1,823
Gain on sale of mortgage loans, net	(1,527)	(1,488)
Gain on sale of SBA loans held for sale, net	(705)	(660)
BOLI income	(774)	(544)
Net change in other assets and liabilities	(12,292)	3,479
Net cash provided by operating activities	44,906	47,987
INVESTING ACTIVITIES
Purchases of securities held to maturity		(5,000)
Purchases of equity securities	(2,666)	(2,247)
Purchases of securities available for sale	(15,448)	(10,500)
(Purchases) redemption from sale of FHLB stock, at cost	(1,807)	5,928
Maturities and principal payments on debt securities held to maturity	4,784	100
Maturities and principal payments on debt securities available for sale	37,199	7,824
Proceeds from sales of securities available for sale	1,000
Proceeds from sales of equity securities	6,558	785
Net increase in loans	(285,892)	(89,010)
Purchases of premises and equipment, net	(564)	(693)
Net cash used in investing activities	(256,836)	(92,813)
FINANCING ACTIVITIES
Net increase in deposits	223,748	176,173
Proceeds (repayments) of short-term borrowings, net	30,000	(137,000)
Proceeds from long-term borrowings, net	5,270	1,066
(Shares withheld for taxes), net of proceeds from stock option exercises	(359)	1,480
Dividends on common stock	(5,609)	(5,021)
Purchase of treasury stock, including excise tax accrual	(5,039)	(6,210)
Net cash provided by financing activities	248,011	30,488
Increase (decrease) in cash and cash equivalents	36,081	(14,338)
Cash and cash equivalents, beginning of period	180,438	194,776
Cash and cash equivalents, end of period	216,519	180,438
SUPPLEMENTAL DISCLOSURES
Interest paid	56,159	57,349
Income taxes paid	14,033	14,074
Noncash activities:
Establishment of lease liability and right-of-use asset	725
Capitalization of servicing rights	228	$ 186
Transfer of loans to OREO	$ 1,472

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2025

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

1. Summary of Significant Accounting Policies

Overview

The accompanying Consolidated Financial Statements include the accounts of Unity Bancorp, Inc. (the “Parent Company”) and its wholly-owned subsidiary, Unity Bank (the “Bank” or when consolidated with the Parent Company, the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation.

Unity Bancorp, Inc. is a financial holding company incorporated in New Jersey and registered under the Bank Holding Company Act of 1956, as amended. Its wholly-owned subsidiary, the Bank, is chartered by the New Jersey Department of Banking and Insurance. The Bank provides a full range of commercial and retail banking services through twenty-two branch offices located in Bergen, Hunterdon, Middlesex, Morris, Ocean, Somerset, Union and Warren counties in New Jersey and Northampton County in Pennsylvania. These services include the acceptance of demand, savings and time deposits and the extension of consumer, real estate, SBA and other commercial credits.

Unity Investment Services, Inc. is a wholly-owned subsidiary of Unity Bank and is used to hold and administer part of the Bank’s investment portfolio. Unity Investment Services, Inc. has one subsidiary, Unity Delaware Investment 2, Inc., which has three subsidiaries. Unity Strategic Investment I, Inc. and Unity Strategic Investment II, Inc. and Unity NJ REIT, Inc., which was formed in 2013 to hold real estate related loans.

The Company has a wholly-owned subsidiary: Unity (NJ) Statutory Trust II. For additional information on Unity (NJ) Statutory Trust II, see Note 7 to the Consolidated Financial Statements.

Use of Estimates in the Preparation of Financial Statements

In preparing the consolidated financial statements in conformity with U.S. GAAP, Management has made estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Consolidated Balance Sheet and Statement of Income for the periods indicated. Amounts requiring the use of significant estimates include the allowance for credit losses. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, amounts due from banks and interest-bearing deposits.

Restrictions on Cash

In addition, the Company’s contract with its current electronic funds transfer provider requires a predetermined balance be maintained in a settlement account controlled by the provider equal to the Company’s average daily net settlement position multiplied by four days. The required balance was $262 thousand as of December 31, 2025 and 2024, respectively. This balance can be adjusted periodically to reflect actual transaction volume and seasonal factors.

Securities

The Company classifies its securities into three categories, debt securities available for sale (“AFS”), debt securities held to maturity (“HTM”) and equity securities held at fair value ("equity securities").

Debt securities that are classified as available for sale are stated at fair value. Unrealized gains and losses on debt securities available for sale are excluded from results of operations and are reported in other comprehensive income, a separate component of shareholders’ equity, net of taxes. Debt securities classified as available for sale include debt securities that may be sold in response to changes in interest rates, changes in prepayment risks, for asset/liability management purposes or liquidity needs. The cost of debt securities sold is determined on a specific identification basis. Gains and losses on sales of debt securities are recognized in the Consolidated Statements of Income on a trade date basis.

Debt securities are classified as held to maturity based on Management’s intent and ability to hold them to maturity. Such debt securities are stated at cost, adjusted for unamortized purchase premiums and discounts.

For debt securities, purchase discounts are accreted using the interest method over the stated terms of the securities; whereas purchase premiums are amortized through the earliest call date.

Equity securities are investments carried at fair value that may be sold in response to changing market and interest rate conditions or for other business purposes. Activity in this portfolio is undertaken primarily to manage liquidity and interest rate risk, to take advantage of market conditions that create economically attractive returns and as an additional source of earnings. Periodic net gains and losses on equity investments are recognized in the Consolidated Statements of Income as realized gains and losses carried at fair value with changes recognized in net income.

For additional information on securities, see Note 2 to the Consolidated Financial Statements.

Valuation Allowance – Debt Securities

The Company has a process in place to identify debt securities that could potentially incur credit impairment. This process involves monitoring late payments, pricing levels, downgrades by rating agencies, key financial ratios, financial statements, revenue forecasts and cash flow projections as indicators of credit issues. Management evaluates debt securities for impairment at least on a quarterly basis and more frequently when economic or market concern warrants such evaluation. This evaluation considers relevant facts and circumstances in evaluating whether there is credit or interest rate-related impairment of a security.

The CECL standard requires credit losses on both HTM and AFS debt securities to be recognized through a valuation allowance instead of as a direct write-down to the amortized cost basis of the security. Management assesses its intent to sell and whether it is more likely than not that it will be required to sell a security before recovery of its amortized cost basis less any current-period credit losses. For debt securities that are considered impaired where Management has no intent to sell and the Company has no requirement to sell prior to recovery of its amortized cost basis, the amount of the impairment is separated into the amount that is credit related (credit loss component) and the amount due to all other factors. The credit loss component is recognized in earnings as provision expense and is the difference between the security’s amortized cost basis and the present value of its expected future cash flows. The remaining difference between the security’s fair value and the present value of future expected cash flows due to factors that are not credit related is recognized in other comprehensive income. For debt securities where Management has the intent to sell, the amount of the impairment is reflected in earnings as realized losses.

The present value of expected future cash flows is determined using the best estimate cash flows discounted at the effective interest rate implicit to the security at the date of purchase or the current yield to accrete an asset-backed or floating rate security. The methodology and assumptions for establishing the best estimate cash flows vary depending on the type of security. The asset-backed securities cash flow estimates are based on bond specific facts and circumstances that may include collateral characteristics, expectations of delinquency and default rates, loss severity and prepayment speeds and structural support, including subordination and guarantees. The corporate bond cash flow estimates are derived from scenario-based outcomes of expected corporate restructurings or the disposition of assets using bond specific facts and circumstances including timing, security interests and loss severity. The Company elected the practical expedient of zero loss estimates for securities issued by U.S. government entities and agencies for available for sale and held to maturity securities. These securities are either explicitly or implicitly guaranteed by the U.S. Government, are highly rated by major agencies and have a long history of no credit losses.

The Company considers a debt security to be past due in terms of payment based on its contractual terms. A debt security may be placed on nonaccrual, with interest no longer recognized, when collectability of principal or interest is doubtful.

A security may be partially or fully charged-off against the allowance if it is determined to be uncollectible. Recoveries of previously charged-off available for sale securities are recognized when received, while recoveries on held to maturity securities are recognized when expected.

For additional information on the allowance for credit losses, see Note 4 to the Consolidated Financial Statements.

Transfers of Financial Assets

Transfers of financial assets are accounted for as sales, when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (i) the assets have been isolated from the Company; (ii) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets and (iii) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

During the normal course of business, the Company may transfer a portion of a financial asset, for example, a participation in a loan or the government guaranteed portion of a loan. In order to be eligible for sales treatment, the transfer of the portion of the loan must meet the criteria of a participating interest. If it does not meet the criteria of a participating interest, the transfer must be accounted for as a secured borrowing. In order to meet the criteria for a participating interest, all cash flows from the loan must be divided proportionately, the rights of each loan holder must have the same priority, the loan holders must have no recourse to the transferor other than standard representations and warranties and no loan holder has the right to pledge or exchange the entire loan.

Loans

Loans Held for Sale

Loans held for sale represent the guaranteed portion of certain SBA loans and Mortgage loans, that the Company has elected to hold for sale and are reflected at the lower of aggregate cost or market value. The Company originates loans to customers under an SBA program that historically has provided for SBA guarantees of up to 90 percent of each loan. The Company may sell the guaranteed portion of its SBA loans to a third party and retains the servicing, holding the nonguaranteed portion in its portfolio. The net amount of loan origination fees on loans sold is included in the carrying value and in the gain or loss on the sale. When sales of SBA loans do occur, the premium received on the sale and the present value of future cash flows of the servicing assets are recognized in income. All criteria for sale accounting must be met in order for the loan sales to occur; see details under the “Transfers of Financial Assets” heading above.

Servicing assets represent the estimated fair value of retained servicing rights, net of servicing costs, at the time loans are sold. Servicing assets are amortized in proportion to, and over the period of, estimated net servicing revenues. Impairment is evaluated based on stratifying the underlying financial assets by date of origination and term. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Any impairment, if temporary, would generally be reported as a valuation allowance.

Serviced loans sold to others are not included in the accompanying Consolidated Balance Sheets. Income and fees collected for loan servicing are credited to noninterest income when earned, net of amortization on the related servicing assets.

For additional information on servicing assets, see Note 3 to the Consolidated Financial Statements.

Loans Held for Investment

Loans held for investment are stated at the unpaid principal balance, net of unearned discounts, deferred loan origination fees and costs and net charge-offs. In accordance with the level yield method, loan origination fees, net of direct loan origination costs, are deferred and recognized over the estimated life of the related loans as an adjustment to the loan yield. Interest is credited to operations primarily based upon the principal balance outstanding.

Loans are reported as past due when either interest or principal is unpaid in the following circumstances: fixed payment loans when (i) the borrower is in arrears for two or more monthly payments; (ii) open end credit for two or more billing cycles or (iii) single payment notes if interest or principal remains unpaid for 30 days or more.

Nonaccrual loans consist of loans that are not accruing interest as a result of principal or interest being delinquent for a period of 90 days or more or when the ability to collect principal and interest according to the contractual terms is in doubt (nonaccrual loans). When a loan is classified as nonaccrual, interest accruals are discontinued and all past due interest previously recognized as income is reversed and charged against current period earnings. Generally, until the loan becomes current, any payments received from the borrower are applied to outstanding principal until such time as Management determines that the financial condition of the borrower and other factors merit recognition of a portion of such payments as interest income. Loans may be returned to an accrual status when the ability to collect is reasonably assured or when the loan is brought current as to principal and interest.

Loans are charged-off when collection is in doubt and when the Company can no longer justify maintaining the loan as an asset on the Consolidated Balance Sheet. Loans qualify for charge-off when, after thorough analysis, all possible sources of repayment are insufficient. These include: (i) potential future cash flows; (ii) value of collateral and/or (iii) strength of co-makers and guarantors. Additionally, all loans classified as a loss or that portion of the loan classified as a loss is charged-off, subject to government guarantee. All loan charge-offs are approved by Executive Management.

For additional information on loans, see Note 3 to the Consolidated Financial Statements.

Allowance for Credit Losses for Loans and Reserve for Unfunded Loan Commitments

The allowance for credit losses represents the estimated amount considered necessary to cover lifetime expected credit losses inherent in financial assets at the Balance Sheet date. The measurement of expected credit losses is applicable to loans receivable and securities measured at amortized cost. It also applies to off-balance sheet credit exposures such as loan commitments and unused lines of credit. The allowance is established through a provision for credit losses that is charged against income. The methodology for determining the allowance for credit losses is considered a critical accounting policy by Management because of the high degree of judgment involved, the subjectivity of the assumptions used and the potential for changes in the forecasted economic environment that could result in changes to the amount of the recorded allowance for credit losses.

The allowance for credit losses is reported separately as a contra-asset on the Consolidated Balance Sheet. The expected credit losses for unfunded lending commitments and unfunded loan commitments is reported on the Consolidated Balance Sheet in Accrued expenses and other liabilities.

The allowance for credit losses on loans is deducted from the amortized cost basis of the loan to present the net amount expected to be collected. Expected losses are evaluated and calculated on a collective, or pooled, basis for those loans which share similar risk characteristics. At each reporting period, the Company evaluates whether loans within a pool continue to exhibit similar risk characteristics. If the risk characteristics of a loan change, such that they are no longer similar to other loans in the pool, the Company will evaluate the loan with a different pool of loans that share similar risk characteristics. If the loan does not share risk characteristics with other loans, the Company will evaluate the loan on an individual basis. The Company generally considers those loans for individual evaluation to be those on nonaccrual. Loans are charged off against the allowance for credit losses when the Company believes the balances to be uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged-off or expected to be charged-off.

The Company has chosen to segment its portfolio consistent with the manner in which it manages credit risk. Such segments include SBA, Commercial, Residential mortgage, Consumer and Residential construction. The Commercial segment is further sub-segmented into SBA 504, Commercial & industrial, Commercial real estate and Commercial construction. The Consumer segment is further bifurcated into Home equity and Consumer other. For most segments the Company calculates estimated credit losses using a weighted average remaining maturity methodology.

The Company estimates the allowance for credit losses on loans via a quantitative analysis which considers relevant available information from internal and external sources related to past events and current conditions, as well as the incorporation of reasonable and supportable forecasts. The Company evaluates a variety of factors including third party economic forecasts, industry trends and other available published economic information in arriving at its forecasts. After the reasonable and supportable forecast period, the Company reverts, after four quarters, on a straight-line basis over the following four quarters, to the historical average economic variables. Expected credit losses are estimated over the contractual term of the loans, adjusted for expected prepayments when appropriate.

Also included in the allowance for credit losses on loans are qualitative reserves to cover losses that are expected but, in the Company’s assessment, may not be adequately represented in the quantitative analysis or the forecasts described above. Factors that the Company considers include changes in lending policies and procedures, business conditions, the nature and size of the portfolio, portfolio concentrations and the volume and severity of past due loans and nonaccrual loans.

On a case-by-case basis, the Company may conclude that a loan should be evaluated on an individual basis based on its disparate risk characteristics. When the Company determines that a loan no longer shares similar risk characteristics with other loans in the portfolio, the allowance will be determined on an individual basis using the present value of expected cash flows or, for collateral-dependent loans, the fair value of the collateral as of the reporting date, less estimated selling costs, as applicable. If the fair value of the collateral is less than the amortized cost basis of the loan, the Company will record a provision for the difference between the fair value of the collateral, less costs to sell at the reporting date and the amortized cost basis of the loan.

The Company is required to include unfunded commitments that are expected to be funded in the future within the allowance calculation, other than those that are unconditionally cancelable. To arrive at that reserve, the reserve percentage for each applicable segment is applied to the unused portion of the expected commitment balance and is multiplied by the expected funding rate. To determine the expected funding rate, the Company uses a historical utilization rate for each segment.

There were no changes to the Company’s methodology for credit loss estimates during the year ended December 31, 2025.

For additional information on the allowance for credit losses and reserve for unfunded loan commitments, see Note 4 to the Consolidated Financial Statements.

Premises and Equipment, net

Land is carried at cost. All other fixed assets are carried at cost less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. The useful life of buildings is not to exceed 30 years, furniture and fixtures is generally 10 years or less and equipment is 3 to 5 years. Leasehold improvements are depreciated over the lesser of the useful life of the asset or the life of the underlying lease.

For additional information on premises and equipment, see Note 5 to the Consolidated Financial Statements.

Bank Owned Life Insurance

The Company purchased life insurance policies on certain members of Management. Bank owned life insurance is recorded at its cash surrender value or the amount that can be realized and the appreciation and death benefits from Bank owned life insurance are not subject to income tax.

Federal Home Loan Bank (“FHLB”) Stock

Federal law requires a member institution of the Federal Home Loan Bank system to hold stock of its district FHLB according to a predetermined formula. The stock is carried at cost. Management reviews the stock for impairment based on the ultimate recoverability of the cost basis in the stock. The stock’s value is determined by the ultimate recoverability of the par value rather than by recognizing temporary declines. Management considers such criteria as the significance of the decline in net assets, if any, of the FHLB, the length of time this situation has persisted, commitments by the FHLB to make payments required by law or regulation, the impact of legislative and regulatory changes on the customer base of the FHLB and the liquidity position of the FHLB.

Accrued Interest Receivable

Accrued interest receivable consists of amounts earned on investments and loans. The Company recognizes accrued interest receivable as it is earned. The Company is using the practical expedient to exclude accrued interest receivable from credit loss measurement.

Other Real Estate Owned

Other real estate owned (“OREO”) is recorded at the fair value, less estimated costs to sell at the date of acquisition, with a charge to the allowance for credit losses for any excess of the loan carrying value over such amount. Subsequently, OREO is carried at the lower of cost or fair value, as determined by current appraisals. Certain costs that increase the value or extend the useful life in preparing properties for sale are capitalized to the extent that the appraisal amount exceeds the carrying value and expenses of holding foreclosed properties are charged to operations as incurred.

Goodwill

The Company accounts for goodwill and other intangible assets in accordance with Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”) Topic 350, “Intangibles – Goodwill and Other,” which allows an entity to first assess qualitative factors to determine whether it is necessary to perform the quantitative goodwill impairment test. Based on a qualitative assessment, Management determined that the Company’s recorded goodwill totaling $1.5 million, which resulted from the 2005 acquisition of its Phillipsburg, New Jersey branch, is not impaired as of December 31, 2025.

Reclassification

Certain reclassifications have been made in the Consolidated Financial Statements to conform to the current year presentation. Such reclassifications had no impact on net income or stockholders’ equity as previously reported.

Appraisals

All appraisals must be performed in accordance with the Uniform Standards of Professional Appraisal Practice (“USPAP”). Appraisals are certified to the Company and performed by appraisers on the Company’s approved list of appraisers. Evaluations are completed by a person independent of Company Management. The content of the appraisal depends on the complexity and location of the property.

Derivative Instruments and Hedging Activities

The Company utilizes derivative instruments in the form of interest rate swaps to hedge its exposure to interest rate risk in conjunction with its overall asset and liability risk management process. In accordance with accounting requirements, the Company formally designates all of its hedging relationships as either fair value hedges or cash flow hedges. The Company’s derivative instruments currently consist of cash flow hedges.

The Company recognizes all derivative instruments at fair value in either Prepaid expense and other assets or Accrued expenses and other liabilities on the Consolidated Balance Sheet and the related cash flows in the Operating Activities section of the Consolidated Statement of Cash Flows.

For derivatives designated as cash flow hedges (i.e., hedging the exposure to variability in expected future cash flows), the gain or loss on the derivative is reported in other comprehensive income and is reclassified into earnings in the same periods during which the hedged transaction affects earnings.

Those derivative financial instruments that do not meet the hedging criteria would be classified as undesignated derivatives and would be recorded at fair value with changes in fair value recorded in income.

The Company discontinues hedge accounting when (a) it determines that a derivative is no longer effective in offsetting changes in cash flows of a hedged item; (b) the derivative expires or is sold, terminated or exercised; (c) probability exists that the forecasted transaction will no longer occur or (d) Management determines that designating the derivative as a hedging instrument is no longer appropriate. In all cases in which hedge accounting is discontinued and a derivative remains outstanding, the Company will carry the derivative at fair value in the Consolidated Financial Statements, recognizing changes in fair value in current period income in the Consolidated Statement of Income.

For additional information on derivative instruments and hedging activities, see Note 7 to the Consolidated Financial Statements.

Income Taxes

The Company follows FASB ASC Topic 740, “Income Taxes,” which prescribes a threshold for the financial statement recognition of income taxes and provides criteria for the measurement of tax positions taken or expected to be taken in a tax return. ASC 740 also includes guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition of income taxes. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using the enacted tax rates applicable to taxable income for the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Valuation reserves are established against certain deferred tax assets when it is more likely than not that the deferred tax assets will not be realized. Increases or decreases in the valuation reserve are charged or credited to the income tax provision.

When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that ultimately would be sustained. The benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, Management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any. The evaluation of a tax position taken is considered by itself and not offset or aggregated with other positions. Tax positions that meet the more likely than not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of benefits associated with tax positions taken that exceeds the amount measured as described above is reflected as a liability for unrecognized tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination.

The Company participates in federal and state income tax credit programs. Tax credits are accounted for within the scope of ASC 740 and are reflected as a reduction of income tax expense when the related tax benefit is realized or realizable. Tax credits are recognized in the period when the Company concludes that it has met the more-likely-than-not recognition threshold under ASC 740.

Interest and penalties associated with unrecognized tax benefits are recognized in income tax expense on the Consolidated Statements of Income.

For additional information on income taxes, see Note 11 to the Consolidated Financial Statements.

Net Income Per Share

Basic net income per common share is calculated as net income available to common shareholders divided by the weighted average common shares outstanding during the reporting period.

Diluted net income per common share is computed similarly to that of basic net income per common share, except that the denominator is increased to include the number of additional common shares that would have been outstanding if all potentially dilutive common shares, principally stock options, were issued during the reporting period utilizing the treasury stock method; however, when a net loss rather than net income is recognized, diluted earnings per share equals basic earnings per share.

For additional information on net income per share, see Note 12 to the Consolidated Financial Statements.

Stock-Based Compensation

The Company accounts for its stock-based compensation awards in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation,” which requires recognition of compensation expense related to stock-based compensation awards over the period during which an employee is required to provide service for the award. Compensation expense is equal to the fair value of the award, net of estimated forfeitures, and is recognized over the vesting period of such awards.

For additional information on the Company’s stock-based compensation, see Note 14 to the Consolidated Financial Statements.

Fair Value

The Company follows FASB ASC Topic 820, “Fair Value Measurement and Disclosures,” which provides a framework for measuring fair value under generally accepted accounting principles.

For additional information on the fair value of the Company’s financial instruments, see Note 15 to the Consolidated Financial Statements.

Other Comprehensive Income (Loss)

Other comprehensive income (loss) consists of the change in unrealized gains (losses) on securities available for sale and derivative related items that were reported as a component of shareholders’ equity, net of tax.

For additional information on other comprehensive income (loss), see Note 9 to the Consolidated Financial Statements.

Dividend Restrictions

Banking regulations require maintaining certain capital levels that may limit the dividends paid by the Bank to the holding company or by the holding company to the shareholders.

Operating Segments

While Management, whom includes the Chief Executive Officer and acts as the Chief Operating Decision Maker (“CODM”), monitors the revenue streams of its various products and services, operating results and financial performance are evaluated on a company-wide basis. The accounting policies of the segment are the same as those described in the summary of significant accounting policies. The CODM uses net income reporting in the Company’s Consolidated Statements of Income to make operating and strategic decisions. Accordingly, there is only one reportable segment. The Company adopted ASU 2023-07 during the year ended December 31, 2024 noting no material impact.

Revenue Recognition

FASB ASC 606, Revenue from Contracts with Customers ("ASC 606"), establishes principles for reporting information about the nature, amount, timing and uncertainty of revenue and cash flows arising from the entity’s contracts to provide goods or services to customers. The core principle requires an entity to recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration that it expects to be entitled to receive in exchange for those goods or services recognized as performance obligations are satisfied.

The majority of the Company’s revenue-generating transactions are not subject to ASC 606, including revenue generated from financial instruments, such as loans, letters of credit, derivatives and investment securities, as well as revenue related to mortgage servicing activities, as these activities are subject to other U.S. GAAP discussed elsewhere within the Company’s disclosures. Descriptions of the Company’s revenue-generating activities that are within the scope of ASC 606, which are presented in its income statements as components of non-interest income are as follows:

●

Branch fee income - these represent general service fees for monthly account maintenance and activity or transaction based fees and consist of transaction-based revenue, time-based revenue (service period), item-based revenue or some other individual attribute-based revenue. Revenue is recognized when the Company’s performance obligation is completed which is generally monthly for account maintenance services or when a transaction has been completed (such as a wire transfer). Payments for such performance obligations are generally received at the time the performance obligations are satisfied.

●

Other non-interest income primarily includes items such as loan-related fees, investment gains/losses, bank owned life insurance income, dividends on FHLB and FRB stock and other general operating income, none of which are subject to the requirements of ASC 606.

Recent Accounting Pronouncements


Accounting Standard Update (“ASU”)	Required Adoption Date	Brief Description	Effect on the Company’s Financial Statements
ASU 2024-03, Income Statement – Reporting comprehensive income – Expense Disaggregation Disclosures (Subtopic 220-40)	Fiscal years beginning after December 15, 2026	Improve transparency of specific expense categories, which is generally not presented in the financial statements today.	No significant impact
ASU 2025-08, Financial Instruments – Credit Losses (Topic 326): Purchased Loans	Fiscal years beginning after December 15, 2026	Expands the “gross-up” method to more types of purchased loans and reduce day-1 credit loss expense volatility on purchased credit-deteriorated (“PCD”) assets.	No significant impact
ASU 2025-09, Derivatives and Hedging (Topic 815): Hedge Accounting Improvements	Fiscal years beginning after December 15, 2026	To more closely align hedge accounting with the economics of an entity’s risk management activities.	No significant impact

Securities

12 Months Ended

Dec. 31, 2025

Investments, Debt and Equity Securities [Abstract]

Securities

2. Securities

This table provides the major components of debt securities AFS, HTM and equity securities at amortized cost and estimated fair value at December 31, 2025 and December 31, 2024:

December 31, 2025

 

Gross

 

Gross

 

Amortized

unrealized

Estimated

(In thousands)

cost

gains

losses

fair value

Available for sale:

U.S. Government sponsored entities

$

5,000

$

—

$

(31)

$

4,969

State and political subdivisions

185

—

(26)

159

Residential mortgage-backed securities

12,702

27

(977)

11,752

Asset backed securities

22,001

11

(12)

22,000

Corporate and other securities

32,586

314

(910)

31,990

Total debt securities available for sale

$

72,474

$

352

$

(1,956)

$

70,870

Held to maturity:

U.S. Government sponsored entities

$

28,000

$

—

$

(3,812)

$

24,188

State and political subdivisions

1,299

42

—

1,341

Residential mortgage-backed securities

7,277

—

(2,401)

4,876

Total debt securities held to maturity

$

36,576

$

42

$

(6,213)

$

30,405

Equity securities:

Total equity securities

$

15,009

$

1,965

$

(405)

$

16,569


	December 31, 2024
				Gross			Gross
	Amortized			unrealized			unrealized				Valuation	Estimated
(In thousands)	cost			gains			losses				allowance	fair value
Available for sale:
U.S. Government sponsored entities	$	15,000		$	—		$	(241)		$	—	$	14,759
State and political subdivisions		357			—			(24)			—		333
Residential mortgage-backed securities		13,814			27			(1,555)			—		12,286
Asset backed securities		39,300			94			(2)			—		39,392
Corporate and other securities		31,741			165			(1,968)			(2,824)		27,114
Total debt securities available for sale	$	100,212		$	286		$	(3,790)		$	(2,824)	$	93,884
Held to maturity:
U.S. Government sponsored entities	$	28,000		$	—		$	(4,932)		$	—	$	23,068
State and political subdivisions		1,234			59			—			—		1,293
Residential mortgage-backed securities		12,060			—			(2,607)			—		9,453
Total debt securities held to maturity	$	41,294		$	59		$	(7,539)		$	—	$	33,814
Equity securities:
Total equity securities	$	10,606		$	64		$	(820)		$	—	$	9,850

For the year ended December 31, 2025, there was a release in credit losses on AFS debt securities of $2.8 million, compared to a provision of $1.5 million for the year ended December 31, 2024.

The following table summarizes the amortized cost of HTM debt securities by external credit rating at December 31, 2025 and 2024:


					Non-investment
(In thousands)	AAA/AA/A rated		BBB rated		grade rated		Non-rated		Total
December 31, 2025
U.S. Government sponsored entities	$	28,000	$	—	$	—	$	—	$	28,000
State and political subdivisions		1,299		—		—		—		1,299
Residential mortgage-backed securities		7,277		—		—		—		7,277
Total	$	36,576	$	—	$	—	$	—	$	36,576
December 31, 2024
U.S. Government sponsored entities	$	28,000	$	—	$	—	$	—	$	28,000
State and political subdivisions		1,234		—		—		—		1,234
Residential mortgage-backed securities		12,060		—		—		—		12,060
Total	$	41,294	$	—	$	—	$	—	$	41,294

This table provides the remaining contractual maturities within the investment portfolios. The carrying value of securities at December 31, 2025 is distributed by contractual maturity. Securities, which may have principal prepayment provisions, are distributed based on contractual maturity. Expected maturities will differ materially from contractual maturities as a result of early prepayments and calls.



		Amortized		Fair
(In thousands)		cost		value
Available for sale, at fair value:
Due in one year	$	2,000	$	1,951
Due after one year through five years		16,240		15,946
Due after five years through ten years		31,346		31,061
Due after ten years		10,186		10,160
Residential mortgage-backed securities		12,702		11,752
Total	$	72,474	$	70,870
Held to maturity, at amortized cost:
Due in one year	$	—	$	—
Due after one year through five years		3,000		2,996
Due after five years through ten years		—		—
Due after ten years		26,299		22,533
Residential mortgage-backed securities		7,277		4,876
Total	$	36,576	$	30,405

The number of securities in an unrealized loss position as of December 31, 2025 totaled 67, compared to 75 at December 31, 2024. This decrease is primarily due to payoffs and market interest rate fluctuations.

As of December 31, 2025, the company had accrued interest receivable of $0.8 million relating to debt securities, compared to $1.2 million at December 31, 2024. During the year ended December 31, 2025, there was no interest income reversed relating to nonaccrual debt securities compared to $125 thousand during the year ended December 31, 2024. During the

year ended December 31, 2025, there were no interest payments recorded as a reduction of principal relating to nonaccrual debt securities compared to $213 thousand during the year ended December 31, 2024.

At the year-end 2025 and 2024, there were no holdings of securities of any one issuer, other than the U.S. Government and its agencies, in an amount greater than 10% of shareholders’ equity.

The fair value of securities with unrealized losses by length of time where the individual securities have been in a continuous unrealized loss position at December 31, 2025 and December 31, 2024 are as follows:

December 31, 2025

Less than 12 months

12 months and greater

Total

 

Estimated

Unrealized

Estimated

Unrealized

Estimated

Unrealized

(In thousands)

fair value

(loss)

fair value

(loss)

fair value

(loss)

Available for sale:

U.S. Government sponsored entities

$

—

$

—

$

4,969

$

(31)

$

4,969

$

(31)

State and political subdivisions

—

159

(26)

159

(26)

Residential mortgage-backed securities

—

11,625

(977)

11,625

(977)

Asset backed securities

9,988

(12)

—

9,988

(12)

Corporate and other securities

2,483

(18)

9,681

(892)

12,164

(910)

Total temporarily impaired AFS securities

$

12,471

$

(30)

$

26,434

$

(1,926)

$

38,905

$

(1,956)

Held to maturity:

U.S. Government sponsored entities

$

—

$

—

$

24,188

$

(3,812)

$

24,188

$

(3,812)

Residential mortgage-backed securities

—

4,876

(2,401)

4,876

(2,401)

Total temporarily impaired HTM securities

$

—

$

—

$

29,064

$

(6,213)

$

29,064

$

(6,213)


		December 31, 2024
			Less than 12 months						12 months and greater						Total

			Estimated			Unrealized			Estimated			Unrealized			Estimated			Unrealized
(In thousands)			fair value			(loss)			fair value			(loss)			fair value			(loss)
Available for sale:
U.S. Government sponsored entities			$	—		$	—		$	14,759		$	(241)		$	14,759		$	(241)
State and political subdivisions				—			—			333			(24)			333			(24)
Residential mortgage-backed securities				8			(1)			12,145			(1,554)			12,153			(1,555)
Asset backed securities				3,998			(1)			3,000			(1)			6,998			(2)
Corporate and other securities				—			—			14,609			(1,968)			14,609			(1,968)
Total temporarily impaired AFS securities			$	4,006		$	(2)		$	44,846		$	(3,788)		$	48,852		$	(3,790)
Held to maturity:
U.S. Government sponsored entities			$	—		$	—		$	23,068		$	(4,932)		$	23,068		$	(4,932)
Residential mortgage-backed securities				—			—			4,453			(2,607)			4,453			(2,607)
Total temporarily impaired HTM securities			$	—		$	—		$	27,521		$	(7,539)		$	27,521		$	(7,539)

Unrealized losses in each of the categories presented in the tables above were primarily driven by market interest rate fluctuations.

Realized Gains and Losses

There was an $11 thousand gross realized loss on available for sale securities due to sales in 2025 compared to no gross realized gains or losses relating to sales in 2024.

Pledged Securities

Securities with a carrying value of $69.2 million and $11.5 million at December 31, 2025 and December 31, 2024, respectively, were pledged to secure other borrowings and for other purposes required or permitted by law.

Equity Securities

Included in this category are Community Reinvestment Act ("CRA") investments and the Company’s current other equity holdings of financial institutions. Equity securities are defined to include (a) preferred, common and other ownership interests in entities including partnerships, joint ventures and limited liability companies and (b) rights to acquire or dispose of ownership interests in entities at fixed or determinable prices.

The following is a summary of the gains and losses recognized in net income on equity securities for the past two years:


		For the year ended December 31,
(In thousands)		2025			2024
Net unrealized gains (losses) recognized during the period on equity securities		$	2,084		$	492
Net gains recognized during the period on equity securities sold during the period			3,523			94
Gains recognized during the reporting period on equity securities		$	5,607		$	586

Loans

12 Months Ended

Dec. 31, 2025

Receivables [Abstract]

Loans and Allowance for Credit Losses and Reserve for Unfunded Loan Commitments

3. Loans

The following table sets forth the classification of loans by class, including unearned fees, deferred costs and excluding the allowance for credit losses for the past two years:


(In thousands)		December 31, 2025			December 31, 2024
SBA loans held for investment		$	34,259		$	38,309
Commercial loans
SBA 504 loans			43,802			48,479
Commercial & industrial			183,163			147,186
Commercial real estate (1)			1,291,067			1,085,771
Commercial construction loans			147,215			130,193
Residential mortgage loans			677,221			630,927
Consumer loans
Home equity			82,488			73,223
Consumer other			2,731			3,488
Residential construction loans			73,277			90,918
Total loans held for investment		$	2,535,223		$	2,248,494
Loans held for sale			9,490			12,163
Total loans		$	2,544,713		$	2,260,657

(1)

Commercial real estate includes Commercial Mortgage – Owner Occupied, Commercial Mortgage – Nonowner Occupied and Commercial Mortgage – Other. Commercial Mortgage – Other primarily includes multifamily and land loans.

Loans are made to individuals and commercial entities. Specific loan terms vary as to interest rate, repayment and collateral requirements based on the type of loan requested and the credit worthiness of the prospective borrower. Credit risk tends to be geographically concentrated in that a majority of the loan customers are located in the markets serviced by the Bank. Loan performance may be adversely affected by factors impacting the general economy or conditions specific to the real estate market such as geographic location and/or property type. A description of the Company’s different loan segments follows:

Loans Held for Sale: Loans held for sale represent the guaranteed portion of SBA loans and qualified residential mortgage loans. These loans are reflected at the lower of aggregate cost or market value. When sales of loans do occur, the premium received on the sale and the present value of future cash flows of the servicing assets are recognized in income. All criteria for sale accounting must be met in order for the loan sales to occur.

Servicing assets represent the estimated fair value of retained servicing rights, net of servicing costs, at the time loans are sold. Servicing assets are amortized in proportion to, and over the period of, estimated net servicing revenues. Impairment is evaluated based on stratifying the underlying financial assets by date of origination and term. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions.

Serviced loans sold to others are not included in the accompanying Consolidated Balance Sheets. Income and fees collected for loan servicing are credited to noninterest income when earned, net of amortization on the related servicing assets, in the accompanying Consolidated Statements of Income.

SBA Loans: SBA 7(a) loans, on which the SBA has historically provided guarantees of up to 90 percent of the principal balance, are considered a higher risk loan product for the Company than its other loan products. The guaranteed portion of the Company’s SBA loans is generally sold in the secondary market with the nonguaranteed portion held in the portfolio as a loan held for investment. SBA loans are for the purpose of providing working capital, business acquisitions, financing the purchase of equipment, inventory or commercial real estate and for other business purposes. Loans are guaranteed by the businesses’ major owners. SBA loans are made based primarily on the historical and projected cash flow of the business and secondarily on the underlying collateral provided.

Commercial Loans: Commercial credit is extended primarily to middle market and small business customers. Commercial loans are generally made in the Company’s market place for the purpose of providing working capital, financing the purchase of equipment, inventory or commercial real estate and for other business purposes. The SBA 504 program consists of real estate backed commercial mortgages where the Company has the first mortgage and the SBA has the second mortgage on the property. Loans are generally guaranteed in full or for a meaningful amount by the businesses’ major owners. Commercial loans are made based primarily on the historical and projected cash flow of the business and secondarily on the underlying collateral provided.

Residential Mortgage, Consumer and Residential Construction Loans: The Company originates mortgage and consumer loans including principally residential real estate, home equity lines and loans and residential construction lines. Each loan type is evaluated on debt to income, type of collateral, loan to collateral value, credit history and Company relationship with the borrower. Risks in these loan categories are dependent on overall economic conditions and the housing market.

Inherent in the lending function is credit risk, which is the possibility a borrower may not perform in accordance with the contractual terms of their loan. A borrower’s inability to pay their obligations according to the contractual terms can create the risk of past due loans and, ultimately, credit losses, especially on collateral deficient loans. The Company minimizes its credit risk by loan diversification and adhering to credit administration policies and procedures. Due diligence on loans begins when the Company initiates contact regarding a loan with a borrower. Documentation, including a borrower’s credit history, materials establishing the value and liquidity of potential collateral, the purpose of the loan, the source of funds for repayment of the loan and other factors, are analyzed before a loan is submitted for approval. The loan portfolio is then subject to on-going internal reviews for credit quality, as well as independent credit reviews by an outside firm.

The Company’s extension of credit is governed by the Credit Risk Policy which was established to control the quality of the Company’s loans. These policies and procedures are reviewed and approved by the Board of Directors on a regular basis.

Credit Ratings

The Company places all SBA, commercial, commercial construction and residential construction loans into various credit risk rating categories based on an assessment of the expected ability of the borrowers to properly service their debt. The assessment considers numerous factors including, but not limited to, current financial information on the borrower, historical payment experience, strength of any guarantor, nature of and value of any collateral, acceptability of the loan structure and documentation, relevant public information and current economic trends. This credit risk rating analysis is performed when the loan is initially underwritten and then annually based on set criteria in the loan policy.

The Company uses the following regulatory definitions for criticized and classified risk ratings:

Pass: Risk ratings of 1 through 6 are used for loans that are performing, as they meet, and are expected to continue to meet, all of the terms and conditions set forth in the original loan documentation, and are generally current on principal and interest payments. These performing loans are termed “Pass”.

Special Mention: These loans have a potential weakness that deserves Management’s close attention. If left uncorrected, the potential weaknesses may result in deterioration of the repayment prospects for the loans or of the institution’s credit position at some future date.

Substandard: These loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as Substandard have a well-defined weakness or weaknesses that may jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution may sustain some loss if the deficiencies are not corrected.

Doubtful: These loans have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable, based on currently existing facts, conditions and values. Once a borrower is deemed incapable of repayment of unsecured debt, the loan is termed a “Loss” and charged off immediately, subject to government guarantee.

Loss: These loans are considered uncollectible and hold minute value that their continuance as bankable loans is no longer warranted. This classification does not imply zero possible recovery or salvage value; rather, it is neither practical nor desirable to postpone writing off the asset despite some partial recovery occurring later.

For residential mortgage and consumer loans, Management uses performing versus nonperforming as the best indicator of credit quality. Nonperforming loans consist of loans that are not accruing interest (nonaccrual loans) as a result of principal or interest being delinquent for a period of 90 days or more or when the ability to collect principal and interest according to the contractual terms is in doubt. These credit quality indicators are updated on an ongoing basis, as a loan is placed on nonaccrual status as soon as Management believes there is sufficient doubt as to the ultimate ability to collect interest on a loan.

The following table shows the internal loan classification risk by loan portfolio classification by origination year and gross writeoffs as of December 31, 2025:


	Term Loans
	Amortized Cost Basis by Origination Year
(In thousands)		2025		2024		2023		2022		2021		2020 and Earlier		Revolving Loans Amortized Cost Basis		Total
SBA loans held for investment
Risk Rating:
Pass	$	2,719	$	3,311	$	1,155	$	5,663	$	6,339	$	11,751	$	-	$	30,938
Special Mention		-		-		711		283		351		311		-		1,656
Substandard		-		-		172		1,493		-		-		-		1,665
Total SBA loans held for investment	$	2,719	$	3,311	$	2,038	$	7,439	$	6,690	$	12,062	$	-	$	34,259
SBA loans held for investment
Current-period gross writeoffs	$	-	$	-	$	61	$	535	$	323	$	11	$	-	$	930

Commercial loans
Risk Rating:
Pass	$	291,258	$	148,983	$	127,049	$	309,072	$	137,214	$	375,281	$	100,978	$	1,489,835
Special Mention		-		-		762		536		914		6,460		-		8,672
Substandard		-		9,893		137		-		6,714		2,781		-		19,525
Total commercial loans	$	291,258	$	158,876	$	127,948	$	309,608	$	144,842	$	384,522	$	100,978	$	1,518,032
Commercial loans
Current-period gross writeoffs	$	-	$	-	$	-	$	-	$	1	$	101	$	-	$	102

Commercial Construction loans
Risk Rating:
Pass	$	58,495	$	55,511	$	10,118	$	10,003	$	-	$	5,692	$	7,396	$	147,215
Total commercial construction loans	$	58,495	$	55,511	$	10,118	$	10,003	$	-	$	5,692	$	7,396	$	147,215
Commercial Construction loans
Current-period gross writeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Residential mortgage loans
Risk Rating:
Performing	$	147,623	$	69,751	$	53,816	$	197,958	$	57,512	$	142,388	$	-	$	669,048
Nonperforming		-		865		-		3,294		944		3,070		-		8,173
Total residential mortgage loans	$	147,623	$	70,616	$	53,816	$	201,252	$	58,456	$	145,458	$	-	$	677,221
Residential mortgage loans
Current-period gross writeoffs	$	-	$	-	$	-	$	-	$	312	$	231	$	-	$	543

Consumer loans
Risk Rating:
Performing	$	9,647	$	4,093	$	1,624	$	2,404	$	390	$	7,928	$	57,865	$	83,951
Nonperforming		-		926		-		-		-		342		-		1,268
Total consumer loans	$	9,647	$	5,019	$	1,624	$	2,404	$	390	$	8,270	$	57,865	$	85,219
Consumer loans
Current-period gross writeoffs	$	-	$	-	$	-	$	11	$	71	$	30	$	-	$	112

Residential construction
Risk Rating:
Pass	$	46,077	$	22,263	$	1,773	$	-	$	595	$	2,398	$	-	$	73,106
Substandard		-		-		-		-		-		171		-		171
Total residential construction loans	$	46,077	$	22,263	$	1,773	$	-	$	595	$	2,569	$	-	$	73,277
Residential construction
Current-period gross writeoffs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Total loans held for investment	$	555,819	$	315,596	$	197,317	$	530,706	$	210,973	$	558,573	$	166,239	$	2,535,223

The following table shows the internal loan classification risk by loan portfolio classification by origination year and gross writeoffs as of December 31, 2024:


	Term Loans
	Amortized Cost Basis by Origination Year

(In thousands)			2024		2023		2022		2021		2020		2019 and Earlier		Revolving Loans Amortized Cost Basis		Total
SBA loans held for investment
Risk Rating:
Pass		$	2,167	$	1,580	$	5,205	$	6,411	$	5,570	$	10,085	$	-	$	31,018
Special Mention			-		769		1,740		356		508		729		-		4,102
Substandard			-		-		956		2,116		116		1		-		3,189
Total SBA loans held for investment		$	2,167	$	2,349	$	7,901	$	8,883	$	6,194	$	10,815	$	-	$	38,309
SBA loans held for investment
Current-period gross writeoffs		$	-	$	-	$	300	$	70	$	-	$	-	$	-	$	370

Commercial loans
Risk Rating:
Pass		$	189,371	$	167,190	$	331,349	$	161,508	$	123,225	$	330,131	$	94,369	$	1,397,143
Special Mention			-		-		6,269		1,737		-		3,108		17		11,131
Substandard			-		-		-		2		1,187		2,157		9		3,355
Total commercial loans		$	189,371	$	167,190	$	337,618	$	163,247	$	124,412	$	335,396	$	94,395	$	1,411,629
Commercial loans
Current-period gross writeoffs		$	-	$	-	$	38	$	138	$	200	$	107	$	150	$	633

Residential mortgage loans
Risk Rating:
Performing		$	93,825	$	73,862	$	224,295	$	65,192	$	44,366	$	122,916	$	-	$	624,456
Nonperforming			-		227		1,488		2,238		-		2,518		-		6,471
Total residential mortgage loans		$	93,825	$	74,089	$	225,783	$	67,430	$	44,366	$	125,434	$	-	$	630,927
Residential mortgage loans
Current-period gross writeoffs		$	-	$	-	$	-	$	150	$	-	$	-	$	-	$	150

Consumer loans
Risk Rating:
Performing		$	5,898	$	2,602	$	3,275	$	1,515	$	667	$	10,409	$	52,345	$	76,711
Total consumer loans		$	5,898	$	2,602	$	3,275	$	1,515	$	667	$	10,409	$	52,345	$	76,711
Consumer loans
Current-period gross writeoffs		$	-	$	-	$	63	$	100	$	-	$	198	$	-	$	361

Residential construction loans
Risk Rating:
Performing		$	36,522	$	16,889	$	26,683	$	7,766	$	1,154	$	1,357	$	-	$	90,371
Nonperforming			-		-		-		-		547		-		-		547
Total residential construction loans		$	36,522	$	16,889	$	26,683	$	7,766	$	1,701	$	1,357	$	-	$	90,918
Residential construction
Current-period gross writeoffs		$	-	$	-	$	-	$	-	$	-	$	277	$	-	$	277

Total loans held for investment		$	327,783	$	263,119	$	601,260	$	248,841	$	177,340	$	483,411	$	146,740	$	2,248,494

Nonaccrual and Past Due Loans

Nonaccrual loans consist of loans that are not accruing interest as a result of principal or interest being delinquent for a period of 90 days or more or when the ability to collect principal and interest according to the contractual terms is in doubt. When a loan is classified as nonaccrual, interest accruals are discontinued and all past due interest previously recognized as income is reversed and charged against current period earnings. Generally, until the loan becomes current, any payments received from the borrower are applied to outstanding principal until such time as Management determines that the financial condition of the borrower and other factors merit recognition of a portion of such payments as interest income. Loans may be returned to an accrual status when the ability to collect is reasonably assured or when the loan is brought current as to principal and interest. The risk of loss is difficult to quantify and is subject to fluctuations in collateral values, general economic conditions and other factors. The Company values its collateral through the use of appraisals, broker price opinions and knowledge of its local market.

The Bank’s nonaccrual policy requires stopping interest accrual and amortization of fees and costs on any loan that shows serious doubt about collectability, such as loans in default for 90 days or more, loans not expected to be repaid in full, or loans maintained on a cash basis due to borrower deterioration. A loan may return to accrual status only when repayment is reasonably assured, or it becomes well secured and in process of collection, supported by documented borrower performance and a current credit evaluation.

The following tables set forth an aging analysis of past due and nonaccrual loans as of December 31, 2025 and December 31, 2024:

December 31, 2025

 

90+ days

 

30‑59 days

60‑89 days

and still

Total past

(In thousands)

past due

accruing

Nonaccrual

due

Current

Total loans

SBA loans held for investment

$

730

$

68

$

—

$

1,751

$

2,549

$

31,710

$

34,259

Commercial loans

SBA 504 loans

—

43,802

Commercial & industrial

401

—

1,240

1,641

181,522

183,163

Commercial real estate

6,463

150

—

17,233

23,846

1,168,535

1,192,381

Commercial other

—

98,686

Commercial construction loans

—

147,215

Residential mortgage loans

8,538

7,568

—

8,173

24,279

652,942

677,221

Consumer loans

Home equity

2,507

240

—

1,268

4,015

78,473

82,488

Consumer other

4

—

4

2,727

2,731

Residential construction loans

—

171

73,106

73,277

Total loans held for investment

18,643

8,026

—

29,836

56,505

2,478,718

2,535,223

Loans held for sale

—

9,490

Total loans

$

18,643

$

8,026

$

—

$

29,836

$

56,505

$

2,488,208

$

2,544,713


		December 31, 2024
								90+ days
		30‑59 days			60‑89 days			and still						Total past
(In thousands)		past due			past due			accruing			Nonaccrual			due			Current			Total loans
SBA loans held for investment		$	1,006		$	451		$	—		$	3,850		$	5,307		$	33,002		$	38,309
Commercial loans
SBA 504 loans			—			—			—			—			—			48,479			48,479
Commercial & industrial			941			—			—			1,228			2,169			145,017			147,186
Commercial real estate			22,378			2,339			—			1,746			26,463			1,059,308			1,085,771
Commercial construction loans			—			—			—			—			—			130,193			130,193
Residential mortgage loans			15,654			4,094			760			5,711			26,219			604,708			630,927
Consumer loans
Home equity			479			2,162			—			—			2,641			70,582			73,223
Consumer other			36			5			—			—			41			3,447			3,488
Residential construction loans			—			—			—			547			547			90,371			90,918
Total loans held for investment			40,494			9,051			760			13,082			63,387			2,185,107			2,248,494
Loans held for sale			—			—			—			—			—			12,163			12,163
Total loans		$	40,494		$	9,051		$	760		$	13,082		$	63,387		$	2,197,270		$	2,260,657

As of December 31, 2025 and 2024, the Company had accrued interest receivable of $12.0 million and $11.3 million relating to loans receivable, respectively. During the years ended December 31, 2025 and 2024 the company reversed $1.6 million and $0.6 million in interest income from nonaccrual loans, respectively.

Individually Evaluated Loans

The Company has defined individually evaluated loans to be all nonperforming loans. Management individually evaluates a loan when, based on current information and events, it is determined that the Company will not be able to collect all amounts due according to the loan contract.

The following tables provide detail on the Company’s loans individually evaluated in the Company’s CECL evaluation with the associated allowance amount, if applicable, as of December 31, 2025 and December 31, 2024:


		December 31, 2025
		Unpaid						Allowance for
		principal			Recorded			Credit Losses
(In thousands)		balance			investment			Allocated
With no related allowance:
SBA loans held for investment		$	1,355		$	1,163		$	—
Commercial loans
Commercial & industrial			1,468			1,156			—
Commercial real estate			17,235			17,233			—
Total commercial loans			18,703			18,389			—
Residential mortgage loans			5,704			5,494			—
Consumer loans
Home equity			1,292			1,268			—
Total consumer loans			1,292			1,268			—
Total individually evaluated loans with no related allowance			27,054			26,314			—

With an allowance:
SBA loans held for investment			1,504			588			3
Commercial loans
Commercial & industrial			91			84			84
Total commercial loans			91			84			84
Residential mortgage loans			2,725			2,679			15
Residential construction loans			171			171			44
Total individually evaluated loans with a related allowance			4,491			3,522			146

Total individually evaluated loans:
SBA loans held for investment			2,859			1,751			3
Commercial loans
Commercial & industrial			1,559			1,240			84
Commercial real estate			17,235			17,233			—
Total commercial loans			18,794			18,473			84
Residential mortgage loans			8,429			8,173			15
Consumer loans
Home equity			1,292			1,268			—
Total consumer loans			1,292			1,268			—
Residential construction loans			171			171			44
Total individually evaluated loans		$	31,545		$	29,836		$	146


		December 31, 2024
		Unpaid						Allowance for
		principal			Recorded			Credit Losses
(In thousands)		balance			investment			Allocated
With no related allowance:
SBA loans held for investment		$	432		$	334		$	—
Commercial loans
Commercial & industrial			638			33			—
Commercial real estate			2,055			1,746			—
Total commercial loans			2,693			1,779			—
Residential mortgage loans			4,238			4,238			—
Total individually evaluated loans with no related allowance			7,363			6,351			—

With an allowance:
SBA loans held for investment			4,011			3,516			755
Commercial loans
Commercial & industrial			1,672			1,195			62
Total commercial loans			1,672			1,195			62
Residential mortgage loans			2,413			2,233			52
Residential construction loans			547			547			102
Total individually evaluated loans with a related allowance			8,643			7,491			971

Total individually evaluated loans:
SBA loans held for investment			4,443			3,850			755
Commercial loans
Commercial & industrial			2,310			1,228			62
Commercial real estate			2,055			1,746			—
Total commercial loans			4,365			2,974			62
Residential mortgage loans			6,651			6,471			52
Residential construction loans			547			547			102
Total individually evaluated loans		$	16,006		$	13,842		$	971

The Company did not recognize interest income on nonaccrual loans for the years ended December 31, 2025 and December 31, 2024.

Other Loan Information

Servicing Assets:

Loans sold to others and serviced by the Company are not included in the accompanying Consolidated Balance Sheets. The total amount of such loans serviced, but owned by third party investors, amounted to approximately $63.5 million and $91.2 million at December 31, 2025 and 2024, respectively. At December 31, 2025 and 2024, the carrying value of servicing assets was $0.5 million and $0.7 million, respectively, and is included in Prepaid expenses and other assets. A summary of the changes in the related servicing assets for the past two years follows:


		For the years ended December 31,
(In thousands)		2025		2024
Balance, beginning of year		$	663	$	881
Servicing assets capitalized			228		186
Amortization of expense, net			(361)		(404)
Balance, end of year		$	530	$	663

In addition, the Company had $0.4 million and $0.5 million in discounts related to the retained portion of unsold SBA loans at December 31, 2025 and 2024, respectively. These discounts are amortized to income over the same period of the balance of the loans sold.

As of December 31, 2025 and 2024, the Company held $1.5 million and $3.4 million, respectively, in Residential mortgage loans in the process of being sold.

Officer and Director Loans:

In the ordinary course of business, the Company may extend credit to officers, directors or their associates. These loans are subject to the Company’s normal lending policy, and are done on an arms-length basis. An analysis of such loans, all of which are current as to principal and interest payments, is as follows:


(In thousands)		December 31, 2025			December 31, 2024
Balance, beginning of year		$	8,316		$	7,894
New loans and advances			750			1,500
Loan repayments			(1,293)			(1,078)
Balance, end of year		$	7,773		$	8,316

Loan Portfolio Collateral:

The majority of the Company’s loans are secured by real estate. Declines in the market values of real estate in the Company’s trade area impact the value of the collateral securing its loans. This could lead to greater losses in the event of defaults on loans secured by real estate. At December 31, 2025 and December 31, 2024, approximately 96% of the Company’s loan portfolio was secured by real estate.

Modifications

The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon asset origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Company uses a weighted-average remaining maturity model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.

Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification. Occasionally, the Company modifies loans by providing principal forgiveness on certain of its real estate loans. When principal forgiveness is provided, the amortized cost basis of the asset is written off against the allowance for credit losses. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses.

In some cases, the Company will modify a certain loan by providing multiple types of concessions. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted.

The following table shows the amortized cost basis at the end of the reporting period of the loans modified to borrowers experiencing financial difficulty, disaggregated by class of gross loans and type of concession granted during the twelve months ended December 31, 2025 and December 31, 2024:


	Payment Delay					Term Extension			Interest Rate Reduction
		Principal	Percentage			Principal	Percentage			Principal	Percentage
(In thousands)		Balance	of Loan Class			Balance	of Loan Class			Balance	of Loan Class
Commercial loans:
Commercial real estate		628	0.1			5,158	0.4			1,846	0.2
Commercial & industrial		—	—			210	0.1			—	—
Residential mortgage loans		2,419	0.4			—	—			—	—
Balance, December 31, 2025	$	3,047	0.1	%	$	5,368	0.2	%	$	1,846	0.1	%


		Payment Delay				Term Extension
		Principal	Percentage			Principal	Percentage
(In thousands)		Balance	of Loan Class			Balance	of Loan Class
SBA loans held for investment	$	93	0.3	%	$	—	—	%
Commercial loans:
Commercial real estate		632	0.1			—	—
Commercial & industrial		—	—			1,882	2.4
Residential mortgage loans		—	—			1,033	0.2
Consumer loans:
Home equity		—	—			2,162	3.0
Balance, December 31, 2024	$	725	0.1	%	$	5,077	0.2	%

Upon the Company's determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or portion of the loan) is charged-off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount. Two loans, a $0.6 million residential mortgage loan and a $83.8 thousand commercial and industrial loan, that were modified during the year ended December 31, 2025 were not in compliance with the modified terms as of December 31, 2025, compared to one home equity loan for $2.2 million as of December 31, 2024.

4. Allowance for Credit Losses and Reserve for Unfunded Loan Commitments

Allowance for Credit Losses

The Company has an established methodology to determine the adequacy of the allowance for credit losses that assesses the risks and losses inherent in the loan portfolio. At a minimum, the adequacy of the allowance for credit losses is reviewed by Management on a quarterly basis. The allowance is increased by provisions charged to expense and is reduced by net charge-offs.

The standardized methodology used to assess the adequacy of the allowance includes the allocation of specific and general reserves. The same standard methodology is used, regardless of loan type. Specific reserves are evaluated for individually evaluated loans. The general reserve is set based upon a representative average historical net charge-off rate adjusted for the following environmental factors: delinquency and impairment trends, charge-off and recovery trends, volume and loan term trends, changes in risk and underwriting policy trends, staffing and experience changes, national and local economic trends, industry conditions and credit concentration changes. These environmental factors include reasonable and supportable forecasts. Within the historical net charge-off rate, the Company weights the data dating back 10 years on a straight line basis and projects the losses on a weighted average remaining maturity basis for each segment. All of the environmental factors are ranked and assigned a basis points value based on the following scale: low, low moderate,

moderate, high moderate and high risk. Each environmental factor is evaluated separately for each class of loans and risk weighted based on its individual characteristics.

According to the Company’s policy, a loss (“charge-off”) is to be recognized and charged to the allowance for credit losses as soon as a loan is recognized as uncollectable. All credits which are 90 days past due must be analyzed for the Company’s ability to collect on the credit. Once a loss is known to exist, the charge-off approval process is immediately expedited. This charge-off policy is followed for all loan types.

The allocated allowance is the total of identified specific and general reserves by loan category. The allocation is not necessarily indicative of the categories in which future losses may occur. The total allowance is available to absorb losses from any segment of the portfolio.

The following tables detail the activity in the allowance for credit losses by portfolio segment held for investment for the past two years:

For the year ended December 31, 2025

Residential

(In thousands)

SBA

Commercial

Residential

Consumer

Construction

Total

Balance, beginning of period

$

1,535

$

17,361

$

6,254

$

775

$

863

$

26,788

Charge-offs

(930)

(102)

(543)

(112)

—

(1,687)

Recoveries

61

395

—

86

—

542

Net charge-offs

(869)

293

(543)

(26)

—

(1,145)

Provision for (credit to) credit losses charged to expense

119

4,494

1,984

246

(144)

6,699

Balance, end of period

$

785

$

22,148

$

7,695

$

995

$

719

$

32,342


	For the year ended December 31, 2024
										Residential
(In thousands)	SBA		Commercial		Residential		Consumer		Construction		Total
Balance, beginning of period	$	1,221	$	15,876	$	6,529	$	1,022	$	1,206	$	25,854
Charge-offs		(370)		(633)		(150)		(361)		(277)		(1,791)
Recoveries		47		204		—		67		—		318
Net charge-offs		(323)		(429)		(150)		(294)		(277)		(1,473)
Provision for (credit to) credit losses charged to expense		637		1,914		(125)		47		(66)		2,407
Balance, end of period	$	1,535	$	17,361	$	6,254	$	775	$	863	$	26,788

The change in the allowance for credit losses for the year-ended December 31, 2025 was mainly due to loan growth and an increase in nonperforming assets, partially offset by charge-offs.

Reserve for Unfunded Loan Commitments

The Company is required to include unfunded commitments that are expected to be funded in the future within the allowance calculation, other than those that are unconditionally cancelable. To arrive at that reserve, the reserve percentage for each applicable segment is applied to the unused portion of the expected commitment balance and is multiplied by the expected funding rate. To determine the expected funding rate, the Company uses a historical utilization rate for each segment. As noted above, the allowance for credit losses on unfunded loan commitments is included in Other liabilities on the Consolidated Balance Sheet. At December 31, 2025, a $0.7 million commitment reserve was reported, compared to $0.6 million at 2024.

Valuation Allowance: Debt Security Available for Sale

The Company maintains a valuation allowance on AFS debt securities. Adjustments to the reserve are made through provision for credit losses and applied to the reserve which is classified in “Debt securities available for sale” on the Consolidated Balance Sheet. At December 31, 2025, there was no reserve, compared to $2.8 million at December 31, 2024. The decrease was due to a security that went into nonaccrual status in 2024. The debt security was converted into common stock and Unity realized a $3.5 million gain resulting in a release in reserve.

The Company maintains a valuation allowance on HTM debt securities at a level that Management believes is adequate to absorb estimated probable losses. At December 31, 2025 and December 31, 2024, no reserve was reported on the Consolidated Balance Sheet as these securities are either explicitly or implicitly guaranteed by the U.S. Government, are highly rated by major agencies and have a long history of no credit losses.

Allowance for Credit Losses and Reserve for Unfunded Loan Commitments

12 Months Ended

Dec. 31, 2025

Receivables [Abstract]

Loans and Allowance for Credit Losses and Reserve for Unfunded Loan Commitments

3. Loans

The following table sets forth the classification of loans by class, including unearned fees, deferred costs and excluding the allowance for credit losses for the past two years:


(In thousands)		December 31, 2025			December 31, 2024
SBA loans held for investment		$	34,259		$	38,309
Commercial loans
SBA 504 loans			43,802			48,479
Commercial & industrial			183,163			147,186
Commercial real estate (1)			1,291,067			1,085,771
Commercial construction loans			147,215			130,193
Residential mortgage loans			677,221			630,927
Consumer loans
Home equity			82,488			73,223
Consumer other			2,731			3,488
Residential construction loans			73,277			90,918
Total loans held for investment		$	2,535,223		$	2,248,494
Loans held for sale			9,490			12,163
Total loans		$	2,544,713		$	2,260,657