Item 1. Financial Statements
Item 1. Financial Statements
Parke Bancorp, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(unaudited)
(Dollars in thousands except per share data)
June 30,
December 31,
2026
2025
Assets
Cash and due from banks
$ 8,980 $ 7,738
Interest bearing deposits with banks
195,743 149,125
Cash and cash equivalents
204,723 156,863
Investment securities available for sale, at fair value
4,049 4,746
Investment securities held to maturity, net of allowance for credit losses of $ 0 at June 30, 2026 and December 31, 2025 (fair value of $ 8,897 at June 30, 2026 and $ 7,487 at December 31, 2025)
10,245 8,777
Total investment securities
14,294 13,523
Loans, net of unearned income
2,031,361 2,035,227
Less: Allowance for credit losses
( 34,624 ) ( 34,649 )
Net loans
1,996,737 2,000,578
Accrued interest receivable
11,223 11,257
Premises and equipment, net
5,534 5,506
Restricted stock
9,783 8,085
Bank owned life insurance (BOLI)
35,790 35,320
Deferred tax asset
10,720 10,719
Other real estate owned (OREO)
6,762 2,862
Other
7,483 4,723
Total assets
$ 2,303,049 $ 2,249,436
Liabilities and Shareholders' Equity
Liabilities
Deposits
Noninterest-bearing deposits
$ 193,186 $ 196,506
Interest-bearing deposits
1,566,417 1,562,163
Total deposits
1,759,603 1,758,669
FHLBNY borrowings
164,000 130,000
Subordinated debentures
13,403 13,403
Accrued interest payable
4,266 4,575
Other
15,708 18,271
Total liabilities
1,956,980 1,924,918
Shareholders' Equity
Preferred stock, 1,000,000 shares authorized, $ 1,000 liquidation value Series B non-cumulative convertible; 325 shares outstanding at June 30, 2026 and December 31, 2025
325 325
Common stock, $ 0.10 par value; authorized 15,000,000 shares; Issued: 12,545,792 shares and 12,425,768 shares at June 30, 2026 and December 31, 2025, respectively
1,255 1,243
Additional paid-in capital
141,206 139,268
Retained earnings
217,275 197,671
Accumulated other comprehensive loss
( 203 ) ( 200 )
Treasury stock, 784,522 shares at June 30, 2026 and December 31, 2025, at cost
( 13,789 ) ( 13,789 )
Total shareholders’ equity
346,069 324,518
Total liabilities and shareholders' equity
$ 2,303,049 $ 2,249,436
See accompanying notes to the unaudited consolidated financial statements
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Parke Bancorp Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(Dollars in thousands except per share data)
For the Three Months Ended
For the Six Months Ended
June 30,
June 30,
2026
2025
2026
2025
Interest income:
Interest and fees on loans
$
36,956
$
32,756
$
72,847
$
64,232
Interest and dividends on investments
237
232
459
520
Interest on deposits with banks
1,257
2,036
2,084
4,118
Total interest income
38,450
35,024
75,390
68,870
Interest expense:
Interest on deposits
13,736
15,144
27,164
30,312
Interest on borrowings
1,705
2,009
3,085
4,080
Total interest expense
15,441
17,153
30,249
34,392
Net interest income
23,009
17,871
45,141
34,478
Provision for credit losses
676
984
878
1,574
Net interest income after provision for credit losses
22,333
16,887
44,263
32,904
Non-interest income
Service fees on deposit accounts
278
312
566
620
Other loan fees
168
145
329
322
Bank owned life insurance income
250
169
470
334
Other
181
190
366
361
Total non-interest income
877
816
1,731
1,637
Non-interest expense
Compensation and benefits
3,560
3,264
7,264
6,555
Professional services
680
652
1,278
1,366
Occupancy and equipment
730
676
1,491
1,364
Data processing
272
425
588
845
FDIC insurance and other assessments
369
384
742
734
OREO expense
51
100
131
227
Other operating expense
1,259
1,179
2,642
2,127
Total non-interest expense
6,921
6,680
14,136
13,218
Income before income tax expense
16,289
11,023
31,858
21,323
Income tax expense
4,048
2,740
7,773
5,262
Net income attributable to Company
12,241
8,283
24,085
16,061
Less: Preferred stock dividend
( 5
)
( 5
)
( 10
)
( 10
)
Net income available to common shareholders
$
12,236
$
8,278
$
24,075
$
16,051
Earnings per common share
Basic
$
1.04
$
0.70
$
2.05
$
1.36
Diluted
$
1.03
$
0.69
$
2.02
$
1.34
Weighted average common shares outstanding
Basic
11,725,654
11,843,328
11,716,114
11,839,856
Diluted
11,922,397
12,008,224
11,913,086
12,007,594
See accompanying notes to the unaudited consolidated financial statements
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Parke Bancorp Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited)
(Dollars in thousands)
For the Three Months Ended
For the Six Months Ended
June 30,
June 30,
2026
2025
2026
2025
Net income attributable to the Company
$ 12,241 $ 8,283 $ 24,085 $ 16,061
Unrealized gain (loss) on investment securities
— 46 ( 4 ) 116
Tax impact on unrealized gain (loss)
— ( 12 ) 1 ( 30 )
Total unrealized gain (loss) on investment securities
— 34 ( 3 ) 86
Comprehensive income attributable to the Company
$ 12,241 $ 8,317 $ 24,082 $ 16,147
See accompanying notes to the unaudited consolidated financial statements
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Parke Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EQUITY
(unaudited)
(Dollars in thousands except share data)
Three and Six months ended June 30, 2026
Accumulated
Shares of
Shares of
Additional
Other
Total
Preferred Stock
Preferred
Common Stock
Common
Paid-In
Retained
Comprehensive
Treasury
Shareholders'
Outstanding
Stock
issued
Stock
Capital
Earnings
Income (Loss)
Stock
Equity
Three Months Ended
Balance, March 31, 2026
325 $ 325 12,515,472 $ 1,252 $ 140,587 $ 207,391 $ ( 203 ) $ ( 13,789 ) $ 335,563
Net income attributable to the company
— — — — — 12,241 — — 12,241
Common stock options exercised
— — 30,320 3 524 — — — 527
Other comprehensive loss
— — — — — — — — —
Stock compensation expense
— — — — 95 — — — 95
Dividend on preferred stock ($ 15.00 per share)
— — — — — ( 5 ) — — ( 5 )
Dividend on common stock ($ 0.20 per share)
— — — — — ( 2,352 ) — — ( 2,352 )
Balance, June 30, 2026
325 $ 325 12,545,792 $ 1,255 $ 141,206 $ 217,275 $ ( 203 ) $ ( 13,789 ) $ 346,069
Six Months Ended
Balance, December 31, 2025
325 $ 325 12,425,768 $ 1,243 $ 139,268 $ 197,671 $ ( 200 ) $ ( 13,789 ) $ 324,518
Net income attributable to the company
— — — — — 24,085 — — 24,085
Common stock options exercised
— — 120,024 12 1,765 — — — 1,777
Other comprehensive loss
— — — — — — ( 3 ) — ( 3 )
Stock compensation expense
— — — — 173 — — — 173
Dividend on preferred stock ($ 30.00 per share)
— — — — — ( 10 ) — — ( 10 )
Dividend on common stock ($ 0.38 per share)
— — — — — ( 4,471 ) — — ( 4,471 )
Balance, June 30, 2026
325 $ 325 12,545,792 $ 1,255 $ 141,206 $ 217,275 $ ( 203 ) $ ( 13,789 ) $ 346,069
See accompanying notes to the unaudited consolidated financial statements
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Parke Bancorp, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF EQUITY
(unaudited)
(Dollars in thousands except share data)
Three and Six months ended June 30, 2025
Accumulated
Shares of
Shares of
Additional
Other
Total
Preferred Stock
Preferred
Common Stock
Common
Paid-In
Retained
Comprehensive
Treasury
Shareholders'
Outstanding
Stock
issued
Stock
Capital
Earnings
Income (Loss)
Stock
Equity
Three Months Ended
Balance, March 31, 2025
325 $ 325 12,327,850 $ 1,233 $ 137,951 $ 173,995 $ ( 285 ) $ ( 7,277 ) $ 305,942
Net income attributable to the company
— — — — — 8,283 — — 8,283
Other comprehensive income
— — — — — — 34 — 34
Stock compensation expense
— — — — 63 — — — 63
Excise tax payment on stock repurchase
— — — — — — — ( 29 ) ( 29 )
Dividend on preferred stock ($ 15.00 per share)
— — — — — ( 5 ) — — ( 5 )
Dividend on common stock ($ 0.18 per share)
— — — — — ( 2,132 ) — — ( 2,132 )
Balance, June 30, 2025
325 $ 325 12,327,850 $ 1,233 $ 138,014 $ 180,141 $ ( 251 ) $ ( 7,306 ) $ 312,156
Six Months Ended
Balance, December 31, 2024
325 $ 325 12,313,489 $ 1,231 $ 137,784 $ 168,347 $ ( 337 ) $ ( 7,277 ) $ 300,073
Net income attributable to the company
— — — — — 16,061 — — 16,061
Common stock options exercised
— — 14,361 2 97 — — — 99
Excise tax payment on stock repurchase
— — — — — — — ( 29 ) ( 29 )
Other comprehensive income
— — — — — — 86 — 86
Stock compensation expense
— — — — 133 — — — 133
Dividend on preferred stock ($ 30.00 per share)
— — — — — ( 10 ) — — ( 10 )
Dividend on common stock ($ 0.36 per share)
— — — — — ( 4,257 ) — — ( 4,257 )
Balance, June 30, 2025
325 $ 325 12,327,850 $ 1,233 $ 138,014 $ 180,141 $ ( 251 ) $ ( 7,306 ) $ 312,156
See accompanying notes to the unaudited consolidated financial statements
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Parke Bancorp Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(Dollars in thousands)
For the Six Months Ended
June 30,
2026
2025
Cash Flows from Operating Activities:
Net income
$
24,085
$
16,061
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization
229
272
Provision for credit losses
878
1,574
Increase in value of bank owned life insurance
( 470
)
( 334
)
Net accretion of purchase premiums and discounts on securities
( 25
)
( 23
)
Stock based compensation
173
133
Net changes in:
Increase in accrued interest receivable and other assets
( 2,725
)
( 2,051
)
Decrease in accrued interest payable and other accrued liabilities
( 3,069
)
( 1,874
)
Net cash provided by operating activities
19,076
13,758
Cash Flows from Investing Activities:
Repayments and maturities of investment securities available for sale
684
741
Repayments and maturities of investment securities held to maturity
68
157
Purchase of investment securities
( 1,503
)
—
Net increase in loans
( 1,004
)
( 66,630
)
Purchases of bank premises and equipment
( 257
)
( 442
)
Redemptions of restricted stock
2,250
4,963
Purchases of restricted stock
( 3,948
)
( 3,035
)
Net cash used in investing activities
( 3,710
)
( 64,246
)
Cash Flows from Financing Activities:
Cash dividends
( 4,217
)
( 4,267
)
Proceeds from exercise of stock options
1,777
99
Excise tax payment on purchase of treasury stock
—
( 29
)
Net increase (decrease) in FHLBNY term borrowings
34,000
( 45,000
)
Net (decrease) increase in noninterest-bearing deposits
( 3,320
)
4,701
Net increase in interest-bearing deposits
4,254
57,711
Net cash used in financing activities
32,494
13,215
Net increase (decrease) in cash and cash equivalents
47,860
( 37,273
)
Cash and Cash Equivalents, January 1,
156,863
221,527
Cash and Cash Equivalents, June 30,
$
204,723
$
184,254
Supplemental Disclosure of Cash Flow Information:
Interest paid
$
30,558
$
35,575
Income taxes paid
$
11,865
$
6,082
Non-cash Investing and Financing Items
Loans transferred to OREO
$
3,900
$
—
Accrued dividends payable
$
2,357
$
2,137
See accompanying notes to the unaudited consolidated financial statements
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Notes to Consolidated Financial Statements (Unaudited)
NOTE 1. ORGANIZATION
Parke Bancorp, Inc. (the “Company, we, us, our”) is a bank holding company headquartered in Sewell, New Jersey. Through subsidiaries, the Company provides individuals, corporations and other businesses and institutions with commercial and retail banking services, principally loans and deposits. The Company was incorporated in January 2005 under the laws of the State of New Jersey for the sole purpose of becoming the holding company of Parke Bank (the "Bank").
The Bank is a commercial bank, which was incorporated on August 25, 1998, and commenced operations on January 28, 1999. The Bank is chartered by the New Jersey Department of Banking and Insurance and its deposits are insured by the Federal Deposit Insurance Corporation. The Bank maintains its principal office at 601 Delsea Drive, Sewell, New Jersey, and has six additional branch office locations; 501 Tilton Road, Northfield, New Jersey, 567 Egg Harbor Road, Washington Township, New Jersey, 67 East Jimmie Leeds Road, Galloway Township, New Jersey, 1150 Haddon Avenue, Collingswood, New Jersey, 1610 Spruce Street, Philadelphia, Pennsylvania, and 1032 Arch Street, Philadelphia, Pennsylvania. The Bank also has a loan office located at 1817 East Venango Street, Philadelphia, Pennsylvania.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Financial Statement Presentation: We prepared our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Parke Bank (including certain partnership interests). Parke Capital Trust I, Parke Capital Trust II and Parke Capital Trust III are wholly-owned subsidiaries but are not consolidated as they do not meet the requirements for consolidation under applicable accounting guidance. We have eliminated inter-company balances and transactions. We have also reclassified certain prior year amounts to conform to the current year presentation, which did not have a material impact on our consolidated financial condition or results of operations.
The accompanying interim financial statements should be read in conjunction with the annual financial statements and notes thereto included in the Company’s Annual Report on Form 10 -K for the year ended December 31, 2025 . The accompanying interim financial statements for the three and six months ended June 30, 2026 and 2025 are unaudited. The balance sheet as of December 31, 2025 , was derived from the audited financial statements. In the opinion of management, these financial statements include all normal and recurring adjustments necessary for a fair statement of the results for such interim periods. Results of operations for the three and six months ended June 30, 2026 are not necessarily indicative of the results for the full year or any other period.
Use of Estimates: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change in the near term include the allowance for credit losses, the valuation of deferred income taxes, and the carrying value of other real estate owned ("OREO").
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Segment Reporting: The Company operates one reportable segment of business, "community banking". Through its community banking segment, the Company provides a broad range of retail and community banking services. The accounting policies of the community banking segment are the same as those described in the summary of significant accounting policies.
The Company's chief operating decision maker ("CODM") is the President, Chief Executive Officer and Director, who decides how to allocate resources based on net income that also is reported on the income statement as consolidated net income.
The measure of segment assets is reported on the balance sheet as total consolidated assets.
The following table presents segment profit and significant expenses.
Community Banking Segment
(Dollars in thousands)
For the Three Months Ended June 30,
For the Six Months Ended June 30,
2026
2025
2026
2025
Total interest income
$ 38,450 $ 35,024 $ 75,390 $ 68,870
Total interest expense
15,441 17,153 30,249 34,392
Provision for credit losses
676 984 878 1,574
Net interest income after provision for credit losses
22,333 16,887 44,263 32,904
Total non-interest income
877 816 1,731 1,637
Total non-interest expense
6,921 6,680 14,136 13,218
Income before income tax expense
16,289 11,023 31,858 21,323
Income tax expense
4,048 2,740 7,773 5,262
Net income attributable to the Company
$ 12,241 $ 8,283 $ 24,085 $ 16,061
Reconciliation of profit or loss
Adjustments and reconciling items
— — — —
Consolidated net income
$ 12,241 $ 8,283 $ 24,085 $ 16,061
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NOTE 3. INVESTMENT SECURITIES
The following is a summary of the Company's investments in available for sale and held to maturity securities as of June 30, 2026 and December 31, 2025 . None of the securities shown below required an allowance for credit losses.
Gross
Gross
Amortized
unrealized
unrealized
As of June 30, 2026
cost
gains
losses
Fair value
(Dollars in thousands)
Available for sale:
Residential mortgage-backed securities
$ 3,822 $ 8 $ 284 $ 3,546
Corporate debt obligations
500 3 — 503
Total available for sale
$ 4,322 $ 11 $ 284 $ 4,049
Held to maturity:
Residential mortgage-backed securities
$ 4,687 $ — $ 962 $ 3,725
States and political subdivisions
5,558 — 386 5,172
Total held to maturity
$ 10,245 $ — $ 1,348 $ 8,897
Gross
Gross
Amortized
unrealized
unrealized
As of December 31, 2025
cost
gains
losses
Fair value
(Dollars in thousands)
Available for sale:
Residential mortgage-backed securities
$ 4,515 $ 10 $ 279 $ 4,246
Corporate debt obligations
500 — — 500
Total available for sale
$ 5,015 $ 10 $ 279 $ 4,746
Held to maturity:
Residential mortgage-backed securities
$ 4,753 $ — $ 945 $ 3,808
States and political subdivisions
4,024 — 345 3,679
Total held to maturity
$ 8,777 $ — $ 1,290 $ 7,487
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The amortized cost and fair value of debt securities classified as available for sale and held to maturity, by contractual maturity as of June 30, 2026 are as follows:
Amortized
Fair
Cost
Value
(Dollars in thousands)
Available for sale:
Due within one year
$ 14 $ 11
Due after one year through five years
1,238 1,150
Due after five years through ten years
1,267 1,210
Due after ten years
1,803 1,678
Total available for sale
$ 4,322 $ 4,049
Held to maturity:
Due within one year
$ 1,590 $ 1,570
Due after one year through five years
— —
Due after five years through ten years
2,470 2,111
Due after ten years
6,185 5,216
Total held to maturity
$ 10,245 $ 8,897
Expected maturities may differ from contractual maturities because the issuers of certain debt securities do have the right to call or prepay their obligations without any penalty.
The Company did not sell any securities during the three and six months ended June 30, 2026 and 2025 . The following tables show the gross unrealized losses and fair value of the Company's available for sale investments for which an allowance for credit losses has not been recorded, which are aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position at June 30, 2026 and December 31, 2025 :
As of June 30, 2026
Less Than 12 Months
12 Months or Greater
Total
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
Description of Securities
Value
Losses
Value
Losses
Value
Losses
(Dollars in thousand)
Available for sale:
Residential mortgage-backed securities
$ 35 $ — $ 3,244 $ 284 $ 3,279 $ 284
Total available for sale
$ 35 $ — $ 3,244 $ 284 $ 3,279 $ 284
As of December 31, 2025
Less Than 12 Months
12 Months or Greater
Total
Fair
Unrealized
Fair
Unrealized
Fair
Unrealized
Description of Securities
Value
Losses
Value
Losses
Value
Losses
(Dollars in thousands)
Available for sale:
Residential mortgage-backed securities
$ 46 $ — $ 3,816 $ 279 $ 3,862 $ 279
Total available for sale
$ 46 $ — $ 3,816 $ 279 $ 3,862 $ 279
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On at least a quarterly basis, we review all debt securities that are in an unrealized loss position for a credit loss. An investment security is deemed impaired if the fair value of the investment is less than its amortized cost. Amortized cost includes adjustments (if any) made to the cost basis of an investment for accretion, amortization, and previous other-than-temporary impairments. For individual debt securities classified as available for sale, we determine whether a decline in fair value below the amortized cost has resulted from a credit loss or other factors. If the decline in fair value is due to credit, we will record the portion of the impairment loss relating to credit through an allowance for credit losses. Impairment that has not been recorded through an allowance for credit losses is recorded through other comprehensive income, net of applicable taxes.
The Company’s unrealized loss for the debt securities classified as available for sale is comprised of 5 securities in the less than 12 months loss position and 12 securities in the 12 months or greater loss position at June 30, 2026 . These securities are mortgage-backed securities that had unrealized losses issued or guaranteed by the US government or US government sponsored entities. The unrealized losses associated with those mortgage-backed securities are generally driven by changes in interest rates and are not due to credit losses given the explicit or implicit guarantees provided by the U.S. government.
The Company classifies the held-to-maturity debt securities into the following major security types: residential mortgage backed, and state and political subdivisions. These securities are highly rated with a history of no credit losses, and are assigned ratings based on the most recent data from ratings agencies depending on the availability of data for the security. Credit ratings of held-to-maturity debt securities, which are a significant input in calculating the expected credit loss, are reviewed on a quarterly basis. Based on the credit ratings of our held-to-maturity securities and our historical experience including no losses, we have determined that an allowance for credit loss on the held-to-maturity portfolio is not required. Because the Company does not intend to sell the securities and it is not more likely than not that the Company will be required to sell these investments before recovery of their amortized cost basis, the Company does not consider the unrealized loss in these securities to be credit losses at June 30, 2026 .
NOTE 4. LOANS AND ALLOWANCE FOR CREDIT LOSSES ON LOANS
At June 30, 2026 and December 31, 2025 , the Company had $ 2.03 billion and $ 2.04 billion, respectively, in loans receivable outstanding. Outstanding balances include $ 0.20 million and $ 0.03 million at June 30, 2026 and December 31, 2025 , respectively, for net deferred loan costs, and unamortized discounts.
The portfolio segments of loans receivable at June 30, 2026 and December 31, 2025 , consist of the following:
June 30, 2026
December 31, 2025
(Dollars in thousands)
Commercial and Industrial
$ 36,628 $ 38,672
Construction
220,002 212,307
Real Estate Mortgage:
Commercial – Owner Occupied
186,738 182,529
Commercial – Non-owner Occupied
470,762 478,295
Residential – 1 to 4 Family
427,955 451,463
Residential – 1 to 4 Family Investment
466,929 494,228
Residential – Multifamily
218,690 173,611
Consumer
3,657 4,122
Total Loan receivable
2,031,361 2,035,227
Allowance for credit losses on loans
( 34,624 ) ( 34,649 )
Total loan receivable, net of allowance for credit losses on loans
$ 1,996,737 $ 2,000,578
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An age analysis of past due loans by class at June 30, 2026 and December 31, 2025 is as follows:
30 - 59
60 - 89
Greater
Days Past
Days Past
than 90
Total
Total
June 30, 2026
Due
Due
Days
Past Due
Current
Loans
(Dollars in Thousands)
Commercial and Industrial
$ — $ — $ 675 $ 675 $ 35,953 $ 36,628
Construction
— — 1,091 1,091 218,911 220,002
Real Estate Mortgage:
Commercial – Owner Occupied
— — 400 400 186,338 186,738
Commercial – Non-owner Occupied
— — 603 603 470,159 470,762
Residential – 1 to 4 Family
— 1,345 1,723 3,068 424,887 427,955
Residential – 1 to 4 Family Investment
— 689 772 1,461 465,468 466,929
Residential – Multifamily
— — — — 218,690 218,690
Consumer
44 31 151 226 3,431 3,657
Total Loans
$ 44 $ 2,065 $ 5,415 $ 7,524 $ 2,023,837 $ 2,031,361
30 - 59
60 - 89
Greater
Days Past
Days Past
than 90
Total
Total
December 31, 2025
Due
Due
Days
Past Due
Current
Loans
(Dollars in thousands)
Commercial and Industrial
$ — $ — $ 688 $ 688 $ 37,984 $ 38,672
Construction
— — 1,091 1,091 211,216 212,307
Real Estate Mortgage:
Commercial – Owner Occupied
— — 400 400 182,129 182,529
Commercial – Non-owner Occupied
— 1,122 3,668 4,790 473,505 478,295
Residential – 1 to 4 Family
— 1,434 2,965 4,399 447,064 451,463
Residential – 1 to 4 Family Investment
— 896 1,840 2,736 491,492 494,228
Residential – Multifamily
— — — — 173,611 173,611
Consumer
— 32 141 173 3,949 4,122
Total Loans
$ — $ 3,484 $ 10,793 $ 14,277 $ 2,020,950 $ 2,035,227
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The following table provides the amortized cost of loans on nonaccrual status:
June 30, 2026
Loans Past Due
Nonaccrual
Nonaccrual
Total
Over 90 Days
Total
(amounts in thousands)
with no ACL
with ACL
Nonaccrual
Still Accruing
Nonperforming
Commercial and Industrial
$ — $ 675 $ 675 $ — $ 675
Construction
1,091 — 1,091 — 1,091
Commercial - Owner Occupied
400 — 400 — 400
Commercial - Non-owner Occupied
243 360 603 — 603
Residential - 1 to 4 Family
1,624 99 1,723 — 1,723
Residential - 1 to 4 Family Investment
772 — 772 — 772
Residential - Multifamily
— — — — —
Consumer
151 — 151 — 151
Total
$ 4,281 $ 1,134 $ 5,415 $ — $ 5,415
December 31, 2025
Loans Past Due
Nonaccrual
Nonaccrual
Total
Over 90 Days
Total
(amounts in thousands)
with no ACL
with ACL
Nonaccrual
Still Accruing
Nonperforming
Commercial and Industrial
$ — $ 688 $ 688 $ — $ 688
Construction
1,091 — 1,091 — 1,091
Commercial - Owner Occupied
400 — 400 — 400
Commercial - Non-owner Occupied
1,109 2,559 3,668 — 3,668
Residential - 1 to 4 Family
2,965 — 2,965 — 2,965
Residential - 1 to 4 Family Investment
1,840 — 1,840 — 1,840
Residential - Multifamily
— — — — —
Consumer
141 — 141 — 141
Total
$ 7,546 $ 3,247 $ 10,793 $ — $ 10,793
Allowance for Credit Losses on Off-Balance Sheet Credit Exposures
The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures is recorded in other liabilities and is adjusted through the provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. At June 30, 2026 and December 31, 2025 , the allowance for credit losses on off-balance sheet credit exposures was $ 762.3 thousand and $ 829.1 thousand, respectively, on exposures totaling $ 262.0 million and $ 189.8 million, respectively. During the three and six months ended June 30, 2026 and 2025 , we recorded a recovery for credit losses of zero and $ 66.8 thousand, and a provision for credit losses on off balance sheet exposures of $ 306.0 thousand and $ 439.0 thousand, respectively.
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Allowance for Credit Losses (ACL)
The following tables present the information regarding the allowance for credit losses for the three and six months ended June 30, 2026 and 2025 :
Real Estate Mortgage
Commercial
Commercial
Residential
Commercial
Owner
Non-owner
Residential
1 to 4 Family
Residential
and Industrial
Construction
Occupied
Occupied
1 to 4 Family
Investment
Multifamily
Consumer
Total
(Dollars in thousands)
Three months ended June 30, 2026
March 31, 2026
$ 1,032 $ 3,895 $ 2,214 $ 9,225 $ 7,931 $ 8,127 $ 2,441 $ 56 $ 34,921
Charge-offs
— — — ( 979 ) — — — — ( 979 )
Recoveries
6 — — — — — — — 6
Provisions (benefits)
( 48 ) 290 417 ( 18 ) ( 255 ) ( 200 ) 490 — 676
Ending Balance at June 30, 2026
$ 990 $ 4,185 $ 2,631 $ 8,228 $ 7,676 $ 7,927 $ 2,931 $ 56 $ 34,624
Six months ended June 30, 2026
December 31, 2025
$ 1,008 $ 4,032 $ 2,239 $ 9,661 $ 8,205 $ 7,601 $ 1,845 $ 58 $ 34,649
Charge-offs
— — — ( 979 ) — — — — ( 979 )
Recoveries
8 — — — — — — — 8
Provisions (benefits)
( 26 ) 153 392 ( 454 ) ( 529 ) 326 1,086 ( 2 ) 946
Ending Balance at June 30, 2026
$ 990 $ 4,185 $ 2,631 $ 8,228 $ 7,676 $ 7,927 $ 2,931 $ 56 $ 34,624
For the three months ended June 30, 2026, the increase to the Commercial Owner Occupied segment was due to an increase in the qualitative factors due to an increase in the concentration level of the segment. The increase in the Residential Multi-family segment was due to an increase in the portfolio balance that increased the loan exposure and also caused changes to the qualitative factors within the portfolio segment. The provision benefit to the Residential 1 to 4 Family, and the Residential 1 to 4 Family Investment portfolios, was due to a decrease in the portfolios' balance. The increase in charge-offs for the Commercial Non-owner Occupied segment was primarily attributed to one, distressed office building, which was repossessed and transferred to Other Real Estate Owned.
For the six months ended June 30, 2026 , the increase to the Commercial Owner-Occupied segment was due to an increase in the qualitative factors due to an increase in the concentration level of the segment, as well as an increase in the qualitative factors related to increased risk in the economy due to an increase in interest rates, and a decrease in GDP experienced during 2026. The increase in the Residential 1 to 4 Family Investment segment was due to the aforementioned increase in the economic qualitative factor, partially offset by a decrease in the portfolio balance. The increase in the Residential Multifamily segment is due to the increase in the portfolio balance, and the aforementioned increase in the economic qualitative factor. The provision benefit during the six months ended June 30, 2026 to the Commercial Non-owner Occupied segment is due to a decrease in the problem loans balance that decreased the loan exposure and also caused changes to the qualitative factors related to concentration levels within the portfolio segments, partially offset by the aforementioned increase in the economic qualitative factor. The provision benefit to the Residential 1 to 4 Family segment is due to a decrease in the portfolio's balance, partially offset by the aforementioned increase in the economic qualitative factor.
Real Estate Mortgage
Commercial
Commercial
Residential
Commercial
Owner
Non-owner
Residential
1 to 4 Family
Residential
and Industrial
Construction
Occupied
Occupied
1 to 4 Family
Investment
Multifamily
Consumer
Total
(Dollars in thousands)
Three months ended June 30, 2025
March 31, 2025
$ 1,048 $ 2,275 $ 2,470 $ 7,361 $ 8,814 $ 8,855 $ 2,202 $ 66 $ 33,091
Charge-offs
— — — — — — — — —
Recoveries
1 — — — — — — — 1
Provisions (benefits)
( 58 ) 847 ( 432 ) 1,199 ( 443 ) ( 362 ) ( 61 ) ( 12 ) 678
Ending Balance at June 30, 2025
$ 991 $ 3,122 $ 2,038 $ 8,560 $ 8,371 $ 8,493 $ 2,141 $ 54 $ 33,770
Six months ended June 30, 2025
December 31, 2024
$ 1,097 $ 3,037 $ 1,871 $ 6,300 $ 9,166 $ 8,832 $ 2,203 $ 67 $ 32,573
Charge-offs
— — — — — — — — —
Recoveries
2 — — — — — — — 2
Provisions (benefits)
( 108 ) 85 167 2,260 ( 795 ) ( 339 ) ( 62 ) ( 13 ) 1,195
Ending Balance at June 30, 2025
$ 991 $ 3,122 $ 2,038 $ 8,560 $ 8,371 $ 8,493 $ 2,141 $ 54 $ 33,770
During the three months ended June 30, 2025, the increase to the Commercial Non-Owner Occupied, and the Construction portfolios' was due to an increase in the portfolios' balances that increased the loan exposure and also caused changes to the qualitative factors related to concentration levels within the portfolio segments. The provision benefit during the quarter to the Commercial Owner Occupied, Residential 1 to 4 Family, and Residential 1 to 4 Family Investment portfolio segments is due to a decrease in the portfolio balance that decreased the loan exposure and also caused changes to the qualitative factors related to concentration levels within the portfolio segments.
For the six months ended June 30, 2025, the increase to the Commercial Non-Owner Occupied portfolio was due to an increase in the portfolio balances that increased the loan exposure and also caused changes to the qualitative factors related to concentration levels within the portfolio segment. The provision benefit during the six months ended June 30, 2025 to the Residential 1 to 4 Family segment is due to a decrease in the portfolio balance that decreased the loan exposure and also caused changes to the qualitative factors related to concentration levels within the portfolio segments.
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Collateral-Dependent Loans
The following table presents the collateral-dependent loans by portfolio segment and collateral type at June 30, 2026 :
Business
(amounts in thousands)
Real Estate
Assets
Other
Commercial and Industrial
$ 675 $ — $ —
Construction
1,091 — —
Commercial - Owner Occupied
400 — —
Commercial - Non-owner Occupied
603 — —
Residential - 1 to 4 Family
1,723 — —
Residential - 1 to 4 Family Investment
772 — —
Residential - Multifamily
— — —
Consumer
151 — —
Total
$ 5,415 $ — $ —
The following table presents the collateral-dependent loans by portfolio segment and collateral type at December 31, 2025 :
Business
(amounts in thousands)
Real Estate
Assets
Other
Commercial and Industrial
$ 688 $ — $ —
Construction
1,091 — —
Commercial - Owner Occupied
400 — —
Commercial - Non-owner Occupied
3,668 — —
Residential - 1 to 4 Family
2,965 — —
Residential - 1 to 4 Family Investment
1,840 — —
Residential - Multifamily
— — —
Consumer
141 — —
Total
$ 10,793 $ — $ —
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Table of Contents
Credit Quality Indicators : As part of the on-going monitoring of the credit quality of the Company's loan portfolio, management tracks certain credit quality indicators including trends related to the risk grades of loans, the level of classified loans, net charge-offs, nonperforming loans (see details above) and the general economic conditions in the region.
The Company utilizes a risk grading matrix to assign a risk grade to each of its loans. Loans are graded on a scale of 1 to 7. Grades 1 through 4 are considered “Pass”. A description of the general characteristics of the seven risk grades is as follows:
1.
Good : Borrower exhibits the strongest overall financial condition and represents the most creditworthy profile.
2.
Satisfactory (A) : Borrower reflects a well-balanced financial condition, demonstrates a high level of creditworthiness and typically will have a strong banking relationship with the Bank.
3.
Satisfactory (B) : Borrower exhibits a balanced financial condition and does not expose the Bank to more than a normal or average overall amount of risk. Loans are considered fully collectable.
4.
Watch List : Borrower reflects a fair financial condition, but there exists an overall greater than average risk. Risk is deemed acceptable by virtue of increased monitoring and control over borrowings. Probability of timely repayment is present.
5.
Other Assets Especially Mentioned (OAEM) : Financial condition is such that assets in this category have a potential weakness or pose unwarranted financial risk to the Bank even though the asset value is not currently individually evaluated. The asset does not currently warrant adverse classification but if not corrected could weaken and could create future increased risk exposure. Includes loans that require an increased degree of monitoring or servicing as a result of internal or external changes.
6.
Substandard : This classification represents more severe cases of #5 (OAEM) characteristics that require increased monitoring. Assets are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Assets are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral. Asset has a well-defined weakness or weaknesses that impairs the ability to repay debt and jeopardizes the timely liquidation or realization of the collateral at the asset’s net book value.
7.
Doubtful : Assets which have all the weaknesses inherent in those assets classified #6 (Substandard) but the risks are more severe relative to financial deterioration in capital and/or asset value; accounting/evaluation techniques may be questionable and the overall possibility for collection in full is highly improbable. Borrowers in this category require constant monitoring, are considered work-out loans and present the potential for future loss to the Bank.
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Table of Contents
The following tables provide an analysis of loans by portfolio segment based on the credit quality indicators used to determine the allowance for credit losses, as of June 30, 2026 .
Revolving
Loans at
(Dollars in thousands)
Term Loans Amortized Cost Basis by Origination Year
Amortized
As of June 30, 2026
2026
2025
2024
2023
2022
Prior
Cost Basis
Total
Commercial and Industrial
Pass
$ 1,768 $ 4,297 $ 676 $ 2,986 $ 294 $ 5,785 $ 20,147 $ 35,953
OAEM
— — — — — — — —
Substandard
— — — — 398 — 277 675
Doubtful
— — — — — — — —
$ 1,768 $ 4,297 $ 676 $ 2,986 $ 692 $ 5,785 $ 20,424 $ 36,628
Current period gross charge-offs
$ — $ — $ — $ — $ — $ — $ — $ —
Construction
Pass
$ — $ 3,118 $ 323 $ 303 $ 991 $ 74 $ 214,102 $ 218,911
OAEM
— — — — — — — —
Substandard
— — — — — 1,091 — 1,091
Doubtful
— — — — — — — —
$ — $ 3,118 $ 323 $ 303 $ 991 $ 1,165 $ 214,102 $ 220,002
Current period gross charge-offs
$ — $ — $ — $ — $ — $ — $ — $ —
Commercial – Owner Occupied
Pass
$ 16,669 $ 33,391 $ 23,069 $ 28,949 $ 31,939 $ 50,078 $ 2,243 $ 186,338
OAEM
— — — — — — — —
Substandard
— — — — — 400 — 400
Doubtful
— — — — — — — —
$ 16,669 $ 33,391 $ 23,069 $ 28,949 $ 31,939 $ 50,478 $ 2,243 $ 186,738
Current period gross charge-offs
$ — $ — $ — $ — $ — $ — $ — $ —
Commercial – Non-owner Occupied
Pass
$ 14,987 $ 107,557 $ 49,997 $ 13,025 $ 100,303 $ 160,860 $ 10,129 $ 456,858
OAEM
— — — — — 2,144 — 2,144
Substandard
— — — — 360 11,400 — 11,760
Doubtful
— — — — — — — —
$ 14,987 $ 107,557 $ 49,997 $ 13,025 $ 100,663 $ 174,404 $ 10,129 $ 470,762
Current period gross charge-offs
$ — $ — $ — $ — $ — $ — $ 979 $ 979
Residential – 1 to 4 Family
Performing
$ 23,858 $ 41,054 $ 40,929 $ 43,545 $ 89,960 $ 180,938 $ 5,948 $ 426,232
Nonperforming
— — — 388 614 721 — 1,723
$ 23,858 $ 41,054 $ 40,929 $ 43,933 $ 90,574 $ 181,659 $ 5,948 $ 427,955
Current period gross charge-offs
$ — $ — $ — $ — $ — $ — $ — $ —
Residential – 1 to 4 Family Investment
Performing
$ 11,107 $ 36,566 $ 49,007 $ 64,539 $ 106,222 $ 198,716 $ — $ 466,157
Nonperforming
— — — 478 — 294 — 772
$ 11,107 $ 36,566 $ 49,007 $ 65,017 $ 106,222 $ 199,010 $ — $ 466,929
Current period gross charge-offs
$ — $ — $ — $ — $ — $ — $ — $ —
Residential – Multifamily
Pass
$ 21,572 $ 63,599 $ 13,870 $ 4,761 $ 53,349 $ 61,539 $ — $ 218,690
OAEM
— — — — — — — —
Substandard
— — — — — — — —
Doubtful
— — — — — — — —
$ 21,572 $ 63,599 $ 13,870 $ 4,761 $ 53,349 $ 61,539 $ — $ 218,690
Current period gross charge-offs
$ — $ — $ — $ — $ — $ — $ — $ —
Consumer
Performing
$ — $ — $ 216 $ — $ — $ 3,281 $ 9 $ 3,506
Nonperforming
— — — — — 151 — 151
$ — $ — $ 216 $ — $ — $ 3,432 $ 9 $ 3,657
Current period gross charge-offs
$ — $ — $ — $ — $ — $ — $ — $ —
Total Loan Receivable
$ 89,961 $ 289,582 $ 178,087 $ 158,974 $ 384,430 $ 677,472 $ 252,855 $ 2,031,361
As of June 30, 2026 , the Company was in the process of foreclosing on 13 residential 1 to 4 family loans with a principal balance of $ 3.3 million.
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Table of Contents
The following tables provide an analysis of loans by portfolio segment based on the credit quality indicators used to determine the allowance for credit losses, as of December 31, 2025 .
Revolving
Loans at
(Dollars in thousands)
Term Loans Amortized Cost Basis by Origination Year
Amortized
As of December 31, 2025
2025
2024
2023
2022
2021
Prior
Cost Basis
Total
Commercial and Industrial
Pass
$ 4,990 $ 879 $ 3,313 $ 305 $ 2 $ 5,778 $ 22,717 $ 37,984
OAEM
— — — — — — — —
Substandard
— — — 411 — — 277 688
Doubtful
— — — — — — — —
$ 4,990 $ 879 $ 3,313 $ 716 $ 2 $ 5,778 $ 22,994 $ 38,672
Current period gross charge-offs
$ — $ — $ — $ — $ — $ — $ — $ —
Construction
Pass
$ 1,001 $ 325 $ 307 $ 1,396 $ — $ 193 $ 207,994 $ 211,216
OAEM
— — — — — — — —
Substandard
— — — — — 1,091 — 1,091
Doubtful
— — — — — — — —
$ 1,001 $ 325 $ 307 $ 1,396 $ — $ 1,284 $ 207,994 $ 212,307
Current period gross charge-offs
$ — $ — $ — $ — $ — $ — $ — $ —
Commercial – Owner Occupied
Pass
$ 32,560 $ 23,259 $ 32,471 $ 34,016 $ 11,545 $ 46,025 $ 2,253 $ 182,129
OAEM
— — — — — — — —
Substandard
— — — — — 400 — 400
Doubtful
— — — — — — — —
$ 32,560 $ 23,259 $ 32,471 $ 34,016 $ 11,545 $ 46,425 $ 2,253 $ 182,529
Current period gross charge-offs
$ — $ — $ — $ — $ — $ — $ — $ —
Commercial – Non-owner Occupied
Pass
$ 109,092 $ 50,669 $ 14,659 $ 102,688 $ 29,279 $ 150,007 $ 4,794 $ 461,188
OAEM
— — — — — 2,176 — 2,176
Substandard
— — — 370 — 14,561 — 14,931
Doubtful
— — — — — — — —
$ 109,092 $ 50,669 $ 14,659 $ 103,058 $ 29,279 $ 166,744 $ 4,794 $ 478,295
Current period gross charge-offs
$ — $ — $ — $ — $ — $ 202 $ — $ 202
Residential – 1 to 4 Family
Performing
$ 59,089 $ 43,287 $ 47,018 $ 95,574 $ 49,503 $ 148,408 $ 5,619 $ 448,498
Nonperforming
— — 841 733 — 1,391 — 2,965
$ 59,089 $ 43,287 $ 47,859 $ 96,307 $ 49,503 $ 149,799 $ 5,619 $ 451,463
Current period gross charge-offs
$ — $ — $ 47 $ — $ — $ 203 $ — $ 250
Residential – 1 to 4 Family Investment
Performing
$ 39,340 $ 52,575 $ 70,258 $ 114,208 $ 90,734 $ 125,273 $ — $ 492,388
Nonperforming
— — 985 525 — 330 — 1,840
$ 39,340 $ 52,575 $ 71,243 $ 114,733 $ 90,734 $ 125,603 $ — $ 494,228
Current period gross charge-offs
$ — $ — $ — $ — $ — $ — $ — $ —
Residential – Multifamily
Pass
$ 27,456 $ 13,952 $ 4,812 $ 63,789 $ 31,067 $ 32,535 $ — $ 173,611
OAEM
— — — — — — — —
Substandard
— — — — — — — —
Doubtful
— — — — — — — —
$ 27,456 $ 13,952 $ 4,812 $ 63,789 $ 31,067 $ 32,535 $ — $ 173,611
Current period gross charge-offs
$ — $ — $ — $ — $ — $ — $ — $ —
Consumer
Performing
$ — $ 226 $ — $ — $ — $ 3,746 $ 9 $ 3,981
Nonperforming
— — — — — 141 — 141
$ — $ 226 $ — $ — $ — $ 3,887 $ 9 $ 4,122
Current period gross charge-offs
$ — $ — $ — $ — $ — $ —
$ — $ —
Total Loan Receivable
$ 273,528 $ 185,172 $ 174,664 $ 414,015 $ 212,130 $ 532,055 $ 243,663 $ 2,035,227
Modifications to Borrowers Experiencing Financial Difficulty
During the periods ended June 30, 2026 and 2025 , the Company did not make any modifications to borrowers experiencing financial difficulty.
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Table of Contents
NOTE 5. EARNINGS PER SHARE ( “ EPS ” )
The following tables set forth the calculation of basic and diluted EPS for the three and six months ended June 30, 2026 and 2025 .
Three months ended June 30,
Six months ended June 30,
2026
2025
2026
2025
(Dollars in thousands except share and per share data)
(Dollars in thousands except share and per share data)
Basic earnings per common share
Net income available to the Company
$ 12,241 $ 8,283 $ 24,085 $ 16,061
Less: Dividend on series B preferred stock
( 5 ) ( 5 ) ( 10 ) ( 10 )
Net income available to common shareholders
12,236 8,278 24,075 16,051
Basic weighted-average common shares outstanding
11,725,654 11,843,328 11,716,114 11,839,856
Basic earnings per common share
$ 1.04 $ 0.70 $ 2.05 $ 1.36
Diluted earnings per common share
Net income available to common shares
$ 12,236 $ 8,278 $ 24,075 $ 16,051
Add: Dividend on series B preferred stock
5 5 10 10
Net income available to diluted common shares
12,241 8,283 24,085 16,061
Basic weighted-average common shares outstanding
11,725,654 11,843,328 11,716,114 11,839,856
Dilutive potential common shares
196,743 164,896 196,972 167,738
Diluted weighted-average common shares outstanding
11,922,397 12,008,224 11,913,086 12,007,594
Diluted earnings per common share
$ 1.03 $ 0.69 $ 2.02 $ 1.34
During the six months ended June 30, 2026 and 2025, there were 0 and 322,755 weighted average options outstanding, respectively, that were not included in the computation of diluted EPS because these options were anti-dilutive.
NOTE 6. FAIR VALUE
Fair Value Measurements
The Company uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. The fair value is a reasonable point within the range that is most representative of fair value under current market conditions. In accordance with this guidance, the Company groups its assets and liabilities carried at fair value in three levels as follows:
Level 1 Input:
1 )
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2 Inputs:
1 )
Quoted prices for similar assets or liabilities in active markets.
2 )
Quoted prices for identical or similar assets or liabilities in markets that are not active.
3 )
Inputs other than quoted prices that are observable, either directly or indirectly, for the term of the asset or liability (e.g., interest rates, yield curves, credit risks, prepayment speeds or volatilities) or “market corroborated inputs.”
Level 3 Inputs:
1 )
Prices or valuation techniques that require inputs that are both unobservable (i.e. supported by little or no market activity) and that are significant to the fair value of the assets or liabilities.
2 )
These assets and liabilities include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
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Table of Contents
Fair Value on a Recurring Basis:
The following is a description of the Company’s valuation methodologies for assets carried at fair value on a recurring basis. These methods may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes that its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting measurement date.
Investments in Available for Sale Securities:
Where quoted prices are available in an active market, securities or other assets are classified in Level 1 of the valuation hierarchy. If quoted market prices are not available for the specific security or available for sale loans, then fair values are provided by independent third -party valuation services. These valuation services estimate fair values using pricing models and other accepted valuation methodologies, such as quotes for similar securities and observable yield curves and spreads. As part of the Company’s overall valuation process, management evaluates these third -party methodologies to ensure that they are representative of exit prices in the Company’s principal markets. Securities in Level 2 are mortgage-backed securities.
The table below presents the balances of assets and liabilities measured at fair value on a recurring basis.
Financial Assets
Level 1
Level 2
Level 3
Total
(Dollars in thousands)
Available for Sale Securities
As of June 30, 2026
Corporate debt obligations
$ — $ 503 $ — $ 503
Residential mortgage-backed securities
— 3,546 — 3,546
Total
$ — $ 4,049 $ — $ 4,049
As of December 31, 2025
Corporate debt obligations
$ — $ 500 $ — $ 500
Residential mortgage-backed securities
— 4,246 — 4,246
Total
$ — $ 4,746 $ — $ 4,746
For the six months ended June 30, 2026 , there were no transfers between the levels within the fair value hierarchy. There were no level 3 assets or liabilities held during the three and six months ended June 30, 2026 and 2025 .
Fair Value on a Non-recurring Basis:
Certain assets and liabilities are not measured at fair value on an ongoing basis but are subject to fair value adjustments in certain circumstances (for example, when there is evidence of impairment).
Financial Assets
Level 1
Level 2
Level 3
Total
(Dollars in thousands)
As of June 30, 2026
Collateral-dependent loans
$ — $ — $ 1,754 $ 1,754
OREO
— — 6,762 6,762
As of December 31, 2025
Collateral-dependent loans
$ — $ — $ 2,672 $ 2,672
OREO
— — 2,862 2,862
Collateral-dependent loans are those loans that are accounted for under ASC 326, Financial Instruments - Credit Losses ("ASC 326" ), in which the Bank has measured impairment generally based on the fair value of the loan’s collateral. Fair value is generally determined based upon independent third -party appraisals of the properties that collateralize the loans to determine the net realizable value, less costs to sell (a range of 5% to 10% ) and other costs, such as unpaid real estate taxes, that have been identified. If the loan balance exceeds the fair value of the collateral, a specific reserve is applied and these assets are generally classified as Level 3 fair values, based upon the lowest level of input that is significant to the fair value measurements.
OREO consists of real estate properties that are recorded at fair value based upon current appraised value, or agreements of sale, less estimated disposition costs using level 3 inputs. Properties are reappraised annually.
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Table of Contents
Fair Value of Financial Instruments
The Company discloses estimated fair values for its significant financial instruments in accordance with FASB ASC (Topic 825 ), “ Disclosures about Fair Value of Financial Instruments ”. The methodologies for estimating the fair value of financial assets and liabilities that are measured at fair value on a recurring or non-recurring basis are discussed above.
For certain financial assets and liabilities, carrying value approximates fair value due to the nature of the financial instrument. These instruments include cash and cash equivalents, accrued interest receivable, bank owned life insurance, Federal Home Loan Bank of New York ("FHLBNY") restricted stock, demand and other non-maturity deposits and accrued interest payable, and they are considered to be level 1 measurements.
The following table summarizes the carrying amounts and fair values for financial instruments that are not carried at fair value at June 30, 2026 and December 31, 2025 :
Carrying
Fair Value
June 30, 2026
Amount
Total
Level 1
Level 2
Level 3
(Dollars in thousands)
Financial Assets:
Investment securities HTM
$ 10,245 $ 8,897 $ — $ 8,897 $ —
Loans, net
1,996,737 2,006,769 — 2,001,710 5,059
Financial Liabilities:
Time deposits
$ 627,338 $ 626,859 $ — $ 626,859 $ —
Borrowings
177,403 176,339 — 176,339 —
Carrying
Fair Value
December 31, 2025
Amount
Total
Level 1
Level 2
Level 3
(Dollars in thousands)
Financial Assets:
Investment securities HTM
$ 8,777 $ 7,487 $ — $ 7,487 $ —
Loans, net
2,000,578 2,020,810 — 2,010,017 10,793
Financial Liabilities:
Time deposits
$ 661,833 $ 662,947 $ — $ 662,947 $ —
Borrowings
143,403 145,748 — 145,748 —
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Table of Contents
NOTE 7. COMMITMENTS AND CONTINGENCIES
The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheet. The contract or notional amounts of these instruments reflect the extent of the Company’s involvement in these particular classes of financial instruments. The Company’s exposure to the maximum possible credit risk in the event of nonperformance by the other party to the financial instruments for commitments to extend credit and standby letters of credit is represented by the contractual or notional amount of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require the payment of a fee. The Company evaluates each customer’s credit-worthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on management’s credit evaluation. Collateral held varies but may include accounts receivable; inventory; property, plant and equipment and income-producing commercial properties. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Commitments to fund fixed-rate loans were immaterial at June 30, 2026 . Variable-rate commitments are generally issued for less than one year and carry market rates of interest. Such instruments are not likely to be affected by annual rate caps triggered by rising interest rates. As of June 30, 2026 and December 31, 2025 , unused commitments to extend credit amounted to approximately $ 262.0 million and $ 189.8 million, respectively. At June 30, 2026 and December 31, 2025 , the allowance for credit losses on off-balance sheet credit exposures was $ 762.3 thousand and $ 829.1 thousand, respectively, a decrease of $ 66.8 thousand.
Standby letters of credit are conditional commitments issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. As of June 30, 2026 and December 31, 2025 , standby letters of credit with customers were $ 0.6 million, and $ 0.6 million, respectively.
On June 29, 2026, the Bank entered into an agreement with the FHLBNY for a Municipal Letter of Credit ("MLOC") of $ 110.0 million. The MLOC is used to pledge against public deposits and the MLOC expires on July 23, 2026. There were no outstanding borrowings on the letters of credit as of June 30, 2026 .
The Company also has entered into an employment contract with the President of the Company, which provides for continued payment of certain employment salary and benefits prior to the expiration date of the agreement and in the event of a change in control, as defined. The Company has also entered in Change-in-Control Severance Agreements with certain officers which provide for the payment of severance in certain circumstances following a change in control.
We provide banking services to customers that are licensed by various States to do business in the cannabis industry as growers, processors and dispensaries. Cannabis businesses are legal in these States, although they are not legal at the federal level. The U.S. Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) published guidelines in 2014 for financial institutions servicing state legal cannabis businesses. A financial institution that provides services to cannabis-related businesses can comply with Bank Secrecy Act (“BSA”) disclosure standards by following the FinCEN guidelines. We maintain stringent written policies and procedures related to the acceptance of such businesses and to the monitoring and maintenance of such business accounts. We conduct a significant due diligence review of the cannabis business before the business is accepted, including confirmation that the business is properly licensed by the applicable state. Throughout the relationship, we continue monitoring the business, including site visits, to ensure that the business continues to meet our stringent requirements, including maintenance of required licenses and periodic financial reviews of the business.
While we believe we are operating in compliance with the FinCEN guidelines, there can be no assurance that federal enforcement guidelines will not change. Federal prosecutors have significant discretion and there can be no assurance that the federal prosecutors will not choose to strictly enforce the federal laws governing cannabis. Any change in the Federal government’s enforcement position, could cause us to immediately cease providing banking services to the cannabis industry.
At June 30, 2026 and December 31, 2025 , deposit balances from cannabis customers were approximately $ 61.1 million and $ 61.9 million, or 3.5 % and 3.5 % of total deposits, respectively, with two customers accounting for 27.1 % and 30.7 % of the total at June 30, 2026 and December 31, 2025 . At June 30, 2026 and December 31, 2025 , there were cannabis-related loans in the amounts of $ 50.9 million and $ 47.0 million, respectively.
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