Note 4: Loans, Allowance for Credit Losses and Other Real Estate Owned

A summary of the major categories of loans outstanding is shown in the following tables at the dates indicated:

The following summarizes activity in the allowance for credit losses:

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The allowance for credit losses for commercial loans increased in the three and six months ended June 30, 2025 primarily due to an increase in estimated credit losses over the remaining life of individually evaluated loans totaling $3.6 million. The allowance for credit losses for consumer installment and other loans decreased in the three and six months ended June 30, 2025 primarily due to a decrease in estimated future credit losses based on improved delinquency and net charge-off trends and declining loan balances, primarily indirect auto loans.

The Company’s customers are primarily small businesses, professionals and consumers. Given the scale of these borrowers, corporate credit rating agencies do not evaluate the borrowers’ financial condition. The Bank maintains a Loan Review Department which reports directly to the Audit Committee of the Board of Directors. The Loan Review Department performs independent evaluations of loans and validates management assigned credit risk grades on evaluated loans using grading standards employed by bank regulatory agencies. Loans judged to carry lower-risk attributes are assigned a “pass” grade, with a minimal likelihood of loss. Loans judged to carry higher-risk attributes are referred to as “classified loans,” and are further disaggregated, with increasing expectations for loss recognition, as “substandard,” “doubtful,” and “loss.” The Loan Review Department performs continuous evaluations throughout the year. If the Bank becomes aware of deterioration in a borrower’s performance or financial condition between Loan Review Department examinations, assigned risk grades are re-evaluated promptly. Credit risk grades assigned by management and validated by the Loan Review Department are subject to review by the Bank’s regulatory authorities during regulatory examinations.

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The following summarizes the credit risk profile by internally assigned grade:

The following tables summarize loans by delinquency and nonaccrual status:

At June 30, 2025, $2.3 million was allocated as allowance for credit losses to two loans totaling $3.6 million on nonaccrual status. There was no allowance for credit losses allocated to loans on nonaccrual status as of December 31, 2024.

There were no commitments to lend additional funds to borrowers whose loans were on nonaccrual status at June 30, 2025 or December 31, 2024.

There were no loan modifications made to borrowers experiencing financial difficulty during the three and six months ended June 30, 2025 and June 30, 2024.

A loan is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. Loans considered collateral dependent are reassessed quarterly. Loans that were considered collateral dependent at June 30, 2025 included the following: eight commercial real estate loans totaling $10.2 million secured by real property and $301 thousand of indirect consumer installment loans secured by personal property. There were no other collateral dependent loans at June 30, 2025. Loans that were considered collateral dependent at December 31, 2024 included the following: nine commercial real estate loans totaling $17.6 million secured by real property and $503 thousand of indirect consumer installment loans secured by personal property. There were no other collateral dependent loans at December 31, 2024.

Based on the most recent analysis performed, the risk category of loans by class of loans is as follows:

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The Company considers the delinquency and nonaccrual status of the consumer loan portfolio and its impact on the allowance for credit losses. The following table presents the amortized cost in consumer installment and other loans based on delinquency and nonaccrual status:

There were no loans held for sale at June 30, 2025 and December 31, 2024.

The Company held no other real estate owned (OREO) at June 30, 2025 and December 31, 2024. At June 30, 2025 and December 31, 2024, there were no consumer mortgage loans outstanding secured by residential real estate properties for which formal foreclosure proceedings were in process.