The Company has pledged certain commercial and residential mortgage loans as collateral for borrowings with the FHLB. Loans totaling $749.7 million and $797.7 million were pledged with the FHLB as of June 30, 2025 and December 31, 2024, respectively. Additionally, the Company has pledged certain construction, and commercial and industrial loans totaling $75.1 million and $91.6 million as of June 30, 2025 and December 31, 2024, respectively, as collateral for borrowings with the FRB Discount Window.

The following tables present the aging of the recorded investment of loans held for investment by loan category as of the dates stated.


	June 30, 2025
(Dollars in thousands)	Current Loans		30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due & Accruing		Nonaccrual		Total Loans
Commercial and industrial	$	311,082	$	1,049	$	1,042	$	1,643	$	9,160	$	323,976
Real estate – construction, commercial		78,476		—		—		—		—		78,476
Real estate – construction, residential		51,877		154		—		—		—		52,031
Real estate – commercial		803,361		511		3,073		—		4,033		810,978
Real estate – residential		659,398		930		2,745		—		8,244		671,317
Real estate – farmland		4,723		—		—		—		—		4,723
Consumer		34,051		1,078		201		238		669		36,237
Deferred costs, net of loan fees		847		—		—		—		—		847
Total	$	1,943,815	$	3,722	$	7,061	$	1,881	$	22,106	$	1,978,585


	December 31, 2024
(Dollars in thousands)	Current Loans		30-59 Days Past Due		60-89 Days Past Due		Greater than 90 Days Past Due & Accruing		Nonaccrual		Total Loans
Commercial and industrial	$	339,893	$	1,335	$	1,232	$	2,259	$	10,185	$	354,904
Real estate – construction, commercial		114,238		—		33		—		220		114,491
Real estate – construction, residential		51,807		—		—		—		—		51,807
Real estate – commercial		842,982		625		—		—		4,235		847,842
Real estate – residential		680,406		3,874		476		—		7,497		692,253
Real estate – farmland		5,520		—		—		—		—		5,520
Consumer		41,295		1,296		300		227		820		43,938
Deferred costs, net of loan fees		1,042		—		—		—		—		1,042
Total	$	2,077,183	$	7,130	$	2,041	$	2,486	$	22,957	$	2,111,797

The Company recognized $30 thousand and $148 thousand of interest income on nonaccrual loans during the three and six months ended June 30, 2025, respectively, compared to $122 thousand and $187 thousand for the same respective periods in 2024.

The Company segments loans held for investment into risk categories based on relevant information about the expected ability of borrowers to repay debt, such as current financial information, historical payment performance, experience, collateral adequacy, credit documentation, and current economic trends, among other factors. Management assigns loan risk grades by a numerical system as an indication of credit quality of its portfolio of loans held for investment. The Company uses the following definitions for loan risk ratings and periodically evaluates the appropriateness of these ratings across its loan portfolio. Independent third-party loan reviews are performed periodically on the Company's loan portfolio and such reviews validate management's determination of loan risk grades. Bank regulatory agencies also periodically review the Company's loan portfolio, including loan risk grades and may, on occasion, change a grade based on their judgment of the facts at the time of review.

Risk Grade 1 – Strong: This grade is for the strongest of loans. These loans are extended to individuals or businesses where the probability of default is extremely low to the Bank and secured with liquid collateral where the loss given default is unlikely because of the source of repayment such as a lien on a deposit account held at the Bank. Character, credit history, and ability of individuals or company principals are excellent. High liquidity, minimum risk, strong ratios, and low servicing cost are present.

Risk Grade 2 – Minimal: This grade is for loans deemed exceptionally strong. These loans are within established guidelines and where the borrowers have documented significant overall financial strength with consistent and predictable cash flows. These loans have excellent sources of repayment, significant balance sheet liquidity, no significant identifiable risk of collection, and conform in all respects to policy, underwriting standards, and federal and state regulations (no exceptions of any kind). In addition, guarantor support, when provided, is deemed as excellent.

Risk Grade 3 – Acceptable: This grade is for loans deemed strong. These loans have adequate sources of repayment, with a minimal identifiable risk of collection. Generally, loans assigned this risk grade will demonstrate the following characteristics: (1) conformity in all respects with policy, guidelines, underwriting standards, and federal and state regulations (no exceptions of any kind), (2) documented historical cash flow that meets or exceeds required minimum guidelines, or that can be supplemented with verifiable cash flow from other sources, and (3) adequate secondary sources to liquidate the debt. In addition, guarantor support, when provided, is deemed strong.

Risk Grade 4 – Satisfactory: This grade is for satisfactory loans containing more but deemed acceptable risk, and where the borrower is deemed as sound. These loans have adequate sources of repayment, with minimal identifiable risk of collection. Loans assigned with this risk grade will demonstrate the following characteristics: (1) general conformity to the Bank's underwriting requirements, with limited exceptions to policy, product, or underwriting guidelines, and all exceptions noted have documented mitigating factors that offset any additional risk associated with the exceptions noted, (2) documented historical cash flow that meets or exceeds required minimum guidelines, or that can be supplemented with verifiable cash flow from other sources, and (3) adequate secondary sources to liquidate the debt. In addition, guarantor support, when provided, is deemed as satisfactory.

Risk Grade 5 – Watch: This grade is for satisfactory loans containing acceptable but elevated risk. These loans are characterized by borrowers who exhibit signs of financial stress or are experiencing unstable or unfavorable change(s) adversely impacting the current or expected financial condition. The borrower's management is considered to be satisfactory; however, the collateral securing the loan may have decreased in value, the debt service coverage ratio is inconsistent or breakeven but mostly positive, and/or guarantor support, if any, is deemed limited or marginal. Loans classified as Watch warrant additional monitoring by management.

Risk Grade 6 – Special Mention: This grade is for loans that have potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the Bank's credit position potentially at a future date. Special Mention loans are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. Special Mention credits typically do not conform to established guidelines and/or exceptions without mitigating factors, or have emerging weaknesses that may or may not be remedied with the passage of time.

Risk Grade 7 – Substandard: This grade is for loans inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as Substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. The probability of default is highly likely and may have already occurred. Loans in this category are characterized by deterioration in quality exhibited by any number of well-defined weaknesses requiring corrective action. The weaknesses may include, but are not limited to: (1) current or expected unprofitable operations, (2) inadequate debt service coverage, (3) declining or inadequate liquidity, (4) improper loan structure, (5) questionable or weak repayment sources, and (6) lack of well-defined secondary repayment source. There is a distinct possibility of loss and the Bank will sustain loss if the deficiencies remain uncorrected.

Risk Grade 8 – Doubtful: Loans classified Doubtful have all the weaknesses inherent in loans classified Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values highly questionable and improbable. However, these loans are not yet rated as loss because certain events may occur which would salvage the Bank's position, which can include, but not limited to (1) an injection of capital, (2) alternative financing, and (3) liquidation of assets or the pledging of additional collateral. Doubtful is a temporary grade, where the Bank expects a loss but is presently not quantified with any degree of accuracy. Once the loss position is determined, the amount is recorded and charged off against the ACL.

Risk Grade 9 – Loss: Loans classified Loss are deemed uncollectible and of such little value that continuance as assets held for investment is no longer warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer charging off the worthless loan, even though partial recovery may occur in the future. Probable loss amounts, either principal or interest, deemed uncollectible are charged off promptly against the ACL.

The following table presents the recorded investment of loans held for investment by internal loan risk grade by year of origination as of June 30, 2025. There were no loans classified as loss (risk grade 9) as of the same date. Also presented are current period gross charge-offs by loan type for the six months ended June 30, 2025.


	Term Loans Recorded Investment Basis by Origination Year
(Dollars in thousands)	2025		2024		2023		2022		2021		Prior		Revolving Loans		Total
Commercial and industrial
Risk Grades 1 - 4	$	5,579	$	10,041	$	11,821	$	50,243	$	11,492	$	26,355	$	99,294	$	214,825
Risk Grades 5 - 6		200		368		23,881		36,538		5,792		5,512		10,722		83,013
Risk Grade 7		—		303		3,036		5,972		12,964		1,849		1,947		26,071
Risk Grade 8		—		—		—		—		67		—		—		67
Total		5,779		10,712		38,738		92,753		30,315		33,716		111,963		323,976
Current period gross charge-offs		—		369		30		4,103		—		109		50		4,661

Real estate – construction, commercial
Risk Grades 1 - 4		1,504		6,608		2,641		43,841		4,709		6,813		56		66,172
Risk Grades 5 - 6		169		—		1,082		—		700		10,224		—		12,175
Risk Grade 7		—		—		114		—		15		—		—		129
Total		1,673		6,608		3,837		43,841		5,424		17,037		56		78,476
Current period gross charge-offs		—		—		—		—		—		—		—		—

Real estate – construction, residential
Risk Grades 1 - 4		14,826		11,275		1,183		394		—		53		683		28,414
Risk Grades 5 - 6		540		—		—		3,187		19,423		—		—		23,150
Risk Grade 7		—		—		—		467		—		—		—		467
Total		15,366		11,275		1,183		4,048		19,423		53		683		52,031
Current period gross charge-offs		—		—		—		—		—		—		—		—

Real estate – commercial
Risk Grades 1 - 4		10,255		4,603		34,844		190,611		112,137		252,503		18,229		623,182
Risk Grades 5 - 6		—		522		3,381		82,100		8,494		47,189		4,383		146,069
Risk Grade 7		—		1,560		—		26,928		10,029		1,871		—		40,388
Risk Grade 8		—		—		—		—		1,339		—		—		1,339
Total		10,255		6,685		38,225		299,639		131,999		301,563		22,612		810,978
Current period gross charge-offs		—		—		—		—		—		63		—		63

Real estate – residential
Risk Grades 1 - 4		4,221		2,205		69,989		220,306		108,735		191,408		53,931		650,795
Risk Grades 5 - 6		575		456		165		739		974		4,810		227		7,946
Risk Grade 7		141		—		1,200		1,903		2,457		6,319		554		12,574
Risk Grade 8		—		—		—		—		—		1		1		2
Total		4,937		2,661		71,354		222,948		112,166		202,538		54,713		671,317
Current period gross charge-offs		—		—		—		—		—		16		107		123

Real estate – farmland
Risk Grades 1 - 4		—		145		—		993		1,212		1,938		147		4,435
Risk Grades 5 - 6		63		—		129		—		96		—		—		288
Total		63		145		129		993		1,308		1,938		147		4,723
Current period gross charge-offs		—		—		—		—		—		—		—		—

Consumer
Risk Grades 1 - 4		2,078		4,529		13,590		6,832		1,026		785		5,815		34,655
Risk Grades 5 - 6		—		120		190		243		90		32		—		675
Risk Grade 7		—		74		263		365		149		56		—		907
Risk Grade 8		—		—		—		—		—		—		—		—
Total		2,078		4,723		14,043		7,440		1,265		873		5,815		36,237
Current period gross charge-offs		71		347		118		463		28		8		—		1,035

Total Loans
Risk Grades 1 - 4	$	38,463	$	39,406	$	134,068	$	513,220	$	239,311	$	479,855	$	178,155	$	1,622,478
Risk Grades 5 - 6		1,547		1,466		28,828		122,807		35,569		67,767		15,332		273,316
Risk Grade 7		141		1,937		4,613		35,635		25,614		10,095		2,501		80,536
Risk Grade 8		—		—		—		—		1,406		1		1		1,408
Total	$	40,151	$	42,809	$	167,509	$	671,662	$	301,900	$	557,718	$	195,989	$	1,977,738
Total current period gross charge-offs	$	71	$	716	$	148	$	4,566	$	28	$	196	$	157	$	5,882

The following table presents the recorded investment of loans held for investment by internal loan risk grade by year of origination as of December 31, 2024. There were no loans classified as loss (risk grade 9) as of the same date.


	Term Loans Recorded Investment Basis by Origination Year
(Dollars in thousands)	2024		2023		2022		2021		2020		Prior		Revolving Loans		Total
Commercial and industrial
Risk Grades 1 - 4	$	13,883	$	13,559	$	64,530	$	14,600	$	17,405	$	15,760	$	98,867	$	238,604
Risk Grades 5 - 6		672		24,430		37,503		10,201		5,183		979		15,092		94,060
Risk Grade 7		944		2,248		5,173		10,462		562		1,247		1,521		22,157
Risk Grade 8		—		—		—		82		—		1		—		83
Total		15,499		40,237		107,206		35,345		23,150		17,987		115,480		354,904

Real estate – construction, commercial
Risk Grades 1 - 4		6,219		6,277		65,560		7,776		5,405		4,792		399		96,428
Risk Grades 5 - 6		—		1,090		—		7,567		4,770		4,235		—		17,662
Risk Grade 7		—		116		—		24		—		261		—		401
Total		6,219		7,483		65,560		15,367		10,175		9,288		399		114,491

Real estate – construction, residential
Risk Grades 1 - 4		19,574		8,861		7,837		13,971		—		57		990		51,290
Risk Grades 5 - 6		193		—		—		—		—		—		—		193
Risk Grade 7		—		169		155		—		—		—		—		324
Total		19,767		9,030		7,992		13,971		—		57		990		51,807

Real estate – commercial
Risk Grades 1 - 4		4,747		34,698		245,563		118,435		142,211		133,856		21,323		700,833
Risk Grades 5 - 6		535		5,092		64,677		7,002		14,604		23,104		4,184		119,198
Risk Grade 7		1,565		—		9,970		10,380		2,945		1,355		25		26,240
Risk Grade 8		—		—		—		1,379		—		192		—		1,571
Total		6,847		39,790		320,210		137,196		159,760		158,507		25,532		847,842

Real estate – residential
Risk Grades 1 - 4		2,815		66,780		225,159		114,682		64,548		143,002		53,498		670,484
Risk Grades 5 - 6		853		—		2,303		1,295		318		2,378		95		7,242
Risk Grade 7		—		736		2,153		2,113		1,454		5,822		2,249		14,527
Total		3,668		67,516		229,615		118,090		66,320		151,202		55,842		692,253

Real estate – farmland
Risk Grades 1 - 4		147		—		997		1,239		—		2,753		149		5,285
Risk Grades 5 - 6		—		135		—		100		—		—		—		235
Total		147		135		997		1,339		—		2,753		149		5,520

Consumer
Risk Grades 1 - 4		5,944		17,211		8,716		1,650		1,034		486		7,283		42,324
Risk Grades 5 - 6		74		133		225		99		32		3		—		566
Risk Grade 7		87		330		332		184		63		24		28		1,048
Total		6,105		17,674		9,273		1,933		1,129		513		7,311		43,938

Total Loans
Risk Grades 1 - 4	$	53,329	$	147,386	$	618,362	$	272,353	$	230,603	$	300,706	$	182,509	$	1,805,248
Risk Grades 5 - 6		2,327		30,880		104,708		26,264		24,907		30,699		19,371		239,156
Risk Grade 7		2,596		3,599		17,783		23,163		5,024		8,709		3,823		64,697
Risk Grade 8		—		—		—		1,461		—		193		—		1,654
Total	$	58,252	$	181,865	$	740,853	$	323,241	$	260,534	$	340,307	$	205,703	$	2,110,755

The following tables present an analysis of the change in the ACL by loan segment for the periods stated.


	For the three months ended June 30, 2025
(Dollars in thousands)	Commercial and industrial			Real estate – construction, commercial			Real estate – construction, residential			Real estate – commercial			Real estate – residential			Real estate – farmland			Consumer			Total
ACL, beginning of period	$	5,726		$	1,992		$	552		$	5,998		$	8,171		$	18		$	669		$	23,126
Provision for (recovery of) credit losses - loans		147			(720	)		(154	)		(119	)		(69	)		(3	)		218			(700	)
Charge-offs		(2,537	)		—			—			—			(107	)		—			(448	)		(3,092	)
Recoveries		2,510			—			—			—			6			—			124			2,640
Net charge-offs		(27	)		—			—			—			(101	)		—			(324	)		(452	)
ACL, end of period	$	5,846		$	1,272		$	398		$	5,879		$	8,001		$	15		$	563		$	21,974

	For the three months ended June 30, 2024
(Dollars in thousands)	Commercial and industrial			Real estate – construction, commercial			Real estate – construction, residential			Real estate – commercial			Real estate – residential			Real estate – farmland			Consumer			Total
ACL, beginning of period	$	13,619		$	3,596		$	919		$	9,832		$	6,338		$	18		$	703		$	35,025
Provision for (recovery of) credit losses - loans		3,451			(408	)		(143	)		430			(57	)		—			327			3,600
Charge-offs		(11,982	)		—			(39	)		—			(44	)		—			(545	)		(12,610	)
Recoveries		1,828			—			—			—			3			—			190			2,021
Net charge-offs		(10,154	)		—			(39	)		—			(41	)		—			(355	)		(10,589	)
ACL, end of period	$	6,916		$	3,188		$	737		$	10,262		$	6,240		$	18		$	675		$	28,036


	For the six months ended June 30, 2025
(Dollars in thousands)	Commercial and industrial			Real estate – construction, commercial			Real estate – construction, residential			Real estate – commercial			Real estate – residential			Real estate – farmland			Consumer			Total
ACL, beginning of period	$	5,767		$	2,057		$	540		$	5,963		$	7,933		$	18		$	745		$	23,023
(Recovery of) provision for credit losses - loans		(42	)		(785	)		(142	)		(359	)		184			(3	)		447			(700	)
Charge-offs		(4,661	)		—			—			(63	)		(123	)		—			(1,035	)		(5,882	)
Recoveries		4,782			—			—			338			7			—			406			5,533
Net recoveries (charge-offs)		121			—			—			275			(116	)		—			(629	)		(349	)
ACL, end of period	$	5,846		$	1,272		$	398		$	5,879		$	8,001		$	15		$	563		$	21,974

	For the six months ended June 30, 2024
(Dollars in thousands)	Commercial and industrial			Real estate – construction, commercial			Real estate – construction, residential			Real estate – commercial			Real estate – residential			Real estate – farmland			Consumer			Total
ACL, beginning of period	$	13,787		$	4,024		$	1,094		$	9,929		$	6,286		$	15		$	758		$	35,893
Provision for (recovery of) credit losses - loans		3,708			(836	)		(318	)		333			(18	)		3			728			3,600
Charge-offs		(13,939	)		—			(39	)		—			(44	)		—			(1,290	)		(15,312	)
Recoveries		3,360			—			—			—			16			—			479			3,855
Net charge-offs		(10,579	)		—			(39	)		—			(28	)		—			(811	)		(11,457	)
ACL, end of period	$	6,916		$	3,188		$	737		$	10,262		$	6,240		$	18		$	675		$	28,036

There were no material changes to the assumptions, loss factors (both quantitative and qualitative), or reasonable and supportable forecasts used in the estimation of the ACL and the provision for (recovery of) credit losses for loans held for investment as of and for the three and six months ended June 30, 2025.

Excluded from the ACL as of both June 30, 2025 and December 31, 2024 was $10.0 million and $10.7 million of accrued interest attributable to loans held for investment, respectfully, which is included in accrued interest receivable on the consolidated balance sheet.

As of June 30, 2025 and December 31, 2024, the amortized cost of purchased credit deteriorated ("PCD") loans totaled $39.1 million and $43.8 million, respectively, with an estimated ACL of $0.2 million and $0.3 million, respectively. The remaining non-credit discount on PCD loans was $2.5 million and $3.0 million as of June 30, 2025 and December 31, 2024, respectively.

The Company closely monitors the performance of borrowers experiencing financial difficulty and grants certain loan modifications it would otherwise not consider. The Company refers to such loan modifications as troubled loan modifications ("TLMs").

During the first quarter of 2025, the borrower of a commercial and industrial loan, which has been on nonaccrual status since the second quarter of 2024, was granted an 18-month term extension and principal deferral, extending the loan's maturity to a total of 72 months. Interest-only payments are due through the extended term, with a principal balloon payment due at the revised maturity date of June 2027. Also in the first quarter of 2025, three loans partially charged off in 2024 to a single borrower were refinanced into a single residential mortgage loan, which included the forgiveness of $40 thousand of accrued interest.

For the three months ended June 30, 2025 and 2024, the Company did not grant any new TLMs.

As of June 30, 2025 and December 31, 2024, there were no unfunded commitments to borrowers with TLMs.

As of June 30, 2025, nine residential mortgage loans with a total amortized cost of $1.6 million were in the process of foreclosure.