Note 3 - Loans and Allowance for Credit Losses

6 Months Ended

Jun. 30, 2025

Note 3: Loans and Allowance for Credit Losses

Loans

Loans include acquired loans and originated loans. Acquired loans are presented at their outstanding principal balance, net of the remaining purchase discount of $6,949 as of June 30, 2025 and $7,564 as of December 31, 2024. Originated loans as of June 30, 2025 and December 31, 2024 are presented at amortized cost, net of deferred fees and costs. The following table presents the composition of the loan portfolio, excluding mortgage loans held for sale, as of the dates indicated.


	June 30,			December 31,
	2025			2024
Real estate construction	$	44,529		$	50,798
Consumer real estate		317,949			307,855
Commercial real estate		494,755			478,078
Commercial non real estate		51,383			51,844
Public sector and IDA		56,347			57,171
Consumer non real estate		46,172			42,867
Gross loans	$	1,011,135		$	988,613
Less deferred fees and costs		(438	)		(663	)
Loans, net of deferred fees and costs	$	1,010,697		$	987,950
Allowance for credit losses on loans		(10,422	)		(10,262	)
Total loans, net	$	1,000,275		$	977,688

Accrued interest receivable of $3,382 at June 30, 2025 and $3,299 at December 31, 2024 is not included in total loans above.

Past Due and Nonaccrual Loans

The following tables present the aging of past due loans, by loan pool, as of the dates indicated.


June 30, 2025	Accruing Current Loans		Accruing Loans 30 – 89 Days Past Due		Accruing Loans 90 or More Days Past Due		Nonaccrual Loans		Total Loans		Accruing and Nonaccrual 90 or More Days Past Due
Real Estate Construction
Construction, 1-4 family residential	$	13,773	$	332	$	-	$	-	$	14,105	$	-
Construction, other		30,424		-		-		-		30,424		-
Consumer Real Estate
Equity line		24,055		177		-		-		24,232		-
Residential closed-end first liens		192,628		1,322		-		-		193,950		-
Residential closed-end junior liens		9,437		8		-		-		9,445		-
Investor-owned residential real estate		90,322		-		-		-		90,322		-
Commercial Real Estate
Multifamily residential real estate		160,083		194		-		-		160,277		-
Commercial real estate, owner-occupied		134,950		975		-		2,111		138,036		199
Commercial real estate, other		195,051		1,391		-		-		196,442		-
Commercial Non Real Estate
Commercial and industrial		51,145		238		-		-		51,383		-
Public Sector and IDA
States and political subdivisions		56,347		-		-		-		56,347		-
Consumer Non Real Estate
Credit cards		4,975		13		5		-		4,993		5
Automobile		12,091		126		9		-		12,226		9
Other consumer loans		28,669		277		7		-		28,953		7
Total	$	1,003,950	$	5,053	$	21	$	2,111	$	1,011,135	$	220


December 31, 2024	Accruing Current Loans		Accruing Loans 30 – 89 Days Past Due		Accruing Loans 90 or More Days Past Due		Nonaccrual Loans		Total Loans		Accruing and Nonaccrual 90 or More Days Past Due
Real Estate Construction
Construction, 1-4 family residential	$	16,162	$	-	$	-	$	-	$	16,162	$	-
Construction, other		34,636		-		-		-		34,636		-
Consumer Real Estate
Equity line		22,551		67		-		-		22,618		-
Residential closed-end first liens		170,110		949		323		-		171,382		323
Residential closed-end junior liens		8,565		9		-		-		8,574		-
Investor-owned residential real estate		104,756		347		178		-		105,281		178
Commercial Real Estate
Multifamily residential real estate		143,444		186		-		-		143,630		-
Commercial real estate, owner-occupied		138,284		147		-		2,222		140,653		209
Commercial real estate, other		193,249		546		-		-		193,795		-
Commercial Non Real Estate
Commercial and industrial		51,547		253		44		-		51,844		44
Public Sector and IDA
States and political subdivisions		57,171		-		-		-		57,171		-
Consumer Non Real Estate
Credit cards		4,696		2		-		-		4,698		-
Automobile		12,802		193		-		-		12,995		-
Other consumer loans		24,921		250		3		-		25,174		3
Total	$	982,894	$	2,949	$	548	$	2,222	$	988,613	$	757

The following table presents nonaccrual loans, by loan class, as of the dates indicated:


	June 30, 2025						December 31, 2024
	With No Allowance		With an Allowance		Total		With No Allowance		With an Allowance		Total
Commercial Real Estate
Commercial real estate owner-occupied	$	1,912	$	199	$	2,111	$	2,013	$	209	$	2,222
Total	$	1,912	$	199	$	2,111	$	2,013	$	209	$	2,222

No accrued interest receivable was reversed against interest income during the three and six months ended June 30, 2025 or June 30, 2024.

Allowance for Credit Losses on Loans (“ACLL”)

The following tables present the activity in the ACLL by portfolio segment for the periods indicated:


	Activity in the ACLL for the Six Months Ended June 30, 2025
	Real Estate Construction		Consumer Real Estate			Commercial Real Estate		Commercial Non Real Estate			Public Sector and IDA			Consumer Non Real Estate			Unallocated			Total
Balance, December 31, 2024	$	348	$	3,926		$	4,299	$	655		$	336		$	648		$	50		$	10,262
Charge-offs		-		(3	)		-		-			-			(250	)		-			(253	)
Recoveries		-		-			16		31			-			44			-			91
Provision for (recovery of) credit losses		18		9			116		(62	)		(13	)		294			(40	)		322
Balance, June 30, 2025	$	366	$	3,932		$	4,431	$	624		$	323		$	736		$	10		$	10,422


	Activity in the ACLL for the Six Months Ended June 30, 2024
	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate			Public Sector and IDA			Consumer Non Real Estate			Unallocated		Total
Balance, December 31, 2023	$	408	$	3,162	$	3,576	$	682		$	333		$	583		$	350	$	9,094
Charge-offs		-		-		-		(20	)		-			(157	)		-		(177	)
Recoveries		-		-		29		3			-			71			-		103
Provision for (recovery of) credit losses		131		376		594		79			(10	)		87			50		1,307
Merger adjustment(1)		10		97		55		4			-			9			-		175
Balance, June 30, 2024	$	549	$	3,635	$	4,254	$	748		$	323		$	593		$	400	$	10,502


	Activity in the ACLL for the Year Ended December 31, 2024
	Real Estate Construction			Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate			Public Sector and IDA		Consumer Non Real Estate			Unallocated			Total
Balance, December 31, 2023	$	408		$	3,162	$	3,576	$	682		$	333	$	583		$	350		$	9,094
Charge-offs		-			-		-		(166	)		-		(353	)		-			(519	)
Recoveries		-			-		53		79			-		138			-			270
Provision for (recovery of) credit losses		(70	)		667		615		56			3		271			(300	)		1,242
Merger adjustment(1)		10			97		55		4			-		9			-			175
Balance, December 31, 2024	$	348		$	3,926	$	4,299	$	655		$	336	$	648		$	50		$	10,262

(1) Adjustment for PCD acquired loans.

The following tables present information about the ACLL for individually evaluated loans and collectively evaluated loans by portfolio segment as of the dates indicated.


	ACLL by Segment and Evaluation Method
June 30, 2025	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Unallocated		Total
Individually evaluated	$	–	$	28	$	113	$	–	$	–	$	–	$	–	$	141
Collectively evaluated		366		3,904		4,318		624		323		736		10		10,281
Total	$	366	$	3,932	$	4,431	$	624	$	323	$	736	$	10	$	10,422


	ACLL by Segment and Evaluation Method
December 31, 2024	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Unallocated		Total
Individually evaluated	$	-	$	31	$	49	$	-	$	-	$	-	$	-	$	80
Collectively evaluated		348		3,895		4,250		655		336		648		50		10,182
Total	$	348	$	3,926	$	4,299	$	655	$	336	$	648	$	50	$	10,262

The following tables present information about individually evaluated loans and collectively evaluated loans by portfolio segment as of the dates indicated.


	Loans by Segment and Evaluation Method
June 30, 2025	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Total
Individually evaluated	$	–	$	481	$	10,368	$	–	$	–	$	–	$	10,849
Collectively evaluated		44,529		317,468		484,387		51,383		56,347		46,172		1,000,286
Total	$	44,529	$	317,949	$	494,755	$	51,383	$	56,347	$	46,172	$	1,011,135


	Loans by Segment and Evaluation Method
December 31, 2024	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Total
Individually evaluated	$	-	$	497	$	10,024	$	-	$	-	$	-	$	10,521
Collectively evaluated		50,798		307,358		468,054		51,844		57,171		42,867		978,092
Total	$	50,798	$	307,855	$	478,078	$	51,844	$	57,171	$	42,867	$	988,613

Collateral Dependent Loans

Loans are collateral dependent when repayment is expected substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. Collateral dependent loans are individually evaluated. The Company measures the ACLL on collateral dependent loans based upon the fair value of the collateral. Fair value of the collateral is adjusted for liquidation costs/discounts. If the fair value of the collateral falls below the amortized cost of the loan, the shortfall is recognized in the ACLL. If the fair value of the collateral exceeds the amortized cost, no ACLL is required.

As of June 30, 2025 and December 31, 2024, three of the Company’s individually evaluated loans were collateral dependent and secured by real estate. The following table provides detail on collateral dependent loans as of the dates indicated:


	June 30, 2025				December 31, 2024
	Balance		Related Allowance		Balance		Related Allowance
Commercial Real Estate
Commercial real estate, owner occupied	$	8,224	$	-	$	8,387	$	-
Commercial real estate, other		682		-		872		-
Total Loans	$	8,906	$	-	$	9,259	$	-

Credit Quality

The Company categorizes loans by risk based on relevant information about the ability of borrowers to service their debt, including: collateral and financial information, payment history, credit documentation and current economic trends, among other factors. At origination, each loan is assigned a risk rating. Ongoing analysis of the loan portfolio adjusts risk ratings on an individual loan basis to reflect updated information. General descriptions of risk ratings are as follows:

•

Pass: loans with acceptable credit quality are rated pass.

•

Special mention: loans with potential weakness due to challenging economic or financial conditions are rated special mention.

•

Classified: loans with well-defined weaknesses that heighten the risk of default are rated classified.

The following tables present the amortized cost basis of the loan portfolio by year of origination, loan class and credit quality as of June 30, 2025 and December 31, 2024, and gross charge-offs by year of origination for the six months ended June 30, 2025 and the year ended December 31, 2024.


	Term Loans Amortized Cost Basis by Origination Year														Revolving Loans Converted
June 30, 2025	Prior		2021		2022		2023		2024		2025		Revolving		to Term		Total
Construction, residential
Pass	$	-	$	-	$	-	$	793	$	3,535	$	1,134	$	5,514	$	3,129	$	14,105
Construction, other
Pass	$	4,284	$	777	$	1,645	$	12,053	$	2,704	$	3,852	$	5,059	$	50	$	30,424
Equity lines
Pass	$	-	$	-	$	-	$	-	$	-	$	-	$	24,232	$	-	$	24,232
Residential closed-end first liens
Pass	$	58,727	$	33,918	$	36,630	$	27,473	$	22,490	$	12,317	$	824	$	1,374	$	193,753
Special Mention		1		-		134		-		-		-		-		-		135
Classified		62		-		-		-		-		-		-		-		62
Total	$	58,790	$	33,918	$	36,764	$	27,473	$	22,490	$	12,317	$	824	$	1,374	$	193,950
Residential closed-end junior liens
Pass	$	1,557	$	259	$	2,014	$	1,403	$	2,920	$	1,260	$	32	$	-	$	9,445
Investor-owned residential real estate
Pass	$	46,978	$	16,957	$	12,020	$	3,318	$	3,785	$	4,679	$	2,104	$	-	$	89,841
Classified		481		-		-		-		-		-		-		-		481
Total	$	47,459	$	16,957	$	12,020	$	3,318	$	3,785	$	4,679	$	2,104	$	-	$	90,322
Multifamily residential real estate
Pass	$	41,084	$	38,987	$	40,357	$	4,182	$	13,124	$	22,204	$	145	$	-	$	160,083
Classified		194		-		-		-		-		-		-		-		194
Total	$	41,278	$	38,987	$	40,357	$	4,182	$	13,124	$	22,204	$	145	$	-	$	160,277
Commercial real estate, owner occupied
Pass	$	73,254	$	6,998	$	27,363	$	9,328	$	5,750	$	3,801	$	2,049	$	-	$	128,543
Special mention		6,312		-		-		-		-		-		-		-		6,312
Classified		2,927		-		-		-		-		-		254		-		3,181
Total	$	82,493	$	6,998	$	27,363	$	9,328	$	5,750	$	3,801	$	2,303	$	-	$	138,036
Commercial real estate, other
Pass	$	101,833	$	35,456	$	31,381	$	16,798	$	6,265	$	1,979	$	1,504	$	-	$	195,216
Classified		682		-		544		-		-		-		-		-		1,226
Total	$	102,515	$	35,456	$	31,925	$	16,798	$	6,265	$	1,979	$	1,504	$	-	$	196,442
Commercial and industrial
Pass	$	7,425	$	10,735	$	3,547	$	4,392	$	6,778	$	6,350	$	12,148	$	8	$	51,383
Public sector and IDA
Pass	$	19,360	$	24,693	$	5,717	$	6,524	$	53	$	-	$	-	$	-	$	56,347
Credit cards
Pass	$	-	$	-	$	-	$	-	$	-	$	-	$	4,993	$	-	$	4,993
Automobile
Pass	$	136	$	412	$	1,064	$	3,086	$	4,456	$	3,057	$	-	$	-	$	12,211
Special Mention		-		-		-		2		-		-		-		-		2
Classified		-		4		-		-		9		-		-		-		13
Total	$	136	$	416	$	1,064	$	3,088	$	4,465	$	3,057	$	-	$	-	$	12,226
Other consumer
Pass	$	456	$	585	$	1,440	$	3,654	$	8,234	$	13,145	$	1,421	$	-	$	28,935
Special Mention		-		-		-		-		7		4		-		-		11
Classified		-		-		-		3		4		-		-		-		7
Total	$	456	$	585	$	1,440	$	3,657	$	8,245	$	13,149	$	1,421	$	-	$	28,953
Total Loans
Pass	$	355,094	$	169,777	$	163,178	$	93,004	$	80,094	$	73,778	$	60,025	$	4,561	$	999,511
Special Mention		6,313		-		134		2		7		4		-		-		6,460
Classified		4,346		4		544		3		13		-		254		-		5,164
Total	$	365,753	$	169,781	$	163,856	$	93,009	$	80,114	$	73,782	$	60,279	$	4,561	$	1,011,135


	Gross Charge Offs by Origination Year for the Six Months Ended June 30, 2025														Revolving Loans Converted
	Prior		2021		2022		2023		2024		2025		Revolving		to Term		Total
Residential closed-end first liens	$	3	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	3
Credit cards		-		-		-		-		-		-		19		-		19
Automobile		-		-		13		33		7		-		-		-		53
Other consumer		-		-		20		14		66		78		-		-		178
Total Gross Charge-Offs	$	3	$	-	$	33	$	47	$	73	$	78	$	19	$	-	$	253


	Term Loans Amortized Cost Basis by Origination Year														Revolving Loans Converted
December 31, 2024	Prior		2020		2021		2022		2023		2024		Revolving		to Term		Total
Construction, residential
Pass	$	-	$	-	$	-	$	337	$	2,312	$	3,328	$	10,185	$	-	$	16,162
Construction, other
Pass	$	2,938	$	1,138	$	805	$	10,795	$	8,669	$	6,194	$	4,097	$	-	$	34,636
Equity lines
Pass	$	363	$	249	$	387	$	470	$	816	$	402	$	19,894	$	12	$	22,593
Classified		-		-		-		-		-		-		25		-		25
Total	$	363	$	249	$	387	$	470	$	816	$	402	$	19,919	$	12	$	22,618
Residential closed-end first liens
Pass	$	42,211	$	18,111	$	33,630	$	35,557	$	21,593	$	18,991	$	-	$	303	$	170,396
Special mention		367		-		-		-		-		-		-		-		367
Classified		441		-		-		178		-		-		-		-		619
Total	$	43,019	$	18,111	$	33,630	$	35,735	$	21,593	$	18,991	$	-	$	303	$	171,382
Residential closed-end junior liens
Pass	$	1,596	$	-	$	277	$	2,048	$	1,597	$	3,004	$	31	$	21	$	8,574
Investor-owned residential real estate
Pass	$	28,919	$	22,946	$	19,280	$	16,242	$	8,175	$	3,266	$	1,907	$	3,668	$	104,403
Special mention		-		-		-		138		-		-		-		-		138
Classified		740		-		-		-		-		-		-		-		740
Total	$	29,659	$	22,946	$	19,280	$	16,380	$	8,175	$	3,266	$	1,907	$	3,668	$	105,281
Multifamily residential real estate
Pass	$	39,665	$	2,055	$	39,879	$	40,198	$	8,470	$	13,205	$	158	$	-	$	143,630
Commercial real estate, owner occupied
Pass	$	52,916	$	24,539	$	7,432	$	28,753	$	10,351	$	3,810	$	3,422	$	83	$	131,306
Special mention		6,375		-		-		-		-		-		-		-		6,375
Classified		2,222		738		-		-		-		-		12		-		2,972
Total	$	61,513	$	25,277	$	7,432	$	28,753	$	10,351	$	3,810	$	3,434	$	83	$	140,653
Commercial real estate, other
Pass	$	90,358	$	17,919	$	36,777	$	23,775	$	16,990	$	5,583	$	1,703	$	-	$	193,105
Classified		690		-		-		-		-		-		-		-		690
Total	$	91,048	$	17,919	$	36,777	$	23,775	$	16,990	$	5,583	$	1,703	$	-	$	193,795
Commercial and industrial
Pass	$	6,437	$	2,070	$	11,849	$	5,528	$	5,903	$	8,407	$	11,644	$	-	$	51,838
Classified		-		-		-		6		-		-		-		-		6
Total	$	6,437	$	2,070	$	11,849	$	5,534	$	5,903	$	8,407	$	11,644	$	-	$	51,844
Public sector and IDA
Pass	$	19,309	$	218	$	25,232	$	5,922	$	6,490	$	-	$	-	$	-	$	57,171
Credit cards
Pass	$	-	$	-	$	-	$	-	$	-	$	-	$	4,698	$	-	$	4,698
Automobile
Pass	$	36	$	243	$	727	$	1,640	$	4,474	$	5,832	$	-	$	-	$	12,952
Special mention		-		-		-		-		4		-		-		-		4
Classified		-		-		-		-		28		11		-		-		39
Total	$	36	$	243	$	727	$	1,640	$	4,506	$	5,843	$	-	$	-	$	12,995
Other Consumer
Pass	$	184	$	401	$	874	$	2,274	$	4,804	$	15,846	$	760	$	-	$	25,143
Special mention		-		-		1		-		-		9		-		-		10
Classified		-		-		-		2		14		5		-		-		21
Total	$	184	$	401	$	875	$	2,276	$	4,818	$	15,860	$	760	$	-	$	25,174
Total Loans
Pass	$	284,932	$	89,889	$	177,149	$	173,539	$	100,644	$	87,868	$	58,499	$	4,087	$	976,607
Special mention		6,742		-		1		138		4		9		-		-		6,894
Classified		4,093		738		-		186		42		16		37		-		5,112
Total	$	295,767	$	90,627	$	177,150	$	173,863	$	100,690	$	87,893	$	58,536	$	4,087	$	988,613


	Gross Charge Offs by Origination Year for the Twelve Monts Ended December 31, 2024														Revolving Loans Converted
	Prior		2020		2021		2022		2023		2024		Revolving		to Term		Total
Commercial and industrial	$	125	$	-	$	-	$	-	$	-	$	22	$	19	$	-	$	166
Credit cards		-		-		-		-		-		-		53		-		53
Automobile		-		-		6		14		16		11		-		-		47
Other Consumer		-		4		15		19		94		121		-		-		253
Total YTD gross charge-offs	$	125	$	4	$	21	$	33	$	110	$	154	$	72	$	-	$	519

Loan Modifications to Borrowers Experiencing Financial Difficulty

On the date a loan is modified, the Company assesses whether the borrower is experiencing financial difficulty. If the borrower is experiencing financial difficulty, the loan is risk rated special mention or classified, as determined appropriate. If the loan exceeds $400, if it is placed in nonaccrual, or if foreclosure is probable, the loan is individually evaluated for the ACLL.

During the three and six months ended June 30, 2025, no loans were modified for borrowers experiencing financial difficulty. Two loans were modified for borrowers experiencing financial difficulty during the first three months of 2024. One of these loans was modified a second time during the three month period ended June 30, 2024.

The following table presents information as of June 30, 2024 about loans modified for borrowers experiencing financial difficulty during the six months ended June 30, 2024.

         June 30, 2024

         Amortized
Cost Basis

         % of
Class

         Type of
Modification

         Financial Effect

         Commercial Real Estate

Commercial real estate owner-occupied

6,396

5.57

Interest only
payments

6 months of interest only payments, re-amortization of the balance to contractual maturity

         Commercial Non real estate

Commercial and industrial

7

0.01

Term extension

Renewal of single-payment note for an additional 3 months

The Company closely monitors the performance of loans that are modified for borrowers experiencing financial difficulty. As of June 30, 2024, the loans were in current status and individually evaluated. There were no modified loans to borrowers experiencing financial difficulty that had a payment default during the three or six months ended June 30, 2025 and 2024 and that were modified in the twelve months prior. Default occurs when a payment is 90 days past due, the loan is fully or partially charged off or the Company forecloses on the collateral.

Consumer Real Estate Loans In Process of Foreclosure

As of June 30, 2025, the Company had no loans in process of foreclosure. As of December 31, 2024, three consumer real estate loans totaling $37 were in process of foreclosure.

ACL for Unfunded Commitments

The following tables present the balance and activity in the ACL for unfunded commitments for the six months ended June 30, 2025 and 2024:


Allowance for Credit Losses on Unfunded Commitments
Balance, December 31, 2024	$	251
Recovery of credit losses		(10	)
Balance, June 30, 2025	$	241

Balance, December 31, 2023	$	259
Recovery of credit losses		(15	)
FCB acquisition		7
Balance, June 30, 2024	$	251