v3.26.1
Loan Quality And Allowance For Credit Losses
3 Months Ended
Mar. 31, 2026
Loan Quality And Allowance For Credit Losses [Abstract]  
Loan Quality And Allowance For Credit Losses Note 6. Loan Quality and Allowance for Credit Losses

The Bank categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, and current economic trends, among other factors. Management utilizes a risk rating scale ranging from 1-Prime to 9-Loss to evaluate loan quality. This risk rating scale is used primarily for commercial purpose loans. Consumer purpose loans are identified as either performing or nonperforming based on the payment status of the loans. Nonperforming consumer loans are loans that are nonaccrual or 90 days or more past due and still accruing. The Bank uses the following definitions for risk ratings:

Pass (1-5): Loans are considered pass credits with lower or average risk and are not otherwise classified.

Other Assets Especially Mentioned (OAEM) (6): Loans classified as OAEM have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the borrower’s credit position at some future date.

Substandard (7): Loans classified as Substandard are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that

jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful (8): Loans classified as Doubtful have all the weaknesses inherent in those classified as 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.

Loss (9): Loans classified as Loss are considered uncollectable and the loan will be charged-off in the period it is deemed uncollectable.

Loans that do not share risk characteristics with pooled loans are evaluated on an individual basis. Loans evaluated individually are not included in the pool evaluation, this includes collateral dependent loans. Loans are considered Collateral Dependent when management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be provided substantially through the sale of the collateral, the expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for any discounts and selling costs as appropriate.

Management monitors loan performance on a monthly basis and performs a quarterly evaluation of the adequacy of the Allowance for Credit Loss for loans (ACL). The Bank begins enhanced monitoring of all loans rated 6–OAEM or worse and obtains a new appraisal or asset valuation for any loans placed on nonaccrual or rated 7-Substandard or worse. Management, at its discretion, may determine that additional adjustments to the appraisal or valuation are required. Valuation adjustments will be made as necessary based on factors, including, but not limited to: the economy, deferred maintenance, industry, type of property/equipment, age of the appraisal, etc. and the knowledge Management has about a particular situation. In addition, the cost to sell or liquidate the collateral is also estimated and deducted from the valuation in order to determine the net realizable value to the Bank. When determining the ACL, certain factors involved in the evaluation are inherently subjective and require material estimates that may be susceptible to significant change, including the amounts and timing of future cash flows. Management monitors the adequacy of the ACL on an ongoing basis and reports its adequacy quarterly to the Enterprise Risk Management Committee of the Board of Directors.

As of March 31, 2026, the Bank had outstanding loans to a related party of a Bank Director who is considered an “insider” under Regulation O. The Bank Director serves on the Board of Directors of the related party. The loans are currently classified as Substandard (rated 7) on the Bank’s internal credit risk rating system, indicating potential weaknesses that warrant management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loans. As of March 31, 2026, the outstanding balance of the loans was $4.2 million, and were not past due or on nonaccrual status.


The following table presents loans by year of origination and internally assigned risk ratings:

(Dollars in thousands)

Revolving

Revolving

Term Loans

Loans

Loans

Amortized Cost Basis by Origination Year

Amortized

Converted

As of March 31, 2026

2026

2025

2024

2023

2022

Prior

Cost Basis

to Term

Total

Residential real estate 1-4 family:

Commercial:

Risk rating:

Pass (1-5)

$

3,349 

$

6,554 

$

4,585 

$

14,150 

$

6,193 

$

28,828 

$

5,904 

$

$

69,563 

OAEM (6)

95 

95 

Substandard (7)

227 

227 

Doubtful (8)

Total Commercial

3,349 

6,554 

4,585 

14,150 

6,193 

29,055 

5,999 

69,885 

Consumer:

Performing

9,149 

42,000 

46,710 

57,334 

27,549 

43,833 

69,901 

15,429 

311,905 

Nonperforming

1 

20 

21 

Total Consumer

9,149 

42,000 

46,710 

57,334 

27,549 

43,834 

69,921 

15,429 

311,926 

Total

$

12,498 

$

48,554 

$

51,295 

$

71,484 

$

33,742 

$

72,889 

$

75,920 

$

15,429 

$

381,811 

Current period gross charge-offs

$

$

$

$

$

$

$

$

$

Residential real estate construction:

Commercial:

Risk rating:

Pass (1-5)

$

411 

$

3,132 

$

16,615 

$

1,663 

$

138 

$

2,426 

$

$

$

24,385 

OAEM (6)

Substandard (7)

Doubtful (8)

Total Commercial

411 

3,132 

16,615 

1,663 

138 

2,426 

24,385 

Consumer:

Performing

1,478 

26,111 

4,839 

32,428 

Nonperforming

Total Consumer

1,478 

26,111 

4,839 

32,428 

Total

$

1,889 

$

29,243 

$

21,454 

$

1,663 

$

138 

$

2,426 

$

$

$

56,813 

Current period gross charge-offs

$

$

$

$

$

$

$

$

$

Commercial real estate:

Risk rating:

Pass (1-5)

$

24,860 

$

132,458 

130,702 

199,953 

$

96,418 

$

267,093 

$

12,668 

$

$

864,152 

OAEM (6)

12,878 

916 

6,768 

15 

20,577 

Substandard (7)

233 

21,911 

234 

1,960 

24,338 

Doubtful (8)

Total

$

24,860 

$

132,458 

$

130,935 

$

234,742 

$

97,568 

$

275,821 

$

12,683 

$

$

909,067 

Current period gross charge-offs

$

$

$

$

$

$

$

$

$

Commercial:

Risk rating:

Pass (1-5)

$

3,255 

$

17,635 

$

20,217 

$

10,021 

$

17,917 

$

96,375 

$

41,139 

$

$

206,559 

OAEM (6)

8 

344 

1,277 

200 

1,829 

Substandard (7)

399 

732 

4,488 

5,619 

Doubtful (8)

Total

$

3,255 

$

17,635 

$

20,616 

$

10,029 

$

18,993 

$

97,652 

$

45,827 

$

$

214,007 

Current period gross charge-offs

$

(1)

$

$

(55)

$

$

(1)

$

$

(290)

$

$

(347)

Consumer:

Performing

605 

1,431 

1,009 

594 

165 

1,468 

5,439 

10,711 

Nonperforming

17 

17 

Total

$

605 

$

1,431 

$

1,009 

$

611 

$

165 

$

1,468 

$

5,439 

$

$

10,728 

Current period gross charge-offs

$

(16)

$

$

$

$

$

(3)

$

(22)

$

$

(41)


(Dollars in thousands)

Revolving

Revolving

Term Loans

Loans

Loans

Amortized Cost Basis by Origination Year

Amortized

Converted

As of December 31, 2025

2025

2024

2023

2022

2020

Prior

Cost Basis

to Term

Total

Residential real estate 1-4 family:

Commercial:

Risk rating:

Pass (1-5)

$

6,601 

$

4,914 

$

14,483 

$

6,381 

$

8,982 

$

23,381 

$

5,237 

$

$

69,979 

OAEM (6)

95 

95 

Substandard (7)

222 

222 

Doubtful (8)

Total Commercial

6,601 

4,914 

14,483 

6,381 

8,982 

23,603 

5,332 

70,296 

Consumer:

Performing

35,726 

45,927 

60,145 

27,930 

13,385 

31,675 

67,410 

15,872 

298,070 

Nonperforming

20 

20 

Total Consumer

35,726 

45,927 

60,145 

27,930 

13,385 

31,675 

67,430 

15,872 

298,090 

Total

$

42,327 

$

50,841 

$

74,628 

$

34,311 

$

22,367 

$

55,278 

$

72,762 

$

15,872 

$

368,386 

Current period gross charge-offs

$

$

$

$

$

$

$

$

$

Residential real estate construction:

Commercial:

Risk rating:

Pass (1-5)

$

4,228 

$

16,503 

$

1,204 

$

$

1,093 

$

1,488 

$

$

$

24,516 

OAEM (6)

Substandard (7)

Doubtful (8)

Total Commercial

4,228 

16,503 

1,204 

1,093 

1,488 

24,516 

Consumer:

Performing

24,744 

4,865 

29,609 

Nonperforming

Total Consumer

24,744 

4,865 

29,609 

Total

$

28,972 

$

21,368 

$

1,204 

$

$

1,093 

$

1,488 

$

$

$

54,125 

Current period gross charge-offs

$

$

$

$

$

$

$

$

$

Commercial real estate:

Risk rating:

Pass (1-5)

$

137,253 

$

126,702 

$

206,916 

$

96,083 

$

84,154 

$

189,407 

$

12,236 

$

$

852,751 

OAEM (6)

12,956 

448 

689 

11,924 

26,017 

Substandard (7)

544 

22,040 

239 

1,980 

24,803 

Doubtful (8)

Total

$

137,253 

$

127,246 

$

241,912 

$

96,770 

$

84,843 

$

203,311 

$

12,236 

$

$

903,571 

Current period gross charge-offs

$

$

$

$

$

$

$

$

$

Commercial:

Risk rating:

Pass (1-5)

$

17,563 

$

23,890 

$

11,979 

$

19,675 

$

33,813 

$

65,515 

$

45,425 

$

$

217,860 

OAEM (6)

8 

359 

1,323 

198 

1,888 

Substandard (7)

553 

583 

4,615 

5,751 

Doubtful (8)

Total

$

17,563 

$

24,443 

$

11,987 

$

20,617 

$

35,136 

$

65,515 

$

50,238 

$

$

225,499 

Current period gross charge-offs

$

(9)

$

$

(17)

$

$

(2)

$

(8)

$

$

$

(36)

Consumer:

Performing

1,853 

1,145 

709 

201 

1,499 

4,245 

9,652 

Nonperforming

5 

5 

Total

$

1,853 

$

1,145 

$

709 

$

201 

$

1,499 

$

$

4,250 

$

$

9,657 

Current period gross charge-offs

$

(71)

$

(6)

$

(18)

$

(3)

$

(1)

$

(2)

$

(30)

$

$

(131)


The following table presents the amortized cost basis of loans on nonaccrual status and loans past due 90 days or more and still accruing as of the date presented:

March 31, 2026

December 31, 2025

(Dollars in thousands)

Nonaccrual and Loans past due 90 Days or more

Nonaccrual and Loans past due 90 Days or more

Loans past due

Loans past due

Nonaccrual

Nonaccrual

90 Days or more

Nonaccrual

Nonaccrual

90 Days or more

Without ACL

With ACL

Still Accruing

Without ACL

With ACL

Still Accruing

March 31, 2026

Residential Real Estate 1-4 Family

First liens

$

51 

$

$

1 

$

$

$

Junior liens and lines of credit

20 

20 

Total

71 

1 

20 

Residential real estate - construction

Commercial real estate

713 

7,027 

1,029 

7,119 

Commercial

49 

621 

55 

290 

Consumer

17 

5 

Total

$

833 

$

7,648 

$

18 

$

1,104 

$

7,409 

$

5 

At March 31, 2026, the Bank had $7.9 million of loans considered to be collateral dependent.  These loans are comprised of a commercial real estate construction loan totaling $7.0 million for a mixed-use project, a commercial real estate loan totaling $233 thousand and three commercial loans to a single borrower, secured by business assets, totaling $621 thousand. At December 31, 2025, collateral dependent loans totaled $7.1 million for a commercial real estate construction loan for a mixed-use project. As of March 31, 2026, the Bank had established a $1.0 million specific reserve for the commercial real estate construction loan and a $557 thousand specific reserve for the three commercial loans as of March 31, 2026.

At March 31, 2026 and December 31, 2025, the Bank had $0 of residential properties in the process of foreclosure.

The following table presents the aging of payments of the loan portfolio:

(Dollars in thousands)

Loans Past Due

Total

Total

30-59 Days

60-89 Days

90 Days+

Past Due

Current

Loans

March 31, 2026

Residential Real Estate 1-4 Family

First liens

$

164 

$

28 

$

43 

$

235 

$

288,186 

$

288,421 

Junior liens and lines of credit

216 

20 

236 

93,154 

93,390 

Total

380 

28 

63 

471 

381,340 

381,811 

Residential real estate - construction

56,813 

56,813 

Commercial real estate

7,456 

713 

8,169 

900,898 

909,067 

Commercial

621 

49 

670 

213,337 

214,007 

Consumer

26 

2 

17 

45 

10,683 

10,728 

Total

$

7,862 

$

651 

$

842 

$

9,355 

$

1,563,071 

$

1,572,426 

Loans Past Due

Total

Total

30-59 Days

60-89 Days

90 Days+

Past Due

Current

Loans

December 31, 2025

Residential Real Estate 1-4 Family

First liens

$

145 

$

855 

$

$

1,000 

$

275,897 

$

276,897 

Junior liens and lines of credit

333 

160 

20 

513 

90,976 

91,489 

Total

478 

1,015 

20 

1,513 

366,873 

368,386 

Residential real estate - construction

54,125 

54,125 

Commercial real estate

542 

1,029 

1,571 

902,000 

903,571 

Commercial

500 

1 

345 

846 

224,653 

225,499 

Consumer

55 

19 

5 

79 

9,578 

9,657 

Total

$

1,575 

$

1,035 

$

1,399 

$

4,009 

$

1,557,229 

$

1,561,238 

The following table presents, by class, the activity in the Allowance for Credit Losses (ACL) for the periods shown:

Residential Real Estate 1-4 Family

First

Junior Liens &

Commercial

(Dollars in thousands)

Liens

Lines of Credit

Construction

Real Estate

Commercial

Consumer

Total

ACL at December 31, 2025

$

1,665 

$

500 

$

652 

$

14,042 

$

3,641 

$

155 

$

20,655 

Charge-offs

(347)

(41)

(388)

Recoveries

67 

179 

14 

260 

Provision

68 

10 

(27)

538 

(436)

49 

202 

ACL at March 31, 2026

$

1,733 

$

510 

$

692 

$

14,580 

$

3,037 

$

177 

$

20,729 

ACL at December 31, 2024

$

1,497 

$

461 

$

376 

$

12,004 

$

3,182 

$

133 

$

17,653 

Charge-offs

(3)

(18)

(21)

Recoveries

3 

54 

5 

62 

Provision

32 

9 

76 

476 

161 

(4)

750 

ACL at March 31, 2025

$

1,529 

$

470 

$

455 

$

12,480 

$

3,394 

$

116 

$

18,444 

As of March 31, 2026 and December 31, 2025 there were no modifications made to borrowers experiencing financial difficulty. During the three months ended March 31, 2026 and 2025, there were no loans to borrowers experiencing financial difficulty that had a payment default and were modified in the twelve months prior to that default. Default is determined at 90 or more days past due, upon charge-off, or upon foreclosure.