v3.26.1
Loans and Allowance for Credit Losses
 6 Months Ended
Jun. 30, 2026
Receivables [Abstract]  
Loans and Allowance for Credit Losses Loans and Allowance for Credit Losses
The Company’s loan portfolio is its largest class of earning assets and typically provides higher yields than other types of earning assets. Associated with the higher yields is an inherent amount of credit risk which the Company attempts to mitigate through strong underwriting practices. Table 4.1 presents the balance of each major product type within the Company’s portfolio as of the dates indicated.
Table 4.1: Loans Outstanding
(in thousands)June 30, 2026December 31, 2025
Real estate:
Commercial$3,597,173 $3,305,713 
Commercial land and development2,507 1,352 
Commercial construction124,053 96,760 
Residential construction21,809 8,389 
Residential41,874 37,566 
Farmland59,900 59,606 
Commercial:
Secured258,736 251,736 
Unsecured41,263 40,422 
Consumer and other374,614 275,475 
Subtotal4,521,929 4,077,019 
Net deferred loan fees(2,248)(2,090)
Loans held for investment4,519,681 4,074,929 
Allowance for credit losses(47,335)(44,409)
Loans held for investment, net of allowance for credit losses$4,472,346 $4,030,520 
Underwriting
Real estate loans: Real estate loans are subject to underwriting standards and processes similar to those for commercial loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts, and the repayment of these loans is generally largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected than other loans by conditions in the real estate market or in the general economy. The properties securing the Company’s commercial real estate portfolio are diverse in terms of type. This diversity helps reduce the Company’s exposure to adverse economic events that affect any single market or industry. Management monitors and evaluates commercial real estate loans based on collateral, geography, and risk grade criteria.
Construction loans: With respect to construction loans that the Company may originate from time to time, the Company generally requires the borrower to have had an existing relationship with the Company and have a proven record of success. Construction loans may be underwritten utilizing feasibility studies, independent appraisal reviews, sensitivity analysis of absorption and lease rates, and financial analysis of the developers and property owners. Construction loans are generally based upon estimates of costs and value associated with the completed project. These estimates may be inaccurate. Construction loans often involve the disbursement of substantial funds with repayment substantially dependent on the ultimate success of the project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property, or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored using on-site inspections and are generally considered to have higher risks than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions, and the availability of long-term financing.
Residential real estate loans: Residential real estate loans are underwritten based upon the borrower’s income, credit history, and collateral. To monitor and manage residential loan risk, policies and procedures are developed and modified,
as needed. This activity, coupled with relatively small loan amounts that are spread across many individual borrowers, minimizes risk. Underwriting standards for home loans are heavily influenced by statutory requirements, which include, but are not limited to, a maximum loan-to-value percentage, collection remedies, the number of such loans a borrower can have at one time, and documentation requirements.
Farmland loans: Farmland loans are generally made to producers and processors of crops and livestock. Repayment is primarily from the sale of an agricultural product or service. Farmland loans are secured by real property and are susceptible to changes in market demand for specific commodities. This may be exacerbated by, among other things, industry changes, changes in the individual financial capacity of the business owner, general economic conditions, changes in business cycles, and adverse weather conditions.
Commercial loans: Commercial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and prudently expand its business. Underwriting standards are designed to promote relationship banking rather than transactional banking. Once it is determined that the borrower’s management possesses sound ethics and solid business acumen, the Company’s management examines current and projected cash flows to determine the ability of the borrower to repay its obligations as agreed. Commercial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected, and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.
Consumer loans: The Company purchased consumer loans underwritten utilizing credit scoring analysis to supplement the underwriting process. To monitor and manage consumer loan risk, policies and procedures are developed and modified, as needed. This activity, coupled with relatively small loan amounts that are spread across many individual borrowers, minimizes risk. Underwriting standards for home equity loans are heavily influenced by statutory requirements, which include, but are not limited to, a maximum loan-to-value percentage, collection remedies, the number of such loans a borrower can have at one time, and documentation requirements.
Credit Quality Indicators
The Company has established a loan risk rating system to measure and monitor the quality of the loan portfolio. All loans are assigned a risk rating from the inception of the loan until the loan is paid off. The primary loan grades are as follows:
Loans rated pass: These are loans to borrowers with satisfactory financial support, repayment capacity, and credit strength. Borrowers in this category demonstrate fundamentally sound financial positions, repayment capacity, credit history, and management expertise. Loans in this category must have an identifiable and stable source of repayment and meet the Company’s policy regarding debt service coverage ratios. These borrowers are capable of sustaining normal economic, market, or operational setbacks without significant financial impacts and their financial ratios and trends are acceptable. Negative external industry factors are generally not present. The loan may be secured, unsecured, or supported by non-real estate collateral for which the value is more difficult to determine and/or marketability is more uncertain.
Loans rated watch: These are loans that have developed an element of uncertainty, potentially reflecting deficient loan quality and significant issues, but losses do not appear to be imminent, and the issues may be temporary in nature. The significant issues are typically: (i) a history of losses or events that threaten the borrower’s viability; (ii) a property with significant depreciation and/or marketability concerns; or (iii) poor or deteriorating credit, occasional late payments, and/or limited reserves but the loan is generally kept current. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Company’s credit position at some future date.
Loans rated special mention: These are loans that exhibit or have an emerging credit weaknesses that warrants management’s close attention but do not yet demonstrate the well-defined weaknesses associated with a substandard classification. Credits in this category may include loans with documentation deficiencies that affect the Company’s legal position, covenant non-compliance expected to be resolved within six months, or other developing concerns that could cause deterioration in the borrower’s financial condition or repayment capacity if not corrected. Special mention is a transitional rating, and credits should generally be upgraded or downgraded within six months unless there is appropriate justification for remaining in this category.
Loans rated substandard: These are loans which are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged (if any). Loans so classified exhibit a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. Loans are characterized by the distinct possibility that the Company may sustain some loss if the deficiencies are not corrected.
Loans rated doubtful: These are loans for which the collection or liquidation of the entire debt is highly questionable or improbable. Typically, the possibility of loss is extremely high. The losses on these loans are deferred until all pending factors have been addressed.
Table 4.2 presents the amortized cost basis of the Company’s loans by origination year, where origination is defined as the later of origination or renewal date, and credit quality indicator as of the periods indicated.
Table 4.2: Loans by Risk Category and Vintage
Amortized Cost Basis by Origination Year as of June 30, 2026
(in thousands)20262025202420232022PriorRevolving LoansRevolving Converted to TermTotal
Real estate:
Commercial
Pass$425,279 $654,178 $401,054 $255,666 $771,984 $880,223 $16,341 $— $3,404,725 
Watch— — 5,686 2,962 69,551 61,728 1,391 — 141,318 
Special Mention5,505 — — 1,212 7,175 14,967 — — 28,859 
Substandard— 1,037 — — — 17,598 464 — 19,099 
Total430,784 655,215 406,740 259,840 848,710 974,516 18,196 — 3,594,001 
Commercial land and development
Pass772 819 69 — — 355 496 — 2,511 
Total772 819 69 — — 355 496 — 2,511 
Commercial construction
Pass11,715 36,020 9,148 50,899 519 — — — 108,301 
Special Mention— — 15,373 — — — — — 15,373 
Total11,715 36,020 24,521 50,899 519 — — — 123,674 
Residential construction
Pass5,964 15,806 — — — — — — 21,770 
Total5,964 15,806 — — — — — — 21,770 
Residential
Pass12,349 2,956 5,731 4,692 2,644 10,633 2,900 — 41,905 
Total12,349 2,956 5,731 4,692 2,644 10,633 2,900 — 41,905 
Farmland
Pass2,697 19,712 1,032 1,307 6,043 28,508 — — 59,299 
Watch— — — — — 576 — — 576 
Total2,697 19,712 1,032 1,307 6,043 29,084 — — 59,875 
Commercial:
Secured
Pass15,210 54,275 21,522 13,380 13,310 18,884 111,163 350 248,094 
Watch— — 92 520 6,763 2,728 — — 10,103 
Special Mention— — 203 208 181 — 2 — 594 
Substandard186 — — 33 374 11 544 — 1,148 
Total15,396 54,275 21,817 14,141 20,628 21,623 111,709 350 259,939 
Unsecured
Pass3,092 12,026 7,037 2,320 850 3,600 9,862 — 38,787 
Watch— — — — — — 2,500 — 2,500 
Total3,092 12,026 7,037 2,320 850 3,600 12,362 — 41,287 
Consumer and other
Pass136,008 70,794 143,724 16,615 3,943 3,516 115 — 374,715 
Substandard— — — — 4 — — — 4 
Total136,008 70,794 143,724 16,615 3,947 3,516 115 — 374,719 
Total$618,777 $867,623 $610,671 $349,814 $883,341 $1,043,327 $145,778 $350 $4,519,681 
Total loans held for investment by risk category
Pass613,086 866,586 589,317 344,879 799,293 945,719 140,877 350 4,300,107 
Watch— — 5,778 3,482 76,314 65,032 3,891 — 154,497 
Special Mention5,505 — 15,576 1,420 7,356 14,967 2 — 44,826 
Substandard186 1,037 — 33 378 17,609 1,008 — 20,251 
Total$618,777 $867,623 $610,671 $349,814 $883,341 $1,043,327 $145,778 $350 $4,519,681 
Table 4.2: Loans by Risk Category and Vintage (continued)
Amortized Cost Basis by Origination Year as of December 31, 2025
(in thousands)20252024202320222021PriorRevolving LoansRevolving Converted to TermTotal
Real estate:
Commercial
Pass$670,067 $414,556 $282,656 $831,032 $573,695 $384,650 $13,549 $— $3,170,205 
Watch200 — 2,974 31,209 16,949 23,407 1,391 — 76,130 
Special Mention— — — 7,256 6,226 21,623 — — 35,105 
Substandard1,044 — 2,122 — 3,700 14,040 415 — 21,321 
Total671,311 414,556 287,752 869,497 600,570 443,720 15,355 — 3,302,761 
Commercial land and development
Pass414 75 — — — 369 496 — 1,354 
Total414 75 — — — 369 496 — 1,354 
Commercial construction
Pass19,160 11,692 50,158 522 — — — — 81,532 
Watch— 14,891 — — — — — — 14,891 
Total19,160 26,583 50,158 522 — — — — 96,423 
Residential construction
Pass8,341 — — — — — — — 8,341 
Total8,341 — — — — — — — 8,341 
Residential
Pass6,285 5,923 4,718 2,784 8,883 7,548 1,459 — 37,600 
Total6,285 5,923 4,718 2,784 8,883 7,548 1,459 — 37,600 
Farmland
Pass19,761 1,080 1,994 6,126 8,215 21,323 — — 58,499 
Watch— — — — — 585 — — 585 
Special Mention— 500 — — — — — — 500 
Total19,761 1,580 1,994 6,126 8,215 21,908 — — 59,584 
Commercial:
Secured
Pass53,217 25,960 15,257 16,058 6,881 15,762 106,526 — 239,661 
Watch— 95 528 6,867 1,665 1,122 — — 10,277 
Special Mention73 — 251 212 — — 1,374 — 1,910 
Substandard167 — 166 34 74 17 499 — 957 
Total53,457 26,055 16,202 23,171 8,620 16,901 108,399 — 252,805 
Unsecured
Pass12,597 8,163 2,514 1,282 1,828 2,874 11,195 — 40,453 
Total12,597 8,163 2,514 1,282 1,828 2,874 11,195 — 40,453 
Consumer and other
Pass72,893 172,130 21,159 4,976 4,172 120 152 — 275,602 
Substandard— — — 6 — — — — 6 
Total72,893 172,130 21,159 4,982 4,172 120 152 — 275,608 
Total$864,219 $655,065 $384,497 $908,364 $632,288 $493,440 $137,056 $— $4,074,929 
Total loans held for investment
Pass862,735 639,579 378,456 862,780 603,674 432,646 133,377 — 3,913,247 
Watch200 14,986 3,502 38,076 18,614 25,114 1,391 — 101,883 
Special Mention73 500 251 7,468 6,226 21,623 1,374 — 37,515 
Substandard1,211 — 2,288 40 3,774 14,057 914 — 22,284 
Total$864,219 $655,065 $384,497 $908,364 $632,288 $493,440 $137,056 $— $4,074,929 
Management regularly reviews the Company’s loans for accuracy of risk grades whenever new information is received. Borrowers are generally required to submit financial information at regular intervals. Typically, commercial borrowers with lines of credit are required to submit financial information with reporting intervals generally ranging from monthly to annually depending on credit size, risk, and complexity. All commercial borrowers with loans exceeding a certain dollar threshold are usually required to submit financials annually for review, which includes business financial statements, rent rolls, property income statements, and tax returns. Management monitors construction loans monthly and reviews consumer loans based on delinquency. Management also reviews loans graded “watch” or worse, regardless of loan type, no less than quarterly.
Table 4.3 presents the Company’s gross charge-offs by origination year and class, where origination is defined as the later of origination or renewal date, for the periods indicated.
Table 4.3: Gross Charge-Offs by Vintage
Gross Charge-Offs by Origination Year
for the six months ended June 30, 2026
(in thousands)20262025202420232022PriorRevolving LoansRevolving Converted to TermTotal
Commercial:
Secured$— $91 $570 $410 $317 $482 $— $— $1,870 
Consumer and other— — — 29 81 37 — — 147 
Total$— $91 $570 $439 $398 $519 $— $— $2,017 
Gross Charge-Offs by Origination Year
for the six months ended June 30, 2025
(in thousands)20252024202320222021PriorRevolving LoansRevolving Converted to TermTotal
Commercial:
Secured$— $224 $444 $386 $214 $993 $— $— $2,261 
Unsecured— — — — 50 — — — 50 
Consumer and other— — 13 81 49 — — — 143 
Total$— $224 $457 $467 $313 $993 $— $— $2,454 
Table 4.4 shows the age analysis of past due loans by class as of the dates shown.
Table 4.4: Age Analysis of Past Due Loans by Class
(in thousands)Past Due
30-59 Days60-89 DaysGreater Than 90 DaysTotal Past DueCurrentTotal Loans Receivable
June 30, 2026
Real estate:
Commercial$— $— $— $— $3,594,001 $3,594,001 
Commercial land and development— — — — 2,511 2,511 
Commercial construction— — — — 123,674 123,674 
Residential construction— — — — 21,770 21,770 
Residential— — — — 41,905 41,905 
Farmland— — — — 59,875 59,875 
Commercial:
Secured1,322 83 217 1,622 258,317 259,939 
Unsecured— — — — 41,287 41,287 
Consumer and other22 9 — 31 374,688 374,719 
Total$1,344 $92 $217 $1,653 $4,518,028 $4,519,681 
December 31, 2025
Real estate:
Commercial$859 $— $— $859 $3,301,902 $3,302,761 
Commercial land and development— — — — 1,354 1,354 
Commercial construction— — — — 96,423 96,423 
Residential construction— — — — 8,341 8,341 
Residential— — — — 37,600 37,600 
Farmland— — — — 59,584 59,584 
Commercial:
Secured691 8 183 882 251,923 252,805 
Unsecured— — — — 40,453 40,453 
Consumer and other46 — — 46 275,562 275,608 
Total $1,596 $8 $183 $1,787 $4,073,142 $4,074,929 
There were no loans greater than 90 days past due and still accruing interest income as of June 30, 2026 or December 31, 2025.
Table 4.5 presents the amortized cost basis of the Company’s collateral dependent loans by class as of the periods indicated. These loans were individually evaluated for credit loss in accordance with the Company’s allowance for credit losses methodology.
Table 4.5: Collateral Dependent Loans by Class
(in thousands)June 30, 2026December 31, 2025
Real estate:
Commercial$13,083 $2,667 
Commercial:
Secured11 17 
Total$13,094 $2,684 
There were no residential real estate loans in process of foreclosure at June 30, 2026 or December 31, 2025.
Modifications to loans for borrowers experiencing financial difficulty may include interest rate reductions, principal or interest forgiveness, forbearances, term extensions, and other actions intended to minimize economic loss and to avoid foreclosure or repossession of collateral.
Table 4.6 presents the amortized cost basis of loans by class that were modified due to financial difficulty during the periods indicated.
Table 4.6: Amortized Cost Basis of Loans Modified due to Financial Difficulty
(in thousands)
For the three months ended June 30, 2026
For the three months ended June 30, 2025
Payment Change
Total % of Loans Receivable
Payment Change
Total % of Loans Receivable
Real estate:
Commercial$— — %$1,679 0.04 %
Total$— — %$1,679 0.04 %
(in thousands)
For the six months ended June 30, 2026
For the six months ended June 30, 2025
Payment Change
Total % of Loans Receivable
Payment Change
Total % of Loans Receivable
Real estate:
Commercial$— — %$1,679 0.04 %
Total$— — %$1,679 0.04 %
Table 4.7 presents the financial effect of loans by class that were modified due to financial difficulty during the periods indicated.
Table 4.7: Financial Effect of Loans Modified due to Financial Difficulty
For the three months ended June 30,
Modification Type
Loan Type
Financial Effect
2025Payment Change/Deferment
Real estate: Commercial
Reduced the loan payment owed by the borrower for two months and deferred the full loan payment for one month
2026None
For the six months ended June 30,
Modification Type
Loan Type
Financial Effect
2025Payment Change/Deferment
Real estate: Commercial
Reduced the loan payment owed by the borrower for five months and deferred the full loan payment for one month
2026None
Table 4.8 presents the Company’s non-accrual loans by class as of the periods indicated.
Table 4.8: Non-accrual Loans
(in thousands)June 30, 2026December 31, 2025
Real estate:
Commercial$13,122 $2,666 
Commercial:
Secured228 430 
Total non-accrual loans$13,350 $3,096 
No interest income was recognized on non-accrual loans in the three and six months ended June 30, 2026 or June 30, 2025. Non-accrual real estate loans did not have an allowance for credit losses as of June 30, 2026 or December 31, 2025. Non-accrual commercial loans had an immaterial allowance for credit losses as of June 30, 2026 and December 31, 2025. Interest income can be recognized on non-accrual loans in cases where resolution occurs through a sale or full payment is received on the non-accrual loan.
The amount of foregone interest income related to non-accrual loans was $94.1 thousand and $148.5 thousand for the three and six months ended June 30, 2026, as compared to $35.6 thousand and $70.9 thousand for the three and six months ended June 30, 2025.
Allowance for Credit Losses
Table 4.9 discloses activity in the allowance for credit losses for the periods indicated.
Table 4.9: Allowance for Credit Losses
(in thousands)Beginning BalanceCharge-offsRecoveriesProvision (Benefit)Ending Balance
Three months ended June 30, 2026
Real estate:
Commercial$26,919 $— $— $1,452 $28,371 
Commercial land and development93 — — (3)90 
Commercial construction3,982 — — 462 4,444 
Residential construction492 — — 41 533 
Residential421 — — (2)419 
Farmland495 — — (27)468 
Commercial:
Secured11,191 (1,189)158 (566)9,594 
Unsecured487 — — (1)486 
Consumer and other2,359 (102)79 594 2,930 
Total$46,439 $(1,291)$237 $1,950 $47,335 
Three months ended June 30, 2025
Real estate:
Commercial$27,027 $— $— $765 $27,792 
Commercial land and development70 — — (37)33 
Commercial construction2,227 — — 348 2,575 
Residential construction78 — — (3)75 
Residential279 — — 55 334 
Farmland598 — — 125 723 
Commercial:
Secured5,905 (1,516)96 1,138 5,623 
Unsecured403 (50)— 64 417 
Consumer and other2,637 (72)85 (55)2,595 
Total$39,224 $(1,638)$181 $2,400 $40,167 
Table 4.9: Allowance for Credit Losses (continued)
(in thousands)Beginning BalanceCharge-offsRecoveriesProvision (Benefit)Ending Balance
Six months ended June 30, 2026
Real estate:
Commercial$25,219 $— $— $3,152 $28,371 
Commercial land and development56 — — 34 90 
Commercial construction4,050 — — 394 4,444 
Residential construction213 — — 320 533 
Residential362 — — 57 419 
Farmland467 — — 1 468 
Commercial:
Secured11,204 (1,870)269 (9)9,594 
Unsecured482 — 2 2 486 
Consumer and other2,356 (147)122 599 2,930 
Total$44,409 $(2,017)$393 $4,550 $47,335 
Six months ended June 30, 2025
Real estate:
Commercial$25,864 $— $— $1,928 $27,792 
Commercial land and development78 — — (45)33 
Commercial construction2,268 — — 307 2,575 
Residential construction64 — — 11 75 
Residential270 — — 64 334 
Farmland607 — — 116 723 
Commercial:
Secured5,866 (2,261)160 1,858 5,623 
Unsecured278 (50)— 189 417 
Consumer and other2,496 (143)120 122 2,595 
Total$37,791 $(2,454)$280 $4,550 $40,167 
Unfunded Loan Commitment Reserves
Unfunded loan commitment reserves are included in “Interest payable and other liabilities” in the unaudited consolidated balance sheets. Provisions for unfunded loan commitments are included in “Provision for credit losses” in the unaudited consolidated statements of income.
Table 4.10: Unfunded Loan Commitment Reserves
Three months endedSix months ended
(in thousands)June 30, 2026June 30, 2025June 30, 2026June 30, 2025
Balance at beginning of period$772 $497 $697 $747 
Provision (benefit)
300 100 375 (150)
Balance at end of period$1,072 $597 $1,072 $597 
Pledged Loans
The Company’s FHLB line of credit is secured under terms of a collateral agreement by a pledge of certain qualifying loans with unpaid principal balances of $2.3 billion and $2.2 billion at June 30, 2026 and December 31, 2025, respectively. In addition, the Company pledges eligible tenants in common loans, which totaled $1.5 billion and $1.3 billion at June 30,
2026 and December 31, 2025, respectively, to secure its borrowing capacity with the Federal Reserve Discount Window. See Note 6, Subordinated Notes and Other Borrowings, for further discussion of these borrowings.