Note 3. Loans Receivable

Loans receivable were comprised of the following:

The unsecured consumer loans above include $0.2 million and $0.2 million of overdrafts reclassified as loans at June 30, 2026 and December 31, 2025, respectively.

The following tables present the amortized cost basis by segments of the loan portfolio summarized by aging categories as of June 30, 2026 and December 31, 2025:

The following tables summarize the activity in the allowance for credit losses on loans by loan class for the three and six months ended June 30, 2026 and 2025.

Allowance for Credit Losses By Portfolio Segment

The following table is a summary of the Company's non-accrual loans by major categories for the periods indicated.

The following table represents the accrued interest receivables written off by reversing interest income during the three and six months ended June 30, 2026 and 2025. 

During the six months ended June 30, 2026, $0.2 million of accrued interest reversed in 2025 was recovered. For the six months ended June 30, 2026, interest income on loans was impacted by $0.5 million in net reversals.

The Company has certain loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty. The underlying collateral can vary based upon the type of loan. The following provides more detail about the types of collateral that secure collateral dependent loans:

The following table details the amortized cost of collateral dependent loans for the periods indicated:

As of  June 30, 2026 and December 31, 2025, there was one residential real estate loan totaling $0.5 million in the process of foreclosure.

The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon asset origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Company uses a weighted average remaining life model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.

The effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses, given the measurement methodologies used to estimate the allowance; therefore, a change to the allowance for credit losses is generally not recorded upon modification. Occasionally, the Company modifies loans by providing principal forgiveness on certain loans. When principal forgiveness is provided, the amortized cost basis of the asset is written off against the allowance for credit losses. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses.

In some cases, the Company will modify a certain loan by providing multiple types of concessions. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another type of concession, such as principal forgiveness, may be granted. 

The Company did not modify any loans to borrowers experiencing financial difficulty during the six months ended June 30, 2026. The following table shows the amortized cost basis of the loans modified to borrowers experiencing financial difficulty, disaggregated by class of loans and type of concession granted and describes the financial effect of the modifications made to borrowers experiencing financial difficulty during the three and six months ended June 30, 2025.

The Company monitors loan payments on modified loans on an ongoing basis to determine how the loan is performing under the modification and if the loan is considered to have a payment default. Of the loans modified during the 12 months prior to June 30, 2026 to borrowers experiencing financial difficulties, three loans totaling $11.6 million were over 30 days past due as of June 30, 2026. One of these past due loans, with an amortized cost of $3.4 million, is a multifamily loan that initially received an interest rate reduction, and had a payment default during the three months ended June 30, 2026. All three of these past due loans are individually evaluated for credit losses as of June 30, 2026. Of the loans modified during the 12 months prior to June 30, 2025 to borrowers experiencing financial difficulties, six loans for $25.8 million were over 30 days past due and none had a payment default during the three months ended June 30, 2025. Five of these past due loans were individually evaluated for credit losses and the sixth loan was included in the general pool for allowance for credit losses as of  June 30, 2025. 

The Company 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, public information, and current economic trends, among other factors. Credit quality risk ratings include regulatory classifications of Pass, Watch, Criticized (Special Mention), Classified (Substandard), Doubtful, and Loss. Loans classified as Pass have quality metrics to support that the loan will be repaid according to the terms established. Loans classified as Watch have similar characteristics as Pass loans with some emerging signs of financial weaknesses that should be monitored closer. Loans classified as Watch are included in the Pass totals in the following tables. Loans classified as Criticized have potential weaknesses that deserve management’s close attention. If uncorrected, the potential weaknesses  may result in deterioration of prospects for repayment. Loans classified as Classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They include loans that are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified Doubtful have all the weaknesses inherent in Classified loans with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans classified as a Loss are considered uncollectible and are charged to the allowance for credit losses. 

The following tables summarize the recorded investment in the Company's loans by aggregate Pass and categories of Criticized and Classified within the Company’s internal risk rating system by year of origination as of June 30, 2026 and December 31, 2025.  The following tables also summarize gross charge-offs, by year of origination as of and for the six months ended June 30, 2026 and as of and for the year ended  December 31, 2025.