The ACL on the loan portfolio is a material estimate for the Company. The Company estimates an ACL on its loan portfolio on a quarterly basis and uses this analysis to assess the sufficiency of the ACL on loans and to determine the necessary provision for credit losses. The portfolio is segmented into categories based on common risk factors.

The following table shows the ACL activity by loan portfolio for the six months ended June 30, 2026 (dollars in thousands):


	Commercial Loans			Real Estate Construction and Land			1-4 Family Residential Mortgages			Commercial Mortgages			Consumer Loans			Total
Allowance for Credit Losses:
Balance as of December 31, 2025	$	481		$	930		$	2,482		$	3,840		$	537		$	8,270
Charge-offs		-			-			-			-			(93	)		(93	)
Recoveries		8			-			-			1			76			85
Recovery of credit losses		(57	)		(193	)		(135	)		120			(16	)		(281	)
Balance as of March 31, 2026	$	432		$	737		$	2,347		$	3,961		$	504		$	7,981
Charge-offs		(8	)		-			-			(1	)		(65	)		(74	)
Recoveries		-			-			-			-			80			80
Provision for (recovery of) credit losses		15			231			42			(95	)		(56	)		137
Balance as of June 30, 2026	$	439		$	968		$	2,389		$	3,865		$	463		$	8,124

The following table shows the ACL activity by loan portfolio for the year ended December 31, 2025 (dollars in thousands):


	Commercial Loans			Real Estate Construction and Land			1-4 Family Residential Mortgages			Commercial Mortgages		Consumer Loans			Total
Allowance for Credit Losses:
Balance as of December 31, 2024	$	760		$	737		$	2,551		$	3,533	$	874		$	8,455
Charge-offs		(6	)		-			-			-		(64	)		(70	)
Recoveries		4			-			1			1		42			48
Recovery of credit losses		(66	)		(12	)		(36	)		39		(30	)		(105	)
Balance as of March 31, 2025	$	692		$	725		$	2,516		$	3,573	$	822		$	8,328
Charge-offs		(9	)		-			-			-		(102	)		(111	)
Recoveries		5			-			-			1		34			40
Provision for (recovery of) credit losses		155			(269	)		(101	)		297		8			90
Balance as of June 30, 2025	$	843		$	456		$	2,415		$	3,871	$	762		$	8,347

As of June 30, 2026 and December 31, 2025, the Company had $2.1 million and $2.2 million respectively, of collateral dependent loans secured by 1-4 family residential mortgages, individually evaluated for expected losses. There was no ACL allocation for the loans for either period.

Pass - Loans with the following risk ratings are pooled by class and considered together as “Pass”:

Excellent – minimal risk loans secured by cash or fully guaranteed by a U.S. government agency

Satisfactory – modest risk loans where the borrower has strong and liquid financial statements and more than adequate cash flow

Average – average risk loans where the borrower has reasonable debt service capacity

Marginal – acceptable risk loans where the borrower has acceptable financial statements but is leveraged

Watch - These loans have an acceptable risk but require more attention than normal servicing.

Special Mention - These potential problem loans are currently protected but are potentially weak.

Substandard - These problem loans are inadequately protected by the sound worth and paying capacity of the borrower and/or the value of any collateral pledged. If such loans are not accruing interest, they would be evaluated on an individual basis.

Doubtful - Loans with this rating have significant deterioration in the sound worth and paying capacity of the borrower and/or the value of any collateral pledged, making collection or liquidation of the loan in full highly questionable. These loans would be considered impaired and evaluated on an individual basis.

The following table presents the Company's recorded investment in loans by credit quality indicators by year of origination as of June 30, 2026 (dollars in thousands). Current period gross write-off amounts represent write-offs for the six months ended June 30, 2026.


	June 30, 2026
	Term Loans Amortized Cost Basis by Origination Year
	2026		2025		2024		2023		2022		Prior		Revolving Loans		Loans Converted to Term		Total
Commercial loans
Pass	$	20,780	$	45,508	$	77,164	$	71,696	$	9,496	$	22,104	$	11,387	$	100	$	258,235
Watch		-		-		-		-		10		-		-		-		10
Special Mention		-		51		-		-		-		-		-		-		51
Substandard		-		-		130		-		472		77		-		-		679
Total commercial	$	20,780	$	45,559	$	77,294	$	71,696	$	9,978	$	22,181	$	11,387	$	100	$	258,975
Current period gross write-off	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
.
Real estate construction and land
Pass	$	4,306	$	9,732	$	6,973	$	1,925	$	352	$	2,422	$	1,035	$	-	$	26,745
Watch		-		-		-		-		-		-		-		-		-
Special Mention		-		-		-		-		-		151		-		-		151
Substandard		-		-		-		-		6,215		-		-		-		6,215
Total real estate construction and land	$	4,306	$	9,732	$	6,973	$	1,925	$	6,567	$	2,573	$	1,035	$	-	$	33,111
Current period gross write-off	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
.
1-4 family residential mortgages
Pass	$	19,574	$	12,706	$	20,052	$	16,233	$	11,167	$	186,509	$	15,973	$	96	$	282,310
Watch		-		282		1,174		2,888		150		3,362		590		-		8,446
Special Mention		296		18		194		950		333		4,499		43		-		6,333
Substandard		-		-		102		-		56		3,521		-		-		3,679
Total 1-4 family residential mortgage	$	19,870	$	13,006	$	21,522	$	20,071	$	11,706	$	197,891	$	16,606	$	96	$	300,768
Current period gross write-off	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-
.
Commercial mortgages
Pass	$	40,238	$	57,120	$	89,791	$	81,705	$	37,210	$	249,226	$	1,113	$	-	$	556,403
Watch		-		-		-		16,138		-		3,746		-		-		19,884
Special Mention		-		80		12,450		14,025		-		12,862		-		-		39,417
Substandard		-		-		-		-		-		937		-		-		937
Total commercial mortgages	$	40,238	$	57,200	$	102,241	$	111,868	$	37,210	$	266,771	$	1,113	$	-	$	616,641
Current period gross write-off	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Consumer
Pass	$	83	$	543	$	175	$	1,067	$	30	$	12,143	$	10,423	$	-	$	24,464
Watch		-		-		-		-		-		4		-		-		4
Special Mention		-		-		-		-		-		16		-		-		16
Substandard		-		-		-		1		-		-		-		-		1
Total consumer	$	83	$	543	$	175	$	1,068	$	30	$	12,163	$	10,423	$	-	$	24,485
Current period gross write-off	$	-	$	-	$	-	$	-	$	-	$	158	$	-	$	-	$	158

The following table presents the Company's recorded investment in loans by credit quality indicators by year of origination as of December 31, 2025 (dollars in thousands). Current period gross write-off amounts represent write-offs for the year ended December 31, 2025.


	December 31, 2025
	Term Loans Amortized Cost Basis by Origination Year
	2025		2024		2023		2022		2021		Prior		Revolving Loans		Loans Converted to Term		Total
Commercial loans
Pass	$	49,895	$	86,243	$	79,833	$	9,847	$	1,392	$	24,201	$	13,136	$	-	$	264,547
Watch		-		-		-		15		-		-		-		-		15
Special Mention		56		-		-		-		-		-		-		69		125
Substandard		-		77		-		524		-		104		1		-		706
Total commercial	$	49,951	$	86,320	$	79,833	$	10,386	$	1,392	$	24,305	$	13,137	$	69	$	265,393
Current period gross write-off	$	-	$	-	$	1	$	-	$	-	$	94	$	5	$	-	$	100

Real estate construction and land
Pass	$	8,570	$	6,978	$	8,984	$	365	$	1,823	$	1,163	$	104	$	-	$	27,987
Watch		-		-		-		-		153		-		-		-		153
Special Mention		-		-		-		-		-		186		-		-		186
Substandard		-		-		-		6,215		-		459		-		-		6,674
Total real estate construction and land	$	8,570	$	6,978	$	8,984	$	6,580	$	1,976	$	1,808	$	104	$	-	$	35,000
Current period gross write-off	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

1-4 family residential mortgages
Pass	$	11,278	$	22,275	$	17,500	$	10,275	$	45,608	$	150,553	$	15,217	$	294	$	273,000
Watch		284		1,502		3,737		1,503		2,145		1,545		967		129		11,812
Special Mention		19		196		961		878		1,167		5,021		193		-		8,435
Substandard		-		206		-		266		162		3,207		391		110		4,342
Total 1-4 family residential mortgage	$	11,581	$	24,179	$	22,198	$	12,922	$	49,082	$	160,326	$	16,768	$	533	$	297,589
Current period gross write-off	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Commercial mortgages
Pass	$	57,470	$	105,944	$	110,311	$	37,753	$	38,914	$	236,444	$	571	$	-	$	587,407
Watch		-		-		987		-		-		8,145		-		-		9,132
Special Mention		-		77		1,741		-		1,357		12,600		-		-		15,775
Substandard		95		794		-		-				240		-		-		1,129
Total commercial mortgages	$	57,565	$	106,815	$	113,039	$	37,753	$	40,271	$	257,429	$	571	$	-	$	613,443
Current period gross write-off	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Consumer
Pass	$	619	$	559	$	1,076	$	36	$	145	$	13,341	$	10,140	$	-	$	25,916
Watch		-		-		-		-		8		58		1		-		67
Special Mention		-		-		-		-		15		64		-		-		79
Substandard		-				-		-		-		86		4		-		90
Total consumer	$	619	$	559	$	1,076	$	36	$	168	$	13,549	$	10,145	$	-	$	26,152
Current period gross write-off	$	-	$	-	$	-	$	-	$	9	$	343	$	1	$	-	$	353