Allowance for Credit Losses

6 Months Ended

Jun. 30, 2025

The Company’s ACL is calculated quarterly, with any adjustment recorded to the provision for credit losses in the Consolidated Statement of Income. Management calculates the quantitative portion of collectively evaluated loans for all loan categories using the weighted average remaining maturity (“WARM”) method. For purposes of estimating the Company’s ACL, management generally evaluates collectively evaluated loans by federal call code in order to group loans with similar risk characteristics.

Loans that do not share similar risk characteristics are evaluated on an individual loan basis and are excluded from the collective evaluation for the ACL. Loans identified to be individually evaluated under CECL include loans on non-accrual status and may include accruing loans that do not share similar risk characteristics to other accruing loans that are collectively evaluated on a loan pool basis. A specific reserve analysis may be applied to the individually evaluated loans, which considers collateral value, an observable market price, or the present value of the expected future cash flows. A specific reserve is assigned if the measured value of the loan using one of the before mentioned methods is less than the carrying value of the loan.

Based on management’s analysis, adjustments may be applied for additional factors impacting the risk of loss in the loan portfolio beyond the information that is used to calculate a reasonable and supportable forecast and a reversion period forecast on collectively evaluated loans. Management may consider an additional or reduced reserve as warranted through qualitative risk factors based on the current and expected conditions as measured in supplemental information relative to the macroeconomic variable loss drivers used to calculate a reasonable and supportable forecast and a reversion period

forecast. These qualitative risk factors considered by management are largely comparable to legacy factors prior to the adoption of CECL.

The following tables present the activity in the ACL for the three and six months ended June 30, 2025, and for the three and six months ended June 30, 2024, including the impact of the allowance established for Purchase Credit Deteriorated (“PCD”) loans for the three and six months ended June 30, 2024, (in thousands).


	Commercial real estate		Owner-occupied commercial real estate		Acquisition, construction & development		Commercial & industrial		Single family residential (1-4 units)		Consumer non-real estate and other		Total
Three months ended
June 30, 2025
Balance, beginning of period	$	34,746	$	3,273	$	11,474	$	8,272	$	9,554	$	434	$	67,753
Provision for (recapture of) credit losses	(6,543)		660		611		2,454		2,669		866		717
Charge-offs	(97)		(413)		—		(104)		(45)		(881)		(1,540)
Recoveries	7		10		—		21		30		258		326
Balance, end of period	$	28,113	$	3,530	$	12,085	$	10,643	$	12,208	$	677	$	67,256

June 30, 2024
Balance, beginning of period	$	18,977	$	782	$	674	$	824	$	3,272	$	77	$	24,606
Allowance established for acquired PCD loans	7,503		1,931		5,968		5,684		2,608		216		23,910
Provision for (recapture of) credit losses	1,030		2,327		11,997		(1,594)		5,805		535		20,100
Charge-offs	(210)		—		—		(146)		(37)		(218)		(611)
Recoveries	4		—		—		—		—		8		12
Balance, end of period	$	27,304	$	5,040	$	18,639	$	4,768	$	11,648	$	618	$	68,017


	Commercial real estate	Owner-occupied commercial real estate	Acquisition, construction & development	Commercial & Industrial	Single family residential (1-4 units)	Consumer non-real estate and other	Total
Six months ended
June 30, 2025
Balance, beginning of period	30,444	3,261	17,386	6,633	9,763	553	68,040
Provision for (recapture of) credit losses	(2,247)	1,359	(5,301)	4,182	2,361	1,263	1,617
Charge-offs	(116)	(1,100)	(1)	(197)	(37)	(1,513)	(2,964)
Recoveries	32	10	1	25	121	374	563
Balance, end of period	28,113	3,530	12,085	10,643	12,208	677	67,256

June 30, 2024
Balance, beginning of period	20,633	783	368	645	2,797	75	25,301
Allowance established for acquired PCD loans	7,503	1,931	5,968	5,684	2,608	216	23,910
Provision for (recapture of) credit losses	(629)	2,326	12,303	(1,415)	6,279	566	19,430
Charge-offs	(210)	—	—	(146)	(37)	(248)	(641)
Recoveries	7	—	—	—	1	9	17
Balance, end of period	27,304	5,040	18,639	4,768	11,648	618	68,017

The recorded investment in loans excludes accrued interest receivable due to immateriality. The following table presents the aging of the recorded investment in past due loans as of June 30, 2025, and December 31, 2024, by portfolio segment (in thousands):


	June 30, 2025
	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total Past Due		Current Loans		Total Loans		90 Days Past Due or More & Still Accruing		Non-accrual loans
Commercial real estate	$	7,400	$	14,810	$	35,729	$	57,939	$	2,709,322	$	2,767,261	$	856	$	51,383
Owner-occupied commercial real estate	3,147		1,750		4,707		9,604		608,207		617,811		188		4,987
Acquisition, construction & development	3,781		4,131		5,972		13,884		333,775		347,659		812		12,190
Commercial & industrial	1,287		3,037		3,898		8,222		596,842		605,064		531		5,511
Single family residential (1-4 units)	4,922		4,839		2,869		12,630		1,136,239		1,148,869		2,083		6,802
Consumer non-real estate and other	879		173		155		1,207		102,586		103,793		2		186
Total	$	21,416	$	28,740	$	53,330	$	103,486	$	5,486,971	$	5,590,457	$	4,472	$	81,059

	December 31, 2024
	30 - 59 Days Past Due		60 - 89 Days Past Due		90 Days or More Past Due		Total Past Due		Current Loans		Total Loans		90 Days Past Due or More & Still Accruing		Non-accrual loans
Commercial real estate	$	10,974	$	—	$	8,440	$	19,414	$	2,618,388	$	2,637,802	$	—	$	19,183
Owner-occupied commercial real estate	1,160		1,636		5,240		8,036		606,326		614,362		307		5,760
Acquisition, construction & development	5,210		38		1,243		6,491		459,046		465,537		812		1,098
Commercial & industrial	1,654		1,594		1,469		4,717		608,368		613,085		350		1,757
Single family residential (1-4 units)	20,724		4,379		3,420		28,523		1,145,226		1,173,749		1,012		7,857
Consumer non-real estate and other	637		300		195		1,132		166,569		167,701		16		216
Total	$	40,359	$	7,947	$	20,007	$	68,313	$	5,603,923	$	5,672,236	$	2,497	$	35,871

Credit Quality Indicators

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, current economic information, and other factors. The Company analyzes loans individually by classifying the loans by credit risk. The Company internally grades all commercial loans at the time of origination. In addition, the Company performs an annual review on at least 50% of the Bank’s commercial credit exposure to each borrower. The Company uses the following definitions for credit risk classifications:

Pass: These include satisfactory loans that have acceptable levels of risk.

Special Mention: Loans classified as special mention have a potential credit 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 institution’s credit position at some future date.

Substandard: Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the orderly liquidation of debt. Loans classified as substandard are inadequately protected by sound net worth, payment capacity of the borrower, or of the collateral pledged. If weaknesses go uncorrected, there is potential for partial loss of principal and/or interest.

Doubtful: 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 unlikely.

Loss: Loans classified as a loss are considered to be uncollectible and cannot be justified to continue as viable assets. While there may be the possibility of some recovery in the future, it is not practical or desirable to defer writing off these loans at the present time.

The Company has a portfolio of smaller homogenous loans that are not individually risk rated that are included within the single family residential and consumer non-real estate and other loan classes. Generally, these loan classes are rated as “Pass” unless these loans are on non-accrual and are then classified as substandard.

The following table presents 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 (in thousands):


	June 30, 2025
	Term Loans
	2025		2024		2023		2022		2021		Prior		Revolving Loans		Total
Commercial real estate
Pass	$	84,619	$	249,191	$	413,969	$	484,097	$	376,050	$	674,497	$	119,358	$	2,401,781
Special Mention	—		—		3,336		36,780		30,031		54,017		4,149		128,313
Substandard	—		—		15,751		41,766		71,733		67,204		35,594		232,048
Doubtful	—		—		—		3,238		—		1,881		—		5,119
Loss	—		—		—		—		—		—		—		—
Total	$	84,619	$	249,191	$	433,056	$	565,881	$	477,814	$	797,599	$	159,101	$	2,767,261

Year to date gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	116	$	—	$	116

Owner-occupied commercial real estate
Pass	$	43,411	$	63,435	$	68,340	$	88,947	$	120,226	$	184,903	$	29,536	$	598,798
Special Mention	—		—		—		—		238		4,183		—		4,421
Substandard	—		—		527		1,935		1,112		5,986		75		9,635
Doubtful	—		—		—		3,415		1,542		—		—		4,957
Loss	—		—		—		—		—		—		—		—
Total	$	43,411	$	63,435	$	68,867	$	94,297	$	123,118	$	195,072	$	29,611	$	617,811

Year to date gross charge-offs	$	—	$	—	$	—	$	363	$	10	$	632	$	95	$	1,100

Acquisition, construction & development
Pass	$	13,931	$	27,659	$	122,173	$	62,589	$	69,499	$	16,735	$	20,728	$	333,314
Special Mention	—		—		397		—		—		139		—		536
Substandard	—		—		—		812		3,515		5,048		—		9,375
Doubtful	—		—		—		3,516		—		—		190		3,706
Loss	180		—		—		—		—		—		548		728
Total	$	14,111	$	27,659	$	122,570	$	66,917	$	73,014	$	21,922	$	21,466	$	347,659

Year to date gross charge-offs	$	—	$	—	$	1	$	—	$	—	$	—	$	—	$	1

Commercial & industrial
Pass	$	95,357	$	98,144	$	36,019	$	39,198	$	20,714	$	31,905	$	202,896	$	524,233
Special Mention	535		309		278		33,319		10,392		1,473		16,573		62,879
Substandard	—		34		823		2,560		569		1,671		12,226		17,883
Doubtful	—		—		24		—		—		—		—		24
Loss	—		—		—		—		—		37		8		45
Total	$	95,892	$	98,487	$	37,144	$	75,077	$	31,675	$	35,086	$	231,703	$	605,064

Year to date gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	14	$	183	$	197

Single family residential (1-4 units)
Pass	$	22,914	$	88,920	$	144,181	$	192,307	$	134,521	$	388,222	$	170,688	$	1,141,753
Special Mention	—		—		—		—		—		202		—		202
Substandard	—		—		1,522		820		736		3,274		450		6,802
Doubtful	—		—		—		—		—		95		16		111
Loss	—		—		—		—		—		1		—		1
Total	$	22,914	$	88,920	$	145,703	$	193,127	$	135,257	$	391,794	$	171,154	$	1,148,869


Year to date gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	30	$	7	$	37

Consumer non-real estate and other
Pass	$	4,984	$	14,702	$	7,869	$	3,969	$	1,111	$	2,625	$	68,432	$	103,692
Special Mention	—		—		—		—		—		—		—		—
Substandard	—		65		33		—		—		—		—		98
Doubtful	—		—		—		—		2		1		—		3
Loss	—		—		—		—		—		—		—		—
Total	$	4,984	$	14,767	$	7,902	$	3,969	$	1,113	$	2,626	$	68,432	$	103,793

Year to date gross charge-offs	$	1,195	$	160	$	116	$	38	$	—	$	—	$	4	$	1,513

Totals	$	265,931	$	542,459	$	815,242	$	999,268	$	841,991	$	1,444,099	$	681,467	$	5,590,457


	December 31, 2024
	Term Loans
	2024		2023		2022		2021		2020		Prior		Revolving Loans		Total
Commercial real estate
Pass	$	248,023	$	378,322	$	482,195	$	337,136	$	153,187	$	588,490	$	96,914	$	2,284,267
Special Mention	—		7,148		30,018		52,885		7,154		57,255		28,211		182,671
Substandard	—		2,232		49,752		39,636		2,999		52,740		23,505		170,864
Doubtful	—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—
Total	$	248,023	$	387,702	$	561,965	$	429,657	$	163,340	$	698,485	$	148,630	$	2,637,802

Year to date gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	382	$	—	$	382

Owner-occupied commercial real estate
Pass	$	61,433	$	72,571	$	93,941	$	126,700	$	36,197	$	170,809	$	32,452	$	594,103
Special Mention	—		—		—		243		2,729		1,275		—		4,247
Substandard	—		—		5,192		1,496		5,499		3,594		82		15,863
Doubtful	—		—		—		—		—		149		—		149
Loss	—		—		—		—		—		—		—		—
Total	$	61,433	$	72,571	$	99,133	$	128,439	$	44,425	$	175,827	$	32,534	$	614,362

Year to date gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Acquisition, construction & development
Pass	$	25,461	$	109,751	$	90,652	$	147,702	$	3,564	$	16,312	$	15,107	$	408,549
Special Mention	—		—		—		2,641		142		—		—		2,783
Substandard	—		13,115		4,467		3,326		21,372		63		11,564		53,907
Doubtful	—		—		—		—		—		—		298		298
Loss	—		—		—		—		—		—		—		—
Total	$	25,461	$	122,866	$	95,119	$	153,669	$	25,078	$	16,375	$	26,969	$	465,537

Year to date gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial & industrial
Pass	$	108,206	$	57,280	$	47,828	$	35,189	$	15,109	$	28,019	$	237,852	$	529,483
Special Mention	365		—		35,237		10,898		1,505		—		16,856		64,861
Substandard	37		285		4,482		618		523		1,029		11,765		18,739
Doubtful	—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		2		—		2
Total	$	108,608	$	57,565	$	87,547	$	46,705	$	17,137	$	29,050	$	266,473	$	613,085

Year to date gross charge-offs	$	—	$	10	$	195	$	87	$	—	$	9	$	—	$	301

Single family residential (1-4 units)


Pass	$	88,857	$	152,438	$	201,410	$	142,719	$	77,783	$	332,025	$	170,077	$	1,165,309
Special Mention	—		—		—		—		—		214		174		388
Substandard	—		1,494		800		586		605		3,935		437		7,857
Doubtful	—		—		—		—		—		—		—		—
Loss	93		—		—		—		—		1		101		195
Total	$	88,950	$	153,932	$	202,210	$	143,305	$	78,388	$	336,175	$	170,789	$	1,173,749

Year to date gross charge-offs	$	—	$	39	$	28	$	—	$	—	$	123	$	—	$	190

Consumer non-real estate and other
Pass	$	21,095	$	10,796	$	6,122	$	1,836	$	1,096	$	2,797	$	123,148	$	166,890
Special Mention	15		—		—		—		—		—		—		15
Substandard	363		90		17		—		—		17		—		487
Doubtful	—		—		—		5		3		—		—		8
Loss	289		12		—		—		—		—		—		301
Total	$	21,762	$	10,898	$	6,139	$	1,841	$	1,099	$	2,814	$	123,148	$	167,701

Year to date gross charge-offs	$	468	$	71	$	17	$	1	$	—	$	20	$	357	$	934

Totals	$	554,237	$	805,534	$	1,052,113	$	903,616	$	329,467	$	1,258,726	$	768,543	$	5,672,236

The following tables present information about collateral-dependent loans that were individually evaluated for purposes of determining the ACL as of June 30, 2025, and December 31, 2024 (in thousands):


	June 30, 2025
	With Allowance				With No Related Allowance		Total
	Amortized Cost		Related Allowance		Amortized Cost		Amortized Cost		Related Allowance
June 30, 2025
Commercial real estate	$	5,824	$	4,660	$	46,586	$	52,410	$	4,660
Owner-occupied commercial real estate	—		—		5,492		5,492		—
Acquisition, construction & development	427		194		12,314		12,741		194
Commercial & industrial	4,017		3,832		332		4,349		3,832
Single family residential (1-4 units)	—		—		3,893		3,893		—
Consumer non-real estate and other	—		—		—		—		—
Total	$	10,268	$	8,686	$	68,617	$	78,885	$	8,686


	December 31, 2024
	With Allowance				With No Related Allowance		Total
	Amortized Cost		Related Allowance		Amortized Cost		Amortized Cost		Related Allowance
December 31, 2024
Commercial real estate	$	7,459	$	4,791	$	12,439	$	19,898	$	4,791
Owner-occupied commercial real estate	—		—		1,833		1,833		—
Acquisition, construction & development	535		303		369		904		303
Commercial & industrial	983		734		348		1,331		734
Single family residential (1-4 units)	898		26		3,408		4,306		26
Consumer non-real estate and other	—		—		—		—		—
Total	$	9,875	$	5,854	$	18,397	$	28,272	$	5,854

Purchased Credit Deteriorated Loans

The Company has purchased loans for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The carrying amount of those loans, at acquisition, is as follows (in thousands):


	Amounts
Purchase price of loans at acquisition	$	380,795
Allowance for credit losses at acquisition	23,910
Non-credit discount/(premium) at acquisition	37,640

Par value of acquired loans at acquisition	$	442,345

Loan Modifications

On January 1, 2023, the Company adopted ASU 2022-02 on a modified retrospective basis. ASU 2022-02 eliminates the troubled debt restructuring (“TDR”) accounting model and requires that the Company evaluate, based on the accounting for loan modifications, whether the borrower is experiencing financial difficulty, and the modification results in a more-than-insignificant direct change in the contractual cash flows and represents a new loan or a continuation of an existing loan. This change required all loan modifications to be accounted for under the general loan modification guidance in ASC 310-20, Receivables — Nonrefundable Fees and Other Costs, and subjects entities to new disclosure requirements on loan modifications to borrowers experiencing financial difficulty.

The Company may modify loans to borrowers experiencing financial difficulty by providing principal forgiveness, term extension, interest rate reduction, or an other-than-insignificant payment delay. When principal forgiveness is provided, the amount of forgiveness is charged off against the ACL. The Company may also provide multiple types of modifications on an individual loan. For the six months ended June 30, 2025, and for the year ended, December 31, 2024, the Company did not extend any modifications to borrowers experiencing financial difficulty that had a more-than-insignificant direct change in the contractual cash flows of the loan.

Other Real Estate Owned

Real estate owned activity was as follows for the six months ended June 30, 2025, and for the year ended, December 31, 2024 (in thousands):


	June 30, 2025		December 31, 2024
Beginning balance	$	2,783	$	—
Loans acquired/transferred to real estate owned	117		3,541
Capital expenditures	—		—
Direct write-downs	—		—
Sales of real estate owned	(158)		(758)

End of period balance	$	2,742	$	2,783