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LOANS AND ALLOWANCE FOR CREDIT LOSSES

9 Months Ended

Sep. 30, 2025

LOANS AND ALLOWANCE FOR CREDIT LOSSES

NOTE 4. LOANS AND ALLOWANCE FOR CREDIT LOSSES

We evaluate risk characteristics of loans based on regulatory call report code with segmentation based on the underlying collateral for certain loan types. The following is a summary of total loans based on regulatory call report code segmentation for certain loan types:


	September 30,		December 31,
(in thousands)	2025		2024
Commercial construction	$	169,928	$	131,617
Commercial real estate owner occupied		342,237		302,074
Commercial real estate non-owner occupied		1,473,136		1,358,903
Tax exempt and other		42,395		44,275
Commercial and industrial		340,907		319,766
Residential real estate		1,089,550		888,251
Home equity		110,988		94,141
Consumer other		14,575		8,069
Total loans		3,583,716		3,147,096
Allowance for credit losses		33,940		28,744
Net loans	$	3,549,776	$	3,118,352

Total unamortized net costs and premiums included in loan totals were as follows:


	September 30,		December 31,
(in thousands)	2025		2024
Net unamortized loan origination costs	$	2,043	$	1,982
Net unamortized fair value discount on acquired loans		(35,386)		(2,442)
Total	$	(33,343)	$	(460)

We exclude accrued interest receivable from the amortized cost basis of loans disclosed throughout this footnote. As of September 30, 2025 and December 31, 2024, accrued interest receivable for loans totaled $12.2 million and $10.5 million, respectively, and is included in the “other assets” line item on the consolidated balance sheets.

Characteristics of each loan portfolio segment, including acquired loans, are as follows:

Commercial construction - Loans in this segment primarily include raw land, land development and construction of commercial and multifamily residential properties. Collateral values are determined based upon appraisals and evaluations of the completed structure in accordance with established policy guidelines. Maximum loan-to-value ratios at origination are governed by established policy guidelines that are more restrictive than on stabilized commercial real estate transactions. Construction loans are primarily paid by the cash flow generated from the completed structure, such as operating leases, rents, or other operating cash flows from the borrower.

Commercial real estate owner occupied and non-owner occupied - Loans in these segments are primarily owner-occupied or income-producing properties. Loans to real estate investment trusts and unsecured loans to developers that closely correlate to the inherent risk in commercial real estate markets are also included. Commercial real estate loans are typically underwritten with amortizing payment structures. Collateral values are determined based upon appraisals and evaluations in accordance with established policy guidelines. Maximum loan-to-value ratios at origination are governed by established policy and regulatory guidelines. Commercial real estate loans are primarily paid by the cash flow generated from the real property, such as operating leases, rents, or other operating cash flows from the borrower.

Tax Exempt - Loans in this segment primarily include loans to various state and municipal government entities. Loans made to these borrowers may provide us with tax-exempt income. While governed and underwritten similar to commercial loans they do have unique requirements based on established polices. Almost all state and municipal loans are considered a general obligation of the issuing entity. Given the size of many municipal borrowers, borrowings are normally not rated by major rating agencies.

Commercial and industrial loans - Loans consist of revolving and term loan obligations extended to businesses and corporate enterprises for the purpose of financing working capital and/or capital investment in this segment. Generally, loans are secured by assets of the business such as accounts receivable, inventory, marketable securities, other liquid collateral, equipment and other business assets. Some loans in this category may be unsecured or guaranteed by government agencies such as the US Small Business Administration. Loans are primarily paid by the operating cash flow of the borrower.

Residential real estate - All loans in this segment are collateralized by one-to-four family homes. Residential real estate loans held in the loan portfolio are made to borrowers who demonstrate the ability to make scheduled payments with full consideration to various underwriting factors. Borrower qualifications include favorable credit history combined with supportive income requirements and combined loan-to-value ratios within established policy guidelines.

Home equity - All loans and lines of credit are made to qualified individuals and are secured by senior or junior mortgage liens on owner-occupied one-to-four-family homes, condominiums, or vacation homes. The home equity loan has a fixed rate and is billed as equal payments comprised of principal and interest. The home equity line of credit has a variable rate and is billed as interest-only payments during the draw period. At the end of the draw period, the home equity line of credit is billed as a percentage of the principal balance plus all accrued interest. Borrower qualifications include favorable credit history combined with supportive income requirements and combined loan-to-value ratios within established policy guidelines.

Consumer other - Loans in this segment include personal lines of credit and amortizing loans made to qualified individuals for various purposes such as auto loans, recreational equipment, overdraft protection or other consumer loans. Borrower qualifications include favorable credit history combined with supportive income and collateral requirements within established policy guidelines, as applicable.

Allowance for Credit Losses

The Allowance for Credit Losses (“ACL”) is comprised of the allowance for loan losses, the allowance for securities losses and the allowance for unfunded commitments which is accounted for as a separate liability in other liabilities on our consolidated balance sheets. The level of the ACL represents management’s estimate of expected credit losses over the expected life of the loans at the consolidated balance sheet date.

The ACL is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans. Loans, or portions thereof, are charged off against the allowance when they are deemed uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged off. The ACL is comprised of reserves measured on a collective (pool) basis based on a lifetime loss-rate model when similar risk characteristics exist. Loans that do not share risk characteristics are evaluated on an individual basis, generally larger non-accruing commercial loans.

The activity in the ACL for the periods ended are as follows:


	At or for the Three Months Ended September 30, 2025
	Balance at
	Beginning of						Acquired PCD		Provision/		Balance at
(in thousands)	Period		Charge Offs		Recoveries		Loans⁽¹⁾		(Credit)		End of Period
Commercial construction	$	2,032	$	—	$	—	$	—	$	490	$	2,522
Commercial real estate owner occupied		2,823		—		—		76		292		3,191
Commercial real estate non-owner occupied		10,980		—		—		301		1,418		12,699
Tax exempt		110		—		—		—		18		128
Commercial and industrial		5,664		(236)		12		1,174		(329)		6,285
Residential real estate		6,406		—		18		53		1,547		8,024
Home equity		786		—		2		2		129		919
Consumer other		84		(117)		5		16		184		172
Total	$	28,885	$	(353)	$	37	$	1,622	$	3,749	$	33,940

(1)	Upon acquisition of Woodsville the Company designated certain acquired loans with an unpaid principal balance of $11.2 million as PCD loans. Refer to Note 2 for further discussion of the Company's designation of PCD loans.


	At or for the Nine Months Ended September 30, 2025
	Balance at
	Beginning of						Acquired PCD		Provision/		Balance at
(in thousands)	Period		Charge Offs		Recoveries		Loans⁽¹⁾		(Credit)		End of Period
Commercial construction	$	2,096	$	—	$	—	$	—	$	426	$	2,522
Commercial real estate owner occupied		2,794		—		—		76		321		3,191
Commercial real estate non-owner occupied		11,104		—		—		301		1,294		12,699
Tax exempt and other		128		—		—		—		—		128
Commercial and industrial		5,064		(480)		15		1,174		512		6,285
Residential real estate		6,732		—		28		53		1,211		8,024
Home equity		741		—		9		2		167		919
Consumer other		85		(223)		5		16		289		172
Total	$	28,744	$	(703)	$	57	$	1,622	$	4,220	$	33,940

(1)	Upon acquisition of Woodsville the Company designated certain acquired loans with an unpaid principal balance of $11.2 million as PCD loans. Refer to Note 2 for further discussion of the Company's designation of PCD loans.


	At or for the Three Months Ended September 30, 2024
	Balance at
	Beginning of						Provision/		Balance at
(in thousands)	Period		Charge Offs		Recoveries		(Credit)		End of Period
Commercial construction	$	4,217	$	—	$	—	$	(1,464)	$	2,753
Commercial real estate owner occupied		2,620		—		—		314		2,934
Commercial real estate non-owner occupied		9,574		—		—		965		10,539
Tax exempt		110		—		—		7		117
Commercial and industrial		3,982		(9)		1		217		4,191
Residential real estate		7,516		—		5		51		7,572
Home equity		763		—		3		80		846
Consumer other		73		(89)		29		58		71
Total	$	28,855	$	(98)	$	38	$	228	$	29,023


	At or for the Nine Months Ended September 30, 2024
	Balance at
	Beginning of						Provision/		Balance at
(in thousands)	Period		Charge Offs		Recoveries		(Credit)		End of Period
Commercial construction	$	4,261	$	—	$	—	$	(1,508)	$	2,753
Commercial real estate owner occupied		2,863		(3)		—		74		2,934
Commercial real estate non-owner occupied		9,443		—		—		1,096		10,539
Tax exempt and other		119		—		—		(2)		117
Commercial and industrial		3,259		(91)		17		1,006		4,191
Residential real estate		7,352		—		13		207		7,572
Home equity		767		—		8		71		846
Consumer other		78		(223)		58		158		71
Total	$	28,142	$	(317)	$	96	$	1,102	$	29,023

Unfunded Commitments

The ACL on unfunded commitments is recognized as a liability (other liabilities on the consolidated balance sheets), with adjustments to the reserve recognized in other non-interest expense in the consolidated statements of income. The activity in the ACL on unfunded commitments for the periods ended was as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(in thousands)	2025		2024		2025		2024
Beginning Balance	$	2,975	$	3,640	$	3,049	$	3,825
Provision for credit losses		145		35		71		(150)
Ending Balance	$	3,120	$	3,675	$	3,120	$	3,675

Loan Origination/Risk Management: We have certain lending policies and procedures in place designed to maximize loan income within an acceptable level of risk. Our Board of Directors reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management and the Board of Directors with frequent reports related to loan production, loan quality, and concentration of credit, loan delinquencies, non-performing loans and potential problem loans. We seek to diversify the loan portfolio as a means of managing risk associated with fluctuations in economic conditions.

Credit Quality Indicators: In monitoring the credit quality of the portfolio, management applies a credit quality indicator and uses an internal risk rating system to categorize commercial loans. These credit quality indicators range from one through nine, with a higher number correlating to increasing risk of loss. Consistent with regulatory guidelines, the Company provides for the classification of loans which are considered to be of lesser quality as special mention, substandard, doubtful, or loss (i.e. risk-rated 6, 7, 8 and 9, respectively). Residential, home equity and consumer loans are classified as performing or non-performing based on payment performance.

The following are the definitions of our credit quality indicators:

Pass: Loans we consider in the commercial portfolio segments that are not adversely rated, are contractually current as to principal and interest, and are otherwise in compliance with the contractual terms of the loan agreement. Management believes there is a low risk of loss related to these loans considered pass-rated.

Special Mention: Loans considered having some potential weaknesses, but are deemed to not carry levels of risk inherent in one of the subsequent categories, are designated as special mention. A special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. This might include loans which may require a higher level of supervision or internal reporting because of: (i) declining industry trends; (ii) increasing reliance on secondary sources of repayment; (iii) the poor condition of or lack of control over collateral; or (iv) failure to obtain proper documentation or any other deviations from prudent lending practices. Economic or market conditions which may, in the future, affect the obligor may warrant special mention of the asset. Loans for which an

adverse trend in the borrower's operations or an imbalanced position in the balance sheet which has not reached a point where the liquidation is jeopardized may be included in this classification. Special mention loans are not adversely classified and do not expose us to sufficient risks to warrant classification.

Substandard: Loans we consider as substandard are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Substandard loans have a well-defined weakness that jeopardizes liquidation of the debt. Substandard loans include those loans where there is the distinct possibility of some loss of principal, if the deficiencies are not corrected.

Doubtful: Loans we consider as doubtful have all of the weaknesses inherent in those loans that are classified as substandard. These loans have the added characteristic of a well-defined weakness which is inadequately protected by the current sound worth and paying capacity of borrower or of the collateral pledged, if any, and calls into question the collectability of the full balance of the loan. The possibility of loss is high but because of certain important and reasonably specific pending factors, which may work to the advantage and strengthening of the loan, its classification as loss is deferred until its more exact status is determined. Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral and refinancing plans. The entire amount of the loan might not be classified as doubtful when collection of a specific portion appears highly probable. Loans are generally not classified doubtful for an extended period of time (i.e., over a year).

Loss: Loans we consider as losses are those considered uncollectible and of such little value that their continuance as an asset is not warranted and the uncollectible amounts are charged-off. This classification does not mean the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this worthless asset even though partial recovery may be effected in the future. Losses are taken in the period in which they are determined to be uncollectible.

The following table presents our loans by year of origination, loan segmentation and risk indicator as of September 30, 2025:



(in thousands)	2025		2024		2023		2022		2021		Prior		Total
Commercial construction
Risk rating:
Pass	$	22,509	$	57,785	$	38,590	$	29,636	$	2,408	$	4,567	$	155,495
Special mention		—		14,433		—		—		—		—		14,433
Substandard		—		—		—		—		—		—		—
Total	$	22,509	$	72,218	$	38,590	$	29,636	$	2,408	$	4,567	$	169,928
Current period gross write-offs		—		—		—		—		—		—		—

Commercial real estate owner occupied
Risk rating:
Pass	$	33,299	$	36,999	$	44,291	$	71,647	$	31,702	$	116,926	$	334,864
Special mention		—		—		986		601		700		2,608		4,895
Substandard		—		—		—		—		—		2,421		2,421
Doubtful		—		—		—		—		—		57		57
Total	$	33,299	$	36,999	$	45,277	$	72,248	$	32,402	$	122,012	$	342,237
Current period gross write-offs		—		—		—		—		—		—		—

Commercial real estate non-owner occupied
Risk rating:
Pass	$	174,427	$	113,724	$	71,328	$	352,343	$	198,225	$	417,413	$	1,327,460
Special mention		—		25,371		—		32,129		33,515		18,970		109,985
Substandard		—		—		7,625		—		—		28,066		35,691
Doubtful		—		—		—		—		—		—		—
Total	$	174,427	$	139,095	$	78,953	$	384,472	$	231,740	$	464,449	$	1,473,136
Current period gross write-offs		—		—		—		—		—		—		—

Tax exempt and other
Risk rating:
Pass	$	6,200	$	3,154	$	4,629	$	6,030	$	918	$	21,464	$	42,395
Special mention		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—
Total	$	6,200	$	3,154	$	4,629	$	6,030	$	918	$	21,464	$	42,395
Current period gross write-offs		—		—		—		—		—		—		—

Commercial and industrial
Risk rating:
Pass	$	54,183	$	70,205	$	50,634	$	48,501	$	10,079	$	95,663	$	329,265
Special mention		129		109		1,582		1,962		668		4,315		8,765
Substandard		71		613		61		536		234		973		2,488
Doubtful		—		—		—		—		—		389		389
Total	$	54,383	$	70,927	$	52,277	$	50,999	$	10,981	$	101,340	$	340,907
Current period gross write-offs		—		—		—		—		19		461		480


Residential real estate
Performing	$	34,213	$	52,472	$	79,655	$	216,692	$	192,766	$	507,018	$	1,082,816
Nonperforming		—		—		1,103		1,305		1,025		3,301		6,734
Total	$	34,213	$	52,472	$	80,758	$	217,997	$	193,791	$	510,319	$	1,089,550
Current period gross write-offs		—		—		—		—		—		—		—

Home equity
Performing	$	14,553	$	21,159	$	16,295	$	13,691	$	6,675	$	37,574	$	109,947
Nonperforming		—		—		124		232		50		635		1,041
Total	$	14,553	$	21,159	$	16,419	$	13,923	$	6,725	$	38,209	$	110,988
Current period gross write-offs		—		—		—		—		—		—		—

Consumer other
Performing	$	5,580	$	3,039	$	3,426	$	1,234	$	404	$	878	$	14,561
Nonperforming		—		—		12		—		—		2		14
Total	$	5,580	$	3,039	$	3,438	$	1,234	$	404	$	880	$	14,575
Current period gross write-offs		—		—		20		13		4		186		223

Total Loans	$	345,164	$	399,063	$	320,341	$	776,539	$	479,369	$	1,263,240	$	3,583,716

The following table presents our loans by year of origination, loan segmentation and risk indicator as of December 31, 2024:



(in thousands)	2024		2023		2022		2021		2020		Prior		Total
Commercial construction
Risk rating:
Pass	$	34,320	$	27,251	$	55,825	$	771	$	4,404	$	9,046	$	131,617
Special mention		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—
Total	$	34,320	$	27,251	$	55,825	$	771	$	4,404	$	9,046	$	131,617
Current period gross write-offs		—		—		—		—		—		—		—

Commercial real estate owner occupied
Risk rating:
Pass	$	42,705	$	46,869	$	60,102	$	29,808	$	20,761	$	96,123	$	296,368
Special mention		—		128		—		—		—		2,070		2,198
Substandard		—		—		—		—		—		3,442		3,442
Doubtful		—		—		—		—		—		66		66
Total	$	42,705	$	46,997	$	60,102	$	29,808	$	20,761	$	101,701	$	302,074
Current period gross write-offs		—		—		—		—		—		3		3

Commercial real estate non-owner occupied
Risk rating:
Pass	$	142,348	$	47,986	$	405,235	$	234,520	$	156,873	$	295,646	$	1,282,608
Special mention		—		—		—		20,446		3,913		26,969		51,328
Substandard		—		7,702		—		—		—		17,265		24,967
Doubtful		—		—		—		—		—		—		—
Total	$	142,348	$	55,688	$	405,235	$	254,966	$	160,786	$	339,880	$	1,358,903
Current period gross write-offs		—		—		—		—		—		—		—

Tax exempt and other
Risk rating:
Pass	$	11,026	$	2,669	$	6,283	$	602	$	178	$	23,517	$	44,275
Special mention		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—
Total	$	11,026	$	2,669	$	6,283	$	602	$	178	$	23,517	$	44,275
Current period gross write-offs		—		—		—		—		—		—		—

Commercial and industrial
Risk rating:
Pass	$	79,211	$	62,047	$	47,739	$	12,154	$	32,239	$	65,002	$	298,392
Special mention		9		14,878		1,266		834		60		632		17,679
Substandard		128		72		408		221		—		2,866		3,695
Doubtful		—		—		—		—		—		—		—
Total	$	79,348	$	76,997	$	49,413	$	13,209	$	32,299	$	68,500	$	319,766
Current period gross write-offs		—		48		28		62		18		31		187


Residential real estate
Performing	$	35,872	$	67,708	$	174,677	$	154,229	$	89,752	$	362,421	$	884,659
Nonperforming		—		194		458		—		—		2,940		3,592
Total	$	35,872	$	67,902	$	175,135	$	154,229	$	89,752	$	365,361	$	888,251
Current period gross write-offs		—		—		—		—		—		—		—

Home equity
Performing	$	19,175	$	15,762	$	12,515	$	6,648	$	5,536	$	33,238	$	92,874
Nonperforming		—		—		198		53		—		1,016		1,267
Total	$	19,175	$	15,762	$	12,713	$	6,701	$	5,536	$	34,254	$	94,141
Current period gross write-offs		—		—		—		—		—		—		—

Consumer other
Performing	$	4,432	$	1,644	$	870	$	276	$	108	$	715	$	8,045
Nonperforming		—		8		—		1		—		15		24
Total	$	4,432	$	1,652	$	870	$	277	$	108	$	730	$	8,069
Current period gross write-offs		—		59		12		—		2		204		277

Total Loans	$	369,226	$	294,918	$	765,576	$	460,563	$	313,824	$	942,989	$	3,147,096

Past Dues

The following is a summary of past due loans for the periods ended:


	September 30, 2025
(in thousands)	30-59		60-89		90+		Total Past Due		Current		Total Loans
Commercial construction	$	—	$	—	$	—	$	—	$	169,928	$	169,928
Commercial real estate owner occupied		—		—		155		155		342,082		342,237
Commercial real estate non-owner occupied		—		—		127		127		1,473,009		1,473,136
Tax exempt and other		—		—		—		—		42,395		42,395
Commercial and industrial		1,056		300		733		2,089		338,818		340,907
Residential real estate		817		923		2,701		4,441		1,085,109		1,089,550
Home equity		332		97		330		759		110,229		110,988
Consumer other		84		12		68		164		14,411		14,575
Total	$	2,289	$	1,332	$	4,114	$	7,735	$	3,575,981	$	3,583,716


	December 31, 2024
(in thousands)	30-59		60-89		90+		Total Past Due		Current		Total Loans
Commercial construction	$	—	$	—	$	—	$	—	$	131,617	$	131,617
Commercial real estate owner occupied		—		—		6		6		302,068		302,074
Commercial real estate non-owner occupied		184		—		93		277		1,358,626		1,358,903
Tax exempt and other		—		—		—		—		44,275		44,275
Commercial and industrial		428		227		578		1,233		318,533		319,766
Residential real estate		14,076		2,426		663		17,165		871,086		888,251
Home equity		963		441		193		1,597		92,544		94,141
Consumer other		35		20		1		56		8,013		8,069
Total	$	15,686	$	3,114	$	1,534	$	20,334	$	3,126,762	$	3,147,096

Non-Accrual Loans

The following is a summary of non-accrual loans for the periods ended:


	September 30, 2025
			Nonaccrual With No		90+ Days Past
(in thousands)	Nonaccrual		Related Allowance		Due and Accruing
Commercial construction	$	—	$	—	$	—
Commercial real estate owner occupied		305		32		147
Commercial real estate non-owner occupied		195		67		—
Tax exempt and other		—		—		—
Commercial and industrial		1,221		545		—
Residential real estate		6,734		1,054		190
Home equity		1,041		1		—
Consumer other		14		1		61
Total	$	9,510	$	1,700	$	398


	December 31, 2024
			Nonaccrual With No		90+ Days Past
(in thousands)	Nonaccrual		Related Allowance		Due and Accruing
Commercial construction	$	—	$	—	$	—
Commercial real estate owner occupied		736		671		—
Commercial real estate non-owner occupied		277		184		—
Tax exempt and other		—		—		—
Commercial and industrial		1,099		295		—
Residential real estate		3,591		898		—
Home equity		1,267		1		2
Consumer other		24		1		—
Total	$	6,994	$	2,050	$	2

Our policy is to reverse previously recorded interest income when a loan is placed on non-accrual, as such, the Company did not record any interest income on its non-accrual loans for the three and nine months ended September 30, 2025 and 2024.

Collateral Dependent Loans

Loans that do not share risk characteristics are evaluated on an individual basis. For loans that are individually evaluated and collateral dependent, financial loans where we have determined that foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and we expect repayment of the financial asset to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the asset as of the measurement date.

The following table presents the amortized cost basis of collateral-dependent loans by loan portfolio segment for the periods ended:


	September 30, 2025				December 31, 2024
(in thousands)	Real Estate		Other		Real Estate		Other
Commercial construction	$	—	$	—	$	—	$	—
Commercial real estate owner occupied		—		—		736		—
Commercial real estate non-owner occupied		—		—		277		—
Tax exempt and other		—		—		—		—
Commercial and industrial		—		579		1,099		—
Residential real estate		1,334		—		3,591		—
Home equity		—		—		1,267		—
Consumer other		—		—		24		—
Total	$	1,334	$	579	$	6,994	$	—

Loan Modifications to Borrowers Experiencing Financial Difficulty

In January 2023, the Company adopted ASU 2022-02, “Financial Instruments - Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures” which eliminated the accounting guidance for troubled debt restructurings while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. This guidance was applied on a prospective basis. Upon adoption of this guidance, we are no longer required to establish a specific reserve for modifications to borrowers experiencing financial difficulty. Instead, these modifications are included in their respective category and a historical loss rate is applied to the current loan balance to arrive at the quantitative baseline portion of the ACL.

These modifications typically result from loss mitigation activities and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions.

The following table presents the amortized cost basis of loans that were both experiencing financial difficulty and modified during the three and nine months ended September 30, 2025 and 2024, by class and by type of modification.


(in thousands)	Principal Forgiveness		Payment Delay		Term Extension		Interest Rate Reduction		Combination Interest Rate Reduction and Term Extension		% of Total Class of Loans
Three Months Ended September 30, 2025
Commercial construction	$	—	$	—	$	—	$	—	$	—	—	%
Commercial real estate owner occupied		—		—		—		—		—	—
Commercial real estate non-owner occupied		—		—		11,512		—		—	0.78
Tax exempt and other		—		—		—		—		—	—
Commercial and industrial		—		—		55		—		—	0.02
Residential real estate		—		—		—		—		—	—
Home equity		—		—		—		—		—	—
Consumer other		—		—		—		—		—	—
Total	$	—	$	—	$	11,567	$	—	$	—	0.32	%

Nine Months Ended September 30, 2025
Commercial construction	$	—	$	—	$	—	$	—	$	—	—	%
Commercial real estate owner occupied		—		—		—		—		—	—
Commercial real estate non-owner occupied		—		—		11,512		—		—	0.78
Tax exempt and other		—		—		—		—		—	—
Commercial and industrial		—		—		221		—		—	0.06
Residential real estate		—		—		—		—		—	—
Home equity		—		—		—		—		—	—
Consumer other		—		—		—		—		—	—
Total	$	—	$	—	$	11,733	$	—	$	—	0.33	%


(in thousands)	Principal Forgiveness		Payment Delay		Term Extension		Interest Rate Reduction		Combination Interest Rate Reduction and Term Extension		% of Total Class of Loans
Three Months Ended September 30, 2024
Commercial construction	$	—	$	—	$	—	$	—	$	—	—	%
Commercial real estate owner occupied		—		—		—		—		—	—
Commercial real estate non-owner occupied		—		—		—		—		—	—
Tax exempt and other		—		—		—		—		—	—
Commercial and industrial		—		—		9		—		—	—
Residential real estate		—		70		—		—		76	0.02
Home equity		—		—		—		—		—	—
Consumer other		—		—		—		—		—	—
Total	$	—	$	70	$	9	$	—	$	76	0.01	%

Nine Months Ended September 30, 2024
Commercial construction	$	—	$	—	$	—	$	—	$	—	—	%
Commercial real estate owner occupied		—		—		—		—		—	—
Commercial real estate non-owner occupied		—		—		—		—		—	—
Tax exempt and other		—		—		—		—		—	—
Commercial and industrial		—		—		9		—		—	—
Residential real estate		—		70		31		—		76	0.02
Home equity		—		—		—		—		—	—
Consumer other		—		—		—		—		—	—
Total	$	—	$	70	$	40	$	—	$	76	0.01	%

The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2025 and 2024.


	Weighted-Average Months of Payment Delay		Weighted-Average Months of Term Extension		Weighted-Average Interest Rate Reduction
Three Months Ended September 30, 2025
Commercial construction		—		—	—	%
Commercial real estate owner occupied		—		—	—
Commercial real estate non-owner occupied		—		8	—
Tax exempt and other		—		—	—
Commercial and industrial		—		6	—
Residential real estate		—		—	—
Home equity		—		—	—
Consumer other		—		—	—

Nine Months Ended September 30, 2025
Commercial construction		—		—	—	%
Commercial real estate owner occupied		—		—	—
Commercial real estate non-owner occupied		—		8	—
Tax exempt and other		—		—	—
Commercial and industrial		—		35	—
Residential real estate		—		—	—
Home equity		—		—	—
Consumer other		—		—	—


	Weighted-Average Months of Payment Delay		Weighted-Average Months of Term Extension		Weighted-Average Interest Rate Reduction
Three Months Ended September 30, 2024
Commercial construction		—		—	—	%
Commercial real estate owner occupied		—		—	—
Commercial real estate non-owner occupied		—		—	—
Tax exempt and other		—		—	—
Commercial and industrial		—		58	—
Residential real estate		3		60	1.25
Home equity		—		—	—
Consumer other		—		—	—

Nine Months Ended September 30, 2024
Commercial construction		—		—	—	%
Commercial real estate owner occupied		—		—	—
Commercial real estate non-owner occupied		—		—	—
Tax exempt and other		—		—	—
Commercial and industrial		—		58	—
Residential real estate		3		61	1.25
Home equity		—		—	—
Consumer other		—		—	—

Foreclosure

There were $89 thousand of residential mortgage loans collateralized by real estate that are in the process of foreclosure as of September 30, 2025. Residential mortgage loans collateralized by real estate that were in the process of foreclosure as of December 31, 2024 totaled $83 thousand.

Mortgage Banking

Loans held for sale at September 30, 2025 had an unpaid principal balance of $5.4 million and $1.2 million as of December 31, 2024. The interest rate exposure on loans held for sale is mitigated through forward sale commitments with certain approved secondary market investors. Forward sale commitments had a notional amount of $8.5 million at September 30, 2025, and $4.8 million at December 31, 2024. Refer to Note 8 for further discussion of forward sale commitments.

For the three months ended September 30, 2025 and 2024, we sold $12.4 million and $20.7 million, respectively, of residential mortgage loans on the secondary market, which resulted in a net gain on sale of loans (net of costs, including direct and indirect origination costs) of $167 thousand and $317 thousand, respectively.

For the nine months ended September 30, 2025 and 2024, we sold $33.7 million and $37.9 million, respectively, of residential mortgage loans on the secondary market, which resulted in a net gain on sale of loans (net of costs, including direct and indirect origination costs) of $616 thousand and $502 thousand, respectively.

We sell residential loans on the secondary market while primarily retaining the servicing of these loans. Servicing retained loans helps to maintain customer relationships and earn fees over the servicing period. Loans serviced for others are not included in the accompanying consolidated balance sheets. The risks inherent in servicing assets relate primarily to level of prepayments that result from shifts in interest rates. We obtain third-party valuations of our servicing assets portfolio quarterly, and the assumptions are reflected in Fair Value disclosures.