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Loans and Allowance for Credit Losses
 9 Months Ended
Sep. 30, 2025
Receivables [Abstract]  
Loans and Allowance for Credit Losses

NOTE 4 – Loans and Allowance for Credit Losses

 

The following table summarizes the composition of our loan portfolio. Total gross loans are recorded net of deferred loan fees and costs, which totaled $5.7 million as of September 30, 2025 and $6.2 million as of December 31, 2024.

 

Schedule of composition of our loan portfolio                    
  
   September 30, 2025   December 31, 2024 
(dollars in thousands)  Amount   %  of Total   Amount   %  of Total 
Commercial                
Owner occupied RE  $705,383    18.6%  $651,597    17.9%
Non-owner occupied RE   943,304    24.9%   924,367    25.5%
Construction   71,928    1.9%   103,204    2.8%
Business   604,411    16.0%   556,117    15.3%
Total commercial loans   2,325,026    61.4%   2,235,285    61.5%
Consumer                    
Real estate   1,159,693    30.6%   1,128,629    31.1%
Home equity   239,996    6.3%   204,897    5.6%
Construction   25,842    0.7%   20,874    0.6%
Other   38,464    1.0%   42,082    1.2%
Total consumer loans   1,463,995    38.6%   1,396,482    38.5%
Total gross loans, net of deferred fees   3,789,021    100.0%   3,631,767    100.0%
Less—allowance for credit losses   (41,799)        (39,914)     
Total loans, net  $3,747,222        $3,591,853      

 

Maturities and Sensitivity of Loans to Changes in Interest Rates

 

The information in the following tables summarize the loan maturity distribution by type and related interest rate characteristics based on the contractual maturities of individual loans, including loans which may be subject to renewal at their contractual maturity. Renewal of such loans is subject to review and credit approval, as well as modification of terms upon maturity. Actual repayments of loans may differ from the maturities reflected below, because borrowers have the right to prepay obligations with or without prepayment penalties.

 

 

Schedule of loan maturity distribution by type and related interest rate                         
                 
       September 30, 2025 
(dollars in thousands)  One year
or less		   After one
but within
five years		   After five but
within fifteen
years		   After fifteen
years		   Total 
Commercial                    
Owner occupied RE  $39,707    265,726    374,989    24,961    705,383 
Non-owner occupied RE   145,791    578,899    200,798    17,816    943,304 
Construction   22,802    34,011    15,115    -    71,928 
Business   149,210    325,022    126,524    3,655    604,411 
Total commercial loans   357,510    1,203,658    717,426    46,432    2,325,026 
Consumer                         
Real estate   28,929    114,413    222,671    793,680    1,159,693 
Home equity   5,516    37,676    192,731    4,073    239,996 
Construction   18,043    568    7,231    -    25,842 
Other   5,648    30,673    1,397    746    38,464 
Total consumer loans   58,136    183,330    424,030    798,499    1,463,995 
Total gross loans, net of deferred fees  $415,646    1,386,988    1,141,456    844,931    3,789,021 

 

           December 31, 2024 
(dollars in thousands)  One year
or less		   After one
but within
five years		   After five
but within
fifteen years		   After fifteen
years		   Total 
Commercial                         
Owner occupied RE  $21,235    220,648    369,748    39,966    651,597 
Non-owner occupied RE   129,269    547,864    227,987    19,247    924,367 
Construction   6,479    77,636    19,089    -    103,204 
Business   129,978    277,830    144,056    4,253    556,117 
Total commercial loans   286,961    1,123,978    760,880    63,466    2,235,285 
Consumer                         
Real estate   20,982    82,896    281,091    743,660    1,128,629 
Home equity   3,454    36,722    160,380    4,341    204,897 
Construction   5,849    2,133    10,427    2,465    20,874 
Other   7,660    30,633    3,040    749    42,082 
Total consumer loans   37,945    152,384    454,938    751,215    1,396,482 
Total gross loans, net of deferred fees  $324,906    1,276,362    1,215,818    814,681    3,631,767 

 

 

The following table summarizes the loans due after one year by category.

 

Schedule of loans due after one year by category                    
             
   September 30, 2025   December 31, 2024 
   Interest Rate       Interest Rate 
(dollars in thousands)  Fixed   Floating or
Adjustable		   Fixed   Floating or
Adjustable		 
Commercial                    
Owner occupied RE  $616,874    48,802   $599,179    31,183 
Non-owner occupied RE   694,257    103,256    701,297    93,801 
Construction   23,200    25,926    63,019    33,706 
Business   284,688    170,513    281,316    144,823 
Total commercial loans   1,619,019    348,497    1,644,811    303,513 
Consumer                    
Real estate   979,075    151,689    1,023,593    84,054 
Home equity   8,889    225,591    9,899    191,544 
Construction   7,799    -    15,025    - 
Other   6,653    26,163    8,038    26,384 
Total consumer loans   1,002,416    403,443    1,056,555    301,982 
Total gross loans, net of deferred fees  $2,621,435    751,940   $2,701,366    605,495 

 

Credit Quality Indicators

 

The Company tracks credit quality based on its internal risk ratings. Upon origination, a loan is assigned an initial risk grade, which is generally based on several factors such as the borrower’s credit score, the loan-to-value ratio, the debt-to-income ratio, etc. After loans are initially graded, they are monitored regularly for credit quality based on many factors, such as payment history, the borrower’s financial status, and changes in collateral value. Loans can be downgraded or upgraded depending on management’s evaluation of these factors. Internal risk-grading policies are consistent throughout each loan type.

 

A description of the general characteristics of the risk grades is as follows:

 

·Pass— A pass loan ranges from minimal to average credit risk; however, still has acceptable credit risk.

 

·Watch—A watch loan exhibits above average credit risk due to minor weaknesses and warrants closer scrutiny by management.

 

·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 loan or the institution’s credit position at some future date.

 

·Substandard—A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness, or weaknesses, which may jeopardize the liquidation of the debt. A substandard loan is characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

 

·Doubtful—A doubtful loan has all of the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of the currently existing facts, conditions and values, highly questionable and improbable.

 

The following table presents loan balances classified by credit quality indicators by year of origination as of September 30, 2025.

 

Schedule of classified by credit quality indicators by year of origination                                             
                                     
                           September 30, 2025 
(dollars in thousands)  2025   2024   2023   2022   2021   Prior   Revolving   Revolving
Converted
to Term		   Total 
Commercial                                    
Owner occupied RE                                             
Pass  $59,743    63,053    40,074    190,168    122,283    197,552    85    -    672,958 
Watch   4,016    440    5,848    5,801    2,277    10,325    -    -    28,707 
Special Mention   -    -    -    -    -    3,456    -    -    3,456 
Substandard   -    -    -    262    -    -    -    -    262 
Total Owner occupied RE   63,759    63,493    45,922    196,231    124,560    211,333    85    -    705,383 
                                              
Non-owner occupied RE                                             
Pass   60,224    61,653    64,117    302,806    149,628    257,611    471    467    896,977 
Watch   -    618    2,228    5,970    10,666    9,723    -    -    29,205 
Special Mention   -    146    -    -    191    7,627    -    -    7,964 
Substandard   -    -    -    2,247    -    6,911    -    -    9,158 
Total Non-owner occupied RE   60,224    62,417    66,345    311,023    160,485    281,872    471    467    943,304 
                                              
Construction                                             
Pass   14,053    20,451    12,004    22,011    58    -    -    -    68,577 
Watch   -    -    -    1,170    2,181    -    -    -    3,351 
Total Construction   14,053    20,451    12,004    23,181    2,239    -    -    -    71,928 
                                              
Business                                             
Pass   85,947    46,287    47,430    107,471    30,003    55,049    204,217    474    576,878 
Watch   704    778    1,220    3,177    2,264    4,194    10,971    387    23,695 
Special Mention   77    655    635    630    -    589    160    386    3,132 
Substandard   165    -    -    -    -    74    467    -    706 
Total Business   86,893    47,720    49,285    111,278    32,267    59,906    215,815    1,247    604,411 
Current period gross write-offs   -    -    -    -    -    (78)   (63)   -    (141)
                                              
Total Commercial loans   224,929    194,081    173,556    641,713    319,551    553,111    216,371    1,714    2,325,026 
                                              
Consumer                                             
Real estate                                             
Pass   117,871    64,687    130,511    258,945    250,683    283,170    -    -    1,105,867 
Watch   1,200    665    4,539    6,379    8,474    9,577    -    -    30,834 
Special Mention   149    817    1,720    5,174    2,621    7,564    -    -    18,045 
Substandard   -    641    844    986    720    1,756    -    -    4,947 
Total Real estate   119,220    66,810    137,614    271,484    262,498    302,067    -    -    1,159,693 
                                              
Home equity                                             
Pass   -    -    -    -    -    -    223,850    -    223,850 
Watch   -    -    -    -    -    -    8,880    -    8,880 
Special Mention   -    -    -    -    -    -    5,757    -    5,757 
Substandard   -    -    -    -    -    -    1,509    -    1,509 
Total Home equity   -    -    -    -    -    -    239,996    -    239,996 
                                              
Construction                                             
Pass   15,623    4,507    -    3,089    -    -    648    -    23,867 
Watch   -    -    1,975    -    -    -    -    -    1,975 
Total Construction   15,623    4,507    1,975    3,089    -    -    648    -    25,842 
                                              
Other                                             
Pass   1,586    658    614    1,121    394    1,775    31,018    -    37,166 
Watch   25    156    38    29    327    115    131    -    821 
Special Mention   14    29    5    318    51    41    19    -    477 
Total Other   1,625    843    657    1,468    772    1,931    31,168    -    38,464 
Current period gross write-offs   (30)   -    -    -    (21)   -    (9)   -    (60)
                                              
Total Consumer loans   136,468    72,160    140,246    276,041    263,270    303,998    271,812    -    1,463,995 
Total loans  $361,397    266,241    313,802    917,754    582,821    857,109    488,183    1,714    3,789,021 

Total Current period gross write-offs

   (30)   -    -    -    (21)   (78)   (72)   -    (201)

 

The following table presents loan balances classified by credit quality indicators by year of origination as of December 31, 2024.

 

                                     
                           December 31, 2024 
(dollars in thousands)  2024   2023   2022   2021   2020   Prior   Revolving   Revolving
Converted
to Term		   Total 
Commercial                                    
Owner occupied RE                                             
Pass  $51,338    47,997    186,361    122,306    66,561    145,743    160    238    620,704 
Watch   480    1,180    3,638    1,962    8,828    11,012    -    -    27,100 
Special Mention   -    -    162    -    -    2,840    -    -    3,002 
Substandard   -    -    -    -    -    791    -    -    791 
Total Owner occupied RE   51,818    49,177    190,161    124,268    75,389    160,386    160    238    651,597 
                                              
Non-owner occupied RE                                             
Pass   50,685    70,517    321,726    145,658    95,994    183,723    360    220    868,883 
Watch   -    954    6,081    10,238    4,705    8,435    -    -    30,413 
Special Mention   -    -    -    7,579    -    8,882    -    -    16,461 
Substandard   -    -    969    -    -    7,641    -    -    8,610 
Total Non-owner occupied RE   50,685    71,471    328,776    163,475    100,699    208,681    360    220    924,367 
Current period gross write-offs   -    -    -    -    -    (1,029)   -    -    (1,029)
                                              
Construction                                             
Pass   24,076    26,501    34,067    15,000    -    -    -    -    99,644 
Watch   -    2,420    1,140    -    -    -    -    -    3,560 
Total Construction   24,076    28,921    35,207    15,000    -    -    -    -    103,204 
                                              
Business                                             
Pass   54,814    41,743    129,450    38,312    15,716    51,566    196,246    803    528,650 
Watch   -    132    5,353    2,174    1,423    5,243    8,776    389    23,490 
Special Mention   660    95    805    -    65    533    -    206    2,364 
Substandard   28    -    -    -    385    630    570    -    1,613 
Total Business   55,502    41,970    135,608    40,486    17,589    57,972    205,592    1,398    556,117 
Current period gross write-offs   -    -    -    (143)   (347)   (18)   (72)   -    (580)
                                              
Total Commercial loans   182,081    191,539    689,752    343,229    193,677    427,039    206,112    1,856    2,235,285 
                                              
Consumer                                             
Real estate                                             
Pass   78,287    144,487    277,854    263,079    160,007    153,584    -    -    1,077,298 
Watch   671    2,409    6,961    8,573    4,147    4,632    -    -    27,393 
Special Mention   817    1,536    5,987    2,664    2,804    5,181    -    -    18,989 
Substandard   212    508    967    746    821    1,695    -    -    4,949 
Total Real estate   79,987    148,940    291,769    275,062    167,779    165,092    -    -    1,128,629 
                                              
Home equity                                             
Pass   -    -    -    -    -    -    188,451    -    188,451 
Watch   -    -    -    -    -    -    9,114    -    9,114 
Special Mention   -    -    -    -    -    -    6,173    -    6,173 
Substandard   -    -    -    -    -    -    1,159    -    1,159 
Total Home equity   -    -    -    -    -    -    204,897    -    204,897 
Current period gross write-offs   -    -    -    -    -    -    (45)   -    (45)
                                              
Construction                                             
Pass   7,700    3,636    9,222    316    -    -    -    -    20,874 
Total Construction   7,700    3,636    9,222    316    -    -    -    -    20,874 
                                              
Other                                             
Pass   2,732    836    1,521    1,593    1,229    2,609    29,660    -    40,180 
Watch   167    61    12    366    -    129    595    -    1,330 
Special Mention   36    35    325    66    -    65    45    -    572 
Total Other   2,935    932    1,858    2,025    1,229    2,803    30,300    -    42,082 
Current period gross write-offs   -    -    -    -    -    (38)   (42)   -    (80)
                                              
Total Consumer loans   90,622    153,508    302,849    277,403    169,008    167,895    235,197    -    1,396,482 
Total loans  $272,703    345,047    992,601    620,632    362,685    594,934    441,309    1,856    3,631,767 

Total Current period gross write-offs

   -    -    -    (143)   (347)   (1,085)   (159)   -    (1,734)

 

The following tables present loan balances by age and payment status.

 

Schedule of loan balances by age and payment status                              
 
   September 30, 2025 
(dollars in thousands)  Accruing 30-59
days past due		   Accruing
60-89 days
past due		   Accruing 90
days or more
past due		   Nonaccrual
loans		   Accruing
current		   Total 
Commercial                              
Owner occupied RE  $1,974    -    -    262    703,147    705,383 
Non-owner occupied RE   491    -    -    6,911    935,902    943,304 
Construction   -    -    -    -    71,928    71,928 
Business   914    -    -    195    603,302    604,411 
Consumer                              
Real estate   2,078    685    -    3,394    1,153,536    1,159,693 
Home equity   703    -    -    705    238,588    239,996 
Construction   -    -    -    -    25,842    25,842 
Other   51    -    -    -    38,413    38,464 
Total loans  $6,211    685    -    11,467    3,770,658    3,789,021 

 

   December 31, 2024 
(dollars in thousands)  Accruing 30-59
days past due		   Accruing
60-89 days
past due		   Accruing 90
days or more
past due		   Nonaccrual
loans		   Accruing
current		   Total 
Commercial                              
Owner occupied RE  $292    -    -    -    651,305    651,597 
Non-owner occupied RE   -    -    -    7,641    916,726    924,367 
Construction   -    -    -    -    103,204    103,204 
Business   1,319    -    -    1,016    553,782    556,117 
Consumer                              
Real estate   3,839    938    -    1,908    1,121,944    1,128,629 
Home equity   41    -    -    312    204,544    204,897 
Construction   -    -    -    -    20,874    20,874 
Other   -    -    -    -    42,082    42,082 
Total loans  $5,491    938    -    10,877    3,614,461    3,631,767 

 

As of September 30, 2025 and December 31, 2024, accruing loans 30 days or more past due represented 0.18% of the Company’s total loan portfolio. Commercial loans accruing 30 days or more past due were 0.09% and 0.05% of the Company’s total loan portfolio as of September 30, 2025 and December 31, 2024, respectively. Consumer loans accruing 30 days or more past due were 0.09% and 0.13% of total loans as of September 30, 2025 and December 31, 2024, respectively.

 

The table below summarizes nonaccrual loans by major categories for the periods presented.

 

             
   September 30, 2025       December 31, 2024 
   Nonaccrual   Nonaccrual       Nonaccrual   Nonaccrual     
   loans   loans   Total   loans   loans   Total 
   with no   with an   nonaccrual   with no   with an   nonaccrual 
(dollars in thousands)  allowance   allowance   loans   allowance   allowance   loans 
Commercial                              
Owner occupied RE  $262    -    262   $-    -    - 
Non-owner occupied RE   5,122    1,789    6,911    5,844    1,797    7,641 
Business   -    195    195    -    1,016    1,016 
Total commercial   5,384    1,984    7,368    5,844    2,813    8,657 
Consumer                              
Real estate   2,412    982    3,394    1,526    382    1,908 
Home equity   705    -    705    312    -    312 
Total consumer   3,117    982    4,099    1,838    382    2,220 
Total nonaccrual loans  $8,501    2,966    11,467   $7,682    3,195    10,877 

 

The Company did not recognize interest income on nonaccrual loans for the three months ended September 30, 2025 and September 30, 2024. The accrued interest reversed during the three months ended September 30, 2025 and September 30, 2024 was not material. Foregone interest income on the nonaccrual loans for the three month period ended September 30, 2025 was $28,000, while foregone interest income on the nonaccrual loans for the three month period ended September 30, 2024 was $111,000.

 

The Company did not recognize interest income on nonaccrual loans for the nine months ended September 30, 2025 and September 30, 2024. Accrued interest of $63,000 was reversed during the nine months ended September 30, 2025 and $94,000 was reversed during the nine months ended September 30, 2024. Foregone interest income on the nonaccrual loans for the nine month period ended September 30, 2025 was $229,000, while foregone interest income on the nonaccrual loans for the nine month period ended September 30, 2024 was $134,000.

 

The table below summarizes information regarding nonperforming assets.

 

Schedule of nonperforming assets        
         
(dollars in thousands)  September 30, 2025   December 31, 2024 
Nonaccrual loans  $11,467    10,877 
Other real estate owned   275    - 
Total nonperforming assets  $11,742    10,877 
Nonperforming assets as a percentage of:          
Total assets   0.27%   0.27%
Gross loans   0.31%   0.30%
Total loans over 90 days past due  $1,480    2,641 
Loans over 90 days past due and still accruing   -    - 

 

Modifications to Borrowers Experiencing Financial Difficulty

The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon 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 discounted cash flow 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.

 

Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses due to the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification. Loan modifications to borrowers experiencing financial difficulty were not material for the three and nine months ended September 30, 2025 and September 30, 2024.

 

Allowance for Credit Losses

The Company maintains an allowance for credit losses to provide for expected credit losses. Losses are charged against the allowance when management believes that the principal is uncollectable. Subsequent recoveries, if any, are credited to the allowance. Allocations of the allowance are made for specific loans and for pools of similar types of loans, although the entire allowance is available for any loan that, in management’s judgment, should be charged against the allowance. A provision for credit losses is taken based on management’s ongoing evaluation of the appropriate allowance balance.

 

A formal evaluation of the adequacy of the ACL is conducted quarterly. This assessment includes procedures to estimate the allowance and test the adequacy and appropriateness of the resulting balance. The level of the allowance is based upon management's evaluation of historical default and loss experience, current and projected economic conditions, asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrowers' ability to repay a loan, the estimated value of any underlying collateral, composition of the loan portfolio, industry and peer bank loan quality indications and other pertinent factors, including regulatory recommendations. Management believes the level of the ACL is adequate to absorb all expected future losses inherent in the loan portfolio at the balance sheet date. The allowance is increased through provision for credit losses and decreased by charge-offs, net of recoveries of amounts previously charged-off.

 

On January 1, 2025, the Company transitioned to the DCF modeling approach to estimate the ACL on loans as it allows for a better estimation of credit losses through customization among the various inputs by loan segmentation. The DCF methodology is applied on a segment-by-segment basis at the loan level with a one-year reasonable and supportable forecast period, followed by a one-year reversion to the long-term average. The Company considers economic forecasts of national gross domestic product (“GDP”) and unemployment rates as reported by Fannie Mae to inform the model for loss estimation. Historical loss rates used in the quantitative model were derived using both the Bank's and peer bank data obtained from publicly-available sources (i.e., federal call reports) encompassing an economic cycle. The peer group utilized by the Bank is comprised of financial institutions of relatively similar size (i.e., $1-$15 billion of total assets) and in similar markets. In addition, the DCF methodology considers the weighted average life of the portfolio, impacting the reaction time and the exposure to potential loss based on changes in the interest rate environment. Management also considers qualitative adjustments when estimating loan losses to take into account the model's quantitative limitations. Qualitative adjustments to quantitative loss factors, either negative or positive, may include changes in lending policies; international, national, regional, and local conditions; volume and terms of loans; experience and depth of management; volume and severity of past due loans; effects of changes in lending policy; concentrations of credit; and loan review results. The Company enhanced its qualitative factor framework to better address risks that are not reflected in the quantitative loss factors.

 

Prior to January 1, 2025, the Company used a lifetime probability of default and loss given default modeling approach to estimate the allowance for credit losses on loans. This method used historical correlations between default experience and the age of loans to forecast defaults and losses, assuming that a loan in a pool shares similar risk characteristics such as loan product type, risk rating and loan age, and demonstrates similar default characteristics as other loans in that pool, as the loan progresses through its lifecycle. The Company calculated lifetime probability of default and loss given default rates based on historical loss experience, which is used to calculate expected losses based on the pool’s loss rate and the age of loans in the pool. The Company used its own internal data to measure historical credit loss experience within the pools with similar risk characteristics over an economic cycle. The probability of default and loss given default method also includes assumptions of observed migration over the lifetime of the underlying loan data. Loans that do not share risk characteristics were evaluated for expected credit losses on an individual basis and excluded from the collective evaluation.

 

During the quarter ended September 30, 2025, the risk weightings associated with certain qualitative factors were revised based on new information reflecting the current economic and market environment. The result of these changes was immaterial as it relates to the allowance for credit loss balance. 

 

The following tables summarize the activity related to the allowance for credit losses for the three and nine months ended September 30, 2025 and September 30, 2024.

 

                                    
                 
               Three months September 30, 2025 
   Commercial       Consumer 
(dollars in thousands)  Owner
occupied
RE		   Non-
owner
occupied
RE		   Construction   Business   Real
Estate		   Home
Equity		   Construction   Other   Total 
Balance, beginning of period  $4,003    7,417    462    11,293    15,533    1,649    455    473    41,285 
Provision for credit losses for loans   (469)   (751)   140    769    451    115    177    68    500 
Loan charge-offs   -    -    -    -    -    -    -    (55)   (55)
Loan recoveries   -    -    -    30    36    3    -    -    69 
Net loan recoveries (charge-offs)   -    -    -    30    36    3    -    (55)   14 
Balance, end of period  $3,534    6,666    602    12,092    16,020    1,767    632    486    41,799 
Net recoveries to average loans (annualized)         0.00%
Allowance for credit losses to gross loans         1.10%
Allowance for credit losses to nonperforming loans         364.50%

 

                                     
                 
               Three months ended September 30, 2024 
   Commercial       Consumer 
(dollars in thousands)  Owner
occupied
RE		   Non-
owner
occupied
RE		   Construction   Business   Real
Estate		   Home
Equity		   Construction   Other   Total 
Balance, beginning of period  $5,467    10,562    1,331    7,236    12,397    2,479    278    407    40,157 
Provision for credit losses for loans   -    -    -    -    -    -    -    -    - 
Loan charge-offs   -    -    -    (72)   -    (45)   -    (1)   (118)
Loan recoveries   -    -    -    73    -    4    -    50    127 
Net loan recoveries (charge-offs)   -    -    -    1    -    (41)   -    49    9 
Balance, end of period  $5,467    10,562    1,331    7,237    12,397    2,438    278    456    40,166 
Net recoveries to average loans (annualized)         0.00%
Allowance for credit losses to gross loans         1.11%
Allowance for credit losses to nonperforming loans         346.78%

 

                                     
               Nine months ended September 30, 2025 
   Commercial   Consumer     
(dollars in thousands)  Owner
occupied
RE		   Non-
owner
occupied
RE		   Construction   Business   Real
Estate		   Home
Equity		   Construction   Other   Total 
Balance, beginning of period  $5,482    10,219    940    7,745    12,359    2,655    115    399    39,914 
Provision for credit losses   (1,948)   (3,553)   (338)   4,384    3,625    (899)   517    112    1,900 
Loan charge-offs   -    -    -    (141)   -    -    -    (60)   (201)
Loan recoveries   -    -    -    104    36    11    -    35    186 
Net loan recoveries (charge-offs)   -    -    -    (37)   36    11    -    (25)   (15)
Balance, end of period  $3,534    6,666    602    12,092    16,020    1,767    632    486    41,799 
Net charge-offs to average loans (annualized)         0.00%
Allowance for credit losses to gross loans         1.10%
Allowance for credit losses to nonperforming loans         364.50%

 

                                     
               Nine months ended September 30, 2024 
   Commercial   Consumer     
(dollars in thousands)  Owner
occupied
RE		   Non-
owner
occupied
RE		   Construction   Business   Real
Estate		   Home
Equity		   Construction   Other   Total 
Balance, beginning of period  $6,118    11,167    1,594    7,385    10,647    2,600    677    494    40,682 
Provision for credit losses   (651)   424    (263)   190    1,750    (244)   (399)   (57)   750 
Loan charge-offs   -    (1,029)   -    (437)   -    (45)   -    (80)   (1,591)
Loan recoveries   -    -    -    99    -    127    -    99    325 
Net loan recoveries (charge-offs)   -    (1,029)   -    (338)   -    82    -    19    (1,266)
Balance, end of period  $5,467    10,562    1,331    7,237    12,397    2,438    278    456    40,166 
Net charge-offs to average loans (annualized)         0.05%
Allowance for credit losses to gross loans         1.11%
Allowance for credit losses to nonperforming loans         346.78%

 

There was a provision for credit losses of $500,000 for the three months ended September 30, 2025 and no provision for credit losses for the three months ended September 30, 2024. In addition, the provision for credit losses was $1.9 million and $750,000 for the nine months ended September 30, 2025 and September 30, 2024, respectively.

 

Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. The Company reviews individually evaluated loans for designation as collateral dependent loans, as well as other loans that management of the Company designates as having higher risk. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the allowance for credit losses.

 

Under CECL, for collateral dependent loans, the Company has adopted the practical expedient to measure the allowance for credit losses based on the fair value of collateral. The allowance for credit losses is calculated on an individual loan basis based on the shortfall between the fair value of the loan's collateral, which is adjusted for liquidation costs/discounts, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required.

 

The following tables present an analysis of collateral-dependent loans of the Company as of September 30, 2025 and December 31, 2024.

 

                    
             
           September 30, 2025 
   Real   Business         
(dollars in thousands)  estate   assets   Other   Total 
Commercial                    
Owner occupied RE  $262    -    -    262 
Non-owner occupied RE   6,911              6,911 
Business   171    24    -    195 
Total commercial   7,344    24    -    7,368 
Consumer                    
Real estate   3,394    -    -    3,394 
Home equity   705    -    -    705 
Total consumer   4,099    -    -    4,099 
Total  $11,443    24    -    11,467 

 

           December 31, 2024 
   Real   Business         
(dollars in thousands)  estate   assets   Other   Total 
Commercial                    
Non-owner occupied RE  $7,641    -    -    7,641 
Business   460    556    -    1,016 
Total commercial   8,101    556    -    8,657 
Consumer                    
Real estate   1,908    -    -    1,908 
Home equity   312    -    -    312 
Total consumer   2,220    -    -    2,220 
Total  $10,321    556    -    10,877 

 

Allowance for Credit Losses - Unfunded Loan Commitments

 

The allowance for credit losses for unfunded loan commitments was $1.9 million and $1.5 million at September 30, 2025 and December 31, 2024, respectively, and is separately classified on the balance sheet within other liabilities. The following table presents the balance and activity in the ACL for unfunded loan commitments for the three and nine months ended September 30, 2025 and September 30, 2024.

 

Schedule of allowance for credit losses for unfunded loan commitments          
         
   Three months ended   Three months ended 
(dollars in thousands)  September 30, 2025   September 30, 2024 
Balance, beginning of period  $1,506    1,406 
Provision for credit losses   350    - 
Balance, end of period  $1,856    1,406 
Unfunded Loan Commitments  $836,396    699,888 
Reserve for Unfunded Commitments   0.22%   0.20%
         
   Nine months ended   Nine months ended 
(dollars in thousands)  September 30, 2025   September 30, 2024 
Balance, beginning of period  $1,456    1,831 
Provision for (reversal of) credit losses   400    (425)
Balance, end of period  $1,856    1,406 
Unfunded Loan Commitments  $836,396    699,888 
Reserve for Unfunded Commitments   0.22%   0.20%