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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 3 – Loans and Allowance for Credit Losses

The following table presents the components of loans as of the periods shown:
(Dollars in thousands)September 30, 2025December 31, 2024
Commercial:
   Business$677,339 $668,458 
   Real estate819,031 632,898 
   Acquisition, development and construction96,431 115,500 
          Total commercial1,592,801 1,416,856 
Residential real estate637,226 650,708 
Home equity lines of credit10,476 12,933 
Consumer19,538 18,620 
Total loans2,260,041 2,099,117 
   Deferred loan origination costs, net(655)1,014 
Loans receivable$2,259,386 $2,100,131 

Commercial loans include shared national credits, which are participations in loans or loan commitments of at least $100.0 million that are shared by three or more banks. As of September 30, 2025, the Bank had four shared national credit relationships with an aggregate commitment for $89.8 million and an aggregate outstanding balance of $61.2 million. These shared national credits are classified as pass rated and all payments are current and the loans are performing in accordance with their contractual terms. The Bank’s accounting policies for shared national credits, including our charge off and reserve policy, are consistent with the significant accounting policies disclosed in our financial statements for the total loan portfolio. Shared national credits are subject to the same underwriting guidelines as loans originated by the Bank and are subject to annual reviews where the risk rating of the loan is evaluated. Additionally, the Bank routinely obtains updated financial information and performs a financial analysis on a regular basis to ensure that the borrower can comply with the financial terms of the loan. The information used in the analysis is provided by the borrower through the agent bank.

We currently manage our loan portfolios and the respective exposure to credit losses (credit risk) by the specific portfolio segments shown below. Our loan portfolio segmentation is based primarily on call report codes, which are levels at which we develop and document our systematic methodology to determine the ACL attributable to each respective portfolio segment. The ACL portfolio segments are aggregated into broader segments in order to present informative disclosures, as follows:

Commercial business loans – Commercial business loans are made to provide funds for equipment and general corporate needs, as well as to finance owner-occupied real estate, and to finance future cash flows of federal government lease contracts. Repayment of these loans primarily uses the funds obtained from the operation of the borrower’s business. Commercial business loans also include lines of credit that are utilized to finance a borrower’s short-term credit needs and/or to finance a percentage of eligible working capital. This segment includes both internally originated and purchased participation loans. Credit risk is dependent upon the successful operation of the business, which may be affected by competition, rising interest rates, regulatory changes and adverse conditions in the local and regional economy. Commercial business loans include the following ACL segments: commercial and industrial (including both healthcare and U.S. Small Business Administration ("SBA") subsegments), commercial real estate owner-occupied (including both healthcare and SBA subsegments), government leases and other loans.
Commercial real estate loans – Commercial real estate loans consist of non-owner occupied properties, such as investment properties for retail, office and multifamily, with a history of occupancy and cash flow. This segment includes both internally originated and purchased participation loans. These loans carry the risk of adverse changes in the local economy and a tenant’s deteriorating credit strength, lease expirations in soft markets and sustained vacancies, which can adversely impact cash flow. Commercial real estate loans include the following ACL segment: commercial real estate non-owner occupied (including both healthcare and SBA subsegments).

Commercial acquisition, development and construction loans – Commercial acquisition, development and construction loans are intended to finance the construction of commercial and residential properties, and also includes loans for the acquisition and development of land. Construction loans represent a higher degree of risk than permanent real estate loans and may be affected by a variety of factors such as the borrower’s ability to control costs and adhere to time schedules and the risk that the market may not absorb constructed units within the anticipated time frame or at the anticipated price. The loan commitment on these loans often includes an interest reserve that allows the lender to periodically advance loan funds to pay interest charges on the outstanding balance of the loan. Commercial acquisition, development and construction loans include the following ACL segment: other construction (including an SBA subsegment).

Residential real estate – This residential real estate segment contains permanent and construction mortgage loans, principally to consumers, but also includes loans to residential real estate developers, secured by residential real estate. Residential real estate loans to consumers are evaluated for the adequacy of repayment sources at the time of approval, based upon measures including credit scores, debt-to-income ratios and collateral values. Credit risk arises from the continuing financial stability of the borrower and, where applicable, the builder, which can be adversely impacted by job loss, divorce, illness or personal bankruptcy, among other factors. Residential real estate secured loans to developers represent a higher degree of risk than permanent real estate loans and may be affected by a variety of factors such as the borrower’s ability to control costs and adhere to time schedules and the risk that the market may not absorb constructed units within the anticipated time frame or at the anticipated price. Also impacting credit risk would be a shortfall in the value of the residential real estate in relation to the outstanding loan balance in the event of a default or subsequent liquidation of the real estate collateral. Residential real estate loans include the following ACL segment: residential and residential construction (including an SBA subsegment).

Home equity lines of credit – Credit risk is for home equity lines of credit is similar to residential real estate loans described above as it is subject to the borrower’s continuing financial stability and the value of the collateral securing the loan. Home equity lines of credit include the following ACL segment: home equity lines of credit (including senior lien lines of credit and subordinate lien lines of credit).

Consumer loans – This segment of loans primarily includes installment loans and personal lines of credit. Credit risk is similar to residential real estate loans described above as it is subject to the borrower’s continuing financial stability and the value of the collateral securing the loan. Substantially all of the outstanding loans in this segment are loans purchased from a third-party originator that originates loans in order to finance the purchase of personal automotive vehicles. Credit risk is unique as this segment includes only those loans provided to consumers who cannot typically obtain financing through traditional lenders. As such, these loans are subject to a higher risk of default than the typical consumer loan. Consumer loans include the following ACL segments: Americas Leading Finance consumer automotive and consumer.

As of September 30, 2025, the Bank’s other real estate owned balance totaled $0.6 million. The other real estate owned balance consists of one residential mortgage with a balance of $0.1 million and one commercial loan from our 2020 acquisition of another bank with a balance of $0.5 million. Other real estate is included in accrued interest receivable and other assets on the consolidated balance sheet. As of September 30, 2025, there was one residential mortgage in the process of foreclosure with the loan balance totaling $0.4 million.

Bank management uses a nine-point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first five categories are considered not criticized and are aggregated as “Pass” rated. The criticized rating categories utilized by management generally follow bank regulatory definitions.

Loans categorized as “Pass” rated have adequate sources of repayment, with little identifiable risk of collection and general conformity to the Bank's policy requirements, product guidelines and underwriting standards. Any exceptions that are identified during the underwriting and approval process have been adequately mitigated by other factors.

Loans categorized as “Special Mention” rated have 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. Special mention assets are not adversely classified and do not expose the institution to sufficient risk to warrant adverse classification.

Loans categorized as “Substandard” rated are inadequately protected by the current worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt and are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Loans categorized as “Doubtful” rated have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weakness makes collections or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable. However, these loans are not yet rated as loss because certain events may occur which would salvage the debt.

Any portion of a loan that has been or is expected to be charged off is placed in the “Loss” category.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Bank has a structured loan rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories, unless a specific action, such as past due status, bankruptcy, repossession or death, occurs to raise awareness of a possible credit event. The Bank’s Chief Credit Officer is responsible for the timely and accurate risk rating of the loans in the portfolio at origination and on an ongoing basis. The Bank's credit department ensures that a review of all commercial relationships of $1.0 million or more is performed annually.

Review of the appropriate risk grade is included in both the internal and external loan review process on an ongoing basis. The Bank has an experienced credit department that continually reviews and assesses loans within the portfolio. The Bank engages an external consultant to conduct independent loan reviews on at least an annual basis. Generally, the external consultant reviews commercial relationships with the intent of reviewing 35% to 40% of the Bank's commercial outstanding loan balances on an annual basis. The Bank's credit department compiles detailed reviews, including plans for resolution, on loans classified as Substandard on a quarterly basis.

The following table presents the amortized cost of loans summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system by vintage year as of the periods shown:

Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)20252024202320222021PriorRevolving Loans Converted to TermTotal
September 30, 2025
Commercial business:
Risk rating:
Pass$124,929 $83,387 $100,368 $127,332 $43,993 $152,393 $6,105 $638,507 
Special Mention— — — 14,267 197 1,516 695 16,675 
Substandard— — — 3,121 3,876 9,891 — 16,888 
Doubtful— — — 4,410 19 840 — 5,269 
Total commercial business loans$124,929 $83,387 $100,368 $149,130 $48,085 $164,640 $6,800 $677,339 
Gross charge-offs$— $— $— $1,577 $21 $— $— $1,598 
Commercial real estate:
Risk rating:
Pass$292,671 $42,696 $104,118 $127,901 $107,564 $106,204 $341 $781,495 
Special Mention— — — — 11,060 9,506 — 20,566 
Substandard— — — — — 16,970 — 16,970 
Doubtful— — — — — — — — 
Total commercial real estate loans$292,671 $42,696 $104,118 $127,901 $118,624 $132,680 $341 $819,031 
Gross charge-offs$— $— $— $— $— $— $— $— 
(Dollars in thousands)20252024202320222021PriorRevolving Loans Converted to TermTotal
September 30, 2025
Commercial acquisition, development and construction:
Risk rating:
Pass$31,069 $35,920 $300 $6,544 $7,809 $1,319 $— $82,961 
Special Mention— — — — — — — — 
Substandard— — — — 12,576 894 — 13,470 
Doubtful— — — — — — — — 
Total commercial acquisition, development and construction loans$31,069 $35,920 $300 $6,544 $20,385 $2,213 $— $96,431 
Gross charge-offs$— $— $— $— $— $— $— $— 
Residential Real Estate:
Risk rating:
Pass$53,355 $68,628 $29,282 $346,575 $81,265 $52,276 $2,624 $634,005 
Special Mention— — — — — 982 — 982 
Substandard— — — 2,038 — 91 110 2,239 
Doubtful— — — — — — — — 
Total residential real estate loans$53,355 $68,628 $29,282 $348,613 $81,265 $53,349 $2,734 $637,226 
Gross charge-offs$— $— $— $— $— $— $— $— 
Home equity lines of credit:
Risk rating:
Pass$— $— $56 $34 $— $10,305 $— $10,395 
Special Mention— — — — — 13 — 13 
Substandard— — — — — 68 — 68 
Doubtful— — — — — — — — 
Total home equity lines of credit loans$— $— $56 $34 $— $10,386 $— $10,476 
Gross charge-offs$— $— $— $— $— $— $— $— 
Consumer:
Risk rating:
Pass$6,109 $— $1,182 $9,367 $2,718 $33 $— $19,409 
Special Mention— — — — — — — — 
Substandard25 — 28 14 62 — — 129 
Doubtful— — — — — — — — 
Total consumer loans$6,134 $— $1,210 $9,381 $2,780 $33 $— $19,538 
Gross charge-offs$— $— $144 $1,038 $201 $— $— $1,383 
(Dollars in thousands)20252024202320222021PriorRevolving Loans Converted to TermTotal
September 30, 2025
Total:
Risk rating:
Pass$508,133 $230,631 $235,306 $617,753 $243,349 $322,530 $9,070 $2,166,772 
Special Mention— — — 14,267 11,257 12,017 695 38,236 
Substandard25 — 28 5,173 16,514 27,914 110 49,764 
Doubtful— — — 4,410 19 840 — 5,269 
Total loans$508,158 $230,631 $235,334 $641,603 $271,139 $363,301 $9,875 $2,260,041 
Gross charge-offs$— $— $144 $2,615 $222 $— $— $2,981 


Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)20242023202220212020PriorRevolving Loans Converted to TermTotal
December 31, 2024
Commercial business:
Risk rating:
Pass$68,129 $124,736 $211,526 $51,202 $58,015 $98,747 $6,439 $618,794 
Special Mention35 — 21,053 9,259 1,816 4,863 813 37,839 
Substandard— 1,227 2,549 1,777 508 2,290 207 8,558 
Doubtful— — 1,681 292 278 1,016 — 3,267 
Total commercial business loans$68,164 $125,963 $236,809 $62,530 $60,617 $106,916 $7,459 $668,458 
Gross charge-offs$2 $— $3,125 $885 $— $367 $— $4,379 
Commercial real estate:
Risk rating:
Pass$63,058 $97,119 $121,694 $161,886 $9,222 $122,809 $431 $576,219 
Special Mention— — — 7,743 — — — 7,743 
Substandard— — — 17,984 — 30,952 — 48,936 
Doubtful— — — — — — — — 
Total commercial real estate loans$63,058 $97,119 $121,694 $187,613 $9,222 $153,761 $431 $632,898 
Gross charge-offs$— $— $— $— $— $— $— $— 
Commercial acquisition, development and construction:
Risk rating:
Pass$11,352 $13,675 $36,425 $29,885 $6,673 $1,287 $— $99,297 
Special Mention— — — — — 2,267 — 2,267 
Substandard— — — 13,506 — 430 — 13,936 
Doubtful— — — — — — — — 
Total commercial acquisition, development and construction loans$11,352 $13,675 $36,425 $43,391 $6,673 $3,984 $— $115,500 
Gross charge-offs$— $— $— $— $— $— $— $— 
(Dollars in thousands)20242023202220212020PriorRevolving Loans Converted to TermTotal
December 31, 2024
Residential Real Estate:
Risk rating:
Pass$81,559 $37,914 $375,065 $90,440 $32,902 $22,759 $2,666 $643,305 
Special Mention— — 798 — — 1,567 — 2,365 
Substandard— — 2,798 — 360 1,672 115 4,945 
Doubtful— — — — — 93 — 93 
Total residential real estate loans$81,559 $37,914 $378,661 $90,440 $33,262 $26,091 $2,781 $650,708 
Gross charge-offs$— $— $— $11 $— $— $— $11 
Home equity lines of credit:
Risk rating:
Pass$— $57 $35 $— $1,056 $11,475 $— $12,623 
Special Mention— — — — — 142 — 142 
Substandard— — — — — 168 — 168 
Doubtful— — — — — — — — 
Total home equity lines of credit loans$— $57 $35 $— $1,056 $11,785 $— $12,933 
Gross charge-offs$— $— $— $— $— $— $— $— 
Consumer:
Risk rating:
Pass$— $1,597 $12,812 $3,949 $— $43 $— $18,401 
Special Mention— — — — — — — — 
Substandard— 21 147 51 — — — 219 
Doubtful— — — — — — — — 
Total consumer loans$— $1,618 $12,959 $4,000 $— $43 $— $18,620 
Gross charge-offs$— $384 $2,530 $452 $— $— $— $3,366 
Total:
Risk rating:
Pass$224,098 $275,098 $757,557 $337,362 $107,868 $257,120 $9,536 $1,968,639 
Special Mention35 — 21,851 17,002 1,816 8,839 813 50,356 
Substandard— 1,248 5,494 33,318 868 35,512 322 76,762 
Doubtful— — 1,681 292 278 1,109 — 3,360 
Total loans$224,133 $276,346 $786,583 $387,974 $110,830 $302,580 $10,671 $2,099,117 
Gross charge-offs$2 $384 $5,655 $1,348 $— $367 $— $7,756 
Management further monitors the performance and credit quality of the loan portfolio by analyzing the past due status of the portfolio, which is determined by the length of time a payment is past due.

The following table presents the amortized cost basis in loans by aging category and accrual status as of the periods shown:
(Dollars in thousands)Current30-59 Days Past Due60-89 Days Past Due90+ Days Past DueTotal Past DueTotal LoansNon-Accrual90+ Days Still AccruingNon Accrual with No Credit LossInterest Income Recognized
September 30, 2025
Commercial
Business$662,883 $3,869 $1,149 $9,438 $14,456 $677,339 $10,508 $— $5,761 $— 
Real estate814,902 4,129 — — 4,129 819,031 — — — — 
Acquisition, development and construction96,431 — — — — 96,431 13,470 — 13,470 — 
          Total commercial1,574,216 7,998 1,149 9,438 18,585 1,592,801 23,978 — 19,231 — 
Residential real estate634,796 — 1,053 1,377 2,430 637,226 2,038 — 995 — 
Home equity lines of credit10,431 — — 45 45 10,476 68 — — — 
Consumer17,738 1,368 302 130 1,800 19,538 130 — — — 
          Total loans$2,237,181 $9,366 $2,504 $10,990 $22,860 $2,260,041 $26,214 $— $20,226 $— 
December 31, 2024
Commercial
Business$662,163 $736 $2,252 $3,307 $6,295 $668,458 $6,174 $— $2,682 $— 
Real estate614,914 — — 17,984 17,984 632,898 — 17,984 — — 
Acquisition, development and construction101,564 430 — 13,506 13,936 115,500 13,935 — 13,936 — 
          Total commercial1,378,641 1,166 2,252 34,797 38,215 1,416,856 20,109 17,984 16,618 — 
Residential real estate645,430 3,364 45 1,869 5,278 650,708 4,110 — 1,871 — 
Home equity lines of credit12,799 40 46 48 134 12,933 168 — — — 
Consumer16,720 1,390 290 220 1,900 18,620 220 — — — 
          Total loans$2,053,590 $5,960 $2,633 $36,934 $45,527 $2,099,117 $24,607 $17,984 $18,489 $— 

The ACL is a valuation reserve established and maintained by charges against income and is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans. Loans are charged off against the ACL when management believes the loan balance is uncollectible. Accrued interest receivable is excluded from the estimate of credit losses. Management determines the ACL balance using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit behaviors, along with model judgments, provide the basis for the estimation of expected credit losses. Adjustments to modeled loss estimates may be made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level or term, as well as for changes in environmental conditions, such as changes in economic conditions, property values or other relevant factors.

The Bank’s methodology for determining the ACL is based on the requirements of Accounting Standards Codification Topic 326 Financial Instruments - Credit Losses. The ACL is calculated on a collective basis when similar risk characteristics exist. The ACL for the majority of loans was calculated using a discounted cash flow methodology applied at a loan level, with a one-year reasonable and supportable forecast period and a one-year straight-line reversion period with loss rates, prepayment assumptions and curtailment assumptions driven by each loan’s collateral type. Expected credit loss rates were estimated using a regression model based on historical data from peer banks which incorporates a third-party vendor’s economic forecast to predict the change in credit losses. As of September 30, 2025, the Bank expects the markets in which it operates will experience potential economic
volatility over the next one to two years. The ACL for only one portfolio segment consisting entirely of automotive loans to consumers was calculated under the remaining life methodology using straight-line amortization over the remaining life of the portfolio.

Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. When Bank management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs, as appropriate.

The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of the periods shown:
(Dollars in thousands)Real EstateVehicles and EquipmentAssignment of Cash FlowAccounts ReceivableOtherTotalsAllowance for Credit Losses
September 30, 2025
Commercial
Business$2,290 $720 $— $— $5,243 $8,253 $2,890 
Real estate— — — — — — — 
Acquisition, development and construction12,576 — — — — 12,576 — 
Total commercial$14,866 $720 $— $— $5,243 $20,829 $2,890 
Residential995 — — — — 995 — 
Home equity lines of credit— — — — — — — 
Consumer— 130 — — — 130 46 
Total$15,861 $850 $— $— $5,243 $21,954 $2,936 
Collateral value$87,235 $1,355 $— $— $3,625 $92,215 
December 31, 2024
Commercial
Business$2,500 $1,516 $— $— $240 $4,256 $827 
Real estate17,984 — — — — 17,984 — 
Acquisition, development and construction13,506 — — — — 13,506 — 
Total commercial$33,990 $1,516 $— $— $240 $35,746 $827 
Residential2,866 — — — — 2,866 36 
Home equity lines of credit— — — — — — — 
Consumer— 220 — — — 220 73 
Total$36,856 $1,736 $— $— $240 $38,832 $936 
Collateral value$66,247 $2,578 $— $— $— $68,825 

The Bank evaluates certain loans in homogeneous pools, rather than on an individual basis, when those loans are below specific thresholds based on outstanding principal balance. More specifically, residential mortgage loans, home equity lines of credit and consumer loans are evaluated collectively for expected credit losses by applying allocation rates derived from the Bank’s historical losses specific to these loans. The reserve for these certain loans in homogeneous pools was immaterial at September 30, 2025 and December 31, 2024.

Management has identified a number of additional qualitative factors that it uses to supplement the estimated losses derived from the loss rate methodologies employed within the current expected credit losses model because these factors are likely to cause estimated credit losses associated with the existing loan pools to differ from the loss rate methodologies. The additional factors that are evaluated quarterly and updated using information obtained from internal, regulatory and governmental sources are: lending policies and procedures, nature and volume of the portfolio, experience and ability of lending management and staff, volume and severity of problem credits, quality of the loan review system, changes in the value of underlying collateral, effect of concentrations of credit from a loan type, industry and/or geographic standpoint, changes in economic and business conditions, consumer sentiment and other external factors.
To estimate the liability for off-balance sheet credit exposures, Bank management analyzed the portfolios of unfunded commitments based on the same segmentation used for the ACL calculation. The estimated funding rate for each segment was derived from a funding rate study created by a third-party vendor, which analyzed funding of various loan types over time to develop industry benchmarks at the call report code level. Once the estimated future advances were calculated, the allocation rate applicable to that portfolio segment was applied in the same manner as those used for the ACL calculation. The resulting estimated loss allocations were totaled to determine the liability for unfunded commitments related to these loans, which management considers necessary to anticipate potential losses on those commitments that have a reasonable probability of funding. As of September 30, 2025 and December 31, 2024, the liability for unfunded commitments related to loans held-for-investment was $1.8 million and $1.6 million, respectively.

Bank management reviews the loan portfolio on a quarterly basis using a defined, consistently-applied process in order to make appropriate and timely adjustments to the ACL. When information confirms that all or a part of specific loans is uncollectible, these amounts are promptly charged off against the ACL.

The following table presents the balance and activity for the primary segments of the ACL as of the periods shown:
CommercialResidentialHome EquityConsumerTotal
(Dollars in thousands)BusinessReal EstateAcquisition, development and constructionTotal Commercial
ACL balance at June 30, 2025$7,704 $3,022 $1,907 $12,633 $6,955 $87 $1,110 $20,785 
Provision (release of allowance) for credit losses1
2,064 295 (482)1,877 1,255 10 67 3,209 
Charge-offs(546)— — (546)— — (421)(967)
Recoveries— 3 — 3 — 1 291 295 
ACL balance at September 30, 2025$9,222 $3,320 $1,425 $13,967 $8,210 $98 $1,047 $23,322 
(Dollars in thousands)
ACL at December 31, 2024$6,495 $2,571 $1,772 $10,838 $7,322 $95 $1,408 $19,663 
Provision (release of allowance) for credit losses1
4,275 741 (347)4,669 888 — (187)5,370 
Charge-offs(1,598)— — (1,598)— — (1,383)(2,981)
Recoveries50 8 — 58 — 3 1,209 1,270 
ACL at September 30, 2025$9,222 $3,320 $1,425 $13,967 $8,210 $98 $1,047 $23,322 
1 Excludes the provision (release of allowance) for unfunded commitments and any provision for credit losses related to available-for-sale debt securities, as applicable.
CommercialResidentialHome EquityConsumerTotal
(Dollars in thousands)BusinessReal EstateAcquisition, development and constructionTotal Commercial
ACL balance at June 30, 2024$9,573 $2,472 $1,437 $13,482 $6,248 $85 $2,269 $22,084 
Provision (release of allowance) for credit losses1
(743)308 228 (207)839 5 (511)126 
Charge-offs(415)— — (415)— — (977)(1,392)
Recoveries— 3 — 3 — 1 677 681 
ACL balance at September 30, 2024$8,415 $2,783 $1,665 $12,863 $7,087 $91 $1,458 $21,499 
(Dollars in thousands)
ACL balance at December 31, 2023$7,931 $2,931 $1,674 $12,536 $6,412 $97 $3,079 $22,124 
Provision (release of allowance) for credit losses1
2,734 (166)(9)2,559 640 (9)(939)2,251 
Charge-offs(2,292)— — (2,292)— — (2,788)(5,080)
Recoveries42 18 — 60 35 3 2,106 2,204 
ACL balance at September 30, 2024$8,415 $2,783 $1,665 $12,863 $7,087 $91 $1,458 $21,499 
1 Excludes the provision (release of allowance) for unfunded commitments and any provision for credit losses related to available-for-sale debt securities, as applicable.

During the three and nine months ended September 30, 2025, there were charge-offs totaling $1.0 million and $3.0 million, respectively. For the three months ended September 30, 2025, $0.6 million of charge-offs were related to two commercial notes secured by business assets and $0.4 million of charge offs were related to the subprime consumer automotive segment. For the nine months ended September 30, 2025, $1.6 million of charge-offs were related to ten commercial notes secured by business assets and $1.4 million of charge-offs were related to the subprime automotive segment. During the three and nine months ended September 30, 2025, the provision related to unfunded commitments was $0.2 million for each period. During the three and nine months ended September 30, 2024, there was an $0.3 million and $0.5 million provision related to unfunded commitments, respectively.

The ACL is based on estimates and actual losses will vary from current estimates. Management believes that the granularity of the portfolio segments, the related loss estimation methodologies and other qualitative factors, as well as the consistency in the application of assumptions, result in an ACL that is representative of the risk found in the components of the portfolio at any given date.

Loan Modifications for Borrowers Experiencing Financial Difficulty

Occasionally, the Bank modifies loans to borrowers in financial distress by providing concessions that allow for the borrower to lower their payment obligations for a defined period. These modifications may include, but are not limited to: principal forgiveness, payment delays, term extensions, interest rate reductions and any combinations of the preceding.
The following tables summarize the period-end amortized cost basis of loans to borrowers in financial difficulty that were modified during the periods shown:

(Dollars in thousands)Principal ForgivenessPayment DelayTerm ExtensionInterest Rate ReductionTotalTotal Class of Financing Receivable
Three Months Ended September 30, 2025
Commercial
Business$— $1,920 $107 $— $2,027 — %
Real estate— — — — — — %
Acquisition, development and construction— — — — — — %
Total commercial— 1,920 107 — 2,027 — %
Residential— — — — — — %
Home equity lines of credit— — — — — — %
Consumer— — — — — — %
Total$— $1,920 $107 $— $2,027 — %
Three Months Ended September 30, 2024
Commercial
Business$— $— $475 $— $475 — %
Real estate— — — — — — %
Acquisition, development and construction— — — — — — %
Total commercial— — 475 — 475 — %
Residential— — — — — — %
Home equity lines of credit— — — — — — %
Consumer— — — — — — %
Total$— $— $475 $— $475 — %
(Dollars in thousands)Principal ForgivenessPayment DelayTerm ExtensionInterest Rate ReductionTotalTotal Class of Financing Receivable
Nine Months Ended September 30, 2025
Commercial
Business$— $8,045 $107 $— $8,152 1 %
Real estate— — — — — — %
Acquisition, development and construction— — 13,470 — 13,470 14 %
Total commercial— 8,045 13,577 — 21,622 1 %
Residential— — — — — %
Home equity lines of credit— — — — — %
Consumer— — — — — %
Total$— $8,045 $13,577 $— $21,622 1 %
Nine Months Ended September 30, 2024
Commercial
Business$— $5,333 $475 $— $5,808 1 %
Real estate— — — — — — %
Acquisition, development and construction— — — — — — %
Total commercial— 5,333 475 — 5,808 — %
Residential— — — — — — %
Home equity lines of credit— — — — — — %
Consumer— — — — — — %
Total$— $5,333 $475 $— $5,808 — %

The above tables present the amortized cost basis of loans at September 30, 2025 and 2024 that were experiencing financial difficulty and modified during the three and nine months ended September 30, 2025 and 2024, by class and by type of modification. Also presented above is the percentage of the amortized cost basis of loans that were modified for borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable.

During the three months ended September 30, 2025, there are four loans to four borrowers that received a payment delay modification for $1.9 million, and one loan to one borrower that received a term extension modification for $0.1 million. These notes are to unrelated SBA borrowers and are secured by Owner Occupied Real Estate and various vehicles & equipment.

There are eight loans to eight borrowers that received payment delay modifications in the nine months ended September 30, 2025. These eight total loans that received payment delay modifications include seven commercial loans with government guarantees totaling $5.5 million and one note secured by a business valuation totaling $2.5 million. In addition, there is two loan to two borrower that received term extension modifications for $1.0 million. One of these notes is secured by residential lots valued at $1.3 million and the other is secured by business assets.

During the three and nine months ended September 30, 2024, there were $0.5 million and $5.8 million in modifications to one and 17 borrowers, respectively, experiencing financial difficulties.

The Bank closely monitors the performance of loans that are modified for borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of such loans that have been modified as of the periods shown:
(Dollars in thousands)30-59 Days
Past Due		60-89 Days
Past Due		Greater Than
89 Days
Past Due		Total Past Due
Three Months Ended September 30, 2025
Commercial
Business$773 $107 $448 $1,328 
Real estate— — — — 
Acquisition, development and construction— — — — 
Total commercial773 107 448 1,328 
Residential— — — — 
Home equity lines of credit— — — — 
Consumer— — — — 
Total$773 $107 $448 $1,328 
Nine Months Ended September 30, 2025
Commercial
Business$773 $107 $3,878 $4,758 
Real estate— — — — 
Acquisition, development and construction— — — — 
Total commercial773 107 3,878 4,758 
Residential— — — — 
Home equity lines of credit— — — — 
Consumer— — — — 
Total$773 $107 $3,878 $4,758 
Nine Months Ended September 30, 2024
Commercial
Business$33 $1,412 $3,690 $5,135 
Real estate— — — — 
Acquisition, development and construction— — — — 
Total commercial33 1,412 3,690 5,135 
Residential— — — — 
Home equity lines of credit— — — — 
Consumer— — — — 
Total$33 $1,412 $3,690 $5,135 

As of September 30, 2025, there are three modified loans past due, with an amortized cost basis of $4.8 million. Two loans are commercial notes with government guarantees secured by business assets. One loan is a commercial note secured by owner occupied real estate. Two loans totaling $0.6 million are considered non-accrual as of September 30, 2025. There were no loans modified in the three months ended September 30, 2024 that were past due.
The following table presents the amortized cost basis of loans that had a payment default and were modified prior to that default to borrowers experiencing financial difficulty as of the period shown:
(Dollars in thousands)Principal ForgivenessPayment DelayTerm ExtensionInterest Rate ReductionTotal
Three Months Ended September 30, 2025
Commercial
Business$— $2,498 $— $— $2,498 
Real estate— — — — — 
Acquisition, development and construction— — — — — 
Total commercial— 2,498 — — 2,498 
Residential— — — — — 
Home equity lines of credit— — — — — 
Consumer— — — — — 
Total$— $2,498 $— $— $2,498 
Three Months Ended September 30, 2024
Commercial
Business$— $1,864 $— $— $1,864 
Real estate— — — — — 
Acquisition, development and construction— — — — — 
Total commercial— 1,864 — — 1,864 
Residential— — — — — 
Home equity lines of credit— — — — — 
Consumer— — — — — 
Total$— $1,864 $— $— $1,864 
Nine Months Ended September 30, 2025
Commercial
Business$— $2,498 $— $— $2,498 
Real estate— — — — — 
Acquisition, development and construction— — — — — 
Total commercial— 2,498 — — 2,498 
Residential— — — — — 
Home equity lines of credit— — — — — 
Consumer— — — — — 
Total$— $2,498 $— $— $2,498 
Nine Months Ended September 30, 2024
Commercial
Business$— $2,275 $— $— $2,275 
Real estate— — — — — 
Acquisition, development and construction— — — — — 
Total commercial— 2,275 — — 2,275 
Residential— — — — — 
Home equity lines of credit— — — — — 
Consumer— — — — — 
Total$— $2,275 $— $— $2,275 

As of September 30, 2025, there was one modified loan that had defaulted, with an amortized cost basis of $2.5 million that is secured by business assets and is non-accrual. As of September 30, 2024, there were three modified loans that had defaulted, with
an amortized cost basis of $2.3 million. All three loans were commercial notes that had government guarantees and were on non-accrual status as of September 30, 2024. Upon the Bank’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the ACL is adjusted by the same amount.