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Note 3 - Loans

6 Months Ended

Jun. 30, 2025

Loans, Notes, Trade and Other Receivables, Excluding Allowance for Credit Losses [Text Block]

Note 3. Loans

Loans at June 30, 2025 and December 31, 2024 are summarized as follows (in thousands):

	June 30, 2025			December 31, 2024
Real estate loans:
Construction and land development	$	78,169		$	84,480
Secured by 1-4 family residential		544,162			547,167
Other real estate loans		680,063			672,162
Commercial and industrial loans		120,700			141,333
Consumer and other loans		19,928			21,453
Total loans	$	1,443,022		$	1,466,595
Allowance for credit losses		(15,186	)		(16,400	)
Loans, net	$	1,427,836		$	1,450,195

Net deferred loan fees included in the above loan categories were $1.5 million at June 30, 2025 and $1.3 million at December 31, 2024. Net unamortized discounts on loans acquired through business combinations included in the above loan categories totaled $13.5 million at June 30, 2025 and $14.3 million at December 31, 2024. Unamortized premiums on loans purchased from a third-party loan originator are included in the commercial and industrial loan categories and totaled $5.2 million as of June 30, 2025 and $5.8 million as of December 31, 2024. Consumer and other loans included $454 thousand and $450 thousand of demand deposit overdrafts at June 30, 2025 and December 31, 2024, respectively.

Loans acquired in business combinations are recorded in the Consolidated Balance Sheets at fair value at the acquisition date under the acquisition method of accounting. The principal balance of purchased loans is included in the allowance for credit losses calculation. The remaining net discount on purchased loans at June 30, 2025 was $13.5 million. The outstanding principal balance and the carrying amount at June 30, 2025 and December 31, 2024 of loans acquired in business combinations were as follows:

	June 30, 2025		December 31, 2024
	Acquired Loans-		Acquired Loans-
	Non-Purchased		Non-Purchased
(Dollars in thousands)	Credit Deteriorated		Credit Deteriorated
Outstanding principal balance	$	526,786	$	603,046

Carrying amount
Real estate loans:
Construction and land development	$	11,489	$	15,810
Secured by 1-4 family residential		220,931		234,004
Other real estate loans		246,099		291,805
Commercial and industrial loans		30,976		40,885
Consumer and other loans		3,752		6,268
Total acquired loans	$	513,247	$	588,772

The following table presents additional information related to the acquired Touchstone loan portfolio at the acquisition date, including the initial ACL at acquisition on the purchased credit deteriorated (PCD) loans (in thousands):

PCD Loans:	2024
Book value of acquired loans at acquisition	$	13,050
Initial ACL at acquisition		386
Non-credit discount at acquisition		1,413
Purchase Price	$	14,849
Non-PCD Loans:
Fair Value	$	467,891
Gross contractual amounts receivable	$	479,591
Estimate of contractual cash flows not expected to be collected	$	8,138

There have been no material changes to PCD loans since the acquisition date.

Risk characteristics of each loan portfolio class that are considered by the Company include:

•

1-4 family residential mortgage loans carry risks associated with the continued creditworthiness of the borrower and changes in the value of the collateral.

•

Real estate construction and land development loans carry risks that the project may not be finished according to schedule, the project may not be finished according to budget, and the value of the collateral may, at any point in time, be less than the principal amount of the loan. Construction loans also bear the risk that the general contractor, who may or may not be a loan customer, may be unable to finish the construction project as planned because of financial pressure or other factors unrelated to the project.

•

Other real estate loans carry risks associated with the successful operation of a business or a real estate project, in addition to other risks associated with the ownership of real estate, because repayment of these loans may be dependent upon the profitability and cash flows of the business or project.

•

Commercial and industrial loans carry risks associated with the successful operation of a business because repayment of these loans may be dependent upon the profitability and cash flows of the business. In addition, there is risk associated with the value of collateral other than real estate which may depreciate over time and cannot be appraised with as much reliability. Commercial and industrial loans also include purchased loans which could have been originated outside of the Company's market area.

•

Consumer and other loans carry risks associated with the continued creditworthiness of the borrower and the value of the collateral, if any. Consumer loans are typically either unsecured or secured by rapidly depreciating assets such as automobiles. They are also likely to be immediately and adversely affected by job loss, divorce, illness, personal bankruptcy, or other changes in circumstances. Consumer and other loans also include purchased consumer loans which could have been originated outside of the Company's market area. Other loans included in this category include loans to states and political subdivisions.

The following tables provide a summary of loan classes and an aging of past due loans as of June 30, 2025 and December 31, 2024 (in thousands):

	June 30, 2025
	30-59 Days Past Due		60-89 Days Past Due		> 90 Days Past Due		Total Past Due		Current		Total Loans		Non-accrual Loans		90 Days or More Past Due and Accruing
Real estate loans:
Construction and land development	$	200	$	—	$	48	$	248	$	77,921	$	78,169	$	48	$	—
Secured by 1-4 family residential		1,599		860		908		3,367		540,795		544,162		2,218		—
Other real estate loans		—		1		932		933		679,130		680,063		932		—
Commercial and industrial		1,684		150		1,444		3,278		117,422		120,700		3,597		—
Consumer and other loans		37		11		—		48		19,880		19,928		1		—
Total	$	3,520	$	1,022	$	3,332	$	7,874	$	1,435,148	$	1,443,022	$	6,796	$	—

	December 31, 2024
	30-59 Days Past Due		60-89 Days Past Due		> 90 Days Past Due		Total Past Due		Current		Total Loans		Non-accrual Loans		90 Days or More Past Due and Accruing
Real estate loans:
Construction and land development	$	56	$	26	$	23	$	105	$	84,375	$	84,480	$	50	$	23
Secured by 1-4 family residential		2,192		210		54		2,456		544,711		547,167		2,148		54
Other real estate loans		12		41		—		53		672,109		672,162		—		—
Commercial and industrial		145		373		288		806		140,527		141,333		4,773		288
Consumer and other loans		31		—		—		31		21,422		21,453		—		—
Total	$	2,436	$	650	$	365	$	3,451	$	1,463,144	$	1,466,595	$	6,971	$	365

Credit Quality Indicators

As part of the ongoing monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to the risk grading of specified classes of loans. The Company utilizes a risk grading matrix to assign a rating to each of its loans. The loan ratings are summarized into the following categories: pass, special mention, substandard, doubtful, and loss. Pass rated loans include all risk rated credits other than those included in special mention, substandard, or doubtful. Loans classified as loss are charged-off. Loan officers assign risk grades to loans at origination and as renewals arise. The Bank’s Credit Administration department reviews risk grades for accuracy on a quarterly basis and as credit issues arise. In addition, a certain amount of loans are reviewed each year through the Company’s internal and external loan review process. A description of the general characteristics of the loan grading categories is as follows:

Pass – Loans classified as pass exhibit acceptable operating trends, balance sheet trends, and liquidity. Sufficient cash flow exists to service the loan. All obligations have been paid by the borrower as agreed.

Special Mention – Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the Bank’s credit position at some future date.

Substandard – Loans classified as substandard are inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The Company considers all doubtful loans to be impaired and places the loan on non-accrual status.

Loss – Loans classified as loss are considered uncollectable and of such little value that their continuance as bankable assets is not warranted.

The following table presents the Company's recorded investment in loans by credit quality indicators by year of origination as of June 30, 2025 and December 31, 2024 (in thousands).

	June 30, 2025
	Term Loans by Year of Origination
	2025		2024		2023		2022		2021		Prior		Revolving		Total
Construction and land development
Pass	$	4,275	$	1,028	$	2,649	$	1,828	$	4,757	$	6,242	$	57,342	$	78,121
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		48		—		48
Doubtful		—		—		—		—		—		—		—		—
Total construction and land development	$	4,275	$	1,028	$	2,649	$	1,828	$	4,757	$	6,290	$	57,342	$	78,169

Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	22	$	—	$	22

Secured by 1-4 family residential
Pass	$	19,514	$	31,672	$	66,180	$	106,681	$	95,762	$	149,402	$	71,888	$	541,099
Special Mention		—		119		—		—		—		290		—		409
Substandard		—		—		30		242		355		2,027		—		2,654
Doubtful		—		—		—		—		—		—		—		—
Total secured by 1-4 family residential	$	19,514	$	31,791	$	66,210	$	106,923	$	96,117	$	151,719	$	71,888	$	544,162

Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	44	$	—	$	44

Other real estate loans
Pass	$	27,908	$	59,869	$	94,425	$	133,164	$	113,634	$	217,549	$	29,773	$	676,322
Special Mention		—		315		—		—		—		2,159		—		2,474
Substandard		—		932		—		—		—		335		—		1,267
Doubtful		—		—		—		—		—		—		—		—
Total other real estate loans	$	27,908	$	61,116	$	94,425	$	133,164	$	113,634	$	220,043	$	29,773	$	680,063

Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	7	$	—	$	7

Commercial and industrial
Pass	$	1,991	$	19,727	$	18,499	$	16,385	$	16,235	$	11,925	$	29,410	$	114,172
Special Mention		—		415		—		1,144		—		—		—		1,559
Substandard		—		—		722		2,889		405		953		—		4,969
Doubtful		—		—		—		—		—		—		—		—
Total commercial and industrial	$	1,991	$	20,142	$	19,221	$	20,418	$	16,640	$	12,878	$	29,410	$	120,700

Current period gross write-offs	$	—	$	618	$	319	$	1,314	$	410	$	2	$	—	$	2,663

Consumer and other loans
Pass	$	2,988	$	2,924	$	1,454	$	4,719	$	150	$	3,720	$	3,972	$	19,927
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		1		—		1
Doubtful		—		—		—		—		—		—		—		—
Total consumer and other loans	$	2,988	$	2,924	$	1,454	$	4,719	$	150	$	3,721	$	3,972	$	19,928

Current period gross write-offs	$	279	$	3	$	4	$	—	$	—	$	3	$	—	$	289

	December 31, 2024
	Term Loans by Year of Origination
	2024		2023		2022		2021		2020		Prior		Revolving		Total
Construction and land development
Pass	$	4,419	$	5,401	$	2,421	$	5,811	$	4,424	$	5,419	$	56,509	$	84,404
Special Mention		26		—		—		—		—		—		—		26
Substandard		—		—		—		18		—		32		—		50
Doubtful		—		—		—		—		—		—		—		—
Total construction and land development	$	4,445	$	5,401	$	2,421	$	5,829	$	4,424	$	5,451	$	56,509	$	84,480

Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	4	$	—	$	4

Secured by 1-4 family residential
Pass	$	32,609	$	69,884	$	113,535	$	99,470	$	49,250	$	115,032	$	64,740	$	544,520
Special Mention		120		—		—		—		—		83		—		203
Substandard		—		32		252		317				1,843		—		2,444
Doubtful		—		—		—		—		—		—		—		—
Total secured by 1-4 family residential	$	32,729	$	69,916	$	113,787	$	99,787	$	49,250	$	116,958	$	64,740	$	547,167

Current period gross write-offs	$	20	$	—	$	—	$	—	$	—	$	18	$	—	$	38

Other real estate loans
Pass	$	64,958	$	83,725	$	142,077	$	120,012	$	48,238	$	192,869	$	15,531	$	667,410
Special Mention		318		—		—		—		—		4,072		—		4,390
Substandard		—		—		—		—		—		362		—		362
Doubtful		—		—		—		—		—		—		—		—
Total other real estate loans	$	65,276	$	83,725	$	142,077	$	120,012	$	48,238	$	197,303	$	15,531	$	672,162

Current period gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial and industrial
Pass	$	24,270	$	24,835	$	21,819	$	23,086	$	3,583	$	12,815	$	22,627	$	133,035
Special Mention		430		—		1,211		—		—		513		—		2,154
Substandard		615		737		3,699		647				446		—		6,144
Doubtful		—		—		—		—		—		—		—		—
Total commercial and industrial	$	25,315	$	25,572	$	26,729	$	23,733	$	3,583	$	13,774	$	22,627	$	141,333

Current period gross write-offs	$	110	$	1,275	$	772	$	1,519	$	20	$	3	$	—	$	3,699

Consumer and other loans
Pass	$	5,129	$	1,697	$	1,437	$	130	$	1,306	$	2,566	$	8,917	$	21,182
Special Mention		—		270		—		—		—		—		—		270
Substandard		—		—		—		—		—		1		—		1
Doubtful		—		—		—		—		—		—		—		—
Total consumer and other loans	$	5,129	$	1,967	$	1,437	$	130	$	1,306	$	2,567	$	8,917	$	21,453

Current period gross write-offs	$	249	$	29	$	9	$	3	$	1	$	2	$	—	$	293