XML 25 R13.htm IDEA: XBRL DOCUMENT

Note 4 - Allowance for Credit Losses

6 Months Ended

Jun. 30, 2025

Allowance for Credit Losses [Text Block]

Note 4. Allowance for Credit Losses

The following tables present, as of and during the periods ended June 30, 2025, December 31, 2024 and June 30, 2024, the activity in the Allowance for Credit Losses on Loans (ACLL) by portfolio, and information about individually evaluated and collectively evaluated loans (in thousands):

	June 30, 2025
	Construction and Land Development			Secured by 1-4 Family Residential			Other Real Estate			Commercial and Industrial			Consumer and Other Loans			Total
Allowance for credit losses:
Beginning Balance, December 31, 2024	$	585		$	4,266		$	7,462		$	3,927		$	160		$	16,400
Charge-offs		(22	)		(44	)		(7	)		(2,663	)		(289	)		(3,025	)
Recoveries		1			20			3			74			78			176
Provision for (recovery of) credit losses on loans		(68	)		920			(1,611	)		2,102			292			1,635
Ending Balance, June 30, 2025	$	496		$	5,162		$	5,847		$	3,440		$	241		$	15,186
Ending Balance:
Individually evaluated		—			—			—			2,240			—			2,240
Collectively evaluated		496			5,162			5,847			1,200			241			12,946
Loans:
Ending Balance	$	78,169		$	544,162		$	680,063		$	120,700		$	19,928		$	1,443,022
Individually evaluated		48			2,218			932			3,597			1			6,796
Collectively evaluated		78,121			541,944			679,131			117,103			19,927			1,436,226

	December 31, 2024
	Construction and Land Development			Secured by 1-4 Family Residential			Other Real Estate		Commercial and Industrial			Consumer and Other Loans			Total
Allowance for credit losses:
Beginning Balance, December 31, 2023	$	312		$	3,159		$	4,698	$	3,706		$	99		$	11,974
Initial Allowance on PCD Touchstone loans		11			173			201		1			—			386
Charge-offs		(4	)		(38	)		—		(3,699	)		(293	)		(4,034	)
Recoveries		—			22			3		111			148			284
Initial Provision on Non-PCD Touchstone loans		118			1,310			1,370		143			888			3,829
Provision for (recovery of) credit losses on loans		148			(360	)		1,190		3,665			(682	)		3,961
Ending Balance, December 31, 2024	$	585		$	4,266		$	7,462	$	3,927		$	160		$	16,400
Ending Balance:
Individually evaluated		—			—			—		3,079			—			3,079
Collectively evaluated		585			4,266			7,462		848			160			13,321
Loans:
Ending Balance	$	84,480		$	547,167		$	672,162	$	141,333		$	21,453		$	1,466,595
Individually evaluated		50			2,148			—		4,773			—			6,971
Collectively evaluated		84,430			545,019			672,162		136,560			21,453			1,459,624

	June 30, 2024
	Construction and Land Development			Secured by 1-4 Family Residential			Other Real Estate		Commercial and Industrial			Consumer and Other Loans			Total
Allowance for credit losses:
Beginning Balance, December 31, 2023	$	312		$	3,159		$	4,698	$	3,706		$	99		$	11,974
Charge-offs		(4	)		(10	)		—		(759	)		(161	)		(934	)
Recoveries		—			5			1		16			67			89
Provision for (recovery of) credit losses on loans		39			(466	)		141		1,596			114			1,424
Ending Balance, June 30, 2024	$	347		$	2,688		$	4,840	$	4,559		$	119		$	12,553
Ending Balance:
Individually evaluated		—			—			—		3,750			—			3,750
Collectively evaluated		347			2,688			4,840		809			119			8,803
Loans:
Ending Balance	$	60,919		$	346,977		$	449,768	$	116,299		$	16,013		$	989,976
Individually evaluated		36			749			—		7,845			—			8,630
Collectively evaluated		60,883			346,228			449,768		108,454			16,013			981,346

Nonaccrual loans

The following is a summary of the Company's nonaccrual loans by major categories for the periods indicated (in thousands):


	June 30, 2025						December 31, 2024
	Nonaccrual Loans with No Allowance		Nonaccrual loans with an Allowance		Total Nonaccrual Loans		Nonaccrual Loans with No Allowance		Nonaccrual loans with an Allowance		Total Nonaccrual Loans
Real estate loans:
Construction and land development	$	48	$	—	$	48	$	50	$	—	$	50
Secured by 1-4 family residential		2,218		—		2,218		2,148		—		2,148
Other real estate loans		932		—		932		—		—		—
Commercial and industrial		46		3,551		3,597		237		4,536		4,773
Consumer and other loans		1		—		1		—		—		—
Total	$	3,245	$	3,551	$	6,796	$	2,435	$	4,536	$	6,971

Collateral-Dependent Loans

The Company may determine that an individual loan exhibits unique risk characteristics which differentiate it from other loans within our loan pools. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. Specific allocations of the allowance for credit losses are determined by analyzing the borrower’s ability to repay amounts owed, collateral deficiencies, the relative risk grade of the loan and economic conditions affecting the borrower’s industry, among other things. A loan is considered to be collateral dependent when, based upon management's assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. The Company reevaluates the fair value of collateral supporting collateral dependent loans on a quarterly basis. The fair value of real estate collateral supporting collateral dependent loans is evaluated by appraisal services using a methodology that is consistent with the Uniform Standards of Professional Appraisal Practice. The underlying collateral can vary based upon the type of loan. The following provides more detail about the types of collateral that secure collateral dependent loans:

•

Commercial real estate loans can be secured by either owner occupied commercial real estate or non-owner occupied investment commercial real estate. Typically, owner occupied commercial real estate loans are secured by office buildings, warehouses, manufacturing facilities and other commercial and industrial properties occupied by operating companies. Non-owner occupied commercial real estate loans are generally secured by office buildings and complexes, retail facilities, multifamily complexes, land under development, industrial properties, as well as other commercial or industrial real estate.

	•	Residential real estate loans are typically secured by first mortgages, and in some cases could be secured by a second mortgage.
	•	Home equity lines of credit are generally secured by second mortgages on residential real estate property.
	•	Consumer loans are generally secured by automobiles, motorcycles, recreational vehicles and other personal property. Some consumer loans are unsecured and have no underlying collateral.

The following table presents the amortized cost of collateral-dependent loans (in thousands):

	June 30, 2025						December 31, 2024
(Dollars in thousands)	Real Estate Secured		Non-Real Estate Secured		Total Collateral-Dependent Loans		Real Estate Secured		Non-Real Estate Secured		Total Collateral-Dependent Loans
Real estate loans:
Construction and land development	$	18	$	—	$	18	$	—	$	—	$	—
Secured by 1-4 family residential		1,045		—		1,045		703		—		703
Total	$	1,063	$	—	$	1,063	$	703	$	—	$	703

At June 30, 2025 and December 31, 2024 there were no allowance for credit losses on collateral-dependent loans.

Modifications Made 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 asset 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 probability of default/loss given default 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 because of the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification. Occasionally, the Company modifies loans by providing principal forgiveness on certain of its real estate loans. When principal forgiveness is provided, the amortized cost basis of the asset is written off against the allowance for credit losses. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses.

In some cases, the Company will modify a certain loan by providing multiple types of concessions. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. For combination real estate loans, multiple types of modifications may be made on the same loan within the current reporting period. The combination is at least two of the following: a term extension, principal forgiveness, and interest rate reduction.

During the six months ended June 30, 2025 and 2024, there were no loans modified due to borrowers experiencing financial difficulty.

Upon the Company'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 allowance for credit losses is adjusted by the same amount. For the six months ended June 30, 2025 and 2024, there were no payment defaults of modified loans that were modified during the previous twelve months. At June 30, 2025 and December 31, 2024 there was no allowance for credit losses on modified loans.

Unfunded Commitments

The Company maintains a separate reserve for credit losses on off-balance-sheet credit exposures, including unfunded loan commitments, which is included in other liabilities on the consolidated balance sheet. The reserve for credit losses on off-balance-sheet credit exposures is adjusted as a provision for credit losses in the income statement. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life, utilizing the same models and approaches for the Company's other loan portfolio segments described in Note 1 of Form 10-K, as these unfunded commitments share similar risk characteristics as its loan portfolio segments. The Company has identified the unfunded portion of certain lines of credit as unconditionally cancellable credit exposures, meaning the Company can cancel the unfunded commitment at any time. No credit loss estimate is reported for off-balance-sheet credit exposures that are unconditionally cancellable by the Company or for undrawn amounts under such arrangements that may be drawn prior to the cancellation of the arrangement.

For the six months ended June 30, 2025 and 2024, the Company recorded a $105 thousand provision for credit losses and a $26 thousand recovery on unfunded commitments, respectively. The allowance for credit losses on off-balance sheet exposures was $591 and $387 thousand at June 30, 2025 and 2024, respectively.