Note 3 - Loans and Allowance for Credit Losses

9 Months Ended

Sep. 30, 2025

Note 3: Loans and Allowance for Credit Losses

Loans

Loans include acquired loans and originated loans. Acquired loans are presented at their outstanding principal balance, net of the remaining purchase discount of $6,239 as of September 30, 2025 and $7,564 as of December 31, 2024. Originated loans as of September 30, 2025 and December 31, 2024 are presented at amortized cost, net of deferred fees and costs. The following table presents the composition of the loan portfolio, excluding mortgage loans held for sale, as of the dates indicated.


	September 30,			December 31,
	2025			2024
Real estate construction	$	46,381		$	50,798
Consumer real estate		324,597			307,855
Commercial real estate		490,968			478,078
Commercial non real estate		53,532			51,844
Public sector and IDA		54,332			57,171
Consumer non real estate		47,135			42,867
Gross loans	$	1,016,945		$	988,613
Less deferred fees and costs		(543	)		(663	)
Loans, net of deferred fees and costs	$	1,016,402		$	987,950
Allowance for credit losses on loans		(10,579	)		(10,262	)
Total loans, net	$	1,005,823		$	977,688

Accrued interest receivable of $3,357 at September 30, 2025 and $3,299 at December 31, 2024 is not included in total loans above.

Past Due and Nonaccrual Loans

The following tables present the aging of past due loans, by loan pool, as of the dates indicated.


September 30, 2025	Accruing Current Loans		Accruing Loans 30 – 89 Days Past Due		Accruing Loans 90 or More Days Past Due		Nonaccrual Loans		Total Loans		Accruing and Nonaccrual 90 or More Days Past Due
Real Estate Construction
Construction, 1-4 family residential	$	17,527	$	-	$	-	$	-	$	17,527	$	-
Construction, other		28,818		36		-		-		28,854		-
Consumer Real Estate
Equity line		26,922		-		-		-		26,922		-
Residential closed-end first liens		194,837		909		80		-		195,826		80
Residential closed-end junior liens		10,476		7		-		-		10,483		-
Investor-owned residential real estate		91,138		228		-		-		91,366		-
Commercial Real Estate
Multifamily residential real estate		162,129		356		194		-		162,679		194
Commercial real estate owner-occupied		132,066		-		-		2,027		134,093		194
Commercial real estate, other		193,656		540		-		-		194,196		-
Commercial Non Real Estate
Commercial and industrial		53,420		112		-		-		53,532		-
Public Sector and IDA
States and political subdivisions		54,332		-		-		-		54,332		-
Consumer Non Real Estate
Credit cards		4,687		4		5		-		4,696		5
Automobile		12,168		142		-		-		12,310		-
Other consumer loans		29,678		447		4		-		30,129		4
Total	$	1,011,854	$	2,781	$	283	$	2,027	$	1,016,945	$	477


December 31, 2024	Accruing Current Loans		Accruing Loans 30 – 89 Days Past Due		Accruing Loans 90 or More Days Past Due		Nonaccrual Loans		Total Loans		Accruing and Nonaccrual 90 or More Days Past Due
Real Estate Construction
Construction, 1-4 family residential	$	16,162	$	-	$	-	$	-	$	16,162	$	-
Construction, other		34,636		-		-		-		34,636		-
Consumer Real Estate
Equity line		22,551		67		-		-		22,618		-
Residential closed-end first liens		170,110		949		323		-		171,382		323
Residential closed-end junior liens		8,565		9		-		-		8,574		-
Investor-owned residential real estate		104,756		347		178		-		105,281		178
Commercial Real Estate
Multifamily residential real estate		143,444		186		-		-		143,630		-
Commercial real estate owner-occupied		138,284		147		-		2,222		140,653		209
Commercial real estate, other		193,249		546		-		-		193,795		-
Commercial Non Real Estate
Commercial and industrial		51,547		253		44		-		51,844		44
Public Sector and IDA
States and political subdivisions		57,171		-		-		-		57,171		-
Consumer Non Real Estate
Credit cards		4,696		2		-		-		4,698		-
Automobile		12,802		193		-		-		12,995		-
Other consumer loans		24,921		250		3		-		25,174		3
Total	$	982,894	$	2,949	$	548	$	2,222	$	988,613	$	757

The following table presents nonaccrual loans, by loan class, as of the dates indicated:


	September 30, 2025						December 31, 2024
	With No Allowance		With an Allowance		Total		With No Allowance		With an Allowance		Total
Commercial Real Estate
Commercial real estate owner-occupied	$	1,833	$	194	$	2,027	$	2,013	$	209	$	2,222
Total	$	1,833	$	194	$	2,027	$	2,013	$	209	$	2,222

No accrued interest receivable was reversed against interest income during the three and nine months ended September 30, 2025 or September 30, 2024.

Allowance for Credit Losses on Loans (“ACLL”)

The following tables present the activity in the ACLL by portfolio segment for the periods indicated:


	Activity in the ACLL for the Nine Months Ended September 30, 2025
	Real Estate Construction		Consumer Real Estate			Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA			Consumer Non Real Estate			Unallocated			Total
Balance, December 31, 2024	$	348	$	3,926		$	4,299	$	655	$	336		$	648		$	50		$	10,262
Charge-offs		-		(3	)		-		-		-			(403	)		-			(406	)
Recoveries		-		-			29		31		-			82			-			142
Provision for (recovery of) credit losses		77		(35	)		32		74		(29	)		465			(3	)		581
Balance, September 30, 2025	$	425	$	3,888		$	4,360	$	760	$	307		$	792		$	47		$	10,579


	Activity in the ACLL for the Nine Months Ended September 30, 2024
	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate			Public Sector and IDA		Consumer Non Real Estate			Unallocated			Total
Balance, December 31, 2023	$	408	$	3,162	$	3,576	$	682		$	333	$	583		$	350		$	9,094
Charge-offs		-		-		-		(145	)		-		(266	)		-			(411	)
Recoveries		-		-		41		12			-		105			-			158
Provision for (recovery of) credit losses		43		697		589		106			5		139			(267	)		1,312
Merger adjustment(1)		10		97		55		4			-		9			-			175
Balance, September 30, 2024	$	461	$	3,956	$	4,261	$	659		$	338	$	570		$	83		$	10,328


	Activity in the ACLL for the Year Ended December 31, 2024
	Real Estate Construction			Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate			Public Sector and IDA		Consumer Non Real Estate			Unallocated			Total
Balance, December 31, 2023	$	408		$	3,162	$	3,576	$	682		$	333	$	583		$	350		$	9,094
Charge-offs		-			-		-		(166	)		-		(353	)		-			(519	)
Recoveries		-			-		53		79			-		138			-			270
Provision for (recovery of) credit losses		(70	)		667		615		56			3		271			(300	)		1,242
Merger adjustment(1)		10			97		55		4			-		9			-			175
Balance, December 31, 2024	$	348		$	3,926	$	4,299	$	655		$	336	$	648		$	50		$	10,262

(1) Adjustment for PCD acquired loans.

The following tables present information about the ACLL for individually evaluated loans and collectively evaluated loans by portfolio segment as of the dates indicated.


	ACLL by Segment and Evaluation Method
September 30, 2025	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Unallocated		Total
Individually evaluated	$	–	$	27	$	63	$	–	$	–	$	–	$	–	$	90
Collectively evaluated		425		3,861		4,297		760		307		792		47		10,489
Total	$	425	$	3,888	$	4,360	$	760	$	307	$	792	$	47	$	10,579


	ACLL by Segment and Evaluation Method
December 31, 2024	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Unallocated		Total
Individually evaluated	$	-	$	31	$	49	$	-	$	-	$	-	$	-	$	80
Collectively evaluated		348		3,895		4,250		655		336		648		50		10,182
Total	$	348	$	3,926	$	4,299	$	655	$	336	$	648	$	50	$	10,262

The following tables present information about individually evaluated loans and collectively evaluated loans by portfolio segment as of the dates indicated.


	Loans by Segment and Evaluation Method
September 30, 2025	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Total
Individually evaluated	$	–	$	473	$	10,226	$	–	$	–	$	–	$	10,699
Collectively evaluated		46,381		324,124		480,742		53,532		54,332		47,135		1,006,246
Total	$	46,381	$	324,597	$	490,968	$	53,532	$	54,332	$	47,135	$	1,016,945


	Loans by Segment and Evaluation Method
December 31, 2024	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Total
Individually evaluated	$	-	$	497	$	10,024	$	-	$	-	$	-	$	10,521
Collectively evaluated		50,798		307,358		468,054		51,844		57,171		42,867		978,092
Total	$	50,798	$	307,855	$	478,078	$	51,844	$	57,171	$	42,867	$	988,613

Collateral Dependent Loans

Loans are collateral dependent when repayment is expected substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. Collateral dependent loans are individually evaluated. The Company measures the ACLL on collateral dependent loans based upon the fair value of the collateral. Fair value of the collateral is adjusted for liquidation costs/discounts. If the fair value of the collateral falls below the amortized cost of the loan, the shortfall is recognized in the ACLL. If the fair value of the collateral exceeds the amortized cost, no ACLL is required.

As of September 30, 2025 and December 31, 2024, three of the Company’s individually evaluated loans were collateral dependent and secured by real estate. The following table provides detail on collateral dependent loans as of the dates indicated:


	September 30, 2025				December 31, 2024
	Balance		Related Allowance		Balance		Related Allowance
Commercial Real Estate
Commercial real estate, owner occupied	$	8,114	$	-	$	8,387	$	-
Commercial real estate, other		677		-		872		-
Total Loans	$	8,791	$	-	$	9,259	$	-

Credit Quality

The Company categorizes loans by risk based on relevant information about the ability of borrowers to service their debt, including: collateral and financial information, payment history, credit documentation and current economic trends, among other factors. At origination, each loan is assigned a risk rating. Ongoing analysis of the loan portfolio adjusts risk ratings on an individual loan basis to reflect updated information. General descriptions of risk ratings are as follows:

•

Pass: loans with acceptable credit quality are rated pass.

•

Special mention: loans with potential weakness due to challenging economic or financial conditions are rated special mention.

•

Classified: loans with well-defined weaknesses that heighten the risk of default are rated classified.

The following tables present the amortized cost basis of the loan portfolio by year of origination, loan class and credit quality as of September 30, 2025 and December 31, 2024, and gross charge-offs by year of origination for the nine months ended September 30, 2025 and the year ended December 31, 2024.


	Term Loans Amortized Cost Basis by Origination Year														Revolving Loans Converted
September 30, 2025	Prior		2021		2022		2023		2024		2025		Revolving		to Term		Total
Construction, residential
Pass	$	-	$	-	$	-	$	265	$	2,255	$	2,901	$	9,517	$	2,589	$	17,527
Construction, other
Pass	$	4,044	$	765	$	1,247	$	13,470	$	1,545	$	4,605	$	3,128	$	50	$	28,854
Equity lines
Pass	$	-	$	-	$	-	$	-	$	-	$	-	$	26,922	$	-	$	26,922
Residential closed-end first liens
Pass	$	56,578	$	32,623	$	35,725	$	27,675	$	21,470	$	20,063	$	50	$	1,369	$	195,553
Special Mention		-		-		132		-		-		-		-		-		132
Classified		61		80		-		-		-		-		-		-		141
Total	$	56,639	$	32,703	$	35,857	$	27,675	$	21,470	$	20,063	$	50	$	1,369	$	195,826
Residential closed-end junior liens
Pass	$	1,527	$	251	$	1,853	$	1,336	$	3,134	$	2,350	$	32	$	-	$	10,483
Investor-owned residential real estate
Pass	$	45,930	$	15,716	$	11,598	$	3,179	$	3,758	$	8,652	$	2,060	$	-	$	90,893
Classified		473		-		-		-		-		-		-		-		473
Total	$	46,403	$	15,716	$	11,598	$	3,179	$	3,758	$	8,652	$	2,060	$	-	$	91,366
Multifamily residential real estate
Pass	$	40,649	$	38,700	$	40,107	$	4,153	$	13,084	$	25,652	$	140	$	-	$	162,485
Classified		194		-		-		-		-		-		-		-		194
Total	$	40,843	$	38,700	$	40,107	$	4,153	$	13,084	$	25,652	$	140	$	-	$	162,679
Commercial real estate, owner occupied
Pass	$	70,784	$	6,900	$	25,008	$	9,258	$	5,538	$	4,815	$	2,597	$	-	$	124,900
Special mention		6,280		-		-		-		-		-		-		-		6,280
Classified		2,816		-		-		-		-		-		97		-		2,913
Total	$	79,880	$	6,900	$	25,008	$	9,258	$	5,538	$	4,815	$	2,694	$	-	$	134,093
Commercial real estate, other
Pass	$	100,307	$	34,898	$	31,089	$	16,701	$	6,195	$	2,300	$	1,489	$	-	$	192,979
Classified		677		-		540		-		-		-		-		-		1,217
Total	$	100,984	$	34,898	$	31,629	$	16,701	$	6,195	$	2,300	$	1,489	$	-	$	194,196
Commercial and industrial
Pass	$	7,257	$	10,052	$	2,846	$	3,740	$	10,196	$	7,858	$	11,386	$	177	$	53,512
Special Mention		-		-		-		-		-		-		20		-		20
Total	$	7,257	$	10,052	$	2,846	$	3,740	$	10,196	$	7,858	$	11,406	$	177	$	53,532
Public sector and IDA
Pass	$	18,700	$	23,451	$	5,610	$	6,522	$	49	$	-	$	-	$	-	$	54,332
Credit cards
Pass	$	-	$	-	$	-	$	-	$	-	$	-	$	4,696	$	-	$	4,696
Automobile
Pass	$	94	$	292	$	856	$	2,649	$	3,931	$	4,486	$	-	$	-	$	12,308
Special Mention		-		-		-		2		-		-		-		-		2
Total	$	94	$	292	$	856	$	2,651	$	3,931	$	4,486	$	-	$	-	$	12,310
Other consumer
Pass	$	398	$	484	$	1,165	$	2,884	$	6,987	$	16,821	$	1,358	$	-	$	30,097
Special Mention		-		-		-		-		6		3		-		-		9
Classified		-		12		-		-		6		3		2		-		23
Total	$	398	$	496	$	1,165	$	2,884	$	6,999	$	16,827	$	1,360	$	-	$	30,129
Total Loans
Pass	$	346,268	$	164,132	$	157,104	$	91,832	$	78,142	$	100,503	$	63,375	$	4,185	$	1,005,541
Special Mention		6,280		-		132		2		6		3		20		-		6,443
Classified		4,221		92		540		-		6		3		99		-		4,961
Total	$	356,769	$	164,224	$	157,776	$	91,834	$	78,154	$	100,509	$	63,494	$	4,185	$	1,016,945


	Gross Charge Offs by Origination Year for the Nine Months Ended September 30, 2025														Revolving Loans Converted
	Prior		2021		2022		2023		2024		2025		Revolving		to Term		Total
Residential closed-end first liens	$	3	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	3
Credit cards		-		-		-		-		-		-		42		-		42
Automobile		-		4		13		38		23		-		-		-		78
Other consumer		-		-		20		19		70		174		-		-		283
Total Gross Charge-Offs	$	3	$	4	$	33	$	57	$	93	$	174	$	42	$	-	$	406


	Term Loans Amortized Cost Basis by Origination Year														Revolving Loans Converted
December 31, 2024	Prior		2020		2021		2022		2023		2024		Revolving		to Term		Total
Construction, residential
Pass	$	-	$	-	$	-	$	337	$	2,312	$	3,328	$	10,185	$	-	$	16,162
Construction, other
Pass	$	2,938	$	1,138	$	805	$	10,795	$	8,669	$	6,194	$	4,097	$	-	$	34,636
Equity lines
Pass	$	363	$	249	$	387	$	470	$	816	$	402	$	19,894	$	12	$	22,593
Classified		-		-		-		-		-		-		25		-		25
Total	$	363	$	249	$	387	$	470	$	816	$	402	$	19,919	$	12	$	22,618
Residential closed-end first liens
Pass	$	42,211	$	18,111	$	33,630	$	35,557	$	21,593	$	18,991	$	-	$	303	$	170,396
Special mention		367		-		-		-		-		-		-		-		367
Classified		441		-		-		178		-		-		-		-		619
Total	$	43,019	$	18,111	$	33,630	$	35,735	$	21,593	$	18,991	$	-	$	303	$	171,382
Residential closed-end junior liens
Pass	$	1,596	$	-	$	277	$	2,048	$	1,597	$	3,004	$	31	$	21	$	8,574
Investor-owned residential real estate
Pass	$	28,919	$	22,946	$	19,280	$	16,242	$	8,175	$	3,266	$	1,907	$	3,668	$	104,403
Special mention		-		-		-		138		-		-		-		-		138
Classified		740		-		-		-		-		-		-		-		740
Total	$	29,659	$	22,946	$	19,280	$	16,380	$	8,175	$	3,266	$	1,907	$	3,668	$	105,281
Multifamily residential real estate
Pass	$	39,665	$	2,055	$	39,879	$	40,198	$	8,470	$	13,205	$	158	$	-	$	143,630
Commercial real estate, owner occupied
Pass	$	52,916	$	24,539	$	7,432	$	28,753	$	10,351	$	3,810	$	3,422	$	83	$	131,306
Special mention		6,375		-		-		-		-		-		-		-		6,375
Classified		2,222		738		-		-		-		-		12		-		2,972
Total	$	61,513	$	25,277	$	7,432	$	28,753	$	10,351	$	3,810	$	3,434	$	83	$	140,653
Commercial real estate, other
Pass	$	90,358	$	17,919	$	36,777	$	23,775	$	16,990	$	5,583	$	1,703	$	-	$	193,105
Classified		690		-		-		-		-		-		-		-		690
Total	$	91,048	$	17,919	$	36,777	$	23,775	$	16,990	$	5,583	$	1,703	$	-	$	193,795
Commercial and industrial
Pass	$	6,437	$	2,070	$	11,849	$	5,528	$	5,903	$	8,407	$	11,644	$	-	$	51,838
Classified		-		-		-		6		-		-		-		-		6
Total	$	6,437	$	2,070	$	11,849	$	5,534	$	5,903	$	8,407	$	11,644	$	-	$	51,844
Public sector and IDA
Pass	$	19,309	$	218	$	25,232	$	5,922	$	6,490	$	-	$	-	$	-	$	57,171
Credit cards
Pass	$	-	$	-	$	-	$	-	$	-	$	-	$	4,698	$	-	$	4,698
Automobile
Pass	$	36	$	243	$	727	$	1,640	$	4,474	$	5,832	$	-	$	-	$	12,952
Special mention		-		-		-		-		4		-		-		-		4
Classified		-		-		-		-		28		11		-		-		39
Total	$	36	$	243	$	727	$	1,640	$	4,506	$	5,843	$	-	$	-	$	12,995
Other Consumer
Pass	$	184	$	401	$	874	$	2,274	$	4,804	$	15,846	$	760	$	-	$	25,143
Special mention		-		-		1		-		-		9		-		-		10
Classified		-		-		-		2		14		5		-		-		21
Total	$	184	$	401	$	875	$	2,276	$	4,818	$	15,860	$	760	$	-	$	25,174
Total Loans
Pass	$	284,932	$	89,889	$	177,149	$	173,539	$	100,644	$	87,868	$	58,499	$	4,087	$	976,607
Special mention		6,742		-		1		138		4		9		-		-		6,894
Classified		4,093		738		-		186		42		16		37		-		5,112
Total	$	295,767	$	90,627	$	177,150	$	173,863	$	100,690	$	87,893	$	58,536	$	4,087	$	988,613


	Gross Charge Offs by Origination Year for the Twelve Monts Ended December 31, 2024														Revolving Loans Converted
	Prior		2020		2021		2022		2023		2024		Revolving		to Term		Total
Commercial and industrial	$	125	$	-	$	-	$	-	$	-	$	22	$	19	$	-	$	166
Credit cards		-		-		-		-		-		-		53		-		53
Automobile		-		-		6		14		16		11		-		-		47
Other Consumer		-		4		15		19		94		121		-		-		253
Total YTD gross charge-offs	$	125	$	4	$	21	$	33	$	110	$	154	$	72	$	-	$	519

Loan Modifications to Borrowers Experiencing Financial Difficulty

On the date a loan is modified, the Company assesses whether the borrower is experiencing financial difficulty. If the borrower is experiencing financial difficulty, the loan is risk rated special mention or classified, as appropriate. If the loan exceeds $400, if it is placed in nonaccrual, or if foreclosure is probable, the loan is individually evaluated for the ACLL.

During the three and nine months ended September 30, 2025, no loans were modified for borrowers experiencing financial difficulty. Two loans were modified for borrowers experiencing financial difficulty during the first three months of 2024. These loans were modified again during the three month period ended September 30, 2024.

The following table presents information as of September 30, 2024 about loans modified for borrowers experiencing financial difficulty during the nine months ended September 30, 2024.

         September 30, 2024

         Amortized
Cost Basis

         % of
Class

         Type of
Modification

         Financial Effect

         Commercial Real Estate

Commercial real estate owner-occupied

6,396

4.40

Interest only
payments

3 months of interest only payments, re-amortization of the balance to contractual maturity

         Commercial Non real estate

Commercial and industrial

6

0.01

Term extension

Renewal of single-payment note for an additional 3 months

The Company closely monitors the performance of loans that are modified for borrowers experiencing financial difficulty. As of September 30, 2024, the loans were in current status and individually evaluated. There were no modified loans to borrowers experiencing financial difficulty that had a payment default during the three or nine months ended September 30, 2025 and 2024 and that were modified in the twelve months prior. Default occurs when a payment is 90 days past due, the loan is fully or partially charged off or the Company forecloses on the collateral.

Consumer Real Estate Loans In Process of Foreclosure

As of September 30, 2025, the Company had no consumer real estate loans in process of foreclosure. As of December 31, 2024, three consumer real estate loans totaling $37 were in process of foreclosure.

ACL for Unfunded Commitments

The following tables present the balance and activity in the ACL for unfunded commitments for the nine months ended September 30, 2025 and 2024:


Allowance for Credit Losses on Unfunded Commitments
Balance, December 31, 2024	$	251
Provision for credit losses		37
Balance, September 30, 2025	$	288

Balance, December 31, 2023	$	259
Recovery of credit losses		(25	)
FCB acquisition		7
Balance, September 30, 2024	$	241