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Loans | 12 Months Ended
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Dec. 31, 2024
Receivables [Abstract] |
Loans | Loans Loans, net of unearned fees and unamortized loan origination costs, are comprised of the following:
|  | December 31,
|  | 2024 |  | 2023
(In thousands) |  | Loan Balance |  | % of Total Loans |  | Loan Balance |  | % of Total Loans
Commercial and business loans |  | $ | 63,653 |  |  | 6.9 | % |  | $ | 53,273 |  |  | 5.8 | %
Government program loans |  | 62 |  |  | <0.01 | % |  | 74 |  |  | <0.01 | %
Total commercial and industrial |  | 63,715 |  |  | 6.9 | % |  | 53,347 |  |  | 5.8 | %
Real estate – mortgage: |  |  |  |  |  |  |  |
Commercial real estate |  | 419,422 |  |  | 45.2 | % |  | 386,134 |  |  | 42.0 | %
Residential mortgages |  | 247,248 |  |  | 26.6 | % |  | 260,539 |  |  | 28.3 | %
Home improvement and home equity loans |  | 24 |  |  | <0.01 | % |  | 36 |  |  | <0.01 | %
Total real estate mortgage |  | 666,694 |  |  | 71.8 | % |  | 646,709 |  |  | 70.3 | %
Real estate construction and development |  | 111,145 |  |  | 12.0 | % |  | 127,944 |  |  | 13.9 | %
Agricultural |  | 49,462 |  |  | 5.3 | % |  | 49,795 |  |  | 5.4 | %
Installment and student loans |  | 37,446 |  |  | 4.0 | % |  | 42,247 |  |  | 4.6 | %
Total loans |  | $ | 928,462 |  |  | 100.0 | % |  | $ | 920,042 |  |  | 100.0 | %
The Company’s loans are predominantly in the San Joaquin Valley, and the greater Oakhurst/East Madera County area, as well as the Campbell area of Santa Clara County. The Company’s participation loans with other financial institutions are primarily in the state of California. Commercial and industrial loans are generally made to support the ongoing operations of small- and medium-sized commercial businesses. Commercial and industrial loans have a high degree of industry diversification and provide working capital, financing for the purchase of manufacturing plants and equipment, or funding for growth and general expansion of businesses. A substantial portion of commercial and industrial loans are secured by accounts receivable, inventory, leases, or other collateral, including real estate. While the remainder are unsecured, those extensions of credit are predicated upon the financial capacity of the borrower. Repayment of commercial and industrial loans generally comes from the cash flow of the borrower. Real estate mortgage loans are secured by trust deeds on primarily commercial property and by trust deeds on single family residences. Repayment of real estate mortgage loans is generally from the cash flow of the borrower. •Commercial real estate mortgage loans comprise the largest segment of this loan category and are available on all types of income producing and commercial properties, including: office buildings and shopping centers, apartments and motels, owner-occupied buildings, manufacturing facilities, and other properties. Commercial real estate mortgage loans can also be used to refinance existing debt. Commercial real estate loans typically receive payment from the borrower’s business operations, rental income associated with the real property, or personal assets. •Residential mortgage loans are provided to individuals to finance or refinance single-family residences. Residential mortgages are not a primary business line offered by the Company, and a majority are conventional mortgages that were purchased as a pool. •Home improvement and home equity loans comprise a relatively small portion of total real estate mortgage loans. Home equity loans are generally secured by junior trust deeds, but may be secured by 1 st trust deeds. Real estate construction and development loans consist of loans for residential and commercial construction projects, as well as land acquisition and development, or land held for future development. Loans in this category are secured by real estate including improved and unimproved land, as well as single-family residential, multi-family residential, and commercial properties in various stages of completion. All real estate loans have established equity requirements. Repayment on construction loans generally comes from long-term mortgages with other lending institutions obtained at completion of the project or from the sale of the constructed homes to individuals. Agricultural loans are generally secured by land, equipment, inventory and receivables. Repayment is from the cash flow of the borrower. Installment loans consist primarily of student loans as well as loans to individuals for household, family, and other personal expenditures such as credit cards, automobiles or other consumer items. See “Note 4 - Student Loans” for specific information on the student loan portfolio. In the normal course of business, the Company is party to financial instruments with off-balance sheet risk to meet the financing needs of its customers. At December 31, 2024, and 2023, these financial instruments include commitments to extend credit of $204.0 million and $183.5 million, respectively, and standby letters of credit of $29.2 million and $2.9 million, respectively. These instruments involve elements of credit risk in excess of the amount recognized on the consolidated balance sheet. The contract amounts of these instruments reflect the extent of the involvement the Company has in off-balance sheet financial instruments. The Company’s exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amounts of those instruments. The Company applies the same credit policies as it does for on-balance sheet instruments. Commitments to extend credit are agreements to lend to a customer, as long as there is no violation of any condition established in the contract. Substantially all of these commitments are at floating interest rates based on the prime rate. Commitments generally have fixed expiration dates. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if necessary, is based on management’s credit evaluation. Collateral held varies but includes accounts receivable, inventory, leases, property, plant and equipment, residential real estate, and income-producing properties. Standby letters of credit are generally unsecured and are issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. Loans to directors, officers, principal shareholders and their affiliates are summarized below:
(In thousands) |  | 2024 |  | 2023 |
Aggregate amount outstanding, beginning of year |  | $ | 3,039 |  |  | $ | 3,610 |  |
New loans or advances during year |  | 400 |  |  | 825 |  |
Repayments during year |  | (758) |  |  | (1,396) |  |
Aggregate amount outstanding, end of year |  | $ | 2,681 |  |  | $ | 3,039 |  |
Undisbursed commitments, end of year |  | $ | 1,803 |  |  | $ | 1,525 |  |
Key terms and conditions for loans to directors, officers, principal shareholders and their affiliates do not differ from those of other borrowers. Past Due Loans The Company monitors delinquent and potentially problematic loans on an ongoing basis through weekly reports to the loan committee and monthly reports to the Board of Directors. The following is a summary of delinquent loans, net of unearned fees and loan origination costs, at December 31, 2024, (in thousands):
December 31, 2024 |  | Loans 30-60 Days Past Due |  | Loans 61-89 Days Past Due |  | Loans 90 or More Days Past Due |  | Total Past Due Loans |  | Current Loans |  | Total Loans |  | Accruing Loans 90 or More Days Past Due
Commercial and business loans |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 63,653 |  |  | $ | 63,653 |  |  | $ | — |
Government program loans |  | — |  |  | — |  |  | — |  |  | — |  |  | 62 |  |  | 62 |  |  | — |
Total commercial and industrial |  | — |  |  | — |  |  | — |  |  | — |  |  | 63,715 |  |  | 63,715 |  |  | — |
Commercial real estate loans |  | — |  |  | — |  |  | — |  |  | — |  |  | 419,422 |  |  | 419,422 |  |  | — |
Residential mortgages |  | 214 |  |  | — |  |  | — |  |  | 214 |  |  | 247,034 |  |  | 247,248 |  |  | — |
Home improvement and home equity loans |  | — |  |  | — |  |  | — |  |  | — |  |  | 24 |  |  | 24 |  |  | — |
Total real estate mortgage |  | 214 |  |  | — |  |  | — |  |  | 214 |  |  | 666,480 |  |  | 666,694 |  |  | — |
Real estate construction and development loans |  | — |  |  | — |  |  | 12,185 |  |  | 12,185 |  |  | 98,960 |  |  | 111,145 |  |  | — |
Agricultural loans |  | — |  |  | — |  |  | — |  |  | — |  |  | 49,462 |  |  | 49,462 |  |  | — |
Installment and student loans |  | 1,625 |  |  | 1,373 |  |  | 421 |  |  | 3,419 |  |  | 34,027 |  |  | 37,446 |  |  | 421 |
Total loans |  | $ | 1,839 |  |  | $ | 1,373 |  |  | $ | 12,606 |  |  | $ | 15,818 |  |  | $ | 912,644 |  |  | $ | 928,462 |  |  | $ | 421 |
The following is a summary of delinquent loans, net of unearned fees and loan origination costs, at December 31, 2023, (in thousands):
December 31, 2023 |  | Loans 30-60 Days Past Due |  | Loans 61-89 Days Past Due |  | Loans 90 or More Days Past Due |  | Total Past Due Loans |  | Current Loans |  | Total Loans |  | Accruing Loans 90 or More Days Past Due
Commercial and business loans |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 53,273 |  |  | $ | 53,273 |  |  | $ | — |
Government program loans |  | — |  |  | — |  |  | — |  |  | — |  |  | 74 |  |  | 74 |  |  | — |
Total commercial and industrial |  | — |  |  | — |  |  | — |  |  | — |  |  | 53,347 |  |  | 53,347 |  |  | — |
Commercial real estate loans |  | — |  |  | — |  |  | — |  |  | — |  |  | 386,134 |  |  | 386,134 |  |  | — |
Residential mortgages |  | — |  |  | — |  |  | — |  |  | — |  |  | 260,539 |  |  | 260,539 |  |  | — |
Home improvement and home equity loans |  | — |  |  | — |  |  | — |  |  | — |  |  | 36 |  |  | 36 |  |  | — |
Total real estate mortgage |  | — |  |  | — |  |  | — |  |  | — |  |  | 646,709 |  |  | 646,709 |  |  | — |
Real estate construction and development loans |  | — |  |  | — |  |  | 11,390 |  |  | 11,390 |  |  | 116,554 |  |  | 127,944 |  |  | — |
Agricultural loans |  | — |  |  | — |  |  | 45 |  |  | 45 |  |  | 49,750 |  |  | 49,795 |  |  | — |
Installment and student loans |  | 791 |  |  | 328 |  |  | 426 |  |  | 1,545 |  |  | 40,702 |  |  | 42,247 |  |  | 426 |
Total loans |  | $ | 791 |  |  | $ | 328 |  |  | $ | 11,861 |  |  | $ | 12,980 |  |  | $ | 907,062 |  |  | $ | 920,042 |  |  | $ | 426 |
Nonaccrual Loans The following table presents the amortized costs of loans on nonaccrual status and accruing loans more than 90 days past due: December 31, 2024, and 2023:
|  | December 31, 2024 |  | December 31, 2023
(In thousands) |  | Nonaccrual Loans With No Allowance For Credit Losses |  | Total Nonaccrual Loans |  | Accruing Loans 90 or More Days Past Due |  | Nonaccrual Loans With No Allowance For Credit Losses |  | Total Nonaccrual Loans |  | Accruing Loans 90 or More Days Past Due
Real estate construction and development loans |  | 12,198 |  |  | 12,198 |  |  | — |  |  | 11,403 |  |  | 11,403 |  |  | — |
Agricultural loans |  | — |  |  | — |  |  | — |  |  | — |  |  | 45 |  |  | — |
Installment and student loans |  | — |  |  | — |  |  | 421 |  |  | — |  |  | — |  |  | 426 |
Total |  | $ | 12,198 |  |  | $ | 12,198 |  |  | $ | 421 |  |  | $ | 11,403 |  |  | $ | 11,448 |  |  | $ | 426 |
There were no remaining undisbursed commitments to extend credit on nonaccrual loans at December 31, 2024, and 2023. Credit Quality Indicators As part of its credit monitoring program, the Company utilizes a risk rating system which quantifies the risk the Company estimates it has assumed during the life of a loan. The system rates the strength of the borrower and the facility or transaction, and is designed to provide a program for risk management and early detection of problems. For each new credit approval, credit extension, renewal, or modification of existing credit facilities, the Company assigns risk ratings utilizing the rating scale identified in this policy. In addition, on an on-going basis, loans and credit facilities are reviewed for internal and external influences which might impact the credit facility and warrant a change in the risk rating. Each loan credit facility is given a risk rating that takes into account factors that materially affect credit quality. When assigning risk ratings, the Company evaluates two risk rating approaches, a facility rating and a borrower rating as follows: Facility Rating: The facility rating is determined by the analysis of positive and negative factors that may indicate that the quality of a particular loan or credit arrangement requires that it be rated differently from the risk rating assigned to the borrower. The Company assesses the risk impact of these factors: Collateral - The rating may be affected by the type and quality of the collateral, the degree of coverage, the economic life of the collateral, liquidation value, and the Company’s ability to dispose of the collateral. Guarantees - The value of third party support arrangements varies widely. Unconditional guarantees from persons with demonstrable ability to perform are more substantial than that of closely-related persons to the borrower who offer only modest support. Unusual Terms - Credit may be extended on terms that subject the Company to a higher level of risk than indicated in the rating of the borrower. Borrower Rating: The borrower rating is a measure of loss possibility based on the historical, current and anticipated financial characteristics of the borrower in the current risk environment. To determine the rating, the Company considers at least the following factors: - Quality of management - Liquidity - Leverage/capitalization - Profit margins/earnings trend - Adequacy of financial records - Alternative funding sources - Geographic risk - Industry risk - Cash flow risk - Accounting practices - Asset protection - Extraordinary risks The Company assigns risk ratings to loans other than consumer loans and other homogeneous loan pools based on the following scale. The risk ratings are used when determining borrower ratings as well as facility ratings. When the borrower rating and the facility ratings differ, the lowest rating applied is: - Grades 1 and 2 – These grades include loans which are given to high-quality borrowers with high credit quality and sound financial strength. Key financial ratios are generally above industry averages and the borrower’s strong earnings history or net worth. These may be secured by deposit accounts or high-grade investment securities. - Grade 3 – This grade includes loans to borrowers with solid credit quality with minimal risk. The borrower’s balance sheet and financial ratios are generally in line with industry averages, and the borrower has historically demonstrated the ability to manage economic adversity. Real estate and asset-based loans assigned this risk rating must have characteristics which place them well above the minimum underwriting requirements for those departments. Asset-based borrowers assigned this rating must exhibit extremely favorable leverage and cash flow characteristics, and consistently demonstrate a high level of unused borrowing capacity. - Grades 4 and 5 – These include “pass” grade loans to borrowers of acceptable credit quality and risk. The borrower’s balance sheet and financial ratios may be below industry averages, but above the lowest industry quartile. Leverage is above and liquidity is below industry averages. Inadequacies evident in financial performance and/or management sufficiency are offset by readily available features of support, such as adequate collateral, or good guarantors having the liquid assets and/or cash flow capacity to repay the debt. While the borrower may have recognized a loss over three or four years, recent earnings trends, while perhaps somewhat cyclical, are improving and cash flows are adequate to cover debt service and fixed obligations. Real estate and asset-borrowers who fully comply with all underwriting standards and perform according to projections would be assigned this rating. These also include grade 5 loans which are “leveraged” or on management’s “watch list.” While still considered pass loans (loans given a grade 5), the borrower’s financial condition, cash flow, or operations evidence more than average risk and short term weaknesses. These loans warrant a higher than average level of monitoring, supervision, and attention from the Company, but do not reflect credit weakness trends that weaken or inadequately protect the Company’s credit position. Loans with a grade rating of 5 are not normally acceptable as new credits unless they are adequately secured or carry substantial endorsers/guarantors. - Grade 6 – This grade includes “special mention” loans which are loans that are currently protected but are potentially weak. This generally is an interim grade classification and these loans will usually be upgraded to an “acceptable” rating or downgraded to a “substandard” rating within a reasonable time period. Weaknesses in special mention loans may, if not checked or corrected, weaken the asset or inadequately protect the Company’s credit position at some future date. Special mention loans are often loans which exhibit weaknesses inherent in the loan origination and loan servicing, and may have some technical deficiencies. The main theme in special mention credits is the distinct probability that the classification will deteriorate to a more adverse class if the noted deficiencies are not addressed by the loan officer or loan management. - Grade 7 – This grade includes “substandard” loans which are inadequately supported by the current sound net worth and paying capacity of the borrower or of the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that may impair the regular liquidation of the debt. When a loan has been downgraded to “substandard,” there exists a distinct possibility that the Company will sustain a loss if the deficiencies are not corrected. - Grade 8 – This grade includes “doubtful” loans which exhibit the same characteristics as the “substandard” loans. Additionally, loan weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors, which may work to the advantage and strengthening of the loan, its classification as an estimated loss is deferred until its more exact status can be determined. Pending factors include a proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral, and refinancing plans. - Grade 9 – This grade includes loans classified “loss” which are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off the asset even though partial recovery may be achieved in the future. The following table presents loans by class, net of unearned fees and loan origination costs, by risk rating and period indicated as of December 31, 2024:
|  | Term Loans Amortized Cost Basis by Origination Year - As of December 31, 2024 |  | Revolving Loans Amortized Cost Basis |  | Revolving Loans Converted to Term Loans |  |
(In thousands) |  | 2024 |  | 2023 |  | 2022 |  | 2021 |  | 2020 |  | Prior |  |  |  | Total
Commercial and business |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 2,374 |  |  | $ | 3,640 |  |  | $ | 2,076 |  |  | $ | 341 |  |  | $ | 408 |  |  | $ | 764 |  |  | $ | 29,349 |  |  | $ | — |  |  | $ | 38,952 |
Special Mention |  | — |  |  | 2,000 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 2,000 |
Substandard |  | — |  |  | — |  |  | 68 |  |  | — |  |  | 6,989 |  |  | — |  |  | 15,644 |  |  | — |  |  | 22,701 |
Total |  | $ | 2,374 |  |  | $ | 5,640 |  |  | $ | 2,144 |  |  | $ | 341 |  |  | $ | 7,397 |  |  | $ | 764 |  |  | $ | 44,993 |  |  | $ | — |  |  | $ | 63,653 |
Current period gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Government program |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 2 |  |  | $ | 60 |  |  | $ | — |  |  | $ | — |  |  | $ | 62 |
Special Mention |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Substandard |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 2 |  |  | $ | 60 |  |  | $ | — |  |  | $ | — |  |  | $ | 62 |
Current period gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Commercial real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 78,889 |  |  | $ | 32,794 |  |  | $ | 80,121 |  |  | $ | 31,376 |  |  | $ | 37,480 |  |  | $ | 151,066 |  |  | $ | 1,491 |  |  | $ | — |  |  | $ | 413,217 |
Special Mention |  | — |  |  | — |  |  | — |  |  | — |  |  | 5,653 |  |  | — |  |  | — |  |  | — |  |  | 5,653 |
Substandard |  | — |  |  | — |  |  | — |  |  | 552 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 552 |
Total |  | $ | 78,889 |  |  | $ | 32,794 |  |  | $ | 80,121 |  |  | $ | 31,928 |  |  | $ | 43,133 |  |  | $ | 151,066 |  |  | $ | 1,491 |  |  | $ | — |  |  | $ | 419,422 |
Current period gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Residential mortgages |  |  |  |  |  |  |  |  |  |  |  |  |  |
Not graded |  | $ | — |  |  | $ | — |  |  | $ | 23,929 |  |  | $ | 196,340 |  |  | $ | 2,480 |  |  | $ | 6,226 |  |  | $ | — |  |  | $ | — |  |  | $ | 228,975 |
Pass |  | 4,824 |  |  | 3,969 |  |  | 1,926 |  |  | 4,320 |  |  | 1,580 |  |  | 1,654 |  |  | — |  |  | — |  |  | 18,273 |
Special Mention |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Substandard |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total |  | $ | 4,824 |  |  | $ | 3,969 |  |  | $ | 25,855 |  |  | $ | 200,660 |  |  | $ | 4,060 |  |  | $ | 7,880 |  |  | $ | — |  |  | $ | — |  |  | $ | 247,248 |
Current period gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Home improvement and home equity |  |  |  |  |  |  |  |  |  |  |  |  |  |
Not graded |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 24 |  |  | $ | — |  |  | $ | — |  |  | $ | 24 |
Pass |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Special Mention |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Substandard |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 24 |  |  | $ | — |  |  | $ | — |  |  | $ | 24 |
Current period gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
|  | Term Loans Amortized Cost Basis by Origination Year - As of December 31, 2024 |  | Revolving Loans Amortized Cost Basis |  | Revolving Loans Converted to Term Loans |  |
(In thousands) |  | 2024 |  | 2023 |  | 2022 |  | 2021 |  | 2020 |  | Prior |  |  |  | Total
Real estate construction and development |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 13,761 |  |  | $ | 15,743 |  |  | $ | 8,004 |  |  | $ | — |  |  | $ | 32,389 |  |  | $ | 2,473 |  |  | $ | 26,577 |  |  | $ | — |  |  | $ | 98,947 |
Special Mention |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Substandard |  | — |  |  | — |  |  | — |  |  | — |  |  | 3,524 |  |  | 8,674 |  |  | — |  |  | — |  |  | 12,198 |
Total |  | $ | 13,761 |  |  | $ | 15,743 |  |  | $ | 8,004 |  |  | $ | — |  |  | $ | 35,913 |  |  | $ | 11,147 |  |  | $ | 26,577 |  |  | $ | — |  |  | $ | 111,145 |
Current period gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Agricultural |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 3,097 |  |  | $ | 2,115 |  |  | $ | 3,990 |  |  | $ | 490 |  |  | $ | 2,861 |  |  | $ | 11,586 |  |  | $ | 22,705 |  |  | $ | — |  |  | $ | 46,844 |
Special Mention |  | — |  |  | — |  |  | 1,503 |  |  | — |  |  | 440 |  |  | 285 |  |  | — |  |  | — |  |  | 2,228 |
Substandard |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 390 |  |  | — |  |  | 390 |
Total |  | $ | 3,097 |  |  | $ | 2,115 |  |  | $ | 5,493 |  |  | $ | 490 |  |  | $ | 3,301 |  |  | $ | 11,871 |  |  | $ | 23,095 |  |  | $ | — |  |  | $ | 49,462 |
Current period gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Installment and student loans |  |  |  |  |  |  |  |  |  |
Not graded |  | $ | 440 |  |  | $ | 1,607 |  |  | $ | 103 |  |  | $ | 99 |  |  | $ | 8 |  |  | $ | 34,162 |  |  | $ | 606 |  |  | $ | — |  |  | $ | 37,025 |
Pass |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Special Mention |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Substandard |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 421 |  |  | — |  |  | — |  |  | 421 |
Total |  | $ | 440 |  |  | $ | 1,607 |  |  | $ | 103 |  |  | $ | 99 |  |  | $ | 8 |  |  | $ | 34,583 |  |  | $ | 606 |  |  | $ | — |  |  | $ | 37,446 |
Current period gross charge-offs |  | $ | — |  |  | $ | 20 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 2,842 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,862 |
Total loans outstanding (risk rating): |  |  |  |  |  |  |  |  |  |  |  |  |  |
Not graded |  | $ | 440 |  |  | $ | 1,607 |  |  | $ | 24,032 |  |  | $ | 196,439 |  |  | $ | 2,488 |  |  | $ | 40,412 |  |  | $ | 606 |  |  | $ | — |  |  | $ | 266,024 |
Pass |  | 102,945 |  |  | 58,261 |  |  | 96,117 |  |  | 36,527 |  |  | 74,720 |  |  | 167,603 |  |  | 80,122 |  |  | — |  |  | 616,295 |
Special Mention |  | — |  |  | 2,000 |  |  | 1,503 |  |  | — |  |  | 6,093 |  |  | 285 |  |  | — |  |  | — |  |  | 9,881 |
Substandard |  | — |  |  | — |  |  | 68 |  |  | 552 |  |  | 10,513 |  |  | 9,095 |  |  | 16,034 |  |  | — |  |  | 36,262 |
Grand total loans |  | $ | 103,385 |  |  | $ | 61,868 |  |  | $ | 121,720 |  |  | $ | 233,518 |  |  | $ | 93,814 |  |  | $ | 217,395 |  |  | $ | 96,762 |  |  | $ | — |  |  | $ | 928,462 |
Current period gross charge-offs |  | $ | — |  |  | $ | 20 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 2,842 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,862 |
The following table presents loans by class, net of deferred fees, by risk rating and period indicated as of December 31, 2023:
|  | Term Loans Amortized Cost Basis by Origination Year - As of December 31, 2023 |  | Revolving Loans Amortized Cost Basis |  | Revolving Loans Converted to Term Loans |  |
(In thousands) |  | 2023 |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | Prior |  |  |  | Total
Commercial and business |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 5,989 |  |  | $ | 5,066 |  |  | $ | 1,594 |  |  | $ | 810 |  |  | $ | 6 |  |  | $ | 939 |  |  | $ | 38,869 |  |  | $ | — |  |  | $ | 53,273 |
Special Mention |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Substandard |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total |  | $ | 5,989 |  |  | $ | 5,066 |  |  | $ | 1,594 |  |  | $ | 810 |  |  | $ | 6 |  |  | $ | 939 |  |  | $ | 38,869 |  |  | $ | — |  |  | $ | 53,273 |
Current period gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Government program |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 8 |  |  | $ | — |  |  | $ | 66 |  |  | $ | — |  |  | $ | — |  |  | $ | 74 |
Special Mention |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Substandard |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 8 |  |  | $ | — |  |  | $ | 66 |  |  | $ | — |  |  | $ | — |  |  | $ | 74 |
Current period gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Commercial real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 40,929 |  |  | $ | 81,823 |  |  | $ | 52,019 |  |  | $ | 39,155 |  |  | $ | 60,626 |  |  | $ | 105,285 |  |  | $ | 501 |  |  | $ | — |  |  | $ | 380,338 |
Special Mention |  | — |  |  | — |  |  | — |  |  | 5,796 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 5,796 |
Substandard |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total |  | $ | 40,929 |  |  | $ | 81,823 |  |  | $ | 52,019 |  |  | $ | 44,951 |  |  | $ | 60,626 |  |  | $ | 105,285 |  |  | $ | 501 |  |  | $ | — |  |  | $ | 386,134 |
Current period gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Residential mortgages |  |  |  |  |  |  |  |  |  |  |  |  |  |
Not graded |  | $ | — |  |  | $ | 24,835 |  |  | $ | 206,257 |  |  | $ | 2,260 |  |  | $ | — |  |  | $ | 8,969 |  |  | $ | — |  |  | $ | — |  |  | $ | 242,321 |
Pass |  | 4,189 |  |  | 1,925 |  |  | 5,253 |  |  | 1,579 |  |  | 3,494 |  |  | 1,778 |  |  | — |  |  | — |  |  | 18,218 |
Special Mention |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Substandard |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total |  | $ | 4,189 |  |  | $ | 26,760 |  |  | $ | 211,510 |  |  | $ | 3,839 |  |  | $ | 3,494 |  |  | $ | 10,747 |  |  | $ | — |  |  | $ | — |  |  | $ | 260,539 |
Current period gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Home improvement and home equity |  |  |  |  |  |  |  |  |  |  |  |  |  |
Not graded |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 32 |  |  | $ | — |  |  | $ | — |  |  | $ | 32 |
Pass |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 4 |  |  | — |  |  | — |  |  | 4 |
Special Mention |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Substandard |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 36 |  |  | $ | — |  |  | $ | — |  |  | $ | 36 |
Current period gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
|  | Term Loans Amortized Cost Basis by Origination Year - As of December 31, 2023 |  | Revolving Loans Amortized Cost Basis |  | Revolving Loans Converted to Term Loans |  |
(In thousands) |  | 2023 |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | Prior |  |  |  | Total
Real estate construction and development |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 27,951 |  |  | $ | 9,571 |  |  | $ | — |  |  | $ | 31,308 |  |  | $ | — |  |  | $ | 3,978 |  |  | $ | 43,734 |  |  | $ | — |  |  | $ | 116,542 |
Special Mention |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Substandard |  | — |  |  | — |  |  | — |  |  | 3,524 |  |  | — |  |  | 7,878 |  |  | — |  |  | — |  |  | 11,402 |
Total |  | $ | 27,951 |  |  | $ | 9,571 |  |  | $ | — |  |  | $ | 34,832 |  |  | $ | — |  |  | $ | 11,856 |  |  | $ | 43,734 |  |  | $ | — |  |  | $ | 127,944 |
Current period gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Agricultural |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 2,086 |  |  | $ | 4,163 |  |  | $ | 457 |  |  | $ | 2,958 |  |  | $ | 1,592 |  |  | $ | 12,574 |  |  | $ | 22,556 |  |  | $ | — |  |  | $ | 46,386 |
Special Mention |  | — |  |  | 2,105 |  |  | — |  |  | 513 |  |  | — |  |  | 356 |  |  | — |  |  | — |  |  | 2,974 |
Substandard |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 45 |  |  | 390 |  |  | — |  |  | 435 |
Total |  | $ | 2,086 |  |  | $ | 6,268 |  |  | $ | 457 |  |  | $ | 3,471 |  |  | $ | 1,592 |  |  | $ | 12,975 |  |  | $ | 22,946 |  |  | $ | — |  |  | $ | 49,795 |
Current period gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Installment and student loans |  |  |  |  |  |  |  |  |  |
Not graded |  | $ | 708 |  |  | $ | 250 |  |  | $ | 142 |  |  | $ | 74 |  |  | $ | 483 |  |  | $ | 38,519 |  |  | $ | 472 |  |  | $ | — |  |  | $ | 40,648 |
Pass |  | 1,173 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,173 |
Special Mention |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Substandard |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 426 |  |  | — |  |  | — |  |  | 426 |
Total |  | $ | 1,881 |  |  | $ | 250 |  |  | $ | 142 |  |  | $ | 74 |  |  | $ | 483 |  |  | $ | 38,945 |  |  | $ | 472 |  |  | $ | — |  |  | $ | 42,247 |
Current period gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 2,588 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,588 |
Total loans outstanding (risk rating): |  |  |  |  |  |  |  |  |  |  |  |  |  |
Not graded |  | $ | 708 |  |  | $ | 25,085 |  |  | $ | 206,399 |  |  | $ | 2,334 |  |  | $ | 483 |  |  | $ | 47,520 |  |  | $ | 472 |  |  | $ | — |  |  | $ | 283,001 |
Pass |  | 82,317 |  |  | 102,548 |  |  | 59,323 |  |  | 75,818 |  |  | 65,718 |  |  | 124,624 |  |  | 105,660 |  |  | — |  |  | 616,008 |
Special Mention |  | — |  |  | 2,105 |  |  | — |  |  | 6,309 |  |  | — |  |  | 356 |  |  | — |  |  | — |  |  | 8,770 |
Substandard |  | — |  |  | — |  |  | — |  |  | 3,524 |  |  | — |  |  | 8,349 |  |  | 390 |  |  | — |  |  | 12,263 |
Grand total loans |  | $ | 83,025 |  |  | $ | 129,738 |  |  | $ | 265,722 |  |  | $ | 87,985 |  |  | $ | 66,201 |  |  | $ | 180,849 |  |  | $ | 106,522 |  |  | $ | — |  |  | $ | 920,042 |
Current period gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 2,588 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,588 |
Allowance for Credit Losses on Loans The following summarizes the activity in the allowance for credit losses by loan category for the years ended December 31, 2024, and 2023 (in thousands).
December 31, 2024 |  | Commercial and Industrial |  | Real Estate Mortgage |  | Real Estate Construction Development |  | Agricultural |  | Installment & Student Loans |  |  |  |  |  | Total
Beginning balance |  | $ | 1,903 |  |  | $ | 2,524 |  |  | $ | 3,614 |  |  | $ | 1,250 |  |  | $ | 6,367 |  |  |  |  |  |  | $ | 15,658 |
Provision for (reversal of) credit losses (1) |  | 935 |  |  | 104 |  |  | (1,110) |  |  | (222) |  |  | 3,312 |  |  |  |  |  |  | 3,019 |
Charge-offs |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,862) |  |  |  |  |  |  | (2,862) |
Recoveries |  | 1 |  |  | 6 |  |  | — |  |  | — |  |  | 224 |  |  |  |  |  |  | 231 |
Ending balance |  | $ | 2,839 |  |  | $ | 2,634 |  |  | $ | 2,504 |  |  | $ | 1,028 |  |  | $ | 7,041 |  |  |  |  |  |  | $ | 16,046 |
(1) Excludes a $56,000 reversal of provision for unfunded loan commitments during the year.
December 31, 2023 |  | Commercial and Industrial |  | Real Estate Mortgage |  | Real Estate Construction and Development |  | Agricultural |  | Installment & Student Loans |  | Unallocated |  | Total
Beginning balance |  | $ | 955 |  |  | $ | 1,363 |  |  | $ | 3,409 |  |  | $ | 525 |  |  | $ | 2,898 |  |  | $ | 1,032 |  |  | $ | 10,182 |
CECL Adjustment |  | 1,336 |  |  | 2,359 |  |  | 720 |  |  | 1,025 |  |  | 1,959 |  |  | (1,032) |  |  | 6,367 |
Provision for (reversal of) credit losses (1) |  | (390) |  |  | (1,253) |  |  | (515) |  |  | (300) |  |  | 3,888 |  |  | — |  |  | 1,430 |
Charge-offs |  | — |  |  | — |  |  | — |  |  | — |  |  | (2,588) |  |  | — |  |  | (2,588) |
Recoveries |  | 2 |  |  | 55 |  |  | — |  |  | — |  |  | 210 |  |  | — |  |  | 267 |
Ending balance |  | $ | 1,903 |  |  | $ | 2,524 |  |  | $ | 3,614 |  |  | $ | 1,250 |  |  | $ | 6,367 |  |  | $ | — |  |  | $ | 15,658 |
(1) Excludes a $30,000 provision for unfunded loan commitments during the year. Collateral-Dependent Loans The following table presents the recorded investment in collateral-dependent loans by type of loan:
|  | December 31, 2024 |  | December 31, 2023
(Dollars in thousands) |  | Amount |  |  | Number of Collateral-Dependent Loans |  | Amount |  |  | Number of Collateral-Dependent Loans
Real estate construction and development loans |  | $ | 12,185 |  |  |  | 3 |  |  | $ | 11,390 |  |  |  | 3 |
Agricultural loans |  | 390 |  |  |  | 1 |  |  | 390 |  |  |  | 1 |
Total |  | $ | 12,575 |  |  |  | 4 |  |  | $ | 11,780 |  |  |  | 4 |
At December 31, 2024, two of the real estate and construction and development loans were secured by land and one was secured by a multifamily property, and the agricultural loan was secured by farmland. At December 31, 2023, two of the real estate construction and development loans were secured by land and one was secured by a multifamily property, and agricultural loan was secured by farmland. Reserve for Unfunded Commitments The allowance for off-balance sheet credit exposure relates to commitments to extend credit, letters of credit, and undisbursed funds on lines of credit. The Company evaluates credit risk associated with the off-balance sheet loan commitments in the same manner as it evaluates credit risk within the loan portfolio. There was a reversal of provision of $56,000 for unfunded loan commitments made during the year ended December 31, 2024, decreasing the liability balance to $780,000. For the year ended December 31, 2023, there was a provision of $30,000 made for unfunded loan commitments. The balance for unfunded loan commitments totaled $835,000 at December 31, 2023. The reserve for the unfunded loan commitments is a liability on the Company’s consolidated financial statements and is included in other liabilities. Loan Modifications Occasionally, the Company modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, and other-than-insignificant payment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged off against the allowance for credit losses. There were no loan modifications at December 31, 2023. The following tables present loan modifications made to borrowers experiencing financial difficulties for the period indicated:
|  | December 31, 2024
(In thousands) |  | Principal Forgiveness |  | Term Extension |  | Interest Rate Reduction |  | Payment Delay |  | Total % of Loans Outstanding
Commercial and business loans |  | $ | — |  |  | $ | 6,989 |  |  | $ | — |  |  | $ | — |  |  | 0.75%
The following table presents the financial effects of loan modifications made to borrower experiencing financial difficulties:
|  |  |  | December 31, 2024
(In thousands) |  |  |  | 12 months term extension
Commercial and business loans |  |  |  | 6,989 |

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