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Loan and Allowance for Credit Losses | 6 Months Ended
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Jun. 30, 2025
Loans And Leases Receivable Disclosure [Abstract] |
Loans and leases receivable disclosure [Text Block] | NOTE 3: LOANS AND ALLOWANCE FOR CREDIT LOSSES June 30, December 31, (Dollars in thousands) 2025 2024 Commercial and industrial $ 59,773 $ 63,274 Construction and land development 93,820 82,493 Commercial real estate: Owner occupied 61,839 55,346 Hotel/motel 34,064 35,210 Multi-family 42,807 43,556 Other 144,158 155,880 Total commercial real estate 282,868 289,992 Residential real estate: Consumer mortgage 59,212 60,399 Investment property 57,947 58,228 Total residential real estate 117,159 118,627 Consumer installment 9,094 9,631 Total Loans $ 562,714 $ 564,017 Loans secured by real estate were approximately 87.8% of the Company’s total loan portfolio at June 30, 2025. At June 30, 2025, the Company’s geographic loan distribution was concentrated primarily in Lee County, Alabama, and surrounding areas. The loan portfolio segment is defined as the level at which an entity develops and documents a systematic method for determining its allowance for credit losses. As part of the Company’s quarterly assessment of the allowance, the loan portfolio included the following portfolio segments: commercial and industrial, construction and land development, commercial real estate, residential real estate, and consumer installment. Where appropriate, the Company’s loan portfolio segments are further disaggregated into classes. A class is generally determined based on the initial measurement attribute, risk characteristics of the loan, and an entity’s method for monitoring and determining credit risk. The following describes the risk characteristics relevant to each of the portfolio segments and classes. Commercial and industrial (“C&I”) — includes loans to finance business operations, equipment purchases, or other needs for small and medium-sized commercial customers. Also included in this category are loans to finance agricultural production. Generally, the primary source of repayment is the cash flow from business operations and activities of the borrower. Construction and land development (“C&D”) — includes both loans and credit lines for the purpose of purchasing, carrying, and developing land into commercial developments or residential subdivisions. Also included are loans and credit lines for construction of residential, multi-family, and commercial buildings. Generally, the primary source of repayment is dependent upon the sale or refinance of the real estate collateral. Commercial real estate (“CRE”) — includes loans in these classes: ● Owner occupied – includes loans secured by business facilities to finance business operations, equipment and owner-occupied facilities primarily for small and medium-sized commercial customers. Generally, the primary source of repayment is the cash flow from business operations and activities of the borrower, who owns the property. ● Hotel/motel – includes loans for hotels and motels. Generally, the primary source of repayment is dependent upon income generated from the hotel/motel securing the loan. The underwriting of these loans takes into consideration the occupancy and rental rates, as well as the financial health of the borrower. ● Multi-family – primarily includes loans to finance income-producing multi-family properties. These include loans for 5 or more unit residential properties and apartments leased to residents. Generally, the primary source of repayment is dependent upon income generated from the real estate collateral. The underwriting of these loans takes into consideration the occupancy and rental rates, as well as the financial health of the respective borrowers. ● Other – primarily includes loans to finance income-producing commercial properties other than hotels/motels and multi-family properties, and which are not owner occupied. Loans in this class include loans for neighborhood retail centers, medical and professional offices, single retail stores, industrial buildings, and warehouses leased to local and other businesses. Generally, the primary source of repayment is dependent upon income generated from the real estate collateral. The underwriting of these loans takes into consideration the occupancy and rental rates, as well as the financial health of the borrower. Residential real estate (“RRE”) — includes loans in these two classes: ● Consumer mortgage – primarily includes first or second lien mortgages and home equity lines of credit to consumers that are secured by a primary residence or second home. These loans are underwritten in accordance with the Bank’s general loan policies and procedures which require, among other things, proper documentation of each borrower’s financial condition, satisfactory credit history, and property value. ● Investment property – primarily includes loans to finance income-producing 1-4 family residential properties. Generally, the primary source of repayment is dependent upon income generated from leasing the property securing the loan. The underwriting of these loans takes into consideration the rental rates and property values, as well as the financial health of the borrowers. Consumer installment — includes loans to individuals, which may be secured by personal property or are unsecured. Loans include personal lines of credit, automobile loans, and other retail loans. These loans are underwritten in accordance with the Bank’s general loan policies and procedures which require, among other things, proper documentation of each borrower’s financial condition, satisfactory credit history, and, if applicable, property values. The following is a summary of current, accruing past due, and nonaccrual loans by portfolio segment and class as of June 30, 2025 and December 31, 2024. Accruing Accruing Total 30-89 Days Greater than Accruing Non- Total (Dollars in thousands) Current Past Due 90 days Loans Accrual Loans June 30, 2025: Commercial and industrial $ 59,742 31 — 59,773 — $ 59,773 Construction and land development 93,820 — — 93,820 — 93,820 Commercial real estate: Owner occupied 61,332 507 — 61,839 — 61,839 Hotel/motel 34,064 — — 34,064 — 34,064 Multi-family 42,807 — — 42,807 — 42,807 Other 144,039 — — 144,039 119 144,158 Total commercial real estate 282,242 507 — 282,749 119 282,868 Residential real estate: Consumer mortgage 59,144 — — 59,144 68 59,212 Investment property 57,691 141 — 57,832 115 57,947 Total residential real estate 116,835 141 — 116,976 183 117,159 Consumer installment 9,064 30 — 9,094 — 9,094 Total $ 561,703 709 — 562,412 302 $ 562,714 December 31, 2024: Commercial and industrial $ 63,163 12 — 63,175 99 $ 63,274 Construction and land development 82,089 — — 82,089 404 82,493 Commercial real estate: Owner occupied 55,346 — — 55,346 — 55,346 Hotel/motel 35,210 — — 35,210 — 35,210 Multi-family 43,556 — — 43,556 — 43,556 Other 155,880 — — 155,880 — 155,880 Total commercial real estate 289,992 — — 289,992 — 289,992 Residential real estate: Consumer mortgage 59,677 722 — 60,399 — 60,399 Investment property 58,179 49 — 58,228 — 58,228 Total residential real estate 117,856 771 — 118,627 — 118,627 Consumer installment 9,579 52 — 9,631 — 9,631 Total $ 562,679 835 — 563,514 503 $ 564,017 Credit Quality Indicators The credit quality of the loan portfolio is summarized no less frequently than quarterly using categories similar to the standard asset classification system used by the federal banking agencies. These categories are utilized to develop the associated allowance for credit losses using historical losses adjusted for qualitative and environmental factors and are defined as follows: ● Pass – loans which are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less the estimated cost to acquire and sell any underlying collateral. ● Special Mention – loans with potential weakness that may, if not reversed or corrected, weaken the credit or inadequately protect the Company’s position at some future date. These loans are not adversely classified and do not expose an institution to sufficient risk to warrant an adverse classification. ● Substandard Accruing – loans that exhibit a well-defined weakness which presently jeopardizes debt repayment, even though they are currently performing. These loans are characterized by the distinct possibility that the Company may incur a loss in the future if these weaknesses are not corrected. ● Nonaccrual – includes loans where management has determined that full payment of principal and interest is not expected. Substandard accrual and nonaccrual loans are often collectively referred to as “classified.” The following tables presents credit quality indicators for the loan portfolio segments and classes by year of origination as of June 30, 2025 and December 31, 2024. Year of Origination 2025 2024 2023 2022 2021 Prior to 2021 Revolving Loans Total Loans (Dollars in thousands) June 30, 2025: Commercial and industrial Pass $ 6,684 5,588 6,228 8,078 11,712 17,451 3,689 $ 59,430 Special mention 114 — 2 — — — — 116 Substandard 50 — 16 157 4 — — 227 Nonaccrual — — — — — — — — Total commercial and industrial 6,848 5,588 6,246 8,235 11,716 17,451 3,689 59,773 Current period gross charge-offs — — 99 4 — — — 103 Construction and land development Pass 12,638 42,484 19,949 16,723 810 918 298 93,820 Special mention — — — — — — — — Substandard — — — — — — — — Nonaccrual — — — — — — — — Total construction and land development 12,638 42,484 19,949 16,723 810 918 298 93,820 Current period gross charge-offs — — — — — — — — Commercial real estate: Owner occupied Pass 9,235 1,416 11,130 6,498 16,023 13,836 2,566 60,704 Special mention 628 — — — — — — 628 Substandard — 507 — — — — — 507 Nonaccrual — — — — — — — — Total owner occupied 9,863 1,923 11,130 6,498 16,023 13,836 2,566 61,839 Current period gross charge-offs — — — — — — — — Hotel/motel Pass — 447 6,313 9,208 3,014 14,827 255 34,064 Special mention — — — — — — — — Substandard — — — — — — — — Nonaccrual — — — — — — — — Total hotel/motel — 447 6,313 9,208 3,014 14,827 255 34,064 Current period gross charge-offs — — — — — — — — Year of Origination 2025 2024 2023 2022 2021 Prior to 2021 Revolving Loans Total Loans (Dollars in thousands) June 30, 2025: Multi-family Pass 101 3,587 8,391 16,797 1,814 8,304 3,813 42,807 Special mention — — — — — — — — Substandard — — — — — — — — Nonaccrual — — — — — — — — Total multi-family 101 3,587 8,391 16,797 1,814 8,304 3,813 42,807 Current period gross charge-offs — — — — — — — — Other Pass 3,065 35,012 17,638 23,751 22,435 30,208 11,930 144,039 Special mention — — — — — — — — Substandard — — — — — — — — Nonaccrual — — — — — 119 — 119 Total other 3,065 35,012 17,638 23,751 22,435 30,327 11,930 144,158 Current period gross charge-offs — — — — — — — — Residential real estate: Consumer mortgage Pass 2,154 5,238 16,673 17,786 2,595 12,068 1,365 57,879 Special mention — — — — — 206 — 206 Substandard 245 — — — — 814 — 1,059 Nonaccrual — — 68 — — — — 68 Total consumer mortgage 2,399 5,238 16,741 17,786 2,595 13,088 1,365 59,212 Current period gross charge-offs — — 4 — — 1 — 5 Investment property Pass 3,738 8,693 10,004 10,314 7,458 14,677 2,471 57,355 Special mention — — — — — — — — Substandard 379 — — 92 6 — — 477 Nonaccrual — — 38 — — 77 — 115 Total investment property 4,117 8,693 10,042 10,406 7,464 14,754 2,471 57,947 Current period gross charge-offs — — 2 — — — — 2 Consumer installment Pass 3,112 2,794 1,368 1,133 180 91 328 9,006 Special mention — 10 12 — — — — 22 Substandard 8 36 13 9 — — — 66 Nonaccrual — — — — — — — — Total consumer installment 3,120 2,840 1,393 1,142 180 91 328 9,094 Current period gross charge-offs — 9 — — — — — 9 Total loans Pass 40,727 105,259 97,694 110,288 66,041 112,380 26,715 559,104 Special mention 742 10 14 — — 206 — 972 Substandard 682 543 29 258 10 814 — 2,336 Nonaccrual — — 106 — — 196 — 302 Total loans $ 42,151 105,812 97,843 110,546 66,051 113,596 26,715 $ 562,714 Total current period gross charge-offs $ — 9 105 4 — 1 — 119 Year of Origination 2024 2023 2022 2021 2020 Prior to 2020 Revolving Loans Total Loans (Dollars in thousands) December 31, 2024: Commercial and industrial Pass $ 11,290 7,265 8,488 9,677 4,659 16,989 4,425 $ 62,793 Special mention 49 74 — — — — — 123 Substandard 50 21 181 7 — — — 259 Nonaccrual — 99 — — — — — 99 Total commercial and industrial 11,389 7,459 8,669 9,684 4,659 16,989 4,425 63,274 Current period gross charge-offs — — 9 — — — — 9 Construction and land development Pass 31,144 29,520 16,504 1,794 1,434 104 1,589 $ 82,089 Special mention — — — — — — — — Substandard — — — — — — — — Nonaccrual 404 — — — — — — 404 Total construction and land development 31,548 29,520 16,504 1,794 1,434 104 1,589 82,493 Current period gross charge-offs — — — — — — — — Commercial real estate: Owner occupied Pass 1,921 11,206 6,776 17,114 3,396 12,030 1,552 $ 53,995 Special mention — 249 — — 591 — — 840 Substandard 511 — — — — — — 511 Nonaccrual — — — — — — — — Total owner occupied 2,432 11,455 6,776 17,114 3,987 12,030 1,552 55,346 Current period gross charge-offs — — — — — — — — Hotel/motel Pass 480 6,480 5,303 3,079 1,299 14,437 4,132 35,210 Special mention — — — — — — — — Substandard — — — — — — — — Nonaccrual — — — — — — — — Total hotel/motel 480 6,480 5,303 3,079 1,299 14,437 4,132 35,210 Current period gross charge-offs — — — — — — — — Year of Origination 2024 2023 2022 2021 2020 Prior to 2020 Revolving Loans Total Loans (Dollars in thousands) December 31, 2024: Multi-family Pass 3,739 6,041 17,037 1,863 3,493 6,400 4,983 43,556 Special mention — — — — — — — — Substandard — — — — — — — — Nonaccrual — — — — — — — — Total multi-family 3,739 6,041 17,037 1,863 3,493 6,400 4,983 43,556 Current period gross charge-offs — — — — — — — — Other Pass 43,753 21,085 32,521 21,249 16,743 16,289 4,120 155,760 Special mention — — — — — — — — Substandard — — — — 120 — — 120 Nonaccrual — — — — — — — — Total other 43,753 21,085 32,521 21,249 16,863 16,289 4,120 155,880 Current period gross charge-offs — — — — — — — — Residential real estate: Consumer mortgage Pass 5,885 18,389 18,434 2,466 2,565 10,590 808 59,137 Special mention 243 — — — 2 486 — 731 Substandard — — — — — 531 — 531 Nonaccrual — — — — — — — — Total consumer mortgage 6,128 18,389 18,434 2,466 2,567 11,607 808 60,399 Current period gross charge-offs — — — — — 61 — 61 Investment property Pass 10,339 10,824 10,651 8,305 11,435 4,794 1,317 57,665 Special mention — — — — — — — — Substandard 278 40 93 9 143 — — 563 Nonaccrual — — — — — — — — Total investment property 10,617 10,864 10,744 8,314 11,578 4,794 1,317 58,228 Current period gross charge-offs — — — — — — — — Consumer installment Pass 5,015 2,057 1,911 296 90 113 67 9,549 Special mention — 9 — 9 — — — 18 Substandard 39 15 10 — — — — 64 Nonaccrual — — — — — — — — Total consumer installment 5,054 2,081 1,921 305 90 113 67 9,631 Current period gross charge-offs 25 42 42 1 — 4 — 114 Total loans Pass 113,566 112,867 117,625 65,843 45,114 81,746 22,993 559,754 Special mention 292 332 — 9 593 486 — 1,712 Substandard 878 76 284 16 263 531 — 2,048 Nonaccrual 404 99 — — — — — 503 Total loans $ 115,140 113,374 117,909 65,868 45,970 82,763 22,993 $ 564,017 Total current period gross charge-offs $ 25 42 51 1 — 65 — 184 Allowance for Credit Losses The allowance for credit losses is measured on a collective basis for pools of loans with similar risk characteristics, and for loans that do not share similar risk characteristics with the collectively evaluated pools, evaluations are performed on an individual basis. The composition of the provision for credit losses for the respective periods is presented below. Quarter ended June 30, Six months ended June 30, (Dollars in thousands) 2025 2024 2025 2024 Provision for credit losses: Loans $ 166 $ (64) $ 110 $ 221 Reserve for unfunded commitments (53) (59) (7) (10) Total provision for credit losses $ 113 $ (123) $ 103 $ 211 The following table details the changes in the allowance for credit losses for loans, by portfolio segment, for the respective periods. (Dollars in thousands) Commercial and industrial Construction and land development Commercial real estate Residential real estate Consumer installment Total Quarter ended June 30, 2025: Beginning balance $ 1,219 1,401 3,153 861 116 $ 6,750 Charge-offs (3) — — (6) (9) (18) Recoveries 1 — — 61 5 67 Net (charge-offs) recoveries (2) — — 55 (4) 49 Provision for credit losses (5) 212 (2) (50) 11 166 Ending balance $ 1,212 1,613 3,151 866 123 $ 6,965 Six months ended June 30, 2025: Beginning balance $ 1,244 1,059 3,842 588 138 $ 6,871 Charge-offs (103) — — (7) (9) (119) Recoveries 30 — — 63 10 103 Net (charge-offs) recoveries (73) — — 56 1 (16) Provision for credit losses 41 554 (691) 222 (16) 110 Ending balance $ 1,212 1,613 3,151 866 123 $ 6,965 Quarter ended June 30, 2024: Beginning balance $ 1,415 840 4,202 613 145 $ 7,215 Charge-offs (9) — — — (19) (28) Recoveries 8 — — 2 9 19 Net (charge-offs) recoveries (1) — — 2 (10) (9) Provision for credit losses (48) 102 (111) (12) 5 (64) Ending balance $ 1,366 942 4,091 603 140 $ 7,142 Six months ended June 30, 2024: Beginning balance $ 1,288 960 3,921 546 148 $ 6,863 Charge-offs (9) — — — (43) (52) Recoveries 74 — — 5 31 110 Net recoveries (charge-offs) 65 — — 5 (12) 58 Provision for credit losses 13 (18) 170 52 4 221 Ending balance $ 1,366 942 4,091 603 140 $ 7,142 The Company had no collateral dependent loans which were individually evaluated at June 30, 2025. The following table presents the amortized cost basis of collateral dependent loans, which were individually evaluated to determine expected credit losses at December 31, 2024. Business (Dollars in thousands) Real Estate Assets Total Loans December 31, 2024: Commercial and industrial $ — 99 $ 99 Construction and land development 404 — 404 Total $ 404 99 $ 503 The following table summarizes the Company’s nonaccrual loans by major categories for the respective periods. Nonaccrual Loans Nonaccrual Loans Total (Dollars in thousands) With No Allowance With An Allowance Nonaccrual Loans June 30, 2025 Commercial real estate $ — 119 $ 119 Residential real estate — 183 183 Total $ — 302 $ 302 December 31, 2024 Commercial and industrial $ — 99 $ 99 Construction and land development 404 — 404 Total $ 404 99 $ 503

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