Loans and Allowance for Credit Losses

3 Months Ended

Mar. 31, 2025

Receivables [Abstract]

Loans and Allowance for Credit Losses

Loans and Allowance for Credit Losses

Loans Held for Sale

Loans held for sale are comprised entirely of 1-4 family residential mortgage loans as of March 31, 2025 and December 31, 2024. The Company designates loans held for sale as either carried at fair value or the lower of cost or fair value at loan level at origination.

Loans Held for Investment

The following table presents amortized cost and unpaid principal balance of loans, categorized by the segments used in the Company's Current Expected Credit Losses (“CECL”) methodology to assess credit risk, for the periods indicated:

	March 31, 2025			December 31, 2024
(In Thousands)	Amortized Cost	Unpaid Principal	Difference	Amortized Cost	Unpaid Principal	Difference
Commercial & industrial loans	$491,945	$494,286	($2,341)	$437,922	$440,163	($2,241)
Commercial real estate:
Owner occupied properties	428,443	430,442	(1,999)	418,092	420,060	(1,968)
Non-owner occupied and multifamily properties	686,097	690,277	(4,180)	615,662	619,431	(3,769)
Residential real estate:
1-4 family residential properties secured by first liens	188,086	188,219	(133)	270,966	270,535	431
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	54,225	53,836	389	49,160	48,857	303
1-4 family residential construction loans	33,786	34,017	(231)	39,516	39,789	(273)
Other construction, land development and raw land loans	155,158	156,211	(1,053)	212,561	214,068	(1,507)
Obligations of states and political subdivisions in the US	30,941	30,939	2	29,471	29,468	3
Agricultural production, including commercial fishing	46,296	46,513	(217)	45,840	46,069	(229)
Consumer loans	7,508	7,424	84	7,638	7,562	76
Other loans	1,845	1,855	(10)	2,435	2,448	(13)
Total	2,124,330	2,134,019	(9,689)	2,129,263	2,138,450	(9,187)
Allowance for credit losses	(20,922)			(22,020)
Net loans	$2,103,408	$2,134,019	($9,689)	$2,107,243	$2,138,450	($9,187)

The difference between the amortized cost and unpaid principal balance is net deferred origination fees totaling $9.7 million at March 31, 2025 and $9.2 million at December 31, 2024.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $9.9 million and $8.4 million at March 31, 2025 and December 31, 2024, respectively, and is included in other assets in the Consolidated Balance Sheets.

Allowance for Credit Losses

The table below presents activity in the ACL related to loans held for investment for the periods indicated.

Three Months Ended March 31,	Beginning Balance	Credit Loss Expense (Benefit)	Charge-offs	Recoveries	Ending Balance
	(In Thousands)
2025
Commercial & industrial loans	$5,800	$1,550	($37)	$74	$7,387
Commercial real estate:
Owner occupied properties	2,944	(502)	—	—	2,442
Non-owner occupied and multifamily properties	3,967	(11)	—	—	3,956
Residential real estate:
1-4 family residential properties secured by first liens	4,364	(308)	—	—	4,056
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	775	(13)	—	7	769
1-4 family residential construction loans	230	(11)	—	—	219
Other construction, land development and raw land loans	3,589	(1,883)	—	—	1,706
Obligations of states and political subdivisions in the US	106	17	—	—	123
Agricultural production, including commercial fishing	169	16	—	2	187
Consumer loans	71	12	(13)	1	71
Other loans	5	1	—	—	6
Total	$22,020	($1,132)	($50)	$84	$20,922
2024
Commercial & industrial loans	$3,438	$890	($149)	$361	$5,800
Commercial real estate:
Owner occupied properties	2,867	77	—	—	2,944
Non-owner occupied and multifamily properties	3,294	673	—	—	3,967
Residential real estate:
1-4 family residential properties secured by first liens	3,470	894	—	—	4,364
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	551	202	—	22	775
1-4 family residential construction loans	191	39	—	—	230
Other construction, land development and raw land loans	3,127	462	—	—	3,589
Obligations of states and political subdivisions in the US	80	26	—	—	106
Agricultural production, including commercial fishing	168	20	(25)	6	169
Consumer loans	81	(9)	(15)	14	71
Other loans	3	2	—	—	5
Total	$17,270	$3,276	($189)	$403	$22,020

The following table shows gross charge-offs by year of loan origination for the periods indicated:

Three Months Ended March 31,
(In Thousands)	2025	2024	2023	2022	2021	Prior	Total
2025
Commercial & industrial loans	$—	$—	$—	$—	$37	$—	$37
Consumer loans	—	—	3	—	—	10	13
Total	$—	$—	$3	$—	$37	$10	$50

Credit Quality Information

As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management utilizes a loan risk grading system called the Asset Quality Rating (“AQR”) system to assign a risk classification to each of its loans. The risk classification is a dual rating system that contemplates both probability of default and risk of loss given default. Loans are graded on a scale of 1 to 10 and, loans graded 1 – 6 are considered “pass” grade loans. Loans graded 7 or higher are considered “classified” loans. A description of the general characteristics of the AQR risk classifications are as follows:

Pass grade loans – 1 through 6: The borrower demonstrates sufficient cash flow to fund debt service, including acceptable profit margins, cash flows, liquidity and other balance sheet ratios. Historic and projected performance indicates that the borrower is able to meet obligations under most economic circumstances. The borrower has competent management with an acceptable track record. The category does not include loans with undue or unwarranted credit risks that constitute identifiable weaknesses.

Classified loans:

Special Mention – 7: A “special mention” credit has weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset at some future date.

Substandard – 8: A “substandard” credit is inadequately protected by the current worth and paying capacity of the obligor or by the collateral pledged, if any. Assets so classified must 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 – 9: An asset classified “doubtful” has all the weaknesses inherent in one that is classified "substandard-8" with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable. The loan has substandard characteristics, and available information suggests that it is unlikely that the loan will be repaid in its entirety.

Loss – 10: An asset classified “loss” is considered uncollectible and of such little value that its continuance on the books is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this basically worthless asset, even though partial recovery may be affected in the future.

The following tables present the Company's portfolio of risk-rated loans by grade and by year of origination. Management considers the guidance in ASC 310-20 when determining whether a modification, extension, or renewal of loan constitutes a current period origination. Generally, current period renewals of credit are re-underwritten at the point of renewal and considered current period originations for purposes of the table below.

March 31, 2025	2025	2024	2023	2022	2021	Prior	Total
	(In Thousands)
Commercial & industrial loans
Pass	$40,464	$108,928	$72,264	$113,643	$36,159	$75,313	$446,771
Classified	792	119	6,120	16,724	14,160	7,259	45,174
Total commercial & industrial loans	$41,256	$109,047	$78,384	$130,367	$50,319	$82,572	$491,945
Commercial real estate:
Owner occupied properties
Pass	$9,058	$79,991	$48,041	$71,034	$59,637	$140,247	$408,008

Classified	—	—	—	3,743	—	16,692	20,435
Total commercial real estate owner occupied properties	$9,058	$79,991	$48,041	$74,777	$59,637	$156,939	$428,443
Non-owner occupied and multifamily properties
Pass	$15,628	$121,670	$74,433	$141,104	$88,876	$233,296	$675,007
Classified	—	—	—	1,162	29	9,899	11,090
Total commercial real estate non-owner occupied and multifamily properties	$15,628	$121,670	$74,433	$142,266	$88,905	$243,195	$686,097
Residential real estate:
1-4 family residential properties secured by first liens
Pass	$12,212	$108,703	$10,497	$41,789	$3,245	$10,752	$187,198
Classified	—	—	521	315	—	52	888
Total residential real estate 1-4 family residential properties secured by first liens	$12,212	$108,703	$11,018	$42,104	$3,245	$10,804	$188,086
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens
Pass	$4,815	$20,177	$12,985	$5,166	$2,669	$7,770	$53,582
Classified	—	—	373	—	—	270	643
Total residential real estate 1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	$4,815	$20,177	$13,358	$5,166	$2,669	$8,040	$54,225
1-4 family residential construction loans
Pass	$5,123	$18,661	$413	$2,353	$—	$7,236	$33,786
Classified	—	—	—	—	—	—	—
Total residential real estate 1-4 family residential construction loans	$5,123	$18,661	$413	$2,353	$—	$7,236	$33,786
Other construction, land development and raw land loans
Pass	$3,652	$58,947	$58,857	$14,180	$9,151	$8,794	$153,581
Classified	—	—	—	—	—	1,577	1,577
Total other construction, land development and raw land loans	$3,652	$58,947	$58,857	$14,180	$9,151	$10,371	$155,158
Obligations of states and political subdivisions in the US
Pass	$—	$1,699	$—	$29,241	$—	$1	$30,941
Classified	—	—	—	—	—	—	—
Total obligations of states and political subdivisions in the US	$—	$1,699	$—	$29,241	$—	$1	$30,941
Agricultural production, including commercial fishing
Pass	$150	$8,117	$9,258	$8,323	$15,850	$4,461	$46,159
Classified	—	—	—	—	137	—	137
Total agricultural production, including commercial fishing	$150	$8,117	$9,258	$8,323	$15,987	$4,461	$46,296
Consumer loans
Pass	$833	$2,690	$2,103	$672	$63	$1,097	$7,458
Classified	—	—	45	5	—	—	50
Total consumer loans	$833	$2,690	$2,148	$677	$63	$1,097	$7,508
Other loans
Pass	$—	$—	$192	$108	$282	$1,263	$1,845
Classified	—	—	—	—	—	—	—
Total other loans	$—	$—	$192	$108	$282	$1,263	$1,845
Total loans
Pass	$91,935	$529,583	$289,043	$427,613	$215,932	$490,230	$2,044,336
Classified	792	119	7,059	21,949	14,326	35,749	79,994
Total loans	$92,727	$529,702	$296,102	$449,562	$230,258	$525,979	$2,124,330
Total pass loans	$91,935	$529,583	$289,043	$427,613	$215,932	$490,230	$2,044,336
Government guarantees	(7,768)	(39,014)	(17,408)	(5,227)	(13,158)	(18,657)	(101,232)
Total pass loans, net of government guarantees	$84,167	$490,569	$271,635	$422,386	$202,774	$471,573	$1,943,104

Total classified loans	$792	$119	$7,059	$21,949	$14,326	$35,749	$79,994
Government guarantees	—	—	(1,604)	(17,134)	(12,752)	(12,954)	(44,444)
Total classified loans, net government guarantees	$792	$119	$5,455	$4,815	$1,574	$22,795	$35,550

December 31, 2024	2024	2023	2022	2021	2020	Prior	Total
	(In Thousands)
Commercial & industrial loans
Pass	$112,361	$70,871	$120,377	$37,628	$10,581	$40,288	$392,106
Classified	201	3,386	16,888	14,973	5,759	4,609	45,816
Total commercial & industrial loans	$112,562	$74,257	$137,265	$52,601	$16,340	$44,897	$437,922
Commercial real estate:
Owner occupied properties
Pass	$68,074	$48,655	$74,611	$64,234	$74,662	$74,987	$405,223
Classified	—	—	492	—	348	12,029	12,869
Total commercial real estate owner occupied properties	$68,074	$48,655	$75,103	$64,234	$75,010	$87,016	$418,092
Non-owner occupied and multifamily properties
Pass	$114,879	$70,806	$104,924	$73,008	$65,592	$175,349	$604,558
Classified	—	—	1,166	30	—	9,908	11,104
Total commercial real estate non-owner occupied and multifamily properties	$114,879	$70,806	$106,090	$73,038	$65,592	$185,257	$615,662
Residential real estate:
1-4 family residential properties secured by first liens
Pass	$103,919	$108,642	$43,562	$3,279	$4,228	$6,978	$270,608
Classified	—	205	—	—	—	153	358
Total residential real estate 1-4 family residential properties secured by first liens	$103,919	$108,847	$43,562	$3,279	$4,228	$7,131	$270,966
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens
Pass	$18,946	$13,553	$5,116	$2,695	$2,097	$6,083	$48,490
Classified	—	372	—	—	—	298	670
Total residential real estate 1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	$18,946	$13,925	$5,116	$2,695	$2,097	$6,381	$49,160
1-4 family residential construction loans
Pass	$25,458	$4,118	$2,353	$—	$—	$7,587	$39,516
Classified	—	—	—	—	—	—	—
Total residential real estate 1-4 family residential construction loans	$25,458	$4,118	$2,353	$—	$—	$7,587	$39,516
Other construction, land development and raw land loans
Pass	$63,430	$60,693	$51,809	$25,836	$1,236	$7,942	$210,946
Classified	—	—	—	—	—	1,615	1,615
Total other construction, land development and raw land loans	$63,430	$60,693	$51,809	$25,836	$1,236	$9,557	$212,561
Obligations of states and political subdivisions in the US
Pass	$—	$—	$29,471	$—	$—	$—	$29,471
Classified	—	—	—	—	—	—	—
Total obligations of states and political subdivisions in the US	$—	$—	$29,471	$—	$—	$—	$29,471
Agricultural production, including commercial fishing
Pass	$8,097	$8,776	$8,380	$15,847	$3,109	$1,631	$45,840
Classified	—	—	—	—	—	—	—
Total agricultural production, including commercial fishing	$8,097	$8,776	$8,380	$15,847	$3,109	$1,631	$45,840
Consumer loans
Pass	$3,346	$2,377	$717	$75	$252	$820	$7,587

Classified	—	45	5	—	—	1	51
Total consumer loans	$3,346	$2,422	$722	$75	$252	$821	$7,638
Other loans
Pass	$—	$345	$122	$285	$1,683	$—	$2,435
Classified	—	—	—	—	—	—	—
Total other loans	$—	$345	$122	$285	$1,683	$—	$2,435
Total loans
Pass	$518,510	$388,836	$441,442	$222,887	$163,440	$321,665	$2,056,780
Classified	201	4,008	18,551	15,003	6,107	28,613	72,483
Total loans	$518,711	$392,844	$459,993	$237,890	$169,547	$350,278	$2,129,263
Total pass loans	$518,510	$388,836	$441,442	$222,887	$163,440	$321,665	$2,056,780
Government guarantees	(35,244)	(12,421)	(7,727)	(13,785)	(1,591)	(17,276)	(88,044)
Total pass loans, net of government guarantees	$483,266	$376,415	$433,715	$209,102	$161,849	$304,389	$1,968,736
Total classified loans	$201	$4,008	$18,551	$15,003	$6,107	$28,613	$72,483
Government guarantees	—	(1,640)	(14,816)	(13,476)	(5,183)	(7,963)	(43,078)
Total classified loans, net government guarantees	$201	$2,368	$3,735	$1,527	$924	$20,650	$29,405

Past Due Loans: The following tables present an aging of contractually past due loans as of the periods presented:

(In Thousands)	30-59 Days Past Due	60-89 Days Past Due	Greater Than 90 Days Past Due	Total Past Due	Current	Total	Greater Than 90 Days Past Due Still Accruing
March 31, 2025
Commercial & industrial loans	$—	$80	$1,499	$1,579	$490,366	$491,945	$—
Commercial real estate:
Owner occupied properties	—	—	217	217	428,226	428,443	—
Non-owner occupied and multifamily properties	—	—	—	—	686,097	686,097	—
Residential real estate:
1-4 family residential properties secured by first liens	991	—	—	991	187,095	188,086	—
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	—	—	460	460	53,765	54,225	—
1-4 family residential construction loans	—	—	—	—	33,786	33,786	—
Other construction, land development and raw land loans	—	—	1,490	1,490	153,668	155,158	—
Obligations of states and political subdivisions in the US	—	—	—	—	30,941	30,941	—
Agricultural production, including commercial fishing	—	—	—	—	46,296	46,296	—
Consumer loans	—	—	—	—	7,508	7,508	—
Other loans	—	—	—	—	1,845	1,845	—
Total	$991	$80	$3,666	$4,737	$2,119,593	$2,124,330	$—
December 31, 2024
Commercial & industrial loans	$718	$—	$1,558	$2,276	$435,646	$437,922	$—
Commercial real estate:
Owner occupied properties	—	492	224	716	417,376	418,092	—
Non-owner occupied and multifamily properties	—	—	—	—	615,662	615,662	—
Residential real estate:
1-4 family residential properties secured by first liens	712	323	205	1,240	269,726	270,966	—
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	—	—	466	466	48,694	49,160	17
1-4 family residential construction loans	—	—	94	94	39,422	39,516	—
Other construction, land development and raw land loans	—	—	1,432	1,432	211,129	212,561	—
Obligations of states and political subdivisions in the US	—	—	—	—	29,471	29,471	—
Agricultural production, including commercial fishing	—	—	—	—	45,840	45,840	—
Consumer loans	—	—	—	—	7,638	7,638	—
Other loans	—	—	—	—	2,435	2,435	—
Total	$1,430	$815	$3,979	$6,224	$2,123,039	$2,129,263	$17

Nonaccrual loans: Nonaccrual loans net of government guarantees totaled $8.0 million and $7.5 million at March 31, 2025 and December 31, 2024, respectively. The following table presents loans on nonaccrual status and loans on nonaccrual status for the periods presented for which there was no related ACL. All loans with no ACL are individually evaluated for credit losses in the Company's CECL methodology.

	March 31, 2025		December 31, 2024
(In  Thousands)	Nonaccrual	Nonaccrual With No ACL	Nonaccrual	Nonaccrual With No ACL
Commercial & industrial loans	$5,600	$1,966	$4,983	$4,760
Commercial real estate:
Owner occupied properties	217	217	224	224
Residential real estate:
1-4 family residential properties secured by first liens	221	—	233	—
1-4 family residential properties secured by junior liens       and revolving secured by 1-4 family first liens	540	460	550	466
1-4 family residential construction loans	—	—	94	94
Other construction, land development and raw land loans	1,490	1,490	1,432	1,432
Total nonaccrual loans	8,068	4,133	7,516	6,976
Government guarantees on nonaccrual loans	(80)	(80)	—	—
Net nonaccrual loans	$7,988	$4,053	$7,516	$6,976

There was no interest on nonaccrual loans reversed through interest income during the three-month periods ending March 31, 2025 or March 31, 2024.

There was no interest earned on nonaccrual loans with a principal balance during the three-month periods ending March 31, 2025 and March 31, 2024. However, the Company recognized interest income of $42,000 and $202,000 in the three-month periods ending March 31, 2025 and 2024, respectively, related to interest collected on nonaccrual loans whose principal had been paid down to zero.

Loan Modifications: The Company modifies loans to borrowers experiencing financial difficulty as a normal part of our business. These modifications include providing term extensions/modifications, payment modifications, interest rate modifications, or, on rare occasions, principal forgiveness. When principal forgiveness is provided, the amount of forgiveness is charged-off against the ACL. The Company may provide multiple types of concessions on any one loan.

The following table shows the amortized cost basis of the loans that were both experiencing financial difficulty and modified during the periods indicated, by class and type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers experiencing financial difficulty as compared to the amortized cost basis of each class of financing receivable is also presented below:

	Three Months Ended March 31, 2025
	Payment Modification	Term and payment modifications	Total Modifications	Percentage of Class of Financing Receivable
(In Thousands)
Commercial real estate:
Owner occupied properties	$—	$3,252	$3,252	0.76	%
Total	$—	$3,252	$3,252	0.15	%

	Three Months Ended March 31, 2024
	Term Modification	Term and payment modifications	Total Modifications	Percentage of Class of Financing Receivable
(In Thousands)
Commercial & industrial loans	$5,396	$265	$5,661	1.43	%
Total	$5,396	$842	$5,661	0.31	%

The Company has no outstanding unfunded commitments to the borrowers included in the previous tables.

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty as of the dates indicated:

	Three Months Ended March 31, 2025
	Principal Forgiveness	Weighted-Average Interest Rate Reduction		Weighted-Average Term Extension (months)
(In Thousands)
Commercial real estate:
Owner occupied properties	$—	—	%	33

	Three Months Ended March 31, 2024
	Principal Forgiveness	Weighted-Average Interest Rate Reduction		Weighted-Average Term Extension (months)
(In Thousands)
Commercial & industrial loans	$—	8	%	7

The following table presents the amortized cost basis of loans to borrowers experiencing financial difficulty as of the dates indicated:

	March 31, 2025	December 31, 2024
(In Thousands)
Commercial & industrial loans	$4,318	$5,075
Commercial real estate:
Owner occupied properties	3,468	224
Residential real estate:
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	460	466
1-4 family residential construction loans	—	94
Other construction, land development and raw land loans	1,490	1,432
Total	$9,736	$7,291

:

The following table presents the amortized cost basis of loans that had a payment default during the period indicated and were modified in the twelve months before default to borrowers experiencing financial difficulty:

	Three Months Ended March 31, 2025
	Term modification
(In Thousands)
Residential real estate:
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	$—
1-4 family residential construction loans	—
Other construction, land development and raw land loans	—
Total	$—

	Three Months Ended March 31, 2024
	Term modification
(In Thousands)
Residential real estate:
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	$112
1-4 family residential construction loans	109
Other construction, land development and raw land loans	968
Total	$1,189

The Company monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the payment performance of loans that have been modified in the last twelve months as of the date indicated:

	March 31, 2025
	60-89 Days Past Due	Greater Than 89 Days Past Due	Total Past Due	Current	Total
(In Thousands)
Commercial & industrial loans	$—	$—	$—	$4,318	$4,318
Commercial real estate:
Owner occupied properties	—	217	217	3,251	3,468
Residential real estate:
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	—	460	460	—	460
Other construction, land development and raw land loans	—	1,490	1,490	—	1,490
Total	$—	$2,167	$2,167	$7,569	$9,736

	March 31, 2024
	30-59 Days Past Due	Greater Than 89 Days Past Due	Total Past Due	Current	Total
(In Thousands)
Commercial & industrial loans	$—	$—	$—	$7,633	$7,633
Commercial real estate:
Owner occupied properties	—	—	—	253	253
Residential real estate:
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	112	—	112	—	112
1-4 family residential construction loans	109	—	109	—	109
Other construction, land development and raw land loans	968	—	968	572	1,540
Total	$—	$—	$1,189	$8,458	$9,647

Upon the Company's determination that a modified loan (or a 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 ACL is adjusted by the same amount.