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Allowance for Credit Losses on Loans and Off-Balance Sheet Credit Exposures
 6 Months Ended
Jun. 30, 2025
Credit Loss [Abstract]  
Allowance for Credit Losses on Loans and Off-Balance Sheet Credit Exposures Allowance for Credit Losses on Loans and Off-Balance Sheet Credit Exposures
The level of the ACL on loans represents management's estimate of expected credit losses over the expected life of the loans at the balance sheet date. For all loan segments, loan losses are charged against the ACL on loans when management believes the loan balance is uncollectible or in accordance with federal guidelines. Subsequent recoveries, if any, are credited to the ACL on loans.
The ACL on loans is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans. The ACL on loans is comprised of reserves measured on a collective (pool) basis based on a lifetime loss-rate model when similar risk characteristics exist. Loans that do not share risk characteristics are evaluated on an individual basis, generally larger non-accruing commercial loans.
The Company uses the DCF method to estimate expected credit losses for all loan pools. For each of the loan segments, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, time to recovery, and loss rates. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on historical benchmark data.
The Company uses regression analysis of historical internal and peer data to determine suitable loss drivers to utilize when modeling lifetime loss rates. This analysis also determines how expected loss rates will react to forecasted levels of the loss drivers. For all loan pools utilizing the DCF method, management utilizes and forecasts national unemployment as a loss driver.
For all DCF models, management has determined that four quarters represents a reasonable and supportable forecast period and reverts back to a historical loss rate over four quarters on a straight-line basis. Management leverages economic projections from a reputable and independent third party to inform its loss driver forecasts over the four-quarter forecast period.
The combination of adjustments for credit expectations (default and loss) and timing expectations (prepayment, curtailment, and time to recovery) produces an expected cash flow stream at the instrument level that represents the sum of expected losses to determine the estimated ACL on loans.
The ACL on loans evaluation also considers various qualitative factors, including changes in policy and/or underwriting standards, actual or expected changes in economic trends and conditions, changes in the nature and volume of the portfolio, changes in credit and lending staff/administration, problem loan trends, credit risk concentrations, loan review results, changes in the value of underlying collateral for loans, and changes in the regulatory and business environment.
Certain loans are individually evaluated for estimated credit losses, including those greater than $500 thousand that are classified as substandard or doubtful and are on nonaccrual or that have other unique characteristics differing from the segment. Specific reserves are established when appropriate for such loans based on the present value of expected future cash flows of the loan or the estimated realizable value of the collateral, if any.
Risk characteristics relevant to each portfolio segment are as follows:
•Residential real estate - Loans in this segment are collateralized by owner-occupied 1-4 family residential real estate, second and vacation homes, 1-4 family investment properties, home equity and second mortgage loans. Repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, could have an effect on the credit quality of this segment.
•Construction real estate - Loans in this segment include residential and commercial construction properties, commercial real estate development loans (while in the construction phase of the projects), land and land development loans. Repayment is dependent on the credit quality of the individual borrower and/or the underlying cash flows generated by the properties being constructed. The overall health of the economy, including unemployment rates, housing prices, vacancy rates and material costs, could have an effect on the credit quality of this segment.
•Commercial real estate - Loans in this segment are primarily properties occupied by businesses or income-producing properties. The underlying cash flows generated by the properties may be adversely impacted by a downturn in the economy as evidenced by a general slowdown in business or increased vacancy rates which, in turn, could have an effect on the credit quality of this segment. Management requests business financial statements at least annually and monitors the cash flows of these loans.
•Commercial - Loans in this segment are made to businesses and are generally secured by non-real estate assets of the business. Repayment is expected from the cash flows of the business. A weakened economy, and resultant decreased consumer or business spending, could have an effect on the credit quality of this segment.
•Consumer - Loans in this segment are made to individuals for personal expenditures, such as automobile purchases, and include unsecured loans. Repayment is primarily dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment, could have an effect on the credit quality of this segment.
•Municipal - Loans in this segment are made to municipalities located within the Company's service area. Repayment is primarily dependent on taxes or other funds collected by the municipalities. Management considers there to be minimal risk surrounding the credit quality of this segment.
Changes in the ACL on loans, by loan segment, for the three and six months ended June 30, 2025 and 2024 were as follows:
For The Three Months Ended June 30, 2025Balance,
March 31, 2025		Charge-OffsRecoveriesCredit Loss Expense (Benefit)Balance,
June 30, 2025
(Dollars in thousands)
Non-revolving residential real estate$2,866 $— $4 $35 $2,905 
Revolving residential real estate200 — — 30 230 
Residential real estate3,066 — 4 65 3,135 
Commercial construction real estate822 — — 197 1,019 
Residential construction real estate196 — — 23 219 
Construction real estate1,018 — — 220 1,238 
Non-residential commercial real estate3,255 — — (55)3,200 
Multi-family residential real estate258 — — — 258 
Commercial real estate3,513 — — (55)3,458 
Commercial427 — — 12 439 
Consumer7 — 1 (2)6 
Municipal79 — — (48)31 
Total$8,110 $— $5 $192 $8,307 
For The Six Months Ended June 30, 2025Balance,
December 31, 2024		Charge-OffsRecoveriesCredit Loss Expense (Benefit)Balance,
June 30, 2025
(Dollars in thousands)
Non-revolving residential real estate$3,212 $— $9 $(316)$2,905 
Revolving residential real estate280 — — (50)230 
Residential real estate3,492 — 9 (366)3,135 
Commercial construction real estate651 — — 368 1,019 
Residential construction real estate102 — — 117 219 
Construction real estate753 — — 485 1,238 
Non-residential commercial real estate2,766 — — 434 3,200 
Multi-family residential real estate212 — — 46 258 
Commercial real estate2,978 — — 480 3,458 
Commercial377 — — 62 439 
Consumer6 (4)1 3 6 
Municipal74 — — (43)31 
Total$7,680 $(4)$10 $621 $8,307 
For The Three Months Ended June 30, 2024Balance,
March 31, 2024		Charge-OffsRecoveriesCredit Loss Expense (Benefit)Balance,
June 30, 2024
(Dollars in thousands)
Non-revolving residential real estate$2,845 $— $10 $112 $2,967 
Revolving residential real estate247 — — 26 273 
Residential real estate3,092 — 10 138 3,240 
Commercial construction real estate420 — — 124 544 
Residential construction real estate93 — — (5)88 
Construction real estate513 — — 119 632 
Non-residential commercial real estate2,454 — — 15 2,469 
Multi-family residential real estate208 — — (1)207 
Commercial real estate2,662 — — 14 2,676 
Commercial307 — 1 4 312 
Consumer6 (1)— 2 7 
Municipal65 — — (39)26 
Total$6,645 $(1)$11 $238 $6,893 

For The Six Months Ended June 30, 2024Balance,
December 31, 2023		Charge-OffsRecoveriesCredit Loss Expense (Benefit)Balance,
June 30, 2024
(Dollars in thousands)
Non-revolving residential real estate$2,361 $— $11 $595 $2,967 
Revolving residential real estate159 — — 114 273 
Residential real estate2,520 — 11 709 3,240 
Commercial construction real estate1,035 — — (491)544 
Residential construction real estate163 — — (75)88 
Construction real estate1,198 — — (566)632 
Non-residential commercial real estate2,182 — — 287 2,469 
Multi-family residential real estate244 — — (37)207 
Commercial real estate2,426 — — 250 2,676 
Commercial352 — 1 (41)312 
Consumer5 (1)— 3 7 
Municipal65 — — (39)26 
Total$6,566 $(1)$12 $316 $6,893 
The Company's ACL on off-balance sheet credit exposures is recognized as a liability within Accrued interest and other liabilities on the consolidated balance sheets, with adjustments to the ACL recognized in Credit loss expense (benefit) in the consolidated statements of income. The activity in the ACL on off-balance sheet credit exposures for the three and six months ended June 30, 2025 and 2024 was as follows:
For The Three Months Ended June 30,For the Six Months Ended June 30,
2025202420252024
ACL on Off-Balance Sheet Credit Exposures(Dollars in thousands)
Balance at beginning of period$877 $925 $1,071 $1,233 
Credit loss expense (benefit)29 150 (165)(158)
Balance at end of period$906 $1,075 $906 $1,075 

Risk and collateral ratings are assigned to loans and are subject to ongoing monitoring by lending and credit personnel, with such ratings updated annually or more frequently if warranted. The following is an overview of the Company's loan rating system:
1-3 Rating - Pass
Risk-rating grades "1" through "3" comprise those loans ranging from those with lower than average credit risk, defined as borrowers with high liquidity, excellent financial condition, strong management, favorable industry trends or loans secured by highly liquid assets, through those with marginal credit risk, defined as borrowers that, while creditworthy, exhibit some characteristics requiring special attention by the account officer.
4-4.5 Rating - Satisfactory/Monitor
Borrowers exhibit potential credit weaknesses or downward trends warranting management's attention. While potentially weak, these borrowers are currently marginally acceptable; no loss of principal or interest is envisioned. When warranted, these credits may be monitored on the watch list.
5-7 Rating - Substandard
Borrowers exhibit well defined weaknesses that jeopardize the orderly liquidation of debt. The loan may be inadequately protected by the net worth and paying capacity of the obligor and/or the underlying collateral is inadequate.
The following tables summarize the Company's loans by year of origination and by loan ratings applied by management to the Company's loans by segment as of June 30, 2025 and December 31, 2024:
June 30, 202520252024202320222021PriorRevolvingTotal
Residential Real Estate(Dollars in thousands)
Pass$17,947 $78,367 $63,915 $94,702 $76,343 $74,821 $— $406,095 
Satisfactory/Monitor2,906 5,711 6,122 11,087 4,112 7,497 — 37,435 
Substandard— 25 — 644 — 32 — 701 
Non-revolving residential real estate20,853 84,103 70,037 106,433 80,455 82,350 — 444,231 
Pass— — — — — — 23,805 23,805 
Satisfactory/Monitor— — — — — — 1,613 1,613 
Substandard— — — — — — 37 37 
Revolving residential real estate— — — — — — 25,455 25,455 
Construction Real Estate
Pass5,162 8,882 1,315 1,816 1,192 1,028 — 19,395 
Satisfactory/Monitor2,803 20,559 1,262 — 757 125 — 25,506 
Substandard— — 12,480 — — — — 12,480 
Commercial construction real estate7,965 29,441 15,057 1,816 1,949 1,153 — 57,381 
Pass11,366 35,671 5,131 971 — — — 53,139 
Satisfactory/Monitor1,998 2,341 872 200 2,053 1,590 — 9,054 
Substandard— — — — — — — — 
Residential construction real estate13,364 38,012 6,003 1,171 2,053 1,590 — 62,193 
Commercial Real Estate
Pass4,042 3,693 10,112 46,154 28,584 77,219 7,681 177,485 
Satisfactory/Monitor2,245 54,119 16,045 19,264 16,210 24,864 14,870 147,617 
Substandard— — — — — 4,312 — 4,312 
Non-residential commercial real estate6,287 57,812 26,157 65,418 44,794 106,395 22,551 329,414 
Pass— 1,042 275 4,274 9,472 41,026 — 56,089 
Satisfactory/Monitor1,542 1,204 5,590 14,734 10,492 16,215 — 49,777 
Substandard— — — — — 247 — 247 
Multi-family residential real estate1,542 2,246 5,865 19,008 19,964 57,488 — 106,113 
Pass972 2,562 2,427 2,526 1,322 7,308 4,817 21,934 
Satisfactory/Monitor627 1,811 1,704 1,947 1,742 2,426 1,181 11,438 
Substandard— 43 — — — 218 483 744 
Commercial1,599 4,416 4,131 4,473 3,064 9,952 6,481 34,116 
Pass879 678 594 58 20 212 23 2,464 
Satisfactory/Monitor4 — — — — — — 4 
Substandard— — — — — — — — 
Consumer883 678 594 58 20 212 23 2,468 
Pass7,107 18,962 10,466 534 383 3,943 — 41,395 
Satisfactory/Monitor— — — — — — — — 
Substandard— — — — — — — — 
Municipal7,107 18,962 10,466 534 383 3,943 — 41,395 
Total Loans$59,600 $235,670 $138,310 $198,911 $152,682 $263,083 $54,510 $1,102,766 
December 31, 202420242023202220212020PriorRevolvingTotal
Residential Real Estate(Dollars in thousands)
Pass$83,371 $70,515 $100,168 $79,234 $27,326 $51,661 $— $412,275 
Satisfactory/Monitor5,381 5,065 10,744 3,642 2,450 5,627 — 32,909 
Substandard— — — — 158 83 — 241 
Non-revolving residential real estate88,752 75,580 110,912 82,876 29,934 57,371 — 445,425 
Pass— — — — — — 20,516 20,516 
Satisfactory/Monitor— — — — — — 1,344 1,344 
Substandard— — — — — — 24 24 
Revolving residential real estate— — — — — — 21,884 21,884 
Construction Real Estate
Pass8,968 2,216 4,514 1,460 559 714 — 18,431 
Satisfactory/Monitor13,524 15,276 1,760 5,800 53 141 — 36,554 
Substandard— — — — — — — — 
Commercial construction real estate22,492 17,492 6,274 7,260 612 855 — 54,985 
Pass34,189 8,725 960 — — — — 43,874 
Satisfactory/Monitor2,199 1,547 136 2,307 1,139 — — 7,328 
Substandard— — — — — — — — 
Residential construction real estate36,388 10,272 1,096 2,307 1,139 — — 51,202 
Commercial Real Estate
Pass3,427 10,481 49,645 31,969 17,227 64,073 5,431 182,253 
Satisfactory/Monitor48,068 17,365 15,874 13,967 5,297 27,610 14,954 143,135 
Substandard— — — — 1,606 2,969 47 4,622 
Non-residential commercial real estate51,495 27,846 65,519 45,936 24,130 94,652 20,432 330,010 
Pass1,720 283 4,329 10,115 1,853 31,787 — 50,087 
Satisfactory/Monitor563 2,484 14,980 10,291 5,535 20,132 — 53,985 
Substandard— — — — — 256 — 256 
Multi-family residential real estate2,283 2,767 19,309 20,406 7,388 52,175 — 104,328 
Pass3,224 2,583 4,417 1,517 370 7,492 3,483 23,086 
Satisfactory/Monitor1,958 2,438 899 1,977 203 2,595 1,295 11,365 
Substandard— — — — — — 724 724 
Commercial5,182 5,021 5,316 3,494 573 10,087 5,502 35,175 
Pass1,253 777 105 53 66 188 24 2,466 
Satisfactory/Monitor57 — — — — — — 57 
Substandard— — — — — — — — 
Consumer1,310 777 105 53 66 188 24 2,523 
Pass93,280 10,482 1,363 606 1,272 3,201 — 110,204 
Satisfactory/Monitor— — — — — — — — 
Substandard— — — — — — — — 
Municipal93,280 10,482 1,363 606 1,272 3,201 — 110,204 
Total Loans$301,182 $150,237 $209,894 $162,938 $65,114 $218,529 $47,842 $1,155,736 

There were no gross charge-offs for the three months ended June 30, 2025. Gross charge-offs for the six months ended June 30, 2025 consisted of two consumer loans totaling $4 thousand that were originated in 2023. Gross charge-offs for the three and six months ended June 30, 2024 consisted of one $1 thousand consumer loan that was originated in 2021.
A summary of current and past due loans as of June 30, 2025 and December 31, 2024 follows:
June 30, 202530-59 Days60-89 Days90 Days and OverTotal Past DueCurrentTotal
(Dollars in thousands)
Residential real estate
Non-revolving residential real estate$— $996 $57 $1,053 $443,178 $444,231 
Revolving residential real estate— — 15 15 25,440 25,455 
Construction real estate
Commercial construction real estate— — — — 57,381 57,381 
Residential construction real estate— — — — 62,193 62,193 
Commercial real estate
Non-residential commercial real estate255 7 — 262 329,152 329,414 
Multi-family residential real estate— — — — 106,113 106,113 
Commercial44 43 — 87 34,029 34,116 
Consumer— — — — 2,468 2,468 
Municipal— — — — 41,395 41,395 
Total$299 $1,046 $72 $1,417 $1,101,349 $1,102,766 

December 31, 202430-59 Days60-89 Days90 Days and OverTotal Past DueCurrentTotal
(Dollars in thousands)
Residential real estate
Non-revolving residential real estate$1,560 $1,158 $241 $2,959 $442,466 $445,425 
Revolving residential real estate— — — — 21,884 21,884 
Construction real estate
Commercial construction real estate— — — — 54,985 54,985 
Residential construction real estate— — — — 51,202 51,202 
Commercial real estate
Non-residential commercial real estate355 46 — 401 329,609 330,010 
Multi-family residential real estate— — — — 104,328 104,328 
Commercial45 — — 45 35,130 35,175 
Consumer— 4 — 4 2,519 2,523 
Municipal— — — — 110,204 110,204 
Total$1,960 $1,208 $241 $3,409 $1,152,327 $1,155,736 
A summary of nonaccrual loans as of June 30, 2025 and December 31, 2024 follows:
June 30, 2025NonaccrualNonaccrual With No Allowance for Credit Losses90 Days and Over and Accruing
Residential real estate(Dollars in thousands)
Non-revolving residential real estate$643 $— $57 
Revolving residential real estate— — 15 
Construction real estate
Commercial construction real estate12,480 — — 
Commercial real estate
Non-residential commercial real estate1,540 1,540 — 
Commercial526 — — 
Total$15,189 $1,540 $72 
December 31, 2024NonaccrualNonaccrual With No Allowance for Credit Losses90 Days and Over and Accruing
Residential real estate(Dollars in thousands)
Non-revolving residential real estate$— $— $241 
Commercial real estate
Non-residential commercial real estate1,652 1,652 — 
Total$1,652 $1,652 $241 
There were no loans in process of foreclosure at June 30, 2025 and one residential real estate loan totaling $8 thousand in process of foreclosure at December 31, 2024. Aggregate interest on nonaccrual loans not recognized was $645 thousand as of June 30, 2025 and $235 thousand as of December 31, 2024.
Loans that do not share risk characteristics are evaluated on an individual basis. Loans that are individually evaluated and collateral dependent represent loans that the Company has determined foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the sale of the collateral. For these loans, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan at the measurement date.
The following table presents collateral dependent loans to borrowers experiencing financial difficulty by loan class and collateral type as of the balance sheet dates:
June 30, 2025December 31, 2024
(Dollars in thousands)
Commercial construction real estate$12,480 $— 
Non-residential commercial real estate4,134 4,246 
Commercial526 500 
Total$17,140 $4,746 

Collateral dependent loans are loans for which the repayment is expected to be provided substantially by the underlying collateral and there are no other available and reliable sources of repayment.

Occasionally, the Company modifies loans to borrowers experiencing financial difficulty by providing interest rate reductions, term extensions, payment deferrals or principal forgiveness. When principal forgiveness is provided, the amount of forgiveness is charged off against the ACL on loans. The following tables summarize loan modifications to borrowers experiencing financial difficulty by loan class, type of modification and the financial effect of the modifications as of and for the three and six months ended June 30, 2025 and 2024.
Payment Delay
Three Months Ended
June 30, 2025		Six Months Ended
June 30, 2025
Amortized Cost Basis% of Loan ClassAmortized Cost Basis% of Loan ClassFinancial Effect
(Dollars in thousands)
Commercial construction real estate$12,480 21.75 %$12,480 21.75 %
Modification extended loan draw period 6 months, extended interest only payments by 12 months and extended maturity date by 18 months.
Payment Delay
Three Months Ended June 30, 2024Six Months Ended
June 30, 2024
Amortized Cost Basis% of Loan ClassAmortized Cost Basis% of Loan ClassFinancial Effect
(Dollars in thousands)
Non-revolving residential real estate$18 — %$18 — %
Modification deferred 3 months of principal and interest payments.
Non-residential commercial real estate266 0.09 %266 0.09 %
Modification deferred 3 months of principal and interest payments.
Commercial48 0.12 %48 0.12 %
Modification deferred 3 months of principal and interest payments.

The following tables present the performance of loans as of June 30, 2025 and December 31, 2024 that had been modified in the previous twelve months:
June 30, 2025CurrentPast Due
30-89 Days		Past Due 90 Days and Over
(Dollars in thousands)
Commercial construction real estate$12,480 $— $— 
Total$12,480 $— $— 

December 31, 2024CurrentPast Due
30-89 Days		Past Due 90 Days and Over
(Dollars in thousands)
Non-revolving residential real estate$14 $— $— 
Non-residential commercial real estate2,851 — — 
Commercial— 45 — 
Total$2,865 $45 $— 

There were no loans to borrowers experiencing financial difficulty that were modified within the previous twelve months that had subsequently defaulted during the three and six months ended June 30, 2025 and 2024. Loans are considered defaulted at 90 days past due.

At June 30, 2025 and December 31, 2024, the Company was not committed to lend any additional funds to borrowers experiencing financial difficulty for which the Company modified the terms of the loans in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, or a term extension.