Note 4 - Loans and Other Real Estate Owned ("OREO")

9 Months Ended

Sep. 30, 2025

Notes to Financial Statements

Financing Receivables [Text Block]

4.         Loans and Other Real Estate Owned ("OREO")

Major categories of loans are summarized as follows as of  September 30, 2025 and  December 31, 2024 (in thousands):

	2025			2024
Commercial	$	161,695		$	87,990
Commercial real estate		341,595			212,595
Residential mortgage		354,070			121,345
Home equity		31,224			7,186
Consumer, other		4,442			1,526
Consumer, automobile		8,598			6,516
		901,624			437,158
Less: net deferred loan fees		(1,014	)		(819	)
Total loans net of deferred loan fees		900,610			436,339
Less: allowance for credit losses		(9,512	)		(4,379	)
Net Loans	$	891,098		$	431,960

The Company has elected to exclude accrued interest from the amortized cost basis in its determination of the allowance for credit losses for loans, as well as elected the policy to write-off accrued interest receivable directly through the reversal of interest income. Accrued interest receivable totaled $2,444,000 and $1,179,000 at  September 30, 2025 and December 31, 2024, respectively, and is included in “Accrued Interest Receivable” on the Company’s Consolidated Balance Sheets.

An initial allowance for credit losses on non-PCD loans of $4.0 million was recorded through the provision for credit losses within the Consolidated Statements of Income. At the date of acquisition, of the $446.4 million of loans acquired from NNB, $53.7 million, or 12.0%, of NNB’s loan portfolio, was accounted for as PCD loans.

The following table provides details related to the fair value of acquired PCD loans:

(Dollars in Thousands)	Par Value		Purchase (Premium) Discount			Allowance		Purchase Price
Commercial	$	18,083	$	(891	)	$	423	$	17,615
Commercial Real Estate		14,180		(860	)		114		13,434
Residential Mortgage		20,073		(437	)		178		19,814
Home Equity		1,077		48			7		1,132
Consumer - Other		263		(17	)		3		249
Consumer - Auto		-		-			-		-
Total	$	53,676	$	(2,157	)	$	725	$	52,244

The following table provides details related to the fair value of acquired Non-PCD loans:

(Dollars in Thousands)	Par Value		Purchase (Premium) Discount			Purchase Price
Commercial	$	67,002	$	(4,645	)	$	62,357
Commercial Real Estate		82,855		(4,944	)		77,911
Residential Mortgage		209,109		(7,169	)		201,940
Home Equity		28,180		(971	)		27,209
Consumer - Other		5,599		(141	)		5,458
Consumer - Auto		-		-			-
Total	$	392,745	$	(17,870	)	$	374,875

Other Real Estate Owned

Foreclosed assets held for sale consist of real estate acquired in settlement of foreclosed loans and is initially recorded at fair value less estimated costs to sell at the time of transfer from loans to foreclosed, establishing a new cost basis. Subsequent to the transfer, foreclosed assets are carried at the lower of the adjusted cost or fair value less costs to sell. Additional write-downs are charged against operating expenses. Costs related to the acquisition and holding of foreclosed assets are charged to operations when incurred. The fair value of real estate acquired through foreclosure is generally determined by reference to an outside appraisal. The Company did not hold any foreclosed assets as of  September 30, 2025 and  December 31, 2024.  At  September 30, 2025 there were two residential loans and two commercial loans totaling $457,000 in the process of foreclosure. There was one residential loan in the amount of $75,000 in the process of foreclosure as of December 31, 2024.  

Mortgage Servicing

The Company retains the servicing rights on certain mortgage loans sold to the FHLB and Fannie Mae and receives mortgage banking fee income based upon the principal balance outstanding. The mortgage servicing rights recorded as an asset are not material. Total loans serviced for the FHLB and Fannie Mae amounted to $157,785,000 and $54,863,000 at  September 30, 2025 and December 31, 2024, respectively. These mortgage loans sold and serviced by the Company are not reflected in the Company’s Consolidated Balance Sheets.