Note 5 - Allowance for Credit Losses on Loans and Nonperforming Assets

12 Months Ended

Dec. 31, 2024

Note 5: Allowance for Credit Losses on Loans and Nonperforming Assets

Please refer to Note 1: Summary of Significant Accounting Policies for information on evaluation of collectively evaluated loans and individually evaluated loans and associated reserves, and policies regarding nonaccruals, past due status and charge-offs.

A detailed analysis showing the allowance roll-forward by portfolio segment for the periods indicated follows:


	Activity in the ACLL for the Year Ended December 31, 2024
	Real Estate Construction			Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate			Public Sector and IDA		Consumer Non Real Estate			Unallocated			Total
Balance, December 31, 2023	$	408		$	3,162	$	3,576	$	682		$	333	$	583		$	350		$	9,094
Charge-offs		-			-		-		(166	)		-		(353	)		-			(519	)
Recoveries		-			-		53		79			-		138			-			270
Provision for (recovery of) credit losses		(70	)		667		615		56			3		271			(300	)		1,242
Merger adjustment(1)		10			97		55		4			-		9			-			175
Balance, December 31, 2024	$	348		$	3,926	$	4,299	$	655		$	336	$	648		$	50		$	10,262

(1) Adjustment for PCD acquired loans.


	Activity in the ACLL for the Year Ended December 31, 2023
	Real Estate Construction			Consumer Real Estate			Commercial Real Estate			Commercial Non Real Estate			Public Sector and IDA			Consumer Non Real Estate			Unallocated		Total
Balance, December 31, 2022	$	450		$	2,199		$	3,642		$	930		$	319		$	506		$	179	$	8,225
Adoption of ASU 2016-13		(21	)		1,261			700			216			(15	)		72			129		2,342
Charge-offs		-			(17	)		-			(214	)		-			(247	)		-		(478	)
Recoveries		-			103			45			6			-			129			-		283
(Recovery of) provision for credit losses		(21	)		(384	)		(811	)		(256	)		29			123			42		(1,278	)
Balance, December 31, 2023	$	408		$	3,162		$	3,576		$	682		$	333		$	583		$	350	$	9,094

A detailed analysis showing the allowance and loan portfolio by segment and evaluation method as of the dates indicated follows:


	ACLL by Segment and Evaluation Method
December 31, 2024	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Unallocated		Total
Individually evaluated	$	–	$	31	$	49	$	–	$	–	$	–	$	–	$	80
Collectively evaluated		348		3,895		4,250		655		336		648		50		10,182
Total	$	348	$	3,926	$	4,299	$	655	$	336	$	648	$	50	$	10,262


	Loans by Segment and Evaluation Method
December 31, 2024	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Total
Individually evaluated	$	–	$	497	$	10,024	$	–	$	–	$	–	$	10,521
Collectively evaluated		50,798		307,358		468,054		51,844		57,171		42,867		978,092
Total	$	50,798	$	307,855	$	478,078	$	51,844	$	57,171	$	42,867	$	988,613


	ACLL by Segment and Evaluation Method
December 31, 2023	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Unallocated		Total
Individually evaluated	$	-	$	74	$	367	$	126	$	-	$	5	$	-	$	572
Collectively evaluated		408		3,088		3,209		556		333		578		350		8,522
Total	$	408	$	3,162	$	3,576	$	682	$	333	$	583	$	350	$	9,094


	Loans by Segment and Evaluation Method
December 31, 2023	Real Estate Construction		Consumer Real Estate		Commercial Real Estate		Commercial Non Real Estate		Public Sector and IDA		Consumer Non Real Estate		Total
Individually evaluated	$	286	$	1,183	$	8,805	$	227	$	-	$	43	$	10,544
Collectively evaluated		55,093		240,381		410,325		41,328		60,551		38,953		846,631
Total	$	55,379	$	241,564	$	419,130	$	41,555	$	60,551	$	38,996	$	857,175

A summary of ratios for the allowance for credit losses, as of the dates indicated, follows:


	December 31,
	2024			2023
Ratio of ACLL to the end of period loans, net of deferred fees and costs		1.04	%		1.06	%
Ratio of net charge-offs to average loans, net of deferred fees and costs		0.03	%		0.02	%

The following table presents nonaccrual loans, by class, as of the dates indicated:


	December 31, 2024						December 31, 2023
	With No Allowance		With an Allowance		Total		With No Allowance		With an Allowance		Total
Commercial Real Estate
Commercial real estate owner-occupied	$	2,013	$	209	$	2,222	$	2,177	$	231	$	2,408
Commercial Non Real Estate
Commercial and industrial		-		-		-		-		221		221
Total	$	2,013	$	209	$	2,222	$	2,177	$	452	$	2,629

The following tables present the aging of past due loans, by loan pool, as of the dates indicated.


December 31, 2024	Accruing Current Loans		Accruing Loans 30 – 89 Days Past Due		Accruing Loans 90 or More Days Past Due		Nonaccrual Loans		Total Loans		Accruing and Nonaccrual 90 or More Days Past Due
Real Estate Construction
Construction, 1-4 family residential	$	16,162	$	-	$	-	$	-	$	16,162	$	-
Construction, other		34,636		-		-		-		34,636		-
Consumer Real Estate
Equity line		22,551		67		-		-		22,618		-
Residential closed-end first liens		170,110		949		323		-		171,382		323
Residential closed-end junior liens		8,565		9		-		-		8,574		-
Investor-owned residential real estate		104,756		347		178		-		105,281		178
Commercial Real Estate
Multifamily residential real estate		143,444		186		-		-		143,630		-
Commercial real estate owner-occupied		138,284		147		-		2,222		140,653		209
Commercial real estate, other		193,249		546		-		-		193,795		-
Commercial Non Real Estate
Commercial and industrial		51,547		253		44		-		51,844		44
Public Sector and IDA
States and political subdivisions		57,171		-		-		-		57,171		-
Consumer Non Real Estate
Credit cards		4,696		2		-		-		4,698		-
Automobile		12,802		193		-		-		12,995		-
Other consumer loans		24,921		250		3		-		25,174		3
Total	$	982,894	$	2,949	$	548	$	2,222	$	988,613	$	757


December 31, 2023	Accruing Current Loans		Accruing Loans 30 – 89 Days Past Due		Accruing Loans 90 or More Days Past Due		Nonaccrual Loans		Total Loans		Accruing and Nonaccrual 90 or More Days Past Due
Real Estate Construction
Construction, 1-4 family residential	$	13,442	$	-	$	-	$	-	$	13,442	$	-
Construction, other		41,916		21		-		-		41,937		-
Consumer Real Estate
Equity line		17,178		104		-		-		17,282		-
Residential closed-end first liens		124,886		662		131		-		125,679		131
Residential closed-end junior liens		5,027		12		-		-		5,039		-
Investor-owned residential real estate		93,564		-		-		-		93,564		-
Commercial Real Estate
Multifamily residential real estate		119,052		195		-		-		119,247		-
Commercial real estate owner-occupied		114,477		336		-		2,408		117,221		231
Commercial real estate, other		182,662		-		-		-		182,662		-
Commercial Non Real Estate
Commercial and industrial		41,249		57		28		221		41,555		28
Public Sector and IDA
States and political subdivisions		60,551		-		-		-		60,551		-
Consumer Non Real Estate
Credit cards		4,648		17		3		-		4,668		3
Automobile		12,126		135		-		-		12,261		-
Other consumer loans		21,934		107		26		-		22,067		26
Total	$	852,712	$	1,646	$	188	$	2,629	$	857,175	$	419

Collateral Dependent Loans

Loans are collateral dependent when repayment is expected substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. Collateral dependent loans are individually evaluated. The Company measures the ACL on collateral dependent loans based upon the fair value of the collateral, as permitted by ASU 2016-13. Fair value of the collateral is adjusted for liquidation costs/discounts. If the fair value of the collateral falls below the amortized cost of the loan, the shortfall is recognized in the ACLL. If the fair value of the collateral exceeds the amortized cost, no ACL is required.

As of December 31, 2024, three of the Company’s individually evaluated loans were considered collateral dependent, and all are secured by real estate. The following table provides details on collateral dependent loans as of the dates indicated:


	December 31, 2024				December 31, 2023
	Balance		Related Allowance		Balance		Related Allowance
Consumer Real Estate
Residential closed-end first lien	$	-	$	-	$	7	$	-
Commercial Real Estate
Commercial real estate, owner occupied		8,387		-		2,177		-
Commercial real estate, other		872		-		-		-
Total Loans	$	9,259	$	-	$	2,184	$	-

Credit Quality

The Company categorizes loans by risk based on relevant information about the ability of borrowers to service their debt, including: collateral and financial information, historical payment experience, credit documentation and current economic trends, among other factors. At origination, each loan is assigned a risk rating. Ongoing analysis of the loan portfolio adjusts risk ratings on an individual loan basis to reflect updated information. General descriptions of risk ratings are as follows:

•

Pass: loans with acceptable credit quality are rated pass.

•

Special mention: loans with potential weaknesses due to challenging economic or financial conditions are rated special mention.

•

Classified: loans with well-defined weaknesses that heighten the risk of default are rated classified.

The following table presents the amortized cost basis of the loan portfolio, by year of origination, loan class, and credit quality, as of the date indicated.


	Term Loans Amortized Cost Basis by Origination Year														Revolving Loans Converted
December 31, 2024	Prior		2020		2021		2022		2023		2024		Revolving		to Term		Total
Construction, residential
Pass	$	-	$	-	$	0	$	337	$	2,312	$	3,328	$	10,185	$	-	$	16,162
Construction, other
Pass	$	2,938	$	1,138	$	805	$	10,795	$	8,669	$	6,194	$	4,097	$	-	$	34,636
Equity lines
Pass	$	363	$	249	$	387	$	470	$	816	$	402	$	19,894	$	12	$	22,593
Classified		-		-		-		-		-		-		25		-		25
Total	$	363	$	249	$	387	$	470	$	816	$	402	$	19,919	$	12	$	22,618
Residential closed-end first liens
Pass	$	42,211	$	18,111	$	33,630	$	35,557	$	21,593	$	18,991	$	-	$	303	$	170,396
Special Mention		367		-		-		-		-		-		-		-		367
Classified		441		-		-		178		-		-		-		-		619
Total	$	43,019	$	18,111	$	33,630	$	35,735	$	21,593	$	18,991	$	-	$	303	$	171,382
Residential closed-end junior liens
Pass	$	1,596	$	-	$	277	$	2,048	$	1,597	$	3,004	$	31	$	21	$	8,574
Investor-owned residential real estate
Pass	$	28,919	$	22,946	$	19,280	$	16,242	$	8,175	$	3,266	$	1,907	$	3,668	$	104,403
Special Mention		-		-		-		138		-		-		-		-		138
Classified		740		-		-		-		-		-		-		-		740
Total	$	29,659	$	22,946	$	19,280	$	16,380	$	8,175	$	3,266	$	1,907	$	3,668	$	105,281
Multifamily residential real estate
Pass	$	39,665	$	2,055	$	39,879	$	40,198	$	8,470	$	13,205	$	158	$	-	$	143,630
Commercial real estate, owner occupied
Pass	$	52,916	$	24,539	$	7,432	$	28,753	$	10,351	$	3,810	$	3,422	$	83	$	131,306
Special mention		6,375		-		-		-		-		-		-		-		6,375
Classified		2,222		738		-		-		-		-		12		-		2,972
Total	$	61,513	$	25,277	$	7,432	$	28,753	$	10,351	$	3,810	$	3,434	$	83	$	140,653
Commercial real estate, other
Pass	$	90,358	$	17,919	$	36,777	$	23,775	$	16,990	$	5,583	$	1,703	$	-	$	193,105
Classified		690		-		-		-		-		-		-		-		690
Total	$	91,048	$	17,919	$	36,777	$	23,775	$	16,990	$	5,583	$	1,703	$	-	$	193,795
Commercial and industrial
Pass	$	6,437	$	2,070	$	11,849	$	5,528	$	5,903	$	8,407	$	11,644	$	-	$	51,838
Classified		-		-		-		6		-		-		-		-		6
Total	$	6,437	$	2,070	$	11,849	$	5,534	$	5,903	$	8,407	$	11,644	$	-	$	51,844
YTD gross charge-offs	$	125	$	-	$	-	$	-	$	-	$	22	$	19	$	-	$	166
Public sector and IDA
Pass	$	19,309	$	218	$	25,232	$	5,922	$	6,490	$	-	$	-	$	-	$	57,171
Credit cards
Pass	$	-	$	-	$	-	$	-	$	-	$	-	$	4,698	$	-	$	4,698
YTD gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	53	$	-	$	53
Automobile
Pass	$	36	$	243	$	727	$	1,640	$	4,474	$	5,832	$	-	$	-	$	12,952
Special Mention		-		-		-		-		4		-		-		-		4
Classified		-		-		-		-		28		11		-		-		39
Total	$	36	$	243	$	727	$	1,640	$	4,506	$	5,843	$	-	$	-	$	12,995
YTD gross charge-offs	$	-	$	-	$	6	$	14	$	16	$	11	$	-	$	-	$	47
Other consumer
Pass	$	184	$	401	$	874	$	2,274	$	4,804	$	15,846	$	760	$	-	$	25,143
Special Mention		-		-		1		-		-		9		-		-		10
Classified		-		-		-		2		14		5		-		-		21
Total	$	184	$	401	$	875	$	2,276	$	4,818	$	15,860	$	760	$	-	$	25,174
YTD gross charge-offs	$	-	$	4	$	15	$	19	$	94	$	121	$	-	$	-	$	253
Total Loans
Pass	$	284,932	$	89,889	$	177,149	$	173,539	$	100,644	$	87,868	$	58,499	$	4,087	$	976,607
Special Mention		6,742		-		1		138		4		9		-		-		6,894
Classified		4,093		738		-		186		42		16		37		-		5,112
Total	$	295,767	$	90,627	$	177,150	$	173,863	$	100,690	$	87,893	$	58,536	$	4,087	$	988,613
YTD gross charge-offs	$	125	$	4	$	21	$	33	$	110	$	154	$	72	$	-	$	519

The following table presents the recorded investment of collectively evaluated loans by loan pool and credit quality as of the date indicated.


	Term Loans Amortized Cost Basis by Origination Year														Revolving Loans Converted
December 31, 2023	Prior		2019		2020		2021		2022		2023		Revolving		to Term		Total
Construction, residential
Pass	$	-	$	-	$	246	$	158	$	3,275	$	5,157	$	4,606	$	-	$	13,442
Construction, other
Pass	$	2,741	$	1,094	$	1,305	$	12,671	$	17,397	$	4,884	$	1,559	$	-	$	41,651
Classified		-		-		-		286		-		-		-		-		286
Total	$	2,741	$	1,094	$	1,305	$	12,957	$	17,397	$	4,884	$	1,559	$	-	$	41,937
Equity lines
Pass	$	51	$	-	$	-	$	-	$	-	$	-	$	17,182	$	-	$	17,233
Classified		-		-		-		-		-		-		49		-		49
Total	$	51	$	-	$	-	$	-	$	-	$	-	$	17,231	$	-	$	17,282
Residential closed-end first liens
Pass	$	32,404	$	5,806	$	14,634	$	31,414	$	29,787	$	11,208	$	-	$	-	$	125,253
Classified		426		-		-		-		-		-		-		-		426
Total	$	32,830	$	5,806	$	14,634	$	31,414	$	29,787	$	11,208	$	-	$	-	$	125,679
YTD gross charge-offs	$	-	$	-	$	17	$	-	$	-	$	-	$	-	$	-	$	17
Residential closed-end junior liens
Pass	$	1,499	$	116	$	-	$	172	$	1,387	$	1,850	$	-	$	15	$	5,039
Investor-owned residential real estate
Pass	$	24,556	$	5,162	$	23,649	$	19,062	$	14,166	$	4,880	$	1,283	$	98	$	92,856
Classified		708		-		-		-		-		-		-		-		708
Total	$	25,264	$	5,162	$	23,649	$	19,062	$	14,166	$	4,880	$	1,283	$	98	$	93,564
Multifamily residential real estate
Pass	$	40,092	$	1,806	$	2,148	$	40,544	$	25,681	$	8,850	$	126	$	-	$	119,247
Commercial real estate, owner occupied
Pass	$	41,573	$	11,091	$	23,407	$	4,792	$	16,720	$	7,914	$	2,919	$	-	$	108,416
Special mention		6,396		-		-		-		-		-		-		-		6,396
Classified		2,409		-		-		-		-		-		-		-		2,409
Total	$	50,378	$	11,091	$	23,407	$	4,792	$	16,720	$	7,914	$	2,919	$	-	$	117,221
Commercial real estate, other
Pass	$	68,889	$	21,841	$	19,098	$	36,157	$	22,697	$	13,279	$	701	$	-	$	182,662
Commercial and industrial
Pass	$	6,004	$	438	$	1,060	$	12,667	$	6,954	$	6,938	$	7,267	$	-	$	41,328
Classified		220		-		-		-		7		-		-		-		227
Total	$	6,224	$	438	$	1,060	$	12,667	$	6,961	$	6,938	$	7,267	$	-	$	41,555
YTD gross charge-offs	$	-	$	12	$	-	$	-	$	-	$	12	$	190	$	-	$	214
Public sector and IDA
Pass	$	20,817	$	-	$	235	$	26,702	$	6,335	$	6,462	$	-	$	-	$	60,551
Credit cards
Pass	$	-	$	-	$	-	$	-	$	-	$	-	$	4,668	$	-	$	4,668
YTD gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	39	$	-	$	39
Automobile
Pass	$	78	$	204	$	563	$	1,619	$	2,750	$	7,047	$	-	$	-	$	12,261
YTD gross charge-offs	$	-	$	3	$	-	$	1	$	38	$	-	$	-	$	-	$	42
Other Consumer
Pass	$	93	$	334	$	811	$	1,943	$	5,815	$	12,356	$	672	$	-	$	22,024
Special mention		-		-		-		-		-		17		-		-		17
Classified		-		-		-		-		11		15		-		-		26
Total	$	93	$	334	$	811	$	1,943	$	5,826	$	12,388	$	672	$	-	$	22,067
YTD gross charge-offs	$	-	$	-	$	-	$	19	$	52	$	95	$	-	$	-	$	166
Total Loans
Pass	$	238,797	$	47,892	$	87,156	$	187,901	$	152,964	$	90,825	$	40,983	$	113	$	846,631
Special mention		6,396		-		-		-		-		17		-		-		6,413
Classified		3,763		-		-		286		18		15		49		-		4,131
Total	$	248,956	$	47,892	$	87,156	$	188,187	$	152,982	$	90,857	$	41,032	$	113	$	857,175
YTD gross charge-offs	$	-	$	15	$	17	$	20	$	90	$	107	$	229	$	-	$	478

Loan Modifications to Borrowers Experiencing Financial Difficulty

The Company modifies loans for a variety of reasons. At the date of modification, the Company assesses whether the borrower is experiencing financial difficulty. If the borrower is experiencing financial difficulty, the loan’s risk rating is evaluated and adjusted to special mention or classified, as determined appropriate. If the loan exceeds $400, if it is placed in nonaccrual, or if foreclosure is probable, the loan is individually evaluated for the ACLL. The Company modified one loan to a borrower experiencing financial difficulty during the year ended December 31, 2024. The following table presents information on the modification.

        December 31, 2024

        Amortized
Cost Basis

        % of
Class

        Type of
Modification

        Financial Effect

        Commercial Real Estate

Commercial real estate owner-occupied

6,396

4.48

Interest only payments

3 months of interest only payments, following which the balance will be re-amortizd to contractual maturity

The Company closely monitors the performance of modified loans to borrowers experiencing financial difficulty. As of December 31, 2024, the loan was in current status, risk rated special mention and individually evaluated using the fair value of collateral method, resulting in no specific reserve.

The Company modified one loan to a borrower experiencing financial difficulty during the year ended December 31, 2023. The following table presents information on the modification.

        December 31, 2023

        Amortized
Cost Basis

        % of
Class

        Type of
Modification

        Financial Effect

        Commercial Real Estate

Commercial real estate owner-occupied

6,396

5.46

Interest only
payments

6 months of interest only payments, after which remaining balance will be re-amortized to the contractual maturity date.

As of December 31, 2023, the loan was in current status, was rated special mention and individually evaluated using the discounted cash flow method, resulting in a specific reserve of $347.

The Company analyzed its modified loan portfolio for loans that defaulted during the 12 month period ended December 31, 2024, and that were modified within 12 months prior. The Company designates three circumstances that indicate default: one or more payments that occur more than 90 days past the due date, charge-off, or foreclosure after the date of modification. There were no loans to borrowers experiencing financial difficulty that defaulted during the year ended December 31, 2024 or December 31, 2023 and were modified in the twelve months prior.

ACL on Unfunded Commitments

The following table presents information on the ACL for unfunded commitments for the years ended December 31, 2024 and December 31, 2023:


Allowance for Credit Losses on Unfunded Commitments
Balance, December 31, 2022	$	35
Adoption of ASU 2016-13		207
Provision for credit losses	$	17
Balance, December 31, 2023	$	259
Recovery of credit losses		(15	)
FCB acquisition		7
Balance, December 31, 2024	$	251