Quarterly report [Sections 13 or 15(d)]

Note 5 - Loans

v3.25.2
Note 5 - Loans
6 Months Ended
Jun. 30, 2025
Notes to Financial Statements  
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

NOTE 5 LOANS

 

The loan portfolio is classified based on the underlying collateral utilized to secure each loan for financial reporting purposes. This classification is consistent with the Quarterly Report of Condition and Income filed by ServisFirst Bank with the Federal Deposit Insurance Corporation (“FDIC”).

 

Commercial, financial and agricultural - Includes loans to business enterprises issued for commercial, industrial, agricultural production and/or other professional purposes. These loans are generally secured by equipment, inventory, and accounts receivable of the borrower and repayment is primarily dependent on business cash flows.

 

Real estate construction – Includes loans secured by real estate to finance land development or the construction of industrial, commercial or residential buildings. Repayment is dependent upon the completion and eventual sale, refinance or operation of the related real estate project.

 

Owner-occupied commercial real estate mortgage – Includes loans secured by nonresidential properties for which the primary source of repayment is the cash flow from the ongoing operations conducted by the party that owns the property.

 

1-4 family real estate mortgage – Includes loans secured by residential properties, including home equity lines of credit. Repayment is primarily dependent on the personal cash flow of the borrower.

 

Non-owner occupied commercial real estate mortgage – Includes loans secured by non-owner occupied properties, including office buildings, industrial buildings, warehouses, retail buildings, and multifamily residential properties. Repayment is primarily dependent on income generated from the underlying collateral.

 

Consumer – Includes loans to individuals not secured by real estate. Repayment is dependent upon the personal cash flow of the borrower.

 

The following table details the Company’s loans at June 30, 2025 and December 31, 2024:

 

   

June 30,

   

December 31,

 
   

2025

   

2024

 
                 
   

(Dollars In Thousands)

 

Commercial, financial and agricultural

  $ 2,966,191     $ 2,869,894  

Real estate - construction

    1,735,405       1,489,306  

Real estate - mortgage:

               

Owner-occupied commercial

    2,557,711       2,547,143  

1-4 family mortgage

    1,561,461       1,444,623  

Non-owner occupied commercial

    4,338,697       4,181,243  

Subtotal: Real estate - mortgage

    8,457,869       8,173,009  

Consumer

    73,095       73,627  

Total Loans

    13,232,560       12,605,836  

Less: Allowance for credit losses on loans

    (169,959 )     (164,458 )

Net Loans

  $ 13,062,601     $ 12,441,378  
                 
                 

Commercial, financial and agricultural

    22.42 %     22.77 %

Real estate - construction

    13.11 %     11.81 %

Real estate - mortgage:

               

Owner-occupied commercial

    19.33 %     20.21 %

1-4 family mortgage

    11.80 %     11.46 %

Non-owner occupied commercial

    32.79 %     33.17 %

Subtotal: Real estate - mortgage

    63.92 %     64.84 %

Consumer

    0.55 %     0.58 %

Total Loans

    100.00 %     100.00 %

 

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. The following table presents credit quality indicators for the credit loss portfolio segments and classes. These categories are utilized to develop the associated allowance for credit losses using historical losses adjusted for current economic conditions defined as follows:

 

 

Pass – loans that are well protected by the current net worth and paying capacity of the obligor (or obligors, if any) or by the fair value, less cost to acquire and sell, of 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 – loans that exhibit well-defined weakness or weaknesses that presently jeopardize debt repayment. These loans are characterized by the distinct possibility that the institution will sustain some loss if the weaknesses are not corrected.

 

Doubtful – loans that have all the weaknesses inherent in loans classified substandard, plus the added characteristic that the weaknesses make collection or liquidation in full on the basis of currently existing facts, conditions, and values highly questionable and improbable.

 

The table below presents loan balances classified by credit quality indicator, loan type and based on year of origination as of June 30, 2025:

 

June 30, 2025

 

2025

   

2024

   

2023

   

2022

   

2021

   

Prior

   

Revolving

   

Revolving lines of credit converted to term loans

   

Total

 
   

(In Thousands)

 

Commercial, financial and agricultural

                                                                       

Pass

  $ 358,354     $ 372,499     $ 142,078     $ 278,631     $ 216,249     $ 256,151     $ 1,185,257     $ 23,682     $ 2,832,901  

Special Mention

    1,200       2,042       1,772       5,612       3,396       7,573       32,959       1,297       55,851  

Substandard - Accruing

    -       222       -       11,536       -       25,310       3,086       876       41,030  

Substandard - Non-accrual

    -       -       669       965       5,289       8,969       20,496       21       36,409  

Total Commercial, financial and agricultural

  $ 359,554     $ 374,763     $ 144,519     $ 296,744     $ 224,934     $ 298,003     $ 1,241,798     $ 25,876     $ 2,966,191  

Current-period gross write-offs

  $ -     $ -     $ 618     $ 5,275     $ 886     $ 543     $ 1,618     $ 323     $ 9,263  
                                                                         

Real estate - construction

                                                                       

Pass

  $ 170,525     $ 554,630     $ 280,417     $ 414,424     $ 142,719     $ 39,546     $ 89,338     $ -     $ 1,691,599  

Special Mention

    317       5,253       532       12,887       16,425       -       1       -       35,415  

Substandard - Accruing

    -       -       -       -       -       945       -       -       945  

Substandard - Non-accrual

    -       -       3,628       3,818       -       -       -       -       7,446  

Total Real estate - construction

  $ 170,842     $ 559,883     $ 284,577     $ 431,129     $ 159,144     $ 40,491     $ 89,339     $ -     $ 1,735,405  

Current-period gross write-offs

  $ -       -       -       46       -     $ -     $ -     $ -     $ 46  
                                                                         

Owner-occupied commercial

                                                                       

Pass

  $ 180,699     $ 357,092     $ 164,458     $ 494,066     $ 432,830     $ 793,053     $ 60,170     $ 5,679     $ 2,488,047  

Special Mention

    65       4,967       6,795       397       11,622       23,203       5,724       -       52,773  

Substandard - Accruing

    -       -       417       2,148       -       2,211       -       -       4,776  

Substandard - Non-accrual

    -       688       -       2,886       6,552       1,709       280       -       12,115  

Total Owner-occupied commercial

  $ 180,764     $ 362,747     $ 171,670     $ 499,497     $ 451,004     $ 820,176     $ 66,174     $ 5,679     $ 2,557,711  

Current-period gross write-offs

  $ -     $ 2,790     $ -     $ -     $ -     $ 560     $ 1     $ -     $ 3,351  
                                                                         

1-4 family mortgage

                                                                       

Pass

  $ 202,139     $ 261,471     $ 113,469     $ 296,990     $ 177,886     $ 125,345     $ 359,490     $ 3,712     $ 1,540,502  

Special Mention

    -       778       165       2,940       1,731       6,781       2,663       796       15,854  

Substandard - Accruing

    -       -       -       -       -       402       91       -       493  

Substandard - Non-accrual

    -       -       733       384       943       1,182       1,370       -       4,612  

Total 1-4 family mortgage

  $ 202,139     $ 262,249     $ 114,367     $ 300,314     $ 180,560     $ 133,710     $ 363,614     $ 4,508     $ 1,561,461  

Current-period gross write-offs

  $ -     $ -     $ -     $ 20     $ -     $ -     $ 31     $ -     $ 51  
                                                                         

Non-owner occupied commercial

                                                                       

Pass

  $ 260,089     $ 480,159     $ 169,005     $ 1,434,093     $ 816,635     $ 970,527     $ 69,165     $ 9,077     $ 4,208,750  

Special Mention

    487       -       262       28,062       91,229       -       -       -       120,040  

Substandard - Accruing

    -       -       -       -       -       2,643       -       -       2,643  

Substandard - Non-accrual

    -       -       -       1,957       2,593       2,714       -       -       7,264  

Total Non-owner occupied commercial

  $ 260,576     $ 480,159     $ 169,267     $ 1,464,112     $ 910,457     $ 975,884     $ 69,165     $ 9,077     $ 4,338,697  

Current-period gross write-offs

  $ -       -       -       750       -     $ -     $ -     $ -     $ 750  
                                                                         

Consumer

                                                                       

Pass

  $ 24,451     $ 5,353     $ 2,214     $ 1,934     $ 1,026     $ 2,975     $ 34,341     $ -     $ 72,294  

Special Mention

    -       -       -       -       -       -       -       -       -  

Substandard - Accruing

    -       -       -       -       -       30       -       -       30  

Substandard - Non-accrual

    -       -       -       -       -       737       34       -       771  

Total Consumer

  $ 24,451     $ 5,353     $ 2,214     $ 1,934     $ 1,026     $ 3,742     $ 34,375     $ -     $ 73,095  

Current-period gross write-offs

  $ -       -       -       -       -     $ 133     $ -     $ -     $ 133  
                                                                         

Total Loans

                                                                       

Pass

  $ 1,196,257     $ 2,031,204     $ 871,641     $ 2,920,138     $ 1,787,345     $ 2,187,597     $ 1,797,761     $ 42,150     $ 12,834,093  

Special Mention

    2,069       13,040       9,526       49,898       124,403       37,557       41,347       2,093       279,933  

Substandard - Accruing

    -       222       417       13,684       -       31,541       3,177       876       49,917  

Substandard - Non-accrual

    -       688       5,030       10,010       15,377       15,311       22,180       21       68,617  

Total Loans

  $ 1,198,326     $ 2,045,154     $ 886,614     $ 2,993,730     $ 1,927,125     $ 2,272,006     $ 1,864,465     $ 45,140     $ 13,232,560  

Current-period gross write-offs

  $ -     $ 2,790     $ 618     $ 6,091     $ 886     $ 1,236     $ 1,650     $ 323     $ 13,594  

 

 

Loans by credit quality indicator, loan type and based on year of origination as of December 31, 2024 were as follows:

 

December 31, 2024

 

2024

   

2023

   

2022

   

2021

   

2020

   

Prior

   

Revolving

   

Revolving lines of credit converted to term loans

   

Total

 
   

(In Thousands)

         

Commercial, financial and agricultural

                                                                       

Pass

  $ 529,002     $ 171,139     $ 331,476     $ 273,304     $ 120,088     $ 195,012     $ 1,121,196     $ 248     $ 2,741,464  

Special Mention

    1,767       666       12,260       2,442       3,254       10,001       21,647       -       52,037  

Substandard - Accruing

    1,064       -       987       349       364       25,620       22,317       -       50,701  

Substandard -Non-accrual

    -       1,177       2,049       8,201       271       8,513       5,481       -       25,692  

Total Commercial, financial and agricultural

  $ 531,833     $ 172,982     $ 346,772     $ 284,296     $ 123,977     $ 239,146     $ 1,170,641     $ 248     $ 2,869,894  

Current-period gross write-offs

  $ 36     $ 1,002     $ -     $ 52     $ 675     $ 4,327     $ 2,851     $ 3,172     $ 12,115  
                                                                         

Real estate - construction

                                                                       

Pass

  $ 367,275     $ 292,379     $ 506,542     $ 150,307     $ 32,330     $ 16,083     $ 72,793     $ -     $ 1,437,710  

Special Mention

    259       3,100       28,224       16,477       -       -       -       -       48,060  

Substandard - Accruing

    -       590       2,000       -       -       946       -       -       3,536  

Substandard -Non-accrual

    -       -       -       -       -       -       -       -       -  

Total Real estate - construction

  $ 367,534     $ 296,069     $ 536,766     $ 166,784     $ 32,330     $ 17,029     $ 72,793     $ -     $ 1,489,306  

Current-period gross write-offs

  $ -     $ -     $ -     $ -     $ -     $ -     $ -     $ -     $ -  
                                                                         

Owner-occupied commercial

                                                                       

Pass

  $ 377,351     $ 168,561     $ 503,351     $ 467,790     $ 276,795     $ 594,794     $ 65,269     $ 802     $ 2,454,713  

Special Mention

    10,148       6,410       1,373       22,087       5,441       16,912       4,961       -       67,332  

Substandard - Accruing

    3,562       417       1,147       6,681       2,169       2,378       -       -       16,354  

Substandard -Non-accrual

    -       -       2,886       -       79       5,779       -       -       8,744  

Total Owner-occupied commercial

  $ 391,061     $ 175,388     $ 508,757     $ 496,558     $ 284,484     $ 619,863     $ 70,230     $ 802     $ 2,547,143  

Current-period gross write-offs

  $ -     $ -     $ -     $ 100     $ -     $ 137     $ -     $ -     $ 237  
                                                                         

1-4 family mortgage

                                                                       

Pass

  $ 294,602     $ 126,953     $ 319,472     $ 188,104     $ 65,673     $ 78,629     $ 351,240     $ -     $ 1,424,673  

Special Mention

    -       469       2,523       2,943       1,124       6,628       2,428       -       16,115  

Substandard - Accruing

    -       -       -       -       -       403       381       -       784  

Substandard -Non-accrual

    -       265       646       855       405       380       500       -       3,051  

Total 1-4 family mortgage

  $ 294,602     $ 127,687     $ 322,641     $ 191,902     $ 67,202     $ 86,040     $ 354,549     $ -     $ 1,444,623  

Current-period gross write-offs

  $ -     $ 28     $ 61     $ 62     $ -     $ 129     $ 481     $ -     $ 761  
                                                                         

Non-owner occupied commercial

                                                                       

Pass

  $ 479,275     $ 174,415     $ 1,449,886     $ 888,829     $ 367,100     $ 670,317     $ 70,161     $ 246     $ 4,100,229  

Special Mention

    -     $ -     $ 8,304     $ 53,926     $ -     $ 3,376     $ -     $ -       65,606  

Substandard - Accruing

    -       -       4,584       -       -       9,565       -       -       14,149  

Substandard -Non-accrual

    -       -       384       875       -       -       -       -       1,259  

Total Non-owner occupied commercial

  $ 479,275     $ 174,415     $ 1,463,158     $ 943,630     $ 367,100     $ 683,258     $ 70,161     $ 246     $ 4,181,243  

Current-period gross write-offs

  $ -     $ -     $ -     $ -     $ -     $ -     $ -     $ -     $ -  
                                                                         

Consumer

                                                                       

Pass

  $ 33,004     $ 2,941     $ 2,462     $ 1,346     $ 1,234     $ 2,505     $ 29,335     $ -     $ 72,827  

Special Mention

    -       -       -       -       -       -       45       -       45  

Substandard - Accruing

    -       -       -       -       -       -       -       -       -  

Substandard -Non-accrual

    -       -       -       -       -       755       -       -       755  

Total Consumer

  $ 33,004     $ 2,941     $ 2,462     $ 1,346     $ 1,234     $ 3,260     $ 29,380     $ -     $ 73,627  

Current-period gross write-offs

  $ 19     $ 8     $ -     $ -     $ -     $ 75     $ 469     $ -     $ 571  
                                                                         

Total Loans

                                                                       

Pass

  $ 2,080,509     $ 936,388     $ 3,113,189     $ 1,969,680     $ 863,220     $ 1,557,340     $ 1,709,994     $ 1,296     $ 12,231,616  

Special Mention

    12,174       10,645       52,684       97,875       9,819       36,917       29,081       -       249,195  

Substandard - Accruing

    4,626       1,007       8,718       7,030       2,533       38,912       22,698       -       85,524  

Substandard -Non-accrual

    -       1,442       5,965       9,931       755       15,427       5,981       -       39,501  

Total Loans

  $ 2,097,309     $ 949,482     $ 3,180,556     $ 2,084,516     $ 876,327     $ 1,648,596     $ 1,767,754     $ 1,296     $ 12,605,836  

Current-period gross write-offs

  $ 55     $ 1,038     $ 61     $ 214     $ 675     $ 4,668     $ 3,801     $ 3,172     $ 13,684  

 

 

Loans by performance status as of June 30, 2025 and December 31, 2024 were as follows:

 

June 30, 2025

 

Performing

   

Nonperforming

   

Total

 
                         
   

(In Thousands)

 

Commercial, financial and agricultural

  $ 2,928,673     $ 37,518     $ 2,966,191  

Real estate - construction

    1,727,959       7,446       1,735,405  

Real estate - mortgage:

                       

Owner-occupied commercial

    2,545,596       12,115       2,557,711  

1-4 family mortgage

    1,554,422       7,039       1,561,461  

Non-owner occupied commercial

    4,331,433       7,264       4,338,697  

Total real estate mortgage

    8,431,451       26,418       8,457,869  

Consumer

    72,309       786       73,095  

Total

  $ 13,160,392     $ 72,168     $ 13,232,560  

 

December 31, 2024

 

Performing

   

Nonperforming

   

Total

 
                         
   

(In Thousands)

 

Commercial, financial and agricultural

  $ 2,844,164     $ 25,730     $ 2,869,894  

Real estate - construction

    1,488,645       661       1,489,306  

Real estate - mortgage:

                       

Owner-occupied commercial

    2,538,399       8,744       2,547,143  

1-4 family mortgage

    1,439,332       5,291       1,444,623  

Non-owner occupied commercial

    4,179,984       1,259       4,181,243  

Total real estate mortgage

    8,157,715       15,294       8,173,009  

Consumer

    72,846       781       73,627  

Total

  $ 12,563,370     $ 42,466     $ 12,605,836  

 

 

Loans by past due status as of June 30, 2025 and December 31, 2024 were as follows:

 

June 30, 2025

 

Past Due Status (Accruing Loans)

                                 
                           

Total Past

   

Total

                   

Nonaccrual

 
   

30-59 Days

   

60-89 Days

   

90+ Days

   

Due

   

Nonaccrual

   

Current

   

Total Loans

   

With no ACL

 
                                                                 
   

(In Thousands)

 

Commercial, financial and agricultural

  $ 5,138     $ 11,230     $ 1,108     $ 17,476     $ 36,410     $ 2,912,305     $ 2,966,191     $ 30,790  

Real estate - construction

    2,120       34,310       -       36,430       7,446       1,691,529       1,735,405       7,446  

Real estate - mortgage:

                                                               

Owner-occupied commercial

    1,866       2,639       -       4,505       12,115       2,541,091       2,557,711       10,440  

1-4 family mortgage

    831       3,072       2,426       6,329       4,613       1,550,519       1,561,461       3,947  

Non-owner occupied commercial

    -       69,225       -       69,225       7,264       4,262,208       4,338,697       6,436  

Total real estate - mortgage

    2,697       74,936       2,426       80,059       23,992       8,353,818       8,457,869       20,823  

Consumer

    65       63       15       143       771       72,181       73,095       1  

Total

  $ 10,020     $ 120,539     $ 3,549     $ 134,108     $ 68,619     $ 13,029,833     $ 13,232,560     $ 59,060  

 

December 31, 2024

 

Past Due Status (Accruing Loans)

                                 
                           

Total Past

   

Total

                   

Nonaccrual

 
   

30-59 Days

   

60-89 Days

   

90+ Days

   

Due

   

Nonaccrual

   

Current

   

Total Loans

   

With no ACL

 
                                                                 
   

(In Thousands)

 

Commercial, financial and agricultural

  $ 9,218     $ 8,469     $ 38     $ 17,725     $ 25,692     $ 2,826,477     $ 2,869,894     $ 22,266  

Real estate - construction

    6,046       15,898       661       22,605       -       1,466,701       1,489,306       -  

Real estate - mortgage:

                                                               

Owner-occupied commercial

    9,494       2,478       -       11,972       8,744       2,526,427       2,547,143       8,644  

1-4 family mortgage

    1,157       3,111       2,240       6,508       3,051       1,435,064       1,444,623       2,787  

Non-owner occupied commercial

    4,432       -       -       4,432       1,259       4,175,552       4,181,243       729  

Total real estate - mortgage

    15,083       5,589       2,240       22,912       13,054       8,137,043       8,173,009       12,160  

Consumer

    83       34       26       143       755       72,729       73,627       -  

Total

  $ 30,430     $ 29,990     $ 2,965     $ 63,385     $ 39,501     $ 12,502,950     $ 12,605,836     $ 34,426  

 

Under the current expected credit losses (“CECL”) methodology, the ACL is measured on a collective basis for pools of loans with similar risk characteristics. For loans that do not share similar risk characteristics with the collectively evaluated pools, evaluations are performed on an individual basis. For all loan segments collectively evaluated, losses are predicted over a period of time determined to be reasonable and supportable, and at the end of the reasonable and supportable forecast period losses are reverted to long-term historical averages. The estimated loan losses for all loan segments are adjusted for changes in qualitative factors not inherently considered in the quantitative analyses.         

 

The Company uses the discounted cash flow (“DCF”) method to estimate ACL for all loan pools except for commercial revolving lines of credit and credit cards.  For all loan pools utilizing the DCF method, the Company utilizes and forecasts national unemployment rate as a loss driver. The Company also utilizes and forecasts GDP growth as a second loss driver for its agricultural and consumer loan pools.  Consistent forecasts of the loss drivers are used across the loan segments.  At June 30, 2025 and December 31, 2024, the Company utilized a reasonable and supportable forecast period of twelve months followed by a six-month straight-line reversion to long term averages.  The Company leveraged economic projections from reputable and independent sources to inform its loss driver forecasts.  The Company expects national unemployment to rise and national GDP growth rate to decline compared to the December 31, 2024 forecast.

 

The Company uses a loss-rate method to estimate expected credit losses for its commercial revolving lines of credit and credit card pools.  The commercial revolving lines of credit pool incorporates a probability of default (“PD”) and loss given default (“LGD”) modeling approach.  This approach involves estimating the pool average life and then using historical correlations of default and loss experience over time to calculate the lifetime PD and LGD.  These two inputs are then applied to the outstanding pool balance.  The credit card pool incorporates a remaining life modeling approach, which utilizes an attrition-based method to estimate the remaining life of the pool.  A quarterly average loss rate is then calculated using the Company’s historical loss data. The model reduces the pool balance quarterly on a straight-line basis over the estimated life of the pool. The quarterly loss rate is multiplied by the outstanding balance at each period-end resulting in an estimated loss for each quarter. The sum of estimated loss for all quarters is the total calculated reserve for the pool.  Management has also applied the loss-rate method to commercial and industrial (“C&I”) lines of credit and to credit cards due to their generally short-term nature.  An expected loss ratio is applied based on internal and peer historical losses.

 

Each loan pool is adjusted for qualitative factors not inherently considered in the quantitative analyses. The qualitative adjustments either increase or decrease the quantitative model estimation.  The Company considers factors that are relevant within the qualitative framework, which include the following:  lending policy, changes in nature and volume of loans, staff experience, changes in volume and trends of problem loans, concentration risk, trends in underlying collateral values, external factors, quality of loan review system and other economic conditions.

 

Inherent risks in the loan portfolio will differ based on type of loan. Specific risk characteristics by loan portfolio segment are listed below:

 

Commercial and industrial loans include risks associated with borrower’s cash flow, debt service coverage, and management’s expertise.  These loans are subject to the risk that the Company may have difficulty converting collateral to a liquid asset if necessary, as well as risks associated with degree of specialization, mobility and general collectability in a default situation. These commercial loans may be subject to many different types of risks, including fraud, bankruptcy, economic downturn, deteriorated or non-existent collateral, and changes in interest rates.

 

Real estate construction loans include risks associated with the borrower’s credit-worthiness, contractor’s qualifications, borrower and contractor performance, and the overall risk and complexity of the proposed project.  Construction lending is also subject to risks associated with sub-market dynamics, including population, employment trends and household income.  During times of economic stress, this type of loan has typically had a greater degree of risk than other loan types.  

 

Real estate mortgage loans consist of loans secured by commercial and residential real estate.  Commercial real estate lending is dependent upon successful management, marketing and expense supervision necessary to maintain the property.  Repayment of these loans may be adversely affected by conditions in the real estate market or the general economy.  Also, commercial real estate loans typically involve relatively large loan balances to a single borrower.  Residential real estate lending risks are generally less significant than those of other loans.  Real estate lending risks include fluctuations in the value of real estate, bankruptcies, economic downturns and customer financial problems.

 

Consumer loans carry a moderate degree of risk compared to other loans.  They are generally more risky than traditional residential real estate loans but less risky than commercial loans.  Risk of default is usually determined by the well-being of the local economies.  During times of economic stress, there is usually some level of job loss both nationally and locally, which directly affects the ability of the consumer to repay debt.

 

The following table presents changes in the ACL, segregated by loan type, for the three and six months ended June 30, 2025 and 2024.

 

   

Commercial,

            Owner-              

Non-owner

                         
   

financial and

   

Real estate -

   

occupied

   

1-4 family

   

 

occupied

   

Real estate -

                 
   

agricultural

   

construction

   

commercial

   

mortgage

   

 

commercial

   

mortgage

   

Consumer

   

Total

 
                                                                 
   

(In Thousands)

 
   

Three Months Ended June 30, 2025

 

Allowance for credit losses on Loans:

                                                               

Balance at April 1, 2025

  $ 52,518     $ 41,809       21,330       15,246       31,853     $ 68,429     $ 2,278     $ 165,034  

Charge-offs

    (6,849 )     -       (560 )     (20 )     -       (580 )     (73 )     (7,502 )

Recoveries

    959       -       1       -       -       1       58       1,018  

Provision for credit losses on loans

    6,394       4,614       156       (282 )     336       210       191       11,409  

Balance at June 30, 2025

  $ 53,022     $ 46,423       20,927       14,944       32,189     $ 68,060     $ 2,454     $ 169,959  

 

   

Three Months Ended June 30, 2024

 

Allowance for credit losses:

                                                               

Balance at April 1, 2024

  $ 51,022     $ 45,689       18,391       12,994       26,255     $ 57,640     $ 1,541     $ 155,892  

Charge-offs

    (3,355 )     -       (100 )     (19 )     -       (119 )     (108 )     (3,582 )

Recoveries

    406       8       -       -       -       -       15       429  

Provision

    8,143       (5,247 )     748       654       761       2,163       294       5,353  

Balance at June 30, 2024

  $ 56,216     $ 40,450       19,039       13,629       27,016     $ 59,684     $ 1,742     $ 158,092  

 

   

Six Months Ended June 30, 2025

 

Allowance for credit losses:

                                                               

Balance at January 1, 2025

  $ 55,330     $ 38,597       22,302       14,096       31,328     $ 67,726     $ 2,805     $ 164,458  

Charge-offs

    (9,263 )     (46 )     (3,351 )     (51 )     (750 )     (4,152 )     (133 )     (13,594 )

Recoveries

    1,129       -       1       -       -       1       84       1,214  

Provision for credit losses on loans

    5,826       7,872       1,975       899       1,611       4,485       (302 )     17,881  

Balance at June 30, 2025

  $ 53,022     $ 46,423       20,927       14,944       32,189     $ 68,060     $ 2,454     $ 169,959  

 

   

Six Months Ended June 30, 2024

 

Allowance for credit losses:

                                                               

Balance at January 1, 2024

  $ 52,121     $ 44,658       17,702       12,029       25,395     $ 55,126     $ 1,412     $ 153,317  

Charge-offs

    (5,197 )     -       (100 )     (86 )     -       (186 )     (206 )     (5,589 )

Recoveries

    605       8       6       -       -       6       24       643  

Provision

    8,687       (4,216 )     1,431       1,686       1,621       4,738       512       9,721  

Balance at June 30, 2024

  $ 56,216     $ 40,450       19,039       13,629       27,016     $ 59,684     $ 1,742     $ 158,092  

 

We maintain an ACL on unfunded commercial lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The ACL is computed using a methodology similar to that used to determine the ACL for loans, modified to take into account the probability of a drawdown on the commitment. The ACL on unfunded loan commitments is classified as a liability account on the Consolidated Balance Sheets within other liabilities, while the corresponding provision for these credit losses is recorded as a component of provision for credit losses. The ACL on unfunded commitments was $655,000 at June 30, 2025, and $608,000 at December 31, 2024. The provision (recovery) expense for unfunded commitments was $(113,000) and $47,000 for the three and six months ended June 30, 2025, respectively. There was $336,000 and $503,000 provision expense for the three and six months ended June 30, 2024, respectively.

 

Loans that no longer share similar risk characteristics with collectively evaluated pools are estimated on an individual basis. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The following table summarizes collateral-dependent gross loans held for investment by collateral type as follows:

 

           

Accounts

                           

ACL

 

June 30, 2025

 

Real Estate

   

Receivable

   

Equipment

   

Other

   

Total

   

Allocation

 
   

(In Thousands)

 

Commercial, financial and agricultural

  $ 18,795     $ 1,836     $ 15,470     $ 37,370     $ 73,471     $ 15,349  

Real estate - construction

    7,443       -       -       945       8,388       -  

Real estate - mortgage:

                                               

Owner-occupied commercial

    16,583       -       -       356       16,939       1,674  

1-4 family mortgage

    4,961       -       107       -       5,068       457  

Non-owner occupied commercial

    9,044       -       -       876       9,920       1,514  

Total real estate - mortgage

    30,588       -       107       1,232       31,927       3,645  

Consumer

    -       -       -       800       800       800  

Total

  $ 56,826     $ 1,836     $ 15,577     $ 40,347     $ 114,586     $ 19,794  

 

           

Accounts

                           

ACL

 

December 31, 2024

 

Real Estate

   

Receivable

   

Equipment

   

Other

   

Total

   

Allocation

 
   

(In Thousands)

 

Commercial, financial and agricultural

  $ 18,901     $ 1,721     $ 7,449     $ 42,684     $ 70,755     $ 17,615  

Real estate - construction

    2,590       -       -       946       3,536       -  

Real estate - mortgage:

                                               

Owner-occupied commercial

    24,935       -       -       78       25,013       2,890  

1-4 family mortgage

    3,719       -       109       -       3,828       287  

Non-owner occupied commercial

    14,533       -       -       875       15,408       2,081  

Total real estate - mortgage

    43,187       -       109       953       44,249       5,258  

Consumer

    -       -       -       755       755       755  

Total

  $ 64,678     $ 1,721     $ 7,558     $ 45,338     $ 119,295     $ 23,628  

 

The table below details the amortized cost basis at the end of the reporting period for loans made to borrowers experiencing financial difficulty that were modified during the three and six months ended June 30, 2025 and 2024:

 

   

Three Months Ended June 30, 2025

 
            Payment Deferral                          
    Term    

and Term

                   

Percentage of

 
   

Extensions

   

Extensions

   

New loan

   

Total

   

Total Loans

 
   

(In Thousands)

 

Commercial, financial and agricultural

  $ 494     $ -     $ -     $ 494       - %

Real estate - construction

    -       -       -       -       - %

Owner-occupied commercial

    -       -       -       -       - %

1-4 family mortgage

    -       -       -       -       - %

Non-owner occupied commercial

    -       -       -       -       - %

Total

  $ 494     $ -     $ -     $ 494       - %

 

   

Six Months Ended June 30, 2025

 
            Payment Deferral                          
    Term    

and Term

                   

Percentage of

 
   

Extensions

   

Extensions

   

New loan

   

Total

   

Total Loans

 
   

(In Thousands)

 

Commercial, financial and agricultural

  $ 494     $ -     $ -     $ 494       - %

Real estate - construction

    -       -       -       -       - %

Owner-occupied commercial

    -       11,105       -       11,105       0.08 %

1-4 family mortgage

    -       -       -       -       - %

Non-owner occupied commercial

    -       -       -       -       - %

Total

  $ 494     $ 11,105     $ -     $ 11,599       0.08 %

 

   

Three months ended June 30, 2024

 
            Payment Deferral                          
    Term    

and Term

                   

Percentage of

 
   

Extensions

   

Extensions

   

New loan

   

Total

   

Total Loans

 
   

(In Thousands)

 

Commercial, financial and agricultural

  $ 2,504     $ 1,014     $ -     $ 3,518       0.03 %

Real estate - construction

    -       -       -       -       - %

Owner-occupied commercial

    -       1,158       -       1,158       0.01 %

1-4 family mortgage

    -       43       -       43       - %

Non-owner occupied commercial

    -       -       -       -       - %

Total

  $ 2,504     $ 2,215     $ -     $ 4,719       0.04 %

 

   

Six months ended June 30, 2024

 
            Payment Deferral                          
    Term    

and Term

                   

Percentage of

 
   

Extensions

   

Extensions

   

New loan

   

Total

   

Total Loans

 
   

(In Thousands)

 

Commercial, financial and agricultural

  $ 2,504     $ 1,014     $ 429     $ 3,947       0.03 %

Real estate - construction

    -       -       -       -       - %

Owner-occupied commercial

    -       1,158       -       1,158       0.01 %

1-4 family mortgage

    -       43       106       149       - %

Non-owner occupied commercial

    -       -       -       -       - %

Total

  $ 2,504     $ 2,215     $ 535     $ 5,254       0.04 %

 

The following table summarizes the financial impacts of loan modifications made to borrowers experiencing financial difficulty during the three and six months ended June 30, 2025 and 2024:

 

   

Three Months Ended June 30, 2025

 
           

Total Payment

 
   

Term Extensions

   

Deferral

 
   

(In months)

   

(In Thousands)

 

Commercial, financial and agricultural

    3     $ -  

Real estate - construction

    -       -  

Owner-occupied commercial

    -       -  

1-4 family mortgage

    -       -  

Non-owner occupied commercial

    -       -  

 

   

Six Months Ended June 30, 2025

 
           

Total Payment

 
   

Term Extensions

   

Deferral

 
   

(In months)

   

(In Thousands)

 

Commercial, financial and agricultural

    3     $ -  

Real estate - construction

    -       -  

Owner-occupied commercial

    3       132  

1-4 family mortgage

    -       -  

Non-owner occupied commercial

    -       -  

 

   

Three Months Ended June 30, 2024

 
           

Total Payment

 
   

Term Extensions

   

Deferral

 
   

(In months)

   

(In Thousands)

 

Commercial, financial and agricultural

    3 to 60     $ 125  

Real estate - construction

    -       -  

Owner-occupied commercial

    60       16  

1-4 family mortgage

    121       2  

Non-owner occupied commercial

    -       -  

 

   

Six Months Ended June 30, 2024

 
           

Total Payment

 
   

Term Extensions

   

Deferral

 
   

(In months)

   

(In Thousands)

 

Commercial, financial and agricultural

    3 to 60     $ 125  

Real estate - construction

    -       -  

Owner-occupied commercial

    60       16  

1-4 family mortgage

    3 to 121       2  

Non-owner occupied commercial

    -       -  

 

There was one loan modified on or after June 30, 2024, past due greater than 30 days or on non-accrual as of June 30, 2025.

 

As of June 30, 2025, the Company did not have any loans made to borrowers experiencing financial difficulty that were modified during the first or second quarters of 2025 that subsequently defaulted. For purposes of this disclosure, default is defined as 90 days past due and still accruing or placement on nonaccrual status. Beginning in the second quarter of 2024, the policy surrounding the definition of borrowers experiencing financial difficulty was refined.