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LOANS AND ALLOWANCE FOR CREDIT LOSSES ON LOANS
 3 Months Ended
Mar. 31, 2024
Receivables [Abstract]  
LOANS AND ALLOWANCE FOR CREDIT LOSSES ON LOANS LOANS AND ALLOWANCE FOR CREDIT LOSSES ON LOANS
At March 31, 2024 and December 31, 2023, the Company had $1.79 billion and $1.79 billion, respectively, in loans receivable outstanding. Outstanding balances include $2.4 million and $2.7 million at March 31, 2024 and December 31, 2023, respectively, for net deferred loan costs, and unamortized discounts.

The portfolio segments of loans receivable at March 31, 2024 and December 31, 2023, consist of the following:
 March 31, 2024December 31, 2023
 (Dollars in thousands)
Commercial and Industrial$37,002 $35,451 
Construction142,178 157,556 
Real Estate Mortgage:  
Commercial – Owner Occupied140,021 141,742 
Commercial – Non-owner Occupied360,961 369,909 
Residential – 1 to 4 Family448,219 449,682 
Residential – 1 to 4 Family Investment523,029 524,167 
Residential – Multifamily128,855 103,324 
Consumer5,277 5,509 
Total Loan receivable1,785,542 1,787,340 
Allowance for credit losses on loans (31,918)(32,131)
Total loan receivable, net of allowance for credit losses on loans$1,753,624 $1,755,209 

An age analysis of past due loans by class at March 31, 2024 and December 31, 2023 is as follows:

March 31, 202430-59
Days Past
Due		60-89
Days Past
Due		Greater
than 90
Days		Total Past
Due		CurrentTotal
Loans
 (Dollars in Thousands)
Commercial and Industrial$— $— $698 $698 $36,304 $37,002 
Construction— — 1,091 1,091 141,087 142,178 
Real Estate Mortgage:      
Commercial – Owner Occupied— — 1,117 1,117 138,904 140,021 
Commercial – Non-owner Occupied— — 2,106 2,106 358,855 360,961 
Residential – 1 to 4 Family357 — 1,969 2,326 445,893 448,219 
Residential – 1 to 4 Family Investment438 287 — 725 522,304 523,029 
Residential – Multifamily— — — — 128,855 128,855 
Consumer19 — — 19 5,258 5,277 
Total Loans$814 $287 $6,981 $8,082 $1,777,460 $1,785,542 
December 31, 202330-59
Days Past
Due		60-89
Days Past
Due		Greater
than 90
Days		Total Past
Due		CurrentTotal
Loans
 (Dollars in thousands)
Commercial and Industrial$— $— $712 $712 $34,739 $35,451 
Construction— — 1,091 1,091 156,465 157,556 
Real Estate Mortgage:      
Commercial – Owner Occupied
— — 1,117 1,117 140,625 141,742 
Commercial – Non-owner Occupied
— 1,549 3,107 4,656 365,253 369,909 
Residential – 1 to 4 Family
58 1,793 1,211 3,062 446,620 449,682 
Residential – 1 to 4 Family Investment— 440 — 440 523,727 524,167 
Residential – Multifamily
— — — — 103,324 103,324 
Consumer66 — — 66 5,443 5,509 
Total Loans$124 $3,782 $7,238 $11,144 $1,776,196 $1,787,340 

The following table provides the amortized cost of loans on nonaccrual status:
March 31, 2024
(amounts in thousands)Nonaccrual with no ACLNonaccrual with ACLTotal NonaccrualLoans Past Due Over 90 Days Still AccruingTotal Nonperforming
Commercial and Industrial$277 $421 $698 $— $698 
Construction1,091 — 1,091 — 1,091 
Commercial - Owner Occupied717 400 1,117 — 1,117 
Commercial - Non-owner Occupied2,106 — 2,106 — 2,106 
Residential - 1 to 4 Family1,954 — 1,954 15 1,969 
Residential - 1 to 4 Family Investment— — — — — 
Residential - Multifamily— — — — — 
Consumer— — — — — 
     Total$6,145 $821 $6,966 $15 $6,981 
December 31, 2023
(amounts in thousands)Nonaccrual with no ACLNonaccrual with ACLTotal NonaccrualLoans Past Due Over 90 Days Still AccruingTotal Nonperforming
Commercial and Industrial$277 $435 $712 $— $712 
Construction1,091 — 1,091 — 1,091 
Commercial - Owner Occupied717 400 1,117 — 1,117 
Commercial - Non-owner Occupied3,107 — 3,107 — 3,107 
Residential - 1 to 4 Family1,211 — 1,211 — 1,211 
Residential - 1 to 4 Family Investment— — — — — 
Residential - Multifamily— — — — — 
Consumer— — — — — 
     Total$6,403 $835 $7,238 $— $7,238 

Allowance For Credit Losses (ACL)
We maintain the ACL at a level that we believe to be appropriate to absorb estimated credit losses in the loan portfolios as of the balance sheet date. We established our allowance in accordance with guidance provided in Accounting Standard Codification ("ASC") - Financial Instruments - Credit Losses ("ASC 326").

The allowance for credit losses represents management’s estimate of expected losses inherent in the Company’s lending activities excluding loans accounted for under fair value. The allowance for credit losses is maintained through charges to the provision for credit losses in the Consolidated Statements of Income as expected losses are estimated. Loans or portions thereof that are determined to be uncollectible are charged against the allowance, and subsequent recoveries, if any, are credited to the allowance.

The Company performs periodic reviews of its loan and lease portfolios to identify credit risks and to assess the overall collectability of those portfolios. The Company's allowance for credit losses includes a general component and an asset-specific component for collateral-dependent loans. To determine the asset-specific component of the allowance, the loans are evaluated individually based on the fair value of the underlying collateral. The Company generally measures the asset-specific allowance as the difference between the net realizable value of loan collateral and the recorded investment of a loan.

The general component of the allowance evaluates the impairments of pools of the loan portfolio collectively. It incorporates a historical valuation allowance and qualitative allowance. The historical valuation utilizes a vintage loss rate approach utilizing a third party software model. The vintage loss rate approach creates pools of loans based on the segments defined by management, and consists of commercial and industrial, construction, commercial - owner occupied, commercial - non-owner occupied, residential - 1 to 4 family, residential - 1 to 4 family investment, residential - multifamily, and consumer. The loan pools are aggregated by origination year. Charge-offs, net of recoveries, are allocated by the year of charge-off to each loan pool. An average life is prescribed to a pool of loans that were originated in a particular year. The actual charge-offs as a percent of total loans are calculated for each historical year, and projected for future years for each year within the average life time horizon. The sum of the actual charge-offs and projected charge-offs are divided by the average amortized origination amount for each respective year. Those charge-off percentages are added together to obtain an aggregated vintage loss percentage which is then multiplied by the outstanding loan balances to obtain a reserve requirement.

The qualitative allowance component is based on general economic conditions and other qualitative risk factors both internal and external to the Company. It is generally determined by evaluating, among other things: (i) the experience, ability and effectiveness of the Bank's lending management and staff; (ii) the effectiveness of the Bank's lending policies, procedures and internal controls;(iii) volume and severity of loan credit quality; (iv) nature and volume of portfolio and term of loans (v) the composition and concentrations of credit; (vi) the effectiveness of the internal loan review system; and (vii) national and local economic trends and conditions, and industry conditions. Management evaluates the degree of risk that each one of these components has on the quality of the loan portfolio on a quarterly basis. Each component is determined to have either a high, high-moderate, moderate, low-moderate or low degree of risk. The results are then input into a "general allocation matrix" to determine an appropriate general valuation allowance.
The Company has elected to exclude accrued interest receivable from the measurement of the ACL. When a loan is placed on non-accrual status, any outstanding accrued interest is generally reversed against interest income.

The process of determining the level of the allowance for credit losses requires a high degree of estimate and judgment. It is reasonably possible that actual outcomes may differ from our estimates.


Allowance for Credit Losses on Off-Balance Sheet Credit Exposures

The Company estimates expected credit losses over the contractual period in which the Company is exposed to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet credit exposures is adjusted through the provision for credit loss expense. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over its estimated life. At March 31, 2024 and December 31, 2023, the allowance for credit losses on off-balance sheet credit exposures was $938.0 thousand and $499 thousand, respectively.

The following tables present the information regarding the allowance for credit losses for the three months ended March 31, 2024 and 2023:

Real Estate Mortgage
Commercial and IndustrialConstructionCommercial Owner OccupiedCommercial Non-owner OccupiedResidential 1 to 4 FamilyResidential 1 to 4 Family InvestmentResidential MultifamilyConsumerTotal
(Dollars in thousands)
Three months ended March 31, 2024
December 31, 2023$926 $3,347 $1,795 $7,108 $9,061 $8,783 $1,049 $62 $32,131 
    Charge-offs— — — — — — — — — 
    Recoveries22 — — — — — — — 22 
    Provisions (benefits)112 (314)(104)(1,722)274 813 698 8 (235)
Ending Balance at March 31, 2024
$1,060 $3,033 $1,691 $5,386 $9,335 $9,596 $1,747 $70 $31,918 

During the quarter, the increase to the Residential Multifamily portfolio was due to an increase in the portfolio balance that increased the loan exposure and also caused changes to the qualitative factors related to concentration levels within the portfolio segments. The increase to the Residential 1 to 4 Family Investment portfolio is driven by changes to the qualitative factors related to concentration levels within the portfolio segments. The provision benefit during the quarter to the Commercial Non-owner Occupied segment was mainly due to a decrease in the problem loan balance as well as a decrease in the portfolio balance.

Real Estate Mortgage
Commercial and IndustrialConstructionCommercial Owner OccupiedCommercial Non-owner OccupiedResidential 1 to 4 FamilyResidential 1 to 4 Family InvestmentResidential MultifamilyConsumerTotal
(Dollars in thousands)
Three months ended March 31, 2023
December 31, 2022$390 $2,581 $2,298 $9,709 $6,076 $9,381 $1,347 $63 $31,845 
Impact of adoption of ASC 326168 1,899 (171)(951)1,782 (795)(128)53 $1,857 
    Charge-offs— — — — — — — — — 
    Recoveries3 — 2 — — — — — 5 
    Provisions (benefits)177 (881)(253)(682)(52)(516)19 (12)(2,200)
Ending Balance at March 31, 2023$738 $3,599 $1,876 $8,076 $7,806 $8,070 $1,238 $104 $31,507 
During the quarter, the credit provisions to the Construction, Commercial Non-owner Occupied, and Residential 1-4 Family Investment segments were largely driven by declines or slowdowns to growth within the portfolio that lowered the loan exposure and also caused changes to the qualitative factors related to loan volume within the portfolio segments. The credit provision to the Commercial Owner Occupied segment was largely driven by a reduction in other assets especially mentioned ("OAEM") loans during the quarter, partially offset by an increase in loan volume.


Collateral-Dependent Loans

The following table presents the collateral-dependent loans by portfolio segment and collateral type at March 31, 2024:

(amounts in thousands)Real EstateBusiness AssetsOther
Commercial and Industrial$698 $— $— 
Construction1,091 — — 
Commercial - Owner Occupied1,117 — — 
Commercial - Non-owner Occupied2,106 — — 
Residential - 1 to 4 Family1,954 — — 
Residential - 1 to 4 Family Investment— — — 
Residential - Multifamily— — — 
Consumer— — — 
    Total$6,966 $— $— 

The following table presents the collateral-dependent loans by portfolio segment and collateral type at December 31, 2023:

(amounts in thousands)Real EstateBusiness AssetsOther
Commercial and Industrial$712 $— $— 
Construction1,091 — — 
Commercial - Owner Occupied1,117 — — 
Commercial - Non-owner Occupied3,107 — — 
Residential - 1 to 4 Family1,211 — — 
Residential - 1 to 4 Family Investment— — — 
Residential - Multifamily— — — 
Consumer— — — 
    Total$7,238 $— $— 

Credit Quality Indicators: As part of the on-going monitoring of the credit quality of the Company's loan portfolio, management tracks certain credit quality indicators including trends related to the risk grades of loans, the level of classified loans, net charge-offs, nonperforming loans (see details above) and the general economic conditions in the region.
 
The Company utilizes a risk grading matrix to assign a risk grade to each of its loans. Loans are graded on a scale of 1 to 7. Grades 1 through 4 are considered “Pass”. A description of the general characteristics of the seven risk grades is as follows:

1.Good: Borrower exhibits the strongest overall financial condition and represents the most creditworthy profile.
2.Satisfactory (A): Borrower reflects a well-balanced financial condition, demonstrates a high level of creditworthiness and typically will have a strong banking relationship with the Bank.
3.Satisfactory (B): Borrower exhibits a balanced financial condition and does not expose the Bank to more than a normal or average overall amount of risk. Loans are considered fully collectable.
4.Watch List: Borrower reflects a fair financial condition, but there exists an overall greater than average risk. Risk is deemed acceptable by virtue of increased monitoring and control over borrowings. Probability of timely repayment is present.
5.Other Assets Especially Mentioned (OAEM): Financial condition is such that assets in this category have a potential weakness or pose unwarranted financial risk to the Bank even though the asset value is not currently individually evaluated. The asset does not currently warrant adverse classification but if not corrected could weaken and could create future increased risk exposure. Includes loans that require an increased degree of monitoring or servicing as a result of internal or external changes.
6.Substandard: This classification represents more severe cases of #5 (OAEM) characteristics that require increased monitoring. Assets are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Assets are inadequately protected by the current net worth and paying capacity of the borrower or of the collateral. Asset has a well-defined weakness or weaknesses that impairs the ability to repay debt and jeopardizes the timely liquidation or realization of the collateral at the asset’s net book value.
7.Doubtful: Assets which have all the weaknesses inherent in those assets classified #6 (Substandard) but the risks are more severe relative to financial deterioration in capital and/or asset value; accounting/evaluation techniques may be questionable and the overall possibility for collection in full is highly improbable. Borrowers in this category require constant monitoring, are considered work-out loans and present the potential for future loss to the Bank.

The following tables provide an analysis of loans by portfolio segment based on the credit quality indicators used to determine the allowance for credit losses, as of March 31, 2024.

(Dollars in thousands)Term Loans Amortized Cost Basis by Origination YearRevolving Loans at Amortized Cost Basis
As of March 31, 2024
20242023202220212020PriorTotal
Commercial and Industrial
Pass$574 $4,584 $1,115 $56 $734 $7,459 $21,782 $36,304 
OAEM— — — — — — — — 
Substandard— — 421 — — — 277 698 
Doubtful— — — — — — — — 
$574 $4,584 $1,536 $56 $734 $7,459 $22,059 $37,002 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
Construction
Pass$— $321 $3,337 $10 $207 $— $137,212 $141,087 
OAEM— — — — — — — — 
Substandard— — — — — 1,091 — 1,091 
Doubtful— — — — — — — — 
$— $321 $3,337 $10 $207 $1,091 $137,212 $142,178 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
Commercial – Owner Occupied
Pass$— $19,729 $35,746 $21,380 $6,976 $52,379 $2,694 $138,904 
OAEM— — — — — — — — 
Substandard— — — — — 1,117 — 1,117 
Doubtful— — — — — — — — 
$— $19,729 $35,746 $21,380 $6,976 $53,496 $2,694 $140,021 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
Commercial – Non-owner Occupied
Pass$19,977 $15,908 $75,683 $33,292 $32,735 $164,639 $1,235 $343,469 
OAEM— — — — — 15,386 — 15,386 
Substandard— — — — 249 1,857 — 2,106 
Doubtful— — — — — — — — 
$19,977 $15,908 $75,683 $33,292 $32,984 $181,882 $1,235 $360,961 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
Residential – 1 to 4 Family
Performing$22,696 $57,115 $115,529 $60,054 $32,883 $153,230 $4,758 $446,265 
Nonperforming— — — — 758 1,196 — 1,954 
$22,696 $57,115 $115,529 $60,054 $33,641 $154,426 $4,758 $448,219 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
Residential – 1 to 4 Family Investment
Performing$13,128 $85,537 $135,889 $113,834 $48,909 $125,732 $— $523,029 
Nonperforming— — — — — — — — 
$13,128 $85,537 $135,889 $113,834 $48,909 $125,732 $— $523,029 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
Residential – Multifamily
Pass$999 $5,400 $45,934 $26,258 $12,088 $38,176 $— $128,855 
OAEM— — — — — — — $— 
Substandard— — — — — — — $— 
Doubtful— — — — — — — — 
$999 $5,400 $45,934 $26,258 $12,088 $38,176 $— $128,855 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
Consumer
Performing$— $— $— $— $— $5,277 $— $5,277 
Nonperforming— — — — — — — — 
$— $— $— $— $— $5,277 $— $5,277 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
As of March 31, 2024, the Company was in the process of foreclosing on $6.4 million in loans, consisting of 12 residential 1 to 4 family loans with a principal balance of $2.0 million, two commercial - owner occupied loans with a principal balance of $1.1 million, and three commercial - non-owner occupied loans with a principal balance of $3.3 million.
The following tables provide an analysis of loans by portfolio segment based on the credit quality indicators used to determine the allowance for credit losses, as of December 31, 2023.

(Dollars in thousands)Term Loans Amortized Cost Basis by Origination YearRevolving Loans at Amortized Cost Basis
As of December 31, 2023
20232022202120202019PriorTotal
Commercial and Industrial
Pass$4,724 $1,269 $87 $759 $598 $7,154 $20,148 $34,739 
OAEM— — — — — — — — 
Substandard— 435 — — — — 277 712 
Doubtful— — — — — — — — 
$4,724 $1,704 $87 $759 $598 $7,154 $20,425 $35,451 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
Construction
Pass$323 $3,335 $4,499 $195 $— $— $148,113 $156,465 
OAEM— — — — — — — — 
Substandard— — — — — 1,091 — 1,091 
Doubtful— — — — — — — — 
$323 $3,335 $4,499 $195 $— $1,091 $148,113 $157,556 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
Commercial – Owner Occupied
Pass$19,842 $36,030 $21,536 $7,104 $8,346 $45,249 $2,518 $140,625 
OAEM— — — — — — — — 
Substandard— — — — — 1,117 — 1,117 
Doubtful— — — — — — — — 
$19,842 $36,030 $21,536 $7,104 $8,346 $46,366 $2,518 $141,742 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
Commercial – Non-owner Occupied
Pass$19,123 $93,805 $37,002 $33,316 $54,484 $112,471 $1,180 $351,381 
OAEM— — — — — 15,421 — 15,421 
Substandard— — — 250 2,586 271 — 3,107 
Doubtful— — — — — — — — 
$19,123 $93,805 $37,002 $33,566 $57,070 $128,163 $1,180 $369,909 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
Residential – 1 to 4 Family
Performing$58,358 $117,044 $61,580 $33,037 $25,623 $148,124 $4,705 $448,471 
Nonperforming155 — — 285 771 — — 1,211 
$58,513 $117,044 $61,580 $33,322 $26,394 $148,124 $4,705 $449,682 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
Residential – 1 to 4 Family Investment
Performing$87,734 $138,884 $116,487 $50,119 $54,576 $76,367 $— $524,167 
Nonperforming— — — — — — — — 
$87,734 $138,884 $116,487 $50,119 $54,576 $76,367 $— $524,167 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
Residential – Multifamily
Pass$2,292 $23,030 $27,006 $12,159 $9,989 $28,848 $— $103,324 
OAEM— — — — — — — $— 
Substandard— — — — — — — $— 
Doubtful— — — — — — — — 
$2,292 $23,030 $27,006 $12,159 $9,989 $28,848 $— $103,324 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
Consumer
Performing$— $— $— $— $— $5,493 $16 $5,509 
Nonperforming— — — — — — — — 
$— $— $— $— $— $5,493 $16 $5,509 
Current period gross charge-offs$— $— $— $— $— $— $— $— 
Modifications to Borrowers Experiencing Financial Difficulty

At March 31, 2024, the Company did not make any modifications to borrowers experiencing financial difficulty.