Loans and Credit Quality

9 Months Ended

Sep. 30, 2024

Note 5 – Loans and Credit Quality

The following table presents the composition of loans receivable at September 30, 2024 and December 31, 2023, respectively:



	September 30, 2024			December 31, 2023
			Percentage of			Percentage of
	Balance		total Loans	Balance		total Loans

		(Dollars in Thousands)

Commercial real estate	$	534,004	42.45%	$	539,034	43.00%
Commercial construction		19,886	1.58%		16,840	1.34%
Commercial		37,185	2.95%		33,951	2.71%
Residential real estate		666,491	52.98%		663,127	52.90%
Consumer		518	0.04%		565	0.05%
Total loans		1,258,084	100.00%		1,253,517	100.00%
Unearned origination fees		646			522
Allowance for credit losses		(12,206)			(12,461)
Net Loans	$	1,246,524		$	1,241,578

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The following table presents the classes of the loan portfolio summarized by the aggregate pass rating and the classified ratings of special mention (potential weakness), substandard (well defined weakness) and doubtful (full collection unlikely) within the Company's internal risk rating system as of September 30, 2024 by year of origination:


		2024		2023		2022		2021		2020		Prior		Revolving		Total

		(In Thousands)
Commercial
real estate
	Pass	$	39,974	$	59,399	$	147,920	$	49,038	$	58,286	$	168,955	$	9,084	$	532,656
	Special Mention		-		-		-		136		-		-		-		136
	Substandard		-		-		-		-		-		1,212		-		1,212
	Total		39,974		59,399		147,920		49,174		58,286		170,167		9,084		534,004

Commercial
construction
	Pass		2,617		4,264		7,544		5,139		-		29		-		19,593
	Special Mention		-		-		-		-		-		-		-		-
	Substandard		-		-		-		-		-		238		55		293
	Total		2,617		4,264		7,544		5,139		-		267		55		19,886

Commercial
	Pass		5,985		1,717		3,534		754		2,668		12,435		6,643		33,736
	Special Mention		191		-		409		922		147		20		1,760		3,449
	Substandard		-		-		-		-		-		-		-		-
	Total		6,176		1,717		3,943		1,676		2,815		12,455		8,403		37,185

Residential
real estate
	Pass		57,133		67,023		89,936		146,767		131,372		151,130		21,879		665,240
	Special Mention		-		-		-		-		-		425		-		425
	Substandard		-		-		43		196		-		587		-		826
	Total		57,133		67,023		89,979		146,963		131,372		152,142		21,879		666,491

Consumer
	Pass		98		73		83		13		-		4		247		518
	Special Mention		-		-		-		-		-		-		-		-
	Substandard		-		-		-		-		-		-		-		-
	Total		98		73		83		13		-		4		247		518
Total
Loans Receivable		$	105,998	$	132,476	$	249,469	$	202,965	$	192,473	$	335,035	$	39,668	$	1,258,084

The Company had gross charge-offs of $11 thousand during the nine months ending September 30, 2024. One (1) charge-off of $5 thousand was a consumer loan originated in 2021 and one (1) charge-off of $6 thousand was a consumer loan originated in 2023.

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		2023		2022		2021		2020		2019		Prior		Revolving		Total

		(In Thousands)
Commercial
real estate
	Pass	$	62,467	$	160,257	$	58,094	$	64,146	$	26,835	$	157,888	$	8,094	$	537,781
	Special Mention		-		-		-		-		-		-		-		-
	Substandard		-		-		-		-		-		1,253		-		1,253
	Total		62,467		160,257		58,094		64,146		26,835		159,141		8,094		539,034

Commercial
construction
	Pass		2,071		8,591		5,412		-		440		30		-		16,544
	Special Mention		-		-		-		-		-		-		-		-
	Substandard		-		-		-		-		-		241		55		296
	Total		2,071		8,591		5,412		-		440		271		55		16,840

Commercial
	Pass		2,236		4,851		2,260		3,312		5,388		9,311		6,572		33,930
	Special Mention		-		-		-		-		21		-		-		21
	Substandard		-		-		-		-		-		-		-		-
	Total		2,236		4,851		2,260		3,312		5,409		9,311		6,572		33,951

Residential
real estate
	Pass		75,372		96,032		158,135		142,318		46,035		122,252		21,423		661,567
	Special Mention		-		-		-		-		-		443		-		443
	Substandard		-		-		-		-		173		944		-		1,117
	Total		75,372		96,032		158,135		142,318		46,208		123,639		21,423		663,127

Consumer
	Pass		130		118		22		1		13		11		270		565
	Special Mention		-		-		-		-		-		-		-		-
	Substandard		-		-		-		-		-		-		-		-
	Total		130		118		22		1		13		11		270		565
Total
Loans Receivable		$	142,276	$	269,849	$	223,923	$	209,777	$	78,905	$	292,373	$	36,414	$	1,253,517

The Company had no loans that were charged off during the year ended December 31, 2023.

At September 30, 2024, the Company had no foreclosed assets and had one (1) recorded investment in mortgage loans collateralized by residential real estate property in the process of foreclosure in the amount of $173 thousand. At December 31, 2023, the Company had no foreclosed assets and had one (1) recorded investment in a mortgage loan collateralized by residential real estate property in the process of foreclosure in the amount of $121 thousand.

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The following table presents the carrying value and related allowance for credit losses of individually analyzed loans at September 30, 2024 and December 31, 2023, respectively:


	September 30, 2024						December 31, 2023
	Recorded Investment		Unpaid Principal Balance		Related Allowance for Credit Losses		Recorded Investment		Unpaid Principal Balance		Related Allowance for Credit Losses
	(In Thousands)
With no related allowance recorded:
Commercial real estate (1)	$	1,348	$	1,348			$	1,303	$	1,543
Commercial construction (1)		55		55				55		55
Commercial (1)		513		513				-		-
Residential real estate (1)		970		973				1,202		1,206
Consumer		-		-				-		-
With an allowance recorded:
Commercial real estate	$	-	$	-	$	-	$	-	$	-	$	-
Commercial construction (1)		238		238		19		241		241		22
Commercial (2)		35		35		35		21		21		21
Residential real estate (1)		425		425		82		516		516		152
Consumer		-		-		-		-		-		-
Total:
Commercial real estate	$	1,348	$	1,348	$	-	$	1,303	$	1,543	$	-
Commercial construction		293		293		19		296		296		22
Commercial		548		548		35		21		21		21
Residential real estate		1,395		1,398		82		1,718		1,722		152
Consumer		-		-		-		-		-		-
	$	3,584	$	3,587	$	136	$	3,338	$	3,582	$	195

1.All loans are real estate collateral dependent.

2.All loans are non-collateral dependent loans.

The following table presents non-accrual loans by classes of the loan portfolio:



	September 30, 2024		December 31, 2023

	(In Thousands)
Commercial real estate	$	136	$	-
Commercial construction		-		-
Commercial		528		-
Residential real estate		544		366
Consumer		-		-
Total	$	1,208	$	366

As of September 30, 2024, there were seven (7) loans in non-accrual status in the amount of $1.2 million, of which one (1) loan of $15 thousand is non-collateral dependent and required a related allowance of $15 thousand. The remaining collateral dependent non-accrual loans did not have a required related allowance. There was interest income of $7 thousand and $32 thousand recognized for the three and nine months ended September 30, 2024, respectively, on non-accrual loans. As of December 31, 2023, there were three (3) loans in non-accrual status in the amount of $366 thousand. There was a required related allowance of $66 thousand for these collateral dependent non-accrual loans.
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The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the past due status as of September 30, 2024 and December 31, 2023, respectively:


					Greater								Loan
					than								Receivables >
	30-59 Days		60-89 Days		90 Days		Total				Total Loan		90 Days and
	Past Due		Past Due		Past Due		Past Due		Current		Receivables		Accruing

September 30, 2024	(In Thousands)
Commercial real estate	$	349	$	-	$	136	$	485	$	533,519	$	534,004	$	-
Commercial construction		-		-		-		-		19,886		19,886		-
Commercial		-		15		-		15		37,170		37,185		-
Residential real estate		1,490		-		501		1,991		664,500		666,491		-
Consumer		4		-		-		4		514		518		-
Total	$	1,843	$	15	$	637	$	2,495	$	1,255,589	$	1,258,084	$	-
December 31, 2023
Commercial real estate	$	630	$	-	$	-	$	630	$	538,404	$	539,034	$	-
Commercial construction		-		-		-		-		16,840		16,840		-
Commercial		-		-		-		-		33,951		33,951		-
Residential real estate		344		-		193		537		662,590		663,127		-
Consumer		-		-		-		-		565		565		-
Total	$	974	$	-	$	193	$	1,167	$	1,252,350	$	1,253,517	$	-

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The following tables detail the activity in the allowance for credit losses for the three and nine months ended September 30, 2024 and September 30, 2023, respectively:


	Commercial Real Estate		Commercial Construction		Commercial		Residential Real Estate		Consumer		Unallocated		Total

Allowance for credit losses	(In Thousands)
Three Months Ending September 30, 2024
Beginning Balance - June 30, 2024	$	6,017	$	227	$	525	$	5,438	$	39	$	-	$	12,246
Charge-offs		-		-		-		-		-		-		-
Recoveries		-		-		-		-		-		-		-
Provisions (credits) on loans		(22)		6		(9)		(9)		(6)		-		(40)
Ending Balance - September 30, 2024	$	5,995	$	233	$	516	$	5,429	$	33	$	-	$	12,206

Nine Months Ending September 30, 2024
Beginning Balance - December 31, 2023	$	6,108	$	195	$	920	$	5,224	$	14	$	-	$	12,461
Charge-offs		-		-		-		-		(11)		-		(11)
Recoveries		240		-		-		-		-		-		240
Provisions (credits) on loans		(353)		38		(404)		205		30		-		(484)
Ending Balance - September 30, 2024	$	5,995	$	233	$	516	$	5,429	$	33	$	-	$	12,206

Allowance for credit losses
Three Months Ending September 30, 2023
Beginning Balance - June 30, 2023	$	5,941	$	317	$	973	$	5,299	$	23	$	195	$	12,748
Charge-offs		-		-		-		-		-		-		-
Recoveries		-		-		-		1		-		-		1
Provisions (credits) on loans		(158)		46		(37)		29		3		(183)		(300)
Ending Balance - September 30, 2023	$	5,783	$	363	$	936	$	5,329	$	26	$	12	$	12,449

Nine Months Ending September 30, 2023
Beginning Balance - December 31, 2022	$	5,113	$	200	$	1,289	$	4,960	$	13	$	874	$	12,449
January 1, 2023 adoption of ASU 2016-13		492		77		(172)		522		19		(750)		188
Charge-offs		-		-		-		-		-		-		-
Recoveries		-		-		-		2		-		-		2
Provisions (credits) on loans		178		86		(181)		(155)		(6)		(112)		(190)
Ending Balance - September 30, 2023	$	5,783	$	363	$	936	$	5,329	$	26	$	12	$	12,449

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The following tables represent the allocation for credit losses and the related loan portfolio disaggregated based on impairment methodology at September 30, 2024 and December 31, 2023:



	Commercial Real Estate		Commercial Construction		Commercial		Residential Real Estate		Consumer		Unallocated		Total

	(In Thousands)
September 30, 2024
Allowance for Credit Losses
Ending Balance	$	5,995	$	233	$	516	$	5,429	$	33	$	-	$	12,206
Ending balance: individually evaluated for impairment - real estate collateral dependent	$	-	$	19	$	-	$	82	$	-	$	-	$	101
Ending balance: individually evaluated for impairment - non-collateral dependent	$	-	$	-	$	35	$	-	$	-	$	-	$	35
Ending balance: collectively evaluated for impairment	$	5,995	$	214	$	481	$	5,347	$	33	$	-	$	12,070

Loans receivables:
Ending balance	$	534,004	$	19,886	$	37,185	$	666,491	$	518			$	1,258,084
Ending balance: individually evaluated for impairment - real estate collateral dependent	$	1,348	$	293	$	513	$	1,395	$	-			$	3,549
Ending balance: individually evaluated for impairment - non-collateral dependent	$	-	$	-	$	35	$	-	$	-			$	35
Ending balance: collectively evaluated for impairment	$	532,656	$	19,593	$	36,637	$	665,096	$	518			$	1,254,500

December 31, 2023
Allowance for Credit Losses
Ending Balance	$	6,108	$	195	$	920	$	5,224	$	14	$	-	$	12,461
Ending balance: individually evaluated for impairment - real estate collateral dependent	$	-	$	22	$	-	$	152	$	-	$	-	$	174
Ending balance: individually evaluated for impairment - non-collateral dependent	$	-	$	-	$	21	$	-	$	-	$	-	$	21
Ending balance: collectively evaluated for impairment	$	6,108	$	173	$	899	$	5,072	$	14	$	-	$	12,266

Loans receivables:
Ending balance	$	539,034	$	16,840	$	33,951	$	663,127	$	565			$	1,253,517
Ending balance: individually evaluated for impairment - real estate collateral dependent	$	1,303	$	296	$	-	$	1,718	$	-			$	3,317
Ending balance: individually evaluated for impairment - non-collateral dependent	$	-	$	-	$	21	$	-	$	-			$	21
Ending balance: collectively evaluated for impairment	$	537,731	$	16,544	$	33,930	$	661,409	$	565			$	1,250,179

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Based on the guidance in ASU 2022-02, Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures, a loan modification or refinancing results in a new loan if the terms of the new loan are at least as favorable to the lender as the terms with customers with similar collection risks that are not refinancing or restricting their loans and the modification to the terms of the loan are more than minor. If a loan modification or refinancing does not result in a new loan, it is classified as a loan modification.

There are additional disclosures for modification of loans with borrowers experiencing financial difficulty that result in a direct change in the timing or amount of contractual cash flows. The disclosures are applicable to situations where there is principal forgiveness, interest rate reductions, other than insignificant payment delays, term extensions, or a combination of any of these items. If the Company modifies any loans to borrowers in financial distress that involves principal forgiveness, the amount of principal that is forgiven is charged off against the allowance for credit losses. The Company had no new loan modifications to borrowers experiencing financial difficulties in the three months ending September 30, 2024. The Company had no new loan modifications to borrowers experiencing financial difficulties in the three and nine months ending September 30, 2023, and there were no modifications to borrowers experiencing financial difficulties that were outstanding at September 30, 2023.

The following table presents new loan modifications for credit concerns during the nine months ending September 30, 2024:


	Number of Loans	Pre-Modification Outstanding Balance		Post- Modification Outstanding Balance

	(Dollars In Thousands)
Nine Months Ending September 30, 2024
Residential real estate	1	$	79	$	79
	1	$	79	$	79

The loan modification listed above was to a borrower experiencing financial distress and had no reserve recorded in the allowance for credit losses at September 30, 2024. The loan also was not past due at September 30, 2024. The modified home equity loan had an extended maturity date compared to the original loan, which represents less than 0.01% of the total residential real estate loans outstanding at September 30, 2024. There is no commitment to lend additional amounts on this modified loan. The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. There were $138 thousand of modifications to borrowers experiencing financial difficulties that were outstanding at September 30, 2024.