Loans

3 Months Ended

Mar. 31, 2023

Loans receivable that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at their unpaid principal balances, adjusted for any charge-offs, the ACL, and any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans.

Loan interest income is accrued daily on outstanding balances. The following accounting policies, related to accrual and nonaccrual loans, apply to all portfolio segments and loan classes, which the Company considers to be the same. The accrual of interest is normally discontinued when a loan is specifically determined to be impaired and/or management believes, after considering collection efforts and other factors, that the borrower's financial condition is such that collection of interest is doubtful. In general, loans that are 90 days or more past due are placed in nonaccrual, unless there are circumstances that cause management to believe the collection of interest is not doubtful. Generally, any unpaid interest previously accrued on those loans is reversed against current period interest income. A loan may be restored to accrual status when its financial status has significantly improved and there is no principal or interest past due. A loan may also be restored to accrual status if the borrower makes six consecutive monthly payments or the lump sum equivalent. Income on nonaccrual loans is generally not recognized unless a loan is returned to accrual status or after all principal has been collected. Interest payments received on such loans are generally applied as a reduction of the loan principal balance. Delinquency status is determined based on contractual terms for all portfolio segments and loan classes. Loans past due 30 days or more are considered delinquent. Loans are considered in process of foreclosure when a judgment of foreclosure has been issued by the court.

Loan origination fees and direct loan origination costs are deferred and amortized as an adjustment of the related loan's yield using methods that approximate the interest method. The Company generally amortizes these amounts over the estimated average life of the related loans.

Effective with the adoption of CECL on January 1, 2023, the Company evaluates the risk characteristics of its loans based on regulatory call report code with segmentation based on the underlying collateral or purpose for certain loan types. Prior to the adoption of CECL, under the incurred loss model, the Company evaluated the risk characteristics of its loans based on the underlying collateral securing the loans.

The composition of Net loans as of the balance sheet dates, by regulatory call report code segmentation based on underlying collateral or purpose for certain loan types, was as follows:


	March 31, 2023		December 31, 2022
	(Dollars in thousands)
Residential real estate
Non-revolving residential real estate	$	341,880	$	335,470
Revolving residential real estate	16,299		16,963
Construction real estate
Commercial construction real estate	60,847		56,501
Residential construction real estate	46,320		40,119
Commercial real estate
Non-residential commercial real estate	278,366		282,397
Multi-family residential real estate	93,953		95,550
Commercial	41,553		40,973
Consumer	2,373		2,204
Municipal	90,818		87,980
Gross loans	972,409		958,157
ACL losses on loans	(6,934)		(8,339)
Net deferred loan costs	1,358		1,336
Net loans	$	966,833	$	951,154

Qualifying residential first mortgage loans and certain commercial real estate loans with an aggregate carrying value of $265.8 million and $272.9 million were pledged as collateral for borrowings from the FHLB under a blanket lien at March 31, 2023 and December 31, 2022, respectively.

Accrued interest receivable on loans totaled $3.1 million at March 31, 2023 and December 31, 2022 and is excluded from the estimate of credit losses within Note 7.