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Loans and Allowance for Credit Losses | 9 Months Ended
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Sep. 30, 2024
Receivables [Abstract] |
Loans and Allowance for Credit Losses | Note 3 – Loans and Allowance for Credit Losses The following table presents the components of loans as of the periods shown:
(Dollars in thousands) |  | September 30, 2024 |  | December 31, 2023
Commercial: |  |  |  |
Business |  | $ | 701,974 |  |  | $ | 797,100 |
Real estate |  | 665,038 |  |  | 670,584 |
Acquisition, development and construction |  | 113,521 |  |  | 134,004 |
Total commercial |  | 1,480,533 |  |  | 1,601,688 |
Residential real estate |  | 656,606 |  |  | 672,547 |
Home equity lines of credit |  | 12,356 |  |  | 14,531 |
Consumer |  | 20,452 |  |  | 27,408 |
Total loans |  | 2,169,947 |  |  | 2,316,174 |
Deferred loan origination costs, net |  | 1,325 |  |  | 1,420 |
Loans receivable |  | $ | 2,171,272 |  |  | $ | 2,317,594 |
We currently manage our loan portfolios and the respective exposure to credit losses (credit risk) by the specific portfolio segments shown below. Our loan portfolio segmentation is based primarily on call report codes, which are levels at which we develop and document our systematic methodology to determine the ACL attributable to each respective portfolio segment. The ACL portfolio segments are aggregated into broader segments in order to present informative yet concise disclosures within this document, as follows: Commercial business loans – Commercial business loans are made to provide funds for equipment and general corporate needs, as well as to finance owner-occupied real estate, and to finance future cash flows of Federal government lease contracts. Repayment of these loans primarily uses the funds obtained from the operation of the borrower’s business. Commercial business loans also include lines of credit that are utilized to finance a borrower’s short-term credit needs and/or to finance a percentage of eligible receivables and inventory. This segment includes both internally originated and purchased participation loans. Credit risk arises from the successful operation of the business, which may be affected by competition, rising interest rates, regulatory changes and adverse conditions in the local and regional economy. Commercial business loans include the following ACL segments: commercial and industrial (including both healthcare and SBA subsegments), commercial real estate owner-occupied (including both healthcare and SBA subsegments), government leases, and other loans. Commercial real estate loans – Commercial real estate loans consist of non-owner occupied properties, such as investment properties for retail, office and multifamily with a history of occupancy and cash flow. This segment includes both internally originated and purchased participation loans. These loans carry the risk of adverse changes in the local economy and a tenant’s deteriorating credit strength, lease expirations in soft markets and sustained vacancies, which can adversely impact cash flow. Commercial real estate loans include the following ACL segments: commercial real estate non-owner occupied (including both healthcare and SBA subsegments). Commercial acquisition, development and construction loans – Commercial acquisition, development and construction loans are intended to finance the construction of commercial and residential properties, and also includes loans for the acquisition and development of land. Construction loans represent a higher degree of risk than permanent real estate loans and may be affected by a variety of factors such as the borrower’s ability to control costs and adhere to time schedules and the risk that the market may not absorb constructed units within the anticipated time frame or at the anticipated price. The loan commitment on these loans often includes an interest reserve that allows the lender to periodically advance loan funds to pay interest charges on the outstanding balance of the loan. Commercial acquisition, development and construction loans include the following ACL segments: other construction (including an SBA subsegment). Residential real estate – This residential real estate segment contains permanent and construction mortgage loans principally to consumers, but also includes loans to residential real estate developers, secured by residential real estate, which we previously presented under commercial acquisitions, development and construction loans under the incurred loss model. Residential real estate loans to consumers are evaluated for the adequacy of repayment sources at the time of approval, based upon measures including credit scores, debt-to-income ratios and collateral values. Credit risk arises from the continuing financial stability of the borrower and, where applicable, the builder, which can be adversely impacted by job loss, divorce, illness or personal bankruptcy, among other factors. Residential real estate secured loans to developers represent a higher degree of risk than permanent real estate loans and may be affected by a variety of factors such as the borrower’s ability to control costs and adhere to time schedules and the risk that the market may not absorb constructed units within the anticipated time frame or at the anticipated price. Also impacting credit risk would be a shortfall in the value of the residential real estate in relation to the outstanding loan balance in the event of a default or subsequent liquidation of the real estate collateral. Residential real estate loans include the following ACL segments: residential and residential construction (including SBA subsegment). Home equity lines of credit – This segment includes subsegments for senior lien and subordinate lien lines of credit. Credit risk is similar to residential real estate loans described above as it is subject to the borrower’s continuing financial stability and the value of the collateral securing the loan. Consumer loans – This segment of loans includes primarily installment loans and personal lines of credit. Consumer loans include installment loans used by clients to purchase automobiles, boats and recreational vehicles. Credit risk is similar to residential real estate loans described above as it is subject to the borrower’s continuing financial stability and the value of the collateral securing the loan. This segment primarily includes loans purchased from a third-party originator that originates loans in order to finance the purchase of personal automotive vehicles. Credit risk is unique as this segment includes only those loans provided to consumers who cannot typically obtain financing through traditional lenders. As such, these loans are subject to a higher risk of default than the typical consumer loan. Consumer loans include the following ACL segments: subprime consumer automotive and consumer. As of September 30, 2024, the Bank’s other real estate owned balance totaled $0.8 million, all of which was related to a 2020 acquisition of another bank. The other real estate owned balance consisted of two unrelated commercial properties. As of September 30, 2024, there were eight residential mortgages in the process of foreclosure with a loan balance totaling $3.4 million. Bank management uses a nine-point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first five categories are considered not criticized and are aggregated as “Pass” rated. The criticized rating categories utilized by management generally follow bank regulatory definitions. Loans categorized as “Pass” rated have adequate sources of repayment, with little identifiable risk of collection and general conformity to the Bank's policy requirements, product guidelines and underwriting standards. Any exceptions that are identified during the underwriting and approval process have been adequately mitigated by other factors. Loans categorized as “Special Mention” rated have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose the institution to sufficient risk to warrant adverse classification. Loans categorized as “Substandard” rated are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt and are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Loans categorized as “Doubtful” rated have all the weaknesses inherent in those classified as Substandard with the added characteristic that the weakness makes collections or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable. However, these loans are not yet rated as loss because certain events may occur which would salvage the debt. Any portion of a loan that has been or is expected to be charged off is placed in the “Loss” category. To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Bank has a structured loan rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories, unless a specific action, such as past due status, bankruptcy, repossession or death, occurs to raise awareness of a possible credit event. The Bank’s Chief Credit Officer is responsible for the timely and accurate risk rating of the loans in the portfolio at origination and on an ongoing basis. The Bank's Credit Department ensures that a review of all commercial relationships of $1.0 million or more is performed annually. Review of the appropriate risk grade is included in both the internal and external loan review process and on an ongoing basis. The Bank has an experienced credit department that continually reviews and assesses loans within the portfolio. The Bank engages an external consultant to conduct independent loan reviews on at least an annual basis. Generally, the external consultant reviews commercial relationships with the intent of reviewing 35% to 40% of the Bank's commercial outstanding loan balances on an annual basis. The Bank's credit department compiles detailed reviews, including plans for resolution, on loans classified as Substandard on a quarterly basis. The following table presents the amortized cost of loans summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system by vintage year as of the period shown:
|  | Term Loans Amortized Cost Basis by Origination Year |  |  |  |  |  |
(Dollars in thousands) |  | 2024 |  | 2023 |  | 2022 |  | 2021 |  | 2020 |  | Prior |  |  |  | Revolving Loans Converted to Term |  | Total
September 30, 2024 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial business: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 49,244 |  |  | $ | 142,643 |  |  | $ | 211,830 |  |  | $ | 65,488 |  |  | $ | 70,770 |  |  | $ | 114,002 |  |  |  |  | $ | 7,136 |  |  | $ | 661,113 |
Special Mention |  | 41 |  |  | — |  |  | 21,785 |  |  | 222 |  |  | 791 |  |  | 4,011 |  |  |  |  | — |  |  | 26,850 |
Substandard |  | — |  |  | 1,242 |  |  | 5,178 |  |  | 285 |  |  | — |  |  | 4,410 |  |  |  |  | 202 |  |  | 11,317 |
Doubtful |  | — |  |  | — |  |  | 1,011 |  |  | 382 |  |  | 285 |  |  | 1,016 |  |  |  |  | — |  |  | 2,694 |
Total commercial business loans |  | $ | 49,285 |  |  | $ | 143,885 |  |  | $ | 239,804 |  |  | $ | 66,377 |  |  | $ | 71,846 |  |  | $ | 123,439 |  |  |  |  | $ | 7,338 |  |  | $ | 701,974 |
Gross charge-offs |  | $ | 2 |  |  | $ | — |  |  | $ | 1,083 |  |  | $ | 840 |  |  | $ | — |  |  | $ | 367 |  |  |  |  |  |  | $ | 2,292 |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 50,668 |  |  | $ | 111,823 |  |  | $ | 137,027 |  |  | $ | 167,909 |  |  | $ | 11,531 |  |  | $ | 124,518 |  |  |  |  | $ | 460 |  |  | $ | 603,936 |
Special Mention |  | — |  |  | — |  |  | — |  |  | 7,797 |  |  | — |  |  | 14,835 |  |  |  |  | — |  |  | 22,632 |
Substandard |  | — |  |  | — |  |  | — |  |  | 18,002 |  |  | — |  |  | 20,468 |  |  |  |  | — |  |  | 38,470 |
Doubtful |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |
Total commercial real estate loans |  | $ | 50,668 |  |  | $ | 111,823 |  |  | $ | 137,027 |  |  | $ | 193,708 |  |  | $ | 11,531 |  |  | $ | 159,821 |  |  |  |  | $ | 460 |  |  | $ | 665,038 |
Gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |  |  |  |  | $ | — |
Commercial acquisition, development and construction: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 11,867 |  |  | $ | 11,277 |  |  | $ | 35,154 |  |  | $ | 30,339 |  |  | $ | 7,235 |  |  | $ | 3,608 |  |  |  |  | $ | — |  |  | $ | 99,480 |
Special Mention |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |
Substandard |  | — |  |  | — |  |  | — |  |  | 13,506 |  |  | — |  |  | 535 |  |  |  |  | — |  |  | 14,041 |
Doubtful |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |
Total commercial acquisition, development and construction loans |  | $ | 11,867 |  |  | $ | 11,277 |  |  | $ | 35,154 |  |  | $ | 43,845 |  |  | $ | 7,235 |  |  | $ | 4,143 |  |  |  |  | $ | — |  |  | $ | 113,521 |
Gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |  |  |  |  | $ | — |
Residential Real Estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 44,489 |  |  | $ | 57,280 |  |  | $ | 388,965 |  |  | $ | 97,588 |  |  | $ | 33,618 |  |  | $ | 24,334 |  |  |  |  | $ | 2,679 |  |  | $ | 648,953 |
Special Mention |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 670 |  |  |  |  | — |  |  | 670 |
Substandard |  | — |  |  | — |  |  | 1,821 |  |  | — |  |  | 2,490 |  |  | 2,252 |  |  |  |  | 116 |  |  | 6,679 |
Doubtful |  | — |  |  | — |  |  | — |  |  | 211 |  |  | — |  |  | 93 |  |  |  |  | — |  |  | 304 |
Total residential real estate loans |  | $ | 44,489 |  |  | $ | 57,280 |  |  | $ | 390,786 |  |  | $ | 97,799 |  |  | $ | 36,108 |  |  | $ | 27,349 |  |  |  |  | $ | 2,795 |  |  | $ | 656,606 |
Gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |  |  |  |  | $ | — |
|  | Term Loans Amortized Cost Basis by Origination Year |  |  |  |  |  |
(Dollars in thousands) |  | 2024 |  | 2023 |  | 2022 |  | 2021 |  | 2020 |  | Prior |  |  |  | Revolving Loans Converted to Term |  | Total
September 30, 2024 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity lines of credit: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | — |  |  | $ | 57 |  |  | $ | 35 |  |  | $ | — |  |  | $ | 1,052 |  |  | $ | 10,858 |  |  |  |  | $ | — |  |  | $ | 12,002 |
Special Mention |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 229 |  |  |  |  | — |  |  | 229 |
Substandard |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 125 |  |  |  |  | — |  |  | 125 |
Doubtful |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |
Total home equity lines of credit loans |  | $ | — |  |  | $ | 57 |  |  | $ | 35 |  |  | $ | — |  |  | $ | 1,052 |  |  | $ | 11,212 |  |  |  |  | $ | — |  |  | $ | 12,356 |
Gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |  |  |  |  | $ | — |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | — |  |  | $ | 1,709 |  |  | $ | 14,131 |  |  | $ | 4,383 |  |  | $ | — |  |  | $ | 42 |  |  |  |  | $ | — |  |  | $ | 20,265 |
Special Mention |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |
Substandard |  | — |  |  | — |  |  | 151 |  |  | 36 |  |  | — |  |  | — |  |  |  |  | — |  |  | 187 |
Doubtful |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |
Total consumer loans |  | $ | — |  |  | $ | 1,709 |  |  | $ | 14,282 |  |  | $ | 4,419 |  |  | $ | — |  |  | $ | 42 |  |  |  |  | $ | — |  |  | $ | 20,452 |
Gross charge-offs |  | $ | — |  |  | $ | 352 |  |  | $ | 2,057 |  |  | $ | 379 |  |  | $ | — |  |  | $ | — |  |  |  |  |  |  | $ | 2,788 |
Total: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 156,268 |  |  | $ | 324,789 |  |  | $ | 787,142 |  |  | $ | 365,707 |  |  | $ | 124,206 |  |  | $ | 277,362 |  |  |  |  | $ | 10,275 |  |  | $ | 2,045,749 |
Special Mention |  | 41 |  |  | — |  |  | 21,785 |  |  | 8,019 |  |  | 791 |  |  | 19,745 |  |  |  |  | — |  |  | 50,381 |
Substandard |  | — |  |  | 1,242 |  |  | 7,150 |  |  | 31,829 |  |  | 2,490 |  |  | 27,790 |  |  |  |  | 318 |  |  | 70,819 |
Doubtful |  | — |  |  | — |  |  | 1,011 |  |  | 593 |  |  | 285 |  |  | 1,109 |  |  |  |  | — |  |  | 2,998 |
Total loans |  | $ | 156,309 |  |  | $ | 326,031 |  |  | $ | 817,088 |  |  | $ | 406,148 |  |  | $ | 127,772 |  |  | $ | 326,006 |  |  |  |  | $ | 10,593 |  |  | $ | 2,169,947 |
Gross charge-offs |  | $ | 2 |  |  | $ | 352 |  |  | $ | 3,140 |  |  | $ | 1,219 |  |  | $ | — |  |  | $ | 367 |  |  |  |  | $ | — |  |  | $ | 5,080 |
|  | Term Loans Amortized Cost Basis by Origination Year |  |  |  |  |  |
(Dollars in thousands) |  | 2023 |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | Prior |  |  |  | Revolving Loans Converted to Term |  | Total
December 31, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial business: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 187,743 |  |  | $ | 249,718 |  |  | $ | 95,547 |  |  | $ | 66,195 |  |  | $ | 51,025 |  |  | $ | 91,435 |  |  |  |  | $ | 4,617 |  |  | $ | 746,280 |
Special Mention |  | 990 |  |  | 30,695 |  |  | 72 |  |  | 830 |  |  | 339 |  |  | 3,767 |  |  |  |  | 1,647 |  |  | 38,340 |
Substandard |  | 368 |  |  | 988 |  |  | 317 |  |  | — |  |  | 4,640 |  |  | 1,436 |  |  |  |  | 204 |  |  | 7,953 |
Doubtful |  | — |  |  | 2,022 |  |  | 839 |  |  | 264 |  |  | — |  |  | 1,402 |  |  |  |  | — |  |  | 4,527 |
Total commercial business loans |  | $ | 189,101 |  |  | $ | 283,423 |  |  | $ | 96,775 |  |  | $ | 67,289 |  |  | $ | 56,004 |  |  | $ | 98,040 |  |  |  |  | $ | 6,468 |  |  | $ | 797,100 |
Gross charge-offs |  | $ | — |  |  | $ | 228 |  |  | $ | 1,250 |  |  | $ | 141 |  |  | $ | — |  |  | $ | 2,953 |  |  |  |  | $ | — |  |  | $ | 4,572 |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 112,063 |  |  | $ | 149,189 |  |  | $ | 217,222 |  |  | $ | 11,952 |  |  | $ | 26,438 |  |  | $ | 108,934 |  |  |  |  | $ | 546 |  |  | $ | 626,344 |
Special Mention |  | — |  |  | — |  |  | 7,961 |  |  | — |  |  | 6,079 |  |  | 11,201 |  |  |  |  | — |  |  | 25,241 |
Substandard |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 18,999 |  |  |  |  | — |  |  | 18,999 |
Doubtful |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |
Total commercial real estate loans |  | $ | 112,063 |  |  | $ | 149,189 |  |  | $ | 225,183 |  |  | $ | 11,952 |  |  | $ | 32,517 |  |  | $ | 139,134 |  |  |  |  | $ | 546 |  |  | $ | 670,584 |
Gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | — |  |  | $ | — |
Commercial acquisition, development and construction: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 6,546 |  |  | $ | 54,468 |  |  | $ | 31,120 |  |  | $ | 22,041 |  |  | $ | 2,940 |  |  | $ | 1,483 |  |  |  |  | $ | — |  |  | $ | 118,598 |
Special Mention |  | — |  |  | — |  |  | 14,652 |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | 14,652 |
Substandard |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 754 |  |  |  |  | — |  |  | 754 |
Doubtful |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |
Total commercial acquisition, development and construction loans |  | $ | 6,546 |  |  | $ | 54,468 |  |  | $ | 45,772 |  |  | $ | 22,041 |  |  | $ | 2,940 |  |  | $ | 2,237 |  |  |  |  | $ | — |  |  | $ | 134,004 |
Gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | — |  |  | $ | — |
Residential Real Estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 54,453 |  |  | $ | 429,326 |  |  | $ | 107,763 |  |  | $ | 40,202 |  |  | $ | 8,292 |  |  | $ | 21,313 |  |  |  |  | $ | — |  |  | $ | 661,349 |
Special Mention |  | — |  |  | — |  |  | — |  |  | 4,224 |  |  | 414 |  |  | 708 |  |  |  |  | — |  |  | 5,346 |
Substandard |  | — |  |  | 988 |  |  | 3,764 |  |  | 82 |  |  | 146 |  |  | 777 |  |  |  |  | — |  |  | 5,757 |
Doubtful |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 95 |  |  |  |  | — |  |  | 95 |
Total residential real estate loans |  | $ | 54,453 |  |  | $ | 430,314 |  |  | $ | 111,527 |  |  | $ | 44,508 |  |  | $ | 8,852 |  |  | $ | 22,893 |  |  |  |  | $ | — |  |  | $ | 672,547 |
Gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 19 |  |  | $ | 381 |  |  |  |  | $ | — |  |  | $ | 400 |
|  | Term Loans Amortized Cost Basis by Origination Year |  |  |  |  |  |
(Dollars in thousands) |  | 2023 |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | Prior |  |  |  | Revolving Loans Converted to Term |  | Total
December 31, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Home equity lines of credit: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 58 |  |  | $ | 36 |  |  | $ | — |  |  | $ | 1,338 |  |  | $ | 5,147 |  |  | $ | 7,568 |  |  |  |  | $ | — |  |  | $ | 14,147 |
Special Mention |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 223 |  |  |  |  | — |  |  | 223 |
Substandard |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 161 |  |  |  |  | — |  |  | 161 |
Doubtful |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |
Total home equity lines of credit loans |  | $ | 58 |  |  | $ | 36 |  |  | $ | — |  |  | $ | 1,338 |  |  | $ | 5,147 |  |  | $ | 7,952 |  |  |  |  | $ | — |  |  | $ | 14,531 |
Gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | — |  |  | $ | — |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 2,295 |  |  | $ | 18,926 |  |  | $ | 5,753 |  |  | $ | — |  |  | $ | 39 |  |  | $ | 51 |  |  |  |  | $ | — |  |  | $ | 27,064 |
Special Mention |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |
Substandard |  | 20 |  |  | 266 |  |  | 58 |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | 344 |
Doubtful |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | — |  |  | — |
Total consumer loans |  | $ | 2,315 |  |  | $ | 19,192 |  |  | $ | 5,811 |  |  | $ | — |  |  | $ | 39 |  |  | $ | 51 |  |  |  |  | $ | — |  |  | $ | 27,408 |
Gross charge-offs |  | $ | 1,144 |  |  | $ | 10,608 |  |  | $ | 1,753 |  |  | $ | — |  |  | $ | — |  |  | $ | 2 |  |  |  |  | $ | — |  |  | $ | 13,507 |
Total: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk rating: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 363,158 |  |  | $ | 901,663 |  |  | $ | 457,405 |  |  | $ | 141,728 |  |  | $ | 93,881 |  |  | $ | 230,784 |  |  |  |  | $ | 5,163 |  |  | $ | 2,193,782 |
Special Mention |  | 990 |  |  | 30,695 |  |  | 22,685 |  |  | 5,054 |  |  | 6,832 |  |  | 15,899 |  |  |  |  | 1,647 |  |  | 83,802 |
Substandard |  | 388 |  |  | 2,242 |  |  | 4,139 |  |  | 82 |  |  | 4,786 |  |  | 22,127 |  |  |  |  | 204 |  |  | 33,968 |
Doubtful |  | — |  |  | 2,022 |  |  | 839 |  |  | 264 |  |  | — |  |  | 1,497 |  |  |  |  | — |  |  | 4,622 |
Total loans |  | $ | 364,536 |  |  | $ | 936,622 |  |  | $ | 485,068 |  |  | $ | 147,128 |  |  | $ | 105,499 |  |  | $ | 270,307 |  |  |  |  | $ | 7,014 |  |  | $ | 2,316,174 |
Gross charge-offs |  | $ | 1,144 |  |  | $ | 10,836 |  |  | $ | 3,003 |  |  | $ | 141 |  |  | $ | 19 |  |  | $ | 3,336 |  |  |  |  | $ | — |  |  | $ | 18,479 |
Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following table presents the amortized cost basis in loans by aging category and accrual status as of the periods shown:
(Dollars in thousands) |  | Current |  | 30-59 Days Past Due |  | 60-89 Days Past Due |  | 90+ Days Past Due |  | Total Past Due |  | Total Loans |  | Non-Accrual |  | 90+ Days Still Accruing |  | Non Accrual with No Credit Loss |  | Interest Income Recognized
September 30, 2024 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Business |  | $ | 691,716 |  |  | $ | 813 |  |  | $ | 2,379 |  |  | $ | 7,066 |  |  | $ | 10,258 |  |  | $ | 701,974 |  |  | $ | 8,639 |  |  | $ | — |  |  | $ | 3,388 |  |  | $ | — |
Real estate |  | 647,036 |  |  | 18,002 |  |  | — |  |  | — |  |  | 18,002 |  |  | 665,038 |  |  | — |  |  | — |  |  | — |  |  | — |
Acquisition, development and construction |  | 111,392 |  |  | — |  |  | — |  |  | 2,129 |  |  | 2,129 |  |  | 113,521 |  |  | 16,170 |  |  | — |  |  | 16,170 |  |  | — |
Total commercial |  | 1,450,144 |  |  | 18,815 |  |  | 2,379 |  |  | 9,195 |  |  | 30,389 |  |  | 1,480,533 |  |  | 24,809 |  |  | — |  |  | 19,558 |  |  | — |
Residential real estate |  | 651,768 |  |  | 1,330 |  |  | 395 |  |  | 3,113 |  |  | 4,838 |  |  | 656,606 |  |  | 3,388 |  |  | — |  |  | 906 |  |  | — |
Home equity lines of credit |  | 12,307 |  |  | — |  |  | — |  |  | 49 |  |  | 49 |  |  | 12,356 |  |  | 172 |  |  | — |  |  | — |  |  | — |
Consumer |  | 18,402 |  |  | 1,414 |  |  | 449 |  |  | 187 |  |  | 2,050 |  |  | 20,452 |  |  | 187 |  |  | — |  |  | — |  |  | — |
Total loans |  | $ | 2,132,621 |  |  | $ | 21,559 |  |  | $ | 3,223 |  |  | $ | 12,544 |  |  | $ | 37,326 |  |  | $ | 2,169,947 |  |  | $ | 28,556 |  |  | $ | — |  |  | $ | 20,464 |  |  | $ | — |
December 31, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Business |  | $ | 788,430 |  |  | $ | 4,728 |  |  | $ | 448 |  |  | $ | 3,494 |  |  | $ | 8,670 |  |  | $ | 797,100 |  |  | $ | 6,926 |  |  | $ | — |  |  | $ | 1,825 |  |  | $ | — |
Real estate |  | 670,170 |  |  | — |  |  | 414 |  |  | — |  |  | 414 |  |  | 670,584 |  |  | — |  |  | — |  |  | — |  |  | — |
Acquisition, development and construction |  | 134,004 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 134,004 |  |  | 754 |  |  | — |  |  | 754 |  |  | — |
Total commercial |  | 1,592,604 |  |  | 4,728 |  |  | 862 |  |  | 3,494 |  |  | 9,084 |  |  | 1,601,688 |  |  | 7,680 |  |  | — |  |  | 2,579 |  |  | — |
Residential real estate |  | 670,539 |  |  | 1,671 |  |  | 337 |  |  | — |  |  | 2,008 |  |  | 672,547 |  |  | 82 |  |  | — |  |  | — |  |  | — |
Home equity lines of credit |  | 14,522 |  |  | 9 |  |  | — |  |  | — |  |  | 9 |  |  | 14,531 |  |  | 161 |  |  | — |  |  | — |  |  | — |
Consumer |  | 24,494 |  |  | 1,792 |  |  | 778 |  |  | 344 |  |  | 2,914 |  |  | 27,408 |  |  | 344 |  |  | — |  |  | — |  |  | — |
Total loans |  | $ | 2,302,159 |  |  | $ | 8,200 |  |  | $ | 1,977 |  |  | $ | 3,838 |  |  | $ | 14,015 |  |  | $ | 2,316,174 |  |  | $ | 8,267 |  |  | $ | — |  |  | $ | 2,579 |  |  | $ | — |
The increase in acquisition, development and construction loans in non-accrual status from December 31, 2023 was primarily the result of the addition of a single commercial multifamily loan that was put into non-accrual status during the three months ended June 30, 2024. The loan had a balance of $13.5 million as of September 30, 2024. The ACL is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be collected on the loans. Loans are charged off against the ACL when management believes the loan balance is uncollectible. Accrued interest receivable is excluded from the estimate of credit losses. Management determines the ACL balance using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit behaviors along with model judgments provide the basis for the estimation of expected credit losses. Adjustments to modeled loss estimates may be made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level or term, as well as for changes in environmental conditions, such as changes in economic conditions, property values or other relevant factors. The Bank’s methodology for determining the ACL is based on the requirements of ASC 326. The ACL is calculated on a collective basis when similar risk characteristics exist. The ACL for the majority of loans and leases was calculated using a discounted cash flow methodology applied at a loan level with a one-year reasonable and supportable forecast period and a one-year straight-line reversion period with loss rates, prepayment assumptions and curtailment assumptions driven by each loan’s collateral type. Expected credit loss rates were estimated using a regression model based on historical data from peer banks which incorporates a third-party vendor’s economic forecast to predict the change in credit losses. As of September 30, 2024, the Bank expects the markets in which it operates will experience economic improvements over the next one to two years. The ACL for only one portfolio segment consisting entirely of automotive loans to consumers was calculated under the remaining life methodology using straight-line amortization over the remaining life of the portfolio. Loans that do not share risk characteristics are evaluated on an individual basis. Loans evaluated individually are not also included in the collective evaluation. When Bank management determines that foreclosure is probable or when the borrower is experiencing financial difficulty at the reporting date and repayment is expected to be substantially through the operation or sale of the collateral, expected credit losses are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of the periods shown:
(Dollars in thousands) |  | Real Estate |  | Vehicles and Equipment |  | Assignment of Cash Flow |  | Accounts Receivable |  | Other |  | Totals |  | Allowance for Credit Losses
September 30, 2024 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |
Business |  | $ | 3,508 |  |  | $ | 2,016 |  |  | $ | — |  |  | $ | 213 |  |  | $ | 1,524 |  |  | $ | 7,261 |  |  | $ | 3,382 |
Real estate |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Acquisition, development and construction |  | 15,635 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 15,635 |  |  | — |
Total commercial |  | $ | 19,143 |  |  | $ | 2,016 |  |  | $ | — |  |  | $ | 213 |  |  | $ | 1,524 |  |  | $ | 22,896 |  |  | $ | 3,382 |
Residential |  | 1,889 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,889 |  |  | 5 |
Home equity lines of credit |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Consumer |  | — |  |  | 187 |  |  | — |  |  | — |  |  | — |  |  | 187 |  |  | 47 |
Total |  | $ | 21,032 |  |  | $ | 2,203 |  |  | $ | — |  |  | $ | 213 |  |  | $ | 1,524 |  |  | $ | 24,972 |  |  | $ | 3,434 |
Collateral value |  | $ | 39,883 |  |  | $ | 2,994 |  |  | $ | — |  |  | $ | 84 |  |  | $ | — |  |  | $ | 42,961 |  |  |
December 31, 2023 |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |
Business |  | $ | 424 |  |  | $ | 2,277 |  |  | $ | — |  |  | $ | 452 |  |  | $ | 1,037 |  |  | $ | 4,190 |  |  | $ | 1,583 |
Real estate |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Acquisition, development and construction |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total commercial |  | $ | 424 |  |  | $ | 2,277 |  |  | $ | — |  |  | $ | 452 |  |  | $ | 1,037 |  |  | $ | 4,190 |  |  | $ | 1,583 |
Residential |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Home equity lines of credit |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Consumer |  | — |  |  | 344 |  |  | — |  |  | — |  |  | — |  |  | 344 |  |  | 60 |
Total |  | $ | 424 |  |  | $ | 2,621 |  |  | $ | — |  |  | $ | 452 |  |  | $ | 1,037 |  |  | $ | 4,534 |  |  | $ | 1,643 |
Collateral value |  | $ | 301 |  |  | $ | 2,040 |  |  | $ | — |  |  | $ | 906 |  |  | $ | 320 |  |  | $ | 3,567 |  |  |
The Bank evaluates certain loans in homogeneous pools, rather than on an individual basis, when those loans are below specific thresholds based on outstanding principal balance. More specifically, residential mortgage loans, home equity lines of credit and consumer loans are evaluated collectively for expected credit losses by applying allocation rates derived from the Bank’s historical losses specific to these loans. The reserve was immaterial at September 30, 2024 and December 31, 2023. Management has identified a number of additional qualitative factors that it uses to supplement the estimated losses derived from the loss rate methodologies employed within the Current Expected Credit Losses model because these factors are likely to cause estimated credit losses associated with the existing loan pools to differ from the loss rate methodologies. The additional factors that are evaluated quarterly and updated using information obtained from internal, regulatory and governmental sources are: lending policies and procedures, nature and volume of the portfolio, experience and ability of lending management and staff, volume and severity of problem credits, quality of the loan review system, changes in the value of underlying collateral, effect of concentrations of credit from a loan type, industry and/or geographic standpoint, changes in economic and business conditions, consumer sentiment and other external factors. To estimate the liability for off-balance sheet credit exposures, Bank management analyzed the portfolios of unfunded commitments based on the same segmentation used for the ACL calculation. The estimated funding rate for each segment was derived from a funding rate study created by a third-party vendor which analyzed funding of various loan types over time to develop industry benchmarks at the call report code level. Once the estimated future advances were calculated, the allocation rate applicable to that portfolio segment was applied in the same manner as those used for the ACL calculation. The resulting estimated loss allocations were totaled to determine the liability for unfunded commitments related to these loans, which management considers necessary to anticipate potential losses on those commitments that have a reasonable probability of funding. As of September 30, 2024 and December 31, 2023, the liability for unfunded commitments related to loans held-for-investment was $1.4 million and $1.0 million, respectively. Bank management reviews the loan portfolio on a quarterly basis using a defined, consistently-applied process in order to make appropriate and timely adjustments to the ACL. When information confirms that all or part of specific loans are uncollectible, these amounts are promptly charged off against the ACL. The following table presents the balance and activity for the primary segments of the ACL as of the periods shown:
|  | Commercial |  | Residential |  | Home Equity |  | Consumer |  | Total
(Dollars in thousands) |  | Business |  | Real Estate |  | Acquisition, development and construction |  | Total Commercial |  |  |  |
ACL at June 30, 2024 |  | $ | 9,573 |  |  | $ | 2,472 |  |  | $ | 1,437 |  |  | $ | 13,482 |  |  | $ | 6,248 |  |  | $ | 85 |  |  | $ | 2,269 |  |  | $ | 22,084 |
Provision (release of allowance) for credit losses 1 |  | (743) |  |  | 308 |  |  | 228 |  |  | (207) |  |  | 839 |  |  | 5 |  |  | (511) |  |  | 126 |
Charge-offs |  | (415) |  |  | — |  |  | — |  |  | (415) |  |  | — |  |  | — |  |  | (977) |  |  | (1,392) |
Recoveries |  | — |  |  | 3 |  |  | — |  |  | 3 |  |  | — |  |  | 1 |  |  | 677 |  |  | 681 |
ACL at September 30, 2024 |  | $ | 8,415 |  |  | $ | 2,783 |  |  | $ | 1,665 |  |  | $ | 12,863 |  |  | $ | 7,087 |  |  | $ | 91 |  |  | $ | 1,458 |  |  | $ | 21,499 |
(Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
ALL at December 31, 2023 |  | $ | 7,931 |  |  | $ | 2,931 |  |  | $ | 1,674 |  |  | $ | 12,536 |  |  | $ | 6,412 |  |  | $ | 97 |  |  | $ | 3,079 |  |  | $ | 22,124 |
Provision (release of allowance) for credit losses 1 |  | 2,734 |  |  | (166) |  |  | (9) |  |  | 2,559 |  |  | 640 |  |  | (9) |  |  | (939) |  |  | 2,251 |
Charge-offs |  | (2,292) |  |  | — |  |  | — |  |  | (2,292) |  |  | — |  |  | — |  |  | (2,788) |  |  | (5,080) |
Recoveries |  | 42 |  |  | 18 |  |  | — |  |  | 60 |  |  | 35 |  |  | 3 |  |  | 2,106 |  |  | 2,204 |
ACL at September 30, 2024 |  | $ | 8,415 |  |  | $ | 2,783 |  |  | $ | 1,665 |  |  | $ | 12,863 |  |  | $ | 7,087 |  |  | $ | 91 |  |  | $ | 1,458 |  |  | $ | 21,499 |
1 Excludes the provision for unfunded commitments and the provision for credit losses related to available-for-sale debt securities.
|  | Commercial |  | Residential |  | Home Equity |  | Consumer |  | Total
(Dollars in thousands) |  | Business |  | Real Estate |  | Acquisition, development and construction |  | Total Commercial |  |  |  |
ACL balance at June 30, 2023 |  | $ | 11,308 |  |  | $ | 3,051 |  |  | $ | 1,707 |  |  | $ | 16,066 |  |  | $ | 7,168 |  |  | $ | 114 |  |  | $ | 6,946 |  |  | $ | 30,294 |
Provision (release of allowance) for credit losses 1 |  | 1,584 |  |  | 183 |  |  | 343 |  |  | 2,110 |  |  | (242) |  |  | (15) |  |  | (2,012) |  |  | (159) |
Charge-offs |  | (4,028) |  |  | — |  |  | — |  |  | (4,028) |  |  | (359) |  |  | — |  |  | (3,677) |  |  | (8,064) |
Recoveries |  | 4 |  |  | 7 |  |  | — |  |  | 11 |  |  | — |  |  | 1 |  |  | 2,193 |  |  | 2,205 |
ALL balance at September 30, 2023 |  | $ | 8,868 |  |  | $ | 3,241 |  |  | $ | 2,050 |  |  | $ | 14,159 |  |  | $ | 6,567 |  |  | $ | 100 |  |  | $ | 3,450 |  |  | $ | 24,276 |
(Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
ALL, prior to adoption of ASC 326, at December 31, 2022 |  | $ | 8,771 |  |  | $ | 5,704 |  |  | $ | 1,064 |  |  | $ | 15,539 |  |  | $ | 2,880 |  |  | $ | 131 |  |  | $ | 5,287 |  |  | $ | 23,837 |
Impact of adopting ASC 326 |  | (126) |  |  | (2,846) |  |  | 288 |  |  | (2,684) |  |  | 3,889 |  |  | (5) |  |  | 6,482 |  |  | 7,682 |
Initial allowance on loans purchased with credit deterioration |  | 710 |  |  | — |  |  | — |  |  | 710 |  |  | 507 |  |  | — |  |  | — |  |  | 1,217 |
Provision (release of allowance) for credit losses 1 |  | 3,770 |  |  | 363 |  |  | 698 |  |  | 4,831 |  |  | (328) |  |  | (29) |  |  | (4,165) |  |  | 309 |
Charge-offs |  | (4,297) |  |  | — |  |  | — |  |  | (4,297) |  |  | (381) |  |  | — |  |  | (11,933) |  |  | (16,611) |
Recoveries |  | 40 |  |  | 20 |  |  | — |  |  | 60 |  |  | — |  |  | 3 |  |  | 7,779 |  |  | 7,842 |
ACL balance at September 30, 2023 |  | $ | 8,868 |  |  | $ | 3,241 |  |  | $ | 2,050 |  |  | $ | 14,159 |  |  | $ | 6,567 |  |  | $ | 100 |  |  | $ | 3,450 |  |  | $ | 24,276 |
1 Excludes the provision for unfunded commitments and the provision for credit losses related to available-for-sale debt securities. During the three and nine months ended September 30, 2024, there were charge offs totaling $1.4 million and $5.1 million, respectively. For the three months ended September 30, 2024, $1.0 million, or 71%, of charge offs were related to the subprime consumer automotive segment and $0.4 million, or 29%, was related to five commercial notes secured by business assets. During the three and nine months ended September 30, 2024, the provision related to unfunded commitments was $0.3 million and $0.5 million, respectively. During the three and nine months ended September 30, 2023, there was an inconsequential and a $0.1 million release of allowance related to unfunded commitments, respectively. The ACL is based on estimates and actual losses will vary from current estimates. Management believes that the granularity of the portfolio segments, the related loss estimation methodologies and other qualitative factors, as well as the consistency in the application of assumptions, result in an ACL that is representative of the risk found in the components of the portfolio at any given date. Loan Modifications for Borrowers Experiencing Financial Difficulty Occasionally, the Bank modifies loans to borrowers in financial distress by providing concessions that allow for the borrower to lower their payment obligations for a defined period, these may include, but are not limited to: principal forgiveness, payment delays, term extensions, interest rate reductions and any combinations of the preceding. The following table summarize the amortized cost basis of loans that were modified as of the period shown:
(Dollars in thousands) |  | Principal Forgiveness |  | Payment Delay |  | Term Extension |  | Interest Rate Reduction |  | Total |  | Total Class of Financing Receivable
Three Months Ended September 30, 2024 |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  |  |  |  |  |  |  |  |  |  |
Business |  | $ | — |  |  | $ | — |  |  | $ | 475 |  |  | $ | — |  |  | $ | 475 |  |  | — | %
Real estate |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — | %
Acquisition, development and construction |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — | %
Total commercial |  | — |  |  | — |  |  | 475 |  |  | — |  |  | 475 |  |  | — | %
Residential |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — | %
Home equity lines of credit |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — | %
Consumer |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — | %
Total |  | $ | — |  |  | $ | — |  |  | $ | 475 |  |  | $ | — |  |  | $ | 475 |  |  | — | %
Three Months Ended September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  |  |  |  |  |  |  |  |  |  |
Business |  | $ | — |  |  | $ | 3,122 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,122 |  |  | — | %
Real estate |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — | %
Acquisition, development and construction |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — | %
Total commercial |  | — |  |  | 3,122 |  |  | — |  |  | — |  |  | 3,122 |  |  | — | %
Residential |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — | %
Home equity lines of credit |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — | %
Consumer |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — | %
Total |  | $ | — |  |  | $ | 3,122 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,122 |  |  | — | %
(Dollars in thousands) |  | Principal Forgiveness |  | Payment Delay |  | Term Extension |  | Interest Rate Reduction |  | Total |  | Total Class of Financing Receivable
Nine Months Ended September 30, 2024 |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  |  |  |  |  |  |  |  |  |  |
Business |  | $ | — |  |  | $ | 5,333 |  |  | $ | 475 |  |  | $ | — |  |  | $ | 5,808 |  |  | 1 | %
Real estate |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — | %
Acquisition, development and construction |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — | %
Total commercial |  | — |  |  | 5,333 |  |  | 475 |  |  | — |  |  | 5,808 |  |  | — | %
Residential |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | — | %
Home equity lines of credit |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | — | %
Consumer |  | — |  |  |  |  | — |  |  | — |  |  | — |  |  | — | %
Total |  | $ | — |  |  | $ | 5,333 |  |  | $ | 475 |  |  | $ | — |  |  | $ | 5,808 |  |  | — | %
Nine Months Ended September 30, 2023 |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  |  |  |  |  |  |  |  |  |  |
Business |  | $ | — |  |  | $ | 7,681 |  |  | $ | — |  |  | $ | — |  |  | $ | 7,681 |  |  | 1 | %
Real estate |  | — |  |  | 11,321 |  |  | — |  |  | — |  |  | 11,321 |  |  | 2 | %
Acquisition, development and construction |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — | %
Total commercial |  | — |  |  | 19,002 |  |  | — |  |  | — |  |  | 19,002 |  |  | 1 | %
Residential |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — | %
Home equity lines of credit |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — | %
Consumer |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — | %
Total |  | $ | — |  |  | $ | 19,002 |  |  | $ | — |  |  | $ | — |  |  | $ | 19,002 |  |  | 1 | %
The above table presents the amortized cost basis of loans at September 30, 2024 that were experiencing financial difficulty and modified during the three and nine months ended September 30, 2024, by class and by type of modification. Also presented above is the percentage of the amortized cost basis of loans that were modified for borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable. There are 16 loans to 15 borrowers that received payment delay modifications in the nine months ended September 30, 2024, and one loan received a term extension. These 17 total loans include 16 commercial loans with government guarantees totaling $5.6 million and one note secured by accounts receivable totaling $0.2 million. The Bank closely monitors the performance of loans that are modified for borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of such loans that have been modified as of the periods shown:
(Dollars in thousands) |  | 30-59 Days Past Due |  | 60-89 Days Past Due |  | Greater Than 89 Days Past Due |  | Total Past Due
Nine Months Ended September 30, 2024 |  |  |  |  |  |  |  |
Commercial |  |  |  |  |  |  |  |
Business |  | $ | 33 |  |  | $ | 1,412 |  |  | $ | 3,690 |  |  | $ | 5,135 |
Real estate |  | — |  |  | — |  |  | — |  |  | — |
Acquisition, development and construction |  | — |  |  | — |  |  | — |  |  | — |
Total commercial |  | 33 |  |  | 1,412 |  |  | 3,690 |  |  | 5,135 |
Residential |  | — |  |  | — |  |  | — |  |  | — |
Home equity lines of credit |  | — |  |  | — |  |  | — |  |  | — |
Consumer |  | — |  |  | — |  |  | — |  |  | — |
Total |  | $ | 33 |  |  | $ | 1,412 |  |  | $ | 3,690 |  |  | $ | 5,135 |
Nine Months Ended September 30, 2023 |  |  |  |  |  |  |  |
Commercial |  |  |  |  |  |  |  |
Business |  | $ | — |  |  | $ | 2,071 |  |  | $ | — |  |  | $ | 2,071 |
Real estate |  | — |  |  | — |  |  | — |  |  | — |
Acquisition, development and construction |  | — |  |  | — |  |  | — |  |  | — |
Total commercial |  | — |  |  | 2,071 |  |  | — |  |  | 2,071 |
Residential |  | — |  |  | — |  |  | — |  |  | — |
Home equity lines of credit |  | — |  |  | — |  |  | — |  |  | — |
Consumer |  | — |  |  | — |  |  | — |  |  | — |
Total |  | $ | — |  |  | $ | 2,071 |  |  | $ | — |  |  | $ | 2,071 |
As of September 30, 2024, there are 12 modified loans past due, with an amortized cost basis of $5.1 million. This includes 11 commercial notes with government guarantees totaling $5.1 million secured by business assets. Seven notes totaling $4.1 million are considered non-accrual as of September 30, 2024. As of September 30, 2023, there was one modified loan past due, with an amortized cost basis of $2.1 million. This note is a commercial note with a government guarantee and is considered non-accrual as of September 30, 2023. The following table presents the amortized cost basis of loans that had a payment default and were modified prior to that default to borrowers experiencing financial difficulty as of the period shown:
(Dollars in thousands) |  | Principal Forgiveness |  | Payment Delay |  | Term Extension |  | Interest Rate Reduction |  | Total
Three Months Ended September 30, 2024 |  |  |  |  |  |  |  |  |  |
Commercial |  |  |  |  |  |  |  |  |  |
Business |  | $ | — |  |  | $ | 1,864 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,864 |
Real estate |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Acquisition, development and construction |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total commercial |  | — |  |  | 1,864 |  |  | — |  |  | — |  |  | 1,864 |
Residential |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Home equity lines of credit |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Consumer |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total |  | $ | — |  |  | $ | 1,864 |  |  | $ | — |  |  | $ | — |  |  | $ | 1,864 |
Three Months Ended September 30, 2023 |  |  |  |  |  |  |  |  |  |
Commercial |  |  |  |  |  |  |  |  |  |
Business |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Real estate |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Acquisition, development and construction |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total commercial |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Residential |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Home equity lines of credit |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Consumer |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Nine Months Ended September 30, 2024 |  |  |  |  |  |  |  |  |  |
Commercial |  |  |  |  |  |  |  |  |  |
Business |  | $ | — |  |  | $ | 2,275 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,275 |
Real estate |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Acquisition, development and construction |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total commercial |  | — |  |  | 2,275 |  |  | — |  |  | — |  |  | 2,275 |
Residential |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Home equity lines of credit |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Consumer |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total |  | $ | — |  |  | $ | 2,275 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,275 |
Nine Months Ended September 30, 2023 |  |  |  |  |  |  |  |  |  |
Commercial |  |  |  |  |  |  |  |  |  |
Business |  | $ | — |  |  | $ | 2,071 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,071 |
Real estate |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Acquisition, development and construction |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total commercial |  | — |  |  | 2,071 |  |  | — |  |  | — |  |  | 2,071 |
Residential |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Home equity lines of credit |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Consumer |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total |  | $ | — |  |  | $ | 2,071 |  |  | $ | — |  |  | $ | — |  |  | $ | 2,071 |
As of September 30, 2024, there are three modified loans that have defaulted, with an amortized cost basis of $2.3 million. All three loans are commercial notes that have government guarantees and are considered non-accrual as of September 30, 2024. As of September 30, 2023, there is one commercial note with a government guarantee that was considered non-accrual as of September 30, 2023. Upon the Bank’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the ACL is adjusted by the same amount.

X
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