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Note 7 - Loans and Related Allowance for Credit Losses

6 Months Ended

Jun. 30, 2024

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

NOTE 7 – LOANS AND RELATED ALLOWANCE FOR CREDIT LOSSES

The following table summarizes the loan portfolio by primary segment and class of financial receivable (in thousands) ^(a)(b):

	June 30,			December 31,
	2024			2023

Commercial real estate:
Owner occupied	$	182,809		$	183,545
Non-owner occupied		385,648			401,580
Multifamily		86,951			82,506
Residential real estate		337,121			328,854
Commercial and industrial		234,702			221,508
Home equity lines of credit		131,047			127,818
Construction and other		132,530			125,105
Consumer installment		6,896			7,214
Total loans		1,497,704			1,478,130
Less: Allowance for credit losses		(21,795	)		(21,693	)
Net loans	$	1,475,909		$	1,456,437

(a)	Accrued interest of $5.7 million and $5.5 million at June 30, 2024 and December 31, 2023, respectively, is excluded from amortized cost and presented in "Accrued interest receivable and other assets" on the Consolidated Balance Sheets.
(b)	Unearned income, including net deferred loan fees and costs and unamortized premiums and discounts, totaled $8.6 million and $9.2 million at June 30, 2024 and December 31, 2023, respectively.

Allowance for Credit Losses: Loans

On January 1, 2023, the Company adopted ASU 2016-13. This methodology for calculating the allowance for credit losses considers the possibility of loss over the life of the loan. It also considers historical loss rates and other qualitative adjustments, as well as a new forward-looking component that considers reasonable and supportable forecasts over the expected life of each loan. To develop the ACL estimate under the current expected loss model, the Company segments the loan portfolio into loan pools based on loan type and similar credit risk elements. An ACL is maintained to absorb losses from the loan portfolio. The ACL is based on management’s continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience, and the amount of nonperforming loans.

Management reviews the loan portfolio quarterly using a defined, consistently applied process to make appropriate and timely adjustments to the ACL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ACL.

The following tables summarize the ACL within the primary segments of the loan portfolio and the activity within those segments (in thousands):

	For the Three Months Ended June 30, 2024
	Allowance for Credit Losses
	Balance										Balance
	March 31, 2024		Charge-offs			Recoveries		Provision			June 30, 2024
Loans:
Commercial real estate:
Owner occupied	$	2,060	$	-		$	-	$	(2	)	$	2,058
Non-owner occupied		7,768		-			-		213			7,981
Multifamily		1,204		-			-		64			1,268
Residential real estate		4,774		-			-		117			4,891
Commercial and industrial		2,038		-			8		384			2,430
Home equity lines of credit		785		-			-		28			813
Construction and other		2,373		-			-		(83	)		2,290
Consumer installment		67		(6	)		27		(24	)		64
Total	$	21,069	$	(6	)	$	35	$	697		$	21,795

	For the Three Months Ended June 30, 2023
	Allowance for Credit Losses
	Balance		CECL										Balance
	March 31, 2023		Adoption		Charge-offs			Recoveries		Provision			June 30, 2023
Loans:
Commercial real estate:
Owner occupied	$	2,678	$	-	$	(46	)	$	1	$	780		$	3,413
Non-owner occupied		4,712		-		-			-		(866	)		3,846
Multifamily		1,371		-		-			-		(92	)		1,279
Residential real estate		4,967		-		(108	)		-		255			5,114
Commercial and industrial		3,819		-		(6	)		9		282			4,104
Home equity lines of credit		809		-		-			-		(86	)		723
Construction and other		1,553		-		-			-		331			1,884
Consumer installment		253		-		(3	)		42		(64	)		228
Total	$	20,162	$	-	$	(163	)	$	52	$	540		$	20,591

	For the Six Months Ended June 30, 2024
	Allowance for Credit Losses
	Balance										Balance
	December 31, 2023		Charge-offs			Recoveries		Provision			June 30, 2024
Loans:
Commercial real estate:
Owner occupied	$	2,668	$	-		$	11	$	(621	)	$	2,058
Non-owner occupied		4,480		-			-		3,501			7,981
Multifamily		1,796		-			-		(528	)		1,268
Residential real estate		5,450		-			-		(559	)		4,891
Commercial and industrial		4,377		-			16		(1,963	)		2,430
Home equity lines of credit		750		(7	)		-		70			813
Construction and other		1,990		-			-		300			2,290
Consumer installment		182		(6	)		83		(195	)		64
Total	$	21,693	$	(13	)	$	110	$	5		$	21,795

	For the Six Months Ended June 30, 2023
	Allowance for Credit Losses
	Balance		CECL											Balance
	December 31, 2022		Adoption			Charge-offs			Recoveries		Provision			June 30, 2023
Loans:
Commercial real estate:
Owner occupied	$	2,203	$	811		$	(46	)	$	3	$	442		$	3,413
Non-owner occupied		5,597		(1,206	)		-			-		(545	)		3,846
Multifamily		662		591			-			-		26			1,279
Residential real estate		2,047		2,744			(108	)		-		431			5,114
Commercial and industrial		1,483		2,320			(60	)		20		341			4,104
Home equity lines of credit		1,753		(1,031	)		-			70		(69	)		723
Construction and other		609		956			-			-		319			1,884
Consumer installment		84		197			(61	)		79		(71	)		228
Total	$	14,438	$	5,382		$	(275	)	$	172	$	874		$	20,591

The total ACL increased by $102,000, or 0.5%, from December 31, 2023 to June 30, 2024. The increase was driven by portfolio activity and the economic outlook. The Bank utilized economic projections issued by the Federal Open Market Committee (FOMC) to estimate credit losses, and the projections are updated quarterly for the ACL calculation. The forecast takes into account the national housing price index and national unemployment rates. To the extent that credit risk is not fully identified within the forecasts, management has made qualitative adjustments to the ACL balance. The fluctuation in the ACL can also be attributed to the following:

• Increase in residential real estate, C&I, and construction loans offset by a decrease in the loss rate included in the ACL calculation.

• Decrease in non-owner occupied CRE loans offset by an increase in the loss rate included in the ACL calculation.

The provision fluctuations during the six months ended June 30, 2023, were allocated to:

• Adoption of CECL on January 1, 2023

• Increase in non-owner occupied commercial loans, residential real estate, C&I, and construction loans

• Decrease in owner-occupied loans

Credit Quality Indicators

Management evaluates individual loans in all of the commercial segments for possible impairment based on guidelines established by the Board of Directors. Loans are individually analyzed when, based on current information and events, the Company will probably be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in evaluating credit loss include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall concerning the principal and interest owed. The evaluation of the need and amount of a specific allocation of the allowance and whether a loan can be removed from impairment status is made quarterly.

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. The Special Mention category includes assets that are currently protected but have potential weaknesses, resulting in undue and unwarranted credit risk, but not to the point of justifying a Substandard classification. Loans in the Substandard category have well-defined weaknesses that jeopardize the liquidation of the debt and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. All loans greater than 90 days past due are considered Substandard. A loan categorized as Doubtful contains all of the weaknesses as a Substandard loan with the added characteristic that the weaknesses are so pronounced that the collection or liquidation in full of both principal and interest is highly questionable or improbable. Any portion of a loan that has been 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 Company 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 payment delinquency, bankruptcy, repossession, or death, occurs to raise awareness of a possible credit quality loss. The Company’s Commercial Loan Officers are responsible for the timely and accurate risk rating of the loans in their portfolios at origination and on an ongoing basis. The Credit Department performs an annual review of all commercial relationships with loan balances of $750,000 or greater. Detailed reviews, including plans for resolution, are performed on criticized loans of $150,000 or more on at least a quarterly basis. Loans in the Special Mention and Substandard categories that are collectively evaluated for impairment are given separate consideration in the determination of the allowance.

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 represents outstanding loan balances by credit quality indicators and vintage year by class of financing receivable and current period gross charge-offs by year of origination as of June 30, 2024:

June 30, 2024
Term Loans Amortized Cost Basis by Origination Year														Revolving Amortized
(Dollar amounts in thousands)	2024		2023		2022		2021		2020		Prior			Cost Basis		Total
Commercial real estate:
Owner occupied
Pass	$	5,523	$	20,753	$	30,965	$	38,412	$	25,592	$	50,059		$	2,407	$	173,711
Special Mention		-		-		-		402		-		789			-		1,191
Substandard		-		-		4,562		-		-		3,345			-		7,907
Total Owner occupied	$	5,523	$	20,753	$	35,527	$	38,814	$	25,592	$	54,193		$	2,407	$	182,809
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-		$	-	$	-
Non-owner occupied
Pass	$	5,480	$	43,873	$	91,055	$	40,339	$	20,833	$	142,187		$	179	$	343,946
Special Mention		-		-		2,508		-		-		2,129			-		4,637
Substandard		-		-		3,991		639		-		32,435			-		37,065
Total Non-owner occupied	$	5,480	$	43,873	$	97,554	$	40,978	$	20,833	$	176,751		$	179	$	385,648
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-		$	-	$	-
Multifamily
Pass	$	2,766	$	28,897	$	25,488	$	7,545	$	10,256	$	11,953		$	46	$	86,951
Total Multifamily	$	2,766	$	28,897	$	25,488	$	7,545	$	10,256	$	11,953		$	46	$	86,951
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-		$	-	$	-
Residential real estate
Pass	$	20,935	$	49,734	$	55,009	$	76,884	$	37,503	$	94,586		$	885	$	335,536
Substandard		-		-		121		107		-		1,357			-		1,585
Total Residential real estate	$	20,935	$	49,734	$	55,130	$	76,991	$	37,503	$	95,943		$	885	$	337,121
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-		$	-	$	-
Commercial and industrial
Pass	$	22,184	$	42,175	$	37,492	$	15,639	$	22,547	$	6,558		$	70,309	$	216,904
Special Mention		-		-		-		-		-		-			792		792
Substandard		214		5,011		1,013		-		336		105			10,331		17,010
Loss		-		-		-		-		-		(4	)		-		(4	)
Total Commercial and industrial	$	22,398	$	47,186	$	38,505	$	15,639	$	22,883	$	6,659		$	81,432	$	234,702
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-		$	-	$	-
Home equity lines of credit
Pass	$	-	$	-	$	155	$	-	$	42	$	2,016		$	127,192	$	129,405
Substandard		-		-		100		-		35		756			751		1,642
Total Home equity lines of credit	$	-	$	-	$	255	$	-	$	77	$	2,772		$	127,943	$	131,047
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	7		$	-	$	7
Construction and other
Pass	$	3,683	$	69,283	$	21,740	$	15,868	$	1,447	$	1,668		$	10,487	$	124,176
Special Mention		-		-		848		2,332		-		243			-		3,423
Substandard		-		-		2,710		420		-		1,271			530		4,931
Total Construction and other	$	3,683	$	69,283	$	25,298	$	18,620	$	1,447	$	3,182		$	11,017	$	132,530
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-		$	-	$	-
Consumer installment
Pass	$	912	$	1,399	$	855	$	177	$	58	$	3,310		$	-	$	6,711
Substandard		-		-		4		-		-		181			-		185
Total Consumer installment	$	912	$	1,399	$	859	$	177	$	58	$	3,491		$	-	$	6,896
Current-period gross charge-offs	$	-	$	-	$	-	$	6	$	-	$	-		$	-	$	6
Total Loans	$	61,697	$	261,125	$	278,616	$	198,764	$	118,649	$	354,944		$	223,909	$	1,497,704

Pass	$	61,483	$	256,114	$	262,759	$	194,864	$	118,278	$	312,337		$	211,505	$	1,417,340
Special Mention		-		-		3,356		2,734		-		3,161			792		10,043
Substandard		214		5,011		12,501		1,166		371		39,450			11,612		70,325
Loss		-		-		-		-		-		(4	)		-		(4	)
Total Loans	$	61,697	$	261,125	$	278,616	$	198,764	$	118,649	$	354,944		$	223,909	$	1,497,704

December 31, 2023
Term Loans Amortized Cost Basis by Origination Year														Revolving Amortized
(Dollar amounts in thousands)	2023		2022		2021		2020		2019		Prior			Cost Basis		Total
Commercial real estate:
Owner occupied
Pass	$	14,634	$	34,850	$	41,609	$	25,040	$	12,304	$	41,976		$	2,662	$	173,075
Special Mention		-		2,271		-		-		13		799			-		3,083
Substandard		-		2,356		-		1,559		146		3,326			-		7,387
Total Owner occupied	$	14,634	$	39,477	$	41,609	$	26,599	$	12,463	$	46,101		$	2,662	$	183,545
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	46		$	-	$	46
Non-owner occupied
Pass	$	43,393	$	95,098	$	40,959	$	22,707	$	32,405	$	127,469		$	504	$	362,535
Special Mention		-		2,508		-		-		-		2,197			-		4,705
Substandard		-		-		-		-		5,237		24,569			-		29,806
Doubtful		-		-		647		-		3,887		-			-		4,534
Total Non-owner occupied	$	43,393	$	97,606	$	41,606	$	22,707	$	41,529	$	154,235		$	504	$	401,580
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-		$	-	$	-
Multifamily
Pass	$	29,218	$	25,776	$	4,267	$	10,453	$	1,391	$	11,231		$	104	$	82,440
Substandard		-		-		-		-		-		66			-		66
Total Multifamily	$	29,218	$	25,776	$	4,267	$	10,453	$	1,391	$	11,297		$	104	$	82,506
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-		$	-	$	-
Residential real estate
Pass	$	50,086	$	56,180	$	78,909	$	39,476	$	19,418	$	82,441		$	672	$	327,182
Substandard		-		127		210		-		24		1,311			-		1,672
Total Residential real estate	$	50,086	$	56,307	$	79,119	$	39,476	$	19,442	$	83,752		$	672	$	328,854
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	108		$	-	$	108
Commercial and industrial
Pass	$	46,918	$	43,494	$	17,909	$	25,143	$	2,741	$	6,533		$	66,842	$	209,580
Special Mention		-		-		-		-		-		-			184		184
Substandard		13		15		-		353		124		876			10,367		11,748
Loss		-		-		-		-		-		(4	)		-		(4	)
Total Commercial and industrial	$	46,931	$	43,509	$	17,909	$	25,496	$	2,865	$	7,405		$	77,393	$	221,508
Current-period gross charge-offs	$	-	$	-	$	75	$	-	$	6	$	4		$	-	$	85
Home equity lines of credit
Pass	$	-	$	126	$	-	$	16	$	63	$	2,097		$	124,001	$	126,303
Substandard		-		105		-		36		29		583			762		1,515
Total Home equity lines of credit	$	-	$	231	$	-	$	52	$	92	$	2,680		$	124,763	$	127,818
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-		$	-	$	-
Construction and other
Pass	$	55,528	$	23,059	$	20,246	$	1,777	$	5,609	$	851		$	9,152	$	116,222
Special Mention		-		3,573		2,371		-		265		-			-		6,209
Substandard		-		-		420		-		1,770		-			484		2,674
Total Construction and other	$	55,528	$	26,632	$	23,037	$	1,777	$	7,644	$	851		$	9,636	$	125,105
Current-period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-		$	-	$	-
Consumer installment
Pass	$	1,810	$	1,088	$	324	$	89	$	74	$	3,669		$	-	$	7,054
Substandard		-		7		-		-		-		153			-		160
Total Consumer installment	$	1,810	$	1,095	$	324	$	89	$	74	$	3,822		$	-	$	7,214
Current-period gross charge-offs	$	-	$	25	$	-	$	-	$	-	$	38		$	-	$	63
Total Loans	$	241,600	$	290,633	$	207,871	$	126,649	$	85,500	$	310,143		$	215,734	$	1,478,130

Pass	$	241,587	$	279,671	$	204,223	$	124,701	$	74,005	$	276,267		$	203,937	$	1,404,391
Special Mention		-		8,352		2,371		-		278		2,996			184		14,181
Substandard		13		2,610		630		1,948		7,330		30,884			11,613		55,028
Doubtful		-		-		647		-		3,887		-			-		4,534
Loss		-		-		-		-		-		(4	)		-		(4	)
Total Loans	$	241,600	$	290,633	$	207,871	$	126,649	$	85,500	$	310,143		$	215,734	$	1,478,130

Collateral-dependent Loans

The following table presents individually analyzed and collateral-dependent loans by class of loans (in thousands):

	June 30, 2024
	Type of Collateral
(Dollar amounts in thousands)	Real Estate		Blanket Lien		Investment/Cash		Other		Total
Commercial real estate:
Owner occupied	$	4,562	$	-	$	-	$	-	$	4,562
Non-owner occupied		5,878		-		-		8,040		13,918
Commercial and industrial		-		14,948		-		1,213		16,161
Construction and other		2,710		-		-		-		2,710
Total	$	13,150	$	14,948	$	-	$	9,253	$	37,351

	December 31, 2023
	Type of Collateral
(Dollar amounts in thousands)	Real Estate		Blanket Lien		Investment/Cash		Other		Total
Commercial real estate:
Non-owner occupied	$	8,150	$	-	$	-	$	-	$	8,150
Total	$	8,150	$	-	$	-	$	-	$	8,150

Nonperforming and Past Due Loans

The following tables present the aging of the recorded investment in past-due loans by class of loans (in thousands):

			30-59 Days		60-89 Days		90 Days+		Total		Total
June 30, 2024	Current		Past Due		Past Due		Past Due		Past Due		Loans

Commercial real estate:
Owner occupied	$	182,350	$	353	$	-	$	106	$	459	$	182,809
Non-owner occupied		376,655		1,385		-		7,608		8,993		385,648
Multifamily		86,951		-		-		-		-		86,951
Residential real estate		333,303		2,507		1,181		130		3,818		337,121
Commercial and industrial		233,390		252		655		405		1,312		234,702
Home equity lines of credit		130,238		198		100		511		809		131,047
Construction and other		132,530		-		-		-		-		132,530
Consumer installment		6,864		32		-		-		32		6,896
Total	$	1,482,281	$	4,727	$	1,936	$	8,760	$	15,423	$	1,497,704

			30-59 Days		60-89 Days		90 Days+		Total		Total
December 31, 2023	Current		Past Due		Past Due		Past Due		Past Due		Loans

Commercial real estate:
Owner occupied	$	183,242	$	197	$	-	$	106	$	303	$	183,545
Non-owner occupied		397,964		3,616		-		-		3,616		401,580
Multifamily		82,440		-		-		66		66		82,506
Residential real estate		326,224		1,366		1,010		254		2,630		328,854
Commercial and industrial		221,304		-		146		58		204		221,508
Home equity lines of credit		126,894		447		180		297		924		127,818
Construction and other		125,040		65		-		-		65		125,105
Consumer installment		7,138		69		-		7		76		7,214
Total	$	1,470,246	$	5,760	$	1,336	$	788	$	7,884	$	1,478,130

The following tables present the recorded investment in nonaccrual loans and loans 90 and greater days past due and still on accrual by class of loans (in thousands):

	June 30, 2024
	Nonaccrual		Nonaccrual				Loans Past
(Dollar amounts in thousands)	with no		with		Total		Due Over 90 Days		Total
	ACL		ACL		Nonaccrual		Still Accruing		Nonperforming
Commercial real estate:
Owner occupied	$	-	$	238	$	238	$	-	$	238
Non-owner occupied		8,416		3,616		12,032		-		12,032
Multifamily		-		-		-		-		-
Residential real estate		-		1,173		1,173		-		1,173
Commercial and industrial		345		879		1,224		-		1,224
Home equity lines of credit		-		1,013		1,013		96		1,109
Consumer installment		181		4		185		-		185
Total	$	8,942	$	6,923	$	15,865	$	96	$	15,961

	December 31, 2023
	Nonaccrual		Nonaccrual				Loans Past
(Dollar amounts in thousands)	with no		with		Total		Due Over 90 Days		Total
	ACL		ACL		Nonaccrual		Still Accruing		Nonperforming
Commercial real estate:
Owner occupied	$	-	$	252	$	252	$	-	$	252
Non-owner occupied		4,534		3,616		8,150		-		8,150
Multifamily		-		66		66		-		66
Residential real estate		-		1,170		1,170		-		1,170
Commercial and industrial		-		223		223		-		223
Home equity lines of credit		-		856		856		-		856
Consumer installment		153		7		160		-		160
Total	$	4,687	$	6,190	$	10,877	$	-	$	10,877

Interest income that would have been recorded had these loans not been placed on nonaccrual status was $171,000 and $300,000 for the three and six months ended June 30, 2024, respectively, and $88,000 and $203,000 for the three and six months ended June 30, 2023, respectively.

Modifications to Borrowers Experiencing Financial Difficulty

Effective January 1, 2023, the Company implemented ASU 2022-02, which eliminated the recognition and measure of troubled debt restructurings and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty. The Bank may modify the contractual terms of a loan to a borrower experiencing financial difficulty to mitigate the risk of loss. Such modifications may include a term extension, interest rate reduction, significant payment deferral, other modifications, or a combination of modification types. In general, any delay in payment of greater than 90 days in the last 12 months is considered to be a significant payment deferral.

The table below details the amortized cost basis of the loans modified to borrowings experiencing financial difficulty, disaggregated by class of loans and type of concessions granted, and the financial effect of the modifications:

	June 30, 2024
	Modifications
					Payment		Interest Rate		Interest Rate				Percentage of
					Deferral		Reduction		Reduction				Total Loans
	Payment		Term		and Term		and Term		and Principal				Held for
	Deferral		Extension		Extension		Past Due		Forgiveness		Total		Investment

Commercial real estate:
Non-owner occupied	$	-	$	14,854	$	2,507	$	-	$	-	$	17,361		1.2	%
Construction and other		-		2,221		-		-		-		2,221		0.1	%
Total	$	-	$	17,075	$	2,507	$	-	$	-	$	19,582		1.3	%

	June 30, 2023
	Modifications
					Payment		Interest Rate		Interest Rate				Percentage of
					Deferral		Reduction		Reduction				Total Loans
	Payment		Term		and Term		and Term		and Principal				Held for
	Deferral		Extension		Extension		Past Due		Forgiveness		Total		Investment

Commercial real estate:
Non-owner occupied	$	-	$	14,924	$	2,507	$	-	$	-	$	17,431		1.3	%
Commercial and industrial		-		86		-		-		-		86		0.0	%
Total	$	-	$	15,010	$	2,507	$	-	$	-	$	17,517		1.3	%

As of June 30, 2024, the Bank had no commitments to lend additional funds on modified loans. As of June 30, 2024, the Bank did not have any loans that were modified for borrowers experiencing financial difficulty and subsequently defaulted. As of June 30, 2024, there were no modified loans that were delinquent. Payment default is defined as movement to nonperforming status, foreclosure or charge-off, whichever occurs first. At June 30, 2024 and December 31, 2023, the Company reported $195,000 and $228,000, respectively, in residential real estate loans in the process of foreclosure.

Allowance for Credit Losses: Unfunded Commitments

Upon adoption of ASU 2016-13 on January 1, 2023, the Company recorded a separate ACL for unfunded commitments using a methodology that is inherently similar to the methodology used for calculating the ACL for loans. The liability for credit losses on these exposures is included in “Accrued interest payable and other liabilities” on the Consolidated Balance Sheet and amounted to $1.7 million and $1.8 million as of June 30, 2024, and December 31, 2023, respectively.