Loans, Allowance for Credit Losses and Credit Quality

3 Months Ended

Mar. 31, 2025

Loans, Allowance for Credit Losses and Credit Quality

NOTE 4 – LOANS, ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY

Loans

Loans that the Company has the intent and ability to hold until maturity or payoff are carried at amortized cost (net of the allowance for credit losses). Amortized cost is the principal amount outstanding, adjusted by partial charge-offs and net of deferred loan origination costs and fees. For originated loans, loan fees and certain direct origination costs are deferred and amortized into interest income over the contractual life of the loan using the level-yield method. When a loan is paid off, the unamortized portion is recognized in interest income. Interest income on loans is accrued based upon the daily principal amount outstanding except for loans on nonaccrual status. As a general rule, loans more than 90 days past due with respect to principal or interest, or sooner if management considers such action to be prudent, are classified as nonaccrual loans. However, loans that are more than 90 days past due may be kept on an accruing status if the loan is well secured and in the process of collection. Income accruals are suspended on all nonaccrual loans in a timely manner and all previously accrued and uncollected interest is reversed against current income. A loan can be returned to accrual status when collectibility of principal and interest is reasonably assured and the loan has performed for a period of time, generally six months. When doubt exists as to the collectability of a loan, any payments received are applied to reduce the amortized cost of the loan to the extent necessary to eliminate such doubt. For all loan portfolios, a charge-off occurs when the Company determines that a specific loan, or portion thereof, is uncollectible. This determination is made based on management's review of specific facts and circumstances of the individual loan, including the expected cash flows to repay the loan, the value of the collateral and the ability and willingness of any guarantors to perform.

Allowance for Credit Losses - Loans Held for Investment

The allowance for credit losses is established based upon the Company's current estimate of expected lifetime credit losses on loans measured at amortized cost. Credit losses are charged against the allowance when management's assessments confirm that the Company will not collect the full amortized cost basis of a loan. Subsequent recoveries, if any, are credited to the allowance. Under the current expected credit loss (CECL) methodology, the Company estimates credit losses for financial assets on a collective basis for loans sharing similar risk characteristics. The Company segments financial assets with similar risk characteristics and has elected to segment its loans based on Federal Call codes used for reporting loans to the Federal Deposit Insurance Corporation as part of the Call Report process. These segments are collectively evaluated for expected credit losses using a quantitative Discounted Cash Flow ("DCF") model combined with an assessment of certain qualitative factors designed to address forecast risk and model risk inherent in the quantitative model output. The Company has elected to use this approach because DCF models allow for effective incorporation of a reasonable and supportable forecast in a directionally consistent and objective manner and peer data is available for certain inputs such as the probability of default and the loss given default. The quantitative model utilizes a loss factor based approach to estimate expected credit losses, which are derived from internal historical and industry peer loss experience. The model estimates expected credit losses using loan level data over the estimated life of the exposure, considering the effect of prepayments. Economic forecasts are incorporated into the estimate over a reasonable and supportable forecast period, beyond which is a reversion to the historical long-run average using the straight-line reversion method. Management periodically evaluates a reasonable and supportable forecast period and a reversion period to be appropriate for purposes of estimating expected credit losses. The qualitative risk factors impacting the expected risk of loss within the portfolio include the following:

•

Lending policies and procedures

•

Economic and business conditions

•

Nature and volume of loans

•

Changes in management

•

Changes in credit quality

•

Changes in loan review system

•

Changes to underlying collateral values

•

Concentrations of credit risk

•

Other external factors

Loans that do not share similar risk characteristics with any pools of assets are subject to individual evaluation and are removed from the collectively assessed pools to avoid double counting. This includes loans on non-accrual and loans that are 90 days or greater past due. For the loans that will be individually evaluated, the Company will use either a discounted cash flow ("DCF") approach or a fair value of collateral approach. The latter approach will be used for loans deemed to be collateral dependent or when foreclosure is probable. Accrued interest receivable amounts are excluded from balances of loans held at amortized cost and are included within accrued interest receivable in the consolidated balance sheets. Management has elected not to measure an allowance for credit losses on these amounts as the Company employs a timely write-off policy. Consistent with the Company's policy for nonaccrual loans, accrued interest receivable is typically written off when loans reach 90 days past due and are placed on nonaccrual status.

In the ordinary course of business, the Company enters into commitments to extend credit. Such financial instruments are recorded in the financial statements when they are funded. The credit risk associated with these commitments is evaluated in a manner similar to the allowance for credit losses on loans with an additional assumption of probability of funding. The reserve for unfunded lending commitments is included in other liabilities in the consolidated balance sheets.

Loans consisted of the following as of the dates indicated:


	At March 31,						At December 31,
	2025						2024
	Amount			Percent			Amount			Percent
	(Dollars in thousands)
Real estate loans:
One-to-four family residential	$	434,371			36.6	%	$	422,841			36.9	%
Multi-family		371,014			31.3	%		343,970			30.0	%
Commercial		255,066			21.5	%		228,991			20.0	%
Home equity lines of credit and loans		44,032			3.7	%		45,154			4.0	%
Construction		69,684			5.9	%		90,894			7.9	%
Other loans:
Commercial		12,553			1.0	%		13,844			1.2	%
Consumer		209			0.0	%		141			0.0	%
Total loans, gross		1,186,929			100.0	%		1,145,835			100.0	%
Less:
Net deferred loan fees		(578	)					(502	)
Allowance for credit losses		(8,808	)					(8,884	)
Total loans, net	$	1,177,543					$	1,136,449

The carrying value of loans pledged to secure advances from the FHLBB were $731.2 million and $744.6 million as of March 31, 2025 and December 31, 2024, respectively.

The following tables set forth information regarding the allowance for credit losses on loans as of and for the three months ended March 31, 2025 and 2024:


	For the three months ended March 31, 2025
	(in thousands)
	Beginning Balance		Charge-offs			Recoveries		(Benefit) provision			Ending Balance(1)
Real estate loans:
One-to-four family residential	$	2,928	$	-		$	-	$	(230	)	$	2,698
Multi-family		2,422		-			-		210			2,632
Commercial		2,260		-			-		272			2,532
Home equity lines of credit and loans		118		-			-		1			119
Construction		1,036		-			-		(328	)		708
Other loans:
Commercial		119		(81	)		-		80			118
Consumer		1		(1	)		-		1			1
Total	$	8,884	$	(82	)	$	-	$	6		$	8,808


	For the three months ended March 31, 2024
	(in thousands)
	Beginning Balance		Charge-offs		Recoveries		(Benefit) provision			Ending Balance(1)
Real estate loans:
One-to-four family residential	$	3,555	$	-	$	-	$	(44	)	$	3,511
Multi-family		1,190		-		-		93			1,283
Commercial		1,636		-		-		36			1,672
Home equity lines of credit and loans		321		-		-		(2	)		319
Construction		1,757		-		-		(76	)		1,681
Other loans:
Commercial		131		-		-		72			203
Consumer		1		-		-		-			1
Total	$	8,591	$	-	$	-		79		$	8,670

(1) Balances of accrued interest receivable excluded from amortized cost and the calculation of allowance for credit losses amounted to $3.8 million and $3.5 million as of March 31, 2025 and December 31, 2024.

The following tables show the age analysis of past due loans as of the dates indicated:


	30–59 Days		60–89 Days		90 Days or More		Total Past Due		Total Current		Total Loans		90 days or more past due and accruing		Loans on Non-accrual
	(in thousands)
As of March 31, 2025
Real estate loans:
One-to-four family residential	$	623	$	—	$	106	$	729	$	433,642	$	434,371	$	—	$	959
Multi-family		—		—		—		—		371,014		371,014		—		—
Commercial		—		—		—		—		255,066		255,066		—		—
Home equity lines of credit and loans		193		—		12		205		43,827		44,032		—		305
Construction		—		—		—		—		69,684		69,684		—		—

Other loans:
Commercial		—		—		—		—		12,553		12,553		—		—
Consumer		—		—		—		—		209		209		—		—
	$	816	$	—	$	118	$	934	$	1,185,995	$	1,186,929	$	—	$	1,264


	30–59 Days		60–89 Days		90 Days or More		Total Past Due		Total Current		Total Loans		90 days or more past due and accruing		Loans on Non-accrual
	(in thousands)
As of December 31, 2024
Real estate loans:
One-to-four family residential	$	1,260	$	—	$	1,077	$	2,337	$	420,504	$	422,841	$	—	$	1,872
Multi-family		—		—		—		—		343,970		343,970		—		—
Commercial		—		—		—		—		228,991		228,991		—		—
Home equity lines of credit and loans		405		—		85		490		44,664		45,154		—		85
Construction		—		—		—		—		90,894		90,894		—		—

Other loans:
Commercial		—		—		—		—		13,844		13,844		—		—
Consumer		—		—		—		—		141		141		—		—
	$	1,665	$	—	$	1,162	$	2,827	$	1,143,008	$	1,145,835	$	—	$	1,957

During the three months ended March 31, 2025 and 2024, interest income recognized on nonaccrual loans amounted to $39,000 and $15,000, respectively. The following tables show information regarding nonaccrual loans as of the dates indicated:


	As of March 31, 2025						Three Months Ended March 31, 2025
	With an Allowance for Credit Losses		Without an Allowance for Credit Losses		Total		Interest Income Recognized
	(in thousands)

Real estate loans:
One-to-four family residential	$	—	$	959	$	959	$	28
Home equity lines of credit and loans		—		305		305		11
Total nonaccrual loans	$	—	$	1,264	$	1,264	$	39


	As of December 31, 2024						Year Ended December 31, 2024
	With an Allowance for Credit Losses		Without an Allowance for Credit Losses		Total		Interest Income Recognized
	(in thousands)

Real estate loans:
One-to-four family residential	$	—	$	1,872	$	1,872	$	53
Home equity lines of credit and loans		—		85		85		1
Total nonaccrual loans	$	—	$	1,957	$	1,957	$	54

Credit Quality Information

The Company's loan rating system for multi-family and commercial real estate, construction, commercial loans and certain residential and home equity lines of credit is as follows:

Loans rated 1 – 6: Loans in these categories are considered “pass” rated loans with low to average risk.

Loans rated 7: Loans in this category are considered “special mention.” These loans are starting to show signs of potential weakness and are being closely monitored by management.

Loans rated 8: Loans in this category are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Bank will sustain some loss if the weakness is not corrected.

Loans rated 9: Loans in this category are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.

Loans rated 10: Loans in this category are considered uncollectible (loss) and of such little value that their continuance as loans is not warranted.

On an annual basis, or more often if needed, the Company formally reviews the ratings on all commercial loans with aggregate potential outstanding balances of $500,000 or more, and all commercial real estate loans (including multi-family and construction loans as well as residential and home equity line of credit loans to commercial borrowers) with aggregate potential outstanding balances of $2.0 million or more. For loans that are not formally rated, the Company initially assesses credit quality based upon the borrower’s ability to pay and subsequently monitors these loans based on the borrower’s payment activity.

The following tables detail the amortized cost balances of the Company's loan portfolios, presented by credit quality indicator and origination year as of March 31, 2025 and December 31, 2024:


	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
	2025		2024		2023		2022		2021		Prior
As of March 31, 2025	(in thousands)
One-to-four family residential
Pass	$	5,059	$	8,874	$	14,022	$	34,310	$	15,014	$	15,380	$	—	$	—	$	92,659
Special Mention		—		—		523		—		371		495		—		—		1,389
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Loans not formally rated (1)		10,101		29,826		47,074		82,289		67,885		103,148		—		—		340,323
Total	$	15,160	$	38,700	$	61,619	$	116,599	$	83,270	$	119,023	$	—	$	—	$	434,371

Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Multi-family
Pass	$	21,403	$	24,918	$	57,090	$	205,573	$	35,081	$	17,246	$	9,703	$	—	$	371,014
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Loans not formally rated (1)		—		—		—		—		—		—		—		—		—
Total	$	21,403	$	24,918	$	57,090	$	205,573	$	35,081	$	17,246	$	9,703	$	—	$	371,014

Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial real estate
Pass	$	12,918	$	28,514	$	38,761	$	98,669	$	25,030	$	46,010	$	5,164	$	—		255,066
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Loans not formally rated (1)		—		—		—		—		—		—		—		—		—
Total	$	12,918	$	28,514	$	38,761	$	98,669	$	25,030	$	46,010	$	5,164	$	—	$	255,066

Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Home equity lines of credit and loans
Pass	$	—	$	198	$	321	$	—	$	—	$	—	$	6,370	$	—	$	6,889
Special Mention		—		—		—		—		—		6		297		—		303
Substandard		—		—		—		—		—		—		99		—		99
Doubtful		—		—		—		—		—		—		—		—		—
Loans not formally rated (1)		90		175		375		26		6		67		35,161		841		36,741
Total	$	90	$	373	$	696	$	26	$	6	$	73	$	41,927	$	841	$	44,032

Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Construction
Pass	$	3,644	$	34,215	$	13,419	$	11,623	$	1,355	$	2,988	$	—	$	—	$	67,244
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Loans not formally rated (1)		701		1,291		448		—		—		—		—		—		2,440
Total	$	4,345	$	35,506	$	13,867	$	11,623	$	1,355	$	2,988	$	—	$	—	$	69,684

Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—


Commercial
Pass	$	—	$	4,501	$	4,401	$	2,453	$	301	$	172	$	725	$	—	$	12,553
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Loans not formally rated (1)		—		—		—		—		—		—		—		—		—
Total	$	-	$	4,501	$	4,401	$	2,453	$	301	$	172	$	725	$	—	$	12,553

Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	16	$	65	$	—	$	81

Consumer
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Loans not formally rated (1)		78		7		14		27		37		5		41		—		209
Total	$	78	$	7	$	14	$	27	$	37	$	5	$	41	$	—	$	209

Current-period gross charge-offs	$	1	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	1


	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
	2024		2023		2022		2021		2020		Prior
As of December 31, 2024	(in thousands)
One-to-four family residential
Pass	$	8,351	$	12,065	$	34,466	$	15,123	$	3,979	$	11,766	$	—	$	—	$	85,750
Special Mention		—		—		—		—		636		771		—		—		1,407
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Loans not formally rated (1)		30,905		46,491		84,245		68,818		48,728		56,497		—		—		335,684
Total	$	39,256	$	58,556	$	118,711	$	83,941	$	53,343	$	69,034	$	—	$	—	$	422,841

Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Multi-family
Pass	$	24,006	$	55,612	$	201,562	$	35,315	$	8,611	$	8,792	$	10,072	$	—	$	343,970
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Loans not formally rated (1)		—		—		—		—		—		—		—		—		—
Total	$	24,006	$	55,612	$	201,562	$	35,315	$	8,611	$	8,792	$	10,072	$	—	$	343,970

Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Commercial real estate
Pass	$	28,614	$	40,935	$	82,054	$	25,215	$	15,447	$	32,071	$	4,655	$	—	$	228,991
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Loans not formally rated (1)		—		—		—		—		—		—		—		—		—
Total	$	28,614	$	40,935	$	82,054	$	25,215	$	15,447	$	32,071	$	4,655	$	—	$	228,991

Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Home equity lines of credit and loans
Pass	$	199	$	323	$	—	$	—	$	—	$	—	$	8,083	$	—	$	8,605
Special Mention		—		—		—		—		—		10		322		—		332
Substandard		—		—		—		—		—		—		99		—		99
Doubtful		—		—		—		—		—		—		—		—		—
Loans not formally rated (1)		176		382		27		7		—		71		34,618		837		36,118
Total	$	375	$	705	$	27	$	7	$	—	$	81	$	43,122	$	837	$	45,154

Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Construction
Pass	$	30,986	$	19,398	$	32,483	$	2,493	$	—	$	2,988	$	—	$	—	$	88,348
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Loans not formally rated (1)		1,116		1,430		—		—		—		—		—		—		2,546
Total	$	32,102	$	20,828	$	32,483	$	2,493	$	—	$	2,988	$	—	$	—	$	90,894

Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—


Commercial
Pass	$	4,501	$	4,410	$	2,597	$	340	$	—	$	195	$	1,801	$	—	$	13,844
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Loans not formally rated (1)		—		—		—		—		—		—		—		—		—
Total	$	4,501	$	4,410	$	2,597	$	340	$	—	$	195	$	1,801	$	—	$	13,844

Current-period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Consumer
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Loans not formally rated (1)		7		16		29		39		—		6		44		—		141
Total	$	7	$	16	$	29	$	39	$	—	$	6	$	44	$	—	$	141

Current-period gross charge-offs	$	4	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	4

(1) Non-accrual loans that were not formally rated amounted to $51,000 and $526,000 as of March 31, 2025 and December 31, 2024, respectively.

At March 31, 2025, the Company had one consumer mortgage loan secured by residential real estate property in the process of foreclosure for $107,000. At December 31, 2024, the Company had one consumer mortgage loan secured by residential real estate property in the process of foreclosure for $335,000.

For the three months ended March 31, 2025 and 2024, the Company did not provide loan restructurings involving borrowers that are experiencing financial difficulty.