Allowance for Loan Losses

3 Months Ended

Mar. 31, 2023

Allowance For Loan Losses [Abstract]

Note 7: Allowance for Credit Losses

Management extensively reviews recent trends in historical losses, qualitative factors, including concentrations of loans to related borrowers and concentrations of loans by collateral type, and specific reserve needs on loans individually evaluated for impairment in its determination of the adequacy of the credit losses. We recorded $692,000 in provision for credit losses for the three month period ended March 31, 2023, as compared to $102,000 for the three month period ended March 31, 2022. The increase in provision for credit losses in the third quarter of 2023, as compared to the same three month period in 2022, primarily reflected required reserves related to year-over-year loan growth. Certain credit sensitive portfolios continue to be carefully monitored, and the Bank will consistently apply its loan classification and reserve building methodologies to the analysis of these portfolios. Please refer to the asset quality section below for a further discussion of asset quality as it relates to the credit losses.

Summarized in the tables below are changes in the allowance for credit losses for the indicated periods and information pertaining to the allocation of the balances of the credit losses, loans receivable based on individual, and collective impairment evaluation by loan portfolio class. An allocation of a portion of the allowance to a given portfolio class does not limit the Company’s ability to absorb losses in another portfolio class.


	For the three months ended March 31, 2023
	1-4 family
	first-lien			Residential										Other
	residential			construction			Commercial				Commercial			commercial
(In thousands)	mortgage			mortgage			real estate				lines of credit			and industrial
Allowance for credit losses:
Beginning Balance	$	714		$	-		$	5,881			$	3,990		$	2,944
Adoption of New Accounting Standard		1,396			969			(1,744	)			95			10
Charge-offs		-			-			-				-			(36	)
Recoveries		-			-			-				1			62
Provisions		(173	)		(269	)		1,045				(1,991	)		2,101
Ending balance	$	1,937		$	700		$	5,182			$	2,095		$	5,081


	Tax exempt			Home equity and junior liens			Other consumer				Total
Allowance for credit losses:
Beginning Balance	$	3		$	741		$	1,046				15,319
Adoption of New Accounting Standards		14			(97	)		1,242				1,886
Charge-offs		-			-			(83	)			(119	)
Recoveries		-			-			28				91
Provisions		(2	)		79			(98	)	-		692
Ending balance	$	15		$	723		$	2,135			$	17,869


	For the three months ended March 31, 2022
	1-4 family
	first-lien			Residential									Other
	residential			construction			Commercial			Commercial			commercial
(In thousands)	mortgage			mortgage			real estate			lines of credit			and industrial
Allowance for credit losses:
Beginning Balance	$	872		$	-		$	5,308		$	935		$	2,762
Charge-offs		-			-			-			(17	)		-
Recoveries		-			-			-			-			-
Provisions		(42	)		-			(10	)		143			(25	)
Ending balance	$	830		$	-		$	5,298		$	1,061		$	2,737
Ending balance: related to loans


	Tax exempt			Home equity and junior liens			Other consumer			Unfunded Commitments			Total
Allowance for credit losses:
Beginning Balance	$	3		$	774		$	1,297		$	984		$	12,935
Charge-offs		-			-			(29	)		-			(46	)
Recoveries		-			-			26			-			26
Provisions		1			(98	)		128			5			102
Ending balance	$	4		$	676		$	1,422		$	989		$	13,017

The Company’s methodology for determining its allowance for credit losses includes an analysis of qualitative factors that are added to the historical loss rates in arriving at the total allowance for credit losses needed for this general pool of loans. The qualitative factors include, but are not limited to, the following:

•

Changes in national and local economic trends;

•

The rate of growth in the portfolio;

•

Trends of delinquencies and nonaccrual balances;

•

Changes in loan policy; and

•

Changes in lending management experience and related staffing.

Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available at the time of the evaluation. These qualitative factors, applied to each product class, make the evaluation inherently subjective, as it requires material estimates that may be susceptible to significant revision as more information becomes available. Adjustments to the factors are supported through documentation of changes in conditions in a narrative accompanying the allowance for credit losses analysis and calculation.

The allocation of the allowance for credit losses summarized on the basis of the Company’s calculation methodology was as follows:


	March 31, 2023
	1-4 family
	first-lien		Residential						Other
	residential		construction		Commercial		Commercial		commercial
(In thousands)	mortgage		mortgage		real estate		lines of credit		and industrial
Specifically reserved	$	63	$	-	$	627	$	1,301	$	3,478
Historical loss rate		1,579		537		2,802		193		963
Qualitative factors		295		163		1,754		601		640
Total	$	1,937	$	700	$	5,183	$	2,095	$	5,081

			Home equity		Other
	Tax exempt		and junior liens		consumer		Total
Specifically reserved	$	-	$	157	$	-	$	5,626
Historical loss rate		4		502		2,095		8,675
Qualitative factors		11		64		40		3,568
Total	$	15	$	723	$	2,135	$	17,869


	March 31, 2022
	1-4 family
	first-lien		Residential						Other
	residential		construction		Commercial		Commercial		commercial
(In thousands)	mortgage		mortgage		real estate		lines of credit		and industrial
Specifically reserved	$	97	$	-	$	352	$	48	$	1,353
Historical loss rate		85		-		2		26		96
Qualitative factors		648		-		4,944		987		1,288
Total	$	830	$	-	$	5,298	$	1,061	$	2,737

			Home equity		Other
	Tax exempt		and junior liens		consumer		Unallocated		Total
Specifically reserved	$	-	$	114	$	-	$	-	$	1,964
Historical loss rate		-		324		1,147		-		1,680
Qualitative factors		4		238		275		-		8,384
Other		-		-		-		989		989
Total	$	4	$	676	$	1,422	$	989	$	13,017