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Allowance for Credit Losses
 3 Months Ended
Mar. 31, 2025
Allowance For Loan Losses [Abstract]  
Allowance for Credit Losses

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 requirements on loans individually evaluated in its determination of the adequacy of the credit losses. The Company recorded $457,000 in provision for credit losses ("PCL") for the three month period ended March 31, 2025, as compared to $726,000 for the three month period ended March 31, 2024.

 

There was a $269,000 decrease in provision for credit losses in the three months ended March 31, 2025, when compared to the same three month period in 2024. During the first quarter of 2025, the Company recorded a $504,000 increase to provision for credit losses related to its loan portfolio and a reduction to its reserves related to unfunded commitments in the amount of $47,000. The provision in the quarter ended March 31, 2025 was reflective of the qualitative factors used in determining the adequacy of the ACL and changes in the levels of delinquent and nonaccrual loans. The first quarter PCL reflects an addition to reserves considering asset quality metrics.

 

The following table summarizes all activity related to the ACL from December 31, 2024 to March 31, 2025 and to the recorded PCL for the three months ended March 31, 2025 (in thousands):

 

ACL - Loans

Reserves as of December 31, 2024

 

Q1 2025 Charge-Offs

 

Q1 2025 Recoveries

 

Q1 2025 PCL

 

Reserves as of March 31, 2025

 

Individually evaluated

$

2,485

 

$

-

 

$

-

 

$

5

 

$

2,490

 

     Overdraft

 

-

 

 

(38

)

 

9

 

 

29

 

 

-

 

     Pooled - quantitative

 

6,570

 

 

(263

)

 

20

 

 

311

 

 

6,638

 

     Pooled - qualitative

 

4,269

 

 

-

 

 

-

 

 

159

 

 

4,428

 

     Purchased

 

3,919

 

 

(207

)

 

139

 

 

-

 

 

3,851

 

Total ACL - Loans

$

17,243

 

$

(508

)

$

168

 

$

504

 

$

17,407

 

 

 

 

 

 

 

 

 

 

 

 

ACL - Held-To-Maturity

 

257

 

 

-

 

 

-

 

 

-

 

 

257

 

 

 

 

 

 

 

 

 

 

 

 

Other Liabilities - Unfunded Commitments

 

550

 

 

-

 

 

-

 

 

(47

)

 

503

 

Total ACL

$

18,050

 

$

(508

)

$

168

 

$

457

 

$

18,167

 

 

The following table summarizes all activity related to the ACL from December 31, 2023 to March 31, 2024 and to the recorded PCL for the three months ended March 31, 2024 (in thousands):

 

ACL - Loans

Reserves as of December 31, 2023

 

Q1 2024 Charge-Offs

 

Q1 2024 Recoveries

 

Q1 2024 PCL

 

Reserves as of March 31, 2024

 

Individually evaluated

$

3,716

 

$

-

 

$

-

 

$

100

 

$

3,816

 

     Overdraft

 

364

 

 

(5

)

 

4

 

 

-

 

 

363

 

     Pooled - quantitative

 

6,203

 

 

(63

)

 

34

 

 

101

 

 

6,275

 

     Pooled - qualitative

 

3,566

 

 

-

 

 

-

 

 

509

 

 

4,075

 

     Purchased

 

2,126

 

 

-

 

 

-

 

 

-

 

 

2,126

 

Total ACL - Loans

$

15,975

 

$

(68

)

$

38

 

$

710

 

$

16,655

 

 

 

 

 

 

 

 

 

 

 

 

ACL - Held-To-Maturity

 

352

 

 

-

 

 

-

 

 

15

 

 

367

 

 

 

 

 

 

 

 

 

 

 

 

Other Liabilities - Unfunded Commitments

 

589

 

 

-

 

 

-

 

 

1

 

 

590

 

Total ACL

$

16,916

 

$

(68

)

$

38

 

$

726

 

$

17,612

 

 

Summarized in the tables below are changes in the allowance for credit losses for loans for the indicated periods and information pertaining to the allocation of the balances of the credit losses, loans receivable based on individual, and collective 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.

 

 

 

As of and for the three months ended March 31, 2025

 

 

 

1-4 family

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

first-lien

 

 

Residential

 

 

 

 

 

 

 

 

Other

 

 

Paycheck

 

 

 

residential

 

 

construction

 

 

Commercial

 

 

Commercial

 

 

commercial

 

 

Protection

 

(In thousands)

 

mortgage

 

 

mortgage

 

 

real estate

 

 

lines of credit

 

 

and industrial

 

 

Program

 

Allowance for credit losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Balance

 

$

1,467

 

 

$

592

 

 

$

6,746

 

 

$

749

 

 

$

2,879

 

 

$

-

 

Charge-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(92

)

 

 

(80

)

 

 

-

 

Recoveries

 

 

3

 

 

 

-

 

 

 

1

 

 

 

-

 

 

 

4

 

 

 

-

 

Provisions (credits)

 

 

(37

)

 

 

(88

)

 

 

332

 

 

 

254

 

 

 

45

 

 

 

-

 

Ending balance

 

$

1,433

 

 

$

504

 

 

$

7,079

 

 

$

911

 

 

$

2,848

 

 

$

-

 

Ending balance: related to loans
   individually evaluated

 

$

41

 

 

$

-

 

 

$

1,004

 

 

$

253

 

 

$

1,012

 

 

$

-

 

Ending balance: related to loans
   collectively evaluated

 

$

1,392

 

 

$

504

 

 

$

6,075

 

 

$

658

 

 

$

1,836

 

 

$

-

 

Loans receivables:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance

 

$

243,854

 

 

$

3,162

 

 

$

381,479

 

 

$

65,074

 

 

$

91,644

 

 

$

96

 

Ending balance: individually
   evaluated

 

$

1,170

 

 

$

-

 

 

$

10,650

 

 

$

503

 

 

$

2,945

 

 

$

-

 

Ending balance: collectively
   evaluated

 

$

242,684

 

 

$

3,162

 

 

$

370,829

 

 

$

64,571

 

 

$

88,699

 

 

$

96

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home equity

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

Tax exempt

 

 

and junior liens

 

 

Consumer

 

 

Total

 

 

 

 

 

 

 

Allowance for credit losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Balance

 

$

4

 

 

$

715

 

 

$

4,091

 

 

 

17,243

 

 

 

 

 

 

 

Charge-offs

 

 

-

 

 

 

-

 

 

 

(336

)

 

 

(508

)

 

 

 

 

 

 

Recoveries

 

 

-

 

 

 

1

 

 

 

159

 

 

 

168

 

 

 

 

 

 

 

Provisions (credits)

 

 

(2

)

 

 

(22

)

 

 

22

 

 

 

504

 

 

 

 

 

 

 

Ending balance

 

$

2

 

 

$

694

 

 

$

3,936

 

 

$

17,407

 

 

 

 

 

 

 

Ending balance: related to loans
   individually evaluated

 

$

-

 

 

$

180

 

 

$

-

 

 

$

2,490

 

 

 

 

 

 

 

Ending balance: related to loans
   collectively evaluated

 

$

2

 

 

$

514

 

 

$

3,936

 

 

$

14,917

 

 

 

 

 

 

 

Loans receivables:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance

 

$

4,446

 

 

$

52,315

 

 

$

71,681

 

 

$

913,751

 

 

 

 

 

 

 

Ending balance: individually
   evaluated

 

$

-

 

 

$

530

 

 

$

-

 

 

$

15,798

 

 

 

 

 

 

 

Ending balance: collectively
   evaluated

 

$

4,446

 

 

$

51,785

 

 

$

71,681

 

 

$

897,953

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As of and for the three months ended March 31, 2024

 

 

 

1-4 family

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

first-lien

 

 

Residential

 

 

 

 

 

 

 

 

Other

 

 

Paycheck

 

 

 

residential

 

 

construction

 

 

Commercial

 

 

Commercial

 

 

commercial

 

 

Protection

 

(In thousands)

 

mortgage

 

 

mortgage

 

 

real estate

 

 

lines of credit

 

 

and industrial

 

 

Program

 

Allowance for credit losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Balance

 

$

1,608

 

 

$

858

 

 

$

5,751

 

 

$

1,674

 

 

$

3,281

 

 

$

-

 

Charge-offs

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Recoveries

 

 

2

 

 

 

-

 

 

 

6

 

 

 

-

 

 

 

5

 

 

 

-

 

Provisions (credits)

 

 

9

 

 

 

(56

)

 

 

810

 

 

 

(283

)

 

 

117

 

 

 

-

 

Ending balance

 

$

1,619

 

 

$

802

 

 

$

6,567

 

 

$

1,391

 

 

$

3,403

 

 

$

-

 

Ending balance: related to loans
   individually evaluated

 

$

138

 

 

$

-

 

 

$

1,057

 

 

$

725

 

 

$

1,710

 

 

$

-

 

Ending balance: related to loans
  collectively evaluated

 

$

1,481

 

 

$

802

 

 

$

5,510

 

 

$

666

 

 

$

1,693

 

 

$

-

 

Loans receivables:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance

 

$

252,026

 

 

$

1,689

 

 

$

363,467

 

 

$

67,416

 

 

$

91,178

 

 

$

147

 

Ending balance: individually
   evaluated

 

$

2,129

 

 

$

-

 

 

$

12,138

 

 

$

1,270

 

 

$

6,849

 

 

$

-

 

Ending balance: collectively
   evaluated

 

$

249,897

 

 

$

1,689

 

 

$

351,329

 

 

$

66,146

 

 

$

84,329

 

 

$

147

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home equity

 

 

Other

 

 

 

 

 

 

 

 

 

 

 

 

Tax exempt

 

 

and junior liens

 

 

Consumer

 

 

Total

 

 

 

 

 

 

 

Allowance for credit losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning Balance

 

$

1

 

 

$

657

 

 

$

2,145

 

 

$

15,975

 

 

 

 

 

 

 

Charge-offs

 

 

-

 

 

 

-

 

 

 

(68

)

 

 

(68

)

 

 

 

 

 

 

Recoveries

 

 

-

 

 

 

-

 

 

 

25

 

 

 

38

 

 

 

 

 

 

 

Provisions

 

 

1

 

 

 

5

 

 

 

107

 

 

 

710

 

 

 

 

 

 

 

Ending balance

 

$

2

 

 

$

662

 

 

$

2,209

 

 

$

16,655

 

 

 

 

 

 

 

Ending balance: related to loans
   individually evaluated

 

$

-

 

 

$

146

 

 

$

70

 

 

$

3,846

 

 

 

 

 

 

 

Ending balance: related to loans
  collectively evaluated

 

$

2

 

 

$

516

 

 

$

2,139

 

 

$

12,809

 

 

 

 

 

 

 

Loans receivables:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ending balance

 

$

3,374

 

 

$

35,723

 

 

$

77,106

 

 

$

892,126

 

 

 

 

 

 

 

Ending balance: individually
   evaluated

 

$

-

 

 

$

715

 

 

$

70

 

 

$

23,171

 

 

 

 

 

 

 

Ending balance: collectively
   evaluated

 

$

3,374

 

 

$

35,008

 

 

$

77,036

 

 

$

868,955

 

 

 

 

 

 

 

 

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:

 

 

 

As of March 31, 2025

 

 

 

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

 

$

41

 

 

$

-

 

 

$

1,004

 

 

$

253

 

 

$

1,012

 

Historical loss rate

 

 

1,440

 

 

 

504

 

 

 

2,880

 

 

 

154

 

 

 

1,111

 

Qualitative factors

 

 

(48

)

 

 

-

 

 

 

3,195

 

 

 

504

 

 

 

725

 

Total

 

$

1,433

 

 

$

504

 

 

$

7,079

 

 

$

911

 

 

$

2,848

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home equity

 

 

Other

 

 

 

 

 

 

 

 

 

Tax exempt

 

 

and junior liens

 

 

consumer

 

 

Total

 

 

 

 

Specifically reserved

 

$

-

 

 

$

392

 

 

$

3,639

 

 

$

6,341

 

 

 

 

Historical loss rate

 

 

2

 

 

 

281

 

 

 

266

 

 

 

6,638

 

 

 

 

Qualitative factors

 

 

-

 

 

 

21

 

 

 

31

 

 

 

4,428

 

 

 

 

Total

 

$

2

 

 

$

694

 

 

$

3,936

 

 

$

17,407

 

 

 

 

 

 

 

As of December 31, 2024

 

 

 

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

 

$

42

 

 

$

-

 

 

$

853

 

 

$

154

 

 

$

1,165

 

Historical loss rate

 

 

1,474

 

 

 

592

 

 

 

2,779

 

 

 

126

 

 

 

1,032

 

Qualitative factors

 

 

(49

)

 

 

-

 

 

 

3,114

 

 

 

469

 

 

 

682

 

Total

 

$

1,467

 

 

$

592

 

 

$

6,746

 

 

$

749

 

 

$

2,879

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Home equity

 

 

Other

 

 

 

 

 

 

 

 

 

Tax exempt

 

 

and junior liens

 

 

consumer

 

 

Total

 

 

 

 

Specifically reserved

 

$

-

 

 

$

416

 

 

$

3,774

 

 

$

6,404

 

 

 

 

Historical loss rate

 

 

4

 

 

 

278

 

 

 

285

 

 

 

6,570

 

 

 

 

Qualitative factors

 

 

-

 

 

 

21

 

 

 

32

 

 

 

4,269

 

 

 

 

Total

 

$

4

 

 

$

715

 

 

$

4,091

 

 

$

17,243

 

 

 

 

 

Collateral Dependent Disclosures

The Company has certain loans for which repayment is dependent upon the operation or sale of collateral, as the borrower is experiencing financial difficulty. The underlying collateral can vary based upon the type of loan. The following provides more detail about the types of collateral that secure collateral dependent loans:

•
Commercial real estate loans can be secured by either owner occupied commercial real estate or non-owner occupied investment commercial real estate. Typically, owner occupied commercial real estate loans are secured by office buildings, warehouses, manufacturing facilities and other commercial and industrial properties occupied by operating companies. Non-owner occupied commercial real estate loans are generally secured by office buildings and complexes, retail facilities, multifamily complexes, land under development, industrial properties, as well as other commercial or industrial real estate.
•
Residential real estate loans are typically secured by first mortgages, and in some cases could be secured by a second mortgage.
•
Home equity lines of credit are generally secured by second mortgages on residential real estate property.
•
Consumer loans are generally secured by automobiles, motorcycles, recreational vehicles and other personal property. Some consumer loans are unsecured and have no underlying collateral.

The following table details the amortized cost of collateral dependent loans at March 31, 2025 and December 31, 2024:

 

(In thousands)

March 31, 2025

 

December 31, 2024

 

Commercial and industrial

$

3,349

 

$

7,478

 

Commercial real estate

 

10,650

 

 

8,591

 

Residential (1-4 family) first mortgages

 

373

 

 

374

 

Home equity loans and lines of credit

 

504

 

 

528

 

Consumer loans

 

-

 

 

67

 

Total loans

$

14,876

 

$

17,038