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Loans and Allowance for Credit Losses

3 Months Ended

Mar. 31, 2025

Loans and Allowance for Credit Losses

Loans and Allowance for Credit Losses

Note 3: Loans and Allowance for Credit Losses

Categories of loans by purpose include:


		March 31,			December 31,
		2025			2024

		(In thousands)
Commercial and Industrial		$	99,571		$	98,795
Commercial real estate			296,493			291,673
Residential real estate			92,709			91,737
Consumer loans			8,093			8,766

Total gross loans			496,866			490,971

Less allowance for credit losses			(4,095)			(4,026)

Total loans		$	492,771		$	486,945

The risk characteristics of each loan portfolio segment are as follows:

Commercial and Industrial, and Commercial Real Estate

Commercial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets, such as accounts receivable or inventory, and may include a personal guarantee. Short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers. Commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy. The characteristics of properties securing the Company’s commercial real estate portfolio are diverse, but with geographic location almost entirely in the Company’s market area. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria. In general, the Company avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied commercial real estate versus nonowner-occupied loans.

Residential Real Estate and Consumer

Residential real estate and consumer loans consist of two segments - residential mortgage loans and personal loans. For residential mortgage loans that are secured by 1-4 family residences and are generally owner-occupied, the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Home equity loans are typically secured by a subordinate interest in 1-4 family residences, and consumer personal loans are secured by consumer personal assets, such as automobiles or recreational vehicles. Some consumer personal loans are unsecured, such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas, such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.

The following tables present the balance in the allowance for credit losses by collateral type and the recorded investment in loans by purpose based on portfolio segment and credit loss method as of March 31, 2025 and December 31, 2024.


		March 31, 2025
		Commercial and			Commercial
		Industrial			Real Estate			Residential			Installment			Total

		(In thousands)
Allowance for credit losses:

Balance, beginning of period		$	699		$	1,488		$	1,708		$	131		$	4,026
Provision for credit loss expense			19			(63)			129			11			96
Losses charged off			—			—			—			(34)			(34)
Recoveries			1			—			—			6			7
Balance, end of period		$	719		$	1,425		$	1,837		$	114		$	4,095

Ending balance: individually evaluated for credit losses		$	111		$	—		$	—		$	—		$	111
Ending balance: collectively evaluated for credit losses		$	608		$	1,425		$	1,837		$	114		$	3,984
Loans:
Ending balance: individually evaluated for credit losses		$	323		$	1,469		$	—		$	200		$	1,992
Ending balance: collectively evaluated for credit losses		$	99,248		$	295,024		$	92,709		$	7,893		$	494,874


		March 31, 2024
		Commercial and			Commercial
		Industrial			Real Estate			Residential			Installment			Total

		(In thousands)
Allowance for credit losses:

Balance, beginning of period		$	573		$	1,408		$	1,843		$	94		$	3,918
Provision for credit loss expense			15			(31)			(60)			76			—
Losses charged off			—			—			—			(57)			(57)
Recoveries			1			—			—			8			9
Balance, end of period		$	589		$	1,377		$	1,783		$	121		$	3,870

Ending balance: individually evaluated for credit losses		$	75		$	—		$	—		$	—		$	75
Ending balance: collectively evaluated for credit losses		$	514		$	1,377		$	1,783		$	121		$	3,795
Loans:
Ending balance: individually evaluated for credit losses		$	141		$	8		$	235		$	—		$	384
Ending balance: collectively evaluated for losses		$	90,086		$	288,878		$	92,477		$	8,482		$	479,923

Allowance for Loan Losses and Recorded Investment in Loans

As of December 31, 2024


					December 31, 2024
		Commercial and			Commercial
		Industrial			Real Estate			Residential			Installment			Total

		(In thousands)
Allowance for credit losses:
Ending balance: individually evaluated for impairment		$	—		$	—		$	—		$	—		$	—
Ending balance: collectively evaluated for impairment		$	699		$	1,488		$	1,708		$	131		$	4,026

Loans:
Ending balance: individually evaluated for impairment		$	—		$	—		$	220		$	—		$	220
Ending balance: collectively evaluated for impairment		$	98,795		$	291,673		$	91,517		$	8,766		$	490,751

The following tables show the portfolio quality indicators.

Based on the most recent analysis performed, the following table presents the recorded investment in non-homogeneous loans by internal risk rating system as of March 31, 2025 (in thousands):


																				Revolving			Revolving
																				Loans			Loans
																				Amortized			Converted
March 31, 2025		2025			2024			2023			2022			2021			Prior			Cost Basis			to Term			Total
Commercial and Industrial
Risk Rating
Pass		$	6,512		$	21,013		$	17,007		$	10,640		$	7,088		$	18,425		$	17,491		$	—		$	98,176
Special Mention			—			—			—			—			—			—			1,072			—			1,072
Substandard			—			—			41			26			—			186			70			—			323
Doubtful			—			—			—			—			—			—			—			—			—
Total		$	6,512		$	21,013		$	17,048		$	10,666		$	7,088		$	18,611		$	18,633		$	—		$	99,571

Commercial and Industrial
Current period gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—

Commercial real estate
Risk Rating
Pass		$	11,377		$	19,453		$	32,301		$	32,347		$	36,169		$	95,886		$	54,180		$	—		$	281,713
Special Mention			—			—			—			315			—			6,654			6,342			—			13,311
Substandard			—			—			—			—			377			1,092			—			—			1,469
Doubtful			—			—			—			—			—			—			—			—			—
Total		$	11,377		$	19,453		$	32,301		$	32,662		$	36,546		$	103,632		$	60,522		$	—		$	296,493

Commercial real estate
Current period gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—

Total
Pass		$	17,889		$	40,466		$	49,308		$	42,987		$	43,257		$	114,311		$	71,671		$	—		$	379,889
Special Mention			—			—			—			315			—			6,654			7,414			—			14,383
Substandard			—			—			41			26			377			1,278			70			—			1,792
Doubtful			—			—			—			—			—			—			—			—			—
Total		$	17,889		$	40,466		$	49,349		$	43,328		$	43,634		$	122,243		$	79,155		$	—		$	396,064
Current period gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—

The Company monitors the credit risk profile by payment activity for residential and consumer loan classes. Loans past due 90 days or more and loans on nonaccrual status are considered nonperforming. Nonperforming loans are reviewed quarterly. The following table presents the amortized cost in residential and consumer loans based on payment activity:


																				Revolving			Revolving
																				Loans			Loans
																				Amortized			Converted
March 31, 2025		2025			2024			2023			2022			2021			Prior			Cost Basis			to Term			Total
Residential Real Estate
Payment Performance
Performing		$	2,414		$	9,410		$	10,234		$	16,772		$	14,846		$	38,769		$	—		$	—		$	92,445
Nonperforming			—			—			21			—			16			227			—			—			264
Total		$	2,414		$	9,410		$	10,255		$	16,772		$	14,862		$	38,996		$	—		$	—		$	92,709

Residential real estate
Current period gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—

Consumer
Payment Performance
Performing		$	418		$	4,099		$	1,199		$	698		$	305		$	980		$	375		$	—		$	8,074
Nonperforming			—			—			2			—			—			17			—			—			19
Total		$	418		$	4,099		$	1,201		$	698		$	305		$	997		$	375		$	—		$	8,093

Consumer
Current period gross charge-offs		$	34		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	34

Total
Payment Performance
Performing		$	2,632		$	13,509		$	11,433		$	17,470		$	15,151		$	39,752		$	375		$	—		$	100,322
Nonperforming			—			—			23			—			16			241			—			—			280
Total		$	2,632		$	13,509		$	11,456		$	17,470		$	15,167		$	39,993		$	375		$	—		$	100,602

The following tables show the portfolio quality indicators.

Based on the most recent analysis performed, the following table presents the recorded investment in non-homogeneous loans by internal risk rating system as of December 31, 2024 (in thousands):


																				Revolving			Revolving
																				Loans			Loans
																				Amortized			Converted
December 31, 2024		2024			2023			2022			2021			2020			Prior			Cost Basis			to Term			Total
Commercial and industrial
Risk Rating
Pass		$	22,474		$	17,993		$	11,487		$	8,082		$	10,099		$	8,295		$	19,068		$	—		$	97,498
Special Mention			—			—			26			—			—			185			1,086			—			1,297
Substandard			—			—			—			—			—			—			—			—			—
Doubtful			—			—			—			—			—			—			—			—			—
Total		$	22,474		$	17,993		$	11,513		$	8,082		$	10,099		$	8,480		$	20,154		$	—		$	98,795

Commercial and industrial
Current period gross charge-offs		$	—		$	127		$	—		$	—		$	—		$	—		$	—		$	—		$	127

Commercial real estate
Risk Rating
Pass		$	19,554		$	30,858		$	32,972		$	36,870		$	31,461		$	68,279		$	57,096		$	—		$	277,090
Special Mention			—			—			315			242			—			7,781			6,229			—			14,567
Substandard			—			—			—			—			—			16			—			—			16
Doubtful			—			—			—			—			—			—			—			—			—
Total		$	19,554		$	30,858		$	33,287		$	37,112		$	31,461		$	76,076		$	63,325		$	—		$	291,673

Commercial real estate
Current period gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—

Total
Pass		$	42,028		$	48,851		$	44,459		$	44,952		$	41,560		$	76,574		$	76,164		$	—		$	374,588
Special Mention			—			—			341			242			—			7,966			7,315			—			15,864
Substandard			—			—			—			—			—			16			—			—			16
Doubtful			—			—			—			—			—			—			—			—			—
Total		$	42,028		$	48,851		$	44,800		$	45,194		$	41,560		$	84,556		$	83,479		$	—		$	390,468
Current period gross charge-offs		$	—		$	127		$	—		$	—		$	—		$	—		$	—		$	—		$	127

The Company monitors the credit risk profile by payment activity for residential and consumer loan classes. Loans past due 90 days or more and loans on nonaccrual status are considered nonperforming. Nonperforming loans are reviewed quarterly. The following table presents the amortized cost in residential and consumer loans based on payment activity (in thousands):


																				Revolving			Revolving
																				Loans			Loans
																				Amortized			Converted
December 31, 2024		2024			2023			2022			2021			2020			Prior			Cost Basis			to Term			Total
Residential Real Estate
Payment Performance
Performing		$	9,480		$	10,469		$	16,912		$	15,174		$	17,401		$	21,993		$	—		$	—		$	91,429
Nonperforming			—			22			—			17			—			269			—			—			308
Total		$	9,480		$	10,491		$	16,912		$	15,191		$	17,401		$	22,262		$	—		$	—		$	91,737

Residential real estate
Current period gross charge-offs		$	—		$	—		$	—		$	—		$	—		$	17		$	—		$	—		$	17

Consumer
Payment Performance
Performing		$	4,619		$	1,427		$	798		$	349		$	275		$	907		$	376		$	—		$	8,751
Nonperforming			—			—			—			—			15			—			—			—			15
Total		$	4,619		$	1,427		$	798		$	349		$	290		$	907		$	376		$	—		$	8,766

Consumer
Current period gross charge-offs		$	144		$	72		$	—		$	—		$	—		$	—		$	—		$	—		$	216

Total
Payment Performance
Performing		$	14,099		$	11,896		$	17,710		$	15,523		$	17,676		$	22,900		$	376		$	—		$	100,180
Nonperforming			—			22			—			17			15			269			—			—			323
Total		$	14,099		$	11,918		$	17,710		$	15,540		$	17,691		$	23,169		$	376		$	—		$	100,503
Current period gross charge-offs		$	144		$	72		$	—		$	—		$	—		$	17		$	—		$	—		$	233

To facilitate the monitoring of credit quality within the loan portfolio, and for purposes of analyzing historical loss rates used in the determination of the allowance for credit losses, the Company utilizes the following categories of credit grades: pass, special mention, substandard, and doubtful. The four categories, which are derived from standard regulatory rating definitions, are assigned upon initial approval of credit to borrowers and updated periodically thereafter. Pass ratings, which are assigned to those borrowers that do not have identified potential or well defined weaknesses and for which there is a high likelihood of orderly repayment, are updated periodically based on the size and credit characteristics of the borrower. All other categories are updated on at least a quarterly basis.

The Company assigns a special mention rating to loans that have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may, at some future date, result in the deterioration of the repayment prospects for the loan or the Company’s credit position.

The Company assigns a substandard rating to loans that are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged. Substandard loans have well defined weaknesses or weaknesses that could jeopardize the orderly repayment of the debt. Loans and leases in this grade also are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies noted are not addressed and corrected.

The Company assigns a doubtful rating to loans that have all the attributes of a substandard rating with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonable specific pending factors that may work to the advantage of and strengthen the credit quality of the loan or lease, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors may include a proposed merger or acquisition, liquidation proceeding, capital injection, perfecting liens on additional collateral or refinancing plans.

The Company evaluates the loan risk grading system definitions and allowance for credit losses methodology on an ongoing basis. No significant changes were made to either during the past year to date period.

Loan Portfolio Aging Analysis

As of March 31, 2025


		30-59 Days			60‑89 Days			Greater
		Past Due			Past Due			Than 90 Days						Total Past
		and			and			and						Due and						Total Loans
		Accruing			Accruing			Accruing			Non Accrual			Non Accrual			Current			Receivable

		(In thousands)
Commercial and Industrial		$	27		$	—		$	—		$	323		$	350		$	99,221		$	99,571
Commercial real estate			338			—			—			1,335			1,673			294,820			296,493
Residential			443			30			—			264			737			91,972			92,709
Installment			58			5			3			16			82			8,011			8,093
Total		$	866		$	35		$	3		$	1,938		$	2,842		$	494,024		$	496,866

Loan Portfolio Aging Analysis

As of December 31, 2024


		30‑59 Days			60‑89 Days			Greater
		Past Due			Past Due			Than 90 Days						Total Past
		and			and			and						Due and						Total Loans
		Accruing			Accruing			Accruing			Non Accrual			Non Accrual			Current			Receivable

		(In thousands)
Commercial and Insustrial		$	—		$	43		$	41		$	170		$	254		$	98,541		$	98,795
Commercial real estate			48			—			—			258			306			291,367			291,673
Residential			95			30			—			308			433			91,304			91,737
Installment			15			2			15			—			32			8,734			8,766
Total		$	158		$	75		$	56		$	736		$	1,025		$	489,946		$	490,971

Nonperforming Loans

The following table present the amortized cost basis of loans on nonaccrual status and loans past due over 90 days still accruing interest as of March 31, 2025:


											Loans Past
											Due Over 90 Days			Total
		Nonaccrual with no ACL			Nonaccrual with ACL			Total Nonaccrual			Still Accruing			Nonperforming

		(In thousands)
Commercial and Industrial		$	211		$	112		$	323		$	—		$	323
Commercial real estate			1,335			—			1,335			—			1,335
Residential			264			—			264			—			264
Installment			16			—			16			3			19
Total		$	1,826		$	112		$	1,938		$	3		$	1,941

The Company recognized $103,000 interest income on nonaccrual loans during the period ended March 31, 2025.

The following table present the amortized cost basis of loans on nonaccrual status and loans past due over 90 days still accruing interest as of December 31, 2024:


											Loans Past
											Due Over 90 Days			Total
		Nonaccrual with no ACL			Nonaccrual with ACL			Total Nonaccrual			Still Accruing			Nonperforming

		(In thousands)
Commercial and Industrial		$	170		$	—		$	170		$	41		$	211
Commercial real estate			258			—			258			—			258
Residential			308			—			308			—			308
Consumer			—			—			—			15			15
Total		$	736		$	—		$	736		$	56		$	792

The Company recognized approximately $4,000 interest income on nonaccrual loans during the the period ended December 31, 2024.