Loans And Allowance For Credit Losses

12 Months Ended

Dec. 31, 2024

Loans And Allowance For Credit Losses [Abstract]

Note 5 - Loans and allowance for credit losses

On January 1, 2023, the Company adopted the amendments within ASU 2016-13 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures. Accordingly, the Company’s financial results for reporting periods beginning after January 1, 2023 are presented in accordance with ASC 326. For a detailed discussion of the impact of the adoption of ASU 2016-13 and information related to loans and credit quality, including accounting policies and methodologies used to estimate the allowance for credit losses, see Note 2.

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Note 5 - Loans and allowance for credit losses (continued)

The Company’s primary portfolio segments align with the methodology applied in estimating the allowance for credit losses under CECL and are reflected as such in the disclosures as of and for the periods ended December 31, 2024 and 2023 as provided below.



Loan Segments:		Loan Classes:
Commercial		Commercial and Industrial Loans
Commercial Real Estate		Commercial Mortgages – Owner Occupied
		Commercial Mortgages – Non-Owner Occupied
		Commercial Construction/Land
Consumer		Consumer Open-End
		Consumer Closed-End
Residential		Residential Mortgages
		Residential Consumer Construction/Land

Each of the foregoing segments has a unique risk profile, detailed as follows:

Commercial Loans: Credit risk for the loans (primarily to businesses) is primarily influenced by borrower cash flows, business health, and management effectiveness. Economic downturns, industry-specific challenges, or adverse business conditions can affect borrower repayment capacity. Loans are typically secured by business assets or personal guarantees.

Commercial Real Estate Loans: This portfolio, consisting of loans to finance owner-occupied and non-owner-occupied properties, depends heavily on local real estate market conditions, including occupancy rates, rental income, and property values. The Bank maintains conservative underwriting standards, limiting loan-to-value ratios generally to 80% or less, and monitors portfolio concentration closely. Exposure to large office buildings and shopping centers is minimal, with most lending secured by multi-tenant properties diversified across various local industries and geographies.

Consumer Loans: Consumer loans (primarily personal installment loans, auto loans, and home equity lines) are influenced by borrowers' employment stability and personal financial circumstances. Repayment can be impacted by economic downturns, unemployment rates, or rising costs of living. Loans in this segment may be unsecured or secured by depreciating collateral such as automobiles.

Residential Mortgage Loans: Comprised of 1-4 family home mortgages (often owner-occupied). Risks primarily involve borrower employment and income stability, along with local housing market dynamics. These loans are secured by first-lien residential real estate. Long amortization periods (10–30 years) mean credit quality can be impacted by housing market cycles and interest rate changes. Conservative underwriting standards, such as prudent loan-to-value ratios and income verification, mitigate risk exposure.

The Bank actively monitors and manages these risks through comprehensive underwriting standards, regular portfolio reviews, stress testing, and ongoing oversight by management and the board.

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Note 5 - Loans and allowance for credit losses (continued)


A summary of loans, net (1) is as follows (dollars in thousands):
	As of	As of
	December 31, 2024	December 31, 2023
Commercial	$ 66,418	$ 65,324
Commercial Real Estate:
Commercial Mortgages-Owner Occupied	140,443	131,519
Commercial Mortgages-Non-Owner Occupied	195,089	175,344
Commercial Construction/Land	23,883	21,966
Consumer
Consumer Open-End	50,041	50,282
Consumer Closed-End	28,269	26,235
Residential:
Residential Mortgages	113,303	106,990
Residential Consumer Construction/Land	26,150	31,673

Total loans	$ 643,596	$ 609,333

Less allowance for credit losses	7,044	7,412

Net loans	$ 636,552	$ 601,921

(1)Includes net deferred costs of $589 and $961 as of December 31, 2024 and 2023 respectively.

The following table presents the amortized cost basis of collateral dependent loans by loan segment:


Collateral Dependent Loans	December 31, 2024
(dollars in thousands)	Business/Other Assets	Real Estate
Commercial	$ 3,315	$ -
Commercial Real Estate	-	7,350
Consumer	-	592
Residential	-	1,369
Total	$ 3,315	$ 9,311

Collateral Dependent Loans	December 31, 2023
(dollars in thousands)	Business/Other Assets	Real Estate
Commercial	$ 313	$ -
Commercial Real Estate	-	3,566
Consumer	-	329
Residential	-	1,105
Total	$ 313	$ 5,000

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Note 5 - Loans and allowance for credit losses (continued)

The following tables present the activity in the allowance for credit losses for the year-to-date periods ended and the distribution of the allowance by segment as of December 31, 2024 and 2023:



	Allowance for Credit Losses
	(dollars in thousands)
	As of and For the Year Ended December 31, 2024

			Commercial
2024	Commercial		Real Estate		Consumer		Residential		Total
Allowance for Credit Losses:

Beginning Balance	$	514	$	3,985	$	1,093	$	1,820	$	7,412
Charge-Offs		(8)		-		(76)		-		(84)
Recoveries		200		7		41		1		249
Provision (recovery of provision)		(20)		(273)		(216)		(24)		(533)
Ending Balance	$	686	$	3,719	$	842	$	1,797	$	7,044



	Allowance for Credit Losses
	(dollars in thousands)
	As of and For the Year Ended December 31, 2023

			Commercial
2023	Commercial		Real Estate		Consumer		Residential		Total
Allowance for Credit Losses:

Beginning Balance	$	1,102	$	2,902	$	904	$	1,351	$	6,259
Adoption of ASU 2016-13		(526)		1,157		257		357		1,245
Charge-Offs		(149)		-		(84)		(3)		(236)
Recoveries		50		96		44		19		209
Provision (recovery of provision)		37		(170)		(28)		96		(65)
Ending Balance	$	514	$	3,985	$	1,093	$	1,820	$	7,412

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Note 5 - Loans and allowance for credit losses (continued)

Credit Quality Indicators

The Bank’s internal risk rating system is in place to grade commercial and commercial real estate loans. Category ratings are reviewed periodically by lenders and the credit review area of the Bank based on the borrower’s individual situation. Additionally, internal and external monitoring and review of credits are conducted on an annual basis.

Below is a summary and definition of the Bank’s risk rating categories:



RATING 1		Excellent
RATING 2		Above Average
RATING 3		Satisfactory
RATING 4		Acceptable / Low Satisfactory
RATING 5		Monitor
RATING 6		Special Mention
RATING 7		Substandard
RATING 8		Doubtful
RATING 9		Loss

We segregate loans into the above categories based on the following criteria and we review the characteristics of each rating at least annually, generally during the first quarter. The characteristics of these ratings are as follows:

“Pass.” These are loans having risk ratings of 1 through 4. Pass loans are to persons or business entities with an acceptable financial condition, appropriate collateral margins, appropriate cash flow to service the existing loan, and an appropriate leverage ratio. The borrower has paid all obligations as agreed and it is expected that this type of payment history will continue. When necessary, acceptable personal guarantors support the loan.

“Monitor.” These are loans having a risk rating of 5. Monitor loans have currently acceptable risk but may have the potential for a specific defined weakness in the borrower’s operations and the borrower’s ability to generate positive cash flow on a sustained basis. The borrower’s recent payment history may currently or in the future be characterized by late payments. The Bank’s risk exposure is mitigated by collateral supporting the loan. The collateral is considered to be well-margined, well maintained, accessible and readily marketable.

“Special Mention.” These are loans having a risk rating of 6. Special Mention loans have weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the bank’s credit position at some future date. Special Mention loans are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. These loans do warrant more than routine monitoring due to a weakness caused by adverse events.

“Substandard.” These are loans having a risk rating of 7. Substandard loans are considered to have specific and well-defined weaknesses that jeopardize the viability of the Bank’s credit extension. The payment history for the loan has been inconsistent and the expected or projected primary repayment source may be inadequate to service the loan. The estimated net liquidation value of the collateral pledged and/or ability of the personal guarantor(s) to pay the loan may not adequately protect the Bank. There is a distinct possibility that the Bank will sustain some loss if the deficiencies associated with the loan are not corrected in the near term. A substandard loan would not automatically need to be downgraded unless the loan is significantly past due and the borrower’s performance and financial condition provides evidence that it is probable that the Bank will be unable to collect all amounts due.

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Note 5 - Loans and allowance for credit losses (continued)

“Doubtful.” These are loans having a risk rating of 8. Doubtful rated loans have all the weaknesses inherent in a loan that is classified substandard but 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.

“Loss.” These are loans having a risk rating of 9. Loss rated loans are not considered collectible under normal circumstances and there is no realistic expectation for any future payment on the loan. Loss rated loans are fully charged off.

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Note 5 - Loans and allowance for credit losses (continued)

The table below details the amortized cost of the classes of loans by credit quality indicator and year of origination as of December 31, 2024.


	Term Loans Amortized Cost Basis by Origination Year
	2024	2023	2022	2021	2020	Prior	Revolving Loans Amortized Cost Basis	Revolving Loans Converted to Term	Total
Commercial
Risk Rating
Pass	$ 10,412	$ 3,680	$ 2,901	$ 7,188	$ 734	$ 16,070	$ 21,602	$ 341	$ 62,928
Special Mention	-	-	41	79	-	-	-	-	120
Substandard	-	922	13	43	-	569	1,654	169	3,370
Total	$ 10,412	$ 4,602	$ 2,955	$ 7,310	$ 734	$ 16,639	$ 23,256	$ 510	$ 66,418

Commercial Real Estate:
Commercial Mort. - Owner Occupied
Risk Rating
Pass	$ 21,261	$ 8,959	$ 21,770	$ 39,881	$ 5,663	$ 35,869	$ 1,564	$ 153	$ 135,120
Special Mention	-	-	-	-	-	451	-	-	451
Substandard	-	93	-	2,898	44	1,837	-	-	4,872
Total	$ 21,261	$ 9,052	$ 21,770	$ 42,779	$ 5,707	$ 38,157	$ 1,564	$ 153	$ 140,443

Commercial Mort. - Non-Owner Occupied
Risk Rating
Pass	$ 39,659	$ 12,203	$ 49,273	$ 27,410	$ 9,698	$ 49,206	$ 6,467	$ -	$ 193,916
Special Mention	-	-	-	-	-	-	-	-	-
Substandard	-	-	-	-	1,173	-	-	-	1,173
Total	$ 39,659	$ 12,203	$ 49,273	$ 27,410	$ 10,871	$ 49,206	$ 6,467	$ -	$ 195,089

Commercial Construction/Land
Risk Rating
Pass	$ 7,180	$ 1,496	$ 768	$ 9,497	$ 1,976	$ 1,020	$ 641	$ -	$ 22,578
Special Mention	-	-	-	-	-	-	-	-	-
Substandard	-	-	951	354	-	-	-	-	1,305
Total	$ 7,180	$ 1,496	$ 1,719	$ 9,851	$ 1,976	$ 1,020	$ 641	$ -	$ 23,883

Consumer:
Consumer - Open-End
Risk Rating
Pass	$ -	$ -	$ -	$ -	$ -	$ -	$ 48,531	$ 1,110	$ 49,641
Special Mention	-	-	-	-	-	-	-	-	-
Substandard	-	-	-	-	-	-	-	400	400
Total	$ -	$ -	$ -	$ -	$ -	$ -	$ 48,531	$ 1,510	$ 50,041

Consumer - Closed-End
Risk Rating

Pass	$ 6,660	$ 4,548	$ 9,634	$ 382	$ 398	$ 6,366	$ -	$ -	$ 27,988
Special Mention	-	-	-	-	-	-	-	-	-
Substandard	37	-	119	-	-	125	-	-	281
Total	$ 6,697	$ 4,548	$ 9,753	$ 382	$ 398	$ 6,491	$ -	$ -	$ 28,269

Residential:
Residential Mortgages
Risk Rating
Pass	$ 18,418	$ 23,905	$ 22,954	$ 9,082	$ 8,376	$ 28,572	$ -	$ -	$ 111,307
Special Mention	-	-	-	-	-	73	-	-	73
Substandard	-	-	265	-	103	1,555	-	-	1,923
Total	$ 18,418	$ 23,905	$ 23,219	$ 9,082	$ 8,479	$ 30,200	$ -	$ -	$ 113,303

Residential Consumer Construction/Land
Risk Rating
Pass	$ 12,522	$ 6,375	$ 2,436	$ 1,161	$ 848	$ 2,808	$ -	$ -	$ 26,150
Special Mention	-	-	-	-	-	-	-	-	-
Substandard	-	-	-	-	-	-	-	-	-
Total	$ 12,522	$ 6,375	$ 2,436	$ 1,161	$ 848	$ 2,808	$ -	$ -	$ 26,150

Totals:
Risk Rating
Pass	$ 116,112	$ 61,166	$ 109,736	$ 94,601	$ 27,693	$ 139,911	$ 78,805	$ 1,604	$ 629,628
Special Mention	-	-	41	79	-	524	-	-	644
Substandard	37	1,015	1,348	3,295	1,320	4,086	1,654	569	13,324
Total	$ 116,149	$ 62,181	$ 111,125	$ 97,975	$ 29,013	$ 144,521	$ 80,459	$ 2,173	$ 643,596

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Note 5 - Loans and allowance for credit losses (continued)


	Term Loans Amortized Cost Basis by Origination Year
	2023	2022	2021	2020	2019	Prior	Revolving Loans Amortized Cost Basis	Revolving Loans Converted to Term	Total
Commercial
Risk Rating
Pass	$ 6,086	$ 4,559	$ 9,091	$ 6,067	$ 2,754	$ 18,429	$ 17,302	$ 39	$ 64,327
Special Mention	100	-	-	132	-	-	382	-	614
Substandard	-	18	51	-	6	127	-	181	383
Total	$ 6,186	$ 4,577	$ 9,142	$ 6,199	$ 2,760	$ 18,556	$ 17,684	$ 220	$ 65,324

Commercial Real Estate:
Commercial Mort. - Owner Occupied
Risk Rating
Pass	$ 10,260	$ 23,120	$ 45,838	$ 7,972	$ 8,988	$ 31,254	$ 1,471	$ 159	$ 129,062
Special Mention	-	-	-	-	-	456	-	-	456
Substandard	94	-	-	45	283	1,579	-	-	2,001
Total	$ 10,354	$ 23,120	$ 45,838	$ 8,017	$ 9,271	$ 33,289	$ 1,471	$ 159	$ 131,519

Commercial Mort. - Non-Owner Occupied
Risk Rating
Pass	$ 13,069	$ 52,341	$ 35,419	$ 10,210	$ 4,397	$ 52,583	$ 6,152	$ -	$ 174,171
Special Mention	-	-	-	-	-	-	-	-	-
Substandard	-	-	-	1,173	-	-	-	-	1,173
Total	$ 13,069	$ 52,341	$ 35,419	$ 11,383	$ 4,397	$ 52,583	$ 6,152	$ -	$ 175,344

Commercial Construction/Land
Risk Rating
Pass	$ 1,848	$ 3,157	$ 9,869	$ 2,842	$ 628	$ 463	$ 2,768	$ -	$ 21,575
Special Mention	-	-	-	-	-	-	-	-	-
Substandard	-	-	391	-	-	-	-	-	391
Total	$ 1,848	$ 3,157	$ 10,260	$ 2,842	$ 628	$ 463	$ 2,768	$ -	$ 21,966

Consumer:
Consumer - Open-End
Risk Rating
Pass	$ -	$ -	$ -	$ -	$ -	$ -	$ 48,576	$ 1,466	$ 50,042
Special Mention	-	-	-	-	-	-	-	-	-
Substandard	-	-	-	-	-	-	240	-	240
Total	$ -	$ -	$ -	$ -	$ -	$ -	$ 48,816	$ 1,466	$ 50,282

Consumer - Closed-End
Risk Rating
Pass	$ 5,587	$ 11,121	$ 588	$ 529	$ 7,647	$ 601	$ -	$ -	$ 26,073
Special Mention	-	-	-	14	-	-	-	-	14
Substandard	-	-	-	-	32	116	-	-	148
Total	$ 5,587	$ 11,121	$ 588	$ 543	$ 7,679	$ 717	$ -	$ -	$ 26,235

Residential:

Residential Mortgages
Risk Rating
Pass	$ 26,854	$ 24,740	$ 10,220	$ 9,007	$ 7,161	$ 25,935	$ -	$ -	$ 103,917
Special Mention	-	-	-	-	-	1,687	-	-	1,687
Substandard	-	-	-	105	54	1,227	-	-	1,386
Total	$ 26,854	$ 24,740	$ 10,220	$ 9,112	$ 7,215	$ 28,849	$ -	$ -	$ 106,990

Residential Consumer Construction/Land
Risk Rating
Pass	$ 10,762	$ 11,341	$ 3,821	$ 1,414	$ 1,896	$ 2,417	$ -	$ -	$ 31,651
Special Mention	-	-	22	-	-	-	-	-	22
Substandard	-	-	-	-	-	-	-	-	-
Total	$ 10,762	$ 11,341	$ 3,843	$ 1,414	$ 1,896	$ 2,417	$ -	$ -	$ 31,673

Totals:
Risk Rating
Pass	$ 74,466	$ 130,379	$ 114,846	$ 38,041	$ 33,471	$ 131,682	$ 76,269	$ 1,664	$ 600,818
Special Mention	100	-	22	146	-	2,143	382	-	2,793
Substandard	94	18	442	1,323	375	3,049	240	181	5,722
Total	$ 74,660	$ 130,397	$ 115,310	$ 39,510	$ 33,846	$ 136,874	$ 76,891	$ 1,845	$ 609,333

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Note 5 - Loans and allowance for credit losses (continued)

The following table details the current period gross charge-offs of loans by year of origination for the years ended of December 31, 2024 and 2023:


Charge-Offs by Origination Year (in thousands)


For the year endedDecember 31, 2024	2024	2023	2022	2021	2020	Prior	Revolving Loans Amortized Cost Basis	Total	Revolving Loans Converted to Term
Commercial	$ -	$ 8	$ -	$ -	$ -	$ -	$ -	$ 8	$ -
Commercial Real Estate:
Commercial Mortgages-Owner Occupied	-	-	-	-	-	-	-	-	-
Commercial Mortgages-Non-Owner Occupied	-	-	-	-	-	-	-	-	-
Commercial Construction/Land	-	-	-	-	-	-	-	-	-
Consumer:
Consumer Open-End	-	-	-	-	-	2	-	2	-
Consumer Closed-End	-	-	74	-	-	-	-	74	-
Residential:
Residential Mortgages	-	-	-	-	-	-	-	-	-
Residential Consumer Construction/Land	-	-	-	-	-	-	-	-	-

Total	$ -	$ 8	$ 74	$ -	$ -	$ 2	$ -	$ 84	$ -


For the year ended December 31, 2023	2023	2022	2021	2020	2019	Prior	Revolving Loans Amortized Cost Basis	Total	Revolving Loans Converted to Term
Commercial	$ -	$ -	$ -	$ 17	$ -	$ 132	$ -	$ 149	$ -
Commercial Real Estate:
Commercial Mortgages-Owner Occupied	-	-	-	-	-	-	-	-	-
Commercial Mortgages-Non-Owner Occupied	-	-	-	-	-	-	-	-	-
Commercial Construction/Land	-	-	-	-	-	-	-	-	-
Consumer:
Consumer Open-End	-	-	-	-	-	6	7	13	-
Consumer Closed-End	19	33	19	-	-	-	-	71	-
Residential:
Residential Mortgages	-	-	-	-	-	3	-	3	-
Residential Consumer Construction/Land	-	-	-	-	-	-	-	-	-

Total	$ 19	$ 33	$ 19	$ 17	$ -	$ 141	$ 7	$ 236	$ -

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Note 5 - Loans and allowance for credit losses (continued)

The following table details loans on nonaccrual status as of December 31, 2024 and 2023:


Loans on Nonaccrual Status
(dollars in thousands)

	December 31, 2024
	Nonaccrual Loans
	With No Allowance	With an Allowance	Total
Commercial	$ 279	$ 193	$ 472
Commercial Real Estate:
Commercial Mortgages-Owner Occupied	43	-	43
Commercial Mortgages-Non-Owner Occupied	-	-	-
Commercial Construction/Land	354	-	354
Consumer
Consumer Open-End	-	-	-
Consumer Closed-End	192	-	192
Residential:
Residential Mortgages	579	-	579
Residential Consumer Construction/Land	-	-	-
Total	$ 1,447	$ 193	$ 1,640


	December 31, 2023
	Nonaccrual Loans
	With No Allowance	With an Allowance	Total
Commercial	$ -	$ -	$ -
Commercial Real Estate:
Commercial Mortgages-Owner Occupied	-	-	-
Commercial Mortgages-Non-Owner Occupied	-	-	-
Commercial Construction/Land	391	-	391
Consumer
Consumer Open-End	-	-	-
Consumer Closed-End	-	-	-
Residential:
Residential Mortgages	-	-	-
Residential Consumer Construction/Land	-	-	-
Total	$ 391	$ -	$ 391

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Note 5 - Loans and allowance for credit losses (continued)

The following tables present an aging analysis of the loan portfolio by class and past due as of December 31, 2024 and 2023:


Age Analysis of Past Due Loans as of December 31, 2024 (in thousands)
														Recorded
						Greater								Investment
		30-59 Days		60-89 Days		than		Total Past				Total		> 90 Days &
		Past Due		Past Due		90 Days		Due		Current		Loans		Accruing
Commercial	$	—	$	398	$	74	$	472	$	65,946	$	66,418	$	—
Commercial Real Estate:
Commercial Mortgages-Owner Occupied		—		—		43		43		140,400		140,443		—
Commercial Mortgages-Non-Owner Occupied		—		—		—		—		195,089		195,089		—
Commercial Construction/Land		—		—		—		—		23,883		23,883		—
Consumer:
Consumer Open-End		39		1		—		40		50,001		50,041		—
Consumer Closed-End		112		73		—		185		28,084		28,269		—
Residential:
Residential Mortgages		174		358		340		872		112,431		113,303		—
Residential Consumer Construction/Land		—		—		—		—		26,150		26,150		—
Total	$	325	$	830	$	457	$	1,612	$	641,984	$	643,596	$	—


Age Analysis of Past Due Loans as of December 31, 2023 (in thousands)
														Recorded
						Greater								Investment
		30-59 Days		60-89 Days		than		Total Past				Total		> 90 Days &
		Past Due		Past Due		90 Days		Due		Current		Loans		Accruing
Commercial	$	—	$	—	$	—	$	—	$	65,324	$	65,324	$	—
Commercial Real Estate:
Commercial Mortgages-Owner Occupied		91		—		—		91		131,428		131,519		—
Commercial Mortgages-Non-Owner Occupied		—		—		—		—		175,344		175,344		—
Commercial Construction/Land		—		—		—		—		21,966		21,966		—
Consumer:
Consumer Open-End		357		—		—		357		49,925		50,282		—
Consumer Closed-End		126		89		—		215		26,020		26,235		—
Residential:
Residential Mortgages		396		—		—		396		106,594		106,990		—
Residential Consumer Construction/Land		—		—		—		—		31,673		31,673		—
Total	$	970	$	89	$	—	$	1,059	$	608,274	$	609,333	$	—

Note 5 - Loans and allowance for credit losses (continued)

The amounts of overdrafts reclassified as loans were $46 and $31 as of December 31, 2024 and 2023, respectively.

The Company’s officers, directors and their related interests have various types of loan relationships with the Bank. The total outstanding balances of these related party loans at December 31, 2024 and 2023 were $10,380,000 and $9,904,000 respectively. During 2024, new loans and advances amounted to $1,804 and repayments amounted to $1,328,000.

Occasionally, the Bank modifies loans to borrowers experiencing financial difficulties by providing principal forgiveness, term extensions, interest rate reductions or payment deferrals. As the effect of most modifications is already included in the allowance for credit losses due to the measurement methodologies used in its estimate, the allowance for credit losses is typically not adjusted upon modification. When principal forgiveness is provided at modification, the amount forgiven is charged against the allowance for credit losses.

There were no loan modifications to borrowers experiencing financial difficulty during the twelve months ended December 31, 2024 and 2023. There were no loan modifications to borrowers experiencing financial difficulty that defaulted (90 days past due) during the twelve months ended December 31, 2024 and 2023.

The amount of interest reversed for loans that became classified as nonaccrual loans during 2024 and 2023 was approximately $35,000 and $0, respectively.

ACL on Unfunded Commitments

The Company maintains an allowance for off-balance sheet credit exposures such as unfunded balances for existing lines of credit, commitments to extend future credit, as well as both standby and commercial letters of credit when there is a contractual obligation to extend credit and when this extension of credit is not unconditionally cancellable by the Company. The allowance for off-balance sheet credit exposures is adjusted as a provision for (or recovery of) credit losses in the Consolidated Statements of Income. The estimate includes consideration of the likelihood that funding will occur, which is based on a historical funding study derived from internal information, and an estimate of expected credit losses on commitments expected to be funded over its estimated life, which are the same loss rates that are used in computing the allowance for loan credit losses. The allowance for credit losses for unfunded loan commitments of $543 and $665 at December 31, 2024 and 2023, is separately classified within Other Liabilities on the Consolidated Balance Sheets.

The following table presents the balance and activity in the ACL for unfunded commitments for the twelve months ended December 31, 2024 and 2023:


Allowance for Credit Losses on Unfunded Commitments	(in thousands)
Balance, December 31, 2022	$ -
Adoption of ASU 2016-13	779
Recovery of credit losses	(114)
Balance December 31, 2023	$ 665

Balance, December 31, 2023	$ 665
Recovery of credit losses	(122)
Balance December 31, 2024	$ 543