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Allowance for Credit Losses - Loans

3 Months Ended

Mar. 31, 2024

8. Allowance for Credit Losses – Loans

The allowance for credit losses (ACL) is a valuation reserve established and maintained by charges against income and is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans. Loans, or portions thereof, are charged-off against the ACL when they are deemed uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off.

The ACL is an estimate of expected credit losses, measured over the contractual life of a loan, that considers our historical loss experience, current conditions and forecasts of future economic conditions. Determination of an appropriate ACL is inherently subjective and may have significant changes from period to period. The methodology for determining the ACL has two main components: evaluation of expected credit losses for certain groups of homogeneous loans that share similar risk characteristics and evaluation of loans that do not share risk characteristics with other loans.

The allowance for credit losses is measured on a collective (pool) basis when similar risk characteristics exist. The Company has aligned our segmentation to the quarterly Call Report. This allowed the Company to use not only our data but also peer institutions’ data to supplement loss observations in determining our qualitative adjustments. Some further sub-segmenting was performed on the commercial and industrial (C&I) and commercial real estate (CRE) portfolios based on collateral type. The Company has identified the following portfolio segments:

●

C&I and CRE Owner Occupied – Real Estate

●

C&I and CRE Owner Occupied – Other

●

CRE Non-Owner Occupied – Retail

●

CRE Non-Owner Occupied – Multi-Family

●

CRE Non-Owner Occupied – Other

●

Residential Mortgages

●

Consumer

The Company is utilizing the static pool analysis (cohort) method for our current expected credit losses (CECL) model. The static pool analysis methodology captures loans that qualify for a segment (i.e. balance of a pool of loans with similar risk characteristics) as of a point in time to form a cohort then tracks that cohort over their remaining lives to determine their loss behavior. The remaining lifetime loss rate is then applied to current loans that qualify for the same segmentation criteria to form a remaining life expectation on current loans. Once historical cohorts are established, the loans in each individual cohort are tracked over their remaining lives for loss and recovery events. Each cohort is

evaluated individually and as a result, a loss may be counted in several different quarterly cohort periods, as long as the specific loan existed in the population of each of those cohort periods.

The following tables summarize the rollforward of the allowance for credit losses by loan portfolio segment for the three-month periods ending March 31, 2024 and 2023 (in thousands).

Three months ended March 31, 2024

Balance at

Charge-

Provision

Balance at

December 31, 2023

Offs

Recoveries

(Recovery)

March 31, 2024

Commercial real estate (owner occupied)

1,529

—

(1,119)

416

Other commercial and industrial

3,030

(103)

(272)

2,667

Commercial real estate (non-owner occupied) - retail

3,488

—

118

3,606

Commercial real estate (non-owner occupied) - multi-family

1,430

—

(74)

1,358

Other commercial real estate (non-owner occupied)

3,428

—

1,186

4,616

Residential mortgages

1,021

—

(175)

847

Consumer

1,127

(61)

1,129

Total

15,053

(164)

(293)

14,639


	Three months ended March 31, 2023
	Balance at		Impact of Adopting		Charge-				Provision		Balance at
	December 31, 2022		ASC 326		Offs		Recoveries		(Recovery)		March 31, 2023
Commercial real estate (owner occupied)	$	—	$	1,380	$	—	$	6	$	(66)	$	1,320
Other commercial and industrial		—		2,908		—		1		(36)		2,873
Commercial real estate (non-owner occupied) - retail		—		1,432		—		—		54		1,486
Commercial real estate (non-owner occupied) - multi-family		—		1,226		—		1		(81)		1,146
Other commercial real estate (non-owner occupied)		5,972		(2,776)		—		4		(3)		3,197
Commercial (owner occupied real estate and other)		2,653		(2,653)		—		—		—		—
Residential mortgages		1,380		(355)		—		2		5		1,032
Consumer		85		695		(139)		9		428		1,078
Allocation for general risk		653		(653)		—		—		—		—
Total	$	10,743	$	1,204	$	(139)	$	23	$	301	$	12,132

The Company recorded a $293,000 provision for credit losses recovery in the first quarter of 2024 as compared to a $301,000 provision expense recorded in the first quarter of 2023, representing a $594,000 favorable shift between years. The 2024 provision for credit losses recovery was recognized due to payoff activity that resulted in the total loan portfolio balance decreasing since year-end 2023. Additionally, contributing to this recovery was a favorable adjustment to the historical loss and qualitative factors used to calculate the allowance for credit losses in accordance with CECL.

Non-performing assets decreased from $12.4 million at December 31, 2023 to $12.2 million at March 31, 2024 primarily due to a reduction in non-accrual commercial real estate loans. Non-performing assets were at 1.18% of total loans. During the first three months of 2024, the Company experienced net loan charge-offs of $121,000, or 0.05% of total average loans, which is relatively consistent with net charge-offs of $116,000, or 0.05% of total average loans, in the first three months of 2023. In summary, the allowance for credit losses on the loan portfolio provided 120% coverage of non-performing assets, and 1.43% of total loans, at March 31, 2024 compared to 121% coverage of non-performing assets, and 1.45% of total loans, on December 31, 2023.

Historical credit loss experience is the basis for the estimation of expected credit losses. The Company applies historical loss rates to pools of loans with similar risk characteristics. After consideration of the historic loss calculation, management applies qualitative adjustments to reflect the current conditions and reasonable and supportable forecasts not already captured in the historical loss information at the balance sheet date. Our reasonable and supportable forecast adjustment is based on a blend of peer and Company data as well as management judgment. Including peer data addresses the Company’s lack of loss history in some pools of loans. For periods beyond our reasonable and supportable forecast period of two years, loss expectations revert to the long-run historical mean. The qualitative adjustments for current conditions are based upon the following factors:

●

changes in lending policies and procedures;

●

changes in economic conditions;

●

changes in the nature and volume of the portfolio;

●

staff experience;

●

changes in volume and severity of delinquency, non-performing loans, and classified loans;

●

changes in the quality of the Company’s loan review system;

●

trends in underlying collateral value;

●

concentration risk; and

●

external factors: competition, legal, regulatory.

These modified historical loss rates are multiplied by the outstanding principal balance of each loan to calculate a required reserve. Ultimately, 45% of the first quarter of 2024 general reserve represented qualitative adjustment with 55% representing quantitative reserve.

In accordance with ASC 326, Financial Instruments - Credit Losses, the Company will evaluate individual loans for expected credit losses when those loans do not share similar risk characteristics with loans evaluated using a collective (pooled) basis. In contrast to legacy accounting standards, this criterion is broader than the impairment concept and management may evaluate loans individually even when no specific expectation of collectability is in place. Loans will not be included in both collective and individual analysis. The individual analysis will establish a specific reserve for loans in scope. It should be noted that there is a review threshold of $150,000 or more for loans being subject to individual evaluation within the consumer and residential mortgage segments.

Specific reserves are established based on the following three acceptable methods for measuring the ACL: 1) the present value of expected future cash flows discounted at the loan’s original effective interest rate; 2) the loan’s observable market price; or 3) the fair value of the collateral when the loan is collateral dependent. The method is selected on a loan-by-loan basis, with management primarily utilizing either the discounted cash flows or the fair value of collateral method. The evaluation of the need and amount of a specific allocation of the allowance is made on a quarterly basis.

The need for an updated appraisal on collateral dependent loans is determined on a case-by-case basis. The useful life of an appraisal or evaluation will vary depending upon the circumstances of the property and the economic conditions in the marketplace. A new appraisal is not required if there is an existing appraisal which, along with other information, is sufficient to determine a reasonable value for the property and to support an appropriate and adequate allowance for credit losses. At a minimum, annual documented reevaluation of the property is completed by the Bank’s internal Collections and Assigned Risk Department to support the value of the property.

When reviewing an appraisal associated with an existing real estate collateral dependent transaction, the Bank’s Chief Credit Officer must determine if there have been material changes to the underlying assumptions in the appraisal which affect the original estimate of value. Some of the factors that could cause material changes to reported values include:

●

the passage of time;

●

the volatility of the local market;

●

the availability of financing;

●

natural disasters;

●

the inventory of competing properties;

●

new improvements to, or lack of maintenance of, the subject property or competing properties upon physical inspection by the Bank;

●

changes in underlying economic and market assumptions, such as material changes in current and projected vacancy, absorption rates, capitalization rates, lease terms, rental rates, sales prices, concessions, construction overruns and delays, zoning changes, etc.; and/or

●

environmental contamination.

The value of the property is adjusted to appropriately reflect the above listed factors and the value is discounted to reflect the value impact of a forced or distressed sale, any outstanding senior liens, any outstanding unpaid real estate taxes, transfer taxes and closing costs that would occur with sale of the real estate. If the Chief Credit Officer determines that a reasonable value cannot be derived based on available information, a new appraisal is ordered. The determination of the need for a new appraisal, versus completion of a property valuation by the Bank’s Collections and Assigned Risk Department personnel, rests with the Chief Credit Officer and not the originating account officer.

The following tables summarize the loan portfolio and allowance for credit losses (in thousands).

At March 31, 2024

Commercial real estate (owner occupied)

Other commercial and industrial

Commercial real estate (non-owner occupied) - retail

Commercial real estate (non-owner occupied) - multi-family

Other commercial real estate (non-owner occupied)

Residential mortgages

Consumer

Total

Loans:

Individually evaluated

185

1,678

—

12,141

524

—

14,528

Collectively evaluated

87,845

147,127

169,787

109,556

217,433

176,467

102,944

1,011,159

Total loans

88,030

148,805

169,787

109,556

229,574

176,991

102,944

1,025,687

Allowance for credit losses:

Specific reserve allocation

—

394

—

1,608

—

2,002

General reserve allocation

416

2,273

3,606

1,358

3,008

847

1,129

12,637

Total allowance for credit losses

416

2,667

3,606

1,358

4,616

847

1,129

14,639


	At December 31, 2023
	Commercial real estate (owner occupied)		Other commercial and industrial		Commercial real estate (non-owner occupied) - retail			Commercial real estate (non-owner occupied) - multi-family	Other commercial real estate (non-owner occupied)		Residential mortgages		Consumer		Total
Loans:
Individually evaluated	$	187	$	1,694	$	—	$	—	$	8,780	$	173	$	—	$	10,834
Collectively evaluated		88,960		157,730		161,961		110,008		231,506		174,497		102,775		1,027,437
Total loans	$	89,147	$	159,424	$	161,961	$	110,008	$	240,286	$	174,670	$	102,775	$	1,038,271
Allowance for credit losses:
Specific reserve allocation	$	—	$	414	$	—	$	—	$	—	$	—	$	—	$	414
General reserve allocation		1,529		2,616		3,488		1,430		3,428		1,021		1,127		14,639
Total allowance for credit losses	$	1,529	$	3,030	$	3,488	$	1,430	$	3,428	$	1,021	$	1,127	$	15,053

The following tables present the amortized cost basis of collateral-dependent loans by class of loans (in thousands).


	Collateral Type
March 31, 2024	Real Estate
Commercial:
Commercial real estate (owner occupied)	$	185
Commercial real estate (non-owner occupied):
Other		12,141
Residential mortgages		524
Total	$	12,850


	Collateral Type
December 31, 2023	Real Estate
Commercial:
Commercial real estate (owner occupied)	$	187
Commercial real estate (non-owner occupied):
Other		8,780
Residential mortgages		173
Total	$	9,140

Non-Performing Assets

Non-performing assets are comprised of (i) loans which are on a non-accrual basis, (ii) loans which are contractually past due 90 days or more as to interest or principal payments, and (iii) other real estate owned (OREO – real estate acquired through foreclosure and in-substance foreclosures) and repossessed assets.

Loans will be transferred to non-accrual status when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in evaluating the loan include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. The following table presents non-accrual loans, loans past due over 90 days still accruing interest, and OREO and repossessed assets by portfolio class (in thousands).


	At March 31, 2024
	Non-accrual with no ACL		Non-accrual with ACL		Total non-accrual		Loans past due over 90 days still accruing		OREO and repossessed assets		Total non-performing assets
Commercial real estate (owner occupied)	$	185	$	—	$	185	$	—	$	—	$	185
Other commercial and industrial		—		1,678		1,678		79		108		1,865
Commercial real estate (non-owner occupied) - retail		—		—		—		—		—		—
Commercial real estate (non-owner occupied) - multi-family		—		—		—		—		—		—
Other commercial real estate (non-owner occupied)		8,553		—		8,553		—		—		8,553
Residential mortgages		524		180		704		—		15		719
Consumer		—		839		839		—		—		839
Total	$	9,262	$	2,697	$	11,959	$	79	$	123	$	12,161


	At December 31, 2023
	Non-accrual with no ACL		Non-accrual with ACL		Total non-accrual		Loans past due over 90 days still accruing		OREO and repossessed assets		Total non-performing assets
Commercial real estate (owner occupied)	$	187	$	—	$	187	$	—	$	—	$	187
Other commercial and industrial		—		1,694		1,694		211		—		1,905
Commercial real estate (non-owner occupied) - retail		—		—		—		—		—		—
Commercial real estate (non-owner occupied) - multi-family		—		—		—		—		—		—
Other commercial real estate (non-owner occupied)		8,780		—		8,780		—		—		8,780
Residential mortgages		173		545		718		—		15		733
Consumer		—		788		788		—		—		788
Total	$	9,140	$	3,027	$	12,167	$	211	$	15	$	12,393

It should be noted that the Company has elected to exclude accrued interest receivable from the measurement of its ACL. When a loan is placed in non-accrual status, any outstanding interest is reversed against interest income.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public

information, and current economic trends, among other factors. The Company analyzes loans individually to classify the loans as to credit risk.

Management uses a nine-point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first six categories are considered not criticized. The first five pass categories are aggregated, while the pass-6, special mention, substandard and doubtful categories are disaggregated to separate pools. The criticized rating categories utilized by management generally follow bank regulatory definitions. The special mention category includes assets that are currently protected but are potentially weak, resulting in an undue and unwarranted credit risk, but not to the point of justifying a substandard classification. Loans in the substandard category have well-defined weaknesses that jeopardize the liquidation of the debt, and have a distinct possibility that some loss will be sustained if the weaknesses are not corrected. Loans in the doubtful category have all the weaknesses inherent in those classified as substandard, 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. All loans greater than 90 days past due, or for which any portion of the loan represents a specific allocation of the allowance for credit losses, are placed in substandard or doubtful.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Company has a structured loan rating process, which dictates that, at a minimum, credit reviews are mandatory for all commercial and commercial mortgage loan relationships with aggregate balances in excess of $1,000,000 within a 12-month period. Generally, consumer and residential mortgage loans are included in the pass categories unless a specific action, such as bankruptcy, delinquency, or death occurs to raise awareness of a possible credit event. The Company’s commercial relationship managers are responsible for the timely and accurate risk rating of the loans in their portfolios at origination and on an ongoing basis. Risk ratings are assigned by the account officer, but require independent review and rating concurrence from the Company’s internal Loan Review Department. The Loan Review Department is an experienced, independent function which reports directly to the Board’s Audit Committee. The scope of commercial portfolio coverage by the Loan Review Department is defined and presented to the Audit Committee for approval on an annual basis. The approved scope of coverage for the year ending December 31, 2024 requires review of approximately 37% of the commercial loan portfolio.

In addition to loan monitoring by the account officer and Loan Review Department, the Company also requires presentation of all credits rated pass-6 with aggregate balances greater than $2,000,000, all credits rated special mention or substandard with aggregate balances greater than $250,000, and all credits rated doubtful with aggregate balances greater than $100,000 on an individual basis to the Company’s Loan Loss Reserve Committee on a quarterly basis. Additionally, the Asset Quality Task Force, which is a group comprised of senior level personnel, meets monthly to monitor the status of problem loans.

The following tables present the classes of the commercial and commercial real estate loan portfolios summarized by the aggregate pass and the criticized categories of special mention, substandard and doubtful within the internal risk rating system.


	At March 31, 2024
													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
	Term Loans Amortized Cost Basis by Origination Year												Cost		to
	2024		2023		2022		2021		2020		Prior		Basis		Term		Total

	(In Thousands)
Commercial real estate (owner occupied)
Pass	$	2,074	$	17,706	$	6,481	$	15,375	$	11,157	$	33,491	$	1,489	$	—	$	87,773
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		257		—		—		257
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	2,074	$	17,706	$	6,481	$	15,375	$	11,157	$	33,748	$	1,489	$	—	$	88,030
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Other commercial and industrial
Pass	$	4,955	$	21,643	$	32,438	$	12,016	$	5,480	$	23,002	$	47,076	$	—	$	146,610
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		567		—		—		1,554		74		—		2,195
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	4,955	$	21,643	$	33,005	$	12,016	$	5,480	$	24,556	$	47,150	$	—	$	148,805
Current period gross charge-offs	$	—	$	—	$	103	$	—	$	—	$	—	$	—	$	—	$	103
Commercial real estate (non-owner occupied) - retail
Pass	$	8,000	$	36,073	$	23,143	$	32,820	$	22,935	$	44,397	$	983	$	—	$	168,351
Special Mention		—		—		312		—		—		1,124		—		—		1,436
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	8,000	$	36,073	$	23,455	$	32,820	$	22,935	$	45,521	$	983	$	—	$	169,787
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate (non-owner occupied) - multi-family
Pass	$	5,297	$	23,843	$	16,682	$	17,062	$	11,920	$	31,840	$	566	$	—	$	107,210
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		954		1,392		—		—		2,346
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	5,297	$	23,843	$	16,682	$	17,062	$	12,874	$	33,232	$	566	$	—	$	109,556
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Other commercial real estate (non-owner occupied)
Pass	$	473	$	30,675	$	37,016	$	48,002	$	16,835	$	68,203	$	6,436	$	—	$	207,640
Special Mention		—		—		—		—		—		3,705		—		—		3,705
Substandard		—		—		867		199		—		17,163		—		—		18,229
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	473	$	30,675	$	37,883	$	48,201	$	16,835	$	89,071	$	6,436	$	—	$	229,574
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Total by risk rating
Pass	$	20,799	$	129,940	$	115,760	$	125,275	$	68,327	$	200,933	$	56,550	$	—	$	717,584
Special Mention		—		—		312		—		—		4,829		—		—		5,141
Substandard		—		—		1,434		199		954		20,366		74		—		23,027
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	20,799	$	129,940	$	117,506	$	125,474	$	69,281	$	226,128	$	56,624	$	—	$	745,752
Current period gross charge-offs	$	—	$	—	$	103	$	—	$	—	$	—	$	—	$	—	$	103


	At December 31, 2023
													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
	Term Loans Amortized Cost Basis by Origination Year												Cost		to
	2023		2022		2021		2020		2019		Prior		Basis		Term		Total

	(In Thousands)
Commercial real estate (owner occupied)
Pass	$	17,801	$	6,750	$	15,067	$	8,415	$	10,322	$	26,538	$	351	$	—	$	85,244
Special Mention		—		—		464		—		2,252		—		923		—		3,639
Substandard		—		—		—		—		—		264		—		—		264
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	17,801	$	6,750	$	15,531	$	8,415	$	12,574	$	26,802	$	1,274	$	—	$	89,147
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Other commercial and industrial
Pass	$	22,662	$	34,816	$	12,767	$	5,831	$	4,912	$	19,587	$	56,391	$	70	$	157,036
Special Mention		—		—		127		—		—		—		—		—		127
Substandard		—		619		—		—		—		1,578		64		—		2,261
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	22,662	$	35,435	$	12,894	$	5,831	$	4,912	$	21,165	$	56,455	$	70	$	159,424
Current period gross charge-offs	$	—	$	75	$	—	$	—	$	—	$	405	$	—	$	—	$	480
Commercial real estate (non-owner occupied) - retail
Pass	$	35,545	$	23,368	$	33,110	$	23,146	$	9,226	$	35,102	$	983	$	—	$	160,480
Special Mention		—		314		—		—		—		1,167		—		—		1,481
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	35,545	$	23,682	$	33,110	$	23,146	$	9,226	$	36,269	$	983	$	—	$	161,961
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	2,028	$	—	$	—	$	2,028
Commercial real estate (non-owner occupied) - multi-family
Pass	$	22,620	$	16,767	$	16,622	$	12,041	$	9,638	$	28,632	$	1,321	$	—	$	107,641
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		966		1,278		123		—		—		2,367
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	22,620	$	16,767	$	16,622	$	13,007	$	10,916	$	28,755	$	1,321	$	—	$	110,008
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Other commercial real estate (non-owner occupied)
Pass	$	29,591	$	36,398	$	48,267	$	20,168	$	23,025	$	54,792	$	5,670	$	—	$	217,911
Special Mention		—		—		—		—		—		3,777		—		—		3,777
Substandard		—		1,043		—		—		6,243		11,113		—		199		18,598
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	29,591	$	37,441	$	48,267	$	20,168	$	29,268	$	69,682	$	5,670	$	199	$	240,286
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	804	$	—	$	—	$	—	$	804
Total by risk rating
Pass	$	128,219	$	118,099	$	125,833	$	69,601	$	57,123	$	164,651	$	64,716	$	70	$	728,312
Special Mention		—		314		591		—		2,252		4,944		923		—		9,024
Substandard		—		1,662		—		966		7,521		13,078		64		199		23,490
Doubtful		—		—		—		—		—		—		—		—		—
Total	$	128,219	$	120,075	$	126,424	$	70,567	$	66,896	$	182,673	$	65,703	$	269	$	760,826
Current period gross charge-offs	$	—	$	75	$	—	$	—	$	804	$	2,433	$	—	$	—	$	3,312

It is generally the policy of the Bank that the outstanding balance of any residential mortgage or home equity loan that exceeds 90-days past due as to principal and/or interest is transferred to non-accrual status and an evaluation is completed to determine the fair value of the collateral less selling costs, unless the balance is minor. A charge-down is recorded for any deficiency balance determined from the collateral evaluation. It is generally the policy of the Bank that the outstanding balance of any unsecured consumer loan that exceeds 90-days past due as to principal and/or interest is charged-off. Loans past due 90 days or more and loans in non-accrual status are considered non-performing. The

following tables present the performing and non-performing outstanding balances of the residential mortgage and consumer loan portfolio classes.


	At March 31, 2024
													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
	Term Loans Amortized Cost Basis by Origination Year												Cost		to
	2024		2023		2022		2021		2020		Prior		Basis		Term		Total

	(In Thousands)
Residential mortgages
Performing	$	2,145	$	14,498	$	11,444	$	60,531	$	43,569	$	44,100	$	—	$	—	$	176,287
Non-performing		—		—		—		—		—		704		—		—		704
Total	$	2,145	$	14,498	$	11,444	$	60,531	$	43,569	$	44,804	$	—	$	—	$	176,991
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Consumer
Performing	$	2,546	$	13,484	$	19,635	$	9,180	$	3,035	$	5,490	$	48,532	$	203	$	102,105
Non-performing		—		15		—		—		68		560		196		—		839
Total	$	2,546	$	13,499	$	19,635	$	9,180	$	3,103	$	6,050	$	48,728	$	203	$	102,944
Current period gross charge-offs	$	—	$	2	$	8	$	10	$	10	$	31	$	—	$	—	$	61
Total by payment performance
Performing	$	4,691	$	27,982	$	31,079	$	69,711	$	46,604	$	49,590	$	48,532	$	203	$	278,392
Non-performing		—		15		—		—		68		1,264		196		—		1,543
Total	$	4,691	$	27,997	$	31,079	$	69,711	$	46,672	$	50,854	$	48,728	$	203	$	279,935
Current period gross charge-offs	$	—	$	2	$	8	$	10	$	10	$	31	$	—	$	—	$	61


	At December 31, 2023
													Revolving		Revolving
													Loans		Loans
													Amortized		Converted
	Term Loans Amortized Cost Basis by Origination Year												Cost		to
	2023		2022		2021		2020		2019		Prior		Basis		Term		Total

	(In Thousands)
Residential mortgages
Performing	$	14,576	$	11,620	$	61,172	$	44,049	$	7,092	$	35,443	$	—	$	—	$	173,952
Non-performing		—		—		—		—		—		718		—		—		718
Total	$	14,576	$	11,620	$	61,172	$	44,049	$	7,092	$	36,161	$	—	$	—	$	174,670
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	54	$	—	$	—	$	54
Consumer
Performing	$	13,890	$	20,430	$	9,782	$	3,190	$	1,169	$	4,515	$	48,344	$	667	$	101,987
Non-performing		15		—		—		73		42		280		157		221		788
Total	$	13,905	$	20,430	$	9,782	$	3,263	$	1,211	$	4,795	$	48,501	$	888	$	102,775
Current period gross charge-offs	$	9	$	35	$	43	$	7	$	8	$	173	$	—	$	—	$	275
Total by payment performance
Performing	$	28,466	$	32,050	$	70,954	$	47,239	$	8,261	$	39,958	$	48,344	$	667	$	275,939
Non-performing		15		—		—		73		42		998		157		221		1,506
Total	$	28,481	$	32,050	$	70,954	$	47,312	$	8,303	$	40,956	$	48,501	$	888	$	277,445
Current period gross charge-offs	$	9	$	35	$	43	$	7	$	8	$	227	$	—	$	—	$	329

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due. The following tables present the classes of the loan portfolio summarized by the aging categories of performing loans and non-accrual loans.

At March 31, 2024

30 – 59

60 – 89

DAYS

90+ DAYS

TOTAL

CURRENT

PAST DUE

LOANS

(IN THOUSANDS)

Commercial real estate (owner occupied)

87,845

—

185

88,030

Other commercial and industrial

147,873

364

475

932

148,805

Commercial real estate (non-owner occupied) - retail

168,559

1,228

—

1,228

169,787

Commercial real estate (non-owner occupied) - multi-family

109,556

—

109,556

Other commercial real estate (non-owner occupied)

222,577

6,224

—

773

6,997

229,574

Residential mortgages

176,167

134

675

824

176,991

Consumer

102,181

330

240

193

763

102,944

Total

1,014,758

8,280

348

2,301

10,929

1,025,687


	At December 31, 2023

			30 – 59		60 – 89
			DAYS		DAYS		90+ DAYS		TOTAL		TOTAL
	CURRENT		PAST DUE		PAST DUE		PAST DUE		PAST DUE		LOANS

	(IN THOUSANDS)
Commercial real estate (owner occupied)	$	88,960	$	—	$	—	$	187	$	187	$	89,147
Other commercial and industrial		158,290		526		22		586		1,134		159,424
Commercial real estate (non-owner occupied) - retail		161,961		—		—		—		—		161,961
Commercial real estate (non-owner occupied) - multi-family		110,008		—		—		—		—		110,008
Other commercial real estate (non-owner occupied)		239,243		—		—		1,043		1,043		240,286
Residential mortgages		173,647		437		18		568		1,023		174,670
Consumer		101,664		741		23		347		1,111		102,775
Total	$	1,033,773	$	1,704	$	63	$	2,731	$	4,498	$	1,038,271

Loan Modifications to Borrowers Experiencing Financial Difficulty

Occasionally, the Company modifies loans to borrowers experiencing financial difficulty as a result of our loss mitigation activities. A variety of solutions are offered to borrowers, including loan modifications that may result in principal forgiveness, interest rate reductions, term extensions, payment delays, or combinations thereof.

●

Principal forgiveness includes principal and accrued interest forgiveness. When principal forgiveness is provided, the amount of forgiveness is charged-off against the ACL.

●

Interest rate reductions include modifications where the interest rate is reduced and interest is deferred.

●

Term extensions extend the original contractual maturity date of the loan.

●

Payment delays consist of modifications where we expect to collect the contractual amounts due but result in a delay in the receipt of payments specified under the original loan terms. We generally consider payment delays to be insignificant when the delay is three months or less.

The following tables summarize the amortized cost basis of loans modified to borrowers experiencing financial difficulty during the three months ended March 31, 2024 and 2023 (in thousands).


	Three months ended March 31, 2024
	Term Extension
	Amortized Cost Basis		% of Total Class of Loans
Commercial real estate (owner occupied)	$	185		0.21	%
Total	$	185

	Combination - Term Extension and Payment Delay
	Amortized Cost Basis		% of Total Class of Loans
Other commercial and industrial	$	171		0.11	%
Total	$	171


	Three months ended March 31, 2023
	Term Extension
	Amortized Cost Basis		% of Total Class of Loans
Other commercial and industrial	$	439		0.29	%
Total	$	439

At March 31, 2024 and 2023, the Company had no unfunded loan commitments associated with the loan modifications to borrowers experiencing financial difficulty. In addition, as of March 31, 2024 and 2023, the modified loans described in the tables above were current as to payments.

The following tables describe the financial effect of the modifications made to borrowers experiencing financial difficulty during the three months ended March 31, 2024 and 2023.


Three months ended March 31, 2024
Term Extension
Loan Type		Financial Effect
Commercial real estate (owner occupied)		Provided a maturity date extension of five years.

Combination - Term Extension and Payment Delay
Loan Type		Financial Effect
Other commercial and industrial		Provided a maturity date extension of nine months and modified seasonal principal and interest payments to interest only until maturity.


Three months ended March 31, 2023
Term Extension
Loan Type		Financial Effect
Other commercial and industrial		Provided five-month expiration date extension on non-accrual line of credit under which availability was eliminated.

The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The Company had no loans which were modified to borrowers experiencing financial difficulty which subsequently defaulted during the three months ended March 31, 2024 and 2023.