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ALLOWANCE FOR CREDIT LOSSES
 9 Months Ended
Sep. 30, 2024
Receivables [Abstract]  
ALLOWANCE FOR CREDIT LOSSES ALLOWANCE FOR CREDIT LOSSES
The following schedules present the activity in the ACL by loan segment for the three and nine months ended September 30, 2024 and September 30, 2023:
Three Months EndedReal Estate - ResidentialReal Estate - CommercialReal Estate - Construction and LandCommercial and IndustrialConsumer and OtherTotal
September 30, 2024
Beginning Balance$1,234 $1,864 $555 $7,714 $2,476 $13,843 
Charge-offs(20)— — (2,375)(550)(2,945)
Recoveries— 2 — 111 75 188 
Provision(41)(3)(41)2,855 330 3,100 
Ending Balance$1,173 $1,863 $514 $8,305 $2,331 $14,186 
September 30, 2023
Beginning Balance$2,542 $1,889 $359 $7,011 $797 $12,598 
Charge-offs— (108)— (1,542)(875)(2,525)
Recoveries8 75 — 114 93 290 
Provision131 (298)121 1,861 1,187 3,002 
Ending Balance$2,681 $1,558 $480 $7,444 $1,202 $13,365 
Real Estate - ResidentialReal Estate - CommercialReal Estate - Construction and LandCommercial and IndustrialConsumer and OtherUnallocatedTotal
Nine Months Ended
September 30, 2024
Beginning Balance$1,987 $1,818 $519 $6,579 $2,594 $— $13,497 
Charge-offs(20)(60)— (7,898)(2,299)— (10,277)
Recoveries— 6 — 352 249 — 607 
Provision(794)99 (5)9,272 1,787 — 10,359 
Ending Balance$1,173 $1,863 $514 $8,305 $2,331 $— $14,186 
September 30, 2023
Beginning Balance$731 $956 $28 $6,182 $1,090 $59 $9,046 
Impact of adopting ASC 3261,479 613 281 1,116 (323)(59)3,107 
Charge-offs— (108)— (4,660)(2,214)— (6,982)
Recoveries8 77 — 303 219 — 607 
Provision463 20 171 4,503 2,430 — 7,587 
Ending Balance$2,681 $1,558 $480 $7,444 $1,202 $— $13,365 
The ACL represents management’s best estimate of future lifetime expected losses on its HFI loan portfolio. The Company calculates its ACL by estimating expected credit losses on a collective basis for loans that share similar risk characteristics. Loans that do not share similar risk characteristics with other loans are evaluated for credit losses on an individual basis. The Company uses a combination of modeled and non-modeled approaches that incorporates current and future economic conditions to estimate lifetime expected losses on a collective basis. Individually evaluated loans are evaluated for impairment and a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the rate implicit in the original loan agreement or at the fair value of collateral adjusted for selling costs as appropriate if repayment is expected solely from the collateral.
The Company uses reasonable and supportable forecasts that are developed with internal and external data. These are updated quarterly by management and utilize data from the FOMC’s median forecasts of change in national GDP and of national unemployment. The FOMC’s forecast of GDP and unemployment for the next calendar year is used in conjunction
with the most recent 4 quarters of historical data from FRED (Federal Reserve Economic Data) to determine changes in certain qualitative factors used in calculating loss rates.
See Note 1 and Note 5 of the Notes to Consolidated Financial Statements for further discussion of the Company’s ACL methodology in the December 31, 2023 Form 10-K.
The Company maintains a separate ACL for its off-balance sheet unfunded loan commitments. The ACL on unfunded loan commitments is based on estimates of probability that these commitments will be drawn upon according to historical utilization experience, expected loss severity and loss rates as determined for pooled funded loans. As of September 30, 2024 and December 31, 2023, the ACL for unfunded commitments recorded in other liabilities was $664 and $839, respectively.
The following table presents the activity in the ACL for unfunded commitments for the three and nine months ended September 30, 2024 and September 30, 2023:
For the Three Months Ended
For the Nine Months Ended
September 30, 2024September 30, 2023September 30, 2024September 30, 2023
Balance at beginning of period$641 $844 $839 $511 
Impact of adopting ASC 326— — — 213 
Provision for credit losses on unfunded commitments23 — (175)120 
Unfunded commitments charge-offs— — — — 
Unfunded commitments recoveries— — — — 
Balance at end of period$664 $844 $664 $844 
The following tables present the principal balance of nonaccrual loans and loans past due over 89 days still on accrual by loan segment at September 30, 2024 and December 31, 2023. In the following tables, the principal balance does not include the government guaranteed balance or loans measured at fair value.
September 30, 2024
Nonaccrual with no ACL(1)
Nonaccrual with ACL(1)
Loans Past Due Over
89 Days Still Accruing(1)
Real estate - residential
$— $4,838 $233 
Real estate - commercial
— 4,207 — 
Commercial and industrial
— 1,429 3 
Consumer and other
— — 282 
Total
$— $10,474 $518 
December 31, 2023
Nonaccrual with no ACL(1)
Nonaccrual with ACL(1)
Loans Past Due Over
89 Days Still Accruing(1)
Real estate - residential
$— $4,654 $583 
Real estate - commercial
— 1,159 — 
Commercial and industrial
— 1,587 — 
Consumer and other— — 282 
Total
$— $7,400 $865 
(1) Excludes loans measured at fair value. See Note 6. Fair Value for additional information.
A financial asset is considered collateral dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. Expected credit losses for collateral dependent loans are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate.
Significant quarter over quarter changes are reflective of changes in nonaccrual status and not necessarily associated with credit quality indicators like appraised value. As of September 30, 2024 there were no loans individually evaluated. The following table presents the principal balance of individually analyzed collateral dependent loans by loan portfolio segment as of December 31, 2023:
December 31, 2023Type of CollateralACL
Business Assets
Commercial and industrial$390 $255 
The following table presents the aging of the principal balance of past due loans HFI at amortized cost at September 30, 2024 by loan segment:
30-89 Days
Past Due		Greater Than
89 Days
Past Due
Total
Past Due
Loans Not
Past Due (1)
Total
Loans
Real estate - residential
$1,926 $5,070 $6,996 $314,744 $321,740 
Real estate - commercial
499 4,108 4,607 287,419 292,026 
Real estate - construction and land
— — — 33,784 33,784 
Commercial and industrial
3,332 1,228 4,560 195,652 200,212 
Commercial and industrial - PPP
— — — 1,656 1,656 
Consumer and other
747 282 1,029 91,517 92,546 
Total
$6,504 $10,688 $17,192 $924,772 $941,964 
(1) $1,733 of balances 30-89 days past due and $4,252 of balances greater than 89 days past due are reported as Loans Not Past Due as a result of the government guarantee. Of those loans, $1,228 of commercial and industrial PPP loans were delinquent as of September 30, 2024.
The following table presents the aging of the principal balance of past due loans HFI at amortized cost at December 31, 2023 by loan segment:
30-89 Days
Past Due		Greater Than
89 Days
Past Due
Total
Past Due
Loans Not
Past Due (1)
Total
Loans
Real estate - residential
$1,840 $5,184 $7,024 $257,102 $264,126 
Real estate - commercial
2,870 791 3,661 289,934 293,595 
Real estate - construction and land
— — — 26,272 26,272 
Commercial and industrial
3,970 603 4,573 172,993 177,566 
Commercial and industrial - PPP
— — — 3,202 3,202 
Consumer and other
1,221 282 1,503 45,784 47,287 
Total
$9,901 $6,860 $16,761 $795,287 $812,048 
(1) $1,469 of balances 30-89 days past due and $638 of balances greater than 89 days past due are reported as Loans Not Past Due as a result of the government guarantee. Of those loans, $261 of commercial and industrial PPP loans were delinquent as of December 31, 2023.
Modifications to Borrowers Experiencing Financial Difficulty
For the three and nine months ended September 30, 2024 and the year ended December 31, 2023, there were no loan modifications to borrowers experiencing financial difficulty and no loan modifications that subsequently defaulted during the period.
Credit Quality Indicators
Internal risk-rating grades are assigned to loans by lending, credit administration or loan review personnel, based on an analysis of the financial and collateral strength and other credit attributes underlying each loan. Management analyzes the
resulting ratings, as well as other statistics and factors such as delinquency, to track the migration performance of the portfolio balances. This analysis is performed at least annually. The Bank uses the following definitions for its risk ratings:
Pass – Loans properly approved, documented, collateralized, and performing which do not reflect an abnormal credit risk.
Special Mention – These credits have potential weaknesses that may, if not checked or corrected, weaken the asset, or inadequately protect the Company’s position at some future date. These assets pose elevated risk, but their weakness does not yet justify a “Substandard” classification.
Substandard – These loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
Doubtful – These loans 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 known facts, conditions, and values, highly questionable and improbable.
The table below sets forth principal balance for the commercial loan portfolio disaggregated by loan segment based on internally assigned risk ratings at September 30, 2024 and gross write offs for the nine months ended September 30, 2024:
RevolvingRevolving
LoansLoans
Term Loans Amortized Cost Basis by Origination YearAmortizedConverted
2024202320222021PriorCost Basisto TermTotal
Real estate - commercial
Risk Rating
Pass$40,742 $67,755 $71,376 $47,918 $53,626 $2,528 $— $283,945 
Special mention154 814 2,368 117 410 10 — 3,873 
Substandard— 2,971 291 99 847 — — 4,208 
Doubtful— — — — — — — — 
Total real estate - commercial loans, at amortized cost, gross40,896 71,540 74,035 48,134 54,883 2,538 — 292,026 
Gross write offs— — 60 — — — — 60 
Real estate - construction and land
Risk Rating
Pass1,951 19,747 9,245 2,841 — — — 33,784 
Special mention— — — — — — — — 
Substandard— — — — — — — — 
Doubtful— — — — — — — — 
Total real estate - construction and land loans, at amortized cost, gross1,951 19,747 9,245 2,841 — — — 33,784 
Gross write offs— — — — — — — — 
RevolvingRevolving
LoansLoans
Term Loans Amortized Cost Basis by Origination YearAmortizedConverted
2024202320222021PriorCost Basisto TermTotal
Commercial and industrial
Risk Rating
Pass51,316 42,657 35,791 11,170 39,896 9,057 — 189,887 
Special mention215 1,994 2,268 626 3,739 — — 8,842 
Substandard— 42 459 11 971 — — 1,483 
Doubtful— — — — — — — — 
Total commercial and industrial loans, at amortized cost, gross51,531 44,693 38,518 11,807 44,606 9,057 — 200,212 
Gross write offs— 2,533 2,572 317 2,476 — — 7,898 
Commercial and industrial - PPP
Risk Rating
Pass— — — 223 434 — — 657 
Special mention— — — — 999 — — 999 
Substandard— — — — — — — — 
Doubtful— — — — — — — — 
Total commercial and industrial - PPP loans, at amortized cost, gross— — — 223 1,433 — — 1,656 
Gross write offs— — — — — — — — 
The table below sets forth principal balance for the commercial loan portfolio disaggregated by loan segment based on internally assigned risk ratings at December 31, 2023 and gross write offs for the year ended December 31, 2023:
RevolvingRevolving
LoansLoans
Term Loans Amortized Cost Basis by Origination YearAmortizedConverted
202320222021PriorCost Basisto TermTotal
Real estate - commercial
Risk Rating
Pass$94,092 $79,712 $50,985 $64,648 $2,439 $— $291,876 
Special mention— 482 78 — — — 560 
Substandard— 195 31 933 — — 1,159 
Doubtful— — — — — — — 
Total real estate - commercial loans, at amortized cost, gross94,092 80,389 51,094 65,581 2,439 — 293,595 
Gross write offs— 101 — 7 — — 108 
RevolvingRevolving
LoansLoans
Term Loans Amortized Cost Basis by Origination YearAmortizedConverted
202320222021PriorCost Basisto TermTotal
Real estate - construction and land
Risk Rating
Pass11,366 12,755 2,151 — — — 26,272 
Special mention— — — — — — — 
Substandard— — — — — — — 
Doubtful— — — — — — — 
Total real estate - construction and land loans, at amortized cost, gross11,366 12,755 2,151 — — — 26,272 
Gross write offs— — — — — — — 
Commercial and industrial
Risk Rating
Pass51,212 45,325 13,807 54,003 10,750 — 175,097 
Special mention— 150 43 671 — — 864 
Substandard— 1,004 14 587 — — 1,605 
Doubtful— — — — — — — 
Total commercial and industrial loans, at amortized cost, gross51,212 46,479 13,864 55,261 10,750 — 177,566 
Gross write offs325 1,543 259 4,113 — — 6,240 
Commercial and industrial - PPP
Risk Rating
Pass— — 135 3,067 — — 3,202 
Special mention— — — — — — — 
Substandard— — — — — — — 
Doubtful— — — — — — — 
Total commercial and industrial - PPP loans, at amortized cost, gross— — 135 3,067 — — 3,202 
Gross write offs— — — 223 — — 223 
The Company considers the performance of the loan portfolio to determine its impact on the ACL. For residential and consumer loan classes, the Company evaluates credit quality based on the aging status of the loan by payment activity. The following table presents the principal balance at September 30, 2024 in residential and consumer loans based on payment activity as well as gross write offs for the nine months ended September 30, 2024.
RevolvingRevolving
LoansLoans
Term Loans Amortized Cost Basis by Origination YearAmortizedConverted
2024202320222021PriorCost Basisto TermTotal
Real estate - residential
Payment Performance
Performing$31,743 $28,410 $84,265 $23,020 $17,892 $131,339 $— $316,669 
Nonperforming— — 814 132 2,949 1,176 — 5,071 
Total real estate - residential loans, at amortized cost, gross31,743 28,410 85,079 23,152 20,841 132,515 — 321,740 
Gross write offs— — — — 20 — — 20 
Consumer and other
Payment Performance
Performing56,112 22,437 11,635 701 156 1,223 — 92,264 
Nonperforming32 16 234 — — — — 282 
Total consumer and other loans, at amortized cost, gross56,144 22,453 11,869 701 156 1,223 — 92,546 
Gross write offs— 228 1,888 33 150 — — 2,299 
The following table presents the principal balance at December 31, 2023 in residential and consumer loans based on payment activity as well as gross write offs for the year ended December 31, 2023.
RevolvingRevolving
LoansLoans
Term Loans Amortized Cost Basis by Origination YearAmortizedConverted
202320222021PriorCost Basisto TermTotal
Real estate - residential
Payment Performance
Performing$31,377 $83,951 $24,524 $19,709 $99,328 $— $258,889 
Nonperforming— 1,197 286 2,951 803 — 5,237 
Total real estate - residential loans, at amortized cost, gross31,377 85,148 24,810 22,660 100,131 — 264,126 
Gross write offs— — — — — — — 
Consumer and other
Payment Performance
Performing25,491 19,390 930 204 990 — 47,005 
Nonperforming— 258 24 — — — 282 
Total consumer and other loans, at amortized cost, gross25,491 19,648 954 204 990 — 47,287 
Gross write offs79 3,182 11 8 — — 3,280