Credit Risk Management and ACL for Loans

12 Months Ended

Dec. 31, 2024

Receivables [Abstract]

Credit Risk Management and ACL for Loans

Credit Risk Management and ACL for Loans

See item (j) "Credit Risk Management and ACL for Loans Methodology" contained in Note 1, "Summary of Significant Accounting Policies" of this Form 10-K, for additional information on the Company's loan accounting policies, Credit Risk monitoring, and ACL methodology.

The following tables present the amortized cost basis of the Company's loan portfolio risk ratings within portfolio classifications, by origination date, or revolving status as of the dates indicated:

	At or for the year ended December 31, 2024
	Term Loans by Origination Year
(Dollars in thousands)	2024		2023		2022		2021		2020		Prior		Revolving Loans		Revolving Loans Converted to Term		Total
Commercial real estate owner-occupied
Pass	$	49,097	$	126,723	$	101,658	$	83,937	$	49,526	$	277,331	$	7,312	$	—	$	695,584
Special mention	—		130		—		—		—		6,546		—		—		6,676
Substandard	—		—		1,228		423		—		723		—		—		2,374
Total commercial real estate owner-occupied	49,097		126,853		102,886		84,360		49,526		284,600		7,312		—		704,634
Current period charge-offs	—		—		—		—		—		—		—		—		—
Commercial real estate non owner-occupied
Pass	154,004		141,723		292,192		287,506		147,374		520,370		827		300		1,544,296
Special mention	—		—		15,448		—		—		—		—		—		15,448
Substandard	—		—		218		340		445		2,454		—		—		3,457
Total commercial real estate non owner-occupied	154,004		141,723		307,858		287,846		147,819		522,824		827		300		1,563,201
Current period charge-offs	—		—		—		—		—		—		—		—		—
Commercial and industrial
Pass	81,891		60,997		39,791		32,536		20,325		50,476		182,184		5,924		474,124
Special mention	—		—		—		—		203		258		270		—		731
Substandard	—		17		3,248		691		—		504		303		203		4,966
Total commercial and industrial	81,891		61,014		43,039		33,227		20,528		51,238		182,757		6,127		479,821
Current period charge-offs	12		44		—		196		—		267		—		—		519
Commercial construction
Pass	138,845		229,116		127,493		106,452		9,517		21,582		32,325		—		665,330
Substandard	—		—		14,639		—		—		—		—		—		14,639
Total commercial construction	138,845		229,116		142,132		106,452		9,517		21,582		32,325		—		679,969
Current period charge-offs	—		—		—		—		—		—		—		—		—
Residential mortgages
Pass	79,540		79,929		101,910		64,219		44,149		71,188		—		—		440,935
Substandard	—		—		—		1,042		—		1,119		—		—		2,161
Total residential mortgages	79,540		79,929		101,910		65,261		44,149		72,307		—		—		443,096
Current period charge-offs	—		—		—		—		—		—		—		—		—
Home equity
Pass	623		454		783		528		433		2,033		97,217		1,507		103,578
Substandard	—		—		—		—		—		83		—		197		280
Total home equity	623		454		783		528		433		2,116		97,217		1,704		103,858
Current period charge-offs	—		—		—		—		—		—		—		—		—
Consumer
Pass	3,211		2,014		1,209		982		461		442		—		—		8,319
Total consumer	3,211		2,014		1,209		982		461		442		—		—		8,319
Current period charge-offs	94		3		1		—		—		1		—		—		99
Total loans	$	507,211	$	641,103	$	699,817	$	578,656	$	272,433	$	955,109	$	320,438	$	8,131	$	3,982,898
Total current period charge-offs	$	106	$	47	$	1	$	196	$	—	$	268	$	—	$	—	$	618

	At or for the year ended December 31, 2023
	Term Loans by Origination Year
(Dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolving Loans		Revolving Loans Converted to Term		Total
Commercial real estate owner-occupied
Pass	$	82,500	$	83,366	$	88,178	$	52,891	$	51,379	$	242,518	$	2,169	$	—	$	603,001
Special mention	31		—		—		—		489		6,971		—		—		7,491
Substandard	—		1,311		270		—		—		7,229		—		—		8,810
Total commercial real estate	82,531		84,677		88,448		52,891		51,868		256,718		2,169		—		619,302
Current period charge-offs	—		—		—		—		—		—		—		—		—
Commercial real estate non owner-occupied
Pass	133,179		288,240		278,833		148,730		165,676		398,516		9,961		107		1,423,242
Special mention	—		15,782		—		—		—		2,977		—		—		18,759
Substandard	—		—		361		—		969		1,654		—		450		3,434
Total commercial real estate non owner-occupied	133,179		304,022		279,194		148,730		166,645		403,147		9,961		557		1,445,435
Current period charge-offs	—		—		—		—		—		—		—		—		—
Commercial and industrial
Pass	73,608		51,990		45,278		24,778		23,724		44,609		156,465		3,402		423,854
Special mention	—		—		—		70		215		201		2,227		223		2,936
Substandard	—		—		18		—		1		209		316		3,415		3,959
Total commercial and industrial	73,608		51,990		45,296		24,848		23,940		45,019		159,008		7,040		430,749
Current period charge-offs	15		248		—		—		67		266		—		—		596
Commercial construction
Pass	192,462		164,313		143,203		22,017		16,247		10,532		27,261		—		576,035
Special mention	—		7,905		—		—		1,173		—		—		—		9,078
Total commercial construction	192,462		172,218		143,203		22,017		17,420		10,532		27,261		—		585,113
Current period charge-offs	—		—		—		—		—		—		—		—		—
Residential mortgages
Pass	82,848		107,222		69,979		46,674		19,205		65,311		—		—		391,239
Special mention	—		—		—		—		—		109		—		—		109
Substandard	—		—		236		—		1,055		503		—		—		1,794
Total residential mortgages	82,848		107,222		70,215		46,674		20,260		65,923		—		—		393,142
Current period charge-offs	—		—		—		—		—		—		—		—		—
Home equity
Pass	1,203		775		561		444		317		1,738		79,421		636		85,095
Substandard	—		—		—		—		—		72		—		208		280
Total home equity	1,203		775		561		444		317		1,810		79,421		844		85,375
Current period charge-offs	—		—		—		—		—		—		—		—		—
Consumer
Pass	3,705		1,652		1,371		722		623		442		—		—		8,515
Total consumer	3,705		1,652		1,371		722		623		442		—		—		8,515
Current period charge-offs	35		—		—		—		—		1		—		—		36
Total loans	$	569,536	$	722,556	$	628,288	$	296,326	$	281,073	$	783,591	$	277,820	$	8,441	$	3,567,631
Total current period charge-offs	$	50	$	248	$	—	$	—	$	67	$	267	$	—	$	—	$	632

The total amortized cost basis of adversely classified loans amounted to $50.7 million, or 1.27% of total loans, at December 31, 2024, and $56.7 million, or 1.59% of total loans, at December 31, 2023.

Past due and non-accrual loans

The following tables present an age analysis of past due loans by portfolio classification as of the dates indicated:

	Balance at December 31, 2024
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Past Due 90 Days or More		Total Past Due Loans(1)		Current  Loans(1)		Total Loans
Commercial real estate owner-occupied	$	1,333	$	—	$	522	$	1,855	$	702,779	$	704,634
Commercial real estate non owner-occupied	1,856		366		2,665		4,887		1,558,314		1,563,201
Commercial and industrial	1,319		69		3,702		5,090		474,731		479,821
Commercial construction	1,688		2,484		7,905		12,077		667,892		679,969
Residential mortgages	690		940		—		1,630		441,466		443,096
Home equity	467		133		—		600		103,258		103,858
Consumer	34		3		—		37		8,282		8,319
Total loans	$	7,387	$	3,995	$	14,794	$	26,176	$	3,956,722	$	3,982,898

	Balance at December 31, 2023
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Past Due 90 days or More		Total Past Due Loans(1)		Current  Loans(1)		Total Loans
Commercial real estate owner-occupied	$	459	$	270	$	212	$	941	$	618,361	$	619,302
Commercial real estate non owner-occupied	722		504		1,122		2,348		1,443,087		1,445,435
Commercial and industrial	660		64		—		724		430,025		430,749
Commercial construction	—		—		—		—		585,113		585,113
Residential mortgages	1,265		—		1,277		2,542		390,600		393,142
Home equity	53		—		97		150		85,225		85,375
Consumer	25		2		—		27		8,488		8,515
Total loans	$	3,184	$	840	$	2,708	$	6,732	$	3,560,899	$	3,567,631

_______________________________________

(1)The loan balances in the table above include loans designated as non-accrual despite their payment due status. Loans designated as non-accrual are presented below.

At December 31, 2024 and December 31, 2023, all loans past due 90 days or more were carried as non-accrual, however, not all non-accrual loans were 90 days or more past due in their payments. Loans that were less than 90 days past due where reasonable doubt existed as to the full and timely collection of interest or principal have also been designated as non-accrual, despite their payment due status.

The following tables present the amortized cost of loans designated as non-accrual, despite their payment status, by portfolio classification as of the dates indicated:

	Balance at December 31, 2024
(Dollars in thousands)	Total Non-accrual Loans		Non-accrual Loans without a Specific Reserve		Non-accrual Loans with a Specific Reserve		Related Specific Reserve
Commercial real estate owner-occupied	$	2,374	$	2,374	$	—	$	—
Commercial real estate non owner-occupied	3,457		2,532		925		185
Commercial and industrial	4,029		714		3,315		2,398
Commercial construction	14,639		—		14,639		3,649
Residential mortgages	1,931		1,931		—		—
Home equity	257		257		—		—
Consumer	—		—		—		—
Total loans	$	26,687	$	7,808	$	18,879	$	6,232

	Balance at December 31, 2023
(Dollars in thousands)	Total Non-accrual Loans		Non-accrual Loans without a Specific Reserve		Non-accrual Loans with a Specific Reserve		Related Specific Reserve
Commercial real estate owner-occupied	$	2,683	$	2,683	$	—	$	—
Commercial real estate non owner-occupied	2,686		1,717		969		229
Commercial and industrial	4,262		736		3,526		2,658
Commercial construction	—		—		—		—
Residential mortgages	1,526		1,526		—		—
Home equity	257		257		—		—
Consumer	—		—		—		—
Total loans	$	11,414	$	6,919	$	4,495	$	2,887

The ratio of non-accrual loans to total loans amounted to 0.67% and 0.32% at December 31, 2024 and December 31, 2023, respectively. At December 31, 2024 and December 31, 2023, additional funding commitments for non-accrual loans were not material.

The reduction in interest income for the years ended December 31, associated with non-accruing loans is summarized as follows:

(Dollars in thousands)	2024		2023		2022
Income that would have been recognized if non-accrual loans had been on accrual	$	2,097	$	1,285	$	1,083
Less income recognized	628		191		1,050
Reduction in interest income	$	1,469	$	1,094	$	33

Collateral dependent loans

The total recorded investment in collateral dependent loans amounted to $26.9 million at December 31, 2024, compared to $13.7 million at December 31, 2023. Total accruing collateral dependent loans amounted to $438 thousand, while non-accrual collateral dependent loans amounted to $26.5 million as of December 31, 2024. As of December 31, 2023, total accruing collateral dependent loans amounted to $2.4 million, while non-accrual collateral dependent loans amounted to $11.3 million.

Loans that have been individually evaluated and repayment is expected substantially from the operations or ultimate sale of the underlying collateral are deemed to be collateral dependent loans. Collateral dependent loans are adversely classified loans. These loans may be accruing or on non-accrual status. Collateral dependent loans are carried at the lower of the recorded investment in the loan or the estimated fair value. Underlying collateral will vary by type of loan, as discussed below.

Commercial real estate loans include loans secured by both owner and non-owner occupied (investor) real estate. These loans are typically secured by a variety of commercial, residential investment, and industrial property types, including one-to-four and multi-family apartment buildings, office, industrial, or mixed-use facilities, strip shopping centers, or other commercial properties.

Commercial and industrial credits may be unsecured loans and lines to financially strong borrowers, loans secured in whole or in part by real estate unrelated to the principal purpose of the loan or secured by inventories, equipment, or receivables.

Commercial construction loans include the development of residential housing and condominium projects, the development of commercial and industrial use property, and loans for the purchase and improvement of raw land. These loans are secured in whole or in part by underlying real estate collateral.

Residential mortgage loans and home equity lines may be secured by one-to-four family residential properties serving as the borrower's primary residence, or as vacation homes or investment properties.

Consumer loans consist primarily of secured or unsecured personal loans, loans under energy efficiency financing programs in conjunction with Massachusetts public utilities, and overdraft protection lines on checking accounts.

Management does not set any minimum delay of payments as a factor in reviewing for individual evaluation. Management considers the individual payment status, net worth and earnings potential of the borrower, and the value and cash flow of the collateral as factors to determine if a loan will be paid in accordance with its contractual terms.

The following tables present the recorded investment in collateral dependent individually evaluated loans and the related specific allowance by portfolio allocation as of the dates indicated:

	Balance at December 31, 2024
(Dollars in thousands)	Unpaid Contractual Principal Balance		Total Recorded Investment in Collateral Dependent Loans		Recorded Investment without a Specific Reserve		Recorded Investment with a Specific Reserve		Related Specific Reserve
Commercial real estate owner-occupied	$	2,921	$	2,374	$	2,374	$	—	$	—
Commercial real estate non owner-occupied	4,368		3,457		2,532		925		185
Commercial and industrial	5,507		4,184		921		3,263		2,346
Commercial construction	14,824		14,639		—		14,639		3,649
Residential mortgages	2,347		2,161		2,161		—		—
Home equity	145		108		108		—		—
Consumer	—		—		—		—		—
Total	$	30,112	$	26,923	$	8,096	$	18,827	$	6,180

	Balance at December 31, 2023
(Dollars in thousands)	Unpaid Contractual Principal Balance		Total Recorded Investment in Collateral Dependent Loans		Recorded Investment without a Specific Reserve		Recorded Investment with a Specific Reserve		Related Specific Reserve
Commercial real estate owner-occupied	$	4,641	$	4,165	$	4,165	$	—	$	—
Commercial real estate non owner-occupied	4,062		2,983		2,015		968		229
Commercial and industrial	6,804		4,332		950		3,382		2,526
Commercial construction	—		—		—		—		—
Residential mortgages	2,117		1,902		1,902		—		—
Home equity	359		281		281		—		—
Consumer	—		—		—		—		—
Total	$	17,983	$	13,663	$	9,313	$	4,350	$	2,755

The Company's obligation to fulfill the additional funding commitments on individually evaluated loans is generally contingent on the borrower's compliance with the terms of the credit agreement. If the borrower is not in compliance, additional funding commitments may or may not be made at the Company's discretion. At December 31, 2024 and December 31, 2023, additional funding commitments for individually evaluated collateral dependent loans were not material.

Loan modifications to borrowers experiencing financial difficulty

The following table presents the amortized cost basis of loan modifications made to borrowers experiencing financial difficulty by type of concession granted during the period indicated:

	Year ended
	December 31, 2024								December 31, 2023
(Dollars in thousands)	Payment Deferrals		Term Extensions		Total		% of Loan Class Total		Payment Deferrals		Term Extensions		Total		% of Loan Class Total
Commercial real estate owner-occupied	$	—	$	—	$	—	—	%	$	270	$	—	$	270	0.01	%
Commercial and industrial	1,640		—		1,640		0.34	%	177		—		177		0.04	%
Commercial construction	7,906		—		7,906		1.16	%	—		—		—		—	%
Residential mortgages	—		—		—		—	%	31		—		31		0.01	%
Home equity loans and lines	—		23		23		0.02	%	—		—		—		—	%
Total	$	9,546	$	23	$	9,569	0.24	%	$	478	$	—	$	478	0.01	%

The following table presents the financial effect of loan modifications made to borrowers experiencing financial difficulty during the periods indicated:

	Year ended
	December 31, 2024		December 31, 2023
	Weighted Average Payment Deferrals	Weighted-Average Term Extensions	Weighted Average Payment Deferrals	Weighted-Average Term Extensions
Commercial real estate owner-occupied	0.0 years	0.0 years	0.5 years	0.0 years
Commercial and industrial	0.5 years	0.0 years	0.5 years	0.0 years
Commercial construction	0.5 years	0.0 years	0.0 years	0.0 years
Residential mortgages	0.0 years	0.0 years	0.5 years	0.0 years
Home equity loans and lines	0.0 years	10.0 years	0.0 years	0.0 years

The Company closely monitors the performance of loans that are modified for borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance status of loans that had been modified within the preceding twelve months for borrowers experiencing financial difficulty, at the period indicated.

	Balance at December 31, 2024
(Dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		Past Due 90 Days or More		Total Past Due
Commercial real estate owner-occupied	$	—	$	—	$	—	$	—	$	—
Commercial real estate non owner-occupied	—		—		—		—		—
Commercial and industrial	1,640		—		—		—		—
Commercial construction	—		—		—		7,906		7,906
Residential mortgages	—		—		—		—		—
Home equity	23		—		—		—		—
Consumer	—		—		—		—		—
Total	$	1,663	$	—	$	—	$	7,906	$	7,906

During the year ended December 31, 2024, the Company had one loan amounting to $7.9 million that was modified within the preceding twelve months for a borrower experiencing financial difficulty which subsequently defaulted.

At December 31, 2024, additional funding commitments to borrowers experiencing financial difficulty who were party to a loan modification were immaterial.

ACL for loans and provision for credit loss activity

The following table presents changes in the provision for credit losses on loans and unfunded commitments during the periods indicated:

(Dollars in thousands)	December 31, 2024		December 31, 2023		December 31, 2022
Provision for credit losses on loans - collectively evaluated	$	1,463	$	4,184	$	5,949
Provision for credit losses on loans - individually evaluated	3,246		2,276		(774)
Provision for credit losses on loans	4,709		6,460		5,175
Provision for unfunded commitments	(2,724)		2,789		625
Provision for credit losses	$	1,985	$	9,249	$	5,800

The ACL for loans amounted to $63.5 million and $59.0 million at December 31, 2024 and December 31, 2023, respectively. The ACL for loans to total loans ratio was 1.59% and 1.65% at December 31, 2024 and December 31, 2023, respectively.

Changes in the allowance for credit losses for the years ended December 31, 2024, 2023 and 2022 are summarized as follows:

(Dollars in thousands)	2024		2023		2022
Balance at beginning of year	$	58,995	$	52,640	$	47,704
Provision	4,709		6,460		5,175
Recoveries	412		527		272
Less: Charge-offs	618		632		511
Balance at end of year	$	63,498	$	58,995	$	52,640

The following tables present changes in the ACL for loans by portfolio classification, during the periods presented below:

(Dollars in thousands)	Commercial Real Estate Owner-Occupied		Commercial Real Estate Non Owner-Occupied		Commercial and Industrial		Commercial Construction		Residential Mortgage		Home Equity		Consumer		Total
Beginning Balance at December 31, 2023	$	10,455	$	27,619	$	11,089	$	6,787	$	2,152	$	579	$	314	$	58,995
Provision for credit losses for loans	358		155		(996)		4,978		53		160		1		4,709
Recoveries	—		—		366		—		—		7		39		412
Less: Charge-offs	—		—		519		—		—		—		99		618
Ending Balance at December 31, 2024	$	10,813	$	27,774	$	9,940	$	11,765	$	2,205	$	746	$	255	$	63,498

(Dollars in thousands)	Commercial Real Estate Owner-Occupied		Commercial Real Estate Non Owner-Occupied		Commercial and Industrial		Commercial Construction		Residential Mortgage		Home Equity		Consumer		Total
Beginning Balance at December 31, 2022	$	10,304	$	26,260	$	8,896	$	3,961	$	2,255	$	633	$	331	$	52,640
Provision for credit losses for loans	151		1,359		2,292		2,825		(103)		(66)		2		6,460
Recoveries	—		—		497		1		—		12		17		527
Less: Charge-offs	—		—		596		—		—		—		36		632
Ending Balance at December 31, 2023	$	10,455	$	27,619	$	11,089	$	6,787	$	2,152	$	579	$	314	$	58,995

Reserve for unfunded commitments

The Company’s reserve for unfunded commitments amounted to $4.4 million as of December 31, 2024 and $7.1 million at December 31, 2023.

Other real estate owned

The Company carried no OREO at December 31, 2024, 2023 or 2022. During the years ended December 31, 2024, 2023 and 2022, there were no additions to or sales of OREO. For the years ended December 31, 2024, 2023 and 2022, there were no write-downs of OREO.

At December 31, 2024, the Company had no consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdictions.

At December 31, 2023, the Company had $1.1 million in consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdictions.