Loans and Allowance for Credit Losses on Loans

3 Months Ended

Mar. 31, 2024

Loans and Allowance for Credit Losses on Loans

Loans and Allowance for Credit Losses on Loans

5) Loans and Allowance for Credit Losses on Loans

In accordance with Accounting Standards Codification (“ASC”) 326, the Company is required to measure the allowance for credit losses of financial assets with similar risk characteristics on a collective or pooled basis. In considering the segmentation of financial assets measured at amortized cost into pools, the Company considered various risk characteristics in its analysis. Generally, the segmentation utilized represents the level at which the Company develops and documents its systematic methodology to determine the allowance for credit losses for the financial assets held at amortized cost, specifically the Company's loan portfolio and debt securities classified as held-to-maturity.

In accordance with ASC 326, the Company elected to not measure an allowance for credit losses on accrued interest. As such accrued interest is written off in a timely manner when deemed uncollectible. Any such write-off of accrued interest will reverse previously recognized interest income. In addition, the Company elected to not include accrued interest within presentation and disclosures of the carrying amount of financial assets held at amortized cost. This election is applicable to the various disclosures included within the Company's financial statements. Accrued interest related to financial assets held at amortized cost is included within accrued interest receivable and other assets within the Company's Consolidated Statements of Condition and totaled $16,246,000 at March 31, 2024 and $14,959,000 at December 31, 2023.

The loan portfolio is classified into eight segments of loans – commercial, commercial real estate – owner occupied, commercial real estate – non-owner occupied, land and construction, home equity, multifamily, residential mortgages and consumer and other.

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

Commercial

Commercial loans primarily rely on the identified cash flows of the borrower for repayment and secondarily on the underlying collateral provided by the borrower. However, the cash flows of the borrowers may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable, inventory or equipment and may incorporate a personal guarantee; however, some loans may be unsecured. Included in commercial loans are $55,698,000 of Bay View Funding factored receivables at March 31, 2024, compared to $ $57,458,000 at December 31, 2023.

Commercial Real Estate (“CRE”)

CRE loans rely primarily on the cash flows of the properties securing the loan and secondarily on the value of the property that is securing the loan. CRE loans comprise two segments differentiated by owner occupied CRE and non-owner occupied CRE. Owner occupied CRE loans are secured by commercial properties that are at least 50% occupied by the borrower or borrower affiliate. Although CRE loans often incorporate a personal guarantee, the commercial property collateral is typically sufficient and reliance on personal guarantees is minimal. Non-owner occupied CRE loans are

secured by commercial properties that are less than 50% occupied by the borrower or borrower affiliate. CRE loans may be adversely affected by conditions in the real estate markets or in the general economy.

Land and Construction

Land and construction loans are generally based on estimates of costs and value associated with the complete project. Construction loans usually involve the disbursement of funds with repayment substantially dependent on the success of the completion of the project. Sources of repayment for these loans may be permanent loans from HBC or other lenders, or proceeds from the sales of the completed project. These loans are monitored by on-site inspections and are considered to have higher risk than other real estate loans due to the final repayment dependent on numerous factors including general economic conditions.

Home Equity

Home equity loans are secured by 1-4 family residences that are generally owner occupied. Repayment of these loans depends primarily on the personal income of the borrower and secondarily on the value of the property securing the loan which can be impacted by changes in economic conditions such as the unemployment rate and property values. These loans are generally revolving lines of credit.

Multifamily

Multifamily loans are loans on residential properties with five or more units. These loans rely primarily on the cash flows of the properties securing the loan for repayment and secondarily on the value of the properties securing the loan. The cash flows of these borrowers can fluctuate along with the values of the underlying property depending on general economic conditions.

Residential Mortgages

Residential mortgage loans are secured by 1-4 family residences which are generally owner-occupied. Repayment of these loans depends primarily on the personal income of the borrower and secondarily on the value of the property securing the loan which can be impacted by changes in economic conditions such as the unemployment rate and property values. These are term loans and are acquired.

Consumer and Other

Consumer and other loans are secured by personal property or are unsecured and rely primarily on the income of the borrower for repayment and secondarily on the collateral value for secured loans. Borrower income and collateral values can vary depending on economic conditions.

Loan Distribution

Loans by portfolio segment and the allowance for credit losses on loans were as follows for the periods indicated:

	March 31,		December 31,
	2024		2023
	(Dollars in thousands)
Loans held-for-investment:
Commercial	$	452,231	$	463,778
Real estate:
CRE - owner occupied		585,031		583,253
CRE - non-owner occupied		1,271,184		1,256,590
Land and construction		129,712		140,513
Home equity		122,794		119,125
Multifamily		269,263		269,734
Residential mortgages		490,035		496,961
Consumer and other		16,439		20,919
Loans		3,336,689		3,350,873
Deferred loan fees, net		(587)		(495)
Loans, net of deferred fees		3,336,102		3,350,378
Allowance for credit losses on loans		(47,888)		(47,958)
Loans, net	$	3,288,214	$	3,302,420

The allowance for credit losses on loans was calculated by pooling loans of similar credit risk characteristics and credit monitoring procedures.

Changes in the allowance for credit losses on loans were as follows for the periods indicated:

	Three Months Ended March 31, 2024
			CRE		CRE
			Owner		Non-owner		Land &		Home		Multi-		Residential		Consumer
	Commercial		Occupied		Occupied		Construction		Equity		Family		Mortgages		and Other		Total
	(Dollars in thousands)
Beginning of period balance	$	5,853	$	5,121	$	25,323	$	2,352	$	644	$	5,053	$	3,425	$	187	$	47,958
Charge-offs		(358)		—		—		—		—		—		—		—		(358)
Recoveries		82		4		—		—		18		—		—		—		104
Net (charge-offs) recoveries		(276)		4		—		—		18		—		—		—		(254)
Provision for (recapture of)
credit losses on loans		(548)		16		1,086		(470)		91		(744)		774		(21)		184
End of period balance	$	5,029	$	5,141	$	26,409	$	1,882	$	753	$	4,309	$	4,199	$	166	$	47,888

	Three Months Ended March 31, 2023
			CRE		CRE
			Owner		Non-owner		Land &		Home		Multi-		Residential		Consumer
	Commercial		Occupied		Occupied		Construction		Equity		Family		Mortgages		and Other		Total
	(Dollars in thousands)
Beginning of period balance	$	6,617	$	5,751	$	22,135	$	2,941	$	666	$	3,366	$	5,907	$	129	$	47,512
Charge-offs		(134)		—		—		—		(246)		—		—		—		(380)
Recoveries		80		4		—		—		25		—		—		—		109
Net (charge-offs) recoveries		(54)		4		—		—		(221)		—		—		—		(271)
Provision for (recapture of)
credit losses on loans		(29)		(302)		542		235		243		1,026		(1,711)		28		32
End of period balance	$	6,534	$	5,453	$	22,677	$	3,176	$	688	$	4,392	$	4,196	$	157	$	47,273

The following tables present the amortized cost basis of nonperforming loans and loans past due over 90 days and still accruing at the periods indicated:

	March 31, 2024
	Nonaccrual		Nonaccrual			Loans
	with no Specific		with Specific			over 90 Days
	Allowance for		Allowance for			Past Due
	Credit		Credit			and Still
	Losses		Losses			Accruing	Total
	(Dollars in thousands)
Commercial	$	924	$	203	$	1,443	$	2,570
Real estate:
CRE - Owner Occupied		—		—		—		—
CRE - Non-Owner Occupied		—		—		—		—
Land and construction		4,673		—		—		4,673
Home equity		120		—		—		120
Residential mortgages		—		—		508		508
Total	$	5,717	$	203	$	1,951	$	7,871

	December 31, 2023
	Nonaccrual		Nonaccrual		Loans
	with no Specific		with no Specific		over 90 Days
	Allowance for		Allowance for		Past Due
	Credit		Credit		and Still
	Losses		Losses		Accruing		Total
	(Dollars in thousands)
Commercial	$	946	$	290	$	889	$	2,125
Real estate:
CRE - Owner Occupied		—		—		—		—
CRE - Non-Owner Occupied		—		—		—		—
Land and construction		4,661		—		—		4,661
Home equity		142		—		—		142
Residential mortgages		779		—		—		779
Total	$	6,528	$	290	$	889	$	7,707

The following tables present the aging of past due loans by class for the periods indicated:

	March 31, 2024
	30 - 59		60 - 89		90 Days or
	Days		Days		Greater		Total
	Past Due		Past Due		Past Due		Past Due		Current		Total
	(Dollars in thousands)
Commercial	$	3,522	$	1,180	$	1,955	$	6,657	$	445,574	$	452,231
Real estate:
CRE - Owner Occupied		—		—		—		—		585,031		585,031
CRE - Non-Owner Occupied		5,662		—		—		5,662		1,265,522		1,271,184
Land and construction		3,550		—		4,672		8,222		121,490		129,712
Home equity		441		—				441		122,353		122,794
Multifamily		—		—		—		—		269,263		269,263
Residential mortgages		—		—		508		508		489,527		490,035
Consumer and other		—		—		—		—		16,439		16,439
Total	$	13,175	$	1,180	$	7,135	$	21,490	$	3,315,199	$	3,336,689

	December 31, 2023
	30 - 59		60 - 89		90 Days or
	Days		Days		Greater		Total
	Past Due		Past Due		Past Due		Past Due		Current		Total
	(Dollars in thousands)
Commercial	$	6,688	$	2,030	$	1,264	$	9,982	$	453,796	$	463,778
Real estate:
CRE - Owner Occupied		—		—		—		—		583,253		583,253
CRE - Non-Owner Occupied		1,289		—		—		1,289		1,255,301		1,256,590
Land and construction		955		—		3,706		4,661		135,852		140,513
Home equity		—		—		142		142		118,983		119,125
Multifamily		—		—		—		—		269,734		269,734
Residential mortgages		3,794		510		779		5,083		491,878		496,961
Consumer and other		—		—		—		—		20,919		20,919
Total	$	12,726	$	2,540	$	5,891	$	21,157	$	3,329,716	$	3,350,873

The following table presents the past due loans on nonaccrual and current loans on nonaccrual for the periods indicated:

	March 31,		December 31,
	2024		2023
	(Dollars in thousands)
Past due nonaccrual loans	$	5,184	$	6,100
Current nonaccrual loans		736		718
Total nonaccrual loans	$	5,920	$	6,818

Management’s classification of a loan as “nonaccrual” is an indication that there is reasonable doubt as to the full recovery of principal or interest on the loan. At that point, the Company stops accruing interest income, and reverses any uncollected interest that had been accrued as income. The Company resumes recognizing interest income only as cash interest payments are received and it has been determined the collection of all outstanding principal is not in doubt.

Credit Quality Indicators

Concentrations of credit risk arise when a number of customers are engaged in similar business activities, or activities in the same geographic region, or have similar features that would cause their ability to meet contractual obligations to be similarly affected by changes in economic conditions. The Company’s loan portfolio is concentrated in commercial (primarily manufacturing, wholesale, and service) and real estate lending, with the remaining balance in consumer loans. While no specific industry concentration is considered significant, the Company’s lending operations are located in the Company’s market areas that are dependent on the technology and real estate industries and their supporting companies. Thus, the Company’s borrowers and their guarantors could be adversely impacted by a downturn in these sectors of the economy which could reduce the demand for loans and adversely impact the borrowers’ ability to repay their loans.

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, and other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on a quarterly basis. Nonclassified loans generally include those loans that are expected to be repaid in accordance with their contractual loan terms. Loans categorized as special mention have potential weaknesses that may, if not checked or corrected, weaken the credit or inadequately protect the Company’s position at some future date. These loans pose elevated risk, but their weaknesses do not yet justify a substandard classification. Classified loans are those loans that are assigned a substandard, substandard-nonaccrual, or doubtful risk rating using the following definitions:

Special Mention. A Special Mention asset has potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in a deterioration of the repayment prospects for the asset or in the

credit position at some future date. Special Mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

Substandard. Loans classified as substandard 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 will jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Substandard-Nonaccrual. Loans classified as substandard-nonaccrual are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any, and it is probable that the Company will not receive payment of the full contractual principal and interest. 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 institution will sustain some loss if the deficiencies are not corrected. In addition, the Company no longer accrues interest on the loan because of the underlying weaknesses.

Doubtful. Loans classified as doubtful 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.

Loss. Loans classified as loss are considered uncollectable or of so little value that their continuance as assets is not warranted. This classification does not necessarily mean that a loan has no recovery or salvage value; but rather, there is much doubt about whether, how much, or when the recovery would occur. Loans classified as loss are immediately charged off against the allowance for credit losses on loans. Therefore, there is no balance to report as of March 31, 2024 and December 31, 2023.

Loans may be reviewed at any time throughout a loan’s duration. If new information is provided, a new risk assessment may be performed if warranted.

The following tables present term loans amortized cost by vintage and loan grade classification, and revolving loans amortized cost by loan grade classification at March 31, 2024 and December 31, 2023. The loan grade classifications are based on the Bank’s internal loan grading methodology. Loan grade categories for doubtful and loss rated loans are not included on the tables below as there are no loans with those grades at March 31, 2024 and December 31, 2023. The vintage year represents the period the loan was originated or in the case of renewed loans, the period last renewed. The amortized balance is the loan balance less any purchase discounts, plus any loan purchase premiums.  The loan categories are based on the loan segmentation in the Company's CECL reserve methodology based on loan purpose and type. 

														Revolving
														Loans
		Term Loans Amortized Cost Basis by Originated Period as of March 31, 2024												Amortized
	3/31/2024		2023		2022		2021		2020		Prior Periods			Cost Basis		Total
	(Dollars in thousands)
Commercial:
Pass	$	74,006	$	36,626	$	23,777	$	18,808	$	13,368	$	30,291	$	239,157	$	436,033
Special Mention		2,020		82		1,062		38		—		3,272		2,471		8,945
Substandard		4		—		1,478		—		97		4,490		57		6,126
Substandard-Nonaccrual		—		—		—		343		—		784		—		1,127
Total		76,030		36,708		26,317		19,189		13,465		38,837		241,685		452,231
CRE - Owner Occupied:
Pass		12,117		32,194		84,349		109,741		64,592		262,613		10,107		575,713
Special Mention		—		—		249		3,219		457		1,251		—		5,176
Substandard		—		—		—		—		3,042		1,100		—		4,142
Substandard-Nonaccrual		—		—		—		—		—		—		—		—
Total		12,117		32,194		84,598		112,960		68,091		264,964		10,107		585,031
CRE - Non-Owner Occupied:
Pass		21,427		226,112		240,250		260,618		27,717		465,826		5,116		1,247,066
Special Mention		—		—		—		708		—		10,958		—		11,666
Substandard		—		—		—		4,564		—		7,562		326		12,452
Substandard-Nonaccrual		—		—		—		—		—		—		—		—
Total		21,427		226,112		240,250		265,890		27,717		484,346		5,442		1,271,184
Land and construction:
Pass		9,596		38,701		39,325		23,083		9,246		1,844		—		121,795
Special Mention		—		—		—		—		—		2,163		—		2,163
Substandard		—		—		—		—		—		1,081		—		1,081
Substandard-Nonaccrual		—		—		—		3,706		967		—		—		4,673
Total		9,596		38,701		39,325		26,789		10,213		5,088		—		129,712
Home equity:
Pass		—		—		—		—		—		2,055		114,967		117,022
Special Mention		—		—		—		—		—		—		2,256		2,256
Substandard		—		—		—		—		—		—		3,396		3,396
Substandard-Nonaccrual		—		—		—		—		—		120		—		120
Total		—		—		—		—		—		2,175		120,619		122,794
Multifamily:
Pass		4,523		47,031		40,893		54,977		5,358		116,026		455		269,263
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Substandard-Nonaccrual		—		—		—		—		—		—		—		—
Total		4,523		47,031		40,893		54,977		5,358		116,026		455		269,263
Residential mortgage:
Pass		—		1,678		178,340		271,180		1,030		34,206		—		486,434
Special Mention		—		—		1,326		—		—		—		—		1,326
Substandard		—		—		764		—		—		1,511		—		2,275
Substandard-Nonaccrual		—		—		—		—		—		—		—		—
Total		—		1,678		180,430		271,180		1,030		35,717		—		490,035
Consumer and other:
Pass		—		1,566		1,373		58		—		2,060		10,588		15,645
Special Mention		—		705		—		—		—		89		—		794
Substandard		—		—		—		—		—		—		—		—
Substandard-Nonaccrual		—		—		—		—		—		—		—		—
Total		—		2,271		1,373		58		—		2,149		10,588		16,439
Total loans	$	123,693	$	384,695	$	613,186	$	751,043	$	125,874	$	949,302	$	388,896	$	3,336,689
Risk Grades:
Pass	$	121,669	$	383,908	$	608,307	$	738,465	$	121,311	$	914,921	$	380,390	$	3,268,971
Special Mention		2,020		787		2,637		3,965		457		17,733		4,727		32,326
Substandard		4		—		2,242		4,564		3,139		15,744		3,779		29,472
Substandard-Nonaccrual		—		—		—		4,049		967		904		—		5,920
Grand Total	$	123,693	$	384,695	$	613,186	$	751,043	$	125,874	$	949,302	$	388,896	$	3,336,689

														Revolving
														Loans
		Term Loans Amortized Cost Basis by Originated Period as of December 31, 2023												Amortized
	2023		2022		2021		2020		2019		Prior Periods			Cost Basis		Total
	(Dollars in thousands)
Commercial:
Pass	$	99,387	$	25,250	$	19,732	$	14,929	$	11,893	$	22,134	$	258,461	$	451,786
Special Mention		2,107		1,092		41		—		133		1,134		467		4,974
Substandard		4		1,516		—		100		185		3,835		142		5,782
Substandard-Nonaccrual		—		—		349		—		116		771		—		1,236
Total		101,498		27,858		20,122		15,029		12,327		27,874		259,070		463,778
CRE - Owner Occupied:
Pass		32,993		86,688		110,613		68,184		52,885		214,729		10,302		576,394
Special Mention		—		250		3,241		462		—		1,802		—		5,755
Substandard		—		—		—		—		1,100		4		—		1,104
Substandard-Nonaccrual		—		—		—		—		—		—		—		—
Total		32,993		86,938		113,854		68,646		53,985		216,535		10,302		583,253
CRE - Non-Owner Occupied:
Pass		225,505		243,080		267,870		28,315		92,648		370,552		3,199		1,231,169
Special Mention		—		—		—		—		7,493		10,040		—		17,533
Substandard		—		—		—		—		—		7,614		274		7,888
Substandard-Nonaccrual		—		—		—		—		—		—		—		—
Total		225,505		243,080		267,870		28,315		100,141		388,206		3,473		1,256,590
Land and construction:
Pass		40,142		52,862		27,419		9,273		1,864		—		—		131,560
Special Mention		2,163		—		—		—		—		—		—		2,163
Substandard		2,129		—		—		—		—		—		—		2,129
Substandard-Nonaccrual		—		—		3,706		955		—		—		—		4,661
Total		44,434		52,862		31,125		10,228		1,864		—		—		140,513
Home equity:
Pass		—		—		—		—		—		1,463		111,250		112,713
Special Mention		—		—		—		—		—		—		2,110		2,110
Substandard		—		—		—		—		—		—		4,160		4,160
Substandard-Nonaccrual		—		—		—		—		—		—		142		142
Total		—		—		—		—		—		1,463		117,662		119,125
Multifamily:
Pass		47,089		41,112		55,557		5,394		42,129		75,890		355		267,526
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		2,208		—		2,208
Substandard-Nonaccrual		—		—		—		—		—		—		—		—
Total		47,089		41,112		55,557		5,394		42,129		78,098		355		269,734
Residential mortgage:
Pass		1,684		187,417		268,617		1,037		6,861		28,892		—		494,508
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		973		—		—		—		701		—		1,674
Substandard-Nonaccrual		—		779		—		—		—		—		—		779
Total		1,684		189,169		268,617		1,037		6,861		29,593		—		496,961
Consumer and other:
Pass		2,332		1,376		3		—		—		2,089		14,961		20,761
Special Mention		—		—		62		—		—		96		—		158
Substandard		—		—		—		—		—		—		—		—
Substandard-Nonaccrual		—		—		—		—		—		—		—		—
Total		2,332		1,376		65		—		—		2,185		14,961		20,919
Total loans	$	455,535	$	642,395	$	757,210	$	128,649	$	217,307	$	743,954	$	405,823	$	3,350,873
Risk Grades:
Pass	$	449,132	$	637,785	$	749,811	$	127,132	$	208,280	$	715,749	$	398,528	$	3,286,417
Special Mention		4,270		1,342		3,344		462		7,626		13,072		2,577		32,693
Substandard		2,133		2,489		—		100		1,285		14,362		4,576		24,945
Substandard-Nonaccrual		—		779		4,055		955		116		771		142		6,818
Grand Total	$	455,535	$	642,395	$	757,210	$	128,649	$	217,307	$	743,954	$	405,823	$	3,350,873

The following tables present the gross charge-offs by class of loans and year of origination for the periods indicated:

		Gross Charge-offs by Originated Period for the Three Months Ended March 31, 2024
											Prior			Revolving
	3/31/2024		2023		2022		2021		2020		Periods			Loans		Total
	(Dollars in thousands)
Commercial	$	—	$	—	$	—	$	—	$	—	$	358	$	—	$	358
Real estate:
CRE - Owner Occupied		—		—		—		—		—		—		—		—
CRE - Non-Owner Occupied		—		—		—		—		—		—		—		—
Land and construction		—		—		—		—		—		—		—		—
Home equity		—		—		—		—		—		—		—		—
Multifamily		—		—		—		—		—		—		—		—
Residential mortgages		—		—		—		—		—		—		—		—
Consumer and other		—		—		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	—	$	358	$	—	$	358

		Gross Charge-offs by Originated Period for the Three Months Ended March 31, 2023
											Prior			Revolving
	03/31/2023		2022		2021		2020		2019		Periods			Loans		Total
	(Dollars in thousands)
Commercial	$	—	$	—	$	—	$	—	$	49	$	85	$	—	$	134
Real estate:
CRE - Owner Occupied		—		—		—		—		—		—		—		—
CRE - Non-Owner Occupied		—		—		—		—		—		—		—		—
Land and construction		—		—		—		—		—		—		—		—
Home equity		—		—		—		—		—		—		246		246
Multifamily		—		—		—		—		—		—		—		—
Residential mortgages		—		—		—		—		—		—		—		—
Consumer and other		—		—		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	49	$	85	$	246	$	380

The amortized cost basis of collateral-dependent loans at March 31, 2024 and December 31, 2023 was $203,000 and $290,000, respectively, and were secured by business assets.

When management determines that foreclosures are probable, 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. For loans which foreclosure is not probable, but for which repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty, management has elected the practical expedient under ASC 326 to estimate expected credit losses based on the fair value of collateral, adjusted for selling costs as appropriate. The class of loan represents the primary collateral type associated with the loan. Significant quarter over quarter changes are reflective of changes in nonaccrual status and not necessarily associated with credit quality indicators like appraisal value.

Loan Modifications

Occasionally, the Company modifies loans to borrowers experiencing financial difficulty by providing principal forgiveness, term extension, payment delay, or interest reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.

In some cases, the Company provides multiple types of concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. For the loans included in the “combination” columns below, multiple types of modifications have been made on the same loan within the current reporting period. The combination is at least two of the following: a term extension, principal forgiveness, payment delay, and/or interest rate reduction.

The following tables present the amortized cost basis of loans that were both experiencing financial difficulty and modified through the periods indicated, by segment and type of modification. The percentage of the amortized cost basis of the loans that were modified to borrowers experiencing financial difficulty as compared to the amortized cost basis of each class of financing receivable is also presented below.

	Three Months Ended March 31, 2024
									Combination		Combination
									Term		Term
									Extension		Extension		Total
							Interest		and		and		Class of
	Principal		Payment		Term		Rate		Principal		Interest Rate		Financing
	Forgiveness		Delay		Extension		Reduction		Forgiveness		Reduction		Receivables
	(Dollars in thousands)
Commercial	$	—	$	—	$	33	$	—	$	—	$	—	0.01	%
Total	$	—	$	—	$	33	$	—	$	—	$	—	0.01	%

	Three Months Ended March 31, 2023
									Combination		Combination
									Term		Term
									Extension		Extension		Total
							Interest		and		and		Class of
	Principal		Payment		Term		Rate		Principal		Interest Rate		Financing
	Forgiveness		Delay		Extension		Reduction		Forgiveness		Reduction		Receivables
	(Dollars in thousands)
Commercial	$	6	$	88	$	36	$	—	$	—	$	—	0.03	%
Total	$	6	$	88	$	36	$	—	$	—	$	—	0.03	%

The Company has committed to lend no additional amounts to the borrowers included in the previous tables.

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 following tables present the performance of such loans that have been modified for the periods indicated.

	Three Months Ended March 31, 2024
	30 - 59		60 - 89		90 Days or
	Days		Days		Greater		Total
	Past Due		Past Due		Past Due		Past Due
	(Dollars in thousands)
Commercial	$	—	$	—	$	—	$	—
Total	$	—	$	—	$	—	$	—

	Three Months Ended March 31, 2023
	30 - 59		60 - 89		90 Days or
	Days		Days		Greater		Total
	Past Due		Past Due		Past Due		Past Due
	(Dollars in thousands)
Commercial	$	—	$	36	$	6	$	42
Total	$	—	$	36	$	6	$	42

The following tables present the financial effect of the loan modification presented above to borrowers experiencing financial difficulty for the periods indicated:

	Three Months Ended March 31, 2024
			Weighted		Weighted
			Average		Average
			Interest		Term
	Principal		Rate		Extension
	Forgiveness		Reduction		(Months)
	(Dollars in thousands)
Commercial	$	—	—	%	10
Total	$	—	—	%	10

	Three Months Ended March 31, 2023
			Weighted		Weighted
			Average		Average
			Interest		Term
	Principal		Rate		Extension
	Forgiveness		Reduction		(Months)
	(Dollars in thousands)
Commercial	$	3	—	%	9
Total	$	3	—	%	9

There were no payment defaults for loans modified for the three months ended March 31, 2024 and March 31, 2023.