
(In thousands)	September 30, 2022		December 31, 2021
Real estate loans:
Residential	$	61,664	$	79,987
Commercial	1,647,928		1,356,709
Construction	117,355		98,341
	1,826,947		1,535,037

Commercial business (1)	443,288		350,975

Consumer	16,558		8,869
Total loans	2,286,793		1,894,881

Allowance for loan losses	(18,167)		(16,902)
Deferred loan origination fees, net	(5,194)		(2,812)

Loans receivable, net	$	2,263,432	$	1,875,167

Lending activities consist of commercial real estate loans, commercial business loans and, to a lesser degree, a variety of consumer loans. Loans may also be granted for the construction of commercial properties. The majority of commercial mortgage loans are collateralized by first or second mortgages on real estate.

The Company has established credit policies applicable to each type of lending activity in which it engages. The Company evaluates the creditworthiness of each customer and extends credit of up to 80% of the market value of the collateral, depending on the borrower's creditworthiness and the type of collateral. The borrower’s ability to service the debt is monitored on an ongoing basis. Real estate is the primary form of collateral. Other important forms of collateral are business assets, time deposits and marketable securities. While collateral provides assurance as a secondary source of repayment, the Company ordinarily requires the primary source of repayment for commercial loans to be based on the borrower’s ability to generate continuing cash flows. In the fourth quarter of 2017, management made the strategic decision to cease the origination of residential mortgage loans. At the beginning of the third quarter 2019, the Company no longer offered home equity loans or lines of credit. The Company’s policy for residential lending generally required that the amount of the loan may not exceed 80% of the original appraised value of the property. In certain situations, the amount may have exceeded 80% LTV either with private mortgage insurance being required for that portion of the residential loan in excess of 80% of the appraised value of the property or where secondary financing is provided by a housing authority program second mortgage, a community’s low/moderate income housing program, or a religious or civic organization.

Management segregates the loan portfolio into defined segments, which are used to develop and document a systematic method for determining the Company's allowance for loan losses. The portfolio segments are segregated based on loan types and the underlying risk factors present in each loan type. Such risk factors are periodically reviewed by management and revised as deemed appropriate.

Residential Real Estate: This portfolio segment consists of first mortgage loans secured by one-to-four family owner occupied residential properties for personal use located in the Company's market area. This segment also includes home equity loans and home equity lines of credit secured by owner occupied one-to-four family residential properties. Loans of this type were written at a combined maximum of 80% of the appraised value of the property and the Company requires a first or second lien position on the property. These loans can be affected by economic conditions and the values of the underlying properties.

Commercial Real Estate: This portfolio segment includes loans secured by commercial real estate, multi-family dwellings, owner-occupied commercial real estate and investor-owned one-to-four family dwellings. Loans secured by commercial real estate generally have larger loan balances and more credit risk than owner occupied one-to-four family mortgage loans.

Construction: This portfolio segment includes commercial construction loans for commercial development projects, including apartment buildings and condominiums, as well as office buildings, retail and other income producing properties and land loans, which are loans made with land as collateral. Construction and land development financing generally involves greater credit risk than long-term financing on improved, owner-occupied or leased real estate. Risk of loss on a construction loan depends largely upon the accuracy of the initial estimate of the value of the property at completion of construction compared to the estimated cost (including interest) of construction and other assumptions. If the estimate of construction cost proves to be inaccurate, the Company may be required to advance additional funds beyond the amount originally committed in order to protect the value of the property. Moreover, if the estimated value of the completed project proves to be inaccurate, the borrower may hold a property with a value that is insufficient to assure full repayment through sale or refinance. Construction loans also expose the Company to the risks that improvements will not be completed on time in accordance with specifications and projected costs and that repayment will depend on the successful operation or sale of the properties, which may cause some borrowers to be unable to continue paying debt service, which exposes the Company to greater risk of non-payment and loss.

Commercial Business: This portfolio segment includes commercial business loans secured by assignments of corporate assets and personal guarantees of the business owners. Commercial business loans generally have higher interest rates and shorter terms than other loans, but they also have increased difficulty of loan monitoring and a higher risk of default since their repayment generally depends on the successful operation of the borrower’s business. This segment also includes Paycheck Protection Program ("PPP") loans made under the CARES Act to small businesses impacted by COVID-19, to cover payroll and other operating expenses. Loans extended under the PPP are fully guaranteed by the U.S. Small Business Administration ("SBA").

Consumer: This portfolio segment includes loans secured by savings or certificate accounts, automobiles, as well as unsecured personal loans and overdraft lines of credit. In addition, there are loans to finance insurance premiums, secured primarily by the cash surrender value of life insurance and marketable securities.


	Residential Real Estate		Commercial Real Estate		Construction		Commercial Business		Consumer		Total
	(In thousands)
Three Months Ended September 30, 2022
Beginning balance	$	331	$	11,480	$	95	$	3,802	$	65	$	15,773
Charge-offs	—		—		—		—		(8)		(8)
Recoveries	—		—		—		21		—		21
(Credits) provisions	(159)		1,446		38		985		71		2,381
Ending balance	$	172	$	12,926	$	133	$	4,808	$	128	$	18,167


	Residential Real Estate		Commercial Real Estate		Construction		Commercial Business		Consumer		Total
	(In thousands)
Three Months Ended September 30, 2021
Beginning balance	$	318	$	13,209	$	133	$	2,976	$	36	$	16,672
Charge-offs	—		—		—		—		(15)		(15)
Recoveries	—		—		—		11		1		12
Provisions (credits)	158		37		9		(84)		14		134
Ending balance	$	476	$	13,246	$	142	$	2,903	$	36	$	16,803


	Residential Real Estate		Commercial Real Estate		Construction		Commercial Business		Consumer		Total
	(In thousands)
Nine Months Ended September 30, 2022
Beginning balance	$	504	$	12,751	$	4	$	3,590	$	53	$	16,902
Charge-offs	—		—		—		—		(12)		(12)
Recoveries	—		77		—		34		1		112
(Credits) provisions	(332)		98		129		1,184		86		1,165
Ending balance	$	172	$	12,926	$	133	$	4,808	$	128	$	18,167


	Residential Real Estate		Commercial Real Estate		Construction		Commercial Business		Consumer		Total
	(In thousands)
Nine Months Ended September 30, 2021
Beginning balance	$	610	$	16,425	$	221	$	3,753	$	—	$	21,009
Charge-offs	—		(3,977)		—		(51)		(33)		(4,061)
Recoveries	—		—		—		27		10		37
(Credits) provisions	(134)		798		(79)		(826)		59		(182)
Ending balance	$	476	$	13,246	$	142	$	2,903	$	36	$	16,803


	Portfolio		Allowance
	(In thousands)
September 30, 2022
Loans individually evaluated for impairment:
Residential real estate	$	3,844	$	—
Commercial real estate	25,445		871
Construction	9,382		—
Commercial business	4,571		44

Subtotal	43,242		915
Loans collectively evaluated for impairment:
Residential real estate	57,820		172
Commercial real estate	1,622,483		12,055
Construction	107,973		133
Commercial business	438,717		4,764
Consumer	16,558		128
Subtotal	2,243,551		17,252

Total	$	2,286,793	$	18,167


	Portfolio		Allowance
	(In thousands)
December 31, 2021
Loans individually evaluated for impairment:
Residential real estate	$	4,150	$	261
Commercial real estate	29,666		2,520
Construction	8,997		—
Commercial business	4,368		87

Subtotal	47,181		2,868
Loans collectively evaluated for impairment:
Residential real estate	75,837		243
Commercial real estate	1,327,043		10,231
Construction	89,344		4
Commercial business	346,607		3,503
Consumer	8,869		53
Subtotal	1,847,700		14,034

Total	$	1,894,881	$	16,902

To measure credit risk for the loan portfolios, the Company employs a credit risk rating system. This risk rating represents an assessed level of a loan’s risk based on the character and creditworthiness of the borrower/guarantor, the capacity of the borrower to adequately service the debt, any credit enhancements or additional sources of repayment, and the quality, value and coverage of the collateral, if any.

credit weaknesses so that timely action can be taken to minimize a potential credit loss, to identify relevant trends affecting the collectability of the loan portfolio, to isolate potential problem areas and to provide essential information for determining the adequacy of the allowance for loan losses. The Company’s credit risk rating system has nine grades, with each grade corresponding to a progressively greater risk of default. Risk ratings of (1) through (5) are "pass" categories and risk ratings of (6) through (9) are criticized asset categories as defined by the regulatory agencies.

A “special mention” (6) loan has a potential weakness which, if uncorrected, may result in a deterioration of the repayment prospects or inadequately protect the Company’s credit position at some time in the future. “Substandard” (7) loans have a well-defined weakness or weaknesses that jeopardize the full repayment of the debt. A loan rated “doubtful” (8) has all the weaknesses inherent in a substandard loan and which, in addition, make collection or liquidation in full highly questionable and improbable when considering existing facts, conditions, and values. Loans classified as “loss” (9) are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value; rather, it is not practical or desirable to defer writing-off this asset even though partial recovery may be made in the future.

Risk ratings are assigned as necessary to differentiate risk within the portfolio. They are reviewed on an ongoing basis through the annual loan review process performed by Company personnel, normal renewal activity and the quarterly watchlist and watched asset report process. They are revised to reflect changes in the borrower's financial condition and outlook, debt service coverage capability, repayment performance, collateral value and coverage, as well as other considerations. In addition to internal review at multiple points, outsourced loan review opines on risk ratings with regard to the sample of loans their review covers.


	Commercial Credit Quality Indicators
	September 30, 2022								December 31, 2021
	Commercial Real Estate		Construction		Commercial Business		Total		Commercial Real Estate		Construction		Commercial Business		Total
	(In thousands)
Pass	$	1,621,467	$	107,973	$	438,278	$	2,167,718	$	1,307,992	$	89,344	$	345,153	$	1,742,489
Special Mention	1,016		—		440		1,456		19,051		—		1,454		20,505
Substandard	25,370		9,382		4,347		39,099		29,255		8,997		2,847		41,099
Doubtful	75		—		223		298		411		—		1,521		1,932
Loss	—		—		—		—		—		—		—		—
Total loans	$	1,647,928	$	117,355	$	443,288	$	2,208,571	$	1,356,709	$	98,341	$	350,975	$	1,806,025


	Residential and Consumer Credit Quality Indicators
	September 30, 2022						December 31, 2021
	Residential Real Estate		Consumer		Total		Residential Real Estate		Consumer		Total
	(In thousands)
Pass	$	57,675	$	16,558	$	74,233	$	75,692	$	8,869	$	84,561
Special Mention	145		—		145		145		—		145
Substandard	3,844		—		3,844		3,975		—		3,975
Doubtful	—		—		—		175		—		175
Loss	—		—		—		—		—		—
Total loans	$	61,664	$	16,558	$	78,222	$	79,987	$	8,869	$	88,856

When a loan is 15 days past due, the Company sends the borrower a late notice. The Company attempts to contact the borrower by phone if the delinquency is not corrected promptly after the notice has been sent. When the loan is 30 days past due, the Company mails the borrower a letter reminding the borrower of the delinquency and attempts to contact the borrower personally to determine the reason for the delinquency and ensure the borrower understands the terms of the loan. If necessary, after the 90th day of delinquency, the Company may take other appropriate legal action. A summary report of all loans 30 days or more past due is provided to the Board of Directors of the Company periodically. Loans greater than 90 days past due are generally put on nonaccrual status. A nonaccrual loan is restored to accrual status when it is no longer delinquent and collectability of interest and principal is no longer in doubt. A loan is considered to be no longer delinquent when timely payments are made for a period of at least six months (one year for loans providing for quarterly or semi-annual payments) by the borrower in accordance with the contractual terms. Loans that are granted payment deferrals under the CARES Act are not required to be reported as past due or placed on non-accrual status if the criteria under section 4013 of the CARES Act is met. As of September 30, 2022, no loans remained on active deferral under the CARES Act.


	September 30, 2022
	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Loans
	(In thousands)
Real estate loans:
Residential real estate	$	861	$	—	$	131	$	992	$	60,672	$	61,664
Commercial real estate	57		—		2,633		2,690		1,645,238		1,647,928
Construction	—		—		9,382		9,382		107,973		117,355
Commercial business	2,337		230		2,156		4,723		438,565		443,288
Consumer	—		—		—		—		16,558		16,558
Total loans	$	3,255	$	230	$	14,302	$	17,787	$	2,269,006	$	2,286,793


	December 31, 2021
	30-59 Days Past Due		60-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Loans
	(In thousands)
Real estate loans:
Residential real estate	$	873	$	—	$	878	$	1,751	$	78,236	$	79,987
Commercial real estate	2,186		10,500		4,244		16,930		1,339,779		1,356,709
Construction	—		—		8,997		8,997		89,344		98,341
Commercial business	1,995		1,483		1,469		4,947		346,028		350,975
Consumer	—		3		—		3		8,866		8,869
Total loans	$	5,054	$	11,986	$	15,588	$	32,628	$	1,862,253	$	1,894,881

There were no loans delinquent greater than 90 days and still accruing interest as of September 30, 2022. There were two loans, totaling $1.1 million, delinquent greater than 90 days and still accruing interest as of December 31, 2021. The delinquencies for these particular loans were a result of an administrative delay.

Interest income on loans that would have been recognized if loans on nonaccrual status had been current in accordance with their original terms for the nine months ended September 30, 2022 and 2021 was $0.7 million and $0.9 million, respectively. There was $0 thousand and $49 thousand of interest income recognized on these loans for the nine months ended September 30, 2022 and 2021, respectively.

At September 30, 2022 and December 31, 2021, there were no commitments to lend additional funds to any borrower on nonaccrual status. Nonaccrual loans with no specific reserve totaled $14.9 million and $14.2 million at September 30, 2022 and December 31, 2021, respectively, as these loans were deemed to be adequately collateralized.

An impaired loan is generally one for which it is probable, based on current information, that the Company will not collect all the amounts due in accordance with the contractual terms of the loan. Impaired loans are individually evaluated for impairment. When the Company classifies a problem loan as impaired, it evaluates whether a specific valuation allowance is required for that portion of the asset that is estimated to be impaired.


	Carrying Amount				Unpaid Principal Balance				Associated Allowance
	September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021		September 30, 2022		December 31, 2021
	(In thousands)
Impaired loans without a valuation allowance:
Residential real estate	$	3,844	$	1,851	$	4,083	$	2,038	$	—	$	—
Commercial real estate	1,045		8,338		1,343		8,698		—		—
Construction	9,382		8,997		9,382		8,997		—		—
Commercial business	2,570		1,938		2,807		2,582		—		—

Total impaired loans without a valuation allowance	16,841		21,124		17,615		22,315		—		—

Impaired loans with a valuation allowance:
Residential real estate	$	—	$	2,299	$	—	$	2,304	$	—	$	261
Commercial real estate	24,401		21,328		24,440		21,367		871		2,520

Commercial business	2,000		2,430		2,000		2,429		44		87
Total impaired loans with a valuation allowance	26,401		26,057		26,440		26,100		915		2,868
Total impaired loans	$	43,242	$	47,181	$	44,055	$	48,415	$	915	$	2,868


	Average Carrying Amount				Interest Income Recognized
	Three Months Ended September 30,				Three Months Ended September 30,
	2022		2021		2022		2021
	(In thousands)
Impaired loans without a valuation allowance:
Residential real estate	$	3,864	$	3,058	$	21	$	13
Commercial real estate	1,082		10,153		—		72
Commercial business	2,585		1,987		6		5
Construction	9,382		8,997		—		—

Total impaired loans without a valuation allowance	16,913		24,195		27		90
Impaired loans with a valuation allowance:
Residential real estate	$	—	$	1,775	$	—	$	12
Commercial real estate	24,419		20,301		148		62

Commercial business	2,000		2,763		20		18

Total impaired loans with a valuation allowance	26,419		24,839		168		92
Total impaired loans	$	43,332	$	49,034	$	195	$	182


	Average Carrying Amount				Interest Income Recognized
	Nine Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
	(In thousands)
Impaired loans without a valuation allowance:
Residential real estate	$	3,901	$	3,080	$	45	$	28
Commercial real estate	1,171		10,121		—		435
Commercial business	2,619		2,018		16		18
Construction	9,266		8,997		—		—

Total impaired loans without a valuation allowance	16,957		24,216		61		481
Impaired loans with a valuation allowance:
Residential real estate	$	—	$	1,791	$	—	$	40
Commercial real estate	24,439		22,386		426		490
Commercial business	2,098		2,772		48		76


Total impaired loans with a valuation allowance	26,537		26,949		474		606
Total impaired loans	$	43,494	$	51,165	$	535	$	1,087

Modifications to a loan are considered to be a troubled debt restructuring when both of the following conditions are met: 1) the borrower is experiencing financial difficulties and 2) the modification constitutes a concession that is not in line with market rates and/or terms. Modified terms are dependent upon the financial position and needs of the individual borrower. Troubled debt restructurings are classified as impaired loans.

If a performing loan is restructured into a TDR, it remains in performing status. If a nonperforming loan is restructured into a TDR, it continues to be carried in nonaccrual status. Nonaccrual classification may be removed if the borrower demonstrates compliance with the modified terms for a minimum of six months.



	Number of Loans		Pre-Modification				Post-Modification
(Dollars in thousands)	2022	2021	2022		2021		2022		2021
Nine Months Ended September 30,
Residential real estate	1	2	$	703	$	764	$	703	$	764
Commercial business	—	1	—		2,567		—		2,655
Commercial real estate	—	2	—		13,534		—		13,570
Total	1	5	$	703	$	16,865	$	703	$	16,989

Section 4013 of the CARES Act provides relief from certain requirements under GAAP and permits a financial institution to elect to suspend troubled debt restructuring accounting, in certain circumstances, beginning March 1, 2020 and ending on the earlier of January 1, 2022, or sixty days after the national emergency concerning COVID-19 terminates. All short term loan modifications made on a good faith basis in response to COVID-19 to borrowers who were current prior to any request for relief are not considered TDRs.