Loans and Allowance for Credit Losses

12 Months Ended

Dec. 31, 2024

Loans and Allowance for Credit Losses

Loans and Allowance for Credit Losses

3.    Loans and Allowance for credit losses

A summary of the Company’s loan portfolio is as follows:

	At December 31,
	2024		2023
Commercial real estate loans:
Construction	$	26,611	$	20,208
Non-residential		350,962		324,493
Multi-family		105,030		83,376
Residential real estate loans		86,651		77,259
Commercial and industrial loans		91,517		88,927
Consumer loans:
Indirect automobile		295,669		394,245
Home equity		11,656		11,990
Other consumer		6,830		8,095
Total gross loans		974,926		1,008,593
Dealer reserves		5,392		8,382
Allowance for credit losses		(8,539)		(8,124)
Total net loans	$	971,779	$	1,008,851

At December 31, 2024 and 2023, the unpaid principal balances of loans held for sale, included in the residential real estate category above, were $0 and $908, respectively.

On an annual basis, or more often if needed, the Company formally reviews the ratings on all commercial real estate, multifamily, construction and commercial loans. To assist in the review process, the Company engages an independent third-party to review a significant portion of loans within these segments. Consumer and residential loans are rated as performing or non-performing based on payment status in accordance with regulatory retail credit guidance. Management uses the results of these reviews as part of its annual review process. In addition, management utilizes delinquency reports, the watch list and other loan reports to monitor credit quality of other loan segments.

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 by classifying the loans as to credit risk. This analysis is performed on all loans at origination and is updated on a quarterly basis for loans risk rated Watch, Special Mention, Substandard, or Doubtful.

The Company uses the following definitions for risk ratings:

Watch – Loans classified as watch exhibit weaknesses that require more than usual monitoring. Issues may include deteriorating financial condition, payments made after due date but within 30 days, adverse industry conditions or management problems.

Special Mention – Loans classified as special mention exhibit signs of further deterioration but still generally make payments within 30 days. This is a transitional rating and loans should typically not be rated Special Mention for more than 12 months.

Substandard – Loans classified as substandard possess weaknesses that jeopardize the ultimate collection of the principal and interest outstanding. These loans exhibit continued financial losses, ongoing delinquency, overall poor financial condition, and/or insufficient collateral. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans classified as non-performing have all the weaknesses of substandard loans, and have deteriorated to the level that there is a high probability of substantial loss.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered Pass rated loans.

The following table presents the credit risk profile of the Company’s loan portfolio (excluding loans in process and deferred loan fees) based on rating category, as well as gross write-offs for the year ended December 31, 2024, and by fiscal year of origination as of December 31, 2024.

													Revolving
	Loans by Origination Year												Loans
	2024		2023		2022		2021		2020		Prior		Amortized Cost		Total
Commercial construction
Watch	$	6,509	$	17,261	$	2,841	$	-	$	-	$	-	$	-	$	26,611
Total commercial construction		6,509		17,261		2,841		-		-		-		-		26,611
Commercial non-residential
Pass	$	46,429	$	36,900	$	47,082	$	27,329	$	16,104	$	69,260	$	-	$	243,104
Watch		8,515		14,336		16,201		7,341		10,952		33,799		-		91,144
Special mention		-		-		3,009		873		322		5,745		-		9,949
Substandard		-		-		2,834		-		-		3,931		-		6,765
Total commercial non-residential		54,944		51,236		69,126		35,543		27,378		112,735		-		350,962
Current-period gross write-offs		-		-		-		-		-		291		-		291
Multifamily
Pass	$	-	$	1,398	$	18,410	$	28,939	$	2,034	$	5,296	$	-	$	56,077
Watch		5,673		10,235		11,027		11,863		-		10,155		-		48,953
Total multifamily		5,673		11,633		29,437		40,802		2,034		15,451		-		105,030
Residential
Performing	$	15,456	$	26,755	$	23,922	$	2,032	$	2,638	$	14,666	$	-	$	85,469
Non-performing		-		-		-		-		-		1,182		-		1,182
Total residential		15,456		26,755		23,922		2,032		2,638		15,848		-		86,651
Commercial and industrial
Pass	$	13,386	$	9,810	$	19,044	$	7,944	$	650	$	957	$	17,303	$	69,094
Watch		3,269		745		5,667		191		365		1,081		10,004		21,322
Special mention		-		-		506		191		98		6		-		801
Substandard		-		-		-		-		-		103		38		141
Doubtful		-		-		-		-		-		159		-		159
Total commercial and industrial		16,655		10,555		25,217		8,326		1,113		2,306		27,345		91,517
Current-period gross write-offs		-		40		-		7		-		561		-		608
Indirect automobile
Performing	$	54,048	$	72,083	$	104,879	$	42,286	$	15,440	$	6,343	$	-	$	295,079
Non-performing		46		78		182		187		62		35		-		590
Total indirect automobile		54,094		72,161		105,061		42,473		15,502		6,378		-		295,669
Current-period gross write-offs		171		812		1,533		665		256		189		-		3,626
Home equity
Performing	$	341	$	-	$	-	$	-	$	-	$	3,684	$	7,457	$	11,482
Non-performing		-		-		-		-		-		174		-		174
Total home equity		341		-		-		-		-		3,858		7,457		11,656
Other consumer
Performing	$	2,581	$	1,703	$	1,829	$	400	$	89	$	11	$	217	$	6,830
Total other consumer		2,581		1,703		1,829		400		89		11		217		6,830
Current-period gross write-offs		12		82		73		6		24		4		-		201
Total Loans
Pass/performing	$	132,241	$	148,649	$	215,166	$	108,930	$	36,955	$	100,217	$	24,977	$	767,135
Watch		23,966		42,577		35,736		19,395		11,317		45,035		10,004		188,030
Special mention		0		-		3,515		1,064		420		5,751		-		10,750
Substandard		-		-		2,834		-		0		4,034		38		6,906
Non-performing		46		78		182		187		62		1,391		-		1,946
Total Loans	$	156,253	$	191,304	$	257,433	$	129,576	$	48,754	$	156,587	$	35,019	$	974,926
Total Current-period gross write-offs	$	183	$	934	$	1,606	$	678	$	280	$	1,045	$	-	$	4,726

The following table presents the credit risk profile of the Company’s loan portfolio (excluding loans in process and deferred loan fees) based on rating category, as well as gross write-offs for the year ended December 31, 2023, and by fiscal year of origination as of December 31, 2023.

													Revolving
	Loans by Origination Year												Loans
	2023		2022		2021		2020		2019		Prior		Amortized Cost		Total
Commercial construction
Pass	$	-	$	8,227	$	-	$	-	$	-	$	-	$	-	$	8,227
Watch		9,328		2,653		-		-		-		-		-		11,981
Total commercial construction		9,328		10,880		-		-		-		-		-		20,208
Commercial non-residential
Pass	$	34,508	$	43,534	$	26,600	$	16,673	$	39,943	$	44,412	$	-	$	205,670
Watch		16,575		19,235		14,854		12,747		7,573		38,004		-		108,988
Special mention		-		-		-		-		5,884		963		-		6,847
Substandard		-		-		-		-		465		2,523		-		2,988
Total commercial non-residential		51,083		62,769		41,454		29,420		53,865		85,902		-		324,493
Multifamily
Pass	$	807	$	18,765	$	30,374	$	2,100	$	1,540	$	4,348	$	-	$	57,934
Watch		1,000		6,754		6,925		-		1,265		9,498		-		25,442
Total multifamily		1,807		25,519		37,299		2,100		2,805		13,846		-		83,376
Residential
Performing	$	28,670	$	25,260	$	2,150	$	2,732	$	2,626	$	14,197	$	-	$	75,635
Non-performing		-		257		-		-		-		1,367		-		1,624
Total residential		28,670		25,517		2,150		2,732		2,626		15,564		-		77,259
Current-period gross write-offs		-		-		-		-		-		-		-		-
Commercial and industrial
Pass	$	12,637	$	26,070	$	10,804	$	1,474	$	962	$	1,254	$	11,662	$	64,863
Watch		2,082		3,227		321		620		482		1,603		14,204		22,539
Special mention		224		-		301		-		33		-		-		558
Substandard		-		-		-		-		83		841		43		967
Total commercial and industrial		14,943		29,297		11,426		2,094		1,560		3,698		25,909		88,927
Current-period gross write-offs		-		-		710		-		-		126		-		836
Indirect automobile
Performing	$	101,230	$	160,439	$	72,941	$	34,196	$	19,035	$	5,773	$	-	$	393,614
Non-performing		31		259		196		69		63		13		-		631
Total indirect automobile		101,261		160,698		73,137		34,265		19,098		5,786		-		394,245
Current-period gross write-offs		198		1,492		1,034		418		309		126		-		3,577
Home equity
Performing	$	-	$	-	$	-	$	-	$	34	$	4,064	$	7,793	$	11,891
Non-performing		-		-		-		-		-		99		-		99
Total home equity		-		-		-		-		34		4,163		7,793		11,990
Other consumer
Performing	$	2,928	$	3,477	$	856	$	411	$	138	$	22	$	238	$	8,070
Non-performing		-		-		-		24		-		-		1		25
Total other consumer		2,928		3,477		856		435		138		22		239		8,095
Current-period gross write-offs		8		30		10		11		-		3		-		62
Total Loans
Pass/performing	$	180,780	$	285,772	$	143,725	$	57,586	$	64,278	$	74,070	$	19,693	$	825,904
Watch		28,985		31,869		22,100		13,367		9,320		49,105		14,204		168,950
Special mention		224		-		301		0		5,917		963		-		7,405
Substandard		-		-		-		-		548		3,364		43		3,955
Non-performing		31		516		196		93		63		1,479		1		2,379
Total Loans	$	210,020	$	318,157	$	166,322	$	71,046	$	80,126	$	128,981	$	33,941	$	1,008,593
Total Current-period gross write-offs	$	206	$	1,522	$	1,754	$	429	$	309	$	255	$	-	$	4,475

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 past due status of all classes of loans is determined based on contractual due dates for loan payments.

The following tables present the classes of the loan portfolio summarized by the aging categories of performing loans and non-accrual loans:

	December 31, 2024
							Greater Than
			30-59 Days		60-89 Days		90 Days Past		Total Loans
	Current		Past Due		Past Due		Due		Receivable		Non-accrual
Commercial real estate:
Construction	$	26,611	$	—	$	—	$	—	$	26,611	$	—
Non-residential		348,220		873		—		1,869		350,962		1,869
Multifamily		105,008		22		—		—		105,030		—
Residential real estate		85,961		604		—		86		86,651		1,182
Commercial and industrial		91,090		57		159		211		91,517		319
Consumer:
Indirect automobile		283,458		10,062		1,593		556		295,669		590
Home equity		11,173		153		156		174		11,656		174
Other consumer		6,689		121		20		—		6,830		—
Total	$	958,210	$	11,892	$	1,928	$	2,896	$	974,926	$	4,134

	December 31, 2023
							Greater Than
			30-59 Days		60-89 Days		90 Days Past		Total Loans
	Current		Past Due		Past Due		Due		Receivable		Non-accrual
Commercial real estate:
Construction	$	20,208	$	—	$	—	$	—	$	20,208	$	—
Non-residential		319,467		1,276		2,129		1,621		324,493		1,621
Multifamily		83,376		—		—		—		83,376		—
Residential real estate		75,998		888		37		336		77,259		1,624
Commercial and industrial		88,646		17		83		181		88,927		181
Consumer:
Indirect automobile		382,042		10,155		1,478		570		394,245		631
Home equity		11,843		—		48		99		11,990		99
Other consumer		7,844		202		24		25		8,095		25
Total	$	989,424	$	12,538	$	3,799	$	2,832	$	1,008,593	$	4,181

All of our non-accrual loans are individually analyzed. The Company had one individually analyzed home equity loan of $98 that was accruing interest at December 31, 2024.

The following table presents the Company’s amortized cost basis of non-accrual loans for which there is no related ACL:

	December 31, 2024		December 31, 2023
Commercial real estate:
Non-residential	$	1,869	$	1,152
Residential real estate		1,182		1,624
Commercial and industrial		299		150
Consumer:
Indirect automobile		131		160
Home equity		174		99
Other consumer		—		24
Total	$	3,655	$	3,209

The following table presents the Company’s amortized cost basis of only those non-accrual loans with a related ACL:

	December 31, 2024				December 31, 2023
	Non-accrual loans		Related ACL		Non-accrual loans		Related ACL
Commercial real estate:
Non-residential	$	—	$	—	$	469	$	16
Commercial and industrial		20		20		31		31
Consumer:
Indirect automobile		459		139		471		166
Other consumer		—		—		1		1
Total	$	479	$	159	$	972	$	214

For the year ended December 31, 2024, $147 in accrued interest was reversed for non-accrual loans. Total accrued interest receivable associated with loans totaled $3,937 and $4,014, at December 31, 2024 and December 31, 2023, respectively, and was reported in accrued interest receivable on the consolidated statements of financial condition.

The Company has transferred a portion of its originated commercial real estate loans to participating lenders. The amounts transferred have been accounted for as sales and are therefore not included in the Company’s accompanying statements of financial condition. The Company and participating lenders share ratably in any gains or losses that may result from a borrower’s lack of compliance with contractual terms of the loan. The Company continues to service the loans on behalf of the participating lenders and, as such, collects cash payments from the borrowers, remits payments to participating lenders and disburses required escrow funds to relevant parties. At December 31, 2024 and 2023, the Company was servicing loans for participants aggregating $54,390 and $44,418, respectively.

The Company services certain loans that it has sold to third parties. The aggregate balances of loans serviced for others were $266,547 and $282,269 as of December 31, 2024 and 2023, respectively. Included in these loans serviced for others are loans serviced for the Federal Home Loan Mortgage Corporation with a recourse provision whereby the Company is obligated to bear all costs when a default, including foreclosure, occurs. At December 31, 2024 and 2023, the maximum contingent liability associated with loans sold with recourse was $805 and $1,873, respectively, which is not recorded in the consolidated financial statements. Losses are borne in priority order by the borrower, private mortgage insurance and the Company. The Company has never repurchased any loans or incurred any losses under these recourse provisions.

The balance of capitalized servicing rights, included in other assets at December 31, 2024 and 2023, were $1,592 and $1,977, respectively. Fair value exceeds carrying value. No impairment charges related to servicing rights were recognized during the years ended December 31, 2024 or 2023.

Residential mortgage and consumer loans secured by residential real estate properties for which formal foreclosure proceedings are in process totaled $531 and $152 at December 31, 2024 and 2023, respectively.

In the normal course of business, the Company grants loans to officers, directors and other related parties. Balances and activity of such loans during the years presented were not material.

Activity in the Company’s ACL for loans for the year ended December 31, 2024 is summarized in the table below.

	Commercial		Residential		Commercial
	Real Estate		Real Estate		and Industrial		Indirect		Consumer		Totals
	Year ended December 31, 2024
Allowance for credit losses:
Beginning balance	$	2,716	$	346	$	606	$	4,348	$	108	$	8,124
Provision for credit losses		563		229		684		1,178		159		2,813
Loans charged-off		(291)		—		(608)		(3,626)		(201)		(4,726)
Recoveries		—		—		2		2,233		93		2,328
Ending balance	$	2,988	$	575	$	684	$	4,133	$	159	$	8,539
Ending balance:
Loans individually analyzed	$	—	$	—	$	20	$	139	$	—	$	159
Loans collectively analyzed	$	2,988	$	575	$	664	$	3,994	$	159	$	8,380
Loan receivables:
Ending balance	$	482,603	$	86,651	$	91,517	$	295,669	$	18,486	$	974,926
Ending balance:
Loans individually analyzed	$	1,868	$	1,183	$	319	$	590	$	272	$	4,232
Loans collectively analyzed	$	480,735	$	85,468	$	91,198	$	295,079	$	18,214	$	970,694

Activity in the Company’s allowance for loan losses for the year ended December 31, 2023 is summarized in the table below.

	Commercial		Residential		Commercial
	Real Estate		Real Estate		and Industrial		Indirect		Consumer		Totals
	Year ended December 31, 2023
Allowance for credit losses:
Beginning balance	$	3,031	$	103	$	881	$	3,868	$	60	$	7,943
Adoption of ASC 326		(860)		54		(383)		1,710		59		580
Provision for (reversal of) credit losses		545		137		833		165		(14)		1,666
Loans charged-off		—		—		(836)		(3,577)		(62)		(4,475)
Recoveries		—		52		111		2,182		65		2,410
Ending balance	$	2,716	$	346	$	606	$	4,348	$	108	$	8,124
Ending balance:
Loans individually analyzed	$	16	$	—	$	32	$	166	$	2	$	216
Loans collectively analyzed	$	2,700	$	346	$	574	$	4,182	$	106	$	7,908
Loan receivables:
Ending balance	$	428,077	$	77,259	$	88,927	$	394,245	$	20,085	$	1,008,593
Ending balance:
Loans individually analyzed	$	1,621	$	1,624	$	181	$	631	$	222	$	4,279
Loans collectively analyzed	$	426,456	$	75,635	$	88,746	$	393,614	$	19,863	$	1,004,314

The Company’s allowance for credit losses for loans totaled $8,539 and $8,124 as of December 31, 2024 and December 31, 2023, respectively. The $415 increase in our allowance for credit losses for loans was primarily driven by an increase in our collectively evaluated loans, partially offset by a decrease in the allowance for credit losses on individually analyzed loans.

Activity in the Company’s ACL for unfunded commitments for the years ended December 31, 2024 and 2023 is summarized in the tables below and included in accrued expenses and other liabilities. The Adoption of the CECL Standard row presents adjustments recorded on January 1, 2023 through retained earnings.

	Commercial				Commercial
	Real Estate		Residential		and Industrial		Indirect		Consumer		Totals
	Year ended December 31, 2024
Allowance for credit losses:
Beginning balance	$	172	$	—	$	72	$	—	$	13	$	257
(Reversal of) provision for credit losses		(53)		1		32		—		7		(13)
Ending balance	$	119	$	1	$	104	$	—	$	20	$	244

	Commercial				Commercial
	Real Estate		Residential		and Industrial		Indirect		Consumer		Totals
	Year ended December 31, 2023
Allowance for credit losses:
Beginning balance	$	—	$	—	$	—	$	—	$	—	$	—
Adoption of CECL standard		149		—		65		—		7		221
Provision for credit losses		23		—		7		—		6		36
Ending balance	$	172	$	—	$	72	$	—	$	13	$	257

The following table summarizes the provision for credit losses for the years ended December 31, 2024 and 2023:

	Year Ended December 31,
	2024		2023
Provision for credit losses - loans	$	2,813	$	1,666
(Reversal of) provision for credit losses - unfunded commitments		(13)		36
Provision for credit losses	$	2,800	$	1,702