Loans

12 Months Ended

Dec. 31, 2022

The Bank’s lending activities are primarily conducted in and around Dover, New Hampshire and in the areas surrounding its branches. The Bank originates commercial real estate loans, multifamily 5+ dwelling unit loans, commercial and industrial loans, acquisition, development and land loans, one- to four-family residential loans, home equity loans and lines of credit and consumer loans. Most loans originated by the Bank are collateralized by real estate. The ability and willingness of real estate, commercial and construction loan borrowers to honor their repayment commitments is generally dependent on the health of the real estate sector in the borrowers’ geographic area and the general economy.

In response to the COVID-19 pandemic, the Small Business Administration (“SBA”) established the Paycheck Protection Program (“PPP”), which was designed to aid small- and medium-sized businesses through federally guaranteed SBA loans (“PPP loans”) distributed through banks. PPP loans are fully guaranteed as to principal and interest by the SBA. During the years ended December 31, 2022 and 2021, the Bank originated -0- and 134 PPP loans, respectively, with aggregate outstanding principal balances of $-0- and $13.1 million, respectively. As of December 31, 2022 and 2021, total PPP loan principal balances were $-0- and $5.5 million, respectively, and are included in commercial and industrial loans (C+I).

Loans consisted of the following at December 31:


	December 31,
	2022			2021
	(Dollars in thousands)
Commercial real estate (CRE)	$	80,506		$	72,057
Multifamily (MF)		8,185			8,998
Commercial and industrial (C+I)		24,059			26,851
Acquisition, development, and land (ADL)		18,490			21,365
1-4 family residential (RES)		251,466			234,199
Home equity loans and lines of credit (HELOC)		10,161			6,947
Consumer (CON)		7,189			4,574
Total loans		400,056			374,991
Net deferred loan costs		2,449			1,650
Allowance for loan losses		(3,581	)		(3,590	)
Net loans	$	398,924		$	373,051

Transactions in the Allowance for loan losses (“ALL”) for the years ended December 31, 2022 and 2021 by portfolio segment, are summarized as follows:


(Dollars in thousands)	CRE		MF			C+I			ADL			RES			HELOC			CON			Unallocated			Total
Balance, December 31, 2020	$	753	$	60		$	267		$	174		$	1,656		$	78		$	52		$	302		$	3,342
Provision for loan losses		80		20			(112	)		4			482			(15	)		20			(274	)		205
Charge-offs		—		—			—			—			—			—			—			—			—
Recoveries		—		—			39			—			1			—			3			—			43
Balance at December 31, 2021		833		80			194			178			2,139			63			75			28			3,590

Balance, December 31, 2021		833		80			194			178			2,139			63			75			28			3,590
Provision for loan losses		109		(26	)		(14	)		(40	)		(91	)		18			38			6			—
Charge-offs		—		—			—			—			—			—			(14	)		—			(14	)
Recoveries		—		—			4			—			—			—			1			—			5
Balance at December 31, 2022	$	942	$	54		$	184		$	138		$	2,048		$	81		$	100		$	34		$	3,581

As of December 31, 2022 and 2021, information about loans and the ALL by portfolio segment, are summarized below:


(Dollars in thousands)	CRE		MF		C+I		ADL		RES		HELOC		CON		Unallocated		Total
December 31, 2022 Loan Balances
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	273	$	—	$	5	$	—	$	278
Collectively evaluated for impairment		80,506		8,185		24,059		18,490		251,193		10,161		7,184		—		399,778
Total	$	80,506	$	8,185	$	24,059	$	18,490	$	251,466	$	10,161	$	7,189	$	—	$	400,056
ALL related to the loans
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		942		54		184		138		2,048		81		100		34		3,581
Total	$	942	$	54	$	184	$	138	$	2,048	$	81	$	100	$	34	$	3,581
December 31, 2021 Loan Balances
Individually evaluated for impairment	$	104	$	—	$	28	$	—	$	722	$	115	$	—	$	—	$	969
Collectively evaluated for impairment		71,953		8,998		26,823		21,365		233,477		6,832		4,574		—		374,022
Total	$	72,057	$	8,998	$	26,851	$	21,365	$	234,199	$	6,947	$	4,574	$	—	$	374,991
ALL related to the loans
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		833		80		194		178		2,139		63		75		28		3,590
Total	$	833	$	80	$	194	$	178	$	2,139	$	63	$	75	$	28	$	3,590

The following is an aged analysis of past due loans by portfolio segment as of December 31, 2022:


	30-59 Days		60-89 Days		90 + Days		Total Past Due		Current		Total Loans		Non- Accrual Loans
	(Dollars in thousands)
CRE	$	—	$	—	$	—	$	—	$	80,506	$	80,506	$	—
MF		—		—		—		—		8,185		8,185		—
C+I		—		—		—		—		24,059		24,059		—
ADL		—		—		—		—		18,490		18,490		—
RES		—		84		—		84		251,382		251,466		84
HELOC		5		—		—		5		10,156		10,161		—
CON		7		—		—		7		7,181		7,189		5
	$	12	$	84	$	—	$	96	$	399,960	$	400,056	$	89

The following is an aged analysis of past due loans by portfolio segment as of December 31, 2021:


	30-59 Days		60-89 Days		90 + Days		Total Past Due		Current		Total Loans		Non- Accrual Loans
	(Dollars in thousands)
CRE	$	—	$	—	$	—	$	—	$	72,057	$	72,057	$	—
MF		—		—		—		—		8,998		8,998		—
C+I		—		—		—		—		26,851		26,851		—
ADL		—		—		—		—		21,365		21,365		—
RES		—		487		235		722		233,477		234,199		722
HELOC		117		129		—		246		6,701		6,947		115
CON		6		—		—		6		4,568		4,574		—
	$	123	$	616	$	235	$	974	$	374,017	$	374,991	$	837

There were no loans collateralized by residential real estate property in the process of foreclosure at December 31, 2022 and 2021.

The following table provides information on impaired loans as of and for the years ended December 31, 2022 and 2021:


	As of December 31, 2022						At December 31, 2022
(Dollars in thousands)	Recorded Carrying Value		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
With no related allowance recorded:
CRE	$	—	$	—	$	—	$	—	$	—
MF		—		—		—		—		—
C+I		—		—		—		—		—
ADL		—		—		—		—		—
RES		273		273		—		446		32
HELOC		—		—		—		57		3
CON		5		5		—		2		—
Total impaired loans	$	278	$	278	$	—	$	505	$	35

	As of December 31, 2021						At December 31, 2021
With no related allowance recorded:
CRE	$	—	$	—	$	—	$	—	$	—
MF		—		—		—		—		—
C+I		—		—		—		203		12
ADL		—		—		—		—		—
RES		722		722		—		77		2
HELOC		115		115		—		10		—
CON		—		—		—		—		—
Total impaired loans	$	837	$	837	$	—	$	290	$	14

There were no loans modified and determined to be a TDR during the year ended December 31, 2022. During 2021, one residential mortgage loan was modified and determined to be a TDR as it did not meet the qualifications of Section 4013 of the CARES Act. At December 31, 2022 and 2021, this loan had a recorded investment of $189,000 and $195,000, respectively. The modification agreement defers delinquent interest and escrow payments to the end of the loan. The loan was returned to performing status during June 2022. The allowance for loan losses includes a specific reserve for this TDR of $-0- as of December 31, 2022 and 2021, which was determined through a calculation of the present value of estimated cash flows. There have been no defaults within twelve months of the modification. There are no commitments to extend additional credit to these borrowers.

Credit Quality Information

The Bank utilizes a ten-grade internal loan rating system for its commercial real estate, multifamily, commercial and industrial and acquisition, development and land loans. Residential real estate, home equity loans and line of credit and consumer loans are considered “pass” rated loans until they become delinquent. Once delinquent, loans can be rated an 8, 9 or 10 as applicable.

Loans rated 1 through 6: Loans in these categories are considered “pass” rated loans with low to average risk.

Loans rated 7: Loans in this category are considered “special mention.” These loans are starting to show signs of potential weakness and are being closely monitored by management.

Loans rated 8: Loans in this category are considered “substandard.” Generally, a loan is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. There is a distinct possibility that the Bank will sustain some loss if the weakness is not corrected.

Loans rated 9: Loans in this category are considered “doubtful.” Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.

Loans rated 10: Loans in this category are considered uncollectible (“loss”) and of such little value that their continuance as loans is not warranted and should be charged off.

On an annual basis, or more often if needed, the Bank formally reviews the ratings on all commercial and industrial, commercial real estate, acquisition, development and land loans and multifamily loans. On a periodic basis, the Bank engages an independent third party to review a significant portion of loans within these segments and to assess the credit risk management practices of its commercial lending department. Management uses the results of these reviews as part of its annual review process and overall credit risk administration.

On a quarterly basis, the Bank formally reviews the ratings on all residential real estate and home equity loans if they have become delinquent. Criteria used to determine ratings consist of loan-to-value ratios and days delinquent.

The following presents the internal risk rating of loans by portfolio segment as of December 31, 2022:


(Dollars in thousands)	Pass		Special Mention		Substandard		Total
CRE	$	77,820	$	2,686	$	—	$	80,506
MF		8,185		—		—		8,185
C+I		24,059		—		—		24,059
ADL		18,490		—		—		18,490
RES		251,382		—		84		251,466
HELOC		10,161		—		—		10,161
CON		7,184		—		5		7,189
Total	$	397,281	$	2,686	$	89	$	400,056

The following presents the internal risk rating of loans by portfolio segment as of December 31, 2021:


(Dollars in thousands)	Pass		Special Mention		Substandard		Total
CRE	$	69,252	$	2,701	$	104	$	72,057
MF		8,998		—		—		8,998
C+I		26,823		—		28		26,851
ADL		21,365		—		—		21,365
RES		233,477		—		722		234,199
HELOC		6,832		—		115		6,947
CON		4,574		—		—		4,574
Total	$	371,321	$	2,701	$	969	$	374,991

Certain directors and executive officers of the Bank and companies in which they have significant ownership interests were customers of the Bank during 2022 and 2021. For the years ended December 31, 2022 and 2021, activity in these loans was as follows:


	December 31,
(Dollars in thousands)	2022			2021
Loans outstanding – beginning of year	$	4,849		$	5,279
Principal payments		(576	)		(430	)
Advances		170			—
Loans outstanding – end of year	$	4,443		$	4,849