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 December 2019, a novel strain of coronavirus (“COVID-19”) was reported and in March 2020, the COVID-19 outbreak was declared a pandemic. On March 27, 2020, the Small Business Administration (“SBA”) established a loan program in response to the COVID-19 pandemic, the Paycheck Protection Program (“PPP”), which was added to the SBA’s 7(a) loan program by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) (such loans, “PPP loans”). The PPP, a $350 billion program, was designed to aid small- and medium-sized businesses through federally guaranteed SBA loans distributed through banks. The CARES Act provides that PPP loans are fully guaranteed as to principal and interest by the SBA. On December 27, 2020, the 2021 Consolidated Appropriations Act was signed, which extended relief provisions contained in the CARES act to the earlier of 60 days after the national emergency termination date or January 1, 2022. This legislation also included a $900 billion relief package and the extension of certain relief provisions from the March 2020 CARES Act that were set to expire at the end of 2020, including the extension of the eviction moratorium and $286 billion of additional PPP funds. The Consolidated Appropriations Act also continued to suspend the requirements under U.S. GAAP for loan modifications related to the COVID–19 pandemic that would otherwise be categorized as a troubled debt restructuring (“TDR”) and suspend any determination of a loan modified as a result of the effects of the COVID–19 pandemic as being a TDR, including impairment for accounting purposes. During the year ended December 31, 2021 and 2020, the Bank originated 134 and 286 PPP loans, respectively, with aggregate outstanding principal balances of $13.1 million and $33.0 million, respectively. As of December 31, 2021 and 2020, total PPP loan principal balances were $5.5 million and $21.2 million, respectively, and are included in commercial and industrial loans (C+I).

Transactions in the Allowance for loan losses (“ALL”) for the years ended December 31, 2021 and 2020 by portfolio segment, are summarized as follows:

(Dollars in thousands)	CRE			MF		C+I			ADL		RES		HELOC			CON			Unallocated			Total
Balance, December 31, 2019	$	781		$	23	$	350		$	145	$	1,503	$	52		$	18		$	3		$	2,875
Provision for loan losses		(28	)		37		(85	)		29		134		26			68			299			480
Charge-offs		—			—		—			—		—		—			(35	)		—			(35	)
Recoveries		—			—		2			—		19		—			1			—			22
Balance, December 31, 2020		753			60		267			174		1,656		78			52			302			3,342

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

As of December 31, 2021 and 2020, 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, 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
December 31, 2020 Loan Balances
Individually evaluated for impairment	$	117	$	—	$	822	$	—	$	62	$	—	$	—	$	—	$	1,001
Collectively evaluated for impairment		66,049		6,619		44,440		23,145		213,656		9,583		2,944		—		366,436
Total	$	66,166	$	6,619	$	45,262	$	23,145	$	213,718	$	9,583	$	2,944	$	—	$	367,437
ALL related to the loans
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively evaluated for impairment		753		60		267		174		1,656		78		52		302		3,342
Total	$	753	$	60	$	267	$	174	$	1,656	$	78	$	52	$	302	$	3,342

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

The following is an aged analysis of past due loans by portfolio segment as of December 31, 2020:

	30-59 Days		60-89 Days		90 + Days		Total Past Due		Current		Total Loans		Non- Accrual Loans
	(Dollars in thousands)
CRE	$	—	$	—	$	—	$	—	$	66,166	$	66,166	$	—
MF		—		—		—		—		6,619		6,619		—
C+I		—		—		822		822		44,440		45,262		822
ADL		—		—		—		—		23,145		23,145		—
RES		42		—		62		104		213,614		213,718		62
HELOC		143		—		—		143		9,440		9,583		—
CON		—		—		—		—		2,944		2,944		—
	$	185	$	—	$	884	$	1,069	$	366,368	$	367,437	$	884

There were no loans collateralized by residential real estate property in the process of foreclosure at December 31, 2021 and 2020.

The following table provides information on impaired loans as of and for the years ended December 31, 2021 and 2020:

(Dollars in thousands)	Recorded Carrying Value		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
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
December 31, 2020
With no related allowance recorded:
CRE	$	—	$	—	$	—	$	—	$	—
MF		—		—		—		—		—
C+I		822		938		—		909		—
ADL		—		—		—		—		—
RES		62		62		—		64		5
HELOC		—		—		—		—		—
CON		—		—		—		—		—
Total impaired loans	$	884	$	1,000	$	—	$	973	$	5

During 2021, one loan was determined to be a TDR as it did not meet the qualifications of Section 4013 of the CARES Act. At December 31, 2021, this loan had a balance of $195,000 which was determined through a calculation of the present value of estimated future cashflows. The modification agreement defers delinquent interest and escrow payments to the end of the loan. The allowance for loan losses includes a specific reserve for this TDR of $-0- as of December 31, 2021. There were no TDRs in 2020.

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, 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

The following presents the internal risk rating of loans by portfolio segment as of December 31, 2020:

(Dollars in thousands)	Pass		Special Mention		Substandard		Total
CRE	$	63,191	$	2,858	$	117	$	66,166
MF		6,619		—		—		6,619
C+I		41,021		4,083		158		45,262
ADL		23,145		—		—		23,145
RES		213,656		—		62		213,718
HELOC		9,583		—		—		9,583
CON		2,944		—		—		2,944
Total	$	360,159	$	6,941	$	337	$	367,437

In response to the COVID-19 pandemic, the Bank implemented a short-term loan modification program to provide temporary payment relief to certain of our borrowers who met the program’s qualifications. The program was offered to both retail and commercial borrowers. The majority of short-term loan modifications for retail loan borrowers consisted of deferred payments (which may include principal, interest and escrow), which were capitalized to the loan balance and recovered through the re-amortization of the monthly payment at the end of the deferral period. For commercial loan borrowers, the majority of short-term modifications consisted of allowing the borrower to make interest-only payments with the deferred principal to be due at maturity or repaid as the monthly payment is re-amortized at the next interest reset date as is applicable to the individual loan structure. Alternatively, commercial loan borrowers deferred their full monthly payment similar to the retail loan program outlined above. All loans modified under these programs were maintained on full accrual status during the deferral period. As of December 31, 2021, there were no loans with outstanding modifications for temporary payment relief.

Certain directors and executive officers of the Bank and companies in which they have significant ownership interests were customers of the Bank during 2021 and 2020. For the years ended December 31, 2021 and 2020, activity in these loans was as follows: