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Loans Receivable

3 Months Ended

Mar. 31, 2024

Note 4 – Loans Receivable

Loans receivable, net at March 31, 2024 and December 31, 2023 were comprised of the following:


	March 31, 2024			December 31, 2023
	(In thousands)
Commercial real estate	$	1,162,741		$	1,142,864
Commercial and industrial		45,930			50,961
Construction		321,009			310,187
Residential first-lien mortgage		36,565			38,040
Home equity/consumer		7,311			8,081

Total loans		1,573,556			1,550,133
Deferred fees and costs		(2,325	)		(1,798	)

Loans, net	$	1,571,231		$	1,548,335

The Company did not purchase any loans during the three months ended March 31, 2024, or 2023.

Upon CECL, the Company uses the discounted cash flow methodology in determining the appropriate quantitative adjustments, which projects future losses, based on historical and peer loss data, as part of the allowance for credit losses (“ACL”) reserve. Qualitative adjustments include and consider changes in national, regional, and local economic and business conditions, an assessment of the lending environment, including underwriting standards, and other factors affecting credit quality. There were no significant changes to the Company’s ACL methodology for the quarter ended March 31, 2024.

The following table presents the components of the allowance for credit losses:


	March 31, 2024			December 31, 2023
	(In thousands)
Allowance for credit losses - loans	$	(18,618	)	$	(18,492	)
Allowance for credit losses - off balance sheet		(473	)		(589	)

	$	(19,091	)	$	(19,081	)

The following table presents nonaccrual loans by segment of the loan portfolio as of March 31, 2024 and December 31, 2023:


	March 31, 2024				December 31, 2023
	With a Related Allowance		Without a Related Allowance		With a Related Allowance		Without a Related Allowance
			(In thousands)
Commercial real estate	$	110	$	1,235	$	—	$	4,485
Commercial and industrial		40	$	596		—		2,116
Construction		—		—		—		—
Residential first-lien mortgage		—		134		—		107

Total nonaccrual loans	$	150	$	1,965	$	—	$	6,708

The calculation of the allowance for credit losses does not include any accrued interest receivable. The Company’s policy is to write off any interest not collected after 90 days. During the three-month period ending March 31, 2024, the Company wrote off $310 thousand in accrued interest receivable for loans, compared to $130

thousand for the three-month period ending March 31, 2023. Accrued interest receivable related to loans, at March 31, 2024, and March 31, 2023, was

$5.6 million and $4.3 million, respectively. The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loan receivables by the length of time a recorded payment is past due. The following table presents the segments of the loan portfolio, summarized by the past due status as of March 31, 2024:


	30-59 Days Past Due		60-89 Days Past Due		>90 Days Past Due		Total Past Due		Current		Total Loans Receivable		Loans Receivable >90 Days and Accruing
							(In thousands)
Commercial real estate	$	356	$	841	$	1,345	$	2,542	$	1,160,199	$	1,162,741	$	—
Commercial and industrial		232		274		636		1,142		44,788		45,930		—
Construction		—		—		—		—		321,009		321,009		—
Residential first-lien mortgage		27		—		134		161		36,404		36,565		—
Home equity/consumer		—		—		—		—		7,311		7,311		—

Total	$	615	$	1,115	$	2,115	$	3,845	$	1,569,711	$	1,573,556	$	—

The following table presents the segments of the loan portfolio summarized by the past due status as of December 31, 2023:


	30-59 Days Past Due		60-89 Days Past Due		>90 Days Past Due		Total Past Due		Current		Total Loans Receivable		Loans Receivable >90 Days and Accruing
							(In thousands)
Commercial real estate	$	159	$	—	$	4,485	$	4,644	$	1,138,220	$	1,142,864	$	—
Commercial and industrial		303		—		2,116		2,419		48,542		50,961		—
Construction		—		—		—		—		310,187		310,187		—
Residential first-lien mortgage		—		—		107		107		37,933		38,040		—
Home equity/consumer		29		—		—		29		8,052		8,081		—

Total	$	491	$	—	$	6,708	$	7,199	$	1,542,934	$	1,550,133	$	—

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 and current economic trends, among other factors. The Company evaluates risk ratings on an ongoing basis and assigns one of the following ratings: pass, special mention, substandard and doubtful. The Company engages a third party to review its assessment on a semiannual basis. The Company classifies residential and consumer loans as either performing or nonperforming based on payment status.

The following table summarizes total loans by year of origination, internally assigned credit grades and risk characteristics as of March 31, 2024.


	2024		2023		2022		2021		2020		Prior			Revolving Loans		Total
	(Dollars in thousands)
Commercial real estate
Pass	$	25,851	$	134,137	$	244,778	$	116,312	$	61,828	$	574,323		$	5,512	$	1,162,741
Special mention		—		—		—		—		—		—			—		—
Substandard		—		—		—		—		—		—			—		—

Total commercial real estate		25,851		134,137		244,778		116,312		61,828		574,323			5,512		1,162,741
Current period gross charge-offs												(237	)				(237	)
Commercial and industrial
Pass		653		563		1,615		11,702		148		12,158			12,230		39,069
Special mention		—		—		—		—		—		4,508			—		4,508
Substandard		—		—		—		—		500		1,853			—		2,353

Total commercial and industrial		653		563		1,615		11,702		648		18,519			12,230		45,930
Current period gross charge-offs												(46	)				(46	)
Construction
Pass		6,050		5,832		17,809		83,849		11,371		7,391			188,707		321,009
Special mention		—		—		—		—		—		—			—		—
Substandard		—		—		—		—		—		—			—		—

Total construction		6,050		5,832		17,809		83,849		11,371		7,391			188,707		321,009
Residential first-lien mortgage
Performing		—		—		966		3,805		2,816		28,846			—		36,433
Nonperforming		—		—		—		—		—		132			—		132

Total residential first-lien mortgage		—		—		966		3,805		2,816		28,978			—		36,565
Home equity/consumer
Performing		223		546		1,371		298		3		1,893			2,949		7,283
Nonperforming		—		—		28		—		—		—			—		28

Total home equity/consumer		223		546		1,399		298		3		1,893			2,949		7,311
Total
Pass		32,777		141,078		266,539		215,966		76,166		624,611			209,398		1,566,535
Special mention		—		—		—		—		—		4,508			—		4,508
Substandard		—		—		28		—		500		1,985			—		2,513

Total loans	$	32,777	$	141,078	$	266,567	$	215,966	$	76,666	$	631,104		$	209,398	$	1,573,556

F-14

The following table summarizes total loans by year of origination, internally assigned credit grades and risk characteristics as of December 31, 2023.


	2023		2022		2021		2020		2019		Prior		Revolving Loans		Total
	(Dollars in thousands)
Commercial real estate
Pass	$	132,834	$	233,436	$	116,836	$	53,574	$	175,991	$	417,417	$	5,551	$	1,135,639
Special mention		—		—		—		—		—		2,740		—		2,740
Substandard		—		—		—		—		—		4,485		—		4,485

Total commercial real estate		132,834		233,436		116,836		53,574		175,991		424,642		5,551		1,142,864

Current period gross charge-offs												1,718				1,718
Commercial and industrial
Pass		2,098		2,304		11,925		1,962		1,133		13,954		15,045		48,421
Special mention		—		—		—		—		—		500		—		500
Substandard		—		—		—		—		—		2,040		—		2,040

Total commercial and industrial		2,098		2,304		11,925		1,962		1,133		16,494		15,045		50,961

Current period gross charge-offs												55				55
Construction
Pass		5,832		18,379		91,774		19,216		—		8,484		166,502		310,187
Special mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—

Total construction		5,832		18,379		91,774		19,216		—		8,484		166,502		310,187

Current period gross charge-offs												148				148
Residential first-lien mortgage
Performing		—		979		4,792		2,839		1,545		27,778		—		37,933
Non performing		—		—		—		—		—		107		—		107

Total residential first-lien mortgage		—		979		4,792		2,839		1,545		27,885		—		38,040

Current period gross charge-offs												2				2
Home equity/consumer
Performing		1,153		1,016		1,172		—		—		1,606		3,134		8,081
Nonperforming		—		—		—		—		—		—		—		—

Total home equity/consumer		1,153		1,016		1,172		—		—		1,606		3,134		8,081

Total
Pass/performing		141,917		256,114		226,499		77,591		178,669		469,239		190,232		1,540,261
Special mention		—		—		—		—		—		3,240		—		3,240
Substandard /non performing		—		—		—		—		—		6,632		—		6,632

Total loans	$	141,917	$	256,114	$	226,499	$	77,591	$	178,669	$	479,111	$	190,232	$	1,550,133

The following table presents the allowance for credit losses on loans receivable at and for the three months ended March 31, 2024:


	Commercial real estate			Commercial and industrial			Construction			Residential first-lien mortgage			Home equity/ consumer			Total
							(In thousands)
Allowance for credit losses:
Beginning balance	$	16,047		$	488		$	1,145		$	725		$	87		$	18,492
Provision 1		631			(31	)		(124	)		(153	)		(21	)		302
Charge-offs		(237	)		(46	)		—			—			—			(283	)
Recoveries		5			102			—			—			—			107

Total	$	16,446		$	513		$	1,021		$	572		$	66		$	18,618

1	The provision for credit losses on the Consolidated Statement of Income is $186,000 comprising of a $302,000 thousand increase to the ACL for loans and a $116,000 reduction to the reserve for unfunded liabilities.

The following table presents the allowance for credit losses on loans receivable at and for the three months ended March 31, 2023:


	Commercial real estate			Commercial and industrial			Construction			Residential first-lien mortgage			Home equity/ consumer		PPP		Unallocated			Total
	(In thousands)
Allowance for credit losses:
Beginning balance	$	8,654		$	271		$	6,289		$	236		$	45	$	—	$	966		$	16,461
CECL adoption		1,384			(73	)		(1,269	)		428			195		—		(966	)		(301	)
Provision 1		(4	)		16			329			(10	)		13		—		—			344
Charge-offs		—			—			—			—			—		—		—			—
Recoveries		3			—			—			—			—		—		—			3

Total	$	10,037		$	214		$	5,349		$	654		$	253	$	—	$	—		$	16,507

1	The provision for credit losses on the Consolidated Statement of Income is $265,000 comprising a $344,000 increase to the allowance for credit losses on loans and a $79,000 reduction to the reserve for unfunded liabilities.

As of March 31, 2024, the Company had six loans totaling $2.1 million that were individually analyzed for potential credit loss and all the loans have real estate as credit support. Compared to December 31, 2023, the Company had nine loans totaling $6.7 million that were individually analyzed for potential credit loss.

Occasionally, the Company will modify the contractual terms of loans to a borrower experiencing financial difficulties as a way to mitigate loss, proactively work with borrowers in financial difficulty, or to comply with regulations regarding the treatment of certain bankruptcy filing and discharge situations. Typically, such concessions may consist of a reduction in interest rate to a below market rate, taking into account the credit quality of the note, extension of additional credit base on receipt of adequate collateral, or a deferment or reduction of payments (principal or interest) which materially alters the Company’s position or significantly extends the note’s maturity date, such that the present value of cash flows to be received is materially less than those contractually established at the loan’s origination. When principal forgiveness is provided, the amount forgiven is charged off against the allowance for credit losses on loans.