Financial Instruments with Off-Balance Sheet Credit Exposures

9 Months Ended

Sep. 30, 2024

Credit Loss [Abstract]

Financial Instruments with Off-Balance Sheet Credit Exposures

7.Financial Instruments with Off-Balance Sheet Credit Exposures

The Company is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to originate loans, unadvanced funds on loans and standby letters of credit. The instruments involve, to varying degrees, elements of credit risk in excess of the amount recognized in the consolidated balance sheets. The contract amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments.

The Company’s exposure to credit loss in the event of nonperformance by the other party to the financial instrument for loan commitments and standby letters of credit is represented by the contractual amounts of those instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments.

Commitments to originate loans are agreements to lend to a customer provided there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not

necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the borrower. Collateral held varies, but generally includes secured interests in mortgages.

Standby letters of credit are conditional commitments issued by the Company to guarantee performance by a customer to a third-party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

In the ordinary course of business, the Company may be subject to various legal proceedings. Management, after consultation with legal counsel, believes that the liabilities, if any, arising from such proceedings will not be material to the consolidated balance sheet or consolidated statements of income (loss).

Notional amounts of financial instruments with off-balance sheet credit risk are as follows as of September 30, 2024 and December 31, 2023:

	September 30, 2024		December 31, 2023
Unadvanced portions of loans	$	41,135	$	46,175
Commitments to originate loans		25,095		34,074
Standby letters of credit		125		125

The Company records an ACL for off-balance sheet credit exposures that are not unconditionally cancelable through a charge to the provision (release) for credit losses on the Company’s consolidated statements of income (loss). At September 30, 2024 and December 31, 2023 the ACL for off-balance sheet credit exposures totaled $291,000 and $391,000, respectively, and was included in other liabilities on the Company’s consolidated balance sheets. The release of credit losses for off-balance sheet credit exposures for the three and nine months ended September 30, 2024 was $(4,000) and $(100,000), respectively. The provision for credit losses for off-balance sheet credit exposures for the three and nine months ended September 30, 2023 was $90,000 and $105,000, respectively.