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Allowance for Credit Losses on Loans and Off-Balance Sheet Credit Exposures
 12 Months Ended
Dec. 31, 2023
Credit Loss [Abstract]  
Allowance for Credit Losses on Loans and Off-Balance Sheet Credit Exposures Allowance for Credit Losses on Loans and Off-Balance Sheet Credit Exposures
Results for reporting periods beginning after January 1, 2023 are presented under CECL while prior period amounts continue to be reported under the incurred loss model in accordance with previously applicable GAAP as described in Note 1.
Changes in the ACL on loans, by class of loans, for the year ended December 31, 2023 were as follows:
December 31, 2023Balance, December 31, 2022Impact of Adoption of ASU No. 2016-13Charge-OffsRecoveriesCredit Loss Expense (Benefit)Balance, December 31, 2023
(Dollars in thousands)
Non-revolving residential real estate$2,294 $(270)$— $1 $336 $2,361 
Revolving residential real estate123 25 — — $11 159 
Residential real estate2,417 (245)— 1 347 2,520 
Commercial construction real estate611 982 — — (558)1,035 
Residential construction real estate421 (290)— — 32 163 
Construction real estate1,032 692 — — (526)1,198 
Non-residential commercial real estate2,931 (757)— — 8 2,182 
Multi-family residential real estate1,004 (780)— — 20 244 
Commercial real estate3,935 (1,537)— — 28 2,426 
Commercial301 191 — — (140)352 
Consumer10 (5)(8)3 5 5 
Municipal95 (42)— — 12 65 
Unallocated549 (549)— — — — 
Total$8,339 $(1,495)$(8)$4 $(274)$6,566 

Changes in the ACL on loans, by class of loans under the incurred loss methodology, for the year ended December 31, 2022 were as follows:
December 31, 2022Balance, December 31, 2021Charge-OffsRecoveriesCredit Loss Expense (Benefit)Balance, December 31, 2022
(Dollars in thousands)
Residential real estate$2,068 $— $— $349 $2,417 
Construction real estate837 — — 195 1,032 
Commercial real estate4,122 — — (187)3,935 
Commercial275 (1)2 25 301 
Consumer11 (3)5 (3)10 
Municipal86 — — 9 95 
Unallocated937 — — (388)549 
Total$8,336 $(4)$7 $— $8,339 
The Company's ACL on off-balance sheet credit exposures is recognized as a liability within Accrued interest and other liabilities on the consolidated balance sheet, with adjustments to the ACL recognized in Credit loss expense in the consolidated statement of income. In accordance with previously applicable GAAP, there was no ACL on off-balance sheet credit exposures required during the year ended December 31, 2022. The Company's activity in the ACL on off-balance sheet credit exposures for the year ended December 31, 2023 was as follows:
2023
ACL on Off-Balance Sheet Credit Exposures(Dollars in thousands)
Balance, December 31, 2022
$— 
Impact of adoption of ASU No. 2016-131,458 
Credit loss benefit(225)
Balance, December 31, 2023$1,233 

Risk and collateral ratings are assigned to loans and are subject to ongoing monitoring by lending and credit personnel, with such ratings updated annually or more frequently if warranted. The following is an overview of the Company's loan rating system:
1-3 Rating - Pass
Risk-rating grades "1" through "3" comprise those loans ranging from those with lower than average credit risk, defined as borrowers with high liquidity, excellent financial condition, strong management, favorable industry trends or loans secured by highly liquid assets, through those with marginal credit risk, defined as borrowers that, while creditworthy, exhibit some characteristics requiring special attention by the account officer.
4-4.5 Rating - Satisfactory/Monitor
Borrowers exhibit potential credit weaknesses or downward trends warranting management's attention. While potentially weak, these borrowers are currently marginally acceptable; no loss of principal or interest is envisioned. When warranted, these credits may be monitored on the watch list.
5-7 Rating - Substandard
Borrowers exhibit well defined weaknesses that jeopardize the orderly liquidation of debt. The loan may be inadequately protected by the net worth and paying capacity of the obligor and/or the underlying collateral is inadequate.
The following table summarizes the Company's loans by year of origination and by loan ratings applied by management to the Company's loans by class as of December 31, 2023:
20232022202120202019PriorRevolvingTotal
Residential Real Estate(Dollars in thousands)
Pass$84,211 $112,215 $83,137 $29,704 $8,991 $53,021 $— $371,279 
Satisfactory/Monitor4,362 7,038 5,671 2,280 386 5,873 — 25,610 
Substandard— — — 14 — 506 — 520 
Non-revolving residential real estate88,573 119,253 88,808 31,998 9,377 59,400 — 397,409 
Pass— — — — — — 17,133 17,133 
Satisfactory/Monitor— — — — — — 1,724 1,724 
Substandard— — — — — — 45 45 
Revolving residential real estate— — — — — — 18,902 18,902 
Construction Real Estate
Pass3,736 5,767 2,736 616 437 873 — 14,165 
Satisfactory/Monitor10,312 3,673 8,352 355 — 116 — 22,808 
Substandard— — — — — — — — 
Commercial construction real estate14,048 9,440 11,088 971 437 989 — 36,973 
Pass24,496 17,904 498 — — 123 — 43,021 
Satisfactory/Monitor3,978 2,114 568 1,981 — — — 8,641 
Substandard— — — — — — — — 
Residential construction real estate28,474 20,018 1,066 1,981 — 123 — 51,662 
Commercial Real Estate
Pass5,977 44,428 34,562 18,327 23,650 57,197 16,629 200,770 
Satisfactory/Monitor17,908 24,563 13,819 5,552 6,172 23,521 3,486 95,021 
Substandard— — — 1,773 — 516 68 2,357 
Non-residential commercial real estate23,885 68,991 48,381 25,652 29,822 81,234 20,183 298,148 
Pass250 5,364 10,208 2,061 8,226 34,993 — 61,102 
Satisfactory/Monitor841 12,485 11,863 5,664 9,933 2,126 — 42,912 
Substandard— — — — — 1,330 — 1,330 
Multi-family residential real estate1,091 17,849 22,071 7,725 18,159 38,449 — 105,344 
Pass1,958 6,394 2,125 671 2,849 7,755 4,992 26,744 
Satisfactory/Monitor1,914 1,243 2,350 467 132 6,717 648 13,471 
Substandard— — — — — 4 229 233 
Commercial3,872 7,637 4,475 1,138 2,981 14,476 5,869 40,448 
Pass1,566 342 131 98 229 175 28 2,569 
Satisfactory/Monitor20 — — — — — — 20 
Substandard— — — — — — — — 
Consumer1,586 342 131 98 229 175 28 2,589 
Pass66,396 2,942 986 1,931 130 4,410 — 76,795 
Satisfactory/Monitor— — — — — — — — 
Substandard— — — — — — — — 
Municipal66,396 2,942 986 1,931 130 4,410 — 76,795 
Total Loans$227,925 $246,472 $177,006 $71,494 $61,135 $199,256 $44,982 $1,028,270 

Gross charge-offs for the year ended December 31, 2023 consisted of two consumer loans totaling $8 thousand that were originated in 2022.
The following table summarizes the loan ratings applied by management to the Company's loans by class, under the incurred loss methodology, as of December 31, 2022:
December 31, 2022Residential Real EstateConstruction Real EstateCommercial Real EstateCommercialConsumerMunicipalTotal
(Dollars in thousands)
Pass$328,885 $47,356 $258,175 $36,338 $2,197 $87,980 $760,931 
Satisfactory/Monitor21,429 49,206 111,077 4,368 7 — 186,087 
Substandard2,119 58 8,695 267 — — 11,139 
Total$352,433 $96,620 $377,947 $40,973 $2,204 $87,980 $958,157 

A summary of current and past due loans as of December 31, 2023 follows:
December 31, 202330-59 Days60-89 Days90 Days and OverTotal Past DueCurrentTotal
(Dollars in thousands)
Residential real estate
Non-revolving residential real estate$2,015 $312 $162 $2,489 $394,920 $397,409 
Revolving residential real estate— — 17 17 18,885 18,902 
Construction real estate
Commercial construction real estate17 — — 17 36,956 36,973 
Residential construction real estate— — — — 51,662 51,662 
Commercial real estate
Non-residential commercial real estate197 — — 197 297,951 298,148 
Multi-family residential real estate1,058 — — 1,058 104,286 105,344 
Commercial4 — — 4 40,444 40,448 
Consumer14 — — 14 2,575 2,589 
Municipal— — — — 76,795 76,795 
Total$3,305 $312 $179 $3,796 $1,024,474 $1,028,270 

A summary of current and past due loans as of December 31, 2022, under the incurred loss methodology, follows:
December 31, 202230-59 Days60-89 Days90 Days and OverTotal Past DueCurrentTotal
(Dollars in thousands)
Residential real estate$1,724 $79 $289 $2,092 $350,341 $352,433 
Construction real estate535 — — 535 96,085 96,620 
Commercial real estate515 2,087 34 2,636 375,311 377,947 
Commercial7 160 — 167 40,806 40,973 
Consumer7 — — 7 2,197 2,204 
Municipal— — — — 87,980 87,980 
Total$2,788 $2,326 $323 $5,437 $952,720 $958,157 
A summary of nonaccrual loans as of December 31, 2023 follows:
December 31, 2023NonaccrualNonaccrual With No Allowance for Credit Losses90 Days and Over and Accruing
Residential real estate(Dollars in thousands)
Non-revolving residential real estate$— $— $162 
Revolving residential real estate17 — — 
Commercial real estate
Non-residential commercial real estate1,841 1,841 — 
Total$1,858 $1,841 $162 

A summary of nonaccrual loans as of December 31, 2022, under the incurred loss methodology, follows:
December 31, 2022NonaccrualNonaccrual With No Allowance for Credit Losses90 Days and Over and Accruing
(Dollars in thousands)
Residential real estate$103 $— $186 
Construction real estate6 6 — 
Commercial real estate2,102 — — 
Total$2,211 $6 $186 

There was one revolving residential real estate loan totaling $17 thousand in process of foreclosure at December 31, 2023 and one residential real estate loan totaling $28 thousand in process of foreclosure at December 31, 2022. Aggregate interest on nonaccrual loans not recognized was $143 thousand as of December 31, 2023 and $59 thousand as of December 31, 2022.
Loans that do not share risk characteristics are evaluated on an individual basis. Loans that are individually evaluated and collateral dependent represent loans that the Company has determined foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and the Company expects repayment of the loan to be provided substantially through the sale of the collateral. For these loans, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan at the measurement date.
The following table presents collateral dependent loans to borrowers experiencing financial difficulty by loan class and collateral type as of the balance sheet dates:
December 31, 2023December 31, 2022
Real EstateReal Estate
(Dollars in thousands)
Non-residential commercial real estate$1,841 $2,068 

Collateral dependent loans are loans for which the repayment is expected to be provided substantially by the underlying collateral and there are no other available and reliable sources of repayment.

For periods prior to the adoption of CECL, loans were evaluated for impairment and may have been classified as impaired when management believed it was probable that the Company would not collect all the contractual interest and principal payments as scheduled in the loan agreement. Under previously applicable GAAP, a specific reserve amount was allocated to the ACL for individual loans that had been classified as impaired based on management's estimate of the fair value of the collateral for collateral dependent loans, an observable market price, or the present value of anticipated future cash flows. The Company accounted for the change in present value attributable to the passage of time in the ACL. Large groups of smaller balance homogeneous loans were collectively evaluated for impairment. Accordingly, the Company did not separately identify individual consumer, real estate or small balance commercial loans for impairment evaluation, unless such loans were subject to a restructuring agreement or had been identified as impaired as part of a larger customer relationship. Based on an evaluation of the Company's historical loss experience on substandard commercial loans, management established the commercial loan threshold for individual impairment evaluation as commercial loan relationships with aggregate balances greater than $500 thousand.
The following table provides information with respect to impaired loans by class of loan as of and for year ended December 31, 2022, prior to the adoption of CECL:
December 31, 2022For The Year Ended December 31, 2022
Recorded Investment
(1)		Principal Balance
(1)		Related AllowanceAverage Recorded InvestmentInterest Income Recognized
(Dollars in thousands)
Residential real estate$190 $200 $21 
Commercial real estate2,068 2,068 9 
With an allowance recorded2,258 2,268 30 
Residential real estate1,283 1,787 — 
Construction real estate58 83 — 
Commercial real estate5,865 6,403 — 
Commercial7 7 — 
With no allowance recorded7,213 8,280 — 
Residential real estate1,473 1,987 21 $1,570 $101 
Construction real estate58 83 — 116 27 
Commercial real estate7,933 8,471 9 5,822 185 
Commercial7 7 — 8 1 
Total$9,471 $10,548 $30 $7,516 $314 
____________________
(1)Does not reflect government guaranties on impaired loans as of December 31, 2022 totaling $423 thousand.

Occasionally, the Company modifies loans to borrowers experiencing financial difficulty by providing interest rate reductions, term extensions, payment deferrals or principal forgiveness. When principal forgiveness is provided, the amount of forgiveness is charged off against the ACL on loans. The following tables summarize loan modifications to borrowers experiencing financial difficulty by loan class, type of modification and the financial effect of the modifications as of and for the year ended December 31, 2023:
Interest Rate Reduction
Amortized Cost Basis% of Loan ClassFinancial Effect
(Dollars in thousands)
Non-residential commercial real estate$398 0.13 %
Reduced weighted average contractual interest rate from 8.75% to 6.85%
Multi-family residential real estate440 0.42 %
Reduced weighted average contractual interest rate from 9.25% to 7.75%

Payment Delay
Amortized Cost Basis% of Loan ClassFinancial Effect
(Dollars in thousands)
Non-residential commercial real estate$3,383 1.13 %
Modification allowed for 7 months of interest only payments with remaining balances due at maturity.
The following table presents the performance of loans as of December 31, 2023 that have been modified in the last twelve months:
December 31, 2023CurrentPast Due
30-89 Days		Past Due 90 Days and Over
(Dollars in thousands)
Non-residential commercial real estate$3,781 $— $— 
Multi-family residential real estate440 — — 
There were no loans to borrowers experiencing financial difficulty that were modified within the previous twelve months that had subsequently defaulted during the year ended December 31, 2023. Loans are considered defaulted at 90 days past due.

At December 31, 2023, the Company was not committed to lend any additional funds to borrowers experiencing financial difficulty for which the Company modified the terms of the loans in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, or a term extension.