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Allowance for Credit Losses on Loans and Off-Balance Sheet Credit Exposures
 3 Months Ended
Mar. 31, 2025
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
The level of the ACL on loans represents management's estimate of expected credit losses over the expected life of the loans at the balance sheet date. For all loan segments, loan losses are charged against the ACL on loans when management believes the loan balance is uncollectible or in accordance with federal guidelines. Subsequent recoveries, if any, are credited to the ACL on loans.
The ACL on loans is a valuation account that is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans. The ACL on loans is comprised of reserves measured on a collective (pool) basis based on a lifetime loss-rate model when similar risk characteristics exist. Loans that do not share risk characteristics are evaluated on an individual basis, generally larger non-accruing commercial loans.
The Company uses the DCF method to estimate expected credit losses for all loan pools. For each of the loan segments, the Company generates cash flow projections at the instrument level wherein payment expectations are adjusted for estimated prepayment speed, curtailments, time to recovery, and loss rates. The modeling of expected prepayment speeds, curtailment rates, and time to recovery are based on historical benchmark data.
The Company uses regression analysis of historical internal and peer data to determine suitable loss drivers to utilize when modeling lifetime loss rates. This analysis also determines how expected loss rates will react to forecasted levels of the loss drivers. For all loan pools utilizing the DCF method, management utilizes and forecasts national unemployment as a loss driver.
For all DCF models, management has determined that four quarters represents a reasonable and supportable forecast period and reverts back to a historical loss rate over four quarters on a straight-line basis. Management leverages economic projections from a reputable and independent third party to inform its loss driver forecasts over the four-quarter forecast period.
The combination of adjustments for credit expectations (default and loss) and timing expectations (prepayment, curtailment, and time to recovery) produces an expected cash flow stream at the instrument level that represents the sum of expected losses to determine the estimated ACL on loans.
The ACL on loans evaluation also considers various qualitative factors, including changes in policy and/or underwriting standards, actual or expected changes in economic trends and conditions, changes in the nature and volume of the portfolio, changes in credit and lending staff/administration, problem loan trends, credit risk concentrations, loan review results, changes in the value of underlying collateral for loans, and changes in the regulatory and business environment.
Certain loans are individually evaluated for estimated credit losses, including those greater than $500 thousand that are classified as substandard or doubtful and are on nonaccrual or that have other unique characteristics differing from the segment. Specific reserves are established when appropriate for such loans based on the present value of expected future cash flows of the loan or the estimated realizable value of the collateral, if any.
Risk characteristics relevant to each portfolio segment are as follows:
•Residential real estate - Loans in this segment are collateralized by owner-occupied 1-4 family residential real estate, second and vacation homes, 1-4 family investment properties, home equity and second mortgage loans. Repayment is dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment rates and housing prices, could have an effect on the credit quality of this segment.
•Construction real estate - Loans in this segment include residential and commercial construction properties, commercial real estate development loans (while in the construction phase of the projects), land and land development loans. Repayment is dependent on the credit quality of the individual borrower and/or the underlying cash flows generated by the properties being constructed. The overall health of the economy, including unemployment rates, housing prices, vacancy rates and material costs, could have an effect on the credit quality of this segment.
•Commercial real estate - Loans in this segment are primarily properties occupied by businesses or income-producing properties. The underlying cash flows generated by the properties may be adversely impacted by a downturn in the economy as evidenced by a general slowdown in business or increased vacancy rates which, in turn, could have an effect on the credit quality of this segment. Management requests business financial statements at least annually and monitors the cash flows of these loans.
•Commercial - Loans in this segment are made to businesses and are generally secured by non-real estate assets of the business. Repayment is expected from the cash flows of the business. A weakened economy, and resultant decreased consumer or business spending, could have an effect on the credit quality of this segment.
•Consumer - Loans in this segment are made to individuals for personal expenditures, such as automobile purchases, and include unsecured loans. Repayment is primarily dependent on the credit quality of the individual borrower. The overall health of the economy, including unemployment, could have an effect on the credit quality of this segment.
•Municipal - Loans in this segment are made to municipalities located within the Company's service area. Repayment is primarily dependent on taxes or other funds collected by the municipalities. Management considers there to be minimal risk surrounding the credit quality of this segment.
Changes in the ACL on loans, by segment of loans, for the three months ended March 31, 2025 and 2024 were as follows:
For The Three Months Ended March 31, 2025Balance,
December 31, 2024		Charge-OffsRecoveriesCredit Loss Expense (Benefit)Balance,
March 31, 2025
(Dollars in thousands)
Non-revolving residential real estate$3,212 $— $5 $(351)$2,866 
Revolving residential real estate280 — — (80)200 
Residential real estate3,492 — 5 (431)3,066 
Commercial construction real estate651 — — 171 822 
Residential construction real estate102 — — 94 196 
Construction real estate753 — — 265 1,018 
Non-residential commercial real estate2,766 — — 489 3,255 
Multi-family residential real estate212 — — 46 258 
Commercial real estate2,978 — — 535 3,513 
Commercial377 — — 50 427 
Consumer6 (4)— 5 7 
Municipal74 — — 5 79 
Total$7,680 $(4)$5 $429 $8,110 

For The Three Months Ended March 31, 2024Balance,
December 31, 2023		Charge-OffsRecoveriesCredit Loss Expense (Benefit)Balance,
March 31, 2024
(Dollars in thousands)
Non-revolving residential real estate$2,361 $— $1 $483 $2,845 
Revolving residential real estate159 — — 88 247 
Residential real estate2,520 — 1 571 3,092 
Commercial construction real estate1,035 — — (615)420 
Residential construction real estate163 — — (70)93 
Construction real estate1,198 — — (685)513 
Non-residential commercial real estate2,182 — — 272 2,454 
Multi-family residential real estate244 — — (36)208 
Commercial real estate2,426 — — 236 2,662 
Commercial352 — — (45)307 
Consumer5 — — 1 6 
Municipal65 — — — 65 
Total$6,566 $— $1 $78 $6,645 
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 sheets, with adjustments to the ACL recognized in Credit loss expense (benefit) in the consolidated statements of income. The Company's activity in the ACL on off-balance sheet credit exposures for the three months ended March 31, 2025 and 2024 were as follows:
For the Three Months Ended March 31,
20252024
ACL on Off-Balance Sheet Credit Exposures(Dollars in thousands)
Balance at beginning of period$1,071 $1,233 
Credit loss benefit(194)(308)
Balance at end of period$877 $925 

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 tables summarize the Company's loans by year of origination and by loan ratings applied by management to the Company's loans by segment as of March 31, 2025 and December 31, 2024:
March 31, 202520252024202320222021PriorRevolvingTotal
Residential Real Estate(Dollars in thousands)
Pass$6,855 $79,880 $66,217 $96,741 $77,891 $76,531 $— $404,115 
Satisfactory/Monitor1,538 5,179 6,436 10,789 3,601 8,359 — 35,902 
Substandard— 25 — 1,106 — 1 — 1,132 
Non-revolving residential real estate8,393 85,084 72,653 108,636 81,492 84,891 — 441,149 
Pass— — — — — — 20,694 20,694 
Satisfactory/Monitor— — — — — — 1,460 1,460 
Substandard— — — — — — 23 23 
Revolving residential real estate— — — — — — 22,177 22,177 
Construction Real Estate
Pass1,913 8,663 1,574 4,442 1,459 1,181 — 19,232 
Satisfactory/Monitor— 16,455 2,149 — 1,174 215 — 19,993 
Substandard— — 12,160 — — — — 12,160 
Commercial construction real estate1,913 25,118 15,883 4,442 2,633 1,396 — 51,385 
Pass3,460 37,394 6,133 965 — — — 47,952 
Satisfactory/Monitor1,183 2,152 872 171 2,130 1,629 — 8,137 
Substandard— — — — — — — — 
Residential construction real estate4,643 39,546 7,005 1,136 2,130 1,629 — 56,089 
Commercial Real Estate
Pass4,563 3,406 8,564 47,779 29,530 77,047 6,681 177,570 
Satisfactory/Monitor1,529 54,653 18,971 18,269 15,821 28,151 14,926 152,320 
Substandard— — — — — 4,533 21 4,554 
Non-residential commercial real estate6,092 58,059 27,535 66,048 45,351 109,731 21,628 334,444 
Pass— 1,050 279 4,297 9,973 37,785 — 53,384 
Satisfactory/Monitor— 1,211 5,620 14,864 10,212 20,849 — 52,756 
Substandard— — — — — 252 — 252 
Multi-family residential real estate— 2,261 5,899 19,161 20,185 58,886 — 106,392 
Pass932 2,862 2,012 2,879 1,417 7,453 3,491 21,046 
Satisfactory/Monitor410 1,860 2,748 2,030 1,925 2,581 948 12,502 
Substandard— 47 — — — — 715 762 
Commercial1,342 4,769 4,760 4,909 3,342 10,034 5,154 34,310 
Pass681 1,001 683 78 34 218 23 2,718 
Satisfactory/Monitor106 — — — — — — 106 
Substandard— — — — — — — — 
Consumer787 1,001 683 78 34 218 23 2,824 
Pass4,786 91,863 10,199 683 524 4,334 — 112,389 
Satisfactory/Monitor— — — — — — — — 
Substandard— — — — — — — — 
Municipal4,786 91,863 10,199 683 524 4,334 — 112,389 
Total Loans$27,956 $307,701 $144,617 $205,093 $155,691 $271,119 $48,982 $1,161,159 
December 31, 202420242023202220212020PriorRevolvingTotal
Residential Real Estate(Dollars in thousands)
Pass$83,371 $70,515 $100,168 $79,234 $27,326 $51,661 $— $412,275 
Satisfactory/Monitor5,381 5,065 10,744 3,642 2,450 5,627 — 32,909 
Substandard— — — — 158 83 — 241 
Non-revolving residential real estate88,752 75,580 110,912 82,876 29,934 57,371 — 445,425 
Pass— — — — — — 20,516 20,516 
Satisfactory/Monitor— — — — — — 1,344 1,344 
Substandard— — — — — — 24 24 
Revolving residential real estate— — — — — — 21,884 21,884 
Construction Real Estate
Pass8,968 2,216 4,514 1,460 559 714 — 18,431 
Satisfactory/Monitor13,524 15,276 1,760 5,800 53 141 — 36,554 
Substandard— — — — — — — — 
Commercial construction real estate22,492 17,492 6,274 7,260 612 855 — 54,985 
Pass34,189 8,725 960 — — — — 43,874 
Satisfactory/Monitor2,199 1,547 136 2,307 1,139 — — 7,328 
Substandard— — — — — — — — 
Residential construction real estate36,388 10,272 1,096 2,307 1,139 — — 51,202 
Commercial Real Estate
Pass3,427 10,481 49,645 31,969 17,227 64,073 5,431 182,253 
Satisfactory/Monitor48,068 17,365 15,874 13,967 5,297 27,610 14,954 143,135 
Substandard— — — — 1,606 2,969 47 4,622 
Non-residential commercial real estate51,495 27,846 65,519 45,936 24,130 94,652 20,432 330,010 
Pass1,720 283 4,329 10,115 1,853 31,787 — 50,087 
Satisfactory/Monitor563 2,484 14,980 10,291 5,535 20,132 — 53,985 
Substandard— — — — — 256 — 256 
Multi-family residential real estate2,283 2,767 19,309 20,406 7,388 52,175 — 104,328 
Pass3,224 2,583 4,417 1,517 370 7,492 3,483 23,086 
Satisfactory/Monitor1,958 2,438 899 1,977 203 2,595 1,295 11,365 
Substandard— — — — — — 724 724 
Commercial5,182 5,021 5,316 3,494 573 10,087 5,502 35,175 
Pass1,253 777 105 53 66 188 24 2,466 
Satisfactory/Monitor57 — — — — — — 57 
Substandard— — — — — — — — 
Consumer1,310 777 105 53 66 188 24 2,523 
Pass93,280 10,482 1,363 606 1,272 3,201 — 110,204 
Satisfactory/Monitor— — — — — — — — 
Substandard— — — — — — — — 
Municipal93,280 10,482 1,363 606 1,272 3,201 — 110,204 
Total Loans$301,182 $150,237 $209,894 $162,938 $65,114 $218,529 $47,842 $1,155,736 

Gross charge-offs for the three months ended March 31, 2025 consisted of two consumer loans totaling $4 thousand that were originated in 2023. There were no gross charge-off for the three months ended March 31, 2024.
A summary of current and past due loans as of March 31, 2025 and December 31, 2024 follows:
March 31, 202530-59 Days60-89 Days90 Days and OverTotal Past DueCurrentTotal
(Dollars in thousands)
Residential real estate
Non-revolving residential real estate$1,832 $— $695 $2,527 $438,622 $441,149 
Revolving residential real estate— — — — 22,177 22,177 
Construction real estate
Commercial construction real estate82 — — 82 51,303 51,385 
Residential construction real estate— — — — 56,089 56,089 
Commercial real estate
Non-residential commercial real estate289 — — 289 334,155 334,444 
Multi-family residential real estate— — — — 106,392 106,392 
Commercial— — 48 48 34,262 34,310 
Consumer— — — — 2,824 2,824 
Municipal— — — — 112,389 112,389 
Total$2,203 $— $743 $2,946 $1,158,213 $1,161,159 

December 31, 202430-59 Days60-89 Days90 Days and OverTotal Past DueCurrentTotal
(Dollars in thousands)
Residential real estate
Non-revolving residential real estate$1,560 $1,158 $241 $2,959 $442,466 $445,425 
Revolving residential real estate— — — — 21,884 21,884 
Construction real estate
Commercial construction real estate— — — — 54,985 54,985 
Residential construction real estate— — — — 51,202 51,202 
Commercial real estate
Non-residential commercial real estate355 46 — 401 329,609 330,010 
Multi-family residential real estate— — — — 104,328 104,328 
Commercial45 — — 45 35,130 35,175 
Consumer— 4 — 4 2,519 2,523 
Municipal— — — — 110,204 110,204 
Total$1,960 $1,208 $241 $3,409 $1,152,327 $1,155,736 
A summary of nonaccrual loans as of March 31, 2025 and December 31, 2024 follows:
March 31, 2025NonaccrualNonaccrual With No Allowance for Credit Losses90 Days and Over and Accruing
Residential real estate(Dollars in thousands)
Non-revolving residential real estate$670 $— $25 
Construction real estate
Commercial construction real estate12,160 — — 
Commercial real estate
Non-residential commercial real estate1,593 1,593 — 
Commercial541 — — 
Total$14,964 $1,593 $25 
December 31, 2024NonaccrualNonaccrual With No Allowance for Credit Losses90 Days and Over and Accruing
Residential real estate(Dollars in thousands)
Non-revolving residential real estate$— $— $241 
Commercial real estate
Non-residential commercial real estate1,652 1,652 — 
Total$1,652 $1,652 $241 
There were no loans in process of foreclosure at March 31, 2025 and one residential real estate loan totaling $8 thousand in process of foreclosure at December 31, 2024. Aggregate interest on nonaccrual loans not recognized was $416 thousand as of March 31, 2025 and $235 thousand as of December 31, 2024.
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:
March 31, 2025December 31, 2024
(Dollars in thousands)
Commercial construction real estate$12,160 $— 
Non-residential commercial real estate4,187 4,246 
Commercial541 500 
Total$16,888 $4,746 

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.

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. There were no loan modifications to borrowers experiencing financial difficulty during the three months ended March 31, 2025 or 2024.
The following table presents the performance of loans as of March 31, 2025 that have been modified in the last twelve months:
March 31, 2025CurrentPast Due
30-89 Days		Past Due 90 Days and Over
(Dollars in thousands)
Non-revolving residential real estate$12 $— $— 
Non-residential commercial real estate2,849 — — 
Commercial44 — — 

There were no loans to borrowers experiencing financial difficulty that were modified within the previous twelve months that had subsequently defaulted during the three months ended March 31, 2025. Loans are considered defaulted at 90 days past due.

At March 31, 2025, 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.