| Loans and the Allowance for Credit Losses | 7. LOANS AND THE ALLOWANCE FOR CREDIT LOSSES Loans outstanding are detailed by category as follows:
March 31, 2024 December 31, 2023
(dollars in thousands)
Residential mortgage
Mortgages - fixed rate $ 813,224 $ 813,374
Mortgages - adjustable rate 753,387 760,632
Construction 39,098 45,863
Deferred costs, net of unearned fees 5,562 6,395
Total residential mortgages 1,611,271 1,626,264
Commercial mortgage
Mortgages - non-owner occupied 1,643,368 1,648,408
Mortgages - owner occupied 164,487 167,522
Construction 112,063 113,133
Deferred costs, net of unearned fees 2,360 2,410
Total commercial mortgages 1,922,278 1,931,473
Home equity
Home equity - lines of credit 87,712 92,730
Home equity - term loans 2,701 2,679
Deferred costs, net of unearned fees 234 240
Total home equity 90,647 95,649
Commercial and industrial
Commercial and industrial 347,392 342,475
Paycheck Protection Program loans 559 653
Unearned fees, net of deferred costs 598 583
Total commercial and industrial 348,549 343,711
Consumer
Secured 20,574 22,592
Unsecured 1,397 1,822
Deferred costs, net of unearned fees 33 33
Total consumer 22,004 24,447
Total loans $ 3,994,749 $ 4,021,544 Directors and officers of the Company and their associates are clients of, and have other transactions with, the Company in the normal course of business. All loans and commitments included in such transactions were made on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and do not involve more than normal risk of collection or present other unfavorable features. Asset Quality The Company’s philosophy toward managing its loan portfolios is predicated upon careful monitoring, which stresses early detection and response to delinquent and default situations. The Company seeks to make arrangements to resolve any delinquent or default situation over the shortest possible time frame. As a general rule, loans more than 90 days past due with respect to principal or interest are classified as non-accrual loans. The Company may use discretion regarding other loans over 90 days past due if the loan is well secured and/or in process of collection. The following tables set forth information regarding non-performing loans disaggregated by loan category:
March 31, 2024
Residential Commercial Home Commercial and Total
(dollars in thousands)
Non-performing loans:
Non-accrual loans $ 6,183 $ 9,638 $ 1,291 $ 89 $ 17,201
Total $ 6,183 $ 9,638 $ 1,291 $ 89 $ 17,201
December 31, 2023
Residential Commercial Home Commercial and Total
(dollars in thousands)
Non-performing loans:
Non-accrual loans $ 6,412 $ 9,758 $ 285 $ 61 $ 16,516
Loans past due >90 days, but still accruing — — — 51 51
Total $ 6,412 $ 9,758 $ 285 $ 112 $ 16,567 It is the Company’s policy to reverse any accrued interest when a loan is put on non-accrual status and, generally, to record any payments received from a borrower related to a loan on non-accrual status as a reduction of the amortized cost basis of the loan. The Company did no t record any interest income on non-accrual loans during the three months ended March 31, 2024 and December 31, 2023. Accrued interest reversed against interest income for the three months ended March 31, 2024 and December 31, 2023 was immaterial. There were no significant commitments to lend additional funds to borrowers whose loans were on non-accrual status at March 31, 2024 and December 31, 2023. A financial asset is considered collateral-dependent when the debtor is experiencing financial difficulty and repayment is expected to be provided substantially through the sale or operation of the collateral. Expected credit losses for collateral-dependent loans are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. The following table presents the amortized costs basis and related reserve amount of individually analyzed collateral-dependent loans by portfolio segment.
For the Period Ended,
March 31, 2024 December 31, 2023
Amortized Cost Basis Reserve Amount Amortized Cost Basis Reserve Amount
(dollars in thousands)
Commercial real estate-owner occupied $ 9,613 $ 3,342 $ 9,611 $ 2,345
Commercial & Industrial 96 76 64 43
Total $ 9,709 $ 3,418 $ 9,675 $ 2,388 Loan Modifications and Restructurings The Company evaluates all loan restructurings according to the accounting guidance for loan modifications to determine if the restructuring results in a new loan or a continuation of the existing loan. An assessment of whether a borrower is experiencing financial difficulty is made at the time of a modification. Loan modifications to borrowers experiencing financial difficulty that result in a change in the timing or amount of contractual cash flows include situations where there is principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, and combinations of the listed modifications. Therefore, the disclosures related to loan restructurings are only for modifications to borrowers experiencing financial difficulty, that directly affect cash flows. At March 31, 2024, the Company had no loan modifications or restructurings to borrowers experiencing financial difficulty. Foreclosure proceedings As of March 31, 2024 , there was one loan in process of foreclosure with a carrying value of approximately $ 354,000 . This loan is secured by one to four family residential property. As of December 31, 2023, there were two loans in process of foreclosure with a carrying value of approximately $ 1.5 million . These loans are secured by one to four family residential property. Loans by Credit Quality Indicator With respect to residential real estate mortgages, home equity, and consumer loans, the Company utilizes the following categories as indicators of credit quality: • Performing – These loans are accruing and are considered having low to moderate risk. • Non-performing – These loans are on non-accrual, are more than 90 days past due but are still accruing, or are restructured. These loans may contain greater than average risk. With respect to commercial real estate mortgages and commercial loans, the Company utilizes a 10-grade internal loan rating system as an indicator of credit quality. The grades are as follows: • Loans rated 1-6 (Pass) – These loans are considered “pass” rated with low to moderate risk. • Loans rated 7 (Special Mention) – These loans have potential weaknesses warranting close attention, which, if left uncorrected, may result in deterioration of the credit at some future date. • Loans rated 8 (Substandard) – These loans have well-defined weaknesses that jeopardize the orderly liquidation of the debt under the original loan terms. Loss potential exists but is not identifiable in any one client. • Loans rated 9 (Doubtful) – These loans have pronounced weaknesses that make full collection highly questionable and improbable. • Loans rated 10 (Loss) – These loans are considered uncollectible and continuance as a bankable asset is not warranted. The following tables contain period-end balances of loans receivable disaggregated by credit quality indicator:
Credit Quality Indicator - by Origination Year as of March 31, 2024
2024 2023 2022 2021 2020 Prior Revolving loans amortized cost basis Total
(dollars in thousands)
Residential Mortgage:
Current $ 11,804 $ 91,643 $ 328,117 $ 503,616 $ 268,481 $ 401,427 $ — $ 1,605,088
Non-performing — — — 231 190 5,762 — 6,183
Total $ 11,804 $ 91,643 $ 328,117 $ 503,847 $ 268,671 $ 407,189 $ — $ 1,611,271
Current-period gross write-offs $ — $ — $ — $ — $ — $ 3 $ — $ 3
Home equity:
Current $ 1,925 $ 8,538 $ 2,243 $ 2,290 $ 1,342 $ 14,973 $ 58,045 $ 89,356
Non-performing — — 56 — — 1,235 — 1,291
Total $ 1,925 $ 8,538 $ 2,299 $ 2,290 $ 1,342 $ 16,208 $ 58,045 $ 90,647
Current-period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ —
Consumer:
Current $ 1,437 $ 6,426 $ 6,220 $ 1,324 $ 1,896 $ 4,099 $ 602 $ 22,004
Non-performing — — — — — — — —
Total $ 1,437 $ 6,426 $ 6,220 $ 1,324 $ 1,896 $ 4,099 $ 602 $ 22,004
Current-period gross write-offs $ — $ 4 $ 5 $ 2 $ 10 $ 4 $ — $ 25
Credit Quality Indicator - by Origination Year as of March 31, 2024
2024 2023 2022 2021 2020 Prior Revolving loans amortized cost basis Total
(dollars in thousands)
Commercial Mortgage:
Credit risk profile by internally assigned grade:
1-6 (Pass) $ 9,224 $ 69,823 $ 468,137 $ 358,601 $ 225,668 $ 697,709 $ — $ 1,829,162
7 (Special Mention) — 1,815 3,521 1,332 1,028 74,582 — 82,278
8 (Substandard) 100 — 1,088 — — 9,650 — 10,838
9 (Doubtful) — — — — — — — —
10 (Loss) — — — — — — — —
Total $ 9,324 $ 71,638 $ 472,746 $ 359,933 $ 226,696 $ 781,941 $ — $ 1,922,278
Current-period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ —
Commercial and Industrial:
Credit risk profile by internally assigned grade:
1-6 (Pass) $ 9,916 $ 46,037 $ 102,279 $ 42,648 $ 49,036 $ 60,135 $ 503 $ 310,554
7 (Special Mention) — 60 25,208 62 9,540 — 10 34,880
8 (Substandard) — — 1,321 — 233 1,561 — 3,115
9 (Doubtful) — — — — — — — —
10 (Loss) — — — — — — — —
Total $ 9,916 $ 46,097 $ 128,808 $ 42,710 $ 58,809 $ 61,696 $ 513 $ 348,549
Current-period gross write-offs $ — $ — $ — $ — $ — $ 8 $ — $ 8
Credit Quality Indicator - by Origination Year as of December 31, 2023
2023 2022 2021 2020 2019 Prior Revolving loans amortized cost basis Total
(dollars in thousands)
Residential Mortgage:
Current $ 92,911 $ 331,817 $ 507,677 $ 274,988 $ 111,715 $ 300,744 $ — $ 1,619,852
Non-performing — — — 193 1,490 4,729 — 6,412
Total $ 92,911 $ 331,817 $ 507,677 $ 275,181 $ 113,205 $ 305,473 $ — $ 1,626,264
Current-period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ —
Home equity:
Current $ 8,085 $ 2,411 $ 2,241 $ 1,399 $ 2,587 $ 14,674 $ 63,967 $ 95,364
Non-performing — 58 — — — 227 — 285
Total $ 8,085 $ 2,469 $ 2,241 $ 1,399 $ 2,587 $ 14,901 $ 63,967 $ 95,649
Current-period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ —
Consumer:
Current $ 7,281 $ 7,459 $ 1,706 $ 2,841 $ 694 $ 3,842 $ 624 $ 24,447
Non-performing — — — — — — — —
Total $ 7,281 $ 7,459 $ 1,706 $ 2,841 $ 694 $ 3,842 $ 624 $ 24,447
Current-period gross write-offs $ — $ — $ — $ — $ — $ 67 $ — $ 67
Credit Quality Indicator - by Origination Year as of December 31, 2023
2023 2022 2021 2020 2019 Prior Revolving loans amortized cost basis Total
(dollars in thousands)
Commercial Mortgage:
Credit risk profile by internally
1-6 (Pass) $ 69,636 $ 466,760 $ 360,331 $ 226,994 $ 258,296 $ 459,472 $ — $ 1,841,489
7 (Special Mention) 1,826 1,822 — 1,507 48,470 25,493 — 79,118
8 (Substandard) — 1,096 — — — 9,770 — 10,866
9 (Doubtful) — — — — — — — —
10 (Loss) — — — — — — — —
Total $ 71,462 $ 469,678 $ 360,331 $ 228,501 $ 306,766 $ 494,735 $ — $ 1,931,473
Current-period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ —
Commercial and Industrial:
Credit risk profile by internally
1-6 (Pass) $ 43,388 $ 107,494 $ 46,678 $ 50,660 $ 22,325 $ 40,647 $ 436 $ 311,628
7 (Special Mention) 60 25,057 92 3,467 2 121 10 28,809
8 (Substandard) — 1,321 — 256 1,575 122 — 3,274
9 (Doubtful) — — — — — — — —
10 (Loss) — — — — — — — —
Total $ 43,448 $ 133,872 $ 46,770 $ 54,383 $ 23,902 $ 40,890 $ 446 $ 343,711
Current-period gross write-offs $ — $ — $ — $ — $ — $ 62 $ — $ 62 Loan origination dates in the tables above reflect the original date, or the date of a material modification of a previously originated loan, for both organic originations and acquired loans. Delinquencies The past due status of a loan is determined in accordance with its contractual repayment terms. All loan types are reported past due when one scheduled payment is due and unpaid for 30 days or more. Loan delinquencies can be attributed to many factors, such as but not limited to, a continuing weakness in, or deteriorating, economic conditions in the region in which the collateral is located, the loss of a tenant or lower lease rates for commercial borrowers, or the loss of income for consumers and the resulting liquidity impacts on the borrowers. The following tables contain period-end balances of loans receivable disaggregated by past due status:
March 31, 2024
30-59 Days 60-89 Days 90 Days or Greater Total Current Total
(dollars in thousands)
Residential mortgage $ 14,089 $ 1,013 $ 2,176 $ 17,278 $ 1,593,993 $ 1,611,271
Commercial mortgage 3,661 487 — 4,148 1,918,130 1,922,278
Home equity 1,534 — 966 2,500 88,147 90,647
Commercial and industrial 1,005 238 42 1,285 347,264 348,549
Consumer 33 — — 33 21,971 22,004
Total $ 20,322 $ 1,738 $ 3,184 $ 25,244 $ 3,969,505 $ 3,994,749
December 31, 2023
30-59 Days 60-89 Days 90 Days Total Current Total
(dollars in thousands)
Residential mortgage $ 16,768 $ 1,234 $ 2,548 $ 20,550 $ 1,605,714 $ 1,626,264
Commercial mortgage 1,885 — — 1,885 1,929,588 1,931,473
Home equity 1,855 171 — 2,026 93,623 95,649
Commercial and industrial 1,477 301 58 1,836 341,875 343,711
Consumer 251 14 — 265 24,182 24,447
Total $ 22,236 $ 1,720 $ 2,606 $ 26,562 $ 3,994,982 $ 4,021,544 There were no lo ans 90 days or more past due and still accruing at March 31, 2024 and there were two loans 90 days or more past due and still accruing totaling $ 51,000 at December 31, 2023. There were no significant commitments to lend additional funds to borrowers whose loans were on non-accrual status at March 31, 2024 and December 31, 2023. Allowance for Credit Losses The following tables contain changes in the allowance for credit losses disaggregated by loan category:
Three Months Ended March 31, 2024
Residential Commercial Home Commercial & Consumer Unfunded Commitments Total
(dollars in thousands)
Allowance for credit loss:
Allowance for credit losses - loan
Balance at December 31, 2023 $ 8,399 $ 24,452 $ 580 $ 4,940 $ 573 $ — $ 38,944
Charge-offs ( 3 ) — — ( 8 ) ( 25 ) — ( 36 )
Recoveries — — — 32 2 — 34
Provision for (release of) credit ( 152 ) 568 19 67 ( 97 ) — 405
Allowance for credit losses -loan portfolio at March 31, 2024 $ 8,244 $ 25,020 $ 599 $ 5,031 $ 453 $ — $ 39,347
Allowance for credit losses -
Balance at December 31, 2023 $ — $ — $ — $ — $ — $ 1,760 $ 1,760
Provision for (release of) credit — — — — — ( 280 ) ( 280 )
Allowance for credit losses- unfunded commitments at March 31, 2024 $ — $ — $ — $ — $ — $ 1,480 $ 1,480
Total allowance for credit loss $ 8,244 $ 25,020 $ 599 $ 5,031 $ 453 $ 1,480 $ 40,827
Three Months Ended March 31, 2023
Residential Commercial Home Commercial & Consumer Unfunded Commitments Total
(dollars in thousands)
Allowance for credit loss:
Allowance for credit losses - loan
Balance at December 31, 2022 $ 13,321 $ 19,086 $ 573 $ 4,153 $ 641 $ — $ 37,774
Charge-offs — — — ( 11 ) ( 3 ) — ( 14 )
Recoveries — — — 10 10 — 20
Provision for (release of) credit ( 157 ) 510 ( 45 ) — ( 83 ) — 225
Allowance for credit losses - loan portfolio at March 31, 2023 $ 13,164 $ 19,596 $ 528 $ 4,152 $ 565 $ — $ 38,005
Allowance for credit losses -
Balance at December 31, 2022 $ — $ — $ — $ — $ — $ 2,096 $ 2,096
Provision for credit — — — — — ( 165 ) ( 165 )
Allowance for credit losses- unfunded commitments at March 31, 2023 — — — — — 1,931 1,931
Total allowance for credit loss $ 13,164 $ 19,596 $ 528 $ 4,152 $ 565 $ 1,931 $ 39,936 |
