Annual report [Section 13 and 15(d), not S-K Item 405]

Note 3 - Loans Receivable

v3.25.1
Note 3 - Loans Receivable
12 Months Ended
Dec. 31, 2024
Notes to Financial Statements  
Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

NOTE 3 Loans Receivable

 

Year end loans are summarized below:

 

(Dollars in thousands)

               
   

December 31, 2024

   

December 31, 2023

 

Loans secured by real estate:

               

Residential real estate

  $ 467,293     $ 484,948  

Home equity

    49,758       46,599  

Commercial real estate

    551,674       503,202  

Construction and land development

    82,874       115,227  

Multifamily

    212,455       219,917  

Total loans secured by real estate

    1,364,054       1,369,893  

Commercial business

    104,246       97,386  

Consumer

    551       610  

Manufactured homes

    26,708       30,845  

Government

    11,024       10,021  

Loans receivable

    1,506,583       1,508,755  

Add:

               

Net deferred loan origination costs

    2,439       3,705  

Loan clearing funds

    (46 )     135  

Loans receivable, net of deferred fees and costs

  $ 1,508,976     $ 1,512,595  

 

 

The Company's age analysis of past due loans is summarized below:

 

(Dollars in thousands)

 

30-59 Days

Past Due

   

60-89 Days

Past Due

   

Greater Than

90 Days Past

Due

   

Total Past Due

and Accruing

   

Current

   

Accruing

Loans

   

Non-accrual

Loans

   

Total Loans

Receivable

 

December 31, 2024

                                                               

Residential real estate

  $ 4,423     $ 1,184     $ -     $ 5,607     $ 457,021     $ 462,628     $ 4,665     $ 467,293  

Home equity

    1,002       123       -       1,125       48,150       49,275       483       49,758  

Commercial real estate

    4,556       571       -       5,127       545,267       550,394       1,280       551,674  

Construction and land development

    2,039       -       -       2,039       80,177       82,216       658       82,874  

Multifamily

    1,961       359       -       2,320       206,773       209,093       3,362       212,455  

Commercial business

    493       508       -       1,001       99,955       100,956       3,290       104,246  

Consumer

    5       -       -       5       546       551       -       551  

Manufactured homes

    428       54       -       482       26,226       26,708       -       26,708  

Government

    -       -       -       -       11,024       11,024       -       11,024  

Total

  $ 14,907     $ 2,799     $ -     $ 17,706     $ 1,475,139     $ 1,492,845     $ 13,738     $ 1,506,583  
                                                                 

December 31, 2023

                                                               

Residential real estate

  $ 5,857     $ 4,362     $ 1,131     $ 11,350     $ 471,905     $ 483,255     $ 1,693     $ 484,948  

Home equity

    226       18       -       244       45,887       46,131       468       46,599  

Commercial real estate

    3,168       262       712       4,142       498,227       502,369       833       503,202  

Construction and land development

    2,523       -       -       2,523       112,704       115,227       -       115,227  

Multifamily

    5,333       -       -       5,333       210,869       216,202       3,715       219,917  

Commercial business

    105       29       -       134       94,355       94,489       2,897       97,386  

Consumer

    12       -       -       12       596       608       2       610  

Manufactured homes

    634       379       -       1,013       29,832       30,845       -       30,845  

Government

    -       -       -       -       10,021       10,021       -       10,021  

Total

  $ 17,858     $ 5,050     $ 1,843     $ 24,751     $ 1,474,396     $ 1,499,147     $ 9,608     $ 1,508,755  

 

The following table shows the amortized cost of loans, segregated by portfolio segment, credit quality rating and year of origination as of December 31, 2024, and December 31, 2023 and gross charge-offs for the year ended December 31, 2024 and for the year ended December 31, 2023.

 

December 31, 2024

 

2024

   

2023

   

2022

   

2021

   

2020

   

Prior

   

Revolving

   

Revolving

Converted to

Term

   

Total

 

Total Loans Receivable

  $ 124,670     $ 143,098     $ 291,855     $ 308,352     $ 211,268     $ 324,738     $ 102,602     $ -     $ 1,506,583  

Total current period gross charge-off

  $ (64 )   $ -     $ (1,010 )   $ (125 )   $ (2 )   $ (1,267 )   $ -     $ -     $ (2,468 )
                                                                         

Residential real estate

                                                                       

Pass (1-6)

  $ 13,118     $ 30,947     $ 90,324     $ 99,390     $ 102,552     $ 119,449     $ 2,468     $ -     $ 458,248  

Special Mention (7)

    -       371       365       1,064       554       1,937       -       -       4,291  

Substandard (8)

    -       539       1,161       601       510       1,943       -       -       4,754  

Total

  $ 13,118     $ 31,857     $ 91,850     $ 101,055     $ 103,616     $ 123,329     $ 2,468     $ -     $ 467,293  

Current period gross charge-off

    -       -       -       -       -       (28 )     -       -       (28 )
                                                                         

Home equity

                                                                       

Pass (1-6)

  $ 193     $ 68     $ 153     $ 110     $ -     $ 3,342     $ 44,943     $ -     $ 48,809  

Special Mention (7)

    -       132       -       -       3       15       309       -       459  

Substandard (8)

    26       -       138       -       -       218       108       -       490  

Total

  $ 219     $ 200     $ 291     $ 110     $ 3     $ 3,575     $ 45,360     $ -     $ 49,758  

Current period gross charge-off

    -       -       -       -       -       -       -       -       -  
                                                                         

Commercial real estate

                                                                       

Pass (1-6)

  $ 49,861     $ 67,290     $ 123,342     $ 96,206     $ 53,864     $ 148,529     $ 2,976     $ -     $ 542,068  

Special Mention (7)

    974       -       1,036       2,375       668       2,930       25       -       8,008  

Substandard (8)

    -       -       -       -       202       1,396       -       -       1,598  

Total

  $ 50,835     $ 67,290     $ 124,378     $ 98,581     $ 54,734     $ 152,855     $ 3,001     $ -     $ 551,674  

Current period gross charge-off

    -       -       -       -       -       -       -       -       -  
                                                                         

Construction and land development

                                                                       

Pass (1-6)

  $ 34,599     $ 24,360     $ 3,732     $ 7,867     $ 224     $ 820     $ 5,312     $ -     $ 76,914  

Special Mention (7)

    -       -       -       1,207       2,468       -       -       -       3,675  

Substandard (8)

    -       1,018       -       1,267       -       -       -       -       2,285  

Total

  $ 34,599     $ 25,378     $ 3,732     $ 10,341     $ 2,692     $ 820     $ 5,312     $ -     $ 82,874  

Current period gross charge-off

    -       -       -       -       -       -       -       -       -  
                                                                         

Multifamily

                                                                       

Pass (1-6)

  $ 6,398     $ 8,923     $ 56,771     $ 74,716     $ 36,075     $ 20,066     $ 627     $ -     $ 203,576  

Special Mention (7)

    -       -       780       3,332       1,217       -       -       -       5,329  

Substandard (8)

    -       -       446       1,219       1,516       369       -       -       3,550  

Total

  $ 6,398     $ 8,923     $ 57,997     $ 79,267     $ 38,808     $ 20,435     $ 627     $ -     $ 212,455  

Current period gross charge-off

    -       -       -       (125 )     -       -       -       -       (125 )
                                                                         

Commercial business

                                                                       

Pass (1-6)

  $ 14,655     $ 8,123     $ 9,441     $ 6,094     $ 3,653     $ 11,416     $ 44,046     $ -     $ 97,428  

Special Mention (7)

    -       25       978       39       -       800       1,686       -       3,528  

Substandard (8)

    -       1,139       80       171       177       1,621       102       -       3,290  

Total

  $ 14,655     $ 9,287     $ 10,499     $ 6,304     $ 3,830     $ 13,837     $ 45,834     $ -     $ 104,246  

Current period gross charge-off

    -       -       (1,010 )     -       -       (1,239 )     -       -       (2,249 )
                                                                         

Consumer

                                                                       

Pass (1-6)

  $ 301     $ 163     $ 34     $ 51     $ -     $ 2     $ -     $ -     $ 551  

Substandard (8)

    -       -       -       -       -       -       -       -       -  

Total

  $ 301     $ 163     $ 34     $ 51     $ -     $ 2     $ -     $ -     $ 551  

Current period gross charge-off

    (64 )     -       -       -       (2 )     -       -       -       (66 )
                                                                         

Manufactured homes

                                                                       

Pass (1-6)

  $ -     $ -     $ 1,634     $ 11,360     $ 7,559     $ 6,101     $ -     $ -     $ 26,654  

Substandard (8)

    -       -       -       28       26       -       -       -       54  

Total

  $ -     $ -     $ 1,634     $ 11,388     $ 7,585     $ 6,101     $ -     $ -     $ 26,708  

Current period gross charge-off

    -       -       -       -       -       -       -       -       -  
                                                                         

Government

                                                                       

Pass (1-6)

  $ 4,545     $ -     $ 1,440     $ 1,255     $ -     $ 3,784     $ -     $ -     $ 11,024  

Total

  $ 4,545     $ -     $ 1,440     $ 1,255     $ -     $ 3,784     $ -     $ -     $ 11,024  

Current period gross charge-off

    -       -       -       -       -       -       -       -       -  

 

December 31, 2023

 

2023

   

2022

   

2021

   

2020

   

2019

   

Prior

   

Revolving

   

Revolving

Converted to

Term

   

Total

 

Total Loans Receivable

  $ 148,105     $ 323,820     $ 321,183     $ 234,861     $ 108,683     $ 274,027     $ 94,893     $ 3,183     $ 1,508,755  

Total current period gross charge-off

  $ (95 )   $ (150 )   $ -     $ (367 )   $ (50 )   $ (1,882 )   $ (27 )   $ -       (2,571 )
                                                                         

Residential real estate

                                                                       

Pass (1-6)

  $ 20,740     $ 97,671     $ 106,778     $ 115,001     $ 23,873     $ 113,987     $ 1,716     $ -     $ 479,766  

Special Mention (7)

    405       -       473       173       431       1,602       -       -       3,084  

Substandard (8)

    -       786       152       471       217       472       -       -       2,098  

Total

  $ 21,145     $ 98,457     $ 107,403     $ 115,645     $ 24,521     $ 116,061     $ 1,716     $ -     $ 484,948  

Current period gross charge-off

    -       (40 )     -       (25 )     (39 )     (893 )     -       -       (997 )
                                                                         

Home equity

                                                                       

Pass (1-6)

  $ 110     $ 114     $ 101     $ 14     $ 61     $ 2,051     $ 42,801     $ 700     $ 45,952  

Special Mention (7)

    -       -       -       -       4       31       70       63       168  

Substandard (8)

    -       161       -       -       -       67       251       -       479  

Total

  $ 110     $ 275     $ 101     $ 14     $ 65     $ 2,149     $ 43,122     $ 763     $ 46,599  

Current period gross charge-off

    -       -       -       -       -       (16 )     (27 )     -       (43 )
                                                                         

Commercial real estate

                                                                       

Pass (1-6)

  $ 52,880     $ 127,607     $ 90,108     $ 55,236     $ 56,255     $ 108,489     $ 2,649     $ -     $ 493,224  

Special Mention (7)

    -       69       2,429       1,274       1,123       2,397       142       -       7,434  

Substandard (8)

    -       -       -       230       -       2,314       -       -       2,544  

Total

  $ 52,880     $ 127,676     $ 92,537     $ 56,740     $ 57,378     $ 113,200     $ 2,791     $ -     $ 503,202  

Current period gross charge-off

    -       -       -       -       -       (372 )     -       -       (372 )
                                                                         

Construction and land development

                                                                       

Pass (1-6)

  $ 48,518     $ 24,948     $ 13,411     $ 1,732     $ 4,284     $ 473     $ 12,539     $ 2,420     $ 108,325  

Special Mention (7)

    365       76       4,205       2,256       -       -       -       -       6,902  

Substandard (8)

    -       -       -       -       -       -       -       -       -  

Total

  $ 48,883     $ 25,024     $ 17,616     $ 3,988     $ 4,284     $ 473     $ 12,539     $ 2,420     $ 115,227  

Current period gross charge-off

    -       -       -       -       -       -       -       -       -  
                                                                         

Multifamily

                                                                       

Pass (1-6)

  $ 9,333     $ 53,493     $ 78,122     $ 41,773     $ 13,156     $ 19,609     $ 186     $ -     $ 215,672  

Substandard (8)

    -       -       1,666       1,562       -       1,017       -       -       4,245  

Total

  $ 9,333     $ 53,493     $ 79,788     $ 43,335     $ 13,156     $ 20,626     $ 186     $ -     $ 219,917  

Current period gross charge-off

    -       -       -       -       -       -       -       -       -  
                                                                         

Commercial business

                                                                       

Pass (1-6)

  $ 13,110     $ 13,774     $ 9,327     $ 5,705     $ 4,105     $ 12,905     $ 33,954     $ -     $ 92,880  

Special Mention (7)

    373       197       58       -       129       436       417       -       1,610  

Substandard (8)

    43       1,094       256       214       -       1,121       168       -       2,896  

Total

  $ 13,526     $ 15,065     $ 9,641     $ 5,919     $ 4,234     $ 14,462     $ 34,539     $ -     $ 97,386  

Current period gross charge-off

    -       (110 )     -       (342 )     (11 )     (601 )     -       -       (1,064 )
                                                                         

Consumer

                                                                       

Pass (1-6)

  $ 338     $ 73     $ 108     $ 4     $ 14     $ 71     $ -     $ -     $ 608  

Substandard (8)

    -       -       -       2       -       -       -       -       2  

Total

  $ 338     $ 73     $ 108     $ 6     $ 14     $ 71     $ -     $ -     $ 610  

Current period gross charge-off

    (95 )     -       -       -       -       -       -       -       (95 )
                                                                         

Manufactured homes

                                                                       

Pass (1-6)

  $ -     $ 1,942     $ 12,556     $ 9,214     $ 5,031     $ 2,102     $ -     $ -     $ 30,845  

Total

  $ -     $ 1,942     $ 12,556     $ 9,214     $ 5,031     $ 2,102     $ -     $ -     $ 30,845  

Current period gross charge-off

    -       -       -       -       -       -       -       -       -  
                                                                         

Government

                                                                       

Pass (1-6)

  $ 1,890     $ 1,815     $ 1,433     $ -     $ -     $ 4,883     $ -     $ -     $ 10,021  

Total

  $ 1,890     $ 1,815     $ 1,433     $ -     $ -     $ 4,883     $ -     $ -     $ 10,021  

Current period gross charge-off

    -       -       -       -       -       -       -       -       -  

 

The Company has established a standard loan grading system to assist management, lenders and review personnel in their analysis and supervision of the loan portfolio. The use and application of these grades by the Company is uniform and conforms to regulatory definitions. The loan grading system is as follows:

 

1 Superior Quality

Loans in this category are substantially risk free. Loans fully collateralized by a Bank certificate of deposit or Bank deposits with a hold are substantially risk free.

 

2 Excellent Quality

The borrower generates excellent and consistent cash flow for debt coverage, excellent average credit scores, excellent liquidity and net worth and are reputable operators with over 15 years’ experience. Current and debt to tangible net worth ratios are excellent. Loan to value is substantially below policy and collateral condition is excellent.

 

3 Great Quality

The borrower generates more than sufficient cash flow to fund debt service and cash flow is improving. Average credit scores are very strong. Operators are reputable with significant years of experience. Liquidity, net worth, current and debt to tangible net worth ratios are very strong. Loan to value is significantly below policy and collateral condition is significantly above average.

 

4 Above Average Quality

The borrower generates more than sufficient cash flow to fund debt service but cash flow trends may be stable or slightly declining. Average credit scores are strong. The borrower is a reputable operator with many years of experience. Liquidity, net worth, current and debt to tangible net worth ratios are strong. Loan to value is below policy and collateral condition is above average.

 

5 Average Quality

Borrowers are considered creditworthy and can repay the debt in the normal course of business, however, cash flow trends may be inconsistent or fluctuating. Average credit scores are satisfactory and years of experience is acceptable. Liquidity and net worth are satisfactory. Current and debt to tangible net worth ratios are average. Loan to value is slightly below policy and the collateral condition is slightly above average.

 

6  Pass

Borrowers are considered credit worthy but financial condition may show signs of weakness due to internal or external factors. Cash flow trends may be declining annually. Average credit scores may be low but remain acceptable. Borrower has limited years of experience. Liquidity, net worth, current and debt to tangible net worth ratios are below average. Loan to value is nearing policy limits and collateral condition is average.

 

7 Special Mention

A special mention asset has identified weaknesses that deserve Management’s close attention. If left uncorrected, these weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. Special mention assets are not adversely classified and do not expose the Bank institution to sufficient risk to warrant adverse classification. There is still adequate protection by the current sound worth and paying capacity of the obligor or of the collateral pledged. The Special Mention rating is viewed as transitional and will be monitored closely.

 

Loans in this category may exhibit some of the following risk factors. Cash flow trends may be consistently declining or may be questionable. Debt coverage ratios may be at or near 1:1. Average credit scores may be very weak or the borrower may have minimal years of experience. Liquidity, net worth, current and debt to tangible net worth ratios may be very weak. Loan to value may be at policy limits or may exceed policy limits. Collateral condition may be below average.

 

8 Substandard

This classification consists of loans which are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged. Financial statements normally reveal some or all of the following: poor trends, lack of earnings and cash flow, excessive debt, lack of liquidity, and the absence of creditor protection. Loans are still considered collectible, but due to increased risks and defined weaknesses of the credit, some loss could be incurred in collection if the deficiencies are not corrected.

 

9 Doubtful

Such loans have been placed on nonaccrual status and may be heavily dependent upon collateral possessing a value that is difficult to determine or based upon some near-term event which lacks clear certainty. These loans have all of the weaknesses of those classified as Substandard; however, based on existing conditions, these weaknesses make full collection of the principal balance highly improbable.

 

10 Loss

Loans that are considered uncollectible and of such little value that continuing to carry them as assets is not warranted.

 

Loans with risk classifications of pass and special mention were part of the pooled loan ACL analysis. Loans classified as substandard or worse were individually evaluated for impairment and specific reserves were established, if applicable.  Risk gradings for loans with balances greater than $1 million are updated every 12 months through analysis during origination, renewals, modifications, or regular annual review. Risk gradings for loans with balances less than $1 million are updated primarily through analysis during origination, renewals, modifications, or periodic review.  Risk gradings are also downgraded due to delinquency at month end. In particular, 60 days past due are downgraded to Special Mention, while 90 days past due are further downgraded to Substandard.

 

Modifications to Borrowers Experiencing Financial Difficulty

 

The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination. The starting point to estimate such credit losses is historical loss information. The Company uses a probability of default/loss given default model to determine the allowance for credit losses recorded at origination. Occasionally, the Company subsequently modifies loans for borrowers experiencing financial distress by providing the following forms of relief: principal forgiveness, term extension, payment delay, or interest rate reduction. In some cases, the Company provides multiple types of modifications on one loan. Because the effect of most modifications to borrowers experiencing financial difficulty is already included in the allowance for credit losses, no change to the allowance for credit losses is generally recorded for these modifications.

 

The following table shows the amortized cost of loans at December 31, 2024, that were both experiencing financial difficulty and modified during the year ended December 31, 2024, segregated by portfolio segment and type of modification. The percentage of the amortized cost of loans that were modified to borrowers in financial distress as compared to the amortized cost of each segment of financial receivable is also presented below.

 

   

For the twelve months ended December 31, 2024

 

(Dollars in thousands)

 

Payment

Delay

   

Term

Extension

   

Interest

Rate

Reduction

   

Combination Term

Extension and

Interest Rate

Reduction

   

% of Total

Segment

Financing

Receivables

 

Residential Real Estate

  $ 528     $ 1,115     $ -     $ -       0.35 %

Home Equity

    41       -       -       -       0.01 %

Total

  $ 569     $ 1,115     $ -     $ -       0.11 %

 

   

For the year ended December 31, 2023

 

(Dollars in thousands)

 

Payment

Delay

   

Term

Extension

   

Interest

Rate

Reduction

   

Combination Term

Extension and

Interest Rate

Reduction

   

% of Total

Segment

Financing

Receivables

 

Residential Real Estate

  $ -     $ 868     $ -     $ -       0.18 %

Total

  $ -     $ 868     $ -     $ -       0.06 %

 

The financial effects of payment delay modifications and term extension modifications were forbearance average of five months and four months weighted average extension to life of loan, respectively. There were no commitments to lend additional amounts to the borrowers included in the previous tables.

 

The Company closely monitors the performance of loans and leases that have been modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The performance of such modified loans is presented below.

 

   

For the year ended December 31, 2024

 

(Dollars in thousands)

 

Current

   

30-59 Days

Past Due

   

60-89

Days Past

Due

   

Greater Than 90

Days Past Due

 

Residential Real Estate

  $ 545     $ 570     $ -     $ 528  

Home Equity

    -       -       -       41  

Total

  $ 545     $ 570     $ -     $ 569  

 

   

For the year ended December 31, 2023

 

(Dollars in thousands)

 

Current

   

30-59 Days

Past Due

   

60-89

Days Past

Due

   

Greater Than 90

Days Past Due

 

Residential Real Estate

  $ 868     $ -     $ -     $ -  

Total

  $ 868     $ -     $ -     $ -  

 

Upon the Company’s determination that a modified loan has subsequently been deemed uncollectible, the loan is written off. Therefore, the amortized cost of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount. All modified loans are deemed collectible.

 

Foreclosures

 

There were $589 thousand in multifamily loans, $7 thousand in home equity loans and $736 thousand in residential loans in the process of foreclosure as of December 31, 2024.

 

 

Acquired Loan Purchase Discounts

 

As part of the fair value of loans receivable, there was a net fair value discount for loans acquired of $4.4 million at December 31, 2024, compared to $5.2 million at December 31, 2023.

 

Accretable yield, or income recorded for the twelve months ended December 31, is as follows:

 

(Dollars in thousands)

 

Total

 

2023

  $ 1,078  

2024

    799  

 

Accretable yield, or income expected to be recorded in the future is as follows:

 

(Dollars in thousands)

 

Total

 

2025

  $ 643  

2026

    474  

2027

    305  

2028

    290  

2029

    253  

2030 and thereafter

    2,440  

Total

  $ 4,405  

 

Allowance for Credit Losses

 

The allowance for credit losses is established for current expected credit losses on the Company’s loan portfolio utilizing guidance in Accounting Standards Codification (ASC) Topic 326.

 

The determination of the allowance requires significant judgment to estimate credit losses measured on a collective pool basis when similar risk characteristics exist, and for loans evaluated individually. In determining the allowance, the Company estimates expected future losses for the loan’s entire contractual term adjusted for expected payments when appropriate. The allowance estimate considers relevant available information, from internal and external sources relating to the historical loss experience, current conditions, and reasonable and supportable forecasts for the Company’s outstanding loan balances. The allowance is an estimation that reflects management’s evaluation of expected losses related to the Company’s financial assets measured at amortized cost. To ensure that the allowance is maintained at an adequate level, a detailed analysis is performed on a quarterly basis and an appropriate provision is made to adjust the allowance.

 

The Company categorizes the loan portfolio into nine segments based on similar risk characteristics. Loans within each segment are collectively evaluated using the probability of default (“PD”)/loss given default (“LGD”) methodology (PD/LGD). In creating the “current expected credit loss (CECL)” model as required under ASC 326, the Company has established a two-year reasonable and supportable forecast period with a two-year straight line reversion to the long-term historical average. Due to its minimal loss history, the Company elected to use peer data for a more reasonable calculation.

 

The Bancorp's activity in the allowance for credit losses, by loan segment, is summarized below for the year ended December 31, 2024: 

 

(Dollars in thousands)

 

Beginning Balance

   

Charge-offs

   

Recoveries

   

Provisions

   

Ending Balance

 
                                         

Allowance for credit losses:

                                       

Residential real estate

  $ 3,984     $ (28 )   $ 44     $ 481     $ 4,481  

Home equity

    698       -       -       137       835  

Commercial real estate

    7,045       -       5       (606 )     6,444  

Construction and land development

    4,206       -       -       (1,555 )     2,651  

Multifamily

    933       (125 )     31       164       1,003  

Commercial business

    1,649       (2,249 )     310       1,475       1,185  

Consumer

    7       (66 )     22       42       5  

Manufactured homes

    181       -       -       71       252  

Government

    65       -       -       (10 )     55  

Total

  $ 18,768     $ (2,468 )   $ 412     $ 199     $ 16,911  

 

 

The Bancorp's activity in the allowance for credit losses, by loan segment, is summarized below for the year ended December 31, 2023:

 

(Dollars in thousands)

 

Beginning Balance

   

Charge-offs

   

Recoveries

   

Provisions

   

Ending Balance

 
                                         

Allowance for credit losses:

                                       

Residential real estate

  $ 5,244     $ (997 )   $ 149     $ (412 )   $ 3,984  

Home equity

    538       (43 )     -       203       698  

Commercial real estate

    7,230       (372 )     3       184       7,045  

Construction and land development

    2,988       -       -       1,218       4,206  

Multifamily

    1,148       -       131       (346 )     933  

Commercial business

    1,690       (1,064 )     265       758       1,649  

Consumer

    79       (95 )     15       8       7  

Manufactured homes

    112       -       -       69       181  

Government

    55       -       -       10       65  

Total

  $ 19,084     $ (2,571 )   $ 563     $ 1,692     $ 18,768  

 

A collateral dependent loan relies solely on the operation or sale of the collateral for repayment. In evaluating the overall risk associated with the loan, the Company considers character, overall financial condition and resources, and payment record of the borrower; the prospects for support from any financially responsible guarantors; and the nature and degree of protection provided by the cash flow and value of any underlying collateral. However, as other sources of repayment become inadequate over time, the significance of the collateral's value increases and the loan may become collateral dependent.

 

The table below presents the amortized cost basis and allowance for credit losses (“ACL”) allocated for collateral dependent loans in accordance with ASC 326, which are individually evaluated to determine expected credit losses.

 

(Dollars in thousands)

 

December 31, 2024

         
                                                 
   

Real Estate

   

Equipment/Inventory

   

Accounts Receivable

   

Vehicles

   

Total

   

ACL Allocation

 

Residential real estate

  $ 3,012     $ -     $ -     $ -     $ 3,012     $ 50  

Home equity

    219       -       -       -       219       -  

Commercial real estate

    1,598       -       -       -       1,598       43  

Construction and land development

    2,285       -       -       -       2,285       -  

Multifamily

    3,550       -       -       -       3,550       -  

Commercial business

    712       1,399       1,428       144       3,683       191  
    $ 11,376     $ 1,399     $ 1,428     $ 144     $ 14,347     $ 284  

 

 

(Dollars in thousands)

 

December 31, 2023

         
                                                 
   

Real Estate

   

Equipment/Inventory

   

Accounts Receivable

   

Vehicles

   

Total

   

ACL Allocation

 

Residential real estate

  $ 30     $ -     $ -     $ -     $ 30     $ 30  

Commercial real estate

    2,541       -       -       -       2,541       53  

Multifamily

    4,244       -       -       -       4,244       85  

Commercial business

    -       1,583       1,557       192       3,332       738  
    $ 6,815     $ 1,583     $ 1,557     $ 192     $ 10,147     $ 906  

 

A deferred cost reserve is maintained for the portfolio of manufactured home loans that have been purchased. This reserve is available for use for manufactured home loan nonperformance and costs associated with nonperformance. If the segment performs in line with expectations, the deferred cost reserve is paid as a premium to the third party originator of the loan. The unamortized balance of the deferred cost reserve totaled $3.2 million and $3.5 million as of December 31, 2024, and December 31, 2023, respectively, and is included in net deferred loan origination cost.

 

The following table presents non–accrual loans, and loans past due over 90 days still on accrual by class of loans:

 

As of December 31, 2024
(Dollars in thousands)

 

Nonaccrual with

No Allowance for

Credit Loss

   

Nonaccrual with

Allowance for

Credit Loss

   

Nonaccrual Loans

in Total

   

Loans Past Due

over 90 Days Still

Accruing

 

Residential real estate

  $ 1,514     $ 3,150       4,664     $ -  

Home equity

    179       304       483       -  

Commercial real estate

    1,078       202       1,280       -  

Construction and land development

    659       -       659       -  

Multifamily

    3,362       -       3,362       -  

Commercial business

    3,099       191       3,290       -  

Total

  $ 9,891     $ 3,847     $ 13,738     $ -  

 

As of December 31, 2023
(Dollars in thousands)

 

Nonaccrual with

No Allowance for

Credit Loss

   

Nonaccrual with

Allowance for

Credit Loss

   

Nonaccrual Loans

in Total

   

Loans Past Due

over 90 Days Still

Accruing

 

Residential real estate

  $ 442     $ 1,251     $ 1,693     $ 1,131  

Home equity

    161       307       468       -  

Commercial real estate

    603       230       833       712  

Multifamily

    2,357       1,358       3,715       -  

Commercial business

    1,724       1,173       2,897       -  

Consumer

    -       2       2       -  

Total

  $ 5,287     $ 4,321     $ 9,608     $ 1,843  

 

Accrued interest receivable on loans totaled $5.5 million as of December 31, 2024 and $5.7 million as of December 31, 2023 and is excluded from the estimate of credit losses. The Company made the accounting policy election to not measure an ACL for accrued interest receivable. Accrued interest deemed uncollectible will be written off through interest income.

 

Liability for Credit Losses on Unfunded Loan Commitments

 

The liability for credit losses inherent in unfunded loan commitments is included in accrued expenses and other liabilities on the Consolidated Balance Sheet. The adequacy of the reserve for unfunded commitments is determined quarterly based on methodology similar to the methodology for determining the ACL. The following table shows the changes in the liability for credit losses on unfunded loan commitments.

 

   

For the year ended

   

For the year ended

 

(Dollars in thousands)

 

December 31, 2024

   

December 31, 2023

 

Balance, beginning of period

  $ 3,441     $ 3,108  

Provision (Release)

    (702 )     333  

Balance, end of period

  $ 2,739     $ 3,441