Note 6 — Loans Receivable and the Allowance for Credit Losses

The composition of loans was as follows at June 30, 2025 and December 31, 2024:

​

​

Loans serviced for the benefit of others totaled approximately $53.1 million and $52.5 million at June 30, 2025 and December 31, 2024, respectively. The value of mortgage servicing rights was not material at June 30, 2025 and December 31, 2024.

The allowance for credit losses on loans represents management’s estimate of losses inherent in the loan portfolio as of the statement of financial condition date and is recorded as a reduction to loans. The allowance for credit losses is increased by the provision for credit losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for credit losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of loans receivable are charged off to the allowance as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely.

The allowance for credit losses on loans is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is based on the relevant available information from internal and external sources related to past events and current conditions, as well as the incorporation of reasonable and supportable forecasts. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available.

The following tables summarize the allocation of the allowance for credit losses and loans receivable by loan class and credit loss method at June 30, 2025 and December 31, 2024:

At June 30, 2025:

​

​

​

At December 31, 2024:

​

​

The activity in the allowance for credit loss by loan class for the three and six months ended June 30, 2025 and 2024 was as follows:

​

​

​

During the three months ended June 30, 2025, the reversal of provision recorded for residential real estate loans and non-residential real estate loans was primarily attributed to improving economic and housing conditions in the Bank’s local markets. The provision expense recorded for commercial and industrial loans was attributed to slightly increased credit risk. The provision expense recorded for constructions loans was primarily attributed to increased loan balances, offset by improving economic and housing conditions in the Bank’s local markets. The provision expense recorded for consumer loans was primarily attributed to a net charge off $403,000 in checking account overdrafts during the three months ended June 30, 2025.

During the three months ended June 30, 2024, the reversal of provision recorded for residential real estate loans was primarily attributed to reduced credit risk. The provision expenses recorded for non-residential real estate loans and commercial and industrial loans were primarily attributed to the increased loan balances. The reversal of provision recorded for consumer loans was primarily attributed to the reduced credit risk on deposit account overdrafts. The

reversal of provision recorded for constructions loans was primarily attributed to improving sub-market housing conditions during the second quarter of 2024, offset by slightly increased loan balances.

During the six months ended June 30, 2025, the provision expense recorded for residential real estate loans was primarily attributed to increased loan balances, offset by improving economic and housing conditions in the Bank’s local markets. The provision expense recorded for commercial and industrial loans was attributed to increased loan balances and slightly increased credit risk. The reversal of provision recorded for non-residential real estate loans was primarily attributed to a $350,000 recovery from a loan charged off in 2021, and slightly decreased loan balances. The reversal of provision recorded for constructions loans was primarily attributed to improving economic and housing conditions in the Bank’s local markets, offset by decreased loan balances. The provision expense recorded for consumer loans was primarily attributed to a net charge off $518,000 in checking account overdrafts during the six months ended June 30, 2025.

During the six months ended June 30, 2024, the reversal of provision recorded for residential real estate loans was primarily attributed to reduced credit risk and a slight decrease of loan balances. The provision expenses recorded for non-residential real estate loans and commercial and industrial loans were primarily attributed to the increased loan balances. The provision expenses recorded for consumer loans was primarily attributed to increased deposit account overdraft balances. The reversal of provision recorded for constructions loans was primarily attributed to improving economic and housing conditions in the Bank’s local markets during the six months ended June 30, 2024, offset by increased loan balances.

The Company has one individually evaluated loan, totaling $234,000 at June 30, 2025 and $241,000 at December 31, 2024. The underlying business experienced a significant decline in sales revenue since 2024, but the borrower continues to make monthly payments through personal guarantees. Therefore, this loan was downgraded to substandard in December 2024 but still accruing. Interest income recognized for this loan was $5,000 for the three months and $9,000 for the six months ended June 30, 2025. No interest income was recognized for this loan in 2024. There were no non-accrual loans at June 30, 2025 and December 31, 2024.

​

The following tables provide information about delinquencies in our loan portfolio at the dates indicated.

Age Analysis of Past Due Loans as of June 30, 2025:

​

Age Analysis of Past Due Loans as of December 31, 2024:

​

​

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually to classify the loans as to credit risk. The Company uses the following definitions for risk ratings:

Pass – Loans that are well protected by the current net worth and paying capacity of the obligor (or guarantors, if any) or by the fair value, less cost to acquire and sell, of any underlying collateral in a timely manner.

Special Mention – Loans which do not currently expose the Company to a sufficient degree of risk to warrant an adverse classification but have some credit deficiencies or other potential weaknesses.

Substandard – Loans which are inadequately protected by the paying capacity and net worth of the obligor or the collateral pledged, if any. Substandard assets include those characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful – Loans which have all of the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses present make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions and values.

​

The following table presents the risk category of loans at June 30, 2025 by loan segment and vintage year:

​