Note 2. Loans Receivable

A summary of the balances of loans as of June 30, 2025 and December 31, 2024 is as follows:

Loans are stated at the amount of unpaid principal net of unamortized loan costs and exclude accrued interest. Accrued interest is reflected in the accrued interest line item on the consolidated statements of financial condition.

The following tables present an analysis of past due loans as of as of June 30, 2025 and December 31, 2024:

Nonaccrual loans for which no related allowance for loan losses was recorded totaled $73,000 at June 30, 2025 and consisted of residential real estate. There are no non-accrual loans as of December 31, 2024. The amount of interest income that would have been recorded in the six months ended June 30, 2025 and 2024 is not material.

Credit Quality Indicators

The Company uses several credit quality indicators to manage credit risk in an ongoing manner. The Company's primary credit quality indicators are to use an internal credit risk rating system that categorizes loans into pass, special mention, substandard or doubtful categories. Credit risk ratings are applied individually to those classes of loans that have significant or unique credit characteristics that benefit from a case-by-case evaluation.

The following are the definitions of the Company's credit quality indicators:

Pass: Loans that comply in all material respects with the Company's loan policies, which are adequately secured with conforming collateral, and are extended to borrowers with documented cash flow and/or liquidity to safely cover their total debt service requirements.

Watch: Loans that are above the FNMA limits are monitored on a routine basis. In addition, loans that become delinquent are initially identified as watch list loans for further monitoring: these loans do not currently expose the institution to sufficient risk to warrant adverse classification.

Special Mention: Loans that have potential weaknesses that, if left uncorrected, may result in deterioration of repayment prospects for the asset or in the Company's credit position at some future date.

Classified Loans Credit Quality Indicators

Substandard: Loans that are inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged. These assets have a well-defined weakness or weaknesses. The Company has a distinct possibility to sustain some loss if the deficiencies are not corrected.

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

The Company’s credit quality indicators are periodically updated on a case-by-case basis.

The following table reflects loans by credit quality indicator and origination year at June 30, 2025:

The following table reflects loans by credit quality indicator and origination year at December 31, 2024:

The allowance for credit loss represents the estimated amount considered necessary to cover lifetime expected credit losses inherent in financial assets at the statement of financial condition date. The following tables summarize the activity in the allowance for credit losses for the three and six months ended June 30, 2025 and 2024:

The Company considered an adjustment for credit losses on unfunded loan commitments for the periods ended June 30, 2025 and December 31, 2024 to be insignificant.

In the ordinary course of business, the Company has granted loans to principal officers and directors, and entities in which they have significant ownership or management positions. An analysis of the changes in loans to such borrowers for the six months ended June 30, 2025 and 2024 follows: