Allowance for Credit Losses | 3. Allowance for Credit Losses The following table presents the activity of the allowance for credit losses by portfolio segment for the three months ended March 31. Allowance for Credit Losses: March 31, 2023 (Dollar amounts in thousands) Commercial Residential Consumer Unallocated Total Beginning balance $ 12,949 $ 14,568 $ 12,104 $ 158 $ 39,779 Provision for credit losses (54) 500 1,254 100 1,800 Loans charged-off (306) (79) (3,991) — (4,376) Recoveries 201 70 2,146 — 2,417 Ending Balance $ 12,790 $ 15,059 $ 11,513 $ 258 $ 39,620 Allowance for Credit Losses: March 31, 2022 (Dollar amounts in thousands) Commercial Residential Consumer Unallocated Total Beginning balance $ 18,883 $ 18,316 $ 10,721 $ 385 $ 48,305 Provision for credit losses (1,040) (5,144) (300) (66) (6,550) Loans charged-off (883) (466) (1,905) — (3,254) Recoveries 340 529 1,146 — 2,015 Ending Balance $ 17,300 $ 13,235 $ 9,662 $ 319 $ 40,516 The tables below present the recorded investment in non-performing loans by class of loans. March 31, 2023 Loans Past Nonaccrual Due Over With No 90 Days Still Allowance (Dollar amounts in thousands) Accruing Nonaccrual For Credit Loss Commercial Commercial & Industrial $ — $ 1,503 $ 972 Farmland — 584 456 Non Farm, Non Residential — 1,803 1,791 Agriculture — 184 155 All Other Commercial 297 24 — Residential First Liens 766 1,205 — Home Equity 41 73 — Junior Liens 80 220 — Multifamily — 1,459 1,264 All Other Residential — 465 — Consumer Motor Vehicle — 2,993 — All Other Consumer — 407 — TOTAL $ 1,184 $ 10,920 $ 4,638 December 31, 2022 Loans Past Nonaccrual Due Over With No 90 Days Still Allowance (Dollar amounts in thousands) Accruing Nonaccrual For Credit Loss Commercial Commercial & Industrial $ 114 $ 2,137 $ 254 Farmland — 461 — Non Farm, Non Residential — 2,064 2,052 Agriculture — 186 155 All Other Commercial — 26 — Residential First Liens 666 1,380 — Home Equity 180 133 — Junior Liens 197 256 — Multifamily — 1,468 — All Other Residential — 478 — Consumer Motor Vehicle — 2,549 — All Other Consumer — 416 — TOTAL $ 1,157 $ 11,554 $ 2,461 The following tables present the amortized cost basis of collateral dependent loans by class of loans: March 31, 2023 Collateral Type (Dollar amounts in thousands) Real Estate Other Commercial Commercial & Industrial $ 3,983 $ — Farmland 2,224 — Non Farm, Non Residential 4,818 — Agriculture — 155 All Other Commercial — — Residential First Liens — — Home Equity — — Junior Liens — — Multifamily 1,264 — All Other Residential — — Consumer Motor Vehicle — — All Other Consumer — — Total $ 12,289 $ 155 December 31, 2022 Collateral Type (Dollar amounts in thousands) Real Estate Other Commercial Commercial & Industrial $ 4,613 $ 1 Farmland 3,289 — Non Farm, Non Residential 5,123 — Agriculture — 155 All Other Commercial — — Residential First Liens — — Home Equity — — Junior Liens — — Multifamily 895 — All Other Residential — — Consumer Motor Vehicle — — All Other Consumer — — Total $ 13,920 $ 156 The following tables presents the aging of the recorded investment in loans by past due category and class of loans. March 31, 2023 90 Days 30-59 Days 60-89 Days and Greater Total (Dollar amounts in thousands) Past Due Past Due Past Due Past Due Current Total Commercial Commercial & Industrial $ 3,199 $ 67 $ 983 $ 4,249 $ 660,729 $ 664,978 Farmland 60 470 530 1,060 131,569 132,629 Non Farm, Non Residential 149 103 — 252 396,054 396,306 Agriculture 1,503 — — 1,503 107,065 108,568 All Other Commercial 173 — 297 470 504,908 505,378 Residential First Liens 3,187 574 961 4,722 348,644 353,366 Home Equity 213 107 80 400 61,512 61,912 Junior Liens 191 211 223 625 56,088 56,713 Multifamily 145 946 373 1,464 179,813 181,277 All Other Residential 369 — — 369 24,369 24,738 Consumer Motor Vehicle 8,113 1,595 730 10,438 558,332 568,770 All Other Consumer 232 40 5 277 31,578 31,855 TOTAL $ 17,534 $ 4,113 $ 4,182 $ 25,829 $ 3,060,661 $ 3,086,490 December 31, 2022 90 Days 30-59 Days 60-89 Days and Greater Total (Dollar amounts in thousands) Past Due Past Due Past Due Past Due Current Total Commercial Commercial & Industrial $ 1,698 $ 529 $ 726 $ 2,953 $ 674,569 $ 677,522 Farmland 112 — — 112 127,498 127,610 Non Farm, Non Residential 274 34 — 308 387,108 387,416 Agriculture — 1,231 — 1,231 136,451 137,682 All Other Commercial 333 — 14 347 478,095 478,442 Residential First Liens 4,528 1,203 1,054 6,785 341,131 347,916 Home Equity 305 144 276 725 63,615 64,340 Junior Liens 213 69 327 609 56,367 56,976 Multifamily 317 83 — 400 180,305 180,705 All Other Residential 1,115 350 — 1,465 24,058 25,523 Consumer Motor Vehicle 15,151 1,930 985 18,066 539,651 557,717 All Other Consumer 341 56 15 412 32,967 33,379 TOTAL $ 24,387 $ 5,629 $ 3,397 $ 33,413 $ 3,041,815 $ 3,075,228 Loan Modifications Made to Borrowers Experiencing Financial Difficulty: Modification of the terms of such loans typically include one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan. No modification in 2023 or 2022 resulted in the permanent reduction of the recorded investment in the loan. During the three months ended the Corporation had no modified loans made to borrowers experiencing financial difficulty. A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms. Credit Quality Indicators: The Corporation 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 Corporation analyzes loans individually by classifying the loans as to credit risk. This analysis includes non-homogeneous loans, such as commercial loans, with an outstanding balance greater than $100 thousand. Any consumer loans outstanding to a borrower who had commercial loans analyzed will be similarly risk rated. This analysis is performed on a quarterly basis. The Corporation uses the following definitions for risk ratings: Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Substandard: Loans classified as substandard are inadequately protected by the current net worth and debt service capacity of the borrower or of any pledged collateral. These loans have a well-defined weakness or weaknesses which have clearly jeopardized repayment of principal and interest as originally intended. They are characterized by the distinct possibility that the institution will sustain some future loss if the deficiencies are not corrected. Doubtful: Loans classified as doubtful have all the weaknesses inherent in those graded substandard, with the added characteristic that the severity of the weaknesses makes collection or liquidation in full highly questionable or improbable based upon currently existing facts, conditions, and values. Furthermore, non-homogeneous loans which were not individually analyzed, but are 90+ days past due or on non-accrual are classified as substandard. Loans included in homogeneous pools, such as residential or consumer may be classified as substandard due to 90+ days delinquency, non-accrual status, bankruptcy, or loan restructuring. The following tables present the commercial loan portfolio by risk category: March 31, 2023 Term Loans at Amortized Cost Basis by Origination Year Revolving 2023 2022 2021 2020 2019 Prior Loans Total Commercial Commercial and Industrial Pass $ 20,794 $ 143,766 $ 123,586 $ 46,757 $ 51,857 $ 114,938 $ 108,126 $ 609,824 Special Mention 43 — 9,423 3,264 43 3,676 948 $ 17,397 Substandard 3,297 256 676 1,167 931 8,456 7,823 $ 22,606 Doubtful — — — — — — — $ — Not Rated 8,745 1,668 1,284 718 368 175 — $ 12,958 Subtotal $ 32,879 $ 145,690 $ 134,969 $ 51,906 $ 53,199 $ 127,245 $ 116,897 $ 662,785 Current period gross charge-offs $ 8 $ 15 $ 39 $ - $ - $ - $ - $ 62 Farmland Pass $ 12,394 $ 16,577 $ 21,962 $ 8,885 $ 9,067 $ 54,997 $ 283 $ 124,165 Special Mention — — — — 882 2,495 — $ 3,377 Substandard — — — 504 608 2,133 — $ 3,245 Doubtful — — — — — — — $ — Not Rated — — — — — 17 — $ 17 Subtotal $ 12,394 $ 16,577 $ 21,962 $ 9,389 $ 10,557 $ 59,642 $ 283 $ 130,804 Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ — Non Farm, Non Residential Pass $ 15,142 $ 112,290 $ 73,946 $ 32,431 $ 18,736 $ 130,690 $ 2,893 $ 386,128 Special Mention — 96 1,025 — 904 276 — $ 2,301 Substandard — — — — 505 5,647 — $ 6,152 Doubtful — — — — — — — $ — Not Rated — — — 692 — 91 — $ 783 Subtotal $ 15,142 $ 112,386 $ 74,971 $ 33,123 $ 20,145 $ 136,704 $ 2,893 $ 395,364 Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ — Agriculture Pass $ 2,397 $ 13,026 $ 8,962 $ 7,319 $ 8,134 $ 18,202 $ 43,559 $ 101,599 Special Mention — 86 — 8 3 705 1,446 $ 2,248 Substandard — — — — 224 1,406 549 $ 2,179 Doubtful — — — — — — — $ — Not Rated — 62 37 63 45 15 — $ 222 Subtotal $ 2,397 $ 13,174 $ 8,999 $ 7,390 $ 8,406 $ 20,328 $ 45,554 $ 106,248 Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ — Other Commercial Pass $ 7,514 $ 153,260 $ 96,815 $ 95,111 $ 18,223 $ 108,023 $ 10,792 $ 489,738 Special Mention — 22 — — 846 11,815 — $ 12,683 Substandard — — 21 — — 6 — $ 27 Doubtful — — — — — — — $ — Not Rated — 15 80 — — 496 — $ 591 Subtotal $ 7,514 $ 153,297 $ 96,916 $ 95,111 $ 19,069 $ 120,340 $ 10,792 $ 503,039 Current period gross charge-offs $ 244 $ - $ - $ - $ - $ - $ - $ 244 Residential Multifamily >5 Residential Pass $ 696 $ 55,592 $ 34,781 $ 42,724 $ 6,672 $ 29,669 $ 170 $ 170,304 Special Mention — — — 368 — 7,278 — $ 7,646 Substandard — — — — — 1,275 — $ 1,275 Doubtful — — — — — — — $ — Not Rated — — 1,118 — — 260 — $ 1,378 Subtotal $ 696 $ 55,592 $ 35,899 $ 43,092 $ 6,672 $ 38,482 $ 170 $ 180,603 Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ — Total Pass $ 58,937 $ 494,511 $ 360,052 $ 233,227 $ 112,689 $ 456,519 $ 165,823 $ 1,881,758 Special Mention 43 204 10,448 3,640 2,678 26,245 2,394 $ 45,652 Substandard 3,297 256 697 1,671 2,268 18,923 8,372 $ 35,484 Doubtful — — — — — — — $ — Not Rated 8,745 1,745 2,519 1,473 413 1,054 — $ 15,949 $ 71,022 $ 496,716 $ 373,716 $ 240,011 $ 118,048 $ 502,741 $ 176,589 $ 1,978,843 December 31, 2022 Term Loans at Amortized Cost Basis by Origination Year Revolving 2022 2021 2020 2019 2018 Prior Loans Total Commercial Commercial and Industrial Pass $ 163,479 $ 128,012 $ 56,830 $ 54,208 $ 26,514 $ 99,522 $ 92,110 $ 620,675 Special Mention 2,071 9,738 3,434 2,572 2,061 1,848 453 $ 22,177 Substandard 423 723 1,861 954 3,169 6,264 9,103 $ 22,497 Doubtful — — — — — — — $ — Not Rated 7,041 1,408 822 469 149 85 — $ 9,974 Subtotal $ 173,014 $ 139,881 $ 62,947 $ 58,203 $ 31,893 $ 107,719 $ 101,666 $ 675,323 Farmland Pass $ 16,261 $ 22,530 $ 9,244 $ 9,438 $ 10,352 $ 48,847 $ 340 $ 117,012 Special Mention — — 1,164 882 — 2,930 — $ 4,976 Substandard — — 456 608 337 1,969 — $ 3,370 Doubtful — — — — — — — $ — Not Rated — — — — — 17 — $ 17 Subtotal $ 16,261 $ 22,530 $ 10,864 $ 10,928 $ 10,689 $ 53,763 $ 340 $ 125,375 Non Farm, Non Residential Pass $ 102,629 $ 75,011 $ 33,214 $ 19,596 $ 31,438 $ 111,586 $ 2,975 $ 376,449 Special Mention 99 1,035 — 921 — 279 — $ 2,334 Substandard — — — 513 — 6,281 — $ 6,794 Doubtful — — — — — — — $ — Not Rated — — 696 — — 269 — $ 965 Subtotal $ 102,728 $ 76,046 $ 33,910 $ 21,030 $ 31,438 $ 118,415 $ 2,975 $ 386,542 Agriculture Pass $ 13,085 $ 9,028 $ 8,015 $ 8,422 $ 1,987 $ 26,729 $ 62,397 $ 129,663 Special Mention 89 — 10 3 — 709 2,519 $ 3,330 Substandard — — — 224 1,201 56 762 $ 2,243 Doubtful — — — — — — — $ — Not Rated 71 39 68 61 25 — — $ 264 Subtotal $ 13,245 $ 9,067 $ 8,093 $ 8,710 $ 3,213 $ 27,494 $ 65,678 $ 135,500 Other Commercial Pass $ 143,941 $ 91,615 $ 90,845 $ 19,259 $ 29,143 $ 82,535 $ 5,602 $ 462,940 Special Mention 23 — — 10 — 11,911 — $ 11,944 Substandard — 23 — — — 6 — $ 29 Doubtful — — — — — — — $ — Not Rated 16 82 — — 29 480 — $ 607 Subtotal $ 143,980 $ 91,720 $ 90,845 $ 19,269 $ 29,172 $ 94,932 $ 5,602 $ 475,520 Residential Multifamily >5 Residential Pass $ 50,424 $ 33,415 $ 46,740 $ 6,734 $ 4,969 $ 27,353 $ 96 $ 169,731 Special Mention — 533 372 — — 6,795 — $ 7,700 Substandard — — — — — 1,280 — $ 1,280 Doubtful — — — — — — — $ — Not Rated — 1,124 — — — 263 — $ 1,387 Subtotal $ 50,424 $ 35,072 $ 47,112 $ 6,734 $ 4,969 $ 35,691 $ 96 $ 180,098 Total Pass $ 489,819 $ 359,611 $ 244,888 $ 117,657 $ 104,403 $ 396,572 $ 163,520 $ 1,876,470 Special Mention 2,282 11,306 4,980 4,388 2,061 24,472 2,972 $ 52,461 Substandard 423 746 2,317 2,299 4,707 15,856 9,865 $ 36,213 Doubtful — — — — — — — $ — Not Rated 7,128 2,653 1,586 530 203 1,114 — $ 13,214 $ 499,652 $ 374,316 $ 253,771 $ 124,874 $ 111,374 $ 438,014 $ 176,357 $ 1,978,358 The Corporation evaluates the credit quality of its other loan portfolios, which includes residential real estate, consumer and lease financing loans, based primarily on the aging status of the loan and payment activity. Accordingly, loans on non-accrual status and loans past due 90 days or more and still accruing interest are considered to be nonperforming for purposes of credit quality evaluation. The following table presents the balance of our other loan portfolio based on the credit risk profile of loans that are performing and loans that are nonperforming: March 31, 2023 Term Loans at Amortized Cost Basis by Origination Year Revolving 2023 2022 2021 2020 2019 Prior Loans Total Residential First Liens Performing $ 9,258 $ 74,715 $ 69,431 $ 44,378 $ 16,703 $ 133,024 $ 2,835 $ 350,344 Non-performing — 27 418 — 115 1,521 — $ 2,081 Subtotal $ 9,258 $ 74,742 $ 69,849 $ 44,378 $ 16,818 $ 134,545 $ 2,835 $ 352,425 Current period gross charge-offs $ - $ - $ - $ - $ - $ 79 $ - $ 79 Home Equity Performing $ 62 $ 590 $ — $ 8 $ 169 $ 810 $ 59,975 $ 61,614 Non-performing — — — 20 — 53 40 $ 113 Subtotal $ 62 $ 590 $ — $ 28 $ 169 $ 863 $ 60,015 $ 61,727 Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ — Junior Liens Performing $ 2,874 $ 19,375 $ 9,764 $ 7,038 $ 5,452 $ 10,747 $ 1,020 $ 56,270 Non-performing — — 8 72 64 157 — $ 301 Subtotal $ 2,874 $ 19,375 $ 9,772 $ 7,110 $ 5,516 $ 10,904 $ 1,020 $ 56,571 Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ — Other Residential Performing $ 747 $ 12,414 $ 8,261 $ 488 $ 753 $ 1,523 $ — $ 24,186 Non-performing — — — — 416 50 — $ 466 Subtotal $ 747 $ 12,414 $ 8,261 $ 488 $ 1,169 $ 1,573 $ — $ 24,652 Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ — Consumer Motor Vehicle Performing $ 64,910 $ 287,205 $ 104,775 $ 75,616 $ 23,788 $ 7,578 $ 6 $ 563,878 Non-performing — 1,008 709 625 252 90 — $ 2,684 Subtotal $ 64,910 $ 288,213 $ 105,484 $ 76,241 $ 24,040 $ 7,668 $ 6 $ 566,562 Current period gross charge-offs $ - $ 1,876 $ 1,247 $ 561 $ 149 $ 70 $ - $ 3,903 Other Consumer Performing $ 2,974 $ 11,645 $ 6,582 $ 3,492 $ 1,140 $ 1,070 $ 4,425 $ 31,328 Non-performing — 29 234 94 32 18 2 $ 409 Subtotal $ 2,974 $ 11,674 $ 6,816 $ 3,586 $ 1,172 $ 1,088 $ 4,427 $ 31,737 Current period gross charge-offs $ - $ 28 $ 23 $ 7 $ - $ - $ 30 $ 88 Total Performing $ 80,825 $ 405,944 $ 198,813 $ 131,020 $ 48,005 $ 154,752 $ 68,261 $ 1,087,620 Non-performing — 1,064 1,369 811 879 1,889 42 $ 6,054 Total other loans $ 80,825 $ 407,008 $ 200,182 $ 131,831 $ 48,884 $ 156,641 $ 68,303 $ 1,093,674 December 31, 2022 Term Loans at Amortized Cost Basis by Origination Year Revolving 2022 2021 2020 2019 2018 Prior Loans Total Residential First Liens Performing $ 71,607 $ 70,197 $ 45,080 $ 16,968 $ 20,258 $ 117,488 $ 3,245 $ 344,843 Non-performing 106 — — 141 100 1,782 — $ 2,129 Subtotal $ 71,713 $ 70,197 $ 45,080 $ 17,109 $ 20,358 $ 119,270 $ 3,245 $ 346,972 Home Equity Performing $ 1,995 $ 943 $ 8 $ 115 $ 55 $ 820 $ 59,875 $ 63,811 Non-performing — — 78 — 14 40 176 $ 308 Subtotal $ 1,995 $ 943 $ 86 $ 115 $ 69 $ 860 $ 60,051 $ 64,119 Junior Liens Performing $ 19,074 $ 10,485 $ 7,507 $ 5,830 $ 5,366 $ 6,195 $ 1,928 $ 56,385 Non-performing — 4 77 90 139 141 — $ 451 Subtotal $ 19,074 $ 10,489 $ 7,584 $ 5,920 $ 5,505 $ 6,336 $ 1,928 $ 56,836 Other Residential Performing $ 11,542 $ 9,923 $ 501 $ 915 $ 498 $ 1,582 $ — $ 24,961 Non-performing — — — 425 35 18 — $ 478 Subtotal $ 11,542 $ 9,923 $ 501 $ 1,340 $ 533 $ 1,600 $ — $ 25,439 Consumer Motor Vehicle Performing $ 306,565 $ 118,362 $ 88,144 $ 29,004 $ 8,652 $ 2,230 $ 6 $ 552,963 Non-performing 813 739 437 237 66 47 — $ 2,339 Subtotal $ 307,378 $ 119,101 $ 88,581 $ 29,241 $ 8,718 $ 2,277 $ 6 $ 555,302 Other Consumer Performing $ 13,426 $ 7,914 $ 4,109 $ 1,302 $ 429 $ 819 $ 4,819 $ 32,818 Non-performing 18 247 89 39 12 12 2 $ 419 Subtotal $ 13,444 $ 8,161 $ 4,198 $ 1,341 $ 441 $ 831 $ 4,821 $ 33,237 Total Performing $ 424,209 $ 217,824 $ 145,349 $ 54,134 $ 35,258 $ 129,134 $ 69,873 $ 1,075,781 Non-performing 937 990 681 932 366 2,040 178 $ 6,124 Total other loans $ 425,146 $ 218,814 $ 146,030 $ 55,066 $ 35,624 $ 131,174 $ 70,051 $ 1,081,905 |