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 June 30. Allowance for Credit Losses: June 30, 2023 (Dollar amounts in thousands) Commercial Residential Consumer Unallocated Total Beginning balance $ 12,790 $ 15,059 $ 11,513 $ 258 $ 39,620 Provision for credit losses (377) 166 1,733 278 1,800 Loans charged-off (209) (63) (3,271) — (3,543) Recoveries 246 106 1,678 — 2,030 Ending Balance $ 12,450 $ 15,268 $ 11,653 $ 536 $ 39,907 Allowance for Credit Losses: June 30, 2022 (Dollar amounts in thousands) Commercial Residential Consumer Unallocated Total Beginning balance $ 17,300 $ 13,235 $ 9,662 $ 319 $ 40,516 Provision for credit losses (1,392) 895 1,319 (72) 750 Loans charged-off (370) (56) (1,985) — (2,411) Recoveries 931 94 1,588 — 2,613 Ending Balance $ 16,469 $ 14,168 $ 10,584 $ 247 $ 41,468 The following table presents the activity of the allowance for credit losses by portfolio segment for the six months ended June 30. Allowance for Credit Losses: June 30, 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 (431) 666 2,987 378 3,600 Loans charged -off (515) (142) (7,262) — (7,919) Recoveries 447 176 3,824 — 4,447 Ending Balance $ 12,450 $ 15,268 $ 11,653 $ 536 $ 39,907 Allowance for Credit Losses: June 30, 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 (2,432) (4,249) 1,019 (138) (5,800) Loans charged -off (1,253) (522) (3,890) — (5,665) Recoveries 1,271 623 2,734 — 4,628 Ending Balance $ 16,469 $ 14,168 $ 10,584 $ 247 $ 41,468 The tables below present the recorded investment in non-performing loans by class of loans. June 30, 2023 Loans Past Nonaccrual Due Over With No 90 Days Still Allowance (Dollar amounts in thousands) Accruing Nonaccrual For Credit Loss Commercial Commercial & Industrial $ — $ 1,536 $ 933 Farmland — 2,070 1,662 Non Farm, Non Residential — 1,641 1,530 Agriculture — 1,242 1,208 All Other Commercial — 22 — Residential First Liens 454 998 — Home Equity 106 72 — Junior Liens 140 218 — Multifamily — 1,430 1,250 All Other Residential — 449 — Consumer Motor Vehicle — 2,602 — All Other Consumer — 336 — TOTAL $ 700 $ 12,616 $ 6,583 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: June 30, 2023 Collateral Type (Dollar amounts in thousands) Real Estate Other Commercial Commercial & Industrial $ 3,890 $ — Farmland 2,435 — Non Farm, Non Residential 4,519 — Agriculture 68 1,140 All Other Commercial — — Residential First Liens — — Home Equity — — Junior Liens — — Multifamily 1,250 — All Other Residential — — Consumer Motor Vehicle — — All Other Consumer — — Total $ 12,162 $ 1,140 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. June 30, 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 $ 1,309 $ 128 $ 1,163 $ 2,600 $ 656,982 $ 659,582 Farmland 363 — 1,975 2,338 129,998 132,336 Non Farm, Non Residential 1,292 — 100 1,392 406,706 408,098 Agriculture 194 21 1,140 1,355 113,510 114,865 All Other Commercial — 41 — 41 507,301 507,342 Residential First Liens 652 881 638 2,171 355,819 357,990 Home Equity 172 133 145 450 63,192 63,642 Junior Liens 312 41 282 635 57,158 57,793 Multifamily 146 — 1,250 1,396 185,230 186,626 All Other Residential — — — — 25,266 25,266 Consumer Motor Vehicle 10,222 1,614 584 12,420 582,729 595,149 All Other Consumer 244 47 6 297 32,476 32,773 TOTAL $ 14,906 $ 2,906 $ 7,283 $ 25,095 $ 3,116,367 $ 3,141,462 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 six 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: June 30, 2023 Term Loans at Amortized Cost Basis by Origination Year Revolving 2023 2022 2021 2020 2019 Prior Loans Total Commercial Commercial and Industrial Pass $ 42,227 $ 144,886 $ 119,578 $ 43,911 $ 51,395 $ 110,920 $ 99,856 $ 612,773 Special Mention 58 69 10,483 3,219 2,542 2,751 144 $ 19,266 Substandard 3,296 252 731 1,087 961 8,515 5,977 $ 20,819 Doubtful — — — — — — — $ — Not Rated 699 1,533 1,167 621 303 138 — $ 4,461 Subtotal $ 46,280 $ 146,740 $ 131,959 $ 48,838 $ 55,201 $ 122,324 $ 105,977 $ 657,319 Current period gross charge-offs $ 8 $ 20 $ 39 $ 69 $ - $ - $ - $ 136 Farmland Pass $ 14,598 $ 16,549 $ 21,454 $ 8,518 $ 9,269 $ 54,810 $ 200 $ 125,398 Special Mention — — — — 313 1,373 — $ 1,686 Substandard — — — 456 608 2,144 — $ 3,208 Doubtful — — — — — — — $ — Not Rated — — — — — 17 — $ 17 Subtotal $ 14,598 $ 16,549 $ 21,454 $ 8,974 $ 10,190 $ 58,344 $ 200 $ 130,309 Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ — Non Farm, Non Residential Pass $ 38,087 $ 115,365 $ 71,005 $ 26,599 $ 21,963 $ 121,235 $ 3,613 $ 397,867 Special Mention — 92 1,015 — 863 1 — $ 1,971 Substandard 597 — — — 528 5,356 — $ 6,481 Doubtful — — — — — — — $ — Not Rated — — — 687 — 85 — $ 772 Subtotal $ 38,684 $ 115,457 $ 72,020 $ 27,286 $ 23,354 $ 126,677 $ 3,613 $ 407,091 Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ — Agriculture Pass $ 6,297 $ 11,900 $ 7,810 $ 6,567 $ 7,709 $ 18,395 $ 49,793 $ 108,471 Special Mention — 107 — 8 3 700 1,916 $ 2,734 Substandard — — — — 69 1,179 211 $ 1,459 Doubtful — — — — — — — $ — Not Rated 68 59 35 55 31 1 — $ 249 Subtotal $ 6,365 $ 12,066 $ 7,845 $ 6,630 $ 7,812 $ 20,275 $ 51,920 $ 112,913 Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ — Other Commercial Pass $ 19,209 $ 150,139 $ 94,461 $ 94,799 $ 14,423 $ 106,116 $ 9,592 $ 488,739 Special Mention — 21 — 2,555 7 11,718 — $ 14,301 Substandard — — 19 — 849 5 — $ 873 Doubtful — — — — — — — $ — Not Rated — 14 — — — 476 — $ 490 Subtotal $ 19,209 $ 150,174 $ 94,480 $ 97,354 $ 15,279 $ 118,315 $ 9,592 $ 504,403 Current period gross charge-offs $ 379 $ - $ - $ - $ - $ - $ - $ 379 Residential Multifamily >5 Residential Pass $ 8,132 $ 58,632 $ 31,343 $ 42,385 $ 6,517 $ 28,843 $ 90 $ 175,942 Special Mention — — — 365 — 6,664 361 $ 7,390 Substandard — — — — — 1,250 — $ 1,250 Doubtful — — — — — — — $ — Not Rated — — 1,112 — — 257 — $ 1,369 Subtotal $ 8,132 $ 58,632 $ 32,455 $ 42,750 $ 6,517 $ 37,014 $ 451 $ 185,951 Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ — Total Pass $ 128,550 $ 497,471 $ 345,651 $ 222,779 $ 111,276 $ 440,319 $ 163,144 $ 1,909,190 Special Mention 58 289 11,498 6,147 3,728 23,207 2,421 $ 47,348 Substandard 3,893 252 750 1,543 3,015 18,449 6,188 $ 34,090 Doubtful — — — — — — — $ — Not Rated 767 1,606 2,314 1,363 334 974 — $ 7,358 $ 133,268 $ 499,618 $ 360,213 $ 231,832 $ 118,353 $ 482,949 $ 171,753 $ 1,997,986 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: June 30, 2023 Term Loans at Amortized Cost Basis by Origination Year Revolving 2023 2022 2021 2020 2019 Prior Loans Total Residential First Liens Performing $ 22,550 $ 76,215 $ 68,330 $ 42,893 $ 16,503 $ 127,413 $ 1,525 $ 355,429 Non-performing — 26 — — 44 1,474 — $ 1,544 Subtotal $ 22,550 $ 76,241 $ 68,330 $ 42,893 $ 16,547 $ 128,887 $ 1,525 $ 356,973 Current period gross charge-offs $ - $ - $ - $ - $ - $ 142 $ - $ 142 Home Equity Performing $ 62 $ 398 $ — $ 8 $ 133 $ 920 $ 61,755 $ 63,276 Non-performing — 26 — 19 — 72 58 $ 175 Subtotal $ 62 $ 424 $ — $ 27 $ 133 $ 992 $ 61,813 $ 63,451 Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ — Junior Liens Performing $ 7,541 $ 18,253 $ 9,263 $ 6,451 $ 5,049 $ 9,838 $ 899 $ 57,294 Non-performing — — 8 106 65 180 — $ 359 Subtotal $ 7,541 $ 18,253 $ 9,271 $ 6,557 $ 5,114 $ 10,018 $ 899 $ 57,653 Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ — Other Residential Performing $ 2,987 $ 11,662 $ 7,183 $ 440 $ 736 $ 1,580 $ 133 $ 24,721 Non-performing — — — — 403 47 — $ 450 Subtotal $ 2,987 $ 11,662 $ 7,183 $ 440 $ 1,139 $ 1,627 $ 133 $ 25,171 Current period gross charge-offs $ - $ - $ - $ - $ - $ - $ - $ — Consumer Motor Vehicle Performing $ 148,410 $ 260,415 $ 92,262 $ 64,929 $ 19,388 $ 5,185 $ — $ 590,589 Non-performing 54 916 526 478 174 57 — $ 2,205 Subtotal $ 148,464 $ 261,331 $ 92,788 $ 65,407 $ 19,562 $ 5,242 $ — $ 592,794 Current period gross charge-offs $ 56 $ 3,861 $ 1,931 $ 855 $ 277 $ 144 $ - $ 7,124 Other Consumer Performing $ 7,572 $ 9,755 $ 5,477 $ 2,887 $ 985 $ 870 $ 4,753 $ 32,299 Non-performing 4 25 202 68 26 12 12 $ 349 Subtotal $ 7,576 $ 9,780 $ 5,679 $ 2,955 $ 1,011 $ 882 $ 4,765 $ 32,648 Current period gross charge-offs $ - $ 38 $ 30 $ 11 $ - $ - $ 59 $ 138 Total Performing $ 189,122 $ 376,698 $ 182,515 $ 117,608 $ 42,794 $ 145,806 $ 69,065 $ 1,123,608 Non-performing 58 993 736 671 712 1,842 70 $ 5,082 Total other loans $ 189,180 $ 377,691 $ 183,251 $ 118,279 $ 43,506 $ 147,648 $ 69,135 $ 1,128,690 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 |