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Loans and Allowance for Credit Losses
 3 Months Ended
Mar. 31, 2023
Loans and Leases Receivable Disclosure [Abstract]  
Loans, Notes, Trade and Other Receivables Disclosure Loans and Leases and Allowance for Credit Losses
Loans and leases are presented in the Consolidated Statements of Financial Condition net of deferred fees and costs, and discounts related to purchased loans. Net deferred fees were $6.7 million and $5.9 million as of March 31, 2023 and December 31, 2022, respectively, and discounts on purchased loans from acquisitions were $33.5 million and $5.4 million as of March 31, 2023 and December 31, 2022, respectively. The following table provides outstanding balances related to each of our loan types:
 
March 31, 2023December 31, 2022
 (dollars in thousands)
Commercial, financial, agricultural and other$1,471,079 $1,211,706 
Time and demand1,254,315 1,023,824 
Commercial credit cards13,706 13,920 
Equipment finance109,221 79,674 
Time and demand other93,837 94,288 
Real estate construction541,902 513,101 
Construction other422,831 395,439 
Construction residential119,071 117,662 
Residential real estate2,323,867 2,194,669 
Residential first lien1,660,433 1,547,192 
Residential junior lien/home equity663,434 647,477 
Commercial real estate2,991,930 2,425,012 
Multifamily484,193 431,151 
Nonowner occupied1,817,453 1,510,347 
Owner occupied690,284 483,514 
Loans to individuals1,328,167 1,297,655 
Automobile and recreational vehicles1,244,874 1,210,451 
Consumer credit cards9,886 10,657 
Consumer other73,407 76,547 
Total loans and leases$8,656,945 $7,642,143 
First Commonwealth’s loan portfolio includes five primary loan categories. When calculating the allowance for credit losses these categories are classified into fourteen portfolio segments. The composition of loans by portfolio segment includes:
Commercial, financial, agricultural and other
Time & Demand - Consists primarily of commercial and industrial loans. This category consists of loans that are typically cash flow dependent and therefore have different risk and loss characteristics than other commercial loans. Loans in this category include revolving and term structures with fixed and variable interest rates. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and economic conditions measured by GDP. At March 31, 2023 and December 31, 2022, this category includes $5.3 million and $4.3 million in Paycheck Protection Program ("PPP") loans for small businesses. Because PPP loans are fully guaranteed by the SBA, there is no allowance for credit losses recognized for these loans.
Commercial Credit Cards - Consists of unsecured credit cards for commercial customers. These commercial credit cards have separate characteristics outside of normal commercial non-real estate loans, as they tend to have shorter overall duration. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and economic conditions measured by GDP.
Equipment Finance - Consists of loans and leases to finance the purchase of equipment for commercial customers. The risk and loss characteristics are unique for this group due to the type of collateral. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and economic conditions measured by GDP.
Time & Demand Other - Consists primarily of loans to state and political subdivisions and other commercial loans that have different characteristics than loans in the Time and Demand category. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of household debt to income and economic conditions measured by GDP.
Real estate construction
Construction Other - Consists of construction loans to commercial builders and developers and are secured by the properties under development.
Construction Residential - Consists of loans to finance the construction of residential properties during the construction period. Borrowers are typically individuals who will occupy the completed single family property.
The risk and loss characteristics of these two construction categories are different than other real estate secured categories due to the collateral being at various stages of completion. The nature of the project and type of borrower of the two construction categories provides for unique risk and loss characteristics for each category. The primary macroeconomic drivers for estimating credit losses for construction loans include forecasts of national unemployment and measures of completed construction projects.
Residential real estate
Residential first lien - Consists of loans with collateral of 1-4 family residencies with a senior lien position. The risk and loss characteristics are unique for this group because the collateral for these loans are the borrower’s primary residence. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and residential property values.
Residential Junior Lien/Home Equity - Consists of loans with collateral of 1-4 family residencies with an open end line of credit or junior lien position. The junior lien position for the majority of these loans provides a higher risk of loss than other residential real estate loans. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and residential property values.
Commercial real estate
Multifamily - Consists of loans secured by commercial multifamily properties. Real estate related to rentals to consumers provide unique risk and loss characteristics. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of commercial real estate values and national unemployment.
Nonowner Occupied - Consists of loans secured by commercial real estate non-owner occupied and provides different loss characteristics than other real estate categories. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and economic conditions measured by GDP.
Owner Occupied - Consists of loans secured by commercial real estate owner occupied properties. The risk and loss characteristics of this category were considered different than other real estate categories because it is owner occupied and would impact the ability to conduct business. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and economic conditions measured by GDP.
Loans to individuals
Automobile and Recreational Vehicles - Consists of both direct and indirect loans with automobiles and recreational vehicles held as collateral. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of consumer sentiment and automobile retention value.
Consumer Credit Cards – Consists of unsecured consumer credit cards. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of consumer sentiment and economic conditions measured by GDP.
Other Consumer - Consists of lines of credit, student loans and other consumer loans, not secured by real estate or autos. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of consumer sentiment and retail sales.
The allowance for credit losses is calculated by pooling loans of similar credit risk characteristics and applying a discounted cash flow methodology after incorporating probability of default and loss given default estimates. Probability of default represents an estimate of the likelihood of default, and loss given default measures the expected loss upon default. Inputs impacting the expected losses include a forecast of macroeconomic factors, using a weighted forecast from a nationally
recognized firm. Our model incorporates a one-year forecast of macroeconomic factors, after which the factors revert back to the historical mean over a one-year period. The most significant macroeconomic factor used in estimating credit losses is the national unemployment rate. The forecasted value for national unemployment at the beginning of the forecast period was 3.47% and during the one-year forecast period it was projected to average 4.42%, with a peak of 4.84%.
Credit Quality Information
As part of the on-going monitoring of credit quality within the loan portfolio, the following credit worthiness categories are used in grading our loans:
Pass  Acceptable levels of risk exist in the relationship. Includes all loans not classified as OAEM, substandard or doubtful.
Other Assets Especially Mentioned (OAEM)Potential weaknesses that deserve management’s close attention. The potential weaknesses may result in deterioration of the repayment prospects or weaken the Company’s credit position at some future date. The credit risk may be relatively minor, yet constitute an undesirable risk in light of the circumstances surrounding the specific credit. No loss of principal or interest is expected.
SubstandardWell-defined weakness or a weakness that jeopardizes the repayment of the debt. A loan may be classified as substandard as a result of deterioration of the borrower’s financial condition and repayment capacity. Loans for which repayment plans have not been met or collateral equity margins do not protect the Company may also be classified as substandard.
DoubtfulLoans with the characteristics of substandard loans with the added characteristic that collection or liquidation in full, on the basis of presently existing facts and conditions, is highly improbable.

The Company’s internal creditworthiness grading system provides a measurement of credit risk based primarily on an evaluation of the borrower’s cash flow and collateral. Category ratings are reviewed each quarter, at which time management analyzes the results, as well as other external statistics and factors related to loan performance.
The following tables represent our credit risk profile by creditworthiness:
 March 31, 2023
Non-Pass
PassOAEMSubstandardDoubtfulLossTotal Non-PassTotal
(dollars in thousands)
Commercial, financial, agricultural and other$1,368,580 $63,654 $38,845 $— $— $102,499 $1,471,079 
Time and demand1,152,045 63,654 38,616 — — 102,270 1,254,315 
Commercial credit cards13,706 — — — — — 13,706 
Equipment finance109,020 — 201 — — 201 109,221 
Time and demand other93,809 — 28 — — 28 93,837 
Real estate construction540,264 1,638 — — — 1,638 541,902 
Construction other421,193 1,638 — — — 1,638 422,831 
Construction residential119,071 — — — — — 119,071 
Residential real estate2,313,412 2,119 8,336 — — 10,455 2,323,867 
Residential first lien1,654,259 2,119 4,055 — — 6,174 1,660,433 
Residential junior lien/home equity659,153 — 4,281 — — 4,281 663,434 
Commercial real estate2,917,078 45,500 29,352 — — 74,852 2,991,930 
Multifamily483,668 479 46 — — 525 484,193 
Nonowner occupied1,765,458 28,201 23,794 — — 51,995 1,817,453 
Owner occupied667,952 16,820 5,512 — — 22,332 690,284 
Loans to individuals1,327,738 — 429 — — 429 1,328,167 
Automobile and recreational vehicles1,244,519 — 355 — — 355 1,244,874 
Consumer credit cards9,886 — — — — — 9,886 
Consumer other73,333 — 74 — — 74 73,407 
Total loans and leases$8,467,072 $112,911 $76,962 $— $— $189,873 $8,656,945 
 
 December 31, 2022
Non-Pass
PassOAEMSubstandardDoubtfulLossTotal Non-PassTotal
(dollars in thousands)
Commercial, financial, agricultural and other$1,164,193 $35,389 $12,124 $— $— $47,513 $1,211,706 
Time and demand976,346 35,389 12,089 — — 47,478 1,023,824 
Commercial credit cards13,920 — — — — — 13,920 
Equipment finance79,674 — — — — — 79,674 
Time and demand other94,253 — 35 — — 35 94,288 
Real estate construction513,101 — — — — — 513,101 
Construction other395,439 — — — — — 395,439 
Construction residential117,662 — — — — — 117,662 
Residential real estate2,187,780 736 6,153 — — 6,889 2,194,669 
Residential first lien1,542,854 675 3,663 — — 4,338 1,547,192 
Residential junior lien/home equity644,926 61 2,490 — — 2,551 647,477 
Commercial real estate2,347,000 52,291 25,721 — — 78,012 2,425,012 
Multifamily430,613 488 50 — — 538 431,151 
Nonowner occupied1,439,478 49,037 21,832 — — 70,869 1,510,347 
Owner occupied476,909 2,766 3,839 — — 6,605 483,514 
Loans to individuals1,297,206 — 449 — — 449 1,297,655 
Automobile and recreational vehicles1,210,090 — 361 — — 361 1,210,451 
Consumer credit cards10,657 — — — — — 10,657 
Consumer other76,459 — 88 — — 88 76,547 
Total loans and leases$7,509,280 $88,416 $44,447 $— $— $132,863 $7,642,143 

The following table summarizes the loan risk rating category by loan type including term loans on an amortized cost basis by origination year:
March 31, 2023
Term LoansRevolving Loans
20232022202120202019PriorTotal
(dollars in thousands)
Time and demand$48,152 $229,873 $173,699 $84,221 $92,893 $108,814 $516,663 $1,254,315 
Pass48,152 215,243 163,441 73,274 82,030 104,781 465,124 1,152,045 
OAEM— 14,630 2,806 1,547 1,604 1,224 41,843 63,654 
Substandard— — 7,452 9,400 9,259 2,809 9,696 38,616 
Gross charge-offs— — — — — (14)(241)(255)
Gross recoveries— — — 34 4 78 — 116 
Commercial credit cards— — — — — — 13,706 13,706 
Pass— — — — — — 13,706 13,706 
Gross charge-offs— — — — — — (26)(26)
Gross recoveries— — — — — — 2 2 
March 31, 2023
Term LoansRevolving Loans
20232022202120202019PriorTotal
(dollars in thousands)
Equipment finance33,014 76,207 — — — — — 109,221 
Pass33,014 76,006 — — — — — 109,020 
Substandard— 201 — — — — — 201 
Gross charge-offs— (45)— — — — — (45)
Gross recoveries— — — — — — — — 
Time and demand other2,251 5,879 19,698 20,130 3,624 39,653 2,602 93,837 
Pass2,251 5,879 19,698 20,130 3,624 39,625 2,602 93,809 
Substandard— — — — — 28 — 28 
Gross charge-offs— — — — — — (337)(337)
Gross recoveries— — — — — — 41 41 
Construction other2,156 117,145 201,349 65,640 21,922 14,310 309 422,831 
Pass2,156 117,145 199,711 65,640 21,922 14,310 309 421,193 
OAEM— — 1,638 — — — — 1,638 
Gross charge-offs— — — — — — — — 
Gross recoveries— — — — — — — — 
Construction residential1,842 103,518 4,429 5,376 3,208 — 698 119,071 
Pass1,842 103,518 4,429 5,376 3,208 — 698 119,071 
Gross charge-offs— — — — — — — — 
Gross recoveries— — — — — — — — 
Residential first lien26,936 300,936 559,299 339,378 102,937 328,714 2,233 1,660,433 
Pass26,936 300,872 557,367 339,288 102,120 325,707 1,969 1,654,259 
OAEM— — 1,571 — 130 341 77 2,119 
Substandard— 64 361 90 687 2,666 187 4,055 
Gross charge-offs— (1)— (4)(1)(10)— (16)
Gross recoveries— — — — — 26 — 26 
Residential junior lien/home equity10,373 77,342 49,009 1,563 3,220 6,260 515,667 663,434 
Pass10,373 77,342 49,009 1,563 3,155 6,181 511,530 659,153 
Substandard— — — — 65 79 4,137 4,281 
Gross charge-offs— — — — — — (63)(63)
Gross recoveries— — — — — 1 11 12 
Multifamily1,863 154,628 101,627 79,771 32,764 111,833 1,707 484,193 
Pass1,863 154,628 101,627 79,771 32,764 111,308 1,707 483,668 
OAEM— — — — — 479 — 479 
Substandard— — — — — 46 — 46 
Gross charge-offs— — — — — — — — 
Gross recoveries— — — — — — — — 
Nonowner occupied37,368 401,997 214,359 163,827 247,824 742,094 9,984 1,817,453 
Pass37,368 401,523 214,359 159,321 246,350 697,715 8,822 1,765,458 
OAEM— — — 4,506 1,474 21,219 1,002 28,201 
Substandard— 474 — — — 23,160 160 23,794 
Gross charge-offs— — — — — — — — 
Gross recoveries— — — — — 38 — 38 
Owner occupied23,235 163,650 140,176 95,510 67,131 190,969 9,613 690,284 
Pass23,235 163,055 139,972 88,836 56,667 186,685 9,502 667,952 
OAEM— 595 182 5,089 9,798 1,123 33 16,820 
Substandard— — 22 1,585 666 3,161 78 5,512 
Gross charge-offs— — — — — — — — 
Gross recoveries— — — — — 4 — 4 
March 31, 2023
Term LoansRevolving Loans
20232022202120202019PriorTotal
(dollars in thousands)
Automobile and recreational vehicles129,646 575,915 304,240 157,298 59,302 18,473 — 1,244,874 
Pass129,646 575,889 304,197 157,204 59,184 18,399 — 1,244,519 
Substandard— 26 43 94 118 74 — 355 
Gross charge-offs— (266)(199)(196)(102)(39)— (802)
Gross recoveries— 60 80 92 98 60 — 390 
Consumer credit cards— — — — — — 9,886 9,886 
Pass— — — — — — 9,886 9,886 
Gross charge-offs— — — — — — (66)(66)
Gross recoveries— — — — — — 17 17 
Consumer other1,792 5,998 16,226 2,185 2,943 4,818 39,445 73,407 
Pass1,792 5,998 16,226 2,185 2,924 4,814 39,394 73,333 
Substandard— — — — 19 4 51 74 
Gross charge-offs— (44)(27)(3)(19)(6)(174)(273)
Gross recoveries— — — 1 4 18 41 64 
Total loans and leases$318,628 $2,213,088 $1,784,111 $1,014,899 $637,768 $1,565,938 $1,122,513 $8,656,945 
Total charge-offs— (356)(226)(203)(122)(69)(907)(1,883)
Total recoveries— 60 80 127 106 225 112 710 
December 31, 2022
Term LoansRevolving Loans
20222021202020192018PriorTotal
(dollars in thousands)
Time and demand$180,134 $165,064 $66,006 $88,959 $57,030 $57,907 $408,724 $1,023,824 
Pass180,134 154,542 56,592 79,935 56,718 56,309 392,116 976,346 
OAEM— 10,489 8,387 1,846 250 895 13,522 35,389 
Substandard— 33 1,027 7,178 62 703 3,086 12,089 
Commercial credit cards— — — — — — 13,920 13,920 
Pass— — — — — — 13,920 13,920 
Equipment finance79,674 — — — — — — 79,674 
Pass79,674 — — — — — — 79,674 
Time and demand other7,172 20,281 19,626 3,823 2,885 36,197 4,304 94,288 
Pass7,172 20,281 19,626 3,823 2,885 36,162 4,304 94,253 
Substandard— — — — — 35 — 35 
Construction other81,870 179,919 85,264 23,001 24,005 1,011 369 395,439 
Pass81,870 179,919 85,264 23,001 24,005 1,011 369 395,439 
Construction residential82,829 34,783 — 31 18 — 1 117,662 
Pass82,829 34,783 — 31 18 — 1 117,662 
Residential first lien272,136 507,573 337,995 102,870 69,890 255,573 1,155 1,547,192 
Pass272,136 507,042 337,979 102,097 69,212 253,310 1,078 1,542,854 
OAEM— 164 — 133 51 250 77 675 
Substandard— 367 16 640 627 2,013 — 3,663 
Residential junior lien/home equity77,016 49,273 1,499 2,584 1,683 4,396 511,026 647,477 
Pass77,016 49,273 1,499 2,517 1,683 4,263 508,675 644,926 
OAEM— — — — — 51 10 61 
Substandard— — — 67 — 82 2,341 2,490 
Multifamily140,004 90,868 60,699 39,848 19,914 78,483 1,335 431,151 
Pass140,004 90,868 60,699 39,848 19,914 77,945 1,335 430,613 
OAEM— — — — — 488 — 488 
Substandard— — — — — 50 — 50 
Nonowner occupied298,751 153,918 115,947 214,068 141,814 581,060 4,789 1,510,347 
Pass298,751 153,918 115,947 212,588 113,638 541,007 3,629 1,439,478 
OAEM— — — 1,480 20,349 26,207 1,001 49,037 
Substandard— — — — 7,827 13,846 159 21,832 
Owner occupied113,010 105,513 56,977 44,430 26,456 131,432 5,696 483,514 
Pass113,010 105,309 55,468 43,014 26,294 128,230 5,584 476,909 
OAEM— 182 745 791 92 923 33 2,766 
Substandard— 22 764 625 70 2,279 79 3,839 
Automobile and recreational vehicles613,513 330,298 172,530 68,996 20,589 4,525 — 1,210,451 
Pass613,513 330,252 172,435 68,865 20,524 4,501 — 1,210,090 
Substandard— 46 95 131 65 24 — 361 
Consumer credit cards— — — — — — 10,657 10,657 
Pass— — — — — — 10,657 10,657 
Consumer other6,561 17,177 2,489 3,798 1,656 4,085 40,781 76,547 
Pass6,561 17,177 2,489 3,775 1,652 4,085 40,720 76,459 
Substandard— — — 23 4 — 61 88 
Total loans and leases$1,952,670 $1,654,667 $919,032 $592,408 $365,940 $1,154,669 $1,002,757 $7,642,143 
Portfolio Risks
The credit quality of our loan portfolio can potentially represent significant risk to our earnings, capital and liquidity. First Commonwealth devotes substantial resources to managing this risk primarily through our credit administration department that develops and administers policies and procedures for underwriting, maintaining, monitoring and collecting loans. Credit administration is independent of lending departments and oversight is provided by the Credit Committee of the First Commonwealth Board of Directors.
Total net charge-offs for the three months ended March 31, 2023 and 2022 were $1.2 million and $1.1 million, respectively.
Age Analysis of Past Due Loans by Segment
The following tables delineate the aging analysis of the recorded investments in past due loans as of March 31, 2023 and December 31, 2022. Also included in these tables are loans that are 90 days or more past due and still accruing because they are well-secured and in the process of collection.
 March 31, 2023
 30 - 59 days past due60 - 89 days past due90 days or greater and still accruingNonaccrualTotal past due and nonaccrualCurrentTotal
 (dollars in thousands)
Commercial, financial, agricultural and other$1,470 $311 $551 $12,364 $14,696 $1,456,383 $1,471,079 
Time and demand1,462 293 548 12,163 14,466 1,239,849 1,254,315 
Commercial credit cards6 18 1 — 25 13,681 13,706 
Equipment finance— — — 201 201 109,020 109,221 
Time and demand other2 — 2 — 4 93,833 93,837 
Real estate construction833 — — — 833 541,069 541,902 
Construction other— — — — — 422,831 422,831 
Construction residential833 — — — 833 118,238 119,071 
Residential real estate3,787 1,821 280 7,655 13,543 2,310,324 2,323,867 
Residential first lien1,934 1,188 61 3,543 6,726 1,653,707 1,660,433 
Residential junior lien/home equity1,853 633 219 4,112 6,817 656,617 663,434 
Commercial real estate4,623 21 — 23,786 28,430 2,963,500 2,991,930 
Multifamily68 — — — 68 484,125 484,193 
Nonowner occupied1,941 — — 21,111 23,052 1,794,401 1,817,453 
Owner occupied2,614 21 — 2,675 5,310 684,974 690,284 
Loans to individuals2,141 802 609 429 3,981 1,324,186 1,328,167 
Automobile and recreational vehicles1,786 586 205 355 2,932 1,241,942 1,244,874 
Consumer credit cards41 40 — — 81 9,805 9,886 
Consumer other314 176 404 74 968 72,439 73,407 
Total loans and leases$12,854 $2,955 $1,440 $44,234 $61,483 $8,595,462 $8,656,945 
 
 December 31, 2022
 30 - 59 days past due60 - 89 days past due90 days or greater and still accruingNonaccrualTotal past due and nonaccrual CurrentTotal
 (dollars in thousands)
Commercial, financial, agricultural and other$1,233 $279 $355 $2,374 $4,241 $1,207,465 $1,211,706 
Time and demand1,121 270 352 2,374 4,117 1,019,707 1,023,824 
Commercial credit cards27 9 — — 36 13,884 13,920 
Equipment finance— — — — — 79,674 79,674 
Time and demand other85 — 3 — 88 94,200 94,288 
Real estate construction502 — — — 502 512,599 513,101 
Construction other— — — — — 395,439 395,439 
Construction residential502 — — — 502 117,160 117,662 
Residential real estate3,023 1,178 811 5,683 10,695 2,183,974 2,194,669 
Residential first lien1,547 771 214 3,369 5,901 1,541,291 1,547,192 
Residential junior lien/home equity1,476 407 597 2,314 4,794 642,683 647,477 
Commercial real estate7,870 25 93 20,539 28,527 2,396,485 2,425,012 
Multifamily202 — — — 202 430,949 431,151 
Nonowner occupied7,547 — 92 19,575 27,214 1,483,133 1,510,347 
Owner occupied121 25 1 964 1,111 482,403 483,514 
Loans to individuals3,268 571 732 449 5,020 1,292,635 1,297,655 
Automobile and recreational vehicles2,694 368 295 361 3,718 1,206,733 1,210,451 
Consumer credit cards53 29 5 — 87 10,570 10,657 
Consumer other521 174 432 88 1,215 75,332 76,547 
Total loans and leases$15,896 $2,053 $1,991 $29,045 $48,985 $7,593,158 $7,642,143 
Nonaccrual Loans
The previous tables summarize nonaccrual loans by loan segment. The Company generally places loans on nonaccrual status when the full and timely collection of interest or principal becomes uncertain, when part of the principal balance has been charged off and no restructuring has occurred, or the loans reach a certain number of days past due. Generally, loans 90 days or more past due are placed on nonaccrual status, except for consumer loans, which are placed on nonaccrual status at 150 days past due.
When a loan is placed on nonaccrual, the accrued unpaid interest receivable is reversed against interest income and all future payments received are applied as a reduction to the loan principal. Generally, the loan is returned to accrual status when (a) all delinquent interest and principal becomes current under the terms of the loan agreement or (b) the loan is both well-secured and in the process of collection and collectability is no longer in doubt.
Nonperforming Loans
Management considers loans to be nonperforming when, based on current information and events, it is determined that the Company will not be able to collect all amounts due according to the loan contract, including scheduled interest payments. When management identifies a loan as nonperforming, the credit loss is measured based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, except when the sole source for repayment of the loan is the operation or liquidation of collateral. When the loan is collateral dependent, the appraised value less estimated cost to sell is utilized. If management determines that the value of the loan is less than the recorded investment in the loan, a credit loss is recognized through an allowance estimate or a charge-off to the allowance for credit losses.
When the ultimate collectability of the total principal of a nonperforming loan is in doubt and the loan is on nonaccrual status, all payments are applied to principal, under the cost recovery method. When the ultimate collectability of the total principal of a
nonperforming loan is not in doubt and the loan is on nonaccrual status, contractual interest is credited to interest income when received under the cash basis method.
At March 31, 2023 and December 31, 2022, there were no nonperforming loans held for sale. During both the three months ended March 31, 2023 and 2022, there were no gains recognized on the sale of nonperforming loans.
The following tables include the recorded investment and unpaid principal balance for nonperforming loans with the associated allowance amount, if applicable, as of March 31, 2023 and December 31, 2022. Also presented are the average recorded investment in nonperforming loans and the related amount of interest recognized while the loan was considered nonperforming. Average balances are calculated using month-end balances of the loans for the period reported and are included in the table below based on their period-end allowance position. The increase in nonperforming loans is primarily a result of $14.9 million in loans acquired from Centric, offset by the removal of $6.4 million in accruing troubled debt restructurings ("TDR's"). The TDR's were eliminated as a result of our adoption of ASU 2022-02, Financial Instruments Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02"). This standard was adopted on January 1, 2023 and eliminates the accounting guidance for TDR's while enhancing disclosure requirements for loan modifications for borrowers experiencing financial difficulty.
 March 31, 2023December 31, 2022
 Recorded
investment		Unpaid
principal
balance		Related
allowance		Recorded
investment		Unpaid
principal
balance		Related
allowance
 (dollars in thousands)
With no related allowance recorded:
Commercial, financial, agricultural and other$1,808 $10,187 $3,141 $9,555 
Time and demand1,607 9,978 3,141 9,555 
Equipment finance201 209 — — 
Time and demand other— — — — 
Real estate construction— — — — 
Construction other— — — — 
Construction residential— — — — 
Residential real estate6,419 8,312 9,145 11,010 
Residential first lien3,543 4,633 5,754 6,848 
Residential junior lien/home equity2,876 3,679 3,391 4,162 
Commercial real estate22,689 25,685 21,505 24,119 
Multifamily— — — — 
Nonowner occupied20,938 23,063 20,155 22,565 
Owner occupied1,751 2,622 1,350 1,554 
Loans to individuals429 470 528 563 
Automobile and recreational vehicles355 396 440 475 
Consumer other74 74 88 88 
Subtotal31,345 44,654 34,319 45,247 
With an allowance recorded:
Commercial, financial, agricultural and other10,556 13,881 $9,071 1,168 1,186 $711 
Time and demand10,556 13,881 9,071 1,168 1,186 711 
Equipment finance— — — — — — 
Time and demand other— — — — — — 
Real estate construction— — — — — — 
Construction other— — — — — — 
Construction residential— — — — — — 
Residential real estate1,237 1,406 103 — — — 
Residential first lien— — — — — — 
Residential junior lien/home equity1,237 1,406 103 — — — 
Commercial real estate1,096 1,103 588 — — — 
Multifamily— — — — — — 
Nonowner occupied173 212 172 — — — 
Owner occupied923 891 416 — — — 
Loans to individuals— — — — — — 
Automobile and recreational vehicles— — — — — — 
Consumer other— — — — — — 
Subtotal12,889 16,390 9,762 1,168 1,186 711 
Total$44,234 $61,044 $9,762 $35,487 $46,433 $711 
 For the Three Months Ended March 31,
 20232022
 Average
recorded
investment		Interest
income
recognized		Average
recorded
investment		Interest
income
recognized
 (dollars in thousands)
With no related allowance recorded:
Commercial, financial, agricultural and other$1,693 $— $3,561 $29 
Time and demand1,455 — 3,561 29 
Equipment finance238 — — — 
Time and demand other— — — — 
Real estate construction— — — — 
Construction other— — — — 
Construction residential— — — — 
Residential real estate6,069 20 9,201 84 
Residential first lien3,437 20 5,197 62 
Residential junior lien/home equity2,632 — 4,004 22 
Commercial real estate21,974 — 24,312 13 
Multifamily— — — — 
Nonowner occupied20,487 — 22,714 9 
Owner occupied1,487 — 1,598 4 
Loans to individuals432 — 435 4 
Automobile and recreational vehicles356 — 350 4 
Consumer other76 — 85 — 
Subtotal30,168 20 37,509 130 
With an allowance recorded:
Commercial, financial, agricultural and other7,445 — 384 6 
Time and demand7,445 — 384 6 
Equipment finance— — — — 
Time and demand other— — — — 
Real estate construction— — — — 
Construction other— — — — 
Construction residential— — — — 
Residential real estate824 — — — 
Residential first lien— — — — 
Residential junior lien/home equity824 — — — 
Commercial real estate711 — 416 — 
Multifamily— — 416 — 
Nonowner occupied115 — — — 
Owner occupied596 — — — 
Loans to individuals— — — — 
Automobile and recreational vehicles— — — — 
Consumer other— — — — 
Subtotal8,980 — 800 6 
Total$39,148 $20 $38,309 $136 
Unfunded commitments related to nonperforming loans were $0.2 million at both March 31, 2023 and December 31, 2022. After consideration of the requirements to draw and available collateral related to these commitments, it was determined that no reserve was required at March 31, 2023 and December 31, 2022.
Loan Modifications Made to Borrowers Experiencing Financial Difficulty
The Company adopted ASU 2022-02 on January 1, 2023 on a prospective basis. Disclosures for years prior to adoption continue to reflect TDR's as nonperforming loans and include TDR disclosures required under the previous guidance. Upon adoption of this guidance, the Company no longer establishes a specific reserve for modifications to borrowers experiencing financial difficulty. Instead, these modifications are included in their respective loan segment and an allowance is determined by a loss given default and probability of default methodology.
Modifications to borrowers experiencing financial difficulty may include interest rate reductions, principal forgiveness, other- than-insignificant payment delay, term extensions or any combination thereof.
The following table presents the amortized cost basis of loan modifications made to borrowers experiencing financial difficulty:
For the Three Months Ended March 31, 2023
Rate ReductionTerm ExtensionPrincipal ForgivenessPayment DeferralTotalPercentage of Total Loans and Leases
(dollars in thousands)
Residential real estate$25 $— $— $— $25 — %
Residential first lien25 — — — 25 — 
Total$25 $— $— $— $25 — %
The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty:
For the Three Months Ended March 31, 2023
Rate ReductionTerm ExtensionPrincipal ForgivenessPayment Deferral
(dollars in thousands)
Residential real estate(2.25)%0$— — 
Residential first lien(2.25)0— — 
Total(2.25)%0$— — 
A modification is considered to be in default when the loan is 90 days or more past due. For the three months ended March 31, 2023, there were no modified loans that were considered to be in default. The following table shows the payment status of loans that have been modified on or after January 1, 2023, the date we adopted ASU 2022-02:
March 31, 2023
Current30 - 59 days past due60 - 89 days past due90 days or greater and still accruingTotal
(dollars in thousands)
Residential real estate$25 $— $— $— $25 
Residential first lien25 — — — 25 
Total loans and leases$25 $— $— $— $25 
Troubled Debt Restructurings Disclosures Prior to Adoption of ASU 2022-02
Troubled debt restructured loans are those loans whose terms have been renegotiated to provide a reduction or deferral of principal or interest as a result of the financial difficulties experienced by the borrower, who could not obtain comparable terms from alternative financing sources. Troubled debt restructured loans are considered to be nonperforming loans.
The following tables provide detail, including specific reserves and reasons for modification, related to loans identified as troubled debt restructurings:
 For the Three Months Ended March 31, 2022
  Type of Modification   
 Number
of
Contracts		Extend
Maturity		Modify
Rate		Modify
Payments		Total
Pre-Modification
Outstanding
Recorded
Investment		Post-
Modification
Outstanding
Recorded
Investment		Specific
Reserve
 (dollars in thousands)
Residential real estate2 $— $10 $59 $69 $69 $— 
Residential first lien2 — 10 59 69 69 — 
Total2 $— $10 $59 $69 $69 $— 
The troubled debt restructurings included in the above tables are also included in the nonperforming loan tables provided earlier in this note. Loans defined as modified due to a change in rate may include loans that were modified for a change in rate as well as a re-amortization of the principal and an extension of the maturity. For the three months ended March 31, 2022, $10 thousand of total rate modifications represent loans with modifications to the rate as well as payment as a result of re-amortization. The changes in loan balances between the pre-modification balance and the post-modification balance are due to customer payments.
A troubled debt restructuring is considered to be in default when a restructured loan is 90 days or more past due. The following table provides information related to loans that were restructured within the past twelve months and that were considered to be in default during the three months ended March 31:
 2022
 Number of
Contracts		Recorded
Investment
 (dollars in thousands)
Residential real estate1 $17 
Residential first lien1 17 
Total1 $17 
The following tables provide detail related to the allowance for credit losses:
 For the Three Months Ended March 31, 2023
Beginning balanceAllowance for credit loss on PCD acquired loansCharge-offsRecoveries
Provision (credit)a
Ending balance
(dollars in thousands)
Commercial, financial, agricultural and other$22,650 $15,949 $(663)$159 $4,473 $42,568 
Time and demand20,040 15,949 (255)116 3,615 39,465 
Commercial credit cards335 — (26)2 20 331 
Equipment finance1,086 — (45)— 420 1,461 
Time and demand other1,189 — (337)41 418 1,311 
Real estate construction8,822 287 — — (1,160)7,949 
Construction other6,360 227 — — (696)5,891 
Construction residential2,462 60 — — (464)2,058 
Residential real estate21,412 527 (79)38 875 22,773 
Residential first lien14,822 197 (16)26 795 15,824 
Residential junior lien/home equity6,590 330 (63)12 80 6,949 
Commercial real estate28,804 5,313 — 42 5,218 39,377 
Multifamily4,726 234 — — 581 5,541 
Nonowner occupied16,426 2,739 — 38 2,349 21,552 
Owner occupied7,652 2,340 — 4 2,288 12,284 
Loans to individuals21,218 3 (1,141)471 667 21,218 
Automobile and recreational vehicles18,819 3 (802)390 603 19,013 
Consumer credit cards412 — (66)17 5 368 
Consumer other1,987 — (273)64 59 1,837 
Total loans and leases$102,906 $22,079 $(1,883)$710 $10,073 $133,885 
a) The provision expense (credit) shown here includes the day 1 provision on non-PCD loans acquired from Centric and excludes the provision for off-balance sheet credit exposure included in the income statement.
 For the Three Months Ended March 31, 2022
 Beginning balanceCharge-offsRecoveries
Provision (credit)a
Ending balance
 (dollars in thousands)
Commercial, financial, agricultural and other$18,093 $(475)$80 $3,023 $20,721 
Time and demand15,283 (144)53 3,715 18,907 
Commercial credit cards247 (19)1 113 342 
Equipment finance— — — 31 31 
Time and demand other2,563 (312)26 (836)1,441 
Real estate construction4,220 — — 710 4,930 
Construction other3,278 — — (103)3,175 
Construction residential942 — — 813 1,755 
Residential real estate12,625 (139)29 4,213 16,728 
Residential first lien7,459 (40)23 3,683 11,125 
Residential junior lien/home equity5,166 (99)6 530 5,603 
Commercial real estate33,376 — 14 314 33,704 
Multifamily3,561 — — 49 3,610 
Nonowner occupied24,838 — 5 (1,576)23,267 
Owner occupied4,977 — 9 1,841 6,827 
Loans to individuals24,208 (1,009)366 (8,460)15,105 
Automobile and recreational vehicles21,392 (552)255 (8,460)12,635 
Consumer credit cards496 (109)24 (29)382 
Consumer other2,320 (348)87 29 2,088 
Total loans and leases$92,522 $(1,623)$489 $(200)$91,188 
a) The provision expense (credit) shown here excludes the provision for off-balance sheet credit exposure included in the income statement.
Recorded Investment and Unpaid Principal Balance for Impaired Loans with Associated Allowance The following tables include the recorded investment and unpaid principal balance for nonperforming loans with the associated allowance amount, if applicable, as of March 31, 2023 and December 31, 2022. Also presented are the average recorded investment in nonperforming loans and the related amount of interest recognized while the loan was considered nonperforming. Average balances are calculated using month-end balances of the loans for the period reported and are included in the table below based on their period-end allowance position. The increase in nonperforming loans is primarily a result of $14.9 million in loans acquired from Centric, offset by the removal of $6.4 million in accruing troubled debt restructurings ("TDR's"). The TDR's were eliminated as a result of our adoption of ASU 2022-02, Financial Instruments Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures ("ASU 2022-02"). This standard was adopted on January 1, 2023 and eliminates the accounting guidance for TDR's while enhancing disclosure requirements for loan modifications for borrowers experiencing financial difficulty.
 March 31, 2023December 31, 2022
 Recorded
investment		Unpaid
principal
balance		Related
allowance		Recorded
investment		Unpaid
principal
balance		Related
allowance
 (dollars in thousands)
With no related allowance recorded:
Commercial, financial, agricultural and other$1,808 $10,187 $3,141 $9,555 
Time and demand1,607 9,978 3,141 9,555 
Equipment finance201 209 — — 
Time and demand other— — — — 
Real estate construction— — — — 
Construction other— — — — 
Construction residential— — — — 
Residential real estate6,419 8,312 9,145 11,010 
Residential first lien3,543 4,633 5,754 6,848 
Residential junior lien/home equity2,876 3,679 3,391 4,162 
Commercial real estate22,689 25,685 21,505 24,119 
Multifamily— — — — 
Nonowner occupied20,938 23,063 20,155 22,565 
Owner occupied1,751 2,622 1,350 1,554 
Loans to individuals429 470 528 563 
Automobile and recreational vehicles355 396 440 475 
Consumer other74 74 88 88 
Subtotal31,345 44,654 34,319 45,247 
With an allowance recorded:
Commercial, financial, agricultural and other10,556 13,881 $9,071 1,168 1,186 $711 
Time and demand10,556 13,881 9,071 1,168 1,186 711 
Equipment finance— — — — — — 
Time and demand other— — — — — — 
Real estate construction— — — — — — 
Construction other— — — — — — 
Construction residential— — — — — — 
Residential real estate1,237 1,406 103 — — — 
Residential first lien— — — — — — 
Residential junior lien/home equity1,237 1,406 103 — — — 
Commercial real estate1,096 1,103 588 — — — 
Multifamily— — — — — — 
Nonowner occupied173 212 172 — — — 
Owner occupied923 891 416 — — — 
Loans to individuals— — — — — — 
Automobile and recreational vehicles— — — — — — 
Consumer other— — — — — — 
Subtotal12,889 16,390 9,762 1,168 1,186 711 
Total$44,234 $61,044 $9,762 $35,487 $46,433 $711 
 For the Three Months Ended March 31,
 20232022
 Average
recorded
investment		Interest
income
recognized		Average
recorded
investment		Interest
income
recognized
 (dollars in thousands)
With no related allowance recorded:
Commercial, financial, agricultural and other$1,693 $— $3,561 $29 
Time and demand1,455 — 3,561 29 
Equipment finance238 — — — 
Time and demand other— — — — 
Real estate construction— — — — 
Construction other— — — — 
Construction residential— — — — 
Residential real estate6,069 20 9,201 84 
Residential first lien3,437 20 5,197 62 
Residential junior lien/home equity2,632 — 4,004 22 
Commercial real estate21,974 — 24,312 13 
Multifamily— — — — 
Nonowner occupied20,487 — 22,714 9 
Owner occupied1,487 — 1,598 4 
Loans to individuals432 — 435 4 
Automobile and recreational vehicles356 — 350 4 
Consumer other76 — 85 — 
Subtotal30,168 20 37,509 130 
With an allowance recorded:
Commercial, financial, agricultural and other7,445 — 384 6 
Time and demand7,445 — 384 6 
Equipment finance— — — — 
Time and demand other— — — — 
Real estate construction— — — — 
Construction other— — — — 
Construction residential— — — — 
Residential real estate824 — — — 
Residential first lien— — — — 
Residential junior lien/home equity824 — — — 
Commercial real estate711 — 416 — 
Multifamily— — 416 — 
Nonowner occupied115 — — — 
Owner occupied596 — — — 
Loans to individuals— — — — 
Automobile and recreational vehicles— — — — 
Consumer other— — — — 
Subtotal8,980 — 800 6 
Total$39,148 $20 $38,309 $136