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Note 3 - Loans and Allowance for Credit Losses | 12 Months Ended
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Dec. 31, 2023
Notes to Financial Statements |
Loans, Notes, Trade and Other Receivables Disclosure [Text Block] | NOTE 3 – LOANS AND ALLOWANCE FOR CREDIT LOSSES Commercial loans are divided among five segments based primarily on collateral type, risk characteristics, and primary and secondary sources of repayment. These segments are then further stratified based on the commercial loan grade that is assigned using our standard loan grading paradigm. Retail loans are divided into one of two groups based on risk characteristics and source of repayment. Our allowance for credit loss pools are consistent with those used for loan note disclosure purposes. Our loan portfolio segments as of December 31, 2023 were as follows:
| o | Commercial Loans
| ■ | Commercial and Industrial: Risks to this loan category include industry concentration and the practical limitations associated with monitoring the condition of the collateral which often consists of inventory, accounts receivable, and other non-real estate assets. Equipment and inventory obsolescence can also pose a risk. Declines in general economic conditions and other events can cause cash flows to fall to levels insufficient to service debt.
| ■ | Owner Occupied Commercial Real Estate: Risks to this loan category include industry concentration and the inability to monitor the condition of the collateral. Declines in general economic conditions and other events can cause cash flows to fall to levels insufficient to service debt. Also, declines in real estate values and lack of suitable alternative use for the properties are risks for loans in this category.
| ■ | Non-Owner Occupied Commercial Real Estate: Loans in this category are susceptible to declines in occupancy rates, business failure, and general economic conditions. Also, declines in real estate values and lack of suitable alternative use for the properties are risks for loans in this category.
| ■ | Multi-Family and Residential Rental: Risks to this loan category include industry concentration and the inability to monitor the condition of the collateral. Loans in this category are susceptible to weakening general economic conditions and increases in unemployment rates, as well as market demand and supply of similar property and the resulting impact on occupancy rates, market rents, cash flow, and income-based real estate values. Also, the lack of a suitable alternative use for the properties is a risk for loans in this category.
| ■ | Vacant Land, Land Development and Residential Construction: Risks common to commercial construction loans are cost overruns, changes in market demand for property, inadequate long-term financing arrangements, and declines in real estate values. Residential construction loans are susceptible to those same risks as well as those associated with residential mortgage loans. Changes in market demand for property could lead to longer marketing times resulting in higher carrying costs, declining values, and higher interest rates.
| o | Retail Loans
| ■ | 1-4 Family Mortgages: Residential mortgage loans are susceptible to weakening general economic conditions and increases in unemployment rates and declining real estate values.
| ■ | Other Consumer Loans: Risks common to these loans include regulatory risks, unemployment, and changes in local economic conditions as well as the inability to monitor collateral consisting of personal property.
During 2023, we changed the segmentation of credit cards to business customers from other consumer loans to commercial and industrial loans. This division of the credit card balances was done to better align the risk characteristics of the portfolio, which include the customer type and source of repayment. Credit cards to business customers totaled $17.8 million and $16.6 million as of December 31, 2023, and 2022, respectively. We also changed the segmentation of home equity lines of credit from 1-4 family mortgage loans to other consumer loans during the year ended December 31, 2023. Home equity lines of credit share many of the same risk characteristics of both segments, however, losses are primarily driven by a lack of underlying collateral value during distressed situations as many of the loans are in a second lien position, and thus, best segmented within the other consumer portfolio. Home equity lines of credit totaled $38.1 million and $37.4 million as of December 31, 2023, and 2022, respectively. Year-end loans disaggregated by class of loan within the loan portfolio segments were as follows:
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Percent |
|  | December 31, 2023 |  |  | December 31, 2022 |  |  | Increase |
(Dollars in thousands) |  | Balance |  |  | % |  |  | Balance |  |  | % |  |  | (Decrease) |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial (1) |  | $ | 1,254,586 |  |  |  | 29.2 | % |  | $ | 1,185,083 |  |  |  | 30.3 | % |  |  | 5.9 | %
Vacant land, land development, and residential construction |  |  | 74,753 |  |  |  | 1.7 |  |  |  | 61,873 |  |  |  | 1.6 |  |  |  | 20.8 |
Real estate – owner occupied |  |  | 717,667 |  |  |  | 16.7 |  |  |  | 639,192 |  |  |  | 16.3 |  |  |  | 12.3 |
Real estate – non-owner occupied (3) |  |  | 1,035,684 |  |  |  | 24.1 |  |  |  | 979,214 |  |  |  | 25.0 |  |  |  | 5.8 |
Real estate – multi-family and residential rental (3) |  |  | 332,609 |  |  |  | 7.7 |  |  |  | 266,468 |  |  |  | 6.8 |  |  |  | 24.8 |
Total commercial |  |  | 3,415,299 |  |  |  | 79.4 |  |  |  | 3,131,830 |  |  |  | 80.0 |  |  |  | 9.1 |
Retail: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
1-4 family mortgages (2) |  |  | 837,406 |  |  |  | 19.5 |  |  |  | 755,036 |  |  |  | 19.3 |  |  |  | 10.9 |
Other consumer loans (1) |  |  | 51,053 |  |  |  | 1.1 |  |  |  | 29,753 |  |  |  | 0.7 |  |  |  | 71.6 |
Total retail |  |  | 888,459 |  |  |  | 20.6 |  |  |  | 784,789 |  |  |  | 20.0 |  |  |  | 13.2 |
Total loans |  | $ | 4,303,758 |  |  |  | 100.0 | % |  | $ | 3,916,619 |  |  |  | 100.0 | % |  |  | 9.9 | %
| (1) | Credit cards to business customers were reclassified from other consumer loans to commercial and industrial during the year ended December 31, 2023. Credit cards to business customers totaled $17.8 million and $16.6 million as of December 31, 2023, and 2022, respectively.
| (2) | Home equity lines of credit were reclassified from 1-4 family mortgage loans to other consumer loans during the year ended December 31, 2023. Home equity lines of credit totaled $38.1 million and $37.4 million as of December 31, 2023, and 2022, respectively.
| (3) | We have reclassified multi-family construction loans from real estate - non-owner occupied loans to real estate - multi-family and residential rental loans. The table above reflects a classification change of $54.5 million as of December 31, 2022. All the tables that follow have been adjusted to reflect the reclassifications as of the applicable dates.
Concentrations within the loan portfolio were as follows at year end:
|  | 2023 |  |  | 2022 |
|  |  |  |  |  | Percentage |  |  |  |  |  |  | Percentage |
|  |  |  |  |  | of |  |  |  |  |  |  | of |
|  |  |  |  |  | Loan |  |  |  |  |  |  | Loan |
(Dollars in thousands) |  | Balance |  |  | Portfolio |  |  | Balance |  |  | Portfolio |
Commercial real estate loans to lessors of non-residential buildings |  | $ | 754,611 |  |  |  | 17.5 | % |  | $ | 738,891 |  |  |  | 18.9 | %
An age analysis of past due loans is as follows as of December 31, 2023:
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Recorded |
|  |  |  |  |  |  |  |  |  | Greater |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Balance > |
|  | 30 – 59 |  |  | 60 – 89 |  |  | Than 89 |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 89 |
|  | Days |  |  | Days |  |  | Days |  |  | Total |  |  |  |  |  |  | Total |  |  | Days and |
(Dollars in thousands) |  | Past Due |  |  | Past Due |  |  | Past Due |  |  | Past Due |  |  | Current |  |  | Loans |  |  | Accruing |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 4 |  |  | $ | 0 |  |  | $ | 249 |  |  | $ | 253 |  |  | $ | 1,254,333 |  |  | $ | 1,254,586 |  |  | $ | 0 |
Vacant land, land development, and residential construction |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 74,753 |  |  |  | 74,753 |  |  |  | 0 |
Real estate – owner occupied |  |  | 0 |  |  |  | 0 |  |  |  | 70 |  |  |  | 70 |  |  |  | 717,597 |  |  |  | 717,667 |  |  |  | 0 |
Real estate – non-owner occupied |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 1,035,684 |  |  |  | 1,035,684 |  |  |  | 0 |
Real estate – multi-family and residential rental |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 332,609 |  |  |  | 332,609 |  |  |  | 0 |
Total commercial |  |  | 4 |  |  |  | 0 |  |  |  | 319 |  |  |  | 323 |  |  |  | 3,414,976 |  |  |  | 3,415,299 |  |  |  | 0 |
Retail: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
1-4 family mortgages |  |  | 934 |  |  |  | 145 |  |  |  | 38 |  |  |  | 1,117 |  |  |  | 836,289 |  |  |  | 837,406 |  |  |  | 0 |
Other consumer loans |  |  | 97 |  |  |  | 0 |  |  |  | 0 |  |  |  | 97 |  |  |  | 50,956 |  |  |  | 51,053 |  |  |  | 0 |
Total retail |  |  | 1,031 |  |  |  | 145 |  |  |  | 38 |  |  |  | 1,214 |  |  |  | 887,245 |  |  |  | 888,459 |  |  |  | 0 |
Total past due loans |  | $ | 1,035 |  |  | $ | 145 |  |  | $ | 357 |  |  | $ | 1,537 |  |  | $ | 4,302,221 |  |  | $ | 4,303,758 |  |  | $ | 0 |
An age analysis of past due loans is as follows as of December 31, 2022:
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Recorded |
|  |  |  |  |  |  |  |  |  | Greater |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Balance > |
|  | 30 – 59 |  |  | 60 – 89 |  |  | Than 89 |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 89 |
|  | Days |  |  | Days |  |  | Days |  |  | Total |  |  |  |  |  |  | Total |  |  | Days and |
(Dollars in thousands) |  | Past Due |  |  | Past Due |  |  | Past Due |  |  | Past Due |  |  | Current |  |  | Loans |  |  | Accruing |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 0 |  |  | $ | 5,705 |  |  | $ | 249 |  |  | $ | 5,954 |  |  | $ | 1,179,129 |  |  | $ | 1,185,083 |  |  | $ | 0 |
Vacant land, land development, and residential construction |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 61,873 |  |  |  | 61,873 |  |  |  | 0 |
Real estate – owner occupied |  |  | 0 |  |  |  | 248 |  |  |  | 0 |  |  |  | 248 |  |  |  | 638,944 |  |  |  | 639,192 |  |  |  | 0 |
Real estate – non-owner occupied |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 979,214 |  |  |  | 979,214 |  |  |  | 0 |
Real estate – multi-family and residential rental |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 266,468 |  |  |  | 266,468 |  |  |  | 0 |
Total commercial |  |  | 0 |  |  |  | 5,953 |  |  |  | 249 |  |  |  | 6,202 |  |  |  | 3,125,628 |  |  |  | 3,131,830 |  |  |  | 0 |
Retail: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
1-4 family mortgages |  |  | 1,334 |  |  |  | 88 |  |  |  | 116 |  |  |  | 1,538 |  |  |  | 753,498 |  |  |  | 755,036 |  |  |  | 0 |
Other consumer loans |  |  | 15 |  |  |  | 1 |  |  |  | 0 |  |  |  | 16 |  |  |  | 29,737 |  |  |  | 29,753 |  |  |  | 0 |
Total retail |  |  | 1,349 |  |  |  | 89 |  |  |  | 116 |  |  |  | 1,554 |  |  |  | 783,235 |  |  |  | 784,789 |  |  |  | 0 |
Total past due loans |  | $ | 1,349 |  |  | $ | 6,042 |  |  | $ | 365 |  |  | $ | 7,756 |  |  | $ | 3,908,863 |  |  | $ | 3,916,619 |  |  | $ | 0 |
Nonaccrual loans as of December 31, 2023 were as follows:
|  | Recorded |  |  |  |  |
|  | Principal |  |  | Related |
(Dollars in thousands) |  | Balance |  |  | Allowance |
With no allowance recorded: |  |  |  |  |  |  |  |
Commercial: |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 0 |  |  | $ | 0 |
Vacant land, land development and residential construction |  |  | 0 |  |  |  | 0 |
Real estate – owner occupied |  |  | 70 |  |  |  | 0 |
Real estate – non-owner occupied |  |  | 0 |  |  |  | 0 |
Real estate – multi-family and residential rental |  |  | 0 |  |  |  | 0 |
Total commercial |  |  | 70 |  |  |  | 0 |
Retail: |  |  |  |  |  |  |  |
1-4 family mortgages |  |  | 2,272 |  |  |  | 0 |
Other consumer loans |  |  | 0 |  |  |  | 0 |
Total retail |  |  | 2,272 |  |  |  | 0 |
Total with no allowance recorded |  | $ | 2,342 |  |  | $ | 0 |
With an allowance recorded: |  |  |  |  |  |  |  |
Commercial: |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 249 |  |  | $ | 1 |
Vacant land, land development and residential construction |  |  | 0 |  |  |  | 0 |
Real estate – owner occupied |  |  | 0 |  |  |  | 0 |
Real estate – non-owner occupied |  |  | 0 |  |  |  | 0 |
Real estate – multi-family and residential rental |  |  | 0 |  |  |  | 0 |
Total commercial |  |  | 249 |  |  |  | 1 |
Retail: |  |  |  |  |  |  |  |
1-4 family mortgages |  |  | 824 |  |  |  | 240 |
Other consumer loans |  |  | 0 |  |  |  | 0 |
Total retail |  |  | 824 |  |  |  | 240 |
Total with an allowance recorded |  | $ | 1,073 |  |  | $ | 241 |
Total nonaccrual loans: |  |  |  |  |  |  |  |
Commercial |  | $ | 319 |  |  | $ | 1 |
Retail |  |  | 3,096 |  |  |  | 240 |
Total nonaccrual loans |  | $ | 3,415 |  |  | $ | 241 |
Nonaccrual loans represent the entire balance of collateral dependent loans. As of December 31, 2023 and 2022, all collateral dependent loans were secured by real estate, with the exception of those classified as commercial and industrial, which were secured by accounts receivable, inventory, and equipment. Interest income recognized on nonaccrual loans totaled $0.2 million in 2023, and less than $0.1 million in 2022 and 2021, reflecting the collection of interest at the time of principal pay-off. Nonaccrual loans as of December 31, 2022 were as follows:
|  | Recorded |  |  |  |  |
|  | Principal |  |  | Related |
(Dollars in thousands) |  | Balance |  |  | Allowance |
With no allowance recorded: |  |  |  |  |  |  |  |
Commercial: |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 249 |  |  | $ | 0 |
Vacant land, land development and residential construction |  |  | 0 |  |  |  | 0 |
Real estate – owner occupied |  |  | 0 |  |  |  | 0 |
Real estate – non-owner occupied |  |  | 0 |  |  |  | 0 |
Real estate – multi-family and residential rental |  |  | 0 |  |  |  | 0 |
Total commercial |  |  | 249 |  |  |  | 0 |
Retail: |  |  |  |  |  |  |  |
1-4 family mortgages |  |  | 1,064 |  |  |  | 0 |
Other consumer loans |  |  | 0 |  |  |  | 0 |
Total retail |  |  | 1,064 |  |  |  | 0 |
Total with no allowance recorded |  | $ | 1,313 |  |  | $ | 0 |
With an allowance recorded: |  |  |  |  |  |  |  |
Commercial: |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 5,775 |  |  | $ | 2,051 |
Vacant land, land development and residential construction |  |  | 0 |  |  |  | 0 |
Real estate – owner occupied |  |  | 248 |  |  |  | 32 |
Real estate – non-owner occupied |  |  | 0 |  |  |  | 0 |
Real estate – multi-family and residential rental |  |  | 0 |  |  |  | 0 |
Total commercial |  |  | 6,023 |  |  |  | 2,083 |
Retail: |  |  |  |  |  |  |  |
1-4 family mortgages |  |  | 392 |  |  |  | 200 |
Other consumer loans |  |  | 0 |  |  |  | 0 |
Total retail |  |  | 392 |  |  |  | 200 |
Total with an allowance recorded |  | $ | 6,415 |  |  | $ | 2,283 |
Total nonaccrual loans: |  |  |  |  |  |  |  |
Commercial |  | $ | 6,272 |  |  | $ | 2,083 |
Retail |  |  | 1,456 |  |  |  | 200 |
Total nonaccrual loans |  | $ | 7,728 |  |  | $ | 2,283 |
Credit Quality Indicators. We utilize a comprehensive grading system for our commercial loans. All commercial loans are graded on a ten grade rating system. The rating system utilizes standardized grade paradigms that analyze several critical factors such as cash flow, operating performance, financial condition, collateral, industry condition and management. All commercial loans are graded at inception and reviewed and, if appropriate, re-graded at various intervals thereafter. The risk assessment for retail loans is primarily based on the type of collateral. Loans by credit quality indicators were as follows as of December 31, 2023: Commercial credit exposure – credit risk profiled by internal credit risk grades:
|  |  |  |  |  | Commercial |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Vacant Land, |  |  |  |  |  |  |  |  |  |  | Commercial |
|  |  |  |  |  | Land |  |  | Commercial |  |  | Commercial |  |  | Real Estate - |
|  | Commercial |  |  | Development, |  |  | Real Estate - |  |  | Real Estate - |  |  | Multi-Family |
|  | and |  |  | and Residential |  |  | Owner |  |  | Non-Owner |  |  | and Residential |
(Dollars in thousands) |  | Industrial |  |  | Construction |  |  | Occupied |  |  | Occupied |  |  | Rental |
Internal credit risk grade groupings: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Grades 1 – 4 |  | $ | 724,156 |  |  | $ | 34,944 |  |  | $ | 468,339 |  |  | $ | 451,019 |  |  | $ | 172,455 |
Grades 5 – 7 |  |  | 505,807 |  |  |  | 39,719 |  |  |  | 248,802 |  |  |  | 573,771 |  |  |  | 147,903 |
Grades 8 – 9 |  |  | 24,623 |  |  |  | 90 |  |  |  | 526 |  |  |  | 10,894 |  |  |  | 12,251 |
Total commercial |  | $ | 1,254,586 |  |  | $ | 74,753 |  |  | $ | 717,667 |  |  | $ | 1,035,684 |  |  | $ | 332,609 |
Retail credit exposure – credit risk profiled by collateral type:
|  | Retail |  |  | Retail |
|  | 1-4 Family |  |  | Other |
(Dollars in thousands) |  | Mortgages |  |  | Consumer Loans |
Performing |  | $ | 834,310 |  |  | $ | 51,053 |
Nonperforming |  |  | 3,096 |  |  |  | 0 |
Total retail |  | $ | 837,406 |  |  | $ | 51,053 |
Loans by credit quality indicators were as follows as of December 31, 2022: Commercial credit exposure – credit risk profiled by internal credit risk grades:
|  |  |  |  |  | Commercial |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Vacant Land, |  |  |  |  |  |  |  |  |  |  | Commercial |
|  |  |  |  |  | Land |  |  | Commercial |  |  | Commercial |  |  | Real Estate - |
|  | Commercial |  |  | Development, |  |  | Real Estate - |  |  | Real Estate - |  |  | Multi-Family |
|  | and |  |  | and Residential |  |  | Owner |  |  | Non-Owner |  |  | and Residential |
(Dollars in thousands) |  | Industrial |  |  | Construction |  |  | Occupied |  |  | Occupied |  |  | Rental |
Internal credit risk grade groupings: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Grades 1 – 4 (1) |  | $ | 719,583 |  |  | $ | 41,711 |  |  | $ | 406,341 |  |  | $ | 428,733 |  |  | $ | 137,258 |
Grades 5 – 7 |  |  | 450,405 |  |  |  | 20,057 |  |  |  | 229,766 |  |  |  | 538,081 |  |  |  | 129,161 |
Grades 8 – 9 |  |  | 15,095 |  |  |  | 105 |  |  |  | 3,085 |  |  |  | 12,400 |  |  |  | 49 |
Total commercial |  | $ | 1,185,083 |  |  | $ | 61,873 |  |  | $ | 639,192 |  |  | $ | 979,214 |  |  | $ | 266,468 |
Retail credit exposure – credit risk profiled by collateral type:
|  | Retail |  |  | Retail |
|  | 1-4 Family |  |  | Other |
(Dollars in thousands) |  | Mortgages |  |  | Consumer Loans |
Performing |  | $ | 753,580 |  |  | $ | 29,753 |
Nonperforming |  |  | 1,456 |  |  |  | 0 |
Total retail |  | $ | 755,036 |  |  | $ | 29,753 |
All commercial loans are graded using the following criteria:
| Grade 1. | “Exceptional” Loans with this rating contain very little, if any, risk.
| Grade 2. | “Outstanding” Loans with this rating have excellent and stable sources of repayment and conform to bank policy and regulatory requirements.
| Grade 3. | “Very Good” Loans with this rating have strong sources of repayment and conform to bank policy and regulatory requirements. These are loans for which repayment risks are acceptable.
| Grade 4. | “Good” Loans with this rating have solid sources of repayment and conform to bank policy and regulatory requirements. These are loans for which repayment risks are modest.
| Grade 5. | “Acceptable” Loans with this rating exhibit acceptable sources of repayment and conform with most bank policies and all regulatory requirements. These are loans for which repayment risks are satisfactory.
| Grade 6. | “Monitor” Loans with this rating are considered to have emerging weaknesses which may include negative current cash flow, high leverage, or operating losses. Generally, if further deterioration is observed, these credits will be downgraded to the criticized asset report.
| Grade 7. | “Special Mention” Loans with this rating have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan at some future date.
| Grade 8. | “Substandard” Loans with this rating are inadequately protected by current sound net worth, paying capacity of the obligor, or of the pledged collateral, if any. A Substandard loan normally has one or more well-defined weaknesses that jeopardize the repayment of the debt. They are characterized by the distinct possibility of loss if the deficiencies are not corrected.
| Grade 9. | “Doubtful” Loans with this rating exhibit all the weaknesses inherent in the Substandard classification and where collection or liquidation in full is highly questionable and improbable.
| Grade 10. | “Loss” Loans with this rating are considered uncollectable, and of such little value that continuance as an active asset is not warranted.
The primary risk elements with respect to commercial loans are the financial condition of the borrower, the sufficiency of collateral, and timeliness of scheduled payments. We have a policy of requesting and reviewing periodic financial statements from commercial loan customers and employ a disciplined and formalized review of the existence of collateral and its value. The primary risk element with respect to each residential real estate loan and consumer loan is the timeliness of scheduled payments; loans 90 days or more past due are considered nonperforming. We have a reporting system that monitors past due loans and have adopted policies to pursue creditors’ rights in order to preserve our collateral position. The following table reflects loan balances as of December 31, 2023 based on year of origination:
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Revolving |  |  | Grand |
(Dollars in thousands) |  | 2023 |  |  | 2022 |  |  | 2021 |  |  | 2020 |  |  | 2019 |  |  | Prior |  |  | Term Total |  |  | Loans |  |  | Total |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and Industrial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Grades 1 – 4 |  | $ | 103,531 |  |  | $ | 79,883 |  |  | $ | 90,107 |  |  | $ | 20,577 |  |  | $ | 5,978 |  |  | $ | 9,160 |  |  | $ | 309,236 |  |  | $ | 414,920 |  |  | $ | 724,156 |
Grades 5 – 7 |  |  | 174,668 |  |  |  | 57,979 |  |  |  | 20,075 |  |  |  | 18,361 |  |  |  | 7,450 |  |  |  | 119 |  |  |  | 278,652 |  |  |  | 227,155 |  |  |  | 505,807 |
Grades 8 – 9 |  |  | 3,671 |  |  |  | 2,122 |  |  |  | 277 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 6,070 |  |  |  | 18,553 |  |  |  | 24,623 |
Total |  | $ | 281,870 |  |  | $ | 139,984 |  |  | $ | 110,459 |  |  | $ | 38,938 |  |  | $ | 13,428 |  |  | $ | 9,279 |  |  | $ | 593,958 |  |  | $ | 660,628 |  |  | $ | 1,254,586 |
Current-period gross write-offs |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 218 |  |  | $ | 218 |
Vacant Land, Land Development and Residential Construction: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Grades 1 – 4 |  | $ | 24,875 |  |  | $ | 6,570 |  |  | $ | 1,108 |  |  | $ | 2,110 |  |  | $ | 0 |  |  | $ | 281 |  |  | $ | 34,944 |  |  | $ | 0 |  |  | $ | 34,944 |
Grades 5 – 7 |  |  | 17,799 |  |  |  | 21,244 |  |  |  | 138 |  |  |  | 2 |  |  |  | 40 |  |  |  | 496 |  |  |  | 39,719 |  |  |  | 0 |  |  |  | 39,719 |
Grades 8 – 9 |  |  | 9 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 81 |  |  |  | 90 |  |  |  | 0 |  |  |  | 90 |
Total |  | $ | 42,683 |  |  | $ | 27,814 |  |  | $ | 1,246 |  |  | $ | 2,112 |  |  | $ | 40 |  |  | $ | 858 |  |  | $ | 74,753 |  |  | $ | 0 |  |  | $ | 74,753 |
Current-period gross write-offs |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |
Real Estate – Owner Occupied: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Grades 1 – 4 |  | $ | 205,379 |  |  | $ | 110,130 |  |  | $ | 85,982 |  |  | $ | 47,630 |  |  | $ | 14,362 |  |  | $ | 2,908 |  |  | $ | 466,391 |  |  | $ | 1,948 |  |  | $ | 468,339 |
Grades 5 – 7 |  |  | 111,197 |  |  |  | 63,271 |  |  |  | 27,729 |  |  |  | 27,029 |  |  |  | 9,419 |  |  |  | 439 |  |  |  | 239,084 |  |  |  | 9,718 |  |  |  | 248,802 |
Grades 8 – 9 |  |  | 0 |  |  |  | 417 |  |  |  | 0 |  |  |  | 38 |  |  |  | 0 |  |  |  | 71 |  |  |  | 526 |  |  |  | 0 |  |  |  | 526 |
Total |  | $ | 316,576 |  |  | $ | 173,818 |  |  | $ | 113,711 |  |  | $ | 74,697 |  |  | $ | 23,781 |  |  | $ | 3,418 |  |  | $ | 706,001 |  |  | $ | 11,666 |  |  | $ | 717,667 |
Current-period gross write-offs |  | $ | 0 |  |  | $ | 14 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 40 |  |  | $ | 54 |  |  | $ | 0 |  |  | $ | 54 |
Real Estate – Non-Owner Occupied: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Grades 1 – 4 |  | $ | 109,125 |  |  | $ | 84,912 |  |  | $ | 113,846 |  |  | $ | 102,279 |  |  | $ | 27,664 |  |  | $ | 13,193 |  |  | $ | 451,019 |  |  | $ | 0 |  |  | $ | 451,019 |
Grades 5 – 7 |  |  | 233,471 |  |  |  | 118,464 |  |  |  | 109,238 |  |  |  | 88,315 |  |  |  | 6,148 |  |  |  | 18,135 |  |  |  | 573,771 |  |  |  | 0 |  |  |  | 573,771 |
Grades 8 – 9 |  |  | 10,894 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 10,894 |  |  |  | 0 |  |  |  | 10,894 |
Total |  | $ | 353,490 |  |  | $ | 203,376 |  |  | $ | 223,084 |  |  | $ | 190,594 |  |  | $ | 33,812 |  |  | $ | 31,328 |  |  | $ | 1,035,684 |  |  | $ | 0 |  |  | $ | 1,035,684 |
Current-period gross write-offs |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |
Real Estate – Multi-Family and Residential Rental: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Grades 1 – 4 |  | $ | 36,038 |  |  | $ | 28,512 |  |  | $ | 64,244 |  |  | $ | 35,129 |  |  | $ | 4,883 |  |  | $ | 3,649 |  |  | $ | 172,455 |  |  | $ | 0 |  |  | $ | 172,455 |
Grades 5 – 7 |  |  | 72,916 |  |  |  | 55,964 |  |  |  | 4,816 |  |  |  | 9,372 |  |  |  | 2,699 |  |  |  | 2,136 |  |  |  | 147,903 |  |  |  | 0 |  |  |  | 147,903 |
Grades 8 – 9 |  |  | 11,250 |  |  |  | 0 |  |  |  | 0 |  |  |  | 1,001 |  |  |  | 0 |  |  |  | 0 |  |  |  | 12,251 |  |  |  | 0 |  |  |  | 12,251 |
Total |  | $ | 120,204 |  |  | $ | 84,476 |  |  | $ | 69,060 |  |  | $ | 45,502 |  |  | $ | 7,582 |  |  | $ | 5,785 |  |  | $ | 332,609 |  |  | $ | 0 |  |  | $ | 332,609 |
Current-period gross write-offs |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |
Total Commercial |  | $ | 1,114,823 |  |  | $ | 629,468 |  |  | $ | 517,560 |  |  | $ | 351,843 |  |  | $ | 78,643 |  |  | $ | 50,668 |  |  | $ | 2,743,005 |  |  | $ | 672,294 |  |  | $ | 3,415,299 |
Current-period gross write-offs |  | $ | 0 |  |  | $ | 14 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 40 |  |  | $ | 54 |  |  | $ | 218 |  |  | $ | 272 |
Retail: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
1-4 Family Mortgages: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing |  | $ | 133,823 |  |  | $ | 332,098 |  |  | $ | 231,842 |  |  | $ | 82,002 |  |  | $ | 10,515 |  |  | $ | 44,003 |  |  | $ | 834,283 |  |  | $ | 27 |  |  | $ | 834,310 |
Nonperforming |  |  | 108 |  |  |  | 1,728 |  |  |  | 305 |  |  |  | 0 |  |  |  | 10 |  |  |  | 945 |  |  |  | 3,096 |  |  |  | 0 |  |  |  | 3,096 |
Total |  | $ | 133,931 |  |  | $ | 333,826 |  |  | $ | 232,147 |  |  | $ | 82,002 |  |  | $ | 10,525 |  |  | $ | 44,948 |  |  | $ | 837,379 |  |  | $ | 27 |  |  | $ | 837,406 |
Current-period gross write-offs |  | $ | 0 |  |  | $ | 174 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 240 |  |  | $ | 414 |  |  | $ | 0 |  |  | $ | 414 |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  | 0 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Other Consumer Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing |  | $ | 5,138 |  |  | $ | 2,569 |  |  | $ | 1,664 |  |  | $ | 608 |  |  | $ | 651 |  |  | $ | 716 |  |  | $ | 11,346 |  |  | $ | 39,707 |  |  | $ | 51,053 |
Nonperforming |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Total |  | $ | 5,138 |  |  | $ | 2,569 |  |  | $ | 1,664 |  |  | $ | 608 |  |  | $ | 651 |  |  | $ | 716 |  |  | $ | 11,346 |  |  | $ | 39,707 |  |  | $ | 51,053 |
Current-period gross write-offs |  | $ | 3 |  |  | $ | 16 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 3 |  |  | $ | 22 |  |  | $ | 155 |  |  | $ | 177 |
Total Retail |  | $ | 139,069 |  |  | $ | 336,395 |  |  | $ | 233,811 |  |  | $ | 82,610 |  |  | $ | 11,176 |  |  | $ | 45,664 |  |  | $ | 848,725 |  |  | $ | 39,734 |  |  | $ | 888,459 |
Current-period gross write-offs |  | $ | 3 |  |  | $ | 190 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 243 |  |  | $ | 436 |  |  | $ | 155 |  |  | $ | 591 |
Grand Total |  | $ | 1,253,892 |  |  | $ | 965,863 |  |  | $ | 751,371 |  |  | $ | 434,453 |  |  | $ | 89,819 |  |  | $ | 96,332 |  |  | $ | 3,591,730 |  |  | $ | 712,028 |  |  | $ | 4,303,758 |
Current-period gross write-offs |  | $ | 3 |  |  | $ | 204 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 283 |  |  | $ | 490 |  |  | $ | 373 |  |  | $ | 863 |
There were lines of credit with principal balances of $6.4 million as of December 31, 2022 that were converted to term loans during 2023. The following table reflects loan balances as of December 31, 2022 based on year of origination:
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Revolving |  |  | Grand |
(Dollars in thousands) |  | 2022 |  |  | 2021 |  |  | 2020 |  |  | 2019 |  |  | 2018 |  |  | Prior |  |  | Term Total |  |  | Loans |  |  | Total |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and Industrial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Grades 1 – 4 |  | $ | 115,494 |  |  | $ | 141,481 |  |  | $ | 43,961 |  |  | $ | 9,194 |  |  | $ | 3,230 |  |  | $ | 9,851 |  |  | $ | 323,211 |  |  | $ | 396,372 |  |  | $ | 719,583 |
Grades 5 – 7 |  |  | 151,783 |  |  |  | 47,030 |  |  |  | 31,697 |  |  |  | 8,870 |  |  |  | 569 |  |  |  | 93 |  |  |  | 240,042 |  |  |  | 210,363 |  |  |  | 450,405 |
Grades 8 – 9 |  |  | 3,784 |  |  |  | 249 |  |  |  | 0 |  |  |  | 0 |  |  |  | 48 |  |  |  | 29 |  |  |  | 4,110 |  |  |  | 10,985 |  |  |  | 15,095 |
Total |  | $ | 271,061 |  |  | $ | 188,760 |  |  | $ | 75,658 |  |  | $ | 18,064 |  |  | $ | 3,847 |  |  | $ | 9,973 |  |  | $ | 567,363 |  |  | $ | 617,720 |  |  | $ | 1,185,083 |
Vacant Land, Land Development and Residential Construction: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Grades 1 – 4 |  | $ | 31,756 |  |  | $ | 6,196 |  |  | $ | 3,428 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 331 |  |  | $ | 41,711 |  |  | $ | 0 |  |  | $ | 41,711 |
Grades 5 – 7 |  |  | 10,270 |  |  |  | 8,760 |  |  |  | 351 |  |  |  | 50 |  |  |  | 0 |  |  |  | 626 |  |  |  | 20,057 |  |  |  | 0 |  |  |  | 20,057 |
Grades 8 – 9 |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 14 |  |  |  | 91 |  |  |  | 105 |  |  |  | 0 |  |  |  | 105 |
Total |  | $ | 42,026 |  |  | $ | 14,956 |  |  | $ | 3,779 |  |  | $ | 50 |  |  | $ | 14 |  |  | $ | 1,048 |  |  | $ | 61,873 |  |  | $ | 0 |  |  | $ | 61,873 |
Real Estate – Owner Occupied: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Grades 1 – 4 |  | $ | 194,072 |  |  | $ | 113,528 |  |  | $ | 53,630 |  |  | $ | 19,670 |  |  | $ | 19,279 |  |  | $ | 6,162 |  |  | $ | 406,341 |  |  | $ | 0 |  |  | $ | 406,341 |
Grades 5 – 7 |  |  | 115,720 |  |  |  | 56,173 |  |  |  | 33,913 |  |  |  | 10,245 |  |  |  | 12,550 |  |  |  | 1,165 |  |  |  | 229,766 |  |  |  | 0 |  |  |  | 229,766 |
Grades 8 – 9 |  |  | 2,919 |  |  |  | 0 |  |  |  | 44 |  |  |  | 0 |  |  |  | 122 |  |  |  | 0 |  |  |  | 3,085 |  |  |  | 0 |  |  |  | 3,085 |
Total |  | $ | 312,711 |  |  | $ | 169,701 |  |  | $ | 87,587 |  |  | $ | 29,915 |  |  | $ | 31,951 |  |  | $ | 7,327 |  |  | $ | 639,192 |  |  | $ | 0 |  |  | $ | 639,192 |
Real Estate – Non-Owner Occupied: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Grades 1 – 4 |  | $ | 121,281 |  |  | $ | 152,034 |  |  | $ | 89,125 |  |  | $ | 44,196 |  |  | $ | 10,079 |  |  | $ | 12,018 |  |  | $ | 428,733 |  |  | $ | 0 |  |  | $ | 428,733 |
Grades 5 – 7 |  |  | 176,216 |  |  |  | 142,647 |  |  |  | 133,163 |  |  |  | 35,200 |  |  |  | 13,456 |  |  |  | 37,399 |  |  |  | 538,081 |  |  |  | 0 |  |  |  | 538,081 |
Grades 8 – 9 |  |  | 6,712 |  |  |  | 5,688 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 12,400 |  |  |  | 0 |  |  |  | 12,400 |
Total |  | $ | 304,209 |  |  | $ | 300,369 |  |  | $ | 222,288 |  |  | $ | 79,396 |  |  | $ | 23,535 |  |  | $ | 49,417 |  |  | $ | 979,214 |  |  | $ | 0 |  |  | $ | 979,214 |
Real Estate – Multi-Family and Residential Rental: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Grades 1 – 4 |  | $ | 39,342 |  |  | $ | 49,177 |  |  | $ | 36,348 |  |  | $ | 5,306 |  |  | $ | 3,082 |  |  | $ | 4,003 |  |  | $ | 137,258 |  |  | $ | 0 |  |  | $ | 137,258 |
Grades 5 – 7 |  |  | 56,019 |  |  |  | 47,473 |  |  |  | 19,667 |  |  |  | 3,162 |  |  |  | 2,557 |  |  |  | 283 |  |  |  | 129,161 |  |  |  | 0 |  |  |  | 129,161 |
Grades 8 – 9 |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 49 |  |  |  | 49 |  |  |  | 0 |  |  |  | 49 |
Total |  | $ | 95,361 |  |  | $ | 96,650 |  |  | $ | 56,015 |  |  | $ | 8,468 |  |  | $ | 5,639 |  |  | $ | 4,335 |  |  | $ | 266,468 |  |  | $ | 0 |  |  | $ | 266,468 |
Total Commercial |  | $ | 1,025,368 |  |  | $ | 770,436 |  |  | $ | 445,327 |  |  | $ | 135,893 |  |  | $ | 64,986 |  |  | $ | 72,100 |  |  | $ | 2,514,110 |  |  | $ | 617,720 |  |  | $ | 3,131,830 |
Retail: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
1-4 Family Mortgages: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing |  | $ | 313,611 |  |  | $ | 242,950 |  |  | $ | 91,936 |  |  | $ | 12,094 |  |  | $ | 14,297 |  |  | $ | 41,622 |  |  | $ | 716,510 |  |  | $ | 37,070 |  |  | $ | 753,580 |
Nonperforming |  |  | 142 |  |  |  | 82 |  |  |  | 0 |  |  |  | 0 |  |  |  | 203 |  |  |  | 1,029 |  |  |  | 1,456 |  |  |  | 0 |  |  |  | 1,456 |
Total |  | $ | 313,753 |  |  | $ | 243,032 |  |  | $ | 91,936 |  |  | $ | 12,094 |  |  | $ | 14,500 |  |  | $ | 42,651 |  |  | $ | 717,966 |  |  | $ | 37,070 |  |  | $ | 755,036 |
Other Consumer Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing |  | $ | 4,349 |  |  | $ | 2,870 |  |  | $ | 1,040 |  |  | $ | 1,074 |  |  | $ | 395 |  |  | $ | 430 |  |  | $ | 10,158 |  |  | $ | 19,595 |  |  | $ | 29,753 |
Nonperforming |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Total |  | $ | 4,349 |  |  | $ | 2,870 |  |  | $ | 1,040 |  |  | $ | 1,074 |  |  | $ | 395 |  |  | $ | 430 |  |  | $ | 10,158 |  |  | $ | 19,595 |  |  | $ | 29,753 |
Total Retail |  | $ | 318,102 |  |  | $ | 245,902 |  |  | $ | 92,976 |  |  | $ | 13,168 |  |  | $ | 14,895 |  |  | $ | 43,081 |  |  | $ | 728,124 |  |  | $ | 56,665 |  |  | $ | 784,789 |
Grand Total |  | $ | 1,343,470 |  |  | $ | 1,016,338 |  |  | $ | 538,303 |  |  | $ | 149,061 |  |  | $ | 79,881 |  |  | $ | 115,181 |  |  | $ | 3,242,234 |  |  | $ | 674,385 |  |  | $ | 3,916,619 |
There were lines of credit with principal balances of $1.3 million as of December 31, 2021 that were converted to term loans during 2022. We use a migration to loss methodology to determine historical loss rates for commercial loans given the comprehensive loan grading process employed by our bank for over two decades, while an open pool approach is best suited for retail loans given the smaller dollar size of the segments. A baseline loss rate is produced at each reporting date for each loan portfolio segment using bank-specific loan charge-off and recovery data over a defined historical look-back period. The look-back period represents the number of data periods that will be used to calculate a baseline loss rate for each loan portfolio segment. We determined that the look-back period commencing on January 1, 2011 through the current reporting date was reasonable and appropriate, which was used in the calculation of both the December 31, 2023 and 2022 allowance for credit losses. Our historical loss rate is then applied to future loan balances at the instrument level based on remaining contractual life adjusted for amortization, prepayment and default to develop a baseline lifetime loss. Our prepayment speed assumptions are developed at the loan segment level based upon the consideration of all relevant data in which we believe to impact anticipated customer behavior including changes in interest rates, economic conditions, and underlying property valuations. For the commercial portfolio segments, we assumed a 2% prepayment speed as of both December 31, 2023 and 2022 as we deemed there to be no considerable changes from historical experience. For the retail 1-4 family mortgage portfolio we decreased the prepayment speed from 16.1% as of December 31, 2022 to 9.0% as of December 31, 2023 over the course of the year. This decrease extended the average lives of the portfolio in which the loss rates were applied, resulting in an increase to the allowance of $5.3 million, from December 31, 2022 to December 31, 2023. This change in assumption was driven by the increasing interest rate environment and the composition of the underlying portfolio. For the retail other consumer portfolio, we assumed a 9% prepayment speed as of both December 31, 2023 and 2022 as we deemed there to be no considerable changes from historical experience. During each reporting period, we also consider the need to adjust the historical loss rates as determined to reflect the extent to which we expect current conditions and reasonable and supportable economic forecasts to differ from the conditions that existed for the period over which the historical loss information was determined. These qualitative adjustments may increase or decrease our estimate of expected future credit losses. As of December 31, 2023 and 2022, we used a one-year reasonable and supportable economic forecast period, with a six-month straight-line reversion period for all loan segments. The economic forecasts used for our December 31, 2023 allowance calculation reflected a $2.0 million allowance balance reduction. The forecasts used for our December 31, 2022 allowance calculation reflected a $1.7 million allowance balance reduction. Individual loans exhibiting unique risk characteristics which differentiate the loans from other loans within the loan segments and are evaluated for expected credit losses on an individual basis totaled $5.4 million and $13.2 million as of December 31, 2023 and 2022, respectively. Individual allowance allocations totaled $0.4 million and $2.6 million as of December 31, 2023 and 2022, respectively. The allowance for credit losses for the year ended December 31, 2023 is as follows:
|  |  |  |  |  | Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | vacant land, |  |  |  |  |  |  |  |  |  |  | Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | land |  |  |  |  |  |  |  |  |  |  | real estate – |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  | development |  |  | Commercial |  |  | Commercial |  |  | multi-family |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Commercial |  |  | and |  |  | real estate – |  |  | real estate – |  |  | and |  |  | 1-4 |  |  | Other |  |  |  |  |  |  |  |
|  | and |  |  | residential |  |  | owner |  |  | non-owner |  |  | residential |  |  | family |  |  | consumer |  |  |  |  |  |  |  |  |
(Dollars in thousands) |  | industrial |  |  | construction |  |  | occupied |  |  | occupied |  |  | rental |  |  | mortgages |  |  | loans |  |  | Unallocated |  |  | Total |
Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 10,203 |  |  | $ | 490 |  |  | $ | 5,914 |  |  | $ | 9,242 |  |  | $ | 2,191 |  |  | $ | 14,027 |  |  | $ | 160 |  |  | $ | 19 |  |  | $ | 42,246 |
Credit risk reclassifications |  |  | 90 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | (697 | ) |  |  | 607 |  |  |  | 0 |  |  |  | 0 |
Balances, December 31, 2022 after reclassifications |  |  | 10,293 |  |  |  | 490 |  |  |  | 5,914 |  |  |  | 9,242 |  |  |  | 2,191 |  |  |  | 13,330 |  |  |  | 767 |  |  |  | 19 |  |  |  | 42,246 |
Provision for credit losses |  |  | (2,822 | ) |  |  | (141 | ) |  |  | 1,255 |  |  |  | 610 |  |  |  | 967 |  |  |  | 5,638 |  |  |  | 2,212 |  |  |  | (19 | ) |  |  | 7,700 |
Charge-offs |  |  | (218 | ) |  |  | 0 |  |  |  | (54 | ) |  |  | 0 |  |  |  | 0 |  |  |  | (414 | ) |  |  | (177 | ) |  |  | 0 |  |  |  | (863 | )
Recoveries |  |  | 188 |  |  |  | 35 |  |  |  | 71 |  |  |  | 0 |  |  |  | 26 |  |  |  | 432 |  |  |  | 79 |  |  |  | 0 |  |  |  | 831 |
Ending balance |  | $ | 7,441 |  |  | $ | 384 |  |  | $ | 7,186 |  |  | $ | 9,852 |  |  | $ | 3,184 |  |  | $ | 18,986 |  |  | $ | 2,881 |  |  | $ | 0 |  |  | $ | 49,914
The allowance for credit losses for the year ended December 31, 2022 is as follows:
|  |  |  |  |  | Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | vacant land, |  |  |  |  |  |  |  |  |  |  | Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | land |  |  |  |  |  |  |  |  |  |  | real estate – |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  | development |  |  | Commercial |  |  | Commercial |  |  | multi-family |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Commercial |  |  | and |  |  | real estate – |  |  | real estate – |  |  | and |  |  | 1-4 |  |  | Other |  |  |  |  |  |  |  |  |
|  | and |  |  | residential |  |  | owner |  |  | non-owner |  |  | residential |  |  | family |  |  | consumer |  |  |  |  |  |  |  |  |
(Dollars in thousands) |  | industrial |  |  | construction |  |  | occupied |  |  | occupied |  |  | rental |  |  | mortgages |  |  | loans |  |  | Unallocated |  |  | Total |
Allowance for credit losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 10,782 |  |  | $ | 420 |  |  | $ | 6,045 |  |  | $ | 12,990 |  |  | $ | 2,006 |  |  | $ | 2,449 |  |  | $ | 626 |  |  | $ | 45 |  |  | $ | 35,363 |
Adoption of ASU 2016-13 |  |  | (1,571 | ) |  |  | (43 | ) |  |  | (560 | ) |  |  | (2,534 | ) |  |  | (621 | ) |  |  | 5,395 |  |  |  | (411 | ) |  |  | (55 | ) |  |  | (400 | )
Provision for credit losses |  |  | 946 |  |  |  | 138 |  |  |  | 378 |  |  |  | (1,214 | ) |  |  | 763 |  |  |  | 5,621 |  |  |  | (111 | ) |  |  | 29 |  |  |  | 6,550 |
Charge-offs |  |  | (171 | ) |  |  | (29 | ) |  |  | (38 | ) |  |  | 0 |  |  |  | 0 |  |  |  | (33 | ) |  |  | (21 | ) |  |  | 0 |  |  |  | (292 | )
Recoveries |  |  | 217 |  |  |  | 4 |  |  |  | 89 |  |  |  | 0 |  |  |  | 43 |  |  |  | 595 |  |  |  | 77 |  |  |  | 0 |  |  |  | 1,025 |
Ending balance |  | $ | 10,203 |  |  | $ | 490 |  |  | $ | 5,914 |  |  | $ | 9,242 |  |  | $ | 2,191 |  |  | $ | 14,027 |  |  | $ | 160 |  |  | $ | 19 |  |  | $ | 42,246 |
The allowance for loan losses for the year ended December 31, 2021 is as follows:
|  |  |  |  |  | Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | vacant land, |  |  |  |  |  |  |  |  |  |  | Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | land |  |  |  |  |  |  |  |  |  |  | real estate – |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  | development |  |  | Commercial |  |  | Commercial |  |  | multi-family |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Commercial |  |  | and |  |  | real estate – |  |  | real estate – |  |  | and |  |  | Home |  |  |  |  |  |  |  |  |  |  |  |
|  | and |  |  | residential |  |  | owner |  |  | non-owner |  |  | residential |  |  | equity |  |  | 1-4 family |  |  |  |  |  |  |  |  |
(Dollars in thousands) |  | industrial |  |  | construction |  |  | occupied |  |  | occupied |  |  | rental |  |  | and other |  |  | mortgages |  |  | Unallocated |  |  | Total |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 9,424 |  |  | $ | 679 |  |  | $ | 8,246 |  |  | $ | 13,611 |  |  | $ | 1,819 |  |  | $ | 889 |  |  | $ | 3,240 |  |  | $ | 59 |  |  | $ | 37,967 |
Provision for loan losses |  |  | 2,030 |  |  |  | (618 | ) |  |  | (3,308 | ) |  |  | (621 | ) |  |  | 161 |  |  |  | (301 | ) |  |  | (1,629 | ) |  |  | (14 | ) |  |  | (4,300 | )
Charge-offs |  |  | (882 | ) |  |  | (15 | ) |  |  | (12 | ) |  |  | 0 |  |  |  | 0 |  |  |  | (43 | ) |  |  | (92 | ) |  |  | 0 |  |  |  | (1,044 | )
Recoveries |  |  | 210 |  |  |  | 374 |  |  |  | 1,119 |  |  |  | 0 |  |  |  | 26 |  |  |  | 81 |  |  |  | 930 |  |  |  | 0 |  |  |  | 2,740 |
Ending balance |  | $ | 10,782 |  |  | $ | 420 |  |  | $ | 6,045 |  |  | $ | 12,990 |  |  | $ | 2,006 |  |  | $ | 626 |  |  | $ | 2,449 |  |  | $ | 45 |  |  | $ | 35,363 |
The following table presents the period-end amortized cost basis of modifications to borrowers experiencing financial difficulty by type of modification made during the year ended December 31, 2023:
|  | Interest Rate |  |  |  |  |  |  | Principal |
(Dollars in thousands) |  | Reduction |  |  | Term Extension |  |  | Forgiveness |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 0 |  |  | $ | 17,919 |  |  | $ | 0 |
Vacant land, land development and residential construction |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Real estate – owner occupied |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Real estate – non-owner occupied |  |  | 0 |  |  |  | 10,894 |  |  |  | 0 |
Real estate – multi-family and residential rental |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Total commercial |  | $ | 0 |  |  | $ | 28,813 |  |  | $ | 0 |
Retail: |  |  |  |  |  |  |  |  |  |  |  |
1-4 family mortgages |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Other consumer loans |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Total retail |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |
Total loans |  | $ | 0 |  |  | $ | 28,813 |  |  | $ | 0 |
Loans listed under Term Extension were generally granted a series of short-term maturity extensions as part of workout process and associated forbearance agreements. The following table presents the period-end amortized cost basis of loans that have been modified in the past twelve months to borrowers experiencing financial difficulty by payment status and loan segment:
|  |  |  |  |  | 30 – 89 Days |  |  | 90 + Days |  |  |  |  |
(Dollars in thousands) |  | Current |  |  | Past Due |  |  | Past Due |  |  | Total |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 17,919 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 17,919 |
Vacant land, land development and residential construction |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Real estate – owner occupied |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Real estate – non-owner occupied |  |  | 10,894 |  |  |  | 0 |  |  |  | 0 |  |  |  | 10,894 |
Real estate – multi-family and residential rental |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Total commercial |  | $ | 28,813 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 28,813 |
Retail: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
1-4 family mortgages |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Other consumer loans |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Total retail |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 0 |
Total loans |  | $ | 28,813 |  |  | $ | 0 |  |  | $ | 0 |  |  | $ | 28,813 |
Loans modified as troubled debt restructurings generally reflect payment extensions and below market interest rates. Loans modified as troubled debt restructurings during the year ended December 31, 2022 were as follows:
|  |  |  |  |  | Pre- |  |  | Post- |
|  |  |  |  |  | Modification |  |  | Modification |
|  |  |  |  |  | Recorded |  |  | Recorded |
|  | Number of |  |  | Principal |  |  | Principal |
(Dollars in thousands) |  | Contracts |  |  | Balance |  |  | Balance |
Commercial: |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  |  | 3 |  |  | $ | 6,593 |  |  | $ | 6,593 |
Vacant land, land development and residential construction |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Real estate – owner occupied |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Real estate – non-owner occupied |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Real estate – multi-family and residential rental |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Total commercial |  |  | 3 |  |  |  | 6,593 |  |  |  | 6,593 |
Retail: |  |  |  |  |  |  |  |  |  |  |  |
Home equity and other |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
1-4 family mortgages |  |  | 7 |  |  |  | 758 |  |  |  | 757 |
Total retail |  |  | 7 |  |  |  | 758 |  |  |  | 757 |
Total |  |  | 10 |  |  | $ | 7,351 |  |  | $ | 7,350 |
The following loans, modified as troubled debt restructurings within the previous twelve months, became over 30 days past due during the year ended December 31, 2022 (amounts as of period end):
|  |  |  |  |  | Recorded |
|  | Number of |  |  | Principal |
(Dollars in thousands) |  | Contracts |  |  | Balance |
Commercial: |  |  |  |  |  |  |  |
Commercial and industrial |  |  | 2 |  |  | $ | 5,665 |
Vacant land, land development and residential construction |  |  | 0 |  |  |  | 0 |
Real estate – owner occupied |  |  | 0 |  |  |  | 0 |
Real estate – non-owner occupied |  |  | 0 |  |  |  | 0 |
Real estate – multi-family and residential rental |  |  | 0 |  |  |  | 0 |
Total commercial |  |  | 2 |  |  |  | 5,665 |
Retail: |  |  |  |  |  |  |  |
Home equity and other |  |  | 0 |  |  |  | 0 |
1-4 family mortgages |  |  | 0 |  |  |  | 0 |
Total retail |  |  | 0 |  |  |  | 0 |
Total |  |  | 2 |  |  |  | 5,665 |
Activity for loans categorized as troubled debt restructurings during the year ended December 31, 2022 is as follows:
|  |  |  |  |  | Commercial |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |  |  | Vacant Land, |  |  |  |  |  |  |  |  |  |  | Commercial |
|  |  |  |  |  | Land |  |  |  |  |  |  |  |  |  |  | Real Estate - |
|  |  |  |  |  | Development, |  |  | Commercial |  |  | Commercial |  |  | Multi-Family |
|  | Commercial |  |  | and |  |  | Real Estate - |  |  | Real Estate - |  |  | and |
|  | and |  |  | Residential |  |  | Owner |  |  | Non-Owner |  |  | Residential |
(Dollars in thousands) |  | Industrial |  |  | Construction |  |  | Occupied |  |  | Occupied |  |  | Rental |
Commercial Loan Portfolio: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning Balance |  | $ | 4,973 |  |  | $ | 0 |  |  | $ | 10,435 |  |  | $ | 146 |  |  | $ | 91 |
Charge-Offs |  |  | (95 | ) |  |  | 0 |  |  |  | (39 | ) |  |  | 0 |  |  |  | 0 |
Payments |  |  | (772 | ) |  |  | 0 |  |  |  | (9,683 | ) |  |  | (16 | ) |  |  | (91 | )
Transfers to ORE |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |  |  |  | 0 |
Net Additions/Deletions |  |  | 4,566 |  |  |  | 0 |  |  |  | (669 | ) |  |  | 0 |  |  |  | 0 |
Ending Balance |  | $ | 8,672 |  |  | $ | 0 |  |  | $ | 44 |  |  | $ | 130 |  |  | $ | 0 |
|  | Retail |  |  | Retail |
|  | Home Equity |  |  | 1-4 Family |
(Dollars in thousands) |  | and Other |  |  | Mortgages |
Retail Loan Portfolio: |  |  |  |  |  |  |  |
Beginning Balance |  | $ | 1,202 |  |  | $ | 627 |
Charge-Offs |  |  | 0 |  |  |  | 0 |
Payments |  |  | (14 | ) |  |  | (317 | )
Transfers to ORE |  |  | 0 |  |  |  | 0 |
Net Additions/Deletions |  |  | (1,187 | ) |  |  | 2,426 |
Ending Balance |  | $ | 1 |  |  | $ | 2,736 |

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- Definition The entire disclosure for claims held for amounts due a entity, excluding financing receivables. Examples include, but are not limited to, trade accounts receivables, notes receivables, loans receivables. Includes disclosure for allowance for credit losses. + References Reference 1: http://www.xbrl.org/2009/role/commonPracticeRef -Topic 310 -SubTopic 10 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//310-10/tableOfContent + Details
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