The Company’s loan portfolio is grouped into segments which are further broken down into classes to allow management to monitor the performance by the borrower and to monitor the yield on the portfolio. The risks associated with lending activities differ among the various loan classes and are subject to the impact of changes in interest rates, market conditions of collateral securing the loans, and general economic conditions. All of these factors may adversely impact both the borrower’s ability to repay its loans and the value of its associated collateral.

The Company has various types of commercial real estate loans, which have differing levels of credit risk. Owner occupied commercial real estate loans are generally dependent upon the successful operation of the borrower’s business, with the cash flows generated from the business being the primary source of repayment of the loan. If the business suffers a downturn in sales or profitability, the borrower’s ability to repay the loan could be in jeopardy.

Non-owner occupied and multi-family commercial real estate loans and non-owner occupied residential loans present a different credit risk to the Company than owner occupied commercial real estate loans, as the repayment of the loan is dependent upon the borrower’s ability to generate a sufficient level of occupancy to produce rental income that exceeds debt service requirements and operating expenses. Lower occupancy or lease rates may result in a reduction in cash flows, which hinders the ability of the borrower to meet debt service requirements, and may result in lower collateral values. The Company generally recognizes that greater risk is inherent in these credit relationships compared to owner occupied loans mentioned above.

Acquisition and development loans consist of 1-4 family residential construction and commercial and land development loans. The risk of loss on these loans is largely dependent on the Company’s ability to assess the property’s value at the completion of the project, which should exceed the property’s construction costs. During the construction phase, a number of factors could potentially negatively impact the collateral value, including cost overruns, delays in completing the project, competition, and real estate market conditions, which may change based on the supply of similar properties in the area. In the event the collateral value at the completion of the project is not sufficient to cover the outstanding loan balance, the Company must rely upon other repayment sources, if any, including the guarantors of the project or other collateral securing the loan.

Commercial and industrial loans include advances to local and regional businesses for general commercial purposes and include permanent and short-term working capital, machinery and equipment financing, and may be either in the form of lines of credit or term loans. Although commercial and industrial loans may be unsecured to our highest-rated borrowers, the majority of these loans are secured by the borrower’s accounts receivable, inventory and machinery and equipment. In a significant number of these loans, the collateral also includes the business real estate or the business owner’s personal real estate or assets. Commercial and industrial loans present credit exposure to the Company, as they are more susceptible to risk of loss during a downturn in the economy as borrowers may have greater difficulty in meeting their debt service requirements and the value of the collateral may decline. The Company attempts to mitigate this risk through its underwriting standards, including evaluating the creditworthiness of the borrower and, to the extent available, credit ratings on the business. Additionally, monitoring of the loans through annual renewals and meetings with the borrowers are typical. However, these procedures cannot eliminate the risk of loss associated with commercial and industrial lending. At March 31, 2023 and December 31, 2022, commercial and industrial loans include $10.8 million and $13.8 million, respectively, net of deferred fees and costs, originated through the SBA PPP. At March 31, 2023, the Bank has $181 thousand of net deferred SBA PPP fees remaining to be recognized through net interest income over the remaining life of the loans. The timing of the recognition of these fees is dependent upon the loan forgiveness process established by the SBA. As these loans are 100% guaranteed by the SBA, there is no associated ACL at March 31, 2023.

The Company originates loans to its retail clients, including fixed-rate and adjustable first lien mortgage loans, with the underlying 1-4 family owner occupied residential property securing the loan. The Company’s risk exposure is minimized in these types of loans through the evaluation of the creditworthiness of the borrower, including credit scores and debt-to-income ratios, and underwriting standards, which limit the loan-to-value ratio to generally no more than 80% upon loan origination, unless the borrower obtains private mortgage insurance.

Home equity loans, including term loans and lines of credit, present a slightly higher risk to the Company than 1-4 family first liens, as these loans can be first or second liens on 1-4 family owner occupied residential property, but can have loan-to-value ratios of no greater than 85% of the value of the real estate taken as collateral. The creditworthiness of the borrower is also considered, including credit scores and debt-to-income ratios.

Installment and other loans’ credit risk is mitigated through prudent underwriting standards, including evaluation of the creditworthiness of the borrower through credit scores and debt-to-income ratios and, if secured, the collateral value of the assets. These loans can be unsecured or secured by assets the value of which may depreciate quickly or may fluctuate, and may present a greater risk to the Company than 1-4 family residential loans.

The following table presents the loan portfolio by segment and class, excluding residential LHFS, at March 31, 2023 and December 31, 2022:


	March 31, 2023		December 31, 2022
Commercial real estate:
Owner occupied	$	339,371	$	315,770
Non-owner occupied	603,396		608,043
Multi-family	144,053		138,832
Non-owner occupied residential	106,390		104,604
Acquisition and development:
1-4 family residential construction	20,941		25,068
Commercial and land development	174,556		158,308
Commercial and industrial (1)	380,683		357,774
Municipal	11,329		12,173
Residential mortgage:
First lien	227,031		229,849
Home equity - term	5,371		5,505
Home equity - lines of credit	183,340		183,241
Installment and other loans	11,040		12,065
Total loans	$	2,207,501	$	2,151,232

In order to monitor ongoing risk associated with its loan portfolio and specific loans within the segments, management uses an internal grading system. The first several rating categories, representing the lowest risk to the Bank, are combined and given a “Pass” rating. Management generally follows regulatory definitions in assigning criticized ratings to loans, including "Special Mention," "Substandard," "Doubtful" or "Loss." The Special Mention category includes loans that have potential weaknesses that may, if not monitored or corrected, weaken the asset or inadequately protect the Bank's position at some future date. These assets pose elevated risk, but their weakness does not yet justify a more severe, or classified rating. Substandard loans are classified as they have a well-defined weakness, or weaknesses that jeopardize liquidation of the debt. These loans are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Substandard loans include loans that management may determine to be either individually evaluated, referred to as "Substandard - Individually Evaluated Loan," or collectively evaluated, referred to as "Substandard Non-Individually Evaluated Loan." A Doubtful loan has a high probability of total or substantial loss, but because of specific pending events that may strengthen the asset, its classification as Loss is deferred. Loss loans are considered uncollectible, as the borrowers are often in bankruptcy, have suspended debt repayments, or have ceased business operations. Once a loan is classified as Loss, there is little prospect of collecting the loan’s principal or interest and it is charged-off.

The Company has a loan review policy and program, which is designed to identify and monitor risk in the lending function. The Management ERM Committee, comprised of executive officers, senior officers and loan department personnel, is charged with the oversight of overall credit quality and risk exposure of the Company's loan portfolio. This includes the monitoring of the lending activities of all Company personnel with respect to underwriting and processing new loans and the timely follow-up and corrective action for loans showing signs of deterioration in quality. A loan review program provides the Company with an independent review of the commercial loan portfolio on an ongoing basis. Generally, consumer and residential mortgage loans are included in the Pass categories unless a specific action, such as extended delinquencies, bankruptcy, repossession or death of the borrower occurs, which heightens awareness as to a possible credit event.

Internal loan reviews are completed annually on all commercial relationships with a committed loan balance in excess of $1.0 million, which includes confirmation of risk rating by an independent credit officer. In addition, all commercial relationships greater than $500 thousand rated Substandard, Doubtful or Loss are reviewed quarterly and corresponding risk ratings are reaffirmed by the Company's Problem Loan Committee, with subsequent reporting to the Management ERM Committee and the Board of Directors.

The following table presents the amortized cost basis of the loan portfolio, by year of origination, loan class, and credit quality, as of March 31, 2023. For residential and consumer loan classes, the Company also evaluates credit quality based on the aging status of the loan and payment activity, which residential mortgage and installment and other consumer loans are presented below based on payment performance: performing or nonperforming.


	Term Loans Amortized Cost Basis by Origination Year
As of March 31, 2023	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Basis		Revolving Loans Converted to Term		Total
Commercial Real Estate:
Owner-occupied:
Risk rating
Pass	$	25,068	$	107,533	$	69,946	$	29,509	$	22,314	$	74,607	$	2,420	$	—	$	331,397
Special mention	—		—		—		—		—		2,560		—		—		2,560
Substandard - Non-IEL	—		—		—		—		—		2,257		468		—		2,725
Substandard - IEL	—		—		—		—		—		2,635		54		—		2,689
Total owner-occupied loans	$	25,068	$	107,533	$	69,946	$	29,509	$	22,314	$	82,059	$	2,942	$	—	$	339,371
Current period gross charge offs - owner-occupied	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Non-owner occupied:
Risk rating
Pass	$	13,063	$	94,461	$	194,367	$	85,305	$	66,223	$	143,337	$	631	$	877	$	598,264
Special mention	—		—		—		—		—		2,206		400		—		2,606
Substandard - Non-IEL	—		—		—		2,170		—		80		—		—		2,250
Substandard - IEL	—		—		—		—		—		276		—		—		276
Total non-owner occupied loans	$	13,063	$	94,461	$	194,367	$	87,475	$	66,223	$	145,899	$	1,031	$	877	$	603,396
Current period gross charge offs - non-owner occupied	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Multi-family:
Risk rating
Pass	$	—	$	54,897	$	9,008	$	12,888	$	7,971	$	51,500	$	129	$	—	$	136,393
Special mention	—		—		—		—		—		7,660		—		—		7,660
Substandard - Non-IEL	—		—		—		—		—		—		—		—		—
Substandard - IEL	—		—		—		—		—		—		—		—		—
Total multi-family loans	$	—	$	54,897	$	9,008	$	12,888	$	7,971	$	59,160	$	129	$	—	$	144,053
Current period gross charge offs - multi-family	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Non-owner occupied residential:
Risk rating
Pass	$	3,207	$	27,191	$	19,814	$	10,893	$	7,067	$	35,158	$	1,572	$	—	$	104,902
Special mention	—		—		—		—		—		841		—		—		841
Substandard - Non-IEL	—		—		—		—		—		405		—		—		405
Substandard - IEL	—		—		—		—		—		242		—		—		242
Total non-owner occupied residential loans	$	3,207	$	27,191	$	19,814	$	10,893	$	7,067	$	36,646	$	1,572	$	—	$	106,390
Current period gross charge offs - non-owner occupied residential	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—


	Term Loans Amortized Cost Basis by Origination Year
As of March 31, 2023	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Basis		Revolving Loans Converted to Term		Total
Home equity - term:
Payment performance
Performing	$	159	$	806	$	151	$	502	$	131	$	3,618	$	—	$	—	$	5,367
Nonperforming	—		—		—		—		—		4		—		—		4
Total home equity - term loans	$	159	$	806	$	151	$	502	$	131	$	3,622	$	—	$	—	$	5,371
Current period gross charge offs - home equity - term	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Home equity - lines of credit:
Payment performance
Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	112,345	$	70,333	$	182,678
Nonperforming	—		—		—		—		—		—		643		19		662
Total residential real estate - home equity - lines of credit loans	$	—	$	—	$	—	$	—	$	—	$	—	$	112,988	$	70,352	$	183,340
Current period gross charge offs - home equity - lines of credit	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Installment and other loans:
Payment performance
Performing	$	197	$	561	$	448	$	192	$	1,266	$	2,433	$	5,919	$	—	$	11,016
Nonperforming	—		—		—		—		22		2		—		—		24
Total Installment and other loans	$	197	$	561	$	448	$	192	$	1,288	$	2,435	$	5,919	$	—	$	11,040
Current period gross charge offs - installment and other	$	31	$	24	$	—	$	—	$	1	$	—	$	—	$	—	$	56

The information presented in the table above is not required for periods prior to the adoption of CECL. The following table summarizes the Company’s loan portfolio ratings based on its internal risk rating system at December 31, 2022, which presents the most comparable required information for the prior period. Prior to the adoption of CECL, PCD loans were classified as PCI loans and accounted for under ASC 310-30. In accordance with the CECL standard, management did not reassess whether PCI assets met the criteria of PCD assets as of the adoption date. At March 31, 2023, the amortized cost of the PCD loans was $9.4 million.


	Pass		Special Mention		Non-Impaired Substandard		Impaired - Substandard		Doubtful		PCI Loans		Total


















December 31, 2022
Commercial real estate:
Owner occupied	$	305,159	$	2,109	$	3,532	$	2,767	$	—	$	2,203	$	315,770
Non-owner occupied	601,244		4,243		2,273		—		—		283		608,043
Multi-family	130,851		7,739		242		—		—		—		138,832
Non-owner occupied residential	102,674		810		482		81		—		557		104,604
Acquisition and development:
1-4 family residential construction	25,068		—		—		—		—		—		25,068
Commercial and land development	142,424		458		—		15,426		—		—		158,308
Commercial and industrial	331,103		17,579		7,013		31		—		2,048		357,774
Municipal	12,173		—		—		—		—		—		12,173
Residential mortgage:
First lien	222,849		—		215		2,520		—		4,265		229,849
Home equity - term	5,485		—		—		5		—		15		5,505
Home equity - lines of credit	182,801		—		45		395		—		—		183,241
Installment and other loans	12,017		—		—		40		—		8		12,065
	$	2,073,848	$	32,938	$	13,802	$	21,265	$	—	$	9,379	$	2,151,232

For commercial real estate, acquisition and development, commercial and industrial and municipal segments, a loan is evaluated individually when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not individually evaluated. Generally, loans that are more than 90 days past due will be individually evaluated for a specific reserve. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed to determine if the loan should be placed on nonaccrual status. Nonaccrual loans are, by definition, deemed to be individually evaluated under CECL. A specific reserve allocation for individually evaluated loans is measured on a loan-by-loan basis for commercial and construction loans by either the present value of the expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. A loan is collateral dependent if the repayment of the loan is expected to be provided solely by the underlying collateral. For loans that are experiencing financial difficulty for extended periods of time, periodic updates on fair values are obtained, which may include updated appraisals. Updated fair values are incorporated into the analysis in the next reporting period.

Loan charge-offs, which may include partial charge-offs, are taken on an individually evaluated loan that is collateral dependent if the carrying balance of the loan exceeds the appraised value of the collateral, the loan has been placed on nonaccrual status or identified as uncollectible, and it is deemed to be a confirmed loss. Typically, loans with a charge-off or partial charge-off will continue to be individually evaluated. Generally, an individually evaluated loan with a partial charge-off may continue to have a specific reserve on it after the partial charge-off, if factors warrant.

At March 31, 2023, the Company’s individually evaluated loans were measured based on the estimated fair value of the collateral securing the loan, except for purchased auto loans on nonaccrual status and accruing loans accounted for as TDRs prior to the adoption of ASU 2022-02. At December 31, 2022, except for TDRs, the Company's individually evaluated loans were measured based on the estimated fair value of the collateral securing the loan. Prior to the adoption of ASU 2022-02, by definition, TDRs were considered impaired and the related impairment analyses were initially based on discounted cash flows. For real estate loans, collateral generally consists of commercial or residential real estate, but in the case of commercial and industrial loans, it could also consist of accounts receivable, inventory, equipment or other business assets. Commercial and industrial loans may also have real estate collateral.

Updated appraisals are generally required every 18 months for classified commercial loans, secured by commercial real estate, in excess of $250 thousand. The “as is" value provided in the appraisal is often used as the fair value of the collateral in determining impairment, unless circumstances, such as subsequent improvements, approvals, or other circumstances, dictate that another value than that provided by the appraiser is more appropriate.

Generally, commercial loans secured by real estate that are evaluated individually are measured at fair value using certified real estate appraisals that had been completed within the last 18 months. Appraised values are discounted for estimated costs to sell the property and other selling considerations to arrive at the property’s fair value. In those situations in which it is determined an updated appraisal is not required for loans individually evaluated for credit expected losses, fair values are based on either an existing appraisal or a discounted cash flow analysis as determined by management. The approaches are discussed below:

•Existing appraisal – if the existing appraisal provides a strong loan-to-value ratio (generally 70% or lower) and, after consideration of market conditions and knowledge of the property and area, it is determined by the Credit Administration staff that there has not been a significant deterioration in the collateral value, the existing certified appraised value may be used. Discounts to the appraised value, as deemed appropriate for selling costs, are factored into the fair value.

Collateral on loans evaluated individually is not limited to real estate, and may consist of accounts receivable, inventory, equipment or other business assets. Estimated fair values are determined based on borrowers’ financial statements, inventory ledgers, accounts receivable aging or appraisals from individuals with knowledge in the business. Stated balances are generally discounted for the age of the financial information or the quality of the assets. In determining fair value, liquidation discounts are applied to this collateral based on existing loan evaluation policies.

The Company distinguishes substandard loans for both loans individually and collectively evaluated, as it places less emphasis on a loan’s classification, and increased reliance on whether the loan was performing in accordance with the contractual terms. A substandard classification does not automatically meet the definition of an individually evaluated loan. Loss potential, while existing in the aggregate amount of substandard loans, does not have to exist in individual extensions of credit classified as substandard. As a result, the Company’s methodology includes an evaluation of certain accruing commercial real estate, acquisition and development, commercial and industrial and municipal loans rated substandard to be collectively evaluated for credit expected losses. Although the Company believes these loans meet the definition of substandard, they are generally performing and management has concluded that it is likely the Company will be able to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement.


	March 31, 2023								December 31, 2022
	Nonaccrual loans with a related ACL		Nonaccrual loans with no related ACL		Total nonaccrual loans		Loans Past Due 90+ Accruing		Total nonaccrual loans
Commercial real estate:
Owner-occupied	$	—	$	2,689	$	2,689	$	—	$	2,767
Non-owner occupied	—		276		276		—		—

Non-owner occupied residential	—		243		243		—		81
Acquisition and development:

Commercial and land development	—		15,151		15,151		—		15,426
Commercial and industrial	—		43		43		—		31

Residential mortgage:
First lien	—		2,155		2,155		28		1,838
Home equity – term	—		4		4		—		5
Home equity – lines of credit	—		661		661		—		395
Installment and other loans	—		24		24		—		40
Total	$	—	$	21,246	$	21,246	$	28	$	20,583

A loan is considered to be collateral-dependent when the borrower is experiencing financial difficulty and the repayment is expected to be provided substantially through the operation or sale of collateral. At March 31, 2023, substantively all individually evaluated loans were collateral-dependent and consisted primarily of commercial real estate, acquisition and development and residential mortgage loans, which were primarily secured by commercial or residential real estate. All of the Company’s collateral-dependent loans had appraised collateral values which exceeded the amortized cost basis of the related loan as of March 31, 2023. The following table presents the amortized cost basis of collateral-dependent loans by class as of March 31, 2023:


	Type of Collateral
	Business Assets		Commercial Real Estate		Equipment		Land		Residential Real Estate		Other		Total
Commercial real estate:
Owner occupied	$	—	$	2,689	$	—	$	—	$	—	$	—	$	2,689
Non-owner occupied	—		276		—		—		—		—		276


Acquisition and development:

Commercial and land development	—		15,151		—		—		—		—		15,151
Commercial and industrial	34		—		11		—		—		—		45

Residential mortgage:
First lien	—		—		—		—		2,310		—		2,310
Home equity - term	—		—		—		—		4		—		4
Home equity - lines of credit	—		—		—		—		661		—		661
Installment and other loans	—		—		—		—		—		1		1
Total	$	34	$	18,116	$	11	$	—	$	2,975	$	1	$	21,137

The information presented above in the nonaccrual loan table and the collateral-dependent table are not required for periods prior to the adoption of CECL. The following table, which excludes accruing PCI loans, presents the most comparable required information for the prior period, which summarizes impaired loans by segment and class, segregated by those for which a specific allowance was required and those for which a specific allowance was not required at December 31, 2022. The recorded investment in loans excludes accrued interest receivable. Related allowances established generally pertain to those loans in which loan forbearance agreements were in the process of being negotiated or updated appraisals were pending, and any partial charge-off will be recorded when final information is received.


	Impaired Loans with a Specific Allowance						Impaired Loans with No Specific Allowance
	Recorded Investment (Book Balance)		Unpaid Principal Balance (Legal Balance)		Related Allowance		Recorded Investment (Book Balance)		Unpaid Principal Balance (Legal Balance)
















December 31, 2022
Commercial real estate:
Owner-occupied	$	—	$	—	$	—	$	2,767	$	3,799


Non-owner occupied residential	—		—		—		81		207
Acquisition and development:

Commercial and land development	—		—		—		15,426		15,426
Commercial and industrial	—		—		—		31		112
Residential mortgage:
First lien	178		178		28		2,342		3,126
Home equity—term	—		—		—		5		8
Home equity—lines of credit	—		—		—		395		684
Installment and other loans	—		—		—		40		40
	$	178	$	178	$	28	$	21,087	$	23,402

On January 1, 2023, the Company adopted ASU 2022-02 on a modified retrospective basis. ASU 2022-02 eliminates the TDR accounting model, and requires that the Company evaluate, based on the accounting for loan modifications, whether the borrower is experiencing financial difficulty and the modification results in a more-than-insignificant direct change in the contractual cash flows and represents a new loan or a continuation of an existing loan. This change required all loan modifications to be accounted for under the general loan modification guidance in ASC 310-20, Receivables – Nonrefundable Fees and Other Costs, and subject entities to new disclosure requirements on loan modifications to borrowers experiencing financial difficulty. Upon adoption of CECL, the TDRs were evaluated and included in the CECL loan segment pools if the

The Company may modify loans to borrowers experiencing financial difficulty by providing principal forgiveness, term extension, interest rate reduction or an other-than-insignificant payment delay. When principal forgiveness is provided, the amount of forgiveness is charged off against the ACL. The Company may also provide multiple types of modifications on an individual loan. For three months ended March 31, 2023, the Company did not extend any modifications to borrowers experiencing financial difficulty that had a more-than-insignificant direct change in the contractual cash flows of the loan.

Management further monitors the performance and credit quality of the loan portfolio by analyzing the length of time a portfolio is past due by aggregating loans based on its delinquencies. The following table presents the classes of the loan portfolio summarized by aging categories at March 31, 2023:


	30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total Past Due		Loans Not Past Due		Total Loans
March 31, 2023
Commercial real estate:
Owner occupied	$	277	$	—	$	112	$	389	$	338,982	$	339,371
Non-owner occupied	—		—		—		—		603,396		603,396
Multi-family	—		—		—		—		144,053		144,053
Non-owner occupied residential	104		—		61		165		106,225		106,390
Acquisition and development:
1-4 family residential construction	—		—		—		—		20,941		20,941
Commercial and land development	—		—		—		—		174,556		174,556
Commercial and industrial	198		153		—		351		380,332		380,683
Municipal	—		—		—		—		11,329		11,329
Residential mortgage:
First lien	3,884		933		453		5,270		221,761		227,031
Home equity - term	7		—		—		7		5,364		5,371
Home equity - lines of credit	2,116		188		32		2,336		181,004		183,340
Installment and other loans	57		—		5		62		10,978		11,040
	$	6,643	$	1,274	$	663	$	8,580	$	2,198,921	$	2,207,501


			Days Past Due
	Current		30-59		60-89		90+ (still accruing)		Total Past Due		Non- Accrual		Total Loans
December 31, 2022
Commercial real estate:
Owner-occupied	$	310,769	$	31	$	—	$	—	$	31	$	2,767	$	313,567
Non-owner occupied	607,760		—		—		—		—		—		607,760
Multi-family	138,832		—		—		—		—		—		138,832
Non-owner occupied residential	103,782		184		—		—		184		81		104,047
Acquisition and development:
1-4 family residential construction	24,622		446		—		—		446		—		25,068
Commercial and land development	142,613		269		—		—		269		15,426		158,308
Commercial and industrial	355,179		464		52		—		516		31		355,726
Municipal	12,173		—		—		—		—		—		12,173
Residential mortgage:
First lien	219,715		3,485		414		132		4,031		1,838		225,584
Home equity – term	5,485		—		—		—		—		5		5,490
Home equity – lines of credit	181,350		1,395		101		—		1,496		395		183,241
Installment and other loans	11,953		64		—		—		64		40		12,057
Subtotal	2,114,233		6,338		567		132		7,037		20,583		2,141,853
Loans acquired with credit deterioration:
Commercial real estate:
Owner-occupied	2,203		—		—		—		—		—		2,203
Non-owner occupied	283		—		—		—		—		—		283

Non-owner occupied residential	452		—		—		105		105		—		557



Commercial and industrial	2,048		—		—		—		—		—		2,048

Residential mortgage:
First lien	3,657		327		79		202		608		—		4,265
Home equity – term	15		—		—		—		—		—		15

Installment and other loans	8		—		—		—		—		—		8
Subtotal	8,666		327		79		307		713		—		9,379
	$	2,122,899	$	6,665	$	646	$	439	$	7,750	$	20,583	$	2,151,232

As disclosed in Note 1, on January 1, 2023 the Company implemented CECL and increased the ACL, previously the ALL, with a cumulative-effect adjustment to the ACL for loans of $2.4 million. The Company’s ACL is calculated quarterly, with any adjustment recorded to the provision for credit losses in the consolidated statement of income. Management calculates the quantitative portion of collectively evaluated loans for all loan categories, with the exception of the consumer loan segment, using DCF methodology. For purposes of calculating the quantitative portion of collectively evaluated reserves on the consumer loan segment, the remaining life methodology is utilized. For purposes of estimating the Company’s ACL, management generally evaluates collectively evaluated loans by federal call code in order to group loans with similar risk characteristics.

Loans that do not share similar risk characteristics are evaluated on an individual loan basis, and are excluded from the collective evaluation for the ACL. Loans identified to be individually evaluated under CECL include loans on nonaccrual status and may include accruing loans that do not share similar risk characteristics to other accruing loans that are collectively evaluated on a loan pool basis. A specific reserve analysis may be applied to the individually evaluated loans, which considers collateral value, an observable market price or the present value of expected future cash flows. A specific reserve is assigned if the measured value of the loan using one of the before mentioned methods is less than the current carrying value of the loan.

Based on management's analysis, adjustments may be applied for additional factors impacting the risk of loss in the loan portfolio beyond the quantitatively calculated reserve calculated on collectively evaluated loans. As the quantitative reserve calculation incorporates historical conditions, management may consider an additional or reduced reserve is warranted through qualitative risk factors based on current and expected conditions. These qualitative risk factors considered by management are comparable to legacy factors prior to the adoption of CECL and include significant or unexpected changes in:

The following table presents the activity in the ACL, including the impact of adopting CECL, for the three months ended March 31, 2023 and the activity in the ALL for the three months ended March 31, 2022:


	Commercial										Consumer
	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Municipal		Total		Residential Mortgage		Installment and Other		Total		Unallocated		Total
















Three Months Ended
March 31, 2023
Beginning balance, prior to adoption of CECL	$	13,558	$	3,214	$	4,505	$	24	$	21,301	$	3,444	$	188	$	3,632	$	245	$	25,178
Impact of adopting CECL	2,857		(214)		928		169		3,740		(1,121)		49		(1,072)		(245)		2,423
Provision for credit losses	262		215		412		(16)		873		(140)		(4)		(144)		—		729
Charge-offs	—		—		(86)		—		(86)		—		(56)		(56)		—		(142)
Recoveries	20		2		28		—		50		95		31		126		—		176
Balance, end of period	$	16,697	$	3,217	$	5,787	$	177	$	25,878	$	2,278	$	208	$	2,486	$	—	$	28,364
March 31, 2022
Balance, beginning of period	$	12,037	$	2,062	$	3,814	$	30	$	17,943	$	2,785	$	215	$	3,000	$	237	$	21,180

Provision for loan losses	(523)		258		500		(1)		234		72		(6)		66		—		300
Charge-offs	—		—		(61)		—		(61)		(10)		(13)		(23)		—		(84)
Recoveries	32		1		48		—		81		26		5		31		—		112
Balance, end of period	$	11,546	$	2,321	$	4,301	$	29	$	18,197	$	2,873	$	201	$	3,074	$	237	$	21,508

The information presented in the table below is not required for periods subsequent to the adoption of CECL. The following table summarizes the ALL allocation for loans individually and collectively evaluated for impairment by loan segment at December 31, 2022. Accruing PCI loans are excluded from loans individually evaluated for impairment.


	Commercial										Consumer
	Commercial Real Estate		Acquisition and Development		Commercial and Industrial		Municipal		Total		Residential Mortgage		Installment and Other		Total		Unallocated		Total











December 31, 2022
Loans allocated by:
Individually evaluated for impairment	$	2,848	$	15,426	$	31	$	—	$	18,305	$	2,920	$	40	$	2,960	$	—	$	21,265
Collectively evaluated for impairment	1,164,401		167,950		357,743		12,173		1,702,267		415,675		12,025		427,700		—		2,129,967
	$	1,167,249	$	183,376	$	357,774	$	12,173	$	1,720,572	$	418,595	$	12,065	$	430,660	$	—	$	2,151,232
ALL allocated by:
Individually evaluated for impairment	$	—	$	—	$	—	$	—	$	—	$	28	$	—	$	28	$	—	$	28
Collectively evaluated for impairment	13,558		3,214		4,505		24		21,301		3,416		188		3,604		245		25,150
	$	13,558	$	3,214	$	4,505	$	24	$	21,301	$	3,444	$	188	$	3,632	$	245	$	25,178