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's underwriting standards are developed to mitigate this risk. The underwriting process includes 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 is typical. However, these procedures cannot eliminate the risk of loss associated with commercial and industrial lending. At September 30, 2023 and December 31, 2022, commercial and industrial loans include $6.2 million and $13.8 million, respectively, net of deferred fees and costs, originated through the SBA PPP. At September 30, 2023, the Bank has $88 thousand of net deferred SBA PPP fees remaining to be recognized through net interest income over the remaining life of the loans. As these loans are 100% guaranteed by the SBA, there is no associated ACL at September 30, 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 September 30, 2023 and December 31, 2022:


	September 30, 2023		December 31, 2022
Commercial real estate:
Owner occupied	$	376,350	$	315,770
Non-owner occupied	630,514		608,043
Multi-family	143,437		138,832
Non-owner occupied residential	100,391		104,604
Acquisition and development:
1-4 family residential construction	25,642		25,068
Commercial and land development	153,279		158,308
Commercial and industrial (1)	374,190		357,774
Municipal	10,334		12,173
Residential mortgage:
First lien	248,335		229,849
Home equity - term	5,223		5,505
Home equity - lines of credit	188,736		183,241
Installment and other loans	10,405		12,065
Total loans	$	2,266,836	$	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 September 30, 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 September 30, 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	$	46,027	$	94,573	$	79,707	$	22,354	$	21,605	$	66,222	$	5,372	$	—	$	335,860
Special mention	—		10,007		2,541		—		—		2,398		—		—		14,946
Substandard - Non-IEL	—		—		—		6,122		—		2,165		457		—		8,744
Substandard - IEL	—		—		—		14,321		—		2,479		—		—		16,800
Total owner-occupied loans	$	46,027	$	104,580	$	82,248	$	42,797	$	21,605	$	73,264	$	5,829	$	—	$	376,350
Current period gross charge offs - owner-occupied	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Non-owner occupied:
Risk rating
Pass	$	36,918	$	98,722	$	206,053	$	85,808	$	63,827	$	135,331	$	510	$	871	$	628,040
Special mention	—		—		—		—		—		2,144		—		—		2,144
Substandard - Non-IEL	—		—		—		—		—		78		—		—		78
Substandard - IEL	—		—		—		—		—		252		—		—		252
Total non-owner occupied loans	$	36,918	$	98,722	$	206,053	$	85,808	$	63,827	$	137,805	$	510	$	871	$	630,514
Current period gross charge offs - non-owner occupied	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Multi-family:
Risk rating
Pass	$	2,255	$	59,413	$	8,732	$	12,765	$	7,791	$	50,300	$	150	$	—	$	141,406
Special mention	—		—		—		—		—		2,031		—		—		2,031
Substandard - Non-IEL	—		—		—		—		—		—		—		—		—
Substandard - IEL	—		—		—		—		—		—		—		—		—
Total multi-family loans	$	2,255	$	59,413	$	8,732	$	12,765	$	7,791	$	52,331	$	150	$	—	$	143,437
Current period gross charge offs - multi-family	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—


	Term Loans Amortized Cost Basis by Origination Year
As of September 30, 2023	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Basis		Revolving Loans Converted to Term		Total
Residential mortgage:
First lien:
Payment performance
Performing	$	27,657	$	65,681	$	35,176	$	8,071	$	7,690	$	100,990	$	—	$	642	$	245,907
Nonperforming	—		—		—		—		172		2,256		—		—		2,428
Total first lien loans	$	27,657	$	65,681	$	35,176	$	8,071	$	7,862	$	103,246	$	—	$	642	$	248,335
Current period gross charge offs - first lien	$	—	$	—	$	—	$	—	$	—	$	58	$	—	$	—	$	58
Home equity - term:
Payment performance
Performing	$	553	$	750	$	140	$	443	$	124	$	3,210	$	—	$	—	$	5,220
Nonperforming	—		—		—		—		—		3		—		—		3
Total home equity - term loans	$	553	$	750	$	140	$	443	$	124	$	3,213	$	—	$	—	$	5,223
Current period gross charge offs - home equity - term	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Home equity - lines of credit:
Payment performance
Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	111,582	$	76,259	$	187,841
Nonperforming	—		—		—		—		—		—		877		18		895
Total residential real estate - home equity - lines of credit loans	$	—	$	—	$	—	$	—	$	—	$	—	$	112,459	$	76,277	$	188,736
Current period gross charge offs - home equity - lines of credit	$	—	$	—	$	—	$	—	$	—	$	—	$	40	$	—	$	40
Installment and other loans:
Payment performance
Performing	$	718	$	457	$	357	$	118	$	861	$	1,350	$	6,516	$	—	$	10,377
Nonperforming	—		—		—		—		19		5		4		—		28
Total Installment and other loans	$	718	$	457	$	357	$	118	$	880	$	1,355	$	6,520	$	—	$	10,405
Current period gross charge offs - installment and other	$	139	$	24	$	—	$	—	$	4	$	10	$	21	$	—	$	198

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. 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 September 30, 2023, the amortized cost of the PCD loans was $8.8 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 September 30, 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.


	September 30, 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	$	—	$	16,800	$	16,800	$	—	$	2,767
Non-owner occupied	—		252		252		—		—

Non-owner occupied residential	—		288		288		—		81
Acquisition and development:

Commercial and land development	—		1,417		1,417		—		15,426
Commercial and industrial	—		662		662		—		31

Residential mortgage:
First lien	—		2,025		2,025		277		1,838
Home equity – term	—		3		3		—		5
Home equity – lines of credit	—		849		849		—		395
Installment and other loans	4		24		28		—		40
Total	$	4	$	22,320	$	22,324	$	277	$	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 September 30, 2023, substantially 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 September 30, 2023. The following table presents the amortized cost basis of collateral-dependent loans by class as of September 30, 2023:


	Type of Collateral
	Business Assets		Commercial Real Estate		Equipment		Land		Residential Real Estate		Other		Total
Commercial real estate:
Owner occupied	$	—	$	16,800	$	—	$	—	$	—	$	—	$	16,800
Non-owner occupied	—		252		—		—		—		—		252

Non-owner occupied residential	—		288		—		—		—		—		288
Acquisition and development:

Commercial and land development	—		1,417		—		—		—		—		1,417
Commercial and industrial	654		—		8		—		—		—		662

Residential mortgage:
First lien	—		—		—		—		1,940		—		1,940
Home equity - term	—		—		—		—		3		—		3
Home equity - lines of credit	—		—		—		—		849		—		849
Installment and other loans	—		—		—		—		—		4		4
Total	$	654	$	18,757	$	8	$	—	$	2,792	$	4	$	22,215

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 at December 31, 2022, 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


	September 30, 2022
	Average Impaired Balance		Interest Income Recognized
Three Months Ended September 30,
Commercial real estate:
Owner-occupied	$	2,881	$	—


Non-owner occupied residential	93		—



Commercial and industrial	51		—
Residential mortgage:
First lien	2,390		10
Home equity – term	5		—
Home equity - lines of credit	382		—
Installment and other loans	43		—
	$	5,845	$	10
Nine Months Ended September 30,
Commercial real estate:
Owner occupied	$	3,126	$	—


Non-owner occupied residential	100		—



Commercial and industrial	132		—
Residential mortgage:
First lien	2,370		25
Home equity - term	6		—
Home equity - lines of credit	407		—
Installment and other loans	45		—
	$	6,186	$	25

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 loans shared similar risk characteristics to other loans in the pool or remained with individually evaluated loans for which the ACL was measured using the collateral-dependent or discounted cash flow method.

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 the nine months ended September 30, 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.


	30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Total Past Due		Loans Not Past Due		Total Loans
September 30, 2023
Commercial real estate:
Owner occupied	$	—	$	230	$	131	$	361	$	375,989	$	376,350
Non-owner occupied	—		—		—		—		630,514		630,514
Multi-family	—		—		—		—		143,437		143,437
Non-owner occupied residential	—		—		—		—		100,391		100,391
Acquisition and development:
1-4 family residential construction	—		—		—		—		25,642		25,642
Commercial and land development	—		—		—		—		153,279		153,279
Commercial and industrial	893		16		38		947		373,243		374,190
Municipal	—		—		—		—		10,334		10,334
Residential mortgage:
First lien	1,564		1,311		749		3,624		244,711		248,335
Home equity - term	—		—		—		—		5,223		5,223
Home equity - lines of credit	1,174		887		513		2,574		186,162		188,736
Installment and other loans	70		5		4		79		10,326		10,405
	$	3,701	$	2,449	$	1,435	$	7,585	$	2,259,251	$	2,266,836


			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:

All factors noted above were established upon adoption of CECL and were deemed appropriate at September 30, 2023. For the three and nine months ended September 30, 2023, these factors were unchanged from levels at adoption of CECL, except for an increase in the Delinquency and Classified Loan Trends qualitative factor for the commercial & industrial and owner-occupied commercial real estate loan classes, which was based on a recent trend of increases in loans downgraded to the special mention or classified risk rating, and an increase in the Economic Conditions qualitative factor for the residential mortgages, installment and other loans, which was based on growing concerns related to consumer debt levels, the impact of inflationary pressures and the reinstatement of student loan repayments.

The following table presents the activity in the ACL, including the impact of adopting CECL, for the three and nine months ended September 30, 2023 and the activity in the ALL for the three and nine months ended September 30, 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
September 30, 2023
Balance, beginning of period	$	16,996	$	2,767	$	5,854	$	167	$	25,784	$	2,307	$	292	$	2,599	$	—	$	28,383

Provision for credit losses	(173)		125		(62)		(11)		(121)		239		18		257		—		136
Charge-offs	—		—		(267)		—		(267)		—		(75)		(75)		—		(342)
Recoveries	17		1		33		—		51		31		19		50		—		101
Balance, end of period	$	16,840	$	2,893	$	5,558	$	156	$	25,447	$	2,577	$	254	$	2,831	$	—	$	28,278
September 30, 2022
Balance, beginning of period	$	12,294	$	3,024	$	4,471	$	26	$	19,815	$	3,004	$	223	$	3,227	$	237	$	23,279

Provision for loan losses	551		342		296		(1)		1,188		309		(5)		304		8		1,500
Charge-offs	—		—		(87)		—		(87)		—		(24)		(24)		—		(111)
Recoveries	—		1		32		—		33		2		6		8		—		41
Balance, end of period	$	12,845	$	3,367	$	4,712	$	25	$	20,949	$	3,315	$	200	$	3,515	$	245	$	24,709

Nine Months Ended
September 30, 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	335		(111)		790		(37)		977		163		124		287		—		1,264
Charge-offs	(12)		—		(748)		—		(760)		(98)		(198)		(296)		—		(1,056)
Recoveries	102		4		83		—		189		189		91		280		—		469
Balance, end of period	$	16,840	$	2,893	$	5,558	$	156	$	25,447	$	2,577	$	254	$	2,831	$	—	$	28,278
September 30, 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	776		1,295		980		(5)		3,046		508		13		521		8		3,575
Charge-offs	—		—		(202)		—		(202)		(10)		(42)		(52)		—		(254)
Recoveries	32		10		120		—		162		32		14		46		—		208
Balance, end of period	$	12,845	$	3,367	$	4,712	$	25	$	20,949	$	3,315	$	200	$	3,515	$	245	$	24,709

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