XML 21 R12.htm IDEA: XBRL DOCUMENT

Loans, net and allowance for credit losses

9 Months Ended

Sep. 30, 2023

Loans, net and allowance for credit losses

Loans, net and allowance for credit losses

5. Loans, net and allowance for credit losses:

The major classifications of loans outstanding, net of deferred loan origination fees and costs at September 30, 2023 and December 31, 2022 are summarized as follows. The Company had net deferred loan origination fees of $0.2 million and $0.3 million at September 30, 2023 and December 31, 2022, respectively.



(Dollars in thousands)			September 30, 2023		December 31, 2022
Commercial and Industrial		$	404,245		$	433,048
Municipal			176,935			166,210
Total			581,180			599,258
Real estate
Commercial			1,846,350			1,709,827
Residential			357,647			330,728
Total			2,203,997			2,040,555
Consumer
Indirect Auto			78,953			76,461
Consumer Other			6,839			13,842
Total			85,792			90,303
Total		$	2,870,969		$	2,730,116

The following tables present the balance of the allowance for credit losses at September 30, 2023 and 2022. For the three and nine months ended September 30, 2023, the balance of the allowance for credit losses is based on the CECL methodology, as presented in Note 1. For the three and nine months ended September 30, 2022, the allowance for loan losses is based upon the calculation methodology as described in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022. The tables identify the valuation allowances attributable to specifically identified impairments on individually evaluated loans, including those acquired with deteriorated credit quality, as well as valuation allowances for impairments on loans evaluated collectively. The tables include the underlying balance of loans receivable applicable to each category as of those dates.


(Dollars in thousands)								Real estate
September 30, 2023		Commercial			Municipal			Commercial			Residential			Consumer			Total
Allowance for credit losses:
Beginning Balance July 1, 2023		$	2,751		$	827		$	14,961		$	3,767		$	912		$	23,218
Charge-offs															(65)			(65)
Recoveries			4									3			16			23
Provisions (credits)			(504)			40			134			128			36			(166)
Ending balance		$	2,251		$	867		$	15,095		$	3,898		$	899		$	23,010

(Dollars in thousands)								Real estate
September 30, 2022		Commercial			Municipal			Commercial			Residential			Consumer			Total
Allowance for loan losses:
Beginning Balance July 1, 2022		$	6,522		$	1,244		$	17,569		$	3,220		$	819		$	29,374
Charge-offs									(15)						(86)			(101)
Recoveries			10						32			1			56			99
Provisions (credits)			(12)			7			437			9			9			450
Ending balance		$	6,520		$	1,251		$	18,023		$	3,230		$	798		$	29,822


(Dollars in thousands)								Real estate
September 30, 2023		Commercial			Municipal			Commercial			Residential			Consumer			Total
Allowance for credit losses:
Beginning Balance January 1, 2023		$	4,365		$	1,247		$	17,915		$	3,072		$	873		$	27,472
Impact of adopting ASU 2016-13			(1,683)			747			(3,344)			967			30			(3,283)
Beginning Balance January 1, 2023			2,682			1,994			14,571			4,039			903			24,189
Charge-offs			(4)												(213)			(217)
Recoveries			9						1			22			109			141
Provisions (credits)			(436)			(1,127)			523			(163)			100			(1,103)
Ending balance		$	2,251		$	867		$	15,095		$	3,898		$	899		$	23,010

(Dollars in thousands)								Real estate
September 30, 2022		Commercial			Municipal			Commercial			Residential			Consumer			Total
Allowance for loan losses:
Beginning Balance January 1, 2022		$	7,466		$	987		$	15,928		$	3,209		$	793		$	28,383
Charge-offs			(161)						(147)			(2)			(244)			(554)
Recoveries			39						109			4			141			293
Provisions (credits)			(824)			264			2,133			19			108			1,700
Ending balance		$	6,520		$	1,251		$	18,023		$	3,230		$	798		$	29,822

The following table represents the allowance for credit losses by major classification of loan and whether the loans were individually or collectively evaluated and collateral dependent by class of loans at September 30, 2023 under ASU 2016-13.


(Dollars in thousands)								Real estate
September 30, 2023		Commercial			Municipal			Commercial			Residential			Consumer			Total
Allowance for credit losses:
Ending balance		$	2,251		$	867		$	15,095		$	3,898		$	899		$	23,010
Ending balance: individually evaluated			42															42
Ending balance: collectively evaluated		$	2,209		$	867		$	15,095		$	3,898		$	899		$	22,968
Loans receivable:
Ending balance		$	404,245		$	176,935		$	1,846,350		$	357,647		$	85,792		$	2,870,969
Individually evaluated - collateral dependent - real estate			61						2,065			1,327						3,453
Individually evaluated - collateral dependent - non-real estate			42															42
Collectively evaluated			404,142			176,935			1,844,285			356,320			85,792			2,867,474

The following table represents the allowance for loan losses by major classification of loan and whether the loans were individually or collectively evaluated for impairment at December 31, 2022 prior to the adoption of ASU 2016-13.



(Dollars in thousands)								Real estate
December 31, 2022		Commercial			Municipal			Commercial			Residential			Consumer			Total
Allowance for loan losses:
Ending balance		$	4,365		$	1,247		$	17,915		$	3,072		$	873		$	27,472
Ending balance: individually evaluated for impairment			19									21						40
Ending balance: collectively evaluated for impairment		$	4,346		$	1,247		$	17,915		$	3,051		$	873		$	27,432
Loans receivable:
Ending balance		$	433,048		$	166,210		$	1,709,827		$	330,728		$	90,303		$	2,730,116
Ending balance: individually evaluated for impairment			98						2,063			1,760						3,921
Ending balance: collectively evaluated for impairment			432,950			166,210			1,707,764			328,968			90,303			2,726,195

Nonaccrual Loans

The following table presents the Company’s nonaccrual loans at September 30, 2023 and December 31, 2022.



			September 30, 2023
			Total			Nonaccrual with			Nonaccrual with
			Nonaccrual			an Allowance for			no Allowance for
(Dollars in thousands)			Loans			Credit Losses			Credit Losses
Commercial		$	42		$	42		$
Municipal
Real estate:
Commercial			2,065						2,065
Residential			687						687
Consumer			266						266
Total		$	3,060		$	42		$	3,018



									December 31, 2022
									Total
									Nonaccrual
(Dollars in thousands)									Loans
Commercial								$	86
Municipal
Real estate:
Commercial									1,155
Residential									562
Consumer									232
Total								$	2,035

Interest income recorded on nonaccrual loans for the three and nine months ended September 30, 2023 was $11 thousand and $426 thousand, respectively.

The following table summarizes information concerning impaired loans, which include nonaccrual loans, troubled debt restructurings and loans past due 90 days or more and still accruing, as of and for the three and nine months ended September 30, 2022 by major loan classification:


		September 30, 2022
											This Quarter							Year-to-Date
					Unpaid						Average			Interest				Average			Interest
		Recorded			Principal			Related			Recorded			Income				Recorded			Income
(Dollars in thousands)		Investment			Balance			Allowance			Investment			Recognized				Investment			Recognized
With no related allowance:
Commercial		$	94		$	425		$			$	110		$	3		$	129		$	7
Municipal
Real estate:
Commercial			2,389			3,193						2,431			9			2497			31
Residential			918			1,102						957			6			915			16
Consumer			245			256						258						215
Total			3,646			4,976						3,756			18			3,756			54
With an allowance recorded:
Commercial			20			20			19			27						29
Municipal
Real estate:
Commercial			332			332			1			381			7			429			15
Residential			243			247			21			257			3			297			9
Consumer
Total			595			599			41			665			10			755			24
Total impaired loans
Commercial			114			445			19			137			3			158			7
Municipal
Real estate:
Commercial			2,721			3,525			1			2,812			16			2,926			46
Residential			1,161			1,349			21			1,214			9			1,212			25
Consumer			245			256						258						215
Total		$	4,241		$	5,575		$	41		$	4,421		$	28		$	4,511		$	78

The Company segments loans into risk categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. Loans are individually analyzed for credit risk by classifying them within the Company’s internal risk rating system. The Company’s risk rating classifications are defined as follows:

●

Pass- A loan to borrowers with acceptable credit quality and risk that is not adversely classified as Substandard, Doubtful, Loss nor designated as Special Mention.

●

Special Mention- A loan that has potential weaknesses that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the institution’s credit position at some future date. Special Mention loans are not adversely classified since they do not expose the Company to sufficient risk to warrant adverse classification.

●

Substandard- A loan that is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected.

●

Doubtful – A loan classified as Doubtful has all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make the collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

●

Loss- A loan classified as Loss is considered uncollectible and of such little value that its continuance as bankable loan is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future.

The following table presents the amortized cost of loans and gross charge-offs by year of origination and by major classification of loans summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system at September 30, 2023:




(Dollars in thousands)			2023			2022			2021			2020			2019			Prior			Revolving Loans Amortized Cost Basis			Total
Commercial
Pass		$	12,683		$	40,553		$	36,636		$	28,862		$	47,241		$	89,914		$	139,540		$	395,429
Special Mention																					41			41
Substandard			15						43						39			540			8,138			8,775
Total Commercial			12,698			40,553			36,679			28,862			47,280			90,454			147,719			404,245

Municipal
Pass			1,191			48,439			96,517			11,387			22			19,292			87			176,935
Special Mention
Substandard
Total Municipal			1,191			48,439			96,517			11,387			22			19,292			87			176,935

Commercial real estate
Pass			120,565			551,075			495,384			147,219			153,519			370,440						1,838,202
Special Mention						484									298			434						1,216
Substandard			170						1,636			162			618			4,346						6,932
Total Commercial real estate			120,735			551,559			497,020			147,381			154,435			375,220						1,846,350

Residential real estate
Pass			21,151			54,932			67,074			28,033			17,125			87,298			81,347			356,960
Special Mention
Substandard			4									329						349			5			687
Total Residential real estate			21,155			54,932			67,074			28,362			17,125			87,647			81,352			357,647

Consumer
Pass			24,163			33,055			13,885			6,285			3,765			3,602			772			85,527
Special Mention
Substandard						51			105			51			12			34			12			265
Total Consumer			24,163			33,106			13,990			6,336			3,777			3,636			784			85,792

Total Loans		$	179,942		$	728,589		$	711,280		$	222,328		$	222,639		$	576,249		$	229,942		$	2,870,969

Gross charge-offs
Commercial		$			$			$			$			$			$			$	4		$	4
Municipal
Commercial real estate
Residential real estate
Consumer						32			79			50			37			15						213
Total Gross charge-offs		$			$	32		$	79		$	50		$	37		$	15		$	4		$	217

The following table presents the amortized cost of loans by major classification of loans summarized by the aggregate pass rating and the classified ratings of special mention, substandard and doubtful within the Company’s internal risk rating system at December 31, 2022 as disclosed prior to ASU 2016-13:


		December 31, 2022
					Special
(Dollars in thousands)		Pass			Mention			Substandard			Doubtful			Total
Commercial		$	424,411		$	7,822		$	815		$			$	433,048
Municipal			166,210												166,210
Real estate:
Commercial			1,699,041			7,509			3,277						1,709,827
Residential			329,098						1,630						330,728
Consumer			90,020						283						90,303
Total		$	2,708,780		$	15,331		$	6,005		$			$	2,730,116

The major classifications of loans by past due status are summarized as follows:


		September 30, 2023
								Greater												Loans > 90
		30-59 Days			60-89 Days			than 90			Total Past									Days and
(Dollars in thousands)		Past Due			Past Due			Days			Due			Current			Total Loans			Accruing
Commercial		$	57		$	5		$	103		$	165		$	404,080		$	404,245		$	60
Municipal															176,935			176,935
Real estate:
Commercial						1,660			392			2,052			1,844,298			1,846,350
Residential			1,032			20			1,041			2,093			355,554			357,647			640
Consumer			795			376			174			1,345			84,447			85,792
Total		$	1,884		$	2,061		$	1,710		$	5,655		$	2,865,314		$	2,870,969		$	700


		December 31, 2022
								Greater												Loans > 90
		30-59 Days			60-89 Days			than 90			Total Past									Days and
(Dollars in thousands)		Past Due			Past Due			Days			Due			Current			Total Loans			Accruing
Commercial		$	137		$	38		$	86		$	261		$	432,787		$	433,048		$
Municipal															166,210			166,210
Real estate:
Commercial			102			2			334			438			1,709,389			1,709,827
Residential			1,162			128			988			2,278			328,450			330,728			748
Consumer			690			199			120			1,009			89,294			90,303
Total		$	2,091		$	367		$	1,528		$	3,986		$	2,726,130		$	2,730,116		$	748

Allowance for Credit Losses on Off Balance Sheet Commitments

The following table presents the activity in the ACL on off balance sheet commitments, which include commitments to extend credit, unused portions of lines of credit and standby letters of credit, for the nine months ended September 30, 2023:


(Dollars in thousands)			September 30, 2023
Balance at December 31, 2022		$	179
Impact of adopting Topic 326			270
Credit recorded in noninterest expense			(368)
Total allowance for credit losses on off balance sheet commitments		$	81

Modifications to Borrowers Experiencing Financial Difficulty

The Company adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”) effective January 1, 2023. The amendments in ASU 2022-02 eliminated the recognition and measurement of troubled debt restructurings and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty.

There were no loans made to borrowers experiencing financial difficulty that were modified during the nine months ended September 30, 2023 and hence there were no loans made to borrowers experiencing financial difficulty that subsequently defaulted.

Information on loan modifications prior to the adoption of ASU 2022-02 on January 1, 2023 is presented in accordance with the applicable accounting standards in effect at that time. During the three and nine months ended September 30, 2022, the Company did not modify any loans that were determined to be a troubled debt restructuring.