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Loans, net and allowance for credit losses

12 Months Ended

Dec. 31, 2024

Loans, net and allowance for credit losses

Loans, net and allowance for credit losses

4. Loans, net and allowance for credit losses:

The major classifications of loans outstanding, net of deferred loan origination fees and costs at December 31, 2024 and 2023 are summarized as follows. Net deferred loan fees of $1.1 million and $0.4 million are included in loan balances at December 31, 2024 and 2023, respectively.


(Dollars in thousands)		December 31, 2024			December 31, 2023
Commercial
Commercial and Industrial		$	648,102		$	368,411
Municipal			187,918			175,304
Total			836,020			543,715
Real estate
Commercial			2,294,113			1,863,118
Residential			551,383			360,803
Total			2,845,496			2,223,921
Consumer
Indirect Auto			117,914			75,389
Consumer Other			14,955			6,872
Total			132,869			82,261
Equipment Financing			179,120
Total		$	3,993,505		$	2,849,897

At December 31, 2024, the majority of the Company’s loans were at least partially secured by real estate in the markets we operate in. Therefore, a primary concentration of credit risk is directly related to the real estate market in these regions. Changes in the general economy, local economy or in the real estate market could affect the ultimate collectability of this portion of the loan portfolio. Management does not believe there are any other significant concentrations of credit risk that could affect the loan portfolio.

Loans are pledged to the FHLB and the FRB as collateral for borrowing lines of credit as part of our contingent liquidity strategy. At December 31, 2024, $2.4 billion was pledged to the FHLB providing $1.7 billion in borrowing capacity and $624.8 million was pledged to the FRB’s Borrow-in-Custody program providing $476.0 million in borrowing capacity.

Past Due Loans

The major classification of loans by past due status at December 31, 2024 and 2023 are summarized as follows:


		December 31, 2024
								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		$	2,740		$	157		$	838		$	3,735		$	644,367		$	648,102		$
Municipal															187,918			187,918
Real estate:
Commercial			2,800			141			11,164			14,105			2,280,008			2,294,113
Residential			2,390			997			2,477			5,864			545,519			551,383			403
Consumer			2,393			539			492			3,424			129,445			132,869			55
Equipment Financing			639			1,259			815			2,713			176,407			179,120
Total		$	10,962		$	3,093		$	15,786		$	29,841		$	3,963,664		$	3,993,505		$	458


		December 31, 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		$	53		$	155		$	10		$	218		$	368,193		$	368,411		$
Municipal															175,304			175,304
Real estate:
Commercial			152			5			279			436			1,862,682			1,863,118
Residential			1,456			50			1,610			3,116			357,687			360,803			986
Consumer			1,069			285			85			1,439			80,822			82,261
Total		$	2,730		$	495		$	1,984		$	5,209		$	2,844,688		$	2,849,897		$	986

The amount of residential loans in the formal process of foreclosure totaled $0.2 million at December 31, 2024 and $0.3 million at December 31, 2023.

Nonaccrual Loans

The following tables present the Company’s nonaccrual loans at December 31, 2024 and December 31, 2023.



			December 31, 2024
			Total			Nonaccrual with			Nonaccrual with
			Nonaccrual			an Allowance for			no Allowance for
(Dollars in thousands)			Loans			Credit Losses			Credit Losses
Commercial		$	1,907		$	343		$	1,564
Municipal
Real estate:
Commercial			15,609			2,574			13,035
Residential			2,809						2,809
Consumer			744						744
Equipment Financing			1,430			819			611
Total		$	22,499		$	3,736		$	18,763



			December 31, 2023
			Total			Nonaccrual with			Nonaccrual with
			Nonaccrual			an Allowance for			no Allowance for
(Dollars in thousands)			Loans			Credit Losses			Credit Losses
Commercial		$	10		$	10		$
Municipal
Real estate:
Commercial			2,974			1,170			1,804
Residential			760						760
Consumer			218						218
Total		$	3,962		$	1,180		$	2,782

Interest income recorded on nonaccrual loans for the year ended December 31, 2024 was $1.1 million and $0.4 million for the year ended December 31, 2023.

Credit Quality Indicators

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 following tables present 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 December 31, 2024 and 2023:


		As of December 31, 2024
(Dollars in thousands)			2024			2023			2022			2021			2020			Prior			Revolving Loans Amortized Cost Basis			Revolving Loans Converted to Term			Total
Commercial
Pass		$	61,657		$	69,329		$	83,123		$	64,488		$	29,950		$	91,906		$	199,737		$	68		$	600,258
Special Mention			1,273			1,131			686			13,475			2,043			1,261			16,840						36,709
Substandard						300			854			904			85			597			8,395						11,135
Total Commercial			62,930			70,760			84,663			78,867			32,078			93,764			224,972			68			648,102

Municipal
Pass			5,072			6,254			50,886			99,064			9,932			13,816			2,894						187,918
Special Mention
Substandard
Total Municipal			5,072			6,254			50,886			99,064			9,932			13,816			2,894						187,918

Commercial real estate
Pass			161,186			196,779			651,254			525,233			156,970			538,905									2,230,327
Special Mention			1,231			46			2,724			4,361			1,635			24,951									34,948
Substandard						3,276			8,883			1,106			1,704			13,869									28,838
Total Commercial real estate			162,417			200,101			662,861			530,700			160,309			577,725									2,294,113

Residential real estate
Pass			39,488			45,172			77,862			123,154			50,831			106,877			105,867			67			549,318
Special Mention
Substandard												126			296			1,565			78						2,065
Total Residential real estate			39,488			45,172			77,862			123,280			51,127			108,442			105,945			67			551,383

Consumer
Pass			28,872			38,223			38,668			18,963			4,132			2,495			853						132,206
Special Mention
Substandard			65			156			209			124			43			64			2						663
Total Consumer			28,937			38,379			38,877			19,087			4,175			2,559			855						132,869

Equipment Financing
Pass			67,100			66,341			39,323			4,259															177,023
Special Mention						261			125																		386
Substandard						697			1,014																		1,711
Total Equipment Financing			67,100			67,299			40,462			4,259															179,120

Total Loans		$	365,944		$	427,965		$	955,611		$	855,257		$	257,621		$	796,306		$	334,666		$	135		$	3,993,505

Gross charge-offs
Commercial		$			$	41		$			$	2		$			$	8		$			$			$	51
Municipal
Commercial real estate																		282									282
Residential real estate
Consumer			90			245			255			183			32			87									892
Equipment Financing						551			109																		660
Total Gross charge-offs		$	90		$	837		$	364		$	185		$	32		$	377		$			$			$	1,885



		As of December 31, 2023
(Dollars in thousands)			2023			2022			2021			2020			2019			Prior			Revolving Loans Amortized Cost Basis			Revolving Loans Converted to Term			Total
Commercial
Pass		$	9,856		$	38,172		$	28,127		$	29,966		$	44,551		$	82,190		$	131,536		$	650		$	365,048
Special Mention						876			182									49			832						1,939
Substandard			15			19			42						33			534			781						1,424
Total Commercial			9,871			39,067			28,351			29,966			44,584			82,773			133,149			650			368,411

Municipal
Pass			1,888			48,095			94,791			10,804			16			19,652			58						175,304
Special Mention
Substandard
Total Municipal			1,888			48,095			94,791			10,804			16			19,652			58						175,304

Commercial real estate
Pass			156,277			553,754			491,506			143,068			153,426			351,142						117			1,849,290
Special Mention						1,299									360			2,761									4,420
Substandard			169			1,338			1,520			160			697			5,524									9,408
Total Commercial real estate			156,446			556,391			493,026			143,228			154,483			359,427						117			1,863,118

Residential real estate
Pass			17,385			52,093			65,280			27,118			16,652			84,652			83,507			13,490			360,177
Special Mention
Substandard			4									329						288			5						626
Total Residential real estate			17,389			52,093			65,280			27,447			16,652			84,940			83,512			13,490			360,803

Consumer
Pass			27,053			30,307			12,460			5,441			3,107			2,981			694						82,043
Special Mention
Substandard						58			79			31			30			20									218
Total Consumer			27,053			30,365			12,539			5,472			3,137			3,001			694						82,261

Total Loans		$	212,647		$	726,011		$	693,987		$	216,917		$	218,872		$	549,793		$	217,413		$	14,257		$	2,849,897

Gross charge-offs
Commercial		$			$			$			$	21		$			$	33		$	4		$			$	58
Municipal
Commercial real estate																		2,598									2,598
Residential real estate
Consumer						95			101			69			49			55									369
Total Gross charge-offs		$			$	95		$	101		$	90		$	49		$	2,686		$	4		$			$	3,025

Modifications to Borrowers Experiencing Financial Difficulty

The following presents, by class of loans, information regarding nonaccrual modified loans to borrowers experiencing financial difficulty during the years ended December 31, 2024 and 2023.

Other-Than-Insignificant Payment Delay

For the Years Ended December 31,

2024

2023

Number
of

Amortized Cost

% of Total Class of Financing

Related

Number
of

Amortized Cost

% of Total Class of Financing

Related

(Dollars in thousands)

Loans

Basis

Receivable

Reserve

Loans

Basis

Receivable

Reserve

Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:

Commercial and industrial

1

$

408

0.06%

$

$

$

Total

1

$

408

$

$

$

There were no modifications of accruing loans in 2024 or 2023.

The following presents, by class of loans, information regarding the financial effect on nonaccrual modified loans to borrowers experiencing financial difficulty during the year ended December 31, 2024.


	Other-Than-Insignificant Payment Delay
(Dollars in thousands)	No. of Loans		Financial Effect
For the Year Ended December 31, 2024
Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:
Commercial and Industrial	1		Modified principal and interest payment to interest only through December 31, 2024
Total	1

There were no loans made to borrowers experiencing financial difficulty that were modified during the twelve months ended December 31, 2023.

The following presents, by class of loans, the amortized cost and performance status of nonaccrual modified loans to borrowers experiencing financial difficulty that have been modified in the last 12 months as of December 31, 2024.


		At December 31, 2024
(Dollars in thousands)		Current			30-89 Days Past Due			90 Days or More Past Due			Total
Nonaccrual Modified Loans to Borrowers Experiencing Financial Difficulty:
Commercial and Industrial	$			$	408		$			$	408
Total	$			$	408		$			$	408

Allowance for Credit Losses

ACL on loans receivable

The following tables present the balance of the ACL at December 31, 2024, 2023 and 2022. For the years ended December 31, 2024 and 2023, the balance of the ACL is based on the CECL methodology, as presented in Note 1. For the year ended December 31, 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. The following tables represent the ACL by major classification of loan and whether the loans were individually or collectively evaluated and collateral dependent by class of loans at December 31, 2024 and 2023 under ASC 326.


		December 31, 2024
								Real estate									Equipment
(Dollars in thousands)		Commercial			Municipal			Commercial			Residential			Consumer			Financing			Total
Allowance for credit losses:
Beginning balance		$	2,272		$	788		$	14,153		$	3,782		$	900		$			$	21,895
Non PCD allowance for credit losses at acquisition			2,259			502			4,149			1,785			1,470			4,163			14,328
PCD allowance for credit losses at acquisition			337			71			371			468			320			274			1,841
Charge-offs			(51)						(282)						(892)			(660)			(1,885)
Recoveries			90						69			16			478			141			794
Provisions (Credits)			1,097			(289)			3,344			(1,127)			264			1,514			4,803
Ending balance		$	6,004		$	1,072		$	21,804		$	4,924		$	2,540		$	5,432		$	41,776
Ending balance: individually evaluated for impairment			325						190									434			949
Ending balance: collectively evaluated for impairment		$	5,679		$	1,072		$	21,614		$	4,924		$	2,540		$	4,998		$	40,827
Loans receivable:
Ending balance		$	648,102		$	187,918		$	2,294,113		$	551,383		$	132,869		$	179,120		$	3,993,505
Individually evaluated - collateral dependent - real estate			906						15,326			3,212									19,444
Individually evaluated - collateral dependent - non-real estate			1,007						284									1,429			2,720
Collectively evaluated for impairment		$	646,189		$	187,918		$	2,278,503		$	548,171		$	132,869		$	177,691		$	3,971,341

*See Note 2 - Business Combination and the initial provision for non-PCD loans.


		December 31, 2023
								Real estate
(Dollars in thousands)		Commercial			Municipal			Commercial			Residential			Consumer			Total
Allowance for credit losses:
Beginning balance		$	4,365		$	1,247		$	17,915		$	3,072		$	873		$	27,472
Impact of adopting ASC 326			(1,683)			747			(3,344)			967			30			(3,283)
Beginning balance			2,682			1,994			14,571			4,039			903			24,189
Charge-offs			(58)						(2,598)						(369)			(3,025)
Recoveries			11						1			24			129			165
(Credits) provisions			(363)			(1,206)			2,179			(281)			237			566
Ending balance		$	2,272		$	788		$	14,153		$	3,782		$	900		$	21,895
Ending balance: individually evaluated for impairment			10						21									31
Ending balance: collectively evaluated for impairment		$	2,262		$	788		$	14,132		$	3,782		$	900		$	21,864
Loans receivable:
Ending balance		$	368,411		$	175,304		$	1,863,118		$	360,803		$	82,261		$	2,849,897
Individually evaluated - collateral dependent - real estate			7						2,974			1,749						4,730
Individually evaluated - collateral dependent - non-real estate			10															10
Collectively evaluated for impairment		$	368,394		$	175,304		$	1,860,144		$	359,054		$	82,261		$	2,845,157

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 ASC 326.


		December 31, 2022
								Real estate
(Dollars in thousands)		Commercial			Municipal			Commercial			Residential			Consumer			Total
Allowance for loan losses:
Beginning balance		$	6,498		$	1,955		$	15,928		$	3,209		$	793		$	28,383
Charge-offs			(161)						(284)			(31)			(311)			(787)
Recoveries			40						110			4			171			325
(Credits) provisions			(2,012)			(708)			2,161			(110)			220			(449)
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

ACL 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 years ended December 31, 2024, 2023 and 2022. The ACL on off balance sheet commitments is included in other liabilities on the consolidated balance sheets and the related credit expense is recorded in other noninterest expense in the consolidated statements of income and comprehensive income (loss).


(Dollars in thousands)			December 31, 2024			December 31, 2023			December 31, 2022
Beginning balance		$	43		$	179		$	137
Impact of adopting Topic 326						270
Merger related adjustments			880
(Credit to) provision for credit losses recorded in noninterest expense			(43)			(406)			42
Total allowance for credit losses on off balance sheet commitments		$	880		$	43		$	179