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Loans and Allowance for Credit Losses
 9 Months Ended
Sep. 30, 2022
Receivables [Abstract]  
Loans and Allowance for Credit Losses

NOTE 4 – Loans and Allowance for Credit Losses

 

The following table summarizes the composition of our loan portfolio. Total gross loans are recorded net of deferred loan fees and costs, which totaled $6.7 million as of September 30, 2022 and $5.0 million as of December 31, 2021.

 

 
   September 30, 2022   December 31, 2021 
(dollars in thousands)  Amount   %  of Total   Amount   %  of Total 
Commercial                
Owner occupied RE  $572,972    18.9%  $488,965    19.6%
Non-owner occupied RE   799,569    26.4%   666,833    26.8%
Construction   85,850    2.8%   64,425    2.6%
Business   419,312    13.8%   333,049    13.4%
Total commercial loans   1,877,703    61.9%   1,553,272    62.4%
Consumer                    
Real estate   873,471    28.8%   694,401    27.9%
Home equity   171,904    5.7%   154,839    6.2%
Construction   77,798    2.6%   59,846    2.4%
Other   29,151    1.0%   27,519    1.1%
Total consumer loans   1,152,324    38.1%   936,605    37.6%
Total gross loans, net of deferred fees   3,030,027    100.0%   2,489,877    100.0%
Less—allowance for credit losses   (36,317)        (30,408)     
Total loans, net  $2,993,710        $2,459,469      

 

Maturities and Sensitivity of Loans to Changes in Interest Rates

 

The information in the following tables summarizes the loan maturity distribution by type and related interest rate characteristics based on the contractual maturities of individual loans, including loans which may be subject to renewal at their contractual maturity. Renewal of such loans is subject to review and credit approval, as well as modification of terms upon maturity. Actual repayments of loans may differ from the maturities reflected below, because borrowers have the right to prepay obligations with or without prepayment penalties.

 

                     
   September 30, 2022 
(dollars in thousands)  One year
or less		   After one but within five years   After five but within fifteen years   After
fifteen years		   Total 
Commercial                         
Owner occupied RE  $11,625    117,787    394,256    49,304    572,972 
Non-owner occupied RE   44,182    383,518    344,874    26,995    799,569 
Construction   5,413    26,336    48,891    5,210    85,850 
Business   75,690    181,097    158,292    4,233    419,312 
Total commercial loans   136,910    708,738    946,313    85,742    1,877,703 
Consumer                         
Real estate  $11,605    41,365    233,316    587,185    873,471 
Home equity   1,377    20,822    144,336    5,369    171,904 
Construction   241    589    20,129    56,839    77,798 
Other   3,525    22,742    2,098    786    29,151 
Total consumer loans   16,748    85,518    399,879    650,179    1,152,324 
Total gross loans, net of deferred fees  $153,658    794,256    1,346,192    735,921    3,030,027 
     
   December 31, 2021 
(dollars in thousands)   One year or less    After one
but within
five years		    After five
but within
fifteen years		    After fifteen years    Total 
Commercial                         
Owner occupied RE  $16,858    120,480    316,261    35,366    488,965 
Non-owner occupied RE   47,453    329,085    263,317    26,978    666,833 
Construction   4,882    16,393    29,310    13,840    64,425 
Business   66,833    152,732    109,008    4,476    333,049 
Total commercial loans   136,026    618,690    717,896    80,660    1,553,272 
Consumer                         
Real estate   14,632    45,219    162,655    471,895    694,401 
Home equity   2,178    21,280    125,427    5,954    154,839 
Construction   961    594    8,956    49,335    59,846 
Other   8,071    15,711    3,341    396    27,519 
Total consumer   25,842    82,804    300,379    527,580    936,605 
Total gross loan, net of deferred fees  $161,868    701,494    1,018,275    608,240    2,489,877 
                          

The following table summarizes the loans due after one year by category.

 

             
   September 30, 2022   December 31, 2021 
   Interest Rate       Interest Rate 
(dollars in thousands)   Fixed    Floating or
Adjustable		    Fixed    Floating or
Adjustable		 
Commercial                    
   Owner occupied RE  $558,592    2,755    463,589    8,518 
   Non-owner occupied RE   683,796    71,591    533,565    85,815 
   Construction   71,957    8,480    57,139    2,404 
   Business   270,224    73,398    191,522    74,694 
     Total commercial loans   1,584,569    156,224    1,245,815    171,431 
Consumer                    
   Real estate   861,854    12    679,756    13 
   Home equity   13,684    156,843    12,850    139,811 
   Construction   77,557    
-
    58,884    
-
 
   Other   17,816    7,810    13,220    6,228 
     Total consumer loans   970,911    164,665    764,710    146,052 
Total gross loans, net of deferred fees  $2,555,480    320,889    2,010,525    317,483 

 

Credit Quality Indicators

 

The Company tracks credit quality based on its internal risk ratings. Upon origination, a loan is assigned an initial risk grade, which is generally based on several factors such as the borrower’s credit score, the loan-to-value ratio, the debt-to-income ratio, etc. After loans are initially graded, they are monitored regularly for credit quality based on many factors, such as payment history, the borrower’s financial status, and changes in collateral value. Loans can be downgraded or upgraded depending on management’s evaluation of these factors. Internal risk-grading policies are consistent throughout each loan type.

 

A description of the general characteristics of the risk grades is as follows:

 

●Pass—These loans range from minimal to average credit risk however still have acceptable credit risk. Watch loans also fall into this category, representing loans with above average risk due to minor weaknesses and warrant closer scrutiny by management.

 

●Special mention—A special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the institution’s credit position at some future date.

 

●Substandard—A substandard loan 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 may jeopardize the liquidation of the debt. A substandard loan is characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

 

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

 

The following table presents loan balances classified by credit quality indicators by year of origination as of September 30, 2022.

 

                                     
                           September 30, 2022 
(dollars in thousands)  2022   2021   2020   2019   2018   Prior   Revolving   Revolving
Converted
to Term		   Total 
Commercial                                             
Owner occupied RE                                             
Pass  $119,148    130,792    96,397    70,219    37,121    103,847    
-
    
-
    557,524 
Watch   1,375    484    
-
    2,460    
-
    7,005    
-
    
-
    11,324 
Special Mention   205    
-
    
-
    
-
    
-
    2,981    
-
    
-
    3,186 
Substandard   
-
    
-
    646    
-
    292    
-
    
-
    
-
    938 
Total Owner occupied RE   120,728    131,276    97,043    72,679    37,413    113,833    
-
    
-
    572,972 
                                              
Non-owner occupied RE                                             
Pass   208,206    171,640    115,680    58,927    75,772    109,884    604    
-
    740,713 
Watch   1,399    9,494    
-
    12,220    6,538    12,089    
-
    
-
    41,740 
Special Mention   
-
    203    
-
    6,145    173    1,286    
-
    
-
    7,807 
Substandard   
-
    135    
-
    7,995    304    875    
-
    
-
    9,309 
Total Non-owner occupied RE   209,605    181,472    115,680    85,287    82,787    124,134    604    
-
    799,569 
                                              
Construction                                             
Pass   26,521    54,253    3,394    1,682    
-
    
-
    
-
    
-
    85,850 
Watch   
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
 
Special Mention   
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
 
Substandard   
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
 
Total Construction   26,521    54,253    3,394    1,682    
-
    
-
    
-
    
-
    85,850 
                                              
Business                                             
Pass   91,796    59,303    30,860    23,015    36,217    30,292    121,475    590    393,548 
Watch   6,844    2,399    1,375    1,370    157    3,070    5,433    477    21,125 
Special Mention   903    
-
    390    240    
-
    162    115    182    1,992 
Substandard   500    
-
    191    130    329    932    565    
-
    2,647 
Total Business   100,043    61,702    32,816    24,755    36,703    34,456    127,588    1,249    419,312 
Total Commercial loans   456,897    428,703    248,933    184,403    156,903    272,423    128,192    1,249    1,877,703 
                                              
Consumer                                             
Real estate                                             
Pass   198,590    263,113    189,049    74,324    39,731    77,887    
-
    
-
    842,694 
Watch   1,707    8,554    2,991    3,002    896    4,737    
-
    
-
    21,887 
Special Mention   116    1,341    1,373    1,057    562    1,085    
-
    
-
    5,534 
Substandard   
-
    652    228    548    403    1,525    
-
    
-
    3,356 
Total Real estate   200,413    273,660    193,641    78,931    41,592    85,234    
-
    
-
    873,471 
                                              
Home equity                                             
Pass   
-
    
-
    
-
    
-
    
-
    
-
    160,975    
-
    160,975 
Watch   
-
    
-
    
-
    
-
    
-
    
-
    6,187    
-
    6,187 
Special Mention   
-
    
-
    
-
    
-
    
-
    
-
    2,283    
-
    2,283 
Substandard   
-
    
-
    
-
    
-
    
-
    
-
    2,459    
-
    2,459 
Total Home equity   
-
    
-
    
-
    
-
    
-
    
-
    171,904    
-
    171,904 
                                              
Construction                                             
Pass   29,666    37,281    9,947    
-
    
-
    
-
    
-
    
-
    76,894 
Watch   
-
    
-
    588    
-
    
-
    
-
    
-
    
-
    588 
Special Mention   
-
    
-
    
-
    316    
-
    
-
    
-
    
-
    316 
Substandard   
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
 
Total Construction   29,666    37,281    10,535    316    
-
    
-
    
-
    
-
    77,798 
                                              
Other                                             
Pass   3,690    2,123    1,815    1,643    410    3,298    15,297    
-
    28,276 
Watch   
-
    368    17    20    25    181    90    
-
    701 
Special Mention   4    
-
    
-
    30    53    4    34    
-
    125 
Substandard   
-
    36    
-
    6    
-
    
-
    7    
-
    49 
Total Other   3,694    2,527    1,832    1,699    488    3,483    15,428    
-
    29,151 
Total Consumer loans   233,773    313,468    206,008    80,946    42,080    88,717    187,332    
-
    1,152,324 
Total loans  $690,670    742,171    454,941    265,349    198,983    361,140    315,524    1,249    3,030,027 

 

The following table presents loan balances classified by credit quality indicators and loan categories as of December 31, 2021.

 

             
           December 31, 2021 
   Commercial   Consumer     
(dollars in thousands)  Owner
occupied
RE		   Non-owner
occupied
RE		   Construction   Business   Real
Estate		   Home
Equity		   Construction   Other   Total 
Pass  $487,422    589,280    64,425    328,371    684,923    148,933    59,846    27,365    2,390,565 
Special mention   327    48,310    
-
    1,530    4,294    2,986    
-
    129    57,576 
Substandard   1,216    29,243    
-
    3,148    5,184    2,920    
-
    25    41,736 
Total loans  $488,965    666,833    64,425    333,049    694,401    154,839    59,846    27,519    2,489,877 

 

The following tables present loan balances by payment status.

 

                 
   September 30, 2022 
(dollars in thousands)  Accruing 30-59
days past due		   Accruing 60-89
days past due		   Accruing 90
days or more
past due		   Nonaccrual
loans		   Accruing
current		   Total 
Commercial                              
Owner occupied RE  $
                    -
    
                 -
    
                 -
    
                -
    572,972    572,972 
Non-owner occupied RE   57    
-
    
-
    253    799,259    799,569 
Construction   
-
    
-
    
-
    
-
    85,850    85,850 
Business   123    
-
    
-
    79    419,110    419,312 
Consumer                              
Real estate   77    131    
-
    904    872,359    873,471 
Home equity   129    
-
    
-
    1,379    170,396    171,904 
Construction   
-
    
-
    
-
    
-
    77,798    77,798 
Other   
-
    
-
    
-
    
-
    29,151    29,151 
Total loans  $386    131    
-
    2,615    3,026,895    3,030,027 
                               
   December 31, 2021 
(dollars in thousands)  Accruing 30-59 days past due   Accruing 60-89 days past due   Accruing 90 days or more past due   Nonaccrual loans   Accruing current   Total 
Commercial                              
Owner occupied RE  $
-
    
-
    
-
    
-
    488,965    488,965 
Non-owner occupied RE   
-
    
-
    
-
    1,069    665,764    666,833 
Construction   
-
    
-
    
-
    
-
    64,425    64,425 
Business   
-
    
-
    
-
    
-
    333,049    333,049 
Consumer                              
Real estate   136    
-
    
-
    1,750    692,515    694,401 
Home equity   417    174    
-
    2,045    152,203    154,839 
Construction   
-
    
-
    
-
    
-
    59,846    59,846 
Other   5    
-
    
-
    
-
    27,514    27,519 
Total loans  $558    174    
-
    4,864    2,484,281    2,489,877 
                               

 

As of September 30, 2022 and December 31, 2021, loans 30 days or more past due represented 0.07% and 0.09% of the Company’s total loan portfolio, respectively. Commercial loans 30 days or more past due were 0.01% and 0.00% of the Company’s total loan portfolio as of September 30, 2022 and December 31, 2021, respectively. Consumer loans 30 days or more past due were 0.06% of total loans as of September 30, 2022 and December 31, 2021.

 

Nonperforming assets

 

Generally, a loan is placed on nonaccrual status when it becomes 90 days past due as to principal or interest, or when the Company believes, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that collection of the contractual principal or interest on the loan is doubtful. A payment of interest on a loan that is classified as nonaccrual is recognized as a reduction in principal when received.

 

The following table shows the nonperforming assets and the related percentage of nonperforming assets to total assets and gross loans.

 

         
(dollars in thousands)   September 30, 2022    December 31, 2021 
Nonaccrual loans  $529    
-
 
Nonaccruing TDRs   2,086    2,952 
Total nonaccrual loans, including nonaccruing TDRs   2,615    4,864 
Other real estate owned   
-
    
-
 
Total nonperforming assets  $2,615    4,864 
Nonperforming assets as a percentage of:          
Total assets   0.08%   0.17%
Gross loans   0.09%   0.20%
Total loans over 90 days past due  $49    554 
Loans over 90 days past due and still accruing   
-
    
-
 
Accruing troubled debt restructurings   4,683    3,299 

 

The table below summarizes nonaccrual loans by major categories for the periods presented.

 

                 
   CECL   Incurred loss 
   September 30, 2022   December 31, 2021 
   Nonaccrual   Nonaccrual         
   loans   loans   Total   Total 
   with no   with an   nonaccrual   nonaccrual 
(dollars in thousands)   allowance    allowance    loans    loans 
Commercial                    
Owner occupied RE   
-
    
-
    
-
    
-
 
Non-owner occupied RE  $117    136    253    1,070 
Construction   
-
    
-
    
-
    
-
 
Business   79    
-
    79    - 
Total commercial   196    136    332    1,070 
Consumer                    
Real estate   -    904    904    1,750 
Home equity   197    1,182    1,379    2,044 
Construction   
-
    
-
    
-
    
-
 
Other   
-
    
-
    
-
    - 
Total consumer   197    2,086    2,283    3,794 
Total  $393    2,222    2,615    4,864 

 

The table below summarizes key information for loans individually evaluated for impairment loans under the incurred loss methodology. These loans include loans on nonaccrual status and loans modified in a TDR, whether on accrual or nonaccrual status. These loans may have estimated impairment which is included in the allowance for credit losses.

 

     December 31, 2021 
     Recorded investment     
           Impaired loans   Impaired loans     
   Unpaid       with no related   with related   Related 
   Principal   Impaired   allowance for   allowance for   allowance for 
(dollars in thousands)   Balance    loans    credit losses    credit losses    credit losses 
Commercial                         
Owner occupied RE  $1,261    1,261    1,261    
-
    
-
 
Non-owner occupied RE   2,012    1,070    270    800    171 
Construction   
-
    
-
    
-
    
-
    
-
 
Business   1,104    1,104    
-
    1,104    452 
Total commercial   4,377    3,435    1,531    1,904    623 
Consumer                         
Real estate   2,638    2,561    1,743    818    144 
Home equity   2,206    2,044    1,989    55    55 
Construction   
-
    
-
    
-
    
-
    
-
 
Other   123    123    
-
    123    14 
Total consumer   4,967    4,728    3,732    996    213 
Total gross loans  $9,344    8,163    5,263    2,900    836 

 

The following table provides the average recorded investment in individually assessed loans and the amount of interest income recognized on individually assessed loans after impairment by portfolio segment and class.

 

         
   Three months ended
September 30, 2022		   Three months ended
September 30, 2021		 
(dollars in thousands)   Average
recorded
investment		    Recognized
interest
income		    Average
recorded
investment		    Recognized
interest
income		 
Commercial                    
Owner occupied RE  $1,240    16    1,269    17 
Non-owner occupied RE   361    
-
    5,125    227 
Construction   
-
    
-
    
-
    
-
 
Business   1,539    47    2,665    61 
Total commercial   3,140    63    9,059    305 
Consumer                    
Real estate   1,862    48    3,609    
-
 
Home equity   1,190    15    1,859    30 
Construction   
-
    
-
    
-
    
-
 
Other   115    1    127    1 
Total consumer   3,167    64    5,595    31 
Total gross loans  $6,307    127    14,654    336 

 

             
   Nine months ended
September 30, 2022		   Nine months ended
September 30, 2021		   Year ended
December 31, 2021		 
(dollars in thousands)  Average
recorded
investment		   Recognized
interest
income		   Average
recorded
investment		   Recognized
interest
income		   Average
recorded
investment		   Recognized
interest
income		 
Commercial                              
Owner occupied RE  $1,248    48    1,419    49    1,387    65 
Non-owner occupied RE   535    78    3,643    321    3,128    182 
Construction   
-
    
-
    69    
-
    55    
-
 
Business   1,573    76    2,497    115    2,218    62 
Total commercial   3,356    202    7,628    485    6,788    309 
Consumer                              
Real estate   2,378    86    3,911    102    3,641    98 
Home equity   1,613    36    1,944    64    1,964    85 
Construction   
-
    
-
    
-
    
-
    
-
    
-
 
Other   118    3    130    3    129    4 
Total consumer   4,109    125    5,985    169    5,734    187 
Total gross loans  $7,465    327    13,613    654    12,522    496 

 

Allowance for Credit Losses

 

The following table summarizes the activity related to the allowance for credit losses for the nine months ended September 30, 2022 under the CECL methodology.

 

                 
               Three months ended September 30, 2022 
   Commercial   Consumer     
(dollars in thousands)  Owner
occupied
RE		   Non-
owner
occupied
RE		   Construction   Business   Real
Estate		   Home
Equity		   Construction   Other   Total 
Balance, beginning of period  $4,829    10,010    1,060    6,717    7,992    2,442    851    291    34,192 
Provision for credit losses   476    (1,595)   (82)   875    782    3    41    25    525 
Loan charge-offs   
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
    
-
 
Loan recoveries   
-
    1,540    
-
    51    
-
    8    
-
    1    1,600 
Net loan recoveries (charge-offs)   
-
    1,540    
-
    51    
-
    8    
-
    1    1,600 
Balance, end of period  $5,305    9,955    978    7,643    8,774    2,453    892    317    36,317 
Net charge-offs to average loans (annualized)                             (0.22%)
Allowance for credit losses to gross loans                             1.20%
Allowance for credit losses to nonperforming loans                             1388.87%

 

                 
               Nine months ended September 30, 2022 
   Commercial   Consumer     
(dollars in thousands)  Owner
occupied
RE		   Non-
owner
occupied
RE		   Construction   Business   Real
Estate		   Home
Equity		   Construction   Other   Total 
Balance, beginning of period  $4,700    10,518    625    4,887    7,083    1,697    578    320    30,408 
Adjustment for CECL   (313)   333    154    1,057    (294)   438    130    (5)   1,500 
Provision for credit losses   918    (2,436)   199    1,558    1,985    575    184    92    3,075 
Loan charge-offs   
-
    
-
    
-
    (55)   
-
    (339)   
-
    (91)   (485)
Loan recoveries   
-
    1,540    
-
    196    -    82    
-
    1    1,819 
Net loan recoveries (charge-offs)   
-
    1,540    
-
    141    -    (257)   
-
    (90)   1,334 
Balance, end of period  $5,305    9,955    978    7,643    8,774    2,453    892    317    36,317 
Net charge-offs (recoveries) to average loans (annualized)                             (0.06%)
Allowance for credit losses to gross loans                             1.20%
Allowance for credit losses to nonperforming loans                             1388.87%

 

Prior to the adoption of ASC 326 on January 1, 2022, the Company calculated the allowance for loan losses under the incurred loss methodology. The following two tables are disclosures related to the allowance for loan losses in prior periods under this methodology.

 

   Three months ended September 30, 2021 
   Commercial   Consumer     
(dollars in thousands)  Owner
occupied
RE		   Non-
owner
occupied
RE		   Construction   Business   Real
Estate		   Home
equity		   Construction   Other   Total 
Balance, beginning of
period		  $7,099    13,223    951    6,722    10,028    2,562    753    574    41,912 
Provision for loan losses   (1,159)   (1,558)   149    (1,246)   (1,469)   (598)   (28)   (91)   (6,000)
Loan charge-offs   
-
    (159)   
-
    (84)   
-
    
-
    
-
    
-
    (243)
Loan recoveries   
-
    129    
-
    58    18    193    
-
    8    406 
Net loan recoveries
(charge-offs)		   
-
    (30)   
-
    (26)   18    193    
-
    8    163 
Balance, end of period  $5,940    11,635    1,100    5,450    8,577    2,157    725    491    36,075 
Net charge-offs (recoveries) to average loans (annualized)                            (0.03%)
Allowance for loan losses to gross loans                            1.51%
Allowance for loan losses to nonperforming loans                            259.95%

 

                   Nine months ended September 30, 2021 
   Commercial           Consumer     
(dollars in thousands)  Owner
occupied
RE		   Non-
owner
occupied
RE		   Construction   Business   Real
Estate		   Home
Equity		   Construction   Other   Total 
Balance, beginning of
period		  $8,145    12,049    1,154    7,845    10,453    3,249    747    507    44,149 
Provision for loan losses   (2,299)   (509)   (54)   (2,256)   (1,894)   (1,149)   (22)   (17)   (8,200)
Loan charge-offs   
-
    (158)   
-
    (353)   
-
    (139)   
-
    (8)   (658)
Loan recoveries   94    253    
-
    214    18    196    
-
    9    784 
Net loan recoveries
(charge-offs)		   94    95    
-
    (139)   18    57    
-
    1    126 
Balance, end of period  $5,940    11,635    1,100    5,450    8,577    2,157    725    491    36,075 
Net charge-offs to average loans (annualized)                                 
 
    
 
    0.01%

 

The following table disaggregates the allowance for loan losses and recorded investment in loans by impairment methodology under the incurred loss methodology.

 

                   December 31, 2021 
   Allowance for loan losses   Recorded investment in loans 
(dollars in thousands)  Commercial   Consumer   Total   Commercial   Consumer   Total 
Individually evaluated  $623    213    836    3,435    4,728    8,163 
Collectively evaluated   20,107    9,465    29,572    1,549,837    931,877    2,481,714 
Total  $20,730    9,678    30,408    1,553,272    936,605    2,489,877 

 

                   September 30, 2021 
   Allowance for loan losses   Recorded investment in loans 
(dollars in thousands)  Commercial   Consumer   Total   Commercial   Consumer   Total 
Individually evaluated  $955    210    1,165    12,810    5,111    17,921 
Collectively evaluated   23,170    11,740    34,910    1,482,186    888,940    2,371,126 
Total  $24,125    11,950    36,075    1,494,996    894,051    2,389,047 

 

Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. The Company reviews individually evaluated loans for designation as collateral dependent loans, as well as other loans that management of the Company designates as having higher risk. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the allowance for credit losses.

 

The following table presents an analysis of collateral-dependent loans of the Company as of September 30, 2022.

 

           September 30, 2022 
   Real   Business         
(dollars in thousands)  estate   assets   Other   Total 
Commercial                    
Owner occupied RE  $
-
    
-
    
-
    
-
 
Non-owner occupied RE   117    
-
    
-
    117 
Construction   
-
    
-
    
-
    
-
 
Business   80    
-
    
-
    80 
Total commercial   197    
-
    
-
    197 
Consumer                    
Real estate   
-
    
-
    
-
    
-
 
Home equity   197    
-
    
-
    197 
Construction   
-
    
-
    
-
    
-
 
Other   
-
    
-
    
-
    
-
 
Total consumer   197    
-
    
-
    197 
Total  $394    
-
    
-
    394 

 

Under CECL, for collateral dependent loans, the Company has adopted the practical expedient to measure the allowance for credit losses based on the fair value of collateral. The allowance for credit losses is calculated on an individual loan basis based on the shortfall between the fair value of the loan’s collateral, which is adjusted for liquidation costs/discounts, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required.

 

Allowance for Credit Losses - Unfunded Loan Commitments

 

The allowance for credit losses for unfunded loan commitments was $2.8 million at September 30, 2022 and is separately classified on the balance sheet within other liabilities. Prior to the adoption of CECL, the Company’s reserve for unfunded commitments was not material. The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the nine months ended September 30, 2022.

 

   Three months ended   Nine months ended 
(dollars in thousands)  September 30, 2022   September 30, 2022 
Balance, beginning of period  $2,330    
-
 
Adjustment for adoption of CECL   
-
    2,000 
Provision for loan losses   425    755 
Balance, end of period  $2,755    2,755 
Unfunded Loan Commitments        840,912 
Reserve for Unfunded Commitments to Unfunded Loan Commitments        0.33%