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Loans and Allowance for Credit Losses

3 Months Ended

Mar. 31, 2024

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 $6.9 million as of March 31, 2024 and $7.0 million as of December 31, 2023.



	March 31, 2024						December 31, 2023
(dollars in thousands)Commercial [Member]	Amount			% of Total			Amount			% of Total
Commercial
Owner occupied REOwner occupied RE [Member]	$	631,047			17.3	%	$	631,657			17.5	%
Non-owner occupied RENon-owner occupied RE [Member]		944,530			25.9	%		942,529			26.2	%
ConstructionConstruction [Member]		157,464			4.3	%		150,680			4.2	%
BusinessBusiness [Member]		520,073			14.3	%		500,161			13.9	%
Total commercial loansConsumer [Member]		2,253,114			61.8	%		2,225,027			61.8	%
Consumer
Real estateReal estate [Member]		1,101,573			30.2	%		1,082,429			30.0	%
Home equityHome equity [Member]		184,691			5.1	%		183,004			5.1	%
Construction		53,216			1.5	%		63,348			1.7	%
OtherOther [Member]		51,172			1.4	%		48,819			1.4	%
Total consumer loans		1,390,652			38.2	%		1,377,600			38.2	%
Total gross loans, net of deferred fees		3,643,766			100.0	%		3,602,627			100.0	%
Less—allowance for credit losses		(40,441	)					(40,682	)
Total loans, net	$	3,603,325					$	3,561,945

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.



					March 31, 2024
(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	$	15,855		185,107		388,424		41,661		631,047
Non-owner occupied RE		77,445		516,176		326,650		24,259		944,530
Construction		32,425		61,546		63,493		-		157,464
Business		117,557		218,031		180,132		4,353		520,073
Total commercial loans		243,282		980,860		958,699		70,273		2,253,114
Consumer
Real estate		10,230		52,771		310,383		728,189		1,101,573
Home equity		2,878		27,460		149,530		4,823		184,691
Construction		382		901		31,926		20,007		53,216
Other		12,564		34,683		3,103		822		51,172
Total consumer loans		26,054		115,815		494,942		753,841		1,390,652
Total gross loans, net of deferred fees	$	269,336		1,096,675		1,453,641		824,114		3,643,766

	December 31, 2023
(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	$	17,358		177,203		395,130		41,966		631,657
Non-owner occupied RE		68,601		517,622		331,727		24,579		942,529
Construction		26,762		64,432		59,486		-		150,680
Business		114,432		194,416		186,927		4,386		500,161
Total commercial loans		227,153		953,673		973,270		70,931		2,225,027
Consumer
Real estate		10,593		51,956		301,095		718,785		1,082,429
Home equity		2,716		27,578		147,855		4,855		183,004
Construction		-		252		39,459		23,637		63,348
Other		11,157		33,592		3,265		805		48,819
Total consumer loans		24,466		113,378		491,674		748,082		1,377,600
Total gross loans, net of deferred fees	$	251,619		1,067,051		1,464,944		819,013		3,602,627

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



	March 31, 2024			December 31, 2023
	Interest Rate			Interest Rate
(dollars in thousands)		Fixed	Floating or Adjustable		Fixed	Floating or Adjustable
Commercial
Owner occupied RE	$	600,279	14,913		605,199	9,100
Non-owner occupied RE		746,525	120,560		768,048	105,880
Construction		96,176	28,863		81,326	42,592
Business		293,897	108,619		293,920	91,809
Total commercial loans		1,736,877	272,955		1,748,493	249,381
Consumer
Real estate		1,091,343	-		1,071,836	-
Home equity		11,485	170,328		11,441	168,847
Construction		52,834	-		63,348	-
Other		12,127	26,481		11,525	26,137
Total consumer loans		1,167,789	196,809		1,158,150	194,984
Total gross loans, net of deferred fees	$	2,904,666	469,764		2,906,643	444,365

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—A pass loan ranges from minimal to average credit risk; however, still has acceptable credit risk.

	●	Watch—A watch loan exhibits above average credit risk due to minor weaknesses and warrants 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, which 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 March 31, 2024.



										March 31, 2024
(dollars in thousands)		2024	2023	2022	2021	2020		Prior			Revolving		Revolving Converted to Term	Total
Commercial
Owner occupied RE
Pass	$	11,770	42,283	180,226	134,787	63,949		164,174			85		-	597,274
Watch		-	-	3,429	456	15,880		10,101			-		-	29,866
Special Mention		-	-	177	-	-		2,889			-		-	3,066
Substandard		-	-	-	-	-		841			-		-	841
Total Owner occupied RE		11,770	42,283	183,832	135,243	79,829		178,005			85		-	631,047

Non-owner occupied RE
Pass		12,575	79,336	303,755	169,028	105,833		226,072			303		-	896,902
Watch		-	1,002	2,596	448	527		15,911			-		-	20,484
Special Mention		-	-	967	7,707	-		9,049			-		-	17,723
Substandard		-	-	-	305	-		9,116			-		-	9,421
Total Non-owner occupied RE		12,575	80,338	307,318	177,488	106,360		260,148			303		-	944,530

Construction
Pass		3,563	28,027	86,648	26,741	11,087		-			-		-	156,066
Watch		-	-	1,398	-	-		-			-		-	1,398
Total Construction		3,563	28,027	88,046	26,741	11,087		-			-		-	157,464

Business
Pass		8,232	52,166	134,401	45,948	18,339		61,981			163,010		-	484,077
Watch		-	120	17,160	1,814	980		4,600			6,942		5	31,621
Special Mention		-	231	942	89	500		1,736			101		-	3,599
Substandard		-	-	-	151	-		625			-		-	776
Total Business		8,232	52,517	152,503	48,002	19,819		68,942			170,053		5	520,073
Current period gross write-offs		-	-	-	-	(346	)	-			-		-	(346	)
Total Commercial loans		36,140	203,165	731,699	387,474	217,095		507,095			170,441		5	2,253,114

Consumer
Real estate
Pass		18,718	146,761	281,881	276,118	171,468		168,438			-		-	1,063,384
Watch		-	488	5,615	7,360	3,883		5,876			-		-	23,222
Special Mention		-	142	2,487	1,905	1,282		5,253			-		-	11,069
Substandard		-	275	350	631	986		1,656			-		-	3,898
Total Real estate		18,718	147,666	290,333	286,014	177,619		181,223			-		-	1,101,573

Home equity
Pass		-	-	-	-	-		-			173,125		-	173,125
Watch		-	-	-	-	-		-			6,103		-	6,103
Special Mention		-	-	-	-	-		-			5,007		-	5,007
Substandard		-	-	-	-	-		-			456		-	456
Total Home equity		-	-	-	-	-		-			184,691		-	184,691

Construction
Pass		664	13,604	30,974	7,974	-		-			-		-	53,216
Total Construction		664	13,604	30,974	7,974	-		-			-		-	53,216

Other
Pass		1,979	1,171	2,411	2,174	1,387		3,253			37,657		-	50,032
Watch		-	8	25	345	-		156			51		-	585
Special Mention		-	32	330	71	-		73			36		-	542
Substandard		-	-	-	-	-		-			13		-	13
Total Other		1,979	1,211	2,766	2,590	1,387		3,482			37,757		-	51,172
Current period gross write-offs		-	-	-	-	-		(38	)		(40	)	-	(78	)
Total Consumer loans		21,361	162,481	324,073	296,578	179,006		184,705			222,448		-	1,390,652
Total loans	$	57,501	365,646	1,055,772	684,052	396,101		691,800			392,889		5	3,643,766
Total Current period gross write-offs		-	-	-	-	(346	)	(38	)		(40	)	-	(424	)

The following table presents loan balances classified by credit quality indicators by year of origination as of December 31, 2023.


	December 31, 2023
(dollars in thousands)	2023		2022			2021		2020			2019		Prior			Revolving			Revolving Converted to Term			Total
Commercial
Owner occupied RE
Pass	$	42,846		180,654			138,549		64,818			59,880		110,502			85			166			597,500
Watch		-		3,460			460		15,997			3,525		6,616			-			-			30,058
Special Mention		-		181			-		-			-		3,057			-			-			3,238
Substandard		-		-			-		-			-		861			-			-			861
Total Owner occupied RE		42,846		184,295			139,009		80,815			63,405		121,036			85			166			631,657

Non-owner occupied RE
Pass		84,617		298,063			162,697		107,364			59,260		163,990			9,249			-			885,240
Watch		1,007		3,260			9,914		533			5,545		10,630			-			-			30,889
Special Mention		-		-			7,759		-			8,252		879			-			-			16,890
Substandard		-		-			313		-			8,088		1,109			-			-			9,510
Total Non-owner occupied RE		85,624		301,323			180,683		107,897			81,145		176,608			9,249			-			942,529
Current period gross write-offs		-		(200	)		-		-			-		(42	)		-			-			(242	)

Construction
Pass		27,262		86,161			24,399		11,459			-		-			-			-			149,281
Watch		-		1,399			-		-			-		-			-			-			1,399
Total Construction		27,262		87,560			24,399		11,459			-		-			-			-			150,680

Business
Pass		48,705		134,999			48,557		18,868			17,292		47,708			146,745			1,431			464,305
Watch		127		15,867			1,833		1,010			842		3,584			7,570			506			31,339
Special Mention		241		961			98		857			184		447			150			97			3,035
Substandard		-		-			155		-			132		1,195			-			-			1,482
Total Business		49,073		151,827			50,643		20,735			18,450		52,934			154,465			2,034			500,161
Current period gross write-offs		-		-			-		(28	)		-		-			(15	)		(22	)		(65	)
Total Commercial loans		204,805		725,005			394,734		220,906			163,000		350,578			163,799			2,200			2,225,027

Consumer
Real estate
Pass		144,179		273,585			278,138		176,395			66,087		105,383			-			-			1,043,767
Watch		490		5,658			8,230		3,917			2,051		3,890			-			-			24,236
Special Mention		143		2,499			1,657		1,291			2,220		3,360			-			-			11,170
Substandard		-		-			635		817			318		1,486			-			-			3,256
Total Real estate		144,812		281,742			288,660		182,420			70,676		114,119			-			-			1,082,429

Home equity
Pass		-		-			-		-			-		-			171,003			-			171,003
Watch		-		-			-		-			-		-			6,393			-			6,393
Special Mention		-		-			-		-			-		-			4,283			-			4,283
Substandard		-		-			-		-			-		-			1,325			-			1,325
Total Home equity		-		-			-		-			-		-			183,004			-			183,004
Current period gross write-offs		-		-			-		-			-		-			(438	)		-			(438	)

Construction
Pass		14,339		39,893			9,116		-			-		-			-			-			63,348
Total Construction		14,339		39,893			9,116		-			-		-			-			-			63,348

Other
Pass		1,278		2,551			2,361		1,457			803		2,604			36,549			-			47,603
Watch		9		29			348		-			15		163			58			-			622
Special Mention		33		333			-		-			23		82			41			-			512
Substandard		-		-			75		-			-		-			7			-			82
Total Other		1,320		2,913			2,784		1,457			841		2,849			36,655			-			48,819
Current period gross write-offs		-		-			-		-			-		-			(16	)		-			(16	)
Total Consumer loans		160,471		324,548			300,560		183,877			71,517		116,968			219,659			-			1,377,600
Total loans	$	365,276		1,049,553			695,294		404,783			234,517		467,546			383,458			2,200			3,602,627
Total Current period gross write-offs		-		(200	)		-		(28	)		-		(42	)		(469	)		(22	)		(761	)

The following tables present loan balances by age and payment status.



	March 31, 2024
(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	$	-		-		-		-		631,047		631,047
Non-owner occupied RE		8,031		27		-		1,410		935,062		944,530
Construction		-		-		-		-		157,464		157,464
Business		428		18		-		488		519,139		520,073
Consumer
Real estate		2,903		-		-		1,380		1,097,290		1,101,573
Home equity		231		127		-		367		183,966		184,691
Construction		-		-		-		-		53,216		53,216
Other		-		7		-		1		51,164		51,172
Total loans	$	11,593		179		-		3,646		3,628,348		3,643,766
Total loans over 90 days past due		-		-		-		-		-		889

		December 31, 2023
(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	$	74		-		-		-		631,583		631,657
Non-owner occupied RE		8,102		-		-		1,423		933,004		942,529
Construction		-		-		-		-		150,680		150,680
Business		567		-		-		319		499,275		500,161
Consumer
Real estate		1,750		-		-		985		1,079,694		1,082,429
Home equity		601		30		-		1,236		181,137		183,004
Construction		-		-		-		-		63,348		63,348
Other		25		25		-		-		48,769		48,819
Total loans	$	11,119		55		-		3,963		3,587,490		3,602,627
Total loans over 90 days past due		-		-		-		-		-		1,300

As of March 31, 2024 and December 31, 2023, loans 30 days or more past due represented 0.36% and 0.37% of the Company’s total loan portfolio, respectively. Commercial loans 30 days or more past due were 0.24% and 0.27% of the Company’s total loan portfolio as of March 31, 2024 and December 31, 2023, respectively. Consumer loans 30 days or more past due were 0.11% and 0.09% of total loans as of March 31, 2024 and December 31, 2023, respectively.

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



	March 31, 2024								December 31, 2023
	Nonaccrual		Nonaccrual				Nonaccrual		Nonaccrual
	loans		loans		Total		loans		loans		Total
	with no		with an		nonaccrual		with no		with an		nonaccrual
(dollars in thousands)		allowance		allowance		loans		allowance		allowance		loans
Commercial
Owner occupied RE	$	-		-		-	$	-		-		-
Non-owner occupied RE		646		764		1,410		653		770		1,423
Construction		-		-		-		-		-		-
Business		-		488		488		164		155		319
Total commercial		646		1,252		1,898		817		925		1,742
Consumer
Real estate		625		755		1,380		-		985		985
Home equity		367		-		367		343		893		1,236
Construction		-		-		-		-		-		-
Other		-		1		1		-		-		-
Total consumer		992		756		1,748		343		1,878		2,221
Total nonaccrual loans	$	1,638		2,008		3,646	$	1,160		2,803		3,963

The Company did not recognize interest income on nonaccrual loans for the three months ended March 31, 2024 and March 31, 2023. The accrued interest reversed during the three months ended March 31, 2024 and March 31, 2023 was not material. Foregone interest income on the nonaccrual loans for the three-month period ended March 31, 2024 and March 31, 2023 was not material.0

The table below summarizes information regarding nonperforming assets.

Schedule of nonperforming assets

(dollars in thousands)	March 31, 2024			December 31, 2023
Nonaccrual loans	$	3,646			3,963
Other real estate owned		-			-
Total nonperforming assets	$	3,646			3,963
Nonperforming assets as a percentage of:
Total assets		0.09	%		0.10	%
Gross loans		0.10	%		0.11	%
Total loans over 90 days past due	$	889			1,300
Loans over 90 days past due and still accruing		-			-

Modifications to Borrowers Experiencing Financial Difficulty

The Company adopted Accounting Standards Update (“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 measure of troubled debt restructurings and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty.

The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Company uses a probability of default/loss given default model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.

Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification.

There were no loans modified to borrowers experiencing financial difficulty during the three months ended March 31, 2024. The following table shows the amortized cost basis of the loans modified to borrowers experiencing financial difficulty during the twelve months ended December 31, 2023, disaggregated by class of loans and type of concession granted and describes the financial effect of the modifications made to borrowers experiencing financial difficulty.


						Term Extension
(dollars in thousands)	Amortized Cost Basis		% of Total Loan Type			Financial Effect
Commercial Business	$	309		0.06	%	Added a 1-year term to both of the loans modified. One loan was granted an extended amortization due to the inability to pay on a 3-year amortization. The other loan was given an interest only period due to the ability to pay only interest to get the loan renewed.

Neither of the two loans modified had a payment default during the period. The Company closely monitors the performance of the loans that are modified for borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. Both loans are in current payment status since the loan modification occurred in the third quarter of 2023. There have been no commitments to lend additional funds to the borrowers experiencing financial difficulty as of March 31, 2024.

Allowance for Credit Losses

The Company maintains an allowance for credit losses to provide for expected credit losses. Losses are charged against the allowance when management believes that the principal is uncollectable. Subsequent recoveries, if any, are credited to the allowance. Allocations of the allowance are made for specific loans and for pools of similar types of loans, although the entire allowance is available for any loan that, in management’s judgment, should be charged against the allowance. A provision for credit losses is taken based on management’s ongoing evaluation of the appropriate allowance balance.

A formal evaluation of the adequacy of the credit loss allowance is conducted quarterly. This assessment includes procedures to estimate the allowance and test the adequacy and appropriateness of the resulting balance. The level of the allowance is based upon management's evaluation of historical default and loss experience, current and projected economic conditions, asset quality trends, known and inherent risks in the portfolio, adverse situations that may affect the borrowers' ability to repay a loan, the estimated value of any underlying collateral, composition of the loan portfolio, industry and peer bank loan quality indications and other pertinent factors, including regulatory recommendations. Management believes the level of the allowance for credit losses is adequate to absorb all expected future losses inherent in the loan portfolio at the balance sheet date. The allowance is increased through provision for credit losses and decreased by charge-offs, net of recoveries of amounts previously charged-off.

The Company uses a lifetime probability of default and loss given default modeling approach to estimate the allowance for credit losses on loans. This method uses historical correlations between default experience and the age of loans to forecast defaults and losses, assuming that a loan in a pool shares similar risk characteristics such as loan product type, risk rating and loan age, and demonstrates similar default characteristics as other loans in that pool, as the loan progresses through its lifecycle. The Company calculates lifetime probability of default and loss given default rates based on historical loss experience, which is used to calculate expected losses based on the pool’s loss rate and the age of loans in the pool. Management believes that the Company’s historical loss experience provides the best basis for its assessment of expected credit losses to determine the allowance for credit losses. The Company uses its own internal data to measure historical credit loss experience within the pools with similar risk characteristics over an economic cycle. The probability of default and loss given default method also includes assumptions of observed migration over the lifetime of the underlying loan data. Loans that do not share risk characteristics are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation.

Management also considers further adjustments to historical loss information for current conditions and reasonable and supportable forecasts that differ from the conditions that exist for the period over which historical information is evaluated as well as other changes in qualitative factors not inherently considered in the quantitative analyses. The Company generally utilizes a four-quarter forecast period in evaluating the appropriateness of the reasonable and supportable forecast scenarios which are incorporated through qualitative adjustments. There is immediate reversion to historical loss rates. The qualitative categories and the measurements used to quantify the risks within each of these categories are subjectively selected by management but measured by objective measurements period over period. The data for each measurement may be obtained from internal or external sources. The current period measurements are evaluated and assigned a factor commensurate with the current level of risk relative to past measurements over time. The resulting qualitative adjustments are applied to the relevant collectively evaluated loan pools. These adjustments are based upon quarterly trend assessments in certain economic factors such as labor, inflation, consumer sentiment and real disposable income, as well as associate retention and turnover, portfolio concentrations, and growth characteristics. The qualitative analysis increases or decreases the allowance allocation for each loan pool based on the assessment of factors described above.

The following tables summarize the activity related to the allowance for credit losses for the three months ended March 31, 2024 and March 31, 2023 under the CECL methodology.



									Three months ended March 31, 2024
	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	$	6,118		11,167			1,594			7,385			10,647		2,600		677			494		40,682
Provision for credit losses		-		-			-			-			-		-		-			-		-
Loan charge-offs		-		-			-			(346	)		-		-		-			(78	)	(424	)
Loan recoveries		-		-			-			15			-		119		-			49		183
Net loan recoveries (charge-offs)		-		-			-			(331	)		-		119		-			(29	)	(241	)
Balance, end of period	$	6,118		11,167			1,594			7,054			10,647		2,719		677			465		40,441
Net charge-offs to average loans (annualized)																						0.03	%
Allowance for credit losses to gross loans																						1.11	%
Allowance for credit losses to nonperforming loans																						1,109.13	%

										Three months ended March 31, 2023
		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	$	5,867		10,376			1,292			7,861			9,487		2,551		893			312		38,639
Provision for credit losses		117		1,038			(182	)		150			592		53		(83	)		170		1,855
Loan charge-offs		-		(160	)		-			(1	)		-		-		-			-		(161	)
Loan recoveries		-		31			-			12			-		59		-			-		102
Net loan recoveries (charge-offs)		-		(129	)		-			11			-		59		-			-		(59	)
Balance, end of period	$	5,984		11,285			1,110			8,022			10,079		2,663		810			482		40,435
Net charge-offs to average loans (annualized)																						0.01	%
Allowance for credit losses to gross loans																						1.18	%
Allowance for credit losses to nonperforming loans																						854.33	%

There was no provision for credit losses recorded during the first quarter of 2024, compared to a provision of $1.9 million for the first quarter of 2023. No provision was recorded during the first quarter of 2024 due to continued low net charge-offs and a continued decline of the expected loss rates in the allowance for credit losses.

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.

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.

The following tables present an analysis of collateral-dependent loans of the Company as of March 31, 2024 and December 31, 2023.



					March 31, 2024
	Real		Business
(dollars in thousands)	estate		assets		Other		Total
Commercial
Owner occupied RE	$	-		-		-		-
Non-owner occupied RE		723		-		-		723
Construction		-		-		-		-
Business		-		-		-		-
Total commercial		723		-		-		723
Consumer
Real estate		789		-		-		789
Home equity		367		-		-		367
Construction		-		-		-		-
Other		-		-		-		-
Total consumer		1,156		-		-		1,156
Total	$	1,879		-		-		1,879

	December 31, 2023
		Real		Business
(dollars in thousands)		estate		assets		Other		Total
Commercial
Owner occupied RE	$	-		-		-		-
Non-owner occupied RE		720		-		-		720
Construction		-		-		-		-
Business		164		-		-		164
Total commercial		884		-		-		884
Consumer
Real estate		166		-		-		166
Home equity		343		-		-		343
Construction		-		-		-		-
Other		-		-		-		-
Total consumer		509		-		-		509
Total	$	1,393		-		-		1,393

Allowance for Credit Losses - Unfunded Loan Commitments

The allowance for credit losses for unfunded loan commitments was $1.7 million and $1.8 million at March 31, 2024 and December 31, 2023, respectively, and is separately classified on the balance sheet within other liabilities. The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the three months ended March 31, 2024 and for the twelve months ended December 31, 2023.



	Three months ended			Twelve months ended
(dollars in thousands)	March 31, 2024			December 31, 2023
Balance, beginning of period	$	1,831			2,780
Provision for (reversal of) credit losses		(175	)		(949	)
Balance, end of period	$	1,656			1,831
Unfunded Loan Commitments	$	710,669			724,606
Reserve for Unfunded Commitments to Unfunded Loan Commitments		0.23	%		0.25	%