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Loans and Allowance for Credit Losses

6 Months Ended

Jun. 30, 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 $6.8 million as of June 30, 2024 and $7.0 million as of December 31, 2023.



	June 30, 2024						December 31, 2023
(dollars in thousands)Commercial [Member]	Amount			% of Total			Amount			% of Total
Commercial
Owner occupied REOwner occupied RE [Member]	$	642,008			17.7	%	$	631,657			17.5	%
Non-owner occupied RE		917,034			25.3	%		942,529			26.2	%
ConstructionConstruction [Member]		144,968			4.0	%		150,680			4.2	%
BusinessBusiness [Member]		527,017			14.5	%		500,161			13.9	%
Total commercial loansConsumer [Member]		2,231,027			61.5	%		2,225,027			61.8	%
Consumer
Real estateReal estate [Member]		1,126,155			31.1	%		1,082,429			30.0	%
Home equityHome equity [Member]		189,294			5.3	%		183,004			5.1	%
ConstructionNon-owner occupied RE [Member]		32,936			0.9	%		63,348			1.7	%
OtherOther [Member]		43,109			1.2	%		48,819			1.4	%
Total consumer loans		1,391,494			38.5	%		1,377,600			38.2	%
Total gross loans, net of deferred fees		3,622,521			100.0	%		3,602,627			100.0	%
Less—allowance for credit losses		(40,157	)					(40,682	)
Total loans, net	$	3,582,364					$	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.



	June 30, 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	$	14,444		191,243		395,013		41,308		642,008
Non-owner occupied RE		95,160		499,411		300,272		22,191		917,034
Construction		27,588		69,004		48,376		-		144,968
Business		114,676		245,232		162,789		4,320		527,017
Total commercial loans		251,868		1,004,890		906,450		67,819		2,231,027
Consumer
Real estate		17,847		59,442		306,892		741,974		1,126,155
Home equity		2,768		31,447		150,681		4,398		189,294
Construction		2,084		1,246		19,953		9,653		32,936
Other		5,017		34,340		2,963		789		43,109
Total consumer loans		27,716		126,475		480,489		756,814		1,391,494
Total gross loans, net of deferred fees	$	279,584		1,131,365		1,386,939		824,633		3,622,521

					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.



	June 30, 2024				December 31, 2023
	Interest Rate						Interest Rate
(dollars in thousands)	Fixed		Floating or Adjustable		Fixed		Floating or Adjustable
Commercial
Owner occupied RE	$	607,993		19,571		605,199		9,100
Non-owner occupied RE		730,091		91,783		768,048		105,880
Construction		84,955		32,425		81,326		42,592
Business		288,076		124,265		293,920		91,809
Total commercial loans		1,711,115		268,044		1,748,493		249,381
Consumer
Real estate		1,108,308		-		1,071,836		-
Home equity		10,791		175,735		11,441		168,847
Construction		30,852		-		63,348		-
Other		11,463		26,629		11,525		26,137
Total consumer loans		1,161,414		202,364		1,158,150		194,984
Total gross loans, net of deferred fees	$	2,872,529		470,408		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 June 30, 2024.



															June 30, 2024
(dollars in thousands)	2024		2023		2022		2021		2020			Prior			Revolving			Revolving Converted to Term		Total
Commercial
Owner occupied RE
Pass	$	23,203		44,004		179,234		139,629		69,627			157,231			85			240		613,253
Watch		501		-		3,400		1,483		8,947			10,562			-			-		24,893
Special Mention		-		-		172		-		-			2,866			-			-		3,038
Substandard		-		-		-		-		-			824			-			-		824
Total Owner occupied RE		23,704		44,004		182,806		141,112		78,574			171,483			85			240		642,008

Non-owner occupied RE
Pass		18,752		78,134		307,936		163,811		106,253			200,283			348			-		875,517
Watch		-		997		2,363		444		522			11,614			-			-		15,940
Special Mention		-		-		-		7,662		-			8,999			-			-		16,661
Substandard		-		-		967		304		-			7,645			-			-		8,916
Total Non-owner occupied RE		18,752		79,131		311,266		172,221		106,775			228,541			348			-		917,034
Current period gross write-offs		-		-		-		-		-			(1,029	)		-			-		(1,029	)

Construction
Pass		11,547		27,377		84,630		20,016		-			-			-			-		143,570
Watch		-		-		1,398		-		-			-			-			-		1,398
Total Construction		11,547		27,377		86,028		20,016		-			-			-			-		144,968

Business
Pass		14,126		48,209		137,919		42,732		17,134			57,525			172,528			230		490,403
Watch		-		152		16,870		1,965		1,448			4,394			6,985			146		31,960
Special Mention		662		223		827		80		131			1,812			-			-		3,735
Substandard		-		-		-		148		361			410			-			-		919
Total Business		14,788		48,584		155,616		44,925		19,074			64,141			179,513			376		527,017
Current period gross write-offs		-		-		-		-		(347	)		(18	)		-			-		(365	)
Total Commercial loans		68,791		199,096		735,716		378,274		204,423			464,165			179,946			616		2,231,027

Consumer
Real estate
Pass		47,322		148,130		287,524		271,998		166,714			165,723			-			-		1,087,411
Watch		-		487		5,590		7,305		4,764			5,813			-			-		23,959
Special Mention		-		142		2,472		1,509		993			5,104			-			-		10,220
Substandard		-		275		341		1,220		978			1,751			-			-		4,565
Total Real estate		47,322		149,034		295,927		282,032		173,449			178,391			-			-		1,126,155

Home equity
Pass		-		-		-		-		-			-			175,981			-		175,981
Watch		-		-		-		-		-			-			8,094			-		8,094
Special Mention		-		-		-		-		-			-			3,724			-		3,724
Substandard		-		-		-		-		-			-			1,495			-		1,495
Total Home equity		-		-		-		-		-			-			189,294			-		189,294

Construction
Pass		2,638		10,263		15,424		4,611		-			-			-			-		32,936
Total Construction		2,638		10,263		15,424		4,611		-			-			-			-		32,936

Other
Pass		2,411		1,066		2,316		2,034		1,320			3,053			29,800			-		42,000
Watch		-		8		20		341		-			150			55			-		574
Special Mention		5		31		327		69		-			68			30			-		530
Substandard		-		-		-		-		-			-			5			-		5
Total Other		2,416		1,105		2,663		2,444		1,320			3,271			29,890			-		43,109
Current period gross write-offs		-		-		-		-		-			(38	)		(41	)		-		(79	)
Total Consumer loans		52,376		160,402		314,014		289,087		174,769			181,662			219,184			-		1,391,494
Total loans	$	121,167		359,498		1,049,730		667,361		379,192			645,827			399,130			616		3,622,521
Total Current period gross write-offs		-		-		-		-		(347	)		(1,085	)		(41	)		-		(1,473	)

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.



	June 30, 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	$	-		-		-		-		642,008		642,008
Non-owner occupied RE		115		-		-		7,949		908,970		917,034
Construction		-		-		-		-		144,968		144,968
Business		622		-		-		829		525,566		527,017
Consumer
Real estate		124		871		-		1,876		1,123,284		1,126,155
Home equity		352		45		-		564		188,333		189,294
Construction		-		-		-		-		32,936		32,936
Other		-		-		-		-		43,109		43,109
Total loans	$	1,213		916		-		11,218		3,609,174		3,622,521
Total loans over 90 days past due		-		-		-		-		-		1,527

	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 June 30, 2024 and December 31, 2023, loans 30 days or more past due represented 0.30% and 0.37% of the Company’s total loan portfolio, respectively. Commercial loans 30 days or more past due were 0.23% and 0.27% of the Company’s total loan portfolio as of June 30, 2024 and December 31, 2023, respectively. Consumer loans 30 days or more past due were 0.07% and 0.09% of total loans as of June 30, 2024 and December 31, 2023, respectively.

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



	June 30, 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		5,454		2,495		7,949		653		770		1,423
Construction		-		-		-		-		-		-
Business		-		829		829		164		155		319
Total commercial		5,454		3,324		8,778		817		925		1,742
Consumer
Real estate		1,148		728		1,876		-		985		985
Home equity		489		75		564		343		893		1,236
Construction		-		-		-		-		-		-
Other		-		-		-		-		-		-
Total consumer		1,637		803		2,440		343		1,878		2,221
Total nonaccrual loans	$	7,091		4,127		11,218	$	1,160		2,803		3,963

The Company did not recognize interest income on nonaccrual loans for the three months ended June 30, 2024 and June 30, 2023. The accrued interest reversed during the three months ended June 30, 2024 was $76,000. Accrued interest reversed during the three months ended June 30, 2023 was not material. Foregone interest income on the nonaccrual loans for the three-month period ended June 30, 2024 and June 30, 2023 was not material.

We did not recognize interest income on nonaccrual loans for the six months ended June 30, 2024 and June 30, 2023. Accrued interest of $82,000 was reversed during the six months ended June 30, 2024 and $23,000 was reversed during the six months ended June 30, 2023.

The table below summarizes information regarding nonperforming assets.

Schedule of nonperforming assets

(dollars in thousands)	June 30, 2024			December 31, 2023
Nonaccrual loans	$	11,218			3,963
Other real estate owned		-			-
Total nonperforming assets	$	11,218			3,963
Nonperforming assets as a percentage of:
Total assets		0.27	%		0.10	%
Gross loans		0.31	%		0.11	%
Total loans over 90 days past due	$	1,527			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. Loan modifications to borrowers experiencing financial difficulty were not material for the three and six months ended June 30, 2024 and June 30, 2023.

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 and six months ended June 30, 2024 and June 30, 2023 under the CECL methodology.



										Three months ended June 30, 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			7,054			10,647		2,719			677			465			40,441
Provision for credit losses		(651	)		424			(263	)		190			1,750		(244	)		(399	)		(57	)		750
Loan charge-offs		-			(1,029	)		-			(19	)		-		-			-			(1	)		(1,049	)
Loan recoveries		-			-			-			11			-		4			-			-			15
Net loan recoveries (charge-offs)		-			(1,029	)		-			(8	)		-		4			-			(1	)		(1,034	)
Balance, end of period	$	5,467			10,562			1,331			7,236			12,397		2,479			278			407			40,157
Net charge-offs to average loans (annualized)																									0.11	%
Allowance for credit losses to gross loans																									1.11	%
Allowance for credit losses to nonperforming loans																									357.95	%


									Three months ended June 30, 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	$	5,984			11,285			1,110		8,022		10,079		2,663			810			482			40,435
Provision for credit losses		(88	)		347			221		118		316		245			(126	)		62			1,095
Loan charge-offs		-			(48	)		-		-		-		(389	)		-			(2	)		(439	)
Loan recoveries		-			-			-		12		-		2			-			-			14
Net loan recoveries (charge-offs)		-			(48	)		-		12		-		(387	)		-			(2	)		(425	)
Balance, end of period	$	5,896			11,584			1,331		8,152		10,395		2,521			684			542			41,105
Net charge-offs to average loans (annualized)																							0.05	%
Allowance for credit losses to gross loans																							1.16	%
Allowance for credit losses to nonperforming loans																							1,363.11	%



										Six months ended June 30, 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		(651	)		424			(263	)		190			1,750		(244	)		(399	)		(57	)		750
Loan charge-offs		-			(1,029	)		-			(365	)		-		-			-			(79	)		(1,473	)
Loan recoveries		-			-			-			26			-		123			-			49			198
Net loan recoveries (charge-offs)		-			(1,029	)		-			(339	)		-		123			-			(30	)		(1,275	)
Balance, end of period	$	5,467			10,562			1,331			7,236			12,397		2,479			278			407			40,157
Net charge-offs to average loans (annualized)																									0.07	%
Allowance for credit losses to gross loans																									1.11	%
Allowance for credit losses to nonperforming loans																									357.95	%


								Six months ended June 30, 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		29		1,385			39		268			908		298			(209	)		232			2,950
Loan charge-offs		-		(209	)		-		(1	)		-		(389	)		-			(2	)		(601	)
Loan recoveries		-		32			-		24			-		61			-			-			117
Net loan recoveries (charge-offs)		-		(177	)		-		23			-		(328	)		-			(2	)		(484	)
Balance, end of period	$	5,896		11,584			1,331		8,152			10,395		2,521			684			542			41,105
Net charge-offs to average loans (annualized)																							0.03	%
Allowance for credit losses to gross loans																							1.16	%
Allowance for credit losses to nonperforming loans																							1,363.11	%

The provision for credit losses was $750,000 and $1.1 million for the three months ended June 30, 2024 and June 30, 2023, respectively. In addition, the provision for credit losses was $750,000 and $3.0 million for the six months ended June 30, 2024 and June 30, 2023, respectively.

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 June 30, 2024 and December 31, 2023.



					June 30, 2024
	Real		Business
(dollars in thousands)	estate		assets		Other		Total
Commercial
Owner occupied RE	$	-		-		-		-
Non-owner occupied RE		7,274		-		-		7,274
Construction		-		-		-		-
Business		361		321		-		682
Total commercial		7,635		321		-		7,956
Consumer
Real estate		1,304		-		-		1,304
Home equity		564		-		-		564
Construction		-		-		-		-
Other		-		-		-		-
Total consumer		1,868		-		-		1,868
Total	$	9,503		321		-		9,824

					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 $1.4 million and $1.8 million at June 30, 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 and six months ended June 30, 2024 and June 30, 2023.



	Three months ended			Three months ended
(dollars in thousands)	June 30, 2024			June 30, 2023
Balance, beginning of period	$	1,656			2,750
Provision for (reversal of) credit losses		(250	)		(185	)
Balance, end of period	$	1,406			2,565
Unfunded Loan Commitments	$	694,524			849,977
Reserve for Unfunded Commitments to Unfunded Loan Commitments		0.20	%		0.30	%

	Six months ended			Six months ended
(dollars in thousands)	June 30, 2024			June 30, 2023
Balance, beginning of period	$	1,831			2,780
Provision for (reversal of) credit losses		(425	)		(215	)
Balance, end of period	$	1,406			2,565
Unfunded Loan Commitments	$	694,524			849,977
Reserve for Unfunded Commitments to Unfunded Loan Commitments		0.20	%		0.30	%