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Loans and Allowance for Credit Losses
 12 Months Ended
Dec. 31, 2023
Receivables [Abstract]  
Loans and Allowance for Credit Losses
Note 3 – Loans and Allowance for Credit Losses
The components of loans in the Consolidated Balance Sheet at December 31, were as follows:
(Dollars in thousands)20232022
Commercial:
Business$797,100 $851,072 
Real estate670,584 632,839 
Acquisition, development and construction134,004 126,999 
Total commercial$1,601,688 $1,610,910 
Residential real estate672,547 606,970 
Home equity lines of credit14,531 18,734 
Consumer27,408 131,566 
Total loans, excluding PCI2,316,174 2,368,180 
Purchased credit impaired loans:
Residential real estate— 2,482 
Total purchased credit impaired loans$— $2,482 
Total loans2,316,174 2,370,662 
Deferred loan origination costs, net of fees1,420 1,983 
Loans receivable$2,317,594 $2,372,645 

Loans serviced for others are not included in the accompanying consolidated balance sheet. The amortized cost basis of loans serviced for others requiring recognition of a servicing asset were $184.3 million and $164.1 million at December 31, 2023 and 2022, respectively.

We currently manage our loan portfolios and the respective exposure to credit losses (credit risk) by the following specific portfolio segments. With the adoption of ASC 326 in January 2023, we modified our loan portfolio segmentation to be based primarily on call report codes, which are levels at which we develop and document our systematic methodology to determine the ACL attributable to each respective portfolio segment. The ACL portfolio segments are aggregated into broader segments in order to present informative yet concise disclosures within this document, as follows:

Commercial business loans – Commercial business loans are made to provide funds for equipment and general corporate needs, as well as to finance owner-occupied real estate, and to finance future cash flows of Federal government lease contracts. Repayment of these loans primarily uses the funds obtained from the operation of the borrower’s business. Commercial business loans also include lines of credit that are utilized to finance a borrower’s short-term credit needs and/or to finance a percentage of eligible receivables and inventory. This segment includes both internally originated and purchased participation loans. Credit risk arises from the successful operation of the business, which may be affected by competition, rising interest rates, regulatory changes and adverse conditions in the local and regional economy.

Commercial real estate loans – Commercial real estate loans consist of non-owner occupied properties, such as investment properties for retail, office and multifamily with a history of occupancy and cash flow. This segment includes both internally originated and purchased participation loans. These loans carry the risk of adverse changes in the local economy and a tenant’s
deteriorating credit strength, lease expirations in soft markets and sustained vacancies, which can adversely impact cash flow.

Commercial acquisition, development and construction loans – Commercial acquisition, development and construction loans are intended to finance the construction of commercial and residential properties, and also includes loans for the acquisition and development of land. Construction loans represent a higher degree of risk than permanent real estate loans and may be affected by a variety of factors such as the borrower’s ability to control costs and adhere to time schedules and the risk that constructed units may not be absorbed by the market within the anticipated time frame or at the anticipated price. The loan commitment on these loans often includes an interest reserve that allows the lender to periodically advance loan funds to pay interest charges on the outstanding balance of the loan.

Residential real estate – This residential real estate subsegment contains permanent and construction mortgage loans principally to consumers, but also includes loans to residential real estate developers, secured by residential real estate, which we previously presented under commercial acquisitions, development and construction loans under the incurred loss model. Residential real estate loans to consumers are evaluated for the adequacy of repayment sources at the time of approval, based upon measures including credit scores, debt-to-income ratios and collateral values. Credit risk arises from the borrower’s, and where applicable, the builder’s, continuing financial stability, which can be adversely impacted by job loss, divorce, illness or personal bankruptcy, among other factors. Residential real estate secured loans to developers represent a higher degree of risk than permanent real estate loans and may be affected by a variety of factors such as the borrower’s ability to control costs and adhere to time schedules and the risk that constructed units may not be absorbed by the market within the anticipated time frame or at the anticipated price. Also impacting credit risk would be a shortfall in the value of the residential real estate in relation to the outstanding loan balance in the event of a default or subsequent liquidation of the real estate collateral.

Home equity lines of credit – This segment includes subsegments for senior lien and subordinate lien lines of credit. Credit risk is similar to residential real estate loans described above as it is subject to the borrower’s continuing financial stability and the value of the collateral securing the loan.

Consumer loans – This segment of loans includes primarily installment loans and personal lines of credit. Consumer loans include installment loans used by clients to purchase automobiles, boats and recreational vehicles. Credit risk is similar to residential real estate loans described above as it is subject to the borrower’s continuing financial stability and the value of the collateral securing the loan. This segment primarily includes loans purchased from a third-party originator that originates loans in order to finance the purchase of personal automotive vehicles for sub-prime borrowers. Credit risk is unique in comparison to the Consumer segment as this segment includes only those loans provided to consumers that cannot typically obtain financing through traditional lenders. As such, these loans are subject to a higher risk of default than the typical consumer loan.

Results for reporting periods beginning January 2023 are presented under ASC 326, while prior period amounts continue to be reported in accordance with the incurred loss model.

The following table presents impaired loans by class segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of the periods shown:
 Impaired Loans with Specific AllowanceImpaired Loans with No Specific AllowanceTotal Impaired Loans
(Dollars in thousands)Recorded InvestmentRelated AllowanceRecorded InvestmentRecorded InvestmentUnpaid Principal Balance
December 31, 2022
Commercial:
Business$3,436 $1,253 $8,486 $11,922 $16,795 
Real estate1,240 222 546 1,786 1,891 
Acquisition, development and construction— — — — 1,415 
          Total commercial4,676 1,475 9,032 13,708 20,101 
Residential— — 3,098 3,098 3,166 
Home equity lines of credit— — 90 90 94 
Consumer1,347 268 4 1,351 1,351 
          Total impaired loans$6,023 $1,743 $12,224 $18,247 $24,712 
The following table presents the average recorded investment in impaired loans and related interest income recognized for the years ended:
December 31, 2022December 31, 2021
(Dollars in thousands)Average Investment in Impaired LoansInterest Income Recognized on Accrual BasisInterest Income Recognized on Cash BasisAverage Investment in Impaired LoansInterest Income Recognized on Accrual BasisInterest Income Recognized on Cash Basis
Commercial:
Business$12,781 $8 $6 $7,701 $— $— 
Real estate1,479 57 59 2,051 60 43 
Acquisition, development and construction273 — — 344 — — 
    Total commercial14,533 65 65 10,096 60 43 
Residential6,952 15 15 5,992 15 14 
Home equity lines of credit149 — — 81 — — 
Consumer915 — — 41 — — 
Total$22,549 $80 $80 $16,210 $75 $57 

As of December 31, 2023, the Bank’s other real estate owned balance totaled $0.8 million, all of which was related to two unrelated commercial loans from our acquisition of The First State Bank (“First State”) in 2020. As of December 31, 2023, there were no residential mortgages in the process of foreclosure.

As of December 31, 2022, there are ten loans collateralized by residential real estate property in the process of foreclosure. The total recorded investment in these loans was $2.1 million as of December 31, 2022. These loans are included in the table above and have no specific allowance allocated to them.

As of December 31, 2022, the Bank's other real estate owned balance totaled $1.2 million. The Bank held five foreclosed residential real estate properties, representing $0.2 million, or 16.7%, of the total balance of other real estate owned. The Bank held three commercial real estate properties representing $1.0 million or 83.3% of the total of other real estate owned.

Bank management uses a nine-point internal risk rating system to monitor the credit quality of the overall loan portfolio. The first six categories are considered not criticized and are aggregated as “Pass” rated. The criticized rating categories utilized by management generally follow bank regulatory definitions.

Loans categorized as “Pass” rated have adequate sources of repayment, with little identifiable risk of collection and general conformity to the Bank's policy requirements, product guidelines and underwriting standards. Any exceptions that are identified during the underwriting and approval process have been adequately mitigated by other factors.

Loans categorized as “Special Mention” rated have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose the institution to sufficient risk to warrant adverse classification.

Loans categorized as “Substandard” rated are inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt and are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Loans categorized as “Doubtful” rated have all the weakness inherent in those classified Substandard with the added characteristic that the weakness makes collections or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable. However, these loans are not yet rated as loss because certain events may occur which would salvage the debt.

Any portion of a loan that has been or is expected to be charged off is placed in the “Loss” category.

To help ensure that risk ratings are accurate and reflect the present and future capacity of borrowers to repay a loan as agreed, the Bank has a structured loan rating process with several layers of internal and external oversight. Generally, consumer and residential mortgage loans are included in the Pass categories, unless a specific action, such as past due status, bankruptcy,
repossession or death, occurs to raise awareness of a possible credit event. The Bank’s Chief Credit Officer is responsible for the timely and accurate risk rating of the loans in the portfolio at origination and on an ongoing basis. The Bank's Credit Department ensures that a review of all commercial relationships of $1.0 million or more is performed annually.

Review of the appropriate risk grade is included in both the internal and external loan review process and on an ongoing basis. The Bank has an experienced credit department that continually reviews and assesses loans within the portfolio. The Bank engages an external consultant to conduct independent loan reviews on at least an annual basis. Generally, the external consultant reviews commercial relationships with the intent of reviewing 40% to 45% of the Bank's commercial outstanding loan balances on an annual basis. The Bank's credit department compiles detailed reviews, including plans for resolution, on loans classified as Substandard on a quarterly basis.

The following table presents the amortized cost of loans summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system by vintage year as of the period shown:

Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)20232022202120202019PriorRevolving Loans Amortized Cost BasisRevolving Loans Converted to TermTotal
December 31, 2023
Commercial business:
Risk rating:
Pass$176,309 $251,265 $92,307 $64,964 $50,765 $90,355 $20,315 $— $746,280 
Special Mention990 32,342 72 830 339 3,767 — — 38,340 
Substandard368 988 521 — 4,640 1,436 — — 7,953 
Doubtful— 2,022 839 264 — 1,402 — — 4,527 
Total commercial business loans$177,667 $286,617 $93,739 $66,058 $55,744 $96,960 $20,315 $— $797,100 
Gross charge-offs$— $228 $1,250 $141 $— $2,953 $— $— $4,572 
Commercial real estate:
Risk rating:
Pass$80,553 $149,189 $205,651 $11,952 $26,438 $101,322 $51,239 $— $626,344 
Special Mention— — 7,961 — 6,079 11,201 — — 25,241 
Substandard— — — — — 18,999 — — 18,999 
Doubtful— — — — — — — — — 
Total commercial real estate loans$80,553 $149,189 $213,612 $11,952 $32,517 $131,522 $51,239 $— $670,584 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Commercial acquisition, development and construction:
Risk rating:
Pass$6,546 $54,170 $29,535 $22,041 $— $1,483 $4,823 $— $118,598 
Special Mention— — 14,652 — — — — — 14,652 
Substandard— — — — — 754 — — 754 
Doubtful— — — — — — — — — 
Total commercial acquisition, development and construction loans$6,546 $54,170 $44,187 $22,041 $— $2,237 $4,823 $— $134,004 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Term Loans Amortized Cost Basis by Origination Year
(Dollars in thousands)20232022202120202019PriorRevolving Loans Amortized Cost BasisRevolving Loans Converted to TermTotal
December 31, 2023
Residential Real Estate:
Risk rating:
Pass$33,867 $413,466 $96,413 $38,169 $7,306 $21,313 $50,815 $— $661,349 
Special Mention— — — 4,224 414 708 — — 5,346 
Substandard— 988 3,764 82 146 777 — — 5,757 
Doubtful— — — — — 95 — — 95 
Total residential real estate loans$33,867 $414,454 $100,177 $42,475 $7,866 $22,893 $50,815 $— $672,547 
Gross charge-offs$— $— $— $— $19 $381 $— $— $400 
Home equity lines of credit:
Risk rating:
Pass$638 $3,798 $1,779 $1,192 $501 $3,084 $3,154 $— $14,146 
Special Mention— 61 — 36 — 41 86 — 224 
Substandard— 83 — 78 — — — — 161 
Doubtful— — — — — — — — — 
Total home equity lines of credit loans$638 $3,942 $1,779 $1,306 $501 $3,125 $3,240 $— $14,531 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Consumer:
Risk rating:
Pass$2,275 $18,926 $5,753 $9 $28 $53 $20 $— $27,064 
Special Mention— — — — — — — — — 
Substandard20 266 58 — — — — — 344 
Doubtful— — — — — — — — — 
Total consumer loans$2,295 $19,192 $5,811 $9 $28 $53 $20 $— $27,408 
Gross charge-offs$1,144 $10,608 $1,753 $— $— $2 $— $— $13,507 
Total:
Risk rating:
Pass$300,188 $890,814 $431,438 $138,327 $85,038 $217,610 $130,366 $— $2,193,781 
Special Mention990 32,403 22,685 5,090 6,832 15,717 86 — 83,803 
Substandard388 2,325 4,343 160 4,786 21,966 — — 33,968 
Doubtful— 2,022 839 264 — 1,497 — — 4,622 
Total loans$301,566 $927,564 $459,305 $143,841 $96,656 $256,790 $130,452 $— $2,316,174 
Gross charge-offs$1,144 $10,836 $3,003 $141 $19 $3,336 $— $— $18,479 
The following table represents the classes of the loan portfolio summarized by the aggregate Pass and the criticized categories of Special Mention, Substandard and Doubtful within the internal risk rating system as of the periods shown:
(Dollars in thousands)PassSpecial MentionSubstandardDoubtfulTotal
December 31, 2022
Commercial:
Business$830,319 $5,963 $12,103 $2,687 $851,072 
Real estate592,997 18,883 20,600 359 632,839 
Acquisition, development and construction120,788 5,277 934 — 126,999 
          Total commercial1,544,104 30,123 33,637 3,046 1,610,910 
Residential605,513 760 1,556 1,623 609,452 
Home equity lines of credit18,269 375 90 — 18,734 
Consumer131,562 — 4 — 131,566 
          Total loans$2,299,448 $31,258 $35,287 $4,669 $2,370,662 

Management further monitors the performance and credit quality of the loan portfolio by analyzing the age of the portfolio as determined by the length of time a recorded payment is past due.

The following table presents the amortized cost basis in loans by aging category and accrual status as of the periods shown:
(Dollars in thousands)Current30-59 Days Past Due60-89 Days Past Due90+ Days Past DueTotal Past DueTotal LoansNon-Accrual90+ Days Still AccruingNon Accrual with No Credit LossInterest Income Recognized
December 31, 2023
Commercial:
Business$788,430 $4,728 $448 $3,494 $8,670 $797,100 $6,926 $— $1,825 $— 
Real estate670,170 — 414 — 414 670,584 — — — — 
Acquisition, development and construction134,004 — — — — 134,004 754 — 754 — 
          Total commercial1,592,604 4,728 862 3,494 9,084 1,601,688 7,680 — 2,579 — 
Residential670,539 1,671 337 — 2,008 672,547 82 — — — 
Home equity lines of credit14,522 9 — — 9 14,531 161 — — — 
Consumer24,494 1,792 778 344 2,914 27,408 344 — — — 
          Total loans$2,302,159 $8,200 $1,977 $3,838 $14,015 $2,316,174 $8,267 $— $2,579 $— 

The following table presents the aging of recorded investment in loans, including accruing and nonaccrual loans, as of the period shown:
(Dollars in thousands)Current30-59 Days Past Due60-89 Days Past Due90+ Days Past DueTotal Past DueTotal LoansNon-Accrual90+ Days Still Accruing
December 31, 2022
Commercial:
Business$850,112 $— $960 $— $960 $851,072 $7,528 $— 
Real estate632,839 — — — — 632,839 — — 
Acquisition, development and construction126,999 — — — — 126,999 — — 
          Total commercial1,609,950 — 960 — 960 1,610,910 7,528 — 
Residential606,554 1,820 1,078 — 2,898 609,452 2,196 — 
Home equity lines of credit18,131 603 — — 603 18,734 90 — 
Consumer120,504 6,848 2,867 1,347 11,062 131,566 1,351 — 
          Total loans$2,355,139 $9,271 $4,905 $1,347 $15,523 $2,370,662 $11,165 $— 

The ACL is a valuation account that is deducted from the loans' amortized cost basis to present the net amount expected to be
collected on the loans. Loans are charged off against the ACL when management believes the loan balance is uncollectible. Accrued interest receivable is excluded from the estimate of credit losses. Management determines the ACL balance using relevant available information, from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Historical credit behaviors along with model judgments provide the basis for the estimation of expected credit losses. Adjustments to modeled loss estimates may be made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level or term, as well as for changes in environmental conditions, such as changes in economic conditions, property values or other relevant factors.

At December 31, 2023 and 2022, individually analyzed loans totaled $11.8 million and $18.2 million, respectively. A portion of the ACL of $1.9 million and $1.7 million was allocated to cover any loss in these loans at December 31, 2023 and 2022, respectively.

The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of the periods shown:
(Dollars in thousands)Real EstateVehicles and EquipmentAssignment of Cash FlowAccounts ReceivableOtherTotalsAllowance for Credit Losses
December 31, 2023
Commercial
Business$424 $2,277 $— $452 $1,037 $4,190 $1,583 
Real estate— — — — — — — 
Acquisition, development and construction— — — — — — — 
Total commercial$424 $2,277 $— $452 $1,037 $4,190 $1,583 
Residential— — — — — — — 
Home equity lines of credit— — — — — — — 
Consumer— 344 — — — 344 60 
Total$424 $2,621 $— $452 $1,037 $4,534 $1,643 
Collateral value$301 $2,040 $— $906 $320 $3,567 

The Bank evaluates certain loans in homogeneous pools, rather than on an individual basis, when those loans are below specific thresholds based on outstanding principal balance. More specifically, residential mortgage loans, home equity lines of credit and consumer loans are evaluated collectively for expected credit losses by applying allocation rates derived from the Bank’s historical losses specific to these loans. The reserve was immaterial at December 31, 2023 and December 31, 2022.

Management has identified a number of additional qualitative factors which it uses to supplement the estimated losses derived from the loss rate methodologies employed within the CECL model because these factors are likely to cause estimated credit losses associated with the existing loan pools to differ from the loss rate methodologies. The additional factors that are evaluated quarterly and updated using information obtained from internal, regulatory and governmental sources are: lending policies and procedures, nature and volume of the portfolio, experience and ability of lending management and staff, volume and severity of problem credits, quality of the loan review system, changes in the value of underlying collateral, effect of concentrations of credit from a loan type, industry and/or geographic standpoint, changes in economic and business conditions, consumer sentiment and other external factors.

Bank management reviews the loan portfolio on a quarterly basis using a defined, consistently applied process in order to make appropriate and timely adjustments to the ACL. When information confirms all or part of specific loans to be uncollectible, these amounts are promptly charged off against the ACL.

The release of allowance related to unfunded commitments was $0.6 million for the year ended December 31, 2023 and immaterial for the years ended December 31, 2022 and 2021, respectively.
The following table presents the balance and activity for the primary segments of the ACL as of the periods shown:
Commercial
(Dollars in thousands)BusinessReal EstateAcquisition, development and constructionTotal CommercialResidentialHome Equity Lines of CreditConsumerTotal
ALL, prior to adoption of ASC 326, at December 31, 2022$8,771 $5,704 $1,064 $15,539 $2,880 $131 $5,287 $23,837 
Impact of adopting ASC 326(126)(2,846)288 (2,684)3,889 (5)6,482 7,682 
Provision (release of allowance) for credit losses2,954 71 322 3,347 (541)(33)(4,091)(1,318)
Initial allowance on loans purchased with credit deterioration710 — — 710 507 — — 1,217 
Charge-offs(4,572)— — (4,572)(400)— (13,507)(18,479)
Recoveries194 2 — 196 77 4 8,908 9,185 
ACL balance at December 31, 2023$7,931 $2,931 $1,674 $12,536 $6,412 $97 $3,079 $22,124 
Commercial
(Dollars in thousands)BusinessReal EstateAcquisition, development and constructionTotal CommercialResidentialHome Equity Lines of CreditConsumerTotal
ALL, prior to adoption of ASC 326, at December 31, 2021$8,027 $5,091 $982 $14,100 $1,492 $128 $2,546 $18,266 
Provision (release of allowance) for credit losses3,546 486 82 4,114 1,472 (4)8,612 14,194 
Charge-offs(2,858)— — (2,858)(84)— (12,241)(15,183)
Recoveries56 127 — 183 — 7 6,370 6,560 
ALL, prior to adoption of ASC 326, at December 31, 2022$8,771 $5,704 $1,064 $15,539 $2,880 $131 $5,287 $23,837 
Individually evaluated for impairment$1,253 $222 $— $1,475 $— $— $268 $1,743 
Collectively evaluated for impairment$7,518 $5,482 $1,064 $14,064 $2,880 $131 $5,019 $22,094 
Commercial
(Dollars in thousands)BusinessReal EstateAcquisition, development and constructionTotal CommercialResidentialHome Equity Lines of CreditConsumerTotal
ALL, prior to adoption of ASC 326, at December 31, 2020$12,193 $9,079 $2,761 $24,033 $1,462 $298 $51 $25,844 
Provision (release of allowance) for credit losses(3,113)(3,905)(1,779)(8,797)35 (194)2,681 (6,275)
Charge-offs(1,284)(83)— (1,367)(5)— (247)(1,619)
Recoveries231 — — 231 — 24 61 316 
ALL, prior to adoption of ASC 326, at December 31, 2021$8,027 $5,091 $982 $14,100 $1,492 $128 $2,546 $18,266 
Individually evaluated for impairment$232 $243 $— $475 $— $— $— $475 
Collectively evaluated for impairment$7,795 $4,848 $982 $13,625 $1,492 $128 $2,546 $17,791 
The following table summarizes the primary segments of the loan portfolio as of the period shown:
Commercial
(Dollars in thousands)BusinessReal EstateAcquisition, development and constructionTotal CommercialResidentialHome Equity Lines of CreditConsumerTotal
December 31, 2022
Individually evaluated for impairment$10,451 $1,365 $— $11,816 $2,603 $90 $1,351 $15,860 
Collectively evaluated for impairment840,621 631,474 126,999 1,599,094 606,849 18,644 130,215 2,354,802 
Total loans$851,072 $632,839 $126,999 $1,610,910 $609,452 $18,734 $131,566 $2,370,662 

The ACL is based on estimates and actual losses will vary from current estimates. Management believes that the granularity of the portfolio segments, the related loss estimation methodologies and other qualitative factors, as well as the consistency in the application of assumptions, result in an ACL that is representative of the risk found in the components of the portfolio at any given date.

Loan Modifications for Borrowers Experiencing Financial Difficulty

Occasionally, the Bank modifies loans to borrowers in financial distress by providing concessions that allow for the borrower to lower their payment obligations for a defined period, these may include, but are not limited to: principal forgiveness, payment delays, term extensions, interest rate reductions and any combinations of the preceding.

The following tables summarize the amortized cost basis of loans that were modified during the twelve months ended December 31, 2023:
(Dollars in thousands)Principal ForgivenessPayment DelayTerm ExtensionInterest Rate ReductionTotalTotal Class of Financing Receivable
December 31, 2023
Commercial
Business$— $8,535 $— $— $8,535 1 %
Real estate— 11,201 1,702 — 12,903 2 %
Acquisition, development and construction— — 754 — 754 1 %
Total commercial— 19,736 2,456 — 22,192 1 %
Residential— — — — — — %
Home equity lines of credit— — — — — — %
Consumer— — — — — — %
Total$— $19,736 $2,456 $— $22,192 1 %

The above table presents the amortized cost basis of loans at December 31, 2023 that were experiencing financial difficulty and modified during the twelve months ended December 31, 2023, by class and by type of modification. Also presented above is the percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable. 18 loans to 17 borrowers received payment delay modifications in the twelve months ended December 31, 2023, including one secured by commercial office real estate totaling $11.2 million, one commercial loan secured by accounts receivable totaling $0.2 million, and 16 commercial loans with government guarantees totaling $8.3 million.

The Bank closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table presents the performance of such loans that have been modified as of the period shown:
(Dollars in thousands)30-59 Days
Past Due		60-89 Days
Past Due		Greater Than
89 Days
Past Due		Total Past Due
December 31, 2023
Commercial
Business$1,702 $418 $3,370 $5,490 
Real estate— — — — 
Acquisition, development and construction— — — — 
Total commercial1,702 418 3,370 5,490 
Residential— — — — 
Home equity lines of credit— — — — 
Consumer— — — — 
Total$1,702 $418 $3,370 $5,490 

As of December 31, 2023, there are eight modified loans past due, with an amortized costs basis of $5.5 million. Of the eight modified loans past due, three are commercial notes to a single borrower totaling $1.7 million secured by equipment and five commercial notes with government guarantees totaling $3.8 million. All eight of these notes are considered non-accrual as of December 31, 2023.

The following table presents the amortized cost basis of loans that had a payment default and were modified prior to that default to borrowers experiencing financial difficulty as of the period shown:
(Dollars in thousands)Principal ForgivenessPayment DelayTerm ExtensionInterest Rate ReductionTotal
December 31, 2023
Commercial
Business$— $2,634 $— $— $2,634 
Real estate— — — — — 
Total commercial— 2,634 — — 2,634 
Residential— — — — — 
Home equity lines of credit— — — — — 
Consumer— — — — — 
Total$— $2,634 $— $— $2,634 

As of December 31, 2023, there are two modified loans that has defaulted, with an amortized costs basis of $2.6 million. These loans are commercial notes with government guarantees and both are considered non-accrual as of December 31, 2023. Upon the Bank’s determination that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written-off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the ACL is adjusted by the same amount.

Troubled Debt Restructurings

Results for reporting periods beginning January 2023 are presented under ASC 326, which eliminated the accounting guidance for TDRs, while prior period amounts continue to be reported in accordance with the TDR model.

At December 31, 2022, the Bank had specific reserve allocations for TDRs of $0.4 million. Loans considered to be troubled debt restructured loans totaled $10.4 million as of December 31, 2022. Of the total, $4.7 million, represent accruing troubled debt restructured loans and represent 45% of total impaired loans. As of December 31, 2022, $5.7 million represents nine loans to seven borrowers that have defaulted under the restructured terms. The largest of these loans is a $1.9 million restructured commercial loan to a company previously dependent on the coal industry, which is now structured as an unsecured loan. Three of these loans to an unrelated borrower, totaling $3.1 million, are restructured equipment loans to a borrower in the coal industry, which was provided extended interest-only terms to allow time for the collateral equipment to be sold. There is a commercial loan totaling $0.5 million secured by government lease payments that previously defaulted and is now making restructured payments. The four remaining unrelated borrowers have a single loan each, totaling $0.2 million. These borrowers have experienced continued financial difficulty and are considered non-performing loans as of December 31, 2022.
During the year ended December 31, 2023, no restructured loans defaulted under their modified terms that were not already classified as non-performing for having previously defaulted under their modified terms.