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Note 5 - Loans and Leases

3 Months Ended

Mar. 31, 2024

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

5. Loans and leases

The classifications of loans and leases at March 31, 2024 and December 31, 2023 are summarized as follows:

(dollars in thousands)	*March 31, 2024*			December 31, 2023
Commercial and industrial:
Commercial	$	152,953		$	152,640
Municipal		113,058			94,724
Commercial real estate:
Non-owner occupied		305,962			311,565
Owner occupied		299,394			304,399
Construction		48,473			39,823
Consumer:
Home equity installment		55,626			56,640
Home equity line of credit		52,564			52,348
Auto loans - Recourse		10,980			10,756
Auto loans - Non-recourse		102,622			112,595
Direct finance leases		32,544			33,601
Other		16,045			16,500
Residential:
Real estate		475,712			465,010
Construction		33,174			36,536
Total		1,699,107			1,687,137
Less:
Allowance for credit losses on loans		(18,886	)		(18,806	)
Unearned lease revenue		(2,079	)		(2,039	)
Loans and leases, net	$	1,678,142		$	1,666,292

Total unamortized net costs and premiums included in loan totals were as follows:

(dollars in thousands)	*March 31, 2024*			December 31, 2023
Net unamortized fair value mark discount on acquired loans	$	(6,015	)	$	(6,468	)
Net unamortized deferred loan origination costs		4,966			4,930
Total	$	(1,049	)	$	(1,538	)

The Company excludes accrued interest receivable from the amortized cost basis of loans disclosed throughout this footnote. As of March 31, 2024 and December 31, 2023, accrued interest receivable for loans totaled $6.4 million and $5.7 million, respectively, and is included in the accrued interest receivable line in the consolidated balance sheets and is excluded from the estimate of credit losses.

Direct finance leases include the lease receivable and the guaranteed lease residual. Unearned lease revenue represents the difference between the lessor’s investment in the property and the gross investment in the lease. Unearned revenue is accrued over the life of the lease using the effective interest method.

The Company services real estate loans for investors in the secondary mortgage market which are not included in the accompanying consolidated balance sheets. The approximate unpaid principal balance of mortgages serviced for others amounted to $479.3 million as of March 31, 2024 and $477.7 million as of December 31, 2023. Mortgage servicing rights amounted to $1.4 million and $1.5 million as of March 31, 2024 and December 31, 2023, respectively, and is included in other assets in the consolidated balance sheets.

Non-accrual loans

Non-accrual loans and loans past due over 89 days still accruing, segregated by class, at March 31, 2024 and December 31, 2023, were as follows:

(dollars in thousands)	Non-accrual With No Allowance for Credit Loss		Non-accrual With an Allowance for Credit Loss		Total Non-accrual		Loans Past Due Over 89 Days Still Accruing
At March 31, 2024
Commercial and industrial:
Commercial	$	-	$	55	$	55	$	-
Municipal		-		-		-		-
Commercial real estate:
Non-owner occupied		525		-		525		-
Owner occupied		1,578		457		2,035		-
Consumer:
Home equity installment		79		-		79		-
Home equity line of credit		299		67		366		-
Auto loans - Recourse		-		-		-		-
Auto loans - Non-recourse		27		8		35		-
Direct finance leases		-		-		-		12
Other		-		24		24		-
Residential:
Real estate		438		-		438		-
Total	$	2,946	$	611	$	3,557	$	12

(dollars in thousands)	Non-accrual With No Allowance for Credit Loss		Non-accrual With an Allowance for Credit Loss		Total Non-accrual		Loans Past Due Over 89 Days Still Accruing
At December 31, 2023
Commercial and industrial:
Commercial	$	39	$	16	$	55	$	-
Municipal		-		-		-		-
Commercial real estate:
Non-owner occupied		252		-		252		-
Owner occupied		2,040		210		2,250		-
Construction		-				-
Consumer:
Home equity installment		70		-		70		-
Home equity line of credit		297		67		364		-
Auto loans - Recourse		-		-		-		-
Auto loans - Non-recourse		32		7		39		-
Direct finance leases		-		-		-		14
Other		-		-		-		-
Residential:
Real estate		278		-		278		-
Total	$	3,008	$	300	$	3,308	$	14

The decision to place loans on non-accrual status is made on an individual basis after considering factors pertaining to each specific loan. C&I and CRE loans are placed on non-accrual status when management has determined that payment of all contractual principal and interest is in doubt or the loan is past due 90 days or more as to principal and interest, unless well-secured and in the process of collection. Consumer loans secured by real estate and residential mortgage loans are placed on non-accrual status at 90 days past due as to principal and interest and unsecured consumer loans are charged-off when the loan is 90 days or more past due as to principal and interest. The Company considers all non-accrual loans to be impaired loans.

Loan modifications to borrowers experiencing financial difficulty

Occasionally, the Company modifies loans to borrowers in financial distress by providing interest rates below the market rate, temporary interest-only payment periods, term extensions at interest rates lower than the current market rate for new debt with similar risk and/or converting revolving credit lines to term loans. The Company typically does not forgive principal when modifying loans.

In some cases, the Company provides multiple types of concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as lowering the interest rate, may be granted. For the loans included in the "combination" columns below, multiple types of modifications have been made on the same loan within the current reporting period.

The following tables present the amortized cost basis of loans at March 31, 2024 and March 31, 2023 that were both experiencing financial difficulty and modified during the three months ended March 31, 2024 and 2023, by class and type of modification. The percentage of the amortized cost basis of loans that were modified to borrowers experiencing financial difficulty as compared to the amortized cost basis of each class of financing receivable is also presented below:

Loans modified during the three months ended:

(dollars in thousands)

March 31, 2024

Principal Forgiveness

Payment Delay

Term Extension

Interest Rate Reduction

Combination Term Extension and Principal Forgiveness

Combination Term Extension Interest Rate Reduction

Total Class of Financing Receivable

Commercial real estate:

Non-owner occupied

849

0.28

Owner occupied

6,533

2.18

Total

7,382

	Loans modified during the three months ended:
(dollars in thousands)	*March 31, 2023*
	Principal Forgiveness		Payment Delay		Term Extension		Interest Rate Reduction		Combination Term Extension and Principal Forgiveness		Combination Term Extension Interest Rate Reduction		Total Class of Financing Receivable
Commercial real estate:
Non-owner occupied	$	-	$	-	$	65	$	3,261	$	-	$	-		1.07	%
Total	$	-	$	-	$	65	$	3,261	$	-	$	-

The Company has not committed to lend additional amounts to the borrowers included in the previous tables.

Loans modified to borrowers experiencing financial difficulty are closely monitored to understand the effectiveness of its modification efforts. The following table depicts the performance of loans that have been modified in the previous 12 months:


(dollars in thousands)	*March 31, 2024*
	Current		30 - 59 Days Past Due		60 - 89 Days Past Due		Greater Than 89 Days Past Due		Total Past Due

Commercial and industrial:
Commercial	$	15	$	-	$	-	$	-	$	-
Commercial real estate:
Non-owner occupied		849		-		-		-		-
Owner occupied		8,191		-		-		-		-
Total	$	9,055	$	-	$	-	$	-	$	-

(dollars in thousands)	*March 31, 2023*
	Current		30 - 59 Days Past Due		60 - 89 Days Past Due		Greater Than 89 Days Past Due		Total Past Due

Commercial real estate:
Non-owner occupied	$	3,326	$	-	$	-	$	-	$	-
Total	$	3,326	$	-	$	-	$	-	$	-

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the three months ended March 31, 2024 and 2023:

(dollars in thousands)	*March 31, 2024*
	Principal Forgiveness		Weighted-Average Interest Rate Reduction			Weighted-Average Term Extension (Months)

Commercial real estate:
Non-owner occupied	$	-		-	%		3.0
Owner occupied		-		-			5.0

(dollars in thousands)	March 31, 2023
	Principal Forgiveness		Weighted-Average Interest Rate Reduction			Weighted-Average Term Extension (Months)

Commercial real estate:
Non-owner occupied	$	-		6.13	%		6.0

There were no financing receivables that had a payment default during the three months ended March 31, 2024 and 2023 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty.

Upon the Company'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 allowance for credit losses is adjusted by the same amount. The allowance for credit losses (ACL) may be increased, adjustments may be made in the allocation of the ACL or partial charge-offs may be taken to further write-down the carrying value of the loan.

Past due loans

Loans are considered past due when the contractual principal and/or interest is not received by the due date. For loans reported 30-59 days past due, certain categories of loans are reported past due as and when the loan is in arrears for two payments or billing cycles. An aging analysis of past due loans, segregated by class of loans, as of the period indicated is as follows (dollars in thousands):

Recorded

Past due

investment past

30 - 59 Days

60 - 89 Days

90 days

Total

due ≥ 90 days

March 31, 2024

past due

or more ⁽¹⁾

past due

Current

loans ⁽³⁾

and accruing

Commercial and industrial:

Commercial

145

200

152,753

152,953

Municipal

113,058

Commercial real estate:

Non-owner occupied

285

525

810

305,152

305,962

Owner occupied

2,035

2,177

297,217

299,394

Construction

48,473

Consumer:

Home equity installment

164

243

55,383

55,626

Home equity line of credit

366

455

52,109

52,564

Auto loans - Recourse

10,934

10,980

Auto loans - Non-recourse

519

567

102,055

102,622

Direct finance leases

211

223

30,242

30,465

(2)

Other

118

151

15,894

16,045

Residential:

Real estate

430

438

868

474,844

475,712

Construction

33,174

Total

1,364

807

3,569

5,740

1,691,288

1,697,028

⁽¹⁾ Includes non-accrual loans. ⁽²⁾ Net of unearned lease revenue of $2.1 million. ⁽³⁾ Includes net deferred loan costs of $5.0 million.

														Recorded
					Past due									investment past
	30 - 59 Days		60 - 89 Days		90 days		Total				Total			due ≥ 90 days
December 31, 2023	past due		past due		or more (1)		past due		Current		loans (3)			and accruing

Commercial and industrial
Commercial	$	77	$	16	$	55	$	148	$	152,492	$	152,640		$	-
Municipal		-		-		-		-		94,724		94,724
Commercial real estate:
Non-owner occupied		85		65		252		402		311,163		311,565			-
Owner occupied		1,875		104		2,250		4,229		300,170		304,399			-
Construction		-		-		-		-		39,823		39,823			-
Consumer:
Home equity installment		105		150		70		325		56,315		56,640			-
Home equity line of credit		60		92		364		516		51,832		52,348			-
Auto loans - Recourse		86		1		-		87		10,669		10,756			-
Auto loans - Non-recourse		417		48		39		504		112,091		112,595			-
Direct finance leases		548		-		14		562		31,000		31,562	(2)		14
Other		30		4		-		34		16,466		16,500			-
Residential:
Real estate		42		682		278		1,002		464,008		465,010			-
Construction		-		-		-		-		36,536		36,536			-
Total	$	3,325	$	1,162	$	3,322	$	7,809	$	1,677,289	$	1,685,098		$	14

⁽¹⁾ Includes non-accrual loans. ⁽²⁾ Net of unearned lease revenue of $2.0 million. ⁽³⁾ Includes net deferred loan costs of $4.9 million.

Credit Quality Indicators

Management is responsible for conducting the Company’s credit risk evaluation process, which includes credit risk grading of individual commercial and industrial and commercial real estate loans. Commercial and industrial and commercial real estate loans are assigned credit risk grades based on the Company’s assessment of conditions that affect the borrower’s ability to meet its contractual obligations under the loan agreement. That process includes reviewing borrowers’ current financial information, historical payment experience, credit documentation, public information, and other information specific to each individual borrower. Upon review, the commercial loan credit risk grade is revised or reaffirmed. The credit risk grades may be changed at any time management feels an upgrade or downgrade may be warranted. The Company utilizes an external independent loan review firm that reviews and validates the credit risk program on at least an annual basis. Results of these reviews are presented to management and the Board of Directors. The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel, as well as the Company’s policies and procedures.

Commercial and industrial and commercial real estate

The Company utilizes a loan grading system and assigns a credit risk grade to its loans in the C&I and CRE portfolios. The grading system provides a means to measure portfolio quality and aids in the monitoring of the credit quality of the overall loan portfolio. The credit risk grades are arrived at using a risk rating matrix to assign a grade to each of the loans in the C&I and CRE portfolios.

These loans are assigned credit risk grades based on the Company’s assessment of conditions that affect the borrower’s ability to meet its contractual obligations under the loan agreement. That process includes reviewing borrowers’ current financial information, historical payment experience, credit documentation, public information and other information specific to each individual borrower. Upon review, the commercial loan credit risk grade is revised or reaffirmed. The credit risk grades may be changed at any time management feels an upgrade or downgrade may be warranted.

The following is a description of each risk rating category the Company uses to classify each of its C&I and CRE loans:

Pass

Loans in this category have an acceptable level of risk and are graded in a range of one to five. Secured loans generally have good collateral coverage. Current financial statements reflect acceptable balance sheet ratios, sales and earnings trends. Management is competent, and a reasonable succession plan is evident. Payment experience on the loans has been good with minor or no delinquency experience. Loans with a grade of one are of the highest quality in the range. Those graded five are of marginally acceptable quality.

Special Mention

Loans in this category are graded a six and may be protected but are potentially weak. They constitute a credit risk to the Company but have not yet reached the point of adverse classification. Some of the following conditions may exist: little or no collateral coverage; lack of current financial information; delinquency problems; highly leveraged; available financial information reflects poor balance sheet ratios and profit and loss statements reflect uncertain trends; and document exceptions. Cash flow may not be sufficient to support total debt service requirements.

Substandard

Loans in this category are graded a seven and have a well-defined weakness which may jeopardize the ultimate collectability of the debt. The collateral pledged may be lacking in quality or quantity. Financial statements may indicate insufficient cash flow to service the debt; and/or do not reflect a sound net worth. The payment history indicates chronic delinquency problems. Management is weak. There is a distinct possibility that the Company may sustain a loss. All loans on non-accrual are rated substandard. Other loans that are included in the substandard category can be accruing, as well as loans that are current or past due. Loans 90 days or more past due, unless otherwise fully supported, are classified substandard. Also, borrowers that are bankrupt or have loans categorized as modifications experiencing financial difficulty can be graded substandard.

Doubtful

Loans in this category are graded an eight and have a better than 50% possibility of the Company sustaining a loss, but the loss cannot be determined because of specific reasonable factors which may strengthen credit in the near-term. Many of the weaknesses present in a substandard loan exist. Liquidation of collateral, if any, is likely. Any loan graded lower than an eight is considered to be uncollectible and charged-off.

Consumer and residential

The consumer and residential loan segments are regarded as homogeneous loan pools and as such are not risk rated. For these portfolios, the Company utilizes payment activity and history in assessing performance. Non-performing loans are comprised of non-accrual loans and loans past due 90 days or more and accruing. All loans not classified as non-performing are considered performing.

The following table presents loans including $5.0 million and $4.9 million of deferred costs, segregated by class and vintage, categorized into the appropriate credit quality indicator category as of March 31, 2024 and December 31, 2023, respectively:

Commercial credit exposure

Credit risk profile by creditworthiness category

As of March 31, 2024

(dollars in thousands)

March 31, 2024	2024		2023		2022		2021		2020		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
Commercial and industrial
Risk Rating
Pass	$	5,443	$	29,235		18,316		15,459		4,978		18,956		52,436	$	-	$	144,823
Special Mention		-		-		139		193		-		-		-		-		332
Substandard		-		-		259		6,338		17		353		831		-		7,798
Doubtful		-		-		-		-		-		-		-		-		-
Total commercial and industrial	$	5,443	$	29,235	$	18,714	$	21,990	$	4,995	$	19,309	$	53,267	$	-	$	152,953
Current period gross write-offs	$	-	$	-	$	-	$	30	$	-	$	84	$	-	$	-	$	114

Commercial and industrial - municipal
Risk Rating
Pass	$	16,861	$	26,778	$	15,758	$	21,783	$	12,996	$	18,882	$	-	$	-	$	113,058
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total commercial and industrial - municipal	$	16,861	$	26,778	$	15,758	$	21,783	$	12,996	$	18,882	$	-	$	-	$	113,058
Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Commercial real estate - non-owner occupied
Risk Rating
Pass	$	3,814	$	33,675		38,013		70,006		41,912		102,540	$	7,269	$	-	$	297,229
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		688		125		7,920		-		-		8,733
Doubtful		-		-		-		-		-		-		-		-		-
Total commercial real estate - non-owner occupied	$	3,814	$	33,675	$	38,013	$	70,694	$	42,037	$	110,460	$	7,269	$	-	$	305,962
Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Commercial real estate - owner occupied
Risk Rating
Pass	$	1,922		29,866		58,559		45,279		28,676		104,280		10,805	$	-	$	279,387
Special Mention		-		-		-		486		-		-		-		-		486
Substandard				-		6,740		512		527		11,156		586		-		19,521
Doubtful		-		-		-		-		-		-		-		-		-
Total commercial real estate - owner occupied	$	1,922	$	29,866	$	65,299	$	46,277	$	29,203	$	115,436	$	11,391	$	-	$	299,394
Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	5	$	-	$	-	$	5

Commercial real estate - construction
Risk Rating
Pass	$	4,846	$	21,758	$	17,216	$	-	$	-	$	3,689	$	964	$	-	$	48,473
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total commercial real estate - construction	$	4,846	$	21,758	$	17,216	$	-	$	-	$	3,689	$	964	$	-	$	48,473
Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Consumer & Mortgage lending credit exposure

Credit risk profile based on payment activity

As of March 31, 2024

(dollars in thousands)

March 31, 2024	2024		2023		2022		2021		2020		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
Home equity installment
Payment performance
Performing	$	1,416	$	8,372	$	17,214	$	9,081	$	7,501	$	11,963	$	-	$	-	$	55,547
Non-performing		-		-		-		-		-		79		-		-		79
Total home equity installment	$	1,416	$	8,372	$	17,214	$	9,081	$	7,501	$	12,042	$	-	$	-	$	55,626
Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Home equity line of credit
Payment performance
Performing	$	-	$	-	$	-	$	-	$	-	$	-	$	41,497	$	10,701	$	52,198
Non-performing		-		-		-		-		-		-		366		-		366
Total home equity line of credit	$	-	$	-	$	-	$	-	$	-	$	-	$	41,863	$	10,701	$	52,564
Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Auto loans - recourse
Payment performance
Performing	$	1,236	$	3,029	$	1,779	$	2,540	$	1,678	$	718	$	-	$	-	$	10,980
Non-performing		-		-		-		-		-		-		-		-		-
Total auto loans - recourse	$	1,236	$	3,029	$	1,779	$	2,540	$	1,678	$	718	$	-	$	-	$	10,980
Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Auto loans - non-recourse
Payment performance
Performing	$	1,375	$	36,683	$	38,441	$	15,457	$	6,823	$	3,808	$	-	$	-	$	102,587
Non-performing		-		-		12		4		-		19		-		-		35
Total auto loans - non-recourse	$	1,375	$	36,683	$	38,453	$	15,461	$	6,823	$	3,827	$	-	$	-	$	102,622
Current period gross write-offs	$	-	$	15	$	29	$	6	$	3	$	-	$	-	$	-	$	53

Direct finance leases ⁽¹⁾
Payment performance
Performing	$	2,852	$	10,252	$	9,776	$	6,568	$	935	$	70	$	-	$	-	$	30,453
Non-performing		-		-		-		12		-		-		-		-		12
Total direct finance leases	$	2,852	$	10,252	$	9,776	$	6,580	$	935	$	70	$	-	$	-	$	30,465
Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Consumer - other
Payment performance
Performing	$	1,422	$	7,244	$	2,767	$	1,770	$	592	$	898	$	1,328	$	-	$	16,021
Non-performing		-		-		24		-		-		-		-		-		24
Total consumer - other	$	1,422	$	7,244	$	2,791	$	1,770	$	592	$	898	$	1,328	$	-	$	16,045
Current period gross write-offs	$	1	$	15	$	10	$	10	$	2	$	16	$	-	$	-	$	54

Residential real estate
Payment performance
Performing	$	9,706	$	52,897	$	84,935	$	139,372	$	51,022	$	137,342	$	-	$	-	$	475,274
Non-performing		-		-		-		-		-		438		-		-		438
Total residential real estate	$	9,706	$	52,897	$	84,935	$	139,372	$	51,022	$	137,780	$	-	$	-	$	475,712
Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Residential - construction
Payment performance
Performing	$	2,212	$	12,642	$	8,601	$	6,420	$	2,665	$	634	$	-	$	-	$	33,174
Non-performing		-		-		-		-		-		-		-		-		-
Total residential - construction	$	2,212	$	12,642	$	8,601	$	6,420	$	2,665	$	634	$	-	$	-	$	33,174
Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

⁽¹⁾Net of unearned lease revenue of $2.1 million.

Commercial credit exposure

Credit risk profile by creditworthiness category

As of December 31, 2023

(dollars in thousands)

December 31, 2023	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
Commercial and industrial
Risk Rating
Pass	$	30,328	$	19,115		22,820		4,848		6,922		12,156		53,758	$	-	$	149,947
Special Mention		-		597		288		-		-		55		30		-		970
Substandard		-		-		16		20		53		324		1,310		-		1,723
Doubtful		-		-		-		-		-		-		-		-		-
Total commercial and industrial	$	30,328	$	19,712	$	23,124	$	4,868	$	6,975	$	12,535	$	55,098	$	-	$	152,640
Current period gross write-offs	$	-	$	-	$	300	$	20	$	-	$	-	$	-	$	-	$	320

Commercial and industrial - municipal
Risk Rating
Pass	$	27,016	$	13,933	$	21,241	$	13,137	$	1,445	$	17,952	$	-	$	-	$	94,724
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total commercial and industrial - municipal	$	27,016	$	13,933	$	21,241	$	13,137	$	1,445	$	17,952	$	-	$	-	$	94,724
Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Commercial real estate - non-owner occupied
Risk Rating
Pass	$	34,103	$	37,508		71,209		42,692		17,390		89,860	$	6,779	$	-	$	299,541
Special Mention		-		-		1,044		304		-		1,375		-		-		2,723
Substandard		-		65		1,063		129		566		7,478		-		-		9,301
Doubtful		-		-		-		-		-		-		-		-		-
Total commercial real estate - non-owner occupied	$	34,103	$	37,573	$	73,316	$	43,125	$	17,956	$	98,713	$	6,779	$	-	$	311,565
Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	32	$	-	$	-	$	32

Commercial real estate - owner occupied
Risk Rating
Pass	$	29,429		59,132		47,240		29,377		24,636		84,423		9,731	$	-	$	283,968
Special Mention		-		199		554		-		-		-		125		-		878
Substandard				7,029		379		560		-		10,991		594		-		19,553
Doubtful		-		-		-		-		-		-		-		-		-
Total commercial real estate - owner occupied	$	29,429	$	66,360	$	48,173	$	29,937	$	24,636	$	95,414	$	10,450	$	-	$	304,399
Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	59	$	-	$	-	$	59

Commercial real estate - construction
Risk Rating
Pass	$	15,075	$	17,358	$	852	$	-	$	-	$	3,739	$	2,799	$	-	$	39,823
Special Mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total commercial real estate - construction	$	15,075	$	17,358	$	852	$	-	$	-	$	3,739	$	2,799	$	-	$	39,823
Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Consumer & Mortgage lending credit exposure

Credit risk profile based on payment activity

As of December 31, 2023

(dollars in thousands)

December 31, 2023	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
Home equity installment
Payment performance
Performing	$	8,581	$	17,890	$	9,487	$	7,988	$	3,832	$	8,792	$	-	$	-	$	56,570
Non-performing		-		-		-		-		-		70		-		-		70
Total home equity installment	$	8,581	$	17,890	$	9,487	$	7,988	$	3,832	$	8,862	$	-	$	-	$	56,640
Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	26	$	-	$	-	$	26

Home equity line of credit
Payment performance
Performing	$	-	$	-	$	-	$	-	$	-	$	-	$	40,939	$	11,045	$	51,984
Non-performing		-		-		-		-		-		-		364		-		364
Total home equity line of credit	$	-	$	-	$	-	$	-	$	-	$	-	$	41,303	$	11,045	$	52,348
Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Auto loans - recourse
Payment performance
Performing	$	3,120	$	1,957	$	2,834	$	1,926	$	765	$	154	$	-	$	-	$	10,756
Non-performing		-		-		-		-		-		-		-		-		-
Total auto loans - recourse	$	3,120	$	1,957	$	2,834	$	1,926	$	765	$	154	$	-	$	-	$	10,756
Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Auto loans - non-recourse
Payment performance
Performing	$	39,673	$	42,059	$	17,314	$	8,162	$	3,999	$	1,349	$	-	$	-	$	112,556
Non-performing		-		-		3		17		-		19		-		-		39
Total auto loans - non-recourse	$	39,673	$	42,059	$	17,317	$	8,179	$	3,999	$	1,368	$	-	$	-	$	112,595
Current period gross write-offs	$	3	$	7	$	105	$	36	$	15	$	-	$	-	$	-	$	166

Direct finance leases⁽¹⁾
Payment performance
Performing	$	11,569	$	10,728	$	7,508	$	1,660	$	83	$	-	$	-	$	-	$	31,548
Non-performing		-		-		14		-		-		-		-		-		14
Total direct finance leases	$	11,569	$	10,728	$	7,522	$	1,660	$	83	$	-	$	-	$	-	$	31,562
Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Consumer - other
Payment performance
Performing	$	8,127	$	3,266	$	1,963	$	705	$	368	$	762	$	1,309	$	-	$	16,500
Non-performing		-		-		-		-		-		-		-		-		-
Total consumer - other	$	8,127	$	3,266	$	1,963	$	705	$	368	$	762	$	1,309	$	-	$	16,500
Current period gross write-offs	$	125	$	77	$	16	$	7	$	17	$	29	$	-	$	-	$	271

Residential real estate
Payment performance
Performing	$	53,604	$	80,516	$	137,620	$	51,710	$	29,859	$	111,423	$	-	$	-	$	464,732
Non-performing		-		-		-		-		-		278		-		-		278
Total residential real estate	$	53,604	$	80,516	$	137,620	$	51,710	$	29,859	$	111,701	$	-	$	-	$	465,010
Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

Residential - construction
Payment performance
Performing	$	10,733	$	13,084	$	9,267	$	2,675	$	343	$	434	$	-	$	-	$	36,536
Non-performing		-		-		-		-		-		-		-		-		-
Total residential - construction	$	10,733	$	13,084	$	9,267	$	2,675	$	343	$	434	$	-	$	-	$	36,536
Current period gross write-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	-

⁽²⁾ Net of unearned lease revenue of $2.0 million.

Collateral dependent loans

Loans that do not share risk characteristics are evaluated on an individual basis. For loans that are individually evaluated and foreclosure of the collateral is probable, or where the borrower is experiencing financial difficulty and repayment of the financial asset is expected to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the asset as of the measurement date. The following table presents the individually evaluated, collateral dependent loans as of March 31, 2024 and December 31, 2023:

(dollars in thousands)	Real Estate		Other		Total Collateral-Dependent Loans
At March 31, 2024
Commercial and industrial:
Commercial	$	-	$	55	$	55
Commercial real estate:
Non-owner occupied		525		-		525
Owner occupied		2,035		-		2,035
Consumer:
Home equity installment		79		-		79
Home equity line of credit		366		-		366
Auto loans - Non-recourse		-		35		35
Other		24		-		24
Residential:
Real estate		438		-		438
Total	$	3,467	$	90	$	3,557

(dollars in thousands)	Real Estate		Other		Total Collateral-Dependent Loans
At December 31, 2023
Commercial and industrial:
Commercial	$	-	$	55	$	55
Commercial real estate:
Non-owner occupied		252		-		252
Owner occupied		2,250		-		2,250
Consumer:
Home equity installment		70		-		70
Home equity line of credit		364		-		364
Auto loans - Non-recourse		-		39		39
Residential:
Real estate		278		-		278
Total	$	3,214	$	94	$	3,308

Allowance for credit losses

Management continually evaluates the credit quality of the Company’s loan portfolio and performs a formal review of the adequacy of the allowance for credit losses (ACL) on a quarterly basis. The allowance reflects management’s best estimate of the amount of credit losses in the loan portfolio.

Information related to the change in the allowance for credit losses on loans and the Company’s recorded investment in loans by portfolio segment as of the period indicated is as follows:

As of and for the three months ended March 31, 2024
	Commercial &			Commercial						Residential
(dollars in thousands)	industrial			real estate			Consumer			real estate		Unallocated		Total
Allowance for Credit Losses:
Beginning balance	$	1,850		$	8,835		$	2,391		$	5,694	$	36	$	18,806
Charge-offs		(114	)		(5	)		(107	)		-		-		(226	)
Recoveries		2			155			22			2		-		181
Provision (benefit) for credit losses		166			(161	)		(43	)		150		13		125
Ending balance	$	1,904		$	8,824		$	2,263		$	5,846	$	49	$	18,886

As of and for the three months ended March 31, 2023
	Commercial &			Commercial						Residential
(dollars in thousands)	industrial			real estate			Consumer			real estate		Unallocated			Total
Allowance for Credit Losses:
Beginning balance	$	2,924		$	7,162		$	2,827		$	4,169	$	67		$	17,149
Impact of adopting ASC 326		278			756			(547	)		198		(67	)		618
Initial allowance on loans purchased with credit deterioration		-			126			-			-		-			126
Charge-offs		(170	)		(32	)		(101	)		-		-			(303	)
Recoveries		20			39			72			9		-			140
Provision (benefit) for loan losses		(502	)		106			197			307		72			180
Ending balance	$	2,550		$	8,157		$	2,448		$	4,683	$	72		$	17,910

Unfunded commitments

In accordance with ASC Topic 326, the Company estimates expected credit losses for off-balance-sheet credit exposures over the contractual period during which the Company is exposed to credit risk. The estimate of expected credit losses takes into consideration the likelihood that funding will occur (i.e., funding rate) as well as the amount expected to be collected over the estimated remaining contractual term of the off-balance-sheet credit exposures (i.e., loss rate). The Company does not record an estimate of expected credit losses for off-balance-sheet exposures that are unconditionally cancellable. On a quarterly basis, Management evaluates expected credit losses for off-balance-sheet credit exposures.

The Company's allowance for credit losses on unfunded commitments is recognized as a liability on the consolidated balance sheets, with adjustments to the reserve recognized in the provision for credit losses on unfunded commitments on the consolidated statements of income. The Company's activity in the allowance for credit losses on unfunded commitments for the period was as follows:

(dollars in thousands)	For the Three Months Ended March 31, 2024			For the Three Months Ended March 31, 2023
Beginning balance	$	944		$	49
Impact of adopting ASC 326		-			1,060
Provision (benefit) for credit losses		(50	)		225
Ending balance	$	894		$	1,334

Direct finance leases

The Company originates direct finance leases through three automobile dealerships. The amortized cost of the Company’s lease receivables, net of unearned income, was $5.8 million and $6.1 million as of March 31, 2024 and December 31, 2023, respectively. The residual value of the direct finance leases is fully guaranteed by the dealerships. Residual values amounted to $24.2 million and $25.1 million at March 31, 2024 and December 31, 2023, respectively, and are included in the amortized cost of direct finance leases. As of March 31, 2024, there was also $478 thousand in deferred lease expense included in the carrying value of direct finance leases that is not included in the table below.

The undiscounted cash flows to be received on an annual basis for the direct finance leases are as follows:

(dollars in thousands)	Amount

2024	$	10,128
2025		13,162
2026		6,410
2027		2,271
2028		95
2029 and thereafter		-
Total future minimum lease payments receivable		32,066
Less: Unearned income		(2,079	)
Undiscounted cash flows to be received	$	29,987