Allowance for Credit Losses

6 Months Ended

Jun. 30, 2023

Allowance for Credit Losses

Allowance for Credit Losses

3.    Allowance for Credit Losses

The following table presents the activity of the allowance for credit losses by portfolio segment for the three months ended June 30.

Allowance for Credit Losses:			June 30, 2023
(Dollar amounts in thousands)	Commercial		Residential		Consumer		Unallocated		Total
Beginning balance	$	12,790	$	15,059	$	11,513	$	258	$	39,620
Provision for credit losses		(377)		166		1,733		278		1,800
Loans charged-off		(209)		(63)		(3,271)		—		(3,543)
Recoveries		246		106		1,678		—		2,030
Ending Balance	$	12,450	$	15,268	$	11,653	$	536	$	39,907

Allowance for Credit Losses:			June 30, 2022
(Dollar amounts in thousands)	Commercial		Residential		Consumer		Unallocated		Total
Beginning balance	$	17,300	$	13,235	$	9,662	$	319	$	40,516
Provision for credit losses		(1,392)		895		1,319		(72)		750
Loans charged-off		(370)		(56)		(1,985)		—		(2,411)
Recoveries		931		94		1,588		—		2,613
Ending Balance	$	16,469	$	14,168	$	10,584	$	247	$	41,468

The following table presents the activity of the allowance for credit losses by portfolio segment for the six months ended June 30.

Allowance for Credit Losses:			June 30, 2023
(Dollar amounts in thousands)	Commercial		Residential		Consumer		Unallocated		Total
Beginning balance	$	12,949	$	14,568	$	12,104	$	158	$	39,779
Provision for credit losses		(431)		666		2,987		378		3,600
Loans charged -off		(515)		(142)		(7,262)		—		(7,919)
Recoveries		447		176		3,824		—		4,447
Ending Balance	$	12,450	$	15,268	$	11,653	$	536	$	39,907

Allowance for Credit Losses:			June 30, 2022
(Dollar amounts in thousands)	Commercial		Residential		Consumer		Unallocated		Total
Beginning balance	$	18,883	$	18,316	$	10,721	$	385	$	48,305
Provision for credit losses		(2,432)		(4,249)		1,019		(138)		(5,800)
Loans charged -off		(1,253)		(522)		(3,890)		—		(5,665)
Recoveries		1,271		623		2,734		—		4,628
Ending Balance	$	16,469	$	14,168	$	10,584	$	247	$	41,468

The tables below present the recorded investment in non-performing loans by class of loans.

	June 30, 2023
	Loans Past				Nonaccrual
	Due Over				With No
	90 Days Still				Allowance
(Dollar amounts in thousands)	Accruing		Nonaccrual		For Credit Loss
Commercial
Commercial & Industrial	$	—	$	1,536	$	933
Farmland		—		2,070		1,662
Non Farm, Non Residential		—		1,641		1,530
Agriculture		—		1,242		1,208
All Other Commercial		—		22		—
Residential
First Liens		454		998		—
Home Equity		106		72		—
Junior Liens		140		218		—
Multifamily		—		1,430		1,250
All Other Residential		—		449		—
Consumer
Motor Vehicle		—		2,602		—
All Other Consumer		—		336		—
TOTAL	$	700	$	12,616	$	6,583

	December 31, 2022
	Loans Past				Nonaccrual
	Due Over				With No
	90 Days Still				Allowance
(Dollar amounts in thousands)	Accruing		Nonaccrual		For Credit Loss
Commercial
Commercial & Industrial	$	114	$	2,137	$	254
Farmland		—		461		—
Non Farm, Non Residential		—		2,064		2,052
Agriculture		—		186		155
All Other Commercial		—		26		—
Residential
First Liens		666		1,380		—
Home Equity		180		133		—
Junior Liens		197		256		—
Multifamily		—		1,468		—
All Other Residential		—		478		—
Consumer
Motor Vehicle		—		2,549		—
All Other Consumer		—		416		—
TOTAL	$	1,157	$	11,554	$	2,461

The following tables present the amortized cost basis of collateral dependent loans by class of loans:

	June 30, 2023
	Collateral Type
(Dollar amounts in thousands)	Real Estate		Other
Commercial
Commercial & Industrial	$	3,890	$	—
Farmland		2,435		—
Non Farm, Non Residential		4,519		—
Agriculture		68		1,140
All Other Commercial		—		—
Residential
First Liens		—		—
Home Equity		—		—
Junior Liens		—		—
Multifamily		1,250		—
All Other Residential		—		—
Consumer
Motor Vehicle		—		—
All Other Consumer		—		—
Total	$	12,162	$	1,140

	December 31, 2022
	Collateral Type
(Dollar amounts in thousands)	Real Estate		Other
Commercial
Commercial & Industrial	$	4,613	$	1
Farmland		3,289		—
Non Farm, Non Residential		5,123		—
Agriculture		—		155
All Other Commercial		—		—
Residential
First Liens		—		—
Home Equity		—		—
Junior Liens		—		—
Multifamily		895		—
All Other Residential		—		—
Consumer
Motor Vehicle		—		—
All Other Consumer		—		—
Total	$	13,920	$	156

The following tables presents the aging of the recorded investment in loans by past due category and class of loans.

	June 30, 2023
					90 Days
	30-59 Days		60-89 Days		and Greater		Total
(Dollar amounts in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Total
Commercial
Commercial & Industrial	$	1,309	$	128	$	1,163	$	2,600	$	656,982	$	659,582
Farmland		363		—		1,975		2,338		129,998		132,336
Non Farm, Non Residential		1,292		—		100		1,392		406,706		408,098
Agriculture		194		21		1,140		1,355		113,510		114,865
All Other Commercial		—		41		—		41		507,301		507,342
Residential
First Liens		652		881		638		2,171		355,819		357,990
Home Equity		172		133		145		450		63,192		63,642
Junior Liens		312		41		282		635		57,158		57,793
Multifamily		146		—		1,250		1,396		185,230		186,626
All Other Residential		—		—		—		—		25,266		25,266
Consumer
Motor Vehicle		10,222		1,614		584		12,420		582,729		595,149
All Other Consumer		244		47		6		297		32,476		32,773
TOTAL	$	14,906	$	2,906	$	7,283	$	25,095	$	3,116,367	$	3,141,462

	December 31, 2022
					90 Days
	30-59 Days		60-89 Days		and Greater		Total
(Dollar amounts in thousands)	Past Due		Past Due		Past Due		Past Due		Current		Total
Commercial
Commercial & Industrial	$	1,698	$	529	$	726	$	2,953	$	674,569	$	677,522
Farmland		112		—		—		112		127,498		127,610
Non Farm, Non Residential		274		34		—		308		387,108		387,416
Agriculture		—		1,231		—		1,231		136,451		137,682
All Other Commercial		333		—		14		347		478,095		478,442
Residential
First Liens		4,528		1,203		1,054		6,785		341,131		347,916
Home Equity		305		144		276		725		63,615		64,340
Junior Liens		213		69		327		609		56,367		56,976
Multifamily		317		83		—		400		180,305		180,705
All Other Residential		1,115		350		—		1,465		24,058		25,523
Consumer
Motor Vehicle		15,151		1,930		985		18,066		539,651		557,717
All Other Consumer		341		56		15		412		32,967		33,379
TOTAL	$	24,387	$	5,629	$	3,397	$	33,413	$	3,041,815	$	3,075,228

Loan Modifications Made to Borrowers Experiencing Financial Difficulty:

Modification of the terms of such loans typically include one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan. No modification in 2023 or 2022 resulted in the permanent reduction of the recorded investment in the loan.

During the six months ended June 30, 2023, the Corporation had no modified loans made to borrowers experiencing financial difficulty. There were no modified loans that had a payment default during the six months ended June 30, 2023 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty.A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms.

Credit Quality Indicators:

The Corporation categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Corporation analyzes loans individually by classifying the loans as to credit risk. This analysis includes non-homogeneous loans, such as commercial loans, with an outstanding balance greater than $100 thousand. Any consumer loans outstanding to a borrower who had commercial loans analyzed will be similarly risk rated. This analysis is performed on a quarterly basis. The Corporation uses the following definitions for risk ratings:

Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard: Loans classified as substandard are inadequately protected by the current net worth and debt service capacity of the borrower or of any pledged collateral. These loans have a well-defined weakness or weaknesses which have clearly jeopardized repayment of principal and interest as originally intended. They are characterized by the distinct possibility that the institution will sustain some future loss if the deficiencies are not corrected.

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those graded substandard, with the added characteristic that the severity of the weaknesses makes collection or liquidation in full highly questionable or improbable based upon currently existing facts, conditions, and values.

Furthermore, non-homogeneous loans which were not individually analyzed, but are 90+ days past due or on non-accrual are classified as substandard. Loans included in homogeneous pools, such as residential or consumer may be classified as substandard due to 90+ days delinquency, non-accrual status, bankruptcy, or loan restructuring.

The following tables present the commercial loan portfolio by risk category:

		June 30, 2023
		Term Loans at Amortized Cost Basis by Origination Year												Revolving
		2023		2022		2021		2020		2019		Prior		Loans		Total
Commercial
Commercial and Industrial	Pass	$	42,227	$	144,886	$	119,578	$	43,911	$	51,395	$	110,920	$	99,856	$	612,773
	Special Mention		58		69		10,483		3,219		2,542		2,751		144	$	19,266
	Substandard		3,296		252		731		1,087		961		8,515		5,977	$	20,819
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		699		1,533		1,167		621		303		138		—	$	4,461
	Subtotal	$	46,280	$	146,740	$	131,959	$	48,838	$	55,201	$	122,324	$	105,977	$	657,319
	Current period gross charge-offs	$	8	$	20	$	39	$	69	$	-	$	-	$	-	$	136
Farmland	Pass	$	14,598	$	16,549	$	21,454	$	8,518	$	9,269	$	54,810	$	200	$	125,398
	Special Mention		—		—		—		—		313		1,373		—	$	1,686
	Substandard		—		—		—		456		608		2,144		—	$	3,208
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		—		—		—		—		—		17		—	$	17
	Subtotal	$	14,598	$	16,549	$	21,454	$	8,974	$	10,190	$	58,344	$	200	$	130,309
	Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	—
Non Farm, Non Residential	Pass	$	38,087	$	115,365	$	71,005	$	26,599	$	21,963	$	121,235	$	3,613	$	397,867
	Special Mention		—		92		1,015		—		863		1		—	$	1,971
	Substandard		597		—		—		—		528		5,356		—	$	6,481
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		—		—		—		687		—		85		—	$	772
	Subtotal	$	38,684	$	115,457	$	72,020	$	27,286	$	23,354	$	126,677	$	3,613	$	407,091
	Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	—
Agriculture	Pass	$	6,297	$	11,900	$	7,810	$	6,567	$	7,709	$	18,395	$	49,793	$	108,471
	Special Mention		—		107		—		8		3		700		1,916	$	2,734
	Substandard		—		—		—		—		69		1,179		211	$	1,459
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		68		59		35		55		31		1		—	$	249
	Subtotal	$	6,365	$	12,066	$	7,845	$	6,630	$	7,812	$	20,275	$	51,920	$	112,913
	Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	—
Other Commercial	Pass	$	19,209	$	150,139	$	94,461	$	94,799	$	14,423	$	106,116	$	9,592	$	488,739
	Special Mention		—		21		—		2,555		7		11,718		—	$	14,301
	Substandard		—		—		19		—		849		5		—	$	873
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		—		14		—		—		—		476		—	$	490
	Subtotal	$	19,209	$	150,174	$	94,480	$	97,354	$	15,279	$	118,315	$	9,592	$	504,403
	Current period gross charge-offs	$	379	$	-	$	-	$	-	$	-	$	-	$	-	$	379
Residential
Multifamily >5 Residential	Pass	$	8,132	$	58,632	$	31,343	$	42,385	$	6,517	$	28,843	$	90	$	175,942
	Special Mention		—		—		—		365		—		6,664		361	$	7,390
	Substandard		—		—		—		—		—		1,250		—	$	1,250
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		—		—		1,112		—		—		257		—	$	1,369
	Subtotal	$	8,132	$	58,632	$	32,455	$	42,750	$	6,517	$	37,014	$	451	$	185,951
	Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	—
Total	Pass	$	128,550	$	497,471	$	345,651	$	222,779	$	111,276	$	440,319	$	163,144	$	1,909,190
	Special Mention		58		289		11,498		6,147		3,728		23,207		2,421	$	47,348
	Substandard		3,893		252		750		1,543		3,015		18,449		6,188	$	34,090
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		767		1,606		2,314		1,363		334		974		—	$	7,358
		$	133,268	$	499,618	$	360,213	$	231,832	$	118,353	$	482,949	$	171,753	$	1,997,986

		December 31, 2022
		Term Loans at Amortized Cost Basis by Origination Year												Revolving
		2022		2021		2020		2019		2018		Prior		Loans		Total
Commercial
Commercial and Industrial	Pass	$	163,479	$	128,012	$	56,830	$	54,208	$	26,514	$	99,522	$	92,110	$	620,675
	Special Mention		2,071		9,738		3,434		2,572		2,061		1,848		453	$	22,177
	Substandard		423		723		1,861		954		3,169		6,264		9,103	$	22,497
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		7,041		1,408		822		469		149		85		—	$	9,974
	Subtotal	$	173,014	$	139,881	$	62,947	$	58,203	$	31,893	$	107,719	$	101,666	$	675,323
Farmland	Pass	$	16,261	$	22,530	$	9,244	$	9,438	$	10,352	$	48,847	$	340	$	117,012
	Special Mention		—		—		1,164		882		—		2,930		—	$	4,976
	Substandard		—		—		456		608		337		1,969		—	$	3,370
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		—		—		—		—		—		17		—	$	17
	Subtotal	$	16,261	$	22,530	$	10,864	$	10,928	$	10,689	$	53,763	$	340	$	125,375
Non Farm, Non Residential	Pass	$	102,629	$	75,011	$	33,214	$	19,596	$	31,438	$	111,586	$	2,975	$	376,449
	Special Mention		99		1,035		—		921		—		279		—	$	2,334
	Substandard		—		—		—		513		—		6,281		—	$	6,794
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		—		—		696		—		—		269		—	$	965
	Subtotal	$	102,728	$	76,046	$	33,910	$	21,030	$	31,438	$	118,415	$	2,975	$	386,542
Agriculture	Pass	$	13,085	$	9,028	$	8,015	$	8,422	$	1,987	$	26,729	$	62,397	$	129,663
	Special Mention		89		—		10		3		—		709		2,519	$	3,330
	Substandard		—		—		—		224		1,201		56		762	$	2,243
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		71		39		68		61		25		—		—	$	264
	Subtotal	$	13,245	$	9,067	$	8,093	$	8,710	$	3,213	$	27,494	$	65,678	$	135,500
Other Commercial	Pass	$	143,941	$	91,615	$	90,845	$	19,259	$	29,143	$	82,535	$	5,602	$	462,940
	Special Mention		23		—		—		10		—		11,911		—	$	11,944
	Substandard		—		23		—		—		—		6		—	$	29
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		16		82		—		—		29		480		—	$	607
	Subtotal	$	143,980	$	91,720	$	90,845	$	19,269	$	29,172	$	94,932	$	5,602	$	475,520
Residential
Multifamily >5 Residential	Pass	$	50,424	$	33,415	$	46,740	$	6,734	$	4,969	$	27,353	$	96	$	169,731
	Special Mention		—		533		372		—		—		6,795		—	$	7,700
	Substandard		—		—		—		—		—		1,280		—	$	1,280
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		—		1,124		—		—		—		263		—	$	1,387
	Subtotal	$	50,424	$	35,072	$	47,112	$	6,734	$	4,969	$	35,691	$	96	$	180,098
Total	Pass	$	489,819	$	359,611	$	244,888	$	117,657	$	104,403	$	396,572	$	163,520	$	1,876,470
	Special Mention		2,282		11,306		4,980		4,388		2,061		24,472		2,972	$	52,461
	Substandard		423		746		2,317		2,299		4,707		15,856		9,865	$	36,213
	Doubtful		—		—		—		—		—		—		—	$	—
	Not Rated		7,128		2,653		1,586		530		203		1,114		—	$	13,214
		$	499,652	$	374,316	$	253,771	$	124,874	$	111,374	$	438,014	$	176,357	$	1,978,358

The Corporation evaluates the credit quality of its other loan portfolios, which includes residential real estate, consumer and lease financing loans, based primarily on the aging status of the loan and payment activity. Accordingly, loans on non-accrual status and loans past due 90 days or more and still accruing interest are considered to be nonperforming for purposes of credit quality evaluation. The following table presents the balance of our other loan portfolio based on the credit risk profile of loans that are performing and loans that are nonperforming:

		June 30, 2023
		Term Loans at Amortized Cost Basis by Origination Year												Revolving
		2023		2022		2021		2020		2019		Prior		Loans		Total
Residential
First Liens	Performing	$	22,550	$	76,215	$	68,330	$	42,893	$	16,503	$	127,413	$	1,525	$	355,429
	Non-performing		—		26		—		—		44		1,474		—	$	1,544
	Subtotal	$	22,550	$	76,241	$	68,330	$	42,893	$	16,547	$	128,887	$	1,525	$	356,973
	Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	142	$	-	$	142
Home Equity	Performing	$	62	$	398	$	—	$	8	$	133	$	920	$	61,755	$	63,276
	Non-performing		—		26		—		19		—		72		58	$	175
	Subtotal	$	62	$	424	$	—	$	27	$	133	$	992	$	61,813	$	63,451
	Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	—
Junior Liens	Performing	$	7,541	$	18,253	$	9,263	$	6,451	$	5,049	$	9,838	$	899	$	57,294
	Non-performing		—		—		8		106		65		180		—	$	359
	Subtotal	$	7,541	$	18,253	$	9,271	$	6,557	$	5,114	$	10,018	$	899	$	57,653
	Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	—
Other Residential	Performing	$	2,987	$	11,662	$	7,183	$	440	$	736	$	1,580	$	133	$	24,721
	Non-performing		—		—		—		—		403		47		—	$	450
	Subtotal	$	2,987	$	11,662	$	7,183	$	440	$	1,139	$	1,627	$	133	$	25,171
	Current period gross charge-offs	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	—
Consumer
Motor Vehicle	Performing	$	148,410	$	260,415	$	92,262	$	64,929	$	19,388	$	5,185	$	—	$	590,589
	Non-performing		54		916		526		478		174		57		—	$	2,205
	Subtotal	$	148,464	$	261,331	$	92,788	$	65,407	$	19,562	$	5,242	$	—	$	592,794
	Current period gross charge-offs	$	56	$	3,861	$	1,931	$	855	$	277	$	144	$	-	$	7,124
Other Consumer	Performing	$	7,572	$	9,755	$	5,477	$	2,887	$	985	$	870	$	4,753	$	32,299
	Non-performing		4		25		202		68		26		12		12	$	349
	Subtotal	$	7,576	$	9,780	$	5,679	$	2,955	$	1,011	$	882	$	4,765	$	32,648
	Current period gross charge-offs	$	-	$	38	$	30	$	11	$	-	$	-	$	59	$	138
Total	Performing	$	189,122	$	376,698	$	182,515	$	117,608	$	42,794	$	145,806	$	69,065	$	1,123,608
	Non-performing		58		993		736		671		712		1,842		70	$	5,082
Total other loans		$	189,180	$	377,691	$	183,251	$	118,279	$	43,506	$	147,648	$	69,135	$	1,128,690

		December 31, 2022
		Term Loans at Amortized Cost Basis by Origination Year												Revolving
		2022		2021		2020		2019		2018		Prior		Loans		Total
Residential
First Liens	Performing	$	71,607	$	70,197	$	45,080	$	16,968	$	20,258	$	117,488	$	3,245	$	344,843
	Non-performing		106		—		—		141		100		1,782		—	$	2,129
	Subtotal	$	71,713	$	70,197	$	45,080	$	17,109	$	20,358	$	119,270	$	3,245	$	346,972
Home Equity	Performing	$	1,995	$	943	$	8	$	115	$	55	$	820	$	59,875	$	63,811
	Non-performing		—		—		78		—		14		40		176	$	308
	Subtotal	$	1,995	$	943	$	86	$	115	$	69	$	860	$	60,051	$	64,119
Junior Liens	Performing	$	19,074	$	10,485	$	7,507	$	5,830	$	5,366	$	6,195	$	1,928	$	56,385
	Non-performing		—		4		77		90		139		141		—	$	451
	Subtotal	$	19,074	$	10,489	$	7,584	$	5,920	$	5,505	$	6,336	$	1,928	$	56,836
Other Residential	Performing	$	11,542	$	9,923	$	501	$	915	$	498	$	1,582	$	—	$	24,961
	Non-performing		—		—		—		425		35		18		—	$	478
	Subtotal	$	11,542	$	9,923	$	501	$	1,340	$	533	$	1,600	$	—	$	25,439
Consumer
Motor Vehicle	Performing	$	306,565	$	118,362	$	88,144	$	29,004	$	8,652	$	2,230	$	6	$	552,963
	Non-performing		813		739		437		237		66		47		—	$	2,339
	Subtotal	$	307,378	$	119,101	$	88,581	$	29,241	$	8,718	$	2,277	$	6	$	555,302
Other Consumer	Performing	$	13,426	$	7,914	$	4,109	$	1,302	$	429	$	819	$	4,819	$	32,818
	Non-performing		18		247		89		39		12		12		2	$	419
	Subtotal	$	13,444	$	8,161	$	4,198	$	1,341	$	441	$	831	$	4,821	$	33,237
Total	Performing	$	424,209	$	217,824	$	145,349	$	54,134	$	35,258	$	129,134	$	69,873	$	1,075,781
	Non-performing		937		990		681		932		366		2,040		178	$	6,124
Total other loans		$	425,146	$	218,814	$	146,030	$	55,066	$	35,624	$	131,174	$	70,051	$	1,081,905