
	Three Months Ended March 31, 2022
(In thousands)	Beginning Balance		Initial Allowance on PCD Loans Acquired During the Period		Provision for Credit Losses		Charge- Offs		Recoveries		TDR Allowance Adjustments		Ending Balance
Construction and land development	$	2,751	$	—	$	(493)	$	—	$	10	$	—	$	2,268
Commercial real estate - owner-occupied	8,579		—		715		—		—		—		9,294
Commercial real estate - non owner-occupied	36,617		31		7,274		—		—		—		43,922
Residential real estate	12,811		17		1,060		(1)		191		(3)		14,075
Commercial and financial	19,744		3		(1,628)		(569)		177		—		17,727
Consumer	2,813		—		(372)		(95)		208		(2)		2,552
Paycheck Protection Program	—		—		—		—		—		—		—
Totals	$	83,315	$	51	$	6,556	$	(665)	$	586	$	(5)	$	89,838


	Three Months Ended March 31, 2021
(In thousands)	Beginning Balance		Provision for Credit Losses		Charge- Offs		Recoveries		TDR Allowance Adjustments		Ending Balance
Construction and land development	$	4,920	$	(510)	$	—	$	18	$	—	$	4,428
Commercial real estate - owner occupied	9,868		(76)		—		—		—		9,792
Commercial real estate - non-owner occupied	38,266		(2,038)		—		1		—		36,229
Residential real estate	17,500		(3,372)		—		229		(4)		14,353
Commercial and financial	18,690		775		(756)		207		—		18,916
Consumer	3,489		(494)		(185)		116		(1)		2,925

Paycheck Protection Program	—		—		—		—		—		—
Totals	$	92,733	$	(5,715)	$	(941)	$	571	$	(5)	$	86,643

Management establishes the allowance using relevant available information from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts to project losses over a three-year forecast period. Forecast data is sourced primarily from Moody’s Analytics (“Moody’s”), a firm widely recognized for its research, analysis, and economic forecasts. For portfolio segments with a weighted average life longer than three years, the Company reverts to longer-term historical loss experience to estimate losses over the remaining life of the loans within each segment.

Historical credit losses provide the basis for the estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, loan to value ratios, borrower credit characteristics, loan seasoning or term as well as for changes in current and forecasted environmental conditions, such as changes in unemployment rates, property values, occupancy rates, and other macroeconomic metrics.

As of March 31, 2022, the Company utilized Moody’s most recent “U.S. Macroeconomic Outlook Baseline” scenario and considered the uncertainty associated with the assumptions in the Baseline scenario, including actions taken by the Federal Reserve with regard to monetary policy and interest rates and the potential impact of those actions, the Russian invasion of Ukraine and the magnitude of the resulting market disruption, and the potential impact of persistent high inflation on economic growth. Outcomes in any or all of these factors could differ from the Baseline scenario, and the Company incorporated qualitative considerations reflecting the risk of uncertain economic conditions, and for additional dimensions of risk not captured in the quantitative model.

In the Construction and Land Development segment, the decrease in reserves reflects continuing low historical loss rates for this segment and improved economic variables relating to residential real estate. In this segment, the primary source of repayment is typically from proceeds of the sale, refinancing, or permanent financing of the underlying property; therefore, industry and collateral type and estimated collateral values are among the relevant factors in assessing expected losses.

In the Commercial Real Estate - Owner-Occupied segment, increases in the allowance correspond with the increase in loan balances during the quarter. Risk characteristics include but are not limited to, collateral type, loan seasoning, and lien position.

In the Commercial Real Estate - Non Owner-Occupied segment, the increase in reserves reflects the increase in loan balances and changes in economic forecast variables including unemployment. Repayment is often dependent upon rental income from the successful operation of the underlying property. Loan performance may be adversely affected by general economic conditions or conditions specific to the real estate market, including property types. Collateral type, loan seasoning, and lien position are among the risk characteristics analyzed for this segment.

The Residential Real Estate segment includes first mortgages secured by residential property, and home equity lines of credit. The increase in reserves reflects the impact of higher loan balances. Risk characteristics considered for this segment include, but are not limited to, collateral type, lien position, loan to value ratios, and loan seasoning.

In the Commercial and Financial segment, borrowers are primarily small to medium sized professional firms and other businesses, and loans are generally supported by projected cash flows of the business, collateralized by business assets, and/or guaranteed by the business owners. The decrease in reserves is attributed to improved economic forecast variables including business profitability. Industry, collateral type, estimated collateral values and loan seasoning are among the relevant factors in assessing expected losses.

Consumer loans include installment and revolving lines, loans for automobiles, boats, and other personal or family purposes. Risk characteristics considered for this segment include, but are not limited to, collateral type, loan to value ratios, loan seasoning and FICO score. The decline in the reserve reflects lower loan balances and improved economic forecast variables.

The allowance for credit losses is composed of specific allowances for loans individually evaluated and general allowances for loans grouped into loan pools based on similar characteristics, which are collectively evaluated. The Company’s loan portfolio and related allowance at March 31, 2022 and December 31, 2021 is shown in the following tables:


	March 31, 2022
	Individually Evaluated				Collectively Evaluated				Total
(In thousands)	Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance
Construction and land development	$	248	$	89	$	259,173	$	2,179	$	259,421	$	2,268
Commercial real estate - owner occupied	4,996		380		1,279,519		8,914		1,284,515		9,294
Commercial real estate - non owner-occupied	5,527		787		1,960,623		43,135		1,966,150		43,922
Residential real estate	13,154		312		1,586,491		13,763		1,599,645		14,075
Commercial and financial	13,172		2,511		1,119,334		15,216		1,132,506		17,727
Consumer	540		481		169,184		2,071		169,724		2,552
Paycheck Protection Program	—		—		39,256		—		39,256		—
Totals	$	37,637	$	4,560	$	6,413,580	$	85,278	$	6,451,217	$	89,838