Allowance for Credit Losses

6 Months Ended

Jun. 30, 2024

Activity in the allowance for credit losses is summarized as follows:


	Three Months Ended June 30, 2024
(In thousands)	Beginning Balance		Provision for Credit Losses		Charge- Offs		Recoveries		Ending Balance
Construction and land development	$	7,001	$	(1,515)	$	(1)	$	8	$	5,493
Commercial real estate - owner occupied	10,017		1,866		(302)		1		11,582
Commercial real estate - non-owner occupied	46,601		(1,254)		(19)		106		45,434
Residential real estate	38,628		638		(122)		65		39,209
Commercial and financial	30,707		4,706		(7,950)		966		28,429
Consumer	13,715		477		(3,031)		333		11,494
Totals	$	146,669	$	4,918	$	(11,425)	$	1,479	$	141,641


	Three Months Ended June 30, 2023
(In thousands)	Beginning Balance		Allowance on PCD Loans Acquired During the Period 1		Provision for Credit Losses		Charge- Offs		Recoveries		Ending Balance
Construction and land development	$	6,540	$	—	$	414	$	—	$	6	$	6,960
Commercial real estate - owner occupied	6,292		—		125		—		1		6,418
Commercial real estate - non-owner occupied	53,575		—		423		—		105		54,103
Residential real estate	39,894		—		(3,248)		(109)		173		36,710
Commercial and financial	31,593		5,544		2,202		(727)		1,660		40,272
Consumer	17,746		—		(680)		(1,904)		90		15,252
Totals	$	155,640	$	5,544	$	(764)	$	(2,740)	$	2,035	$	159,715
1 Amount represents a measurement period adjustment of a PCD loan acquired through the acquisition of Professional. See Note 11 - Business Combinations.


	Six Months Ended June 30, 2024
(In thousands)	Beginning Balance		Provision for Credit Losses		Charge- Offs		Recoveries		Ending Balance
Construction and land development	$	8,637	$	(3,155)	$	(1)	$	12	$	5,493
Commercial real estate - owner occupied	5,529		6,350		(302)		5		11,582
Commercial real estate - non-owner occupied	48,288		(2,875)		(103)		124		45,434
Residential real estate	39,016		7		(122)		308		39,209
Commercial and financial	34,343		3,205		(10,606)		1,487		28,429
Consumer	13,118		2,754		(4,919)		541		11,494
Totals	$	148,931	$	6,286	$	(16,053)	$	2,477	$	141,641


	Six Months Ended June 30, 2023
(In thousands)	Beginning Balance		Allowance on PCD Loans Acquired During the Period		Provision for Credit Losses		Charge- Offs		Recoveries		Ending Balance
Construction and land development	$	6,464	$	5	$	483	$	—	$	8	$	6,960
Commercial real estate - owner occupied	6,051		139		226		—		2		6,418
Commercial real estate - non-owner occupied	43,258		647		10,138		(109)		169		54,103
Residential real estate	29,605		400		6,650		(268)		323		36,710
Commercial and financial	15,648		17,527		8,616		(3,369)		1,850		40,272
Consumer	12,869		161		4,721		(2,599)		100		15,252
Totals	$	113,895	$	18,879	$	30,834	$	(6,345)	$	2,452	$	159,715

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. Forecast data is sourced from Moody’s Analytics (“Moody’s”), a firm widely recognized for its research, analysis, and economic forecasts. The forecasts of future economic conditions are over the expected remaining life of the loan using economic forecasts that revert to long-term historical averages over time.

As of June 30, 2024 and December 31, 2023, the Company utilized a multiple scenario model comprised of a blend of Moody’s economic scenarios and considered the uncertainty associated with the assumptions in the scenarios, including continued actions taken by the Federal Reserve with regard to monetary policy and interest rates and the potential impact of those actions. Outcomes could differ from the scenarios utilized, and the Company incorporated qualitative considerations reflecting the risk of uncertain economic conditions, and for additional dimensions of risk that may not be captured in the quantitative model.

The following section discusses changes in the level of the allowance for credit losses for the three months ended June 30, 2024.

In the Construction and Land Development segment, the decrease in the allowance is due to an improvement in the forecast for macroeconomic factors and a decrease in loan balances. In this segment, the primary source of repayment is typically from proceeds of the sale 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, the allowance increased due to continued uncertainty in connection with commercial real estate valuations broadly. Risk characteristics include but are not limited to, collateral type, note structure and loan seasoning.

In the Commercial Real Estate - Non Owner-Occupied segment, the decrease in the allowance is primarily attributed to improvement in the forecast for macroeconomic factors, partially offset by higher loan balances. Repayment is often dependent upon rental income from the successful operation of the underlying property or from the sale of the property. Loan performance may be adversely affected by general economic conditions or conditions specific to the real estate market, including property types. Collateral type, note structure, and loan seasoning 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 the allowance is due to an increase in loan balances. Risk characteristics considered for this segment include, but are not limited to, borrower FICO score, 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 the allowance is due to charge-offs of previously established reserves on a small number of individually evaluated loans. 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 decrease in the allowance is due to a decrease in loan balances.