
	Three Months Ended September 30, 2024
(In thousands)	Beginning Balance		Provision for Credit Losses		Charge- Offs		Recoveries		Ending Balance
Construction and land development	$	5,493	$	1,562	$	—	$	3	$	7,058
Commercial real estate - owner occupied	11,582		338		(2)		—		11,918
Commercial real estate - non-owner occupied	45,434		826		(602)		18		45,676
Residential real estate	39,209		(159)		(6)		104		39,148
Commercial and financial	28,429		3,003		(6,180)		726		25,978
Consumer	11,494		703		(1,794)		288		10,691
Totals	$	141,641	$	6,273	$	(8,584)	$	1,139	$	140,469


	Three Months Ended September 30, 2023
(In thousands)	Beginning Balance		Provision for Credit Losses		Charge- Offs		Recoveries		Ending Balance
Construction and land development	$	6,960	$	725	$	—	$	—	$	7,685
Commercial real estate - owner occupied	6,418		(353)		—		—		6,065
Commercial real estate - non-owner occupied	54,103		(1,677)		—		15		52,441
Residential real estate	36,710		2,009		(44)		60		38,735
Commercial and financial	40,272		2,932		(11,814)		135		31,525
Consumer	15,252		(942)		(1,265)		165		13,210
Totals	$	159,715	$	2,694	$	(13,123)	$	375	$	149,661


	Nine Months Ended September 30, 2024
(In thousands)	Beginning Balance		Provision for Credit Losses		Charge- Offs		Recoveries		Ending Balance
Construction and land development	$	8,637	$	(1,593)	$	(1)	$	15	$	7,058
Commercial real estate - owner occupied	5,529		6,688		(304)		5		11,918
Commercial real estate - non-owner occupied	48,288		(2,049)		(705)		142		45,676
Residential real estate	39,016		(152)		(128)		412		39,148
Commercial and financial	34,343		6,208		(16,786)		2,213		25,978
Consumer	13,118		3,457		(6,713)		829		10,691
Totals	$	148,931	$	12,559	$	(24,637)	$	3,616	$	140,469


	Nine Months Ended September 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	$	1,208	$	—	$	8	$	7,685
Commercial real estate - owner occupied	6,051		139		(127)		—		2		6,065
Commercial real estate - non-owner occupied	43,258		647		8,461		(109)		184		52,441
Residential real estate	29,605		400		8,659		(312)		383		38,735
Commercial and financial	15,648		17,527		11,548		(15,183)		1,985		31,525
Consumer	12,869		161		3,779		(3,864)		265		13,210
Totals	$	113,895	$	18,879	$	33,528	$	(19,468)	$	2,827	$	149,661

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 September 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 September 30, 2024.

The allowance decreased $1.2 million, or 0.8%, during the third quarter of 2024 to $140.5 million, or 1.38% of loans held for investment as of September 30, 2024.

In the Construction and Land Development segment, the increase in allowance is due to continued uncertainty in connection with commercial real estate markets. 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 nominally due to an increase in loan balances and continued uncertainty in connection with commercial real estate valuations broadly and uncertainty associated with the economy. 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 allowance increased slightly driven by higher loan balances and was partially offset by the charge-off of one nonaccrual loan. 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. Allowance levels were essentially flat from last quarter. 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 primarily driven by the charge-off of one nonaccrual relationship that was previously individually reserved. 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 allowance for consumer loans was driven by lower loan balances and improved economic forecasts.