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Loans and Leases and Allowance for Credit Losses

12 Months Ended

Dec. 31, 2023

Loans and Leases and Allowance for Credit Losses

Note 5. Loans and Leases and Allowance for Credit Losses

Portfolio Segmentation:

Major categories of loans and leases are summarized as follows (in thousands):


	December 31,		December 31,
	2023		2022
Commercial real estate	$	1,739,205	$	1,627,761
Consumer real estate		649,867		587,977
Construction and land development		327,185		402,501
Commercial and industrial		645,918		551,867
Leases		68,752		67,427
Consumer and other		13,535		16,094
Total loans and leases		3,444,462		3,253,627
Less: Allowance for credit losses		(35,066)		(23,334)
Loans and leases, net	$	3,409,396	$	3,230,293

The loan and lease portfolio is disaggregated into segments. There are six loan and lease portfolio segments that include commercial real estate, consumer real estate, construction and land development, commercial and industrial, leases, and consumer and other.

The following describe risk characteristics relevant to each of the portfolio segments:

Commercial Real Estate: Commercial real estate loans include owner-occupied commercial real estate loans and loans secured by income-producing properties. Owner-occupied commercial real estate loans to operating businesses are long-term financing of land and buildings. These loans are repaid by cash flow generated from the business operation. Real estate loans for income-producing properties such as apartment buildings, office and industrial buildings, and retail shopping centers are repaid from rent income derived from the properties. Loans within this portfolio segment are particularly sensitive to the valuation of real estate.

Consumer Real Estate: Consumer real estate loans include real estate loans secured by first liens, second liens, or open end real estate loans, such as home equity lines. These are repaid by various means such as a borrower’s income, sale of the property, or rental income derived from the property. Loans within this portfolio segment are particularly sensitive to the valuation of real estate.

Construction and Land Development: Loans for real estate construction and development are repaid through cash flow related to the operations, sale or refinance of the underlying property. This portfolio segment includes extensions of credit to real estate developers or investors where repayment is dependent on the sale of the real estate or income generated from the real estate collateral. Loans within this portfolio segment are particularly sensitive to the valuation of real estate.

Commercial and Industrial: The commercial and industrial loan portfolio segment includes commercial and financial loans. These loans include those loans to commercial customers for use in normal business operations to finance working capital needs, equipment purchases, or expansion projects. Loans are repaid by business cash flows. Collection risk in this portfolio is driven by the creditworthiness of the underlying borrower, particularly cash flows from the customers’ business operations.

Leases: The lease portfolio segment includes leases to small and mid-size companies for equipment financing leases. These leases are secured by a secured interest in the equipment being leased.

Consumer and Other: The consumer loan portfolio segment includes direct consumer installment loans, overdrafts and other revolving credit loans, and educational loans. Loans in this portfolio are sensitive to unemployment and other key consumer economic measures.

The Bank occasionally enters into loan participation agreements with other banks in the ordinary course of business to diversify credit risk. For certain sold participation loans, the Bank has retained effective control of the loans, typically by restricting the participating institutions from pledging or selling their share of the loan without permission from the Bank. GAAP requires the participated portion of these loans to be recorded as secured borrowings. The participated portions of these loans are included in the Commercial Real Estate totals above with a corresponding liability reflected in other borrowings. At December 31, 2023, and 2022, the total participated portions of loans of this nature totaled $0 and $24.6 million, respectively.

Allowance for credit losses:

As described in Note 1 - Summary of Significant Accounting Policies, the Company adopted ASU 2016-13 on January 1, 2023.

The following tables detail the changes in the allowance for credit losses by loan and lease classification (in thousands):


	Year Ended December 31, 2023
			Consumer		Construction		Commercial
	Commercial		Real		and Land		and				Consumer
	Real Estate		Estate		Development		Industrial		Leases		and Other		Total
Beginning balance	$	10,821	$	4,028	$	3,059	$	3,997	$	1,293	$	136	$	23,334
Impact of adopting ASU 2016-13		879		1,952		2,145		1,451		(683)		13		5,757
PCD gross up		2,652		166		25		27		28		—		2,898
Charged-off loans and leases		—		(9)		—		(584)		(345)		(425)		(1,363)
Recoveries of charge-offs		6		53		25		396		—		205		685
Provision charged to expense ⁽¹⁾		906		1,059		(380)		1,637		347		186		3,755
Ending balance	$	15,264	$	7,249	$	4,874	$	6,924	$	640	$	115	$	35,066

(1)

In the provision charged to expense there was a release of $726 thousand for unfunded commitments through the provision for credit losses not reflected in the year ended December 31, 2023.


	Year Ended December 31, 2022
			Consumer		Construction		Commercial
	Commercial		Real		and Land		and				Consumer
	Real Estate		Estate		Development		Industrial		Leases		and Other		Total
Beginning balance	$	9,781	$	3,454	$	1,882	$	3,781	$	330	$	124	$	19,352
Charged-off loans and leases		—		(33)		—		(307)		(110)		(744)		(1,194)
Recoveries of charge-offs		6		564		—		184		194		210		1,158
Provision charged to expense		1,034		43		1,177		339		879		546		4,018
Ending balance	$	10,821	$	4,028	$	3,059	$	3,997	$	1,293	$	136	$	23,334


	Year Ended December 31, 2021
			Consumer		Construction		Commercial
	Commercial		Real		and Land		and				Consumer
	Real Estate		Estate		Development		Industrial		Leases		and Other		Total
Beginning balance	$	7,579	$	3,471	$	2,076	$	5,107	$	—	$	113	$	18,346
Charged-off loans and leases		—		(67)		—		(298)		(166)		(482)		(1,013)
Recoveries of charge-offs		83		39		—		25		41		198		386
Provision charged to expense		2,119		11		(194)		(1,053)		455		295		1,633
Ending balance	$	9,781	$	3,454	$	1,882	$	3,781	$	330	$	124	$	19,352

The following tables detail the allowance for credit losses and recorded investment in loans by loan classification and by impairment evaluation method as of December 31, 2022, as determined in accordance with ASC 310 prior to the adoption of ASU 2016-13 (in thousands):


					Construction		Commercial				Consumer
	Commercial		Consumer		and Land		and				and
	Real Estate		Real Estate		Development		Industrial		Leases		Other		Total
December 31, 2022:
Performing loans and leases	$	10,815	$	3,913	$	2,674	$	3,997	$	1,293	$	136	$	22,828
Impaired loans and leases		—		—		385		—		—		—		385
		10,815		3,913		3,059		3,997		1,293		136		23,213
PCI loans and leases		6		115		—		—		—		—		121
Total allowance for loans and leases	$	10,821	$	4,028	$	3,059	$	3,997	$	1,293	$	136	$	23,334


					Construction		Commercial
	Commercial		Consumer		and Land		and				Consumer
	Real Estate		Real Estate		Development		Industrial		Leases		and Other		Total
December 31, 2022:
Performing loans and leases	$	1,611,815	$	578,342	$	400,114	$	549,974	$	66,459	$	16,091	$	3,222,795
Impaired loans and leases		—		1,283		858		—		—		—		2,141
		1,611,815		579,625		400,972		549,974		66,459		16,091		3,224,936
PCI loans and leases		15,946		8,352		1,529		1,893		968		3		28,691
Total loans and leases	$	1,627,761	$	587,977	$	402,501	$	551,867	$	67,427	$	16,094	$	3,253,627

We maintain the allowance for credit losses at a level that we deem appropriate to adequately cover the expected credit loss in the loan and lease portfolio. Our provision for loan and lease losses for the years ended December 31, 2023, 2022 and 2021, were $3.8 million, $4.0 million and $1.6 million, respectively. As of December 31, 2023, and 2022, our allowance for credit losses was $35.1 million and $23.3 million, respectively, which we deemed to be adequate at each of the respective dates. Our allowance for credit losses as a percentage of total loans was 1.02% at December 31, 2023 and 0.72% at December 31, 2022.

Credit Risk Management:

The Company employs a credit risk management process with defined policies, accountability and routine reporting to manage credit risk in the loan and lease portfolio segments. Credit risk management is guided by credit policies that provide for a consistent and prudent approach to underwriting and approvals of credits. Within the Credit Policy, procedures exist that elevate the approval requirements as credits become larger and more complex. All loans and leases are individually underwritten, risk-rated, approved, and monitored.

Responsibility and accountability for adherence to underwriting policies and accurate risk ratings lies in each portfolio segment. For the consumer real estate and consumer and other portfolio segments, the risk management process focuses on managing customers who become delinquent in their payments. For the other portfolio segments, the risk management process focuses on underwriting new business and, on an ongoing basis, monitoring the credit of the portfolios, including a third party review of the largest credits on an annual basis or more frequently, as needed. To ensure problem credits are identified on a timely basis, several specific portfolio reviews occur periodically to assess the larger adversely rated credits for proper risk rating and accrual status.

Credit quality and trends in the loan and lease portfolio segments are measured and monitored regularly. Detailed reports (e.g., by product, collateral, accrual status) are reviewed by director, management and loan committees.

A description of the general characteristics of the risk grades used by the Company is as follows:

Pass: Loans and leases in this risk category involve borrowers of acceptable-to-strong credit quality and risk who have the apparent ability to satisfy their loan and lease obligations. Loans and leases in this risk grade would possess sufficient mitigating factors, such as adequate collateral or strong guarantors possessing the capacity to repay the debt if required, for any weakness that may exist.

Watch: Loans and leases in this risk category involve borrowers that exhibit characteristics, or are operating under conditions that, if not successfully mitigated as planned, have a reasonable risk of resulting in a downgrade within the next six to twelve months. Loans and leases may remain in this risk category for six months and then are either upgraded or downgraded upon subsequent evaluation.

Special Mention: Loans and leases in this risk grade are the equivalent of the regulatory definition of "Other Assets Especially Mentioned" classification. Loans and leases in this category possess some credit deficiency or potential weakness, which requires a high level of management attention. Potential weaknesses include declining trends in operating earnings and cash flows and /or reliance on the secondary source of repayment. If left uncorrected, these potential weaknesses may result in noticeable deterioration of the repayment prospects for the asset or in the Company’s credit position.

Substandard: Loans and leases in this risk grade are inadequately protected by the borrower’s current financial condition and payment capability or of the collateral pledged, if any. Loans and leases so classified have a well-defined weakness or weaknesses that jeopardize the orderly repayment of debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans and leases in this risk grade have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or orderly repayment in full, on the basis of current existing facts, conditions and values, highly questionable and improbable. Possibility of loss is extremely high, but because of certain important and reasonably specific factors that may work to the advantage and strengthening of the exposure, its classification as an estimated loss is deferred until its more exact status may be determined.

Uncollectible: Loans and leases in this risk grade are considered to be non-collectible and of such little value that their continuance as bankable assets is not warranted. This does not mean the loan or lease has absolutely no recovery value, but rather it is neither practical nor desirable to defer writing off the loan or lease, even though partial recovery may be obtained in the future. Charge-offs against the allowance for loan and lease losses are taken in the period in which the loan or lease becomes uncollectible. Consequently, the Company typically does not maintain a recorded investment in loans or leases within this category.

The Company evaluates the loan risk grading system definitions and allowance for credit loss methodology on an ongoing basis. There were no changes to these subsequent to adoption ASU 2016-13 on January 1, 2023.

The following tables outline the amount of each loan and lease classification and the amount categorized into each risk rating based on year of origination (in thousands):


	December 31, 2023
	Loans Amortized Cost Basis by Origination Year
															Revolving
															Loans
													Revolving		Converted
	2023		2022		2021		2020		2019		Prior		Loans		to Term		Total
Commercial real estate
Pass	$	237,110	$	578,227	$	433,505	$	181,374	$	134,495	$	106,315	$	15,132	$	6,690	$	1,692,848
Watch		22,295		1,267		1,950		921		4,426		2,926		-		3,500		37,285
Special mention		-		3,215		-		-		-		-		-		-		3,215
Substandard		903		-		3,932		310		282		430		-		-		5,857
Doubtful		-		-		-		-		-		-		-		-		-
Total commercial real estate		260,308		582,709		439,387		182,605		139,203		109,671		15,132		10,190		1,739,205
YTD gross charge-offs		-		-		-		-		-		-		-		-		-

Consumer real estate
Pass		123,203		174,755		98,460		53,688		33,598		48,378		107,949		3,026		643,057
Watch		171		-		258		116		-		55		1,581		-		2,181
Special mention		-		-		-		-		-		53		-		-		53
Substandard		196		824		176		253		164		2,850		113		-		4,576
Doubtful		-		-		-		-		-		-		-		-		-
Total consumer real estate		123,570		175,579		98,894		54,057		33,762		51,336		109,643		3,026		649,867
YTD gross charge-offs		-		-		-		-		-		(9)		-		-		(9)

Construction and land development
Pass		113,752		115,032		23,823		2,749		5,056		6,595		40,667		7,489		315,163
Watch		6,670		3,233		607		-		-		1		-		-		10,511
Special mention		437		-		-		-		-		-		-		-		437
Substandard		-		-		35		620		-		419		-		-		1,074
Doubtful		-		-		-		-		-		-		-		-		-
Total construction and land development		120,859		118,265		24,465		3,369		5,056		7,015		40,667		7,489		327,185
YTD gross charge-offs		-		-		-		-		-		-		-		-		-

Commercial and industrial
Pass		168,957		162,799		62,796		22,639		9,135		25,207		185,619		7,270		644,422
Watch		54		15		13		-		-		-		120		83		285
Special mention		-		-		-		-		-		-		-		-		-
Substandard		193		614		200		129		75		-		-		-		1,211
Doubtful		-		-		-		-		-		-		-		-		-
Total commercial and industrial		169,204		163,428		63,009		22,768		9,210		25,207		185,739		7,353		645,918
YTD gross charge-offs		(75)		(274)		(50)		(183)		-		-		(2)		-		(584)

Leases
Pass		28,922		26,658		8,658		3,603		703		208		-		-		68,752
Watch		-		-		-		-		-		-		-		-		-
Special mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total leases		28,922		26,658		8,658		3,603		703		208		-		-		68,752
YTD gross charge-offs		(122)		(193)		(18)		-		(12)		-		-		-		(345)

Consumer and other
Pass		5,926		2,049		841		373		132		206		3,931		67		13,525
Watch		-		-		-		-		10		-		-		-		10
Special mention		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total consumer and other		5,926		2,049		841		373		142		206		3,931		67		13,535
YTD gross charge-offs		(40)		(135)		(74)		(54)		(33)		(89)		-		-		(425)

Total loans
Pass		677,870		1,059,520		628,083		264,426		183,119		186,909		353,298		24,542		3,377,767
Watch		29,190		4,515		2,828		1,037		4,436		2,982		1,701		3,583		50,272
Special mention		437		3,215		-		-		-		53		-		-		3,705
Substandard		1,292		1,438		4,343		1,312		521		3,699		113		-		12,718
Doubtful		-		-		-		-		-		-		-		-		-
Total loans	$	708,789	$	1,068,688	$	635,254	$	266,775	$	188,076	$	193,643	$	355,112	$	28,125	$	3,444,462
Total YTD gross charge-offs	$	(237)	$	(602)	$	(142)	$	(237)	$	(45)	$	(98)	$	(2)	$	-	$	(1,363)

The following tables outline the amount of each loan and lease classification and the amount categorized into each risk rating as of December 31, 2022, prior to the adoption of ASU 2016-13 (in thousands):


	December 31, 2022
					Construction		Commercial
	Commercial		Consumer		and Land		and				Consumer
Non PCI Loans and Leases:	Real Estate		Real Estate		Development		Industrial		Leases		and Other		Total
Pass	$	1,579,387	$	576,428	$	399,846	$	545,210	$	66,459	$	16,057	$	3,183,387
Watch		29,810		1,496		224		4,523		—		19		36,072
Special mention		2,539		35		—		61		—		—		2,635
Substandard		79		1,666		902		180		—		15		2,842
Doubtful		—		—		—		—		—		—		—
Total		1,611,815		579,625		400,972		549,974		66,459		16,091		3,224,936

PCI Loans and Leases:
Pass		11,924		6,927		1,054		1,893		968		3		22,769
Watch		1,439		188		46		—		—		—		1,673
Special mention		11		54		—		—		—		—		65
Substandard		2,572		1,183		429		—		—		—		4,184
Doubtful		—		—		—		—		—		—		—
Total		15,946		8,352		1,529		1,893		968		3		28,691
Total loans and leases	$	1,627,761	$	587,977	$	402,501	$	551,867	$	67,427	$	16,094	$	3,253,627

Past Due Loans and Leases:

A loan or lease is considered past due if any required principal and interest payments have not been received as of the date such payments were required to be made under the terms of the loan agreement. Generally, management places a loan or lease on nonaccrual when there is a clear indication that the borrower’s cash flow may not be sufficient to meet payments as they become due, which is generally when a loan is 90 days past due.

The following tables present an aging analysis of our loan and lease portfolio (in thousands):


	December 31, 2023
					90 Days
	30-59 Days		60-89 Days		or More		Total		Loans Not		Total
	Past Due		Past Due		Past Due		Past Due		Past Due		Loans
Commercial real estate	$	52	$	270	$	1,660	$	1,982	$	1,737,223	$	1,739,205
Consumer real estate		2,216		1,347		561		4,124		645,743		649,867
Construction and land development		631		—		620		1,251		325,934		327,185
Commercial and industrial		956		330		2,286		3,572		642,346		645,918
Leases		1,208		132		212		1,552		67,200		68,752
Consumer and other		80		9		98		187		13,348		13,535
Total	$	5,143	$	2,088	$	5,437	$	12,668	$	3,431,794	$	3,444,462


	December 31, 2022
					90 Days
	30-59 Days		60-89 Days		or More		Total		Loans Not		Total
	Past Due		Past Due		Past Due		Past Due		Past Due		Loans
Commercial real estate	$	54	$	—	$	—	$	54	$	1,627,707		1,627,761
Consumer real estate		731		—		108		839		587,138		587,977
Construction and land development		—		—		920		920		401,581		402,501
Commercial and industrial		185		18		180		383		551,484		551,867
Leases		1,024		84		170		1,278		66,149		67,427
Consumer and other		103		10		9		122		15,972		16,094
Total	$	2,097	$	112	$	1,387	$	3,596	$	3,250,031	$	3,253,627

The table below presents the amortized cost basis of loans on nonaccrual status and loans past due 90 or more days and still accruing interest at December 31, 2023, and 2022. Also presented is the balance of loans on nonaccrual status at December 31, 2023, for which there was no related allowance for credit losses recorded (in thousands):


	December 31, 2023						December 31, 2022
	Total		Nonaccrual		Loans Past Due		Total		Loans Past Due
	Nonaccrual		With No Allowance		Over 90 Days		Nonaccrual		Over 90 Days
	Loans		for Credit Losses		Still Accruing		Loans		Still Accruing
Commercial real estate	$	2,044	$	1,352	$	—	$	—	$	—
Consumer real estate		2,647		1,562		—		1,665		—
Construction and land development		620		—		—		920		—
Commercial and industrial		2,480		160		—		180		—
Leases		140		—		72		28		143
Consumer and other		—		—		98		15		—
Total	$	7,931	$	3,074	$	170	$	2,808	$	143

The following table presents the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses (in thousands):


	December 31, 2023
	Real Estate		Other		Total
Commercial real estate	$	5,155	$	—	$	5,155
Consumer real estate		2,756		—		2,756
Construction and land development		1,411		—		1,411
Commercial and industrial		—		1,018		1,018
Leases		—		—		—
Consumer and other		—		—		—
Total	$	9,322	$	1,018	$	10,340

Impaired Loans and Leases:

The following table presents impaired loans at December 31, 2022, as determined under ASC 310 prior to the adoption of ASU 2016-13. A loan or lease held for investment is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect all amounts due (both principal and interest) according to the terms of the loan or lease agreement. Presented are the recorded investment, unpaid principal balance and related allowance of impaired loans at December 31, 2022, by loan classification (in thousands):


	December 31, 2022
			Unpaid
	Recorded		Principal		Related
	Investment		Balance		Allowance
Impaired loans and leases without a valuation allowance:
Commercial real estate	$	—	$	—	$	—
Consumer real estate		1,283		1,282		—
Construction and land development		—		—		—
Commercial and industrial		—		—		—
Leases		—		—		—
Consumer and other		—		—		—
		1,283		1,282		—
Impaired loans and leases with a valuation allowance:
Commercial real estate		—		—		—
Consumer real estate		—		—		—
Construction and land development		858		858		385
Commercial and industrial		—		—		—
Leases		—		—		—
Consumer and other		—		—		—
		858		858		385
PCI loans and leases:
Commercial real estate		500		580		6
Consumer real estate		684		646		115
Construction and land development		—		—		—
Commercial and industrial		—		—		—
Leases		—		—		—
Consumer and other		—		—		—
		1,184		1,226		121
Total impaired loans and leases	$	3,325	$	3,366	$	506

The following table details the average recorded investment and the amount of interest income recognized on a cash basis for the years ended December 31, 2022 and 2021, respectively, of impaired loans by loan classification as determined under ASC 310 prior to the adoption of ASU 2016-13 (in thousands):


	Year Ended December 31,
	2022				2021
	Average		Interest		Average		Interest
	Recorded		Income		Recorded		Income
	Investment		Recognized		Investment		Recognized
Impaired loans and leases without a valuation allowance:
Commercial real estate	$	122	$	—	$	800	$	1
Consumer real estate		1,728		94		1,783		78
Construction and land development		—		—		—		—
Commercial and industrial		—		—		—		—
Leases				—		—		—
Consumer and other		—		—		—		—
		1,850		94		2,583		79
Impaired loans and leases with a valuation allowance:
Commercial real estate		343		—		1,145		104
Consumer real estate		52		—		334		14
Construction and land development		515		—		—		—
Commercial and industrial		19		—		132		8
Leases		—		—		—		—
Consumer and other		—		—		—		—
		929		—		1,611		126
PCI loans and leases:
Commercial real estate		702		57		488		42
Consumer real estate		819		50		1,140		83
Construction and land development		—		—		—		—
Commercial and industrial		—		—		197		3
Leases		—		—		—		—
Consumer and other		2		—		13		—
		1,523		107		1,838		128
Total impaired loans and leases	$	4,302	$	201	$	6,032	$	333

Loan Modifications to Borrowers Experiencing Financial Difficulty:

From time to time, we may modify certain loans to borrowers who are experiencing financial difficulty. In some cases, these modifications may result in forbearance agreements. Loan modifications to borrowers experiencing financial difficulty may be in the form of a principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, a term extension, or a combination thereof, among other things.

The Company adopted ASU 2022-02, “Financial Instruments – Credit Losses (Topic 326), Troubled Debt Restructurings and Vintage Disclosures” (“ASU 2022-02”) effective January 1, 2023. The amendments in ASU 2022-02 eliminated the recognition and measure of troubled debt restructurings and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty.

The table below shows the amortized cost of loans and leases made to borrowers experiencing financial difficulty that were modified during the year ended December 31, 2023 (dollars in thousands):


					Payment Delay				Total Class
	Payment		Term		and Term				of Financing
Year ended December 31, 2023	Delay		Extension		Extension		Total		Receivable
Commercial real estate	$	386	$	2,530	$	—	$	2,916	0.17	%
Consumer real estate		—		446		—		446	0.07
Construction and land development		—		690		—		690	0.21
Commercial and industrial		57		—		136		193	0.03
Leases		—		—		—		—	-
Consumer and other		—		—		—		—	-
Total	$	443	$	3,666	$	136	$	4,245	0.12	%

The following table summarizes the financial impacts of loan modifications made to borrowers experiencing financial difficulty for the year ended December 31, 2023 (dollars in thousands):


	Weighted-Average
	Term		Weighted-Average
	Extension		Total Payment
Year ended December 31, 2023	(in months)		Delay
Commercial real estate		10	$	22
Consumer real estate		16		—
Construction and land development		8		—
Commercial and industrial		30		6
Leases		—		—
Consumer and other		—		—

No loan modifications made to borrowers experiencing financial difficulty defaulted after modification during the year ended December 31, 2023.

The table below shows an age analysis of loans and leases made to borrowers experiencing financial difficulty that were modified on or after January 1, 2023, that date the Company adopted ASU 2022-02 (in thousands):


	December 31, 2023
					90 Days
			30-89 Days		or More
	Current		Past Due		Past Due		Nonaccrual		Total
Commercial real estate	$	2,530	$	—	$	—	$	386	$	2,916
Consumer real estate		446		—		—		—		446
Construction and land development		690		—		—		—		690
Commercial and industrial		—		—		—		193		193
Leases		—		—		—		—		—
Consumer and other		—		—		—		—		—
Total	$	3,666	$	—	$	—	$	579	$	4,245

As of December 31, 2022, prior to the adoption ASU 2022-02, management had approximately $101 thousand that meet the criteria of TDR, none of which were on nonaccrual.

Foreclosure Proceedings and Balances:

As of December 31, 2023, there were two residential real estate properties totaling $279 thousand in which physical possession had been obtained and included within other real estate owned assets and one property for $281 thousand at December 31, 2022. There were two residential real estate loans totaling $1.2 million in the process of foreclosure at December 31, 2023, and one for $33 thousand at December 31, 2022.

Related Party Loans:

In the ordinary course of business, the Company has granted loans to certain related interests, including directors, executive officers, and their affiliates (collectively referred to as "related parties"). Such loans are made in the ordinary course of business and on substantially the same terms as those for comparable transactions prevailing at the time and do not present other unfavorable features. A summary of activity in loans to related parties is as follows (in thousands):


	2023		2022
Balance, beginning of year	$	14,246	$	13,970
Additions		8,653		3,162
Repayments		(2,063)		(2,886)
Balance, end of year	$	20,836	$	14,246

At December 31, 2023, the Company had pre-approved but unused lines of credit totaling approximately $8.9 million to related parties.