Loans and Allowance for Credit Losses

3 Months Ended

Mar. 31, 2022

Loans and Leases Receivable Disclosure [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure

Loans and Leases and Allowance for Credit Losses

Loans and leases are presented in the Consolidated Statements of Financial Condition net of deferred fees and costs, and discounts related to purchased loans. Net deferred fees were $2.9 million and $0.8 million as of March 31, 2022 and December 31, 2021, respectively, and discounts on purchased loans were $6.0 million at both March 31, 2022 and December 31, 2021. The following table provides outstanding balances related to each of our loan types:

 

	March 31, 2022		December 31, 2021
	(dollars in thousands)
Commercial, financial, agricultural and other	$	1,123,690	$	1,173,452
Time and demand	992,477		1,159,524
Commercial credit cards	13,675		13,928
Equipment finance	2,505
Time and demand other	115,033
Real estate construction	398,988		494,456
Construction other	307,411
Construction residential	91,577
Residential real estate	2,006,221		1,920,250
Residential first lien	1,381,742		1,299,534
Residential junior lien/home equity	624,479		620,716
Commercial real estate	2,344,281		2,251,097
Multifamily	401,581		385,432
Nonowner occupied	1,516,518		1,465,247
Owner occupied	426,182		400,418
Loans to individuals	1,078,932		999,975
Automobile and recreational vehicles	984,001		901,280
Consumer credit cards	10,675		11,151
Consumer other	84,256		87,544
Total loans and leases	$	6,952,112	$	6,839,230

In the table above, Commercial, financial, agricultural and other loans at March 31, 2022 and December 31, 2021 includes $28.9 million and $71.3 million, respectively, in Paycheck Protection Program ("PPP") loans for small businesses who meet the necessary eligibility requirements. PPP loans are 100% guaranteed by the Small Business Administration ("SBA") under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and are forgivable, in whole or in part, if the proceeds are used for payroll and other permitted purposes in accordance with the PPP requirements. Because PPP loans are fully guaranteed by the SBA, there is no allowance for credit losses recognized for these loans. Although the Company believes that the majority of these loans will ultimately be forgiven by the SBA in accordance with the terms of the program, there could be risks and liability to the Company associated with participation in the program.

First Commonwealth’s loan portfolio includes five primary loan categories. When calculating the allowance for credit losses these categories are classified into fourteen portfolio segments. The composition of loans by portfolio segment includes:

Commercial, financial, agricultural and other

Time & Demand - Consists primarily of commercial and industrial loans. This category consists of loans that are typically cash flow dependent and therefore have different risk and loss characteristics than other commercial loans. Loans in this category include revolving and term structures with fixed and variable interest rates. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and economic conditions measured by GDP.

Commercial Credit Cards - Consists of unsecured credit cards for commercial customers. These commercial credit cards have separate characteristics outside of normal commercial non-real estate loans, as they tend to have shorter overall duration. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and economic conditions measured by GDP.

Equipment Finance - Consists of loans and leases to finance the purchase of equipment for commercial customers. The risk and loss characteristics are unique for this group due to the type of collateral. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and economic conditions measured by GDP. There were no equipment finance loans or leases in the portfolio prior to the first quarter of 2022.

Time & Demand Other - Consists primarily of loans to state and political subdivisions and other commercial loans that have different characteristics than loans in the Time and Demand category. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of household debt to income and economic conditions measured by GDP. Prior to the first quarter of 2022, these loans were included in the Time and Demand category. The breakout into a separate category is the result of an annual review of the peer group loss history and loss drivers used in the Allowance for Credit Losses model.

Real estate construction

Construction Other - Consists of construction loans to commercial builders and developers and are secured by the properties under development.

Construction Residential - Consists of loans to finance the construction of residential properties during the construction period. Borrowers are typically individuals who will occupy the completed single family property.

The risk and loss characteristics of these two construction categories are different than other real estate secured categories due to the collateral being at various stages of completion. The nature of the project and type of borrower of the two construction categories provides for unique risk and loss characteristics for each category. The primary macroeconomic drivers for estimating credit losses for construction loans include forecasts of national unemployment and measures of completed construction projects. Prior to the first quarter of 2022, all construction loans were included in one loan category. The breakout into separate construction categories is the result of an annual review of the peer group loss history and loss drivers used in the Allowance for Credit Losses model.

Residential real estate

Residential first lien - Consists of loans with collateral of 1-4 family residencies with a senior lien position. The risk and loss characteristics are unique for this group because the collateral for these loans are the borrower’s primary residence. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and residential property values.

Residential Junior Lien/Home Equity - Consists of loans with collateral of 1-4 family residencies with an open end line of credit or junior lien position. The junior lien position for the majority of these loans provides a higher risk of loss than other residential real estate loans. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and residential property values.

Commercial real estate

Multifamily - Consists of loans secured by commercial multifamily properties. Real estate related to rentals to consumers provide unique risk and loss characteristics. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of commercial real estate values and national unemployment. In the first quarter of 2022, as a result of an annual review of peer group loss history and loss drivers, national unemployment replaced rental vacancy as one of the primary macroeconomic drivers in this category.

Nonowner Occupied - Consists of loans secured by commercial real estate non-owner occupied and provides different loss characteristics than other real estate categories. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and economic conditions measured by GDP.

Owner Occupied - Consists of loans secured by commercial real estate owner occupied properties. The risk and loss characteristics of this category were considered different than other real estate categories because it is owner occupied and would impact the ability to conduct business. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of national unemployment and economic conditions measured by GDP.

Loans to individuals

Automobile and Recreational Vehicles - Consists of both direct and indirect loans with automobiles and recreational vehicles held as collateral. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of consumer sentiment and automobile retention value.

Consumer Credit Cards – Consists of unsecured consumer credit cards. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of consumer sentiment and economic conditions measured by GDP.

Other Consumer - Consists of lines of credit, student loans and other consumer loans, not secured by real estate or autos. The primary macroeconomic drivers for estimating credit losses for this category include forecasts of consumer sentiment and retail sales. In the first quarter of 2022, as a result of an annual review of peer group loss history and loss drivers, retail sales replaced household debt as one of the primary macroeconomic factors for this category.

The allowance for credit losses is calculated by pooling loans of similar credit risk characteristics and applying a discounted cash flow methodology after incorporating probability of default and loss given default estimates. Probability of default represents an estimate of the likelihood of default and loss given default measures the expected loss upon default. Inputs impacting the expected losses include a forecast of macroeconomic factors, using a weighted forecast from a nationally recognized firm. Our model incorporates a one-year forecast of macroeconomic factors, after which the factors revert back to the historical mean over a one-year period. The most significant macroeconomic factor used in estimating credit losses is the national unemployment rate. The forecasted value for national unemployment at the beginning of the forecast period was 3.87% and during the one-year forecast period it was projected to average 4.36%, with a peak of 4.58%. Current forecast assumptions consider the impact of rising interest rates, global oil prices and supply chain disruption, COVID-19, Russia's invasion of Ukraine and the potential effects of these on the US economy.

Credit Quality Information

As part of the on-going monitoring of credit quality within the loan portfolio, the following credit worthiness categories are used in grading our loans:

Pass	Acceptable levels of risk exist in the relationship. Includes all loans not classified as OAEM, substandard or doubtful.
Other Assets Especially Mentioned (OAEM)	Potential weaknesses that deserve management’s close attention. The potential weaknesses may result in deterioration of the repayment prospects or weaken the Company’s credit position at some future date. The credit risk may be relatively minor, yet constitute an undesirable risk in light of the circumstances surrounding the specific credit. No loss of principal or interest is expected.
Substandard	Well-defined weakness or a weakness that jeopardizes the repayment of the debt. A loan may be classified as substandard as a result of deterioration of the borrower’s financial condition and repayment capacity. Loans for which repayment plans have not been met or collateral equity margins do not protect the Company may also be classified as substandard.
Doubtful	Loans with the characteristics of substandard loans with the added characteristic that collection or liquidation in full, on the basis of presently existing facts and conditions, is highly improbable.

The Company’s internal creditworthiness grading system provides a measurement of credit risk based primarily on an evaluation of the borrower’s cash flow and collateral. Category ratings are reviewed each quarter, at which time management analyzes the results, as well as other external statistics and factors related to loan performance.

The following tables represent our credit risk profile by creditworthiness:

	March 31, 2022
			Non-Pass
	Pass		OAEM		Substandard		Doubtful		Loss		Total Non-Pass		Total
	(dollars in thousands)
Commercial, financial, agricultural and other	$	1,090,034	$	15,396	$	18,260	$	—	$	—	$	33,656	$	1,123,690
Time and demand	959,190		15,396		17,891		—		—		33,287		992,477
Commercial credit cards	13,675		—		—		—		—		—		13,675
Equipment finance	2,505		—		—		—		—		—		2,505
Time and demand other	114,664		—		369		—		—		369		115,033
Real estate construction	398,233		281		474		—		—		755		398,988
Construction other	306,937		—		474		—		—		474		307,411
Construction residential	91,296		281		—		—		—		281		91,577
Residential real estate	1,999,616		523		6,082		—		—		6,605		2,006,221
Residential first lien	1,378,124		455		3,163		—		—		3,618		1,381,742
Residential junior lien/home equity	621,492		68		2,919		—		—		2,987		624,479
Commercial real estate	2,211,496		82,590		50,195		—		—		132,785		2,344,281
Multifamily	361,021		25,588		14,972		—		—		40,560		401,581
Nonowner occupied	1,434,603		52,231		29,684		—		—		81,915		1,516,518
Owner occupied	415,872		4,771		5,539		—		—		10,310		426,182
Loans to individuals	1,078,673		—		259		—		—		259		1,078,932
Automobile and recreational vehicles	983,838		—		163		—		—		163		984,001
Consumer credit cards	10,675		—		—		—		—		—		10,675
Consumer other	84,160		—		96		—		—		96		84,256
Total loans and leases	$	6,778,052	$	98,790	$	75,270	$	—	$	—	$	174,060	$	6,952,112

 

	December 31, 2021
			Non-Pass
	Pass		OAEM		Substandard		Doubtful		Loss		Total Non-Pass		Total
	(dollars in thousands)
Commercial, financial, agricultural and other	$	1,121,234	$	33,765	$	18,453	$	—	$	—	$	52,218	$	1,173,452
Time and demand	1,107,306		33,765		18,453		—		—		52,218		1,159,524
Commercial credit cards	13,928		—		—		—		—		—		13,928
Real estate construction	493,913		498		45		—		—		543		494,456
Residential real estate	1,913,064		976		6,210		—		—		7,186		1,920,250
Residential first lien	1,295,524		905		3,105		—		—		4,010		1,299,534
Residential junior lien/home equity	617,540		71		3,105		—		—		3,176		620,716
Commercial real estate	2,113,123		85,324		52,650		—		—		137,974		2,251,097
Multifamily	355,702		14,565		15,165		—		—		29,730		385,432
Nonowner occupied	1,368,922		63,783		32,542		—		—		96,325		1,465,247
Owner occupied	388,499		6,976		4,943		—		—		11,919		400,418
Loans to individuals	999,770		—		205		—		—		205		999,975
Automobile and recreational vehicles	901,132		—		148		—		—		148		901,280
Consumer credit cards	11,151		—		—		—		—		—		11,151
Consumer other	87,487		—		57		—		—		57		87,544
Total loans and leases	$	6,641,104	$	120,563	$	77,563	$	—	$	—	$	198,126	$	6,839,230

The following table summarizes the loan risk rating category by loan type including term loans on an amortized cost basis by origination year:

	March 31, 2022
	Term Loans												Revolving Loans
	2022		2021		2020		2019		2018		Prior				Total
	(dollars in thousands)
Time and demand	$	24,040	$	210,288	$	87,599	$	126,639	$	73,613	$	73,454	$	396,844	$	992,477
Pass	24,040		209,897		85,098		110,803		73,326		64,994		391,032		959,190
OAEM	—		391		2,048		2,338		178		7,186		3,255		15,396
Substandard	—		—		453		13,498		109		1,274		2,557		17,891
Commercial credit cards	—		—		—		—		—		—		13,675		13,675
Pass	—		—		—		—		—		—		13,675		13,675
Equipment finance	2,505		—		—		—		—		—		—		2,505
Pass	2,505		—		—		—		—		—		—		2,505
Time and demand other	6,058		20,678		29,228		5,673		3,318		47,566		2,512		115,033
Pass	6,058		20,678		29,228		5,673		3,318		47,397		2,312		114,664
Substandard	—		—		—		—		—		169		200		369
Construction other	5,311		91,272		84,577		100,754		23,806		1,250		441		307,411
Pass	5,311		91,272		84,103		100,754		23,806		1,250		441		306,937
Substandard	—		—		474		—		—		—		—		474
Construction residential	3,265		85,129		2,430		735		18		—		—		91,577
Pass	3,265		85,129		2,149		735		18		—		—		91,296
OAEM	—		—		281		—		—		—		—		281
Residential first lien	80,916		427,539		364,873		117,741		79,385		309,316		1,972		1,381,742
Pass	80,916		427,528		364,854		117,473		78,931		306,527		1,895		1,378,124
OAEM	—		—		—		—		63		315		77		455
Substandard	—		11		19		268		391		2,474		—		3,163
Residential junior lien/home equity	18,665		55,709		1,926		2,922		2,426		5,884		536,947		624,479
Pass	18,665		55,709		1,926		2,848		2,426		5,736		534,182		621,492
OAEM	—		—		—		—		—		58		10		68
Substandard	—		—		—		74		—		90		2,755		2,919
Multifamily	19,494		89,609		78,400		27,474		35,535		149,698		1,371		401,581
Pass	19,494		89,609		78,400		27,474		21,035		123,638		1,371		361,021
OAEM	—		—		—		—		—		25,588		—		25,588
Substandard	—		—		—		—		14,500		472		—		14,972
Nonowner occupied	46,087		194,623		121,039		200,683		185,938		764,263		3,885		1,516,518
Pass	46,087		194,623		121,039		200,683		156,700		712,831		2,640		1,434,603
OAEM	—		—		—		—		15,240		35,903		1,088		52,231
Substandard	—		—		—		—		13,998		15,529		157		29,684
Owner occupied	31,902		85,107		62,071		51,792		32,035		158,206		5,069		426,182
Pass	31,902		85,083		60,575		49,894		31,552		151,909		4,957		415,872
OAEM	—		—		498		845		483		2,912		33		4,771
Substandard	—		24		998		1,053		—		3,385		79		5,539
Automobile and recreational vehicles	173,055		422,172		228,508		106,348		39,116		14,802		—		984,001
Pass	173,055		422,168		228,508		106,278		39,067		14,762		—		983,838
Substandard	—		4		—		70		49		40		—		163
Consumer credit cards	—		—		—		—		—		—		10,675		10,675
Pass	—		—		—		—		—		—		10,675		10,675
Consumer other	1,667		20,590		3,947		6,792		4,065		5,394		41,801		84,256
Pass	1,667		20,590		3,947		6,783		4,065		5,352		41,756		84,160
Substandard	—		—		—		9		—		42		45		96
Total	$	412,965	$	1,702,716	$	1,064,598	$	747,553	$	479,255	$	1,529,833	$	1,015,192	$	6,952,112

	December 31, 2021
	Term Loans												Revolving Loans
	2021		2020		2019		2018		2017		Prior				Total
	(dollars in thousands)
Time and demand	$	281,244	$	126,403	$	143,030	$	91,118	$	45,442	$	111,127	$	361,160	$	1,159,524
Pass	280,854		125,728		128,080		83,204		31,472		102,399		355,569		1,107,306
OAEM	390		596		1,125		7,780		13,945		7,126		2,803		33,765
Substandard	—		79		13,825		134		25		1,602		2,788		18,453
Commercial credit cards	—		—		—		—		—		—		13,928		13,928
Pass	—		—		—		—		—		—		13,928		13,928
Real estate construction	202,016		129,298		123,153		38,267		441		841		440		494,456
Pass	201,992		128,824		123,153		38,267		441		796		440		493,913
OAEM	24		474		—		—		—		—		—		498
Substandard	—		—		—		—		—		45		—		45
Residential first lien	376,106		375,904		126,788		84,484		74,268		260,010		1,974		1,299,534
Pass	376,095		375,885		126,618		84,079		74,135		256,815		1,897		1,295,524
OAEM	—		—		—		67		—		761		77		905
Substandard	11		19		170		338		133		2,434		—		3,105
Residential junior lien/home equity	56,861		1,999		3,322		2,684		1,009		5,348		549,493		620,716
Pass	56,861		1,999		3,246		2,684		1,009		5,195		546,546		617,540
OAEM	—		—		—		—		—		61		10		71
Substandard	—		—		76		—		—		92		2,937		3,105
Multifamily	90,062		73,068		16,782		36,523		63,872		103,774		1,351		385,432
Pass	90,062		73,068		16,782		21,846		49,832		102,761		1,351		355,702
OAEM	—		—		—		—		14,040		525		—		14,565
Substandard	—		—		—		14,677		—		488		—		15,165
Nonowner occupied	194,137		98,840		202,236		173,053		177,295		615,943		3,743		1,465,247
Pass	194,137		98,840		202,236		155,293		152,174		563,743		2,499		1,368,922
OAEM	—		—		—		3,723		19,235		39,737		1,088		63,783
Substandard	—		—		—		14,037		5,886		12,463		156		32,542
Owner occupied	77,710		62,380		53,954		34,115		32,989		134,713		4,557		400,418
Pass	77,710		59,973		51,513		33,623		31,644		129,593		4,443		388,499
OAEM	—		2,194		1,220		492		1,321		1,716		33		6,976
Substandard	—		213		1,221		—		24		3,404		81		4,943
Automobile and recreational vehicles	456,730		252,518		122,943		48,375		17,230		3,484		—		901,280
Pass	456,730		252,518		122,867		48,361		17,224		3,432		—		901,132
Substandard	—		—		76		14		6		52		—		148
Consumer credit cards	—		—		—		—		—		—		11,151		11,151
Pass	—		—		—		—		—		—		11,151		11,151
Consumer other	22,156		4,655		8,030		5,084		542		5,503		41,574		87,544
Pass	22,156		4,655		8,030		5,084		542		5,460		41,560		87,487
Substandard	—		—		—		—		—		43		14		57
Total	$	1,757,022	$	1,125,065	$	800,238	$	513,703	$	413,088	$	1,240,743	$	989,371	$	6,839,230

Portfolio Risks

The credit quality of our loan portfolio can potentially represent significant risk to our earnings, capital and liquidity. First Commonwealth devotes substantial resources to managing this risk primarily through our credit administration department that develops and administers policies and procedures for underwriting, maintaining, monitoring and collecting loans. Credit administration is independent of lending departments and oversight is provided by the Credit Committee of the First Commonwealth Board of Directors.

Total net charge-offs for the three months ended March 31, 2022 and 2021 were $1.1 million and $3.3 million, respectively.

Age Analysis of Past Due Loans by Segment

The following tables delineate the aging analysis of the recorded investments in past due loans as of March 31, 2022 and December 31, 2021. Also included in these tables are loans that are 90 days or more past due and still accruing because they are well-secured and in the process of collection.

In the March 31, 2022 table below, $14.5 million in multifamily commercial real estate loans are reflected as 30-59 days past due. This balance relates to one commercial borrower and subsequent to March 31, 2022, the loan was paid off in full.

	March 31, 2022
	30 - 59 days past due		60 - 89 days past due		90 days or greater and still accruing		Nonaccrual		Total past due and nonaccrual		Current		Total
	(dollars in thousands)
Commercial, financial, agricultural and other	$	160	$	86	$	998	$	2,037	$	3,281	$	1,120,409	$	1,123,690
Time and demand	110		30		989		2,037		3,166		989,311		992,477
Commercial credit cards	48		56		9		—		113		13,562		13,675
Equipment finance	—		—		—		—		—		2,505		2,505
Time and demand other	2		—		—		—		2		115,031		115,033
Real estate construction	418		474		—		—		892		398,096		398,988
Construction other	—		474		—		—		474		306,937		307,411
Construction residential	418		—		—		—		418		91,159		91,577
Residential real estate	3,764		568		306		5,500		10,138		1,996,083		2,006,221
Residential first lien	2,268		156		104		2,777		5,305		1,376,437		1,381,742
Residential junior lien/home equity	1,496		412		202		2,723		4,833		619,646		624,479
Commercial real estate	15,140		108		—		22,784		38,032		2,306,249		2,344,281
Multifamily	14,500		—		—		409		14,909		386,672		401,581
Nonowner occupied	511		71		—		21,160		21,742		1,494,776		1,516,518
Owner occupied	129		37		—		1,215		1,381		424,801		426,182
Loans to individuals	1,334		640		617		259		2,850		1,076,082		1,078,932
Automobile and recreational vehicles	803		299		122		163		1,387		982,614		984,001
Consumer credit cards	70		57		68		—		195		10,480		10,675
Consumer other	461		284		427		96		1,268		82,988		84,256
Total loans and leases	$	20,816	$	1,876	$	1,921	$	30,580	$	55,193	$	6,896,919	$	6,952,112

 

	December 31, 2021
	30 - 59 days past due		60 - 89 days past due		90 days or greater and still accruing		Nonaccrual		Total past due and nonaccrual		Current		Total
	(dollars in thousands)
Commercial, financial, agricultural and other	$	633	$	987	$	155	$	2,006	$	3,781	$	1,169,671	$	1,173,452
Time and demand	605		972		144		2,006		3,727		1,155,797		1,159,524
Commercial credit cards	28		15		11		—		54		13,874		13,928
Real estate construction	813		—		448		45		1,306		493,150		494,456
Residential real estate	3,393		983		218		5,608		10,202		1,910,048		1,920,250
Residential first lien	1,934		354		51		2,706		5,045		1,294,489		1,299,534
Residential junior lien/home equity	1,459		629		167		2,902		5,157		615,559		620,716
Commercial real estate	—		74		—		40,195		40,269		2,210,828		2,251,097
Multifamily	—		—		—		15,097		15,097		370,335		385,432
Nonowner occupied	—		—		—		23,930		23,930		1,441,317		1,465,247
Owner occupied	—		74		—		1,168		1,242		399,176		400,418
Loans to individuals	1,611		417		785		206		3,019		996,956		999,975
Automobile and recreational vehicles	1,228		175		199		148		1,750		899,530		901,280
Consumer credit cards	36		44		63		—		143		11,008		11,151
Consumer other	347		198		523		58		1,126		86,418		87,544
Total loans and leases	$	6,450	$	2,461	$	1,606	$	48,060	$	58,577	$	6,780,653	$	6,839,230

Nonaccrual Loans

The previous tables summarize nonaccrual loans by loan segment. The Company generally places loans on nonaccrual status when the full and timely collection of interest or principal becomes uncertain, when part of the principal balance has been charged off and no restructuring has occurred, or the loans reach a certain number of days past due. Generally, loans 90 days or more past due are placed on nonaccrual status, except for consumer loans, which are placed on nonaccrual status at 150 days past due.

When a loan is placed on nonaccrual, the accrued unpaid interest receivable is reversed against interest income and all future payments received are applied as a reduction to the loan principal. Generally, the loan is returned to accrual status when (a) all delinquent interest and principal becomes current under the terms of the loan agreement or (b) the loan is both well-secured and in the process of collection and collectability is no longer in doubt.

Nonperforming Loans

Management considers loans to be nonperforming when, based on current information and events, it is determined that the Company will not be able to collect all amounts due according to the loan contract, including scheduled interest payments. Nonperforming loans include nonaccrual loans and all troubled debt restructured loans. When management identifies a loan as nonperforming, the credit loss is measured based on the present value of expected future cash flows, discounted at the loan’s effective interest rate, except when the sole source for repayment of the loan is the operation or liquidation of collateral. When the loan is collateral dependent, the appraised value less estimated cost to sell is utilized. If management determines that the value of the loan is less than the recorded investment in the loan, a credit loss is recognized through an allowance estimate or a charge-off to the allowance for credit losses.

When the ultimate collectability of the total principal of a nonperforming loan is in doubt and the loan is on nonaccrual status, all payments are applied to principal, under the cost recovery method. When the ultimate collectability of the total principal of a nonperforming loan is not in doubt and the loan is on nonaccrual status, contractual interest is credited to interest income when received under the cash basis method.

At March 31, 2022 and December 31, 2021, there were no nonperforming loans held for sale. During the three months ended March 31, 2022 and 2021, there were no gains recognized on the sale of nonperforming loans.

The following tables include the recorded investment and unpaid principal balance for nonperforming loans with the associated allowance amount, if applicable, as of March 31, 2022 and December 31, 2021. Also presented are the average recorded investment in nonperforming loans and the related amount of interest recognized while the loan was considered nonperforming.

Average balances are calculated using month-end balances of the loans for the period reported and are included in the table below based on their period-end allowance position.

	March 31, 2022						December 31, 2021
	Recorded investment		Unpaid principal balance		Related allowance		Recorded investment		Unpaid principal balance		Related allowance
	(dollars in thousands)
With no related allowance recorded:
Commercial, financial, agricultural and other	$	3,505	$	9,719			$	3,720	$	10,303
Time and demand	3,505		9,719				3,720		10,303
Equipment finance	—		—
Time and demand other	—		—
Real estate construction	—		—				45		53
Construction other	—		—
Construction residential	—		—
Residential real estate	9,161		11,035				9,365		11,294
Residential first lien	5,245		6,327				5,200		6,337
Residential junior lien/home equity	3,916		4,708				4,165		4,957
Commercial real estate	23,425		24,395				40,591		41,525
Multifamily	—		—				14,677		14,677
Nonowner occupied	21,791		22,558				24,581		25,310
Owner occupied	1,634		1,837				1,333		1,538
Loans to individuals	423		542				446		485
Automobile and recreational vehicles	327		441				388		422
Consumer other	96		101				58		63
Subtotal	36,514		45,691				54,167		63,660
With an allowance recorded:
Commercial, financial, agricultural and other	544		572		$	272	327		349		$	307
Time and demand	544		572		272		327		349		307
Equipment finance	—		—		—
Time and demand other	—		—		—
Real estate construction	—		—		—		—		—		—
Construction other	—		—		—
Construction residential	—		—		—
Residential real estate	—		—		—		—		—		—
Residential first lien	—		—		—		—		—		—
Residential junior lien/home equity	—		—		—		—		—		—
Commercial real estate	409		441		79		686		711		88
Multifamily	409		441		79		421		446		88
Nonowner occupied	—		—		—		—		—		—
Owner occupied	—		—		—		265		265		—
Loans to individuals	—		—		—		—		—		—
Automobile and recreational vehicles	—		—		—		—		—		—
Consumer other	—		—		—		—		—		—
Subtotal	953		1,013		351		1,013		1,060		395
Total	$	37,467	$	46,704	$	351	$	55,180	$	64,720	$	395

	For the Three Months Ended March 31,
	2022				2021
	Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
	(dollars in thousands)
With no related allowance recorded:
Commercial, financial, agricultural and other	$	3,561	$	29	$	2,280	$	11
Time and demand	3,561		29		2,280		11
Equipment finance	—		—
Time and demand other	—		—
Real estate construction	—		—		54		—
Construction other	—		—
Construction residential	—		—
Residential real estate	9,201		84		10,892		63
Residential first lien	5,197		62		5,982		45
Residential junior lien/home equity	4,004		22		4,910		18
Commercial real estate	24,312		13		25,739		22
Multifamily	—		—		—		—
Nonowner occupied	22,714		9		22,593		7
Owner occupied	1,598		4		3,146		15
Loans to individuals	435		4		479		2
Automobile and recreational vehicles	350		4		437		2
Consumer other	85		—		42		—
Subtotal	37,509		130		39,444		98
With an allowance recorded:
Commercial, financial, agricultural and other	384		6		4,895		18
Time and demand	384		6		4,895		18
Equipment finance	—		—
Time and demand other	—		—
Real estate construction	—		—		—		—
Construction other	—		—
Construction residential	—		—
Residential real estate	—		—		—		—
Residential first lien	—		—		—		—
Residential junior lien/home equity	—		—		—		—
Commercial real estate	416		—		7,462		—
Multifamily	416		—		464		—
Nonowner occupied	—		—		6,917		—
Owner occupied	—		—		81		—
Loans to individuals	—		—		—		—
Automobile and recreational vehicles	—		—		—		—
Consumer other	—		—		—		—
Subtotal	800		6		12,357		18
Total	$	38,309	$	136	$	51,801	$	116

Unfunded commitments related to nonperforming loans were $0.2 million at both March 31, 2022 and December 31, 2021. After consideration of the requirements to draw and available collateral related to these commitments, it was determined that no reserve was required at March 31, 2022 and December 31, 2021.

Troubled debt restructured loans are those loans whose terms have been renegotiated to provide a reduction or deferral of principal or interest as a result of the financial difficulties experienced by the borrower, who could not obtain comparable terms from alternative financing sources. Troubled debt restructured loans are considered to be nonperforming loans.

The following table provides detail as to the total troubled debt restructured loans and total commitments outstanding on troubled debt restructured loans:

	March 31, 2022		December 31, 2021
	(dollars in thousands)
Troubled debt restructured loans
Accrual status	$	6,887	$	7,120
Nonaccrual status	10,090		13,134
Total	$	16,977	$	20,254
Commitments
Letters of credit	$	60	$	60
Unused lines of credit	18		16
Total	$	78	$	76

The following tables provide detail, including specific reserves and reasons for modification, related to loans identified as troubled debt restructurings:

	For the Three Months Ended March 31, 2022
		Type of Modification
	Number of Contracts	Extend Maturity		Modify Rate		Modify Payments		Total Pre-Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Specific Reserve
	(dollars in thousands)
Residential real estate	2	$	—	$	10	$	59	$	69	$	69	$	—
Residential first lien	2	—		10		59		69		69		—
Total	2	$	—	$	10	$	59	$	69	$	69	$	—

	For the Three Months Ended March 31, 2021
		Type of Modification
	Number of Contracts	Extend Maturity		Modify Rate		Modify Payments		Total Pre-Modification Outstanding Recorded Investment		Post- Modification Outstanding Recorded Investment		Specific Reserve
	(dollars in thousands)
Commercial, financial, agricultural and other	2	$	6,373	$	—	$	—	$	6,373	$	6,339	$	1,190
Time and demand	2	6,373		—		—		6,373		6,339		1,190
Residential real estate	3	—		105		14		119		119		—
Residential first lien	2	—		105		—		105		106		—
Residential junior lien/home equity	1	—		—		14		14		13		—
Loans to individuals	2	—		64		—		64		61		—
Automobile and recreational vehicles	2	—		64		—		64		61		—
Total	7	$	6,373	$	169	$	14	$	6,556	$	6,519	$	1,190

The troubled debt restructurings included in the above tables are also included in the nonperforming loan tables provided earlier in this note. Loans defined as modified due to a change in rate may include loans that were modified for a change in rate as well as a re-amortization of the principal and an extension of the maturity. For the three months ended March 31, 2022 and 2021, $10 thousand and $169 thousand, respectively, of total rate modifications represent loans with modifications to the rate as well as payment as a result of re-amortization. For both 2022 and 2021, the changes in loan balances between the pre-modification balance and the post-modification balance are due to customer payments.A troubled debt restructuring is considered to be in default when a restructured loan is 90 days or more past due. The following table provides information related to loans that were restructured within the past twelve months and that were considered to be in default during the three months ended March 31:

	2022			2021
	Number of Contracts	Recorded Investment		Number of Contracts	Recorded Investment
	(dollars in thousands)
Residential real estate	1	$	17	—	$	—
Residential first lien	1	17		—	—
Total	1	$	17	—	$	—

The following tables provide detail related to the allowance for credit losses:

	For the Three Months Ended March 31, 2022
	Beginning balance		Charge-offs		Recoveries		Provision (credit)a		Ending balance
	(dollars in thousands)
Commercial, financial, agricultural and other	$	18,093	$	(475)	$	80	$	3,023	$	20,721
Time and demand	15,283		(144)		53		3,715		18,907
Commercial credit cards	247		(19)		1		113		342
Equipment finance	—		—		—		31		31
Time and demand other	2,563		(312)		26		(836)		1,441
Real estate construction	4,220		—		—		710		4,930
Construction other	3,278		—		—		(103)		3,175
Construction residential	942		—		—		813		1,755
Residential real estate	12,625		(139)		29		4,213		16,728
Residential first lien	7,459		(40)		23		3,683		11,125
Residential junior lien/home equity	5,166		(99)		6		530		5,603
Commercial real estate	33,376		—		14		314		33,704
Multifamily	3,561		—		—		49		3,610
Nonowner occupied	24,838		—		5		(1,576)		23,267
Owner occupied	4,977		—		9		1,841		6,827
Loans to individuals	24,208		(1,009)		366		(8,460)		15,105
Automobile and recreational vehicles	21,392		(552)		255		(8,460)		12,635
Consumer credit cards	496		(109)		24		(29)		382
Consumer other	2,320		(348)		87		29		2,088
Total loans and leases	$	92,522	$	(1,623)	$	489	$	(200)	$	91,188

a) The provision expense(credit) shown here excludes the provision for off-balance sheet credit exposure included in the income statement.

	For the Three Months Ended March 31, 2022
							Loans
	Ending balance		Ending balance: individually evaluated for credit losses		Ending balance: collectively evaluated for credit losses		Ending balance		Ending balance: individually evaluated for credit losses		Ending balance: collectively evaluated for credit losses
	(dollars in thousands)
Commercial, financial, agricultural and other	$	20,721	$	272	$	20,449	$	1,123,690	$	3,179	$	1,120,511
Time and demand	18,907		272		18,635		992,477		3,179		989,298
Commercial credit cards	342		—		342		13,675		—		13,675
Equipment finance	31		—		31		2,505		—		2,505
Time and demand other	1,441		—		1,441		115,033		—		115,033
Real estate construction	4,930		—		4,930		398,988		—		398,988
Construction other	3,175		—		3,175		307,411		—		307,411
Construction residential	1,755		—		1,755		91,577		—		91,577
Residential real estate	16,728		—		16,728		2,006,221		253		2,005,968
Residential first lien	11,125		—		11,125		1,381,742		—		1,381,742
Residential junior lien/home equity	5,603		—		5,603		624,479		253		624,226
Commercial real estate	33,704		79		33,625		2,344,281		37,263		2,307,018
Multifamily	3,610		79		3,531		401,581		14,909		386,672
Nonowner occupied	23,267		—		23,267		1,516,518		21,425		1,495,093
Owner occupied	6,827		—		6,827		426,182		929		425,253
Loans to individuals	15,105		—		15,105		1,078,932		—		1,078,932
Automobile and recreational vehicles	12,635		—		12,635		984,001		—		984,001
Consumer credit cards	382		—		382		10,675		—		10,675
Consumer other	2,088		—		2,088		84,256		—		84,256
Total loans and leases	$	91,188	$	351	$	90,837	$	6,952,112	$	40,695	$	6,911,417

	For the Three Months Ended March 31, 2021
	Beginning balance		Charge-offs		Recoveries		Provision (credit)a		Ending balance
	(dollars in thousands)
Commercial, financial, agricultural and other	$	17,187	$	(569)	$	90	$	5,093	$	21,801
Time and demand	16,838		(460)		89		4,960		21,427
Commercial credit cards	349		(109)		1		133		374
Real estate construction	7,966		—		—		(3,945)		4,021
Residential real estate	14,358		(105)		37		(1,461)		12,829
Residential first lien	7,919		(23)		23		(692)		7,227
Residential junior lien/home equity	6,439		(82)		14		(769)		5,602
Commercial real estate	41,953		(1,550)		39		(2,774)		37,668
Multifamily	6,240		(1)		—		(1,988)		4,251
Nonowner occupied	28,414		(1,549)		39		985		27,889
Owner occupied	7,299		—		—		(1,771)		5,528
Loans to individuals	19,845		(1,541)		329		1,811		20,444
Automobile and recreational vehicles	16,133		(680)		181		1,254		16,888
Consumer credit cards	635		(168)		17		205		689
Consumer other	3,077		(693)		131		352		2,867
Total loans and leases	$	101,309	$	(3,765)	$	495	$	(1,276)	$	96,763

a) The provision expense(credit) shown here excludes the provision for off-balance sheet credit exposure included in the income statement.

Recorded Investment and Unpaid Principal Balance for Impaired Loans with Associated Allowance

The following tables include the recorded investment and unpaid principal balance for nonperforming loans with the associated allowance amount, if applicable, as of March 31, 2022 and December 31, 2021. Also presented are the average recorded investment in nonperforming loans and the related amount of interest recognized while the loan was considered nonperforming.

Average balances are calculated using month-end balances of the loans for the period reported and are included in the table below based on their period-end allowance position.

	March 31, 2022						December 31, 2021
	Recorded investment		Unpaid principal balance		Related allowance		Recorded investment		Unpaid principal balance		Related allowance
	(dollars in thousands)
With no related allowance recorded:
Commercial, financial, agricultural and other	$	3,505	$	9,719			$	3,720	$	10,303
Time and demand	3,505		9,719				3,720		10,303
Equipment finance	—		—
Time and demand other	—		—
Real estate construction	—		—				45		53
Construction other	—		—
Construction residential	—		—
Residential real estate	9,161		11,035				9,365		11,294
Residential first lien	5,245		6,327				5,200		6,337
Residential junior lien/home equity	3,916		4,708				4,165		4,957
Commercial real estate	23,425		24,395				40,591		41,525
Multifamily	—		—				14,677		14,677
Nonowner occupied	21,791		22,558				24,581		25,310
Owner occupied	1,634		1,837				1,333		1,538
Loans to individuals	423		542				446		485
Automobile and recreational vehicles	327		441				388		422
Consumer other	96		101				58		63
Subtotal	36,514		45,691				54,167		63,660
With an allowance recorded:
Commercial, financial, agricultural and other	544		572		$	272	327		349		$	307
Time and demand	544		572		272		327		349		307
Equipment finance	—		—		—
Time and demand other	—		—		—
Real estate construction	—		—		—		—		—		—
Construction other	—		—		—
Construction residential	—		—		—
Residential real estate	—		—		—		—		—		—
Residential first lien	—		—		—		—		—		—
Residential junior lien/home equity	—		—		—		—		—		—
Commercial real estate	409		441		79		686		711		88
Multifamily	409		441		79		421		446		88
Nonowner occupied	—		—		—		—		—		—
Owner occupied	—		—		—		265		265		—
Loans to individuals	—		—		—		—		—		—
Automobile and recreational vehicles	—		—		—		—		—		—
Consumer other	—		—		—		—		—		—
Subtotal	953		1,013		351		1,013		1,060		395
Total	$	37,467	$	46,704	$	351	$	55,180	$	64,720	$	395

	For the Three Months Ended March 31,
	2022				2021
	Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
	(dollars in thousands)
With no related allowance recorded:
Commercial, financial, agricultural and other	$	3,561	$	29	$	2,280	$	11
Time and demand	3,561		29		2,280		11
Equipment finance	—		—
Time and demand other	—		—
Real estate construction	—		—		54		—
Construction other	—		—
Construction residential	—		—
Residential real estate	9,201		84		10,892		63
Residential first lien	5,197		62		5,982		45
Residential junior lien/home equity	4,004		22		4,910		18
Commercial real estate	24,312		13		25,739		22
Multifamily	—		—		—		—
Nonowner occupied	22,714		9		22,593		7
Owner occupied	1,598		4		3,146		15
Loans to individuals	435		4		479		2
Automobile and recreational vehicles	350		4		437		2
Consumer other	85		—		42		—
Subtotal	37,509		130		39,444		98
With an allowance recorded:
Commercial, financial, agricultural and other	384		6		4,895		18
Time and demand	384		6		4,895		18
Equipment finance	—		—
Time and demand other	—		—
Real estate construction	—		—		—		—
Construction other	—		—
Construction residential	—		—
Residential real estate	—		—		—		—
Residential first lien	—		—		—		—
Residential junior lien/home equity	—		—		—		—
Commercial real estate	416		—		7,462		—
Multifamily	416		—		464		—
Nonowner occupied	—		—		6,917		—
Owner occupied	—		—		81		—
Loans to individuals	—		—		—		—
Automobile and recreational vehicles	—		—		—		—
Consumer other	—		—		—		—
Subtotal	800		6		12,357		18
Total	$	38,309	$	136	$	51,801	$	116