ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY

12 Months Ended

Dec. 31, 2022

ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY

ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY

ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY

The Company adopted ASC 326 using the modified retrospective for all financial assets measured at amortized cost. Results for reporting periods after January 1, 2021 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP.

The following table presents the activity in the allowance for credit losses by portfolio segment for the year ended December 31, 2022 and 2021:

(dollars in thousands)	Commercial and Industrial		Commercial Real Estate and Multi-family  Residential		Agri-business and Agricultural		Other Commercial		Consumer 1-4 Family Mortgage		Other Consumer		Unallocated		Total
2022
Beginning balance	$	30,595	$	26,535	$	5,034	$	1,146	$	2,866	$	1,147	$	450	$	67,773
Provision for credit losses	8,646		1,179		(605)		(229)		125		155		104		9,375
Loans charged-off	(4,022)		(597)		0		0		(42)		(473)		0		(5,134)
Recoveries	71		277		0		0		52		192		0		592
Net loans (charged-off) recovered	(3,951)		(320)		0		0		10		(281)		0		(4,542)
Ending balance	$	35,290	$	27,394	$	4,429	$	917	$	3,001	$	1,021	$	554	$	72,606

(dollars in thousands)	Commercial and Industrial		Commercial Real Estate and Multi-family  Residential		Agri-business and Agricultural		Other Commercial		Consumer 1-4 Family Mortgage		Other Consumer		Unallocated		Total
2021
Beginning balance	$	28,333	$	22,907	$	3,043	$	416	$	2,619	$	951	$	3,139	$	61,408
Impact of adopting ASC 326	4,312		4,316		1,060		941		953		349		(2,881)		9,050
Provision for credit losses	1,966		(632)		611		(211)		(777)		(72)		192		1,077
Loans charged-off	(5,575)		(70)		0		0		(51)		(287)		0		(5,983)
Recoveries	1,559		14		320		0		122		206		0		2,221
Net loans (charged-off) recovered	(4,016)		(56)		320		0		71		(81)		0		(3,762)
Ending balance	$	30,595	$	26,535	$	5,034	$	1,146	$	2,866	$	1,147	$	450	$	67,773

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes commercial loans individually by classifying the loans as to credit risk. This analysis is performed on a quarterly basis for Special Mention, Substandard and Doubtful grade loans and annually on Pass grade loans over $250,000.

The Company uses the following definitions for risk ratings:

Special Mention. Loans classified as Special Mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

Substandard. Loans classified as Substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized as the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

NOTE 4 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY (continued)

Doubtful. Loans classified as Doubtful have all the weaknesses inherent in those classified as Substandard, with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans are considered to be "Pass" rated when they are reviewed as part of the previously described process and do not meet the criteria above with the exception of consumer troubled debt restructurings, which are evaluated and listed with Substandard commercial grade loans and consumer nonaccrual loans which are evaluated individually and listed with “Not Rated” loans. Loans listed as Not Rated are consumer loans or commercial loans with consumer characteristics included in groups of homogenous loans which are analyzed for credit quality indicators utilizing delinquency status.

NOTE 4 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY (continued)

The following tables summarize the risk category of loans by loan segment and origination date as of December 31, 2022 and 2021. Balances presented are at the amortized cost basis by origination year.

(dollars in thousands)	2022		2021		2020		2019		2018		Prior		Term Total		Revolving		Total
Commercial and industrial loans:
Working capital lines of credit loans:
Pass	$	2,207	$	2,718	$	1,601	$	0	$	0	$	0	$	6,526	$	597,108	$	603,634
Special Mention	0		0		0		0		0		0		0		36,410		36,410
Substandard	200		0		0		300		0		0		500		10,495		10,995
Total	2,407		2,718		1,601		300		0		0		7,026		644,013		651,039
Non-working capital loans:
Pass	272,273		124,600		91,850		47,711		9,981		13,670		560,085		240,490		800,575
Special Mention	448		1,620		0		109		159		2,961		5,297		2,153		7,450
Substandard	11,831		872		5,021		194		1,351		3,979		23,248		4,171		27,419
Not Rated	2,891		1,550		1,254		413		120		23		6,251		0		6,251
Total	287,443		128,642		98,125		48,427		11,611		20,633		594,881		246,814		841,695
Commercial real estate and multi-family residential loans:
Construction and land development loans:
Pass	26,889		19,944		14,026		356		0		0		61,215		453,953		515,168
Total	26,889		19,944		14,026		356		0		0		61,215		453,953		515,168
Owner occupied loans:
Pass	113,656		179,014		139,880		97,353		65,519		97,335		692,757		40,533		733,290
Special Mention	2,960		7,608		0		446		1,491		8,054		20,559		0		20,559
Substandard	308		105		1,491		373		1,161		229		3,667		0		3,667
Total	116,924		186,727		141,371		98,172		68,171		105,618		716,983		40,533		757,516
Nonowner occupied loans:
Pass	194,294		125,190		134,661		91,907		15,109		64,874		626,035		68,603		694,638
Special Mention	0		11,024		0		0		0		0		11,024		0		11,024
Total	194,294		136,214		134,661		91,907		15,109		64,874		637,059		68,603		705,662
Multi-family loans:
Pass	38,460		25,741		36,929		35,695		2,046		28,866		167,737		7,349		175,086
Special Mention	21,855		0		0		0		0		0		21,855		0		21,855
Total	60,315		25,741		36,929		35,695		2,046		28,866		189,592		7,349		196,941
Agri-business and agricultural loans:
Loans secured by farmland:
Pass	38,344		28,684		29,741		9,656		8,145		19,638		134,208		63,094		197,302
Special Mention	260		0		1,676		1,780		0		15		3,731		0		3,731
Substandard	0		0		0		0		0		145		145		0		145
Total	38,604		28,684		31,417		11,436		8,145		19,798		138,084		63,094		201,178
Loans for agricultural production:
Pass	6,040		30,262		22,167		3,625		9,248		4,539		75,881		143,599		219,480
Special Mention	947		243		7,262		928		0		0		9,380		2,129		11,509
Total	6,987		30,505		29,429		4,553		9,248		4,539		85,261		145,728		230,989
Other commercial loans:
Pass	27,097		4,815		17,911		147		931		10,985		61,886		48,295		110,181
Special Mention	0		0		0		0		0		3,160		3,160		0		3,160
Total	27,097		4,815		17,911		147		931		14,145		65,046		48,295		113,341
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans
Pass	8,768		12,809		12,289		4,805		4,045		3,860		46,576		5,634		52,210
Special Mention	0		0		552		0		0		0		552		0		552
Substandard	0		0		0		0		83		1,944		2,027		0		2,027
Not Rated	57,404		44,331		20,023		5,936		2,970		27,004		157,668		0		157,668
Total	66,172		57,140		32,864		10,741		7,098		32,808		206,823		5,634		212,457
Open end and junior lien loans
Pass	137		541		357		63		75		0		1,173		5,841		7,014
Substandard	0		0		0		31		49		0		80		111		191
Not Rated	44,472		13,597		3,014		3,616		1,476		2,252		68,427		101,750		170,177
Total	44,609		14,138		3,371		3,710		1,600		2,252		69,680		107,702		177,382
Residential construction loans
Not Rated	14,463		2,167		897		291		129		1,223		19,170		0		19,170
Total	14,463		2,167		897		291		129		1,223		19,170		0		19,170
Other consumer loans
Pass	1,344		1,841		432		600		0		948		5,165		16,152		21,317
Substandard	0		0		0		210		0		0		210		0		210
Not Rated	24,395		14,563		9,168		3,606		2,755		1,352		55,839		10,492		66,331
Total	25,739		16,404		9,600		4,416		2,755		2,300		61,214		26,644		87,858
TOTAL	$	911,943	$	653,839	$	552,202	$	310,151	$	126,843	$	297,056	$	2,852,034	$	1,858,362	$	4,710,396

NOTE 4 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY (continued)

(dollars in thousands)	2021		2020		2019		2018		2017		Prior		Term Total		Revolving		Total
Commercial and industrial loans:
Working capital lines of credit loans:
Pass	$	3,699	$	830	$	3,360	$	0	$	0	$	0	$	7,889	$	558,634	$	566,523
Special Mention	0		0		0		0		0		0		0		60,441		60,441
Substandard	0		0		35		0		0		0		35		25,928		25,963
Total	3,699		830		3,395		0		0		0		7,924		645,003		652,927
Non-working capital loans:
Pass	185,374		139,157		79,477		38,899		19,415		18,489		480,811		203,794		684,605
Special Mention	17,728		0		225		979		2,350		1,426		22,708		0		22,708
Substandard	2,996		6,948		1,091		2,534		5,465		426		19,460		3,321		22,781
Not Rated	2,265		1,758		837		563		128		14		5,565		0		5,565
Total	208,363		147,863		81,630		42,975		27,358		20,355		528,544		207,115		735,659
Commercial real estate and multi-family residential loans:
Construction and land development loans:
Pass	35,136		30,224		1,276		998		0		0		67,634		310,396		378,030
Total	35,136		30,224		1,276		998		0		0		67,634		310,396		378,030
Owner occupied loans:
Pass	135,861		169,404		124,117		85,070		78,155		93,925		686,532		29,611		716,143
Special Mention	6,555		0		880		933		7,387		1,235		16,990		0		16,990
Substandard	489		1,570		909		1,758		694		238		5,658		0		5,658
Total	142,905		170,974		125,906		87,761		86,236		95,398		709,180		29,611		738,791
Nonowner occupied loans:
Pass	146,342		154,433		107,262		19,054		31,023		59,154		517,268		44,362		561,630
Special Mention	11,825		331		0		0		0		14,253		26,409		0		26,409
Total	158,167		154,764		107,262		19,054		31,023		73,407		543,677		44,362		588,039
Multi-family loans:
Pass	84,678		53,195		36,575		12,286		14,574		9,793		211,101		13,434		224,535
Special Mention	0		0		0		0		22,252		0		22,252		0		22,252
Total	84,678		53,195		36,575		12,286		36,826		9,793		233,353		13,434		246,787
Agri-business and agricultural loans:
Loans secured by farmland:
Pass	47,532		37,035		16,249		10,469		10,454		17,021		138,760		61,774		200,534
Special Mention	0		1,985		2,303		0		180		30		4,498		918		5,416
Substandard	207		0		0		0		0		145		352		0		352
Total	47,739		39,020		18,552		10,469		10,634		17,196		143,610		62,692		206,302
Loans for agricultural production:
Pass	36,238		25,855		4,224		11,072		1,331		4,178		82,898		138,142		221,040
Special Mention	448		8,642		1,171		0		0		0		10,261		8,272		18,533
Total	36,686		34,497		5,395		11,072		1,331		4,178		93,159		146,414		239,573
Other commercial loans:
Pass	6,556		21,111		3,243		1,273		8,592		7,460		48,235		21,145		69,380
Special Mention	0		0		0		0		0		3,798		3,798		0		3,798
Total	6,556		21,111		3,243		1,273		8,592		11,258		52,033		21,145		73,178
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans
Pass	14,635		16,173		5,312		5,903		3,049		3,221		48,293		5,005		53,298
Substandard	0		0		0		0		0		1,274		1,274		0		1,274
Not Rated	45,089		27,738		9,248		5,217		7,628		26,321		121,241		482		121,723
Total	59,724		43,911		14,560		11,120		10,677		30,816		170,808		5,487		176,295
Open end and junior lien loans
Pass	679		379		159		313		0		0		1,530		5,074		6,604
Substandard	0		0		0		0		0		0		0		98		98
Not Rated	21,945		5,624		5,987		3,899		1,653		1,526		40,634		110,523		151,157
Total	22,624		6,003		6,146		4,212		1,653		1,526		42,164		115,695		157,859
Residential construction loans
Not Rated	7,926		1,537		960		138		171		1,125		11,857		0		11,857
Total	7,926		1,537		960		138		171		1,125		11,857		0		11,857
Other consumer loans
Pass	3,401		957		1,523		0		1,155		0		7,036		12,998		20,034
Substandard	36		23		230		0		0		0		289		0		289
Not Rated	21,652		14,931		7,474		5,844		1,890		1,203		52,994		9,227		62,221
Total	25,089		15,911		9,227		5,844		3,045		1,203		60,319		22,225		82,544
TOTAL	$	839,292	$	719,840	$	414,127	$	207,202	$	217,546	$	266,255	$	2,664,262	$	1,623,579	$	4,287,841

NOTE 4 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY (continued)

As of December 31, 2022 and 2021, $1.5 million and $26.2 million, respectively, in PPP loans were included in the "Pass" category of non-working capital commercial and industrial loans. These loans were included in this risk rating category because they are fully guaranteed by the Small Business Administration ("SBA").

Nonaccrual and Past Due Loans:

For all loan classes, a loan is generally placed on nonaccrual status when principal or interest becomes 90 days past due unless it is well secured and in process of collection, or earlier when concern exists as to the ultimate collectability of principal or interest. Interest accrued but not received is reversed against earnings. Cash interest received on these loans is applied to the principal balance until the principal is recovered or until the loan returns to accrual status. Loans may be returned to accrual status when all the principal and interest amounts contractually due are brought current, remain current for a prescribed period, and the payments are reasonably assured.

The following table presents the aging of the amortized cost basis in past due loans as of December 31, 2022 and 2021 by class of loans and loans past due 90 days or more and still accruing by class of loan:

(dollars in thousands)	Loans Not Past Due		30-89 Days Past Due		Greater than 89 Days Past Due and Accruing		Total Accruing		Total Nonaccrual		Nonaccrual With No Allowance For Credit Loss		Total
2022
Commercial and industrial loans:
Working capital lines of credit loans	$	649,529	$	68	$	0	$	649,597	$	1,442	$	0	$	651,039
Non-working capital loans	830,033		39		1		830,073		11,622		727		841,695
Commercial real estate and multi-family residential loans:
Construction and land development loans	515,168		0		0		515,168		0		0		515,168
Owner occupied loans	754,451		0		0		754,451		3,065		1,469		757,516
Nonowner occupied loans	705,662		0		0		705,662		0		0		705,662
Multi-family loans	196,941		0		0		196,941		0		0		196,941
Agri-business and agricultural loans:
Loans secured by farmland	201,033		0		0		201,033		145		0		201,178
Loans for agricultural production	230,989		0		0		230,989		0		0		230,989
Other commercial loans	113,341		0		0		113,341		0		0		113,341
Consumer 1‑4 family mortgage loans:
Closed end first mortgage loans	211,736		306		122		212,164		293		225		212,457
Open end and junior lien loans	176,758		436		0		177,194		188		188		177,382
Residential construction loans	19,170		0		0		19,170		0		0		19,170
Other consumer loans	87,333		316		0		87,649		209		6		87,858
Total	$	4,692,144	$	1,165	$	123	$	4,693,432	$	16,964	$	2,615	$	4,710,396

As of December 31, 2022, there were an insignificant number of loans 30-89 days past due or greater than 89 days past due on nonaccrual. Additionally, interest income recognized on nonaccrual loans was insignificant during the year ended December 31, 2022.

NOTE 4 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY (continued)

(dollars in thousands)	Loans Not Past Due		30-89 Days Past Due		Greater than 89 Days Past Due and Accruing		Total Accruing		Total Nonaccrual		Nonaccrual With No Allowance For Credit Loss		Total
2021
Commercial and industrial loans:
Working capital lines of credit loans	$	652,903	$	24	$	0	$	646,961	$	5,966	$	5,200	$	652,927
Non-working capital loans	735,658		1		0		731,063		4,596		229		735,659
Commercial real estate and multi-family residential loans:
Construction and land development loans	378,030		0		0		378,030		0		0		378,030
Owner occupied loans	738,791		0		0		735,157		3,634		2,129		738,791
Nonowner occupied loans	588,039		0		0		588,039		0		0		588,039
Multi-family loans	246,787		0		0		246,787		0		0		246,787
Agri-business and agricultural loans:
Loans secured by farmland	206,302		0		0		205,967		335		0		206,302
Loans for agricultural production	239,573		0		0		239,573		0		0		239,573
Other commercial loans	73,178		0		0		73,178		0		0		73,178
Consumer 1‑4 family mortgage loans:
Closed end first mortgage loans	175,678		500		117		176,240		55		55		176,295
Open end and junior lien loans	157,729		130		0		157,761		98		98		157,859
Residential construction loans	11,857		0		0		11,857		0		0		11,857
Other consumer loans	82,472		72		0		82,255		289		0		82,544
Total	$	4,286,997	$	727	$	117	$	4,272,868	$	14,973	$	7,711	$	4,287,841

As of December 31, 2021, there were an insignificant number of loans 30-89 days past due or greater than 89 days past due on nonaccrual. Additionally, interest income recognized on nonaccrual loans was insignificant during the year ended December 31, 2021.

When management determines that foreclosure is probable, expected credit losses for collateral dependent loans are based on the fair value of the collateral at the reporting date, adjusted for selling costs as appropriate. A loan is considered collateral dependent when the borrower is experiencing financial difficulty and the loan is expected to be repaid substantially through the operation or sale of the collateral. The class of loan represents the primary collateral type associated with the loan. Significant year over year changes are reflective of changes in nonaccrual status and not necessarily associated with credit quality indicators like appraisal value.

NOTE 4 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY (continued)

The following tables present the amortized cost basis of collateral dependent loans by class of loan as of December 31, 2022 and 2021:

(dollars in thousands)	Real Estate		General Business  Assets		Other		Total
2022
Commercial and industrial loans:
Working capital lines of credit loans	$	50	$	5,402	$	0	$	5,452
Non-working capital loans	544		18,109		229		18,882
Commercial real estate and multi-family residential loans:
Owner occupied loans	413		1,491		1,161		3,065
Nonowner occupied loans	0		0		0		0
Agri-business and agricultural loans:
Loans secured by farmland	0		145		0		145
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans	2,030		0		0		2,030
Open end and junior lien loans	188		0		0		188
Other consumer loans	0		0		7		7
Total	$	3,225	$	25,147	$	1,397	$	29,769

(dollars in thousands)	Real Estate		General Business  Assets		Other		Total
2021
Commercial and industrial loans:
Working capital lines of credit loans	$	0	$	5,966	$	0	$	5,966
Non-working capital loans	1,606		9,475		229		11,310
Commercial real estate and multi-family residential loans:
Owner occupied loans	1,435		1,505		1,161		4,101
Nonowner occupied loans	0		0		0		0
Agri-business and agricultural loans:
Loans secured by farmland	190		145		0		335
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans	3,081		0		0		3,081
Open end and junior lien loans	98		0		0		98
Other consumer loans	0		0		59		59
Total	$	6,410	$	17,091	$	1,449	$	24,950

NOTE 4 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY (continued)

Modifications Made to Borrowers Experiencing Financial Difficulty

The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Company uses a probability of default/loss given default model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made at the time of a modification.

Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses, a change to the allowance for credit losses is generally not recorded upon modification.

Occasionally, the Company modifies loans by providing principal forgiveness that is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses. Additionally, the Company may allow a borrower to to make interest only payments for a specified period of time.

During the year ended December 31, 2022, no loans received a material modification based on borrower financial difficulty.

Troubled Debt Restructurings (Prior to January 1, 2022):

Prior to the partial adoption of ASU 2022-02 on January 1, 2022, which had an immaterial impact on the Company's allowance for credit losses, troubled debt restructured loans were included in the total for individually analyzed loans. The following are disclosures related to troubled debt restructured loans in prior periods.

Troubled debt restructured loans are included in the totals for individually analyzed loans. The Company has allocated $5.8 million of specific allocations to customers whose loan terms have been modified in troubled debt restructurings as of December 31, 2021. The Company is not committed to lend additional funds to debtors whose loans have been modified in a troubled debt restructuring.

(dollars in thousands)	December 31, 2021
Accruing troubled debt restructured loans	$	5,121
Nonaccrual troubled debt restructured loans	6,218
Total troubled debt restructured loans	$	11,339

During the year ending December 31, 2021, certain loans were modified as troubled debt restructurings. The modified terms of these loans include one or a combination of the following: inadequate compensation for the terms of the restructure or renewal; a modification of the repayment terms which delays principal payment for some period; terms offered to borrowers in financial distress where no additional credit enhancements were obtained at the time of renewal.

Additional concessions were granted to borrowers during 2021 with previously identified troubled debt restructured loans. There were 8 loans with recorded investments totaling $2.2 million where collateral values or cash flows were insufficient to support the loans. These troubled debt restructured loans with additional concessions decreased the allowance by $423,000 and resulted in no charge-offs for the year ending December 31, 2021. These concessions are not included in the table on the next page.

NOTE 4 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY (continued)

The following table presents loans by class modified as new troubled debt restructurings that occurred during the year ending December 31, 2021:

						Modified Repayment Terms
(dollars in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans	Extension Period or Range (in months)
Troubled Debt Restructurings
Consumer 1-4 family loans:
Closed end first mortgage loans	2	$	217	$	217	2	172-204
Total	2	$	217	$	217	2	172-204

For the period ending December 31, 2021, the troubled debt restructurings described above had no impact to the allowance and no charge-offs were recorded.

As of December 31, 2021, one retail loan in the amount of $11,000 had a COVID-19 related deferral. In accordance with Section 4013 of the CARES Act, this deferral was not considered to be a troubled debt restructuring. This provision was effective until its expiration on January 1, 2022 under the Consolidated Appropriations Act, 2021.

During the year ended December 31, 2020, certain loans were modified as troubled debt restructurings. The modified terms of these loans include one or a combination of the following: inadequate compensation for the terms of the restructure or renewal; a modification of the repayment terms which delays principal repayment for some period; or renewal terms offered to borrowers in financial distress where no additional credit enhancements were obtained at the time of renewal.

The following table presents loans by class modified as new troubled debt restructurings that occurred during the year ending December 31, 2020:

						Modified Repayment Terms
(dollars in thousands)	Number of Loans	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of Loans	Extension Period or Range (in months)
Troubled Debt Restructurings
Commercial and industrial loans:
Working capital lines of credit loans	1	$	250	$	315	1	0
Non-working capital lines of credit loans	2	4,288		3,691		2	0
Commercial real estate and multi-family residential loans:
Owner occupied loans	1	1,528		1,527		1	0
Total	4	$	6,066	$	5,533	4	0

For the period ending December 31, 2020, the troubled debt restructurings described above had no impact to the allowance and no charge-offs were recorded.

As of December 31, 2020, total deferrals attributed to COVID-19 were $100.7 million representing 49 borrowers. This represented 2.2% of the total loan portfolio. Of that 22 were commercial loan borrowers representing $98.2 million in loans, or 2.3% of commercial loans, and 27 were retail loan borrowers representing $2.5 million, or 0.7% of total retail loans. The majority of all loan deferrals were for a period of 90 days. Of the total commercial deferrals attributed to COVID-19, $11.9 million represented a first deferral action, $22.8 million represented a second deferral action, $41.9 million represented a third deferral action and $24.1 million represented a fourth deferral action. Two borrowers represented 90% of the fourth deferral population and were commercial real estate nonowner occupied loans supported by adequate collateral and personal guarantors and consist of loans to the hotel and accommodation industry. All COVID-19 related loan deferrals were on accrual status, as each deferral was individually analyzed, and management determined that all contractual cashflows were collectable at that

NOTE 4 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY (continued)

time. In accordance with Section 4013 of the CARES Act, these were not considered to be troubled debt restructurings and were excluded from the table above.

A loan is considered to be in payment default once it is 30 days contractually past due under the modified terms. There were no loans modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the period ending December 31, 2021 and 2020.

Allowance for Loan Losses (Prior to January 1, 2021)

Prior to the adoption of ASC 326 on January 1, 2021 the Company calculated the allowance for loan losses using the incurred losses methodology. The following tables are disclosures related to the allowance for loan losses in prior periods.

The following tables present the activity and balance in the allowance for loan losses by portfolio segment for the year ended December 31, 2020. PPP loans are fully guaranteed by the SBA and have not been allocated for within the allowance for loan losses.

(dollars in thousands)	Commercial and Industrial		Commercial Real Estate and Multi-family  Residential		Agri-business and Agricultural		Other Commercial		Consumer 1-4 Family Mortgage		Other Consumer		Unallocated		Total
Beginning balance	$	25,789	$	15,796	$	3,869	$	447	$	2,086	$	345	$	2,320	$	50,652
Provision for loan losses	6,640		6,868		(826)		(31)		341		959		819		14,770
Loans charged-off	(4,524)		(72)		0		0		(141)		(516)		0		(5,253)
Recoveries	428		315		0		0		333		163		0		1,239
Net loans (charged-off) recovered	(4,096)		243		0		0		192		(353)		0		(4,014)
Ending balance	$	28,333	$	22,907	$	3,043	$	416	$	2,619	$	951	$	3,139	$	61,408

NOTE 4 – ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY (continued)

The following table presents loans individually evaluated for impairment by class of loans for the year ended December 31, 2020:

(dollars in thousands)	Average Recorded Investment		Interest Income Recognized		Cash Basis Interest Income Recognized
With no related allowance recorded:
Commercial and industrial loans:
Working capital lines of credit loans	$	375	$	0	$	0
Non-working capital loans	816		21		21
Commercial real estate and multi-family residential loans:
Owner occupied loans	2,156		13		12
Agri-business and agricultural loans:
Loans secured by farmland	283		0		0
Loans for agricultural production	4		0		0
Consumer 1-4 family loans:
Closed end first mortgage loans	291		3		2
Open end and junior lien loans	49		0		0
With an allowance recorded:
Commercial and industrial loans:
Working capital lines of credit loans	2,433		0		0
Non-working capital loans	11,579		287		287
Commercial real estate and multi-family residential loans:
Construction and land development loans
Owner occupied loans	3,156		30		30
Agri-business and agricultural loans:
Loans secured by farmland	147		0		0
Consumer 1-4 family mortgage loans:
Closed end first mortgage loans	1,557		36		33
Open end and junior lien loans	481		0		0
Residential construction loans	35		0		0
Other consumer loans	0		0		0
Total	$	23,362	$	390	$	385

Nonaccrual loans and loans past due 90 days still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans.