
	For the Year Ended
	December 31, 2022
(In thousands)	Beginning Balance		Initial Allowance on PCD Loans Acquired During the Period		Provision for Loan Losses		Charge- Offs		Recoveries		TDR Allowance Adjustments		Ending Balance
Construction and land development	$	2,751	$	518	$	3,127	$	—	$	68	$	—	$	6,464
Commercial real estate - owner occupied	8,579		38		(2,566)		—		—		—		6,051
Commercial real estate - non-owner occupied	36,617		880		5,871		(179)		69		—		43,258
Residential real estate	12,811		229		16,284		(84)		393		(28)		29,605
Commercial and financial	19,744		1,699		(5,367)		(1,233)		807		(2)		15,648
Consumer	2,813		1,911		8,834		(1,415)		733		(7)		12,869

Total	$	83,315	$	5,275	$	26,183	$	(2,911)	$	2,070	$	(37)	$	113,895


	For the Year Ended
	December 31, 2021
(In thousands)	Beginning Balance		Initial Allowance on PCD Loans Acquired During the Period		Provision for Credit Losses		Charge- Offs		Recoveries		TDR Allowance Adjustments		Ending Balance
Construction and land development	$	4,920	$	—	$	(2,300)	$	—	$	133	$	(2)	$	2,751
Commercial real estate - owner occupied	9,868		—		(1,289)		—		—		—		8,579
Commercial real estate - non-owner occupied	38,266		1,327		(1,664)		(1,327)		15		—		36,617
Residential real estate	17,500		—		(5,822)		(57)		1,196		(6)		12,811
Commercial and financial	18,690		1,719		2,292		(3,987)		1,030		—		19,744
Consumer	3,489		—		(638)		(727)		697		(8)		2,813

Total	$	92,733	$	3,046	$	(9,421)	$	(6,098)	$	3,071	$	(16)	$	83,315


	For the Year Ended
	December 31, 2020
(In thousands)	Beginning Balance		Impact of Adoption of ASC 326		Initial Allowance on PCD Loans Acquired During the Period		Provision for Loan Losses 1		Charge- Offs		Recoveries		TDR Allowance Adjustments		Ending Balance
Construction and land development	$	1,842	$	1,479	$	87	$	1,399	$	—	$	114	$	(1)	$	4,920
Commercial real estate - owner occupied	5,361		80		1,161		3,632		(310)		18		(74)		9,868
Commercial real estate - non-owner occupied	7,863		9,341		2,236		18,966		(177)		37		—		38,266
Residential real estate	7,667		5,787		124		3,840		(240)		350		(28)		17,500
Commercial and financial	9,716		3,677		2,643		8,329		(7,091)		1,416		—		18,690
Consumer	2,705		862		28		1,613		(2,024)		316		(11)		3,489
Total	$	35,154	$	21,226	$	6,279	$	37,779	$	(9,842)	$	2,251	$	(114)	$	92,733
1In addition, the Company recorded a $0.4 million provision to establish a valuation allowance on accrued interest receivable.

Management establishes the allowance using relevant available information from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. Forecast data is sourced from Moody’s Analytics (“Moody’s”), a firm widely recognized for its research, analysis, and economic forecasts. The forecasts of future economic conditions are over a period that has been deemed reasonable and supportable, and in segments where it can no longer develop reasonable and supportable forecasts, the Company reverts to longer-term historical loss experience to estimate losses over the remaining life of the loans.

In the implementation of CECL at January 1, 2020 and through June 30, 2022, the Company utilized a top-down allowance model based on an analysis of the probability of default (“PD”) and loss given default (“LGD”) to determine an expected loss by loan segment. During the third quarter of 2022, the Company transitioned to a tool that calculates the quantitative portion of expected credit losses using a discounted cash flow methodology for its commercial loans and using a loss rate methodology for its consumer loans. The new tool being utilized produces more granular results of expected loan loss, allows for greater differentiation and a more efficient process. This change did not result in a material impact to the Company’s financial statements.

As of December 31, 2022 and 2021, the Company utilized a blend of Moody’s most recent “U.S. Macroeconomic Outlook Baseline” and “Alternative Scenario 3 - Downside - 90th Percentile” scenarios and considered the uncertainty associated with the assumptions in both scenarios, including for the 2022 analysis the continued actions taken by the Federal Reserve with regard to monetary policy and interest rates and the potential impact of those actions, the ongoing Russia-Ukraine conflict and the magnitude of the resulting market disruption, the potential impact of persistent high inflation on economic growth, and expectations around a recession occurring over the next 12 to 24 months. Outcomes in any or all of these factors could differ from the scenarios identified above, and the Company incorporated qualitative considerations reflecting the risk of uncertain economic conditions, and for additional dimensions of risk not captured in the quantitative model.

In the Construction and Land Development segment, the increase in the allowance during the year is primarily attributed to higher loan balances. In this segment, the primary source of repayment is typically from proceeds of the sale, refinancing, or permanent financing of the underlying property; therefore, industry and collateral type and estimated collateral values are among the relevant factors in assessing expected losses.

In the Commercial Real Estate - Owner-Occupied segment, the decrease in the allowance reflects the transition to a discounted cash flow approach which, while continuing to consider relevant macroeconomic forecast variables, also considers loan-specific available collateral. The decrease is partially offset by increases due to loan growth. Risk characteristics include but are not limited to, collateral type, note structure, and loan seasoning.

In the Commercial Real Estate - Non Owner-Occupied segment, the increase in the allowance reflects higher loan balances, partially offset by the impact of transitioning from a portfolio level estimate to a discounted cash flow approach, utilizing macroeconomic variables specific to the loan segment. Repayment is often dependent upon rental income from the successful

operation of the underlying property. Loan performance may be adversely affected by general economic conditions or conditions specific to the real estate market, including property types. Collateral type, note structure, and loan seasoning are among the risk characteristics analyzed for this segment.

The Residential Real Estate segment includes first mortgages secured by residential property, and home equity lines of credit. The increase in the allowance reflects both higher loan balances and deterioration in the economic forecast, including the transition to a loss rate tool for estimating credit losses, utilizing macroeconomic variables specific to the loan segment. Risk characteristics considered for this segment include, but are not limited to, borrower FICO score, lien position, loan to value ratios, and loan seasoning.

In the Commercial and Financial segment, borrowers are primarily small to medium sized professional firms and other businesses, and loans are generally supported by projected cash flows of the business, collateralized by business assets, and/or guaranteed by the business owners. The decrease in reserves is attributed to the transition from a portfolio level estimate to a discounted cash flow tool, utilizing macroeconomic variables specific to the loan segment. The decrease was partially offset by the impact of higher loan balances. Industry, collateral type, estimated collateral values and loan seasoning are among the relevant factors in assessing expected losses.

Consumer loans include installment and revolving lines, loans for automobiles, boats, and other personal or family purposes. Risk characteristics considered for this segment include, but are not limited to, collateral type, loan to value ratios, loan seasoning and FICO score. The increase in the reserve during the year reflects higher loan balances and an increasing likelihood of economic recession reflected within the forecast.

The allowance for credit losses is comprised of specific allowances for loans individually evaluated and general allowances for loans grouped into loan pools based on similar characteristics, which are collectively evaluated. The Company’s loan portfolio and related allowance at December 31, 2022 and 2021 is shown in the following tables.


	December 31, 2022
	Individually Evaluated				Collectively Evaluated				Total
(In thousands)	Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance
Construction and land development	$	59	$	—	$	587,273	$	6,464	$	587,332	$	6,464
Commercial real estate - owner occupied	3,346		41		1,474,956		6,010		1,478,302		6,051
Commercial real estate - non-owner occupied	4,183		230		2,585,591		43,028		2,589,774		43,258
Residential real estate	11,333		275		1,838,170		29,330		1,849,503		29,605
Commercial and financial	12,167		2,639		1,336,469		13,009		1,348,636		15,648
Consumer	426		362		286,161		12,507		286,587		12,869
Paycheck Protection Program	—		—		4,590		—		4,590		—
Total	$	31,514	$	3,547	$	8,113,210	$	110,348	$	8,144,724	$	113,895


	December 31, 2021
	Individually Evaluated				Collectively Evaluated				Total
(In thousands)	Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance		Recorded Investment		Associated Allowance
Construction and land development	$	271	$	92	$	230,553	$	2,659	$	230,824	$	2,751
Commercial real estate - owner occupied	5,131		419		1,192,643		8,160		1,197,774		8,579
Commercial real estate - non-owner occupied	5,905		27		1,730,534		36,590		1,736,439		36,617
Residential real estate	16,345		646		1,409,009		12,165		1,425,354		12,811
Commercial and financial	11,470		2,885		1,057,886		16,859		1,069,356		19,744
Consumer	741		685		173,434		2,128		174,175		2,813
Paycheck Protection Program	—		—		91,107		—		91,107		—
Total	$	39,863	$	4,754	$	5,885,166	$	78,561	$	5,925,029	$	83,315