LOANS AND ALLOWANCE | 4. LOANS AND ALLOWANCE FOR CREDIT LOSSES The following table summarizes the composition of our loan portfolio as of June 30, 2022 and December 31, 2021 (in thousands): June 30, 2022 December 31, 2021 Loans held for sale $ 16,096 $ — Loans secured by real estate: Commercial real estate - owner occupied 432,533 387,703 Commercial real estate - non-owner occupied 598,974 588,000 Secured by farmland 7,951 8,612 Construction and land development 117,529 121,444 Residential 1-4 family 606,303 547,560 Multi-family residential 144,406 164,071 Home equity lines of credit 69,860 73,846 Total real estate loans 1,977,556 1,891,236 Commercial loans 447,182 301,980 Paycheck Protection Program loans 17,525 77,319 Consumer loans 179,691 60,996 Total Non-PCD loans 2,621,954 2,331,531 PCD loans 6,843 8,455 Total loans $ 2,628,797 $ 2,339,986 The accounting policy related to the allowance for credit losses is considered a critical policy given the level of estimation, judgment, and uncertainty in the levels of the allowance required to account for the expected losses in the loan portfolio and the material effect such estimation, judgment, and uncertainty can have on the consolidated financial results. Accrued Interest Receivable Accrued interest receivable on loans totaled $9.0 million and $10.8 million at June 30, 2022 and December 31, 2021, respectively, and is included in other assets in the consolidated balance sheets. Nonaccrual and Past Due Loans Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. In determining whether or not a borrower may be unable to meet payment obligations for each class of loans, we consider the borrower’s debt service capacity through the analysis of current financial information, if available, and/or current information with regards to our collateral position. Regulatory provisions would typically require the placement of a loan on nonaccrual status if (i) principal or interest has been in default for a period of 90 days or more unless the loan is both well secured and in the process of collection or (ii) full payment of principal and interest is not expected. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income on nonaccrual loans is recognized only to the extent that cash payments are received in excess of principal due. A loan may be returned to accrual status when all the principal and interest amounts contractually due are brought current and future principal and interest amounts contractually due are reasonably assured, which is typically evidenced by a sustained period (at least six months) of repayment performance by the borrower. The following tables present the aging of the recorded investment in past due loans by class of loans as of June 30, 2022 and December 31, 2021 (in thousands): 30 - 59 60 - 89 90 Days Days Days Total Loans Not Total June 30, 2022 Past Due Past Due or More Past Due Past Due Loans Commercial real estate - owner occupied $ 387 $ 136 $ — $ 523 $ 432,010 $ 432,533 Commercial real estate - non-owner occupied 5,738 15,709 — 21,447 577,527 598,974 Secured by farmland — — 659 659 7,292 7,951 Construction and land development 430 32 — 462 117,067 117,529 Residential 1-4 family 1,317 303 8,682 10,302 596,001 606,303 Multi- family residential — — — — 144,406 144,406 Home equity lines of credit 223 36 170 429 69,431 69,860 Commercial loans 1,976 1,711 2,510 6,197 440,985 447,182 Paycheck Protection Program loans 57 104 1,512 1,673 15,852 17,525 Consumer loans 443 56 — 499 179,192 179,691 Total Non-PCD loans 10,571 18,087 13,533 42,191 2,579,763 2,621,954 PCD loans 135 1,361 12 1,508 5,335 6,843 Total $ 10,706 $ 19,448 $ 13,545 $ 43,699 $ 2,585,098 $ 2,628,797 30 - 59 60 - 89 90 Days Days Days Total Loans Not Total December 31, 2021 Past Due Past Due or More Past Due Past Due Loans Commercial real estate - owner occupied $ 194 $ 346 $ — $ 540 $ 387,163 $ 387,703 Commercial real estate - non-owner occupied — — — — 588,000 588,000 Secured by farmland 791 — — 791 7,821 8,612 Construction and land development 204 131 4,575 4,910 116,534 121,444 Residential 1-4 family 9,384 254 137 9,775 537,785 547,560 Multi- family residential — — — — 164,071 164,071 Home equity lines of credit 331 — 171 502 73,344 73,846 Commercial loans 387 — 1,246 1,633 300,347 301,980 Paycheck Protection Program loans 4,954 8,559 283 13,796 63,523 77,319 Consumer loans 193 130 2 325 60,671 60,996 Total Non-PCD loans 16,438 9,420 6,414 32,272 2,299,259 2,331,531 PCD loans 1,717 — — 1,717 6,738 8,455 Total $ 18,155 $ 9,420 $ 6,414 $ 33,989 $ 2,305,997 $ 2,339,986 The amortized cost, by class, of loans and leases on nonaccrual status at June 30, 2022 and December 31, 2021, were as follows (in thousands): 90 Less Than Total Nonaccrual With Days 90 Days Nonaccrual No Credit June 30, 2022 or More Past Due Loans (1) Loss Allowance (2) Commercial real estate - owner occupied $ — $ 356 $ 356 $ 356 Secured by farmland 659 148 807 659 Construction and land development — 32 32 — Residential 1-4 family 8,682 658 9,340 8,600 Multi- family residential — 4,151 4,151 4,151 Home equity lines of credit 170 469 639 23 Commercial loans 2,510 400 2,910 1,117 Consumer loans — 27 27 2 Total Non-PCD loans 12,021 6,241 18,262 14,908 PCD loans 12 1,361 1,373 — Total $ 12,033 $ 7,602 $ 19,635 $ 14,908 90 Less Than Total Nonaccrual With Days 90 Days Nonaccrual No Credit December 31, 2021 or More Past Due Loans (1) Loss Allowance (2) Commercial real estate - owner occupied $ — $ 842 $ 842 $ 842 Secured by farmland — 836 836 836 Construction and land development 4,575 34 4,609 4,609 Residential 1-4 family 137 411 548 548 Multi- family residential — 4,301 4,301 4,301 Home equity lines of credit 171 253 424 424 Commercial loans 1,246 476 1,722 745 Consumer loans 2 16 18 10 Total Non-PCD loans 6,131 7,169 13,300 12,315 PCD loans — 1,729 1,729 — Total $ 6,131 $ 8,898 $ 15,029 $ 12,315 (1) Nonaccrual loans include SBA guaranteed amounts totaling $0.8 million and $1.1 million at June 30, 2022 and December 31, 2021, respectively. (2) Nonaccrual loans with no credit loss allowance include SBA guaranteed amounts totaling $0.7 million and $1.1 million at June 30, 2022 and December 31, 2021, respectively. We had $1.5 million and $0.3 million of PPP loans greater than 90 days past due and still accruing at June 30, 2022 and December 31, 2021, respectively . The following table presents nonaccrual loans as of June 30, 2022 by class and year of origination (in thousands): Revolving Loans Revolving Converted 2022 2021 2020 2019 2018 Prior Loans To Term Total Commercial real estate - owner occupied $ — $ — $ — $ — $ — $ 356 $ — $ — $ 356 Secured by farmland — — — 19 — 659 — 129 807 Construction and land development — — — — — 32 — — 32 Residential 1-4 family — — — 8,600 — 475 — 265 9,340 Multi- family residential — — — — — 4,151 — — 4,151 Home equity lines of credit — — — — — — 616 23 639 Commercial loans — — 7 — 1,502 245 1,156 — 2,910 Paycheck Protection Program loans — — — — — — — — Consumer loans — — — — 2 6 19 — 27 Total non-PCD nonaccruals — — 7 8,619 1,504 5,924 1,791 417 18,262 PCD loans — — — — — 1,373 — — 1,373 Total nonaccrual loans $ — $ — $ 7 $ 8,619 $ 1,504 $ 7,297 $ 1,791 $ 417 $ 19,635 Interest received on nonaccrual loans was $0.1 million and $0.05 million for the three months ended June 30, 2022 and 2021, respectively, and $0.3 million and $0.09 million for the six months ended June 30, 2022 and 2021, respectively. Troubled Debt Restructurings A modification is classified as a TDR if both of the following exist: (1) the borrower is experiencing financial difficulty and (2) the Bank has granted a concession to the borrower. The Bank determines that a borrower may be experiencing financial difficulty if the borrower is currently delinquent on any of its debt, or if the Bank is concerned that the borrower may not be able to perform in accordance with the current terms of the loan agreement in the foreseeable future. Many aspects of the borrower’s financial situation are assessed when determining whether they are experiencing financial difficulty, particularly as it relates to commercial borrowers due to the complex nature of the loan structure, business/industry risk and borrower/guarantor structures. Concessions may include the reduction of an interest rate at a rate lower than current market rates for a new loan with similar risk, extension of the maturity date, reduction of accrued interest, or principal forgiveness. When evaluating whether a concession has been granted, the Bank also considers whether the borrower has provided additional collateral or guarantors and whether such additions adequately compensate the Bank for the restructured terms, or if the revised terms are consistent with those currently being offered to new loan customers. The assessments of whether a borrower is experiencing (or is likely to experience) financial difficulty and whether a concession has been granted is subjective in nature and management’s judgment is required when determining whether a modification is a TDR. Although each occurrence is unique to the borrower and is evaluated separately, for all portfolio segments, TDRs are typically modified through reduction in interest rates, reductions in payments, changing the payment terms from principal and interest to interest only, and/or extensions in term maturity. As of June 30, 2022, there were 11 TDR loans outstanding in the amount of $2.7 million primarily due to the economic impact of COVID-19 on certain of the Bank’s borrowers. There have been no defaults of TDRs modified during the past twelve months. Credit Quality Indicators Through its system of internal controls, Primis evaluates and segments loan portfolio credit quality using regulatory definitions for Special Mention, Substandard and Doubtful. Special Mention loans are considered to be criticized. Substandard and Doubtful loans are considered to be classified. Special Mention loans are loans that have a potential weakness that deserve 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. Substandard loans may be 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 by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Doubtful loans have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Primis had no loans classified Doubtful at June 30, 2022 or December 31, 2021. In monitoring credit quality trends in the context of assessing the appropriate level of the allowance for credit losses on loans, we monitor portfolio credit quality by the weighted-average risk grade of each class of loan. The following table presents weighted-average risk grades for all loans, by class and year of origination/renewal as of June 30, 2022 (in thousands): Revolving Loans Revolving Converted 2022 2021 2020 2019 2018 Prior Loans To Term Total Commercial real estate - owner occupied Pass $ 48,503 $ 60,905 $ 19,728 $ 34,832 $ 27,892 $ 219,330 $ 10,509 $ 6,838 $ 428,537 Special Mention — — — — — 1,190 — — 1,190 Substandard — — — 1 — 2,805 — — 2,806 Doubtful — — — — — — — — — $ 48,503 $ 60,905 $ 19,728 $ 34,833 $ 27,892 $ 223,325 $ 10,509 $ 6,838 $ 432,533 Weighted average risk grade 3.20 3.49 3.38 3.49 3.43 3.52 3.16 3.96 3.46 Commercial real estate - nonowner occupied Pass $ 22,983 $ 122,209 $ 36,361 $ 31,382 $ 61,577 $ 262,383 $ 3,001 $ 3,099 $ 542,995 Special Mention — — — — 15,072 40,306 — 601 55,979 Substandard — — — — — — — — — Doubtful — — — — — — — — — $ 22,983 $ 122,209 $ 36,361 $ 31,382 $ 76,649 $ 302,689 $ 3,001 $ 3,700 $ 598,974 Weighted average risk grade 3.22 3.17 3.71 3.92 3.83 3.82 2.67 3.32 3.66 Secured by farmland Pass $ 857 $ 23 $ 60 $ — $ — $ 3,580 $ 1,499 $ 92 $ 6,111 Special Mention — — — — — 1,033 — — 1,033 Substandard — — — 19 — 659 — 129 807 Doubtful — — — — — — — — — $ 857 $ 23 $ 60 $ 19 $ — $ 5,272 $ 1,499 $ 221 $ 7,951 Weighted average risk grade 3.43 4.00 4.00 6.00 N/A 4.18 3.98 4.33 4.07 Construction and land development Pass $ 15,995 $ 62,404 $ 9,687 $ 1,477 $ 7,564 $ 19,385 $ 961 $ 24 $ 117,497 Special Mention — — — — — — — — — Substandard — — — — — 32 — — 32 Doubtful — — — — — — — — — $ 15,995 $ 62,404 $ 9,687 $ 1,477 $ 7,564 $ 19,417 $ 961 $ 24 $ 117,529 Weighted average risk grade 3.29 3.12 3.80 3.68 3.24 3.67 3.31 4.00 3.31 Residential 1-4 family Pass $ 120,609 $ 157,734 $ 46,431 $ 65,915 $ 43,122 $ 157,392 $ 1,935 $ 3,179 $ 596,317 Special Mention — — — — — — — — — Substandard — — — 8,599 — 1,122 — 265 9,986 Doubtful — — — — — — — — — $ 120,609 $ 157,734 $ 46,431 $ 74,514 $ 43,122 $ 158,514 $ 1,935 $ 3,444 $ 606,303 Weighted average risk grade 3.09 3.04 3.07 3.40 3.13 3.23 3.90 3.27 3.16 Multi- family residential Pass $ 3,382 $ 22,187 $ 18,604 $ 7,142 $ 2,834 $ 78,732 $ 306 $ 704 $ 133,891 Special Mention — — — — — 5,327 — — 5,327 Substandard — — — — — 4,889 — 299 5,188 Doubtful — — — — — — — — — $ 3,382 $ 22,187 $ 18,604 $ 7,142 $ 2,834 $ 88,948 $ 306 $ 1,003 $ 144,406 Weighted average risk grade 3.59 3.00 3.90 3.00 3.49 3.55 4.00 4.60 3.49 Home equity lines of credit Pass $ 168 $ 590 $ 55 $ 71 $ 231 $ 4,601 $ 62,356 $ 872 $ 68,944 Special Mention — — — — — — 276 — 276 Substandard — — — — — — 617 23 640 Doubtful — — — — — — — — — $ 168 $ 590 $ 55 $ 71 $ 231 $ 4,601 $ 63,249 $ 895 $ 69,860 Weighted average risk grade 3.00 3.00 3.00 3.00 3.00 3.81 3.07 4.05 3.13 Commercial loans Pass $ 176,511 $ 68,077 $ 9,581 $ 8,472 $ 9,870 $ 23,506 $ 97,155 $ 45,432 $ 438,604 Special Mention — — — 1,997 — — 509 — 2,506 Substandard — — 7 — 1,502 1,817 2,746 — 6,072 Doubtful — — — — — — — — — $ 176,511 $ 68,077 $ 9,588 $ 10,469 $ 11,372 $ 25,323 $ 100,410 $ 45,432 $ 447,182 Weighted average risk grade 2.95 3.41 3.40 3.99 3.77 3.72 3.26 3.72 3.27 Paycheck Protection Program loans Pass $ — $ 14,440 $ 3,085 $ — $ — $ — $ — $ — $ 17,525 Special Mention — — — — — — — — — Substandard — — — — — — — — — Doubtful — — — — — — — — — $ — $ 14,440 $ 3,085 $ — $ — $ — $ — $ — $ 17,525 Weighted average risk grade N/A 2.00 2.00 N/A N/A N/A N/A N/A 2.00 Revolving Loans Revolving Converted 2022 2021 2020 2019 2018 Prior Loans To Term Total Consumer loans Pass $ 136,676 $ 31,200 $ 1,885 $ 551 $ 679 $ 5,002 $ 3,569 $ — $ 179,562 Special Mention — — — — — 72 — — 72 Substandard — 30 — — 2 6 19 — 57 Doubtful — — — — — — — — — $ 136,676 $ 31,230 $ 1,885 $ 551 $ 681 $ 5,080 $ 3,588 $ — $ 179,691 Weighted average risk grade 3.11 3.81 3.99 3.99 4.01 4.02 3.96 N/A 3.29 PCD Pass $ — $ — $ — $ — $ — $ 3,960 $ — $ — $ 3,960 Special Mention — — — — — 1,353 — — 1,353 Substandard — — — — — 1,530 — — 1,530 Doubtful — — — — — — — — — $ — $ — $ — $ — $ — $ 6,843 $ — $ — $ 6,843 Weighted average risk grade N/A N/A N/A N/A N/A 4.48 N/A N/A 4.48 Total $ 525,684 $ 539,799 $ 145,484 $ 160,458 $ 170,345 $ 840,012 $ 185,458 $ 61,557 $ 2,628,797 Weighted average risk grade 3.07 3.19 3.44 3.55 3.55 3.60 3.21 3.72 3.37 The following table presents weighted-average risk grades for all loans, by class and year of origination/renewal as of December 31, 2021 (in thousands): Revolving Loans Revolving Converted 2021 2020 2019 2018 2017 Prior Loans To Term Total Commercial real estate - owner occupied Pass $ 58,596 $ 18,411 $ 35,498 $ 28,163 $ 45,013 $ 187,461 $ 3,010 $ 6,937 $ 383,089 Special Mention — — — — 140 1,184 — — 1,324 Substandard — — 475 — — 2,815 — — 3,290 Doubtful — — — — — — — — $ 58,596 $ 18,411 $ 35,973 $ 28,163 $ 45,153 $ 191,460 $ 3,010 $ 6,937 $ 387,703 Weighted average risk grade 3.43 3.42 3.47 3.43 3.55 3.53 3.29 3.96 3.51 Commercial real estate - nonowner occupied Pass $ 107,572 $ 55,956 19,816 $ 76,076 $ 58,883 $ 235,676 $ 3,668 $ — $ 557,647 Special Mention — — — — — 12,097 — — 12,097 Substandard — — — — — 17,655 — 601 18,256 Doubtful — — — — — — — — — $ 107,572 $ 55,956 $ 19,816 $ 76,076 $ 58,883 $ 265,428 $ 3,668 $ 601 $ 588,000 Weighted average risk grade 3.05 3.47 3.83 3.45 3.81 3.81 2.94 6.00 3.59 Secured by farmland Pass $ 320 $ 66 $ — $ — $ 445 $ 3,734 $ 1,955 $ — $ 6,520 Special Mention — — — — 852 404 — — 1,256 Substandard — — 24 — 681 — 131 — 836 Doubtful — — — — — — — — — $ 320 $ 66 $ 24 $ — $ 1,978 $ 4,138 $ 2,086 $ — $ 8,612 Weighted average risk grade 3.17 4.00 6.00 N/A 5.04 3.61 4.09 N/A 4.05 Construction and land development Pass $ 57,320 $ 14,003 $ 13,360 $ 7,061 $ 8,414 $ 15,664 $ 982 $ 31 $ 116,835 Special Mention — — — — — — — — — Substandard — — 4,575 — — 34 — — 4,609 Doubtful — — — — — — — — — $ 57,320 $ 14,003 $ 17,935 $ 7,061 $ 8,414 $ 15,698 $ 982 $ 31 $ 121,444 Weighted average risk grade 3.15 3.56 4.48 3.26 3.91 3.54 3.31 4.00 3.50 Residential 1-4 family Pass $ 165,106 $ 54,037 $ 81,905 $ 49,694 $ 43,173 $ 138,711 $ 1,845 $ 3,484 $ 537,955 Special Mention — — 8,514 — — — — — 8,514 Substandard — — — — — 795 — 296 1,091 Doubtful — — — — — — — — — $ 165,106 $ 54,037 $ 90,419 $ 49,694 $ 43,173 $ 139,506 $ 1,845 $ 3,780 $ 547,560 Weighted average risk grade 3.04 3.06 3.24 3.13 3.07 3.26 3.98 3.30 3.15 Multi- family residential Pass $ 37,030 $ 18,866 $ 7,228 $ 6,328 $ 36,574 $ 42,310 $ 5,031 $ — $ 153,367 Special Mention — — — — — 5,326 — — 5,326 Substandard — — — — — 5,076 — 302 5,378 Doubtful — — — — — — — — — $ 37,030 $ 18,866 $ 7,228 $ 6,328 $ 36,574 $ 52,712 $ 5,031 $ 302 $ 164,071 Weighted average risk grade 3.40 3.90 3.00 3.59 3.00 3.92 4.00 6.00 3.55 Home equity lines of credit Pass $ 715 $ 59 $ 75 $ 235 $ 425 $ 4,337 $ 67,157 $ 143 $ 73,146 Special Mention — — — — — — 276 — 276 Substandard — — — — — — 398 26 424 Doubtful — — — — — — — — — $ 715 $ 59 $ 75 $ 235 $ 425 $ 4,337 $ 67,831 $ 169 $ 73,846 Weighted average risk grade 3.00 3.00 3.00 3.00 3.77 3.79 3.09 4.31 3.14 Commercial loans Pass $ 95,085 $ 10,415 $ 11,923 $ 10,648 $ 10,522 $ 18,284 $ 134,302 $ 5,338 $ 296,517 Special Mention — — — — — — 845 — 845 Substandard — 9 — 1,508 — 1,938 1,163 — 4,618 Doubtful — — — — — — — — — $ 95,085 $ 10,424 $ 11,923 $ 12,156 $ 10,522 $ 20,222 $ 136,310 $ 5,338 $ 301,980 Weighted average risk grade 3.43 3.36 3.79 3.77 2.95 3.96 3.43 3.95 3.48 Paycheck Protection Program loans Pass $ 56,087 $ 21,232 $ — $ — $ — $ — $ — $ — $ 77,319 Special Mention — — — — — — — — — Substandard — — — — — — — — — Doubtful — — — — — — — — — $ 56,087 $ 21,232 $ — $ — $ — $ — $ — $ — $ 77,319 Weighted average risk grade 2.00 2.00 N/A N/A N/A N/A N/A N/A 2.00 Revolving Loans Revolving Converted 2021 2020 2019 2018 2017 Prior Loans To Term Total Consumer loans Pass $ 48,107 $ 2,351 $ 1,002 $ 914 $ 237 $ 5,766 $ 2,519 $ — $ 60,896 Special Mention — — — — — 82 — — 82 Substandard — — — 7 9 2 — — 18 Doubtful — — — — — — — — — $ 48,107 $ 2,351 $ 1,002 $ 921 $ 246 $ 5,850 $ 2,519 $ — $ 60,996 Weighted average risk grade 3.55 3.99 3.99 4.02 4.07 4.01 4.00 N/A 3.65 PCD Pass $ — $ — $ — $ — $ — $ 5,145 $ 30 $ — $ 5,175 Special Mention — — — — — 1,391 — — 1,391 Substandard — — — — 1,717 172 — — 1,889 Doubtful — — — — — — — — — $ — $ — $ — $ — $ 1,717 $ 6,708 $ 30 $ — $ 8,455 Weighted average risk grade N/A N/A N/A N/A 6.00 4.08 3.00 N/A 4.47 Total $ 625,938 $ 195,405 $ 184,395 $ 180,634 $ 207,085 $ 706,059 $ 223,312 $ 17,158 $ 2,339,986 Weighted average risk grade 3.12 3.24 3.50 3.38 3.45 3.64 3.35 3.92 3.39 For the three months ended June 30, 2022 For the six months ended June 30, 2022 Commercial real estate - non-owner occupied $ 3,099 $ 3,099 Secured by farmland 129 220 Residential 1-4 family 174 422 Multi- family residential 704 704 Home equity lines of credit — 740 Commercial loans 40,325 40,459 Total loans $ 44,431 $ 45,644 The amount of foreclosed residential real estate property held at June 30, 2022 and December 31, 2021 was $0.8 million and $0.9 million, respectively. There were no recorded investments in consumer mortgage loans collateralized by residential real estate property in the process of foreclosure at June 30, 2022 and December 31, 2021. Allowance For Credit Losses – Loans The allowance for credit losses on loans is a contra-asset valuation account, calculated in accordance with ASC 326 that is deducted from the amortized cost basis of loans to present the net amount expected to be collected. The amount of the allowance represents management's best estimate of current expected credit losses on loans considering available information, from internal and external sources, relevant to assessing collectability over the loans' contractual terms, adjusted for expected prepayments when appropriate. In calculating the allowance for credit losses, most loans are segmented into pools based upon similar characteristics and risk profiles. For allowance modeling purposes, our loan pools include (i) commercial real estate - owner occupied, (ii) commercial real estate - non-owner occupied, (iii) construction and land development, (iv) commercial, (v) agricultural loans, (vi) residential 1-4 family and (vii) consumer loans. We periodically reassess each pool to ensure the loans within the pool continue to share similar characteristics and risk profiles and to determine whether further segmentation is necessary. For each loan pool, we measure expected credit losses over the life of each loan utilizing a combination of inputs: (i) probability of default, (ii) probability of attrition, (iii) loss given default and (iv) exposure at default. Internal data is supplemented by, but not replaced by, peer data when required, primarily to determine the probability of default input. The various pool-specific inputs may be adjusted for current macroeconomic assumptions. Significant macroeconomic variables utilized in our allowance models include, among other things, (i) VA Gross Domestic Product, (ii) VA House Price Index, and (iii) VA unemployment rates. Management qualitatively adjusts allowance model results for risk factors that are not considered within our quantitative modeling processes but are nonetheless relevant in assessing the expected credit losses within our loan pools. Qualitative factor (“Q-Factor”) adjustments are driven by key risk indicators that management tracks on a pool-by-pool basis. In some cases, management may determine that an individual loan exhibits unique risk characteristics which differentiate the loan from other loans within our loan pools. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation. The following tables present details of the allowance for credit losses on loans segregated by loan portfolio segment as of June 30, 2022 and December 31, 2021, calculated in accordance with the current expected credit losses (“CECL”) methodology described above (in thousands). Commercial Commercial Home Real Estate Real Estate Construction Equity Paycheck Owner Non-owner Secured by and Land 1-4 Family Multi-Family Lines Of Commercial Protection Consumer PCD June 30, 2022 Occupied Occupied Farmland Development Residential Residential Credit Loans Program Loans Loans Total Modeled expected credit losses $ 4,014 $ 7,411 $ 10 $ 610 $ 3,431 $ 1,715 $ 272 $ 3,592 $ — $ 1,550 $ — $ 22,605 Q-factor and other qualitative adjustments 287 506 39 414 841 445 91 809 — — — 3,432 Specific allocations — — — — — — — 2,027 — 19 2,126 4,172 Total $ 4,301 $ 7,917 $ 49 $ 1,024 $ 4,272 $ 2,160 $ 363 |