LOANS AND ALLOWANCE | 4. LOANS AND ALLOWANCE FOR CREDIT LOSSES The following table summarizes the composition of our loan portfolio as of December 31, 2022 and 2021 (in thousands): December 31, 2022 December 31, 2021 Loans held for sale $ 27,626 $ — Loans held for investment Loans secured by real estate: Commercial real estate - owner occupied $ 459,866 $ 387,703 Commercial real estate - non-owner occupied 579,733 588,000 Secured by farmland 7,116 8,612 Construction and land development 148,690 121,444 Residential 1-4 family 609,694 547,560 Multi-family residential 140,321 164,071 Home equity lines of credit 65,152 73,846 Total real estate loans 2,010,572 1,891,236 Commercial loans 521,794 301,980 Paycheck Protection Program loans 4,564 77,319 Consumer loans 405,278 60,996 Total Non-PCD loans 2,942,208 2,331,531 PCD loans 6,628 8,455 Total loans held for investment $ 2,948,836 $ 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 $13.8 million and $10.8 million at December 31, 2022 and 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 held for investment as of December 31, 2022 and 2021 (in thousands): 30 - 59 60 - 89 90 Days Days Days Total Loans Not Total December 31, 2022 Past Due Past Due or More Past Due Past Due Loans Commercial real estate - owner occupied $ 55 $ — $ — $ 55 $ 459,811 $ 459,866 Commercial real estate - non-owner occupied 290 169 19,641 20,100 559,633 579,733 Secured by farmland — — — — 7,116 7,116 Construction and land development 46 — — 46 148,644 148,690 Residential 1-4 family 2,180 410 304 2,894 606,800 609,694 Multi- family residential — — — — 140,321 140,321 Home equity lines of credit 431 96 249 776 64,376 65,152 Commercial loans 39 — 2,956 2,995 518,799 521,794 Paycheck Protection Program loans 16 15 3,360 3,391 1,173 4,564 Consumer loans 2,079 1,421 200 3,700 401,578 405,278 Total Non-PCD loans 5,136 2,111 26,710 33,957 2,908,251 2,942,208 PCD loans — — 1,328 1,328 5,300 6,628 Total $ 5,136 $ 2,111 $ 28,038 $ 35,285 $ 2,913,551 $ 2,948,836 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 December 31, 2022 and 2021, were as follows (in thousands): 90 Less Than Total Nonaccrual With Days 90 Days Nonaccrual No Credit December 31, 2022 or More Past Due Loans (1) Loss Allowance (2) Commercial real estate - owner occupied $ — $ 509 $ 509 $ 509 Commercial real estate - non-owner occupied 19,641 — 19,641 19,641 Secured by farmland — 713 713 713 Construction and land development — 29 29 29 Residential 1-4 family 304 8,995 9,299 9,299 Home equity lines of credit 249 301 550 550 Commercial loans 2,956 121 3,077 121 Paycheck Protection Program loans — 4 4 4 Consumer loans 200 134 334 299 Total Non-PCD loans 23,350 10,806 34,156 31,165 PCD loans 1,328 — 1,328 1,328 Total $ 24,678 $ 10,806 $ 35,484 $ 32,493 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 $0.6 million and $1.1 million at December 31, 2022 and 2021, respectively. (2) Nonaccrual loans with no credit loss allowance include SBA guaranteed amounts totaling $0.6 million and $1.1 million at December 31, 2022 and 2021, respectively. There were $3.4 million and $0.3 million of Paycheck Protection Program (“PPP”) loans greater than 90 days past due and still accruing at December 31, 2022 and 2021, respectively. The following table presents nonaccrual loans as of December 31, 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 $ — $ — $ — $ — $ — $ 509 $ — $ — $ 509 Commercial real estate - non-owner occupied — — — 13,066 6,575 — — 19,641 Secured by farmland — — — 6 — 707 — — 713 Construction and land development — — — — — 29 — — 29 Residential 1-4 family 285 — — 8,099 — 672 — 243 9,299 Multi- family residential — — — — — — — — — Home equity lines of credit — — — — — 53 476 21 550 Commercial loans — — 5 — — 1,482 1,590 — 3,077 Paycheck Protection Program loans — 4 — — — — — — 4 Consumer loans 46 288 — — — — — — 334 Total non-PCD nonaccruals 331 292 5 8,105 13,066 10,027 2,066 264 34,156 PCD loans — — — — — 1,328 — — 1,328 Total nonaccrual loans $ 331 $ 292 $ 5 $ 8,105 $ 13,066 $ 11,355 $ 2,066 $ 264 $ 35,484 Interest received on nonaccrual loans was $1.2 million and $0.5 million for the years ended December 31, 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. For the year ended December 31, 2022, there were eighteen TDR loans outstanding in the amount of $3.6 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 December 31, 2022 or 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 December 31, 2022 (in thousands): Revolving Loans Revolving Converted 2022 2021 2020 2019 2018 Prior Loans To Term Total Commercial real estate - owner occupied Pass $ 116,545 $ 58,202 $ 19,178 $ 21,985 $ 27,397 $ 202,484 $ 3,389 $ 6,740 $ 455,920 Special Mention — — — — — 988 — — 988 Substandard — — — — — 2,958 — — 2,958 Doubtful — — — — — — — — — $ 116,545 $ 58,202 $ 19,178 $ 21,985 $ 27,397 $ 206,430 $ 3,389 $ 6,740 $ 459,866 Weighted average risk grade 3.25 3.45 3.38 3.27 3.43 3.50 3.52 3.96 3.42 Commercial real estate - nonowner occupied Pass $ 28,128 $ 126,291 $ 44,696 $ 41,631 $ 55,702 $ 228,735 $ 4,173 $ 3,065 $ 532,421 Special Mention — — 1,566 — 926 24,580 — 601 27,673 Substandard — — — — 13,066 6,573 — — 19,639 Doubtful — — — — — — — — — $ 28,128 $ 126,291 $ 46,262 $ 41,631 $ 69,694 $ 259,888 $ 4,173 $ 3,666 $ 579,733 Weighted average risk grade 3.36 3.16 3.82 3.95 4.01 3.82 2.87 3.33 3.68 Secured by farmland Pass $ 141 $ 16 $ 110 $ — $ — $ 3,425 $ 1,697 $ 85 $ 5,474 Special Mention — — — — — 649 — 112 761 Substandard — — — 6 — 875 — — 881 Doubtful — — — — — — — — — $ 141 $ 16 $ 110 $ 6 $ — $ 4,949 $ 1,697 $ 197 $ 7,116 Weighted average risk grade 4.00 4.00 4.00 6.00 N/A 4.20 3.98 3.70 4.13 Construction and land development Pass $ 44,253 $ 73,226 $ 847 $ 3,006 $ 6,937 $ 19,553 $ 822 $ 17 $ 148,661 Special Mention — — — — — — — — — Substandard — — — — — 29 — — 29 Doubtful — — — — — — — — — $ 44,253 $ 73,226 $ 847 $ 3,006 $ 6,937 $ 19,582 $ 822 $ 17 $ 148,690 Weighted average risk grade 3.21 3.06 3.60 3.42 3.17 3.69 3.36 4.00 3.20 Residential 1-4 family Pass $ 152,178 $ 157,233 $ 43,812 $ 61,268 $ 40,707 $ 138,782 $ 1,837 $ 3,437 $ 599,254 Special Mention — — — — — 30 — — 30 Substandard 285 — — 8,099 — 1,310 — 716 10,410 Doubtful — — — — — — — — — $ 152,463 $ 157,233 $ 43,812 $ 69,367 $ 40,707 $ 140,122 $ 1,837 $ 4,153 $ 609,694 Weighted average risk grade 3.09 3.04 3.07 3.41 3.13 3.23 3.92 3.54 3.15 Multi- family residential Pass $ 9,953 $ 21,927 $ 18,338 $ 7,064 $ 1,804 $ 75,370 $ 4,192 $ 676 $ 139,324 Special Mention — — — — — — — — — Substandard — — — — — 702 — 295 997 Doubtful — — — — — — — — — $ 9,953 $ 21,927 $ 18,338 $ 7,064 $ 1,804 $ 76,072 $ 4,192 $ 971 $ 140,321 Weighted average risk grade 3.58 3.00 3.90 3.00 3.21 3.31 4.00 4.61 3.37 Home equity lines of credit Pass $ 463 $ 431 $ 52 $ 63 $ 230 $ 4,093 $ 58,312 $ 957 $ 64,601 Special Mention — — — — — — — — — Substandard — — — — — 54 476 21 551 Doubtful — — — — — — — — — $ 463 $ 431 $ 52 $ 63 $ 230 $ 4,147 $ 58,788 $ 978 $ 65,152 Weighted average risk grade 3.00 3.00 3.00 3.00 3.00 3.94 3.05 3.89 3.12 Commercial loans Pass $ 295,459 $ 59,642 $ 7,332 $ 6,658 $ 9,228 $ 20,883 $ 100,407 $ 17,381 $ 516,990 Special Mention — 396 64 74 — — 519 388 1,441 Substandard — — 5 90 — 1,678 1,590 — 3,363 Doubtful — — — — — — — — — $ 295,459 $ 60,038 $ 7,401 $ 6,822 $ 9,228 $ 22,561 $ 102,516 $ 17,769 $ 521,794 Weighted average risk grade 3.14 3.41 3.38 3.90 3.42 3.70 3.47 3.33 3.29 Paycheck Protection Program loans Pass $ — $ 2,119 $ 2,435 $ — $ — $ — $ — $ — $ 4,554 Special Mention — — — — — — — — — Substandard — 10 — — — — — — 10 Doubtful — — — — — — — — — $ — $ 2,129 $ 2,435 $ — $ — $ — $ — $ — $ 4,564 Weighted average risk grade N/A 2.02 2.00 N/A N/A N/A N/A N/A 2.01 Revolving Loans Revolving Converted 2022 2021 2020 2019 2018 Prior Loans To Term Total Consumer loans Pass $ 365,842 $ 29,184 $ 1,493 $ 340 $ 534 $ 4,319 $ 2,918 $ — $ 404,630 Special Mention — — — — — 65 — — 65 Substandard 70 513 — — — — — — 583 Doubtful — — — — — — — — — $ 365,912 $ 29,697 $ 1,493 $ 340 $ 534 $ 4,384 $ 2,918 $ — $ 405,278 Weighted average risk grade 3.24 3.74 3.99 3.98 4.00 4.02 3.81 N/A 3.30 PCD Pass $ — $ — $ — $ — $ — $ 3,692 $ — $ — $ 3,692 Special Mention — — — — — 1,320 — — 1,320 Substandard — — — — — 1,616 — — 1,616 Doubtful — — — — — — — — — $ — $ — $ — $ — $ — $ 6,628 $ — $ — $ 6,628 Weighted average risk grade N/A N/A N/A N/A N/A 4.54 N/A N/A 4.54 Total $ 1,013,317 $ 529,190 $ 139,928 $ 150,284 $ 156,531 $ 744,763 $ 180,332 $ 34,491 $ 2,948,836 Weighted average risk grade 3.20 3.19 3.48 3.54 3.60 3.57 3.35 3.53 3.36 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 Revolving loans that converted to term during 2022 and 2021were as follows (in thousands): For the year ended December 31, 2022 For the year ended December 31, 2021 Commercial real estate - owner occupied $ — $ 298 Commercial real estate - non-owner occupied 3,065 601 Secured by farmland 198 — Residential 1-4 family 1,492 1,706 Multi- family residential 676 302 Home equity lines of credit 832 — Commercial loans 13,309 561 Total loans $ 19,572 $ 3,468 The amount of foreclosed residential real estate property held at December 31, 2022 and 2021 was zero and $0.9 million, respectively. The recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure was $0.1 million and zero at December 31, 2022 and 2021, respectively. 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 but not limited to (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 December 31, 2022 and 2021, calculated in accordance with the current expected credit losses (“CECL”) methodology (in thousands). Commercial Commercial Home Real Estate Real Estate Construction Equity Owner Non-owner Secured by and Land 1-4 Family Multi-Family Lines Of Commercial Consumer PCD December 31, 2022 Occupied Occupied Farmland Development Residential Residential Credit Loans Loans Loans Total Modeled expected credit losses $ 5,297 6,652 4 997 3,579 1,814 310 5,006 3,851 — $ 27,510 Q-factor and other qualitative adjustments 261 |