Loans Held for Investment and ACL | Loans Held for Investment and ACL Loans held for investment in the accompanying condensed consolidated balance sheets are summarized as follows: June 30, 2021 December 31, 2020 Loans held for investment, carried at amortized cost: Real estate: Construction and land $ 871,765 $ 693,030 Farmland 13,661 13,844 1 - 4 family residential 513,635 524,344 Multi-family residential 367,445 424,962 Owner occupied commercial (“OOCRE”) 744,899 717,472 Non-owner occupied commercial (“NOOCRE”) 1,986,538 1,904,132 Commercial 1,771,100 1,559,546 MW 559,939 577,594 Consumer 10,530 13,000 6,839,512 6,427,924 Deferred loan fees, net (7,486) (2,468) ACL (99,543) (105,084) Loans held for investment carried at amortized cost, net 6,732,483 6,320,372 Loans held for investment, carried at fair value: PPP loans 291,401 358,042 Total loans held for investment, net $ 7,023,884 $ 6,678,414 Included in the total loans held for investment, net, as of June 30, 2021 and December 31, 2020 was an accretable discount related to purchased performing and purchased credit deteriorated (“PCD”) loans acquired within a business combination in the approximate amounts of $12,192 and $15,526, respectively. The discount is being accreted into income on a level-yield basis over the life of the loans. In addition, included in the net loan portfolio as of June 30, 2021 and December 31, 2020 is a discount on retained loans from sale of originated U.S. Small Business Administration (“SBA”) loans of $3,291 and $3,215, respectively. Loans held for investment, PPP loans, carried at fair value Included in total loans held for investment, net, as of June 30, 2021 and December 31, 2020 was $291,401 and $358,042, respectively, of PPP loans, which are carried at fair value. The following table summarizes the PPP fee income which is included in government guaranteed loan income, net on the accompanying condensed consolidated statements of income and the net gain (loss) due to the change in the fair value of PPP loans which is included in government guaranteed loan income, net, on the accompanying condensed consolidated statements of income and in change in fair value of government guaranteed loans using fair value option on the accompanying condensed consolidated statements of cash flows. June 30, 2021 June 30, 2020 Three Months Ended Six Months Ended Three Months Ended Six Months Ended PPP fee income $ 1,004 $ 7,628 $ 12,516 $ 12,516 Net gain (loss) due to the change in fair value 622 335 (2,005) (2,005) These PPP loans were originated through an application to the SBA under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act and are 100% forgivable if certain criteria are met by the borrowers. As of June 30, 2021, we believe a majority of the Company’s PPP loans will meet such criteria. ACL The Company’s estimate of the ACL reflects losses expected over the remaining contractual life of the assets. The contractual term does not consider extensions, renewals or modifications unless the Company has identified an expected troubled debt restructuring (“TDR”). The activity in the ACL related to loans held for investment is as follows: Three Months Ended June 30, 2021 Construction and Land Farmland Residential Multifamily OOCRE NOOCRE Commercial Consumer Total Balance at beginning of period $ 6,805 $ 47 $ 6,968 $ 4,814 $ 9,122 $ 39,503 $ 37,381 $ 296 $ 104,936 Credit loss expense non-PCD loans 462 (1) 130 (627) 2,408 (595) 2,750 (76) 4,451 Credit loss expense PCD loans 13 — (173) — (17) (1,666) (2,610) 2 (4,451) Charge-offs — — (288) — (689) — (5,620) (20) (6,617) Recoveries — — 23 — 500 — 659 42 1,224 Ending Balance $ 7,280 $ 46 $ 6,660 $ 4,187 $ 11,324 $ 37,242 $ 32,560 $ 244 $ 99,543 Three Months Ended June 30, 2020 Construction and Land Farmland Residential Multifamily OOCRE NOOCRE Commercial Consumer Total Balance at beginning of period $ 6,838 $ 58 $ 8,318 $ 4,899 $ 16,461 $ 25,681 $ 38,110 $ 618 $ 100,983 Credit loss expense non-PCD loans 2,818 5 2,609 1,529 1,597 7,424 1,202 (11) 17,173 Credit loss expense PCD loans (635) — (150) — (4,172) 2,962 998 (4) (1,001) Charge-offs — — — — — — (1,740) (57) (1,797) Recoveries — — — — — — 7 — 7 Ending Balance $ 9,021 $ 63 $ 10,777 $ 6,428 $ 13,886 $ 36,067 $ 38,577 $ 546 $ 115,365 Six Months Ended June 30, 2021 Construction and Land Farmland Residential Multifamily OOCRE NOOCRE Commercial Consumer Total Balance at beginning of year $ 7,768 $ 56 $ 8,148 $ 6,231 $ 9,719 $ 35,237 $ 37,554 $ 371 $ 105,084 Credit loss expense non-PCD loans (487) (10) (1,014) (2,044) 793 3,479 1,647 (130) 2,234 Credit loss expense PCD loans (1) (197) — 1,001 (1,474) (1,560) (3) (2,234) Charge-offs — — (303) — (689) — (5,966) (38) (6,996) Recoveries — — 26 — 500 — 885 44 1,455 Ending Balance $ 7,280 0 $ 46 $ 6,660 $ 4,187 $ 11,324 $ 37,242 $ 32,560 $ 244 $ 99,543 Six Months Ended June 30, 2020 Construction and Land Farmland Residential Multifamily OOCRE NOOCRE Commercial Consumer Total Balance at beginning of year $ 3,822 $ 61 $ 1,378 $ 1,965 $ 1,978 $ 8,139 $ 12,369 $ 122 $ 29,834 Impact of adopting ASC 326 non-PCD loans (707) 4 3,716 628 3,406 5,138 7,025 217 19,427 Impact of adoption ASC 326 PCD loans 645 — 908 — 7,682 2,037 8,335 103 19,710 Credit loss expense non-PCD loans 5,783 (2) 5,097 3,835 2,515 17,379 11,428 (26) 46,009 Credit loss expense PCD loans (522) — (323) — (1,695) 3,374 1,124 (19) 1,939 Charge-offs — — — — — — (1,740) (125) (1,865) Recoveries — — 1 — — — 36 274 311 Ending Balance $ 9,021 $ 63 $ 10,777 $ 6,428 $ 13,886 $ 36,067 $ 38,577 $ 546 $ 115,365 The majority of the Company’s loan portfolio consists of loans to businesses and individuals in the Dallas-Fort Worth metroplex and the Houston metropolitan area. This geographic concentration subjects the loan portfolio to the general economic conditions within these areas. The risks created by this concentration have been considered by management in the determination of the adequacy of the ACL. Management believes the ACL was adequate to cover estimated losses on loans held for investment as of June 30, 2021 and December 31, 2020. The following table presents the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans as of June 30, 2021 and December 31, 2020, were as follows: June 30, 2021 December 31, 2020 Real Property (1) ACL Allocation Real Property (1) ACL Allocation Real estate: 1 - 4 family residential $ 199 $ — $ 199 $ 11 OOCRE 1,413 430 — — NOOCRE 19,321 6,147 16,080 — Commercial 4,053 1,508 8,666 4,668 Consumer 1,063 — 143 50 Total $ 26,049 $ 8,085 $ 25,088 $ 4,729 (1) Loans reported exclude PCD loans that transitioned upon adoption of ASC 326 and accounted for on a pooled basis. 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 in accordance with the terms of the applicable loan agreement . 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. 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 is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Nonaccrual loans aggregated by class of loans, as of June 30, 2021 and December 31, 2020, were as follows: June 30, 2021 December 31, 2020 Nonaccrual Nonaccrual With No ACL Nonaccrual Nonaccrual With No ACL Real estate: 1 - 4 family residential $ 1,201 $ 1,201 $ 3,308 $ 3,199 OOCRE 16,960 16,385 6,266 5,645 NOOCRE 35,181 15,739 40,830 19,213 Commercial 22,424 1,743 29,318 1,015 Consumer 1,228 1,216 1,374 1,220 Total $ 76,994 $ 36,284 $ 81,096 $ 30,292 There were $12,515 and $1,508 of PCD loans that are not accounted for on a pooled basis included in nonaccrual loans at June 30, 2021 and December 31, 2020, respectively. During the three and six months ended June 30, 2021, interest income not recognized on nonaccrual loans was $255 and $1,375, respectively. During the three and six months ended June 30, 2020, interest income not recognized on nonaccrual loans was $363 and $536, respectively. An age analysis of past due loans, aggregated by class of loans and including past due nonaccrual loans, as of June 30, 2021 and December 31, 2020, is as follows: June 30, 2021 30 to 59 Days 60 to 89 Days 90 Days or Greater Total Past Due Total Current PCD Total Total 90 Days Past Due and Still Accruing (1) Real estate: Construction and land $ — $ — $ — $ — $ 869,324 $ 2,441 $ 871,765 $ — Farmland — — — — 13,661 — 13,661 — 1 - 4 family residential 1,837 — 1,145 2,982 509,444 1,209 513,635 43 Multi-family residential — — — — 367,445 — 367,445 — OOCRE 143 4,612 11,740 16,495 699,518 28,886 744,899 — NOOCRE 855 12,501 3,359 16,715 1,941,201 28,622 1,986,538 — Commercial 1,985 404 11,560 13,949 1,741,947 15,204 1,771,100 356 MW — — — — 559,939 — 559,939 — Consumer 148 2 1,159 1,309 9,035 186 10,530 63 Total $ 4,968 $ 17,519 $ 28,963 $ 51,450 $ 6,711,514 $ 76,548 $ 6,839,512 $ 462 (1) Loans 90 days past due and still accruing excludes $17,099 of pooled PCD loans as of June 30, 2021 that transitioned upon adoption of ASC 326. December 31, 2020 30 to 59 Days 60 to 89 Days 90 Days or Greater Total Past Due Total Current PCD Total Total 90 Days Past Due and Still Accruing (1) Real estate: Construction and land $ — $ — $ — $ — $ 690,345 $ 2,685 $ 693,030 $ — Farmland — — — — 13,844 — 13,844 — 1 - 4 family residential 2,338 122 4,802 7,262 508,341 8,741 524,344 1,670 Multi-family residential — — — — 424,962 — 424,962 — OOCRE 2,278 2,143 2,814 7,235 672,246 37,991 717,472 1,280 NOOCRE 7,675 2,911 17,586 28,172 1,832,784 43,176 1,904,132 — Commercial 1,983 1,431 20,360 23,774 1,516,312 19,460 1,559,546 1,230 MW — — — — 577,594 — 577,594 — Consumer 75 77 1,338 1,490 11,308 202 13,000 24 Total $ 14,349 $ 6,684 $ 46,900 $ 67,933 $ 6,247,736 $ 112,255 $ 6,427,924 $ 4,204 (1) Loans 90 days past due and still accruing excludes $32,627 of PCD loans accounted for on a pooled basis as of December 31, 2020. Loans past due 90 days and still accruing were $462 and $4,204 as of June 30, 2021 and December 31, 2020, respectively. These loans are also considered well-secured, and are in the process of collection with plans in place for the borrowers to bring the notes fully current or to subsequently be renewed. The Company believes that it will collect all principal and interest due on each of the loans past due 90 days and still accruing. Troubled Debt Restructuring Modifications of terms for the Company’s loans and their inclusion as TDRs are based on individual facts and circumstances. Loan modifications that are included as TDRs may involve a reduction of the stated interest rate of the loan, an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk, or deferral of principal payments, regardless of the period of the modification. The recorded investment in TDRs was $28,643 and $29,157 as of June 30, 2021 and December 31, 2020, respectively. The following table presents the pre- and post-modification amortized cost of loans modified as TDRs during the six months ended June 30, 2021 and 2020. There were no loans modified as TDRS during the three months ended June 30, 2021 and 2020. Adjusted Payment Structure Payment Deferrals Total Modifications Number of Loans Six months ended June 30, 2021 Commercial $ 207 $ — $ 207 1 Six months ended June 30, 2020 Commercial $ 1,440 $ 1,337 $ 2,777 3 There were no loans modified as TDR loans within the previous 12 months and for which there was a payment default during the three and six months ended June 30, 2021 and 2020. A default for purposes of this disclosure is a TDR loan in which the borrower is 90 days past due or results in the foreclosure and repossession of the applicable collateral. Interest income during the three and six months ended June 30, 2021 that would have been recorded had the terms of the loans not been modified on TDR loans was $57 and $179, respectively. Interest income recorded during the three and six months ended June 30, 2020 on TDR loans and interest income that would have been recorded had the terms of the loans not been modified was minimal. The Company has not committed to lend additional amounts to customers with outstanding loans classified as TDRs as of June 30, 2021 or December 31, 2020. For the six months ended June 30, 2021, the Company ha d 12 modifications of loans with an aggregate principal balances of $4,758 that qualified for temporary suspension of TDR requirements under Section 4013 of the CARES Act, as amended by the Consolidated Appropriations Act, 2021, and related interagency guidance of the federal banking agencies (collectively “Section 4013 of the CARES Act”). For the year ended December 31, 2020, the Company had 754 modifications of loans with an aggregate principal balance of $1,126,975 that qualified for temporary suspension of TDR requirements under Section 4013 of the CARES Act. As of June 30, 2021, the Company had 2 loans with an aggregate principal balance of $6,920 remaining on deferment under Section 4013 of the CARES Act. Credit Quality Indicators From a credit risk standpoint, the Company classifies its loans in one of the following categories: (i) pass, (ii) special mention, (iii) substandard or (iv) doubtful. Loans classified as loss are charged-off. Loans not rated special mention, substandard, doubtful or loss are classified as pass loans. The classifications of loans reflect a judgment about the risks of default and loss associated with the loan. The Company reviews the ratings on criticized credits monthly. Ratings are adjusted to reflect the degree of risk and loss that is felt to be inherent in each credit as of each monthly reporting period. All classified credits are evaluated for impairment. If impairment is determined to exist, a specific reserve is established. The Company’s methodology is structured so that specific reserves are increased in accordance with deterioration in credit quality (and a corresponding increase in risk and loss) or decreased in accordance with improvement in credit quality (and a corresponding decrease in risk and loss). Credits rated special mention show clear signs of financial weaknesses or deterioration in credit worthiness, however, such concerns are generally not so pronounced that the Company expects to experience significant loss within the short-term. Such credits typically maintain the ability to perform within standard credit terms and credit exposure is not as prominent as credits with a lower rating. Credits rated substandard are those in which the normal repayment of principal and interest may be, or has been, jeopardized by reason of adverse trends or developments of a financial, managerial, economic or political nature, or important weaknesses which exist in collateral. A protracted workout on these credits is a distinct possibility. Prompt corrective action is therefore required to strengthen the Company’s position, and/or to reduce exposure and to assure that adequate remedial measures are taken by the borrower. Credit exposure becomes more likely in such credits and a serious evaluation of the secondary support to the credit is performed. Credits rated doubtful are those in which full collection of principal appears highly questionable, and in which some degree of loss is anticipated, even though the ultimate amount of loss may not yet be certain and/or other factors exist which could affect collection of debt. Based upon available information, positive action by the Company is required to avert or minimize loss. Credits rated doubtful are generally also placed on non-accrual. Credits classified as PCD are those that, at acquisition date, have experienced a more-than-insignificant deterioration in credit quality since origination. All loans considered to be purchased-credit impaired loans prior to January 1, 2020 were converted to PCD loans upon adoption of ASC 326. The Company elected to maintain pools of loans that were previously accounted for under ASC 310-30 and will continue to account for these pools as a unit of account. Loans are only removed from the existing pools if they are foreclosed, written off, paid off, or sold. The Company considers the guidance in ASC 310-20 when determining whether a modification, extension or renewal of a loan constitutes a current period origination. Generally, current period renewals of credit are re-underwritten at the point of renewal and considered current period originations for purposes of the table below. Based on the most recent analysis performed, the risk category of loans by class of loans based on year or origination is as follows: Term Loans Amortized Cost Basis by Origination Year 1 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total As of June 30, 2021 Construction and land: Pass $ 114,709 $ 309,478 $ 267,673 $ 116,639 $ 16,742 $ 29,490 $ 12,591 $ 496 $ 867,818 Special mention — — — 321 — — — — 321 Substandard — — — 1,185 — — — — 1,185 PCD — — — — — 2,441 — — 2,441 Total construction and land $ 114,709 $ 309,478 $ 267,673 $ 118,145 $ 16,742 $ 31,931 $ 12,591 $ 496 $ 871,765 Farmland: Pass $ 1,549 $ 534 $ 469 $ 3,367 $ 3,023 $ 3,554 $ 1,165 $ — $ 13,661 Total farmland $ 1,549 $ 534 $ 469 $ 3,367 $ 3,023 $ 3,554 $ 1,165 $ — $ 13,661 1 - 4 family residential: Pass $ 90,644 $ 112,315 $ 61,905 $ 77,038 $ 32,372 $ 115,821 $ 16,295 $ 3,338 $ 509,728 Special mention — — — 152 — 421 — — 573 Substandard — — — — 118 1,117 890 — 2,125 PCD — — — — — 1,209 — — 1,209 Total 1 - 4 family residential $ 90,644 $ 112,315 $ 61,905 $ 77,190 $ 32,490 $ 118,568 $ 17,185 $ 3,338 $ 513,635 Multi-family residential: Pass $ 51,096 $ 66,234 $ 94,568 $ 81,127 $ 13,762 $ 39,419 $ 52 $ — $ 346,258 Special mention — — — 21,187 — — — — 21,187 Total multi-family residential $ 51,096 $ 66,234 $ 94,568 $ 102,314 $ 13,762 $ 39,419 $ 52 $ — $ 367,445 OOCRE: Pass $ 64,427 $ 149,710 $ 69,980 $ 59,757 $ 69,529 $ 212,896 $ 2,246 $ — $ 628,545 Special mention — — 1,077 20,251 333 8,218 — — 29,879 Substandard — 414 — 25,656 881 30,638 — — 57,589 PCD — — 1,431 — 7,299 20,156 — — 28,886 Total OOCRE $ 64,427 $ 150,124 $ 72,488 $ 105,664 $ 78,042 $ 271,908 $ 2,246 $ — $ 744,899 NOOCRE: Pass $ 192,285 $ 337,090 $ 265,817 $ 441,505 $ 97,425 $ 416,101 $ 15,848 $ 1,593 $ 1,767,664 Special mention — 238 2,747 15,678 22,176 45,872 493 — 87,204 Substandard — 1,495 11,044 26,127 4,487 47,394 12,501 — 103,048 PCD — — — 18,855 — 9,767 — — 28,622 Total NOOCRE $ 192,285 $ 338,823 $ 279,608 $ 502,165 $ 124,088 $ 519,134 $ 28,842 $ 1,593 $ 1,986,538 Commercial: Pass $ 297,688 $ 244,094 $ 161,556 $ 78,968 $ 21,978 $ 55,754 $ 800,605 $ 12,640 $ 1,673,283 Special mention 760 4,367 1,395 8,137 9,217 2,390 3,814 3,448 33,528 Substandard — 866 4,315 14,683 6,288 4,244 14,665 4,024 49,085 PCD — — — 365 2,121 12,718 — — 15,204 Total commercial $ 298,448 $ 249,327 $ 167,266 $ 102,153 $ 39,604 $ 75,106 $ 819,084 $ 20,112 $ 1,771,100 MW: Pass $ — $ — $ — $ — $ — $ — $ 558,400 $ — $ 558,400 Special mention — — — — — — 1,539 — 1,539 Total MW $ — $ — $ — $ — $ — $ — $ 559,939 $ — $ 559,939 Consumer: Pass $ 325 $ 1,818 $ 842 $ 622 $ 3,290 $ 1,142 $ 1,053 $ — $ 9,092 Special mention — — — — — 16 — — 16 Substandard — — 3 3 107 59 1,064 — 1,236 PCD — — — — 26 160 — — 186 Total consumer $ 325 $ 1,818 $ 845 $ 625 $ 3,423 $ 1,377 $ 2,117 $ — $ 10,530 Total Pass $ 812,723 $ 1,221,273 $ 922,810 $ 859,023 $ 258,121 $ 874,177 $ 1,408,255 $ 18,067 $ 6,374,449 Total Special Mention 760 4,605 5,219 65,726 31,726 56,917 5,846 3,448 174,247 Total Substandard — 2,775 15,362 67,654 11,881 83,452 29,120 4,024 214,268 Total PCD — — 1,431 19,220 9,446 46,451 — — 76,548 Total $ 813,483 $ 1,228,653 $ 944,822 $ 1,011,623 $ 311,174 $ 1,060,997 $ 1,443,221 $ 25,539 $ 6,839,512 1 Term loans amortized cost basis by origination year excludes $7,486 of deferred loan fees, net . Term Loans Amortized Cost Basis by Origination Year 1 2020 2019 2018 2017 2016 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total As of December 31, 2020 Construction and land: Pass $ 155,358 $ 282,497 $ 179,372 $ 11,791 $ 9,938 $ 27,147 $ 21,066 $ — $ 687,169 Special mention — — 2,666 — — — — — 2,666 Substandard — — 510 — — — — — 510 PCD — — — — — 2,685 — — 2,685 Total construction and land $ 155,358 $ 282,497 $ 182,548 $ 11,791 $ 9,938 $ 29,832 $ 21,066 $ — $ 693,030 Farmland: Pass $ 867 $ 972 $ 3,367 $ 3,688 $ — $ 3,656 $ 1,294 $ — $ 13,844 Total farmland $ 867 $ 972 $ 3,367 $ 3,688 $ — $ 3,656 $ 1,294 $ — $ 13,844 1 - 4 family residential: Pass $ 120,580 $ 79,617 $ 91,890 $ 49,338 $ 31,936 $ 115,797 $ 19,065 $ 2,968 $ 511,191 Special mention — 1,077 154 760 — 687 — — 2,678 Substandard — — 142 668 — — 924 — 1,734 PCD — — — — — 8,741 — — 8,741 Total 1 - 4 family residential $ 120,580 $ 80,694 $ 92,186 $ 50,766 $ 31,936 $ 125,225 $ 19,989 $ 2,968 $ 524,344 Multi-family residential: Pass $ 107,332 $ 106,559 $ 139,721 $ 18,722 $ 32,672 $ 7,218 $ 58 $ — $ 412,282 Special mention — — 12,680 — — — — — 12,680 Total multi-family residential $ 107,332 $ 106,559 $ 152,401 $ 18,722 $ 32,672 $ 7,218 $ 58 $ — $ 424,962 OOCRE: Pass $ 113,741 $ 65,262 $ 75,940 $ 79,253 $ 79,202 $ 176,668 $ 5,532 $ — $ 595,598 Special mention — 948 22,725 3,701 12,860 4,326 — — 44,560 Substandard 370 — 10,579 3,830 11,315 6,822 201 6,206 39,323 PCD — — — — 7,951 30,040 — — 37,991 Total OOCRE $ 114,111 $ 66,210 $ 109,244 $ 86,784 $ 111,328 $ 217,856 $ 5,733 $ 6,206 $ 717,472 NOOCRE: Pass $ 361,246 $ 255,976 $ 445,079 $ 90,738 $ 174,893 $ 309,572 $ 13,413 $ — $ 1,650,917 Special mention 101 31,714 37,572 19,262 25,997 37,951 493 — 153,090 Substandard 1,226 0 9,850 0 4,562 4,108 — 23,098 14,105 — 56,949 PCD — — 18,744 — 6,652 17,780 — — 43,176 Total NOOCRE $ 362,573 $ 297,540 $ 505,957 $ 114,108 $ 207,542 $ 388,401 $ 28,011 $ — $ 1,904,132 Commercial: Pass $ 251,004 $ 158,158 $ 112,961 $ 50,734 $ 19,821 $ 41,856 $ 758,832 $ 13,400 $ 1,406,766 Special mention 1,306 2,539 8,224 10,033 1,201 2,165 26,922 3,670 56,060 Substandard 722 4,487 23,245 3,772 7,216 2,083 30,460 5,275 77,260 PCD — — — 3,382 4,196 11,882 — — 19,460 Total commercial $ 253,032 $ 165,184 $ 144,430 $ 67,921 $ 32,434 $ 57,986 $ 816,214 $ 22,345 $ 1,559,546 MW: Pass $ — $ — $ — $ — $ — $ — $ 577,594 $ — $ 577,594 Total MW $ — $ — $ — $ — $ — $ — $ 577,594 $ — $ 577,594 Consumer: Pass $ 2,489 $ 1,216 $ 1,038 $ 3,899 $ 887 $ 353 $ 1,475 $ — $ 11,357 Special mention — — — — 25 227 — — 252 Substandard — — — 60 — 66 1,063 — 1,189 PCD — — — 36 — 166 — — 202 Total consumer $ 2,489 $ 1,216 $ 1,038 $ 3,995 $ 912 $ 812 $ 2,538 $ — $ 13,000 Total Pass $ 1,112,617 $ 950,257 $ 1,049,368 $ 308,163 $ 349,349 $ 682,267 $ 1,398,329 $ 16,368 $ 5,866,718 Total Special Mention 1,407 36,278 84,021 33,756 40,083 45,356 27,415 3,670 271,986 Total Substandard 2,318 14,337 39,038 12,438 18,531 32,069 46,753 11,481 176,965 Total PCD — — 18,744 3,418 18,799 71,294 — — 112,255 Total $ 1,116,342 $ 1,000,872 $ 1,191,171 $ 357,775 $ 426,762 $ 830,986 $ 1,472,497 $ 31,519 $ 6,427,924 1 Term loans amortized cost basis by origination year excludes $2,468 of deferred loan fees, net. Servicing Assets The Company was servicing loans of approximately $304,290 and $215,638 as of June 30, 2021 and 2020, respectively. A summary of the changes in the related servicing assets are as follows: Three Months Ended June 30, Six Months Ended June 30, 2021 2020 2021 2020 Balance at beginning of period $ 3,402 $ 2,990 $ 3,363 $ 3,113 Increase from loan sales 384 22 384 131 Net recoveries 84 — 212 — Amortization charged as a reduction to income (145) (72) (234) (304) Balance at end of period $ 3,725 $ 2,940 $ 3,725 $ 2,940 Fair value of servicing assets is estimated by discounting estimated future cash flows from the servicing assets using discount rates that approximate current market rates over the expected lives of the loans being serviced. A valuation allowance is recorded when the fair value is below the carrying amount of the asset. As of June 30, 2021 and June 30, 2020 there was a valuation allowance of $344 and $536, respectively. The Company may also receive a portion of subsequent interest collections on loans sold that exceed the contractual servicing fees. In that case, the Company records an interest-only strip based on its relative fair market value and the other components of the loans. There was no interest-only strip receivable recorded at June 30, 2021 and December 31, 2020. During the quarter ended June 30, 2021, the Bank sold $15,176 of SBA loans held for investment resulting in a gain of $1,953. During the quarter ended June 30, 2020, the Bank sold $7,780 of SBA loans held for investment resulting in a gain of $604. The gain on sale of SBA loans is recorded in government guaranteed loan income, net in the accompanying condensed consolidated statements of income. |