| Allowance for Credit Losses | Allowance for Credit Losses For the periods indicated, the following tables summarize the activity in the allowance for credit losses on loans which is recorded as a contra asset, and the reserve for unfunded commitments which is recorded on the balance sheet within other liabilities: Allowance for credit losses – Three months ended September 30, 2022 (in thousands) Beginning Charge-offs Recoveries Provision (benefit) Ending Commercial real estate: CRE non-owner occupied $ 28,081 $ — $ 1 $ 1,162 $ 29,244 CRE owner occupied 12,620 — 1 904 13,525 Multifamily 11,795 — — 954 12,749 Farmland 2,954 — — 168 3,122 Total commercial real estate loans 55,450 — 2 3,188 58,640 Consumer: SFR 1-4 1st DT liens 10,311 — 38 322 10,671 SFR HELOCs and junior liens 11,591 — 98 (306) 11,383 Other 2,029 (185) 53 (19) 1,878 Total consumer loans 23,931 (185) 189 (3) 23,932 Commercial and industrial 9,979 (82) 119 384 10,400 Construction 7,522 — — (1,390) 6,132 Agriculture production 1,046 — 1 1,321 2,368 Leases 16 — — — 16 Allowance for credit losses on loans $ 97,944 $ (267) $ 311 $ 3,500 $ 101,488 Reserve for unfunded commitments 4,075 — — 295 4,370 Total $ 102,019 $ (267) $ 311 $ 3,795 $ 105,858 Allowance for credit losses – Nine months ended September 30, 2022 (in thousands) Beginning ACL on PCD Loans Charge-offs Recoveries Provision (benefit) Ending Commercial real estate: CRE non-owner occupied $ 25,739 $ 746 $ — $ 1 $ 2,758 $ 29,244 CRE owner occupied 10,691 63 — 2 2,769 13,525 Multifamily 12,395 — — — 354 12,749 Farmland 2,315 764 (294) — 337 3,122 Total commercial real estate loans 51,140 1,573 (294) 3 6,218 58,640 Consumer: SFR 1-4 1st DT liens 10,723 144 — 79 (275) 10,671 SFR HELOCs and junior liens 10,510 — — 426 447 11,383 Other 2,241 — (470) 200 (93) 1,878 Total consumer loans 23,474 144 (470) 705 79 23,932 Commercial and industrial 3,862 81 (647) 1,130 5,974 10,400 Construction 5,667 201 — — 264 6,132 Agriculture production 1,215 38 — 3 1,112 2,368 Leases 18 — — — (2) 16 Allowance for credit losses on loans $ 85,376 $ 2,037 $ (1,411) $ 1,841 $ 13,645 $ 101,488 Reserve for unfunded commitments 3,790 — — — 580 4,370 Total $ 89,166 $ 2,037 $ (1,411) $ 1,841 $ 14,225 $ 105,858 The allowance for credit losses (ACL) was $101,488,000 as of September 30, 2022, a net increase of $3,544,000 over the immediately preceding quarter. The provision for credit losses of $3,500,000 during the quarter was the net effect of increases in required reserves due to loan portfolio growth and changes in individually analyzed credits, which increased the provision need by approximately $3,218,000 and $1,356,000, respectively, while net decreases in qualitative factors and improvement in overall portfolio credit quality reduced the provisioning need by approximately $1,030,000. In addition to the aforementioned quarterly increase, the provision for credit losses of $13,645,000 during the nine months ended September 30, 2022 was comprised of $10,820,000 in association with the loans acquired from Valley Republic Bank in the first quarter of 2022, and a net provision for credit losses of $2,825,000 associated with organic loan portfolio growth and the net changes in quantitative and qualitative factors associated with overall borrower performance. Net recoveries for the three and nine months ended September 30, 2022 were approximately $44,000 and $430,000, respectively while during the same three and nine month periods of 2021, the Company recorded $261,000 in net charge-offs and $339,000 in recoveries, respectively. In determining the allowance for credit losses, accruing loans with similar risk characteristics are generally evaluated collectively. To estimate expected losses the Company generally utilizes historical loss trends and the remaining contractual lives of the loan portfolios to determine estimated credit losses through a reasonable and supportable forecast period. Individual loan credit quality indicators including loan grade and borrower repayment performance have been statistically correlated with historical credit losses and various econometrics, including California unemployment, gross domestic product, and corporate bond yields. Model forecasts may be adjusted for inherent limitations or biases that have been identified through independent validation and back-testing of model performance to actual realized results. The Company utilizes a forecast period of approximately eight quarters and obtains the forecast data from publicly available sources as of the balance sheet date. This forecast data continues to evolve and included improving shifts in the magnitude of changes for both the unemployment and GDP factors leading up to the balance sheet date, particularly CA unemployment trends. Inflation remains elevated from continued disruptions in the supply chain and volatile energy prices Despite the expected continued benefit to the net interest income of the Company from the elevated rate environment, Management notes the rapid intervals of rate increases by the Federal Reserve and flattening or inversion of the yield curve, have boosted expectations of the US entering a recession within 12 months and has led to the lowest levels of consumer sentiment in decades. As a result, management continues to believe that certain credit weakness are likely present in the overall economy and that it is appropriate to cautiously maintain a reserve level that incorporates such risk factors. Purchased loans and leases that reflect a more-than-insignificant deterioration of credit from origination are considered PCD. For PCD loans and leases, the initial estimate of expected credit losses is recognized in the ACL on the date of acquisition using the same methodology as other loans and leases held-for-investment. The following table provides a summary of loans and leases purchased as part of the VRB acquisition with credit deterioration at acquisition: As of March 25, 2022 (in thousands) Commercial Real Estate Consumer Commercial and Industrial Construction Agriculture Production Total Par value $ 27,237 $ 3,877 $ 2,674 $ 25,645 $ 9,080 $ 68,513 ACL at acquisition (1,573) (144) (81) (201) (38) (2,037) Non-credit discount (2,305) (360) (47) (232) (12) (2,956) Purchase price $ 23,359 $ 3,373 $ 2,546 $ 25,212 $ 9,030 $ 63,520 For the periods indicated, the following tables summarize the activity in the allowance for credit losses on loans which is recorded as a contra asset, and the reserve for unfunded commitments which is recorded on the balance sheet within other liabilities: Allowance for credit losses – Year ended December 31, 2021 (in thousands) Beginning Charge-offs Recoveries Provision Ending Balance Commercial real estate: CRE non-owner occupied $ 29,380 $ — $ 12 $ (3,653) $ 25,739 CRE owner occupied 10,861 (18) 794 (946) 10,691 Multifamily 11,472 — — 923 12,395 Farmland 1,980 (126) — 461 2,315 Total commercial real estate loans 53,693 (144) 806 (3,215) 51,140 Consumer: SFR 1-4 1st DT liens 10,117 (145) 13 738 10,723 SFR HELOCs and junior liens 11,771 (29) 1,127 (2,359) 10,510 Other 3,260 (577) 361 (803) 2,241 Total consumer loans 25,148 (751) 1,501 (2,424) 23,474 Commercial and industrial 4,252 (1,470) 755 325 3,862 Construction 7,540 (27) — (1,846) 5,667 Agriculture production 1,209 — 24 (18) 1,215 Leases 5 — — 13 18 Allowance for credit losses on loans $ 91,847 $ (2,392) $ 3,086 $ (7,165) $ 85,376 Reserve for unfunded commitments 3,400 — — 390 3,790 Total $ 95,247 $ (2,392) $ 3,086 $ (6,775) $ 89,166 Allowance for credit losses – Three months ended September 30, 2021 (in thousands) Beginning Charge-offs Recoveries Provision Ending Balance Commercial real estate: CRE non-owner occupied $ 26,028 $ — $ 10 $ (817) $ 25,221 CRE owner occupied 10,463 (18) 793 (508) 10,730 Multifamily 13,196 — — (320) 12,876 Farmland 1,950 (126) — 78 1,902 Total commercial real estate loans 51,637 (144) 803 (1,567) 50,729 Consumer: SFR 1-4 1st DT liens 10,629 (145) 1 133 10,618 SFR HELOCs and junior liens 10,701 — 63 (333) 10,431 Other 2,620 (181) 97 (94) 2,442 Total consumer loans 23,950 (326) 161 (294) 23,491 Commercial and industrial 4,511 (1,112) 355 (327) 3,427 Construction 4,951 — — 577 5,528 Agriculture production 1,007 — 2 110 1,119 Leases 6 — — 6 12 Allowance for credit losses on loans $ 86,062 $ (1,582) $ 1,321 $ (1,495) $ 84,306 Reserve for unfunded commitments 3,465 — — 60 3,525 Total $ 89,527 $ (1,582) $ 1,321 $ (1,435) $ 87,831 Allowance for credit losses – Nine months ended September 30, 2021 (in thousands) Beginning Charge-offs Recoveries Provision Ending Balance Commercial real estate: CRE non-owner occupied $ 29,380 $ — $ 12 $ (4,171) $ 25,221 CRE owner occupied 10,861 (18) 794 (907) 10,730 Multifamily 11,472 — — 1,404 12,876 Farmland 1,980 (126) — 48 1,902 Total commercial real estate loans 53,693 (144) 806 (3,626) 50,729 Consumer: SFR 1-4 1st DT liens 10,117 (145) 12 634 10,618 SFR HELOCs and junior liens 11,771 — 860 (2,200) 10,431 Other 3,260 (460) 262 (620) 2,442 Total consumer loans 25,148 (605) 1,134 (2,186) 23,491 Commercial and industrial 4,252 (1,446) 570 51 3,427 Construction 7,540 — — (2,012) 5,528 Agriculture production 1,209 — 24 (114) 1,119 Leases 5 — — 7 12 Allowance for credit losses on loans 91,847 (2,195) 2,534 (7,880) 84,306 Reserve for unfunded commitments 3,400 — — 125 3,525 Total $ 95,247 $ (2,195) $ 2,534 $ (7,755) $ 87,831 As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including, but not limited to, trends relating to (i) the level of criticized and classified loans, (ii) net charge-offs, (iii) non-performing loans, and (iv) delinquency within the portfolio. The Company analyzes loans individually to classify the loans as to credit risk and grading. This analysis is performed annually for all outstanding balances greater than $1,000,000 and non-homogeneous loans, such as commercial real estate loans, unless other indicators, such as delinquency, trigger more frequent evaluation. Loans below the $1,000,000 threshold and homogenous in nature are evaluated as needed for proper grading based on delinquency and borrower credit scores. The Company utilizes a risk grading system to assign a risk grade to each of its loans. Loans are graded on a scale ranging from Pass to Loss. A description of the general characteristics of the risk grades is as follows: • Pass – This grade represents loans ranging from acceptable to very little or no credit risk. These loans typically meet most if not all policy standards in regard to: loan amount as a percentage of collateral value, debt service coverage, profitability, leverage, and working capital. • Special Mention – This grade represents “Other Assets Especially Mentioned” in accordance with regulatory guidelines and includes loans that display some potential weaknesses which, if left unaddressed, may result in deterioration of the repayment prospects for the asset or may inadequately protect the Company’s position in the future. These loans warrant more than normal supervision and attention. • Substandard – This grade represents “Substandard” loans in accordance with regulatory guidelines. Loans within this rating typically exhibit weaknesses that are well defined to the point that repayment is jeopardized. Loss potential is, however, not necessarily evident. The underlying collateral supporting the credit appears to have sufficient value to protect the Company from loss of principal and accrued interest, or the loan has been written down to the point where this is true. There is a definite need for a well-defined workout/rehabilitation program. • Doubtful – This grade represents “Doubtful” loans in accordance with regulatory guidelines. An asset classified as Doubtful has all the weaknesses inherent in a loan classified 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. Pending factors include proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral, and financing plans. • Loss – This grade represents “Loss” loans in accordance with regulatory guidelines. A loan classified as Loss is considered uncollectible and of such little value that its continuance as a bankable asset is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off the loan, even though some recovery may be affected in the future. The portion of the loan that is graded loss should be charged off no later than the end of the quarter in which the loss is identified. Based on the most recent analysis performed, the risk category of loans by class of loans is as follows for the period indicated: Term Loans Amortized Cost Basis by Origination Year – As of September 30, 2022 (in thousands) 2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total Commercial real estate: CRE non-owner occupied risk ratings Pass $ 314,435 $ 309,032 $ 151,529 $ 225,181 $ 152,544 $ 761,494 $ 108,941 $ — $ 2,023,156 Special Mention — — — 8,650 — 22,079 1,345 — 32,074 Substandard — 900 792 — 1,066 4,418 — — 7,176 Doubtful/Loss — — — — — — — — — Total CRE non-owner occupied risk ratings $ 314,435 $ 309,932 $ 152,321 $ 233,831 $ 153,610 $ 787,991 $ 110,286 $ — $ 2,062,406 Commercial real estate: CRE owner occupied risk ratings Pass $ 187,346 $ 193,426 $ 132,676 $ 69,125 $ 50,770 $ 267,391 $ 34,869 $ — $ 935,603 Special Mention — 16,904 236 — — 7,217 — — 24,357 Substandard 3,230 723 — 117 1,130 3,326 1,102 — 9,628 Doubtful/Loss — — — — — — — — — Total CRE owner occupied risk ratings $ 190,576 $ 211,053 $ 132,912 $ 69,242 $ 51,900 $ 277,934 $ 35,971 $ — $ 969,588 Commercial real estate: Multifamily risk ratings Pass $ 153,679 $ 285,798 $ 97,578 $ 88,771 $ 105,714 $ 165,961 $ 29,924 $ — $ 927,425 Special Mention — — — — — — — — — Substandard — — — — — 132 — — 132 Doubtful/Loss — — — — — — — — — Total multifamily loans $ 153,679 $ 285,798 $ 97,578 $ 88,771 $ 105,714 $ 166,093 $ 29,924 $ — $ 927,557 Commercial real estate: Farmland risk ratings Pass $ 43,021 $ 53,913 $ 16,940 $ 23,810 $ 13,611 $ 39,521 $ 49,444 $ — $ 240,260 Special Mention 2,284 777 239 — — 1,433 21,431 — 26,164 Substandard — — 335 1,520 3,155 7,026 919 — 12,955 Doubtful/Loss — — — — — — — — — Total farmland loans $ 45,305 $ 54,690 $ 17,514 $ 25,330 $ 16,766 $ 47,980 $ 71,794 $ — $ 279,379 Consumer loans: SFR 1-4 1st DT liens risk ratings Pass $ 154,671 $ 269,240 $ 136,710 $ 33,821 $ 30,232 $ 122,402 $ 10 $ 3,242 $ 750,328 Special Mention — — — 283 3,297 3,708 — 441 7,729 Substandard — 1,209 — — 1,025 4,123 — 615 6,972 Doubtful/Loss — — — — — — — — — Total SFR 1st DT liens $ 154,671 $ 270,449 $ 136,710 $ 34,104 $ 34,554 $ 130,233 $ 10 $ 4,298 $ 765,029 Term Loans Amortized Cost Basis by Origination Year – As of September 30, 2022 (in thousands) 2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total Consumer loans: SFR HELOCs and Junior Liens Pass $ 420 $ — $ — $ — $ — $ 136 $ 378,609 $ 8,522 $ 387,687 Special Mention — — — — — — 1,783 82 1,865 Substandard — — — — — — 3,814 770 4,584 Doubtful/Loss — — — — — — — — — Total SFR HELOCs and Junior Liens $ 420 $ — $ — $ — $ — $ 136 $ 384,206 $ 9,374 $ 394,136 Consumer loans: Other risk ratings Pass $ 11,538 $ 13,996 $ 11,175 $ 11,977 $ 5,657 $ 2,118 $ 873 $ — $ 57,334 Special Mention 2 4 104 143 184 113 43 — 593 Substandard — — 42 43 1 96 23 — 205 Doubtful/Loss — — — — — — — — — Total other consumer loans $ 11,540 $ 14,000 $ 11,321 $ 12,163 $ 5,842 $ 2,327 $ 939 $ — $ 58,132 Commercial and industrial loans: Commercial and industrial risk ratings Pass $ 115,676 $ 68,377 $ 25,530 $ 25,839 $ 9,157 $ 7,005 $ 260,876 $ 761 $ 513,221 Special Mention 3,354 150 22 1,590 169 29 14,374 — 19,688 Substandard — 24 — — 35 710 1,180 102 2,051 Doubtful/Loss — — — — — — — — — Total commercial and industrial loans $ 119,030 $ 68,551 $ 25,552 $ 27,429 $ 9,361 $ 7,744 $ 276,430 $ 863 $ 534,960 Construction loans: Construction risk ratings Pass $ 43,353 $ 85,108 $ 52,726 $ 42,886 $ 2,642 $ 5,186 $ — $ — $ 231,901 Special Mention — — — 11,455 — — — — 11,455 Substandard — — — 84 — 131 — — 215 Doubtful/Loss — — — — — — — — — Total construction loans $ 43,353 $ 85,108 $ 52,726 $ 54,425 $ 2,642 $ 5,317 $ — $ — $ 243,571 Agriculture production loans: Agriculture production risk ratings Pass $ 1,837 $ 2,635 $ 1,288 $ 1,204 $ 8,947 $ 1,181 $ 41,865 $ — $ 58,957 Special Mention — — — — 104 33 2,211 — 2,348 Substandard — — 1,804 — — — 8,490 — 10,294 Doubtful/Loss — — — — — — — — — Total agriculture production loans $ 1,837 $ 2,635 $ 3,092 $ 1,204 $ 9,051 $ 1,214 $ 52,566 $ — $ 71,599 Term Loans Amortized Cost Basis by Origination Year – As of September 30, 2022 (in thousands) 2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total Leases: Lease risk ratings Pass $ 7,933 $ — $ — $ — $ — $ — $ — $ — $7,933 Special Mention — — — — — — — — — Substandard — — — — — — — — — Doubtful/Loss — — — — — — — — — Total leases $ 7,933 $ — $ — $ — $ — $ — $ — $ — $ 7,933 Total loans outstanding: Risk ratings Pass $ 1,033,909 $ 1,281,525 $ 626,152 $ 522,614 $ 379,274 $ 1,372,395 $ 905,411 $ 12,525 $ 6,133,805 Special Mention 5,640 17,835 601 22,121 3,754 34,612 41,187 523 126,273 Substandard 3,230 2,856 2,973 1,764 6,412 19,962 15,528 1,487 54,212 Doubtful/Loss — — — — — — — — — Total loans outstanding $ 1,042,779 $ 1,302,216 $ 629,726 $ 546,499 $ 389,440 $ 1,426,969 $ 962,126 $ 14,535 $ 6,314,290 Term Loans Amortized Cost Basis by Origination Year – As of December 31, 2021 (in thousands) 2021 2020 2019 2018 2016 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total Commercial real estate: CRE non-owner occupied risk ratings Pass $ 275,305 $ 127,299 $ 199,764 $ 133,046 $ 224,581 $ 543,430 $ 49,899 $ — $ 1,553,324 Special Mention — — 8,386 399 4,390 20,612 1,732 — 35,519 Substandard — — — 1,382 739 12,177 — — 14,298 Doubtful/Loss — — — — — — — — — Total CRE non-owner occupied risk ratings $ 275,305 $ 127,299 $ 208,150 $ 134,827 $ 229,710 $ 576,219 $ 51,631 $ — $ 1,603,141 Commercial real estate: CRE owner occupied risk ratings Pass $ 178,092 $ 104,571 $ 63,979 $ 48,721 $ 55,399 $ 203,431 $ 22,745 $ — $ 676,938 Special Mention 15,515 — — 289 2,964 3,833 — — 22,601 Substandard — — 858 1,214 455 4,241 — — 6,768 Doubtful/Loss — — — — — — — — — Total CRE owner occupied risk ratings $ 193,607 $ 104,571 $ 64,837 $ 50,224 $ 58,818 $ 211,505 $ 22,745 $ — $ 706,307 Commercial real estate: Multifamily risk ratings Pass $ 278,942 $ 100,752 $ 71,822 $ 109,374 $ 85,932 $ 146,984 $ 25,236 $ — $ 819,042 Special Mention — — — — — — — — — Substandard — — 4,305 — — 153 — — 4,458 Doubtful/Loss — — — — — — — — — Total multifamily loans $ 278,942 $ 100,752 $ 76,127 $ 109,374 $ 85,932 $ 147,137 $ 25,236 $ — $ 823,500 Commercial real estate: Farmland risk ratings Pass $ 43,601 $ 17,399 $ 20,223 $ 15,119 $ 9,129 $ 18,455 $ 37,612 $ — $ 161,538 Special Mention — — — — 1,197 2,519 1,491 — 5,207 Substandard — — 2,895 — 578 1,371 1,517 — 6,361 Doubtful/Loss — — — — — — — — — Total farmland loans $ 43,601 $ 17,399 $ 23,118 $ 15,119 $ 10,904 $ 22,345 $ 40,620 $ — $ 173,106 Consumer loans: SFR 1-4 1st DT liens risk ratings Pass $ 268,743 $ 159,860 $ 40,661 $ 30,880 $ 36,197 $ 113,519 $ — $ 3,527 $ 653,387 Special Mention — — 286 3,282 416 1,476 — 383 5,843 Substandard 1,103 — — 1,089 256 4,758 — 524 7,730 Doubtful/Loss — — — — — — — — — Total SFR 1st DT liens $ 269,846 $ 159,860 $ 40,947 $ 35,251 $ 36,869 $ 119,753 $ — $ 4,434 $ 666,960 Term Loans Amortized Cost Basis by Origination Year – As of December 31, 2021 (in thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total Consumer loans: SFR HELOCs and Junior Liens Pass $ 494 $ — $ — $ — $ — $ 185 $ 317,381 $ 9,675 $ 327,735 Special Mention — — — — — 53 3,655 832 4,540 Substandard — — — — — 2 4,164 1,072 5,238 Doubtful/Loss — — — — — — — — — Total SFR HELOCs and Junior Liens $ 494 $ — $ — $ — $ — $ 240 $ 325,200 $ 11,579 $ 337,513 Consumer loans: Other risk ratings Pass $ 20,920 $ 15,939 $ 17,316 $ 8,016 $ 2,137 $ 1,079 $ 612 $ — $ 66,019 Special Mention — 46 157 233 98 51 69 — 654 Substandard — 53 96 94 67 85 10 — 405 Doubtful/Loss — — — — — — — — — Total other consumer loans $ 20,920 $ 16,038 $ 17,569 $ 8,343 $ 2,302 $ 1,215 $ 691 $ — $ 67,078 Commercial and industrial loans: Commercial and industrial risk ratings Pass $ 92,972 $ 17,933 $ 27,335 $ 11,335 $ 6,355 $ 6,774 $ 89,358 $ 860 $ 252,922 Special Mention — 2,417 69 152 71 80 116 — 2,905 Substandard — — 146 152 804 414 1,832 180 3,528 Doubtful/Loss — — — — — — — — — Total commercial and industrial loans $ 92,972 $ 20,350 $ 27,550 $ 11,639 $ 7,230 $ 7,268 $ 91,306 $ 1,040 $ 259,355 Construction loans: Construction risk ratings Pass $ 66,318 $ 79,567 $ 58,383 $ 4,849 $ 1,716 $ 8,148 $ — $ — $ 218,981 Special Mention — — — — — — — — — Substandard 2,675 472 — — — 153 — — 3,300 Doubtful/Loss — — — — — — — — — Total construction loans $ 68,993 $ 80,039 $ 58,383 $ 4,849 $ 1,716 $ 8,301 $ — $ — $ 222,281 Agriculture production loans: Agriculture production risk ratings Pass $ 2,068 $ 878 $ 1,393 $ 801 $ 940 $ 853 $ 43,686 $ — $ 50,619 Special Mention — — — 150 — 42 — — 192 Substandard — — — — — — — — — Doubtful/Loss — — — — — — — — — Total agriculture production loans $ 2,068 $ 878 $ 1,393 $ 951 $ 940 $ 895 $ 43,686 $ — $ 50,811 Term Loans Amortized Cost Basis by Origination Year – As of December 31, 2021 (in thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total Pass $ 6,572 $ — $ — $ — $ — $ — $ — $ — $ 6,572 Special Mention — — — — — — — — — Substandard — — — — — — — — — Doubtful/Loss — — — — — — — — — Total leases $ 6,572 $ — $ — $ — $ — $ — $ — $ — $ 6,572 Total loans outstanding: Risk ratings Pass $ 1,234,027 $ 624,198 $ 500,876 $ 362,141 $ 422,386 $ 1,042,858 $ 586,529 $ 14,062 $ 4,787,077 Special Mention 15,515 2,463 8,898 4,505 9,136 28,666 7,063 1,215 77,461 Substandard 3,778 525 8,300 3,931 2,899 23,354 7,523 1,776 52,086 Doubtful/Loss — — — — — — — — — Total loans outstanding $ 1,253,320 $ 627,186 $ 518,074 $ 370,577 $ 434,421 $ 1,094,878 $ 601,115 $ 17,053 $ 4,916,624 The following table shows the ending balance of current and past due originated loans by loan category as of the date indicated: Analysis of Past Due Loans - As of September 30, 2022 (in thousands) 30-59 days 60-89 days > 90 days Total Past Current Total Commercial real estate: CRE non-owner occupied $ 113 $ 166 $ 224 $ 503 $ 2,061,903 $ 2,062,406 CRE owner occupied 689 — 75 764 968,824 969,588 Multifamily — — — — 927,557 927,557 Farmland 336 438 — 774 278,605 279,379 Total commercial real estate loans 1,138 604 299 2,041 4,236,889 4,238,930 Consumer: SFR 1-4 1st DT liens 15 114 616 745 764,284 765,029 SFR HELOCs and junior liens 1,257 53 964 2,274 391,862 394,136 Other 63 44 42 149 57,983 58,132 Total consumer loans 1,335 211 1,622 3,168 1,214,129 1,217,297 Commercial and industrial 669 280 140 1,089 533,871 534,960 Construction — — 85 85 243,486 243,571 Agriculture production — — 88 88 71,511 71,599 Leases — — — — 7,933 7,933 Total $ 3,142 $ 1,095 $ 2,234 $ 6,471 $ 6,307,819 $ 6,314,290 Analysis of Past Due Loans - As of December 31, 2021 (in thousands) 30-59 days 60-89 days > 90 days Total Past Current Total Commercial real estate: CRE non-owner occupied $ 226 $ 37 $ — $ 263 $ 1,602,878 $ 1,603,141 CRE owner occupied 271 127 273 671 705,636 706,307 Multifamily — — — — 823,500 823,500 Farmland — — 575 575 172,531 173,106 Total commercial real estate loans 497 164 848 1,509 3,304,545 3,306,054 Consumer: SFR 1-4 1st DT liens — 13 362 375 666,585 666,960 SFR HELOCs and junior liens 36 361 1,212 1,609 335,904 337,513 Other 109 7 28 144 66,934 67,078 Total consumer loans 145 381 1,602 2,128 1,069,423 1,071,551 Commercial and industrial 146 245 166 557 258,798 259,355 Construction — 90 — 90 222,191 222,281 Agriculture production 48 — — 48 50,763 50,811 Leases — — — — 6,572 6,572 Total $ 836 $ 880 $ 2,616 $ 4,332 $ 4,912,292 $ 4,916,624 The following table shows the ending balance of non accrual loans by loan category as of the date indicated: Non Accrual Loans As of September 30, 2022 As of December 31, 2021 (in thousands) Non accrual with no allowance for credit losses Total non accrual Past due 90 days or more and still accruing Non accrual with no allowance for credit losses Total non accrual Past due 90 days or more and still accruing Commercial real estate: CRE non-owner occupied $ 2,032 $ 2,032 $ — $ 7,899 $ 7,899 $ — CRE owner occupied 1,703 1,778 — 4,763 5,036 — Multifamily 132 132 — 4,457 4,457 — Farmland 813 695 — 452 3,020 — Total commercial real estate loans 4,680 4,637 — 17,571 20,412 — Consumer: SFR 1-4 1st DT liens 3,103 3,255 — 3,594 3,595 — SFR HELOCs and junior liens 2,945 3,365 — 3,285 3,801 — Other 6 61 — 48 71 — Total consumer loans 6,054 6,681 — 6,927 7,467 — Commercial and industrial 462 655 5 1,904 2,416 — Construction 120 120 — 15 55 — Agriculture production — 5,373 — — — — Leases — — — — — — Sub-total 11,316 17,466 5 26,417 30,350 — Less: Guaranteed loans (110) (147) — (713) (775) Total, net $ 11,206 $ 17,319 $ 5 $ 25,704 $ 29,575 $ — Interest income on non accrual loans that would have been recognized during the three months ended September 30, 2022 and 2021, if all such loans had been current in accordance with their original terms, totaled $497,000 and $412,000, respectively. Interest income actually recognized on these originated loans during the three months ended September 30, 2022 and 2021 was $272,000 and $117,000, respectively. Interest income on non accrual loans that would have been recognized during the nine months ended September 30, 2022 and 2021, if all such loans had been current in accordance with their original terms, totaled $901,000 and $1,472,000, respectively. Interest income actually recognized on these originated loans during the nine months ended September 30, 2022 and 2021 was $285,000 and $293,000, respectively. The following tables present the amortized cost basis of collateral dependent loans by class of loans as of the following periods: As of September 30, 2022 (in thousands) Retail Office Warehouse Other Multifamily Farmland SFR-1st Deed SFR-2nd Deed Automobile/Truck A/R and Inventory Equipment Total Commercial real estate: CRE non-owner occupied $ 1,031 $ 101 $ — $ 900 $ — $ — $ — $ — $ — $ — $ — $ 2,032 CRE owner occupied 573 75 1,131 — — — — — — — — 1,779 Multifamily — — — — 132 — — — — — — 132 Farmland — — — — — 813 — — — — — 813 Total commercial real estate loans 1,604 176 1,131 900 132 813 — — — — — 4,756 Consumer: SFR 1-4 1st DT liens — — — — — — 3,255 — — — — 3,255 SFR HELOCs and junior liens — — — — — — 1,503 1,442 — — — 2,945 Other — — — 5 — — — — 43 — 2 50 Total consumer loans — — — 5 — — 4,758 1,442 43 — 2 6,250 Commercial and industrial — — — — — — — — — 604 50 654 Construction — — — — — — 120 — — — — 120 Agriculture production — — — 88 — — — — — 1,804 3,481 5,373 Leases — — — — — — — — — — — — Total $ 1,604 $ 176 $ 1,131 $ 993 $ 132 $ 813 $ 4,878 $ 1,442 $ 43 $ 2,408 $ 3,533 $ 17,153 As of December 31, 2021 (in thousands) Retail Office Warehouse Other Multifamily Farmland SFR -1st Deed SFR -2nd Deed Automobile/Truck A/R and Inventory Equipment Total Commercial real estate: CRE non-owner occupied $ 2,591 $ 1,253 $ 1,545 $ 7,272 $ — $ — $ — $ — $ — $ — $ — $ 12,661 CRE owner occupied — — — — — — — — — — — — Multifamily — — — — 4,458 — — — — — — 4,458 Farmland — — — — — — 1,027 — — — — — 1,027 Total commercial real estate loans 2,591 1,253 1,545 7,272 4,458 1,027 — — — — — 18,146 Consumer: SFR 1-4 1st DT liens — — — — — — 3,589 — — — — 3,589 SFR HELOCs and junior liens — — — — — — 1,649 1,636 — — — 3,285 Other — — — 43 — — — — 5 — 5 53 Total consumer loans — — — 43 — — 5,238 1,636 5 — 5 6,927 Commercial and industrial — — — — — — — — — 2,162 112 2,274 Construction — — — — — — 15 — — — — 15 Agriculture production — — — — — — — — — — — — Leases — — — — — — — — — — — — Total $ 2,591 $ 1,253 $ 1,545 $ 7,315 $ 4,458 $ 1,027 $ 5,253 $ 1,636 $ 5 $ 2,162 $ 117 $ 27,362 The following tables show certain information regarding TDRs that occurred during the periods indicated: TDR information for the three months ended September 30, 2022 (dollars in thousands) Number Pre-mod Post-mod Financial Number that Recorded Financial impact Commercial real estate: CRE non-owner occupied — $ — $ — $ — — $ — $ — CRE owner occupied — — — — — — — Multifamily — — — — — — — Farmland — — — — — — — Total commercial real estate loans — — — — — — — Consumer: SFR 1-4 1st DT liens — — — — — — — SFR HELOCs and junior liens — — — — — — — Other — — — — — — — Total consumer loans — — — — — — — Commercial and industrial — — — — — — — Construction — — — — — — — Agriculture production 4 7,210 7,210 — — — — Leases — — — — — — — Total 4 $ 7,210 $ 7,210 $ — — $ — $ — TDR information for the three months ended September 30, 2021 (dollars in thousands) Number Pre-mod Post-mod Financial Number that Recorded Financial impact Commercial real estate: CRE non-owner occupied 3 $ 3,943 $ 3,938 $ — — $ — $ — CRE owner occupied — — — — — — — Multifamily — — — — — — — Farmland 1 50 50 50 — — — Total commercial real estate loans 4 3,993 3,988 50 — — — Consumer: SFR 1-4 1st DT liens — — — — — — — SFR HELOCs and junior liens — — — — — — — Other — — — — — — — Total consumer loans — — — — — — — Commercial and industrial 2 160 159 106 — — — Construction — — — — — — — Agriculture production — — — — — — — Leases — — — — — — — Total 6 $ 4,153 $ 4,147 $ 156 — $ — $ — TDR Information for the nine months ended September 30, 2022 (dollars in thousands) Number Pre-mod Post-mod Financial Number that Recorded Financial impact Commercial real estate: CRE non-owner occupied — $ — $ — $ — — $ — $ — CRE owner occupied — — — — — — — Multifamily — — — — — — — Farmland 3 1,228 1,440 — — — — Total commercial real estate loans 3 1,228 1,440 — — — — Consumer: SFR 1-4 1st DT liens — — — — — — — SFR HELOCs and junior liens — — — — 2 146 — Other — — — — — — — Total consumer loans — — — — 2 146 — Commercial and industrial — — — — 1 22 — Construction — — — — — — — Agriculture production 4 7,210 7,210 — — — — Leases — — — — — — — Total 7 $ 8,438 $ 8,650 $ — 3 $ 168 $ — TDR Information for the nine months ended September 30, 2021 (dollars in thousands) Number Pre-mod Post-mod Financial Number that Recorded Financial impact Commercial real estate: CRE non-owner occupied — $ 4,966 $ 4,956 $ 1,020 — $ — $ — CRE owner occupied — 740 742 742 — — — Multifamily — — — — — — — Farmland — 50 50 50 — 847 — Total commercial real estate loans — 5,756 5,748 1,812 — 847 — Consumer: SFR 1-4 1st DT liens — — — — — — — SFR HELOCs and junior liens — — — — — — — Other — — — — — — — Total consumer loans — — — — — — — Commercial and industrial — 2,476 2,469 709 — 260 (5) Construction — — — — — — — Agriculture production — — — — — — — Leases — — — — — — — Total — $ 8,232 $ 8,217 $ 2,521 — $ 1,107 $ (5) The Company also modified the terms of select loans in an effort to assist borrowers that were not related to the COVID-19 pandemic. If the borrower was experiencing financial difficulty and a concession was granted, the Company considered such modifications as troubled debt restructurings. Modifications classified as TDRs can include one or a combination of the following: rate modifications, term extensions, interest only modifications, either temporary or long-term, payment modifications, and collateral substitutions/additions. The objective of the modifications was to increase loan repayments by customers and thereby reduce net charge-offs. The modified loans are included in impaired loans for purposes of determining the level of the allowance for credit losses. For all new TDRs, an impairment analysis is conducted. If the loan is determined to be collateral dependent, any additional amount of impairment will be calculated based on the difference between estimated collectible value and the current carrying balance of the loan. This difference could result in an increased provision and is typically charged off. If the asset is determined not to be collateral dependent, the impairment is measured on the net present value difference between the expected cash flows of the restructured loan and |
