Allowance for Credit Losses | Allowance for Credit Losses The ACL was $105,680,000 as of December 31, 2022 as compared to $85,376,000 at December 31, 2021. The provision for credit losses on loans of $17,945,000 during the year ended December 31, 2022 was comprised of $10,820,000 in day 1 required reserves from loans acquired in connection with the VRB merger in the first quarter of 2022. Additionally, the Company designated certain loans and leases purchased from VRB as PCD, which required $2,037,000 in additional credit reserves as of the acquisition date. 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 remaining increase in the allowance for credit reserves was the result of changes in loan volume and changes in credit quality associated with levels of classified, past due and non-performing loans in addition to changes in qualitative factors. The quantitative component of the ACL increased reserve requirements due to loan volume growth and increases in specific reserves. In addition to the quantitative loan portfolio, credit quality characteristics which are illustrated in the following tabular disclosures, the Company’s expected credit loss methodology (CECL) incorporates the use of qualitative factors. The qualitative components of the ACL resulted in a net increase in required reserves despite continued improvement in US employment rates, due to increased uncertainty in the global economic markets, US economic policy uncertainty, and the continued rise in corporate debt yields. As compared to historical norms, inflation remains elevated from continued disruptions in the supply chain, wage pressures, and higher living costs such as housing and food prices. Management notes the rapid intervals of rate increases by the Federal Reserve and inversion of the yield curve, have boosted expectations of the US entering a recession within 12 months. As a result, management continues to believe that certain credit weakness are likely present in the overall economy and that it is appropriate to maintain an allowance for credit losses that incorporates such risk factors. The table below sets forth the components of the Company’s allowance for credit losses as of the dates indicated: (dollars in thousands) December 31, 2022 December 31, 2021 Allowance for credit losses: Qualitative and forecast factor allowance $ 70,777 $ 59,855 Quantitative (Cohort) model allowance reserves 32,489 24,539 Total allowance for credit losses 103,266 84,394 Allowance for individually evaluated loans 2,414 982 Total allowance for credit losses $ 105,680 $ 85,376 The following table provides a summary of loans and leases purchased as part of the VRB acquisition with credit deterioration (PCD) 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 The following tables summarize the activity in the allowance for credit losses, and ending balance of loans, net of unearned fees for the periods indicated. Allowance for Credit Losses – December 31, 2022 (in thousands) Beginning ACL on PCD Loans Charge-offs Recoveries Provision for Ending Commercial real estate: CRE non-owner occupied $ 25,739 $ 746 $ — $ 1 $ 4,476 $ 30,962 CRE owner occupied 10,691 63 — 2 3,258 14,014 Multifamily 12,395 — — — 737 13,132 Farmland 2,315 764 (294) — 488 3,273 Total commercial real estate loans 51,140 1,573 (294) 3 8,959 61,381 Consumer: SFR 1-4 1st DT liens 10,723 144 — 79 322 11,268 SFR HELOCs and junior liens 10,510 — (22) 429 496 11,413 Other 2,241 — (572) 235 54 1,958 Total consumer loans 23,474 144 (594) 743 872 24,639 Commercial and industrial 3,862 81 (697) 1,157 9,194 13,597 Construction 5,667 201 — — (726) 5,142 Agriculture production 1,215 38 — 4 (351) 906 Leases 18 — — — (3) 15 Allowance for credit losses on loans 85,376 2,037 (1,585) 1,907 17,945 105,680 Reserve for unfunded commitments 3,790 — — — 525 4,315 Total $ 89,166 $ 2,037 $ (1,585) $ 1,907 $ 18,470 $ 109,995 Allowance for Credit Losses – December 31, 2021 (in thousands) Beginning Charge-offs Recoveries Provision for Ending 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 – December 31, 2020 (in thousands) Beginning Impact of CECL Adoption Charge-offs Recoveries Provision for Ending Commercial real estate: CRE non-owner occupied $ 5,948 $ 6,701 $ — $ 198 $ 16,533 $ 29,380 CRE owner occupied 2,027 2,281 — 28 6,525 10,861 Multifamily 3,352 2,281 — — 5,839 11,472 Farmland 668 585 (182) — 909 1,980 Total commercial real estate loans 11,995 11,848 (182) 226 29,806 53,693 Consumer: SFR 1-4 1st DT liens 2,306 2,675 (13) 416 4,733 10,117 SFR HELOCs and junior liens 6,183 4,638 (116) 304 762 11,771 Other 1,595 971 (670) 347 1,017 3,260 Total consumer loans 10,084 8,284 (799) 1,067 6,512 25,148 Commercial and industrial 4,867 (1,961) (774) 568 1,552 4,252 Construction 3,388 933 — — 3,219 7,540 Agriculture production 261 (179) — 24 1,103 1,209 Leases 21 (12) — — (4) 5 Allowance for credit losses on loans 30,616 18,913 (1,755) 1,885 42,188 91,847 Reserve for unfunded commitments 2,775 — — — 625 3,400 Total $ 33,391 $ 18,913 $ (1,755) $ 1,885 $ 42,813 $ 95,247 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. Collateral values may be determined by appraisals obtained through Bank approved, licensed appraisers, qualified independent third parties, public value information (blue book values for autos), sales invoices, or other appropriate means. Appropriate valuations are obtained at initiation of the credit and periodically (every 3-12 months depending on collateral type) once repayment is questionable and the loan has been classified. 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. The following tables present ending loan balances by loan category and risk grade for the periods indicated: Term Loans Amortized Cost Basis by Origination Year - As of December 31, 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 $ 399,910 $ 304,636 $ 152,960 $ 221,659 $ 147,842 $ 748,994 $ 123,794 $ — $ 2,099,795 Special Mention — — — 20,033 — 21,681 1,346 — 43,060 Substandard — 864 768 — 1,059 4,179 — — 6,870 Doubtful/Loss — — — — — — — — — Total CRE non-owner occupied risk ratings $ 399,910 $ 305,500 $ 153,728 $ 241,692 $ 148,901 $ 774,854 $ 125,140 $ — $ 2,149,725 Commercial real estate: CRE owner occupied risk ratings Pass $ 210,101 $ 197,787 $ 120,929 $ 64,244 $ 49,755 $ 251,137 $ 43,343 $ — $ 937,296 Special Mention 131 16,296 234 731 — 6,971 879 — 25,242 Substandard 3,213 — 5,249 1,893 1,103 10,654 157 — 22,269 Doubtful/Loss — — — — — — — — — Total CRE owner occupied risk ratings $ 213,445 $ 214,083 $ 126,412 $ 66,868 $ 50,858 $ 268,762 $ 44,379 $ — $ 984,807 Term Loans Amortized Cost Basis by Origination Year - As of December 31, 2022 (in thousands) 2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total Commercial real estate: Multifamily risk ratings Pass $ 159,318 $ 290,170 $ 96,937 $ 108,586 $ 106,287 $ 154,125 $ 28,989 $ — $ 944,412 Special Mention — — — — — — — — — Substandard — — — — — 125 — — 125 Doubtful/Loss — — — — — — — — — Total multifamily loans $ 159,318 $ 290,170 $ 96,937 $ 108,586 $ 106,287 $ 154,250 $ 28,989 $ — $ 944,537 Commercial real estate: Farmland risk ratings Pass $ 47,067 $ 53,275 $ 16,739 $ 18,589 $ 12,386 $ 34,528 $ 53,684 $ — $ 236,268 Special Mention 3,139 783 246 5,000 — 3,991 14,275 — 27,434 Substandard — — 1,772 765 3,158 7,094 3,523 — 16,312 Doubtful/Loss — — — — — — — — — Total farmland loans $ 50,206 $ 54,058 $ 18,757 $ 24,354 $ 15,544 $ 45,613 $ 71,482 $ — $ 280,014 Consumer loans: SFR 1-4 1st DT liens risk ratings Pass $ 194,933 $ 265,370 $ 131,922 $ 33,395 $ 28,545 $ 115,469 $ 8 $ 2,924 $ 772,566 Special Mention — — 1,531 282 3,277 5,854 — 465 11,409 Substandard — 1,204 — — 1,004 3,521 — 645 6,374 Doubtful/Loss — — — — — — — — — Total SFR 1st DT liens $ 194,933 $ 266,574 $ 133,453 $ 33,677 $ 32,826 $ 124,844 $ 8 $ 4,034 $ 790,349 Consumer loans: SFR HELOCs and Junior Liens risk ratings Pass $ 505 $ — $ — $ — $ — $ 127 $ 378,939 $ 8,462 $ 388,033 Special Mention — — — — — — 1,842 81 1,923 Substandard — — — — — — 3,072 638 3,710 Doubtful/Loss — — — — — — — — — Total SFR HELOCs and Junior Liens $ 505 $ — $ — $ — $ — $ 127 $ 383,853 $ 9,181 $ 393,666 Consumer loans: Other risk ratings Pass $ 14,070 $ 12,990 $ 10,211 $ 10,650 $ 5,225 $ 1,945 $ 899 $ — $ 55,990 Special Mention — 18 77 135 176 32 47 — 485 Substandard — — 42 92 — 96 23 — 253 Doubtful/Loss — — — — — — — — — Total other consumer loans $ 14,070 $ 13,008 $ 10,330 $ 10,877 $ 5,401 $ 2,073 $ 969 $ — $ 56,728 Term Loans Amortized Cost Basis by Origination Year - As of December 31, 2022 (in thousands) 2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total Commercial and industrial loans: Commercial and industrial risk ratings Pass $ 125,710 $ 64,966 $ 17,746 $ 23,131 $ 7,628 $ 5,051 $ 297,341 $ 483 $ 542,056 Special Mention 3,032 139 21 49 138 768 11,547 — 15,694 Substandard 1,293 1,142 5,179 14 33 611 3,798 101 12,171 Doubtful/Loss — — — — — — — — Total commercial and industrial loans $ 130,035 $ 66,247 $ 22,946 $ 23,194 $ 7,799 $ 6,430 $ 312,686 $ 584 $ 569,921 Construction loans: Construction risk ratings Pass $ 72,840 $ 72,308 $ 43,409 $ 15,358 $ 2,159 $ 4,900 $ — $ — $ 210,974 Special Mention — — — — — — — — — Substandard — — — 457 — 129 — — 586 Doubtful/Loss — — — — — — — — — Total construction loans $ 72,840 $ 72,308 $ 43,409 $ 15,815 $ 2,159 $ 5,029 $ — $ — $ 211,560 Agriculture production loans: Agriculture production risk ratings Pass $ 3,414 $ 2,777 $ 1,149 $ 1,104 $ 8,902 $ 1,058 $ 38,425 $ — $ 56,829 Special Mention — — — — 90 31 1,632 — 1,753 Substandard — — — — — — 2,832 — 2,832 Doubtful/Loss — — — — — — — — — Total agriculture production loans $ 3,414 $ 2,777 $ 1,149 $ 1,104 $ 8,992 $ 1,089 $ 42,889 $ — $ 61,414 Leases: Lease risk ratings Pass $ 7,726 $ — $ — $ — $ — $ — $ — $ — $ 7,726 Special Mention — — — — — — — — — Substandard — — — — — — — — — Doubtful/Loss — — — — — — — — — Total leases $ 7,726 $ — $ — $ — $ — $ — $ — $ — $ 7,726 Total loans outstanding: Risk ratings Pass $ 1,235,594 $ 1,264,279 $ 592,002 $ 496,716 $ 368,729 $ 1,317,334 $ 965,422 $ 11,869 $ 6,251,945 Special Mention 6,302 17,236 2,109 26,230 3,681 39,328 31,568 546 127,000 Substandard 4,506 3,210 13,010 3,221 6,357 26,409 13,405 1,384 71,502 Doubtful/Loss — — — — — — — — — Total loans outstanding $ 1,246,402 $ 1,284,725 $ 607,121 $ 526,167 $ 378,767 $ 1,383,071 $ 1,010,395 $ 13,799 $ 6,450,447 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 2016 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total Consumer loans: SFR HELOCs and Junior Liens risk ratings 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 2016 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total Leases: Lease risk ratings 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 Once a loan becomes delinquent and repayment becomes questionable, a Bank collection officer will address collateral shortfalls with the borrower and attempt to obtain additional collateral. If this is not forthcoming and payment in full is unlikely, the Bank will estimate its probable loss, using a recent valuation as appropriate to the underlying collateral less estimated costs of sale, and charge the loan down to the estimated net realizable amount. Depending on the length of time until ultimate collection, the Bank may revalue the underlying collateral and take additional charge-offs as warranted. Revaluations may occur as often as every 3-12 months depending on the underlying collateral and volatility of values. Final charge-offs or recoveries are taken when collateral is liquidated and actual loss is known. Unpaid balances on loans after or during collection and liquidation may also be pursued through lawsuit and attachment of wages or judgment liens on borrower’s other assets. 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 December 31, 2022 (in thousands) 30-59 days 60-89 days > 90 days Total Past Current Total Commercial real estate: CRE non-owner occupied $ — $ — $ — $ — $ 2,149,725 $ 2,149,725 CRE owner occupied — 98 75 173 984,634 984,807 Multifamily 159 — — 159 944,378 944,537 Farmland — — — 0 280,014 280,014 Total commercial real estate loans 159 98 75 332 4,358,751 4,359,083 Consumer: SFR 1-4 1st DT liens 24 — 279 303 790,046 790,349 SFR HELOCs and junior liens 172 166 707 1,045 392,621 393,666 Other 26 34 55 115 56,613 56,728 Total consumer loans 222 200 1,041 1,463 1,239,280 1,240,743 Commercial and industrial 2,300 190 283 2,773 567,148 569,921 Construction — — 379 379 211,181 211,560 Agriculture production — — — — 61,414 61,414 Leases — — — — 7,726 7,726 Total $ 2,681 $ 488 $ 1,778 $ 4,947 $ 6,445,500 $ 6,450,447 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 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 December 31, 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 $ 1,739 $ 1,739 $ — $ 7,899 $ 7,899 $ — CRE owner occupied 4,938 4,938 — 4,763 5,036 — Multifamily 125 125 — 4,457 4,457 — Farmland 1,772 1,772 — 452 3,020 — Total commercial real estate loans 8,574 8,574 — 17,571 20,412 — Consumer: SFR 1-4 1st DT liens 4,117 4,220 — 3,594 3,595 — SFR HELOCs and junior liens 2,498 3,155 — 3,285 3,801 — Other 47 84 — 48 71 — Total consumer loans 6,662 7,459 — 6,927 7,467 — Commercial and industrial 1,224 3,518 — 1,904 2,416 — Construction 491 491 — 15 55 — Agriculture production 1,279 1,279 — — — — Leases — — — — — — Sub-total 18,230 21,321 — 26,417 30,350 — Less: Guaranteed loans (105) (225) — (713) (775) — Total, net $ 18,125 $ 21,096 $ — $ 25,704 $ 29,575 $ — The following tables present the amortized cost basis of collateral dependent loans by class of loans as of the following periods: As of December 31, 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 $ 777 $ 98 $ — $ 864 $ — $ — $ — $ — $ — $ — $ — $ 1,739 CRE owner occupied 548 75 1,103 3,212 — — — — — — — 4,938 Multifamily — — — — 125 — — — — — — 125 Farmland — — — — — 1,772 — — — — — 1,772 Total commercial real estate loans 1,325 173 1,103 4,076 125 1,772 — — — — 8,574 Consumer: SFR 1-4 1st DT liens — — — — — — 4,220 — — — — 4,220 SFR HELOCs and junior liens — — — — — — 1,664 1,121 — — — 2,785 Other — — — 5 — — — — 61 — 2 68 Total consumer loans — — — 5 — — 5,884 1,121 61 — 2 7,073 Commercial and industrial — — — 1,874 — — — — — 1,596 48 3,518 Construction — — — 379 — — 112 — — — — 491 Agriculture production — — — — — — — — — — 1,279 1,279 Leases — — — — — — — — — — — — Total $ 1,325 $ 173 $ 1,103 $ 6,334 $ 125 $ 1,772 $ 5,996 $ 1,121 $ 61 $ 1,596 $ 1,329 $ 20,935 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 Troubled Debt Restructurings that occurred during the periods indicated: 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. TDR information for the year ended December 31, 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 1 — 130 — — — — Multifamily — — — — — — — Farmland 3 1,228 1,440 — — — — Total commercial real estate loans 4 1,228 1,570 — — — — Consumer: SFR 1-4 1st DT liens — — — — — — — SFR HELOCs and junior liens — — — — 2 146 — Other — — — — — — — Total consumer loans — — — — 2 146 — Commercial and industrial 1 39 39 — 1 22 — Construction — — — — — — — Agriculture production 4 7,210 7,210 — — — — Leases — — — — — — — Total 9 $ 8,477 $ 8,819 $ — 3 $ 168 $ — TDR information for the year ended December 31, 2021 (dollars in thousands) Number Pre-mod Post-mod Financial Number that Recorded Financial impact Commercial real estate: CRE non-owner occupied 5 $ 4,966 $ 4,956 $ 1,020 — $ — $ — CRE owner occupied 1 740 742 742 — — — Multifamily — — — — — — — Farmland 2 701 703 50 3 847 — Total commercial real estate loans 8 6,407 6,401 1,812 3 847 — Consumer: SFR 1-4 1st DT liens — — — — — — — SFR HELOCs and junior liens 1 200 247 — — — — Other — — — — — — — Total consumer loans 1 200 247 — — — — Commercial and industrial 7 2,476 2,468 709 2 260 (5) Construction — — — — — — — Agriculture production — — — — — — — Leases — — — — — — — Total 16 $ 9,083 $ 9,116 $ 2,521 5 $ 1,107 $ (5) TDR information for the year ended December 31, 2020 (in thousands) Number Pre-mod Post-mod Financial Number that Recorded Financial impact Commercial real estate: CRE non-owner occupied 1 $ 319 $ 314 $ 314 1 $ 141 $ — CRE owner occupied 4 1,847 1,877 67 1 950 — Multifamily — — — — — — — Farmland 5 1,566 1,636 — 1 451 — Total commercial real estate loans 10 3,732 3,827 381 3 1,542 — Consumer: SFR 1-4 1st DT liens — — — — 3 1,180 — SFR HELOCs and junior liens 2 172 169 — 2 140 (90) Other — — — — — — — Total consumer loans 2 172 169 — 5 1,320 (90) Commercial and industrial 6 2,106 2,078 90 — — — Construction — — — — — — — Agriculture production — — — — — — — Leases — — — — — — — Total 18 $ 6,010 $ 6,074 $ 471 8 $ 2,862 $ (90) 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 the cash flows which would have been received under the original terms. The effect of this could result in a requirement for additional provision to the reserve. The effect of these required provisions for the period are indicated above. Typically if a TDR defaults during the period, the loan is then considered collateral dependent and, if it was not already considered collateral dependent, an appropriate provision will be reserved or charge will be taken. The additional provisions required resulting from default of previously modified TDR’s are noted above. |