We adopted the new current expected credit loss accounting guidance, CECL, and all related amendments as of January 1, 2022. Certain prior period credit quality disclosures related to impaired loans and individually and collectively evaluated loans were superseded with the current guidance and have not been included below as of June 30, 2022. Under CECL, disclosures are required on the amortized cost basis, whereas legacy GAAP required presentation on the recorded investment basis, with the primary difference being net deferred fees and costs. Unless specifically noted otherwise,

June 30, 2022 disclosures are prepared on the amortized cost basis and December 31, 2021 disclosures present information according to the recorded investment basis.

The following table presents loans by class as of June 30, 2022 and December 31, 2021. Accrued interest receivable on loans of $5.4 million and $6.8 million at June 30, 2022 and December 31, 2021 respectively is not included in the loans included in the table below but is included in other assets on the Company’s balance sheet. The June 30, 2022, balance in 1-4 family closed end loans reflects year-to-date 2022 loan purchase of $173.1 million. The majority of the disclosures in this footnote are prepared at the class level which is equivalent to the call report classification or call code classification. The final table in this section separates a roll forward of the Allowance for Credit Losses at the portfolio segment level.

The following table presents the amortized cost basis of nonaccrual loans, according to loan class, with and without individually evaluated reserves as of June 30, 2022:

The following table presents the impaired loans as of December 31, 2021, according to loan class, with and without an individually evaluated reserve according to the recorded investment basis. Impaired loans as of December 31, 2021 included both nonaccrual loans and performing TDRs. A separate breakout of nonaccrual loans by class as of December 31, 2021 is included in the past due loans table as of December 31, 2021, later in this footnote.

(1)	Contractual principal balance due from customer.

(2)	Principal balance on Company’s books, less any direct charge offs.

(3)	Interest income is recognized on performing balances on a regular accrual basis.

The Company recognized $0 in interest on nonaccrual loans during the second quarter 2022 and would have recognized an additional $0.6 million on nonaccrual loans had those loans not been designated as nonaccrual.

The following table presents the amortized cost basis of collateral-dependent loans by class as of June 30, 2022:


Collateral Dependent Loans
(dollars in thousands, unaudited)
	June 30, 2022
	Amortized Cost		Individual Reserves
Real estate:
1-4 family residential construction	$	—	$	—
Other construction/land		—		—
1-4 family - closed-end		41		—
Equity lines		—		—
Multi-family residential		—		—
Commercial real estate - owner occupied		204		—
Commercial real estate - non-owner occupied		—		—
Farmland		19,300		—
Total real estate		19,545		—
Agricultural		8,414		—
Commercial and industrial		478		—
Mortgage warehouse lines		—		—
Consumer loans		—		—
Total loans and leases	$	28,437	$	—

During the second quarter the amortized cost balance of collateral-dependent loans declined by $1.3 million due to declines resulting from upgrades and payoffs, partially offset by additional collateral dependent loans downgraded during the quarter. The weighted average loan-to-value ratio of collateral dependent loans was 91% at June 30, 2022. There were no collateral dependent loans in the process of foreclosure as of June 30, 2022

The following table presents the aging of the amortized cost basis in past-due loans, according to class, as of June 30, 2022:


Past Due Loans and Leases
(dollars in thousands, unaudited)
	June 30, 2022
	30-59 Days Past Due		60-89 Days Past Due		Loans Past Due 90+ Days		Total Past Due		Loans not Past Due		Total Loans
Real estate:
1-4 family residential construction	$	—	$	—	$	632	$	632	$	4,910	$	5,542
Other construction/land		—		—		—		—		20,757		20,757
1-4 family - closed-end		32		—		8		40		430,095		430,135
Equity lines		—		—		—		—		25,575		25,575
Multi-family residential		—		—		—		—		66,291		66,291
Commercial real estate - owner occupied		—		124		—		124		311,965		312,089
Commercial real estate - non-owner occupied		—		—		—		—		895,352		895,352
Farmland		5,129		13,932		342		19,403		82,358		101,761
Total real estate		5,161		14,056		982		20,199		1,837,303		1,857,502
Agricultural		—		7,760		597		8,357		20,400		28,757
Commercial and industrial		174		—		263		437		72,389		72,826
Mortgage warehouse lines		—		—		—		—		58,134		58,134
Consumer loans		7		2		—		9		4,353		4,362
Total loans and leases	$	5,342	$	21,818	$	1,842	$	29,002	$	1,992,579	$	2,021,581

The following table presents the aging of the recorded investment in past-due and nonaccrual loans, according to class, as of December 31, 2021:


December 31, 2021	30-59 Days		60-89 Days		90 Days Or More Past						Total Financing		Non-Accrual
	Past Due		Past Due		Due⁽²⁾		Total Past Due		Current		Receivables		Loans⁽¹⁾
Real Estate:
1-4 family residential construction	$	—	$	—	$	—	$	—	$	21,369	$	21,369	$	—
Other construction/land		—		—		—		—		25,299		25,299		—
1-4 family - closed-end		1,532		132		—		1,664		287,793		289,457		1,023
Equity lines		30		—		—		30		26,558		26,588		892
Multi-family residential		—		—		—		—		53,458		53,458		—
Commercial real estate owner occupied		124		—		698		822		333,624		334,446		1,234
Commercial real estate non-owner occupied		—		—		—		—		882,888		882,888		—
Farmland		—		—		—		—		106,706		106,706		—
Total real estate loans		1,686		132		698		2,516		1,737,695		1,740,211		3,149

Agricultural		—		—		284		284		33,706		33,990		378
Commercial and industrial		473		—		283		756		109,035		109,791		973
Mortgage warehouse lines		—		—		—		—		101,184		101,184		—
Consumer loans		6		3		—		9		4,541		4,550		22
Total gross loans and leases	$	2,165	$	135	$	1,265	$	3,565	$	1,986,161	$	1,989,726	$	4,522

(1)	Included in Total Financing Receivables

(2)	As of December 31, 2021 there were no loans over 90 days past due and still accruing.

Troubled Debt Restructurings

A loan that is modified for a borrower who is experiencing financial difficulty is classified as a troubled debt restructuring (TDR) if the modification constitutes a concession. At June 30, 2022, the Company had a total of $5.1 million in TDRs, including $0.3 million in TDRs that were on non-accrual status. Generally, a non-accrual loan that has been modified as a TDR remains on non-accrual status for a period of at least six months to demonstrate the borrower’s ability to comply with the modified terms. However, performance prior to the modification, or significant events that coincide with the modification, could result in a loan’s return to accrual status after a shorter performance period or even

at the time of loan modification. Regardless of the period of time that has elapsed, if the borrower’s ability to meet the revised payment schedule is uncertain, then the loan will be kept on non-accrual status.

The Company may agree to different types of concessions when modifying a loan or lease. The tables below summarize TDRs which were modified during the three and six months ended June 30, 2021, by type of concession. For the three and six months ended June 30, 2022, there were no new TDRs and no modifications of existing TDRs

Troubled Debt Restructurings, by Type of Loan Modification

(dollars in thousands, unaudited)


	Three months ended June 30, 2021
	Rate Modification		Term Modification		Interest Only Modification		Rate & Term Modification		Term & Interest Modification		Total
Real estate:
Other construction/land	$	—	$	—	$	—	$	—	$	—	$	—
1-4 family - closed-end		—		—		—		—		—		—
Equity lines		—		—		—		—		—		—
Multi-family residential		—		—		—		—		—		—
Commercial real estate - owner occupied		—		136		—		—		—		136
Farmland		—		—		—		—		—		—
Total real estate loans		—		136		—		—		—		136
Agricultural		—		—		—		—		—		—
Commercial and industrial		—		—		—		—		—		—
Consumer loans		—		—		—		—		—		—
Total	$	—	$	136	$	—	$	—	$	—	$	136


		Six months ended June 30, 2021
	Rate Modification		Term Modification		Interest Only Modification		Rate & Term Modification		Term & Interest Modification		Total
Real estate:
Other construction/land	$	—	$	—	$	—	$	—	$	—	$	—
1-4 family - closed-end		—		—		—		—		—		—
Equity lines		—		—		—		83		—		83
Multi-family residential		—		—		—		—		—		—
Commercial real estate - owner occupied		—		136		—		—		—		136
Farmland		—		—		—		—		—		—
Total real estate loans		—		136		—		83		—		219
Agricultural		—		118		—		—				118
Commercial and industrial		—		185		—		—		—		185
Consumer loans		—		41		—		—		—		41
Total	$	—	$	480	$	—	$	83	$	—	$	563

Troubled Debt Restructurings

(dollars in thousands, unaudited)


	Three months ended June 30, 2021
		Pre- Modification		Post- Modification
	Number of Loans	Outstanding Recorded Investment		Outstanding Recorded Investment		Reserve Difference⁽¹⁾		Reserve
Real estate:
Other construction/land	0	$	—	$	—	$	—	$	—
1-4 family - closed-end	0		—		—		—		—
Equity lines	0		—		—		—		—
Multi-family residential	0		—		—		—		—
Commercial real estate - owner occupied	1		137		136		(1)		—
Farmland	0		—		—		—		—
Total real estate loans			137		136		(1)		—

Agricultural	0		—		—		—		—
Commercial and industrial	0		—		—		—		—
Consumer loans	0		—		—		—		—
Total		$	137	$	136	$	($1)	$	—

(1)	This represents the change in the ACL reserve for these credits measured as the difference between the specific post-modification impairment reserve and the pre-modification reserve calculated under our general allowance for loan loss methodology.


	Six months ended June 30, 2021
		Pre- Modification		Post- Modification
	Number of Loans	Outstanding Recorded Investment		Outstanding Recorded Investment		Reserve Difference⁽¹⁾		Reserve
Real estate:
Other construction/land	0	$	—	$	—	$	—	$	—
1-4 family - closed-end	0		—		—		—		—
Equity lines	1		83		83		—		1
Multi-family residential	0		—		—		—		—
Commercial real estate - owner occupied	1		137		136		(1)		—
Farmland	0		—		—		—		—
Total real estate loans			220		219		(1)		1

Agricultural	1		118		118		116		—
Commercial and industrial	1		185		185		(1)		48
Consumer loans	1		41		41		—		—
Total		$	564	$	563	$	114	$	49

(1)	This represents the change in the ACL reserve for these credits measured as the difference between the specific post-modification impairment reserve and the pre-modification reserve calculated under our general allowance for loan loss methodology.

The Company had no finance receivables modified as TDRs within the previous twelve months that defaulted or were charged off during the three or six-month periods ending June 30, 2022 and 2021.

The Company monitors the credit quality of loans on a continuous basis using the regulatory and accounting classifications of pass, special mention and substandard to characterize and qualify the associated credit risk. Loans classified as “loss” are immediately charged-off. The Company uses the following definitions of risk classifications:

Pass – Loans listed as pass include larger non-homogeneous loans not meeting the risk rating definitions below and smaller, homogeneous loans not assessed on an individual basis.

Special Mention – Loans classified as special mention have the potential weakness that deserves 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 at some future date.

Substandard – Loans classified as substandard are those loans with clear and well-defined weaknesses such as a highly leveraged position, unfavorable financial operating results and/or trends, or uncertain repayment sources or poor financial condition, which may jeopardize ultimate recoverability of the debt.

The following tables present the amortized cost of loans and leases by credit quality classification in addition to loan and lease vintage as of June 30, 2022:


Loan and Lease Credit Quality by Vintage
(dollars in thousands, unaudited)
	Term Loans and Loans Amortized Cost Basis by Origination Year
	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost		Total Loans
1-4 family construction
Pass	$	—	$	—	$	—	$	—	$	—	$	—	$	4,910	$	4,910
Special Mention		—		—		—		—		—		—		632		632
Substandard		—		—		—		—		—		—		—		—
Subtotal		—		—		—		—		—		—		5,542		5,542
Other construction/land
Pass		—	$	3,591	$	4,343	$	777	$	1,054	$	1,116	$	9,802		20,683
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		74		—		—		—		—		74
Subtotal		—		3,591		4,417		777		1,054		1,116		9,802		20,757
1-4 family - closed-end
Pass		110,397	$	243,625	$	8,058	$	2,094	$	11,042	$	50,354	$	—		425,570
Special Mention		264		—		—		—		1,022		2,095		—		3,381
Substandard		—		—		—		—		32		1,152		—		1,184
Subtotal		110,661		243,625		8,058		2,094		12,096		53,601		—		430,135
Equity lines
Pass		2,355	$	171	$	551	$	361	$	79	$	—	$	20,691		24,208
Special Mention		—		—		20		—		—		—		790		810
Substandard		—		118		—		—		—		—		439		557
Subtotal		2,355		289		571		361		79		—		21,920		25,575
Multi-family residential
Pass		19,320	$	522	$	9,504	$	668	$	13,159	$	12,757	$	4,720		60,650
Special Mention		—		—		2,240		—		—		3,401		—		5,641
Substandard		—		—		—		—		—		—		—		—
Subtotal		19,320		522		11,744		668		13,159		16,158		4,720		66,291
Commercial real estate - OO
Pass		9,855	$	26,311	$	63,756	$	38,080	$	39,071	$	118,601	$	7,346		303,020
Special Mention		—		—		—		2,403		—		2,107		—		4,510
Substandard		326		—		—		—		80		3,393		760		4,559
Subtotal		10,181		26,311		63,756		40,483		39,151		124,101		8,106		312,089
Commercial real estate - NOO
Pass		51,922	$	19,710	$	451,234	$	26,810	$	56,883	$	165,217	$	62,955		834,731
Special Mention		—		—	$	33,613		—		7,266		3,121		12,671		56,671
Substandard		—		—	$	—		—		852		3,098		—		3,950
Subtotal		51,922		19,710		484,847		26,810		65,001		171,436		75,626		895,352
Farmland
Pass		—	$	1,377	$	5,008	$	1,978	$	8,202	$	25,700	$	27,588		69,853
Special Mention		—		—		—		—		7,116		4,385		1,004		12,505
Substandard		—		—		—		—		4,722		14,133		548		19,403
Subtotal		—		1,377		5,008		1,978		20,040		44,218		29,140		101,761
Agricultural
Pass		549	$	1,684	$	475	$	30	$	1,092	$	6,882	$	9,329		20,041
Special Mention		—		—		—		—		—		—		272		272
Substandard		—		7,847		—		—		—		—		597		8,444
Subtotal		549		9,531		475		30		1,092		6,882		10,198		28,757
Commercial and industrial
Pass		1,272	$	11,449	$	8,021	$	6,977	$	5,682	$	10,004	$	19,576		62,981
Special Mention		—		312		3,186		50		—		1,553		3,772		8,873
Substandard		—		—		44		143		93		643		49		972
Subtotal		1,272		11,761		11,251		7,170		5,775		12,200		23,397		72,826
Mortgage warehouse lines
Pass		—	$	—	$	—	$	—	$	—	$	—	$	58,134		58,134
Subtotal		—		—		—		—		—		—		58,134		58,134
Consumer loans
Pass		953	$	275	$	173	$	299	$	19	$	429	$	2,163		4,311
Special Mention		—		—		40	$	—		—		—		7		47
Substandard		2		—		—	$	—		—		2		—		4
Subtotal		955		275		213		299		19		431		2,170		4,362
Total	$	197,215	$	316,992	$	590,340	$	80,670	$	157,466	$	430,143	$	248,755	$	2,021,581

The following table presents the Company’s loan portfolio on the recorded investment basis, according to loan class and credit grade as of December 31, 2021:


	Pass		Special Mention		Substandard		Impaired		Total
Real estate:
1-4 family residential construction	$	19,669	$	1,700	$	—	$	—	$	21,369
Other construction/land		24,958		—		—		341		25,299
1-4 family - closed-end		282,717		4,703		201		1,836		289,457
Equity lines		23,277		615		55		2,641		26,588
Multi-family residential		49,986		3,472		—		—		53,458
Commercial real estate owner occupied		321,996		6,108		3,860		2,482		334,446
Commercial real estate non-owner occupied		841,728		26,364		14,429		367		882,888
Farmland		92,479		10,266		3,961		—		106,706
Total real estate		1,656,810		53,228		22,506		7,667		1,740,211
Agricultural		32,513		—		1,099		378		33,990
Commercial and industrial		98,367		9,989		212		1,223		109,791
Mortgage warehouse lines		101,184		—		—		—		101,184
Consumer loans		4,349		31		6		164		4,550
Total gross loans and leases	$	1,893,223	$	63,248	$	23,823	$	9,432	$	1,989,726

CECL replaces the legacy accounting for loans designated as purchased credit impaired (“PCI”) with loans designated as purchased credit deteriorated (“PCD”). PCD loans are loans acquired or purchased, which as of acquisition, had evidence of more than insignificant credit deterioration since origination. Due to the immaterial balance in the Company’s PCI loans as of December 31, 2021 management elected not to transition these loans into the PCD designation. As of June 30, 2022 the Company had no loans categorized as PCD.

As noted in footnote 3, on January 1, 2022 the Company implemented CECL and increased our ACL, previously the allowance for loan and lease losses, with a $9.5 million cumulative adjustment. The Company’s ACL is calculated quarterly, with any difference in the calculated ACL and the recorded ACL trued-up through an entry to the provision for credit losses. Management calculates the quantitative portion of collectively evaluated reserves for all loan categories, with the exception of Farmland, Agricultural Production and Consumer loans, using a discounted cash flow (“DCF”) methodology. For purposes of calculating the quantitative portion of collectively evaluated reserves on Farmland, Agricultural Production, and Consumer categories a Remaining Life methodology is utilized. For purposes of estimating the Company’s ACL, Management generally evaluates collectively evaluated loans by Federal Call code in order to group loans with similar risk characteristics together, however management has grouped loans in selected call codes together in determining portfolio segments, due to similar risk characteristics and reserve methodologies used for certain call code classifications.

The DCF quantitative reserve methodology incorporates the consideration of probability of default (“PD”) and loss given default (“LGD”) estimates to estimate periodic losses. The PD estimates are derived through the application of reasonable and supportable economic forecasts to call code specific regression models, derived from the consideration of historical bank-specific and peer loss-rate data. The loss rate data has been regressed against benchmark economic indicators, for which reasonable and supportable forecasts exist, in the development of the call-code specific regression models. Regression models are generally refreshed on an annual basis, in order to pull in more recent loss rate data. Reasonable and supportable forecasts of the selected economic metric are then input into the regression model to calculate an expected default rate. The expected default rates are then applied to expected monthly loan balances estimated through the consideration of contractual repayment terms and expected prepayments. The Company utilizes a four-quarter forecast period, after which the expected default rates revert to the historical average for each call code, over a four-quarter reversion period, on a straight-line basis. The prepayment assumptions applied to expected cash flow over the contractual life of the loans are estimated based on historical, bank-specific experience, peer data and current conditions and circumstances including the level of interest rates. The prepayment assumptions may be updated by

Management in the event that changing conditions impact Management’s estimate or additional historical data gathered has resulted in the need for a reevaluation. LGD utilized in the DCF is derived from the application of the Frye-Jacobs theory which relates LGD to PD based on historical peer data, as calculated by a third-party. Economic forecasts are considered over a four-quarter forecast period, with reversion to mean occurring on a straight-line basis over four quarters. The call code regression models utilized upon implementation of CECL on January 1, 2022, and as of June 30, 2022, were identical, and relied upon reasonable and supportable forecasts of the National Unemployment Rate. Management selected the National Unemployment Rate as the driver of quantitative portion of collectively reserves on loan classes reliant upon the DCF methodology, primarily as a result of high correlation coefficients identified in regression modeling, the availability of forecasts including the quarterly FOMC forecast, and given the widespread familiarity of stakeholders with this economic metric.

The quantitative reserves for Farmland, Agricultural Production and Consumer loans are calculated using a Remaining Life methodology where average historical bank specific and peer loss rates are applied to expected loan balances over an estimated remaining life of loans in calculation of the quantitative portion of collectively evaluated loans in these classes. The estimated remaining life is calculated using historical bank-specific loan attrition data. For the Farmland, Agricultural Production and Consumer classes of loans, reasonable and supportable forecasts of the National Unemployment rate, real GDP and the housing price index are considered through estimation of qualitative reserves.

Management recognizes that there are additional factors impacting risk of loss in the loan portfolio beyond what is captured in the quantitative portion of reserves on collectively evaluated loans. As current and expected conditions, may vary compared with conditions over the historical lookback period, which is utilized in the calculation of quantitative reserves, management considers whether additional or reduced reserve levels on collectively evaluated loans may be warranted given the consideration of a variety of qualitative factors. Several of the following qualitative factors (“Q-factors”) considered by management reflect the legacy regulatory guidance on Q-factors, whereas several others represent factors unique to the Company or unique to the current time period.

●

Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices

●

Changes in international, regional and local economic and business conditions, and developments that affect the collectability of the portfolio, as reflected in forecasts of the Housing Price Index, Real GDP and the National Unemployment Rate (Farmland & Agricultural Production and Consumer segments only)

●

Changes in the nature and volume of the loan portfolio

●

Changes in the experience, ability, and depth of lending management and other relevant staff

●

Changes in the volume and severity of past due, non-accruals loans, and adversely classified loans, as reflected in changes of the relative level of loans classified as substandard and special mention

●

Changes in the quality of the Bank’s loan review processes

●

Changes in the value of underlying collateral for loans not identified as collateral dependent

●

Changes in loan categorization concentrations

●

Other external factors, which include, the influence of peer data on estimated quantitative reserves, residual COVID-19 related risk, expected impact of current and expected inflationary environment, reliance on the National Unemployment rate as opposed to the California unemployment rate in the calculation of quantitative reserves, the expected impact of current and expected geo-political conditions

The qualitative portion of the Company’s reserves on collectively evaluated loans are calculated using a combination of numeric frameworks and management judgement, to determine risk categorizations in each of the Q-factors presented above. The amount of qualitative reserves is also contingent upon the historical peer, life-of-loan-equivalent, loss rate ranges and the relative weighting of Q-factors according to management’s judgement.

Although collectively evaluated reserves are generally calculated separately at the call code or loan class level, management has grouped loan classes with similar risk characteristics into the following portfolio segments: 1-4 Family Real Estate, Commercial Real Estate, Farmland & Agricultural Production, Commercial & Industrial, Mortgage Warehouse and Consumer loans. Loans secured by 1-4 family residences have a different profile from loans secured by Commercial Real Estate. Generally, the borrowers for 1-4 Family loans are consumers whereas borrowers for

Commercial Real Estate are often businesses. The COVID-19 pandemic illustrated how these different categories of real estate loans were subject to different risks, which was exacerbated by the widespread work-from-home model adopted by many companies during and since the pandemic. Farmland and Agricultural Production loans are included in a single segment as these loans are often times to the same borrowers, facing the same risks relating to commodity prices, water supply and drought conditions in addition to other environmental concerns. Commercial & Industrial loans are separated into a unique segment given the uniqueness of these loans, which are often revolving and secured by other business assets as opposed to real estate. Mortgage warehouse loans are also unique in the Company’s portfolio and warrant separate presentation as an individual portfolio segment, given the specific nature of these constantly revolving lines to mortgage originators and also attributable to a very limited loss history, even after consideration of peer data. Finally, the Company splits out Consumer loans as a separate segment as a result of the small balance, homogeneous terms that characterize these loans.

Management individually evaluates loans that do not share risk characteristics with other loans when estimating reserves. As of June 30, 2022, the only loans that Management considered to have different risk characteristics from other loans sharing the same Federal Call Report code were loans designated nonaccrual.

The following table presents the activity in the allowance for credit losses by portfolio segment for the quarter ended June 30, 2022:


Allowance for Credit Losses and Recorded Investment in Financing Receivables
(dollars in thousands, unaudited)
	1-4 Family Real Estate		Commercial Real Estate		Farmland & Agricultural Production		Commercial & Industrial		Mortgage Warehouse		Consumer		Total
Allowance for credit losses:
Balance, March 31, 2022	$	3,329	$	17,043	$	606	$	1,231	$	51	$	270	$	22,530
Charge-offs		—		(1,911)		(213)		(86)		—		(313)		(2,523)
Recoveries		12		—		—		62		—		173		247
Provision for credit losses		252		2,187		(17)		(74)		(10)		210		2,548
Ending allowance balance:	$	3,593	$	17,319	$	376	$	1,133	$	41	$	340	$	22,802

The $0.3 million increase in the Company’s loan portfolio ACL in the second quarter 2022 from $22.5 million at March 31, 2022 to $22.8 million at June 30, 2022, is primarily a reflection of growth in loan balances recognized in the second quarter 2022.

The following table presents the activity in the allowance for credit losses by portfolio segment for the six months ended June 30, 2022:


Allowance for Credit Losses and Recorded Investment in Financing Receivables
(dollars in thousands, unaudited)
	1-4 Family Real Estate		Commercial Real Estate		Farmland & Agricultural Production		Commercial & Industrial		Mortgage Warehouse		Consumer		Total
Allowance for credit losses:
Balance, December 31, 2021	$	1,909	$	9,052	$	1,202	$	1,060	$	512	$	521	$	14,256
Impact of adopting ASC 326		611		9,628		(480)		358		(421)		(242)		9,454
Charge-offs		—		(1,911)		(2,171)		(160)		—		(612)		(4,854)
Recoveries		99		260		—		82		—		357		798
Provision for credit losses		974		290		1,825		(207)		(50)		316		3,148
Ending allowance balance:	$	3,593	$	17,319	$	376	$	1,133	$	41	$	340	$	22,802

The $0.9 million decline in the Company’s loan portfolio ACL between the $23.7 million ACL recognized upon implementation of CECL on January 1, 2022 and the $22.8 million as of June 30, 2022, reflects a narrowing of the gap between the California unemployment rate and the National Unemployment rate during the first six months of 2022, compared with December 31, 2021. The $2.2 million in charge-offs recognized in the Farmland and Agricultural Production portfolio segment is primarily the result of a reduction in the expected valuation of collateral on a single loan relationship, recorded in the first quarter 2022. The $1.9 million charge-off in Commercial Real Estate was recognized during the second quarter, when Management became aware of a borrower’s reduced ability to service their loan primarily as a result of increased vacancy rates related to the remote work which has increased following the pandemic.

The following table presents the activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2021:


		Three months ended June 30, 2021
		Real Estate		Agricultural Products		Commercial and Industrial ⁽¹⁾		Consumer		Unallocated		Total

Allowance for credit losses:
Beginning balance	$	12,806	$	672	$	4,205	$	593	$	43	$	18,319
Charge-offs		(11)		(50)		(25)		(169)		—		(255)
Recoveries		195		—		82		180		—		457
(Benefit) provision		(915)		(98)		(1,190)		86		17		(2,100)
Ending balance	$	12,075	$	524	$	3,072	$	690	$	60	$	16,421

	Six months ended June 30, 2021
	Real Estate		Agricultural Products		Commercial and Industrial ⁽¹⁾		Consumer		Unallocated		Total
Allowance for credit losses:
Beginning balance	$	11,766	$	482	$	4,721	$	720	$	49	$	17,738
Charge-offs		(245)		(50)		(77)		(331)		—		(703)
Recoveries		648		—		192		396		—		1,236
(Benefit) provision		(94)		92		(1,764)		(95)		11		(1,850)
Ending balance	$	12,075	$	524	$	3,072	$	690	$	60	$	16,421
Reserves:
Specific	$	641	$	246	$	381	$	16	$	—	$	1,284
General		11,434		278		2,691		674		60		15,137
Ending balance	$	12,075	$	524	$	3,072	$	690	$	60	$	16,421
Loans evaluated for impairment:
Individually	$	15,677	$	517	$	1,649	$	207	$	—	$	18,050
Collectively		1,780,290		42,435		299,334		4,687		—		2,126,746
Ending balance	$	1,795,967	$	42,952	$	300,983	$	4,894	$	—	$	2,144,796