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Loans and Allowance for Credit Losses (Tables)

6 Months Ended

Jun. 30, 2023

Amortized Cost and Unpaid Principal Balance of Loans by Loan Segment

The following table presents amortized cost and unpaid principal balance of loans, categorized by the segments used in the Company's Current Expected Credit Losses methodology to assess credit risk, for the periods indicated:


	June 30, 2023			December 31, 2022
(In Thousands)	Amortized Cost	Unpaid Principal	Difference	Amortized Cost	Unpaid Principal	Difference
Commercial & industrial loans	$418,752	$420,443	($1,691)	$358,128	$359,900	($1,772)
Commercial real estate:
Owner occupied properties	348,834	350,411	(1,577)	349,973	351,580	(1,607)
Non-owner occupied and multifamily properties	490,821	494,505	(3,684)	482,270	486,021	(3,751)
Residential real estate:
1-4 family residential properties secured by first liens	160,546	160,467	79	73,381	73,674	(293)
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	25,156	24,970	186	20,259	20,103	156
1-4 family residential construction loans	35,349	35,527	(178)	44,000	44,314	(314)
Other construction, land development and raw land loans	95,124	96,015	(891)	99,182	100,075	(893)
Obligations of states and political subdivisions in the US	35,325	35,327	(2)	32,539	32,540	(1)
Agricultural production, including commercial fishing	40,767	40,975	(208)	34,099	34,263	(164)
Consumer loans	5,551	5,498	53	4,335	4,293	42
Other loans	3,014	3,035	(21)	3,619	3,632	(13)
Total	1,659,239	1,667,173	(7,934)	1,501,785	1,510,395	(8,610)
Allowance for credit losses	(15,645)			(13,838)
	$1,643,594	$1,667,173	($7,934)	$1,487,947	$1,510,395	($8,610)

Allowance for Credit Losses

The activity in the ACL related to loans held for investment for the periods indicated is as follows:


Three Months Ended June 30,	Beginning Balance	Credit Loss Expense (Benefit)	Charge-offs	Recoveries	Ending Balance
	(In Thousands)
2023
Commercial & industrial loans	$3,080	$366	($49)	$21	$3,418
Commercial real estate:
Owner occupied properties	2,778	29	—	—	2,807
Non-owner occupied and multifamily properties	3,174	86	—	—	3,260
Residential real estate:
1-4 family residential properties secured by first liens	2,226	980	—	—	3,206
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	392	26	—	5	423
1-4 family residential construction loans	260	(54)	—	—	206
Other construction, land development and raw land loans	1,925	71	—	—	1,996
Obligations of states and political subdivisions in the US	106	(18)	—	—	88
Agricultural production, including commercial fishing	150	12	—	—	162
Consumer loans	61	12	—	1	74
Other loans	5	—	—	—	5
Total	$14,157	$1,510	($49)	$27	$15,645
2022
Commercial & industrial loans	$2,901	$123	($166)	$103	$2,961
Commercial real estate:
Owner occupied properties	2,513	60	—	—	2,573
Non-owner occupied and multifamily properties	3,063	44	—	—	3,107
Residential real estate:
1-4 family residential properties secured by first liens	510	110	—	—	620
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	301	17	—	9	327
1-4 family residential construction loans	210	21	—	—	231
Other construction, land development and raw land loans	1,550	(88)	—	—	1,462
Obligations of states and political subdivisions in the US	52	7	—	—	59
Agricultural production, including commercial fishing	128	(8)	—	7	127
Consumer loans	75	(12)	—	1	64
Other loans	7	(1)	—	—	6
Total	$11,310	$273	($166)	$120	$11,537


Six Months Ended June 30,	Beginning Balance	Credit Loss Expense (Benefit)	Charge-offs	Recoveries	Ending Balance
	(In Thousands)
2023
Commercial & industrial loans	$2,914	$467	($49)	$86	$3,418
Commercial real estate:
Owner occupied properties	3,094	(287)	—	—	2,807
Non-owner occupied and multifamily properties	3,615	(355)	—	—	3,260
Residential real estate:
1-4 family residential properties secured by first liens	1,413	1,793	—	—	3,206
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	389	22	—	12	423
1-4 family residential construction loans	312	(106)	—	—	206
Other construction, land development and raw land loans	1,803	193	—	—	1,996
Obligations of states and political subdivisions in the US	79	9	—	—	88
Agricultural production, including commercial fishing	145	17	—	—	162
Consumer loans	68	17	(14)	3	74
Other loans	6	(1)	—	—	5
Total	$13,838	$1,769	($63)	$101	$15,645
2022
Commercial & industrial loans	$3,027	$279	($461)	$116	$2,961
Commercial real estate:
Owner occupied properties	3,176	(603)	—	—	2,573
Non-owner occupied and multifamily properties	2,930	177	—	—	3,107
Residential real estate:
1-4 family residential properties secured by first liens	439	181	—	—	620
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	215	91	—	21	327
1-4 family residential construction loans	120	111	—	—	231
Other construction, land development and raw land loans	1,635	(173)	—	—	1,462
Obligations of states and political subdivisions in the US	32	27	—	—	59
Agricultural production, including commercial fishing	91	21	—	15	127
Consumer loans	67	(4)	—	1	64
Other loans	7	(1)	—	—	6
Total	$11,739	$106	($461)	$153	$11,537

Schedule of Financing Receivables For Gross Charge-Offs By Grade And Year Of Loan Origination

The following table shows gross charge-offs by grade and by year of loan origination for the periods indicated:


Six Months Ended June 30,

(In Thousands)	2023	2022	2021	2020	2019	Prior	Total
2023
Commercial & industrial loans	$—	$—	$49	$—	$—	$—	$49
Commercial real estate:
Owner occupied properties	—	—	—	—	—	—	—
Non-owner occupied and multifamily properties	—	—	—	—	—	—	—
Residential real estate:
1-4 family residential properties secured by first liens	—	—	—	—	—	—	—
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	—	—	—	—	—	—	—
1-4 family residential construction loans	—	—	—	—	—	—	—
Other construction, land development and raw land loans	—	—	—	—	—	—	—
Obligations of states and political subdivisions in the US	—	—	—	—	—	—	—
Agricultural production, including commercial fishing	—	—	—	—	—	—	—
Consumer loans	—	1	—	—	—	13	14
Other loans	—	—	—	—	—	—	—
Total	$—	$1	$49	$—	$—	$13	$63

The following tables present the Company's portfolio of risk-rated loans by grade and by year of origination. Management considers the guidance in ASC 310-20 when determining whether a modification, extension, or renewal of loan constitutes a current period origination. Generally, current period renewals of credit are re-underwritten at the point of renewal and considered current period originations for purposes of the table below.


June 30, 2023	2023	2022	2021	2020	2019	Prior	Total
	(In Thousands)
Commercial & industrial loans
Pass	$84,022	$157,326	$67,058	$34,816	$14,899	$47,016	$405,137
Classified	2,468	1,988	6,108	296	74	2,681	13,615
Total commercial & industrial loans	$86,490	$159,314	$73,166	$35,112	$14,973	$49,697	$418,752

Commercial real estate:
Owner occupied properties
Pass	$20,413	$70,774	$69,552	$78,317	$30,643	$74,370	$344,069
Classified	—	—	—	1,189	—	3,576	4,765
Total commercial real estate owner occupied properties	$20,413	$70,774	$69,552	$79,506	$30,643	$77,946	$348,834

Non-owner occupied and multifamily properties
Pass	$26,893	$88,664	$84,365	$68,986	$57,212	$155,191	$481,311
Classified	—	—	—	—	—	9,510	9,510
Total commercial real estate non-owner occupied and multifamily properties	$26,893	$88,664	$84,365	$68,986	$57,212	$164,701	$490,821

Residential real estate:
1-4 family residential properties secured by first liens
Pass	$92,980	$48,795	$4,349	$5,009	$2,469	$6,757	$160,359
Classified	—	—	—	—	—	187	187
Total residential real estate 1-4 family residential properties secured by first liens	$92,980	$48,795	$4,349	$5,009	$2,469	$6,944	$160,546

1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens
Pass	$4,976	$6,636	$3,739	$1,749	$2,610	$5,112	$24,822
Classified	—	—	—	—	—	334	334
Total residential real estate 1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	$4,976	$6,636	$3,739	$1,749	$2,610	$5,446	$25,156

1-4 family residential construction loans
Pass	$11,456	$14,639	$2,004	$419	$—	$6,722	$35,240
Classified	—	—	—	—	—	109	109
Total residential real estate 1-4 family residential construction loans	$11,456	$14,639	$2,004	$419	$—	$6,831	$35,349

Other construction, land development and raw land loans
Pass	$9,629	$38,765	$27,770	$7,508	$1,500	$8,163	$93,335
Classified	—	—	—	—	—	1,789	1,789
Total other construction, land development and raw land loans	$9,629	$38,765	$27,770	$7,508	$1,500	$9,952	$95,124

Obligations of states and political subdivisions in the US
Pass	$—	$29,346	$4,055	$1,771	$—	$153	$35,325
Classified	—	—	—	—	—	—	—
Total obligations of states and political subdivisions in the US	$—	$29,346	$4,055	$1,771	$—	$153	$35,325

Agricultural production, including commercial fishing
Pass	$7,049	$10,377	$17,006	$3,582	$594	$2,159	$40,767
Classified	—	—	—	—	—	—	—
Total agricultural production, including commercial fishing	$7,049	$10,377	$17,006	$3,582	$594	$2,159	$40,767



Consumer loans
Pass	$2,076	$1,209	$303	$391	$313	$1,259	$5,551
Classified	—	—	—	—	—	—	—
Total consumer loans	$2,076	$1,209	$303	$391	$313	$1,259	$5,551

Other loans
Pass	$610	$203	$319	$1,492	$351	$39	$3,014
Classified	—	—	—	—	—	—	—
Total other loans	$610	$203	$319	$1,492	$351	$39	$3,014

Total loans
Pass	$260,104	$466,734	$280,520	$204,040	$110,591	$306,941	$1,628,930
Classified	2,468	1,988	6,108	1,485	74	18,186	30,309
Total loans	$262,572	$468,722	$286,628	$205,525	$110,665	$325,127	$1,659,239

Total pass loans	$260,104	$466,734	$280,520	$204,040	$110,591	$306,941	$1,628,930
Government guarantees	(2,965)	(24,663)	(29,973)	(9,042)	(12,519)	(8,004)	(87,166)
Total pass loans, net of government guarantees	$257,139	$442,071	$250,547	$194,998	$98,072	$298,937	$1,541,764

Total classified loans	$2,468	$1,988	$6,108	$1,485	$74	$18,186	$30,309
Government guarantees	(2,271)	—	(5,497)	(1,070)	—	(8,662)	(17,500)
Total classified loans, net government guarantees	$197	$1,988	$611	$415	$74	$9,524	$12,809


December 31, 2022	2022	2021	2020	2019	2018	Prior	Total
	(In Thousands)
Commercial & industrial loans
Pass	$157,555	$86,543	$37,147	$17,881	$9,844	$40,571	$349,541
Classified	137	4,879	397	91	2,737	346	8,587
Total commercial & industrial loans	$157,692	$91,422	$37,544	$17,972	$12,581	$40,917	$358,128

Commercial real estate:
Owner occupied properties
Pass	$66,955	$70,777	$90,496	$32,564	$13,233	$69,701	$343,726
Classified	—	—	1,261	—	165	4,821	6,247
Total commercial real estate owner occupied properties	$66,955	$70,777	$91,757	$32,564	$13,398	$74,522	$349,973

Non-owner occupied and multifamily properties
Pass	$94,412	$82,352	$71,407	$58,033	$16,905	$149,223	$472,332
Classified	—	—	—	274	3	9,661	9,938
Total commercial real estate non-owner occupied and multifamily properties	$94,412	$82,352	$71,407	$58,307	$16,908	$158,884	$482,270

Residential real estate:
1-4 family residential properties secured by first liens
Pass	$52,117	$5,088	$6,001	$2,535	$462	$6,968	$73,171
Classified	—	—	—	—	79	131	210
Total residential real estate 1-4 family residential properties secured by first liens	$52,117	$5,088	$6,001	$2,535	$541	$7,099	$73,381

1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens
Pass	$6,992	$3,376	$2,041	$2,763	$2,781	$2,060	$20,013
Classified	—	—	—		239	7	246
Total residential real estate 1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	$6,992	$3,376	$2,041	$2,763	$3,020	$2,067	$20,259

1-4 family residential construction loans
Pass	$26,860	$3,897	$61	$—	$—	$13,073	$43,891
Classified	—	—	—	—	—	109	109
Total residential real estate 1-4 family residential construction loans	$26,860	$3,897	$61	$—	$—	$13,182	$44,000



Other construction, land development and raw land loans
Pass	$38,673	$42,448	$5,740	$1,713	$3,675	$5,112	$97,361
Classified	—	—	—	—	369	1,452	1,821
Total other construction, land development and raw land loans	$38,673	$42,448	$5,740	$1,713	$4,044	$6,564	$99,182

Obligations of states and political subdivisions in the US
Pass	$32,319	$—	$—	$—	$219	$1	$32,539
Classified	—	—	—	—	—	—	—
Total obligations of states and political subdivisions in the US	$32,319	$—	$—	$—	$219	$1	$32,539

Agricultural production, including commercial fishing
Pass	$9,748	$17,692	$3,740	$604	$879	$1,436	$34,099
Classified	—	—	—	—	—	—	—
Total agricultural production, including commercial fishing	$9,748	$17,692	$3,740	$604	$879	$1,436	$34,099

Consumer loans
Pass	$1,513	$363	$481	$345	$235	$1,391	$4,328
Classified	—	—	—	—	—	7	7
Total consumer loans	$1,513	$363	$481	$345	$235	$1,398	$4,335

Other loans
Pass	$1,291	$330	$1,547	$384	$—	$67	$3,619
Classified	—	—	—	—	—	—	—
Total other loans	$1,291	$330	$1,547	$384	$—	$67	$3,619

Total loans
Pass	$488,435	$312,866	$218,661	$116,822	$48,233	$289,603	$1,474,620
Classified	137	4,879	1,658	365	3,592	16,534	27,165
Total loans	$488,572	$317,745	$220,319	$117,187	$51,825	$306,137	$1,501,785

Total pass loans	$488,435	$312,866	$218,661	$116,822	$48,233	$289,603	$1,474,620
Government guarantees	(25,172)	(36,531)	(9,751)	(12,885)	(2,964)	(5,314)	(92,617)
Total pass loans, net of government guarantees	$463,263	$276,335	$208,910	$103,937	$45,269	$284,289	$1,382,003

Total classified loans	$137	$4,879	$1,658	$365	$3,592	$16,534	$27,165
Government guarantees	—	(4,396)	(1,135)	—	—	(9,293)	(14,824)
Total classified loans, net government guarantees	$137	$483	$523	$365	$3,592	$7,241	$12,341

Aging of Contractually Past Due Loans

The following tables present an aging of contractually past due loans as of the periods presented:


(In Thousands)	30-59 Days Past Due	60-89 Days Past Due	Greater Than 90 Days Past Due	Total Past Due	Current	Total	Greater Than 90 Days Past Due Still Accruing
June 30, 2023
Commercial & industrial loans	$—	$—	$400	$400	$418,352	$418,752	$—
Commercial real estate:
Owner occupied properties	—	—	411	411	348,423	348,834	—
Non-owner occupied and multifamily properties	—		—	—	490,821	490,821	—
Residential real estate:
1-4 family residential properties secured by first liens	28	128	—	156	160,390	160,546	—
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	—	—	161	161	24,995	25,156	—
1-4 family residential construction loans	—	—	109	109	35,240	35,349	—
Other construction, land development and raw land loans		—	1,545	1,545	93,579	95,124	—
Obligations of states and political subdivisions in the US	—	—	—	—	35,325	35,325	—
Agricultural production, including commercial fishing	—	—	—	—	40,767	40,767	—
Consumer loans	—	—	—	—	5,551	5,551	—
Other loans	—	—	—	—	3,014	3,014	—
Total	$28	$128	$2,626	$2,782	$1,656,457	$1,659,239	$—
December 31, 2022
Commercial & industrial loans	$37	$521	$56	$614	$357,514	$358,128	$—
Commercial real estate:
Owner occupied properties	—	—	798	798	349,175	349,973	—
Non-owner occupied and multifamily properties	—	—	274	274	481,996	482,270	—
Residential real estate:
1-4 family residential properties secured by first liens	60	79	72	211	73,170	73,381	—
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	112	—	127	239	20,020	20,259	—
1-4 family residential construction loans	—	—	109	109	43,891	44,000	—
Other construction, land development and raw land loans	—	—	1,545	1,545	97,637	99,182	—
Obligations of states and political subdivisions in the US	—	—	—	—	32,539	32,539	—
Agricultural production, including commercial fishing	—	—	—	—	34,099	34,099	—
Consumer loans	6	80	—	86	4,249	4,335	—
Other loans	—	—	—	—	3,619	3,619	—
Total	$215	$680	$2,981	$3,876	$1,497,909	$1,501,785	$—

Loans on Nonaccrual Status

The following table presents loans on nonaccrual status and loans on nonaccrual status for the periods presented for which there was no related ACL. All loans with no ACL are individually evaluated for credit losses in the Company's Current Expected Credit Losses methodology.


	June 30, 2023		December 31, 2022
(In Thousands)	Nonaccrual	Nonaccrual With No ACL	Nonaccrual	Nonaccrual With No ACL

Commercial & industrial loans	$5,236	$5,236	$3,294	$3,287
Commercial real estate:
Owner occupied properties	470	470	1,457	1,457
Non-owner occupied and multifamily properties	—	—	274	274
Residential real estate:
1-4 family residential properties secured by first liens	132	129	151	144
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	231	186	246	198
1-4 family residential construction loans	109	109	109	109
Other construction, land development and raw land loans	1,545	1,545	1,545	1,545




Total nonaccrual loans	7,723	7,675	7,076	7,014
Government guarantees on nonaccrual loans	(2,374)	(2,374)	(646)	(646)
Net nonaccrual loans	$5,349	$5,301	$6,430	$6,368

Financing Receivable, Modified

The percentage of the amortized cost basis of loans that were modified to borrowers experiencing financial difficulty as compared to the amortized cost basis of each class of financing receivable is also presented below:


	June 30, 2023
	Term Modification	Payment Modification	Interest Rate Modification	Principal Forgiveness	Total Modifications	Percentage of Class of Financing Receivable
(In Thousands)
Commercial & industrial loans	$2,468	$1,988	$—	$—	$4,456	1	%
Commercial real estate:
Owner occupied properties	—	—	—	—	—	—	%
Non-owner occupied and multifamily properties	—	—	—	—	—	—	%
Residential real estate:
1-4 family residential properties secured by first liens	—	—	—	—	—	—	%
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	—	—	—	—	—	—	%
1-4 family residential construction loans	—	—	—	—	—	—	%
Other construction, land development and raw land loans	—	—	—	—	—	—	%
Obligations of states and political subdivisions in the US	—	—	—	—	—	—	%
Agricultural production, including commercial fishing	—	—	—	—	—	—	%
Consumer loans	—	—	—	—	—	—	%
Other loans	—	—	—	—	—	—	%
Total	$2,468	$1,988	$—	$—	$4,456	—	%

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty for the three-months ended June 30, 2023:


	June 30, 2023
	Principal Forgiveness	Weighted-Average Interest Rate Reduction		Weighted-Average Term Extension (months)
(In Thousands)
Commercial & industrial loans	$—	—	%	3
Commercial real estate:
Owner occupied properties	—	—	%	0
Non-owner occupied and multifamily properties	—	—	%	0
Residential real estate:
1-4 family residential properties secured by first liens	—	—	%	0
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	—	—	%	0
1-4 family residential construction loans	—	—	%	0
Other construction, land development and raw land loans	—	—	%	0
Obligations of states and political subdivisions in the US	—	—	%	0
Agricultural production, including commercial fishing	—	—	%	0
Consumer loans	—	—	%	0
Other loans	—	—	%	0
Total	$—	—	%	3

At December 31, 2022, the Company had made the following types of loan modifications related to COVID-19, which are not classified as TDRs principal balance outstanding of:


Loan Modifications due to COVID-19 as of December 31, 2022
(Dollars in thousands)	Interest Only	Full Payment Deferral	Total
Portfolio loans	$999	$—	$999
Number of modifications	1	—	1