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Loans and Allowance for Credit Losses (Tables)

9 Months Ended

Sep. 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 (“CECL”) methodology to assess credit risk, for the periods indicated:


	September 30, 2023			December 31, 2022
(In Thousands)	Amortized Cost	Unpaid Principal	Difference	Amortized Cost	Unpaid Principal	Difference
Commercial & industrial loans	$415,898	$417,695	($1,797)	$358,128	$359,900	($1,772)
Commercial real estate:
Owner occupied properties	357,455	359,019	(1,564)	349,973	351,580	(1,607)
Non-owner occupied and multifamily properties	506,256	509,939	(3,683)	482,270	486,021	(3,751)
Residential real estate:
1-4 family residential properties secured by first liens	180,849	180,719	130	73,381	73,674	(293)
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	27,535	27,342	193	20,259	20,103	156
1-4 family residential construction loans	32,185	32,374	(189)	44,000	44,314	(314)
Other construction, land development and raw land loans	119,716	120,909	(1,193)	99,182	100,075	(893)
Obligations of states and political subdivisions in the US	30,463	30,465	(2)	32,539	32,540	(1)
Agricultural production, including commercial fishing	40,923	41,143	(220)	34,099	34,263	(164)
Consumer loans	5,986	5,930	56	4,335	4,293	42
Other loans	2,825	2,842	(17)	3,619	3,632	(13)
Total	1,720,091	1,728,377	(8,286)	1,501,785	1,510,395	(8,610)
Allowance for credit losses	(16,491)			(13,838)
	$1,703,600	$1,728,377	($8,286)	$1,487,947	$1,510,395	($8,610)

Allowance for Credit Losses

The table below presents activity in the ACL related to loans held for investment for the periods indicated. The ACL for loans held for investment increased $2.7 million from December 31, 2022 primarily due to higher non-government guaranteed loan balances as well as a decrease in estimated prepayment rates in the Company's discounted cash flow model given the current economic environment. These changes were only partially offset by a decrease in the Company's forecasted future unemployment rates.


Three Months Ended September 30,	Beginning Balance	Credit Loss Expense (Benefit)	Charge-offs	Recoveries	Ending Balance
	(In Thousands)
2023
Commercial & industrial loans	$3,418	($55)	($91)	$181	$3,453
Commercial real estate:
Owner occupied properties	2,807	(15)	—	—	2,792
Non-owner occupied and multifamily properties	3,260	(36)	—	—	3,224
Residential real estate:
1-4 family residential properties secured by first liens	3,206	334	—	—	3,540
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	423	78	—	5	506
1-4 family residential construction loans	206	(31)	—	—	175
Other construction, land development and raw land loans	1,996	480	—	—	2,476
Obligations of states and political subdivisions in the US	88	(11)	—	—	77
Agricultural production, including commercial fishing	162	2	—	—	164
Consumer loans	74	4	—	1	79
Other loans	5	—	—	—	5
Total	$15,645	$750	($91)	$187	$16,491
2022
Commercial & industrial loans	$2,961	($1,344)	($45)	$1,325	$2,897
Commercial real estate:
Owner occupied properties	2,573	132	—	55	2,760
Non-owner occupied and multifamily properties	3,107	120	—	—	3,227
Residential real estate:
1-4 family residential properties secured by first liens	620	73	—	5	698
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	327	30	—	9	366
1-4 family residential construction loans	231	50	—	—	281
Other construction, land development and raw land loans	1,462	15	—	—	1,477
Obligations of states and political subdivisions in the US	59	4	—	—	63
Agricultural production, including commercial fishing	127	13	—	—	140
Consumer loans	64	3	(3)	2	66
Other loans	6	1	—	—	7
Total	$11,537	($903)	($48)	$1,396	$11,982


Nine Months Ended September 30,	Beginning Balance	Credit Loss Expense (Benefit)	Charge-offs	Recoveries	Ending Balance
	(In Thousands)
2023
Commercial & industrial loans	$2,914	$412	($140)	$267	$3,453
Commercial real estate:
Owner occupied properties	3,094	(302)	—	—	2,792
Non-owner occupied and multifamily properties	3,615	(391)	—	—	3,224
Residential real estate:
1-4 family residential properties secured by first liens	1,413	2,127	—	—	3,540
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	389	100	—	17	506
1-4 family residential construction loans	312	(137)	—	—	175
Other construction, land development and raw land loans	1,803	673	—	—	2,476
Obligations of states and political subdivisions in the US	79	(2)	—	—	77
Agricultural production, including commercial fishing	145	19	—	—	164
Consumer loans	68	21	(14)	4	79
Other loans	6	(1)	—	—	5
Total	$13,838	$2,519	($154)	$288	$16,491
2022
Commercial & industrial loans	$3,027	($1,065)	($506)	$1,441	$2,897
Commercial real estate:
Owner occupied properties	3,176	(471)	—	55	2,760
Non-owner occupied and multifamily properties	2,930	297	—	—	3,227
Residential real estate:
1-4 family residential properties secured by first liens	439	254	—	5	698
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	215	121	—	30	366
1-4 family residential construction loans	120	161	—	—	281
Other construction, land development and raw land loans	1,635	(158)	—	—	1,477
Obligations of states and political subdivisions in the US	32	31	—	—	63
Agricultural production, including commercial fishing	91	34	—	15	140
Consumer loans	67	(1)	(3)	3	66
Other loans	7	—	—	—	7
Total	$11,739	($797)	($509)	$1,549	$11,982

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:


Nine Months Ended September 30,

(In Thousands)	2023	2022	2021	2020	2019	Prior	Total
2023
Commercial & industrial loans	$—	$—	$49	$—	$—	$91	$140










Consumer loans	—	1	—	—	—	13	14

Total	$—	$1	$49	$—	$—	$104	$154

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.


September 30, 2023	2023	2022	2021	2020	2019	Prior	Total
	(In Thousands)
Commercial & industrial loans
Pass	$96,467	$123,831	$58,372	$24,947	$14,227	$48,281	$366,125
Classified	3,916	18,880	17,231	7,235	65	2,446	49,773
Total commercial & industrial loans	$100,383	$142,711	$75,603	$32,182	$14,292	$50,727	$415,898

Commercial real estate:
Owner occupied properties
Pass	$26,585	$68,242	$72,939	$83,211	$30,245	$73,253	$354,475


Classified	—	—	—	1,152	—	1,828	2,980
Total commercial real estate owner occupied properties	$26,585	$68,242	$72,939	$84,363	$30,245	$75,081	$357,455

Non-owner occupied and multifamily properties
Pass	$38,234	$95,181	$83,998	$69,550	$56,536	$153,324	$496,823
Classified	—	—	—	—	—	9,433	9,433
Total commercial real estate non-owner occupied and multifamily properties	$38,234	$95,181	$83,998	$69,550	$56,536	$162,757	$506,256

Residential real estate:
1-4 family residential properties secured by first liens
Pass	$114,314	$48,278	$5,120	$4,736	$2,434	$5,835	$180,717
Classified	—	—	—	—	—	132	132
Total residential real estate 1-4 family residential properties secured by first liens	$114,314	$48,278	$5,120	$4,736	$2,434	$5,967	$180,849

1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens
Pass	$10,648	$5,283	$2,446	$1,452	$2,324	$5,053	$27,206
Classified	—	—	—	—	—	329	329
Total residential real estate 1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	$10,648	$5,283	$2,446	$1,452	$2,324	$5,382	$27,535

1-4 family residential construction loans
Pass	$16,057	$6,205	$1,118	$21	$—	$8,675	$32,076
Classified	—	—	—	—	—	109	109
Total residential real estate 1-4 family residential construction loans	$16,057	$6,205	$1,118	$21	$—	$8,784	$32,185

Other construction, land development and raw land loans
Pass	$18,172	$53,412	$33,797	$3,186	$1,479	$7,897	$117,943
Classified	—	—	—	—	—	1,773	1,773
Total other construction, land development and raw land loans	$18,172	$53,412	$33,797	$3,186	$1,479	$9,670	$119,716

Obligations of states and political subdivisions in the US
Pass	$—	$30,341	$—	$—	$—	$122	$30,463
Classified	—	—	—	—	—	—	—
Total obligations of states and political subdivisions in the US	$—	$30,341	$—	$—	$—	$122	$30,463

Agricultural production, including commercial fishing
Pass	$7,842	$9,892	$17,095	$3,567	$589	$1,938	$40,923
Classified	—	—	—	—	—	—	—
Total agricultural production, including commercial fishing	$7,842	$9,892	$17,095	$3,567	$589	$1,938	$40,923

Consumer loans
Pass	$2,791	$1,094	$282	$394	$279	$1,133	$5,973
Classified	—	13	—	—	—	—	13
Total consumer loans	$2,791	$1,107	$282	$394	$279	$1,133	$5,986

Other loans
Pass	$590	$190	$313	$1,379	$331	$22	$2,825
Classified	—	—	—	—	—	—	—
Total other loans	$590	$190	$313	$1,379	$331	$22	$2,825

Total loans
Pass	$331,700	$441,949	$275,480	$192,443	$108,444	$305,533	$1,655,549
Classified	3,916	18,893	17,231	8,387	65	16,050	64,542
Total loans	$335,616	$460,842	$292,711	$200,830	$108,509	$321,583	$1,720,091

Total pass loans	$331,700	$441,949	$275,480	$192,443	$108,444	$305,533	$1,655,549
Government guarantees	(842)	(8,194)	(19,164)	(2,469)	(12,321)	(7,726)	(50,716)
Total pass loans, net of government guarantees	$330,858	$433,755	$256,316	$189,974	$96,123	$297,807	$1,604,833


Total classified loans	$3,916	$18,893	$17,231	$8,387	$65	$16,050	$64,542
Government guarantees	(3,849)	(16,896)	(15,331)	(7,259)	—	(8,500)	(51,835)
Total classified loans, net government guarantees	$67	$1,997	$1,900	$1,128	$65	$7,550	$12,707


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
September 30, 2023
Commercial & industrial loans	$3,748	$—	$297	$4,045	$411,853	$415,898	$—
Commercial real estate:
Owner occupied properties	—	—	271	271	357,184	357,455	—
Non-owner occupied and multifamily properties	380	—	—	380	505,876	506,256	—
Residential real estate:
1-4 family residential properties secured by first liens	—	—	28	28	180,821	180,849	28
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	—	—	159	159	27,376	27,535	—
1-4 family residential construction loans	—	—	109	109	32,076	32,185	—
Other construction, land development and raw land loans		—	1,545	1,545	118,171	119,716	—
Obligations of states and political subdivisions in the US	—	—	—	—	30,463	30,463	—
Agricultural production, including commercial fishing	—	—	—	—	40,923	40,923	—
Consumer loans	—	13	—	13	5,973	5,986	—
Other loans	—	—	—	—	2,825	2,825	—
Total	$4,128	$13	$2,409	$6,550	$1,713,541	$1,720,091	$28
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 CECL methodology.


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

Commercial & industrial loans	$4,254	$4,056	$3,294	$3,287
Commercial real estate:
Owner occupied properties	306	271	1,457	1,457
Non-owner occupied and multifamily properties	—	—	274	274
Residential real estate:
1-4 family residential properties secured by first liens	53	—	151	144
1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	225	119	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	6,492	6,100	7,076	7,014
Government guarantees on nonaccrual loans	(1,455)	(1,455)	(646)	(646)
Net nonaccrual loans	$5,037	$4,645	$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:


	Three Months Ended September 30, 2023
	Term Modification	Term and payment modifications	Total Modifications	Percentage of Class of Financing Receivable
(In Thousands)

Commercial real estate:
Owner occupied properties	$—	$271	$271	0.08	%

Residential real estate:

1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	119	—	119	0.43	%
1-4 family residential construction loans	109	—	109	0.34	%
Other construction, land development and raw land loans	968	577	1,545	1.29	%




Total	$1,196	$848	$2,044	0.12	%


	Nine Months Ended September 30, 2023
	Term Modification	Payment Modification	Term and payment modifications	Total Modifications	Percentage of Class of Financing Receivable
(In Thousands)
Commercial & industrial loans	$1,511	$1,985	$—	$3,496	0.84	%
Commercial real estate:
Owner occupied properties	—	—	271	271	0.08	%

Residential real estate:

1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	119	—	—	119	0.43	%
1-4 family residential construction loans	109	—	—	109	0.34	%
Other construction, land development and raw land loans	968	—	577	1,545	1.29	%




Total	$2,707	$1,985	$848	$5,540	0.32	%

The following table presents the financial effect of the loan modifications presented above to borrowers experiencing financial difficulty as of the dates indicated:


	Three Months Ended September 30, 2023
	Principal Forgiveness	Weighted-Average Interest Rate Reduction		Weighted-Average Term Extension (months)
(In Thousands)

Commercial real estate:
Owner occupied properties	—	—	%	5

Residential real estate:

1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	—	—	%	5
1-4 family residential construction loans	—	—	%	5
Other construction, land development and raw land loans	—	—	%	5


	Nine Months Ended September 30, 2023
	Principal Forgiveness	Weighted-Average Interest Rate Reduction		Weighted-Average Term Extension (months)
(In Thousands)
Commercial & industrial loans	$—	—	%	20
Commercial real estate:
Owner occupied properties	—	—	%	5

Residential real estate:

1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	—	—	%	5
1-4 family residential construction loans	—	—	%	5
Other construction, land development and raw land loans	—	—	%	5

The following table presents the payment performance of such loans as of the dates indicated:


	September 30, 2023
	30-59 Days Past Due	60-89 Days Past Due	Greater Than 89 Days Past Due	Total Past Due
(In Thousands)

Commercial real estate:
Owner occupied properties	$—	$—	$271	$271

Residential real estate:

1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	—	—	119	119
1-4 family residential construction loans	—	—	109	109
Other construction, land development and raw land loans	—	—	1,545	1,545




Total	$—	$—	$2,044	$2,044

The following table presents the amortized cost basis of loans that had a payment default during the three-months ended September 30, 2023 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty:


	September 30, 2023
	Term modification	Term and payment modification
(In Thousands)

Commercial real estate:
Owner occupied properties	$—	$271

Residential real estate:

1-4 family residential properties secured by junior liens and revolving secured by 1-4 family first liens	119	—
1-4 family residential construction loans	109	—
Other construction, land development and raw land loans	968	577




Total	$1,196	$848

At December 31, 2022, the Company had made the following types of loan modifications related to COVID-19 with a 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