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LOANS AND ALLOWANCE FOR CREDIT LOSSES (Revised and Restated)

6 Months Ended

Jun. 30, 2023

LOANS AND ALLOWANCE FOR CREDIT LOSSES (Revised and Restated) [Abstract]

LOANS AND ALLOWANCE FOR CREDIT LOSSES (Revised and Restated)

3.LOANS AND ALLOWANCE FOR CREDIT LOSSES (Revised and Restated)

The following table summarizes the composition of our loan portfolio as of June 30, 2023 and December 31, 2022 (in thousands):


	June 30, 2023		December 31, 2022
Loans held for sale	$	57,704	$	27,626
Loans held for investment
Loans secured by real estate:
Commercial real estate - owner occupied ⁽¹⁾	$	454,067	$	459,866
Commercial real estate - non-owner occupied		595,805		579,733
Secured by farmland		5,271		5,970
Construction and land development		175,073		148,690
Residential 1-4 family		591,938		609,694
Multi-family residential		133,754		140,321
Home equity lines of credit		62,808		65,152
Total real estate loans		2,018,716		2,009,426

Commercial loans ⁽²⁾		598,305		520,741
Paycheck Protection Program loans		2,143		4,564
Consumer loans		567,755		405,278
Total Non-PCD loans		3,186,919		2,940,009
PCD loans		6,049		6,628
Total loans held for investment	$	3,192,968	$	2,946,637

¹ Includes $6.7 million related to loans collateralizing secured borrowings.

² Includes $14.0 million related to loans collateralizing secured borrowings.

Accrued Interest Receivable

Accrued interest receivable on loans totaled $13.5 million and $10.8 million at June 30, 2023 and December 31, 2022, respectively, and is included in other assets in the consolidated balance sheets.

Nonaccrual and Past Due Loans

Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. In determining whether or not a borrower may be unable to meet payment obligations for each class of loans, we consider the borrower’s debt service capacity through the analysis of current financial information, if available, and/or current information with regards to our collateral position. Regulatory provisions would typically require the placement of a loan on nonaccrual status if (i) principal or interest has been in default for a period of 90 days or more unless the loan is both well secured and in the process of collection or (ii) full payment of principal and interest is not expected. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income on nonaccrual loans is recognized only to the extent that cash payments are received in excess of principal due. A loan may be returned to accrual status when all the principal and interest amounts contractually due are brought current and future principal and interest amounts contractually due are reasonably assured, which is typically evidenced by a sustained period (at least six months) of repayment performance by the borrower.

The following tables present the aging of the recorded investment in past due loans by class of loans held for investment as of June 30, 2023 and December 31, 2022 (in thousands):


	30 - 59		60 - 89		90
	Days		Days		Days		Total		Loans Not		Total
June 30, 2023	Past Due		Past Due		or More		Past Due		Past Due		Loans
Commercial real estate - owner occupied	$	83	$	53	$	—	$	136	$	453,931	$	454,067
Commercial real estate - non-owner occupied		—		—		19,187		19,187		576,618		595,805
Secured by farmland		2		—		503		505		4,766		5,271
Construction and land development		41		—		—		41		175,032		175,073
Residential 1-4 family		2,277		904		715		3,896		588,042		591,938
Multi- family residential		101		—		—		101		133,653		133,754
Home equity lines of credit		670		294		254		1,218		61,590		62,808
Commercial loans		10,437		184		1,371		11,992		586,313		598,305
Paycheck Protection Program loans		7		—		1,775		1,782		361		2,143
Consumer loans		2,628		1,872		129		4,629		563,126		567,755
Total Non-PCD loans		16,246		3,307		23,934		43,487		3,143,432		3,186,919
PCD loans		443		—		1,242		1,685		4,364		6,049
Total	$	16,689	$	3,307	$	25,176	$	45,172	$	3,147,796	$	3,192,968


	30 - 59		60 - 89		90
	Days		Days		Days		Total		Loans Not		Total
December 31, 2022	Past Due		Past Due		or More		Past Due		Past Due		Loans
Commercial real estate - owner occupied	$	55	$	—	$	—	$	55	$	459,811	$	459,866
Commercial real estate - non-owner occupied		290		169		19,641		20,100		559,633		579,733
Secured by farmland		—		—		—		—		5,970		5,970
Construction and land development		46		—		—		46		148,644		148,690
Residential 1-4 family		2,180		410		304		2,894		606,800		609,694
Multi- family residential		—		—		—		—		140,321		140,321
Home equity lines of credit		431		96		249		776		64,376		65,152
Commercial loans		39		—		2,956		2,995		517,746		520,741
Paycheck Protection Program loans		16		15		3,360		3,391		1,173		4,564
Consumer loans		2,079		1,421		200		3,700		401,578		405,278
Total Non-PCD loans		5,136		2,111		26,710		33,957		2,906,052		2,940,009
PCD loans		—		—		1,328		1,328		5,300		6,628
Total	$	5,136	$	2,111	$	28,038	$	35,285	$	2,911,352	$	2,946,637

The amortized cost, by class, of loans and leases on nonaccrual status at June 30, 2023 and December 31, 2022, were as follows (in thousands):


	90			Less Than	Total		Nonaccrual With
	Days			90 Days	Nonaccrual		No Credit
June 30, 2023	or More			Past Due	Loans		Loss Allowance
Commercial real estate - owner occupied	$	—	$	491	$	491	$	491
Commercial real estate - non-owner occupied		19,187		—		19,187		1,323
Secured by farmland		503		2		505		505
Construction and land development		—		26		26		26
Residential 1-4 family		715		529		1,244		1,244
Home equity lines of credit		254		276		530		530
Commercial loans		1,371		60		1,431		61
Paycheck Protection Program loans		61		—		61		61
Consumer loans		129		444		573		573
Total Non-PCD loans		22,220		1,828		24,048		4,814
PCD loans		1,242		—		1,242		1,242
Total	$	23,462	$	1,828	$	25,290	$	6,056

	90			Less Than	Total		Nonaccrual With
	Days			90 Days	Nonaccrual		No Credit
December 31, 2022	or More			Past Due	Loans		Loss Allowance
Commercial real estate - owner occupied	$	—	$	509	$	509	$	509
Commercial real estate - non-owner occupied		19,641		—		19,641		19,641
Secured by farmland		—		713		713		713
Construction and land development		—		29		29		29
Residential 1-4 family		304		8,995		9,299		9,299
Home equity lines of credit		249		301		550		550
Commercial loans		2,956		121		3,077		121
Paycheck Protection Program loans		—		4		4		4
Consumer loans		200		134		334		299
Total Non-PCD loans		23,350		10,806		34,156		31,165
PCD loans		1,328		—		1,328		1,328
Total	$	24,678	$	10,806	$	35,484	$	32,493

There were $1.7 million and $3.4 million of Paycheck Protection Program (“PPP”) loans greater than 90 days past due and still accruing at June 30, 2023 and December 31, 2022, respectively.

The following table presents nonaccrual loans as of June 30, 2023 by class and year of origination (in thousands):


															Revolving
															Loans
													Revolving		Converted
	2023		2022		2021		2020		2019		Prior		Loans		To Term		Total
Commercial real estate - owner occupied	$	—	$	—	$	—	$	—	$	—	$	491	$	—	$	—	$	491
Commercial real estate - non-owner occupied		—		—				—		—		19,187		—		—		19,187
Secured by farmland		—		—		—		—		2		503		—		—		505
Construction and land development		—		—		—		—		—		26		—		—		26
Residential 1-4 family		—				—		—		—		981		—		263		1,244
Home equity lines of credit		—		—		—		—		—		54		457		19		530
Commercial loans		—		—		—		3		—		1,428		—		—		1,431
Paycheck Protection Program loans		—		—		—		61		—		—		—		—		61
Consumer loans		—		379		194		—		—		—		—		—		573
Total non-PCD nonaccruals		—		379		194		64		2		22,670		457		282		24,048
PCD loans		—		—		—		—		—		1,242		—		—		1,242
Total nonaccrual loans	$	—	$	379	$	194	$	64	$	2	$	23,912	$	457	$	282	$	25,290

Interest received on nonaccrual loans was zero and $0.1 million for the three months ended June 30, 2023 and 2022, respectively and $0.01 million and $0.3 million for the six months ended June 30, 2023 and 2022, respectively.

Modifications Provided to Borrowers Experiencing Financial Difficulty

The Bank determines that a borrower may be experiencing financial difficulty if the borrower is currently delinquent on any of its debt, or if the Bank is concerned that the borrower may not be able to perform in accordance with the current terms of the loan agreement in the foreseeable future. Many aspects of the borrower’s financial situation are assessed when determining whether they are experiencing financial difficulty, particularly as it relates to commercial borrowers due to the complex nature of the loan structure, business/industry risk and borrower/guarantor structures. Concessions may include the reduction of an interest rate at a rate lower than current market rates for a new loan with similar risk, extension of the maturity date, reduction of accrued interest, or principal forgiveness. When evaluating whether a concession has been granted, the Bank also considers whether the borrower has provided additional collateral or guarantors and whether such additions adequately compensate the Bank for the restructured terms, or if the revised terms are consistent with those currently being offered to new loan customers.

The assessments of whether a borrower is experiencing financial difficulty at the time a concession has been granted is subjective in nature and management’s judgment is required when determining whether the concession results in a modification that is accounted for as a new loan or a continuation of the existing loan under U.S. GAAP.

Although each occurrence is unique to the borrower and is evaluated separately, for all portfolio segments, loans modified as a result of borrowers experiencing financial difficulty are typically modified through reduction in interest rates, reductions in payments, changing the payment terms from principal and interest to interest only, and/or extensions in term maturity.

For the quarter ended June 30, 2023, two loans from our owner occupied commercial real estate loan portfolio with an amortized cost basis of $0.4 million, were modified for a borrower experiencing financial difficulty. This modification resulted in reamortization of the balance of the notes over a 25 year period, while maintaining the original maturity dates of February and July 2027, respectively. Contractual payments for both notes, prior to modification, for the three month period would have totaled $0.03 million. The modified loans had no payment delinquencies in the second quarter of 2023 and represents 0.09% of our total owner occupied commercial real estate loans.

An existing modification performed in the first quarter of 2023, and was comprised of one loan with a $0.9 million amortized cost, which will resume contractual payments in August 2023. This existing modification has had no payment delinquencies since its modification and accounts for only 0.15% of our total 1-4 family residential loans.

The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon asset origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification. Occasionally, the Company modifies certain loans by providing principal forgiveness. When principal forgiveness is provided, the amortized cost basis of the loan is written off against the allowance. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses.

If it is determined that a modified loan (or portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is written off. At that time, the amortized cost basis of the loan is reduced by the uncollectible amount and the allowance for credit losses is adjusted by the same amount.

Credit Quality Indicators

Through its system of internal controls, Primis evaluates and segments loan portfolio credit quality using regulatory definitions for Special Mention, Substandard and Doubtful. Special Mention loans are considered to be criticized. Substandard and Doubtful loans are considered to be classified.

Special Mention loans are loans that have a potential weakness that deserve 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.

Substandard loans may be inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful loans have all the weaknesses inherent in those classified as 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. Primis had no loans classified as Doubtful at June 30, 2023 or December 31, 2022.

In monitoring credit quality trends in the context of assessing the appropriate level of the allowance for credit losses on loans, we monitor portfolio credit quality by the weighted-average risk grade of each class of loan.

The following table presents weighted-average risk grades for all loans, by class and year of origination/renewal as of June 30, 2023 (in thousands)


															Revolving
															Loans
														Revolving	Converted
	2023		2022		2021		2020		2019		Prior		Loans		To Term		Total
Commercial real estate - owner occupied
Pass	$	26,032	$	91,578	$	61,730	$	18,444	$	21,553	$	214,548	$	2,832	$	6,821	$	443,538
Special Mention		—		—		220		—		—		5,081		—		—		5,301
Substandard		—		—		—		—		97		5,131		—		—		5,228
Doubtful		—		—		—		—		—		—		—		—		—
	$	26,032	$	91,578	$	61,950	$	18,444	$	21,650	$	224,760	$	2,832	$	6,821	$	454,067
Current period gross charge offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Weighted average risk grade		3.49		3.31		3.44		3.39		3.28		3.53		3.66		3.97		3.46
Commercial real estate - nonowner occupied
Pass	$	1,472	$	59,088	$	120,978	$	43,528	$	41,039	$	281,105	$	1,884	$	5,085	$	554,179
Special Mention		—		—		—		1,548		—		20,291		—		601		22,440
Substandard		—		—		—		—		—		19,186		—		—		19,186
Doubtful		—		—		—		—		—		—		—		—		—
	$	1,472	$	59,088	$	120,978	$	45,076	$	41,039	$	320,582	$	1,884	$	5,686	$	595,805
Current period gross charge offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Weighted average risk grade		3.15		3.27		3.08		3.83		3.95		3.84		2.86		3.21		3.63
Secured by farmland
Pass	$	514	$	—	$	13	$	108	$	—	$	3,627	$	328	$	176	$	4,766
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		2		503		—		—		505
Doubtful		—		—		—		—		—		—		—		—		—
	$	514	$	—	$	13	$	108	$	2	$	4,130	$	328	$	176	$	5,271
Current period gross charge offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Weighted average risk grade		N/A		N/A		4.00		4.00		6.00		4.02		3.92		3.12		3.97
Construction and land development
Pass	$	15,392	$	61,912	$	71,105	$	544	$	2,522	$	21,805	$	807	$	9	$	174,096
Special Mention		—		—		—		—		—		951		—		—		951
Substandard		—		—		—		—		—		26		—		—		26
Doubtful		—		—		—		—		—		—		—		—		—
	$	15,392	$	61,912	$	71,105	$	544	$	2,522	$	22,782	$	807	$	9	$	175,073
Current period gross charge offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Weighted average risk grade		3.55		3.21		3.39		3.39		3.29		3.57		3.37		4.00		3.36
Residential 1-4 family
Pass	$	12,664	$	153,892	$	154,811	$	42,560	$	57,486	$	162,489	$	1,908	$	2,736	$	588,546
Special Mention		—		—		—		—		—		179		—		—		179
Substandard		—		—		—		—		118		2,363		—		732		3,213
Doubtful		—		—		—		—		—		—		—		—		—
	$	12,664	$	153,892	$	154,811	$	42,560	$	57,604	$	165,031	$	1,908	$	3,468	$	591,938
Current period gross charge offs	$	—	$	—	$	—	$	—	$	94	$	—	$	—	$	—	$	94
Weighted average risk grade		3.16		3.08		3.04		3.07		3.07		3.22		3.92		3.64		3.12
Multi- family residential
Pass	$	—	$	8,257	$	21,678	$	18,045	$	6,997	$	76,520	$	649	$	648	$	132,794
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		669		—		291		960
Doubtful		—		—		—		—		—		—		—		—		—
	$	—	$	8,257	$	21,678	$	18,045	$	6,997	$	77,189	$	649	$	939	$	133,754
Current period gross charge offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Weighted average risk grade		N/A		3.69		3.00		3.90		3.00		3.41		4.00		4.62		3.42
Home equity lines of credit
Pass	$	75	$	492	$	423	$	50	$	52	$	3,201	$	57,009	$	880	$	62,182
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		54		553		19		626
Doubtful		—		—		—		—		—		—		—		—		—
	$	75	$	492	$	423	$	50	$	52	$	3,255	$	57,562	$	899	$	62,808
Current period gross charge offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Weighted average risk grade		3.00		3.00		3.00		3.00		3.00		3.89		3.05		3.93		3.11
Commercial loans
Pass	$	123,570	$	290,981	$	54,530	$	6,648	$	2,888	$	28,008	$	81,285	$	6,947	$	594,857
Special Mention		—		—		—		12		144		—		1,311		360		1,827
Substandard		—		—		—		3		66		1,552		—		—		1,621
Doubtful		—		—		—		—		—		—		—		—		—
	$	123,570	$	290,981	$	54,530	$	6,663	$	3,098	$	29,560	$	82,596	$	7,307	$	598,305
Current period gross charge offs	$	—	$	—	$	—	$	—	$	—	$	1,590	$	—	$	—	$	1,590
Weighted average risk grade		2.74		3.01		3.36		3.36		3.98		3.47		3.20		3.82		3.06

															Revolving
															Loans
														Revolving	Converted
	2023		2022		2021		2020		2019		Prior		Loans		To Term		Total
Paycheck Protection Program loans
Pass	$	—	$	—	$	1,115	$	967	$	—	$	—	$	—	$	—	$	2,082
Special Mention		—		—		—		61		—		—		—		—		61
Substandard		—		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—		—
	$	—	$	—	$	1,115	$	1,028	$	—	$	—	$	—	$	—	$	2,143
Current period gross charge offs	$	—	$	—	$	—	$		$	—	$	—	$	—	$	—	$	—
Weighted average risk grade		N/A		N/A		2.00		2.24		N/A		N/A		N/A		N/A		2.11
Consumer loans
Pass	$	279,034	$	249,363	$	26,879	$	1,209	$	200	$	4,176	$	5,872	$	186	$	566,919
Special Mention		—		—		—		—		—		67		—		—		67
Substandard		—		382		387		—		—		—		—		—		769
Doubtful		—		—		—		—		—		—		—		—		—
	$	279,034	$	249,745	$	27,266	$	1,209	$	200	$	4,243	$	5,872	$	186	$	567,755
Current period gross charge offs	$	—	$	3,729	$	751	$	—	$	—	$	—	$	—	$	—	$	4,480
Weighted average risk grade		3.50		2.70		3.67		3.99		3.97		4.02		2.93		4.00		3.16
PCD
Pass	$	—	$	—	$	—	$	—	$	—	$	2,908	$	—	$	—	$	2,908
Special Mention		—		—		—		—		—		1,618		—		—		1,618
Substandard		—		—		—		—		—		1,523		—		—		1,523
Doubtful		—		—		—		—		—		—		—		—		—
	$	—	$	—	$	—	$	—	$	—	$	6,049	$	—	$	—	$	6,049
Current period gross charge offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Weighted average risk grade		N/A		N/A		N/A		N/A		N/A		4.67		N/A		N/A		4.67
Total	$	458,753	$	915,945	$	513,869	$	133,727	$	133,164	$	857,581	$	154,438	$	25,491	$	3,192,968
Current period gross charge offs	$	—	$	3,729	$	751	$	—	$	94	$	1,590	$	—	$	—	$	6,164
Weighted average risk grade		3.29		3.00		3.21		3.50		3.40		3.59		3.16		3.73		3.29

The following table presents weighted-average risk grades for all loans, by class and year of origination/renewal as of December 31, 2022 (in thousands):


															Revolving
															Loans
														Revolving	Converted
	2022		2021		2020		2019		2018		Prior		Loans		To Term		Total
Commercial real estate - owner occupied
Pass	$	116,545	$	58,202	$	19,178	$	21,985	$	27,397	$	202,484	$	3,389	$	6,740	$	455,920
Special Mention		—		—		—		—		—		988		—		—		988
Substandard		—		—		—		—		—		2,958		—		—		2,958
Doubtful		—		—		—		—		—		—		—		—		—
	$	116,545	$	58,202	$	19,178	$	21,985	$	27,397	$	206,430	$	3,389	$	6,740	$	459,866
Weighted average risk grade		3.25		3.45		3.38		3.27		3.43		3.50		3.52		3.96		3.42
Commercial real estate - nonowner occupied
Pass	$	28,128	$	126,291	$	44,696	$	41,631	$	55,702	$	228,735	$	4,173	$	3,065	$	532,421
Special Mention		—		—		1,566		—		926		24,580		—		601		27,673
Substandard		—		—		—		—		13,066		6,573		—		—		19,639
Doubtful		—		—		—		—		—		—		—		—		—
	$	28,128	$	126,291	$	46,262	$	41,631	$	69,694	$	259,888	$	4,173	$	3,666	$	579,733
Weighted average risk grade		3.36		3.16		3.82		3.95		4.01		3.82		2.87		3.33		3.68
Secured by farmland
Pass	$	141	$	16	$	110	$	—	$	—	$	3,425	$	551	$	85	$	4,328
Special Mention		—		—		—		—		—		649		—		112		761
Substandard		—		—		—		6		—		875		—		—		881
Doubtful		—		—		—		—		—		—		—		—		—
	$	141	$	16	$	110	$	6	$	—	$	4,949	$	551	$	197	$	5,970
Weighted average risk grade		4.00		4.00		4.00		6.00		N/A		4.20		3.98		3.70		4.13
Construction and land development
Pass	$	44,253	$	73,226	$	847	$	3,006	$	6,937	$	19,553	$	822	$	17	$	148,661
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		29		—		—		29
Doubtful		—		—		—		—		—		—		—		—		—
	$	44,253	$	73,226	$	847	$	3,006	$	6,937	$	19,582	$	822	$	17	$	148,690
Weighted average risk grade		3.21		3.06		3.60		3.42		3.17		3.69		3.36		4.00		3.20
Residential 1-4 family
Pass	$	152,178	$	157,233	$	43,812	$	61,268	$	40,707	$	138,782	$	1,837	$	3,437	$	599,254
Special Mention		—		—		—		—		—		30		—		—		30
Substandard		285		—		—		8,099		—		1,310		—		716		10,410
Doubtful		—		—		—		—		—		—		—		—		—
	$	152,463	$	157,233	$	43,812	$	69,367	$	40,707	$	140,122	$	1,837	$	4,153	$	609,694
Weighted average risk grade		3.09		3.04		3.07		3.41		3.13		3.23		3.92		3.54		3.15
Multi- family residential
Pass	$	9,953	$	21,927	$	18,338	$	7,064	$	1,804	$	75,370	$	4,192	$	676	$	139,324
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		702		—		295		997
Doubtful		—		—		—		—		—		—		—		—		—
	$	9,953	$	21,927	$	18,338	$	7,064	$	1,804	$	76,072	$	4,192	$	971	$	140,321
Weighted average risk grade		3.58		3.00		3.90		3.00		3.21		3.31		4.00		4.61		3.37
Home equity lines of credit
Pass	$	463	$	431	$	52	$	63	$	230	$	4,093	$	58,312	$	957	$	64,601
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		54		476		21		551
Doubtful		—		—		—		—		—		—		—		—		—
	$	463	$	431	$	52	$	63	$	230	$	4,147	$	58,788	$	978	$	65,152
Weighted average risk grade		3.00		3.00		3.00		3.00		3.00		3.94		3.05		3.89		3.12
Commercial loans
Pass	$	295,459	$	59,642	$	6,768	$	6,369	$	9,228	$	20,883	$	100,207	$	17,381	$	515,937
Special Mention		—		396		64		74		—		—		519		388		1,441
Substandard		—		—		5		90		—		1,678		1,590		—		3,363
Doubtful		—		—		—		—		—		—		—		—		—
	$	295,459	$	60,038	$	6,837	$	6,533	$	9,228	$	22,561	$	102,316	$	17,769	$	520,741
Weighted average risk grade		3.14		3.41		3.38		3.90		3.42		3.70		3.47		3.33		3.29
Paycheck Protection Program loans
Pass	$	—	$	2,119	$	2,435	$	—	$	—	$	—	$	—	$	—	$	4,554
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		10		—		—		—		—		—		—		10
Doubtful		—		—		—		—		—		—		—		—		—
	$	—	$	2,129	$	2,435	$	—	$	—	$	—	$	—	$	—	$	4,564
Weighted average risk grade		N/A		2.02		2.00		N/A		N/A		N/A		N/A		N/A		2.01


															Revolving
															Loans
														Revolving	Converted
	2022		2021		2020		2019		2018		Prior		Loans		To Term		Total
Consumer loans
Pass	$	365,842	$	29,184	$	1,493	$	340	$	534	$	4,319	$	2,918	$	—	$	404,630
Special Mention		—		—		—		—		—		65		—		—		65
Substandard		70		513		—		—		—		—		—		—		583
Doubtful		—		—		—		—		—		—		—		—		—
	$	365,912	$	29,697	$	1,493	$	340	$	534	$	4,384	$	2,918	$	—	$	405,278
Weighted average risk grade		3.24		3.74		3.99		3.98		4.00		4.02		3.81		N/A		3.30
PCD
Pass	$	—	$	—	$	—	$	—	$	—	$	3,692	$	—	$	—	$	3,692
Special Mention		—		—		—		—		—		1,320		—		—		1,320
Substandard		—		—		—		—		—		1,616		—		—		1,616
Doubtful		—		—		—		—		—		—		—		—		—
	$	—	$	—	$	—	$	—	$	—	$	6,628	$	—	$	—	$	6,628
Weighted average risk grade		N/A		N/A		N/A		N/A		N/A		4.54		N/A		N/A		4.54
Total	$	1,013,317	$	529,190	$	139,364	$	149,995	$	156,531	$	744,763	$	178,986	$	34,491	$	2,946,637
Weighted average risk grade		3.20		3.19		3.48		3.54		3.60		3.57		3.35		3.53		3.36

Revolving loans that converted to term during the reported periods were as follows (in thousands):


	For the three months ended June 30, 2023		For the six months ended June 30, 2023
Commercial real estate - owner occupied	$	214	$	214
Commercial real estate - non-owner occupied		—		2,057
Secured by farmland		—		—
Construction and land development		—		—
Residential 1-4 family		142		142
Multi- family residential		—		—
Home equity lines of credit		—		—
Commercial loans		—		186
Paycheck Protection Program loans		—		—
Consumer loans		—		—
Total loans	$	356	$	2,599

The recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure was $0.3 million and $0.1 million at June 30, 2023 and December 31, 2022, respectively.

Allowance For Credit Losses – Loans

The allowance for credit losses on loans is a contra-asset valuation account, calculated in accordance with ASC 326 that is deducted from the amortized cost basis of loans to present the net amount expected to be collected. The amount of the allowance represents management's best estimate of current expected credit losses on loans considering available information, from internal and external sources, relevant to assessing collectability over the loans' contractual terms, adjusted for expected prepayments when appropriate.

In calculating the allowance for credit losses, most loans are segmented into pools based upon similar characteristics and risk profiles. For allowance modeling purposes, our loan pools include but are not limited to (i) commercial real estate - owner occupied, (ii) commercial real estate - non-owner occupied, (iii) construction and land development, (iv) commercial, (v) agricultural loans, (vi) residential 1-4 family and (vii) consumer loans. We periodically reassess each pool to ensure the loans within the pool continue to share similar characteristics and risk profiles and to determine whether further segmentation is necessary. For each loan pool, we measure expected credit losses over the life of each loan utilizing a combination of inputs: (i) probability of default, (ii) probability of attrition, (iii) loss given default and (iv) exposure at default. Internal data is supplemented by, but not replaced by, peer data when required, primarily to determine the probability of default input. The various pool-specific inputs may be adjusted for current macroeconomic assumptions.

Significant macroeconomic variables utilized in our allowance models include, among other things, (i) VA Gross Domestic Product, (ii) VA House Price Index, and (iii) VA unemployment rates.

Management qualitatively adjusts allowance model results for risk factors that are not considered within our quantitative modeling processes but are nonetheless relevant in assessing the expected credit losses within our loan pools. Qualitative factor (“Q-Factor”) adjustments are driven by key risk indicators that management tracks on a pool-by-pool basis.

In some cases, management may determine that an individual loan exhibits unique risk characteristics which differentiate the loan from other loans within our loan pools. In such cases, the loans are evaluated for expected credit losses on an individual basis and excluded from the collective evaluation.

The following tables present details of the allowance for credit losses on loans segregated by loan portfolio segment as of June 30, 2023 and December 31, 2022, calculated in accordance with the current expected credit losses (“CECL”) methodology (in thousands).


	Commercial		Commercial										Home
	Real Estate		Real Estate				Construction						Equity
	Owner		Non-owner		Secured by		and Land		1-4 Family		Multi-Family		Lines Of		Commercial		Consumer		PCD
June 30, 2023	Occupied		Occupied		Farmland		Development		Residential		Residential		Credit		Loans		Loans		Loans		Total
Modeled expected credit losses	$	4,799	$	6,360	$	3	$	914	$	4,067	$	1,641	$	307	$	5,300	$	7,011	$	—	$	30,402
Q-factor and other qualitative adjustments		268		625		29		372		385		352		19		855		5		—		2,910
Specific allocations		—		2,454		—		—		—		—		—		843		—		1,932		5,229
Total	$	5,067	$	9,439	$	32	$	1,286	$	4,452	$	1,993	$	326	$	6,998	$	7,016	$	1,932	$	38,541

	Commercial		Commercial										Home
	Real Estate		Real Estate				Construction						Equity
	Owner		Non-owner		Secured by		and Land		1-4 Family		Multi-Family		Lines Of		Commercial		Consumer		PCD
December 31, 2022	Occupied		Occupied		Farmland		Development		Residential		Residential		Credit		Loans		Loans		Loans		Total
Modeled expected credit losses	$	5,297	$	6,652	$	4	$	997	$	3,579	$	1,814	$	310	$	5,006	$	3,851	$	—	$	27,510
Q-factor and other qualitative adjustments		261		495		21		376		512		387		19		654		2		—		2,727
Specific allocations		—		—		—		—		—		—		—		2,193		42		2,072		4,307
Total	$	5,558	$	7,147	$	25	$	1,373	$	4,091	$	2,201	$	329	$	7,853	$	3,895	$	2,072	$	34,544

No allowance for credit losses has been recognized for PPP loans as such loans are fully guaranteed by the SBA.

Activity in the allowance for credit losses by class of loan for the three months ended June 30, 2023 and 2022 is summarized below (in thousands):


	Commercial		Commercial
	Real Estate		Real Estate				Construction						Home Equity
	Owner		Non-owner		Secured by		and Land		1-4 Family		Multi-Family		Lines Of		Commercial		Consumer		PCD
Three Months Ended June 30, 2023	Occupied		Occupied		Farmland		Development		Residential		Residential		Credit		Loans		Loans		Loans		Total
Allowance for credit losses:
Beginning balance	$	5,304	$	7,161	$	21	$	1,280	$	4,343	$	2,087	$	350	$	6,510	$	6,802	$	1,945	$	35,803
Provision (recovery)		(237)		2,278		11		6		203		(94)		(19)		497		1,720		(13)		4,352
Charge offs		—		—		—		—		(94)		—		(7)		(10)		(1,629)		—		(1,740)
Recoveries		—		—		—		—		—		—		2		1		123		—		126
Ending balance	$	5,067	$	9,439	$	32	$	1,286	$	4,452	$	1,993	$	326	$	6,998	$	7,016	$	1,932	$	38,541

Three Months Ended June 30, 2022
Allowance for credit losses:
Beginning balance	$	4,173	$	8,913	$	49	$	1,029	$	3,888	$	2,289	$	376	$	5,466	$	1,025	$	2,171	$	29,379
Provision (recovery)		142		(1,498)		—		(5)		384		(129)		(14)		962		625		(45)		422
Charge offs		(14)		—		—		—		—		—		—		—		(84)		—		(98)
Recoveries		—		502		—		—		—		—		1		—		3		—		506
Ending balance	$	4,301	$	7,917	$	49	$	1,024	$	4,272	$	2,160	$	363	$	6,428	$	1,569	$	2,126	$	30,209

Activity in the allowance for credit losses by class of loan for the six months ended June 30, 2023 (As Restated) and 2022 is summarized below (in thousands):


	Commercial		Commercial
	Real Estate		Real Estate				Construction						Home Equity
	Owner		Non-owner		Secured by		and Land		1-4 Family		Multi-Family		Lines Of		Commercial		Consumer		PCD
Six Months Ended June 30, 2023	Occupied		Occupied		Farmland		Development		Residential		Residential		Credit		Loans		Loans		Loans		Total
Allowance for credit losses:
Beginning balance	$	5,558	$	7,147	$	25	$	1,373	$	4,091	$	2,201	$	329	$	7,853	$	3,895	$	2,072	$	34,544
Provision (recovery)		(491)		2,292		7		(199)		469		(208)		2		920		6,963		(140)		9,615
Charge offs		—		—		—		—		(269)		—		(7)		(1,776)		(4,112)		—		(6,164)
Recoveries		—		—		—		112		161		—		2		1		270		—		546
Ending balance	$	5,067	$	9,439	$	32	$	1,286	$	4,452	$	1,993	$	326	$	6,998	$	7,016	$	1,932	$	38,541

Six Months Ended June 30, 2022
Allowance for credit losses:
Beginning balance	$	4,562	$	9,028	$	56	$	998	$	3,588	$	3,280	$	437	$	4,088	$	787	$	2,281	$	29,105
Provision (recovery)		(247)		(1,613)		(7)		26		627		(1,120)		(61)		2,170		901		(155)		521
Charge offs		(14)		—		—		—		—		—		(14)		—		(131)		—		(159)
Recoveries		—		502		—		—		57		—		1		170		12		—		742
Ending balance	$	4,301	$	7,917	$	49	$	1,024	$	4,272	$	2,160	$	363	$	6,428	$	1,569	$	2,126	$	30,209

Generally, a commercial loan, or a portion thereof, is charged-off when it is determined, through the analysis of any available current financial information with regards to the borrower, that the borrower is incapable of servicing unsecured debt, there is little or no prospect for near term improvement and no realistic strengthening action of significance is pending or, in the case of secured debt, when it is determined, through analysis of current information with regards to our collateral position, that amounts due from the borrower are in excess of the calculated current fair value of the collateral. Losses on installment loans are recognized in accordance with regulatory guidelines. All other consumer loan losses are recognized when delinquency exceeds 120 cumulative days.

The following table presents loans that were evaluated for expected credit losses on an individual basis and the related specific allocations, by loan portfolio segment as of June 30, 2023 and December 31, 2022 (in thousands):


	June 30, 2023				December 31, 2022
	Loan		Specific		Loan		Specific
	Balance		Allocations		Balance		Allocations
Commercial real estate - owner occupied	$	5,073	$	—	$	2,795	$	—
Commercial real estate - non-owner occupied		19,187		2,454		19,641		—
Secured by farmland		503		—		525		—
Construction and land development		—		—		—		—
Residential 1-4 family		1,655		—		9,636		—
Multi- family residential		960		—		996		—
Home equity lines of credit		—		—		21		—
Commercial loans		1,369		843		2,979		2,193
Consumer loans		—		—		259		42
Total non-PCD loans		28,747		3,297		36,852		2,235
PCD loans		6,049		1,932		6,628		2,072
Total loans	$	34,796	$	5,229	$	43,480	$	4,307