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LOANS AND THE ALLOWANCE FOR LOAN LOSSES
 3 Months Ended
Mar. 31, 2023
Receivables [Abstract]  
LOANS AND THE ALLOWANCE FOR LOAN LOSSES LOANS AND THE ALLOWANCE FOR CREDIT LOSSES
On January 1, 2023, the Company adopted the new CECL standard, ASU 2016-13, using the modified retrospective method for all financial assets measured at amortized cost. For comparability, the Company has adjusted certain prior period amounts to conform to the current presentation under CECL. Refer to Note 1 - Organization and Summary of Significant Accounting Policies for additional information related to the Company’s methodology for estimating the allowance for credit losses.
The following presents a summary of the Company’s loans at amortized cost as of the dates noted (dollars in thousands):
March 31,
2023		December 31,
2022
Cash, Securities, and Other$157,264 $165,559 
Consumer and Other(1)
42,503 49,391 
Construction and Development281,281 285,627 
1-4 Family Residential891,639 899,722 
Non-Owner Occupied CRE533,218 493,134 
Owner Occupied CRE221,709 214,189 
Commercial and Industrial341,424 361,791 
Total loans held for investment2,469,038 2,469,413 
Allowance for credit losses(19,843)(17,183)
Loans, net$2,449,195 $2,452,230 
______________________________________
(1)Includes $21.1 million and $23.4 million of unpaid principal balance of loans held for investment measured at fair value as of March 31, 2023 and December 31, 2022, respectively. Includes fair value adjustments on loans held for investment accounted for under the fair value option.
As of March 31, 2023 and December 31, 2022, total loans held for investment included $228.8 million and $230.4 million, respectively, of performing loans purchased through mergers or acquisitions. As of March 31, 2023 and December 31, 2022, Consumer and Other included $21.1 million and $23.4 million, respectively, of unpaid principal balance of loans held for investment measured at fair value. See Note 13 – Fair Value.
As of March 31, 2023, the Cash, Securities, and Other portion of the loan portfolio included $6.0 million of SBA Paycheck Protection Program (“PPP”) loans, or 3.8% of the total category. As of December 31, 2022, the Cash, Securities, and Other portion of the loan portfolio included $6.9 million of PPP loans, or 4.2% of the total category.
As of March 31, 2023, the Company’s Commercial and Industrial loans included four Main Street Lending Program (“MSLP”) loans with the net carrying amount of $5.4 million, or 1.6% of the total category. As of December 31, 2022, the Company’s Commercial and Industrial loans included five MSLP loans with the net carrying amount of $5.9 million, or 1.6% of the total category.
Loan Modifications
As a result of the COVID-19 pandemic, a loan modification program was designed and implemented to assist our clients experiencing financial stress resulting from the economic impacts caused by the global pandemic. The Company offered loan extensions, temporary payment moratoriums, and financial covenant waivers for commercial and consumer borrowers impacted by the pandemic who have a pass risk rating and have not been delinquent over 30 days on payments in the last two years.
In 2021, the deferral period ended for all non-acquired loans previously modified and payments resumed under the original terms. As of March 31, 2023, the Company’s loan portfolio included 45 non-acquired loans which were previously modified under the loan modification program, totaling $76.4 million. Through the Teton Acquisition, the Company acquired loans which were previously modified and are no longer in their deferral period. As of March 31, 2023, there were 14 of these loans, totaling $3.1 million.
All loans modified in response to COVID-19 are classified as performing and pass rated as of March 31, 2023. These loans are included in the allowance for credit loss general reserve in accordance with ASU 2016-13. Management has increased our loan level reviews and portfolio monitoring to address the changing environment. Management believes the diversity of the loan portfolio is prudent and remains consistent with the credit culture and goals of the Bank.
Interest accrued during the modification term on modified loans is deferred to the end of the loan term. Accrued interest receivable is excluded from the estimate of credit losses.
For the three months ended March 31, 2023 there were no loan modifications made to borrowers experiencing financial difficulty and the Company had not committed any additional funds to borrowers experiencing financial difficulty.
The following presents, by class, an aging analysis of the amortized cost basis in loans past due as of the date noted (dollars in thousands):
March 31, 202330-59
Days
Past Due		60-89
Days
Past Due		90 or
More Days
Past Due		Total
Loans
Past Due		CurrentTotal
Amortized
Cost
Loans Accounted for Under the Fair Value Option(1)
Total Loans
Cash, Securities, and Other$386 $— $1,726 $2,112 $155,152 $157,264 — $157,264 
Consumer and Other8 8 — 16 21,680 21,696 20,807 42,503 
Construction and Development280 — — 280 281,001 281,281 — 281,281 
1-4 Family Residential— — — — 891,639 891,639 — 891,639 
Non-Owner Occupied CRE4,399 — — 4,399 528,819 533,218 — 533,218 
Owner Occupied CRE— — — — 221,709 221,709 — 221,709 
Commercial and Industrial462 — 13,105 13,567 327,857 341,424 — 341,424 
Total$5,535 $8 $14,831 $20,374 $2,427,857 $2,448,231 $20,807 $2,469,038 

December 31, 202230-59
Days
Past Due		60-89
Days
Past Due		90 or
More Days
Past Due		Total
Loans
Past Due		CurrentTotal Amortized Cost
Loans Accounted for Under the Fair Value Option(1)
Total Loans
Cash, Securities, and Other$1,735 $539 $4 $2,278 $163,281 $165,559 $— $165,559 
Consumer and Other657 5 5 667 25,403 26,070 23,321 49,391 
Construction and Development— — 201 201 285,426 285,627 — 285,627 
1-4 Family Residential1,752 — 5 1,757 897,965 899,722 — 899,722 
Non-Owner Occupied CRE1,071 — — 1,071 492,063 493,134 — 493,134 
Owner Occupied CRE1,165 — — 1,165 213,024 214,189 — 214,189 
Commercial and Industrial4,858 10,648 1,319 16,825 344,966 361,791 — 361,791 
Total$11,238 $11,192 $1,534 $23,964 $2,422,128 $2,446,092 $23,321 $2,469,413 
(1)Refer to Note 13 - Fair Value for additional information on the measurement of loans accounted for under the fair value option.
As of March 31, 2023, the Company had two loans, totaling $1.7 million, in the Cash, Securities and Other portfolio and one loan in the Commercial and Industrial portfolio, totaling $3.0 million, that were more than 90 days delinquent and accruing interest. As of December 31, 2022, the Company had one loan, totaling an immaterial amount, in the Commercial and Industrial portfolio that was more than 90 days delinquent and accruing interest.
Non-Accrual Loans
The accrual of interest on loans is discontinued at the time the loan becomes 90 or more days delinquent unless the loan is well secured and in the process of collection or renewal due to maturity. Past due status is based on the contractual terms of the loan. In all cases, loans are placed on non-accrual status or charged off if collection of interest or principal is considered doubtful. The following presents the amortized cost basis of loans on nonaccrual status and loans past due over 89 days still accruing by class as of the date noted (dollars in thousands).
As of March 31, 2023
Nonaccrual loans with
no ACL		Total nonaccrual loansLoans past due over 89 days still accruing
Cash, Securities, and Other$— $— $1,726 
Consumer and Other— — — 
Construction and Development— — — 
1-4 Family Residential— — — 
Owner Occupied CRE1,135 1,135 — 
Commercial and Industrial(1)
10,741 11,124 3,000 
Total$11,876 $12,259 $4,726 
(1)The Company recorded a specific reserve of $0.2 million on an individually analyzed loan of $0.4 million as of March 31, 2023.
The following presents the recorded investment in non-accrual loans by class as of the date noted (dollars in thousands):
As of December 31, 2022
Nonaccrual loans with
no ALLL		Total nonaccrual loansLoans past due over 89 days still accruing
Cash, Securities, and Other$4 $4 $— 
Consumer and Other5 5 — 
Construction and Development201 201 — 
1-4 Family Residential— — — 
Owner Occupied CRE1,165 1,165 — 
Commercial and Industrial10,762 10,762 25 
Total$12,137 $12,137 $25 
(1)The Company did not record a specific reserve on any individually analyzed loans as of December 31, 2022.
The Company recognized an immaterial amount of interest income on nonaccrual loans during the three months ended March 31, 2023 and 2022.
Non-accrual loans, excluding loans held for investment measured at fair value, are classified as collateral dependent loans and are individually evaluated. The following presents the amortized cost basis of collateral-dependent loans, which are individually evaluated to determine expected credit losses, by class of loans as of the date noted (dollars in thousands):
As of March 31, 2023
Collateral Dependent Loans
Secured by Real EstateSecured by Cash and
Securities		Secured by OtherTotal
Cash, Securities, and Other$— $— $— $— 
Consumer and Other— — — — 
Construction and Development— — — — 
1-4 Family Residential— — — — 
Non-Owner Occupied CRE— — — — 
Owner Occupied CRE1,135 — — 1,135 
Commercial and Industrial— — 11,124 11,124 
Total$1,135 $— $11,124 $12,259 
Allowance for Credit Losses on Loans
Beginning January 1, 2023, the allowance for credit losses for loans is measured on the loan’s amortized cost basis, excluding interest receivable. Interest receivable excluded at March 31, 2023 and December 31, 2022 was $10.0 million and $9.8 million, respectively, presented in Accrued interest receivable on the Condensed Consolidated Balance Sheets. Refer to Note 1 - Organization and Summary of Significant Accounting Policies for additional information related to the Company’s methodology on estimated credit losses.
Allocation of a portion of the allowance for credit losses to one category of loans does not preclude its availability to absorb losses in other categories. The following table presents the activity in the allowance for credit losses by portfolio segment for the three months ended March 31, 2023 (dollars in thousands):
Cash,
Securities
and Other		Consumer
and
Other		Construction
and
Development		1-4
Family
Residential		Non-Owner
Occupied
CRE		Owner
Occupied
CRE		Commercial
and
Industrial		Total
Changes in allowance for loan losses for the three months ended March 31, 2023
Beginning balance, prior to the adoption of ASU 2016-13
$1,198 $191 $2,025 $6,309 $3,490 $1,510 $2,460 $17,183 
Impact of adopting ASU 2016-13
193 106 4,681 (2,808)(689)(104)2,091 $3,470 
(Release)/provision for credit losses60 (95)(477)320 (92)(134)(387)(805)
Charge-offs— (17)— — — — — (17)
Recoveries— 11 — — — — 1 12 
Ending balance$1,451 $196 $6,229 $3,821 $2,709 $1,272 $4,165 $19,843 
Allowance for loan losses as of March 31, 2023 allocated to loans evaluated:         
Individually$— $— $— $— $— $— $195 $195 
Collectively1,451 196 6,229 3,821 2,709 1,272 3,970 19,648 
Ending balance$1,451 $196 $6,229 $3,821 $2,709 $1,272 $4,165 $19,843 
Loans as of March 31, 2023:        
Individually evaluated$— $— $— $— $— $1,135 $11,124 $12,259 
Collectively evaluated157,264 21,696 281,281 891,639 533,218 220,574 330,300 2,435,972 
Loans held for investment measured at fair value— 20,807 — — — — — 20,807 
Ending balance$157,264 $42,503 $281,281 $891,639 $533,218 $221,709 $341,424 $2,469,038 
Cash,
Securities
and Other		Consumer
and
Other		Construction
and
Development		1-4
Family
Residential		Non-Owner
Occupied
CRE		Owner
Occupied
CRE		Commercial
and
Industrial		Total
Changes in allowance for loan losses for the three months ended March 31, 2022
Beginning balance$1,598 $266 $1,092 $3,553 $2,952 $1,292 $2,979 $13,732 
(Release)/provision for loan losses(158)74 (138)236 (85)36 245 210 
Charge-offs— (97)— — — — — (97)
Recoveries— 40 — — — — — 40 
Ending balance$1,440 $283 $954 $3,789 $2,867 $1,328 $3,224 $13,885 
Allowance for loan losses as of December 31, 2022 allocated to loans evaluated:        
Individually$— $— $— $— $— $— $— $— 
Collectively1,198 191 2,025 6,309 3,490 1,510 2,460 17,183 
Ending balance$1,198 $191 $2,025 $6,309 $3,490 $1,510 $2,460 $17,183 
Loans as of December 31, 2022:        
Individually evaluated$4 $5 $201 $— $— $1,165 $10,762 $12,137 
Collectively evaluated165,555 26,065 285,426 899,722 493,134 213,024 351,029 2,433,955 
Loans held for investment measured at fair value$— $23,321 $— $— $— $— $— $23,321 
Ending balance$165,559 $49,391 $285,627 $899,722 $493,134 $214,189 $361,791 $2,469,413 
Credit Quality Indicators
The Company categorizes loans into risk categories based on relevant information about the ability of the borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans by credit risk on a quarterly basis. The Company uses the following definitions for risk ratings:
Special Mention—Loans classified as special mention have a potential weakness or borrowing relationships that require more than the usual amount of management attention. Adverse industry conditions, deteriorating financial conditions, declining trends, management problems, documentation deficiencies, or other similar weaknesses may be evident. Ability to meet current payment schedules may be questionable, even though interest and principal are still being paid as agreed. The asset has potential weaknesses that may result in deteriorating repayment prospects if left uncorrected. Loans in this risk grade are not considered adversely classified.
Substandard—Substandard loans are considered "classified" and are inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardizes the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected. Loans in this category may be placed on non-accrual status and may individually be evaluated.
Doubtful—Loans graded Doubtful are considered "classified" and 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 known facts, conditions, and values, highly questionable and improbable. However, the amount of certainty of eventual loss is not known because of specific pending factors.
Loans accounted for under the fair value option are not rated.
The following table presents the amortized cost basis of loans by credit quality indicator, by class of financing receivable, and year of origination for term loans as of March 31, 2023. For revolving lines of credit that converted to term loans, if the conversion involved a credit decision, such loans are included in the origination year in which the credit decision was made. If revolving lines of credit converted to term loans without a credit decision, such lines of credit are included in the “Revolving lines of credit converted to term” column in the following table.

Term Loans Amortized Cost by Origination Year
March 31, 202320232022202120202019PriorRevolving Loans Amortized Cost BasisRevolving Loans Converted to TermTotal
Cash, Securities, and Other
Pass$638 $12,929 $23,213 $5,778 $7,127 $19,944 $87,635 $— $157,264 
Special mention— — — — — — — — — 
Substandard— — — — — — — — — 
Not rated— — — — — — — — — 
Total Cash, Securities, and Other$638 $12,929 $23,213 $5,778 $7,127 $19,944 $87,635 $— $157,264 
Current year-to-date gross write-offs$— $— $— $— $— $— $— $— $— 
Consumer and Other
Pass$103 $2,117 $692 $891 $1,264 $29 $16,600 $— $21,696 
Special mention— — — — — — — — — 
Substandard— — — — — — — — — 
Not rated(1)
— 14,959 4,294 1,403 151 — — — 20,807 
Total Consumer and Other$103 $17,076 $4,986 $2,294 $1,415 $29 $16,600 $— $42,503 
Current year-to-date gross write-offs$— $— $— $2 $13 $2 $— $— $17 
Construction and Development
Pass$3,824 $203,543 $50,172 $19,389 $— $— $4,353 $— $281,281 
Special mention— — — — — — — — — 
Substandard— — — — — — — — — 
Not rated— — — — — — — — — 
Total Construction and Development$3,824 $203,543 $50,172 $19,389 $— $— $4,353 $— $281,281 
Current year-to-date gross write-offs$— $— $— $— $— $— $— $— $— 
Term Loans Amortized Cost by Origination Year
March 31, 202320232022202120202019PriorRevolving Loans Amortized Cost BasisRevolving Loans Converted to TermTotal
1-4 Family Residential
Pass$12,980 $399,464 $155,127 $117,018 $38,556 $42,728 $125,766 $— $891,639 
Special mention— — — — — — — — — 
Substandard— — — — — — — — — 
Not rated— — — — — — — — — 
Total 1-4 Family Residential$12,980 $399,464 $155,127 $117,018 $38,556 $42,728 $125,766 $— $891,639 
Current year-to-date gross write-offs$— $— $— $— $— $— $— $— $— 
Non-Owner Occupied CRE
Pass$3,272 $203,689 $130,033 $82,161 $24,906 $55,304 $25,133 $— $524,498 
Special mention— — — 5,095 — — — — 5,095 
Substandard— 3,625 — — — — — — 3,625 
Not rated— — — — — — — — — 
Total Non-Owner Occupied CRE$3,272 $207,314 $130,033 $87,256 $24,906 $55,304 $25,133 $— $533,218 
Current year-to-date gross write-offs$— $— $— $— $— $— $— $— $— 
Owner Occupied CRE
Pass$4,542 $47,976 $58,851 $42,285 $5,773 $53,030 $8,117 $— $220,574 
Special mention— — — — — — — — — 
Substandard— — — 1,135 — — — — 1,135 
Not rated— — — — — — — — — 
Total Owner Occupied CRE$4,542 $47,976 $58,851 $43,420 $5,773 $53,030 $8,117 $— $221,709 
Current year-to-date gross write-offs$— $— $— $— $— $— $— $— $— 
Commercial and Industrial
Pass$10,907 $91,110 $47,110 $15,575 $7,235 $13,977 $138,490 $— $324,404 
Special mention— — — 2,896 — — — — 2,896 
Substandard— 8,404 — 635 — 1,099 3,986 — 14,124 
Not rated— — — — — — — — — 
Total Commercial and Industrial$10,907 $99,514 $47,110 $19,106 $7,235 $15,076 $142,476 $— $341,424 
Current year-to-date gross write-offs$— $— $— $— $— $— $— $— $— 
Total$36,266 $987,816 $469,492 $294,261 $85,012 $186,111 $410,080 $— $2,469,038 
(1)Includes loans held for investment measured at fair value as of March 31, 2023. Includes fair value adjustments on loans held for investment accounted for under the fair value option.
The following presents, by class and by credit quality indicator, the recorded investment in the Company’s loans as of the date noted (dollars in thousands):
December 31, 2022PassSpecial
Mention		SubstandardNot RatedTotal
Cash, Securities, and Other$165,555 $— $4 $— $165,559 
Consumer and Other(1)
26,065 — 5 23,321 49,391 
Construction and Development285,426 — 201 — 285,627 
1-4 Family Residential899,722 — — — 899,722 
Non-Owner Occupied CRE493,134 — — — 493,134 
Owner Occupied CRE213,024 — 1,165 — 214,189 
Commercial and Industrial348,844 2,185 10,762 — 361,791 
Total$2,431,770 $2,185 $12,137 $23,321 $2,469,413 
(1)Includes loans held for investment measured at fair value as of December 31, 2022. Includes fair value adjustments on loans held for investment accounted for under the fair value option.