LOANS AND THE ALLOWANCE FOR CREDIT LOSSES (Tables)

6 Months Ended

Jun. 30, 2023

The following presents a summary of the Company’s loans at amortized cost as of the dates noted (dollars in thousands):


	June 30, 2023		December 31, 2022
Cash, Securities, and Other	$	150,620	$	165,559
Consumer and Other	21,762		26,070
Construction and Development	310,382		285,627
1-4 Family Residential	880,600		899,722
Non-Owner Occupied CRE	558,276		493,134
Owner Occupied CRE	217,020		214,189
Commercial and Industrial	339,399		361,791
Total	2,478,059		2,446,092

Allowance for credit losses	(22,044)		(17,183)
Total, net	$	2,456,015	$	2,428,909
Loans accounted for under the fair value option(1)	17,523		23,321
Loans, net	$	2,473,538	$	2,452,230

______________________________________

(1)Includes $18.3 million and $23.4 million of unpaid principal balance of loans held for investment measured at fair value as of June 30, 2023 and December 31, 2022, respectively. Includes fair value adjustments on loans held for investment accounted for under the fair value option. See Note 13 – Fair Value.

Summary of aging analysis of the recorded investments in loans past due

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):


June 30, 2023	30-59 Days Past Due		60-89 Days Past Due		90 or More Days Past Due		Total Loans Past Due		Current		Total Amortized Cost		Loans Accounted for Under the Fair Value Option(1)		Total Loans
Cash, Securities, and Other	$	1,704	$	—	$	—	$	1,704	$	148,916	$	150,620	$	—	$	150,620
Consumer and Other	9		1,016		6		1,031		20,731		21,762		17,523		39,285
Construction and Development	—		—		—		—		310,382		310,382		—		310,382
1-4 Family Residential	651		—		—		651		879,949		880,600		—		880,600
Non-Owner Occupied CRE	—		—		—		—		558,276		558,276		—		558,276
Owner Occupied CRE	3,950		—		—		3,950		213,070		217,020		—		217,020
Commercial and Industrial	7,012		11,014		10,030		28,056		311,343		339,399		—		339,399
Total	$	13,326	$	12,030	$	10,036	$	35,392	$	2,442,667	$	2,478,059	$	17,523	$	2,495,582


December 31, 2022	30-59 Days Past Due		60-89 Days Past Due		90 or More Days Past Due		Total Loans Past Due		Current		Total 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 Other	657		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 Residential	1,752		—		5		1,757		897,965		899,722		—		899,722
Non-Owner Occupied CRE	1,071		—		—		1,071		492,063		493,134		—		493,134
Owner Occupied CRE	1,165		—		—		1,165		213,024		214,189		—		214,189
Commercial and Industrial	4,858		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.

Schedule of recorded investment in non accrual loans by class

The following presents the amortized cost basis of loans on non-accrual status and loans past due over 89 days still accruing by class as of the date noted (dollars in thousands).


	As of June 30, 2023
	Non-accrual loans with no ACL		Total non-accrual loans		Loans past due over 89 days still accruing
Cash, Securities, and Other	$	—	$	—	$	—
Consumer and Other	6		6		—
Construction and Development	—		—		—
1-4 Family Residential	—		—		—
Owner Occupied CRE	—		—		—
Commercial and Industrial(1)	2,076		10,030		—
Total	$	2,082	$	10,036	$	—

(1)The Company recorded an allowance of $2.2 million on three individually analyzed loans totaling $8.9 million as of June 30, 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
	Non-accrual loans with no ALLL		Total non-accrual loans		Loans past due over 89 days still accruing
Cash, Securities, and Other	$	4	$	4	$	—
Consumer and Other	5		5		—
Construction and Development	201		201		—
1-4 Family Residential	—		—		—
Owner Occupied CRE	1,165		1,165		—
Commercial and Industrial	10,762		10,762		25
Total(1)	$	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 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 June 30, 2023
	Collateral Dependent Loans
	Secured by Real Estate		Secured by Cash and Securities		Secured by Other		Total
Cash, Securities, and Other	$	—	$	—	$	—	$	—
Consumer and Other	—		—		—		—
Construction and Development	—		—		—		—
1-4 Family Residential	—		—		—		—
Non-Owner Occupied CRE	—		—		—		—
Owner Occupied CRE	—		—		—		—
Commercial and Industrial	—		—		10,030		10,030
Total	$	—	$	—	$	10,030	$	10,030

Schedule of activity in the Company's allowance for loan losses by portfolio class

The following table presents the activity in the allowance for credit losses by portfolio segment for the three months ended June 30, 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 credit losses for the three months ended June 30, 2023
Beginning balance	$	1,451	$	196	$	6,229		$	3,821	$	2,709	$	1,272	$	4,165	$	19,843

Provision for credit losses	(140)		(50)		1,267			(242)		(214)		(90)		1,678		2,209
Charge-offs	—		(13)		—			—		—		—		—		(13)
Recoveries	—		4		—			—		—		—		1		5
Ending balance	$	1,311	$	137	$	7,496		$	3,579	$	2,495	$	1,182	$	5,844	$	22,044

Changes in allowance for credit losses for the six months ended June 30, 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
Provision for credit losses	(80)		(145)		790			78		(306)		(224)		1,291		1,404
Charge-offs	—		(30)		—			—		—		—		—		(30)
Recoveries	—		15		—			—		—		—		2		17
Ending balance	$	1,311	$	137	$	7,496		$	3,579	$	2,495	$	1,182	$	5,844	$	22,044

Allowance for credit losses as of June 30, 2023 allocated to loans evaluated:
Individually	$	—	$	—	$	—		$	—	$	—	$	—	$	2,195	$	2,195
Collectively	1,311		137		7,496			3,579		2,495		1,182		3,649		19,849
Ending balance	$	1,311	$	137	$	7,496		$	3,579	$	2,495	$	1,182	$	5,844	$	22,044

Loans as of June 30, 2023:
Individually evaluated	$	—	$	—	$	—		$	—	$	—	$	—	$	10,030	$	10,030
Collectively evaluated	150,620		21,762		310,382			880,600		558,276		217,020		329,369		2,468,029
Loans held for investment measured at fair value	—		17,523		—			—		—		—		—		17,523
Ending balance	$	150,620	$	39,285	$	310,382		$	880,600	$	558,276	$	217,020	$	339,399	$	2,495,582


	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 June 30, 2022
Beginning balance	$	1,440	$	283	$	954	$	3,789	$	2,867	$	1,328	$	3,224	$	13,885
Provision for loan losses	(246)		(16)		120		1,056		368		149		(912)		519
Charge-offs	—		(95)		—		—		—		—		—		(95)
Recoveries	—		48		—		—		—		—		—		48
Ending balance	$	1,194	$	220	$	1,074	$	4,845	$	3,235	$	1,477	$	2,312	$	14,357

Changes in allowance for loan losses for the six months ended June 30, 2022
Beginning balance	$	1,598	$	266	$	1,092	$	3,553	$	2,952	$	1,292	$	2,979	$	13,732
Provision for loan losses	(404)		58		(18)		1,292		283		185		(667)		729
Charge-offs	—		(192)		—		—		—		—		—		(192)
Recoveries	—		88		—		—		—		—		—		88
Ending balance	$	1,194	$	220	$	1,074	$	4,845	$	3,235	$	1,477	$	2,312	$	14,357

Allowance for loan losses as of December 31, 2022 allocated to loans evaluated:
Individually	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Collectively	1,198		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 evaluated	165,555		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

Summary of recorded investment in the Company's loans by class and by credit quality indicator

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 June 30, 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
June 30, 2023	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
Cash, Securities, and Other
Pass	$	2,252	$	12,232	$	22,220	$	5,712	$	6,405	$	13,269	$	88,530	$	—	$	150,620
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Not rated	—		—		—		—		—		—		—		—		—
Total Cash, Securities, and Other	$	2,252	$	12,232	$	22,220	$	5,712	$	6,405	$	13,269	$	88,530	$	—	$	150,620
Current year-to-date gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Consumer and Other
Pass	$	102	$	2,164	$	676	$	800	$	1,075	$	27	$	16,918	$	—	$	21,762
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Not rated(1)	—		12,721		3,559		1,113		130		—		—		—		17,523
Total Consumer and Other	$	102	$	14,885	$	4,235	$	1,913	$	1,205	$	27	$	16,918	$	—	$	39,285
Current year-to-date gross write-offs	$	—	$	—	$	—	$	3	$	25	$	2	$	—	$	—	$	30
Construction and Development
Pass	$	8,625	$	231,454	$	46,347	$	19,620	$	—	$	—	$	4,336	$	—	$	310,382
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Not rated	—		—		—		—		—		—		—		—		—
Total Construction and Development	$	8,625	$	231,454	$	46,347	$	19,620	$	—	$	—	$	4,336	$	—	$	310,382
Current year-to-date gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
1-4 Family Residential
Pass	$	29,331	$	391,651	$	154,576	$	113,083	$	38,392	$	36,469	$	117,098	$	—	$	880,600
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Not rated	—		—		—		—		—		—		—		—		—
Total 1-4 Family Residential	$	29,331	$	391,651	$	154,576	$	113,083	$	38,392	$	36,469	$	117,098	$	—	$	880,600
Current year-to-date gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—


	Term Loans Amortized Cost by Origination Year
June 30, 2023	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total
Non-Owner Occupied CRE
Pass	$	31,476	$	207,850	$	130,026	$	79,679	$	24,756	$	54,668	$	24,758	$	—	$	553,213
Special mention	—		—		—		5,063		—		—		—		—		5,063
Substandard	—		—		—		—		—		—		—		—		—
Not rated	—		—		—		—		—		—		—		—		—
Total Non-Owner Occupied CRE	$	31,476	$	207,850	$	130,026	$	84,742	$	24,756	$	54,668	$	24,758	$	—	$	558,276
Current year-to-date gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Owner Occupied CRE
Pass	$	4,513	$	46,604	$	58,368	$	41,498	$	5,702	$	52,374	$	7,961	$	—	$	217,020
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—
Not rated	—		—		—		—		—		—		—		—		—
Total Owner Occupied CRE	$	4,513	$	46,604	$	58,368	$	41,498	$	5,702	$	52,374	$	7,961	$	—	$	217,020
Current year-to-date gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial and Industrial
Pass	$	14,149	$	80,825	$	45,913	$	15,064	$	6,971	$	14,060	$	149,459	$	—	$	326,441
Special mention	—		—		—		2,928		—		—		—		—		2,928
Substandard	—		7,954		—		—		—		1,090		986		—		10,030
Not rated	—		—		—		—		—		—		—		—		—
Total Commercial and Industrial	$	14,149	$	88,779	$	45,913	$	17,992	$	6,971	$	15,150	$	150,445	$	—	$	339,399
Current year-to-date gross write-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Total	$	90,448	$	993,455	$	461,685	$	284,560	$	83,431	$	171,957	$	410,046	$	—	$	2,495,582

(1)Includes loans held for investment measured at fair value as of June 30, 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, 2022	Pass		Special Mention		Substandard		Not Rated		Total
Cash, Securities, and Other	$	165,555	$	—	$	4	$	—	$	165,559
Consumer and Other(1)	26,070		—		—		23,321		49,391
Construction and Development	285,426		—		201		—		285,627
1-4 Family Residential	899,722		—		—		—		899,722
Non-Owner Occupied CRE	493,134		—		—		—		493,134
Owner Occupied CRE	213,024		—		1,165		—		214,189
Commercial and Industrial	348,844		2,185		10,762		—		361,791
Total	$	2,431,775	$	2,185	$	12,132	$	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.