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LOANS AND THE ALLOWANCE FOR LOAN LOSSES
 12 Months Ended
Dec. 31, 2023
Receivables [Abstract]  
LOANS AND THE ALLOWANCE FOR LOAN LOSSES LOANS AND THE ALLOWANCE FOR CREDIT LOSSES
The following table presents a summary of the Company’s loans at amortized cost as of the dates noted:
(Dollars in thousands)December 31,
2023		December 31,
2022
Cash, Securities and Other$139,947 $165,559 
Consumer and Other27,028 26,070 
Construction and Development345,516 285,627 
1-4 Family Residential927,965 899,722 
Non-Owner Occupied CRE543,692 493,134 
Owner Occupied CRE195,861 214,189 
Commercial and Industrial337,180 361,791 
Total2,517,189 2,446,092 
Allowance for credit losses(1)
(23,931)(17,183)
Total, net2,493,258 2,428,909 
Loans accounted for under the fair value option(2)
13,726 23,321 
Loans, net$2,506,984 $2,452,230 
_____________________________
(1)Allowance for credit loss amounts for periods prior to the ASC 326 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP.
(2)Includes $14.1 million and $23.4 million of unpaid principal balance of loans held for investment measured at fair value as of December 31, 2023 and December 31, 2022 respectively. Includes fair value adjustments on loans held for investment accounted for under the fair value option. See Note 16 – Fair Value.

As of December 31, 2023 and 2022, total loans held for investment included $208.2 million and $230.4 million, respectively, of performing loans purchased through mergers or acquisitions.
As of December 31, 2023 the Cash, Securities, and Other portion of the loan portfolio included $4.2 million of SBA Paycheck Protection Program (“PPP”) loans, or 3.0% 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 December 31, 2023, the Company’s Commercial and Industrial loans included three Main Street Lending Program (“MSLP”) loans with the net carrying amount of $5.1 million, or 1.5% of the total category. Two of these loans are risk rated Substandard with one of those on non-accrual after a modification was completed during the fourth quarter of 2023. The remaining MSLP loan is risk rated Pass. 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
On January 1, 2023 the Company adopted ASU 2022-02, which introduces new reporting requirements for modifications of loans to borrowers experiencing financial difficulty. GAAP requires that certain types of modifications of loans in response to a borrower’s financial difficulty be reported and include the following; (i) principal forgiveness, (ii) interest rate reduction, (iii) other than insignificant payment delay, (iv) term extension, or (v) any combination of the foregoing. ASU 2022-02 eliminates the recognition measurement guidance for troubled debt restructured ("TDR") loans, and instead requires an entity to evaluate whether a modification represents a new loan or a continuation of an existing loan in accordance with ASC Topic 310-20, Receivables - Nonrefundable Fees and Other Costs. If a modification results in a new loan under the guidance, the Company will recognize any unearned deferred net revenue and measure the ACL on the loan on a collective basis rather than individually analyzed.
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 2 years prior to the loan modification.
In 2021, the deferral period ended for all non-acquired loans previously modified and payments have resumed under the original terms. As of December 31, 2023, the Company’s loan portfolio included 41 non-acquired loans which were previously modified under the loan modification program, totaling $71.3 million. Through the Teton Acquisition, the Company acquired loans which were previously modified and are still in their deferral period. As of December 31, 2023, there were 14 of these loans, totaling $2.9 million.
All loans modified in response to COVID-19 are classified as performing and pass rated as of December 31, 2023. These loans are included in the allowance for credit loss general reserve in accordance with ASU 2016-13. Management continues to focus on loan level reviews and portfolio monitoring to address the changing environment. Management believes the diversity of the loan portfolio is prudent and remains consistent with the credit culture and goals of the Bank.
Interest accrued during the modification term on modified loans is deferred to the end of the loan term. Accrued interest receivable is excluded from the estimate of credit losses.
The following presents, by class, an aging analysis of the amortized cost basis in loans past due as of the date noted (dollars in thousands):
December 31, 202330-59
Days
Past Due		60-89
Days
Past Due		90 or
More Days
Past Due		Total
Loans
Past Due		CurrentTotal Amortized Cost
Loans Accounted for Under the Fair Value Option(1)
Total Loans
Cash, Securities and Other$— $76 $1,704 $1,780 $138,167 $139,947 $— $139,947 
Consumer and Other676 11 7,504 8,191 18,837 27,028 13,726 40,754 
Construction and Development— 1,500 — 1,500 344,016 345,516 — 345,516 
1-4 Family Residential1,093 — 2,722 3,815 924,150 927,965 — 927,965 
Non-Owner Occupied CRE— — — — 543,692 543,692 — 543,692 
Owner Occupied CRE— — 3,980 3,980 191,881 195,861 — 195,861 
Commercial and Industrial19,305 1,085 29,180 49,570 287,610 337,180 — 337,180 
Total$21,074 $2,672 $45,090 $68,836 $2,448,353 $2,517,189 $13,726 $2,530,915 
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 16 – Fair Value for additional information on the measurement of loans accounted for under the fair value option.
As of December 31, 2023 , the Company had one loan, totaling $0.3 million, in the 1-4 Family Residential portfolio that was more than 90 days delinquent and accruing interest. As of December 31, 2022, the Company had one loan, totaling an immaterial amount, in the Commercial and Industrial portfolio that was more than 90 days delinquent and accruing interest.
The following table presents the amortized cost basis as of December 31, 2023 of the loans modified to borrowers experiencing financial difficulty disaggregated by class of financing receivable and type of concession granted during the year ended December 31, 2023. The percentage of the amortized cost basis of loans that were modified to borrowers in financial distress as compared to the amortized cost basis of each class of financing receivable is also presented below.
(Dollars in thousands)Principal forgivenessInterest rate reductionTerm extensionCombination: term extension and principal forgivenessCombination: term extension and interest rate reductionTotal class of financing receivable
Commercial and Industrial$— $— $2,123 $183 $— 0.7 %
Total$— $— $2,123 $183 $— 
The following table presents the financial effect by type of modification made to borrowers experiencing financial difficulty for the period ended December 31, 2023:
Principal forgivenessInterest rate reductionTerm extension
Commercial and Industrial
Reduced the amortized cost basis of the loan by $185 thousand
—
Added a weighted-average 2.8 years to the life of the loan, which reduced monthly payment amounts for the borrower
Commercial and Industrial—
—
Six months of interest payments were deferred to the maturity of the loan. Principal payment of $988 thousand was deferred 0.6 years
Commercial and Industrial—
—
Added a weighted-average 0.5 years to the life of the loan
For all loans that have been modified during the period, the borrowers continue to pay as agreed.
Non-Accrual Loans
The accrual of interest on loans is discontinued at the time the loan becomes 90 days or more 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 non-accrual status and loans past due over 89 days still accruing by class as of the date noted (dollars in thousands).
December 31, 2023
(dollars in thousands)Non-accrual loans with no ACL
Total non-accrual loans(1)
Loans past due over 89 days still accruing
Cash, Securities, and Other$1,704 $1,704 $— 
Consumer and Other4 7,504 — 
Construction and Development2,719 2,719 — 
1-4 Family Residential578 3,016 285 
Owner Occupied CRE— 3,980 — 
Commercial and Industrial2,355 31,893 — 
Total$7,360 $50,816 $285 
(1) As of December 31, 2023, the Company had an allowance of $3.8 million on non-performing loans.
The following presents the recorded investment in non-accrual loans by class as of the date noted (dollars in thousands):
December 31,
2022
Cash, Securities and Other$4 
Consumer and Other146 
Construction and Development201 
Owner Occupied CRE1,165 
Commercial and Industrial10,833 
Total$12,349 
The following presents impaired loans by portfolio and related valuation allowance as of the periods presented (in thousands):
December 31, 2022
Total
Recorded
Investment		Unpaid
Contractual
Principal
Balance		Allowance
for
Loan
Losses
Impaired loans with no related valuation allowance:
Cash, Securities, and Other$4 $4 $— 
Construction and Development201 201 — 
1-4 Family Residential— — — 
Owner Occupied CRE1,165 1,165 — 
Commercial and Industrial10,833 10,833 — 
Total$12,203 $12,203 $— 
Total impaired loans:
Cash, Securities, and Other$4 $4 $— 
Consumer and Other— — — 
Construction and Development201 201 — 
Commercial and Industrial10,833 10,833 — 
1-4 Family Residential— — — 
Owner Occupied CRE1,165 1,165 — 
Total$12,203 $12,203 $— 
The Company recognized $0.2 million of interest income on non-accrual loans during the year ended December 31, 2023. The Company recognized an immaterial amount of interest income on non-accrual loans during the year ended December 31, 2022.
Non-accrual loans, excluding loans held for investment measured at fair value, are classified as collateral dependent loans and are individually evaluated. The following presents the amortized cost basis of collateral-dependent loans, which are individually evaluated to determine expected credit losses, by class of loans as of the date noted (dollars in thousands):
As of December 31, 2023
Collateral Dependent Loans
(dollars in thousands)Secured by Real EstateSecured by Cash and SecuritiesSecured by OtherTotal
Cash, Securities, and Other$— $1,704 $— $1,704 
Consumer and Other— — 7,500 7,500 
Construction and Development2,719 — — 2,719 
1-4 Family Residential3,016 — — 3,016 
Owner Occupied CRE3,980 — — 3,980 
Commercial and Industrial— — 31,893 31,893 
Total$9,715 $1,704 $39,393 $50,812 
Charge-offs
The Company recorded $8.8 million and $0.2 million of charge-offs, net of recoveries, during the year ended December 31, 2023 and December 31, 2022, respectively.
Allowance for Credit Losses
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 December 31, 2023 and December 31, 2022 was $10.8 million and $9.8 million, respectively, presented in Accrued interest receivable on the 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.
The Allowance for credit losses on loans (“ACL”) represents Management’s best estimate of current expected credit losses on loans considering available information, from internal and external sources, relevant to assessing collectibility over the loans’ contractual terms, adjusted for expected prepayments when appropriate. Our quantitative discounted cash flow models use economic forecasts including; housing price index (“HPI”), gross domestic product (“GDP”), and national unemployment. The HPI, GDP, and unemployment twelve month forecasts used in our model as of December 31, 2023 is based on a slightly improved macro-economic forecast assuming a soft landing as compared to assumptions previously used as of January 1, 2023 projecting the likelihood of a deeper recession. As a result, we forecasted decreased probability of default rates and loss given default rates which in turn reduced our model loss rates, partially offset by loan growth and changes in our segment mix, resulting in a $0.5 million release of provision on pooled loans for the year ended December 31, 2023. The allowance on credit losses on non-performing loans was $3.8 million as of December 31, 2023.
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 gross loan activity in the allowance for credit losses by portfolio segment during the periods presented (dollars in thousands):
Cash, Securities and OtherConsumer and OtherConstruction and Development1-4 Family ResidentialNon-Owner Occupied CREOwner Occupied CRECommercial and IndustrialTotal
Changes in allowance for credit losses for the year ended December 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 2016-13193 106 4,681 (2,808)(689)(104)2,091 3,470 
Provision (release) for credit losses(430)(94)1,239 856 (476)(372)11,354 12,077 
Charge-offs— (101)— — — — (8,737)(8,838)
Recoveries— 22 — 13 — — 4 39 
Ending balance$961 $124 $7,945 $4,370 $2,325 $1,034 $7,172 $23,931 
Cash,
Securities
and Other		Consumer and OtherConstruction
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 year ended December 31, 2022(1):
Beginning balance$1,598 $266 $1,092 $3,553 $2,952 $1,292 $2,979 $13,732 
(Recovery of)/provision for loan losses(399)84 933 2,756 538 218 (448)3,682 
Charge-offs(1)(262)— — — — (71)(334)
Recoveries— 103 — — — — — 103 
Ending balance$1,198 $191 $2,025 $6,309 $3,490 $1,510 $2,460 $17,183 
Allowance for loan losses as of December 31, 2022 allocated to loans evaluated for impairment(1):
Individually$— $— $— $— $— $— $— $— 
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, evaluated for impairment(1):
Individually$4 $— $201 $— $— $1,165 $10,833 $12,203 
Collectively165,666 26,539 288,296 898,154 496,776 214,891 350,195 2,440,517 
Measured at fair value— 23,415 — — — — — 23,415 
Ending balance$165,670 $— $49,954 $— $288,497 $— $898,154 $— $496,776 $— $216,056 $— $361,028 $— $2,476,135 
(1)The allowance for credit losses for periods prior to the ASU 2016-13 adoption date of January 1, 2023 are reported in accordance with previously applicable GAAP which presented loan balances gross rather than amortized cost.
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 December 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
December 31, 202320232022202120202019PriorRevolving Loans Amortized Cost BasisTotal
Cash, Securities, and Other
Pass$8,091 $17,878 $17,181 $5,966 $6,337 $13,188 $69,602 $138,243 
Special mention— — — — — — — — 
Substandard— — — — — — 1,704 1,704 
Doubtful— — — — — — — — 
Not rated— — — — — — — — 
Total Cash, Securities, and Other$8,091 $17,878 $17,181 $5,966 $6,337 $13,188 $71,306 $139,947 
Current year-to-date gross write-offs$— $— $— $— $— $— $— $— 
Consumer and Other
Pass$614 $2,013 $647 $633 $797 $24 $14,800 $19,528 
Special mention— — — — — — — — 
Substandard— — — — — — 7,500 7,500 
Doubtful— — — — — — — — 
Not rated(1)— 10,469 2,544 614 99 — — 13,726 
Total Consumer and Other$614 $12,482 $3,191 $1,247 $896 $24 $22,300 $40,754 
Current year-to-date gross write-offs$— $— $— $8 $91 $2 $— $101 
Construction and Development
Pass$32,509 $231,103 $42,796 $21,615 $— $— $431 $328,454 
Special mention— 14,343 — — — — — 14,343 
Substandard2,719 — — — — — — 2,719 
Doubtful— — — — — — — — 
Not rated— — — — — — — — 
Total Construction and Development$35,228 $245,446 $42,796 $21,615 $— $— $431 $345,516 
Current year-to-date gross write-offs$— $— $— $— $— $— $— $— 
1-4 Family Residential
Pass$97,901 $373,525 $143,694 $108,815 $37,756 $31,452 $131,806 $924,949 
Special mention— — — — — — — — 
Substandard578 2,438 — — — — — 3,016 
Doubtful— — — — — — — — 
Not rated— — — — — — — — 
Total 1-4 Family Residential$98,479 $375,963 $143,694 $108,815 $37,756 $31,452 $131,806 $927,965 
Current year-to-date gross write-offs$— $— $— $— $— $— $— $— 
Non-Owner Occupied CRE
Pass$42,799 $197,122 $125,726 $75,026 $24,411 $53,056 $20,553 $538,693 
Special mention— — — 4,999 — — — 4,999 
Substandard— — — — — — — — 
Doubtful— — — — — — — — 
Not rated— — — — — — — — 
Total Non-Owner Occupied CRE$42,799 $197,122 $125,726 $80,025 $24,411 $53,056 $20,553 $543,692 
Current year-to-date gross write-offs$— $— $— $— $— $— $— $— 
Owner Occupied CRE
Pass$3,229 $46,751 $44,805 $37,957 $5,555 $51,259 $2,325 $191,881 
Special mention— — — — — — — — 
Substandard— — 3,980 — — — — 3,980 
Doubtful— — — — — — — — 
Not rated— — — — — — — — 
Total Owner Occupied CRE$3,229 $46,751 $48,785 $37,957 $5,555 $51,259 $2,325 $195,861 
Current year-to-date gross write-offs$— $— $— $— $— $— $— $— 
Commercial and Industrial
Pass$38,497 $59,612 $15,430 $13,457 $6,430 $16,068 $152,782 $302,276 
Special mention— — — — — — 649 649 
Substandard1,618 — 29,355 1,674 — 920 688 34,255 
Doubtful— — — — — — — — 
Not rated— — — — — — — — 
Total Commercial and Industrial$40,115 $59,612 $44,785 $15,131 $6,430 $16,988 $154,119 $337,180 
Current year-to-date gross write-offs$— $8,737 $— $— $— $— $— $8,737 
Total pass$223,640 $928,004 $390,279 $263,469 $81,286 $165,047 $392,299 $2,444,024 
Total special mention— 14,343 — 4,999 — — 649 19,991 
Total substandard4,915 2,438 33,335 1,674 — 920 9,892 53,174 
Total doubtful— — — — — — — — 
Total not rated— 10,469 2,544 614 99 — — 13,726 
Total$228,555 $955,254 $426,158 $270,756 $81,385 $165,967 $402,840 $2,530,915 
(1)Includes loans held for investment measured at fair value as of December 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(2)
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.