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Loans and Allowance for Credit Losses on Loans HFI

9 Months Ended

Sep. 30, 2023

Loans and Allowance for Credit Losses on Loans HFI

Loans and allowance for credit losses on loans HFI:

Loans outstanding as of September 30, 2023 and December 31, 2022, by class of financing receivable are as follows:


	September 30,		December 31,
	2023		2022
Commercial and industrial	$	1,667,857	$	1,645,783
Construction	1,532,306		1,657,488
Residential real estate:
1-to-4 family mortgage	1,553,096		1,573,121
Residential line of credit	517,082		496,660
Multi-family mortgage	501,323		479,572
Commercial real estate:
Owner-occupied	1,206,351		1,114,580
Non-owner occupied	1,911,913		1,964,010
Consumer and other	397,297		366,998
Gross loans	9,287,225		9,298,212
Less: Allowance for credit losses on loans HFI	(146,134)		(134,192)
Net loans	$	9,141,091	$	9,164,020

As of September 30, 2023 and December 31, 2022, $1,012,837 and $909,734, respectively, of qualifying residential mortgage loans (including loans held for sale) and $1,719,881 and $1,763,730, respectively, of qualifying commercial mortgage loans were pledged to the FHLB system securing advances against the Bank’s line of credit. Additionally, as of September 30, 2023 and December 31, 2022, qualifying commercial and industrial, construction and consumer loans, of $3,145,288 and $3,118,172, respectively, were pledged to the Federal Reserve under the Borrower-in-Custody program.

The amortized cost of loans HFI on the consolidated balance sheets exclude accrued interest receivable as the Company presents accrued interest receivable separately on the balance sheet. As of September 30, 2023 and December 31, 2022, accrued interest receivable on loans held for investment amounted to $41,926 and $38,507, respectively.

Allowance for Credit Losses on Loans HFI

The Company calculates its expected credit loss using a lifetime loss rate methodology. The Company utilizes probability-weighted forecasts, which consider multiple macroeconomic variables from Moody's that are applicable to each type of loan. Each of the Company's loss rate models incorporate forward-looking macroeconomic projections throughout the reasonable and supportable forecast period and the subsequent historical reversion at the macroeconomic variable input level. In order to estimate the life of a loan, the contractual term of the loan is adjusted for estimated prepayments based on market information and the Company’s prepayment history.

The Company's loss rate models estimate the lifetime loss rate for pools of loans by combining the calculated loss rate based on each variable within the model (including the macroeconomic variables). The lifetime loss rate for the pool is then multiplied by the loan balances to determine the expected credit losses on the pool.

The quantitative models require loan data and macroeconomic variables based on the inherent credit risks in each portfolio to more accurately measure the credit risks associated with each. Each of the quantitative models pools loans with similar risk characteristics and collectively assesses the lifetime loss rate for each pool to estimate its expected credit loss.

The Company considers the need to qualitatively adjust its modeled quantitative expected credit loss estimate for information not already captured in the model loss estimation process. These qualitative factor adjustments may increase or decrease the Company’s estimate of expected credit losses. The Company reviews the qualitative adjustments so as to validate that information that has already been considered and included in the modeled quantitative loss estimation process is not also included in the qualitative adjustment. The Company considers the qualitative factors that are relevant to the institution as of the reporting date, which may include, but are not limited to: levels of and trends in delinquencies and performance of loans; levels of and trends in write-offs and recoveries collected; trends in volume and terms of loans; effects of any changes in reasonable and supportable economic forecasts; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and expertise; available relevant information sources that contradict the Company’s own forecast; effects of changes in prepayment expectations or other factors affecting assessments of loan contractual terms; industry conditions; and effects of changes in credit concentrations.

The Company performed evaluations within it’s established qualitative framework, assessing the impact of the current economic outlook, including: continued actions taken by the Federal Reserve with regard to monetary policy, interest rates and the potential impact of those actions, potential impact of persistent high inflation on economic growth, failures of several U.S. banks in the first half of 2023, potential negative economic forecasts, and other considerations. The increase in the allowance for credit losses on loans HFI as of September 30, 2023 compared with December 31, 2022 is primarily the result of deterioration in economic forecasts between periods. These forecasts included weighted projections that the economy may be nearing a recession, reflected through deterioration in asset quality projected over life of the loan portfolio. As of September 30, 2023, the macroeconomic forecast was based solely using the Moody’s baseline scenario, which showed a slightly more negative outlook than the comparative baseline as of December 31, 2022, which used a weighting of two economic forecasts from Moody’s in order to align with management’s best estimate over the reasonable and supportable forecast period. At December 31, 2022, the Moody’s baseline scenario was more heavily weighted while the downside scenario received a smaller weighting. While the primary driver of the increase in allowance for credit losses on loans HFI was the deterioration in economic forecasts between periods, a portion of the increase was attributable to reserves on individually evaluated loans. Most notably, the Company had a single commercial and industrial relationship that was moved to nonaccrual during the three months ended September 30, 2023 and had a specific reserve of $3,143.

The Company calculates its allowance for credit losses on loans HFI using a lifetime loss rate methodology and disaggregates the loan portfolio into three pools. The following presents a summary of quantitative and qualitative factors considered as of September 30, 2023, which resulted in changes in the allowance for credit losses compared to December 31, 2022 as described below.


Pool	Source of repayment	Quantitative and Qualitative factors considered
Commercial and Industrial	Repayment is largely dependent upon the operation of the borrower's business.	Quantitative: Prepayment speeds are modeled in the form of a prepayment benchmarking that directly impacts the ACL output for all C&I loans and lines of credit. Loss rates incorporate a peer scaling factor. Qualitative: Uncertainty in the economic outlook, including the effects of inflation and the interest rate environment, along with slight deterioration in asset quality are driving an increase in the qualitative reserves in the ACL attributable to C&I loans.
Retail	Repayment is primarily dependent on the personal cash flow of the borrower.	Quantitative: Average FICO scores, remaining life of the portfolio, delinquency composition, prepayment speeds leveraging Equifax and Moody's data Qualitative: High modeled loss rates and the relatively strong housing market within the bank’s footprint are driving a qualitative decrease in the ACL.
Commercial Real Estate	Repayment is primarily dependent on lease income generated from the underlying collateral.	Quantitative: Prepayment speeds leverage a reverse-compounding formula. Loss rates incorporate a peer scaling factor. Qualitative: Uncertainty in the economic outlook, including the effects of inflation and the interest rate environment, are driving an increase the qualitative reserves in the ACL attributable to CRE loans.

When a loan no longer shares similar risk characteristics with other loans in any given pool, the loan is individually assessed. The Company has determined the following circumstances in which a loan may require an individual evaluation: collateral dependent loans; loans for which foreclosure is probable; and loans with other unique risk characteristics. A loan is deemed collateral dependent when 1) the borrower is experiencing financial difficulty and 2) the repayment is expected to be primarily through sale or operation of the collateral. The allowance for credit losses for collateral dependent loans as well as loans where foreclosure is probable is calculated as the amount for which the loan’s amortized cost basis exceeds fair value. Fair value is determined based on appraisals performed by qualified appraisers and reviewed by qualified personnel. In cases where repayment is to be provided substantially through the sale of collateral, the Company reduces the fair value by the estimated costs to sell.

Effective January 1, 2023, the Company prospectively adopted the accounting guidance in ASU 2022-02, "Financial Instruments—Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures", which eliminates the recognition and measurement of TDRs. Upon adoption of this guidance, the Company no longer measures an allowance for credit losses for TDRs it reasonably expects will occur, and it evaluates all loan modifications according to the accounting guidance for loan refinancing and modifications to determine whether the modification should be accounted for as a new loan or a continuation of the existing loan. After adoption, the Company now derecognizes the existing loan and accounts for the modified loan as a new loan if the effective yield on the modified loan is at least equal to the effective yield for comparable loans with similar collection risks and the modifications to the original loan are more than minor. If a loan modification does not meet these conditions, it extends the existing loan’s amortized cost basis and accounts for the modified loan as a continuation of the existing loan. Substantially all of its loan modifications involving borrowers experiencing financial difficulty are accounted for as a continuation of the existing loan.

Prior to January 1, 2023, loans experiencing financial difficulty for which a concession has not yet been provided may be identified as reasonably expected TDRs. Reasonably expected TDRs and TDRs used the same methodology to estimate credit losses. In cases where the expected credit loss could only be captured through a discounted cash flow analysis (such as an interest rate modification for a TDR loan), the allowance was measured by the amount which the loan’s amortized cost exceeds the discounted cash flow analysis.

The following tables provide the changes in the allowance for credit losses on loans HFI by class of financing receivable for the three and nine months ended September 30, 2023 and 2022:


	Commercial and industrial		Construction		1-to-4 family residential mortgage		Residential line of credit		Multi-family residential mortgage		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Consumer and other		Total
Three Months Ended September 30, 2023
Beginning balance - June 30, 2023	$	11,311	$	39,920	$	27,407	$	9,185	$	6,828	$	8,467	$	22,877	$	14,669	$	140,664
Provision for (reversal of) credit losses on loans HFI	6,293		(2,025)		(1,724)		(23)		20		2,046		(130)		1,574		6,031
Recoveries of loans previously charged-off	112		—		16		1		—		13		—		93		235
Loans charged off	(154)		—		(4)		—		—		—		—		(638)		(796)


Ending balance - September 30, 2023	$	17,562	$	37,895	$	25,695	$	9,163	$	6,848	$	10,526	$	22,747	$	15,698	$	146,134
Nine Months Ended September 30, 2023
Beginning balance - December 31, 2022	$	11,106	$	39,808	$	26,141	$	7,494	$	6,490	$	7,783	$	21,916	$	13,454	$	134,192


Provision for (reversal of) credit losses on loans HFI	6,475		(1,923)		(466)		1,668		358		2,792		831		3,868		13,603
Recoveries of loans previously charged-off	192		10		56		1		—		95		—		440		794
Loans charged off	(211)		—		(36)		—		—		(144)		—		(2,064)		(2,455)


Ending balance - September 30, 2023	$	17,562	$	37,895	$	25,695	$	9,163	$	6,848	$	10,526	$	22,747	$	15,698	$	146,134


	Commercial and industrial		Construction		1-to-4 family residential mortgage		Residential line of credit		Multi-family residential mortgage		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Consumer and other		Total
Three Months Ended September 30, 2022
Beginning balance - June 30, 2022	$	10,191	$	38,383	$	21,398	$	6,875	$	6,503	$	7,329	$	22,536	$	13,057	$	126,272
Provision for (reversal of) credit losses on loans HFI	5		3,044		3,975		77		(629)		688		247		782		8,189
Recoveries of loans previously charged-off	342		—		13		—		—		51		—		70		476
Loans charged off	—		—		(20)		—		—		—		—		(441)		(461)

Ending balance - September 30, 2022	$	10,538	$	41,427	$	25,366	$	6,952	$	5,874	$	8,068	$	22,783	$	13,468	$	134,476
Nine Months Ended September 30, 2022
Beginning balance - December 31, 2021	$	15,751	$	28,576	$	19,104	$	5,903	$	6,976	$	12,593	$	25,768	$	10,888	$	125,559


(Reversal of) provision for credit losses on loans HFI	(4,784)		12,840		6,266		1,032		(1,102)		(4,601)		(2,985)		3,575		10,241
Recoveries of loans previously charged-off	1,326		11		39		17		—		76		—		635		2,104
Loans charged off	(1,755)		—		(43)		—		—		—		—		(1,630)		(3,428)


Ending balance - September 30, 2022	$	10,538	$	41,427	$	25,366	$	6,952	$	5,874	$	8,068	$	22,783	$	13,468	$	134,476

Credit Quality - Commercial Type Loans

The Company categorizes commercial loan types into risk categories based on relevant information about the ability of 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 that share similar risk characteristics collectively. Loans that do not share similar risk characteristics are evaluated individually.

The Company uses the following definitions for risk ratings:


			Pass.			Loans rated Pass include those that are adequately collateralized performing loans which management believes do not have conditions that have occurred or may occur that would result in the loan being downgraded into an inferior category. The Pass category also includes commercial loans rated as Watch, which include those that management believes have conditions that have occurred, or may occur, which could result in the loan being downgraded to an inferior category.




			Special Mention.			Loans rated Special Mention are those that have 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 in the institution’s credit position at some future date. Management does not believe there will be a loss of principal or interest. These loans require intensive servicing and may possess more than normal credit risk.




			Classified.			Loans included in the Classified category include loans rated as Substandard and Doubtful. Loans rated as Substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans 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. Also included in this category are loans classified as Doubtful, which have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weakness or weaknesses make collection or liquidation in full, based on currently existing facts, conditions, and values, highly questionable and improbable.

Risk ratings are updated on an ongoing basis and are subject to change by continuous loan monitoring processes.

The following tables present the credit quality of the Company's commercial type loan portfolio as of September 30, 2023 and December 31, 2022 and the gross charge-offs for the nine months ended September 30, 2023 by year of origination. Revolving loans are presented separately. Management considers the guidance in ASC 310-20 when determining whether a modification, extension, or renewal constitutes a current period origination. Generally, current period renewals of credit are reunderwritten at the point of renewal and considered current period originations for the purposes of the tables below.

Effective January 1, 2023, the Company adopted the accounting guidance in ASU 2022-02 which requires the presentation of gross charge-offs by year of origination. The Company prospectively adopted ASU 2022-02; therefore, prior period activity of gross charge-offs by year of origination are not included in the below tables.





As of and for the nine months ended September 30, 2023	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Total
Commercial and industrial
Pass	$	173,571	$	318,859	$	161,099	$	44,240	$	74,359	$	76,543	$	770,102	$	1,618,773
Special Mention	—		3,597		3,650		1,886		154		554		16,763		26,604
Classified	479		3,331		2,981		1,851		418		6,417		7,003		22,480

Total	174,050		325,787		167,730		47,977		74,931		83,514		793,868		1,667,857

Current-period gross charge-offs	—		—		200		—		—		—		11		211
Construction
Pass	126,434		693,076		301,232		54,005		64,365		46,581		222,274		1,507,967
Special Mention	—		11,710		2,712		4		—		665		—		15,091
Classified	—		2,974		297		5,977		—		—		—		9,248

Total	126,434		707,760		304,241		59,986		64,365		47,246		222,274		1,532,306

Current-period gross charge-offs	—		—		—		—		—		—		—		—
Residential real estate:

Multi-family mortgage
Pass	28,892		143,075		147,585		93,134		30,125		43,865		13,540		500,216
Special Mention	—		—		—		—		—		—		—		—
Classified	—		—		—		—		—		1,107		—		1,107

Total	28,892		143,075		147,585		93,134		30,125		44,972		13,540		501,323


Current-period gross charge-offs	—		—		—		—		—		—		—		—
Commercial real estate:
Owner occupied
Pass	66,870		265,604		238,442		116,923		155,174		292,046		48,698		1,183,757
Special Mention	—		1,310		1,843		—		158		4,061		—		7,372
Classified	—		6,152		667		—		1,240		3,965		3,198		15,222

Total	66,870		273,066		240,952		116,923		156,572		300,072		51,896		1,206,351

Current-period gross charge-offs	—		—		144		—		—		—		—		144
Non-owner occupied
Pass	20,929		463,203		448,364		120,945		160,039		614,751		50,233		1,878,464
Special Mention	—		5,341		3,027		—		391		10,521		2,151		21,431
Classified	—		—		1,954		—		—		10,064		—		12,018

Total	20,929		468,544		453,345		120,945		160,430		635,336		52,384		1,911,913




Current-period gross charge-offs	—		—		—		—		—		—		—		—
Total commercial loan types
Pass	416,696		1,883,817		1,296,722		429,247		484,062		1,073,786		1,104,847		6,689,177
Special Mention	—		21,958		11,232		1,890		703		15,801		18,914		70,498
Classified	479		12,457		5,899		7,828		1,658		21,553		10,201		60,075

Total	$	417,175	$	1,918,232	$	1,313,853	$	438,965	$	486,423	$	1,111,140	$	1,133,962	$	6,819,750
Current-period gross charge-offs	$	—	$	—	$	344	$	—	$	—	$	—	$	11	$	355





As of December 31, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total
Commercial and industrial
Pass	$	396,643	$	204,000	$	67,231	$	90,894	$	39,780	$	62,816	$	762,717	$	1,624,081
Special Mention	125		7		—		160		143		771		2,520		3,726
Classified	65		823		1,916		1,651		273		6,913		6,335		17,976

Total	396,833		204,830		69,147		92,705		40,196		70,500		771,572		1,645,783

Construction
Pass	682,885		495,723		142,233		84,599		17,360		44,326		188,906		1,656,032
Special Mention	—		—		15		—		—		707		—		722
Classified	80		309		—		—		—		345		—		734

Total	682,965		496,032		142,248		84,599		17,360		45,378		188,906		1,657,488

Residential real estate:

Multi-family mortgage
Pass	142,912		147,168		96,819		33,547		6,971		37,385		13,604		478,406
Special Mention	—		—		—		—		—		—		—		—
Classified	—		—		—		—		—		1,166		—		1,166

Total	142,912		147,168		96,819		33,547		6,971		38,551		13,604		479,572


Commercial real estate:
Owner occupied
Pass	237,862		223,883		110,748		148,405		66,101		246,414		57,220		1,090,633
Special Mention	101		683		—		168		2,225		1,258		5,000		9,435
Classified	—		1,293		224		4,589		1,276		7,018		112		14,512

Total	237,963		225,859		110,972		153,162		69,602		254,690		62,332		1,114,580

Non-owner occupied
Pass	467,360		440,319		131,497		159,205		210,752		473,607		60,908		1,943,648
Special Mention	—		—		—		—		82		2,459		—		2,541
Classified	—		2,258		—		146		3,270		12,147		—		17,821

Total	467,360		442,577		131,497		159,351		214,104		488,213		60,908		1,964,010

Total commercial loan types
Pass	1,927,662		1,511,093		548,528		516,650		340,964		864,548		1,083,355		6,792,800
Special Mention	226		690		15		328		2,450		5,195		7,520		16,424
Classified	145		4,683		2,140		6,386		4,819		27,589		6,447		52,209
Total	$	1,928,033	$	1,516,466	$	550,683	$	523,364	$	348,233	$	897,332	$	1,097,322	$	6,861,433

Credit Quality - Consumer Type Loans

For consumer and residential loan classes, the company primarily evaluates credit quality based on delinquency and accrual status of the loan, credit documentation and by payment activity. The performing or nonperforming status is updated on an on-going basis dependent upon improvement and deterioration in credit quality.

The following tables present the credit quality by classification (performing or nonperforming) of the Company's consumer type loan portfolio as of September 30, 2023 and December 31, 2022 and the gross charge-offs for the nine months ended September 30, 2023 by year of origination. Revolving loans are presented separately. Management considers the guidance in ASC 310-20 when determining whether a modification, extension, or renewal constitutes a current period origination. Generally, current period renewals of credit are reunderwritten at the point of renewal and considered current period originations for the purposes of the tables below.

Effective January 1, 2023, the Company adopted the accounting guidance in ASU 2022-02 which requires the presentation of gross charge-offs by year of origination. The Company prospectively adopted ASU 2022-02; therefore, prior period balances for gross charge-offs by year of origination are not included below.





As of and for the nine months ended September 30, 2023	2023		2022		2021		2020		2019		Prior		Revolving Loans Amortized Cost Basis		Total





Residential real estate:
1-to-4 family mortgage
Performing	$	144,807	$	513,172	$	403,190	$	148,530	$	85,472	$	239,905	$	—	$	1,535,076
Nonperforming	—		4,585		2,847		3,401		448		6,739		—		18,020
Total	144,807		517,757		406,037		151,931		85,920		246,644		—		1,553,096
Current-period gross charge-offs	—		16		—		4		—		16		—		36
Residential line of credit
Performing	—		—		—		—		—		—		514,592		514,592
Nonperforming	—		—		—		—		—		—		2,490		2,490
Total	—		—		—		—		—		—		517,082		517,082
Current-period gross charge-offs	—		—		—		—		—		—		—		—
Consumer and other
Performing	78,288		95,910		47,756		35,648		25,257		96,766		7,175		386,800
Nonperforming	113		1,076		2,179		1,880		1,323		3,924		2		10,497
Total	78,401		96,986		49,935		37,528		26,580		100,690		7,177		397,297
Current-period gross charge-offs	1,022		519		116		120		38		247		2		2,064
Total consumer type loans
Performing	223,095		609,082		450,946		184,178		110,729		336,671		521,767		2,436,468
Nonperforming	113		5,661		5,026		5,281		1,771		10,663		2,492		31,007
Total	$	223,208	$	614,743	$	455,972	$	189,459	$	112,500	$	347,334	$	524,259	$	2,467,475
Current-period gross charge-offs	$	1,022	$	535	$	116	$	124	$	38	$	263	$	2	$	2,100





As of December 31, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost Basis		Total





Residential real estate:
1-to-4 family mortgage
Performing	$	568,210	$	448,401	$	160,715	$	93,548	$	68,113	$	211,019	$	—	$	1,550,006
Nonperforming	1,227		5,163		5,472		1,778		2,044		7,431		—		23,115
Total	569,437		453,564		166,187		95,326		70,157		218,450		—		1,573,121
Residential line of credit
Performing	—		—		—		—		—		—		495,129		495,129
Nonperforming	—		—		—		—		—		—		1,531		1,531
Total	—		—		—		—		—		—		496,660		496,660
Consumer and other
Performing	118,637		56,779		41,008		29,139		26,982		82,318		4,175		359,038
Nonperforming	166		1,396		1,460		906		1,507		2,525		—		7,960
Total	118,803		58,175		42,468		30,045		28,489		84,843		4,175		366,998
Total consumer type loans
Performing	686,847		505,180		201,723		122,687		95,095		293,337		499,304		2,404,173
Nonperforming	1,393		6,559		6,932		2,684		3,551		9,956		1,531		32,606
Total	$	688,240	$	511,739	$	208,655	$	125,371	$	98,646	$	303,293	$	500,835	$	2,436,779

Nonaccrual and Past Due Loans

Nonperforming loans include loans that are no longer accruing interest (nonaccrual loans) and loans past due ninety or more days and still accruing interest.

The following tables represent an analysis of the aging by class of financing receivable as of September 30, 2023 and December 31, 2022:


September 30, 2023	30-89 days past due and accruing interest		90 days or more and accruing interest		Nonaccrual loans		Loans current on payments and accruing interest		Total
Commercial and industrial	$	6,522	$	38	$	12,070	$	1,649,227	$	1,667,857
Construction	2,301		—		2,454		1,527,551		1,532,306
Residential real estate:
1-to-4 family mortgage	20,003		8,346		9,674		1,515,073		1,553,096
Residential line of credit	1,440		1,341		1,149		513,152		517,082
Multi-family mortgage	—		—		35		501,288		501,323
Commercial real estate:
Owner occupied	534		—		3,521		1,202,296		1,206,351
Non-owner occupied	—		—		5,402		1,906,511		1,911,913
Consumer and other	10,030		1,924		8,573		376,770		397,297
Total	$	40,830	$	11,649	$	42,878	$	9,191,868	$	9,287,225


December 31, 2022	30-89 days past due and accruing interest		90 days or more and accruing interest		Nonaccrual loans		Loans current on payments and accruing interest		Total
Commercial and industrial	$	1,650	$	136	$	1,307	$	1,642,690	$	1,645,783
Construction	1,246		—		389		1,655,853		1,657,488
Residential real estate:
1-to-4 family mortgage	15,470		16,639		6,476		1,534,536		1,573,121
Residential line of credit	772		131		1,400		494,357		496,660
Multi-family mortgage	—		—		42		479,530		479,572
Commercial real estate:
Owner occupied	1,948		—		5,410		1,107,222		1,114,580
Non-owner occupied	102		—		5,956		1,957,952		1,964,010
Consumer and other	10,108		1,509		6,451		348,930		366,998
Total	$	31,296	$	18,415	$	27,431	$	9,221,070	$	9,298,212

The following tables provide the amortized cost basis of loans on non-accrual status, as well as any related allowance as of September 30, 2023 and December 31, 2022 by class of financing receivable.



September 30, 2023	Nonaccrual with no related allowance		Nonaccrual with related allowance		Related allowance
Commercial and industrial	$	1,244	$	10,826	$	3,333
Construction	1,482		972		67
Residential real estate:
1-to-4 family mortgage	2,340		7,334		138
Residential line of credit	706		443		8
Multi-family mortgage	—		35		1
Commercial real estate:
Owner occupied	3,410		111		4
Non-owner occupied	5,360		42		1
Consumer and other	—		8,573		465
Total	$	14,542	$	28,336	$	4,017


December 31, 2022	Nonaccrual with no related allowance		Nonaccrual with related allowance		Related allowance

Commercial and industrial	$	790	$	517	$	10
Construction	—		389		7
Residential real estate:
1-to-4 family mortgage	2,834		3,642		78
Residential line of credit	1,134		266		4
Multi-family mortgage	1		41		1
Commercial real estate:
Owner occupied	5,200		210		1
Non-owner occupied	5,755		201		5
Consumer and other	—		6,451		327
Total	$	15,714	$	11,717	$	433

The following presents interest income recognized on nonaccrual loans for the three and nine months ended September 30, 2023 and 2022:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Commercial and industrial	$	302	$	26	$	350	$	163
Construction	—		5		52		31
Residential real estate:
1-to-4 family mortgage	83		78		232		185
Residential line of credit	34		37		85		98
Multi-family mortgage	1		—		2		2
Commercial real estate:
Owner occupied	—		61		97		149
Non-owner occupied	58		89		195		235
Consumer and other	100		113		416		182
Total	$	578	$	409	$	1,429	$	1,045

Accrued interest receivable written off as an adjustment to interest income amounted to $322 and $666 for the three and nine months ended September 30, 2023, respectively, and $151 and $458 for the three and nine months ended September 30, 2022, respectively.

Loan Modifications to Borrowers Experiencing Financial Difficulty

Occasionally, the Company may make certain modifications of loans to borrowers experiencing financial difficulty. These modifications may be in the form of an interest rate reduction, a term extension or a combination thereof.

Upon the Company's determination that a modified loan has subsequently been deemed uncollectible, the portion of the loan deemed uncollectible is charged off against the allowance for credit losses on loans HFI.

The Company closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts.

During the three months ended September 30, 2023, the Company modified one residential mortgage loan with a balance of $31 and one commercial and industrial loan with a balance of $187 in the form of term extensions for borrowers experiencing financial difficulties. During the nine months ended September 30, 2023, the Company modified three residential mortgage loans with balances totaling $165 and one commercial and industrial loan with a balance of $187 in the form of term extensions for borrowers experiencing financial difficulties.

Troubled debt restructurings

The following disclosure is presented in accordance with GAAP in effect prior to the adoption of ASU 2022-02. The Company has included this disclosure as of December 31, 2022 or for the three and nine months ended September 30, 2022.

Prior to the Company's adoption of ASU 2022-02, the Company accounted for a modification to the contractual terms of a loan that resulted in granting a concession to a borrower experiencing financial difficulties as a TDR. ASU 2022-02 eliminated TDR accounting prospectively for all restructurings occurring on or after January 1, 2023. Loans that were restructured in a TDR prior to the adoption of ASU 2022-02 will continue to be accounted for under the historical TDR accounting until the loan is paid off, liquidated or subsequently modified. See Note 1, "Basis of presentation" for more information on the Company's adoption of ASU 2022-02.

The following table presents the financial effect of TDRs recorded during the periods indicated:


Three Months Ended September 30, 2022	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Charge offs and specific reserves
Commercial and industrial	1	$	207	$	117	$	—




Residential real estate:
1-to-4 family mortgage	1	252		568		—



Total	2	$	459	$	685	$	—


Nine Months Ended September 30, 2022	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Charge offs and specific reserves
Commercial and industrial	2	$	262	$	172	$	—




Residential real estate:
1-to-4 family mortgage	2	332		648		—
Residential line of credit	1	49		49		—

Consumer and other	1	22		22		—
Total	6	$	665	$	891	$	—

Troubled debt restructurings for which there was a payment default within twelve months following the modification totaled $304 during the nine months ended September 30, 2022. There were no loans modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the three months ended September 30, 2022. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

Collateral-Dependent Loans

For loans for which the repayment (based on the Company's assessment) is expected to be provided substantially through the operation or sale of collateral and the borrower is experiencing financial difficulty, the following tables present the loans and the corresponding individually assessed allowance for credit losses by class of financing receivable. Significant changes in individually assessed reserves are due to changes in the valuation of the underlying collateral in addition to changes in accrual and past due status.


	September 30, 2023
	Type of Collateral
	Real Estate		Farmland		Business Assets		Total		Individually assessed allowance for credit loss
Commercial and industrial	$	470	$	363	$	10,818	$	11,651	$	3,251
Construction	7,160		—		—		7,160		60
Residential real estate:
1-to-4 family mortgage	9,402		—		—		9,402		132
Residential line of credit	706		—		—		706		—

Commercial real estate:
Owner occupied	2,462		1,165		—		3,627		—
Non-owner occupied	5,360		—		—		5,360		—
Consumer and other	118		—		—		118		23
Total	$	25,678	$	1,528	$	10,818	$	38,024	$	3,466


	December 31, 2022
	Type of Collateral
	Real Estate		Business Assets		Total		Individually assessed allowance for credit loss
Commercial and industrial	$	2,596	$	—	$	2,596	$	—

Residential real estate:
1-to-4 family mortgage	4,467		—		4,467		194
Residential line of credit	1,135		—		1,135		—

Commercial real estate:
Owner occupied	5,424		—		5,424		—
Non-owner occupied	5,755		—		5,755		—
Consumer and other	134		—		134		—
Total	$	19,511	$	—	$	19,511	$	194