The following table presents total loans outstanding, by portfolio segment, as of December 31, 2022 and 2021:

(1)	Includes PPP loans of $737 thousand at December 31, 2022 and $33.6 million at December 31, 2021.

Total loans include net deferred loan fees and costs of $919 thousand and $231 thousand at December 31, 2022 and 2021, respectively. Deferred loan fees on PPP loans were zero at December 31, 2022 and $881 thousand at December 31, 2021. Unearned discounts associated with the acquisition of Metro Phoenix Bank totaled $7.1 million as of December 31, 2022.

As part of the acquisition of Metro Phoenix Bank, the Company acquired loans that displayed evidence of deterioration of credit quality since origination and which was probable that all contractually required payments would not be collected. The carrying amounts and contractually required payments of these loans which are included in the loan balances above are summarized in the following table:


	December 31,
(dollars in thousands)	2022
Real estate construction	$	440
Outstanding balance		440
Carrying amount		262
Allowance for loan losses		97
Carrying amount, net of allowance for loan losses	$	165

Accretable yield, or income expected to be collected, is shown in the table below:


	For the year ended
	December 31,
(dollars in thousands)	2022
Beginning balance	$	—
New loans purchased		225
Accretion of income		(48)
Ending balance	$	177

Management monitors the credit quality of its loan portfolio on an ongoing basis. Measurement of delinquency and past due status are based on the contractual terms of each loan. Past due loans are reviewed regularly to identify loans for nonaccrual status.

The following tables present past due aging analysis of total loans outstanding, by portfolio segment, as of December 31, 2022 and 2021, respectively:


	December 31, 2022
					90 Days
	Accruing		30 - 89 Days		or More				Total
(dollars in thousands)	Current		Past Due		Past Due		Nonaccrual		Loans
Commercial
Commercial and industrial	$	580,288	$	2,426	$	—	$	1,162	$	583,876
Real estate construction		97,370		—		—		440		97,810
Commercial real estate		879,830		368		—		1,472		881,670
Total commercial		1,557,488		2,794		—		3,074		1,563,356
Consumer
Residential real estate first mortgage		677,471		1,545		—		535		679,551
Residential real estate junior lien		149,918		377		—		184		150,479
Other revolving and installment		50,360		247		—		1		50,608
Total consumer		877,749		2,169		—		720		880,638
Total loans	$	2,435,237	$	4,963	$	—	$	3,794	$	2,443,994


	December 31, 2021
					90 Days
	Accruing		30 - 89 Days		or More				Total
(dollars in thousands)	Current		Past Due		Past Due		Nonaccrual		Loans
Commercial
Commercial and industrial	$	435,135	$	168	$	121	$	1,337	$	436,761
Real estate construction		40,619		—		—		—		40,619
Commercial real estate		598,264		—		—		629		598,893
Total commercial		1,074,018		168		121		1,966		1,076,273
Consumer
Residential real estate first mortgage		508,925		1,770		—		21		510,716
Residential real estate junior lien		125,412		167		—		89		125,668
Other revolving and installment		45,242		121		—		—		45,363
Total consumer		679,579		2,058		—		110		681,747
Total loans	$	1,753,597	$	2,226	$	121	$	2,076	$	1,758,020

The Company’s consumer loan portfolio is primarily comprised of both secured and unsecured loans that are relatively small and are evaluated at origination on a centralized basis against standardized underwriting criteria. The Company generally does not risk rate consumer loans unless a default event such as bankruptcy or extended nonperformance takes place. Credit quality for the consumer loan portfolio is measured by delinquency rates, nonaccrual amounts, and actual losses incurred.

The Company assigns a risk rating to all commercial loans, except pools of homogeneous loans, and periodically performs detailed internal and external reviews of risk rated loans over a certain threshold to identify credit risks and to assess the overall collectability of the portfolio. These risk ratings are also subject to examination by the Company’s regulators. During the internal reviews, management monitors and analyzes the financial condition of borrowers and guarantors, trends in the industries in which the borrowers operate, and the estimated fair values of collateral securing the loans. These credit quality indicators are used to assign a risk rating to each individual loan.

The Company’s ratings are aligned to pass and criticized categories. The criticized category includes special mention, substandard, and doubtful risk ratings. The risk ratings are defined as follows:

Pass: A pass loan is a credit with no existing or known potential weaknesses deserving of management’s close attention.

Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, this potential weakness may result in deterioration of the repayment prospects for the

loan or of the Company’s credit position at some future date. Special mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

Substandard: Loans classified as substandard are not adequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Loans classified as substandard have a well-defined weakness or weaknesses that jeopardize the repayment of the debt. Well-defined weaknesses include a borrower’s lack of marketability, inadequate cash flow or collateral support, failure to complete construction on time, or the failure to fulfill economic expectations. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or repayment in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loss: Loans classified as loss are considered uncollectible and charged off immediately.

The tables below present total loans outstanding, by portfolio segment and risk category, as of December 31, 2022 and 2021:


	December 31, 2022
			Criticized
			Special
(dollars in thousands)	Pass		Mention		Substandard		Doubtful		Total
Commercial
Commercial and industrial	$	558,694	$	21,969	$	3,213	$	—	$	583,876
Real estate construction		97,548		—		262		—		97,810
Commercial real estate		873,270		—		8,400		—		881,670
Total commercial		1,529,512		21,969		11,875		—		1,563,356
Consumer
Residential real estate first mortgage		678,743		63		745		—		679,551
Residential real estate junior lien		149,847		—		632		—		150,479
Other revolving and installment		50,607		—		1		—		50,608
Total consumer		879,197		63		1,378		—		880,638
Total loans	$	2,408,709	$	22,032	$	13,253	$	—	$	2,443,994


	December 31, 2021
			Criticized
			Special
(dollars in thousands)	Pass		Mention		Substandard		Doubtful		Total
Commercial
Commercial and industrial	$	430,235	$	480	$	6,046	$	—	$	436,761
Real estate construction		40,619		—		—		—		40,619
Commercial real estate		585,291		—		13,602		—		598,893
Total commercial		1,056,145		480		19,648		—		1,076,273
Consumer
Residential real estate first mortgage		510,375		—		341		—		510,716
Residential real estate junior lien		124,898		—		770		—		125,668
Other revolving and installment		45,363		—		—		—		45,363
Total consumer		680,636		—		1,111		—		681,747
Total loans	$	1,736,781	$	480	$	20,759	$	—	$	1,758,020

The adequacy of the allowance for loan losses is assessed at the end of each quarter. The allowance for loan losses includes a specific component related to loans that are individually evaluated for impairment and a general component related to loans that are segregated into homogeneous pool and collectively evaluated for impairment. The factors applied to these pools are an estimate of probable incurred losses based on management’s evaluation of historical net losses from loans with similar characteristics, which are adjusted by management to reflect current events, trends, and conditions. The adjustments include consideration of the following: changes in lending policies and procedures,

economic conditions, nature and volume of the portfolio, experience of lending management, volume and severity of past due loans, quality of the loan review system, value of underlying collateral for collateral dependent loans, concentrations, and other external factors.

The following tables present, by loan portfolio segment, a summary of the changes in the allowance for loan losses for the three years ending December 31, 2022, 2021, and 2020:


	Year ended December 31, 2022
	Beginning		Provision for		Loan		Loan		Ending
(dollars in thousands)	Balance		Loan Losses		Charge-offs		Recoveries		Balance
Commercial
Commercial and industrial	$	8,925	$	1,168	$	(1,396)	$	461	$	9,158
Real estate construction		783		587		—		76		1,446
Commercial real estate		12,376		178		—		134		12,688
Total commercial		22,084		1,933		(1,396)		671		23,292
Consumer
Residential real estate first mortgage		6,532		(763)		—		—		5,769
Residential real estate junior lien		1,295		(288)		—		282		1,289
Other revolving and installment		481		30		(153)		170		528
Total consumer		8,308		(1,021)		(153)		452		7,586
Unallocated		1,180		(912)		—		—		268
Total	$	31,572	$	—	$	(1,549)	$	1,123	$	31,146


	Year ended December 31, 2021
	Beginning		Provision for		Loan		Loan		Ending
(dollars in thousands)	Balance		Loan Losses		Charge-offs		Recoveries		Balance
Commercial
Commercial and industrial	$	10,205	$	(1,710)	$	(1,230)	$	1,660	$	8,925
Real estate construction		658		125		—		—		783
Commercial real estate		14,105		(2,015)		(536)		822		12,376
Total commercial		24,968		(3,600)		(1,766)		2,482		22,084
Consumer
Residential real estate first mortgage		5,774		758		—		—		6,532
Residential real estate junior lien		1,373		(201)		—		123		1,295
Other revolving and installment		753		(259)		(156)		143		481
Total consumer		7,900		298		(156)		266		8,308
Unallocated		1,378		(198)		—		—		1,180
Total	$	34,246	$	(3,500)	$	(1,922)	$	2,748	$	31,572


	Year ended December 31, 2020
	Beginning		Provision for		Loan		Loan		Ending
(dollars in thousands)	Balance		Loan Losses		Charge-offs		Recoveries		Balance
Commercial
Commercial and industrial	$	12,270	$	(2,168)	$	(4,249)	$	4,352	$	10,205
Real estate construction		303		355		—		—		658
Commercial real estate		6,688		8,185		(865)		97		14,105
Total commercial		19,261		6,372		(5,114)		4,449		24,968
Consumer
Residential real estate first mortgage		1,448		4,321		—		5		5,774
Residential real estate junior lien		671		507		(12)		207		1,373
Other revolving and installment		352		514		(242)		129		753
Total consumer		2,471		5,342		(254)		341		7,900
Unallocated		2,192		(814)		—		—		1,378
Total	$	23,924	$	10,900	$	(5,368)	$	4,790	$	34,246

The following tables present the recorded investment in loans and related allowance for the loan losses, by portfolio segment, disaggregated on the basis of the Company’s impairment methodology, as of December 31, 2022 and 2021:


	December 31, 2022
	Recorded Investment						Allowance for Loan Losses
	Individually		Collectively				Individually		Collectively
(dollars in thousands)	Evaluated		Evaluated		Total		Evaluated		Evaluated		Total
Commercial
Commercial and industrial	$	1,313	$	582,563	$	583,876	$	275	$	8,883	$	9,158
Real estate construction		262		97,548		97,810		97		1,349		1,446
Commercial real estate		1,472		880,198		881,670		582		12,106		12,688
Total commercial		3,047		1,560,309		1,563,356		954		22,338		23,292
Consumer
Residential real estate first mortgage		535		679,016		679,551		—		5,769		5,769
Residential real estate junior lien		184		150,295		150,479		—		1,289		1,289
Other revolving and installment		1		50,607		50,608		—		528		528
Total consumer		720		879,918		880,638		—		7,586		7,586
Unallocated		—		—		—		—		—		268
Total loans	$	3,767	$	2,440,227	$	2,443,994	$	954	$	29,924	$	31,146


	December 31, 2021
	Recorded Investment						Allowance for Loan Losses
	Individually		Collectively				Individually		Collectively
(dollars in thousands)	Evaluated		Evaluated		Total		Evaluated		Evaluated		Total
Commercial
Commercial and industrial	$	1,831	$	434,930	$	436,761	$	278	$	8,647	$	8,925
Real estate construction		—		40,619		40,619		—		783		783
Commercial real estate		809		598,084		598,893		5		12,371		12,376
Total commercial		2,640		1,073,633		1,076,273		283		21,801		22,084
Consumer
Residential real estate first mortgage		21		510,695		510,716		—		6,532		6,532
Residential real estate junior lien		91		125,577		125,668		—		1,295		1,295
Other revolving and installment		—		45,363		45,363		—		481		481
Total consumer		112		681,635		681,747		—		8,308		8,308
Unallocated		—		—		—		—		—		1,180
Total loans	$	2,752	$	1,755,268	$	1,758,020	$	283	$	30,109	$	31,572

The tables below summarize key information on impaired loans. These impaired loans may have estimated losses which are included in the allowance for loan losses.


	December 31, 2022						December 31, 2021
	Recorded		Unpaid		Related		Recorded		Unpaid		Related
(dollars in thousands)	Investment		Principal		Allowance		Investment		Principal		Allowance
Impaired loans with a valuation allowance
Commercial and industrial	$	675	$	711	$	275	$	445	$	464	$	278
Real estate construction		262		440		97		—		—		—
Commercial real estate		896		900		582		180		203		5
Residential real estate junior lien		—		—		—		—		—		—
Other revolving and installment		—		—		—		—		—		—
Total impaired loans with a valuation allowance		1,833		2,051		954		625		667		283
Impaired loans without a valuation allowance
Commercial and industrial		638		767		—		1,386		1,575		—
Real estate construction		—		—		—		—		—		—
Commercial real estate		576		660		—		629		684		—
Residential real estate first mortgage		535		573		—		21		24		—
Residential real estate junior lien		184		218		—		91		120		—
Other revolving and installment		1		1		—		—		—		—
Total impaired loans without a valuation allowance		1,934		2,219		—		2,127		2,403		—
Total impaired loans
Commercial and industrial		1,313		1,478		275		1,831		2,039		278
Real estate construction		262		440		97		—		—		—
Commercial real estate		1,472		1,560		582		809		887		5
Residential real estate first mortgage		535		573		—		21		24		—
Residential real estate junior lien		184		218		—		91		120		—
Other revolving and installment		1		1		—		—		—		—
Total impaired loans	$	3,767	$	4,270	$	954	$	2,752	$	3,070	$	283

The table below presents the average recorded investment in impaired loans and interest income for the three years ending December 31, 2022, 2021, and 2020:


	Year Ended December 31,
	2022				2021				2020
	Average				Average				Average
	Recorded		Interest		Recorded		Interest		Recorded		Interest
(dollars in thousands)	Investment		Income		Investment		Income		Investment		Income
Impaired loans with a valuation allowance
Commercial and industrial	$	722	$	13	$	517	$	13	$	765	$	14
Real estate construction		442		—		—		—		—		—
Commercial real estate		935		—		187		7		3,972		138
Residential real estate junior lien		—		—		—		—		19		—
Other revolving and installment		—		—		—		—		28		—
Total impaired loans with a valuation allowance		2,099		13		704		20		4,784		152
Impaired loans without a valuation allowance
Commercial and industrial		707		—		1,988		20		4,151		25
Real estate construction		—		—		—		—		—		—
Commercial real estate		618		—		672		—		1,614		—
Residential real estate first mortgage		575		—		23		—		461		—
Residential real estate junior lien		191		—		98		—		234		3
Other revolving and installment		1		—		1		—		—		—
Total impaired loans without a valuation allowance		2,092		—		2,782		20		6,460		28
Total impaired loans
Commercial and industrial		1,429		13		2,505		33		4,916		39
Real estate construction		442		—		—		—		—		—
Commercial real estate		1,553		—		859		7		5,586		138
Residential real estate first mortgage		575		—		23		—		461		—
Residential real estate junior lien		191		—		98		—		253		3
Other revolving and installment		1		—		1		—		28		—
Total impaired loans	$	4,191	$	13	$	3,486	$	40	$	11,244	$	180

Loans with a carrying value of $1.5 billion and $1.2 billion were pledged at December 31, 2022 and 2021, respectively, to secure FHLB borrowings, public deposits, and for other purposes required or permitted by law.

Under certain circumstances, the Company will provide borrowers relief through loan restructurings. A restructuring of debt constitutes a troubled debt restructuring, or TDR, if the Company, for economic or legal reasons related to the borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. TDR concessions can include reduction of interest rates, extension of maturity dates, forgiveness of principal or interest due, or acceptance of other assets in full or partial satisfaction of the debt.

During the year December 31, 2022, there were no loans modified as a TDR.

During the second quarter of 2021, there were three loans modified as TDRs as a result of changing the terms allowing for interest rate reductions and an extension of the maturity dates. As of December 31, 2021, the carrying value of the restructured loans was $701 thousand. The loans are not currently performing in compliance with the modified terms and were placed on nonaccrual. There was no specific reserve for loan losses allocated to the loan modified as a TDR.

Consistent with regulatory guidance urging banks to work with borrowers during the COVID-19 pandemic, the Company offered a payment deferral program for its lending clients that were adversely affected by the COVID-19 pandemic. These deferrals were generally no more than 90 days in duration and were not considered TDRs in accordance with the Interagency Statement on Loan Modifications and Reporting for Financial Institutions as issued on April 7, 2020.

For the year ended December 31, 2022, the Company entered into no new modifications and as of December 31, 2022, only one loan with a total outstanding principal balance of $268 thousand remained on deferral.

As of December 31, 2021, 6 loans with a total outstanding principal balance of $3.3 million had been granted second deferrals, 2 loans with a total outstanding principal balance of $72 thousand remained on the first deferral and the remaining loans have been returned to a normal payment status.

As an SBA-Certified Preferred lender, we were delegated the authority as part of the CARES Act to make PPP SBA-guaranteed financing available to eligible borrowers. As of December 31, 2021, we had assisted 2,454 new and existing clients secure approximately $474.2 million of PPP financing. The SBA pays a processing fee based on the balance of the financing outstanding at the time of final disbursement. The processing fees were as follows: five percent for loans of not more than $350 thousand, three percent for loans of more than $350 thousand and less than $2 million, and one percent for loans of at least $2 million. Net processing fees in the amount of $15.7 million were being deferred and recognized as interest income on a level yield method of the life of the represented loans. At December 31, 2022, the Company recognized all of the net processing fees.

The Company does not have material commitments to lend additional funds to borrowers with loans whose terms have been modified in TDRs or whose loans are on nonaccrual.