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Allowance for Credit Losses

6 Months Ended

Jun. 30, 2023

Note 4 — Allowance for Credit Losses

The allowance for credit losses (“ACL”) is based on a loss-rate methodology that measures lifetime losses on loan pools that have similar risk characteristics. Loans that do not have similar risk characteristics are evaluated on an individual basis. The segmentation of the loan portfolio into pools requires a balancing process between capturing similar risk characteristics and containing sufficient loss history to provide meaningful results. Our segmentation starts at the general loan category with further sub-segmentation based on collateral types that may be of meaningful size and/or may contain sufficient differences in risk characteristics based on management’s judgement that would warrant further segmentation. The general loan categories along with primary risk characteristics used in our calculation are as follows:

Commercial and industrial loans. This category includes loans extended to a diverse array of businesses for working capital or equipment purchases. These loans are mostly secured by the collateral pledged by the borrower that is directly related to the business activities of the company such as equipment, accounts receivable and inventory. The borrower’s abilities to generate revenues from equipment purchases, collect accounts receivable, and to turn inventory into sales are risk factors in the repayment of the loan. A small portion of this loan category is related to loans secured by oil & gas production and loans secured by aircraft.

Construction and land development loans. This category includes the development of land from unimproved land to lot development for both residential and commercial use and vertical construction across residential and commercial real estate classes. These loans carry risk of repayment when projects incur cost overruns, have an increase in the price of construction materials, encounter zoning, entitlement and environmental issues, or encounter other factors that may affect the completion of a project on time and on budget. Additionally, repayment risk may be negatively impacted when the market experiences a deterioration in the value of real estate. Risks specifically related to 1-4 family development loans also include mortgage rate risk and the practice by the mortgage industry of more

restrictive underwriting standards, which inhibits the buyer from obtaining long term financing creating excessive housing and lot inventory in the market.

Commercial real estate loans. This category includes loans secured by farmland, multifamily properties, owner occupied commercial properties, and non-owner occupied commercial properties. Owner occupied commercial properties include warehouses often along the border for import/export operations, office space where the borrower is the primary tenant, restaurants and other single-tenant retail. Non-owner occupied commercial properties include hotels, retail centers, office and professional buildings, and leased warehouses. These loans carry risk of repayment when market values deteriorate, the business experiences turnover in key management, the business has an inability to attract or keep occupancy levels stable, or when the market experiences an exit of a specific business type that is significant to the local economy, such as a manufacturing plant.

1-4 family mortgages. This category includes both first and second lien mortgages for the purpose of home purchases or refinancing of existing mortgage loans. A small portion of this loan category is related to home equity lines of credits, lots purchases, and home construction. Loan repayments may be affected by unemployment or underemployment and deteriorating market values of real estate.

Consumer loans. This category includes deposit secured, vehicle secured, and unsecured loans, including overdrafts, made to individuals. Repayment is primarily affected by unemployment or underemployment.

The loan pools are further broken down using a risk-based segmentation based on internal classifications for commercial loans and past due status for consumer mortgage loans. Non-mortgage consumer loans are evaluated as one segment. On a weekly basis, commercial loan past due reports are reviewed by the credit quality committee to determine if a loan has any potential problems and if a loan should be placed on our internal Watch List report. Additionally, our credit department reviews the majority of our loans for proper internal classification purposes regardless of whether they are past due and segregates any loans with potential problems for further review. The credit department will discuss the potential problem loans with the servicing loan officers to determine any relevant issues that were not discovered in the evaluation. Also, an analysis of loans that is provided through examinations by regulatory authorities is considered in the review process. After the above analysis is completed, we will determine if a loan should be placed on an internal Watch List report because of issues related to the analysis of the credit, credit documents, collateral and/or payment history.

Our internal Watch List report is segregated into the following categories: (i) Pass, (ii) Economic Monitoring, (iii) Special Review, (iv) Watch List—Pass, (v) Watch List—Substandard, and (vi) Watch List—Doubtful. The loans placed in the Special Review category and lower rated credits reflect our opinion that the loans reflect potential weakness which require monitoring on a more frequent basis. Credits in those categories are reviewed and discussed on a regular basis, no less frequently than quarterly, with the credit department and the lending staff to determine if a change in category is warranted. The loans placed in the Watch List—Pass category and lower rated credits reflect our opinion that the credit contains weaknesses which represent a greater degree of risk, which warrant “extra attention.” Credits in this category are reviewed and discussed on a regular basis with the credit department and the lending staff to determine if a change in category is warranted. The loans placed in the Watch List—Substandard category are considered to be potentially inadequately protected by the current sound worth and debt service capacity of the borrower or of any pledged collateral. These credit obligations, even if apparently protected by collateral value, have shown defined weaknesses related to adverse financial, managerial, economic, market or political conditions which may jeopardize repayment of principal and interest. Furthermore, there is the possibility that we may sustain some future loss if such weaknesses are not corrected. The loans placed in the Watch List—Doubtful category have shown defined weaknesses and it is likely, based on current information and events, that we will be unable to collect all principal and/or interest amounts contractually due. Watch List—Doubtful loans are placed on non-accrual when they are moved to that category.

For the purposes of the ACL, in order to maintain segments with sufficient history for meaningful results, the credits in the Pass and Economic Monitoring categories are aggregated, the credits in the Special Review and Watch List—Pass credits are aggregated, and the credits in the Watch List—Substandard category remain in their own segment. For loans that are classified as Watch List—Doubtful, management evaluates these credits in accordance with ASC 310-10, “Receivables,” and, if deemed necessary, a specific reserve is allocated to the loan. The specific reserve allocated under ASC 310-10, is based on (i) the present value of expected future cash flows discounted at the loan’s

effective interest rate; (ii) the loan’s observable market price; or (iii) net realizable value of the fair value of the collateral if the loan is collateral dependent. Substantially all of our loans evaluated as Watch List—Doubtful under ASC 310-10 are measured using the fair value of collateral method. In rare cases, we may use other methods to determine the specific reserve of a loan under ASC 310-10 if such loan is not collateral dependent.

Within each collectively evaluated pool, the robustness of the lifetime historical loss-rate is evaluated and, if needed, is supplemented with peer loss rates through a model risk adjustment. Certain qualitative loss factors are then evaluated to incorporate management’s two-year reasonable and supportable forecast period followed by a reversion to the pool’s average lifetime loss-rate. Those qualitative loss factors are: (i) trends in portfolio volume and composition, (ii) volume and trends in classified loans, delinquencies, non-accruals and TDR’s, (iii) concentration risk, (iv) trends in underlying collateral value, (v) changes in policies, procedures, and strategies, and (vi) economic conditions. Qualitative factors also include potential losses stemming from operational risk factors arising from fraud, natural disasters, pandemics, geopolitical events, and large loans. The large loan operational risk factor was added for the second quarter 2023 ACL. Because of the magnitude of large loans, they pose a higher risk of default and recognizing this risk, and establishing an operational risk factor to capture that risk is prudent action in the current economic environment. Large loans are usually part of a larger relationship with collateral that is pledged across the relationship, thus the default of one of these larger loans in a relationship may jeopardize the entire relationship. The current economic environment has created challenges for borrowers to service their debt. Increasing cap rates, elevated office vacancies, an upward trend in apartment vacancies and significant increases in interest rates are all contributing to the elevated risk in large loans. Should any of the factors considered by management in evaluating the adequacy of the ACL change, our estimate could also change, which could affect the level of future credit loss expense.

We have elected to not measure an ACL for accrued interest receivable given our timely approach in identifying and writing off uncollectible accrued interest. An ACL for off-balance sheet exposure is derived from a projected usage rate of any unfunded commitment multiplied by the historical loss rate, plus model risk adjustment, if any, of the on-balance sheet loan pools.

Our management continually reviews the ACL of the Subsidiary Banks using the amounts determined from the estimates established on specific doubtful loans, the estimate established on quantitative historical loss percentages, and the estimate based on qualitative current conditions and reasonable and supportable two-year forecasted data. Our methodology reverts to the average lifetime loss-rate beyond the forecast period when we can no longer develop reasonable and supportable forecasts. Should any of the factors considered by management in evaluating the adequacy of the estimate for current expected credit losses change, our estimate of current expected credit losses could also change, which could affect the level of future credit loss expense. While the calculation of our ACL utilizes management’s best judgment and all information reasonably available, the adequacy of the ACL is dependent on a variety of factors beyond our control, including, among other things, the performance of the entire loan portfolio, the economy, government actions, changes in interest rates and the view of regulatory authorities towards loan classifications.

A summary of the transactions in the allowance for credit loan losses by loan class is as follows:


	Three Months Ended June 30, 2023
	Domestic														Foreign
			Commercial
			Real Estate:
			Other		Commercial
			Construction &		Real Estate:		Commercial
			Land		Farmland &		Real Estate:		Residential:		Residential:
	Commercial		Development		Commercial		Multifamily		First Lien		Junior Lien		Consumer		Foreign		Total

	(Dollars in Thousands)

Balance at March 31, 2023	$	27,788	$	50,933	$	36,556	$	3,984	$	4,559	$	8,357	$	291	$	1,089	$	133,557
Losses charged to allowance		(2,792)		—		—		—		—		(164)		(26)		—		(2,982)
Recoveries credited to allowance		556		526		6		—		1		15		8		—		1,112
Net (losses) recoveries charged to allowance		(2,236)		526		6		—		1		(149)		(18)		—		(1,870)

Credit loss expense		2,093		1,605		2,126		122		532		2,234		13		91		8,816

Balance at June 30, 2023	$	27,645	$	53,064	$	38,688	$	4,106	$	5,092	$	10,442	$	286	$	1,180	$	140,503


	Three Months Ended June 30, 2022
	Domestic														Foreign
			Commercial
			Real Estate:
			Other		Commercial
			Construction &		Real Estate:		Commercial
			Land		Farmland &		Real Estate:		Residential:		Residential:
	Commercial		Development		Commercial		Multifamily		First Lien		Junior Lien		Consumer		Foreign		Total

	(Dollars in Thousands)

Balance at March 31, 2022	$	23,901	$	36,372	$	34,854	$	3,062	$	4,016	$	7,046	$	264	$	712	$	110,227

Losses charged to allowance		(2,001)		—		—		—		(57)		—		(34)		—		(2,092)
Recoveries credited to allowance		508		1		6		—		168		14		5		—		702
Net (losses) recoveries charged to allowance		(1,493)		1		6		—		111		14		(29)		—		(1,390)

Credit loss expense		3,169		340		410		(206)		10		(166)		35		143		3,735

Balance at June 30, 2022	$	25,577	$	36,713	$	35,270	$	2,856	$	4,137	$	6,894	$	270	$	855	$	112,572


	Six Months Ended June 30, 2023
	Domestic														Foreign
			Commercial
			Real Estate:
			Other		Commercial
			Construction &		Real Estate:		Commercial
			Land		Farmland &		Real Estate:		Residential:		Residential:
	Commercial		Development		Commercial		Multifamily		First Lien		Junior Lien		Consumer		Foreign		Total

	(Dollars in Thousands)

Balance at December 31, 2022	$	26,728	$	44,684	$	36,474	$	3,794	$	4,759	$	8,284	$	281	$	968	$	125,972

Losses charged to allowance		(4,763)		—		—		—		—		(165)		(87)		—		(5,015)
Recoveries credited to allowance		1,181		837		11		—		8		92		14		—		2,143
Net (losses) recoveries charged to allowance		(3,582)		837		11		—		8		(73)		(73)		—		(2,872)

Credit loss expense		4,499		7,543		2,203		312		325		2,231		78		212		17,403

Balance at June 30, 2023	$	27,645	$	53,064	$	38,688	$	4,106	$	5,092	$	10,442	$	286	$	1,180	$	140,503


	Six Months Ended June 30, 2022
	Domestic														Foreign
			Commercial
			Real Estate:
			Other		Commercial
			Construction &		Real Estate:		Commercial
			Land		Farmland &		Real Estate:		Residential:		Residential:
	Commercial		Development		Commercial		Multifamily		First Lien		Junior Lien		Consumer		Foreign		Total

	(Dollars in Thousands)

Balance at December 31, 2021	$	23,178	$	35,390	$	35,654	$	3,291	$	4,073	$	7,754	$	272	$	762	$	110,374

Losses charged to allowance		(4,113)		(2)		—		—		(156)		(28)		(122)		—		(4,421)
Recoveries credited to allowance		1,110		3		14		—		198		62		16		—		1,403
Net (losses) recoveries charged to allowance		(3,003)		1		14		—		42		34		(106)		—		(3,018)

Credit loss expense		5,402		1,322		(398)		(435)		22		(894)		104		93		5,216

Balance at June 30, 2022	$	25,577	$	36,713	$	35,270	$	2,856	$	4,137	$	6,894	$	270	$	855	$	112,572

The credit loss charged to expense for the three and six months ended June 30, 2023 has increased from the same periods of 2022 in order to provide some protection from potential losses in our loan portfolio given the high level of uncertainty in the economy and a potential economic recession on the horizon. We have increased the severity of some of the qualitative loss factors in certain pools of the portfolio to encompass the economic uncertainty, resulting in an increase in the required ACL. The pool specific qualitative loss factors management deemed appropriate for the ACL calculation at December 31, 2022 remained constant in the June 30, 2023 ACL calculation.

The tables below provide additional information on the balance of loans individually or collectively evaluated for impairment and their related allowance, by loan class as of June 30, 2023 and December 31, 2022:


	June 30, 2023
	Loans Individually				Loans Collectively
	Evaluated For				Evaluated For
	Impairment				Impairment
	Recorded				Recorded
	Investment		Allowance		Investment		Allowance

	(Dollars in Thousands)
Domestic
Commercial	$	31,312	$	3,010	$	1,421,885	$	24,635
Commercial real estate: other construction & land development		10,173		70		2,192,014		52,994
Commercial real estate: farmland & commercial		287		—		2,518,383		38,688
Commercial real estate: multifamily		108		—		308,061		4,106
Residential: first lien		70		—		418,831		5,092
Residential: junior lien		318		—		447,208		10,442
Consumer		—		—		43,411		286
Foreign		—		—		181,016		1,180

Total	$	42,268	$	3,080	$	7,530,809	$	137,423


	December 31, 2022
	Loans Individually				Loans Collectively
	Evaluated For				Evaluated For
	Impairment				Impairment
	Recorded				Recorded
	Investment		Allowance		Investment		Allowance

	(Dollars in Thousands)
Domestic
Commercial	$	30,747	$	2,375	$	1,468,006	$	24,353
Commercial real estate: other construction & land development		20,483		70		1,969,186		44,614
Commercial real estate: farmland & commercial		94		—		2,568,025		36,474
Commercial real estate: multifamily		117		—		306,384		3,794
Residential: first lien		77		—		425,647		4,759
Residential: junior lien		312		—		439,958		8,284
Consumer		—		—		41,592		281
Foreign		—		—		159,975		968

Total	$	51,830	$	2,445	$	7,378,773	$	123,527

The table below provides additional information on loans accounted for on a non-accrual basis by loan class at June 30, 2023 and December 31, 2022:


	June 30, 2023		December 31, 2022

	(Dollars in Thousands)
Domestic
Commercial	$	31,312	$	30,747
Commercial real estate: other construction & land development		10,173		20,483
Commercial real estate: farmland & commercial		287		94
Commercial real estate: multifamily		108		117
Residential: first lien		203		207
Total non-accrual loans	$	42,083	$	51,648

We adopted the provisions of Accounting Standards Update 2022-02, Financial Instruments – Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”) on January 1, 2023. ASU 2022-02 eliminates the accounting guidance for troubled debt restructurings in existing guidance and enhances disclosure requirements for certain loan refinancings and restructurings when a borrower is experiencing financial difficulty. Additionally, ASU 2022-02 requires entities to disclose current period gross write-offs by year of origination for financing receivables and net investments in leases. The adoption of ASU 2022-22 did not have a significant impact to our consolidated financial statements.

We occasionally provide modifications to borrowers experiencing financial difficulties. Modifications may include certain concessions that we must evaluate under ASU 2022-02 to determine the need for disclosure. Concessions to borrowers experiencing financial difficulties that would require disclosure include principal forgiveness, term extension, an other-than-insignificant payment delay, an interest rate reduction or a combination of these concessions.

For the six months ended June 30, 2023, we did not provide any modifications under these circumstances to any borrower experiencing financial difficulty.

Under guidance in effect prior to January 1, 2023, the following table details loans accounted for as “troubled debt restructuring,” segregated by loan class. Loans accounted for as troubled debt restructuring are included in Watch List—Doubtful loans.


	December 31, 2022
	(Dollars in Thousands)
Domestic
Residential: first lien	$	1,642
Residential: junior lien		714
Consumer		802
Foreign		55
Total troubled debt restructuring	$	3,213

The Subsidiary Banks charge-off that portion of any loan which management considers to represent a loss as well as that portion of any other loan which is classified as a “loss” by bank examiners. Commercial and industrial or real estate loans are generally considered by management to represent a loss, in whole or part, when an exposure beyond any collateral coverage is apparent and when no further collection of the loss portion is anticipated based on the borrower’s financial condition and general economic conditions in the borrower’s industry. Generally, unsecured consumer loans are charged-off when 90 days past due.

While our management believes that it is generally able to identify borrowers with financial problems reasonably early and to monitor credit extended to such borrowers carefully, there is no precise method of predicting loan losses. The determination that a loan is likely to be uncollectible and that it should be wholly or partially charged-off as a loss is an exercise of judgment. Similarly, the determination of the adequacy of the ACL can be made only on a subjective basis. It is the judgment of our management that the ACL at June 30, 2023 was adequate to absorb probable losses from loans in the portfolio at that date.

The following tables present information regarding the aging of past due loans by loan class at June 30, 2023 and December 31, 2022:


	June 30, 2023
							90 Days or		Total
	30 - 59		60 - 89		90 Days or		greater &		Past				Total
	Days		Days		Greater		still accruing		Due		Current		Portfolio

	(Dollars in Thousands)
Domestic
Commercial	$	14,411	$	1,584	$	29,975	$	167	$	45,970	$	1,407,227	$	1,453,197
Commercial real estate: other construction & land development		629		98		10,085		—		10,812		2,191,375		2,202,187
Commercial real estate: farmland & commercial		745		—		—		—		745		2,517,925		2,518,670
Commercial real estate: multifamily		45		108		—		—		153		308,016		308,169
Residential: first lien		3,338		758		2,713		2,588		6,809		412,093		418,902
Residential: junior lien		1,344		299		1,278		1,278		2,921		444,604		447,525
Consumer		255		19		6		6		280		43,131		43,411
Foreign		184		226		374		374		784		180,232		181,016
Total past due loans	$	20,951	$	3,092	$	44,431	$	4,413	$	68,474	$	7,504,603	$	7,573,077


	December 31, 2022
							90 Days or		Total
	30 - 59		60 - 89		90 Days or		greater &		Past				Total
	Days		Days		Greater		still accruing		Due		Current		Portfolio

		(Dollars in Thousands)
Domestic
Commercial	$	1,732	$	258	$	1,014	$	59	$	3,004	$	1,495,750	$	1,498,754
Commercial real estate: other construction & land development		1,130		—		—		—		1,130		1,988,539		1,989,669
Commercial real estate: farmland & commercial		1,744		117		—		—		1,861		2,566,257		2,568,118
Commercial real estate: multifamily		—		—		—		—		—		306,501		306,501
Residential: first lien		2,023		1,068		4,189		4,061		7,280		418,444		425,724
Residential: junior lien		925		771		1,717		1,717		3,413		436,857		440,270
Consumer		281		14		7		7		302		41,290		41,592
Foreign		717		23		288		288		1,028		158,947		159,975
Total past due loans	$	8,552	$	2,251	$	7,215	$	6,132	$	18,018	$	7,412,585	$	7,430,603

The increase in Commercial loans past due 90 days or greater at June 30, 2023 can be primarily attributed to a loan secured by equipment and other assets used in the oil and gas industry as well as oil and gas production that is on non-accrual. The increase in Commercial Real Estate: Other Construction & Land Development loans past due 90 days or greater can be primarily attributed to a loan secured by commercial property that is on non-accrual.

A summary of the loan portfolio by credit quality indicator by loan class and by year of origination at June 30, 2023 and December 31, 2022 is presented below:



		2023	2022		2021		2020		2019		Prior		Total

	(Dollars in Thousands)
Balance at June 30, 2023
Domestic
Commercial
Pass	$	389,737	$	432,583	$	423,509	$	58,607	$	25,484	$	65,813	$	1,395,733
Special Review		—		300		189		—		—		—		489
Watch List - Substandard		23,992		1,543		113		—		15		—		25,663
Watch List - Doubtful		32		31,280		—		—		—		—		31,312
Total Commercial	$	413,761	$	465,706	$	423,811	$	58,607	$	25,499	$	65,813	$	1,453,197
Commercial
Current-period gross writeoffs	$	2,443	$	2,045	$	9	$	264	$	—	$	2	$	4,763
Commercial real estate: other construction & land development
Pass	$	650,337	$	713,105	$	479,217	$	166,136	$	129,419	$	30,999	$	2,169,213
Special Review		20,094		2,500		—		—		207		—		22,801
Watch List - Doubtful		88		10,085		—		—		—		—		10,173
Total Commercial real estate: other construction & land development	$	670,519	$	725,690	$	479,217	$	166,136	$	129,626	$	30,999	$	2,202,187
Commercial real estate: other construction & land development
Current-period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate: farmland & commercial
Pass	$	427,809	$	681,701	$	418,069	$	317,679	$	210,586	$	314,081	$	2,369,925
Special Review		69,450		—		—		829		—		—		70,279
Watch List - Pass		16,722		88		239		—		—		—		17,049
Watch List - Substandard		56,333		2,232		—		2,473		91		1		61,130
Watch List - Doubtful		198		89		—		—		—		—		287
Total Commercial real estate: farmland & commercial	$	570,512	$	684,110	$	418,308	$	320,981	$	210,677	$	314,082	$	2,518,670
Commercial real estate: farmland & commercial
Current-period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate: multifamily
Pass	$	54,095	$	123,832	$	43,201	$	58,737	$	11,321	$	16,875	$	308,061
Watch List - Doubtful		—		108		—		—		—		—		108
Total Commercial real estate: multifamily	$	54,095	$	123,940	$	43,201	$	58,737	$	11,321	$	16,875	$	308,169
Commercial real estate: multifamily
Current-period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Residential: first lien
Pass	$	93,380	$	91,403	$	72,269	$	43,195	$	30,667	$	87,575	$	418,489
Watch List - Substandard		—		—		343		—		—		—		343
Watch List - Doubtful		—		70		—		—		—		—		70
Total Residential: first lien	$	93,380	$	91,473	$	72,612	$	43,195	$	30,667	$	87,575	$	418,902
Residential: first lien
Current-period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Residential: junior lien
Pass	$	40,329	$	86,506	$	103,393	$	81,966	$	37,583	$	97,430	$	447,207
Watch List- Doubtful		318		—		—		—		—		—		318
Total Residential: junior lien	$	40,647	$	86,506	$	103,393	$	81,966	$	37,583	$	97,430	$	447,525
Residential: junior lien
Current-period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	165	$	165
Consumer
Pass	$	22,184	$	15,853	$	3,187	$	441	$	228	$	1,518	$	43,411
Total Consumer	$	22,184	$	15,853	$	3,187	$	441	$	228	$	1,518	$	43,411
Consumer
Current-period gross writeoffs	$	9	$	73	$	4	$	—	$	—	$	1	$	87
Foreign
Pass	$	60,834	$	91,375	$	14,995	$	4,598	$	3,974	$	5,240	$	181,016
Total Foreign	$	60,834	$	91,375	$	14,995	$	4,598	$	3,974	$	5,240	$	181,016
Foreign
Current-period gross writeoffs	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Total Loans	$	1,925,932	$	2,284,653	$	1,558,724	$	734,661	$	449,575	$	619,532	$	7,573,077



		2022	2021		2020		2019		2018		Prior		Total

	(Dollars in Thousands)
Balance at December 31, 2022
Domestic
Commercial
Pass	$	736,462	$	524,879	$	96,401	$	35,917	$	43,792	$	29,464	$	1,466,915
Special Review		377		213		—		—		—		—		590
Watch List - Substandard		161		149		143		—		49		—		502
Watch List - Doubtful		29,789		—		954		—		—		4		30,747
Total Commercial	$	766,789	$	525,241	$	97,498	$	35,917	$	43,841	$	29,468	$	1,498,754
Commercial
Commercial real estate: other construction & land development
Pass	$	913,675	$	666,347	$	173,824	$	174,897	$	35,069	$	5,165	$	1,968,977
Special Review		—		—		—		209		—		—		209
Watch List - Doubtful		19,982		407		94		—		—		—		20,483
Total Commercial real estate: other construction & land development	$	933,657	$	666,754	$	173,918	$	175,106	$	35,069	$	5,165	$	1,989,669
Commercial real estate: farmland & commercial
Pass	$	811,117	$	584,134	$	456,200	$	232,537	$	325,214	$	81,295	$	2,490,497
Special Review		2,855		—		842		—		—		—		3,697
Watch List - Pass		17,060		247		—		—		—		—		17,307
Watch List - Substandard		2,275		—		54,152		96		—		—		56,523
Watch List - Doubtful		94		—		—		—		—		—		94
Total Commercial real estate: farmland & commercial	$	833,401	$	584,381	$	511,194	$	232,633	$	325,214	$	81,295	$	2,568,118
Commercial real estate: multifamily
Pass	$	127,680	$	87,469	$	59,035	$	12,026	$	5,490	$	14,684	$	306,384
Watch List - Doubtful		117		—		—		—		—		—		117
Total Commercial real estate: multifamily	$	127,797	$	87,469	$	59,035	$	12,026	$	5,490	$	14,684	$	306,501
Residential: first lien
Pass	$	138,771	$	82,466	$	49,591	$	40,985	$	33,814	$	79,660	$	425,287
Watch List - Substandard		—		360		—		—		—		—		360
Watch List - Doubtful		77		—		—		—		—		—		77
Total Residential: first lien	$	138,848	$	82,826	$	49,591	$	40,985	$	33,814	$	79,660	$	425,724
Residential: junior lien
Pass	$	92,256	$	108,815	$	91,130	$	41,273	$	21,975	$	84,509	$	439,958
Watch List- Doubtful		—		312		—		—		—		—		312
Total Residential: junior lien	$	92,256	$	109,127	$	91,130	$	41,273	$	21,975	$	84,509	$	440,270
Consumer
Pass	$	31,962	$	6,603	$	897	$	489	$	28	$	1,613	$	41,592
Total Consumer	$	31,962	$	6,603	$	897	$	489	$	28	$	1,613	$	41,592
Foreign
Pass	$	124,265	$	19,082	$	5,362	$	4,848	$	3,417	$	3,001	$	159,975
Total Foreign	$	124,265	$	19,082	$	5,362	$	4,848	$	3,417	$	3,001	$	159,975
Total Loans	$	3,048,975	$	2,081,483	$	988,625	$	543,277	$	468,848	$	299,395	$	7,430,603

The increase in Watch-List Substandard Commercial loans at June 30, 2023 compared to December 31, 2022 can be primarily attributed to a loan secured by accounts receivable that was downgraded from Pass. The increase in Special Review Commercial Real Estate: Other Construction and Land Development loans at June 30, 2023 can be attributed to a loan secured by land that was downgraded from Pass. The increase in Watch-List Substandard Commercial Real Estate: Farmland & Commercial loans at June 30, 2023 compared to December 31, 2022 can be primarily attributed to the downgrade from Pass of a loan secured by a retail building that was downgraded from Pass.