Loans and Lease Finance Receivables and Allowance for Credit Losses

12 Months Ended

Dec. 31, 2022

Loans and Lease Finance Receivables and Allowance for Credit Losses

. LOANS AND LEASE FINANCE RECEIVABLES AND ALLOWANCE FOR CREDIT LOSSES

The following table provides a summary of total loans and lease finance receivables by type.


	December 31,
	2022			2021
	(Dollars in thousands)

Commercial real estate	$	6,884,948		$	5,789,730
Construction		88,271			62,264
SBA		290,908			288,600
SBA - Paycheck Protection Program (PPP)		9,087			186,585
Commercial and industrial		948,683			813,063
Dairy & livestock and agribusiness		433,564			386,219
Municipal lease finance receivables		81,126			45,933
SFR mortgage		266,024			240,654
Consumer and other loans		76,781			74,665
Total loans, at amortized cost		9,079,392			7,887,713
Less: Allowance for credit losses		(85,117	)		(65,019	)
Total loans and lease finance receivables, net	$	8,994,275		$	7,822,694

As of December 31, 2022, 79.73% of the Company’s total gross loan portfolio consisted of real estate loans, with commercial real estate loans representing 75.83% of total loans. Substantially all of the Company’s real estate loans and construction loans are secured by real properties located in California. As of December 31, 2022, $517.8 million, or 7.52% of the total commercial real estate loans included loans secured by farmland, compared to $364.4 million, or 6.29%, at December 31, 2021. The loans secured by farmland included $140.5 million for loans secured by dairy & livestock land and $377.3 million for loans secured by agricultural land at December 31, 2022, compared to $134.9 million for loans secured by dairy & livestock land and $229.5 million for loans secured by agricultural land at December 31, 2021. As of December 31, 2022, dairy & livestock and agribusiness loans of $433.6 million were comprised of $388.5 million for dairy & livestock loans and $45.1 million for agribusiness loans. This compares to $351.7 million for dairy & livestock loans and $34.5 million for agribusiness loans at December 31, 2021.

At December 31, 2022 and 2021, loans totaling $4.30 billion and $3.96 billion, respectively, were pledged to secure the borrowings and available lines of credit from the FHLB and the Federal Reserve Bank.

There were no outstanding loans held-for-sale as of December 31, 2022 and 2021.

Credit Quality Indicators

We monitor credit quality by evaluating various risk attributes and utilize such information in our evaluation of the appropriateness of the allowance for credit losses. Internal credit risk ratings, within our loan risk rating system, are the credit quality indicators that we most closely monitor.

An important element of our approach to credit risk management is our loan risk rating system. The originating officer assigns each loan an initial risk rating, which is reviewed and confirmed or changed, as appropriate, by credit management. Approvals are made based upon the amount of inherent credit risk specific to the transaction and are reviewed for appropriateness by senior line and credit management personnel. Credits are monitored by line and credit management personnel for deterioration or improvement in a borrower’s financial condition, which would impact the ability of the borrower to perform under the contract. Risk ratings are adjusted as necessary.

Loans are risk rated into the following categories: Pass, Special Mention, Substandard, Doubtful and Loss. Each of these groups is assessed for the proper amount to be used in determining the adequacy of our allowance for losses. These categories can be described as follows:

Pass — These loans, including loans on the Bank’s internal watch list, range from minimal credit risk to lower than average, but still acceptable, credit risk. Watch list loans usually require more than normal management attention. Loans on the watch list may involve borrowers with adverse financial trends, higher debt/equity ratios, or weaker liquidity positions, but not to the degree of being considered a defined weakness or problem loan where risk of loss may be apparent.

Special Mention — Loans assigned to this category have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in the deterioration of the repayment prospects for the asset or the Company’s credit position at some future date. Special mention assets are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

Substandard — Loans classified as substandard are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. Substandard loans are characterized by the distinct possibility that the Company will sustain some loss if deficiencies are not corrected.

Doubtful — Loans classified as doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or the liquidation 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 of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loan has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this asset with insignificant value even though partial recovery may be affected in the future.

The following table summarizes loans by type and origination year, according to our internal risk ratings as of the dates presented.


	Origination Year												Revolving loans amortized		Revolving loans converted to
December 31, 2022	2022		2021		2020		2019		2018		Prior		cost basis		term loans		Total
	(Dollars in thousands)
Commercial real estate loans:
Risk Rating:
Pass	$	1,363,733	$	1,197,290	$	957,965	$	542,827	$	506,613	$	1,889,478	$	175,373	$	39,616	$	6,672,895
Special Mention		3,285		12,114		11,284		32,976		21,646		76,290		908		—		158,503
Substandard		—		—		15,624		16,297		94		21,535		—		—		53,550
Doubtful & Loss		—		—		—		—		—		—		—		—		—
Total Commercial real estate loans:	$	1,367,018	$	1,209,404	$	984,873	$	592,100	$	528,353	$	1,987,303	$	176,281	$	39,616	$	6,884,948

Construction loans:
Risk Rating:
Pass	$	17,203	$	26,689	$	16,578	$	—	$	—	$	—	$	22,850	$	—	$	83,320
Special Mention		—		—		—		—		4,951		—		—		—		4,951
Substandard		—		—		—		—		—		—		—		—		—
Doubtful & Loss		—		—		—		—		—		—		—		—		—
Total Construction loans:	$	17,203	$	26,689	$	16,578	$	—	$	4,951	$	—	$	22,850	$	—	$	88,271

SBA loans:
Risk Rating:
Pass	$	60,623	$	54,781	$	35,243	$	7,460	$	28,886	$	96,473	$	1,026	$	—	$	284,492
Special Mention		—		—		—		1,321		1,293		2,065		—		—		4,679
Substandard		—		—		—		—		556		1,181		—		—		1,737
Doubtful & Loss		—		—		—		—		—		—		—		—		-
Total SBA loans:	$	60,623	$	54,781	$	35,243	$	8,781	$	30,735	$	99,719	$	1,026	$	—	$	290,908

SBA - PPP loans:
Risk Rating:
Pass	$	—	$	5,515	$	3,572	$	—	$	—	$	—	$	—	$	—	$	9,087
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—		—
Doubtful & Loss		—		—		—		—		—		—		—		—		—
Total SBA - PPP loans:	$	—	$	5,515	$	3,572	$	—	$	—	$	—	$	—	$	—	$	9,087

Commercial and industrial loans:
Risk Rating:
Pass	$	154,765	$	135,162	$	80,763	$	101,192	$	42,731	$	85,406	$	305,589	$	7,775	$	913,383
Special Mention		3,955		761		459		1,693		462		8		15,156		544		23,038
Substandard		494		—		728		959		5,624		496		3,200		761		12,262
Doubtful & Loss		—		—		—		—		—		—		—		—		—
Total Commercial and industrial loans:	$	159,214	$	135,923	$	81,950	$	103,844	$	48,817	$	85,910	$	323,945	$	9,080	$	948,683


	Origination Year												Revolving loans amortized		Revolving loans converted to
December 31, 2022	2022		2021		2020		2019		2018		Prior		cost basis		term loans		Total
	(Dollars in thousands)
Dairy & livestock and agribusiness loans:
Risk Rating:
Pass	$	207	$	2,318	$	1,515	$	187	$	69	$	628	$	400,229	$	450	$	405,603
Special Mention		—		—		—		599		46		—		17,129		853		18,627
Substandard		1,041		—		40		—		95		113		1,841		6,204		9,334
Doubtful & Loss		—		—		—		—		—		—		—		—		—
Total Dairy & livestock and agribusiness loans:	$	1,248	$	2,318	$	1,555	$	786	$	210	$	741	$	419,199	$	7,507	$	433,564

Municipal lease finance receivables loans:
Risk Rating:
Pass	$	6,442	$	26,858	$	6,814	$	4,327	$	4,948	$	31,292	$	—	$	—	$	80,681
Special Mention		—		—		—		—		—		262		—		—		262
Substandard		—		—		—		—		—		183		—		—		183
Doubtful & Loss		—		—		—		—		—		—		—		—		—
Total Municipal lease finance receivables loans:	$	6,442	$	26,858	$	6,814	$	4,327	$	4,948	$	31,737	$	—	$	—	$	81,126

SFR mortgage loans:
Risk Rating:
Pass	$	63,761	$	46,748	$	45,819	$	33,585	$	15,836	$	58,730	$	—	$	—	$	264,479
Special Mention		—		—		943		—		—		—		—		—		943
Substandard		—		—		—		—		—		214		—		388		602
Doubtful & Loss		—		—		—		—		—		—		—		—		—
Total SFR mortgage loans:	$	63,761	$	46,748	$	46,762	$	33,585	$	15,836	$	58,944	$	—	$	388	$	266,024

Consumer and other loans:
Risk Rating:
Pass	$	7,653	$	3,722	$	1,298	$	926	$	79	$	1,277	$	58,578	$	1,107	$	74,640
Special Mention		—		561		—		—		—		—		590		—		1,151
Substandard		—		—		—		—		—		13		5		972		990
Doubtful & Loss		—		—		—		—		—		—		—		—		—
Total Consumer and other loans:	$	7,653	$	4,283	$	1,298	$	926	$	79	$	1,290	$	59,173	$	2,079	$	76,781

Total Loans:
Risk Rating:
Pass	$	1,674,387	$	1,499,083	$	1,149,567	$	690,504	$	599,162	$	2,163,284	$	963,645	$	48,948	$	8,788,580
Special Mention		7,240		13,436		12,686		36,589		28,398		78,625		33,783		1,397		212,154
Substandard		1,535		—		16,392		17,256		6,369		23,735		5,046		8,325		78,658
Doubtful & Loss		—		—		—		—		—		—		—		—		—
Total Loans:	$	1,683,162	$	1,512,519	$	1,178,645	$	744,349	$	633,929	$	2,265,644	$	1,002,474	$	58,670	$	9,079,392


	Origination Year												Revolving loans amortized		Revolving loans converted to
December 31, 2021	2021		2020		2019		2018		2017		Prior		cost basis		term loans		Total
	(Dollars in thousands)
Commercial real estate loans:
Risk Rating:
Pass	$	1,137,714	$	963,697	$	591,202	$	534,468	$	484,721	$	1,704,267	$	156,841	$	33,564	$	5,606,474
Special Mention		3,133		20,640		14,477		16,097		43,262		44,045		6,970		6,800		155,424
Substandard		—		—		2,859		6,933		4,646		7,329		5,951		114		27,832
Doubtful & Loss		—		—		—		—		—		—		—		—		—
Total Commercial real estate loans:	$	1,140,847	$	984,337	$	608,538	$	557,498	$	532,629	$	1,755,641	$	169,762	$	40,478	$	5,789,730

Construction loans:
Risk Rating:
Pass	$	10,511	$	15,896	$	7,236	$	—	$	—	$	—	$	25,262	$	—	$	58,905
Special Mention		—		—		—		3,359		—		—		—		—		3,359
Substandard		—		—		—		—		—		—		—		—		—
Doubtful & Loss		—		—		—		—		—		—		—		—		—
Total Construction loans:	$	10,511	$	15,896	$	7,236	$	3,359	$	—	$	—	$	25,262	$	—	$	62,264

SBA loans:
Risk Rating:
Pass	$	70,929	$	36,468	$	11,129	$	36,068	$	38,504	$	78,527	$	—	$	—	$	271,625
Special Mention		—		—		—		—		4,056		2,700		—		—		6,756
Substandard		—		—		—		785		4,092		5,342		—		—		10,219
Doubtful & Loss		—		—		—		—		—		—		—		—		—
Total SBA loans:	$	70,929	$	36,468	$	11,129	$	36,853	$	46,652	$	86,569	$	—	$	—	$	288,600

SBA - PPP loans:
Risk Rating:
Pass	$	183,614	$	2,969	$	—	$	—	$	—	$	—	$	—	$	—	$	186,583
Special Mention		—		—		—		—		—		—		—		—		—
Substandard		—		2		—		—		—		—		—		—		2
Doubtful & Loss		—		—		—		—		—		—		—		—		—
Total SBA - PPP loans:	$	183,614	$	2,971	$	—	$	—	$	—	$	—	$	—	$	—	$	186,585

Commercial and industrial loans:
Risk Rating:
Pass	$	145,494	$	81,944	$	126,647	$	54,690	$	32,455	$	73,600	$	267,659	$	6,992	$	789,481
Special Mention		1,556		1,929		127		1,396		394		26		9,369		177		14,974
Substandard		244		6		602		1,712		505		475		1,991		3,073		8,608
Doubtful & Loss		—		—		—		—		—		—		—		—		—
Total Commercial and industrial loans:	$	147,294	$	83,879	$	127,376	$	57,798	$	33,354	$	74,101	$	279,019	$	10,242	$	813,063


	Origination Year												Revolving loans amortized		Revolving loans converted to
December 31, 2021	2021		2020		2019		2018		2017		Prior		cost basis		term loans		Total
	(Dollars in thousands)
Dairy & livestock and agribusiness loans:
Risk Rating:
Pass	$	1,756	$	942	$	1,285	$	1,035	$	95	$	295	$	364,312	$	454	$	370,174
Special Mention		1,052		—		—		—		—		—		6,979		1,301		9,332
Substandard		—		—		—		37		—		—		—		6,676		6,713
Doubtful & Loss		—		—		—		—		—		—		—		—		—
Total Dairy & livestock and agribusiness loans:	$	2,808	$	942	$	1,285	$	1,072	$	95	$	295	$	371,291	$	8,431	$	386,219

Municipal lease finance receivables loans:
Risk Rating:
Pass	$	9,310	$	7,666	$	—	$	279	$	9,528	$	18,811	$	—	$	—	$	45,594
Special Mention		—		—		—		—		—		339		—		—		339
Substandard		—		—		—		—		—		—		—		—		—
Doubtful & Loss		—		—		—		—		—		—		—		—		—
Total Municipal lease finance receivables loans:	$	9,310	$	7,666	$	—	$	279	$	9,528	$	19,150	$	—	$	—	$	45,933

SFR mortgage loans:
Risk Rating:
Pass	$	48,813	$	49,261	$	41,776	$	19,877	$	16,046	$	61,965	$	451	$	—	$	238,189
Special Mention		8		—		—		—		—		—		—		—		8
Substandard		—		—		—		—		—		2,052		—		405		2,457
Doubtful & Loss		—		—		—		—		—		—		—		—		—
Total SFR mortgage loans:	$	48,821	$	49,261	$	41,776	$	19,877	$	16,046	$	64,017	$	451	$	405	$	240,654

Consumer and other loans:
Risk Rating:
Pass	$	5,145	$	1,947	$	1,415	$	469	$	386	$	1,611	$	58,060	$	3,378	$	72,411
Special Mention		839		—		—		—		—		150		591		403		1,983
Substandard		—		—		—		—		—		15		5		251		271
Doubtful & Loss		—		—		—		—		—		—		—		—		—
Total Consumer and other loans:	$	5,984	$	1,947	$	1,415	$	469	$	386	$	1,776	$	58,656	$	4,032	$	74,665

Total Loans:
Risk Rating:
Pass	$	1,613,286	$	1,160,790	$	780,690	$	646,886	$	581,735	$	1,939,076	$	872,585	$	44,388	$	7,639,436
Special Mention		6,588		22,569		14,604		20,852		47,712		47,260		23,909		8,681		192,175
Substandard		244		8		3,461		9,467		9,243		15,213		7,947		10,519		56,102
Doubtful & Loss		—		—		—		—		—		—		—		—		—
Total Loans:	$	1,620,118	$	1,183,367	$	798,755	$	677,205	$	638,690	$	2,001,549	$	904,441	$	63,588	$	7,887,713

Allowance for Credit Losses

Our allowance for credit losses is based upon lifetime loss rate models developed from an estimation framework that uses historical lifetime loss experiences to derive loss rates at a collective pool level. We measure the expected credit losses on a collective (pooled) basis for those loans that share similar risk characteristics. We have three collective loan pools: Commercial Real Estate, Commercial and Industrial, and Consumer. Our ACL amounts are largely driven by portfolio characteristics, including loss history and various risk attributes, and the economic outlook for certain macroeconomic variables. Risk attributes for commercial real estate loans include Original Loan to Value ratios ("OLTV"), origination year, loan seasoning, and macroeconomic variables that include GDP growth, commercial real estate price index and unemployment rate. Risk attributes for commercial and industrial loans include internal risk ratings, borrower industry sector, loan credit spreads and macroeconomic variables that include unemployment rate and BBB spread. The macroeconomic variables for Consumer include unemployment rate and GDP. The Commercial Real Estate methodology is applied over commercial real estate loans, a portion of construction loans, and a portion of SBA loans (excluding Paycheck Protection Program loans). The Commercial and Industrial methodology is applied over a substantial portion of the Company’s commercial and industrial loans, all dairy & livestock and agribusiness loans, municipal lease receivables, as well as the remaining portion of SBA loans (excluding Paycheck Protection Program loans). The Consumer methodology is applied to SFR mortgage loans, consumer loans, as well as the remaining construction loans. In addition to determining the quantitative life of loan loss rate to be applied against the amortized cost basis of the portfolio segments, management reviews current conditions and forecasts to determine whether adjustments are needed to ensure that the life of loan loss rates reflect both the current state of the portfolio, and expectations for macroeconomic changes. Our methodology for assessing the appropriateness of the allowance is reviewed on a regular basis and considers overall risks in the Bank’s loan portfolio. Refer

to Note 3 – Summary of Significant Accounting Policies contained herein for a more detailed discussion concerning the allowance for credit losses.

The ACL totaled $85.1 million as of December 31, 2022, compared to $65.0 million as of December 31, 2021. As a result of the acquisition of Suncrest, we recorded a provision for credit loss of $4.9 million on January 7, 2022 to establish the ACL for the acquired loans that were not considered PCD. The ACL at January 7, 2022, also included $8.6 million for the acquired Suncrest PCD loans. The 20.1 million increase in the ACL from December 31, 2021 to December 31, 2022 is comprised of approximately $893,000 in net recoveries, the $8.6 million for the Suncrest PCD loans and a $10.5 million provision for credit losses, including the $4.9 million provision recorded to establish the ACL for the non-PCD loans acquired from Suncrest. At December 31, 2022, the ACL as a percentage of total loans and leases, at amortized cost, was 0.94%. This compares to 0.82% as of December 31, 2021. Our economic forecast continues to be a blend of multiple forecasts produced by Moody’s. These U.S. economic forecasts include a baseline forecast, as well as downside forecasts. We continue to have the largest individual scenario weighting on the baseline forecast, with downside risks weighted among multiple forecasts. As of December 31, 2022, the resulting weighted forecast assumes GDP will increase by 0.3% in 2023, including a decline in GDP for the first half of 2023, followed by modest growth of 1.3% for 2024 and then grow by 2.8% in 2025. The unemployment rate is forecasted to be 4.8% in 2023, 5.1% in 2024 and then decline to 4.5% in 2025.

Management believes that the ACL was appropriate at December 31, 2022 and 2021. Due to inflationary pressures, rising interest rates and geopolitical events, no assurance can be given that economic conditions that adversely affect the Company’s service areas or other circumstances will not be reflected in increased provisions for credit losses in the future.

The following tables present the balance and activity related to the allowance for credit losses for held-for-investment loans by type for the periods presented.


	Year Ended December 31, 2022
	Ending Balance December 31, 2021		Charge-offs			Recoveries		Initial ACL for PCD Loans at Acquisition		Provision Recorded at Acquisition		Provision for (Recapture of) Credit Losses			Ending Balance December 31, 2022
	(Dollars in thousands)
Commercial real estate	$	50,950	$	—		$	—	$	5,086	$	4,127	$	4,643		$	64,806
Construction		765		—			12		122		58		745			1,702
SBA		2,668		(127	)		107		62		64		35			2,809
SBA - PPP		—		—			—		—		—		—			—
Commercial and industrial		6,669		(66	)		503		500		508		2,092			10,206
Dairy & livestock and agribusiness		3,066		—			468		2,832		149		(2,115	)		4,400
Municipal lease finance receivables		100		—			—		3		26		167			296
SFR mortgage		188		—			—		—		—		178			366
Consumer and other loans		613		(4	)		—		—		—		(77	)		532
Total allowance for credit losses	$	65,019	$	(197	)	$	1,090	$	8,605	$	4,932	$	5,668		$	85,117


	Year Ended December 31, 2021
	Ending Balance December 31, 2020		Charge-offs			Recoveries		Provision for (Recapture of) Credit Losses			Ending Balance December 31, 2021
	(Dollars in thousands)
Commercial real estate	$	75,439	$	—		$	—	$	(24,489	)	$	50,950
Construction		1,934		—			58		(1,227	)		765
SBA		2,992		(223	)		23		(124	)		2,668
SBA - PPP		—		—			—		—			—
Commercial and industrial		7,142		(3,019	)		12		2,534			6,669
Dairy & livestock and agribusiness		3,949		(118	)		—		(765	)		3,066
Municipal lease finance receivables		74		—			—		26			100
SFR mortgage		367		—			79		(258	)		188
Consumer and other loans		1,795		(11	)		26		(1,197	)		613
Total allowance for loan losses	$	93,692	$	(3,371	)	$	198	$	(25,500	)	$	65,019


	Year Ended December 31, 2020
	Ending Balance, prior to adoption of ASU 2016-13 December 31, 2019		Impact of Adoption of ASU 2016-13			Charge-offs			Recoveries		Provision for (Recapture of) Credit Losses			Ending Balance December 31, 2020
	(Dollars in thousands)
Commercial real estate	$	48,629	$	3,547		$	—		$	—	$	23,263		$	75,439
Construction		858		655			—			11		410			1,934
SBA		1,453		1,818			(362	)		72		11			2,992
SBA - PPP		—		—			—			—		—			—
Commercial and industrial		8,880		(2,442	)		(195	)		10		889			7,142
Dairy & livestock and agribusiness		5,255		(186	)		—			—		(1,120	)		3,949
Municipal lease finance receivables		623		(416	)		—			—		(133	)		74
SFR mortgage		2,339		(2,043	)		—			206		(135	)		367
Consumer and other loans		623		907			(109	)		59		315			1,795
Total allowance for credit losses	$	68,660	$	1,840		$	(666	)	$	358	$	23,500		$	93,692

Past Due and Nonperforming Loans

We seek to manage asset quality and control credit risk through diversification of the loan portfolio and the application of policies designed to promote sound underwriting and loan monitoring practices. The Bank’s Credit Management Division is in charge of monitoring asset quality, establishing credit policies and procedures and enforcing the consistent application of these policies and procedures across the Bank. Reviews of nonperforming, past due loans and larger credits, designed to identify potential charges to the allowance for credit losses, are conducted on an ongoing basis. These reviews consider such factors as the financial strength of borrowers and any guarantors, the value of the applicable collateral, loan loss experience, estimated credit losses, growth in the loan portfolio, prevailing economic conditions and other factors. Refer to Note 3 – Summary of Significant Accounting Policies, included herein, for additional discussion concerning the Bank’s policy for past due and nonperforming loans.

The following table presents the recorded investment in, and the aging of, past due loans (including nonaccrual loans), by type of loans as of the date presented.


	December 31, 2022
	30-59 Days Past Due		60-89 Days Past Due		Greater than 89 Days Past Due		Total Past Due		Loans Not Past Due		Total Loans and Financing Receivables
	(Dollars in thousands)
Commercial real estate
Owner occupied	$	—	$	—	$	2,639	$	2,639	$	2,482,471	$	2,485,110
Non-owner occupied		—		—		—		—		4,399,838		4,399,838
Construction
Speculative (1)		—		—		—		—		67,436		67,436
Non-speculative		—		—		—		—		20,835		20,835
SBA		374		182		443		999		289,909		290,908
SBA - PPP		—		—		—		—		9,087		9,087
Commercial and industrial		—		—		1,318		1,318		947,365		948,683
Dairy & livestock and agribusiness		—		—		269		269		433,295		433,564
Municipal lease finance receivables		—		—		—		—		81,126		81,126
SFR mortgage		—		388		—		388		265,636		266,024
Consumer and other loans		175		—		33		208		76,573		76,781
Total loans	$	549	$	570	$	4,702	$	5,821	$	9,073,571	$	9,079,392

(1)

Speculative construction loans are generally for properties where there is no identified buyer or renter.


	December 31, 2021
	30-59 Days Past Due		60-89 Days Past Due		Greater than 89 Days Past Due		Total Past Due		Loans Not Past Due		Total Loans and Financing Receivables
	(Dollars in thousands)
Commercial real estate
Owner occupied	$	438	$	—	$	3,383	$	3,821	$	2,127,979	$	2,131,800
Non-owner occupied		—		—		—		—		3,657,930		3,657,930
Construction
Speculative (1)		—		—		—		—		44,859		44,859
Non-speculative		—		—		—		—		17,405		17,405
SBA		417		1,145		339		1,901		286,699		288,600
SBA - PPP		—		—		—		—		186,585		186,585
Commercial and industrial		—		16		1,356		1,372		811,691		813,063
Dairy & livestock and agribusiness		—		—		—		—		386,219		386,219
Municipal lease finance receivables		—		—		—		—		45,933		45,933
SFR mortgage		1,040		—		—		1,040		239,614		240,654
Consumer and other loans		—		—		42		42		74,623		74,665
Total loans	$	1,895	$	1,161	$	5,120	$	8,176	$	7,879,537	$	7,887,713

(1)

Speculative construction loans are generally for properties where there is no identified buyer or renter.


	December 31, 2022
	Nonaccrual with No Allowance for Credit Losses		Total Nonaccrual (1) (3)		Loans Past Due Over 89 Days Still Accruing
	(Dollars in thousands)
Commercial real estate
Owner occupied	$	2,639	$	2,639	$	—
Non-owner occupied		18		18		—
Construction
Speculative (2)		—		—		—
Non-speculative		—		—		—
SBA		268		443		—
SBA - PPP		—		—		—
Commercial and industrial		771		1,320		—
Dairy & livestock and agribusiness		364		477		—
Municipal lease finance receivables		—		—		—
SFR mortgage		—		—		—
Consumer and other loans		34		33		—
Total loans	$	4,094	$	4,930	$	—

(1)

As of December 31, 2022, $228,000 of nonaccruing loans were current and $4.7 million were 90+ days past due.

(2)

Speculative construction loans are generally for properties where there is no identified buyer or renter.

(3)

Excludes $221,000 of guaranteed portion of nonaccrual SBA loans that are in process of collection.


	December 31, 2021
	Nonaccrual with No Allowance for Credit Losses		Total Nonaccrual (1)		Loans Past Due Over 89 Days Still Accruing
	(Dollars in thousands)
Commercial real estate
Owner occupied	$	3,607	$	3,607	$	—
Non-owner occupied		—		—		—
Construction
Speculative (2)		—		—		—
Non-speculative		—		—		—
SBA		521		1,034		—
SBA - PPP		—		—		—
Commercial and industrial		1,326		1,714		—
Dairy & livestock and agribusiness		—		—		—
Municipal lease finance receivables		—		—		—
SFR mortgage		380		380		—
Consumer and other loans		158		158		—
Total loans	$	5,992	$	6,893	$	—

(1)

As of December 31, 2021, $1.2 million of nonaccruing loans were current, $332,000 were 30-59 days past due, $267,000 were 60-89 days past due, and $5.1 million were 90+ days past due.

(2)

Speculative construction loans are generally for properties where there is no identified buyer or renter.

Collateral Dependent Loans

A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The following table presents the recorded investment in collateral-dependent loans by type of loans as of the date presented.


	December 31, 2022						Number of Loans
	Real Estate		Business Assets		Other		Dependent on Collateral
	(Dollars in thousands)
Commercial real estate	$	17,935	$	—	$	—		4
Construction		—		—		—		—
SBA		151		292		—		6
SBA - PPP		—		—		—		—
Commercial and industrial		87		2,774		81		13
Dairy & livestock and agribusiness		269		2,000		208		4
Municipal lease finance receivables		—		—		—		—
SFR mortgage		—		—		—		—
Consumer and other loans		33		—		—		1
Total collateral-dependent loans	$	18,475	$	5,066	$	289		28


	December 31, 2021						Number of Loans
	Real Estate		Business Assets		Other		Dependent on Collateral
	(Dollars in thousands)
Commercial real estate	$	6,001	$	—	$	—		6
Construction		—		—		—		—
SBA		405		517		112		10
SBA - PPP		—		—		—		—
Commercial and industrial		688		5,133		96		19
Dairy & livestock and agribusiness		—		—		—		—
Municipal lease finance receivables		—		—		—		—
SFR mortgage		380		—		—		2
Consumer and other loans		158		—		—		2
Total collateral-dependent loans	$	7,632	$	5,650	$	208		39

Reserve for Unfunded Loan Commitments

The allowance for off-balance sheet credit exposure relates to commitments to extend credit, letters of credit and undisbursed funds on lines of credit. The Company evaluates credit risk associated with the off-balance sheet loan commitments in the same manner as it evaluates credit risk associated with the loan and lease portfolio. The Bank's ACL methodology produced an allowance of $8.0 million for the off-balance sheet credit exposures as of December 31, 2022. There was no provision or recapture of provision for unfunded commitments for the year ended December 31, 2022 and December 31, 2021. As of December 31, 2022 and December 31, 2021 the balance in this reserve was $8.0 million and was included in other liabilities.

Troubled Debt Restructurings

Loans that are reported as TDRs and are considered uncollectible, charge-off amounts are taken on an individual loan basis, as deemed appropriate. The majority of restructured loans are loans for which the terms of repayment have been renegotiated, resulting in a reduction in interest rate or deferral of principal. Refer to Note 3 — Summary of Significant Accounting Policies, Troubled Debt Restructurings, included herein, for a more detailed discussion regarding TDRs.

As of December 31, 2022, there were $7.8 million of loans classified as a TDR, all of which were performing. TDRs on accrual status are comprised of loans that were accruing interest at the time of restructuring or have demonstrated repayment performance in compliance with the restructured terms for a sustained period and for which the Company anticipates full repayment of both principal and interest. At December 31, 2022, performing TDRs were comprised of four

commercial and industrial loans of $4.8 million, one dairy & livestock and agribusiness loan of $2.0 million, and five SFR mortgage loans of $1.0 million.

The majority of TDRs have no specific allowance allocated as any impairment amount is normally charged off at the time the loan is considered uncollectible. We have no allocated allowance to TDRs as of December 31, 2022 and December 31, 2021.

The following table provides a summary of the activity related to TDRs for the periods presented.


	Year Ended December 31,
	2022			2021
	(Dollars in thousands)
Performing TDRs:
Beginning balance	$	5,293		$	2,159
New modifications		5,204			7,340
Payoffs/payments, net and other		(2,680	)		(4,206	)
TDRs returned to accrual status		—			—
TDRs placed on nonaccrual status		—			—
Ending balance	$	7,817		$	5,293
Nonperforming TDRs:
Beginning balance	$	—		$	—
New modifications		—			—
Charge-offs		—			—
Transfer to OREO		—			—
Payoffs/payments, net and other		—			—
TDRs returned to accrual status		—			—
TDRs placed on nonaccrual status		—			—
Ending balance	$	—		$	—
Total TDRs	$	7,817		$	5,293

The following tables summarize loans modified as TDRs for the periods presented.

Modifications (1)


	For the Year Ended December 31, 2022
	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Outstanding Recorded Investment at December 31, 2022		Financial Effect Resulting From Modifications (2)
	(Dollars in thousands)
Commercial real estate:
Interest rate reduction		—	$	—	$	—	$	—	$	—
Change in amortization period or maturity		—		—		—		—		—
Commercial and industrial:
Interest rate reduction		—		—		—		—		—
Change in amortization period or maturity		2		3,204		3,204		3,204		—
Dairy & livestock and agribusiness:
Interest rate reduction		1		2,000		2,000		2,000		—
Change in amortization period or maturity		—		—		—		—		—
SFR mortgage:
Interest rate reduction		—		—		—		—		—
Change in amortization period or maturity		—		—		—		—		—
Total loans		3	$	5,204	$	5,204	$	5,204	$	—


	For the Year Ended December 31, 2021
	Number of Loans		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Outstanding Recorded Investment at December 31, 2021		Financial Effect Resulting From Modifications (2)
	(Dollars in thousands)
Commercial real estate:
Interest rate reduction		1	$	2,453	$	2,453	$	2,394	$	—
Change in amortization period or maturity		—		—		—		—		—
Commercial and industrial:
Interest rate reduction		—		—		—		—		—
Change in amortization period or maturity		3		4,887		4,887		1,859		—
SFR mortgage:
Interest rate reduction		—		—		—		—		—
Change in amortization period or maturity		—		—		—		—		—
Total loans		4	$	7,340	$	7,340	$	4,253	$	—

(1)

The tables above exclude modified loans that were paid off prior to the end of the period.

(2)

Financial effects resulting from modifications represent charge-offs and current allowance for credit losses at modification date.

As of December 31, 2022 and 2021, there were no loans that were modified as a TDR within the previous 12 months that subsequently defaulted.

In accordance with regulatory guidance, if borrowers are less than 30 days past due on their loans, upon implementation of the modification program, or as allowed under the CARES Act if borrowers are less than 30 days past due on their loans as of December 31, 2019, and enter into short-term loan modifications offered as a result of COVID-19, their loans generally continue to be considered performing loans and continue to accrue interest during the period of the loan modification. For borrowers who are 30 days or more past due when entering into loan modifications offered as a result of COVID-19, we evaluate the loan modifications under our existing troubled debt restructuring framework, and where such a loan modification would result in a concession to a borrower experiencing financial difficulty, the loan will be accounted for as a TDR and will generally not accrue interest. For all borrowers who enroll in these loan modification programs offered as a result of COVID-19, the delinquency status of the borrowers is frozen, resulting in a static delinquency metric during the deferral period. Upon exiting the deferral program, the measurement of loan delinquency will resume where it had left off upon entry into the program.