
	December 31,		December 31,
	2022		2021
	(dollars in thousands)
Commercial and industrial loans	$	312,628	$	419,060
Real estate loans:
Construction, land, and land development	214,055		183,594
Residential real estate	449,157		204,389
Commercial real estate	1,048,752		835,587
Consumer and other loans	608,771		108,871
Gross loans receivable	2,633,363		1,751,501
Net deferred origination fees and premiums	(6,107)		(8,766)
Loans receivable	$	2,627,256	$	1,742,735

Included in commercial and industrial loans is $146.0 million and $202.9 million in capital call lines, as of December 31, 2022 and December 31, 2021, respectively, provided to venture capital firms through one of our BaaS clients. These loans are secured by the capital call rights and are individually underwritten to the Bank’s credit standards and the underwriting is reviewed by the Bank on every line. Also included in commercial and industrial loans are Paycheck Protection Program (“PPP”) loans of $4.7 million and $111.8 million at December 31, 2022 and December 31, 2021, respectively. PPP loans are 100% guaranteed by the SBA.

The Company, at times, purchases individual loans through the community bank at fair value as of the acquisition date. The Company held purchased loans with remaining balances totaled $9.6 million and $12.8 million as of December 31, 2022 and December 31, 2021, respectively. Unamortized premiums totaled $167,000 and $223,000 as of December 31, 2022 and December 31, 2021, respectively, and are amortized into interest income over the life of the loans. These loans are included in the applicable loan category depending upon the collateral and purpose of the individual loan.

The Company purchased loans from CCBX partners, at par, through agreements with those CCBX partners, and those loans had a remaining balance of $157.4 million as of December 31, 2022 and $59.7 million as of December 31, 2021. As of December 31, 2022, $146.1 million is included in consumer and other loans and $11.3 million is included in commercial and industrial loans, compared to $59.4 million in consumer and other loans and $281,000 in commercial and industrial loans as of December 31, 2021.

Commercial and industrial loans - Commercial and industrial loans are secured by business assets including inventory, receivables and machinery and equipment of businesses located generally in the Company’s primary market area and capital calls on venture and investment funds. Also included in commercial and industrial loans are $14.9 million in unsecured loans originated through CCBX partners as of December 31, 2022, compared to zero as of December 31, 2021. Loan types include PPP loans, revolving lines of credit, term loans, and loans secured by liquid collateral such as cash deposits or marketable securities. Also included in commercial and industrial loans are loans to other financial institutions. Additionally, the Company issues letters of credit on behalf of its customers. Risk arises primarily due to the difference between expected and actual cash flows of the borrowers. In addition, the recoverability of the Company’s investment in these loans is also dependent on other factors primarily dictated by the type of collateral securing these loans. The fair value of the collateral securing these loans may fluctuate as market conditions change. In the case of loans secured by accounts receivable, the recovery of the Company’s investment is dependent upon the borrower’s ability to collect amounts due from its customers.

For the year ended December 31, 2022, $146.0 million in CCBX capital call lines are included in commercial and industrial loans compared to $202.9 million at December 31, 2021. Capital call lines are provided to venture capital firms. These loans are secured by the capital call rights and are individually underwritten to the Bank’s credit standards and the underwriting is reviewed by the Bank on every line/loan.

Construction, land and land development loans – The Company originates loans for the construction of 1-4 family, multifamily, and CRE properties in the Company’s market area. Construction loans are considered to have higher risks due to construction completion and timing risk, the ultimate repayment being sensitive to interest rate changes, government regulation of real property and the availability of long-term financing. Additionally, economic conditions may impact the Company’s ability to recover its investment in construction loans, as adverse economic conditions may negatively impact the real estate market, which could affect the borrower’s ability to complete and sell the project. Additionally, the fair value of the underlying collateral may fluctuate as market conditions change. The Company occasionally originates land loans for the purpose of facilitating the ultimate construction of a home or commercial building. The primary risks include the borrower’s ability to pay and the inability of the Company to recover its investment due to a material decline in the fair value of the underlying collateral.

Residential real estate - Residential real estate includes various types of loans for which the Company holds real property as collateral. Included in this segment are multi-family loans, first lien single family loans, which the Company occasionally purchases to diversify its loan portfolio, home equity lines of credit and rental portfolios secured by one-to-four family homes. The primary risks of residential real estate loans include the borrower’s inability to pay, material decreases in the value of the collateral, and significant increases in interest rates which may make the loan unprofitable.

Commercial real estate (includes owner occupied and nonowner occupied) - Commercial real estate loans include various types of loans for which the Company holds real property as collateral. We make commercial mortgage loans collateralized by owner-occupied and non-owner-occupied real estate, as well as multi-family residential loans. The primary risks of commercial real estate loans include the borrower’s inability to pay, material decreases in the value of the collateralized real estate and significant increases in interest rates, which may make the real estate loan unprofitable. Commercial real estate loans may be more adversely affected by conditions in the real estate markets or in the general economy.

Consumer and other loans – The community bank originates a limited number of consumer loans, generally for banking customers only, which consist primarily of lines of credit, saving account secured loans, and auto loans. CCBX originates consumer loans including credit cards, consumer term loans and secured and unsecured lines of credit. This loan category also includes overdrafts. Repayment of these loans is dependent on the borrower’s ability to pay and the fair value of the underlying collateral.


	30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		Recorded Investment 90 Days or More Past Due and Still Accruing
	(dollars in thousands)
December 31, 2022
Commercial and industrial loans	$	393	$	486	$	879	$	311,749	$	312,628	$	404
Real estate loans:
Construction, land and land development	—		66		66		213,989		214,055		—
Residential real estate	1,016		876		1,892		447,265		449,157		876
Commercial real estate	95		6,901		6,996		1,041,756		1,048,752		—
Consumer and other loans	37,932		24,815		62,747		546,024		608,771		24,815
	$	39,436	$	33,144	$	72,580	$	2,560,783	$	2,633,363	$	26,095
Less net deferred origination fees and premiums									(6,107)
Loans receivable									$	2,627,256


	30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		Recorded Investment 90 Days or More Past Due and Still Accruing
	(dollars in thousands)
December 31, 2021
Commercial and industrial loans	$	259	$	38	$	297	$	418,763	$	419,060	$	—
Real estate loans:
Construction, land and land development	—		—		—		183,594		183,594		—
Residential real estate	809		94		903		203,486		204,389		39
Commercial real estate	—		—		—		835,587		835,587		—
Consumer and other loans	3,901		1,467		5,368		103,503		108,871		1,467
	$	4,969	$	1,599	$	6,568	$	1,744,933	$	1,751,501	$	1,506
Less net deferred origination fees and premiums									(8,766)
Loans receivable									$	1,742,735


	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance
	(dollars in thousands)
December 31, 2022
Commercial and industrial loans	$	124	$	—	$	113	$	113	$	95
Real estate loans:
Construction, land and land development	67		66		—		66		—
Residential real estate	—		—		—		—		—
Commercial real estate	6,901		6,901		—		6,901		—
Total	$	7,092	$	6,967	$	113	$	7,080	$	95

December 31, 2021
Commercial and industrial loans	$	173	$	—	$	166	$	166	$	132
Real estate loans:
Residential real estate	69		55		—		55		—
Total	$	242	$	55	$	166	$	221	$	132


	December 31, 2022				December 31, 2021
	Average Recorded Investment		Interest Income Recognized		Average Recorded Investment		Interest Income Recognized
	(dollars in thousands)
Commercial and industrial loans	$	121	$	—	$	498	$	—
Real estate loans:
Construction, land and land development	40		—		—		—
Residential real estate	32		—		143		—
Commercial real estate	1,395		—		—		—
Total	$	1,588	$	—	$	641	$	—

In some circumstances, the Company grants restructurings in response to borrower financial difficulty, and generally provides for a temporary modification of loan repayment terms. The restructured loans on accrual status represent the only impaired loans accruing interest. In order for a restructured loan to be considered for accrual status, the loan’s collateral coverage generally will be greater than or equal to 100% of the loan balance, the loan is current on payments, and the borrower must either prefund an interest reserve or demonstrate the ability to make payments from a verified source of cash flow for an extended period of time, usually at least six months in duration.

Pursuant to guidance from the federal bank regulatory agencies, the Company deferred or modified payments on existing loans to assist customers financially during the COVID-19 pandemic and economic shutdown. As of December 31, 2022 all deferred and modified loans during the COVID-19 pandemic have either returned to active status or paid off. In accordance with GAAP, the CARES Act, as amended by the Consolidated Appropriations Act, 2021, and interagency guidance issued on March 22, 2020 and April 7, 2020, these short-term modifications, made on a good faith basis in response to the COVID-19 pandemic to borrowers that were current prior to any relief, were not considered TDRs.

The accrual of interest on community bank loans is discontinued when, in management’s opinion, the borrower may be unable to meet payments as they become due or when they are 90 days past due as to either principal or interest, unless they are well secured and in the process of collection. Installment/closed-end, and revolving/open-end consumer loans originated through CCBX lending partners will continue to accrue interest until 120 and 180 days past due, respectively and an allowance is recorded through provision expense for these probable incurred losses. For installment/closed-end and revolving/open-end consumer loans originated through CCBX lending partners with balances outstanding beyond 120 days and 180 days past due, respectively, principal and capitalized interest outstanding is charged off against the allowance and accrued interest outstanding is reversed against interest income. These consumer loans are reported as substandard, 90 days or more days past due and still accruing.

When loans are placed on nonaccrual status, all accrued interest is reversed from current period earnings. Payments received on nonaccrual loans are generally applied as a reduction to the loan principal balance. If the likelihood of further loss is removed, the Company will recognize interest on a cash basis only. Loans may be returned to accruing status if the Company believes that all remaining principal and interest is fully collectible and there has been at least six months of sustained repayment performance since the loan was placed on nonaccrual.

Federal regulations require that the Company periodically evaluate the risks inherent in its loan portfolio. In addition, the Company’s regulatory agencies have authority to identify problem loans and, if appropriate, require them to be reclassified. The Company classifies some loans as Watch or Other Loans Especially Mentioned (“OLEM”). Loans classified as Watch are performing assets but have elements of risk that require more monitoring than other performing loans and are reported in the OLEM column in the following table. Loans classified as OLEM are assets that continue to perform but have shown deterioration in credit quality and require close monitoring. There are three classifications for problem loans: Substandard, Doubtful, and Loss. Substandard loans have one or more defined weaknesses and are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Revolving (open-ended loans, such as credit cards) and installment (closed end) consumer loans originated through CCBX partners continue to accrue interest until they are charged-off at 120 days past due for installment loans (primarily unsecured loans to consumers) and 180 days past due for revolving loans (primarily credit cards) and are classified as substandard. Doubtful loans have the weaknesses of loans classified as Substandard, with additional characteristics that suggest the weaknesses make collection or recovery in full after liquidation of collateral questionable on the basis of currently existing facts, conditions, and values. There is a high possibility of loss in loans classified as Doubtful. A loan classified as Loss is considered uncollectible and of such little value that continued classification of the credit as a loan is not warranted. If a loan or a portion thereof is classified as Loss, it must be charged-off, meaning the amount of the loss is charged against the allowance for loan losses, thereby reducing that reserve.


	Pass		Other Loans Especially Mentioned		Sub- Standard		Doubtful		Total
	(dollars in thousands)
December 31, 2022
Commercial and industrial loans	$	304,840	$	7,219	$	569	$	—	$	312,628
Real estate loans:
Construction, land, and land development	206,304		7,685		66		—		214,055
Residential real estate	448,185		96		876		—		449,157
Commercial real estate	1,030,650		11,201		6,901		—		1,048,752
Consumer and other loans	583,956		—		24,815		—		608,771
	$	2,573,935	$	26,201	$	33,227	$	—	2,633,363
Less net deferred origination fees									(6,107)
Loans receivable									$	2,627,256

December 31, 2021
Commercial and industrial loans	$	416,642	$	2,180	$	238	$	—	$	419,060
Real estate loans:
Construction, land, and land development	183,594		—		—		—		183,594
Residential real estate	204,173		122		94		—		204,389
Commercial real estate	824,676		10,911		—		—		835,587
Consumer and other loans	107,404		—		1,467		—		108,871
	$	1,736,489	$	13,213	$	1,799	$	—	1,751,501
Less net deferred origination fees									(8,766)
Loans receivable									$	1,742,735

The Company’s ALLL covers estimated credit losses on individually evaluated loans that are determined to be impaired as well as estimated probable losses inherent in the remainder of the loan portfolio. The ALLL for the community bank is prepared using the information provided by the Company’s credit review process and our historical loss data, together with data from peer institutions and economic information gathered from published sources.

The loan portfolio is segmented into groups of loans with similar risk profiles. Each segment possesses varying degrees of risk based on the type of loan, the type of collateral, and the sensitivity of the borrower or industry to changes in external factors such as economic conditions. An estimated loss rate calculated from the community bank’s actual historical loss rates adjusted for current portfolio trends, economic conditions, and other relevant internal and external factors, is applied to each group’s aggregate loan balances.

CCBX loans have a higher level of expected losses than our community bank loans, which is reflected in the factors for the allowance for loan losses. Agreements with our CCBX partners provide for a credit enhancement which protects the Bank by absorbing incurred losses. In accordance with accounting guidance, we estimate and record a provision for probable losses for these CCBX loans and reclassified negative deposit accounts. When the provision for CCBX loan losses and provision for unfunded commitments are recorded, a credit enhancement asset is also recorded on the balance sheet through noninterest income (BaaS credit enhancements). Incurred losses are recorded in the allowance for loan losses. The credit enhancement asset is relieved when credit enhancement recoveries are received from the CCBX partner. Although agreements with our CCBX partners include credit enhancements that provide protection to the Bank from credit and fraud losses, the Bank would be exposed to additional loan losses if our partner is unable to fulfill its contracted obligations. In accordance with the program agreement for one CCBX partner, the Company is responsible for credit losses on approximately 10% of a $114.5 million loan portfolio. At December 31, 2022, 10% of this portfolio represented $11.5 million in loans. The partner is responsible for credit losses on approximately 90% of this portfolio and for fraud losses on 100% of this portfolio. The Company earns 100% of the revenue on the aforementioned $11.5 million of loans. For the year ended December 31, 2022, there were $216,000 in net charge-offs on the portion of loans for which the Company is responsible for credit losses.


	Commercial and Industrial		Construction, Land, and Land Development		Residential Real Estate		Commercial Real Estate		Consumer and Other		Unallocated		Total
	(dollars in thousands)
Twelve Months Ended December 31, 2022
ALLL balance, December 31, 2021	$	3,221	$	6,984	$	4,598	$	6,590	$	7,092	$	147	$	28,632
Provision for loan losses or (recapture)	2,125		441		(4)		(1,120)		76,604		1,018		79,064
	5,346		7,425		4,594		5,470		83,696		1,165		107,696
Loans charged-off	(555)		—		(452)		—		(32,742)		—		(33,749)
Recoveries of loans previously charged-off	40		—		—		—		42		—		82
Net (charge-offs) recoveries	(515)		—		(452)		—		(32,700)		—		(33,667)
ALLL balance, December 31, 2022	$	4,831	$	7,425	$	4,142	$	5,470	$	50,996	$	1,165	$	74,029

As of December 31, 2022
ALLL amounts allocated to
Individually evaluated for impairment	$	95	$	—	$	—	$	—	$	—	$	—	$	95
Collectively evaluated for impairment	4,736		7,425		4,142		5,470		50,996		1,165		73,934
ALLL balance, December 31, 2022	$	4,831	$	7,425	$	4,142	$	5,470	$	50,996	$	1,165	$	74,029
Loans individually evaluated for impairment	$	113	$	66	$	—	$	6,901	$	—			$	7,080
Loans collectively evaluated for impairment	312,515		213,989		449,157		1,041,851		608,771				2,626,283
Loan balance, December 31, 2022	$	312,628	$	214,055	$	449,157	$	1,048,752	$	608,771			$	2,633,363
As of December 31, 2021
Loan balance, December 31, 2021	$	419,060	$	183,594	$	204,389	$	835,587	$	108,871			$	1,751,501


	Commercial and Industrial		Construction, Land, and Land Development		Residential Real Estate		Commercial Real Estate		Consumer and Other		Unallocated		Total
	(dollars in thousands)
Twelve Months Ended December 31, 2021
Balance, December 31, 2020	$	3,353	$	3,545	$	3,410	$	7,810	$	127	$	1,017	$	19,262
Provision for loan losses or (recapture)	23		3,439		1,267		(1,220)		7,276		(870)		9,915
	3,376		6,984		4,677		6,590		7,403		147		29,177
Loans charged-off	(222)		—		(79)		—		(339)		—		(640)
Recoveries of loans previously charged-off	67		—		—		—		28		—		95
Net (charge-offs) recoveries	(155)		—		(79)		—		(311)		—		(545)
Balance, December 31, 2021	$	3,221	$	6,984	$	4,598	$	6,590	$	7,092	$	147	$	28,632

As of December 31, 2021
ALLL amounts allocated to
Individually evaluated for impairment	$	132	$	—	$	—	$	—	$	—	$	—	$	132
Collectively evaluated for impairment	3,089		6,984		4,598		6,590		7,092		147		28,500
ALLL balance, December 31, 2021	$	3,221	$	6,984	$	4,598	$	6,590	$	7,092	$	147	$	28,632
Loans individually evaluated for impairment	$	166	$	—	$	55	$	—	$	—			$	221
Loans collectively evaluated for impairment	418,894		183,594		204,334		835,587		108,871				1,751,280
Loan balance, December 31, 2021	$	419,060	$	183,594	$	204,389	$	835,587	$	108,871			$	1,751,501
As of December 31, 2020
Loan balance, December 31, 2020	$	539,200	$	94,423	$	143,869	$	774,925	$	3,916			$	1,556,333