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Allowance for Credit Losses

9 Months Ended

Sep. 30, 2023

Note 6 Allowance for Credit Losses

The tables below detail the Company’s allowance for credit losses as of the dates shown:


	Three months ended September 30, 2023
			Non-owner
			occupied
			commercial		Residential
	Commercial		real estate		real estate		Consumer		Total
Beginning balance	$	42,058	$	30,768	$	19,331	$	424	$	92,581
Charge-offs		(239)		—		—		(301)		(540)
Recoveries		241		1		7		31		280
Provision expense (release) for credit losses		3,231		(2,301)		(47)		242		1,125
Ending balance	$	45,291	$	28,468	$	19,291	$	396	$	93,446


	Nine months ended September 30, 2023
			Non-owner
			occupied
			commercial		Residential
	Commercial		real estate		real estate		Consumer		Total
Beginning balance	$	37,608	$	32,050	$	19,306	$	589	$	89,553
Charge-offs		(242)		—		(46)		(930)		(1,218)
Recoveries		286		3		19		78		386
Provision expense (release) for credit losses		7,639		(3,585)		12		659		4,725
Ending balance	$	45,291	$	28,468	$	19,291	$	396	$	93,446


	Three months ended September 30, 2022
			Non-owner
			occupied
			commercial		Residential
	Commercial		real estate		real estate		Consumer		Total
Beginning balance	$	32,011	$	8,426	$	10,072	$	351	$	50,860
Day 1 CECL provision expense		2,261		2,327		596		17		5,201
Purchase credit deteriorated ("PCD") allowance for credit loss at acquisition		2,257		2		215		—		2,474
Charge-offs		—		—		—		(253)		(253)
Recoveries		40		—		3		23		66
Provision expense for credit losses		1,651		3,419		1,988		217		7,275
Ending balance	$	38,220	$	14,174	$	12,874	$	355	$	65,623


	Nine months ended September 30, 2022
			Non-owner
			occupied
			commercial		Residential
	Commercial		real estate		real estate		Consumer		Total
Beginning balance	$	31,256	$	10,033	$	8,056	$	349	$	49,694
Day 1 CECL provision expense		2,261		2,327		596		17		5,201
PCD allowance for credit loss at acquisition		2,257		2		215		—		2,474
Charge-offs		(754)		—		(2)		(582)		(1,338)
Recoveries		115		21		49		71		256
Provision expense for credit losses		3,085		1,791		3,960		500		9,336
Ending balance	$	38,220	$	14,174	$	12,874	$	355	$	65,623

In evaluating the loan portfolio for an appropriate ACL level, excluding loans evaluated individually, loans were grouped into segments based on broad characteristics such as primary use and underlying collateral. Within the segments, the portfolio was further disaggregated into classes of loans with similar attributes and risk characteristics for purposes of developing the underlying data used within the discounted cash flow model including, but not limited to, prepayment and recovery rates as well as loss rates tied to macro-economic conditions within management’s reasonable and supportable forecast. The ACL also includes subjective adjustments based

upon qualitative risk factors including asset quality, loss trends, lending management, portfolio growth and loan review/internal audit results.

Net charge-offs on loans during the three and nine months ended September 30, 2023 were $0.3 million and $0.8 million, respectively. The Company recorded an increase in the allowance for credit losses of $1.1 million during the three months ended September 30, 2023, primarily driven by loan growth. During the nine months ended September 30, 2023, the Company recorded an increase in the allowance for credit losses of $4.7 million, driven by loan growth and higher reserve requirements.

Net charge-offs on loans during the three and nine months ended September 30, 2022 were $0.2 million and $1.1 million, respectively. The Company recorded an increase in the allowance for credit losses of $15.0 million during the three months ended September 30, 2022. During the nine months ended September 30, 2022, the Company recorded an increase in the allowance for credit losses of $17.0 million, driven by record loan growth, higher reserve requirements from changes in the CECL model’s underlying macro-economic forecast and Day 1 reserve requirements for the acquired Rock Canyon Bank (“RCB”) portfolio.

The Company has elected to exclude AIR from the allowance for credit losses calculation. As of September 30, 2023 and December 31, 2022, AIR from loans totaled $41.7 million and $31.8 million, respectively.