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Loans Receivable and Allowance for Credit Losses

6 Months Ended

Jun. 30, 2023

Loans Receivable and Allowance for Credit Losses

The following is a summary of loans receivable by segment:


	June 30, 2023		December 31, 2022
	(Dollars in thousands)
Loan portfolio composition
Commercial real estate (“CRE”) loans	$	9,192,160	$	9,414,580
Commercial and industrial (“C&I”) loans	4,805,126		5,109,532
Residential mortgage loans	834,377		846,080
Consumer and other loans	33,147		33,348
Total loans receivable, net of deferred costs and fees	14,864,810		15,403,540
Allowance for credit losses	(172,996)		(162,359)
Loans receivable, net of allowance for credit losses	$	14,691,814	$	15,241,181

Loans receivable is stated at the amount of unpaid principal, adjusted for net deferred fees and costs, premiums and discounts, and purchase accounting fair value adjustments. The Company had net deferred fees of $10.5 million and $11.1 million at June 30, 2023 and December 31, 2022, respectively.

The loan portfolio consists of four segments: CRE loans, C&I loans, residential mortgage loans, and consumer and other loans. CRE loans are extended for the purchase and refinance of commercial real estate and are generally secured by first deeds of trust and collateralized by residential or commercial properties. C&I loans are loans provided to businesses for various purposes such as working capital, purchasing inventory, debt refinancing, business acquisitions, international trade finance activities, and other business-related financing needs. This segment includes warehouse lines of credit for residential mortgages and Small Business Administration (“SBA”) loans. Residential mortgage loans are extended for personal, family, or household use and are secured by a mortgage or deed of trust. Consumer and other loans consist of home equity, credit card, and other personal loans.

The Company had loans receivable of $14.86 billion at June 30, 2023, a decrease of $538.7 million, or 3.5%, from December 31, 2022. The largest decrease in loans receivable during the six months ended June 30, 2023, was in C&I and CRE loans. During the six months ended June 30, 2023, loan payoffs and paydowns exceeded new origination volume, reflecting, in part, declining customer demand in a high interest rate environment, and the Company’s disciplined pricing and conservative underwriting.

The Company had $49.2 million in loans held for sale at June 30, 2023, compared with $49.2 million at December 31, 2022. Loans held for sale at June 30, 2023, consisted of $3.2 million in residential mortgage loans and $46.0 million in other loans. Loans held for sale are not included in the loans receivable table presented above.

The tables below detail the activity in the allowance for credit losses (“ACL”) by portfolio segment for the three and six months ended June 30, 2023 and 2022.



	CRE Loans		C&I Loans		Residential Mortgage Loans		Consumer and Other Loans		Total
	(Dollars in thousands)
Three Months Ended June 30, 2023
Balance, beginning of period	$	108,835	$	42,790	$	11,253	$	666	$	163,544

Provision (credit) for credit losses	(3,076)		11,013		730		233		8,900
Loans charged off	(561)		(298)		—		(120)		(979)
Recoveries of charge offs	123		1,389		—		19		1,531
Balance, end of period	$	105,321	$	54,894	$	11,983	$	798	$	172,996

Six Months Ended June 30, 2023
Balance, beginning of period	$	95,884	$	56,872	$	8,920	$	683	$	162,359
ASU 2022-02 day 1 adoption adjustment	19		(426)		—		—		(407)
Provision (credit) for credit losses	9,787		(2,487)		3,063		237		10,600
Loans charged off	(561)		(738)		—		(175)		(1,474)
Recoveries of charge offs	192		1,673		—		53		1,918
Balance, end of period	$	105,321	$	54,894	$	11,983	$	798	$	172,996


	CRE Loans		C&I Loans		Residential Mortgage Loans		Consumer and Other Loans		Total
	(Dollars in thousands)
Three Months Ended June 30, 2022
Balance, beginning of period	$	106,545	$	35,676	$	4,262	$	967	$	147,450
Provision (credit) for credit losses	(7,229)		8,715		1,817		(103)		3,200
Loans charged off	(476)		(172)		—		(64)		(712)
Recoveries of charge offs	984		633		—		25		1,642
Balance, end of period	$	99,824	$	44,852	$	6,079	$	825	$	151,580

Six Months Ended June 30, 2022
Balance, beginning of period	$	108,440	$	27,811	$	3,316	$	983	$	140,550
Provision (credit) for credit losses	(25,542)		15,051		2,763		(72)		(7,800)
Loans charged off	(1,751)		(349)		—		(115)		(2,215)
Recoveries of charge offs	18,677		2,339		—		29		21,045
Balance, end of period	$	99,824	$	44,852	$	6,079	$	825	$	151,580

The following tables break out the allowance for credit losses and loan balance by measurement methodology at June 30, 2023 and December 31, 2022:


	June 30, 2023
	CRE Loans		C&I Loans		Residential Mortgage Loans		Consumer and Other Loans		Total
	(Dollars in thousands)
Allowance for credit losses:
Individually evaluated	$	1,150	$	11,706	$	245	$	72	$	13,173
Collectively evaluated	104,171		43,188		11,738		726		159,823
Total	$	105,321	$	54,894	$	11,983	$	798	$	172,996

Loans outstanding:
Individually evaluated	$	29,096	$	23,042	$	8,583	$	180	$	60,901
Collectively evaluated	9,163,064		4,782,084		825,794		32,967		14,803,909
Total	$	9,192,160	$	4,805,126	$	834,377	$	33,147	$	14,864,810


	December 31, 2022
	CRE Loans		C&I Loans		Residential Mortgage Loans		Consumer and Other Loans		Total
	(Dollars in thousands)
Allowance for credit losses:
Individually evaluated	$	870	$	2,941	$	24	$	21	$	3,856
Collectively evaluated	95,014		53,931		8,896		662		158,503
Total	$	95,884	$	56,872	$	8,920	$	683	$	162,359

Loans outstanding:
Individually evaluated	$	43,461	$	12,477	$	9,775	$	436	$	66,149
Collectively evaluated	9,371,119		5,097,055		836,305		32,912		15,337,391
Total	$	9,414,580	$	5,109,532	$	846,080	$	33,348	$	15,403,540

At June 30, 2023 and December 31, 2022, reserves for unfunded loan commitments recorded in other liabilities were $3.1 million and $1.4 million, respectively. For the three and six months ended June 30, 2023, the Company recorded additions to reserves for unfunded commitments totaling $110 thousand and $1.7 million, respectively. For the three and six months ended June 30, 2022, the Company recorded additions to reserves for unfunded commitments totaling $180 thousand and $380 thousand, respectively.

Generally, loans are placed on nonaccrual status if principal and/or interest payments become 90 days or more past due, and/or management deems the collectability of the principal and/or interest to be in question, as well as when required by regulatory requirements. Loans to customers whose financial conditions have deteriorated are considered for nonaccrual status whether or not the loan is 90 days or more past due. Generally, payments received on nonaccrual loans are recorded as principal reductions. Loans are returned to accrual status only when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. The Company does not recognize interest income while loans are on nonaccrual status.

The tables below represent the amortized cost of nonaccrual loans, as well as loans past due 90 or more days and still on accrual status, by loan segment and broken out by loans with a recorded ACL and those without a recorded ACL, at June 30, 2023 and December 31, 2022.


	June 30, 2023
	Nonaccrual with No ACL		Nonaccrual with an ACL		Total Nonaccrual (1)		Accruing Loans Past Due 90 Days or More
	(Dollars in thousands)
CRE loans	$	22,286	$	6,984	$	29,270	$	14,737
C&I loans	1,212		21,830		23,042		362
Residential mortgage loans	4,420		4,163		8,583		—
Consumer and other loans	—		357		357		83
Total	$	27,918	$	33,334	$	61,252	$	15,182


	December 31, 2022
	Nonaccrual with No ACL		Nonaccrual with an ACL		Total Nonaccrual (1)		Accruing Loans Past Due 90 Days or More
	(Dollars in thousands)









CRE loans	$	29,782	$	4,133	$	33,915	$	—
C&I loans	1,618		4,002		5,620		336
Residential mortgage loans	5,959		3,816		9,775		—
Consumer and other loans	—		377		377		65
Total	$	37,359	$	12,328	$	49,687	$	401

__________________________________

(1) Total nonaccrual loans exclude the guaranteed portion of SBA loans that are in liquidation totaling $11.9 million and $9.8 million, at June 30, 2023 and December 31, 2022, respectively.

The following table presents the amortized cost of collateral-dependent loans at June 30, 2023 and December 31, 2022:


	June 30, 2023						December 31, 2022
	Real Estate Collateral		Other Collateral		Total		Real Estate Collateral		Other Collateral		Total
	(Dollars in thousands)
CRE loans	$	25,635	$	—	$	25,635	$	35,523	$	—	$	35,523
C&I loans	1,212		20,203		21,415		1,618		2,743		4,361
Residential mortgage loans	4,420		—		4,420		5,959		—		5,959

Total	$	31,267	$	20,203	$	51,470	$	43,100	$	2,743	$	45,843

Collateral on loans is a significant portion of what secures collateral-dependent loans and significant changes to the fair value of the collateral can potentially impact ACL. During the six months ended June 30, 2023, the Company did not have any significant changes to the extent to which collateral secured its collateral-dependent loans, due to general deterioration or from other factors. Real estate collateral securing CRE and C&I consisted of commercial real estate properties including hotel/motel, building, office, gas station/carwash, and warehouse properties.

Accrued interest receivable on loans totaled $50.6 million at June 30, 2023, and $47.3 million at December 31, 2022. With the adoption of CECL, the Company elected not to consider accrued interest receivable in its estimates of expected credit losses because the Company writes off uncollectible accrued interest receivable in a timely manner. The Company considers writing off accrued interest amounts once the amounts become 90 days past due to be considered within a timely manner. The Company has elected to write off accrued interest receivable by reversing interest income. The following table presents interest income reversals, due to loans being placed on nonaccrual status, by loan segment for the three and six months ended June 30, 2023 and 2022:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
	(Dollars in thousands)
CRE loans	$	214	$	1,097	$	665	$	1,252
C&I loans	368		7		886		26
Residential mortgage loans	18		—		32		139

Total	$	600	$	1,104	$	1,583	$	1,417

The following table presents the amortized cost of past due loans, including nonaccrual loans past due 30 or more days, by the number of days past due at June 30, 2023 and December 31, 2022, by loan segment:


	June 30, 2023								December 31, 2022
	30-59 Days Past Due		60-89 Days Past Due		90 or More Days Past Due		Total Past Due		30-59 Days Past Due		60-89 Days Past Due		90 or More Days Past Due		Total Past Due
	(Dollars in thousands)
CRE loans	$	7,497	$	319	$	21,063	$	28,879	$	2,292	$	2,727	$	5,694	$	10,713
C&I loans	765		121		20,150		21,036		3,258		18		2,137		5,413
Residential mortgage loans	1,043		—		4,606		5,649		2,310		—		5,106		7,416
Consumer and other loans	148		57		83		288		617		44		308		969
Total Past Due	$	9,453	$	497	$	45,902	$	55,852	$	8,477	$	2,789	$	13,245	$	24,511

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, including, but not limited to, current financial information, historical payment experience, credit documentation, public information, and current economic trends. Homogeneous loans (i.e., home mortgage loans, home equity lines of credit, overdraft loans, express business loans, and automobile loans) are not risk rated and credit risk is analyzed largely by the number of days past due. This analysis is performed at least on a quarterly basis.

The definitions for risk ratings are as follows:

•Pass: Loans that meet a preponderance or more of the Company’s underwriting criteria and evidence an acceptable level of risk.

•Special Mention: Loans that have potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date.

•Substandard: Loans that are inadequately protected by the current net worth and paying capacity of the borrower or by the collateral pledged, if any. Loans in this classification have a well-defined weakness or weaknesses that jeopardize the repayment of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

•Doubtful: Loans that 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.

The following table presents the amortized cost basis of loans receivable by segment, risk rating, and year of origination at June 30, 2023 and December 31, 2022.


	June 30, 2023
	Term Loan by Origination Year												Revolving Loans		Total
	2023		2022		2021		2020		2019		Prior
	(Dollars in thousands)
CRE loans
Pass	$	389,783	$	2,450,867	$	2,107,752	$	1,281,552	$	1,039,543	$	1,693,896	$	81,560	$	9,044,953
Special mention	—		2,772		22,388		4,145		22,789		19,165		10,997		82,256
Substandard	—		824		8,370		1,001		2,884		51,872		—		64,951

Subtotal	$	389,783	$	2,454,463	$	2,138,510	$	1,286,698	$	1,065,216	$	1,764,933	$	92,557	$	9,192,160
Year-to-date gross charge offs	$	—	$	119	$	—	$	11	$	34	$	397	$	—	$	561

C&I loans
Pass	$	807,771	$	1,686,472	$	885,837	$	255,862	$	219,210	$	107,364	$	654,007	$	4,616,523
Special mention	38		19,212		54,415		9,854		173		—		44,858		128,550
Substandard	51		16,977		24,716		4,695		577		2,910		10,127		60,053

Subtotal	$	807,860	$	1,722,661	$	964,968	$	270,411	$	219,960	$	110,274	$	708,992	$	4,805,126
Year-to-date gross charge offs	$	—	$	89	$	54	$	45	$	85	$	465	$	—	$	738

Residential mortgage loans
Pass	$	15,658	$	373,241	$	273,044	$	1,374	$	29,436	$	132,782	$	—	$	825,535
Special mention	—		—		—		—		—		—		—		—
Substandard	—		—		314		—		1,723		6,805		—		8,842

Subtotal	$	15,658	$	373,241	$	273,358	$	1,374	$	31,159	$	139,587	$	—	$	834,377
Year-to-date gross charge offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Consumer and other loans
Pass	$	3,565	$	1,158	$	332	$	2,739	$	165	$	8,861	$	15,970	$	32,790
Special mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		357		—		357

Subtotal	$	3,565	$	1,158	$	332	$	2,739	$	165	$	9,218	$	15,970	$	33,147
Year-to-date gross charge offs	$	—	$	—	$	—	$	—	$	—	$	—	$	175	$	175

Total loans
Pass	$	1,216,777	$	4,511,738	$	3,266,965	$	1,541,527	$	1,288,354	$	1,942,903	$	751,537	$	14,519,801
Special mention	38		21,984		76,803		13,999		22,962		19,165		55,855		210,806
Substandard	51		17,801		33,400		5,696		5,184		61,944		10,127		134,203

Total	$	1,216,866	$	4,551,523	$	3,377,168	$	1,561,222	$	1,316,500	$	2,024,012	$	817,519	$	14,864,810
Total year-to-date gross charge offs	$	—	$	208	$	54	$	56	$	119	$	862	$	175	$	1,474


	December 31, 2022
	Term Loan by Origination Year												Revolving Loans		Total
	2022		2021		2020		2019		2018		Prior
	(Dollars in thousands)
CRE loans
Pass	$	2,421,631	$	2,194,073	$	1,372,027	$	1,076,405	$	1,018,553	$	1,064,267	$	105,274	$	9,252,230
Special mention	—		14,622		7,301		20,426		13,565		26,746		202		82,862
Substandard	—		8,240		1,736		7,881		10,250		51,381		—		79,488

Subtotal	$	2,421,631	$	2,216,935	$	1,381,064	$	1,104,712	$	1,042,368	$	1,142,394	$	105,476	$	9,414,580

C&I loans
Pass	$	2,311,344	$	1,090,034	$	291,592	$	298,133	$	69,721	$	95,531	$	864,343	$	5,020,698
Special mention	17,911		37,393		13,707		110		—		24		5,256		74,401
Substandard	—		2,833		5,889		1,000		1,020		3,691		—		14,433

Subtotal	$	2,329,255	$	1,130,260	$	311,188	$	299,243	$	70,741	$	99,246	$	869,599	$	5,109,532

Residential mortgage loans
Pass	$	382,935	$	283,163	$	1,386	$	30,603	$	62,976	$	75,242	$	—	$	836,305
Special mention	—		—		—		—		—		—		—		—
Substandard	—		311		—		967		384		8,113		—		9,775

Subtotal	$	382,935	$	283,474	$	1,386	$	31,570	$	63,360	$	83,355	$	—	$	846,080

Consumer and other loans
Pass	$	10,005	$	723	$	3,351	$	223	$	10	$	1,420	$	17,239	$	32,971
Special mention	—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		377		—		377

Subtotal	$	10,005	$	723	$	3,351	$	223	$	10	$	1,797	$	17,239	$	33,348

Total loans
Pass	$	5,125,915	$	3,567,993	$	1,668,356	$	1,405,364	$	1,151,260	$	1,236,460	$	986,856	$	15,142,204
Special mention	17,911		52,015		21,008		20,536		13,565		26,770		5,458		157,263
Substandard	—		11,384		7,625		9,848		11,654		63,562		—		104,073

Total	$	5,143,826	$	3,631,392	$	1,696,989	$	1,435,748	$	1,176,479	$	1,326,792	$	992,314	$	15,403,540

For the three and six months ended June 30, 2023 and the twelve months ended December 31, 2022, there were no revolving loans converted to term loans.

The Company may reclassify loans held for investment to loans held for sale in the event that the Company plans to sell loans that were originated with the intent to hold to maturity. Loans transferred from held for investment to held for sale are carried at the lower of cost or fair value. The breakdown of loans by segment that were reclassified from held for investment to held for sale for the three and six months ended June 30, 2023 and 2022, is presented in the following table:


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Transfer of loans held for investment to held for sale	(Dollars in thousands)
CRE loans	$	13,168	$	57,835	$	66,776	$	155,486

C&I loans	61,608		9,867		170,483		16,769

Total	$	74,776	$	67,702	$	237,259	$	172,255

The Company calculates its ACL by estimating expected credit losses on a collective basis for loans that share similar risk characteristics. Loans that do not share similar risk characteristics with other loans are evaluated for credit losses on an individual basis. The Company differentiates its loan segments based on shared risk characteristics for which allowance for credit losses is measured on a collective basis.


			Risk Characteristics
CRE loans			Property type, location, owner-occupied status
C&I loans			Delinquency status, risk rating, industry type
Residential mortgage loans			FICO score, LTV, delinquency status, maturity date, collateral value, location
Consumer and other loans			Historical losses

The Company uses a combination of a modeled and non-modeled approach that incorporates current and future economic conditions to estimate lifetime expected losses on a collective basis. The Company uses Probability of Default (“PD”), Loss Given Default (“LGD”), and Exposure at Default (“EAD”) methodologies with quantitative factors and qualitative considerations in the calculation of the allowance for credit losses for collectively assessed loans. The Company uses a reasonable and supportable period of two years, at which point loss assumptions revert back to historical loss information by means of one-year reversion period. Included in the quantitative portion of the ACL analysis are inputs such as borrowers’ net operating income, debt coverage ratios, real estate collateral values, as well as factors that are more subjective or require management’s judgment, including key macroeconomic variables from Moody’s forecast scenarios such as GDP, unemployment rates, interest rates, and CRE prices. These key inputs are utilized in the Company’s models to develop PD and LGD assumptions used in the calculation of estimated quantitative losses.

The ACL for the Company’s construction, credit card, and certain consumer loans is calculated based on a non-modeled approach that utilizes historical loss rates to estimate losses. A non-modeled approach was chosen for these loans as fewer data points exist, which could result in high levels of estimated loss volatility under a modeled approach. In the aggregate, non-modeled loans represented less than 2% of the Company’s total loan portfolio at June 30, 2023.

The Company’s Economic Forecast Committee (“EFC”) reviews economic forecast scenarios that are incorporated in the Company’s ACL. The EFC reviews multiple scenarios provided to the Company by an independent third party and chooses a single scenario that best aligns with management’s expectation of future economic conditions. At June 30, 2023, the Company utilized the June 2023 Consensus economic forecast scenario from Moody’s, as it best aligned with management’s expectations of future conditions. The forecast projected GDP growth of 0.2% in 2023, 1.4% for 2024, and 2.1% for 2025, with unemployment projected to be 4.3% for 2023, 4.7% for 2024, and 4.3% in 2025. CRE prices in the Consensus scenario were expected to decrease, with the CRE price index declining to -5.2% for 2023 and -8.6% for 2024, then rebounding to +8.8% in 2025. The Company also utilized Moody’s December 2022 Consensus economic forecast for the calculation of the December 31, 2022 ACL.

In order to quantify the credit risk impact of other trends and changes within the loan portfolio, the Company utilizes qualitative adjustments to the modeled and non-modeled estimated loss approaches. The parameters for making adjustments are established under a Credit Risk Matrix that provides different possible scenarios for each of the factors below. The Credit Risk Matrix and the possible scenarios enable the Bank to qualitatively adjust the Loss Migration Ratio by as much as 25 basis points for each loan type pool. This matrix considers the following seven factors, which are patterned after the guidelines provided under the Federal Financial Institutions Examination Council (“FFIEC”) Interagency Policy Statement on the Allowance for Loan and Lease Losses, updated to reflect the adoption of CECL:

•Changes in lending policies and procedures, including underwriting standards and collection, charge off, and recovery practices;

•Changes in the nature and volume of the loan portfolio;

•Changes in the experience, ability, and depth of lending management and staff;

•Changes in the trends of the volume and severity of past due loans, classified loans, nonaccrual loans, and other loan modifications;

•Changes in the quality of the loan review system and the degree of oversight by the management and the Board of Directors;

•The existence and effect of any concentrations of credit, and changes in the level of such concentrations; and

•The effect of external factors, such as competition, legal requirements, and regulatory requirements on the level of estimated losses in the loan portfolio.

For loans that do not share similar risk characteristics such as nonaccrual loans above $1.0 million, the Company evaluates these loans on an individual basis in accordance with ASC 326. Such nonaccrual loans are considered to have different risk profiles than performing loans and are therefore evaluated individually. The Company elected to collectively assess nonaccrual loans with balances below $1.0 million along with the performing and accrual loans, in order to reduce the operational burden of individually assessing small nonaccrual loans with immaterial balances. For individually assessed loans, the ACL is measured using either 1) the present value of future cash flows discounted at the loan’s effective interest rate; 2) the loan’s observable market price; or 3) the fair value of the collateral, if the loan is collateral-dependent. For the collateral-dependent loans, the Company obtains a new appraisal to determine the fair value of collateral. The appraisals are based on an “as-is” valuation. To ensure that appraised values remain current, the Company either obtains updated appraisals every twelve months from a qualified independent appraiser or an internal evaluation of the collateral is performed by qualified personnel. If the third-party market data indicates that the value of the collateral property has declined since the most recent valuation date, management adjusts the value of the property downward to reflect current market conditions. If the fair value of the collateral is less than the amortized balance of the loan, the Company recognizes an ACL with a corresponding charge to the provision for credit losses.

The Company maintains a separate ACL for its off-balance-sheet unfunded loan commitments. The Company uses an estimated funding rate to allocate an allowance to undrawn exposures. This funding rate is used as a credit conversion factor to capture how much undrawn lines of credit can potentially become drawn at any point. The funding rate is determined based on a look-back period of eight quarters. Credit loss is not estimated for off-balance-sheet credit exposures that are unconditionally cancellable by the Company.

Loan Modifications to Borrowers Experiencing Financial Difficulty

In January 2023, the Company adopted ASU 2022-02, Financial Instruments - Credit Losses (Topic 326): TDR and Vintage Disclosures (“ASU 2022-02”), which eliminated the accounting guidance for TDR while enhancing disclosure requirements for certain loan refinancing and restructurings by creditors when a borrower is experiencing financial difficulty. The Company applied this guidance on a modified retrospective transition method, which resulted in a positive cumulative effect adjustment to retained earnings of $287 thousand, net of tax. Subsequent to the adoption of ASU 2022-02, the new guidance is applied uniformly to the Company’s entire loan portfolio when estimating expected credit losses.

For the three and six months ended June 30, 2023, there was only one C&I loan modification to a borrower experiencing financial difficulty, amounting to $26.0 million or 0.54% of total C&I loans. The loan modification type was a term extension of four months. For the three and six months ended June 30, 2023, the Company recorded an allowance for credit losses of $115 thousand for this modification. There were no loan modifications that subsequently defaulted during the period.

Troubled Debt Restructurings

At December 31, 2022, TDR loans totaled $41.1 million, consisting of $16.9 million in TDR loans on accrual status and $24.2 million in TDR loans on nonaccrual status. The Company recorded an allowance for credit losses totaling $2.8 million for TDR loans at December 31, 2022. At December 31, 2022, the Company had outstanding commitments to extend additional funds to these borrowers totaling $40 thousand. On January 1, 2023, the Company adopted ASU 2022-02, which eliminated the accounting guidance for TDR loans. The Company adopted ASU 2022-02 applying the amended requirements prospectively, except the recognition and measurement of existing TDRs, for which the Company elected the option to apply a modified retrospective transition method. Therefore, the Company did not have any TDR loans at June 30, 2023.