The following table presents total loans outstanding, by portfolio segment, as of March 31, 2023 and December 31, 2022:

Total loans included net deferred loan fees and costs of $800 thousand and $919 thousand at March 31, 2023 and December 31, 2022, respectively. Unearned discounts associated with the acquisition of Metro Phoenix Bank totaled $6.9 million as of March 31, 2023.

Accrued interest receivable on loans is recorded within accrued interest receivable and totaled $9.2 million at both March 31, 2023 and December 31, 2022.

Management monitors the credit quality of its loan portfolio on an ongoing basis. Measurements of delinquency and past due status are based on the contractual terms of each loan. Past due loans are reviewed regularly to identify loans for nonaccrual status.

The following tables present a past due aging analysis of total loans outstanding, by portfolio segment, as of March 31, 2023 and December 31, 2022:

In calculating expected credit losses, the Company includes loans on nonaccrual status and loans 90 days or more past due and still accruing. The following table presents the amortized cost basis on nonaccrual status loans and loans 90 days or more past due and still accruing as of March 31, 2023:

Loans with a carrying value of $1.6 billion as of March 31, 2023 and $1.5 billion as of December 31, 2022, were pledged to secure public deposits, and for other purposes required or permitted by law.

A loan for which the terms have been modified resulting in a concession represents a loan experiencing financial difficulty. Loans experiencing financial difficulty can include modifications for an interest rate reduction below current market rates, a forgiveness of principal balance, an extension of the loan term, an other than significant payment delay, or some combination of similar types of modifications. During the first quarter of 2023, the Company did not provide any modifications to loans under these circumstances that were experiencing financial difficulty.

The Company’s consumer loan portfolio is primarily comprised of secured loans that are evaluated at origination on a centralized basis against standardized underwriting criteria. The Company generally does not risk rate consumer loans unless a default event such as bankruptcy or extended nonperformance takes place. Credit quality for the consumer loan portfolio is measured by delinquency rates, nonaccrual amounts and actual losses incurred.

The Company assigns a risk rating to all commercial loans, except pools of homogeneous loans, and performs detailed internal and external reviews of risk rated loans over a certain threshold to identify credit risks and to assess the overall collectability of the portfolio. These risk ratings are also subject to examination by the Company’s regulators. During the internal reviews, management monitors and analyzes the financial condition of borrowers and guarantors, trends in the industries in which the borrowers operate and the estimated fair values of collateral securing the loans. These credit quality indicators are used to assign a risk rating to each individual loan.

The Company’s ratings are aligned to pass and criticized categories. The criticized category includes special mention, substandard, and doubtful risk ratings. The risk ratings are defined as follows:

Pass: A pass loan is a credit with no existing or known potential weaknesses deserving of management’s close attention.

Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, this potential weakness may result in deterioration of the repayment prospects for the loan or of the Company’s credit position at some future date. Special mention loans are not adversely classified and do not expose the Company to sufficient risk to warrant adverse classification.

Substandard: Loans classified as substandard are not adequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Loans classified as substandard have a well-defined

weakness or weaknesses that jeopardize the repayment of the debt. Well-defined weaknesses include a borrower’s lack of marketability, inadequate cash flow or collateral support, failure to complete construction on time, or the failure to fulfill economic expectations. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

Doubtful: Loans classified as doubtful 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.

Loss: Loans classified as loss are considered uncollectible and charged off immediately.

The following table sets forth the amortized cost basis of loans by credit quality indicator and vintage based on the most recent analysis performed, as of March 31, 2023:

The following table sets forth the risk category of loans by class of loans and credit quality indicator used on the most recent analysis performed as of December 31, 2022:

The adequacy of the allowance for credit losses on loans is assessed at the end of each quarter. The allowance for credit losses is estimated using relevant information, from internal and external sources, relating to past events, current conditions, and reasonable supportable forecasts. Historical data is evaluated in multiple components of the expected credit loss, including the reasonable and supportable forecast of each loan segment. The historical experience is used to infer probability of default and loss given the reasonable and supportable forecast period. Qualitative reserves reflect management’s overall estimate of the extent to which current expected credit losses on collectively evaluated loans will differ from historical loss experience. The analysis takes into consideration other analytics performed within the organization, such as enterprise and concentration management, along with other credit-related analytics as deemed appropriate.

The following tables present, by loan portfolio segment, a summary of the changes in the allowance for credit losses on loans for the three months ended March 31, 2023 and 2022:

(1)	The difference in the credit loss expense reported herein as compared to the Consolidated Statements of Income is associated with the credit loss expense of $230 thousand related to off-balance sheet credit exposures and $51 thousand related to investment securities held-to-maturity.


	Three months ended March 31, 2022
	Beginning		Provision for		Loan		Loan		Ending
(dollars in thousands)	Balance		Loan Losses		Charge-offs		Recoveries		Balance
Commercial
Commercial and industrial	$	8,925	$	771	$	(27)	$	126	$	9,795
Real estate construction		783		27		—		—		810
Commercial real estate		12,376		(441)		—		11		11,946
Total commercial		22,084		357		(27)		137		22,551
Consumer
Residential real estate first mortgage		6,532		129		—		—		6,661
Residential real estate junior lien		1,295		92		—		13		1,400
Other revolving and installment		481		145		(18)		36		644
Total consumer		8,308		366		(18)		49		8,705
Unallocated		1,180		(723)		—		—		457
Total	$	31,572	$	—	$	(45)	$	186	$	31,713

The following table presents, by loan portfolio segment, a summary of charge-offs, by vintage, for the three months ended March 31, 2023:


	Gross Charge-offs for the three months ended March 31, 2023
(dollars in thousands)	2023		2022		2021		2020		2019		Prior		Total
Commercial
Commercial and industrial	$	(16)	$	—	$	—	$	—	$	(159)	$	—	$	(175)
Real estate construction		—		—		—		—		—		—		—
Commercial real estate		—		—		—		—		—		—		—
Total commercial		(16)		—		—		—		(159)		—		(175)
Consumer
Residential real estate first mortgage		—		—		—		—		—		—		—
Residential real estate junior lien		—		—		—		—		—		(77)		(77)
Other revolving and installment		—		(2)		—		—		(3)		—		(5)
Total consumer		—		(2)		—		—		(3)		(77)		(82)
Total loans	$	(16)	$	(2)	$	—	$	—	$	(162)	$	(77)	$	(257)

The following tables present the amortized cost and the related allowance for credit losses on loans, by portfolio segment, as of March 31, 2023 and December 31, 2022:


	March 31, 2023
	Amortized Cost						Allowance for Credit Losses on Loans
	Individually		Collectively				Individually		Collectively
	Evaluated for		Evaluated for				Evaluated for		Evaluated for
(dollars in thousands)	Impairment		Impairment		Total		Impairment		Impairment		Total
Commercial
Commercial and industrial	$	1,095	$	552,483	$	553,578	$	215	$	7,585	$	7,800
Real estate construction		262		108,514		108,776		—		4,406		4,406
Commercial real estate		896		933,428		934,324		—		12,344		12,344
Total commercial		2,253		1,594,425		1,596,678		215		24,335		24,550
Consumer
Residential real estate first mortgage		424		697,578		698,002		73		7,987		8,060
Residential real estate junior lien		—		152,281		152,281		—		1,277		1,277
Other revolving and installment		1		39,663		39,664		—		314		314
Total consumer		425		889,522		889,947		73		9,578		9,651
Unallocated		—		—		—		—		—		901
Total loans	$	2,678	$	2,483,947	$	2,486,625	$	288	$	33,913	$	35,102


	December 31, 2022
	Recorded Investment						Allowance for Loan Losses
	Individually		Collectively				Individually		Collectively
(dollars in thousands)	Evaluated		Evaluated		Total		Evaluated		Evaluated		Total
Commercial
Commercial and industrial	$	1,313	$	582,563	$	583,876	$	275	$	8,883	$	9,158
Real estate construction		262		97,548		97,810		97		1,349		1,446
Commercial real estate		1,472		880,198		881,670		582		12,106		12,688
Total commercial		3,047		1,560,309		1,563,356		954		22,338		23,292
Consumer
Residential real estate first mortgage		535		679,016		679,551		—		5,769		5,769
Residential real estate junior lien		184		150,295		150,479		—		1,289		1,289
Other revolving and installment		1		50,607		50,608		—		528		528
Total consumer		720		879,918		880,638		—		7,586		7,586
Unallocated		—		—		—		—		—		268
Total loans	$	3,767	$	2,440,227	$	2,443,994	$	954	$	29,924	$	31,146

The following table presents the amortized cost basis of collateral dependent loans, by the primary collateral type, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans:


	As of March 31, 2023
	Primary Type of Collateral
									Allowance for
(dollars in thousands)	Real estate		Equipment		Other		Total		Credit Losses
Commercial
Commercial and industrial	$	—	$	120	$	—	$	120	$	60
Total commercial		—		120		—		120		60
Consumer
Residential real estate first mortgage		424		—		—		—		10
Total consumer		424		—		—		—		10
Total loans	$	424	$	120	$	—	$	120	$	70

Pre-ASC 326 Adoption impaired loan disclosures

The table below summarizes key information on impaired loans as of December 31, 2022:


	December 31, 2022
	Recorded		Unpaid		Related
(dollars in thousands)	Investment		Principal		Allowance
Impaired loans with a valuation allowance
Commercial and industrial	$	675	$	711	$	275
Real estate construction		262		440		97
Commercial real estate		896		900		582
Residential real estate first mortgage		—		—		—
Total impaired loans with a valuation allowance		1,833		2,051		954
Impaired loans without a valuation allowance
Commercial and industrial		638		767		—
Real estate construction		—		—		—
Commercial real estate		576		660		—
Residential real estate first mortgage		535		573		—
Residential real estate junior lien		184		218		—
Other revolving and installment		1		1		—
Total impaired loans without a valuation allowance		1,934		2,219		—
Total impaired loans
Commercial and industrial		1,313		1,478		275
Real estate construction		262		440		97
Commercial real estate		1,472		1,560		582
Residential real estate first mortgage		535		573		—
Residential real estate junior lien		184		218		—
Other revolving and installment		1		1		—
Total impaired loans	$	3,767	$	4,270	$	954

The table below presents the average recorded investment in impaired loans and interest income for the three months ended March 31, 2023:



	2022
	Average
	Recorded		Interest
(dollars in thousands)	Investment		Income
Impaired loans with a valuation allowance
Commercial and industrial	$	528	$	3
Commercial real estate		180		2
Residential real estate first mortgage		—		—
Residential real estate junior lien		—		—
Other revolving and installment		41		—
Total impaired loans with a valuation allowance		749		5
Impaired loans without a valuation allowance
Commercial and industrial		1,126		—
Real estate construction		—		—
Commercial real estate		642		—
Residential real estate first mortgage		1,759		—
Residential real estate junior lien		230		—
Other revolving and installment		9		—
Total impaired loans without a valuation allowance		3,766		—
Total impaired loans
Commercial and industrial		1,654		3
Real estate construction		—		—
Commercial real estate		822		2
Residential real estate first mortgage		1,759		—
Residential real estate junior lien		230		—
Other revolving and installment		50		—
Total impaired loans	$	4,515	$	5