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Loans and Allowance for Credit Losses

3 Months Ended

Mar. 31, 2024

Loans and Allowance for Credit Losses

Note 4: Loans and Allowance for Credit Losses

The following table presents the components of the loan portfolio at March 31, 2024 and December 31, 2023:


	March 31,		December 31,
(dollars in thousands)	2024		2023
Commercial	$	483,069	$	464,061
Construction and Land Development		200,970		232,804
1-4 Family Construction		65,606		65,087
Real Estate Mortgage:
1-4 Family Mortgage		417,773		402,396
Multifamily		1,389,345		1,388,541
CRE Owner Occupied		182,589		175,783
CRE Nonowner Occupied		1,035,702		987,306
Total Real Estate Mortgage Loans		3,025,409		2,954,026
Consumer and Other		9,151		8,304
Total Loans, Gross		3,784,205		3,724,282
Allowance for Credit Losses		(51,347)		(50,494)
Net Deferred Loan Fees		(6,356)		(6,573)
Total Loans, Net	$	3,726,502	$	3,667,215

The following tables present the aging in past due loans and nonaccrual status, with and without an ACL, by loan segment as of March 31, 2024 and December 31, 2023:


	Accruing Interest
			30-89 Days		90 Days or		Nonaccrual		Nonaccrual
(dollars in thousands)	Current		Past Due		More Past Due		with ACL		without ACL		Total
March 31, 2024
Commercial	$	482,894	$	—	$	—	$	—	$	175	$	483,069
Construction and Land Development		200,896		—		—		—		74		200,970
1-4 Family Construction		65,606		—		—		—		—		65,606
Real Estate Mortgage:
1-4 Family Mortgage		417,773		—		—		—		—		417,773
Multifamily		1,389,345		—		—		—		—		1,389,345
CRE Owner Occupied		182,589		—		—		—		—		182,589
CRE Nonowner Occupied		1,035,702		—		—		—		—		1,035,702
Consumer and Other		9,151		—		—		—		—		9,151
Totals	$	3,783,956	$	—	$	—	$	—	$	249	$	3,784,205


	Accruing Interest
			30-89 Days		90 Days or		Nonaccrual		Nonaccrual
(dollars in thousands)	Current		Past Due		More Past Due		with ACL		without ACL		Total
December 31, 2023
Commercial	$	463,966	$	—	$	—	$	—	$	95	$	464,061
Construction and Land Development		232,724		—		—		—		80		232,804
1-4 Family Construction		64,838		—		—		—		249		65,087
Real Estate Mortgage:
1-4 Family Mortgage		402,396		—		—		—		—		402,396
Multifamily		1,373,431		15,110		—		—		—		1,388,541
CRE Owner Occupied		175,289		—		—		—		494		175,783
CRE Nonowner Occupied		987,306		—		—		—		—		987,306
Consumer and Other		8,303		—		—		—		1		8,304
Totals	$	3,708,253	$	15,110	$	—	$	—	$	919	$	3,724,282

The Company aggregates loans into credit quality indicators based on relevant information about the ability of borrowers to service their debt by using internal reviews in which management monitors and analyzes the financial condition of borrowers and guarantors, trends in the industries in which the borrowers operate, and the fair values of collateral securing the loans. The Company analyzes all loans individually to assign a risk rating, grouped into five major categories defined as follows:

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

Watch: Loans classified as watch 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. Watch 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 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 presents loan balances classified by credit quality indicators by year of origination as of March 31, 2024 and December 31, 2023:


		March 31, 2024
(dollars in thousands)		2024		2023		2022		2021		2020		Prior		Revolving		Total
Commercial
Pass	$	45,707	$	77,410	$	116,209	$	35,888	$	17,453	$	21,502	$	153,257	$	467,426
Watch		—		—		—		24		—		—		495		519
Substandard		—		45		11,213		—		—		—		3,866		15,124
Total Commercial		45,707		77,455		127,422		35,912		17,453		21,502		157,618		483,069
Current Period Gross Write-offs		—		—		—		—		—		—		—		—

Construction and Land Development
Pass		18,627		72,163		84,752		16,961		41		—		8,352		200,896
Substandard		—		—		74		—		—		—		—		74
Total Construction and Land Development		18,627		72,163		84,826		16,961		41		—		8,352		200,970
Current Period Gross Write-offs		—		—		—		—		—		—		—		—

1-4 Family Construction
Pass		4,521		30,238		16,331		942		—		—		13,574		65,606
Total 1-4 Family Construction		4,521		30,238		16,331		942		—		—		13,574		65,606
Current Period Gross Write-offs		—		—		—		—		—		—		—		—

Real Estate Mortgage:
1-4 Family Mortgage
Pass		30,248		66,675		104,943		80,452		55,779		20,138		58,883		417,118
Substandard		—		—		—		—		—		655		—		655
Total 1-4 Family Mortgage		30,248		66,675		104,943		80,452		55,779		20,793		58,883		417,773
Current Period Gross Write-offs		—		—		—		—		—		—		—		—

Multifamily
Pass		86,323		169,735		452,006		402,045		189,453		74,471		12,408		1,386,441
Watch		—		2,904		—		—		—		—		—		2,904
Total Multifamily		86,323		172,639		452,006		402,045		189,453		74,471		12,408		1,389,345
Current Period Gross Write-offs		—		—		—		—		—		—		—		—

CRE Owner Occupied
Pass		14,053		30,839		63,297		39,429		20,219		11,966		1,790		181,593
Substandard		—		996		—		—		—		—		—		996
Total CRE Owner Occupied		14,053		31,835		63,297		39,429		20,219		11,966		1,790		182,589
Current Period Gross Write-offs		—		—		—		—		—		—		—		—

CRE Nonowner Occupied
Pass		70,675		153,480		318,367		236,313		76,481		141,216		3,989		1,000,521
Watch		—		15,013		—		3,188		—		—		—		18,201
Substandard		—		15,036		1,944		—		—		—		—		16,980
Total CRE Nonowner Occupied		70,675		183,529		320,311		239,501		76,481		141,216		3,989		1,035,702
Current Period Gross Write-offs		—		—		—		—		—		—		—		—

Total Real Estate Mortgage Loans		201,299		454,678		940,557		761,427		341,932		248,446		77,070		3,025,409

Consumer and Other
Pass		193		2,731		206		7		1,363		3		4,648		9,151
Total Consumer and Other		193		2,731		206		7		1,363		3		4,648		9,151
Current Period Gross Write-offs		1		—		—		—		—		—		1		2

Total Period Gross Write-offs		1		—		—		—		—		—		1		2
Total Loans	$	270,347	$	637,265	$	1,169,342	$	815,249	$	360,789	$	269,951	$	261,262	$	3,784,205


		December 31, 2023
(dollars in thousands)		2023		2022		2021		2020		2019		Prior		Revolving		Total
Commercial
Pass	$	93,299	$	121,274	$	37,056	$	19,297	$	18,594	$	4,507	$	149,836	$	443,863
Watch		1,700		318		34		—		—		—		2,003		4,055
Substandard		3		11,299		—		—		—		50		4,791		16,143
Total Commercial		95,002		132,891		37,090		19,297		18,594		4,557		156,630		464,061
Current Period Gross Write-offs		72		96		12		—		—		—		—		180

Construction and Land Development
Pass		87,402		99,133		34,122		46		—		—		12,021		232,724
Substandard		—		80		—		—		—		—		—		80
Total Construction and Land Development		87,402		99,213		34,122		46		—		—		12,021		232,804
Current Period Gross Write-offs		—		—		—		—		—		—		—		—

1-4 Family Construction
Pass		35,172		16,156		941		355		—		—		12,214		64,838
Substandard		249		—		—		—		—		—		—		249
Total 1-4 Family Construction		35,421		16,156		941		355		—		—		12,214		65,087
Current Period Gross Write-offs		—		—		—		—		—		—		—		—

Real Estate Mortgage:
1-4 Family Mortgage
Pass		74,602		106,085		83,525		52,813		18,789		3,403		62,490		401,707
Substandard		—		—		—		—		—		659		30		689
Total 1-4 Family Mortgage		74,602		106,085		83,525		52,813		18,789		4,062		62,520		402,396
Current Period Gross Write-offs		—		—		—		—		—		—		—		—

Multifamily
Pass		192,078		456,179		444,162		196,784		41,998		45,847		8,577		1,385,625
Watch		2,916		—		—		—		—		—		—		2,916
Total Multifamily		194,994		456,179		444,162		196,784		41,998		45,847		8,577		1,388,541
Current Period Gross Write-offs		—		—		—		—		—		—		—		—

CRE Owner Occupied
Pass		36,255		61,724		40,748		20,610		4,903		8,312		1,672		174,224
Substandard		194		—		494		—		—		871		—		1,559
Total CRE Owner Occupied		36,449		61,724		41,242		20,610		4,903		9,183		1,672		175,783
Current Period Gross Write-offs		—		—		—		—		—		—		—		—

CRE Nonowner Occupied
Pass		164,226		305,749		253,683		77,618		78,288		66,569		4,521		950,654
Watch		16,301		—		3,213		—		—		—		—		19,514
Substandard		15,183		1,955		—		—		—		—		—		17,138
Total CRE Nonowner Occupied		195,710		307,704		256,896		77,618		78,288		66,569		4,521		987,306
Current Period Gross Write-offs		—		—		—		—		—		—		—		—

Total Real Estate Mortgage Loans		501,755		931,692		825,825		347,825		143,978		125,661		77,290		2,954,026

Consumer and Other
Pass		2,908		256		9		1,460		6		—		3,665		8,304
Total Consumer and Other		2,908		256		9		1,460		6		—		3,665		8,304
Current Period Gross Write-offs		42		—		—		—		—		—		2		44

Total Period Gross Write-offs		114		96		12		—		—		—		2		224
Total Loans	$	722,488	$	1,180,208	$	897,987	$	368,983	$	162,578	$	130,218	$	261,820	$	3,724,282

The following tables present the activity in the allowance for credit losses, by segment, for the three months ended March 31, 2024 and 2023:


			Construction								CRE		CRE
			and Land		1-4 Family		1--4 Family				Owner		Non-owner		Consumer
(dollars in thousands)	Commercial		Development		Construction		Mortgage		Multifamily		Occupied		Occupied		and Other		Total
Three Months Ended March 31, 2024
Allowance for Credit Losses for Loans:
Beginning Balance	$	5,398	$	2,156	$	558	$	2,651	$	22,217	$	1,184	$	16,225	$	105	$	50,494
Provision for Credit Losses for Loans		206		(328)		19		102		13		51		780		7		850
Loans Charged-off		—		—		—		—		—		—		—		(2)		(2)
Recoveries of Loans		3		—		—		1		—		—		—		1		5
Total Ending Allowance Balance	$	5,607	$	1,828	$	577	$	2,754	$	22,230	$	1,235	$	17,005	$	111	$	51,347


			Construction								CRE		CRE
			and Land		1-4 Family		1--4 Family				Owner		Non-owner		Consumer
(dollars in thousands)	Commercial		Development		Construction		Mortgage		Multifamily		Occupied		Occupied		and Other		Unallocated		Total
Three Months Ended March 31, 2023
Allowance for Credit Losses for Loans:
Beginning Balance, Prior to Adoption of CECL	$	6,501	$	3,911		845	$	4,325	$	17,459	$	1,965	$	12,576	$	151	$	263	$	47,996
Impact of Adopting CECL		(1,158)		(1,070)		(235)		(1,778)		3,318		(943)		2,869		(90)		(263)		650
Balance ss of January 1, 2023, as Adjusted for Adoption of CECL		5,343		2,841		610		2,547		20,777		1,022		15,445		61		—		48,646
Provision for Credit Losses for Loans		220		328		196		169		212		61		299		15		—		1,500
Loans Charged-off		—		—		—		—		—		—		—		(4)		—		(4)
Recoveries of Loans		3		—		—		1		—		—		—		2		—		6
Total Ending Allowance Balance	$	5,566	$	3,169	$	806	$	2,717	$	20,989	$	1,083	$	15,744	$	74	$	—	$	50,148

The following tables present the balance in the allowance for credit losses and the recorded investment in loans, by segment, as of March 31, 2024 and December 31, 2023:


			Construction								CRE		CRE
			and Land		1-4 Family		1--4 Family				Owner		Non-owner		Consumer
(dollars in thousands)	Commercial		Development		Construction		Mortgage		Multifamily		Occupied		Occupied		and Other		Total
ACL at March 31, 2024
Individually Evaluated for Impairment	$	26	$	—	$	—	$	—	$	—	$	—	$	205	$	—	$	231
Collectively Evaluated for Impairment		5,581		1,828		577		2,754		22,230		1,235		16,800		111		51,116
Totals	$	5,607	$	1,828	$	577	$	2,754	$	22,230	$	1,235	$	17,005	$	111	$	51,347


			Construction								CRE		CRE
			and Land		1-4 Family		1--4 Family				Owner		Non-owner		Consumer
(dollars in thousands)	Commercial		Development		Construction		Mortgage		Multifamily		Occupied		Occupied		and Other		Total
ACL at December 31, 2023
Individually Evaluated for Impairment	$	8	$	—	$	—	$	—	$	—	$	—	$	95	$	—	$	103
Collectively Evaluated for Impairment		5,390		2,156		558		2,651		22,217		1,184		16,130		105		50,391
Totals	$	5,398	$	2,156	$	558	$	2,651	$	22,217	$	1,184	$	16,225	$	105	$	50,494


			Construction								CRE		CRE
			and Land		1-4 Family		1--4 Family				Owner		Non-owner		Consumer
(dollars in thousands)	Commercial		Development		Construction		Mortgage		Multifamily		Occupied		Occupied		and Other		Total
Loans at March 31, 2024
Individually Evaluated for Impairment	$	15,124	$	74	$	—	$	655	$	—	$	996	$	16,980	$	—	$	33,829
Collectively Evaluated for Impairment		467,945		200,896		65,606		417,118		1,389,345		181,593		1,018,722		9,151		3,750,376
Totals	$	483,069	$	200,970	$	65,606	$	417,773	$	1,389,345	$	182,589	$	1,035,702	$	9,151	$	3,784,205

Loans at December 31, 2023
Individually Evaluated for Impairment	$	16,143	$	80	$	249	$	689	$	—	$	1,559	$	17,138	$	—	$	35,858
Collectively Evaluated for Impairment		447,918		232,724		64,838		401,707		1,388,541		174,224		970,168		8,304		3,688,424
Totals	$	464,061	$	232,804	$	65,087	$	402,396	$	1,388,541	$	175,783	$	987,306	$	8,304	$	3,724,282

The following tables present 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, 2024 and December 31, 2023:


	Primary Type of Collateral
			Business						ACL
(dollars in thousands)	Real Estate		Assets		Other		Total		Allocation
March 31, 2024
Commercial	$	—	$	4,766	$	10,358	$	15,124	$	26
Construction and Land Development		74		—		—		74
Real Estate Mortgage:
1-4 Family Mortgage		655		—		—		655		—
CRE Owner Occupied		996		—		—		996		—
CRE Nonowner Occupied		16,980		—		—		16,980		205
Totals	$	18,705	$	4,766	$	10,358	$	33,829	$	231


	Primary Type of Collateral
			Business						ACL
(dollars in thousands)	Real Estate		Assets		Other		Total		Allocation
December 31, 2023
Commercial	$	—	$	5,782	$	10,361	$	16,143	$	8
Construction and Land Development		80		—		—		80		—
1-4 Family Construction		249		—		—		249		—
Real Estate Mortgage:
1-4 Family Mortgage		689		—		—		689		—
CRE Owner Occupied		1,559		—		—		1,559		—
CRE Nonowner Occupied		17,138		—		—		17,138		95
Totals	$	19,715	$	5,782	$	10,361	$	35,858	$	103

Accrued interest receivable on loans, which is recorded within accrued interest on the balance sheet, totaled $11.5 million and $11.8 million at March 31, 2024 and December 31, 2023, respectively, and was excluded from the estimate of credit losses.

For the three months ended March 31, 2024, there were no loans modified to borrowers experiencing financial difficulty. For the three months ended March 31, 2023, the Company modified one CRE nonowner occupied loan, with an outstanding balance of $9.5 million, for a borrower experiencing financial difficulty by granting a 12-month extension at a below market rate. There was no forgiveness of principal and this loan was current with its modified terms as of March 31, 2024.