Loans and Allowance for Credit Losses

9 Months Ended

Sep. 30, 2023

The Bank makes loans to customers primarily in the Washington, D.C. metropolitan area and surrounding communities. A substantial portion of the Bank's loan portfolio consists of loans to businesses secured by real estate and other business assets.

Loans, net of unamortized deferred fees and costs, at September 30, 2023 and December 31, 2022 are summarized by portfolio segment as follows:


	September 30, 2023				December 31, 2022
(dollars in thousands, except amounts in the footnote)	Amount		%		Amount		%
Commercial	$	1,418,760	18	%	$	1,487,349	19	%
PPP loans	588		—	%	3,256		—	%
Income-producing - commercial real estate	4,147,301		52	%	3,919,941		51	%
Owner-occupied - commercial real estate	1,182,959		15	%	1,110,325		15	%
Real estate mortgage - residential	76,511		1	%	73,001		1	%
Construction - commercial and residential	904,282		11	%	877,755		12	%
Construction - C&I (owner-occupied)	129,616		2	%	110,479		1	%
Home equity	53,917		1	%	51,782		1	%
Other consumer	2,457		—	%	1,744		—	%
Total loans	7,916,391		100	%	7,635,632		100	%
Less: allowance for credit losses	(83,332)				(74,444)
Net loans (1)	$	7,833,059			$	7,561,188

(1)Excludes accrued interest receivable of $45.4 million and $43.5 million at September 30, 2023 and December 31, 2022, respectively, which were recorded in other assets on the Consolidated Balance Sheets.

Unamortized net deferred fees and costs amounted to $27.4 million and $29.2 million at September 30, 2023 and December 31, 2022, respectively.

As of September 30, 2023 and December 31, 2022, the Bank serviced $315.9 million and $361.5 million, respectively, of multifamily FHA loans, SBA loans and other loan participations that are not reflected as loan balances on the Consolidated Balance Sheets.

Real estate loans are secured primarily by duly recorded first deeds of trust or mortgages. In some cases, the Bank may accept a recorded junior trust position. In general, borrowers will have a proven ability to build, lease, manage and/or sell a commercial or residential project and demonstrate satisfactory financial condition. Additionally, an equity contribution toward the project is customarily required.

Construction loans require that the financial condition and experience of the general contractor and major subcontractors be satisfactory to the Bank. Guaranteed, fixed-price contracts are required whenever appropriate, along with payment and performance bonds or completion bonds for larger scale projects.

Loans intended for residential land acquisition, lot development and construction are made on the premise that the land: 1) is or will be developed for building sites for residential structures, and 2) will ultimately be utilized for construction or improvement of residential zoned real properties, including the creation of housing. Residential development and construction loans will finance projects such as single family subdivisions, planned unit developments, townhouses, and condominiums. Residential land acquisition, development and construction loans generally are underwritten with a maximum term of 36 months, including extensions approved at origination.

Commercial land acquisition and construction loans are secured by real property where loan funds will be used to acquire land and to construct or improve appropriately zoned real property for the creation of income producing or owner occupied commercial properties. Borrowers are generally required to put equity into each project at levels determined by the appropriate approval authority. Commercial land acquisition and construction loans generally are underwritten with a maximum term of 24 months.

Substantially all construction draw requests must be presented in writing on American Institute of Architects documents and certified either by the contractor, the borrower and/or the borrower's architect. Each draw request shall also include the borrower's soft cost breakdown certified by the borrower or their agent. Prior to an advance, the Bank or its contractor inspects the project to determine that the work has been completed, to justify the draw requisition.

Commercial permanent loans are generally secured by improved real property that is generating income in the normal course of operation. Debt service coverage, assuming stabilized occupancy, must be satisfactory to support a permanent loan. The debt service coverage ratio is ordinarily at least 1.15 to 1.0. As part of the underwriting process, debt service coverage ratios are stress tested assuming a 200 basis point increase in interest rates from their current levels.

Commercial permanent loans generally are underwritten with a term not greater than 10 years or the remaining useful life of the property, whichever is lower. The preferred term is between 5 to 7 years, with amortization to a maximum of 25 years.

The Company's loan portfolio includes acquisition, development and construction ("ADC") real estate loans including both investment and owner-occupied projects. ADC loans amounted to $1.5 billion at September 30, 2023. A portion of the ADC portfolio includes loan-funded interest reserves at origination. ADC loans that provide for the use of interest reserves represent approximately 52.4% of the outstanding ADC loan portfolio at September 30, 2023. The decision to establish a loan-funded interest reserve is made upon origination of the ADC loan and is based upon a number of factors considered during underwriting of the credit, including: (1) the feasibility of the project; (2) the experience of the sponsor; (3) the creditworthiness of the borrower and guarantors; (4) the borrower equity contribution; and (5) the level of collateral protection. When appropriate, an interest reserve provides a means of addressing the cash flow characteristics of a properly underwritten ADC loan. The Company recognizes that one of the risks inherent in the use of interest reserves is the potential masking of underlying problems with the project and/or the borrower's ability to repay the loan. In order to mitigate these inherent risks, the Company employs a series of reporting and monitoring mechanisms on all ADC loans, whether or not an interest reserve is provided, including: (1) construction and development timelines that are monitored on an ongoing basis and track the progress of a given project to the timeline projected at origination; (2) a construction loan administration department independent of the lending function; (3) third party independent construction loan inspection reports; (4) monthly interest reserve monitoring reports detailing the balance of the interest reserves approved at origination and the days of interest carry represented by the reserve balances as compared to the then current anticipated time to completion and/or sale of speculative projects; and (5) quarterly commercial real estate construction meetings among senior Company management, which include monitoring of current and projected real estate market conditions.

The following table details activity in the allowance for credit losses by portfolio segment for the three and nine months ended September 30, 2023 and 2022. PPP loans are excluded from these tables since they do not carry an allowance for credit loss, as these loans are fully guaranteed as to principal and interest by the SBA, whose guarantee is backed by the full faith and credit of the U.S. Government. Allocation of a portion of the allowance to one category of loans does not restrict the use of the allowance to absorb losses in other categories.


(dollars in thousands)	Commercial		Income-Producing Commercial Real Estate		Owner-Occupied -Commercial Real Estate		Real Estate Mortgage Residential		Construction - Commercial and Residential		Construction - C&I (Owner-Occupied)		Home Equity		Other Consumer		Total
Three Months Ended September 30, 2023
Allowance for credit losses:
Balance at beginning of period	$	15,374	$	38,486	$	12,805	$	811	$	8,018	1,914		$	595	$	26	$	78,029
Loans charged-off	(467)		—		—		—		—		—		—		—		(467)
Recoveries of loans previously charged-off	103		—		23		—		—		—		—		1		127
Net loans (charged-off) recovered	(364)		—		23		—		—		—		—		1		(340)
Provision for (reversal of) credit losses	1,327		2,207		1,424		53		615		(20)		39		(2)		5,643
Ending balance	$	16,337	$	40,693	$	14,252	$	864	$	8,633	$	1,894	$	634	$	25	$	83,332

Nine Months Ended September 30, 2023
Allowance for credit losses:
Balance at beginning of period	$	15,655	$	35,688	$	12,702	$	969	$	7,195	1,606		$	555	$	74	$	74,444
Loans charged-off	(1,828)		(5,306)		—		—		(136)		—		—		(50)		(7,320)
Recoveries of loans previously charged-off	335		—		31		—		34		—		—		6		406
Net loans (charged-off) recovered	(1,493)		(5,306)		31		—		(102)		—		—		(44)		(6,914)
Provision for (reversal of) credit losses	2,175		10,311		1,519		(105)		1,540		288		79		(5)		15,802
Ending balance	$	16,337	$	40,693	$	14,252	$	864	$	8,633	$	1,894	$	634	$	25	$	83,332

Three Months Ended September 30, 2022
Allowance for credit losses:
Balance at beginning of period	$	15,754	$	34,120	$	12,796	$	790	$	6,470	2,024		$	647	$	64	$	72,665
Loans charged-off	(53)		—		—		—		—		—		—		(70)		(123)
Recoveries of loans previously charged-off	152		—		25		—		—		—		—		2		179
Net loans (charged-off) recovered	99		—		25		—		—		—		—		(68)		56
Provision for (reversal of) credit losses	20		2,207		(240)		20		759		261		(23)		42		3,046
Ending balance	$	15,873	$	36,327	$	12,581	$	810	$	7,229	$	2,285	$	624	$	38	$	75,767

Nine Months Ended September 30, 2022
Allowance for credit losses:
Balance at beginning of period	$	14,475	$	38,287	$	12,146	$	449	$	7,094	$	2,005	$	474	$	35	$	74,965
Loans charged-off	(604)		—		(1,356)		—		—		—		—		(74)		(2,034)
Recoveries of loans previously charged-off	648		—		25		—		1,627		—		—		4		2,304
Net loans (charged-off) recovered	44		—		(1,331)		—		1,627		—		—		(70)		270
Provision for (reversal of) credit losses	1,354		(1,960)		1,766		361		(1,492)		280		150		73		532
Ending balance	$	15,873	$	36,327	$	12,581	$	810	$	7,229	$	2,285	$	624	$	38	$	75,767

The following table presents the amortized cost basis of collateral-dependent loans by class of loans as of September 30, 2023 and December 31, 2022:


	September 30, 2023				December 31, 2022
	Business/Other				Business/Other
(dollars in thousands)	Assets		Real Estate		Assets		Real Estate
Commercial	$	2,330	$	1,070	$	1,563	$	1,871

Income-producing - commercial real estate	1,753		23,236		2,000		4,328
Owner-occupied - commercial real estate	—		19,882		—		19,187
Real estate mortgage - residential	—		1,692		—		1,698
Construction - commercial and residential	—		39,695		—		—
Home equity	—		245		—		—
Other consumer	—		—		50		—
Total	$	4,083	$	85,820	$	3,613	$	27,084

Credit Quality Indicators

The Company uses several credit quality indicators to manage credit risk in an ongoing manner. The Company's primary credit quality indicators inform an internal credit risk rating system that categorizes loans into pass, watch, special mention, or classified categories. Credit risk ratings are applied individually to those classes of loans that have significant or unique credit characteristics that benefit from a case-by-case evaluation. These are typically loans to businesses or individuals in the classes that comprise the commercial portfolio segment. Groups of loans that are underwritten and structured using standardized criteria and characteristics, such as statistical models (e.g., credit scoring or payment performance), are typically risk rated and monitored collectively. These are typically loans to individuals in the classes that comprise the consumer portfolio segment.

The following are the definitions of the Company's credit quality indicators:


Pass:			Loans in all classes that comprise the commercial and consumer portfolio segments that are not adversely rated, are contractually current as to principal and interest, and are otherwise in compliance with the contractual terms of the loan agreement. Management believes that there is a low likelihood of loss related to those loans that are considered pass.

Special Mention:			Loans in the classes that comprise the commercial portfolio segment that have potential weaknesses that deserve management's close attention. If not addressed, these potential weaknesses may result in deterioration of the repayment prospects for the loan. The special mention credit quality indicator is not used for classes of loans that comprise the consumer portfolio segment. Management believes that there is a moderate likelihood of some loss related to those loans that are considered special mention.

Classified:			Classified (a) Substandard – Loans inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the company will sustain some loss if the deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard loans, does not have to exist in individual loans classified substandard.

			Classified (b) Doubtful – Loans that have all the weaknesses inherent in a loan classified substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. The possibility of loss is extremely high, but because of certain important and reasonably specific pending factors, which may work to the advantage and strengthening of the assets, its classification as an estimated loss is deferred until its more exact status may be determined.

The Company's credit quality indicators are generally updated annually, however, credits rated "Special Mention" or below are reviewed more frequently. Based on the most recent analysis performed, the amortized cost basis of loans by risk category, class and year of origination are as follows:


(dollars in thousands)	Prior		2019		2020		2021		2022		2023		Revolving Loans Amort. Cost Basis		Revolving Loans Convert. to Term		Total
September 30, 2023
Commercial
Pass	$	179,327	$	50,533	$	48,437	$	217,772	$	159,417	$	82,375	$	665,282	$	5,209	$	1,408,352
Special Mention	—		—		5,299		—		68		—		2,439		—		7,806
Substandard	1,172		90		—		542		149		—		380		269		2,602
Total	180,499		50,623		53,736		218,314		159,634		82,375		668,101		5,478		1,418,760
YTD gross charge-offs	(885)		—		—		—		—		—		—		(943)		(1,828)
PPP loans
Pass	—		—		—		588		—		—		—		—		588



Income producing - commercial real estate
Pass	1,320,917		385,392		371,421		516,336		731,489		317,755		196,981		1,848		3,842,139
Special Mention	91,756		4,175		6,739		—		—		—		47,706		—		150,376
Substandard	106,407		48,379		—		—		—		—		—		—		154,786
Total	1,519,080		437,946		378,160		516,336		731,489		317,755		244,687		1,848		4,147,301
YTD gross charge-offs	(5,306)		—		—		—		—		—		—		—		(5,306)
Owner occupied - commercial real estate
Pass	614,664		117,143		37,206		203,082		45,904		121,169		1,890		22,019		1,163,077

Substandard	19,882		—		—		—		—		—		—		—		19,882
Total	634,546		117,143		37,206		203,082		45,904		121,169		1,890		22,019		1,182,959

Real estate mortgage - residential
Pass	27,025		8,057		2,198		16,007		14,798		6,734		—		—		74,819
Substandard	1,692		—		—		—		—		—		—		—		1,692
Total	28,717		8,057		2,198		16,007		14,798		6,734		—		—		76,511

Construction - commercial and residential
Pass	39,878		4,087		41,069		268,943		338,874		58,341		112,439		956		864,587

Substandard	525		39,170		—		—		—		—		—		—		39,695
Total	40,403		43,257		41,069		268,943		338,874		58,341		112,439		956		904,282
YTD gross charge-offs	(136)		—		—		—		—		—		—		—		(136)
Construction - C&I (owner occupied)
Pass	18,658		4,294		56,784		638		33,229		9,607		6,406		—		129,616

Total	18,658		4,294		56,784		638		33,229		9,607		6,406		—		129,616

Home equity
Pass	2,171		—		88		152		133		—		50,452		577		53,573
Substandard	—		37		—		—		—		—		62		245		344
Total	2,171		37		88		152		133		—		50,514		822		53,917

Other consumer
Pass	2		—		—		—		68		1,858		529		—		2,457

Total	2		—		—		—		68		1,858		529		—		2,457
YTD gross charge-offs	(50)		—		—		—		—		—		—		—		(50)
Total recorded investment	$	2,424,076	$	661,357	$	569,241	$	1,224,060	$	1,324,129	$	597,839	$	1,084,566	$	31,123	$	7,916,391
Total YTD gross charge-offs	$	(6,377)	$	—	$	—	$	—	$	—	$	—	$	—	$	(943)	$	(7,320)

(dollars in thousands)	Prior		2018		2019		2020		2021		2022		Revolving Loans Amort. Cost Basis		Revolving Loans Convert. to Term		Total
December 31, 2022
Commercial
Pass	$	183,329	$	47,393	$	56,261	$	64,163	$	237,146	$	144,390	$	736,090	$	8,570	$	1,477,342
Special Mention	—		—		—		—		—		82		5,475		—		5,557
Substandard	1,332		351		276		—		—		—		1,344		1,147		4,450
Total	184,661		47,744		56,537		64,163		237,146		144,472		742,909		9,717		1,487,349
YTD gross charge-offs	(283)		(101)		(49)		—		—		—		(483)		—		(916)
PPP loans
Pass	—		—		—		2,479		777		—		—		—		3,256



Income producing - commercial real estate
Pass	1,016,529		439,221		480,474		334,165		542,143		744,328		192,089		358		3,749,307
Special Mention	44,195		5,206		4,209		6,735		—		—		47,676		—		108,021
Substandard	60,613		2,000		—		—		—		—		—		—		62,613
Total	1,121,337		446,427		484,683		340,900		542,143		744,328		239,765		358		3,919,941
YTD gross charge-offs	(680)		(645)		(676)		—		—		—		—		—		(2,001)
Owner occupied - commercial real estate
Pass	461,029		191,646		111,497		40,562		206,595		41,765		24,240		13,238		1,090,572

Substandard	19,753		—		—		—		—		—		—		—		19,753
Total	480,782		191,646		111,497		40,562		206,595		41,765		24,240		13,238		1,110,325

Real estate mortgage - residential
Pass	16,968		12,438		8,219		2,640		16,307		14,731		—		—		71,303
Substandard	1,698		—		—		—		—		—		—		—		1,698
Total	18,666		12,438		8,219		2,640		16,307		14,731		—		—		73,001

Construction - commercial and residential
Pass	84,522		71,841		90,560		189,023		191,127		159,771		90,911		—		877,755


Total	84,522		71,841		90,560		189,023		191,127		159,771		90,911		—		877,755

Construction - C&I (owner occupied)
Pass	14,816		8,160		11,810		33,854		653		34,679		6,507		—		110,479



Home equity
Pass	1,747		—		—		98		551		—		48,378		906		51,680
Substandard	—		—		41		—		—		—		61		—		102
Total	1,747		—		41		98		551		—		48,439		906		51,782

Other consumer
Pass	4		—		—		—		—		126		1,561		3		1,694
Substandard	—		—		—		—		—		—		—		50		50
Total	4		—		—		—		—		126		1,561		53		1,744
YTD gross charge-offs	(3)		—		—		—		—		—		(75)		—		(78)
Total recorded investment	$	1,906,531	$	778,256	$	763,347	$	673,719	$	1,195,299	$	1,139,872	$	1,154,332	$	24,272	$	7,635,632
Total YTD gross charge-offs	$	(966)	$	(746)	$	(725)	$	—	$	—	$	—	$	(558)	$	—	$	(2,995)

Nonaccrual and Past Due Loans

As part of the Company's comprehensive loan review process, management evaluates loans that are past-due 30 days or more. Management makes a thorough assessment of the conditions and circumstances surrounding each delinquent loan. The Bank's loan policy requires that loans be placed on nonaccrual if they are 90 days past-due, unless they are well secured and in the process of collection. Additionally, Credit Administration specifically analyzes the status of development and construction projects, sales activities and utilization of interest reserves in order to carefully and prudently assess potential increased levels of risk requiring additional reserves.

The table presents, by class of loan, an aging analysis and the recorded investments in loans past due on an amortized cost basis as of September 30, 2023 and December 31, 2022:


(dollars in thousands, except amount in the footnote)	Loans 30-59 Days Past Due		Loans 60-89 Days Past Due		Loans 90 Days or More Past Due		Total Past Due Loans		Current Loans		Nonaccrual Loans		Total Recorded Investment in Loans
September 30, 2023
Commercial	$	55	$	—	$	—	$	55	$	1,416,184	$	2,521	$	1,418,760
PPP loans	—		—		—		—		588		—		588
Income producing - commercial real estate	25,769		—		—		25,769		4,096,543		24,989		4,147,301
Owner occupied - commercial real estate	404		19,125		—		19,529		1,162,672		758		1,182,959
Real estate mortgage - residential	—		—		—		—		74,561		1,950		76,511
Construction - commercial and residential	976		—		—		976		863,611		39,695		904,282
Construction - C&I (owner occupied)	—		—		—		—		129,616		—		129,616
Home equity	42		—		—		42		53,630		245		53,917
Other consumer	—		—		—		—		2,457		—		2,457
Total	$	27,246	$	19,125	$	—	$	46,371	$	7,799,862	$	70,158	$	7,916,391

December 31, 2022
Commercial	$	697	$	643	$	—	$	1,340	$	1,483,521	$	2,488	$	1,487,349
PPP loans	—		—		—		—		3,256		—		3,256
Income producing - commercial real estate	—		—		—		—		3,917,941		2,000		3,919,941
Owner occupied - commercial real estate	—		279		—		279		1,110,029		17		1,110,325
Real estate mortgage – residential	—		—		—		—		71,088		1,913		73,001
Construction - commercial and residential	531		—		—		531		877,224		—		877,755
Construction - C&I (owner occupied)	—		—		—		—		110,479		—		110,479
Home equity	—		52		—		52		51,730		—		51,782
Other consumer	—		1		—		1		1,693		50		1,744
Total	$	1,228	$	975	$	—	$	2,203	$	7,626,961	$	6,468	$	7,635,632

The following presents the nonaccrual loans on an amortized cost basis as of September 30, 2023 and December 31, 2022:


(dollars in thousands, except amounts in footnotes)	Nonaccrual with No Allowance for Credit Losses		Nonaccrual with an Allowance for Credit Losses		Total Nonaccrual Loans
September 30, 2023
Commercial	$	366	$	2,155	$	2,521

Income producing - commercial real estate	23,236		1,753		24,989
Owner occupied - commercial real estate	758		—		758
Real estate mortgage - residential	—		1,950		1,950
Construction - commercial and residential	39,170		525		39,695
Home equity	245		—		245
Total (1)	$	63,775	$	6,383	$	70,158

December 31, 2022
Commercial	$	101	$	2,387	$	2,488

Income producing - commercial real estate	—		2,000		2,000
Owner occupied - commercial real estate	17		—		17
Real estate mortgage - residential	—		1,913		1,913


Other consumer	—		50		50
Total (1)	$	118	$	6,350	$	6,468

(1)Gross coupon interest income of approximately $4.1 million and $410 thousand would have been recorded for the nine months ended September 30, 2023 and 2022, respectively, if nonaccrual loans shown above had been current and in accordance with their original terms, while $1.1 million and $5 thousand of coupon interest income was actually recorded on such loans for the nine months ended September 30, 2023 and 2022, respectively. See Note 1 to the Consolidated Financial Statements for a description of the Company's policy for placing loans on nonaccrual status.

Modifications with Borrowers Experiencing Financial Difficulty

On January 1, 2023, the Company adopted the accounting guidance in ASU No. 2022-02, effective as of January 1, 2023, which eliminates the recognition and measurement of a TDR. Due to the removal of the TDR designation, the Company evaluates all loan restructurings according to the accounting guidance for loan modifications to determine if the restructuring results in a new loan or a continuation of the existing loan. Loan modifications to borrowers experiencing financial difficulties that result in a direct change in the timing or amount of contractual cash flows include situations where there is principal forgiveness, interest rate reductions, other-than-insignificant payment delays, term extensions, and combinations of the listed modifications. Therefore, the disclosures related to loan restructurings are for modifications which have a direct impact on cash flows.

The Company may offer various types of modifications when restructuring a loan. Commercial and industrial loans modified in a loan restructuring often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans. Additional collateral, a co-borrower, or a guarantor is often requested.

Commercial mortgage and construction loans modified in a loan restructuring often involve reducing the interest rate for the remaining term of the loan, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk, or substituting or adding a new borrower or guarantor. Construction loans modified in a loan restructuring may also involve extending the interest-only payment period.

Loans modified in a loan restructuring for the Company may have the financial effect of increasing the specific allowance associated with the loan. An allowance for consumer and commercial loans that have been modified in a loan restructuring is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate, the loan's observable market price, or the estimated fair value of the collateral, less any selling costs, if the loan is collateral dependent. Management exercises significant judgment in developing these estimates.

Commercial and consumer loans modified in a loan restructuring are closely monitored for delinquency as an early indicator of possible future default. If loans modified in a loan restructuring subsequently default, the Company evaluates the loan for possible further loss. The allowance may be increased, adjustments may be made in the allocation of the allowance, or partial charge-offs may be taken to further write-down the carrying value of the loan.

The following table presents the amortized cost basis as of September 30, 2023 and the financial effect of loans modified to borrowers experiencing financial difficulty during the three and nine months ended September 30, 2023:


	September 30, 2023
(dollars in thousands)	Term Extension		Combination - Term Extension and Principal Payment Delay		Combination - Term Extension, Principal Payment Delay and Interest Rate Reduction		Total		Percentage of Total Loan Type		Weighted Average Term and Principal Payment Extension (1)	Weighted Average Interest Rate Reduction (2)
Three months ended September 30, 2023
Commercial	$	29,898	$	—	$	—	$	29,898	2.1	%	4 months	—	%
Income producing - commercial real estate	7,190		55,649		113,833		176,672		4.3	%	10 months	1.89	%
Owner occupied - commercial real estate	—		19,125		—		19,125		1.6	%	3 months	—	%

Total	$	37,088	$	74,774	$	113,833	$	225,695

Nine months ended September 30, 2023
Commercial	$	36,969	$	—	$	—	$	36,969	2.6	%	7 months	—	%
Income producing - commercial real estate (3)	7,190		57,808		113,833		178,831		4.3	%	13 months	2.55	%
Owner occupied - commercial real estate	—		19,125		—		19,125		1.6	%	9 months	—	%
Construction - commercial and residential	7,093		—		—		7,093		0.8	%	6 months	—	%
Total	$	51,252	$	76,933	$	113,833	$	242,018

(1)For loans that received multiple modifications during the nine months ended September 30, 2023, weighted average term and principal payment extensions were calculated based on the aggregated impact of the extensions received during the period.

(2)The weighted average is calculated based on the total amortized cost at September 30, 2023 of loans that received interest rate reduction modifications during the three and nine months ended September 30, 2023.

(3)Includes one loan modified as a combination - principal payment delay and term extension during the first quarter of 2023 that was moved to nonaccrual status and incurred a $2.1 million charge off in the second quarter of 2023. In October 2023, the loan was sold.

The following table presents the performance of loans modified to borrowers experiencing financial difficulty during the nine months ended September 30, 2023:


	September 30, 2023
	Payment Status (Amortized Cost Basis)
(dollars in thousands)	Current		30-89 Days Past Due		Nonaccrual
Commercial	$	36,969	$	—	$	—
Income producing - commercial real estate	130,461		25,769		22,601
Owner occupied - commercial real estate	—		19,125		—
Construction - commercial and residential	7,093		—		—
Total	$	174,523	$	44,894	$	22,601

The Company monitors loan payments on performing and nonperforming loans on an on-going basis to determine if a loan is considered to have a payment default. To determine the existence of a payment default, the Company analyzes the economic conditions that exist for each borrower and their ability to generate positive cash flow during a given loan's term.

The following table presents the amortized cost basis of loans that had a payment default during the nine months ended September 30, 2023 and were modified in the twelve months prior to that default to borrowers experiencing financial difficulty:


	September 30, 2023
	Amortized Cost Basis
(dollars in thousands)	Combination - Term Extension and Principal Payment Delay		Combination - Term Extension, Principal Payment Delay and Interest Rate Reduction
Income producing - commercial real estate	$	—	$	46,211
Owner occupied - commercial real estate	19,125		—
Total	$	19,125	$	46,211

The Company individually evaluates nonaccrual loans when performing its CECL estimate to calculate the ACL. Additionally, the Company utilizes historical internal and third-party service provider sourced loss data in the determination of its PD/LGD rates applied in the calculation of its CECL estimate. Upon determination that a modified loan (or a portion of a loan) has subsequently been deemed uncollectible, the loan (or a portion of the loan) is charged off. Therefore, the amortized cost basis of the loan is reduced by the uncollectible amount and the ACL is adjusted by the same amount.