LOANS AND ALLOWANCE FOR CREDIT LOSSES

6 Months Ended

Jun. 30, 2022

NOTE 3 - LOANS AND ALLOWANCE FOR CREDIT LOSSES

The following table summarizes the Company’s loan portfolio by type of loan as of:


	June 30, 2022			December 31, 2021
Commercial and industrial	$	268,812		$	280,569
Real estate:
Construction and development		350,024			307,797
Commercial real estate		749,603			622,842
Farmland		166,309			145,501
1-4 family residential		450,929			410,673
Multi-family residential		55,985			30,971
Consumer		56,433			50,965
Agricultural		14,502			14,639
Warehouse lending(1)		25,344			43,720
Overdrafts		435			363
Total loans(2)		2,138,376			1,908,040
Net of:
Deferred loan fees, net		(1,721	)		(1,531	)
Allowance for credit losses		(28,997	)		(30,433	)
Total net loans(2)	$	2,107,658		$	1,876,076

(1) Warehouse lending is presented as a component of commercial and industrial loans in remaining tables.
(2) Excludes accrued interest receivable on loans of $5.7 million and $5.8 million as of June 30, 2022 and December 31, 2021, respectively, which is presented separately on the consolidated balance sheets.

The Company’s estimate of the allowance for credit losses (“ACL”) reflects losses expected over the remaining contractual life of the assets. The contractual term does not consider extensions, renewals or modifications unless the Company has identified an expected troubled debt restructuring. The following tables present the activity in the ACL by class of loans for the six months ended June 30, 2022, for the year ended December 31, 2021 and for the six months ended June 30, 2021:


Six Months Ended June 30, 2022	Commercial and industrial			Construction and development		Commercial real estate			Farmland		1-4 family residential		Multi-family residential		Consumer			Agricultural			Overdrafts			Total
Allowance for credit losses:
Beginning balance	$	3,600		$	4,221	$	13,765		$	1,698	$	5,818	$	396	$	762		$	169		$	4		$	30,433
(Reversal of) provision for credit losses		462			27		(2,420	)		55		121		208		209			(8	)		96			(1,250	)
Loans charged-off		(154	)		—		—			—		—		—		(36	)		—			(138	)		(328	)
Recoveries		45			—		1			—		30		—		23			—			43			142
Ending balance	$	3,953		$	4,248	$	11,346		$	1,753	$	5,969	$	604	$	958		$	161		$	5		$	28,997


For the Year Ended December 31, 2021	Commercial and industrial			Construction and development			Commercial real estate			Farmland		1-4 family residential			Multi-family residential		Consumer			Agricultural			Overdrafts			Total
Allowance for credit losses:
Beginning balance	$	4,033		$	4,735		$	15,780		$	1,220	$	6,313		$	363	$	929		$	239		$	7		$	33,619
(Reversal of) provision for credit losses		(43	)		(515	)		(1,229	)		478		(495	)		33		(51	)		(78	)		200			(1,700	)
Loans charged-off		(411	)		—			(816	)		—		—			—		(151	)		—			(263	)		(1,641	)
Recoveries		21			1			30			—		—			—		35			8			60			155
Ending balance	$	3,600		$	4,221		$	13,765		$	1,698	$	5,818		$	396	$	762		$	169		$	4		$	30,433


Six Months Ended June 30, 2021	Commercial and industrial			Construction and development			Commercial real estate			Farmland		1-4 family residential			Multi-family residential		Consumer			Agricultural			Overdrafts			Total
Allowance for credit losses:
Beginning balance	$	4,033		$	4,735		$	15,780		$	1,220	$	6,313		$	363	$	929		$	239		$	7		$	33,619
Provision for credit losses		(329	)		(914	)		167			19		(162	)		255		(34	)		(49	)		47			(1,000	)
Loans charged-off		(238	)		—			(760	)		—		—			—		(76	)		—			(84	)		(1,158	)
Recoveries		11			1			11			—		—			—		28			—			36			87
Ending balance	$	3,477		$	3,822		$	15,198		$	1,239	$	6,151		$	618	$	847		$	190		$	6		$	31,548

During the year ended December 31, 2020, a total allowance for credit losses provision of $13,200 was recorded primarily to account for the estimated impact of COVID-19 on credit quality and resulted largely from changes to individual loan risk ratings, as well as COVID-specific qualitative factors primarily derived from changes in national GDP, Texas unemployment rates and national industry related CRE trends, all of which were impacted by the effects of COVID-19. During 2021, we recorded no provision in the first quarter, a $1,000 reverse provision in the second quarter and a $700 reverse provision in the third quarter. No provision was recorded in the fourth quarter of 2021. These provision reversals captured improvements that occurred to macroeconomic factors evaluated at the onset of the pandemic as part of the aforementioned COVID-specific qualitative factors, as well as risk rating upgrades for specific loans, which impacted the reserve calculations within our model. In the first quarter of 2022, we unwound the remaining COVID-specific qualitative factors and recorded an additional reverse provision of $1,250 to account for significant improvements in COVID-related health statistics and economic impacts.

The Company uses the weighted-average remaining maturity ("WARM") method as the basis for the estimation of expected credit losses. The WARM method uses a historical average annual charge-off rate containing loss content over a historical lookback period and is used as a foundation for estimating the credit loss reserve for the remaining outstanding balances of loans in a segment at the balance sheet date. The average annual charge-off rate is applied to the contractual term, further adjusted for estimated prepayments, to determine the unadjusted historical charge-off rate. The calculation of the unadjusted historical charge-off rate is then adjusted, using qualitative factors, for current conditions and for reasonable and supportable forecast periods. Qualitative loss factors are based on the Company’s judgment of company, market, industry or business specific data, differences in loan-specific risk characteristics such as underwriting standards, portfolio mix, risk grades, delinquency level, or term. These qualitative factors serve to compensate for additional areas of uncertainty inherent in the portfolio that are not reflected in our historic loss factors. Additionally, we have adjusted for changes in expected environmental and economic conditions, such as changes in unemployment rates, property values, and other relevant factors over the next 12 to 24 months. Management adjusted the historical loss experience for these expectations. No reversion adjustments were necessary, as the starting point for the Company’s estimate was a cumulative loss rate covering the expected contractual term of the portfolio.

The ACL is measured on a collective segment basis when similar risk characteristics exist. Our loan portfolio is segmented first by regulatory call report code, and second, by internally identified risk grades for our commercial loan segments and by delinquency status for our consumer loan segments. We also have separate segments for our warehouse lines of credit, for our internally originated SBA loans, for our SBA loans acquired from Westbound Bank and for SBA-guaranteed PPP loans. Consistent forecasts of the loss drivers are used across the loan segments. For loans that do not share general risk characteristics with segments, we estimate a specific reserve on an individual basis. A reserve is recorded when the carrying amount of the loan exceeds the discounted estimated cash flows using the loan's initial effective interest rate or the fair value of collateral for collateral-dependent loans.

Assets are graded “pass” when the relationship exhibits acceptable credit risk and indicates repayment ability, tolerable collateral coverage and reasonable performance history. Lending relationships exhibiting potentially significant credit risk and marginal repayment ability and/or asset protection are graded “special mention.” Assets classified as “substandard” are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness that jeopardizes the liquidation of the debt. Substandard graded loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. Assets graded “doubtful” are substandard graded loans that have added characteristics that make collection or liquidation in full improbable. Loans that are on nonaccrual status are generally classified as substandard.

In general, the loans in our portfolio have low historical credit losses. The Company closely monitors economic conditions and loan performance trends to manage and evaluate the exposure to credit risk. Key factors tracked by the Company and utilized in evaluating the credit quality of the loan portfolio include trends in delinquency ratios, the level of nonperforming assets, borrower’s repayment capacity, and collateral coverage.

The following table summarizes the credit exposure in the Company’s loan portfolio, by year of origination, as of June 30, 2022:


June 30, 2022	2022		2021		2020			2019		2018		Prior		Revolving Loans Amortized Cost			Total
Commercial and industrial:
Pass	$	72,035	$	74,565	$	22,755		$	13,675	$	5,010	$	15,538	$	89,101		$	292,679
Special mention		—		148		—			—		—		—		—			148
Substandard		—		—		258			653		204		30		—			1,145
Nonaccrual		—		32		57			—		—		—		95			184
Total commercial and industrial loans	$	72,035	$	74,745	$	23,070		$	14,328	$	5,214	$	15,568	$	89,196		$	294,156

Charge-offs	$	—	$	—	$	(30	)	$	—	$	—	$	—	$	(124	)	$	(154	)
Recoveries		—		—		—			—		—		33		12			45
Current period net	$	—	$	—	$	(30	)	$	—	$	—	$	33	$	(112	)	$	(109	)

Construction and development:
Pass	$	90,460	$	178,336	$	30,558		$	17,497	$	5,771	$	17,007	$	9,474		$	349,103
Special mention		—		—		—			—		—		920		—			920
Substandard		—		—		—			—		1		—		—			1
Nonaccrual		—		—		—			—		—		—		—			—
Total construction and development loans	$	90,460	$	178,336	$	30,558		$	17,497	$	5,772	$	17,927	$	9,474		$	350,024

Charge-offs	$	—	$	—	$	—		$	—	$	—	$	—	$	—		$	—
Recoveries		—		—		—			—		—		—		—			—
Current period net	$	—	$	—	$	—		$	—	$	—	$	—	$	—		$	—

Commercial real estate:
Pass	$	160,736	$	144,217	$	108,522		$	68,311	$	50,281	$	162,261	$	16,445		$	710,773
Special mention		—		—		950			—		8,841		17,536		—			27,327
Substandard		—		—		—			—		1,030		3,047		—			4,077
Nonaccrual		—		—		248			106		63		7,009		—			7,426
Total commercial real estate loans	$	160,736	$	144,217	$	109,720		$	68,417	$	60,215	$	189,853	$	16,445		$	749,603

Charge-offs	$	—	$	—	$	—		$	—	$	—	$	—	$	—		$	—
Recoveries		—		—		—			—		1		—		—			1
Current period net	$	—	$	—	$	—		$	—	$	1	$	—	$	—		$	1


June 30, 2022	2022		2021		2020		2019		2018		Prior		Revolving Loans Amortized Cost		Total
Farmland:
Pass	$	65,506	$	57,309	$	11,768	$	7,164	$	6,828	$	12,908	$	4,630	$	166,113
Special mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		32		—		67		—		99
Nonaccrual		—		—		—		—		—		97		—		97
Total farmland loans	$	65,506	$	57,309	$	11,768	$	7,196	$	6,828	$	13,072	$	4,630	$	166,309

Charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Recoveries		—		—		—		—		—		—		—		—
Current period net	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

1-4 family residential:
Pass	$	79,199	$	132,508	$	55,175	$	34,883	$	29,142	$	100,769	$	17,572	$	449,248
Special mention		—		—		—		—		22		109		—		131
Substandard		—		—		—		—		—		—		—		—
Nonaccrual		—		159		—		—		118		1,273		—		1,550
Total 1-4 family residential loans	$	79,199	$	132,667	$	55,175	$	34,883	$	29,282	$	102,151	$	17,572	$	450,929

Charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Recoveries		—		—		—		—		—		30		—		30
Current period net	$	—	$	—	$	—	$	—	$	—	$	30	$	—	$	30

Multi-family residential:
Pass	$	25,629	$	18,566	$	2,511	$	6,334	$	893	$	1,961	$	91	$	55,985
Special mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—
Total multi-family residential loans	$	25,629	$	18,566	$	2,511	$	6,334	$	893	$	1,961	$	91	$	55,985

Charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Recoveries		—		—		—		—		—		—		—		—
Current period net	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—


June 30, 2022	2022			2021			2020			2019		2018		Prior		Revolving Loans Amortized Cost			Total
Consumer and overdrafts:
Pass	$	18,010		$	17,136		$	8,071		$	2,865	$	3,674	$	660	$	6,028		$	56,444
Special mention		8			32			2			—		—		—		—			42
Substandard		—			—			—			—		—		—		—			—
Nonaccrual		—			68			17			8		31		8		250			382
Total consumer loans and overdrafts	$	18,018		$	17,236		$	8,090		$	2,873	$	3,705	$	668	$	6,278		$	56,868

Charge-offs	$	(138	)	$	(14	)	$	(22	)	$	—	$	—	$	—	$	—		$	(174	)
Recoveries		43			1			—			11		—		11		—			66
Current period net	$	(95	)	$	(13	)	$	(22	)	$	11	$	—	$	11	$	—		$	(108	)

Agricultural:
Pass	$	1,719		$	2,392		$	1,377		$	680	$	665	$	540	$	6,865		$	14,238
Special mention		—			—			—			—		—		6		—			6
Substandard		—			—			14			3		—		32		—			49
Nonaccrual		—			—			—			71		6		53		79			209
Total agricultural loans	$	1,719		$	2,392		$	1,391		$	754	$	671	$	631	$	6,944		$	14,502

Charge-offs	$	—		$	—		$	—		$	—	$	—	$	—	$	—		$	—
Recoveries		—			—			—			—		—		—		—			—
Current period net	$	—		$	—		$	—		$	—	$	—	$	—	$	—		$	—

Total loans:
Pass	$	513,294		$	625,029		$	240,737		$	151,409	$	102,264	$	311,644	$	150,206		$	2,094,583
Special mention		8			180			952			—		8,863		18,571		—			28,574
Substandard		—			—			272			688		1,235		3,176		—			5,371
Nonaccrual		—			259			322			185		218		8,440		424			9,848
Total loans	$	513,302		$	625,468		$	242,283		$	152,282	$	112,580	$	341,831	$	150,630		$	2,138,376

Charge-offs	$	(138	)	$	(14	)	$	(52	)	$	—	$	—	$	—	$	(124	)	$	(328	)
Recoveries		43			1			—			11		1		74		12			142
Total current period net (charge-offs) recoveries	$	(95	)	$	(13	)	$	(52	)	$	11	$	1	$	74	$	(112	)	$	(186	)

The following table summarizes the credit exposure in the Company’s loan portfolio, by year of origination, as of December 31, 2021:


December 31, 2021	2021		2020		2019			2018			2017			Prior			Revolving Loans Amortized Cost			Total
Commercial and industrial:
Pass	$	176,972	$	31,337	$	16,207		$	6,449		$	3,493		$	14,657		$	74,364		$	323,479
Special mention		—		88		—			—			14			—			—			102
Substandard		—		272		55			192			40			1			—			560
Nonaccrual		14		101		—			22			—			11			—			148
Total commercial and industrial loans	$	176,986	$	31,798	$	16,262		$	6,663		$	3,547		$	14,669		$	74,364		$	324,289

Charge-offs	$	—	$	—	$	(168	)	$	(67	)	$	(115	)	$	—		$	(61	)	$	(411	)
Recoveries		—		—		—			—			—			—			21			21
Current period net	$	—	$	—	$	(168	)	$	(67	)	$	(115	)	$	—		$	(40	)	$	(390	)

Construction and development:
Pass	$	180,056	$	68,765	$	20,499		$	6,507		$	8,235		$	13,565		$	8,615		$	306,242
Special mention		—		—		—			—			944			—			—			944
Substandard		—		—		609			2			—			—			—			611
Nonaccrual		—		—		—			—			—			—			—			—
Total construction and development loans	$	180,056	$	68,765	$	21,108		$	6,509		$	9,179		$	13,565		$	8,615		$	307,797

Charge-offs	$	—	$	—	$	—		$	—		$	—		$	—		$	—		$	—
Recoveries		—		—		—			—			—			1			—			1
Current period net	$	—	$	—	$	—		$	—		$	—		$	1		$	—		$	1

Commercial real estate:
Pass	$	134,617	$	93,806	$	80,733		$	59,380		$	43,457		$	145,477		$	16,065		$	573,535
Special mention		—		765		—			—			4,550			788			—			6,103
Substandard		—		6,987		—			10,041			12,981			12,553			—			42,562
Nonaccrual		—		—		124			69			32			337			80			642
Total commercial real estate loans	$	134,617	$	101,558	$	80,857		$	69,490		$	61,020		$	159,155		$	16,145		$	622,842

Charge-offs	$	—	$	—	$	(17	)	$	(56	)	$	(472	)	$	(271	)	$	—		$	(816	)
Recoveries		—		—		19			—			11			—			—			30
Current period net	$	—	$	—	$	2		$	(56	)	$	(461	)	$	(271	)	$	—		$	(786	)


December 31, 2021	2021		2020		2019		2018		2017		Prior		Revolving Loans Amortized Cost		Total
Farmland:
Pass	$	94,491	$	11,868	$	8,664	$	7,456	$	5,191	$	11,145	$	6,290	$	145,105
Special mention		—		—		—		—		—		26		—		26
Substandard		—		—		—		—		—		72		—		72
Nonaccrual		—		195		—		—		—		103		—		298
Total farmland loans	$	94,491	$	12,063	$	8,664	$	7,456	$	5,191	$	11,346	$	6,290	$	145,501

Charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Recoveries		—		—		—		—		—		—		—		—
Current period net	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

1-4 family residential:
Pass	$	132,448	$	64,590	$	43,016	$	36,501	$	26,987	$	91,864	$	13,714	$	409,120
Special mention		—		—		—		—		—		18		—		18
Substandard		—		—		—		—		—		—		—		—
Nonaccrual		170		—		—		180		58		1,127		—		1,535
Total 1-4 family residential loans	$	132,618	$	64,590	$	43,016	$	36,681	$	27,045	$	93,009	$	13,714	$	410,673

Charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Recoveries		—		—		—		—		—		—		—		—
Current period net	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Multi-family residential:
Pass	$	16,663	$	4,286	$	6,436	$	908	$	474	$	2,113	$	91	$	30,971
Special mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		—		—		—
Nonaccrual		—		—		—		—		—		—		—		—
Total multi-family residential loans	$	16,663	$	4,286	$	6,436	$	908	$	474	$	2,113	$	91	$	30,971

Charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Recoveries		—		—		—		—		—		—		—		—
Current period net	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—


December 31, 2021	2021			2020			2019			2018			2017			Prior			Revolving Loans Amortized Cost			Total
Consumer and overdrafts:
Pass	$	24,715		$	11,589		$	4,557		$	4,647		$	558		$	543		$	4,478		$	51,087
Special mention		76			—			5			—			—			—			—			81
Substandard		—			—			—			—			—			—			—			—
Nonaccrual		56			27			10			62			5			—			—			160
Total consumer loans and overdrafts	$	24,847		$	11,616		$	4,572		$	4,709		$	563		$	543		$	4,478		$	51,328

Charge-offs	$	(285	)	$	(36	)	$	(57	)	$	(32	)	$	(2	)	$	(2	)	$	—		$	(414	)
Recoveries		61			3			—			8			2			21			—			95
Current period net	$	(224	)	$	(33	)	$	(57	)	$	(24	)	$	—		$	19		$	—		$	(319	)

Agricultural:
Pass	$	3,557		$	1,866		$	927		$	917		$	221		$	526		$	6,492		$	14,506
Special mention		—			—			—			—			13			—			—			13
Substandard		—			14			4			15			39			—			—			72
Nonaccrual		—			—			—			8			—			40			—			48
Total agricultural loans	$	3,557		$	1,880		$	931		$	940		$	273		$	566		$	6,492		$	14,639

Charge-offs	$	—		$	—		$	—		$	—		$	—		$	—		$	—		$	—
Recoveries		—			—			—			—			—			8			—			8
Current period net	$	—		$	—		$	—		$	—		$	—		$	8		$	—		$	8

Total loans:
Pass	$	763,519		$	288,107		$	181,039		$	122,765		$	88,616		$	279,890		$	130,109		$	1,854,045
Special mention		76			853			5			—			5,521			832			—			7,287
Substandard		—			7,273			668			10,250			13,060			12,626			—			43,877
Nonaccrual		240			323			134			341			95			1,618			80			2,831
Total loans	$	763,835		$	296,556		$	181,846		$	133,356		$	107,292		$	294,966		$	130,189		$	1,908,040

Charge-offs	$	(285	)	$	(36	)	$	(242	)	$	(155	)	$	(589	)	$	(273	)	$	(61	)	$	(1,641	)
Recoveries		61			3			19			8			13			30			21			155
Total current period net charge-offs	$	(224	)	$	(33	)	$	(223	)	$	(147	)	$	(576	)	$	(243	)	$	(40	)	$	(1,486	)

There were no loans classified in the “doubtful” or “loss” risk rating categories as of June 30, 2022 and December 31, 2021.

The following tables presents the amortized cost basis of individually evaluated collateral-dependent loans by class of loan, and their impact on the ACL, as of June 30, 2022 and December 31, 2021:


June 30, 2022	Real Estate		Non-RE		Total		Allowance for Credit Losses Allocation
Commercial and industrial	$	718	$	—	$	718	$	246
Real estate:
Commercial real estate		1,030		—		1,030		354
Consumer		—		250		250		250
Total	$	1,748	$	250	$	1,998	$	850


December 31, 2021	Real Estate		Non-RE		Total		Allowance for Credit Losses Allocation
Commercial and industrial	$	116	$	—	$	116	$	40
Real estate:
Construction and development		609		—		609		207
Commercial real estate		4,319		—		4,319		553
Total	$	5,044	$	—	$	5,044	$	800

The following tables summarize the payment status of loans in the Company’s total loan portfolio, including an aging of delinquent loans and loans 90 days or more past due continuing to accrue interest as of:


June 30, 2022	30 to 59 Days Past Due		60 to 89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days and Accruing
Commercial and industrial	$	1,900	$	97	$	145	$	2,142	$	292,014	$	294,156	$	—
Real estate:
Construction and development		94		—		—		94		349,930		350,024		—
Commercial real estate		8		87		6,734		6,829		742,774		749,603		—
Farmland		20		—		—		20		166,289		166,309		—
1-4 family residential		784		186		411		1,381		449,548		450,929		—
Multi-family residential		—		—		—		—		55,985		55,985		—
Consumer		60		47		306		413		56,020		56,433		—
Agricultural		71		6		71		148		14,354		14,502		—
Overdrafts		—		—		—		—		435		435		—
Total	$	2,937	$	423	$	7,667	$	11,027	$	2,127,349	$	2,138,376	$	—


December 31, 2021	30 to 59 Days Past Due		60 to 89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days and Accruing
Commercial and industrial	$	969	$	38	$	134	$	1,141	$	323,148	$	324,289	$	—
Real estate:
Construction and development		885		132		—		1,017		306,780		307,797		—
Commercial real estate		—		360		350		710		622,132		622,842		—
Farmland		114		87		195		396		145,105		145,501		—
1-4 family residential		1,650		123		410		2,183		408,490		410,673		—
Multi-family residential		—		—		—		—		30,971		30,971		—
Consumer		189		113		68		370		50,595		50,965		—
Agricultural		41		8		—		49		14,590		14,639		—
Overdrafts		—		—		—		—		363		363		—
Total	$	3,848	$	861	$	1,157	$	5,866	$	1,902,174	$	1,908,040	$	—

The following table presents information regarding nonaccrual loans as of:


	June 30, 2022		December 31, 2021
Commercial and industrial	$	184	$	148
Real estate:
Commercial real estate		7,426		642
Farmland		97		298
1-4 family residential		1,550		1,535
Consumer and overdrafts		382		160
Agricultural		209		48
Total	$	9,848	$	2,831

Troubled Debt Restructurings

A troubled debt restructuring (“TDR”) is a restructuring in which a bank, for economic or legal reasons related to a borrower's financial difficulties, grants a concession to the borrower that it would not otherwise consider.

There were no loans modified as TDRs during the six months ended June 30, 2022.

The following table presents loans, by class, modified as TDRs during the year ended December 31, 2021:


Year Ended December 31, 2021	Number of Contracts		Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings:
Commercial and industrial		1		17		14
Total		1	$	17	$	14

There were four TDRs that subsequently defaulted during 2022 and remained on nonaccrual status as of June 30, 2022. There were no TDRs that subsequently defaulted during 2021. The TDRs described above did not increase the allowance for credit losses and resulted in no charge-offs during the six months ended June 30, 2022 or the year ended December 31, 2021.