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Loans
 3 Months Ended
Mar. 31, 2023
Receivables [Abstract]  
Loans Loans
Loans are comprised of the following:
(In thousands)March 31, 2023December 31, 2022
Commercial and industrial:
Commercial and business loans$50,379 $57,770 
Government program loans132 132 
Total commercial and industrial50,511 57,902 
Real estate mortgage:  
Commercial real estate395,669 398,115 
Residential mortgages269,991 273,357 
Home improvement and home equity loans46 49 
Total real estate mortgage665,706 671,521 
Real estate construction and development137,257 153,374 
Agricultural45,513 52,722 
Installment and student loans43,740 44,659 
Total loans$942,727 $980,178 
 
The Company’s directly originated loans are predominantly in the San Joaquin Valley and the greater Oakhurst/East Madera County area, as well as the Campbell area of Santa Clara County. The Company’s participation loans with other financial institutions are primarily in the state of California.

Commercial and industrial loans, representing 5.4% of total loans at March 31, 2023 and 5.9% at December 31, 2022, are generally made to support the ongoing operations of small-to-medium sized commercial businesses. Commercial and industrial loans have a high degree of industry diversification and provide working capital, financing for the purchase of manufacturing plants and equipment, or funding for growth and general expansion of businesses. A substantial portion of commercial and industrial loans are secured by accounts receivable, inventory, leases, or other collateral including real estate. The remainder are unsecured; however, extensions of credit are predicated upon the financial capacity of the borrower. Repayment of commercial loans is generally from the cash flow of the borrower.

Real estate mortgage loans, representing 70.6% of total loans at March 31, 2023 and 68.5% at December 31, 2022, are typically secured by either trust deeds on primarily commercial property or by trust deeds on single family residences. Repayment of real estate mortgage loans generally comes from the cash flow of the borrower and or guarantor(s).

•Commercial real estate mortgage loans comprise the largest segment of this loan category and are available on all types of income producing and non-income producing commercial properties, including: office buildings, shopping centers; apartments and motels; owner occupied buildings; manufacturing facilities and more. Commercial real estate mortgage loans can also be used to refinance existing debt. Commercial real estate loans are made under the premise that the loan will be repaid from the borrower’s business operations, rental income associated with the real property, or personal assets.

•Residential mortgage loans are provided to individuals to finance or refinance single-family residences. Residential mortgages are not a primary business line offered by the Company, and a majority are conventional mortgages that were purchased as a pool.

•Home Improvement and Home Equity loans comprise a relatively small portion of total real estate mortgage loans. Home equity loans are generally secured by junior trust deeds, but may be secured by 1st trust deeds.

Real estate construction and development loans, representing 14.6% of total loans at March 31, 2023 and 15.7% at December 31, 2022, consist of loans for residential and commercial construction projects, as well as land acquisition and development, or land held for future development. Loans in this category are secured by real estate including improved and unimproved land, as well as single-family residential, multi-family residential, and commercial properties in various stages of completion. All real estate loans have established equity requirements. Repayment on construction loans generally comes from
long-term mortgages with other lending institutions obtained at completion of the project or from the sale of the constructed homes to individuals.

Agricultural loans, representing 4.8% of total loans at March 31, 2023 and 5.4% at December 31, 2022, are generally secured by land, equipment, inventory and receivables. Repayment is from the cash flow of the borrower.

Installment loans, including student loans, which represented 4.6% of total loans at March 31, 2023 and 4.6% at December 31, 2022, generally consist of student loans, loans to individuals for household, family and other personal expenditures, automobiles or other consumer items. See Note 4 - Student Loans for specific information on the student loan portfolio.

In the normal course of business, the Company is party to financial instruments with off-balance sheet risk to meet the financing needs of its customers. At March 31, 2023 and December 31, 2022, these financial instruments include commitments to extend credit of $214.7 million and $190.2 million, respectively, and standby letters of credit of $1.6 million at both period ends. These instruments involve elements of credit risk in excess of the amount recognized on the consolidated balance sheet. The contract amounts of these instruments reflect the extent of the involvement the Company has in off-balance sheet financial instruments.

The Company’s exposure to credit loss in the event of nonperformance by the counterparty to the financial instrument for commitments to extend credit and standby letters of credit is represented by the contractual amounts of those instruments. The Company uses the same credit policies as it does for on-balance sheet instruments.

Commitments to extend credit are agreements to lend to a customer, as long as there is no violation of any condition established in the contract. Substantially all of these commitments are at floating interest rates based on the Prime rate. Commitments generally have fixed expiration dates. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary, is based on management’s credit evaluation. Collateral held varies but includes accounts receivable, inventory, leases, property, plant and equipment, residential real estate, and income-producing properties.

Standby letters of credit are generally unsecured and are issued by the Company to guarantee the performance of a customer to a third party. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers.

Past Due Loans

The Company monitors delinquency and potential problem loans on an ongoing basis through weekly reports to the Loan Committee and monthly reports to the Board of Directors.
The following is a summary of the amortized cost of delinquent loans at March 31, 2023:
(In thousands)Loans
30-60 Days Past Due		Loans
61-89 Days Past Due		Loans
90 or More
Days Past Due		Total Past Due LoansCurrent LoansTotal LoansAccruing Loans 90 or More Days Past Due
Commercial and business loans$— $— $— $— $50,379 $50,379 $— 
Government program loans— — — — 132 132 — 
Total commercial and industrial— — — — 50,511 50,511 — 
Commercial real estate loans— — — — 395,669 395,669 — 
Residential mortgages2,732 — — 2,732 267,259 269,991 — 
Home improvement and home equity loans7 — — 7 39 46 — 
Total real estate mortgage2,739 — — 2,739 662,967 665,706 — 
Real estate construction and development loans— — 11,269 11,269 125,988 137,257 — 
Agricultural loans— — 86 86 45,427 45,513 — 
Installment and student loans817 571 382 1,770 41,881 43,651 382 
Overdraft protection lines— — — — 11 11 — 
Overdrafts— — — — 78 78 — 
Installment and student loans817 571 382 1,770 41,970 43,740 382 
Total loans$3,556 $571 $11,737 $15,864 $926,863 $942,727 $382 

The following is a summary of the amortized cost of delinquent loans at December 31, 2022:
(In thousands)Loans
30-60 Days Past Due		Loans
61-89 Days Past Due		Loans
90 or More
Days Past Due		Total Past Due LoansCurrent LoansTotal LoansAccruing Loans 90 or More Days Past Due
Commercial and business loans$— $— $— $— $57,770 $57,770 $— 
Government program loans— — — — 132 132 — 
Total commercial and industrial— — — — 57,902 57,902 — 
Commercial real estate loans— — — — 398,115 398,115 — 
Residential mortgages— — — — 273,357 273,357 — 
Home improvement and home equity loans8 — — 8 41 49 — 
Total real estate mortgage8 — — 8 671,513 671,521 — 
Real estate construction and development loans— — 12,545 12,545 140,829 153,374 — 
Agricultural loans— — 108 108 52,614 52,722 — 
Installment and student loans546 642 252 1,440 42,714 44,154 252 
Overdraft protection lines— — — — 17 17 — 
Overdrafts— — — — 488 488 — 
Installment and student loans546 642 252 1,440 43,219 44,659 252 
Total loans$554 $642 $12,905 $14,101 $966,077 $980,178 $252 

Nonaccrual Loans
Commercial, construction and commercial real estate loans are placed on nonaccrual status under the following circumstances:

- When there is doubt regarding the full repayment of interest and principal.

- When principal and/or interest on the loan has been in default for a period of 90-days or more, unless the asset is both well secured and in the process of collection that will result in repayment in the near future.

- When the loan is identified as having loss elements and/or is risk rated “8” Doubtful.

Loans on non-accrual status are usually not returned to accrual status unless all delinquent principal and/or interest has been brought current, there is no identified element of loss, and current and continued satisfactory performance is expected. Return to accrual is generally demonstrated through the timely receipt of at least six monthly payments on a loan with monthly amortization.

There were no remaining undisbursed commitments to extend credit on nonaccrual loans at March 31, 2023 or December 31, 2022.

The following table presents the amortized cost basis of loans on nonaccrual status and loans past due over 89 days still accruing:

March 31, 2023December 31, 2022
(In thousands)Nonaccrual Loans With No Allowance For Credit LossesNonaccrual LoansLoans past due over 89 Days Still AccruingNonaccrual Loans With No Allowance For Credit LossesNonaccrual LoansLoans Past Due Over 89 Days Still Accruing
Real estate construction and development loans$13,109 $13,109 $— $14,436 $14,436 $— 
Agricultural loans— 86 — 108 — 
Installment and student loans— — 382 252 
Total$13,109 $13,195 $382 $14,436 $14,544 $252 

Credit Quality Indicators

As part of its credit monitoring program, the Company utilizes a risk rating system which quantifies the risk the Company estimates it has assumed during the life of a loan. The system rates the strength of the borrower and the facility or transaction, and is designed to provide a program for risk management and early detection of problems.

For each new credit approval, credit extension, renewal, or modification of existing credit facilities, the Company assigns risk ratings utilizing the rating scale identified in this policy. In addition, on an on-going basis, loans and credit facilities are reviewed for internal and external influences impacting the credit facility that would warrant a change in the risk rating. Each credit facility is to be given a risk rating that takes into account factors that materially affect credit quality.

When assigning risk ratings, the Company evaluates two risk rating approaches, a facility rating and a borrower rating as follows:

Facility Rating:

The facility rating is determined by the analysis of positive and negative factors that may indicate that the quality of a particular loan or credit arrangement requires that it be rated differently from the risk rating assigned to the borrower. The Company assesses the risk impact of these factors:

Collateral - The rating may be affected by the type and quality of the collateral, the degree of coverage, the economic life of the collateral, liquidation value and the Company's ability to dispose of the collateral.

Guarantees - The value of third party support arrangements varies widely. Unconditional guaranties from persons with demonstrable ability to perform are more substantial than that of closely related persons to the borrower who offer only modest support.
Unusual Terms - Credit may be extended on terms that subject the Company to a higher level of risk than indicated in the rating of the borrower.

Borrower Rating:

The borrower rating is a measure of loss possibility based on the historical, current and anticipated financial characteristics of the borrower in the current risk environment. To determine the rating, the Company considers at least the following factors:

-    Quality of management
-    Liquidity
-    Leverage/capitalization
-    Profit margins/earnings trend
-    Adequacy of financial records
-    Alternative funding sources
-    Geographic risk
-    Industry risk
-    Cash flow risk
-    Accounting practices
-    Asset protection
-    Extraordinary risks

The Company assigns risk ratings to loans other than consumer loans and other homogeneous loan pools based on the following scale. The risk ratings are used when determining borrower ratings as well as facility ratings. When the borrower rating and the facility ratings differ, the lowest rating is applied. The Company uses the following risk rating grades:

Pass Ratings:
-    Grades 1 and 2 – These grades include loans which are given to high quality borrowers with high credit quality and sound financial strength. Key financial ratios are generally above industry averages and the borrower has a strong earnings history or net worth. These may be secured by deposit accounts or high-grade investment securities.

-    Grade 3 – This grade includes loans to borrowers with solid credit quality with minimal risk. The borrower’s balance sheet and financial ratios are generally in line with industry averages, and the borrower has historically demonstrated the ability to manage economic adversity. Real estate and asset-based loans assigned this risk rating must have characteristics, which place them well above the minimum underwriting requirements for those departments. Asset-based borrowers assigned this rating must exhibit extremely favorable leverage and cash flow characteristics, and consistently demonstrate a high level of unused borrowing capacity.

-    Grades 4 and 5 – These include pass grade loans to borrowers of acceptable credit quality and risk. The borrower’s balance sheet and financial ratios may be below industry averages, but above the lowest industry quartile. Leverage is above and liquidity is below industry averages. Inadequacies evident in financial performance and/or management sufficiency are offset by readily available features of support, such as adequate collateral, or good guarantors having the liquid assets and/or cash flow capacity to repay the debt. The borrower may have recognized a loss over three or four years, however recent earnings trends, while perhaps somewhat cyclical, are improving and cash flows are adequate to cover debt service and fixed obligations. Real estate and asset-borrowers who fully comply with all underwriting standards and are performing according to projections would be assigned this rating. These also include grade 5 loans which are leveraged or on management’s watch list. While still considered pass loans (loans given a grade 5), the borrower’s financial condition, cash flow or operations evidence more than average risk and short term weaknesses, these loans warrant a higher than average level of monitoring, supervision and attention from the Company, but do not reflect credit weakness trends that weaken or inadequately protect the Company’s credit position. Loans with a grade rating of 5 are not normally acceptable as new credits unless they are adequately secured or carry substantial endorser/guarantors.

Special Mention Rating:
-    Grade 6 – This grade includes special mention loans which are loans that are currently protected but are potentially weak. This generally is an interim grade classification and these loans will usually be upgraded to an acceptable rating or downgraded to a substandard rating within a reasonable time period. Weaknesses in special mention loans may, if not checked or corrected, weaken the asset or inadequately protect the Company’s credit position at some future date. Special mention loans are often loans with weaknesses inherent in the loan origination and loan servicing, and may
have some technical deficiencies. The main theme in special mention credits is the distinct probability that the classification will deteriorate to a more adverse class if the noted deficiencies are not addressed by the loan officer or loan management.

Substandard Rating:
-    Grade 7 – This grade includes substandard loans which are inadequately supported by the current sound net worth and paying capacity of the borrower or of the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that may impair the regular liquidation of the debt. When a loan has been downgraded to substandard, there exists a distinct possibility that the Company will sustain a loss if the deficiencies are not corrected. Substandard loans may also include impaired loans.

Doubtful Ratings:
-    Grade 8 – This grade includes doubtful loans which exhibit the same characteristics as the substandard loans. Additionally, loan 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 loan, its classification as an estimated loss is deferred until its more exact status may be determined. Pending factors include a proposed merger, acquisition, or liquidation procedures, capital injection, perfecting liens on additional collateral, and refinancing plans.

-    Grade 9 – This grade includes loans classified loss which are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off the asset even though partial recovery may be achieved in the future.

The following table presents loans by type, risk rating, and origination year according to our internal risk ratings as of March 31, 2023:
Origination YearRevolving Loans Amortized Cost BasisRevolving Loans Converted to Term Loans
(In thousands)20232022202120202019PriorTotal
Commercial and business
Pass$850 $1,465 $730 $1,340 $45 $995 $44,954 $— $50,379 
Special Mention— — — — — — — — — 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
850 1,465 730 1,340 45 995 44,954 — 50,379 
Government program
Pass— — — 12 — 120 — — 132 
Special Mention— — — — — — — — — 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
— — — 12 — 120 — — 132 
Commercial real estate
Pass2,887 89,262 36,313 59,853 54,170 110,070 17,291 — 369,846 
Special Mention— — — 4,952 7,874 9,937 3,060 — 25,823 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
2,887 89,262 36,313 64,805 62,044 120,007 20,351 — 395,669 
Residential mortgages
Not graded— 27,680 213,059 3,236 — 10,149 — — 254,124 
Pass— — — — — 1,746 14,121 — 15,867 
Special Mention— — — — — — — — 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
— 27,680 213,059 3,236 — 11,895 14,121 — 269,991 
(Continued)
Origination YearRevolving Loans Amortized Cost BasisRevolving Loans Converted to Term Loans
(In thousands)20232022202120202019PriorTotal
Home improvement and home equity
Not graded— — — — — 39 — — 39 
Pass— — — — — 7 — — 7 
Special Mention— — — — — — — — — 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
— — — — — 46 — — 46 
Real estate construction and development
Pass— — — 4,606 180 4,896 114,466 — 124,148 
Special Mention— — — — — — — — — 
Substandard— — — — — 4,836 8,273 — 13,109 
Doubtful— — — — — — — — — 
— — — 4,606 180 9,732 122,739 — 137,257 
Agricultural
Pass— 6,865 470 2,999 1,499 11,119 20,667 — 43,619 
Special Mention— — — 589 — 428 — — 1,017 
Substandard— — — — — 87 790 — 877 
Doubtful— — — — — — — — — 
— — — 589 — 515 790 — 45,513 
Installment and student loans
Not graded237 337 244 179 1,598 40,470 675 — 43,740 
Pass— — — — — — — — — 
Special Mention— — — — — — — — — 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
237 337 244 179 1,598 40,470 675 — 43,740 
Total Loans$3,974 $118,744 $250,346 $74,767 $63,867 $183,780 $203,630 $— $942,727 

The following table presents loans by type, risk rating, and origination year according to our internal risk ratings as of December 31, 2022:
Origination YearRevolving loan amortized cost basisRevolving loan converted to term loans
(In thousands)20222021202020192018PriorTotal
Commercial and business loans
Pass$1,486 $775 $1,471 $210 $1,081 $237 $52,310 $— $57,570 
Special Mention— — — — — — 200 — 200 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
1,486 775 1,471 210 1,081 237 52,510 — 57,770 
Government program loans
Pass— — 13 — — 119 — — 132 
Special Mention— — — — — — — — — 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
— — 13 — — 119 — — 132 
(Continued)
Origination YearRevolving loan amortized cost basisRevolving loan converted to term loans
(In thousands)20222021202020192018PriorTotal
Commercial real estate
Pass89,610 36,506 60,293 54,595 32,935 82,170 15,987 — 372,096 
Special Mention— — 4,979 7,935 408 9,637 3,060 — 26,019 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
89,610 36,506 65,272 62,530 33,343 91,807 19,047 — 398,115 
Residential mortgages
Not graded27,746 215,326 3,255 — — 10,908 — — 257,235 
Pass— — — — — 1,826 14,296 — 16,122 
Special Mention— — — — — — — — 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
27,746 215,326 3,255 — — 12,734 14,296 — 273,357 
Home improvement and home equity loans
Not graded— — — — — 41 — — 41 
Pass— — — — — 8 — — 8 
Special Mention— — — — — — — — — 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
— — — — — 49 — — 49 
Real estate construction and development
Pass— — 4,842 180 824 6,599 126,493 — 138,938 
Special Mention— — — — — — — — — 
Substandard— — — — — 5,372 9,064 — 14,436 
Doubtful— — — — — — — — — 
— — 4,842 180 824 11,971 135,557 — 153,374 
Agricultural
Pass7,0514743,0103,777— 11,421 24,924 — 50,657 
Special Mention— — 589 — 428 — — — 1,017 
Substandard— — — — — 258 790 — 1,048 
Doubtful— — — — — — — — — 
7,051 474 3,599 3,777 428 11,679 25,714 — 52,722 
Installment and student loans
Not Graded373 272 196 1,623 10,759 30,905 531 — 44,659 
Pass— — — — — — — — — 
Special Mention— — — — — — — — — 
Substandard— — — — — — — — — 
Doubtful— — — — — — — — — 
373 272 196 1,623 10,759 30,905 531 — 44,659 
Total Loans$126,266 $253,353 $78,648 $68,320 $46,435 $159,501 $247,655 $— $980,178 

Allowance for Loan Losses

The Company adopted ASU 2016-13 effective January 1, 2023, and utilizes the CECL cohort methodology analysis which relies on segmenting the loan portfolio into pools with similar risks, tracking the performance of the pools over time, and using
the data to determine pool loss experience. Management estimates the allowance for loan loss balance using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The cumulative loss rate used as the basis for the estimate of credit losses is comprised of the Company’s historical loss experience from 2006 to 2022. The Company expects that the markets in which it operates will experience a slight decline in economic conditions and an increase in unemployment rate and level and trend of delinquencies over the next two years. Management adjusted the historical loss experience for these expectations.

The Company analyzes risk characteristics inherent in each loan portfolio segment as part of the quarterly review of the adequacy of the allowance for loan losses. The following summarizes some of the key risk characteristics for the ten segments of the loan portfolio (Consumer loans include three segments):

Commercial and industrial loans – Commercial loans are subject to the effects of economic cycles and tend to exhibit increased risk as economic conditions deteriorate, or if the economic downturn is prolonged. The Company considers this segment to be one of higher risk given the size of individual loans and the balances in the overall portfolio.
 
Government program loans – This is a relatively a small part of the Company’s loan portfolio, but has historically had a high percentage of loans that have migrated from pass to substandard given their vulnerability to economic cycles.
 
Commercial real estate loans – This segment is considered to have more risk in part because of the vulnerability of commercial businesses to economic cycles as well as the exposure to fluctuations in real estate prices because most of these loans are secured by real estate. Losses in this segment have however been historically low because most of the loans are real estate secured, and the bank maintains appropriate loan-to-value ratios.
 
Residential mortgages – This segment is considered to have low risk factors both from the Company and peer statistics. These loans are secured by first deeds of trust.
 
Home improvement and home equity loans – Because of their junior lien position, these loans have an inherently higher risk level.
 
Real estate construction and development loans –This segment of loans is considered to have a higher risk profile due to construction and market value issues in conjunction with normal credit risks.
 
Agricultural loans – This segment is considered to have risks associated with weather, insects, and marketing issues. In addition, concentrations in certain crops or certain agricultural areas can increase risk. Additionally, from time to time, California experiences severe droughts, which can significantly harm the business of customers and the credit quality of the loans to those customers. Water resources and related issues affecting customers are closely monitored. Signs of deterioration within the loan portfolio are also monitored in an effort to manage credit quality and work with borrowers where possible to mitigate any losses.

Installment and student loans (Includes consumer loans, student loans, overdrafts, and overdraft protection lines) – This segment is higher risk because many of the loans are unsecured. Additionally, in the case of student loans, there are increased risks associated with liquidity as there is a significant time lag between funding of a student loan and eventual repayment.

The following summarizes the activity in the allowance for credit losses by loan category:
Three Months Ended March 31, 2023
(In thousands)Commercial and IndustrialReal Estate MortgageReal Estate Construction Development AgriculturalInstallment and Student LoansTotal
Beginning balance, prior to adoption of ASC 326$955 $1,363 $3,409 $525 $3,930 $10,182 
Impact of ASC 326 adoption1,336 2,359 720 1,025 927 6,367 
Provision (recapture of provision) for credit losses(383)(37)(542)(294)763 (493)
Charge-offs— — — — (477)(477)
Recoveries— 20 — — 23 43 
Net recoveries (charge-offs)— 20 — — (454)(434)
Ending balance$1,908 $3,705 $3,587 $1,256 $5,166 $15,622 
Three Months Ended March 31, 2022
(In thousands)Commercial and IndustrialReal Estate MortgageReal Estate Construction Development AgriculturalInstallment and Student LoansTotal
Beginning balance$597 $1,174 $2,840 $1,233 $3,489 $9,333 
Provision (recapture of provision) for credit losses(306)117 57 (292)429 5 
Charge-offs— — — — (358)(358)
Recoveries268 4 — 16 8 296 
Net (charge-offs) recoveries268 4 — 16 (350)(62)
Ending balance$559 $1,295 $2,897 $957 $3,568 $9,276 

The following summarizes information with respect to the loan balances:
 March 31, 2023March 31, 2022
(In thousands)Loans Individually Evaluated for ImpairmentLoans Collectively Evaluated for ImpairmentTotal LoansLoans Individually Evaluated for ImpairmentLoans Collectively Evaluated for ImpairmentTotal Loans
Commercial and business loans$— $50,379 $50,379 $— $38,725 $38,725 
Government program loans— 132 132 — 221 221 
Total commercial and industrial— 50,511 50,511 — 38,946 38,946 
Commercial real estate loans— 395,669 395,669 — 330,870 330,870 
Residential mortgage loans74 269,917 269,991 145 256,766 256,911 
Home improvement and home equity loans— 46 46 — 74 74 
Total real estate mortgage74 665,632 665,706 145 587,710 587,855 
Real estate construction and development loans13,109 124,148 137,257 11,147 141,820 152,967 
Agricultural loans879 44,634 45,513 653 47,142 47,795 
Installment and student loans— 43,740 43,740 — 49,400 49,400 
Total loans$14,062 $928,665 $942,727 $11,945 $865,018 $876,963 

Collateral Dependent Loans

A loan is considered collateral dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral.

The following table presents the recorded investment in collateral-dependent loans by type of loan:

 March 31, 2023December 31, 2022
(Dollars in thousands)AmountNumber of Collateral-Dependent LoansAmountNumber of Collateral-Dependent Loans
Real estate construction and development loans$13,110 4 $14,436 4 
Agricultural loans790 2 108 2 
Total$13,900 6 $14,544 6 

Reserve for Unfunded Commitments

The allowance for off-balance sheet credit exposure relates to commitments to extend credit, letters of credit and undisbursed funds on lines of credit. The Company evaluates credit risk associated with the off-balance sheet loan commitments in the same
manner as it evaluates credit risk associated with the loan portfolio. The adoption of CECL as of January 1, 2023 required a cumulative adjustment of $273,000 to the reserve for unfunded loan commitments, increasing the liability balance to $805,000 post adoption. There was no provision for unfunded loan commitments for the quarter ended March 31, 2023. The reserve for the unfunded loan commitments is a liability on the Company’s consolidated financial statements and is included in other liabilities.

Loan Modifications
Occasionally, the Company modifies loans to borrowers in financial distress by providing principal forgiveness, term extension, an other-than-insignificant payment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses. There were no loan modifications for the quarter ended March 31, 2023.