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Note 3 - LOANS/LEASES RECEIVABLE

6 Months Ended

Jun. 30, 2023

NOTE 3 – LOANS/LEASES RECEIVABLE

The composition of the loan/lease portfolio as of June 30, 2023 and December 31, 2022 is presented as follows:


	June 30, 2023		December 31, 2022

	(dollars in thousands)
C&I:
C&I - revolving	$	304,617	$	296,869
C&I - other * **		1,402,553		1,451,693
		1,707,170		1,748,562

CRE - owner occupied		609,717		629,367
CRE - non-owner occupied		963,814		963,239
Construction and land development**		1,307,766		1,192,061
Multi-family**		1,100,794		963,803
Direct financing leases***		32,937		31,889
1-4 family real estate****		535,405		499,529
Consumer		121,717		110,421
		6,379,320		6,138,871
Allowance for credit losses		(85,797)		(87,706)
	$	6,293,523	$	6,051,165
*** Direct financing leases:
Net minimum lease payments to be received	$	36,291	$	34,754
Estimated unguaranteed residual values of leased assets		165		165
Unearned lease/residual income		(3,519)		(3,030)
		32,937		31,889
Plus deferred lease origination costs, net of fees		133		226
		33,070		32,115
Less allowance for credit losses		(1,006)		(970)
	$	32,064	$	31,145

* Includes equipment financing agreements outstanding at m2, totaling $295.5 million and $278.0 million as of June 30, 2023 and December 31, 2022, respectively.

** As of June 30, 2023, there were C&I – other, construction and land development and multi-family loans held for sale in preparation for securitization totaling $291.1 million. The balances in these loan classes as of June 30, 2023 were $360 thousand, $12.7 million and $278.0 million, respectively. There were no loans held for sale in preparation for securitization at December 31, 2022.

*** Management performs an evaluation of the estimated unguaranteed residual values of leased assets on an annual basis, at a minimum. The evaluation consists of discussions with reputable and current vendors, which is combined with management's expertise and understanding of the current states of particular industries to determine informal valuations of the equipment. As necessary and where available, management will utilize valuations by independent appraisers. The majority of leases with residual values contain a lease options rider, which requires the lessee to pay the residual value directly, finance the payment of the residual value, or extend the lease term to pay the residual value. In these cases, the residual value is protected and the risk of loss is minimal.

**** Includes residential real estate held for sale totaling $4.0 million and $1.5 million as of June 30, 2023 and December 31, 2022, respectively.

Accrued interest on loans, which is excluded from the amortized cost of loans, totaled $27.3 million and $24.3 million at June 30, 2023 and December 31, 2022, respectively, and was included in other assets on the consolidated balance sheets.

Changes in discounts on acquired loans for the three and six months ended June 30, 2023 and 2022, respectively, are presented as follows:


	For the Three Months Ended				For the Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022
	Performing		Performing			Performing	Performing
	Loans		Loans		Loans		Loans

	(dollars in thousands)

Balance at the beginning of the period	$	(5,239)	$	(1,372)	$	(6,088)	$	(1,533)
Discount added at acquisition		—		(13,381)		—		(13,381)
Accretion recognized		135		1,764		984		1,925
Balance at the end of the period	$	(5,104)	$	(12,989)	$	(5,104)	$	(12,989)

The aging of the loan/lease portfolio by classes of loans/leases as of June 30, 2023 and December 31, 2022 is presented as follows:


	As of June 30, 2023
										Accruing Past
				30-59 Days			60-89 Days			Due 90 Days or			Nonaccrual
Classes of Loans/Leases	Current			Past Due			Past Due			More			Loans/Leases			Total

	(dollars in thousands)
C&I:
C&I - revolving	$	304,617		$	—		$	—		$	—		$	—	$		304,617
C&I - other		1,384,130			6,270			3,928			3			8,222			1,402,553
CRE - owner occupied		605,065			1,848			281			—			2,523			609,717
CRE - non-owner occupied		957,595			4,008			—			—			2,211			963,814
Construction and land development		1,303,847			1,320			240			—			2,359			1,307,766
Multi-family		1,092,622			—			—			—			8,172			1,100,794
Direct financing leases		32,682			123			—			—			132			32,937
1-4 family real estate		533,103			—			71			80			2,151			535,405
Consumer		121,019			376			30			—			292			121,717
	$	6,334,680		$	13,945		$	4,550		$	83		$	26,062		$	6,379,320

As a percentage of total loan/lease portfolio		99.30	%		0.22	%		0.07	%		0.00	%		0.41	%		100.00	%


	As of December 31, 2022
										Accruing Past
				30-59 Days			60-89 Days			Due 90 Days or			Nonaccrual
Classes of Loans/Leases	Current			Past Due			Past Due			More			Loans/Leases			Total

	(dollars in thousands)

C&I
C&I - revolving	$	296,869		$	—		$	—		$	—		$	—		$	296,869
C&I - other		1,442,629			4,800			1,124			5			3,135			1,451,693
CRE - owner occupied		625,611			1,166			—			—			2,590			629,367
CRE - non-owner occupied		962,444			421			—			—			374			963,239
Construction and land development		1,191,929			—			—			—			132			1,192,061
Multi-family		963,803			—			—			—			—			963,803
Direct financing leases		31,557			141			56			—			135			31,889
1-4 family real estate		495,936			1,030			517			—			2,046			499,529
Consumer		110,041			27			—			—			353			110,421
	$	6,120,819		$	7,585		$	1,697		$	5		$	8,765		$	6,138,871

As a percentage of total loan/lease portfolio		99.71	%		0.12	%		0.03	%		0.00	%		0.14	%		100.00	%

NPLs by classes of loans/leases as of June 30, 2023 and December 31, 2022 are presented as follows:


	As of June 30, 2023
	Accruing Past		Nonaccrual		Nonaccrual
	Due 90 Days or		Loans/Leases		Loans/Leases				Percentage of
Classes of Loans/Leases	More		with an ACL		without an ACL		Total NPLs		Total NPLs

	(dollars in thousands)
C&I:
C&I - revolving	$	—	$	—	$	—	$	—	-	%
C&I - other		3		5,904		2,318		8,225	31.46
CRE - owner occupied		—		1,086		1,437		2,523	9.65
CRE - non-owner occupied		—		1,268		943		2,211	8.46
Construction and land development		—		2,359		—		2,359	9.02
Multi-family		—		—		8,172		8,172	31.26
Direct financing leases		—		132		—		132	0.50
1-4 family real estate		80		1,757		394		2,231	8.53
Consumer		—		292		—		292	1.12
	$	83	$	12,798	$	13,264	$	26,145	100.00	%


	As of December 31, 2022
	Accruing Past		Nonaccrual		Nonaccrual
	Due 90 Days or		Loans/Leases		Loans/Leases				Percentage of
Classes of Loans/Leases	More		with an ACL		without an ACL		Total NPLs		Total NPLs

		(dollars in thousands)

C&I:
C&I - revolving	$	—	$	—	$	—	$	—	-	%
C&I - other		5		2,775		360		3,140	35.80
CRE - owner occupied		—		1,738		852		2,590	29.53
CRE - non-owner occupied		—		68		306		374	4.26
Construction and land development		—		132		—		132	1.51
Multi-family		—		—		—		—	-
Direct financing leases		—		80		55		135	1.54
1-4 family real estate		—		1,641		405		2,046	23.33
Consumer		—		353		—		353	4.03
	$	5	$	6,787	$	1,978	$	8,770	100.00	%

The Company did not recognize any interest income on nonaccrual loans during the three and six months ended June 30, 2023 and 2022.

Changes in the ACL loans/leases by portfolio segment for the three and six months ended June 30, 2023 and 2022, respectively, are presented as follows:


	Three Months Ended June 30, 2023
					CRE		CRE		Construction				1-4
	C&I -		C&I -		Owner		Non-Owner		and Land		Multi-		Family
	Revolving		Other*		Occupied		Occupied		Development		Family		Real Estate		Consumer		Total

	(dollars in thousands)

Balance, beginning	$	4,637	$	26,637	$	9,089	$	12,632	$	15,245	$	11,621	$	5,270	$	1,442	$	86,573
Change in ACL for writedown of LHFS to fair value		—		(5)		—		—		207		(2,479)		—		—		(2,277)
Provision		(536)		2,318		(358)		(664)		436		2,087		(57)		87		3,313
Charge-offs		—		(1,920)		—		—		—		—		—		(27)		(1,947)
Recoveries		—		132		—		—		—		—		—		3		135
Balance, ending	$	4,101	$	27,162	$	8,731	$	11,968	$	15,888	$	11,229	$	5,213	$	1,505	$	85,797


	Six Months Ended June 30, 2023
					CRE		CRE		Construction				1-4
	C&I -		C&I -		Owner		Non-Owner		and Land		Multi-		Family
	Revolving		Other**		Occupied		Occupied		Development		Family		Real Estate		Consumer		Total

	(dollars in thousands)

Balance, beginning	$	4,457	$	27,753	$	9,965	$	11,749	$	14,262	$	13,186	$	4,963	$	1,371	$	87,706
Change in ACL for writedown of LHFS to fair value		—		(5)		—		—		(147)		(3,834)		—		—		(3,986)
Provision		(356)		2,875		(1,026)		214		1,785		1,877		245		157		5,771
Charge-offs		—		(3,975)		(208)		—		(12)		—		—		(27)		(4,222)
Recoveries		—		514		—		5		—		—		5		4		528
Balance, ending	$	4,101	$	27,162	$	8,731	$	11,968	$	15,888	$	11,229	$	5,213	$	1,505	$	85,797

* Included within the C&I – Other column are ACL on leases with a beginning balance of $1.1 million, negative provision of $10 thousand, charge- offs of $49 thousand and recoveries of $12 thousand. ACL on leases was $1.0 million as of June 30, 2023.

** Included within the C&I – Other column are ACL on leases with a beginning balance of $970 thousand, provision of $59 thousand, charge-offs of $53 thousand and recoveries of $30 thousand. ACL on leases was $1.0 million as of June 30, 2023.


	Three Months Ended June 30, 2022
					CRE		CRE		Construction				1-4
	C&I -		C&I -		Owner		Non-Owner		and Land		Multi-		Family
	Revolving		Other*		Occupied		Occupied		Development		Family		Real Estate		Consumer		Total

	(dollars in thousands)

Balance, beginning	$	3,619	$	25,437	$	7,897	$	7,857	$	14,671	$	10,336	$	4,154	$	815	$	74,786
Initial ACL recorded for PCD loans		600		7		2,481		1,076		1,100		481		137		20		5,902
Provision**		960		2,864		686		3,309		617		1,966		1,222		517		12,141
Charge-offs		—		(426)		—		(193)		—		—		—		(1)		(620)
Recoveries		—		211		1		—		—		—		—		4		216
Balance, ending	$	5,179	$	28,093	$	11,065	$	12,049	$	16,388	$	12,783	$	5,513	$	1,355	$	92,425


	Six Months Ended June 30, 2022
					CRE		CRE		Construction				1-4
	C&I -		C&I -		Owner		Non-Owner		and Land		Multi-		Family
	Revolving		Other***		Occupied		Occupied		Development		Family		Real Estate		Consumer		Total

	(dollars in thousands)

Balance, beginning	$	3,907	$	25,982	$	8,501	$	8,549	$	16,972	$	9,339	$	4,541	$	930	$	78,721
Initial ACL recorded for PCD loans		600		7		2,481		1,076		1,100		481		137		20		5,902
Provision**		672		2,533		77		2,489		(1,684)		2,963		835		407		8,292
Charge-offs		—		(875)		—		(193)		—		—		—		(8)		(1,076)
Recoveries		—		446		6		128		—		—		—		6		586
Balance, ending	$	5,179	$	28,093	$	11,065	$	12,049	$	16,388	$	12,783	$	5,513	$	1,355	$	92,425

* Included within the C&I – Other column are ACL on leases with adoption impact of $1.5 million, provision of $185 thousand, charge-offs of $109 thousand and recoveries of $48 thousand. ACL on leases was $1.6 million as of June 30, 2022.

** Provision for the three and six months ended June 30, 2022, included $11.0 million related to the acquired Guaranty Bank non-PCD loans.

*** Included within the C&I - Other column are ACL on leases with a beginning balance of $1.5 million, provision of $158 thousand, charge-offs of $223 thousand and recoveries of $108 thousand. ACL on leases was $1.6 million as of June 30, 2022.

The composition of the ACL loans/leases by portfolio segment based on evaluation method are as follows:


	As of June 30, 2023
	Amortized Cost of Loans Receivable						Allowance for Credit Losses
	Individually		Collectively				Individually		Collectively
	Evaluated for		Evaluated for				Evaluated for		Evaluated for
	Credit Losses		Credit Losses		Total		Credit Losses		Credit Losses		Total

	(dollars in thousands)
C&I :
C&I - revolving	$	2,840	$	301,777	$	304,617	$	507	$	3,594	$	4,101
C&I - other*		11,999		1,423,491		1,435,490		1,740		25,422		27,162
		14,839		1,725,268		1,740,107		2,247		29,016		31,263
CRE - owner occupied		23,478		586,239		609,717		2,615		6,116		8,731
CRE - non-owner occupied		22,839		940,975		963,814		941		11,027		11,968
Construction and land development		2,359		1,305,407		1,307,766		775		15,113		15,888
Multi-family		9,531		1,091,263		1,100,794		417		10,812		11,229
1-4 family real estate		3,341		532,064		535,405		314		4,899		5,213
Consumer		693		121,024		121,717		70		1,435		1,505
	$	77,080	$	6,302,240	$	6,379,320	$	7,379	$	78,418	$	85,797

* Included within the C&I – Other category are leases individually evaluated of $132 thousand with a related allowance for credit losses of $40 thousand and leases collectively evaluated of $32.8 million with a related allowance for credit losses of $966 thousand.


	As of December 31, 2022
	Amortized Cost of Loans Receivable						Allowance for Credit Losses
	Individually		Collectively				Individually		Collectively
	Evaluated for		Evaluated for				Evaluated for		Evaluated for
	Credit Losses		Credit Losses		Total		Credit Losses		Credit Losses		Total

	(dollars in thousands)
C&I :
C&I - revolving	$	3,386	$	293,483	$	296,869	$	961	$	3,496	$	4,457
C&I - other*		9,358		1,474,224		1,483,582		1,445		26,308		27,753
		12,744		1,767,707		1,780,451		2,406		29,804		32,210
CRE - owner occupied		24,880		604,487		629,367		2,853		7,112		9,965
CRE - non-owner occupied		21,588		941,651		963,239		869		10,880		11,749
Construction and land development		10,394		1,181,667		1,192,061		13		14,249		14,262
Multi-family		1,302		962,501		963,803		395		12,791		13,186
1-4 family real estate		3,177		496,352		499,529		317		4,646		4,963
Consumer		741		109,680		110,421		75		1,296		1,371
	$	74,826	$	6,064,045	$	6,138,871	$	6,928	$	80,778	$	87,706

* Included within the C&I – Other category are leases individually evaluated of $135 thousand with a related allowance for credit losses of $24 thousand and leases collectively evaluated of $31.8 million with a related allowance for credit losses of $946 thousand.

The following table presents the amortized cost basis of collateral dependent loans, by the primary collateral type, which are individually evaluated to determine expected credit losses as of June 30, 2023 and December 31, 2022:



	As of June 30, 2023
					Non
	Commercial		Owner-occupied		Owner-Occupied		Owner Occupied
	Assets		CRE		Real Estate		Real Estate		Securities		Equipment		Other		Total

	(dollars in thousands)
C & I:
C&I - revolving	$	2,735	$	—	$	—	$	—	$	—	$	105	$	—	$	2,840
C&I - other*		866		—		—		—		95		10,665		373		11,999
		3,601		—		—		—		95		10,770		373		14,839
CRE - owner occupied		—		23,412		—		66		—		—		—		23,478
CRE - non-owner occupied		—		—		22,839		—		—		—		—		22,839
Construction and land development		—		—		2,359		—		—		—		—		2,359
Multi-family		—		—		9,531		—		—		—		—		9,531
1-4 family real estate		—		—		363		2,978		—		—		—		3,341
Consumer		—		—		120		536		—		—		37		693
	$	3,601	$	23,412	$	35,212	$	3,580	$	95	$	10,770	$	410	$	77,080

* Included within the C&I – Other category are leases individually evaluated of $132 thousand with primary collateral of equipment.


	As of December 31, 2022
					Non
	Commercial		Owner-occupied		Owner-Occupied		Owner Occupied
	Assets		CRE		Real Estate		Real Estate		Securities		Equipment		Other		Total

	(dollars in thousands)
C & I:
C&I - revolving	$	3,281	$	—	$	—	$	—	$	—	$	105	$	—	$	3,386
C&I - other*		1,589		210		—		—		108		7,289		162		9,358
		4,870		210		—		—		108		7,394		162		12,744
CRE - owner occupied		—		24,814		—		66		—		—		—		24,880
CRE - non-owner occupied		—		—		21,588		—		—		—		—		21,588
Construction and land development		—		—		10,394		—		—		—		—		10,394
Multi-family		—		—		1,302		—		—		—		—		1,302
1-4 family real estate		—		—		33		3,144		—		—		—		3,177
Consumer		—		—		120		608		—		—		13		741
	$	4,870	$	25,024	$	33,437	$	3,818	$	108	$	7,394	$	175	$	74,826

* Included within the C&I – Other category are leases individually evaluated of $135 thousand with primary collateral of equipment.

For certain C&I loans, all CRE loans, certain construction and land development loans, all multifamily loans, certain 1-4 family residential loans and certain consumer loans, the Company’s credit quality indicator consists of internally assigned risk ratings. Each such loan is assigned a risk rating upon origination. The risk rating is reviewed every 15 months, at a minimum, and on an as-needed basis depending on the specific circumstances of the loan.

For certain C&I loans (including equipment financing agreements and direct financing leases), certain construction and land development, certain 1-4 family real estate loans, and certain consumer loans, the Company’s credit quality indicator is performance determined by delinquency status. Delinquency status is updated daily by the Company’s loan system.

The following tables show the credit quality indicator of loans by class of receivable and year of origination as of June 30, 2023:


	As of June 30, 2023
	Term Loans
	Amortized Cost Basis by Origination Year
													Revolving
													Loans
Internally Assigned													Amortized
Risk Rating	2023		2022		2021		2020		2019		Prior		Cost Basis		Total

	(dollars in thousands)
C&I - revolving
Pass (Ratings 1 through 5)	$	—	$	—	$	—	$	—	$	—	$	—	$	277,753	$	277,753
Special Mention (Rating 6)		—		—		—		—		—		—		24,024		24,024
Substandard (Rating 7)		—		—		—		—		—		—		2,840		2,840
Doubtful (Rating 8)		—		—		—		—		—		—		—		—
Total C&I - revolving	$	—	$	—	$	—	$	—	$	—	$	—	$	304,617	$	304,617

C&I - other
Pass (Ratings 1 through 5)	$	243,118	$	332,368	$	187,767	$	96,026	$	73,226	$	147,909	$	—	$	1,080,414
Special Mention (Rating 6)		8,225		3,852		5,476		3,624		946		305		—		22,428
Substandard (Rating 7)		—		315		250		34		3,322		249		—		4,170
Doubtful (Rating 8)		—		—		—		—		—		—		—		—
Total C&I - other	$	251,343	$	336,535	$	193,493	$	99,684	$	77,494	$	148,463	$	—	$	1,107,012

CRE - owner occupied
Pass (Ratings 1 through 5)	$	40,936	$	131,227	$	163,991	$	124,295	$	32,120	$	65,922	$	10,735	$	569,226
Special Mention (Rating 6)		2,896		782		7,355		6,301		475		310		873		18,992
Substandard (Rating 7)		2,392		726		—		16,032		1,200		1,149		—		21,499
Doubtful (Rating 8)		—		—		—		—		—		—		—		—
Total CRE - owner occupied	$	46,224	$	132,735	$	171,346	$	146,628	$	33,795	$	67,381	$	11,608	$	609,717

CRE - non-owner occupied
Pass (Ratings 1 through 5)	$	84,164	$	306,989	$	205,376	$	130,383	$	77,559	$	90,070	$	7,822	$	902,363
Special Mention (Rating 6)		5,714		4,832		269		17,410		—		10,388		—		38,613
Substandard (Rating 7)		4,008		3,472		—		156		15,097		—		105		22,838
Doubtful (Rating 8)		—		—		—		—		—		—		—		—
Total CRE - non-owner occupied	$	93,886	$	315,293	$	205,645	$	147,949	$	92,656	$	100,458	$	7,927	$	963,814

Construction and land development
Pass (Ratings 1 through 5)	$	225,179	$	479,466	$	301,544	$	222,318	$	11,703	$	12,034	$	25,396	$	1,277,640
Special Mention (Rating 6)		1,100		—		10,160		—		—		—		—		11,260
Substandard (Rating 7)		—		1,367		992		—		—		—		—		2,359
Doubtful (Rating 8)		—		—		—		—		—		—		—		—
Total Construction and land development	$	226,279	$	480,833	$	312,696	$	222,318	$	11,703	$	12,034	$	25,396	$	1,291,259

Multi-family
Pass (Ratings 1 through 5)	$	91,011	$	233,466	$	265,375	$	229,203	$	152,741	$	117,806	$	96	$	1,089,698
Special Mention (Rating 6)		—		—		—		—		1,564		—		—		1,564
Substandard (Rating 7)		—		—		8,211		1,321		—		—		—		9,532
Doubtful (Rating 8)		—		—		—		—		—		—		—		—
Total Multi-family	$	91,011	$	233,466	$	273,586	$	230,524	$	154,305	$	117,806	$	96	$	1,100,794

1-4 family real estate
Pass (Ratings 1 through 5)	$	45,483	$	51,944	$	54,924	$	28,824	$	11,738	$	8,085	$	3,537	$	204,535
Special Mention (Rating 6)		29		—		—		—		—		—		—		29
Substandard (Rating 7)		—		26		—		—		3		254		—		283
Doubtful (Rating 8)		—		—		—		—		—		—		—		—
Total 1-4 family real estate	$	45,512	$	51,970	$	54,924	$	28,824	$	11,741	$	8,339	$	3,537	$	204,847

Consumer
Pass (Ratings 1 through 5)	$	93	$	485	$	716	$	499	$	28	$	776	$	8,999	$	11,596
Special Mention (Rating 6)		—		—		—		—		—		—		—		—
Substandard (Rating 7)		44		280		—		11		—		100		—		435
Doubtful (Rating 8)		—		—		—		—		—		—		—		—
Total Consumer	$	137	$	765	$	716	$	510	$	28	$	876	$	8,999	$	12,031

Total	$	754,392	$	1,551,597	$	1,212,406	$	876,437	$	381,722	$	455,357	$	362,180	$	5,594,091


	As of June 30, 2023
	Term Loans
	Amortized Cost Basis by Origination Year												Revolving
													Loans
													Amortized
Delinquency Status *	2023		2022		2021		2020		2019		Prior		Cost Basis		Total

	(dollars in thousands)
C&I - other
Performing	$	78,476	$	130,879	$	53,969	$	18,994	$	5,056	$	665	$	—	$	288,039
Nonperforming		—		5,047		2,281		156		17		1		—		7,502
Total C&I - other	$	78,476	$	135,926	$	56,250	$	19,150	$	5,073	$	666	$	—	$	295,541

Construction and land development
Performing	$	10,561	$	5,590	$	284	$	10	$	2	$	60	$	—	$	16,507
Nonperforming		—		—		—		—		—		—		—		—
Total Construction and land development	$	10,561	$	5,590	$	284	$	10	$	2	$	60	$	—	$	16,507

Direct financing leases
Performing	$	6,833	$	13,839	$	4,237	$	4,168	$	2,994	$	734	$	—	$	32,805
Nonperforming		—		34		25		47		8		18		—		132
Total Direct financing leases	$	6,833	$	13,873	$	4,262	$	4,215	$	3,002	$	752	$	—	$	32,937

1-4 family real estate
Performing	$	40,655	$	60,315	$	84,754	$	72,512	$	16,158	$	53,960	$	82	$	328,436
Nonperforming		87		131		607		394		455		448		—		2,122
Total 1-4 family real estate	$	40,742	$	60,446	$	85,361	$	72,906	$	16,613	$	54,408	$	82	$	330,558

Consumer
Performing	$	9,001	$	11,020	$	2,964	$	3,171	$	795	$	1,763	$	80,852	$	109,566
Nonperforming		—		37		—		—		—		40		43		120
Total Consumer	$	9,001	$	11,057	$	2,964	$	3,171	$	795	$	1,803	$	80,895	$	109,686

Total	$	145,613	$	226,892	$	149,121	$	99,452	$	25,485	$	57,689	$	80,977	$	785,229

* Performing = loans/leases accruing and less than 90 days past due. Nonperforming = loans/leases on nonaccrual and accruing loans/leases that are greater than or equal to 90 days past due.

The following table shows the gross charge-offs of loans and leases by class of receivable and year of origination for the six months ended June 30, 2023:


	Three Months Ended June 30, 2023														Six Months Ended June 30, 2023
	Gross Charge-off by Origination Year														Gross Charge-off by Origination Year
Classes of Loans/Leases	2023		2022		2021		2020		2019		Prior		Total		2023		2022		2021		2020		2019		Prior		Total

	(dollars in thousands)														(dollars in thousands)
C&I:
C&I - revolving	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
C&I - other		—		1,120		590		55		32		74		1,871		—		1,860		871		849		233		109		3,922
CRE - owner occupied		—		—		—		—		—		—		—		—		—		208		—		—		—		208
CRE - non-owner occupied		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Construction and land development		—		—		—		—		—		—		—		—		12		—		—		—		—		12
Multi-family		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Direct financing leases		—		37		—		—		12		—		49		—		37		—		—		15		1		53
1-4 family real estate		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Consumer		—		19		3		—		5		—		27		—		19		3		—		5		—		27
	$	—	$	1,157	$	590	$	55	$	44	$	74	$	1,947	$	—	$	1,909	$	1,079	$	849	$	248	$	110	$	4,222

The following tables show the credit quality indicator of loans by class of receivable and year of origination as of December 31, 2022:


	As of December 31, 2022
	Term Loans
	Amortized Cost Basis by Origination Year
													Revolving
													Loans
Internally Assigned													Amortized
Risk Rating	2022		2021		2020		2019		2018		Prior		Cost Basis		Total

	(dollars in thousands)
C&I - revolving
Pass (Ratings 1 through 5)	$	—	$	—	$	—	$	—	$	—	$	—	$	275,888	$	275,888
Special Mention (Rating 6)		—		—		—		—		—		—		17,595		17,595
Substandard (Rating 7)		—		—		—		—		—		—		3,386		3,386
Doubtful (Rating 8)		—		—		—		—		—		—		—		—
Total C&I - revolving	$	—	$	—	$	—	$	—	$	—	$	—	$	296,869	$	296,869

C&I - other
Pass (Ratings 1 through 5)	$	496,445	$	279,412	$	127,803	$	87,054	$	59,675	$	105,184	$	—	$	1,155,573
Special Mention (Rating 6)		9,542		679		901		723		—		308		—		12,153
Substandard (Rating 7)		187		125		661		4,535		310		106		—		5,924
Doubtful (Rating 8)		—		—		—		—		—		—		—		—
Total C&I - other	$	506,174	$	280,216	$	129,365	$	92,312	$	59,985	$	105,598	$	—	$	1,173,650

CRE - owner occupied
Pass (Ratings 1 through 5)	$	146,211	$	182,440	$	142,596	$	33,571	$	27,088	$	45,993	$	13,460	$	591,359
Special Mention (Rating 6)		6,190		—		6,379		484		—		1,346		269		14,668
Substandard (Rating 7)		3,750		171		16,336		1,396		1,197		490		—		23,340
Doubtful (Rating 8)		—		—		—		—		—		—		—		—
Total CRE - owner occupied	$	156,151	$	182,611	$	165,311	$	35,451	$	28,285	$	47,829	$	13,729	$	629,367

CRE - non-owner occupied
Pass (Ratings 1 through 5)	$	310,163	$	221,953	$	173,478	$	89,337	$	56,898	$	40,923	$	7,510	$	900,262
Special Mention (Rating 6)		2,824		882		18,920		—		12,917		6,198		—		41,741
Substandard (Rating 7)		5,651		—		157		15,217		—		—		211		21,236
Doubtful (Rating 8)		—		—		—		—		—		—		—		—
Total CRE - non-owner occupied	$	318,638	$	222,835	$	192,555	$	104,554	$	69,815	$	47,121	$	7,721	$	963,239

Construction and land development
Pass (Ratings 1 through 5)	$	479,016	$	330,434	$	240,778	$	31,607	$	30,300	$	—	$	29,647	$	1,141,782
Special Mention (Rating 6)		1,465		9,200		—		—		—		—		—		10,665
Substandard (Rating 7)		132		10,262		—		—		—		—		—		10,394
Doubtful (Rating 8)		—		—		—		—		—		—		—		—
Total Construction and land development	$	480,613	$	349,896	$	240,778	$	31,607	$	30,300	$	—	$	29,647	$	1,162,841

Multi-family
Pass (Ratings 1 through 5)	$	237,839	$	254,056	$	224,920	$	134,378	$	99,695	$	7,875	$	2,227	$	960,990
Special Mention (Rating 6)		—		44		—		1,467		—		—		—		1,511
Substandard (Rating 7)		—		—		1,302		—		—		—		—		1,302
Doubtful (Rating 8)		—		—		—		—		—		—		—		—
Total Multi-family	$	237,839	$	254,100	$	226,222	$	135,845	$	99,695	$	7,875	$	2,227	$	963,803

1-4 family real estate
Pass (Ratings 1 through 5)	$	61,953	$	57,731	$	33,737	$	12,687	$	5,813	$	6,002	$	5,855	$	183,778
Special Mention (Rating 6)		—		—		—		—		—		—		—		—
Substandard (Rating 7)		28		—		—		5		—		—		—		33
Doubtful (Rating 8)		—		—		—		—		—		—		—		—
Total 1-4 family real estate	$	61,981	$	57,731	$	33,737	$	12,692	$	5,813	$	6,002	$	5,855	$	183,811

Consumer
Pass (Ratings 1 through 5)	$	511	$	801	$	493	$	122	$	254	$	621	$	10,226	$	13,028
Special Mention (Rating 6)		—		—		—		—		—		—		—		—
Substandard (Rating 7)		282		—		12		—		112		—		—		406
Doubtful (Rating 8)		—		—		—		—		—		—		—		—
Total Consumer	$	793	$	801	$	505	$	122	$	366	$	621	$	10,226	$	13,434

Total	$	1,762,189	$	1,348,190	$	988,473	$	412,583	$	294,259	$	215,046	$	366,274	$	5,387,014


	As of December 31, 2022
	Term Loans
	Amortized Cost Basis by Origination Year												Revolving
													Loans
													Amortized
Delinquency Status *	2022		2021		2020		2019		2018		Prior		Cost Basis		Total

	(dollars in thousands)
C&I - other
Performing	$	170,180	$	69,694	$	25,540	$	8,066	$	1,804	$	79	$	—	$	275,363
Nonperforming		1,110		1,320		155		95		—		—		—		2,680
Total C&I - other	$	171,290	$	71,014	$	25,695	$	8,161	$	1,804	$	79	$	—	$	278,043

Direct financing leases
Performing	$	14,578	$	5,172	$	5,700	$	4,398	$	1,536	$	370	$	—	$	31,754
Nonperforming		—		32		88		7		8		—		—		135
Total Direct financing leases	$	14,578	$	5,204	$	5,788	$	4,405	$	1,544	$	370	$	—	$	31,889

Construction and land development
Performing	$	28,785	$	360	$	10	$	3	$	62	$	—	$	—	$	29,220
Nonperforming		—		—		—		—		—		—		—		—
Total Construction and land development	$	28,785	$	360	$	10	$	3	$	62	$	—	$	—	$	29,220

1-4 family real estate
Performing	$	69,094	$	92,762	$	75,153	$	17,089	$	11,381	$	48,136	$	90	$	313,705
Nonperforming		267		524		487		279		8		448		—		2,013
Total 1-4 family real estate	$	69,361	$	93,286	$	75,640	$	17,368	$	11,389	$	48,584	$	90	$	315,718

Consumer
Performing	$	14,685	$	3,844	$	3,717	$	1,123	$	1,140	$	1,325	$	70,974	$	96,808
Nonperforming		7		—		—		—		3		59		110		179
Total Consumer	$	14,692	$	3,844	$	3,717	$	1,123	$	1,143	$	1,384	$	71,084	$	96,987

Total	$	298,706	$	173,708	$	110,850	$	31,060	$	15,942	$	50,417	$	71,174	$	751,857

The following table shows the amortized cost basis of the loans and leases modified to borrowers experiencing financial difficulty by class of receivable and type of concession granted for the three and six months ended June 30, 2023.

For the three months ended

For the six months ended

June 30, 2023

Amortized Cost

Payment

% of Class of

Payment

% of Class of

Classes of Loans/Leases

Delay

Receivable

Delay

Receivable

(dollars in thousands)

Direct Financing Leases

235

At June 30, 2023, there were no commitments to extend credit to any of the borrowers experiencing financial difficulty.

There were no loans to borrowers experiencing financial difficulty that had a payment default during the three and six months ended June 30, 2023, that had been modified in the twelve-month period prior to the default.

The Company closely monitors the performance of the loans and leases that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. None of these loan or lease modifications were past due as of June 30, 2023.

Changes in the ACL for OBS exposures for the three and six months ended June 30, 2023 and 2022 are presented as follows:


	Three Months Ended				Six Months Ended
	June 30, 2023		June 30, 2022		June 30, 2023		June 30, 2022

	(dollars in thousands)

Balance, beginning	$	6,033	$	7,819	$	5,552	$	6,886
Provisions (credited) to expense		293		(941)		774		(8)
Balance, ending	$	6,326	$	6,878	$	6,326	$	6,878