SIERRA BANCORP 10-Q

Item 1 – Financial Statements SIERRA BANCORP CONSOLIDATED BALANCE SHEETS (dollars in thousands) ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2022 December 31, 2021 ASSETS ​ (unaudited) ​ (audited) Cash and due from banks ​ $ 66,039 ​ $ 63,147 Interest bearing deposits in banks ​ ​ 187,495 ​ ​ 194,381 Total cash & cash equivalents ​ ​ 253,534 ​ ​ 257,528 Investment securities available-for-sale, at fair value (net of zero allowance for credit losses at March 31, 2022 and December 31, 2021) ​ ​ 1,025,032 ​ ​ 973,314 Loans and leases: ​ ​ ​ ​ ​ ​ Gross loans and leases ​ ​ 1,983,331 ​ ​ 1,989,726 Deferred loan and lease fees, net ​ ​ ( 1,200 ) ​ ​ ( 1,865 ) Allowance for credit losses on loans and leases ​ ​ ( 22,530 ) ​ ​ ( 14,256 ) Net loans and leases ​ ​ 1,959,601 ​ ​ 1,973,605 Foreclosed assets ​ ​ 93 ​ ​ 93 Premises and equipment, net ​ ​ 23,239 ​ ​ 23,571 Goodwill ​ ​ 27,357 ​ ​ 27,357 Other intangible assets, net ​ ​ 3,022 ​ ​ 3,275 Bank-owned life insurance ​ ​ 53,594 ​ ​ 54,242 Other assets ​ ​ 73,382 ​ ​ 58,029 Total assets ​ $ 3,418,854 ​ $ 3,371,014 ​ ​ ​ ​ ​ ​ ​ LIABILITIES AND SHAREHOLDERS' EQUITY ​ ​ ​ ​ ​ ​ Deposits: ​ ​ ​ ​ ​ ​ Noninterest bearing ​ $ 1,104,691 ​ $ 1,084,544 Interest bearing ​ ​ 1,760,252 ​ ​ 1,697,028 Total deposits ​ ​ 2,864,943 ​ ​ 2,781,572 Repurchase agreements ​ ​ 107,760 ​ ​ 106,937 Long-term debt ​ ​ 49,151 ​ ​ 49,141 Subordinated debentures ​ ​ 35,347 ​ ​ 35,302 Allowance for credit losses on unfunded loan commitments ​ ​ 1,040 ​ ​ 203 Other liabilities ​ ​ 34,922 ​ ​ 35,365 Total liabilities ​ ​ 3,093,163 ​ ​ 3,008,520 ​ ​ ​ ​ ​ ​ ​ Commitments and contingent liabilities (Note 7) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Shareholders' equity ​ ​ ​ ​ ​ ​ Common stock, no par value; 24,000,000 shares authorized; 15,086,032 and 15,270,010 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively ​ ​ 111,673 ​ ​ 113,007 Additional paid-in capital ​ ​ 4,281 ​ ​ 3,910 Retained earnings ​ ​ 227,445 ​ ​ 234,410 Accumulated other comprehensive (loss) income, net ​ ​ ( 17,708 ) ​ ​ 11,167 Total shareholders' equity ​ ​ 325,691 ​ ​ 362,494 Total liabilities and shareholders' equity ​ $ 3,418,854 ​ $ 3,371,014 ​ The accompanying notes are an integral part of these consolidated financial statements ​ 1 Table of Contents SIERRA BANCORP CONSOLIDATED STATEMENTS OF INCOME FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 (dollars in thousands, except per share data, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended March 31, ​ 2022 2021 Interest and dividend income ​ ​ ​ ​ ​ ​ Loans and leases, including fees ​ $ 20,772 ​ $ 26,412 Taxable securities ​ ​ 3,490 ​ ​ 1,578 Tax-exempt securities ​ ​ 1,726 ​ ​ 1,449 Federal funds sold and other ​ ​ 93 ​ ​ 19 Total interest income ​ ​ 26,081 ​ ​ 29,458 Interest expense ​ ​ ​ ​ ​ ​ Deposits ​ ​ 560 ​ ​ 608 Short-term borrowings ​ ​ 82 ​ ​ 48 Subordinated debentures ​ ​ 683 ​ ​ 247 Total interest expense ​ ​ 1,325 ​ ​ 903 Net interest income ​ ​ 24,756 ​ ​ 28,555 Provision for credit losses on loans and leases ​ ​ 600 ​ ​ 250 Benefit for credit losses on unfunded loan commitments ​ ​ ( 94 ) ​ ​ — Net interest income after provision for credit losses ​ ​ 24,250 ​ ​ 28,305 Noninterest income ​ ​ ​ ​ ​ ​ Service charges on deposits ​ ​ 3,040 ​ ​ 2,767 Other income ​ ​ 3,023 ​ ​ 4,063 Total noninterest income ​ ​ 6,063 ​ ​ 6,830 Noninterest expense ​ ​ ​ ​ ​ ​ Salaries and employee benefits ​ ​ 11,805 ​ ​ 11,151 Occupancy ​ ​ 2,294 ​ ​ 2,486 Other ​ ​ 6,074 ​ ​ 6,634 Total noninterest expense ​ ​ 20,173 ​ ​ 20,271 Income before taxes ​ ​ 10,140 ​ ​ 14,864 Provision for income taxes ​ ​ 2,733 ​ ​ 3,786 Net income ​ $ 7,407 ​ $ 11,078 ​ ​ ​ ​ ​ ​ ​ PER SHARE DATA ​ ​ ​ ​ ​ ​ Book value ​ $ 21.59 ​ $ 22.58 Cash dividends ​ $ 0.23 ​ $ 0.21 Earnings per share basic ​ $ 0.49 ​ $ 0.73 Earnings per share diluted ​ $ 0.49 ​ $ 0.72 Average shares outstanding, basic ​ ​ 15,021,138 ​ ​ 15,241,190 Average shares outstanding, diluted ​ ​ 15,120,990 ​ ​ 15,355,890 ​ ​ ​ ​ ​ ​ ​ Total shareholders' equity (in thousands) ​ $ 325,691 ​ $ 347,981 Shares outstanding ​ ​ 15,086,032 ​ ​ 15,410,763 Dividends paid (in thousands) ​ $ 3,508 ​ $ 3,231 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 2 Table of Contents SIERRA BANCORP CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended March 31, ​ 2022 2021 Net income ​ $ 7,407 ​ $ 11,078 Other comprehensive loss, before tax: ​ ​ ​ ​ ​ ​ Unrealized gains on securities: ​ ​ ​ ​ ​ ​ Unrealized holding loss arising during period ​ ​ ( 39,962 ) ​ ​ ( 5,759 ) Less: reclassification adjustment for gains included in net income (1) ​ ​ ( 1,032 ) ​ ​ — Other comprehensive loss, before tax ​ ​ ( 40,994 ) ​ ​ ( 5,759 ) Income tax benefit related to items of other comprehensive loss, net of tax ​ ​ 12,119 ​ ​ 1,703 Other comprehensive loss ​ ​ ( 28,875 ) ​ ​ ( 4,056 ) Comprehensive (loss) income ​ $ ( 21,468 ) ​ $ 7,022 (1) Amounts are included in net gains on investment securities available-for-sale on the Consolidated Statements of Income in noninterest income. Income tax expense associated with the reclassification adjustment for the three months ended March 31, 2022 and 2021 was $ 305 thousand and $ 0 respectively. ​ ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 3 Table of Contents SIERRA BANCORP CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 (dollars in thousands, except per share data, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ ​ ​ ​ Other ​ ​ ​ ​ ​ Common Stock ​ Paid In ​ Retained ​ Comprehensive ​ Shareholders' ​ Shares Amount Capital Earnings Income (Loss) Equity Balance, December 31 2020 ​ 15,388,423 ​ $ 113,384 ​ $ 3,736 ​ $ 208,371 ​ $ 18,405 ​ $ 343,896 Net income ​ — ​ ​ — ​ ​ — ​ ​ 11,078 ​ ​ — ​ ​ 11,078 Other comprehensive loss, net of tax ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 4,056 ) ​ ​ ( 4,056 ) Stock options exercised, net of shares surrendered for cashless exercises ​ 4,160 ​ ​ 69 ​ ​ ( 15 ) ​ ​ — ​ ​ — ​ ​ 54 Stock compensation costs ​ 18,180 ​ ​ — ​ ​ 240 ​ ​ — ​ ​ — ​ ​ 240 Cash dividends - $ 0.21 per share ​ — ​ ​ — ​ ​ — ​ ​ ( 3,231 ) ​ ​ — ​ ​ ( 3,231 ) Balance, March 31, 2021 ​ 15,410,763 ​ $ 113,453 ​ $ 3,961 ​ $ 216,218 ​ $ 14,349 ​ $ 347,981 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, December 31, 2021 ​ 15,270,010 ​ $ 113,007 ​ $ 3,910 ​ $ 234,410 ​ $ 11,167 ​ $ 362,494 Cumulative effect of change in accounting principle (Note 3) ​ — ​ ​ — ​ ​ — ​ ​ ( 7,315 ) ​ ​ — ​ ​ ( 7,315 ) Net income ​ — ​ ​ — ​ ​ — ​ ​ 7,407 ​ ​ — ​ ​ 7,407 Other comprehensive loss, net of tax ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 28,875 ) ​ ​ ( 28,875 ) Restricted stock surrendered due to employee tax liability ​ ( 1,196 ) ​ ​ ( 9 ) ​ ​ — ​ ​ ( 23 ) ​ ​ — ​ ​ ( 32 ) Restricted stock forfeited / cancelled ​ ( 220 ) ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Stock based compensation - stock options ​ — ​ ​ — ​ ​ 30 ​ ​ — ​ ​ — ​ ​ 30 Stock based compensation - restricted stock ​ — ​ ​ — ​ ​ 341 ​ ​ — ​ ​ — ​ ​ 341 Stock repurchase ​ ( 182,562 ) ​ ​ ( 1,325 ) ​ ​ — ​ ​ ( 3,526 ) ​ ​ — ​ ​ ( 4,851 ) Cash dividends - $ 0.23 per share ​ — ​ ​ — ​ ​ — ​ ​ ( 3,508 ) ​ ​ — ​ ​ ( 3,508 ) Balance, March 31, 2022 ​ 15,086,032 ​ $ 111,673 ​ $ 4,281 ​ $ 227,445 ​ $ ( 17,708 ) ​ $ 325,691 ​ ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 4 Table of Contents SIERRA BANCORP CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, 2022 AND 2021 (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended March 31, ​ 2022 2021 Cash flows from operating activities: ​ ​ ​ ​ ​ ​ Net income ​ $ 7,407 ​ $ 11,078 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gain on sales of securities ​ ​ ( 1,032 ) ​ ​ — Loss on disposal of fixed assets ​ ​ 6 ​ ​ 4 Gain on sale on foreclosed assets ​ ​ ( 5 ) ​ ​ ( 15 ) Writedowns on foreclosed assets ​ ​ — ​ ​ 98 Stock based compensation expense ​ ​ 371 ​ ​ 240 Provision for credit losses on loans and leases ​ ​ 600 ​ ​ 250 Depreciation and amortization ​ ​ 636 ​ ​ 819 Net amortization on securities premiums and discounts ​ ​ 1,177 ​ ​ 1,152 Amortization (accretion) of premiums (discounts) for loans acquired ​ ​ 36 ​ ​ ( 98 ) Decrease (increase) in cash surrender value of life insurance policies ​ ​ 645 ​ ​ ( 583 ) Amortization of core deposit intangible ​ ​ 253 ​ ​ 269 (Increase) decrease in interest receivable and other assets ​ ​ ( 1,419 ) ​ ​ 5,690 Decrease in other liabilities ​ ​ ( 537 ) ​ ​ ( 1,499 ) Deferred income tax benefit (provision) ​ ​ 811 ​ ​ ( 2,002 ) Decrease (increase) in value of restricted bank equity securities ​ ​ 332 ​ ​ ( 857 ) Net amortization of partnership investment ​ ​ 113 ​ ​ 133 Net cash provided by operating activities ​ ​ 9,394 ​ ​ 14,679 ​ ​ ​ ​ ​ ​ ​ Cash flows from investing activities: ​ ​ ​ ​ ​ ​ Maturities and calls of securities available for sale ​ ​ 2,373 ​ ​ 1,705 Proceeds from sales of securities available for sale ​ ​ 26,408 ​ ​ — Purchases of securities available for sale ​ ​ ( 145,327 ) ​ ​ ( 45,713 ) Principal pay downs on securities available for sale ​ ​ 23,688 ​ ​ 28,141 Loan originations and payments, net ​ ​ 3,914 ​ ​ 175,550 Purchases of premises and equipment ​ ​ ( 265 ) ​ ​ ( 68 ) Proceeds from sales of foreclosed assets ​ ​ 5 ​ ​ 35 Purchase of bank-owned life insurance ​ ​ ( 8 ) ​ ​ ( 133 ) Liquidation of bank-owned life insurance ​ ​ 11 ​ ​ — Amortization of debt issuance costs ​ ​ 10 ​ ​ — Net cash (used in) provided by investing activities ​ ​ ( 89,191 ) ​ ​ 159,517 ​ ​ ​ ​ ​ ​ ​ Cash flows from financing activities: ​ ​ ​ ​ ​ ​ Increase in deposits ​ ​ 83,371 ​ ​ 229,286 Decrease in borrowed funds ​ ​ — ​ ​ ( 137,900 ) Increase in repurchase agreements ​ ​ 823 ​ ​ 12,389 Cash dividends paid ​ ​ ( 3,508 ) ​ ​ ( 3,231 ) Repurchases of common stock ​ ​ ( 4,883 ) ​ ​ — Stock options exercised ​ ​ — ​ ​ 54 Net cash provided by financing activities ​ ​ 75,803 ​ ​ 100,598 ​ ​ ​ ​ ​ ​ ​ (Decrease) increase in cash and cash equivalents ​ ​ ( 3,994 ) ​ ​ 274,794 ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ ​ ​ ​ ​ ​ Beginning of period ​ ​ 257,528 ​ ​ 71,417 End of period ​ $ 253,534 ​ $ 346,211 ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of cash flow information: ​ ​ ​ ​ ​ ​ Interest paid ​ $ 1,730 ​ $ 879 Supplemental noncash disclosures: ​ ​ ​ ​ ​ ​ Real estate acquired through foreclosure ​ $ — ​ $ 94 ​ The accompanying notes are an integral part of these consolidated financial statements. 5 Table of Contents SIERRA BANCORP NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 2022 (Unaudited) Note 1 – The Business of Sierra Bancorp Sierra Bancorp (the “Company”) is a California corporation headquartered in Porterville, California, and is a registered bank holding company under federal banking laws. The Company was formed to serve as the holding company for Bank of the Sierra (the “Bank”), and has been the Bank’s sole shareholder since August 2001. The Company exists primarily for the purpose of holding the stock of the Bank and of such other subsidiaries it may acquire or establish. As of March 31, 2022, the Company’s only other subsidiaries were Sierra Statutory Trust II, Sierra Capital Trust III, and Coast Bancorp Statutory Trust II, which were formed solely to facilitate the issuance of capital trust pass-through securities (“TRUPS”). Pursuant to the Financial Accounting Standards Board (“FASB”) standard on the consolidation of variable interest entities, these trusts are not reflected on a consolidated basis in the Company’s financial statements. References herein to the “Company” include Sierra Bancorp and its consolidated subsidiary, the Bank, unless the context indicates otherwise. Bank of the Sierra, a California state-chartered bank headquartered in Porterville, California, offers a wide range of retail and commercial banking services via branch offices located throughout California’s South San Joaquin Valley, the Central Coast, Ventura County, the Sacramento area, and neighboring communities. The Bank was incorporated in September 1977, and opened for business in January 1978 as a one -branch bank with $ 1.5 million in capital. Our growth in the ensuing years has largely been organic in nature, but includes four whole-bank acquisitions: Sierra National Bank in 2000, Santa Clara Valley Bank in 2014, Coast National Bank in 2016, and Ojai Community Bank in October 2017. As of the filing date of this report the Bank operates 35 full-service branches and an online branch, and maintains ATMs at all but one of our branch locations as well as seven non-branch locations. Moreover, the Bank has specialized lending units which focus on agricultural borrowers, SBA loans, and mortgage warehouse lending. In addition, in February 2020 the bank opened a loan production office which is currently located in Roseville, CA. To support organic growth in the agricultural lending sector the bank also opened a loan production office in Templeton, CA in April 2022. The Company had total assets of $ 3.4 billion at March 31, 2022, and for a number of years we have claimed the distinction of being the largest bank headquartered in the South San Joaquin Valley. The Bank’s deposit accounts, which totaled $ 2.9 billion at March 31, 2022, are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to maximum insurable amounts. Note 2 – Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in a condensed format, and therefore do not include all of the information and footnotes required by U.S. generally accepted accounting principles (“GAAP”) for complete financial statements. The information furnished in these interim statements reflects all adjustments that are, in the opinion of Management, necessary for a fair statement of the results for such periods. Such adjustments can generally be considered as normal and recurring unless otherwise disclosed in this Form 10-Q. In preparing the accompanying financial statements, Management has taken subsequent events into consideration and recognized them where appropriate. The results of operations in the interim statements are not necessarily indicative of the results that may be expected for any other quarter, or for the full year. Certain amounts reported for 2020 have been reclassified to be consistent with the reporting for 2021. The interim financial information should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, as filed with the Securities and Exchange Commission (the “SEC”). Note 3 – Current Accounting Developments In September 2016 the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments , which eliminates the probable initial recognition threshold for credit losses in current U.S. GAAP, and instead requires an organization to record a current estimate of all expected credit losses over the contractual term for financial assets carried at amortized cost (generally loans and held-to-maturity investment securities) in addition to certain off balance-sheet credit exposure. Under the current expected credit losses (“CECL”) 6 Table of Contents methodology expected credit losses for financial assets are estimated over the contractual life of the financial asset, adjusted for expected prepayments, considering historical experience, current conditions, and reasonable and supportable forecasts. Additionally, under CECL the accounting for credit losses on available-for-sale debt securities is addressed through an allowance for credit losses which is a change from legacy GAAP which previously required the direct write-down of securities through the other-than-temporary impairment approach. The Company implemented CECL on January 1, 2022 , using the modified retrospective approach to estimate lifetime expected losses on financial assets measured at amortized cost in addition to certain off balance sheet credit exposures. The January 1, 2022, increase in the Company’s allowance for credit losses, of $ 9.5 million on loans and leases and $ 0.9 million in off balance sheet credit exposures, net of the impact of deferred taxes, was reflected in a transition adjustment of $ 7.3 million to retained earnings. There was no cumulative effect adjustment related to our available-for-sale investment portfolio upon adoption. Results for reporting periods beginning after December 31, 2021, are presented under CECL whereas prior comparative periods are presented under legacy GAAP. The following table illustrates the impact of the adoption of CECL, and the transition away from the incurred loss method, on January 1, 2022 . The impact to the Allowance for Credit losses (“ACL”) on the Loan Portfolio is broken out at the class level (dollars in thousands, unaudited): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Transition Impact on Allowance for Credit Losses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ January 1, 2022 ​ ​ Reserves Under Incurred Loss Reserves Under CECL Transition Impact Gross Impact of Deferred Taxes Impact to Retained Earnings Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ $ 135 ​ $ 28 ​ $ ( 107 ) ​ $ 32 ​ $ ( 75 ) Other construction/land ​ ​ 228 ​ ​ 254 ​ ​ 26 ​ ​ ( 8 ) ​ ​ 18 1-4 family - closed-end ​ ​ 1,618 ​ ​ 2,310 ​ ​ 692 ​ ​ ( 205 ) ​ ​ 487 Equity lines ​ ​ 290 ​ ​ 210 ​ ​ ( 80 ) ​ ​ 25 ​ ​ ( 55 ) Multi-family residential ​ ​ 274 ​ ​ 574 ​ ​ 300 ​ ​ ( 89 ) ​ ​ 211 Commercial real estate - owner occupied ​ ​ 2,217 ​ ​ 3,444 ​ ​ 1,227 ​ ​ ( 363 ) ​ ​ 864 Commercial real estate - non-owner occupied ​ ​ 6,199 ​ ​ 14,380 ​ ​ 8,181 ​ ​ ( 2,419 ) ​ ​ 5,762 Farmland ​ ​ 737 ​ ​ 340 ​ ​ ( 397 ) ​ ​ 117 ​ ​ ( 280 ) Total real estate ​ ​ 11,698 ​ ​ 21,540 ​ ​ 9,842 ​ ​ ( 2,910 ) ​ ​ 6,932 Agricultural ​ ​ 465 ​ ​ 382 ​ ​ ( 83 ) ​ ​ 25 ​ ​ ( 58 ) Commercial and industrial ​ ​ 1,060 ​ ​ 1,418 ​ ​ 358 ​ ​ ( 106 ) ​ ​ 252 Mortgage warehouse lines ​ ​ 512 ​ ​ 91 ​ ​ ( 421 ) ​ ​ 124 ​ ​ ( 297 ) Consumer loans ​ ​ 521 ​ ​ 279 ​ ​ ( 242 ) ​ ​ 72 ​ ​ ( 170 ) Total allowance for credit losses - loans ​ $ 14,256 ​ $ 23,710 ​ $ 9,454 ​ $ ( 2,795 ) ​ $ 6,659 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for credit losses - unfunded loan commitments ​ $ 203 ​ $ 1,134 ​ $ 931 ​ $ ( 275 ) ​ $ 656 ​ The Company currently categorizes all of its loans and leases as held-for-investment and following CECL implementation, reports loans and leases on the amortized cost basis. The Company’s amortized cost basis is comprised of the principal balance outstanding, net of remaining purchase discount or premium and any deferred fees or costs. Notably, the Company elected the practical expedient available under CECL to exclude accrued interest receivable from the amortized cost basis of all categorizations of loans and investment securities, and resultingly did not estimate reserves on accrued interest receivable balances, as any past due interest income is reversed on a timely basis. Accrued interest receivable continues to be included in other assets on the Company’s balance sheet and as of March 31, 2022, measured at $ 4.8 million and $ 6.7 million for available-for-sale securities and loans, respectively. During 2022 no accrued interest receivable on loans or available for sale investment securities was reversed against interest income. 7 Table of Contents For available-for-sale debt securities in an unrealized loss position for which management has an intent to sell the security, or considers it more likely-than-not that the security in question will be sold prior to a recovery of its amortized cost basis, the security will be written down to fair value through a direct charge to income. For the remainder of available sale debt securities in an unrealized loss position, which don’t meet the previously outlined criteria, management evaluates whether the decline in fair value is a reflection of credit deterioration or other factors. In performing this evaluation, management considers the extent which fair value has fallen below amortized cost, changes in rating by rating agencies, and other information indicating a deterioration in repayment capacity of either the underlying issuer or the borrowers providing repayment capacity in a securitization. If management’s evaluation indicates that a credit loss exists then a present value of the expected cash flows is calculated and compared to the amortized cost basis of the security in question and to the degree that the amortized cost basis exceeds the present value an allowance for credit loss (“ACL”) is established, with the caveat that the maximum amount of the reserve on any individual security is the difference between the fair value and amortized cost balance of the security in question. Any impairment that has not been recorded through an ACL is recognized in other comprehensive income. Similar to practice under legacy GAAP, the Company generally continues to place loans and leases on nonaccrual status when management has determined that the full repayment of principal and collection of contractually agreed upon interest is unlikely or when the loan in question has become delinquent more than 90 days. The Company may decide that it is appropriate to continue to accrue interest on certain loans and leases more than 90 days delinquent if they are well-secured by collateral and collection is in process. When a loan is placed on nonaccrual status, any accrued but uncollected interest for the loan and lease is reversed out of interest income in the period in which the loan’s status changed. For loans and leases with an interest reserve, i.e., where loan and lease proceeds are advanced to the borrower to make interest payments, all interest recognized from the inception of the loan and lease is reversed when the loan and lease is placed on non-accrual. Once a loan and lease is on non-accrual status subsequent payments received from the customer are applied to principal, and no further interest income is recognized until the principal has been paid in full or until circumstances have changed such that payments are again consistently received as contractually required. Generally, loans and leases are not restored to accrual status until the obligation is brought current and has performed in accordance with the contractual terms for a reasonable period of time, and the ultimate collectability of the total contractual principal and interest is no longer in doubt. Similar to practice under legacy GAAP, the ACL on the loan portfolio is a valuation allowance deducted from the recorded balance in loans and leases. However, under CECL the ACL represents principal which is not expected to be collected over the contractual life of the loans and leases, adjusted for expected prepayment, whereas under legacy GAAP the allowance represented only losses already incurred as of the balance sheet date. The ACL is increased by a provision for credit losses charged to expense, and by principal recovered on charged-off balances. It is reduced by principal charge-offs. The amount of the allowance is based on management’s evaluation of the collectability of the loan and lease portfolio, using information from internal and external sources, relating to past events, current conditions and reasonable and supportable forecasts. Adjustments are also made for changes in risk profile, credit concentrations, historical trends, and other economic conditions. The ACL for loans and leases is separated between a collective reserve evaluation, for loans where similar risk characteristics exist and an individual reserve evaluation for loans without similar risk characteristics. The collective evaluation of loans is performed at the portfolio segment level, using call code as the primary segmentation key but also considering similarity in quantitative reserve methodology. The Company’s ACL is categorized according to the following portfolio segments: 1-4 Family Real Estate, Commercial Real Estate, Farmland & Agricultural Production, Commercial & Industrial, Mortgage Warehouse, and Consumer. Management utilizes a discounted cash flow methodology to estimate the quantitative portion of collectively evaluated reserves for the 1-4 Family Real Estate, Commercial Real Estate, Commercial & Industrial and Mortgage Warehouse portfolio segments. Management utilizes a Remaining Life Quantitative Reserve Methodology for the Farmland & Agricultural Production, and Consumer portfolio segments. Within the portfolio segments utilizing the DCF quantitative reserve methodology, management has made the election to adjust the effective interest rate to consider the impact of expected prepayments. Loans and leases where similar risk characteristics exist are evaluated for the ACL in the collective reserve evaluation. The Company’s policy is that loans designated as nonaccrual no longer share risk characteristics similar to other loans and leases evaluated collectively and as such, all nonaccrual loans and leases are individually evaluated for reserves. As 8 Table of Contents of March 31, 2022 the Bank’s nonaccrual loans and leases comprised the entire population of loans and leases individually evaluated. The Company’s policy is that nonaccrual loans also represent the subset of loans and leases where borrowers are experiencing financial difficulty where an evaluation of the source of repayment is required to determine if the nonaccrual loan and lease should be categorized as collateral dependent. It is the Company’s policy that the only loans and leases where the credit quality has deteriorated to the point where foreclosure is probable are the Company’s nonaccrual loans and leases. The implementation of CECL also impacted the Company’s ACL on unfunded loan commitments, as this ACL now represents expected credit losses over the contractual life of commitments not identified as unconditionally cancellable by the Company. The Reserve for Unfunded Commitments is estimated using the same reserve or coverage rates calculated on collectively evaluated loans following the application of a funding rate to the amount of the unfunded commitment. The funding rate represents management’s estimate of the amount of the current unfunded commitment that will be funded over the remaining contractual life of the commitment and is based on historical data. Under CECL the ACL on unfunded loan commitments remains in Other Liabilities while any related provision expense has been moved to provision for credit loss expense from its prior presentation in noninterest expense. Prior period expense has been reclassified for comparative purposes. Note 4 – Share Based Compensation On March 16, 2017 the Company’s Board of Directors approved and adopted the 2017 Stock Incentive Plan (the “2017 Plan”), which became effective May 24, 2017, the date approved by the Company’s shareholders. The 2017 Plan replaced the Company’s 2007 Stock Incentive Plan (the “2007 Plan”), which expired by its own terms on March 15, 2017. Options to purchase 172,689 shares that were granted under the 2007 Plan were still outstanding as of March 31, 2022 and remain unaffected by that plan’s expiration. The 2017 Plan provides for the issuance of both “incentive” and “nonqualified” stock options to officers and employees, and of “nonqualified” stock options to non-employee directors and consultants of the Company. The 2017 Plan also provides for the issuance of restricted stock awards to these same classes of eligible participants. The total number of shares of the Company’s authorized but unissued stock reserved for issuance pursuant to awards under the 2017 Plan was initially 850,000 shares, and the number remaining available for grant as of March 31, 2022 was 417,320 . Options to purchase 436,418 shares granted under the 2017 Plan were outstanding as of March 31, 2022. The potential dilutive impact of unexercised stock options is discussed below in Note 5, Earnings per Share. Pursuant to FASB’s standards on stock compensation, the value of each stock option and restricted stock award is reflected in our income state­ment as employee compensation or directors’ expense by amortizing its grant date fair value over the vesting period of the option or award. The Company utilizes a Black-Scholes model to determine grant date fair values for options, while the market price of the Company’s common stock at the date of grant is used for restricted stock awards. Forfeitures are reflected in compensation costs as they occur for both types of awards. A pre-tax charge of $ 0.4 million was reflected in the Company’s income statement during the first quarter of 2022 and $ 0.2 million was charged during the first quarter of 2021, as expense related to stock options and restricted stock awards. Restricted Stock Grants The Company’s Restricted Stock Awards are awards of time-vested, non-transferrable shares of common stock and are available to be granted to the Company’s employees and directors. The vesting period of Restricted Stock Awards is determined at the time the awards are issued, and different awards may have different vesting terms; provided, however, that no installment of any Restricted Stock Award shall become vested less than one year from the grant date. Restricted Stock Awards are valued utilizing the fair value of the Company’s stock at the grant date. There were no shares granted to employees and directors of the Company during the first three months of 2022. These awards are expensed on a straight-line basis over the vesting period. As of March 31, 2022, there was $ 2.6 million of unamortized compensation cost related to unvested Restricted Stock Awards granted under the 2017 plan. That cost is expected to be amortized over a weighted average period of 3.0 years. ​ 9 Table of Contents The Company’s time-vested award activity for the three months ended March 31, 2022 and 2021 is summarized below (unaudited): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended March 31, ​ ​ 2022 ​ 2021 ​ ​ Shares ​ ​ Weighted Average Grant-Date Fair Value ​ Shares ​ ​ Weighted Average Grant-Date Fair Value Unvested shares, January 1, ​ 165,131 ​ $ 21.72 ​ 148,885 ​ $ 18.00 Granted ​ — ​ ​ — ​ 18,180 ​ ​ 25.30 Vested ​ ( 3,162 ) ​ ​ 25.30 ​ — ​ ​ — Forfeited ​ ( 220 ) ​ ​ 27.16 ​ — ​ ​ — Unvested shares March 31, ​ 161,749 ​ $ 21.65 ​ 167,065 ​ $ 18.79 ​ Stock Option Grants The Company has issued equity instruments in the form of Incentive Stock Options and Nonqualified Stock Options to certain officers and directors and may continue to do so under the 2017 Plan. The exercise price of each stock option is determined at the time of the grant and may be no less than 100 % of the fair market value of such stock at the time the option is granted. The Company’s stock option activity during the three months ended March 31, 2022 and 2021 are summarized below (dollars in thousands, except per share data, unaudited): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended March 31, ​ ​ 2022 ​ 2021 ​ Shares Weighted Average Exercise Price ​ Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (1) Shares Weighted Average Exercise Price ​ Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value (1) Outstanding at January 1, ​ 415,870 ​ $ 24.15 ​ ​ ​ $ 1,338 ​ 495,489 ​ $ 23.67 ​ ​ ​ $ 1,340 Granted ​ — ​ $ — ​ ​ ​ $ — ​ — ​ $ — ​ ​ ​ $ — Exercised ​ — ​ $ — ​ ​ ​ $ 91 ​ ( 4,160 ) ​ $ 12.95 ​ ​ ​ $ 50 Canceled ​ ( 3,081 ) ​ $ 27.30 ​ ​ ​ $ — ​ ( 10,600 ) ​ $ 27.64 ​ ​ ​ $ — Outstanding at March 31, ​ 412,789 ​ $ 24.12 ​ 5.66 ​ $ 1,092 ​ 480,729 ​ $ 23.68 ​ 6.47 ​ $ 1,701 Exercisable at March 31, ​ 370,789 ​ $ 23.78 ​ 5.43 ​ $ 1,092 ​ 393,129 ​ $ 22.96 ​ 6.05 ​ $ 1,684 (1) The aggregate intrinsic value of stock option in the table above represents the total pre-tax intrinsic value (the amount by which the current market value of the underlying stock exceeds the exercise price of the option) that would have been received by the option holders had all option holders exercised their options on March 31, 2022. This amount changes based on changes in the market value of the Company's stock. ​ ​ Note 5 – Earnings per Share The computation of earnings per share, as presented in the Consolidated Statements of Income, is based on the weighted average number of shares outstanding during each period, excluding unvested restricted stock awards. There were 15,021,138 weighted average shares outstanding during the first quarter of 2022 and 15,241,190 during the first quarter of 2021. Diluted earnings per share calculations include the effect of the potential issuance of common shares, which for the Company is limited to shares that would be issued on the exercise of “in-the-money” stock options, and unvested restricted stock awards. For the first quarter of 2022, calculations under the treasury stock method resulted in the equivalent of 51,609 shares being added to basic weighted average shares outstanding for purposes of determining diluted earnings per share, while a weighted average of 301,714 stock options were excluded from the calculation because they were underwater and thus anti-dilutive. For the first quarter of 2021 the equivalent of 114,700 shares were added in calculating diluted earnings per share, while 351,827 anti-dilutive stock options were not factored into the computation. 10 Table of Contents Note 6 – Comprehensive Income (Loss) As presented in the Consolidated Statements of Comprehensive Income (Loss), comprehensive income (loss) includes net income and other comprehensive income (loss). The Company’s only source of other comprehensive income (loss) is unrealized gains and losses on available-for-sale investment securities. Investment gains or losses that were realized and reflected in net income of the current period, which had previously been included in other comprehensive income (loss) as unrealized holding gains or losses in the period in which they arose, are considered to be reclassification adjustments that are excluded from other comprehensive income (loss) in the current period. Note 7 – Commitments and Contingent Liabilities The Company is a party to financial instruments with off-balance-sheet risk in the normal course of business. Those financial instruments currently consist of unused commitments to extend credit and standby letters of credit. They involve, to varying degrees, elements of risk in excess of the amount recognized in the balance sheet. The Company’s exposure to credit loss in the event of nonperformance by counterparties for commitments to extend credit and letters of credit is represented by the contractual amount of those instruments. The Company uses the same credit policies in making commitments and issuing letters of credit as it does for originating loans included on the balance sheet. The following financial instruments represent off-balance-sheet credit risk (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2022 December 31, 2021 Commitments to extend credit ​ $ 574,625 ​ $ 554,028 Standby letters of credit ​ $ 7,037 ​ $ 6,651 ​ Commitments to extend credit consist primarily of the unused or unfunded portions of the following: home equity lines of credit; commercial real estate construction loans, where disbursements are made over the course of construction; commercial revolving lines of credit; mortgage warehouse lines of credit; unsecured personal lines of credit; and formalized (disclosed) deposit account overdraft lines. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many commitments are expected to expire without being drawn upon, the unused portions of committed amounts do not necessarily represent future cash requirements. Standby letters of credit are issued by the Company to guarantee the performance of a customer to a third party, and the credit risk involved in issuing letters of credit is essentially the same as the risk involved in extending loans to customers. At March 31, 2022, the Company was also utilizing a letter of credit in the amount of $ 128.6 million issued by the Federal Home Loan Bank on the Company’s behalf as security for certain deposits and to facilitate certain credit arrangements with the Company’s customers. That letter of credit is backed by loans which are pledged to the FHLB by the Company. The Company is subject to loss contingencies, including claims and legal actions arising in the ordinary course of business, which are recorded as liabilities when the likelihood of loss is probable, and an amount or range of loss can be reasonably estimated. Management does not believe there are such matters that will have a material effect on the financial statements. As noted under footnote 3 the adoption of CECL on January 1, 2022 impacted the Company’s ACL on unfunded loan commitments. Additional information is included in footnote 3. Note 8 – Fair Value Disclosures and Reporting and Fair Value Measurements FASB’s standards on financial instruments, and on fair value measurements and disclosures, require public business entities to disclose in their financial statement footnotes the estimated fair values of financial instruments. In addition to disclosure requirements, FASB’s standard on investments requires that our debt securities that are classified as available for sale and any equity securities which have readily determinable fair values be measured and reported at fair value in our statement of financial position. Certain individually identified loans are also reported at fair value, as explained in greater detail below, and foreclosed assets are carried at the lower of cost or fair value. FASB’s standard on financial 11 Table of Contents instruments permits companies to report certain other financial assets and liabilities at fair value, but the Company has not elected the fair value option for any of those financial instruments. Fair value measurement and disclosure standards also establish a framework for measuring fair values. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants on the measurement date. Further, the standards establish a fair value hierarchy that encourages an entity to maximize the use of observable inputs and limit the use of unobservable inputs when measuring fair values. The standards describe three levels of inputs that may be used to measure fair values: ● Level 1 : Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. ● Level 2 : Significant observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, and other inputs that are observable or can be corroborated by observable market data. ● Level 3 : Significant unobservable inputs that reflect a company’s own assumptions about the factors that market participants would likely consider in pricing an asset or liability. Fair value estimates are made at a specific point in time based on relevant market data and information about the financial instruments. Fair value disclosures for deposits include demand deposits, which are, by definition, equal to the amount payable on demand at the reporting date. Fair value calculations for loans and leases reflect exit pricing, and incorporate our assumptions with regard to the impact of prepayments on future cash flows and credit quality adjustments based on risk characteristics of various financial instruments, among other things. Since the estimates are subjective and involve uncertainties and matters of significant judgment they cannot be determined with precision, and changes in assumptions could significantly alter the fair values presented. Estimated fair values for the Company’s financial instruments are as follows, as of the dates noted: Fair Value of Financial Instruments (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2022 ​ ​ ​ ​ ​ Fair Value Measurements ​ Carrying Amount Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Financial assets: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 253,534 ​ $ 253,534 ​ $ — ​ $ — ​ $ 253,534 Investment securities available for sale ​ ​ 1,025,032 ​ ​ — ​ ​ 984,148 ​ ​ 40,884 ​ ​ 1,025,032 Loans and leases, net held for investment ​ ​ 1,940,933 ​ ​ — ​ ​ — ​ ​ 1,938,933 ​ ​ 1,938,933 Collateral dependent loans ​ ​ 18,668 ​ ​ — ​ ​ 18,668 ​ ​ — ​ ​ 18,668 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Financial liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deposits ​ ​ 2,864,943 ​ ​ 1,104,691 ​ ​ 1,757,812 ​ ​ — ​ ​ 2,862,503 Repurchase agreements ​ ​ 107,760 ​ ​ — ​ ​ 107,760 ​ ​ — ​ ​ 107,760 Long-term debt ​ ​ 49,151 ​ ​ — ​ ​ 46,585 ​ ​ — ​ ​ 46,585 Subordinated debentures ​ ​ 35,347 ​ ​ — ​ ​ 31,404 ​ ​ — ​ ​ 31,404 ​ 12 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ ​ ​ ​ Fair Value Measurements ​ Carrying Amount Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Financial assets: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 257,528 ​ $ 257,528 ​ $ — ​ $ — ​ $ 257,528 Investment securities available for sale ​ ​ 973,314 ​ ​ — ​ ​ 750,077 ​ ​ 223,237 ​ ​ 973,314 Loans and leases, net held for investment ​ ​ 1,973,207 ​ ​ — ​ ​ — ​ ​ 1,960,966 ​ ​ 1,960,966 Collateral dependent loans ​ ​ 398 ​ ​ — ​ ​ 221 ​ ​ 177 ​ ​ 398 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Financial liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deposits ​ ​ 2,781,572 ​ ​ 1,084,544 ​ ​ 1,696,124 ​ ​ — ​ ​ 2,780,668 Repurchase agreements ​ ​ 106,937 ​ ​ — ​ ​ 106,937 ​ ​ — ​ ​ 106,937 Short term borrowings ​ ​ 49,141 ​ ​ — ​ ​ 49,118 ​ ​ — ​ ​ 49,118 Subordinated debentures ​ ​ 35,302 ​ ​ — ​ ​ 33,281 ​ ​ — ​ ​ 33,281 ​ For financial asset categories that were carried on our balance sheet at fair value as of March 31, 2022 and December 31, 2021, the Company used the following methods and significant assumptions: ● Investment securities : Fair values are determined by obtaining quoted prices on nationally recognized securities exchanges or by matrix pricing, which is a mathematical technique used widely in the industry to value debt securities by relying on their relationship to other benchmark quoted securities. ● Collateral-dependent loans : Collateral-dependent loans are carried at fair value when it is probable that the Company will be unable to collect all amounts due according to the contractual terms of the original loan agreement and the loan has been written down to the fair value of its underlying collateral, net of expected disposition costs where applicable. ● Foreclosed assets : Repossessed real estate (known as other real estate owned, or “OREO”) and other foreclosed assets are carried at the lower of cost or fair value. Fair value is the appraised value less expected disposition costs for OREO; fair values for any other foreclosed assets are represented by estimated sales proceeds as determined using reasonably available sources. Foreclosed assets for which appraisals can be feasibly obtained are periodically measured for impairment using updated appraisals. Fair values for other foreclosed assets are adjusted as necessary, subsequent to a periodic reevaluation of expected cash flows and the timing of resolution. If impairment is determined to exist, the book value of a foreclosed asset is immediately written down to its estimated impaired value through the income statement, thus the carrying amount is equal to the fair value and there is no valuation allowance. 13 Table of Contents Assets reported at fair value on a recurring basis are summarized below: Fair Value Measurements – Recurring (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements at March 31, 2022, using ​ ​ ​ ​ Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Realized Gain/(Loss) (Level 3) Securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ — ​ $ 9,437 ​ $ — ​ $ 9,437 ​ $ — Mortgage-backed securities ​ ​ — ​ ​ 293,418 ​ ​ — ​ ​ 293,418 ​ ​ — State and political subdivisions ​ ​ — ​ ​ 286,380 ​ ​ — ​ ​ 286,380 ​ ​ — Corporate bonds ​ ​ — ​ ​ 2,475 ​ ​ 40,884 ​ ​ 43,359 ​ ​ — Collateralized loan obligations ​ ​ — ​ ​ 392,438 ​ ​ — ​ ​ 392,438 ​ ​ — Total available-for-sale securities ​ $ — ​ $ 984,148 ​ $ 40,884 ​ $ 1,025,032 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements at December 31, 2021, using ​ ​ ​ ​ Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Realized Gain/(Loss) (Level 3) Securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ U.S. government agencies ​ $ — ​ $ 1,574 ​ $ — ​ $ 1,574 ​ $ — Mortgage-backed securities ​ ​ — ​ ​ 306,727 ​ ​ — ​ ​ 306,727 ​ ​ — State and political subdivisions ​ ​ — ​ ​ 304,268 ​ ​ — ​ ​ 304,268 ​ ​ — Corporate bonds ​ ​ — ​ ​ 999 ​ ​ 27,530 ​ ​ 28,529 ​ ​ — Collateralized loan obligations ​ ​ — ​ ​ 136,509 ​ ​ 195,707 ​ ​ 332,216 ​ ​ — Total available-for-sale securities ​ $ — ​ $ 750,077 ​ $ 223,237 ​ $ 973,314 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements - Level 3 Recurring ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Collateralized Loan Obligations Corporate Bonds ​ ​ 2022 ​ 2021 ​ 2022 ​ 2021 Balance of recurring Level 3 assets at January 1, ​ $ 195,707 ​ $ — ​ $ 27,530 ​ $ — Purchases ​ ​ — ​ ​ — ​ ​ 13,354 ​ ​ — Transfers out of Level 3 ​ ​ ( 195,707 ) ​ ​ — ​ ​ — ​ ​ — Balance of recurring Level 3 assets at March 31, ​ $ — ​ $ — ​ $ 40,884 ​ $ — ​ ​ All of the Company’s collateralized loan obligations with a fair value of $ 195.7 million as of January 1, 2022 were transferred from Level 3 to Level 2 because observable market data became available due to a significant increase in trading volume for these securities in the first quarter of 2022. ​ 14 Table of Contents Assets reported at fair value on a nonrecurring basis are summarized below: Fair Value Measurements – Nonrecurring (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements at March 31, 2022, using ​ Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Collateral dependent loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ $ — ​ $ — ​ $ — ​ $ — Other construction/land ​ ​ — ​ ​ — ​ ​ — ​ ​ — 1-4 family - closed-end ​ ​ — ​ ​ — ​ ​ — ​ ​ — Equity lines ​ ​ — ​ ​ — ​ ​ — ​ ​ — Multi-family residential ​ ​ — ​ ​ — ​ ​ — ​ ​ — Commercial real estate - owner occupied ​ ​ — ​ ​ 219 ​ ​ — ​ ​ 219 Commercial real estate - non-owner occupied ​ ​ — ​ ​ — ​ ​ — ​ ​ — Farmland ​ ​ — ​ ​ 18,449 ​ ​ — ​ ​ 18,449 Total real estate ​ ​ — ​ ​ 18,668 ​ ​ — ​ ​ 18,668 Agricultural ​ ​ — ​ ​ — ​ ​ — ​ ​ — Commercial and industrial ​ ​ — ​ ​ — ​ ​ — ​ ​ — Consumer loans ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total collateral dependent loans ​ $ — ​ $ 18,668 ​ $ — ​ $ 18,668 Foreclosed assets ​ $ — ​ $ 93 ​ $ — ​ $ 93 Total assets measured on a nonrecurring basis ​ $ — ​ $ 18,761 ​ $ — ​ $ 18,761 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements at December 31, 2021, using ​ Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total Collateral dependent loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ $ — ​ $ — ​ $ — ​ $ — Other construction/land ​ ​ — ​ ​ — ​ ​ — ​ ​ — 1-4 family - closed-end ​ ​ — ​ ​ — ​ ​ — ​ ​ — Equity lines ​ ​ — ​ ​ 161 ​ ​ — ​ ​ 161 Multi-family residential ​ ​ — ​ ​ — ​ ​ — ​ ​ — Commercial real estate - owner occupied ​ ​ — ​ ​ 60 ​ ​ — ​ ​ 60 Commercial real estate - non-owner occupied ​ ​ — ​ ​ — ​ ​ — ​ ​ — Farmland ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total real estate ​ ​ — ​ ​ 221 ​ ​ — ​ ​ 221 Agricultural ​ ​ — ​ ​ — ​ ​ — ​ ​ — Commercial and industrial ​ ​ — ​ ​ — ​ ​ 177 ​ ​ 177 Consumer loans ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total collateral dependent loans ​ $ — ​ $ 221 ​ $ 177 ​ $ 398 Foreclosed assets ​ $ — ​ $ 93 ​ $ — ​ $ 93 Total assets measured on a nonrecurring basis ​ $ — ​ $ 314 ​ $ 177 ​ $ 491 ​ The table above includes collateral-dependent loan balances for which a specific reserve has been established or on which a write-down has been taken. Information on the Company’s total collateral dependent loan balances and specific loss reserves associated with those balances is included in Note 10 below. 15 Table of Contents The unobservable inputs are based on Management’s best estimates of appropriate discounts in arriving at fair market value. Adjusting any of those inputs could result in a significantly lower or higher fair value measurement. For example, an increase or decrease in actual loss rates would create a directionally opposite change in the fair value of unsecured individually identified loans. ​ Note 9 – Investments Investment Securities Although the Company currently has the intent and the ability to hold the securities in its investment portfolio to maturity, the securities are all marketable and are classified as “available for sale” to allow maximum flexibility with regard to interest rate risk and liquidity management. Pursuant to FASB’s guidance on accounting for debt securities, available for sale securities are carried on the Company’s financial statements at their estimated fair market values, with monthly tax-effected “mark-to-market” adjustments made vis-à-vis accumulated other comprehensive income in shareholders’ equity. The amortized cost and estimated fair value of available-for-sale investment securities are as follows: Amortized Cost And Estimated Fair Value (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2022 ​ Amortized Cost Gross Unrealized Gains Gross Unrealized Losses ​ Allowance for Credit Losses - AFS Securities Estimated Fair Value U.S. government agencies ​ $ 9,695 ​ $ — ​ $ ( 258 ) ​ $ — ​ $ 9,437 Mortgage-backed securities ​ ​ 304,904 ​ ​ 395 ​ ​ ( 11,881 ) ​ ​ — ​ ​ 293,418 State and political subdivisions ​ ​ 294,077 ​ ​ 2,356 ​ ​ ( 10,053 ) ​ ​ — ​ ​ 286,380 Corporate bonds ​ ​ 44,755 ​ ​ — ​ ​ ( 1,396 ) ​ ​ — ​ ​ 43,359 Collateralized loan obligations ​ ​ 396,741 ​ ​ — ​ ​ ( 4,303 ) ​ ​ — ​ ​ 392,438 Total securities ​ $ 1,050,172 ​ $ 2,751 ​ $ ( 27,891 ) ​ $ — ​ $ 1,025,032 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Estimated Fair Value U.S. government agencies ​ $ 1,546 ​ $ 28 ​ $ — ​ $ 1,574 Mortgage-backed securities ​ ​ 303,912 ​ ​ 4,772 ​ ​ ( 1,957 ) ​ ​ 306,727 State and political subdivisions ​ ​ 290,729 ​ ​ 13,807 ​ ​ ( 268 ) ​ ​ 304,268 Corporate bonds ​ ​ 28,436 ​ ​ 94 ​ ​ ( 1 ) ​ ​ 28,529 Collateralized loan obligations ​ ​ 332,836 ​ ​ 68 ​ ​ ( 688 ) ​ ​ 332,216 Total securities ​ $ 957,459 ​ $ 18,769 ​ $ ( 2,914 ) ​ $ 973,314 ​ The Company did not record an ACL on the AFS portfolio at March 31, 2022 or upon implementation on January 1, 2022. As of both dates the Company considers the unrealized loss across the classes of major security-type to be related to fluctuations in market conditions, primarily interest rates, and not reflective of a deterioration in credit value in any case. The Company maintains that it has intent and ability to hold these securities until the amortized cost basis of each security is recovered and likewise concluded as of both January 1, 2022 and March 31, 2022 that it was not more likely than not that any of the securities in an unrealized loss position would be required to be sold. The following bullets outline additional support for management’s conclusion that no amount of the unrealized loss of the securities in an unrealized loss position as of January 1, 2022 and March 31, 2022 was attributable to credit deterioration and a risk of loss, requiring a reserve. ​ 16 Table of Contents ● US Government Agencies are supported by the full faith and credit-worthiness of the U.S. Federal Government and the management did not consider a default, much less a loss on these securities to be a reasonable possibility as of either January 1, 2022 or March 31, 2022. ● Mortgage-backed securities issued by government sponsored entities (“GSEs”) carry an implicit guarantee by the U.S. Federal Government, as the GSEs can draw funds from the U.S. Federal Government up to a limit, with an implied ability to draw funds beyond the limit. Management did not consider a default, much less a loss on these securities to be a reasonable possibility as of either January 1, 2022 or March 31, 2022. ● Management routinely monitors third party credit grades of the municipal issuers in the Company’s state and political subdivisions portfolio and as of both January 1, 2022 and March 31, 2022 noted that all municipal securities in an unrealized loss position were either investment grade rated or guaranteed. On a quarterly basis management receives financial information from a third-party service related to underlying issuer’s financial stability. In addition, management performs annual reviews of the underlying municipal issuers financial statements in order to evaluate stability and repayment capacity and has noted no concerns with any of the bonds in the Company’s State and Local portfolio. As of both January 1, 2022 and March 31, 2022 management concluded that no reserve was warranted on any of the Company’s municipal securities and the unrealized loss position of each of the securities reflected fluctuations in market conditions, primarily interest rates, since the time of purchase. ● The Company has invested in corporate debt issuances of other financial institutions. Various financial metrics of each of the issuing financial institutions are reviewed by management quarterly, these metrics include credit quality, reserve adequacy, capital, profitability and capital. Following review of the financial metrics available for each of the underlying institutions as of January 1, 2022 and March 31, 2022 management concluded that the unrealized loss position of these securities related exclusively to the fluctuation in market conditions, primarily interest rates, from the date of purchase, and were not reflective of any credit concerns with the issuing financial institution. ● The Company has invested in AA and AAA tranches of various collateralized debt obligations, which are securitizations of commercial loans. Management monitors the credit rating of these investments on a quarterly basis in addition to various performance metrics available through a third-party informational service. Following review of financial metrics as of both January 1, 2022 and March 31, 2022 management concluded that the unrealized loss position of these securities related exclusively to the fluctuation in market conditions, primarily interest rate spreads, from the date of purchase, and were not reflective of any credit concerns with the tranches comprising the Company’s investments. ​ 17 Table of Contents At March 31, 2022 and December 31, 2021, the Company had 568 securities and 98 securities, respectively, with gross unrealized losses. Since the declines in market values were primarily attributable to changes in interest rates and volatility in the financial markets and not a result of an expected credit loss, no allowance for credit losses was recorded as of March 31, 2022. Gross unrealized losses on our investment securities as of the indicated dates are disclosed in the table below, categorized by investment type and by the duration of time that loss positions on individual securities have continuously existed (over or under twelve months). Investment Portfolio - Unrealized Losses (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2022 ​ ​ Less than twelve months ​ Twelve months or more ​ Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value U.S. government agencies ​ $ ( 258 ) ​ $ 7,837 ​ $ — ​ $ — Mortgage-backed securities ​ ​ ( 10,795 ) ​ ​ 245,781 ​ ​ ( 1,086 ) ​ ​ 9,535 State and political subdivisions ​ ​ ( 10,053 ) ​ ​ 172,561 ​ ​ — ​ ​ — Corporate bonds ​ ​ ( 1,396 ) ​ ​ 40,360 ​ ​ — ​ ​ — Collateralized loan obligations ​ ​ ( 4,303 ) ​ ​ 392,438 ​ ​ — ​ ​ — Total ​ $ ( 26,805 ) ​ $ 858,977 ​ $ ( 1,086 ) ​ $ 9,535 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ Less than twelve months ​ Twelve months or more ​ Gross Unrealized Losses Fair Value Gross Unrealized Losses Fair Value U.S. government agencies ​ $ — ​ $ — ​ $ — ​ $ — Mortgage-backed securities ​ ​ ( 1,797 ) ​ ​ 107,026 ​ ​ ( 160 ) ​ ​ 2,808 State and political subdivisions ​ ​ ( 268 ) ​ ​ 30,170 ​ ​ — ​ ​ — Corporate bonds ​ ​ ( 1 ) ​ ​ 499 ​ ​ — ​ ​ — Collateralized loan obligations ​ ​ ( 688 ) ​ ​ 175,581 ​ ​ — ​ ​ — Total ​ $ ( 2,754 ) ​ $ 313,276 ​ $ ( 160 ) ​ $ 2,808 ​ The table below summarizes the Company’s gross realized gains and losses as well as gross proceeds from the sales of securities, for the periods indicated: Investment Portfolio - Realized Gains/(Losses) (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended March 31, ​ 2022 2021 Proceeds from sales, calls and maturities of securities available for sale ​ $ 28,781 ​ $ 1,705 Gross gains on sales, calls and maturities of securities available for sale ​ ​ 1,032 ​ ​ — Gross losses on sales, calls and maturities of securities available for sale ​ ​ — ​ ​ — Net gains on sale of securities available for sale ​ $ 1,032 ​ $ — ​ 18 Table of Contents The amortized cost and estimated fair value of investment securities available-for-sale at March 31, 2022 and December 31, 2021 are shown below, grouped by the remaining time to contractual maturity dates. The expected life of investment securities may not be consistent with contractual maturity dates, since the issuers of the securities might have the right to call or prepay obligations with or without penalties. Estimated Fair Value of Contractual Maturities (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2022 ​ Amortized Cost Fair Value Maturing within one year ​ $ 1,627 ​ $ 1,640 Maturing after one year through five years ​ ​ 11,874 ​ ​ 11,807 Maturing after five years through ten years ​ ​ 79,707 ​ ​ 78,347 Maturing after ten years ​ ​ 256,330 ​ ​ 248,302 Securities not due at a single maturity date: ​ ​ ​ ​ ​ ​ Mortgage-backed securities ​ ​ 303,893 ​ ​ 292,498 Collateralized loan obligations ​ ​ 396,741 ​ ​ 392,438 ​ ​ $ 1,050,172 ​ $ 1,025,032 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ Amortized Cost Fair Value Maturing within one year ​ $ 3,513 ​ $ 3,547 Maturing after one year through five years ​ ​ 26,422 ​ ​ 26,718 Maturing after five years through ten years ​ ​ 36,840 ​ ​ 38,314 Maturing after ten years ​ ​ 253,936 ​ ​ 265,792 Securities not due at a single maturity date: ​ ​ ​ ​ ​ ​ Mortgage-backed securities ​ ​ 303,912 ​ ​ 306,727 Collateralized loan obligations ​ ​ 332,836 ​ ​ 332,216 ​ ​ $ 957,459 ​ $ 973,314 ​ At March 31, 2022, the Company’s investment portfolio included 400 “muni” bonds issued by 334 different government municipalities and agencies located within 33 different states, with an aggregate fair value of $ 286.4 million. The largest exposure to any single municipality or agency was a combined $ 4.0 million (fair value) in general obligation bonds issued by the Alvin Independent School District of Brazoria County (TX). In addition, the Company owned 36 subordinated debentures issued by bank holding companies totaling $ 43.4 million (fair value). The Company’s investments in bonds issued by corporations, states, municipalities and political subdivisions are evaluated in accordance with Financial Institution Letter 48-2012, issued by the FDIC, “Revised Standards of Creditworthiness for Investment Securities,” and other regulatory guidance. Credit ratings are considered in our analysis only as a guide to the historical default rate associated with similarly rated bonds. There have been no significant differences in our internal analyses compared with the ratings assigned by the third-party credit rating agencies. 19 Table of Contents The following table summarizes the amortized cost and fair values of general obligation and revenue bonds in the Company’s investment securities portfolio at the indicated dates, identifying the state in which the issuing municipality or agency operates for our largest geographic concentrations: Revenue and General Obligation Bonds by Location (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2022 ​ December 31, 2021 ​ ​ Amortized ​ Fair Market ​ Amortized ​ Fair Market General obligation bonds Cost Value Cost Value State of issuance ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Texas ​ $ 100,358 ​ $ 98,135 ​ $ 85,045 ​ $ 89,225 California ​ ​ 61,033 ​ ​ 58,612 ​ ​ 64,092 ​ ​ 67,066 Washington ​ ​ 20,407 ​ ​ 20,614 ​ ​ 23,858 ​ ​ 24,812 Other (26 & 26 states, respectively) ​ ​ 74,020 ​ ​ 72,156 ​ ​ 75,037 ​ ​ 78,579 Total general obligation bonds ​ ​ 255,818 ​ ​ 249,517 ​ ​ 248,032 ​ ​ 259,682 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revenue bonds ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ State of issuance ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Texas ​ ​ 5,752 ​ ​ 5,626 ​ ​ 7,038 ​ ​ 7,377 Washington ​ ​ 4,113 ​ ​ 3,973 ​ ​ 1,349 ​ ​ 1,392 California ​ ​ 2,823 ​ ​ 2,659 ​ ​ 4,334 ​ ​ 4,602 Other (15 & 15 states, respectively) ​ ​ 25,571 ​ ​ 24,605 ​ ​ 29,976 ​ ​ 31,215 Total revenue bonds ​ ​ 38,259 ​ ​ 36,863 ​ ​ 42,697 ​ ​ 44,586 Total obligations of states and political subdivisions ​ $ 294,077 ​ $ 286,380 ​ $ 290,729 ​ $ 304,268 ​ The revenue bonds in the Company’s investment securities portfolios were issued by government municipalities and agencies to fund public services such as utilities (water, sewer, and power), educational facilities, and general public and economic improvements. The primary sources of revenue for these bonds are delineated in the table below, which shows the amortized cost and fair market values for the largest revenue concentrations as of the indicated dates. Revenue Bonds by Type (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2022 ​ December 31, 2021 ​ ​ Amortized ​ Fair Market ​ Amortized ​ Fair Market Revenue bonds Cost Value Cost Value Revenue source: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Water ​ $ 14,145 ​ $ 13,581 ​ $ 15,534 ​ $ 16,220 Sewer ​ ​ 5,037 ​ ​ 4,922 ​ ​ 3,932 ​ ​ 4,165 Lease ​ ​ 3,321 ​ ​ 3,263 ​ ​ 6,556 ​ ​ 6,718 Tax revenue ​ ​ 2,205 ​ ​ 1,986 ​ ​ — ​ ​ — Special Tax ​ ​ 2,106 ​ ​ 2,035 ​ ​ 5,514 ​ ​ 5,842 Other (9 and 9 sources, respectively) ​ ​ 13,649 ​ ​ 13,062 ​ ​ 11,161 ​ ​ 11,641 Total revenue bonds ​ $ 38,259 ​ $ 36,863 ​ $ 42,697 ​ $ 44,586 ​ Low-Income Housing Tax Credit (“LIHTC”) Fund Investments The Company has the ability to invest in limited partnerships which own housing projects that qualify for federal and/or California state tax credits, by mandating a specified percentage of low-income tenants for each project. The primary investment return comes from tax credits that flow through to investors. Because rent levels are lower than standard market rents and the projects are generally highly leveraged, each project also typically generates tax-deductible operating losses that are allocated to the limited partners for tax purposes. 20 Table of Contents The Company currently has investments in two different LIHTC fund limited partnerships made in 2014 and 2015, both of which were California-focused funds that help the Company meet its obligations under the Community Reinvestment Act. We utilize the cost method of accounting for our LIHTC fund investments, under which we initially record on our balance sheet an asset that represents the total cash expected to be invested over the life of the partnership. Any commitments or contingent commitments for future investment are reflected as a liability. The income statement reflects tax credits and any other tax benefits from these investments “below the line” within our income tax provision, while the initial book value of the investment is amortized on a straight-line basis as an offset to noninterest income, over the time period in which the tax credits and tax benefits are expected to be received. As of March 31, 2022, our total LIHTC investment book balance was $ 2.8 million, which includes $ 0.1 million in remaining commitments for additional capital contributions. There were $ 0.1 million in tax credits derived from our LIHTC investments that were recognized during the three months ended March 31, 2022, and amortization expense of $ 0.1 million associated with those investments was netted against pre-tax noninterest income for the same time period. Our LIHTC investments are evaluated annually for potential impairment, and we have concluded that the carrying value of the investments is stated fairly and is not impaired. Note 10 – Loans and Leases and Allowance for Credit Losses We adopted the new current expected credit loss accounting guidance, CECL, and all related amendments as of January 1, 2022. Certain prior period credit quality disclosures related to impaired loans and individually and collectively evaluated loans were superseded with the current guidance and have not been included below as of March 31, 2022. Under CECL, disclosures are required on the amortized cost basis, whereas legacy GAAP required presentation on the recorded investment basis, with the primary difference being net deferred fees and costs. Unless specifically noted otherwise, March 31, 2022 disclosures are prepared on the amortized cost basis and December 31, 2021 disclosures present information according to the recorded investment basis. The following table presents loans by class as of March 31, 2022 and December 31, 2021. Accrued interest receivable on loans of $ 6.7 million and $ 6.8 million at March 31, 2022 and December 31, 2021 respectively is not included in the loans included in the table below but is included in other assets on the Company’s balance sheet. The March 31, 2022, balance in 1-4 family closed end loans reflects first quarter 2022 purchase of $ 125.2 million. The majority of the disclosures in this footnote are prepared at the class level which is equivalent to the call report classification or call code classification. The final table in this section separates a rollforward of the Allowance for Credit Losses at the portfolio segment level. ​ 21 Table of Contents ​ ​ ​ ​ ​ ​ ​ Loan And Lease Distribution ​ ​ ​ ​ ​ ​ (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ March 31, 2022 December 31, 2021 Real estate: ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ $ 8,800 ​ $ 21,369 Other construction/land ​ ​ 24,633 ​ ​ 25,299 1-4 family - closed-end ​ ​ 398,871 ​ ​ 289,457 Equity lines ​ ​ 23,389 ​ ​ 26,588 Multi-family residential ​ ​ 59,711 ​ ​ 53,458 Commercial real estate - owner occupied ​ ​ 331,764 ​ ​ 334,446 Commercial real estate - non-owner occupied ​ ​ 857,051 ​ ​ 882,888 Farmland ​ ​ 98,865 ​ ​ 106,706 Total real estate ​ ​ 1,803,084 ​ ​ 1,740,211 Agricultural ​ ​ 31,663 ​ ​ 33,990 Commercial and industrial ​ ​ 87,173 ​ ​ 109,791 Mortgage warehouse lines ​ ​ 57,178 ​ ​ 101,184 Consumer loans ​ ​ 4,233 ​ ​ 4,550 Subtotal ​ ​ 1,983,331 ​ ​ 1,989,726 Less net deferred loan fees and costs ​ ​ ( 1,200 ) ​ ​ ( 1,865 ) Loans and leases, amortized cost basis ​ ​ 1,982,131 ​ ​ 1,987,861 Allowance for credit losses ​ ​ ( 22,530 ) ​ ​ ( 14,256 ) Net loans and leases ​ $ 1,959,601 ​ $ 1,973,605 ​ The following table presents the amortized cost basis of nonaccrual loans, according to loan class, with and without individually evaluated reserves as of March 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonaccrual Loans and Leases ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2022 ​ ​ Nonaccrual Loans ​ ​ ​ ​ With no allowance for credit loss With an allowance for credit loss ​ Total ​ Loans Past Due 90+ Accruing Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ $ — ​ $ — ​ $ — ​ $ — Other construction/land ​ ​ — ​ ​ — ​ ​ — ​ ​ — 1-4 family - closed-end ​ ​ 1,713 ​ ​ — ​ ​ 1,713 ​ ​ — Equity lines ​ ​ 845 ​ ​ — ​ ​ 845 ​ ​ — Multi-family residential ​ ​ — ​ ​ — ​ ​ — ​ ​ — Commercial real estate - owner occupied ​ ​ 399 ​ ​ — ​ ​ 399 ​ ​ — Commercial real estate - non-owner occupied ​ ​ — ​ ​ — ​ ​ — ​ ​ — Farmland ​ ​ 18,449 ​ ​ — ​ ​ 18,449 ​ ​ — Total real estate ​ ​ 21,406 ​ ​ — ​ ​ 21,406 ​ ​ — Agricultural ​ ​ 7,868 ​ ​ 242 ​ ​ 8,110 ​ ​ — Commercial and industrial ​ ​ 627 ​ ​ 285 ​ ​ 912 ​ ​ 19 Mortgage warehouse lines ​ ​ — ​ ​ — ​ ​ — ​ ​ — Consumer loans ​ ​ 18 ​ ​ — ​ ​ 18 ​ ​ — Total ​ $ 29,919 ​ $ 527 ​ $ 30,446 ​ $ 19 ​ ​ 22 Table of Contents The following table presents the impaired loans as of December 31, 2021, according to loan class, with and without an individually evaluated reserve according to the recorded investment basis. Impaired loans as of December 31, 2021 included both nonaccrual loans and performing TDRs. A separate breakout of nonaccrual loans by class as of December 31, 2021 is included in the past due loans table as of December 31, 2021, later in this footnote. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ Unpaid Principal ​ Recorded ​ ​ ​ Average Recorded ​ Interest Income ​ Balance (1) Investment (2) Related Allowance Investment Recognized (3) With an Allowance Recorded ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other construction/land ​ $ 341 ​ $ 341 ​ $ 64 ​ $ 352 ​ $ 55 1-4 family - closed-end ​ ​ 1,048 ​ ​ 1,048 ​ ​ 37 ​ ​ 1,096 ​ ​ 104 Equity lines ​ ​ 2,005 ​ ​ 1,993 ​ ​ 182 ​ ​ 2,056 ​ ​ 138 Commercial real estate - owner occupied ​ ​ 1,249 ​ ​ 1,248 ​ ​ 19 ​ ​ 1,278 ​ ​ 144 Commercial real estate - non-owner occupied ​ ​ 367 ​ ​ 367 ​ ​ 126 ​ ​ 393 ​ ​ 32 Total real estate ​ ​ 5,010 ​ ​ 4,997 ​ ​ 428 ​ ​ 5,175 ​ ​ 473 Agricultural ​ ​ 244 ​ ​ 244 ​ ​ 244 ​ ​ 246 ​ ​ — Commercial and industrial ​ ​ 757 ​ ​ 757 ​ ​ 127 ​ ​ 873 ​ ​ 41 Consumer loans ​ ​ 164 ​ ​ 164 ​ ​ 19 ​ ​ 180 ​ ​ 28 ​ ​ ​ 6,175 ​ ​ 6,162 ​ ​ 818 ​ ​ 6,474 ​ ​ 542 With no Related Allowance Recorded ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family - closed-end ​ ​ 788 ​ ​ 788 ​ ​ — ​ ​ 869 ​ ​ — Equity lines ​ ​ 648 ​ ​ 648 ​ ​ — ​ ​ 690 ​ ​ 6 Commercial real estate - owner occupied ​ ​ 1,353 ​ ​ 1,234 ​ ​ — ​ ​ 1,282 ​ ​ — Total real estate ​ ​ 2,789 ​ ​ 2,670 ​ ​ — ​ ​ 2,841 ​ ​ 6 Agricultural ​ ​ 134 ​ ​ 134 ​ ​ — ​ ​ 186 ​ ​ — Commercial and industrial ​ ​ 466 ​ ​ 466 ​ ​ — ​ ​ 550 ​ ​ — ​ ​ ​ 3,389 ​ ​ 3,270 ​ ​ — ​ ​ 3,577 ​ ​ 6 Total ​ $ 9,564 ​ $ 9,432 ​ $ 818 ​ $ 10,051 ​ $ 548 (1) Contractual principal balance due from customer. (2) Principal balance on Company’s books, less any direct charge offs. (3) Interest income is recognized on performing balances on a regular accrual basis. The Company recognized $ 0 in interest on nonaccrual loans during the first quarter 2022 and would have recognized an additional $ 0.1 million on nonaccrual loans had those loans not been designated as nonaccrual. ​ 23 Table of Contents The following table presents the amortized cost basis of collateral-dependent loans by class as of March 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ Collateral Dependent Loans ​ ​ ​ ​ ​ ​ (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2022 ​ Amortized Cost ​ Individual Reserves Real estate: ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ $ — ​ $ — Other construction/land ​ ​ — ​ ​ — 1-4 family - closed-end ​ ​ 1,487 ​ ​ — Equity lines ​ ​ 712 ​ ​ — Multi-family residential ​ ​ — ​ ​ — Commercial real estate - owner occupied ​ ​ 562 ​ ​ — Commercial real estate - non-owner occupied ​ ​ — ​ ​ — Farmland ​ ​ 18,449 ​ ​ — Total real estate ​ ​ 21,210 ​ ​ — Agricultural ​ ​ 7,868 ​ ​ — Commercial and industrial ​ ​ 613 ​ ​ — Mortgage warehouse lines ​ ​ — ​ ​ — Consumer loans ​ ​ — ​ ​ — Total loans and leases ​ $ 29,691 ​ $ — ​ ​ Absent the significant deterioration of the collateral value of Farmland securing several loans to a single borrower, which were downgraded to non-accrual and collateral dependent during the first quarter of 2022 there were no significant changes in the population of collateral dependent loans, or in the valuations of the related collateral. All of the Company’s collateral dependent loans had appraised collateral values which exceed the amortized cost basis of the related loan as of March 31, 2022, which the company has applied discounts against. The weighted-average loan to value of the Company’s collateral-dependent loans as of March 31, 2022, was 18 %. No collateral-dependent loans were in the process of foreclosure as of March 31, 2022. ​ 24 Table of Contents The following table presents the aging of the amortized cost basis in past-due loans, according to class, as of March 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Past Due Loans and Leases ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2022 ​ 30-59 Days Past Due 60-89 Days Past Due ​ Loans Past Due 90+ Days ​ Total Past Due ​ Loans not Past Due ​ Total Loans Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 8,800 ​ $ 8,800 Other construction/land ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 24,532 ​ ​ 24,532 1-4 family - closed-end ​ ​ 179 ​ ​ — ​ ​ — ​ ​ 179 ​ ​ 399,673 ​ ​ 399,852 Equity lines ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 23,690 ​ ​ 23,690 Multi-family residential ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 59,632 ​ ​ 59,632 Commercial real estate - owner occupied ​ ​ 2,543 ​ ​ — ​ ​ — ​ ​ 2,543 ​ ​ 329,257 ​ ​ 331,800 Commercial real estate - non-owner occupied ​ ​ 189 ​ ​ — ​ ​ — ​ ​ 189 ​ ​ 854,315 ​ ​ 854,504 Farmland ​ ​ 44 ​ ​ — ​ ​ — ​ ​ 44 ​ ​ 98,881 ​ ​ 98,925 Total real estate ​ ​ 2,955 ​ ​ — ​ ​ — ​ ​ 2,955 ​ ​ 1,798,780 ​ ​ 1,801,735 Agricultural ​ ​ — ​ ​ — ​ ​ 259 ​ ​ 259 ​ ​ 31,502 ​ ​ 31,761 Commercial and industrial ​ ​ 10 ​ ​ 14 ​ ​ 320 ​ ​ 344 ​ ​ 86,788 ​ ​ 87,132 Mortgage warehouse lines ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 57,178 ​ ​ 57,178 Consumer loans ​ ​ 12 ​ ​ 5 ​ ​ — ​ ​ 17 ​ ​ 4,308 ​ ​ 4,325 Total loans and leases ​ $ 2,977 ​ $ 19 ​ $ 579 ​ $ 3,575 ​ $ 1,978,556 ​ $ 1,982,131 ​ The following table presents the aging of the recorded investment in past-due and nonaccrual loans, according to class, as of December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ 30-59 Days ​ 60-89 Days ​ 90 Days Or More Past ​ ​ ​ ​ ​ ​ ​ Total Financing ​ Non-Accrual ​ Past Due Past Due Due (2) Total Past Due Current Receivables Loans (1) Real Estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 21,369 ​ $ 21,369 ​ $ — Other construction/land ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 25,299 ​ ​ 25,299 ​ ​ — 1-4 family - closed-end ​ ​ 1,532 ​ ​ 132 ​ ​ — ​ ​ 1,664 ​ ​ 287,793 ​ ​ 289,457 ​ ​ 1,023 Equity lines ​ ​ 30 ​ ​ — ​ ​ — ​ ​ 30 ​ ​ 26,558 ​ ​ 26,588 ​ ​ 892 Multi-family residential ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 53,458 ​ ​ 53,458 ​ ​ — Commercial real estate owner occupied ​ ​ 124 ​ ​ — ​ ​ 698 ​ ​ 822 ​ ​ 333,624 ​ ​ 334,446 ​ ​ 1,234 Commercial real estate non-owner occupied ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 882,888 ​ ​ 882,888 ​ ​ — Farmland ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 106,706 ​ ​ 106,706 ​ ​ — Total real estate loans ​ ​ 1,686 ​ ​ 132 ​ ​ 698 ​ ​ 2,516 ​ ​ 1,737,695 ​ ​ 1,740,211 ​ ​ 3,149 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Agricultural ​ ​ — ​ ​ — ​ ​ 284 ​ ​ 284 ​ ​ 33,706 ​ ​ 33,990 ​ ​ 378 Commercial and industrial ​ ​ 473 ​ ​ — ​ ​ 283 ​ ​ 756 ​ ​ 109,035 ​ ​ 109,791 ​ ​ 973 Mortgage warehouse lines ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 101,184 ​ ​ 101,184 ​ ​ — Consumer loans ​ ​ 6 ​ ​ 3 ​ ​ — ​ ​ 9 ​ ​ 4,541 ​ ​ 4,550 ​ ​ 22 Total gross loans and leases ​ $ 2,165 ​ $ 135 ​ $ 1,265 ​ $ 3,565 ​ $ 1,986,161 ​ $ 1,989,726 ​ $ 4,522 (1) Included in Total Financing Receivables (2) As of December 31, 2021 there were no loans over 90 days past due and still accruing. Troubled Debt Restructurings A loan that is modified for a borrower who is experiencing financial difficulty is classified as a troubled debt restructuring (TDR) if the modification constitutes a concession. At March 31, 2022, the Company had a total of $ 5.6 million in TDRs, including $ 1.0 million in TDRs that were on non-accrual status. Generally, a non-accrual loan that has been modified as a TDR remains on non-accrual status for a period of at least six months to demonstrate the borrower’s ability to comply with the modified terms. However, performance prior to the modification, or significant events that coincide with the modification, could result in a loan’s return to accrual status after a shorter performance period or even 25 Table of Contents at the time of loan modification. Regardless of the period of time that has elapsed, if the borrower’s ability to meet the revised payment schedule is uncertain, then the loan will be kept on non-accrual status. The Company may agree to different types of concessions when modifying a loan or lease. The tables below summarize TDRs which were modified during the noted periods, by type of concession: Troubled Debt Restructurings, by Type of Loan Modification (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended March 31, 2022 ​ Rate Modification Term Modification Interest Only Modification Rate & Term Modification Term & Interest Modification ​ Total Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other construction/land ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — 1-4 family - closed-end ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Equity lines ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Multi-family residential ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Commercial real estate - owner occupied ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Farmland ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total real estate loans ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Agricultural ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Commercial and industrial ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Consumer loans ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended March 31, 2021 ​ Rate Modification Term Modification Interest Only Modification Rate & Term Modification Term & Interest Modification ​ Total Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other construction/land ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — 1-4 family - closed-end ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Equity lines ​ ​ — ​ ​ — ​ ​ — ​ ​ 83 ​ ​ — ​ ​ 83 Multi-family residential ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Commercial real estate - owner occupied ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Farmland ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total real estate loans ​ ​ — ​ ​ — ​ ​ — ​ ​ 83 ​ ​ — ​ ​ 83 Agricultural ​ ​ — ​ ​ 118 ​ ​ — ​ ​ — ​ ​ — ​ ​ 118 Commercial and industrial ​ ​ — ​ ​ 185 ​ ​ — ​ ​ — ​ ​ — ​ ​ 185 Consumer loans ​ ​ — ​ ​ 41 ​ ​ — ​ ​ — ​ ​ — ​ ​ 41 Total ​ $ — ​ $ 344 ​ $ — ​ $ 83 ​ $ — ​ $ 427 ​ ​ 26 Table of Contents Troubled Debt Restructurings (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended March 31, 2022 ​ ​ ​ ​ Pre- Modification ​ Post- Modification ​ ​ ​ ​ ​ Number of Loans Outstanding Recorded Investment Outstanding Recorded Investment Reserve Difference ⁽ ¹ ⁾ Reserve Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other construction/land ​ 0 ​ $ — ​ $ — ​ $ — ​ $ — 1-4 family - closed-end ​ 0 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Equity lines ​ 0 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Multi-family residential ​ 0 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Commercial real estate - owner occupied ​ 0 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Farmland ​ 0 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total real estate loans ​ ​ ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Agricultural ​ 0 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Commercial and industrial ​ 0 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Consumer loans ​ 0 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total ​ ​ ​ $ — ​ $ — ​ $ — ​ $ — (1) This represents the change in the ACL reserve for these credits measured as the difference between the specific post-modification impairment reserve and the pre-modification reserve calculated under our general allowance for loan loss methodology. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended March 31, 2021 ​ ​ ​ ​ Pre- Modification ​ Post- Modification ​ ​ ​ ​ ​ ​ ​ Number of Loans Outstanding Recorded Investment Outstanding Recorded Investment Reserve Difference ⁽ ¹ ⁾ Reserve Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other construction/land ​ 0 ​ $ — ​ $ — ​ $ — ​ $ — 1-4 family - closed-end ​ 0 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Equity lines ​ 1 ​ ​ 83 ​ ​ 83 ​ ​ — ​ ​ 1 Multi-family residential ​ 0 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Commercial real estate - owner occupied ​ 0 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Farmland ​ 0 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Total real estate loans ​ ​ ​ ​ 83 ​ ​ 83 ​ ​ — ​ ​ 1 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Agricultural ​ 1 ​ ​ 118 ​ ​ 118 ​ ​ 116 ​ ​ 111 Commercial and industrial ​ 1 ​ ​ 185 ​ ​ 185 ​ ​ ( 1 ) ​ ​ 48 Consumer loans ​ 1 ​ ​ 41 ​ ​ 41 ​ ​ — ​ ​ — Total ​ ​ ​ $ 427 ​ $ 427 ​ $ 115 ​ $ 160 (1) This represents the change in the ACL reserve for these credits measured as the difference between the specific post-modification impairment reserve and the pre-modification reserve calculated under our general allowance for loan loss methodology. ​ 27 Table of Contents The Company had no finance receivables modified as TDRs within the previous twelve months that defaulted or were charged off during the three-month period ending March 31, 2022 and 2021. The Company monitors the credit quality of loans on a continuous basis using the regulatory and accounting classifications of pass, special mention and substandard to characterize and qualify the associated credit risk. Loans classified as “loss” are immediately charged-off. The Company uses the following definitions of risk classifications: Pass – Loans listed as pass include larger non-homogeneous loans not meeting the risk rating definitions below and smaller, homogeneous loans not assessed on an individual basis. Special Mention – Loans classified as special mention have the potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Substandard – Loans classified as substandard are those loans with clear and well-defined weaknesses such as a highly leveraged position, unfavorable financial operating results and/or trends, or uncertain repayment sources or poor financial condition, which may jeopardize ultimate recoverability of the debt. ​ The following tables present the amortized cost of loans and leases by credit quality classification in addition to loan and lease vintage as of March 31, 2022: ​ 28 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loan and Lease Credit Quality by Vintage ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Term Loans and Loans Amortized Cost Basis by Origination Year ​ ​ ​ ​ ​ ​ ​ ​ 2022 ​ 2021 ​ 2020 ​ 2019 ​ 2018 ​ Prior ​ Revolving Loans Amortized Cost ​ Total Loans 1-4 family construction ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ $ ​ ​ $ — ​ $ — ​ $ — ​ $ — ​ $ — ​ $ 8,800 ​ $ 8,800 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Subtotal ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 8,800 ​ ​ 8,800 Other construction/land ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ — ​ ​ 3,617 ​ ​ 4,395 ​ ​ 798 ​ ​ 1,087 ​ ​ 1,306 ​ ​ 13,253 ​ ​ 24,456 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Substandard ​ ​ — ​ ​ — ​ ​ 76 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 76 Subtotal ​ ​ — ​ ​ 3,617 ​ ​ 4,471 ​ ​ 798 ​ ​ 1,087 ​ ​ 1,306 ​ ​ 13,253 ​ ​ 24,532 1-4 family - closed-end ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 66,654 ​ ​ 253,394 ​ ​ 8,104 ​ ​ 2,112 ​ ​ 12,057 ​ ​ 52,248 ​ ​ — ​ ​ 394,569 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,022 ​ ​ 2,116 ​ ​ — ​ ​ 3,138 Substandard ​ ​ — ​ ​ 869 ​ ​ — ​ ​ — ​ ​ 33 ​ ​ 1,243 ​ ​ — ​ ​ 2,145 Subtotal ​ ​ 66,654 ​ ​ 254,263 ​ ​ 8,104 ​ ​ 2,112 ​ ​ 13,112 ​ ​ 55,607 ​ ​ — ​ ​ 399,852 Equity lines ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ — ​ ​ 91 ​ ​ 587 ​ ​ 376 ​ ​ 81 ​ ​ — ​ ​ 20,990 ​ ​ 22,125 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 468 ​ ​ 468 Substandard ​ ​ — ​ ​ 122 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 975 ​ ​ 1,097 Subtotal ​ ​ — ​ ​ 213 ​ ​ 587 ​ ​ 376 ​ ​ 81 ​ ​ — ​ ​ 22,433 ​ ​ 23,690 Multi-family residential ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 6,589 ​ ​ 525 ​ ​ 12,099 ​ ​ 5,014 ​ ​ 13,297 ​ ​ 12,919 ​ ​ 5,754 ​ ​ 56,197 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 3,435 ​ ​ — ​ ​ 3,435 Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Subtotal ​ ​ 6,589 ​ ​ 525 ​ ​ 12,099 ​ ​ 5,014 ​ ​ 13,297 ​ ​ 16,354 ​ ​ 5,754 ​ ​ 59,632 Commercial real estate - OO ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 5,305 ​ ​ 26,484 ​ ​ 75,109 ​ ​ 38,895 ​ ​ 39,813 ​ ​ 128,482 ​ ​ 8,230 ​ ​ 322,318 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ 2,057 ​ ​ — ​ ​ 2,790 ​ ​ — ​ ​ 4,847 Substandard ​ ​ 343 ​ ​ — ​ ​ — ​ ​ — ​ ​ 80 ​ ​ 3,450 ​ ​ 762 ​ ​ 4,635 Subtotal ​ ​ 5,648 ​ ​ 26,484 ​ ​ 75,109 ​ ​ 40,952 ​ ​ 39,893 ​ ​ 134,722 ​ ​ 8,992 ​ ​ 331,800 Commercial real estate - NOO ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 9,456 ​ ​ 19,831 ​ ​ 488,558 ​ ​ 27,003 ​ ​ 58,415 ​ ​ 173,452 ​ ​ 33,369 ​ ​ 810,084 Special Mention ​ ​ — ​ ​ — ​ ​ 16,432 ​ ​ — ​ ​ 7,277 ​ ​ 3,652 ​ ​ 2,710 ​ ​ 30,071 Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 852 ​ ​ 13,175 ​ ​ 322 ​ ​ 14,349 Subtotal ​ ​ 9,456 ​ ​ 19,831 ​ ​ 504,990 ​ ​ 27,003 ​ ​ 66,544 ​ ​ 190,279 ​ ​ 36,401 ​ ​ 854,504 Farmland ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ — ​ ​ 1,386 ​ ​ 5,042 ​ ​ 2,060 ​ ​ 8,318 ​ ​ 31,618 ​ ​ 17,364 ​ ​ 65,788 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 7,150 ​ ​ 3,857 ​ ​ 548 ​ ​ 11,555 Substandard ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 4,722 ​ ​ 16,860 ​ ​ — ​ ​ 21,582 Subtotal ​ ​ — ​ ​ 1,386 ​ ​ 5,042 ​ ​ 2,060 ​ ​ 20,190 ​ ​ 52,335 ​ ​ 17,912 ​ ​ 98,925 Agricultural ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 273 ​ ​ 3,180 ​ ​ 481 ​ ​ 34 ​ ​ 1,092 ​ ​ 6,990 ​ ​ 9,585 ​ ​ 21,635 Special Mention ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 939 ​ ​ 939 Substandard ​ ​ — ​ ​ 8,607 ​ ​ — ​ ​ — ​ ​ — ​ ​ 16 ​ ​ 564 ​ ​ 9,187 Subtotal ​ ​ 273 ​ ​ 11,787 ​ ​ 481 ​ ​ 34 ​ ​ 1,092 ​ ​ 7,006 ​ ​ 11,088 ​ ​ 31,761 Commercial and industrial ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 1,414 ​ ​ 18,261 ​ ​ 8,686 ​ ​ 7,372 ​ ​ 6,129 ​ ​ 11,558 ​ ​ 23,261 ​ ​ 76,681 Special Mention ​ ​ — ​ ​ 242 ​ ​ 3,245 ​ ​ 142 ​ ​ — ​ ​ 1,760 ​ ​ 3,952 ​ ​ 9,341 Substandard ​ ​ — ​ ​ — ​ ​ 48 ​ ​ 161 ​ ​ 102 ​ ​ 721 ​ ​ 78 ​ ​ 1,110 Subtotal ​ ​ 1,414 ​ ​ 18,503 ​ ​ 11,979 ​ ​ 7,675 ​ ​ 6,231 ​ ​ 14,039 ​ ​ 27,291 ​ ​ 87,132 Mortgage warehouse lines ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 57,178 ​ ​ 57,178 Subtotal ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ 57,178 ​ ​ 57,178 Consumer loans ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass ​ ​ 604 ​ ​ 340 ​ ​ 212 ​ ​ 337 ​ ​ 26 ​ ​ 491 ​ ​ 2,250 ​ ​ 4,260 Special Mention ​ ​ — ​ ​ 9 ​ ​ 26 ​ ​ — ​ ​ 2 ​ ​ 2 ​ ​ 8 ​ ​ 47 Substandard ​ ​ — ​ ​ — ​ ​ 17 ​ ​ — ​ ​ — ​ ​ 1 ​ ​ — ​ ​ 18 Subtotal ​ ​ 604 ​ ​ 349 ​ ​ 255 ​ ​ 337 ​ ​ 28 ​ ​ 494 ​ ​ 2,258 ​ ​ 4,325 Total ​ $ 90,638 ​ $ 336,958 ​ $ 623,117 ​ $ 86,361 ​ $ 161,555 ​ $ 472,142 ​ $ 211,360 ​ $ 1,982,131 ​ 29 Table of Contents The following table presents the Company’s loan portfolio on the recorded investment basis, according to loan class and credit grade as of December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Pass Special Mention Substandard Impaired Total Real estate: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 family residential construction ​ $ 19,669 ​ $ 1,700 ​ $ — ​ $ — ​ $ 21,369 Other construction/land ​ ​ 24,958 ​ ​ — ​ ​ — ​ ​ 341 ​ ​ 25,299 1-4 family - closed-end ​ ​ 282,717 ​ ​ 4,703 ​ ​ 201 ​ ​ 1,836 ​ ​ 289,457 Equity lines ​ ​ 23,277 ​ ​ 615 ​ ​ 55 ​ ​ 2,641 ​ ​ 26,588 Multi-family residential ​ ​ 49,986 ​ ​ 3,472 ​ ​ — ​ ​ — ​ ​ 53,458 Commercial real estate owner occupied ​ ​ 321,996 ​ ​ 6,108 ​ ​ 3,860 ​ ​ 2,482 ​ ​ 334,446 Commercial real estate non-owner occupied ​ ​ 841,728 ​ ​ 26,364 ​ ​ 14,429 ​ ​ 367 ​ ​ 882,888 Farmland ​ ​ 92,479 ​ ​ 10,266 ​ ​ 3,961 ​ ​ — ​ ​ 106,706 Total real estate ​ ​ 1,656,810 ​ ​ 53,228 ​ ​ 22,506 ​ ​ 7,667 ​ ​ 1,740,211 Agricultural ​ ​ 32,513 ​ ​ — ​ ​ 1,099 ​ ​ 378 ​ ​ 33,990 Commercial and industrial ​ ​ 98,367 ​ ​ 9,989 ​ ​ 212 ​ ​ 1,223 ​ ​ 109,791 Mortgage warehouse lines ​ ​ 101,184 ​ ​ — ​ ​ — ​ ​ — ​ ​ 101,184 Consumer loans ​ ​ 4,349 ​ ​ 31 ​ ​ 6 ​ ​ 164 ​ ​ 4,550 Total gross loans and leases ​ $ 1,893,223 ​ $ 63,248 ​ $ 23,823 ​ $ 9,432 ​ $ 1,989,726 ​ CECL replaces the legacy accounting for loans designated as purchased credit impaired (“PCI”) with loans designated as purchased credit deteriorated (“PCD”). PCD loans are loans acquired or purchased, which as of acquisition, had evidence of more than insignificant credit deterioration since origination. Due to the immaterial balance in the Company’s PCI loans as of December 31, 2021 management elected not to transition these loans into the PCD designation. As of March 31, 2022 the Company had no loans categorized as PCD. As noted in footnote 3, on January 1, 2022 the Company implemented CECL and increased our ACL, previously the allowance for loan and lease losses, with a $ 9.5 million cumulative adjustment. The Company’s ACL is calculated quarterly, with any difference in the calculated ACL and the recorded ACL trued-up through an entry to the provision for credit losses. Management calculates the quantitative portion of collectively evaluated reserves for all loan categories, with the exception of Farmland, Agricultural Production and Consumer loans, using a discounted cash flow (“DCF”) methodology. For purposes of calculating the quantitative portion of collectively evaluated reserves on Farmland, Agricultural Production, and Consumer categories a Remaining Life methodology is utilized. For purposes of estimating the Company’s ACL, Management generally evaluates collectively evaluated loans by Federal Call code in order to group loans with similar risk characteristics together, however management has grouped loans in selected call codes together in determining portfolio segments, due to similar risk characteristics and reserve methodologies used for certain call code classifications. The DCF quantitative reserve methodology incorporates the consideration of probability of default (“PD”) and loss given default (“LGD”) estimates to estimate periodic losses. The PD estimates are derived through the application of reasonable and supportable economic forecasts to call code specific regression models, derived from the consideration of historical bank-specific and peer loss-rate data. The loss rate data has been regressed against benchmark economic indicators, for which reasonable and supportable forecasts exist, in the development of the call-code specific regression models. Regression models are refreshed on an annual basis, in order to pull in more recent loss rate data. Reasonable and supportable forecasts of the selected economic metric are then input into the regression model to calculate an expected default rate. The expected default rates are then applied to expected monthly loan balances estimated through the consideration of contractual repayment terms and expected prepayments. The Company utilizes a four-quarter forecast period, after which the expected default rates revert to the historical average for each call code, over a four-quarter reversion period, on a straight-line basis. The prepayment assumptions applied to expected cash flows over the contractual life of the loans, are based on Bank specific prepayment history, specific to each call code, and subject to update on an annual basis. LGD utilized in the DCF is derived from the application of the Frye-Jacobs theory which 30 Table of Contents relates LGD to PD based on historical peer data, as calculated by a third-party. Economic forecasts are considered over a four-quarter forecast period, with reversion to mean occurring on a straight-line basis over four quarters. The call code regression models utilized upon implementation of CECL on January 1, 2022, and as of March 31, 2022, were identical, and relied upon reasonable and supportable forecasts of the National Unemployment Rate. Management selected the National Unemployment Rate as the driver of quantitative portion of collectively reserves on loan classes reliant upon the DCF methodology, primarily as a result of high correlation coefficients identified in regression modeling, the availability of forecasts including the quarterly FOMC forecast, and given the widespread familiarity of stakeholders with this economic metric. The quantitative reserves for Farmland, Agricultural Production and Consumer loans are calculated using a Remaining Life methodology where average historical bank specific and peer loss rates are applied to expected loan balances over an estimated remaining life of loans in calculation of the quantitative portion of collectively evaluated loans in these classes. The estimated remaining life is calculated using historical bank-specific loan attrition data. For the Farmland, Agricultural Production and Consumer classes of loans, reasonable and supportable forecasts of the National Unemployment rate, real GDP and the housing price index are considered through estimation of qualitative reserves. Management recognizes that there are additional factors impacting risk of loss in the loan portfolio beyond what is captured in the quantitative portion of reserves on collectively evaluated loans. As current and expected conditions, may vary compared with conditions over the historical lookback period, which is utilized in the calculation of quantitative reserves, management considers whether additional or reduced reserve levels on collectively evaluated loans may be warranted given the consideration of a variety of qualitative factors. Several of the following qualitative factors (“Q-factors”) considered by management reflect the legacy regulatory guidance on Q-factors, whereas several others represent factors unique to the Company or unique to the current time period. ● Changes in lending policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices ● Changes in international, regional and local economic and business conditions, and developments that affect the collectability of the portfolio, as reflected in forecasts of the Housing Price Index, Real GDP and the National Unemployment Rate (Farmland & Agricultural Production and Consumer segments only) ● Changes in the nature and volume of the loan portfolio ● Changes in the experience, ability, and depth of lending management and other relevant staff ● Changes in the volume and severity of past due, non-accruals loans, and adversely classified loans, as reflected in changes of the relative level of loans classified as substandard and special mention ● Changes in the quality of the Bank’s loan review processes ● Changes in the value of underlying collateral for loans not identified as collateral dependent ● Changes in loan categorization concentrations ● Other external factors, which include, the influence of peer data on estimated quantitative reserves, residual COVID-19 related risk, impact of government stimulus, reliance on the National Unemployment rate as opposed to the California unemployment rate in the calculation of quantitative reserves, the expected impact of fluctuations in interest rate levels on the life of the Company’s loans The qualitative portion of the Company’s reserves on collectively evaluated loans are calculated using a combination of numeric frameworks and management judgement, to determine risk categorizations in each of the Q-factors presented above. The amount of qualitative reserves is also contingent upon the historical peer, life-of-loan-equivalent, loss rate ranges and the relative weighting of Q-factors according to management’s judgement. Although collectively evaluated reserves are generally calculated separately at the call code or loan class level, management has grouped loan classes with similar risk characteristics into the following portfolio segments: 1-4 Family Real Estate, Commercial Real Estate, Farmland & Agricultural Production, Commercial & Industrial, Mortgage Warehouse and Consumer loans. Loans secured by 1-4 family residences have a different profile from loans secured by Commercial Real Estate. Generally, the borrowers for 1-4 Family loans are consumers whereas borrowers for Commercial Real Estate are often businesses. The COVID-19 pandemic illustrated how these different categories of real estate loans were subject to different risks, which was exacerbated by the widespread work-from-home model adopted by many companies during and since the pandemic. Farmland and Agricultural Production loans are included in a single 31 Table of Contents segment as these loans are often times to the same borrowers, facing the same risks relating to commodity prices, water supply and drought conditions in addition to other environmental concerns. Commercial & Industrial loans are separated into a unique segment given the uniqueness of these loans, which are often revolving and secured by other business assets as opposed to real estate. Mortgage warehouse loans are also unique in the Company’s portfolio and warrant separate presentation as an individual portfolio segment, given the specific nature of these constantly revolving lines to mortgage originators and also attributable to a very limited loss history, even after consideration of peer data. Finally, the Company splits out Consumer loans as a separate segment as a result of the small balance, homogeneous terms that characterize these loans. Management individually evaluates loans that do not share risk characteristics with other loans when estimating reserves. As of March 31, 2022, the only loans that Management considered to have different risk characteristics from other loans sharing the same Federal Call Report code were loans designated nonaccrual. ​ The following table presents the activity in the allowance for credit losses by portfolio segment for the quarter ended March 31, 2022: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Allowance for Credit Losses and Recorded Investment in Financing Receivables ​ ​ ​ (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 1-4 Family Real Estate ​ Commercial Real Estate Farmland & Agricultural Production Commercial & Industrial ​ Mortgage Warehouse Consumer Total Allowance for credit losses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance, December 31, 2021 ​ $ 1,909 ​ $ 9,052 ​ $ 1,202 ​ $ 1,060 ​ $ 512 ​ $ 521 ​ $ 14,256 Impact of adopting ASC 326 ​ ​ 611 ​ ​ 9,628 ​ ​ ( 480 ) ​ ​ 358 ​ ​ ( 421 ) ​ ​ ( 242 ) ​ ​ 9,454 Charge-offs ​ ​ — ​ ​ — ​ ​ ( 1,958 ) ​ ​ ( 74 ) ​ ​ — ​ ​ ( 299 ) ​ ​ ( 2,331 ) Recoveries ​ ​ 87 ​ ​ 260 ​ ​ — ​ ​ 20 ​ ​ — ​ ​ 184 ​ ​ 551 Provision for credit losses ​ ​ 722 ​ ​ ( 1,897 ) ​ ​ 1,842 ​ ​ ( 133 ) ​ ​ ( 40 ) ​ ​ 106 ​ ​ 600 Ending allowance balance: ​ $ 3,329 ​ $ 17,043 ​ $ 606 ​ $ 1,231 ​ $ 51 ​ $ 270 ​ $ 22,530 ​ The $ 1.2 million reduction in the Company’s Loan Portfolio ACL in the first quarter, from $ 23.7 million upon implementation on January 1, 2022 and $ 22.5 million as of March 31, 2022 primarily reflects a narrowing of the gap between the current and expected California unemployment rate and the National unemployment rate as of March 31, 2022 compared with December 31, 2021. The charge-offs of $ 2.0 million in the Farmland & Agricultural Production segment during the first quarter 2022 reflects a change in the expected valuation of collateral on a single loan relationship. Management considers this charge-off to be a unique circumstance and not indicative of an increased level of risk in the Farmland & Agricultural Production segment. ​ 32 Table of Contents The following table presents the activity in the allowance for loan losses by portfolio segment for the quarter ended March 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three months ended March 31, 2021 ​ Real Estate Agricultural Products Commercial and Industrial (1) Consumer Unallocated Total Allowance for credit losses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Beginning balance ​ $ 11,766 $ 482 $ 4,721 $ 720 $ 49 ​ $ 17,738 Charge-offs ​ ​ ( 233 ) ​ ​ — ​ ​ ( 52 ) ​ ​ ( 163 ) ​ ​ — ​ ​ ( 448 ) Recoveries ​ ​ 453 ​ ​ — ​ ​ 110 ​ ​ 216 ​ ​ — ​ ​ 779 Provision ​ ​ 820 ​ ​ 190 ​ ​ ( 574 ) ​ ​ ( 180 ) ​ ​ ( 6 ) ​ ​ 250 Ending balance ​ $ 12,806 ​ $ 672 ​ $ 4,205 ​ $ 593 ​ $ 43 ​ $ 18,319 Reserves: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Specific ​ $ 398 ​ $ 361 ​ $ 409 ​ $ 17 ​ $ — ​ $ 1,185 General ​ ​ 12,408 ​ ​ 311 ​ ​ 3,796 ​ ​ 576 ​ ​ 43 ​ ​ 17,134 Ending balance ​ $ 12,806 ​ $ 672 ​ $ 4,205 ​ $ 593 ​ $ 43 ​ $ 18,319 Loans evaluated for impairment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Individually ​ $ 16,611 ​ $ 467 ​ $ 1,898 ​ $ 219 ​ $ — ​ $ 19,195 Collectively ​ ​ 1,849,655 ​ ​ 45,009 ​ ​ 369,804 ​ ​ 4,805 ​ ​ — ​ ​ 2,269,273 Ending balance ​ $ 1,866,266 ​ $ 45,476 ​ $ 371,702 ​ $ 5,024 ​ $ — ​ $ 2,288,468 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Note 11 – Long-Term Debt Long-Term Debt (dollars in thousands, unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ March 31, 2022 ​ December 31, 2021 ​ ​ ​ ​ Unamortized ​ ​ ​ Unamortized ​ ​ ​ ​ Debt Issuance ​ ​ ​ Debt Issuance ​ Principal Costs Principal Costs Fixed - floating rate subordinated debentures, due 2031 (1) $ 50,000 $ ( 849 ) $ 50,000 $ ( 859 ) Total long-term debt ​ $ 50,000 ​ $ ( 849 ) ​ $ 50,000 ​ $ ( 859 ) (1) 3.25 % fixed rate for five years, then floating rate beginning October 1, 2026 at 253.5 basis points over 3-month term SOFR adjusted quarterly . ​ Note 12 – Revenue Recognition The Company utilizes the guidance found in ASU 2014-09, Revenue from Contracts with Customers (ASC 606), when accounting for certain noninterest income. The core principle of this guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Sufficient information should be provided to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The Company’s revenue streams that are within the scope of and accounted for under Topic 606 include service charges on deposit accounts, debit card interchange fees, and fees levied for other services the Company provides its customers. The guidance does not apply to revenue associated with financial instruments such as loans and investments, and other noninterest income such as loan servicing fees and earnings on bank-owned life insurance, which are accounted for on an accrual basis under other provisions of GAAP. 33 Table of Contents All of the Company’s revenue from contracts within the scope of ASC 606 is recognized as noninterest income, except for gains on the sale of OREO which is classified as noninterest expense. The following table presents the Company’s sources of noninterest income for the three-month periods ended March 31, 2022 and 2021. Items outside the scope of ASC 606 are noted as such (dollars in thousands, unaudited). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the three months ended March 31, ​ 2022 2021 Noninterest income ​ ​ ​ ​ ​ ​ Service charges on deposits ​ ​ ​ ​ ​ ​ Returned item and overdraft fees $ 1,328 $ 1,105 Other service charges on deposits ​ ​ 1,712 ​ ​ 1,662 Debit card interchange income ​ ​ 2,056 ​ ​ 1,894 Loss on limited partnerships (1) ​ ​ ( 113 ) ​ ​ ( 133 ) Dividends on equity investments (1) ​ ​ 246 ​ ​ 192 Unrealized gains recognized on equity investments (1) ​ ​ ( 332 ) ​ ​ 857 Net gains on sale of securities (1) ​ ​ 1,032 ​ ​ — Other (1) ​ ​ 134 ​ ​ 1,253 Total noninterest income ​ $ 6,063 ​ $ 6,830 ​ ​ ​ ​ ​ ​ ​ Noninterest expense ​ ​ ​ ​ ​ ​ Salaries and employee benefits (1) ​ $ 11,805 ​ $ 11,151 Occupancy expense (1) ​ ​ 2,294 ​ ​ 2,486 (Gain) loss on sale of OREO ​ ​ ( 5 ) ​ ​ ( 15 ) Other (1) ​ ​ 6,079 ​ ​ 6,649 Total noninterest expense ​ $ 20,173 ​ $ 20,271 Percentage of noninterest revenue not within scope of ASC 606. ​ ​ 15.95 % ​ ​ 31.76 % ​ (1) Not within scope of ASC 606. Revenue streams are not related to contract with customers and are accounted for on an accrual basis under other provisions of GAAP. ​ With regard to noninterest income associated with customer contracts, the Company has determined that transaction prices are fixed, and performance obligations are satisfied as services are rendered, thus there is little or no judgment involved in the timing of revenue recognition under contracts that are within the scope of ASC 606. ​ ​ ​ 34 Table of Contents PART I - FINANCIAL INFORMATION