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Portfolio Loans | 3 Months Ended
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Mar. 31, 2023
Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract] |
Portfolio Loans | Portfolio Loans Loan Categories The Company’s lending can be summarized in two primary categories: commercial and retail. Lending is further classified into five primary areas of loans: commercial loans, commercial real estate loans, real estate construction loans, retail real estate loans, and retail other loans. Distributions of the loan portfolio by loan category and class is presented in the following table (dollars in thousands):
| As of
| March 31, 2023 |  | December 31, 2022
Commercial loans |  |  |
Commercial | $ | 1,937,158 |  |  | $ | 1,974,154 |
Commercial real estate | 3,324,536 |  |  | 3,261,873 |
Real estate construction | 554,009 |  |  | 530,469 |
Total commercial loans | 5,815,703 |  |  | 5,766,496 |
Retail loans |  |  |
Retail real estate | 1,667,537 |  |  | 1,657,082 |
Retail other | 300,568 |  |  | 302,124 |
Total retail loans | 1,968,105 |  |  | 1,959,206 |
Total portfolio loans | 7,783,808 |  |  | 7,725,702 |
ACL | (91,727) |  |  | (91,608) |
Portfolio loans, net | $ | 7,692,081 |  |  | $ | 7,634,094 |
Net deferred loan origination costs included in the balances above were $13.7 million as of March 31, 2023, compared to $14.0 million as of December 31, 2022. Net accretable purchase accounting adjustments included in the balances above reduced loans by $5.5 million as of March 31, 2023, and $5.9 million as of December 31, 2022. Commercial balances include loans originated under the PPP with an amortized cost of $0.8 million as of both March 31, 2023, and December 31, 2022. The Company did not purchase any retail real estate loans during the three months ended March 31, 2023, or 2022. Pledged Loans The Company had loans pledged to the FHLB and Federal Reserve for liquidity as set forth in the table below (dollars in thousands):
| As of
| March 31, 2023 |  | December 31, 2022
Pledged loans |  |  |
FHLB | $ | 5,065,913 |  |  | $ | 5,095,448 |
Federal Reserve Bank | 825,410 |  |  | 804,718 |
Total pledged loans | $ | 5,891,323 |  |  | $ | 5,900,166 |
Risk Grading The Company utilizes a loan grading scale to assign a risk grade to all of its loans. A description of the general characteristics of each grade is as follows: •Pass – This category includes loans that are all considered acceptable credits, ranging from investment or near investment grade, to loans made to borrowers who exhibit credit fundamentals that meet or exceed industry standards. •Watch – This category includes loans that warrant a higher-than-average level of monitoring to ensure that weaknesses do not cause the inability of the credit to perform as expected. These loans are not necessarily a problem due to other inherent strengths of the credit, such as guarantor strength, but have above average concern and monitoring. •Special mention – This category is for “Other Assets Specially Mentioned” loans that have potential weaknesses, which may, if not checked or corrected, weaken the asset or inadequately protect the Company’s credit position at some future date. •Substandard – This category includes “Substandard” loans, determined in accordance with regulatory guidelines, for which the accrual of interest has not been stopped. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. •Substandard non-accrual – This category includes loans that have all the characteristics of a “Substandard” loan with additional factors that make collection in full highly questionable and improbable. Such loans are placed on non-accrual status and may be dependent on collateral with a value that is difficult to determine. All loans are graded at their inception. Commercial lending relationships that are $1.0 million or less are usually processed through an expedited underwriting process. Most commercial loans greater than $1.0 million are included in a portfolio review at least annually. Commercial loans greater than $0.35 million that have a grading of special mention or worse are typically reviewed on a quarterly basis. Interim reviews may take place if circumstances of the borrower warrant a more frequent review. The following table is a summary of risk grades segregated by category and class of portfolio loans (dollars in thousands):
| As of March 31, 2023
| Pass |  | Watch |  | Special Mention |  | Substandard |  | Substandard Non-accrual |  | Total
Commercial loans |  |  |  |  |  |  |  |  |  |  |
Commercial | $ | 1,624,656 |  |  | $ | 208,613 |  |  | $ | 42,827 |  |  | $ | 55,652 |  |  | $ | 5,410 |  |  | $ | 1,937,158 |
Commercial real estate | 2,888,970 |  |  | 362,187 |  |  | 43,195 |  |  | 24,623 |  |  | 5,561 |  |  | 3,324,536 |
Real estate construction | 531,786 |  |  | 16,819 |  |  | — |  |  | 5,404 |  |  | — |  |  | 554,009 |
Total commercial loans | 5,045,412 |  |  | 587,619 |  |  | 86,022 |  |  | 85,679 |  |  | 10,971 |  |  | 5,815,703 |
Retail loans |  |  |  |  |  |  |  |  |  |  |
Retail real estate | 1,649,407 |  |  | 11,722 |  |  | 503 |  |  | 2,206 |  |  | 3,699 |  |  | 1,667,537 |
Retail other | 300,524 |  |  | — |  |  | — |  |  | — |  |  | 44 |  |  | 300,568 |
Total retail loans | 1,949,931 |  | 1,949,931 |  | 11,722 |  |  | 503 |  |  | 2,206 |  |  | 3,743 |  |  | 1,968,105 |
Total portfolio loans | $ | 6,995,343 |  |  | $ | 599,341 |  |  | $ | 86,525 |  |  | $ | 87,885 |  |  | $ | 14,714 |  |  | $ | 7,783,808 |
| As of December 31, 2022
| Pass |  | Watch |  | Special Mention |  | Substandard |  | Substandard Non-accrual |  | Total
Commercial loans |  |  |  |  |  |  |  |  |  |  |
Commercial | $ | 1,668,495 |  |  | $ | 201,758 |  |  | $ | 46,540 |  |  | $ | 51,187 |  |  | $ | 6,174 |  |  | $ | 1,974,154 |
Commercial real estate | 2,851,709 |  |  | 326,455 |  |  | 43,526 |  |  | 34,539 |  |  | 5,644 |  |  | 3,261,873 |
Real estate construction | 502,904 |  |  | 25,164 |  |  | 1 |  |  | 2,400 |  |  | — |  |  | 530,469 |
Total commercial loans | 5,023,108 |  |  | 553,377 |  |  | 90,067 |  |  | 88,126 |  |  | 11,818 |  |  | 5,766,496 |
Retail loans |  |  |  |  |  |  |  |  |  |  |
Retail real estate | 1,639,599 |  |  | 10,520 |  |  | 1,338 |  |  | 2,529 |  |  | 3,096 |  |  | 1,657,082 |
Retail other | 301,971 |  |  | — |  |  | — |  |  | — |  |  | 153 |  |  | 302,124 |
Total retail loans | 1,941,570 |  | 1,941,570 |  | 10,520 |  |  | 1,338 |  |  | 2,529 |  |  | 3,249 |  |  | 1,959,206 |
Total portfolio loans | $ | 6,964,678 |  |  | $ | 563,897 |  |  | $ | 91,405 |  |  | $ | 90,655 |  |  | $ | 15,067 |  |  | $ | 7,725,702 |
Risk grades of portfolio loans and net charge-offs are presented in the tables below by loan class, further sorted by origination year (dollars in thousands):
|  | As of and For The Three Months Ended March 31, 2023
|  | Term Loans Amortized Cost Basis by Origination Year |  | Revolving Loans |  | Total
Risk Grade Ratings |  | 2023 |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | Prior |  |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 193,301 |  |  | $ | 326,112 |  |  | $ | 237,528 |  |  | $ | 130,503 |  |  | $ | 45,737 |  |  | $ | 152,200 |  |  | $ | 539,275 |  |  | $ | 1,624,656 |
Watch |  | 19,141 |  |  | 44,289 |  |  | 47,474 |  |  | 2,758 |  |  | 6,384 |  |  | 5,162 |  |  | 83,405 |  |  | 208,613 |
Special Mention |  | — |  |  | 1,682 |  |  | 2,811 |  |  | 1,340 |  |  | 652 |  |  | 17,343 |  |  | 18,999 |  |  | 42,827 |
Substandard |  | 19,386 |  |  | 1,360 |  |  | 1,143 |  |  | 526 |  |  | 6,229 |  |  | 2,030 |  |  | 24,978 |  |  | 55,652 |
Substandard non-accrual |  | 94 |  |  | — |  |  | 2,976 |  |  | 205 |  |  | 133 |  |  | 2 |  |  | 2,000 |  |  | 5,410 |
Total commercial |  | 231,922 |  |  | 373,443 |  |  | 291,932 |  |  | 135,332 |  |  | 59,135 |  |  | 176,737 |  |  | 668,657 |  |  | 1,937,158 |
Current period charge-offs |  | — |  |  | — |  |  | 400 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 400 |
Commercial real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 139,599 |  |  | 882,834 |  |  | 810,278 |  |  | 457,122 |  |  | 279,737 |  |  | 306,763 |  |  | 12,637 |  |  | 2,888,970 |
Watch |  | 29,344 |  |  | 65,687 |  |  | 75,032 |  |  | 57,391 |  |  | 89,469 |  |  | 40,302 |  |  | 4,962 |  |  | 362,187 |
Special Mention |  | 816 |  |  | 7,001 |  |  | 4,365 |  |  | 15,293 |  |  | 3,743 |  |  | 11,977 |  |  | — |  |  | 43,195 |
Substandard |  | 11,604 |  |  | 5,975 |  |  | 1,095 |  |  | 3,394 |  |  | 1,888 |  |  | 667 |  |  | — |  |  | 24,623 |
Substandard non-accrual |  | — |  |  | 604 |  |  | 3,847 |  |  | 30 |  |  | — |  |  | 1,080 |  |  | — |  |  | 5,561 |
Total commercial real estate |  | 181,363 |  |  | 962,101 |  |  | 894,617 |  |  | 533,230 |  |  | 374,837 |  |  | 360,789 |  |  | 17,599 |  |  | 3,324,536 |
Current period charge-offs |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 539 |  |  | — |  |  | 539 |
Real estate construction |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 38,451 |  |  | 219,520 |  |  | 179,369 |  |  | 69,767 |  |  | 1,447 |  |  | 3,510 |  |  | 19,722 |  |  | 531,786 |
Watch |  | 12 |  |  | 4,454 |  |  | 9,230 |  |  | 3,077 |  |  | 46 |  |  | — |  |  | — |  |  | 16,819 |
Substandard |  | — |  |  | 5,404 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 5,404 |
Total real estate construction |  | 38,463 |  |  | 229,378 |  |  | 188,599 |  |  | 72,844 |  |  | 1,493 |  |  | 3,510 |  |  | 19,722 |  |  | 554,009 |
Current period charge-offs |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Retail real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 62,890 |  |  | 394,383 |  |  | 439,515 |  |  | 171,450 |  |  | 75,296 |  |  | 307,826 |  |  | 198,047 |  |  | 1,649,407 |
Watch |  | 546 |  |  | 2,989 |  |  | 2,952 |  |  | 1,332 |  |  | 1,423 |  |  | 974 |  |  | 1,506 |  |  | 11,722 |
Special Mention |  | 55 |  |  | 58 |  |  | — |  |  | — |  |  | — |  |  | 390 |  |  | — |  |  | 503 |
Substandard |  | — |  |  | 75 |  |  | 361 |  |  | 189 |  |  | 82 |  |  | 1,256 |  |  | 243 |  |  | 2,206 |
Substandard non-accrual |  | — |  |  | 10 |  |  | 238 |  |  | 159 |  |  | 104 |  |  | 2,387 |  |  | 801 |  |  | 3,699 |
Total retail real estate |  | 63,491 |  |  | 397,515 |  |  | 443,066 |  |  | 173,130 |  |  | 76,905 |  |  | 312,833 |  |  | 200,597 |  |  | 1,667,537 |
Current period charge-offs |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 5 |  |  | — |  |  | 5 |
Retail other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 35,635 |  |  | 123,857 |  |  | 32,214 |  |  | 11,275 |  |  | 10,581 |  |  | 4,278 |  |  | 82,684 |  |  | 300,524 |
Substandard non-accrual |  | — |  |  | 6 |  |  | 35 |  |  | 3 |  |  | — |  |  | — |  |  | — |  |  | 44 |
Total retail other |  | 35,635 |  |  | 123,863 |  |  | 32,249 |  |  | 11,278 |  |  | 10,581 |  |  | 4,278 |  |  | 82,684 |  |  | 300,568 |
Current period charge-offs |  | $ | — |  |  | $ | 36 |  |  | $ | 102 |  |  | $ | 1 |  |  | $ | — |  |  | $ | 98 |  |  | $ | — |  |  | $ | 237 |
Total portfolio loans |  | $ | 550,874 |  |  | $ | 2,086,300 |  |  | $ | 1,850,463 |  |  | $ | 925,814 |  |  | $ | 522,951 |  |  | $ | 858,147 |  |  | $ | 989,259 |  |  | $ | 7,783,808 |
Total current period charge-offs |  | $ | — |  |  | $ | 36 |  |  | $ | 502 |  |  | $ | 1 |  |  | $ | — |  |  | $ | 642 |  |  | $ | — |  |  | $ | 1,181 |
|  | As of and For The Year Ended December 31, 2022
|  | Term Loans Amortized Cost Basis by Origination Year |  | Revolving Loans |  | Total
Risk Grade Ratings |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | 2018 |  | Prior |  |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 479,893 |  |  | $ | 266,122 |  |  | $ | 136,445 |  |  | $ | 52,046 |  |  | $ | 50,764 |  |  | $ | 135,000 |  |  | $ | 548,225 |  |  | $ | 1,668,495 |
Watch |  | 54,195 |  |  | 49,382 |  |  | 3,288 |  |  | 7,201 |  |  | 1,258 |  |  | 2,160 |  |  | 84,274 |  |  | 201,758 |
Special Mention |  | 1,958 |  |  | 937 |  |  | 1,642 |  |  | 974 |  |  | 1,000 |  |  | 17,024 |  |  | 23,005 |  |  | 46,540 |
Substandard |  | 8,926 |  |  | 1,165 |  |  | 570 |  |  | 6,671 |  |  | 2,382 |  |  | 5,191 |  |  | 26,282 |  |  | 51,187 |
Substandard non-accrual |  | 21 |  |  | 3,292 |  |  | 226 |  |  | 135 |  |  | — |  |  | 100 |  |  | 2,400 |  |  | 6,174 |
Total commercial |  | 544,993 |  |  | 320,898 |  |  | 142,171 |  |  | 67,027 |  |  | 55,404 |  |  | 159,475 |  |  | 684,186 |  |  | 1,974,154 |
Commercial real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 883,688 |  |  | 819,133 |  |  | 478,452 |  |  | 297,525 |  |  | 161,409 |  |  | 198,419 |  |  | 13,083 |  |  | 2,851,709 |
Watch |  | 77,346 |  |  | 56,113 |  |  | 64,282 |  |  | 96,664 |  |  | 21,592 |  |  | 5,758 |  |  | 4,700 |  |  | 326,455 |
Special Mention |  | 11,943 |  |  | 5,389 |  |  | 12,386 |  |  | 1,420 |  |  | 6,917 |  |  | 5,471 |  |  | — |  |  | 43,526 |
Substandard |  | 5,340 |  |  | 13,528 |  |  | 3,454 |  |  | 1,907 |  |  | 10,248 |  |  | 62 |  |  | — |  |  | 34,539 |
Substandard non-accrual |  | — |  |  | 3,959 |  |  | 33 |  |  | — |  |  | 1,647 |  |  | 5 |  |  | — |  |  | 5,644 |
Total commercial real estate |  | 978,317 |  |  | 898,122 |  |  | 558,607 |  |  | 397,516 |  |  | 201,813 |  |  | 209,715 |  |  | 17,783 |  |  | 3,261,873 |
Real estate construction |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 219,112 |  |  | 191,724 |  |  | 68,015 |  |  | 1,490 |  |  | 1,901 |  |  | 1,751 |  |  | 18,911 |  |  | 502,904 |
Watch |  | 8,530 |  |  | 12,019 |  |  | 3,169 |  |  | 48 |  |  | — |  |  | 1,398 |  |  | — |  |  | 25,164 |
Special Mention |  | — |  |  | — |  |  | — |  |  | 1 |  |  | — |  |  | — |  |  | — |  |  | 1 |
Substandard |  | 2,400 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 2,400 |
Total real estate construction |  | 230,042 |  |  | 203,743 |  |  | 71,184 |  |  | 1,539 |  |  | 1,901 |  |  | 3,149 |  |  | 18,911 |  |  | 530,469 |
Retail real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 396,547 |  |  | 456,158 |  |  | 175,148 |  |  | 77,569 |  |  | 56,887 |  |  | 267,387 |  |  | 209,903 |  |  | 1,639,599 |
Watch |  | 2,928 |  |  | 2,991 |  |  | 1,846 |  |  | 1,444 |  |  | 1,063 |  |  | 27 |  |  | 221 |  |  | 10,520 |
Special Mention |  | 945 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 393 |  |  | — |  |  | 1,338 |
Substandard |  | 77 |  |  | 732 |  |  | 198 |  |  | 81 |  |  | 141 |  |  | 1,293 |  |  | 7 |  |  | 2,529 |
Substandard non-accrual |  | 10 |  |  | 191 |  |  | 107 |  |  | 32 |  |  | 390 |  |  | 1,708 |  |  | 658 |  |  | 3,096 |
Total retail real estate |  | 400,507 |  |  | 460,072 |  |  | 177,299 |  |  | 79,126 |  |  | 58,481 |  |  | 270,808 |  |  | 210,789 |  |  | 1,657,082 |
Retail other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 134,567 |  |  | 43,512 |  |  | 13,141 |  |  | 13,086 |  |  | 5,646 |  |  | 991 |  |  | 91,028 |  |  | 301,971 |
Substandard non-accrual |  | 14 |  |  | 134 |  |  | 3 |  |  | — |  |  | — |  |  | 2 |  |  | — |  |  | 153 |
Total retail other |  | 134,581 |  |  | 43,646 |  |  | 13,144 |  |  | 13,086 |  |  | 5,646 |  |  | 993 |  |  | 91,028 |  |  | 302,124 |
Total portfolio loans |  | $ | 2,288,440 |  |  | $ | 1,926,481 |  |  | $ | 962,405 |  |  | $ | 558,294 |  |  | $ | 323,245 |  |  | $ | 644,140 |  |  | $ | 1,022,697 |  |  | $ | 7,725,702 |
Past Due and Non-accrual Loans An analysis of the amortized cost basis of portfolio loans that are past due and still accruing, or on a non-accrual status, is as follows (dollars in thousands):
| As of March 31, 2023
| Loans past due, still accruing |  | Non-accrual Loans
| 30-59 Days |  | 60-89 Days |  | 90+Days |
Past due and non-accrual loans |  |  |  |  |  |  |
Commercial loans: |  |  |  |  |  |  |
Commercial | $ | 78 |  |  | $ | 1 |  |  | $ | — |  |  | $ | 5,410 |
Commercial real estate | 444 |  |  | — |  |  | — |  |  | 5,561 |
Past due and non-accrual commercial loans | 522 |  |  | 1 |  |  | — |  |  | 10,971 |
Retail loans: |  |  |  |  |  |  |
Retail real estate | 3,120 |  |  | 1,169 |  |  | 472 |  |  | 3,699 |
Retail other | 653 |  |  | 7 |  |  | 28 |  |  | 44 |
Past due and non-accrual retail loans | 3,773 |  |  | 1,176 |  |  | 500 |  |  | 3,743 |
Total past due and non-accrual loans | $ | 4,295 |  |  | $ | 1,177 |  |  | $ | 500 |  |  | $ | 14,714 |
| As of December 31, 2022
| Loans past due, still accruing |  | Non-accrual Loans
| 30-59 Days |  | 60-89 Days |  | 90+Days |
Past due and non-accrual loans |  |  |  |  |  |  |
Commercial loans: |  |  |  |  |  |  |
Commercial | $ | 2 |  |  | $ | — |  |  | $ | — |  |  | $ | 6,174 |
Commercial real estate | 124 |  |  | — |  |  | — |  |  | 5,644 |
Past due and non-accrual commercial loans | 126 |  |  | — |  |  | — |  |  | 11,818 |
Retail loans: |  |  |  |  |  |  |
Retail real estate | 4,709 |  |  | 1,239 |  |  | 673 |  |  | 3,096 |
Retail other | 414 |  |  | 60 |  |  | — |  |  | 153 |
Past due and non-accrual retail loans | 5,123 |  |  | 1,299 |  |  | 673 |  |  | 3,249 |
Total past due and non-accrual loans | $ | 5,249 |  |  | $ | 1,299 |  |  | $ | 673 |  |  | $ | 15,067 |
Gross interest income recorded on 90+ days past due loans, and that would have been recorded on non-accrual loans if they had been accruing interest in accordance with their original terms, was $0.4 million and $0.2 million for the three months ended March 31, 2023, and 2022, respectively. The amount of interest collected on those loans and recognized on a cash basis that was included in interest income was insignificant for the three months ended March 31, 2023, and was $0.4 million for the three months ended March 31, 2022. Loan Modification Disclosures Pursuant to ASU 2022-02 The following table shows the amortized cost basis of loans that were modified during the three months ended March 31, 2023, for borrowers experiencing financial difficulty, disaggregated by class of financing receivable and type of concession granted (dollars in thousands):
|  |  |  |  | As of March 31, 2023
|  |  |  |  | Payment Deferral 1 |  | % of Total Class of Financing Receivable 2 |  | Term Extension 3 |  | % of Total Class of Financing Receivable |  |  |  |  |  |  |  |  |  |  |  |
Loan class: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial |  |  |  |  | $ | 489 |  |  | — | % |  | $ | 25,155 |  |  | 1.3 | % |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate |  |  |  |  | — |  |  | — | % |  | 12,698 |  |  | 0.4 | % |  |  |  |  |  |  |  |  |  |  |  |
Total of loans modified during the period 4 |  |  |  |  | $ | 489 |  |  | — | % |  | $ | 37,853 |  |  | 0.5 | % |  |  |  |  |  |  |  |  |  |  |  |
___________________________________________ 1.Loans with payment deferrals were modified to defer all principal payments until the end of the loan terms, which were shortened. Regular interest payments continue to be required during the deferral period. 2.Loans with payment deferrals represent an insignificant portion of of commercial loans and total loans, rounding to zero percent. 3.Modifications to extend loan terms also included, in most cases, interest rate increases during the extension period. 4.All modifications were for loans classified as substandard. The following table summarizes the financial effects of loan modifications made during the three months ended March 31, 2023, for borrowers experiencing financial difficulty:
|  |  | Weighted Average Term Extension |  |
Loan class: |  |  |  |  |
Commercial |  |  | 9.1 months |  |
Commercial real estate |  |  | 5.8 months |  |
Total financial effect |  |  | 8.0 months |  |
First Busey closely monitors the performance of the loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table depicts the payment performance of loans modified on or after January 1, 2023, the date we adopted ASU 2022-02 (dollars in thousands):
| As of March 31, 2023
| Current |  | 30-89 Days |  | 90+ Days
Loan class: |  |  |  |  |
Commercial | $ | 25,644 |  |  | $ | — |  |  | $ | — |
Commercial real estate | 12,698 |  |  | — |  |  | — |
Amortized cost of modified loans | $ | 38,342 |  |  | $ | — |  |  | $ | — |
TDR Disclosures Prior to the Adoption of ASU 2022-02 At December 31, 2022, performing TDR’s were $3.0 million and non-performing TDR’s were $0.5 million. No loans were newly designated as TDRs during the three months ended March 31, 2022. There were no TDRs entered into during the 12 months ended March 31, 2022, that had subsequent defaults during the three months ended March 31, 2022. Gross interest income that would have been recorded in the three months ended March 31, 2022, if TDRs had performed in accordance with their original terms compared with their modified terms, was insignificant. Collateral Dependent Loans Management's evaluation as to the ultimate collectability of loans includes estimates regarding future cash flows from operations and the value of property, real and personal, pledged as collateral. These estimates are affected by changing economic conditions and the economic prospects of borrowers. Collateral dependent loans are loans in which repayment is expected to be provided solely by the underlying collateral and there are no other available and reliable sources of repayment. Loans are written down to the lower of cost or fair value of underlying collateral, less estimated costs to sell. The Company had $13.3 million and $14.0 million of collateral dependent loans secured by real estate or business assets as of March 31, 2023, and December 31, 2022, respectively. Foreclosures As of March 31, 2023, the Company had $1.1 million of residential real estate in the process of foreclosure. The Company follows Federal Housing Finance Agency guidelines on single-family foreclosures and real estate owned evictions on portfolio loans. Loans Evaluated Individually The Company evaluates loans with disparate risk characteristics on an individual basis. The following tables provide details of loans evaluated individually, segregated by loan category and class. The unpaid principal balance represents customer outstanding contractual principal balances excluding any partial charge-offs. Recorded investment represents the amortized cost of customer balances net of any partial charge-offs recognized on the loan. Average recorded investment is calculated using the most recent four quarters (dollars in thousands):
| As of March 31, 2023
| Unpaid Principal Balance |  | Recorded Investment |  |  |  | Average Recorded Investment
|  | With No Allowance |  | With Allowance |  | Total |  | Related Allowance |
Loans evaluated individually |  |  |  |  |  |  |  |  |  |  |
Commercial loans: |  |  |  |  |  |  |  |  |  |  |
Commercial | $ | 8,761 |  |  | $ | 564 |  |  | $ | 5,181 |  |  | $ | 5,745 |  |  | $ | 1,825 |  |  | $ | 6,512 |
Commercial real estate | 8,421 |  |  | 2,286 |  |  | 3,794 |  |  | 6,080 |  |  | 1,344 |  |  | 5,285 |
Real estate construction | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 206 |
Commercial loans evaluated individually | 17,182 |  |  | 2,850 |  |  | 8,975 |  |  | 11,825 |  |  | 3,169 |  |  | 12,003 |
Retail loans: |  |  |  |  |  |  |  |  |  |  |
Retail real estate | 1,249 |  |  | 1,080 |  |  | 25 |  |  | 1,105 |  |  | 25 |  |  | 2,058 |
Retail loans evaluated individually | 1,249 |  |  | 1,080 |  |  | 25 |  |  | 1,105 |  |  | 25 |  |  | 2,058 |
Total loans evaluated individually | $ | 18,431 |  |  | $ | 3,930 |  |  | $ | 9,000 |  |  | $ | 12,930 |  |  | $ | 3,194 |  |  | $ | 14,061 |
| As of December 31, 2022
| Unpaid Principal Balance |  | Recorded Investment |  |  |  | Average Recorded Investment
|  | With No Allowance |  | With Allowance |  | Total |  | Related Allowance |
Loans evaluated individually |  |  |  |  |  |  |  |  |  |  |
Commercial loans: |  |  |  |  |  |  |  |  |  |  |
Commercial | $ | 9,589 |  |  | $ | 656 |  |  | $ | 5,918 |  |  | $ | 6,574 |  |  | $ | 2,476 |  |  | $ | 6,761 |
Commercial real estate | 8,039 |  |  | 2,334 |  |  | 3,903 |  |  | 6,237 |  |  | 2,000 |  |  | 5,219 |
Real estate construction | 247 |  |  | 247 |  |  | — |  |  | 247 |  |  | — |  |  | 260 |
Commercial loans evaluated individually | 17,875 |  |  | 3,237 |  |  | 9,821 |  |  | 13,058 |  |  | 4,476 |  |  | 12,240 |
Retail loans: |  |  |  |  |  |  |  |  |  |  |
Retail real estate | 2,733 |  |  | 2,564 |  |  | 25 |  |  | 2,589 |  |  | 25 |  |  | 2,311 |
Retail loans evaluated individually | 2,733 |  |  | 2,564 |  |  | 25 |  |  | 2,589 |  |  | 25 |  |  | 2,311 |
Total loans evaluated individually | $ | 20,608 |  |  | $ | 5,801 |  |  | $ | 9,846 |  |  | $ | 15,647 |  |  | $ | 4,501 |  |  | $ | 14,551 |
Allowance for Credit Losses Management estimates the ACL balance using relevant available information from internal and external sources relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. The cumulative loss rate used as the basis for the estimate of credit losses is comprised of the Company’s historical loss experience beginning in 2010. Due to the continued economic uncertainty in the markets in which the Company operates, the Company will continue to utilize a forecast period of 12 months with an immediate reversion to historical loss rates beyond this forecast period in its ACL estimate. The following tables summarize activity in the ACL attributable to each class of loan. Allocation of a portion of the ACL to one class does not preclude its availability to absorb losses in other classes (dollars in thousands):
| Three Months Ended March 31, 2023
| Commercial |  | Commercial Real Estate |  | Real Estate Construction |  | Retail Real Estate |  | Retail Other |  | Total
ACL balance, December 31, 2022 | $ | 23,860 |  |  | $ | 38,299 |  |  | $ | 6,457 |  |  | $ | 18,193 |  |  | $ | 4,799 |  |  | $ | 91,608 |
Provision for credit losses | 695 |  |  | (3,359) |  |  | (1,329) |  |  | 5,948 |  |  | (1,002) |  |  | 953 |
Charged-off | (400) |  |  | (539) |  |  | — |  |  | (5) |  |  | (237) |  |  | (1,181) |
Recoveries | 121 |  |  | 20 |  |  | 31 |  |  | 119 |  |  | 56 |  |  | 347 |
ACL balance, March 31, 2023 | $ | 24,276 |  |  | $ | 34,421 |  |  | $ | 5,159 |  |  | $ | 24,255 |  |  | $ | 3,616 |  |  | $ | 91,727 |
| Three Months Ended March 31, 2022
| Commercial |  | Commercial Real Estate |  | Real Estate Construction |  | Retail Real Estate |  | Retail Other |  | Total
ACL balance, December 31, 2021 | $ | 23,855 |  |  | $ | 38,249 |  |  | $ | 5,102 |  |  | $ | 17,589 |  |  | $ | 3,092 |  |  | $ | 87,887 |
Provision for credit losses | 251 |  |  | (1,218) |  |  | 510 |  |  | (170) |  |  | 374 |  |  | (253) |
Charged-off | — |  |  | — |  |  | — |  |  | (16) |  |  | (109) |  |  | (125) |
Recoveries | 67 |  |  | 308 |  |  | 93 |  |  | 152 |  |  | 84 |  |  | 704 |
ACL balance, March 31, 2022 | $ | 24,173 |  |  | $ | 37,339 |  |  | $ | 5,705 |  |  | $ | 17,555 |  |  | $ | 3,441 |  |  | $ | 88,213 |
The following tables present the ACL and amortized cost of portfolio loans by loan category and class (dollars in thousands):
| As of March 31, 2023
| Portfolio Loans |  | ACL Attributed to Portfolio Loans
| Collectively Evaluated for Impairment |  | Individually Evaluated for Impairment |  | Total |  | Collectively Evaluated for Impairment |  | Individually Evaluated for Impairment |  | Total
Portfolio loans and related ACL |  |  |  |  |  |  |  |  |  |  |
Commercial loans: |  |  |  |  |  |  |  |  |  |  |
Commercial | $ | 1,931,413 |  |  | $ | 5,745 |  |  | $ | 1,937,158 |  |  | $ | 22,451 |  |  | $ | 1,825 |  |  | $ | 24,276 |
Commercial real estate | 3,318,456 |  |  | 6,080 |  |  | 3,324,536 |  |  | 33,077 |  |  | 1,344 |  |  | 34,421 |
Real estate construction | 554,009 |  |  | — |  |  | 554,009 |  |  | 5,159 |  |  | — |  |  | 5,159 |
Commercial loans and related ACL | 5,803,878 |  |  | 11,825 |  |  | 5,815,703 |  |  | 60,687 |  |  | 3,169 |  |  | 63,856 |
Retail loans: |  |  |  |  |  |  |  |  |  |  |
Retail real estate | 1,666,432 |  |  | 1,105 |  |  | 1,667,537 |  |  | 24,230 |  |  | 25 |  |  | 24,255 |
Retail other | 300,568 |  |  | — |  |  | 300,568 |  |  | 3,616 |  |  | — |  |  | 3,616 |
Retail loans and related ACL | 1,967,000 |  |  | 1,105 |  |  | 1,968,105 |  |  | 27,846 |  |  | 25 |  |  | 27,871 |
Portfolio loans and related ACL | $ | 7,770,878 |  |  | $ | 12,930 |  |  | $ | 7,783,808 |  |  | $ | 88,533 |  |  | $ | 3,194 |  |  | $ | 91,727 |
| As of December 31, 2022
| Portfolio Loans |  | ACL Attributed to Portfolio Loans
| Collectively Evaluated for Impairment |  | Individually Evaluated for Impairment |  | Total |  | Collectively Evaluated for Impairment |  | Individually Evaluated for Impairment |  | Total
Portfolio loans and related ACL |  |  |  |  |  |  |  |  |  |  |
Commercial loans: |  |  |  |  |  |  |  |  |  |  |
Commercial | $ | 1,967,580 |  |  | $ | 6,574 |  |  | $ | 1,974,154 |  |  | $ | 21,384 |  |  | $ | 2,476 |  |  | $ | 23,860 |
Commercial real estate | 3,255,636 |  |  | 6,237 |  |  | 3,261,873 |  |  | 36,299 |  |  | 2,000 |  |  | 38,299 |
Real estate construction | 530,222 |  |  | 247 |  |  | 530,469 |  |  | 6,457 |  |  | — |  |  | 6,457 |
Commercial loans and related ACL | 5,753,438 |  |  | 13,058 |  |  | 5,766,496 |  |  | 64,140 |  |  | 4,476 |  |  | 68,616 |
Retail loans: |  |  |  |  |  |  |  |  |  |  |
Retail real estate | 1,654,493 |  |  | 2,589 |  |  | 1,657,082 |  |  | 18,168 |  |  | 25 |  |  | 18,193 |
Retail other | 302,124 |  |  | — |  |  | 302,124 |  |  | 4,799 |  |  | — |  |  | 4,799 |
Retail loans and related ACL | 1,956,617 |  |  | 2,589 |  |  | 1,959,206 |  |  | 22,967 |  |  | 25 |  |  | 22,992 |
Portfolio loans and related ACL | $ | 7,710,055 |  |  | $ | 15,647 |  |  | $ | 7,725,702 |  |  | $ | 87,107 |  |  | $ | 4,501 |  |  | $ | 91,608 |

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