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Loans and Allowance for Credit Losses

12 Months Ended

Dec. 31, 2022

LOANS AND ALLOWANCE FOR CREDIT LOSSES

Loans Held for Sale

The following table presents loans held for sale:


(Dollars in thousands)	December 31, 2022		December 31, 2021
1-4 family residential	$	—	$	712
Commercial	5,641		6,618
Total loans held for sale	$	5,641	$	7,330

Loans Held for Investment and Allowance for Credit Losses

The following table presents the amortized cost and unpaid principal for loans held for investment:


	December 31, 2022						December 31, 2021
(Dollars in thousands)	Amortized Cost		Unpaid Principal		Difference		Amortized Cost		Unpaid Principal		Difference
Commercial real estate	$	678,144	$	679,239	$	(1,095)	$	632,775	$	634,319	$	(1,544)
Construction, land development, land	90,976		91,147		(171)		123,464		123,643		(179)
1-4 family residential properties	125,981		126,185		(204)		123,115		123,443		(328)
Farmland	68,934		69,185		(251)		77,394		77,905		(511)
Commercial	1,251,110		1,262,493		(11,383)		1,430,429		1,440,542		(10,113)
Factored receivables	1,237,449		1,241,032		(3,583)		1,699,537		1,703,936		(4,399)
Consumer	8,868		8,871		(3)		10,885		10,883		2
Mortgage warehouse	658,829		658,829		—		769,973		769,973		—
Total	4,120,291		$	4,136,981	$	(16,690)	4,867,572		$	4,884,644	$	(17,072)
Allowance for credit losses	(42,807)						(42,213)
	$	4,077,484					$	4,825,359

The difference between the amortized cost and unpaid principal balance is due to (1) premiums and discounts associated with acquired loans totaling $13,383,000 and $11,723,000 at December 31, 2022 and 2021, respectively, and (2) net deferred origination and factoring fees totaling $3,307,000 and $5,349,000 at December 31, 2022 and 2021, respectively.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $19,279,000 and $14,513,000 at December 31, 2022 and 2021, respectively, and was included in other assets in the Consolidated Balance Sheets.

As of December 31, 2022, most of the Company’s non-factoring business activity is with customers located within certain states. The states of Texas (23%), Colorado (11%), Illinois (11%), and Iowa (6%), make up 51% of the Company’s gross loans, excluding factored receivables. Therefore, the Company’s exposure to credit risk is affected by changes in the economies in these states. At December 31, 2021, the states of Texas (21%), Colorado (15%), Illinois (15%), and Iowa (6%) made up 57% of the Company’s gross loans, excluding factored receivables.

A majority (96%) of the Company’s factored receivables, representing approximately 29% of the total loan portfolio as of December 31, 2022, are transportation receivables. At December 31, 2021, 91% of our factored receivables, representing approximately 32% of our total loan portfolio, were transportation receivables.

At December 31, 2022 and 2021, the Company had $249,288,000 and $254,970,000, respectively, of customer reserves associated with factored receivables which are held to settle any payment disputes or collection shortfalls, may be used to pay customers’ obligations to various third parties as directed by the customer and are periodically released to or withdrawn by customers. Customer reserves are reported as deposits in the consolidated balance sheets.

At December 31, 2022 and 2021 the balance of the Over-Formula Advance Portfolio included in factored receivables was $8,202,000 and $10,077,000, respectively. These amounts were fully reserved at both dates.

As of December 31, 2022 the Company carried a separate $19,361,000 receivable (the “Misdirected Payments”) payable by the United States Postal Service (“USPS”) arising from accounts factored to the largest over-formula advance carrier. This amount is separate from the acquired Over-Formula Advances. The amounts represented by this receivable were paid by the USPS directly to such customer in contravention of notices of assignment delivered to, and previously honored by, the USPS, which amount was then not remitted back to us by such customer as required. The USPS disputes their obligation to make such payment, citing purported deficiencies in the notices delivered to them. We are a party to litigation in the United States Court of Federal Claims against the USPS seeking a ruling that the USPS was obligated to make the payments represented by this receivable directly to us. Based on our legal analysis and discussions with our counsel advising us on this matter, we continue to believe it is probable that we will prevail in such action and that the USPS will have the capacity to make payment on such receivable. Consequently, we have not reserved for such balance as of December 31, 2022.

Loans with carrying amounts of $1,356,922,000 and $1,733,917,000 at December 31, 2022 and 2021, respectively, were pledged to secure Federal Home Loan Bank borrowing capacity, Paycheck Protection Program Liquidity Facility borrowings, and Federal Reserve Bank discount window borrowing capacity.

Allowance for Credit Losses

The Company’s estimate of the ACL reflects losses expected over the remaining contractual life of the assets. The contractual term does not consider extensions, renewals or modifications unless the Company has identified an expected troubled debt restructuring. The activity in the allowance for credit losses (“ACL”) related to loans held for investment is as follows:


(Dollars in thousands)	Beginning Balance		Credit Loss Expense (Benefit)		Charge-offs		Recoveries		Ending Balance
Year ended December 31, 2022
Commercial real estate	$	3,961	$	546	$	(108)	$	60	$	4,459
Construction, land development, land	827		323		—		5		1,155
1-4 family residential properties	468		363		—		7		838
Farmland	562		(79)		—		—		483
Commercial	14,485		2,713		(2,205)		925		15,918
Factored receivables	20,915		3,045		(5,853)		1,014		19,121
Consumer	226		239		(435)		145		175
Mortgage warehouse	769		(111)		—		—		658
	$	42,213	$	7,039	$	(8,601)	$	2,156	$	42,807


(Dollars in thousands)	Beginning Balance		Credit Loss Expense (Benefit)		Charge-offs		Recoveries		Ending Balance
Year ended December 31, 2021
Commercial real estate	$	10,182	$	(6,214)	$	(17)	$	10	$	3,961
Construction, land development, land	3,418		(2,584)		(12)		5		827
1-4 family residential properties	1,225		(849)		(34)		126		468
Farmland	832		(270)		—		—		562
Commercial	22,040		(7,725)		(481)		651		14,485
Factored receivables	56,463		10,038		(46,043)		457		20,915
Consumer	542		(92)		(359)		135		226
Mortgage warehouse	1,037		(268)		—		—		769
	$	95,739	$	(7,964)	$	(46,946)	$	1,384	$	42,213


(Dollars in thousands)	Beginning Balance		Provision		Charge-offs		Recoveries		Initial ACL on Loans Purchased with Credit Deterioration		Reclassification To Held For Sale		Impact of Adopting ASC 326		Ending Balance
Year ended December 31, 2020
Commercial real estate	$	5,353	$	3,607	$	(320)	$	170	$	—	$	—	$	1,372	$	10,182
Construction, land development, land	1,382		2,005		(23)		241		—		—		(187)		3,418
1-4 family residential properties	308		378		(27)		53		—		—		513		1,225
Farmland	670		(355)		—		80		—		—		437		832
Commercial	12,566		11,336		(2,344)		1,115		—		(449)		(184)		22,040
Factored receivables	7,657		16,079		(3,201)		143		37,415		—		(1,630)		56,463
Consumer	488		562		(573)		117		—		—		(52)		542
Mortgage warehouse	668		369		—		—		—		—		—		1,037
	$	29,092	$	33,981	$	(6,488)	$	1,919	$	37,415	$	(449)	$	269	$	95,739

The increase in required ACL during the year ended December 31, 2022 is a function of net charge-offs of $6,445,000 and credit loss expense of $7,039,000.

The decrease in required ACL during the year ended December 31, 2021 is a function of net charge-offs of $45,562,000 and a benefit to credit loss expense of $7,964,000. Net charge-offs during the year reflect the net charge-off of $41,265,000 due from the largest acquired Over-Formula Advance client. See Note 2 – Acquisitions and Divestitures for further discussion of Over-Formula Advance activity.

The Company uses the discounted cash flow (DCF) method to estimate ACL for the commercial real estate, construction, land development, land, 1-4 family residential, commercial (excluding liquid credit and PPP), and consumer loan pools. For all loan pools utilizing the DCF method, the Company utilizes and forecasts national unemployment as a loss driver. The Company also utilizes and forecasts either one-year percentage change in national retail sales (commercial real estate – non multifamily, commercial general, commercial agriculture, commercial asset-based lending, commercial equipment finance, consumer), one-year percentage change in the national home price index (1-4 family residential and construction, land development, land), or one-year percentage change in national gross domestic product (commercial real estate – multifamily) as a second loss driver depending on the nature of the underlying loan pool and how well that loss driver correlates to expected future losses. Consistent forecasts of the loss drivers are used across the loan segments. The Company also forecasts prepayments speeds for use in the DCF models with higher prepayment speeds resulting in lower required ACL levels and vice versa for shorter prepayment speeds. These assumed prepayment speeds are based upon our historical prepayment speeds by loan type adjusted for the expected impact of the current interest rate environment. Generally, the impact of these assumed prepayment speeds is lesser in magnitude than the aforementioned loss driver assumptions.

For all DCF models at December 31, 2022, the Company has determined that four quarters represents a reasonable and supportable forecast period and reverts back to a historical loss rate over eight quarters on a straight-line basis. The Company leverages economic projections from a reputable and independent third party to inform its loss driver forecasts over the four-quarter forecast period. Other internal and external indicators of economic forecasts are also considered by the Company when developing the forecast metrics. At December 31, 2022 as compared to December 31, 2021, the Company there was relatively little change to assumed forecasted national unemployment, a steeper decrease in one-year percentage change in national retail sales, a steeper decrease in one-year percentage change in the national home price index, and a steeper decrease in one-year percentage change in national gross domestic product. At December 31, 2022 for national unemployment, the Company projected a low percentage in the first quarter followed by a gradual rise in the following three quarters. For percentage change in national retail sales, the Company projected a slight increase in the first projected quarter followed by a decline to near-zero or negative levels over the last three projected quarters to a level below recent actual periods. For percentage changes in national home price index and national gross domestic product, the Company projected declines over the last three projected quarters to negative levels below recent actual periods. At December 31, 2022, the Company slowed its historical prepayment speeds in response to the rising interest rate environment in the macro economy.

The Company uses a loss-rate method to estimate expected credit losses for the farmland, liquid credit, factored receivable, and mortgage warehouse loan pools. For each of these loan segments, the Company applies an expected loss ratio based on internal and peer historical losses adjusted as appropriate for qualitative factors. Qualitative loss factors are based on the Company's judgment of company, market, industry or business specific data, changes in underlying loan composition of specific portfolios, trends relating to credit quality, delinquency, non-performing and adversely rated loans, and reasonable and supportable forecasts of economic conditions. Loss factors used to calculate the required ACL on pools that use the loss-rate method reflect the forecasted economic conditions described above.

For the year ended December 31, 2022, changes in projected loss drivers and prepayment assumptions over the reasonable and supportable forecast period increased the required ACL by $1,769,000. Changes in required specific reserves also increased the required ACL at December 31, 2022. Changes in loan volume and mix during the year ended December 31, 2022 decreased the ACL during the period. Net charge-offs during the period were $6,445,000.

The following table presents the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans:


(Dollars in thousands)	Real Estate		Accounts Receivable		Equipment		Other		Total		ACL Allocation
December 31, 2022
Commercial real estate	$	1,003	$	—	$	—	$	140	$	1,143	$	283
Construction, land development, land	150		—		—		—		150		—
1-4 family residential	1,342		—		—		49		1,391		108
Farmland	196		—		108		96		400		—
Commercial	193		—		5,334		10,370		15,897		4,737
Factored receivables	—		42,409		—		—		42,409		13,042
Consumer	—		—		—		91		91		—
Mortgage warehouse	—		—		—		—		—		—
Total	$	2,884	$	42,409	$	5,442	$	10,746	$	61,481	$	18,170

At December 31, 2022 the balance of the Over-Formula Advance Portfolio included in factored receivables was $8,202,000 and was fully reserved. At December 31, 2022 the balance of Misdirected Payments included in factored receivables was $19,361,000 and carried no ACL allocation.


(Dollars in thousands)	Real Estate		Accounts Receivable		Equipment		Other		Total		ACL Allocation
December 31, 2021
Commercial real estate	$	2,143	$	—	$	—	$	155	$	2,298	$	283
Construction, land development, land	987		—		—		—		987		—
1-4 family residential	1,583		—		—		116		1,699		39
Farmland	1,803		—		126		116		2,045		—
Commercial	254		—		5,598		3,017		8,869		1,733
Factored receivables	—		42,863		—		—		42,863		12,640
Consumer	—		—		—		240		240		21
Mortgage warehouse	—		—		—		—		—		—
Total	$	6,770	$	42,863	$	5,724	$	3,644	$	59,001	$	14,716

At December 31, 2021 the balance of the Over-Formula Advance Portfolio included in factored receivables was $10,077,000 and was fully reserved. At December 31, 2021 the balance of Misdirected Payments included in factored receivables was $19,361,000 and carried no ACL allocation.

Past Due and Nonaccrual Loans

The following tables present an aging of contractually past due loans:


(Dollars in thousands)	Past Due 30-59 Days		Past Due 60-90 Days		Past Due 90 Days or More		Total Past Due		Current		Total		Past Due 90 Days or More Still Accruing
December 31, 2022
Commercial real estate	$	1,301	$	—	$	455	$	1,756	$	676,388	$	678,144	$	—
Construction, land development, land	—		—		145		145		90,831		90,976		—
1-4 family residential properties	936		531		776		2,243		123,738		125,981		—
Farmland	—		—		—		—		68,934		68,934		—
Commercial	1,630		3,139		2,847		7,616		1,243,494		1,251,110		—
Factored receivables	42,797		12,651		37,142		92,590		1,144,859		1,237,449		37,142
Consumer	52		41		2		95		8,773		8,868		—
Mortgage warehouse	—		—		—		—		658,829		658,829		—
	$	46,716	$	16,362	$	41,367	$	104,445	$	4,015,846	$	4,120,291	$	37,142


(Dollars in thousands)	Past Due 30-59 Days		Past Due 60-90 Days		Past Due 90 Days or More		Total Past Due		Current		Total		Past Due 90 Days or More Still Accruing
December 31, 2021
Commercial real estate	$	1,021	$	—	$	16	$	1,037	$	631,738	$	632,775	$	—
Construction, land development, land	30		—		145		175		123,289		123,464		—
1-4 family residential properties	730		332		1,114		2,176		120,939		123,115		134
Farmland	378		154		977		1,509		75,885		77,394		—
Commercial	996		346		4,948		6,290		1,424,139		1,430,429		—
Factored receivables	70,109		18,302		39,134		127,545		1,571,992		1,699,537		39,134
Consumer	255		48		99		402		10,483		10,885		—
Mortgage warehouse	—		—		—		—		769,973		769,973		—
	$	73,519	$	19,182	$	46,433	$	139,134	$	4,728,438	$	4,867,572	$	39,268

At December 31, 2022 and 2021, total past due Over-Formula Advances recorded in factored receivables was $8,202,000 and $10,077,000, respectively, all of which was considered past due 90 days or more. Aging of the Over-Formula Advances is based upon the service month on which the advances were made by TFS prior to acquisition. At December 31, 2022 and 2021, the Misdirected Payments totaled $19,361,000, all of which was considered past due 90 days or more. Given the nature of factored receivables, these assets are disclosed as past due 90 days or more still accruing; however, the Company is not recognizing income on the assets. Historically, any income recognized on factored receivables that are past due 90 days or more has not been material.

The following table presents the amortized cost basis of loans on nonaccrual status and the amortized cost basis of loans on nonaccrual status for which there was no related allowance for credit losses:


	December 31, 2022				December 31, 2021
(Dollars in thousands)	Total Nonaccrual		Nonaccrual With No ACL		Total Nonaccrual		Nonaccrual With No ACL
Commercial real estate	$	871	$	319	$	2,025	$	1,375
Construction, land development, land	150		150		964		964
1-4 family residential	1,391		1,238		1,683		1,582
Farmland	400		400		2,044		2,044
Commercial	15,393		3,662		8,078		3,910
Factored receivables	—		—		—		—
Consumer	91		91		240		159
Mortgage warehouse	—		—		—		—
	$	18,296	$	5,860	$	15,034	$	10,034

The following table presents accrued interest on nonaccrual loans reversed through interest income:


	Year Ended December 31,
(Dollars in thousands)	2022		2021		2020
Commercial real estate	$	—	$	8	$	438
Construction, land development, land	2		—		1
1-4 family residential	1		3		32
Farmland	—		6		39
Commercial	28		36		86
Factored receivables	—		—		—
Consumer	—		3		2
Mortgage warehouse	—		—		—
	$	31	$	56	$	598

There was no interest earned on nonaccrual loans during the years ended December 31, 2022, 2021, and 2020.

The following table presents information regarding nonperforming loans:


(Dollars in thousands)	December 31, 2022		December 31, 2021
Nonaccrual loans(1)	$	18,296	$	15,034
Factored receivables greater than 90 days past due	28,940		29,057
Other nonperforming factored receivables(2)	491		1,428
Troubled debt restructurings accruing interest	503		765
	$	48,230	$	46,284

(1) Includes troubled debt restructurings of $1,897,000 and $3,912,000 at December 31, 2022 and 2021, respectively.

(2) Other nonperforming factored receivables represent the portion of the Over-Formula Advance Portfolio that is not covered by Covenant's indemnification. This amount is also considered Classified from a risk rating perspective.

Credit Quality Information

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, including: current collateral and financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk on a regular basis. Large groups of smaller balance homogeneous loans, such as consumer loans, are analyzed primarily based on payment status. The Company uses the following definitions for risk ratings:

Pass – Pass rated loans have low to average risk and are not otherwise classified.

Classified – Classified loans are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the repayment of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Certain classified loans have the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

Management considers the guidance in ASC 310-20 when determining whether a modification, extension, or renewal of loan constitutes a current period origination. Generally, current period renewals of credit are re-underwritten at the point of renewal and considered current period originations for purposes of the table below. As of December 31, 2022 and 2021, based on the most recent analysis performed, the risk category of loans is as follows:


													Revolving Loans		Revolving Loans Converted To Term Loans		Total
(Dollars in thousands)	Year of Origination
December 31, 2022	2022		2021		2020		2019		2018		Prior
Commercial real estate
Pass	$	231,427	$	156,895	$	198,541	$	28,033	$	17,786	$	35,658	$	3,675	$	—	$	672,015
Classified	3,668		551		1,855		39		—		16		—		—		6,129
Total commercial real estate	$	235,095	$	157,446	$	200,396	$	28,072	$	17,786	$	35,674	$	3,675	$	—	$	678,144

Construction, land development, land
Pass	$	71,236	$	11,328	$	4,535	$	3,186	$	35	$	506	$	—	$	—	$	90,826
Classified	—		—		5		—		—		145		—		—		150
Total construction, land development, land	$	71,236	$	11,328	$	4,540	$	3,186	$	35	$	651	$	—	$	—	$	90,976

1-4 family residential
Pass	$	26,306	$	22,639	$	9,536	$	2,929	$	3,528	$	20,910	$	38,361	$	300	$	124,509
Classified	137		199		7		53		1		1,006		69		—		1,472
Total 1-4 family residential	$	26,443	$	22,838	$	9,543	$	2,982	$	3,529	$	21,916	$	38,430	$	300	$	125,981

Farmland
Pass	$	18,190	$	7,291	$	10,027	$	2,699	$	6,742	$	18,569	$	1,016	$	204	$	64,738
Classified	1,062		2,796		120		108		—		110		—		—		4,196
Total farmland	$	19,252	$	10,087	$	10,147	$	2,807	$	6,742	$	18,679	$	1,016	$	204	$	68,934

Commercial
Pass	$	358,983	$	181,933	$	136,635	$	41,912	$	5,842	$	12,145	$	486,889	$	161	$	1,224,500
Classified	10,721		10,579		3,767		1,038		96		116		293		—		26,610
Total commercial	$	369,704	$	192,512	$	140,402	$	42,950	$	5,938	$	12,261	$	487,182	$	161	$	1,251,110

Factored receivables
Pass	$	1,204,622	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	1,204,622
Classified	12,974		—		19,853		—		—		—		—		—		32,827
Total factored receivables	$	1,217,596	$	—	$	19,853	$	—	$	—	$	—	$	—	$	—	$	1,237,449

Consumer
Pass	$	2,768	$	1,981	$	894	$	304	$	266	$	2,418	$	147	$	—	$	8,778
Classified	—		1		2		—		8		79		—		—		90
Total consumer	$	2,768	$	1,982	$	896	$	304	$	274	$	2,497	$	147	$	—	$	8,868

Mortgage warehouse
Pass	$	658,829	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	658,829
Classified	—		—		—		—		—		—		—		—		—
Total mortgage warehouse	$	658,829	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	658,829

Total loans
Pass	$	2,572,361	$	382,067	$	360,168	$	79,063	$	34,199	$	90,206	$	530,088	$	665	$	4,048,817
Classified	28,562		14,126		25,609		1,238		105		1,472		362		—		71,474
Total loans	$	2,600,923	$	396,193	$	385,777	$	80,301	$	34,304	$	91,678	$	530,450	$	665	$	4,120,291


													Revolving Loans		Revolving Loans Converted To Term Loans		Total
(Dollars in thousands)	Year of Origination
December 31, 2021	2021		2020		2019		2018		2017		Prior
Commercial real estate
Pass	$	211,088	$	249,652	$	50,223	$	25,930	$	47,447	$	37,290	$	4,595	$	—	$	626,225
Classified	2,879		3,358		41		—		16		—		256		—		6,550
Total commercial real estate	$	213,967	$	253,010	$	50,264	$	25,930	$	47,463	$	37,290	$	4,851	$	—	$	632,775

Construction, land development, land
Pass	$	56,764	$	33,756	$	4,744	$	23,696	$	1,199	$	994	$	8	$	—	$	121,161
Classified	2,150		8		—		—		—		145		—		—		2,303
Total construction, land development, land	$	58,914	$	33,764	$	4,744	$	23,696	$	1,199	$	1,139	$	8	$	—	$	123,464

1-4 family residential
Pass	$	26,840	$	15,195	$	9,485	$	6,526	$	8,591	$	22,151	$	32,210	$	318	$	121,316
Classified	273		233		53		6		64		1,089		81		—		1,799
Total 1-4 family residential	$	27,113	$	15,428	$	9,538	$	6,532	$	8,655	$	23,240	$	32,291	$	318	$	123,115

Farmland
Pass	$	14,387	$	13,396	$	7,892	$	8,040	$	10,040	$	19,792	$	1,317	$	241	$	75,105
Classified	199		612		593		333		128		298		126		—		2,289
Total farmland	$	14,586	$	14,008	$	8,485	$	8,373	$	10,168	$	20,090	$	1,443	$	241	$	77,394

Commercial
Pass	$	466,254	$	332,746	$	77,010	$	18,940	$	15,032	$	7,704	$	490,159	$	49	$	1,407,894
Classified	9,317		6,858		5,088		558		56		456		202		—		22,535
Total commercial	$	475,571	$	339,604	$	82,098	$	19,498	$	15,088	$	8,160	$	490,361	$	49	$	1,430,429

Factored receivables
Pass	$	1,667,922	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	1,667,922
Classified	10,826		20,789		—		—		—		—		—		—		31,615
Total factored receivables	$	1,678,748	$	20,789	$	—	$	—	$	—	$	—	$	—	$	—	$	1,699,537

Consumer
Pass	$	3,252	$	1,794	$	669	$	553	$	2,424	$	1,882	$	70	$	—	$	10,644
Classified	5		—		—		12		119		105		—		—		241
Total consumer	$	3,257	$	1,794	$	669	$	565	$	2,543	$	1,987	$	70	$	—	$	10,885

Mortgage warehouse
Pass	$	769,973	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	769,973
Classified	—		—		—		—		—		—		—		—		—
Total mortgage warehouse	$	769,973	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	769,973

Total loans
Pass	$	3,216,480	$	646,539	$	150,023	$	83,685	$	84,733	$	89,813	$	528,359	$	608	$	4,800,240
Classified	25,649		31,858		5,775		909		383		2,093		665		—		67,332
Total loans	$	3,242,129	$	678,397	$	155,798	$	84,594	$	85,116	$	91,906	$	529,024	$	608	$	4,867,572

Troubled Debt Restructurings

The Company had a recorded investment in troubled debt restructurings of $2,400,000 and $4,677,000 as of December 31, 2022 and 2021, respectively. The Company had allocated specific allowances for these loans of $1,067,000 and $1,068,000 at December 31, 2022 and 2021, respectively, and had not committed to lend additional amounts.

The following table presents the pre- and post-modification recorded investment of loans modified as troubled debt restructurings during the years ended December 31, 2022, 2021, and 2020. The Company did not grant principal reductions on any restructured loans.


(Dollars in thousands)	Extended Amortization Period		Payment Deferrals		Protective Advances		Total Modifications		Number of Loans
December 31, 2022
Commercial	$	45	$	—	$	—	$	45	1
	$	45	$	—	$	—	$	45	1

December 31, 2021
Commercial real estate	$	—	$	—	$	741	$	741	1
Commercial	—		697		—		697		2
	$	—	$	697	$	741	$	1,438	3

December 31, 2020
Commercial real estate	$	—	$	727	$	—	$	727	3
Construction, land development, land	8		981		—		989		2
1-4 family residential properties	—		171		—		171		1
Farmland	3,486		—		—		3,486		1
Commercial	4,714		9,877		—		14,591		22
	$	8,208	$	11,756	$	—	$	19,964	29

During the year ended December 31, 2022, the Company had one loan modified as a troubled debt restructuring with a recorded investment of $44,000 for which there was a payment default within twelve months following the modification. The payment default did not result in incremental allowance allocations or charge-offs. During the year ended December 31, 2021, the Company had three loans modified as troubled debt restructurings with a recorded investment of $1,681,000 for which there was a payment default within twelve months following the modification. During the year ended December 31, 2020, the Company had one loan modified as a troubled debt restructuring with a recorded investment of $5,741,000 for which there was a payment default within twelve months following the modification. Default is determined at 90 or more days past due, charge-off, or foreclosure.

The following table summarizes the balance of loans modified for borrowers impacted by the COVID-19 pandemic.


	Year Ended December 31,
(Dollars in thousands)	2022	2021	2020
Total modifications	—	10,801	628,022

These modifications primarily consisted of payment deferrals to assist customers. As these modifications related to the COVID-19 pandemic and qualify under the provisions of either Section 4013 of the CARES act or Interagency Guidance, they are not considered troubled debt restructurings.

There were no loans in deferral at December 31, 2022. The following table summarized the amortized cost of loans with payments currently in deferral and the accrued interest related to the loans with payments in deferral at December 31, 2021:


(Dollars in thousands)	Total Loans		Balance of Loans Currently in Deferral		Percentage of Portfolio		Accrued Interest Receivable

December 31, 2021
Commercial real estate	$	632,775	$	30,212	4.8	%	$	116
Construction, land development, land	123,464		1,340		1.1	%	5
1-4 family residential	123,115		—		—	%	—
Farmland	77,394		338		0.4	%	3
Commercial	1,430,429		—		—	%	—
Factored receivables	1,699,537		—		—	%	—
Consumer	10,885		6		0.1	%	—
Mortgage warehouse	769,973		—		—	%	—
Total	$	4,867,572	$	31,896	0.7	%	$	124

Residential Real Estate Loans In Process of Foreclosure

At December 31, 2022 and 2021, the Company had $129,000 and $301,000, respectively, in 1-4 family residential real estate loans for which formal foreclosure proceedings were in process.