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Loans and Allowance for Credit Losses | 6 Months Ended
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Jun. 30, 2023
Receivables [Abstract] |
Loans and Allowance for Credit Losses | LOANS AND ALLOWANCE FOR CREDIT LOSSES Loans Held for Sale The following table presents loans held for sale:
(Dollars in thousands) |  | June 30, 2023 |  | December 31, 2022
1-4 family residential |  | $ | 89 |  |  | $ | — |
Commercial |  | 6 |  |  | 5,641 |
Total loans held for sale |  | $ | 95 |  |  | $ | 5,641 |
Loans Held for Investment Loans The following table presents the amortized cost and unpaid principal balance of loans held for investment:
|  | June 30, 2023 |  | December 31, 2022
(Dollars in thousands) |  | Amortized Cost |  | Unpaid Principal |  | Difference |  | Amortized Cost |  | Unpaid Principal |  | Difference
Commercial real estate |  | $ | 768,711 |  |  | $ | 769,682 |  |  | $ | (971) |  |  | $ | 678,144 |  |  | $ | 679,239 |  |  | $ | (1,095) |
Construction, land development, land |  | 110,071 |  |  | 110,456 |  |  | (385) |  |  | 90,976 |  |  | 91,147 |  |  | (171) |
1-4 family residential |  | 130,628 |  |  | 130,830 |  |  | (202) |  |  | 125,981 |  |  | 126,185 |  |  | (204) |
Farmland |  | 67,913 |  |  | 68,090 |  |  | (177) |  |  | 68,934 |  |  | 69,185 |  |  | (251) |
Commercial |  | 1,218,892 |  |  | 1,227,039 |  |  | (8,147) |  |  | 1,251,110 |  |  | 1,262,493 |  |  | (11,383) |
Factored receivables |  | 1,173,794 |  |  | 1,177,702 |  |  | (3,908) |  |  | 1,237,449 |  |  | 1,241,032 |  |  | (3,583) |
Consumer |  | 8,409 |  |  | 8,411 |  |  | (2) |  |  | 8,868 |  |  | 8,871 |  |  | (3) |
Mortgage warehouse |  | 846,340 |  |  | 846,340 |  |  | — |  |  | 658,829 |  |  | 658,829 |  |  | — |
Total loans held for investment |  | 4,324,758 |  |  | $ | 4,338,550 |  |  | $ | (13,792) |  |  | 4,120,291 |  |  | $ | 4,136,981 |  |  | $ | (16,690) |
Allowance for credit losses |  | (34,970) |  |  |  |  |  |  | (42,807) |  |  |  |  |
|  | $ | 4,289,788 |  |  |  |  |  |  | $ | 4,077,484 |  |  |  |  |
The difference between the amortized cost and the unpaid principal is due to (1) premiums and discounts associated with acquired loans totaling $9,848,000 and $13,383,000 at June 30, 2023 and December 31, 2022, respectively, and (2) net deferred origination and factoring fees totaling $3,944,000 and $3,307,000 at June 30, 2023 and December 31, 2022, respectively. Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $23,230,000 and $19,279,000 at June 30, 2023 and December 31, 2022, respectively, and was included in other assets on the Company's consolidated balance sheets. At June 30, 2023 and December 31, 2022, the Company had $198,960,000 and $249,288,000, respectively, of customer reserves associated with factored receivables. These amounts represent customer reserves 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, are periodically released to or withdrawn by customers, and are reported as deposits in the consolidated balance sheets. At June 30, 2023 and December 31, 2022 the balance of the Over-Formula Advance Portfolio, acquired from Transport Financial Solutions during 2020, included in factored receivables was $4,011,000 and $8,202,000, respectively. These balances were fully reserved as of those respective dates. During the six months ended June 30, 2023, new adverse developments with one of the two remaining Over-Formula Advance clients caused us to charge-off the entire Over-Formula Advance amount due from that client. This resulted in a net charge-off of $3,330,000; however, this net charge-off had no impact on credit loss expense as the entire amount had been reserved in a prior period. In accordance with the Agreement reached with Covenant, Covenant will reimburse us for $1,665,000 of this charge-off which is reflected as a receivable in other assets on our June 30, 2023 Consolidated Balance Sheet. At June 30, 2023 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 Portfolio 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 June 30, 2023. Loans with carrying amounts of $1,598,726,000 and $1,356,922,000 at June 30, 2023 and December 31, 2022, 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 |  | Charge-offs |  | Recoveries |  | Ending Balance
Three months ended June 30, 2023 |  |  |  |  |
Commercial real estate |  | $ | 4,292 |  |  | $ | 491 |  |  | $ | — |  |  | $ | — |  |  | $ | 4,783 |
Construction, land development, land |  | 1,139 |  |  | 95 |  |  | — |  |  | 1 |  |  | 1,235 |
1-4 family residential |  | 1,004 |  |  | 34 |  |  | — |  |  | 8 |  |  | 1,046 |
Farmland |  | 472 |  |  | 4 |  |  | — |  |  | — |  |  | 476 |
Commercial |  | 16,683 |  |  | 1,368 |  |  | (5,124) |  |  | 50 |  |  | 12,977 |
Factored receivables |  | 17,581 |  |  | 1,521 |  |  | (5,820) |  |  | 159 |  |  | 13,441 |
Consumer |  | 185 |  |  | 44 |  |  | (133) |  |  | 70 |  |  | 166 |
Mortgage warehouse |  | 889 |  |  | (43) |  |  | — |  |  | — |  |  | 846 |
|  | $ | 42,245 |  |  | $ | 3,514 |  |  | $ | (11,077) |  |  | $ | 288 |  |  | $ | 34,970 |
(Dollars in thousands) |  | Beginning Balance |  | Credit Loss Expense |  | Charge-offs |  | Recoveries |  | Ending Balance
Three months ended June 30, 2022 |  |  |  |  |
Commercial real estate |  | $ | 3,527 |  |  | $ | 1,594 |  |  | $ | — |  |  | $ | 46 |  |  | $ | 5,167 |
Construction, land development, land |  | 901 |  |  | 290 |  |  | — |  |  | 1 |  |  | 1,192 |
1-4 family residential |  | 450 |  |  | 305 |  |  | — |  |  | 2 |  |  | 757 |
Farmland |  | 121 |  |  | 369 |  |  | — |  |  | — |  |  | 490 |
Commercial |  | 13,215 |  |  | (407) |  |  | (260) |  |  | 190 |  |  | 12,738 |
Factored receivables |  | 22,471 |  |  | (120) |  |  | (712) |  |  | 573 |  |  | 22,212 |
Consumer |  | 175 |  |  | 77 |  |  | (96) |  |  | 41 |  |  | 197 |
Mortgage warehouse |  | 693 |  |  | (39) |  |  | — |  |  | — |  |  | 654 |
|  | $ | 41,553 |  |  | $ | 2,069 |  |  | $ | (1,068) |  |  | $ | 853 |  |  | $ | 43,407 |
(Dollars in thousands) |  | Beginning Balance |  | Credit Loss Expense |  | Charge-offs |  | Recoveries |  | Ending Balance
Six Months Ended June 30, 2023 |  |  |  |  |
Commercial real estate |  | $ | 4,459 |  |  | $ | 254 |  |  | $ | — |  |  | $ | 70 |  |  | $ | 4,783 |
Construction, land development, land |  | 1,155 |  |  | 78 |  |  | — |  |  | 2 |  |  | 1,235 |
1-4 family residential |  | 838 |  |  | 203 |  |  | (5) |  |  | 10 |  |  | 1,046 |
Farmland |  | 483 |  |  | (7) |  |  | — |  |  | — |  |  | 476 |
Commercial |  | 15,918 |  |  | 2,315 |  |  | (5,346) |  |  | 90 |  |  | 12,977 |
Factored receivables |  | 19,121 |  |  | 2,071 |  |  | (8,113) |  |  | 362 |  |  | 13,441 |
Consumer |  | 175 |  |  | 65 |  |  | (271) |  |  | 197 |  |  | 166 |
Mortgage warehouse |  | 658 |  |  | 188 |  |  | — |  |  | — |  |  | 846 |
|  | $ | 42,807 |  |  | $ | 5,167 |  |  | $ | (13,735) |  |  | $ | 731 |  |  | $ | 34,970 |
(Dollars in thousands) |  | Beginning Balance |  | Credit Loss Expense |  | Charge-offs |  | Recoveries |  | Ending Balance
Six months ended June 30, 2022 |  |  |  |  |
Commercial real estate |  | $ | 3,961 |  |  | $ | 1,254 |  |  | $ | (108) |  |  | $ | 60 |  |  | $ | 5,167 |
Construction, land development, land |  | 827 |  |  | 363 |  |  | — |  |  | 2 |  |  | 1,192 |
1-4 family residential |  | 468 |  |  | 284 |  |  | — |  |  | 5 |  |  | 757 |
Farmland |  | 562 |  |  | (72) |  |  | — |  |  | — |  |  | 490 |
Commercial |  | 14,485 |  |  | (1,014) |  |  | (984) |  |  | 251 |  |  | 12,738 |
Factored receivables |  | 20,915 |  |  | 2,115 |  |  | (1,420) |  |  | 602 |  |  | 22,212 |
Consumer |  | 226 |  |  | 118 |  |  | (207) |  |  | 60 |  |  | 197 |
Mortgage warehouse |  | 769 |  |  | (115) |  |  | — |  |  | — |  |  | 654 |
|  | $ | 42,213 |  |  | $ | 2,933 |  |  | $ | (2,719) |  |  | $ | 980 |  |  | $ | 43,407 |
The decrease in required ACL during the three months ended June 30, 2023 is a function of net charge-offs of $10,789,000 and credit loss expense of $3,514,000. The decrease in required ACL during the six months ended June 30, 2023 is a function of net charge-offs of $13,004,000 and credit loss expense of $5,167,000. 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 future interest rate environment. The impact of these assumed prepayment speeds is lesser in magnitude than the aforementioned loss driver assumptions. For all DCF models at June 30, 2023, 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 June 30, 2023 as compared to December 31, 2022, the Company forecasted a slight decrease national unemployment, a steeper decrease in one-year percentage change in national retail sales, a decrease in one-year percentage change in the national home price index, and a minimal change in one-year percentage change in national gross domestic product. At June 30, 2023 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 near-zero level in the first projected quarter followed by a decline to negative levels over the last three projected quarters to a level below recent actual periods. For percentage change in national home price index, the Company projected a negative levels for all four quarters with such negative levels peaking in the third projected quarter. For percentage change in national gross domestic product, management projected near-zero growth for each projected quarter. At June 30, 2023, the Company slowed its historical prepayment speeds in response to the expected 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 three months ended June 30, 2023, changes in projected loss drivers and prepayment assumptions over the reasonable and supportable forecast period did not have a meaningful impact on the required ACL. Likewise, changes in loan volume and mix did not have a meaningful impact on the ACL during the period. Decreases in required specific reserves decreased the required ACL by $7,108,000. Net charge-offs during the period were $10,789,000. For the three months ended June 30, 2022, changes in projected loss drivers and prepayment assumptions over the reasonable and supportable forecast period increased the required ACL by $2,558,000. Changes in loan volume and mix decreased the required ACL by $1,624,000. Increases in required specific reserves increased the required ACL by $919,000. Net charge-offs during the period were $215,000. For the six months ended June 30, 2023, changes in projected loss drivers and prepayment assumptions over the reasonable and supportable forecast period did not have a meaningful impact on the required ACL. Likewise, changes in loan volume and mix did not have a meaningful impact on the ACL during the period. Decreases in required specific reserves decreased the required ACL by $8,019,000. Net charge-offs during the period were $13,004,000. For the six months ended June 30, 2022, changes in projected loss drivers and prepayment assumptions over the reasonable and supportable forecast period increased the required ACL by $1,541,000. Changes in loan volume and mix decreased the required ACL by $2,146,000. Increases in required specific reserves increased the required ACL by $1,798,000. Net charge-offs during the period were $1,739,000. 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
June 30, 2023 |  |  |  |  |  |
Commercial real estate |  | $ | 1,209 |  |  | $ | — |  |  | $ | 179 |  |  | $ | 803 |  |  | $ | 2,191 |  |  | $ | 32 |
Construction, land development, land |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
1-4 family residential |  | 1,059 |  |  | — |  |  | — |  |  | 26 |  |  | 1,085 |  |  | 126 |
Farmland |  | 303 |  |  | — |  |  | — |  |  | 92 |  |  | 395 |  |  | — |
Commercial |  | 1,045 |  |  | — |  |  | 2,652 |  |  | 2,383 |  |  | 6,080 |  |  | 1,990 |
Factored receivables |  | — |  |  | 36,951 |  |  | — |  |  | — |  |  | 36,951 |  |  | 8,004 |
Consumer |  | — |  |  | — |  |  | — |  |  | 180 |  |  | 180 |  |  | — |
Mortgage warehouse |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total |  | $ | 3,616 |  |  | $ | 36,951 |  |  | $ | 2,831 |  |  | $ | 3,484 |  |  | $ | 46,882 |  |  | $ | 10,152 |
At June 30, 2023 the balance of the Over-Formula Advance Portfolio included in factored receivables was $4,011,000 and was fully reserved. At June 30, 2023 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, 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 carried an ACL allocation of $8,202,000. At December 31, 2022 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 and Accruing
June 30, 2023 |  |  |  |  |  |  |
Commercial real estate |  | $ | — |  |  | $ | 42 |  |  | $ | 16 |  |  | $ | 58 |  |  | $ | 768,653 |  |  | $ | 768,711 |  |  | $ | — |
Construction, land development, land |  | — |  |  | — |  |  | — |  |  | — |  |  | 110,071 |  |  | 110,071 |  |  | — |
1-4 family residential |  | 783 |  |  | 157 |  |  | 431 |  |  | 1,371 |  |  | 129,257 |  |  | 130,628 |  |  | — |
Farmland |  | 3,848 |  |  | 231 |  |  | — |  |  | 4,079 |  |  | 63,834 |  |  | 67,913 |  |  | — |
Commercial |  | 4,277 |  |  | 5,242 |  |  | 3,773 |  |  | 13,292 |  |  | 1,205,600 |  |  | 1,218,892 |  |  | — |
Factored receivables |  | 17,787 |  |  | 3,543 |  |  | 26,819 |  |  | 48,149 |  |  | 1,125,645 |  |  | 1,173,794 |  |  | 26,819 |
Consumer |  | 13 |  |  | 91 |  |  | 108 |  |  | 212 |  |  | 8,197 |  |  | 8,409 |  |  | — |
Mortgage warehouse |  | — |  |  | — |  |  | — |  |  | — |  |  | 846,340 |  |  | 846,340 |  |  | — |
Total |  | $ | 26,708 |  |  | $ | 9,306 |  |  | $ | 31,147 |  |  | $ | 67,161 |  |  | $ | 4,257,597 |  |  | $ | 4,324,758 |  |  | $ | 26,819 |
(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 and 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 |  | 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 |  |  | — |
Total |  | $ | 46,716 |  |  | $ | 16,362 |  |  | $ | 41,367 |  |  | $ | 104,445 |  |  | $ | 4,015,846 |  |  | $ | 4,120,291 |  |  | $ | 37,142 |
At June 30, 2023 and December 31, 2022, total past due Over-Formula Advances recorded in factored receivables was $4,011,000 and $8,202,000, respectively, all of which was considered past due 90 days or more. At June 30, 2023 and December 31, 2022, 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:
|  | June 30, 2023 |  | December 31, 2022
(Dollars in thousands) |  | Total Nonaccrual |  | Nonaccrual With No ACL |  | Total Nonaccrual |  | Nonaccrual With No ACL
Commercial real estate |  | $ | 1,933 |  |  | $ | 1,818 |  |  | $ | 871 |  |  | $ | 319 |
Construction, land development, land |  | — |  |  | — |  |  | 150 |  |  | 150 |
1-4 family residential |  | 1,085 |  |  | 881 |  |  | 1,391 |  |  | 1,238 |
Farmland |  | 394 |  |  | 394 |  |  | 400 |  |  | 400 |
Commercial |  | 5,501 |  |  | 1,813 |  |  | 15,393 |  |  | 3,662 |
Factored receivables |  | — |  |  | — |  |  | — |  |  | — |
Consumer |  | 180 |  |  | 180 |  |  | 91 |  |  | 91 |
Mortgage warehouse |  | — |  |  | — |  |  | — |  |  | — |
|  | $ | 9,093 |  |  | $ | 5,086 |  |  | $ | 18,296 |  |  | $ | 5,860 |
The following table presents accrued interest on nonaccrual loans reversed through interest income:
|  | Three Months Ended June 30, |  | Six Months Ended June 30,
(Dollars in thousands) |  | 2023 |  | 2022 |  | 2023 |  | 2022
Commercial real estate |  | $ | — |  |  | $ | — |  |  | $ | 16 |  |  | $ | — |
Construction, land development, land |  | — |  |  | — |  |  | — |  |  | — |
1-4 family residential |  | 6 |  |  | — |  |  | 6 |  |  | — |
Farmland |  | — |  |  | — |  |  | 22 |  |  | — |
Commercial |  | 1 |  |  | 2 |  |  | 8 |  |  | 6 |
Factored receivables |  | — |  |  | — |  |  | — |  |  | — |
Consumer |  | 1 |  |  | — |  |  | 1 |  |  | — |
Mortgage warehouse |  | — |  |  | — |  |  | — |  |  | — |
|  | $ | 8 |  |  | $ | 2 |  |  | $ | 53 |  |  | $ | 6 |
There was no interest earned on nonaccrual loans during the three and six months ended June 30, 2023 and 2022. The following table presents information regarding nonperforming loans:
(Dollars in thousands) |  | June 30, 2023 |  | December 31, 2022
Nonaccrual loans |  | $ | 9,093 |  |  | $ | 18,296 |
Factored receivables greater than 90 days past due |  | 22,808 |  |  | 28,940 |
Other nonperforming factored receivables(1) |  | 61 |  |  | 491 |
Troubled debt restructurings accruing interest |  | — |  |  | 503 |
|  | $ | 31,962 |  |  | $ | 48,230 |
(1)Other nonperforming factored receivables represent the portion of the Over-Formula Advance Portfolio that is not covered by Covenant's indemnification as well as other nonperforming factored receivables less than 90 days past due. 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 June 30, 2023 and December 31, 2022, 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 |  |  |
June 30, 2023 |  | 2023 |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | Prior |  |  |
Commercial real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 81,407 |  |  | $ | 189,531 |  |  | $ | 155,250 |  |  | $ | 188,216 |  |  | $ | 24,049 |  |  | $ | 41,734 |  |  | $ | 80,562 |  |  | $ | 174 |  |  | $ | 760,923 |
Classified |  | 872 |  |  | 3,177 |  |  | 732 |  |  | 2,953 |  |  | 38 |  |  | 16 |  |  | — |  |  | — |  |  | 7,788 |
Total commercial real estate |  | $ | 82,279 |  |  | $ | 192,708 |  |  | $ | 155,982 |  |  | $ | 191,169 |  |  | $ | 24,087 |  |  | $ | 41,750 |  |  | $ | 80,562 |  |  | $ | 174 |  |  | $ | 768,711 |
YTD gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Construction, land development, land |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 39,791 |  |  | $ | 54,122 |  |  | $ | 6,494 |  |  | $ | 3,361 |  |  | $ | 3,006 |  |  | $ | 392 |  |  | $ | 2,905 |  |  | $ | — |  |  | $ | 110,071 |
Classified |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total construction, land development, land |  | $ | 39,791 |  |  | $ | 54,122 |  |  | $ | 6,494 |  |  | $ | 3,361 |  |  | $ | 3,006 |  |  | $ | 392 |  |  | $ | 2,905 |  |  | $ | — |  |  | $ | 110,071 |
YTD gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
1-4 family residential |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 14,577 |  |  | $ | 23,352 |  |  | $ | 20,376 |  |  | $ | 8,345 |  |  | $ | 2,639 |  |  | $ | 22,464 |  |  | $ | 37,263 |  |  | $ | 182 |  |  | $ | 129,198 |
Classified |  | 317 |  |  | 23 |  |  | 127 |  |  | 5 |  |  | 53 |  |  | 789 |  |  | 116 |  |  | — |  |  | 1,430 |
Total 1-4 family residential |  | $ | 14,894 |  |  | $ | 23,375 |  |  | $ | 20,503 |  |  | $ | 8,350 |  |  | $ | 2,692 |  |  | $ | 23,253 |  |  | $ | 37,379 |  |  | $ | 182 |  |  | $ | 130,628 |
YTD gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 5 |  |  | $ | — |  |  | $ | — |  |  | $ | 5 |
Farmland |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 6,801 |  |  | $ | 14,731 |  |  | $ | 6,437 |  |  | $ | 8,275 |  |  | $ | 2,541 |  |  | $ | 21,301 |  |  | $ | 1,640 |  |  | $ | 172 |  |  | $ | 61,898 |
Classified |  | 4,702 |  |  | 895 |  |  | — |  |  | 21 |  |  | 99 |  |  | 298 |  |  | — |  |  | — |  |  | 6,015 |
Total farmland |  | $ | 11,503 |  |  | $ | 15,626 |  |  | $ | 6,437 |  |  | $ | 8,296 |  |  | $ | 2,640 |  |  | $ | 21,599 |  |  | $ | 1,640 |  |  | $ | 172 |  |  | $ | 67,913 |
YTD gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 191,873 |  |  | $ | 273,932 |  |  | $ | 112,284 |  |  | $ | 102,327 |  |  | $ | 35,368 |  |  | $ | 14,440 |  |  | $ | 467,359 |  |  | $ | 816 |  |  | $ | 1,198,399 |
Classified |  | 1,069 |  |  | 9,873 |  |  | 6,490 |  |  | 1,977 |  |  | 33 |  |  | 168 |  |  | 883 |  |  | — |  |  | 20,493 |
Total commercial |  | $ | 192,942 |  |  | $ | 283,805 |  |  | $ | 118,774 |  |  | $ | 104,304 |  |  | $ | 35,401 |  |  | $ | 14,608 |  |  | $ | 468,242 |  |  | $ | 816 |  |  | $ | 1,218,892 |
YTD gross charge-offs |  | $ | 1 |  |  | $ | 598 |  |  | $ | 4,395 |  |  | $ | 342 |  |  | $ | 10 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 5,346 |
Factored receivables |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 1,138,485 |  |  | $ | — |  |  | $ | — |  |  | $ | 3,950 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 1,142,435 |
Classified |  | 11,937 |  |  | — |  |  | — |  |  | 19,422 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 31,359 |
Total factored receivables |  | $ | 1,150,422 |  |  | $ | — |  |  | $ | — |  |  | $ | 23,372 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 1,173,794 |
YTD gross charge-offs |  | $ | 2,490 |  |  | $ | 2,293 |  |  | $ | — |  |  | $ | 3,330 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 8,113 |
Consumer |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 2,277 |  |  | $ | 2,064 |  |  | $ | 920 |  |  | $ | 599 |  |  | $ | 209 |  |  | $ | 2,109 |  |  | $ | 61 |  |  | $ | — |  |  | $ | 8,239 |
Classified |  | — |  |  | — |  |  | 99 |  |  | — |  |  | — |  |  | 71 |  |  | — |  |  | — |  |  | 170 |
Total consumer |  | $ | 2,277 |  |  | $ | 2,064 |  |  | $ | 1,019 |  |  | $ | 599 |  |  | $ | 209 |  |  | $ | 2,180 |  |  | $ | 61 |  |  | $ | — |  |  | $ | 8,409 |
YTD gross charge-offs |  | $ | 242 |  |  | $ | 13 |  |  | $ | 11 |  |  | $ | 3 |  |  | $ | — |  |  | $ | 2 |  |  | $ | — |  |  | $ | — |  |  | $ | 271 |
Mortgage warehouse |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 846,340 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 846,340 |
Classified |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Total mortgage warehouse |  | $ | 846,340 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 846,340 |
YTD gross charge-offs |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Total loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 2,321,551 |  |  | $ | 557,732 |  |  | $ | 301,761 |  |  | $ | 315,073 |  |  | $ | 67,812 |  |  | $ | 102,440 |  |  | $ | 589,790 |  |  | $ | 1,344 |  |  | $ | 4,257,503 |
Classified |  | 18,897 |  |  | 13,968 |  |  | 7,448 |  |  | 24,378 |  |  | 223 |  |  | 1,342 |  |  | 999 |  |  | — |  |  | 67,255 |
Total loans |  | $ | 2,340,448 |  |  | $ | 571,700 |  |  | $ | 309,209 |  |  | $ | 339,451 |  |  | $ | 68,035 |  |  | $ | 103,782 |  |  | $ | 590,789 |  |  | $ | 1,344 |  |  | $ | 4,324,758 |
YTD gross charge-offs |  | $ | 2,733 |  |  | $ | 2,904 |  |  | $ | 4,406 |  |  | $ | 3,675 |  |  | $ | 10 |  |  | $ | 7 |  |  | $ | — |  |  | $ | — |  |  | $ | 13,735 |
|  | 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 |  | $ | 1,196,912 |  |  | $ | — |  |  | $ | 7,710 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 1,204,622 |
Classified |  | 12,974 |  |  | — |  |  | 19,853 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 32,827 |
Total factored receivables |  | $ | 1,209,886 |  |  | $ | — |  |  | $ | 27,563 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 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 |  | $ | 2,564,651 |  |  | $ | 382,067 |  |  | $ | 367,878 |  |  | $ | 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 |  | $ | 2,593,213 |  |  | $ | 396,193 |  |  | $ | 393,487 |  |  | $ | 80,301 |  |  | $ | 34,304 |  |  | $ | 91,678 |  |  | $ | 530,450 |  |  | $ | 665 |  |  | $ | 4,120,291 |
Loan Modifications to Borrowers Experiencing Financial Difficulty The following table presents the amortized cost basis at the end of the reporting period of the loans modifications to borrowers experiencing financial difficulty:
|  | Term Extension
|  | Three Months Ended June 30, 2023 |  | Six Months Ended June 30, 2023
(Dollars in thousands) |  | Amortized Cost |  | % of Portfolio |  | Amortized Cost |  | % of Portfolio
Commercial real estate |  | $ | 116 |  |  | — | % |  | $ | 116 |  |  | — | %
Commercial |  | — |  |  | — | % |  | 1,218 |  |  | 0.1 | %
The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty:
|  | Term Extension
|  | Three Months Ended June 30, 2023 |  | Six Months Ended June 30, 2023
Commercial real estate |  | Modification added a weighted average 0.3 years to the life of the modified loans, which did not have a material impact on cash flows. |  | Modification added a weighted average 0.3 years to the life of the modified loans, which did not have a material impact on cash flows.
Commercial |  | N/A |  | Modification added a weighted average 0.3 years to the life of the modified loans, which did not have a material impact on cash flows.
|  | Payment Delay
|  | Three Months Ended June 30, 2023 |  | Six Months Ended June 30, 2023
(Dollars in thousands) |  | Amortized Cost |  | % of Portfolio |  | Amortized Cost |  | % of Portfolio
Commercial real estate |  | $ | — |  |  | — | % |  | $ | 756 |  |  | 0.1 | %
The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty:
|  |  |  |  | Payment Delay
|  |  |  | Six Months Ended June 30, 2023
Commercial real estate |  |  |  | Modification allowed for a weighted average 0.5 years of interest only payments with remaining balances due at maturity.
The following table presents the performance of loans that have been modified in the last twelve months:
|  | June 30, 2023
(Dollars in thousands) |  | Current |  | Past Due 30-89 Days |  | Past Due 90 Days or More
Commercial real estate |  | $ | 872 |  |  | $ | — |  |  | $ | — |
Commercial |  | 1,218 |  |  | — |  |  | — |
|  | $ | 2,090 |  |  | $ | — |  |  | $ | — |
At June 30, 2023, the Company had no commitments to lend additional funds to borrowers experiencing financial difficulty for which the Company modified the terms of the loans in the form of principal forgiveness, an interest rate reduction, an other-than-insignificant payment delay, or a term extension during the current period. There were no loans to borrowers experiencing financial difficulty that had a payment default during the three and six months ended June 30, 2023 and were modified in the twelve months prior to that default. Default is determined at 90 or more days past due, upon charge-off, or upon foreclosure. Modified loans in default are individually evaluated for the allowance for credit losses or if the modified loan is deemed uncollectible, the loan, or a portion of the loan, is written off and the allowance for credit losses is adjusted accordingly. Residential Real Estate Loans In Process of Foreclosure At June 30, 2023 and December 31, 2022, the Company had $0 and $129,000, respectively, in 1-4 family residential real estate loans for which formal foreclosure proceedings were in process.

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