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Loans
 3 Months Ended
Mar. 31, 2024
Receivables [Abstract]  
Loans Note 4 — Loans
Loans consist of the following:
(Dollars in thousands)March 31, 2024December 31, 2023
Loans held for sale$14,975 $16,852 
LHFI:
Loans secured by real estate:
Commercial real estate(1)
$2,420,788 $2,442,734 
Construction/land/land development1,168,597 1,070,225 
Residential real estate1,733,297 1,734,935 
Total real estate5,322,682 5,247,894 
Commercial and industrial2,154,151 2,059,460 
Mortgage warehouse lines of credit400,995 329,966 
Consumer22,199 23,624 
Total LHFI(2)
7,900,027 7,660,944 
Less: Allowance for loan credit losses (“ALCL”)
98,375 96,868 
LHFI, net$7,801,652 $7,564,076 
____________________________
(1)Includes owner occupied commercial real estate of $948.6 million and $953.8 million at March 31, 2024, and December 31, 2023, respectively.
(2)Includes unamortized purchase accounting adjustment and net deferred loan fees of $11.4 million and $11.8 million at March 31, 2024, and December 31, 2023, respectively. As of March 31, 2024, and December 31, 2023, the remaining purchase accounting net loan discount was immaterial.
Credit quality indicators. As part of the Company’s commitment to managing the credit quality of its loan portfolio, management annually and periodically updates and evaluates certain credit quality indicators, which include but are not limited to (i) weighted-average risk rating of the loan portfolio, (ii) net charge-offs, (iii) level of non-performing loans, (iv) level of classified loans (defined as substandard, doubtful and loss), and (v) the general economic conditions particularly in the cities and states in which the Company operates. The Company maintains an internal risk rating system where ratings are assigned to individual loans based on assessed risk. Loan risk ratings are the primary indicator of credit quality for the loan portfolio and are continually evaluated to ensure they are appropriate based on currently available information.
The following is a summary description of the Company’s internal risk ratings:
• Pass (1-6)Loans within this risk rating are further categorized as follows:
Minimal risk (1)Well-collateralized by cash equivalent instruments held by the Banks.
Moderate risk (2)Borrowers with excellent asset quality and liquidity. Borrowers’ capitalization and liquidity exceed industry norms. Borrowers in this category have significant levels of liquid assets and have a low level of leverage.
Better than average risk (3)Borrowers with strong financial strength and excellent liquidity that consistently demonstrate strong operating performance. Borrowers in this category generally have a sizable net worth that can be converted into liquid assets within 12 months.
Average risk (4)Borrowers with sound credit quality and financial performance, including liquidity. Borrowers are supported by sufficient cash flow coverage generated through operations across the full business cycle.
Marginally acceptable risk (5)Loans generally meet minimum requirements for an acceptable loan in accordance with lending policy, but possess one or more attributes that cause the overall risk profile to be higher than the majority of newly approved loans.
Watch (6)A passing loan with one or more factors that identify a potential weakness in the overall ability of the borrower to repay the loan. These weaknesses are generally mitigated by other factors that reduce the risk of delinquency or loss.
• Special Mention (7)This grade is intended to be temporary and includes borrowers whose credit quality has deteriorated and is at risk of further decline.
• Substandard (8)This grade includes “Substandard” loans under regulatory guidelines. Substandard loans exhibit a well-defined weakness that jeopardizes debt repayment in accordance with contractual agreements, even though the loan may be performing. These obligations are characterized by the distinct possibility that a loss may be incurred if these weaknesses are not corrected and repayment may be dependent upon collateral liquidation or secondary source of repayment.
• Doubtful (9)This grade includes “Doubtful” loans under regulatory guidelines. Such loans are placed on nonaccrual status and repayment may be dependent upon collateral with no readily determinable valuation or valuations that are highly subjective in nature. Repayment for these loans is considered improbable based on currently existing facts and circumstances.
• Loss (0)This grade includes “Loss” loans under regulatory guidelines. Loss loans are charged-off or written down when repayment is not expected.
In connection with the review of the loan portfolio, the Company considers risk elements attributable to particular loan types or categories in assessing the quality of individual loans. The list of loans to be reviewed for possible individual evaluation consists of unsecured loans over 90 days past due, modified loans to borrowers experiencing financial difficulty, loans greater than $100,000 in which the borrower has filed bankruptcy, collateralized loans 180 days or more past due, classified commercial loans, including non-accrual, over $100,000 with direct exposure, and consumer loans greater than $100,000 with a FICO score under 625. Loans under $50,000 will be evaluated collectively in designated pools unless a loss exposure has been identified. Some additional risk elements considered by loan type include:
•for commercial real estate loans, the debt service coverage ratio, operating results of the owner in the case of owner-occupied properties, the loan to value ratio, the age and condition of the collateral and the volatility of income, property value and future operating results typical of properties of that type;
•for construction, land and land development loans, the perceived feasibility of the project, including the ability to sell developed lots or improvements constructed for resale or the ability to lease property constructed for lease, the quality and nature of contracts for presale or prelease, if any, experience and ability of the developer and loan to value ratio;
•for residential mortgage loans, the borrower’s ability to repay the loan, including a consideration of the debt to income ratio and employment and income stability, the loan-to-value ratio, and the age, condition and marketability of the collateral;
•for commercial and industrial loans, the debt service coverage ratio (income from the business in excess of operating expenses compared to loan repayment requirements), the operating results of the commercial, industrial or professional enterprise, the borrower’s business, professional and financial ability and expertise, the specific risks and volatility of income and operating results typical for businesses in that category and the value, nature and marketability of collateral; and
•for mortgage warehouse loans, the borrower’s adherence to agency or investor underwriting guidelines, while the risk associated with the underlying consumer mortgage loan repayments, similar to other consumer loans, depends on the borrower’s financial stability and are more likely than commercial loans to be adversely affected by divorce, job loss, illness and other personal hardships.
Purchased loans that have experienced more than insignificant credit deterioration since origination at the time of acquisition are PCD loans. An allowance for credit losses is determined using the same methodology as other individually evaluated loans. As a result of the merger with BT Holdings, Inc., (“BTH”), the Company held approximately $32.1 million and $34.8 million of unpaid principal balance PCD loans at March 31, 2024, and December 31, 2023, respectively.
Please see Note 1 — Significant Accounting Policies included in the 2023 Form 10-K, filed with the SEC for a description of our accounting policies related to purchased financial assets with credit deterioration.
The following table reflects recorded investments in loans by credit quality indicator and origination year at March 31, 2024, and gross charge-offs for the three months ended March 31, 2024, excluding loans held for sale. Loans acquired are shown in the table by origination year, not merger date. The Company had an immaterial amount of revolving loans converted to term loans at March 31, 2024.
Term Loans
Amortized Cost Basis by Origination Year
(Dollars in thousands)20242023202220212020PriorRevolving Loans Amortized Cost BasisTotal
Commercial real estate:
Pass$53,920 $339,064 $879,163 $471,291 $238,129 $342,477 $75,186 $2,399,230 
Special mention— — — — — 7,902 — 7,902 
Classified735 732 3,453 3,661 1,939 2,866 270 13,656 
Total commercial real estate loans$54,655 $339,796 $882,616 $474,952 $240,068 $353,245 $75,456 $2,420,788 
Year-to-date gross charge-offs$— $11 $193 $— $251 $— $— $455 
Construction/land/land development:
Pass$33,939 $309,113 $485,551 $212,239 $20,392 $28,738 $45,460 $1,135,432 
Special mention— 746 10,432 19,646 263 — — 31,087 
Classified126 186 228 119 232 1,187 — 2,078 
Total construction/land/land development loans$34,065 $310,045 $496,211 $232,004 $20,887 $29,925 $45,460 $1,168,597 
Year-to-date gross charge-offs$— $— $— $— $— $— $— $— 
Residential real estate:
Pass$27,372 $327,421 $533,926 $285,239 $233,821 $218,562 $91,462 $1,717,803 
Special mention— — — — 136 — — 136 
Classified867 1,944 2,433 2,962 1,193 5,553 406 15,358 
Total residential real estate loans$28,239 $329,365 $536,359 $288,201 $235,150 $224,115 $91,868 $1,733,297 
Year-to-date gross charge-offs$— $— $— $— $— $— $— $— 
Commercial and industrial:
Pass$128,195 $370,024 $237,053 $142,170 $31,382 $74,763 $1,110,563 $2,094,150 
Special mention— 477 6,052 — — — 451 6,980 
Classified1,919 2,921 1,827 9,619 782 712 35,241 53,021 
Total commercial and industrial loans$130,114 $373,422 $244,932 $151,789 $32,164 $75,475 $1,146,255 $2,154,151 
Year-to-date gross charge-offs$— $536 $316 $79 $162 $154 $4,934 $6,181 
Mortgage Warehouse Lines of Credit:
Total mortgage warehouse lines of credit$— $— $— $— $— $— $400,995 $400,995 
Year-to-date gross charge-offs$— $— $— $— $— $— $— $— 
Consumer:
Pass$2,424 $8,578 $2,783 $830 $309 $416 $6,755 $22,095 
Classified— 32 51 8 — — 13 104 
Total consumer loans$2,424 $8,610 $2,834 $838 $309 $416 $6,768 $22,199 
Year-to-date gross charge-offs$— $— $10 $3 $— $— $34 $47 
The following table reflects recorded investments in loans by credit quality indicator and origination year at December 31, 2023, and gross charge-offs for the year ended December 31, 2023, excluding loans held for sale. Loans acquired are shown in the table by origination year, not merger date. The Company had an immaterial amount of revolving loans converted to term loans at December 31, 2023.
Term Loans
Amortized Cost Basis by Origination Year
(Dollars in thousands)20232022202120202019PriorRevolving Loans Amortized Cost BasisTotal
Commercial real estate:
Pass$333,887 $885,234 $470,252 $253,700 $204,421 $188,532 $77,993 $2,414,019 
Special mention— — 308 — — 7,950 — 8,258 
Classified726 4,285 3,212 1,765 524 9,945 — 20,457 
Total commercial real estate loans$334,613 $889,519 $473,772 $255,465 $204,945 $206,427 $77,993 $2,442,734 
Year-to-date gross charge-offs$— $— $— $— $— $42 $— $42 
Construction/land/land development:
Pass$259,502 $461,373 $214,526 $21,309 $7,221 $25,460 $42,700 $1,032,091 
Special mention746 10,462 19,811 — — — — 31,019 
Classified191 3,132 41 240 662 560 2,289 7,115 
Total construction/land/land development loans$260,439 $474,967 $234,378 $21,549 $7,883 $26,020 $44,989 $1,070,225 
Year-to-date gross charge-offs$— $— $— $— $— $— $— $— 
Residential real estate:
Pass$332,874 $549,504 $289,289 $237,813 $79,499 $142,265 $91,972 $1,723,216 
Special mention250 — — 141 — — — 391 
Classified689 1,985 1,439 407 1,367 4,949 492 11,328 
Total residential real estate loans$333,813 $551,489 $290,728 $238,361 $80,866 $147,214 $92,464 $1,734,935 
Year-to-date gross charge-offs$— $— $— $5 $— $22 $— $27 
Commercial and industrial:
Pass$399,485 $272,152 $160,636 $36,995 $57,562 $48,523 $1,035,021 $2,010,374 
Special mention498 6,383 — — — — 650 7,531 
Classified3,583 1,676 12,908 371 470 222 22,325 41,555 
Total commercial and industrial loans$403,566 $280,211 $173,544 $37,366 $58,032 $48,745 $1,057,996 $2,059,460 
Year-to-date gross charge-offs$203 $328 $233 $141 $539 $679 $9,710 $11,833 
Mortgage Warehouse Lines of Credit:
Pass$— $— $— $— $— $— $329,966 $329,966 
Year-to-date gross charge-offs$— $— $— $— $— $— $— $— 
Consumer:
Pass$11,053 $3,567 $1,040 $399 $470 $17 $6,988 $23,534 
Classified35 42 10 — 2 — 1 90 
Total consumer loans$11,088 $3,609 $1,050 $399 $472 $17 $6,989 $23,624 
Year-to-date gross charge-offs$3 $102 $7 $— $— $2 $33 $147 
The following tables present the Company’s loan portfolio aging analysis at the dates indicated:
March 31, 2024
(Dollars in thousands)30-59 Days Past Due60-89 Days Past DueLoans Past Due 90 Days or MoreTotal Past DueCurrent LoansTotal Loans ReceivableAccruing Loans 90 or More Days Past Due
Loans secured by real estate:
Commercial real estate
$2,477 $307 $579 $3,363 $2,417,425 $2,420,788 $— 
Construction/land/land development
132 — 123 255 1,168,342 1,168,597 — 
Residential real estate7,192 679 5,424 13,295 1,720,002 1,733,297 — 
Total real estate9,801 986 6,126 16,913 5,305,769 5,322,682 — 
Commercial and industrial1,044 10,331 4,330 15,705 2,138,446 2,154,151 — 
Mortgage warehouse lines of credit
— — — — 400,995 400,995 — 
Consumer199 13 5 217 21,982 22,199 — 
Total LHFI$11,044 $11,330 $10,461 $32,835 $7,867,192 $7,900,027 $— 
December 31, 2023
(Dollars in thousands)30-59 Days Past Due60-89 Days Past DueLoans Past Due 90 Days or MoreTotal Past DueCurrent LoansTotal Loans ReceivableAccruing Loans 90 or More Days Past Due
Loans secured by real estate:
Commercial real estate$2,264 $— $— $2,264 $2,440,470 $2,442,734 $— 
Construction/land/land development
834 27 13 874 1,069,351 1,070,225 — 
Residential real estate8,055 1,326 5,960 15,341 1,719,594 1,734,935 — 
Total real estate11,153 1,353 5,973 18,479 5,229,415 5,247,894 — 
Commercial and industrial1,221 713 5,417 7,351 2,052,109 2,059,460 — 
Mortgage warehouse lines of credit— — — — 329,966 329,966 — 
Consumer200 10 3 213 23,411 23,624 — 
Total LHFI$12,574 $2,076 $11,393 $26,043 $7,634,901 $7,660,944 $— 
The following tables detail activity in the ALCL by portfolio segment. Accrued interest of $36.2 million and $28.5 million was not included in the book value for the purposes of calculating the allowance at March 31, 2024 and 2023, respectively. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

Three Months Ended March 31, 2024
Commercial Real EstateConstruction/ Land/ Land DevelopmentResidential Real EstateCommercial and IndustrialMortgage Warehouse Lines of CreditConsumerTotal
(Dollars in thousands)
Beginning balance$19,625 $9,990 $10,619 $55,330 $529 $775 $96,868 
Charge-offs455 — — 6,181 — 47 6,683 
Recoveries30 — 4 4,064 — 3 4,101 
Provision(1)
(1,656)(11)11 5,610 132 3 4,089 
Ending balance$17,544 $9,979 $10,634 $58,823 $661 $734 $98,375 
Average balance$2,438,476 $1,130,355 $1,739,105 $2,121,502 $306,248 $23,319 $7,759,005 
Net charge-offs to loan average balance (annualized)0.07 %— %— %0.40 %— %0.76 %0.13 %
_________________________

(1)The $3.0 million provision for credit losses on the consolidated statement of income includes a $4.1 million provision for loan losses, a $1.0 million and $39,000 net benefit provision for off-balance sheet commitments and credit losses on held to maturity securities for the three months ended March 31, 2024.
Three Months Ended March 31, 2023
Commercial Real EstateConstruction/ Land/ Land DevelopmentResidential Real EstateCommercial and IndustrialMortgage Warehouse Lines of CreditConsumerTotal
(Dollars in thousands)
Beginning balance$19,772 $7,776 $8,230 $50,148 $379 $856 $87,161 
Charge-offs42 — — 2,169 — 82 2,293 
Recoveries60 — 5 912 — 5 982 
Provision(1)
891 289 285 4,466 186 41 6,158 
Ending balance$20,681 $8,065 $8,520 $53,357 $565 $820 $92,008 
Average balance$2,342,545 $974,914 $1,519,325 $2,070,356 $213,201 $26,017 $7,146,358 
Net charge-offs to loan average balance (annualized)— %— %— %0.25 %— %1.20 %0.07 %
_________________________

(1)The $6.2 million provision for credit losses on the consolidated statements of income includes a $6.2 million provision for loan losses, a $43,000 benefit for off-balance sheet commitments and an $82,000 provision for held to maturity securities credit losses for the three months ended March 31, 2023.
The following table presents the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses, and the related ALCL allocated to these loans.
March 31, 2024
(Dollars in thousands)Commercial Real EstateConstruction/ Land/ Land DevelopmentResidential Real EstateCommercial and IndustrialMortgage Warehouse Lines of CreditConsumerTotal
Real Estate $2,358 $83 $11,796 $— $— $— $14,237 
Equipment — — — 69 — — 69 
Other— — — 425 — — 425 
Total$2,358 $83 $11,796 $494 $— $— $14,731 
ALCL Allocation$— $— $122 $— $— $— $122 
December 31, 2023
(Dollars in thousands)Commercial Real EstateConstruction/ Land/ Land DevelopmentResidential Real EstateCommercial and IndustrialMortgage Warehouse Lines of CreditConsumerTotal
Real Estate $605 $— $4,029 $— $— $— $4,634 
Equipment— — — 119 — — 119 
Other— — — 258 — — 258 
Total$605 $— $4,029 $377 $— $— $5,011 
ALCL Allocation$— $— $— $— $— $— $— 
Collateral-dependent loans consist primarily of residential real estate, commercial real estate and commercial and industrial loans. These loans are individually evaluated when foreclosure is probable or when the repayment of the loan is expected to be provided substantially through the operation or sale of the underlying collateral. In the case of commercial and industrial loans secured by equipment, the fair value of the collateral is estimated by third-party valuation experts. Loan balances are charged down to the underlying collateral value when they are deemed uncollectible. Note that the Company did not elect to use the collateral maintenance agreement practical expedient available under the current expected credit loss (“CECL”) guidance.
Nonaccrual LHFI was as follows:
Nonaccrual With No
Allowance for Credit Loss		Total Nonaccrual
(Dollars in thousands)
Loans secured by real estate:
March 31, 2024December 31, 2023March 31, 2024December 31, 2023
Commercial real estate$3,006 $746 $4,474 $786 
Construction/land/land development
179 96 383 305 
Residential real estate12,489 5,695 14,918 13,037 
Total real estate15,674 6,537 19,775 14,128 
Commercial and industrial
5,005 4,706 20,560 15,897 
Mortgage warehouse lines of credit— — — — 
Consumer— — 104 90 
Total nonaccrual loans$20,679 $11,243 $40,439 $30,115 
All interest formerly accrued but not received for loans placed on nonaccrual status is reversed from interest income. Subsequent receipts on nonaccrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.
For the three months ended March 31, 2024 and 2023, gross interest income that would have been recorded had the nonaccruing loans been current in accordance with their original terms, was $394,000 and $136,000, respectively. No interest income was recorded on these loans while they were considered nonaccrual during the years ended March 31, 2024 and 2023.
The Company elects the fair value option for recording residential mortgage loans held for sale in accordance with U.S. GAAP. The company had zero nonaccrual mortgage loans held for sale that were recorded using the fair value option election at both March 31, 2024 and December 31, 2023.
The tables below summarize modifications made to borrowers experiencing financial difficulty by loan and modification type during the three months ended March 31, 2024 and 2023.
Amortized Cost Basis at March 31, 2024
Term ExtensionOther-Than-Insignificant Payment Delay
(Dollars in thousands)Amortized Cost% of LoansAmortized Cost% of Loans
Loans secured by real estate:
Construction/land/land development$1,462 0.13 %$— — %
Residential real estate35 — — — 
Total real estate1,497 0.03 — — 
Commercial and industrial7,312 0.34 35 — 
Total$8,809 0.11 $35 — 
Amortized Cost Basis at March 31, 2023
Term Extension
(Dollars in thousands)Amortized Cost% of Loans
Loans secured by real estate:
Commercial real estate$2,230 0.09 %
Construction/land/land development3,346 0.35 
Total real estate5,576 0.11 
Commercial and industrial9,304 0.44 
Total$14,880 0.20 
The following tables describe the financial effect of the modification made to borrowers experiencing financial difficulty during the three months ended March 31, 2024 and 2023.
Three Months Ended March 31, 2024
Term ExtensionOther-Than-Insignificant Payment Delay
Construction/land/land development
Added a weighted average 3.9 months to the life of the modified loans
N/A
Residential real estate
Added a weighted average 6.0 months to the life of the modified loans
N/A
Commercial and industrial
Added a weighted average 6.0 months to the life of the modified loans
Delayed payment of weighted average 2.0 months
Three Months Ended March 31, 2023
Term Extension
Commercial real estate
Added a weighted average 4.1 months to the life of the modified loans
Construction/land/land development
Added a weighted average 4.8 months to the life of the modified loans
Commercial and industrial
Added a weighted average 3.6 months to the life of the modified loans
The following table depicts the performance of loans that have been modified during the last twelve months ended March 31, 2024.
Payment Status (Amortized Cost Basis)
March 31, 2024
(Dollars in thousands)Current30-89 Days Past Due90 Days or More Past Due
Loans secured by real estate:
Commercial real estate
$1,198 $— $168 
Construction/land/land development
1,570 — 96 
Residential real estate2,006 117 235 
Total real estate4,774 117 499 
Commercial and industrial15,511 90 631 
Total LHFI$20,285 $207 $1,130 
At March 31, 2024, and December 31, 2023, the Company had zero and $1.6 million funding commitments for loans in which the terms were modified as a result of the borrowers experiencing financial difficulty, respectively. There were no loans to borrowers experiencing financial difficulty that defaulted during the three months ended March 31, 2024 or 2023, that were modified within the last 12 months.
    A payment default is defined as a loan that was 90 or more days past due. The Company monitors the performance of modified loans on an ongoing basis. In the event of subsequent default, the ALCL is assessed on the basis of an individual evaluation of each loan. The modifications made during the periods presented did not significantly impact the Company’s determination of the allowance for credit losses.