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Loans | 12 Months Ended
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Dec. 31, 2023
Receivables [Abstract] |
Loans | Note 4 — Loans Loans consist of the following:
(Dollars in thousands) | December 31, 2023 |  | December 31, 2022 |
Loans held for sale | $ | 16,852 |  |  | $ | 49,957 |  |
LHFI: |  |  |  |
Loans secured by real estate: |  |  |  |
Commercial real estate(1) | $ | 2,442,734 |  |  | $ | 2,304,678 |  |
Construction/land/land development | 1,070,225 |  |  | 945,625 |  |
Residential real estate | 1,734,935 |  |  | 1,477,538 |  |
Total real estate | 5,247,894 |  |  | 4,727,841 |  |
Commercial and industrial | 2,059,460 |  |  | 2,051,161 |  |
Mortgage warehouse lines of credit | 329,966 |  |  | 284,867 |  |
Consumer | 23,624 |  |  | 26,153 |  |
Total LHFI(2) | 7,660,944 |  |  | 7,090,022 |  |
Less: Allowance for loan credit losses (“ALCL”) | 96,868 |  |  | 87,161 |  |
LHFI, net | $ | 7,564,076 |  |  | $ | 7,002,861 |  |
____________________________ (1)Includes owner occupied commercial real estate of $953.8 million and $843.0 million at December 31, 2023, and December 31, 2022, respectively. (2)Includes unamortized purchase accounting adjustment and net deferred loan fees of $11.8 million and $14.2 million at December 31, 2023, and December 31, 2022, respectively. As of December 31, 2023, and December 31, 2022, the remaining purchase accounting net loan discount was $222,000 and $2.2 million, respectively. 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; and •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. Purchased loans that have experienced more than insignificant credit deterioration since origination 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 $34.8 million and $48.1 million of unpaid principal balance PCD loans at December 31, 2023, and December 31, 2022, respectively. Please see Note 1 — Significant Accounting Policies included in these Notes to Consolidated Financial Statements 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 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) | 2023 |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | Prior |  | Revolving Loans Amortized Cost Basis |  |  |  | Total |
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 |  |
Classified | 726 |  |  | 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 mention | 746 |  |  | 10,462 |  |  | 19,811 |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | 31,019 |  |
Classified | 191 |  |  | 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 mention | 250 |  |  | — |  |  | — |  |  | 141 |  |  | — |  |  | — |  |  | — |  |  |  |  | 391 |  |
Classified | 689 |  |  | 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 mention | 498 |  |  | 6,383 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 650 |  |  |  |  | 7,531 |  |
Classified | 3,583 |  |  | 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 |  |
Classified | 35 |  |  | 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 table reflects recorded investments in loans by credit quality indicator and origination year at December 31, 2022, and gross charge-offs for the year ended December 31, 2022, 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, 2022.
| Term Loans |
| Amortized Cost Basis by Origination Year |
(Dollars in thousands) | 2022 |  | 2021 |  | 2020 |  | 2019 |  | 2018 |  | Prior |  | Revolving Loans Amortized Cost Basis |  |  |  | Total |
Commercial real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 885,244 |  |  | $ | 502,287 |  |  | $ | 283,368 |  |  | $ | 230,040 |  |  | $ | 168,079 |  |  | $ | 131,411 |  |  | $ | 69,952 |  |  |  |  | $ | 2,270,381 |  |
Special mention | — |  |  | — |  |  | — |  |  | — |  |  | 8,174 |  |  | 1,359 |  |  | 1,558 |  |  |  |  | 11,091 |  |
Classified | 930 |  |  | 1,795 |  |  | 1,551 |  |  | 4,014 |  |  | 2,965 |  |  | 11,901 |  |  | 50 |  |  |  |  | 23,206 |  |
Total commercial real estate loans | $ | 886,174 |  |  | $ | 504,082 |  |  | $ | 284,919 |  |  | $ | 234,054 |  |  | $ | 179,218 |  |  | $ | 144,671 |  |  | $ | 71,560 |  |  |  |  | $ | 2,304,678 |  |
Year-to-date gross charge-offs | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 166 |  |  | $ | — |  |  |  |  | $ | 166 |  |
Construction/land/land development: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 445,943 |  |  | $ | 320,951 |  |  | $ | 58,880 |  |  | $ | 27,381 |  |  | $ | 27,753 |  |  | $ | 5,253 |  |  | $ | 48,436 |  |  |  |  | $ | 934,597 |  |
Special mention | 6,217 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | 6,217 |  |
Classified | 180 |  |  | 100 |  |  | 286 |  |  | 38 |  |  | 160 |  |  | 1,708 |  |  | 2,339 |  |  |  |  | 4,811 |  |
Total construction/land/land development loans | $ | 452,340 |  |  | $ | 321,051 |  |  | $ | 59,166 |  |  | $ | 27,419 |  |  | $ | 27,913 |  |  | $ | 6,961 |  |  | $ | 50,775 |  |  |  |  | $ | 945,625 |  |
Year-to-date gross charge-offs | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | — |  |
Residential real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 535,739 |  |  | $ | 308,070 |  |  | $ | 261,293 |  |  | $ | 107,530 |  |  | $ | 48,652 |  |  | $ | 123,052 |  |  | $ | 80,375 |  |  |  |  | $ | 1,464,711 |  |
Special mention | — |  |  | — |  |  | 390 |  |  | — |  |  | — |  |  | — |  |  | — |  |  |  |  | 390 |  |
Classified | 2,227 |  |  | 2,764 |  |  | 90 |  |  | 1,494 |  |  | 1,064 |  |  | 4,653 |  |  | 145 |  |  |  |  | 12,437 |  |
Total residential real estate loans | $ | 537,966 |  |  | $ | 310,834 |  |  | $ | 261,773 |  |  | $ | 109,024 |  |  | $ | 49,716 |  |  | $ | 127,705 |  |  | $ | 80,520 |  |  |  |  | $ | 1,477,538 |  |
Year-to-date gross charge-offs | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 91 |  |  | $ | — |  |  |  |  | $ | 91 |  |
Commercial and industrial: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 454,813 |  |  | $ | 239,411 |  |  | $ | 82,168 |  |  | $ | 75,043 |  |  | $ | 40,534 |  |  | $ | 29,745 |  |  | $ | 1,083,221 |  |  |  |  | $ | 2,004,935 |  |
Special mention | 8,683 |  |  | 2,563 |  |  | — |  |  | — |  |  | 187 |  |  | — |  |  | 1,620 |  |  |  |  | 13,053 |  |
Classified | 3,641 |  |  | 11,455 |  |  | 188 |  |  | 1,978 |  |  | 1,224 |  |  | 3 |  |  | 14,684 |  |  |  |  | 33,173 |  |
Total commercial and industrial loans | $ | 467,137 |  |  | $ | 253,429 |  |  | $ | 82,356 |  |  | $ | 77,021 |  |  | $ | 41,945 |  |  | $ | 29,748 |  |  | $ | 1,099,525 |  |  |  |  | $ | 2,051,161 |  |
Year-to-date gross charge-offs | $ | 28 |  |  | $ | 726 |  |  | $ | 48 |  |  | $ | 869 |  |  | $ | 337 |  |  | $ | 1,103 |  |  | $ | 5,348 |  |  |  |  | $ | 8,459 |  |
| Term Loans |
| Amortized Cost Basis by Origination Year |
(Dollars in thousands) | 2022 |  | 2021 |  | 2020 |  | 2019 |  | 2018 |  | Prior |  | Revolving Loans Amortized Cost Basis |  |  |  | Total |
Mortgage Warehouse Lines of Credit: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 282,298 |  |  |  |  | $ | 282,298 |  |
Special mention | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 2,042 |  |  |  |  | 2,042 |  |
Classified | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 527 |  |  |  |  | 527 |  |
Year-to-date gross charge-offs | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 284,867 |  |  |  |  | $ | 284,867 |  |
Current period year-to-date gross charge-offs | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  |  |  | $ | — |  |
Consumer: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass | $ | 9,730 |  |  | $ | 3,822 |  |  | $ | 1,210 |  |  | $ | 784 |  |  | $ | 135 |  |  | $ | 15 |  |  | $ | 10,408 |  |  |  |  | $ | 26,104 |  |
Classified | 22 |  |  | 19 |  |  | — |  |  | 6 |  |  | — |  |  | — |  |  | 2 |  |  |  |  | 49 |  |
Total consumer loans | $ | 9,752 |  |  | $ | 3,841 |  |  | $ | 1,210 |  |  | $ | 790 |  |  | $ | 135 |  |  | $ | 15 |  |  | $ | 10,410 |  |  |  |  | $ | 26,153 |  |
Year-to-date gross charge-offs | $ | 3 |  |  | $ | 27 |  |  | $ | 7 |  |  | $ | 2 |  |  | $ | 1 |  |  | $ | 1 |  |  | $ | 2 |  |  |  |  | $ | 43 |  |
The following tables present the Company’s loan portfolio aging analysis at the dates indicated:
| December 31, 2023 |
(Dollars in thousands) | 30-59 Days Past Due |  | 60-89 Days Past Due |  | Loans Past Due 90 Days or More |  | Total Past Due |  | Current Loans |  | Total Loans Receivable |  | Accruing 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 estate | 8,055 |  |  | 1,326 |  |  | 5,960 |  |  | 15,341 |  |  | 1,719,594 |  |  | 1,734,935 |  |  | — |  |
Total real estate | 11,153 |  |  | 1,353 |  |  | 5,973 |  |  | 18,479 |  |  | 5,229,415 |  |  | 5,247,894 |  |  | — |  |
Commercial and industrial | 1,221 |  |  | 713 |  |  | 5,417 |  |  | 7,351 |  |  | 2,052,109 |  |  | 2,059,460 |  |  | — |  |
Mortgage warehouse lines of credit | — |  |  | — |  |  | — |  |  | — |  |  | 329,966 |  |  | 329,966 |  |  | — |  |
Consumer | 200 |  |  | 10 |  |  | 3 |  |  | 213 |  |  | 23,411 |  |  | 23,624 |  |  | — |  |
Total LHFI | $ | 12,574 |  |  | $ | 2,076 |  |  | $ | 11,393 |  |  | $ | 26,043 |  |  | $ | 7,634,901 |  |  | $ | 7,660,944 |  |  | $ | — |  |
| December 31, 2022
(Dollars in thousands) | 30-59 Days Past Due |  | 60-89 Days Past Due |  | Loans Past Due 90 Days or More |  | Total Past Due |  | Current Loans |  | Total Loans Receivable |  | Accruing Loans 90 or More Days Past Due
Loans secured by real estate: |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate | $ | 31 |  |  | $ | — |  |  | $ | 104 |  |  | $ | 135 |  |  | $ | 2,304,543 |  |  | $ | 2,304,678 |  |  | $ | — |
Construction/land/land development | 854 |  |  | — |  |  | 17 |  |  | 871 |  |  | 944,754 |  |  | 945,625 |  |  | — |
Residential real estate | 1,814 |  |  | 891 |  |  | 450 |  |  | 3,155 |  |  | 1,474,383 |  |  | 1,477,538 |  |  | — |
Total real estate | 2,699 |  |  | 891 |  |  | 571 |  |  | 4,161 |  |  | 4,723,680 |  |  | 4,727,841 |  |  | — |
Commercial and industrial | 3,878 |  |  | 1,972 |  |  | 544 |  |  | 6,394 |  |  | 2,044,767 |  |  | 2,051,161 |  |  | — |
Mortgage warehouse lines of credit | — |  |  | — |  |  | — |  |  | — |  |  | 284,867 |  |  | 284,867 |  |  | — |
Consumer | 350 |  |  | 16 |  |  | 11 |  |  | 377 |  |  | 25,776 |  |  | 26,153 |  |  | — |
Total LHFI | $ | 6,927 |  |  | $ | 2,879 |  |  | $ | 1,126 |  |  | $ | 10,932 |  |  | $ | 7,079,090 |  |  | $ | 7,090,022 |  |  | $ | — |
The following tables detail activity in the ALCL by portfolio segment. Accrued interest of $35.1 million and $27.1 million was not included in the book value for the purposes of calculating the allowance at December 31, 2023 and 2022, respectively. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.
| Year Ended December 31, 2023 |
| Commercial Real Estate |  | Construction/ Land/ Land Development |  | Residential Real Estate |  | Commercial and Industrial |  | Mortgage Warehouse Lines of Credit |  | Consumer |  | Total |  |
| (Dollars in thousands) |
Beginning balance | $ | 19,772 |  |  | $ | 7,776 |  |  | $ | 8,230 |  |  | $ | 50,148 |  |  | $ | 379 |  |  | $ | 856 |  |  | $ | 87,161 |  |  |
Charge-offs | 42 |  |  | — |  |  | 27 |  |  | 11,833 |  |  | — |  |  | 147 |  |  | 12,049 |  |  |
Recoveries | 140 |  |  | 3 |  |  | 17 |  |  | 4,068 |  |  | — |  |  | 14 |  |  | 4,242 |  |  |
Provision(1) | (245) |  |  | 2,211 |  |  | 2,399 |  |  | 12,947 |  |  | 150 |  |  | 52 |  |  | 17,514 |  |  |
Ending balance | $ | 19,625 |  |  | $ | 9,990 |  |  | $ | 10,619 |  |  | $ | 55,330 |  |  | $ | 529 |  |  | $ | 775 |  |  | $ | 96,868 |  |  |
Average balance | $ | 2,404,530 |  |  | $ | 1,015,178 |  |  | $ | 1,629,589 |  |  | $ | 2,054,081 |  |  | $ | 314,079 |  |  | $ | 24,627 |  |  | $ | 7,442,084 |  |  |
Net charge-offs to loan average balance (annualized) | — | % |  | — | % |  | — | % |  | 0.38 | % |  | — | % |  | 0.54 | % |  | 0.10 | % |  |
_________________________ (1)The $16.8 million provision for credit losses on the consolidated statement of income includes a $17.5 million provision for loan losses, a $75,000 provision for off-balance sheet commitments and an $836,000 net benefit provision for credit losses on held to maturity securities for the year ended December 31, 2023. |  |
| Year Ended December 31, 2022 |  |  |  |  |  |  |  |  |
| Commercial Real Estate |  |  |  | Construction/ Land/ Land Development |  | Residential Real Estate |  | Commercial and Industrial |  | Mortgage Warehouse Lines of Credit |  | Consumer |  |  |  |  |  |  | Total |  |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |
Beginning balance | $ | 13,425 |  |  |  |  | $ | 4,011 |  |  | $ | 6,116 |  |  | $ | 40,146 |  |  | $ | 340 |  |  | $ | 548 |  |  |  |  |  |  |  | $ | 64,586 |  |  |  |  |  |  |  |  |  |
Allowance for loan credit losses - BTH merger(1) | 1 |  |  |  |  | — |  |  | — |  |  | 5,525 |  |  | — |  |  | 1 |  |  |  |  |  |  |  | 5,527 |  |  |  |  |  |  |  |  |  |
Charge-offs | 166 |  |  |  |  | — |  |  | 91 |  |  | 8,459 |  |  | — |  |  | 43 |  |  |  |  |  |  |  | 8,759 |  |  |  |  |  |  |  |  |  |
Recoveries | 40 |  |  |  |  | 211 |  |  | 102 |  |  | 3,825 |  |  | — |  |  | 16 |  |  |  |  |  |  |  | 4,194 |  |  |  |  |  |  |  |  |  |
Provision(2) | 6,472 |  |  |  |  | 3,554 |  |  | 2,103 |  |  | 9,111 |  |  | 39 |  |  | 334 |  |  |  |  |  |  |  | 21,613 |  |  |  |  |  |  |  |  |  |
Ending balance | $ | 19,772 |  |  |  |  | $ | 7,776 |  |  | $ | 8,230 |  |  | $ | 50,148 |  |  | $ | 379 |  |  | $ | 856 |  |  |  |  |  |  |  | $ | 87,161 |  |  |  |  |  |  |  |  |  |
Average balance | $ | 1,951,246 |  |  |  |  | $ | 708,758 |  |  | $ | 1,143,190 |  |  | $ | 1,675,719 |  |  | $ | 420,639 |  |  | $ | 20,913 |  |  |  |  |  |  |  | $ | 5,920,465 |  |  |  |  |  |  |  |  |  |
Net charge-offs to loan average balance (annualized) | 0.01 | % |  |  |  | (0.03) | % |  | — | % |  | 0.28 | % |  | — | % |  | 0.13 | % |  |  |  |  |  |  | 0.08 | % |  |  |  |  |  |  |  |  |
_________________________ (1)Excluded from the allowance is $10.8 million in PCD loans that were acquired in the merger with BTH that were added to the allowance and immediately written off. (2)The $24.7 million provision for credit losses on the consolidated statements of income includes a $21.6 million provision for loan losses, a $2.3 million provision for off-balance sheet commitments and a $732,000 provision for held to maturity securities credit losses for the year ended December 31, 2022. |  |  |  |  |  |  |  |  |
| Year Ended December 31, 2021
| Commercial Real Estate |  |  |  | Construction/ Land/ Land Development |  | Residential Real Estate |  | Commercial and Industrial |  | Mortgage Warehouse Lines of Credit |  | Consumer |  |  |  |  |  |  | Total
| (Dollars in thousands)
Beginning Balance | $ | 15,430 |  |  |  |  | $ | 8,191 |  |  | $ | 9,418 |  |  | $ | 51,857 |  |  | $ | 856 |  |  | $ | 918 |  |  |  |  |  |  |  | $ | 86,670 |
Charge-offs | 170 |  |  |  |  | — |  |  | 78 |  |  | 11,923 |  |  | — |  |  | 63 |  |  |  |  |  |  |  | 12,234 |
Recoveries | 65 |  |  |  |  | — |  |  | 117 |  |  | 717 |  |  | — |  |  | 49 |  |  |  |  |  |  |  | 948 |
Provision(1) | (1,900) |  |  |  |  | (4,180) |  |  | (3,341) |  |  | (505) |  |  | (516) |  |  | (356) |  |  |  |  |  |  |  | (10,798) |
Ending Balance | $ | 13,425 |  |  |  |  | $ | 4,011 |  |  | $ | 6,116 |  |  | $ | 40,146 |  |  | $ | 340 |  |  | $ | 548 |  |  |  |  |  |  |  | $ | 64,586 |
Average Balance | $ | 1,501,890 |  |  |  |  | $ | 528,618 |  |  | $ | 916,039 |  |  | $ | 1,627,077 |  |  | $ | 753,588 |  |  | $ | 16,764 |  |  |  |  |  |  |  | $ | 5,343,976 |
Net Charge-offs to Loan Average Balance | 0.01 | % |  |  |  | — | % |  | — | % |  | 0.69 | % |  | — | % |  | 0.08 | % |  |  |  |  |  |  | 0.21 | %
_________________________ (1)The $10.8 million net benefit provision for credit losses on the consolidated statement of income includes a $10.8 million net benefit provision for loan losses, a $68,000 net benefit provision for off-balance sheet commitments and a $101,000 provision for held to maturity securities credit losses for the year ended December 31, 2021.
Provision expense for loan credit losses declined $4.1 million to $17.5 million for the year ended December 31, 2023, compared to $21.6 million for the year ended December 31, 2022. The higher provision expense for loan credit losses during the year ended December 31, 2022, was primarily due to the Day 1 CECL loan provision of $14.9 million for loan credit losses on non-PCD loans associated with the BTH merger which occurred on August 1, 2022. The Company’s credit quality profile in relation to the ALCL drove an increase of $5.3 million in the collectively evaluated portion of the reserve at December 31, 2023, when compared to December 31, 2022, primarily due to qualitative factor changes across the Company’s risk pools. The individually evaluated portion of the reserve increased $4.4 million at December 31, 2023, when compared to December 31, 2022. 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.
| December 31, 2023
(Dollars in thousands) | Commercial Real Estate |  | Construction/ Land/ Land Development |  | Residential Real Estate |  | Commercial and Industrial |  | Mortgage Warehouse Lines of Credit |  | Consumer |  | Total
Real Estate | $ | 605 |  |  | $ | — |  |  | $ | 4,029 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 4,634 |
Equipment | — |  |  | — |  |  | — |  |  | 119 |  |  | — |  |  | — |  |  | 119 |
Other | — |  |  | — |  |  | — |  |  | 258 |  |  | — |  |  | — |  |  | 258 |
Total | $ | 605 |  |  | $ | — |  |  | $ | 4,029 |  |  | $ | 377 |  |  | $ | — |  |  | $ | — |  |  | $ | 5,011 |
ALCL Allocation | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |
| December 31, 2022
(Dollars in thousands) | Commercial Real Estate |  | Construction/ Land/ Land Development |  | Residential Real Estate |  | Commercial and Industrial |  | Mortgage Warehouse Lines of Credit |  | Consumer |  | Total
Real Estate | $ | 273 |  |  | $ | 97 |  |  | $ | 6,731 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 7,101 |
Accounts Receivable | — |  |  | — |  |  | — |  |  | 831 |  |  | — |  |  | — |  |  | 831 |
Equipment | — |  |  | — |  |  | — |  |  | 285 |  |  | — |  |  | — |  |  | 285 |
Total | $ | 273 |  |  | $ | 97 |  |  | $ | 6,731 |  |  | $ | 1,116 |  |  | $ | — |  |  | $ | — |  |  | $ | 8,217 |
ALCL Allocation | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 738 |  |  | $ | — |  |  | $ | — |  |  | $ | 738 |
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: | December 31, 2023 |  | December 31, 2022 |  | December 31, 2023 |  | December 31, 2022 |
Commercial real estate | $ | 746 |  |  | $ | 435 |  |  | $ | 786 |  |  | $ | 526 |  |
Construction/land/land development | 96 |  |  | 59 |  |  | 305 |  |  | 270 |  |
Residential real estate | 5,695 |  |  | 7,023 |  |  | 13,037 |  |  | 7,712 |  |
Total real estate | 6,537 |  |  | 7,517 |  |  | 14,128 |  |  | 8,508 |  |
Commercial and industrial | 4,706 |  |  | 527 |  |  | 15,897 |  |  | 1,383 |  |
Mortgage warehouse lines of credit | — |  |  | — |  |  | — |  |  | — |  |
Consumer | — |  |  | — |  |  | 90 |  |  | 49 |  |
Total nonaccrual loans | $ | 11,243 |  |  | $ | 8,044 |  |  | $ | 30,115 |  |  | $ | 9,940 |  |
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. At December 31, 2023, and December 31, 2022, the Company had $1.6 million and zero funding commitments for loans in which the terms were modified as a result of the borrowers experiencing financial difficulty, respectively. For the years ended December 31, 2023, 2022 and 2021, gross interest income that would have been recorded had the nonaccruing loans been current in accordance with their original terms, was $1.4 million, $1.3 million, $1.9 million, respectively. No interest income was recorded on these loans while they were considered nonaccrual during the years ended December 31, 2023, 2022, and 2021. The Company elects the fair value option for recording residential mortgage loans held for sale in accordance with U.S. GAAP. The Company transferred $7.1 million of nonperforming mortgage loans from the held for sale portfolio to the held for investment portfolio during the year ended December 31, 2023. As a result, the company had zero nonaccrual mortgage loans held for sale that were recorded using the fair value option election at December 31, 2023, compared to $3.9 million at December 31, 2022. The table below summarizes modifications made to borrowers experiencing financial difficulty by loan and modification type during the year ended December 31, 2023.
|  |  |  |  | Amortized Cost Basis at December 31, 2023 |
|  |  | Term Extension |  | Combination: Term Extension and Interest Rate Reduction |  |  |  | Other-Than-Insignificant Payment Delay |
(Dollars in thousands) |  |  |  |  | Amortized Cost |  | % of Loans |  | Amortized Cost |  | % of Loans |  |  |  |  |  | Amortized Cost |  | % of Loans |
Loans secured by real estate: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial real estate |  |  |  |  | $ | 7,845 |  |  | 0.32 | % |  | $ | — |  |  | — | % |  |  |  |  |  | $ | 428 |  |  | 0.02 | % |
Construction/land/land development |  |  |  |  | 3,979 |  |  | 0.37 |  |  | — |  |  | — |  |  |  |  |  |  | — |  |  | — |  |
Residential real estate |  |  |  |  | 2,599 |  |  | 0.15 |  |  | 190 |  |  | 0.01 |  |  |  |  |  |  | 98 |  |  | 0.01 |  |
Total real estate |  |  |  |  | 14,423 |  |  | 0.27 |  |  | 190 |  |  | — |  |  |  |  |  |  | 526 |  |  | 0.01 |  |
Commercial and industrial |  |  |  |  | 21,093 |  |  | 1.02 |  |  | 1,072 |  |  | 0.05 |  |  |  |  |  |  | 53 |  |  | — |  |
Total |  |  |  |  | $ | 35,516 |  |  | 0.46 |  |  | $ | 1,262 |  |  | 0.02 |  |  |  |  |  |  | $ | 579 |  |  | 0.01 |  |
The following table describes the financial effect of the modification made to borrowers experiencing financial difficulty during the year ended December 31, 2023, respectively.
| Year Ended December 31, 2023
| Interest Rate Reduction |  | Term Extension |  | Other-Than-Insignificant Payment Delay |  |
Commercial real estate | N/A |  | Added a weighted average 10.7 months to the life of the modified loans |  | Delayed payment of weighted average 6 months |  |
Construction/land/land development | N/A |  | Added a weighted average 13.0 months to the life of the modified loans |  | N/A |  |
Residential real estate | Reduced weighted average contractual interest rate from 8.8% to 6.0% |  | Added a weighted average 32.8 months to the life of the modified loans |  | Delayed payment of weighted average 2 months |  |
Commercial and industrial | Reduced weighted average contractual interest rate from 9.9% to 8.9% |  | Added a weighted average 9.5 months to the life of the modified loans |  | Delayed payment of weighted average 6 months |  |
The following table depicts the performance of loans that have been modified during the year ended December 31, 2023.
| Payment Status (Amortized Cost Basis) |  |  |
| December 31, 2023 |
(Dollars in thousands) | Current |  | 30-89 Days Past Due |  | 90 Days or More Past Due |  |  |
Loans secured by real estate: |  |  |  |  |  |  |  |
Commercial real estate | $ | 8,272 |  |  | $ | — |  |  | $ | — |  |  |  |
Construction/land/land development | 3,979 |  |  | — |  |  | — |  |  |  |
Residential real estate | 2,484 |  |  | 120 |  |  | 282 |  |  |  |
Total real estate | 14,735 |  |  | 120 |  |  | 282 |  |  |  |
Commercial and industrial | 22,219 |  |  | — |  |  | — |  |  |  |
Total LHFI | $ | 36,954 |  |  | $ | 120 |  |  | $ | 282 |  |  |  |
The table below provides the details of borrowers that were experiencing financial difficulty that were modified within the last twelve months and defaulted during the year ended December 31, 2023.
|  |  | At Or For The Year Ended December 31, 2023
|  |  | Term Extension |  |  |  |  |
(Dollars in thousands) |  |  | Amortized Cost |  | Default Amount |  |  |  |  |
Residential real estate |  |  | $ | 282 |  |  | $ | 282 |  |  |  |  |  |
Commercial and industrial |  |  | — |  |  | 10 |  |  |  |  |  |
Total LHFI |  |  | $ | 282 |  |  | $ | 292 |  |  |  |  |  |
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.

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