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Loans and ACL | 3 Months Ended
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Mar. 31, 2023
Receivables [Abstract] |
Loans and ACL | Note 4 – Loans and ACL All loan and ACL information presented as of and for the three months ended March 31, 2023 is in accordance with ASC 326. All loan information presented prior to this period is presented in accordance with previously applicable GAAP. As a result, the presentation of information pre-ASC 326 and post-ASC 326 adoption will not be comparable for most disclosures. The following table presents the amortized cost of loans held for investment, including Paycheck Protection Program ("PPP") loans, as of the dates stated.
(Dollars in thousands) |  | March 31, 2023 |  |  | December 31, 2022 |
Commercial and industrial |  | $ | 571,095 |  |  | $ | 590,049 |
Paycheck Protection Program |  |  | 7,988 |  |  |  | 11,967 |
Real estate – construction, commercial |  |  | 180,149 |  |  |  | 183,301 |
Real estate – construction, residential |  |  | 92,403 |  |  |  | 76,599 |
Real estate – mortgage, commercial |  |  | 867,916 |  |  |  | 864,989 |
Real estate – mortgage, residential |  |  | 672,473 |  |  |  | 631,772 |
Real estate – mortgage, farmland |  |  | 6,394 |  |  |  | 6,599 |
Consumer |  |  | 58,907 |  |  |  | 47,423 |
Gross loans |  |  | 2,457,325 |  |  |  | 2,412,699 |
Less: deferred loan fees, net of costs |  |  | (345 | ) |  |  | (1,640 | )
Total |  | $ | 2,456,980 |  |  | $ | 2,411,059 |
The Company has pledged certain commercial and residential mortgages as collateral for borrowings with the FHLB. Loans totaling $531.8 million and $436.0 million were pledged as of March 31, 2023 and December 31, 2022, respectively. Additionally, PPP loans were pledged as collateral for the FRB's Paycheck Protection Program Liquidity Facility ("PPPLF") advances in the amount of $0 and $51 thousand as of March 31, 2023 and December 31, 2022, respectively. The following table presents the aging of the amortized cost of loans held for investment by loan category as of March 31, 2023.
|  | March 31, 2023 |
(Dollars in thousands) |  | Current Loans |  |  | 30-59 Days Past Due |  |  | 60-89 Days Past Due |  |  | Greater than 90 Days Past Due & Accruing |  |  | Nonaccrual |  |  | Total Loans |
Commercial and industrial |  | $ | 561,261 |  |  | $ | 1,122 |  |  | $ | 61 |  |  | $ | — |  |  | $ | 8,651 |  |  | $ | 571,095 |
Paycheck Protection Program |  |  | 7,988 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 7,988 |
Real estate – construction, commercial |  |  | 177,739 |  |  |  | 1,106 |  |  |  | 867 |  |  |  | — |  |  |  | 437 |  |  |  | 180,149 |
Real estate – construction, residential |  |  | 91,616 |  |  |  | 399 |  |  |  | 388 |  |  |  | — |  |  |  | — |  |  |  | 92,403 |
Real estate – mortgage, commercial |  |  | 855,385 |  |  |  | 960 |  |  |  | — |  |  |  | — |  |  |  | 11,571 |  |  |  | 867,916 |
Real estate – mortgage, residential |  |  | 658,290 |  |  |  | 4,153 |  |  |  | 585 |  |  |  | 1,998 |  |  |  | 7,447 |  |  |  | 672,473 |
Real estate – mortgage, farmland |  |  | 6,394 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 6,394 |
Consumer |  |  | 56,891 |  |  |  | 1,246 |  |  |  | 150 |  |  |  | 169 |  |  |  | 451 |  |  |  | 58,907 |
Less: Deferred loan fees, net of costs |  |  | (345 | ) |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (345 | )
Total Loans |  | $ | 2,415,219 |  |  | $ | 8,986 |  |  | $ | 2,051 |  |  | $ | 2,167 |  |  | $ | 28,557 |  |  | $ | 2,456,980 |
The following table presents the amortized cost of nonaccrual loans held for investment by loan category as of the date stated.
|  | March 31, 2023 |
(Dollars in thousands) |  | Nonaccrual Loans with No ACL |  |  | Nonaccrual Loans with an ACL |  |  | Total Nonaccrual Loans |
Commercial and industrial |  | $ | 186 |  |  | $ | 8,465 |  |  | $ | 8,651 |
Real estate – construction, commercial |  |  | — |  |  |  | 437 |  |  |  | 437 |
Real estate – mortgage, commercial |  |  | 10,108 |  |  |  | 1,463 |  |  |  | 11,571 |
Real estate – mortgage, residential |  |  | 592 |  |  |  | 6,855 |  |  |  | 7,447 |
Consumer |  |  | 2 |  |  |  | 449 |  |  |  | 451 |
Total |  | $ | 10,888 |  |  | $ | 17,669 |  |  | $ | 28,557 |
The table above excludes PPP loans of $8.0 million as of March 31, 2023. PPP loans are fully guaranteed by the U.S. government; therefore, the Company reports them as accruing loans. The Company received $378 thousand of interest payments from nonaccrual loans during the three months ended March 31, 2023. Credit Quality Indicators The Company categorizes loans held for investment into risk categories based on relevant information about the expected ability of borrowers to service their debt, such as current financial information, historical payment experience, collateral adequacy, credit documentation, and current economic trends, among other factors. Management considers loan risk grades to be the best indication of credit quality of its portfolio of loans held for investment. The Company uses the following definitions for loan risk ratings and periodically evaluates the appropriateness of these ratings across its loan portfolio: Risk Grade 1 – Strong: This grade is reserved for loans to the strongest of borrowers. These loans are to individuals or corporations that are well known to the Bank and are always secured with an almost guaranteed source of repayment such as a lien on a bank deposit account. Character, credit history, and ability of individuals or company principals are excellent and unquestioned. Source of income and industry of borrower appears stable. High liquidity, minimum risk, good ratios, and low handling cost are present. Risk Grade 2 – Minimal: This grade is reserved for loans to borrowers who are deemed exceptionally strong. These loans are within guidelines and where the borrowers have documented significant overall financial strength. These loans have excellent sources of repayment, significant balance sheet liquidity, no significant identifiable risk of collection, and conform in all respects to policy, guidelines, underwriting standards, and federal and state regulations (no exceptions of any kind). Risk Grade 3 – Acceptable: This grade is reserved for loans to borrowers who are deemed strong. These loans have adequate sources of repayment, with little identifiable risk of collection. Generally, loans assigned this risk grade will demonstrate the following characteristics: (1) conformity in all respects with policy, guidelines, underwriting standards, and federal and state regulations (no exceptions of any kind), (2) documented historical cash flow that meets or exceeds required minimum guidelines, or that can be supplemented with verifiable cash flow from other sources, and (3) adequate secondary sources to liquidate the debt. Risk Grade 4 – Satisfactory: This grade is given to satisfactory loans containing more risk than Risk Grade 3 loans. These loans have adequate sources of repayment, with little identifiable risk of collection. Loans assigned this risk grade will demonstrate the following characteristics: (1) general conformity to the Bank's underwriting requirements, with limited exceptions to policy, product, or underwriting guidelines. All exceptions noted have documented mitigating factors that offset any additional risk associated with the exceptions noted, (2) documented historical cash flow that meets or exceeds required minimum guidelines, or that can be supplemented with verifiable cash flow from other sources, and (3) adequate secondary sources to liquidate the debt, including combinations of liquidity, liquidation of collateral, or liquidation value to the net worth of the borrower or guarantor. Risk Grade 5 – Watch: This grade is for satisfactory loans containing acceptable but elevated risk. These loans are characterized by borrowers who have a marginal cash flow, marginal profitability, or have experienced an unprofitable year and declining financial condition. The borrower's management may be deemed to be satisfactory, the collateral securing the loan may create a loan-to-value ratio in excess of 90%, the debt service coverage ratio and global debt service coverage are unstable but mostly positive, and/or guarantor support, if any, is inadequate. Loans classified as Watch warrant additional monitoring by management. Risk Grade 6 – Special Mention: This grade is for loans that have potential weaknesses that deserve management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the Bank's credit position at some future date. Special Mention loans are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification. Special mention credits typically exhibit underwriting guideline tolerances and/or exceptions with no mitigating factors, or emerging weaknesses that may or may not be cured as time passes. Risk Grade 7 – Substandard: A substandard loan is inadequately protected by the current sound net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt; they are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Loans consistently not meeting the repayment schedule should be downgraded further to substandard. Loans in this category are characterized by deterioration in quality exhibited by any number of well-defined weaknesses requiring corrective action. The weaknesses may include, but are not limited to: (1) high debt to worth ratios, (2) declining or negative earnings trends, (3) declining or inadequate liquidity, (4) improper loan structure, (5) questionable repayment sources, (6) lack of well-defined secondary repayment source, and (7) unfavorable competitive comparisons. Such loans are no longer considered to be adequately protected due to the borrower's declining net worth, lack of earnings capacity, declining collateral margins, and/or unperfected collateral positions. The possibility of loss of a portion of the loan balance cannot be ruled out. The repayment ability of the borrower is marginal or weak and the loan may have exhibited excessive overdue status or extensions and/or renewals. Risk Grade 8 – Doubtful: Loans classified doubtful have all the weaknesses inherent in loans classified substandard, plus 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. However, these loans are not yet rated as loss because certain events may occur which would salvage the Bank's position, which can include, but not limited to (1) an injection of capital, (2) alternative financing, and (3) liquidation of assets or the pledging of additional collateral. Doubtful is a temporary grade where a loss is expected but is presently not quantified with any degree of accuracy. Once the loss position is determined, the amount is charged off against the allowance for loan losses. Risk Grade 9 – Loss: Loans classified loss are considered uncollectable and of such little value that their continuance as assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer charging off the worthless loan, even though partial recovery may be effected in the future. Probable loss portions of doubtful loans are charged off promptly against the allowance for loan losses. There were no loans classified as doubtful or loss as of March 31, 2023. The following table presents the amortized cost of loans held for investment by internal loan risk grade by year of origination as of March 31, 2023. Also presented are current period gross charge-offs by loan type for the three months ended March 31, 2023.
|  | Term Loans Amortized Cost Basis by Origination Year |  |  |  |  |  |  |
(Dollars in thousands) |  | 2023 |  |  | 2022 |  |  | 2021 |  |  | 2020 |  |  | 2019 |  |  | Prior |  |  | Revolving Loans |  |  | Total |
Commercial and industrial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk Grades 1 - 4 |  | $ | 46,836 |  |  | $ | 145,311 |  |  | $ | 54,533 |  |  | $ | 36,707 |  |  | $ | 15,681 |  |  | $ | 20,557 |  |  | $ | 120,901 |  |  | $ | 440,526 |
Risk Grades 5 - 6 |  |  | 117 |  |  |  | 34,640 |  |  |  | 9,205 |  |  |  | 8,391 |  |  |  | 467 |  |  |  | 1,450 |  |  |  | 25,942 |  |  |  | 80,212 |
Risk Grade 7 |  |  | — |  |  |  | 40,262 |  |  |  | — |  |  |  | — |  |  |  | 1,203 |  |  |  | 118 |  |  |  | 8,774 |  |  |  | 50,357 |
Total |  |  | 46,953 |  |  |  | 220,213 |  |  |  | 63,738 |  |  |  | 45,098 |  |  |  | 17,351 |  |  |  | 22,125 |  |  |  | 155,617 |  |  |  | 571,095 |
Current period gross charge-offs |  |  | — |  |  |  | — |  |  |  | 664 |  |  |  | — |  |  |  | — |  |  |  | 9 |  |  |  | 126 |  |  |  | 799 |
Paycheck Protection Program |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk Grades 1 - 4 |  |  | — |  |  |  | — |  |  |  | 7,988 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 7,988 |
Total |  |  | — |  |  |  | — |  |  |  | 7,988 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 7,988 |
Real estate – construction, commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk Grades 1 - 4 |  |  | 8,488 |  |  |  | 52,358 |  |  |  | 55,721 |  |  |  | 16,576 |  |  |  | 2,118 |  |  |  | 8,803 |  |  |  | 12,209 |  |  |  | 156,273 |
Risk Grades 5 - 6 |  |  | — |  |  |  | 5,571 |  |  |  | 6,301 |  |  |  | 722 |  |  |  | — |  |  |  | 710 |  |  |  | 10,282 |  |  |  | 23,586 |
Risk Grade 7 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 290 |  |  |  | — |  |  |  | 290 |
Total |  |  | 8,488 |  |  |  | 57,929 |  |  |  | 62,022 |  |  |  | 17,298 |  |  |  | 2,118 |  |  |  | 9,803 |  |  |  | 22,491 |  |  |  | 180,149 |
Real estate – construction, residential |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk Grades 1 - 4 |  |  | 20,084 |  |  |  | 50,390 |  |  |  | 15,528 |  |  |  | 1,113 |  |  |  | 998 |  |  |  | — |  |  |  | 2,456 |  |  |  | 90,569 |
Risk Grades 5 - 6 |  |  | — |  |  |  | — |  |  |  | 949 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 949 |
Risk Grade 7 |  |  | 21 |  |  |  | 864 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 885 |
Total |  |  | 20,105 |  |  |  | 51,254 |  |  |  | 16,477 |  |  |  | 1,113 |  |  |  | 998 |  |  |  | — |  |  |  | 2,456 |  |  |  | 92,403 |
Real estate – mortgage, commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk Grades 1 - 4 |  |  | 28,993 |  |  |  | 250,028 |  |  |  | 117,823 |  |  |  | 153,436 |  |  |  | 44,957 |  |  |  | 151,324 |  |  |  | 20,171 |  |  |  | 766,732 |
Risk Grades 5 - 6 |  |  | — |  |  |  | 15,442 |  |  |  | 4,039 |  |  |  | 19,182 |  |  |  | 13,390 |  |  |  | 32,237 |  |  |  | 500 |  |  |  | 84,790 |
Risk Grade 7 |  |  | — |  |  |  | — |  |  |  | 6,344 |  |  |  | — |  |  |  | 774 |  |  |  | 9,176 |  |  |  | 100 |  |  |  | 16,394 |
Total |  |  | 28,993 |  |  |  | 265,470 |  |  |  | 128,206 |  |  |  | 172,618 |  |  |  | 59,121 |  |  |  | 192,737 |  |  |  | 20,771 |  |  |  | 867,916 |
Real estate – mortgage, residential |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk Grades 1 - 4 |  |  | 30,743 |  |  |  | 197,427 |  |  |  | 105,466 |  |  |  | 73,162 |  |  |  | 30,080 |  |  |  | 151,984 |  |  |  | 59,207 |  |  |  | 648,069 |
Risk Grades 5 - 6 |  |  | 22 |  |  |  | 1,282 |  |  |  | 24 |  |  |  | 2,112 |  |  |  | 2,508 |  |  |  | 6,852 |  |  |  | 878 |  |  |  | 13,678 |
Risk Grade 7 |  |  | — |  |  |  | 369 |  |  |  | 1,228 |  |  |  | 1,659 |  |  |  | 461 |  |  |  | 6,413 |  |  |  | 596 |  |  |  | 10,726 |
Total |  |  | 30,765 |  |  |  | 199,078 |  |  |  | 106,718 |  |  |  | 76,933 |  |  |  | 33,049 |  |  |  | 165,249 |  |  |  | 60,681 |  |  |  | 672,473 |
Current period gross charge-offs |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 13 |  |  |  | — |  |  |  | 13 |
Real estate – mortgage, farmland |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk Grades 1 - 4 |  |  | — |  |  |  | 729 |  |  |  | 1,328 |  |  |  | — |  |  |  | 1,657 |  |  |  | 2,372 |  |  |  | 184 |  |  |  | 6,270 |
Risk Grades 5 - 6 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 78 |  |  |  | 46 |  |  |  | 124 |
Total |  |  | — |  |  |  | 729 |  |  |  | 1,328 |  |  |  | — |  |  |  | 1,657 |  |  |  | 2,450 |  |  |  | 230 |  |  |  | 6,394 |
Consumer |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk Grades 1 - 4 |  |  | 18,113 |  |  |  | 18,718 |  |  |  | 5,544 |  |  |  | 4,515 |  |  |  | 2,292 |  |  |  | 1,320 |  |  |  | 7,284 |  |  |  | 57,786 |
Risk Grades 5 - 6 |  |  | 13 |  |  |  | 26 |  |  |  | 18 |  |  |  | 81 |  |  |  | 5 |  |  |  | 429 |  |  |  | 30 |  |  |  | 602 |
Risk Grade 7 |  |  | — |  |  |  | 50 |  |  |  | 109 |  |  |  | 115 |  |  |  | 104 |  |  |  | 141 |  |  |  | — |  |  |  | 519 |
Total |  |  | 18,126 |  |  |  | 18,794 |  |  |  | 5,671 |  |  |  | 4,711 |  |  |  | 2,401 |  |  |  | 1,890 |  |  |  | 7,314 |  |  |  | 58,907 |
Current period gross charge-offs |  |  | 38 |  |  |  | 97 |  |  |  | 39 |  |  |  | 12 |  |  |  | 36 |  |  |  | 6 |  |  |  | 269 |  |  |  | 497 |
Total Loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk Grades 1 - 4 |  | $ | 153,257 |  |  | $ | 714,961 |  |  | $ | 363,931 |  |  | $ | 285,509 |  |  | $ | 97,783 |  |  | $ | 336,360 |  |  | $ | 222,412 |  |  | $ | 2,174,213 |
Risk Grades 5 - 6 |  |  | 152 |  |  |  | 56,961 |  |  |  | 20,536 |  |  |  | 30,488 |  |  |  | 16,370 |  |  |  | 41,756 |  |  |  | 37,678 |  |  |  | 203,941 |
Risk Grade 7 |  |  | 21 |  |  |  | 41,545 |  |  |  | 7,681 |  |  |  | 1,774 |  |  |  | 2,542 |  |  |  | 16,138 |  |  |  | 9,470 |  |  |  | 79,171 |
Total |  | $ | 153,430 |  |  | $ | 813,467 |  |  | $ | 392,148 |  |  | $ | 317,771 |  |  | $ | 116,695 |  |  | $ | 394,254 |  |  | $ | 269,560 |  |  | $ | 2,457,325 |
Total current period gross charge-offs |  | $ | 38 |  |  | $ | 97 |  |  | $ | 703 |  |  | $ | 12 |  |  | $ | 36 |  |  | $ | 28 |  |  | $ | 395 |  |  | $ | 1,309 |
The following table presents an analysis of the change in the ACL by major loan segment for the period stated. Loan segments are presented as either commercial or consumer as follows: • Commercial – Commercial and industrial; PPP; real estate – construction, commercial; real estate – mortgage, commercial; and real estate – mortgage, farmland; and • Consumer – real estate – construction, residential; real estate – mortgage, residential; and consumer.
|  | For the three months ended March 31, 2023 |
(Dollars in thousands) |  | Commercial |  |  | Consumer |  |  | Total |
Balance, beginning of period |  | $ | 19,269 |  |  | $ | 3,670 |  |  | $ | 22,939 |
Impact of ASC 326 adoption |  |  | (470 | ) |  |  | 4,492 |  |  |  | 4,022 |
Charge-offs |  |  | (799 | ) |  |  | (510 | ) |  |  | (1,309 | )
Recoveries |  |  | 118 |  |  |  | 104 |  |  |  | 222 |
Net charge-offs |  |  | (681 | ) |  |  | (406 | ) |  |  | (1,087 | )
Provision for credit losses - loans |  |  | 3,161 |  |  |  | 939 |  |  |  | 4,100 |
Balance, end of period |  | $ | 21,279 |  |  | $ | 8,695 |  |  | $ | 29,974 |
There were no material changes to the assumptions, loss factors (both quantitative and qualitative), or reasonable and supportable forecasts used in the estimation of the ACL and the provision for credit losses for loans held for investment as of and for the three months ended March 31, 2023. The following table presents the amortized cost of collateral-dependent loans as of the date stated.
(Dollars in thousands) |  | March 31, 2023 |
Commercial and industrial |  | $ | 71,984 |
Real estate – construction, residential |  |  | 580 |
Real estate – mortgage, commercial |  |  | 12,641 |
Real estate – mortgage, residential |  |  | 772 |
Total collateral-dependent loans |  | $ | 85,977 |
Acquired Loans As of March 31, 2023, the amortized cost of PCD loans totaled $58.2 million with an estimated ACL of $639 thousand. The remaining non-credit discount on PCD loans was $5.3 million as of March 31, 2023. Modified Loans The Company closely monitors the performance of borrowers experiencing financial difficulty to understand the effectiveness of its loan modification efforts. The following table presents information on modified loans as of the date stated.
|  | March 31, 2023
|  | All Modifications
(Dollars in thousands) |  | Number of Loans |  |  | Amortized Cost |  |  | Amortized Cost of Modified Loans to Gross Loans by Category |  |  | Financial Effect
Modification - term extension |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  |  | 1 |  |  | $ | 37,271 |  |  |  | 6.53 | % |  | 13-month extension through January 2024
Modification - interest-only |  |  |  |  |  |  |  |  |  |  |
Real estate – mortgage, commercial |  |  | 2 |  |  |  | 3,381 |  |  |  | 0.39 | % |  | Interest-only payments for six months
Total |  |  | 3 |  |  | $ | 40,652 |  |  |  | 1.65 | % |  |
The modified commercial and industrial loan was performing in accordance with its modified terms during the first quarter 2023. The loan is collateral-dependent, management is closely monitoring, and the loan is adequately collateralized as of March 31, 2023. The following table presents an aging analysis of the amortized cost of loans modified in the preceding 12 months as of the date stated.
|  | March 31, 2023 |
|  | Payment Status (Amortized Cost) |
(Dollars in thousands) |  | Current Loans |  |  | 30-89 Days Past Due |  |  | 90+ Days Past Due |
Commercial and industrial |  | $ | 37,271 |  |  | $ | — |  |  | $ | — |
Real estate – mortgage, commercial |  |  | 3,360 |  |  |  | — |  |  |  | — |
Total modified loans |  | $ | 40,631 |  |  | $ | — |  |  | $ | — |
None of the loans in the preceding tables have had a payment default during the three months ended March 31, 2023. Six residential mortgage loans with a total amortized cost of $645 thousand we re in the process of foreclosure as of March 31, 2023, compared to none as of December 31, 2022. Pre-ASC 326 Adoption Disclosures Prior to the adoption of ASC 326 on January 1, 2023, the Company calculated the allowance for loan losses under the incurred loss methodology. The following disclosures are presented under this previously applicable GAAP for the applicable prior periods. The following table presents the aging of the amortized cost of loans held for investment as of the date stated.
|  | December 31, 2022 |
(Dollars in thousands) |  | 30-59 Days Past Due |  |  | 60-89 Days Past Due |  |  | Greater than 90 Days Past Due & Accruing |  |  | Nonaccrual |  |  | Total Past Due & Nonaccrual |  |  | PCI Loans |  |  | Current Loans |  |  | Total Loans |
Commercial and industrial |  | $ | 488 |  |  | $ | 279 |  |  | $ | — |  |  | $ | 2,314 |  |  | $ | 3,081 |  |  | $ | 1,481 |  |  | $ | 585,487 |  |  | $ | 590,049 |
Paycheck Protection Program |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 11,967 |  |  |  | 11,967 |
Real estate – construction, commercial |  |  | 1,136 |  |  |  | 19 |  |  |  | — |  |  |  | 714 |  |  |  | 1,869 |  |  |  | — |  |  |  | 181,432 |  |  |  | 183,301 |
Real estate – construction, residential |  |  | 1,416 |  |  |  | 1,204 |  |  |  | — |  |  |  | — |  |  |  | 2,620 |  |  |  | 7 |  |  |  | 73,972 |  |  |  | 76,599 |
Real estate – mortgage, commercial |  |  | 6,199 |  |  |  | 297 |  |  |  | 6,234 |  |  |  | 1,658 |  |  |  | 14,388 |  |  |  | 51,223 |  |  |  | 799,378 |  |  |  | 864,989 |
Real estate – mortgage, residential |  |  | 4,544 |  |  |  | 231 |  |  |  | 1,998 |  |  |  | 5,143 |  |  |  | 11,916 |  |  |  | 5,678 |  |  |  | 614,178 |  |  |  | 631,772 |
Real estate – mortgage, farmland |  |  | — |  |  |  | 75 |  |  |  | — |  |  |  | — |  |  |  | 75 |  |  |  | — |  |  |  | 6,524 |  |  |  | 6,599 |
Consumer |  |  | 880 |  |  |  | 200 |  |  |  | 28 |  |  |  | 495 |  |  |  | 1,603 |  |  |  | 359 |  |  |  | 45,461 |  |  |  | 47,423 |
Less: deferred loan fees, net of costs |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | (1,640 | ) |  |  | (1,640 | )
Total Loans |  | $ | 14,663 |  |  | $ | 2,305 |  |  | $ | 8,260 |  |  | $ | 10,324 |  |  | $ | 35,552 |  |  | $ | 58,748 |  |  | $ | 2,316,759 |  |  | $ | 2,411,059 |
The following table presents the aging of the amortized cost of PCI loans as of the date stated.
|  | December 31, 2022 |
(Dollars in thousands) |  | 30-89 Days Past Due |  |  | Greater than 90 Days Past Due & Accruing |  |  | Current Loans |  |  | Total Loans |
Commercial and industrial |  | $ | — |  |  | $ | — |  |  | $ | 1,481 |  |  | $ | 1,481 |
Real estate – construction, commercial |  |  | — |  |  |  | — |  |  |  | 7 |  |  |  | 7 |
Real estate – mortgage, commercial |  |  | — |  |  |  | — |  |  |  | 51,223 |  |  |  | 51,223 |
Real estate – mortgage, residential |  |  | 354 |  |  |  | — |  |  |  | 5,324 |  |  |  | 5,678 |
Consumer |  |  | — |  |  |  | — |  |  |  | 359 |  |  |  | 359 |
Total PCI Loans |  | $ | 354 |  |  | $ | — |  |  | $ | 58,394 |  |  | $ | 58,748 |
The following table presents the outstanding principal balance and related recorded investment of acquired loans included in the consolidated balance sheets as of the date stated.
(Dollars in thousands) |  | December 31, 2022 |
PCI loans |  |  |
Outstanding principal balance |  | $ | 64,911 |
Recorded investment |  |  | 58,748 |
Purchased performing loans |  |  |
Outstanding principal balance |  |  | 513,461 |
Recorded investment |  |  | 511,752 |
Total acquired loans |  |  |
Outstanding principal balance |  |  | 578,372 |
Recorded investment |  |  | 570,500 |
The following table presents the changes in accretable yield for PCI loans for the period stated.
(Dollars in thousands) |  | For the three months ended March 31, 2022 |
Balance, beginning of period |  | $ | 16,849 |
Accretion |  |  | (3,512 | )
Balance, end of period |  | $ | 13,337 |
The following table presents a summary of the loan portfolio individually and collectively evaluated for impairment as of the date stated.
|  | December 31, 2022 |
(Dollars in thousands) |  | Individually Evaluated for Impairment |  |  | Collectively Evaluated for Impairment |  |  | Total Loan Balances |  |  | Related Allowance for Loan Losses |
PCI loans: |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | — |  |  | $ | 1,481 |  |  | $ | 1,481 |  |  | $ | — |
Real estate – construction, commercial |  |  | — |  |  |  | 7 |  |  |  | 7 |  |  |  | — |
Real estate – mortgage, commercial |  |  | — |  |  |  | 51,223 |  |  |  | 51,223 |  |  |  | 3 |
Real estate – mortgage, residential |  |  | — |  |  |  | 5,678 |  |  |  | 5,678 |  |  |  | — |
Consumer |  |  | — |  |  |  | 359 |  |  |  | 359 |  |  |  | — |
Total PCI loans |  |  | — |  |  |  | 58,748 |  |  |  | 58,748 |  |  |  | 3 |
Originated and purchased performing loans: |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  |  | 39,247 |  |  |  | 549,321 |  |  |  | 588,568 |  |  |  | 15,272 |
Real estate – construction, commercial |  |  | 521 |  |  |  | 182,773 |  |  |  | 183,294 |  |  |  | 1,637 |
Real estate – construction, residential |  |  | — |  |  |  | 76,599 |  |  |  | 76,599 |  |  |  | 628 |
Real estate – mortgage, commercial |  |  | 4,567 |  |  |  | 809,199 |  |  |  | 813,766 |  |  |  | 2,353 |
Real estate – mortgage, residential |  |  | 835 |  |  |  | 625,259 |  |  |  | 626,094 |  |  |  | 1,760 |
Real estate – mortgage, farmland |  |  | — |  |  |  | 6,599 |  |  |  | 6,599 |  |  |  | 4 |
Consumer |  |  | — |  |  |  | 47,064 |  |  |  | 47,064 |  |  |  | 1,282 |
Total originated and purchased performing loans |  |  | 45,170 |  |  |  | 2,296,814 |  |  |  | 2,341,984 |  |  |  | 22,936 |
Gross loans |  |  | 45,170 |  |  |  | 2,355,562 |  |  |  | 2,400,732 |  |  |  | 22,939 |
Less: deferred loan fees, net of costs |  |  | — |  |  |  | — |  |  |  | (1,640 | ) |  |  | — |
Total |  | $ | 45,170 |  |  | $ | 2,355,562 |  |  | $ | 2,399,092 |  |  | $ | 22,939 |
The table above excludes PPP loans of $12.0 million as of December 31, 2022. PPP loans are fully guaranteed by the U.S. government; therefore, the Company recorded no allowance for loan losses for these loans. The following tables present information related to impaired loans held for investment by loan type as of and for the dates presented.
|  | December 31, 2022 |
(Dollars in thousands) |  | Recorded Investment |  |  | Unpaid Principal Balance |  |  | Related Allowance |
With no specific allowance recorded: |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 1,309 |  |  | $ | 1,289 |  |  | $ | — |
Real estate – construction, commercial |  |  | 521 |  |  |  | 521 |  |  |  | — |
Real estate – mortgage, commercial |  |  | 4,438 |  |  |  | 4,404 |  |  |  | — |
Real estate – mortgage, residential |  |  | 835 |  |  |  | 834 |  |  |  | — |
With an allowance recorded: |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | 37,938 |  |  | $ | 37,911 |  |  | $ | 3,178 |
Real estate – mortgage, commercial |  |  | 129 |  |  |  | 126 |  |  |  | 1 |
Total |  | $ | 45,170 |  |  | $ | 45,085 |  |  | $ | 3,179 |
|  | For the three months ended March 31, 2022 |
(Dollars in thousands) |  | Average Recorded Investment |  |  | Interest Income Recognized |
With no specific allowance recorded: |  |  |  |  |  |
Commercial and industrial |  | $ | 5,305 |  |  | $ | 62 |
Real estate – construction, commercial |  |  | 524 |  |  |  | — |
Real estate – mortgage, commercial |  |  | 11,880 |  |  |  | 48 |
Real estate – mortgage, residential |  |  | 1,342 |  |  |  | 14 |
With an allowance recorded: |  |  |  |  |  |
Commercial and industrial |  | $ | 3,290 |  |  | $ | — |
Real estate – mortgage, commercial |  |  | 88 |  |  |  | — |
Real estate – mortgage, residential |  |  | 59 |  |  |  | — |
Total |  | $ | 22,488 |  |  | $ | 124 |
Impaired loans also include TDRs, and as of December 31, 2022, there were 11 TDRs totaling $1.1 million. The following table presents the analysis of the change in the allowance for loan losses by loan type for the period stated.
(Dollars in thousands) |  | For the three months ended March 31, 2022 |
Allowance for loan losses, beginning of period |  | $ | 12,121 |
Charge-offs |  |  |
Commercial and industrial |  |  | (2,401 | )
Real estate – construction |  |  | (123 | )
Real estate – mortgage |  |  | (16 | )
Consumer |  |  | (279 | )
Total charge-offs |  |  | (2,819 | )
Recoveries |  |  |
Commercial and industrial |  |  | 74 |
Real estate – construction |  |  | 12 |
Real estate – mortgage |  |  | 4 |
Consumer |  |  | 121 |
Total recoveries |  |  | 211 |
Net charge-offs |  |  | (2,608 | )
Provision for loan losses |  |  | 2,500 |
Allowance for loan losses, end of period |  | $ | 12,013 |
The following table presents the amortized cost of loans held for investment by internal loan grade as of the date stated.
|  | December 31, 2022 |
(Dollars in thousands) |  | Grade 1 Prime |  |  | Grade 2 Desirable |  |  | Grade 3 Good |  |  | Grade 4 Acceptable |  |  | Grade 5 Pass/Watch |  |  | Grade 6 Special Mention |  |  | Grade 7 Substandard |  |  | Total |
PCI loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 1,369 |  |  | $ | — |  |  | $ | 112 |  |  | $ | — |  |  | $ | 1,481 |
Real estate – construction, commercial |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 7 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 7 |
Real estate – mortgage, commercial |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 22,778 |  |  |  | 26,059 |  |  |  | 1,700 |  |  |  | 686 |  |  |  | 51,223 |
Real estate – mortgage residential |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,453 |  |  |  | 1,985 |  |  |  | — |  |  |  | 2,240 |  |  |  | 5,678 |
Consumer |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 353 |  |  |  | — |  |  |  | 6 |  |  |  | 359 |
Total PCI loans |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 25,607 |  |  |  | 28,397 |  |  |  | 1,812 |  |  |  | 2,932 |  |  |  | 58,748 |
Originated and purchased performing loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial and industrial |  |  | 318 |  |  |  | 885 |  |  |  | 193,144 |  |  |  | 312,278 |  |  |  | 38,552 |  |  |  | 2,834 |  |  |  | 40,557 |  |  |  | 588,568 |
Paycheck Protection Program |  |  | 11,967 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 11,967 |
Real estate – construction, commercial |  |  | — |  |  |  | 361 |  |  |  | 14,223 |  |  |  | 156,027 |  |  |  | 8,504 |  |  |  | 3,365 |  |  |  | 814 |  |  |  | 183,294 |
Real estate – construction, residential |  |  | — |  |  |  | — |  |  |  | 3,110 |  |  |  | 72,327 |  |  |  | 1,162 |  |  |  | — |  |  |  | — |  |  |  | 76,599 |
Real estate – mortgage, commercial |  |  | — |  |  |  | 2,330 |  |  |  | 187,648 |  |  |  | 561,554 |  |  |  | 54,352 |  |  |  | 2,048 |  |  |  | 5,834 |  |  |  | 813,766 |
Real estate – mortgage residential |  |  | — |  |  |  | 7,311 |  |  |  | 233,697 |  |  |  | 365,511 |  |  |  | 11,858 |  |  |  | — |  |  |  | 7,717 |  |  |  | 626,094 |
Real estate – mortgage, farmland |  |  | 549 |  |  |  | — |  |  |  | 1,315 |  |  |  | 4,609 |  |  |  | 126 |  |  |  | — |  |  |  | — |  |  |  | 6,599 |
Consumer |  |  | 197 |  |  |  | — |  |  |  | 21,330 |  |  |  | 24,731 |  |  |  | 256 |  |  |  | — |  |  |  | 550 |  |  |  | 47,064 |
Total originated and purchased performing loans |  |  | 13,031 |  |  |  | 10,887 |  |  |  | 654,467 |  |  |  | 1,497,037 |  |  |  | 114,810 |  |  |  | 8,247 |  |  |  | 55,472 |  |  |  | 2,353,951 |
Gross loans |  | $ | 13,031 |  |  | $ | 10,887 |  |  | $ | 654,467 |  |  | $ | 1,522,644 |  |  | $ | 143,207 |  |  | $ | 10,059 |  |  | $ | 58,404 |  |  | $ | 2,412,699 |
Less: deferred loan fees, net of costs |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (1,640 | )
Total |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | $ | 2,411,059 |
There were no loans classified as doubtful or loss as of December 31, 2022.

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