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Loans and Allowance for Credit Losses | 12 Months Ended
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Dec. 31, 2023
Receivables [Abstract] |
Loans and Allowance for Credit Losses | Note 4. Loans and Allowance for Credit Losses The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost and off-balance sheet credit exposures, which included loans held for investment and commitments to extend credit (loan commitments and stand-by letters of credit), respectively. Results for reporting periods beginning after January 1, 2023 are presented under ASC 326, while prior period amounts are reported in accordance with previously applicable GAAP. All loan and ACL information presented as of December 31, 2023 is in accordance with ASC 326. 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 loans held for investment, including Paycheck Protection Program ("PPP") loans, as of the dates stated.
|  | December 31, |
(Dollars in thousands) |  | 2023 |  |  | 2022 |
Commercial and industrial |  | $ | 506,558 |  |  | $ | 590,049 |
Paycheck Protection Program |  |  | 2,386 |  |  |  | 11,967 |
Real estate – construction, commercial |  |  | 180,052 |  |  |  | 183,301 |
Real estate – construction, residential |  |  | 75,832 |  |  |  | 76,599 |
Real estate – mortgage, commercial |  |  | 870,540 |  |  |  | 864,989 |
Real estate – mortgage, residential |  |  | 730,110 |  |  |  | 631,772 |
Real estate – mortgage, farmland |  |  | 5,470 |  |  |  | 6,599 |
Consumer |  |  | 59,169 |  |  |  | 47,423 |
Gross loans |  |  | 2,430,117 |  |  |  | 2,412,699 |
Deferred loan fees, net of costs |  |  | 830 |  |  |  | (1,640 | )
Total |  | $ | 2,430,947 |  |  | $ | 2,411,059 |
The Company has pledged certain commercial and residential mortgages as collateral for borrowings with the FHLB. Loans totaling $767.1 million and $436.0 million were pledged as of December 31, 2023 and 2022, respectively. T he Company has pledged certain commercial and industrial loans totaling $161.0 million as collateral for borrowings with the FRB Discount Window as of December 31, 2023. A dditionally, PPP loans were pledged as collateral for Paycheck Protection Program Liquidity Facility ("PPPLF") advances in the amount of $0 and $51 thousand as of December 31, 2023 and 2022, respectively. The following table present the aging of the recorded investment of loans held for investment by loan category as of the dates stated.
|  | December 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 |  | $ | 462,553 |  |  | $ | 2,235 |  |  | $ | 632 |  |  | $ | 1,709 |  |  | $ | 39,429 |  |  | $ | 506,558 |
Paycheck Protection Program |  |  | 2,386 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,386 |
Real estate – construction, commercial |  |  | 177,653 |  |  |  | 2,016 |  |  |  | — |  |  |  | — |  |  |  | 383 |  |  |  | 180,052 |
Real estate – construction, residential |  |  | 75,309 |  |  |  | 523 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 75,832 |
Real estate – mortgage, commercial |  |  | 855,263 |  |  |  | 2,109 |  |  |  | 714 |  |  |  | 574 |  |  |  | 11,880 |  |  |  | 870,540 |
Real estate – mortgage, residential |  |  | 717,141 |  |  |  | 5,101 |  |  |  | 288 |  |  |  | — |  |  |  | 7,580 |  |  |  | 730,110 |
Real estate – mortgage, farmland |  |  | 5,470 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 5,470 |
Consumer |  |  | 55,084 |  |  |  | 2,298 |  |  |  | 279 |  |  |  | 754 |  |  |  | 754 |  |  |  | 59,169 |
Deferred loan fees, net of costs |  |  | 830 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 830 |
Total Loans |  | $ | 2,351,689 |  |  | $ | 14,282 |  |  | $ | 1,913 |  |  | $ | 3,037 |  |  | $ | 60,026 |  |  | $ | 2,430,947 |
The following table presents the recorded investment of nonaccrual loans held for investment by loan category as of the date stated.
|  | December 31, 2023 |
(Dollars in thousands) |  | Nonaccrual Loans with No ACL |  |  | Nonaccrual Loans with an ACL |  |  | Total Nonaccrual Loans |
Commercial and industrial |  | $ | 1,487 |  |  | $ | 37,942 |  |  | $ | 39,429 |
Real estate – construction, commercial |  |  | — |  |  |  | 383 |  |  |  | 383 |
Real estate – construction, residential |  |  | — |  |  |  | — |  |  |  | — |
Real estate – mortgage, commercial |  |  | 2,024 |  |  |  | 9,856 |  |  |  | 11,880 |
Real estate – mortgage, residential |  |  | 577 |  |  |  | 7,003 |  |  |  | 7,580 |
Consumer |  |  | — |  |  |  | 754 |  |  |  | 754 |
Total |  | $ | 4,088 |  |  | $ | 55,938 |  |  | $ | 60,026 |
For the year ended December 31, 2023, the Company recognized $223 thousand of interest income from nonaccrual loans. Credit Quality Indicators The Company segments loans held for investment into risk categories based on relevant information about the expected ability of borrowers to repay debt, such as current financial information, historical payment performance, experience, collateral adequacy, credit documentation, and current economic trends, among other factors. Management assigns loan risk grades by a numerical system as an 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. Independent third-party loan reviews are periodically performed on the Company's loan portfolio and such reviews are used to validate management's determination of loan risk grades. Bank regulatory agencies also periodically review the Company's loan portfolio, including loan risk grades and may, on occasion, change a grade based on their judgment of the facts at the time of review. Risk Grade 1 – Strong: This grade is reserved for loans to the strongest of borrowers. These loans are to individuals or businesses where the probability of default is extremely low to the Bank and are secured with collateral where the loss given default is unlikely because of the source of repayment such as a lien on a deposit account held at the Bank. Character, credit history, and ability of individuals or company principals are excellent. High liquidity, minimum risk, strong ratios, and low servicing cost are present. Risk Grade 2 – Minimal: This grade is reserved for loans to borrowers who are deemed exceptionally strong. These loans are within established guidelines and where the borrowers have documented significant overall financial strength with consistent and predictable cash flows. These loans have excellent sources of repayment, significant balance sheet liquidity, no significant identifiable risk of collection, and conform in all respects to policy, underwriting standards, and federal and state regulations (no exceptions of any kind). In addition, guarantor support, when provided, is viewed as excellent. Risk Grade 3 – Acceptable: This grade is reserved for loans to borrowers who are deemed strong. These loans have adequate sources of repayment, with minimal 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. In addition, guarantor support, when provided, is viewed as strong. Risk Grade 4 – Satisfactory: This grade is given to satisfactory loans containing more, but deemed acceptable, risk and where the borrower is assessed as sound. These loans have adequate sources of repayment, with minimal 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. In addition, guarantor support, when provided, is viewed as satisfactory. Risk Grade 5 – Watch: This grade is for satisfactory loans containing acceptable but elevated risk. These loans are characterized by borrowers who exhibit signs of financial distress or experience unstable or unfavorable change(s) adversely impacting their current or expected financial condition. The borrower's management is deemed to be satisfactory, the collateral securing the loan may have decreased in value, the debt service coverage ratio is inconsistent or breakeven but mostly positive, and/or guarantor support, if any, is limited or marginal. 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 do not conform to underwriting guidelines and/or exceptions without mitigating factors, or have emerging weaknesses that may or may not be cured with the passage of time. 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. The probability of default is likely and may have occurred. 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) current or expected unprofitable operations, (2) inadequate debt service coverage, (3) declining or inadequate liquidity, (4) improper loan structure, (5) questionable or weak repayment sources, and (6) lack of well-defined secondary repayment source. There is a distinct possibility of loss and the Bank will sustain some loss if the deficiencies are not corrected. Risk Grade 8 – Doubtful: Loans classified doubtful have all the weaknesses inherent in loans classified substandard, with 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 is 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 credit losses. Risk Grade 9 – Loss: Loans classified loss are considered uncollectible and of such little value that 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 deemed uncollectible are charged off promptly against the allowance for credit losses. The following table presents the recorded investment of loans held for investment by internal loan risk grade by year of origination as of December 31, 2023. Also presented are current period gross charge-offs by loan type as of and for the year ended December 31, 2023.
|  | Term Loans Recorded Investment Basis by Origination Year |  |  |  |  |  |  |
(Dollars in thousands) |  | 2023 |  |  | 2022 |  |  | 2021 |  |  | 2020 |  |  | 2019 |  |  | Prior |  |  | Revolving Loans |  |  | Total |
Commercial and industrial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk Grades 1 - 4 |  | $ | 15,830 |  |  | $ | 114,291 |  |  | $ | 29,887 |  |  | $ | 25,429 |  |  | $ | 8,217 |  |  | $ | 14,200 |  |  | $ | 138,267 |  |  | $ | 346,121 |
Risk Grades 5 - 6 |  |  | 26,563 |  |  |  | 40,399 |  |  |  | 12,759 |  |  |  | 6,305 |  |  |  | 819 |  |  |  | 1,537 |  |  |  | 19,722 |  |  |  | 108,104 |
Risk Grade 7 |  |  | — |  |  |  | 877 |  |  |  | 3,623 |  |  |  | 829 |  |  |  | 543 |  |  |  | 134 |  |  |  | 9,191 |  |  |  | 15,197 |
Risk Grade 8 |  |  | — |  |  |  | 34,203 |  |  |  | 2,554 |  |  |  | — |  |  |  | — |  |  |  | 379 |  |  |  | — |  |  |  | 37,136 |
Total |  |  | 42,393 |  |  |  | 189,770 |  |  |  | 48,823 |  |  |  | 32,563 |  |  |  | 9,579 |  |  |  | 16,250 |  |  |  | 167,180 |  |  |  | 506,558 |
Current period gross charge-offs |  |  | 2,266 |  |  |  | 21,086 |  |  |  | 1,067 |  |  |  | 1,920 |  |  |  | 1,211 |  |  |  | 164 |  |  |  | 125 |  |  |  | 27,839 |
Paycheck Protection Program |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk Grades 1 - 4 |  |  | — |  |  |  | — |  |  |  | 2,386 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,386 |
Total |  |  | — |  |  |  | — |  |  |  | 2,386 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 2,386 |
Real estate – construction, commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk Grades 1 - 4 |  |  | 8,533 |  |  |  | 85,687 |  |  |  | 33,344 |  |  |  | 14,690 |  |  |  | 6,358 |  |  |  | 5,589 |  |  |  | 4,367 |  |  |  | 158,568 |
Risk Grades 5 - 6 |  |  | 4,213 |  |  |  | 11,072 |  |  |  | 760 |  |  |  | 293 |  |  |  | — |  |  |  | 738 |  |  |  | 3,827 |  |  |  | 20,903 |
Risk Grade 7 |  |  | 119 |  |  |  | 46 |  |  |  | 40 |  |  |  | — |  |  |  | — |  |  |  | 376 |  |  |  | — |  |  |  | 581 |
Total |  |  | 12,865 |  |  |  | 96,805 |  |  |  | 34,144 |  |  |  | 14,983 |  |  |  | 6,358 |  |  |  | 6,703 |  |  |  | 8,194 |  |  |  | 180,052 |
Current period gross charge-offs |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 8 |  |  |  | 28 |  |  |  | — |  |  |  | 36 |
Real estate – construction, residential |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk Grades 1 - 4 |  |  | 31,611 |  |  |  | 22,734 |  |  |  | 3,867 |  |  |  | 59 |  |  |  | 741 |  |  |  | 67 |  |  |  | 10,656 |  |  |  | 69,735 |
Risk Grades 5 - 6 |  |  | 1,486 |  |  |  | 2,672 |  |  |  | — |  |  |  | 167 |  |  |  | 200 |  |  |  | — |  |  |  | — |  |  |  | 4,525 |
Risk Grade 7 |  |  | 367 |  |  |  | 1,205 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1,572 |
Total |  |  | 33,464 |  |  |  | 26,611 |  |  |  | 3,867 |  |  |  | 226 |  |  |  | 941 |  |  |  | 67 |  |  |  | 10,656 |  |  |  | 75,832 |
Real estate – mortgage, commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk Grades 1 - 4 |  |  | 14,671 |  |  |  | 280,479 |  |  |  | 121,257 |  |  |  | 144,498 |  |  |  | 42,226 |  |  |  | 123,774 |  |  |  | 20,332 |  |  |  | 747,237 |
Risk Grades 5 - 6 |  |  | 2,841 |  |  |  | 25,075 |  |  |  | 9,038 |  |  |  | 19,597 |  |  |  | 12,921 |  |  |  | 27,778 |  |  |  | 4,214 |  |  |  | 101,464 |
Risk Grade 7 |  |  | 323 |  |  |  | — |  |  |  | 8,202 |  |  |  | 4,938 |  |  |  | 111 |  |  |  | 8,265 |  |  |  | — |  |  |  | 21,839 |
Total |  |  | 17,835 |  |  |  | 305,554 |  |  |  | 138,497 |  |  |  | 169,033 |  |  |  | 55,258 |  |  |  | 159,817 |  |  |  | 24,546 |  |  |  | 870,540 |
Real estate – mortgage, residential |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk Grades 1 - 4 |  |  | 51,042 |  |  |  | 218,375 |  |  |  | 121,872 |  |  |  | 69,165 |  |  |  | 27,877 |  |  |  | 132,986 |  |  |  | 55,327 |  |  |  | 676,644 |
Risk Grades 5 - 6 |  |  | 12,014 |  |  |  | 9,339 |  |  |  | 677 |  |  |  | 1,944 |  |  |  | 2,122 |  |  |  | 7,281 |  |  |  | 3,255 |  |  |  | 36,632 |
Risk Grade 7 |  |  | — |  |  |  | 2,240 |  |  |  | 2,446 |  |  |  | 1,812 |  |  |  | 943 |  |  |  | 9,307 |  |  |  | 85 |  |  |  | 16,833 |
Risk Grade 8 |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1 |  |  |  | — |  |  |  | 1 |
Total |  |  | 63,056 |  |  |  | 229,954 |  |  |  | 124,995 |  |  |  | 72,921 |  |  |  | 30,942 |  |  |  | 149,575 |  |  |  | 58,667 |  |  |  | 730,110 |
Current period gross charge-offs |  |  | — |  |  |  | 744 |  |  |  | — |  |  |  | 648 |  |  |  | — |  |  |  | 206 |  |  |  | 32 |  |  |  | 1,630 |
Real estate – mortgage, farmland |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk Grades 1 - 4 |  |  | — |  |  |  | 729 |  |  |  | 1,397 |  |  |  | — |  |  |  | 1,520 |  |  |  | 1,562 |  |  |  | 115 |  |  |  | 5,323 |
Risk Grades 5 - 6 |  |  | 147 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 147 |
Total |  |  | 147 |  |  |  | 729 |  |  |  | 1,397 |  |  |  | — |  |  |  | 1,520 |  |  |  | 1,562 |  |  |  | 115 |  |  |  | 5,470 |
Consumer |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk Grades 1 - 4 |  |  | 26,535 |  |  |  | 14,215 |  |  |  | 3,598 |  |  |  | 2,724 |  |  |  | 1,137 |  |  |  | 466 |  |  |  | 8,766 |  |  |  | 57,441 |
Risk Grades 5 - 6 |  |  | 61 |  |  |  | 42 |  |  |  | 12 |  |  |  | 12 |  |  |  | 8 |  |  |  | 433 |  |  |  | 495 |  |  |  | 1,063 |
Risk Grade 7 |  |  | 14 |  |  |  | 259 |  |  |  | 115 |  |  |  | 131 |  |  |  | 44 |  |  |  | 102 |  |  |  | — |  |  |  | 665 |
Total |  |  | 26,610 |  |  |  | 14,516 |  |  |  | 3,725 |  |  |  | 2,867 |  |  |  | 1,189 |  |  |  | 1,001 |  |  |  | 9,261 |  |  |  | 59,169 |
Current period gross charge-offs |  |  | 1,493 |  |  |  | 421 |  |  |  | 218 |  |  |  | 60 |  |  |  | 53 |  |  |  | 65 |  |  |  | 4 |  |  |  | 2,314 |
Total Loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Risk Grades 1 - 4 |  | $ | 148,222 |  |  | $ | 736,510 |  |  | $ | 317,608 |  |  | $ | 256,565 |  |  | $ | 88,076 |  |  | $ | 278,644 |  |  | $ | 237,830 |  |  | $ | 2,063,455 |
Risk Grades 5 - 6 |  |  | 47,325 |  |  |  | 88,599 |  |  |  | 23,246 |  |  |  | 28,318 |  |  |  | 16,070 |  |  |  | 37,767 |  |  |  | 31,513 |  |  |  | 272,838 |
Risk Grade 7 |  |  | 823 |  |  |  | 4,627 |  |  |  | 14,426 |  |  |  | 7,710 |  |  |  | 1,641 |  |  |  | 18,184 |  |  |  | 9,276 |  |  |  | 56,687 |
Risk Grade 8 |  |  | — |  |  |  | 34,203 |  |  |  | 2,554 |  |  |  | — |  |  |  | — |  |  |  | 380 |  |  |  | — |  |  |  | 37,137 |
Total |  | $ | 196,370 |  |  | $ | 863,939 |  |  | $ | 357,834 |  |  | $ | 292,593 |  |  | $ | 105,787 |  |  | $ | 334,975 |  |  | $ | 278,619 |  |  | $ | 2,430,117 |
Total current period gross charge-offs |  | $ | 3,759 |  |  | $ | 22,251 |  |  | $ | 1,285 |  |  | $ | 2,628 |  |  | $ | 1,272 |  |  | $ | 463 |  |  | $ | 161 |  |  | $ | 31,819 |
Of the $37.1 million of commercial and industrial loans classified as doubtful (risk grade 8) as of December 31, 2023, $34.2 million were attributable to a group of specialty finance loans with a collective specific reserve, a component of the ACL, of $9.6 million as of the same date. There were no loans classified as loss (risk grade 9) as of December 31, 2023. The following table presents an analysis of the change in the ACL by major loan segment as of 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; • Consumer – real estate – construction, residential; real estate – mortgage, residential; and consumer.
|  | December 31, 2023 |
(Dollars in thousands) |  | Commercial |  |  | Consumer |  |  | Total |
Balance, beginning of period |  | $ | 27,070 |  |  | $ | 3,670 |  |  | $ | 30,740 |
Impact of ASC 326 adoption |  |  | 2,926 |  |  |  | 4,492 |  |  |  | 7,418 |
Charge-offs |  |  | (27,874 | ) |  |  | (3,945 | ) |  |  | (31,819 | )
Recoveries |  |  | 3,984 |  |  |  | 867 |  |  |  | 4,851 |
Net charge-offs |  |  | (23,890 | ) |  |  | (3,078 | ) |  |  | (26,968 | )
Provision for credit losses - loans |  |  | 21,648 |  |  |  | 3,055 |  |  |  | 24,703 |
Balance, end of period |  | $ | 27,754 |  |  | $ | 8,139 |  |  | $ | 35,893 |
The increase in the ACL from the prior period was primarily attributable to specific reserve needs for a portfolio of specialty finance loans (classified as commercial and industrial loans) and the adoption of ASC 326 effective January 1, 2023, partially offset by net chargeoffs. Of the $31.8 million in gross loan charge-offs for the year ended December 31, 2023, $19.5 million were for speciality finance loans originated in 2022. 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 for the year ended December 31, 2023. Excluded from the ACL as of December 31, 2023 was $13.2 million of accrued interest attributable to loans held for investment, which is included in accrued interest receivable on the consolidated balance sheet. The following table presents accrued interest receivable by loan type reversed from interest income associated with loans held for investment that were placed on nonaccrual status during the year ended December 31, 2023.
(Dollars in thousands) |  | December 31, 2023 |
Commercial and industrial |  | $ | 179 |
Real estate – construction, commercial |  |  | 7 |
Real estate – construction, residential |  |  | 29 |
Real estate – mortgage, commercial |  |  | 300 |
Real estate – mortgage, residential |  |  | 80 |
Consumer |  |  | 16 |
Total |  | $ | 611 |
The following table presents the amortized cost of collateral-dependent loans as of the date stated.
(Dollars in thousands) |  | December 31, 2023 |
Commercial and industrial |  | $ | 67,555 |
Real estate – construction, commercial |  |  | 6,309 |
Real estate – construction, residential |  |  | 2,303 |
Real estate – mortgage, commercial |  |  | 13,401 |
Real estate – mortgage, residential |  |  | 7,337 |
Total collateral-dependent loans |  | $ | 96,905 |
Acquired Loans As of December 31, 2023, the recorded investment of PCD loans totaled $51.0 million with an estimated ACL of $529 thousand. The remaining non-credit discount on PCD loans was $3.8 million as of December 31, 2023. Modified Loans The Company closely monitors the performance of borrowers experiencing financial difficulty that have been granted certain loan modifications it would otherwise not consider. The following table presents information on modified loans as of the date stated.
|  | December 31, 2023
(Dollars in thousands) |  | Number of Loans |  |  | Recorded Investment |  |  | Recorded Investment of Modified Loans to Gross Loans by Category |  |  | Financial Effect
Modification - term extension and forbearance |  |  |  |  |  |  |  |  |  |  | Forbearance agreements
Commercial and industrial (1) |  |  | 3 |  |  | $ | 36,930 |  |  |  | 7.29 | % |  |
Real estate – mortgage, commercial |  |  | 2 |  |  |  | 6,087 |  |  |  | 0.70 | % |  |
Real estate – mortgage, residential |  |  | 1 |  |  |  | 129 |  |  |  | 0.02 | % |  |
Real estate – construction, residential |  |  | 1 |  |  |  | 155 |  |  |  | 0.20 | % |  |
Modification - payment deferral |  |  |  |  |  |  |  |  |  |  | Payment deferral 6-9 months
Commercial and industrial |  |  | 1 |  |  |  | 182 |  |  |  | 0.04 | % |  |
Real estate - mortgage, residential |  |  | 1 |  |  |  | 577 |  |  |  | 0.08 | % |  |
Total |  |  | 9 |  |  | $ | 44,060 |  |  |  | 1.81 | % |  |
(1) Included in this balance was a $32.8 million loan that was modified via a forbearance agreement in the second quarter of 2023 under which the borrower defaulted in the same period. The Company received cash payments of $4.5 million in the first half of 2023 for interest, which were applied to the book principal balance of the loan. This loan is collateral-dependent, is on nonaccrual status, and has a specific reserve of $9.6 million as of December 31, 2023. Subsequent to December 31, 2023, the Company received cash payments totaling $3.0 million, which were applied to the book principal balance of the loan.
The following table presents an aging analysis of the recorded investment of loans modified as of the date stated.
|  | December 31, 2023 |
(Dollars in thousands) |  | Current Loans |  |  | 30-89 Days Past Due |  |  | Greater than 90 Days Past Due & Accruing |  |  | Nonaccrual |  |  | Total |
Commercial and industrial |  | $ | 1,626 |  |  | $ | — |  |  | $ | — |  |  | $ | 35,486 |  |  | $ | 37,112 |
Real estate – mortgage, commercial |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 6,087 |  |  |  | 6,087 |
Real estate – mortgage, residential |  |  | 129 |  |  |  | — |  |  |  | — |  |  |  | 577 |  |  |  | 706 |
Real estate – construction, residential |  |  | 155 |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 155 |
Total modified loans |  | $ | 1,910 |  |  | $ | — |  |  | $ | — |  |  | $ | 42,150 |  |  | $ | 44,060 |
As of and for the year ended December 31, 2023, three nonaccrual loans in the table above totaling $33.5 million had a payment default, the largest of which was the $32.8 million commercial and industrial loan noted above. Four residential mortgage loans with a total recorded investment of $134 thousand were in the process of foreclosure as of December 31, 2023, and 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 |  |  | $ | — |  |  | $ | 68,039 |  |  | $ | 68,806 |  |  | $ | 1,481 |  |  | $ | 519,762 |  |  | $ | 590,049 |
Paycheck Protection Program |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 11,967 |  |  |  | 11,967 |
Real estate – construction, commercial |  |  | 1,137 |  |  |  | 19 |  |  |  | — |  |  |  | 714 |  |  |  | 1,870 |  |  |  | — |  |  |  | 181,431 |  |  |  | 183,301 |
Real estate – construction, residential |  |  | 1,416 |  |  |  | 1,204 |  |  |  | — |  |  |  | — |  |  |  | 2,620 |  |  |  | 7 |  |  |  | 73,972 |  |  |  | 76,599 |
Real estate – mortgage, commercial |  |  | 6,198 |  |  |  | 297 |  |  |  | 6,234 |  |  |  | 1,658 |  |  |  | 14,387 |  |  |  | 51,223 |  |  |  | 799,379 |  |  |  | 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 |  |  | $ | 76,049 |  |  | $ | 101,277 |  |  | $ | 58,748 |  |  | $ | 2,251,034 |  |  | $ | 2,411,059 |
The following table presents the aging of the recorded investment of PCI loans as of the date stated.
|  | December 31, 2022 |
(Dollars in thousands) |  | Current Loans |  |  | 30-89 Days Past Due |  |  | Greater than 90 Days Past Due & Accruing |  |  | 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 these acquired loans included in the consolidated balance sheet 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 the accretable yield for PCI loans for the period stated.
(Dollars in thousands) |  | December 31, 2022 |
Balance, beginning of period |  | $ | 16,849 |
Accretion |  |  | (9,410 | )
Reclassification of nonaccretable difference due to improvement in expected cash flows |  |  | 3,804 |
Other changes, net |  |  | (71 | )
Balance, end of period |  | $ | 11,172 |
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 |  |  | 67,654 |  |  |  | 520,914 |  |  |  | 588,568 |  |  |  | 23,073 |
Real estate – construction, commercial |  |  | 521 |  |  |  | 182,773 |  |  |  | 183,294 |  |  |  | 1,637 |
Real estate – construction, residential |  |  | — |  |  |  | 76,599 |  |  |  | 76,599 |  |  |  | 628 |
Real estate – mortgage, commercial |  |  | 4,634 |  |  |  | 809,132 |  |  |  | 813,766 |  |  |  | 2,353 |
Real estate – mortgage, residential |  |  | 834 |  |  |  | 625,260 |  |  |  | 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 |  |  | 73,643 |  |  |  | 2,268,341 |  |  |  | 2,341,984 |  |  |  | 30,737 |
Gross loans |  |  | 73,643 |  |  |  | 2,327,089 |  |  |  | 2,400,732 |  |  |  | 30,740 |
Less: deferred loan fees, net of costs |  |  | — |  |  |  | (1,640 | ) |  |  | (1,640 | ) |  |  | — |
Total |  | $ | 73,643 |  |  | $ | 2,325,449 |  |  | $ | 2,399,092 |  |  | $ | 30,740 |
The tables above exclude 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 table presents information related to impaired loans held for investment by loan type as of date stated.
| December 31, 2022 |
(Dollars in thousands) | Recorded Investment |  |  | Unpaid Principal Balance |  |  | Related Allowance |
With no specific allowance recorded: |  |  |  |  |  |  |  |
Commercial and industrial | $ | 1,268 |  |  | $ | 1,289 |  |  | $ | — |
Real estate – construction, commercial |  | 521 |  |  |  | 521 |  |  |  | — |
Real estate – mortgage, commercial |  | 4,508 |  |  |  | 4,504 |  |  |  | — |
Real estate – mortgage, residential |  | 834 |  |  |  | 834 |  |  |  | — |
With an allowance recorded: |  |  |  |  |  |  |  |
Commercial and industrial | $ | 66,386 |  |  | $ | 66,386 |  |  | $ | 11,605 |
Real estate – mortgage, commercial |  | 126 |  |  |  | 126 |  |  |  | 1 |
Total | $ | 73,643 |  |  | $ | 73,660 |  |  | $ | 11,606 |
Impaired loans also include TDRs. As of December 31, 2022, there were 12 TDRs totaling $38.3 million. The following table presents an analysis of the change in the allowance for loans losses by loan type as of the dates and for the periods stated.
|  | December 31, |
(Dollars in thousands) |  | 2022 |  |  | 2021 |
Allowance for loan losses, beginning of period |  | $ | 12,121 |  |  | $ | 13,827 |
Charge-offs |  |  |  |  |  |
Commercial and industrial |  |  | (4,779 | ) |  |  | (1,098 | )
Real estate – construction |  |  | (162 | ) |  |  | (195 | )
Real estate – mortgage |  |  | (1,824 | ) |  |  | (125 | )
Consumer |  |  | (1,686 | ) |  |  | (1,123 | )
Total charge-offs |  |  | (8,451 | ) |  |  | (2,541 | )
Recoveries |  |  |  |  |  |
Commercial and industrial |  |  | 442 |  |  |  | 196 |
Real estate – construction |  |  | 40 |  |  |  | — |
Real estate – mortgage |  |  | 409 |  |  |  | 98 |
Consumer |  |  | 492 |  |  |  | 424 |
Total recoveries |  |  | 1,383 |  |  |  | 718 |
Net charge-offs |  |  | (7,068 | ) |  |  | (1,823 | )
Provision for loan losses |  |  | 25,687 |  |  |  | 117 |
Allowance for loan losses, end of period |  | $ | 30,740 |  |  | $ | 12,121 |
The following table presents the amortized cost of loans held for investment by internal loan risk 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 |  |  | Grade 8 Doubtful |  |  | 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 |  |  |  | 192,393 |  |  |  | 291,204 |  |  |  | 31,902 |  |  |  | 2,834 |  |  |  | 69,032 |  |  |  | — |  |  |  | 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 |  |  |  | 0 |  |  |  | 21,330 |  |  |  | 24,731 |  |  |  | 256 |  |  |  | — |  |  |  | 550 |  |  |  | — |  |  |  | 47,064 |
Total originated and purchased performing loans: |  |  | 13,031 |  |  |  | 10,887 |  |  |  | 653,716 |  |  |  | 1,475,963 |  |  |  | 108,160 |  |  |  | 8,247 |  |  |  | 83,947 |  |  |  | — |  |  |  | 2,353,951 |
Gross loans |  | $ | 13,031 |  |  | $ | 10,887 |  |  | $ | 653,716 |  |  | $ | 1,501,570 |  |  | $ | 136,557 |  |  | $ | 10,059 |  |  | $ | 86,879 |  |  | $ | — |  |  | $ | 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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