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Loans and Allowance for Credit Losses | 12 Months Ended
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Dec. 31, 2022
Loans and Allowance for Credit Losses [Abstract] |
Loans and Allowance for Credit Losses | NOTE 4 – Loans and Allowance for Credit Losses The Company makes loans to individuals and small businesses for various personal and commercial purposes primarily in the Upstate, Midlands, and Lowcountry regions of South Carolina, the Triangle and Triad regions of North Carolina as well as Atlanta, Georgia. The Company’s loan portfolio is not concentrated in loans to any single borrower or a relatively small number of borrowers. The Company focuses its lending activities primarily on the professional markets in these regions including doctors, dentists, and small business owners. The principal component of the loan portfolio is loans secured by real estate mortgages which account for 84.8% of total loans at December 31, 2022. Commercial loans comprise 57.1% of total real estate loans and consumer loans account for 42.9%. Commercial real estate loans are further categorized into owner occupied which represents 18.7% of total loans and non-owner occupied loans which represents 26.3%. Commercial construction loans represent only 3.4% of the total loan portfolio. In addition to monitoring potential concentrations of loans to particular borrowers or groups of borrowers, industries and geographic regions, management monitors exposure to credit risk from concentrations of lending products and practices such as loans that subject borrowers to substantial payment increases (e.g. principal deferral periods, loans with initial interest-only periods, etc.), and loans with high loan-to-value ratios. Additionally, there are industry practices that could subject the Company to increased credit risk should economic conditions change over the course of a loan’s life. For example, the Company makes variable rate loans and fixed rate principal-amortizing loans with maturities prior to the loan being fully paid (i.e. balloon payment loans). The various types of loans are individually underwritten and monitored to manage the associated risks. Paycheck Protection Program (“PPP”) On March 27, 2020, President Trump signed the Coronavirus Aid, Relief, and Economic Security Act (the “CARES” Act or the “Act”) to provide emergency assistance and health care response for individuals, families, and businesses affected by the coronavirus pandemic. The Small Business Administration (“SBA”) received funding and authority through the Act to modify existing loan programs and establish a new loan program to assist small businesses nationwide adversely impacted by the COVID-19 emergency. The Act temporarily permits the SBA to guarantee 100% of certain loans under a new program titled the “Paycheck Protection Program” and also provides for forgiveness of up to the full principal amount of qualifying loans guaranteed under the PPP. In an effort to assist our clients as best we could through the pandemic, we became an approved SBA lender in March 2020 and processed 853 loans under the PPP for a total of $97.5 million, receiving SBA lender fee income of $3.9 million. As the regulations and guidance for PPP loans and the forgiveness process continued to change and evolve, management recognized the operational risk and complexity associated with this portfolio and decided to pursue the sale of the PPP loan portfolio to a third party better suited to support and serve our PPP clients through the loan forgiveness process. The loan sale allowed our team to focus on serving our clients and proactively monitoring and addressing credit risk brought on by the pandemic. On June 26, 2020, we completed the sale of our PPP loan portfolio to The Loan Source Inc., together with its servicing partner, ACAP SME LLC, and immediately recognized SBA lender fee income of $2.2 million, net of sale and processing costs, which is included in other noninterest income in the consolidated financial statements. The SBA offered a second round of PPP loans through May 31, 2021; however, we did not originate any new PPP loans. We did, however, receive referral fees of approximately $268,000 during the three months ended June 30, 2021 from The Loan Source Inc. for PPP loans they originated to our clients. The following table summarizes the composition of our loan portfolio. Total gross loans are recorded net of deferred loan fees and costs, which totaled $7.3 million and $5.0 million as of December 31, 2022 and December 31, 2021, respectively.
|  | December 31 |
(dollars in thousands) |  | 2022 |  |  | 2021 |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied RE |  | $ | 612,901 |  |  |  | 18.7 | % |  |  | 488,965 |  |  |  | 19.6 | %
Non-owner occupied RE |  |  | 862,579 |  |  |  | 26.3 | % |  |  | 666,833 |  |  |  | 26.8 | %
Construction |  |  | 109,726 |  |  |  | 3.4 | % |  |  | 64,425 |  |  |  | 2.6 | %
Business |  |  | 468,112 |  |  |  | 14.3 | % |  |  | 333,049 |  |  |  | 13.4 | %
Total commercial loans |  |  | 2,053,318 |  |  |  | 62.7 | % |  |  | 1,553,272 |  |  |  | 62.4 | %
Consumer |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate |  |  | 931,278 |  |  |  | 28.4 | % |  |  | 694,401 |  |  |  | 27.9 | %
Home equity |  |  | 179,300 |  |  |  | 5.5 | % |  |  | 154,839 |  |  |  | 6.2 | %
Construction |  |  | 80,415 |  |  |  | 2.5 | % |  |  | 59,846 |  |  |  | 2.4 | %
Other |  |  | 29,052 |  |  |  | 0.9 | % |  |  | 27,519 |  |  |  | 1.1 | %
Total consumer loans |  |  | 1,220,045 |  |  |  | 37.3 | % |  |  | 936,605 |  |  |  | 37.6 | %
Total gross loans, net of deferred fees |  |  | 3,273,363 |  |  |  | 100.0 | % |  |  | 2,489,877 |  |  |  | 100.0 | %
Less – allowance for credit losses |  |  | (38,639 | ) |  |  |  |  |  |  | (30,408 | ) |  |  |  |
Total loans, net |  | $ | 3,234,724 |  |  |  |  |  |  |  | 2,459,469 |  |  |  |  |
The composition of gross loans by rate type is as follows:
|  | December 31, |
(dollars in thousands) |  | 2022 |  |  | 2021 |
Floating rate loans |  | $ | 439,287 |  |  |  | 376,805 |
Fixed rate loans |  |  | 2,834,076 |  |  |  | 2,113,072 |
|  | $ | 3,273,363 |  |  |  | 2,489,877 |
At December 31, 2022, approximately $1.05 billion of the Company’s mortgage loans were pledged as collateral for advances from the FHLB, as set forth in Note 10. Credit Quality Indicators Commercial We manage a consistent process for assessing commercial loan credit quality by monitoring our loan grading trends and past due statistics. All loans are subject to individual risk assessment. Our risk categories include Pass, Watch, Special Mention, and Substandard, each of which is defined by banking regulatory agencies. Delinquency statistics are also an important indicator of credit quality in the establishment of our allowance for credit losses. We categorize our loans into risk categories based on relevant information about the ability of the borrower to service their debt such as current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. A description of the general characteristics of the risk grades is as follows:
| ● | Pass—These loans range from minimal credit risk to average however still acceptable credit risk.
| ● | Watch—A watch loan exhibits above average risk due to minor weaknesses and warrants closer scrutiny by management.
| ● | Special mention—A special mention loan has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or the institution’s credit position at some future date.
| ● | Substandard—A substandard loan is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified must have a well-defined weakness, or weaknesses, that may jeopardize the liquidation of the debt. A substandard loan is characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.
| ● | Doubtful—A doubtful loan has all of the weaknesses inherent in one classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of the currently existing facts, conditions and values, highly questionable and improbable.
The following table presents loan balances classified by credit quality indicators by year of origination as of December 31, 2022.
|  | December 31, 2022 |
(dollars in thousands) |  | 2022 |  |  | 2021 |  |  | 2020 |  |  | 2019 |  |  | 2018 |  |  | Prior |  |  | Revolving |  |  | Revolving Converted to Term |  |  | Total |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied RE |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 169,083 |  |  |  | 122,654 |  |  |  | 85,867 |  |  |  | 66,299 |  |  |  | 36,718 |  |  |  | 93,915 |  |  |  | - |  |  |  | - |  |  |  | 574,536 |
Watch |  |  | 14,648 |  |  |  | 479 |  |  |  | 9,339 |  |  |  | 3,658 |  |  |  | - |  |  |  | 6,792 |  |  |  | - |  |  |  | - |  |  |  | 34,916 |
Special Mention |  |  | 200 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 2,960 |  |  |  | - |  |  |  | - |  |  |  | 3,160 |
Substandard |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 289 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 289 |
Total Owner occupied RE |  |  | 183,931 |  |  |  | 123,133 |  |  |  | 95,206 |  |  |  | 69,957 |  |  |  | 37,007 |  |  |  | 103,667 |  |  |  | - |  |  |  | - |  |  |  | 612,901 |
Non-owner occupied RE |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  |  | 281,890 |  |  |  | 169,599 |  |  |  | 113,264 |  |  |  | 59,550 |  |  |  | 79,722 |  |  |  | 106,967 |  |  |  | 604 |  |  |  | 137 |  |  |  | 811,733 |
Watch |  |  | 1,061 |  |  |  | 9,491 |  |  |  | - |  |  |  | 10,683 |  |  |  | 1,408 |  |  |  | 11,660 |  |  |  | - |  |  |  | - |  |  |  | 34,303 |
Special Mention |  |  | - |  |  |  | 202 |  |  |  | - |  |  |  | 6,087 |  |  |  | - |  |  |  | 930 |  |  |  | - |  |  |  | - |  |  |  | 7,219 |
Substandard |  |  | - |  |  |  | 134 |  |  |  | - |  |  |  | 7,992 |  |  |  | 327 |  |  |  | 871 |  |  |  | - |  |  |  | - |  |  |  | 9,324 |
Total Non-owner occupied RE |  |  | 282,951 |  |  |  | 179,426 |  |  |  | 113,264 |  |  |  | 84,312 |  |  |  | 81,457 |  |  |  | 120,428 |  |  |  | 604 |  |  |  | 137 |  |  |  | 862,579 |
Construction |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  |  | 48,420 |  |  |  | 55,129 |  |  |  | 4,811 |  |  |  | 247 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 108,607 |
Watch |  |  | 1,119 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,119 |
Special Mention |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Substandard |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total Construction |  |  | 49,539 |  |  |  | 55,129 |  |  |  | 4,811 |  |  |  | 247 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 109,726 |
Business |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  |  | 136,489 |  |  |  | 57,804 |  |  |  | 29,864 |  |  |  | 21,807 |  |  |  | 35,249 |  |  |  | 28,914 |  |  |  | 136,337 |  |  |  | 709 |  |  |  | 447,174 |
Watch |  |  | 3,186 |  |  |  | 2,058 |  |  |  | 1,318 |  |  |  | 1,282 |  |  |  | 179 |  |  |  | 3,074 |  |  |  | 3,783 |  |  |  | 439 |  |  |  | 15,319 |
Special Mention |  |  | 1,137 |  |  |  | 260 |  |  |  | 386 |  |  |  | 210 |  |  |  | - |  |  |  | 252 |  |  |  | 115 |  |  |  | 642 |  |  |  | 3,002 |
Substandard |  |  | 498 |  |  |  | - |  |  |  | 188 |  |  |  | 233 |  |  |  | 315 |  |  |  | 911 |  |  |  | 472 |  |  |  | - |  |  |  | 2,617 |
Total Business |  |  | 141,310 |  |  |  | 60,122 |  |  |  | 31,756 |  |  |  | 23,533 |  |  |  | 35,743 |  |  |  | 33,151 |  |  |  | 140,707 |  |  |  | 1,790 |  |  |  | 468,112 |
Total Commercial loans |  |  | 657,731 |  |  |  | 417,810 |  |  |  | 245,037 |  |  |  | 178,049 |  |  |  | 154,207 |  |  |  | 257,246 |  |  |  | 141,311 |  |  |  | 1,927 |  |  |  | 2,053,318 |
Consumer |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  |  | 243,589 |  |  |  | 269,565 |  |  |  | 189,075 |  |  |  | 72,499 |  |  |  | 39,042 |  |  |  | 76,172 |  |  |  | - |  |  |  | - |  |  |  | 889,942 |
Watch |  |  | 6,196 |  |  |  | 8,256 |  |  |  | 3,847 |  |  |  | 2,278 |  |  |  | 494 |  |  |  | 3,671 |  |  |  | - |  |  |  | - |  |  |  | 24,742 |
Special Mention |  |  | 3,114 |  |  |  | 1,938 |  |  |  | 2,644 |  |  |  | 2,258 |  |  |  | 955 |  |  |  | 2,639 |  |  |  | - |  |  |  | - |  |  |  | 13,548 |
Substandard |  |  | - |  |  |  | 648 |  |  |  | 227 |  |  |  | 341 |  |  |  | 408 |  |  |  | 1,422 |  |  |  | - |  |  |  | - |  |  |  | 3,046 |
Total Real estate |  |  | 252,899 |  |  |  | 280,407 |  |  |  | 195,793 |  |  |  | 77,376 |  |  |  | 40,899 |  |  |  | 83,904 |  |  |  | - |  |  |  | - |  |  |  | 931,278 |
Home equity |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 165,847 |  |  |  | - |  |  |  | 165,847 |
Watch |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 7,226 |  |  |  | - |  |  |  | 7,226 |
Special Mention |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 4,055 |  |  |  | - |  |  |  | 4,055 |
Substandard |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 2,172 |  |  |  | - |  |  |  | 2,172 |
Total Home equity |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 179,300 |  |  |  | - |  |  |  | 179,300 |
Construction |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  |  | 41,138 |  |  |  | 34,039 |  |  |  | 4,923 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 80,100 |
Watch |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Special Mention |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 315 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 315 |
Substandard |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total Construction |  |  | 41,138 |  |  |  | 34,039 |  |  |  | 4,923 |  |  |  | 315 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 80,415 |
Other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  |  | 3,894 |  |  |  | 3,038 |  |  |  | 1,702 |  |  |  | 1,534 |  |  |  | 341 |  |  |  | 3,015 |  |  |  | 14,465 |  |  |  | - |  |  |  | 27,989 |
Watch |  |  | 46 |  |  |  | 367 |  |  |  | 15 |  |  |  | 5 |  |  |  | 16 |  |  |  | 175 |  |  |  | 93 |  |  |  | - |  |  |  | 717 |
Special Mention |  |  | 94 |  |  |  | - |  |  |  | - |  |  |  | 44 |  |  |  | 75 |  |  |  | 23 |  |  |  | 97 |  |  |  | - |  |  |  | 332 |
Substandard |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 5 |  |  |  | - |  |  |  | - |  |  |  | 9 |  |  |  | - |  |  |  | 14 |
Total Other |  |  | 4,034 |  |  |  | 3,405 |  |  |  | 1,717 |  |  |  | 1,588 |  |  |  | 432 |  |  |  | 3,213 |  |  |  | 14,663 |  |  |  | - |  |  |  | 29,052 |
Total Consumer loans |  |  | 298,071 |  |  |  | 317,851 |  |  |  | 202,433 |  |  |  | 79,279 |  |  |  | 41,331 |  |  |  | 87,117 |  |  |  | 193,963 |  |  |  | - |  |  |  | 1,220,045 |
Total loans |  | $ | 955,802 |  |  |  | 735,661 |  |  |  | 447,470 |  |  |  | 257,328 |  |  |  | 195,538 |  |  |  | 344,363 |  |  |  | 335,274 |  |  |  | 1,927 |  |  |  | 3,273,363 |
The following table presents loan balances classified by credit quality indicators and loan categories as of December 31, 2021.
|  | December 31, 2021 |
|  | Commercial |  |  | Consumer |  |  |  |
(dollars in thousands) |  | Owner occupied RE |  |  | Non-owner occupied RE |  |  | Construction |  |  | Business |  |  | Real Estate |  |  | Home Equity |  |  | Construction |  |  | Other |  |  | Total |
Pass |  | $ | 487,422 |  |  |  | 589,280 |  |  |  | 64,425 |  |  |  | 328,371 |  |  |  | 684,923 |  |  |  | 148,933 |  |  |  | 59,846 |  |  |  | 27,365 |  |  |  | 2,390,565 |
Special mention |  |  | 327 |  |  |  | 48,310 |  |  |  | - |  |  |  | 1,530 |  |  |  | 4,294 |  |  |  | 2,986 |  |  |  | - |  |  |  | 129 |  |  |  | 57,576 |
Substandard |  |  | 1,216 |  |  |  | 29,243 |  |  |  | - |  |  |  | 3,148 |  |  |  | 5,184 |  |  |  | 2,920 |  |  |  | - |  |  |  | 25 |  |  |  | 41,736 |
Total loans |  | $ | 488,965 |  |  |  | 666,833 |  |  |  | 64,425 |  |  |  | 333,049 |  |  |  | 694,401 |  |  |  | 154,839 |  |  |  | 59,846 |  |  |  | 27,519 |  |  |  | 2,489,877 |
The following tables present loan balances by payment status.
|  | December 31, 2022 |
(dollars in thousands) |  | Accruing 30-59 days past due |  |  | Accruing 60-89 days past due |  |  | Accruing 90 days or more past due |  |  | Nonaccrual loans |  |  | Accruing current |  |  | Total |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied RE |  | $ | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 612,901 |  |  |  | 612,901 |
Non-owner occupied RE |  |  | 119 |  |  |  | 757 |  |  |  | - |  |  |  | 247 |  |  |  | 861,456 |  |  |  | 862,579 |
Construction |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 109,726 |  |  |  | 109,726 |
Business |  |  | 24 |  |  |  | 1 |  |  |  | - |  |  |  | 182 |  |  |  | 467,905 |  |  |  | 468,112 |
Consumer |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate |  |  | 330 |  |  |  | - |  |  |  | - |  |  |  | 1,099 |  |  |  | 929,849 |  |  |  | 931,278 |
Home equity |  |  | 50 |  |  |  | - |  |  |  | - |  |  |  | 1,099 |  |  |  | 178,151 |  |  |  | 179,300 |
Construction |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 80,415 |  |  |  | 80,415 |
Other |  |  | 88 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 28,964 |  |  |  | 29,052 |
Total loans |  | $ | 611 |  |  |  | 758 |  |  |  | - |  |  |  | 2,627 |  |  |  | 3,269,367 |  |  |  | 3,273,363 |
|  | December 31, 2021 |
(dollars in thousands) |  | Accruing 30-59 days past due |  |  | Accruing 60-89 days past due |  |  | Accruing 90 days or more past due |  |  | Nonaccrual loans |  |  | Accruing current |  |  | Total |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied RE |  | $ | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 488,965 |  |  |  | 488,965 |
Non-owner occupied RE |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 1,069 |  |  |  | 665,764 |  |  |  | 666,833 |
Construction |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 64,425 |  |  |  | 64,425 |
Business |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 333,049 |  |  |  | 333,049 |
Consumer |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate |  |  | 136 |  |  |  | - |  |  |  | - |  |  |  | 1,750 |  |  |  | 692,515 |  |  |  | 694,401 |
Home equity |  |  | 417 |  |  |  | 174 |  |  |  | - |  |  |  | 2,045 |  |  |  | 152,203 |  |  |  | 154,839 |
Construction |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 59,846 |  |  |  | 59,846 |
Other |  |  | 5 |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | 27,514 |  |  |  | 27,519 |
Total loans |  | $ | 558 |  |  |  | 174 |  |  |  | - |  |  |  | 4,864 |  |  |  | 2,484,281 |  |  |  | 2,489,877 |
As of December 31, 2022 and December 31, 2021, loans 30 days or more past due represented 0.11% and 0.09% of the Company’s total loan portfolio, respectively. Commercial loans 30 days or more past due were 0.03% and 0.00% of the Company’s total loan portfolio as of December 31, 2022 and December 31, 2021, respectively. Consumer loans 30 days or more past due were 0.08% and 0.09% of total loans as of December 31, 2022 and December 31, 2021, respectively. Nonperforming assets The following table shows the nonperforming assets and the related percentage of nonperforming assets to total assets and gross loans. Generally, a loan is placed on nonaccrual status when it becomes 90 days past due as to principal or interest, or when we believe, after considering economic and business conditions and collection efforts, that the borrower’s financial condition is such that collection of the contractual principal or interest on the loan is doubtful. A payment of interest on a loan that is classified as nonaccrual is recognized as a reduction in principal when received.
|  | December 31, |
(dollars in thousands) |  | 2022 |  |  | 2021 |
Nonaccrual loans |  | $ | 831 |  |  |  | 1,912 |
Nonaccruing TDRs |  |  | 1,796 |  |  |  | 2,952 |
Total nonaccrual loans, including nonaccruing TDRs |  |  | 2,627 |  |  |  | 4,864 |
Other real estate owned |  |  | - |  |  |  | - |
Total nonperforming assets |  | $ | 2,627 |  |  |  | 4,864 |
Nonperforming assets as a percentage of: |  |  |  |  |  |  |  |
Total assets |  |  | 0.07 | % |  |  | 0.17 | %
Gross loans |  |  | 0.08 | % |  |  | 0.20 | %
Total loans over 90 days past due |  | $ | 402 |  |  |  | 554 |
Loans over 90 days past due and still accruing |  |  | - |  |  |  | - |
Accruing troubled debt restructurings |  |  | 4,503 |  |  |  | 3,299 |
The table below summarizes nonaccrual loans by major categories for the periods presented.
|  | CECL |  |  | Incurred loss |
|  | December 31, 2022 |  |  | December 31, 2021 |
|  | Nonaccrual |  |  | Nonaccrual |  |  |  |  |  |  |
|  | loans |  |  | loans |  |  | Total |  |  | Total |
|  | with no |  |  | with an |  |  | nonaccrual |  |  | nonaccrual |
(dollars in thousands) |  | allowance |  |  | allowance |  |  | loans |  |  | loans |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied RE |  | $ | - |  |  |  | - |  |  |  | - |  |  |  | - |
Non-owner occupied RE |  |  | 114 |  |  |  | 133 |  |  |  | 247 |  |  |  | 1,070 |
Construction |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Business |  |  | - |  |  |  | 182 |  |  |  | 182 |  |  |  | - |
Total commercial |  |  | 114 |  |  |  | 315 |  |  |  | 429 |  |  |  | 1,070 |
Consumer |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate |  |  | - |  |  |  | 1,099 |  |  |  | 1,099 |  |  |  | 1,750 |
Home equity |  |  | 194 |  |  |  | 905 |  |  |  | 1,099 |  |  |  | 2,044 |
Construction |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Other |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total consumer |  |  | 194 |  |  |  | 2,004 |  |  |  | 2,198 |  |  |  | 3,794 |
Total |  | $ | 308 |  |  |  | 2,319 |  |  |  | 2,627 |  |  |  | 4,864 |
Foregone interest income on the nonaccrual loans for the year ended December 31, 2022 was approximately $28,000 and approximately $55,000 for the same period in 2021. The table below summarizes key information for loans individually evaluated for impairment loans under the incurred loss methodology. These loans include loans on nonaccrual status and loans modified in a TDR, whether on accrual or nonaccrual status. These loans may have estimated impairment which is included in the allowance for credit losses.
|  |  |  |  |  |  |  |  |  | December 31, 2021 |
|  |  |  |  | Recorded investment |  |  |  |
|  |  |  |  |  |  |  | Impaired loans |  |  | Impaired loans |  |  |  |
|  | Unpaid |  |  |  |  |  | with no related |  |  | with related |  |  | Related |
|  | Principal |  |  | Impaired |  |  | allowance for |  |  | allowance for |  |  | allowance for |
(dollars in thousands) |  | Balance |  |  | loans |  |  | loan losses |  |  | loan losses |  |  | loan losses |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied RE |  | $ | 1,261 |  |  |  | 1,261 |  |  |  | 1,261 |  |  |  | - |  |  |  | - |
Non-owner occupied RE |  |  | 2,012 |  |  |  | 1,070 |  |  |  | 270 |  |  |  | 800 |  |  |  | 171 |
Construction |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Business |  |  | 1,104 |  |  |  | 1,104 |  |  |  | - |  |  |  | 1,104 |  |  |  | 452 |
Total commercial |  |  | 4,377 |  |  |  | 3,435 |  |  |  | 1,531 |  |  |  | 1,904 |  |  |  | 623 |
Consumer |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate |  |  | 2,638 |  |  |  | 2,561 |  |  |  | 1,743 |  |  |  | 818 |  |  |  | 144 |
Home equity |  |  | 2,206 |  |  |  | 2,044 |  |  |  | 1,989 |  |  |  | 55 |  |  |  | 55 |
Construction |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Other |  |  | 123 |  |  |  | 123 |  |  |  | - |  |  |  | 123 |  |  |  | 14 |
Total consumer |  |  | 4,967 |  |  |  | 4,728 |  |  |  | 3,732 |  |  |  | 996 |  |  |  | 213 |
Total |  | $ | 9,344 |  |  |  | 8,163 |  |  |  | 5,263 |  |  |  | 2,900 |  |  |  | 836 |
The following table provides the average recorded investment in impaired loans and the amount of interest income recognized on impaired loans after impairment by portfolio segment and class under the incurred loss methodology.
|  | Year ended December 31, |
|  | 2021 |  |  | 2020 |
|  | Average |  |  | Recognized |  |  | Average |  |  | Recognized |
|  | recorded |  |  | interest |  |  | recorded |  |  | interest |
(dollars in thousands) |  | investment |  |  | income |  |  | investment |  |  | income |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied RE |  | $ | 1,387 |  |  |  | 65 |  |  |  | 2,423 |  |  |  | 88 |
Non-owner occupied RE |  |  | 3,128 |  |  |  | 182 |  |  |  | 4,217 |  |  |  | 221 |
Construction |  |  | 55 |  |  |  | - |  |  |  | 56 |  |  |  | 6 |
Business |  |  | 2,218 |  |  |  | 62 |  |  |  | 2,306 |  |  |  | 243 |
Total commercial |  |  | 6,788 |  |  |  | 309 |  |  |  | 9,002 |  |  |  | 558 |
Consumer |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate |  |  | 3,641 |  |  |  | 98 |  |  |  | 3,372 |  |  |  | 170 |
Home equity |  |  | 1,964 |  |  |  | 85 |  |  |  | 2,128 |  |  |  | 5 |
Construction |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Other |  |  | 129 |  |  |  | 4 |  |  |  | 141 |  |  |  | 79 |
Total consumer |  |  | 5,734 |  |  |  | 187 |  |  |  | 5,641 |  |  |  | 254 |
Total |  | $ | 12,522 |  |  |  | 496 |  |  |  | 14,643 |  |  |  | 812 |
Allowance for Credit Losses The following table summarizes the activity related to the allowance for credit losses for the year ended December 31, 2022 under the CECL methodology. On January 1, 2022, we adopted the Current Expected Credit Loss (CECL) methodology for estimating credit losses, which resulted in an increase of $1.5 million in our allowance for credit losses. The $5.4 million provision for credit losses for the 12 months ended December 31, 2022 was driven primarily by $783.5 million in loan growth for the year. In addition to loan growth, the provision for credit losses was impacted by slightly lower expected loss rates due to historically low charge-offs during 2022, while minor adjustments to two internal qualitative factors increased the qualitative component of the allowance and related provision expense.
|  | Twelve months ended December 31, 2022 |
|  | Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Consumer |  |  |  |
(dollars in thousands) |  | Owner occupied RE |  |  | Non-owner occupied RE |  |  | Construction |  |  | Business |  |  | Real Estate |  |  | Home Equity |  |  | Construction |  |  | Other |  |  | Total |
Balance, beginning of period |  | $ | 4,700 |  |  |  | 10,518 |  |  |  | 625 |  |  |  | 4,887 |  |  |  | 7,083 |  |  |  | 1,697 |  |  |  | 578 |  |  |  | 320 |  |  |  | 30,408 |
Adjustment for CECL |  |  | (313 | ) |  |  | 333 |  |  |  | 154 |  |  |  | 1,057 |  |  |  | (294 | ) |  |  | 438 |  |  |  | 130 |  |  |  | (5 | ) |  |  | 1,500 |
Provision for credit losses |  |  | 1,480 |  |  |  | (2,015 | ) |  |  | 513 |  |  |  | 1,764 |  |  |  | 2,698 |  |  |  | 663 |  |  |  | 185 |  |  |  | 87 |  |  |  | 5,375 |
Loan charge-offs |  |  | - |  |  |  | - |  |  |  | - |  |  |  | (55 | ) |  |  | - |  |  |  | (339 | ) |  |  | - |  |  |  | (91 | ) |  |  | (485 | )
Loan recoveries |  |  | - |  |  |  | 1,540 |  |  |  | - |  |  |  | 208 |  |  |  | - |  |  |  | 92 |  |  |  | - |  |  |  | 1 |  |  |  | 1,841 |
Net loan recoveries (charge-offs) |  |  | - |  |  |  | 1,540 |  |  |  | - |  |  |  | 153 |  |  |  | - |  |  |  | (247 | ) |  |  | - |  |  |  | (90 | ) |  |  | 1,356 |
Balance, end of period |  | $ | 5,867 |  |  |  | 10,376 |  |  |  | 1,292 |  |  |  | 7,861 |  |  |  | 9,487 |  |  |  | 2,551 |  |  |  | 893 |  |  |  | 312 |  |  |  | 38,639 |
Net recoveries to average loans (annualized) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | (0.05 | %)
Allowance for credit losses to gross loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1.18 | %
Allowance for credit losses to nonperforming loans |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | 1470.84 | %
Prior to the adoption of ASC 326 on January 1, 2022, the Company calculated the allowance for loan losses under the incurred loss methodology. The following table summarizes the activity related to the allowance for loan losses in prior periods under this methodology.
|  | Twelve months ended December 31, 2021 |
|  | Commercial |  |  |  |  |  |  |  |  |  |  |  | Consumer |  |  |  |
(dollars in thousands) |  | Owner occupied RE |  |  | Non-owner occupied RE |  |  | Construction |  |  | Business |  |  | Real Estate |  |  | Home Equity |  |  | Construction |  |  | Other |  |  | Total |
Balance, beginning of period |  | $ | 8,092 |  |  |  | 12,050 |  |  |  | 1,154 |  |  |  | 7,870 |  |  |  | 10,482 |  |  |  | 3,248 |  |  |  | 746 |  |  |  | 507 |  |  |  | 44,149 |
Provision for credit losses |  |  | (3,486 | ) |  |  | (958 | ) |  |  | (529 | ) |  |  | (2,041 | ) |  |  | (3,417 | ) |  |  | (1,613 | ) |  |  | (168 | ) |  |  | (188 | ) |  |  | (12,400 | )
Loan charge-offs |  |  | - |  |  |  | (837 | ) |  |  | - |  |  |  | (1,181 | ) |  |  | - |  |  |  | (139 | ) |  |  | - |  |  |  | (9 | ) |  |  | (2,166 | )
Loan recoveries |  |  | 94 |  |  |  | 263 |  |  |  | - |  |  |  | 239 |  |  |  | 18 |  |  |  | 201 |  |  |  | - |  |  |  | 10 |  |  |  | 825 |
Net loan recoveries (charge-offs) |  |  | 94 |  |  |  | (574 | ) |  |  | - |  |  |  | (942 | ) |  |  | 18 |  |  |  | 62 |  |  |  | - |  |  |  | 1 |  |  |  | (1,341 | )
Balance, end of period |  | $ | 4,700 |  |  |  | 10,518 |  |  |  | 625 |  |  |  | 4,887 |  |  |  | 7,083 |  |  |  | 1,697 |  |  |  | 578 |  |  |  | 320 |  |  |  | 30,408 |
|  | Twelve months ended December 31, 2020 |
|  | Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  | Consumer |  |  |  |
(dollars in thousands) |  | Owner occupied RE |  |  | Non-owner occupied RE |  |  | Construction |  |  | Business |  |  | Real Estate |  |  | Home Equity |  |  | Construction |  |  | Other |  |  | Total |
Balance, beginning of period |  | $ | 2,782 |  |  |  | 4,305 |  |  |  | 541 |  |  |  | 3,716 |  |  |  | 3,308 |  |  |  | 1,446 |  |  |  | 268 |  |  |  | 276 |  |  |  | 16,642 |
Provision for credit losses |  |  | 5,339 |  |  |  | 8,583 |  |  |  | 613 |  |  |  | 4,993 |  |  |  | 7,290 |  |  |  | 2,032 |  |  |  | 478 |  |  |  | 272 |  |  |  | 29,600 |
Loan charge-offs |  |  | (94 | ) |  |  | (1,508 | ) |  |  | - |  |  |  | (1,309 | ) |  |  | (134 | ) |  |  | (299 | ) |  |  | - |  |  |  | (70 | ) |  |  | (3,414 | )
Loan recoveries |  |  | 65 |  |  |  | 670 |  |  |  | - |  |  |  | 470 |  |  |  | 18 |  |  |  | 69 |  |  |  | - |  |  |  | 29 |  |  |  | 1,321 |
Net loan recoveries (charge-offs) |  |  | (29 | ) |  |  | (838 | ) |  |  | - |  |  |  | (839 | ) |  |  | (116 | ) |  |  | (230 | ) |  |  | - |  |  |  | (41 | ) |  |  | (2,093 | )
Balance, end of period |  | $ | 8,092 |  |  |  | 12,050 |  |  |  | 1,154 |  |  |  | 7,870 |  |  |  | 10,482 |  |  |  | 3,248 |  |  |  | 746 |  |  |  | 507 |  |  |  | 44,149 |
The following tables summarize the activity in the allowance for loan losses by our commercial and consumer portfolio segments under the incurred loss methodology.
|  | Year ended December 31, |
|  | 2021 |  |  | 2020 |
(dollars in thousands) |  | Commercial |  |  | Consumer |  |  | Total |  |  | Commercial |  |  | Consumer |  |  | Total |
Balance, beginning of period |  | $ | 29,166 |  |  |  | 14,983 |  |  |  | 44,149 |  |  |  | 11,372 |  |  |  | 5,270 |  |  |  | 16,642 |
Provision |  |  | (7,014 | ) |  |  | (5,386 | ) |  |  | (12,400 | ) |  |  | 19,500 |  |  |  | 10,100 |  |  |  | 29,600 |
Loan charge-offs |  |  | (2,018 | ) |  |  | (148 | ) |  |  | (2,166 | ) |  |  | (2,911 | ) |  |  | (503 | ) |  |  | (3,414 | )
Loan recoveries |  |  | 596 |  |  |  | 229 |  |  |  | 825 |  |  |  | 1,205 |  |  |  | 116 |  |  |  | 1,321 |
Net loan charge-offs |  |  | (1,422 | ) |  |  | 81 |  |  |  | (1,341 | ) |  |  | (1,706 | ) |  |  | (387 | ) |  |  | (2,093 | )
Balance, end of period |  | $ | 20,730 |  |  |  | 9,678 |  |  |  | 30,408 |  |  |  | 29,166 |  |  |  | 14,983 |  |  |  | 44,149 |
The following table disaggregates the allowance for loan losses and recorded investment in loans by impairment methodology under the incurred loss methodology.
|  | December 31, 2021 |
|  | Allowance for loan losses |  |  | Recorded investment in loans |
(dollars in thousands) |  | Commercial |  |  | Consumer |  |  | Total |  |  | Commercial |  |  | Consumer |  |  | Total |
Individually evaluated |  | $ | 623 |  |  |  | 213 |  |  |  | 836 |  |  |  | 3,435 |  |  |  | 4,728 |  |  |  | 8,163 |
Collectively evaluated |  |  | 20,107 |  |  |  | 9,465 |  |  |  | 29,572 |  |  |  | 1,549,837 |  |  |  | 931,877 |  |  |  | 2,481,714 |
Total |  | $ | 20,730 |  |  |  | 9,678 |  |  |  | 30,408 |  |  |  | 1,553,272 |  |  |  | 936,605 |  |  |  | 2,489,877 |
Collateral dependent loans are loans for which the repayment is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. The Company reviews individually evaluated loans for designation as collateral dependent loans, as well as other loans that management of the Company designates as having higher risk. These loans do not share common risk characteristics and are not included within the collectively evaluated loans for determining the allowance for credit losses. The following table presents an analysis of collateral-dependent loans of the Company as of December 31, 2022.
|  | December 31, 2022 |
|  | Real |  |  | Business |  |  |  |  |  |  |
(dollars in thousands) |  | estate |  |  | assets |  |  | Other |  |  | Total |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Owner occupied RE |  | $ | - |  |  |  | - |  |  |  | - |  |  |  | - |
Non-owner occupied RE |  |  | 114 |  |  |  | - |  |  |  | - |  |  |  | 114 |
Construction |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Business |  |  | 30 |  |  |  | - |  |  |  | - |  |  |  | 30 |
Total commercial |  |  | 144 |  |  |  | - |  |  |  | - |  |  |  | 144 |
Consumer |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Real estate |  |  | 207 |  |  |  | - |  |  |  | - |  |  |  | 207 |
Home equity |  |  | 194 |  |  |  | - |  |  |  | - |  |  |  | 194 |
Construction |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Other |  |  | - |  |  |  | - |  |  |  | - |  |  |  | - |
Total consumer |  |  | 401 |  |  |  | - |  |  |  | - |  |  |  | 401 |
Total |  | $ | 545 |  |  |  | - |  |  |  | - |  |  |  | 545 |
Under CECL, for collateral dependent loans, the Company has adopted the practical expedient to measure the allowance for credit losses based on the fair value of collateral. The allowance for credit losses is calculated on an individual loan basis based on the shortfall between the fair value of the loan’s collateral, which is adjusted for liquidation costs/discounts, and amortized cost. If the fair value of the collateral exceeds the amortized cost, no allowance is required. Allowance for Credit Losses - Unfunded Loan Commitments The allowance for credit losses for unfunded loan commitments was $2.8 million at December 31, 2022 and is separately classified on the balance sheet within other liabilities. Prior to the adoption of CECL, the Company’s reserve for unfunded commitments was not material. The following table presents the balance and activity in the allowance for credit losses for unfunded loan commitments for the twelve months ended December 31, 2022.
|  | Twelve months ended |
(dollars in thousands) |  | December 31, 2022 |
Balance, beginning of period |  |  | - |
Adjustment for adoption of CECL |  | $ | 2,000 |
Provision for credit losses |  |  | 780 |
Balance, end of period |  | $ | 2,780 |
Unfunded Loan Commitments |  |  | 878,324 |
Reserve for Unfunded Commitments to Unfunded Loan Commitments |  |  | 0.32 | %

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