Loans and Allowance for Credit Losses | Note 3: Loans and Allowance for Credit Losses The table below shows the loan portfolio composition including carrying value by segment as of the dates shown. The carrying value of loans is net of discounts, fees, costs, and fair value marks of $24 million and $25 million as of March 31, 2024 and December 31, 2023, respectively. March 31, 2024 December 31, 2023 Amount % of Loans Amount % of Loans (Dollars in thousands) Commercial and industrial $ 2,179,562 35 % $ 2,160,212 35 % Energy 221,217 4 214,218 3 Commercial real estate - owner-occupied 577,812 9 566,253 9 Commercial real estate - non-owner-occupied 2,769,936 44 2,685,534 44 Residential real estate 468,628 7 464,095 8 Consumer 32,032 1 37,378 1 Loans, net of unearned fees 6,249,187 100 % 6,127,690 100 % Less: Allowance for credit losses on loans (74,856) (73,462) Loans, net of the allowance for credit losses on loans $ 6,174,331 $ 6,054,228 Accrued interest of $31 million and $30 million at March 31, 2024 and December 31, 2023, respectively, presented in “interest receivable” on the consolidated statements of financial condition is excluded from the amortized cost basis disclosed in the above table. The Company aggregates the loan portfolio by similar credit risk characteristics. The loan segments are described in additional detail below: ● Commercial and Industrial - The category includes loans and lines of credit to commercial and industrial clients for use in property, plant, and equipment purchases, business operations, expansions and for working capital needs. Loan terms typically require amortizing payments that decrease the outstanding loan balance while the lines of credit typically require interest-only payments with maturities ranging from one- to three-years. Lines of credit allow the borrower to draw down and repay the line of credit based on the borrower’s cash flow needs. Repayment is primarily from the cash flow of a borrower’s principal business operation. Credit risk is driven by creditworthiness of a borrower and the economic conditions that impact the cash flow stability from business operations. ● Energy - The category includes loans to oil and natural gas clients for use in financing working capital needs, exploration and production activities, and acquisitions. The loans are repaid primarily from the conversion of crude oil and natural gas to cash. Credit risk is driven by creditworthiness of a borrower and the economic conditions that impact the cash flow stability from business operations. Energy loans are typically collateralized with the underlying oil and gas reserves. ● Commercial Real Estate - Owner-Occupied - The category includes relationships where the Company is usually the primary provider of financial services for the company and/or the principals and the primary source of repayment is through the cash flows generated by the borrowers’ business operations. Owner-occupied commercial real estate loans are typically secured by a first lien mortgage on real property plus assignments of all leases related to the properties. Credit risk may be impacted by the creditworthiness of a borrower, property values and the local economies in the borrower’s market areas. ● Commercial Real Estate – Non-Owner-Occupied - The category includes loans that typically involve larger principal amounts and repayment of these loans is generally dependent on the leasing income generated from tenants. These are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Additionally, the category includes construction and land development loans that are based upon estimates of costs and estimated value of the completed project. Independent appraisals and a financial analysis of the developers and property owners are completed. Sources of repayment include secondary market permanent loans, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are higher risk than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, general economic conditions, and the availability of long-term financing. The category also includes loans that are secured by multifamily properties. Repayment of these loans is primarily dependent on occupancy rates and rental income. Credit risk for non-owner-occupied commercial real estate loans may be impacted by the creditworthiness of a borrower, property values and the local economies in the borrower’s market areas. ● Residential Real Estate - The category includes loans that are generally secured by owner-occupied 1-4 family residences. Repayment of these loans is primarily dependent on the personal income and credit rating of the borrowers. We also offer open- and closed-ended home equity loans, which are loans generally secured by second lien positions on residential real estate. Credit risk in these loans can be impacted by economic conditions within or outside the borrower’s market areas that might impact either property values or a borrower’s personal income. ● Consumer - The category includes personal lines of credit and various term loans such as automobile loans and loans for other personal purposes. Repayment is primarily dependent on the personal income and credit rating of the borrowers. Credit risk is driven by consumer economic factors (such as unemployment and general economic conditions in the borrower’s market area) and the creditworthiness of a borrower. Risk Ratings The Company uses a series of grades which reflect its assessment of the credit quality of loans based on an analysis of the borrower's financial condition, liquidity and ability to meet contractual debt service requirements. Risk ratings are established for loans at origination and are monitored on an ongoing basis. The rating assigned to a loan reflects the risks posed by the borrower’s expected performance and the transaction’s structure. Performance metrics used to determine a risk rating include, but are not limited to, cash flow adequacy, liquidity, and collateral. A description of the loan risk ratings follows: ● Pass - The category includes loans that are considered satisfactory. The category includes borrowers that generally maintain good liquidity and financial condition, or the credit is currently protected with sales trends remaining flat or declining. Most ratios compare favorably with industry norms and Company policies. Debt is programmed and timely repayment is expected. ● Special Mention - The category includes borrowers that generally exhibit adverse trends in operations or an imbalanced position in their balance sheet that has not reached a point where repayment is jeopardized. Credits are currently protected but, if left uncorrected, the potential weaknesses may result in deterioration of the repayment prospects for the credit or in the Company’s credit or lien position at a future date. These credits are not adversely classified and do not expose the Company to enough risk to warrant adverse classification. ● Substandard - The category includes borrowers that generally exhibit well-defined weakness(es) that jeopardize repayment. Credits are inadequately protected by the current worth and paying capacity of the obligor or of the collateral pledged. A distinct possibility exists that the Company will sustain some loss if deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified substandard. Substandard loans include both performing and non-performing loans and are broken out in the table below. ● Doubtful - The category includes borrowers that exhibit weaknesses inherent in a substandard credit and characteristics that these weaknesses make collection or liquidation in full highly questionable or improbable based on existing facts, conditions, and values. Because of reasonably specific pending factors, which may work to the advantage and strengthening of the assets, classification as a loss is deferred until its more exact status may be determined. ● Loss - Credits that are considered uncollectible or of such little value that their continuance as a bankable asset is not warranted. The following tables present the credit risk profile of the Company’s loan portfolio based on internal rating categories and loan segments: As of March 31, 2024 Amortized Cost Basis by Origination Year and Internal Risk Rating Amortized Cost Basis 2024 2023 2022 2021 2020 2019 and Prior Revolving Loans Revolving Loans Converted to Term Loans Total (Dollars in thousands) Commercial and industrial Pass $ 162,797 $ 301,628 $ 253,530 $ 158,058 $ 39,382 $ 45,697 $ 1,042,118 $ 57,434 $ 2,060,644 Special mention 1,627 1,128 852 1,966 12 43 24,074 79 29,781 Substandard - accrual 1,996 12,850 1,848 6,666 204 2,420 33,699 18,604 78,287 Substandard - non-accrual — 2,213 — 264 — 144 6,105 129 8,855 Doubtful — — — — — — 1,995 — 1,995 Loss — — — — — — — — — Total $ 166,420 $ 317,819 $ 256,230 $ 166,954 $ 39,598 $ 48,304 $ 1,107,991 $ 76,246 $ 2,179,562 Energy Pass $ — $ 4,583 $ 6,345 $ — $ — $ — $ 208,147 $ 1,944 $ 221,019 Special mention — — — — — — — — — Substandard - accrual — — — — — — — — — Substandard - non-accrual — — — — — — — — — Doubtful — — — — — — 198 — 198 Loss — — — — — — — — — Total $ - $ 4,583 $ 6,345 $ - $ - $ - $ 208,345 $ 1,944 $ 221,217 Commercial real estate - owner-occupied Pass $ 6,280 $ 55,911 $ 103,985 $ 116,685 $ 63,069 $ 80,507 $ 76,967 $ 33,023 $ 536,427 Special mention 9,597 548 5,291 9,793 1,736 3,114 — 571 30,650 Substandard - accrual — 2,977 1,464 — 1,630 2,800 — 1,528 10,399 Substandard - non-accrual — — 336 — — — — — 336 Doubtful — — — — — — — — — Loss — — — — — — — — — Total $ 15,877 $ 59,436 $ 111,076 $ 126,478 $ 66,435 $ 86,421 $ 76,967 $ 35,122 $ 577,812 Commercial real estate - non-owner-occupied — Pass $ 79,617 $ 444,515 $ 862,200 $ 246,477 $ 159,192 $ 114,102 $ 651,858 $ 143,649 $ 2,701,610 Special mention — — 18,908 7,228 — 18,960 — — 45,096 Substandard - accrual 3,236 9,619 4,030 1,898 3,627 298 — — 22,708 Substandard - non-accrual — — 522 — — — — — 522 Doubtful — — — — — — — — — Loss — — — — — — — — — Total $ 82,853 $ 454,134 $ 885,660 $ 255,603 $ 162,819 $ 133,360 $ 651,858 $ 143,649 $ 2,769,936 Residential real estate Pass $ 1,924 $ 49,465 $ 90,734 $ 80,314 $ 109,425 $ 94,830 $ 36,618 $ — $ 463,310 Special mention — — 1,076 1,954 173 — — — 3,203 Substandard - accrual 253 — — 1,310 — 200 176 — 1,939 Substandard - non-accrual — — — — — — — 176 176 Doubtful — — — — — — — — — Loss — — — — — — — — — Total $ 2,177 $ 49,465 $ 91,810 $ 83,578 $ 109,598 $ 95,030 $ 36,794 $ 176 $ 468,628 Consumer Pass $ 1,289 $ 10,995 $ 4,381 $ 412 $ 45 $ 246 $ 14,638 $ — $ 32,006 Special mention — — — — — 5 — — 5 Substandard - accrual — — — — 21 — — — 21 Substandard - non-accrual — — — — — — — — — Doubtful — — — — — — — — — Loss — — — — — — — — — Total $ 1,289 $ 10,995 $ 4,381 $ 412 $ 66 $ 251 $ 14,638 $ - $ 32,032 Total Pass $ 251,907 $ 867,097 $ 1,321,175 $ 601,946 $ 371,113 $ 335,382 $ 2,030,346 $ 236,050 $ 6,015,016 Special mention 11,224 1,676 26,127 20,941 1,921 22,122 24,074 650 108,735 Substandard - accrual 5,485 25,446 7,342 9,874 5,482 5,718 33,875 20,132 113,354 Substandard - non-accrual — 2,213 858 264 — 144 6,105 305 9,889 Doubtful — — — — — — 2,193 — 2,193 Loss — — — — — — — — — Total $ 268,616 $ 896,432 $ 1,355,502 $ 633,025 $ 378,516 $ 363,366 $ 2,096,593 $ 257,137 $ 6,249,187 As of December 31, 2023 Amortized Cost Basis by Origination Year and Internal Risk Rating Amortized Cost Basis 2023 2022 2021 2020 2019 2018 and Prior Revolving Loans Revolving Loans Converted to Term Loans Total (Dollars in thousands) Commercial and industrial Pass $ 379,360 $ 258,182 $ 193,302 $ 54,901 $ 38,762 $ 18,801 $ 1,061,365 $ 53,015 $ 2,057,688 Special mention 2,442 925 6,000 2,674 1,460 26 9,748 3,175 26,450 Substandard - accrual 12,655 1,877 5,101 238 598 815 28,652 16,831 66,767 Substandard - non-accrual — — 266 24 — — 6,848 178 7,316 Doubtful — — — — — — 1,991 — 1,991 Loss — — — — — — — — — Total $ 394,457 $ 260,984 $ 204,669 $ 57,837 $ 40,820 $ 19,642 $ 1,108,604 $ 73,199 $ 2,160,212 Energy Pass $ 4,581 $ 6,868 $ — $ 156 $ — $ — $ 202,218 $ 107 $ 213,930 Special mention — — — — — — — — — Substandard - accrual — — — — — — — — — Substandard - non-accrual — — — — — — — — — Doubtful — — — — — — 288 — 288 Loss — — — — — — — — — Total $ 4,581 $ 6,868 $ — $ 156 $ — $ — $ 202,506 $ 107 $ 214,218 Commercial real estate - owner-occupied Pass $ 56,236 $ 92,148 $ 119,684 $ 62,072 $ 49,992 $ 32,936 $ 76,782 $ 36,263 $ 526,113 Special mention 10,095 6,798 8,522 1,747 793 2,448 — 576 30,979 Substandard - accrual 2,977 — — 1,635 770 2,047 — 1,528 8,957 Substandard - non-accrual — — 204 — — — — — 204 Doubtful — — — — — — — — — Loss — — — — — — — — — Total $ 69,308 $ 98,946 $ 128,410 $ 65,454 $ 51,555 $ 37,431 $ 76,782 $ 38,367 $ 566,253 Commercial real estate - non-owner-occupied Pass $ 477,238 $ 842,755 $ 242,405 $ 161,845 $ 65,540 $ 50,062 $ 626,998 $ 145,621 $ 2,612,464 Special mention — 18,939 7,331 — 17,208 4,052 — — 47,530 Substandard - accrual 10,341 — 2,396 3,626 — 298 — 439 17,100 Substandard - non-accrual — 713 6,029 1,698 — — — — 8,440 Doubtful — — — — — — — — — Loss — — — — — — — — — Total $ 487,579 $ 862,407 $ 258,161 $ 167,169 $ 82,748 $ 54,412 $ 626,998 $ 146,060 $ 2,685,534 Residential real estate Pass $ 37,676 $ 86,919 $ 82,390 $ 110,853 $ 36,589 $ 62,288 $ 37,619 $ — $ 454,334 Special mention — 813 3,519 176 — — — — 4,508 Substandard - accrual 253 — 1,317 3,125 203 — 176 — 5,074 Substandard - non-accrual — — — — — — — 179 179 Doubtful — — — — — — — — — Loss — — — — — — — — — Total $ 37,929 $ 87,732 $ 87,226 $ 114,154 $ 36,792 $ 62,288 $ 37,795 $ 179 $ 464,095 Consumer Pass $ 11,591 $ 6,004 $ 462 $ 54 $ 221 $ 25 $ 18,960 $ — $ 37,317 Special mention — — — — — 5 — — 5 Substandard - accrual — — — 23 — — — — 23 Substandard - non-accrual — 33 — — — — — — 33 Doubtful — — — — — — — — — Loss — — — — — — — — — Total $ 11,591 $ 6,037 $ 462 $ 77 $ 221 $ 30 $ 18,960 $ — $ 37,378 Total Pass $ 966,682 $ 1,292,876 $ 638,243 $ 389,881 $ 191,104 $ 164,112 $ 2,023,942 $ 235,006 $ 5,901,846 Special mention 12,537 27,475 25,372 4,597 19,461 6,531 9,748 3,751 109,472 Substandard - accrual 26,226 1,877 8,814 8,647 1,571 3,160 28,828 18,798 97,921 Substandard - non-accrual — 746 6,499 1,722 — — 6,848 357 16,172 Doubtful — — — — — — 2,279 — 2,279 Loss — — — — — — — — — Total $ 1,005,445 $ 1,322,974 $ 678,928 $ 404,847 $ 212,136 $ 173,803 $ 2,071,645 $ 257,912 $ 6,127,690 The following tables present the Company’s loan portfolio aging analysis as of March 31, 2024 and December 31, 2023: As of March 31, 2024 Amortized Cost Basis by Origination Year and Past Due Status Amortized Cost Basis Revolving loans 2019 and converted to 2024 2023 2022 2021 2020 Prior Revolving loans term loans Total (Dollars in thousands) Commercial and industrial 30-59 days $ - $ 2,558 $ 150 $ 448 $ - $ 274 $ 4,672 $ - $ 8,102 60-89 days - 62 18 - - - 2,154 - 2,234 Greater than 90 days - 280 - 331 - 144 8,548 - 9,303 Total past due - 2,900 168 779 - 418 15,374 - 19,639 Current 166,420 314,919 256,062 166,175 39,598 47,886 1,092,617 76,246 2,159,923 Total $ 166,420 $ 317,819 $ 256,230 $ 166,954 $ 39,598 $ 48,304 $ 1,107,991 $ 76,246 $ 2,179,562 Greater than 90 days and accruing $ - $ 280 $ - $ 67 $ - $ - $ 447 $ - $ 794 Energy 30-59 days $ - $ - $ - $ - $ - $ - $ - $ - $ - 60-89 days - - - - - - - - - Greater than 90 days - - - - - - 198 - 198 Total past due - - - - - - 198 - 198 Current - 4,583 6,345 - - - 208,147 1,944 221,019 Total $ - $ 4,583 $ 6,345 $ - $ - $ - $ 208,345 $ 1,944 $ 221,217 Greater than 90 days and accruing $ - $ - $ - $ - $ - $ - $ - $ - $ - Commercial real estate - owner-occupied 30-59 days $ - $ 2,977 $ 336 $ - $ - $ - $ - $ 1,528 $ 4,841 60-89 days - - - - - - - - - Greater than 90 days - - - - 416 229 - - 645 Total past due - 2,977 336 - 416 229 - 1,528 5,486 Current 15,877 56,459 110,740 126,478 66,019 86,192 76,967 33,594 572,326 Total $ 15,877 $ 59,436 $ 111,076 $ 126,478 $ 66,435 $ 86,421 $ 76,967 $ 35,122 $ 577,812 Greater than 90 days and accruing $ - $ - $ - $ - $ 416 $ 229 $ - $ - $ 645 Commercial real estate - non-owner-occupied 30-59 days $ - $ 18,853 $ 4,717 $ - $ - $ 141 $ 5,606 $ - $ 29,317 60-89 days - 573 - - 816 68 - - 1,457 Greater than 90 days - - 522 - - - - - 522 Total past due - 19,426 5,239 - 816 209 5,606 - 31,296 Current 82,853 434,708 880,421 255,603 162,003 133,151 646,252 143,649 2,738,640 Total $ 82,853 $ 454,134 $ 885,660 $ 255,603 $ 162,819 $ 133,360 $ 651,858 $ 143,649 $ 2,769,936 Greater than 90 days and accruing $ - $ - $ - $ - $ - $ - $ - $ - $ - Residential real estate 30-59 days $ - $ - $ 6 $ 89 $ 136 $ - $ - $ - $ 231 60-89 days - - - - - - - - - Greater than 90 days - - - 1,310 - - 176 - 1,486 Total past due - - 6 1,399 136 - 176 - 1,717 Current 2,177 49,465 91,804 82,179 109,462 95,030 36,618 176 466,911 Total $ 2,177 $ 49,465 $ 91,810 $ 83,578 $ 109,598 $ 95,030 $ 36,794 $ 176 $ 468,628 Greater than 90 days and accruing $ - $ - $ - $ 1,310 $ - $ - $ 176 $ - $ 1,486 Consumer 30-59 days $ - $ - $ 4 $ 22 $ - $ - $ 135 $ - $ 161 60-89 days - - 17 16 - 5 - - 38 Greater than 90 days - - - - - - - - - Total past due - - 21 38 - 5 135 - 199 Current 1,289 10,995 4,360 374 66 246 14,503 - 31,833 Total $ 1,289 $ 10,995 $ 4,381 $ 412 $ 66 $ 251 $ 14,638 $ - $ 32,032 Greater than 90 days and accruing $ - $ - $ - $ - $ - $ - $ - $ - $ - Total 30-59 days $ - $ 24,388 $ 5,213 $ 559 $ 136 $ 415 $ 10,413 $ 1,528 $ 42,652 60-89 days - 635 35 16 816 73 2,154 - 3,729 Greater than 90 days - 280 522 1,641 416 373 8,922 - 12,154 Total past due - 25,303 5,770 2,216 1,368 861 21,489 1,528 58,535 Current 268,616 871,129 1,349,732 630,809 377,148 362,505 2,075,104 255,609 6,190,652 Total $ 268,616 $ 896,432 $ 1,355,502 $ 633,025 $ 378,516 $ 363,366 $ 2,096,593 $ 257,137 $ 6,249,187 Greater than 90 days and accruing $ - $ 280 $ - $ 1,377 $ 416 $ 229 $ 623 $ - $ 2,925 As of December 31, 2023 Amortized Cost Basis by Origination Year and Past Due Status Amortized Cost Basis Revolving loans 2018 and converted to 2023 2022 2021 2020 2019 Prior Revolving loans term loans Total (Dollars in thousands) Commercial and industrial 30-59 days $ 250 $ 178 $ — $ 81 $ — $ 136 $ 158 $ 151 $ 954 60-89 days — — — — — — — — — Greater than 90 days 30 28 347 24 199 — 10,800 2,376 13,804 Total past due 280 206 347 105 199 136 10,958 2,527 14,758 Current 394,177 260,778 204,322 57,732 40,621 19,506 1,097,646 70,672 2,145,454 Total $ 394,457 $ 260,984 $ 204,669 $ 57,837 $ 40,820 $ 19,642 $ 1,108,604 $ 73,199 $ 2,160,212 Greater than 90 days and accruing $ 30 $ 28 $ 81 $ — $ 199 $ — $ 2,000 $ 2,199 $ 4,537 Energy 30-59 days $ — $ — $ — $ — $ — $ — $ 30 $ — $ 30 60-89 days — — — — — — — — — Greater than 90 days — — — — — — 288 — 288 Total past due — — — — — — 318 — 318 Current 4,581 6,868 — 156 — — 202,188 107 213,900 Total $ 4,581 $ 6,868 $ — $ 156 $ — $ — $ 202,506 $ 107 $ 214,218 Greater than 90 days and accruing $ — $ — $ — $ — $ — $ — $ — $ — $ — Commercial real estate - owner-occupied 30-59 days $ — $ — $ — $ 371 $ — $ 71 $ — $ — $ 442 60-89 days — — — — — — — — — Greater than 90 days — — 204 — — — — — 204 Total past due — — 204 371 — 71 — — 646 Current 69,308 98,946 128,206 65,083 51,555 37,360 76,782 38,367 565,607 Total $ 69,308 $ 98,946 $ 128,410 $ 65,454 $ 51,555 $ 37,431 $ 76,782 $ 38,367 $ 566,253 Greater than 90 days and accruing $ — $ — $ — $ — $ — $ — $ — $ — $ — Commercial real estate - non-owner-occupied 30-59 days $ — $ — $ — $ — $ — $ — $ — $ — $ — 60-89 days — — — — — — — — — Greater than 90 days — 713 6,029 1,698 — 307 — — 8,747 Total past due — 713 6,029 1,698 — 307 — — 8,747 Current 487,579 861,694 252,132 165,471 82,748 54,105 626,998 146,060 2,676,787 Total $ 487,579 $ 862,407 $ 258,161 $ 167,169 $ 82,748 $ 54,412 $ 626,998 $ 146,060 $ 2,685,534 Greater than 90 days and accruing $ — $ — $ — $ — $ — $ 307 $ — $ — $ 307 Residential real estate 30-59 days $ — $ 6 $ — $ 137 $ — $ — $ — $ — $ 143 60-89 days — — — — — — — — — Greater than 90 days — — 1,317 — — — 176 — 1,493 Total past due — 6 1,317 137 — — 176 — 1,636 Current 37,929 87,726 85,909 114,017 36,792 62,288 37,619 179 462,459 Total $ 37,929 $ 87,732 $ 87,226 $ 114,154 $ 36,792 $ 62,288 $ 37,795 $ 179 $ 464,095 Greater than 90 days and accruing $ — $ — $ 1,317 $ — $ — $ — $ 176 $ — $ 1,493 Consumer 30-59 days $ — $ 219 $ 40 $ — $ — $ — $ 200 $ — $ 459 60-89 days — — — — — — — — — Greater than 90 days — 35 — — — — — — 35 Total past due — 254 40 — — — 200 — 494 Current 11,591 5,783 422 77 221 30 18,760 — 36,884 Total $ 11,591 $ 6,037 $ 462 $ 77 $ 221 $ 30 $ 18,960 $ — $ 37,378 Greater than 90 days and accruing $ — $ 2 $ — $ — $ — $ — $ — $ — $ 2 Total 30-59 days $ 250 $ 403 $ 40 $ 589 $ — $ 207 $ 388 $ 151 $ 2,028 60-89 days — — — — — — — — — Greater than 90 days 30 776 7,897 1,722 199 307 11,264 2,376 24,571 Total past due 280 1,179 7,937 2,311 199 514 11,652 2,527 26,599 Current 1,005,165 1,321,795 670,991 402,536 211,937 173,289 2,059,993 255,385 6,101,091 Total $ 1,005,445 $ 1,322,974 $ 678,928 $ 404,847 $ 212,136 $ 173,803 $ 2,071,645 $ 257,912 $ 6,127,690 Greater than 90 days and accruing $ 30 $ 30 $ 1,398 $ — $ 199 $ 307 $ 2,176 $ 2,199 $ 6,339 Non-accrual loans are loans for which the Company does not record interest income. The accrual of interest on loans is discontinued at the time the loan is 90 days past due unless the credit is well secured and in process of collection. Past due status is based on contractual terms of the loan. In all cases, loans are placed on non-accrual or charged off at an earlier date, if collection of principal or interest is considered doubtful. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. The following table presents the Company’s non-accrual loans by loan segments at March 31, 2024 and December 31, 2023: As of March 31, 2024 Amortized Cost Basis by Origination Year Amortized Cost Basis Revolving Non-accrual loans Loans with 2019 and Revolving converted Total Non- no related 2024 2023 2022 2021 2020 Prior loans to term loans accrual Loans Allowance (Dollars in thousands) Commercial and industrial $ — $ 2,213 $ — $ 264 $ — $ 144 $ 8,100 $ 129 $ 10,850 $ 5,717 Energy — — — — — — 198 — 198 198 Commercial real estate - owner-occupied — — 336 — — — — — 336 336 Commercial real estate - non-owner-occupied — — 522 — — — — — 522 — Residential real estate — — — — — — — 176 176 176 Consumer — — — — — — — — — — Total $ — $ 2,213 $ 858 $ 264 $ — $ 144 $ 8,298 $ 305 $ 12,082 $ 6,427 As of December 31, 2023 Amortized Cost Basis by Origination Year Amortized Cost Basis Revolving Non-accrual loans Loans with 2018 and Revolving converted Total Non- no related 2023 2022 2021 2020 2019 Prior loans to term loans accrual Loans Allowance (Dollars in thousands) Commercial and industrial $ — $ — $ 266 $ 24 $ — $ — $ 8,839 $ 178 $ 9,307 $ 6,198 Energy — — — — — — 288 — 288 288 Commercial real estate - owner-occupied — — 204 — — — — — 204 204 Commercial real estate - non-owner-occupied — 713 6,029 1,698 — — — — 8,440 1,698 Residential real estate — — — — — — — 179 179 179 Consumer — 33 — — — — — — 33 33 Total $ — $ 746 $ 6,499 $ 1,722 $ — $ — $ 9,127 $ 357 $ 18,451 $ 8,600 Interest income recognized on non-accrual loans was zero during the three months ended March 31, 2024 and 2023. Allowance for Credit Losses The Company’s CECL committee meets at least quarterly to oversee the ACL methodology. The committee estimates the ACL using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The ACL represents the Company’s current estimate of lifetime credit losses inherent in the loan portfolio at the statement of financial condition date. The ACL is adjusted for expected prepayments when appropriate and excludes expected extensions, renewals, and modifications. The ACL is the sum of three components: (i) asset specific / individual loan reserves; (ii) quantitative (formulaic or pooled) reserves; and (iii) qualitative (judgmental) reserves. Asset Specific - Quantitative Qualitative ● The nature and volume of changes in risk ratings; ● The volume and severity of past due loans; ● The volume of non-accrual loans; ● The nature and volume of the loan portfolio, including the existence, growth, and effect of any concentrations of credit; ● Changes in the Institute of Supply Management’s Purchasing Manager Indices (“PMI”) for services and manufacturing; ● Changes in collateral values; ● Changes in lending policies, procedures, and quality of loan reviews; ● Changes in lending staff; and ● Changes in competition, legal and regulatory environments In addition to the current condition qualitative adjustments, the Company uses the Federal Reserve’s unemployment forecast to adjust the ACL based on forward-looking guidance. The Federal Reserve’s unemployment forecast extends three years and is eventually reverted to the mean of six percent by year 10. The following table presents the activity in the allowance for credit losses and allowance for credit losses on off-balance sheet credit exposures by loan segment for the three months ended March 31, 2024: For the Three Months Ended March 31, 2024 Commercial Commercial Real Estate Real Estate Commercial Owner- Non-owner- Residential and Industrial Energy Occupied Occupied Real Estate Consumer Total (Dollars in thousands) Allowance for Credit Losses: Beginning balance $ 32,244 $ 3,143 $ 6,445 $ 28,130 $ 3,456 $ 44 $ 73,462 Charge-offs (786) — — (848) — — (1,634) Recoveries 55 118 — — — — 173 Provision (release) 2,308 (92) (60) 707 10 (18) 2,855 Ending balance $ 33,821 $ 3,169 $ 6,385 $ 27,989 $ 3,466 $ 26 $ 74,856 Allowance for Credit Losses on Off-Balance Sheet Credit Exposures: Beginning balance $ 954 $ 149 $ 125 $ 5,096 $ 89 $ — $ 6,413 Provision (release) 54 (149) (36) (1,076) 6 1 (1,200) Ending balance $ 1,008 $ — $ 89 $ 4,020 $ 95 $ 1 $ 5,213 The ACL balance increased $1.4 million during the quarter ended March 31, 2024 and included provision of $2.9 million due to loan growth and an increase in specific reserves. Net charge-offs were million, primarily due to charge-offs on two commercial and industrial loans, two commercial real estate – non-owner-occupied loans and one credit card account. One of the charge-offs on commercial real estate – non-owner-occupied loans was a partial charge-off of a commercial construction non-acc |