Loans | Note 5 - Loans Loans consist of the following: (Dollars in thousands) December 31, 2022 December 31, 2021 Loans held for sale $ 49,957 $ 80,387 LHFI: Loans secured by real estate: Commercial real estate $ 2,304,678 $ 1,693,512 Construction/land/land development 945,625 530,083 Residential real estate 1,477,538 909,739 Total real estate 4,727,841 3,133,334 Commercial and industrial 2,051,161 1,454,235 Mortgage warehouse lines of credit 284,867 627,078 Consumer 26,153 16,684 Total LHFI (1) 7,090,022 5,231,331 Less: Allowance for loan credit losses 87,161 64,586 LHFI, net $ 7,002,861 $ 5,166,745 ____________________________ (1) Includes purchase accounting adjustment and net deferred loan fees of $14.2 million at December 31, 2022, and net deferred loan fees of $9.6 million at December 31, 2021. There were no merger date loan fair value adjustments at December 31, 2021. On August 1, 2022, the Company completed the merger with BTH. As of the merger date, BTH had approximately $1.24 billion in loans and the Company recorded a Day 1 fair value purchase accounting net discount of $5.1 million. As of December 31, 2022, the remaining purchase accounting net loan discount was $2.2 million. Credit quality indicators. As part of the Company's commitment to managing the credit quality of its loan portfolio, management annually and periodically updates and evaluates certain credit quality indicators, which include but are not limited to (i) weighted-average risk rating of the loan portfolio, (ii) net charge-offs, (iii) level of non-performing loans, (iv) level of classified loans (defined as substandard, doubtful and loss), and (v) the general economic conditions in the cities and states in which the Company operates. The Company maintains an internal risk rating system where ratings are assigned to individual loans based on assessed risk. Loan risk ratings are the primary indicator of credit quality for the loan portfolio and are continually evaluated to ensure they are appropriate based on currently available information. The following is a summary description of the Company's internal risk ratings: • Pass (1-6) Loans within this risk rating are further categorized as follows: Minimal risk (1) Well-collateralized by cash equivalent instruments held by the Banks. Moderate risk (2) Borrowers with excellent asset quality and liquidity. Borrowers' capitalization and liquidity exceed industry norms. Borrowers in this category have significant levels of liquid assets and have a low level of leverage. Better than average risk (3) Borrowers with strong financial strength and excellent liquidity that consistently demonstrate strong operating performance. Borrowers in this category generally have a sizable net worth that can be converted into liquid assets within 12 months. Average risk (4) Borrowers with sound credit quality and financial performance, including liquidity. Borrowers are supported by sufficient cash flow coverage generated through operations across the full business cycle. Marginally acceptable risk (5) Loans generally meet minimum requirements for an acceptable loan in accordance with lending policy, but possess one or more attributes that cause the overall risk profile to be higher than the majority of newly approved loans. Watch (6) A passing loan with one or more factors that identify a potential weakness in the overall ability of the borrower to repay the loan. These weaknesses are generally mitigated by other factors that reduce the risk of delinquency or loss. • Special Mention (7) This grade is intended to be temporary and includes borrowers whose credit quality has deteriorated and is at risk of further decline. • Substandard (8) This grade includes "Substandard" loans under regulatory guidelines. Substandard loans exhibit a well-defined weakness that jeopardizes debt repayment in accordance with contractual agreements, even though the loan may be performing. These obligations are characterized by the distinct possibility that a loss may be incurred if these weaknesses are not corrected and repayment may be dependent upon collateral liquidation or secondary source of repayment. • Doubtful (9) This grade includes "Doubtful" loans under regulatory guidelines. Such loans are placed on nonaccrual status and repayment may be dependent upon collateral with no readily determinable valuation or valuations that are highly subjective in nature. Repayment for these loans is considered improbable based on currently existing facts and circumstances. • Loss (0) This grade includes "Loss" loans under regulatory guidelines. Loss loans are charged-off or written down when repayment is not expected. In connection with the review of the loan portfolio, the Company considers risk elements attributable to particular loan types or categories in assessing the quality of individual loans. The list of loans to be reviewed for possible individual evaluation consists of nonaccrual commercial loans over $100,000 with direct exposure, unsecured loans over 90 days past due, commercial loans classified substandard or worse over $100,000 with direct exposure, TDRs, consumer loans greater than $100,000 with a FICO score under 625, loans greater than $100,000 in which the borrower has filed bankruptcy, and all loans 180 days or more past due. Loans under $50,000 will be evaluated collectively in designated pools unless a loss exposure has been identified. Some additional risk elements considered by loan type include: • for commercial real estate loans, the debt service coverage ratio, operating results of the owner in the case of owner-occupied properties, the loan to value ratio, the age and condition of the collateral and the volatility of income, property value and future operating results typical of properties of that type; • for construction, land and land development loans, the perceived feasibility of the project, including the ability to sell developed lots or improvements constructed for resale or the ability to lease property constructed for lease, the quality and nature of contracts for presale or prelease, if any, experience and ability of the developer and loan to value ratio; • for residential mortgage loans, the borrower's ability to repay the loan, including a consideration of the debt to income ratio and employment and income stability, the loan-to-value ratio, and the age, condition and marketability of the collateral; and • for commercial and industrial loans, the debt service coverage ratio (income from the business in excess of operating expenses compared to loan repayment requirements), the operating results of the commercial, industrial or professional enterprise, the borrower's business, professional and financial ability and expertise, the specific risks and volatility of income and operating results typical for businesses in that category and the value, nature and marketability of collateral. Purchased loans that have experienced more than insignificant credit deterioration since origination are PCD loans. An allowance for credit losses is determined using the same methodology as other individually evaluated loans. The Company held approximately $48.1 million of unpaid principal balance PCD loans at December 31, 2022, as a result of the merger with BTH on August 1, 2022, and none at December 31, 2021. Please see Note 1 - Significant Accounting Policies in these Notes to Consolidated Financial Statements for a description of our accounting policies related to purchased financial assets with credit deterioration. The following table reflects recorded investments in loans by credit quality indicator and origination year at December 31, 2022, excluding loans held for sale and loans accounted for at fair value. Loans acquired are shown in the table by origination year, not merger date. The Company had an immaterial amount of revolving loans converted to term loans at December 31, 2022. Term Loans Amortized Cost Basis by Origination Year (Dollars in thousands) 2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Total Commercial real estate: Pass $ 885,244 $ 502,287 $ 283,368 $ 230,040 $ 168,079 $ 131,411 $ 69,952 $ 2,270,381 Special mention — — — — 8,174 1,359 1,558 11,091 Classified 930 1,795 1,551 4,014 2,965 11,901 50 23,206 Total commercial real estate loans $ 886,174 $ 504,082 $ 284,919 $ 234,054 $ 179,218 $ 144,671 $ 71,560 $ 2,304,678 Current period gross charge-offs $ — $ — $ — $ — $ — $ 166 $ — $ 166 Current period gross recoveries — 31 — — 6 3 — 40 Current period net charge-offs (recoveries) $ — $ (31) $ — $ — $ (6) $ 163 $ — $ 126 Construction/land/land development: Pass $ 445,943 $ 320,951 $ 58,880 $ 27,381 $ 27,753 $ 5,253 $ 48,436 $ 934,597 Special mention 6,217 — — — — — — 6,217 Classified 180 100 286 38 160 1,708 2,339 4,811 Total construction/land/land development loans $ 452,340 $ 321,051 $ 59,166 $ 27,419 $ 27,913 $ 6,961 $ 50,775 $ 945,625 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Current period gross recoveries — — — — 200 11 — 211 Current period net charge-offs (recoveries) $ — $ — $ — $ — $ (200) $ (11) $ — $ (211) Residential real estate: Pass $ 535,739 $ 308,070 $ 261,293 $ 107,530 $ 48,652 $ 123,052 $ 80,375 $ 1,464,711 Special mention — — 390 — — — — 390 Classified 2,227 2,764 90 1,494 1,064 4,653 145 12,437 Total residential real estate loans $ 537,966 $ 310,834 $ 261,773 $ 109,024 $ 49,716 $ 127,705 $ 80,520 $ 1,477,538 Current period gross charge-offs $ — $ — $ — $ — $ — $ 91 $ — $ 91 Current period gross recoveries — — — 75 — 27 — 102 Current period net charge-offs (recoveries) $ — $ — $ — $ (75) $ — $ 64 $ — $ (11) Term Loans Amortized Cost Basis by Origination Year (Dollars in thousands) 2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Total Commercial and industrial: Pass $ 454,813 $ 239,411 $ 82,168 $ 75,043 $ 40,534 $ 29,745 $ 1,083,221 $ 2,004,935 Special mention 8,683 2,563 — — 187 — 1,620 13,053 Classified 3,641 11,455 188 1,978 1,224 3 14,684 33,173 Total commercial and industrial loans $ 467,137 $ 253,429 $ 82,356 $ 77,021 $ 41,945 $ 29,748 $ 1,099,525 $ 2,051,161 Current period gross charge-offs $ 28 $ 726 $ 48 $ 869 $ 337 $ 1,103 $ 5,348 $ 8,459 Current period gross recoveries 42 213 4 141 21 2,436 968 3,825 Current period net charge-offs (recoveries) $ (14) $ 513 $ 44 $ 728 $ 316 $ (1,333) $ 4,380 $ 4,634 Mortgage Warehouse Lines of Credit: Pass $ — $ — $ — $ — $ — $ — $ 282,298 $ 282,298 Special mention — — — — — — 2,042 2,042 Classified — — — — — — 527 527 Total mortgage warehouse lines of credit $ — $ — $ — $ — $ — $ — $ 284,867 $ 284,867 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Current period gross recoveries — — — — — — — — Current period net charge-offs (recoveries) $ — $ — $ — $ — $ — $ — $ — $ — Consumer: Pass $ 9,730 $ 3,822 $ 1,210 $ 784 $ 135 $ 15 $ 10,408 $ 26,104 Classified 22 19 — 6 — — 2 49 Total consumer loans $ 9,752 $ 3,841 $ 1,210 $ 790 $ 135 $ 15 $ 10,410 $ 26,153 Current period gross charge-offs $ 3 $ 27 $ 7 $ 2 $ 1 $ 1 $ 2 $ 43 Current period gross recoveries — — 7 — 3 5 1 16 Current period net charge-offs (recoveries) $ 3 $ 27 $ — $ 2 $ (2) $ (4) $ 1 $ 27 The following table reflects recorded investments in loans by credit quality indicator and origination year at December 31, 2021, excluding loans held for sale and loans accounted for at fair value. The Company had an immaterial amount of revolving loans converted to term loans at December 31, 2021. Term Loans Amortized Cost Basis by Origination Year (Dollars in thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total Commercial real estate: Pass $ 556,218 $ 369,128 $ 278,045 $ 236,543 $ 111,308 $ 86,498 $ 22,904 $ 1,660,644 Special mention — — — 8,392 15,828 — — 24,220 Classified 2,045 625 772 2,456 299 2,288 163 8,648 Total commercial real estate loans $ 558,263 $ 369,753 $ 278,817 $ 247,391 $ 127,435 $ 88,786 $ 23,067 $ 1,693,512 Current period gross charge-offs $ — $ — $ — $ 120 $ 24 $ 26 $ — $ 170 Current period gross recoveries — — — 48 3 14 — 65 Current period net charge-offs (recoveries) $ — $ — $ — $ 72 $ 21 $ 12 $ — $ 105 Term Loans Amortized Cost Basis by Origination Year (Dollars in thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total Construction/land/land development: Pass $ 256,212 $ 102,459 $ 85,442 $ 32,128 $ 5,422 $ 553 $ 30,729 $ 512,945 Special mention — — 8,126 — 1,003 — — 9,129 Classified 443 297 272 1,677 158 — 5,162 8,009 Total construction/land/land development loans $ 256,655 $ 102,756 $ 93,840 $ 33,805 $ 6,583 $ 553 $ 35,891 $ 530,083 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Current period gross recoveries — — — — — — — — Current period net charge-offs (recoveries) $ — $ — $ — $ — $ — $ — $ — $ — Residential real estate: Pass $ 313,898 $ 252,115 $ 109,564 $ 52,515 $ 45,042 $ 59,690 $ 60,342 $ 893,166 Special mention — 174 — 421 477 — — 1,072 Classified 1,398 191 2,393 2,848 1,819 6,606 246 15,501 Total residential real estate loans $ 315,296 $ 252,480 $ 111,957 $ 55,784 $ 47,338 $ 66,296 $ 60,588 $ 909,739 Current period gross charge-offs $ — $ 7 $ 61 $ — $ — $ 10 $ — $ 78 Current period gross recoveries — 21 19 — 25 52 — 117 Current period net charge-offs (recoveries) $ — $ (14) $ 42 $ — $ (25) $ (42) $ — $ (39) Commercial and industrial: Pass $ 448,377 $ 164,910 $ 93,488 $ 64,791 $ 14,742 $ 24,014 $ 599,144 $ 1,409,466 Special mention 259 2,170 — 1,519 — — 3,752 7,700 Classified 14,378 167 2,978 3,849 3,849 3,008 8,840 37,069 Total commercial and industrial loans $ 463,014 $ 167,247 $ 96,466 $ 70,159 $ 18,591 $ 27,022 $ 611,736 $ 1,454,235 Current period gross charge-offs $ 9 $ 1,172 $ 54 $ 5 $ 1,467 $ 6,354 $ 2,862 $ 11,923 Current period gross recoveries — 18 51 3 102 204 339 717 Current period net charge-offs (recoveries) $ 9 $ 1,154 $ 3 $ 2 $ 1,365 $ 6,150 $ 2,523 $ 11,206 Mortgage Warehouse Lines of Credit: Pass $ — $ — $ — $ — $ — $ — $ 627,078 $ 627,078 Current period gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — Current period gross recoveries — — — — — — — — Current period net charge-offs (recoveries) $ — $ — $ — $ — $ — $ — $ — $ — Consumer: Pass $ 6,976 $ 2,169 $ 1,467 $ 443 $ 55 $ 67 $ 5,407 $ 16,584 Classified 26 21 1 — — 1 51 100 Total consumer loans $ 7,002 $ 2,190 $ 1,468 $ 443 $ 55 $ 68 $ 5,458 $ 16,684 Current period gross charge-offs $ — $ 5 $ 29 $ 2 $ — $ 9 $ 18 $ 63 Current period gross recoveries — — 20 7 1 17 4 49 Current period net charge-offs (recoveries) $ — $ 5 $ 9 $ (5) $ (1) $ (8) $ 14 $ 14 The following tables present the Company's loan portfolio aging analysis at the dates indicated: December 31, 2022 (Dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due Loans Past Due 90 Days or More Total Past Due Current Loans Total Loans Receivable Accruing Loans 90 or More Days Past Due Loans secured by real estate: Commercial real estate $ 31 $ — $ 104 $ 135 $ 2,304,543 $ 2,304,678 $ — Construction/land/land development 854 — 17 871 944,754 945,625 — Residential real estate 1,814 891 450 3,155 1,474,383 1,477,538 — Total real estate 2,699 891 571 4,161 4,723,680 4,727,841 — Commercial and industrial 3,878 1,972 544 6,394 2,044,767 2,051,161 — Mortgage warehouse lines of credit — — — — 284,867 284,867 — Consumer 350 16 11 377 25,776 26,153 — Total LHFI $ 6,927 $ 2,879 $ 1,126 $ 10,932 $ 7,079,090 $ 7,090,022 $ — December 31, 2021 (Dollars in thousands) 30-59 Days Past Due 60-89 Days Past Due Loans Past Due 90 Days or More Total Past Due Current Loans Total Loans Receivable Accruing Loans 90 or More Days Past Due Loans secured by real estate: Commercial real estate $ 22 $ — $ 197 $ 219 $ 1,693,293 $ 1,693,512 $ — Construction/land/land development — 129 52 181 529,902 530,083 — Residential real estate 2,245 352 10,331 12,928 896,811 909,739 — Total real estate 2,267 481 10,580 13,328 3,120,006 3,133,334 — Commercial and industrial 77 1,172 10,927 12,176 1,442,059 1,454,235 — Mortgage warehouse lines of credit — — — — 627,078 627,078 — Consumer 90 — 21 111 16,573 16,684 — Total LHFI $ 2,434 $ 1,653 $ 21,528 $ 25,615 $ 5,205,716 $ 5,231,331 $ — U.S. GAAP requires that a discount or premium, and also an allowance for credit losses be recorded on acquired loans. The Company completed the merger with BTH on August 1, 2022. As a result, the Company recorded $5.1 million in net loan discounts and a $5.5 million increase in the allowance for credit losses related to PCD loans. In addition, the Company recorded a Day 1 $14.9 million provision for loan credit losses on non-PCD loans required by the Current Expected Credit Losses ("CECL") guidance. The following tables detail activity in the allowance for loan credit losses by portfolio segment. Accrued interest of $27.1 million and $15.9 million was not included in the book value for the purposes of calculating the allowance at December 31, 2022 and 2021, respectively. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories. Year Ended December 31, 2022 Commercial Real Estate Construction/ Land/ Land Development Residential Real Estate Commercial and Industrial Mortgage Warehouse Lines of Credit Consumer Total (Dollars in thousands) Beginning Balance $ 13,425 $ 4,011 $ 6,116 $ 40,146 $ 340 $ 548 $ 64,586 Allowance for loan credit losses - BTH merger 1 — — 5,525 — 1 5,527 Charge-offs 166 — 91 8,459 — 43 8,759 Recoveries 40 211 102 3,825 — 16 4,194 Provision (1)(2) 6,472 3,554 2,103 9,111 39 334 21,613 Ending Balance $ 19,772 $ 7,776 $ 8,230 $ 50,148 $ 379 $ 856 $ 87,161 Average Balance $ 1,951,246 $ 708,758 $ 1,143,190 $ 1,675,719 $ 420,639 $ 20,913 $ 5,920,465 Net Charge-offs to Loan Average Balance 0.01 % (0.03) % — % 0.28 % — % 0.13 % 0.08 % _________________________ (1) The $24.7 million provision for credit losses on the consolidated statement of income includes a $21.6 million provision for loan losses, a $2.3 million provision for off-balance sheet commitments and a $732,000 provision for held to maturity securities credit losses for the year ended December 31, 2022. (2) Excluded from the allowance is $10.8 million in PCD loans that were acquired in the merger with BTH that were added to the allowance and immediately written off. Year Ended December 31, 2021 Commercial Real Estate Construction/ Land/ Land Development Residential Real Estate Commercial and Industrial Mortgage Warehouse Lines of Credit Consumer Total (Dollars in thousands) Beginning Balance $ 15,430 $ 8,191 $ 9,418 $ 51,857 $ 856 $ 918 $ 86,670 Charge-offs 170 — 78 11,923 — 63 12,234 Recoveries 65 — 117 717 — 49 948 Provision (1) (1,900) (4,180) (3,341) (505) (516) (356) (10,798) Ending Balance $ 13,425 $ 4,011 $ 6,116 $ 40,146 $ 340 $ 548 $ 64,586 Average Balance $ 1,501,890 $ 528,618 $ 916,039 $ 1,627,077 $ 753,588 $ 16,764 $ 5,343,976 Net Charge-offs to Loan Average Balance 0.01 % — % — % 0.69 % — % 0.08 % 0.21 % _________________________ (1) The $10.8 million provision for credit losses net benefit on the consolidated statement of income includes a $10.8 million provision for loan losses net benefit, a $68,000 benefit for off-balance sheet commitments and a $101,000 provision for held to maturity securities credit losses for the year ended December 31, 2021. Year Ended December 31, 2020 Commercial Real Estate Construction/ Land/ Land Development Residential Real Estate Commercial and Industrial Mortgage Warehouse Lines of Credit Consumer Total (Dollars in thousands) Beginning Balance $ 10,013 $ 3,711 $ 6,332 $ 16,960 $ 262 $ 242 $ 37,520 Impact of Adopting ASC 326 (5,052) 1,141 (2,526) 7,296 29 360 $ 1,248 Charge-offs 4,924 — 692 6,702 — 76 12,394 Recoveries 19 1 202 1,022 — 24 1,268 Provision (1) 15,374 3,338 6,102 33,281 565 368 59,028 Ending Balance $ 15,430 $ 8,191 $ 9,418 $ 51,857 $ 856 $ 918 $ 86,670 Average Balance $ 1,322,477 $ 554,038 $ 769,838 $ 1,710,648 $ 574,837 $ 18,707 $ 4,950,545 Net Charge-offs to Loan Average Balance 0.37 % — % 0.06 % 0.33 % — % 0.28 % 0.22 % _________________________ (1) The $59.9 million provision for credit losses on the consolidated statement of income includes a $59.0 million net loan loss provision, a 902,000 provision for off-balance sheet commitments and a 30,000 provision benefit for held to maturity securities credit losses for the year ended December 31, 2020. The increase in provision expense during the year ended December 31, 2022, is primarily due to the merger with BTH, completed on August 1, 2022, which required a Day 1 CECL loan provision of $14.9 million for loan credit losses on non-PCD loans along with a $5.5 million allowance for loan credit losses on PCD loans. The allowance for loan credit losses increased $22.6 million compared to December 31, 2021, mainly due to a $23.9 million allowance for BTH loans at December 31, 2022. Qualitative factor changes across the Company's risk pools, which includes the impact of the BTH acquired loans, drove a $22.4 million increase for the year ended December 31, 2022. The decrease in provision expense during the year ended December 31, 2021, compared to the year ended December 31, 2020, was primarily due to improvement in forecasted economic conditions during the year ended December 31, 2021, as compared to continuing uncertainty related to ongoing economic impact and duration of the COVID-19 pandemic during the year ended December 31, 2020. The Company's credit quality profile in relation to the allowance for loan credit losses drove a decline of $25.1 million in the collectively evaluated portion of the reserve during the year ended December 31, 2021, of which a $19.6 million decrease was related to qualitative factor changes across the Company's risk pools for the year ended December 31, 2021. These declines were partially offset by an increase in certain specific loan reserves at December 31, 2021. The following table presents the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses, and the related Allowance for Loan Credit Losses ("ALCL") allocated to these loans. December 31, 2022 (Dollars in thousands) Commercial Real Estate Construction/ Land/ Land Development Residential Real Estate Commercial and Industrial Mortgage Warehouse Lines of Credit Consumer Total Real Estate $ 273 $ 97 $ 6,731 $ — $ — $ — $ 7,101 Accounts Receivable — — — 831 — — 831 Equipment — — — 285 — — 285 Total $ 273 $ 97 $ 6,731 $ 1,116 $ — $ — $ 8,217 ACL Allocation $ — $ — $ — $ 738 $ — $ — $ 738 December 31, 2021 (Dollars in thousands) Commercial Real Estate Construction/ Land/ Land Development Residential Real Estate Commercial and Industrial Mortgage Warehouse Lines of Credit Consumer Total Real Estate $ 166 $ — $ 8,150 $ — $ — $ — $ 8,316 Accounts Receivable — — — 7,783 — — 7,783 Equipment — — — 601 — — 601 Total $ 166 $ — $ 8,150 $ 8,384 $ — $ — $ 16,700 ACL Allocation $ — $ — $ 19 $ 6,563 $ — $ — $ 6,582 Collateral-dependent loans consist primarily of residential real estate and commercial and industrial loans. These loans are individually evaluated when foreclosure is probable or when the repayment of the loan is expected to be provided substantially through the operation or sale of the underlying collateral. In the case of commercial and industrial loans secured by equipment, the fair value of the collateral is estimated by third-party valuation experts. Loan balances are charged down to the underlying collateral value when they are deemed uncollectible. Note that the Company did not elect to use the collateral maintenance agreement practical expedient available under CECL. Nonaccrual LHFI were as follows: Nonaccrual With No Nonaccrual (Dollars in thousands) Loans secured by real estate: December 31, 2022 December 31, 2021 December 31, 2022 December 31, 2021 Commercial real estate $ 435 $ 453 $ 526 $ 512 Construction/land/land development 59 52 270 338 Residential real estate 7,023 7,684 7,712 11,647 Total real estate 7,517 8,189 8,508 12,497 Commercial and industrial 527 58 1,383 12,306 Mortgage warehouse lines of credit — — — — Consumer — — 49 100 Total nonaccrual loans $ 8,044 $ 8,247 $ 9,940 $ 24,903 All interest accrued but not received for loans placed on nonaccrual status is reversed against interest income. Subsequent receipts on nonaccrual loans are recorded as a reduction of principal, and interest income is recorded only after principal recovery is reasonably assured. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. At December 31, 2022 and 2021, the Company had no funding commitments for which the terms were modified in TDRs. For the year ended December 31, 2022, 2021 and 2020 gross interest income, that would have been recorded had the nonaccruing loans been current in accordance with their original terms, was $1.3 million, $1.9 million and $1.5 million, respectively. No interest income was recorded on these loans while they were considered nonaccrual during the years ended December 31, 2022, 2021 and 2020. The Company elects the fair value option for recording residential mortgage loans held for sale in accordance with U.S. GAAP. The Company had $3.9 million of nonaccrual mortgage loans held for sale that were recorded using the fair value option election at December 31, 2022, compared to $1.8 million at December 31, 2021. Loans classified as TDRs were as follows: (Dollars in thousands) December 31, 2022 December 31, 2021 TDRs Nonaccrual TDRs $ 4,389 $ 4,064 Performing TDRs 3,248 2,763 Total $ 7,637 $ 6,827 The tables below summarize loans classified as TDRs by loan and concession type during the dates indicated. Year Ended December 31, 2022 (Dollars in thousands) Number of Loans Restructured Pre-Modification Recorded Balance Term Concessions Interest Rate Concessions Combination of Term and Rate Concessions Total Modifications Loans secured by real estate: Commercial real estate (1) 1 $ 214 $ — $ — $ 211 $ 211 Construction/land/land development 2 850 695 — 97 792 Residential real estate 3 3,822 122 3,570 — 3,692 Total real estate 6 4,886 817 3,570 308 4,695 Commercial and industrial 1 20 20 — — 20 Total 7 $ 4,906 $ 837 $ 3,570 $ 308 $ 4,715 ________________________ (1) Acquired in connection with the BTH merger. Year Ended December 31, 2021 (Dollars in thousands) Number of Loans Restructured Pre-Modification Recorded Balance Term Concessions Interest Rate Concessions Combination of Term and Rate Concessions Total Modifications Residential real estate 1 $ 31 $ 26 $ — $ — $ 26 Commercial and industrial 1 100 100 — — 100 Total 2 $ 131 $ 126 $ — $ — $ 126 Year Ended December 31, 2020 (Dollars in thousands) Number of Loans Restructured Pre-Modification Recorded Balance Term Concessions Interest Rate Concessions Combination of Term and Rate Concessions Total Modifications Loans secured by real estate: Commercial real estate 2 $ 1,696 $ 1,694 $ — $ — $ 1,694 Residential real estate 5 1,212 — 177 877 1,054 Total real estate 7 2,908 1,694 177 877 2,748 Commercial and industrial 5 217 193 — — 193 Consumer 1 2 — — 2 2 Total 13 $ 3,127 $ 1,887 $ 177 $ 879 $ 2,943 |