| LOANS AND ALLOWANCE FOR CREDIT LOSSES |
LOANS AND ALLOWANCE FOR CREDIT LOSSES The loan portfolio balances, net of unearned income and fees, consist of various types of loans primarily made to borrowers located within Texas and are segregated by class of loan as follows: | | | | | | | | | | | | | September 30, 2023 | | December 31, 2022 | | (In thousands) | | Commercial and industrial | $ | 1,474,600 | | | $ | 1,455,795 | | | Paycheck Protection Program (PPP) | 5,968 | | | 13,226 | | | Real estate: | | | | | Commercial real estate (including multi-family residential) | 4,076,606 | | | 3,931,480 | | | Commercial real estate construction and land development | 1,078,265 | | | 1,037,678 | | | 1-4 family residential (including home equity) | 1,024,945 | | | 1,000,956 | | | Residential construction | 289,553 | | | 268,150 | | | Consumer and other | 54,591 | | | 47,466 | | | Total loans | 8,004,528 | | | 7,754,751 | | | Allowance for credit losses on loans | (93,575) | | | (93,180) | | | Loans, net | $ | 7,910,953 | | | $ | 7,661,571 | |
Nonaccrual and Past Due Loans An aging analysis of the recorded investment in past due loans, segregated by class of loans, is included below. The Company defines recorded investment as the outstanding loan balances including net deferred loan fees, and excluding accrued interest receivable of $36.4 million and $34.1 million as of September 30, 2023 and December 31, 2022, respectively, due to immateriality. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | September 30, 2023 | | Loans Past Due and Still Accruing | | Nonaccrual
Loans | | Current
Loans | | Total
Loans | 30-89
Days | | 90 or More
Days | | Total Past
Due Loans | | | | | (In thousands) | | Commercial and industrial | $ | 3,535 | | | $ | — | | | $ | 3,535 | | | $ | 14,971 | | | $ | 1,456,094 | | | $ | 1,474,600 | | | Paycheck Protection Program (PPP) | 85 | | | — | | | 85 | | | 20 | | | 5,863 | | | 5,968 | | | Real estate: | | | | | | | | | | | | Commercial real estate (including multi-family residential) | 19,649 | | | — | | | 19,649 | | | 13,563 | | | 4,043,394 | | | 4,076,606 | | Commercial real estate construction and land development | 4,405 | | | — | | | 4,405 | | | 170 | | | 1,073,690 | | | 1,078,265 | | 1-4 family residential (including home equity) | 4,742 | | | — | | | 4,742 | | | 8,442 | | | 1,011,761 | | | 1,024,945 | | | Residential construction | 3,389 | | | — | | | 3,389 | | | 635 | | | 285,529 | | | 289,553 | | | Consumer and other | 215 | | | — | | | 215 | | | 490 | | | 53,886 | | | 54,591 | | | Total loans | $ | 36,020 | | | $ | — | | | $ | 36,020 | | | $ | 38,291 | | | $ | 7,930,217 | | | $ | 8,004,528 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2022 | | Loans Past Due and Still Accruing | | Nonaccrual
Loans | | Current
Loans | | Total
Loans | 30-89
Days | | 90 or More
Days | | Total Past
Due Loans | | | | | (In thousands) | | Commercial and industrial | $ | 1,591 | | | $ | — | | | $ | 1,591 | | | $ | 25,297 | | | $ | 1,428,907 | | | $ | 1,455,795 | | | Paycheck Protection Program (PPP) | 517 | | | — | | | 517 | | | 105 | | | 12,604 | | | 13,226 | | | Real estate: | | | | | | | | | | | | Commercial real estate (including multi-family residential) | 3,222 | | | — | | | 3,222 | | | 9,970 | | | 3,918,288 | | | 3,931,480 | | Commercial real estate construction and land development | 851 | | | — | | | 851 | | | — | | | 1,036,827 | | | 1,037,678 | | 1-4 family residential (including home equity) | 3,385 | | | — | | | 3,385 | | | 9,404 | | | 988,167 | | | 1,000,956 | | | Residential construction | — | | | — | | | — | | | — | | | 268,150 | | | 268,150 | | | Consumer and other | 192 | | | — | | | 192 | | | 272 | | | 47,002 | | | 47,466 | | | Total loans | $ | 9,758 | | | $ | — | | | $ | 9,758 | | | $ | 45,048 | | | $ | 7,699,945 | | | $ | 7,754,751 | |
Credit Quality Indicators The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt. The Company utilizes a risk rating matrix to assign a risk rating to each of its loans. Loans are rated on a scale of 10 to 90. Risk ratings are updated on an ongoing basis and are subject to change by continuous loan monitoring processes including lending management monitoring, executive management and board committee oversight, and independent credit review. As part of the ongoing monitoring of the credit quality of the Company’s loan portfolio and methodology for calculating the allowance for credit losses, management assigns and tracks certain risk ratings to be used as credit quality indicators including trends related to (1) the weighted-average risk grade of loans, (2) the level of classified loans, (3) the delinquency status of loans, (4) nonperforming loans and (5) the general economic conditions in the our markets. Individual bankers, under the oversight of credit administration, review updated financial information for all pass grade commercial loans to reassess the risk grade on at least an annual basis. When a loan reaches a set of internally designated criteria, including Substandard or higher, a special assets officer will be involved in the monitoring of the loan on an on-going basis. The following is a general description of the risk ratings used by the Company: Pass—Credits in this category contain an acceptable amount of risk. Special Mention—Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Substandard—Loans classified as substandard have well-defined weaknesses on a continuing basis and are inadequately protected by the current net worth and paying capacity of the borrower, declining collateral values, or a continuing downturn in their industry which is reducing their profits to below zero and having a significantly negative impact on their cash flow. These loans so classified are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Doubtful—Loans classified as doubtful have all the weaknesses inherent in those classified as 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. Loss—Loans classified as loss are to be charged-off or charged-down when payment is acknowledged to be uncertain or when the timing or value of payments cannot be determined. “Loss” is not intended to imply that the loan or some portion of it will never be paid, nor does it in any way imply that there has been a forgiveness of debt. The following table presents risk ratings by category and the gross charge-offs by primary loan type and year of origination or renewal. Generally, current period renewals of credit are re-underwritten at the point of renewal and considered current period originations for purposes of the table below. The following summarizes the amortized cost basis of loans by year of origination/renewal and credit quality indicator by class of loan as of September 30, 2023 and December 31, 2022: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | September 30, 2023 | | December 31, 2022 | | Term Loans Amortized Cost Basis by Origination Year | | Revolving
Loans | | Revolving Loans
Converted to Term Loans | | Total | | Total | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | | | | | (In thousands) | | Commercial and industrial | | | | | | | | | | | | | | | | | | | | | Pass | $ | 249,626 | | | $ | 299,874 | | | $ | 194,032 | | | $ | 47,217 | | | $ | 31,150 | | | $ | 23,062 | | | $ | 528,399 | | | $ | 63,180 | | | $ | 1,436,540 | | | $ | 1,400,191 | | | Special Mention | 2,786 | | | 403 | | | 508 | | | 438 | | | 861 | | | — | | | 3,054 | | | 102 | | | 8,152 | | | 18,982 | | | Substandard | 1,250 | | | 3,925 | | | 9,303 | | | 1,140 | | | 12,131 | | | 281 | | | 1,057 | | | 771 | | | 29,858 | | | 36,568 | | | Doubtful | — | | | 50 | | | — | | | — | | | — | | | — | | | — | | | — | | | 50 | | | 54 | | | Total commercial and industrial loans | $ | 253,662 | | | $ | 304,252 | | | $ | 203,843 | | | $ | 48,795 | | | $ | 44,142 | | | $ | 23,343 | | | $ | 532,510 | | | $ | 64,053 | | | $ | 1,474,600 | | | $ | 1,455,795 | | | | | | | | | | | | | | | | | | | | | | | Current period gross charge-offs | $ | — | | | $ | 130 | | | $ | 4,264 | | | $ | 456 | | | $ | 129 | | | $ | — | | | $ | 4,143 | | | $ | 531 | | | $ | 9,653 | | | | | | | | | | | | | | | | | | | | | | | | | Paycheck Protection Program (PPP) | | | | | | | | | | | | | | | | | | | | | Pass | $ | — | | | $ | — | | | $ | 3,218 | | | $ | 2,750 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 5,968 | | | $ | 13,226 | | | Special Mention | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | Substandard | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | Doubtful | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | Total PPP loans | $ | — | | | $ | — | | | $ | 3,218 | | | $ | 2,750 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 5,968 | | | $ | 13,226 | | | | | | | | | | | | | | | | | | | | | | | Current period gross charge-offs | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | | | | | | | | | | | | | | | | | | | | | Commercial real estate (including multi-family residential) | | | | | | | | | | | | | | | | | | | | | Pass | $ | 366,601 | | | $ | 1,327,957 | | | $ | 863,078 | | | $ | 467,867 | | | $ | 348,105 | | | $ | 480,980 | | | $ | 128,848 | | | $ | 11,052 | | | $ | 3,994,488 | | | $ | 3,844,951 | | | Special Mention | 934 | | | 508 | | | 7,756 | | | 8,409 | | | 1,716 | | | 12,414 | | | 305 | | | — | | | 32,042 | | | 18,183 | | | Substandard | 3,906 | | | 5,050 | | | 16,003 | | | 6,832 | | | 5,009 | | | 12,890 | | | 286 | | | 100 | | | 50,076 | | | 68,346 | | | Doubtful | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | Total commercial real estate (including multi-family residential) loans | $ | 371,441 | | | $ | 1,333,515 | | | $ | 886,837 | | | $ | 483,108 | | | 354830 | | $ | 506,284 | | | $ | 129,439 | | | $ | 11,152 | | | $ | 4,076,606 | | | $ | 3,931,480 | | | | | | | | | | | | | | | | | | | | | | | Current period gross charge-offs | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | | | | | | | | | | | | | | | | | | | | | Commercial real estate construction and land development | | | | | | | | | | | | | | | | | | | | | Pass | $ | 211,096 | | | $ | 518,943 | | | $ | 227,438 | | | $ | 29,351 | | | $ | 9,689 | | | $ | 6,189 | | | $ | 58,463 | | | $ | 693 | | | $ | 1,061,862 | | | $ | 1,025,141 | | | Special Mention | — | | | 2,222 | | | 2,062 | | | 139 | | | — | | | 202 | | | — | | | — | | | 4,625 | | | 832 | | | Substandard | 22 | | | 1,016 | | | 10,406 | | | 88 | | | 80 | | | 17 | | | — | | | 149 | | | 11,778 | | | 11,705 | | | Doubtful | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | Total commercial real estate construction and land development | $ | 211,118 | | | $ | 522,181 | | | $ | 239,906 | | | $ | 29,578 | | | $ | 9,769 | | | $ | 6,408 | | | $ | 58,463 | | | $ | 842 | | | $ | 1,078,265 | | | $ | 1,037,678 | | | | | | | | | | | | | | | | | | | | | | | Current period gross charge-offs | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | September 30, 2023 | | December 31, 2022 | | Term Loans Amortized Cost Basis by Origination Year | | Revolving Loans | | Revolving Loans
Converted to Term Loans | | | | | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | Prior | | | | Total | | Total | | (In thousands) | 1-4 family residential (including
home equity) | | | | | | | | | | | | | | | | | | | | | Pass | $ | 132,680 | | | $ | 252,160 | | | $ | 224,562 | | | $ | 116,514 | | | $ | 72,701 | | | $ | 90,921 | | | $ | 94,320 | | | $ | 10,248 | | | $ | 994,106 | | | $ | 969,396 | | | Special Mention | 499 | | | 569 | | | — | | | 1,996 | | | 333 | | | 195 | | | 98 | | | — | | | 3,690 | | | 3,714 | | | Substandard | 1,940 | | | 2,399 | | | 3,103 | | | 1,468 | | | 3,893 | | | 4,493 | | | 7,071 | | | 2,782 | | | 27,149 | | | 27,846 | | | Doubtful | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | Total 1-4 family residential (including home equity) | $ | 135,119 | | | $ | 255,128 | | | $ | 227,665 | | | $ | 119,978 | | | $ | 76,927 | | | $ | 95,609 | | | $ | 101,489 | | | $ | 13,030 | | | $ | 1,024,945 | | | $ | 1,000,956 | | | | | | | | | | | | | | | | | | | | | | | Current period gross charge-offs | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 23 | | | $ | — | | | $ | — | | | $ | 23 | | | | | | | | | | | | | | | | | | | | | | | | | Residential construction | | | | | | | | | | | | | | | | | | | | | Pass | $ | 116,508 | | | $ | 136,500 | | | $ | 6,341 | | | $ | 4,117 | | | $ | 658 | | | $ | 499 | | | $ | 21,710 | | | $ | — | | | $ | 286,333 | | | $ | 266,943 | | | Special Mention | — | | | 634 | | | — | | | — | | | — | | | — | | | — | | | — | | | 634 | | | 421 | | | Substandard | — | | | 635 | | | 1,951 | | | — | | | — | | | — | | | — | | | — | | | 2,586 | | | 786 | | | Doubtful | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | Total residential construction | $ | 116,508 | | | $ | 137,769 | | | $ | 8,292 | | | $ | 4,117 | | | $ | 658 | | | $ | 499 | | | $ | 21,710 | | | $ | — | | | $ | 289,553 | | | $ | 268,150 | | | | | | | | | | | | | | | | | | | | | | | Current period gross charge-offs | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | | | | | | | | | | | | | | | | | | | | | | | Consumer and other | | | | | | | | | | | | | | | | | | | | Pass | $ | 23,489 | | | $ | 9,146 | | | $ | 4,130 | | | $ | 2,005 | | | $ | 676 | | | $ | 465 | | | $ | 13,192 | | | $ | 901 | | | $ | 54,004 | | | $ | 47,062 | | | Special Mention | — | | | 26 | | | — | | | — | | | — | | | — | | | 45 | | | — | | | 71 | | | 43 | | | Substandard | — | | | 312 | | | 35 | | | — | | | 56 | | | 5 | | | 4 | | | 104 | | | 516 | | | 361 | | | Doubtful | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | Total consumer and other | $ | 23,489 | | | $ | 9,484 | | | $ | 4,165 | | | $ | 2,005 | | | $ | 732 | | | $ | 470 | | | $ | 13,241 | | | $ | 1,005 | | | $ | 54,591 | | | $ | 47,466 | | | | | | | | | | | | | | | | | | | | | | | Current period gross charge-offs | $ | — | | | $ | 44 | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 1 | | | $ | — | | | $ | 45 | | | | | | | | | | | | | | | | | | | | | | | | | Total loans | | | | | | | | | | | | | | | | | | | | | Pass | $ | 1,100,000 | | | $ | 2,544,580 | | | $ | 1,522,799 | | | $ | 669,821 | | | $ | 462,979 | | | $ | 602,116 | | | $ | 844,932 | | | $ | 86,074 | | | $ | 7,833,301 | | | $ | 7,566,910 | | | Special Mention | 4,219 | | | 4,362 | | | 10,326 | | | 10,982 | | | 2,910 | | | 12,811 | | | 3,502 | | | 102 | | | 49,214 | | | 42,175 | | | Substandard | 7,118 | | | 13,337 | | | 40,801 | | | 9,528 | | | 21,169 | | | 17,686 | | | 8,418 | | | 3,906 | | | 121,963 | | | 145,612 | | | Doubtful | — | | | 50 | | | — | | | — | | | — | | | — | | | — | | | — | | | 50 | | | 54 | | | Total loans | $ | 1,111,337 | | | $ | 2,562,329 | | | $ | 1,573,926 | | | $ | 690,331 | | | $ | 487,058 | | | $ | 632,613 | | | $ | 856,852 | | | $ | 90,082 | | | $ | 8,004,528 | | | $ | 7,754,751 | | | | | | | | | | | | | | | | | | | | | | | Current period gross charge-offs | $ | — | | | $ | 174 | | | $ | 4,264 | | | $ | 456 | | | $ | 129 | | | $ | 23 | | | $ | 4,144 | | | $ | 531 | | | $ | 9,721 | | | |
The following table presents the activity in the allowance for credit losses on loans by portfolio type for the three and nine months ended September 30, 2023 and 2022: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Commercial and industrial | | Paycheck Protection Program (PPP) | | Commercial real estate (including multi-family residential) | | Commercial real estate construction and land development | | 1-4 family residential (including home equity) | | Residential construction | | Consumer and other | | Total | | (In thousands) | Allowance for credit losses on loans: | | | | | | | | | | | | | | | | | Three Months Ended | | | | | | | | | | | | | | | | | Balance June 30, 2023 | $ | 38,505 | | | $ | — | | | $ | 38,963 | | | $ | 14,500 | | | $ | 4,757 | | | $ | 3,080 | | | $ | 390 | | | $ | 100,195 | | Provision for credit losses on loans | 2,173 | | | — | | | 58 | | | (791) | | | 34 | | | (221) | | | 243 | | | 1,496 | | | Charge-offs | (8,169) | | | — | | | — | | | — | | | — | | | — | | | (7) | | | (8,176) | | | Recoveries | 55 | | | — | | | 2 | | | — | | | — | | | — | | | 3 | | | 60 | | | Net charge-offs | (8,114) | | | — | | | 2 | | | — | | | — | | | — | | | (4) | | | (8,116) | | Balance September 30, 2023 | $ | 32,564 | | | $ | — | | | $ | 39,023 | | | $ | 13,709 | | | $ | 4,791 | | | $ | 2,859 | | | $ | 629 | | | $ | 93,575 | | | Nine Months Ended | | | | | | | | | | | | | | | | Balance December 31, 2022 | $ | 41,236 | | | $ | — | | | $ | 32,970 | | | $ | 14,121 | | | $ | 2,709 | | | $ | 1,796 | | | $ | 348 | | | $ | 93,180 | | Provision for credit losses on loans | (143) | | | — | | | 6,037 | | | (412) | | | 2,096 | | | 1,063 | | | 298 | | | 8,939 | | | Charge-offs | (9,653) | | | — | | | — | | | — | | | (23) | | | — | | | (45) | | | (9,721) | | | Recoveries | 1,124 | | | — | | | 16 | | | — | | | 9 | | | — | | | 28 | | | 1,177 | | | Net charge-offs | (8,529) | | | — | | | 16 | | | — | | | (14) | | | — | | | (17) | | | (8,544) | | Balance September 30, 2023 | $ | 32,564 | | | $ | — | | | $ | 39,023 | | | $ | 13,709 | | | $ | 4,791 | | | $ | 2,859 | | | $ | 629 | | | $ | 93,575 | | | Three Months Ended | | | | | | | | | | | | | | | | | Balance June 30, 2022 | $ | 16,701 | | | $ | — | | | $ | 24,000 | | | $ | 7,399 | | | $ | 1,036 | | | $ | 1,048 | | | $ | 58 | | | $ | 50,242 | | Provision for credit losses on loans | (1,091) | | | — | | | 1,606 | | | 952 | | | (9) | | | 188 | | | 14 | | | 1,660 | | | Charge-offs | (2) | | | — | | | (56) | | | — | | | — | | | — | | | (17) | | | (75) | | | Recoveries | 319 | | | — | | | — | | | — | | | — | | | — | | | 1 | | | 320 | | | Net recoveries | 317 | | | — | | | (56) | | | — | | | — | | | — | | | (16) | | | 245 | | Balance September 30, 2022 | $ | 15,927 | | | $ | — | | | $ | 25,550 | | | $ | 8,351 | | | $ | 1,027 | | | $ | 1,236 | | | $ | 56 | | | $ | 52,147 | | | Nine Months Ended | | | | | | | | | | | | | | | | Balance December 31, 2021 | $ | 16,629 | | | $ | — | | | $ | 23,143 | | | $ | 6,263 | | | $ | 847 | | | $ | 975 | | | $ | 83 | | | $ | 47,940 | | Provision for credit losses on loans | (464) | | | — | | | 2,740 | | | 2,096 | | | 180 | | | 261 | | | 37 | | | 4,850 | | | Charge-offs | (958) | | | — | | | (383) | | | (63) | | | — | | | — | | | (65) | | | (1,469) | | | Recoveries | 720 | | | — | | | 50 | | | 55 | | | — | | | — | | | 1 | | | 826 | | | Net charge-offs | (238) | | | — | | | (333) | | | (8) | | | — | | | — | | | (64) | | | (643) | | Balance September 30, 2022 | $ | 15,927 | | | $ | — | | | $ | 25,550 | | | $ | 8,351 | | | $ | 1,027 | | | $ | 1,236 | | | $ | 56 | | | $ | 52,147 | |
Allowance for Credit Losses on Unfunded Commitments
In addition to the allowance for credit losses on loans, the Company has established an allowance for credit losses on unfunded commitments, classified in other liabilities and adjusted as a provision for credit loss expense. The allowance represents estimates of expected credit losses over the contractual period in which there is exposure to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on the commitments expected to fund. The estimate of commitments expected to fund is informed by historical analysis looking at utilization rates. The expected credit loss rates applied to the commitments expected to fund is informed by the general valuation allowance utilized for outstanding balances with the same underlying assumptions and drivers. The allowance for credit losses on unfunded commitments as of September 30, 2023 and December 31, 2022 was $10.9 million and $12.0 million, respectively. This reserve is maintained at a level management believes to be sufficient to absorb losses arising from unfunded loan commitments. The Company recorded an $818 thousand provision on unfunded commitments during the three months ended September 30, 2023 compared to $302 thousand for the three months ended September 30, 2022 and recorded a $1.0 million reversal of provision on unfunded commitments for the nine months ended September 30, 2023 compared to a provision of $1.1 million for the nine months ended September 30, 2022. Collateral dependent loans are secured by real estate assets, accounts receivable, inventory and equipment. For a collateral dependent loan, the Company’s evaluation process includes a valuation by appraisal or other collateral analysis adjusted for selling costs, when appropriate. This valuation is compared to the remaining outstanding principal balance of the loan. If a loss is determined to be probable, the loss is included in the allowance for credit losses on loans as a specific allocation. The following tables present the amortized cost basis of collateral dependent loans, which are individually evaluated to determine expected credit losses as of September 30, 2023 and December 31, 2022: | | | | | | | | | | | | | | | | | | | | | | | | | September 30, 2023 | | Real Estate | | Business Assets | | Other | | Total | | (In thousands) | | Commercial and industrial | $ | — | | | $ | 7,476 | | | $ | — | | | $ | 7,476 | | | Real estate: | | | | | | | | | Commercial real estate (including multi-family residential) | 3,411 | | | — | | | — | | | 3,411 | | | Commercial real estate construction and land development | | | — | | | — | | | — | | | 1-4 family residential (including home equity) | — | | | — | | | — | | | — | | | Residential construction | — | | | — | | | — | | | — | | | Consumer and other | — | | | — | | | — | | | — | | | Total | $ | 3,411 | | | $ | 7,476 | | | $ | — | | | $ | 10,887 | |
| | | | | | | | | | | | | | | | | | | | | | | | | December 31, 2022 | | Real Estate | | Business Assets | | Other | | Total | | (In thousands) | | Commercial and industrial | $ | — | | | $ | 18,411 | | | $ | 30 | | | $ | 18,441 | | | Real estate: | | | | | | | | | Commercial real estate (including multi-family residential) | 1,612 | | | — | | | — | | | 1,612 | | | Commercial real estate construction and land development | — | | | — | | | — | | | — | | | 1-4 family residential (including home equity) | 3,478 | | | — | | | — | | | 3,478 | | | Residential construction | — | | | — | | | — | | | — | | | Consumer and other | — | | | — | | | — | | | — | | | Total | $ | 5,090 | | | $ | 18,411 | | | $ | 30 | | | $ | 23,531 | |
The following tables present additional information regarding nonaccrual loans. No interest income was recognized on nonaccrual loans as of September 30, 2023 and December 31, 2022. | | | | | | | | | | | | | | | | | | | September 30, 2023 | | Nonaccrual Loans with No Related Allowance | | Nonaccrual Loans with Related Allowance | | Total Nonaccrual Loans | | (In thousands) | | Commercial and industrial | $ | 10,337 | | | $ | 4,634 | | | $ | 14,971 | | | | | | | | | Paycheck Protection Program (PPP) | 20 | | | — | | | 20 | | | Real estate: | | | | | | | Commercial real estate (including multi-family residential) | 10,820 | | | 2,743 | | | 13,563 | | | Commercial real estate construction and land development | 170 | | | — | | | 170 | | | 1-4 family residential (including home equity) | 6,849 | | | 1,593 | | | 8,442 | | | Residential construction | 635 | | | — | | | 635 | | | Consumer and other | 81 | | | 409 | | | 490 | | | Total loans | $ | 28,912 | | | $ | 9,379 | | | $ | 38,291 | |
| | | | | | | | | | | | | | | | | | | December 31, 2022 | | Nonaccrual Loans with No Related Allowance | | Nonaccrual Loans with Related Allowance | | Total Nonaccrual Loans | | (In thousands) | | Commercial and industrial | $ | 2,776 | | | $ | 22,521 | | | $ | 25,297 | | | | | | | | | Paycheck Protection Program (PPP) | 105 | | | — | | | 105 | | | Real estate: | | | | | | | Commercial real estate (including multi-family residential) | 8,704 | | | 1,266 | | | 9,970 | | | Commercial real estate construction and land development | — | | | — | | | — | | | 1-4 family residential (including home equity) | 4,856 | | | 4,548 | | | 9,404 | | | Residential construction | — | | | — | | | — | | | Consumer and other | 94 | | | 178 | | | 272 | | | Total loans | $ | 16,535 | | | $ | 28,513 | | | $ | 45,048 | |
Loan Modifications and Troubled Debt Restructurings Effective January 1, 2023, under ASU 2022-02, loan modifications are reported if concessions have been granted to borrowers that are experiencing financial difficulty. Information on these loan modifications originated after the effective date is presented according to the new accounting guidance. Reporting periods prior to the adoption of ASU 2022-02 present information on troubled debt restructurings ("TDRs") under the previous disclosure requirements. The percentage of loans modified comprised less than 1% of their respective classes of loan portfolios at September 30, 2023. The following tables present information regarding loans that were modified due to the borrowers experiencing financial difficulty during the three and nine months ended September 30, 2023: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended September 30, 2023 | | | Interest Rate Reduction | | Term Extension | | Payment Delay | | Principal forgiveness | | Combination Term Extension and Principal Forgiveness | | Combination Term Extension and Payment Delay | | Total | | (In thousands) | | | Commercial and industrial | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | Real estate: | | | | | | | | | | | | | | | Commercial real estate (including multi-family residential) | | — | | 1,890 | | — | | — | | — | | — | | 1,890 | Commercial real estate construction and land development | | — | | | | — | | — | | — | | — | | — | 1-4 family residential (including home equity) | | — | | 322 | | 99 | | — | | — | | 71 | | 492 | | Residential construction | | — | | — | | — | | — | | — | | — | | — | | Consumer and other | | — | | — | | — | | — | | — | | — | | — | | Total | | $ | — | | | $ | 2,212 | | | $ | — | | | $ | — | | | $ | — | | | $ | 71 | | | $ | 2,382 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Nine Months Ended September 30, 2023 | | | Interest Rate Reduction | | Term Extension | | Payment Delay | | Principal forgiveness | | Combination Term Extension and Principal Forgiveness | | Combination Term Extension and Payment Delay | | Total | | (In thousands) | | Commercial and industrial | | $ | 89 | | | $ | 2,185 | | | $ | — | | | $ | — | | | $ | — | | | $ | 260 | | | $ | 2,534 | | | Real estate: | | | | | | | | | | | | | | | Commercial real estate (including multi-family residential) | | — | | | 2,670 | | | — | | | — | | | — | | | 1,703 | | | 4,373 | | Commercial real estate construction and land development | | — | | | 6,850 | | | — | | | — | | | — | | | — | | | 6,850 | | 1-4 family residential (including home equity) | | — | | | 1,037 | | | 99 | | | — | | | — | | | 71 | | | 1,207 | | | Residential construction | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | Consumer and other | | — | | | 94 | | | — | | | — | | | — | | | — | | | 94 | | | Total | | $ | 89 | | | $ | 12,836 | | | $ | 99 | | | $ | — | | | $ | — | | | $ | 2,034 | | | $ | 15,058 | |
The following table summarizes, by loan portfolio, the financial effect of the Company's loan modifications for the three and nine months ended September 30, 2023: | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended September 30, 2023 | | Nine Months Ended September 30, 2023 | | Weighted Average Interest Rate Reduction | | Weighted Average Term Extension | | Weighted Average Interest Rate Reduction | | Weighted Average Term Extension | | | | (months) | | | | (months) | | Commercial and industrial | — | % | | — | | 2.0 | % | | 12 | | Real estate: | | | | | | | | Commercial real estate (including multi-family residential) | — | % | | 6 | | — | % | | 9 | Commercial real estate construction and land development | — | % | | — | | — | % | | 12 | 1-4 family residential (including home equity) | 1.5 | % | | 24 | | 1.5 | % | | 16 | | Residential construction | — | % | | — | | — | % | | — | | Consumer and other | — | % | | — | | — | % | | 7 |
The following table summarizes loans that had a payment default within the past twelve months that were modified due to the borrowers experiencing financial difficulty during the three and nine months ended September 30, 2023: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Interest Rate Reduction | | Term Extension | | Payment Delay | | Principal forgiveness | | | (In thousands) | | Commercial and industrial | | $ | 89 | | | $ | 670 | | | $ | — | | | $ | — | | | Real estate: | | | | | | | | | Commercial real estate (including multi-family residential) | | — | | — | | — | | — | Commercial real estate construction and land development | | — | | — | | — | | — | 1-4 family residential (including home equity) | | — | | 715 | | 99 | | — | | Residential construction | | — | | — | | — | | — | | Consumer and other | | — | | — | | — | | — | | | $ | 89 | | | $ | 1,385 | | | $ | 99 | | | $ | — | |
The following table presents information regarding loans modified in a troubled debt restructuring during the three and nine months ended September 30, 2022: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Three Months Ended September 30, 2022 | | Nine Months Ended September 30, 2022 | | Number of Contracts | | Pre-modifications of Outstanding Recorded Investment | | Post-modifications of Outstanding Recorded Investment | | Number of Contracts | | Pre-modifications of Outstanding Recorded Investment | | Post-modifications of Outstanding Recorded Investment | | (Dollars in thousands) | | Troubled Debt Restructurings | | | | | | | | | | | | | Commercial and industrial | 1 | | | $ | 224 | | | $ | 224 | | | 4 | | $ | 768 | | | $ | 768 | | | Real estate: | | | | | | | | | | | | Commercial real estate (including multi-family residential) | — | | — | | | — | | | 4 | | 1,207 | | 1,207 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Consumer and other | 1 | | 45 | | | 45 | | | 1 | | 45 | | 45 | | Total | 2 | | | $ | 269 | | | $ | 269 | | | 9 | | | $ | 2,020 | | | $ | 2,020 | |
Troubled debt restructurings resulted in no charge-offs during the nine months ended September 30, 2022. There were no loans modified under a trouble debt restructuring during the previous twelve-month period that subsequently defaulted during the nine-month period ended September 30, 2022. Default is determined to at 90 or more days past due. The trouble debt restructurings related to extending the amortization periods of the loans. The Company did not grant principal reductions on any restructured loans during the nine months ended September 30, 2022. There were no commitments to lend additional amounts to borrowers with trouble debt restructured loans for the three and nine months ended September 30, 2022.
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