
(dollars in thousands)	March 31, 2023		December 31, 2022
Construction, land & land development	$	249,720	$	229,435
Other commercial real estate	985,627		975,447
Total commercial real estate	1,235,347		1,204,882
Residential real estate	316,415		290,054
Commercial, financial, & agricultural	225,269		223,923
Consumer and other	22,822		18,247
Total Loans	$	1,799,853	$	1,737,106

The Company elected to exclude accrued interest receivable from the amortized cost basis of loans disclosed throughout this note. As of March 31, 2023 and December 31, 2022, accrued interest receivable for loans totaled $7.1 million and $6.8 million, respectively, and is included in the "other assets" line item on the Company’s consolidated balance sheet.

Commercial, financial & agricultural loans are extended to a diverse group of businesses within the Company’s market area. These loans are often underwritten based on the borrower’s ability to service the debt from income from the business. Real estate construction loans often require loan funds to be advanced prior to completion of the project. Due to uncertainties inherent in estimating construction costs, changes in interest rates and other economic conditions, these loans often pose a higher risk than other types of loans. Consumer and other loans are originated at the Bank level.

Credit Quality Indicators. As part of the ongoing monitoring of the credit quality of the loan portfolio, management tracks certain credit quality indicators including trends related to (1) the risk grade assigned to commercial and consumer loans, (2) the level of classified commercial loans, (3) net charge-offs, (4) nonperforming loans, and (5) the general economic conditions in the Company’s geographic markets.

•Grades 1, 2 and 3 - Borrowers with these assigned risk grades range from virtual absence of risk to minimal risk. Such loans may be secured by Company-issued and controlled certificates of deposit or properly margined equity securities or bonds. Other loans comprising these grades are made to companies that have been in existence for a long period of time with many years of consecutive profits and strong equity, good liquidity, excellent debt service

•Grades 4 and 5 - Loans assigned these “pass” risk grades are made to borrowers with acceptable credit quality and risk. The risk ranges from loans with no significant weaknesses in repayment capacity and collateral protection to acceptable loans with one or more risk factors considered to be more than average. These loans are also included in into the “pass” classification.

•Grades 7 and 8 - These grades includes “substandard” loans in accordance with regulatory guidelines. This category includes borrowers with well-defined weaknesses that jeopardize the payment of the debt in accordance with the agreed terms. Loans considered to be impaired are assigned grade 8, and these loans often have assigned loss allocations as part of the allowance for credit losses. Generally, loans on which interest accrual has been stopped would be included in this grade.

•Grades 9 and 10 - These grades correspond to regulatory classification definitions of “doubtful” and “loss,” respectively. In practice, any loan with these grades would be for a very short period of time, and generally the Company has no loans with these assigned grades. Management manages the Company’s problem loans in such a way that uncollectible loans or uncollectible portions of loans are charged off immediately with any residual, collectible amounts assigned a risk grade of 7 or 8.

The following table presents the loan portfolio segregated by class of loans and the risk category of term loans by vintage year, which is the year of origination or most recent renewal, as of March 31, 2023. Those loans with a risk grade of 1, 2, 3, 4 and 5 have been combined in the pass column for presentation purposes. There were no loans with a risk rating of "doubtful" or "loss" at March 31, 2023.


	Term Loans Amortized Cost Basis by Origination Year
(dollars in thousands)	2023		2022		2021		2020		2019		Prior		Revolvers		Revolvers converted to term loans		Total
March 31, 2023
Construction, land & land development
Risk rating
Pass	$	25,111	$	156,160	$	39,399	$	8,807	$	1,724	$	6,342	$	11,184	$	—	$	248,727
Special Mention	—		—		—		—		—		233		—		—		233
Substandard	—		599		5		—		67		89		—		—		760
Total Construction, land & land development	25,111		156,759		39,404		8,807		1,791		6,664		11,184		—		249,720

Current period gross write offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—

Other commercial real estate
Risk rating
Pass	24,793		324,093		222,365		99,740		91,335		174,315		26,595		48		963,284
Special Mention	—		54		2,843		1,767		4,634		6,879		—		—		16,177
Substandard	—		2,672		170		—		—		3,278		46		—		6,166
Total Other commercial real estate	24,793		326,819		225,378		101,507		95,969		184,472		26,641		48		985,627

Current period gross write offs	—		—		—		—		—		—		—		—		—

Residential real estate
Risk rating
Pass	17,738		121,766		56,799		24,317		9,924		51,143		21,485		—		303,172
Special Mention	299		158		109		87		968		5,211		122		—		6,954
Substandard	—		532		240		234		96		5,187		—		—		6,289


(dollars in thousands)			Special
December 31, 2022	Pass		Mention		Substandard		Total
Construction, land & land development	$	228,494	$	290	$	651	$	229,435
Other commercial real estate	951,126		17,562		6,759		975,447
Total commercial real estate	1,179,620		17,852		7,410		1,204,882
Residential real estate	277,930		6,574		5,550		290,054
Commercial, financial, & agricultural	220,908		885		2,130		223,923
Consumer and other	18,157		54		$	36	18,247
Total Loans	$	1,696,615	$	25,365	$	15,126	$	1,737,106

A loan’s risk grade is assigned at loan origination and is based on the financial strength of the borrower and the type of collateral. Loan risk grades are subject to review at various times throughout the year as part of the Company’s ongoing loan review process. Loans with an assigned risk grade of six or below and an outstanding balance of $500,000 or more are reassessed on a quarterly basis. During this reassessment process individual reserves may be identified and placed against certain loans which are not considered impaired.

Loans are placed on nonaccrual status if principal or interest payments become 90 days past due or when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory guidelines. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due.

We classify a loan as collateral-dependent when our borrower is experiencing financial difficulty, and we expect repayment to be provided substantially through the operation or sale of collateral. Our commercial loans have collateral that is comprised of real estate and business assets. Our consumer loans have collateral that is substantially comprised of residential real estate.

The following table presents the aging of the amortized cost basis of loans by aging category and accrual status as of March 31, 2023 and December 31, 2022:


(dollars in thousands)	30-89 Days Past Due		90 Days or More Past Due		Total Accruing Loans Past Due		Nonaccrual Loans		Current Loans		Total Loans
March 31, 2023
Construction, land & land development	$	9	$	—	$	9	$	124	$	249,587	$	249,720
Other commercial real estate	554		—		554		1,541		983,532		985,627
Total commercial real estate	563		—		563		1,665		1,233,119		1,235,347
Residential real estate	1,596		—		1,596		2,953		311,866		316,415
Commercial, financial, & agricultural	2,602		—		2,602		2,530		220,137		225,269
Consumer and other	15		—		15		17		22,790		22,822
Total Loans	$	4,776	$	—	$	4,776	$	7,165	$	1,787,912	$	1,799,853

December 31, 2022
Construction, land & land development	$	—	$	—	$	—	$	149	$	229,286	$	229,435
Other commercial real estate	395		—		395		1,509		973,543		975,447
Total commercial real estate	395		—		395		1,658		1,202,829		1,204,882
Residential real estate	882		—		882		2,686		286,486		290,054
Commercial, financial, & agricultural	476		—		476		1,341		222,106		223,923
Consumer and other	40		—		40		21		18,186		18,247
Total Loans	$	1,793	$	—	$	1,793	$	5,706	$	1,729,607	$	1,737,106



	March 31, 2023
(dollars in thousands)	Nonaccrual Loans with No Related ACL		Nonaccrual Loans with a Related ACL		Total Nonaccrual Loans

Construction, land & land development	$	124	$	—	$	124
Other commercial real estate	1,497		44		1,541
Total commercial real estate	1,621		44		1,665
Residential real estate	2,953		—		2,953
Commercial, financial, & agricultural	2,530		—		2,530
Consumer and other	17		—		17
Total Loans	$	7,121	$	44	$	7,165

The following table details impaired loan data, including purchased credit impaired loans, as of December 31, 2022.


	December 31, 2022
(dollars in thousands)	Unpaid Contractual Principal Balance		Recorded Investment		Related Allowance		Average Recorded Investment
With No Related Allowance Recorded
Construction, land & land development	$	40	$	40	$	—	$	10
Other commercial real estate	3,754		3,754		—		5,311
Residential real estate	62		62		—		570
Commercial, financial & agricultural	—		—		—		306
Consumer and other	—		—		—		1
	3,856		3,856		—		6,198

With An Allowance Recorded
Construction, land & land development	474		474		44		177
Other commercial real estate	—		—		—		503
Residential real estate	—		—		—		588
Commercial, financial & agricultural	—		—		—		369
Consumer and other	—		—		—		—
	474		474		44		1,637
Purchased Credit Impaired Loans
Construction, land & land development	—		—		—		—
Other commercial real estate	798		798		33		760
Residential real estate	—		—		—		13
Commercial, financial & agricultural	—		—		—		—
Consumer and other	—		—		—		65
	798		798		33		838
Total
Construction, land & land development	514		514		44		187
Other commercial real estate	4,552		4,552		33		6,574
Residential real estate	62		62		—		1,171
Commercial, financial & agricultural	—		—		—		675
Consumer and other	—		—		—		66
	$	5,128	$	5,128	$	77	$	8,673

The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon asset origination or acquisition. The starting point for the estimate of the allowance for credit losses is historical loss information, which includes losses from modifications of receivables to borrowers experiencing financial difficulty. The Company uses a discounted cash flow model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification.

Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance, a change to the allowance for credit losses is generally not recorded upon modification. Occasionally, the Company modifies loans by providing principal forgiveness on certain of its real estate loans. When principal forgiveness is provided, the amortized cost basis of the asset is written off against the allowance for credit losses. The amount of the principal forgiveness is deemed to be uncollectible; therefore, that portion of the loan is written off, resulting in a reduction of the amortized cost basis and a corresponding adjustment to the allowance for credit losses.

In some cases, the Company will modify a certain loan by providing multiple types of concessions. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. Upon the Company's determination that a modified loan, or portion of a loan, has subsequently been deemed uncollectible, the loan, or portion of the loan, is written off.

Prior to adoption of ASU 2022-02 on January 1, 2023, the restructuring of a loan was considered a troubled debt restructuring ("TDR") if both the borrower was experiencing financial difficulties and the Company had granted a concession to the terms of the loan. Concessions may have included interest rate reductions to below market interest rates, principal forgiveness, restructured amortization schedules and other actions intended to minimize potential losses.

As discussed in Note 1 of the Notes to Consolidated Financial Statements for the year ended December 31, 2022, which are included in the Company’s 2022 Form 10-K, once a loan was identified as a TDR, it was accounted for as an impaired loan. The Company had no unfunded commitments to lend to a customer that had a troubled debt restructured loan as of December 31, 2022 and March 31, 2022. Loans modified in a TDR were considered to be in default once the loan became 90 days past due. A TDR ceased being classified as impaired if the loan was subsequently modified at market terms and, had performed according to the modified terms for at least six months, and there had not been any prior principal forgiveness on a cumulative basis.