That's new bark trying to cover bare wood. Your tree either suffered some sort of mechanical/impact trauma or sun scald which killed the live bark in that area. The tree is now trying to heal itself by wrapping new bark and sapwood around the wound.

The damage you see could be from sun scald, mechanical damage, deer rub, lawnmower scraps.

But, what looks like more of a problem, is a tree that's planted too deep.

The term is called 'telephone poled' when the root flare, that needs to breath, is basically buried under the soil, exposing only the straight part of the trunk.

You can check this by digging around the trunk (careful not to damage bark or larger roots) until you find where the root flare is. If planted too deep, the tree can show poor performance and even decline over time. When you dig, you may find adventitious root coming out of the trunk above the root flare, these are not important and can be snipped off to get them out of the way.

Trees that are in this condition for several years can also show bark damage similar to yours.

the tree is ENCAPSULATING the wound ....https://duckduckgo.com/?q=tree+encapsulating+wound&t=ffcm&iar=images&iax=images&ia=images

the cambium layer ... is the green.. just below normal bark.. its the vascular system of the tree... moving water up.. and energy converted from sun.. down to storage in the roots ...

https://duckduckgo.com/?q=cambium+layer&t=ffcm&iax=images&ia=images

if that makes sense.. its not surprising why your lacked leaves last year.. as a great percentage of the cambium was destroyed ...

it will continue to heal ... in tree time.. might take a decade to finish the job.. and you have to hope... in the meantime.. that the interior wood doesnt rot ...

it might just be easier to start over.... plant it properly ... and not have to worry about the rot potential .... especially if it is close to the house ...

ken

Here's a video explaining the problems of root flares planted too deep.

About 1:50 min. in they repair one tree that is not too far gone.

But I agree with ken, replacement would be a lot easier than trying to raise a tree that's level with the surrounding ground.

The one in the video is high enough to do it.

Even if it is mechanical damage, replacing it would still be my choice.

That's a pretty serious wound for the tree to recover from. And since it has already displayed some growth issues (poor leaf development), that, combined with too deep planting, is reason enough in my book to remove and replace.