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Loans
 6 Months Ended
Jun. 30, 2023
Receivables [Abstract]  
Portfolio Loans LOANS
The following table presents a summary of loans by category:
(in thousands)June 30, 2023December 31, 2022
Commercial and industrial$4,360,862 $3,859,964 
Real estate:  
Commercial - investor owned2,465,654 2,357,820 
Commercial - owner occupied2,336,639 2,270,551 
Construction and land development671,573 611,565 
Residential368,867 395,537 
Total real estate loans5,842,733 5,635,473 
Other315,214 248,990 
Loans, before unearned loan fees10,518,809 9,744,427 
Unearned loan fees, net(6,186)(7,289)
Loans, including unearned loan fees$10,512,623 $9,737,138 

The loan balance at June 30, 2023 and December 31, 2022, includes a net premium on acquired loans of $9.7 million and $11.9 million, respectively. At June 30, 2023 and December 31, 2022, loans of $3.6 billion and $2.8 billion, respectively, were pledged to FHLB and the Federal Reserve Bank.

Accrued interest receivable totaled $45.9 million and $48.1 million at June 30, 2023 and December 31, 2022, respectively, and was reported in “Other Assets” on the consolidated balance sheets.

SBA 7(a) guaranteed loans sold during the six months ended June 30, 2023 totaled $8.8 million, resulting in a gain on sale of $0.5 million. There were no SBA loan sales during three months ended June 30, 2023 or the three and six months ended June 30, 2022.

A summary of the activity in the ACL on loans by category for the three and six months ended June 30, 2023 and 2022 is as follows:
(in thousands)Commercial and industrialCRE - investor ownedCRE -
owner occupied		Construction and land developmentResidential real estateOtherTotal
Allowance for credit losses on loans:       
Balance at March 31, 2023$59,149 $36,266 $22,328 $8,889 $6,997 $4,666 $138,295 
Provision (benefit) for credit losses3,857 (2,420)299 3,898 618 (255)5,997 
Charge-offs(3,289)(7)— — (421)(251)(3,968)
Recoveries601 37 73 8 227 49 995 
Balance at June 30, 2023$60,318 $33,876 $22,700 $12,795 $7,421 $4,209 $141,319 

(in thousands)Commercial and industrialCRE - investor ownedCRE -
owner occupied		Construction and land developmentResidential real estateOtherTotal
Allowance for credit losses on loans:       
Balance at December 31, 2022$53,835 $36,191 $22,752 $11,444 $7,928 $4,782 $136,932 
Provision (benefit) for credit losses8,940 (2,198)(141)1,320 (533)(292)7,096 
Charge-offs(3,996)(177)— (9)(523)(443)(5,148)
Recoveries1,539 60 89 40 549 162 2,439 
Balance at June 30, 2023$60,318 $33,876 $22,700 $12,795 $7,421 $4,209 $141,319 
(in thousands)Commercial and industrialCRE - investor ownedCRE -
owner occupied		Construction and land developmentResidential real estateOtherTotal
Allowance for credit losses on loans:       
Balance at March 31, 2022$60,975 $36,194 $17,038 $12,983 $7,109 $4,913 $139,212 
Provision (benefit) for credit losses4,562 (2,680)(1,066)183 307 (147)1,159 
Charge-offs(97)(200)(25)— (418)(88)(828)
Recoveries206 24 209 14 480 70 1,003 
Balance at June 30, 2022$65,646 $33,338 $16,156 $13,180 $7,478 $4,748 $140,546 
(in thousands)Commercial and industrialCRE - investor ownedCRE -
owner occupied		Construction and land developmentResidential real estateOtherTotal
Allowance for credit losses on loans:       
Balance at December 31, 2021$63,825 $35,877 $17,560 $14,536 $7,927 $5,316 $145,041 
Provision (benefit) for credit losses3,081 (2,559)(1,648)(1,391)(149)(483)(3,149)
Charge-offs(2,256)(200)(205)— (1,305)(174)(4,140)
Recoveries996 220 449 35 1,005 89 2,794 
Balance at June 30, 2022$65,646 $33,338 $16,156 $13,180 $7,478 $4,748 $140,546 

The ACL on sponsor finance loans, which is included in the categories above, represented $22.1 million and $16.1 million, respectively, as of June 30, 2023 and December 31, 2022.

The CECL methodology incorporates various economic scenarios. The Company utilizes three forecasts in the model: Moody’s baseline, a stronger near-term growth upside and a moderate recession downside forecast. The Company weights these scenarios at 40%, 30%, and 30%, respectively, which added approximately $14.3 million to the ACL over the baseline model at June 30, 2023. These forecasts incorporate an expectation that the Federal Reserve will continue quantitative tightening and that the terminal range of the federal funds rate will be 5.00% to 5.25% and that the recent bank failures are not an indication of a broader problem in the industry. The Company has also recognized various risks posed by loans in certain segments, including the commercial office sector, by allocating additional reserves to those segments. Some of the key risks to the forecasts that could result in future provision for credit losses are market reactions to the Federal Reserve policy actions that could push the economy into a recession, persistently higher inflation, tightening in the credit markets, and further weakness in the financial system.

In addition to the CECL methodology, the Company incorporates qualitative adjustments into the ACL on loans to capture credit risks inherent within the loan portfolio that are not captured in the discounted cash flow (DCF) model. Included in these risks are 1) changes in lending policies and procedures, 2) actual and expected changes in business and economic conditions, 3) changes in the nature and volume of the portfolio, 4) changes in lending management, 5) changes in volume and the severity of past due loans, 6) changes in the quality of the loan review system, 7) changes in the value of underlying collateral, 8) the existence and effect of concentrations of credit and 9) other factors such as the regulatory, legal and competitive environments and events such as natural disasters and pandemics. At June 30, 2023, the ACL on loans included a qualitative adjustment of approximately $39.7 million. Of this amount, approximately $13.8 million was allocated to sponsor finance loans due to their mostly unsecured nature.
The current year-to-date gross charge-offs by loan class and year of origination is presented in the following table:
June 30, 2023
Term Loans by Origination Year
(in thousands)20222021PriorRevolving Loans Converted to Term LoansRevolving LoansTotal
Commercial and industrial$3 $— $— $— $3,824 $3,827 
Real estate:
Commercial - investor owned— 170 7 — — 177 
Construction and land development— — 9 — — 9 
Residential— — 478 45 — 523 
Other— 129 3 — — 132 
Total current-period gross charge-offs by risk rating$3 $299 $497 $45 $3,824 $4,668 
Total current-period gross charge-offs by performing status480 
Total current-period gross charge-offs$5,148 
The following tables present the recorded investment in nonperforming loans by category, excluding government guaranteed balances: 
June 30, 2023
(in thousands)NonaccrualLoans over 90 days past due and still accruing interestTotal nonperforming loansNonaccrual loans with no allowance
Commercial and industrial$9,558 $687 $10,245 $4,480 
Real estate:  
    Commercial - investor owned2,766 — 2,766 — 
    Commercial - owner occupied1,386 — 1,386 — 
    Construction and land development742 — 742 742 
    Residential959 — 959 959 
Other— 14 14 — 
       Total$15,411 $701 $16,112 $6,181 

December 31, 2022
(in thousands)NonaccrualRestructured, accruingLoans over 90 days past due and still accruing interestTotal nonperforming loansNonaccrual loans with no allowance
Commercial and industrial$4,373 $— $70 $4,443 $1,047 
Real estate: 
    Commercial - investor owned3,023 — — 3,023 — 
    Commercial - owner occupied1,177 — — 1,177 — 
    Construction and land development1,192 — — 1,192 1,192 
    Residential— 73 — 73 — 
Other1 — 72 73 — 
       Total$9,766 $73 $142 $9,981 $2,239 
The nonperforming loan balances at both June 30, 2023 and December 31, 2022 exclude government guaranteed balances of $6.7 million.

No material interest income was recognized on nonaccrual loans during the three or six months ended June 30, 2023 or 2022.

Collateral-dependent nonperforming loans by class of loan is presented as of the dates indicated:
June 30, 2023
Type of Collateral
(in thousands)Commercial Real EstateResidential Real EstateBlanket Lien
Commercial and industrial$— $— $5,972 
Real estate:
Commercial - investor owned1,055 774 — 
Commercial - owner occupied1,386 — — 
Construction and land development742 
Residential— 959 — 
Total$2,441 $2,475 $5,972 

December 31, 2022
Type of Collateral
(in thousands)Commercial Real EstateResidential Real EstateBlanket Lien
Commercial and industrial$— $— $1,047 
Real estate:
Commercial - investor owned2,238 785 — 
Commercial - owner occupied1,177 — — 
Construction and land development— 1,192 — 
Residential— 73 — 
Total$3,415 $2,050 $1,047 

The aging of the recorded investment in past due loans by class is presented as of the dates indicated.

June 30, 2023
(in thousands)30-89 Days
 Past Due		90 or More
Days
Past Due		Total
Past Due		CurrentTotal
Commercial and industrial$12,386 $3,473 $15,859 $4,345,003 $4,360,862 
Real estate:     
Commercial - investor owned— 1,711 1,711 2,463,943 2,465,654 
Commercial - owner occupied19,476 4,078 23,554 2,313,085 2,336,639 
Construction and land development— — — 671,573 671,573 
Residential271 959 1,230 367,637 368,867 
Other27 14 41 315,173 315,214 
Loans, before unearned loan fees$32,160 $10,235 $42,395 $10,476,414 $10,518,809 
Unearned loan fees, net(6,186)
Total$10,512,623 
December 31, 2022
(in thousands)30-89 Days
 Past Due		90 or More
Days
Past Due		Total
Past Due		CurrentTotal
Commercial and industrial$555 $2,373 $2,928 $3,857,036 $3,859,964 
Real estate:
Commercial - investor owned— 1,135 1,135 2,356,685 2,357,820 
Commercial - owner occupied8,628 164 8,792 2,261,759 2,270,551 
Construction and land development9 1,192 1,201 610,364 611,565 
Residential1,227 — 1,227 394,310 395,537 
Other18 72 90 248,900 248,990 
Loans, before unearned loan fees$10,437 $4,936 $15,373 $9,729,054 $9,744,427 
Unearned loan fees, net(7,289)
Total$9,737,138 

The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon 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 probability of default/loss given default 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. 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.

The most common concession the Company provides to borrowers experiencing financial difficulty is a term extension. In limited circumstances, the Company may modify loans by providing principal forgiveness or an interest rate reduction. 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 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 an interest rate reduction or principal forgiveness, may be granted.

The following table shows the recorded investment at the end of the reporting period for loans modified to borrowers experiencing financial difficulty, disaggregated by loan class and type of concession granted:
Term Extension
Three months endedSix months ended
(in thousands)June 30, 2023Percent of Total Loan ClassJune 30, 2023Percent of Total Loan Class
Commercial and industrial$6,533 0.15 %$27,690 0.63 %
Real estate:
Commercial - owner occupied95 — %95 — %
Construction and land development396 0.06 %1,138 0.17 %
Residential74 0.02 %74 0.02 %
Total$7,098 $28,997 
The following table summarizes the financial impacts of loan modifications made to borrowers experiencing financial difficulty:
Weighted Average Term Extension (in months)
Three months endedSix months ended
June 30, 2023June 30, 2023
Commercial and industrial56
Real estate:
Commercial - owner occupied33
Construction and land development68
Residential55

The following table shows the aging of the recorded investment in modified loans by class:

June 30, 2023
(in thousands)Current90 or More
Days
Past Due		Total
Commercial and industrial$27,029 $661 $27,690 
Real estate:   
Commercial - owner occupied95 — 95 
Construction and land development1,138 — 1,138 
Residential74 — 74 
Total$28,336 $661 $28,997 

As of June 30, 2023, commercial and industrial loans totaling $0.7 million experienced a default subsequent to being granted a term extension modification in the prior twelve months. Default is defined as movement to nonperforming status, foreclosure or charge-off.

There were no loans restructured during the three or six months ended June 30, 2022, and no troubled debt restructurings subsequently defaulted during the three or six months ended June 30, 2022.
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, payment experience, credit documentation, current economic factors and other factors. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:
•Grades 1, 2, and 3 – Includes loans to borrowers with a continuous record of strong earnings, sound balance sheet condition and capitalization, ample liquidity with solid cash flow, and whose management team has experience and depth within their industry.
•Grade 4 – Includes loans to borrowers with positive trends in profitability, satisfactory capitalization and balance sheet condition, and sufficient liquidity and cash flow.
•Grade 5 – Includes loans to borrowers that may display fluctuating trends in sales, profitability, capitalization, liquidity, and cash flow.
•Grade 6 – Includes loans to borrowers where an adverse change or perceived weakness has occurred, but may be correctable in the near future. Alternatively, this rating category may include circumstances where the borrower is starting to reverse a negative trend or condition, or has recently been upgraded from a 7, 8, or 9 rating.
•Grade 7 – Special Mention credits are borrowers that experienced financial setback of a nature that is not determined to be severe or influence ‘ongoing concern’ expectations. Although possible, no loss is anticipated at this time, due to strong collateral and/or guarantor support.
•Grade 8 – Substandard credits include those borrowers characterized by significant losses and sustained downward trends in balance sheet condition, liquidity, and cash flow. Repayment reliance may have shifted to secondary sources. Collateral exposure may exist and additional reserves may be warranted.
•Grade 9 – Doubtful credits include borrowers that may show deteriorating trends that are unlikely to be corrected. Collateral values may appear insufficient for full recovery, therefore requiring a partial charge-off, or debt renegotiation with the borrower. The borrower may have declared bankruptcy or bankruptcy is likely in the near term. All doubtful rated credits will be on nonaccrual.
The recorded investment by risk category of the loans by class and year of origination is presented in the following tables as of the dates indicated:
June 30, 2023
Term Loans by Origination Year
(in thousands)20232022202120202019PriorRevolving Loans Converted to Term LoansRevolving LoansTotal
Commercial and industrial
Pass (1-6)$970,780 $1,190,136 $403,954 $279,051 $135,720 $90,012 $14,163 $1,052,233 $4,136,049 
Special Mention (7)13,250 19,004 15,944 12,909 852 11,595 353 64,652 138,559 
Classified (8-9)6,477 9,567 5,415 1,373 23 394 173 30,456 53,878 
Total Commercial and industrial$990,507 $1,218,707 $425,313 $293,333 $136,595 $102,001 $14,689 $1,147,341 $4,328,486 
Commercial real estate-investor owned
Pass (1-6)$271,496 $618,992 $571,395 $363,098 $205,959 $263,606 $5,762 $52,553 $2,352,861 
Special Mention (7)8,343 25,842 16,774 12,184 10,824 13,125 — — 87,092 
Classified (8-9)— 1,809 — 462 636 4,506 48 — 7,461 
Total Commercial real estate-investor owned$279,839 $646,643 $588,169 $375,744 $217,419 $281,237 $5,810 $52,553 $2,447,414 
Commercial real estate-owner occupied
Pass (1-6)$252,316 $514,007 $514,350 $335,271 $198,183 $346,366 $4,074 $27,122 $2,191,689 
Special Mention (7)10,742 10,906 4,072 19,242 6,093 15,582 4,962 2,496 74,095 
Classified (8-9)— 1,643 2,287 5,009 8,811 23,625 95 500 41,970 
Total Commercial real estate-owner occupied$263,058 $526,556 $520,709 $359,522 $213,087 $385,573 $9,131 $30,118 $2,307,754 
Construction real estate
Pass (1-6)$204,763 $294,359 $113,358 $46,209 $2,524 $3,598 $— $2,359 $667,170 
Special Mention (7)— 2,165 — 242 126 247 — — 2,780 
Classified (8-9)1,138 — — — 13 472 — — 1,623 
Total Construction real estate$205,901 $296,524 $113,358 $46,451 $2,663 $4,317 $— $2,359 $671,573 
Residential real estate
Pass (1-6)$28,768 $46,813 $54,408 $33,718 $20,151 $88,833 $1,472 $81,766 $355,929 
Special Mention (7)44 282 — — 76 1,137 — 7,549 9,088 
Classified (8-9)— 1,077 72 — 49 1,850 74 — 3,122 
Total residential real estate$28,812 $48,172 $54,480 $33,718 $20,276 $91,820 $1,546 $89,315 $368,139 
Other
Pass (1-6)$7,650 $59,071 $87,218 $54,644 $9,748 $23,914 $— $58,773 $301,018 
Special Mention (7)— — — — — — — — — 
Classified (8-9)— — — — — 10 — 1 11 
Total Other$7,650 $59,071 $87,218 $54,644 $9,748 $23,924 $— $58,774 $301,029 
Total loans classified by risk category$1,775,767 $2,795,673 $1,789,247 $1,163,412 $599,788 $888,872 $31,176 $1,380,460 $10,424,395 
Total loans classified by performing status88,228 
Total loans$10,512,623 
December 31, 2022
Term Loans by Origination Year
(in thousands)20222021202020192018PriorRevolving Loans Converted to Term LoansRevolving LoansTotal
Commercial and industrial
Pass (1-6)$1,403,381 $635,275 $332,740 $172,127 $62,729 $66,152 $8,388 $964,592 $3,645,384 
Special Mention (7)37,048 10,836 13,858 423 7,995 4,102 — 72,944 147,206 
Classified (8-9)16,176 4,457 1,627 24 166 183 — 21,349 43,982 
Total Commercial and industrial$1,456,605 $650,568 $348,225 $172,574 $70,890 $70,437 $8,388 $1,058,885 $3,836,572 
Commercial real estate-investor owned
Pass (1-6)$667,107 $584,644 $392,402 $240,033 $115,530 $202,661 $1,457 $53,051 $2,256,885 
Special Mention (7)18,844 5,751 23,502 11,605 — 13,063 — — 72,765 
Classified (8-9)1,823 — 465 953 193 6,092 49 — 9,575 
Total Commercial real estate-investor owned$687,774 $590,395 $416,369 $252,591 $115,723 $221,816 $1,506 $53,051 $2,339,225 
Commercial real estate-owner occupied
Pass (1-6)$539,610 $555,690 $362,150 $232,335 $123,095 $270,613 $— $57,308 $2,140,801 
Special Mention (7)11,164 3,801 16,856 4,455 13,043 9,009 — 800 59,128 
Classified (8-9)— 1,572 3,483 8,910 15,873 11,387 — — 41,225 
Total Commercial real estate-owner occupied$550,774 $561,063 $382,489 $245,700 $152,011 $291,009 $— $58,108 $2,241,154 
Construction real estate
Pass (1-6)$290,146 $232,998 $53,129 $2,909 $2,061 $8,480 $— $1,769 $591,492 
Special Mention (7)17,331 — 681 146 111 106 — — 18,375 
Classified (8-9)1,192 — — 14 471 21 — — 1,698 
Total Construction real estate$308,669 $232,998 $53,810 $3,069 $2,643 $8,607 $— $1,769 $611,565 
Residential real estate
Pass (1-6)$63,317 $60,910 $48,796 $20,943 $11,259 $88,795 $579 $96,304 $390,903 
Special Mention (7)331 — — 79 352 781 — — 1,543 
Classified (8-9)121 73 — 53 1,102 994 — 5 2,348 
Total residential real estate$63,769 $60,983 $48,796 $21,075 $12,713 $90,570 $579 $96,309 $394,794 
Other
Pass (1-6)$38,753 $88,613 $56,252 $10,556 $20,508 $10,796 $— $9,536 $235,014 
Special Mention (7)— — — — — — — — — 
Classified (8-9)— — — 4 3 11 3 4 25 
Total Other$38,753 $88,613 $56,252 $10,560 $20,511 $10,807 $3 $9,540 $235,039 
Total loans classified by risk category$3,106,344 $2,184,620 $1,305,941 $705,569 $374,491 $693,246 $10,476 $1,277,662 $9,658,349 
Total loans classified by performing status78,789 
Total loans$9,737,138 
In the tables above, loan originations in 2023 and 2022 with a classification of “special mention” or “classified” primarily represent renewals or modifications initially underwritten and originated in prior years.

For certain loans the Company evaluates credit quality based on the aging status.

The following tables present the recorded investment on loans based on payment activity as of the dates indicated:

June 30, 2023
(in thousands)PerformingNon PerformingTotal
Commercial and industrial$32,351 $25 $32,376 
Real estate:
Commercial - investor owned18,240 — 18,240 
Commercial - owner occupied28,885 — 28,885 
Residential728 — 728 
Other7,985 14 7,999 
Total$88,189 $39 $88,228 

December 31, 2022
(in thousands)PerformingNon PerformingTotal
Commercial and industrial$23,240 $70 $23,310 
Real estate:
Commercial - investor owned18,595 — 18,595 
Commercial - owner occupied29,397 — 29,397 
Residential743 — 743 
Other6,672 72 6,744 
Total$78,647 $142 $78,789