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Loans
 3 Months Ended
Mar. 31, 2023
Receivables [Abstract]  
Loans Loans
Loans held-for-investment by portfolio type consist of the following as of:
March 31,
2023		December 31,
2022
Commercial and industrial$2,418,771 $2,310,929 
Commercial real estate:
Non-owner occupied709,977 779,546 
Owner occupied659,999 636,272 
Construction and land320,193 327,817 
Multifamily103,767 102,068 
Total commercial real estate1,793,936 1,845,703 
Residential real estate1,046,047 1,003,931 
Public finance597,850 590,284 
Consumer40,806 42,588 
Other163,565 118,397 
Total loans$6,060,975 $5,911,832 
Allowance for credit losses(74,459)(65,917)
Loans, net of allowance for credit losses$5,986,516 $5,845,915 
As of March 31, 2023 and December 31, 2022, we had net deferred fees, costs, premiums and discounts of $16,172 and $17,101, respectively, on our loan portfolio.
Accrued interest receivable on loans totaled $26,666 and $26,494 at March 31, 2023 and December 31, 2022, respectively, and is included in accrued interest receivable in the accompanying consolidated balance sheets.
The following table presents the activity in the allowance for credit losses by portfolio type for the three months ended March 31,:
Commercial
and
Industrial		Commercial
Real
Estate		Residential
Real
Estate		Public
Finance		ConsumerOtherTotal
2023
Allowance for credit losses:
Balance, beginning of period$40,785 $19,754 $2,963 $1,664 $352 $399 $65,917 
Impact of adopting
ASC 326
(13,583)3,867 10,256 3,890 249 577 5,256 
Provision for (benefit from) credit losses1,346 562 946 (5)129 362 3,340 
Loans charged off(59)— — — (64)— (123)
Recoveries56 3 — — 10 — 69 
Balance, end of period$28,545 $24,186 $14,165 $5,549 $676 $1,338 $74,459 
2022
Allowance for credit losses:
Balance, beginning of period$31,622 $13,198 $836 $1,544 $235 $112 $47,547 
Provision for (benefit from) credit losses2,213 1,368 63 67 8 (19)3,700 
Loans charged off(1,003)— — — (26)— (1,029)
Recoveries177 — 98 — 16 — 291 
Balance, end of period$33,009 $14,566 $997 $1,611 $233 $93 $50,509 
We determine the allowance for credit losses estimate on at least a quarterly basis.
As of March 31, 2023 and December 31, 2022, we had an allowance for credit losses on unfunded commitments of $1,117 and $1,313, respectively. For the three months ended March 31, 2023 and 2022 we recorded a provision for credit losses on unfunded commitments of $20 and $125, respectively.
The following table presents our loan portfolio aging analysis as of:
Loans
Not
Past Due		Loans
30-59 Days
Past Due		Loans
60-89 Days
Past Due		Loans Greater
than 90 Days
Past Due,
Still Accruing		NonaccrualTotal
March 31, 2023
Commercial and industrial$2,399,390 $1,560 $6,831 $580 $10,410 $2,418,771 
Commercial real estate:
Non-owner occupied705,029 299 243 2,268 2,138 709,977 
Owner occupied653,268 1,912 — — 4,819 659,999 
Construction and land315,193 4,802 — — 198 320,193 
Multifamily102,809 — 958 — — 103,767 
Total commercial real estate1,776,299 7,013 1,201 2,268 7,155 1,793,936 
Residential real estate1,016,009 18,118 35 — 11,885 1,046,047 
Public Finance597,850 — — — — 597,850 
Consumer40,625 113 — — 68 40,806 
Other160,626 2,472 — — 467 163,565 
Total loans$5,990,799 $29,276 $8,067 $2,848 $29,985 $6,060,975 
December 31, 2022
Commercial and industrial$2,298,207 $2,409 $819 $— $9,494 $2,310,929 
Commercial real estate:
Non-owner occupied773,042 4,356 — — 2,148 779,546 
Owner occupied630,335 — — — 5,937 636,272 
Construction and land324,888 2,632 99 — 198 327,817 
Multifamily102,068 — — — — 102,068 
Total commercial real estate1,830,333 6,988 99 — 8,283 1,845,703 
Residential real estate974,450 17,231 1,524 98 10,628 1,003,931 
Public Finance590,284 — — — — 590,284 
Consumer42,434 58 3 — 93 42,588 
Other117,926 — — — 471 118,397 
Total loans$5,853,634 $26,686 $2,445 $98 $28,969 $5,911,832 
Interest income recorded on nonperforming loans was not material for the three months ended March 31, 2023 and 2022.
Credit risk monitoring and management is a continuous process to manage the quality of the loan portfolio. We segment loans into risk categories based on relevant borrower risk profile information, including the ability to service their debt based on current financial information, historical payment experience, credit documentation, public information and current economic trends among other factors. The risk rating system is used as a tool to analyze and monitor movements in loan portfolio quality.
Risk ratings meeting an internally specified exposure threshold are updated annually, or more frequently upon the occurrence of a circumstance that affects the credit risk of the loan. We use the following definitions for risk ratings:
Pass – Loans classified as Pass have a well-defined primary source of repayment, an acceptable financial position profile (including capitalization), profitability and minimal operating risk.
Pass/Watch – Pass/Watch loans require close attention by bank management and enhanced monitoring due to quantitative or qualitative concerns linked to adverse trends or near-term uncertainty. A covenant default or other type of requirement shortfall may have arisen subsequent to a loan's booking or borrower now shows signs of weakness in the overall base of confirmable financial resources available to repay the loan. However, overall financial capacity & performance are considered sufficient to support an expectation of continued payment performance and / or mitigating factors exist that are expected to limit the risk of near term default and loss.
Special Mention – Special Mention loans have identified potential weaknesses that are of sufficient materiality to require management’s (persistent) close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the bank's credit position under normal business operations. Special Mention loans contain greater than acceptable risk to warrant increases in credit exposure and are thus considered “criticized”, non-pass rated credits. They may contain weaknesses (that have arisen due to deteriorating conditions since origination) and / or underwriting exceptions that are not currently offset by mitigating factors. However, these weaknesses, while sufficient to constitute significantly elevated credit risk, are not sufficient to support a conclusion that the liquidation of the debt is in significant jeopardy.
Substandard - Accruing – Substandard - Accruing loans are inadequately protected by the current sound net worth and paying capacity of the obligor(s). Loans classified as Substandard - Accruing possess one or more well-defined weaknesses that are expected to jeopardize their liquidation but the weaknesses have not progressed to a point where recent late payments on the loan have become more than 90 days past due. These loans are characterized by the distinct possibility that the bank may sustain up to a moderate but not significant level of loss if such weaknesses are not corrected. Losses for Substandard - Accruing loans are moderated by the lower likelihood of ultimate default and the existence of relatively favorable secondary repayment protection. These loans are considered “nonperforming”.
Substandard - Nonaccrual – Substandard - Nonaccrual loans are inadequately protected by the current sound net worth and paying capacity of the obligor or the collateral pledged, if any. Loans classified as Substandard - Nonaccrual possess material, well-defined weaknesses that are expected to jeopardize their liquidation and have progressed to a point where consistently late payments on the loan have become more than 90 or more days past due. These loans are characterized by the distinct possibility that the bank may sustain a material level of loss if such weaknesses are not corrected. Losses for Substandard - Nonaccrual loans are prone to being elevated based on the strong likelihood of the loan remaining in payment default and an undesirable level of secondary repayment protection. These loans are considered “nonperforming”.
Doubtful – Loans classified as Doubtful possess all of the weaknesses inherent in loans classified as Substandard - Nonaccrual with the added characteristic that the weaknesses make collection or liquidation in full highly questionable or improbable based on currently existing facts, conditions and values. A high probability of substantial loss or possible total loss exists. Loans rated as doubtful are not rated as loss because certain events may occur that could salvage at least a portion of the debt. These events include injections of capital, additions of pledged collateral or possible mezzanine debt refinancing options. However, without the occurrence of such events, total loss may be possible. No definite repayment schedule exists for these loans. The Doubtful grade is a temporary grade. If a near term recovery of a portion of the loan balance is indeterminable or unlikely to occur, the remaining balance of the loan should be written off and possible future recoveries may partially offset the full write-off of the loan. These loans are considered “nonperforming”.
Loss – Loans classified as Loss are defaulted loans with limited or immaterial recovery prospects. No loan that has not yet defaulted should be classified at this grade level. This rating level tends to be very short lived as the full balance of the loan tends to be fully written off nearly immediately after a change to this rating level. These loans are considered “nonperforming”.
The following table present the amortized costs by segment of loans by risk category and origination date as of March 31, 2023:
20232022202120202019PriorTerm TotalRevolvingTotal
Commercial and industrial:
Pass$162,090 $745,860 $345,908 $145,402 $53,297 $38,696 $1,491,253 $773,035 $2,264,288 
Pass/Watch685 20,343 2,636 2,427 583 3,880 30,554 2,023 32,577 
Special Mention737 15,769 32,256 722 733 2,354 52,571 7,837 60,408 
Substandard - Accruing160 23,793 10,818 4,954 2,343 3,875 45,943 5,145 51,088 
Substandard - Nonaccrual— 538 1,884 3,541 — 3,886 9,849 — 9,849 
Doubtful— — 561 — — — 561 — 561 
Total commercial and industrial$163,672 $806,303 $394,063 $157,046 $56,956 $52,691 $1,630,731 $788,040 $2,418,771 
Gross charge-offs$— $59 $— $— $— $— $59 $— $59 
Commercial real estate:
Non-owner occupied:
Pass$6,913 $152,332 $118,258 $119,163 $94,647 $141,349 $632,662 $32,571 $665,233 
Pass/Watch— — — — — 29,709 29,709 — 29,709 
Special Mention— — — — — 7 7 — 7 
Substandard - Accruing— — 2,924 — — 9,966 12,890 — 12,890 
Substandard - Nonaccrual— — — — 104 2,034 2,138 — 2,138 
Total non-owner occupied$6,913 $152,332 $121,182 $119,163 $94,751 $183,065 $677,406 $32,571 $709,977 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Owner occupied:
Pass$37,799 $115,829 $149,207 $108,364 $62,745 $118,859 $592,803 $11,275 $604,078 
Pass/Watch1,378 204 — 1,445 1,465 8,076 12,568 1,650 14,218 
Special Mention— — 2,291 2,019 1,850 3,918 10,078 — 10,078 
Substandard - Accruing— — 3,858 7,123 8,951 6,874 26,806 — 26,806 
Substandard - Nonaccrual— — — — — 4,819 4,819 — 4,819 
Total owner occupied$39,177 $116,033 $155,356 $118,951 $75,011 $142,546 $647,074 $12,925 $659,999 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Construction & land:
Pass$17,522 $103,650 $94,855 $35,459 $13,094 $6,470 $271,050 $46,301 $317,351 
Pass/Watch— — 1,420 — — 18 1,438 — 1,438 
Special Mention— 582 — 624 — — 1,206 — 1,206 
Substandard - Nonaccrual— — — 198 — — 198 — 198 
Total construction & land$17,522 $104,232 $96,275 $36,281 $13,094 $6,488 $273,892 $46,301 $320,193 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Multifamily:
Pass$4,091 $36,768 $36,561 $13,134 $6,139 $1,503 $98,196 $5,571 $103,767 
Total multifamily$4,091 $36,768 $36,561 $13,134 $6,139 $1,503 $98,196 $5,571 $103,767 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
20232022202120202019PriorTerm TotalRevolvingTotal
Total commercial real estate:
Pass$66,325 $408,579 $398,881 $276,120 $176,625 $268,181 $1,594,711 $95,718 $1,690,429 
Pass/Watch1,378 204 1,420 1,445 1,465 37,803 43,715 1,650 45,365 
Special Mention— 582 2,291 2,643 1,850 3,925 11,291 — 11,291 
Substandard - Accruing— — 6,782 7,123 8,951 16,840 39,696 — 39,696 
Substandard - Nonaccrual— — — 198 104 6,853 7,155 — 7,155 
Total commercial real estate:$67,703 $409,365 $409,374 $287,529 $188,995 $333,602 $1,696,568 $97,368 $1,793,936 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Residential real estate:
Pass$39,960 $573,226 $104,686 $47,425 $44,940 $176,588 $986,825 $39,979 $1,026,804 
Pass/Watch— 1,573 69 — 567 3,250 5,459 — 5,459 
Special Mention— — — — 259 1,508 1,767 — 1,767 
Substandard - Accruing— — — — — 132 132 — 132 
Substandard - Nonaccrual— 2,983 11 721 2,449 5,683 11,847 38 11,885 
Total residential real estate$39,960 $577,782 $104,766 $48,146 $48,215 $187,161 $1,006,030 $40,017 $1,046,047 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Public Finance:
Pass$16,839 $12,488 $44,299 $169,871 $213,739 $140,614 $597,850 $— $597,850 
Total public finance$16,839 $12,488 $44,299 $169,871 $213,739 $140,614 $597,850 $— $597,850 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Consumer:
Pass$764 $3,661 $6,606 $10,938 $4,265 $3,391 $29,625 $10,261 $39,886 
Pass/Watch— 68 171 105 198 227 769 50 819 
Special Mention— — — 10 — — 10 — 10 
Substandard - Accruing7 — — 15 — — 22 1 23 
Substandard - Nonaccrual— — — — 66 — 66 2 68 
Total consumer$771 $3,729 $6,777 $11,068 $4,529 $3,618 $30,492 $10,314 $40,806 
Gross charge-offs$— $— $11 $1 $3 $17 $32 $32 $64 
Other:
Pass$9 $13,550 $14,587 $3,184 $3,166 $10,469 $44,965 $109,537 $154,502 
Pass/Watch— — 2,696 — — — 2,696 — 2,696 
Substandard - Accruing— — 5,900 — — — 5,900 — 5,900 
Substandard - Nonaccrual— — 467 — — — 467 — 467 
Total other$9 $13,550 $23,650 $3,184 $3,166 $10,469 $54,028 $109,537 $163,565 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Total loans:
Pass$285,987 $1,757,364 $914,967 $652,940 $496,032 $637,939 $4,745,229 $1,028,530 $5,773,759 
Pass/Watch2,063 22,188 6,992 3,977 2,813 45,160 83,193 3,723 86,916 
Special Mention737 16,351 34,547 3,375 2,842 7,787 65,639 7,837 73,476 
Substandard - Accruing167 23,793 23,500 12,092 11,294 20,847 91,693 5,146 96,839 
Substandard - Nonaccrual— 3,521 2,362 4,460 2,619 16,422 29,384 40 29,424 
Doubtful— — 561 — — — 561 — 561 
Total loans$288,954 $1,823,217 $982,929 $676,844 $515,600 $728,155 $5,015,699 $1,045,276 $6,060,975 
Gross charge-offs$— $59 $11 $1 $3 $17 $91 $32 $123 
The following table presents the credit risk profile of our loan portfolio based on our rating categories as of December 31, 2022, which is prior to the adoption of ASU 2016-13 on January 1, 2023 and continue to be reported under ASC 310, Receivables. For a description of these risk ratings, please see our 2022 Annual Report. Amounts are presented at unpaid principal balance.
Non-ClassifiedClassifiedTotal
Commercial and industrial$2,969,786 $55,288 $3,025,074 
Commercial real estate1,715,415 37,945 1,753,360 
Residential real estate1,096,108 10,685 1,106,793 
Consumer43,592 114 43,706 
Total loans$5,824,901 $104,032 $5,928,933 
The following table presents information about collateral dependent loans that were individually evaluated for purposes of determining the ACL as of:
Collateral Dependent Loans
With Allowance		Collateral Dependent Loans
With No Related Allowance		Total Collateral Dependent Loans
Amortized CostRelated AllowanceAmortized CostAmortized CostRelated Allowance
March 31, 2023
Commercial & industrial$4,027 $2,215 $6,383 $10,410 $2,215 
Commercial real estate:
Non-owner occupied104 30 2,033 2,137 30 
Owner occupied612 186 4,208 4,820 186 
Construction and land— — 198 198 — 
Total commercial real estate716 216 6,439 7,155 216 
Residential real estate1,196 41 10,689 11,885 41 
Consumer68 68 — 68 68 
Other— — 467 467 — 
Total loans$6,007 $2,540 $23,978 $29,985 $2,540 
December 31, 2022
Commercial & industrial$6,330 $1,101 $3,164 $9,494 $1,101 
Commercial real estate:
Non-owner occupied115 36 2,033 2,148 36 
Owner occupied681 153 5,256 5,937 153 
Construction and land— — 198 198 — 
Total commercial real estate796 189 7,487 8,283 189 
Residential real estate836 34 9,779 10,615 34 
Consumer91 88 — 91 88 
Other— — 475 475 — 
Total loans$8,053 $1,412 $20,905 $28,958 $1,412 
The allowance related to collateral dependent loans reported in the tables above includes qualitative adjustments applied to the loan portfolio that consider possible changes in circumstances that could ultimately impact credit losses and might not be reflected in historical data or forecasted data incorporated in the quantitative models.
Loan Modifications Made to Borrowers Experiencing Financial Difficulty:
The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination. 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 PD/LGD model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made at the time of a modification.
Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses, a change to the allowance for credit losses is generally not recorded upon modification. Occasionally, the Company modifies loans by providing principal forgiveness that 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. Additionally, the Company may allow a loan to go interest only for a specified period of time.
During the three months ended March 31, 2023 and 2022, no loans received a material modification based on borrower financial difficulty.