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Loans
 6 Months Ended
Jun. 30, 2023
Receivables [Abstract]  
Loans Loans
Loans held-for-investment by portfolio type consist of the following as of:
June 30,
2023		December 31,
2022
Commercial and industrial$2,474,531 $2,310,929 
Commercial real estate:
Non-owner occupied723,365 779,546 
Owner occupied643,191 636,272 
Construction and land316,399 327,817 
Multifamily100,464 102,068 
Total commercial real estate1,783,419 1,845,703 
Residential real estate1,082,991 1,003,931 
Public finance611,748 590,284 
Consumer39,909 42,588 
Other162,492 118,397 
Total loans$6,155,090 $5,911,832 
Allowance for credit losses(77,362)(65,917)
Loans, net of allowance for credit losses$6,077,728 $5,845,915 
As of June 30, 2023 and December 31, 2022, we had net deferred fees, costs, premiums and discounts of $15,019 and $17,101, respectively, on our loan portfolio.
Accrued interest receivable on loans totaled $27,465 and $26,494 at June 30, 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 June 30,:
Commercial
and
Industrial		Commercial
Real
Estate		Residential
Real
Estate		Public
Finance		ConsumerOtherTotal
2023
Allowance for credit losses:
Balance, beginning of period$28,545 $24,186 $14,165 $5,549 $676 $1,338 $74,459 
Provision (benefit) for credit losses5,343 (2,588)773 (43)225 (90)3,620 
Loans charged off(729)— — — (68)— (797)
Recoveries38 — 21 — 21 — 80 
Balance, end of period$33,197 $21,598 $14,959 $5,506 $854 $1,248 $77,362 
2022
Allowance for credit losses:
Balance, beginning of period$33,009 $14,566 $997 $1,611 $233 $93 $50,509 
Provision for (benefit from) credit losses(303)3,784 1,422 (73)116 54 5,000 
Loans charged off(947)— (98)— (38)— (1,083)
Recoveries1,546 1 97 — 7 — 1,651 
Balance, end of period$33,305 $18,351 $2,418 $1,538 $318 $147 $56,077 
The following table presents the activity in the allowance for credit losses by portfolio type for the six months ended June 30,:
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 (benefit) for credit losses6,689 (2,026)1,719 (48)354 272 6,960 
Loans charged off(788)— — — (132)— (920)
Recoveries94 3 21 — 31 — 149 
Balance, end of period$33,197 $21,598 $14,959 $5,506 $854 $1,248 $77,362 
2022
Allowance for credit losses:
Balance, beginning of period$31,622 $13,198 $836 $1,544 $235 $112 $47,547 
Provision (benefit) for credit losses1,910 5,152 1,485 (6)124 35 8,700 
Loans charged off(1,950)— (98)— (64)— (2,112)
Recoveries1,723 1 195 — 23 — 1,942 
Balance, end of period$33,305 $18,351 $2,418 $1,538 $318 $147 $56,077 
We determine the allowance for credit losses estimate on at least a quarterly basis.
As of June 30, 2023 and December 31, 2022, we had an allowance for credit losses on unfunded commitments of $1,919 and $1,313, respectively. For the three months ended June 30, 2023 we recorded a provision for credit losses on unfunded commitments of $802; there was no provision for credit losses on unfunded commitments for the three months ended June 30, 2022. For the six months ended June 30, 2023 and 2022 we recorded a provision for credit losses on unfunded commitments of $822 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
June 30, 2023
Commercial and industrial$2,438,328 $955 $1,070 $— $34,178 $2,474,531 
Commercial real estate:
Non-owner occupied718,562 780 — — 4,023 723,365 
Owner occupied635,395 — — — 7,796 643,191 
Construction and land311,446 — — — 4,953 316,399 
Multifamily100,464 — — — — 100,464 
Total commercial real estate1,765,867 780 — — 16,772 1,783,419 
Residential real estate1,063,855 1,415 1,364 19 16,338 1,082,991 
Public Finance611,748 — — — — 611,748 
Consumer39,775 17 30 — 87 39,909 
Other159,538 2,508 — — 446 162,492 
Total loans$6,079,111 $5,675 $2,464 $19 $67,821 $6,155,090 
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 and six months ended June 30, 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 of borrowers 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 cost by segment of loans by risk category and origination date as of June 30, 2023:
20232022202120202019PriorTerm TotalRevolvingTotal
Commercial and industrial:
Pass$298,843 $629,602 $315,686 $132,497 $47,452 $34,547 $1,458,627 $800,730 $2,259,357 
Pass/Watch948 12,627 8,210 3,110 704 3,640 29,239 25,819 55,058 
Special Mention2,716 50,431 33,333 707 708 2,283 90,178 6,398 96,576 
Substandard - Accruing491 2,544 9,519 6,819 2,112 3,778 25,263 4,099 29,362 
Substandard - Nonaccrual— 531 10,891 5,585 722 3,606 21,335 12,500 33,835 
Doubtful37 — 306 — — — 343 — 343 
Total commercial and industrial$303,035 $695,735 $377,945 $148,718 $51,698 $47,854 $1,624,985 $849,546 $2,474,531 
Gross charge-offs$— $59 $— $— $— $729 $788 $— $788 
Commercial real estate:
Non-owner occupied:
Pass$56,777 $120,593 $132,211 $116,058 $92,647 $141,459 $659,745 $22,648 $682,393 
Pass/Watch— — — — — 25,097 25,097 — 25,097 
Special Mention— — — — — 4,907 4,907 — 4,907 
Substandard - Accruing— — 1,969 — — 4,976 6,945 — 6,945 
Substandard - Nonaccrual— — — — 105 3,918 4,023 — 4,023 
Total non-owner occupied$56,777 $120,593 $134,180 $116,058 $92,752 $180,357 $700,717 $22,648 $723,365 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Owner occupied:
Pass$59,556 $113,041 $144,057 $102,838 $61,929 $100,796 $582,217 $7,241 $589,458 
Pass/Watch609 1,111 1,005 1,436 1,462 7,729 13,352 1,639 14,991 
Special Mention— — 1,633 2,003 1,845 4,578 10,059 — 10,059 
Substandard - Accruing334 466 4,503 6,873 1,869 6,842 20,887 — 20,887 
Substandard - Nonaccrual— — — — 7,018 778 7,796 — 7,796 
Total owner occupied$60,499 $114,618 $151,198 $113,150 $74,123 $120,723 $634,311 $8,880 $643,191 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Construction & land:
Pass$27,825 $132,258 $84,791 $28,883 $8,290 $6,115 $288,162 $20,642 $308,804 
Pass/Watch— — — — — 17 17 — 17 
Special Mention— — 1,407 641 — — 2,048 — 2,048 
Substandard - Accruing— 577 — — — — 577 — 577 
Substandard - Nonaccrual— 350 4,415 188 — — 4,953 — 4,953 
Total construction & land$27,825 $133,185 $90,613 $29,712 $8,290 $6,132 $295,757 $20,642 $316,399 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Multifamily:
Pass$2,322 $35,789 $36,495 $13,052 $6,033 $1,201 $94,892 $5,572 $100,464 
Total multifamily$2,322 $35,789 $36,495 $13,052 $6,033 $1,201 $94,892 $5,572 $100,464 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
20232022202120202019PriorTerm TotalRevolvingTotal
Total commercial real estate:
Pass$146,480 $401,681 $397,554 $260,831 $168,899 $249,571 $1,625,016 $56,103 $1,681,119 
Pass/Watch609 1,111 1,005 1,436 1,462 32,843 38,466 1,639 40,105 
Special Mention— — 3,040 2,644 1,845 9,485 17,014 — 17,014 
Substandard - Accruing334 1,043 6,472 6,873 1,869 11,818 28,409 — 28,409 
Substandard - Nonaccrual— 350 4,415 188 7,123 4,696 16,772 — 16,772 
Total commercial real estate:$147,423 $404,185 $412,486 $271,972 $181,198 $308,413 $1,725,677 $57,742 $1,783,419 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Residential real estate:
Pass$93,610 $556,873 $111,646 $43,442 $43,335 $165,637 $1,014,543 $40,614 $1,055,157 
Pass/Watch205 4,355 29 — 414 3,986 8,989 — 8,989 
Special Mention— — — — 257 1,493 1,750 — 1,750 
Substandard - Accruing631 — — — — 126 757 — 757 
Substandard - Nonaccrual— 4,194 — 2,202 3,051 6,854 16,301 37 16,338 
Total residential real estate$94,446 $565,422 $111,675 $45,644 $47,057 $178,096 $1,042,340 $40,651 $1,082,991 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Public Finance:
Pass$31,602 $12,457 $44,308 $168,647 $212,855 $138,915 $608,784 $2,964 $611,748 
Total public finance$31,602 $12,457 $44,308 $168,647 $212,855 $138,915 $608,784 $2,964 $611,748 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Consumer:
Pass$1,470 $2,973 $6,269 $10,342 $3,938 $3,164 $28,156 $10,930 $39,086 
Pass/Watch— 64 125 105 192 165 651 49 700 
Special Mention15 — — 8 — — 23 — 23 
Substandard - Accruing6 — — 7 — — 13 — 13 
Substandard - Nonaccrual— — 1 — 66 20 87 — 87 
Total consumer$1,491 $3,037 $6,395 $10,462 $4,196 $3,349 $28,930 $10,979 $39,909 
Gross charge-offs$— $— $11 $1 $3 $85 $100 $32 $132 
Other:
Pass$672 $13,917 $14,194 $2,998 $3,001 $10,376 $45,158 $108,801 $153,959 
Pass/Watch— — 2,575 — — — 2,575 — 2,575 
Substandard - Accruing— — 5,512 — — — 5,512 — 5,512 
Substandard - Nonaccrual— — 446 — — — 446 — 446 
Total other$672 $13,917 $22,727 $2,998 $3,001 $10,376 $53,691 $108,801 $162,492 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Total loans:
Pass$572,677 $1,617,503 $889,657 $618,757 $479,480 $602,210 $4,780,284 $1,020,142 $5,800,426 
Pass/Watch1,762 18,157 11,944 4,651 2,772 40,634 79,920 27,507 107,427 
Special Mention2,731 50,431 36,373 3,359 2,810 13,261 108,965 6,398 115,363 
Substandard - Accruing1,462 3,587 21,503 13,699 3,981 15,722 59,954 4,099 64,053 
Substandard - Nonaccrual— 5,075 15,753 7,975 10,962 15,176 54,941 12,537 67,478 
Doubtful37 — 306 — — — 343 — 343 
Total loans$578,669 $1,694,753 $975,536 $648,441 $500,005 $687,003 $5,084,407 $1,070,683 $6,155,090 
Gross charge-offs$— $59 $11 $1 $3 $814 $888 $32 $920 
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
June 30, 2023
Commercial & industrial$30,875 $3,941 $3,303 $34,178 $3,941 
Commercial real estate:
Non-owner occupied105 30 3,919 4,024 30 
Owner occupied7,630 754 166 7,796 754 
Construction and land— — 4,953 4,953 — 
Total commercial real estate7,735 784 9,038 16,773 784 
Residential real estate1,192 44 15,146 16,338 44 
Consumer87 87 — 87 87 
Other— — 446 446 — 
Total loans$39,889 $4,856 $27,933 $67,822 $4,856 
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. 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 and six months ended June 30, 2023 and 2022, no loans received a material modification based on borrower financial difficulty.