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Loans
 9 Months Ended
Sep. 30, 2023
Receivables [Abstract]  
Loans Loans
Loans held-for-investment by portfolio type consist of the following as of:
September 30,
2023		December 31,
2022
Commercial and industrial$2,459,358 $2,310,929 
Commercial real estate:
Non-owner occupied767,135 779,546 
Owner occupied631,352 636,272 
Construction and land329,433 327,817 
Multifamily114,535 102,068 
Total commercial real estate1,842,455 1,845,703 
Residential real estate1,059,074 1,003,931 
Public finance602,844 590,284 
Consumer37,681 42,588 
Other178,110 118,397 
Total loans$6,179,522 $5,911,832 
Allowance for credit losses(78,666)(65,917)
Loans, net of allowance for credit losses$6,100,856 $5,845,915 
As of September 30, 2023 and December 31, 2022, we had net deferred fees, costs, premiums and discounts of $14,474 and $17,101, respectively, on our loan portfolio.
Accrued interest receivable on loans totaled $34,890 and $26,494 at September 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 September 30,:
Commercial
and
Industrial		Commercial
Real
Estate		Residential
Real
Estate		Public
Finance		ConsumerOtherTotal
2023
Allowance for credit losses:
Balance, beginning of period$33,197 $21,598 $14,959 $5,506 $854 $1,248 $77,362 
Provision (benefit) for credit losses4,252 1,495 (2,429)135 (28)175 3,600 
Loans charged off(2,963)— — — (136)— (3,099)
Recoveries155 9 627 — 12 — 803 
Balance, end of period$34,641 $23,102 $13,157 $5,641 $702 $1,423 $78,666 
2022
Allowance for credit losses:
Balance, beginning of period$33,305 $18,351 $2,418 $1,538 $318 $147 $56,077 
Provision for (benefit from) credit losses2,394 1,213 222 (108)32 (3)3,750 
Loans charged off(223)— (24)— (53)— (300)
Recoveries112 2 1 — 36 — 151 
Balance, end of period$35,588 $19,566 $2,617 $1,430 $333 $144 $59,678 
The following table presents the activity in the allowance for credit losses by portfolio type for the nine months ended September 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 losses10,941 (531)(710)87 326 447 10,560 
Loans charged off(3,751)— — — (268)— (4,019)
Recoveries249 12 648 — 43 — 952 
Balance, end of period$34,641 $23,102 $13,157 $5,641 $702 $1,423 $78,666 
2022
Allowance for credit losses:
Balance, beginning of period$31,622 $13,198 $836 $1,544 $235 $112 $47,547 
Provision (benefit) for credit losses4,304 6,365 1,707 (114)156 32 12,450 
Loans charged off(2,173)— (122)— (117)— (2,412)
Recoveries1,835 3 196 — 59 — 2,093 
Balance, end of period$35,588 $19,566 $2,617 $1,430 $333 $144 $59,678 
We determine the allowance for credit losses estimate on at least a quarterly basis.
As of September 30, 2023 and December 31, 2022, we had an allowance for credit losses on unfunded commitments of $2,209 and $1,313, respectively. For the three months ended September 30, 2023 and 2022 we recorded a provision for credit losses on unfunded commitments of $290 and $350, respectively. For the nine months ended September 30, 2023 and 2022 we recorded a provision for credit losses on unfunded commitments of $1,112 and $475, 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
September 30, 2023
Commercial and industrial$2,441,207 $2,858 $3,065 $193 $12,035 $2,459,358 
Commercial real estate:
Non-owner occupied762,297 111 545 — 4,182 767,135 
Owner occupied629,542 450 620 — 740 631,352 
Construction and land329,206 39 — — 188 329,433 
Multifamily114,535 — — — — 114,535 
Total commercial real estate1,835,580 600 1,165 — 5,110 1,842,455 
Residential real estate1,036,230 575 1,697 18 20,554 1,059,074 
Public Finance602,844 — — — — 602,844 
Consumer37,590 90 — — 1 37,681 
Other175,278 — — — 2,832 178,110 
Total loans$6,128,729 $4,123 $5,927 $211 $40,532 $6,179,522 
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 nine months ended September 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 presents the amortized cost by segment of loans by risk category and origination date as of September 30, 2023 and gross charge-offs by origination date for the nine months ended September 30, 2023:
20232022202120202019PriorRevolving Loans Converted to TermRevolvingTotal
Commercial and industrial:
Pass$300,415 $480,464 $388,085 $154,171 $45,291 $48,799 $26,617 $803,301 $2,247,143 
Pass/Watch9,176 2,522 7,001 2,484 1,483 1,626 167 68,825 93,284 
Special Mention3,526 38,881 30,790 1,290 684 1,061 199 7,662 84,093 
Substandard - Accruing630 — 5,648 5,888 1,406 3,680 3,304 2,247 22,803 
Substandard - Nonaccrual— — 3,180 6,656 796 395 — 96 11,123 
Doubtful— — — — 570 35 250 57 912 
Total commercial and industrial$313,747 $521,867 $434,704 $170,489 $50,230 $55,596 $30,537 $882,188 $2,459,358 
Gross charge-offs$— $— $395 $— $— $366 $2,990 $— $3,751 
Commercial real estate:
Non-owner occupied:
Pass$52,362 $98,135 $129,180 $111,588 $69,011 $183,353 $20,935 $54,485 $719,049 
Pass/Watch— — — 986 — 23,562 1,300 — 25,848 
Special Mention— 3,542 — 2,857 — — — — 6,399 
Substandard - Accruing— — — 1,895 — 9,762 — — 11,657 
Substandard - Nonaccrual— — — — — 4,182 — — 4,182 
Total non-owner occupied$52,362 $101,677 $129,180 $117,326 $69,011 $220,859 $22,235 $54,485 $767,135 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Owner occupied:
Pass$60,548 $85,790 $118,772 $117,027 $67,740 $127,986 $2,455 $6,553 $586,871 
Pass/Watch605 909 990 1,427 1,457 1,601 — 1,628 8,617 
Special Mention— 495 1,623 1,990 488 4,391 — — 8,987 
Substandard - Accruing— 463 638 6,805 2,252 15,979 — — 26,137 
Substandard - Nonaccrual— — — — — 740 — — 740 
Total owner occupied$61,153 $87,657 $122,023 $127,249 $71,937 $150,697 $2,455 $8,181 $631,352 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Construction & land:
Pass$25,539 $143,285 $60,953 $35,204 $13,554 $9,458 $15,369 $21,651 $325,013 
Pass/Watch— — — — — 16 — — 16 
Special Mention— — 1,394 2,256 — — — — 3,650 
Substandard - Accruing— — 566 — — — — — 566 
Substandard - Nonaccrual— — — 188 — — — — 188 
Total construction & land$25,539 $143,285 $62,913 $37,648 $13,554 $9,474 $15,369 $21,651 $329,433 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Multifamily:
Pass$1,362 $47,809 $36,731 $12,973 $2,723 $6,060 $— $5,572 $113,230 
Special Mention— — — — 1,305 — — — 1,305 
Total multifamily$1,362 $47,809 $36,731 $12,973 $4,028 $6,060 $— $5,572 $114,535 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
20232022202120202019PriorRevolving Loans Converted to TermRevolvingTotal
Total commercial real estate:
Pass$139,811 $375,019 $345,636 $276,792 $153,028 $326,857 $38,759 $88,261 $1,744,163 
Pass/Watch605 909 990 2,413 1,457 25,179 1,300 1,628 34,481 
Special Mention— 4,037 3,017 7,103 1,793 4,391 — — 20,341 
Substandard - Accruing— 463 1,204 8,700 2,252 25,741 — — 38,360 
Substandard - Nonaccrual— — — 188 — 4,922 — — 5,110 
Total commercial real estate:$140,416 $380,428 $350,847 $295,196 $158,530 $387,090 $40,059 $89,889 $1,842,455 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Residential real estate:
Pass$88,688 $572,932 $118,264 $38,618 $38,835 $152,436 $1,670 $14,804 $1,026,247 
Pass/Watch173 4,881 28 — 350 4,808 179 — 10,419 
Special Mention— — — — 256 1,478 — — 1,734 
Substandard - Accruing— — — — — 120 — — 120 
Substandard - Nonaccrual— 5,706 3,240 2,223 3,942 5,408 — 35 20,554 
Total residential real estate$88,861 $583,519 $121,532 $40,841 $43,383 $164,250 $1,849 $14,839 $1,059,074 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Public Finance:
Pass$31,609 $— $43,980 $178,130 $203,950 $137,539 $— $2 $595,210 
Pass/Watch— — — — 7,634 — — — 7,634 
Total public finance$31,609 $— $43,980 $178,130 $211,584 $137,539 $— $2 $602,844 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Consumer:
Pass$2,387 $2,590 $5,646 $9,846 $3,674 $2,760 $66 $9,968 $36,937 
Pass/Watch— 62 119 100 187 159 1 51 679 
Special Mention— — 14 8 — — — — 22 
Substandard - Accruing5 — — — — — 37 — 42 
Substandard - Nonaccrual— — 1 — — — — — 1 
Total consumer$2,392 $2,652 $5,780 $9,954 $3,861 $2,919 $104 $10,019 $37,681 
Gross charge-offs$— $— $12 $8 $71 $32 $3 $142 $268 
Other:
Pass$7,660 $7,808 $13,662 $6,061 $441 $10,244 $4,935 $117,017 $167,828 
Pass/Watch— — 2,332 — 2,391 — — — 4,723 
Substandard - Accruing— — 2,727 — — — — — 2,727 
Substandard - Nonaccrual— — 2,398 — — — 434 — 2,832 
Total other$7,660 $7,808 $21,119 $6,061 $2,832 $10,244 $5,369 $117,017 $178,110 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
20232022202120202019PriorRevolving Loans Converted to TermRevolvingTotal
Total loans:
Pass$570,570 $1,438,813 $915,273 $663,618 $445,219 $678,635 $72,047 $1,033,353 $5,817,528 
Pass/Watch9,954 8,374 10,470 4,997 13,502 31,772 1,647 70,504 151,220 
Special Mention3,526 42,918 33,821 8,401 2,733 6,930 199 7,662 106,190 
Substandard - Accruing635 463 9,579 14,588 3,658 29,541 3,341 2,247 64,052 
Substandard - Nonaccrual— 5,706 8,819 9,067 4,738 10,725 434 131 39,620 
Doubtful— — — — 570 35 250 57 912 
Total loans$584,685 $1,496,274 $977,962 $700,671 $470,420 $757,638 $77,918 $1,113,954 $6,179,522 
Gross charge-offs$— $— $407 $8 $71 $398 $2,993 $142 $4,019 
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
September 30, 2023
Commercial & industrial$11,991 $4,794 $44 $12,035 $4,794 
Commercial real estate:
Non-owner occupied96 22 4,086 4,182 22 
Owner occupied614 188 126 740 188 
Construction and land— — 188 188 — 
Total commercial real estate710 210 4,400 5,110 210 
Residential real estate1,304 74 19,250 20,554 74 
Consumer1 1 — 1 1 
Other— — 2,832 2,832 — 
Total loans$14,006 $5,079 $26,526 $40,532 $5,079 
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 nine months ended September 30, 2023, no loans received a material modification based on borrower financial difficulty.