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Allowance for Credit Losses
 9 Months Ended
Sep. 30, 2023
Receivables [Abstract]  
Allowance for Credit Losses Allowance for Credit Losses
The analyses by loan segment of the changes in the ACL for the three and nine month periods ended September 30, 2023 and 2022 is summarized in the following tables:
Three Months Ended September 30, 2023
(in thousands)Real EstateCommercialFinancial
Institutions		Consumer
and Others		Total
Balance at beginning of the period$42,238 $36,626 $— $27,092 $105,956 
(Reversal of ) provision for credit losses - loans
(3,067)4,852 — 5,615 7,400 
Loans charged-off(90)(9,288)— (6,441)(15,819)
Recoveries10 736 — 490 1,236 
Balance at end of the period$39,091 $32,926 $— $26,756 $98,773 

Nine Months Ended September 30, 2023
(in thousands)Real EstateCommercialFinancial
Institutions		Consumer
and Others		Total
Balance at beginning of the period$25,237 $25,888 $— $32,375 $83,500 
Provision for credit losses - loans13,655 20,639 — 13,883 48,177 
Loans charged-off(90)(18,715)— (20,428)(39,233)
Recoveries289 5,114 — 926 6,329 
Balance at end of the period$39,091 $32,926 $— $26,756 $98,773 

Three Months Ended September 30, 2022
Recast (1)
(in thousands)
Real Estate
Commercial
Financial
Institutions
Consumer
and Others
Total
Balance at beginning of the period$20,459 $21,152 $— $28,864 $70,475 
Provision for credit losses - loans (1)
2,869 927 — 3,518 7,314 
Loans charged-off— (99)— (1,712)(1,811)
Recoveries12 443 — 40 495 
Balance at end of the period (1)
$23,340 $22,423 $— $30,710 $76,473 
_______________
(1)Recast amounts reflect the impact of the adoption of CECL effective as of January 1, 2022. See Note 1 “Business, Basis of Presentation and Summary of Significant Accounting Policies” for additional information.
Nine Months Ended September 30, 2022
Recast (1)
(in thousands)
Real Estate
Commercial
Financial
Institutions
Consumer
and Others
Total
Balance at beginning of the period$17,952 $38,979 $42 $12,926 $69,899 
Cumulative effect of adoption of accounting principle (1)
17,418 (8,281)(42)9,579 18,674 
(Reversal of) provision for credit losses - loans (1)
(12,056)(2,435)— 11,579 (2,912)
Loans charged-off— (7,979)— (3,674)(11,653)
Recoveries26 2,139 — 300 2,465 
Balance at end of the period (1)
$23,340 $22,423 $— $30,710 $76,473 
______________

(1)Recast amounts reflect the impact of the adoption of CECL effective as of January 1, 2022. See Note 1 “Business, Basis of Presentation and Summary of Significant Accounting Policies” for additional information.

The ACL was determined utilizing a reasonable and supportable forecast period. The ACL was determined using a weighted-average of various economic scenarios provided by a third-party, and incorporated qualitative components. There has not been material changes in our policies and methodology to estimate the ACL in the three and nine month periods ended September 30, 2023.

The ACL increased by $15.3 million, or 18.3% at September 30, 2023, compared to December 31, 2022. The ACL as a percentage of total loans held for investment was 1.40% at September 30, 2023 compared to 1.22% at December 31, 2022. The provision for credit losses on loans in the nine months ended September 30, 2023 was partially offset by net charge-offs. During the third quarter of 2023, the provision for credit losses on loans included $7.6 million to cover charge-offs and $1.4 million due to loan composition and volume changes. These provision requirements were partially offset by a $0.4 million release due to credit quality and macroeconomic factor updates and a $1.2 million release due to recoveries. In the first nine months of 2023, the provision for credit losses on loans includes $36.3 million in additional reserve requirements for loan charge-offs and credit quality, $2.3 million to account for loan growth and composition in the period and $9.6 million to reflect updated macroeconomic factors and loss factor update.
The following is a summary of net proceeds from sales of loans held for investment by portfolio segment:
Three Months Ended September 30,
(in thousands)		Real EstateCommercialFinancial
Institutions		Consumer
and others		Total
2023$20,500 $6,909 $— $— $27,409 
2022$— $6,483 $— $— $6,483 
Nine Months Ended September 30,
(in thousands)		Real EstateCommercialFinancial
Institutions		Consumer
and others		Total
2023$34,075 $7,796 $— $— $41,871 
2022$11,566 $6,483 $— $1,313 $19,362 

Loan Modifications to Borrowers Experiencing Financial Difficulty

The Company modifies loans related to borrowers experiencing financial difficulties 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 principal forgiveness, may be granted.
The Company had no new loan modifications to borrowers experiencing financial difficulty during the three and nine month periods ended September 30, 2023. There were no loans that defaulted in the three and nine month periods ended September 30, 2023 and had been modified within 12 months preceding the payment default related to these modifications.
Troubled Debt Restructurings
As result of adoption of guidance related to CECL effective as of January 1, 2023, the Company had no reportable balances related to TDRs as of and for the three and nine month periods ended September 30, 2023. See Note 1 “Business, Basis of Presentation and Summary of Significant Accounting Policies” for additional information.
There were no new TDRs in the three and nine month periods ended September 30, 2022. In addition, during the three and nine month periods ended September 30, 2022, there were no TDR loans that subsequently defaulted within the 12 months of restructuring in the three and nine month periods ended September 30, 2022.

Credit Risk Quality
The sufficiency of the ACL is reviewed at least quarterly by the Chief Risk Officer and the Chief Financial Officer. The Board of Directors considers the ACL as part of its review of the Company’s consolidated financial statements. As of September 30, 2023 and December 31, 2022, the Company believes the ACL to be sufficient to absorb expected credit losses in the loans portfolio in accordance with GAAP.

Loans may be classified but not considered collateral dependent due to one of the following reasons: (1) the Company has established minimum dollar amount thresholds for individual assessment of expected credit losses, which results in loans under those thresholds being excluded from individual assessment of expected credit losses; and (2) classified loans may be considered in the assessment because the Company expects to collect all amounts due.
As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related primarily to (i) the risk rating of loans, (ii) the loan payment status, (iii) net charge-offs, (iv) nonperforming loans and (v) the general economic conditions in the main geographies where the Company’s borrowers conduct their businesses. The Company considers the views of its regulators as to loan classification and in the process of estimating expected credit losses.
The Company utilizes an internal risk rating system to identify the risk characteristics of each of its loans, or group of homogeneous loans such as consumer loans. Internal risk ratings are updated on a continuous basis on a scale from 1 (worst credit quality) to 10 (best credit quality). Loans are then grouped in five master risk categories for purposes of monitoring rising levels of potential loss risks and to enable the activation of collection or recovery processes as defined in the Company’s Credit Risk Policy. Internal risk ratings are considered the most meaningful indicator of credit quality for commercial loans. Generally, internal risk ratings for commercial real estate loans and commercial loans with balances over $3 million are updated at least annually and more frequently if circumstances indicate that a change in risk rating may be warranted. For consumer loans, single-family residential loans and smaller commercial loans under $3 million, risk ratings are updated based on the loans past due status.The following is a summary of the master risk categories and their associated loan risk ratings, as well as a description of the general characteristics of the master risk category:
Loan Risk Rating
Master risk category
Nonclassified
4 to 10
Classified
1 to 3
Substandard3
Doubtful2
Loss1
Nonclassified
This category includes loans considered as Pass (5-10) and Special Mention (4). A loan classified as Pass is considered of sufficient quality to preclude a lower adverse rating. These loans are generally well protected by the current net worth and paying capacity of the borrower or by the value of any collateral received. Special Mention loans are defined as having potential weaknesses that deserve management’s close attention which, if left uncorrected, could potentially result in further credit deterioration. Special Mention loans may include loans originated with certain credit weaknesses or that developed those weaknesses since their origination.
Classified
This classification indicates the presence of credit weaknesses which could make loan repayment unlikely, such as partial or total late payments and other contractual defaults.
Substandard
A loan classified substandard is inadequately protected by the sound worth and paying capacity of the borrower or the collateral pledged. They are characterized by the distinct possibility that the Company will sustain some loss if the credit weaknesses are not corrected. Loss potential, while existing in the aggregate amount of substandard loans, does not have to exist in individual assets.
Doubtful
These loans have all the weaknesses inherent in a loan classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. These are poor quality loans in which neither the collateral, if any, nor the financial condition of the borrower presently ensure collection in full in a reasonable period of time. As a result, the possibility of loss is extremely high.
Loss
Loans classified as loss are considered uncollectible and of such little value that the continuance as bankable assets is not warranted. This classification does not mean that the assets have absolutely no recovery or salvage value, but not to the point where a write-off should be deferred even though partial recoveries may occur in the future. This classification is based upon current facts, not probabilities. As a result, loans in this category should be promptly charged off in the period in which they are determined to be uncollectible.
Loans held for investment by Credit Quality Indicators
The following tables present Loans held for investment by credit quality indicators and year of origination as of September 30, 2023 and December 31, 2022:

September 30, 2023
Term Loans
Amortized Cost Basis by Origination Year
(in thousands)20232022202120202019PriorRevolving Loans
Amortized Cost
Basis		Total
Real estate loans
Commercial real estate
Nonowner occupied
Credit Risk Rating:
Nonclassified
Pass$99,056 $191,221 $597,265 $35,803 $90,311 $402,213 $177,702 $1,593,571 
Special Mention— — — — — — — — 
Classified
Substandard— — — — — — — — 
Doubtful— — — — — — — — 
Loss— — — — — — — — 
Total Nonowner occupied99,056 191,221 597,265 35,803 90,311 402,213 177,702 1,593,571 
Multi-family residential
Credit Risk Rating:
Nonclassified
Pass1,801 70,396 105,857 26,605 117,535 120,969 305,147 748,310 
Special Mention— — — — — — — — 
Classified
Substandard— — — — — 23,344 — 23,344 
Doubtful— — — — — — — — 
Loss— — — — — — — — 
Total Multi-family residential1,801 70,396 105,857 26,605 117,535 144,313 305,147 771,654 
Land development and construction loans
Credit Risk Rating:
Nonclassified
Pass42,384 9,735 28,911 21,945 — 26,928 172,035 301,938 
Special Mention— — — — — — — — 
Classified
Substandard— — — — — — — — 
Doubtful— — — — — — — — 
Loss— — — — — — — — 
Total land development and construction loans42,384 9,735 28,911 21,945 — 26,928 172,035 301,938 
Single-family residential
Credit Risk Rating:
Nonclassified
Pass286,064 460,287 181,306 65,722 21,041 71,615 282,074 1,368,109 
Special Mention— — — — — — — — 
Classified
Substandard— — — — — 691 2,394 3,085 
Doubtful— — — — — — — — 
Loss— — — — — — — — 
Total Single-family residential286,064 460,287 181,306 65,722 21,041 72,306 284,468 1,371,194 
Owner occupied
Credit Risk Rating:
Nonclassified
Pass143,861 262,104 434,620 20,904 58,112 161,840 44,066 1,125,507 
Special Mention— — — — — 354 1,880 2,234 
Classified
Substandard— — 1,316 — — 864 — 2,180 
Doubtful— — — — — — — — 
Loss— — — — — — — — 
Total owner occupied143,861 262,104 435,936 20,904 58,112 163,058 45,946 1,129,921 
September 30, 2023
Term Loans Amortized Cost Basis by Origination Year
(in thousands)20232022202120202019PriorRevolving Loans
Amortized Cost
Basis		Total
Non-real estate loans
Commercial Loans
Credit Risk Rating:
Nonclassified
Pass302,410 292,024 79,465 12,127 34,900 38,184 660,939 1,420,049 
Special Mention7,007 — — — — — 19,968 26,975 
Classified
Substandard— 623 17 106 1,777 854 2,355 5,732 
Doubtful— — — — 3 — — 3 
Loss— — — — — — — — 
Total commercial Loans309,417 292,647 79,482 12,233 36,680 39,038 683,262 1,452,759 
Loans to financial institutions and acceptances
Credit Risk Rating:
Nonclassified
Pass— — — — — 13,353 — 13,353 
Special Mention— — — — — — — — 
Classified
Substandard— — — — — — — — 
Doubtful— — — — — — — — 
Loss— — — — — — — — 
Total loans to financial institutions and acceptances— — — — — 13,353 — 13,353 
Consumer loans
Credit Risk Rating:
Nonclassified
Pass28,583 211,027 61,386 21,306 35 10 116,649 438,996 
Special Mention— — — — — — — — 
Classified
Substandard— — — — — 1 — 1 
Doubtful— — — — — — — — 
Loss— — — — — — — — 
Total consumer loans28,583 211,027 61,386 21,306 35 11 116,649 438,997 
Total loans held for investment, gross$911,166 $1,497,417 $1,490,143 $204,518 $323,714 $861,220 $1,785,209 $7,073,387 
December 31, 2022
Term Loans
Amortized Cost Basis by Origination Year
(in thousands)20222021202020192018PriorRevolving Loans
Amortized Cost
Basis		Total
Real estate loans
Commercial real estate
Nonowner occupied
Credit Risk Rating:
Nonclassified
Pass$177,852 $637,015 $34,525 $91,941 $82,385 $342,174 $221,333 $1,587,225 
Special Mention— — — — — 8,378 — 8,378 
Classified
Substandard— — — 20,113 — — — 20,113 
Doubtful— — — — — — — — 
Loss— — — — — — — — 
Total Nonowner occupied177,852 637,015 34,525 112,054 82,385 350,552 221,333 1,615,716 
Multi-family residential
Credit Risk Rating:
Nonclassified
Pass85,670 110,943 26,881 126,724 27,242 124,433 318,130 820,023 
Special Mention— — — — — — — — 
Classified
Substandard— — — — — — — — 
Doubtful— — — — — — — — 
Loss— — — — — — — — 
Total Multi-family residential85,670 110,943 26,881 126,724 27,242 124,433 318,130 820,023 
Land development and construction loans
Credit Risk Rating:
Nonclassified
Pass8,846 27,746 23,459 188 — 26,930 186,005 273,174 
Special Mention— — — — — — — — 
Classified
Substandard— — — — — — — — 
Doubtful— — — — — — — — 
Loss— — — — — — — — 
Total land development and construction loans8,846 27,746 23,459 188 — 26,930 186,005 273,174 
Single-family residential
Credit Risk Rating:
Nonclassified
Pass480,328 186,790 70,853 21,654 16,630 65,249 259,411 1,100,915 
Special Mention— — — — — — — — 
Classified
Substandard— — — — — 741 1,189 1,930 
Doubtful— — — — — — — — 
Loss— — — — — — — — 
Total Single-family residential480,328 186,790 70,853 21,654 16,630 65,990 260,600 1,102,845 
Owner occupied
Credit Risk Rating:
Nonclassified
Pass256,816 479,961 22,341 63,629 21,790 162,411 33,146 1,040,094 
Special Mention— — — — — — — — 
Classified
Substandard2,096 1,631 656 — 650 1,283 40 6,356 
Doubtful— — — — — — — — 
Loss— — — — — — — — 
Total owner occupied258,912 481,592 22,997 63,629 22,440 163,694 33,186 1,046,450 
December 31, 2022
Term Loans Amortized Cost Basis by Origination Year
(in thousands)20222021202020192018PriorRevolving Loans
Amortized Cost
Basis		Total
Non-real estate loans
Commercial Loans
Credit Risk Rating:
Nonclassified
Pass400,781 95,470 19,815 42,936 32,248 16,297 761,489 1,369,036 
Special Mention— — — — 1,499 — 250 1,749 
Classified
Substandard— 84 267 194 27 984 8,890 10,446 
Doubtful— — — 3 — — — 3 
Loss— — — — — — — — 
Total commercial Loans400,781 95,554 20,082 43,133 33,774 17,281 770,629 1,381,234 
Loans to financial institutions and acceptances
Credit Risk Rating:
Nonclassified
Pass— — — — — 13,292 — 13,292 
Special Mention— — — — — — — — 
Classified
Substandard— — — — — — — — 
Doubtful— — — — — — — — 
Loss— — — — — — — — 
Total loans to financial institutions and acceptances— — — — — 13,292 — 13,292 
Consumer loans
Credit Risk Rating:
Nonclassified
Pass338,744 121,011 29,053 68 54 — 115,300 604,230 
Special Mention— — — — — — — — 
Classified
Substandard98 128 — — — 4 — 230 
Doubtful— — — — — — — — 
Loss— — — — — — — — 
Total consumer loans338,842 121,139 29,053 68 54 4 115,300 604,460 
Total loans held for investment, gross$1,751,231 $1,660,779 $227,850 $367,450 $182,525 $762,176 $1,905,183 $6,857,194 
The following tables present gross charge-offs by year of origination for the periods presented:

Three Months Ended September 30, 2023
Term Loans Charge-offs by Origination Year
(in thousands)20232022202120202019PriorRevolving Loans
Charge-Offs		Total
Quarter-To-Date Gross Charge-offs
Real estate loans
Commercial real estate
Nonowner occupied$— $— $— $— $— $90 $— $90 
Multi-family residential— — — — — — — — 
Land development and construction loans— — — — — — — — 
— — — — — 90 — 90 
Single-family residential— — — — — — — — 
Owner occupied— — — — — — — — 
— — — — — 90 — 90 
Commercial loans108 534 46 4,868 1,814 1,918 — 9,288 
Loans to financial institutions and acceptances— — — — — — — — 
Consumer loans and overdrafts193 3,527 2,365 185 9 162 — 6,441 
Total Quarter-To-Date Gross Charge-Offs$301 $4,061 $2,411 $5,053 $1,823 $2,170 $— $15,819 

Nine Months Ended September 30, 2023
Term Loans Charge-offs by Origination Year
(in thousands)20232022202120202019PriorRevolving Loans
Charge-Offs		Total
Year-To-Date Gross Charge-offs
Real estate loans
Commercial real estate
Nonowner occupied$— $— $— $— $— $90 $— $90 
Multi-family residential— — — — — — — — 
Land development and construction loans— — — — — — — — 
— — — — — 90 — 90 
Single-family residential— — — — — 39 — 39 
Owner occupied— — — — — — — — 
— — — — — 129 — 129 
Commercial loans108 9,308 216 5,026 1,814 2,243 — 18,715 
Loans to financial institutions and acceptances— — — — — — — — 
Consumer loans and overdrafts592 9,589 8,608 1,031 22 547 — 20,389 
Total Year-To-Date Gross Charge-Offs$700 $18,897 $8,824 $6,057 $1,836 $2,919 $— $39,233 
Three Months Ended September 30, 2022
Term Loans Charge-offs by Origination Year
(in thousands)20222021202020192018PriorRevolving Loans
Charge-Offs		Total
Quarter-To-Date Gross Charge-offs
Real estate loans
Commercial real estate
Nonowner occupied$— $— $— $— $— $— $— $— 
Multi-family residential— — — — — — — — 
Land development and construction loans— — — — — — — — 
— — — — — — — — 
Single-family residential— — — — — — — 
Owner occupied— — — — — — — — 
— — — — — — — — 
Commercial loans— — — — — 99 — 99 
Loans to financial institutions and acceptances— — — — — — — — 
Consumer loans and overdrafts622 785 305 — — — 1,712 
Total Quarter-To-Date Gross Charge-Offs$622 $785 $305 $— $— $99 $— $1,811 



Nine Months Ended September 30, 2022
Term Loans Charge-offs by Origination Year
(in thousands)20222021202020192018PriorRevolving Loans
Charge-Offs		Total
Year-To-Date Gross Charge-offs
Real estate loans
Commercial real estate
Nonowner occupied$— $— $— $— $— $— $— $— 
Multi-family residential— — — — — — — — 
Land development and construction loans— — — — — — — — 
— — — — — — — — 
Single-family residential— — — — — 14 — 14 
Owner occupied— — — — — — — — 
— — — — — 14 — 14 
Commercial loans2,523 — 4,429 541 — 486 — 7,979 
Loans to financial institutions and acceptances— — — — — — — — 
Consumer loans and overdrafts665 2,008 986 — — 1 — 3,660 
Total Year-To-Date Gross Charge-Offs$3,188 $2,008 $5,415 $541 $— $501 $— $11,653 
Collateral -Dependent Loans

Loans are considered collateral-dependent when the repayment of the loan is expected to be provided by the sale or operation of the underlying collateral. The Company performs an individual evaluation as part of the process of calculating the allowance for credit losses related to these loans. The following tables present the amortized cost basis of collateral dependent loans related to borrowers experiencing financial difficulty by type of collateral as of September 30, 2023 and December 31, 2022:

As of September 30, 2023
Collateral Type
(in thousands)Commercial Real EstateResidential Real EstateOtherTotalSpecific Reserves
Real estate loans
Commercial real estate
Multi-family residential$23,344 — — $23,344 8,567 
Single-family residential (1)— 797 — 797 — 
Owner occupied (2)1,951 — — 1,951 — 
Commercial loans— — 3,620 3,620 — 
Total $25,295 $797 $3,620 $29,712 $8,567 
_________________
(1)Weighted-average loan-to-value was approximately 66.8% at September 30, 2023.
(2)Weighted-average loan-to-value was approximately 58.1% at September 30, 2023.



As of December 31, 2022
Collateral Type
(in thousands)Commercial Real EstateResidential Real EstateOtherTotalSpecific Reserves
Real estate loans
Commercial real estate
Nonowner occupied (1)$20,121 $— $— $20,121 $— 
Owner occupied (2)5,934 — — 5,934 — 
26,055 — — 26,055 — 
Commercial loans (3)1,998 — 6,401 8,399 5,179 
Total $28,053 $— $6,401 $34,454 $5,179 
_________________
(1)Weighted-average loan-to-value was approximately 92.7% at December 31, 2022.
(2)Weighted-average loan-to-value was approximately 62.7% at December 31, 2022.
(3)Includes loans with no specific reserves totaling $0.5 million with a weighted-average loan-to-value of approximately 42.0% at December 31, 2022.
Collateral dependent loans are evaluated on an individual basis for purposes of determining expected credit losses. For collateral-dependent loans where the borrower is experiencing financial difficulty and the Company expects repayment of the financial asset to be provided substantially through the operation or sale of the collateral, the ACL is measured based on the difference between the fair value of the collateral and the amortized cost basis of the loan as of the measurement date. When repayment is expected to be from the operation of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the present value of expected cash flows from the operation of the collateral. When repayment is expected to be from the sale of the collateral, expected credit losses are calculated as the amount by which the amortized cost basis of the loan exceeds the fair value of the underlying collateral less estimated costs to sell. The ACL may be zero if the fair value of the collateral at the measurement date exceeds the amortized cost basis of the loan. In the nine months ended September 30, 2023, the weighted-average loan-to-values related to existing owner-occupied collateral dependent loans with no specific reserves decreased approximately 2% since December 31, 2022.