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Portfolio Loans
 9 Months Ended
Sep. 30, 2022
Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract]  
Portfolio Loans Portfolio Loans
Loan Categories
The Company’s lending can be summarized into five primary categories: commercial loans, commercial real estate loans, real estate construction loans, retail real estate loans, and retail other loans. Distributions of the loan portfolio by loan category were as follows (dollars in thousands):
As of
September 30,
2022		December 31,
2021
Portfolio loans
Commercial$1,945,893 $1,943,886 
Commercial real estate3,278,684 3,119,807 
Real estate construction499,560 385,996 
Retail real estate1,643,099 1,512,976 
Retail other302,878 226,333 
Total portfolio loans7,670,114 7,188,998 
ACL(90,722)(87,887)
Portfolio loans, net$7,579,392 $7,101,111 
Net deferred loan origination costs included in the balances above were $13.7 million as of September 30, 2022, compared to $9.0 million as of December 31, 2021. Net accretable purchase accounting adjustments included in the balances above reduced loans by $6.4 million as of September 30, 2022, and $8.8 million as of December 31, 2021. Commercial balances include loans originated under the PPP with an amortized cost of $1.4 million as of September 30, 2022, and $75.0 million as of December 31, 2021.
There were no retail real estate loans purchased during the three or nine months ended September 30, 2022. There were also no retail real estate loans purchased during the three months ended September 30, 2021. The Company purchased $32.2 million of retail real estate loans during the nine months ended September 30, 2021.
Risk Grading
The Company utilizes a loan grading scale to assign a risk grade to all of its loans. A description of the general characteristics of each grade is as follows:
•Pass – This category includes loans that are all considered acceptable credits, ranging from investment or near investment grade, to loans made to borrowers who exhibit credit fundamentals that meet or exceed industry standards.
•Watch – This category includes loans that warrant a higher-than-average level of monitoring to ensure that weaknesses do not cause the inability of the credit to perform as expected. These loans are not necessarily a problem due to other inherent strengths of the credit, such as guarantor strength, but have above average concern and monitoring.
•Special mention – This category is for “Other Assets Specially Mentioned” loans that have potential weaknesses, which may, if not checked or corrected, weaken the asset or inadequately protect the Company’s credit position at some future date.
•Substandard – This category includes “Substandard” loans, determined in accordance with regulatory guidelines, for which the accrual of interest has not been stopped. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.
•Substandard non-accrual – This category includes loans that have all the characteristics of a “Substandard” loan with additional factors that make collection in full highly questionable and improbable. Such loans are placed on non-accrual status and may be dependent on collateral with a value that is difficult to determine.
All loans are graded at their inception. Commercial lending relationships that are $1.0 million or less are usually processed through an expedited underwriting process. Most commercial loans greater than $1.0 million are included in a portfolio review at least annually. Commercial loans greater than $0.35 million that have a grading of special mention or worse are typically reviewed on a quarterly basis. Interim reviews may take place if circumstances of the borrower warrant a more frequent review.
The following table is a summary of risk grades segregated by category of portfolio loans (dollars in thousands):
As of September 30, 2022
PassWatchSpecial
Mention		SubstandardSubstandard
Non-accrual		Total
Portfolio loans
Commercial$1,707,528 $135,254 $58,189 $38,695 $6,227 $1,945,893 
Commercial real estate2,889,804 299,638 42,728 40,722 5,792 3,278,684 
Real estate construction475,099 22,011 2 2,400 48 499,560 
Retail real estate1,625,702 8,601 2,087 3,469 3,240 1,643,099 
Retail other302,760 — — — 118 302,878 
Total portfolio loans$7,000,893 $465,504 $103,006 $85,286 $15,425 $7,670,114 
As of December 31, 2021
PassWatchSpecial
Mention		SubstandardSubstandard
Non-accrual		Total
Portfolio loans
Commercial $1,747,756 $93,582 $69,427 $26,117 $7,004 $1,943,886 
Commercial real estate2,682,441 343,304 49,695 38,394 5,973 3,119,807 
Real estate construction369,797 13,793 6 2,400 — 385,996 
Retail real estate1,491,845 12,374 1,992 3,867 2,898 1,512,976 
Retail other226,262 — — — 71 226,333 
Total portfolio loans$6,518,101 $463,053 $121,120 $70,778 $15,946 $7,188,998 
Risk grades of portfolio loans, further sorted by origination year are as follows (dollars in thousands):
As of September 30, 2022
Term Loans Amortized Cost Basis by Origination YearRevolving
Loans		Total
Risk Grade Ratings20222021202020192018Prior
Commercial
Pass$403,643 $315,433 $145,695 $60,284 $53,197 $149,627 $579,649 $1,707,528 
Watch27,665 18,423 4,263 8,372 1,404 3,144 71,983 135,254 
Special Mention1,772 691 1,325 1,078 3,102 17,538 32,683 58,189 
Substandard9,075 1,292 695 6,999 433 5,402 14,799 38,695 
Substandard non-accrual— 3,586 306 137 — 198 2,000 6,227 
Total commercial442,155 339,425 152,284 76,870 58,136 175,909 701,114 1,945,893 
Commercial real estate
Pass765,398 880,522 501,085 332,768 171,177 222,947 15,907 2,889,804 
Watch69,877 44,756 50,799 95,446 18,821 13,338 6,601 299,638 
Special Mention3,010 4,737 15,598 1,517 6,994 10,872 — 42,728 
Substandard14,349 12,681 497 1,841 10,412 942 — 40,722 
Substandard non-accrual— 4,092 41 — 1,650 9 — 5,792 
Total commercial real estate852,634 946,788 568,020 431,572 209,054 248,108 22,508 3,278,684 
Real estate construction
Pass176,071 191,006 84,748 1,570 2,012 1,949 17,743 475,099 
Watch3,100 3,666 3,269 10,533 — 1,443 — 22,011 
Special Mention— — — 2 — — — 2 
Substandard2,400 — — — — — — 2,400 
Substandard non-accrual— — 48 — — — — 48 
Total real estate construction181,571 194,672 88,065 12,105 2,012 3,392 17,743 499,560 
Retail real estate
Pass344,033 464,066 180,543 79,304 58,925 281,430 217,401 1,625,702 
Watch2,881 1,163 1,875 1,469 1,146 67 — 8,601 
Special Mention148 1,864 — — — — 75 2,087 
Substandard— 1,163 207 82 142 1,868 7 3,469 
Substandard non-accrual— 150 110 — 390 1,985 605 3,240 
Total retail real estate347,062 468,406 182,735 80,855 60,603 285,350 218,088 1,643,099 
Retail other
Pass121,375 47,136 14,999 15,909 7,677 2,124 93,540 302,760 
Substandard non-accrual14 89 3 — 10 2 — 118 
Total retail other121,389 47,225 15,002 15,909 7,687 2,126 93,540 302,878 
Total portfolio loans$1,944,811 $1,996,516 $1,006,106 $617,311 $337,492 $714,885 $1,052,993 $7,670,114 
As of December 31, 2021
Term Loans Amortized Cost Basis by Origination YearRevolving
Loans		Total
Risk Grade Ratings20212020201920182017Prior
Commercial
Pass$512,729 $228,811 $107,877 $84,873 $74,351 $122,418 $616,697 $1,747,756 
Watch13,847 5,913 14,274 5,060 1,361 2,866 50,261 93,582 
Special Mention7,062 898 5,961 4,025 6,790 11,845 32,846 69,427 
Substandard3,595 3,362 3,136 1,855 1,125 5,459 7,585 26,117 
Substandard non-accrual4,126 364 142 — 320 52 2,000 7,004 
Total commercial541,359 239,348 131,390 95,813 83,947 142,640 709,389 1,943,886 
Commercial real estate
Pass969,548 637,550 425,850 235,928 200,373 198,002 15,190 2,682,441 
Watch51,560 38,820 123,324 48,088 46,761 32,608 2,143 343,304 
Special Mention9,542 7,060 6,585 10,098 6,357 9,870 183 49,695 
Substandard21,002 3,781 1,218 11,451 521 421 — 38,394 
Substandard non-accrual112 181 359 1,893 3,407 21 — 5,973 
Total commercial real estate1,051,764 687,392 557,336 307,458 257,419 240,922 17,516 3,119,807 
Real estate construction
Pass202,082 123,491 31,927 3,155 738 1,223 7,181 369,797 
Watch7,886 4,159 54 — 1,574 120 — 13,793 
Special Mention— — 6 — — — — 6 
Substandard— 2,400 — — — — — 2,400 
Total real estate construction209,968 130,050 31,987 3,155 2,312 1,343 7,181 385,996 
Retail real estate
Pass523,541 215,068 96,617 79,158 82,478 281,737 213,246 1,491,845 
Watch4,100 2,460 1,780 1,312 343 150 2,229 12,374 
Special Mention1,965 27 — — — — — 1,992 
Substandard1,369 232 12 71 165 1,687 331 3,867 
Substandard non-accrual235 63 — 16 227 1,705 652 2,898 
Total retail real estate531,210 217,850 98,409 80,557 83,213 285,279 216,458 1,512,976 
Retail other
Pass59,366 22,305 26,126 16,189 7,180 1,326 93,770 226,262 
Substandard non-accrual34 10 — 14 13 — — 71 
Total retail other59,400 22,315 26,126 16,203 7,193 1,326 93,770 226,333 
Total portfolio loans$2,393,701 $1,296,955 $845,248 $503,186 $434,084 $671,510 $1,044,314 $7,188,998 
Past Due and Non-accrual Loans
An analysis of the amortized cost basis of portfolio loans that are past due and still accruing, or on a non-accrual status, is as follows (dollars in thousands):
As of September 30, 2022
Loans past due, still accruingNon-accrual
Loans
30-59 Days60-89 Days90+Days
Past due and non-accrual loans
Commercial $19 $45 $625 $6,227 
Commercial real estate411 — 349 5,792 
Real estate construction— — — 48 
Retail real estate3,734 1,831 255 3,240 
Retail other262 5 — 118 
Total past due and non-accrual loans$4,426 $1,881 $1,229 $15,425 
As of December 31, 2021
Loans past due, still accruingNon-accrual
Loans
30-59 Days60-89 Days90+Days
Past due and non-accrual loans
Commercial $363 $10 $213 $7,004 
Commercial real estate151 441 — 5,973 
Real estate construction56 — — — 
Retail real estate3,312 1,830 693 2,898 
Retail other82 16 — 71 
Total past due and non-accrual loans$3,964 $2,297 $906 $15,946 
Gross interest income recorded on 90+ days past due loans, and that would have been recorded on non-accrual loans if they had been accruing interest in accordance with their original terms, was $0.3 million and $0.8 million for the three and nine months ended September 30, 2022, respectively. Gross interest income recorded on 90+ days past due loans, and that would have been recorded on non-accrual loans if they had been accruing interest in accordance with their original terms, was $0.3 million and $1.2 million for the three and nine months ended September 30, 2021, respectively. The amount of interest collected on those loans and recognized on a cash basis that was included in interest income was insignificant for the three months ended September 30, 2022, and was $0.4 million for the nine months ended September 30, 2022. The amount of interest collected on those loans and recognized on a cash basis that was included in interest income was $0.4 million for the three and nine months ended September 30, 2021.
Troubled Debt Restructurings
TDR loan balances are summarized as follows (dollars in thousands):
As of
September 30,
2022		December 31, 2021
TDRs
In compliance with modified terms$1,940 $1,801 
30 – 89 days past due— — 
Non-performing TDRs483 551 
Total TDRs$2,423 $2,352 
Loans that were newly designated as TDRs during the periods presented, are summarized as follows (dollars in thousands):
Three Months Ended September 30, 2022Nine Months Ended September 30, 2022
Recorded InvestmentRecorded Investment
Number of
Contracts
Rate
Modification1
Payment
Modification1
Number of
Contracts
Rate
Modification1
Payment
Modification1
Commercial—$— $— 1$— $381 
Three Months Ended September 30, 2021Nine Months Ended September 30, 2021
Recorded InvestmentRecorded Investment
Number of
Contracts
Rate
Modification1
Payment
Modification1
Number of
Contracts		 
Rate
Modification1
Payment
Modification1
Commercial—$— $— 1$444 $— 
1.TDRs may include multiple concessions; those that include an interest rate concession and payment concession are shown in the rate modification column.
There were no TDRs entered into during the 12 months ended September 30, 2022, or 2021, that had subsequent defaults during the three or nine months ended September 30, 2022, or 2021. A default occurs when a loan is 90 days or more past due or transferred to non-accrual.
Gross interest income that would have been recorded in the three and nine months ended September 30, 2022, and 2021, if TDRs had performed in accordance with their original terms compared with their modified terms, was insignificant.
Collateral Dependent Loans
Management's evaluation as to the ultimate collectability of loans includes estimates regarding future cash flows from operations and the value of property, real and personal, pledged as collateral. These estimates are affected by changing economic conditions and the economic prospects of borrowers. Collateral dependent loans are loans in which repayment is expected to be provided solely by the underlying collateral and there are no other available and reliable sources of repayment. Loans are written down to the lower of cost or fair value of underlying collateral, less estimated costs to sell. The Company had $14.8 million and $7.9 million of collateral dependent loans secured by real estate or business assets as of September 30, 2022, and December 31, 2021, respectively.
Foreclosures
As of September 30, 2022, the Company had $1.0 million of residential real estate in the process of foreclosure. The Company follows Federal Housing Finance Agency guidelines on single-family foreclosures and real estate owned evictions on portfolio loans.
Loans Modified Under the CARES Act or Interagency Statement
The CARES Act provided financial institutions the option to temporarily suspend certain requirements under GAAP related to TDRs for a limited period of time to account for the effects of COVID-19. Federal regulatory agencies, in consultation with FASB, also issued an Interagency Statement to encourage financial institutions to work with borrowers affected by COVID-19, and to update guidance which allowed banks to modify loans of customers stressed by COVID-19 without having to classify the loan as a TDR. The Company’s TDR loan totals do not include the following modified loans with payment deferrals that fall under the CARES Act or Interagency Statement, which suspended GAAP requirements related to TDR classification (dollars in thousands):
As of September 30, 2022As of December 31, 2021
Number of
Contracts		Recorded
Investment		Number of
Contracts		Recorded
Investment
COVID-19 loan modifications
Commercial loans:
Interest-only deferrals8$20,556 32$128,730 
Retail loans:
Mortgage and personal loan deferrals199 2137 
Total COVID-19 loans modifications9$20,655 34$128,867 
Loans Evaluated Individually
The Company evaluates loans with disparate risk characteristics on an individual basis. The following tables provide details of loans evaluated individually, segregated by category. The unpaid principal balance represents customer outstanding contractual principal balances excluding any partial charge-offs. Recorded investment represents the amortized cost of customer balances net of any partial charge-offs recognized on the loan. Average recorded investment is calculated using the most recent four quarters (dollars in thousands):
As of September 30, 2022
Unpaid
Principal
Balance		Recorded InvestmentAverage
Recorded
Investment
With No
Allowance		With
Allowance		TotalRelated
Allowance
Loans evaluated individually
Commercial $9,455 $547 $5,892 $6,439 $2,806 $7,488 
Commercial real estate7,497 1,663 4,035 5,698 2,000 5,216 
Real estate construction255 255 — 255 — 266 
Retail real estate2,258 2,089 25 2,114 25 2,526 
Total loans evaluated individually$19,465 $4,554 $9,952 $14,506 $4,831 $15,496 
As of December 31, 2021
Unpaid
Principal
Balance		Recorded InvestmentAverage
Recorded
Investment
With No
Allowance		With
Allowance		TotalRelated
Allowance
Loans evaluated individually
Commercial$10,247 $498 $6,490 $6,988 $3,564 $8,791 
Commercial real estate6,456 5,750 — 5,750 — 6,390 
Real estate construction272 272 — 272 — 282 
Retail real estate2,514 2,345 25 2,370 25 4,093 
Total loans evaluated individually$19,489 $8,865 $6,515 $15,380 $3,589 $19,556 
Allowance for Credit Losses
Management estimates the ACL balance using relevant available information from internal and external sources relating to past events, current conditions, and reasonable and supportable forecasts. Historical credit loss experience provides the basis for the estimation of expected credit losses. The cumulative loss rate used as the basis for the estimate of credit losses is comprised of the Company’s historical loss experience beginning in 2010. Due to the continued economic uncertainty in the markets in which the Company operates, in particular the levels of delinquencies, the Company will continue to utilize a forecast period of 12 months with an immediate reversion to historical loss rates beyond this forecast period in its ACL estimate. PPP loans were excluded from the ACL calculation as they are 100% government guaranteed.
The following tables summarize activity in the ACL. Allocation of a portion of the ACL to one category does not preclude its availability to absorb losses in other categories (dollars in thousands):
Three Months Ended September 30, 2022
CommercialCommercial
Real Estate		Real Estate
Construction		Retail
Real Estate		Retail OtherTotal
ACL balance, June 30, 2022$23,359 $37,182 $5,669 $17,984 $4,563 $88,757 
Provision for credit losses615 598 216 684 251 2,364 
Charged-off(381)— — (220)(218)(819)
Recoveries102 19 86 172 41 420 
ACL balance, September 30, 2022$23,695 $37,799 $5,971 $18,620 $4,637 $90,722 
Nine Months Ended September 30, 2022
CommercialCommercial
Real Estate		Real Estate
Construction		Retail
Real Estate		Retail OtherTotal
ACL balance, December 31, 2021$23,855 $38,249 $5,102 $17,589 $3,092 $87,887 
Provision for credit losses123 408 663 826 1,744 3,764 
Charged-off(589)(1,372)— (253)(409)(2,623)
Recoveries306 514 206 458 210 1,694 
ACL balance, September 30, 2022$23,695 $37,799 $5,971 $18,620 $4,637 $90,722 
Three Months Ended September 30, 2021
CommercialCommercial
Real Estate		Real Estate
Construction		Retail
Real Estate		Retail OtherTotal
ACL balance, June 30, 2021$24,356 $39,974 $7,599 $20,505 $2,976 $95,410 
Provision for credit losses657 (25)(1,503)(1,155)157 (1,869)
Charged-off(764)(191)— (155)(98)(1,208)
Recoveries157 73 25 157 57 469 
ACL balance, September 30, 2021$24,406 $39,831 $6,121 $19,352 $3,092 $92,802 
Nine Months Ended September 30, 2021
CommercialCommercial
Real Estate		Real Estate
Construction		Retail
Real Estate		Retail OtherTotal
ACL balance, December 31, 2020$23,866 $46,230 $8,193 $21,992 $767 $101,048 
Day 1 PCD1
3,546 336 — 129 167 4,178 
Provision for credit losses(1,428)(6,109)(2,082)(3,028)2,282 (10,365)
Charged-off(2,026)(812)(209)(315)(349)(3,711)
Recoveries448 186 219 574 225 1,652 
ACL balance, September 30, 2021$24,406 $39,831 $6,121 $19,352 $3,092 $92,802 
1.The Day 1 PCD is attributable to the CAC acquisition in the second quarter of 2021.
The following tables present the ACL and amortized cost of portfolio loans by category (dollars in thousands):
As of September 30, 2022
Portfolio LoansACL Attributed to Portfolio Loans
Collectively
Evaluated for
Impairment		Individually
Evaluated for
Impairment		TotalCollectively
Evaluated for
Impairment		Individually
Evaluated for
Impairment		Total
Portfolio loan category
Commercial$1,939,454 $6,439 $1,945,893 $20,889 $2,806 $23,695 
Commercial real estate3,272,986 5,698 3,278,684 35,799 2,000 37,799 
Real estate construction499,305 255 499,560 5,971 — 5,971 
Retail real estate1,640,985 2,114 1,643,099 18,595 25 18,620 
Retail other302,878 — 302,878 4,637 — 4,637 
Portfolio loans and related ACL$7,655,608 $14,506 $7,670,114 $85,891 $4,831 $90,722 
As of December 31, 2021
Portfolio LoansACL Attributed to Portfolio Loans
Collectively
Evaluated for
Impairment		Individually
Evaluated for
Impairment		TotalCollectively
Evaluated for
Impairment		Individually
Evaluated for
Impairment		Total
Portfolio loan category
Commercial$1,936,898 $6,988 $1,943,886 $20,291 $3,564 $23,855 
Commercial real estate3,114,057 5,750 3,119,807 38,249 — 38,249 
Real estate construction385,724 272 385,996 5,102 — 5,102 
Retail real estate1,510,606 2,370 1,512,976 17,564 25 17,589 
Retail other226,333 — 226,333 3,092 — 3,092 
Portfolio loans and related ACL$7,173,618 $15,380 $7,188,998 $84,298 $3,589 $87,887