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PORTFOLIO LOANS
 12 Months Ended
Dec. 31, 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 December 31,
20222021
Portfolio loans
Commercial$1,974,154 $1,943,886 
Commercial real estate3,261,873 3,119,807 
Real estate construction530,469 385,996 
Retail real estate1,657,082 1,512,976 
Retail other302,124 226,333 
Total portfolio loans$7,725,702 $7,188,998 
ACL(91,608)(87,887)
Portfolio loans, net$7,634,094 $7,101,111 
Net deferred loan origination costs included in the balances above were $14.0 million as of December 31, 2022, compared to $9.0 million as of December 31, 2021. Net accretable purchase accounting adjustments included in the balances above reduced loans by $5.9 million as of December 31, 2022, and by $8.8 million as of December 31, 2021. Commercial balances include loans originated under the PPP with an amortized cost of $0.8 million as of December 31, 2022, compared to $75.0 million as of December 31, 2021.
The Company did not purchase any retail real estate loans during the year ended December 31, 2022, compared to $32.2 million of retail real estate loan purchases during the year ended December 31, 2021.
Pledged Loans
The Company pledged loans as collateral to the FHLB and Federal Reserve Bank for liquidity as set forth in the table below (dollars in thousands):
As of December 31,
20222021
Pledged loans
FHLB$5,095,448 $4,656,331 
Federal Reserve Bank804,718 808,254 
Total pledged loans$5,900,166 $5,464,585 
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 December 31, 2022
PassWatchSpecial
Mention		SubstandardSubstandard
Non-accrual		Total
Portfolio loans
Commercial$1,668,495 $201,758 $46,540 $51,187 $6,174 $1,974,154 
Commercial real estate2,851,709 326,455 43,526 34,539 5,644 3,261,873 
Real estate construction502,904 25,164 1 2,400 — 530,469 
Retail real estate1,639,599 10,520 1,338 2,529 3,096 1,657,082 
Retail other301,971 — — — 153 302,124 
Total portfolio loans$6,964,678 $563,897 $91,405 $90,655 $15,067 $7,725,702 
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 December 31, 2022
Term Loans Amortized Cost Basis by Origination YearRevolving
Loans		Total
Risk Grade Ratings20222021202020192018Prior
Commercial
Pass$479,893 $266,122 $136,445 $52,046 $50,764 $135,000 $548,225 $1,668,495 
Watch54,195 49,382 3,288 7,201 1,258 2,160 84,274 201,758 
Special Mention1,958 937 1,642 974 1,000 17,024 23,005 46,540 
Substandard8,926 1,165 570 6,671 2,382 5,191 26,282 51,187 
Substandard non-accrual21 3,292 226 135 — 100 2,400 6,174 
Total commercial544,993 320,898 142,171 67,027 55,404 159,475 684,186 1,974,154 
Commercial real estate
Pass883,688 819,133 478,452 297,525 161,409 198,419 13,083 2,851,709 
Watch77,346 56,113 64,282 96,664 21,592 5,758 4,700 326,455 
Special Mention11,943 5,389 12,386 1,420 6,917 5,471 — 43,526 
Substandard5,340 13,528 3,454 1,907 10,248 62 — 34,539 
Substandard non-accrual— 3,959 33 — 1,647 5 — 5,644 
Total commercial real estate978,317 898,122 558,607 397,516 201,813 209,715 17,783 3,261,873 
Real estate construction
Pass219,112 191,724 68,015 1,490 1,901 1,751 18,911 502,904 
Watch8,530 12,019 3,169 48 — 1,398 — 25,164 
Special Mention— — — 1 — — — 1 
Substandard2,400 — — — — — — 2,400 
Total real estate construction230,042 203,743 71,184 1,539 1,901 3,149 18,911 530,469 
Retail real estate
Pass396,547 456,158 175,148 77,569 56,887 267,387 209,903 1,639,599 
Watch2,928 2,991 1,846 1,444 1,063 27 221 10,520 
Special Mention945 — — — — 393 — 1,338 
Substandard77 732 198 81 141 1,293 7 2,529 
Substandard non-accrual10 191 107 32 390 1,708 658 3,096 
Total retail real estate400,507 460,072 177,299 79,126 58,481 270,808 210,789 1,657,082 
Retail other
Pass134,567 43,512 13,141 13,086 5,646 991 91,028 301,971 
Substandard non-accrual14 134 3 — — 2 — 153 
Total retail other134,581 43,646 13,144 13,086 5,646 993 91,028 302,124 
Total portfolio loans$2,288,440 $1,926,481 $962,405 $558,294 $323,245 $644,140 $1,022,697 $7,725,702 
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 non-accrual status, is as follows (dollars in thousands):
As of December 31, 2022
Loans past due, still accruingNon-accrual
Loans
30-59 Days60-89 Days90+Days
Past due and non-accrual loans
Commercial $2 $— $— $6,174 
Commercial real estate124 — — 5,644 
Retail real estate4,709 1,239 673 3,096 
Retail other414 60 — 153 
Total past due and non-accrual loans$5,249 $1,299 $673 $15,067 
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 $1.2 million, $1.6 million, and $1.8 million for the years ended December 31, 2022, 2021, and 2020, respectively. Interest collected on those loans and recognized on a cash basis that was included in interest income was $0.4 million for each of the years ended December 31, 2022, and 2021, and was insignificant for the year ended December 31, 2020.
Troubled Debt Restructurings
TDR loan balances are summarized as follows (dollars in thousands):
As of December 31,
20222021
TDRs
In compliance with modified terms$3,032 $1,801 
Non-performing TDRs537 551 
Total TDRs$3,569 $2,352 
Loans that were designated as TDRs during the years ended as of the dates indicated are summarized as follows (dollars in thousands):
Newly Designated TDRs
Recorded Investment1
Number of
Contracts
Rate
Modification2
Payment
Modification2
December 31, 2022
Commercial 3$136 $996 
Retail real estate1— 517 
Total4$136 $1,513 
December 31, 2021
Commercial 1$364 $— 
December 31, 2020
Commercial 3$130 $— 
Commercial real estate1651 — 
Real estate construction4— 986 
Total8$781 $986 
___________________________________________
1.Recorded investment for newly designated TDR’s that were still outstanding as of the dates indicated.
2.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 December 31, 2022, 2021, or 2020, that had subsequent defaults. 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 during the years ended December 31, 2022, 2021, and 2020, 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 $14.0 million and $7.9 million of collateral dependent loans secured by real estate or business assets as of December 31, 2022, and December 31, 2021, respectively.
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 to allow 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 that suspended requirements under GAAP related to TDR classification (dollars in thousands):
As of December 31, 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 the customer outstanding contractual principal balance 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 December 31, 2022
Unpaid
Principal
Balance		Recorded InvestmentAverage
Recorded
Investment
With No
Allowance		With
Allowance		TotalRelated
Allowance
Loans evaluated individually
Commercial $9,589 $656 $5,918 $6,574 $2,476 $6,761 
Commercial real estate8,039 2,334 3,903 6,237 2,000 5,219 
Real estate construction247 247 — 247 — 260 
Retail real estate2,733 2,564 25 2,589 25 2,311 
Total loans evaluated individually$20,608 $5,801 $9,846 $15,647 $4,501 $14,551 
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 attributable to each loan category. Allocation of a portion of the ACL to one category does not preclude its availability to absorb losses in other categories (dollars in thousands):
CommercialCommercial
Real Estate		Real Estate
Construction		Retail Real
Estate		Retail OtherTotal
ACL Balance, December 31, 2019$18,291 $21,190 $3,204 $10,495 $568 $53,748 
Adoption of ASC 326-30715 9,306 2,954 3,292 566 16,833 
Provision for credit losses10,832 17,511 1,452 9,050 (48)38,797 
Charged-off(6,376)(1,972)(18)(2,057)(665)(11,088)
Recoveries404 195 601 1,212 346 2,758 
ACL balance, December 31, 202023,866 46,230 8,193 21,992 767 101,048 
Day 1 PCD1
3,546 336 — 129 167 4,178 
Provision for credit losses(2,160)(7,651)(3,180)(4,456)2,346 (15,101)
Charged-off(2,026)(925)(209)(1,145)(478)(4,783)
Recoveries629 259 298 1,069 290 2,545 
ACL balance, December 31, 202123,855 38,249 5,102 17,589 3,092 87,887 
Provision for credit losses497 892 1,142 219 1,873 4,623 
Charged-off(1,069)(1,375)(23)(251)(461)(3,179)
Recoveries577 533 236 636 295 2,277 
ACL balance, December 31, 2022$23,860 $38,299 $6,457 $18,193 $4,799 $91,608 
__________________________________________
1.The Day 1 PCD is attributable to the CAC acquisition.
The following tables present the ACL and amortized cost of portfolio loans by category (dollars in thousands):
As of December 31, 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$1,967,580 $6,574 $1,974,154 $21,384 $2,476 $23,860 
Commercial real estate3,255,636 6,237 3,261,873 36,299 2,000 38,299 
Real estate construction530,222 247 530,469 6,457 — 6,457 
Retail real estate1,654,493 2,589 1,657,082 18,168 25 18,193 
Retail other302,124 — 302,124 4,799 — 4,799 
Portfolio loans and related ACL$7,710,055 $15,647 $7,725,702 $87,107 $4,501 $91,608 
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