Allowance for Credit Losses

3 Months Ended

Mar. 31, 2022

We maintain an ACL at a level determined to be adequate to absorb estimated expected credit losses within the loan portfolio over the contractual life of an instrument that considers our historical loss experience, current conditions and forecasts of future economic conditions as of the balance sheet date. We develop and document a systematic ACL methodology based on the following portfolio segments: 1) Commercial Real Estate, or CRE, 2) Commercial and Industrial, or C&I, 3) Commercial Construction, 4) Business Banking, 5) Consumer Real Estate and 6) Other Consumer.

The following are key risks within each portfolio segment:

CRE—Loans secured by commercial purpose real estate, including both owner-occupied properties and investment properties for various purposes such as hotels, retail, multifamily and health care. Operations of the individual projects and global cash flows of the debtors are the primary sources of repayment for these loans. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the collateral type and the business prospects of the lessee, if the project is not owner-occupied.

C&I—Loans made to operating companies or manufacturers for the purpose of production, operating capacity, accounts receivable, inventory or equipment financing. Cash flow from the operations of the company is the primary source of repayment for these loans. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the industry of the company. Collateral for these types of loans often does not have sufficient value in a distressed or liquidation scenario to satisfy the outstanding debt.

Commercial Construction—Loans made to finance construction of buildings or other structures, as well as to finance the acquisition and development of raw land for various purposes. While the risk of these loans is generally confined to the construction/development period, if there are problems, the project may not be completed, and as such, may not provide sufficient cash flow on its own to service the debt or have sufficient value in a liquidation to cover the outstanding principal. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the type of project and the experience and resources of the developer.

Business Banking—Commercial purpose loans made to small businesses that are standard, non-complex products evaluated through a streamlined credit approval process that has been designed to maximize efficiency while maintaining high credit quality standards that meet small business market customers’ needs. The business banking portfolio is monitored by utilizing a standard and closely managed process focusing on behavioral and performance criteria. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the collateral type and business.

Consumer Real Estate—Loans secured by first and second liens such as home equity loans, home equity lines of credit and 1-4 family residential mortgages, including purchase money mortgages. The primary source of repayment for these loans is the income and assets of the borrower. The condition of the local economy, in particular the unemployment rate, is an important indicator of risk for this segment. The state of the local housing market can also have a significant impact on this segment because low demand and/or declining home values can limit the ability of borrowers to sell a property and satisfy the debt.

Other Consumer—Loans made to individuals that may be secured by assets other than 1-4 family residences, as well as unsecured loans. This segment includes auto loans, unsecured loans and lines and credits cards. The primary source of repayment for these loans is the income and assets of the borrower. The condition of the local economy, in particular the unemployment rate, is an important indicator of risk for this segment. The value of the collateral, if there is any, is less likely to be a source of repayment due to less certain collateral values.

Management monitors various credit quality indicators for the commercial, business banking and consumer loan portfolios, including changes in risk ratings, nonperforming status and delinquency on a monthly basis.

We monitor the commercial loan portfolio through an internal risk rating system. Loan risk ratings are assigned based upon the creditworthiness of the borrower and are reviewed on an ongoing basis according to our internal policies. Loans within the pass rating generally have a lower risk of loss than loans risk rated as special mention or substandard.

Our risk ratings are consistent with regulatory guidance and are as follows:

Pass—The loan is currently performing and is of high quality.

Special Mention—A special mention loan has potential weaknesses that warrant management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects or in the strength of our credit position at some future date.

Substandard—A substandard loan is not adequately protected by the net worth and/or paying capacity of the borrower or by the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. These loans are characterized by the distinct possibility that we will sustain some loss if the deficiencies are not corrected.

Doubtful—Loans classified doubtful have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions and values, highly questionable and improbable.

The following tables present loan balances by year of origination and internally assigned risk rating for our portfolio segments as of the dates presented:


	March 31, 2022
	Risk Rating
(dollars in thousands)	2022		2021		2020		2019		2018		2017 and Prior		Revolving		Revolving-Term		Total

Commercial real estate
Pass	$	92,158	$	367,329	$	333,477	$	423,653	$	308,371	$	878,459	$	34,981	$	—	$	2,438,428
Special mention	—		—		304		25,293		2,634		100,061		—		—		128,292
Substandard	—		—		1,343		13,865		17,707		104,659		1,500		—		139,074
Doubtful	—		—		—		—		—		5		—		—		5
Total commercial real estate	92,158		367,329		335,124		462,811		328,712		1,083,184		36,481		—		2,705,799

Commercial and industrial
Pass	42,350		369,064		106,684		94,211		75,757		157,096		569,064		—		1,414,226
Special mention	—		44		816		4,012		2,366		1,137		9,862		—		18,237
Substandard	—		—		—		10,654		1,288		4,072		5,523		—		21,537
Doubtful	—		—		—		4,506		—		—		—		—		4,506
Total commercial and industrial	42,350		369,108		107,500		113,383		79,411		162,305		584,449		—		1,458,506

Commercial construction
Pass	24,551		161,638		70,185		73,539		4,984		4,281		31,026		—		370,204
Special mention	—		—		—		3,578		—		4,423		—		—		8,001
Substandard	—		—		2,157		480		4		2,391		—		—		5,032
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial construction	24,551		161,638		72,342		77,597		4,988		11,095		31,026		—		383,237

Business banking
Pass	66,205		255,051		104,999		129,574		100,316		336,209		109,505		505		1,102,364
Special mention	—		98		193		2,926		2,853		5,959		161		110		12,300
Substandard	—		2		103		2,648		3,150		19,129		927		613		26,572
Doubtful	—		—		—		—		—		—		—		—		—
Total business banking	66,205		255,151		105,295		135,148		106,319		361,297		110,593		1,228		1,141,236

Consumer real estate
Pass	56,244		141,404		96,932		84,920		35,181		223,298		482,845		23,510		1,144,334
Special mention	—		—		—		—		—		923		—		—		923
Substandard	40		82		139		286		1,735		11,402		1,004		2,912		17,600
Doubtful	—		—		—		—		—		—		—		—		—
Total consumer real estate	56,284		141,486		97,071		85,206		36,916		235,623		483,849		26,422		1,162,857

Other consumer
Pass	6,035		15,522		8,176		5,931		2,448		1,349		71,494		1,273		112,228
Special mention	—		—		—		—		—		—		—		—		—
Substandard	—		—		—		17		4		2		—		25		48
Doubtful	—		—		—		—		—		—		—		—		—
Total other consumer	6,035		15,522		8,176		5,948		2,452		1,351		71,494		1,298		112,276

Pass	287,543		1,310,008		720,453		811,828		527,057		1,600,692		1,298,915		25,288		6,581,784
Special mention	—		142		1,313		35,809		7,853		112,503		10,023		110		167,753
Substandard	40		84		3,742		27,950		23,888		141,655		8,954		3,550		209,863
Doubtful	—		—		—		4,506		—		5		—		—		4,511
Total	$	287,583	$	1,310,234	$	725,508	$	880,093	$	558,798	$	1,854,855	$	1,317,892	$	28,948	$	6,963,911


	December 31, 2021
	Risk Rating
(dollars in thousands)	2021		2020		2019		2018		2017		2016 and Prior		Revolving		Revolving-Term		Total

Commercial real estate
Pass	$	385,347	$	316,003	$	412,191	$	314,303	$	213,019	$	698,992	$	35,448	$	—	$	2,375,303
Special mention	—		—		37,786		6,401		40,445		75,938		—		—		160,570
Substandard	—		1,356		18,743		14,039		12,555		106,461		1,500		—		154,654
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial real estate	385,347		317,359		468,720		334,743		266,019		881,391		36,948		—		2,690,528

Commercial and industrial
Pass	437,483		126,371		115,359		83,030		37,176		132,182		536,554		—		1,468,155
Special mention	46		—		3,060		2,546		72		832		8,887		—		15,443
Substandard	—		—		14,221		1,336		4,174		3,456		4,961		—		28,148
Doubtful	—		—		1,777		—		—		—		—		—		1,777
Total commercial and industrial	437,529		126,371		134,417		86,912		41,422		136,470		550,402		—		1,513,523

Commercial construction
Pass	142,321		108,405		111,512		16,838		989		3,539		30,036		—		413,640
Special mention	—		—		—		—		—		4,458		—		—		4,458
Substandard	—		2,157		2,020		—		—		2,480		—		—		6,657
Doubtful	—		—		—		—		—		—		—		—		—
Total commercial construction	142,321		110,562		113,532		16,838		989		10,477		30,036		—		424,755

Business banking
Pass	257,264		107,791		141,411		110,586		79,187		293,215		107,093		443		1,096,990
Special mention	104		151		1,986		1,365		1,057		5,929		160		111		10,863
Substandard	41		106		1,579		3,277		1,645		19,591		977		625		27,841
Doubtful	—		—		—		—		—		—		—		—		—
Total business banking	257,409		108,048		144,976		115,228		81,889		318,735		108,230		1,179		1,135,693

Consumer real estate
Pass	137,465		100,995		91,981		48,531		39,029		231,861		442,530		23,391		1,115,783
Special mention	—		—		—		—		—		937		—		—		937
Substandard	—		—		184		1,625		1,355		5,664		876		1,161		10,865
Doubtful	—		—		—		—		—		—		—		—		—
Total consumer real estate	137,465		100,995		92,165		50,156		40,384		238,462		443,406		24,552		1,127,585

Other consumer
Pass	19,976		9,396		7,120		2,878		613		2,037		57,702		1,130		100,852
Special mention	—		—		—		—		—		—		—		—		—
Substandard	83		52		141		215		408		4,407		201		1,547		7,054
Doubtful	—		—		—		—		—		—		—		—		—
Total other consumer	20,059		9,448		7,261		3,093		1,021		6,444		57,903		2,677		107,906


Pass	1,379,856		768,961		879,574		576,166		370,013		1,361,826		1,209,363		24,964		6,570,723
Special Mention	150		151		42,832		10,312		41,574		88,094		9,047		111		192,271
Substandard	124		3,671		36,888		20,492		20,137		142,059		8,515		3,333		235,219
Doubtful	—		—		1,777		—		—		—		—		—		1,777
Total	$	1,380,130	$	772,783	$	961,071	$	606,970	$	431,724	$	1,591,979	$	1,226,925	$	28,408	$	6,999,990

We monitor the delinquent status of the commercial and consumer portfolios on a monthly basis. Loans are considered nonperforming when interest and principal are 90 days or more past due or management has determined that a material deterioration in the borrower’s financial condition exists. The risk of loss is generally highest for nonperforming loans.

The following tables present loan balances by year of origination and performing and nonperforming status for our portfolio segments as of the dates presented:


	March 31, 2022
(dollars in thousands)	2022		2021		2020		2019		2018		2017 and Prior		Revolving		Revolving-Term		Total

Commercial real estate
Performing	$	92,158	$	367,329	$	335,124	$	460,353	$	326,451	$	1,062,113	$	36,481	$	—	$	2,680,009
Nonperforming	—		—		—		2,458		2,261		21,071		—		—		25,790
Total commercial real estate	92,158		367,329		335,124		462,811		328,712		1,083,184		36,481		—		2,705,799

Commercial and industrial
Performing	42,350		369,108		107,500		104,858		79,353		162,248		582,519		—		1,447,936
Nonperforming	—		—		—		8,525		58		57		1,930		—		10,570
Total commercial and industrial	42,350		369,108		107,500		113,383		79,411		162,305		584,449		—		1,458,506

Commercial construction
Performing	24,551		161,638		72,342		77,117		4,988		10,711		31,026		—		382,373
Nonperforming	—		—		—		480		—		384		—		—		864
Total commercial construction	24,551		161,638		72,342		77,597		4,988		11,095		31,026		—		383,237

Business banking
Performing	66,205		255,149		105,295		134,873		104,917		355,063		110,565		1,172		1,133,239
Nonperforming	—		2		—		275		1,402		6,234		28		56		7,997
Total business banking	66,205		255,151		105,295		135,148		106,319		361,297		110,593		1,228		1,141,236

Consumer real estate
Performing	56,284		141,486		96,167		84,952		36,674		230,971		483,658		25,487		1,155,679
Nonperforming	—		—		904		254		242		4,652		191		935		7,178
Total consumer real estate	56,284		141,486		97,071		85,206		36,916		235,623		483,849		26,422		1,162,857

Other consumer
Performing	6,035		15,522		8,051		5,948		2,452		1,351		71,494		1,298		112,151
Nonperforming	—		—		125		—		—		—		—		—		125
Total other consumer	6,035		15,522		8,176		5,948		2,452		1,351		71,494		1,298		112,276

Performing	287,583		1,310,232		724,479		868,101		554,835		1,822,457		1,315,743		27,957		6,911,387
Nonperforming	—		2		1,029		11,992		3,963		32,398		2,149		991		52,524
Total	$	287,583	$	1,310,234	$	725,508	$	880,093	$	558,798	$	1,854,855	$	1,317,892	$	28,948	$	6,963,911


	December 31, 2021
(dollars in thousands)	2021		2020		2019		2018		2017		2016 and Prior		Revolving		Revolving-Term		Total

Commercial real estate
Performing	$	385,347	$	317,359	$	461,613	$	332,482	$	259,723	$	865,567	$	36,948	$	—	$	2,659,039
Nonperforming	—				7,107		2,261		6,296		15,824		—		—		31,488
Total commercial real estate	385,347		317,359		468,720		334,743		266,019		881,391		36,948		—		2,690,528

Commercial and industrial
Performing	437,529		126,371		123,944		86,852		38,540		136,427		548,622		—		1,498,285
Nonperforming	—		—		10,473		60		2,882		43		1,780		—		15,239
Total commercial and industrial	437,529		126,371		134,417		86,912		41,422		136,470		550,402		—		1,513,523

Commercial construction
Performing	142,321		110,562		111,445		16,838		989		10,093		30,036		—		422,284
Nonperforming	—		—		2,087		—		—		384		—		—		2,471
Total commercial construction	142,321		110,562		113,532		16,838		989		10,477		30,036		—		424,755

Business banking
Performing	257,368		107,984		144,689		113,820		81,195		311,673		108,202		1,122		1,126,052
Nonperforming	41		64		287		1,408		694		7,062		28		57		9,641
Total business banking	257,409		108,048		144,976		115,228		81,889		318,735		108,230		1,179		1,135,693

Consumer real estate
Performing	137,465		100,253		91,689		49,853		39,657		234,297		443,238		23,839		1,120,291
Nonperforming	—		742		476		303		727		4,165		168		713		7,294
Total consumer real estate	137,465		100,995		92,165		50,156		40,384		238,462		443,406		24,552		1,127,585

Other consumer
Performing	20,059		9,290		7,261		3,093		1,021		6,444		57,903		2,677		107,748
Nonperforming	—		158		—		—		—		—		—		—		158
Total other consumer	20,059		9,448		7,261		3,093		1,021		6,444		57,903		2,677		107,906

Performing	1,380,089		771,819		940,641		602,938		421,125		1,564,501		1,224,949		27,638		6,933,699
Nonperforming	41		964		20,430		4,032		10,599		27,478		1,976		770		66,291
Total	$	1,380,130	$	772,783	$	961,071	$	606,970	$	431,724	$	1,591,979	$	1,226,925	$	28,408	$	6,999,990

The following tables present the age analysis of past due loans segregated by class of loans as of the dates presented:


	March 31, 2022
(dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		Past Due 90+ Days Still Accruing(2)		Non - performing		Total Past Due Loans		Total Loans
Commercial real estate	$	2,680,009	$	—	$	—	$	—	$	25,790	$	25,790	$	2,705,799
Commercial and industrial	1,447,404		3		—		529		10,570		11,102		1,458,506
Commercial construction	382,373		—		—		—		864		864		383,237
Business banking	1,130,830		1,409		413		587		7,997		10,406		1,141,236
Consumer real estate	1,152,858		2,693		128		—		7,178		9,999		1,162,857
Other consumer	111,765		176		210		—		125		511		112,276
Total(1)	$	6,905,239	$	4,281	$	751	$	1,116	$	52,524	$	58,672	$	6,963,911

(1) We had three loans that were modified totaling $12.5 million under the CARES Act at March 31, 2022. These customers were not considered past due as a result of their delayed payments. Upon exiting the loan modification deferral program, the measurement of loan delinquency will resume where it left off upon entry into the program. Due to the modifications, this delinquency table may not accurately reflect the credit risk associated with these loans.

(2) We had five loans that were originated under the PPP program totaling $1.1 million at March 31, 2022 that were 90 days or greater past due. These loans were in process of forgiveness and were not considered as nonperforming loans due to the terms of the SBA guarantee.


	December 31, 2021
(dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		Past Due 90+ Days Still Accruing		Non - performing		Total Past Due Loans		Total Loans
Commercial real estate	$	2,659,040	$	—	$	—	$	—	$	31,488	$	31,488	$	2,690,528
Commercial and industrial	1,497,755		529		—		—		15,239		15,768		1,513,523
Commercial construction	421,834		450		—		—		2,471		2,921		424,755
Business banking	1,124,748		813		491		—		9,641		10,945		1,135,693
Consumer real estate	1,117,074		1,087		2,130		—		7,294		10,511		1,127,585
Other consumer	107,492		206		50		—		158		414		107,906
Total(1)	$	6,927,943	$	3,085	$	2,671	$	—	$	66,291	$	72,047	$	6,999,990
(1) We had eight loans that were modified totaling $28.8 million under the CARES Act at December 31, 2021. These customers were not considered past due as a result of their delayed payments. Upon exiting the loan modification deferral program, the measurement of loan delinquency will resume where it left off upon entry into the program. Due to the modification program, this delinquency table may not accurately reflect the credit risk associated with these loans.

The following tables present loans on nonaccrual status by class of loan for the periods presented:


										For the Three Months Ended
	March 31, 2022								March 31, 2022
(dollars in thousands)	Beginning of Period Nonaccrual		End of Period Nonaccrual		Nonaccrual With No Related Allowance		Past Due 90+ Days Still Accruing (2)			Interest Income Recognized on Nonaccrual(1)
Commercial real estate	$	31,488	$	25,790	$	21,058	$	—		$	32
Commercial and industrial	15,239		10,570		1,700		529			32
Commercial construction	2,471		864		480		—			—
Business banking	9,641		7,997		1,586		587			48
Consumer real estate	7,294		7,178		—		—			61
Other consumer	158		125		—		—			—
Total	$	66,291	$	52,524	$	24,824	$	1,116		$	173

(1) Represents only cash payments received and applied to interest on nonaccrual loans.


									For the Twelve Months Ended
	December 31, 2021								December 31, 2021
(dollars in thousands)	Beginning of Period Nonaccrual		End of Period Nonaccrual		Nonaccrual With No Related Allowance		Past Due 90+ Days Still Accruing		Interest Income Recognized on Nonaccrual(1)
Commercial real estate	$	101,070	$	31,488	$	28,046	$	—	$	158
Commercial and industrial	16,985		15,239		5,707		—		74
Commercial construction	384		2,471		2,020		—		(28)
Business banking	17,122		9,641		1,696		—		427
Consumer real estate	11,117		7,294		—		—		496
Other consumer	96		158		—		—		1
Total	$	146,774	$	66,291	$	37,469	$	—	$	1,128

(1) Represents only cash payments received and applied to interest on nonaccrual loans.

The following tables present collateral-dependent loans by class of loan as of the dates presented:


	March 31, 2022
	Type of Collateral
(dollars in thousands)	Real Estate		Business Assets		Investment/Cash		Other
Commercial real estate	$	21,058	$	—	$	—	$	571
Commercial and industrial	259		721		—		9,859
Commercial construction	2,167		—		—		480
Business banking	1,028		1,537		—		—
Consumer real estate	965		—		—		—

Total	$	25,477	$	2,258	$	—	$	10,910


	December 31, 2021
	Type of Collateral
(dollars in thousands)	Real Estate		Business Assets		Investment/Cash		Other
Commercial real estate	$	28,046	$	—	$	—	$	—
Commercial and industrial	259		4,905		—		10,473
Commercial construction	4,210		—		—		—
Business banking	910		1,636		—		—
Consumer real estate	1,031		—		—		—

Total	$	34,456	$	6,541	$	—	$	10,473

The following tables present activity in the ACL for the periods presented:


	Three Months Ended March 31, 2022
(dollars in thousands)	Commercial Real Estate		Commercial and Industrial		Commercial Construction		Business Banking		Consumer Real Estate		Other Consumer		Total Loans
Allowance for credit losses on loans:
Balance at beginning of period	$	50,700	$	19,727	$	5,355	$	11,338	$	8,733	$	2,723	$	98,576
Provision for credit losses on loans(1)	(1,996)		(206)		(27)		765		426		340		(698)
Charge-offs	—		—		—		(606)		(78)		(298)		(982)
Recoveries	199		2,716		1		—		37		66		3,019
Net Recoveries/(Charge-offs)	199		2,716		1		(606)		(41)		(232)		2,037
Balance at End of Period	$	48,903	$	22,237	$	5,329	$	11,497	$	9,118	$	2,831	$	99,915
(1) Excludes the provision for credits losses for unfunded commitments


	Three Months Ended March 31, 2021
(dollars in thousands)	Commercial Real Estate		Commercial and Industrial		Commercial Construction		Business Banking		Consumer Real Estate		Other Consumer		Total Loans
Allowance for credit losses on loans:
Balance at beginning of period	$	65,656	$	16,100	$	7,239	$	15,917	$	10,014	$	2,686	$	117,612

Provision for credit losses on loans(1)	1,996		2,728		(911)		514		(844)		(182)		3,301
Charge-offs	(810)		(4,302)		—		(917)		(271)		(232)		(6,532)
Recoveries	—		137		1		166		82		334		720
Net (Charge-offs)/Recoveries	(810)		(4,165)		1		(751)		(189)		102		(5,812)
Balance at End of Period	$	66,842	$	14,663	$	6,329	$	15,680	$	8,981	$	2,606	$	115,101

(1) Excludes the provision for credit losses for unfunded commitments

The C&I portfolio included $41.9 million of loans originated under the PPP program at March 31, 2022 compared to $499.1 million for the same period in 2021.The loans are 100 percent guaranteed by the SBA, therefore, we have not assigned any A