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Loans
 9 Months Ended
Sep. 30, 2023
Receivables [Abstract]  
Portfolio Loans LOANS
The following table presents a summary of loans by category:
(in thousands)September 30, 2023December 31, 2022
Commercial and industrial$4,449,129 $3,859,964 
Real estate:  
Commercial - investor owned2,425,821 2,357,820 
Commercial - owner occupied2,361,370 2,270,551 
Construction and land development723,138 611,565 
Residential375,986 395,537 
Total real estate loans5,886,315 5,635,473 
Other286,953 248,990 
Loans, before unearned loan fees10,622,397 9,744,427 
Unearned loan fees, net(5,577)(7,289)
Loans, including unearned loan fees$10,616,820 $9,737,138 

The loan balance at September 30, 2023 and December 31, 2022, includes a net premium on acquired loans of $9.1 million and $11.9 million, respectively. At September 30, 2023 and December 31, 2022, loans of $3.9 billion and $2.8 billion, respectively, were pledged to FHLB and the Federal Reserve Bank.

Accrued interest receivable totaled $64.5 million and $48.1 million at September 30, 2023 and December 31, 2022, respectively, and was reported in “Other Assets” on the consolidated balance sheets.

SBA 7(a) guaranteed loans sold during the three and nine months ended September 30, 2023 totaled $33.3 million and $42.1 million, respectively. A gain on sale of $1.5 million and $2.0 million was recognized for the three and nine months ended September 30, 2023, respectively. There were no SBA loan sales during 2022.

Consumer mortgage loans secured by residential real estate in process of foreclosure totaled $1.0 million at September 30, 2023. There were no consumer mortgage loans secured by residential real estate in process of foreclosure at December 31, 2022.

A summary of the activity in the ACL on loans by category for the three and nine months ended September 30, 2023 and 2022 is as follows:
(in thousands)Commercial and industrialCRE - investor ownedCRE -
owner occupied		Construction and land developmentResidential real estateOtherTotal
Allowance for credit losses on loans:       
Balance at June 30, 2023$60,318 $33,876 $22,700 $12,795 $7,421 $4,209 $141,319 
Provision (benefit) for credit losses3,914 2,851 2,705 (1,662)(939)801 7,670 
Charge-offs(2,794)(4,692)— — (131)(686)(8,303)
Recoveries1,038 27 28 14 271 69 1,447 
Balance at September 30, 2023$62,476 $32,062 $25,433 $11,147 $6,622 $4,393 $142,133 
(in thousands)Commercial and industrialCRE - investor ownedCRE -
owner occupied		Construction and land developmentResidential real estateOtherTotal
Allowance for credit losses on loans:       
Balance at December 31, 2022$53,835 $36,191 $22,752 $11,444 $7,928 $4,782 $136,932 
Provision (benefit) for credit losses12,854 653 2,564 (342)(1,472)509 14,766 
Charge-offs(6,790)(4,869)— (9)(654)(1,129)(13,451)
Recoveries2,577 87 117 54 820 231 3,886 
Balance at September 30, 2023$62,476 $32,062 $25,433 $11,147 $6,622 $4,393 $142,133 
(in thousands)Commercial and industrialCRE - investor ownedCRE -
owner occupied		Construction and land developmentResidential real estateOtherTotal
Allowance for credit losses on loans:       
Balance at June 30, 2022$65,646 $33,338 $16,156 $13,180 $7,478 $4,748 $140,546 
Provision for credit losses4,202 71 224 (3,987)99 (105)504 
Charge-offs(1,320)— (190)— (401)(88)(1,999)
Recoveries640 225 232 10 365 49 1,521 
Balance at September 30, 2022$69,168 $33,634 $16,422 $9,203 $7,541 $4,604 $140,572 
(in thousands)Commercial and industrialCRE - investor ownedCRE -
owner occupied		Construction and land developmentResidential real estateOtherTotal
Allowance for credit losses on loans:       
Balance at December 31, 2021$63,825 $35,877 $17,560 $14,536 $7,927 $5,316 $145,041 
Provision (benefit) for credit losses7,283 (2,488)(1,424)(5,378)(50)(588)(2,645)
Charge-offs(3,576)(200)(395)— (1,706)(262)(6,139)
Recoveries1,636 445 681 45 1,370 138 4,315 
Balance at September 30, 2022$69,168 $33,634 $16,422 $9,203 $7,541 $4,604 $140,572 

The ACL on sponsor finance loans, which is included in the categories above, represented $21.7 million and $16.1 million, respectively, as of September 30, 2023 and December 31, 2022.

The CECL methodology incorporates various economic scenarios. The Company utilizes three forecasts in the model: Moody’s baseline, a stronger near-term growth upside and a moderate recession downside forecast. The Company weights these scenarios at 40%, 30%, and 30%, respectively, which added approximately $12.9 million to the ACL over the baseline model at September 30, 2023. These forecasts incorporate an expectation that the Federal Reserve will continue quantitative tightening and that the federal funds rate has peaked at the range of 5.25% to 5.50% and will begin falling in the latter half of 2024. It is also assumed that the bank failures in early 2023 were not an indication of a broader problem in the industry. The Company has also recognized various risks posed by loans in certain segments, including the commercial office sector, by allocating additional reserves to those segments. Some of the key risks to the forecasts that could result in future provision for credit losses are market reactions to the Federal Reserve policy actions that could push the economy into a recession, persistently higher inflation, tightening in the credit markets, and further weakness in the financial system.

In addition to the CECL methodology, the Company incorporates qualitative adjustments into the ACL on loans to capture credit risks inherent within the loan portfolio that are not captured in the CECL model. Included in these risks are 1) changes in lending policies and procedures, 2) actual and expected changes in business and economic conditions, 3) changes in the nature and volume of the portfolio, 4) changes in lending management, 5) changes in volume and the severity of past due loans, 6) changes in the quality of the loan review system, 7) changes in the value of underlying collateral, 8) the existence and effect of concentrations of credit and 9) other factors such as the regulatory, legal and competitive environments and events such as natural disasters and pandemics. At September 30, 2023, the ACL on loans included a qualitative adjustment of approximately $39.3 million. Of this amount, approximately $13.8 million was allocated to sponsor finance loans due to their mostly unsecured nature.
The current year-to-date gross charge-offs by loan class and year of origination is presented in the following table:
September 30, 2023
Term Loans by Origination Year
(in thousands)202220212019PriorRevolving Loans Converted to Term LoansRevolving LoansTotal
Commercial and industrial$4 $105 $— $— $4,915 $1,494 $6,518 
Real estate:
Commercial - investor owned— 170 4,692 7 — — 4,869 
Construction and land development— — — 9 — — 9 
Residential— — — 478 176 — 654 
Other— 457 — 236 12 — 705 
Total current-period gross charge-offs by risk rating$4 $732 $4,692 $730 $5,103 $1,494 $12,755 
Total current-period gross charge-offs by performing status696 
Total current-period gross charge-offs$13,451 
The following tables present the recorded investment in nonperforming loans by category, excluding government guaranteed balances: 
September 30, 2023
(in thousands)NonaccrualLoans over 90 days past due and still accruing interestTotal nonperforming loansNonaccrual loans with no allowance
Commercial and industrial$11,913 $145 $12,058 $3,087 
Real estate:  
    Commercial - investor owned20,427 — 20,427 16,254 
    Commercial - owner occupied14,705 — 14,705 9,186 
    Construction and land development741 — 741 741 
    Residential959 — 959 959 
Other1 41 42 — 
       Total$48,746 $186 $48,932 $30,227 

December 31, 2022
(in thousands)NonaccrualRestructured, accruingLoans over 90 days past due and still accruing interestTotal nonperforming loansNonaccrual loans with no allowance
Commercial and industrial$4,373 $— $70 $4,443 $1,047 
Real estate: 
    Commercial - investor owned3,023 — — 3,023 — 
    Commercial - owner occupied1,177 — — 1,177 — 
    Construction and land development1,192 — — 1,192 1,192 
    Residential— 73 — 73 — 
Other1 — 72 73 — 
       Total$9,766 $73 $142 $9,981 $2,239 
The nonperforming loan balances at September 30, 2023 and December 31, 2022 exclude government guaranteed balances of $6.0 million and $6.7 million, respectively.

No material interest income was recognized on nonaccrual loans during the three or nine months ended September 30, 2023 or 2022.

Collateral-dependent nonperforming loans by class of loan is presented as of the dates indicated:
September 30, 2023
Type of Collateral
(in thousands)Commercial Real EstateResidential Real EstateBlanket Lien
Commercial and industrial$875 $1,864 $3,017 
Real estate:
Commercial - investor owned19,490 — — 
Commercial - owner occupied4,815 — 5,735 
Construction and land development741 
Residential— 959 — 
Total$25,180 $3,564 $8,752 

December 31, 2022
Type of Collateral
(in thousands)Commercial Real EstateResidential Real EstateBlanket Lien
Commercial and industrial$— $— $1,047 
Real estate:
Commercial - investor owned2,238 785 — 
Commercial - owner occupied1,177 — — 
Construction and land development— 1,192 — 
Residential— 73 — 
Total$3,415 $2,050 $1,047 

The aging of the recorded investment in past due loans by class is presented as of the dates indicated.

September 30, 2023
(in thousands)30-89 Days
 Past Due		90 or More
Days
Past Due		Total
Past Due		CurrentTotal
Commercial and industrial$15,723 $7,929 $23,652 $4,425,477 $4,449,129 
Real estate:     
Commercial - investor owned16,287 937 17,224 2,408,597 2,425,821 
Commercial - owner occupied5,338 13,052 18,390 2,342,980 2,361,370 
Construction and land development1,737 — 1,737 721,401 723,138 
Residential446 959 1,405 374,581 375,986 
Other109 41 150 286,803 286,953 
Loans, before unearned loan fees$39,640 $22,918 $62,558 $10,559,839 $10,622,397 
Unearned loan fees, net(5,577)
Total$10,616,820 
December 31, 2022
(in thousands)30-89 Days
 Past Due		90 or More
Days
Past Due		Total
Past Due		CurrentTotal
Commercial and industrial$555 $2,373 $2,928 $3,857,036 $3,859,964 
Real estate:
Commercial - investor owned— 1,135 1,135 2,356,685 2,357,820 
Commercial - owner occupied8,628 164 8,792 2,261,759 2,270,551 
Construction and land development9 1,192 1,201 610,364 611,565 
Residential1,227 — 1,227 394,310 395,537 
Other18 72 90 248,900 248,990 
Loans, before unearned loan fees$10,437 $4,936 $15,373 $9,729,054 $9,744,427 
Unearned loan fees, net(7,289)
Total$9,737,138 

The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination or acquisition. 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. The Company uses a probability of default/loss given default model to determine the allowance for credit losses.

An assessment of whether a borrower is experiencing financial difficulty is made on the date of a modification. The effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses because of the measurement methodologies used to estimate the allowance.

The most common concession the Company provides to borrowers experiencing financial difficulty is a term extension. In limited circumstances, the Company may modify loans by providing principal forgiveness or an interest rate reduction. When principal forgiveness is provided, the amortized cost basis of the asset is written off against the allowance for credit losses. The amount of the principal forgiveness 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.

In some cases, the Company will modify a loan 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 an interest rate reduction or principal forgiveness, may be granted.

The following table shows the recorded investment at the end of the reporting period for loans modified to borrowers experiencing financial difficulty, disaggregated by loan class and type of concession granted:
Term Extension
Three months endedNine months ended
(in thousands)September 30, 2023Percent of Total Loan ClassSeptember 30, 2023Percent of Total Loan Class
Commercial and industrial$66 — %$26,033 0.59 %
Real estate:
Commercial - investor owned1,000 0.04 %1,000 0.04 %
Commercial - owner occupied— — %94 — %
Construction and land development— — %1,137 0.16 %
Residential28 0.01 %102 0.03 %
Total$1,094 $28,366 
The following table summarizes the financial impacts of loan modifications made to borrowers experiencing financial difficulty and outstanding at the date indicated:
Weighted Average Term Extension (in months)
Three months endedNine months ended
September 30, 2023September 30, 2023
Commercial and industrial49
Real estate:
Commercial - investor owned33
Commercial - owner occupied— 5
Construction and land development— 10
Residential6022

The following table shows the aging of the recorded investment in modified loans by class:

September 30, 2023
(in thousands)Current30-89 Days
 Past Due		90 or More
Days
Past Due		Total
Commercial and industrial$25,483 $550 $— $26,033 
Real estate:   
Commercial - investor owned— 1,000 1,000 
Commercial - owner occupied94 — — 94 
Construction and land development741 396 — 1,137 
Residential102 — — 102 
Total$26,420 $1,946 $— $28,366 

As of September 30, 2023, no loans experienced a default subsequent to being granted a term extension modification in the prior twelve months. Default is defined as movement to nonperforming status, foreclosure or charge-off.

There were no loans restructured during the three or nine months ended September 30, 2022, and no troubled debt restructurings subsequently defaulted during the three or nine months ended September 30, 2022.
The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, payment experience, credit documentation, current economic factors and other factors. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:
•Grades 1, 2, and 3 – Includes loans to borrowers with a continuous record of strong earnings, sound balance sheet condition and capitalization, ample liquidity with solid cash flow, and whose management team has experience and depth within their industry.
•Grade 4 – Includes loans to borrowers with positive trends in profitability, satisfactory capitalization and balance sheet condition, and sufficient liquidity and cash flow.
•Grade 5 – Includes loans to borrowers that may display fluctuating trends in sales, profitability, capitalization, liquidity, and cash flow.
•Grade 6 – Includes loans to borrowers where an adverse change or perceived weakness has occurred, but may be correctable in the near future. Alternatively, this rating category may include circumstances where the borrower is starting to reverse a negative trend or condition, or has recently been upgraded from a 7, 8, or 9 rating.
•Grade 7 – Special Mention credits are borrowers that experienced financial setback of a nature that is not determined to be severe or influence ‘ongoing concern’ expectations. Although possible, no loss is anticipated at this time, due to strong collateral and/or guarantor support.
•Grade 8 – Substandard credits include those borrowers characterized by significant losses and sustained downward trends in balance sheet condition, liquidity, and cash flow. Repayment reliance may have shifted to secondary sources. Collateral exposure may exist and additional reserves may be warranted.
•Grade 9 – Doubtful credits include borrowers that may show deteriorating trends that are unlikely to be corrected. Collateral values may appear insufficient for full recovery, therefore requiring a partial charge-off, or debt renegotiation with the borrower. The borrower may have declared bankruptcy or bankruptcy is likely in the near term. All doubtful rated credits will be on nonaccrual.
The recorded investment by risk category of the loans by class and year of origination is presented in the following tables as of the dates indicated:
September 30, 2023
Term Loans by Origination Year
(in thousands)20232022202120202019PriorRevolving Loans Converted to Term LoansRevolving LoansTotal
Commercial and industrial
Pass (1-6)$1,302,163 $1,135,119 $368,613 $214,946 $132,515 $79,373 $12,078 $986,762 $4,231,569 
Special Mention (7)15,824 1,966 15,127 11,500 781 11,356 200 29,541 86,295 
Classified (8-9)15,146 19,079 2,054 836 22 420 2,477 48,811 88,845 
Total Commercial and industrial$1,333,133 $1,156,164 $385,794 $227,282 $133,318 $91,149 $14,755 $1,065,114 $4,406,709 
Commercial real estate-investor owned
Pass (1-6)$370,443 $588,862 $555,012 $350,266 $175,231 $243,016 $3,891 $51,604 $2,338,325 
Special Mention (7)8,591 19,202 787 2,272 2,051 11,615 — — 44,518 
Classified (8-9)1,000 1,034 — 15,254 2,832 4,459 48 — 24,627 
Total Commercial real estate-investor owned$380,034 $609,098 $555,799 $367,792 $180,114 $259,090 $3,939 $51,604 $2,407,470 
Commercial real estate-owner occupied
Pass (1-6)$358,503 $504,665 $504,496 $318,273 $194,614 $328,339 $3,985 $29,511 $2,242,386 
Special Mention (7)6,867 2,395 4,390 12,103 4,613 14,364 — 1,428 46,160 
Classified (8-9)2,924 2,381 2,284 1,891 8,844 26,067 5,057 2,199 51,647 
Total Commercial real estate-owner occupied$368,294 $509,441 $511,170 $332,267 $208,071 $368,770 $9,042 $33,138 $2,340,193 
Construction real estate
Pass (1-6)$249,482 $314,888 $116,471 $30,626 $2,288 $3,541 $— $2,287 $719,583 
Special Mention (7)— 1,863 — 253 — 125 — — 2,241 
Classified (8-9)1,138 352 — — 13 469 — — 1,972 
Total Construction real estate$250,620 $317,103 $116,471 $30,879 $2,301 $4,135 $— $2,287 $723,796 
Residential real estate
Pass (1-6)$50,727 $43,430 $52,312 $31,857 $19,385 $81,476 $1,335 $82,571 $363,093 
Special Mention (7)173 252 — — 75 1,448 — — 1,948 
Classified (8-9)28 1,075 71 — 30 1,582 74 7,500 10,360 
Total residential real estate$50,928 $44,757 $52,383 $31,857 $19,490 $84,506 $1,409 $90,071 $375,401 
Other
Pass (1-6)$4,350 $56,435 $84,634 $53,756 $9,541 $23,851 $— $37,660 $270,227 
Special Mention (7)— — — — — 83 — 1 84 
Classified (8-9)— — — — — 8 — 1 9 
Total Other$4,350 $56,435 $84,634 $53,756 $9,541 $23,942 $— $37,662 $270,320 
Total loans classified by risk category$2,387,359 $2,692,998 $1,706,251 $1,043,833 $552,835 $831,592 $29,145 $1,279,876 $10,523,889 
Total loans classified by performing status92,931 
Total loans$10,616,820 
December 31, 2022
Term Loans by Origination Year
(in thousands)20222021202020192018PriorRevolving Loans Converted to Term LoansRevolving LoansTotal
Commercial and industrial
Pass (1-6)$1,403,381 $635,275 $332,740 $172,127 $62,729 $66,152 $8,388 $964,592 $3,645,384 
Special Mention (7)37,048 10,836 13,858 423 7,995 4,102 — 72,944 147,206 
Classified (8-9)16,176 4,457 1,627 24 166 183 — 21,349 43,982 
Total Commercial and industrial$1,456,605 $650,568 $348,225 $172,574 $70,890 $70,437 $8,388 $1,058,885 $3,836,572 
Commercial real estate-investor owned
Pass (1-6)$667,107 $584,644 $392,402 $240,033 $115,530 $202,661 $1,457 $53,051 $2,256,885 
Special Mention (7)18,844 5,751 23,502 11,605 — 13,063 — — 72,765 
Classified (8-9)1,823 — 465 953 193 6,092 49 — 9,575 
Total Commercial real estate-investor owned$687,774 $590,395 $416,369 $252,591 $115,723 $221,816 $1,506 $53,051 $2,339,225 
Commercial real estate-owner occupied
Pass (1-6)$539,610 $555,690 $362,150 $232,335 $123,095 $270,613 $— $57,308 $2,140,801 
Special Mention (7)11,164 3,801 16,856 4,455 13,043 9,009 — 800 59,128 
Classified (8-9)— 1,572 3,483 8,910 15,873 11,387 — — 41,225 
Total Commercial real estate-owner occupied$550,774 $561,063 $382,489 $245,700 $152,011 $291,009 $— $58,108 $2,241,154 
Construction real estate
Pass (1-6)$290,146 $232,998 $53,129 $2,909 $2,061 $8,480 $— $1,769 $591,492 
Special Mention (7)17,331 — 681 146 111 106 — — 18,375 
Classified (8-9)1,192 — — 14 471 21 — — 1,698 
Total Construction real estate$308,669 $232,998 $53,810 $3,069 $2,643 $8,607 $— $1,769 $611,565 
Residential real estate
Pass (1-6)$63,317 $60,910 $48,796 $20,943 $11,259 $88,795 $579 $96,304 $390,903 
Special Mention (7)331 — — 79 352 781 — — 1,543 
Classified (8-9)121 73 — 53 1,102 994 — 5 2,348 
Total residential real estate$63,769 $60,983 $48,796 $21,075 $12,713 $90,570 $579 $96,309 $394,794 
Other
Pass (1-6)$38,753 $88,613 $56,252 $10,556 $20,508 $10,796 $— $9,536 $235,014 
Special Mention (7)— — — — — — — — — 
Classified (8-9)— — — 4 3 11 3 4 25 
Total Other$38,753 $88,613 $56,252 $10,560 $20,511 $10,807 $3 $9,540 $235,039 
Total loans classified by risk category$3,106,344 $2,184,620 $1,305,941 $705,569 $374,491 $693,246 $10,476 $1,277,662 $9,658,349 
Total loans classified by performing status78,789 
Total loans$9,737,138 
In the tables above, loan originations in 2023 and 2022 with a classification of “special mention” or “classified” primarily represent renewals or modifications initially underwritten and originated in prior years.

For certain loans the Company evaluates credit quality based on the aging status.

The following tables present the recorded investment on loans based on payment activity as of the dates indicated:

September 30, 2023
(in thousands)PerformingNon PerformingTotal
Commercial and industrial$41,685 $141 $41,826 
Real estate:
Commercial - investor owned18,063 — 18,063 
Commercial - owner occupied28,629 — 28,629 
Residential719 — 719 
Other3,653 41 3,694 
Total$92,749 $182 $92,931 

December 31, 2022
(in thousands)PerformingNon PerformingTotal
Commercial and industrial$23,240 $70 $23,310 
Real estate:
Commercial - investor owned18,595 — 18,595 
Commercial - owner occupied29,397 — 29,397 
Residential743 — 743 
Other6,672 72 6,744 
Total$78,647 $142 $78,789