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Portfolio Loans | 9 Months Ended
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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 estate | 3,278,684 |  |  | 3,119,807 |
Real estate construction | 499,560 |  |  | 385,996 |
Retail real estate | 1,643,099 |  |  | 1,512,976 |
Retail other | 302,878 |  |  | 226,333 |
Total portfolio loans | 7,670,114 |  |  | 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
| Pass |  | Watch |  | Special Mention |  | Substandard |  | Substandard Non-accrual |  | Total
Portfolio loans |  |  |  |  |  |  |  |  |  |  |
Commercial | $ | 1,707,528 |  |  | $ | 135,254 |  |  | $ | 58,189 |  |  | $ | 38,695 |  |  | $ | 6,227 |  |  | $ | 1,945,893 |
Commercial real estate | 2,889,804 |  |  | 299,638 |  |  | 42,728 |  |  | 40,722 |  |  | 5,792 |  |  | 3,278,684 |
Real estate construction | 475,099 |  |  | 22,011 |  |  | 2 |  |  | 2,400 |  |  | 48 |  |  | 499,560 |
Retail real estate | 1,625,702 |  |  | 8,601 |  |  | 2,087 |  |  | 3,469 |  |  | 3,240 |  |  | 1,643,099 |
Retail other | 302,760 |  |  | — |  |  | — |  |  | — |  |  | 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
| Pass |  | Watch |  | Special Mention |  | Substandard |  | Substandard Non-accrual |  | Total
Portfolio loans |  |  |  |  |  |  |  |  |  |  |
Commercial | $ | 1,747,756 |  |  | $ | 93,582 |  |  | $ | 69,427 |  |  | $ | 26,117 |  |  | $ | 7,004 |  |  | $ | 1,943,886 |
Commercial real estate | 2,682,441 |  |  | 343,304 |  |  | 49,695 |  |  | 38,394 |  |  | 5,973 |  |  | 3,119,807 |
Real estate construction | 369,797 |  |  | 13,793 |  |  | 6 |  |  | 2,400 |  |  | — |  |  | 385,996 |
Retail real estate | 1,491,845 |  |  | 12,374 |  |  | 1,992 |  |  | 3,867 |  |  | 2,898 |  |  | 1,512,976 |
Retail other | 226,262 |  |  | — |  |  | — |  |  | — |  |  | 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 Year |  | Revolving Loans |  | Total
Risk Grade Ratings |  | 2022 |  | 2021 |  | 2020 |  | 2019 |  | 2018 |  | Prior |  |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 403,643 |  |  | $ | 315,433 |  |  | $ | 145,695 |  |  | $ | 60,284 |  |  | $ | 53,197 |  |  | $ | 149,627 |  |  | $ | 579,649 |  |  | $ | 1,707,528 |
Watch |  | 27,665 |  |  | 18,423 |  |  | 4,263 |  |  | 8,372 |  |  | 1,404 |  |  | 3,144 |  |  | 71,983 |  |  | 135,254 |
Special Mention |  | 1,772 |  |  | 691 |  |  | 1,325 |  |  | 1,078 |  |  | 3,102 |  |  | 17,538 |  |  | 32,683 |  |  | 58,189 |
Substandard |  | 9,075 |  |  | 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 commercial |  | 442,155 |  |  | 339,425 |  |  | 152,284 |  |  | 76,870 |  |  | 58,136 |  |  | 175,909 |  |  | 701,114 |  |  | 1,945,893 |
Commercial real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 765,398 |  |  | 880,522 |  |  | 501,085 |  |  | 332,768 |  |  | 171,177 |  |  | 222,947 |  |  | 15,907 |  |  | 2,889,804 |
Watch |  | 69,877 |  |  | 44,756 |  |  | 50,799 |  |  | 95,446 |  |  | 18,821 |  |  | 13,338 |  |  | 6,601 |  |  | 299,638 |
Special Mention |  | 3,010 |  |  | 4,737 |  |  | 15,598 |  |  | 1,517 |  |  | 6,994 |  |  | 10,872 |  |  | — |  |  | 42,728 |
Substandard |  | 14,349 |  |  | 12,681 |  |  | 497 |  |  | 1,841 |  |  | 10,412 |  |  | 942 |  |  | — |  |  | 40,722 |
Substandard non-accrual |  | — |  |  | 4,092 |  |  | 41 |  |  | — |  |  | 1,650 |  |  | 9 |  |  | — |  |  | 5,792 |
Total commercial real estate |  | 852,634 |  |  | 946,788 |  |  | 568,020 |  |  | 431,572 |  |  | 209,054 |  |  | 248,108 |  |  | 22,508 |  |  | 3,278,684 |
Real estate construction |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 176,071 |  |  | 191,006 |  |  | 84,748 |  |  | 1,570 |  |  | 2,012 |  |  | 1,949 |  |  | 17,743 |  |  | 475,099 |
Watch |  | 3,100 |  |  | 3,666 |  |  | 3,269 |  |  | 10,533 |  |  | — |  |  | 1,443 |  |  | — |  |  | 22,011 |
Special Mention |  | — |  |  | — |  |  | — |  |  | 2 |  |  | — |  |  | — |  |  | — |  |  | 2 |
Substandard |  | 2,400 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 2,400 |
Substandard non-accrual |  | — |  |  | — |  |  | 48 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 48 |
Total real estate construction |  | 181,571 |  |  | 194,672 |  |  | 88,065 |  |  | 12,105 |  |  | 2,012 |  |  | 3,392 |  |  | 17,743 |  |  | 499,560 |
Retail real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 344,033 |  |  | 464,066 |  |  | 180,543 |  |  | 79,304 |  |  | 58,925 |  |  | 281,430 |  |  | 217,401 |  |  | 1,625,702 |
Watch |  | 2,881 |  |  | 1,163 |  |  | 1,875 |  |  | 1,469 |  |  | 1,146 |  |  | 67 |  |  | — |  |  | 8,601 |
Special Mention |  | 148 |  |  | 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 estate |  | 347,062 |  |  | 468,406 |  |  | 182,735 |  |  | 80,855 |  |  | 60,603 |  |  | 285,350 |  |  | 218,088 |  |  | 1,643,099 |
Retail other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 121,375 |  |  | 47,136 |  |  | 14,999 |  |  | 15,909 |  |  | 7,677 |  |  | 2,124 |  |  | 93,540 |  |  | 302,760 |
Substandard non-accrual |  | 14 |  |  | 89 |  |  | 3 |  |  | — |  |  | 10 |  |  | 2 |  |  | — |  |  | 118 |
Total retail other |  | 121,389 |  |  | 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 Year |  | Revolving Loans |  | Total
Risk Grade Ratings |  | 2021 |  | 2020 |  | 2019 |  | 2018 |  | 2017 |  | Prior |  |
Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 512,729 |  |  | $ | 228,811 |  |  | $ | 107,877 |  |  | $ | 84,873 |  |  | $ | 74,351 |  |  | $ | 122,418 |  |  | $ | 616,697 |  |  | $ | 1,747,756 |
Watch |  | 13,847 |  |  | 5,913 |  |  | 14,274 |  |  | 5,060 |  |  | 1,361 |  |  | 2,866 |  |  | 50,261 |  |  | 93,582 |
Special Mention |  | 7,062 |  |  | 898 |  |  | 5,961 |  |  | 4,025 |  |  | 6,790 |  |  | 11,845 |  |  | 32,846 |  |  | 69,427 |
Substandard |  | 3,595 |  |  | 3,362 |  |  | 3,136 |  |  | 1,855 |  |  | 1,125 |  |  | 5,459 |  |  | 7,585 |  |  | 26,117 |
Substandard non-accrual |  | 4,126 |  |  | 364 |  |  | 142 |  |  | — |  |  | 320 |  |  | 52 |  |  | 2,000 |  |  | 7,004 |
Total commercial |  | 541,359 |  |  | 239,348 |  |  | 131,390 |  |  | 95,813 |  |  | 83,947 |  |  | 142,640 |  |  | 709,389 |  |  | 1,943,886 |
Commercial real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 969,548 |  |  | 637,550 |  |  | 425,850 |  |  | 235,928 |  |  | 200,373 |  |  | 198,002 |  |  | 15,190 |  |  | 2,682,441 |
Watch |  | 51,560 |  |  | 38,820 |  |  | 123,324 |  |  | 48,088 |  |  | 46,761 |  |  | 32,608 |  |  | 2,143 |  |  | 343,304 |
Special Mention |  | 9,542 |  |  | 7,060 |  |  | 6,585 |  |  | 10,098 |  |  | 6,357 |  |  | 9,870 |  |  | 183 |  |  | 49,695 |
Substandard |  | 21,002 |  |  | 3,781 |  |  | 1,218 |  |  | 11,451 |  |  | 521 |  |  | 421 |  |  | — |  |  | 38,394 |
Substandard non-accrual |  | 112 |  |  | 181 |  |  | 359 |  |  | 1,893 |  |  | 3,407 |  |  | 21 |  |  | — |  |  | 5,973 |
Total commercial real estate |  | 1,051,764 |  |  | 687,392 |  |  | 557,336 |  |  | 307,458 |  |  | 257,419 |  |  | 240,922 |  |  | 17,516 |  |  | 3,119,807 |
Real estate construction |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 202,082 |  |  | 123,491 |  |  | 31,927 |  |  | 3,155 |  |  | 738 |  |  | 1,223 |  |  | 7,181 |  |  | 369,797 |
Watch |  | 7,886 |  |  | 4,159 |  |  | 54 |  |  | — |  |  | 1,574 |  |  | 120 |  |  | — |  |  | 13,793 |
Special Mention |  | — |  |  | — |  |  | 6 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 6 |
Substandard |  | — |  |  | 2,400 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 2,400 |
Total real estate construction |  | 209,968 |  |  | 130,050 |  |  | 31,987 |  |  | 3,155 |  |  | 2,312 |  |  | 1,343 |  |  | 7,181 |  |  | 385,996 |
Retail real estate |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 523,541 |  |  | 215,068 |  |  | 96,617 |  |  | 79,158 |  |  | 82,478 |  |  | 281,737 |  |  | 213,246 |  |  | 1,491,845 |
Watch |  | 4,100 |  |  | 2,460 |  |  | 1,780 |  |  | 1,312 |  |  | 343 |  |  | 150 |  |  | 2,229 |  |  | 12,374 |
Special Mention |  | 1,965 |  |  | 27 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 1,992 |
Substandard |  | 1,369 |  |  | 232 |  |  | 12 |  |  | 71 |  |  | 165 |  |  | 1,687 |  |  | 331 |  |  | 3,867 |
Substandard non-accrual |  | 235 |  |  | 63 |  |  | — |  |  | 16 |  |  | 227 |  |  | 1,705 |  |  | 652 |  |  | 2,898 |
Total retail real estate |  | 531,210 |  |  | 217,850 |  |  | 98,409 |  |  | 80,557 |  |  | 83,213 |  |  | 285,279 |  |  | 216,458 |  |  | 1,512,976 |
Retail other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | 59,366 |  |  | 22,305 |  |  | 26,126 |  |  | 16,189 |  |  | 7,180 |  |  | 1,326 |  |  | 93,770 |  |  | 226,262 |
Substandard non-accrual |  | 34 |  |  | 10 |  |  | — |  |  | 14 |  |  | 13 |  |  | — |  |  | — |  |  | 71 |
Total retail other |  | 59,400 |  |  | 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 accruing |  | Non-accrual Loans
| 30-59 Days |  | 60-89 Days |  | 90+Days |
Past due and non-accrual loans |  |  |  |  |  |  |
Commercial | $ | 19 |  |  | $ | 45 |  |  | $ | 625 |  |  | $ | 6,227 |
Commercial real estate | 411 |  |  | — |  |  | 349 |  |  | 5,792 |
Real estate construction | — |  |  | — |  |  | — |  |  | 48 |
Retail real estate | 3,734 |  |  | 1,831 |  |  | 255 |  |  | 3,240 |
Retail other | 262 |  |  | 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 accruing |  | Non-accrual Loans
| 30-59 Days |  | 60-89 Days |  | 90+Days |
Past due and non-accrual loans |  |  |  |  |  |  |
Commercial | $ | 363 |  |  | $ | 10 |  |  | $ | 213 |  |  | $ | 7,004 |
Commercial real estate | 151 |  |  | 441 |  |  | — |  |  | 5,973 |
Real estate construction | 56 |  |  | — |  |  | — |  |  | — |
Retail real estate | 3,312 |  |  | 1,830 |  |  | 693 |  |  | 2,898 |
Retail other | 82 |  |  | 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 TDRs | 483 |  |  | 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, 2022 |  | Nine Months Ended September 30, 2022
|  |  | Recorded Investment |  |  |  | Recorded Investment
| Number of Contracts |  | Rate Modification 1 |  | Payment Modification 1 |  | Number of Contracts |  | Rate Modification 1 |  | Payment Modification 1
Commercial | — |  | $ | — |  |  | $ | — |  |  | 1 |  | $ | — |  |  | $ | 381 |
| Three Months Ended September 30, 2021 |  | Nine Months Ended September 30, 2021
|  |  | Recorded Investment |  |  |  | Recorded Investment
| Number of Contracts |  | Rate Modification 1 |  | Payment Modification 1 |  | Number of Contracts |  | Rate Modification 1 |  | Payment Modification 1
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, 2022 |  | As of December 31, 2021
| Number of Contracts |  | Recorded Investment |  | Number of Contracts |  | Recorded Investment
COVID-19 loan modifications |  |  |  |  |  |  |
Commercial loans: |  |  |  |  |  |  |
Interest-only deferrals | 8 |  | $ | 20,556 |  |  | 32 |  | $ | 128,730 |
Retail loans: |  |  |  |  |  |  |
Mortgage and personal loan deferrals | 1 |  | 99 |  |  | 2 |  | 137 |
Total COVID-19 loans modifications | 9 |  | $ | 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 Investment |  |  |  | Average Recorded Investment
|  | With No Allowance |  | With Allowance |  | Total |  | Related Allowance |
Loans evaluated individually |  |  |  |  |  |  |  |  |  |  |
Commercial | $ | 9,455 |  |  | $ | 547 |  |  | $ | 5,892 |  |  | $ | 6,439 |  |  | $ | 2,806 |  |  | $ | 7,488 |
Commercial real estate | 7,497 |  |  | 1,663 |  |  | 4,035 |  |  | 5,698 |  |  | 2,000 |  |  | 5,216 |
Real estate construction | 255 |  |  | 255 |  |  | — |  |  | 255 |  |  | — |  |  | 266 |
Retail real estate | 2,258 |  |  | 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 Investment |  |  |  | Average Recorded Investment
|  | With No Allowance |  | With Allowance |  | Total |  | Related Allowance |
Loans evaluated individually |  |  |  |  |  |  |  |  |  |  |
Commercial | $ | 10,247 |  |  | $ | 498 |  |  | $ | 6,490 |  |  | $ | 6,988 |  |  | $ | 3,564 |  |  | $ | 8,791 |
Commercial real estate | 6,456 |  |  | 5,750 |  |  | — |  |  | 5,750 |  |  | — |  |  | 6,390 |
Real estate construction | 272 |  |  | 272 |  |  | — |  |  | 272 |  |  | — |  |  | 282 |
Retail real estate | 2,514 |  |  | 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
| Commercial |  | Commercial Real Estate |  | Real Estate Construction |  | Retail Real Estate |  | Retail Other |  | Total
ACL balance, June 30, 2022 | $ | 23,359 |  |  | $ | 37,182 |  |  | $ | 5,669 |  |  | $ | 17,984 |  |  | $ | 4,563 |  |  | $ | 88,757 |
Provision for credit losses | 615 |  |  | 598 |  |  | 216 |  |  | 684 |  |  | 251 |  |  | 2,364 |
Charged-off | (381) |  |  | — |  |  | — |  |  | (220) |  |  | (218) |  |  | (819) |
Recoveries | 102 |  |  | 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
| Commercial |  | Commercial Real Estate |  | Real Estate Construction |  | Retail Real Estate |  | Retail Other |  | Total
ACL balance, December 31, 2021 | $ | 23,855 |  |  | $ | 38,249 |  |  | $ | 5,102 |  |  | $ | 17,589 |  |  | $ | 3,092 |  |  | $ | 87,887 |
Provision for credit losses | 123 |  |  | 408 |  |  | 663 |  |  | 826 |  |  | 1,744 |  |  | 3,764 |
Charged-off | (589) |  |  | (1,372) |  |  | — |  |  | (253) |  |  | (409) |  |  | (2,623) |
Recoveries | 306 |  |  | 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
| Commercial |  | Commercial Real Estate |  | Real Estate Construction |  | Retail Real Estate |  | Retail Other |  | Total
ACL balance, June 30, 2021 | $ | 24,356 |  |  | $ | 39,974 |  |  | $ | 7,599 |  |  | $ | 20,505 |  |  | $ | 2,976 |  |  | $ | 95,410 |
Provision for credit losses | 657 |  |  | (25) |  |  | (1,503) |  |  | (1,155) |  |  | 157 |  |  | (1,869) |
Charged-off | (764) |  |  | (191) |  |  | — |  |  | (155) |  |  | (98) |  |  | (1,208) |
Recoveries | 157 |  |  | 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
| Commercial |  | Commercial Real Estate |  | Real Estate Construction |  | Retail Real Estate |  | Retail Other |  | Total
ACL balance, December 31, 2020 | $ | 23,866 |  |  | $ | 46,230 |  |  | $ | 8,193 |  |  | $ | 21,992 |  |  | $ | 767 |  |  | $ | 101,048 |
Day 1 PCD 1 | 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) |
Recoveries | 448 |  |  | 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 Loans |  | ACL Attributed to Portfolio Loans
| Collectively Evaluated for Impairment |  | Individually Evaluated for Impairment |  | Total |  | Collectively 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 estate | 3,272,986 |  |  | 5,698 |  |  | 3,278,684 |  |  | 35,799 |  |  | 2,000 |  |  | 37,799 |
Real estate construction | 499,305 |  |  | 255 |  |  | 499,560 |  |  | 5,971 |  |  | — |  |  | 5,971 |
Retail real estate | 1,640,985 |  |  | 2,114 |  |  | 1,643,099 |  |  | 18,595 |  |  | 25 |  |  | 18,620 |
Retail other | 302,878 |  |  | — |  |  | 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 Loans |  | ACL Attributed to Portfolio Loans
| Collectively Evaluated for Impairment |  | Individually Evaluated for Impairment |  | Total |  | Collectively 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 estate | 3,114,057 |  |  | 5,750 |  |  | 3,119,807 |  |  | 38,249 |  |  | — |  |  | 38,249 |
Real estate construction | 385,724 |  |  | 272 |  |  | 385,996 |  |  | 5,102 |  |  | — |  |  | 5,102 |
Retail real estate | 1,510,606 |  |  | 2,370 |  |  | 1,512,976 |  |  | 17,564 |  |  | 25 |  |  | 17,589 |
Retail other | 226,333 |  |  | — |  |  | 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 |

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