| Loans and Allowance for Credit Losses on Loans |
Loans and Allowance for Credit Losses on Loans As discussed in Note 1 - Operations and Summary of Significant Accounting Policies, in the second quarter of 2023, changes were made to certain estimates used in the Company’s current expected credit loss model which resulted in adjustments being made to the Company’s portfolio segments. As a result, certain prior period balances below have been reclassified to conform to the current period presentation of portfolio segments. Loans are summarized by portfolio segment as follows: | | | | | | | | | | | | | | | (in thousands) | December 31, 2023 | | December 31, 2022 | | | | | | Loans held for investment(1): | | | | | Commercial | $ | 10,410,766 | | | $ | 9,832,676 | | | Mortgage finance | 3,978,328 | | | 4,090,033 | | | Commercial real estate | 5,500,774 | | | 4,875,363 | | | Consumer | 530,948 | | | 552,848 | | | | | | | | | | | | | | | Gross loans held for investment | 20,420,816 | | | 19,350,920 | | | Unearned income (net of direct origination costs) | (80,258) | | | (63,580) | | | Total loans held for investment | 20,340,558 | | | 19,287,340 | | | Allowance for credit losses on loans | (249,973) | | | (253,469) | | | Total loans held for investment, net | $ | 20,090,585 | | | $ | 19,033,871 | | | Loans held for sale: | | | | | Mortgage loans, at fair value | $ | 706 | | | $ | — | | | Non-mortgage loans, at lower of cost or fair value | 43,399 | | | 36,357 | | | Total loans held for sale | $ | 44,105 | | | $ | 36,357 | |
(1) Excludes accrued interest receivable of $118.1 million and $100.4 million at December 31, 2023 and December 31, 2022, respectively, that is recorded in accrued interest receivable and other assets on the consolidated balance sheets. The following tables summarize gross loans held for investment by year of origination and internally assigned credit grades: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | | 2023 | | 2022 | | 2021 | | 2020 | | 2019 | | 2018
and prior | | Revolving lines of credit | | Revolving lines of credit converted to term loans | | Total | | December 31, 2023 | | | | | | | | | | | | | | | | | | | | Commercial | | | | | | | | | | | | | | | | | | | | (1-7) Pass | | $ | 1,546,257 | | | $ | 1,408,672 | | | $ | 279,266 | | | $ | 144,699 | | | $ | 142,301 | | | $ | 157,808 | | | $ | 6,284,464 | | | $ | 16,580 | | | $ | 9,980,047 | | | (8) Special mention | | 22,148 | | | 118,991 | | | 35,619 | | | 285 | | | 823 | | | 13,385 | | | 40,647 | | | 89 | | | 231,987 | | | (9) Substandard - accruing | | 12,477 | | | 50,876 | | | 9,334 | | | 18,547 | | | — | | | 78 | | | 38,372 | | | — | | | 129,684 | | | (9+) Non-accrual | | 9,395 | | | 34,229 | | | 340 | | | 2,085 | | | 15,080 | | | 7,840 | | | 79 | | | — | | | 69,048 | | | Total commercial | | $ | 1,590,277 | | | $ | 1,612,768 | | | $ | 324,559 | | | $ | 165,616 | | | $ | 158,204 | | | $ | 179,111 | | | $ | 6,363,562 | | | $ | 16,669 | | | $ | 10,410,766 | | | Mortgage finance | | | | | | | | | | | | | | | | | | | | (1-7) Pass | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 3,978,328 | | | $ | — | | | $ | 3,978,328 | | | (8) Special mention | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (9) Substandard - accruing | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (9+) Non-accrual | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | Total mortgage finance | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 3,978,328 | | | $ | — | | | $ | 3,978,328 | | | Commercial real estate | | | | | | | | | | | | | | | | | | | | (1-7) Pass | | $ | 561,801 | | | $ | 1,689,325 | | | $ | 1,042,953 | | | $ | 419,703 | | | $ | 317,480 | | | $ | 559,026 | | | $ | 575,928 | | | $ | 28,175 | | | $ | 5,194,391 | | | (8) Special mention | | — | | | 136,801 | | | 32,937 | | | 24,440 | | | 34,181 | | | 22,833 | | | 7,895 | | | — | | | 259,087 | | | (9) Substandard - accruing | | — | | | 2,232 | | | — | | | — | | | — | | | 28,573 | | | 4,141 | | | — | | | 34,946 | | | (9+) Non-accrual | | — | | | — | | | 12,350 | | | — | | | — | | | — | | | — | | | — | | | 12,350 | | | Total commercial real estate | | $ | 561,801 | | | $ | 1,828,358 | | | $ | 1,088,240 | | | $ | 444,143 | | | $ | 351,661 | | | $ | 610,432 | | | $ | 587,964 | | | $ | 28,175 | | | $ | 5,500,774 | | | Consumer | | | | | | | | | | | | | | | | | | | | (1-7) Pass | | $ | 31,876 | | | $ | 56,425 | | | $ | 78,096 | | | $ | 47,423 | | | $ | 14,141 | | | $ | 102,691 | | | $ | 199,171 | | | $ | — | | | $ | 529,823 | | | (8) Special mention | | — | | | — | | | — | | | — | | | — | | | — | | | 100 | | | 41 | | | 141 | | | (9) Substandard - accruing | | — | | | — | | | — | | | — | | | — | | | 984 | | | — | | | — | | | 984 | | | (9+) Non-accrual | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | Total consumer | | $ | 31,876 | | | $ | 56,425 | | | $ | 78,096 | | | $ | 47,423 | | | $ | 14,141 | | | $ | 103,675 | | | $ | 199,271 | | | $ | 41 | | | $ | 530,948 | | | Total | | $ | 2,183,954 | | | $ | 3,497,551 | | | $ | 1,490,895 | | | $ | 657,182 | | | $ | 524,006 | | | $ | 893,218 | | | $ | 11,129,125 | | | $ | 44,885 | | | $ | 20,420,816 | | | Gross charge-offs | | $ | 8,364 | | | $ | 5,090 | | | $ | 25,578 | | | $ | — | | | $ | 15,243 | | | $ | 883 | | | $ | 698 | | | $ | 871 | | | $ | 56,727 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | | 2022 | | 2021 | | 2020 | | 2019 | | 2018 | | 2017
and prior | | Revolving lines of credit | | Revolving lines of credit converted to term loans | | Total | | December 31, 2022 | | | | | | | | | | | | | | | | | | | | Commercial | | | | | | | | | | | | | | | | | | | | (1-7) Pass | | $ | 2,022,950 | | | $ | 678,473 | | | $ | 240,511 | | | $ | 254,985 | | | $ | 322,099 | | | $ | 227,853 | | | $ | 5,694,352 | | | $ | 20,933 | | | $ | 9,462,156 | | | (8) Special mention | | 9,141 | | | 7,740 | | | 3,628 | | | 37,794 | | | 11,998 | | | 4,975 | | | 95,310 | | | 2,250 | | | 172,836 | | | (9) Substandard - accruing | | 18,670 | | | 71,147 | | | 514 | | | 1,666 | | | 14,933 | | | 6,305 | | | 37,407 | | | — | | | 150,642 | | | (9+) Non-accrual | | 376 | | | 512 | | | 751 | | | 30,392 | | | 6,226 | | | 2,520 | | | 6,265 | | | — | | | 47,042 | | | Total commercial | | $ | 2,051,137 | | | $ | 757,872 | | | $ | 245,404 | | | $ | 324,837 | | | $ | 355,256 | | | $ | 241,653 | | | $ | 5,833,334 | | | $ | 23,183 | | | $ | 9,832,676 | | | Mortgage finance | | | | | | | | | | | | | | | | | | | | (1-7) Pass | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 4,090,033 | | | $ | — | | | $ | 4,090,033 | | | (8) Special mention | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (9) Substandard - accruing | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (9+) Non-accrual | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | Total mortgage finance | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | — | | | $ | 4,090,033 | | | $ | — | | | $ | 4,090,033 | | | Commercial real estate | | | | | | | | | | | | | | | | | | | | (1-7) Pass | | $ | 1,362,160 | | | $ | 958,669 | | | $ | 670,113 | | | $ | 520,970 | | | $ | 263,240 | | | $ | 448,536 | | | $ | 465,834 | | | $ | 43,237 | | | $ | 4,732,759 | | | (8) Special mention | | 3,494 | | | 6,524 | | | 46,512 | | | 5,295 | | | 19,350 | | | 4,038 | | | — | | | — | | | 85,213 | | | (9) Substandard - accruing | | 7,840 | | | 17,850 | | | — | | | 247 | | | 11,458 | | | 18,733 | | | — | | | — | | | 56,128 | | | (9+) Non-accrual | | — | | | — | | | 1,081 | | | — | | | — | | | 182 | | | — | | | — | | | 1,263 | | | Total commercial real estate | | $ | 1,373,494 | | | $ | 983,043 | | | $ | 717,706 | | | $ | 526,512 | | | $ | 294,048 | | | $ | 471,489 | | | $ | 465,834 | | | $ | 43,237 | | | $ | 4,875,363 | | | Consumer | | | | | | | | | | | | | | | | | | | | (1-7) Pass | | $ | 69,320 | | | $ | 95,470 | | | $ | 57,060 | | | $ | 24,773 | | | $ | 20,055 | | | $ | 89,919 | | | $ | 196,088 | | | $ | 130 | | | $ | 552,815 | | | (8) Special mention | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (9) Substandard - accruing | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | — | | | (9+) Non-accrual | | — | | | — | | | — | | | 33 | | | — | | | — | | | — | | | — | | | 33 | | | Total Consumer | | $ | 69,320 | | | $ | 95,470 | | | $ | 57,060 | | | $ | 24,806 | | | $ | 20,055 | | | $ | 89,919 | | | $ | 196,088 | | | $ | 130 | | | $ | 552,848 | | | Total | | $ | 3,493,951 | | | $ | 1,836,385 | | | $ | 1,020,170 | | | $ | 876,155 | | | $ | 669,359 | | | $ | 803,061 | | | $ | 10,585,289 | | | $ | 66,550 | | | $ | 19,350,920 | |
The following table details activity in the allowance for credit losses on loans. The changes made to the Company’s current expected credit loss model, as discussed above and in Note 1 - Operations and Summary of Significant Accounting Policies, resulted in a reallocation of the allowance for credit losses between loan portfolio segments and allowance balances allocated to off-balance sheet financial instruments, the results of which are included in the table below. The changes made result in a higher allocation of losses to off-balance sheet financial instruments. See Note 9 - Financial Instruments with Off-Balance Sheet Risk for information regarding the allowance for credit losses on off-balance sheet financial instruments. Allocation of a portion of the allowance to one category does not preclude its availability to absorb losses in other categories. | | | | | | | | | | | | | | | | | | | (in thousands) | Commercial | Mortgage
Finance | Commercial Real Estate | Consumer | Total | Year Ended December 31, 2023 | | | | | | | Beginning balance | $ | 185,303 | | $ | 10,745 | | $ | 54,268 | | $ | 3,153 | | $ | 253,469 | | | Provision for credit losses on loans | 31,529 | | (6,572) | | 23,057 | | (583) | | 47,431 | | | Charge-offs | 51,186 | | — | | 5,500 | | 41 | | 56,727 | | | Recoveries | 5,791 | | — | | 4 | | 5 | | 5,800 | | | Net charge-offs (recoveries) | 45,395 | | — | | 5,496 | | 36 | | 50,927 | | | Ending balance | $ | 171,437 | | $ | 4,173 | | $ | 71,829 | | $ | 2,534 | | $ | 249,973 | | | Year Ended December 31, 2022 | | | | | | | Beginning balance | $ | 154,360 | | $ | 6,083 | | $ | 48,247 | | $ | 3,176 | | $ | 211,866 | | | Provision for credit losses on loans | 50,485 | | 4,662 | | 6,371 | | (46) | | 61,472 | | | Charge-offs | 23,219 | | — | | 350 | | — | | 23,569 | | | Recoveries | 3,677 | | — | | — | | 23 | | 3,700 | | | Net charge-offs (recoveries) | 19,542 | | — | | 350 | | (23) | | 19,869 | | | Ending balance | $ | 185,303 | | $ | 10,745 | | $ | 54,268 | | $ | 3,153 | | $ | 253,469 | |
The Company recorded a $47.4 million provision for credit losses on loans for the year ended December 31, 2023, compared to $61.5 million for the same period of 2022. The $47.4 million provision for credit losses on loans resulted primarily from increases in total loans held for investment, criticized and non-accrual loans and net charge-offs during the year ended December 31, 2023. Net charge-offs of $50.9 million were recorded during the year ended December 31, 2023, compared to net charge-offs of $19.9 million during the same period of 2022. Criticized loans totaled $738.2 million at December 31, 2023 and $513.2 million at December 31, 2022. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. At December 31, 2023, the Company had $46.0 million in collateral-dependent commercial loans, collateralized by business assets, and $12.4 million in collateral-dependent commercial real estate loans, collateralized by real estate. The table below provides an age analysis of gross loans held for investment: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | 30-59 Days
Past Due | | 60-89 Days
Past Due | | 90 Days or More Past Due | | Total Past
Due | | Non-accrual(1) | | Current | | Total | | Non-accrual With No Allowance | | December 31, 2023 | | | | | | | | | | | | | | | | | Commercial | $ | 2,642 | | | $ | 9,584 | | | $ | 18,540 | | | $ | 30,766 | | | $ | 69,048 | | | $ | 10,310,952 | | | $ | 10,410,766 | | | $ | 7,773 | | | Mortgage finance | — | | | — | | | — | | | — | | | — | | | 3,978,328 | | | 3,978,328 | | | — | | | Commercial real estate | 679 | | | 4,140 | | | — | | | 4,819 | | | 12,350 | | | 5,483,605 | | | 5,500,774 | | | — | | | Consumer | 1,290 | | | — | | | 983 | | | 2,273 | | | — | | | 528,675 | | | 530,948 | | | — | | | Total | $ | 4,611 | | | $ | 13,724 | | | $ | 19,523 | | | $ | 37,858 | | | $ | 81,398 | | | $ | 20,301,560 | | | $ | 20,420,816 | | | $ | 7,773 | |
(1)As of December 31, 2023, $358,000 of non-accrual loans were earning interest income on a cash basis compared to $2.2 million as of December 31, 2022. Additionally, $37,000 and $801,000 of interest income was recognized on non-accrual loans for the years ended December 31, 2023 and 2022, respectively. Accrued interest of $3.0 million and $1.6 million was reversed during the years ended December 31, 2023 and December 31, 2022, respectively. Modifications to Borrowers Experiencing Financial Difficulty The Company adopted Accounting Standards Update (“ASU”) 2022-02, Financial Instruments - Credit Losses (Topic 326) Troubled Debt Restructurings and Vintage Disclosures (“ASU 2022-02”) effective January 1, 2023. The amendments in ASU 2022-02 eliminated the recognition and measurement of troubled debt restructurings and enhanced disclosures for loan modifications to borrowers experiencing financial difficulty. The table below details gross loans held for investment as of December 31, 2023 made to borrowers experiencing financial difficulty that were modified during the year ended December 31, 2023: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | | | | Payment
Deferral | | Term
Extension | | Payment
Deferral
and Term
Extension | | Interest Rate
Reduction
and Term
Extension | | Total | | Percentage of
Total Loans
Held for
Investment | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Commercial | | | | $ | 30,873 | | | $ | 733 | | | $ | 5,458 | | | $ | 6,064 | | | $ | 43,128 | | | 0.21 | % | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Commercial real estate | | | | — | | | 21,364 | | | — | | | — | | | 21,364 | | | 0.10 | % | | | | | | | | | | | | | | | | | Total | | | | $ | 30,873 | | | $ | 22,097 | | | $ | 5,458 | | | $ | 6,064 | | | $ | 64,492 | | | 0.32 | % |
The following table summarizes the financial impacts of loan modifications made to borrowers experiencing financial difficulty during the year ended December 31, 2023: | | | | | | | | | | | | | | | | | | | | | | | Interest Rate
Reduction | | Term Extension
(in months) | | Total Payment
Deferrals
(in thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Commercial | | 0.70% | | 4 to 36 | | $ | 5,139 | | | | | | | | | Commercial real estate | | —% | | 4 to 6 | | $ | — | | | | | | | | |
During the year ended December 31, 2023, commercial loans totaling $6.3 million 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, whichever occurs first. The table below provides an age analysis of gross loans held for investment as of December 31, 2023 made to borrowers experiencing financial difficulty that were modified on or after January 1, 2023, the date the Company adopted ASU 2022-02: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | (in thousands) | | 30-89 Days
Past Due | | 90+ Days
Past Due | | Non-Accrual | | Current | | Total | | December 31, 2023 | | | | | | | | | | | | Commercial | | $ | 7,617 | | | $ | — | | | $ | 11,601 | | | $ | 23,910 | | | $ | 43,128 | | | | | | | | | | | | | Commercial real estate | | 4,141 | | | — | | | — | | | 17,223 | | | 21,364 | | | | | | | | | | | | | | Total | | $ | 11,758 | | | $ | — | | | $ | 11,601 | | | $ | 41,133 | | | $ | 64,492 | |
Troubled Debt Restructuring Disclosures Prior to the Adoption of ASU 2022-02 The following table details the recorded investments of loans restructured during the year ended December 31, 2022. | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Extended Maturity | | Adjusted Payment Schedule | | Total | | (in thousands, except number of contracts) | | Number of Contracts | Balance at Period End | | Number of Contracts | Balance at Period End | | Number of Contracts | Balance at Period End | Year Ended December 31, 2022 | | | | | | | | | | Commercial | | — | | $ | — | | | 1 | | $ | 531 | | | 1 | | $ | 531 | | | | | | | | | | | | | Total | | — | | $ | — | | | 1 | | $ | 531 | | | 1 | | $ | 531 | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
As of December 31, 2022, the Company did not have any loans considered restructured that were not on non-accrual. Of the non-accrual loans at December 31, 2022, $531,000 met the criteria for restructured. These loans had no unfunded commitments at December 31, 2022.
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