
	December 31,
	2022		2021
	(In thousands)
Commercial and industrial	$	1,455,795	$	693,559
Paycheck Protection Program (PPP)	13,226		145,942
Real estate:
Commercial real estate (including multi-family residential)	3,931,480		2,104,621
Commercial real estate construction and land development	1,037,678		439,125
1-4 family residential (including home equity)	1,000,956		685,071
Residential construction	268,150		117,901
Consumer and other	47,466		34,267
Total loans	7,754,751		4,220,486
Allowance for credit losses on loans	(93,180)		(47,940)
Loans, net	$	7,661,571	$	4,172,546

The Company has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. The Company maintains an independent loan review department that reviews and validates the credit risk program on a periodic basis. In addition, an independent third party loan review is performed on a semi-annual basis. In connection with the reviews of the loan portfolio, the Company considers risk elements attributable to particular loan types or categories in assessing the quality of individual loans. Some of the risk elements include:

Commercial and Industrial Loans. The Company makes commercial and industrial loans in its market area that are underwritten on the basis of the borrower’s ability to service the debt from income. The portfolio includes loans to commercial customers for use in financing working capital needs, equipment purchases and expansions. The loans in this category are repaid primarily from the cash flow of a borrower’s principal business operation. Credit risk in these loans is driven by creditworthiness of a borrower and the economic conditions that impact the cash flow stability from business operations. The Company generally takes as collateral a lien on any available real estate, equipment or other assets owned by the borrower and typically obtains a personal guaranty of the borrower or principal.

The Company’s nonowner-occupied and multi-family commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is generally dependent on sufficient income from the properties securing the loans to cover operating expenses and debt service. The Company generally requires the borrower to have had an existing relationship with the Company and have a proven record of success. In addition, these loans are generally guaranteed by individual owners of the borrower and have typically lower loan to value ratios.

Loans secured by owner-occupied properties represented 45.3% of the outstanding principal balance of the Company’s commercial real estate loans at December 31, 2022. The Company is dependent on the cash flows of the business occupying the property and its owners and requires these loans generally to be secured by property with adequate margins and guaranteed by the individual owners. The Company’s owner-occupied commercial real estate loans collateralized by first liens on real estate typically have fixed interest rates and amortize over a 10 to 20 year period.

Construction and Land Development Loans. The Company makes loans to finance the construction of residential and to a lesser extent nonresidential properties. Construction loans generally are collateralized by first liens on real estate and generally have floating interest rates. Construction and land development real estate loans are usually based upon estimates of costs and estimated value of the completed project and include independent appraisal reviews and a financial analysis of the developers and property owners. The Company generally conducts periodic inspections, either directly or through an agent, prior to approval of periodic draws on these loans. Underwriting guidelines similar to those described above are also used in the Company’s construction lending activities. The Company may be required to fund additional amounts to complete a project and may have to hold the property for an indeterminate period of time. Sources of repayment of these loans may include permanent loans, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are considered to be higher risk than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, general economic conditions and the availability of long-term financing. Credit risk in these loans may be impacted by the creditworthiness of a borrower, property values and the local economies in the Company’s metropolitan area.

Residential Real Estate Loans. The Company’s lending activities also include the origination of 1-4 family residential mortgage loans (including home equity loans) collateralized by owner-occupied residential properties located in the Company’s market areas. The Company offers a variety of mortgage loan portfolio products which have a term of 5 to 7 years and generally amortize over 10 to 30 years. Loans collateralized by 1-4 family residential real estate generally have been originated in amounts of no more than 90% of appraised value. Repayment of these loans is primarily dependent on the personal income and credit rating of the borrowers. Credit risk in these loans can be impacted by economic conditions within the Company’s metropolitan area that might impact either property values or a borrower’s personal income. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a larger number of borrowers.

Consumer and Other Loans. The Company makes a variety of loans to individuals for personal and household purposes including secured and unsecured installment and term loans. Consumer loans are underwritten based on the individual borrower’s income, current debt level, past credit history and the value of any available collateral. Repayment for these loans will come from a borrower’s income source that are typically independent of the loan purpose. The terms of these loans typically range from 12 to 60 months and vary based upon the nature of collateral and size of loan. Credit risk is driven by consumer economic factors, such as, unemployment and general economic conditions in the Company metropolitan area and the creditworthiness of a borrower.

An aging analysis of the recorded investment in past due loans, segregated by class of loans, is included below. For purposes of this and future disclosures recorded investment has been defined as the outstanding loan balances including net deferred loan fees, and excluding accrued interest receivable of $34.1 million and $26.0 million as of December 31, 2022 and 2021, respectively, due to immateriality.


	December 31, 2022
	Loans Past Due and Still Accruing						Nonaccrual Loans		Current Loans		Total Loans
	30-89 Days		90 or More Days		Total Past Due Loans
	(In thousands)
Commercial and industrial	$	1,591	$	—	$	1,591	$	25,297	$	1,428,907	$	1,455,795
Paycheck Protection Program (PPP)	517		—		517		105		12,604		13,226
Real estate:
Commercial real estate (including multi-family residential)	3,222		—		3,222		9,970		3,918,288		3,931,480
Commercial real estate construction and land development	851		—		851		—		1,036,827		1,037,678
1-4 family residential (including home equity)	3,385		—		3,385		9,404		988,167		1,000,956
Residential construction	—		—		—		—		268,150		268,150
Consumer and other	192		—		192		272		47,002		47,466
Total loans	$	9,758	$	—	$	9,758	$	45,048	$	7,699,945	$	7,754,751


	December 31, 2021
	Loans Past Due and Still Accruing						Nonaccrual Loans		Current Loans		Total Loans
	30-89 Days		90 or More Days		Total Past Due Loans
	(In thousands)
Commercial and industrial	$	1,786	$	—	$	1,786	$	8,358	$	683,415	$	693,559
Paycheck Protection Program (PPP)	—		—		—		—		145,942		145,942
Real estate:
Commercial real estate (including multi-family residential)	7,689		—		7,689		12,639		2,084,293		2,104,621
Commercial real estate construction and land development	619		—		619		63		438,443		439,125
1-4 family residential (including home equity)	2,422		—		2,422		2,875		679,774		685,071
Residential construction	1,243		—		1,243		—		116,658		117,901
Consumer and other	23		—		23		192		34,052		34,267
Total loans	$	13,782	$	—	$	13,782	$	24,127	$	4,182,577	$	4,220,486

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt. The Company utilizes a risk rating matrix to assign a risk rating to each of its loans. Loans are rated on a scale of 10 to 90. Risk ratings are updated on an ongoing basis and are subject to change by continuous loan monitoring processes including lending management monitoring, executive management and board committee oversight, and independent credit review. As part of the ongoing monitoring of the credit quality of the Company’s loan portfolio and methodology for calculating the allowance for credit losses, management assigns and tracks certain risk ratings to be used as credit quality indicators including trends related to (1) the weighted-average risk grade of loans, (2) the level of classified loans, (3) the delinquency status of loans, (4) nonperforming loans and (5) the general economic conditions in the our markets. Individual bankers, under the oversight of credit administration, review updated financial information for all pass grade commercial loans to reassess the risk grade on at least an annual basis. When a loan reaches a set of internally designated criteria, including Substandard (60) or higher, a special assets officer will be involved in the monitoring of the loan on an on-going basis.

Special Mention—Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Substandard—Loans classified as substandard have well-defined weaknesses on a continuing basis and are inadequately protected by the current net worth and paying capacity of the borrower, declining collateral values, or a continuing downturn in their industry which is reducing their profits to below zero and having a significantly negative impact on their cash flow. These loans so classified are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.


	As of December 31, 2022																		As of December 31, 2021
	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans		Revolving Loans Converted to Term Loans		Total		Total
	2022		2021		2020		2019		2018		Prior
	(In thousands)
Commercial and industrial
Pass	$	399,592	$	248,344	$	74,568	$	52,910	$	30,696	$	14,169	$	551,642	$	28,270	$	1,400,191	$	659,029
Special Mention	333		830		510		14,067		—		178		3,064		—		18,982		5,724
Substandard	4,490		19,595		2,253		1,613		528		582		7,418		89		36,568		28,705
Doubtful	54		—		—		—		—		—		—		—		54		101
Total commercial and industrial loans	$	404,469	$	268,769	$	77,331	$	68,590	$	31,224	$	14,929	$	562,124	$	28,359	$	1,455,795	$	693,559

Paycheck Protection Program (PPP)
Pass	$	—	$	7,747	$	5,479	$	—	$	—	$	—	$	—	$	—	$	13,226	$	145,942
Special Mention	—		—		—		—		—		—		—		—		—		—
Substandard	—		—		—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—		—		—
Total PPP loans	$	—	$	7,747	$	5,479	$	—	$	—	$	—	$	—	$	—	$	13,226	$	145,942

Commercial real estate (including multi-family residential)
Pass	$	1,362,079	$	877,625	$	508,048	$	374,231	$	294,175	$	367,335	$	43,662	$	17,796	$	3,844,951	$	1,945,542
Special Mention	1,800		3,777		3,038		1,572		4,648		3,348		—		—		18,183		44,850
Substandard	19,666		10,475		10,160		10,138		5,015		12,892		—		—		68,346		114,229
Doubtful	—		—		—		—		—		—		—		—		—		—
Total commercial real estate (including multi-family residential) loans	$	1,383,545	$	891,877	$	521,246	$	385,941	$	303,838	$	383,575	$	43,662	$	17,796	$	3,931,480	$	2,104,621

Commercial real estate construction and land development
Pass	$	512,310	$	340,287	$	62,446	$	41,113	$	15,402	$	5,379	$	48,126	$	78	$	1,025,141	$	429,886
Special Mention	684		—		148		—		—		—		—		—		832		7,331
Substandard	2,840		8,398		92		84		291		—		—		—		11,705		1,908
Doubtful	—		—		—		—		—		—		—		—		—		—
Total commercial real estate construction and land development	$	515,834	$	348,685	$	62,686	$	41,197	$	15,693	$	5,379	$	48,126	$	78	$	1,037,678	$	439,125


	As of December 31, 2022																		As of December 31, 2021
	Term Loans Amortized Cost Basis by Origination Year												Revolving Loans		Revolving Loans Converted to Term Loans		Total		Total
	2022		2021		2020		2019		2018		Prior
	(In thousands)
1-4 family residential (including home equity)
Pass	$	295,280	$	247,733	$	122,495	$	80,306	$	63,757	$	79,076	$	80,345	$	404	$	969,396	$	662,793
Special Mention	60		—		2,041		139		—		199		1,275		—		3,714		5,471
Substandard	1,068		2,317		4,255		3,645		3,530		4,384		7,145		1,502		27,846		16,807
Doubtful	—		—		—		—		—		—		—		—		—		—
Total 1-4 family residential (including home equity)	$	296,408	$	250,050	$	128,791	$	84,090	$	67,287	$	83,659	$	88,765	$	1,906	$	1,000,956	$	685,071

Residential construction
Pass	$	193,124	$	42,085	$	8,022	$	1,299	$	3,164	$	549	$	18,700	$	—	$	266,943	$	116,924
Special Mention	421		—		—		—		—		—		—		—		421		—
Substandard	103		683		—		—		—		—		—		—		786		977
Doubtful	—		—		—		—		—		—		—		—		—		—
Total residential construction	$	193,648	$	42,768	$	8,022	$	1,299	$	3,164	$	549	$	18,700	$	—	$	268,150	$	117,901

Consumer and other
Pass	$	16,500	$	11,151	$	2,967	$	1,035	$	1,171	$	31	$	13,460	$	747	$	47,062	$	34,019
Special Mention	—		43		—		—		—		—		—		—		43		19
Substandard	85		10		—		137		10		—		20		99		361		229
Doubtful	—		—		—		—		—		—		—		—		—		—
Total consumer and other	$	16,585	$	11,204	$	2,967	$	1,172	$	1,181	$	31	$	13,480	$	846	$	47,466	$	34,267

Total loans
Pass	$	2,778,885	$	1,774,972	$	784,025	$	550,894	$	408,365	$	466,539	$	755,935	$	47,295	$	7,566,910	$	3,994,135
Special Mention	3,298		4,650		5,737		15,778		4,648		3,725		4,339		—		42,175		63,395
Substandard	28,252		41,478		16,760		15,617		9,374		17,858		14,583		1,690		145,612		162,855
Doubtful	54		—		—		—		—		—		—		—		54		101
Total loans	$	2,810,489	$	1,821,100	$	806,522	$	582,289	$	422,387	$	488,122	$	774,857	$	48,985	$	7,754,751	$	4,220,486


	Commercial and industrial		Paycheck Protection Program (PPP)		Commercial real estate (including multi-family residential)		Commercial real estate construction and land development		1-4 family residential (including home equity)		Residential construction		Consumer and other		Total
	(In thousands)
Allowance for credit losses on loans:
Balance December 31, 2021	$	16,629	$	—	$	23,143	$	6,263	$	847	$	975	$	83	$	47,940
Allowance on PCD loans	4,559		—		1,040		173		1,563		7		216		7,558
Provision for credit losses on loans	26,175		—		9,013		7,698		304		814		28		44,032
Charge-offs	(7,461)		—		(400)		(72)		(57)		—		(66)		(8,056)
Recoveries	1,334		—		174		59		52		—		87		1,706
Net charge-offs	(6,127)		—		(226)		(13)		(5)		—		21		(6,350)
Balance December 31, 2022	$	41,236	$	—	$	32,970	$	14,121	$	2,709	$	1,796	$	348	$	93,180
Allowance for credit losses on loans:
Balance December 31, 2020	$	17,738	$	—	$	23,934	$	6,939	$	3,279	$	870	$	413	$	53,173
Provision for credit losses on loans	306		—		66		(676)		(2,411)		105		(313)		(2,923)
Charge-offs	(1,579)		—		(857)		—		(21)		—		(24)		(2,481)
Recoveries	164		—		—		—		—		—		7		171
Net charge-offs	(1,415)		—		(857)		—		(21)		—		(17)		(2,310)
Balance December 31, 2021	$	16,629	$	—	$	23,143	$	6,263	$	847	$	975	$	83	$	47,940
Allowance for loan losses:
Balance December 31, 2019	$	8,818	$	—	$	11,170	$	4,421	$	3,852	$	1,057	$	120	$	29,438
Impact of ASC 326 adoption	7,022		—		(5,163)		1,630		1,600		(1)		137		5,225
Provision for loan losses	4,363		—		20,417		3,461		(1,822)		(186)		310		26,543
Charge-offs	(2,938)		—		(2,562)		(2,573)		(351)		—		(159)		(8,583)
Recoveries	473		—		72		—		—		—		5		550
Net charge-offs	(2,465)		—		(2,490)		(2,573)		(351)		—		(154)		(8,033)
Balance December 31, 2020	$	17,738	$	—	$	23,934	$	6,939	$	3,279	$	870	$	413	$	53,173

In addition to the allowance for credit losses on loans, the Company has established an allowance for credit losses on unfunded commitments, classified in other liabilities and adjusted as a provision for credit loss expense. The allowance represents estimates of expected credit losses over the contractual period in which there is exposure to credit risk via a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on the commitments expected to fund. The estimate of commitments expected to fund is informed by historical analysis looking at utilization rates. The expected credit loss rates applied to the commitments expected to fund is informed by the general valuation allowance utilized for outstanding balances with the same underlying assumptions and drivers. The allowance for credit losses on unfunded commitments as of December 31, 2022 and 2021 was $12.0 million and $5.3 million, respectively. This reserve is maintained at a level management believes to be sufficient to absorb losses arising from unfunded loan commitments.

A loan is considered to be collateral dependent when, based upon management's assessment, the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. In such cases, expected credit losses are based on the fair value of the collateral at the measurement date, adjusted for estimated selling costs if satisfaction of the loan depends on the sale of the collateral. The following tables presents the amortized cost basis of collateral dependent loans:


	As of December 31, 2022
	Real Estate		Business Assets		Other		Total
	(In thousands)
Commercial and industrial	$	—	$	18,411	$	30	$	18,441

Paycheck Protection Program (PPP)	—		—		—		—
Real estate:
Commercial real estate (including multi-family residential)	1,612		—		—		1,612
Commercial real estate construction and land development	—		—		—		—
1-4 family residential (including home equity)	3,478		—		—		3,478
Residential construction	—		—		—		—
Consumer and other	—		—		—		—
Total	$	5,090	$	18,411	$	30	$	23,531


	As of December 31, 2021
	Real Estate		Business Assets		Other		Total
	(In thousands)
Commercial and industrial	$	—	$	6,168	$	—	$	6,168

Paycheck Protection Program (PPP)	—		—		—		—
Real estate:
Commercial real estate (including multi-family residential)	5,494		—		—		5,494
Commercial real estate construction and land development	63		—		—		63
1-4 family residential (including home equity)	4,685		—		—		4,685
Residential construction	—		—		—		—
Consumer and other	—		—		158		158
Total	$	10,242	$	6,168	$	158	$	16,568


	As of December 31, 2022
	Nonaccrual Loans with No Related Allowance		Nonaccrual Loans with Related Allowance		Total Nonaccrual Loans
	(In thousands)
Commercial and industrial	$	2,776	$	22,521	$	25,297

Paycheck Protection Program (PPP)	105		—		105
Real estate:
Commercial real estate (including multi-family residential)	8,704		1,266		9,970
Commercial real estate construction and land development	—		—		—
1-4 family residential (including home equity)	4,856		4,548		9,404
Residential construction	—		—		—
Consumer and other	94		178		272
Total loans	$	16,535	$	28,513	$	45,048


	As of December 31, 2021
	Nonaccrual Loans with No Related Allowance		Nonaccrual Loans with Related Allowance		Total Nonaccrual Loans
	(In thousands)
Commercial and industrial	$	1,824	$	6,534	$	8,358

Paycheck Protection Program (PPP)	—		—		—
Real estate:
Commercial real estate (including multi-family residential)	9,018		3,621		12,639
Commercial real estate construction and land development	63		—		63
1-4 family residential (including home equity)	2,324		551		2,875
Residential construction	—		—		—
Consumer and other	158		34		192
Total loans	$	13,387	$	10,740	$	24,127


	As of December 31,
	2022					2021					2020
	Number of Contracts	Pre-Modification of Outstanding Recorded Investment		Post Modification of Outstanding Recorded Investment		Number of Contracts	Pre-Modification of Outstanding Recorded Investment		Post Modification of Outstanding Recorded Investment		Number of Contracts	Pre-Modification of Outstanding Recorded Investment		Post Modification of Outstanding Recorded Investment
	(In thousands)
Troubled Debt Restructurings
Commercial and industrial	14	$	8,859	$	8,859	9	$	2,891	$	2,891	20	$	4,333	$	4,333
Paycheck Protection Program (PPP)	—	—		—		—	—		—		—	—		—
Real estate:
Commercial real estate (including multi-family residential)	7	2,805		2,816		1	545		545		5	4,560		4,560
Commercial real estate construction and land development	—	—		—		—	—		—		1	830		830
1-4 family residential (including home equity)	1	176		176		—	—		—		5	2,051		2,051
Residential construction	—	—		—		—	—		—		—	—		—
Consumer and other	1	45		45		—	—		—		1	30		30
Total	23	$	11,885	$	11,896	10	$	3,436	$	3,436	32	$	11,804	$	11,804

As of December 31, 2022, one loan for a total of $136 thousand was modified under a troubled debt restructuring during the previous twelve-month period that subsequently defaulted during the year 2022. As of December 31, 2021, three loans for a total of $247 thousand were modified under a troubled debt restructuring during the previous twelve-month period that subsequently defaulted during the year 2021. Default is determined at 90 or more days past due. The modifications primarily related to extending the amortization periods of the loans. The Company did not grant principal reductions on any restructured loans. There were no commitments to lend additional amounts for the years 2022 and 2021. During the year ended December 31, 2022, the Company added $11.9 million in new troubled debt restructurings, of which $9.6 million was still outstanding on December 31, 2022. During the year ended December 31, 2021, the Company added $3.4 million in new troubled debt restructurings, of which $2.6 million was still outstanding on December 31, 2021.