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Loans
 12 Months Ended
Dec. 31, 2023
Receivables [Abstract]  
Loans Loans
Loans held-for-investment by portfolio type consist of the following as of December 31,:
20232022
Commercial and industrial$2,467,688 $2,310,929 
Commercial real estate:
Non-owner occupied812,235 779,546 
Owner occupied635,365 636,272 
Construction and land345,430 327,817 
Multifamily103,066 102,068 
Total commercial real estate1,896,096 1,845,703 
Residential real estate1,110,610 1,003,931 
Public finance602,913 590,284 
Consumer36,371 42,588 
Other153,418 118,397 
Total loans$6,267,096 $5,911,832 
Allowance for credit losses(80,398)(65,917)
Loans, net of allowance for credit losses$6,186,698 $5,845,915 
As of December 31, 2023 and 2022, we had net deferred fees, costs, premiums and discounts of $12,859 and $17,101, respectively, on our loan portfolio.
Accrued interest receivable on loans totaled $34,879 and $26,494 at December 31, 2023 and 2022, respectively, and is included in accrued interest receivable in the accompanying consolidated balance sheets.
The following table presents the activity in the allowance for credit losses by portfolio type for the years ended December 31,:
Commercial
and
Industrial		Commercial
Real
Estate		Residential
Real
Estate		Public
Finance		ConsumerOtherTotal
2023
Allowance for credit losses:
Balance, beginning of period$40,785 $19,754 $2,963 $1,664 $352 $399 $65,917 
Impact of adopting
ASC 326
(13,583)3,867 10,256 3,890 249 577 5,256 
Provision for (benefit from) credit losses10,445 3,996 2,457 (217)400 (46)17,035 
Loans charged-off(9,242)(83)(13)— (334)— (9,672)
Recoveries1,118 12 682 — 50 — 1,862 
Balance, end of period$29,523 $27,546 $16,345 $5,337 $717 $930 $80,398 
2022
Allowance for credit losses:
Balance, beginning of period$31,622 $13,198 $836 $1,544 $235 $112 $47,547 
Provision for (benefit from) credit losses9,248 6,168 2,028 120 199 287 18,050 
Loans charged-off(2,321)— (122)— (144)— (2,587)
Recoveries2,236 388 221 — 62 — 2,907 
Balance, end of period$40,785 $19,754 $2,963 $1,664 $352 $399 $65,917 
2021
Allowance for credit losses:
Balance, beginning of period$29,235 $14,033 $1,435 $2,604 $288 $171 $47,766 
Provision for credit losses5,136 (488)(581)(1,060)52 (59)3,000 
Loans charged-off(4,296)(375)(42)— (148)— (4,861)
Recoveries1,547 28 24 — 43 — 1,642 
Balance, end of period$31,622 $13,198 $836 $1,544 $235 $112 $47,547 
We determine the allowance for credit losses estimate on at least a quarterly basis.
As of December 31, 2023 and 2022, we had an allowance for credit losses on unfunded commitments of $2,309 and $1,313, respectively. For the years ended December 31, 2023, 2022 and 2021, we recorded a provision for credit losses on unfunded commitments of $1,212, $525 and $300, respectively.
The following table presents our loan portfolio aging analysis as of December 31,:
Loans
Not
Past Due		Loans
30-59 Days
Past Due		Loans
60-89 Days
Past Due		Loans Greater
than 90 Days
Past Due,
Still Accruing		NonaccrualTotal
2023
Commercial and industrial (1)$2,420,775 $10,117 $3,782 $25,010 $8,004 $2,467,688 
Commercial real estate:
Non-owner occupied796,477 1,063 10,851 — 3,844 812,235 
Owner occupied626,424 8,269 — 638 34 635,365 
Construction and land345,245 — — — 185 345,430 
Multifamily103,066 — — — — 103,066 
Total commercial real estate1,871,212 9,332 10,851 638 4,063 1,896,096 
Residential real estate1,065,438 19,261 3,330 168 22,413 1,110,610 
Public Finance602,913 — — — — 602,913 
Consumer36,357 4 — — 10 36,371 
Other141,794 8,787 — — 2,837 153,418 
Total loans$6,138,489 $47,501 $17,963 $25,816 $37,327 $6,267,096 
2022
Commercial and industrial$2,298,207 $2,409 $819 $— $9,494 $2,310,929 
Commercial real estate:
Non-owner occupied773,042 4,356 — — 2,148 779,546 
Owner occupied630,335 — — — 5,937 636,272 
Construction and land324,888 2,632 99 — 198 327,817 
Multifamily102,068 — — — — 102,068 
Total commercial real estate1,830,333 6,988 99 — 8,283 1,845,703 
Residential real estate974,450 17,231 1,524 98 10,628 1,003,931 
Public Finance590,284 — — — — 590,284 
Consumer42,434 58 3 — 93 42,588 
Other117,926 — — — 471 118,397 
Total loans$5,853,634 $26,686 $2,445 $98 $28,969 $5,911,832 
(1) Loans greater than 90 days past due, still accruing relates primarily to one borrower relationship where interest was paid current in February 2024. Contractual principal payments related to this borrower relationship were deferred until March 15, 2024. This deferral was not significant.
Interest income recorded on nonperforming loans was not material for the years ended December 31, 2023, 2022 and 2021.
Credit risk monitoring and management is a continuous process to manage the quality of the loan portfolio. We segment loans into risk categories based on relevant borrower risk profile information, including the ability to service their debt based on current financial information, historical payment experience, credit documentation, public information and current economic trends among other factors. The risk rating system is used as a tool to analyze and monitor movements in loan portfolio quality.
Risk ratings meeting an internally specified exposure threshold are updated annually, or more frequently upon the occurrence of a circumstance that affects the credit risk of the loan. We use the following definitions for risk ratings:
Pass – Loans classified as Pass have a well-defined primary source of repayment, an acceptable financial position profile (including capitalization), profitability and minimal operating risk.
Pass/Watch – Pass/Watch loans require close attention by bank management and enhanced monitoring due to quantitative or qualitative concerns linked to adverse trends or near-term uncertainty. A covenant default or other type of requirement shortfall may have arisen subsequent to a loan's booking or borrower now shows signs of weakness in the overall base of confirmable financial resources available to repay the loan. However, overall financial capacity & performance are considered sufficient to support an expectation of continued payment performance and / or mitigating factors exist that are expected to limit the risk of near term default and loss.
Special Mention – Special Mention loans have identified potential weaknesses that are of sufficient materiality to require management’s (persistent) close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the bank's credit position under normal business operations. Special Mention loans contain greater than acceptable risk to warrant increases in credit exposure and are thus considered “criticized”, non-pass rated credits. They may contain weaknesses (that have arisen due to deteriorating conditions since origination) and / or underwriting exceptions that are not currently offset by mitigating factors. However, these weaknesses, while sufficient to constitute significantly elevated credit risk, are not sufficient to support a conclusion that the liquidation of the debt is in significant jeopardy.
Substandard - Accruing – Substandard - Accruing loans are inadequately protected by the current sound net worth and paying capacity of the obligor(s). Loans classified as Substandard - Accruing possess one or more well-defined weaknesses that are expected to jeopardize their liquidation but the weaknesses have not progressed to a point where recent late payments on the loan have become more than 90 days past due. These loans are characterized by the distinct possibility that the bank may sustain up to a moderate but not significant level of loss if such weaknesses are not corrected. Losses for Substandard - Accruing loans are moderated by the lower likelihood of ultimate default and the existence of relatively favorable secondary repayment protection. These loans are considered “nonperforming”.
Substandard - Nonaccrual – Substandard - Nonaccrual loans are inadequately protected by the current sound net worth and paying capacity of the obligor or the collateral pledged, if any. Loans classified as Substandard - Nonaccrual possess material, well-defined weaknesses that are expected to jeopardize their liquidation and have progressed to a point where consistently late payments on the loan have become more than 90 or more days past due. These loans are characterized by the distinct possibility that the bank may sustain a material level of loss if such weaknesses are not corrected. Losses for Substandard - Nonaccrual loans are prone to being elevated based on the strong likelihood of the loan remaining in payment default and an undesirable level of secondary repayment protection. These loans are considered “nonperforming”.
Doubtful – Loans classified as Doubtful possess all of the weaknesses inherent in loans classified as Substandard - Nonaccrual with the added characteristic that the weaknesses make collection or liquidation in full highly questionable or improbable based on currently existing facts, conditions and values. A high probability of substantial loss or possible total loss exists. Loans rated as doubtful are not rated as loss because certain events may occur that could salvage at least a portion of the debt. These events include injections of capital, additions of pledged collateral or possible mezzanine debt refinancing options. However, without the occurrence of such events, total loss may be possible. No definite repayment schedule exists for these loans. The Doubtful grade is a temporary grade. If a near term recovery of a portion of the loan balance is indeterminable or unlikely to occur, the remaining balance of the loan should be written off and possible future recoveries may partially offset the full write-off of the loan. These loans are considered “nonperforming”.
Loss – Loans classified as Loss are defaulted loans with limited or immaterial recovery prospects. No loan that has not yet defaulted should be classified at this grade level. This rating level tends to be very short lived as the full balance of the loan tends to be fully written off nearly immediately after a change to this rating level. These loans are considered “nonperforming”.
The following table present the amortized costs by segment of loans by risk category and origination date as of December 31, 2023:
20232022202120202019PriorRevolving Loans Converted to TermRevolvingTotal
Commercial and industrial:
Pass$384,720 $432,903 $342,394 $143,636 $41,667 $39,972 $39,098 $786,059 $2,210,449 
Pass/Watch4,052 2,543 18,832 4,595 1,603 2,441 1,273 93,951 129,290 
Special Mention3,759 47,071 2,253 2,281 659 731 3,334 6,729 66,817 
Substandard - Accruing2,992 362 33,625 4,316 1,338 3,542 3,044 3,909 53,128 
Substandard - Nonaccrual— — 690 4,122 1,110 364 96 248 6,630 
Doubtful— — — 490 547 33 304 — 1,374 
Total commercial and industrial$395,523 $482,879 $397,794 $159,440 $46,924 $47,083 $47,149 $890,896 $2,467,688 
Gross charge-offs$— $— $2,786 $3,096 $— $368 $2,992 $— $9,242 
Commercial real estate:
Non-owner occupied:
Pass$55,581 $117,162 $136,361 $116,402 $60,535 $176,308 $19,256 $71,322 $752,927 
Pass/Watch— — — 3,791 6,342 24,620 1,277 — 36,030 
Special Mention2,717 — — — — — 1,582 — 4,299 
Substandard - Accruing— 3,561 — 1,880 — 9,694 — — 15,135 
Substandard - Nonaccrual— — — — — 3,844 — — 3,844 
Total non-owner occupied$58,298 $120,723 $136,361 $122,073 $66,877 $214,466 $22,115 $71,322 $812,235 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Owner occupied:
Pass$87,167 $83,308 $105,935 $102,885 $64,134 $123,199 $2,961 $6,103 $575,692 
Pass/Watch600 902 — 15,541 2,896 2,520 — 1,615 24,074 
Special Mention— 493 5,745 306 1,092 2,834 — — 10,470 
Substandard - Accruing2,295 460 1,204 3,027 2,259 15,850 — — 25,095 
Substandard - Nonaccrual— — — — — 34 — — 34 
Total owner occupied$90,062 $85,163 $112,884 $121,759 $70,381 $144,437 $2,961 $7,718 $635,365 
Gross charge-offs$— $— $— $— $— $83 $— $— $83 
Construction & land:
Pass$44,496 $171,411 $32,176 $28,221 $13,459 $8,718 $21,600 $1,913 $321,994 
Pass/Watch— — 13,036 6,541 — 15 — — 19,592 
Special Mention— — 1,381 2,278 — — — — 3,659 
Substandard - Nonaccrual— — — 185 — — — — 185 
Total construction & land$44,496 $171,411 $46,593 $37,225 $13,459 $8,733 $21,600 $1,913 $345,430 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Multifamily:
Pass$1,359 $36,852 $36,537 $12,838 $2,716 $5,885 $— $5,574 $101,761 
Special Mention— — — — 1,305 — — — 1,305 
Total multifamily$1,359 $36,852 $36,537 $12,838 $4,021 $5,885 $— $5,574 $103,066 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
20232022202120202019PriorRevolving Loans Converted to TermRevolvingTotal
Total commercial real estate:
Pass$188,603 $408,733 $311,009 $260,346 $140,844 $314,110 $43,817 $84,912 $1,752,374 
Pass/Watch600 902 13,036 25,873 9,238 27,155 1,277 1,615 79,696 
Special Mention2,717 493 7,126 2,584 2,397 2,834 1,582 — 19,733 
Substandard - Accruing2,295 4,021 1,204 4,907 2,259 25,544 — — 40,230 
Substandard - Nonaccrual— — — 185 — 3,878 — — 4,063 
Total commercial real estate:$194,215 $414,149 $332,375 $293,895 $154,738 $373,521 $46,676 $86,527 $1,896,096 
Gross charge-offs$— $— $— $— $— $83 $— $— $83 
Residential real estate:
Pass$153,327 $573,624 $116,695 $38,309 $38,121 $141,216 $1,857 $13,540 $1,076,689 
Pass/Watch155 1,181 28 — 269 4,667 176 — 6,476 
Special Mention— — — — 254 1,465 — — 1,719 
Substandard - Accruing— 3,199 — — — 114 — — 3,313 
Substandard - Nonaccrual— 6,704 3,169 2,214 4,009 6,267 16 34 22,413 
Total residential real estate$153,482 $584,708 $119,892 $40,523 $42,653 $153,729 $2,049 $13,574 $1,110,610 
Gross charge-offs$— $— $— $13 $— $— $— $— $13 
Public Finance:
Pass$37,074 $— $43,512 $174,907 $201,575 $135,326 $— $3,051 $595,445 
Substandard - Accruing— — — — 7,468 — — — 7,468 
Total public finance$37,074 $— $43,512 $174,907 $209,043 $135,326 $— $3,051 $602,913 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Consumer:
Pass$3,232 $2,183 $5,347 $9,414 $3,482 $2,555 $2 $9,491 $35,706 
Pass/Watch— 53 108 99 145 153 1 46 605 
Special Mention— — 13 7 — — — — 20 
Substandard - Accruing— — — — — — 30 — 30 
Substandard - Nonaccrual— 4 6 — — — — — 10 
Total consumer$3,232 $2,240 $5,474 $9,520 $3,627 $2,708 $33 $9,537 $36,371 
Gross charge-offs$— $— $11 $8 $111 $32 $3 $169 $334 
Other:
Pass$5,890 $7,802 $13,198 $806 $282 $10,227 $4,859 $100,183 $143,247 
Pass/Watch— — 7,334 — — — — — 7,334 
Substandard - Nonaccrual— — — — 2,391 — 446 — 2,837 
Total other$5,890 $7,802 $20,532 $806 $2,673 $10,227 $5,305 $100,183 $153,418 
Gross charge-offs$— $— $— $— $— $— $— $— $— 
Total loans:
Pass$772,846 $1,425,245 $832,155 $627,418 $425,971 $643,406 $89,633 $997,236 $5,813,910 
Pass/Watch4,807 4,679 39,338 30,567 11,255 34,416 2,727 95,612 223,401 
Special Mention6,476 47,564 9,392 4,872 3,310 5,030 4,916 6,729 88,289 
Substandard - Accruing5,287 7,582 34,829 9,223 11,065 29,200 3,074 3,909 104,169 
Substandard - Nonaccrual— 6,708 3,865 6,521 7,510 10,509 558 282 35,953 
Doubtful— — — 490 547 33 304 — 1,374 
Total loans$789,416 $1,491,778 $919,579 $679,091 $459,658 $722,594 $101,212 $1,103,768 $6,267,096 
Gross charge-offs$— $— $2,797 $3,117 $111 $483 $2,995 $169 $9,672 
The following table presents the credit risk profile of our loan portfolio, gross of deferred costs, fees, premiums and discounts, based on our rating categories as of December 31, 2022, which is prior to the adoption of ASU 2016-13 on January 1, 2023 and continue to be reported under ASC 310, Receivables. We categorized loans into risk categories based on relevant information about the ability of borrowers to service their debt including current financial information, historical payment experience, credit documentation, public information and current economic trends among other factors. This risk rating system was used as a tool to analyze and monitor loan portfolio quality. Risk ratings meeting an internally specified exposure threshold were updated annually, or more frequently upon the occurrence of a circumstance that affected the credit risk of the loan. We use the following definitions for risk ratings:
Substandard - loans are considered “classified” and have a well-defined weakness, or weaknesses, such as loans that are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans are also characterized by the distinct possibility of loss in the future if the deficiencies are not corrected.
Doubtful - loans are considered “classified” and have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. There were loans totaling $45 categorized as doubtful as of December 31, 2022.
Non-ClassifiedClassifiedTotal
Commercial and industrial$2,969,786 $55,288 $3,025,074 
Commercial real estate1,715,415 37,945 1,753,360 
Residential real estate1,096,108 10,685 1,106,793 
Consumer43,592 114 43,706 
Total loans$5,824,901 $104,032 $5,928,933 
The following table presents information about collateral dependent loans that were individually evaluated for purposes of determining the ACL as of December 31,:
Collateral Dependent Loans
With Allowance		Collateral Dependent Loans
With No Related Allowance		Total Collateral Dependent Loans
Amortized CostRelated AllowanceAmortized CostAmortized CostRelated Allowance
2023
Commercial & industrial$5,084 $2,328 $2,920 $8,004 $2,328 
Commercial real estate:
Non-owner occupied— — 3,844 3,844 — 
Owner occupied— — 34 34 — 
Construction and land— — 185 185 — 
Total commercial real estate— — 4,063 4,063 — 
Residential real estate1,551 103 20,862 22,413 103 
Consumer10 10 — 10 10 
Other2,391 102 446 2,837 102 
Total loans$9,036 $2,543 $28,291 $37,327 $2,543 
2022
Commercial & industrial$6,330 $1,101 $3,164 $9,494 $1,101 
Commercial real estate:
Non-owner occupied115 36 2,033 2,148 36 
Owner occupied681 153 5,256 5,937 153 
Construction and land— — 198 198 — 
Total commercial real estate796 189 7,487 8,283 189 
Residential real estate836 34 9,779 10,615 34 
Consumer91 88 — 91 88 
Other— — 475 475 — 
Total loans$8,053 $1,412 $20,905 $28,958 $1,412 
The allowance related to collateral dependent loans reported in the tables above includes qualitative adjustments applied to the loan portfolio that consider possible changes in circumstances that could ultimately impact credit losses and might not be reflected in historical data or forecasted data incorporated in the quantitative models.
Loan Modifications Made to Borrowers Experiencing Financial Difficulty:
The allowance for credit losses incorporates an estimate of lifetime expected credit losses and is recorded on each asset upon origination. 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 PD/LGD model to determine the allowance for credit losses. An assessment of whether a borrower is experiencing financial difficulty is made at the time of a modification. The loan modifications in the table below did not significantly impact our determination of the allowance for credit losses on loans during 2023.
Because the effect of most modifications made to borrowers experiencing financial difficulty is already included in the allowance for credit losses, a change to the allowance for credit losses is generally not recorded upon modification. Occasionally, the Company modifies loans by providing principal forgiveness that 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. Additionally, the Company may allow a loan to go interest only for a specified period of time.
The following table presents loan modifications that were experiencing financial difficulty during 2023, segregated by modification type, regardless of whether such modifications resulted in a new loan.
Payment
Delay		Interest Rate Reduction% of
Total Class
of Loans
Commercial and industrial$292 $— — %
Commercial real estate:
Non-owner occupied— — — %
Owner occupied— 1,145 0.2 %
Construction and land— — — %
Multifamily— — — %
Total commercial real estate— 1,145 0.2 %
Residential real estate— — — %
Public finance— — — %
Consumer— — — %
Other— — — %
Total loans$292 $1,145 0.2 %
There were no commitments to lend additional funds to these borrowers at December 31, 2023.
The financial effects of our loan modifications made to borrowers experiencing financial difficulty during 2023 were not significant.
We closely monitor the performance of loan modifications made to borrowers experiencing financial difficulty to understand the effectiveness of the modification efforts. There were no loans past due that have been modified in the last 12 months. There is one commercial and industrial loan totaling $292 on nonaccrual status that has been modified in the last 12 months.