Allowance for Credit Losses

12 Months Ended

Dec. 31, 2022

Allowance for Credit Losses

Allowance for Credit Losses

5. Allowance for Credit Losses

The Company maintains an ACL that is deducted from the amortized cost basis of loans and leases to present the net carrying value of loans and leases expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectibility of the reported amount of loans and leases.

The Company also maintains an estimated reserve for unfunded commitments on the consolidated balance sheets. The reserve for unfunded commitments is reduced in the period in which the off-balance sheet financial instruments expire, loan funding occurs, or is otherwise settled.

Rollforward of the Allowance for Credit Losses

The following presents the activity in the ACL by class of loans and leases for the years ended December 31, 2022, 2021 and 2020:

	Year Ended December 31, 2022
	Commercial Lending								Residential Lending
	Commercial		Commercial								Home
	and		Real				Lease		Residential		Equity
(dollars in thousands)	Industrial		Estate		Construction		Financing		Mortgage		Line		Consumer		Total
Allowance for credit losses:
Balance at beginning of year	$	20,080	$	42,951	$	9,773	$	1,659	$	34,364	$	5,642	$	42,793	$	157,262
Charge-offs		(2,012)		(750)		—		—		(103)		(1,175)		(16,848)		(20,888)
Recoveries		897		14		—		60		418		713		7,545		9,647
Provision		(4,401)		1,595		(3,930)		(168)		496		3,116		1,171		(2,121)
Balance at end of year	$	14,564	$	43,810	$	5,843	$	1,551	$	35,175	$	8,296	$	34,661	$	143,900

	Year Ended December 31, 2021
	Commercial Lending								Residential Lending
	Commercial		Commercial								Home
	and		Real				Lease		Residential		Equity
(dollars in thousands)	Industrial		Estate		Construction		Financing		Mortgage		Line		Consumer		Total
Allowance for credit losses:
Balance at beginning of year	$	24,711	$	58,123	$	10,039	$	3,298	$	40,461	$	7,163	$	64,659	$	208,454
Charge-offs		(5,949)		(66)		—		—		(632)		(342)		(16,634)		(23,623)
Recoveries		867		39		266		—		261		117		9,600		11,150
Provision		451		(15,145)		(532)		(1,639)		(5,726)		(1,296)		(14,832)		(38,719)
Balance at end of year	$	20,080	$	42,951	$	9,773	$	1,659	$	34,364	$	5,642	$	42,793	$	157,262

	Year Ended December 31, 2020
	Commercial Lending								Residential Lending
	Commercial		Commercial								Home
	and		Real				Lease		Residential		Equity
(dollars in thousands)	Industrial		Estate		Construction		Financing		Mortgage		Line		Consumer		Unallocated		Total
Allowance for credit losses:
Balance at beginning of year	$	28,975	$	22,325	$	4,844	$	424	$	29,303	$	9,876	$	34,644	$	139	$	130,530
Adoption of ASU No. 2016-13		(16,105)		10,559		(1,803)		207		(2,793)		(4,731)		15,575		(139)		770
Charge-offs		(15,572)		(2,753)		(379)		—		(14)		(54)		(28,791)		—		(47,563)
Recoveries		5,005		615		200		—		216		167		10,499		—		16,702
Provision		22,408		27,377		7,177		2,667		13,749		1,905		32,732		—		108,015
Balance at end of year	$	24,711	$	58,123	$	10,039	$	3,298	$	40,461	$	7,163	$	64,659	$	—	$	208,454

Rollforward of the Reserve for Unfunded Commitments

The following presents the activity in the Reserve for Unfunded Commitments for the years ended December 31, 2022, 2021 and 2020:

	Year Ended December 31, 2022
	Commercial Lending								Residential Lending
	Commercial		Commercial								Home
	and		Real				Lease		Residential		Equity
(dollars in thousands)	Industrial		Estate		Construction		Financing		Mortgage		Line		Consumer		Total
Reserve for unfunded commitments:
Balance at beginning of year	$	8,615	$	2,114	$	8,963	$	—	$	15	$	10,546	$	69	$	30,322
Provision		(804)		(110)		(1,493)		—		15		5,937		(32)		3,513
Balance at end of year	$	7,811	$	2,004	$	7,470	$	—	$	30	$	16,483	$	37	$	33,835

	Year Ended December 31, 2021
	Commercial Lending								Residential Lending
	Commercial		Commercial								Home
	and		Real				Lease		Residential		Equity
(dollars in thousands)	Industrial		Estate		Construction		Financing		Mortgage		Line		Consumer		Total
Reserve for unfunded commitments:
Balance at beginning of year	$	11,719	$	1,328	$	9,037	$	—	$	2	$	8,452	$	65	$	30,603
Provision		(3,104)		786		(74)		—		13		2,094		4		(281)
Balance at end of year	$	8,615	$	2,114	$	8,963	$	—	$	15	$	10,546	$	69	$	30,322

	Year Ended December 31, 2020
	Commercial Lending								Residential Lending
	Commercial		Commercial								Home
	and		Real				Lease		Residential		Equity
(dollars in thousands)	Industrial		Estate		Construction		Financing		Mortgage		Line		Consumer		Total
Reserve for unfunded commitments:
Balance at beginning of year	$	—	$	—	$	—	$	—	$	—	$	—	$	600	$	600
Adoption of ASU No. 2016-13		5,390		778		4,119		—		7		6,587		(581)		16,300
Provision		6,329		550		4,918		—		(5)		1,865		46		13,703
Balance at end of year	$	11,719	$	1,328	$	9,037	$	—	$	2	$	8,452	$	65	$	30,603

Credit Quality Information

The Company performs an internal loan review and grading or scoring procedures on an ongoing basis. The review provides management with periodic information as to the quality of the loan portfolio and effectiveness of the Company’s lending policies and procedures. The objective of the loan review and grading or scoring procedures is to identify, in a timely manner, existing or emerging credit quality issues so that appropriate steps can be initiated to avoid or minimize future losses.

Loans and leases subject to grading primarily include: commercial and industrial loans, commercial real estate loans, construction loans and lease financing. Other loans subject to grading include installment loans to businesses or individuals for business and commercial purposes, overdraft lines of credit, commercial credit cards, and other credits as may be determined. Credit quality indicators for internally graded loans and leases are generally updated on an annual basis or on a quarterly basis for those loans and leases deemed to be of potentially higher risk.

An internal credit risk rating system is used to determine loan grade and is based on borrower credit risk and transactional risk. The loan grading process is a mechanism used to determine the risk of a particular borrower and is based on the following factors of a borrower: character, earnings and operating cash flow, asset and liability structure, debt capacity, management and controls, borrowing entity, and industry and operating environment.

Pass – “Pass” (uncriticized) loans and leases are not considered to carry greater than normal risk. The borrower has the apparent ability to satisfy obligations to the Company, and therefore no loss in ultimate collection is anticipated.

Special Mention – Loans and leases that have potential weaknesses that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for assets or in the institution’s credit position at some future date. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant adverse classification.

Substandard – Loans and leases that are inadequately protected by the current financial condition and paying capacity of the obligor or by any collateral pledged. Loans and leases so classified must have a well-defined weakness or weaknesses that jeopardize the collection of the debt. They are characterized by the distinct possibility that the bank may sustain some loss if the deficiencies are not corrected.

Doubtful – Loans and leases that have weaknesses found in substandard borrowers with the added provision that the weaknesses make collection of debt in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loss – Loans and leases classified as loss are considered uncollectible and of such little value that their continuance as an asset is not warranted. This classification does not mean that the loan or lease has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be effected in the future.

Loans that are primarily monitored for credit quality using FICO scores include: residential mortgage loans, home equity lines and consumer loans. FICO scores are calculated primarily based on a consideration of payment history, the current amount of debt, the length of credit history available, a recent history of new sources of credit and the mix of credit type. FICO scores are updated on a monthly, quarterly or bi-annual basis, depending on the product type.

The amortized cost basis by year of origination and credit quality indicator of the Company's loans and leases as of December 31, 2022 was as follows:

															Revolving
															Loans
															Converted
	Term Loans												Revolving		to Term
	Amortized Cost Basis by Origination Year												Loans		Loans
													Amortized		Amortized
(dollars in thousands)	2022		2021		2020		2019		2018		Prior		Cost Basis		Cost Basis		Total
Commercial Lending
Commercial and Industrial
Risk rating:
Pass	$	359,881	$	422,567	$	54,656	$	170,222	$	51,476	$	137,257	$	894,384	$	15,715	$	2,106,158
Special Mention		2,059		240		1,371		2,643		184		1,431		22,897		378		31,203
Substandard		625		289		1,117		1,092		668		885		14,733		65		19,474
Other (1)		17,679		7,721		4,329		3,965		1,881		1,167		42,320		—		79,062
Total Commercial and Industrial		380,244		430,817		61,473		177,922		54,209		140,740		974,334		16,158		2,235,897
Commercial Real Estate
Risk rating:
Pass		889,583		695,882		319,838		565,587		395,474		1,173,163		48,081		—		4,087,608
Special Mention		170		—		555		14,878		512		11,398		675		—		28,188
Substandard		—		—		173		—		1,704		14,485		—		—		16,362
Other (1)		—		—		—		—		—		151		—		—		151
Total Commercial Real Estate		889,753		695,882		320,566		580,465		397,690		1,199,197		48,756		—		4,132,309
Construction
Risk rating:
Pass		124,464		261,536		96,423		97,000		88,973		84,704		25,957		—		779,057
Special Mention		—		—		—		221		—		—		—		—		221
Substandard		—		—		—		—		21		490		—		—		511
Other (1)		29,694		21,339		4,686		2,201		3,784		2,196		954		—		64,854
Total Construction		154,158		282,875		101,109		99,422		92,778		87,390		26,911		—		844,643
Lease Financing
Risk rating:
Pass		113,563		24,052		43,497		37,502		6,004		67,687		—		—		292,305
Special Mention		—		411		2,498		1,299		—		—		—		—		4,208
Substandard		—		—		197		12		11		1,357		—		—		1,577
Total Lease Financing		113,563		24,463		46,192		38,813		6,015		69,044		—		—		298,090
Total Commercial Lending	$	1,537,718	$	1,434,037	$	529,340	$	896,622	$	550,692	$	1,496,371	$	1,050,001	$	16,158	$	7,510,939

(continued)

															Revolving
															Loans
															Converted
	Term Loans												Revolving		to Term
	Amortized Cost Basis by Origination Year												Loans		Loans
(continued)													Amortized		Amortized
(dollars in thousands)	2022		2021		2020		2019		2018		Prior		Cost Basis		Cost Basis		Total
Residential Lending
Residential Mortgage
FICO:
740 and greater	$	557,636	$	1,064,444	$	560,463	$	245,241	$	165,258	$	920,100	$	—	$	—	$	3,513,142
680 - 739		73,929		112,672		82,416		40,355		22,126		130,508		—		—		462,006
620 - 679		12,320		13,804		9,881		3,649		3,054		35,441		—		—		78,149
550 - 619		2,455		2,246		1,791		263		601		6,955		—		—		14,311
Less than 550		—		1,321		367		—		966		5,304		—		—		7,958
No Score (3)		22,289		14,671		6,820		10,599		15,921		47,245		—		—		117,545
Other (2)		18,970		18,211		15,287		9,201		9,124		29,128		9,202		554		109,677
Total Residential Mortgage		687,599		1,227,369		677,025		309,308		217,050		1,174,681		9,202		554		4,302,788
Home Equity Line
FICO:
740 and greater		—		—		—		—		—		—		817,123		2,059		819,182
680 - 739		—		—		—		—		—		—		171,117		2,714		173,831
620 - 679		—		—		—		—		—		—		45,368		2,100		47,468
550 - 619		—		—		—		—		—		—		7,485		1,029		8,514
Less than 550		—		—		—		—		—		—		1,151		481		1,632
No Score (3)		—		—		—		—		—		—		4,724		—		4,724
Total Home Equity Line		—		—		—		—		—		—		1,046,968		8,383		1,055,351
Total Residential Lending		687,599		1,227,369		677,025		309,308		217,050		1,174,681		1,056,170		8,937		5,358,139
Consumer Lending
FICO:
740 and greater		200,887		111,047		53,534		43,912		24,951		8,432		125,126		185		568,074
680 - 739		99,787		67,140		37,260		31,751		15,874		7,665		72,101		514		332,092
620 - 679		25,949		29,587		14,226		16,872		9,672		6,488		31,854		937		135,585
550 - 619		3,017		5,475		5,226		8,056		5,396		3,924		11,269		854		43,217
Less than 550		656		1,351		2,286		3,779		1,869		1,593		3,541		443		15,518
No Score (3)		3,205		258		—		51		24		29		38,805		227		42,599
Other (2)		1,615		4,082		353		1,368		—		—		78,430		1		85,849
Total Consumer Lending		335,116		218,940		112,885		105,789		57,786		28,131		361,126		3,161		1,222,934
Total Loans and Leases	$	2,560,433	$	2,880,346	$	1,319,250	$	1,311,719	$	825,528	$	2,699,183	$	2,467,297	$	28,256	$	14,092,012

(1) Other credit quality indicators used for monitoring purposes are primarily FICO scores. The majority of the loans in this population were originated to borrowers with a prime FICO score.

(2) Other credit quality indicators used for monitoring purposes are primarily internal risk ratings. The majority of the loans in this population were graded with a “Pass” rating.

(3) No FICO scores are primarily related to loans and leases extended to non-residents. Loans and leases of this nature are primarily secured by collateral and/or are closely monitored for performance.

The amortized cost basis by year of origination and credit quality indicator of the Company's loans and leases as of December 31, 2021 was as follows:

															Revolving
															Loans
															Converted
	Term Loans												Revolving		to Term
	Amortized Cost Basis by Origination Year												Loans		Loans
													Amortized		Amortized
(dollars in thousands)	2021		2020		2019		2018		2017		Prior		Cost Basis		Cost Basis		Total
Commercial Lending
Commercial and Industrial
Risk rating:
Pass	$	623,098	$	129,665	$	223,388	$	88,409	$	29,380	$	168,591	$	644,947	$	40,193	$	1,947,671
Special Mention		397		4,382		4,213		12,552		974		5,313		4,804		986		33,621
Substandard		354		1,380		1,951		1,285		60		3,551		17,893		1,043		27,517
Other (1)		13,277		7,070		7,741		4,453		1,995		370		43,384		—		78,290
Total Commercial and Industrial		637,126		142,497		237,293		106,699		32,409		177,825		711,028		42,222		2,087,099
Commercial Real Estate
Risk rating:
Pass		693,370		338,140		533,887		487,739		415,186		940,732		78,479		14,891		3,502,424
Special Mention		—		—		48,499		7,470		25,513		30,255		7,600		—		119,337
Substandard		—		—		—		1,776		164		15,303		459		—		17,702
Other (1)		—		—		—		—		—		160		—		—		160
Total Commercial Real Estate		693,370		338,140		582,386		496,985		440,863		986,450		86,538		14,891		3,639,623
Construction
Risk rating:
Pass		154,558		107,767		210,314		155,311		62,770		48,021		22,859		—		761,600
Special Mention		—		—		244		707		—		356		—		—		1,307
Substandard		—		—		—		363		—		839		—		—		1,202
Other (1)		26,835		8,875		4,317		4,308		2,684		2,048		793		—		49,860
Total Construction		181,393		116,642		214,875		160,689		65,454		51,264		23,652		—		813,969
Lease Financing
Risk rating:
Pass		33,980		60,650		48,236		9,449		15,009		57,130		—		—		224,454
Special Mention		501		2,702		1,506		311		153		—		—		—		5,173
Substandard		—		270		140		16		871		470		—		—		1,767
Total Lease Financing		34,481		63,622		49,882		9,776		16,033		57,600		—		—		231,394
Total Commercial Lending	$	1,546,370	$	660,901	$	1,084,436	$	774,149	$	554,759	$	1,273,139	$	821,218	$	57,113	$	6,772,085

															Revolving
															Loans
															Converted
	Term Loans												Revolving		to Term
	Amortized Cost Basis by Origination Year												Loans		Loans
(continued)													Amortized		Amortized
(dollars in thousands)	2021		2020		2019		2018		2017		Prior		Cost Basis		Cost Basis		Total
Residential Lending
Residential Mortgage
FICO:
740 and greater	$	1,101,958	$	635,061	$	286,993	$	198,622	$	251,906	$	829,175	$	—	$	—	$	3,303,715
680 - 739		140,997		81,590		45,163		27,315		32,855		125,906		—		—		453,826
620 - 679		15,781		11,943		5,268		10,149		9,069		37,404		—		—		89,614
550 - 619		1,735		873		698		533		2,033		7,475		—		—		13,347
Less than 550		—		—		—		345		2,603		2,838		—		—		5,786
No Score (3)		18,882		7,938		15,051		18,107		17,333		42,185		—		—		119,496
Other (2)		25,625		16,263		10,242		11,297		16,242		17,152		44		718		97,583
Total Residential Mortgage		1,304,978		753,668		363,415		266,368		332,041		1,062,135		44		718		4,083,367
Home Equity Line
FICO:
740 and greater		—		—		—		—		—		—		671,566		1,873		673,439
680 - 739		—		—		—		—		—		—		141,889		3,968		145,857
620 - 679		—		—		—		—		—		—		37,815		2,500		40,315
550 - 619		—		—		—		—		—		—		9,090		948		10,038
Less than 550		—		—		—		—		—		—		2,574		68		2,642
No Score (3)		—		—		—		—		—		—		4,317		—		4,317
Total Home Equity Line		—		—		—		—		—		—		867,251		9,357		876,608
Total Residential Lending		1,304,978		753,668		363,415		266,368		332,041		1,062,135		867,295		10,075		4,959,975
Consumer Lending
FICO:
740 and greater		155,929		83,337		79,617		56,707		24,525		8,067		117,843		209		526,234
680 - 739		93,214		56,327		55,126		34,049		17,527		6,315		69,366		707		332,631
620 - 679		41,671		21,986		28,491		19,403		12,952		5,324		31,165		1,175		162,167
550 - 619		7,836		8,265		13,265		10,497		7,469		3,244		10,359		1,089		62,024
Less than 550		2,272		3,867		6,646		3,484		2,739		1,175		3,195		536		23,914
No Score (3)		481		19		56		40		65		2		35,414		320		36,397
Other (2)		4,737		365		1,712		17		2,182		31		77,528		—		86,572
Total Consumer Lending		306,140		174,166		184,913		124,197		67,459		24,158		344,870		4,036		1,229,939
Total Loans and Leases	$	3,157,488	$	1,588,735	$	1,632,764	$	1,164,714	$	954,259	$	2,359,432	$	2,033,383	$	71,224	$	12,961,999

(1) Other credit quality indicators used for monitoring purposes are primarily FICO scores. The majority of the loans in this population were originated to borrowers with a prime FICO score.

(2) Other credit quality indicators used for monitoring purposes are primarily internal risk ratings. The majority of the loans in this population were graded with a “Pass” rating.

(3) No FICO scores are primarily related to loans and leases extended to non-residents. Loans and leases of this nature are primarily secured by collateral and/or are closely monitored for performance.

There were no loans and leases graded as Loss as of December 31, 2022 and 2021.

The amortized cost basis of revolving loans that were converted to term loans during the years ended December 31, 2022 and 2021 was as follows:

	Year Ended
(dollars in thousands)	December 31, 2022
Commercial and industrial	$	480
Home equity line		2,189
Consumer		1,323
Total Revolving Loans Converted to Term Loans During the Year	$	3,992

	Year Ended
(dollars in thousands)	December 31, 2021
Commercial and industrial	$	1,153
Commercial real estate		14,891
Residential mortgage		577
Home equity line		3,656
Consumer		1,574
Total Revolving Loans Converted to Term Loans During the Year	$	21,851

Past-Due Status

The Company continually updates its aging analysis for loans and leases to monitor the migration of loans and leases into past due categories. The Company considers loans and leases that are delinquent for 30 days or more to be past due. As of December 31, 2022 and 2021, the aging analysis of the amortized cost basis of the Company’s past due loans and leases was as follows:

	December 31, 2022
	Past Due												Loans and
					Greater								Leases Past
					Than or								Due 90 Days
	30-59		60-89		Equal to								or More and
	Days		Days		90 Days		Total				Total Loans		Still Accruing
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		and Leases		Interest
Commercial and industrial	$	2,682	$	769	$	1,441	$	4,892	$	2,231,005	$	2,235,897	$	291
Commercial real estate		4,505		—		727		5,232		4,127,077		4,132,309		—
Construction		109		—		—		109		844,534		844,643		—
Lease financing		—		—		—		—		298,090		298,090		—
Residential mortgage		3,681		1,983		2,572		8,236		4,294,552		4,302,788		58
Home equity line		5,161		1,381		2,072		8,614		1,046,737		1,055,351		—
Consumer		29,927		6,801		2,886		39,614		1,183,320		1,222,934		2,885
Total	$	46,065	$	10,934	$	9,698	$	66,697	$	14,025,315	$	14,092,012	$	3,234

	December 31, 2021
	Past Due												Loans and
					Greater								Leases Past
					Than or								Due 90 Days
	30-59		60-89		Equal to								or More and
	Days		Days		90 Days		Total				Total Loans		Still Accruing
(dollars in thousands)	Past Due		Past Due		Past Due		Past Due		Current		and Leases		Interest
Commercial and industrial	$	1,195	$	1,195	$	1,318	$	3,708	$	2,083,391	$	2,087,099	$	740
Commercial real estate		631		—		—		631		3,638,992		3,639,623		—
Construction		162		—		—		162		813,807		813,969		—
Lease financing		—		—		—		—		231,394		231,394		—
Residential mortgage		3,030		1,002		5,617		9,649		4,073,718		4,083,367		987
Home equity line		1,538		538		3,681		5,757		870,851		876,608		3,681
Consumer		16,534		3,366		1,800		21,700		1,208,239		1,229,939		1,800
Total	$	23,090	$	6,101	$	12,416	$	41,607	$	12,920,392	$	12,961,999	$	7,208

Nonaccrual Loans and Leases

The Company generally places a loan or lease on nonaccrual status when management believes that collection of principal or interest has become doubtful or when a loan or lease becomes 90 days past due as to principal or interest, unless it is well secured and in the process of collection. The Company charges off a loan or lease when facts indicate that the loan or lease is considered uncollectible.

The amortized cost basis of loans and leases on nonaccrual status as of December 31, 2022 and 2021 and the amortized cost basis of loans and leases on nonaccrual status with no allowance for credit losses as of December 31, 2022 and 2021 were as follows:

	December 31, 2022
	Nonaccrual
	Loans
	and Leases
	With No		Nonaccrual
	Allowance		Loans
(dollars in thousands)	for Credit Losses		and Leases
Commercial and industrial	$	665	$	1,215
Commercial real estate		727		727
Residential mortgage		1,560		6,166
Home equity line		596		3,797
Total Nonaccrual Loans and Leases	$	3,548	$	11,905

	December 31, 2021
	Nonaccrual
	Loans
	and Leases
	With No		Nonaccrual
	Allowance		Loans
(dollars in thousands)	for Credit Losses		and Leases
Commercial and industrial	$	—	$	718
Commercial real estate		727		727
Residential mortgage		1,192		5,637
Total Nonaccrual Loans and Leases	$	1,919	$	7,082

During the years ended December 31, 2022, 2021 and 2020, the Company recognized interest income of $0.4 million, $0.4 million and $0.2 million, respectively, on nonaccrual loans and leases. Furthermore, for the years ended December 31, 2022, 2021 and 2020, the amount of accrued interest receivables written off by reversing interest income was $0.9 million, $0.8 million and $1.4 million, respectively.

Collateral-Dependent Loans and Leases

Collateral-dependent loans and leases are those for which repayment (on the basis of the Company’s assessment as of the reporting date) is expected to be provided substantially through the operation or sale of the collateral and the borrower is experiencing financial difficulty. As of December 31, 2022 and 2021, the amortized cost basis of collateral-dependent loans was $8.2 million and $7.5 million, respectively. As of both December 31, 2022 and 2021, these loans were primarily collateralized by residential real estate property and the fair value of collateral on substantially all collateral-dependent loans were significantly in excess of their amortized cost basis.

Modifications

Commercial and industrial loans modified in a TDR may involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans. Modifications of commercial real estate and construction loans in a TDR may involve reducing the interest rate for the remaining term of the loan, extending the maturity date at an interest rate lower than the current market rate for new debt with similar risk, or substituting or adding a new borrower or guarantor. Modifications of construction loans in a TDR may also involve extending the interest-only payment period. Interest continues to accrue on the missed payments and as a result, the effective yield on the loan remains unchanged. Residential real estate loans modified in a TDR may be comprised of loans where monthly payments are lowered to accommodate the borrowers' financial needs for a period of time, including extended interest-only periods and re-amortization of the balance. Modifications of consumer loans in a TDR may involve temporary or permanent reduced payments, temporary interest-only payments and below-market interest rates.

Loans modified in a TDR may already be on nonaccrual status and in some cases, partial charge-offs may have already been taken against the outstanding loan balance. Loans modified in a TDR are evaluated for impairment. As a result, this may have a financial effect of increasing the specific ACL associated with the loan. An ACL for impaired commercial loans, including commercial real estate and construction loans, that have been modified in a TDR is measured based on the present value of expected future cash flows discounted at the loan's effective interest rate or if the loan is collateral-dependent, the estimated fair value of the collateral, less any selling costs. An ACL for impaired residential real estate loans that have been modified in a TDR is measured based on the estimated fair value of the collateral, less any selling costs. Management exercises significant judgment in developing these estimates.

The following presents, by class, information related to loans modified in a TDR during the years ended December 31, 2022, 2021 and 2020:

	Year Ended December 31, 2022
	Number of	Recorded		Related
(dollars in thousands)	Contracts(1)	Investment(2)		ACL
Commercial and industrial	5	$	205	$	17
Residential mortgage	1		247		31
Consumer	258		2,173		443
Total	264	$	2,625	$	491

	Year Ended December 31, 2021
	Number of	Recorded		Related
(dollars in thousands)	Contracts(1)	Investment(2)		ACL
Commercial and industrial	11	$	1,481	$	124
Commercial real estate	1		346		78
Construction	12		689		69
Residential mortgage	13		5,539		207
Consumer	1,652		15,710		2,127
Total	1,689	$	23,765	$	2,605

	Year Ended December 31, 2020
	Number of	Recorded		Related
(dollars in thousands)	Contracts(1)	Investment(2)		ACL
Commercial and industrial	1	$	500	$	30
Commercial real estate	3		6,470		470
Residential mortgage	1		825		90
Total	5	$	7,795	$	590

(1) The number of contracts does not include TDRs that have been fully paid off, charged off or foreclosed upon by the end of the year.

(2) The recorded investment balances reflect all partial paydowns and charge-offs since the modification date and do not include TDRs that have been fully paid off, charged off or foreclosed upon by the end of the year.

The above loans were modified in a TDR through an extension of maturity dates, temporary interest-only payments, temporary payment deferrals, reduced payments, converting revolving credit lines to term loans or below-market interest rates.

The Company had commitments to extend credit, standby letters of credit and commercial letters of credit totaling  $7.0 billion and $6.7 billion as of December 31, 2022 and 2021, respectively. Of the $7.0 billion at December 31, 2022, there were commitments of $0.1 million related to borrowers who had loan terms modified in a TDR. Of the $6.7 billion at December 31, 2021, there were commitments of $0.2 million related to borrowers who had loan terms modified in a TDR.

The following table presents, by class, loans modified in TDRs that have defaulted during the years ended December 31 2022, 2021 and 2020 within 12 months of their permanent modification date for the years indicated. The Company is reporting these defaulted TDRs based on a payment default definition of 30 days past due:

	Year Ended December 31,
	2022			2021			2020
	Number of	Recorded		Number of	Recorded		Number of	Recorded
(dollars in thousands)	Contracts(1)	Investment(2)		Contracts(1)	Investment(2)		Contracts(1)	Investment(2)
Commercial and industrial	2	$	541	3	$	569	1	$	500
Construction	—		—	1		450	—		—
Commercial real estate	—		—	1		356	—		—
Residential mortgage	—		—	4		1,012	—		—
Consumer	213		2,623	405		5,272	—		—
Total	215	$	3,164	414	$	7,659	1	$	500

(1) The number of contracts does not include TDRs that have been fully paid off, charged off or foreclosed upon by the end of the year.

(2) The recorded investment balances reflect all partial paydowns and charge-offs since the modification date and do not include TDRs that have been fully paid off, charged off or foreclosed upon by the end of the year.

Foreclosure Proceedings

As of December 31, 2022, there were two residential mortgage loans of $0.6 million collateralized by real estate properties that were modified in a TDR that was in process of foreclosure. As of December 31, 2021, there was one residential mortgage loan of $0.3 million collateralized by real estate property that was modified in a TDR that was in process of foreclosure.

Foreclosed Property

Residential real estate property held from one foreclosed residential mortgage loan included in other real estate owned and repossessed personal property shown in the consolidated balance sheets was $0.1 million as of December 31, 2022. Residential real estate property held from one foreclosed residential mortgage loan included in other real estate owned and repossessed personal property shown in the consolidated balance sheets was $0.2 million as of December 31, 2021.