CREDIT QUALITY ASSESSMENT

3 Months Ended

Mar. 31, 2023

Credit Loss [Abstract]

CREDIT QUALITY ASSESSMENT

CREDIT QUALITY ASSESSMENT

Allowance for Credit Losses

Summary information on the allowance for credit losses on loans for the period indicated is provided in the following table:

	Three Months Ended March 31,
(In thousands)	2023		2022
Balance at beginning of period	$	136,242	$	109,145
Provision/ (credit) for credit losses - loans (1)	(18,945)		1,635
Loan charge-offs	(171)		(306)
Loan recoveries	487		114
Net charge-offs	316		(192)
Balance at period end	$	117,613	$	110,588

 (1) Excludes the total credit to the provision on unfunded loan commitments for three months ended March 31, 2023 of $2.6 million.

The following table provides summary information regarding collateral dependent loans individually evaluated for credit loss at the dates indicated:

(In thousands)	March 31, 2023		December 31, 2022
Collateral dependent loans individually evaluated for credit loss with an allowance	$	18,596	$	9,743
Collateral dependent loans individually evaluated for credit loss without an allowance	11,246		16,454
Total individually evaluated collateral dependent loans	$	29,842	$	26,197
Allowance for credit losses related to loans evaluated individually	$	9,870	$	6,902
Allowance for credit losses related to loans evaluated collectively	107,743		129,340
Total allowance for credit losses - loans	$	117,613	$	136,242

The following tables provide information on the activity in the allowance for credit losses by the respective loan portfolio segment for the period indicated:

	For the Three Months Ended March 31, 2023
	Commercial Real Estate												Residential Real Estate
(Dollars in thousands)	Commercial Investor R/E			Commercial Owner- Occupied R/E			Commercial AD&C			Commercial Business			Residential Mortgage			Residential Construction			Consumer			Total
Balance at beginning of period	$	64,737		$	11,646		$	18,646		$	28,027		$	9,424		$	1,337		$	2,425		$	136,242
Provision/ (credit) for credit losses - loans	(7,780)			(1,796)			(6,693)			(2,254)			350			(233)			(539)			(18,945)
Charge-offs	—			—			—			(54)			(23)			—			(94)			(171)
Recoveries	5			26			—			181			2			—			273			487
Net recoveries (charge-offs)	5			26			—			127			(21)			—			179			316
Balance at end of period	$	56,962		$	9,876		$	11,953		$	25,900		$	9,753		$	1,104		$	2,065		$	117,613
Total loans	$	5,167,456		$	1,769,928		$	1,046,665		$	1,437,478		$	1,328,524		$	223,456		$	421,734		$	11,395,241
Allowance for credit losses on loans to total loans ratio	1.10		%	0.56		%	1.14		%	1.80		%	0.73		%	0.49		%	0.49		%	1.03		%
Average loans	$	5,136,204		$	1,769,680		$	1,082,791		$	1,444,588		$	1,307,761		$	223,313		$	424,122		$	11,388,459
Annualized net charge-offs/ (recoveries) to average loans	—		%	(0.01)		%	—		%	(0.04)		%	0.01		%	—		%	(0.17)		%	(0.01)		%
Balance of loans individually evaluated for credit loss	$	15,451		$	4,949		$	—		$	9,442		$	—		$	—		$	—		$	29,842
Allowance related to loans evaluated individually	$	1,935		$	1,259		$	—		$	6,676		$	—		$	—		$	—		$	9,870
Individual allowance to loans evaluated individually ratio	12.52		%	25.44		%	—		%	70.71		%	—		%	—		%	—		%	33.07		%
Contractual balance of individually evaluated loans	$	15,526		$	5,694		$	—		$	10,717		$	—		$	—		$	—		$	31,937
Balance of loans collectively evaluated for credit loss	$	5,152,005		$	1,764,979		$	1,046,665		$	1,428,036		$	1,328,524		$	223,456		$	421,734		$	11,365,399
Allowance related to loans evaluated collectively	$	55,027		$	8,617		$	11,953		$	19,224		$	9,753		$	1,104		$	2,065		$	107,743
Collective allowance to loans evaluated collectively ratio	1.07		%	0.49		%	1.14		%	1.35		%	0.73		%	0.49		%	0.49		%	0.95		%

	For the Year Ended December 31, 2022
	Commercial Real Estate												Residential Real Estate
(Dollars in thousands)	Commercial Investor R/E			Commercial Owner- Occupied R/E			Commercial AD&C			Commercial Business			Residential Mortgage			Residential Construction			Consumer			Total
Balance at beginning of period	$	45,289		$	11,687		$	20,322		$	23,170		$	5,384		$	1,048		$	2,245		$	109,145
Provision for credit losses - loans	19,128			(90)			(1,676)			4,774			4,093			281			170			26,680
Charge-offs	—			—			—			(716)			(155)			—			(234)			(1,105)
Recoveries	320			49			—			799			102			8			244			1,522
Net recoveries (charge-offs)	320			49			—			83			(53)			8			10			417
Balance at end of period	$	64,737		$	11,646		$	18,646		$	28,027		$	9,424		$	1,337		$	2,425		$	136,242
Total loans	$	5,130,094		$	1,775,037		$	1,090,028		$	1,455,885		$	1,287,933		$	224,772		$	432,957		$	11,396,706
Allowance for credit losses on loans to total loans ratio	1.26		%	0.66		%	1.71		%	1.93		%	0.73		%	0.59		%	0.56		%	1.20		%
Average loans	$	4,681,607		$	1,730,293		$	1,112,936		$	1,351,906		$	1,117,053		$	221,341		$	423,746		$	10,638,882
Net charge-offs/ (recoveries) to average loans	(0.01)		%	—		%	—		%	(0.01)		%	—		%	—		%	—		%	—		%
Balance of loans individually evaluated for credit loss	$	9,943		$	6,155		$	—		$	8,274		$	1,487		$	—		$	338		$	26,197
Allowance related to loans evaluated individually	$	134		$	1,261		$	—		$	5,507		$	—		$	—		$	—		$	6,902
Individual allowance to loans evaluated individually ratio	1.35		%	20.49		%	—		%	66.56		%	—		%	—		%	—		%	26.35		%
Contractual balance of individually evaluated loans	$	10,882		$	6,849		$	—		$	9,893		$	1,487		$	—		$	364		$	29,475
Balance of loans collectively evaluated for credit loss	$	5,120,151		$	1,768,882		$	1,090,028		$	1,447,611		$	1,286,446		$	224,772		$	432,619		$	11,370,509
Allowance related to loans evaluated collectively	$	64,603		$	10,385		$	18,646		$	22,520		$	9,424		$	1,337		$	2,425		$	129,340
Collective allowance to loans evaluated collectively ratio	1.26		%	0.59		%	1.71		%	1.56		%	0.73		%	0.59		%	0.56		%	1.14		%

Credit Quality

The following section provides information on the credit quality of the loan portfolio for the periods indicated below:

	For the Three Months Ended March 31, 2023
	Commercial Real Estate								Residential Real Estate
(In thousands)	Commercial Investor R/E		Commercial Owner- Occupied R/E		Commercial AD&C		Commercial Business		Residential Mortgage		Residential Construction		Consumer		Total
Analysis of non-accrual loan activity:
Balance at beginning of period	$	9,943	$	5,019	$	—	$	7,322	$	7,439	$	—	$	5,059	$	34,782
Loans placed on non-accrual	14,601		—		—		2,621		2,045		—		447		19,714
Non-accrual balances transferred to OREO	—		—		—		—		—		—		—		—
Non-accrual balances charged-off	—		—		—		(54)		(23)		—		(49)		(126)
Net payments or draws	(9,093)		(70)		—		(446)		(169)		—		(434)		(10,212)
Non-accrual loans brought current	—		—		—		—		(357)		—		(123)		(480)
Balance at end of period	$	15,451	$	4,949	$	—	$	9,443	$	8,935	$	—	$	4,900	$	43,678

	For the Year Ended December 31, 2022
	Commercial Real Estate								Residential Real Estate
(In thousands)	Commercial Investor R/E		Commercial Owner- Occupied R/E		Commercial AD&C		Commercial Business		Residential Mortgage		Residential Construction		Consumer		Total
Analysis of non-accrual loan activity:
Balance at beginning of period	$	12,489	$	9,306	$	650	$	8,420	$	8,441	$	55	$	6,725	$	46,086
Loans placed on non-accrual	4,761		2,370		—		1,591		2,593		—		815		12,130
Non-accrual balances transferred to OREO	—		—		—		—		—		—		—		—
Non-accrual balances charged-off	—		—		—		(677)		(151)		—		(32)		(860)
Net payments or draws	(7,307)		(4,366)		(650)		(2,012)		(2,615)		(55)		(2,060)		(19,065)
Non-accrual loans brought current	—		(2,291)		—		—		(829)		—		(389)		(3,509)
Balance at end of period	$	9,943	$	5,019	$	—	$	7,322	$	7,439	$	—	$	5,059	$	34,782

	March 31, 2023
	Commercial Real Estate								Residential Real Estate
(In thousands)	Commercial Investor R/E		Commercial Owner- Occupied R/E		Commercial AD&C		Commercial Business		Residential Mortgage		Residential Construction		Consumer		Total
Performing loans:
Current	$	5,150,572	$	1,761,671	$	1,043,979	$	1,424,758	$	1,304,124	$	222,387	$	413,306	$	11,320,797
30-59 days	945		—		2,240		154		13,402		739		2,528		20,008
60-89 days	273		3,308		446		121		1,711		330		1,000		7,189
Total performing loans	5,151,790		1,764,979		1,046,665		1,425,033		1,319,237		223,456		416,834		11,347,994
Non-performing loans:
Non-accrual loans	15,451		4,949		—		9,443		8,935		—		4,900		43,678
Loans greater than 90 days past due	215		—		—		3,002		352		—		—		3,569
Restructured loans (1)	—		—		—		—		—		—		—		—
Total non-performing loans	15,666		4,949		—		12,445		9,287		—		4,900		47,247
Total loans	$	5,167,456	$	1,769,928	$	1,046,665	$	1,437,478	$	1,328,524	$	223,456	$	421,734	$	11,395,241

(1) Effective January 1, 2023, the Company adopted ASU 2022-02, which eliminated the accounting and recognition of troubled debt restructurings ("TDRs").

	December 31, 2022
	Commercial Real Estate								Residential Real Estate
(In thousands)	Commercial Investor R/E		Commercial Owner- Occupied R/E		Commercial AD&C		Commercial Business		Residential Mortgage		Residential Construction		Consumer		Total
Performing loans:
Current	$	5,104,204	$	1,767,875	$	1,090,028	$	1,443,012	$	1,261,878	$	222,144	$	422,989	$	11,312,130
30-59 days	9,735		1,007		—		3,556		11,307		2,628		4,343		32,576
60-89 days	6,212		—		—		41		5,822		—		566		12,641
Total performing loans	5,120,151		1,768,882		1,090,028		1,446,609		1,279,007		224,772		427,898		11,357,347
Non-performing loans:
Non-accrual loans	9,943		5,019		—		7,322		7,439		—		5,059		34,782
Loans greater than 90 days past due	—		—		—		1,002		—		—		—		1,002
Restructured loans	—		1,136		—		952		1,487		—		—		3,575
Total non-performing loans	9,943		6,155		—		9,276		8,926		—		5,059		39,359
Total loans	$	5,130,094	$	1,775,037	$	1,090,028	$	1,455,885	$	1,287,933	$	224,772	$	432,957	$	11,396,706

The following tables present average principal balance of total non-accrual loans and contractual interest due on non-accrual loans for the periods indicated below:

	For the Three Months Ended March 31, 2023
	Commercial Real Estate								Residential Real Estate
(In thousands)	Commercial Investor R/E		Commercial Owner- Occupied R/E		Commercial AD&C		Commercial Business		Residential Mortgage		Residential Construction		Consumer		Total
Average non-accrual loans for the period	$	12,697	$	4,984	$	—	$	8,383	$	8,187	$	—	$	4,980	$	39,231
Contractual interest income due on non- accrual loans during the period	$	140	$	73	$	—	$	140	$	90	$	—	$	106	$	549

	For the Year Ended December 31, 2022
	Commercial Real Estate								Residential Real Estate
(In thousands)	Commercial Investor R/E		Commercial Owner- Occupied R/E		Commercial AD&C		Commercial Business		Residential Mortgage		Residential Construction		Consumer		Total
Average non-accrual loans for the period	$	11,892	$	7,314	$	617	$	7,768	$	7,769	$	21	$	5,811	$	41,192
Contractual interest income due on non- accrual loans during the period	$	713	$	106	$	30	$	491	$	319	$	1	$	349	$	2,009

There was no interest income recognized on non-accrual loans during the three months ended March 31, 2023. See Note 1 for additional information on the Company's policies for non-accrual loans. Loans designated as non-accrual have all previously accrued but unpaid interest reversed from interest income. During the three months ended March 31, 2023 new loans placed on non-accrual status totaled $19.7 million and the related amount of reversed uncollected accrued interest was $0.3 million.

The credit quality indicators for commercial loans are developed through review of individual borrowers on an ongoing basis. Each borrower is evaluated at least annually with more frequent evaluation of more severely criticized loans. The indicators represent the rating for loans as of the date presented is based on the most recent credit review performed. These credit quality indicators are defined as follows:

Pass - A pass rated credit is not adversely classified because it does not display any of the characteristics for adverse classification.

Special mention – A special mention credit has potential weaknesses that deserve management’s close attention. If uncorrected, such weaknesses may result in deterioration of the repayment prospects or collateral position at some future date. Special mention assets are not adversely classified and do not warrant adverse classification.

Substandard – A substandard loan is inadequately protected by the current net worth and payment capacity of the obligor or of the collateral pledged, if any. Loans classified as substandard generally have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. These loans are characterized by the distinct possibility of loss if the deficiencies are not corrected.

Doubtful – A loan that is classified as doubtful has all the weaknesses inherent in a loan classified as substandard with added characteristics that the weaknesses make collection or liquidation in full highly questionable and improbable, on the basis of currently existing facts, conditions and values.

Loss – Loans classified as a loss are considered uncollectible and of such little value that their continuing to be carried as a loan is not warranted. This classification is not necessarily equivalent to no potential for recovery or salvage value, but rather that it is not appropriate to defer a full write-off even though partial recovery may be effected in the future.

The following table provides information about credit quality indicators by the year of origination as of March 31, 2023:

	March 31, 2023
	Term Loans by Origination Year												Revolving
(In thousands)	2023		2022		2021		2020		2019		Prior		Loans		Total
Commercial Investor R/E:
Pass	$	173,232	$	1,412,186	$	1,239,661	$	689,500	$	558,229	$	1,024,028	$	28,344	$	5,125,180
Special Mention	4,619		10,349		4,587		—		93		3,253		—		22,901
Substandard	273		550		13,505		—		1,405		3,642		—		19,375
Doubtful	—		—		—		—		—		—		—		—
Total	$	178,124	$	1,423,085	$	1,257,753	$	689,500	$	559,727	$	1,030,923	$	28,344	$	5,167,456
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial Owner-Occupied R/E:
Pass	$	49,900	$	373,223	$	324,299	$	236,977	$	253,818	$	498,559	$	1,038	$	1,737,814
Special Mention	731		1,530		—		1,277		1,716		8,682		—		13,936
Substandard	1,338		6,527		71		355		6,056		3,831		—		18,178
Doubtful	—		—		—		—		—		—		—		—
Total	$	51,969	$	381,280	$	324,370	$	238,609	$	261,590	$	511,072	$	1,038	$	1,769,928
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial AD&C:
Pass	$	126,933	$	334,502	$	325,527	$	94,337	$	32,053	$	14,932	$	116,512	$	1,044,796
Special Mention	—		1,073		—		—		—		—		—		1,073
Substandard	—		796		—		—		—		—		—		796
Doubtful	—		—		—		—		—		—		—		—
Total	$	126,933	$	336,371	$	325,527	$	94,337	$	32,053	$	14,932	$	116,512	$	1,046,665
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial Business:
Pass	$	43,548	$	337,157	$	219,980	$	85,098	$	99,564	$	147,806	$	467,480	$	1,400,633
Special Mention	—		330		650		1,024		6,818		564		12,977		22,363
Substandard	—		3,371		2,079		956		1,995		2,243		3,838		14,482
Doubtful	—		—		—		—		—		—		—		—
Total	$	43,548	$	340,858	$	222,709	$	87,078	$	108,377	$	150,613	$	484,295	$	1,437,478
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	29	$	25	$	54
Residential Mortgage:
Beacon score:
660-850	$	15,508	$	336,165	$	369,442	$	170,124	$	41,488	$	293,891	$	—	$	1,226,618
600-659	—		6,648		13,800		4,119		3,885		30,112		—		58,564
540-599	305		2,929		3,361		526		1,517		8,986		—		17,624
less than 540	—		365		3,025		3,479		3,047		15,802		—		25,718
Total	$	15,813	$	346,107	$	389,628	$	178,248	$	49,937	$	348,791	$	—	$	1,328,524
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	23	$	—	$	23
Residential Construction:
Beacon score:
660-850	$	4,482	$	152,343	$	50,886	$	8,596	$	150	$	2,877	$	—	$	219,334
600-659	—		2,163		739		—		—		—		—		2,902
540-599	—		—		401		—		—		—		—		401
less than 540	—		—		819		—		—		—		—		819
Total	$	4,482	$	154,506	$	52,845	$	8,596	$	150	$	2,877	$	—	$	223,456
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Consumer:
Beacon score:
660-850	$	2,976	$	6,559	$	2,608	$	1,133	$	2,084	$	23,941	$	343,677	$	382,978
600-659	47		554		31		34		112		5,949		12,384		19,111
540-599	12		396		84		39		129		2,299		5,519		8,478
less than 540	40		228		71		30		459		3,319		7,020		11,167
Total	$	3,075	$	7,737	$	2,794	$	1,236	$	2,784	$	35,508	$	368,600	$	421,734
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	49	$	45	$	94
Total loans	$	423,944	$	2,989,944	$	2,575,626	$	1,297,604	$	1,014,618	$	2,094,716	$	998,789	$	11,395,241

 The following table provides information about credit quality indicators by the year of origination as of December 31, 2022:

	December 31, 2022
	Term Loans by Origination Year												Revolving
(In thousands)	2022		2021		2020		2019		2018		Prior		Loans		Total
Commercial Investor R/E:
Pass	$	1,510,446	$	1,197,504	$	694,756	$	567,247	$	335,103	$	742,405	$	15,242	$	5,062,703
Special Mention	32,661		17,146		468		94		473		4,814		—		55,656
Substandard	557		1,896		—		—		8,239		1,043		—		11,735
Doubtful	—		—		—		—		—		—		—		—
Total	$	1,543,664	$	1,216,546	$	695,224	$	567,341	$	343,815	$	748,262	$	15,242	$	5,130,094
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial Owner-Occupied R/E:
Pass	$	391,340	$	328,657	$	240,738	$	260,114	$	140,841	$	381,386	$	1,167	$	1,744,243
Special Mention	4,567		—		1,301		1,740		2,066		7,323		—		16,997
Substandard	3,219		160		133		6,110		2,010		2,165		—		13,797
Doubtful	—		—		—		—		—		—		—		—
Total	$	399,126	$	328,817	$	242,172	$	267,964	$	144,917	$	390,874	$	1,167	$	1,775,037
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial AD&C:
Pass	$	366,096	$	439,468	$	113,713	$	34,340	$	14,816	$	—	$	119,727	$	1,088,160
Special Mention	1,073		—		—		—		—		—		795		1,868
Substandard	—		—		—		—		—		—		—		—
Doubtful	—		—		—		—		—		—		—		—
Total	$	367,169	$	439,468	$	113,713	$	34,340	$	14,816	$	—	$	120,522	$	1,090,028
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial Business:
Pass	$	330,598	$	223,245	$	95,787	$	105,922	$	77,891	$	78,009	$	508,839	$	1,420,291
Special Mention	127		458		1,107		7,787		498		322		13,225		23,524
Substandard	2,902		1,611		1,094		2,030		449		2,121		1,863		12,070
Doubtful	—		—		—		—		—		—		—		—
Total	$	333,627	$	225,314	$	97,988	$	115,739	$	78,838	$	80,452	$	523,927	$	1,455,885
Current period gross charge-offs	$	174	$	—	$	—	$	—	$	138	$	404	$	—	$	716
Residential Mortgage:
Beacon score:
660-850	$	330,109	$	344,062	$	171,330	$	41,883	$	51,651	$	262,570	$	—	$	1,201,605
600-659	4,571		6,196		1,173		3,925		6,041		24,006		—		45,912
540-599	369		4,013		1,439		1,256		1,931		6,945		—		15,953
less than 540	1,860		3,036		2,892		3,822		2,347		10,506		—		24,463
Total	$	336,909	$	357,307	$	176,834	$	50,886	$	61,970	$	304,027	$	—	$	1,287,933
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	24	$	131	$	—	$	155
Residential Construction:
Beacon score:
660-850	$	131,259	$	75,844	$	12,133	$	150	$	1,432	$	1,245	$	—	$	222,063
600-659	908		373		—		—		—		—		—		1,281
540-599	609		—		—		—		—		—		—		609
less than 540	—		819		—		—		—		—		—		819
Total	$	132,776	$	77,036	$	12,133	$	150	$	1,432	$	1,245	$	—	$	224,772
Current period gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Consumer:
Beacon score:
660-850	$	6,689	$	2,346	$	1,201	$	2,147	$	2,047	$	23,170	$	359,468	$	397,068
600-659	658		467		59		198		664		5,459		11,269		18,774
540-599	123		56		—		465		316		2,802		3,824		7,586
less than 540	156		57		40		133		209		2,918		6,016		9,529
Total	$	7,626	$	2,926	$	1,300	$	2,943	$	3,236	$	34,349	$	380,577	$	432,957
Current period gross charge-offs	$	—	$	5	$	15	$	—	$	13	$	20	$	181	$	234
Total loans	$	3,120,897	$	2,647,414	$	1,339,364	$	1,039,363	$	649,024	$	1,559,209	$	1,041,435	$	11,396,706

Effective January 1, 2023, the Company fully adopted provision of ASU 2022-02 that eliminated accounting, classification and disclosures of loans modified into troubled debt restructurings.

As a part of our risk management practices, we may consider modifying a loan for a borrower experiencing a financial difficulty that provides a certain degree of a payment relief. Modification types primarily include a reduction in the interest rate or an extension of the existing term. We do not provide modifications that result in the reduction of the outstanding principal balance. During the three months ended March 31, 2023, we modified two commercial loans to borrowers experiencing financial difficulty with a total outstanding balance of $0.2 million. Both of the modified loans were provided term extensions ranging from six to 12 months and were performing in line with their contractual loan agreements at March 31, 2023.

Other Real Estate Owned

Other real estate owned ("OREO") totaled $0.6 million at both March 31, 2023 and December 31, 2022, respectively. There were no consumer mortgage loans secured by residential real estate property for which formal foreclosure proceedings were in process as of March 31, 2023.