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Loans and Allowance for Credit Losses
 9 Months Ended
Sep. 30, 2023
Receivables [Abstract]  
Loans and Allowance for Credit Losses LOANS AND ALLOWANCE FOR CREDIT LOSSES
At September 30, 2023, the Company’s loan portfolio was $16.77 billion, compared to $16.14 billion at December 31, 2022. The various categories of loans are summarized as follows:
 
September 30,December 31,
(In thousands)20232022
Consumer:  
Credit cards$191,550 $196,928 
Other consumer112,832 152,882 
Total consumer304,382 349,810 
Real Estate:
Construction and development3,022,321 2,566,649 
Single family residential2,657,879 2,546,115 
Other commercial7,565,008 7,468,498 
Total real estate13,245,208 12,581,262 
Commercial:
Commercial2,477,077 2,632,290 
Agricultural296,912 205,623 
Total commercial2,773,989 2,837,913 
Other448,309 373,139 
Total loans$16,771,888 $16,142,124 

The above table presents total loans at amortized cost. The difference between amortized cost and unpaid principal balance is primarily premiums and discounts associated with acquisition date fair value adjustments on acquired loans as well as deferred origination costs and fees totaling $7.7 million and $26.4 million at September 30, 2023 and December 31, 2022, respectively.

Accrued interest on loans, which is excluded from the amortized cost of loans held for investment, totaled $74.3 million and $65.4 million at September 30, 2023 and December 31, 2022, respectively, and is included in interest receivable on the consolidated balance sheets.

Loan Origination/Risk Management – The Company seeks to manage its credit risk by diversifying its loan portfolio, determining that borrowers have adequate sources of cash flow for loan repayment without liquidation of collateral; obtaining and monitoring collateral; and providing an adequate allowance for credit losses by regularly reviewing loans through the internal loan review process. The loan portfolio is diversified by borrower, purpose and industry. The Company seeks to use diversification within the loan portfolio to reduce its credit risk, thereby minimizing the adverse impact on the portfolio if weaknesses develop in either the economy or a particular segment of borrowers. Collateral requirements are based on credit assessments of borrowers and may be used to recover the debt in case of default.
 
Consumer – The consumer loan portfolio consists of credit card loans and other consumer loans. Credit card loans are diversified by geographic region to reduce credit risk and minimize any adverse impact on the portfolio. Although they are regularly reviewed to facilitate the identification and monitoring of creditworthiness, credit card loans are unsecured loans, making them more susceptible to economic downturns that result in increased unemployment. Other consumer loans include direct installment loans and account overdrafts. Loans in this portfolio segment are sensitive to unemployment and other key consumer economic measures.
 
Real estate – The real estate loan portfolio consists of construction and development loans (“C&D”), single family residential loans and commercial loans. C&D and commercial real estate (“CRE”) loans can be particularly sensitive to valuation of real estate. CRE cycles are inevitable. The long planning and production process for new properties and rapid shifts in business conditions and employment create an inherent tension between supply and demand for commercial properties. While general economic trends often move individual markets in the same direction over time, the timing and magnitude of changes are determined by other forces unique to each market. CRE cycles tend to be local in nature and longer than other credit cycles. Factors influencing the CRE market are traditionally different from those affecting residential real estate markets; thereby making predictions for one market based on the other difficult. Additionally, submarkets within CRE – such as office, industrial,
apartment, retail and hotel – also experience different cycles, providing an opportunity to lower the overall risk through diversification across types of CRE loans. Management realizes that local demand and supply conditions will also mean that different geographic areas will experience cycles of different amplitude and duration. The Company monitors these loans closely. 

Commercial – The commercial loan portfolio includes commercial and agricultural loans, representing loans to commercial customers and farmers for use in normal business or farming operations to finance working capital needs, equipment purchases or other expansion projects. Paycheck Protection Program (“PPP”) loans are also included in the commercial loan portfolio. Collection risk in this portfolio is driven by the creditworthiness of the underlying borrowers, particularly cash flow from customers’ business or farming operations. The Company continues its efforts to keep loan terms short, reducing the negative impact of upward movement in interest rates. Term loans are generally set up with one or three year balloons, and the Company has instituted a pricing mechanism for commercial loans. It is standard practice to require personal guaranties on commercial loans for closely-held or limited liability entities.

Paycheck Protection Program Loans – The Company originated loans pursuant to multiple PPP appropriations of the Coronavirus Aid, Relief and Economic Security Act which provided 100% federally guaranteed loans for small businesses to cover up to 24 weeks of payroll costs and assistance with mortgage interest, rent and utilities. Notably, these small business loans may be forgiven by the SBA if borrowers maintain their payrolls and satisfy certain other conditions. PPP loans have a zero percent risk-weight for regulatory capital ratios. As of September 30, 2023 and December 31, 2022, the total outstanding balance of PPP loans was $5.6 million and $8.9 million, respectively.

Other – The other loan portfolio includes mortgage warehouse loans, representing warehouse lines of credit to mortgage originators for the disbursement of newly originated 1-4 family residential loans. Also included in the other loan portfolio are loans to public sector customers, including state and local governments.

Nonaccrual and Past Due Loans – Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

The amortized cost basis of nonaccrual loans segregated by category of loans are as follows:

September 30,December 31,
(In thousands)20232022
Consumer:  
Credit cards$267 $349 
Other consumer658 433 
Total consumer925 782 
Real estate:
Construction and development2,964 2,799 
Single family residential23,662 22,319 
Other commercial11,849 14,998 
Total real estate38,475 40,116 
Commercial:
Commercial41,008 17,356 
Agricultural724 177 
Total commercial41,732 17,533 
Other3 3 
Total$81,135 $58,434 

As of September 30, 2023 and December 31, 2022, nonaccrual loans for which there was no related allowance for credit losses had an amortized cost of $9.2 million and $16.9 million, respectively. These loans are individually assessed and do not hold an allowance due to being adequately collateralized under the collateral-dependent valuation method.
An age analysis of the amortized cost basis of past due loans, including nonaccrual loans, segregated by class of loans is as follows: 
(In thousands)Gross
30-89 Days
Past Due		90 Days
or More
Past Due		Total
Past Due		CurrentTotal
Loans		90 Days
Past Due &
Accruing
September 30, 2023      
Consumer:      
Credit cards$1,973 $672 $2,645 $188,905 $191,550 $588 
Other consumer1,114 252 1,366 111,466 112,832 — 
Total consumer3,087 924 4,011 300,371 304,382 588 
Real estate:
Construction and development481 2,742 3,223 3,019,098 3,022,321 — 
Single family residential13,255 11,846 25,101 2,632,778 2,657,879 121 
Other commercial5,575 2,767 8,342 7,556,666 7,565,008 — 
Total real estate19,311 17,355 36,666 13,208,542 13,245,208 121 
Commercial:
Commercial5,911 20,492 26,403 2,450,674 2,477,077 97 
Agricultural76 126 202 296,710 296,912 — 
Total commercial5,987 20,618 26,605 2,747,384 2,773,989 97 
Other— 3 3 448,306 448,309 — 
Total$28,385 $38,900 $67,285 $16,704,603 $16,771,888 $806 
December 31, 2022
Consumer:
Credit cards$1,297 $409 $1,706 $195,222 $196,928 $225 
Other consumer852 214 1,066 151,816 152,882 — 
Total consumer2,149 623 2,772 347,038 349,810 225 
Real estate:
Construction and development4,677 443 5,120 2,561,529 2,566,649 — 
Single family residential23,625 11,075 34,700 2,511,415 2,546,115 106 
Other commercial2,759 7,100 9,859 7,458,639 7,468,498 — 
Total real estate31,061 18,618 49,679 12,531,583 12,581,262 106 
Commercial:
Commercial5,034 7,575 12,609 2,619,681 2,632,290 176 
Agricultural111 67 178 205,445 205,623 — 
Total commercial5,145 7,642 12,787 2,825,126 2,837,913 176 
Other61 3 64 373,075 373,139 — 
Total$38,416 $26,886 $65,302 $16,076,822 $16,142,124 $507 
 
Loan Modifications to Borrowers Experiencing Financial Difficulty

The Company has internal loan modification programs for borrowers experiencing financial difficulties. Modifications to borrowers experiencing financial difficulties may include interest rate reductions, principal or interest forgiveness and/or term extensions. The Company primarily uses interest rate reduction and/or payment modifications or extensions, with an occasional forgiveness of principal.
The following table presents a summary of the amortized cost basis of loan modifications granted to borrowers experiencing financial difficulty, segregated by class of loans and type of loan modification, for the three and nine month periods ended September 30, 2023.

Percent of
Total Class
(Dollars in thousands)Term Extensionof Loans
Three months ended September 30, 2023
Real estate:
Other commercial$30,617 0.40 %
Total real estate30,617 
Commercial:
Commercial85 — %
Total commercial85 
Total$30,702 
Nine months ended September 30, 2023
Real estate:
Other commercial$30,617 0.40 %
Total real estate30,617 
Commercial:
Commercial736 0.03 %
Total commercial736 
Total$31,353 

The financial effects of the modified loans made to borrowers experiencing financial difficulty in the commercial portfolio were not significant during the three and nine month periods ended September 30, 2023 and did not significantly impact the Company’s determination of the allowance for credit losses on loans during the periods.

During the three and nine months ended September 30, 2023, the Company modified one loan related to the other CRE portfolio, whereby the borrower was experiencing financial difficulty at the time of modification. The modification allowed for two months of interest only payments with the remaining balance due at maturity. Upon modification, a charge-off of $9.6 million was recorded in relation to this modified loan during the third quarter of 2023. As a result of the other CRE loan modified during the three and nine months ended September 30, 2023 being collateral-dependent, the impact to the Company’s allowance for credit losses on loans was the difference between the fair value of the underlying collateral, adjusted for selling costs, and the remaining outstanding principal balance of the loan.

The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty. Loans modified during the three and nine month periods ended September 30, 2023 were all current at September 30, 2023, with no loans in past due status. Additionally, there were no modified loans for which a payment default occurred during the three and nine month periods ended September 30, 2023 and were modified within twelve months prior to default. In relation to loans modified to borrowers experiencing financial difficulty, the Company defines a payment default as a payment received more than 90 days after its due date.

At September 30, 2023 and December 31, 2022, the Company had $1.4 million and $3.0 million, respectively, of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process. At September 30, 2023 and December 31, 2022, the Company had $312,000 and $853,000, respectively, of Other Real Estate Owned (“OREO”) secured by residential real estate properties.
Troubled Debt Restructurings (Prior to the adoption of ASU 2022-02)

When the Company restructured a loan to a borrower that was experiencing financial difficulty and granted a concession that it would not otherwise consider, a “troubled debt restructuring” (“TDR”) resulted, and the Company classified the loan as a TDR. The Company granted various types of concessions, primarily interest rate reduction and/or payment modifications or extensions, with an occasional forgiveness of principal.

Once an obligation was restructured because of such credit problems, it continued to be considered a TDR until paid in full; or, if an obligation yielded a market interest rate and no longer has any concession regarding payment amount or amortization, then it was not considered a TDR at the beginning of the calendar year after the year in which the improvement had taken place. The Company returned TDRs to accrual status only if (1) all contractual amounts due were reasonably expected to be repaid within a prudent period and (2) repayment was in accordance with the contract for a sustained period, typically at least six months.

TDRs were individually evaluated for expected credit losses. The Company assessed the exposure for each modification, either by the fair value of the underlying collateral or the present value of expected cash flows, and determined if a specific allowance for credit losses was needed.

The following table presents a summary of TDRs segregated by class of loans as of December 31, 2022.

 Accruing TDR LoansNonaccrual TDR LoansTotal TDR Loans
(Dollars in thousands)NumberBalanceNumberBalanceNumberBalance
Real estate:
Single-family residential24 $1,849 12 $1,589 36 $3,438 
Other commercial— — — — — — 
Total real estate24 1,849 12 1,589 36 3,438 
Commercial:
Commercial— — 1 33 1 33 
Total commercial— — 1 33 1 33 
Total24 $1,849 13 $1,622 37 $3,471 

The following table presents loans that were restructured as TDRs during the three and nine month periods ended September 30, 2022.

(Dollars in thousands)Number of loansBalance Prior to TDRBalance at September 30,Change in Maturity DateChange in RateFinancial Impact on Date of Restructure
Three Months Ended September 30, 2022
Real estate:
Other commercial3 $747 $727 $— $727 $— 
Total real estate3 $747 $727 $— $727 $— 
Nine Months Ended September 30, 2022
Real estate:
Other commercial4 $760 $740 $— $740 $— 
Total real estate4 $760 $740 $— $740 $— 

During the three months ended September 30, 2022, the Company modified three loans with a recorded investment of $747,000 prior to modification, which were deemed TDRs. The restructured loans were modified by reducing the interest rate on the loan. No specific reserve was recorded with respect to these TDRs. Also, there was no immediate financial impact from the restructuring of these loans, as it was not considered necessary to charge-off interest or principal on the date of restructure.

During the nine months ended September 30, 2022, the Company modified four loans with a recorded investment of $760,000 prior to modification, which were deemed TDRs. The restructured loans were modified by reducing the interest rate on the loan.
No specific reserve was recorded with respect to these TDRs. Also, there was no immediate financial impact from the restructuring of these loans, as it was not considered necessary to charge-off interest or principal on the date of restructure.

Additionally, there were no loans considered TDRs for which a payment default occurred during the nine months ended September 30, 2022.

There were no TDRs with pre-modification loan balances for which OREO was received in full or partial satisfaction of the loans during the three and nine month period ended September 30, 2022.

Credit Quality Indicators – As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to (i) the weighted-average risk rating of commercial and real estate loans, (ii) the level of classified commercial and real estate loans, (iii) net charge-offs, (iv) non-performing loans (see details above) and (v) the general economic conditions of the Company’s local markets.

The Company utilizes a risk rating matrix to assign a risk rate to each of its commercial and real estate loans. 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. A description of the general characteristics of the risk ratings is as follows:
 
•Pass (Excellent) – This category includes loans which are virtually free of credit risk. Borrowers in this category represent the highest credit quality and greatest financial strength.
•Pass (Good) - Loans under this category possess a nominal risk of default. This category includes borrowers with strong financial strength and superior financial ratios and trends. These loans are generally fully secured by cash or equivalents (other than those rated “excellent”).
•Pass (Acceptable – Average) - Loans in this category are considered to possess a normal level of risk. Borrowers in this category have satisfactory financial strength and adequate cash flow coverage to service debt requirements. If secured, the perfected collateral should be of acceptable quality and within established borrowing parameters.
•Pass (Monitor) - Loans in the Watch (Monitor) category exhibit an overall acceptable level of risk, but that risk may be increased by certain conditions, which represent “red flags”. These “red flags” require a higher level of supervision or monitoring than the normal “Pass” rated credit. The borrower may be experiencing these conditions for the first time, or it may be recovering from weakness, which at one time justified a higher rating. These conditions may include: weaknesses in financial trends; marginal cash flow; one-time negative operating results; non-compliance with policy or borrowing agreements; poor diversity in operations; lack of adequate monitoring information or lender supervision; questionable management ability/stability.
•Special Mention - A loan in this category has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special Mention loans are not adversely classified (although they are “criticized”) and do not expose an institution to sufficient risk to warrant adverse classification. Borrowers may be experiencing adverse operating trends or an ill-proportioned balance sheet. Non-financial characteristics of a Special Mention rating may include management problems, pending litigation, a non-existent or ineffective loan agreement or other material structural weakness, and/or other significant deviation from prudent lending practices.
•Substandard - A Substandard loan is inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. The loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. This does not imply ultimate loss of the principal, but may involve burdensome administrative expenses and the accompanying cost to carry the loan.
•Doubtful - A loan classified Doubtful has all the weaknesses inherent in a substandard loan except that the weaknesses make collection or liquidation in full (on the basis of currently existing facts, conditions, and values) highly questionable and improbable. Doubtful borrowers are usually in default, lack adequate liquidity or capital, and lack the resources necessary to remain an operating entity. The possibility of loss is extremely high, but because of specific pending events that may strengthen the asset, its classification as loss is deferred. Pending factors include: proposed merger or acquisition; liquidation procedures; capital injection; perfection of liens on additional collateral; and refinancing plans. Loans classified as Doubtful are placed on nonaccrual status.
•Loss - Loans classified Loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loans has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless loan, even though partial recovery may be affected in the future. Borrowers in the Loss category are often in bankruptcy, have formally suspended debt repayments, or have otherwise ceased normal business operations. Loans should be classified as Loss and charged-off in the period in which they become uncollectible.

The Company monitors credit quality in the consumer portfolio by delinquency status. The delinquency status of loans is updated daily. A description of the delinquency credit quality indicators is as follows:

•Current - Loans in this category are either current in payments or are under 30 days past due. These loans are considered to have a normal level of risk.
•30-89 Days Past Due - Loans in this category are between 30 and 89 days past due and are subject to the Company’s loss mitigation process. These loans are considered to have a moderate level of risk.
•90+ Days Past Due - Loans in this category are 90 days or more past due and are placed on nonaccrual status. These loans have been subject to the Company’s loss mitigation process and foreclosure and/or charge-off proceedings have commenced.

The Company uses a dual risk rating scale that utilizes quantitative models and qualitative factors (“score cards”) to assist in determining the appropriate risk rating for its commercial loans. This dual risk rating methodology incorporates a “probability of default” analysis which utilizes quantified metrics such as loan terms and financial performance, as well as a “loss given default” analysis which utilizes collateral values and economics of the market, among other attributes. Model outputs are reviewed and analyzed to ensure the projected risk levels are commensurate with underwriting and credit leader expectations. The risk rating scale includes Probability of Default levels of 1 – 16 and Loss Given Default levels of A – I. The scale allows for more granular recognition of risk and diversification of grading among traditional Pass grades.

The following is a reconciliation between the expanded risk rating scale and the Company’s traditional risk rating segments utilized within the commercial loan classes presented in the credit quality indicator tables.

•Pass - Includes loans with an expanded risk rating of 1 through 11. Loans with a risk rating of 10 and 11 equate to loans included on management’s “watch list” and is intended to be utilized on a temporary basis for pass grade borrowers where a significant risk-modifying action is anticipated in the near term.
•Special Mention - Includes loans with an expanded risk rating of 12.
•Substandard - Includes loans with an expanded risk rating of 13 and 14.
•Doubtful and loss - Includes loans with an expanded risk rating of 15 and 16.
The following table presents a summary of loans by credit quality indicator, as of September 30, 2023, segregated by class of loans.

Term Loans Amortized Cost Basis by Origination Year
(In thousands)2023 (YTD)20222021202020192018 and PriorLines of Credit (“LOC”) Amortized Cost BasisLOC Converted to Term Loans Amortized Cost BasisTotal
Consumer - credit cards    
Delinquency:
Current$— $— $— $— $— $— $188,905 $— $188,905 
30-89 days past due— — — — — — 1,973 — 1,973 
90+ days past due— — — — — — 672 — 672 
Total consumer - credit cards— — — — — — 191,550 — 191,550 
Current-period consumer - credit cards gross charge-offs— — — — — — 3,803 — 3,803 
Consumer - other
Delinquency:
Current29,356 43,251 15,022 4,515 2,029 1,557 15,736 — 111,466 
30-89 days past due190 535 192 37 27 42 91 — 1,114 
90+ days past due27 160 50 4 9 — 2 — 252 
Total consumer - other29,573 43,946 15,264 4,556 2,065 1,599 15,829 — 112,832 
Current-period consumer - other gross charge-offs133 606 398 65 29 126 291 — 1,648 
Real estate - C&D
Risk rating:
Pass87,306 170,979 55,250 44,198 12,915 22,780 2,623,588 — 3,017,016 
Special mention— — — — — 401 — — 401 
Substandard— 57 60 — — 263 4,524 — 4,904 
Doubtful and loss— — — — — — — — — 
Total real estate - C&D87,306 171,036 55,310 44,198 12,915 23,444 2,628,112 — 3,022,321 
Current-period real estate - C&D gross charge-offs— 1,148 — — — 8 — — 1,156 
Real estate - SF residential
Delinquency:
Current301,165 645,020 366,070 227,692 135,278 576,964 380,016 573 2,632,778 
30-89 days past due220 1,872 2,243 1,826 424 4,579 2,091 — 13,255 
90+ days past due— 2,201 1,558 549 219 6,086 1,233 — 11,846 
Total real estate - SF residential301,385 649,093 369,871 230,067 135,921 587,629 383,340 573 2,657,879 
Current-period real estate - SF residential gross charge-offs— 44 — 36 — 121 232 — 433 
Real estate - other commercial
Risk rating:
Pass412,274 1,743,049 1,346,771 547,764 244,322 630,657 2,257,149 — 7,181,986 
Special mention27,973 8,527 12,310 6,038 1,369 26,631 94,853 — 177,701 
Substandard4,324 6,364 17,613 9,712 8,406 22,574 136,328 — 205,321 
Doubtful and loss— — — — — — — — — 
Total real estate - other commercial444,571 1,757,940 1,376,694 563,514 254,097 679,862 2,488,330 — 7,565,008 
Current-period real estate - other commercial gross charge-offs— — — 7 — 35 9,731 — 9,773 
Term Loans Amortized Cost Basis by Origination Year
(In thousands)2023 (YTD)20222021202020192018 and PriorLines of Credit (“LOC”) Amortized Cost BasisLOC Converted to Term Loans Amortized Cost BasisTotal
Commercial
Risk rating:
Pass314,762 406,164 220,637 68,506 54,024 64,078 1,276,796 — 2,404,967 
Special mention12 11,946 6,714 30 12 1,095 6,554 — 26,363 
Substandard122 8,718 4,154 1,319 1,457 5,188 24,728 — 45,686 
Doubtful and loss— 61 — — — — — — 61 
Total commercial314,896 426,889 231,505 69,855 55,493 70,361 1,308,078 — 2,477,077 
Current-period commercial - gross charge-offs31 1,288 313 224 178 193 620 — 2,847 
Commercial - agriculture
Risk rating:
Pass31,638 35,414 17,050 6,546 2,883 590 202,001 — 296,122 
Special mention— — — — — — — — — 
Substandard— 496 84 69 40 28 72 — 789 
Doubtful and loss— 1 — — — — — — 1 
Total commercial - agriculture31,638 35,911 17,134 6,615 2,923 618 202,073 — 296,912 
Current-period commercial - agriculture gross charge-offs— 7 — — — 3 — — 10 
Other
Delinquency:
Current27,531 147,346 28,709 7,035 4,098 38,579 195,008 — 448,306 
30-89 days past due— — — — — — — — — 
90+ days past due— — — — — 3 — — 3 
Total other27,531 147,346 28,709 7,035 4,098 38,582 195,008 — 448,309 
Current-period other - gross charge-offs— — — — — — 107 — 107 
Total$1,236,900 $3,232,161 $2,094,487 $925,840 $467,512 $1,402,095 $7,412,320 $573 $16,771,888 
The following table presents a summary of loans by credit quality indicator, as of December 31, 2022, segregated by class of loans.

Term Loans Amortized Cost Basis by Origination Year
(In thousands)202220212020201920182017 and PriorLines of Credit (“LOC”) Amortized Cost BasisLOC Converted to Term Loans Amortized Cost BasisTotal
Consumer - credit cards    
Delinquency:
Current$— $— $— $— $— $— $195,222 $— $195,222 
30-89 days past due— — — — — — 1,297 — 1,297 
90+ days past due— — — — — — 409 — 409 
Total consumer - credit cards— — — — — — 196,928 — 196,928 
Consumer - other
Delinquency:
Current86,303 26,339 10,071 3,804 2,671 2,275 20,350 3 151,816 
30-89 days past due298 241 135 13 34 119 12 — 852 
90+ days past due121 47 2 1 2 41 — — 214 
Total consumer - other86,722 26,627 10,208 3,818 2,707 2,435 20,362 3 152,882 
Real estate - C&D
Risk rating:
Pass237,304 68,916 50,912 16,920 13,625 9,611 2,163,776 334 2,561,398 
Special mention— — — — — 41 1,342 — 1,383 
Substandard1,091 116 36 13 31 103 2,478 — 3,868 
Doubtful and loss— — — — — — — — — 
Total real estate - C&D238,395 69,032 50,948 16,933 13,656 9,755 2,167,596 334 2,566,649 
Real estate - SF residential
Delinquency:
Current700,976 411,885 295,365 141,608 192,176 440,931 324,282 4,192 2,511,415 
30-89 days past due3,105 3,415 1,290 2,018 3,129 8,626 2,042 — 23,625 
90+ days past due586 871 885 968 1,017 6,312 436 — 11,075 
Total real estate - SF residential704,667 416,171 297,540 144,594 196,322 455,869 326,760 4,192 2,546,115 
Real estate - other commercial
Risk rating:
Pass1,917,352 1,482,049 768,630 254,986 179,729 428,027 2,093,379 19,469 7,143,621 
Special mention19,538 32,831 38,821 206 2,261 20,741 104,431 — 218,829 
Substandard24,639 3,399 27,399 2,544 2,026 15,217 30,824 — 106,048 
Doubtful and loss— — — — — — — — — 
Total real estate - other commercial1,961,529 1,518,279 834,850 257,736 184,016 463,985 2,228,634 19,469 7,468,498 
Commercial
Risk rating:
Pass595,256 300,650 168,539 41,924 31,329 35,447 1,401,402 24,940 2,599,487 
Special mention199 1,700 11 32 — 927 2,708 80 5,657 
Substandard5,257 2,435 3,328 802 891 1,290 11,337 1,805 27,145 
Doubtful and loss— — — — — — — 1 1 
Total commercial600,712 304,785 171,878 42,758 32,220 37,664 1,415,447 26,826 2,632,290 
Commercial - agriculture
Risk rating:
Pass44,377 22,901 12,044 4,483 1,029 369 119,342 310 204,855 
Special mention8 — — — — — — — 8 
Substandard55 8 78 49 10 — 560 — 760 
Doubtful and loss— — — — — — — — — 
Total commercial - agriculture44,440 22,909 12,122 4,532 1,039 369 119,902 310 205,623 
Other
Delinquency:
Current152,086 29,362 8,181 4,742 20,018 25,349 132,384 953 373,075 
30-89 days past due— — — — — 61 — — 61 
90+ days past due— — — — — 3 — — 3 
Total other152,086 29,362 8,181 4,742 20,018 25,413 132,384 953 373,139 
Total$3,788,551 $2,387,165 $1,385,727 $475,113 $449,978 $995,490 $6,608,013 $52,087 $16,142,124 
Allowance for Credit Losses

Allowance for Credit Losses – The allowance for credit losses is a reserve established through a provision for credit losses charged to expense, which represents management’s best estimate of lifetime expected losses based on reasonable and supportable forecasts, quantitative factors, and other qualitative considerations. The allowance, in the judgment of management, is necessary to reserve for expected loan losses and risks inherent in the loan portfolio. The Company’s allowance for credit loss methodology includes reserve factors calculated to estimate current expected credit losses to amortized cost balances over the remaining contractual life of the portfolio, adjusted for prepayments, in accordance with ASC Topic 326-20, Financial Instruments - Credit Losses. Accordingly, the methodology is comprised of two components: individual assessments on loans with unique risk characteristics and collective assessments for loans that share similar risk characteristics. Loans with similar risk characteristics such as loan type, collateral type, and internal risk ratings are aggregated for collective assessment. The Company uses statistically-based models that leverage assumptions about current and future economic conditions throughout the contractual life of the loan. Expected credit losses are estimated by either lifetime loss rates or expected loss cash flows based on three key parameters: probability-of-default (“PD”), exposure-at-default (“EAD”), and loss-given-default (“LGD”). Future economic conditions are incorporated to the extent that they are reasonable and supportable. Beyond the reasonable and supportable periods, the economic variables revert to a historical equilibrium at a pace dependent on the state of the economy reflected within the economic scenarios. To determine the best estimate of credit losses as of September 30, 2023, the Company utilized a probability-weighted, multiple-scenario approach consisting of Baseline, Upside (S1), and Downside (S3) scenarios published by Moody’s Analytics in September 2023 that was updated to reflect the U.S. economic outlook. The Company also includes qualitative adjustments to the allowance based on factors and considerations that have not otherwise been fully accounted for. These factors may include but are not limited to portfolio trends and considerations, other economic considerations, policy actions, concentration risk, or imprecision risk.

Loans with similar risk characteristics such as loan type, collateral type, and internal risk ratings are aggregated into homogeneous segments for assessment. Reserve factors are based on estimated probability of default and loss given default for each segment. The estimates are determined based on economic forecasts over the reasonable and supportable forecast period based on projected performance of economic variables that have a statistical relationship with the historical loss experience of the segments. For contractual periods that extend beyond the one-year forecast period, the estimates revert to average historical loss experiences over a one-year period on a straight-line basis.

Loans that have unique risk characteristics are evaluated on an individual basis. These evaluations are typically performed on loans with a deteriorated internal risk rating. For a collateral-dependent loan, the Company’s evaluation process includes a valuation by appraisal or other collateral analysis adjusted for selling costs, when appropriate. This valuation is compared to the remaining outstanding principal balance of the loan. If a loss is determined to be probable, the loss is included in the allowance for credit losses as a specific allocation.
Loans for which the repayment is expected to be provided substantially through the operation or sale of collateral and where the borrower is experiencing financial difficulty had an amortized cost of $129.5 million and $70.9 million as of September 30, 2023 and December 31, 2022, respectively, as further detailed in the table below. The collateral securing these loans consist of commercial real estate properties, residential properties, and other business assets.

(In thousands)Real Estate CollateralOther CollateralTotal
September 30, 2023
Construction and development$3,502 $— $3,502 
Single family residential1,442 — 1,442 
Other commercial real estate102,384 — 102,384 
Commercial— 22,164 22,164 
Total$107,328 $22,164 $129,492 
December 31, 2022
Construction and development$2,156 $— $2,156 
Single family residential— — — 
Other commercial real estate65,450 — 65,450 
Commercial— 3,320 3,320 
Total$67,606 $3,320 $70,926 

The following table details activity in the allowance for credit losses by portfolio segment for the three and nine months ended September 30, 2023. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories. 

(In thousands)CommercialReal
Estate		Credit
Card		Other
Consumer
and Other		Total
Allowance for credit losses:
Three Months Ended September 30, 2023
Beginning balance, July 1, 2023$30,985 $165,813 $6,330 $6,838 $209,966 
Provision for credit loss expense4,095 16,528 704 (1,105)20,222 
Charge-offs(1,219)(9,723)(1,318)(633)(12,893)
Recoveries245 429 234 344 1,252 
Net (charge-offs) recoveries(974)(9,294)(1,084)(289)(11,641)
Ending balance, September 30, 2023$34,106 $173,047 $5,950 $5,444 $218,547 
Nine Months Ended September 30, 2023
Beginning balance, January 1, 2023$34,406 $150,795 $5,140 $6,614 $196,955 
Provision for credit loss expense774 32,013 3,847 (435)36,199 
Charge-offs(2,857)(11,362)(3,803)(1,755)(19,777)
Recoveries1,783 1,601 766 1,020 5,170 
Net charge-offs(1,074)(9,761)(3,037)(735)(14,607)
Ending balance, September 30, 2023$34,106 $173,047 $5,950 $5,444 $218,547 
Activity in the allowance for credit losses for the three and nine months ended September 30, 2022 was as follows:

(In thousands)CommercialReal
Estate		Credit
Card		Other
Consumer
and Other		Total
Allowance for credit losses:
Three Months Ended September 30, 2022
Beginning balance, July 1, 2022$32,817 $166,481 $6,609 $6,704 $212,611 
Acquisition adjustment for PCD loans1,057 — — — 1,057 
Provision for credit loss expense(613)(17,243)1,119 840 (15,897)
Charge-offs(1,873)(130)(903)(506)(3,412)
Recoveries720 1,982 250 278 3,230 
Net (charge-offs) recoveries(1,153)1,852 (653)(228)(182)
Ending balance, September 30, 2022$32,108 $151,090 $7,075 $7,316 $197,589 
Nine Months Ended September 30, 2022
Beginning balance, January 1, 2022$17,458 $179,270 $3,987 $4,617 $205,332 
Acquisition adjustment for PCD loans1,911 3,187 — 2 5,100 
Provision for credit loss expense19,721 (33,436)5,142 3,168 (5,405)
Charge-offs(8,880)(730)(2,827)(1,438)(13,875)
Recoveries1,898 2,799 773 967 6,437 
Net (charge-offs) recoveries(6,982)2,069 (2,054)(471)(7,438)
Ending balance, September 30, 2022$32,108 $151,090 $7,075 $7,316 $197,589 

As of September 30, 2023, the Company’s allowance for credit losses was considered sufficient based upon expected losses that were supported by scenario-weighted economic forecasts. The provision expense for the three and nine months ended September 30, 2023 was primarily due to the loan growth experienced during the periods, as well as the impact of updated economic assumptions.

Reserve for Unfunded Commitments
 
In addition to the allowance for credit losses, the Company has established a reserve for unfunded commitments, classified in other liabilities. This reserve is maintained at a level management believes to be sufficient to absorb losses arising from unfunded loan commitments. The reserve for unfunded commitments was $25.6 million and $41.9 million as of September 30, 2023 and December 31, 2022, respectively. The adequacy of the reserve for unfunded commitments is determined quarterly based on methodology similar to the methodology for determining the allowance for credit losses. During the three and nine month periods ended September 30, 2023, $11.3 million and $16.3 million, respectively, was released from the reserve for unfunded commitments primarily due to a decline in unfunded commitments resulting from customers utilizing lines of credit during the periods. For the three month period ended September 30, 2022, an adjustment to the reserve for unfunded commitments resulted in an expense of $16.0 million due to the overall increase in unfunded commitments, primarily made up of commercial construction loans, which receive a higher reserve allocation than other loans. For the nine month period ended September 30, 2022 an adjustment to the reserve for unfunded commitments resulted in an expense of $19.5 million, made up of the increase previously discussed combined with the Day 2 provision related to the Spirit acquisition. These adjustments were included in the provision for credit losses in the statement of income.
Provision for Credit Losses

Provision for credit losses is determined by the Company as the amount to be added to the allowance for credit loss accounts for various types of financial instruments including loans, securities and off-balance-sheet credit exposure after net charge-offs have been deducted to bring the allowance to a level which, in management’s best estimate, is necessary to absorb expected credit losses over the lives of the respective financial instruments.

The components of the provision for credit losses for the three and nine month periods ended September 30, 2023 and 2022 were as follows:

Three Months Ended
September 30,		Nine Months Ended
September 30,
(In thousands)2023202220232022
Provision for credit losses related to:  
Loans$20,222 $(15,897)$36,199 $(5,405)
Unfunded commitments(11,300)16,000 (16,300)19,453 
Securities - HTM— — 1,826 — 
Securities - AFS(1,200)— 10,274 — 
Total$7,722 $103 $31,999 $14,048 

Purchased Credit Deteriorated (“PCD”) Loans

Purchased loans that reflect a more-than-insignificant deterioration of credit from origination are considered PCD. For PCD loans, the initial estimate of expected credit losses is recognized in the allowance for credit loss on the date of acquisition using the same methodology as discussed in the Allowance for Credit Losses section included above.

The following table provides a summary of loans purchased as part of the Spirit acquisition with credit deterioration at acquisition:
(In thousands)CommercialReal
Estate		Credit
Card		Other
Consumer
and Other		Total
Unpaid principal balance$8,258 $66,534 $— $59 $74,851 
PCD allowance for credit loss at acquisition(6,433)(3,187)— (2)(9,622)
Non-credit related discount(378)(998)— (1)(1,377)
Fair value of PCD loans$1,447 $62,349 $— $56 $63,852