Loans and Allowance for Credit Losses | Note 3: Loans and Allowance for Credit Losses The table below shows the loan portfolio composition including carrying value by segment as of the dates shown. The carrying value of loans is net of discounts, fees, costs, and fair value marks of $24 million and $25 million as of September 30, 2024 and December 31, 2023, respectively. September 30, 2024 December 31, 2023 Amount % of Loans Amount % of Loans (Dollars in thousands) Commercial and industrial $ 2,221,014 35 % $ 2,160,212 35 % Energy 224,036 4 214,218 3 Commercial real estate - owner-occupied 583,305 9 566,253 9 Commercial real estate - non-owner-occupied 2,802,954 44 2,685,534 44 Residential real estate 476,336 8 464,095 8 Consumer 23,404 - 37,378 1 Loans, net of unearned fees 6,331,049 100 % 6,127,690 100 % Less: Allowance for credit losses on loans (77,757) (73,462) Loans, net of the allowance for credit losses on loans $ 6,253,292 $ 6,054,228 Accrued interest of $33 million and $30 million at September 30, 2024 and December 31, 2023, respectively, presented in “interest receivable” on the consolidated statements of financial condition is excluded from the amortized cost basis disclosed in the above table. The Company aggregates the loan portfolio by similar credit risk characteristics. The loan segments are described in additional detail below: ● Commercial and Industrial - The category includes loans and lines of credit to commercial and industrial clients for use in property, plant, and equipment purchases, business operations, expansions and for working capital needs. Loan terms typically require amortizing payments that decrease the outstanding loan balance while the lines of credit typically require interest-only payments with maturities ranging from one- to three-years. Lines of credit allow the borrower to draw down and repay the line of credit based on the borrower’s cash flow needs. Repayment is primarily from the cash flow of a borrower’s principal business operation. Credit risk is driven by creditworthiness of a borrower and the economic conditions that impact the cash flow stability from business operations. ● Energy - The category includes loans to oil and natural gas clients for use in financing working capital needs, exploration and production activities, and acquisitions. The loans are repaid primarily from the conversion of crude oil and natural gas to cash. Credit risk is driven by creditworthiness of a borrower and the economic conditions that impact the cash flow stability from business operations. Energy loans are typically collateralized with the underlying oil and gas reserves. ● Commercial Real Estate - Owner-Occupied - The category includes relationships where the Company is usually the primary provider of financial services for the company and/or the principals and the primary source of repayment is through the cash flows generated by the borrowers’ business operations. Owner-occupied commercial real estate loans are typically secured by a first lien mortgage on real property plus assignments of all leases related to the properties. Credit risk may be impacted by the creditworthiness of a borrower, property values and the local economies in the borrower’s market areas. ● Commercial Real Estate – Non-Owner-Occupied - The category includes loans that typically involve larger principal amounts and repayment of these loans is generally dependent on the leasing income generated from tenants. These are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Additionally, the category includes construction and land development loans that are based upon estimates of costs and estimated value of the completed project. Independent appraisals and a financial analysis of the developers and property owners are completed. Sources of repayment include secondary market permanent loans, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are higher risk than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, general economic conditions, and the availability of long-term financing. The category also includes loans that are secured by multifamily properties. Repayment of these loans is primarily dependent on occupancy rates and rental income. Credit risk for non-owner-occupied commercial real estate loans may be impacted by the creditworthiness of a borrower, property values and the local economies in the borrower’s market areas. ● Residential Real Estate - The category includes loans that are generally secured by owner-occupied 1-4 family residences. Repayment of these loans is primarily dependent on the personal income and credit rating of the borrowers. We also offer open- and closed-ended home equity loans, which are loans generally secured by second lien positions on residential real estate. Credit risk in these loans can be impacted by economic conditions within or outside the borrower’s market areas that might impact either property values or a borrower’s personal income. ● Consumer - The category includes personal lines of credit and various term loans such as automobile loans and loans for other personal purposes. Repayment is primarily dependent on the personal income and credit rating of the borrowers. Credit risk is driven by consumer economic factors (such as unemployment and general economic conditions in the borrower’s market area) and the creditworthiness of a borrower. Risk Ratings The Company uses a series of grades which reflect its assessment of the credit quality of loans based on an analysis of the borrower's financial condition, liquidity and ability to meet contractual debt service requirements. Risk ratings are established for loans at origination and are monitored on an ongoing basis. The rating assigned to a loan reflects the risks posed by the borrower’s expected performance and the transaction’s structure. Performance metrics used to determine a risk rating include, but are not limited to, cash flow adequacy, liquidity, and collateral. A description of the loan risk ratings follows: ● Pass - The category includes loans that are considered satisfactory and borrowers that generally maintain good liquidity and financial condition, or the credit is currently protected with sales trends remaining flat or declining. Most ratios compare favorably with industry norms and Company policies. Debt is programmed and timely repayment is expected. ● Special Mention - The category includes borrowers that generally exhibit adverse trends in operations or an imbalanced position in their balance sheet that has not reached a point where repayment is jeopardized. Credits are currently protected but, if left uncorrected, the potential weaknesses may result in deterioration of the repayment prospects for the credit or in the Company’s credit or lien position at a future date. These credits are not adversely classified and do not expose the Company to enough risk to warrant adverse classification. ● Substandard - The category includes borrowers that generally exhibit well-defined weakness(es) that jeopardize repayment. Credits are inadequately protected by the current worth and paying capacity of the obligor or of the collateral pledged. A distinct possibility exists that the Company will sustain some loss if deficiencies are not corrected. Loss potential, while existing in the aggregate amount of substandard assets, does not have to exist in individual assets classified substandard. Substandard loans include both performing and non-performing loans and are broken out in the table below. ● Doubtful - The category includes borrowers that exhibit weaknesses inherent in a substandard credit and characteristics that these weaknesses make collection or liquidation in full highly questionable or improbable based on existing facts, conditions, and values. Because of reasonably specific pending factors, which may work to the advantage and strengthening of the assets, classification as a loss is deferred until its more exact status may be determined. ● Loss - Credits that are considered uncollectible or of such little value that their continuance as a bankable asset is not warranted. The following tables present the credit risk profile of the Company’s loan portfolio based on internal rating categories and loan segments: As of September 30, 2024 Amortized Cost Basis by Origination Year and Internal Risk Rating Amortized Cost Basis 2024 2023 2022 2021 2020 2019 and Prior Revolving Loans Revolving Loans Converted to Term Loans Total (Dollars in thousands) Commercial and industrial Pass $ 297,434 $ 227,975 $ 197,696 $ 119,558 $ 32,895 $ 12,589 $ 1,119,666 $ 72,450 $ 2,080,263 Special mention 682 11,572 12,948 14,859 — 15 26,868 1,008 67,952 Substandard - accrual 1,678 12,002 1,727 5,184 139 1,761 24,714 16,067 63,272 Substandard - non-accrual — 651 47 262 — 478 4,612 468 6,518 Doubtful — — — — — — 1,154 1,855 3,009 Loss — — — — — — — — — Total $ 299,794 $ 252,200 $ 212,418 $ 139,863 $ 33,034 $ 14,843 $ 1,177,014 $ 91,848 $ 2,221,014 Energy Pass $ — $ — $ 5,977 $ — $ — $ — $ 217,178 $ 863 $ 224,018 Special mention — — — — — — — — — Substandard - accrual — — — — — — — — — Substandard - non-accrual — — — — — — — — — Doubtful — — — — — — 18 — 18 Loss — — — — — — — — — Total $ - $ - $ 5,977 $ - $ - $ - $ 217,196 $ 863 $ 224,036 Commercial real estate - owner-occupied Pass $ 39,630 $ 56,401 $ 100,740 $ 109,668 $ 59,365 $ 66,984 $ 68,201 $ 41,535 $ 542,524 Special mention 10,400 1,901 5,619 9,636 1,714 2,612 — 560 32,442 Substandard - accrual 63 2,977 1,443 — 1,618 — — 2,238 8,339 Substandard - non-accrual — — — — — — — — — Doubtful — — — — — — — — — Loss — — — — — — — — — Total $ 50,093 $ 61,279 $ 107,802 $ 119,304 $ 62,697 $ 69,596 $ 68,201 $ 44,333 $ 583,305 Commercial real estate - non-owner-occupied Pass $ 279,544 $ 349,360 $ 756,177 $ 202,001 $ 115,238 $ 100,315 $ 811,239 $ 152,507 $ 2,766,381 Special mention — — 19,499 7,017 — 1,269 — 1,337 29,122 Substandard - accrual 3,538 — — — 3,616 297 — — 7,451 Substandard - non-accrual — — — — — — — — — Doubtful — — — — — — — — — Loss — — — — — — — — — Total $ 283,082 $ 349,360 $ 775,676 $ 209,018 $ 118,854 $ 101,881 $ 811,239 $ 153,844 $ 2,802,954 Residential real estate Pass $ 25,591 $ 46,030 $ 93,014 $ 72,827 $ 96,173 $ 90,538 $ 43,571 $ — $ 467,744 Special mention — 4,145 483 1,707 173 — — — 6,508 Substandard - accrual — — — 1,287 — — 176 — 1,463 Substandard - non-accrual 253 — — — — 199 — 169 621 Doubtful — — — — — — — — — Loss — — — — — — — — — Total $ 25,844 $ 50,175 $ 93,497 $ 75,821 $ 96,346 $ 90,737 $ 43,747 $ 169 $ 476,336 Consumer Pass $ 2,371 $ 3,449 $ 3,562 $ 292 $ 29 $ 54 $ 13,478 $ — $ 23,235 Special mention — — — — — 3 150 — 153 Substandard - accrual — — — — 16 — — — 16 Substandard - non-accrual — — — — — — — — — Doubtful — — — — — — — — — Loss — — — — — — — — — Total $ 2,371 $ 3,449 $ 3,562 $ 292 $ 45 $ 57 $ 13,628 $ - $ 23,404 Total Pass $ 644,570 $ 683,215 $ 1,157,166 $ 504,346 $ 303,700 $ 270,480 $ 2,273,333 $ 267,355 $ 6,104,165 Special mention 11,082 17,618 38,549 33,219 1,887 3,899 27,018 2,905 136,177 Substandard - accrual 5,279 14,979 3,170 6,471 5,389 2,058 24,890 18,305 80,541 Substandard - non-accrual 253 651 47 262 — 677 4,612 637 7,139 Doubtful — — — — — — 1,172 1,855 3,027 Loss — — — — — — — — — Total $ 661,184 $ 716,463 $ 1,198,932 $ 544,298 $ 310,976 $ 277,114 $ 2,331,025 $ 291,057 $ 6,331,049 As of December 31, 2023 Amortized Cost Basis by Origination Year and Internal Risk Rating Amortized Cost Basis 2023 2022 2021 2020 2019 2018 and Prior Revolving Loans Revolving Loans Converted to Term Loans Total (Dollars in thousands) Commercial and industrial Pass $ 379,360 $ 258,182 $ 193,302 $ 54,901 $ 38,762 $ 18,801 $ 1,061,365 $ 53,015 $ 2,057,688 Special mention 2,442 925 6,000 2,674 1,460 26 9,748 3,175 26,450 Substandard - accrual 12,655 1,877 5,101 238 598 815 28,652 16,831 66,767 Substandard - non-accrual — — 266 24 — — 6,848 178 7,316 Doubtful — — — — — — 1,991 — 1,991 Loss — — — — — — — — — Total $ 394,457 $ 260,984 $ 204,669 $ 57,837 $ 40,820 $ 19,642 $ 1,108,604 $ 73,199 $ 2,160,212 Energy Pass $ 4,581 $ 6,868 $ — $ 156 $ — $ — $ 202,218 $ 107 $ 213,930 Special mention — — — — — — — — — Substandard - accrual — — — — — — — — — Substandard - non-accrual — — — — — — — — — Doubtful — — — — — — 288 — 288 Loss — — — — — — — — — Total $ 4,581 $ 6,868 $ — $ 156 $ — $ — $ 202,506 $ 107 $ 214,218 Commercial real estate - owner-occupied Pass $ 56,236 $ 92,148 $ 119,684 $ 62,072 $ 49,992 $ 32,936 $ 76,782 $ 36,263 $ 526,113 Special mention 10,095 6,798 8,522 1,747 793 2,448 — 576 30,979 Substandard - accrual 2,977 — — 1,635 770 2,047 — 1,528 8,957 Substandard - non-accrual — — 204 — — — — — 204 Doubtful — — — — — — — — — Loss — — — — — — — — — Total $ 69,308 $ 98,946 $ 128,410 $ 65,454 $ 51,555 $ 37,431 $ 76,782 $ 38,367 $ 566,253 Commercial real estate - non-owner-occupied Pass $ 477,238 $ 842,755 $ 242,405 $ 161,845 $ 65,540 $ 50,062 $ 626,998 $ 145,621 $ 2,612,464 Special mention — 18,939 7,331 — 17,208 4,052 — — 47,530 Substandard - accrual 10,341 — 2,396 3,626 — 298 — 439 17,100 Substandard - non-accrual — 713 6,029 1,698 — — — — 8,440 Doubtful — — — — — — — — — Loss — — — — — — — — — Total $ 487,579 $ 862,407 $ 258,161 $ 167,169 $ 82,748 $ 54,412 $ 626,998 $ 146,060 $ 2,685,534 Residential real estate Pass $ 37,676 $ 86,919 $ 82,390 $ 110,853 $ 36,589 $ 62,288 $ 37,619 $ — $ 454,334 Special mention — 813 3,519 176 — — — — 4,508 Substandard - accrual 253 — 1,317 3,125 203 — 176 — 5,074 Substandard - non-accrual — — — — — — — 179 179 Doubtful — — — — — — — — — Loss — — — — — — — — — Total $ 37,929 $ 87,732 $ 87,226 $ 114,154 $ 36,792 $ 62,288 $ 37,795 $ 179 $ 464,095 Consumer Pass $ 11,591 $ 6,004 $ 462 $ 54 $ 221 $ 25 $ 18,960 $ — $ 37,317 Special mention — — — — — 5 — — 5 Substandard - accrual — — — 23 — — — — 23 Substandard - non-accrual — 33 — — — — — — 33 Doubtful — — — — — — — — — Loss — — — — — — — — — Total $ 11,591 $ 6,037 $ 462 $ 77 $ 221 $ 30 $ 18,960 $ — $ 37,378 Total Pass $ 966,682 $ 1,292,876 $ 638,243 $ 389,881 $ 191,104 $ 164,112 $ 2,023,942 $ 235,006 $ 5,901,846 Special mention 12,537 27,475 25,372 4,597 19,461 6,531 9,748 3,751 109,472 Substandard - accrual 26,226 1,877 8,814 8,647 1,571 3,160 28,828 18,798 97,921 Substandard - non-accrual — 746 6,499 1,722 — — 6,848 357 16,172 Doubtful — — — — — — 2,279 — 2,279 Loss — — — — — — — — — Total $ 1,005,445 $ 1,322,974 $ 678,928 $ 404,847 $ 212,136 $ 173,803 $ 2,071,645 $ 257,912 $ 6,127,690 The following tables present the Company’s loan portfolio aging analysis as of September 30, 2024 and December 31, 2023: As of September 30, 2024 Amortized Cost Basis by Origination Year and Past Due Status Amortized Cost Basis Revolving loans 2019 and converted to 2024 2023 2022 2021 2020 Prior Revolving loans term loans Total (Dollars in thousands) Commercial and industrial 30-59 days $ - $ 19 $ 43 $ 59 $ - $ - $ 40 $ - $ 161 60-89 days - 137 67 - - 358 150 5 717 Greater than 90 days - 692 1,632 1,512 - 478 8,121 1,855 14,290 Total past due - 848 1,742 1,571 - 836 8,311 1,860 15,168 Current 299,794 251,352 210,676 138,292 33,034 14,007 1,168,703 89,988 2,205,846 Total $ 299,794 $ 252,200 $ 212,418 $ 139,863 $ 33,034 $ 14,843 $ 1,177,014 $ 91,848 $ 2,221,014 Greater than 90 days and accruing $ - $ 41 $ 1,601 $ 1,250 $ - $ - $ 2,355 $ - $ 5,247 Energy 30-59 days $ - $ - $ - $ - $ - $ - $ - $ - $ - 60-89 days - - - - - - - - - Greater than 90 days - - - - - - 18 - 18 Total past due - - - - - - 18 - 18 Current - - 5,977 - - - 217,178 863 224,018 Total $ - $ - $ 5,977 $ - $ - $ - $ 217,196 $ 863 $ 224,036 Greater than 90 days and accruing $ - $ - $ - $ - $ - $ - $ - $ - $ - Commercial real estate - owner-occupied 30-59 days $ - $ - $ - $ - $ - $ - $ - $ - $ - 60-89 days - 829 - - - - - - 829 Greater than 90 days - - - - - - - - - Total past due - 829 - - - - - - 829 Current 50,093 60,450 107,802 119,304 62,697 69,596 68,201 44,333 582,476 Total $ 50,093 $ 61,279 $ 107,802 $ 119,304 $ 62,697 $ 69,596 $ 68,201 $ 44,333 $ 583,305 Greater than 90 days and accruing $ - $ - $ - $ - $ - $ - $ - $ - $ - Commercial real estate - non-owner-occupied 30-59 days $ - $ - $ 99 $ - $ - $ - $ - $ - $ 99 60-89 days - - - - - - - - - Greater than 90 days - - - - - - - - - Total past due - - 99 - - - - - 99 Current 283,082 349,360 775,577 209,018 118,854 101,881 811,239 153,844 2,802,855 Total $ 283,082 $ 349,360 $ 775,676 $ 209,018 $ 118,854 $ 101,881 $ 811,239 $ 153,844 $ 2,802,954 Greater than 90 days and accruing $ - $ - $ - $ - $ - $ - $ - $ - $ - Residential real estate 30-59 days $ - $ - $ 44 $ 248 $ - $ 35 $ - $ - $ 327 60-89 days - - - - 24 1,776 - - 1,800 Greater than 90 days 253 - - 1,373 173 199 3,557 - 5,555 Total past due 253 - 44 1,621 197 2,010 3,557 - 7,682 Current 25,591 50,175 93,453 74,200 96,149 88,727 40,190 169 468,654 Total $ 25,844 $ 50,175 $ 93,497 $ 75,821 $ 96,346 $ 90,737 $ 43,747 $ 169 $ 476,336 Greater than 90 days and accruing $ - $ - $ - $ 1,373 $ 173 $ - $ 3,557 $ - $ 5,103 Consumer 30-59 days $ - $ - $ 44 $ - $ 6 $ 3 $ 70 $ - $ 123 60-89 days - - 14 20 - - 100 - 134 Greater than 90 days - - - - - - 50 - 50 Total past due - - 58 20 6 3 220 - 307 Current 2,371 3,449 3,504 272 39 54 13,408 - 23,097 Total $ 2,371 $ 3,449 $ 3,562 $ 292 $ 45 $ 57 $ 13,628 $ - $ 23,404 Greater than 90 days and accruing $ - $ - $ - $ - $ - $ - $ 50 $ - $ 50 Total 30-59 days $ - $ 19 $ 230 $ 307 $ 6 $ 38 $ 110 $ - $ 710 60-89 days - 966 81 20 24 2,134 250 5 3,480 Greater than 90 days 253 692 1,632 2,885 173 677 11,746 1,855 19,913 Total past due 253 1,677 1,943 3,212 203 2,849 12,106 1,860 24,103 Current 660,931 714,786 1,196,989 541,086 310,773 274,265 2,318,919 289,197 6,306,946 Total $ 661,184 $ 716,463 $ 1,198,932 $ 544,298 $ 310,976 $ 277,114 $ 2,331,025 $ 291,057 $ 6,331,049 Greater than 90 days and accruing $ - $ 41 $ 1,601 $ 2,623 $ 173 $ - $ 5,962 $ - $ 10,400 As of December 31, 2023 Amortized Cost Basis by Origination Year and Past Due Status Amortized Cost Basis Revolving loans 2018 and converted to 2023 2022 2021 2020 2019 Prior Revolving loans term loans Total (Dollars in thousands) Commercial and industrial 30-59 days $ 250 $ 178 $ — $ 81 $ — $ 136 $ 158 $ 151 $ 954 60-89 days — — — — — — — — — Greater than 90 days 30 28 347 24 199 — 10,800 2,376 13,804 Total past due 280 206 347 105 199 136 10,958 2,527 14,758 Current 394,177 260,778 204,322 57,732 40,621 19,506 1,097,646 70,672 2,145,454 Total $ 394,457 $ 260,984 $ 204,669 $ 57,837 $ 40,820 $ 19,642 $ 1,108,604 $ 73,199 $ 2,160,212 Greater than 90 days and accruing $ 30 $ 28 $ 81 $ — $ 199 $ — $ 2,000 $ 2,199 $ 4,537 Energy 30-59 days $ — $ — $ — $ — $ — $ — $ 30 $ — $ 30 60-89 days — — — — — — — — — Greater than 90 days — — — — — — 288 — 288 Total past due — — — — — — 318 — 318 Current 4,581 6,868 — 156 — — 202,188 107 213,900 Total $ 4,581 $ 6,868 $ — $ 156 $ — $ — $ 202,506 $ 107 $ 214,218 Greater than 90 days and accruing $ — $ — $ — $ — $ — $ — $ — $ — $ — Commercial real estate - owner-occupied 30-59 days $ — $ — $ — $ 371 $ — $ 71 $ — $ — $ 442 60-89 days — — — — — — — — — Greater than 90 days — — 204 — — — — — 204 Total past due — — 204 371 — 71 — — 646 Current 69,308 98,946 128,206 65,083 51,555 37,360 76,782 38,367 565,607 Total $ 69,308 $ 98,946 $ 128,410 $ 65,454 $ 51,555 $ 37,431 $ 76,782 $ 38,367 $ 566,253 Greater than 90 days and accruing $ — $ — $ — $ — $ — $ — $ — $ — $ — Commercial real estate - non-owner-occupied 30-59 days $ — $ — $ — $ — $ — $ — $ — $ — $ — 60-89 days — — — — — — — — — Greater than 90 days — 713 6,029 1,698 — 307 — — 8,747 Total past due — 713 6,029 1,698 — 307 — — 8,747 Current 487,579 861,694 252,132 165,471 82,748 54,105 626,998 146,060 2,676,787 Total $ 487,579 $ 862,407 $ 258,161 $ 167,169 $ 82,748 $ 54,412 $ 626,998 $ 146,060 $ 2,685,534 Greater than 90 days and accruing $ — $ — $ — $ — $ — $ 307 $ — $ — $ 307 Residential real estate 30-59 days $ — $ 6 $ — $ 137 $ — $ — $ — $ — $ 143 60-89 days — — — — — — — — — Greater than 90 days — — 1,317 — — — 176 — 1,493 Total past due — 6 1,317 137 — — 176 — 1,636 Current 37,929 87,726 85,909 114,017 36,792 62,288 37,619 179 462,459 Total $ 37,929 $ 87,732 $ 87,226 $ 114,154 $ 36,792 $ 62,288 $ 37,795 $ 179 $ 464,095 Greater than 90 days and accruing $ — $ — $ 1,317 $ — $ — $ — $ 176 $ — $ 1,493 Consumer 30-59 days $ — $ 219 $ 40 $ — $ — $ — $ 200 $ — $ 459 60-89 days — — — — — — — — — Greater than 90 days — 35 — — — — — — 35 Total past due — 254 40 — — — 200 — 494 Current 11,591 5,783 422 77 221 30 18,760 — 36,884 Total $ 11,591 $ 6,037 $ 462 $ 77 $ 221 $ 30 $ 18,960 $ — $ 37,378 Greater than 90 days and accruing $ — $ 2 $ — $ — $ — $ — $ — $ — $ 2 Total 30-59 days $ 250 $ 403 $ 40 $ 589 $ — $ 207 $ 388 $ 151 $ 2,028 60-89 days — — — — — — — — — Greater than 90 days 30 776 7,897 1,722 199 307 11,264 2,376 24,571 Total past due 280 1,179 7,937 2,311 199 514 11,652 2,527 26,599 Current 1,005,165 1,321,795 670,991 402,536 211,937 173,289 2,059,993 255,385 6,101,091 Total $ 1,005,445 $ 1,322,974 $ 678,928 $ 404,847 $ 212,136 $ 173,803 $ 2,071,645 $ 257,912 $ 6,127,690 Greater than 90 days and accruing $ 30 $ 30 $ 1,398 $ — $ 199 $ 307 $ 2,176 $ 2,199 $ 6,339 Non-accrual loans are loans for which the Company does not record interest income. The accrual of interest on loans is discontinued at the time the loan is 90 days past due unless the credit is well secured and in process of collection. Past due status is based on contractual terms of the loan. In all cases, loans are placed on non-accrual or charged off at an earlier date, if collection of principal or interest is considered doubtful. 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 following table presents the Company’s non-accrual loans by loan segment at September 30, 2024 and December 31, 2023: As of September 30, 2024 Amortized Cost Basis by Origination Year Amortized Cost Basis Revolving Non-accrual loans Loans with 2019 and Revolving converted Total Non- no related 2024 2023 2022 2021 2020 Prior loans to term loans accrual Loans Allowance (Dollars in thousands) Commercial and industrial $ — $ 651 $ 47 $ 262 $ — $ 478 $ 5,765 $ 2,324 $ 9,527 $ 4,464 Energy — — — — — — 18 — 18 18 Commercial real estate - owner-occupied — — — — — — — — — — Commercial real estate - non-owner-occupied — — — — — — — — — — Residential real estate 253 — — — — 199 — 169 621 — Consumer — — — — — — — — — — Total $ 253 $ 651 $ 47 $ 262 $ — $ 677 $ 5,783 $ 2,493 $ 10,166 $ 4,482 As of December 31, 2023 Amortized Cost Basis by Origination Year Amortized Cost Basis Revolving Non-accrual loans Loans with 2018 and Revolving converted Total Non- no related 2023 2022 2021 2020 2019 Prior loans to term loans accrual Loans Allowance (Dollars in thousands) Commercial and industrial $ — $ — $ 266 $ 24 $ — $ — $ 8,839 $ 178 $ 9,307 $ 6,198 Energy — — — — — — 288 — 288 288 Commercial real estate - owner-occupied — — 204 — — — — — 204 204 Commercial real estate - non-owner-occupied — 713 6,029 1,698 — — — — 8,440 1,698 Residential real estate — — — — — — — 179 179 179 Consumer — 33 — — — — — — 33 33 Total $ — $ 746 $ 6,499 $ 1,722 $ — $ — $ 9,127 $ 357 $ 18,451 $ 8,600 Interest income recognized on non-accrual loans was zero during the three and nine months ended September 30, 2024 and 2023. Allowance for Credit Losses The Company’s CECL committee meets at least quarterly to oversee the ACL methodology. The committee estimates the ACL using relevant available information, from internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts. The ACL represents the Company’s current estimate of lifetime credit losses inherent in the loan portfolio at the statement of financial condition date. The ACL is adjusted for expected prepayments when appropriate and excludes expected extensions, renewals, and modifications. The ACL is the sum of three components: (i) asset specific / individual loan reserves; (ii) quantitative (formulaic or pooled) reserves; and (iii) qualitative (judgmental) reserves. Asset Specific - Quantitative Qualitative ● The nature and volume of changes in risk ratings; ● The volume and severity of past due loans; ● The volume of non-accrual loans; ● The nature and volume of the loan portfolio, including the existence, growth, and effect of any concentrations of credit; ● Changes in the Institute of Supply Management’s Purchasing Manager Indices (“PMI”) for services and manufacturing; ● Changes in collateral values; ● Changes in lending policies, procedures, and quality of loan reviews; ● Changes in lending staff; and ● Changes in competition, legal and regulatory environments In addition to the current condition qualitative adjustments, the Company uses the Federal Reserve’s unemployment forecast to adjust the ACL based on forward-looking guidance. The Federal Reserve’s unemployment forecast extends three years and is eventually reverted to the mean of six percent by year 10. The following table presents the activity in the allowance for credit losses and allowance for credit losses on off-balance sheet credit exposures by loan segment for the three and nine months ended September 30, 2024: For the Three Months Ended September 30, 2024 Commercial Commercial Real Estate Real Estate Commercial Owner- Non-owner- Residential and Industrial Energy Occupied Occupied Real Estate Consumer Total (Dollars in thousands) Allowance for Credit Losses: Beginning balance $ 33,627 $ 3,325 $ 6,691 $ 29,082 $ 3,423 $ 70 $ 76,218 Charge-offs (1,599) — — (23) — — (1,622) Recoveries 24 — — 4 — — 28 Provision (release) 1,896 (126) (596) 2,137 (337) 159 3,133 Ending balance $ 33,948 $ 3,199 $ 6,095 $ 31,200 $ 3,086 $ 229 $ 77,757 Allowance for Credit Losses on Off-Balance Sheet Credit Exposures: Beginning balance $ 783 $ 133 $ 107 $ 4,119 $ 67 $ 4 $ 5,213 Provision (release) 100 — — 306 (9) 3 400 Ending balance $ 883 $ 133 $ 107 $ 4,425 $ 58 $ 7 $ 5,613 For the Nine Months Ended September 30, 2024 Commercial Commercial Real Estate Real Estate Commercial Owner- Non-owner- Residential and Industrial Energy Occupied Occupied Real Estate Consumer Total (Dollars in thousands) Allowance for Credit Losses: Beginning balance $ 32,244 $ 3,143 $ 6,445 $ 28,1 |