Allowance for Loan and Leases and Reserve for Unfunded Commitments | Note 5—Allowance for Loan and Lease Losses and Reserve for Unfunded Commitments Loans and leases considered for inclusion in the allowance for loan and lease losses include acquired non-impaired loans and leases, those acquired impaired loans with credit deterioration after acquisition, and originated loans and leases. Although all acquired loans and leases are included in the following table, only those with credit deterioration subsequent to acquisition date are included in the allowance for loan and lease losses. The following tables summarize the balance and activity within the allowance for loan and lease losses, the components of the allowance for loan and lease losses in terms of loans and leases individually and collectively evaluated for impairment, and corresponding loan and lease balances by type for the three and six months ended June 30, 2022 and 2021 are as follows: June 30, 2022 Commercial Residential Construction, Commercial Paycheck Installment Lease Total Allowance for loan and Three months ended Beginning balance $ 19,706 $ 2,145 $ 1,116 $ 33,244 $ — $ 10 $ 3,237 $ 59,458 Provision 566 339 676 3,852 — 1 474 5,908 Charge-offs ( 497 ) — — ( 2,654 ) — — ( 324 ) ( 3,475 ) Recoveries 43 5 — 293 — — 204 545 Ending balance $ 19,818 $ 2,489 $ 1,792 $ 34,735 $ — $ 11 $ 3,591 $ 62,436 Six months ended Beginning balance $ 16,918 $ 1,628 $ 522 $ 33,129 $ — $ 9 $ 2,806 $ 55,012 Provision/(recapture) 3,350 852 1,270 4,310 — 2 1,119 10,903 Charge-offs ( 737 ) — — ( 3,117 ) — — ( 687 ) ( 4,541 ) Recoveries 287 9 — 413 — — 353 1,062 Ending balance $ 19,818 $ 2,489 $ 1,792 $ 34,735 $ — $ 11 $ 3,591 $ 62,436 Ending balance: Individually evaluated for $ 6,002 $ — $ — $ 11,337 $ — $ — $ — $ 17,339 Collectively evaluated for 12,576 1,680 1,764 23,012 — 8 3,591 42,631 Loans acquired with 1,240 809 28 386 — 3 — 2,466 Total allowance for loan $ 19,818 $ 2,489 $ 1,792 $ 34,735 $ — $ 11 $ 3,591 $ 62,436 June 30, 2022 Commercial Residential Construction, Commercial Paycheck Installment Lease Total Loans and leases ending balance: Individually evaluated for $ 45,200 $ 5,188 $ 5,541 $ 27,770 $ — $ — $ — $ 83,699 Collectively evaluated for 1,794,663 436,081 428,782 1,866,381 10,391 1,153 442,371 4,979,822 Loans acquired with 60,075 39,902 1,184 3,232 — 157 — 104,550 Total loans and leases $ 1,899,938 $ 481,171 $ 435,507 $ 1,897,383 $ 10,391 $ 1,310 $ 442,371 $ 5,168,071 June 30, 2021 Commercial Residential Construction, Commercial Paycheck Installment Lease Total Allowance for loan and lease losses Three months ended Beginning balance $ 20,498 $ 2,091 $ 785 $ 40,302 $ — $ 12 $ 1,902 $ 65,590 Provision/(recapture) ( 823 ) ( 730 ) ( 166 ) ( 502 ) — ( 3 ) 255 ( 1,969 ) Charge-offs ( 202 ) — — ( 1,829 ) — — ( 385 ) ( 2,416 ) Recoveries 68 3 — 313 — — 130 514 Ending balance $ 19,541 $ 1,364 $ 619 $ 38,284 $ — $ 9 $ 1,902 $ 61,719 Six months ended Beginning balance $ 19,584 $ 2,400 $ 1,352 $ 41,183 $ — $ 15 $ 1,813 $ 66,347 Provision/(recapture) 1,783 ( 1,032 ) ( 407 ) 1,444 — ( 6 ) 616 2,398 Charge-offs ( 2,080 ) ( 11 ) ( 326 ) ( 4,716 ) — — ( 749 ) ( 7,882 ) Recoveries 254 7 — 373 — — 222 856 Ending balance $ 19,541 $ 1,364 $ 619 $ 38,284 $ — $ 9 $ 1,902 $ 61,719 Ending balance: Individually evaluated for $ 7,607 $ 52 $ — $ 17,931 $ — $ — $ — $ 25,590 Collectively evaluated for 9,743 978 611 19,016 — 9 1,902 32,259 Loans acquired with 2,191 334 8 1,337 — — — 3,870 Total allowance for loan $ 19,541 $ 1,364 $ 619 $ 38,284 $ — $ 9 $ 1,902 $ 61,719 June 30, 2021 Commercial Residential Construction, Commercial Paycheck Installment Lease Total Loans and leases ending balance: Individually evaluated for $ 54,182 $ 1,421 $ — $ 39,516 $ — $ — $ — $ 95,119 Collectively evaluated for 1,357,381 453,456 271,918 1,369,275 476,282 1,293 276,387 4,205,992 Loans acquired with 91,313 67,401 2,008 7,444 — 180 — 168,346 Total loans and leases $ 1,502,876 $ 522,278 $ 273,926 $ 1,416,235 $ 476,282 $ 1,473 $ 276,387 $ 4,469,457 The Company increased the allowance for loan and lease losses by $ 3.0 million and $ 7.4 million for the three and six months ended June 30, 2022 , and decreased it by $ 3.9 million and $ 4.6 million for the three and six months ended June 30, 2021 . For acquired impaired loans, the Company decreased the allowance by $ 580,000 and $ 719,000 for the three and six months ended June 30, 2022 . For acquired impaired loans, the Company decreased the allowance by $ 285,000 and $ 2.6 million for the three and six months ended June 30, 2021, respectively. For loans individually evaluated for impairment, the Company decreased the allowance for loan and lease losses by $ 3.4 million and $ 3.7 million, for the three and six months ended June 30, 2022 , respectively. The Company decreased the allowance on loans individually evaluated for impairment by $ 744,000 and increased it by $ 1.6 million for the three and six months ended June 30, 2021. For loans and leases collectively evaluated for impairment, the Company increased allowance for loan and lease losses by $ 7.0 million and $ 11.8 million for the three and six months ended June 30, 2022 , respectively. For loans collectively evaluated for impairment, the Company decreased the allowance for loan and lease losses by $ 2.8 million and $ 3.7 million for the three and six months ended June 30, 2021, respectively. The increase in allowance for loan and lease losses collectively evaluated for impairment was mainly driven by changes to qualitative factors surrounding macroeconomic environment and rising interest rates, as well as growth in the loan and lease portfolio. An allowance for loan and lease loss allocation has not been made for PPP loans as these loans are fully guaranteed by the Small Business Administration ("SBA"). On a quarterly basis, the Company assesses the collectability of its government guarantee loan and lease portfolio using historical loss experience in its small business lending unit. The following tables summarize the recorded investment, unpaid principal balance, and related allowance for loans and leases losses considered impaired as of June 30, 2022 and December 31, 2021, which exclude acquired impaired loans. For purposes of these tables, the unpaid principal balance represents the outstanding contractual balance. Impaired loans include loans that are individually evaluated for impairment as well as troubled debt restructurings for all loan categories. The sum of non-accrual loans and loans past due 90 days still on accrual will differ from the total impaired loan amount. June 30, 2022 Recorded Unpaid Related With no related allowance recorded Commercial real estate $ 21,037 $ 22,445 $ — Residential real estate 5,188 5,318 — Construction, land development, and other land 5,541 5,541 — Commercial and industrial 10,355 12,069 — With an allowance recorded Commercial real estate 24,163 26,018 6,002 Commercial and industrial 17,415 18,497 11,337 Total impaired loans $ 83,699 $ 89,888 $ 17,339 December 31, 2021 Recorded Unpaid Related With no related allowance recorded Commercial real estate $ 17,233 $ 19,252 $ — Residential real estate 1,802 1,919 — Commercial and industrial 16,624 19,148 — With an allowance recorded Commercial real estate 17,818 20,117 6,538 Commercial and industrial 19,446 21,198 14,500 Total impaired loans $ 72,923 $ 81,634 $ 21,038 The following tables summarize the average recorded investment and interest income recognized for loans and leases considered impaired, which excludes acquired impaired loans, for the six months ended: June 30, 2022 Average Interest With no related allowance recorded Commercial real estate $ 19,012 $ 629 Residential real estate 2,596 68 Construction, land development, and other land 1,847 201 Commercial and industrial 14,193 290 With an allowance recorded Commercial real estate 22,326 747 Residential real estate 14 — Commercial and industrial 20,496 606 Total impaired loans $ 80,484 $ 2,541 June 30, 2021 Average Interest With no related allowance recorded Commercial real estate $ 30,770 $ 616 Residential real estate 2,247 29 Commercial and industrial 17,868 296 With an allowance recorded Commercial real estate 25,940 553 Residential real estate 245 2 Commercial and industrial 30,227 991 Total impaired loans $ 107,297 $ 2,487 The following tables summarize the risk rating categories of the loans and leases considered for inclusion in the allowance for loan and lease losses calculation, excluding acquired impaired loans, as of June 30, 2022 and December 31, 2021: June 30, 2022 Commercial Residential Construction, Commercial Paycheck Installment Lease Total Pass $ 1,668,674 $ 418,052 $ 391,492 $ 1,706,352 $ 10,391 $ 1,075 $ 438,645 $ 4,634,681 Watch 90,267 16,274 21,635 118,305 — 78 1,920 248,479 Special Mention 34,527 1,934 15,655 39,272 — — 1,100 92,488 Substandard 46,395 5,009 5,541 30,222 — — 654 87,821 Doubtful — — — — — — 52 52 Loss — — — — — — — — Total $ 1,839,863 $ 441,269 $ 434,323 $ 1,894,151 $ 10,391 $ 1,153 $ 442,371 $ 5,063,521 December 31, 2021 Commercial Residential Construction, Commercial Paycheck Installment Lease Total Pass $ 1,397,228 $ 406,948 $ 286,434 $ 1,341,826 $ 123,712 $ 1,123 $ 354,380 $ 3,911,651 Watch 123,248 19,062 31,768 177,638 — 81 1,992 353,789 Special Mention 37,340 3,118 5,885 21,586 — — 1,609 69,538 Substandard 35,772 1,985 — 36,897 — — 348 75,002 Doubtful — — — — — — 97 97 Loss — — — — — — — — Total $ 1,593,588 $ 431,113 $ 324,087 $ 1,577,947 $ 123,712 $ 1,204 $ 358,426 $ 4,410,077 The following tables summarize contractual delinquency information for acquired non-impaired and originated loans and leases by category at June 30, 2022 and December 31, 2021: June 30, 2022 30-59 Days 60-89 Greater Non- Total Current Total Commercial real estate $ 2,128 $ 1,488 $ — $ 18,941 $ 22,557 $ 1,817,306 $ 1,839,863 Residential real estate 687 275 — 5,009 5,971 435,298 441,269 Construction, land development, — — — — — 434,323 434,323 Commercial and industrial 9,448 868 — 9,311 19,627 1,874,524 1,894,151 Paycheck Protection Program — — — — — 10,391 10,391 Installment and other 1 — — — 1 1,152 1,153 Lease financing receivables 759 139 — 683 1,581 440,790 442,371 Total $ 13,023 $ 2,770 $ — $ 33,944 $ 49,737 $ 5,013,784 $ 5,063,521 December 31, 2021 30-59 60-89 Greater Non- Total Current Total Commercial real estate $ 5,185 $ 2,361 $ — $ 12,751 $ 20,297 $ 1,573,291 $ 1,593,588 Residential real estate 14,282 852 — 1,450 16,584 414,529 431,113 Construction, land development, 5,885 — — — 5,885 318,202 324,087 Commercial and industrial 2,479 1,097 — 8,600 12,176 1,565,771 1,577,947 Paycheck Protection Program — — — — — 123,712 123,712 Installment and other 3 35 — — 38 1,166 1,204 Lease financing receivables 1,661 251 — 329 2,241 356,185 358,426 Total $ 29,495 $ 4,596 $ — $ 23,130 $ 57,221 $ 4,352,856 $ 4,410,077 Troubled debt restructurings (“TDRs”) are granted due to borrower financial difficulty and provide for a modification of loan repayment terms. TDRs are treated in the same manner as impaired loans for purposes of calculating the allowance for loan and lease losses. The tables below present TDRs by loan category as of June 30, 2022 and December 31, 2021: June 30, 2022 Number Pre- Post- Charge-offs Specific Accruing: Commercial real estate 3 $ 1,160 $ 1,160 $ — $ 109 Commercial and industrial 1 42 42 — 42 Residential real estate 2 156 156 — — Total accruing 6 1,358 1,358 — 151 Non-accruing: Commercial real estate 3 751 635 116 49 Commercial and industrial 3 1,656 499 1,157 — Total non-accruing 6 2,407 1,134 1,273 49 Total troubled debt restructurings 12 $ 3,765 $ 2,492 $ 1,273 $ 200 December 31, 2021 Number Pre- Post- Charge-offs Specific Accruing: Commercial real estate 5 $ 1,703 $ 1,703 $ — $ 215 Commercial and industrial 1 56 56 — 131 Residential real estate 2 168 168 — — Total accruing 8 1,927 1,927 — 346 Non-accruing: Commercial real estate 4 1,034 918 116 111 Commercial and industrial 3 1,745 588 1,157 — Total non-accruing 7 2,779 1,506 1,273 111 Total troubled debt restructurings 15 $ 4,706 $ 3,433 $ 1,273 $ 457 Loans modified as troubled debt restructurings that occurred during the three and six months ended June 30, 2022 and 2021 were: Three Months Ended Six Months Ended June 30, June 30, 2022 2021 2022 2021 Accruing: Beginning balance $ 1,456 $ 2,719 $ 1,927 $ 2,495 Additions — — — 281 Net payments ( 98 ) ( 324 ) ( 569 ) ( 381 ) Net transfers from non-accrual — — — — Ending balance 1,358 2,395 1,358 2,395 Non-accruing: Beginning balance 1,343 5,585 1,506 5,650 Additions — — — 673 Net payments ( 209 ) ( 641 ) ( 372 ) ( 984 ) Charge-offs — ( 503 ) — ( 898 ) Net transfers to accrual — — — — Ending balance 1,134 4,441 1,134 4,441 Total troubled debt restructurings $ 2,492 $ 6,836 $ 2,492 $ 6,836 There were no troubled debt restructurings that subsequently defaulted within twelve months of the restructure date during the three and six months ended June 30, 2022 or 2021. In addition, there was no commitment outstanding on troubled debt restructurings at June 30, 2022 or December 31, 2021. The following table presents the change in the balance of the reserve for unfunded commitments as of June 30, 2022 and 2021: For the Three Months Ended For the Six Months Ended June 30, June 30, 2022 2021 2022 2021 Beginning balance $ 2,003 $ 1,768 $ 1,403 $ 1,887 Provision/(recapture) for of unfunded commitments 188 ( 164 ) 788 ( 283 ) Ending balance $ 2,191 $ 1,604 $ 2,191 $ 1,604 There were no charge-offs or recoveries related to the reserve for unfunded commitments during the periods. |