| Loans, Allowance for Credit Losses and Credit Quality | LOANS, ALLOWANCE FOR CREDIT LOSSES AND CREDIT QUALITY Loans Held for Investment and Allowance for Credit Losses The following table summarizes the change in allowance for credit losses by loan category, and bifurcates the amount of loans allocated to each loan category for the period indicated: Three Months Ended September 30, 2023 (Dollars in thousands) Commercial and Commercial Commercial Small Residential Other Consumer Total Allowance for credit losses Beginning balance $ 15,142 $ 78,396 $ 9,038 $ 3,606 $ 21,465 $ 12,433 $ 567 $ 140,647 Charge-offs — (5,072) — (112) — — (834) (6,018) Recoveries 111 — — 35 — 12 282 440 Provision for (release of) credit losses 1,681 1,078 (208) 385 1,682 101 781 5,500 Ending balance (1) $ 16,934 $ 74,402 $ 8,830 $ 3,914 $ 23,147 $ 12,546 $ 796 $ 140,569 Three Months Ended September 30, 2022 (Dollars in thousands) Commercial and Commercial Commercial Small Residential Home Equity Other Consumer Total Allowance for credit losses Beginning balance $ 14,107 $ 83,456 $ 11,710 $ 2,784 $ 19,750 $ 11,740 $ 772 $ 144,319 Charge-offs — (62) — — — — (679) (741) Recoveries 2 330 — 88 — 65 251 736 Provision for (release of) credit losses 6,060 (3,688) (291) (248) 852 (154) 469 3,000 Ending balance (1) $ 20,169 $ 80,036 $ 11,419 $ 2,624 $ 20,602 $ 11,651 $ 812 $ 147,313 Nine Months Ended September 30, 2023 (Dollars in thousands) Commercial and Commercial Commercial Small Residential Home Equity Other Consumer Total Allowance for credit losses Beginning balance $ 27,559 $ 77,799 $ 10,762 $ 2,834 $ 20,973 $ 11,504 $ 988 $ 152,419 Charge-offs (23,471) (5,072) — (199) — — (1,858) (30,600) Recoveries 132 — — 74 — 38 756 1,000 Provision for (release of) credit losses 12,714 1,675 (1,932) 1,205 2,174 1,004 910 17,750 Ending balance (1) $ 16,934 $ 74,402 $ 8,830 $ 3,914 $ 23,147 $ 12,546 $ 796 $ 140,569 Nine Months Ended September 30, 2022 (Dollars in thousands) Commercial and Commercial Commercial Small Residential Other Consumer Total Allowance for credit losses Beginning balance $ 14,402 $ 83,486 $ 12,316 $ 3,508 $ 14,484 $ 17,986 $ 740 $ 146,922 Charge-offs — (62) — (59) — (122) (1,749) (1,992) Recoveries 44 333 — 147 — 105 754 1,383 Provision for (release of) credit losses 5,723 (3,721) (897) (972) 6,118 (6,318) 1,067 1,000 Ending balance (1) $ 20,169 $ 80,036 $ 11,419 $ 2,624 $ 20,602 $ 11,651 $ 812 $ 147,313 (1) Balances of accrued interest receivable excluded from amortized cost and the calculation of allowance for credit losses amounted to $58.1 million and $42.7 million as of September 30, 2023 and September 30, 2022, respectively. The balance of allowance for credit losses decreased to $140.6 million as of September 30, 2023 compared to $152.4 million at December 31, 2022, driven primarily by outsized charge-offs on two large commercial loans, partially offset by net loan growth during the nine months ended September 30, 2023. For the purpose of estimating the allowance for credit losses, management segregated the loan portfolio into the portfolio segments detailed in the above tables. Each of these loan categories possesses unique risk characteristics that are considered when determining the appropriate level of allowance for each segment. Some of the characteristics unique to each loan category include: Commercial Portfolio • Commercial and Industrial : Consists of revolving and term loan obligations extended to business and corporate enterprises for the purpose of financing working capital and/or capital investment. Collateral generally consists of accounts receivable, inventory, plant and equipment, real estate, or other business assets. The primary source of repayment is operating cash flow and, secondarily, liquidation of assets. • Commercial Real Estate : Consists of mortgage loans to finance investment in real property such as multi-family residential, commercial/retail, office, industrial, hotels, educational and healthcare facilities and other specific use properties and is inclusive of owner-occupied commercial properties. Loans are typically written with amortizing payment structures. Collateral values are determined based upon third party appraisals and evaluations. Permissible loan to value ratios at origination are governed by Company policy and regulatory guidelines. The primary source of repayment is cash flow from operating leases and rents and, secondarily, liquidation of assets. • Commercial Construction : Consists of short-term construction loans, revolving and nonrevolving credit lines and construction/permanent loans to finance the acquisition, development and construction or rehabilitation of real property. Project types include residential land development, one-to-four family, condominium, and multi-family home construction, commercial/retail, office, industrial, hotels, educational and healthcare facilities and other specific use properties. Loans may be written with nonamortizing or hybrid payment structures depending upon the type of project. Collateral values are determined based upon third party appraisals and evaluations. Permissible loan to value ratios at origination are governed by Company policy and regulatory guidelines. Repayment sources vary depending upon the type of project and may consist of proceeds from the sale or lease of units, operating cash flows or liquidation of other assets. • Small Business: Consists of revolving, term loan and mortgage obligations extended to sole proprietors and small businesses for purposes of financing working capital and/or capital investment. Collateral generally consists of pledges of business assets including, but not limited to, accounts receivable, inventory, plant and equipment, or real estate if applicable. The primary source of repayment is operating cash flows and, secondarily, liquidation of assets. For the commercial portfolio it is the Company’s policy to obtain personal guarantees for payment from individuals holding material ownership interests in the borrowing entities. Consumer Portfolio • Residential Real Estate : Residential mortgage loans held in the Company’s portfolio are made to borrowers who demonstrate the ability to make scheduled payments with full consideration to underwriting factors such as current and expected income, employment status, current assets, other financial resources, credit history and the value of the collateral. Collateral consists of mortgage liens on one-to-four family residential properties. Residential mortgage loans also include loans to construct owner-occupied one-to-four family residential properties. • Home Equity : Home equity loans and credit lines are made to qualified individuals and are primarily secured by senior or junior mortgage liens on owner-occupied one-to-four family homes, condominiums or vacation homes. Each home equity loan has a fixed rate and is billed in equal payments comprised of principal and interest. The majority of home equity lines of credit have a variable rate and are billed in interest-only payments during the draw period. At the end of the draw period, the home equity line of credit is billed as a percentage of the then outstanding principal balance plus all accrued interest over a predetermined repayment period, as set forth in the note. Additionally, the Company has the option of renewing each line of credit for additional draw periods. Borrower qualifications include favorable credit history combined with supportive income requirements and combined loan to value ratios within established policy guidelines. • Other Consumer: Other consumer loan products include personal lines of credit and amortizing loans made to qualified individuals for various purposes such as debt consolidation, personal expenses or overdraft protection. Borrower qualifications include favorable credit history combined with supportive income and collateral requirements within established policy guidelines. These loans may be secured or unsecured. Credit Quality The Company continually monitors the asset quality of the loan portfolio using all available information. Based on this information, loans demonstrating certain payment issues or other weaknesses may be categorized as adversely risk-rated, delinquent, nonperforming and/or put on nonaccrual status. Additionally, in the course of resolving such loans, the Company may choose to restructure the contractual terms of certain loans to match the borrower’s ability to repay the loan based on their current financial condition. The Company reviews numerous credit quality indicators when assessing the risk in its loan portfolio. For the commercial portfolio, the Company utilizes a 10-point credit risk-rating system, which assigns a risk-grade to each loan obligation based on a number of quantitative and qualitative factors associated with a commercial or small business loan transaction. Factors considered include industry and market conditions, position within the industry, earnings trends, operating cash flow, asset/liability values, debt capacity, guarantor strength, management and controls, financial reporting, collateral, and other considerations. The risk-rating categories for the commercial portfolio are defined as follows: • Pass: Risk-rating “1” through “6” comprises loans ranging from ‘Substantially Risk Free’ which indicates borrowers are of unquestioned credit standing and the pinnacle of credit quality, well established companies with a very strong financial condition, and loans fully secured by cash collateral, through ‘Acceptable Risk,’ which indicates borrowers may exhibit declining earnings, strained cash flow, increasing or above average leverage and/or weakening market fundamentals that indicate below average asset quality, margins and market share. Collateral coverage is protective. • Potential Weakness: Borrowers exhibit potential credit weaknesses or downward trends deserving management’s close attention. If not checked or corrected, these trends will weaken the Company’s asset and position. While potentially weak, currently these borrowers are marginally acceptable; no loss of principal or interest is envisioned. • Definite Weakness Loss Unlikely: Borrowers exhibit well defined weaknesses that jeopardize the orderly liquidation of debt. Loans may be inadequately protected by the current net worth and paying capacity of the obligor or by the collateral pledged, if any. Normal repayment from the borrower is in jeopardy, although no loss of principal is envisioned. However, there is a distinct possibility that a partial loss of interest and/or principal will occur if the deficiencies are not corrected. Collateral coverage may be inadequate to cover the principal obligation. • Partial Loss Probable: Borrowers exhibit well defined weaknesses that jeopardize the orderly liquidation of debt with the added provision that the weaknesses make collection of the debt in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Serious problems exist to the point where partial loss of principal is likely. • Definite Loss: Borrowers deemed incapable of repayment. Loans to such borrowers are considered uncollectible and of such little value that continuation as active assets of the Company is not warranted. The Company utilizes a comprehensive, continuous strategy for evaluating and monitoring commercial credit quality. Initially, credit quality is determined at loan origination and is re-evaluated when subsequent actions, such as renewals, modifications or reviews, occur. Actively managed commercial borrowers are required to provide updated financial information at least annually which is carefully evaluated for any changes in credit quality. Larger loan relationships are subject to a full annual credit review by experienced credit professionals, while continuous portfolio monitoring techniques are employed to evaluate changes in credit quality for smaller loan relationships. Any changes in credit quality are reflected in risk-rating changes. Additionally, the Company retains an independent loan review firm to evaluate the credit quality of the commercial loan portfolio. The independent loan review process achieves significant penetration into the commercial loan portfolio and reports the results of these reviews to the Audit Committee of the Board of Directors on a quarterly basis. For the Company’s consumer portfolio, the quality of the loan is best indicated by the repayment performance of an individual borrower. As a result, for this portfolio the Company utilizes a pass/default risk-rating system, based on an age analysis (i.e., days past due) associated with each consumer loan. Under this structure, consumer loans less than 90 days past due are assigned a "pass" rating, while any consumer loans 90 days or more past due are assigned a "default" rating. The following table details the amortized cost balances of the Company's loan portfolios, presented by credit quality indicator and origination year as of the dates indicated below: September 30, 2023 2023 2022 2021 2020 2019 Prior Revolving Loans Revolving converted to Term Total (1) (Dollars in thousands) Commercial and Pass (2) $ 303,838 $ 188,559 $ 94,714 $ 73,366 $ 45,741 $ 116,052 $ 737,335 $ — $ 1,559,605 Potential weakness 6,511 2,417 614 10,278 90 132 46,706 — 66,748 Definite weakness - loss unlikely 1,933 4,707 1,074 132 1,165 806 16,833 — 26,650 Partial loss probable — — — — — — — — — Definite loss — — — — — — — — — Total commercial and industrial $ 312,282 $ 195,683 $ 96,402 $ 83,776 $ 46,996 $ 116,990 $ 800,874 $ — $ 1,653,003 Current-period gross write-offs $ — $ — $ — $ — $ — $ 34 $ 23,437 $ — $ 23,471 Commercial real estate Pass $ 795,830 $ 1,160,497 $ 1,338,792 $ 1,312,240 $ 610,009 $ 2,188,221 $ 68,496 $ 858 $ 7,474,943 Potential weakness 62,572 37,695 57,987 14,662 2,945 118,830 — — 294,691 Definite weakness - loss unlikely 30,667 27,504 23,568 4,321 19,211 21,325 — — 126,596 Partial loss probable — — — — — — — — — Definite loss — — — — — — — — — Total commercial real estate $ 889,069 $ 1,225,696 $ 1,420,347 $ 1,331,223 $ 632,165 $ 2,328,376 $ 68,496 $ 858 $ 7,896,230 Current-period gross write-offs $ — $ 5,072 $ — $ — $ — $ — $ — $ — $ 5,072 Commercial construction Pass $ 146,278 $ 491,098 $ 201,730 $ 9,939 $ 27,304 $ 1,569 $ 17,248 $ — $ 895,166 Potential weakness 13,484 — 4,823 — — — — — 18,307 Definite weakness - loss unlikely 9,440 26,199 16,330 — — — — — 51,969 Partial loss probable — — — — — — — — — Definite loss — — — — — — — — — Total commercial construction $ 169,202 $ 517,297 $ 222,883 $ 9,939 $ 27,304 $ 1,569 $ 17,248 $ — $ 965,442 Current-period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Small business Pass $ 40,551 $ 52,883 $ 40,706 $ 26,759 $ 13,759 $ 23,458 $ 43,759 $ — $ 241,875 Potential weakness — — — 155 — 186 295 — 636 Definite weakness - loss unlikely 429 324 126 295 — 615 1,035 — 2,824 Partial loss probable — — — — — — — — — Definite loss — — — — — — — — — Total small business $ 40,980 $ 53,207 $ 40,832 $ 27,209 $ 13,759 $ 24,259 $ 45,089 $ — $ 245,335 Current-period gross write-offs $ — $ — $ 22 $ 37 $ — $ — $ 140 $ — $ 199 Residential real estate Pass $ 391,121 $ 645,593 $ 408,752 $ 186,334 $ 89,911 $ 612,878 $ — $ — $ 2,334,589 Default 219 — 393 135 942 1,824 — — 3,513 Total residential real estate $ 391,340 $ 645,593 $ 409,145 $ 186,469 $ 90,853 $ 614,702 $ — $ — $ 2,338,102 Current-period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Home equity Pass $ 21,729 $ 39,251 $ 56,216 $ 50,724 $ 30,039 $ 126,897 $ 765,079 $ 4,190 $ 1,094,125 Default — — — — — — 1,289 141 1,430 Total home equity $ 21,729 $ 39,251 $ 56,216 $ 50,724 $ 30,039 $ 126,897 $ 766,368 $ 4,331 $ 1,095,555 Current-period gross write-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Other consumer (3) Pass $ 538 $ 320 $ 1,370 $ 912 $ 410 $ 2,154 $ 24,843 $ — $ 30,547 Default — — — — — 19 2 — 21 Total other consumer $ 538 $ 320 $ 1,370 $ 912 $ 410 $ 2,173 $ 24,845 $ — $ 30,568 Current-period gross write-offs $ 1,836 $ — $ — $ — $ — $ 7 $ 15 $ — $ 1,858 Total $ 1,825,140 $ 2,677,047 $ 2,247,195 $ 1,690,252 $ 841,526 $ 3,214,966 $ 1,722,920 $ 5,189 $ 14,224,235 Total current-period gross write-offs $ 1,836 $ 5,072 $ 22 $ 37 $ — $ 41 $ 23,592 $ — $ 30,600 September 30, 2022 2022 2021 2020 2019 2018 Prior Revolving Loans Revolving converted to Term Total (1) (Dollars in thousands) Commercial and Pass (2) $ 292,601 $ 149,588 $ 122,752 $ 67,591 $ 82,911 $ 22,943 $ 759,390 $ 3,362 $ 1,501,138 Potential weakness 1,540 973 1,038 1,844 3,955 715 6,557 — 16,622 Definite weakness - loss unlikely 2,485 935 — 39 — 111 27,019 — 30,589 Partial loss probable — — — — — — — — — Definite loss — — — — — — — — — Total commercial and industrial $ 296,626 $ 151,496 $ 123,790 $ 69,474 $ 86,866 $ 23,769 $ 792,966 $ 3,362 $ 1,548,349 Commercial real estate Pass $ 922,772 $ 1,467,370 $ 1,265,711 $ 773,102 $ 733,621 $ 1,976,282 $ 47,317 $ 1,070 $ 7,187,245 Potential weakness 32,579 53,096 41,164 14,147 68,298 205,234 — — 414,518 Definite weakness - loss unlikely 26,684 2,224 4,722 2,585 17,928 21,836 — — 75,979 Partial loss probable — — — — — 175 — — 175 Definite loss — — — — — — — — — Total commercial real estate $ 982,035 $ 1,522,690 $ 1,311,597 $ 789,834 $ 819,847 $ 2,203,527 $ 47,317 $ 1,070 $ 7,677,917 Commercial construction Pass $ 388,627 $ 392,229 $ 231,336 $ 57,768 $ 26,263 $ 7,844 $ 21,457 $ 632 $ 1,126,156 Potential weakness 40,631 — 3,387 — — — — — 44,018 Definite weakness - loss unlikely 2,138 12,845 — — — — — — 14,983 Partial loss probable — — — — — — — — — Definite loss — — — — — — — — — Total commercial construction $ 431,396 $ 405,074 $ 234,723 $ 57,768 $ 26,263 $ 7,844 $ 21,457 $ 632 $ 1,185,157 Small business Pass $ 41,923 $ 46,581 $ 31,968 $ 17,536 $ 10,454 $ 20,227 $ 37,455 $ — $ 206,144 Potential weakness — 163 394 369 193 129 697 — 1,945 Definite weakness - loss unlikely 194 — 442 7 20 224 591 — 1,478 Partial loss probable — — — — — — — — — Definite loss — — — — — — — — — Total small business $ 42,117 $ 46,744 $ 32,804 $ 17,912 $ 10,667 $ 20,580 $ 38,743 $ — $ 209,567 Residential real estate Pass $ 557,643 $ 426,721 $ 196,538 $ 95,689 $ 96,828 $ 582,830 $ — $ — $ 1,956,249 Default — — 676 466 376 1,487 — — 3,005 Total residential real estate $ 557,643 $ 426,721 $ 197,214 $ 96,155 $ 97,204 $ 584,317 $ — $ — $ 1,959,254 Home equity Pass $ 37,298 $ 61,898 $ 56,262 $ 32,761 $ 27,906 $ 124,325 $ 741,952 $ 3,190 $ 1,085,592 Default — — — 122 — 285 1,171 — 1,578 Total home equity $ 37,298 $ 61,898 $ 56,262 $ 32,883 $ 27,906 $ 124,610 $ 743,123 $ 3,190 $ 1,087,170 Other consumer (3) Pass $ 383 $ 2,498 $ 1,969 $ 1,370 $ 380 $ 3,630 $ 22,680 $ — $ 32,910 Default — 14 — — — 11 1 — 26 Total other consumer $ 383 $ 2,512 $ 1,969 $ 1,370 $ 380 $ 3,641 $ 22,681 $ — $ 32,936 Total $ 2,347,498 $ 2,617,135 $ 1,958,359 $ 1,065,396 $ 1,069,133 $ 2,968,288 $ 1,666,287 $ 8,254 $ 13,700,350 (1) Loan origination dates in the tables above reflect the original origination date, or the date of a material modification of a previously originated loan. (2) Loans originated as part of the Paycheck Protection Program ("PPP") established by the Coronavirus Aid, Relief and Economic Security Act (the "CARES Act") are included within commercial and industrial under the 2021 and 2020 vintage year and "pass" category as these loans are 100% guaranteed by the U.S. Government. Outstanding PPP loans totaled $5.1 million and $11.1 million as of September 30, 2023 and 2022, respectively. (3) Other consumer portfolio is inclusive of deposit account overdrafts recorded as loan balances and the associated gross write-offs. For the Company’s consumer portfolio, the quality of the loan is best indicated by the repayment performance of an individual borrower. However, the Company does supplement performance data with current Fair Isaac Corporation (“FICO”) scores and Loan to Value (“LTV”) estimates. Current FICO data is purchased and appended to all consumer loans on a regular basis. In addition, automated valuation services and broker opinions of value are used to supplement original value data for the residential real estate and home equity portfolios, periodically. The following table shows the weighted average FICO scores and the weighted average combined LTV ratios at the dates indicated below: September 30 December 31 Residential real estate portfolio FICO score (re-scored)(1) 753 753 LTV (re-valued)(2) 59.4 % 57.0 % Home equity portfolio FICO score (re-scored)(1) 770 771 LTV (re-valued)(2)(3) 43.1 % 41.3 % (1) The average FICO scores at September 30, 2023 are based upon rescores from September 2023, as available for previously originated loans, or origination score data for loans booked in September 2023. The average FICO scores at December 31, 2022 were based upon rescores available from December 2022, as available for previously originated loans, or origination score data for loans booked in December 2022. (2) The combined LTV ratios for September 30, 2023 are based upon updated automated valuations as of August 2023, when available, and/or the most current valuation data available. The combined LTV ratios for December 31, 2022 were based upon updated automated valuations as of November 2022, when available, and/or the most current valuation data available as of such date. The updated automated valuations provide new information on loans that may be available since the previous valuation was obtained. If no new information is available, the valuation will default to the previously obtained data or most recent appraisal. (3) For home equity loans and lines in a subordinate lien, the LTV data represents a combined LTV, taking into account the senior lien data for loans and lines. Unfunded Commitments Management evaluates the need for a reserve on unfunded lending commitments in a manner consistent with loans held for investment. At September 30, 2023 and December 31, 2022, the Company's estimated reserve for unfunded commitments amounted to $1.5 million and $1.3 million, respectively. Asset Quality The Company’s philosophy toward managing its loan portfolios is predicated upon careful monitoring, which stresses early detection and response to delinquent and default situations. Delinquent loans are managed by a team of collection specialists and the Company seeks to make arrangements to resolve any delinquent or default situation over the shortest possible time frame. As a general rule, loans 90 days or more past due with respect to principal or interest are classified as nonaccrual loans. The Company also may use discretion regarding other loans 90 days or more delinquent if the loan is well secured and/or in process of collection. The following table shows information regarding nonaccrual loans as of the dates indicated: Nonaccrual Balances September 30, 2023 December 31, 2022 With Allowance for Credit Losses Without Allowance for Credit Losses (2) Total With Allowance for Credit Losses Without Allowance for Credit Losses (2) Total (1) (Dollars in thousands) Commercial and industrial $ 2,655 $ 298 $ 2,953 $ 26,395 $ 298 $ 26,693 Commercial real estate 12,178 11,689 23,867 12,961 2,769 15,730 Small business 368 4 372 99 5 104 Residential real estate 8,493 — 8,493 8,479 — 8,479 Home equity 3,411 — 3,411 3,400 — 3,400 Other consumer 72 — 72 475 — 475 Total nonaccrual loans $ 27,177 $ 11,991 $ 39,168 $ 51,809 $ 3,072 $ 54,881 (1) Nonaccrual balances at December 31, 2022 included $11.5 million of nonaccruing troubled debt restructures ("TDRs"). (2) Nonaccrual balances reported above without an allowance for credit losses are attributable to loans evaluated on an individual basis where it was determined that there was no risk of loss due to sufficient underlying collateral values. It is the Company's policy to reverse any accrued interest when a loan is put on nonaccrual status, and, as such, the Company did not record any interest income on nonaccrual loans during the nine months ended September 30, 2023 and 2022, except for instances where nonaccrual loans were paid off in excess of the recorded book balance. The following table shows information regarding foreclosed residential real estate property at the dates indicated: September 30, 2023 December 31, 2022 (Dollars in thousands) Foreclosed residential real estate property held by the creditor $ 110 $ — Recorded investment in mortgage loans collateralized by residential real estate property that are in the process of foreclosure $ 1,667 $ 1,615 The following tables show the age analysis of past due financing receivables as of the dates indicated: September 30, 2023 30-59 days 60-89 days 90 days or more Total Past Due Total Amortized Cost Number Principal Number Principal Number Principal Number Principal Current (Dollars in thousands) Loan Portfolio Commercial and industrial 1 $ 63 2 $ 527 3 $ 390 6 $ 980 $ 1,652,023 $ 1,653,003 $ — Commercial real estate 2 736 1 659 2 11,688 5 13,083 7,883,147 7,896,230 — Commercial construction 1 7,499 — — — — 1 7,499 957,943 965,442 — Small business 7 91 4 69 11 204 22 364 244,971 245,335 — Residential real estate 14 2,405 8 1,446 14 2,067 36 5,918 2,332,184 2,338,102 — Home equity 11 919 4 185 17 1,431 32 2,535 1,093,020 1,095,555 — Other consumer (1) 409 691 12 42 4 24 425 757 29,811 30,568 3 Total 445 $ 12,404 31 $ 2,928 51 $ 15,804 527 $ 31,136 $ 14,193,099 $ 14,224,235 $ 3 December 31, 2022 30-59 days 60-89 days 90 days or more Total Past Due Total Amortized Cost Number Principal Number Principal Number Principal Number Principal Current (Dollars in thousands) Loan Portfolio Commercial and industrial 3 $ 49 1 $ 175 3 $ 23,726 7 $ 23,950 $ 1,611,153 $ 1,635,103 $ — Commercial real estate 7 2,052 5 4,971 3 2,977 15 10,000 7,750,230 7,760,230 — Commercial construction — — — — — — — — 1,154,413 1,154,413 — Small business 12 111 3 25 3 5 18 141 218,961 219,102 — Residential real estate 8 1,654 8 1,105 16 1,725 32 4,484 2,031,040 2,035,524 — Home equity 19 1,647 3 201 17 965 39 2,813 1,085,937 1,088,750 — Other consumer (1) 432 421 15 83 4 28 451 532 35,021 35,553 — Total 481 $ 5,934 35 $ 6,560 46 $ 29,426 562 $ 41,920 $ 13,886,755 $ 13,928,675 $ — (1) Other consumer portfolio is inclusive of deposit account overdrafts recorded as loan balances. (2) The amount of net deferred costs on originated loans included in the ending balance was $6.1 million and $5.0 million at September 30, 2023 and December 31, 2022, respectively. Loan Modifications In the course of resolving nonperforming loans, the Company may choose to restructure the contractual terms of certain loans. The Company attempts to work out an alternative payment schedule with the borrower in order to avoid foreclosure actions. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status and the restructuring of the loan may include principal forgiveness, interest rate reductions, term extensions, other-than-insignificant payment delays, and/or any combinations thereof. Any loans that are modified are reviewed by the Company to determine whether the modification is the direct result of a borrower experiencing financial difficulty, as the Company adopted the accounting and disclosure requirements for loan modifications made to borrowers experiencing financial difficulty and ceased to recognize TDRs effective January 1, 2023. Loan modifications made to borrowers experiencing financial difficulty are evaluated on a collective basis with loans sharing similar risk characteristics in accordance with the current expected credit loss ("CECL") methodology. Under previously applicable accounting guidance, the Company determined the amount of allowance for credit losses on TDRs using a discounted cash flow analysis or a fair value of collateral approach if the loan was determined to be individually evaluated. This change in methodology did not have a material impact on the Company's allowance for credit loss estimate. The following tables present the amortized cost basis of loans modified to borrowers experiencing financial difficulty during the periods presented, disaggregated by class of financing receivable and type of modification granted. The amortized cost basis amounts presented in these tables are as of the modification date and, in certain instances, may include multiple modifications of the same loan during the periods presented. Three Months Ended September 30, 2023 Nine Months Ended September 30, 2023 Term Extension Amortized Cost Basis % of Total Class of Financing Receivable Amortized Cost Basis % of Total Class of Financing Receivable Loan Category (Dollars in thousands) Commercial and industrial $ 7,915 0.48% $ 16,108 0.97% Commercial real estate 719 0.01% 19,180 0.24% Commercial construction — —% 2,369 0.25% Small business — —% 105 0.04% Total $ 8,634 $ 37,762 Other-Than-Insignificant Payment Delay Amortized Cost Basis % of Total Class of Financing Receivable Amortized Cost Basis % of Total Class of Financing Receivable Loan Category (Dollars in thousands) Commercial and industrial $ — —% $ 2,805 0.17% Commercial real estate — —% 7,013 0.09% Total $ — $ 9,818 Combination - Interest Rate Reduction and Term Extension Amortized Cost Basis % of Total Class of Financing Receivable Amortized Cost Basis % of Total Class of Financing Receivable Loan Category (Dollars in thousands) Small business $ — —% $ 44 0.02% Total $ — $ 44 Combination - Term Extension and Other-Than-Insignificant Payment Delay Amortized Cost Basis % of Total Class of Financing Receivable Amortized Cost Basis % of Total Class of Financing Receivable Loan Category (Dollars in thousands) Commercial and industrial $ — —% $ 1,965 0.12% Commercial real estate — —% 6,857 0.09% Total $ — $ 8,822 The following table describes the financial effect of the modifications made to borrowers experiencing financial difficulty for the periods indicated: Three Months Ended September 30, 2023 Term Extension Loan Category Financial Effect Commercial and industrial Added a weighted-average contractual term of 2 months to the life of the loans Commercial real estate Added a weighted-average contractual term of 2.9 years to the life of the loans Nine Months Ended September 30, 2023 Term Extension Loan Category Financial Effect Commercial and industrial Added a weighted-average contractual term of 2 months to the life of the loans Commercial real estate Added a weighted-average contractual term of 1.8 years to the life of the loans Commercial construction Added a weighted-average contractual term of 2 months to the life of the loans Combination - Interest Rate Reduction and Term Extension Loan Category Financial Effect Small business Reduced weighted-average contractual interest rate from 10.00% to 6.50% and added a weighted-average contractual term of 4.3 years to the life of the loan The Company closely monitors the performance of loans that are modified to borrowers experiencing financial difficulty to understand the effectiveness of its modification efforts. The following table depicts the amortized cost and payment status of loans that have been modified in the last 12 months as of September 30, 2023: Payment Status (Amortized Cost Basis) Current 30-89 Days Past Due 90+ Days Past Due Nonaccrual Status (Dollars in thousands) Loan Type Commercial and industrial $ 7,409 $ 504 $ — $ 2,446 Commercial real estate 16,252 660 — 6,850 Small business 140 — — — Total $ 23,801 $ 1,164 $ — $ 9,296 The Company considers a loan to have defaulted when it reaches 90 days past due. During the three and nine months ended September 30, 2023, there was one commercial real estate loan that had a payment default and was modified within the previous 12 months as a combination term extension and other-than-insignificant payment delay, which had an amortized cost basis of $6.7 million at September 30, 2022. During the nine months ended September 30, 2022 there were no TDRs modified during the previous 12 months that subsequently defaulted. At September 30, 2023, the Company did not have any additional commitments to lend to borrowers experiencing financial difficulty who were party to a loan modification. As previously noted, the Company adopted the accounting and disclosure requirements for loan modifications made to borrowers experiencing financial difficulty and ceased to recognize TDRs effective January 1, 2023. As such, the following table and related disclosures show the Company’s total TDRs and other pertinent TDR information as of December 31, 2022 and for the prior applicable periods: (Dollars in thousands) TDRs on accrual status $ 11,278 TDRs on nonaccrual 11,520 Total TDRs $ 22,798 During the three and nine months ended September 3 |
