Loans and Leases Held for Investment and Credit Quality

3 Months Ended

Mar. 31, 2025

Loans and Leases Held for Investment and Credit Quality

The following tables present total loans and leases held for investment and an aging analysis for the Company’s portfolio segments. Loans and leases are considered past due if the required principal and interest payments have not been received as of the date such payments were due.


	Current or Less than 30 Days Past Due		30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Total Carried at Amortized Cost		Loans Accounted for Under the Fair Value Option (1)		Total Loans and Leases
March 31, 2025
Commercial & Industrial
Small Business Banking	$	2,251,813	$	25,540	$	121,830	$	147,370	$	2,399,183	$	112,013	$	2,511,196
Commercial Banking	2,535,684		2,544		39,022		41,566		2,577,250		48,658		2,625,908
Paycheck Protection Program	1,399		101		260		361		1,760		—		1,760
Total	4,788,896		28,185		161,112		189,297		4,978,193		160,671		5,138,864
Construction & Development
Small Business Banking	585,725		—		2,468		2,468		588,193		—		588,193
Commercial Banking	86,236		—		—		—		86,236		—		86,236
Total	671,961		—		2,468		2,468		674,429		—		674,429
Commercial Real Estate
Small Business Banking	2,849,422		20,918		82,618		103,536		2,952,958		106,478		3,059,436
Commercial Banking	1,137,275		15,990		10,451		26,441		1,163,716		19,091		1,182,807
Total	3,986,697		36,908		93,069		129,977		4,116,674		125,569		4,242,243
Commercial Land
Small Business Banking	638,107		—		4,042		4,042		642,149		30,567		672,716
Total	638,107		—		4,042		4,042		642,149		30,567		672,716
Total	$	10,085,661	$	65,093	$	260,691	$	325,784	$	10,411,445	$	316,807	$	10,728,252
Retained Loan Discount and Net Deferred Costs													$	(34,341)
Loans and Leases, Net													$	10,693,911

Guaranteed Balance	$	2,959,459	$	35,990	$	202,876	$	238,866	$	3,198,325	$	81,112	$	3,279,437
% Guaranteed	29.3%		55.3%		77.8%		73.3%		30.7%		25.6%		30.6%


	Current or Less than 30 Days Past Due		30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Total Carried at Amortized Cost		Loans Accounted for Under the Fair Value Option (1)		Total Loans and Leases
December 31, 2024
Commercial & Industrial
Small Business Banking	$	2,182,596	$	37,966	$	104,362	$	142,328	$	2,324,924	$	119,378	$	2,444,302
Commercial Banking	2,418,078		15,282		23,999		39,281		2,457,359		49,767		2,507,126
Paycheck Protection Program	2,361		—		—		—		2,361		—		2,361
Total	4,603,035		53,248		128,361		181,609		4,784,644		169,145		4,953,789
Construction & Development
Small Business Banking	514,997		1,488		2,468		3,956		518,953		—		518,953
Commercial Banking	85,456		—		—		—		85,456		—		85,456
Total	600,453		1,488		2,468		3,956		604,409		—		604,409
Commercial Real Estate
Small Business Banking	2,773,306		42,058		57,896		99,954		2,873,260		107,751		2,981,011
Commercial Banking	1,040,065		5,000		10,778		15,778		1,055,843		19,025		1,074,868
Total	3,813,371		47,058		68,674		115,732		3,929,103		126,776		4,055,879
Commercial Land
Small Business Banking	610,920		2,209		3,324		5,533		616,453		32,825		649,278
Total	610,920		2,209		3,324		5,533		616,453		32,825		649,278
Total	$	9,627,779	$	104,003	$	202,827	$	306,830	$	9,934,609	$	328,746	$	10,263,355
Retained Loan Discount and Net Deferred Costs													$	(29,981)

Loans and Leases, Net													$	10,233,374

Guaranteed Balance	$	2,933,636	$	58,235	$	171,123	$	229,358	$	3,162,994	$	77,514	$	3,240,508
% Guaranteed	30.5%		56.0%		84.4%		74.8%		31.8%		23.6%		31.6%


(1)			Retained portions of government guaranteed loans sold prior to January 1, 2021 are carried at fair value under FASB ASC Subtopic 825-10, Financial Instruments: Overall. See Note 9. Fair Value of Financial Instruments for additional information.

Credit Quality Indicators

The following tables present asset quality indicators by portfolio class and origination year. See Note 3. Loans and Leases Held for Investment and Credit Quality in the Company’s 2024 Form 10-K for additional discussion around the asset quality indicators that the Company uses to manage and monitor credit risk.


	Term Loans and Leases Amortized Cost Basis by Origination Year
	2025		2024		2023		2022		2021		Prior		Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term		Total (1)
March 31, 2025
Small Business Banking
Pass	$	321,320	$	1,194,328	$	1,062,093	$	1,218,096	$	963,900	$	905,959	$	131,367	$	35,824	$	5,832,887
Special Mention	615		20,262		63,949		102,214		53,783		104,710		26,463		1,542		373,538
Substandard	—		15,190		43,727		102,818		83,386		119,238		9,686		2,013		376,058
Total	321,935		1,229,780		1,169,769		1,423,128		1,101,069		1,129,907		167,516		39,379		6,582,483
Commercial Banking
Pass	244,185		1,121,801		700,250		395,072		188,678		120,302		531,286		137,117		3,438,691
Special Mention	—		1,000		16,359		73,194		51,389		36,457		9,127		5,552		193,078
Substandard	—		—		—		18,979		130,346		32,492		402		13,214		195,433
Total	244,185		1,122,801		716,609		487,245		370,413		189,251		540,815		155,883		3,827,202
Paycheck Protection Program
Pass	—		—		—		—		1,257		503		—		—		1,760
Total	—		—		—		—		1,257		503		—		—		1,760
Total	$	566,120	$	2,352,581	$	1,886,378	$	1,910,373	$	1,472,739	$	1,319,661	$	708,331	$	195,262	$	10,411,445

Year-To-Date Gross Charge-offs
Small Business Banking	$	—	$	1,822	$	1,269	$	2,135	$	76	$	1,152	$	469	$	—	$	6,923
Total	$	—	$	1,822	$	1,269	$	2,135	$	76	$	1,152	$	469	$	—	$	6,923


	Term Loans and Leases Amortized Cost Basis by Origination Year
	2024			2023			2022			2021			2020			Prior			Revolving Loans Amortized Cost Basis			Revolving Loans Converted to Term		Total (1)
December 31, 2024
Small Business Banking
Pass	$	1,112,351		$	1,084,996		$	1,323,982		$	1,001,021		$	528,008		$	482,192		$	124,370		$	33,359	$	5,690,279
Special Mention	7,041			46,047			77,638			61,906			31,575			83,693			22,729			2,790		333,419
Substandard	13,805			28,573			84,067			74,990			40,266			59,874			7,922			395		309,892
Total	1,133,197			1,159,616			1,485,687			1,137,917			599,849			625,759			155,021			36,544		6,333,590
Commercial Banking
Pass	1,169,167			752,078			398,333			207,755			51,552			81,166			423,334			116,594		3,199,979
Special Mention	—			16,483			88,464			36,165			24,018			17,569			9,555			4,245		196,499
Substandard	—			—			31,461			136,818			27,905			—			2,902			3,094		202,180
Total	1,169,167		—	768,561		—	518,258		—	380,738		—	103,475		—	98,735		—	435,791		—	123,933		3,598,658
Paycheck Protection Program
Pass	—			—			—			1,461			900			—			—			—		2,361
Total	—			—			—			1,461			900			—			—			—		2,361
Total	$	2,302,364		$	1,928,177		$	2,003,945		$	1,520,116		$	704,224		$	724,494		$	590,812		$	160,477	$	9,934,609

Year-To-Date Gross Charge-offs
Small Business Banking	$	652		$	4,198		$	18,630		$	4,954		$	3,462		$	3,481		$	3,555		$	170	$	39,102
Commercial Banking	—			17			5,176			1,493			756			—			1,535			—		8,977
Total	$	652		$	4,215		$	23,806		$	6,447		$	4,218		$	3,481		$	5,090		$	170	$	48,079


(1)			Excludes $316.8 million and $328.7 million of loans accounted for under the fair value option as of March 31, 2025 and December 31, 2024, respectively.

The following tables present guaranteed and unguaranteed loan and lease balances by asset quality indicator:


March 31, 2025	Loan and Lease Balance (1)		Guaranteed Balance		Unguaranteed Balance		% Guaranteed
Pass	$	9,273,338	$	2,627,607	$	6,645,731	28.3	%
Special Mention	566,616		176,876		389,740		31.2
Substandard	571,491		393,842		177,649		68.9
Total	$	10,411,445	$	3,198,325	$	7,213,120	30.7	%


December 31, 2024	Loan and Lease Balance (1)		Guaranteed Balance		Unguaranteed Balance		% Guaranteed
Pass	$	8,892,619	$	2,644,310	$	6,248,309	29.7	%
Special Mention	529,918		172,015		357,903		32.5
Substandard	512,072		346,669		165,403		67.7
Total	$	9,934,609	$	3,162,994	$	6,771,615	31.8	%


(1)			Excludes $316.8 million and $328.7 million of loans accounted for under the fair value option as of March 31, 2025 and December 31, 2024, respectively.

Nonaccrual Loans and Leases

As of March 31, 2025 and December 31, 2024, there were no loans greater than 90 days past due and still accruing. There was no interest income recognized on nonaccrual loans and leases during the three months ended March 31, 2025 and 2024. Accrued interest receivable on loans totaled $84.6 million and $80.7 million at March 31, 2025 and December 31, 2024, respectively, and is included in other assets in the accompanying Unaudited Condensed Consolidated Balance Sheets.

Nonaccrual loans and leases held for investment as of March 31, 2025 and December 31, 2024 are as follows:


March 31, 2025	Loan and Lease Balance (1)		Guaranteed Balance		Unguaranteed Balance		Unguaranteed Exposure with No Allowance for Credit Losses (“ACL”)
Commercial & Industrial
Small Business Banking	$	152,494	$	126,631	$	25,863	$	4,484
Commercial Banking	136,231		109,371		26,860		3,810
Payroll Protection Program	260		260		—		—
Total	288,985		236,262		52,723		8,294
Construction & Development
Small Business Banking	2,467		2,263		204		—
Total	2,467		2,263		204		—
Commercial Real Estate
Small Business Banking	94,727		63,701		31,026		20,865
Commercial Banking	26,441		13,591		12,850		11,874
Total	121,168		77,292		43,876		32,739
Commercial Land
Small Business Banking	10,280		7,176		3,104		168
Total	10,280		7,176		3,104		168
Total	$	422,900	$	322,993	$	99,907	$	41,201


December 31, 2024	Loan and Lease Balance (1)		Guaranteed Balance		Unguaranteed Balance		Unguaranteed Exposure with No ACL
Commercial & Industrial
Small Business Banking	$	141,674	$	116,596	$	25,078	$	5,219

Commercial Banking	39,282		26,300		12,982		3,816
Total	180,956		142,896		38,060		9,035
Construction & Development
Small Business Banking	3,955		3,379		576		372
Total	3,955		3,379		576		372
Commercial Real Estate
Small Business Banking	81,847		55,290		26,557		17,736
Commercial Banking	26,888		13,981		12,907		11,907
Total	108,735		69,271		39,464		29,643
Commercial Land
Small Business Banking	10,651		7,339		3,312		173
Total	10,651		7,339		3,312		173
Total	$	304,297	$	222,885	$	81,412	$	39,223


(1)			Excludes loans accounted for under the fair value option. See Note 9. Fair Value of Financial Instruments for additional information.

When a loan or lease is placed on nonaccrual status, any accrued interest is reversed from loan interest income. The following table summarizes the amount of accrued interest reversed during the periods presented:


	Three Months Ended March 31,
	2025		2024
Commercial & Industrial	$	444	$	610
Commercial Real Estate	490		119

Construction & Development	—		30
Total	$	934	$	759

The following table presents the amortized cost basis of collateral-dependent loans and leases, which are individually evaluated to determine expected credit losses, as of March 31, 2025 and December 31, 2024:


	Total Collateral-Dependent Loans				Unguaranteed Portion
March 31, 2025	Real Estate		Business Assets			Real Estate		Business Assets		Allowance for Credit Losses
Commercial & Industrial
Small Business Banking	$	32,991	$	20,299		$	9,484	$	6,974	$	9,266
Commercial Banking	2,869		16,525			74		9,812		3,100
Total	35,860		36,824			9,558		16,786		12,366
Commercial Real Estate
Small Business Banking	67,093		—			25,814		—		1,426
Commercial Banking	11,103		—			11,103		—		—
Total	78,196		—			36,917		—		1,426
Commercial Land
Small Business Banking	4,209		2,006			687		2,006		986
Total	4,209		2,006			687		2,006		986
Total	$	118,265	$	38,830		$	47,162	$	18,792	$	14,778


	Total Collateral-Dependent Loans				Unguaranteed Portion
December 31, 2024	Real Estate		Business Assets			Real Estate		Business Assets		Allowance for Credit Losses
Commercial & Industrial
Small Business Banking	$	6,693	$	36,500		$	2,738	$	12,061	$	8,299
Commercial Banking	101,001		26,788			13,704		11,350		4,374
Total	107,694		63,288			16,442		23,411		12,673
Commercial Real Estate
Small Business Banking	53,306		6,327			22,239		1,061		890
Total	53,306		6,327			22,239		1,061		890
Commercial Land
Small Business Banking	6,295		—			2,713		—		974
Total	6,295		—			2,713		—		974
Total	$	167,295	$	69,615		$	41,394	$	24,472	$	14,537

Allowance for Credit Losses - Loans and Leases

See Note 1. Organization and Summary of Significant Accounting Policies of the Notes to the Consolidated Financial Statements in the Company’s 2024 Form 10-K for a description of the methodologies used to estimate the ACL.

The following table details activity in the ACL by portfolio segment allowance for the periods presented:


Three Months Ended	Commercial & Industrial		Construction & Development		Commercial Real Estate		Commercial Land		Total
March 31, 2025
Beginning Balance	$	129,007	$	4,943	$	29,501	$	4,065	$	167,516
Charge offs	(5,987)		—		(936)		—		(6,923)
Recoveries	40		—		91		18		149
Provision	26,856		769		1,639		178		29,442
Ending Balance	$	149,916	$	5,712	$	30,295	$	4,261	$	190,184
March 31, 2024
Beginning Balance	$	87,581	$	4,717	$	28,864	$	4,678	$	125,840
Charge offs	(3,329)		(303)		—		—		(3,632)
Recoveries	455		—		14		—		469
Provision (Recovery)	13,845		(122)		2,491		150		16,364
Ending Balance	$	98,552	$	4,292	$	31,369	$	4,828	$	139,041

During the three months ended March 31, 2025, the ACL increased as a result of loan growth amid a challenging macroeconomic environment which included specific reserve changes on individually evaluated loans. Loss rates are adjusted for twelve month forecasted unemployment followed by a twelve-month straight-line reversion period.

During the three months ended March 31, 2024, the ACL increased as a result of specific reserve changes on individually evaluated loans and to a lesser extent continued growth of the loan and lease portfolio combined with charge-off related impacts. Loss rates are adjusted for twelve month forecasted unemployment followed by a twelve-month straight-line reversion period.

Loan Modifications for Borrowers Experiencing Financial Difficulty

The Company may agree to modify the contractual terms of a loan to a borrower experiencing financial difficulty as a part of ongoing loss mitigation strategies. These modifications may result in an interest rate reduction, term extension, an other-than-insignificant payment delay, or a combination thereof. The Company typically does not offer principal forgiveness.

The following table summarizes the amortized cost basis of loans that were modified during the three months ended March 31, 2025:


Three Months Ended March 31, 2025	Term Extension		Interest Rate Reduction		Combination - Term Extension, Other-Than-Insignificant Payment Delay & Interest Rate Reduction		Combination - Term Extension & Other-Than-Insignificant Payment Delay		Combination - Term Extension & Interest Rate Reduction		% of Total Class of Financing Receivable
Small Business Banking	$	3,601	$	2,243	$	3,057	$	3,009	$	193	0.2	%

Total	$	3,601	$	2,243	$	3,057	$	3,009	$	193	0.2	%

During the three months ended March 31, 2024, there were no loan modifications to borrowers experiencing financial difficulty.

As of March 31, 2025, the Company had commitments to lend additional funds to these borrowers totaling $28 thousand. As of March 31, 2024, the Company had no commitments to lend additional funds to these borrowers.

The following table presents an aging analysis of loans that were modified within the twelve months ended March 31, 2025, and March 31, 2024, respectively:


March 31, 2025	Current		30-89 Days Past Due		90 Days or More Past Due		Total Past Due
Small Business Banking	$	17,644	$	—	$	2,243	$	2,243
Commercial Banking	17,576		—		—		—
Total	$	35,220	$	—	$	2,243	$	2,243


March 31, 2024	Current		30-89 Days Past Due		90 Days or More Past Due		Total Past Due
Small Business Banking	$	15,286	$	—	$	—	$	—
Commercial Banking	17,691		—		—		—
Total	$	32,977	$	—	$	—	$	—

The following table summarizes the financial impacts of loan modifications made to borrowers experiencing financial difficulty during the period presented:


	Three Months Ended March 31, 2025
	Weighted Average Interest Rate Reduction		Weighted Average Term Extension (in Months)
Small Business Banking	1.81	%	44

Additionally, there were no loans that were modified within the twelve months ended March 31, 2025 and March 31, 2024 that subsequently defaulted during the period presented.

The Company’s ACL is estimated using lifetime historical loan performance adjusted to reflect current conditions and reasonable and supportable forecasts. Upon determination that a modified loan, or portion of a modified loan, has subsequently been deemed uncollectible, the uncollectible portion is written off. The amortized cost basis is reduced by the uncollectible amount and the ACL is adjusted by the same amount. As a result, the impact of loss mitigation strategies is captured in the estimates of PD and LGD.