XML 23 R12.htm IDEA: XBRL DOCUMENT v3.20.2
Loans
 6 Months Ended
Jun. 30, 2020
Receivables [Abstract]  
Portfolio Loans LOANS

Below is a summary of loans by category at June 30, 2020 and December 31, 2019:
 
(in thousands)
June 30, 2020
 
December 31, 2019
Commercial and industrial
$
3,165,611

 
$
2,361,157

Real estate:
 
 
 
Commercial - investor owned
1,309,895

 
1,299,884

Commercial - owner occupied
738,549

 
697,437

Construction and land development
481,221

 
457,273

Residential
326,992

 
366,261

Total real estate loans
2,856,657

 
2,820,855

Other
142,224

 
134,941

Loans, before unearned loan fees
6,164,492

 
5,316,953

Unearned loan fees, net
(24,441
)
 
(2,616
)
Loans, including unearned loan fees
$
6,140,051

 
$
5,314,337



PPP loans totaled $830.2 million at June 30, 2020, or $807.8 million net of unearned fees of $22.4 million. The loan balance at June 30, 2020 also includes a discount on acquired loans of $22.2 million. At June 30, 2020 loans of $2.4 billion were pledged to FHLB and the Federal Reserve Bank.

A summary of the activity in the ACLL by category for the three and six months ended June 30, 2020 is as follows:
(in thousands)
Commercial and industrial
 
CRE - investor owned
 
CRE -
owner occupied
 
Construction and land development
 
Residential real estate
 
Other
 
Total
Allowance for credit losses on loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at March 31, 2020
$
45,981

 
$
19,892


$
9,477


$
9,895


$
5,395


$
1,547


$
92,187

Provision for credit losses
7,168

 
2,599

 
1,600

 
6,038

 
744

 
242

 
18,391

Charge-offs
(3,303
)
 
(224
)
 
—

 
—

 
(32
)
 
(105
)
 
(3,664
)
Recoveries
293

 
2,752

 
11

 
29

 
226

 
45

 
3,356

Balance at June 30, 2020
$
50,139

 
$
25,019


$
11,088


$
15,962


$
6,333


$
1,729


$
110,270



(in thousands)
Commercial and industrial
 
CRE - investor owned
 
CRE -
owner occupied
 
Construction and land development
 
Residential real estate
 
Other
 
Total
Allowance for credit losses on loans:
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance at December 31, 2019
$
27,455

 
$
5,935

 
$
4,873

 
$
2,611

 
$
1,280

 
$
1,134

 
$
43,288

CECL adoption
6,494

 
10,726

 
2,598

 
5,183

 
3,470

 
(84
)
 
28,387

PCD loans immediately charged off
—

 
(5
)
 
(57
)
 
(217
)
 
(1,401
)
 
—

 
(1,680
)
Balance at January 1, 2020
$
33,949

 
$
16,656

 
$
7,414

 
$
7,577

 
$
3,349

 
$
1,050

 
$
69,995

Provision for credit losses
18,759

 
5,823

 
3,594

 
8,347

 
2,755

 
808

 
40,086

Charge-offs
(3,366
)
 
(226
)
 
—

 
(31
)
 
(154
)
 
(191
)
 
(3,968
)
Recoveries
797

 
2,766

 
80

 
69

 
383

 
62

 
4,157

Balance at June 30, 2020
$
50,139

 
$
25,019

 
$
11,088

 
$
15,962

 
$
6,333

 
$
1,729

 
$
110,270


Reserves on enterprise value lending and agricultural lending, which are included in the categories above, represented $15.8 million and $2.4 million, respectively.

On January 1, 2020, the Company adopted the CECL methodology which added $28.4 million to the ACLL. Upon adoption, $1.7 million of nonaccrual PCD loans that were less than $100,000 were immediately charged-off. Under the CECL method, the Company recorded a $18.4 million and $40.1 million provision for credit losses on loans in the three and six months ended June 30, 2020, respectively, compared to a $1.7 million and $3.2 million provision for loan losses in the prior year periods, respectively, under the incurred loss method. The increase in the provision for credit losses on loans is primarily due to the Company’s forecast of macroeconomic factors over the next 12 months, which significantly deteriorated in the first quarter 2020 due to the COVID-19 pandemic. The forecast continued to worsen in the second quarter of 2020.

The CECL methodology incorporates various economic scenarios. The Company utilizes three forecasts in the model, a Moody’s baseline, a stronger near-term growth and a moderate recession forecast. The Company weights these scenarios at 80%, 10%, and 10%, respectively. These forecasts incorporate an accommodative monetary policy and the current and anticipated impact of government stimulus. Accordingly, the CECL model has not been adjusted for negative qualitative factors, such as the potential loss mitigation of loan deferrals and the PPP. Some of the key risks to the forecasts that could result in future provision for credit losses are additional shutdowns and self-quarantines if a second wave of COVID hits, small-business bankruptcies occur at higher levels or unemployment increases. The 80/10/10 weighting adds approximately $1.0 million to the ACL.

The recorded investment in nonperforming loans by category at June 30, 2020 and December 31, 2019, is as follows: 
 
June 30, 2020
(in thousands)
Nonaccrual
 
Restructured, accruing
 
Loans over 90 days past due and still accruing interest
 
Total nonperforming loans
 
Nonaccrual loans with no allowance
Commercial and industrial
$
27,431

 
$
3,642

 
$
865

 
$
31,938

 
$
20,553

Real estate:
 
 
 
 
 
 
 
 
 
    Commercial - investor owned
2,389

 
—

 
—

 
2,389

 
1,677

    Commercial - owner occupied
2,400

 
—

 
—

 
2,400

 
1,403

    Construction and land development
207

 
—

 
—

 
207

 
207

    Residential
4,421

 
78

 
—

 
4,499

 
3,444

Other
19

 
—

 
21

 
40

 
—

       Total
$
36,867

 
$
3,720


$
886


$
41,473

 
$
27,284


There was no interest income recognized on nonaccrual loans during the six months ended June 30, 2020.

 
December 31, 2019
(in thousands)
Nonaccrual
 
Restructured, accruing
 
Loans over 90 days past due and still accruing interest
 
Total nonperforming loans
Commercial and industrial
$
22,328

 
$
—

 
$
250

 
$
22,578

Real estate:
 
 
 
 
 
 
 
    Commercial - investor owned
2,303

 
—

 
—

 
2,303

    Commercial - owner occupied
213

 
—

 
—

 
213

    Residential
1,251

 
79

 
—

 
1,330

Other
1

 
—

 
—

 
1

       Total
$
26,096

 
$
79

 
$
250

 
$
26,425



The following table presents the amortized cost basis of collateral-dependent nonperforming loans by class of loan at June 30, 2020:
 
Type of Collateral
(in thousands)
Commercial Real Estate
 
Residential Real Estate
 
Blanket Lien
Commercial and industrial
$
13,124

 
$
—

 
$
4,872

Real estate:
 
 
 
 
 
Commercial - investor owned
2,389

 
—

 
—

Commercial - owner occupied
1,811

 
—

 
—

Construction and land development
—

 
207

 
—

Residential
—

 
4,271

 
—

Total
$
17,324

 
$
4,478

 
$
4,872


 
 
 
 
 
 
There were no troubled debt restructurings that occurred during the three months ended June 30, 2020. The recorded investment by category for troubled debt restructurings that occurred during the six months ended June 30, 2020 and the three and six months ended June 30, 2019 are as follows:
 
June 30, 2020
 
June 30, 2019
(in thousands, except for number of loans)
Number of loans
 
Pre-Modification Outstanding Recorded Balance
 
Post-Modification Outstanding Recorded Balance
 
Number of loans
 
Pre-Modification Outstanding Recorded Balance
 
Post-Modification Outstanding Recorded Balance
Commercial and industrial
1

 
$
3,731

 
$
3,731

 
—

 
$
—

 
$
—

Real estate:
 
 
 
 
 
 
 
 
 
 
 
Commercial - owner occupied
—

 
—

 
—

 
1

 
188

 
188

Residential
2

 
155

 
155

 
2

 
332

 
332

Total
3

 
$
3,886

 
$
3,886

 
3

 
$
520

 
$
520



There were no troubled debt restructured loans that subsequently defaulted during the three or six months ended June 30, 2020 or 2019.

In response to the COVID-19 pandemic, the Company has implemented short-term deferral programs allowing customers to primarily defer payments for up to 90 days. Deferrals under the CARES Act or interagency guidance are not included above as troubled debt restructurings. As of June 30, 2020, $685.7 million in loans have participated in the programs, including $361.4 million in loans deferring full principal and interest payments and $324.3 million in
loans deferring principal only. Interest of $4.0 million has been deferred and will be collected upon final maturity. The Company has moved all loans that have requested deferrals to a level six risk rating for additional monitoring.
 
 
 
 
 
 
 
 
 
 
 
 
The aging of the recorded investment in past due loans by class at June 30, 2020 is shown below.

 
June 30, 2020
(in thousands)
30-89 Days
 Past Due
 
90 or More
Days
Past Due
 
Total
Past Due
 
Current
 
Total
Commercial and industrial
$
6,684

 
$
22,623

 
$
29,307

 
$
3,113,890

 
$
3,143,197

Real estate:
 
 
 
 
 
 
 
 
 
Commercial - investor owned
116

 
2,095

 
2,211

 
1,307,684

 
1,309,895

Commercial - owner occupied
2,723

 
1,208

 
3,931

 
734,618

 
738,549

Construction and land development
58

 
—

 
58

 
481,163

 
481,221

Residential
951

 
1,738

 
2,689

 
324,303

 
326,992

Other
100

 
21

 
121

 
140,076

 
140,197

Total
$
10,632

 
$
27,685


$
38,317


$
6,101,734


$
6,140,051

 
 
 
 
 
 
 
 
 
 

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, payment experience, credit documentation, and current economic factors among other factors. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:
•
Grades 1, 2, and 3 – Includes loans to borrowers with a continuous record of strong earnings, sound balance sheet condition and capitalization, ample liquidity with solid cash flow, and whose management team has experience and depth within their industry.
•
Grade 4 – Includes loans to borrowers with positive trends in profitability, satisfactory capitalization and balance sheet condition, and sufficient liquidity and cash flow.
•
Grade 5 – Includes loans to borrowers that may display fluctuating trends in sales, profitability, capitalization, liquidity, and cash flow.
•
Grade 6 – Includes loans to borrowers where an adverse change or perceived weakness has occurred, but may be correctable in the near future. Alternatively, this rating category may also include circumstances where the borrower is starting to reverse a negative trend or condition, or has recently been upgraded from a 7, 8, or 9 rating.
•
Grade 7 – Watch credits are borrowers that have experienced financial setback of a nature that is not determined to be severe or influence ‘ongoing concern’ expectations. Although possible, no loss is anticipated at this time, due to strong collateral and/or guarantor support.
•
Grade 8 – Substandard credits include those borrowers characterized by significant losses and sustained downward trends in balance sheet condition, liquidity, and cash flow. Repayment reliance may have shifted to secondary sources. Collateral exposure may exist and additional reserves may be warranted.
•
Grade 9 – Doubtful credits include borrowers that may show deteriorating trends that are unlikely to be corrected. Collateral values may appear insufficient for full recovery, therefore requiring a partial charge-off, or debt renegotiation with the borrower. The borrower may have declared bankruptcy or bankruptcy is likely in the near term. All doubtful rated credits will be on nonaccrual.
The recorded investment by risk category of the loans by class at June 30, 2020, which is based upon the most recent analysis performed is as follows:
 
 
Term Loans by Origination Year
 
 
 
 
 
 
(in thousands)
 
2020
 
2019
 
2018
 
2017
 
2016
 
Prior
 
Revolving Loans Converted to Term Loans
 
Revolving Loans
 
Total
Commercial and industrial
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pass (1-6)
 
$
1,239,062

 
$
535,477

 
$
318,046

 
$
180,269

 
$
47,210

 
$
85,529

 
$
14,954

 
$
510,168

 
$
2,930,715

Watch (7)
 
26,347

 
13,354

 
4,850

 
6,468

 
24,044

 
175

 
—

 
62,293

 
137,531

Classified (8-9)
 
3,775

 
15,068

 
8,155

 
3,950

 
5,093

 
3,673

 
295

 
23,222

 
63,231

Total Commercial and industrial
 
$
1,269,184

 
$
563,899

 
$
331,051

 
$
190,687

 
$
76,347

 
$
89,377

 
$
15,249

 
$
595,683

 
$
3,131,477

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate-investor owned
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Pass (1-6)
 
$
246,319

 
$
321,849

 
$
204,242

 
$
126,567

 
$
153,904

 
$
181,761

 
$
3,284

 
$
35,460

 
$
1,273,386

Watch (7)
 
5,136

 
4,220

 
1,192

 
369

 
12,681

 
1,275

 
—

 
—

 
24,873

Classified (8-9)
 
—

 
966

 
8,286

 
455

 
249

 
1,680

 
—

 
—

 
11,636

Total Commercial real estate-investor owned
 
$
251,455

 
$
327,035

 
$
213,720

 
$
127,391

 
$
166,834

 
$
184,716

 
$
3,284

 
$
35,460

 
$
1,309,895

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commercial real estate-owner occupied
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

Pass (1-6)
 
$
147,313

 
$
200,519

 
$
92,624

 
$
79,058

 
$
44,990

 
$
80,172

 
$
2,756

 
$
42,883

 
$
690,315

Watch (7)
 
9,473

 
1,963

 
261

 
9,729

 
8,533

 
5,074

 
—

 
2,500

 
37,533

Classified (8-9)
 
601

 
1,156

 
4,267

 
458

 
—

 
4,219

 
—

 
—

 
10,701

Total Commercial real estate-owner occupied
 
$
157,387

 
$
203,638

 
$
97,152

 
$
89,245

 
$
53,523

 
$
89,465

 
$
2,756

 
$
45,383

 
$
738,549

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Construction real estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pass (1-6)
 
$
75,983

 
$
167,936

 
$
121,909

 
$
37,555

 
$
28,060

 
$
12,906

 
$
—

 
$
20,631

 
$
464,980

Watch (7)
 
2,408

 
722

 
1,254

 
11,047

 
—

 
546

 
—

 
—

 
15,977

Classified (8-9)
 
—

 
227

 
—

 
—

 
—

 
37

 
—

 
—

 
264

Total Construction real estate
 
$
78,391

 
$
168,885

 
$
123,163

 
$
48,602

 
$
28,060

 
$
13,489

 
$
—

 
$
20,631

 
$
481,221

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Residential real estate
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pass (1-6)
 
$
26,448

 
$
33,085

 
$
22,074

 
$
19,931

 
$
34,427

 
$
115,036

 
$
591

 
$
63,505

 
$
315,097

Watch (7)
 
181

 
895

 
842

 
—

 
—

 
2,027

 
279

 
802

 
5,026

Classified (8-9)
 
184

 
1,265

 
758

 
13

 
213

 
3,445

 
—

 
50

 
5,928

Total residential real estate
 
$
26,813

 
$
35,245

 
$
23,674

 
$
19,944

 
$
34,640

 
$
120,508

 
$
870

 
$
64,357

 
$
326,051

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Other
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Pass (1-6)
 
$
8,758

 
$
25,567

 
$
20,615

 
$
682

 
$
3,705

 
$
34,455

 
$
—

 
$
43,971

 
$
137,753

Watch (7)
 
—

 
2

 
—

 
—

 
—

 
—

 
—

 
1

 
3

Classified (8-9)
 
—

 
1

 
3

 
4

 
—

 
19

 
10

 
7

 
44

Total Other
 
$
8,758

 
$
25,570

 
$
20,618

 
$
686

 
$
3,705

 
$
34,474

 
$
10

 
$
43,979

 
$
137,800


In the table above, loan originations in 2020 and 2019 with a classification of watch or classified primarily represent renewals or modifications initially underwritten and originated in prior years.
For certain loans, primarily credit cards, the Company evaluates credit quality based on the aging status.
The following table presents the recorded investment on loans based on payment activity:
 
 
June 30, 2020
(in thousands)
 
Performing
 
Non Performing
 
Total
Commercial and industrial
 
$
11,682

 
$
38

 
$
11,720

Real estate:
 
 
 
 
 
 
Residential
 
941

 
—

 
941

Other
 
2,376

 
21

 
2,397

Total
 
$
14,999

 
$
59

 
$
15,058


 
 
 
 
 
 
 
 
The recorded investment by risk category of loans by class at December 31, 2019, was as follows:
 
December 31, 2019
(in thousands)
Pass (1-6)
 
Watch (7)
 
Classified (8 & 9)
 
Total*
Commercial and industrial
$
2,151,084

 
$
124,718

 
$
70,021

 
$
2,345,823

Real estate:
 
 
 
 
 
 
 
Commercial - investor owned
1,242,569

 
17,572

 
2,840

 
1,262,981

Commercial - owner occupied
643,276

 
28,773

 
6,473

 
678,522

Construction and land development
437,134

 
12,140

 
106

 
449,380

Residential
348,246

 
4,450

 
2,496

 
355,192

Other
132,096

 
3

 
51

 
132,150

Total
$
4,954,405

 
$
187,656


$
81,987

 
$
5,224,048

*Excludes $90.3 million of loans accounted for as PCI