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Loans
 9 Months Ended
Sep. 30, 2020
Receivables [Abstract]  
Portfolio Loans LOANS
The following table presents a summary of loans by category:
 
(in thousands)September 30, 2020December 31, 2019
Commercial and industrial$3,171,916 $2,361,157 
Real estate:  
Commercial - investor owned1,292,182 1,299,884 
Commercial - owner occupied735,704 697,437 
Construction and land development474,727 457,273 
Residential321,792 366,261 
Total real estate loans2,824,405 2,820,855 
Other151,230 134,941 
Loans, before unearned loan fees6,147,551 5,316,953 
Unearned loan fees, net(21,244)(2,616)
Loans, including unearned loan fees$6,126,307 $5,314,337 

PPP loans totaled $838.6 million at September 30, 2020, or $819.1 million net of unearned fees of $19.5 million. The loan balance at September 30, 2020 also includes a discount on acquired loans of $19.8 million. At September 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 nine months ended September 30, 2020 is as follows:
(in thousands)Commercial and industrialCRE - investor ownedCRE -
owner occupied		Construction and land developmentResidential real estateOtherTotal
Allowance for credit losses on loans:       
Balance at June 30, 2020$50,139 $25,019 $11,088 $15,962 $6,333 $1,729 $110,270 
Provision for credit losses8,929 4,869 (1,854)2,873 (1,132)342 14,027 
Charge-offs(2,006)(272)(30)— (173)(103)(2,584)
Recoveries808 55 268 83 303 40 1,557 
Balance at September 30, 2020$57,870 $29,671 $9,472 $18,918 $5,331 $2,008 $123,270 
(in thousands)Commercial and industrialCRE - investor ownedCRE -
owner occupied		Construction and land developmentResidential real estateOtherTotal
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 adoption6,494 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 losses27,688 10,692 1,740 11,220 1,623 1,150 54,113 
Charge-offs(5,372)(498)(30)(31)(327)(294)(6,552)
Recoveries1,605 2,821 348 152 686 102 5,714 
Balance at September 30, 2020$57,870 $29,671 $9,472 $18,918 $5,331 $2,008 $123,270 

Reserves on enterprise value lending and agricultural lending, which are included in the categories above, represented $20.1 million and $1.8 million, respectively, as of September 30, 2020.
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 with individual outstanding balances of less than $100,000 were immediately charged-off. Under the CECL method, the Company recorded $14.0 million and $54.1 million in provision for credit losses on loans in the three and nine months ended September 30, 2020, respectively, compared to $1.8 million and $5.0 million in provision for loan losses in the prior year periods, respectively, under the incurred loss method. The increase in the provision for credit losses in 2020 was primarily due to a change in economic forecasts from the end of 2019 due to the COVID-19 pandemic. The deterioration in the forecast was most significant in the second quarter of 2020. The economic forecast improved in the third quarter of 2020 compared to the second quarter of 2020.

The CECL methodology incorporates various economic scenarios. The Company utilizes three forecasts in the model, Moody’s baseline, a stronger near-term growth upside and a moderate recession downside forecast. The Company weights these scenarios at 80%, 10%, and 10%, respectively, which added approximately $1.2 million to the ACL over the baseline model. These forecasts incorporate an accommodative monetary policy and the current and anticipated impact of government stimulus. The Company has also recognized the risk posed by loans that have received multiple deferrals of principal and interest payments, including the hospitality sector, by allocating additional reserves to those segments. Some of the key risks to the forecasts that could result in future provision for credit losses are additional shutdowns and self-quarantines if another significant wave of COVID hits, small-business bankruptcies occur at higher levels, unemployment increases, or the next round of fiscal stimulus is delayed or does not occur.

The following tables present the recorded investment in nonperforming loans by category: 
September 30, 2020
(in thousands)NonaccrualRestructured, accruingLoans over 90 days past due and still accruing interestTotal nonperforming loansNonaccrual loans with no allowance
Commercial and industrial$19,141 $3,557 $888 $23,586 $10,208 
Real estate:   
    Commercial - investor owned9,850 — — 9,850 1,440 
    Commercial - owner occupied1,511 — — 1,511 1,511 
    Construction and land development200 — — 200 200 
    Residential4,316 78 — 4,394 3,246 
Other19 — 63 82 — 
       Total$35,037 $3,635 $951 $39,623 $16,605 

No interest income was recognized on nonaccrual loans during the three or nine months ended September 30, 2020.
December 31, 2019
(in thousands)NonaccrualRestructured, accruingLoans over 90 days past due and still accruing interestTotal nonperforming loans
Commercial and industrial$22,328 $— $250 $22,578 
Real estate: 
    Commercial - investor owned2,303 — — 2,303 
    Commercial - owner occupied213 — — 213 
    Residential1,251 79 — 1,330 
Other1 — — 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 September 30, 2020:
Type of Collateral
(in thousands)Commercial Real EstateResidential Real EstateBlanket LienOther
Commercial and industrial$11,056 $— $405 $— 
Real estate:
Commercial - investor owned9,850 — — — 
Commercial - owner occupied1,511 — — — 
Construction and land development— 200 — — 
Residential— 4,208 — — 
Other— — — 18 
Total$22,417 $4,408 $405 $18 
The recorded investment by category for troubled debt restructurings that occurred during the three months ended September 30, 2020 are as follows:
September 30, 2020
(in thousands, except for number of loans)Number of loansPre-Modification Outstanding Recorded BalancePost-Modification Outstanding Recorded Balance
Commercial and industrial2 $3,716 $3,716 
Real estate:
Residential1 217 217 
Total3 $3,933 $3,933 
No troubled debt restructurings occurred during the three months ended September 30, 2019.

The recorded investment by category for troubled debt restructurings that occurred during the nine months ended September 30, 2020 and 2019 are as follows:
September 30, 2020September 30, 2019
(in thousands, except for number of loans)Number of loansPre-Modification Outstanding Recorded BalancePost-Modification Outstanding Recorded BalanceNumber of loansPre-Modification Outstanding Recorded BalancePost-Modification Outstanding Recorded Balance
Commercial and industrial3 $7,447 $7,447 — $— $— 
Real estate:
Commercial - owner occupied— — — 1 188 188 
Residential3 372 372 2 332 332 
Total6 $7,819 $7,819 3 $520 $520 

No troubled debt restructurings subsequently defaulted during the three or nine months ended September 30, 2020. Restructured loans that subsequently defaulted during the three months ended September 30, 2019 included one commercial and industrial loan with a recorded balance of $0.1 million. Restructured loans that subsequently defaulted for the nine months ended September 30, 2019 included two commercial and industrial loans with an aggregate recorded balance of $0.4 million

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 September 30, 2020, $690.8 million in loans have participated in the programs, including $355.8 million in loans deferring full principal and interest payments and $335.0 million in loans deferring principal only. As of September 30, 2020, $139.4 million loans remain in a deferral status. Interest of $4.5 million has been deferred and will be collected upon final maturity.
The aging of the recorded investment in past due loans by class at September 30, 2020 is shown below.
September 30, 2020
(in thousands)30-89 Days
Past Due		90 or More
Days
Past Due		Total
Past Due		CurrentTotal
Commercial and industrial$1,558 $16,313 $17,871 $3,134,523 $3,152,394 
Real estate:     
Commercial - investor owned164 9,516 9,680 1,282,502 1,292,182 
Commercial - owner occupied1,166 1,190 2,356 733,348 735,704 
Construction and land development898 — 898 473,829 474,727 
Residential840 2,154 2,994 318,798 321,792 
Other46 82 128 149,380 149,508 
Total$4,672 $29,255 $33,927 $6,092,380 $6,126,307 
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 September 30, 2020, which is based upon the most recent analysis performed is as follows:
Term Loans by Origination Year
(in thousands)20202019201820172016PriorRevolving Loans Converted to Term LoansRevolving LoansTotal
Commercial and industrial
Pass (1-6)$1,378,251 $499,865 $289,283 $155,369 $30,317 $41,477 $14,000 $524,025 $2,932,587 
Watch (7)41,834 11,685 3,421 11,619 22,835 105 — 63,198 154,697 
Classified (8-9)4,685 11,235 3,253 3,861 4,783 2,367 578 21,859 52,621 
Total Commercial and industrial$1,424,770 $522,785 $295,957 $170,849 $57,935 $43,949 $14,578 $609,082 $3,139,905 
Commercial real estate-investor owned
Pass (1-6)$338,563 $277,705 $180,534 $119,492 $138,823 $158,678 $4,969 $33,539 $1,252,303 
Watch (7)6,634 5,115 1,245 — 12,584 3,609 — — 29,187 
Classified (8-9)64 498 8,362 455 248 1,065 — — 10,692 
Total Commercial real estate-investor owned$345,261 $283,318 $190,141 $119,947 $151,655 $163,352 $4,969 $33,539 $1,292,182 
Commercial real estate-owner occupied
Pass (1-6)$192,320 $184,427 $80,269 $72,465 $43,855 $68,277 $2,715 $43,882 $688,210 
Watch (7)10,628 5,213 259 4,851 8,367 4,946 — 2,823 37,087 
Classified (8-9)400 508 4,538 812 — 4,149 — — 10,407 
Total Commercial real estate-owner occupied$203,348 $190,148 $85,066 $78,128 $52,222 $77,372 $2,715 $46,705 $735,704 
Construction real estate
Pass (1-6)$147,206 $152,879 $77,811 $18,076 $11,676 $11,899 $— $25,516 $445,063 
Watch (7)3,064 — 14,540 11,456 — 348 — — 29,408 
Classified (8-9)222 — — — — 34 — — 256 
Total Construction real estate$150,492 $152,879 $92,351 $29,532 $11,676 $12,281 $— $25,516 $474,727 
Residential real estate
Pass (1-6)$38,603 $30,290 $20,571 $17,630 $32,011 $105,538 $644 $64,662 $309,949 
Watch (7)212 852 828 — — 2,122 277 801 5,092 
Classified (8-9)534 882 328 13 906 3,111 — 50 5,824 
Total residential real estate$39,349 $32,024 $21,727 $17,643 $32,917 $110,771 $921 $65,513 $320,865 
Other
Pass (1-6)$23,762 $13,492 $20,109 $551 $3,567 $28,539 $— $52,276 $142,296 
Watch (7)— 1 5 — — 2,685 — 1 2,692 
Classified (8-9)— 19 21 3 — 18 9 6 76 
Total Other$23,762 $13,512 $20,135 $554 $3,567 $31,242 $9 $52,283 $145,064 
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:
September 30, 2020
(in thousands)PerformingNon PerformingTotal
Commercial and industrial$12,425 $64 $12,489 
Real estate:
Residential927 — 927 
Other4,381 63 4,444 
Total$17,733 $127 $17,860 
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 owned1,242,569 17,572 2,840 1,262,981 
Commercial - owner occupied643,276 28,773 6,473 678,522 
Construction and land development437,134 12,140 106 449,380 
Residential348,246 4,450 2,496 355,192 
Other132,096 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