Commitments and Contingencies

3 Months Ended

Mar. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments

In the normal course of business, we offer off-balance sheet credit arrangements to enable our customers to meet their financing objectives. These instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the financial statements. Our exposure to credit loss, in the event the customer does not satisfy the terms of the agreement, equals the contractual amount of the obligation less the value of any collateral. We apply the same credit policies in making commitments and standby letters of credit that are used for the underwriting of loans to customers. Commitments generally have fixed expiration dates, annual renewals or other termination clauses and may require payment of a fee. Because many of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

Estimates of the fair value of these off-balance sheet items were not made because of the short-term nature of these arrangements and the credit standing of the counterparties.

The following table sets forth our commitments and letters of credit as of the dates presented:


(dollars in thousands)	March 31, 2021			December 31, 2020
Commitments to extend credit		$	2,261,223		$	2,185,752
Standby letters of credit		88,418			89,095
Total		$	2,349,641		$	2,274,847

Allowance for Credit Losses on Unfunded Loan Commitments

We maintain an allowance for credit losses on unfunded commercial lending commitments and letters of credit to provide for the risk of loss inherent in these arrangements. The allowance is computed using a methodology similar to that used to determine the allowance for credit losses for loans, modified to take into account the probability of a draw-down on the commitment. The provision for credit losses on unfunded loan commitments is included in the provision for credit losses on our Consolidated Statements of Comprehensive Income. The allowance for unfunded commitments is included in other liabilities in the Consolidated Balance Sheets.

The following table presents activity in the allowance for credit losses on unfunded loan commitments as of the dates presented:


(dollars in thousands)	Three Months Ended March 31, 2021			Three Months Ended March 31, 2020
Balance at beginning of period		$	4,467		$	3,112
Impact of adopting ASU 2016-13 at January 1, 2020		—			1,349
Balance after adoption of ASU 2016-13		4,467			4,461
(Recovery) provision for credit losses		(164)			1,616
Total		$	4,303		$	6,077

The decrease in allowance for credit losses on unfunded loan commitments for the three months ended March 31, 2021 was due to a decrease in the loss rates for the construction portfolio.

Litigation

In the normal course of business, we are subject to various legal and administrative proceedings and claims. While any type of litigation contains a level of uncertainty, we believe that the outcome of such proceedings or claims pending will not have a material adverse effect on our consolidated financial position or results of operations.