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Allowance for Credit Losses
 3 Months Ended
Mar. 31, 2020
Receivables [Abstract]  
Allowance for Credit Losses Allowance for Credit Losses
Activity in the allowance for credit losses is summarized as follows:
 
Three Months Ended March 31, 2020
(In thousands)
Beginning
Balance
 
Impact of Adoption of ASC 326
 
Initial Allowance on PCD Loans Acquired During the Period
 
Provision
for Credit
Losses
 
Charge-
Offs
 
Recoveries
 
TDR
Allowance
Adjustments
 
Ending
Balance
Construction & land development
$
1,842

 
$
1,479

 
$
48

 
$
1,248

 
$
—

 
$
29

 
$
—

 
$
4,646

Commercial real estate - owner occupied
5,361

 
80

 
207

 
(264
)
 
(44
)
 
—

 
(13
)
 
5,327

Commercial real estate - non owner occupied
7,863

 
9,341

 
140

 
18,283

 
(12
)
 
28

 
—

 
35,643

Residential real estate
7,667

 
5,787

 
97

 
6,260

 
(18
)
 
116

 
(10
)
 
19,899

Commercial and financial
9,716

 
3,677

 
11

 
2,746

 
(1,100
)
 
420

 
—

 
15,470

Consumer
2,705

 
862

 
13

 
1,240

 
(473
)
 
80

 
(1
)
 
4,426

Totals
$
35,154


$
21,226

 
$
516

 
$
29,513


$
(1,647
)

$
673


$
(24
)

$
85,411

 
Three Months Ended March 31, 2019
(In thousands)
Beginning
Balance
 
Provision
for Loan
Losses
 
Charge-
Offs
 
Recoveries
 
TDR
Allowance
Adjustments
 
Ending
Balance
Construction & land development
$
2,233

 
$
83

 
$
—

 
$
4

 
$
—

 
$
2,320

Commercial real estate
11,112

 
625

 
(16
)
 
47

 
(15
)
 
11,753

Residential real estate
7,775

 
(414
)
 
(36
)
 
139

 
(19
)
 
7,445

Commercial and financial
8,585

 
853

 
(944
)
 
79

 
—

 
8,573

Consumer
2,718

 
250

 
(483
)
 
247

 
(1
)
 
2,731

Totals
$
32,423


$
1,397


$
(1,479
)

$
516


$
(35
)

$
32,822


Management establishes the allowance using relevant available information from both internal and external sources, relating to past events, current conditions, and reasonable and supportable forecasts to project losses over a three-year forecast period. Forecast data is sourced primarily from Moody’s Analytics, a firm widely recognized for its research, analysis, and economic forecasts. For portfolio segments with a weighted average life longer than three years, the Company reverts to longer term historical loss experience to estimate losses over the remaining life of the loans within each segment.

Historical credit losses provide the basis for estimation of expected credit losses. Adjustments to historical loss information are made for differences in current loan-specific risk characteristics such as differences in underwriting standards, portfolio mix, delinquency level, loan to value ratios, borrower credit characteristics, loan seasoning or term as well as for changes in environmental conditions, such as changes in unemployment rates, property values, occupancy rates, and other macroeconomic metrics.

At March 31, 2020, the Company utilized Moody’s “U.S. Macroeconomic Outlook Baseline” scenario which predicted a sudden sharp recession in the near term, driven primarily by the COVID-19 pandemic, including a deep drop in U.S. gross domestic product in the second quarter of 2020, followed by a return to growth in the second half of 2020. The Company considered the significant uncertainty of factors assumed in the Baseline scenario, including the timing, number and severity of virus infections, the duration of stay-at-home orders and other limitations on businesses, and the amount and availability of fiscal stimulus, including programs offered under the Coronavirus Aid, Relief, and Economic Security ("CARES") Act. The Company considered the potential that outcomes in any or all of these factors could differ from the Baseline scenario, and qualitative considerations were incorporated reflecting the risk of uncertain, and possibly further deteriorating, economic conditions, and for additional dimensions of risk not captured in the quantitative model.

In the Construction & Land Development segment, the increase in loss estimate during the quarter was affected by both the increase in Baseline scenario forecast from the prior period and qualitative adjustments relating to uncertainty of economic conditions. In this segment, the primary source of repayment is typically from proceeds of the sale, refinancing, or permanent financing of the underlying property; therefore, industry and collateral type and estimated collateral values are among the relevant factors in assessing expected losses.

In the Commercial Real Estate - Owner Occupied segment, risk characteristics include, but are not limited to, collateral type, loan seasoning, and lien position. The introduction of government sponsored programs, including the CARES Act, and the Company's expectation that borrowers in this segment will benefit from these programs, offset the otherwise detrimental effect of the negative economic outlook.
 
In the Commercial Real Estate - Non Owner Occupied segment, repayment is often dependent upon rental income from the successful operation of the underlying property. Loan performance may be adversely affected by general economic conditions or conditions specific to the real estate market, including property types. Collateral type, loan seasoning, and lien position are among the risk characteristics analyzed for this segment. Modeled results as of March 31, 2020 reflected higher estimated probabilities of default and loss given default, in addition to qualitative adjustments for uncertainty of macroeconomic factors.

The Residential Real Estate segment includes first mortgages secured by residential property, and home equity lines of credit. Risk characteristics considered for this segment include, but are not limited to, collateral type, lien position loan to value ratios, and loan seasoning .The impact of the forecast on home equity lines of credit increased the estimated expected losses in this segment, while closed-end single family mortgages were less impacted due to anticipated government stimulus efforts and high borrower FICO scores.

In the Commercial & Financial segment, borrowers are primarily small to medium sized professional firms and other businesses, and loans are generally supported by projected cash flows of the business, collateralized by business assets, and/or guaranteed by the business owners. Industry, collateral type, estimated collateral values and loan seasoning are among the relevant factors in assessing expected losses and were affected by a negative economic outlook, in addition to qualitative factors added to consider significant economic uncertainty.

Consumer loans include installment and revolving lines, loans for automobiles, boats, and other personal or family purposes. Risk characteristics considered for this segment include, but are not limited to, collateral type, loan to value ratios, loan seasoning and FICO score. Increases in the forecast for expected unemployment rates increased the reserve in this portfolio, as did qualitative considerations of overall uncertainty as to the depth and duration of the economic downturn.

The allowance for credit losses is composed of specific allowances for individually evaluated and general allowances grouped into loan pools based on similar characteristics, which are collectively evaluated. The Company’s loan portfolio and related allowance at March 31, 2020 and December 31, 2019 is shown in the following tables:
 
 
March 31, 2020
 
Individually Evaluated
 
Collectively Evaluated
 
Total
(In thousands)
Recorded
Investment
 
Associated
Allowance
 
Recorded
Investment
 
Associated
Allowance
 
Recorded
Investment
 
Associated
Allowance
Construction & land development
$
729

 
$
13

 
$
294,676

 
$
4,633

 
$
295,405

 
$
4,646

Commercial real estate - owner occupied
4,590

 
252

 
1,078,303

 
5,075

 
1,082,893

 
5,327

Commercial real estate - non owner occupied
8,916

 
316

 
1,372,180

 
35,327

 
1,381,096

 
35,643

Residential real estate
14,661

 
1,163

 
1,545,093

 
18,736

 
1,559,754

 
19,899

Commercial and financial
8,618

 
2,701

 
787,420

 
12,769

 
796,038

 
15,470

Consumer
754

 
247

 
201,268

 
4,179

 
202,022

 
4,426

Totals
$
38,268


$
4,692


$
5,278,940


$
80,719


$
5,317,208


$
85,411


 
December 31, 2019
 
Individually Evaluated
 
Collectively Evaluated
 
 Total
(In thousands)
Recorded
Investment
 
Associated
Allowance
 
Recorded
Investment
 
Associated
Allowance
 
Recorded
Investment
 
Associated
Allowance
Construction & land development
$
5,217

 
$
14

 
$
319,896

 
$
1,828

 
$
325,113

 
$
1,842

Commercial real estate
20,484

 
220

 
2,358,487

 
13,004

 
2,378,971

 
13,224

Residential real estate
16,093

 
834

 
1,491,770

 
6,833

 
1,507,863

 
7,667

Commercial and financial
6,631

 
1,731

 
771,621

 
7,985

 
778,252

 
9,716

Consumer
337

 
59

 
207,868

 
2,646

 
208,205

 
2,705

Totals
$
48,762


$
2,858


$
5,149,642


$
32,296


$
5,198,404


$
35,154