Loans and Leases

3 Months Ended

Mar. 31, 2020

Loans and Leases Receivable Disclosure [Abstract]

LOANS AND LEASES

BancShares’ accounting methods for loans and leases depends on whether they are originated or purchased, and if purchased, whether or not the loans reflect more than insignificant credit deterioration since origination, as of the date of acquisition. Non-PCD loans consist of loans originated by BancShares and loans purchased from other institutions, that do not reflect more than insignificant credit deterioration at acquisition and are reported by loan segments and classes as defined in Note A - Accounting Polices and Basis of Presentation. Purchased loans which reflect more than insignificant credit deterioration are classified as PCD and reported as a single loan segment or class. At the date of acquisition, all acquired loans are recorded at fair value.

Upon adoption of ASC 326, there were changes to certain non-PCD loan classes to better differentiate credit characteristics and align with our ACL models. Within the commercial segment, owner occupied and non-owner occupied commercial real estate were segregated into separate classes. Similarly, consumer auto was segregated into its own class within the consumer segment. Information for reporting periods beginning after January 1, 2020 are presented in accordance with ASC 326 and reflect changes to the respective classes, while prior period amounts continue to be reported in accordance with previously applicable GAAP and have not been reclassified to conform to the current financial statement presentation.

Loans and leases outstanding included the following at March 31, 2020 and December 31, 2019:



(Dollars in thousands)	March 31, 2020
Commercial:
Construction and land development	$	1,014,017
Owner occupied commercial mortgage	10,076,132
Non-owner occupied commercial mortgage	3,058,235
Commercial and industrial and leases	4,738,098
Total commercial loans	18,886,482
Consumer:
Residential mortgage	5,299,412
Revolving mortgage	2,362,644
Construction and land development	363,190
Consumer auto	1,201,152
Consumer other	567,727
Total consumer loans	9,794,125
Total non-PCD loans and leases	28,680,607
PCD loans	560,352
Total loans and leases	$	29,240,959



(Dollars in thousands)	December 31, 2019
Commercial:
Construction and land development	$	1,013,454
Commercial mortgage	12,282,635
Other commercial real estate	542,028
Commercial and industrial and leases	4,403,792
Other	310,093
Total commercial loans	18,552,002
Noncommercial:
Residential mortgage	5,293,917
Revolving mortgage	2,339,072
Construction and land development	357,385
Consumer	1,780,404
Total noncommercial loans	9,770,778
Total non-PCI loans and leases	28,322,780
PCI loans	558,716
Total loans and leases	$	28,881,496

Accrued interest receivable on loans at March 31, 2020 was $90.0 million and was excluded from the estimate of credit losses.

At March 31, 2020, $10.31 billion in non-PCD loans with a lendable collateral value of $8.22 billion were used to secure $787.7 million in Federal Home Loan Bank (“FHLB”) of Atlanta advances, resulting in additional borrowing capacity of $7.43 billion. At December 31, 2019, $9.41 billion in non-PCD loans with a lendable collateral value of $6.57 billion were used to secure $563.7 million in FHLB of Atlanta advances, resulting in additional borrowing capacity of $6.01 billion.

At March 31, 2020, $3.88 billion in non-PCD loans with a lendable collateral value of $3.15 billion were used to secure additional borrowing capacity at the Federal Reserve Bank (“FRB”). At December 31, 2019, $3.68 billion in non-PCD loans with a lendable collateral value of $2.98 billion were used to secure additional borrowing capacity at the FRB.

Certain residential real estate loans are originated to be sold to investors and are recorded in loans held for sale at fair value. In addition, we may change our strategy for certain portfolio loans and decide to sell them in the secondary market. At that time, portfolio loans are transferred to loans held for sale at fair value. Loans held for sale totaled $76.3 million and $67.9 million at March 31, 2020 and December 31, 2019, respectively.

Net deferred fees on non-PCD loans and leases, including unearned and unamortized costs and fees, were $1.4 million and $0.9 million at March 31, 2020 and December 31, 2019, respectively. The net unamortized discount related to purchased non-PCD loans and leases was $28.3 million at March 31, 2020 and $30.9 million at December 31, 2019. The net unamortized discount related to PCD loans and leases was $61.6 million at March 31, 2020 and $88.2 million at December 31, 2019.

The aging of the outstanding loans and leases, by class, at March 31, 2020 and December 31, 2019 are provided in the tables below. Loans and leases past due 30 days or less are considered current as various grace periods allow borrowers to make payments within a stated period after the due date and still remain in compliance with the loan agreement.



	March 31, 2020
(Dollars in thousands)	30-59 days past due		60-89 days past due		90 days or greater		Total past due		Current		Total loans and leases
Commercial:
Construction and land development	$	3,297	$	342	$	2,098	$	5,737	$	1,008,280	$	1,014,017
Owner occupied commercial mortgage	22,793		3,083		14,499		40,375		10,035,757		10,076,132
Non-owner occupied commercial mortgage	9,173		308		4,895		14,376		3,043,859		3,058,235
Commercial and industrial and leases	18,076		6,924		4,250		29,250		4,708,848		4,738,098
Total commercial loans	53,339		10,657		25,742		89,738		18,796,744		18,886,482
Consumer:
Residential mortgage	40,149		8,015		29,908		78,072		5,221,340		5,299,412
Revolving mortgage	10,145		3,410		8,033		21,588		2,341,056		2,362,644
Construction and land development	6,089		—		1,556		7,645		355,545		363,190
Consumer auto	5,675		1,181		1,485		8,341		1,192,811		1,201,152
Consumer other	3,647		2,058		2,293		7,998		559,729		567,727
Total consumer loans	65,705		14,664		43,275		123,644		9,670,481		9,794,125
PCD loans	27,628		8,680		27,961		64,269		496,083		560,352
Total loans and leases	$	146,672	$	34,001	$	96,978	$	277,651	$	28,963,308	$	29,240,959

	December 31, 2019
(Dollars in thousands)	30-59 days past due		60-89 days past due		90 days or greater		Total past due		Current		Total loans and leases
Commercial:
Construction and land development	$	3,146	$	195	$	2,702	$	6,043	$	1,007,411	$	1,013,454
Commercial mortgage	20,389		8,774		8,319		37,482		12,245,153		12,282,635
Other commercial real estate	861		331		698		1,890		540,138		542,028
Commercial and industrial and leases	18,269		4,842		5,032		28,143		4,375,649		4,403,792
Other	51		411		126		588		309,505		310,093
Total commercial loans	42,716		14,553		16,877		74,146		18,477,856		18,552,002
Noncommercial:
Residential mortgage	45,839		18,289		24,409		88,537		5,205,380		5,293,917
Revolving mortgage	9,729		3,468		9,865		23,062		2,316,010		2,339,072
Construction and land development	977		218		1,797		2,992		354,393		357,385
Consumer	10,481		3,746		3,571		17,798		1,762,606		1,780,404
Total noncommercial loans	67,026		25,721		39,642		132,389		9,638,389		9,770,778
Total non-PCI loans and leases	$	109,742	$	40,274	$	56,519	$	206,535	$	28,116,245	$	28,322,780

The amortized cost, by class, of loans and leases on nonaccrual status, and loans and leases greater than 90 days past due and still accruing at March 31, 2020 and December 31, 2019, were as follows:



	January 1, 2020⁽¹⁾		March 31, 2020
(Dollars in thousands)	Nonaccrual loans and leases		Nonaccrual loans and leases		Loans and leases > 90 days and accruing
Commercial:
Construction and land development	$	4,281	$	3,603	$	—
Owner occupied commercial mortgage	24,476		26,438		536
Non-owner occupied commercial mortgage	5,965		5,679		—
Commercial and industrial and leases	7,685		7,858		488
Total commercial loans	42,407		43,578		1,024
Consumer:
Residential mortgage	44,357		49,220		—
Revolving mortgage	22,411		22,067		—
Construction and land development	2,828		2,881		—
Consumer auto	2,145		2,832		—
Consumer other	798		759		1,909
Total consumer loans	72,539		77,759		1,909
PCD loans	53,771		53,234		37
Total loans and leases	$	168,717	$	174,571	$	2,970
⁽¹⁾Upon the adoption of ASC 326, BancShares eliminated the pooling of PCI loans and as a result $47.0 million in additional PCD loans were recognized as nonaccrual loans at January 1, 2020.



	December 31, 2019
(Dollars in thousands)	Nonaccrual loans and leases		Loans and leases > 90 days and accruing
Commercial:
Construction and land development	$	4,281	$	—
Commercial mortgage	29,733		—
Commercial and industrial and leases	7,365		1,094
Other commercial real estate	708		—
Other	320		—
Total commercial loans	42,407		1,094
Noncommercial:
Construction and land development	2,828		—
Residential mortgage	44,357		45
Revolving mortgage	22,411		—
Consumer	2,943		2,152
Total noncommercial loans	72,539		2,197
Total loans and leases	$	114,946	$	3,291

Credit Quality

Loans and leases are monitored for credit quality on a recurring basis. Commercial and consumer loans and leases have different credit quality indicators as a result of the unique characteristics of the loan segments being evaluated. The credit quality indicators for commercial loans and leases are borrower risk classifications developed through a review of individual borrowers on an ongoing basis. Commercial loans are evaluated at least annually, with more frequent evaluations done on criticized loans. Commercial loans are also updated if there is evidence of potential credit deterioration, such as delinquency. Commercial credit cards are included in the Commercial and industrial and leases segment, but are evaluated based primarily upon delinquency status. The risk classifications as of the date presented are based on the most recent assessment performed and are defined below:

Pass – A pass rated asset is not adversely classified because it does not display any of the characteristics for adverse classification.

Special mention – A special mention asset has potential weaknesses that deserve management’s close attention. If left uncorrected, such potential weaknesses may result in deterioration of the repayment prospects or collateral position at some future date. Special mention assets are not adversely classified and do not warrant adverse classification.

Substandard – A substandard asset is inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Assets classified as substandard generally have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. These assets are characterized by the distinct possibility of loss if the deficiencies are not corrected.

Doubtful – An asset classified as doubtful has all the weaknesses inherent in an asset classified substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently existing facts, conditions and values.

Loss – Assets classified as loss are considered uncollectible and of such little value that it is inappropriate to be carried as an asset. This classification is not necessarily equivalent to any potential for recovery or salvage value, but rather that it is not appropriate to defer a full charge-off even though partial recovery may be affected in the future.

Ungraded – Ungraded loans represent loans that are not included in the individual credit grading process due to their relatively small balances or borrower type. The majority of ungraded loans at March 31, 2020 relate to business credit cards. Business credit card loans are subject to automatic charge-off when they become 120 days past due in the same manner as unsecured consumer lines of credit. The remaining balance is comprised of a small amount of commercial mortgage, lease financing and other commercial real estate loans.

The credit quality indicators for consumer and PCD loans are based on delinquency status of the borrower as of the date presented. As the borrower becomes more delinquent, the likelihood of loss increases.

The following tables represent current credit quality indicators by origination year as of March 31, 2020.



	Commercial Term Loans Amortized Cost Basis by Origination Year
Classification:	2020		2019		2018		2017		2016		Prior		Revolving		Revolving converted to term loans		Total
(Dollars in thousands)
Construction and land development
Pass	$	94,980	$	382,104	$	267,188	$	176,674	$	32,927	$	18,191	$	24,922	$	—	$	996,986
Special Mention	91		—		350		5,407		—		440		—		—		6,288
Substandard	1,638		1,239		7,161		—		8		697		—		—		10,743
Total	$	96,709	$	383,343	$	274,699	$	182,081	$	32,935	$	19,328	$	24,922	$	—	$	1,014,017
Owner occupied commercial mortgage
Pass	$	647,821	$	2,230,133	$	1,860,144	$	1,537,841	$	1,261,880	$	2,195,573	$	126,108	$	139	$	9,859,639
Special Mention	—		8,201		26,827		14,694		18,763		35,475		4,129		—		108,089
Substandard	1,679		10,759		13,471		19,717		14,039		40,751		7,916		72		108,404
Total	$	649,500	$	2,249,093	$	1,900,442	$	1,572,252	$	1,294,682	$	2,271,799	$	138,153	$	211	$	10,076,132
Non-owner occupied commercial mortgage
Pass	$	200,770	$	680,203	$	532,550	$	452,508	$	404,537	$	704,861	$	43,379	$	—	$	3,018,808
Special Mention	—		1,849		10,042		933		5,971		7,485		798		—		27,078
Substandard	499		1,821		1,939		823		4,445		1,343		1,479		—		12,349
Total	$	201,269	$	683,873	$	544,531	$	454,264	$	414,953	$	713,689	$	45,656	$	—	$	3,058,235
Commercial and industrial and leases
Pass	$	348,311	$	1,299,423	$	698,386	$	450,781	$	336,295	$	436,325	$	1,013,228	$	5,616	$	4,588,365
Special Mention	1,389		1,501		4,647		6,052		3,081		3,238		9,913		73		29,894
Substandard	4,035		4,311		4,408		5,798		3,175		7,655		19,632		816		49,830
Doubtful	—		—		—		—		—		—		3		—		3
Ungraded	—		—		—		—		—		—		70,006		—		70,006
Total	$	353,735	$	1,305,235	$	707,441	$	462,631	$	342,551	$	447,218	$	1,112,782	$	6,505	$	4,738,098
Total commercial	$	1,301,213	$	4,621,544	$	3,427,113	$	2,671,228	$	2,085,121	$	3,452,034	$	1,321,513	$	6,716	$	18,886,482



	Consumer and PCD Term Loans Amortized Cost Basis by Origination Year
Days Past Due:	2020		2019		2018		2017		2016		Prior		Revolving		Revolving converted to term loans		Total
(Dollars in thousands)
Residential mortgage
Current	$	308,079	$	1,163,902	$	948,832	$	851,257	$	652,297	$	1,272,796	$	24,177	$	—	$	5,221,340
30-59 days	328		2,491		6,910		6,515		5,023		18,840		42		—		40,149
60-89 days	—		684		117		538		2,081		4,469		126		—		8,015
90 days or greater	—		647		3,388		5,810		5,547		11,544		2,972		—		29,908
Total	$	308,407	$	1,167,724	$	959,247	$	864,120	$	664,948	$	1,307,649	$	27,317	$	—	$	5,299,412
Revolving mortgage
Current	$	—	$	—	$	—	$	—	$	—	$	—	$	2,184,215	$	156,841	$	2,341,056
30-59 days	—		—		—		—		—		—		6,155		3,990		10,145
60-89 days	—		—		—		—		—		—		476		2,934		3,410
90 days or greater	—		—		—		—		—		—		2,206		5,827		8,033
Total	$	—	$	—	$	—	$	—	$	—	$	—	$	2,193,052	$	169,592	$	2,362,644
Construction and land development
Current	$	36,285	$	208,509	$	67,438	$	19,024	$	8,720	$	10,255	$	5,314	$	—	$	355,545
30-59 days	517		3,923		1,310		312		3		24		—		—		6,089
90 days or greater	—		—		—		—		87		1,469		—		—		1,556
Total	$	36,802	$	212,432	$	68,748	$	19,336	$	8,810	$	11,748	$	5,314	$	—	$	363,190
Consumer auto
Current	$	132,008	$	461,232	$	316,446	$	163,033	$	89,287	$	30,805	$	—	$	—	$	1,192,811
30-59 days	43		1,739		1,703		1,346		472		372		—		—		5,675
60-89 days	—		261		376		252		184		108		—		—		1,181
90 days or greater	—		344		560		298		197		86		—		—		1,485
Total	$	132,051	$	463,576	$	319,085	$	164,929	$	90,140	$	31,371	$	—	$	—	$	1,201,152
Consumer other
Current	$	10,371	$	49,571	$	20,504	$	11,024	$	12,296	$	32,561	$	423,402	$	—	$	559,729
30-59 days	79		260		129		35		89		7		3,048		—		3,647
60-89 days	—		59		139		6		—		—		1,854		—		2,058
90 days or greater	—		41		31		5		—		—		2,216		—		2,293
Total	$	10,450	$	49,931	$	20,803	$	11,070	$	12,385	$	32,568	$	430,520	$	—	$	567,727
Total consumer	$	487,710	$	1,893,663	$	1,367,883	$	1,059,455	$	776,283	$	1,383,336	$	2,656,203	$	169,592	$	9,794,125
PCD loans
Current	$	9,871	$	28,888	$	39,500	$	40,406	$	34,571	$	301,337	$	16,310	$	25,200	$	496,083
30-59 days	56		4,291		2,471		1,104		306		18,759		181		460		27,628
60-89 days	—		2,202		105		285		—		5,677		90		321		8,680
90 days or greater	454		1,071		5,004		1,684		3,383		14,308		300		1,757		27,961
Total	$	10,381	$	36,452	$	47,080	$	43,479	$	38,260	$	340,081	$	16,881	$	27,738	$	560,352
Total loans and leases	$	1,799,304	$	6,551,659	$	4,842,076	$	3,774,162	$	2,899,664	$	5,175,451	$	3,994,597	$	204,046	$	29,240,959

Loans and leases outstanding at December 31, 2019 by credit quality indicator are provided below:



	December 31, 2019
(Dollars in thousands)	Commercial loans and leases
Grade:	Construction and land development		Commercial mortgage		Other commercial real estate		Commercial and industrial and leases		Other		PCI		Total commercial loans and leases
Pass	$	1,004,922	$	12,050,799	$	536,682	$	4,256,456	$	308,796	$	148,412	$	18,157,655
Special mention	2,577		115,164		3,899		44,604		622		44,290		166,866
Substandard	5,955		116,672		1,447		34,148		675		87,970		158,897
Doubtful	—		—		—		3		—		3,657		3
Ungraded	—		—		—		68,581		—		—		68,581
Total	$	1,013,454	$	12,282,635	$	542,028	$	4,403,792	$	310,093	$	284,329	$	18,552,002



	December 31, 2019
	Noncommercial loans and leases
(Dollars in thousands)	Residential mortgage		Revolving mortgage		Construction and land development		Consumer		PCI		Total noncommercial loans and leases
Days past due:
Current	$	5,205,380	$	2,316,010	$	354,393	$	1,762,606	$	240,995	$	9,638,389
30-59 days past due	45,839		9,729		977		10,481		13,764		67,026
60-89 days past due	18,289		3,468		218		3,746		5,608		25,721
90 days or greater past due	24,409		9,865		1,797		3,571		14,020		39,642
Total	$	5,293,917	$	2,339,072	$	357,385	$	1,780,404	$	274,387	$	9,770,778

Purchased loans and leases

The following table summarizes PCD loans acquired in the Community Financial transaction and provides the contractually required payments, less the initial allowance for credit losses and discount to produce the fair value of acquired loans with evidence of more than insignificant credit quality deterioration since origination at the acquisition date:



(Dollars in thousands)	Community Financial
Contractually required payments	$	25,635
Initial PCD allowance	1,193
Discount	1,055
Fair value at acquisition date	$	23,387

The recorded fair values of purchased non-PCD loans acquired in the Community Financial transaction as of the acquisition date are as follows:



(Dollars in thousands)	Community Financial
Commercial:
Construction and land development	$	9,428
Owner occupied commercial mortgage	31,473
Non-owner occupied commercial mortgage	25,143
Commercial and industrial and leases	15,065
Total commercial loans	81,109
Consumer:
Residential mortgage	21,168
Revolving mortgage	2,084
Construction and land development	5,254
Consumer auto	294
Consumer other	693
Total consumer loans	29,493
Total non-PCD loans	$	110,602