XML 24 R13.htm IDEA: XBRL DOCUMENT v3.21.1
Allowance for Credit Losses
 3 Months Ended
Mar. 31, 2021
Receivables [Abstract]  
Allowance ALLOWANCE FOR CREDIT LOSSES
The ACL is calculated using a variety of factors, including, but not limited to, charge-off and recovery activity, loan growth, changes in macroeconomic factors, collateral type, estimated loan life and changes in credit quality. For the period ended March 31, 2021, the primary reason for the ACL change since December 31, 2020 was improvement in macroeconomic factors. Forecasted economic conditions are developed using third party macroeconomic scenarios adjusted based on management’s expectations over a forecast period of two years. For most pools, we use a 12-month straight-line reversion period to historical averages for model inputs; however for the consumer other, consumer card and commercial card pools, immediate reversion to historical net loss rates is utilized. Significant macroeconomic factors used in estimating the expected losses include unemployment, gross domestic product, home price index and commercial real estate index. Our ACL forecast considers a range of economic scenarios from an upside scenario to a severely adverse scenario, but the March 31, 2021 ACL forecast was calculated using the consensus baseline scenario. This scenario showed improvements in the most significant economic factors compared to what was used to generate the December 31, 2020 ACL. These loss estimates were also influenced by our strong credit quality, low net charge-offs and recent credit trends, which remained stable through the quarter ended March 31, 2021, despite potential impacts from COVID-19.
Activity in the ACL by portfolio segment is summarized as follows:
Three months ended March 31, 2021
(Dollars in thousands)CommercialConsumerPCDTotal
Balance at January 1$80,842 $119,485 $23,987 $224,314 
Provision (credit)(3,922)(5,504)(1,548)(10,974)
Charge-offs(3,331)(4,469)(763)(8,563)
Recoveries1,275 3,340 1,259 5,874 
Balance at March 31$74,864 $112,852 $22,935 $210,651 
Three months ended March 31, 2020
(Dollars in thousands)CommercialConsumerPCDTotal
Balance at December 31$142,369 $75,236 $7,536 $225,141 
Adoption of ASC 326(87,554)30,629 19,001 (37,924)
Balance at January 154,815 105,865 26,537 187,217 
Provision (credit)21,537 9,406 (2,588)28,355 
Initial allowance on PCD loans— — 1,193 1,193 
Charge-offs(5,369)(7,769)(1,123)(14,261)
Recoveries1,427 2,431 2,897 6,755 
Balance at March 31$72,410 $109,933 $26,916 $209,259 
BancShares records an allowance for credit losses on unfunded commitments within other liabilities. Activity in the allowance for credit losses for unfunded commitments is summarized as follows:
Three months ended March 31
(Dollars in thousands)20212020
Allowance for credit losses:
Beginning balance$12,814 $1,055 
Adoption of ASC 326— 8,885 
Adjusted beginning balance$12,814 $9,940 
Provision (credit)(1,243)572 
Ending balance11,571 10,512 
BancShares individually reviews loans greater than $500 thousand that are determined to be collateral-dependent. These collateral-dependent loans are evaluated based on the fair value of the underlying collateral as repayment of the loan is expected to be made through the operation or sale of the collateral. Commercial and industrial loans and leases are collateralized by business assets, while the remaining loan classes are collateralized by real property.
The following table presents information on collateral-dependent loans by class and includes the amortized cost of collateral-dependent loans and leases, the net realizable value of the collateral, the extent to which collateral secures collateral-dependent loans and the associated ACL as of March 31, 2021 and December 31, 2020 were as follows:
March 31, 2021
(Dollars in thousands)Collateral-Dependant LoansNet Realizable Value of CollateralCollateral CoverageAllowance for Credit Losses
Commercial loans:
Construction and land development$1,424 $1,795 126.1 %$— 
Owner occupied commercial mortgage11,886 16,417 138.1 — 
Non-owner occupied commercial mortgage6,951 9,312 134.0 — 
Commercial and industrial and leases1,256 2,916 232.2 — 
Total commercial loans21,517 30,440 141.5 — 
Consumer:
Residential mortgage21,303 27,279 128.1 120 
Revolving mortgage1,385 1,724 124.5 — 
Total consumer loans22,688 29,003 127.8 120 
PCD loans20,361 35,016 172.0 — 
Total collateral-dependent loans$64,566 $94,459 146.3 %$120 
December 31, 2020
(Dollars in thousands)Collateral-Dependant LoansNet Realizable Value of CollateralCollateral CoverageAllowance for Credit Losses
Commercial loans:
Construction and land development$1,424 $1,795 126.1 %$— 
Owner occupied commercial mortgage9,792 14,253 145.6 — 
Non-owner occupied commercial mortgage5,556 7,577 136.4 — 
Total commercial loans16,772 23,625 140.9 — 
Consumer:
Residential mortgage23,011 29,775 129.4 131 
PCD loans19,042 27,872 146.4 — 
Total collateral-dependent loans$58,825 $81,272 138.2 %$131 
Collateral-dependent nonaccrual loans with no recorded allowance totaled $61.7 million and $57.5 million as of March 31, 2021 and December 31, 2020, respectively. All other nonaccrual loans have a recorded allowance.
Troubled Debt Restructurings
BancShares accounts for certain loan modifications or restructurings as troubled debt restructurings (“TDRs”). In general, the modification or restructuring of a loan is considered a TDR if, for economic or legal reasons related to a borrower’s financial difficulties, a concession is granted to the borrower that creditors would not otherwise consider. Concessions may relate to the contractual interest rate, maturity date, payment structure or other actions. Within BancShares’ ACL loss models, TDRs are not individually evaluated unless determined to be collateral-dependent. Consumer TDRs are included in the definition of default which provides for a 100% probability of default applied within the models. As a result, subsequent changes in credit quality metrics do not impact the calculation of the ACL on consumer TDRs. For commercial TDRs, the TDR distinction does impact the calculation of ACL, as the standard definition of default is utilized.
The Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus was published by banking regulators in April 2020 to clarify expectations around loan modifications and the determination of TDRs for borrowers experiencing financial difficulty due to COVID-19. BancShares applied this regulatory guidance during its TDR identification process for short-term loan forbearance agreements as a result of COVID-19 and in most cases did not record these as TDRs.
The following tables provides a summary of total TDRs by accrual status:
March 31, 2021December 31, 2020
(Dollars in thousands)AccruingNonaccruing Total AccruingNonaccruing Total
Commercial loans:
Construction and land development$529 $41 $570 $578 $54 $632 
Owner occupied commercial mortgage38,969 9,986 48,955 37,574 10,889 48,463 
Non-owner occupied commercial mortgage20,541 1,335 21,876 18,336 1,649 19,985 
Commercial and industrial and leases30,956 6,551 37,507 29,131 3,528 32,659 
Total commercial loans90,995 17,913 108,908 85,619 16,120 101,739 
Consumer:
Residential mortgage25,323 20,802 46,125 29,458 19,380 48,838 
Revolving mortgage18,729 7,331 26,060 20,124 7,128 27,252 
Construction and land development1,501 9 1,510 1,573 9 1,582 
Consumer auto2,173 668 2,841 2,018 696 2,714 
Consumer other910 163 1,073 955 137 1,092 
Total consumer loans48,636 28,973 77,609 54,128 27,350 81,478 
PCD loans20,920 9,509 30,429 17,617 7,346 24,963 
Total loans$160,551 $56,395 $216,946 $157,364 $50,816 $208,180 
The following table provides the types of modifications designated as TDRs during the three months ended March 31, 2021 and March 31, 2020, as well as a summary of loans modified as a TDR during the twelve-month periods ended March 31, 2021 and March 31, 2020 that subsequently defaulted during the three months ended March 31, 2021 and March 31, 2020. BancShares defines payment default as movement of the TDR to nonaccrual status, which is generally 90 days past due for TDRs, foreclosure or charge-off, whichever occurs first.
Three months ended March 31, 2021Three months ended March 31, 2020
All restructuringsRestructurings with payment defaultAll restructuringsRestructurings with payment default
(Dollars in thousands)Number of LoansRecorded investment at period endNumber of LoansRecorded investment at period endNumber of LoansRecorded investment at period endNumber of LoansRecorded investment at period end
Loans and leases
Interest only6 $6,947 2 $42 10 $3,986 — $— 
Loan term extension25 3,863 12 1,749 6 794 3 263 
Below market interest rate53 8,122 20 1,428 88 8,165 29 1,421 
Discharged from bankruptcy45 4,100 12 2,365 68 5,032 28 1,767 
Total restructurings129 $23,032 46 $5,584 172 $17,977 60 $3,451 
For the three months ended March 31, 2021 and March 31, 2020, the pre-modification and post-modification outstanding amortized cost of loans modified as TDRs were not materially different.