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Allowance for Credit Losses
 12 Months Ended
Dec. 31, 2021
Receivables [Abstract]  
Allowance for Credit Losses
ALLOWANCE FOR CREDIT LOSSES
As noted in Note A, Accounting Polices and Basis of Presentation, BancShares determined SBA-PPP loans have zero expected credit losses and as such these are excluded from the following ACL disclosures.
Upon adoption of ASC 326 on January 1, 2020, BancShares recorded a net decrease of $37.9 million in the ACL, which included a decrease of $56.9 million in the ACL on non-PCD loans, offset by an increase of $19.0 million in the ACL on PCD loans. The largest changes as a result of adoption were decreases in the ACL on commercial loan segments as these portfolios have exhibited strong historical credit performance and have relatively short average lives. The reduction in ACL on these segments was partially offset by increases in ACL on our consumer loan segments primarily due to their longer average lives. The increase in the ACL on PCD loans was primarily the result of reallocating credit discount from loan balances into ACL. The remaining non-credit related discount continues to amortize into interest.
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. The decrease in the ACL as of December 31, 2021 compared to December 31, 2020 was primarily driven by continued strong credit performance, low net charge-offs, and 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, BancShares uses 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. BancShares’ ACL forecasts consider a range of economic scenarios from an upside scenario to a severely adverse scenario, but the December 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 BancShares’ strong credit quality and low net charge-offs.
Refer to Note A, Accounting Policies and Basis of Presentation, for discussion of the accounting treatment of the allowance for loan losses prior to adoption of ASC 326.
The following tables summarize activity in the allowance for credit losses for the years ended December 31, 2021 and 2020 and the allowance for loan losses for the year ended December 31, 2019.
Year ended December 31, 2021
(Dollars in thousands)CommercialConsumerPCDTotal
Balance at January 1$80,842 $119,485 $23,987 $224,314 
Benefit(1,228)(21,278)(14,329)(36,835)
Charge-offs(15,924)(17,181)(2,317)(35,422)
Recoveries7,523 11,452 7,461 26,436 
Balance at December 31$71,213 $92,478 $14,802 $178,493 
Year ended December 31, 2020
(Dollars in thousands)CommercialConsumerPCDTotal
Balance at January 1$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 (benefit)37,763 27,791 (7,202)58,352 
Initial allowance on PCD loans— — 1,193 1,193 
Charge-offs(17,586)(24,219)(3,300)(45,105)
Recoveries5,850 10,048 6,759 22,657 
Balance at December 31$80,842 $119,485 $23,987 $224,314 
Year ended December 31, 2019
(Dollars in thousands)CommercialConsumerPCITotal
Balance at January 1$139,043 $75,525 $9,144 $223,712 
Provision (benefit)13,386 19,663 (1,608)31,441 
Charge-offs(14,744)(28,283)— (43,027)
Recoveries4,684 8,331 — 13,015 
Balance at December 31$142,369 $75,236 $7,536 $225,141 
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:
(Dollars in thousands)December 31, 2021December 31, 2020
Allowance for credit losses:
Beginning balance $12,814 $1,055 
Adoption of ASC 326— 8,885 
Adjusted beginning balance $12,814 $9,940 
(Benefit) provision(999)2,874 
Ending balance 11,815 12,814 
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 December 31, 2021 and 2020.
December 31, 2021
(Dollars in thousands)Collateral-Dependent LoansNet Realizable Value of CollateralCollateral CoverageAllowance for Credit Losses
Commercial loans:
Construction and land development$1,424 $1,964 137.9 %$— 
Owner occupied commercial mortgage3,461 4,370 126.3 — 
Non-owner occupied commercial mortgage2,056 2,118 103.0 — 
Commercial and industrial and leases2,665 5,208 195.4 941 
Total commercial loans9,606 13,660 142.2 941 
Consumer:
Residential mortgage5,323 7,353 138.1 — 
Total non-PCD loans14,929 21,013 140.8 941 
PCD4,864 21,099 433.8 — 
Total collateral-dependent loans$19,793 $42,112 212.8 %$941 
December 31, 2020
(Dollars in thousands)Collateral-Dependent 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 
Total non-PCD loans39,783 53,400 134.2 131 
PCD19,042 27,872 146.4 — 
Total collateral-dependent loans$58,825 $81,272 138.2 %$131 
Collateral-dependent nonaccrual loans with no recorded allowance totaled $14.8 million and $57.5 million as of December 31, 2021 and 2020, respectively. All other nonaccrual loans have a recorded allowance. Non-PCI impaired loans less than $500,000 that were collectively evaluated was $41.0 million at December 31, 2019. The following table shows the average non-PCI impaired loan balance and the interest income recognized by loan class for the years ended December 31, 2019.
2019
(Dollars in thousands)Average
Balance		Interest Income Recognized
Non-PCI impaired loans and leases:
Commercial:
Construction and land development$3,915 $53 
Commercial mortgage64,363 2,188 
Other commercial real estate919 27 
Commercial and industrial and leases11,884 482 
Other396 11 
Total commercial81,477 2,761 
Noncommercial:
Residential mortgage52,045 1,386 
Revolving mortgage29,516 1,009 
Construction and land development3,589 116 
Consumer3,311 138 
Total noncommercial88,461 2,649 
Total non-PCI impaired loans and leases$169,938 $5,410 
Troubled Debt Restructurings
BancShares accounts for certain loan modifications or restructurings as 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 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 is not recording these as TDRs.
The following tables provides a summary of total TDRs by accrual status.
December 31, 2021December 31, 2020
(Dollars in thousands)AccruingNonaccruingTotalAccruingNonaccruing Total
Commercial loans:
Construction and land development$328 $29 $357 $578 $54 $632 
Owner occupied commercial mortgage43,593 6,231 49,824 37,574 10,889 48,463 
Non-owner occupied commercial mortgage21,278 2,741 24,019 18,336 1,649 19,985 
Commercial and industrial and leases11,723 9,384 21,107 29,131 3,528 32,659 
Total commercial loans76,922 18,385 95,307 85,619 16,120 101,739 
Consumer:
Residential mortgage20,635 12,262 32,897 29,458 19,380 48,838 
Revolving mortgage16,322 6,395 22,717 20,124 7,128 27,252 
Construction and land development961 259 1,220 1,573 9 1,582 
Consumer auto1,827 455 2,282 2,018 696 2,714 
Consumer other713 76 789 955 137 1,092 
Total consumer loans40,458 19,447 59,905 54,128 27,350 81,478 
PCD loans29,401 9,935 39,336 17,617 7,346 24,963 
Total loans$146,781 $47,767 $194,548 $157,364 $50,816 $208,180 


December 31, 2019
(Dollars in thousands)AccruingNonaccruingTotal
Commercial loans:
Construction and land development$487 $2,279 $2,766 
Commercial mortgage50,819 11,116 61,935 
Other commercial real estate571 — 571 
Commercial and industrial and leases9,430 2,409 11,839 
Other320 105 425 
Total commercial loans61,627 15,909 77,536 
Noncommercial:
Residential mortgage41,813 16,048 57,861 
Revolving mortgage21,032 7,367 28,399 
Construction and land development1,452 2,430 3,882 
Consumer2,826 688 3,514 
Total noncommercial loans67,123 26,533 93,656 
Total loans$128,750 $42,442 $171,192 
The following table summarizes the loan restructurings as of December 31, 2021, 2020 and 2019 that were designated as TDRs. BancShares defines payment default as movement of the TDR to nonaccrual status, which is generally 90 days past due, foreclosure or charge-off, whichever occurs first.
202120202019
RestructuringsRestructuringsRestructurings
(Dollars in thousands)Number of loansAmortized cost at period endNumber of loansAmortized cost at period endNumber of loansAmortized cost at period end
Loans and leases
Interest only period provided
Commercial loans19$17,847 31$28,145 11$1,595 
Consumer loans1297 64,169 74,018 
Total interest only2018,144 3732,314 185,613 
Loan term extension
Commercial loans236,717 265,444 163,904 
Consumer loans1068,803 665,689 2342 
Total loan term extension12915,520 9211,133 184,246 
Below market interest rate
Commercial loans9717,082 9833,870 9013,932 
Consumer loans803,188 1566,074 17612,458 
Total below market interest rate17720,270 25439,944 26626,390 
Discharged from bankruptcy
Commercial loans325,955 301,168 255,571 
Consumer loans963,675 1868,129 17810,349 
Total discharged from bankruptcy1289,630 2169,297 20315,920 
Total restructurings454$63,564 599$92,688 505$52,169 
As of December 31, 2021, 2020 and 2019, the pre-modification and post-modification outstanding amortized cost of loans modified as TDRs were not materially different.