Portfolio Loans | LOANS Below is a summary of loans by category at March 31, 2020 and December 31, 2019 : (in thousands) March 31, 2020 December 31, 2019 Commercial and industrial $ 2,469,013 2,361,157 Real estate: Commercial - investor owned 1,327,814 1,299,884 Commercial - owner occupied 720,543 697,437 Construction and land development 469,627 457,273 Residential 346,758 366,261 Total real estate loans 2,864,742 2,820,855 Consumer and other 126,212 134,941 Loans, before unearned loan fees 5,459,967 5,316,953 Unearned loan fees, net (2,450 ) (2,616 ) Loans, including unearned loan fees $ 5,457,517 $ 5,314,337 The loan balance at March 31, 2020 includes a discount on acquired loans of $24.5 million . At March 31, 2020 loans of $2.7 billion were pledged to FHLB and the Federal Reserve Bank. A summary of the activity in the ACLL by category through March 31, 2020 is as follows: (in thousands) Commercial and industrial CRE - investor owned CRE - owner occupied Construction and land development Residential real estate Consumer and other Total Allowance for credit losses on loans: Balance at December 31, 2019 $ 27,455 $ 5,935 $ 4,873 $ 2,611 $ 1,280 $ 1,134 $ 43,288 CECL adoption 6,494 10,726 2,598 5,183 3,470 (84 ) 28,387 PCD loans immediately charged off — (5 ) (57 ) (217 ) (1,401 ) — (1,680 ) Balance at January 1, 2020 $ 33,949 $ 16,656 $ 7,414 $ 7,577 $ 3,349 $ 1,050 $ 69,995 Provision for credit losses 11,591 3,224 1,994 2,309 2,011 566 21,695 Charge-offs (63 ) (2 ) — (31 ) (122 ) (86 ) (304 ) Recoveries 504 14 69 40 157 17 801 Balance at March 31, 2020 $ 45,981 $ 19,892 $ 9,477 $ 9,895 $ 5,395 $ 1,547 $ 92,187 On January 1, 2020, the Company adopted the CECL methodology which added $28.4 million to the ACLL. Upon adoption, $1.7 million of nonaccrual PCD loans that were less than $100,000 were immediately charged-off. Under the CECL method, the Company recorded a $21.7 million provision for credit losses on loans in the first quarter 2020, compared to a $1.5 million provision for loan losses in the first quarter 2019 under the incurred loss method. The increase in the provision for credit losses on loans is due to the Company’s forecast of macroeconomic factors over the next 12 months, which significantly decreased in the first quarter 2020 due to the COVID-19 pandemic. The CECL methodology incorporates various economic scenarios, including baseline, upside and downside scenarios. In the first quarter 2020, the Company changed its weighting of economic scenarios to capture more downside risk in the economy. This changed added $2.2 million to the ACLL in the first quarter 2020. The recorded investment in nonperforming loans by category at March 31, 2020 and December 31, 2019 , is as follows: March 31, 2020 (in thousands) Nonaccrual Restructured, accruing Loans over 90 days past due and still accruing interest Total nonperforming loans Nonaccrual loans with no allowance Commercial and industrial $ 22,729 $ 3,731 $ 71 $ 26,531 $ 17,915 Real estate: Commercial - investor owned 4,115 — — 4,115 2,576 Commercial - owner occupied 2,110 — — 2,110 1,114 Construction and land development 214 — — 214 214 Residential 4,075 79 — 4,154 3,086 Consumer and other 25 — 55 80 — Total $ 33,268 $ 3,810 $ 126 $ 37,204 $ 24,905 There was no interest income recognized on nonaccrual loans in the first quarter 2020. December 31, 2019 (in thousands) Nonaccrual Restructured, accruing Loans over 90 days past due and still accruing interest Total nonperforming loans Commercial and industrial $ 22,328 $ — $ 250 $ 22,578 Real estate: Commercial - investor owned 2,303 — — 2,303 Commercial - owner occupied 213 — — 213 Residential 1,251 79 — 1,330 Consumer and other 1 — — 1 Total $ 26,096 $ 79 $ 250 $ 26,425 The following table presents the amortized cost basis of collateral-dependent nonperforming loans by class of loan at March 31, 2020: Type of Collateral (in thousands) Commercial Real Estate Residential Real Estate Blanket Lien Commercial and industrial $ 13,051 $ — $ 5,910 Real estate: Commercial - investor owned 4,115 — — Commercial - owner occupied 1,521 — — Construction and land development — 214 — Residential — 3,927 — Total $ 18,687 $ 4,141 $ 5,910 The recorded investment by category for loans restructured during the three months ended March 31, 2020 is as follows: March 31, 2020 (in thousands, except for number of loans) Number of loans Pre-Modification Outstanding Recorded Balance Post-Modification Outstanding Recorded Balance Commercial and industrial 1 $ 3,731 $ 3,731 Real estate: Residential 2 155 155 Total 3 $ 3,886 $ 3,886 There were no loans restructured during the three months ended March 31, 2019. There were no troubled debt restructured loans that subsequently defaulted during the three months ended March 31, 2020 or 2019. The aging of the recorded investment in past due loans by class at March 31, 2020 is shown below. March 31, 2020 (in thousands) 30-89 Days Past Due 90 or More Past Due Total Past Due Current Total Commercial and industrial $ 24,898 $ 9,491 $ 34,389 $ 2,434,624 $ 2,469,013 Real estate: Commercial - investor owned 1,996 3,438 5,434 1,322,380 1,327,814 Commercial - owner occupied 3,870 1,182 5,052 715,491 720,543 Construction and land development 95 — 95 469,532 469,627 Residential 5,124 1,482 6,606 340,152 346,758 Consumer and other 459 75 534 123,228 123,762 Total $ 36,442 $ 15,668 $ 52,110 $ 5,405,407 $ 5,457,517 The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, payment experience, credit documentation, and current economic factors among other factors. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings: • Grades 1 , 2 , and 3 – Includes loans to borrowers with a continuous record of strong earnings, sound balance sheet condition and capitalization, ample liquidity with solid cash flow, and whose management team has experience and depth within their industry. • Grade 4 – Includes loans to borrowers with positive trends in profitability, satisfactory capitalization and balance sheet condition, and sufficient liquidity and cash flow. • Grade 5 – Includes loans to borrowers that may display fluctuating trends in sales, profitability, capitalization, liquidity, and cash flow. • Grade 6 – Includes loans to borrowers where an adverse change or perceived weakness has occurred, but may be correctable in the near future. Alternatively, this rating category may also include circumstances where the borrower is starting to reverse a negative trend or condition, or has recently been upgraded from a 7 , 8 , or 9 rating. • Grade 7 – Watch credits are borrowers that have experienced financial setback of a nature that is not determined to be severe or influence ‘ongoing concern’ expectations. Although possible, no loss is anticipated at this time, due to strong collateral and/or guarantor support. • Grade 8 – Substandard credits include those borrowers characterized by significant losses and sustained downward trends in balance sheet condition, liquidity, and cash flow. Repayment reliance may have shifted to secondary sources. Collateral exposure may exist and additional reserves may be warranted. • Grade 9 – Doubtful credits include borrowers that may show deteriorating trends that are unlikely to be corrected. Collateral values may appear insufficient for full recovery, therefore requiring a partial charge-off, or debt renegotiation with the borrower. The borrower may have declared bankruptcy or bankruptcy is likely in the near term. All doubtful rated credits will be on nonaccrual. The recorded investment by risk category of the loans by class at March 31, 2020 , which is based upon the most recent analysis performed is as follows: Term Loans by Origination Year (in thousands) 2020 2019 2018 2017 2016 Prior Revolving Loans Converted to Term Loans Revolving Loans Total Commercial and industrial Pass (1-6) $ 274,021 $ 623,511 $ 328,712 $ 188,489 $ 53,064 $ 126,446 $ 2,557 $ 660,675 $ 2,257,475 Watch (7) 780 17,643 5,258 11,986 23,454 524 506 66,449 126,600 Classified (8-9) 649 20,887 8,438 3,881 5,253 3,581 431 26,687 69,807 Total Commercial and industrial $ 275,450 $ 662,041 $ 342,408 $ 204,356 $ 81,771 $ 130,551 $ 3,494 $ 753,811 $ 2,453,882 Commercial real estate-investor owned Pass (1-6) $ 114,369 $ 356,099 $ 229,830 $ 154,406 $ 173,623 $ 204,948 $ 1,745 $ 52,875 $ 1,287,895 Watch (7) 113 10,395 1,305 400 12,614 1,623 — — 26,450 Classified (8-9) — 978 8,043 445 246 3,757 — — 13,469 Total Commercial real estate-investor owned $ 114,482 $ 367,472 $ 239,178 $ 155,251 $ 186,483 $ 210,328 $ 1,745 $ 52,875 $ 1,327,814 Commercial real estate-owner occupied Pass (1-6) $ 50,382 $ 226,562 $ 99,918 $ 89,750 $ 58,499 $ 96,149 $ 2,797 $ 44,271 $ 668,328 Watch (7) 2,775 8,802 370 9,904 8,641 5,313 — 5,900 41,705 Classified (8-9) — 1,131 5,212 — — 4,167 — — 10,510 Total Commercial real estate-owner occupied $ 53,157 $ 236,495 $ 105,500 $ 99,654 $ 67,140 $ 105,629 $ 2,797 $ 50,171 $ 720,543 Construction real estate Pass (1-6) $ 23,035 $ 184,561 $ 123,931 $ 63,034 $ 28,407 $ 14,672 $ — $ 17,410 $ 455,050 Watch (7) 966 11,448 1,262 69 — 563 — — 14,308 Classified (8-9) — 226 — — — 43 — — 269 Total Construction real estate $ 24,001 $ 196,235 $ 125,193 $ 63,103 $ 28,407 $ 15,278 $ — $ 17,410 $ 469,627 Residential real estate Pass (1-6) $ 12,356 $ 37,811 $ 23,381 $ 24,306 $ 38,082 $ 132,715 $ 245 $ 65,660 $ 334,556 Watch (7) 1 1,045 875 — 4 2,683 — 1,093 5,701 Classified (8-9) — 1,715 767 13 131 2,882 — 49 5,557 Total residential real estate $ 12,357 $ 40,571 $ 25,023 $ 24,319 $ 38,217 $ 138,280 $ 245 $ 66,802 $ 345,814 Consumer and other Pass (1-6) $ 1,257 $ 26,478 $ 20,911 $ 1,735 $ 5,535 $ 35,940 $ — $ 29,311 $ 121,167 Watch (7) — 2 — — — 1 — 1 4 Classified (8-9) — 2 4 6 — 24 10 24 70 Total consumer and other $ 1,257 $ 26,482 $ 20,915 $ 1,741 $ 5,535 $ 35,965 $ 10 $ 29,336 $ 121,241 In the table above, loan originations in 2020 and 2019 with a classification of watch or classified primarily represent renewals or modifications initially underwritten and originated in prior years. For certain loans, primarily credit cards, the Company evaluates credit quality based on the aging status. The following table presents the recorded investment on loans based on payment activity: March 31, 2020 (in thousands) Performing Non Performing Total Commercial and industrial $ 15,060 $ 71 $ 15,131 Real estate: Residential 944 — 944 Consumer and other 2,465 56 2,521 Total $ 18,469 $ 127 $ 18,596 The recorded investment by risk category of loans by class at December 31, 2019 , was as follows: December 31, 2019 (in thousands) Pass (1-6) Watch (7) Classified (8 & 9) Total* Commercial and industrial $ 2,151,084 $ 124,718 $ 70,021 $ 2,345,823 Real estate: Commercial - investor owned 1,242,569 17,572 2,840 1,262,981 Commercial - owner occupied 643,276 28,773 6,473 678,522 Construction and land development 437,134 12,140 106 449,380 Residential 348,246 4,450 2,496 355,192 Consumer and other 132,096 3 51 132,150 Total $ 4,954,405 $ 187,656 $ 81,987 $ 5,224,048 *Excludes $90.3 million of loans accounted for as PCI In response to the COVID-19 pandemic, the Company has implemented short-term deferral programs allowing customers to primarily defer payments for up to 90 days. As of April 30, 2020, $392.1 million loans have participated in the programs, including $190.8 million loans deferring interest payments of $2.2 million . In addition, the Company has been actively participating in the PPP since the SBA began accepting applications in April 2020. In the second quarter 2020, the Company expects to fund $856.5 million in PPP loans that have been approved by the SBA. |