Portfolio Loans | LOANS Below is a summary of loans by category at June 30, 2020 and December 31, 2019 : (in thousands) June 30, 2020 December 31, 2019 Commercial and industrial $ 3,165,611 $ 2,361,157 Real estate: Commercial - investor owned 1,309,895 1,299,884 Commercial - owner occupied 738,549 697,437 Construction and land development 481,221 457,273 Residential 326,992 366,261 Total real estate loans 2,856,657 2,820,855 Other 142,224 134,941 Loans, before unearned loan fees 6,164,492 5,316,953 Unearned loan fees, net (24,441 ) (2,616 ) Loans, including unearned loan fees $ 6,140,051 $ 5,314,337 PPP loans totaled $830.2 million at June 30, 2020, or $807.8 million net of unearned fees of $22.4 million . The loan balance at June 30, 2020 also includes a discount on acquired loans of $22.2 million . At June 30, 2020 loans of $2.4 billion were pledged to FHLB and the Federal Reserve Bank. A summary of the activity in the ACLL by category for the three and six months ended June 30, 2020 is as follows: (in thousands) Commercial and industrial CRE - investor owned CRE - owner occupied Construction and land development Residential real estate Other Total Allowance for credit losses on loans: Balance at March 31, 2020 $ 45,981 $ 19,892 $ 9,477 $ 9,895 $ 5,395 $ 1,547 $ 92,187 Provision for credit losses 7,168 2,599 1,600 6,038 744 242 18,391 Charge-offs (3,303 ) (224 ) — — (32 ) (105 ) (3,664 ) Recoveries 293 2,752 11 29 226 45 3,356 Balance at June 30, 2020 $ 50,139 $ 25,019 $ 11,088 $ 15,962 $ 6,333 $ 1,729 $ 110,270 (in thousands) Commercial and industrial CRE - investor owned CRE - owner occupied Construction and land development Residential real estate 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 18,759 5,823 3,594 8,347 2,755 808 40,086 Charge-offs (3,366 ) (226 ) — (31 ) (154 ) (191 ) (3,968 ) Recoveries 797 2,766 80 69 383 62 4,157 Balance at June 30, 2020 $ 50,139 $ 25,019 $ 11,088 $ 15,962 $ 6,333 $ 1,729 $ 110,270 Reserves on enterprise value lending and agricultural lending, which are included in the categories above, represented $15.8 million and $2.4 million , respectively. 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 $18.4 million and $40.1 million provision for credit losses on loans in the three and six months ended June 30, 2020, respectively, compared to a $1.7 million and $3.2 million provision for loan losses in the prior year periods, respectively, under the incurred loss method. The increase in the provision for credit losses on loans is primarily due to the Company’s forecast of macroeconomic factors over the next 12 months, which significantly deteriorated in the first quarter 2020 due to the COVID-19 pandemic. The forecast continued to worsen in the second quarter of 2020. The CECL methodology incorporates various economic scenarios. The Company utilizes three forecasts in the model, a Moody’s baseline, a stronger near-term growth and a moderate recession forecast. The Company weights these scenarios at 80% , 10% , and 10% , respectively. These forecasts incorporate an accommodative monetary policy and the current and anticipated impact of government stimulus. Accordingly, the CECL model has not been adjusted for negative qualitative factors, such as the potential loss mitigation of loan deferrals and the PPP. Some of the key risks to the forecasts that could result in future provision for credit losses are additional shutdowns and self-quarantines if a second wave of COVID hits, small-business bankruptcies occur at higher levels or unemployment increases. The 80/10/10 weighting adds approximately $1.0 million to the ACL. The recorded investment in nonperforming loans by category at June 30, 2020 and December 31, 2019 , is as follows: June 30, 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 $ 27,431 $ 3,642 $ 865 $ 31,938 $ 20,553 Real estate: Commercial - investor owned 2,389 — — 2,389 1,677 Commercial - owner occupied 2,400 — — 2,400 1,403 Construction and land development 207 — — 207 207 Residential 4,421 78 — 4,499 3,444 Other 19 — 21 40 — Total $ 36,867 $ 3,720 $ 886 $ 41,473 $ 27,284 There was no interest income recognized on nonaccrual loans during the six months ended June 30, 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 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 June 30, 2020: Type of Collateral (in thousands) Commercial Real Estate Residential Real Estate Blanket Lien Commercial and industrial $ 13,124 $ — $ 4,872 Real estate: Commercial - investor owned 2,389 — — Commercial - owner occupied 1,811 — — Construction and land development — 207 — Residential — 4,271 — Total $ 17,324 $ 4,478 $ 4,872 There were no troubled debt restructurings that occurred during the three months ended June 30, 2020. The recorded investment by category for troubled debt restructurings that occurred during the six months ended June 30, 2020 and the three and six months ended June 30, 2019 are as follows: June 30, 2020 June 30, 2019 (in thousands, except for number of loans) Number of loans Pre-Modification Outstanding Recorded Balance Post-Modification Outstanding Recorded Balance Number of loans Pre-Modification Outstanding Recorded Balance Post-Modification Outstanding Recorded Balance Commercial and industrial 1 $ 3,731 $ 3,731 — $ — $ — Real estate: Commercial - owner occupied — — — 1 188 188 Residential 2 155 155 2 332 332 Total 3 $ 3,886 $ 3,886 3 $ 520 $ 520 There were no troubled debt restructured loans that subsequently defaulted during the three or six months ended June 30, 2020 or 2019. 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. Deferrals under the CARES Act or interagency guidance are not included above as troubled debt restructurings. As of June 30, 2020, $685.7 million in loans have participated in the programs, including $361.4 million in loans deferring full principal and interest payments and $324.3 million in loans deferring principal only. Interest of $4.0 million has been deferred and will be collected upon final maturity. The Company has moved all loans that have requested deferrals to a level six risk rating for additional monitoring. The aging of the recorded investment in past due loans by class at June 30, 2020 is shown below. June 30, 2020 (in thousands) 30-89 Days Past Due 90 or More Past Due Total Past Due Current Total Commercial and industrial $ 6,684 $ 22,623 $ 29,307 $ 3,113,890 $ 3,143,197 Real estate: Commercial - investor owned 116 2,095 2,211 1,307,684 1,309,895 Commercial - owner occupied 2,723 1,208 3,931 734,618 738,549 Construction and land development 58 — 58 481,163 481,221 Residential 951 1,738 2,689 324,303 326,992 Other 100 21 121 140,076 140,197 Total $ 10,632 $ 27,685 $ 38,317 $ 6,101,734 $ 6,140,051 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 June 30, 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) $ 1,239,062 $ 535,477 $ 318,046 $ 180,269 $ 47,210 $ 85,529 $ 14,954 $ 510,168 $ 2,930,715 Watch (7) 26,347 13,354 4,850 6,468 24,044 175 — 62,293 137,531 Classified (8-9) 3,775 15,068 8,155 3,950 5,093 3,673 295 23,222 63,231 Total Commercial and industrial $ 1,269,184 $ 563,899 $ 331,051 $ 190,687 $ 76,347 $ 89,377 $ 15,249 $ 595,683 $ 3,131,477 Commercial real estate-investor owned Pass (1-6) $ 246,319 $ 321,849 $ 204,242 $ 126,567 $ 153,904 $ 181,761 $ 3,284 $ 35,460 $ 1,273,386 Watch (7) 5,136 4,220 1,192 369 12,681 1,275 — — 24,873 Classified (8-9) — 966 8,286 455 249 1,680 — — 11,636 Total Commercial real estate-investor owned $ 251,455 $ 327,035 $ 213,720 $ 127,391 $ 166,834 $ 184,716 $ 3,284 $ 35,460 $ 1,309,895 Commercial real estate-owner occupied Pass (1-6) $ 147,313 $ 200,519 $ 92,624 $ 79,058 $ 44,990 $ 80,172 $ 2,756 $ 42,883 $ 690,315 Watch (7) 9,473 1,963 261 9,729 8,533 5,074 — 2,500 37,533 Classified (8-9) 601 1,156 4,267 458 — 4,219 — — 10,701 Total Commercial real estate-owner occupied $ 157,387 $ 203,638 $ 97,152 $ 89,245 $ 53,523 $ 89,465 $ 2,756 $ 45,383 $ 738,549 Construction real estate Pass (1-6) $ 75,983 $ 167,936 $ 121,909 $ 37,555 $ 28,060 $ 12,906 $ — $ 20,631 $ 464,980 Watch (7) 2,408 722 1,254 11,047 — 546 — — 15,977 Classified (8-9) — 227 — — — 37 — — 264 Total Construction real estate $ 78,391 $ 168,885 $ 123,163 $ 48,602 $ 28,060 $ 13,489 $ — $ 20,631 $ 481,221 Residential real estate Pass (1-6) $ 26,448 $ 33,085 $ 22,074 $ 19,931 $ 34,427 $ 115,036 $ 591 $ 63,505 $ 315,097 Watch (7) 181 895 842 — — 2,027 279 802 5,026 Classified (8-9) 184 1,265 758 13 213 3,445 — 50 5,928 Total residential real estate $ 26,813 $ 35,245 $ 23,674 $ 19,944 $ 34,640 $ 120,508 $ 870 $ 64,357 $ 326,051 Other Pass (1-6) $ 8,758 $ 25,567 $ 20,615 $ 682 $ 3,705 $ 34,455 $ — $ 43,971 $ 137,753 Watch (7) — 2 — — — — — 1 3 Classified (8-9) — 1 3 4 — 19 10 7 44 Total Other $ 8,758 $ 25,570 $ 20,618 $ 686 $ 3,705 $ 34,474 $ 10 $ 43,979 $ 137,800 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: June 30, 2020 (in thousands) Performing Non Performing Total Commercial and industrial $ 11,682 $ 38 $ 11,720 Real estate: Residential 941 — 941 Other 2,376 21 2,397 Total $ 14,999 $ 59 $ 15,058 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 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 |