Portfolio Loans | LOANS The following table presents a summary of loans by category: (in thousands) June 30, 2021 December 31, 2020 Commercial and industrial $ 2,943,048 $ 3,100,299 Real estate: Commercial - investor owned 1,646,021 1,589,419 Commercial - owner occupied 1,554,727 1,498,408 Construction and land development 556,776 546,686 Residential 305,497 319,179 Total real estate loans 4,063,021 3,953,692 Other 235,431 187,083 Loans, before unearned loan fees 7,241,500 7,241,074 Unearned loan fees, net (15,233) (16,139) Loans, including unearned loan fees $ 7,226,267 $ 7,224,935 PPP loans totaled $408.9 million at June 30, 2021, or $396.7 million net of deferred fees of $12.2 million. The loan balance at June 30, 2021 also includes a net premium on acquired loans of $20.6 million. At June 30, 2021 loans of $2.8 billion were pledged to FHLB and the Federal Reserve Bank. PPP loans totaled $709.9 million at December 31, 2020, or $698.6 million net of unearned fees of $11.3 million. The loan balance includes a net premium on acquired loans of $16.1 million at December 31, 2020. At December 31, 2020 loans of $2.5 billion were pledged to FHLB and the Federal Reserve Bank. The Company has elected to present the accrued interest receivable balance separate from amortized cost basis, to exclude accrued interest receivable balances from the tabular disclosures, and not to estimate an ACL on accrued interest receivable as these amounts are timely written off as a credit loss expense. Accrued interest receivable totaled $24.6 million at June 30, 2021 and was reported in Other Assets on the consolidated balance sheets. A summary of the activity in the ACL on loans by category for the three and six months ended June 30, 2021 is as follows: (in thousands) Commercial and industrial CRE - investor owned CRE - Construction and land development Residential real estate Other Total Allowance for credit losses on loans: Balance at March 31, 2021 $ 55,941 $ 33,105 $ 20,219 $ 14,557 $ 4,305 $ 3,400 $ 131,527 Provision (benefit) for credit losses (1,839) 2,859 (4,449) (2,957) 255 3,658 (2,473) Charge-offs (1,451) — (216) — (44) (121) (1,832) Recoveries 700 39 10 32 161 21 963 Balance at June 30, 2021 $ 53,351 $ 36,003 $ 15,564 $ 11,632 $ 4,677 $ 6,958 $ 128,185 (in thousands) Commercial and industrial CRE - investor owned CRE - Construction and land development Residential real estate Other Total Allowance for credit losses on loans: Balance at December 31, 2020 $ 58,812 $ 32,062 $ 17,012 $ 21,413 $ 4,585 $ 2,787 $ 136,671 Provision (benefit) for credit losses (1,298) 6,240 (1,223) (10,048) 103 4,256 (1,970) Charge-offs (5,190) (2,372) (244) — (315) (185) (8,306) Recoveries 1,027 73 19 267 304 100 1,790 Balance at June 30, 2021 $ 53,351 $ 36,003 $ 15,564 $ 11,632 $ 4,677 $ 6,958 $ 128,185 The ACL on sponsor finance loans, which is included in the categories above, represented $20.1 million and $19.0 million, respectively, as of June 30, 2021 and December 30, 2020. A summary of the activity in the ACL on loans by category for the three and six months ended June 30, 2020 is as follows: (in thousands) Commercial and industrial CRE - investor owned CRE - 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 - 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 The CECL methodology incorporates various economic scenarios. The Company utilizes three forecasts in the model: Moody’s baseline, a stronger near-term growth upside and a moderate recession downside forecast. The Company weights these scenarios at 70%, 5%, and 25%, respectively, which added approximately $12.9 million to the ACL over the baseline model. These forecasts incorporate an accommodative monetary policy and the current and anticipated impact of government stimulus. The Company has also recognized the risk posed by loans that have received multiple deferrals of principal and interest payments, loans in the hospitality sector, and loans with other specific identified risks by allocating additional reserves to those segments. Some of the key risks to the forecasts that could result in future provision for credit losses are additional shutdowns and self-quarantines if another significant wave of COVID hits, the vaccination process stalls, small-business bankruptcies occur at higher levels, or unemployment increases. The following tables present the recorded investment in nonperforming loans by category: June 30, 2021 (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 $ 19,082 $ 2,965 $ 2,797 $ 24,844 $ 10,215 Real estate: Commercial - investor owned 7,359 — — 7,359 441 Commercial - owner occupied 5,885 — — 5,885 1,616 Construction and land development 100 — — 100 100 Residential 3,961 77 — 4,038 2,695 Other 16 — 10 26 — Total $ 36,403 $ 3,042 $ 2,807 $ 42,252 $ 15,067 December 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 $ 18,158 $ 3,482 $ 130 $ 21,770 $ 8,316 Real estate: Commercial - investor owned 9,579 — — 9,579 716 Commercial - owner occupied 2,940 — — 2,940 6,024 Residential 4,112 77 — 4,189 — Other 29 — — 29 3,190 Total $ 34,818 $ 3,559 $ 130 $ 38,507 $ 18,246 The total nonperforming loan balances at June 31, 2021 and December 31, 2020 exclude government guaranteed balances of $3.9 million for each period. No interest income was recognized on nonaccrual loans during the three and six months ended June 30, 2021 or 2020. The amortized cost basis of collateral-dependent nonperforming loans by class of loan is presented for the periods indicated: June 30, 2021 Type of Collateral (in thousands) Commercial Real Estate Residential Real Estate Blanket Lien Other Commercial and industrial $ 11,941 $ — $ 4,252 $ — Real estate: Commercial - investor owned 7,141 — — — Commercial - owner occupied 5,767 — — — Residential 100 3,984 — — Other — — — 15 Total $ 24,949 $ 3,984 $ 4,252 $ 15 December 31, 2020 Type of Collateral (in thousands) Commercial Real Estate Residential Real Estate Blanket Lien Other Commercial and industrial $ 8,316 $ — $ 394 $ — Real estate: Commercial - investor owned 9,579 — — — Commercial - owner occupied 2,940 — — — Residential — 4,135 — — Other — — — 17 Total $ 20,835 $ 4,135 $ 394 $ 17 There were no loans restructured during the three and six months ended June 30, 2021 or 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 are as follows: June 30, 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 No troubled debt restructurings subsequently defaulted during the three and six months ended June 30, 2021 or 2020. 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, 2021, $8.5 million loans remain in a deferral status. Interest of $4.1 million has been deferred and will be collected upon final maturity. The aging of the recorded investment in past due loans by class is presented for the periods indicated. June 30, 2021 (in thousands) 30-89 Days 90 or More Total Current Total Commercial and industrial $ 8,245 $ 15,247 $ 23,492 $ 2,907,313 $ 2,930,805 Real estate: Commercial - investor owned 1,065 6,700 7,765 1,638,256 1,646,021 Commercial - owner occupied 4,710 512 5,222 1,549,505 1,554,727 Construction and land development 65 100 165 556,611 556,776 Residential 461 1,925 2,386 303,111 305,497 Other 62 25 87 232,354 232,441 Total $ 14,608 $ 24,509 $ 39,117 $ 7,187,150 $ 7,226,267 December 31, 2020 (in thousands) 30-89 Days 90 or More Total Current Total Commercial and industrial $ 8,652 $ 12,928 $ 21,580 $ 3,067,415 $ 3,088,995 Real estate: Commercial - investor owned 734 9,301 10,035 1,579,384 1,589,419 Commercial - owner occupied 328 4,647 4,975 1,493,433 1,498,408 Construction and land development 13 — 13 546,673 546,686 Residential 2,071 2,118 4,189 314,990 319,179 Other 1,731 50 1,781 180,467 182,248 Total $ 13,529 $ 29,044 $ 42,573 $ 7,182,362 $ 7,224,935 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 loans by class and year of origination is presented in the following tables as of the dates indicated: June 30, 2021 Term Loans by Origination Year (in thousands) 2021 2020 2019 2018 2017 Prior Revolving Loans Converted to Term Loans Revolving Loans Total Commercial and industrial Pass (1-6) $ 731,143 $ 649,462 $ 384,160 $ 183,888 $ 117,020 $ 76,679 $ 8,765 $ 564,593 $ 2,715,710 Watch (7) 31,131 33,339 13,864 8,671 4,163 12,402 7,628 58,428 169,626 Classified (8-9) 7,365 2,049 8,451 2,592 3,254 880 2,018 15,487 42,096 Total Commercial and industrial $ 769,639 $ 684,850 $ 406,475 $ 195,151 $ 124,437 $ 89,961 $ 18,411 $ 638,508 $ 2,927,432 Commercial real estate-investor owned Pass (1-6) $ 249,960 $ 421,836 $ 327,290 $ 169,832 $ 111,808 $ 227,018 $ 3,690 $ 38,687 $ 1,550,121 Watch (7) 9,126 27,342 13,822 7,144 — 19,381 — — 76,815 Classified (8-9) — 6,012 429 6,651 — 2,684 — — 15,776 Total Commercial real estate-investor owned $ 259,086 $ 455,190 $ 341,541 $ 183,627 $ 111,808 $ 249,083 $ 3,690 $ 38,687 $ 1,642,712 Commercial real estate-owner occupied Pass (1-6) $ 213,157 $ 398,971 $ 240,316 $ 181,078 $ 142,757 $ 229,030 $ — $ 41,902 $ 1,447,211 Watch (7) 8,794 7,884 1,651 15,452 5,917 9,605 — 1,349 50,652 Classified (8-9) 1,085 895 11,363 6,112 4,660 8,231 88 63 32,497 Total Commercial real estate-owner occupied $ 223,036 $ 407,750 $ 253,330 $ 202,642 $ 153,334 $ 246,866 $ 88 $ 43,314 $ 1,530,360 Construction real estate Pass (1-6) $ 174,256 $ 133,328 $ 116,620 $ 39,332 $ 7,784 $ 13,490 $ 195 $ 20,974 $ 505,979 Watch (7) 28,003 4,926 — 1,216 11,215 2,423 — — 47,783 Classified (8-9) — 54 — 427 — 26 — 100 607 Total Construction real estate $ 202,259 $ 138,308 $ 116,620 $ 40,975 $ 18,999 $ 15,939 $ 195 $ 21,074 $ 554,369 Residential real estate Pass (1-6) $ 38,535 $ 49,198 $ 21,357 $ 13,139 $ 11,177 $ 99,035 $ 171 $ 62,095 $ 294,707 Watch (7) 33 276 719 342 — 2,691 — 400 4,461 Classified (8-9) 569 706 575 77 13 3,408 — 74 5,422 Total residential real estate $ 39,137 $ 50,180 $ 22,651 $ 13,558 $ 11,190 $ 105,134 $ 171 $ 62,569 $ 304,590 Other Pass (1-6) $ 86,875 $ 54,771 $ 19,687 $ 24,583 $ 8,414 $ 20,903 $ — $ 13,144 $ 228,377 Watch (7) — — — 5 — 2,539 — 135 2,679 Classified (8-9) — — 14 16 — 21 — 2 53 Total Other $ 86,875 $ 54,771 $ 19,701 $ 24,604 $ 8,414 $ 23,463 $ — $ 13,281 $ 231,109 December 31, 2020 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) $ 1,402,276 $ 454,729 $ 262,258 $ 132,832 $ 25,057 $ 58,315 $ 14,118 $ 527,170 $ 2,876,755 Watch (7) 44,922 15,369 9,585 7,509 19,613 110 — 60,448 157,556 Classified (8-9) 6,602 9,219 3,115 3,964 4,490 1,080 1,281 22,432 52,183 Total Commercial and industrial $ 1,453,800 $ 479,317 $ 274,958 $ 144,305 $ 49,160 $ 59,505 $ 15,399 $ 610,050 $ 3,086,494 Commercial real estate-investor owned Pass (1-6) $ 481,867 $ 338,843 $ 189,305 $ 131,718 $ 138,288 $ 161,439 $ 6,509 $ 32,058 $ 1,480,027 Watch (7) 32,308 19,722 6,656 — 9,647 17,370 — — 85,703 Classified (8-9) — 5,278 8,716 5,830 1,245 2,620 — — 23,689 Total Commercial real estate-investor owned $ 514,175 $ 363,843 $ 204,677 $ 137,548 $ 149,180 $ 181,429 $ 6,509 $ 32,058 $ 1,589,419 Commercial real estate-owner occupied Pass (1-6) $ 419,142 $ 287,001 $ 215,181 $ 179,382 $ 104,470 $ 167,456 $ 2,672 $ 45,323 $ 1,420,627 Watch (7) 13,657 5,257 3,113 6,198 4,338 8,460 1,776 941 43,740 Classified (8-9) 2,420 7,427 5,822 6,140 1,309 10,860 — 63 34,041 Total Commercial real estate-owner occupied $ 435,219 $ 299,685 $ 224,116 $ 191,720 $ 110,117 $ 186,776 $ 4,448 $ 46,327 $ 1,498,408 Construction real estate Pass (1-6) $ 223,069 $ 156,360 $ 45,460 $ 18,579 $ 11,539 $ 9,144 $ — $ 28,880 $ 493,031 Watch (7) 2,544 86 34,179 11,632 — 2,499 — — 50,940 Classified (8-9) 56 2,124 503 1 — 31 — — 2,715 Total Construction real estate $ 225,669 $ 158,570 $ 80,142 $ 30,212 $ 11,539 $ 11,674 $ — $ 28,880 $ 546,686 Residential real estate Pass (1-6) $ 57,059 $ 27,907 $ 17,718 $ 17,138 $ 27,443 $ 92,657 $ 1,172 $ 66,902 $ 307,996 Watch (7) 210 840 526 — 514 1,603 287 511 4,491 Classified (8-9) 571 733 121 14 898 3,181 — 253 5,771 Total residential real estate $ 57,840 $ 29,480 $ 18,365 $ 17,152 $ 28,855 $ 97,441 $ 1,459 $ 67,666 $ 318,258 Other Pass (1-6) $ 43,526 $ 28,195 $ 30,074 $ 9,646 $ 5,641 $ 17,027 $ — $ 40,779 $ 174,888 Watch (7) — 1 8 — — 2,637 — 1 2,647 Classified (8-9) — 18 19 13 — 17 8 4 79 Total Other $ 43,526 $ 28,214 $ 30,101 $ 9,659 $ 5,641 $ 19,681 $ 8 $ 40,784 $ 177,614 In the tables above, loan originations in 2021 and 2020 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 tables presents the recorded investment on loans based on payment activity as of the periods indicated: June 30, 2021 (in thousands) Performing Non Performing Total Commercial and industrial $ 3,370 $ 3 $ 3,373 Real estate: Commercial - investor owned 3,309 — 3,309 Commercial - owner occupied 24,367 — 24,367 Construction and land development 2,407 — 2,407 Residential 907 — 907 Other 1,322 10 1,332 Total $ 35,682 $ 13 $ 35,695 December 31, 2020 (in thousands) Performing Non Performing Total Commercial and industrial $ 2,502 $ — $ 2,502 Real estate: Residential 921 — 921 Other 4,612 21 4,633 Total $ 8,035 $ 21 $ 8,056 |