Allowance for Loan and Leases and Reserve for Unfunded Commitments | Note 5—Allowance for Loan and Lease Losses and Reserve for Unfunded Commitments Loans and leases considered for inclusion in the allowance for loan and lease losses include acquired non-impaired loans and leases, those acquired impaired loans with credit deterioration after acquisition, and originated loans and leases. Although all acquired loans and leases are included in the following table, only those with credit deterioration subsequent to acquisition date are included in the allowance for loan and lease losses. The following tables summarize the balance and activity within the allowance for loan and lease losses, the components of the allowance for loan and lease losses in terms of loans and leases individually and collectively evaluated for impairment, and corresponding loan and lease balances by type for the three and nine months ended September 30, 2021 and 2020 are as follows: September 30, 2021 Commercial Residential Construction, Commercial Paycheck Installment Lease Total Allowance for loan and Three months ended Beginning balance $ 19,541 $ 1,364 $ 619 $ 38,284 $ — $ 9 $ 1,902 $ 61,719 Provision/(recapture) 1,108 ( 225 ) ( 61 ) ( 1,218 ) — ( 2 ) 750 352 Charge-offs ( 564 ) ( 65 ) — ( 1,456 ) — — ( 399 ) ( 2,484 ) Recoveries 287 2 — 380 — — 342 1,011 Ending balance $ 20,372 $ 1,076 $ 558 $ 35,990 $ — $ 7 $ 2,595 $ 60,598 Nine months ended Beginning balance $ 19,584 $ 2,400 $ 1,352 $ 41,183 $ — $ 15 $ 1,813 $ 66,347 Provision/(recapture) 2,891 ( 1,257 ) ( 468 ) 226 — ( 8 ) 1,366 2,750 Charge-offs ( 2,644 ) ( 76 ) ( 326 ) ( 6,172 ) — — ( 1,148 ) ( 10,366 ) Recoveries 541 9 — 753 — — 564 1,867 Ending balance $ 20,372 $ 1,076 $ 558 $ 35,990 $ — $ 7 $ 2,595 $ 60,598 Ending balance: Individually evaluated for $ 8,420 $ — $ — $ 16,142 $ — $ — $ — $ 24,562 Collectively evaluated for 9,314 723 550 18,572 — 7 2,595 31,761 Loans acquired with 2,638 353 8 1,276 — — — 4,275 Total allowance for loan $ 20,372 $ 1,076 $ 558 $ 35,990 $ — $ 7 $ 2,595 $ 60,598 September 30, 2021 Commercial Residential Construction, Commercial Paycheck Installment Lease Total Loans and leases ending balance: Individually evaluated for $ 45,563 $ 3,946 $ — $ 37,689 $ — $ — $ — $ 87,198 Collectively evaluated for 1,487,994 441,915 336,666 1,492,065 268,081 1,273 338,756 4,366,750 Loans acquired with 84,821 61,893 1,746 6,651 — 169 — 155,280 Total loans and leases $ 1,618,378 $ 507,754 $ 338,412 $ 1,536,405 $ 268,081 $ 1,442 $ 338,756 $ 4,609,228 September 30, 2020 Commercial Residential Construction, Commercial Paycheck Installment Lease Total Allowance for loan and lease losses Three months ended Beginning balance $ 14,110 $ 3,741 $ 1,491 $ 30,108 $ — $ 36 $ 1,814 $ 51,300 Provision 6,421 291 1,029 7,603 — 1 395 15,740 Charge-offs ( 1,566 ) ( 250 ) ( 701 ) ( 3,254 ) — — ( 374 ) ( 6,145 ) Recoveries 19 8 53 83 — — 200 363 Ending balance $ 18,984 $ 3,790 $ 1,872 $ 34,540 $ — $ 37 $ 2,035 $ 61,258 Nine months ended Beginning balance $ 7,965 $ 1,990 $ 610 $ 19,377 $ — $ 50 $ 1,944 $ 31,936 Provision/(recapture) 14,149 2,031 1,910 26,844 — ( 13 ) 792 45,713 Charge-offs ( 3,206 ) ( 259 ) ( 701 ) ( 12,057 ) — — ( 1,392 ) ( 17,615 ) Recoveries 76 28 53 376 — — 691 1,224 Ending balance $ 18,984 $ 3,790 $ 1,872 $ 34,540 $ — $ 37 $ 2,035 $ 61,258 Ending balance: Individually evaluated for $ 4,516 $ 77 $ — $ 10,189 $ — $ — $ — $ 14,782 Collectively evaluated for 11,825 3,413 1,685 22,450 — 37 2,035 41,445 Loans acquired with 2,643 300 187 1,901 — — — 5,031 Total allowance for loan and $ 18,984 $ 3,790 $ 1,872 $ 34,540 $ — $ 37 $ 2,035 $ 61,258 September 30, 2020 Commercial Residential Construction, Commercial Paycheck Installment Lease Total Loans and leases ending balance: Individually evaluated for $ 39,001 $ 1,636 $ — $ 37,253 $ — $ — $ — $ 77,890 Collectively evaluated for 1,191,740 547,563 234,230 1,281,067 622,191 2,929 200,089 4,079,809 Loans acquired with 117,114 84,197 4,804 10,489 — 214 — 216,818 Total loans and leases $ 1,347,855 $ 633,396 $ 239,034 $ 1,328,809 $ 622,191 $ 3,143 $ 200,089 $ 4,374,517 The Company recaptured $ 1.1 million and $ 5.7 million of the allowance for loan and lease losses for the three and nine months ended September 30, 2021 , respectively, and increased the allowance by $ 10.0 million and $ 29.3 million for the three and nine months ended September 30, 2020 , respectively. For acquired impaired loans, the Company increased the allowance for loan and lease losses by $ 405,000 and recaptured $ 2.2 million of allowance for the three and nine months ended September 30, 2021 , respectively. The Company increased the allowance for loan and lease losses by $ 295,000 and $ 2.3 million for the three and nine months ended September 30, 2020, respectively for acquired impaired loans. For loans individually evaluated for impairment, the Company recaptured $ 1.0 million of the allowance for loan and lease losses and increased the allowance by $ 602,000 for the three and nine months ended September 30, 2021 , respectively. The Company increased the allowance on loans individually evaluated for impairment by $ 768,000 and $ 4.1 million for the three and nine months ended September 30, 2020 , respectively. For loans collectively evaluated for impairment, the Company decreased the allowance for loan and lease losses by $ 498,000 and $ 4.2 million for the three and nine months ended September 30, 2021 , and increased the allowance for loan and lease losses by $ 8.9 million and $ 23.0 million for the three and nine months ended September 30, 2020, respectively. An allowance for loan and lease loss allocation has not been made for Paycheck Protection Program (“PPP”) loans as these loans are fully guaranteed by the Small Business Association ("SBA"). On a quarterly basis, the Company assesses the collectability of its government guarantee loan and lease portfolio using historical loss experience in its small business lending unit. The following tables summarize the recorded investment, unpaid principal balance, and related allowance for loans and leases considered impaired as of September 30, 2021 and December 31, 2020, which exclude acquired impaired loans. For purposes of these tables, the unpaid principal balance represents the outstanding contractual balance. Impaired loans include loans that are individually evaluated for impairment as well as troubled debt restructurings for all loan categories. The sum of non-accrual loans and loans past due 90 days still on accrual will differ from the total impaired loan amount. September 30, 2021 Recorded Unpaid Related With no related allowance recorded Commercial real estate $ 20,432 $ 25,512 $ — Residential real estate 3,850 3,901 — Commercial and industrial 14,212 15,999 — With an allowance recorded Commercial real estate 25,131 26,569 8,420 Residential real estate 96 152 — Commercial and industrial 23,477 25,614 16,142 Total impaired loans $ 87,198 $ 97,747 $ 24,562 December 31, 2020 Recorded Unpaid Related With no related allowance recorded Commercial real estate $ 32,473 $ 34,792 $ — Residential real estate 1,558 1,644 — Commercial and industrial 17,944 19,917 — With an allowance recorded Commercial real estate 13,696 14,919 5,034 Residential real estate 272 274 78 Commercial and industrial 29,412 32,018 18,848 Total impaired loans $ 95,355 $ 103,564 $ 23,960 The following tables summarize the average recorded investment and interest income recognized for loans and leases considered impaired, which excludes acquired impaired loans, for the nine months ended: September 30, 2021 Average Interest With no related allowance recorded Commercial real estate $ 28,480 $ 920 Residential real estate 2,788 109 Commercial and industrial 16,668 481 With an allowance recorded Commercial real estate 27,620 1,185 Residential real estate 207 2 Commercial and industrial 28,785 1,666 Total impaired loans $ 104,548 $ 4,363 September 30, 2020 Average Interest With no related allowance recorded Commercial real estate $ 22,511 $ 927 Residential real estate 1,615 26 Construction, land development, and other land 2,984 220 Commercial and industrial 16,991 493 With an allowance recorded Commercial real estate 13,329 526 Residential real estate 460 21 Commercial and industrial 21,352 1,078 Total impaired loans $ 79,242 $ 3,291 The following tables summarize the risk rating categories of the loans and leases considered for inclusion in the allowance for loan and lease losses calculation, excluding acquired impaired loans, as of September 30, 2021 and December 31, 2020: September 30, 2021 Commercial Residential Construction, Commercial Paycheck Installment Lease Total Pass $ 1,297,981 $ 422,843 $ 291,496 $ 1,261,335 $ 268,081 $ 1,190 $ 335,475 $ 3,878,401 Watch 143,047 16,862 37,795 196,288 — 83 264 394,339 Special Mention 48,605 3,036 7,375 30,841 — — 1,934 91,791 Substandard 43,924 3,120 — 41,290 — — 786 89,120 Doubtful — — — — — — 297 297 Loss — — — — — — — — Total $ 1,533,557 $ 445,861 $ 336,666 $ 1,529,754 $ 268,081 $ 1,273 $ 338,756 $ 4,453,948 December 31, 2020 Commercial Residential Construction, Commercial Paycheck Installment Lease Total Pass $ 1,064,623 $ 463,103 $ 180,458 $ 1,027,399 $ 517,815 $ 1,706 $ 222,818 $ 3,477,922 Watch 134,381 22,086 46,162 225,930 — 96 47 428,702 Special Mention 60,022 3,795 — 56,784 — — 2,721 123,322 Substandard 54,160 4,447 — 48,609 — 1 955 108,172 Doubtful — — — — — — 600 600 Loss — — — — — — — — Total $ 1,313,186 $ 493,431 $ 226,620 $ 1,358,722 $ 517,815 $ 1,803 $ 227,141 $ 4,138,718 The following tables summarize contractual delinquency information for acquired non-impaired and originated loans and leases by category at September 30, 2021 and December 31, 2020: September 30, 2021 30-59 Days 60-89 Greater Non- Total Current Total Commercial real estate $ 330 $ 1,426 $ — $ 17,082 $ 18,838 $ 1,514,719 $ 1,533,557 Residential real estate 1,087 — — 2,127 3,214 442,647 445,861 Construction, land development, 2,035 — — — 2,035 334,631 336,666 Commercial and industrial 1,653 594 — 14,272 16,519 1,513,235 1,529,754 Paycheck Protection Program — — — — — 268,081 268,081 Installment and other 39 — — — 39 1,234 1,273 Lease financing receivables 973 98 — 984 2,055 336,701 338,756 Total $ 6,117 $ 2,118 $ — $ 34,465 $ 42,700 $ 4,411,248 $ 4,453,948 December 31, 2020 30-59 60-89 Greater Non- Total Current Total Commercial real estate $ 1,544 $ 4,194 $ — $ 15,969 $ 21,707 $ 1,291,479 $ 1,313,186 Residential real estate 1,686 — — 1,929 3,615 489,816 493,431 Construction, land development, — — — — — 226,620 226,620 Commercial and industrial 4,521 1,290 — 21,936 27,747 1,330,975 1,358,722 Paycheck Protection Program 517,815 517,815 Installment and other 6 — — 1 7 1,796 1,803 Lease financing receivables 996 376 — 1,268 2,640 224,501 227,141 Total $ 8,753 $ 5,860 $ — $ 41,103 $ 55,716 $ 4,083,002 $ 4,138,718 Trouble debt restructurings (“TDRs”) are granted due to borrower financial difficulty and provide for a modification of loan repayment terms. TDRs are treated in the same manner as impaired loans for purposes of calculating the allowance for loan and lease losses. The tables below present TDRs by loan category as of September 30, 2021 and December 31, 2020: September 30, 2021 Number Pre- Post- Charge-offs Specific Accruing: Commercial real estate 7 $ 2,130 $ 2,130 $ — $ 209 Commercial and industrial 1 63 63 — 63 Residential real estate 2 173 173 — — Total accruing 10 2,366 2,366 — 272 Non-accruing: Commercial real estate 3 856 740 116 311 Commercial and industrial 3 1,730 1,107 623 508 Total non-accruing 6 2,586 1,847 739 819 Total troubled debt restructurings 16 $ 4,952 $ 4,213 $ 739 $ 1,091 December 31, 2020 Number Pre- Post- Charge-offs Specific Accruing: Commercial real estate 8 $ 2,187 $ 2,187 $ — $ 104 Commercial and industrial 1 78 78 — 78 Residential real estate 3 230 230 — — Total accruing 12 2,495 2,495 — 182 Non-accruing: Commercial real estate 4 1,609 1,362 247 102 Commercial and industrial 14 4,420 4,288 132 3,157 Total non-accruing 18 6,029 5,650 379 3,259 Total troubled debt restructurings 30 $ 8,524 $ 8,145 $ 379 $ 3,441 In addition, there was no commitment outstanding on troubled debt restructurings at September 30, 2021 or December 31, 2020. Loans modified as troubled debt restructurings that occurred during the three and nine months ended September 30, 2021 and 2020 were: Three Months Ended Nine Months Ended September 30, September 30, 2021 2020 2021 2020 Accruing: Beginning balance $ 2,395 $ 3,151 $ 2,495 $ 1,771 Additions — 604 281 604 Net payments ( 29 ) ( 1,462 ) ( 410 ) ( 1,538 ) Net transfers from non-accrual — — — 1,456 Ending balance 2,366 2,293 2,366 2,293 Non-accruing: Beginning balance 4,441 7,449 5,650 8,800 Additions — — 673 5,633 Net payments ( 2,584 ) ( 302 ) ( 3,568 ) ( 1,688 ) Charge-offs ( 10 ) ( 852 ) ( 908 ) ( 4,994 ) Net transfers to accrual — — — ( 1,456 ) Ending balance 1,847 6,295 1,847 6,295 Total troubled debt restructurings $ 4,213 $ 8,588 $ 4,213 $ 8,588 There were no troubled debt restructurings that subsequently defaulted within twelve months of the restructure date during the three and nine months ended September 30, 2021 or 2020. At September 30, 2021 and December 31, 2020 , the reserve for unfunded commitments was $ 1.5 million and $ 1.9 million, respectively. During the three and nine months ended September 30, 2021 , there was a recapture for unfunded commitments of $ 79,000 and $ 363,000 , respectively. During the three and nine months ended September 30, 2020 , the provision for unfunded commitments was $ 519,000 and $ 1.2 million, respectively. There were no charge-offs or recoveries related to the reserve for unfunded commitments during the periods. |