Loans and Leases and the Allowance for Credit Losses | Note 4. Loans and Leases and the Allowance for Credit Losses Loans and Leases The Paycheck Protection Program (“PPP”) amounts presented, which are reported net of deferred costs and fees, were previously included as a component of the Commercial and Industrial loan class. The Company’s loan and lease portfolio was comprised of the following as of June 30, 2021, and December 31, 2020: (dollars in thousands) June 30, 2021 December 31, 2020 Commercial Commercial and Industrial $ 1,257,305 $ 1,357,610 PPP 513,513 517,683 Commercial Mortgage 2,944,435 2,854,829 Construction 277,393 259,798 Lease Financing 110,500 110,766 Total Commercial 5,103,146 5,100,686 Consumer Residential Mortgage 4,264,180 4,130,513 Home Equity 1,594,781 1,604,538 Automobile 714,729 708,800 Other 1 364,542 395,483 Total Consumer 6,938,232 6,839,334 Total Loans and Leases $ 12,041,378 $ 11,940,020 1 The majority of the Company’s lending activity is with customers located in the State of Hawaii. A substantial portion of the Company’s real estate loans are secured by real estate in Hawaii. Net gains related to sales of residential mortgage loans, recorded as a component of mortgage banking income were $2.6 million and $2.4 million for the three months ended June 30, 2021, and June 30, 2020, respectively, and $4.7 million and $5.6 million for the first six months ended June 30, 2021 and June 30, 2020, respectively. The Company elected to exclude AIR from the amortized cost basis of loans disclosed throughout this footnote. As of June 30, 2021, and December 31, 2020, AIR for loans totaled $31.2 million and $35.9 million, respectively, and is included in the “accrued interest receivable” line item on the Company’s consolidated statements of condition. In response to the COVID-19 pandemic, the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act was passed by Congress and signed into law on March 27, 2020. The CARES Act established the PPP, which provides loans to small businesses who were affected by economic conditions as a result of COVID-19 to provide cash-flow assistance to employers who maintain their eligible costs during the COVID-19 emergency. PPP loans carry an interest rate of one percent, and a maturity of two or five years. These loans are fully guaranteed by the SBA and may be eligible for forgiveness by the SBA to the extent that the proceeds are used to cover eligible costs over a period of up to 24 weeks after the loan is made as long as certain conditions are met regarding employee retention and compensation levels. PPP loans deemed eligible for forgiveness by the SBA will be repaid by the SBA to the Company. The SBA pays the Company fees for processing PPP loans. These processing fees are accounted for as loan origination fees and recognized over the contractual loan term as a yield adjustment on the loans. Allowance for Credit Losses (the “Allowance”) The following presents by portfolio segment, the activity in the Allowance for the three and six months ended June 30, 2021, and June 30, 2020. (dollars in thousands) Commercial Consumer Total Three Months Ended June 30, 2021 Allowance for Credit Losses: Balance at Beginning of Period $ 82,811 $ 115,532 $ 198,343 Loans and Leases Charged-Off (456 ) (3,853 ) (4,309 ) Recoveries on Loans and Leases Previously Charged-Off 144 2,981 3,125 Net Loans and Leases Recovered (Charged-Off) (312 ) (872 ) (1,184 ) Provision for Credit Losses (3,860 ) (12,914 ) (16,774 ) Balance at End of Period $ 78,639 $ 101,746 $ 180,385 Six Months Ended June 30, 2021 Allowance for Credit Losses: Balance at Beginning of Period $ 84,847 $ 131,405 $ 216,252 Loans and Leases Charged-Off (704 ) (9,896 ) (10,600 ) Recoveries on Loans and Leases Previously Charged-Off 256 6,244 6,500 Net Loans and Leases Recovered (Charged-Off) (448 ) (3,652 ) (4,100 ) Provision for Credit Losses (5,760 ) (26,007 ) (31,767 ) Balance at End of Period $ 78,639 $ 101,746 $ 180,385 Three Months Ended June 30, 2020 Allowance for Credit Losses: Balance at Beginning of Period $ 67,987 $ 70,163 $ 138,150 Loans and Leases Charged-Off (656 ) (7,627 ) (8,283 ) Recoveries on Loans and Leases Previously Charged-Off 1,524 1,648 3,172 Net Loans and Leases Recovered (Charged-Off) 868 (5,979 ) (5,111 ) Provision for Credit Losses 3,667 36,733 40,400 Balance at End of Period $ 72,522 $ 100,917 $ 173,439 Six Months Ended June 30, 2020 Allowance for Credit Losses: Balance at Beginning of Period (December 31, 2020) $ 73,801 $ 36,226 $ 110,027 CECL Adoption (Day 1) Impact (18,789 ) 17,052 (1,737 ) Balance at Beginning of Period (January 1, 2020) 55,012 53,278 108,290 Loans and Leases Charged-Off (1,349 ) (14,111 ) (15,460 ) Recoveries on Loans and Leases Previously Charged-Off 1,853 4,756 6,609 Net Loans and Leases Recovered (Charged-Off) 504 (9,355 ) (8,851 ) Provision for Credit Losses 17,006 56,994 74,000 Balance at End of Period $ 72,522 $ 100,917 $ 173,439 Credit Quality Indicators The Company uses several credit quality indicators to manage credit risk in an ongoing manner. The Company uses an internal credit risk rating system that categorizes loans and leases into pass, special mention, or classified categories. Credit risk ratings are applied individually to those classes of loans and leases that have significant or unique credit characteristics that benefit from a case-by-case evaluation. These are typically loans and leases to businesses or individuals in the classes which comprise the commercial portfolio segment. Groups of loans and leases that are underwritten and structured using standardized criteria and characteristics, such as statistical models (e.g., credit scoring or payment performance), are typically risk-rated and monitored collectively. These are typically loans and leases to individuals in the classes which comprise the consumer portfolio segment. The following are the definitions of the Company’s credit quality indicators: Pass: Loans and leases in all classes within the commercial and consumer portfolio segments that are not adversely rated, are contractually current as to principal and interest, and are otherwise in compliance with the contractual terms of the loan or lease agreement. Residential mortgage loans that are past due 90 days or more as to principal or interest may be considered Pass if the current loan-to-value ratio is 60% or less. Home equity loans that are past due 90 days or more as to principal or interest may be considered Pass if the first mortgage is with the Company and the current combined loan-to-value ratio is 60% or less. Special Mention: Loans and leases in all classes within the commercial portfolio segment that have potential weaknesses that deserve management’s close attention. If not addressed, these potential weaknesses may result in deterioration of the repayment prospects for the loan or lease. The Special Mention credit quality indicator is not used for the consumer portfolio segment. Classified: Loans and leases in the classes within the commercial portfolio segment that are inadequately protected by the sound worth and paying capacity of the borrower or of the collateral pledged, if any. Classified loans and leases are also those in the classes within the consumer portfolio segment that are past due 90 days or more as to principal or interest. Residential mortgage and home equity loans may be current as to principal and interest, but may be considered Classified for a period of generally up to six months following a loan modification. Following a period of demonstrated performance in accordance with the modified contractual terms, the loan may be removed from Classified status. For pass rated credits, risk ratings are certified at a minimum annually. For special mention or classified credits, risk ratings are reviewed for appropriateness on an ongoing basis, monthly, or at a minimum, quarterly. The following presents by credit quality indicator, loan class, and year of origination, the amortized cost basis of the Company’s loans and leases as of June 30, 2021 . Term Loans by Origination Year (dollars in thousands) YTD June 30, 2021 2020 2019 2018 2017 Prior Revolving Loans Revolving Loans Converted to Term Loans Total Loans and Leases June 30, 2021 Commercial Commercial and Industrial Pass $ 155,952 $ 397,887 $ 110,322 $ 88,056 $ 38,839 $ 97,488 $ 264,104 $ 606 $ 1,153,254 Special Mention 2,046 11,189 - - - 167 34,424 35 47,861 Classified 188 1,492 95 13,058 643 18,809 21,826 79 56,190 Total Commercial and Industrial $ 158,186 $ 410,568 $ 110,417 $ 101,114 $ 39,482 $ 116,464 $ 320,354 $ 720 $ 1,257,305 PPP Pass $ 273,933 $ 239,580 $ - $ - $ - $ - $ - $ - $ 513,513 Total PPP $ 273,933 $ 239,580 $ - $ - $ - $ - $ - $ - $ 513,513 Commercial Mortgage Pass $ 366,072 $ 819,888 $ 384,925 $ 334,830 $ 213,563 $ 603,288 $ 76,580 $ - $ 2,799,146 Special Mention 2,082 66,902 28,340 288 - 13,532 - - 111,144 Classified 2,433 13,456 647 - 5,058 12,551 - - 34,145 Total Commercial Mortgage $ 370,587 $ 900,246 $ 413,912 $ 335,118 $ 218,621 $ 629,371 $ 76,580 $ - $ 2,944,435 Construction Pass $ 58,780 $ 122,752 $ 66,038 $ 11,281 $ 895 $ - $ 17,647 $ - $ 277,393 Total Construction $ 58,780 $ 122,752 $ 66,038 $ 11,281 $ 895 $ - $ 17,647 $ - $ 277,393 Lease Financing Pass $ 16,191 $ 17,249 $ 18,115 $ 11,671 $ 3,039 $ 43,308 $ - $ - $ 109,573 Special Mention - - - 927 - - - - 927 Total Lease Financing $ 16,191 $ 17,249 $ 18,115 $ 12,598 $ 3,039 $ 43,308 $ - $ - $ 110,500 Total Commercial $ 877,677 $ 1,690,395 $ 608,482 $ 460,111 $ 262,037 $ 789,143 $ 414,581 $ 720 $ 5,103,146 Consumer Residential Mortgage Pass $ 850,707 $ 1,218,829 $ 452,181 $ 225,001 $ 332,560 $ 1,181,550 $ - $ - $ 4,260,828 Classified - - 294 397 909 1,752 - - 3,352 Total Residential Mortgage $ 850,707 $ 1,218,829 $ 452,475 $ 225,398 $ 333,469 $ 1,183,302 $ - $ - $ 4,264,180 Home Equity Pass $ - $ - $ - $ - $ - $ 3,524 $ 1,550,205 $ 33,831 $ 1,587,560 Classified - - - - - 116 5,839 1,266 7,221 Total Home Equity $ - $ - $ - $ - $ - $ 3,640 $ 1,556,044 $ 35,097 $ 1,594,781 Automobile Pass $ 156,177 $ 181,983 $ 173,776 $ 122,448 $ 49,436 $ 30,631 $ - $ - $ 714,451 Classified 11 64 68 7 22 106 - - 278 Total Automobile $ 156,188 $ 182,047 $ 173,844 $ 122,455 $ 49,458 $ 30,737 $ - $ - $ 714,729 Other 1 Pass $ 51,802 $ 60,646 $ 119,677 $ 68,058 $ 26,288 $ 8,372 $ 27,833 $ 1,431 $ 364,107 Classified - 34 172 120 56 19 32 2 435 Total Other $ 51,802 $ 60,680 $ 119,849 $ 68,178 $ 26,344 $ 8,391 $ 27,865 $ 1,433 $ 364,542 Total Consumer $ 1,058,697 $ 1,461,556 $ 746,168 $ 416,031 $ 409,271 $ 1,226,070 $ 1,583,909 $ 36,530 $ 6,938,232 Total Loans and Leases $ 1,936,374 $ 3,151,951 $ 1,354,650 $ 876,142 $ 671,308 $ 2,015,213 $ 1,998,490 $ 37,250 $ 12,041,378 1 Comprised of other revolving credit, installment, and lease financing. For the six months ended June 30, 2021, and June 30, 2020, $2.9 million and $1.3 million revolving loans, respectively, were converted to term loans. The following presents by credit quality indicator, loan class, and year of origination, the amortized cost basis of the Company’s loans and leases as of December 31, 2020. Term Loans by Origination Year (dollars in thousands) 2020 2019 2018 2017 2016 Prior Revolving Loans Revolving Loans Converted to Term Loans Total Loans and Leases December 31, 2020 Commercial Commercial and Industrial Pass $ 426,780 $ 149,024 $ 149,468 $ 49,385 $ 52,354 $ 68,269 $ 342,339 $ 847 $ 1,238,466 Special Mention 11,702 42 - - 110 95 32,319 52 44,320 Classified 32,208 1,734 2,266 777 19 19,166 18,529 125 74,824 Total Commercial and Industrial $ 470,690 $ 150,800 $ 151,734 $ 50,162 $ 52,483 $ 87,530 $ 393,187 $ 1,024 $ 1,357,610 PPP Pass $ 517,683 $ - $ - $ - $ - $ - $ - $ - $ 517,683 Total PPP $ 517,683 $ - $ - $ - $ - $ - $ - $ - $ 517,683 Commercial Mortgage Pass $ 847,676 $ 458,472 $ 350,363 $ 245,157 $ 267,860 $ 425,157 $ 76,869 $ - $ 2,671,554 Special Mention 66,523 28,418 291 7,117 8,665 5,035 - - 116,049 Classified 49,640 655 2,783 274 4,742 9,132 - - 67,226 Total Commercial Mortgage $ 963,839 $ 487,545 $ 353,437 $ 252,548 $ 281,267 $ 439,324 $ 76,869 $ - $ 2,854,829 Construction Pass $ 106,508 $ 105,731 $ 11,275 $ 8,133 $ - $ - $ 28,151 $ - $ 259,798 Total Construction $ 106,508 $ 105,731 $ 11,275 $ 8,133 $ - $ - $ 28,151 $ - $ 259,798 Lease Financing Pass $ 19,906 $ 20,132 $ 13,785 $ 4,202 $ 9,657 $ 41,755 $ - $ - $ 109,437 Classified 33 67 1,092 42 95 - - - 1,329 Total Lease Financing $ 19,939 $ 20,199 $ 14,877 $ 4,244 $ 9,752 $ 41,755 $ - $ - $ 110,766 Total Commercial $ 2,078,659 $ 764,275 $ 531,323 $ 315,087 $ 343,502 $ 568,609 $ 498,207 $ 1,024 $ 5,100,686 Consumer Residential Mortgage Pass $ 1,300,831 $ 576,452 $ 295,522 $ 454,165 $ 545,798 $ 954,120 $ - $ - $ 4,126,888 Classified - 294 - 1,032 - 2,299 - - 3,625 Total Residential Mortgage $ 1,300,831 $ 576,746 $ 295,522 $ 455,197 $ 545,798 $ 956,419 $ - $ - $ 4,130,513 Home Equity Pass $ - $ - $ - $ - $ - $ 4,449 $ 1,556,671 $ 37,559 $ 1,598,679 Classified - - - - - 88 4,693 1,078 5,859 Total Home Equity $ - $ - $ - $ - $ - $ 4,537 $ 1,561,364 $ 38,637 $ 1,604,538 Automobile Pass $ 219,218 $ 213,914 $ 158,216 $ 68,776 $ 33,899 $ 13,850 $ - $ - $ 707,873 Classified 101 245 171 113 161 136 - - 927 Total Automobile $ 219,319 $ 214,159 $ 158,387 $ 68,889 $ 34,060 $ 13,986 $ - $ - $ 708,800 Other 1 Pass $ 71,042 $ 145,549 $ 92,993 $ 39,770 $ 9,225 $ 2,189 $ 32,070 $ 1,485 $ 394,323 Classified 51 419 375 167 42 21 85 - 1,160 Total Other $ 71,093 $ 145,968 $ 93,368 $ 39,937 $ 9,267 $ 2,210 $ 32,155 $ 1,485 $ 395,483 Total Consumer $ 1,591,243 $ 936,873 $ 547,277 $ 564,023 $ 589,125 $ 977,152 $ 1,593,519 $ 40,122 $ 6,839,334 Total Loans and Leases $ 3,669,902 $ 1,701,148 $ 1,078,600 $ 879,110 $ 932,627 $ 1,545,761 $ 2,091,726 $ 41,146 $ 11,940,020 1 Aging Analysis Loans and leases are considered to be past due once becoming 30 days delinquent. For the consumer portfolio, this generally represents two missed monthly payments. The following presents by class, an aging analysis of the Company’s loan and lease portfolio as of June 30, 2021, and December 31, 2020. (dollars in thousands) 30 - 59 Days Past Due 60 - 89 Days Past Due Past Due 90 Days or More Non- Accrual Total Past Due and Non- Accrual Current Total Loans and Leases Non- Accrual Loans and Leases that are Current 2 As of June 30, 2021 Commercial Commercial and Industrial $ 195 $ 1,990 $ — $ 258 $ 2,443 $ 1,254,862 $ 1,257,305 $ 217 PPP — — — — — 513,513 513,513 — Commercial Mortgage — — — 8,413 8,413 2,936,022 2,944,435 4,869 Construction — — — — — 277,393 277,393 — Lease Financing — — — — — 110,500 110,500 — Total Commercial 195 1,990 — 8,671 10,856 5,092,290 5,103,146 5,086 Consumer Residential Mortgage 5,587 2,194 4,069 2,437 14,287 4,249,893 4,264,180 932 Home Equity 1,031 440 4,498 5,534 11,503 1,583,278 1,594,781 1,154 Automobile 5,828 755 277 — 6,860 707,869 714,729 — Other 1 1,645 852 434 — 2,931 361,611 364,542 — Total Consumer 14,091 4,241 9,278 7,971 35,581 6,902,651 6,938,232 2,086 Total $ 14,286 $ 6,231 $ 9,278 $ 16,642 $ 46,437 $ 11,994,941 $ 12,041,378 $ 7,172 As of December 31, 2020 Commercial Commercial and Industrial $ 191 $ 59 $ — $ 441 $ 691 $ 1,356,919 $ 1,357,610 $ 285 PPP — — — — — 517,683 517,683 — Commercial Mortgage — — — 8,527 8,527 2,846,302 2,854,829 4,983 Construction — — — — — 259,798 259,798 — Lease Financing — — — — — 110,766 110,766 — Total Commercial 191 59 — 8,968 9,218 5,091,468 5,100,686 5,268 Consumer Residential Mortgage 4,049 2,083 5,274 3,223 14,629 4,115,884 4,130,513 2,100 Home Equity 3,423 3,378 3,187 3,958 13,946 1,590,592 1,604,538 987 Automobile 6,358 2,215 925 — 9,498 699,302 708,800 — Other 1 2,556 1,612 1,160 — 5,328 390,155 395,483 — Total Consumer 16,386 9,288 10,546 7,181 43,401 6,795,933 6,839,334 3,087 Total $ 16,577 $ 9,347 $ 10,546 $ 16,149 $ 52,619 $ 11,887,401 $ 11,940,020 $ 8,355 1 Comprised of other revolving credit, installment, and lease financing. 2 Represents non-accrual loans that are not past due 30 days or more; however, full payment of principal and interest is still not expected. Non-Accrual Loans and Leases The following presents the non-accrual loans and leases as of June 30, 2021, and December 31, 2020. June 30, 2021 December 31, 2020 (dollars in thousands) Non-accrual loans with a related ACL Non-accrual loans without a related ACL Total Non- accrual loans Non-accrual loans with a related ACL Non-accrual loans without a related ACL Total Non- accrual loans Commercial Commercial and Industrial $ 258 $ — $ 258 $ 441 $ — $ 441 Commercial Mortgage 8,413 — 8,413 8,527 — 8,527 Total Commercial 8,671 — 8,671 8,968 — 8,968 Consumer Residential Mortgage 2,314 123 2,437 3,096 127 3,223 Home Equity 5,534 — 5,534 3,958 — 3,958 Total Consumer 7,848 123 7,971 7,054 127 7,181 Total $ 16,519 $ 123 $ 16,642 $ 16,022 $ 127 $ 16,149 All payments received while on non-accrual status are applied against the principal balance of the loan or lease. The Company does not recognize interest income while loans or leases are on non-accrual status. Modifications A modification of a loan constitutes a troubled debt restructuring (“TDR”) when the Company, for economic or legal reasons related to a borrower’s financial difficulties, grants a concession to the borrower that it would not otherwise consider. Loans modified in a TDR were $84.9 million as of June 30, 2021, and $72.5 million as of December 31, 2020. There were $0.2 million and $0.5 million commitments to lend additional funds on loans modified in a TDR as of June 30, 2021, and December 31, 2020, respectively. Loans modified in a TDR are typically already on non-accrual status and partial charge-offs have in some cases already been taken against the outstanding loan balance. As a result, loans modified in a TDR may have the financial effect of increasing the specific Allowance associated with the loan. An Allowance for impaired commercial and consumer loans that have been modified in a TDR is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the estimated fair value of the collateral, less any selling costs, if the loan is collateral dependent. Management exercises significant judgment in developing these estimates. The following presents by class, information related to loans modified in a TDR during the three and six months ended June 30, 2021, and June 30, 2020. Loans Modified as a TDR for the Three Months Ended June 30, 2021 Loans Modified as a TDR for the Three Months Ended June 30, 2020 Recorded Increase in Recorded Increase in Troubled Debt Restructurings Investment Allowance Investment Allowance (dollars in thousands) Number of Contracts (as of period end) 1 (as of period end) Number of Contracts (as of period end) 1 (as of period end) Commercial Construction — — — 1 1,152 — Total Commercial — — — 1 1,152 — Consumer Residential Mortgage 7 3,714 120 — — — Home Equity 5 462 9 — — — Automobile 187 3,797 52 19 305 5 Other 2 105 1,010 38 5 52 2 Total Consumer 304 8,983 219 24 357 7 Total 304 $ 8,983 $ 219 25 $ 1,509 $ 7 1 The period end balances reflect all paydowns and charge-offs since the modification date. TDRs fully paid-off, charged-off, or foreclosed upon by period end are not included. 2 Comprised of other revolving credit and installment financing. Loans Modified as a TDR for the Six Months Ended June 30, 2021 Loans Modified as a TDR for the Six Months Ended June 30, 2020 Recorded Increase in Recorded Increase in Troubled Debt Restructurings Investment Allowance Investment Allowance (dollars in thousands) Number of Contracts (as of period end) 1 (as of period end) Number of Contracts (as of period end) 1 (as of period end) Commercial Commercial and Industrial 5 $ 109 $ 2 2 $ 98 $ 2 Construction — — — 1 1,152 — Total Commercial 5 109 2 3 1,250 2 Consumer Residential Mortgage 7 3,714 120 — — — Home Equity 7 717 36 — — — Automobile 570 11,670 162 70 1,172 19 Other 2 320 2,932 111 35 274 11 Total Consumer 904 19,033 429 105 1,446 30 Total 909 $ 19,142 $ 431 108 $ 2,696 $ 32 1 2 Comprised of other revolving credit and installment financing. The following presents by class, all loans modified in a TDR that defaulted during the three and six months ended June 30, 2021, and June 30, 2020, and within twelve months of their modification date. A TDR is considered to be in default once it becomes 60 days or more past due following a modification. Three Months Ended June 30, 2021 Three Months Ended June 30, 2020 TDRs that Defaulted During the Period, Recorded Recorded Within Twelve Months of their Modification Date Number of Investment Number of Investment (dollars in thousands) Contracts (as of period end) 1 Contracts (as of period end) 1 Consumer Automobile 16 $ 296 19 $ 331 Other 2 12 140 2 14 Total Consumer 28 436 21 345 Total 28 $ 436 21 $ 345 Six Months Ended June 30, 2021 Six Months Ended June 30, 2020 TDRs that Defaulted During the Period, Recorded Recorded Within Twelve Months of their Modification Date Number of Investment Number of Investment (dollars in thousands) Contracts (as of period end) 1 Contracts (as of period end) 1 Consumer Residential Mortgage 1 $ 534 — $ — Automobile 23 385 34 636 Other 2 23 216 6 40 Total Consumer 47 1,135 40 676 Total 47 $ 1,135 40 $ 676 1 The period end balances reflect all paydowns and charge-offs since the modification date. TDRs fully paid-off, charged-off, or foreclosed upon by period end are not included. 2 Comprised of other revolving credit and installment financing. Commercial and consumer loans modified in a TDR are closely monitored for delinquency as an early indicator of possible future default. If loans modified in a TDR subsequently default, the Company evaluates the loan for possible further impairment. The specific Allowance associated with the loan may be increased, adjustments may be made in the allocation of the Allowance, or partial charge-offs may be taken to further write-down the carrying value of the loan. Modifications in response to COVID-19 The Company initially offered short-term loan modifications to assist borrowers during the COVID-19 national emergency. These modifications generally involve principal and/or interest payment deferrals for up to six months. As the COVID-19 pandemic persists in negatively impacting the economy, the Company continues to offer additional loan modifications to borrowers struggling as a result of COVID-19. Similar to the initial modifications granted, the additional round of loan modifications generally involve principal and/or interest payment deferrals for up to an additional six months for commercial and consumer loans, and principal-only deferrals for up to an additional 12 months for selected commercial loans. The Company generally continues to accrue and recognize interest income during the deferral period. The Company offers several repayment options such as immediate repayment, repayment over a designated time period or as a balloon payment at maturity, or by extending the loan term. These modifications generally do not involve forgiveness or interest rate reductions. In addition, the Company evaluates the need to record an allowance for the related AIR. As of June 30, 2021, and December 31, 2020, the Company recorded an AIR allowance of $1.4 million and $2.7 million, respectively. The allowance was recorded as a contra-asset against AIR with the offset to provision for credit losses. In addition, the Company elected to deduct the AIR from the AIR Allowance (rather than reversing interest income) when the AIR is deemed uncollectible, which generally occurs when the related loan is placed on nonaccrual status or is charged-off. Company, as lessor, also granted short-term lease concessions on some of its sales-type finance leases for equipment and automobiles. The concessions primarily consists of six-month extension programs whereby lease payments currently due are deferred and shifted to the end of the lease term. Interest income continues to accrue, and in certain cases paid during the deferral period. Additional rounds of lease concessions were not material. In accordance with Section 4013 of the CARES Act and the joint agency statement issued by banking agencies, these COVID-19 related loan and lease modifications are not accounted for as TDRs. These loan and lease modifications totaled $205.3 million (118 loans and leases) for the commercial segment and $13.2 million (65 loans and leases) for the consumer segment as of June 30, 2021, and $311.6 million (210 loans and leases) for the commercial segment and $178.1 million (1,920 loans and leases) for the consumer segment as of December 31, 2020. Foreclosure Proceedings Consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure totaled $1.5 million as of June 30, 2021. |