Past Due Loans, Allowance For Credit Losses, Non-Accrual Loans, and TDRS | PAST DUE LOANS, ALLOWANCE FOR CREDIT LOSSES, NON-ACCRUAL LOANS, AND TDRS Past Due and Non-accrual Loans The following table presents an aging analysis of the Company's past due loans as of September 30, 2021 and December 31, 2020 with balances presented on an amortized cost basis. The aging is determined without regard to accrual status. The table also presents non-performing loans, consisting of non-accrual loans (the majority of which are past due) and loans 90 days or more past due and still accruing interest, as of each balance sheet date. Aging Analysis of Past Due Loans and Non-performing Loans by Class (Dollar amounts in thousands) Aging Analysis (Accruing and Non-accrual) Non-performing Loans Current 30-89 Days 90 Days or Total Total Non- 90 Days or More Past Due, Still Accruing Interest As of September 30, 2021 Commercial and industrial $ 4,687,711 $ 6,475 $ 11,272 $ 17,747 $ 4,705,458 $ 14,616 $ 722 Agricultural 344,374 1,388 3,397 4,785 349,159 6,682 — Commercial real estate: Office, retail, and industrial 1,738,178 15,351 12,063 27,414 1,765,592 20,632 — Multi-family 1,077,754 2,085 3,102 5,187 1,082,941 3,450 — Construction 592,433 920 1,851 2,771 595,204 1,851 — Other commercial real estate 1,388,152 6,314 14,489 20,803 1,408,955 18,060 32 Total commercial real estate 4,796,517 24,670 31,505 56,175 4,852,692 43,993 32 Total corporate loans, 9,828,602 32,533 46,174 78,707 9,907,309 65,291 754 PPP loans 384,100 — — — 384,100 — — Total corporate loans 10,212,702 32,533 46,174 78,707 10,291,409 65,291 754 Home equity 585,157 2,043 3,926 5,969 591,126 10,006 75 1-4 family mortgages 3,319,223 3,978 9,531 13,509 3,332,732 12,786 — Installment 570,600 2,401 464 2,865 573,465 — 464 Total consumer loans 4,474,980 8,422 13,921 22,343 4,497,323 22,792 539 Total loans $ 14,687,682 $ 40,955 $ 60,095 $ 101,050 $ 14,788,732 $ 88,083 $ 1,293 As of December 31, 2020 Commercial and industrial $ 4,530,546 $ 9,254 $ 38,454 $ 47,708 $ 4,578,254 $ 42,965 $ 591 Agricultural 359,373 705 3,960 4,665 364,038 10,719 — Commercial real estate: Office, retail, and industrial 1,827,891 3,961 29,916 33,877 1,861,768 34,224 257 Multi-family 867,815 2,510 2,488 4,998 872,813 2,488 — Construction 606,934 1,154 4,523 5,677 612,611 4,980 1,065 Other commercial real estate 1,448,258 15,015 18,703 33,718 1,481,976 25,824 434 Total commercial real estate 4,750,898 22,640 55,630 78,270 4,829,168 67,516 1,756 Total corporate loans, 9,640,817 32,599 98,044 130,643 9,771,460 121,200 2,347 PPP loans 785,563 — — — 785,563 — — Total corporate loans 10,426,380 32,599 98,044 130,643 10,557,023 121,200 2,347 Home equity 750,263 5,563 5,899 11,462 761,725 10,795 956 1-4 family mortgages 3,009,564 5,296 7,553 12,849 3,022,413 10,530 115 Installment 404,831 4,263 977 5,240 410,071 — 977 Total consumer loans 4,164,658 15,122 14,429 29,551 4,194,209 21,325 2,048 Total loans $ 14,591,038 $ 47,721 $ 112,473 $ 160,194 $ 14,751,232 $ 142,525 $ 4,395 Allowance for Credit Losses The Company maintains an allowance for credit losses at a level deemed adequate by management to absorb estimated losses expected in the existing loan portfolio. See Note 1, "Summary of Significant Accounting Policies," for the accounting policy for the allowance for credit losses. A rollforward of the allowance for credit losses by portfolio segment for the quarters and nine months ended September 30, 2021 and 2020 is presented in the table below. PPP loans are excluded from this table as there is no allowance for credit losses associated with these loans because they are fully guaranteed by the U.S. Small Business Administration ("SBA"). Allowance for Credit Losses by Portfolio Segment (Dollar amounts in thousands) Commercial, Office, Multi- Construction Other Consumer Allowance for Total Quarter Ended September 30, 2021 Beginning balance $ 116,396 $ 17,992 $ 3,459 $ 4,924 $ 20,058 $ 51,772 $ 8,625 $ 223,226 Charge-offs (7,081) (673) (1) (1,153) (857) (1,992) — (11,757) Recoveries 2,116 117 — 167 28 969 — 3,397 Net charge-offs (4,965) (556) (1) (986) (829) (1,023) — (8,360) Provision for loan 508 272 172 (210) 693 (1,435) — — Ending balance $ 111,939 $ 17,708 $ 3,630 $ 3,728 $ 19,922 $ 49,314 $ 8,625 $ 214,866 Quarter Ended September 30, 2020 Beginning balance $ 123,977 $ 24,441 $ 5,311 $ 11,522 $ 21,862 $ 52,939 $ 7,625 $ 247,677 Allowance established (1,188) — — — — — — (1,188) Charge-offs (6,853) (1,344) — (4,889) (1,823) (2,629) — (17,538) Recoveries 1,118 5 — — 70 602 — 1,795 Net charge-offs (5,735) (1,339) — (4,889) (1,753) (2,027) — (15,743) Provision for loan 8,674 1,636 428 99 3,522 1,568 200 16,127 Ending balance $ 125,728 $ 24,738 $ 5,739 $ 6,732 $ 23,631 $ 52,480 $ 7,825 $ 246,873 Nine Months Ended September 30, 2021 Beginning balance $ 119,954 $ 24,078 $ 5,709 $ 6,674 $ 24,309 $ 58,293 $ 8,025 $ 247,042 Charge-offs (26,688) (9,048) (5) (1,371) (1,928) (7,661) — (46,701) Recoveries 4,887 237 7 177 269 2,250 — 7,827 Net charge-offs (21,801) (8,811) 2 (1,194) (1,659) (5,411) — (38,874) Provision for loan 13,786 2,441 (2,081) (1,752) (2,728) (3,568) 600 6,698 Ending balance $ 111,939 $ 17,708 $ 3,630 $ 3,728 $ 19,922 $ 49,314 $ 8,625 $ 214,866 Nine Months Ended September 30, 2020 Beginning balance $ 62,830 $ 7,580 $ 2,950 $ 1,697 $ 6,408 $ 26,557 $ 1,200 $ 109,222 Adjustment to apply recent accounting pronouncements (1) 20,159 11,686 397 10,300 11,427 16,235 5,553 75,757 Allowance established 11,452 2,003 — — — 39 872 14,366 Charge-offs (19,592) (4,774) (19) (7,495) (2,162) (11,660) — (45,702) Recoveries 3,097 20 5 — 226 1,574 — 4,922 Net charge-offs (16,495) (4,754) (14) (7,495) (1,936) (10,086) — (40,780) Provision for loan 47,782 8,223 2,406 2,230 7,732 19,735 200 88,308 Ending balance $ 125,728 $ 24,738 $ 5,739 $ 6,732 $ 23,631 $ 52,480 $ 7,825 $ 246,873 (1) As a result of accounting guidance adopted in the first quarter of 2020, the increase in allowance for credit losses, net of tax, was recognized as a cumulative-effect adjustment to retained earnings as of January 1, 2020. Determination of the allowance for credit losses considers multiple macroeconomic scenarios of stressed GDP, unemployment, and housing price index, detailed portfolio reviews of elevated risk sectors, and the effects of governmental responses to the pandemic. The allowance for credit losses increased from December 31, 2019 primarily due to the adoption of current expected credit losses ("CECL") and the estimated impact of the pandemic on the allowance for credit losses. The table below provides a breakdown of loans and the related allowance for credit losses by portfolio segment as of September 30, 2021 and December 31, 2020. Loans and Related Allowance for Credit Losses by Portfolio Segment (Dollar amounts in thousands) Loans Allowance for Credit Losses Individually Collectively PCD Total Individually Collectively PCD Total As of September 30, 2021 Commercial, industrial, $ 14,580 $ 4,993,501 $ 46,536 $ 5,054,617 $ 1,499 $ 105,470 $ 4,970 $ 111,939 Commercial real estate: Office, retail, and industrial 12,498 1,719,005 34,089 1,765,592 384 13,902 3,422 17,708 Multi-family 2,171 1,074,323 6,447 1,082,941 — 3,555 75 3,630 Construction 1,154 582,683 11,367 595,204 — 3,406 322 3,728 Other commercial real estate 11,993 1,353,603 43,359 1,408,955 164 10,083 9,675 19,922 Total commercial real estate 27,816 4,729,614 95,262 4,852,692 548 30,946 13,494 44,988 Total corporate loans, 42,396 9,723,115 141,798 9,907,309 2,047 136,416 18,464 156,927 PPP loans — 384,100 — 384,100 — — — — Total corporate loans 42,396 10,107,215 141,798 10,291,409 2,047 136,416 18,464 156,927 Consumer — 4,477,967 19,356 4,497,323 — 48,815 499 49,314 Allowance for unfunded — — — — — 8,625 — 8,625 Total loans $ 42,396 $ 14,585,182 $ 161,154 $ 14,788,732 $ 2,047 $ 193,856 $ 18,963 $ 214,866 As of December 31, 2020 Commercial, industrial, and $ 45,650 $ 4,826,017 $ 70,625 $ 4,942,292 $ 3,536 $ 107,763 $ 8,655 $ 119,954 Commercial real estate: Office, retail, and industrial 26,384 1,792,618 42,766 1,861,768 1,123 15,106 7,849 24,078 Multi-family 1,279 864,677 6,857 872,813 — 5,438 271 5,709 Construction 1,154 595,550 15,907 612,611 — 4,535 2,139 6,674 Other commercial real estate 13,736 1,414,541 53,699 1,481,976 171 12,651 11,487 24,309 Total commercial real estate 42,553 4,667,386 119,229 4,829,168 1,294 37,730 21,746 60,770 Total corporate loans, 88,203 9,493,403 189,854 9,771,460 4,830 145,493 30,401 180,724 PPP loans — 785,563 — 785,563 — — — — Total corporate loans 88,203 10,278,966 189,854 10,557,023 4,830 145,493 30,401 180,724 Consumer — 4,172,042 22,167 4,194,209 — 57,567 726 58,293 Allowance for unfunded — — — — — 8,025 — 8,025 Total loans $ 88,203 $ 14,451,008 $ 212,021 $ 14,751,232 $ 4,830 $ 211,085 $ 31,127 $ 247,042 The following table presents collateral-dependent loans, including PCD loans, without regard to accrual status by primary collateral type and non-accrual loans with no related allowance as of September 30, 2021 and December 31, 2020. PPP loans are excluded from this table as there is no allowance for credit losses associated with these loans because they are fully guaranteed by the SBA. Collateral-dependent Loans and Non-accrual Loans With No Related Allowance by Class (Dollar amounts in thousands) Type of Collateral Non-accrual Loans Real Blanket Equipment As of September 30, 2021 Commercial and industrial $ 4,296 $ 11,572 $ 923 $ 10,619 Agricultural 6,445 — — 2,784 Commercial real estate: Office, retail, and industrial 20,285 — — 11,868 Multi-family 2,950 — — 2,950 Construction 2,223 — — 327 Other commercial real estate 30,952 — — 6,475 Total commercial real estate 56,410 — — 21,620 Total corporate loans 67,151 11,572 923 35,023 Home equity 96 — — 96 1-4 family mortgages 1,130 — — — Installment — — — — Total consumer loans 1,226 — — 96 Total loans $ 68,377 $ 11,572 $ 923 $ 35,119 As of December 31, 2020 Commercial and industrial $ 27,007 $ 35,632 $ 2,555 $ 36,686 Agricultural 8,583 1,737 — 5,213 Commercial real estate: Office, retail, and industrial 42,790 — — 23,508 Multi-family 2,097 — — 1,279 Construction 5,370 — — 1,831 Other commercial real estate 40,430 — — 20,158 Total commercial real estate 90,687 — — 46,776 Total corporate loans 126,277 37,369 2,555 88,675 Home equity 211 — — 99 1-4 family mortgages 2,807 — — 578 Installment — — — — Total consumer loans 3,018 — — 677 Total loans $ 129,295 $ 37,369 $ 2,555 $ 89,352 Loans Individually Evaluated The following table presents loans individually evaluated by class of loan as of September 30, 2021 and December 31, 2020. PCD loans are excluded from this disclosure. Loans Individually Evaluated by Class (Dollar amounts in thousands) As of September 30, 2021 As of December 31, 2020 Recorded Investment In Recorded Investment In Loans with Loans with Unpaid Specific Loans with Loans with Unpaid Specific Commercial and industrial $ 7,284 $ 850 $ 22,314 $ 294 $ 33,643 $ 1,687 $ 40,055 $ 398 Agricultural 2,784 3,662 10,917 1,205 5,213 5,107 14,972 3,138 Commercial real estate: Office, retail, and industrial 10,643 1,855 14,849 384 21,537 4,847 30,474 1,123 Multi-family 2,171 — 2,171 — 1,279 — 1,279 — Construction — 1,154 1,182 — 1,154 — 1,507 — Other commercial real estate 2,593 9,400 12,863 164 12,822 914 14,240 171 Total commercial real estate 15,407 12,409 31,065 548 36,792 5,761 47,500 1,294 Total corporate loans 25,475 16,921 64,296 2,047 75,648 12,555 102,527 4,830 Consumer — — — — — — — — Total non-accrual loans $ 25,475 $ 16,921 $ 64,296 $ 2,047 $ 75,648 $ 12,555 $ 102,527 $ 4,830 Interest income recognized on non-accrual loans using the cash basis of accounting for the quarter and nine months ended September 30, 2021, was $291,000 and $864,000, respectively, and $1.0 million and $1.4 million for the same periods in 2020. Credit Quality Indicators Corporate loans and commitments are assessed for credit risk and assigned ratings based on various characteristics, such as the borrower's cash flow, leverage, and collateral. Ratings for commercial credits are reviewed at least annually or more often if events or circumstances arise that could impact the rating. The following tables present credit quality indicators for corporate and consumer loans on an amortized cost basis as of September 30, 2021 and net loan charge-offs for the nine months ended September 30, 2021. PPP loans are excluded from this table as there is no allowance for credit losses associated with these loans because they are fully guaranteed by the SBA. For a summary of credit quality indicators as of December 31, 2020, see Note 7, "Past Due Loans, Allowance for Credit Losses, Impaired Loans, and TDRs," in the Company's 2020 10-K. Corporate Loan Portfolio by Origination Year (Dollar amounts in thousands) 2021 (1) 2020 2019 2018 2017 Prior Revolving Loans Total Commercial, industrial, agricultural: Pass $ 752,464 $ 641,813 $ 723,079 $ 588,007 $ 308,785 $ 430,650 $ 1,280,272 $ 4,725,070 Special Mention (2) 2,370 894 26,523 37,174 20,750 32,822 36,094 156,627 Substandard (3) 252 2,039 21,011 64,985 22,195 19,296 21,844 151,622 Non-accrual (4) — 1,046 1,587 2,432 2,141 13,128 964 21,298 Total commercial, $ 755,086 $ 645,792 $ 772,200 $ 692,598 $ 353,871 $ 495,896 $ 1,339,174 $ 5,054,617 Commercial, industrial, $ — $ 835 $ 4,738 $ 4,745 $ 9,770 $ (873) $ 2,586 $ 21,801 Office, retail, and industrial: Pass $ 139,452 $ 138,270 $ 205,148 $ 157,894 $ 238,194 $ 727,319 $ 14,479 $ 1,620,756 Special Mention (2) 1,717 312 4,577 3,301 17,234 35,009 — 62,150 Substandard (3) 732 628 — 15,922 5,330 39,442 — 62,054 Non-accrual (4) — — — — 324 20,308 — 20,632 Total office, retail, $ 141,901 $ 139,210 $ 209,725 $ 177,117 $ 261,082 $ 822,078 $ 14,479 $ 1,765,592 Office, retail, and $ — $ — $ 246 $ 3,899 $ 1,023 $ 3,643 $ — $ 8,811 Multi-family: Pass $ 220,347 $ 154,304 $ 153,338 $ 80,207 $ 117,350 $ 277,778 $ 18,237 $ 1,021,561 Special Mention (2) — — 5,775 4,385 — 31,356 — 41,516 Substandard (3) — — — 378 70 15,966 — 16,414 Non-accrual (4) — — — — 935 2,515 — 3,450 Total multi-family $ 220,347 $ 154,304 $ 159,113 $ 84,970 $ 118,355 $ 327,615 $ 18,237 $ 1,082,941 Multi-family net loan $ — $ — $ — $ — $ 5 $ (7) $ — $ (2) Construction: Pass $ 62,941 $ 135,694 $ 89,579 $ 133,832 $ 62,946 $ 73,511 $ 24,970 $ 583,473 Special Mention (2) — — — 38 — 162 — 200 Substandard (3) — — — — 1,392 8,288 — 9,680 Non-accrual (4) — — — — 1,154 697 — 1,851 Total construction $ 62,941 $ 135,694 $ 89,579 $ 133,870 $ 65,492 $ 82,658 $ 24,970 $ 595,204 Construction net loan $ — $ — $ — $ — $ 1,104 $ 49 $ 41 $ 1,194 Other commercial real estate: Pass $ 180,456 $ 167,456 $ 157,047 $ 206,984 $ 138,750 $ 335,895 $ 23,160 $ 1,209,748 Special Mention (2) — — 24,396 12,462 10,464 22,403 — 69,725 Substandard (3) — — 1,912 30,358 20,727 58,183 242 111,422 Non-accrual (4) — — — 205 1,056 16,658 141 18,060 Total other $ 180,456 $ 167,456 $ 183,355 $ 250,009 $ 170,997 $ 433,139 $ 23,543 $ 1,408,955 Other commercial real $ — $ — $ — $ 245 $ 11 $ 1,403 $ — $ 1,659 (1) Represents year-to-date loans originated during 2021. (2) Loans categorized as special mention exhibit potential weaknesses that require the close attention of management since these potential weaknesses may result in the deterioration of repayment prospects in the future. (3) Loans categorized as substandard exhibit well-defined weaknesses that may jeopardize the liquidation of the debt. These loans continue to accrue interest because they are well-secured, and collection of principal and interest is expected within a reasonable time. (4) Loans categorized as non-accrual exhibit well-defined weaknesses that may jeopardize the liquidation of the debt or result in a loss if the deficiencies are not corrected. Consumer Loan Portfolio by Origination Year (Dollar amounts in thousands) 2021 (1) 2020 2019 2018 2017 Prior Revolving Loans Total Home equity: Performing $ 7,471 $ 10,778 $ 8,168 $ 9,650 $ 8,508 $ 48,409 $ 488,136 $ 581,120 Non-accrual — — 62 453 223 7,049 2,219 10,006 Total home equity $ 7,471 $ 10,778 $ 8,230 $ 10,103 $ 8,731 $ 55,458 $ 490,355 $ 591,126 Home equity net $ — $ — $ — $ 27 $ (42) $ (347) $ (26) $ (388) 1-4 family mortgages: Performing $ 908,935 $ 1,579,102 $ 379,230 $ 118,836 $ 74,276 $ 258,947 $ 620 $ 3,319,946 Non-accrual — 982 380 627 636 10,161 — 12,786 Total 1-4 family $ 908,935 $ 1,580,084 $ 379,610 $ 119,463 $ 74,912 $ 269,108 $ 620 $ 3,332,732 1-4 family mortgages $ — $ — $ — $ 2 $ — $ 247 $ — $ 249 Installment: Performing $ 165,389 $ 132,025 $ 108,820 $ 74,939 $ 31,654 $ 18,255 $ 42,383 $ 573,465 Non-accrual — — — — — — — — Total installment $ 165,389 $ 132,025 $ 108,820 $ 74,939 $ 31,654 $ 18,255 $ 42,383 $ 573,465 Installment net loan $ 247 $ 1,323 $ 2,590 $ 1,439 $ 97 $ (182) $ 36 $ 5,550 (1) Represents year-to-date loans originated during 2021. During the quarter and nine months ended September 30, 2021, $12.9 million and $34.0 million, respectively, and $5.2 million and $29.0 million, for the same periods in 2020, of revolving loans converted to term loans. TDRs TDRs are generally performed at the request of the individual borrower and may include forgiveness of principal, reduction in interest rates, changes in payments, and maturity date extensions. The table below presents TDRs by class as of September 30, 2021 and December 31, 2020. See Note 1, "Summary of Significant Accounting Policies," for the accounting policy for TDRs. TDRs by Class (Dollar amounts in thousands) As of September 30, 2021 As of December 31, 2020 Accruing Non-accrual (1) Total Accruing Non-accrual (1) Total Commercial and industrial $ — $ 6,255 $ 6,255 $ — $ 8,859 $ 8,859 Agricultural — — — — — — Commercial real estate: Office, retail, and industrial — — — — 2,340 2,340 Multi-family — 151 151 — 160 160 Construction — — — — — — Other commercial real estate 155 — 155 184 — 184 Total commercial real estate 155 151 306 184 2,500 2,684 Total corporate loans 155 6,406 6,561 184 11,359 11,543 Home equity 29 103 132 31 116 147 1-4 family mortgages 355 217 572 598 228 826 Installment — — — — — — Total consumer loans 384 320 704 629 344 973 Total loans $ 539 $ 6,726 $ 7,265 $ 813 $ 11,703 $ 12,516 (1) These TDRs are included in non-accrual loans in the preceding tables. In March of 2020, the Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was enacted by the U.S. government in response to the economic disruption caused by the pandemic. The Company's banking regulators issued the "Interagency Statement on Loan Modifications by Financial Institutions Working with Customers Affected by the Coronavirus" that encourages financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of the pandemic. Additionally, the CARES Act as amended by the 2021 Consolidated Appropriations Act, which was signed into law in December 2020, provides that a qualified loan modification is exempt from classification as a TDR as defined by GAAP, from the period beginning March 1, 2020 until the earlier of January 1, 2022 or the date that is 60 days after the date on which the national emergency concerning the pandemic declared by the President of the United States terminates. As of September 30, 2021, the Company has eligible modifications with outstanding balances totaling $40.6 million, which are not classified as TDRs. TDRs are included in the calculation of the allowance for credit losses in the same manner as non-accrual loans. As of September 30, 2021 and December 31, 2020 there were $245,000 and $140,000 of specific allowances, respectively, related to TDRs. There were no material restructurings during the quarters and nine months ended September 30, 2021 and 2020. Accruing TDRs that do not perform in accordance with their modified terms are transferred to non-accrual. There were no material TDRs that defaulted within twelve months of the restructure date during the quarters and nine months ended September 30, 2021 and 2020. A rollforward of the carrying value of TDRs for the quarters and nine months ended September 30, 2021 and 2020 is presented in the following table. TDR Rollforward (Dollar amounts in thousands) Quarters Ended Nine Months Ended 2021 2020 2021 2020 Accruing Beginning balance $ 782 $ 1,201 $ 813 $ 1,233 Additions — — — — Net payments (243) (13) (274) (45) Net transfers to non-accrual — (347) — (347) Ending balance 539 841 539 841 Non-accrual Beginning balance 7,403 12,093 11,703 20,514 Additions — 11,636 — 11,636 Net payments (677) (5,886) (3,951) (8,205) Charge-offs — (2,353) (1,026) (8,455) Net transfers from accruing — 347 — 347 Ending balance 6,726 15,837 6,726 15,837 Total TDRs $ 7,265 $ 16,678 $ 7,265 $ 16,678 There were no commitments to lend additional funds to borrowers with TDRs as of September 30, 2021 and December 31, 2020. |