Loans and Allowance for Credit Losses | 4. Loans and Allowance for Credit Losses The Company generally makes loans in its market areas of south and central Mississippi; southern and central Alabama; northwest, central and south Louisiana; the northern, central, and panhandle regions of Florida; certain areas of east and northeast Texas, including Houston, Beaumont and Dallas; and Nashville, Tennessee. Loans, net of unearned income, by portfolio are presented at amortized cost basis in the table below. Amortized cost does not include accrued interest, which is reflected in the accrued interest line item in the Consolidated Balance Sheets, totaling $86.0 million and $67.7 million at September 30, 2020 and December 31, 2019, respectively. September 30, December 31, (in thousands) 2020 2019 Commercial non-real estate $ 10,257,788 $ 9,166,947 Commercial real estate - owner occupied 2,779,407 2,738,460 Total commercial and industrial 13,037,195 11,905,407 Commercial real estate - income producing 3,406,554 2,994,448 Construction and land development 1,096,149 1,157,451 Residential mortgages 2,754,388 2,990,631 Consumer 1,945,918 2,164,818 Total loans $ 22,240,204 $ 21,212,755 The following briefly describes the composition of each loan category. Commercial and industrial Commercial and industrial loans are made available to businesses for working capital (including financing of inventory and receivables), business expansion, to facilitate the acquisition of a business, and the purchase of equipment and machinery, including equipment leasing. These loans are primarily made based on the identified cash flows of the borrower and, when secured, have the added strength of the underlying collateral. Commercial non-real estate loans may be secured by the assets being financed or other tangible or intangible business assets such as accounts receivable, inventory, ownership, enterprise value or commodity interests, and may incorporate a personal or corporate guarantee; however, some short-term loans may be made on an unsecured basis, including a small portfolio of corporate credit cards, generally issued as a part of overall customer relationships. Commercial non-real estate loans also include loans made under the Small Business Administration’s (SBA) Paycheck Protection Program (PPP). PPP loans are guaranteed by the SBA and are forgivable to the debtor upon satisfaction of certain criteria. The loans bear interest at 1% per annum and have two or five year terms, depending on the date of origination. These loans also earn an origination fee of 1% to 5%, depending on the loan size, that is deferred and amortized over the estimated life of the loan using the effective yield method. Commercial real estate – owner occupied loans consist of commercial mortgages on properties where repayment is generally dependent on the cash flow from the ongoing operations and activities of the borrower. Like commercial non-real estate, these loans are primarily made based on the identified cash flows of the borrower, but also have the added strength of the value of underlying real estate collateral. Commercial real estate – income producing Commercial real estate – income producing loans consist of loans secured by commercial mortgages on properties where the loan is made to real estate developers or investors and repayment is dependent on the sale, refinance, or income generated from the operation of the property. Properties financed include retail, office, multifamily, senior housing, hotel/motel, skilled nursing facilities and other commercial properties. Construction and land development Construction and land development loans are made to facilitate the acquisition, development, improvement and construction of both commercial and residential-purpose properties. Such loans are made to builders and investors where repayment is expected to be made from the sale, refinance or operation of the property or to businesses to be used in their business operations. This portfolio also includes a small amount of residential construction loans and loans secured by raw land not yet under development. Residential mortgages Residential mortgages consist of closed-end loans secured by first liens on 1- 4 family residential properties. The portfolio includes both fixed and adjustable rate loans, although most longer term, fixed rate loans originated are sold in the secondary mortgage market. Consumer Consumer loans include second lien mortgage home loans, home equity lines of credit and nonresidential consumer purpose loans. Nonresidential consumer loans include both direct and indirect loans. Direct nonresidential consumer loans are made to finance the purchase of personal property, including automobiles, recreational vehicles and boats, and for other personal purposes (secured and unsecured), and deposit account secured loans. Indirect nonresidential consumer loans include automobile financing provided to the consumer through an agreement with automobile dealerships. Consumer loans also include a small portfolio of credit card receivables issued on the basis of applications received through referrals from the Bank’s branches, online and other marketing efforts. Allowance for Credit Losses The following tables show activity in the allowance for credit losses by portfolio class for the nine months ended September 30, 2020 and 2019, as well as the corresponding recorded investment in loans at the end of each period. Effective January 1, 2020, the Company adopted the provisions of ASC 326 (CECL) using a modified retrospective basis. The difference between the December 31, 2019 incurred allowance and the CECL allowance is reflected as a cumulative effect of change in accounting principle in the table below. For further discussion of the day one impact of the CECL adoption, refer to Note 16 – Recent Accounting Pronouncements. Commercial Total Commercial Commercial real estate- commercial real estate- Construction non-real owner and income and land Residential (in thousands) estate occupied industrial producing development mortgages Consumer Total Nine Months Ended September 30, 2020 Allowance for credit losses Allowance for loan losses: Beginning balance $ 106,432 $ 10,977 $ 117,409 $ 20,869 $ 9,350 $ 20,331 $ 23,292 $ 191,251 Cumulative effect of change in accounting principle (244 ) 14,877 14,633 7,287 7,478 12,921 7,092 49,411 Charge-offs (364,123 ) (1,828 ) $ (365,951 ) (2,211 ) (7 ) (170 ) (13,640 ) (381,979 ) Recoveries 4,831 659 $ 5,490 46 549 1,078 4,360 11,523 Net provision for loan losses 401,155 41,336 $ 442,491 78,661 12,325 17,613 27,378 578,468 Ending balance - allowance for loan losses $ 148,051 $ 66,021 $ 214,072 $ 104,652 $ 29,695 $ 51,773 $ 48,482 $ 448,674 Reserve for unfunded lending commitments: Beginning balance $ 3,974 $ — $ 3,974 $ — $ — $ — $ — $ 3,974 Cumulative effect of change in accounting principle 5,772 288 6,060 449 15,658 17 5,146 27,330 Provision for losses on unfunded commitments (3,786 ) 187 (3,599 ) 1,599 6,046 (11 ) (3,813 ) 222 Ending balance - reserve for unfunded lending commitments 5,960 475 6,435 2,048 21,704 6 1,333 31,526 Total allowance for credit losses $ 154,011 $ 66,496 $ 220,507 $ 106,700 $ 51,399 $ 51,779 $ 49,815 $ 480,200 Allowance for loan losses: Individually evaluated $ 27,304 $ 1,344 $ 28,648 $ 24 $ 169 $ 416 $ 456 $ 29,713 Collectively evaluated 120,747 64,677 185,424 104,628 29,526 51,357 48,026 418,961 Allowance for loan losses $ 148,051 $ 66,021 $ 214,072 $ 104,652 $ 29,695 $ 51,773 $ 48,482 $ 448,674 Reserve for unfunded lending commitments: Individually evaluated $ 992 $ — $ 992 $ — $ — $ — $ 5 $ 997 Collectively evaluated 4,968 475 5,443 2,048 21,704 6 1,328 30,529 Reserve for unfunded lending commitments: $ 5,960 $ 475 $ 6,435 $ 2,048 $ 21,704 $ 6 $ 1,333 $ 31,526 Total allowance for credit losses $ 154,011 $ 66,496 $ 220,507 $ 106,700 $ 51,399 $ 51,779 $ 49,815 $ 480,200 Loans: Individually evaluated $ 73,139 $ 11,124 $ 84,263 $ 5,549 $ 1,837 $ 6,064 $ 3,924 $ 101,637 Collectively evaluated 10,184,649 2,768,283 12,952,932 3,401,005 1,094,312 2,748,324 1,941,994 22,138,567 Total loans $ 10,257,788 $ 2,779,407 $ 13,037,195 $ 3,406,554 $ 1,096,149 $ 2,754,388 $ 1,945,918 $ 22,240,204 Commercial Total Commercial Commercial real estate- commercial real estate- Construction non-real owner and income and land Residential (in thousands) estate occupied industrial producing development mortgages Consumer Total Nine Months Ended September 30, 2019 Allowance for loan losses: Beginning balance $ 97,752 $ 13,757 $ 111,509 $ 17,638 $ 15,647 $ 23,782 $ 25,938 $ 194,514 Charge-offs (33,382 ) (137 ) (33,519 ) (10 ) (7 ) (660 ) (13,169 ) (47,365 ) Recoveries 5,662 284 5,946 518 108 433 2,866 9,871 Net provision for loan losses 29,267 545 29,812 7,604 (5,982 ) (2,076 ) 9,194 38,552 Ending balance $ 99,299 $ 14,449 $ 113,748 $ 25,750 $ 9,766 $ 21,479 $ 24,829 $ 195,572 Ending balance: Allowance: Individually evaluated for impairment $ 11,535 $ 57 $ 11,592 $ 49 $ 29 $ 183 $ 365 $ 12,218 Amounts related to purchased credit impaired loans 135 172 307 40 144 8,032 300 8,823 Collectively evaluated for impairment 87,629 14,220 101,849 25,661 9,593 13,264 24,164 174,531 Total allowance $ 99,299 $ 14,449 $ 113,748 $ 25,750 $ 9,766 $ 21,479 $ 24,829 $ 195,572 Loans: Individually evaluated for impairment $ 201,979 $ 11,109 $ 213,088 $ 2,781 $ 3,385 $ 4,301 $ 1,583 $ 225,138 Purchased credit impaired loans 33,040 45,124 78,164 27,281 23,431 93,450 6,294 228,620 Collectively evaluated for impairment 8,657,985 2,678,146 11,336,131 3,030,506 1,163,902 2,907,207 2,144,448 20,582,194 Total loans $ 8,893,004 $ 2,734,379 $ 11,627,383 $ 3,060,568 $ 1,190,718 $ 3,004,958 $ 2,152,325 $ 21,035,952 The calculation of the allowance for credit losses under CECL is performed using two primary approaches: a collective approach for pools of loans that have similar risk characteristics using a loss rate analysis, and a specific reserve analysis for credits individually evaluated. The increase in the allowance for credit losses for the nine months ended September 30, 2020 reflects the impact of the economic shutdown in response to the pandemic and the significant drop in oil prices. The allowance for credit losses was developed using multiple Moody’s macroeconomic forecasts applied to internally developed credit models for a two year reasonable and supportable period. The Company weighted the baseline economic forecast, which Moody’s defines as the “most likely outcome” based on current conditions and its view of where the economy is headed, at 50%. Following the sharp recession in the first half of 2020, the baseline scenario assumes a gradual recovery beginning in the second half of 2020, with the most meaningful growth occurring after a vaccine for the coronavirus becomes widely available in the second quarter of 2021. The upside scenario S-1 and the downside scenario S-2 were each weighted 25% to incorporate reasonably possible alternative outcomes. The S-1 scenario reflects reasonably possible improving conditions and a quicker recovery in 2020 and in 2021 compared to the baseline. The S-2 scenario reflects reasonably possible slower economic recovery, with higher instances of infection and death, and restrictions on travel and business winding down somewhat more slowly as compared to the baseline. The degradation in economic conditions during the nine months ended September 30, 2020 created the need for an increased allowance across all portfolios. The allowance for credit loss activity for the nine months ended September 30, 2020 also reflects the impact the sale of $497 million of energy-related loans. The write-down to loans’ observable market value plus cost to sell resulted in charge-offs of $242.6 million and a reserve release of $82.5 million, for a net provision for credit losses impact of $160.1 million, which is mostly reflected in the commercial non-real estate portfolio. Detail of the individually evaluated allowance is provided in the impaired loans section that follows. Impaired Loans The following table shows the composition of nonaccrual loans by portfolio class. Prior to the adoption of CECL, purchased credit impaired loans accounted for in pools with an accretable yield were considered to be performing. Such loans totaled $17.5 million at December 31, 2019. September 30, December 31, (in thousands) 2020 2019 Commercial non-real estate $ 78,184 $ 178,678 Commercial real estate - owner occupied 14,683 7,708 Total commercial and industrial 92,867 186,386 Commercial real estate - income producing 7,028 2,594 Construction and land development 3,234 1,217 Residential mortgages 43,596 39,262 Consumer 24,737 16,374 Total loans $ 171,462 $ 245,833 For the nine months ended September 30, 2020 and 2019, the estimated amount of interest income that would have been recorded had the loans not been assigned nonaccrual status was $10.6 million and $9.9 million, respectively. Nonaccrual loans include nonaccruing loans modified in troubled debt restructurings (“TDRs”) of $39.9 million and $132.5 million at September 30, 2020 and December 31, 2019, respectively. Total TDRs, both accruing and nonaccruing, were $49.1 million at September 30, 2020 and $193.7 million at December 31, 2019. All TDRs are individually evaluated for credit loss. At September 30, 2020 and December 31, 2019, the Company had unfunded commitments of $1.0 million and $2.4 million, respectively, to borrowers whose loan terms have been modified in a TDR. The tables below detail by portfolio class TDRs that were modified during the three and nine months ended September 30, 2020 and 2019: Three Months Ended ($ in thousands) September 30, 2020 September 30, 2019 Pre- Modification Post- Modification Pre- Modification Post- Modification Number Outstanding Outstanding Number Outstanding Outstanding of Recorded Recorded of Recorded Recorded Troubled Debt Restructurings: Contracts Investment Investment Contracts Investment Investment Commercial non-real estate — $ — $ — 2 $ 13,083 $ 6,271 Commercial real estate - owner occupied — — — — — — Total commercial and industrial — — — 2 13,083 6,271 Commercial real estate - income producing — — — 1 123 123 Construction and land development — — — 3 323 323 Residential mortgages 5 1,358 1,358 3 297 297 Consumer 2 25 25 4 70 70 Total loans 7 $ 1,383 $ 1,383 13 $ 13,896 $ 7,084 Nine Months Ended ($ in thousands) September 30, 2020 September 30, 2019 Troubled Debt Restructurings: Number of Contracts Pre- Modification Outstanding Recorded Investment Post- Modification Outstanding Recorded Investment Number of Contracts Pre- Modification Outstanding Recorded Investment Post- Modification Outstanding Recorded Investment Commercial non-real estate 3 $ 745 $ 745 10 $ 27,220 $ 20,408 Commercial real estate - owner occupied — — — 1 167 167 Total commercial and industrial 3 745 745 11 27,387 20,575 Commercial real estate - income producing — — — 1 123 123 Construction and land development 1 15 15 3 323 323 Residential mortgages 14 3,424 3,424 10 2,199 2,199 Consumer 7 89 89 6 116 116 Total loans 25 4,273 4,273 31 $ 30,148 $ 23,336 The TDRs modified during the nine months ended September 30, 2020 reflected in the table above include $0.7 million of loans with extended amortization terms or other payment concessions, $1.1 million with reduced interest rates, $0.4 million with significant covenant waivers and $2.1 million with other modifications. The TDRs modified during the nine months ended September 30, 2019 include $0.6 million of loans with extended amortization terms or other payment concessions, $22.1 million with significant covenant waivers and $7.4 million with other modifications. One commercial non-real estate loan totaling $0.4 million, one residential mortgage loan totaling $0.6 million, and two consumer loans totaling $0.2 million that defaulted during the nine months ended September 30, 2020 had been modified in a TDR during the twelve months prior to default. The tables below present loans that are individually evaluated by portfolio class at September 30, 2020 and December 31, 2019. Loans individually evaluated include nonaccrual loans, TDRs and other loans that do not share common characteristics with loans evaluated on a collective basis that have aggregate relationship balances of $1 million or more. September 30, 2020 (in thousands) Recorded investment without an allowance Recorded investment with an allowance Unpaid principal balance Related allowance for loan loss Commercial non-real estate $ 20,689 $ 52,450 $ 125,893 $ 27,304 Commercial real estate - owner occupied 6,900 4,224 14,029 1,344 Total commercial and industrial 27,589 56,674 139,922 28,648 Commercial real estate - income producing 5,453 96 7,016 24 Construction and land development 667 1,170 1,838 169 Residential mortgages 2,890 3,174 6,869 416 Consumer 1,592 2,332 3,924 456 Total loans $ 38,191 $ 63,446 $ 159,569 $ 29,713 December 31, 2019 (in thousands) Recorded investment without an allowance Recorded investment with an allowance Unpaid principal balance Related allowance for loan loss Commercial non-real estate $ 134,191 $ 98,247 $ 270,078 $ 21,733 Commercial real estate - owner occupied 2,665 1,716 7,793 104 Total commercial and industrial 136,856 99,963 277,871 21,837 Commercial real estate - income producing 373 1,525 1,959 18 Construction and land development — 277 322 21 Residential mortgages 3,383 1,791 5,709 217 Consumer 479 1,004 1,906 292 Total loans $ 141,091 $ 104,560 $ 287,767 $ 22,385 The tables below present the average balances and interest income for individually evaluated loans for the three and nine months ended September 30, 2020 and 2019. Interest income recognized represents interest on accruing loans modified in a TDR. Three Months Ended September 30, 2020 September 30, 2019 (in thousands) Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Commercial non-real estate $ 81,227 $ 37 $ 213,291 $ 1,062 Commercial real estate - owner occupied 10,553 — 14,439 45 Total commercial and industrial 91,780 37 227,730 1,107 Commercial real estate - income producing 5,886 6 2,331 7 Construction and land development 1,422 3 1,702 2 Residential mortgages 5,887 22 4,195 2 Consumer 3,947 21 1,552 21 Total loans $ 108,922 $ 89 $ 237,510 $ 1,139 Nine Months Ended September 30, 2020 September 30, 2019 (in thousands) Average Recorded Investment Interest Income Recognized Average Recorded Investment Interest Income Recognized Commercial non-real estate $ 190,622 $ 776 $ 225,597 $ 4,202 Commercial real estate - owner occupied 7,306 — 17,044 196 Total commercial and industrial 197,928 776 242,641 4,398 Commercial real estate - income producing 5,749 18 2,430 21 Construction and land development 1,805 7 597 2 Residential mortgages 5,318 43 4,525 9 Consumer 2,651 67 1,442 55 Total loans $ 213,451 $ 911 $ 251,635 $ 4,485 The TDR disclosure above does not include loans modified under Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) signed into law on March 27, 2020, which allows financial institutions to exclude eligible modifications from TDR assessment. Eligible modification must be (1) related to COVID-19, (2) executed on a loan that was not more than 30 days past due as of December 31, 2019 and (3) executed between March 1, 2020 and the earlier of 60 days after the date of the termination of the national emergency or December 31, 2020. At September 30, 2020, there were 817 loans totaling $564.8 million with active short-term payment deferrals of principal, interest or both, or other qualifying CARES Act modifications. These loans are reported in the aging analysis that follows based on the modified terms. Aging Analysis The tables below present the aging analysis of past due loans by portfolio class at September 30, 2020 and December 31, 2019. Prior to the adoption of CECL, purchased credit impaired loans accounted for in pools under ASC 310-30 with an accretable yield were considered to be current in the table below as of December 31, 2019. These loans totaled $6.1 million for 30-59 days past due, $2.0 million for 60-89 days past due and $8.3 September 30, 2020 30-59 days past due 60-89 days past due Greater than 90 days past due Total past due Current Total Loans Recorded investment > 90 days and still accruing (in thousands) Commercial non-real estate $ 6,026 $ 14,277 $ 65,705 $ 86,008 $ 10,171,780 $ 10,257,788 $ 5,110 Commercial real estate - owner occupied 535 2,276 11,708 14,519 2,764,888 2,779,407 113 Total commercial and industrial 6,561 16,553 77,413 100,527 12,936,668 13,037,195 5,223 Commercial real estate - income producing 165 30,238 8,701 39,104 3,367,450 3,406,554 2,490 Construction and land development 1,076 237 3,178 4,491 1,091,658 1,096,149 393 Residential mortgages 3,164 11,779 32,908 47,851 2,706,537 2,754,388 1,818 Consumer 9,451 4,621 12,920 26,992 1,918,926 1,945,918 515 Total $ 20,417 $ 63,428 $ 135,120 $ 218,965 $ 22,021,239 $ 22,240,204 $ 10,439 December 31, 2019 30-59 days past due 60-89 days past due Greater than 90 days past due Total past due Current Total Loans Recorded investment > 90 days and still accruing (in thousands) Commercial non-real estate $ 20,893 $ 13,445 $ 100,806 $ 135,144 $ 9,031,803 9,166,947 $ 1,537 Commercial real estate - owner occupied 4,862 556 7,268 12,686 2,725,774 2,738,460 830 Total commercial and industrial 25,755 14,001 108,074 147,830 11,757,577 11,905,407 2,367 Commercial real estate - income producing 738 703 2,910 4,351 2,990,097 2,994,448 450 Construction and land development 5,747 680 2,480 8,907 1,148,544 1,157,451 2,042 Residential mortgages 32,867 8,584 23,577 65,028 2,925,603 2,990,631 85 Consumer 18,586 6,215 9,901 34,702 2,130,116 2,164,818 1,638 Total $ 83,693 $ 30,183 $ 146,942 $ 260,818 $ 20,951,937 $ 21,212,755 $ 6,582 Credit Quality Indicators The following tables present the credit quality indicators by segments and portfolio class of loans held for investment at September 30, 2020 and December 31, 2019. The Company routinely assesses the ratings of loans in its portfolio through an established and comprehensive portfolio management process. In addition, the Company often examines portfolios of loans to determine if there are areas of risk not specifically identified in its loan by loan approach. As a result, several loans were downgraded to pass-watch in 2020 in reaction to the economic downturn caused by the pandemic and other environmental factors. In alignment with regulatory guidance, the Company has been working with its customers to manage through this period of severe uncertainty and economic stress, including providing various types of loan deferrals. While a significant number of these deferrals have expired, our ability to predict future cash flow is limited due to the economic uncertainty, and we expect that further risk rating adjustments may be required. September 30, 2020 (in thousands) Commercial non-real estate Commercial real estate - owner- occupied Total commercial and industrial Commercial real estate - income producing Construction and land development Total commercial Grade: Pass $ 9,617,743 $ 2,562,635 $ 12,180,378 $ 3,278,116 $ 1,062,252 $ 16,520,746 Pass-Watch 368,292 127,688 495,980 83,736 27,851 607,567 Special Mention 85,096 37,299 122,395 2,021 210 124,626 Substandard 186,657 51,785 238,442 42,681 5,836 286,959 Doubtful — — — — — — Total $ 10,257,788 $ 2,779,407 $ 13,037,195 $ 3,406,554 $ 1,096,149 $ 17,539,898 December 31, 2019 (in thousands) Commercial non-real estate Commercial real estate - owner- occupied Total commercial and industrial Commercial real estate - income producing Construction and land development Total commercial Grade: Pass $ 8,492,113 $ 2,517,448 $ 11,009,561 2,883,553 $ 1,120,997 $ 15,014,111 Pass-Watch 220,850 146,266 367,116 69,765 25,621 462,502 Special Mention 71,654 14,651 86,305 14,995 283 101,583 Substandard 382,330 60,095 442,425 26,135 10,550 479,110 Doubtful — — — — — — Total $ 9,166,947 $ 2,738,460 $ 11,905,407 $ 2,994,448 $ 1,157,451 $ 16,057,306 September 30, 2020 December 31, 2019 (in thousands) Residential mortgage Consumer Total Residential mortgage Consumer Total Performing $ 2,708,484 $ 1,920,049 $ 4,628,533 $ 2,950,854 $ 2,147,312 $ 5,098,166 Nonperforming 45,904 25,869 71,773 39,777 17,506 57,283 Total $ 2,754,388 $ 1,945,918 $ 4,700,306 $ 2,990,631 $ 2,164,818 $ 5,155,449 Below are the definitions of the Company’s internally assigned grades: Commercial: • Pass – loans properly approved, documented, collateralized, and performing which do not reflect an abnormal credit risk. • Pass-Watch – credits in this category are of sufficient risk to cause concern. This category is reserved for credits that display negative performance trends. The “Watch” grade should be regarded as a transition category. • Special Mention – a criticized asset category defined as having potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may, at some future date, result in the deterioration of the repayment prospects for the credit or the institution’s credit position. Special mention credits are not considered part of the Classified credit categories and do not expose the institution to sufficient risk to warrant adverse classification. • Substandard – an asset that is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. • Doubtful – an asset that has all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. • Loss – credits classified as Loss are considered uncollectable and are charged off promptly once so classified. Residential and Consumer: • Performing – accruing loans that have not been modified in a troubled debt restructuring. • Nonperforming – loans for which there are good reasons to doubt that payments will be made in full. All loans with nonaccrual status and all loans that have been modified in a troubled debt restructuring are classified as nonperforming. Vintage Analysis The following table presents credit quality disclosures of amortized cost by class and vintage for term loans and by revolving and revolving converted to amortizing at September 30, 2020. The Company defines vintage as the later of origination, renewal or restructure date. Term Loans Amortized Cost Basis by Origination Year 2020 2019 2018 2017 2016 Prior Revolving Loans Revolving Loans Converted to Term Loans Total Commercial Loans: Pass $ 4,980,953 $ 3,098,996 $ 1,979,152 $ 1,508,213 $ 1,067,144 $ 1,417,583 $ 2,385,763 $ 82,942 $ 16,520,746 Pass-Watch 70,389 101,741 56,681 78,598 53,259 116,413 125,134 5,352 607,567 Special Mention 5,687 13,763 24,805 17,888 31,355 2,268 25,960 2,900 124,626 Substandard 76,243 21,552 24,505 37,104 18,231 50,571 48,004 10,749 286,959 Doubtful — — — — — — — — — Total Commercial Loans $ 5,133,272 $ 3,236,052 $ 2,085,143 $ 1,641,803 $ 1,169,989 $ 1,586,835 $ 2,584,861 $ 101,943 $ 17,539,898 Residential Mortgage and Consumer Loans: Performing $ 351,828 $ 501,172 $ 489,007 $ 629,621 $ 536,380 $ 901,979 $ 1,212,937 $ 5,609 4,628,533 Nonperforming 1,244 4,540 6,181 10,422 5,178 35,169 3,039 6,000 71,773 Total Consumer Loans $ 353,072 $ 505,712 $ 495,188 $ 640,043 $ 541,558 $ 937,148 $ 1,215,976 $ 11,609 $ 4,700,306 Purchased Credit Impaired Loans Under the transition provisions for the application of CECL, the Company has classified all loans previously accounted for as purchased credit impaired under ASC 310-30 to be classified as purchased credit deteriorated. The application of these provisions resulted in an increase of $19.8 million to the amortized cost basis of the financial asset and the allowance for credit losses at the date of adoption, representing the remaining credit portion of the purchased discount. The Company elected not to maintain pools of loans accounted for under Subtopic 310-30 with the adoption of CECL. The remaining noncredit discount was allocated to the individual loans and will be accreted to interest income using the interest method based on the effective interest rate. Changes in the carrying amount of purchased credit impaired loans and related accretable yield are presented in the following table for the year ended December 31, 2019. December 31, 2019 (in thousands) Carrying Amount of Loans Accretable Yield Balance at beginning of period $ 129,596 $ 37,294 Additions 120,562 6,246 Payments received, net (48,076 ) (4,601 ) Accretion 13,163 (13,163 ) Decrease in expected cash flows based on actual cash flows and changes in cash flow assumptions — 4,170 Balance at end of period $ 215,245 $ 29,946 Residential Mortgage Loans in Process of Foreclosure Loans in process of foreclosure include those for which formal foreclosure proceedings are in process according to local requirements of the applicable jurisdiction. Included in loans at September 30, 2020 and December 31, 2019 was $11.2 million and $8.6 million of consumer loans secured by single family residential real estate that were in process of foreclosure. In March 2020, in light of the economic deterioration stemming from the COVID-19 pandemic, the Company placed all active residential mortgage foreclosures on hold and suspended the filing of new foreclosures. On September 1, 2020 the Company resumed foreclosure activity in all states except Florida, where the moratorium expired on September 30 and foreclosure activity resumed October 1, 2020. In addition to the single family residential real estate loans in process of foreclosure, the Company also held $3.6 million and $6.3 million of foreclosed single family residential properties in other real estate owned at September 30, 2020 and December 31, 2019, respectively. Loans Held for Sale At September 30, 2020 and December 31, 2019, loans held for sale was comprised only of mortgage loans originated for sale in the secondary market. |