Loans and Leases | LOANS AND LEASES BancShares’ accounting methods for loans and leases differ depending on whether they are non-PCI or PCI. Loans originated by BancShares and loans performing under their contractual obligations at acquisition are classified as Non-PCI. Loans reflecting credit deterioration since origination such that it is probable at acquisition that BancShares will be unable to collect all contractually required payments are classified as PCI. Additionally, acquired loans are recorded at fair value at the date of acquisition, with no corresponding allowance for loan and lease losses. See Note A , Accounting Policies and Basis of Presentation, for additional information on non-PCI and PCI loans and leases. Loans and leases outstanding include the following at December 31, 2019 and 2018 : (Dollars in thousands) December 31, 2019 December 31, 2018 Non-PCI loans and leases: Commercial: Construction and land development $ 1,013,454 $ 757,854 Commercial mortgage 12,282,635 10,717,234 Other commercial real estate 542,028 426,985 Commercial and industrial and leases 4,403,792 3,938,730 Other 310,093 296,424 Total commercial loans 18,552,002 16,137,227 Noncommercial: Residential mortgage 5,293,917 4,265,687 Revolving mortgage 2,339,072 2,542,975 Construction and land development 357,385 257,030 Consumer 1,780,404 1,713,781 Total noncommercial loans 9,770,778 8,779,473 Total non-PCI loans and leases 28,322,780 24,916,700 Total PCI loans 558,716 606,576 Total loans and leases $ 28,881,496 $ 25,523,276 At December 31, 2019 , $9.41 billion in non-PCI loans with a lendable collateral value of $6.57 billion were used to secure $563.7 million in FHLB of Atlanta advances, resulting in additional borrowing capacity of $6.01 billion . At December 31, 2018 , $9.12 billion in non-PCI loans with a lendable collateral value of $6.36 billion were used to secure $175.2 million in FHLB of Atlanta advances, resulting in additional borrowing capacity of $6.18 billion . At December 31, 2019 , $3.68 billion in non-PCI loans with a lendable collateral value of $2.98 billion were used to secure additional borrowing capacity at the Federal Reserve Bank (“FRB”). At December 31, 2018 , $2.94 billion in non-PCI loans with a lendable collateral value of $2.19 billion were used to secure additional borrowing capacity at the FRB. Certain residential real estate loans are originated to be sold to investors and are recorded in loans held for sale at fair value. Loans held for sale totaled $67.9 million and $45.5 million at December 31, 2019 and 2018 , respectively. We may change our strategy for certain portfolio loans and sell them in the secondary market. At such time, portfolio loans are transferred to loans held for sale at fair value. During 2019 , total proceeds from sales of residential mortgage loans were $756.0 million of which $731.8 million related to sales of loans held for sale. The remaining $24.2 million related to sales of portfolio loans, which resulted in a gain of $299 thousand . During 2018 , total proceeds from sales of residential mortgage loans were $618.1 million , of which $608.5 million related to sales of loans held for sale. The remaining $9.6 million related to sales of portfolio loans, which were sold at par. Net deferred fees on originated non-PCI loans and leases, including unearned income as well as unamortized costs, were $927 thousand and $79 thousand at December 31, 2019 and 2018 , respectively. The unamortized discounts related to purchased non-PCI loans was $30.9 million at December 31, 2019 and $33.3 million at December 31, 2018 . During the years ended December 31, 2019 and 2018 , accretion income on purchased non-PCI loans and leases was $13.2 million and $12.8 million , respectively. Loans and leases to borrowers in medical, dental or related fields were $5.16 billion as of December 31, 2019 , which represents 17.9% of total loans and leases, compared to $4.98 billion or 19.5% of total loans and leases at December 31, 2018 . The credit risk of this industry concentration is mitigated through our underwriting policies, which emphasize reliance on adequate borrower cash flow, rather than underlying collateral value, and our preference for financing secured by owner-occupied real property. Except for this single concentration, no other industry represented more than 10% of total loans and leases outstanding at December 31, 2019 . Credit quality indicators Loans and leases are monitored for credit quality on a recurring basis. Commercial and noncommercial loans and leases have different credit quality indicators as a result of the unique characteristics of the loan segments being evaluated. The credit quality indicators for non-PCI and PCI commercial loans and leases are developed through a review of individual borrowers on an ongoing basis. Commercial loans are evaluated periodically with more frequent evaluations done on criticized loans. The indicators as of the date presented are based on the most recent assessment performed and are defined below: Pass – A pass rated asset is not adversely classified because it does not display any of the characteristics for adverse classification. Special mention – A special mention asset has potential weaknesses which deserve management’s close attention. If left uncorrected, such potential weaknesses may result in deterioration of the repayment prospects or collateral position at some future date. Special mention assets are not adversely classified and do not warrant adverse classification. Substandard – A substandard asset is inadequately protected by the current net worth and paying capacity of the borrower or of the collateral pledged, if any. Assets classified as substandard generally have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. These assets are characterized by the distinct possibility of loss if the deficiencies are not corrected. Doubtful – An asset classified as doubtful has all the weaknesses inherent in an asset classified substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable and improbable on the basis of currently existing facts, conditions and values. Loss – Assets classified as loss are considered uncollectible and of such little value it is inappropriate to be carried as an asset. This classification is not necessarily equivalent to any potential for recovery or salvage value, but rather it is not appropriate to defer a full charge-off even though partial recovery may be affected in the future. Ungraded – Ungraded loans represent loans not included in the individual credit grading process due to their relatively small balances or borrower type. The majority of ungraded loans at December 31, 2019 and 2018, relate to business credit cards. Business credit card loans are subject to automatic charge-off when they become 120 days past due in the same manner as unsecured consumer lines of credit. The remaining balance is comprised of a small amount of commercial mortgage, lease financing and other commercial real estate loans. The credit quality indicators for non-PCI and PCI noncommercial loans are based on delinquency status of the borrower as of the date presented. As the borrower becomes more delinquent, the likelihood of loss increases. The composition of the loans and leases outstanding at December 31, 2019 and December 31, 2018 , by credit quality indicator are provided below: December 31, 2019 Non-PCI commercial loans and leases (Dollars in thousands) Construction and Commercial mortgage Other commercial real estate Commercial and industrial and leases Other Total non-PCI commercial loans and leases Pass $ 1,004,922 $ 12,050,799 $ 536,682 $ 4,256,456 $ 308,796 $ 18,157,655 Special mention 2,577 115,164 3,899 44,604 622 166,866 Substandard 5,955 116,672 1,447 34,148 675 158,897 Doubtful — — — 3 — 3 Ungraded — — — 68,581 — 68,581 Total $ 1,013,454 $ 12,282,635 $ 542,028 $ 4,403,792 $ 310,093 $ 18,552,002 December 31, 2018 Non-PCI commercial loans and leases Construction and Commercial mortgage Other commercial real estate Commercial and industrial and leases Other Total non-PCI commercial loans and leases Pass $ 753,985 $ 10,507,687 $ 422,500 $ 3,778,797 $ 294,700 $ 15,757,669 Special mention 1,369 114,219 3,193 54,814 1,105 174,700 Substandard 2,500 92,743 1,292 30,688 619 127,842 Doubtful — — — 354 — 354 Ungraded — 2,585 — 74,077 — 76,662 Total $ 757,854 $ 10,717,234 $ 426,985 $ 3,938,730 $ 296,424 $ 16,137,227 December 31, 2019 Non-PCI noncommercial loans and leases (Dollars in thousands) Residential mortgage Revolving mortgage Construction and land development Consumer Total non-PCI noncommercial loans and leases Current $ 5,205,380 $ 2,316,010 $ 354,393 $ 1,762,606 $ 9,638,389 30-59 days past due 45,839 9,729 977 10,481 67,026 60-89 days past due 18,289 3,468 218 3,746 25,721 90 days or greater past due 24,409 9,865 1,797 3,571 39,642 Total $ 5,293,917 $ 2,339,072 $ 357,385 $ 1,780,404 $ 9,770,778 December 31, 2018 Non-PCI noncommercial loans and leases Residential mortgage Revolving mortgage Construction and land development Consumer Total non-PCI noncommercial loans and leases Current $ 4,214,783 $ 2,514,269 $ 254,837 $ 1,696,321 $ 8,680,210 30-59 days past due 28,239 12,585 581 10,035 51,440 60-89 days past due 7,357 4,490 21 3,904 15,772 90 days or greater past due 15,308 11,631 1,591 3,521 32,051 Total $ 4,265,687 $ 2,542,975 $ 257,030 $ 1,713,781 $ 8,779,473 December 31, 2019 December 31, 2018 (Dollars in thousands) PCI commercial loans Pass $ 148,412 $ 141,922 Special mention 44,290 48,475 Substandard 87,970 101,447 Doubtful 3,657 4,828 Ungraded — — Total $ 284,329 $ 296,672 December 31, 2019 December 31, 2018 (Dollars in thousands) PCI noncommercial loans Current $ 240,995 $ 268,280 30-89 days past due 13,764 11,155 60-89 days past due 5,608 7,708 90 days or greater past due 14,020 22,761 Total $ 274,387 $ 309,904 The aging of the outstanding non-PCI loans and leases, by class, at December 31, 2019 , and December 31, 2018 is provided in the tables below. Loans and leases 30 days or less past due are considered current, as various grace periods allow borrowers to make payments within a stated period after the due date and still remain in compliance with the loan agreement. December 31, 2019 (Dollars in thousands) 30-59 days past due 60-89 days past due 90 days or greater Total past due Current Total loans and leases Non-PCI loans and leases: Commercial: Construction and land development $ 3,146 $ 195 $ 2,702 $ 6,043 $ 1,007,411 $ 1,013,454 Commercial mortgage 20,389 8,774 8,319 37,482 12,245,153 12,282,635 Other commercial real estate 861 331 698 1,890 540,138 542,028 Commercial and industrial and leases 18,269 4,842 5,032 28,143 4,375,649 4,403,792 Other 51 411 126 588 309,505 310,093 Total commercial loans 42,716 14,553 16,877 74,146 18,477,856 18,552,002 Noncommercial: Residential mortgage 45,839 18,289 24,409 88,537 5,205,380 5,293,917 Revolving mortgage 9,729 3,468 9,865 23,062 2,316,010 2,339,072 Construction and land development 977 218 1,797 2,992 354,393 357,385 Consumer 10,481 3,746 3,571 17,798 1,762,606 1,780,404 Total noncommercial loans 67,026 25,721 39,642 132,389 9,638,389 9,770,778 Total non-PCI loans and leases $ 109,742 $ 40,274 $ 56,519 $ 206,535 $ 28,116,245 $ 28,322,780 December 31, 2018 30-59 days past due 60-89 days past due 90 days or greater Total past due Current Total loans and leases Non-PCI loans and leases: Commercial: Construction and land development $ 516 $ 9 $ 444 $ 969 $ 756,885 $ 757,854 Commercial mortgage 14,200 2,066 3,237 19,503 10,697,731 10,717,234 Other commercial real estate 91 76 300 467 426,518 426,985 Commercial and industrial and leases 9,655 1,759 2,892 14,306 3,924,424 3,938,730 Other 285 — 89 374 296,050 296,424 Total commercial loans 24,747 3,910 6,962 35,619 16,101,608 16,137,227 Noncommercial: Residential mortgage 28,239 7,357 15,308 50,904 4,214,783 4,265,687 Revolving mortgage 12,585 4,490 11,631 28,706 2,514,269 2,542,975 Construction and land development 581 21 1,591 2,193 254,837 257,030 Consumer 10,035 3,904 3,521 17,460 1,696,321 1,713,781 Total noncommercial loans 51,440 15,772 32,051 99,263 8,680,210 8,779,473 Total non-PCI loans and leases $ 76,187 $ 19,682 $ 39,013 $ 134,882 $ 24,781,818 24,916,700 The recorded investment, by class, in loans and leases on nonaccrual status, and loans and leases greater than 90 days past due and still accruing at December 31, 2019 and December 31, 2018 for non-PCI loans and leases, were as follows: December 31, 2019 December 31, 2018 (Dollars in thousands) Nonaccrual loans and leases Loans and leases > 90 days and accruing Nonaccrual loans and leases Loans and leases > 90 days and accruing Commercial: Construction and land development $ 4,281 $ — $ 666 $ — Commercial mortgage 29,733 — 12,594 — Commercial and industrial and leases 7,365 1,094 4,624 808 Other commercial real estate 708 — 366 — Other 320 — 279 — Total commercial loans 42,407 1,094 18,529 808 Noncommercial: Construction and land development 2,828 — 1,823 — Residential mortgage 44,357 45 35,662 — Revolving mortgage 22,411 — 25,563 — Consumer 2,943 2,152 2,969 2,080 Total noncommercial loans 72,539 2,197 66,017 2,080 Total non-PCI loans and leases $ 114,946 $ 3,291 $ 84,546 $ 2,888 Purchased non-PCI loans and leases The following table relates to purchased non-PCI loans acquired in 2019 and 2018 and summarizes the contractually required payments, which include principal and interest, estimate of contractual cash flows not expected to be collected and fair value of the acquired loans at the acquisition date. 2019 2018 (Dollars in thousands) Entegra First South Bancorp Biscayne Bancshares Palmetto Heritage Capital Commerce HomeBancorp Contractually required payments $ 1,135,451 $ 175,465 $ 1,078,854 $ 142,413 $ 198,568 $ 710,876 Fair value at acquisition date 953,679 162,845 850,352 131,283 173,354 550,618 The recorded fair values of purchased non-PCI loans acquired in 2019 and 2018 as of their respective acquisition date were as follows: 2019 2018 (Dollars in thousands) Entegra First South Bancorp Biscayne Bancshares Palmetto Heritage Capital Commerce HomeBancorp Commercial: Construction and land development $ 92,495 $ 8,663 $ 15,647 $ 13,186 $ 10,299 $ 525 Commercial mortgage 381,729 74,713 203,605 29,225 57,049 188,688 Other commercial real estate 28,678 7,509 98,107 753 6,370 55,183 Commercial and industrial and leases 27,062 40,208 28,135 8,153 34,301 7,931 Other 4,741 — — 1,039 — — Total commercial loans and leases 534,705 131,093 345,494 52,356 108,019 252,327 Noncommercial: Residential mortgage 310,039 24,641 405,419 59,076 50,630 296,273 Revolving mortgage 36,701 2,162 54,081 6,175 2,552 51 Construction and land development 51,786 3,552 31,668 11,103 11,173 — Consumer 20,448 1,397 13,690 2,573 980 1,967 Total noncommercial loans and leases 418,974 31,752 504,858 78,927 65,335 298,291 Total non-PCI loans $ 953,679 $ 162,845 $ 850,352 $ 131,283 $ 173,354 $ 550,618 PCI loans The following table relates to PCI loans acquired in 2019 and 2018 and summarizes the contractually required payments, which include principal and interest, expected cash flows to be collected, and the fair value of PCI loans at the respective acquisition dates. 2019 2018 (Dollars in thousands) Entegra First South Bancorp Biscayne Bancshares Palmetto Heritage Capital Commerce HomeBancorp Contractually required payments $ 103,441 $ 23,389 $ 19,720 $ 4,783 $ 13,871 $ 26,651 Cash flows expected to be collected 82,503 21,392 16,815 4,112 11,814 19,697 Fair value at acquisition date 77,507 16,398 13,032 3,863 10,772 15,555 The recorded fair values of PCI loans acquired in 2019 and 2018 as of their respective acquisition date were as follows: 2019 2018 (Dollars in thousands) Entegra First South Bancorp Biscayne Bancshares Palmetto Heritage Capital Commerce HomeBancorp Commercial: Construction and land development $ 10,326 $ 1,233 $ — $ 212 $ 1,482 $ — Commercial mortgage 30,316 9,355 7,589 1,053 1,846 7,815 Other commercial real estate 1,734 — — — — — Commercial and industrial 1,363 1,202 1,660 372 922 423 Other 1,731 — — — — — Total commercial loans 45,470 11,790 9,249 1,637 4,250 8,238 Noncommercial: Residential mortgage 24,989 4,591 3,783 2,226 6,503 7,317 Revolving mortgage 5,582 — — — — — Construction and land development 1,114 17 — — — — Consumer 352 — — — 19 — Total noncommercial loans 32,037 4,608 3,783 2,226 6,522 7,317 Total PCI loans $ 77,507 $ 16,398 $ 13,032 $ 3,863 $ 10,772 $ 15,555 The following table provides changes in the carrying value of all PCI loans during the years ended December 31, 2019 , 2018 and 2017 : (Dollars in thousands) 2019 2018 2017 Balance at January 1 $ 606,576 $ 762,998 $ 809,169 Fair value of PCI loans acquired during the year 106,937 30,190 199,682 Accretion (1) 57,687 61,502 76,594 Payments received and other changes, net (212,484 ) (248,114 ) (322,447 ) Balance at December 31 $ 558,716 $ 606,576 $ 762,998 Unpaid principal balance at December 31 $ 768,391 $ 960,457 $ 1,175,441 (1) Accretion is recorded in interest income from loans and leases The carrying value of PCI loans on the cost recovery method was $2.9 million and $3.3 million at December 31, 2019 , and 2018 , respectively. The recorded investment of PCI loans on nonaccrual status was $6.7 million and $1.3 million at December 31, 2019 , and 2018 , respectively. PCI loans 90 days past due and still accruing were $24.3 million and $37.0 million at December 31, 2019 , and 2018 , respectively. For PCI loans, improved credit loss expectations generally result in the reclassification of nonaccretable difference to accretable yield. Changes in expected cash flows not related to credit improvements or deterioration do not affect the nonaccretable difference. The following table summarizes changes to the amount of accretable yield for 2019 , 2018 and 2017 . (Dollars in thousands) 2019 2018 2017 Balance at January 1 $ 312,894 $ 316,679 $ 335,074 Additions from acquisitions 17,403 6,393 44,120 Accretion (57,687 ) (61,502 ) (76,594 ) Reclassifications from nonaccretable difference 6,489 5,980 18,901 Changes in expected cash flows that do not affect nonaccretable difference (27,964 ) 45,344 (4,822 ) Balance at December 31 $ 251,135 $ 312,894 $ 316,679 |