Loans and Leases | LOANS AND LEASES BancShares’ accounting methods for loans and leases depends on whether they are originated or purchased, and if purchased, whether or not the loans reflect more than insignificant credit deterioration since origination, which is determined as of the acquisition date. Non-PCD loans consist of loans originated by BancShares and loans purchased from other institutions, that do not reflect more than insignificant credit deterioration at acquisition and are reported by loan segments and classes as defined in Note A - Accounting Polices and Basis of Presentation. Purchased loans which reflect more than insignificant credit deterioration are classified as PCD and reported as a single loan segment or class. At the date of acquisition, all acquired loans are recorded at fair value. Loans and leases outstanding included the following at September 30, 2020 and December 31, 2019: (Dollars in thousands) September 30, 2020 Commercial: Construction and land development $ 1,054,186 Owner occupied commercial mortgage 10,683,822 Non-owner occupied commercial mortgage 2,965,904 Commercial and industrial and leases 4,797,344 SBA-PPP 3,112,676 Total commercial loans 22,613,932 Consumer: Residential mortgage 5,463,646 Revolving mortgage 2,145,506 Construction and land development 347,850 Consumer auto 1,234,196 Consumer other 544,136 Total consumer loans 9,735,334 Total non-PCD loans and leases 32,349,266 PCD loans 495,878 Total loans and leases $ 32,845,144 (Dollars in thousands) December 31, 2019 Commercial: Construction and land development $ 1,013,454 Commercial mortgage 12,282,635 Other commercial real estate 542,028 Commercial and industrial and leases 4,403,792 Other 310,093 Total commercial loans 18,552,002 Noncommercial: Residential mortgage 5,293,917 Revolving mortgage 2,339,072 Construction and land development 357,385 Consumer 1,780,404 Total noncommercial loans 9,770,778 Total non-PCI loans and leases 28,322,780 PCI loans 558,716 Total loans and leases $ 28,881,496 Accrued interest receivable on loans at September 30, 2020 was $111.8 million and was excluded from the estimate of credit losses. Management reviewed this policy election during the second quarter of 2020 due to increased accrued interest receivable balances as a result of loan deferrals in response to COVID-19. We have concluded that the policy election remains appropriate as of September 30, 2020. At September 30, 2020, $11.81 billion in non-PCD loans with a lendable collateral value of $8.19 billion were used to secure $652.7 million in Federal Home Loan Bank (“FHLB”) of Atlanta advances, resulting in additional borrowing capacity of $7.54 billion. At December 31, 2019, $9.41 billion in non-PCD 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 September 30, 2020, $3.97 billion in non-PCD loans with a lendable collateral value of $3.21 billion were used to secure additional borrowing capacity at the Federal Reserve Bank (“FRB”). At December 31, 2019, $3.68 billion in non-PCD loans with a lendable collateral value of $2.98 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. In addition, we may change our strategy for certain portfolio loans and decide to sell them in the secondary market. At that time, portfolio loans are transferred to loans held for sale at fair value. Loans held for sale totaled $120.3 million and $67.9 million at September 30, 2020 and December 31, 2019, respectively. Net deferred fees on non-PCD loans and leases, including unearned and unamortized costs and fees, were $83.5 million and $927 thousand at September 30, 2020 and December 31, 2019, respectively. Of the amount outstanding as of September 30, 2020, $76.0 million relates to net deferred fees and costs on SBA-PPP loans. The net unamortized discount related to purchased non-PCD loans and leases was $23.0 million at September 30, 2020 and $30.9 million at December 31, 2019. The net unamortized discount related to PCD loans and leases was $49.2 million at September 30, 2020 and $88.2 million at December 31, 2019. The aging of the outstanding loans and leases, by class, at September 30, 2020 and December 31, 2019 is provided in the tables below. Loans and leases past due 30 days or less 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. September 30, 2020 (Dollars in thousands) 30-59 days 60-89 days 90 days or greater Total past Current Total loans Commercial: Construction and land development $ 7,860 $ — $ 1,502 $ 9,362 $ 1,044,824 $ 1,054,186 Owner occupied commercial mortgage 23,354 5,212 6,695 35,261 10,648,561 10,683,822 Non-owner occupied commercial mortgage 9,854 7,381 6,671 23,906 2,941,998 2,965,904 Commercial and industrial and leases 8,401 3,920 3,862 16,183 4,781,161 4,797,344 SBA-PPP — — — — 3,112,676 3,112,676 Total commercial loans 49,469 16,513 18,730 84,712 22,529,220 22,613,932 Consumer: Residential mortgage 37,921 5,811 36,441 80,173 5,383,473 5,463,646 Revolving mortgage 8,477 1,582 7,508 17,567 2,127,939 2,145,506 Construction and land development 923 — 312 1,235 346,615 347,850 Consumer auto 4,245 1,059 910 6,214 1,227,982 1,234,196 Consumer other 4,490 1,324 1,467 7,281 536,855 544,136 Total consumer loans 56,056 9,776 46,638 112,470 9,622,864 9,735,334 PCD loans 16,298 3,201 32,438 51,937 443,941 495,878 Total loans and leases $ 121,823 $ 29,490 $ 97,806 $ 249,119 $ 32,596,025 $ 32,845,144 December 31, 2019 (Dollars in thousands) 30-59 days 60-89 days 90 days or greater Total past Current Total loans 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 PCI loans 26,478 10,784 28,973 66,235 492,481 558,716 Total loans and leases $ 136,220 $ 51,058 $ 85,492 $ 272,770 $ 28,608,726 $ 28,881,496 The amortized cost, by class, of loans and leases on nonaccrual status, and loans and leases greater than 90 days past due and still accruing at September 30, 2020 and December 31, 2019, were as follows: January 1, 2020 (1) September 30, 2020 (Dollars in thousands) Nonaccrual Nonaccrual Loans and Commercial: Construction and land development $ 4,281 $ 1,564 $ — Owner occupied commercial mortgage 24,476 19,567 1,288 Non-owner occupied commercial mortgage 5,965 8,258 — Commercial and industrial and leases 7,685 10,710 840 Total commercial loans 42,407 40,099 2,128 Consumer: Residential mortgage 44,357 63,646 65 Revolving mortgage 22,411 22,945 — Construction and land development 2,828 689 215 Consumer auto 2,145 2,634 — Consumer other 798 914 1,179 Total consumer loans 72,539 90,828 1,459 PCD loans 53,771 55,527 — Total loans and leases $ 168,717 $ 186,454 $ 3,587 (1) Upon the adoption of ASC 326, BancShares eliminated the pooling of PCI loans and as a result $47.0 million in additional PCD loans were recognized as nonaccrual loans at January 1, 2020. As of September 30, 2020, $27.5 million of these loans remained outstanding. December 31, 2019 (Dollars in thousands) Nonaccrual Loans and Commercial: Construction and land development $ 4,281 $ — Commercial mortgage 29,733 — Commercial and industrial and leases 7,365 1,094 Other commercial real estate 708 — Other 320 — Total commercial loans 42,407 1,094 Noncommercial: Construction and land development 2,828 — Residential mortgage 44,357 45 Revolving mortgage 22,411 — Consumer 2,943 2,152 Total noncommercial loans 72,539 2,197 PCI loans 6,743 24,257 Total loans and leases $ 121,689 $ 27,548 Credit Quality Loans and leases are monitored for credit quality on a recurring basis. Commercial and consumer 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 commercial loans and leases are borrower risk classifications developed through a review of individual borrowers on an ongoing basis. Commercial loans are evaluated at least annually, with more frequent evaluations done on criticized loans. Commercial loans are also updated if there is evidence of potential credit deterioration, such as delinquency. Commercial credit cards are included in the Commercial and industrial and leases segment, but are evaluated based primarily upon delinquency status. The risk classifications 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 that 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 that 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 that 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 that are not included in the individual credit grading process due to their relatively small balances or borrower type. The majority of ungraded loans at September 30, 2020 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 consumer and PCD 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 following tables represent current credit quality indicators by origination year as of September 30, 2020. Commercial Loans Amortized Cost Basis by Origination Year Classification: 2020 2019 2018 2017 2016 Prior Revolving Revolving converted to term loans Total (Dollars in thousands) Construction and land development Pass $ 247,187 $ 396,322 $ 208,736 $ 132,518 $ 35,780 $ 13,144 $ 11,909 $ — $ 1,045,596 Special Mention 176 — 312 5,436 — — — — 5,924 Substandard 292 832 1,452 — 8 82 — — 2,666 Total 247,655 397,154 210,500 137,954 35,788 13,226 11,909 — 1,054,186 Owner occupied commercial mortgage Pass 2,098,636 2,218,063 1,731,557 1,423,847 1,146,027 1,714,102 101,547 135 10,433,914 Special Mention 5,578 24,032 37,273 12,246 17,433 27,905 3,313 — 127,780 Substandard 17,625 14,618 9,465 24,561 11,693 38,206 5,888 72 122,128 Total 2,121,839 2,256,713 1,778,295 1,460,654 1,175,153 1,780,213 110,748 207 10,683,822 Non-owner occupied commercial mortgage Pass 660,088 624,860 407,230 372,287 304,782 469,429 35,321 — 2,873,997 Special Mention 355 701 11,740 1,500 5,213 3,340 777 — 23,626 Substandard 2,387 19,121 12,839 6,918 10,160 14,873 1,983 — 68,281 Total 662,830 644,682 431,809 380,705 320,155 487,642 38,081 — 2,965,904 Commercial and industrial and leases Pass 1,175,036 1,090,278 562,547 361,442 267,706 352,946 809,256 5,433 4,624,644 Special Mention 3,713 17,409 8,908 5,631 3,641 4,607 13,673 216 57,798 Substandard 12,370 3,598 4,387 5,016 2,707 4,685 25,096 803 58,662 Doubtful — — — — 11 — 2 — 13 Ungraded — — — — — — 56,227 — 56,227 Total 1,191,119 1,111,285 575,842 372,089 274,065 362,238 904,254 6,452 4,797,344 SBA-PPP Pass 3,112,676 — — — — — — — 3,112,676 Total 3,112,676 — — — — — — — 3,112,676 Total commercial $ 7,336,119 $ 4,409,834 $ 2,996,446 $ 2,351,402 $ 1,805,161 $ 2,643,319 $ 1,064,992 $ 6,659 $ 22,613,932 Consumer and PCD Loans Amortized Cost Basis by Origination Year Days Past Due: 2020 2019 2018 2017 2016 Prior Revolving Revolving converted to term loans Total (Dollars in thousands) Residential mortgage Current $ 1,349,415 $ 1,044,542 $ 754,024 $ 677,727 $ 524,014 $ 1,006,894 $ 26,857 $ — $ 5,383,473 30-59 days 1,450 3,274 10,486 6,124 4,627 11,875 85 — 37,921 60-89 days 19 854 187 316 2,241 2,194 — — 5,811 90 days or greater 173 1,573 2,704 3,948 6,187 18,884 2,972 — 36,441 Total 1,351,057 1,050,243 767,401 688,115 537,069 1,039,847 29,914 — 5,463,646 Revolving mortgage Current — — — — — — 1,969,703 158,236 2,127,939 30-59 days — — — — — — 4,993 3,484 8,477 60-89 days — — — — — — 419 1,163 1,582 90 days or greater — — — — — — 2,449 5,059 7,508 Total — — — — — — 1,977,564 167,942 2,145,506 Construction and land development Current 144,559 140,794 29,400 13,049 6,818 3,721 8,274 — 346,615 30-59 days 250 26 466 96 17 68 — — 923 60-89 days — — — — — — — — — 90 days or greater — — — — — 97 215 — 312 Total 144,809 140,820 29,866 13,145 6,835 3,886 8,489 — 347,850 Consumer auto Current 398,216 380,919 250,602 122,352 61,076 14,817 — — 1,227,982 30-59 days 492 1,400 823 889 425 216 — — 4,245 60-89 days 120 382 224 160 164 9 — — 1,059 90 days or greater 39 306 268 191 54 52 — — 910 Total 398,867 383,007 251,917 123,592 61,719 15,094 — — 1,234,196 Consumer other Current 39,667 33,269 14,505 7,832 9,269 30,406 401,907 — 536,855 30-59 days 145 92 109 12 61 21 4,050 — 4,490 60-89 days 46 42 31 15 — — 1,190 — 1,324 90 days or greater 7 80 8 1 — — 1,371 — 1,467 Total 39,865 33,483 14,653 7,860 9,330 30,427 408,518 — 544,136 Total consumer $ 1,934,598 $ 1,607,553 $ 1,063,837 $ 832,712 $ 614,953 $ 1,089,254 $ 2,424,485 $ 167,942 $ 9,735,334 PCD loans Current $ 24,169 $ 24,565 $ 29,739 $ 34,617 $ 32,149 $ 262,095 $ 14,236 $ 22,371 $ 443,941 30-59 days 3,531 710 940 438 691 9,575 215 198 16,298 60-89 days — 337 54 155 52 2,054 218 331 3,201 90 days or greater 117 2,889 4,594 1,233 773 21,131 54 1,647 32,438 Total PCD $ 27,817 $ 28,501 $ 35,327 $ 36,443 $ 33,665 $ 294,855 $ 14,723 $ 24,547 $ 495,878 Total loans and leases $ 9,298,534 $ 6,045,888 $ 4,095,610 $ 3,220,557 $ 2,453,779 $ 4,027,428 $ 3,504,200 $ 199,148 $ 32,845,144 Loans and leases outstanding at December 31, 2019 by credit quality indicator are provided below: December 31, 2019 Commercial loans and leases (Dollars in thousands) Construction and land Commercial mortgage Other commercial real estate Commercial and industrial and leases Other PCI Total commercial loans and leases Grade: Pass $ 1,004,922 $ 12,050,799 $ 536,682 $ 4,256,456 $ 308,796 $ 148,412 $ 18,157,655 Special mention 2,577 115,164 3,899 44,604 622 44,290 166,866 Substandard 5,955 116,672 1,447 34,148 675 87,970 158,897 Doubtful — — — 3 — 3,657 3 Ungraded — — — 68,581 — — 68,581 Total $ 1,013,454 $ 12,282,635 $ 542,028 $ 4,403,792 $ 310,093 $ 284,329 $ 18,552,002 December 31, 2019 Noncommercial loans and leases (Dollars in thousands) Residential mortgage Revolving mortgage Construction and land development Consumer PCI Total noncommercial loans and leases Days past due: Current $ 5,205,380 $ 2,316,010 $ 354,393 $ 1,762,606 $ 240,995 $ 9,638,389 30-59 days past due 45,839 9,729 977 10,481 13,764 67,026 60-89 days past due 18,289 3,468 218 3,746 5,608 25,721 90 days or greater past due 24,409 9,865 1,797 3,571 14,020 39,642 Total $ 5,293,917 $ 2,339,072 $ 357,385 $ 1,780,404 $ 274,387 $ 9,770,778 Purchased loans and leases The following table summarizes PCD loans acquired in the Community Financial transaction and provides the contractually required payments, less the initial allowance for credit losses and discount to produce the fair value of acquired loans with evidence of more than insignificant credit quality deterioration since origination at the acquisition date: (Dollars in thousands) Community Financial Contractually required payments $ 25,635 Initial PCD allowance 1,193 Discount 1,055 Fair value at acquisition date $ 23,387 The recorded fair values of purchased non-PCD loans acquired in the Community Financial transaction as of the acquisition date are as follows: (Dollars in thousands) Community Financial Commercial: Construction and land development $ 9,428 Owner occupied commercial mortgage 31,473 Non-owner occupied commercial mortgage 25,143 Commercial and industrial and leases 15,065 Total commercial loans 81,109 Consumer: Residential mortgage 21,168 Revolving mortgage 2,084 Construction and land development 5,254 Consumer auto 294 Consumer other 693 Total consumer loans 29,493 Total non-PCD loans $ 110,602 |