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Loans and Allowance for Credit Losses
 12 Months Ended
Dec. 31, 2018
Receivables [Abstract]  
Loans and Allowance for Credit Losses

Note 4—Loans and Allowance for Credit Losses

The following table presents total loans outstanding by portfolio segment and class of financing receivable as of December 31, 2018 and 2017, respectively. Outstanding balances include originated loans, Acquired Noncredit Impaired (“ANCI”) loans and Acquired Credit Impaired (“ACI”) loans. Information about ACI loans is presented separately in the “Acquired Credit-Impaired Loans” section of this Note.  

 

 

 

 

As of

 

(In thousands)

 

December 31, 2018

 

 

December 31, 2017

 

Commercial and Industrial

 

 

 

 

 

 

 

 

General C&I

 

$

3,275,362

 

 

$

2,746,454

 

Energy sector

 

 

1,285,775

 

 

 

935,371

 

Restaurant industry

 

 

1,096,366

 

 

 

1,035,538

 

Healthcare

 

 

539,839

 

 

 

416,423

 

Total commercial and industrial

 

 

6,197,342

 

 

 

5,133,786

 

Commercial Real Estate

 

 

 

 

 

 

 

 

Income producing

 

 

1,266,791

 

 

 

1,082,929

 

Land and development

 

 

63,948

 

 

 

75,472

 

Total commercial real estate

 

 

1,330,739

 

 

 

1,158,401

 

Consumer

 

 

 

 

 

 

 

 

Residential real estate

 

 

2,227,653

 

 

 

1,690,814

 

Other

 

 

67,100

 

 

 

74,922

 

Total consumer

 

 

2,294,753

 

 

 

1,765,736

 

Small Business Lending

 

 

266,283

 

 

 

221,855

 

Total (Gross of unearned discount and fees)

 

 

10,089,117

 

 

 

8,279,778

 

Unearned discount and fees

 

 

(35,194

)

 

 

(26,351

)

Total (Net of unearned discount and fees)

 

$

10,053,923

 

 

$

8,253,427

 

 

During 2018, the Company purchased $214 million of consumer residential real estate loans, at a premium of approximately 6.0%. These loans were evaluated and determined not to be credit impaired before purchase and are classified as ANCI as of December 31, 2018.

Allowance for Credit Losses (“ACL”)

The ACL is management’s estimate of credit losses inherent in the loan portfolio at the balance sheet date. The Company has an established process to determine the adequacy of the ACL that assesses the losses inherent in our portfolio. While management attributes portions of the ACL to specific portfolio segments, the entire ACL is available to absorb credit losses inherent in the total loan portfolio.

The ACL process involves procedures that appropriately consider the unique risk characteristics of the loan portfolio segments based on management’s assessment of the underlying risks and cash flows. For each portfolio segment, losses are estimated collectively for groups of loans with similar characteristics, individually for impaired loans or, for ACI loans, based on the changes in cash flows expected to be collected on a pool or individual basis.

The level of the ACL is influenced by loan volumes, risk rating migration, historic loss experience influencing loss factors, and other conditions influencing loss expectations, such as economic conditions. The primary indicator of credit quality for the portfolio segments is its internal risk ratings. The assignment of loan risk ratings is the primary responsibility of the lending officer concurrent with approval from the credit officer reviewing and recommending approval of the credit. Additionally, there is independent review by internal credit review, which also performs ongoing, independent review of the risk management process. The risk management process includes underwriting, documentation and collateral control. Credit review is centralized and independent of the lending function. The credit review results are reported to senior management and the Board of Directors.

The following is a summary description of the risk ratings. Tables summarizing the amount of loans by criticized or classified risk rating in each loan portfolio segment is included in the sections “Credit Exposure in the Originated and ANCI Loan Portfolios” and “Credit Exposure in the ACI Portfolio.”

 

•

Pass— For loans within this risk rating, the condition of the borrower and the performance of the loan is satisfactory or better.

 

•

Special Mention—A special mention loan has identified potential weaknesses that are of sufficient materiality to require management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the Bank’s credit position at some future date. Special mention assets contain greater than acceptable risk to warrant increases in credit exposure and are thus considered non-pass rated credits.

 

•

Substandard —A substandard loan is inadequately protected by the current net worth and paying capacity of the obligor or the collateral pledged, if any. Loans classified as substandard possess well-defined weaknesses that are expected to jeopardize their liquidation. Loans in this category may be either on accrual status or nonaccrual status.

 

•

Doubtful—Loans classified as doubtful possess all of the weaknesses inherent in loans classified as substandard with the added characteristic that the weaknesses make collection or liquidation in full highly questionable or improbable based on currently existing facts, conditions and values. Loans rated as doubtful are not rated as loss because certain events may occur that could salvage the debt. Loans in this category are required to be on nonaccrual.

 

•

Loss—Loans classified loss are considered uncollectable and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather that it is not practical or desirable to defer writing off this worthless loan even though partial recovery may be affected in the future. Loans may reside in this classification for administrative purposes for a period not to exceed the earlier of thirty (30) days or calendar quarter-end.

 

 

A summary of the activity in the ACL for each of the three years in the period ended December 31, 2018 is as follows:

 

 

 

 

For the Year Ended December 31, 2018

 

(In thousands)

 

Commercial

and

Industrial

 

 

Commercial

Real Estate

 

 

Consumer

 

 

Small

Business

 

 

Total

 

As of December 31, 2017

 

$

55,919

 

 

$

11,990

 

 

$

14,983

 

 

$

4,684

 

 

$

87,576

 

Provision for loan losses

 

 

15,708

 

 

 

(1,837

)

 

 

(900

)

 

 

(271

)

 

 

12,700

 

Charge-offs

 

 

(6,709

)

 

 

(2

)

 

 

(716

)

 

 

(618

)

 

 

(8,045

)

Recoveries

 

 

1,398

 

 

 

301

 

 

 

336

 

 

 

112

 

 

 

2,147

 

As of December 31, 2018

 

$

66,316

 

 

$

10,452

 

 

$

13,703

 

 

$

3,907

 

 

$

94,378

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allocation of ending ACL

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ACI loans collectively evaluated for impairment

 

$

58

 

 

$

1,641

 

 

$

6,018

 

 

$

—

 

 

$

7,717

 

ACI loans individually evaluated for impairment

 

 

—

 

 

 

—

 

 

 

207

 

 

 

—

 

 

 

207

 

ANCI loans collectively evaluated for impairment

 

 

293

 

 

 

53

 

 

 

535

 

 

 

58

 

 

 

939

 

ANCI loans individually evaluated for impairment

 

 

—

 

 

 

—

 

 

 

6

 

 

 

107

 

 

 

113

 

Originated loans collectively evaluated for impairment

 

 

58,665

 

 

 

8,758

 

 

 

6,918

 

 

 

3,742

 

 

 

78,083

 

Originated loans individually evaluated for impairment

 

 

7,300

 

 

 

—

 

 

 

19

 

 

 

—

 

 

 

7,319

 

ACL as of December 31, 2018

 

$

66,316

 

 

$

10,452

 

 

$

13,703

 

 

$

3,907

 

 

$

94,378

 

Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ACI loans collectively evaluated for impairment

 

$

13,018

 

 

$

58,171

 

 

$

120,717

 

 

$

—

 

 

$

191,906

 

ACI loans individually evaluated for impairment

 

 

3,789

 

 

 

7,256

 

 

 

324

 

 

 

—

 

 

 

11,369

 

ANCI loans collectively evaluated for impairment

 

 

50,469

 

 

 

7,808

 

 

 

280,776

 

 

 

8,462

 

 

 

347,515

 

ANCI loans individually evaluated for impairment

 

 

—

 

 

 

—

 

 

 

1,538

 

 

 

279

 

 

 

1,817

 

Originated loans collectively evaluated for impairment

 

 

6,053,264

 

 

 

1,257,504

 

 

 

1,891,144

 

 

 

257,542

 

 

 

9,459,454

 

Originated loans individually evaluated for impairment

 

 

76,802

 

 

 

—

 

 

 

254

 

 

 

—

 

 

 

77,056

 

Loans as of December 31, 2018

 

$

6,197,342

 

 

$

1,330,739

 

 

$

2,294,753

 

 

$

266,283

 

 

$

10,089,117

 

 

 

 

 

For the Year Ended December 31, 2017

 

(In thousands)

 

Commercial

and

Industrial

 

 

Commercial

Real Estate

 

 

Consumer

 

 

Small

Business

 

 

Total

 

As of December 31, 2016

 

$

54,688

 

 

$

10,103

 

 

$

13,265

 

 

$

4,212

 

 

$

82,268

 

Provision for loan losses

 

 

5,883

 

 

 

1,737

 

 

 

1,746

 

 

 

369

 

 

 

9,735

 

Charge-offs

 

 

(5,645

)

 

 

(93

)

 

 

(929

)

 

 

(204

)

 

 

(6,871

)

Recoveries

 

 

993

 

 

 

243

 

 

 

901

 

 

 

307

 

 

 

2,444

 

As of December 31, 2017

 

$

55,919

 

 

$

11,990

 

 

$

14,983

 

 

$

4,684

 

 

$

87,576

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allocation of ending ACL

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ACI loans collectively evaluated for impairment

 

$

5

 

 

$

2,006

 

 

$

6,289

 

 

$

—

 

 

$

8,300

 

ACI loans individually evaluated for impairment

 

 

—

 

 

 

4

 

 

 

220

 

 

 

—

 

 

 

224

 

ANCI loans collectively evaluated for impairment

 

 

864

 

 

 

130

 

 

 

49

 

 

 

295

 

 

 

1,338

 

ANCI loans individually evaluated for impairment

 

 

—

 

 

 

—

 

 

 

36

 

 

 

22

 

 

 

58

 

Originated loans collectively evaluated for impairment

 

 

46,591

 

 

 

9,850

 

 

 

8,389

 

 

 

4,362

 

 

 

69,192

 

Originated loans individually evaluated for impairment

 

 

8,459

 

 

 

—

 

 

 

—

 

 

 

5

 

 

 

8,464

 

ACL as of December 31, 2017

 

$

55,919

 

 

$

11,990

 

 

$

14,983

 

 

$

4,684

 

 

$

87,576

 

Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ACI loans collectively evaluated for impairment

 

$

19,486

 

 

$

71,675

 

 

$

150,798

 

 

$

—

 

 

$

241,959

 

ACI loans individually evaluated for impairment

 

 

10,091

 

 

 

8,186

 

 

 

324

 

 

 

—

 

 

 

18,601

 

ANCI loans collectively evaluated for impairment

 

 

58,775

 

 

 

15,926

 

 

 

113,357

 

 

 

11,331

 

 

 

199,389

 

ANCI loans individually evaluated for impairment

 

 

—

 

 

 

—

 

 

 

1,582

 

 

 

310

 

 

 

1,892

 

Originated loans collectively evaluated for impairment

 

 

4,974,973

 

 

 

1,062,614

 

 

 

1,499,260

 

 

 

209,627

 

 

 

7,746,474

 

Originated loans individually evaluated for impairment

 

 

70,461

 

 

 

—

 

 

 

415

 

 

 

587

 

 

 

71,463

 

Loans as of December 31, 2017

 

$

5,133,786

 

 

$

1,158,401

 

 

$

1,765,736

 

 

$

221,855

 

 

$

8,279,778

 

 

 

 

 

For the Year Ended December 31, 2016

 

(In thousands)

 

Commercial

and

Industrial

 

 

Commercial

Real Estate

 

 

Consumer

 

 

Small

Business

 

 

Total

 

As of December 31, 2015

 

$

55,824

 

 

$

8,136

 

 

$

13,450

 

 

$

2,373

 

 

$

79,783

 

Provision for loan losses

 

 

43,782

 

 

 

1,389

 

 

 

1,506

 

 

 

2,671

 

 

 

49,348

 

Charge-offs

 

 

(46,367

)

 

 

—

 

 

 

(2,094

)

 

 

(841

)

 

 

(49,302

)

Recoveries

 

 

1,449

 

 

 

578

 

 

 

403

 

 

 

9

 

 

 

2,439

 

As of December 31, 2016

 

$

54,688

 

 

$

10,103

 

 

$

13,265

 

 

$

4,212

 

 

$

82,268

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allocation of ending ACL

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ACI loans collectively evaluated for impairment

 

$

176

 

 

$

2,652

 

 

$

7,215

 

 

$

—

 

 

$

10,043

 

ACI loans individually evaluated for impairment

 

 

—

 

 

 

3

 

 

 

232

 

 

 

—

 

 

 

235

 

ANCI loans collectively evaluated for impairment

 

 

299

 

 

 

243

 

 

 

94

 

 

 

272

 

 

 

908

 

ANCI loans individually evaluated for impairment

 

 

—

 

 

 

—

 

 

 

37

 

 

 

33

 

 

 

70

 

Originated loans collectively evaluated for impairment

 

 

52,615

 

 

 

7,205

 

 

 

5,687

 

 

 

3,900

 

 

 

69,407

 

Originated loans individually evaluated for impairment

 

 

1,598

 

 

 

—

 

 

 

—

 

 

 

7

 

 

 

1,605

 

ACL as of December 31, 2016

 

$

54,688

 

 

$

10,103

 

 

$

13,265

 

 

$

4,212

 

 

$

82,268

 

 

Impaired Originated and ANCI Loans Including TDRs

The following includes certain key information about individually impaired loans as of December 31, 2018 and 2017.

Originated and ANCI Loans Identified as Impaired

 

 

 

 

As of December 31, 2018

 

(In thousands)

 

Recorded

Investment in

Impaired

Loans (1)

 

 

Unpaid

Principal

Balance

 

 

Related

Specific

Allowance

 

 

Nonaccrual

Loans

Included in

Impaired

Loans

 

 

Undisbursed

Commitments

 

With no related allowance for credit losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and Industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Energy sector

 

$

20,713

 

 

$

33,908

 

 

$

—

 

 

$

20,713

 

 

$

3,658

 

Total commercial and industrial

 

 

20,713

 

 

 

33,908

 

 

 

—

 

 

 

20,713

 

 

 

3,658

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

 

1,538

 

 

 

1,535

 

 

 

—

 

 

 

—

 

 

 

—

 

Total consumer

 

 

1,538

 

 

 

1,535

 

 

 

—

 

 

 

—

 

 

 

—

 

Total

 

$

22,251

 

 

$

35,443

 

 

$

—

 

 

$

20,713

 

 

$

3,658

 

With allowance for credit losses recorded

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and Industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

$

28,684

 

 

$

28,677

 

 

$

3,559

 

 

$

24,103

 

 

$

930

 

Restaurant industry

 

 

23,043

 

 

 

23,698

 

 

 

3,485

 

 

 

22,042

 

 

 

2,329

 

Healthcare

 

 

4,496

 

 

 

4,496

 

 

 

256

 

 

 

4,496

 

 

 

-

 

Total commercial and industrial

 

 

56,223

 

 

 

56,871

 

 

 

7,300

 

 

 

50,641

 

 

 

3,259

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

 

254

 

 

 

254

 

 

 

25

 

 

 

—

 

 

 

—

 

Total consumer

 

 

254

 

 

 

254

 

 

 

25

 

 

 

—

 

 

 

—

 

Small Business Lending

 

 

476

 

 

 

1,249

 

 

 

107

 

 

 

229

 

 

 

10

 

Total

 

$

56,953

 

 

$

58,374

 

 

$

7,432

 

 

$

50,870

 

 

$

3,269

 

 

 

 

 

As of December 31, 2017

 

(In thousands)

 

Recorded

Investment in

Impaired

Loans (1)

 

 

Unpaid

Principal

Balance

 

 

Related

Specific

Allowance

 

 

Nonaccrual

Loans

Included in

Impaired

Loans

 

 

Undisbursed

Commitments

 

With no related allowance for credit losses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and Industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

$

5,010

 

 

$

4,994

 

 

$

—

 

 

$

192

 

 

$

—

 

Energy sector

 

 

14,822

 

 

 

23,307

 

 

 

—

 

 

 

14,822

 

 

 

387

 

Total commercial and industrial

 

 

19,832

 

 

 

28,301

 

 

 

—

 

 

 

15,014

 

 

 

387

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

 

1,093

 

 

 

1,097

 

 

 

—

 

 

 

35

 

 

 

—

 

Other

 

 

416

 

 

 

415

 

 

 

—

 

 

 

—

 

 

 

—

 

Total consumer

 

 

1,509

 

 

 

1,512

 

 

 

—

 

 

 

35

 

 

 

—

 

Small Business Lending

 

 

249

 

 

 

695

 

 

 

—

 

 

 

249

 

 

 

—

 

Total

 

$

21,590

 

 

$

30,508

 

 

$

—

 

 

$

15,298

 

 

$

387

 

With allowance for credit losses recorded

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial and Industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Energy sector

 

$

39,857

 

 

$

43,416

 

 

$

8,353

 

 

$

28,000

 

 

$

402

 

Restaurant industry

 

 

11,017

 

 

 

10,969

 

 

 

106

 

 

 

—

 

 

 

2,500

 

Total commercial and industrial

 

 

50,874

 

 

 

54,385

 

 

 

8,459

 

 

 

28,000

 

 

 

2,902

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

 

496

 

 

 

494

 

 

 

36

 

 

 

—

 

 

 

—

 

Small Business Lending

 

 

650

 

 

 

921

 

 

 

27

 

 

 

60

 

 

 

—

 

Total

 

$

52,020

 

 

$

55,800

 

 

$

8,522

 

 

$

28,060

 

 

$

2,902

 

 

(1)

The recorded investment of a loan also includes any interest receivable, net unearned discount or fees, and unamortized premium or discount.

The related amount of interest income recognized for impaired loans was $0.3 million for the year ended December 31, 2018, compared to $1.6 million and $1.4 million for the same periods in 2017 and 2016, respectively.  

Generally, cash receipts on nonperforming loans are used to reduce principal rather than recorded as interest income. Past due status is determined based upon contractual terms. A nonaccrual loan may be returned to accrual status when repayment is reasonably assured and there has been demonstrated performance under the terms of the loan or, if applicable, under the terms of the restructured loan. Approximately $1.7 million of contractual interest paid was recognized on the cash basis for the year ended December 31, 2018, compared to $1.5 million and $1.1 million for same periods in 2017 and 2016, respectively.

Average Recorded Investment in Impaired Originated and ANCI Loans

 

 

 

Year Ended December 31,

 

(In thousands)

 

2018

 

 

2017

 

 

2016

 

Commercial and Industrial

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

$

10,834

 

 

$

8,586

 

 

$

11,291

 

Energy sector

 

 

27,348

 

 

 

108,751

 

 

 

158,192

 

Restaurant industry

 

 

16,600

 

 

 

2,203

 

 

 

—

 

Healthcare

 

 

1,124

 

 

 

—

 

 

 

—

 

Total commercial and industrial

 

 

55,906

 

 

 

119,540

 

 

 

169,483

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

 

1,557

 

 

 

1,426

 

 

 

1,206

 

Other

 

 

313

 

 

 

386

 

 

 

398

 

Total consumer

 

 

1,870

 

 

 

1,812

 

 

 

1,604

 

Small Business Lending

 

 

420

 

 

 

945

 

 

 

547

 

Total

 

$

58,196

 

 

$

122,297

 

 

$

171,634

 

 

Included in impaired loans are loans considered to be TDRs. The Company attempts to work with borrowers when necessary to extend or modify loan terms to better align with the borrower’s ability to repay. Extensions and modifications to loans are made in accordance with internal policies and guidelines which conform to regulatory guidance. Each occurrence is unique to the borrower and is evaluated separately. The Bank considers regulatory guidelines when restructuring loans to ensure that prudent lending practices are followed. Qualifying criteria and payment terms are structured by the borrower’s current and prospective ability to comply with the modified terms of the loan.

A modification is classified as a TDR if the borrower is experiencing financial difficulty and it is determined that the Company has granted a concession to the borrower. The Company may determine that a borrower is experiencing financial difficulty if the borrower is currently in default on any of its debt, or if it is probable that a borrower may default in the foreseeable future without the modification. Concessions could include reductions of interest rates at a rate lower than current market rate for a new loan with similar risk, extension of the maturity date, reduction of accrued interest, principal forgiveness, forbearance, or other concessions. The assessments of whether a borrower is experiencing or will likely experience financial difficulty and whether a concession has been granted is highly subjective in nature, and management’s judgment is required when determining whether a modification is classified as a TDR.

All TDRs are reported as impaired. Impaired classification may be removed if the borrower demonstrates compliance with the modified terms and the restructuring agreement specifies an interest rate equal to that which would be provided to a borrower with similar credit at the time of restructuring. The majority of TDRs are classified as impaired loans for the remaining life of the loan. Nonperforming loans and impaired loans are defined differently. Some loans may be included in both categories, whereas other loans may only be included in one category.

The following tables provide information regarding loans modified into TDRs in the originated and ANCI portfolios for the periods indicated:

Originated and ANCI Loans modified into TDRs

 

 

 

For the Year Ended December 31,

 

 

 

2018

 

 

2017

 

 

2016

 

(In thousands)

 

Number of

TDRs

 

 

Recorded

Investment

 

 

Number of

TDRs

 

 

Recorded

Investment

 

 

Number of

TDRs

 

 

Recorded

Investment

 

Commercial and Industrial

 

 

4

 

 

$

30,244

 

 

 

3

 

 

$

16,027

 

 

 

6

 

 

$

43,609

 

Consumer

 

 

—

 

 

 

—

 

 

 

2

 

 

 

739

 

 

 

2

 

 

 

534

 

Small Business Lending

 

 

2

 

 

 

141

 

 

 

1

 

 

 

138

 

 

 

1

 

 

 

552

 

Total

 

 

6

 

 

$

30,385

 

 

 

6

 

 

$

16,904

 

 

 

9

 

 

$

44,695

 

 

 

There were no TDRs experiencing payment default during the years ended December 31, 2017 and 2016.   Default is defined as the earlier of the troubled debt restructuring being placed on non-accrual status or obtaining 90 day past due status with respect to principal and/or interest payments.

 

 

 

 

For the Year Ended December 31,

 

 

 

2018

 

 

2017

 

2016

 

 

 

Number of Loans Modified by:

 

 

 

Rate

Concession

 

 

Modified

Terms and/

or Other

Concessions

 

 

Rate

Concession

 

 

Modified

Terms and/

or Other

Concessions

 

 

Forbearance Agreement

 

 

Rate

Concession

 

 

Modified

Terms and/

or Other

Concessions

 

Commercial and Industrial

 

 

—

 

 

 

4

 

 

 

2

 

 

 

1

 

 

 

2

 

 

 

1

 

 

 

3

 

Consumer

 

 

—

 

 

 

—

 

 

 

—

 

 

 

2

 

 

 

—

 

 

 

—

 

 

 

2

 

Small Business Lending

 

 

2

 

 

 

—

 

 

 

1

 

 

 

—

 

 

 

—

 

 

 

1

 

 

 

—

 

Total

 

 

2

 

 

 

4

 

 

 

3

 

 

 

3

 

 

 

2

 

 

 

2

 

 

 

5

 

 

Residential Mortgage Loans in Process of Foreclosure

Included in loans are $3.8 million and $4.4 million of consumer loans secured by single family residential real estate that are in process of foreclosure at December 31, 2018 and 2017, respectively. Loans in process of foreclosure include those for which formal foreclosure proceedings are in process according to local requirements of the applicable jurisdiction.  In addition to the single family residential real estate loans in process of foreclosure, the Company also held $1.0 million and $2.7 million of foreclosed single family residential properties in other real estate owned as of December 31, 2018 and 2017.

Credit Exposure in the Originated and ANCI Loan Portfolios

The following provides information regarding the credit exposure by portfolio segment and class of receivable as of December 31, 2018 and 2017:

 

 

 

As of December 31, 2018

 

(Recorded Investment in thousands)

 

Special Mention

 

 

Substandard

 

 

Doubtful

 

 

Total Criticized / Classified

 

Commercial and Industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

$

74,592

 

 

$

79,815

 

 

$

—

 

 

$

154,407

 

Restaurant industry

 

 

24,449

 

 

 

26,171

 

 

 

—

 

 

 

50,620

 

Energy sector

 

 

11,812

 

 

 

6,227

 

 

 

14,486

 

 

 

32,525

 

Healthcare

 

 

—

 

 

 

4,496

 

 

 

—

 

 

 

4,496

 

Total commercial and industrial

 

 

110,853

 

 

 

116,709

 

 

 

14,486

 

 

 

242,048

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Land and development

 

 

—

 

 

 

985

 

 

 

—

 

 

 

985

 

Total commercial real estate

 

 

—

 

 

 

985

 

 

 

—

 

 

 

985

 

Consumer (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

 

—

 

 

 

3,315

 

 

 

—

 

 

 

3,315

 

Total consumer

 

 

—

 

 

 

3,315

 

 

 

—

 

 

 

3,315

 

Small Business Lending

 

 

772

 

 

 

2,013

 

 

 

—

 

 

 

2,785

 

Total

 

$

111,625

 

 

$

123,022

 

 

$

14,486

 

 

$

249,133

 

 

(1)

During the third quarter of 2018, the Company began determining the risk rating classification for its consumer portfolio based on delinquency and nonaccrual status in accordance with the Uniform Retail Credit Classification guidance, which contributed to a lower amount of criticized and classified loans from the previous periods.

 

 

 

As of December 31, 2017

 

(Recorded Investment in thousands)

 

Special Mention

 

 

Substandard

 

 

Doubtful

 

 

Total Criticized / Classified

 

Commercial and Industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

$

80,550

 

 

$

47,324

 

 

$

—

 

 

$

127,874

 

Restaurant industry

 

 

4,536

 

 

 

12,506

 

 

 

—

 

 

 

17,042

 

Energy sector

 

 

—

 

 

 

99,979

 

 

 

7,634

 

 

 

107,613

 

Healthcare

 

 

—

 

 

 

71

 

 

 

—

 

 

 

71

 

Total commercial and industrial

 

 

85,086

 

 

 

159,880

 

 

 

7,634

 

 

 

252,600

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income producing

 

 

—

 

 

 

26

 

 

 

—

 

 

 

26

 

Land and development

 

 

20

 

 

 

—

 

 

 

—

 

 

 

20

 

Total commercial real estate

 

 

20

 

 

 

26

 

 

 

—

 

 

 

46

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

 

7,610

 

 

 

12,416

 

 

 

—

 

 

 

20,026

 

Other

 

 

673

 

 

 

356

 

 

 

4

 

 

 

1,033

 

Total consumer

 

 

8,283

 

 

 

12,772

 

 

 

4

 

 

 

21,059

 

Small Business Lending

 

 

3,480

 

 

 

1,375

 

 

 

27

 

 

 

4,882

 

Total

 

 

$

96,869

 

 

$

174,053

 

 

$

7,665

 

 

$

278,587

 

 

The following provides an aging of past due loans by portfolio segment and class of receivable as of December 31, 2018 and 2017:

Aging of Past Due Originated and ANCI Loans

 

 

 

As of December 31, 2018

 

 

 

Accruing Loans

 

 

Non-Accruing Loans

 

(Recorded Investment in thousands)

 

30-59 DPD

 

 

60-89 DPD

 

 

90+DPD

 

 

0-29 DPD

 

 

30-59 DPD

 

 

60-89 DPD

 

 

90+DPD

 

Commercial and Industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

$

120

 

 

$

—

 

 

$

—

 

 

$

23,928

 

 

$

176

 

 

$

—

 

 

$

—

 

Restaurant industry

 

 

—

 

 

 

—

 

 

 

—

 

 

 

22,043

 

 

 

—

 

 

 

—

 

 

 

—

 

Energy sector

 

 

—

 

 

 

—

 

 

 

—

 

 

 

20,712

 

 

 

—

 

 

 

—

 

 

 

—

 

Healthcare

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4,496

 

 

 

—

 

 

 

—

 

 

 

—

 

Total commercial and industrial

 

 

120

 

 

 

—

 

 

 

—

 

 

 

71,179

 

 

 

176

 

 

 

—

 

 

 

—

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income producing

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Land and development

 

 

—

 

 

 

61

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total commercial real estate

 

 

—

 

 

 

61

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

 

1,275

 

 

 

315

 

 

 

760

 

 

 

876

 

 

 

151

 

 

 

95

 

 

 

1,429

 

Other

 

 

27

 

 

 

112

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total consumer

 

 

1,302

 

 

 

427

 

 

 

760

 

 

 

876

 

 

 

151

 

 

 

95

 

 

 

1,429

 

Small Business Lending

 

 

491

 

 

 

25

 

 

 

—

 

 

 

250

 

 

 

29

 

 

 

4

 

 

 

50

 

Total

 

$

1,913

 

 

$

513

 

 

$

760

 

 

$

72,305

 

 

$

356

 

 

$

99

 

 

$

1,479

 

 

 

 

 

As of December 31, 2017

 

 

 

Accruing Loans

 

 

Non-Accruing Loans

 

(Recorded Investment in thousands)

 

30-59 DPD

 

 

60-89 DPD

 

 

90+DPD

 

 

0-29 DPD

 

 

30-59 DPD

 

 

60-89 DPD

 

 

90+DPD

 

Commercial and Industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

$

59

 

 

$

—

 

 

$

476

 

 

$

—

 

 

$

192

 

 

$

—

 

 

$

—

 

Energy sector

 

 

—

 

 

 

—

 

 

 

—

 

 

 

32,315

 

 

 

—

 

 

 

—

 

 

 

10,507

 

Healthcare

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

71

 

 

 

—

 

 

 

—

 

Total commercial and industrial

 

 

59

 

 

 

—

 

 

 

476

 

 

 

32,315

 

 

 

263

 

 

 

—

 

 

 

10,507

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income producing

 

 

—

 

 

 

—

 

 

 

26

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Land and development

 

 

55

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total commercial real estate

 

 

55

 

 

 

—

 

 

 

26

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

 

3,191

 

 

 

1,030

 

 

 

325

 

 

 

1,070

 

 

 

173

 

 

 

293

 

 

 

2,205

 

Other

 

 

532

 

 

 

3

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

Total consumer

 

 

3,723

 

 

 

1,033

 

 

 

325

 

 

 

1,070

 

 

 

173

 

 

 

293

 

 

 

2,205

 

Small Business Lending

 

 

931

 

 

 

328

 

 

 

—

 

 

 

110

 

 

 

38

 

 

 

—

 

 

 

494

 

Total

 

$

4,768

 

 

$

1,361

 

 

$

827

 

 

$

33,495

 

 

$

474

 

 

$

293

 

 

$

13,206

 

 

Acquired Credit Impaired (“ACI”) Loans

The following table presents total ACI loans outstanding by portfolio segment and class of financing receivable as of December 31, 2018 and 2017.

 

 

 

As of

 

(In thousands)

 

December 31, 2018

 

 

December 31, 2017

 

Commercial and Industrial

 

 

 

 

 

 

 

 

General C&I

 

$

16,807

 

 

$

23,428

 

Healthcare

 

 

—

 

 

 

6,149

 

Total commercial and industrial

 

 

16,807

 

 

 

29,577

 

Commercial Real Estate

 

 

 

 

 

 

 

 

Income producing

 

 

65,427

 

 

 

79,861

 

Total commercial real estate

 

 

65,427

 

 

 

79,861

 

Consumer

 

 

 

 

 

 

 

 

Residential real estate

 

 

120,495

 

 

 

149,942

 

Other

 

 

546

 

 

 

1,180

 

Total consumer

 

 

121,041

 

 

 

151,122

 

Total

 

$

203,275

 

 

$

260,560

 

 

The excess of cash flows expected to be collected over the carrying value of ACI loans is referred to as the accretable yield and is recognized in interest income using an effective yield method over the remaining life of the loan, or pools of loans. The accretable yield is affected by:

 

•

Changes in interest rate indices for variable rate ACI loans—Expected future cash flows are based on the variable rates in effect at the time of the regular evaluations of cash flows expected to be collected;

 

•

Changes in prepayment assumptions—Prepayments affect the estimated life of ACI loans which may change the amount of interest income, and possibly principal, expected to be collected; and

 

•

Changes in the expected principal and interest payments over the estimated life—Updates to expected cash flows are driven by the credit outlook and actions taken with borrowers.

Changes in the amount of accretable discount for ACI loans for each of the years in the period ended December 31, 2018:

Changes in Accretable Yield on ACI Loans

 

 

 

For the Year Ended December 31,

 

(In thousands)

 

2018

 

 

2017

 

 

2016

 

Balance at beginning of period

 

$

78,422

 

 

$

98,728

 

 

$

122,791

 

Maturities/payoff

 

 

(7,456

)

 

 

(9,888

)

 

 

(11,563

)

Charge-offs

 

 

(77

)

 

 

(129

)

 

 

(286

)

Foreclosure

 

 

(436

)

 

 

(1,061

)

 

 

(1,041

)

Accretion

 

 

(19,813

)

 

 

(23,303

)

 

 

(30,870

)

Reclass from nonaccretable difference due to increases in expected cash flow

 

 

16,765

 

 

 

14,075

 

 

 

19,697

 

Balance at end of period

 

$

67,405

 

 

$

78,422

 

 

$

98,728

 

 

Impaired ACI Loans and Pools Including TDRs

The following includes certain key information about individually impaired ACI loans and pooled ACI loans as of and for the years ended December 31, 2018 and 2017.

 

ACI Loans / Pools Identified as Impaired

 

 

 

As of December 31, 2018

 

 

 

ACI Loans / Pools Identified as Impaired

 

(In thousands)

 

Recorded

Investment in

Impaired

Loans(1)

 

 

Unpaid

Principal

Balance

 

 

Related

Specific

Allowance

 

 

Nonaccrual

Loans Included

in Impaired

Loans

 

 

Undisbursed

Commitments

 

Commercial and Industrial

 

$

2,100

 

 

$

2,331

 

 

$

58

 

 

$

—

 

 

$

—

 

Commercial Real Estate

 

 

74,017

 

 

 

97,613

 

 

 

1,641

 

 

 

—

 

 

 

—

 

Consumer

 

 

18,301

 

 

 

17,888

 

 

 

6,225

 

 

 

—

 

 

 

—

 

Total

 

$

94,418

 

 

$

117,832

 

 

$

7,924

 

 

$

—

 

 

$

—

 

 

 

 

As of December 31, 2017

 

 

 

ACI Loans / Pools Identified as Impaired

 

(In thousands)

 

Recorded

Investment in

Impaired

Loans(1)

 

 

Unpaid

Principal

Balance

 

 

Related

Specific

Allowance

 

 

Nonaccrual

Loans Included

in Impaired

Loans

 

 

Undisbursed

Commitments

 

Commercial and Industrial

 

$

13,541

 

 

$

17,630

 

 

$

5

 

 

$

—

 

 

$

—

 

Commercial Real Estate

 

 

82,856

 

 

 

112,330

 

 

 

2,010

 

 

 

225

 

 

 

—

 

Consumer

 

 

18,603

 

 

 

22,064

 

 

 

6,509

 

 

 

—

 

 

 

—

 

Total

 

$

115,000

 

 

$

152,024

 

 

$

8,524

 

 

$

225

 

 

$

—

 

 

(1)

The recorded investment of a loan also includes any interest receivable, net unearned discount or fees, and unamortized premium or discount.

ACI Loans that Were Modified into TDRs

There were no ACI loans modified into a TDR for the years ended December 31, 2018 and 2017.     There were no ACI TDRs experiencing payment default during the three years in the period ended December 31, 2018.  Default is defined as the earlier of the troubled debt restructuring being placed on non-accrual status or obtaining 90 day past due status with respect to principal and interest payments.  

Credit Exposure in the ACI Portfolio

The following provides information regarding the credit exposure by portfolio segment and class of receivable as of December 31, 2018 and 2017:

ACI Loans by Risk Rating / Delinquency Stratification

ACI loans based on internal risk rating:

 

 

 

As of

 

 

 

December 31, 2018

 

 

December 31, 2017

 

(Recorded Investment in thousands)

 

Special Mention

 

 

Substandard

 

 

Doubtful

 

 

Special Mention

 

 

Substandard

 

 

Doubtful

 

Commercial and Industrial

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

General C&I

 

$

426

 

 

$

1,445

 

 

$

39

 

 

$

737

 

 

$

1,173

 

 

$

37

 

Healthcare

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

6,148

 

 

 

—

 

Total commercial and industrial

 

 

426

 

 

 

1,445

 

 

 

39

 

 

 

737

 

 

 

7,321

 

 

 

37

 

Commercial Real Estate

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income producing

 

 

1,207

 

 

 

3,080

 

 

 

—

 

 

 

2,179

 

 

 

6,515

 

 

 

—

 

Total commercial real estate

 

 

1,207

 

 

 

3,080

 

 

 

—

 

 

 

2,179

 

 

 

6,515

 

 

 

—

 

Consumer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Residential real estate

 

 

89

 

 

 

4,442

 

 

 

—

 

 

 

3,900

 

 

 

22,635

 

 

 

—

 

Other

 

 

—

 

 

 

3

 

 

 

—

 

 

 

114

 

 

 

417

 

 

 

—

 

Total consumer

 

 

89

 

 

 

4,445

 

 

 

—

 

 

 

4,014

 

 

 

23,052

 

 

 

 

 

Total

 

$

1,722

 

 

$

8,970

 

 

$

39

 

 

$

6,930

 

 

$

36,888

 

 

$

37

 

 

ACI Consumer credit exposure, based on past due status:

 

 

 

 

As of

 

 

 

December 31, 2018 (1)

 

 

December 31, 2017

 

(Recorded Investment in thousands)

 

Residential

Real Estate

 

 

Other

 

 

Residential

Real Estate

 

 

Other

 

0 – 29 Days Past Due

 

$

115,404

 

 

$

845

 

 

$

139,662

 

 

$

1,356

 

30 – 59 Days Past Due

 

 

1,985

 

 

 

91

 

 

 

2,299

 

 

 

120

 

60 – 89 Days Past Due

 

 

1,435

 

 

 

—

 

 

 

2,496

 

 

 

62

 

90 – 119 Days Past Due

 

 

217

 

 

 

3

 

 

 

399

 

 

 

—

 

120 + Days Past Due

 

 

3,598

 

 

 

—

 

 

 

7,480

 

 

 

45

 

Total

 

$

122,639

 

 

$

939

 

 

$

152,336

 

 

$

1,583

 

 

(1)

During the third quarter of 2018, the Company began determining the risk rating classification for its consumer portfolio based on delinquency and nonaccrual status in accordance with the Uniform Retail Credit Classification guidance, which contributed to a lower amount of nonaccrual loans from the previous periods.