Past Due Loans, Allowance For Credit Losses, Non-Accrual Loans, and TDRS

3 Months Ended

Mar. 31, 2020

Accounts, Notes, Loans and Financing Receivable, Gross, Allowance, and Net [Abstract]

Past Due Loans, Allowance For Credit Losses, Non-Accrual Loans, and TDRS

PAST DUE LOANS, ALLOWANCE FOR CREDIT LOSSES, NON-ACCRUAL LOANS, AND TDRS

Past Due and Non-accrual Loans

The following table presents an aging analysis of the Company's past due loans as of March 31, 2020 and December 31, 2019 with balances presented on an amortized cost basis. The aging is determined without regard to accrual status. The table also presents non-performing loans, consisting of non-accrual loans (the majority of which are past due) and loans 90 days or more past due and still accruing interest, as of each balance sheet date.

Aging Analysis of Past Due Loans and Non-performing Loans by Class⁽¹⁾

(Dollar amounts in thousands)


	Aging Analysis (Accruing and Non-accrual)														Non-performing Loans
	Current		30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Total Loans		Non- accrual		90 Days or More Past Due, Still Accruing Interest
As of March 31, 2020
Commercial and industrial	$	5,005,589	$	23,166	$	22,399	$	45,565	$	5,051,154	$	34,012	$	2,912
Agricultural	382,440		5,420		5,278		10,698		393,138		5,823		146
Commercial real estate:
Office, retail, and industrial	2,229,685		16,590		32,793		49,383		2,279,068		44,625		—
Multi-family	897,392		5,697		3,192		8,889		906,281		2,869		558
Construction	532,427		1,342		28,920		30,262		562,689		28,920		—
Other commercial real estate	1,320,169		25,052		4,591		29,643		1,349,812		11,851		22
Total commercial real estate	4,979,673		48,681		69,496		118,177		5,097,850		88,265		580
Total corporate loans	10,367,702		77,267		97,173		174,440		10,542,142		128,100		3,638
Home equity	956,764		4,548		4,459		9,007		965,771		9,503		360
1-4 family mortgages	1,957,289		5,314		5,986		11,300		1,968,589		8,996		—
Installment	483,504		3,957		1,054		5,011		488,515		—		1,054
Total consumer loans	3,397,557		13,819		11,499		25,318		3,422,875		18,499		1,414
Total loans	$	13,765,259	$	91,086	$	108,672	$	199,758	$	13,965,017	$	146,599	$	5,052
As of December 31, 2019
Commercial and industrial	$	4,455,381	$	11,468	$	14,676	$	26,144	$	4,481,525	$	29,995	$	2,207
Agricultural	398,676		850		6,090		6,940		405,616		5,954		358
Commercial real estate:
Office, retail, and industrial	1,830,321		2,943		15,454		18,397		1,848,718		25,857		546
Multi-family	853,762		211		2,580		2,791		856,553		2,697		—
Construction	588,065		4,876		152		5,028		593,093		152		—
Other commercial real estate	1,377,678		3,233		2,797		6,030		1,383,708		4,729		529
Total commercial real estate	4,649,826		11,263		20,983		32,246		4,682,072		33,435		1,075
Total corporate loans	9,503,883		23,581		41,749		65,330		9,569,213		69,384		3,640
Home equity	841,908		4,992		4,554		9,546		851,454		8,443		146
1-4 family mortgages	1,917,648		5,452		3,978		9,430		1,927,078		4,442		1,203
Installment	491,406		1,167		12		1,179		492,585		—		12
Total consumer loans	3,250,962		11,611		8,544		20,155		3,271,117		12,885		1,361
Total loans	$	12,754,845	$	35,192	$	50,293	$	85,485	$	12,840,330	$	82,269	$	5,001

⁽¹⁾Prior to the adoption of CECL on January 1, 2020, PCI loans with an accretable yield were considered current and were not included in past due loan totals. In addition, PCI loans with an accretable yield were excluded from non-accrual loans. Subsequent to adoption, PCD loans, including those previously classified as PCI, are included in past due and non-accrual loan totals. In addition, an allowance for credit losses is established as of the acquisition date or upon the adoption of CECL for loans previously classified as PCI, as PCD loans are no longer recorded net of a credit-related acquisition adjustment.

Allowance for Credit Losses

The Company maintains an allowance for credit losses at a level deemed adequate by management to absorb estimated losses inherent in the existing loan portfolio. See Note 1, "Summary of Significant Accounting Policies," for the accounting policy for the allowance for credit losses. A rollforward of the allowance for credit losses by portfolio segment for the quarters ended March 31, 2020 and 2019 is presented in the table below.

Allowance for Credit Losses by Portfolio Segment

(Dollar amounts in thousands)


	Commercial, Industrial, and Agricultural		Office, Retail, and Industrial		Multi- family		Construction		Other Commercial Real Estate		Consumer		Allowance for Unfunded Commitments		Total Allowance for Credit Losses
Quarter Ended March 31, 2020
Beginning balance	$	62,830	$	7,580	$	2,950	$	1,697	$	6,408	$	26,557	$	1,200	$	109,222
Adjustment to apply recent accounting pronouncements⁽¹⁾	20,159		11,686		397		10,300		11,427		16,235		5,553		75,757
Allowance established for acquired PCD loans	12,262		2,003		—		—		—		39		—		14,304
Charge-offs	(7,066)		(338)		(10)		(1,808)		(308)		(4,400)		—		(13,930)
Recoveries	1,159		9		5		—		144		499		—		1,816
Net charge-offs	(5,907)		(329)		(5)		(1,808)		(164)		(3,901)		—		(12,114)
Provision for loan losses and other	24,389		4,916		347		1,108		883		7,889		—		39,532
Ending balance	$	113,733	$	25,856	$	3,689	$	11,297	$	18,554	$	46,819	$	6,753	$	226,701
Quarter Ended March 31, 2019
Beginning balance	$	63,276	$	7,900	$	2,464	$	2,173	$	4,934	$	21,472	$	1,200	$	103,419
Charge-offs	(6,451)		(628)		(340)		(6)		(210)		(3,142)		—		(10,777)
Recoveries	1,301		10		1		6		21		354		—		1,693
Net charge-offs	(5,150)		(618)		(339)		—		(189)		(2,788)		—		(9,084)
Provision for loan losses and other	6,559		397		91		(42)		185		3,254		—		10,444
Ending balance	$	64,685	$	7,679	$	2,216	$	2,131	$	4,930	$	21,938	$	1,200	$	104,779

⁽¹⁾As a result of accounting guidance adopted in the first quarter of 2020, the increase in allowance for credit losses, net of tax, was recognized as a cumulative-effect adjustment to retained earnings as of January 1, 2020. For further discussion of this guidance, see Note 2, "Recent Accounting Pronouncements and Other Guidance."

The allowance for credit losses increased from December 31, 2019 primarily due to the adoption of CECL and the estimated impact of the COVID-19 pandemic on the allowance for credit losses, which considers multiple macroeconomic scenarios of stressed GDP, unemployment, and housing price index, detailed portfolio reviews of elevated risk sectors, and the effects of governmental responses to the COVID-19 pandemic.

The table below provides a breakdown of loans and the related allowance for credit losses by portfolio segment as of March 31, 2020 and December 31, 2019.

Loans and Related Allowance for Credit Losses by Portfolio Segment

(Dollar amounts in thousands)


	Loans														Allowance for Credit Losses
	Individually Evaluated		Collectively Evaluated		PCD/PCI⁽¹⁾		Total		Individually Evaluated		Collectively Evaluated		PCD/PCI⁽¹⁾		Total
As of March 31, 2020
Commercial, industrial, and agricultural	$	28,682	$	5,299,373	$	116,237	$	5,444,292	$	1,821	$	91,604	$	20,308	$	113,733
Commercial real estate:
Office, retail, and industrial	25,092		2,192,942		61,034		2,279,068		986		13,257		11,613		25,856
Multi-family	2,338		900,583		3,360		906,281		—		3,642		47		3,689
Construction	18,734		522,832		21,123		562,689		—		3,678		7,619		11,297
Other commercial real estate	3,467		1,297,591		48,754		1,349,812		—		8,422		10,132		18,554
Total commercial real estate	49,631		4,913,948		134,271		5,097,850		986		28,999		29,411		59,396
Total corporate loans	78,313		10,213,321		250,508		10,542,142		2,807		120,603		49,719		173,129
Consumer	—		3,398,211		24,664		3,422,875		—		46,315		504		46,819
Allowance for unfunded commitments	—		—		—		—		—		6,753		—		6,753
Total loans	$	78,313	$	13,611,532	$	275,172	$	13,965,017	$	2,807	$	173,671	$	50,223	$	226,701



As of December 31, 2019
Commercial, industrial, and agricultural	$	34,142	$	4,807,114	$	45,885	$	4,887,141	$	3,414	$	59,108	$	308	$	62,830
Commercial real estate:
Office, retail, and industrial	24,820		1,795,557		28,341		1,848,718		578		6,899		103		7,580
Multi-family	1,995		851,857		2,701		856,553		—		2,854		96		2,950
Construction	123		581,747		11,223		593,093		—		1,681		16		1,697
Other commercial real estate	3,241		1,323,635		56,832		1,383,708		—		4,867		1,541		6,408
Total commercial real estate	30,179		4,552,796		99,097		4,682,072		578		16,301		1,756		18,635
Total corporate loans	64,321		9,359,910		144,982		9,569,213		3,992		75,409		2,064		81,465
Consumer	—		3,248,916		22,201		3,271,117		—		25,424		1,133		26,557
Allowance for unfunded commitments	—		—		—		—		—		1,200		—		1,200
Total loans	$	64,321	$	12,608,826	$	167,183	$	12,840,330	$	3,992	$	102,033	$	3,197	$	109,222

⁽¹⁾Prior to the adoption of CECL on January 1, 2020, loans that had evidence of credit deterioration since origination and for which it was probable at acquisition that the Company would not collect all contractually required principal and interest payments were classified as PCI.

The following table presents collateral-dependent loans, including PCD loans, without regard to accrual status by primary collateral type and non-accrual loans with no related allowance as of March 31, 2020.

Collateral-dependent Loans and Non-accrual Loans With No Related Allowance by Class

(Dollar amounts in thousands)


	Type of Collateral								Non-accrual Loans With No Related Allowance
	Real Estate		Blanket Lien		Equipment

Commercial and industrial	$	7,292	$	60,475	$	2,055	$	9,497
Agricultural	4,755		2,043		—		5,610
Commercial real estate:
Office, retail, and industrial	55,176		—		—		17,674
Multi-family	2,338		—		—		2,338
Construction	29,502		—		—		19,185
Other commercial real estate	27,589		—		—		9,310
Total commercial real estate	114,605		—		—		48,507
Total corporate loans	126,652		62,518		2,055		63,614
Home equity	1,506		—		—		266
1-4 family mortgages	96		—		—		1,942
Installment	—		—		—		—
Total consumer loans	1,602		—		—		2,208
Total loans	$	128,254	$	62,518	$	2,055	$	65,822

Loans Individually Evaluated

The following table presents loans individually evaluated by class of loan as of March 31, 2020 and December 31, 2019. PCD and PCI loans are excluded from this disclosure.

Loans Individually Evaluated by Class

(Dollar amounts in thousands)


	As of March 31, 2020														As of December 31, 2019
	Recorded Investment In												Recorded Investment In
	Loans with No Specific Allowance		Loans with a Specific Allowance		Unpaid Principal Balance		Specific Allowance		Loans with No Specific Allowance		Loans with a Specific Allowance		Unpaid Principal Balance		Specific Allowance
Commercial and industrial	$	6,876	$	16,196	$	47,302	$	1,821	$	12,885	$	15,516	$	52,559	$	2,456
Agricultural	5,610		—		10,389		—		1,889		3,852		9,293		958
Commercial real estate:
Office, retail, and industrial	14,250		10,842		37,317		986		14,111		10,709		37,007		578
Multi-family	2,338		—		2,338		—		1,995		—		1,995		—
Construction	18,734		—		18,734		—		123		—		123		—
Other commercial real estate	3,467		—		3,755		—		3,241		—		3,495		—
Total commercial real estate	38,789		10,842		62,144		986		19,470		10,709		42,620		578
Total non-accrual loans individually evaluated	$	51,275	$	27,038	$	119,835	$	2,807	$	34,244	$	30,077	$	104,472	$	3,992

Interest income recognized on non-accrual loans using the cash basis of accounting totaled $278,000 and $79,000 for the quarters ended March 31, 2020 and 2019, respectively.

Credit Quality Indicators

Corporate loans and commitments are assessed for credit risk and assigned ratings based on various characteristics, such as the borrower's cash flow, leverage, and collateral. Ratings for commercial credits are reviewed at least annually or more often if events or circumstances arise that could impact the rating. The following tables present credit quality indicators for corporate and consumer loans on an amortized cost basis as of March 31, 2020.

Corporate Loan Portfolio by Origination Year

(Dollar amounts in thousands)


	2020⁽¹⁾		2019		2018		2017		2016		Prior		Revolving Loans		Total
Commercial, industrial, and agricultural:
Pass	$	347,347	$	886,843	$	969,223	$	536,226	$	254,029	$	496,992	$	1,684,205	$	5,174,865
Special Mention⁽²⁾	4,155		10,109		11,814		4,424		10,296		14,678		65,270		120,746
Substandard⁽³⁾	523		3,256		25,569		17,947		14,907		15,875		30,769		108,846
Non-accrual⁽⁴⁾	—		130		2,199		10,969		5,300		6,129		15,108		39,835
Total commercial, industrial, and agricultural	$	352,025	$	900,338	$	1,008,805	$	569,566	$	284,532	$	533,674	$	1,795,352	$	5,444,292
Commercial, industrial, and agricultural net loan charge-offs	$	—	$	1	$	533	$	196	$	398	$	1,612	$	3,167	$	5,907
Office, retail, and industrial:
Pass	$	91,286	$	261,537	$	269,725	$	369,944	$	336,235	$	730,037	$	97,171	$	2,155,935
Special Mention⁽²⁾	790		3,170		1,888		5,127		20,430		12,494		—		43,899
Substandard⁽³⁾	—		—		—		374		626		33,609		—		34,609
Non-accrual⁽⁴⁾	—		—		132		2,166		11,878		30,018		431		44,625
Total office, retail, and industrial	$	92,076	$	264,707	$	271,745	$	377,611	$	369,169	$	806,158	$	97,602	$	2,279,068
Office, retail, and industrial net loan charge-offs	$	—	$	333	$	—	$	—	$	4	$	(8)	$	—	$	329
Multi-family:
Pass	$	64,735	$	204,728	$	112,066	$	103,257	$	108,573	$	263,163	$	33,223	$	889,745
Special Mention⁽²⁾	—		—		—		—		—		7,754		—		7,754
Substandard⁽³⁾	—		—		389		84		—		5,440		—		5,913
Non-accrual⁽⁴⁾	—		—		—		2,339		237		293		—		2,869
Total multi-family	$	64,735	$	204,728	$	112,455	$	105,680	$	108,810	$	276,650	$	33,223	$	906,281
Multi-family net loan charge-offs	$	—	$	4	$	—	$	1	$	—	$	—	$	—	$	5
Construction:
Pass	$	6,359	$	124,887	$	125,846	$	89,101	$	66,763	$	64,836	$	31,327	$	509,119
Special Mention⁽²⁾	—		—		—		2,621		13,494		1,258		—		17,373
Substandard⁽³⁾	—		—		—		—		—		7,277		—		7,277
Non-accrual⁽⁴⁾	—		—		—		1,282		—		25,915		1,723		28,920
Total construction	$	6,359	$	124,887	$	125,846	$	93,004	$	80,257	$	99,286	$	33,050	$	562,689
Construction net loan charge-offs	$	—	$	118	$	—	$	—	$	—	$	1,690	$	—	$	1,808
Other commercial real estate:
Pass	$	14,525	$	166,652	$	241,391	$	202,227	$	105,808	$	488,295	$	27,508	$	1,246,406
Special Mention⁽²⁾	—		1,506		6,523		22,233		7,204		12,288		1,300		51,054
Substandard⁽³⁾	—		—		—		1,409		2,926		36,166		—		40,501
Non-accrual⁽⁴⁾	—		—		228		481		326		10,238		578		11,851
Total other commercial real estate	$	14,525	$	168,158	$	248,142	$	226,350	$	116,264	$	546,987	$	29,386	$	1,349,812
Other commercial real estate net loan charge- offs	$	—	$	38	$	1	$	—	$	183	$	(58)	$	—	$	164

⁽¹⁾Represents year-to-date loans originated during 2020.

⁽²⁾Loans categorized as special mention exhibit potential weaknesses that require the close attention of management since these potential weaknesses may result in the deterioration of repayment prospects in the future.

⁽³⁾Loans categorized as substandard exhibit well-defined weaknesses that may jeopardize the liquidation of the debt. These loans continue to accrue interest because they are well-secured, and collection of principal and interest is expected within a reasonable time.

⁽⁴⁾Loans categorized as non-accrual exhibit well-defined weaknesses that may jeopardize the liquidation of the debt or result in a loss if the deficiencies are not corrected.

Consumer Loan Portfolio by Origination Year

(Dollar amounts in thousands)


	2020⁽¹⁾		2019		2018		2017		2016		Prior		Revolving Loans		Total
Home equity:
Performing	$	6,977	$	12,504	$	17,504	$	13,646	$	12,349	$	60,561	$	832,727	$	956,268
Non-accrual	—		22		110		265		494		7,159		1,453		9,503
Total home equity	$	6,977	$	12,526	$	17,614	$	13,911	$	12,843	$	67,720	$	834,180	$	965,771
Home equity net loan charge-offs	$	—	$	—	$	1	$	—	$	1	$	51	$	(7)	$	46
1-4 family mortgages:
Performing	$	134,450	$	798,396	$	378,397	$	181,443	$	196,581	$	269,883	$	443	$	1,959,593
Non-accrual	—		—		422		83		63		8,428		—		8,996
Total 1-4 family mortgages	$	134,450	$	798,396	$	378,819	$	181,526	$	196,644	$	278,311	$	443	$	1,968,589
1-4 family mortgages net loan charge-offs	$	—	$	—	$	4	$	—	$	4	$	81	$	—	$	89
Installment:
Performing	$	42,072	$	204,697	$	120,799	$	53,601	$	21,380	$	23,003	$	22,963	$	488,515
Non-accrual	—		—		—		—		—		—		—		—
Total installment	$	42,072	$	204,697	$	120,799	$	53,601	$	21,380	$	23,003	$	22,963	$	488,515
Installment net loan charge-offs	$	—	$	1,685	$	1,183	$	455	$	52	$	391	$	—	$	3,766

⁽¹⁾Represents year-to-date loans originated during 2020.

During the quarter ended March 31, 2020, $7.0 million of revolving loans converted to term loans.

The following tables present credit quality indicators by class for corporate and consumer loans on an amortized cost basis as of December 31, 2019.

Corporate Credit Quality Indicators by Class

(Dollar amounts in thousands)


	Pass		Special Mention⁽¹⁾		Substandard⁽²⁾		Non-accrual⁽³⁾		Total
As of December 31, 2019
Commercial and industrial	$	4,324,709	$	47,665	$	79,156	$	29,995	$	4,481,525
Agricultural	350,827		32,764		16,071		5,954		405,616
Commercial real estate:
Office, retail, and industrial	1,747,287		42,230		33,344		25,857		1,848,718
Multi-family	839,615		8,279		5,962		2,697		856,553
Construction	564,495		17,977		10,469		152		593,093
Other commercial real estate	1,295,155		39,788		44,036		4,729		1,383,708
Total commercial real estate	4,446,552		108,274		93,811		33,435		4,682,072
Total corporate loans	$	9,122,088	$	188,703	$	189,038	$	69,384	$	9,569,213

⁽¹⁾Loans categorized as special mention exhibit potential weaknesses that require the close attention of management since these potential weaknesses may result in the deterioration of repayment prospects in the future.

⁽²⁾Loans categorized as substandard exhibit a well-defined weakness that may jeopardize the liquidation of the debt. These loans continue to accrue interest because they are well-secured and collection of principal and interest is expected within a reasonable time.

⁽³⁾Loans categorized as non-accrual exhibit a well-defined weakness that may jeopardize the liquidation of the debt or result in a loss if the deficiencies are not corrected.

Consumer Credit Quality Indicators by Class

(Dollar amounts in thousands)


	Performing		Non-accrual		Total
As of December 31, 2019
Home equity	$	843,011	$	8,443	$	851,454
1-4 family mortgages	1,922,636		4,442		1,927,078
Installment	492,585		—		492,585
Total consumer loans	$	3,258,232	$	12,885	$	3,271,117

TDRs

TDRs are generally performed at the request of the individual borrower and may include forgiveness of principal, reduction in interest rates, changes in payments, and maturity date extensions. The table below presents TDRs by class as of March 31, 2020 and December 31, 2019. See Note 1, "Summary of Significant Accounting Policies," for the accounting policy for TDRs.

TDRs by Class

(Dollar amounts in thousands)


	As of March 31, 2020										As of December 31, 2019
	Accruing		Non-accrual⁽¹⁾		Total		Accruing		Non-accrual⁽¹⁾		Total
Commercial and industrial	$	223	$	12,905	$	13,128	$	227	$	16,420	$	16,647
Agricultural	—		—		—		—		—		—
Commercial real estate:
Office, retail, and industrial	—		4,410		4,410		—		3,600		3,600
Multi-family	161		—		161		163		—		163
Construction	—		—		—		—		—		—
Other commercial real estate	167		—		167		170		—		170
Total commercial real estate	328		4,410		4,738		333		3,600		3,933
Total corporate loans	551		17,315		17,866		560		20,020		20,580
Home equity	35		354		389		36		240		276
1-4 family mortgages	630		248		878		637		—		637
Installment	—		—		—		—		252		252
Total consumer loans	665		602		1,267		673		492		1,165
Total loans	$	1,216	$	17,917	$	19,133	$	1,233	$	20,512	$	21,745

⁽¹⁾These TDRs are included in non-accrual loans in the preceding tables.

TDRs are included in the calculation of the allowance for credit losses in the same manner as non-accrual loans. As of March 31, 2020 and December 31, 2019, there were $1.9 million and $2.2 million of specific allowances, respectively, related to TDRs.

There were no material restructurings during the quarters ended March 31, 2020 and 2019.

Accruing TDRs that do not perform in accordance with their modified terms are transferred to non-accrual. There were no material TDRs that defaulted within twelve months of the restructure date during the quarters ended March 31, 2020 and 2019.

A rollforward of the carrying value of TDRs for the quarters ended March 31, 2020 and 2019 is presented in the following table.

TDR Rollforward

(Dollar amounts in thousands)


	Quarters Ended March 31,
	2020		2019
Accruing
Beginning balance	$	1,233	$	1,866
Additions	—		12
Net payments	(17)		(34)

Net transfers to non-accrual	—		—
Ending balance	1,216		1,844
Non-accrual
Beginning balance	20,514		6,612
Additions	934		—
Net (payments) advances	(658)		2,921
Charge-offs	(2,873)		(158)


Net transfers from accruing	—		—
Ending balance	17,917		9,375
Total TDRs	$	19,133	$	11,219

There were $813,000 and $530,000 of commitments to lend additional funds to borrowers with TDRs as of March 31, 2020 and December 31, 2019, respectively.