Loans

9 Months Ended

Sep. 30, 2021

Loans and Leases Receivable, Net Amount [Abstract]

The Company’s loan portfolio includes originated and purchased loans. The following is an analysis of the loan portfolio by segment and class (net of unearned income):


	September 30, 2021		December 31, 2020

	(dollars in thousands)
Commercial loans:
Commercial real estate	$	4,088,484	$	4,062,313
Commercial business	3,436,351		3,597,968
Agriculture	815,985		779,627
Construction	326,569		268,663
Consumer loans:
One-to-four family residential real estate	823,877		683,570
Other consumer	30,119		35,519
Total loans	9,521,385		9,427,660
Less: Allowance for credit losses	(142,785)		(149,140)
Total loans, net	$	9,378,600	$	9,278,520

At September 30, 2021 and December 31, 2020, the Company had no material foreign activities. Substantially all of the Company’s loans and unfunded commitments are geographically concentrated in its service areas within the states of Washington, Oregon and Idaho.

At September 30, 2021 and December 31, 2020, $3.21 billion and $3.46 billion of commercial and residential real estate loans were pledged as collateral on FHLB advances and additional borrowing capacity. The Company has also pledged $200.1 million and $200.4 million of commercial loans to the FRB for additional borrowing capacity at September 30, 2021 and December 31, 2020, respectively.

Accrued interest receivable for loans is included in “Interest receivable” on the Company’s Consolidated Balance Sheet and is not reflected in the balances in the table above. At September 30, 2021 and December 31, 2020, accrued interest receivable for loans was $33.0 million and $37.8 million, respectively. The Company does not measure an allowance for credit losses for accrued interest receivable.

The following is an aging of the recorded investment of the loan portfolio at the dates presented:


	Current Loans		30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Nonaccrual Loans		Total Loans

September 30, 2021	(in thousands)
Commercial loans:
Commercial real estate	$	4,081,036	$	3,803	$	774	$	—	$	4,577	$	2,871	$	4,088,484
Commercial business	3,421,381		1,334		1,531		—		2,865		12,105		3,436,351
Agriculture	808,279		—		—		—		—		7,706		815,985
Construction	326,569		—		—		—		—		—		326,569
Consumer loans:
One-to-four family residential real estate	822,170		10		206		—		216		1,491		823,877
Other consumer	30,020		96		—		—		96		3		30,119
Total	$	9,489,455	$	5,243	$	2,511	$	—	$	7,754	$	24,176	$	9,521,385

	Current Loans		30 - 59 Days Past Due		60 - 89 Days Past Due		Greater than 90 Days Past Due		Total Past Due		Nonaccrual Loans		Total Loans

December 31, 2020	(in thousands)
Commercial loans:
Commercial real estate	$	4,037,309	$	17,292	$	—	$	—	$	17,292	$	7,712	$	4,062,313
Commercial business	3,578,905		1,282		4,559		—		5,841		13,222		3,597,968
Agriculture	767,102		911		—		—		911		11,614		779,627
Construction	268,304		—		142		—		142		217		268,663
Consumer loans:
One-to-four family residential real estate	677,627		2,283		1,659		—		3,942		2,001		683,570
Other consumer	35,450		24		5		—		29		40		35,519
Total	$	9,364,697	$	21,792	$	6,365	$	—	$	28,157	$	34,806	$	9,427,660

Loan payments are considered timely when the contractual principal or interest due in accordance with the terms of the loan agreement or any portion thereof is received on the due date of the scheduled payment. In addition, the risk rating on loans modified in association with the CARES Act or Interagency guidance did not change. These loans are not considered past due until after the deferral period is over and scheduled payments resume. Accrued interest on these COVID-19 modified loans is due, in full, when the deferral period ends. The credit quality of these loans will be reevaluated after the deferral period ends.

Nonaccrual loans are generally loans placed on a nonaccrual basis when they become 90 days past due or when there are otherwise serious doubts about the collectability of principal or interest within the existing terms of the loan. The Company’s policy is to write-off all accrued interest on loans when they are placed on nonaccrual status.

The following table summarizes written-off interest on nonaccrual loans for the periods indicated:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020

	(in thousands)
Commercial loans	$	83	$	387	$	507	$	1,835
Consumer loans	16		6		25		19
Total	$	99	$	393	$	532	$	1,854

The following summarizes the amortized cost of nonaccrual loans for which there was no related ACL for the periods indicated:


	September 30, 2021		December 31, 2020

	(in thousands)
Commercial loans:
Commercial real estate	$	942	$	6,393
Commercial business	6,861		6,382
Agriculture	5,792		8,136

Consumer loans:
One-to-four family residential real estate	502		—

Total	$	14,097	$	20,911

The following is an analysis of loans classified as TDR for the periods indicated:


	Three Months Ended September 30, 2021					Three Months Ended September 30, 2020
	Number of TDR Modifications	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of TDR Modifications	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment

	(dollars in thousands)
Commercial loans:

Commercial business	—	$	—	$	—	4	$	795	$	795
Agriculture	—	—		—		1	2,600		2,600

Consumer loans:
One-to-four family residential real estate	1	15		15		4	618		618

Total	1	$	15	$	15	9	$	4,013	$	4,013



	Nine Months Ended September 30, 2021					Nine Months Ended September 30, 2020
	Number of TDR Modifications	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Number of TDR Modifications	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment

	(dollars in thousands)
Commercial loans:
Commercial real estate	1	$	628	$	628	—	$	—	$	—
Commercial business	11	2,600		2,600		10	2,757		2,757
Agriculture	—	—		—		2	3,495		3,495

Consumer loans:
One-to-four family residential real estate	3	155		155		6	814		814

Total	15	$	3,383	$	3,383	18	$	7,066	$	7,066

The Company’s loans classified as TDR are loans that have been modified or with respect to which the borrower has been granted special concessions due to financial difficulties that, if not for the challenges of the borrower, the Company would not otherwise consider. The TDR modifications or concessions are made to increase the likelihood that these borrowers with financial difficulties will be able to satisfy their debt obligations as amended. The concessions granted in the restructurings, summarized in the table above, largely consisted of maturity extensions, interest rate modifications or a combination of both. In limited circumstances, a reduction in the principal balance of the loan could also be made as a concession. Loans classified as TDR are included with the loans collectively measured for credit losses.

The Company had commitments to lend $1.3 million of additional funds on loans classified as TDR as of September 30, 2021. The Company had $651 thousand of such commitments at December 31, 2020. The Company had no loans classified as TDR that defaulted within 12 months of being classified as TDR during the three months and nine months ended September 30, 2021 and 2020.

Financial institutions are required to maintain records of the volume of loans involved in modifications to which troubled debt restructuring relief is applicable. At September 30, 2021, the Company had 9 short–term deferments on $32.8 million of loans, gross of unearned income. These short–term deferments are not classified as TDRs and will not be reported as past due provided that they are performing in accordance with the modified terms.

The Company offered PPP loans to provide financial support to small and medium-size businesses to cover payroll and certain other expenses during the COVID-19 pandemic. The PPP was established by the CARES Act and is implemented by the U.S. SBA with support from the U.S. Department of Treasury. The program, which was amended by the Paycheck Protection Flexibility Act of 2020, provides small businesses with funds to pay up to 24 weeks of payroll costs including benefits, as well as interest on mortgages, rent and utilities. Funds are provided to small businesses in the form of loans that will be fully forgiven when used for permitted purposes and when at least 60% of the funds are used for payroll costs and applicable employment levels are maintained in accordance with the requirements of the amended PPP. At September 30, 2021, we had $337.0 million of PPP loans outstanding, which are included in commercial business loans.