Quarterly report pursuant to Section 13 or 15(d)

LOANS AND ALLOWANCE FOR LOAN AND LEASE LOSSES

v3.24.2.u1
LOANS AND ALLOWANCE FOR LOAN AND LEASE LOSSES
6 Months Ended
Jun. 30, 2024
Loans and Allowance for Loan Losses [Abstract]  
LOANS AND ALLOWANCE FOR LOAN AND LEASE LOSSES

4. LOANS AND ALLOWANCE FOR LOAN AND LEASE LOSSES

The following tables exclude LHFS. The Company’s LHFI are stated at their face amount, net of deferred fees and costs and includes loan balances as of June 30, 2024, associated with the American National acquisition that closed on April 1, 2024, and consisted of the following as of the periods ended (dollars in thousands):

June 30, 2024

December 31, 2023

Construction and Land Development

$

1,454,545

$

1,107,850

CRE – Owner Occupied

 

2,397,700

 

1,998,787

CRE – Non-Owner Occupied

 

4,906,285

 

4,172,401

Multifamily Real Estate

 

1,353,024

 

1,061,997

Commercial & Industrial

 

3,944,723

 

3,589,347

Residential 1-4 Family – Commercial

 

737,687

 

522,580

Residential 1-4 Family – Consumer

 

1,251,033

 

1,078,173

Residential 1-4 Family – Revolving

 

718,491

 

619,433

Auto

 

396,776

 

486,926

Consumer

 

115,541

 

120,641

Other Commercial

 

1,071,385

 

876,908

Total LHFI, net of deferred fees and costs(1)

18,347,190

15,635,043

Allowance for loan and lease losses

(158,131)

(132,182)

Total LHFI, net

$

18,189,059

$

15,502,861

(1) Total loans included unamortized premiums and discounts, and unamortized deferred fees and costs totaling $241.4 million and $79.7 million as of June 30, 2024 and December 31, 2023, respectively

Refer to Note 1 “Summary of Significant Accounting Policies” and Note 2 “Acquisitions” within Item 1 of this Quarterly Report for further information about the American National acquisition.

Accrued interest receivable on LHFI totaled $81.2 million and $72.5 million, respectively, at June 30, 2024 and December 31, 2023. Accrued interest receivable write-offs were not material to the Company’s consolidated financial statements for the three and six months ended June 30, 2024 and 2023.

The following table shows the aging of the Company’s LHFI portfolio by class at June 30, 2024 (dollars in thousands):

    

    

    

    

Greater than

    

    

30-59 Days

    

60-89 Days

    

90 Days and

    

    

Current

Past Due

    

Past Due

    

still Accruing

    

Nonaccrual

    

Total Loans

Construction and Land Development

$

1,450,793

$

1,689

    

$

155

    

$

764

    

$

1,144

    

$

1,454,545

CRE – Owner Occupied

 

2,388,480

 

3,450

    

 

72

    

 

1,047

    

 

4,651

    

 

2,397,700

CRE – Non-Owner Occupied

 

4,892,919

 

1,316

    

 

    

 

1,309

    

 

10,741

    

 

4,906,285

Multifamily Real Estate

 

1,350,556

 

1,694

    

 

632

    

 

141

    

 

1

    

 

1,353,024

Commercial & Industrial

 

3,938,285

 

2,154

    

 

192

    

 

684

    

 

3,408

    

 

3,944,723

Residential 1-4 Family – Commercial

 

733,664

 

873

    

 

689

    

 

678

    

 

1,783

    

 

737,687

Residential 1-4 Family – Consumer

 

1,235,298

 

1,331

    

 

1,960

    

 

1,645

    

 

10,799

    

 

1,251,033

Residential 1-4 Family – Revolving

 

710,701

 

2,518

 

795

    

 

1,449

    

 

3,028

    

 

718,491

Auto

 

392,131

 

3,463

 

565

 

263

    

 

354

    

 

396,776

Consumer

 

114,667

 

385

 

309

 

176

 

4

 

115,541

Other Commercial

1,063,632

289

7,464

1,071,385

Total LHFI, net of deferred fees and costs

$

18,271,126

$

19,162

$

5,369

$

15,620

$

35,913

$

18,347,190

% of total loans

99.59

%

0.10

%

0.02

%

0.09

%

0.20

%

100.00

%

The following table shows the aging of the Company’s LHFI portfolio by class at December 31, 2023 (dollars in thousands):

    

    

    

    

Greater than

    

    

 

30-59 Days

60-89 Days

90 Days and

 

Current

Past Due

Past Due

still Accruing

Nonaccrual

Total Loans

 

Construction and Land Development

$

1,107,183

$

270

$

24

$

25

$

348

$

1,107,850

CRE – Owner Occupied

 

1,991,632

 

1,575

 

 

2,579

 

3,001

 

1,998,787

CRE – Non-Owner Occupied

 

4,156,089

 

545

 

184

 

2,967

 

12,616

 

4,172,401

Multifamily Real Estate

 

1,061,851

 

 

146

 

 

 

1,061,997

Commercial & Industrial

 

3,579,657

 

4,303

 

49

 

782

 

4,556

 

3,589,347

Residential 1-4 Family – Commercial

 

518,150

 

567

 

676

 

1,383

 

1,804

 

522,580

Residential 1-4 Family – Consumer

 

1,053,255

 

7,546

 

1,804

 

4,470

 

11,098

 

1,078,173

Residential 1-4 Family – Revolving

 

611,584

 

2,238

 

1,429

 

1,095

 

3,087

 

619,433

Auto

 

480,557

 

4,737

 

872

 

410

 

350

 

486,926

Consumer

 

119,487

 

770

 

232

 

152

 

 

120,641

Other Commercial

870,339

6,569

876,908

Total LHFI, net of deferred fees and costs

$

15,549,784

$

29,120

$

5,416

$

13,863

$

36,860

$

15,635,043

% of total loans

99.45

%

0.19

%

0.03

%

0.09

%

0.24

%

100.00

%

The following table shows the Company’s amortized cost basis of loans on nonaccrual status with no related ALLL as of the periods ended (dollars in thousands):

June 30, 

December 31, 

2024

2023

CRE – Owner Occupied

$

1,321

$

CRE – Non-Owner Occupied

8,699

4,835

Total LHFI

$

10,020

$

4,835

There was no interest income recognized on nonaccrual loans during the three and six months ended June 30, 2024 and 2023. See Note 1 “Summary of Significant Accounting Policies” in the “Notes to the Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” in the Company’s 2023 Form 10-K for additional information on the Company’s policies for nonaccrual loans.

Troubled Loan Modifications

See Note 1 “Summary of Significant Accounting Policies” in the “Notes to Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” of the Company’s 2023 Form 10-K for loan modifications to borrowers experiencing financial difficulty and how the Company defines TLMs.

As of June 30, 2024 and 2023, the Company had TLMs with an amortized cost basis of $24.1 million and $31.0 million, respectively.

The following table presents the amortized cost basis of TLMs for the three and six months ended June 30, (dollars in thousands):

Three Months Ended

Six Months Ended

2024

2024

    

Amortized Cost

% of Total Class of Financing Receivable

 

Amortized Cost

% of Total Class of Financing Receivable

 

Combination Other-Than-Insignificant Payment Delay and Term Extension

Commercial and Industrial

$

1,153

0.03

%

$

1,153

0.03

%

CRE – Non-Owner Occupied

22,351

0.46

%

22,351

0.46

%

Total Combination Other-Than-Insignificant Payment Delay and Term Extension

$

23,504

$

23,504

Combination - Term Extension and Interest Rate Reduction

Residential 1-4 Family – Consumer

$

210

0.02

%

$

386

0.03

%

Total Combination - Term Extension and Interest Rate Reduction

$

210

$

386

Combination - Interest Rate Reduction, Term Extension and Other-Than-Insignificant Pmt Delay

Commercial and Industrial

$

206

0.01

%

$

206

0.01

%

Total Combination Interest Rate Reduction, Term Extension and Other-Than-Insignificant Pmt Delay

$

206

$

206

Total

$

23,920

$

24,096

Three Months Ended

Six Months Ended

2023

2023

    

Amortized Cost

% of Total Class of Financing Receivable

 

Amortized Cost

% of Total Class of Financing Receivable

 

Term Extension

 

 

Commercial and Industrial

$

5,549

0.16

%

$

5,549

0.16

%

CRE – Non-Owner Occupied

%

19,001

0.46

%

Residential 1-4 Family – Consumer

371

0.04

%

587

0.06

%

Total Term Extension

$

5,920

$

25,137

Combination - Term Extension and Interest Rate Reduction

Residential 1-4 Family – Consumer

$

604

0.06

%

$

838

0.08

%

Residential 1-4 Family – Revolving

 

15

NM

 

16

NM

Total Combination - Term Extension and Interest Rate Reduction

$

619

$

854

Principal Forgiveness

CRE – Non-Owner Occupied

5,000

0.12

%

5,000

0.12

%

Total Principal Forgiveness

$

5,000

$

5,000

Total

$

11,539

$

30,991

NM = Not Meaningful

The following table describes the financial effects of TLMs on a weighted average basis for TLMs within that loan type for the three and six months ended June 30,:

Three Months Ended

2024

Other-Than-Insignificant Payment Delay and Term Extension

Loan Type

Financial Effect

Commercial and Industrial

Added a weighted-average 1.0 years to the life of loans.

CRE – Non-Owner Occupied

Added a weighted-average 1.6 years to the life of loans.

Six Months Ended

2024

Other-Than-Insignificant Payment Delay and Term Extension

Loan Type

Financial Effect

Commercial and Industrial

Added a weighted-average 1.0 years to the life of loans.

CRE – Non-Owner Occupied

Added a weighted-average 1.6 years to the life of loans.

Three Months Ended

2023

Term Extension

Loan Type

Financial Effect

Commercial and Industrial

Added a weighted-average 0.2 years to the life of loans.

Residential 1-4 Family – Consumer

Added a weighted-average 7.8 years to the life of loans.

Combination - Term Extension and Interest Rate Reduction

Loan Type

Financial Effect

Residential 1-4 Family – Consumer

Added a weighted-average 20.1 years to the life of loans and reduced the weighted average contractual interest rate from 8.4% to 7.6%.

Residential 1-4 Family – Revolving

Added a weighted-average 19.1 years to the life of loans and reduced the weighted average contractual interest rate from 10.5% to 7.3%.

Principal Forgiveness

Loan Type

Financial Effect

CRE – Non-Owner Occupied

Reduced the amortized cost basis of loans by $3.5 million.

Six Months Ended

2023

Term Extension

Loan Type

Financial Effect

Commercial and Industrial

Added a weighted-average 0.2 years to the life of loans.

CRE – Owner Occupied

Added a weighted-average 0.5 years to the life of loans.

Residential 1-4 Family – Consumer

Added a weighted-average 10.7 years to the life of loans.

Combination - Term Extension and Interest Rate Reduction

Loan Type

Financial Effect

Residential 1-4 Family – Consumer

Added a weighted-average 20.3 years to the life of loans and reduced the weighted average contractual interest rate from 8.2% to 7.6%.

Residential 1-4 Family – Revolving

Added a weighted-average 19.1 years to the life of loans and reduced the weighted average contractual interest rate from 10.5% to 7.3%.

Principal Forgiveness

Loan Type

Financial Effect

CRE – Non-Owner Occupied

Reduced the amortized cost basis of loans by $3.5 million.

The Company considers a default of a TLM to occur when the borrower is 90 days past due following the modification or a foreclosure and repossession of the applicable collateral occurs. During the three and six months ended June 30, 2024 and 2023, the Company did not have any significant loans that went into default that had been modified and designated as TLMs in the twelve-month period prior to the time of default.

The Company monitors the performance of TLMs to determine the effectiveness of the modifications. During the three and six months ended June 30, 2024, the Company did not have any material loans that have been modified and designated as TLMs that were past due. During the three and six months ended June 30, 2023, no loans that had been modified and designated as TLMs were past due.

As of June 30, 2024, there were no unfunded commitments on loans modified and designated as TLMs. As of December 31, 2023, unfunded commitments on loans modified and designated as TLMs were $1.6 million.

Allowance for Loan and Lease Losses

ALLL on the loan portfolio is a material estimate for the Company. The Company estimates its ALLL on its loan portfolio on a quarterly basis. The Company models the ALLL using two primary segments, Commercial and Consumer. Each loan segment is further disaggregated into classes based on similar risk characteristics. The Company has identified the following classes within each loan segment:

Commercial: Construction and Land Development, CRE – Owner Occupied, CRE – Non-Owner Occupied, Multifamily Real Estate, Commercial & Industrial, Residential 1-4 Family – Commercial, and Other Commercial
Consumer: Residential 1-4 Family – Consumer, Residential 1-4 Family – Revolving, Auto, and Consumer

The following tables show the ALLL activity by loan segment for the three and six months ended June 30, (dollars in thousands):

Three Months Ended

Six Months Ended

2024

2024

Commercial

Consumer

Total

    

Commercial

Consumer

Total

Balance at beginning of period

$

110,528

$

25,662

$

136,190

$

105,896

$

26,286

$

132,182

Initial Allowance on PCD American National loans

2,609

1,287

3,896

2,609

1,287

3,896

Loans charged-off

 

(2,094)

 

(994)

 

(3,088)

 

 

(7,033)

 

(1,949)

 

(8,982)

Recoveries credited to allowance

 

1,057

 

291

 

1,348

 

1,590

 

735

 

2,325

Initial Provision - Non-PCD American National loans

11,213

2,016

13,229

11,213

2,016

13,229

Provision charged to operations

 

7,826

 

(1,270)

 

6,556

 

 

16,864

 

(1,383)

 

15,481

Balance at end of period

$

131,139

$

26,992

$

158,131

 

$

131,139

$

26,992

$

158,131

Three Months Ended

Six Months Ended

2023

2023

Commercial

Consumer

Total

    

Commercial

Consumer

Total

Balance at beginning of period

$

88,086

$

28,426

$

116,512

 

$

82,753

$

28,015

$

110,768

Loans charged-off

 

(1,794)

 

(808)

 

(2,602)

 

 

(6,801)

 

(1,527)

 

(8,328)

Recoveries credited to allowance

 

518

 

517

 

1,035

 

 

1,033

 

1,169

 

2,202

Provision charged to operations

 

6,160

 

(422)

 

5,738

 

 

15,985

 

56

 

16,041

Balance at end of period

$

92,970

$

27,713

$

120,683

$

92,970

$

27,713

$

120,683

The following table presents additional information related to the acquired American National loan portfolio at the acquisition date, including the initial ACL at acquisition on the PCD loans (dollars in thousands):

PCD Loans:

Book value of acquired loans at acquisition

    

$

89,418

Initial ACL at acquisition

 

(3,896)

Non-credit discount at acquisition

 

(10,466)

Purchase Price

$

75,056

Non-PCD Loans:

Fair Value

$

2,073,037

Gross contractual amounts receivable

2,503,707

Estimate of contractual cash flows not expected to be collected

10,887

Credit Quality Indicators

Credit quality indicators are used to help estimate the collectability of each loan class within the Commercial and Consumer loan segments. For classes of loans within the Commercial segment, the primary credit quality indicator used for evaluating credit quality and estimating the ALLL is risk rating categories of Pass, Watch, Special Mention, Substandard, and Doubtful. For classes of loans within the Consumer segment, the primary credit quality indicator used for evaluating credit quality and estimating ALLL is delinquency bands of current, 30-59, 60-89, 90+, and nonaccrual. While other credit quality indicators are evaluated and analyzed as part of the Company’s credit risk management activities, these indicators are primarily used in estimating the ALLL. The Company evaluates the credit risk of its loan portfolio on at least a quarterly basis.

The Company presents loan and lease portfolio segments and classes by credit quality indicator and vintage year. The Company defines the vintage date for the purpose of this disclosure as the date of the most recent credit decision. Renewals are categorized as new credit decisions and reflect the renewal date as the vintage date, except for renewals of loans modified for borrowers experiencing financial difficulty or TLMs, which are presented in the original vintage.

Refer to Note 1 “Summary of Significant Accounting Policies” in the “Notes to the Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” in the Company’s 2023 Form 10-K for additional information on the Company’s policies and for further information on the Company’s credit quality indicators.

Commercial Loans

The Company uses a risk rating system as the primary credit quality indicator for classes of loans within the Commercial segment. The Company defines pass loans as risk rated 1-5 and criticized loans as risk rated 6-9. See Note 3 “Loans and

Allowance For Loan and Lease Losses” in the “Notes to Consolidated Financial Statements” contained in Item 8 “Financial Statements and Supplementary Data” of the Company’s 2023 Form 10-K for information on the Company’s risk rating system.

The table below details the amortized cost and gross write-offs of the classes of loans within the Commercial segment by risk level and year of origination as of June 30, (dollars in thousands):

2024

Term Loans Amortized Cost Basis by Origination Year

Revolving

2024

2023

2022

2021

2020

Prior

Loans

Total

Construction and Land Development

Pass

$

135,747

$

466,092

$

508,327

$

138,785

$

23,055

$

49,969

$

89,616

$

1,411,591

Watch

2,495

2,125

4,840

79

1,042

10,581

Special Mention

65

107

1,332

2,582

4,086

Substandard

4,544

853

978

20,585

1,327

28,287

Total Construction and Land Development

$

135,747

$

473,196

$

511,305

$

144,710

$

45,051

$

54,920

$

89,616

$

1,454,545

Current period gross write-off

$

$

$

(392)

$

$

$

$

$

(392)

CRE – Owner Occupied

Pass

$

116,969

$

239,609

$

280,038

$

266,878

$

259,742

$

1,087,190

$

31,700

$

2,282,126

Watch

562

13,813

953

4,664

37,674

179

57,845

Special Mention

6,942

2,502

1,387

443

17,584

2,491

31,349

Substandard

165

364

1,978

23,873

26,380

Total CRE – Owner Occupied

$

116,969

$

247,278

$

296,353

$

269,582

$

266,827

$

1,166,321

$

34,370

$

2,397,700

Current period gross write-off

$

$

$

$

$

$

(354)

$

$

(354)

CRE – Non-Owner Occupied

Pass

$

154,295

$

506,988

$

674,662

$

870,243

$

406,643

$

1,962,039

$

35,004

$

4,609,874

Watch

152

1,491

1,665

95,635

2

98,945

Special Mention

245

21,193

5,201

3,356

42,105

12,826

84,926

Substandard

7,522

3,211

20,384

81,423

112,540

Total CRE – Non-Owner Occupied

$

154,540

$

514,662

$

697,346

$

880,320

$

430,383

$

2,181,202

$

47,832

$

4,906,285

Current period gross write-off

$

$

$

$

$

(3,386)

$

$

$

(3,386)

Commercial & Industrial

Pass

$

495,029

$

797,480

$

599,116

$

351,324

$

151,271

$

273,825

$

1,029,488

$

3,697,533

Watch

975

20,544

85,250

20,567

976

19,616

14,090

162,018

Special Mention

48

100

4,724

1,336

3,487

916

43,834

54,445

Substandard

1,509

1,136

1,183

640

4,018

22,241

30,727

Total Commercial & Industrial

$

496,052

$

819,633

$

690,226

$

374,410

$

156,374

$

298,375

$

1,109,653

$

3,944,723

Current period gross write-off

$

$

(42)

$

(239)

$

$

(113)

$

(7)

$

(861)

$

(1,262)

Multifamily Real Estate

Pass

$

33,768

$

25,817

$

195,987

$

454,405

$

241,880

$

342,831

$

39,400

$

1,334,088

Watch

1,725

632

2,357

Special Mention

250

1,972

2,222

Substandard

14,216

141

14,357

Total Multifamily Real Estate

$

33,768

$

40,033

$

197,712

$

454,405

$

242,130

$

345,576

$

39,400

$

1,353,024

Current period gross write-off

$

$

$

$

$

$

$

$

Residential 1-4 Family – Commercial

Pass

$

35,461

$

69,298

$

140,019

$

111,874

$

82,056

$

268,406

$

12,438

$

719,552

Watch

339

1,076

520

1,156

7,341

103

10,535

Special Mention

234

220

1,841

2,295

Substandard

522

55

233

620

3,622

253

5,305

Total Residential 1-4 Family – Commercial

$

35,983

$

69,692

$

141,329

$

112,847

$

83,832

$

281,210

$

12,794

$

737,687

Current period gross write-off

$

$

$

$

$

$

$

$

Other Commercial

Pass

$

119,108

$

217,824

$

183,671

$

175,816

$

91,019

$

180,365

$

89,224

$

1,057,027

Watch

174

993

7,215

4,397

12,779

Special Mention

88

604

692

Substandard

507

42

239

99

887

Total Other Commercial

$

119,108

$

218,419

$

183,845

$

176,809

$

98,276

$

185,605

$

89,323

$

1,071,385

Current period gross write-off

$

$

$

$

$

$

(1,639)

$

$

(1,639)

Total Commercial

Pass

$

1,090,377

$

2,323,108

$

2,581,820

$

2,369,325

$

1,255,666

$

4,164,625

$

1,326,870

$

15,111,791

Watch

975

24,092

105,654

29,538

14,090

166,337

14,374

355,060

Special Mention

293

7,195

28,653

8,251

8,868

67,604

59,151

180,015

Substandard

522

28,518

1,989

5,969

44,249

114,643

22,593

218,483

Total Commercial

$

1,092,167

$

2,382,913

$

2,718,116

$

2,413,083

$

1,322,873

$

4,513,209

$

1,422,988

$

15,865,349

Total current period gross write-off

$

$

(42)

$

(631)

$

$

(3,499)

$

(2,000)

$

(861)

$

(7,033)

The table below details the amortized cost and gross write-offs of the classes of loans within the Commercial segment by risk level and year of origination as of December 31, (dollars in thousands):

2023

Term Loans Amortized Cost Basis by Origination Year

Revolving

2023

2022

2021

2020

2019

Prior

Loans

Total

Construction and Land Development

Pass

$

289,786

$

440,473

$

192,148

$

19,536

$

10,934

$

38,841

$

64,137

$

1,055,855

Watch

84

3,611

16,249

2,127

22,071

Special Mention

4,444

1,332

367

6,143

Substandard

114

1,244

1,248

20,705

205

265

23,781

Total Construction and Land Development

$

289,984

$

445,328

$

214,089

$

41,573

$

11,139

$

41,600

$

64,137

$

1,107,850

Current period gross write-off

$

$

$

$

$

$

(11)

$

$

(11)

CRE – Owner Occupied

Pass

$

175,627

$

257,889

$

194,030

$

239,549

$

259,502

$

750,180

$

23,689

$

1,900,466

Watch

5,919

1,311

4,768

4,422

9,146

27,829

399

53,794

Special Mention

786

849

249

5,150

9,549

611

17,194

Substandard

362

326

26,645

27,333

Total CRE – Owner Occupied

$

182,694

$

260,049

$

199,047

$

244,297

$

273,798

$

814,203

$

24,699

$

1,998,787

Current period gross write-off

$

$

$