Quarterly report pursuant to Section 13 or 15(d)

LOANS AND ALLOWANCE FOR LOAN AND LEASE LOSSES

v3.24.3
LOANS AND ALLOWANCE FOR LOAN AND LEASE LOSSES
9 Months Ended
Sep. 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 September 30, 2024, acquired through the American National acquisition that closed on April 1, 2024, and consisted of the following as of the periods ended (dollars in thousands):

September 30, 2024

December 31, 2023

Construction and Land Development

$

1,588,531

$

1,107,850

CRE – Owner Occupied

 

2,401,807

 

1,998,787

CRE – Non-Owner Occupied

 

4,885,785

 

4,172,401

Multifamily Real Estate

 

1,357,730

 

1,061,997

Commercial & Industrial

 

3,799,872

 

3,589,347

Residential 1-4 Family – Commercial

 

729,315

 

522,580

Residential 1-4 Family – Consumer

 

1,281,914

 

1,078,173

Residential 1-4 Family – Revolving

 

738,665

 

619,433

Auto

 

354,570

 

486,926

Consumer

 

109,522

 

120,641

Other Commercial

 

1,089,588

 

876,908

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

18,337,299

15,635,043

Allowance for loan and lease losses

(160,685)

(132,182)

Total LHFI, net

$

18,176,614

$

15,502,861

(1) Total loans included unamortized premiums and discounts, and unamortized deferred fees and costs totaling $228.3 million and $79.7 million as of September 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 $75.2 million and $72.5 million at September 30, 2024 and December 31, 2023, respectively. Accrued interest receivable write-offs were not material to the Company’s consolidated financial statements for the three and nine months ended September 30, 2024 and 2023.

The following table shows the aging of the Company’s LHFI portfolio by class at September 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

$

1,584,576

$

1,559

    

$

369

    

$

82

    

$

1,945

    

$

1,588,531

CRE – Owner Occupied

 

2,392,190

 

2,291

    

 

1,306

    

 

1,239

    

 

4,781

    

 

2,401,807

CRE – Non-Owner Occupied

 

4,866,516

 

1,085

    

 

6,875

    

 

1,390

    

 

9,919

    

 

4,885,785

Multifamily Real Estate

 

1,356,721

 

821

    

 

135

    

 

53

    

 

    

 

1,357,730

Commercial & Industrial

 

3,789,537

 

5,876

    

 

549

    

 

862

    

 

3,048

    

 

3,799,872

Residential 1-4 Family – Commercial

 

725,395

 

656

    

 

736

    

 

801

    

 

1,727

    

 

729,315

Residential 1-4 Family – Consumer

 

1,260,678

 

471

    

 

6,950

    

 

1,890

    

 

11,925

    

 

1,281,914

Residential 1-4 Family – Revolving

 

728,538

 

3,309

 

2,672

    

 

1,186

    

 

2,960

    

 

738,665

Auto

 

350,373

 

2,796

 

468

 

401

    

 

532

    

 

354,570

Consumer

 

108,487

 

700

 

182

 

143

 

10

 

109,522

Other Commercial

1,082,274

2

185

7,127

1,089,588

Total LHFI, net of deferred fees and costs

$

18,245,285

$

19,566

$

20,427

$

15,174

$

36,847

$

18,337,299

% of total loans

99.50

%

0.11

%

0.11

%

0.08

%

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):

September 30, 

December 31, 

2024

2023

CRE – Owner Occupied

$

2,050

$

CRE – Non-Owner Occupied

8,156

4,835

Total LHFI

$

10,206

$

4,835

There was no interest income recognized on nonaccrual loans during the three and nine months ended September 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 September 30, 2024 and 2023, the Company had TLMs with an amortized cost basis of $24.5 million and $29.4 million, respectively.

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

Three Months Ended

Nine 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

$

%

$

553

0.01

%

CRE – Non-Owner Occupied

%

22,175

0.45

%

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

$

$

22,728

Term Extension

 

 

Construction and Land Development

$

50

NM

%

$

50

NM

%

Commercial and Industrial

141

NM

%

141

NM

%

CRE – Owner Occupied

586

0.02

%

586

0.02

%

Residential 1-4 Family – Consumer

236

0.02

%

236

0.02

%

Total Term Extension

$

1,013

$

1,013

Combination - Term Extension and Interest Rate Reduction

Residential 1-4 Family – Consumer

$

283

0.02

%

$

630

0.05

%

Total Combination - Term Extension and Interest Rate Reduction

$

283

$

630

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

Commercial and Industrial

$

%

$

106

NM

%

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

$

$

106

Total

$

1,296

$

24,477

NM = Not Meaningful

Three Months Ended

Nine 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

$

97

NM

$

2,008

0.06

%

CRE – Non-Owner Occupied

%

20,133

0.49

%

CRE – Owner Occupied

766

0.04

%

766

0.04

%

Residential 1-4 Family – Consumer

29

NM

603

0.06

%

Total Term Extension

$

892

$

23,510

Combination - Term Extension and Interest Rate Reduction

Residential 1-4 Family – Consumer

$

127

0.01

%

$

959

0.09

%

Residential 1-4 Family – Revolving

 

%

 

15

NM

Total Combination - Term Extension and Interest Rate Reduction

$

127

$

974

Principal Forgiveness

CRE – Non-Owner Occupied

%

4,935

0.12

%

Total Principal Forgiveness

$

$

4,935

Total

$

1,019

$

29,419

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 nine months ended September 30,:

Three Months Ended

2024

Term Extension

Loan Type

Financial Effect

CRE – Owner Occupied

Added a weighted-average 3.0 years to the life of loans.

Nine 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.

Term Extension

Loan Type

Financial Effect

CRE – Owner Occupied

Added a weighted-average 3.0 years to the life of loans.

Three Months Ended

2023

Term Extension

Loan Type

Financial Effect

CRE – Owner Occupied

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

Nine 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 0.2 years to the life of loans.

CRE – Non-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 nine months ended September 30, 2024 and 2023, the Company did not have any material 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 nine months ended September 30, 2024 and 2023, the Company did not have any material loans that have been modified and designated as TLMs that were past due.

As of September 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 nine months ended September 30, (dollars in thousands):

Three Months Ended

Nine Months Ended

2024

2024

Commercial

Consumer

Total

    

Commercial

Consumer

Total

Balance at beginning of period

$

131,139

$

26,992

$

158,131

$

105,896

$

26,286

$

132,182

Initial Allowance on PCD American National loans

2,609

1,287

3,896

Loans charged-off

 

(1,642)

 

(1,077)

 

(2,719)

 

 

(8,675)

 

(3,026)

 

(11,701)

Recoveries credited to allowance

 

1,292

 

761

 

2,053

 

2,881

 

1,497

 

4,378

Initial Provision - Non-PCD American National loans

11,213

2,016

13,229

Provision charged to operations

 

1,931

 

1,289

 

3,220

 

 

18,796

 

(95)

 

18,701

Balance at end of period

$

132,720

$

27,965

$

160,685

 

$

132,720

$

27,965

$

160,685

Three Months Ended

Nine Months Ended

2023

2023

Commercial

Consumer

Total

    

Commercial

Consumer

Total

Balance at beginning of period

$

92,970

$

27,713

$

120,683

 

$

82,753

$

28,015

$

110,768

Loans charged-off

 

(788)

 

(841)

 

(1,629)

 

 

(7,589)

 

(2,368)

 

(9,957)

Recoveries credited to allowance

 

878

 

457

 

1,335

 

 

1,911

 

1,626

 

3,537

Provision charged to operations

 

5,880

 

(642)

 

5,238

 

 

21,865

 

(586)

 

21,279

Balance at end of period

$

98,940

$

26,687

$

125,627

$

98,940

$

26,687

$

125,627

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):

April 1, 2024

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 September 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

$

248,772

$

546,827

$

453,332

$

124,660

$

21,372

$

47,130

$

103,907

$

1,546,000

Watch

4,019

2,187

1,135

1,048

8,389

Special Mention

1,824

827

296

226

1,332

2,492

6,997

Substandard

160

81

22,945

991

1,527

1,441

27,145

Total Construction and Land Development

$

250,756

$

551,754

$

478,760

$

127,012

$

24,231

$

52,111

$

103,907

$

1,588,531

Current period gross write-off

$

$

$

(392)

$

$

$

$

$

(392)

CRE – Owner Occupied

Pass

$

119,494

$

237,967

$

286,271

$

267,150

$

253,840

$

1,053,513

$

27,073

$

2,245,308

Watch

32,278

9,567

13,374

1,927

2,539

36,841

51

96,577

Special Mention

1,163

9,527

1,590

1,748

2,878

14,266

2,201

33,373

Substandard

932

1,021

358

1,921

22,317

26,549

Total CRE – Owner Occupied

$

152,935

$

257,993

$

302,256

$

271,183

$

261,178

$

1,126,937

$

29,325

$

2,401,807

Current period gross write-off

$

$

$

$

$

$

(354)

$

$

(354)

CRE – Non-Owner Occupied

Pass

$

220,707

$

520,289

$

664,692

$

851,291

$

387,340

$

1,903,875

$

42,583

$

4,590,777

Watch

152

1,477

5,936

4,037

54,881

66,483

Special Mention

397

17,947

5,125

3,355

62,509

12,750

102,083

Substandard

13,758

1,128

39,701

71,782

73

126,442

Total CRE – Non-Owner Occupied

$

221,104

$

534,199

$

684,116

$

863,480

$

434,433

$

2,093,047

$

55,406

$

4,885,785

Current period gross write-off

$

$

$

$

$

(3,386)

$

$

$

(3,386)

Commercial & Industrial

Pass

$

627,486

$

688,535

$

571,125

$

331,698

$

138,708

$

259,312

$

925,580

$

3,542,444

Watch

3,266

25,712

79,979

1,000

588

17,882

44,303

172,730

Special Mention

46

4,961

9,119

3,653

2,674

290

46,054

66,797

Substandard

61

696

1,249

2,145

620

3,725

9,405

17,901

Total Commercial & Industrial

$

630,859

$

719,904

$

661,472

$

338,496

$

142,590

$

281,209

$

1,025,342

$

3,799,872

Current period gross write-off

$

$

(42)

$

(239)

$

(5)

$

(113)

$

(600)

$

(962)

$

(1,961)

Multifamily Real Estate

Pass

$

39,570

$

28,510

$

226,917

$

427,559

$

240,473

$

339,438

$

36,318

$

1,338,785

Watch

1,722

1,722

Special Mention

250

1,196

1,446

Substandard

14,212

1,512

53

15,777

Total Multifamily Real Estate

$

39,570

$

42,722

$

228,639

$

427,559

$

240,723

$

342,146

$

36,371

$

1,357,730

Current period gross write-off

$

$

$

$

$

$

$

$

Residential 1-4 Family – Commercial

Pass

$

42,386

$

68,715

$

140,565

$

111,205

$

80,592

$

259,004

$

9,394

$

711,861

Watch

338

1,072

509

809

6,840

101

9,669

Special Mention

233

217

335

1,881

2,666

Substandard

519

232

613

3,502

253

5,119

Total Residential 1-4 Family – Commercial

$

42,905

$

69,053

$

141,870

$

112,163

$

82,349

$

271,227

$

9,748

$

729,315

Current period gross write-off

$

$

$

$

$

$

$

$

Other Commercial

Pass

$

163,223

$

206,491

$

175,616

$

166,506

$

87,207

$

172,238

$

96,733

$

1,068,014

Watch

572

7,095

983

7,013

4,599

20,262

Special Mention

86

591

677

Substandard

493

41

2

99

635

Total Other Commercial

$

163,223

$

207,642

$

182,711

$

167,489

$

94,261

$

177,430

$

96,832

$

1,089,588

Current period gross write-off

$

$

$

$

$

$

(2,582)

$

$

(2,582)

Total Commercial

Pass

$

1,461,638

$

2,297,334

$

2,518,518

$

2,280,069

$

1,209,532

$

4,034,510

$

1,241,588

$

15,043,189

Watch

35,544

40,360

106,906

11,490

14,986

122,091

44,455

375,832

Special Mention

3,430

15,401

29,185

10,969

10,824

83,225

61,005

214,039

Substandard

740

30,172

25,215

4,854

44,423

104,281

9,883

219,568

Total Commercial

$

1,501,352

$

2,383,267

$

2,679,824

$

2,307,382

$

1,279,765

$

4,344,107

$

1,356,931

$

15,852,628

Total current period gross write-off

$

$

(42)

$

(631)

$

(5)

$

(3,499)

$

(3,536)

$

(962)

$

(8,675)

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