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Loans and Allowance for Credit Losses | 6 Months Ended
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Jun. 30, 2020
Receivables [Abstract] |
Loans and Allowance for Credit Losses | 4. Loans and Allowance for Credit Losses The Company generally makes loans in its market areas of south Mississippi; southern and central Alabama; northwest, central and south Louisiana; the northern, central, and panhandle regions of Florida; certain areas of east and northeast Texas, including Houston, Beaumont and Dallas; and Nashville, Tennessee. Loans, net of unearned income, by portfolio are presented at amortized cost basis in the table below. Amortized cost does not include accrued interest, which is reflected in the accrued interest line item in the Consolidated Balance Sheets, totaling $94.6 million and $67.7 million at June 30, 2020 and December 31, 2019, respectively.
|  | June 30, |  |  | December 31, |
(in thousands) |  | 2020 |  |  | 2019 |
Commercial non-real estate |  | $ | 10,465,280 |  |  | $ | 9,166,947 |
Commercial real estate - owner occupied |  |  | 2,762,259 |  |  |  | 2,738,460 |
Total commercial and industrial |  |  | 13,227,539 |  |  |  | 11,905,407 |
Commercial real estate - income producing |  |  | 3,350,299 |  |  |  | 2,994,448 |
Construction and land development |  |  | 1,128,959 |  |  |  | 1,157,451 |
Residential mortgages |  |  | 2,877,316 |  |  |  | 2,990,631 |
Consumer |  |  | 2,044,264 |  |  |  | 2,164,818 |
Total loans |  | $ | 22,628,377 |  |  | $ | 21,212,755 |
The following briefly describes the composition of each loan category. Commercial and industrial Commercial and industrial loans are made available to businesses for working capital (including financing of inventory and receivables), business expansion, to facilitate the acquisition of a business, and the purchase of equipment and machinery, including equipment leasing. These loans are primarily made based on the identified cash flows of the borrower and, when secured, have the added strength of the underlying collateral. Commercial non-real estate loans may be secured by the assets being financed or other tangible or intangible business assets such as accounts receivable, inventory, ownership, enterprise value or commodity interests, and may incorporate a personal or corporate guarantee; however, some short-term loans may be made on an unsecured basis, including a small portfolio of corporate credit cards, generally issued as a part of overall customer relationships. Commercial non-real estate loans also include loans made under the Small Business Administration’s (SBA) Paycheck Protection Program (PPP). PPP loans are guaranteed by the SBA and are forgivable to the debtor upon satisfaction of certain criteria. The loans bear interest at 1% per annum and have two or five year terms, depending on the date of origination. These loans also earn an origination fee of 1% to 5%, depending on the loan size, that is deferred and amortized over the estimated life of the loan using the effective yield method. Commercial real estate – owner occupied loans consist of commercial mortgages on properties where repayment is generally dependent on the cash flow from the ongoing operations and activities of the borrower. Like commercial non-real estate, these loans are primarily made based on the identified cash flows of the borrower, but also have the added strength of the value of underlying real estate collateral. Commercial real estate – income producing Commercial real estate – income producing loans consist of loans secured by commercial mortgages on properties where the loan is made to real estate developers or investors and repayment is dependent on the sale, refinance, or income generated from the operation of the property. Properties financed include retail, office, multifamily, senior housing, hotel/motel, skilled nursing facilities and other commercial properties. Construction and land development Construction and land development loans are made to facilitate the acquisition, development, improvement and construction of both commercial and residential-purpose properties. Such loans are made to builders and investors where repayment is expected to be made from the sale, refinance or operation of the property or to businesses to be used in their business operations. This portfolio also includes a small amount of residential construction loans and loans secured by raw land not yet under development. Residential mortgages Residential mortgages consist of closed-end loans secured by first liens on 1- 4 family residential properties. The portfolio includes both fixed and adjustable rate loans, although most longer term, fixed rate loans originated are sold in the secondary mortgage market. Consumer Consumer loans include second lien mortgage home loans, home equity lines of credit and nonresidential consumer purpose loans. Nonresidential consumer loans include both direct and indirect loans. Direct nonresidential consumer loans are made to finance the purchase of personal property, including automobiles, recreational vehicles and boats, and for other personal purposes (secured and unsecured), and deposit account secured loans. Indirect nonresidential consumer loans include automobile financing provided to the consumer through an agreement with automobile dealerships. Consumer loans also include a small portfolio of credit card receivables issued on the basis of applications received through referrals from the Bank’s branches, online and other marketing efforts. Allowance for Credit Losses The following tables show activity in the allowance for credit losses by portfolio class for the six months ended June 30, 2020 and 2019, as well as the corresponding recorded investment in loans at the end of each period. Effective January 1, 2020, the Company adopted the provisions of ASC 326 (CECL) using a modified retrospective basis. The difference between the December 31, 2019 incurred allowance and the CECL allowance is reflected as a cumulative effect of change in accounting principle in the table below. For further discussion of the day one impact of the CECL adoption, refer to Note 16 – Recent Accounting Pronouncements.
|  |  |  |  |  | Commercial |  |  | Total |  |  | Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Commercial |  |  | real estate- |  |  | commercial |  |  | real estate- |  |  | Construction |  |  |  |  |  |  |  |  |  |  |  |  |
|  | non-real |  |  | owner |  |  | and |  |  | income |  |  | and land |  |  | Residential |  |  |  |  |  |  |  |  |
(in thousands) |  | estate |  |  | occupied |  |  | industrial |  |  | producing |  |  | development |  |  | mortgages |  |  | Consumer |  |  | Total |
|  | Six Months Ended June 30, 2020 |
Allowance for credit losses |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 106,432 |  |  | $ | 10,977 |  |  | $ | 117,409 |  |  | $ | 20,869 |  |  | $ | 9,350 |  |  | $ | 20,331 |  |  | $ | 23,292 |  |  | $ | 191,251 |
Cumulative effect of change in accounting principle |  |  | (244 | ) |  |  | 14,877 |  |  |  | 14,633 |  |  |  | 7,287 |  |  |  | 7,478 |  |  |  | 12,921 |  |  |  | 7,092 |  |  |  | 49,411 |
Charge-offs |  |  | (339,566 | ) |  |  | (1,706 | ) |  | $ | (341,272 | ) |  |  | (1,501 | ) |  |  | (5 | ) |  |  | (141 | ) |  |  | (10,736 | ) |  |  | (353,655 | )
Recoveries |  |  | 3,299 |  |  |  | 107 |  |  | $ | 3,406 |  |  |  | 46 |  |  |  | 451 |  |  |  | 761 |  |  |  | 2,543 |  |  |  | 7,207 |
Net provision for loan losses |  |  | 375,050 |  |  |  | 37,211 |  |  | $ | 412,261 |  |  |  | 71,210 |  |  |  | 13,965 |  |  |  | 23,479 |  |  |  | 27,509 |  |  |  | 548,424 |
Ending balance - allowance for loan losses |  | $ | 144,971 |  |  | $ | 61,466 |  |  | $ | 206,437 |  |  | $ | 97,911 |  |  | $ | 31,239 |  |  | $ | 57,351 |  |  | $ | 49,700 |  |  | $ | 442,638 |
Reserve for unfunded lending commitments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 3,974 |  |  | $ | — |  |  | $ | 3,974 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 3,974 |
Cumulative effect of change in accounting principle |  |  | 5,772 |  |  |  | 288 |  |  |  | 6,060 |  |  |  | 449 |  |  |  | 15,658 |  |  |  | 17 |  |  |  | 5,146 |  |  |  | 27,330 |
Provision for losses on unfunded commitments |  |  | (2,900 | ) |  |  | 427 |  |  |  | (2,473 | ) |  |  | 649 |  |  |  | 10,455 |  |  |  | 5 |  |  |  | (3,369 | ) |  |  | 5,267 |
Ending balance - reserve for unfunded lending commitments |  |  | 6,846 |  |  |  | 715 |  |  |  | 7,561 |  |  |  | 1,098 |  |  |  | 26,113 |  |  |  | 22 |  |  |  | 1,777 |  |  |  | 36,571 |
Total allowance for credit losses |  | $ | 151,817 |  |  | $ | 62,181 |  |  | $ | 213,998 |  |  | $ | 99,009 |  |  | $ | 57,352 |  |  | $ | 57,373 |  |  | $ | 51,477 |  |  | $ | 479,209 |
Allowance for loan losses: |  |  |
Individually evaluated |  | $ | 12,619 |  |  | $ | 1,237 |  |  | $ | 13,856 |  |  | $ | 457 |  |  | $ | 55 |  |  | $ | 477 |  |  | $ | 377 |  |  | $ | 15,222 |
Collectively evaluated |  |  | 132,352 |  |  |  | 60,229 |  |  |  | 192,581 |  |  |  | 97,454 |  |  |  | 31,184 |  |  |  | 56,874 |  |  |  | 49,323 |  |  |  | 427,416 |
Allowance for loan losses |  | $ | 144,971 |  |  | $ | 61,466 |  |  | $ | 206,437 |  |  | $ | 97,911 |  |  | $ | 31,239 |  |  | $ | 57,351 |  |  | $ | 49,700 |  |  | $ | 442,638 |
Reserve for unfunded lending commitments: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated |  | $ | 751 |  |  | $ | — |  |  | $ | 751 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 751 |
Collectively evaluated |  |  | 6,095 |  |  |  | 715 |  |  |  | 6,810 |  |  |  | 1,098 |  |  |  | 26,113 |  |  |  | 22 |  |  |  | 1,777 |  |  |  | 35,820 |
Reserve for unfunded lending commitments: |  | $ | 6,846 |  |  | $ | 715 |  |  | $ | 7,561 |  |  | $ | 1,098 |  |  | $ | 26,113 |  |  | $ | 22 |  |  | $ | 1,777 |  |  | $ | 36,571 |
Total allowance for credit losses |  | $ | 151,817 |  |  | $ | 62,181 |  |  | $ | 213,998 |  |  | $ | 99,009 |  |  | $ | 57,352 |  |  | $ | 57,373 |  |  | $ | 51,477 |  |  | $ | 479,209 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated |  | $ | 89,314 |  |  | $ | 9,982 |  |  | $ | 99,296 |  |  | $ | 6,222 |  |  | $ | 1,007 |  |  | $ | 5,710 |  |  | $ | 3,970 |  |  | $ | 116,205 |
Collectively evaluated |  |  | 10,375,966 |  |  |  | 2,752,277 |  |  |  | 13,128,243 |  |  |  | 3,344,077 |  |  |  | 1,127,952 |  |  |  | 2,871,606 |  |  |  | 2,040,294 |  |  |  | 22,512,172 |
Total loans |  | $ | 10,465,280 |  |  | $ | 2,762,259 |  |  | $ | 13,227,539 |  |  | $ | 3,350,299 |  |  | $ | 1,128,959 |  |  | $ | 2,877,316 |  |  | $ | 2,044,264 |  |  | $ | 22,628,377 |
|  |  |  |  |  | Commercial |  |  | Total |  |  | Commercial |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Commercial |  |  | real estate- |  |  | commercial |  |  | real estate- |  |  | Construction |  |  |  |  |  |  |  |  |  |  |  |  |
|  | non-real |  |  | owner |  |  | and |  |  | income |  |  | and land |  |  | Residential |  |  |  |  |  |  |  |  |
(in thousands) |  | estate |  |  | occupied |  |  | industrial |  |  | producing |  |  | development |  |  | mortgages |  |  | Consumer |  |  | Total |
|  | Six Months Ended June 30, 2019 |
Allowance for loan losses: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Beginning balance |  | $ | 97,752 |  |  | $ | 13,757 |  |  | $ | 111,509 |  |  | $ | 17,638 |  |  | $ | 15,647 |  |  | $ | 23,782 |  |  | $ | 25,938 |  |  | $ | 194,514 |
Charge-offs |  |  | (21,653 | ) |  |  | (71 | ) |  |  | (21,724 | ) |  |  | (10 | ) |  |  | - |  |  |  | (439 | ) |  |  | (8,167 | ) |  |  | (30,340 | )
Recoveries |  |  | 2,730 |  |  |  | 221 |  |  |  | 2,951 |  |  |  | 2 |  |  |  | 97 |  |  |  | 266 |  |  |  | 2,004 |  |  |  | 5,320 |
Net provision for loan losses |  |  | 17,698 |  |  |  | 328 |  |  |  | 18,026 |  |  |  | 7,781 |  |  |  | (4,079 | ) |  |  | (551 | ) |  |  | 4,954 |  |  |  | 26,131 |
Ending balance |  | $ | 96,527 |  |  | $ | 14,235 |  |  | $ | 110,762 |  |  | $ | 25,411 |  |  | $ | 11,665 |  |  | $ | 23,058 |  |  | $ | 24,729 |  |  | $ | 195,625 |
Ending balance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Allowance: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | 8,486 |  |  | $ | 142 |  |  | $ | 8,628 |  |  | $ | 93 |  |  | $ | 1 |  |  | $ | 146 |  |  | $ | 253 |  |  | $ | 9,121 |
Amounts related to purchased credit impaired loans |  |  | 138 |  |  |  | 172 |  |  |  | 310 |  |  |  | 105 |  |  |  | 151 |  |  |  | 8,695 |  |  |  | 313 |  |  |  | 9,574 |
Collectively evaluated for impairment |  |  | 87,903 |  |  |  | 13,921 |  |  |  | 101,824 |  |  |  | 25,213 |  |  |  | 11,513 |  |  |  | 14,217 |  |  |  | 24,163 |  |  |  | 176,930 |
Total allowance |  | $ | 96,527 |  |  | $ | 14,235 |  |  | $ | 110,762 |  |  | $ | 25,411 |  |  | $ | 11,665 |  |  | $ | 23,058 |  |  | $ | 24,729 |  |  | $ | 195,625 |
Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Individually evaluated for impairment |  | $ | 224,603 |  |  | $ | 17,769 |  |  | $ | 242,372 |  |  | $ | 1,880 |  |  | $ | 19 |  |  | $ | 4,089 |  |  | $ | 1,521 |  |  | $ | 249,881 |
Purchased credit impaired loans |  |  | 6,313 |  |  |  | 5,581 |  |  |  | 11,894 |  |  |  | 4,702 |  |  |  | 1,482 |  |  |  | 98,472 |  |  |  | 3,444 |  |  |  | 119,994 |
Collectively evaluated for impairment |  |  | 8,328,202 |  |  |  | 2,496,620 |  |  |  | 10,824,822 |  |  |  | 2,888,886 |  |  |  | 1,142,561 |  |  |  | 2,865,710 |  |  |  | 2,083,958 |  |  |  | 19,805,937 |
Total loans |  | $ | 8,559,118 |  |  | $ | 2,519,970 |  |  | $ | 11,079,088 |  |  | $ | 2,895,468 |  |  | $ | 1,144,062 |  |  | $ | 2,968,271 |  |  | $ | 2,088,923 |  |  | $ | 20,175,812 |
The calculation of the allowance for credit losses under CECL is performed using two primary approaches: a collective approach for pools of loans that have similar risk characteristics using a loss rate analysis, and a specific reserve analysis for credits individually evaluated. The increase in the allowance for credit losses for the six months ended June 30, 2020 reflects the impact of the unprecedented economic shutdown in response to the pandemic and the significant drop in oil prices. The allowance for credit losses was developed using multiple Moody’s macroeconomic forecasts applied to internally developed credit models for a two year reasonable and supportable period. The Company weighted the baseline economic forecast 50% which includes a sharp recession in the first and second quarters of 2020, with a gradual recovery beginning in the second half of 2020. The upside scenario S-1 and the downside scenario S-2 were each weighted 25% to incorporate reasonably possible alternative outcomes. The S-1 scenario reflects reasonably possible improving conditions and a quicker recovery in the second half of 2020 compared to the baseline. The S-2 scenario reflects reasonably possible worsening economic conditions and a double-dip recession in the fourth quarter of 2020 and the first quarter of 2021. The degradation in economic conditions during the six months ended June 30, 2020 created the need for an increased allowance across all portfolios. The allowance for credit loss activity for the first six months of 2020 also reflects the impact of the transfer of $497 million of energy-related loans to held for sale in anticipation of a third quarter 2020 transaction. The write-down to loans’ observable market value plus cost to sell resulted in charge-offs of $242.6 million and a reserve release of $82.5 million, for a net provision for credit losses impact of $160.1 million, which is mostly reflected in the commercial non-real estate portfolio. Detail of the individually evaluated allowance is provided in the impaired loans section that follows. Impaired Loans The following table shows the composition of nonaccrual loans by portfolio class. Prior to the adoption of CECL, purchased credit impaired loans accounted for in pools with an accretable yield were considered to be performing. Such loans totaled $17.5 million at December 31, 2019.
|  | June 30, |  |  | December 31, |
(in thousands) |  | 2020 |  |  | 2019 |
Commercial non-real estate |  | $ | 93,471 |  |  | $ | 178,678 |
Commercial real estate - owner occupied |  |  | 14,120 |  |  |  | 7,708 |
Total commercial and industrial |  |  | 107,591 |  |  |  | 186,386 |
Commercial real estate - income producing |  |  | 7,180 |  |  |  | 2,594 |
Construction and land development |  |  | 2,498 |  |  |  | 1,217 |
Residential mortgages |  |  | 42,237 |  |  |  | 39,262 |
Consumer |  |  | 24,473 |  |  |  | 16,374 |
Total loans |  | $ | 183,979 |  |  | $ | 245,833 |
For the six months ended June 30, 2020 and 2019, the estimated amount of interest income that would have been recorded had the loans not been assigned nonaccrual status was $8.4 million and $6.4 million, respectively. Nonaccrual loans include nonaccruing loans modified in troubled debt restructurings (“TDRs”) of $55.2 million and $132.5 million at June 30, 2020 and December 31, 2019, respectively. Total TDRs, both accruing and nonaccruing, were $65.0 million at June 30, 2020 and $193.7 million at December 31, 2019. All TDRs are individually evaluated for credit loss. At June 30, 2020 and December 31, 2019, the Company had unfunded commitments of $0.8 million and $2.4 million, respectively, to borrowers whose loan terms have been modified in a TDR. The tables below detail by portfolio class TDRs that were modified during the six months ended June 30, 2020 and 2019:
|  | Three Months Ended |
($ in thousands) |  | June 30, 2020 |  |  | June 30, 2019 |
|  |  |  |  |  | Pre- Modification |  |  | Post- Modification |  |  |  |  |  |  | Pre- Modification |  |  | Post- Modification |
|  | Number |  |  | Outstanding |  |  | Outstanding |  |  | Number |  |  | Outstanding |  |  | Outstanding |
|  | of |  |  | Recorded |  |  | Recorded |  |  | of |  |  | Recorded |  |  | Recorded |
Troubled Debt Restructurings: |  | Contracts |  |  | Investment |  |  | Investment |  |  | Contracts |  |  | Investment |  |  | Investment |
Commercial non-real estate |  |  | 2 |  |  | $ | 350 |  |  | $ | 350 |  |  |  | 1 |  |  | $ | 334 |  |  | $ | 334 |
Commercial real estate - owner occupied |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total commercial and industrial |  |  | 2 |  |  |  | 350 |  |  |  | 350 |  |  |  | 1 |  |  |  | 334 |  |  |  | 334 |
Commercial real estate - income producing |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Construction and land development |  |  | 1 |  |  |  | 15 |  |  |  | 15 |  |  |  | — |  |  |  | — |  |  |  | — |
Residential mortgages |  |  | 8 |  |  |  | 1,810 |  |  |  | 1,810 |  |  |  | 2 |  |  |  | 638 |  |  |  | 638 |
Consumer |  |  | 2 |  |  |  | 30 |  |  |  | 30 |  |  |  | — |  |  |  | — |  |  |  | — |
Total loans |  |  | 13 |  |  | $ | 2,205 |  |  | $ | 2,205 |  |  |  | 3 |  |  | $ | 972 |  |  | $ | 972 |
|  | Six Months Ended |
($ in thousands) |  | June 30, 2020 |  |  | June 30, 2019 |
Troubled Debt Restructurings: |  | Number of Contracts |  |  | Pre- Modification Outstanding Recorded Investment |  |  | Post- Modification Outstanding Recorded Investment |  |  | Number of Contracts |  |  | Pre- Modification Outstanding Recorded Investment |  |  | Post- Modification Outstanding Recorded Investment |
Commercial non-real estate |  |  | 3 |  |  | $ | 745 |  |  | $ | 745 |  |  |  | 8 |  |  | $ | 14,137 |  |  | $ | 14,137 |
Commercial real estate - owner occupied |  |  | — |  |  |  | — |  |  |  | — |  |  |  | 1 |  |  |  | 167 |  |  |  | 167 |
Total commercial and industrial |  |  | 3 |  |  |  | 745 |  |  |  | 745 |  |  |  | 9 |  |  |  | 14,304 |  |  |  | 14,304 |
Commercial real estate - income producing |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Construction and land development |  |  | 1 |  |  |  | 15 |  |  |  | 15 |  |  |  | — |  |  |  | — |  |  |  | — |
Residential mortgages |  |  | 9 |  |  |  | 2,066 |  |  |  | 2,066 |  |  |  | 7 |  |  |  | 1,902 |  |  |  | 1,902 |
Consumer |  |  | 5 |  |  |  | 64 |  |  |  | 64 |  |  |  | 2 |  |  |  | 46 |  |  |  | 46 |
Total loans |  |  | 18 |  |  |  | 2,890 |  |  |  | 2,890 |  |  |  | 18 |  |  | $ | 16,252 |  |  | $ | 16,252 |
The TDRs modified during the six months ended June 30, 2020 reflected in the table above include $0.7 million of loans with extended amortization terms or other payment concessions and $0.4 million with significant covenant waivers and $1.8 million with other modifications. The TDRs modified during the six months ended June 30, 2019 include $0.1 million of loans with extended amortization terms or other payment concessions, $9.1 million with significant covenant waivers and $7.0 million with other modifications. One commercial non-real estate loan totaling $0.4 million, one residential mortgage loan totaling $0.6 million, and two consumer loans totaling $0.2 million that defaulted during the six months ended June 30, 2020 had been modified in a TDR during the twelve months prior to default. No loans that defaulted during the six months ended June 30, 2019 had been modified in a TDR during the twelve months prior to default. The tables below present loans that are individually evaluated by portfolio class at June 30, 2020 and December 31, 2019. Loans individually evaluated include nonaccrual loans, TDRs and other loans that do not share common characteristics with loans evaluated on a collective basis that have aggregate relationship balances of $1 million or more.
|  | June 30, 2020 |
(in thousands) |  | Recorded investment without an allowance |  |  | Recorded investment with an allowance |  |  | Unpaid principal balance |  |  | Related allowance for loan loss |
Commercial non-real estate |  | $ | 42,426 |  |  | $ | 46,888 |  |  | $ | 150,630 |  |  | $ | 12,619 |
Commercial real estate - owner occupied |  |  | 3,177 |  |  |  | 6,805 |  |  |  | 12,764 |  |  |  | 1,237 |
Total commercial and industrial |  |  | 45,603 |  |  |  | 53,693 |  |  |  | 163,394 |  |  |  | 13,856 |
Commercial real estate - income producing |  |  | 1,332 |  |  |  | 4,890 |  |  |  | 7,018 |  |  |  | 457 |
Construction and land development |  |  | 667 |  |  |  | 340 |  |  |  | 1,007 |  |  |  | 55 |
Residential mortgages |  |  | 1,921 |  |  |  | 3,789 |  |  |  | 6,251 |  |  |  | 477 |
Consumer |  |  | 1,567 |  |  |  | 2,403 |  |  |  | 3,970 |  |  |  | 377 |
Total loans |  | $ | 51,090 |  |  | $ | 65,115 |  |  | $ | 181,640 |  |  | $ | 15,222 |
|  | December 31, 2019 |
(in thousands) |  | Recorded investment without an allowance |  |  | Recorded investment with an allowance |  |  | Unpaid principal balance |  |  | Related allowance for loan loss |
Commercial non-real estate |  | $ | 134,191 |  |  | $ | 98,247 |  |  | $ | 270,078 |  |  | $ | 21,733 |
Commercial real estate - owner occupied |  |  | 2,665 |  |  |  | 1,716 |  |  |  | 7,793 |  |  |  | 104 |
Total commercial and industrial |  |  | 136,856 |  |  |  | 99,963 |  |  |  | 277,871 |  |  |  | 21,837 |
Commercial real estate - income producing |  |  | 373 |  |  |  | 1,525 |  |  |  | 1,959 |  |  |  | 18 |
Construction and land development |  |  | — |  |  |  | 277 |  |  |  | 322 |  |  |  | 21 |
Residential mortgages |  |  | 3,383 |  |  |  | 1,791 |  |  |  | 5,709 |  |  |  | 217 |
Consumer |  |  | 479 |  |  |  | 1,004 |  |  |  | 1,906 |  |  |  | 292 |
Total loans |  | $ | 141,091 |  |  | $ | 104,560 |  |  | $ | 287,767 |  |  | $ | 22,385 |
The tables below present the average balances and interest income for individually evaluated loans for the six months ended June 30, 2020 and 2019. Interest income recognized represents interest on accruing loans modified in a TDR.
|  | Three Months Ended |
|  | June 30, 2020 |  |  | June 30, 2019 |
(in thousands) |  | Average Recorded Investment |  |  | Interest Income Recognized |  |  | Average Recorded Investment |  |  | Interest Income Recognized |
Commercial non-real estate |  | $ | 247,526 |  |  | $ | 217 |  |  | $ | 228,055 |  |  | $ | 1,444 |
Commercial real estate - owner occupied |  |  | 7,083 |  |  |  | — |  |  |  | 17,371 |  |  |  | 71 |
Total commercial and industrial |  |  | 254,609 |  |  |  | 217 |  |  |  | 245,426 |  |  |  | 1,515 |
Commercial real estate - income producing |  |  | 6,761 |  |  |  | 6 |  |  |  | 2,274 |  |  |  | 7 |
Construction and land development |  |  | 2,179 |  |  |  | 2 |  |  |  | 19 |  |  |  | — |
Residential mortgages |  |  | 5,168 |  |  |  | 17 |  |  |  | 4,743 |  |  |  | 2 |
Consumer |  |  | 2,625 |  |  |  | 23 |  |  |  | 1,515 |  |  |  | 18 |
Total loans |  | $ | 271,342 |  |  | $ | 265 |  |  | $ | 253,977 |  |  | $ | 1,542 |
|  | Six Months Ended
|  | June 30, 2020 |  |  | June 30, 2019
(in thousands) |  | Average Recorded Investment |  |  | Interest Income Recognized |  |  | Average Recorded Investment |  |  | Interest Income Recognized
Commercial non-real estate |  | $ | 245,320 |  |  | $ | 739 |  |  | $ | 231,750 |  |  | $ | 3,140
Commercial real estate - owner occupied |  |  | 5,683 |  |  |  | - |  |  |  | 18,346 |  |  |  | 151
Total commercial and industrial |  |  | 251,003 |  |  |  | 739 |  |  |  | 250,096 |  |  |  | 3,291
Commercial real estate - income producing |  |  | 5,680 |  |  |  | 12 |  |  |  | 2,480 |  |  |  | 14
Construction and land development |  |  | 1,996 |  |  |  | 4 |  |  |  | 45 |  |  |  | —
Residential mortgages |  |  | 5,034 |  |  |  | 21 |  |  |  | 4,690 |  |  |  | 7
Consumer |  |  | 2,004 |  |  |  | 46 |  |  |  | 1,386 |  |  |  | 34
Total loans |  | $ | 265,717 |  |  | $ | 822 |  |  | $ | 258,697 |  |  | $ | 3,346
The TDR disclosure above does not include loans modified under Section 4013 of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) signed into law on March 27, 2020, which allows financial institutions to exclude eligible modifications from TDR reporting. Eligible modification must be (1) related to COVID-19, (2) executed on a loan that was not more than 30 days past due as of December 31, 2019 and (3) executed between March 1, 2020 and the earlier of 60 days after the date of the termination of the national emergency or December 31, 2020. As of June 30, 2020, there were 6,945 loans totaling $2.7 billion with active payment deferral modifications of principal, interest or both, that are eligible to be excluded from TDR reporting requirements. These loans are also excluded from reporting in the aging analysis that follows as delinquency is tracked under the modified terms. Aging Analysis The tables below present the aging analysis of past due loans by portfolio class at June 30, 2020 and December 31, 2019. Prior to the adoption of CECL, purchased credit impaired loans accounted for in pools under ASC 310-30 with an accretable yield were considered to be current in the table below as of December 31, 2019. These loans totaled $6.1 million for 30-59 days past due, $2.0 million for 60-89 days past due and $8.3 million for both greater than 90 days past due and greater than 90 days past due and still accruing at December 31, 2019.
June 30, 2020 |  | 30-59 days past due |  |  | 60-89 days past due |  |  | Greater than 90 days past due |  |  | Total past due |  |  | Current |  |  | Total Loans |  |  | Recorded investment > 90 days and still accruing |
(in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial non-real estate |  | $ | 3,940 |  |  | $ | 3,079 |  |  | $ | 80,668 |  |  | $ | 87,687 |  |  | $ | 10,377,593 |  |  | $ | 10,465,280 |  |  | $ | 2,497 |
Commercial real estate - owner occupied |  |  | 1,265 |  |  |  | 1,012 |  |  |  | 12,409 |  |  |  | 14,686 |  |  |  | 2,747,573 |  |  |  | 2,762,259 |  |  |  | 117 |
Total commercial and industrial |  |  | 5,205 |  |  |  | 4,091 |  |  |  | 93,077 |  |  |  | 102,373 |  |  |  | 13,125,166 |  |  |  | 13,227,539 |  |  |  | 2,614 |
Commercial real estate - income producing |  |  | 1,519 |  |  |  | 593 |  |  |  | 7,720 |  |  |  | 9,832 |  |  |  | 3,340,467 |  |  |  | 3,350,299 |  |  |  | 663 |
Construction and land development |  |  | 476 |  |  |  | 2,060 |  |  |  | 2,338 |  |  |  | 4,874 |  |  |  | 1,124,085 |  |  |  | 1,128,959 |  |  |  | 406 |
Residential mortgages |  |  | 3,942 |  |  |  | 11,119 |  |  |  | 30,769 |  |  |  | 45,830 |  |  |  | 2,831,486 |  |  |  | 2,877,316 |  |  |  | 626 |
Consumer |  |  | 9,245 |  |  |  | 5,874 |  |  |  | 14,712 |  |  |  | 29,831 |  |  |  | 2,014,433 |  |  |  | 2,044,264 |  |  |  | 921 |
Total |  | $ | 20,387 |  |  | $ | 23,737 |  |  | $ | 148,616 |  |  | $ | 192,740 |  |  | $ | 22,435,637 |  |  | $ | 22,628,377 |  |  | $ | 5,230 |
December 31, 2019 |  | 30-59 days past due |  |  | 60-89 days past due |  |  | Greater than 90 days past due |  |  | Total past due |  |  | Current |  |  | Total Loans |  |  | Recorded investment > 90 days and still accruing |
(in thousands) |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Commercial non-real estate |  | $ | 20,893 |  |  | $ | 13,445 |  |  | $ | 100,806 |  |  | $ | 135,144 |  |  | $ | 9,031,803 |  |  |  | 9,166,947 |  |  | $ | 1,537 |
Commercial real estate - owner occupied |  |  | 4,862 |  |  |  | 556 |  |  |  | 7,268 |  |  |  | 12,686 |  |  |  | 2,725,774 |  |  |  | 2,738,460 |  |  |  | 830 |
Total commercial and industrial |  |  | 25,755 |  |  |  | 14,001 |  |  |  | 108,074 |  |  |  | 147,830 |  |  |  | 11,757,577 |  |  |  | 11,905,407 |  |  |  | 2,367 |
Commercial real estate - income producing |  |  | 738 |  |  |  | 703 |  |  |  | 2,910 |  |  |  | 4,351 |  |  |  | 2,990,097 |  |  |  | 2,994,448 |  |  |  | 450 |
Construction and land development |  |  | 5,747 |  |  |  | 680 |  |  |  | 2,480 |  |  |  | 8,907 |  |  |  | 1,148,544 |  |  |  | 1,157,451 |  |  |  | 2,042 |
Residential mortgages |  |  | 32,867 |  |  |  | 8,584 |  |  |  | 23,577 |  |  |  | 65,028 |  |  |  | 2,925,603 |  |  |  | 2,990,631 |  |  |  | 85 |
Consumer |  |  | 18,586 |  |  |  | 6,215 |  |  |  | 9,901 |  |  |  | 34,702 |  |  |  | 2,130,116 |  |  |  | 2,164,818 |  |  |  | 1,638 |
Total |  | $ | 83,693 |  |  | $ | 30,183 |  |  | $ | 146,942 |  |  | $ | 260,818 |  |  | $ | 20,951,937 |  |  | $ | 21,212,755 |  |  | $ | 6,582 |
Credit Quality Indicators The following tables present the credit quality indicators by segments and portfolio class of loans held for investment at June 30, 2020 and December 31, 2019. The Company routinely assesses the ratings of loans in its portfolio through an established and comprehensive portfolio management process. In addition, the Company often looks at portfolios of loans to determine if there are areas of risk not specifically identified in its loan by loan approach. As a result, several loans were downgraded to pass-watch in 2020 in reaction to economic downturn caused by the pandemic and other environmental factors. In alignment with regulatory guidance, the Company has been working with its customers to manage through this period of severe uncertainty and economic stress, including providing various types of loan deferrals. As these deferrals expire and more information becomes available concerning individual borrower circumstances, further risk rating adjustments may be required.
|  | June 30, 2020 |
(in thousands) |  | Commercial non-real estate |  |  | Commercial real estate - owner- occupied |  |  | Total commercial and industrial |  |  | Commercial real estate - income producing |  |  | Construction and land development |  |  | Total commercial |
Grade: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 9,954,470 |  |  | $ | 2,564,962 |  |  | $ | 12,519,432 |  |  | $ | 3,239,192 |  |  | $ | 1,097,257 |  |  | $ | 16,855,881 |
Pass-Watch |  |  | 263,198 |  |  |  | 136,658 |  |  |  | 399,856 |  |  |  | 78,302 |  |  |  | 24,617 |  |  |  | 502,775 |
Special Mention |  |  | 60,022 |  |  |  | 9,160 |  |  |  | 69,182 |  |  |  | 10,079 |  |  |  | 1,588 |  |  |  | 80,849 |
Substandard |  |  | 187,590 |  |  |  | 51,479 |  |  |  | 239,069 |  |  |  | 22,726 |  |  |  | 5,497 |  |  |  | 267,292 |
Doubtful |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | 10,465,280 |  |  | $ | 2,762,259 |  |  | $ | 13,227,539 |  |  | $ | 3,350,299 |  |  | $ | 1,128,959 |  |  | $ | 17,706,797 |
|  | December 31, 2019 |
(in thousands) |  | Commercial non-real estate |  |  | Commercial real estate - owner- occupied |  |  | Total commercial and industrial |  |  | Commercial real estate - income producing |  |  | Construction and land development |  |  | Total commercial |
Grade: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 8,492,113 |  |  | $ | 2,517,448 |  |  | $ | 11,009,561 |  |  |  | 2,883,553 |  |  | $ | 1,120,997 |  |  | $ | 15,014,111 |
Pass-Watch |  |  | 220,850 |  |  |  | 146,266 |  |  |  | 367,116 |  |  |  | 69,765 |  |  |  | 25,621 |  |  |  | 462,502 |
Special Mention |  |  | 71,654 |  |  |  | 14,651 |  |  |  | 86,305 |  |  |  | 14,995 |  |  |  | 283 |  |  |  | 101,583 |
Substandard |  |  | 382,330 |  |  |  | 60,095 |  |  |  | 442,425 |  |  |  | 26,135 |  |  |  | 10,550 |  |  |  | 479,110 |
Doubtful |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total |  | $ | 9,166,947 |  |  | $ | 2,738,460 |  |  | $ | 11,905,407 |  |  | $ | 2,994,448 |  |  | $ | 1,157,451 |  |  | $ | 16,057,306 |
|  | June 30, 2020 |  |  | December 31, 2019 |
(in thousands) |  | Residential mortgage |  |  | Consumer |  |  | Total |  |  | Residential mortgage |  |  | Consumer |  |  | Total |
Performing |  | $ | 2,832,131 |  |  | $ | 2,018,614 |  |  | $ | 4,850,745 |  |  | $ | 2,950,854 |  |  | $ | 2,147,312 |  |  | $ | 5,098,166 |
Nonperforming |  |  | 45,185 |  |  |  | 25,650 |  |  |  | 70,835 |  |  |  | 39,777 |  |  |  | 17,506 |  |  |  | 57,283 |
Total |  | $ | 2,877,316 |  |  | $ | 2,044,264 |  |  | $ | 4,921,580 |  |  | $ | 2,990,631 |  |  | $ | 2,164,818 |  |  | $ | 5,155,449 |
Below are the definitions of the Company’s internally assigned grades: Commercial:
| • | Pass – loans properly approved, documented, collateralized, and performing which do not reflect an abnormal credit risk.
| • | Pass-Watch – credits in this category are of sufficient risk to cause concern. This category is reserved for credits that display negative performance trends. The “Watch” grade should be regarded as a transition category.
| • | Special Mention – a criticized asset category defined as having potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may, at some future date, result in the deterioration of the repayment prospects for the credit or the institution’s credit position. Special mention credits are not considered part of the Classified credit categories and do not expose the institution to sufficient risk to warrant adverse classification.
| • | Substandard – an asset that is inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Assets so classified must have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.
| • | Doubtful – an asset that has all the weaknesses inherent in one classified Substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
| • | Loss – credits classified as Loss are considered uncollectable and are charged off promptly once so classified.
Residential and Consumer:
| • | Performing – accruing loans that have not been modified in a troubled debt restructuring.
| • | Nonperforming – loans for which there are good reasons to doubt that payments will be made in full. All loans with nonaccrual status and all loans that have been modified in a troubled debt restructuring are classified as nonperforming.
Vintage Analysis The following table presents credit quality disclosures of amortized cost by class and vintage for term loans and by revolving and revolving converted to amortizing at June 30, 2020. We define vintage as the later of origination, renewal or restructure date.
| Term Loans |  |  |  |  |  |  |  |  |  |  |
| Amortized Cost Basis by Origination Year |  |  |  |  |  |  |  |  |  |  |
|  | 2020 |  |  | 2019 |  |  | 2018 |  |  | 2017 |  |  | 2016 |  |  | Prior |  |  | Revolving Loans |  |  | Revolving Loans Converted to Term Loans |  |  | Total |
Commercial Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Pass |  | $ | 4,296,564 |  |  | $ | 3,327,755 |  |  | $ | 2,146,064 |  |  | $ | 1,672,980 |  |  | $ | 1,187,467 |  |  | $ | 1,605,845 |  |  | $ | 2,518,581 |  |  | $ | 100,625 |  |  | $ | 16,855,881 |
Pass-Watch |  |  | 52,823 |  |  |  | 53,406 |  |  |  | 64,528 |  |  |  | 86,433 |  |  |  | 45,023 |  |  |  | 85,315 |  |  |  | 102,437 |  |  |  | 12,810 |  |  |  | 502,775 |
Special Mention |  |  | 1,598 |  |  |  | 4,372 |  |  |  | 5,798 |  |  |  | 26,179 |  |  |  | 13,687 |  |  |  | 16,091 |  |  |  | 11,882 |  |  |  | 1,242 |  |  |  | 80,849 |
Substandard |  |  | 32,647 |  |  |  | 36,746 |  |  |  | 56,298 |  |  |  | 15,284 |  |  |  | 19,411 |  |  |  | 42,952 |  |  |  | 51,322 |  |  |  | 12,632 |  |  |  | 267,292 |
Doubtful |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |  |  |  | — |
Total Commercial Loans |  | $ | 4,383,632 |  |  | $ | 3,422,279 |  |  | $ | 2,272,688 |  |  | $ | 1,800,876 |  |  | $ | 1,265,588 |  |  | $ | 1,750,203 |  |  | $ | 2,684,222 |  |  | $ | 127,309 |  |  | $ | 17,706,797 |
Residential Mortgage and Consumer Loans: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Performing |  | $ | 277,534 |  |  | $ | 506,177 |  |  | $ | 531,553 |  |  | $ | 698,878 |  |  | $ | 583,723 |  |  | $ | 1,004,835 |  |  | $ | 1,242,586 |  |  | $ | 5,459 |  |  |  | 4,850,745 |
Nonperforming |  |  | 954 |  |  |  | 4,275 |  |  |  | 6,360 |  |  |  | 10,315 |  |  |  | 5,546 |  |  |  | 35,972 |  |  |  | 3,409 |  |  |  | 4,004 |  |  |  | 70,835 |
Total Consumer Loans |  | $ | 278,488 |  |  | $ | 510,452 |  |  | $ | 537,913 |  |  | $ | 709,193 |  |  | $ | 589,269 |  |  | $ | 1,040,807 |  |  | $ | 1,245,995 |  |  | $ | 9,463 |  |  | $ | 4,921,580 |
Purchased Credit Impaired Loans Under the transition provisions for the application of CECL, the Company has classified all loans previously accounted for as purchased credit impaired under ASC 310-30 to be classified as purchased credit deteriorated. The application of these provisions resulted in an increase of $19.8 million to the amortized cost basis of the financial asset and the allowance for credit losses at the date of adoption, representing the remaining credit portion of the purchased discount. The Company elected not to maintain pools of loans accounted for under Subtopic 310-30 with the adoption of CECL. The remaining noncredit discount was allocated to the individual loans and will be accreted to interest income using the interest method based on the effective interest rate. Changes in the carrying amount of purchased credit impaired loans and related accretable yield are presented in the following table for the year ended December 31, 2019.
|  | December 31, 2019 |
(in thousands) |  | Carrying Amount of Loans |  |  | Accretable Yield |
Balance at beginning of period |  | $ | 129,596 |  |  | $ | 37,294 |
Additions |  |  | 120,562 |  |  |  | 6,246 |
Payments received, net |  |  | (48,076 | ) |  |  | (4,601 | )
Accretion |  |  | 13,163 |  |  |  | (13,163 | )
Decrease in expected cash flows based on actual cash flows and changes in cash flow assumptions |  |  | — |  |  |  | 4,170 |
Balance at end of period |  | $ | 215,245 |  |  | $ | 29,946 |
Residential Mortgage Loans in Process of Foreclosure Loans in process of foreclosure include those for which formal foreclosure proceedings are in process according to local requirements of the applicable jurisdiction. Included in loans at December 31, 2019 was $8.6 million of consumer loans secured by single family residential real estate that were in process of foreclosure. In light of the economic conditions stemming from the pandemic, the Company placed all active residential mortgage foreclosures on hold and suspended the filing of new foreclosures. In addition to the single family residential real estate loans in process of foreclosure, the Company also held $4.9 million and $6.3 million of foreclosed single family residential properties in other real estate owned at June 30, 2020 and December 31, 2019, respectively. Loans Held for Sale Included in loans held for sale at June 30, 2020 were commercial loans totaling $254.4 million and residential mortgage loans totaling $110.0 million. At December 31, 2019, loans held for sale of $55.9 million consisted only of residential mortgage loans. The $254.4 million of commercial loans held for sale at June 30, 2020 represents the portion of the Company’s energy loan portfolio sold in a transaction that closed in July 2020. The carrying balance of the loans of $497 million was charged down to the expected net sales proceeds and transferred to loans held for sale at June 30, 2020.

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