
(In thousands)	2020		2019
Consumer:
Credit cards	$	180,354	$	204,802
Other consumer	210,870		249,694
Total consumer	391,224		454,496
Real estate:
Construction and development	1,596,255		2,236,861
Single family residential	1,880,673		2,442,064
Other commercial	5,746,863		6,205,599
Total real estate	9,223,791		10,884,524
Commercial:
Commercial	2,574,386		2,495,516
Agricultural	175,905		315,454
Total commercial	2,750,291		2,810,970
Other	535,591		275,714
Total loans	$	12,900,897	$	14,425,704

Loan Origination/Risk Management – The Company seeks to manage its credit risk by diversifying its loan portfolio, determining that borrowers have adequate sources of cash flow for loan repayment without liquidation of collateral; obtaining and monitoring collateral; providing an adequate allowance for credit losses by regularly reviewing loans through the internal loan review process. The loan portfolio is diversified by borrower, purpose and industry. The Company seeks to use diversification within the loan portfolio to reduce its credit risk, thereby minimizing the adverse impact on the portfolio if weaknesses develop in either the economy or a particular segment of borrowers. Collateral requirements are based on credit assessments of borrowers and may be used to recover the debt in case of default.

Consumer – The consumer loan portfolio consists of credit card loans and other consumer loans. Credit card loans are diversified by geographic region to reduce credit risk and minimize any adverse impact on the portfolio. Although they are regularly reviewed to facilitate the identification and monitoring of creditworthiness, credit card loans are unsecured loans, making them more susceptible to be impacted by economic downturns resulting in increasing unemployment. Other consumer loans include direct and indirect installment loans and overdrafts. Loans in this portfolio segment are sensitive to unemployment and other key consumer economic measures.

Real estate – The real estate loan portfolio consists of construction and development loans, single family residential loans and commercial loans. Construction and development loans (“C&D”) and commercial real estate loans (“CRE”) can be particularly sensitive to valuation of real estate. Commercial real estate cycles are inevitable. The long planning and production process for new properties and rapid shifts in business conditions and employment create an inherent tension between supply and demand for commercial properties. While general economic trends often move individual markets in the same direction over time, the timing and magnitude of changes are determined by other forces unique to each market. CRE cycles tend to be local in nature and longer than other credit cycles. Factors influencing the CRE market are traditionally different from those affecting residential real estate markets; thereby making predictions for one market based on the other difficult. Additionally, submarkets within commercial real estate – such as office, industrial, apartment, retail and hotel – also experience different cycles, providing an opportunity to lower the overall risk through diversification across types of CRE loans. Management realizes that local demand and supply conditions will also mean that different geographic areas will experience cycles of different amplitude and length. The Company monitors these loans closely.

Commercial – The commercial loan portfolio includes commercial and agricultural loans, representing loans to commercial customers and farmers for use in normal business or farming operations to finance working capital needs, equipment purchases or other expansion projects. Paycheck Protection Program (“PPP”) loans are also included in the commercial loan portfolio. Collection risk in this portfolio is driven by the creditworthiness of the underlying borrowers, particularly cash flow from customers’ business or farming operations. The Company continues its efforts to keep loan terms short, reducing the negative impact of upward movement in interest rates. Term loans are generally set up with one or three year balloons, and the Company has instituted a pricing mechanism for commercial loans. It is standard practice to require personal guaranties on commercial loans for closely-held or limited liability entities.

Paycheck Protection Program Loans - The Company participated in both PPP appropriations of the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) which provided 100% federally guaranteed loans for small businesses to cover up to 24 weeks of payroll costs and assist with mortgage interest, rent and utilities. Notably, these small business loans may be forgiven by the SBA if borrowers maintain their payrolls and satisfy certain other conditions. PPP loans have a zero percent risk-weight for regulatory capital ratios. During 2020, we originated 8,208 PPP loans with original balances totaling $975.6 million. As of December 31, 2020, the total outstanding balance of PPP loans was $904.7 million.

Nonaccrual and Past Due Loans – Loans are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans are placed on nonaccrual status when, in management’s opinion, the borrower may be unable to meet payment obligations as they become due, as well as when required by regulatory provisions. Loans may be placed on nonaccrual status regardless of whether or not such loans are considered past due. When interest accrual is discontinued, all unpaid accrued interest is reversed. Interest income is subsequently recognized only to the extent cash payments are received in excess of principal due. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.


(In thousands)	Gross 30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		90 Days Past Due & Accruing
December 31, 2020
Consumer:
Credit cards	$	708	$	256	$	964	$	179,390	$	180,354	$	256
Other consumer	2,771		302		3,073		207,797		210,870		13
Total consumer	3,479		558		4,037		387,187		391,224		269
Real estate:
Construction and development	1,375		3,089		4,464		1,591,791		1,596,255		—
Single family residential	23,726		14,339		38,065		1,842,608		1,880,673		253
Other commercial	2,660		9,586		12,246		5,734,617		5,746,863		—
Total real estate	27,761		27,014		54,775		9,169,016		9,223,791		253
Commercial:
Commercial	7,514		7,429		14,943		2,559,443		2,574,386		56
Agricultural	226		187		413		175,492		175,905		—
Total commercial	7,740		7,616		15,356		2,734,935		2,750,291		56
Other	92		—		92		535,499		535,591		—
Total	$	39,072	$	35,188	$	74,260	$	12,826,637	$	12,900,897	$	578


(In thousands)	Gross 30-89 Days Past Due		90 Days or More Past Due		Total Past Due		Current		Total Loans		90 Days Past Due & Accruing
December 31, 2019
Consumer:
Credit cards	$	848	$	641	$	1,489	$	203,313	$	204,802	$	259
Other consumer	4,884		735		5,619		244,075		249,694		—
Total consumer	5,732		1,376		7,108		447,388		454,496		259
Real estate:
Construction and development	5,792		1,078		6,870		2,229,991		2,236,861		—
Single family residential	26,318		13,789		40,107		2,401,957		2,442,064		597
Other commercial	7,645		6,450		14,095		6,191,504		6,205,599		—
Total real estate	39,755		21,317		61,072		10,823,452		10,884,524		597
Commercial:
Commercial	10,579		13,551		24,130		2,471,386		2,495,516		—
Agricultural	1,223		456		1,679		313,775		315,454		—
Total commercial	11,802		14,007		25,809		2,785,161		2,810,970		—
Other	—		—		—		275,714		275,714		—
Total	$	57,289	$	36,700	$	93,989	$	14,331,715	$	14,425,704	$	856


(In thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Investment in Impaired Loans		Interest Income Recognized
December 31, 2019
Consumer:
Credit cards	$	382	$	382	$	—	$	382	$	—	$	373	$	50
Other consumer	1,537		1,378		—		1,378		—		1,659		41
Total consumer	1,919		1,760		—		1,760		—		2,032		91
Real estate:
Construction and development	4,648		4,466		72		4,538		4		2,464		61
Single family residential	19,466		15,139		2,963		18,102		42		15,470		382
Other commercial	10,645		4,713		3,740		8,453		694		9,983		247
Total real estate	34,759		24,318		6,775		31,093		740		27,917		690
Commercial:
Commercial	53,436		6,582		28,998		35,580		5,007		28,219		697
Agricultural	525		383		116		499		—		908		22
Total commercial	53,961		6,965		29,114		36,079		5,007		29,127		719
Total	$	90,639	$	33,043	$	35,889	$	68,932	$	5,747	$	59,076	$	1,500

Once an obligation has been restructured because of such credit problems, it continues to be considered a TDR until paid in full; or, if an obligation yields a market interest rate and no longer has any concession regarding payment amount or amortization, then it is not considered a TDR at the beginning of the calendar year after the year in which the improvement takes place. The Company returns TDRs to accrual status only if (1) all contractual amounts due can reasonably be expected to be repaid within a prudent period, and (2) repayment has been in accordance with the contract for a sustained period, typically at least six months.

The provisions in the CARES Act included an election to not apply the guidance on accounting for TDRs to loan modifications, such as extensions or deferrals, related to COVID-19 made between March 1, 2020 and the earlier of (i) December 31, 2020 or (ii) 60 days after the President terminates the COVID-19 national emergency declaration. In March 2020, the federal financial institution regulatory agencies issued an interagency statement encouraging financial institutions to work constructively with borrowers affected by COVID-19 and provided information regarding loan modifications. The relief can only be applied to modifications for borrowers that were not more than 30 days past due as of December 31, 2019. The Company elected to adopt these provisions of the CARES Act. In response to the concerns related to the expiration of the applicable period for which the election to not apply the guidance on accounting for TDRs to loan modifications, the CARES Act was amended in late fourth quarter of 2020 to extend COVID-19 relief related to loan modifications from the earlier of (i) January 1, 2022 or (ii) 60 days after the President terminates the COVID-19 national emergency declaration. As of December 31, 2020, the Company has modified 3,729 loans totaling approximately $2.99 billion to loan customers affected by COVID-19. The following table summarizes these modified loans due to COVID-19 by industry.


	Accruing TDR Loans			Nonaccrual TDR Loans			Total TDR Loans
(Dollars in thousands)	Number	Balance		Number	Balance		Number	Balance
December 31, 2019
Real estate:
Construction and development	—	$	—	1	$	72	1	$	72
Single-family residential	25	2,627		20	1,330		45	3,957
Other commercial	1	476		2	80		3	556
Total real estate	26	3,103		23	1,482		49	4,585
Commercial:
Commercial	4	2,784		3	79		7	2,863
Total commercial	4	2,784		3	79		7	2,863
Total	30	$	5,887	26	$	1,561	56	$	7,448


						Modification Type
(Dollars in thousands)	Number of Loans	Balance Prior to TDR		Balance at December 31,		Change in Maturity Date		Change in Rate		Financial Impact on Date of Restructure
Year Ended December 31, 2020
Real estate:
Single-family residential	5	$	1,948	$	1,896	$	1,896	$	—	$	—
Total real estate	5	$	1,948	$	1,896	$	1,896	$	—	$	—

Year Ended December 31, 2019
Real estate:
Single-family residential	4	$	997	$	996	$	996	$	—	$	—
Total real estate	4	$	997	$	996	$	996	$	—	$	—

During the year ended December 31, 2020, the Company modified five loans with a recorded investment of $1,948,000 prior to modification which were deemed troubled debt restructuring. The restructured loans were modified by deferring amortized principal payments, changing the maturity dates and requiring interest-only payments for a period of up to 12 months. A specific reserve of $51,300 was determined necessary for these loans as of December 31, 2020. Additionally, there was no immediate financial impact from the restructuring of these loans as it was not considered necessary to charge-off interest or principal on the date of restructure. During the year ended December 31, 2020, six of the previously restructured loans with prior balances of $837,265 were paid off.

During the year ended December 31, 2019, the Company modified four loans with a recorded investment of $997,000 prior to modification which were deemed troubled debt restructuring. The restructured loans were modified by deferring amortized principal payments, changing the maturity dates and requiring interest-only payments for a period of up to 12 months. Based upon the fair value of the collateral, a specific reserve was not determined necessary for these loans. Also, there was no immediate financial impact from the restructuring of these loans, as it was not considered necessary to charge-off interest or principal on the date of restructure. During the year ended December 31, 2019, three of the previously restructured loans with prior balances of $81,600 were paid off.

There was one commercial loan with an outstanding balance of $2.1 million considered a TDR for which a payment default occurred during the year ended December 31, 2020. During the year ended December 31, 2019, there were four loans with an outstanding balance of $690,000, consisting of commercial and real estate construction loans, considered TDRs for which a payment default occurred. The Company charged off approximately $552,000 for these loans. The Company defines a payment default as a payment received more than 90 days after its due date.

The Company had no TDRs with pre-modification loan balances for which OREO was received in full or partial satisfaction of the loans during the years ended December 31, 2020 and 2019. At December 31, 2020 and 2019, the Company had $7,182,000 and $5,789,000, respectively, of consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings are in process. At December 31, 2020 and 2019, the Company had $3,172,000 and $4,458,000, respectively, of OREO secured by residential real estate properties.

Credit Quality Indicators – As part of the on-going monitoring of the credit quality of the Company’s loan portfolio, management tracks certain credit quality indicators including trends related to (i) the weighted-average risk rating of commercial and real estate loans, (ii) the level of classified commercial and real estate loans, (iii) net charge-offs, (iv) non-performing loans (see details above) and (v) the general economic conditions of the Company’s local markets.

The Company utilizes a risk rating matrix to assign a risk rate to each of its commercial and real estate loans. Loans are rated on a scale of 1 to 8. Risk ratings are updated on an ongoing basis and are subject to change by continuous loan monitoring processes including lending management monitoring, executive management and board committee oversight, and independent credit review. A description of the general characteristics of the 8 risk ratings is as follows:

•Risk Rate 4 – Pass (Monitor) - Loans in the Watch (Monitor) category exhibit an overall acceptable level of risk, but that risk may be increased by certain conditions, which represent “red flags”. These “red flags” require a higher level of supervision or monitoring than the normal “Pass” rated credit. The borrower may be experiencing these conditions for the first time, or it may be recovering from weakness, which at one time justified a higher rating. These conditions may include: weaknesses in financial trends; marginal cash flow; one-time negative operating results; non-compliance with policy or borrowing agreements; poor diversity in operations; lack of adequate monitoring information or lender supervision; questionable management ability/stability.

•Risk Rate 5 – Special Mention - A loan in this category has potential weaknesses that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institution’s credit position at some future date. Special Mention loans are not adversely classified (although they are “criticized”) and do not expose an institution to sufficient risk to warrant adverse classification. Borrowers may be experiencing adverse operating trends, or an ill-proportioned balance sheet. Non-financial characteristics of a Special Mention rating may include management problems, pending litigation, a non-existent, or ineffective loan agreement or other material structural weakness, and/or other significant deviation from prudent lending practices.

•Risk Rate 6 – Substandard - A Substandard loan is inadequately protected by the current sound worth and paying capacity of the borrower or of the collateral pledged, if any. Loans so classified must have a well-defined weakness, or weaknesses, that jeopardize the liquidation of the debt. The loans are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. This does not imply ultimate loss of the principal, but may involve burdensome administrative expenses and the accompanying cost to carry the loan.

•Risk Rate 7 – Doubtful - A loan classified Doubtful has all the weaknesses inherent in a substandard loan except that the weaknesses make collection or liquidation in full (on the basis of currently existing facts, conditions, and values) highly questionable and improbable. Doubtful borrowers are usually in default, lack adequate liquidity, or capital, and lack the resources necessary to remain an operating entity. The possibility of loss is extremely high, but because of specific pending events that may strengthen the asset, its classification as loss is deferred. Pending factors include: proposed merger or acquisition; liquidation procedures; capital injection; perfection of liens on additional collateral; and refinancing plans. Loans classified as Doubtful are placed on nonaccrual status.

•Risk Rate 8 – Loss - Loans classified Loss are considered uncollectible and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the loans has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless loan, even though partial recovery may be affected in the future. Borrowers in the Loss category are often in bankruptcy, have formally suspended debt repayments, or have otherwise ceased normal business operations. Loans should be classified as Loss and charged-off in the period in which they become uncollectible.


	Term Loans Amortized Cost Basis by Origination Year
(In thousands)	2020		2019		2018		2017		2016		2015 and Prior		Lines of Credit (“LOC”) Amortized Cost Basis		LOC Converted to Term Loans Amortized Cost Basis		Total
Consumer - credit cards
Delinquency:
30-89 days past due	$	—	$	—	$	—	$	—	$	—	$	—	$	708	$	—	$	708
90+ days past due	—		—		—		—		—		—		256		—		256
Total consumer - credit cards	—		—		—		—		—		—		964		—		964
Consumer - other
Delinquency:
30-89 days past due	234		441		327		658		689		84		339		—		2,772
90+ days past due	79		58		25		80		40		12		8		—		302
Total consumer - other	313		499		352		738		729		96		347		—		3,074
Real estate - C&D
Risk rating:
5 internal grade	2,728		344		259		2,107		19		—		9,613		—		15,070
6 internal grade	294		2,069		404		449		342		320		17,914		14		21,806
7 internal grade	—		—		—		—		—		—		—		—		—
Total real estate - C&D	3,022		2,413		663		2,556		361		320		27,527		14		36,876
Real estate - SF residential
Delinquency:
30-89 days past due	6,300		2,258		2,593		2,610		2,058		6,050		1,782		76		23,727
90+ days past due	557		1,853		2,735		2,582		832		3,852		1,928		—		14,339
Total real estate - SF residential	6,857		4,111		5,328		5,192		2,890		9,902		3,710		76		38,066
Real estate - other commercial
Risk rating:
5 internal grade	100,085		4,346		10,738		19,943		26,245		10,608		63,305		23,435		258,705
6 internal grade	66,737		9,418		24,380		14,067		3,744		11,158		52,182		39,486		221,172
7 internal grade	—		—		—		—		—		—		—		—		—
Total real estate - other commercial	166,822		13,764		35,118		34,010		29,989		21,766		115,487		62,921		479,877
Commercial
Risk rating:
5 internal grade	5,707		342		465		972		54		—		12,318		22,546		42,404
6 internal grade	23,227		4,495		1,586		730		276		334		53,682		7,522		91,852
7 internal grade	—		—		—		—		—		—		—		—		—
Total commercial	28,934		4,837		2,051		1,702		330		334		66,000		30,068		134,256
Commercial - agriculture
Risk rating:
5 internal grade	—		79		13		299		—		6		34		—		431
6 internal grade	86		101		64		47		12		10		68		75		463
7 internal grade	—		—		—		—		—		—		—		—		—
Total commercial - agriculture	86		180		77		346		12		16		102		75		894
Total	$	206,034	$	25,804	$	43,589	$	44,544	$	34,311	$	32,434	$	214,137	$	93,154	$	694,007


(In thousands)	Risk Rate 1-4		Risk Rate 5		Risk Rate 6		Risk Rate 7		Risk Rate 8		Total
December 31, 2019
Consumer:
Credit cards	$	204,161	$	—	$	641	$	—	$	—	$	204,802
Other consumer	247,668		—		2,026		—		—		249,694
Total consumer	451,829		—		2,667		—		—		454,496
Real estate:
Construction and development	2,229,019		70		7,735		—		37		2,236,861
Single family residential	2,394,284		6,049		41,601		130		—		2,442,064
Other commercial	6,068,425		69,745		67,429		—		—		6,205,599
Total real estate	10,691,728		75,864		116,765		130		37		10,884,524
Commercial:
Commercial	2,384,263		26,713		84,317		43		180		2,495,516
Agricultural	309,741		41		5,672		—		—		315,454
Total commercial	2,694,004		26,754		89,989		43		180		2,810,970
Other	275,714		—		—		—		—		275,714
Total	$	14,113,275	$	102,618	$	209,421	$	173	$	217	$	14,425,704

Allowance for Credit Losses – The allowance for credit losses is a reserve established through a provision for credit losses charged to expense, which represents management’s best estimate of lifetime expected losses based on reasonable and supportable forecasts, historical loss experience, and other qualitative considerations. The allowance, in the judgment of management, is necessary to reserve for expected loan losses and risks inherent in the loan portfolio. The Company’s allowance for credit loss methodology includes reserve factors calculated to estimate current expected credit losses to amortized cost balances over the remaining contractual life of the portfolio, adjusted for the effective interest rate used to discount prepayments, in accordance with ASC Topic 326-20, Financial Instruments - Credit Losses. Accordingly, the methodology is based on the Company’s reasonable and supportable economic forecasts, historical loss experience, and other qualitative adjustments.

Loans for which the repayment is expected to be provided substantially through the operation or sale of collateral and where the borrower is experiencing financial difficulty had an amortized cost of $70.0 million as of December 31, 2020, as further detailed in the table below. The collateral securing these loans consist of commercial real estate properties, residential properties, other business assets, and secured energy production assets.


(In thousands)	Commercial		Real Estate		Credit Card		Other Consumer and Other		Total
December 31, 2020
Beginning balance, January 1, 2020 - prior to adoption of CECL	$	22,863	$	39,161	$	4,051	$	2,169	$	68,244
Impact of CECL adoption	22,733		114,314		2,232		12,098		151,377
Provision for credit loss expense	42,017		42,276		4,288		(6,093)		82,488
Charge-offs	(48,736)		(13,788)		(4,113)		(4,022)		(70,659)
Recoveries	3,216		905		1,014		1,465		6,600
Net charge-offs	(45,520)		(12,883)		(3,099)		(2,557)		(64,059)
Ending balance, December 31, 2020	$	42,093	$	182,868	$	7,472	$	5,617	$	238,050

December 31, 2019
Beginning balance, January 1, 2019	$	20,514	$	29,838	$	3,923	$	2,419	$	56,694
Provision for credit loss expense	24,434		12,714		3,692		2,400		43,240
Charge-offs	(23,352)		(3,892)		(4,585)		(5,007)		(36,836)
Recoveries	1,267		501		1,021		2,357		5,146
Net charge-offs	(22,085)		(3,391)		(3,564)		(2,650)		(31,690)
Ending balance, December 31, 2019	$	22,863	$	39,161	$	4,051	$	2,169	$	68,244

December 31, 2018
Beginning balance, January 1, 2018	$	7,007	$	27,699	$	3,784	$	3,596	$	42,086
Provision for credit loss expense	21,176		8,846		3,185		4,941		38,148
Charge-offs	(8,414)		(7,698)		(4,051)		(6,675)		(26,838)
Recoveries	745		991		1,005		557		3,298
Net charge-offs	(7,669)		(6,707)		(3,046)		(6,118)		(23,540)
Ending balance, December 31, 2018	$	20,514	$	29,838	$	3,923	$	2,419	$	56,694

The primary driver for the provision for credit losses for the year ended December 31, 2020 was the continued uncertainty of a more prolonged recovery than initially anticipated to the economies that affect the loan portfolio as certain industries are being more adversely impacted by the COVID-19 pandemic, such as the restaurant, retail and hotel industries. Additionally, specific provisions were made for two energy credits that were previously identified as problem loans that were impacted by the sharp decline in commodity pricing. Four energy credits within the Commercial segment were charged off during the second quarter of 2020 for a total of $32.6 million. The provision for credit losses was partially offset due to a reduction in loan growth. The Company updated credit loss forecasts using multiple Moody’s economic scenarios published in December 2020. The baseline economic forecast was weighted 68% by the Company, while the downside scenario of S-2 was weighted 15% and the upside scenario of S-1 was weighted 17%. The weighting of the forecasts is characterized by, among others, market rates remaining low, the substantial decline of CRE prices, and the current national unemployment rate.

In addition to the allowance for credit losses, the Company has established a reserve for unfunded commitments, classified in other liabilities. This reserve is maintained at a level management believes to be sufficient to absorb losses arising from unfunded loan commitments. The reserve for unfunded commitments as of December 31, 2020 and December 31, 2019 was $22.4 million and $8.4 million, respectively. The increase from December 31, 2019 was due to the adoption of CECL. The adequacy of the reserve for unfunded commitments is determined quarterly based on methodology similar to the methodology for determining the allowance for credit losses. For the year ended December 31, 2020, net adjustments to the reserve for unfunded commitments resulted in a benefit of $10.0 million and was included in provision for credit losses in the statement of income.

Provision for credit losses is determined by the Company as the amount to be added to the allowance for credit loss accounts for various types of financial instruments including loans, securities and off-balance-sheet credit exposure after net charge-offs have been deducted to bring the allowance to a level which, in management's best estimate, is necessary to absorb expected credit losses over the lives of the respective financial instruments.