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Loans
 9 Months Ended
Sep. 30, 2021
Receivables [Abstract]  
Portfolio Loans LOANS
The following table presents a summary of loans by category:
 
(in thousands)September 30, 2021December 31, 2020
Commercial and industrial$3,386,599 $3,100,299 
Real estate:  
Commercial - investor owned2,121,251 1,589,419 
Commercial - owner occupied2,058,460 1,498,408 
Construction and land development747,759 546,686 
Residential542,690 319,179 
Total real estate loans5,470,160 3,953,692 
Other270,037 187,083 
Loans, before unearned loan fees9,126,796 7,241,074 
Unearned loan fees, net(10,213)(16,139)
Loans, including unearned loan fees$9,116,583 $7,224,935 

PPP loans totaled $446.4 million at September 30, 2021, or $439.0 million net of deferred fees of $7.4 million. The loan balance at September 30, 2021 includes a net premium on acquired loans of $4.1 million. At September 30, 2021 loans of $2.7 billion were pledged to FHLB and the Federal Reserve Bank.

PPP loans totaled $709.9 million at December 31, 2020, or $698.6 million net of unearned fees of $11.3 million. The loan balance includes a net premium on acquired loans of $16.1 million at December 31, 2020. At December 31, 2020 loans of $2.5 billion were pledged to FHLB and the Federal Reserve Bank.

The Company has elected to present the accrued interest receivable balance separate from amortized cost basis, to exclude accrued interest receivable balances from the tabular disclosures, and not to estimate an ACL on accrued interest receivable as these amounts are timely written off as a credit loss expense.

Accrued interest receivable totaled $31.6 million and $31.1 million at September 30, 2021 and December 31, 2020, respectively, and was reported in Other Assets on the consolidated balance sheets.

A summary of the activity in the ACL on loans by category for the three and nine months ended September 30, 2021 is as follows:
(in thousands)Commercial and industrialCRE - investor ownedCRE -
owner occupied		Construction and land developmentResidential real estateOtherTotal
Allowance for credit losses on loans:       
Balance at June 30, 2021$53,351 $36,003 $15,564 $11,632 $4,677 $6,958 $128,185 
Initial allowance on acquired PCD loans1,077 3,651 1,504 37 — 737 7,006 
Provision for credit losses9,836 1,475 1,909 2,215 5,271 (1,951)18,755 
Charge-offs(2,829)(117)(259)(3)(840)(203)(4,251)
Recoveries452 1,623 15 171 115 25 2,401 
Balance at September 30, 2021$61,887 $42,635 $18,733 $14,052 $9,223 $5,566 $152,096 
(in thousands)Commercial and industrialCRE - investor ownedCRE -
owner occupied		Construction and land developmentResidential real estateOtherTotal
Allowance for credit losses on loans:       
Balance at December 31, 2020$58,812 $32,062 $17,012 $21,413 $4,585 $2,787 $136,671 
Initial allowance on acquired PCD loans1,077 3,651 1,504 37 — 737 7,006 
Provision (benefit) for credit losses8,538 7,715 686 (7,833)5,374 2,305 16,785 
Charge-offs(8,019)(2,489)(503)(3)(1,155)(389)(12,558)
Recoveries1,479 1,696 34 438 419 126 4,192 
Balance at September 30, 2021$61,887 $42,635 $18,733 $14,052 $9,223 $5,566 $152,096 

The ACL on sponsor finance loans, which is included in the categories above, represented $17.2 million and $19.0 million, respectively, as of September 30, 2021 and December 30, 2020.

A summary of the activity in the ACL on loans by category for the three and nine months ended September 30, 2020 is as follows:
(in thousands)Commercial and industrialCRE - investor ownedCRE -
owner occupied		Construction and land developmentResidential real estateOtherTotal
Allowance for credit losses on loans:       
Balance at June 30, 2020$50,139 $25,019 $11,088 $15,962 $6,333 $1,729 $110,270 
Provision for credit losses8,929 4,869 (1,854)2,873 (1,132)342 14,027 
Charge-offs(2,006)(272)(30)— (173)(103)(2,584)
Recoveries808 55 268 83 303 40 1,557 
Balance at September 30, 2020$57,870 $29,671 $9,472 $18,918 $5,331 $2,008 $123,270 

(in thousands)Commercial and industrialCRE - investor ownedCRE -
owner occupied		Construction and land developmentResidential real estateOtherTotal
Allowance for credit losses on loans:       
Balance at December 31, 2019$27,455 $5,935 $4,873 $2,611 $1,280 $1,134 $43,288 
CECL adoption6,494 10,726 2,598 5,183 3,470 (84)28,387 
PCD loans immediately charged off— (5)(57)(217)(1,401)— (1,680)
Balance at January 1, 2020$33,949 $16,656 $7,414 $7,577 $3,349 $1,050 $69,995 
Provision for credit losses27,688 10,692 1,740 11,220 1,623 1,150 54,113 
Charge-offs(5,372)(498)(30)(31)(327)(294)(6,552)
Recoveries1,605 2,821 348 152 686 102 5,714 
Balance at September 30, 2020$57,870 $29,671 $9,472 $18,918 $5,331 $2,008 $123,270 

The CECL methodology incorporates various economic scenarios. The Company utilizes three forecasts in the model: Moody’s baseline, a stronger near-term growth upside and a moderate recession downside forecast. The Company weights these scenarios at 40%, 30%, and 30%, respectively, which added approximately $18.3 million to the ACL over the baseline model. These forecasts incorporate an accommodative monetary policy and the current and anticipated impact of government stimulus. The Company has also recognized the risk posed by loans that have received multiple deferrals of principal and interest payments, loans in the hospitality sector, and loans with other specific identified risks by allocating additional reserves to those segments. Some of the key risks to the forecasts that could result in future provision for credit losses are additional shutdowns and self-quarantines if another significant wave of COVID hits, the vaccination process stalls, supply chain issues persist, small-business bankruptcies occur at higher levels, or unemployment increases.

Loans acquired during the period are initially recorded at fair value at the date of acquisition, which includes a credit related discount. In addition, a provision for credit losses is recorded in the period of acquisition for estimated lifetime credit losses on non-PCD acquired loans.
The following tables present the recorded investment in nonperforming loans by category: 
September 30, 2021
(in thousands)NonaccrualRestructured, accruingLoans over 90 days past due and still accruing interestTotal nonperforming loansNonaccrual loans with no allowance
Commercial and industrial$27,655 $2,870 $5 $30,530 $12,137 
Real estate:   
    Commercial - investor owned1,846 — — 1,846 425 
    Commercial - owner occupied6,892 — — 6,892 2,800 
    Residential2,185 77 — 2,262 1,562 
Other13 — 11 24 12 
       Total$38,591 $2,947 $16 $41,554 $16,936 

December 31, 2020
(in thousands)NonaccrualRestructured, accruingLoans over 90 days past due and still accruing interestTotal nonperforming loansNonaccrual loans with no allowance
Commercial and industrial$18,158 $3,482 $130 $21,770 $8,316 
Real estate: 
    Commercial - investor owned9,579 — — 9,579 716 
    Commercial - owner occupied2,940 — — 2,940 6,024 
    Residential4,112 77 — 4,189 — 
Other29 — — 29 3,190 
       Total$34,818 $3,559 $130 $38,507 $18,246 

The total nonperforming loan balances at September 30, 2021 and December 31, 2020 exclude government guaranteed balances of $5.1 million and $5.4 million, respectively.

No interest income was recognized on nonaccrual loans during the three and nine months ended September 30, 2021 or 2020.

The amortized cost basis of collateral-dependent nonperforming loans by class of loan is presented for the periods indicated:
September 30, 2021
Type of Collateral
(in thousands)Commercial Real EstateResidential Real EstateBlanket LienOther
Commercial and industrial$10,804 $300 $11,761 $— 
Real estate:
Commercial - investor owned426 1,209 — — 
Commercial - owner occupied6,689 88 — — 
Residential— 2,262 — — 
Other— — — 12 
Total$17,919 $3,859 $11,761 $12 
December 31, 2020
Type of Collateral
(in thousands)Commercial Real EstateResidential Real EstateBlanket LienOther
Commercial and industrial$8,316 $— $394 $— 
Real estate:
Commercial - investor owned9,579 — — — 
Commercial - owner occupied2,940 — — — 
Residential— 4,135 — — 
Other— — — 17 
Total$20,835 $4,135 $394 $17 

During the three and nine months ended September 30, 2021, one residential real estate loan totaling $0.2 million was modified as a troubled debt restructuring. The recorded investment by category for troubled debt restructurings that occurred during the three months ended September 30, 2020 are as follows:
September 30, 2020
(in thousands, except for number of loans)Number of loansPre-Modification Outstanding Recorded BalancePost-Modification Outstanding Recorded Balance
Commercial and industrial2 $3,716 $3,716 
Real estate:
Residential1 217 217 
Total3 $3,933 $3,933 

The recorded investment by category for troubled debt restructurings that occurred during the nine months ended September 30, 2020 are as follows:
September 30, 2020
(in thousands, except for number of loans)Number of loansPre-Modification Outstanding Recorded BalancePost-Modification Outstanding Recorded Balance
Commercial and industrial3 $7,447 $7,447 
Real estate:
Residential3 372 372 
Total6 $7,819 $7,819 

No troubled debt restructurings subsequently defaulted during the three and nine months ended September 30, 2021 or 2020.

In response to the COVID-19 pandemic, the Company has implemented short-term deferral programs allowing customers to primarily defer payments for up to 90 days. Deferrals under the CARES Act or interagency guidance are not included above as troubled debt restructurings. As of September 30, 2021, nearly all of these loans have returned to a paying status.
The aging of the recorded investment in past due loans by class is presented for the periods indicated.

September 30, 2021
(in thousands)30-89 Days
 Past Due		90 or More
Days
Past Due		Total
Past Due		CurrentTotal
Commercial and industrial$17,470 $11,752 $29,222 $3,349,949 $3,379,171 
Real estate:     
Commercial - investor owned298 — 298 2,120,953 2,121,251 
Commercial - owner occupied9,900 4,560 14,460 2,044,000 2,058,460 
Construction and land development169 — 169 747,590 747,759 
Residential138 1,309 1,447 541,243 542,690 
Other274 11 285 266,967 267,252 
Total$28,249 $17,632 $45,881 $9,070,702 $9,116,583 

December 31, 2020
(in thousands)30-89 Days
 Past Due		90 or More
Days
Past Due		Total
Past Due		CurrentTotal
Commercial and industrial$8,652 $12,928 $21,580 $3,067,415 $3,088,995 
Real estate:     
Commercial - investor owned734 9,301 10,035 1,579,384 1,589,419 
Commercial - owner occupied328 4,647 4,975 1,493,433 1,498,408 
Construction and land development13 — 13 546,673 546,686 
Residential2,071 2,118 4,189 314,990 319,179 
Other1,731 50 1,781 180,467 182,248 
Total$13,529 $29,044 $42,573 $7,182,362 $7,224,935 

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, payment experience, credit documentation, and current economic factors among other factors. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:
•Grades 1, 2, and 3 – Includes loans to borrowers with a continuous record of strong earnings, sound balance sheet condition and capitalization, ample liquidity with solid cash flow, and whose management team has experience and depth within their industry.
•Grade 4 – Includes loans to borrowers with positive trends in profitability, satisfactory capitalization and balance sheet condition, and sufficient liquidity and cash flow.
•Grade 5 – Includes loans to borrowers that may display fluctuating trends in sales, profitability, capitalization, liquidity, and cash flow.
•Grade 6 – Includes loans to borrowers where an adverse change or perceived weakness has occurred, but may be correctable in the near future. Alternatively, this rating category may also include circumstances where the borrower is starting to reverse a negative trend or condition, or has recently been upgraded from a 7, 8, or 9 rating.
•Grade 7 – Watch credits are borrowers that have experienced financial setback of a nature that is not determined to be severe or influence ‘ongoing concern’ expectations. Although possible, no loss is anticipated at this time, due to strong collateral and/or guarantor support.
•Grade 8 – Substandard credits include those borrowers characterized by significant losses and sustained downward trends in balance sheet condition, liquidity, and cash flow. Repayment reliance may have shifted to secondary sources. Collateral exposure may exist and additional reserves may be warranted.
•Grade 9 – Doubtful credits include borrowers that may show deteriorating trends that are unlikely to be corrected. Collateral values may appear insufficient for full recovery, therefore requiring a partial charge-off, or debt renegotiation with the borrower. The borrower may have declared bankruptcy or bankruptcy is likely in the near term. All doubtful rated credits will be on nonaccrual.
The recorded investment by risk category of loans by class and year of origination is presented in the following tables as of the dates indicated:
September 30, 2021
Term Loans by Origination Year
(in thousands)20212020201920182017PriorRevolving Loans Converted to Term LoansRevolving LoansTotal
Commercial and industrial
Pass (1-6)$1,025,274 $600,089 $359,330 $156,889 $127,622 $95,642 $15,631 $773,641 $3,154,118 
Watch (7)37,465 27,305 10,397 9,662 3,520 14,758 6,128 62,883 172,118 
Classified (8-9)19,268 2,554 5,443 2,426 271 911 1,944 13,718 46,535 
Total Commercial and industrial$1,082,007 $629,948 $375,170 $168,977 $131,413 $111,311 $23,703 $850,242 $3,372,771 
Commercial real estate-investor owned
Pass (1-6)$497,726 $499,617 $367,055 $153,179 $133,202 $235,601 $3,668 $62,184 $1,952,232 
Watch (7)9,701 44,311 33,781 8,944 2,365 47,826 — 3,231 150,159 
Classified (8-9)1,396 8,744 264 341 1,167 4,364 — — 16,276 
Total Commercial real estate-investor owned$508,823 $552,672 $401,100 $162,464 $136,734 $287,791 $3,668 $65,415 $2,118,667 
Commercial real estate-owner occupied
Pass (1-6)$495,546 $462,729 $285,680 $182,073 $155,216 $255,326 $— $47,128 $1,883,698 
Watch (7)16,007 13,284 25,665 33,631 10,725 17,548 — 352 117,212 
Classified (8-9)1,868 653 12,257 4,750 6,581 6,651 — 63 32,823 
Total Commercial real estate-owner occupied$513,421 $476,666 $323,602 $220,454 $172,522 $279,525 $— $47,543 $2,033,733 
Construction real estate
Pass (1-6)$298,041 $232,249 $79,465 $36,419 $15,157 $9,394 $388 $3,487 $674,600 
Watch (7)38,496 16,080 60 1,208 11,143 2,377 — — 69,364 
Classified (8-9)53 — 379 423 — 24 96 — 975 
Total Construction real estate$336,590 $248,329 $79,904 $38,050 $26,300 $11,795 $484 $3,487 $744,939 
Residential real estate
Pass (1-6)$136,636 $78,641 $41,755 $15,737 $26,345 $114,292 $283 $101,199 $514,888 
Watch (7)1,277 16,881 2,450 1,284 261 1,286 — 87 23,526 
Classified (8-9)879 222 563 76 12 2,245 — 75 4,072 
Total residential real estate$138,792 $95,744 $44,768 $17,097 $26,618 $117,823 $283 $101,361 $542,486 
Other
Pass (1-6)$110,977 $70,441 $20,206 $24,006 $7,781 $20,193 $— $10,683 $264,287 
Watch (7)— — — 4 — 2,490 — 1 2,495 
Classified (8-9)— — 13 14 — 18 — 1 46 
Total Other$110,977 $70,441 $20,219 $24,024 $7,781 $22,701 $— $10,685 $266,828 
December 31, 2020
Term Loans by Origination Year
(in thousands)20202019201820172016PriorRevolving Loans Converted to Term LoansRevolving LoansTotal
Commercial and industrial
Pass (1-6)$1,402,276 $454,729 $262,258 $132,832 $25,057 $58,315 $14,118 $527,170 $2,876,755 
Watch (7)44,922 15,369 9,585 7,509 19,613 110 — 60,448 157,556 
Classified (8-9)6,602 9,219 3,115 3,964 4,490 1,080 1,281 22,432 52,183 
Total Commercial and industrial$1,453,800 $479,317 $274,958 $144,305 $49,160 $59,505 $15,399 $610,050 $3,086,494 
Commercial real estate-investor owned
Pass (1-6)$481,867 $338,843 $189,305 $131,718 $138,288 $161,439 $6,509 $32,058 $1,480,027 
Watch (7)32,308 19,722 6,656 — 9,647 17,370 — — 85,703 
Classified (8-9)— 5,278 8,716 5,830 1,245 2,620 — — 23,689 
Total Commercial real estate-investor owned$514,175 $363,843 $204,677 $137,548 $149,180 $181,429 $6,509 $32,058 $1,589,419 
Commercial real estate-owner occupied
Pass (1-6)$419,142 $287,001 $215,181 $179,382 $104,470 $167,456 $2,672 $45,323 $1,420,627 
Watch (7)13,657 5,257 3,113 6,198 4,338 8,460 1,776 941 43,740 
Classified (8-9)2,420 7,427 5,822 6,140 1,309 10,860 — 63 34,041 
Total Commercial real estate-owner occupied$435,219 $299,685 $224,116 $191,720 $110,117 $186,776 $4,448 $46,327 $1,498,408 
Construction real estate
Pass (1-6)$223,069 $156,360 $45,460 $18,579 $11,539 $9,144 $— $28,880 $493,031 
Watch (7)2,544 86 34,179 11,632 — 2,499 — — 50,940 
Classified (8-9)56 2,124 503 1 — 31 — — 2,715 
Total Construction real estate$225,669 $158,570 $80,142 $30,212 $11,539 $11,674 $— $28,880 $546,686 
Residential real estate
Pass (1-6)$57,059 $27,907 $17,718 $17,138 $27,443 $92,657 $1,172 $66,902 $307,996 
Watch (7)210 840 526 — 514 1,603 287 511 4,491 
Classified (8-9)571 733 121 14 898 3,181 — 253 5,771 
Total residential real estate$57,840 $29,480 $18,365 $17,152 $28,855 $97,441 $1,459 $67,666 $318,258 
Other
Pass (1-6)$43,526 $28,195 $30,074 $9,646 $5,641 $17,027 $— $40,779 $174,888 
Watch (7)— 1 8 — — 2,637 — 1 2,647 
Classified (8-9)— 18 19 13 — 17 8 4 79 
Total Other$43,526 $28,214 $30,101 $9,659 $5,641 $19,681 $8 $40,784 $177,614 

In the tables above, loan originations in 2021 and 2020 with a classification of watch or classified primarily represent renewals or modifications initially underwritten and originated in prior years.
For certain loans, primarily credit cards, the Company evaluates credit quality based on the aging status.
The following tables presents the recorded investment on loans based on payment activity as of the periods indicated:
September 30, 2021
(in thousands)PerformingNon PerformingTotal
Commercial and industrial$6,395 $5 $6,400 
Real estate:
Commercial - investor owned2,584 — 2,584 
Commercial - owner occupied24,727 — 24,727 
Construction and land development2,820 — 2,820 
Residential204 — 204 
Other413 11 424 
Total$37,143 $16 $37,159 
December 31, 2020
(in thousands)PerformingNon PerformingTotal
Commercial and industrial$2,502 $— $2,502 
Real estate:
Residential921 — 921 
Other4,612 21 4,633 
Total$8,035 $21 $8,056 
The Company has purchased loans through the FCBP acquisition, for which there was, at acquisition, evidence of more than insignificant deterioration of credit quality since origination. The carrying amount of those loans is as follows:
($ in thousands)At July 21, 2021
Par value of acquired loans $180,440 
Allowance for credit losses (7,006)
Non-credit discount(6,428)
Purchase price of acquired loans $167,006