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LOANS AND CREDIT QUALITY
 3 Months Ended
Mar. 31, 2021
Receivables [Abstract]  
LOANS AND CREDIT QUALITY
4. LOANS AND CREDIT QUALITY
 
Loans, excluding loans held for sale, net of ACL under ASC 326 as of March 31, 2021 and December 31, 2020 consisted of the following:
 
(dollars in thousands)March 31, 2021December 31, 2020
Commercial, financial and agricultural:
Small Business Administration Paycheck Protection Program$618,104 $425,993 
Other514,303 545,136 
Real estate:
Construction138,284 125,625 
Residential mortgage1,684,936 1,687,251 
Home equity558,348 550,216 
Commercial mortgage1,166,175 1,158,203 
Consumer476,591 479,580 
Gross loans5,156,741 4,972,004 
Net deferred (fees) costs(18,892)(7,891)
Total loans, net of deferred fees and costs5,137,849 4,964,113 
Allowance for credit losses(81,553)(83,269)
Total loans, net of allowance for credit losses$5,056,296 $4,880,844 

The bank is a Small Business Administration ("SBA") approved lender and actively participated in assisting customers with loan applications for the SBA’s Paycheck Protection Program, or PPP, which was part of the CARES Act. PPP loans have a two or five-year term and earn interest at 1%. The SBA pays the originating bank a processing fee ranging from 1% to 5%, based on the size of the loan, which the Company is recognizing over the life of the loan. The Company saw tremendous interest in the PPP.The SBA began accepting submissions for the initial round of PPP loans on April 3, 2020. In April 2020, the Paycheck Protection Program and Health Care Enhancement Act added an additional round of funding for the PPP. In June 2020, the Paycheck Protection Program Flexibility Act of 2020 was enacted, which among other things, gave borrowers additional time and flexibility to use PPP loan proceeds. Through the end of the second round in August 2020, the Company funded over 7,200 PPP loans totaling over $558 million and received gross processing fees of over $21 million.

In December 2020, the Consolidated Appropriations Act, 2021 was passed which among other things, included a third round of funding and a new simplified forgiveness procedure for PPP loans of $150,000 or less. During the first quarter of 2021, the Company funded over 3,600 loans totaling over $292 million in the third round, earning additional gross processing fees of over $15 million.

The Company developed a PPP forgiveness portal and with assistance from a third party vendor has assisted its customers with applying for forgiveness from the SBA. Since the start of the SBA forgiveness, we have received forgiveness payments totaling over $233 million. A total outstanding balance of $618.1 million and net deferred fees of $20.3 million remain as of March 31, 2021. Although the Company believes that the majority of the remaining loans will ultimately be forgiven by the SBA in accordance with the terms of the program, there could be risks and liabilities by the Company that cannot be determined at this time.

The Company did not transfer any loans to the held-for-sale category during the three months ended March 31, 2021 and 2020.

The Company did not sell any loans originally held for investment during the three months ended March 31, 2021 and 2020.

The Company has previously purchased loan portfolios, none of which were credit deteriorated since origination at the time of purchase.
The following table presents loans purchased by class for the periods presented:

(dollars in thousands)U.S. Mainland Consumer - UnsecuredU.S. Mainland Consumer - AutomobileTotal
Three Months Ended March 31, 2021
Purchases:
Outstanding balance$22,534 $12,990 $35,524 
Purchase premium (discount)(131)666 535 
Purchase price$22,403 $13,656 $36,059 
Three Months Ended March 31, 2020
Purchases:
Outstanding balance$22,953 $— $22,953 
Purchase premium (discount)(613)— (613)
Purchase price$22,340 $— $22,340 
Note: Purchases of unsecured consumer loans were made under forward flow purchase agreements.

Collateral-Dependent Loans

In accordance with ASC 326, a loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. The following table presents the amortized cost basis of collateral-dependent loans by class, which are individually evaluated to determine expected credit losses, and the related ACL allocated to these loans as of March 31, 2021 and December 31, 2020:

(dollars in thousands)Secured by
1-4 Family
Residential
Properties		Secured by
Nonfarm
Nonresidential
Properties		Secured by
Real Estate
and Business
 Assets		TotalAllocated
ACL
March 31, 2021
Commercial, financial and agricultural$— $— $636 $636 $160 
Real estate:
Residential mortgage10,141 — — 10,141 — 
Home equity439 — — 439 — 
Commercial mortgage— 584 — 584 — 
Total$10,580 $584 $636 $11,800 $160 


(dollars in thousands)Secured by
1-4 Family
Residential
Properties		Secured by
Nonfarm
Nonresidential
Properties		Secured by
Real Estate
and Business
 Assets		TotalAllocated
ACL
December 31, 2020
Commercial, financial and agricultural$— $— $676 $676 $209 
Real estate:
Residential mortgage9,833 — — 9,833 — 
Home equity524 — — 524 — 
Commercial mortgage— 626 — 626 — 
Total$10,357 $626 $676 $11,659 $209 
Foreclosure Proceedings

The Company had $1.6 million of residential mortgage loans collateralized by residential real estate property that were in the process of foreclosure at both March 31, 2021 and December 31, 2020.

The Company did not foreclose on any loans during the three months ended March 31, 2021 and 2020.

The Company did not sell any foreclosed properties during the three months ended March 31, 2021 and 2020.

Nonaccrual and Past Due Loans
 
For all loan types, the Company determines delinquency status by considering the number of days full payments required by the contractual terms of the loan are past due. The following tables present by class, the aging of the recorded investment in past due loans as of March 31, 2021 and December 31, 2020. The following tables also present the amortized cost of loans on nonaccrual status for which there was no related ACL under ASC 326 as of March 31, 2021 and December 31, 2020.

(dollars in thousands)Accruing
Loans
30 - 59 Days
Past Due		Accruing
Loans
60 - 89 Days
Past Due		Accruing
Loans
Greater 
Than
90 Days
Past Due		Nonaccrual
Loans		Total
Past Due
and
Nonaccrual		Loans and
Leases
Not
Past Due		TotalNonaccrual
Loans
With
No ACL
March 31, 2021       
Commercial, financial and agricultural:
SBA PPP$— $— $— $— $— $597,819 $597,819 $— 
Other279 54 — 1,412 1,745 512,444 514,189 — 
Real estate:  
Construction— — — — — 137,976 137,976 — 
Residential mortgage2,122 272 4,522 4,553 11,469 1,676,044 1,687,513 4,553 
Home equity— 135 — 439 574 558,940 559,514 439 
Commercial mortgage— — — — — 1,164,338 1,164,338 — 
Consumer1,550 670 262 790 3,272 473,228 476,500 — 
Total$3,951 $1,131 $4,784 $7,194 $17,060 $5,120,789 $5,137,849 $4,992 

(dollars in thousands)Accruing
Loans
30 - 59 Days
Past Due		Accruing
Loans
60 - 89 Days
Past Due		Accruing
Loans
Greater 
Than
90 Days
Past Due		Nonaccrual
Loans		Total
Past Due
and
Nonaccrual		Loans and
Leases
Not
Past Due		TotalNonaccrual
Loans
With
No ACL
December 31, 2020       
Commercial, financial and agricultural:
SBA PPP$— $— $— $— $— $416,375 $416,375 $— 
Other613 350 — 1,461 2,424 542,667 545,091 — 
Real estate:  
Construction— — — — — 125,407 125,407 — 
Residential mortgage2,832 689 567 4,115 8,203 1,682,009 1,690,212 4,115 
Home equity273 3 — 524 800 550,466 551,266 524 
Commercial mortgage— — — — — 1,156,328 1,156,328 — 
Consumer2,725 906 240 92 3,963 475,471 479,434 — 
Total$6,443 $1,948 $807 $6,192 $15,390 $4,948,723 $4,964,113 $4,639 

In accordance with the "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised)" issued in April 2020, loans with deferrals granted because of COVID-19 are not considered past due and/or reported as nonaccrual if deemed collectible during the deferral period.
Troubled Debt Restructurings

Troubled debt restructurings ("TDRs") included in nonperforming assets at March 31, 2021 consisted of two Hawaii residential mortgage loans with a principal balance of $0.2 million and one Hawaii commercial, financial and agricultural loan with a principal balance of $0.6 million. There were $7.5 million of TDRs still accruing interest at March 31, 2021, of which one loan totaling $0.1 million was more than 90 days delinquent. At December 31, 2020, there were $7.8 million of TDRs still accruing interest, of which one loan totaling $0.7 million was more than 90 days delinquent.

The Company offers various types of concessions when modifying a loan. Concessions made to the original contractual terms of the loan typically consists of the deferral of interest and/or principal payments due to deterioration in the borrowers' financial condition. In these cases, the principal balance on the TDR had matured and/or was in default at the time of restructure, and there were no commitments to lend additional funds to the borrower during the three months ended March 31, 2021 and 2020.

As discussed in Note 1 to these financial statements, Section 4013 of CARES Act and the "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised)" provided banks an optional TDR election for certain loan modifications related to COVID-19 as long as the borrowers were not more than 30 days past due as of December 31, 2019 or at the time of modification program implementation, respectively, and meets other applicable criteria. The Company did not identify any loans in the first quarter of 2021 that were modified and did not meet the criteria under Section 4013 of CARES Act or the "Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus (Revised)". The Company had active loan deferrals with outstanding balances of approximately $39.5 million and $119.3 million resulting from the COVID-19 pandemic that were not classified as a TDR at March 31, 2021 and December 31, 2020. The following table sets forth loans on active payment forbearance or deferral as of March 31, 2021:

Loans on Active Forbearance or Deferral
(dollars in thousands)Loan
Count		BalanceAccrued
Interest
Receivable		Total
Loans		% of Asset ClassTotal
Loans,
Excl. PPP		% of Asset Class,
Excl. PPP
Commercial, financial and agricultural — $— $— $1,112,008 — %$514,189 — %
Real estate:
Construction— — — 137,976 — %137,976 — %
Residential mortgage88 38,571 984 1,687,513 2.3 %1,687,513 2.3 %
Home equity— — — 559,514 — %559,514 — %
Commercial mortgage— — — 1,164,338 — %1,164,338 — %
Consumer83 928 — 476,500 0.2 %476,500 0.2 %
Total loans171 $39,499 $984 $5,137,849 0.8 %$4,540,030 0.9 %

The following table presents by class, information related to loans modified in a TDR during the three months ended March 31, 2021:


(dollars in thousands)Number of
Contracts		Recorded
Investment
(as of Period End)		Increase in the
ACL
Three Months Ended March 31, 2021
Commercial, financial and agricultural - Other1 $560 $— 
Total1 $560 $— 

No loans were modified in a TDR during the three months ended March 31, 2020.

No loans were modified as a TDR within the previous twelve months that subsequently defaulted during the three months ended March 31, 2021 and 2020.
Credit Quality Indicators

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, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans by credit risk. This analysis includes non-homogeneous loans, such as commercial and commercial real estate loans. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk rating of loans. Loans not meeting the following criteria that are analyzed individually as part of the described process are considered to be pass-rated loans.

Special Mention. Loans classified as special mention, while still adequately protected by the borrower's capital adequacy and payment capability, exhibit distinct weakening trends and/or elevated levels of exposure to external conditions. If left unchecked or uncorrected, these potential weaknesses may result in deteriorated prospects of repayment. These exposures require management's close attention so as to avoid becoming undue or unwarranted credit exposures.

Substandard. Loans classified as substandard are inadequately protected by the borrower's current financial condition and payment capability or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the orderly repayment of debt. They are characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or orderly repayment in full, on the basis of current existing facts, conditions and values, highly questionable and improbable. Possibility of loss is extremely high, but because of certain important and reasonably specific factors that may work to the advantage and strengthening of the exposure, its classification as an estimated loss is deferred until its more exact status may be determined.

Loss. Loans classified as loss are considered to be non-collectible and of such little value that their continuance as bankable assets is not warranted. This does not mean the loan has absolutely no recovery value, but rather it is neither practical nor desirable to defer writing off the loan, even though partial recovery may be obtained in the future. Losses are taken in the period in which they surface as uncollectible.
The following table presents the amortized cost basis of the Company's loans by class, credit quality indicator and origination year as of March 31, 2021 and 2020. Revolving loans converted to term as of and during the three months ended March 31, 2021 and 2020 were not material to the total loan portfolio.

Amortized Cost of Term Loans by Origination Year
(dollars in thousands)20212020201920182017PriorAmortized Cost of Revolving LoansTotal
March 31, 2021
Commercial, financial and agricultural - SBA PPP:
Risk Rating
Pass$278,212 $319,607 $— $— $— $— $— $597,819 
Subtotal278,212 319,607 — — — — — 597,819 
Commercial, financial and agricultural - Other:
Risk Rating
Pass26,676 75,241 53,756 61,131 39,649 124,952 74,084 455,489 
Special Mention978 6,823 12,354 2,904 20,107 8,409 1,001 52,576 
Substandard— 262 820 1,061 951 3,030 — 6,124 
Subtotal27,654 82,326 66,930 65,096 60,707 136,391 75,085 514,189 
Construction:
Risk Rating
Pass4,854 29,053 34,004 33,818 8,143 20,865 4,070 134,807 
Special Mention— — — 3,169 — — — 3,169 
Subtotal4,854 29,053 34,004 36,987 8,143 20,865 4,070 137,976 
Residential mortgage:
Risk Rating
Pass148,010 534,754 235,514 113,088 120,950 525,067 — 1,677,383 
Special Mention— 991 — — — — — 991 
Substandard— 1,218 393 805 2,079 4,644 — 9,139 
Subtotal148,010 536,963 235,907 113,893 123,029 529,711 — 1,687,513 
Home equity:
Risk Rating
Pass5,288 16,899 13,330 13,820 716 5,693 502,628 558,374 
Special Mention— — — — — — 701 701 
Substandard— — — — — 439 — 439 
Subtotal5,288 16,899 13,330 13,820 716 6,132 503,329 559,514 
Commercial mortgage:
Risk Rating
Pass17,839 134,944 144,012 124,952 163,055 455,960 16,029 1,056,791 
Special Mention— — 2,018 30,564 4,742 33,038 — 70,362 
Substandard— — 1,788 18,964 1,873 14,560 — 37,185 
Subtotal17,839 134,944 147,818 174,480 169,670 503,558 16,029 1,164,338 
Consumer:
Risk Rating
Pass36,826 100,204 126,940 70,102 38,443 33,193 69,739 475,447 
Substandard— 166 441 267 87 65 — 1,026 
Loss— — — — 16 11 — 27 
Subtotal36,826 100,370 127,381 70,369 38,546 33,269 69,739 476,500 
Total$518,683 $1,220,162 $625,370 $474,645 $400,811 $1,229,926 $668,252 $5,137,849 
Amortized Cost of Term Loans by Origination Year
(dollars in thousands)20202019201820172016PriorAmortized Cost of Revolving LoansTotal
December 31, 2020
Commercial, financial and agricultural - SBA PPP:
Risk Rating
Pass$416,375 $— $— $— $— $— $— $416,375 
Subtotal416,375 — — — — — — 416,375 
Commercial, financial and agricultural - Other:
Risk Rating
Pass$86,456 $55,660 $61,314 $47,672 $39,337 $98,136 $82,465 $471,040 
Special Mention9,690 16,120 6,293 26,109 1,556 6,989 420 67,177 
Substandard200 839 1,043 1,045 2,570 1,177 — 6,874 
Subtotal96,346 72,619 68,650 74,826 43,463 106,302 82,885 545,091 
Construction:
Risk Rating
Pass22,491 29,518 36,790 9,365 2,163 19,138 3,099 122,564 
Special Mention— — 2,843 — — — — 2,843 
Subtotal22,491 29,518 39,633 9,365 2,163 19,138 3,099 125,407 
Residential mortgage:
Risk Rating
Pass556,479 276,645 127,490 136,307 180,782 406,020 — 1,683,723 
Special Mention997 — — 597 142 — — 1,736 
Substandard— — 537 785 1,381 2,050 — 4,753 
Subtotal557,476 276,645 128,027 137,689 182,305 408,070 — 1,690,212 
Home equity:
Risk Rating
Pass17,582 15,851 15,567 679 1,023 4,592 494,741 550,035 
Special Mention— — — — — — 707 707 
Substandard— — — — 200 324 — 524 
Subtotal17,582 15,851 15,567 679 1,223 4,916 495,448 551,266 
Commercial mortgage:
Risk Rating
Pass130,448 144,244 123,519 166,618 104,381 363,837 16,200 1,049,247 
Special Mention— 2,021 31,647 2,919 13,546 19,653 — 69,786 
Substandard— 1,791 19,000 1,934 — 14,570 — 37,295 
Subtotal130,448 148,056 174,166 171,471 117,927 398,060 16,200 1,156,328 
Consumer:
Risk Rating
Pass112,955 147,940 78,486 44,571 17,445 4,032 73,423 478,852 
Special Mention— — — — — — 250 250 
Substandard— 138 102 22 — 22 — 284 
Loss— 16 — 26 2 4 — 48 
Subtotal112,955 148,094 78,588 44,619 17,447 4,058 73,673 479,434 
Total$1,353,673 $690,783 $504,631 $438,649 $364,528 $940,544 $671,305 $4,964,113 
The following tables present the Company's loans by class and credit quality indicator as of March 31, 2021 and December 31, 2020:

(dollars in thousands)PassSpecial MentionSubstandardLossSubtotalNet 
Deferred
Costs
(Income) 		Total
March 31, 2021      
Commercial, financial and agricultural: SBA PPP$618,104 $— $— $— $618,104 $(20,285)$597,819 
Commercial, financial and agricultural: Other455,603 52,576 6,124 — 514,303 (114)514,189 
Real estate:  
Construction135,115 3,169 — — 138,284 (308)137,976 
Residential mortgage1,674,806 991 9,139 — 1,684,936 2,577 1,687,513 
Home equity557,208 701 439 — 558,348 1,166 559,514 
Commercial mortgage1,058,628 70,362 37,185 — 1,166,175 (1,837)1,164,338 
Consumer475,538 — 1,026 27 476,591 (91)476,500 
Total$4,975,002 $127,799 $53,913 $27 $5,156,741 $(18,892)$5,137,849 

(dollars in thousands)PassSpecial MentionSubstandardLossSubtotalNet 
Deferred
Costs
(Income) 		Total
December 31, 2020      
Commercial, financial and agricultural: SBA PPP$425,993 $— $— $— $425,993 $(9,618)$416,375 
Commercial, financial and agricultural: Other471,085 67,177 6,874 — 545,136 (45)545,091 
Real estate:  
Construction122,782 2,843 — — 125,625 (218)125,407 
Residential mortgage1,680,762 1,736 4,753 — 1,687,251 2,961 1,690,212 
Home equity548,985 707 524 — 550,216 1,050 551,266 
Commercial mortgage1,051,122 69,786 37,295 — 1,158,203 (1,875)1,156,328 
Consumer478,998 250 284 48 479,580 (146)479,434 
Total$4,779,727 $142,499 $49,730 $48 $4,972,004 $(7,891)$4,964,113