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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, 2022 and December 31, 2021 consisted of the following:
(dollars in thousands)March 31, 2022December 31, 2021
Commercial, financial and agricultural:
Small Business Administration Paycheck Protection Program$45,938 $94,850 
Other544,732 530,383 
Real estate:
Construction123,767 123,351 
Residential mortgage1,873,405 1,875,200 
Home equity674,625 635,721 
Commercial mortgage1,245,423 1,222,138 
Consumer669,194 624,115 
Gross loans5,177,084 5,105,758 
Net deferred fees(2,247)(4,109)
Total loans, net of deferred fees and costs5,174,837 5,101,649 
Allowance for credit losses(64,754)(68,097)
Total loans, net of allowance for credit losses$5,110,083 $5,033,552 

There are different types of risk characteristics for the loans in each portfolio segment. The construction and real estate segment's predominant risk characteristics are the collateral and the geographic location of the property collateralizing the loan, as well as the operating cash flow for the commercial real estate properties. The commercial, financial and agricultural segment's predominant risk characteristics are the cash flows of the business we lend to, the global cash flows and liquidity of the guarantors of such losses, as well as economic and market conditions. The consumer segment's predominant risk characteristics are employment and income levels as they relate to the consumer.

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 paid 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 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 $558.9 million and received gross processing fees of $21.2 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 2021, the Company funded over 4,600 loans totaling $320.9 million in the third round, which ended on May 31, 2021, and received additional gross processing fees of $18.4 million.

The Company received forgiveness payments from the SBA and paydowns from borrowers totaling over $846.8 million as of March 31, 2022. A total outstanding balance of $45.9 million and net deferred fees of $1.7 million remain as of March 31, 2022. Although the Company believes that the majority of these 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, 2022 and 2021.

The Company did not sell any loans originally held for investment during the three months ended March 31, 2022 and 2021.
The Company has 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, 2022
Purchases:
Outstanding balance$48,142 $34,024 $82,166 
(Discount) premium(4,367)1,914 (2,453)
Purchase price$43,775 $35,938 $79,713 
Three Months Ended March 31, 2021
Purchases:
Outstanding balance$22,534 $12,990 $35,524 
(Discount) premium(131)666 535 
Purchase price$22,403 $13,656 $36,059 

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, 2022 and December 31, 2021:
(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, 2022
Real estate:
Residential mortgage$6,665 $— $— $6,665 $— 
Home equity820 — — 820 — 
Total$7,485 $— $— $7,485 $— 

(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, 2021
Real estate:
Residential mortgage$8,391 $— $— $8,391 $— 
Home equity786 — — 786 — 
Total$9,177 $— $— $9,177 $— 
Foreclosure Proceedings

The Company had $1.0 million and $0.7 million of residential mortgage loans collateralized by residential real estate property that were in the process of foreclosure at March 31, 2022 and December 31, 2021, respectively.

The Company did not foreclose on any loans during the three months ended March 31, 2022 and 2021.

The Company did not sell any foreclosed properties during the three months ended March 31, 2022 and 2021.
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, 2022 and December 31, 2021. 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, 2022 and December 31, 2021.
(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, 2022       
Commercial, financial and agricultural:
SBA PPP$— $— $— $— $— $44,231 $44,231 $— 
Other710 323 592 293 1,918 542,498 544,416 — 
Real estate:  
Construction— — — — — 123,317 123,317 — 
Residential mortgage7,512 4,538 111 3,804 15,965 1,858,083 1,874,048 3,804 
Home equity135 138 — 820 1,093 675,233 676,326 820 
Commercial mortgage— — — — — 1,243,499 1,243,499 — 
Consumer3,113 555 621 419 4,708 664,292 669,000 — 
Total$11,470 $5,554 $1,324 $5,336 $23,684 $5,151,153 $5,174,837 $4,624 

(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, 2021       
Commercial, financial and agricultural:
SBA PPP$— $— $— $— $— $91,327 $91,327 $— 
Other970 604 945 183 2,702 527,419 530,121 — 
Real estate:  
Construction638 — — — 638 122,229 122,867 — 
Residential mortgage5,315 — — 4,623 9,938 1,866,042 1,875,980 4,623 
Home equity234 — 44 786 1,064 636,185 637,249 786 
Commercial mortgage— — — — — 1,220,204 1,220,204 — 
Consumer2,444 712 374 289 3,819 620,082 623,901 — 
Total$9,601 $1,316 $1,363 $5,881 $18,161 $5,083,488 $5,101,649 $5,409 

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 were not considered past due and/or reported as nonaccrual if deemed collectible during the deferral period. This relief ended on January 1, 2022.

Troubled Debt Restructurings

Troubled debt restructurings ("TDRs") included in nonperforming assets at March 31, 2022 consisted of five Hawaii residential mortgage loans with a principal balance of $1.1 million. There were $3.9 million of TDRs still accruing interest at March 31, 2022, $0.1 million of which were more than 90 days delinquent. At December 31, 2021, there were $4.9 million of TDRs still accruing interest, none of which were 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, 2022 and 2021.
The Company did not modify any loans during the three months ended March 31, 2022. The Company modified one commercial, financial and agricultural loan totaling $0.6 million during the three months ended March 31,2021. The loan was paid off during the three months ended June 30, 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 as a TDR within the previous twelve months that subsequently defaulted during the three months ended March 31, 2022 and 2021.

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, 2022 and December 31, 2021. Revolving loans converted to term as of and during the three months ended March 31, 2022 and 2021 were not material to the total loan portfolio.
Amortized Cost of Term Loans by Origination Year
(dollars in thousands)20222021202020192018PriorAmortized Cost of Revolving LoansTotal
March 31, 2022
Commercial, financial and agricultural - SBA PPP:
Risk Rating
Pass$— $41,446 $2,785 $— $— $— $— $44,231 
Subtotal— 41,446 2,785 — — — — 44,231 
Commercial, financial and agricultural - Other:
Risk Rating
Pass22,335 116,423 62,923 53,061 50,404 135,034 78,849 519,029 
Special Mention1,720 615 260 2,557 97 8,259 175 13,683 
Substandard— — 1,592 320 617 8,425 750 11,704 
Subtotal24,055 117,038 64,775 55,938 51,118 151,718 79,774 544,416 
Construction:
Risk Rating
Pass1,386 40,722 28,751 3,165 26,372 20,169 1,841 122,406 
Substandard— — — — 911 — — 911 
Subtotal1,386 40,722 28,751 3,165 27,283 20,169 1,841 123,317 
Residential mortgage:
Risk Rating
Pass75,178 664,439 461,369 169,718 70,625 427,838 — 1,869,167 
Substandard— — 967 — — 3,914 — 4,881 
Subtotal75,178 664,439 462,336 169,718 70,625 431,752 — 1,874,048 
Home equity:
Risk Rating
Pass17,421 25,375 12,329 8,607 9,230 9,598 592,763 675,323 
Special Mention— — — — — — 183 183 
Substandard— — 175 — 79 566 — 820 
Subtotal17,421 25,375 12,504 8,607 9,309 10,164 592,946 676,326 
Commercial mortgage:
Risk Rating
Pass58,265 227,168 122,565 142,287 121,026 517,380 9,183 1,197,874 
Special Mention— 1,174 — 5,736 1,020 9,655 — 17,585 
Substandard— — — 1,737 10,227 16,076 — 28,040 
Subtotal58,265 228,342 122,565 149,760 132,273 543,111 9,183 1,243,499 
Consumer:
Risk Rating
Pass74,303 315,526 85,061 78,307 35,064 23,082 56,454 667,797 
Special Mention— — — 163 — — — 163 
Substandard— 60 44 178 83 495 — 860 
Loss— — — — — 180 — 180 
Subtotal74,303 315,586 85,105 78,648 35,147 23,757 56,454 669,000 
Total$250,608 $1,432,948 $778,821 $465,836 $325,755 $1,180,671 $740,198 $5,174,837 
Amortized Cost of Term Loans by Origination Year
(dollars in thousands)20212020201920182017PriorAmortized Cost of Revolving LoansTotal
December 31, 2021
Commercial, financial and agricultural - SBA PPP:
Risk Rating
Pass$84,254 $7,073 $— $— $— $— $— $91,327 
Subtotal84,254 7,073 — — — — — 91,327 
Commercial, financial and agricultural - Other:
Risk Rating
Pass$122,729 $68,021 $56,531 $52,375 $31,817 $93,957 $79,131 $504,561 
Special Mention1,441 1,278 2,443 96 8,671 354 — 14,283 
Substandard— 982 393 682 6,623 1,847 750 11,277 
Subtotal124,170 70,281 59,367 53,153 47,111 96,158 79,881 530,121 
Construction:
Risk Rating
Pass35,236 25,430 3,196 28,333 288 20,090 9,376 121,949 
Substandard— — — 918 — — — 918 
Subtotal35,236 25,430 3,196 29,251 288 20,090 9,376 122,867 
Residential mortgage:
Risk Rating
Pass670,011 478,891 180,687 75,820 92,394 372,539 42 1,870,384 
Special Mention— 973 — — — — — 973 
Substandard— — — 577 881 3,165 — 4,623 
Subtotal670,011 479,864 180,687 76,397 93,275 375,704 42 1,875,980 
Home equity:
Risk Rating
Pass26,479 13,008 10,329 10,593 480 7,743 567,600 636,232 
Special Mention— — — — — — 187 187 
Substandard— 176 — 79 — 575 — 830 
Subtotal26,479 13,184 10,329 10,672 480 8,318 567,787 637,249 
Commercial mortgage:
Risk Rating
Pass229,108 126,169 146,584 126,014 153,041 387,751 9,472 1,178,139 
Special Mention— — 3,106 3,219 283 9,455 — 16,063 
Substandard— — 1,760 8,050 1,784 14,408 — 26,002 
Subtotal229,108 126,169 151,450 137,283 155,108 411,614 9,472 1,220,204 
Consumer:
Risk Rating
Pass308,326 96,066 91,194 41,995 20,719 9,446 55,311 623,057 
Special Mention— — 181 — 10 7 — 198 
Substandard10 35 128 80 19 221 — 493 
Loss— — — — — 153 — 153 
Subtotal308,336 96,101 91,503 42,075 20,748 9,827 55,311 623,901 
Total$1,477,594 $818,102 $496,532 $348,831 $317,010 $921,711 $721,869 $5,101,649 
The following tables present the Company's loans by class and credit quality indicator as of March 31, 2022 and December 31, 2021:
(dollars in thousands)PassSpecial MentionSubstandardLossSubtotalNet Deferred Fees and CostsTotal
March 31, 2022      
Commercial, financial and agricultural: SBA PPP$45,938 $— $— $— $45,938 $(1,707)$44,231 
Commercial, financial and agricultural: Other519,345 13,683 11,704 — 544,732 (316)544,416 
Real estate:  
Construction122,856 — 911 — 123,767 (450)123,317 
Residential mortgage1,868,524 — 4,881 — 1,873,405 643 1,874,048 
Home equity673,622 183 820 — 674,625 1,701 676,326 
Commercial mortgage1,199,798 17,585 28,040 — 1,245,423 (1,924)1,243,499 
Consumer667,991 163 860 180 669,194 (194)669,000 
Total$5,098,074 $31,614 $47,216 $180 $5,177,084 $(2,247)$5,174,837 

(dollars in thousands)PassSpecial MentionSubstandardLossSubtotalNet Deferred Fees and CostsTotal
December 31, 2021      
Commercial, financial and agricultural: SBA PPP$94,850 $— $— $— $94,850 $(3,523)$91,327 
Commercial, financial and agricultural: Other504,823 14,283 11,277 — 530,383 (262)530,121 
Real estate:  
Construction122,433 — 918 — 123,351 (484)122,867 
Residential mortgage1,869,604 973 4,623 — 1,875,200 780 1,875,980 
Home equity634,704 187 830 — 635,721 1,528 637,249 
Commercial mortgage1,180,074 16,062 26,002 — 1,222,138 (1,934)1,220,204 
Consumer623,271 181 510 153 624,115 (214)623,901 
Total$5,029,759 $31,686 $44,160 $153 $5,105,758 $(4,109)$5,101,649