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LOANS AND CREDIT QUALITY
 6 Months Ended
Jun. 30, 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 June 30, 2022 and December 31, 2021 consisted of the following:
(dollars in thousands)June 30, 2022December 31, 2021
Commercial, financial and agricultural:
Small Business Administration Paycheck Protection Program$21,058 $94,850 
Other524,613 530,383 
Real estate:
Construction145,698 123,351 
Residential mortgage1,890,337 1,875,200 
Home equity696,370 635,721 
Commercial mortgage1,305,564 1,222,138 
Consumer719,720 624,115 
Gross loans5,303,360 5,105,758 
Net deferred fees(1,727)(4,109)
Total loans, net of deferred fees and costs5,301,633 5,101,649 
Allowance for credit losses(65,211)(68,097)
Total loans, net of allowance for credit losses$5,236,422 $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 financial strength of the borrower, likelihood of project completion, collateral and geographic location of the collateral, and cash flows from operations. 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, as well as economic and market conditions. The consumer segment's predominant risk characteristics are economic conditions, as well as employment and income levels attributed to the borrower.

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 June 30, 2022. A total outstanding balance of $21.1 million and net deferred fees of $0.9 million remain as of June 30, 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 six months ended June 30, 2022 and 2021.

The Company did not sell any loans originally held for investment during the six months ended June 30, 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 June 30, 2022
Purchases:
Outstanding balance$56,624 $30,866 $87,490 
(Discount) premium(3,043)1,543 (1,500)
Purchase price$53,581 $32,409 $85,990 
Six Months Ended June 30, 2022
Purchases:
Outstanding balance$104,766 $64,890 $169,656 
(Discount) premium(7,410)3,457 (3,953)
Purchase price$97,356 $68,347 $165,703 
Three Months Ended June 30, 2021
Purchases:
Outstanding balance$45,482 $36,381 $81,863 
(Discount) premium(2,632)3,063 431 
Purchase price$42,850 $39,444 $82,294 
Six Months Ended June 30, 2021
Purchases:
Outstanding balance$68,016 $49,371 $117,387 
(Discount) premium(2,763)3,729 966 
Purchase price$65,253 $53,100 $118,353 

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 June 30, 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
June 30, 2022
Real estate:
Residential mortgage$5,495 $— $— $5,495 $— 
Home equity592 — — 592 — 
Total$6,087 $— $— $6,087 $— 

(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 $1.7 million and $0.7 million of residential mortgage loans collateralized by residential real estate property that were in the process of foreclosure at June 30, 2022 and December 31, 2021, respectively.

The Company did not foreclose on any loans during the three and six months ended June 30, 2022 and 2021.

The Company did not sell any foreclosed properties during the three and six months ended June 30, 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 June 30, 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 June 30, 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
June 30, 2022       
Commercial, financial and agricultural:
SBA PPP$— $— $272 $— $272 $19,909 $20,181 $— 
Other564 342 37 333 1,276 522,967 524,243 — 
Real estate:  
Construction— — — — — 145,038 145,038 — 
Residential mortgage— 1,125 — 3,490 4,615 1,886,168 1,890,783 3,490 
Home equity1,140 104 — 592 1,836 696,373 698,209 592 
Commercial mortgage— — — — — 1,303,635 1,303,635 — 
Consumer3,743 935 842 568 6,088 713,456 719,544 — 
Total$5,447 $2,506 $1,151 $4,983 $14,087 $5,287,546 $5,301,633 $4,082 
(dollars in thousands)Accruing
Loans
30 - 59 Days
Past Due		Accruing
Loans
60 - 89 Days
Past Due		Accruing
Loans
Greater 
Than
90 Days
Past Due		Nonaccrual
Loans		Total
Past Due
and
Nonaccrual		Loans and
Leases
Not
Past Due		TotalNonaccrual
Loans
With
No ACL
December 31, 2021       
Commercial, financial and agricultural:
SBA PPP$— $— $— $— $— $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 June 30, 2022 consisted of six Hawaii residential mortgage loans with a principal balance of $1.2 million. There were $3.0 million of TDRs still accruing interest at June 30, 2022, none 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 and six months ended June 30, 2022 and 2021.
The Company did not modify any loans during the three and six months ended June 30, 2022.

The Company did not modify any loans during the three months ended June 30, 2021. 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.

No loans were modified as a TDR within the previous twelve months that subsequently defaulted during the three and six months ended June 30, 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 tables present the amortized cost basis of the Company's loans by class, credit quality indicator and origination year as of June 30, 2022 and December 31, 2021. Revolving loans converted to term as of and during the three and six months ended June 30, 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
June 30, 2022
Commercial, financial and agricultural - SBA PPP:
Risk Rating
Pass$— $19,607 $574 $— $— $— $— $20,181 
Subtotal— 19,607 574 — — — — 20,181 
Commercial, financial and agricultural - Other:
Risk Rating
Pass45,181 104,671 47,314 54,475 36,037 124,122 88,025 499,825 
Special Mention2,057 583 242 2,421 510 14,352 750 20,915 
Substandard— — 1,233 231 576 1,391 72 3,503 
Subtotal47,238 105,254 48,789 57,127 37,123 139,865 88,847 524,243 
Construction:
Risk Rating
Pass11,358 48,869 34,319 3,146 26,524 18,834 1,082 144,132 
Special Mention— — — — 906 — — 906 
Subtotal11,358 48,869 34,319 3,146 27,430 18,834 1,082 145,038 
Residential mortgage:
Risk Rating
Pass152,888 653,965 448,393 162,543 63,935 404,609 — 1,886,333 
Substandard— — 961 — — 3,489 — 4,450 
Subtotal152,888 653,965 449,354 162,543 63,935 408,098 — 1,890,783 
Home equity:
Risk Rating
Pass27,050 24,737 12,965 7,937 7,660 10,784 606,287 697,420 
Special Mention— — — — — — 197 197 
Substandard— — — — 78 514 — 592 
Subtotal27,050 24,737 12,965 7,937 7,738 11,298 606,484 698,209 
Commercial mortgage:
Risk Rating
Pass128,529 224,352 121,754 129,686 134,198 494,827 9,683 1,243,029 
Special Mention— 1,166 — 17,523 9,063 18,160 — 45,912 
Substandard— — — 1,721 2,163 10,810 — 14,694 
Subtotal128,529 225,518 121,754 148,930 145,424 523,797 9,683 1,303,635 
Consumer:
Risk Rating
Pass189,764 286,308 75,080 67,196 29,113 18,214 52,314 717,989 
Special Mention— — — 145 — — — 145 
Substandard15 151 22 247 107 498 10 1,050 
Loss— — — — — 360 — 360 
Subtotal189,779 286,459 75,102 67,588 29,220 19,072 52,324 719,544 
Total$556,842 $1,364,409 $742,857 $447,271 $310,870 $1,120,964 $758,420 $5,301,633 
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 June 30, 2022 and December 31, 2021:
(dollars in thousands)PassSpecial MentionSubstandardLossSubtotalNet Deferred Fees and CostsTotal
June 30, 2022      
Commercial, financial and agricultural: SBA PPP$21,058 $— $— $— $21,058 $(877)$20,181 
Commercial, financial and agricultural: Other500,195 20,915 3,503 — 524,613 (370)524,243 
Real estate:  
Construction144,792 906 — — 145,698 (660)145,038 
Residential mortgage1,885,887 — 4,450 — 1,890,337 446 1,890,783 
Home equity695,581 197 592 — 696,370 1,839 698,209 
Commercial mortgage1,244,958 45,912 14,694 — 1,305,564 (1,929)1,303,635 
Consumer718,165 145 1,050 360 719,720 (176)719,544 
Total$5,210,636 $68,075 $24,289 $360 $5,303,360 $(1,727)$5,301,633 

(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