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LOANS AND LEASES
 12 Months Ended
Dec. 31, 2022
Receivables [Abstract]  
LOANS AND LEASES
3. LOANS
 
Loans, excluding loans held for sale, net of ACL as of December 31, 2022 and 2021 consisted of the following:
 
 December 31,
(Dollars in thousands)20222021
Commercial, financial and agricultural:
Small Business Administration Paycheck Protection Program ("SBA PPP")$2,654 $94,850 
Other544,495 530,383 
Real estate:
Construction167,366 123,351 
Residential mortgage1,940,456 1,875,200 
Home equity737,386 635,721 
Commercial mortgage1,364,998 1,222,138 
Consumer798,957 624,115 
Gross loans5,556,312 5,105,758 
Net deferred fees(846)(4,109)
Total loans, net of deferred fees and costs$5,555,466 $5,101,649 
Allowance for credit losses(63,738)(68,097)
Total loans, net of allowance for credit losses$5,491,728 $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 as an adjustment of yield.

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 repayments from borrowers totaling $877.1 million as of December 31, 2022. A total outstanding balance of $2.7 million and net deferred fees of $0.1 million remains as of December 31, 2022.

The Company did not transfer any loans to the held-for-sale category during the years ended December 31, 2022 and 2021.

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

(Dollars in thousands)Consumer - UnsecuredConsumer - AutomobileTotal
Year Ended December 31, 2022
Purchases:
Outstanding balance$229,283 $101,500 $330,783 
Purchase (discount) premium(12,119)4,738 (7,381)
Purchase price$217,164 $106,238 $323,402 
Year Ended December 31, 2021
Purchases:
Outstanding balance$199,813 $71,432 $271,245 
Purchase (discount) premium(9,613)5,080 (4,533)
Purchase price$190,200 $76,512 $266,712 
 
In the normal course of business, the bank makes loans to certain directors, executive officers and their affiliates. These loans are made in the ordinary course of business at normal credit terms. Related party loan balances were $37.4 million and $36.4 million as of December 31, 2022 and 2021, respectively.

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 December 31, 2022 and 2021:

December 31, 2022
(Dollars in thousands)Secured by
1-4 Family
Residential
Properties		Secured by
Nonfarm
Nonresidential
Properties		Secured by
Real Estate
and Business
 Assets		TotalAllocated
ACL
Real estate:
Residential mortgage$5,653 $— $— $5,653 $— 
Home equity570 — — 570 — 
Total$6,223 $— $— $6,223 $— 

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

Residential mortgage loans collateralized by residential real estate property that were in the process of foreclosure totaled $0.1 million and $0.7 million as of December 31, 2022 and 2021, respectively.
We did not foreclose on any loans during the years ended December 31, 2022 and 2021. We did not sell any foreclosed properties during the years ended December 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 December 31, 2022 and 2021:

December 31, 2022
(Dollars in thousands)Accruing
Loans
30 - 59
Days
Past Due		Accruing
Loans
60 - 89
Days
Past Due		Accruing
Loans
90+ 
Days
Past Due		Nonaccrual
Loans		Total
Past Due
and
Nonaccrual		Loans and
Leases Not
Past Due		TotalNonaccrual Loans with No ACL
Commercial, financial and agricultural:
SBA PPP$471 $37 $13 $— $521 $2,034 $2,555 $— 
Other546 131 26 297 1,000 542,947 543,947 — 
Real estate:
Construction— — — — — 166,723 166,723 — 
Residential mortgage303 — 559 3,808 4,670 1,936,329 1,940,999 3,808 
Home equity1,540 — — 570 2,110 737,270 739,380 570 
Commercial mortgage160 — — — 160 1,362,915 1,363,075 — 
Consumer5,173 1,921 1,240 576 8,910 789,877 798,787 — 
Total$8,193 $2,089 $1,838 $5,251 $17,371 $5,538,095 $5,555,466 $4,378 

December 31, 2021
(Dollars in thousands)Accruing
Loans
30 - 59
Days
Past Due		Accruing
Loans
60 - 89
Days
Past Due		Accruing
Loans
90+ 
Days
Past Due		Nonaccrual
Loans		Total
Past Due
and
Nonaccrual		Loans and
Leases Not
Past Due		TotalNonaccrual Loans with No ACL
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 

Interest income totaling $1.6 million, $0.8 million, and $0.4 million was recognized on nonaccrual loans, including loans held for sale, in 2022, 2021 and 2020, respectively. Additional interest income of $0.2 million, $0.3 million, and $0.2 million would have been recognized in 2022, 2021 and 2020, respectively, had these loans been accruing interest throughout those periods. Additionally, interest income of $0.3 million, $0.3 million, and $0.2 million was collected and recognized on charged-off loans in 2022, 2021 and 2020, respectively.
 
Troubled Debt Restructurings

Troubled debt restructurings ("TDRs") included in nonperforming assets at December 31, 2022 consisted of five Hawaii residential mortgage loans with a combined principal balance of $1.1 million. At December 31, 2021, TDRs included in nonperforming assets consisted of four loans with a principal balance of $0.4 million. There were $2.8 million of TDRs still accruing interest at December 31, 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 consist 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 year ended December 31, 2022 and 2021. The loans modified in a TDR did not have a material effect on the Company's Provision and ACL during the years ended December 31, 2022 and 2021.

No loans were modified in a TDR during the year ended December 31, 2022. The following table presents by class, information related to loans modified in a TDR during the years ended December 31, 2021 and 2020:

Year Ended December 31, 2021
(Dollars in thousands)Number
of
Loans		Recorded
Investment
(as of period end)		Increase
in the
ACL
Real estate: Residential mortgage1 $48 $— 
Total1 $48 $— 
Year Ended December 31, 2020
(Dollars in thousands)Number
of
Loans		Recorded
Investment
(as of period end)		Increase
in the
ACL
Real estate: Residential mortgage1 $677 $— 
Real estate: Commercial mortgage1 $276 $— 
Consumer11 $207 $— 
Total13 $1,160 $— 

No loans were modified as a TDR within the previous twelve months that subsequently defaulted during the years ended December 31, 2022, 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:

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 estimate 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.
Loans not meeting the criteria above are considered to be pass-rated loans.

The following table presents the amortized cost basis, net of deferred (fees) costs of the Company's loans by class, credit quality indicator and origination year as of December 31, 2022. Revolving loans converted to term as of and during the year ended December 31, 2022 were not material to the total loan portfolio.

Amortized Cost of Term Loans by Origination Year
(Dollars in thousands)20222021202020192018PriorAmortized Cost of Revolving LoansTotal
December 31, 2022
Commercial, financial and agricultural - SBA PPP:
Risk Rating
Pass$— $2,546 $9 $— $— $— $— $2,555 
Subtotal— 2,546 9 — — — — 2,555 
Commercial, financial and agricultural - Other:
Risk Rating
Pass77,550 101,595 41,358 53,241 39,106 141,950 76,466 531,266 
Special Mention2,206 350 172 1,011 29 — 99 3,867 
Substandard188 176 833 256 116 7,215 30 8,814 
Subtotal79,944 102,121 42,363 54,508 39,251 149,165 76,595 543,947 
Construction:
Risk Rating
Pass25,663 61,027 23,384 2,387 14,309 18,048 15,044 159,862 
Special Mention— 417 — — 898 — — 1,315 
Substandard— 4,850 — 696 — — — 5,546 
Subtotal25,663 66,294 23,384 3,083 15,207 18,048 15,044 166,723 
Residential mortgage:
Risk Rating
Pass279,146 636,756 434,928 154,906 58,431 371,517 — 1,935,684 
Substandard— — 948 — 503 3,864 — 5,315 
Subtotal279,146 636,756 435,876 154,906 58,934 375,381 — 1,940,999 
Home equity:
Risk Rating
Pass34,973 23,772 10,520 7,463 6,880 11,727 643,277 738,612 
Special Mention— — — — — — 198 198 
Substandard— — — — 78 453 39 570 
Subtotal34,973 23,772 10,520 7,463 6,958 12,180 643,514 739,380 
Commercial mortgage:
Risk Rating
Pass226,137 208,230 119,531 129,950 145,932 472,267 11,473 1,313,520 
Special Mention— — — 11,388 — 16,082 — 27,470 
Substandard— 10,149 — 1,700 2,133 8,103 — 22,085 
Subtotal226,137 218,379 119,531 143,038 148,065 496,452 11,473 1,363,075 
Consumer:
Risk Rating
Pass358,609 242,942 59,352 50,899 20,065 10,958 54,038 796,863 
Special Mention— — — 113 — — — 113 
Substandard1 261 91 126 42 790 — 1,311 
Loss— — — — — 500 — 500 
Subtotal358,610 243,203 59,443 51,138 20,107 12,248 54,038 798,787 
Total loans, net of deferred fees and costs$1,004,473 $1,293,071 $691,126 $414,136 $288,522 $1,063,474 $800,664 $5,555,466 
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
Pass122,729 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 loans, net of deferred fees and costs$1,477,594 $818,102 $496,532 $348,831 $317,010 $921,711 $721,869 $5,101,649 
The following tables present the recorded investment in the Company's loans by class and credit indicator as of December 31, 2022 and 2021:
 
(Dollars in thousands)PassSpecial MentionSubstandardLossGross LoansNet Deferred (Fees) CostsTotal Loans
December 31, 2022      
Commercial, financial and agricultural:
SBA PPP$2,654 $— $— $— $2,654 $(99)$2,555 
Other531,814 3,867 8,814 — 544,495 (548)543,947 
Real estate:
Construction160,505 1,315 5,546 — 167,366 (643)166,723 
Residential mortgage1,935,141 — 5,315 — 1,940,456 543 1,940,999 
Home equity736,618 198 570 — 737,386 1,994 739,380 
Commercial mortgage1,315,443 27,470 22,085 — 1,364,998 (1,923)1,363,075 
Consumer797,029 113 1,315 500 798,957 (170)798,787 
Total$5,479,204 $32,963 $43,645 $500 $5,556,312 $(846)$5,555,466 

(Dollars in thousands)PassSpecial MentionSubstandardLossGross LoansNet Deferred (Fees) CostsTotal Loans
December 31, 2021     
Commercial, financial and agricultural:
SBA PPP$94,850 $— $— $— $94,850 $(3,523)$91,327 
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