Loans | Note 4 Loans The loan portfolio is comprised of loans originated by the Company and loans that were acquired in connection with the Company’s acquisitions. During the first quarter of 2020, the Company updated its loan classifications to include energy loans within the commercial and industrial loan class and present municipal and non-profit loans as their own class within the commercial segment. Additionally, loans previously referred to as “310-30 loans” are included in “acquired loans”. The prior year presentation has been reclassified to conform to the current year presentation. In addition, as the concept of impaired loans does not exist under CECL, disclosures that related solely to impaired loans have been removed. The tables below show the loan portfolio composition including carrying value by segment as of the dates shown. The carrying value of loans is net of discounts, fees, cost and fair value marks of $19.0 million and $21.9 million as of March 31, 2020 and December 31, 2019, respectively. March 31, 2020 Total loans % of total Commercial $ 3,074,096 68.2% Commercial real estate non-owner occupied 643,727 14.3% Residential real estate 766,324 17.0% Consumer 21,588 0.5% Total $ 4,505,735 100.0% December 31, 2019 Total loans % of total Commercial $ 2,992,307 67.8% Commercial real estate non-owner occupied 630,906 14.3% Residential real estate 770,417 17.4% Consumer 21,776 0.5% Total $ 4,415,406 100.0% Delinquency for loans is shown in the following tables at March 31, 2020 and December 31, 2019: March 31, 2020 Greater 30-89 days than 90 days Total past past due and past due and Non-accrual due and accruing accruing loans non-accrual Current Total loans Commercial: Commercial and industrial $ 4,603 $ 714 $ 8,920 $ 14,237 $ 1,424,313 $ 1,438,550 Municipal and non-profit — — — — 877,084 877,084 Owner occupied commercial real estate 1,085 163 2,314 3,562 512,352 515,914 Food and agribusiness 317 — 735 1,052 241,496 242,548 Total commercial 6,005 877 11,969 18,851 3,055,245 3,074,096 Commercial real estate non-owner occupied: Construction — — — — 86,123 86,123 Acquisition/development 60 — 261 321 26,982 27,303 Multifamily — — — — 77,336 77,336 Non-owner occupied 1,451 — 39 1,490 451,475 452,965 Total commercial real estate 1,511 — 300 1,811 641,916 643,727 Residential real estate: Senior lien 2,640 487 8,257 11,384 663,270 674,654 Junior lien 483 — 763 1,246 90,424 91,670 Total residential real estate 3,123 487 9,020 12,630 753,694 766,324 Consumer 54 — 38 92 21,496 21,588 Total loans $ 10,693 $ 1,364 $ 21,327 $ 33,384 $ 4,472,351 $ 4,505,735 March 31, 2020 Non-accrual loans Non-accrual loans with a related with no related allowance for allowance for Non-accrual credit loss credit loss loans Commercial: Commercial and industrial $ 6,081 $ 2,839 $ 8,920 Municipal and non-profit — — — Owner occupied commercial real estate 805 1,509 2,314 Food and agribusiness 313 422 735 Total commercial 7,199 4,770 11,969 Commercial real estate non-owner occupied: Construction — — — Acquisition/development 3 258 261 Multifamily — — — Non-owner occupied 39 — 39 Total commercial real estate 42 258 300 Residential real estate: Senior lien 4,778 3,479 8,257 Junior lien 763 — 763 Total residential real estate 5,541 3,479 9,020 Consumer 38 — 38 Total loans $ 12,820 $ 8,507 $ 21,327 December 31, 2019 Greater 30-89 days than 90 days Total past past due and past due and Non-accrual due and accruing accruing loans non-accrual Current Total loans Commercial: Commercial and industrial $ 2,252 $ 879 $ 10,330 $ 13,461 $ 1,398,070 $ 1,411,531 Municipal and non-profit 226 — — 226 837,300 837,526 Owner occupied commercial real estate 595 630 2,264 3,489 486,633 490,122 Food and agribusiness 190 — 317 507 252,621 253,128 Total commercial 3,263 1,509 12,911 17,683 2,974,624 2,992,307 Commercial real estate non-owner occupied: Construction — — — — 77,733 77,733 Acquisition/development 187 — 416 603 26,276 26,879 Multifamily — — — — 55,808 55,808 Non-owner occupied 438 65 43 546 469,940 470,486 Total commercial real estate 625 65 459 1,149 629,757 630,906 Residential real estate: Senior lien 2,101 9 7,597 9,707 668,955 678,662 Junior lien 245 79 731 1,055 90,700 91,755 Total residential real estate 2,346 88 8,328 10,762 759,655 770,417 Consumer 116 — 50 166 21,610 21,776 Total loans $ 6,350 $ 1,662 $ 21,748 $ 29,760 $ 4,385,646 $ 4,415,406 Loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement remains unpaid after the due date of the scheduled payment. Non-accrual loans include non-accrual loans and TDRs on non-accrual status. There was no interest income recognized on non-accrual loans during the three months ended March 31, 2020 or 2019. The Company’s internal risk rating system uses a series of grades which reflect our assessment of the credit quality of loans based on an analysis of the borrower's financial condition, liquidity and ability to meet contractual debt service requirements and are categorized as “Pass”, “Special mention”, “Substandard” and “Doubtful”. For a description of the general characteristics of the risk grades, refer to note 1 Basis of Presentation. The amortized cost basis for all loans as determined by the Company’s internal risk rating system and year of origination was as follows at March 31, 2020: March 31, 2020 Revolving Revolving loans loans amortized converted 2020 2019 2018 2017 2016 Prior cost basis to term Total Commercial: Commercial and industrial: Pass $ 77,093 $ 263,719 $ 237,591 $ 107,183 $ 37,660 $ 40,127 $ 629,234 $ 11,476 $ 1,404,083 Special mention — 968 5,910 279 5,813 1,226 5,115 — 19,311 Substandard — 1,395 1,091 3,106 399 4,710 3,314 — 14,015 Doubtful — — — 431 — 674 36 — 1,141 Total commercial and industrial 77,093 266,082 244,592 110,999 43,872 46,737 637,699 11,476 1,438,550 Municipal and non-profit: Pass 61,222 98,498 142,299 173,711 136,171 261,847 3,336 — 877,084 Special mention — — — — — — — — — Substandard — — — — — — — — — Doubtful — — — — — — — — — Total municipal and non-profit 61,222 98,498 142,299 173,711 136,171 261,847 3,336 — 877,084 Owner occupied commercial real estate: Pass 35,696 121,398 99,248 51,857 42,753 112,635 1,919 638 466,144 Special mention — — 4,775 11,565 5,687 17,558 — — 39,585 Substandard — — 3,965 — — 6,220 — — 10,185 Doubtful — — — — — — — — — Total owner occupied commercial real estate 35,696 121,398 107,988 63,422 48,440 136,413 1,919 638 515,914 Food and agribusiness: Pass 5,778 11,194 35,979 7,858 10,637 30,853 137,246 409 239,954 Special mention — — — — — 926 — — 926 Substandard — — — 319 — 1,086 231 — 1,636 Doubtful — — — — — 6 26 — 32 Total food and agribusiness 5,778 11,194 35,979 8,177 10,637 32,871 137,503 409 242,548 Total commercial 179,789 497,172 530,858 356,309 239,120 477,868 780,457 12,523 3,074,096 Commercial real estate non-owner occupied: Construction: Pass 6,573 32,167 16,823 24,059 — — 5,688 659 85,969 Special mention 154 — — — — — — — 154 Substandard — — — — — — — — — Doubtful — — — — — — — — — Total construction 6,727 32,167 16,823 24,059 — — 5,688 659 86,123 Acquisition/development: Pass 4,659 2,424 2,313 8,554 4,598 4,177 95 — 26,820 Special mention — — — — — — — — — Substandard — — — 37 — 446 — — 483 Doubtful — — — — — — — — — Total acquisition/development 4,659 2,424 2,313 8,591 4,598 4,623 95 — 27,303 Multifamily: Pass 21,468 13,886 1,832 8,387 21,374 9,912 — — 76,859 Special mention — — — — — 5 — — 5 Substandard — — — — — 472 — — 472 Doubtful — — — — — — — — — Total multifamily 21,468 13,886 1,832 8,387 21,374 10,389 — — 77,336 Non-owner occupied Pass 31,400 92,052 29,996 126,447 34,583 129,563 2,125 — 446,166 Special mention — — 4,360 174 — 1,312 — — 5,846 Substandard — — 66 — — 887 — — 953 Doubtful — — — — — — — — — Total non-owner occupied 31,400 92,052 34,422 126,621 34,583 131,762 2,125 — 452,965 Total commercial real estate 64,254 140,529 55,390 167,658 60,555 146,774 7,908 659 643,727 Residential real estate: Senior lien Pass 33,597 115,680 61,000 71,750 120,014 234,663 27,935 276 664,915 Special mention — — — — — 444 249 — 693 Substandard 102 373 32 1,567 547 6,333 — 92 9,046 Doubtful — — — — — — — — — Total senior lien 33,699 116,053 61,032 73,317 120,561 241,440 28,184 368 674,654 March 31, 2020 Revolving Revolving loans loans amortized converted 2020 2019 2018 2017 2016 Prior cost basis to term Total Junior lien Pass 1,327 6,180 3,962 2,251 1,067 5,010 69,799 828 90,424 Special mention — — — — — 21 344 — 365 Substandard — — 231 116 180 280 74 — 881 Doubtful — — — — — — — — — Total junior lien 1,327 6,180 4,193 2,367 1,247 5,311 70,217 828 91,670 Total residential real estate 35,026 122,233 65,225 75,684 121,808 246,751 98,401 1,196 766,324 Consumer Pass 3,347 8,797 2,933 1,292 821 1,077 3,212 71 21,550 Special mention — — — — — — — — — Substandard — 1 — — 26 11 — — 38 Doubtful — — — — — — — — — Total consumer 3,347 8,798 2,933 1,292 847 1,088 3,212 71 21,588 Total loans $ 282,416 $ 768,732 $ 654,406 $ 600,943 $ 422,330 $ 872,481 $ 889,978 $ 14,449 $ 4,505,735 Loans evaluated individually We evaluate loans individually when they no longer share risk characteristics with pooled loans. These loans include loans on non-accrual status, loans in bankruptcy, and TDRs described below. If a specific allowance is warranted based on the borrower’s overall financial condition, the specific allowance is calculated based on discounted expected cash flows using the loan’s initial contractual effective interest rate or the fair value of the collateral less selling costs for collateral-dependent loans. 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. Management individually evaluates collateral-dependent loans with an amortized cost basis of $250 thousand or more and includes collateral-dependent loans less than $250 thousand within the general allowance population. The amortized cost basis of collateral-dependent loans over $250 thousand was as follows at March 31, 2020: March 31, 2020 Total amortized Real property Business assets cost basis Commercial Commercial and industrial $ 5,965 $ 3,519 $ 9,484 Owner-occupied commercial real estate 1,331 — 1,331 Food and agribusiness 422 314 736 Total Commercial 7,718 3,833 11,551 Commercial real estate non owner-occupied Acquisition/development 1,303 — 1,303 Total commercial real estate 1,303 — 1,303 Residential real estate Senior lien 3,479 — 3,479 Total residential real estate 3,479 — 3,479 Total loans $ 12,500 $ 3,833 $ 16,333 Troubled debt restructurings The Company’s policy is to review each prospective credit to determine the appropriateness and the adequacy of security or collateral prior to making a loan. In the event of borrower default, the Company seeks recovery in compliance with lending laws, the respective loan agreements, and credit monitoring and remediation procedures that may include restructuring a loan to provide a concession by the Company to the borrower from their original terms due to borrower financial difficulties in order to facilitate repayment. Additionally, if a borrower’s repayment obligation has been discharged by a court, and that debt has not been reaffirmed by the borrower, regardless of past due status, the loan is considered to be a TDR. During the three months ended March 31, 2020, the Company had four loan modifications totaling $122 thousand due to the effects of the COVID-19 pandemic that were not identified as TDRs, consistent with the Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus. The Company anticipates additional loans to be restructured due to the effects of COVID-19 in the coming periods that will not be identified as TDRs. During the three months ended March 31, 2020, the Company restructured 2 loans with an amortized cost basis of $1.9 million to facilitate repayment. Included in the total TDR balance as of March 31, 2020 were loans totaling $4.2 million previously accounted for under ASC 310-30. Loan modifications were a reduction of the principal payment, a reduction in interest rate, or an extension of term. The tables below provide additional information related to accruing TDRs at March 31, 2020 and December 31, 2019: March 31, 2020 Amortized Average year-to-date Unpaid Unfunded commitments cost basis amortized cost basis principal balance to fund TDRs Commercial $ 6,093 $ 6,155 $ 6,781 $ 150 Commercial real estate non-owner occupied 2,183 2,208 4,428 — Residential real estate 2,009 2,023 2,893 12 Consumer — — — — Total $ 10,285 $ 10,386 $ 14,102 $ 162 December 31, 2019 Amortized Average year-to-date Unpaid Unfunded commitments cost basis amortized cost basis principal balance to fund TDRs Commercial $ 5,615 $ 5,788 $ 5,714 $ — Commercial real estate non-owner occupied 141 172 192 — Residential real estate 1,129 1,178 1,206 12 Consumer — — — — Total $ 6,885 $ 7,138 $ 7,112 $ 12 The following table summarizes the Company’s carrying value of non-accrual TDRs as of March 31, 2020 and December 31, 2019: March 31, 2020 December 31, 2019 Commercial $ 1,873 $ 1,891 Commercial real estate non-owner occupied 257 410 Residential real estate 2,560 2,553 Consumer — — Total non-accruing TDRs $ 4,690 $ 4,854 Accrual of interest is resumed on loans that were previously on non-accrual only after the loan has performed sufficiently for a period of time. The Company had five TDRs totaling $0.8 million that were modified within the past twelve months and had defaulted on their restructured terms during the three months ended March 31, 2020. During the three months ended March 31, 2019, the Company had two TDRs totaling $0.2 million that were modified within the past twelve months and had defaulted on their restructured terms. For purposes of this disclosure, the Company considers “default” to mean 90 days or more past due on principal or interest. The allowance for credit losses related to TDRs on non-accrual status is determined by individual evaluation, including collateral adequacy, using the same process as loans on non-accrual status which are not classified as TDRs. |