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. 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, costs and fair value marks of $22.3 million and $21.9 million as of September 30, 2020 and December 31, 2019, respectively. Included in commercial loans are loans originated as part of the Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”) of which $348.3 million, net of fees and costs, are outstanding at September 30, 2020, which are fully guaranteed by the SBA. September 30, 2020 Total loans % of total Commercial $ 3,217,406 70.6% Commercial real estate non-owner occupied 617,087 13.5% Residential real estate 700,927 15.4% Consumer 20,701 0.5% Total $ 4,556,121 100.0% 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% Information about delinquent and non-accrual loans are shown in the following tables at September 30, 2020 and December 31, 2019: September 30, 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 $ 970 $ — $ 7,395 $ 8,365 $ 1,592,426 $ 1,600,791 Municipal and non-profit — — — — 883,641 883,641 Owner occupied commercial real estate 1,845 — 3,539 5,384 511,031 516,415 Food and agribusiness 472 — 551 1,023 215,536 216,559 Total commercial 3,287 — 11,485 14,772 3,202,634 3,217,406 Commercial real estate non-owner occupied: Construction — — — — 77,361 77,361 Acquisition/development — — 8 8 26,003 26,011 Multifamily — — — — 69,925 69,925 Non-owner occupied 2,633 — 20 2,653 441,137 443,790 Total commercial real estate 2,633 — 28 2,661 614,426 617,087 Residential real estate: Senior lien 506 161 6,625 7,292 611,971 619,263 Junior lien 154 — 697 851 80,813 81,664 Total residential real estate 660 161 7,322 8,143 692,784 700,927 Consumer 7 — 47 54 20,647 20,701 Total loans $ 6,587 $ 161 $ 18,882 $ 25,630 $ 4,530,491 $ 4,556,121 September 30, 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 $ 4,664 $ 2,731 $ 7,395 Municipal and non-profit — — — Owner occupied commercial real estate 633 2,906 3,539 Food and agribusiness 178 373 551 Total commercial 5,475 6,010 11,485 Commercial real estate non-owner occupied: Construction — — — Acquisition/development 8 — 8 Multifamily — — — Non-owner occupied 20 — 20 Total commercial real estate 28 — 28 Residential real estate: Senior lien 4,429 2,196 6,625 Junior lien 697 — 697 Total residential real estate 5,126 2,196 7,322 Consumer 47 — 47 Total loans $ 10,676 $ 8,206 $ 18,882 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 from non-accrual loans during the nine months ended September 30, 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 September 30, 2020: September 30, 2020 Revolving Revolving loans loans Origination year amortized converted 2020 2019 2018 2017 2016 Prior cost basis to term Total Commercial: Commercial and industrial: Pass $ 488,391 $ 231,994 $ 217,190 $ 98,442 $ 16,130 $ 19,820 $ 478,080 $ 2,290 $ 1,552,337 Special mention 871 1,327 5,849 5,018 6,098 824 4,073 1,019 25,079 Substandard 27 1,284 1,317 12,709 6 4,786 2,145 — 22,274 Doubtful — — — 403 — 674 24 — 1,101 Total commercial and industrial 489,289 234,605 224,356 116,572 22,234 26,104 484,322 3,309 1,600,791 Municipal and non-profit: Pass 116,484 95,749 133,050 158,834 132,527 246,993 4 — 883,641 Special mention — — — — — — — — — Substandard — — — — — — — — — Doubtful — — — — — — — — — Total municipal and non-profit 116,484 95,749 133,050 158,834 132,527 246,993 4 — 883,641 Owner occupied commercial real estate: Pass 67,503 114,301 95,751 54,320 33,105 103,895 1,396 53 470,324 Special mention 1,581 2,996 2,612 548 5,912 19,496 — — 33,145 Substandard — 2,342 6,231 255 102 4,016 — — 12,946 Doubtful — — — — — — — — — Total owner occupied commercial real estate 69,084 119,639 104,594 55,123 39,119 127,407 1,396 53 516,415 Food and agribusiness: Pass 21,695 9,417 31,671 7,366 9,874 28,770 105,873 167 214,833 Special mention — — — — — 370 — — 370 Substandard — — — 308 — 970 69 — 1,347 Doubtful — — — — — 1 8 — 9 Total food and agribusiness 21,695 9,417 31,671 7,674 9,874 30,111 105,950 167 216,559 Total commercial 696,552 459,410 493,671 338,203 203,754 430,615 591,672 3,529 3,217,406 Commercial real estate non-owner occupied: Construction: Pass 13,778 37,496 17,144 4,097 — — 4,563 — 77,078 Special mention 283 — — — — — — — 283 Substandard — — — — — — — — — Doubtful — — — — — — — — — Total construction 14,061 37,496 17,144 4,097 — — 4,563 — 77,361 Acquisition/development: Pass 3,781 2,030 1,951 8,503 4,569 4,653 43 — 25,530 Special mention — — — 35 — 253 — — 288 Substandard — — — — — 193 — — 193 Doubtful — — — — — — — — — Total acquisition/development 3,781 2,030 1,951 8,538 4,569 5,099 43 — 26,011 Multifamily: Pass 21,492 13,743 138 7,273 19,516 5,380 — — 67,542 Special mention — — — — — 2,383 — — 2,383 Substandard — — — — — — — — — Doubtful — — — — — — — — — Total multifamily 21,492 13,743 138 7,273 19,516 7,763 — — 69,925 Non-owner occupied Pass 32,026 96,992 27,884 110,225 28,868 121,540 1,761 49 419,345 Special mention — — 5,912 9,869 3,966 3,698 100 — 23,545 Substandard — — 66 — — 834 — — 900 Doubtful — — — — — — — — — Total non-owner occupied 32,026 96,992 33,862 120,094 32,834 126,072 1,861 49 443,790 Total commercial real estate non-owner occupied 71,360 150,261 53,095 140,002 56,919 138,934 6,467 49 617,087 Residential real estate: Senior lien Pass 95,390 95,318 46,063 54,423 102,307 192,309 25,377 327 611,514 Special mention — — — — — 452 — — 452 Substandard 96 359 20 1,530 562 4,730 — — 7,297 September 30, 2020 Revolving Revolving loans loans Origination year amortized converted 2020 2019 2018 2017 2016 Prior cost basis to term Total Doubtful — — — — — — — — — Total senior lien 95,486 95,677 46,083 55,953 102,869 197,491 25,377 327 619,263 Junior lien Pass 3,731 4,767 3,387 1,963 1,433 4,397 60,327 508 80,513 Special mention — — — — — 21 347 — 368 Substandard — 114 103 196 57 313 — — 783 Doubtful — — — — — — — — — Total junior lien 3,731 4,881 3,490 2,159 1,490 4,731 60,674 508 81,664 Total residential real estate 99,217 100,558 49,573 58,112 104,359 202,222 86,051 835 700,927 Consumer Pass 9,195 4,529 2,086 636 422 732 3,030 24 20,654 Special mention — — — — — — — — — Substandard — 20 — — 19 8 — — 47 Doubtful — — — — — — — — — Total consumer 9,195 4,549 2,086 636 441 740 3,030 24 20,701 Total loans $ 876,324 $ 714,778 $ 598,425 $ 536,953 $ 365,473 $ 772,511 $ 687,220 $ 4,437 $ 4,556,121 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 September 30, 2020: September 30, 2020 Total amortized Real property Business assets cost basis Commercial Commercial and industrial $ 7,936 $ 4,441 $ 12,377 Owner-occupied commercial real estate 6,396 284 6,680 Food and agribusiness 372 86 458 Total Commercial 14,704 4,811 19,515 Commercial real estate non owner-occupied Acquisition/development 253 — 253 Multifamily 1,935 — 1,935 Non-owner occupied 556 — 556 Total commercial real estate 2,744 — 2,744 Residential real estate Senior lien 2,196 — 2,196 Total residential real estate 2,196 — 2,196 Total loans $ 19,644 $ 4,811 $ 24,455 Loan modifications and 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. The CARES Act afforded financial institutions the option to modify loans within certain parameters in response to the COVID-19 pandemic without requiring the modifications to be classified as troubled debt restructurings under ASC Topic 310 if the borrower has been adversely impacted by COVID-19 and was current on their loan payments as of December 31, 2019. During the three and nine months ended September 30, 2020, the Company modified 20 and 483 loans totaling $7.1 million and $499.5 million, respectively, due to the effects of the COVID-19 pandemic that were not classified as TDRs. Loans with COVID-related modifications during the nine months ended September 30, 2020 totaled 11.6% of the total loan portfolio at September 30, 2020. Of those loans, $334.3 million have resumed making principal or interest payments or paid in full as of September 30, 2020. Modified loans that remained on a payment deferral plan at September 30, 2020 totaled $165.2 million, or 3.6% of the total loan portfolio, of which 84.0% were a second modification. Of those loans, principal payment deferrals totaled $155.1 million and full payment deferrals totaled $10.1 million All COVID modified loans were classified as performing as of September 30, 2020. During the three months ended September 30, 2020, the Company restructured seven loans with an amortized cost basis of $0.8 million to facilitate repayment that are considered TDRs. During the nine months ended September 30, 2020, the Company restructured 21 loans with an amortized cost basis of $18.6 million to facilitate repayment that are considered TDRs. Included in the total TDR balance as of September 30, 2020 were loans totaling $4.4 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 September 30, 2020 and December 31, 2019: September 30, 2020 Amortized Average year-to-date Unpaid Unfunded commitments cost basis amortized cost basis principal balance to fund TDRs Commercial $ 14,903 $ 15,394 $ 15,527 $ 157 Commercial real estate non-owner occupied 5,076 4,938 7,001 — Residential real estate 1,807 1,851 2,630 12 Consumer — — — — Total $ 21,786 $ 22,183 $ 25,158 $ 169 December 31, 2019 Recorded Average year-to-date Unpaid Unfunded commitments investment recorded investment 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 September 30, 2020 and December 31, 2019: September 30, 2020 December 31, 2019 Commercial $ 1,590 $ 1,891 Commercial real estate non-owner occupied — 410 Residential real estate 3,069 2,553 Consumer — — Total non-accruing TDRs $ 4,659 $ 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 no TDRs that were modified within the past 12 months and had defaulted on their restructured terms during the nine months ended September 30, 2020 or 2019. 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. |