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. 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 $15.8 million and $16.2 million as of June 30, 2021 and December 31, 2020, respectively. Included in commercial loans are fully-guaranteed loans originated as part of the Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”) of which $129.6 million and $176.1 million, net of fees and costs, were outstanding at June 30, 2021 and December 31, 2020, respectively. June 30, 2021 Total loans % of total Commercial $ 2,981,926 69.4% Commercial real estate non-owner occupied 637,620 14.8% Residential real estate 662,929 15.4% Consumer 18,282 0.4% Total $ 4,300,757 100.0% December 31, 2020 Total loans % of total Commercial $ 3,044,065 70.0% Commercial real estate non-owner occupied 631,996 14.5% Residential real estate 658,659 15.1% Consumer 19,006 0.4% Total $ 4,353,726 100.0% Information about delinquent and non-accrual loans is shown in the following tables at June 30, 2021 and December 31, 2020: June 30, 2021 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 $ 1,319 $ 361 $ 2,269 $ 3,949 $ 1,398,150 $ 1,402,099 Municipal and non-profit — — — — 861,099 861,099 Owner occupied commercial real estate 377 — 6,650 7,027 512,694 519,721 Food and agribusiness 177 — 76 253 198,754 199,007 Total commercial 1,873 361 8,995 11,229 2,970,697 2,981,926 Commercial real estate non-owner occupied: Construction — — — — 72,608 72,608 Acquisition/development — — 2 2 21,838 21,840 Multifamily — — — — 98,014 98,014 Non-owner occupied — 245 132 377 444,781 445,158 Total commercial real estate — 245 134 379 637,241 637,620 Residential real estate: Senior lien 195 161 4,260 4,616 596,481 601,097 Junior lien 21 — 485 506 61,326 61,832 Total residential real estate 216 161 4,745 5,122 657,807 662,929 Consumer 9 — 7 16 18,266 18,282 Total loans $ 2,098 $ 767 $ 13,881 $ 16,746 $ 4,284,011 $ 4,300,757 December 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 $ 170 $ — $ 6,312 $ 6,482 $ 1,440,256 $ 1,446,738 Municipal and non-profit — — — — 870,791 870,791 Owner occupied commercial real estate — — 5,450 5,450 510,789 516,239 Food and agribusiness 146 — 422 568 209,729 210,297 Total commercial 316 — 12,184 12,500 3,031,565 3,044,065 Commercial real estate non-owner occupied: Construction — — — — 91,125 91,125 Acquisition/development — — 6 6 24,665 24,671 Multifamily — — 1,523 1,523 67,233 68,756 Non-owner occupied — — 135 135 447,309 447,444 Total commercial real estate — — 1,664 1,664 630,332 631,996 Residential real estate: Senior lien 527 160 5,820 6,507 577,764 584,271 Junior lien 95 — 709 804 73,584 74,388 Total residential real estate 622 160 6,529 7,311 651,348 658,659 Consumer 30 2 10 42 18,964 19,006 Total loans $ 968 $ 162 $ 20,387 $ 21,517 $ 4,332,209 $ 4,353,726 June 30, 2021 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 $ 2,269 $ — $ 2,269 Municipal and non-profit — — — Owner occupied commercial real estate 4,803 1,847 6,650 Food and agribusiness 76 — 76 Total commercial 7,148 1,847 8,995 Commercial real estate non-owner occupied: Construction — — — Acquisition/development 2 — 2 Multifamily — — — Non-owner occupied 132 — 132 Total commercial real estate 134 — 134 Residential real estate: Senior lien 3,546 714 4,260 Junior lien 485 — 485 Total residential real estate 4,031 714 4,745 Consumer 7 — 7 Total loans $ 11,320 $ 2,561 $ 13,881 December 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 $ 6,080 $ 232 $ 6,312 Municipal and non-profit — — — Owner occupied commercial real estate 2,698 2,752 5,450 Food and agribusiness 88 334 422 Total commercial 8,866 3,318 12,184 Commercial real estate non-owner occupied: Construction — — — Acquisition/development 6 — 6 Multifamily — 1,523 1,523 Non-owner occupied 135 — 135 Total commercial real estate 141 1,523 1,664 Residential real estate: Senior lien 4,158 1,662 5,820 Junior lien 709 — 709 Total residential real estate 4,867 1,662 6,529 Consumer 10 — 10 Total loans $ 13,884 $ 6,503 $ 20,387 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 troubled debt restructurings (“TDRs”) on non-accrual status. There was no interest income recognized from non-accrual loans during the three or six months ended June 30, 2021 or 2020. 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 2 Summary of Significant Accounting Policies in our audited consolidated financial statements in our 2020 Annual Report on Form 10-K The amortized cost basis for all loans as determined by the Company’s internal risk rating system and year of origination is shown in the following tables as of June 30, 2021 and December 31, 2020: June 30, 2021 Revolving Revolving loans loans Origination year amortized converted 2021 2020 2019 2018 2017 Prior cost basis to term Total Commercial: Commercial and industrial: Pass $ 291,810 $ 187,178 $ 193,434 $ 157,743 $ 76,346 $ 23,665 $ 430,813 $ 5,928 $ 1,366,917 Special mention — — 2,163 6,085 4,182 5,973 2,260 — 20,663 Substandard 205 21 338 835 11,288 723 675 — 14,085 Doubtful — — — 79 195 131 29 — 434 Total commercial and industrial 292,015 187,199 195,935 164,742 92,011 30,492 433,777 5,928 1,402,099 Municipal and non-profit: Pass 58,209 90,275 85,838 120,463 152,649 350,024 3,641 — 861,099 Total municipal and non-profit 58,209 90,275 85,838 120,463 152,649 350,024 3,641 — 861,099 Owner occupied commercial real estate: Pass 48,904 93,663 104,223 78,789 47,001 103,023 2,710 165 478,478 Special mention — — 1,744 12,085 1,469 16,542 — — 31,840 Substandard — 1,193 1,729 1,847 236 3,400 — — 8,405 Doubtful — 389 574 — — 35 — — 998 Total owner occupied commercial real estate 48,904 95,245 108,270 92,721 48,706 123,000 2,710 165 519,721 Food and agribusiness: Pass 7,758 27,464 7,773 17,668 5,930 28,307 102,986 12 197,898 Special mention — — — — — 219 — — 219 Substandard — — — — 271 619 — — 890 Total food and agribusiness 7,758 27,464 7,773 17,668 6,201 29,145 102,986 12 199,007 Total commercial 406,886 400,183 397,816 395,594 299,567 532,661 543,114 6,105 2,981,926 Commercial real estate non-owner occupied: Construction: Pass 3,965 7,058 57,375 — 226 — 3,984 — 72,608 Total construction 3,965 7,058 57,375 — 226 — 3,984 — 72,608 Acquisition/development: Pass 1,887 386 1,925 1,830 8,096 7,638 — 51 21,813 Substandard — — — — — 27 — — 27 Total acquisition/development 1,887 386 1,925 1,830 8,096 7,665 — 51 21,840 Multifamily: Pass 1,488 29,660 11,678 16,261 204 38,310 — — 97,601 Special mention — — — — — 413 — — 413 Total multifamily 1,488 29,660 11,678 16,261 204 38,723 — — 98,014 Non-owner occupied Pass 25,552 60,076 88,050 18,697 98,020 120,940 3,483 — 414,818 Special mention — — 5,742 5,748 9,866 3,970 100 — 25,426 Substandard — — — 750 — 4,164 — — 4,914 Total non-owner occupied 25,552 60,076 93,792 25,195 107,886 129,074 3,583 — 445,158 Total commercial real estate non-owner occupied 32,892 97,180 164,770 43,286 116,412 175,462 7,567 51 637,620 Residential real estate: Senior lien Pass 129,600 119,075 51,646 28,401 35,867 210,099 20,266 507 595,461 Special mention — — — — — 476 — — 476 Substandard — 196 796 19 308 3,841 — — 5,160 Total senior lien 129,600 119,271 52,442 28,420 36,175 214,416 20,266 507 601,097 Junior lien Pass 401 2,952 3,470 2,239 1,406 4,295 45,961 198 60,922 Special mention — — — — — 21 343 — 364 Substandard 8 20 108 66 102 223 — 19 546 Total junior lien 409 2,972 3,578 2,305 1,508 4,539 46,304 217 61,832 Total residential real estate 130,009 122,243 56,020 30,725 37,683 218,955 66,570 724 662,929 Consumer Pass 4,600 6,748 2,219 1,037 253 697 2,683 36 18,273 Substandard — — — 1 — 8 — — 9 Total consumer 4,600 6,748 2,219 1,038 253 705 2,683 36 18,282 Total loans $ 574,387 $ 626,354 $ 620,825 $ 470,643 $ 453,915 $ 927,783 $ 619,934 $ 6,916 $ 4,300,757 December 31, 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 $ 372,041 $ 212,388 $ 189,753 $ 93,822 $ 15,145 $ 17,662 $ 499,283 $ 991 $ 1,401,085 Special mention — 1,445 7,381 4,845 5,810 729 2,329 1,478 24,017 Substandard 23 1,238 925 11,885 56 4,840 1,341 — 20,308 Doubtful — — 34 456 — 809 29 — 1,328 Total commercial and industrial 372,064 215,071 198,093 111,008 21,011 24,040 502,982 2,469 1,446,738 Municipal and non-profit: Pass 131,961 91,911 125,247 156,275 124,269 238,453 2,675 — 870,791 Total municipal and non-profit 131,961 91,911 125,247 156,275 124,269 238,453 2,675 — 870,791 Owner occupied commercial real estate: Pass 100,791 107,558 90,398 53,131 32,648 87,758 1,401 — 473,685 Special mention 1,581 2,236 2,714 544 3,254 19,341 — — 29,670 Substandard — 1,988 6,211 251 93 3,802 — — 12,345 Doubtful — 511 — — — 28 — — 539 Total owner occupied commercial real estate 102,372 112,293 99,323 53,926 35,995 110,929 1,401 — 516,239 Food and agribusiness: Pass 28,139 9,198 20,242 7,198 9,556 28,330 106,007 126 208,796 Special mention — — — — — 222 — — 222 Substandard — — — 302 — 977 — — 1,279 Total food and agribusiness 28,139 9,198 20,242 7,500 9,556 29,529 106,007 126 210,297 Total commercial 634,536 428,473 442,905 328,709 190,831 402,951 613,065 2,595 3,044,065 Commercial real estate non-owner occupied: Construction: Pass 15,841 49,658 17,349 4,072 — — 2,006 1,807 90,733 Special mention 392 — — — — — — — 392 Total construction 16,233 49,658 17,349 4,072 — — 2,006 1,807 91,125 Acquisition/development: Pass 3,762 1,997 1,947 8,373 4,559 3,694 11 — 24,343 Special mention — — — 34 — 253 — — 287 Substandard — — — — — 41 — — 41 Total acquisition/development 3,762 1,997 1,947 8,407 4,559 3,988 11 — 24,671 Multifamily: Pass 29,738 13,670 137 212 18,050 4,990 — — 66,797 Special mention — — — — — 436 — — 436 Substandard — — — — — 1,523 — — 1,523 Total multifamily 29,738 13,670 137 212 18,050 6,949 — — 68,756 Non-owner occupied Pass 51,445 92,225 25,362 86,975 26,613 118,144 3,083 643 404,490 Special mention 70 5,458 5,841 22,737 — 3,662 100 — 37,868 Substandard — — 779 — 3,937 370 — — 5,086 Total non-owner occupied 51,515 97,683 31,982 109,712 30,550 122,176 3,183 643 447,444 Total commercial real estate non-owner occupied 101,248 163,008 51,415 122,403 53,159 133,113 5,200 2,450 631,996 Residential real estate: Senior lien Pass 129,551 76,504 36,493 47,887 88,358 173,091 24,884 218 576,986 Special mention — — — — — 463 — — 463 Substandard 95 818 20 1,232 550 4,107 — — 6,822 Total senior lien 129,646 77,322 36,513 49,119 88,908 177,661 24,884 218 584,271 Junior lien Pass 3,479 4,217 2,553 1,775 1,226 3,760 55,860 365 73,235 Special mention — — — — — 21 341 — 362 Substandard — 112 101 177 55 287 — 59 791 Total junior lien 3,479 4,329 2,654 1,952 1,281 4,068 56,201 424 74,388 Total residential real estate 133,125 81,651 39,167 51,071 90,189 181,729 81,085 642 658,659 Consumer Pass 9,777 3,348 1,674 489 329 623 2,700 19 18,959 Substandard — — 37 — 2 8 — — 47 Total consumer 9,777 3,348 1,711 489 331 631 2,700 19 19,006 Total loans $ 878,686 $ 676,480 $ 535,198 $ 502,672 $ 334,510 $ 718,424 $ 702,050 $ 5,706 $ 4,353,726 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 June 30, 2021 and December 31, 2020: June 30, 2021 Total amortized Real property Business assets cost basis Commercial Commercial and industrial $ 3,956 $ 1,910 $ 5,866 Owner-occupied commercial real estate 4,667 284 4,951 Total Commercial 8,623 2,194 10,817 Commercial real estate non owner-occupied Acquisition/development 1,272 — 1,272 Total commercial real estate 1,272 — 1,272 Residential real estate Senior lien 1,970 — 1,970 Total residential real estate 1,970 — 1,970 Total loans $ 11,865 $ 2,194 $ 14,059 December 31, 2020 Total amortized Real property Business assets cost basis Commercial Commercial and industrial $ 7,579 $ 3,005 $ 10,584 Owner-occupied commercial real estate 3,701 284 3,985 Food and agribusiness 334 — 334 Total Commercial 11,614 3,289 14,903 Commercial real estate non owner-occupied Acquisition/development 1,573 — 1,573 Multifamily 1,523 — 1,523 Total commercial real estate 3,096 — 3,096 Residential real estate Senior lien 2,021 — 2,021 Total residential real estate 2,021 — 2,021 Total loans $ 16,731 $ 3,289 $ 20,020 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 TDRs under ASC Topic 310 if the borrower has been adversely impacted by COVID-19 and was current on their loan payments. The Company modified 13 loans totaling $4.6 million during the six months ended June 30, 2021 and 463 loans totaling $492.4 million during the six months ended June 30, 2020, due to the effects of the COVID-19 pandemic, that were not classified as TDRs. Modified loans that remained on a payment deferral plan at June 30, 2021 totaled $108.6 million, or 2.5% of the total loan portfolio. Of those loans, principal payment deferrals totaled $102.3 million and full payment deferrals totaled $6.3 million. At June 30, 2021, 0.9% of loan modifications related to COVID-19 were a subsequent modification. All COVID-19 modified loans were classified as performing as of June 30, 2021. At December 31, 2020, modified loans that remained on a payment deferral plan totaled $173.6 million, or 4.0% of the total loan portfolio, of which 26.2% were a subsequent modification. During the three months ended June 30, 2021, the Company restructured no loans to facilitate repayment that are considered TDRs. During the six months ended June 30, 2021, the Company restructured three loans with an amortized cost basis of $1.6 million to facilitate repayment that are considered TDRs. 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 June 30, 2021 and December 31, 2020: June 30, 2021 Amortized Average year-to-date Unpaid Unfunded commitments cost basis amortized cost basis principal balance to fund TDRs Commercial $ 6,809 $ 7,393 $ 7,215 $ 150 Commercial real estate non-owner occupied 2,075 2,120 3,417 — Residential real estate 2,960 2,994 3,784 35 Consumer — — — — Total $ 11,844 $ 12,507 $ 14,416 $ 185 December 31, 2020 Amortized Average year-to-date Unpaid Unfunded commitments cost basis amortized cost basis principal balance to fund TDRs Commercial $ 9,387 $ 9,544 $ 9,978 $ 150 Commercial real estate non-owner occupied 2,400 2,351 4,105 — Residential real estate 2,121 2,185 2,922 12 Consumer 37 37 37 — Total $ 13,945 $ 14,117 $ 17,042 $ 162 The following table summarizes the Company’s carrying value of non-accrual TDRs as of June 30, 2021 and December 31, 2020: June 30, 2021 December 31, 2020 Commercial $ 2,623 $ 3,397 Commercial real estate non-owner occupied 123 1,644 Residential real estate 1,896 3,156 Consumer — — Total non-accruing TDRs $ 4,642 $ 8,197 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 two TDRs totaling $49 thousand that were modified within the past 12 months and had defaulted on their restructured terms during the six months ended June 30, 2021. During the six months ended June 30, 2020, the Company had two TDRs totaling $0.4 million that were modified within the past 12 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. |