Loans | Note 6 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 $16.2 million and $21.9 million at December 31, 2020 and 2019, respectively. Included in commercial loans are loans originated as part of the SBA’s Paycheck Protection Program of which $176.1 million, net of fees and costs, are outstanding at December 31, 2020, and are fully guaranteed by the SBA. 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% 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 is shown in the following tables at December 31, 2020 and 2019: 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 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 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 $ 2,251 $ 879 $ 10,330 $ 13,460 $ 1,398,071 $ 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 3,262 1,509 12,911 17,682 2,974,625 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 $ 6,349 $ 1,662 $ 21,748 $ 29,759 $ 4,385,647 $ 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 years ended December 31, 2020 and 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 2 Summary of Significant Accounting Policies. 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 December 31, 2020: 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 Special mention — — — — — — — — — Substandard — — — — — — — — — Doubtful — — — — — — — — — 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 Doubtful — — — — — — — — — 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 Substandard — — — — — — — — — Doubtful — — — — — — — — — 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 Doubtful — — — — — — — — — 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 Doubtful — — — — — — — — — 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 Doubtful — — — — — — — — — 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 December 31, 2020 Revolving Revolving loans loans Origination year amortized converted 2020 2019 2018 2017 2016 Prior cost basis to term Total 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 Doubtful — — — — — — — — — 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 Doubtful — — — — — — — — — 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 Special mention — — — — — — — — — Substandard — — 37 — 2 8 — — 47 Doubtful — — — — — — — — — 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 Credit exposure for all loans as determined by the Company’s internal risk rating system was as follows at December 31, 2019: December 31, 2019 Special Pass mention Substandard Doubtful Total Commercial: Commercial and industrial $ 1,366,457 $ 28,226 $ 15,132 $ 1,716 $ 1,411,531 Municipal and non-profit 837,526 — — — 837,526 Owner occupied commercial real estate 439,315 39,986 10,821 — 490,122 Food and agribusiness 249,930 1,408 1,758 32 253,128 Total commercial 2,893,228 69,620 27,711 1,748 2,992,307 Commercial real estate non-owner occupied: Construction 77,733 — — — 77,733 Acquisition/development 26,229 — 650 — 26,879 Multifamily 55,325 — 483 — 55,808 Non-owner occupied 454,045 15,307 1,134 — 470,486 Total commercial real estate 613,332 15,307 2,267 — 630,906 Residential real estate: Senior lien 668,452 441 9,769 — 678,662 Junior lien 90,540 365 850 — 91,755 Total residential real estate 758,992 806 10,619 — 770,417 Consumer 21,725 1 50 — 21,776 Total loans $ 4,287,277 $ 85,734 $ 40,647 $ 1,748 $ 4,415,406 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 December 31, 2020: 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 Impaired Loans During 2019 and 2018, prior to the adoption of ASU 2016-13, loans were considered to be impaired when it was probable that the Company would not be able to collect all amounts due in accordance with the contractual terms of the loan agreement. Impaired loans were comprised of originated and acquired loans on non-accrual status, loans in bankruptcy, and TDRs described below. If a specific allowance was warranted based on the borrower’s overall financial condition, the specific allowance was calculated based on discounted 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. At December 31, 2019 and 2018, the Company’s recorded investment in impaired loans was $32.8 million and $31.1 million, respectively, of which $6.9 million and $4.1 million, respectively, were accruing TDRs. Impaired loans had a collective related allowance allocated to them of $1.8 million and $1.2 million at December 31, 2019 and 2018, respectively. Additional information regarding impaired loans at December 31, 2019 and 2018 is set forth in the table below: December 31, 2019 December 31, 2018 Unpaid Allowance Unpaid Allowance principal Recorded for losses principal Recorded for losses balance investment allocated balance investment allocated With no related allowance recorded: Commercial: Commercial and industrial $ 16,001 $ 10,548 $ — $ 9,740 $ 3,771 $ — Municipal and non-profit — — — — — — Owner occupied commercial real estate 3,265 2,385 — 7,130 6,609 — Food and agribusiness 1,468 1,220 — 1,468 1,260 — Total commercial 20,734 14,153 — 18,338 11,640 — Commercial real estate non-owner occupied: Construction — — — 1,435 1,208 — Acquisition/development 458 415 — 378 121 — Multifamily — — — — — — Non-owner occupied 90 26 — 641 547 — Total commercial real estate 548 441 — 2,454 1,876 — Residential real estate: Senior lien 4,355 3,967 — 4,229 3,814 — Junior lien 311 269 — 409 341 — Total residential real estate 4,666 4,236 — 4,638 4,155 — Consumer 57 50 — 46 42 — Total impaired loans with no related allowance recorded $ 26,005 $ 18,880 $ — $ 25,476 $ 17,713 $ — With a related allowance recorded: Commercial: Commercial and industrial $ 13,768 $ 6,435 $ 1,725 $ 7,252 $ 4,627 $ 996 Municipal and non-profit — — — — — — Owner occupied commercial real estate 711 505 3 1,362 1,169 90 Food and agribusiness 757 751 35 883 845 46 Total commercial 15,236 7,691 1,763 9,497 6,641 1,132 Commercial real estate non-owner occupied: Construction — — — — — — Acquisition/development — — — — — — Multifamily — — — — — — Non-owner occupied 232 171 1 313 254 2 Total commercial real estate 232 171 1 313 254 2 Residential real estate: Senior lien 5,808 5,034 25 6,032 5,178 27 Junior lien 1,074 987 6 1,408 1,293 8 Total residential real estate 6,882 6,021 31 7,440 6,471 35 Consumer — — — — — — Total impaired loans with a related allowance recorded $ 22,350 $ 13,883 $ 1,795 $ 17,250 $ 13,366 $ 1,169 Total impaired loans $ 48,355 $ 32,763 $ 1,795 $ 42,726 $ 31,079 $ 1,169 The table below shows additional information regarding the average recorded investment and interest income recognized on impaired loans for the years presented: For the years ended December 31, 2019 December 31, 2018 Average Interest Average Interest With no related allowance recorded: Commercial: Commercial and industrial $ 13,062 $ 248 $ 4,132 $ 168 Municipal and non-profit — — — — Owner occupied commercial real estate 2,849 27 6,799 38 Food and agribusiness 1,316 — 1,259 98 Total commercial 17,227 275 12,190 304 Commercial real estate non-owner occupied: Construction — — 1,208 — Acquisition/development 575 — 606 — Multifamily — — — — Non-owner occupied 28 — 573 — Total commercial real estate 603 — 2,387 — Residential real estate: Senior lien 4,081 1 3,904 0 Junior lien 287 2 355 2 Total residential real estate 4,368 3 4,259 2 Consumer 11 — 12 — Total impaired loans with no related allowance recorded $ 22,209 $ 278 $ 18,848 $ 306 With a related allowance recorded: Commercial: Commercial and industrial $ 6,653 $ — $ 4,677 $ — Municipal and non-profit 554 17 1,220 19 Owner occupied commercial real estate 796 12 862 5 Food and agribusiness — — — — Total commercial 8,003 29 6,759 24 Commercial real estate non-owner occupied: Construction — — — — Acquisition/development — — — — Multifamily — — — — Non-owner occupied 207 14 288 16 Total commercial real estate 207 14 288 16 Residential real estate: Senior lien 5,241 66 5,412 57 Junior lien 1,034 34 1,331 43 Total residential real estate 6,275 100 6,743 100 Consumer 49 — 36 — Total impaired loans with a related allowance recorded $ 14,534 $ 143 $ 13,826 $ 140 Total impaired loans $ 36,743 $ 421 $ 32,674 $ 446 Interest income recognized on impaired loans noted in the tables above, primarily represents interest earned on accruing TDRs. Interest income recognized on impaired loans during the years ended December 31, 2019 and 2018 was $0.4 million and $0.4 million, respectively. 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. During 2020, the Company modified 510 loans totaling $519.0 million due to the effects of the COVID-19 pandemic that were not classified as TDRs. Of those loans, $345.4 million have resumed making principal or interest payments or paid in full as of December 31, 2020. Modified loans that remained on a payment deferral plan at December 31, 2020 totaled $173.6 million, or 4.0% of the total loan portfolio, of which 26.2% were a subsequent modification. Of those loans, principal payment deferrals totaled $167.1 million and full payment deferrals totaled $6.5 million. All COVID modified loans were classified as performing as of December 31, 2020. During 2020, the Company restructured 24 loans with an amortized cost basis of $10.8 million to facilitate repayment that are considered TDRs. Included in the total TDR balance as of December 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 December 31, 2020 and 2019: 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 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 December 31, 2020 and 2019: December 31, 2020 December 31, 2019 Commercial $ 3,397 $ 1,891 Commercial real estate non-owner occupied 1,644 410 Residential real estate 3,156 2,553 Consumer — — Total non-accruing TDRs $ 8,197 $ 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 three TDRs totaling $3.4 million that were modified within the past 12 months and had defaulted on their restructured terms during the year ended December 31, 2020. During 2019, the Company had two TDRs totaling $0.7 million that had been modified within the prior twelve months and 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. |