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. 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 $9.4 million and $16.2 million at December 31, 2021 and 2020, respectively. Included in commercial loans are fully-guaranteed loans originated as part of the SBA’s Paycheck Protection Program of which $21.7 million and $176.1 million, net of fees and costs, were outstanding at December 31, 2021 and 2020, respectively. December 31, 2021 Total loans % of total Commercial $ 3,162,417 70.1% Commercial real estate non-owner occupied 664,729 14.7% Residential real estate 668,656 14.8% Consumer 17,581 0.4% Total $ 4,513,383 100.0% 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 December 31, 2021 and 2020: December 31, 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 $ 481 $ — $ 1,490 $ 1,971 $ 1,494,176 $ 1,496,147 Municipal and non-profit 202 — — 202 928,843 929,045 Owner occupied commercial real estate 207 — 4,525 4,732 528,904 533,636 Food and agribusiness 89 — 64 153 203,436 203,589 Total commercial 979 — 6,079 7,058 3,155,359 3,162,417 Commercial real estate non-owner occupied: Construction — — — — 86,126 86,126 Acquisition/development — — — — 9,609 9,609 Multifamily — — — — 92,174 92,174 Non-owner occupied 94 217 121 432 476,388 476,820 Total commercial real estate 94 217 121 432 664,297 664,729 Residential real estate: Senior lien 399 198 4,251 4,848 609,780 614,628 Junior lien 179 — 374 553 53,475 54,028 Total residential real estate 578 198 4,625 5,401 663,255 668,656 Consumer 36 5 7 48 17,533 17,581 Total loans $ 1,687 $ 420 $ 10,832 $ 12,939 $ 4,500,444 $ 4,513,383 December 31, 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 $ 1,490 $ — $ 1,490 Municipal and non-profit — — — Owner occupied commercial real estate 4,525 — 4,525 Food and agribusiness 64 — 64 Total commercial 6,079 — 6,079 Commercial real estate non-owner occupied: Construction — — — Acquisition/development — — — Multifamily — — — Non-owner occupied 121 — 121 Total commercial real estate 121 — 121 Residential real estate: Senior lien 3,274 977 4,251 Junior lien 374 — 374 Total residential real estate 3,648 977 4,625 Consumer 7 — 7 Total loans $ 9,855 $ 977 $ 10,832 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 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, 2021 and 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. 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 December 31, 2021 and 2020: December 31, 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 $ 424,813 $ 155,268 $ 146,420 $ 128,002 $ 49,408 $ 18,529 $ 519,678 $ 5,975 $ 1,448,093 Special mention — 1,122 2,000 3,446 22,654 4,440 1,824 250 35,736 Substandard — 99 89 744 10,399 303 105 — 11,739 Doubtful — 375 — 54 49 101 — — 579 Total commercial and industrial 424,813 156,864 148,509 132,246 82,510 23,373 521,607 6,225 1,496,147 Municipal and non-profit: Pass 234,827 93,310 69,509 81,175 147,115 302,574 535 — 929,045 Total municipal and non-profit 234,827 93,310 69,509 81,175 147,115 302,574 535 — 929,045 Owner occupied commercial real estate: Pass 122,641 81,072 84,359 71,183 48,086 77,100 13,666 1,688 499,795 Special mention — — 9,155 3,864 1,429 13,443 — — 27,891 Substandard — 1,192 1,527 — 220 2,028 — — 4,967 Doubtful — 389 550 — — 44 — — 983 Total owner occupied commercial real estate 122,641 82,653 95,591 75,047 49,735 92,615 13,666 1,688 533,636 Food and agribusiness: Pass 11,245 20,606 6,966 21,427 2,443 24,047 107,978 24 194,736 Special mention — 4,670 1,234 — — 215 1,897 — 8,016 Substandard — — — — 259 578 — — 837 Total food and agribusiness 11,245 25,276 8,200 21,427 2,702 24,840 109,875 24 203,589 Total commercial 793,526 358,103 321,809 309,895 282,062 443,402 645,683 7,937 3,162,417 Commercial real estate non-owner occupied: Construction: Pass 39,584 10,047 29,496 — 222 — 6,777 — 86,126 Total construction 39,584 10,047 29,496 — 222 — 6,777 — 86,126 Acquisition/development: Pass 1,691 385 766 1,830 30 4,907 — — 9,609 Total acquisition/development 1,691 385 766 1,830 30 4,907 — — 9,609 Multifamily: Pass 3,101 32,619 2,184 15,977 193 37,713 — — 91,787 Special mention — — — — — 387 — — 387 Total multifamily 3,101 32,619 2,184 15,977 193 38,100 — — 92,174 Non-owner occupied Pass 59,060 58,964 122,452 18,425 92,349 95,265 557 — 447,072 Special mention — — 5,747 5,584 9,745 3,898 — — 24,974 Substandard — — — 729 — 4,045 — — 4,774 Total non-owner occupied 59,060 58,964 128,199 24,738 102,094 103,208 557 — 476,820 Total commercial real estate non-owner occupied 103,436 102,015 160,645 42,545 102,539 146,215 7,334 — 664,729 Residential real estate: Senior lien Pass 223,120 100,476 38,696 21,889 29,554 177,051 18,278 188 609,252 Special mention — — — — — 290 — — 290 Substandard 44 325 684 318 299 3,416 — — 5,086 Total senior lien 223,164 100,801 39,380 22,207 29,853 180,757 18,278 188 614,628 Junior lien Pass 1,320 2,150 2,731 1,639 951 3,209 40,921 328 53,249 Special mention — — — — — — 24 322 346 Substandard — 19 — 62 131 221 — — 433 Total junior lien 1,320 2,169 2,731 1,701 1,082 3,430 40,945 650 54,028 Total residential real estate 224,484 102,970 42,111 23,908 30,935 184,187 59,223 838 668,656 Consumer Pass 8,815 3,528 1,241 631 131 557 2,653 19 17,575 Substandard — — — — — 6 — — 6 Total consumer 8,815 3,528 1,241 631 131 563 2,653 19 17,581 Total loans $ 1,130,261 $ 566,616 $ 525,806 $ 376,979 $ 415,667 $ 774,367 $ 714,893 $ 8,794 $ 4,513,383 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 December 31, 2021 and 2020: December 31, 2021 Total amortized Real property Business assets cost basis Commercial Commercial and industrial $ 3,270 $ 1,261 $ 4,531 Owner-occupied commercial real estate 4,012 255 4,267 Total Commercial 7,282 1,516 8,798 Residential real estate Senior lien 2,212 — 2,212 Total residential real estate 2,212 — 2,212 Total loans $ 9,494 $ 1,516 $ 11,010 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 19 loans totaling $9.9 million during the year ended December 31, 2021 and 510 loans totaling $519.0 million during the year ended December 31, 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, paying interest only, at December 31, 2021 totaled $5.3 million, or 0.1% of the total loan population. At December 31, 2021, $206 thousand of loan modifications related to COVID-19 were a subsequent modification and one loan totaling $206 thousand was classified as non-accrual. 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 2021, the Company restructured four loans with an amortized cost basis of $1.1 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 December 31, 2021 and 2020: December 31, 2021 Amortized Average year-to-date Unpaid Unfunded commitments cost basis amortized cost basis principal balance to fund TDRs Commercial $ 4,066 $ 4,472 $ 4,417 $ — Commercial real estate non-owner occupied 725 767 892 — Residential real estate 2,395 2,468 2,781 — Consumer — — — — Total $ 7,186 $ 7,707 $ 8,090 $ — 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 December 31, 2021 and 2020: December 31, 2021 December 31, 2020 Commercial $ 644 $ 3,397 Commercial real estate non-owner occupied 117 1,644 Residential real estate 1,605 3,156 Consumer — — Total non-accruing TDRs $ 2,366 $ 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 no TDRs that were modified within the past 12 months and had defaulted on their restructured terms during the year ended December 31, 2021. During 2020, the Company had three TDRs totaling $3.4 million that had been modified within the prior 12 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. |