Loans | Note 7 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 $38.8 million and $9.4 million at December 31, 2022 and 2021, respectively. December 31, 2022 Total loans % of total Commercial $ 4,251,780 58.9% Commercial real estate non-owner occupied 1,696,050 23.5% Residential real estate 1,251,281 17.3% Consumer 21,358 0.3% Total $ 7,220,469 100.0% 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% Information about delinquent and non-accrual loans is shown in the following tables at December 31, 2022 and 2021: December 31, 2022 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 $ 919 $ 53 $ 2,601 $ 3,573 $ 2,021,262 $ 2,024,835 Municipal and non-profit — — — — 959,626 959,626 Owner occupied commercial real estate — — 6,551 6,551 906,789 913,340 Food and agribusiness 699 — 2,148 2,847 351,132 353,979 Total commercial 1,618 53 11,300 12,971 4,238,809 4,251,780 Commercial real estate non-owner occupied: Construction — — — — 341,325 341,325 Acquisition/development — — — — 129,102 129,102 Multifamily — — — — 213,677 213,677 Non-owner occupied 629 — 685 1,314 1,010,632 1,011,946 Total commercial real estate 629 — 685 1,314 1,694,736 1,696,050 Residential real estate: Senior lien 446 — 4,174 4,620 1,149,728 1,154,348 Junior lien 255 — 341 596 96,337 96,933 Total residential real estate 701 — 4,515 5,216 1,246,065 1,251,281 Consumer 38 42 12 92 21,266 21,358 Total loans $ 2,986 $ 95 $ 16,512 $ 19,593 $ 7,200,876 $ 7,220,469 December 31, 2022 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 $ 1,640 $ 961 $ 2,601 Municipal and non-profit — — — Owner occupied commercial real estate 693 5,858 6,551 Food and agribusiness 455 1,693 2,148 Total commercial 2,788 8,512 11,300 Commercial real estate non-owner occupied: Construction — — — Acquisition/development — — — Multifamily — — — Non-owner occupied 685 — 685 Total commercial real estate 685 — 685 Residential real estate: Senior lien 3,019 1,155 4,174 Junior lien 341 — 341 Total residential real estate 3,360 1,155 4,515 Consumer 12 — 12 Total loans $ 6,845 $ 9,667 $ 16,512 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 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, 2022 and 2021. 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, 2022 and 2021: December 31, 2022 Revolving Revolving loans loans Origination year amortized converted 2022 2021 2020 2019 2018 Prior cost basis to term Total Commercial: Commercial and industrial: Pass $ 528,180 $ 351,003 $ 129,453 $ 95,003 $ 101,951 $ 88,038 $ 688,398 $ 17,883 $ 1,999,909 Special mention 66 137 388 2,887 588 4,440 3,512 — 12,018 Substandard 34 7 1,882 200 189 10,270 50 30 12,662 Doubtful — — 246 — — — — — 246 Total commercial and industrial 528,280 351,147 131,969 98,090 102,728 102,748 691,960 17,913 2,024,835 Municipal and non-profit: Pass 105,630 246,696 89,562 59,066 73,013 383,158 2,501 — 959,626 Total municipal and non-profit 105,630 246,696 89,562 59,066 73,013 383,158 2,501 — 959,626 Owner occupied commercial real estate: Pass 263,635 203,628 100,522 92,653 70,447 121,448 24,930 894 878,157 Special mention — 515 — 6,956 2,616 17,360 — — 27,447 Substandard — — 1,185 4,612 — 931 — 234 6,962 Doubtful — — — 85 108 581 — — 774 Total owner occupied commercial real estate 263,635 204,143 101,707 104,306 73,171 140,320 24,930 1,128 913,340 Food and agribusiness: Pass 36,505 23,907 25,285 11,035 19,689 31,210 191,785 1,663 341,079 Special mention — 204 4,573 — 3,486 195 1,750 — 10,208 Substandard — 1,747 — 12 — 324 — 173 2,256 Doubtful — 186 250 — — — — — 436 Total food and agribusiness 36,505 26,044 30,108 11,047 23,175 31,729 193,535 1,836 353,979 Total commercial 934,050 828,030 353,346 272,509 272,087 657,955 912,926 20,877 4,251,780 Commercial real estate non-owner occupied: Construction: Pass 106,197 139,012 56,489 14,387 — 213 25,027 — 341,325 Total construction 106,197 139,012 56,489 14,387 — 213 25,027 — 341,325 Acquisition/development: Pass 57,773 33,663 7,810 1,921 3,939 16,648 7,348 — 129,102 Total acquisition/development 57,773 33,663 7,810 1,921 3,939 16,648 7,348 — 129,102 Multifamily: Pass 99,988 22,022 17,658 39,547 17,358 16,009 1,095 — 213,677 Total multifamily 99,988 22,022 17,658 39,547 17,358 16,009 1,095 — 213,677 Non-owner occupied Pass 235,958 172,648 120,871 138,711 42,489 249,461 11,707 — 971,845 Special mention — — 7,313 4,048 3,947 12,658 — — 27,966 Substandard — — — — 629 7,912 — — 8,541 Doubtful — — 280 — — 3,314 — — 3,594 Total non-owner occupied 235,958 172,648 128,464 142,759 47,065 273,345 11,707 — 1,011,946 Total commercial real estate non-owner occupied 499,916 367,345 210,421 198,614 68,362 306,215 45,177 — 1,696,050 Residential real estate: Senior lien Pass 361,405 323,984 133,847 47,557 30,283 184,998 66,792 496 1,149,362 Special mention — — — — — 362 — — 362 Substandard 191 186 468 854 105 2,769 — — 4,573 Doubtful — — — — 51 — — — 51 Total senior lien 361,596 324,170 134,315 48,411 30,439 188,129 66,792 496 1,154,348 Junior lien Pass 6,429 5,977 3,010 4,163 1,726 3,773 69,059 1,286 95,423 Special mention — — — — — 351 — — 351 Substandard 9 — 89 — 54 242 305 251 950 Doubtful — — — — — — — 209 209 Total junior lien 6,438 5,977 3,099 4,163 1,780 4,366 69,364 1,746 96,933 Total residential real estate 368,034 330,147 137,414 52,574 32,219 192,495 136,156 2,242 1,251,281 Consumer Pass 8,576 4,816 2,209 607 282 531 4,292 33 21,346 Substandard 3 — — — — 5 4 — 12 Total consumer 8,579 4,816 2,209 607 282 536 4,296 33 21,358 Total loans $ 1,810,579 $ 1,530,338 $ 703,390 $ 524,304 $ 372,950 $ 1,157,201 $ 1,098,555 $ 23,152 $ 7,220,469 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 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 as 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, 2022 and 2021: December 31, 2022 Total amortized Real property Business assets cost basis Commercial Commercial and industrial $ 2,869 $ 791 $ 3,660 Owner-occupied commercial real estate 6,711 1,346 8,057 Food and agribusiness 3,020 173 3,193 Total Commercial 12,600 2,310 14,910 Commercial real estate non owner-occupied Non-owner occupied 8,561 — 8,561 Total commercial real estate 8,561 — 8,561 Residential real estate Senior lien 2,806 — 2,806 Junior lien 460 — 460 Total residential real estate 3,266 — 3,266 Total loans $ 24,427 $ 2,310 $ 26,737 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 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. During 2022, the Company restructured 10 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, 2022 and 2021: December 31, 2022 Amortized Average year-to-date Unpaid Unfunded commitments cost basis amortized cost basis principal balance to fund TDRs Commercial $ 2,160 $ 2,348 $ 2,150 $ 150 Commercial real estate non-owner occupied 685 734 699 — Residential real estate 1,809 1,867 1,964 — Consumer — — — — Total $ 4,654 $ 4,949 $ 4,813 $ 150 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 $ — The following table summarizes the Company’s carrying value of non-accrual TDRs as of December 31, 2022 and 2021: December 31, 2022 December 31, 2021 Commercial $ 356 $ 644 Commercial real estate non-owner occupied 81 117 Residential real estate 2,041 1,605 Consumer — — Total non-accruing TDRs $ 2,478 $ 2,366 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 did not have any TDRs that were modified within the past 12 months and had defaulted on their restructured terms during the years ended December 31, 2022 or 2021. 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. Accounting for Acquired Loans ASC Topic 805, Business Combinations |