| Loans | Loans Loan balances as of September 30, 2022 and December 31, 2021 are summarized in the table below. Categories of loans include: (in thousands) September 30, 2022 December 31, 2021 Commercial loans Commercial and industrial $ 104,780 $ 96,008 Owner-occupied commercial real estate 58,615 66,732 Investor commercial real estate 91,021 28,019 Construction 139,509 136,619 Single tenant lease financing 895,302 865,854 Public finance 614,139 592,665 Healthcare finance 293,686 387,852 Small business lending 113,001 108,666 Franchise finance 225,012 81,448 Total commercial loans 2,535,065 2,363,863 Consumer loans Residential mortgage 337,565 186,770 Home equity 22,114 17,665 Other consumer loans 312,512 265,478 Total consumer loans 672,191 469,913 Total commercial and consumer loans 3,207,256 2,833,776 Net deferred loan origination fees/costs and premiums/discounts on purchased loans and other (1) 48,650 53,886 Total loans 3,255,906 2,887,662 Allowance for loan losses (29,866) (27,841) Net loans $ 3,226,040 $ 2,859,821 (1) Includes carrying value adjustments of $33.9 million and $37.5 million related to terminated interest rate swaps associated with public finance loans as of September 30, 2022 and December 31, 2021, respectively. Risk characteristics of each loan portfolio segment are as follows: Commercial and Industrial: Commercial and industrial loans’ sources of repayment are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected, and the collateral securing these loans may fluctuate in value. Loans are made for working capital, equipment purchases, or other purposes. Most commercial and industrial loans are secured by the assets being financed and may incorporate a personal guarantee. This portfolio segment is generally concentrated in the Midwest and Southwest regions of the United States. Owner-Occupied Commercial Real Estate: The primary source of repayment is the cash flow from the ongoing operations and activities conducted by the borrower, or an affiliate of the borrower, who owns the property. This portfolio segment is generally concentrated in the Midwest and Southwest regions of the United States and its loans are often secured by manufacturing and service facilities, as well as office buildings. Investor Commercial Real Estate: These loans are underwritten primarily based on the cash flow expected to be generated from the property and are secondarily supported by the value of the real estate. These loans typically incorporate a personal guarantee from the primary sponsor or sponsors. This portfolio segment generally involves larger loan amounts with repayment primarily dependent on the successful leasing and operation of the property securing the loan or the business conducted on the property securing the loan. Investor commercial real estate loans may be more adversely affected by changing economic conditions in the real estate markets, industry dynamics or the overall health of the local economy where the property is located. The properties securing the Company’s investor commercial real estate portfolio tend to be diverse in terms of property type and are generally located in the Midwest and Southwest regions of the United States. Management monitors and evaluates commercial real estate loans based on property financial performance, collateral value, guarantor strength, economic and industry conditions together with other risk grade criteria. As a general rule, the Company avoids financing special use projects unless other underwriting factors are present to mitigate these additional risks. Construction: Construction loans are secured by land and related improvements and are made to assist in the construction of new structures, which may include commercial (retail, industrial, office, and multi-family) properties or single family residential properties offered for sale by the builder. These loans generally finance a variety of project costs, including land, site preparation, architectural services, construction, closing and soft costs and interim financing needs. The cash flows of builders, while initially predictable, may fluctuate with market conditions, and the value of the collateral securing these loans may be subject to fluctuations based on general economic changes. This portfolio segment is generally concentrated in the Midwest and Southwest regions of the United States. Single Tenant Lease Financing: These loans are made on a nationwide basis to property owners of real estate subject to long-term lease arrangements with single tenant operators. The real estate is typically operated by regionally, nationally or globally branded businesses. The loans are underwritten based on the financial strength of the borrower, characteristics of the real estate, cash flows generated from the lease arrangements and the financial strength of the tenant. Similar to the other loan portfolio segments, management monitors and evaluates these loans based on borrower and tenant financial performance, collateral value, industry trends and other risk grade criteria. Public Finance: These loans are made on a nationwide basis to governmental and not-for-profit entities to provide both tax-exempt and taxable loans for a variety of purposes including: short-term cash-flow needs; debt refinancing; economic development; quality of life projects; infrastructure improvements; renewable energy projects; and equipment financing. The primary sources of repayment for public finance loans include pledged revenue sources including but not limited to: general obligations; property taxes; income taxes; tax increment revenue; utility revenue; gaming revenues; sales tax; and pledged general revenue. Certain loans may also include an additional collateral pledge of mortgaged property or a security interest in financed equipment. Healthcare Finance: These loans were made on a nationwide basis to healthcare providers, primarily dentists, for practice acquisition financing or refinancing that occasionally includes owner-occupied commercial real estate and equipment purchases. The sources of repayment are primarily based on the identified cash flows from operations of the borrower and related entities and secondarily on the underlying collateral provided by the borrower. Small Business Lending: These loans are made on a nationwide basis to small businesses and generally carry a partial guaranty from the U.S. Small Business Administration (“SBA”) under its 7(a) loan program. We generally sell the government guaranteed portion of SBA loans into the secondary market while retaining the non-guaranteed portion of the loan and the servicing rights. Loans in the small business lending portfolio have sources of repayment that are primarily based on the identified cash flows of the borrower and secondarily on any underlying collateral provided by the borrower. Loans may, but do not always, have a collateral shortfall. For SBA loans where the guaranteed portion is retained, the SBA guaranty provides a tertiary source of repayment to the Bank in event of borrower default. Cash flows of borrowers, however, may not be as expected and collateral securing these loans may fluctuate in value. Loans are made for a broad array of purposes including, but not limited to, providing operating cash flow, funding ownership changes, and facilitating equipment purchases. These loans also include loans originated by the Bank under the SBA’s Paycheck Protection Program, which are fully guaranteed by the SBA. Franchise Finance: These loans are made on a nationwide basis through our partnership with ApplePie Capital, which, through their deep relationships with franchise brands provides franchisees with financing options for new franchise units, recapitalization, expansion, equipment and working capital. The sources of repayment are either based on identified cash flows from existing operations of the borrower or pro forma cash flow for new franchise locations. Residential Mortgage: With respect to residential loans that are secured by 1-to-4 family residences and are generally owner occupied, the Company typically establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Repayment of these loans is primarily dependent on the financial circumstances of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Repayment can also be impacted by changes in residential property values. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers in geographically diverse locations throughout the country. Home Equity: Home equity loans and lines of credit are typically secured by a subordinate interest in 1-to-4 family residences. The properties securing the home equity portfolio segment are generally geographically diverse as the Company offers these products on a nationwide basis. Repayment of these loans and lines of credit is primarily dependent on the financial circumstances of the borrowers and may be impacted by changes in unemployment levels and property values on residential properties, among other economic conditions in the market. Other Consumer: These loans primarily consist of consumer loans and credit cards. Consumer loans may be secured by consumer assets such as horse trailers or recreational vehicles. Some consumer loans are unsecured, such as small installment loans, home improvement loans and certain lines of credit. Repayment of consumer loans is primarily dependent upon the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers in geographically diverse locations throughout the country. Allowance for Loan Losses Methodology Company policy is designed to maintain an adequate allowance for loan losses (“ALLL”). The portfolio is segmented by loan type, and the required ALLL for types of performing homogeneous loans which do not have a specific reserve is determined by applying a factor based on average historical losses, adjusted for current economic factors and portfolio trends. Management adds qualitative factors for observable trends, changes in internal practices, changes in delinquencies and impairments, and external factors. Observable factors include changes in the composition and size of portfolios, as well as loan terms or concentration levels. The Company evaluates the impact of internal changes such as management and staff experience levels or modification to loan underwriting processes. Delinquency trends are scrutinized for both volume and severity of past due, nonaccrual, or classified loans, as well as any changes in the value of underlying collateral. Finally, the Company considers the effect of other external factors such as national, regional, and local economic and business conditions, as well as competitive, legal, and regulatory requirements. Loans that are considered to be impaired are evaluated to determine the need for a specific allowance by applying at least one of three methodologies: present value of future cash flows; fair value of collateral less costs to sell; or the loan’s observable market price. All troubled debt restructurings (“TDR”) are considered impaired loans. Loans evaluated for impairment are removed from other pools to prevent double-counting. Accounting Standards Codification (“ASC”) Topic 310, Receivables , requires that impaired loans be measured based on the present value of expected future cash flows discounted at the loans’ effective interest rates or the fair value of the underlying collateral less costs to sell and allows existing methods for recognizing interest income. Provision for Loan Losses A provision for estimated losses on loans is charged to income based upon management’s evaluation of the potential losses. Such an evaluation, which includes a review of all loans for which full repayment may not be reasonably assured, considers, among other matters, the estimated net realizable value of the underlying collateral, as applicable, economic conditions, loan loss experience, and other factors that are particularly susceptible to changes that could result in a material adjustment in the near term. While management attempts to use the best information available in making its evaluations, future allowance adjustments may be necessary if economic conditions change substantially from the assumptions used in making the evaluations. Policy for Charging Off Loans The Company’s policy is to charge off a loan at any point in time when it no longer can be considered a bankable asset, meaning collectible within the parameters of policy. A secured loan is generally charged down to the estimated fair value of the collateral, less costs to sell, no later than when it is 120 days past due as to principal or interest. An unsecured loan generally is charged off no later than when it is 180 days past due as to principal or interest. A home improvement loan generally is charged off no later than when it is 90 days past due as to principal or interest. The following tables present changes in the balance of the ALLL during the three and nine months ended September 30, 2022 and 2021. (in thousands) Three Months Ended September 30, 2022 Allowance for loan losses: Balance, Beginning of Period (Credit) Provision Charged to Expense Losses Recoveries Balance, Commercial and industrial $ 2,026 $ (301) $ — $ 2 $ 1,727 Owner-occupied commercial real estate 703 (87) — — 616 Investor commercial real estate 621 453 — — 1,074 Construction 1,707 (117) — — 1,590 Single tenant lease financing 9,712 315 — — 10,027 Public finance 1,850 (61) — — 1,789 Healthcare finance 4,762 (1,150) — — 3,612 Small business lending 1,956 217 (130) 3 2,046 Franchise finance 2,281 734 — — 3,015 Residential mortgage 1,138 231 — 1 1,370 Home equity 54 7 — 1 62 Other consumer loans 2,343 651 (106) 50 2,938 Total $ 29,153 $ 892 $ (236) $ 57 $ 29,866 Nine Months Ended September 30, 2022 Allowance for loan losses: Balance, Beginning of Period (Credit) Provision Charged to Expense Losses Recoveries Balance, Commercial and industrial $ 1,891 $ (166) $ — $ 2 $ 1,727 Owner-occupied commercial real estate 742 (126) — — 616 Investor commercial real estate 328 746 — — 1,074 Construction 1,612 (22) — — 1,590 Single tenant lease financing 10,385 (1,589) — 1,231 10,027 Public finance 1,776 13 — — 1,789 Healthcare finance 5,940 (2,328) — — 3,612 Small business lending 1,387 847 (210) 22 2,046 Franchise finance 1,083 1,932 — — 3,015 Residential mortgage 643 724 — 3 1,370 Home equity 64 (139) — 137 62 Other consumer loans 1,990 1,116 (397) 229 2,938 Tax refund advance loans — 1,860 (1,860) — — Total $ 27,841 $ 2,868 $ (2,467) $ 1,624 $ 29,866 (in thousands) Three Months Ended September 30, 2021 Allowance for loan losses: Balance, Beginning of Period (Credit) Provision Charged to Expense Losses Recoveries Balance, Commercial and industrial $ 1,902 $ 122 $ — $ 2 $ 2,026 Owner-occupied commercial real estate 1,021 (28) — — 993 Investor commercial real estate 329 (4) — — 325 Construction 1,357 (30) — — 1,327 Single tenant lease financing 11,205 (152) — — 11,053 Public finance 1,700 32 — — 1,732 Healthcare finance 6,938 (584) — — 6,354 Small business lending 783 415 (10) 26 1,214 Franchise finance — 310 — — 310 Residential mortgage 594 19 — 3 616 Home equity 63 — — 2 65 Other consumer loans 2,174 (129) (110) 50 1,985 Total $ 28,066 $ (29) $ (120) $ 83 $ 28,000 Nine Months Ended September 30, 2021 Allowance for loan losses: Balance, Beginning of Period (Credit) Provision Charged to Expense Losses Recoveries Balance, Commercial and industrial $ 1,146 $ 823 $ (28) $ 85 $ 2,026 Owner-occupied commercial real estate 1,082 (89) — — 993 Investor commercial real estate 155 170 — — 325 Construction 1,192 135 — — 1,327 Single tenant lease financing 12,990 454 (2,391) — 11,053 Public finance 1,732 — — — 1,732 Healthcare finance 7,485 (1,131) — — 6,354 Small business lending 628 776 (222) 32 1,214 Franchise finance — 310 — — 310 Residential mortgage 519 91 (6) 12 616 Home equity 48 63 (51) 5 65 Other consumer loans 2,507 (334) (423) 235 1,985 Total $ 29,484 $ 1,268 $ (3,121) $ 369 $ 28,000 The following tables present the recorded investment in loans based on portfolio segment and impairment method as of September 30, 2022 and December 31, 2021. (in thousands) Loans Allowance for Loan Losses September 30, 2022 Ending Balance: Ending Balance: Ending Balance Ending Balance: Ending Balance: Ending Balance Commercial and industrial $ 94,617 $ 10,163 $ 104,780 $ 1,377 $ 350 $ 1,727 Owner-occupied commercial real estate 56,993 1,622 58,615 616 — 616 Investor commercial real estate 91,021 — 91,021 1,074 — 1,074 Construction 139,509 — 139,509 1,590 — 1,590 Single tenant lease financing 895,302 — 895,302 10,027 — 10,027 Public finance 614,139 — 614,139 1,789 — 1,789 Healthcare finance 293,686 — 293,686 3,612 — 3,612 Small business lending (1) 105,129 7,872 113,001 1,368 678 2,046 Franchise finance 225,012 — 225,012 3,015 — 3,015 Residential mortgage 334,082 3,483 337,565 1,370 — 1,370 Home equity 22,114 — 22,114 62 — 62 Other consumer 312,509 3 312,512 2,938 — 2,938 Total $ 3,184,113 $ 23,143 $ 3,207,256 $ 28,838 $ 1,028 $ 29,866 1 Balance of loans individually evaluated for impairment are partially guaranteed by the U.S. government. (in thousands) Loans Allowance for Loan Losses December 31, 2021 Ending Balance: Ending Balance: Ending Balance Ending Balance: Ending Balance: Ending Balance Commercial and industrial $ 95,364 $ 644 $ 96,008 $ 1,441 $ 450 $ 1,891 Owner-occupied commercial real estate 63,387 3,345 66,732 742 — 742 Investor commercial real estate 28,019 — 28,019 328 — 328 Construction 136,619 — 136,619 1,612 — 1,612 Single tenant lease financing 864,754 1,100 865,854 10,290 95 10,385 Public finance 592,665 — 592,665 1,776 — 1,776 Healthcare finance 386,926 926 387,852 5,417 523 5,940 Small business lending (1) 106,682 1,984 108,666 994 393 1,387 Franchise finance 81,448 — 81,448 1,083 — 1,083 Residential mortgage 183,852 2,918 186,770 643 — 643 Home equity 17,651 14 17,665 64 — 64 Other consumer 265,469 9 265,478 1,990 — 1,990 Total $ 2,822,836 $ 10,940 $ 2,833,776 $ 26,380 $ 1,461 $ 27,841 1 Balance of loans individually evaluated for impairment are partially guaranteed by the U.S. government. The Company utilizes a risk grading matrix to assign a risk grade to each of its commercial loans. A description of the general characteristics of the risk grades is as follows: • “Pass” - Higher quality loans that do not fit any of the other categories described below. • “Special Mention” - Loans that possess some credit deficiency or potential weakness, which deserve close attention. • “Substandard” - Loans that possess a defined weakness or weaknesses that jeopardize the liquidation of the debt. Loans characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Loans that are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. • “Doubtful” - Such loans have been placed on nonaccrual status and may be heavily dependent upon collateral possessing a value that is difficult to determine or based upon some near-term event that lacks clear certainty. These loans have all of the weaknesses of those classified as Substandard; however, based on existing conditions, these weaknesses make full collection of the principal balance highly improbable. • “Loss” - Loans that are considered uncollectible and of such little value that continuing to carry them as assets is not warranted. Nonaccrual Loans Any loan which becomes 90 days delinquent or for which the full collection of principal and interest may be in doubt will be considered for nonaccrual status. At the time a loan is placed on nonaccrual status, all accrued but unpaid interest will be reversed from interest income. Placing the loan on nonaccrual status does not relieve the borrower of the obligation to repay interest. A loan placed on nonaccrual status may be restored to accrual status when all delinquent principal and interest has been brought current, and the Company expects full payment of the remaining contractual principal and interest. The following tables present the credit risk profile of the Company’s commercial and consumer loan portfolios based on rating category and payment activity as of September 30, 2022 and December 31, 2021. September 30, 2022 (in thousands) Pass Special Mention Substandard Total Commercial and industrial $ 93,262 $ 1,355 $ 10,163 $ 104,780 Owner-occupied commercial real estate 46,423 10,570 1,622 58,615 Investor commercial real estate 91,021 — — 91,021 Construction 139,509 — — 139,509 Single tenant lease financing 894,208 1,094 — 895,302 Public finance 611,709 2,430 — 614,139 Healthcare finance 292,280 1,406 — 293,686 Small business lending (1) 99,722 5,407 7,872 113,001 Franchise finance 224,721 291 — 225,012 Total commercial loans $ 2,492,855 $ 22,553 $ 19,657 $ 2,535,065 1 Balance in “Substandard” is partially guaranteed by the U.S. government. September 30, 2022 (in thousands) Performing Nonaccrual Total Residential mortgage $ 336,492 $ 1,073 $ 337,565 Home equity 22,114 — 22,114 Other consumer 312,509 3 312,512 Total consumer loans $ 671,115 $ 1,076 $ 672,191 December 31, 2021 (in thousands) Pass Special Mention Substandard Total Commercial and industrial $ 82,412 $ 12,952 $ 644 $ 96,008 Owner-occupied commercial real estate 59,369 4,018 3,345 66,732 Investor commercial real estate 28,019 — — 28,019 Construction 124,578 12,041 — 136,619 Single tenant lease financing 859,612 5,142 1,100 865,854 Public finance 591,630 1,035 — 592,665 Healthcare finance 386,337 589 926 387,852 Small business lending (1) 99,250 7,433 1,983 108,666 Franchise finance 81,448 — — 81,448 Total commercial loans $ 2,312,655 $ 43,210 $ 7,998 $ 2,363,863 1 Balance in “Substandard” is partially guaranteed by the U.S. government. December 31, 2021 (in thousands) Performing Nonaccrual Total Residential mortgage $ 185,544 $ 1,226 $ 186,770 Home equity 17,651 14 17,665 Other consumer 265,469 9 265,478 Total consumer loans $ 468,664 $ 1,249 $ 469,913 The following tables present the Company’s loan portfolio delinquency analysis as of September 30, 2022 and December 31, 2021. September 30, 2022 (in thousands) 30-59 60-89 90 Days Total Current Total Non- Total Loans Commercial and industrial $ — $ — $ 350 $ 350 $ 104,430 $ 104,780 $ 350 $ — Owner-occupied commercial real estate — — — — 58,615 58,615 1,622 — Investor commercial real estate — — — — 91,021 91,021 — — Construction — — — — 139,509 139,509 — — Single tenant lease financing — — — — 895,302 895,302 — — Public finance — — — — 614,139 614,139 — — Healthcare finance — — — — 293,686 293,686 — — Small business lending (1) — 356 488 844 112,157 113,001 2,958 — Franchise finance — — — — 225,012 225,012 — — Residential mortgage 171 71 353 595 336,970 337,565 1,073 — Home equity — — — — 22,114 22,114 — — Other consumer 30 20 — 50 312,462 312,512 3 — Total $ 201 $ 447 $ 1,191 $ 1,839 $ 3,205,417 $ 3,207,256 $ 6,006 $ — 1 Balance in “Total Past Due” is partially guaranteed by the U.S. government. December 31, 2021 (in thousands) 30-59 60-89 90 Days Total Current Total Non- Total Loans Commercial and industrial $ — $ — $ — $ — $ 96,008 $ 96,008 $ 674 $ — Owner-occupied commercial real estate — — — — 66,732 66,732 — — Investor commercial real estate — — — — 28,019 28,019 3,419 — Construction — — — — 136,619 136,619 — — Single tenant lease financing — — — — 865,854 865,854 1,100 — Public finance — — — — 592,665 592,665 — — Healthcare finance — — — — 387,852 387,852 — — Small business lending (1) — — 657 657 108,009 108,666 959 — Franchising Finance — — — — 81,448 81,448 — — Residential mortgage 51 226 106 383 186,387 186,770 1,226 — Home equity — — — — 17,665 17,665 14 — Other consumer 68 18 — 86 265,392 265,478 9 — Total $ 119 $ 244 $ 763 $ 1,126 $ 2,832,650 $ 2,833,776 $ 7,401 $ — 1 Balance in “Total Past Due” is partially guaranteed by the U.S. government. Impaired Loans A loan is designated as impaired, in accordance with the impairment accounting guidance, when, based on current information or events, it is probable that the Company will be unable to collect all amounts due (principal and interest) according to the contractual terms of the loan agreement. Payments with delays generally not exceeding 90 days outstanding are not considered impaired. Certain nonaccrual and substantially all delinquent loans more than 90 days past due may be considered to be impaired. Generally, loans are placed on nonaccrual status at 90 days past due and accrued interest is reversed against earnings, unless the loan is well-secured and in the process of collection. The accrual of interest on impaired and nonaccrual loans is discontinued when, in management’s opinion, the borrower may be unable to meet payments as they become due. Impaired loans include nonperforming loans as well as loans modified in TDRs where concessions have been granted to borrowers experiencing financial difficulties. These concessions could include a reduction in the interest rate on the loan, payment extensions, forgiveness of principal, forbearance, or other actions intended to maximize collection. ASC Topic 310, Receivables , requires that impaired loans be measured based on the present value of expected future cash flows discounted at the loans’ effective interest rates or the fair value of the underlying collateral, less costs to sell, and allows existing methods for recognizing interest income. The following table presents the Company’s impaired loans as of September 30, 2022 and December 31, 2021. September 30, 2022 December 31, 2021 (in thousands) Recorded Unpaid Specific Recorded Unpaid Specific Loans without a specific valuation allowance Commercial and industrial $ 9,813 $ 9,813 $ — $ — $ — $ — Owner-occupied commercial real estate — — — 3,345 3,466 — Small business lending (1) 5,838 6,087 — 959 1,193 — Residential mortgage 3,483 3,634 — 2,918 3,063 — Home equity — — — 14 15 — Other consumer loans 3 29 — 9 44 — Total 19,137 19,563 — 7,245 7,781 — Loans with a specific valuation allowance Commercial and industrial 350 350 350 644 677 450 Owner-occupied commercial real estate 1,622 1,779 — — — — Single tenant lease financing — — — 1,100 1,123 95 Healthcare finance — — — 926 926 523 Small business lending (1) 2,034 2,034 678 1,025 1,025 393 Total 4,006 4,163 1,028 3,695 3,751 1,461 Total impaired loans $ 23,143 $ 23,726 $ 1,028 $ 10,940 $ 11,532 $ 1,461 1 Balance of loans individually evaluated for impairment are partially guaranteed by the U.S. government. The table below presents average balances and interest income recognized for impaired loans during the three and nine months ended September 30, 2022 and 2021. Three Months Ended Nine Months Ended September 30, 2022 September 30, 2021 September 30, 2022 September 30, 2021 (in thousands) Average Interest Average Interest Average Interest Average Interest Loans without a specific valuation allowance Commercial and industrial $ 4,906 $ — $ — $ — $ 1,636 $ — $ 259 $ 9 Owner-occupied commercial real estate 1,645 — 3,457 — 2,471 — 3,297 — Single tenant lease financing — — 1,315 — — — 100 5 Healthcare finance — — — — — — 336 — Small business lending (1) 2,167 — — — 1,288 — 1,005 — Residential mortgage 3,711 9 2,267 15 3,550 26 2,138 28 Home equity 15 — 14 — 14 — 13 — Other consumer 8 — 23 — 9 — 27 — Total 12,452 9 7,076 15 8,968 26 7,175 42 Loans with a specific valuation allowance Commercial and industrial 350 — 690 — 456 — 677 — Owner-occupied commercial real estate — — — — — — 473 — Single tenant lease financing — — 2,048 — 547 — 4,875 — Healthcare finance 660 — 956 37 826 45 809 73 Small business lending (1) 1,827 — 1,203 — 1,611 — 401 — Other consumer 199 — — — 66 — — — Total 3,036 — 4,897 37 3,506 45 7,235 73 Total impaired loans $ 15,488 $ 9 $ 11,973 $ 52 $ 12,474 $ 71 $ 14,410 $ 115 1 Balance is partially guaranteed by the U.S. government. The Company did not have any other real estate owned (“OREO”) as of September 30, 2022. The Company had $1.2 million in OREO as of December 31, 2021, which consisted of one commercial property. There were two loans totaling $0.2 million and one loan totaling $0.1 million in the process of foreclosure at September 30, 2022 and December 31, 2021, respectively. Troubled Debt Restructurings The loan portfolio includes TDRs, which are loans that have been modified to grant economic concessions to borrowers who have experienced financial difficulties. These concessions typically result from loss mitigation efforts and could include reductions in the interest rate, payment extensions, forgiveness of principal, forbearance, or other actions. Certain TDRs are classified as nonperforming at the time of restructuring and typically are returned to performing status after considering the borrower’s sustained repayment performance for a reasonable period, generally not less than six consecutive months. When loans are modified in a TDR, any possible impairment similar to other impaired loans is evaluated based on the present value of expected future cash flows, discounted at the contractual interest rate of the original loan agreement, or using the current fair value of the collateral, less selling costs, for collateral dependent loans. If it is determined that the value of the modified loan is less than the recorded balance of the loan, impairment is recognized through a specific allowance or charge-off to the allowance. In periods subsequent to modification, all TDRs, including those that have payment defaults, are evaluated for possible impairment, and impairment is recognized through the allowance. In the course of working with troubled borrowers, the Company may choose to restructure the contractual terms of certain loans in an effort to work out an alternative payment schedule with the borrower in order to optimize the collectability of the loan. Any loan modification is reviewed by the Company to identify whether a TDR has occurred when the Company grants a concession to the borrower that it would not otherwise consider based on economic or legal reasons related to a borrower’s financial difficulties. Terms may be modified to fit the ability of the borrower to repay in line with its current financial status or the loan may be restructured to obtain additional collateral and/or guarantees to support the debt, or a combination of the two. There were no loans classified as new TDRs during the three months ended September 30, 2022. There was one portfolio residential mortgage loan classified as a new TDR during the nine months ended September 30, 2022 with a pre-modification and post-modification outstanding recorded investment of $0.7 million. The Company did not allocate a specific allowance for that loan as of September 30, 2022. The modifications consisted of interest-only payments for a period of time. There was one portfolio residential mortgage loan classified as a new TDR during the three and nine months ended September 30, 2021 with a pre-modification and post-modification outstanding recorded investment of $0.8 million. The Company did not allocate a specific allowance for that loan as of September 30, 2021. The modifications consisted of interest-only payments for a period of time. There were no performing TDRs that had payment defaults within the twelve months following modification during the three and nine months ended September 30, 2022 and 2021, respectively. Non-TDR Loan Modifications due to COVID-19 The “Interagency Statement on Loan Modifications and Reporting for Financial Institutions Working with Customers Affected by the Coronavirus” was issued by our banking regulators on March 22, 2020. This guidance encouraged financial institutions to work prudently with borrowers who are or may be unable to meet their contractual payment obligations due to the effects of COVID-19. Additionally, Section 4013 of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) provides that loan modifications due to the impact of COVID-19 that would otherwise be classified as TDRs under GAAP will not be so classified. Modifications within the scope of this relief were in effect from the period beginning March 1, 2020 until the earlier of Jan |
