| Loans and Allowance for Credit Losses | Loans and allowance for credit losses: Loans outstanding as of March 31, 2022 and December 31, 2021, by class of financing receivable are as follows: March 31, December 31, 2022 2021 Commercial and industrial (1) $ 1,380,600 $ 1,290,565 Construction 1,468,811 1,327,659 Residential real estate: 1-to-4 family mortgage 1,346,349 1,270,467 Residential line of credit 392,740 383,039 Multi-family mortgage 400,501 326,551 Commercial real estate: Owner occupied 978,436 951,582 Non-owner occupied 1,706,546 1,730,165 Consumer and other 330,993 324,634 Gross loans 8,004,976 7,604,662 Less: Allowance for credit losses (120,049) (125,559) Net loans $ 7,884,927 $ 7,479,103 (1) Includes $2,062 and $3,990 of loans originated as part of the Paycheck Protection Program as of March 31, 2022 and December 31, 2021, respectively. PPP loans are federally guaranteed as part of the CARES Act, provided PPP loan recipients receive loan forgiveness under the SBA regulations. As such, there is minimal credit risk associated with these loans. As of March 31, 2022 and December 31, 2021, $1,001,027 and $1,136,294, respectively, of qualifying residential mortgage loans (including loans held for sale) and $1,530,928 and $1,581,673, respectively, of qualifying commercial mortgage loans were pledged to the Federal Home Loan Bank of Cincinnati securing advances against the Bank’s line of credit. Additionally, as of March 31, 2022 and December 31, 2021, qualifying loans of $2,719,096 and $2,440,097, respectively, were pledged to the Federal Reserve Bank under the Borrower-in-Custody program. The components of amortized cost for loans on the consolidated balance sheets exclude accrued interest receivable as the Company presents accrued interest receivable separately on the balance sheet. As of March 31, 2022 and December 31, 2021, accrued interest receivable on loans held for investment was $31,746 and $31,676, respectively. Allowance for Credit Losses The Company calculates its expected credit loss using a lifetime loss rate methodology. The Company utilizes probability-weighted forecasts, which consider multiple macroeconomic variables from a third-party vendor that are applicable to the type of loan. Each of the Company's loss rate models incorporate forward-looking macroeconomic projections throughout the reasonable and supportable forecast period and the subsequent historical reversion at the macroeconomic variable input level. In order to estimate the life of a loan, the contractual term of the loan is adjusted for estimated prepayments based on market information and the Company’s prepayment history. The Company's loss rate models estimate the lifetime loss rate for pools of loans by combining the calculated loss rate based on each variable within the model (including the macroeconomic variables). The lifetime loss rate for the pool is then multiplied by the loan balances to determine the expected credit losses on the pool. The Company considers the need to qualitatively adjust its modeled quantitative expected credit loss estimate for information not already captured in the model loss estimation process. These qualitative factor adjustments may increase or decrease the Company’s estimate of expected credit losses. The Company reviews the qualitative adjustments so as to validate that information that has already been considered and included in the modeled quantitative loss estimation process is not also included in the qualitative adjustment. The Company considers the qualitative factors that are relevant to the institution as of the reporting date, which may include, but are not limited to: levels of and trends in delinquencies and performance of loans; levels of and trends in write-offs and recoveries collected; trends in volume and terms of loans; effects of any changes in reasonable and supportable economic forecasts; effects of any changes in risk selection and underwriting standards; other changes in lending policies, procedures, and practices; experience, ability, and depth of lending management and expertise; available relevant information sources that contradict the Company’s own forecast; effects of changes in prepayment expectations or other factors affecting assessments of loan contractual terms; industry conditions; and effects of changes in credit concentrations. The quantitative models require loan data and macroeconomic variables based on the inherent credit risks in each portfolio to more accurately measure the credit risks associated with each. Each of the quantitative models pools loans with similar risk characteristics and collectively assesses the lifetime loss rate for each pool to estimate its expected credit loss. When a loan no longer shares similar risk characteristics with other loans in any given pool, the loan is individually assessed. The Company has determined the following circumstances in which a loan may require an individual evaluation: collateral dependent loans; loans for which foreclosure is probable; and loans with other unique risk characteristics. A loan is deemed collateral dependent when 1) the borrower is experiencing financial difficulty and 2) the repayment is expected to be primarily through sale or operation of the collateral. The allowance for credit losses for collateral dependent loans as well as loans where foreclosure is probable is calculated as the amount for which the loan’s amortized cost basis exceeds fair value. Fair value is determined based on appraisals performed by qualified appraisers and reviewed by qualified personnel. In cases where repayment is to be provided substantially through the sale of collateral, the Company reduces the fair value by the estimated costs to sell. Loans experiencing financial difficulty for which a concession has not yet been provided may be identified as reasonably expected TDRs. Reasonably expected TDRs and TDRs use the same methodology. In cases where the expected credit loss can only be captured through a discounted cash flow analysis (such as an interest rate modification for a TDR loan), the allowance is measured by the amount which the loan’s amortized cost exceeds the discounted cash flow analysis. The Company performed qualitative evaluations within the Company's established qualitative framework, weighting the impact of the current economic outlook (including inflation, employment and supply chain concerns), status of federal government stimulus programs, and other considerations, in order to identify specific industries or borrowers seeing credit improvement or deterioration specific to the COVID-19 pandemic. The decrease in estimated required reserve during the three months ended March 31, 2022 was a result of improving macroeconomic variables incorporated into the Company's reasonable and supportable forecasts when compared to December 31, 2021. The following tables provide the changes in the allowance for credit losses by class of financing receivable for the three months ended March 31, 2022 and 2021: Commercial Construction 1-to-4 Residential Multi-family Commercial Commercial Consumer Total Three Months Ended March 31, 2022 Beginning balance - December 31, 2021 $ 15,751 $ 28,576 $ 19,104 $ 5,903 $ 6,976 $ 12,593 $ 25,768 $ 10,888 $ 125,559 Provision for credit losses (4,006) 3,206 1,908 641 (578) (4,187) (4,478) 1,365 (6,129) Recoveries of loans previously charged-off 958 — 12 1 — 10 — 217 1,198 Loans charged off (4) — — — — — — (575) (579) Ending balance - March 31, 2022 $ 12,699 $ 31,782 $ 21,024 $ 6,545 $ 6,398 $ 8,416 $ 21,290 $ 11,895 $ 120,049 Commercial Construction 1-to-4 Residential Multi-family Commercial Commercial Consumer Total Three Months Ended March 31, 2021 Beginning balance - December 31, 2020 $ 14,748 $ 58,477 $ 19,220 $ 10,534 $ 7,174 $ 4,849 $ 44,147 $ 11,240 $ 170,389 Provision for credit losses 43 (19,826) 461 (1,257) 4,483 (1,253) 6,032 (315) (11,632) Recoveries of loans previously charged-off 129 — 24 6 — 13 — 195 367 Loans charged off (277) (29) (133) (15) — — — (716) (1,170) Ending balance - $ 14,643 $ 38,622 $ 19,572 $ 9,268 $ 11,657 $ 3,609 $ 50,179 $ 10,404 $ 157,954 Credit Quality - Commercial Loans The Company categorizes commercial loan types into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans that share similar risk characteristics collectively. Loans that do not share similar risk characteristics are evaluated individually. The Company uses the following definitions for risk ratings: Pass. Loans rated Pass include those that are adequately collateralized performing loans which management believes do not have conditions that have occurred or may occur that would result in the loan being downgraded into an inferior category. The Pass category also includes commercial loans rated as Watch, which include those that management believes have conditions that have occurred, or may occur, which could result in the loan being downgraded to an inferior category. Special Mention. Loans rated Special Mention are those that have potential weakness that deserve management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or in the institution’s credit position at some future date. Management does not believe there will be a loss of principal or interest. These loans require intensive servicing and may possess more than normal credit risk. Classified. Loans included in the Classified category include loans rated as Substandard and Doubtful. Loans rated as Substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard loans have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Also included in this category are loans classified as Doubtful, which have all the weaknesses inherent in those classified as Substandard, with the added characteristic that the weakness or weaknesses make collection or liquidation in full, based on currently existing facts, conditions, and values, highly questionable and improbable. Risk ratings are updated on an ongoing basis and are subject to change by continuous loan monitoring processes. During the first quarter of 2022, the Company revised the presentation of the below credit quality vintage tables without change to accounting or credit policies. The updated presentation disaggregates between commercial and consumer loan types with consumer loans reported as either performing or nonperforming based on delinquency and accrual status. As such, the tables presented below as of December 31, 2021 have been revised to align with current period presentation. The following tables present the credit quality of our commercial loan portfolio by year of origination as of March 31, 2022 and December 31, 2021. Revolving loans are presented separately. Management considers the guidance in ASC 310-20 when determining whether a modification, extension, or renewal constitutes a current period origination. Generally, current period renewals of credit are reunderwritten at the point of renewal and considered current period originations for the purposes of the tables below. As of March 31, 2022 Commercial Term Loans Amortized Cost Basis by Origination Year 2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Total Commercial and industrial Pass $ 86,753 $ 262,073 $ 84,369 $ 123,038 $ 46,230 $ 80,906 $ 656,672 $ 1,340,041 Special Mention 27 50 — 941 616 1,494 12,570 15,698 Classified — 900 2,285 2,269 2,933 9,576 6,898 24,861 Total 86,780 263,023 86,654 126,248 49,779 91,976 676,140 1,380,600 Construction - Commercial Pass 103,294 322,557 179,337 111,794 17,366 63,846 47,864 846,058 Special Mention — — 10 — — 2,579 — 2,589 Classified — — — 3,078 — 679 201 3,958 Total 103,294 322,557 179,347 114,872 17,366 67,104 48,065 852,605 Residential real estate: Multi-family mortgage Pass 53,167 190,584 32,964 64,201 5,124 42,130 11,104 399,274 Special Mention — — — — — — — — Classified — — — — — 1,227 — 1,227 Total 53,167 190,584 32,964 64,201 5,124 43,357 11,104 400,501 Commercial real estate: Owner occupied Pass 53,495 178,092 127,649 164,620 78,970 293,791 56,543 953,160 Special Mention — — 30 1,492 3,200 2,325 210 7,257 Classified — — — 3,089 1,667 12,285 978 18,019 Total 53,495 178,092 127,679 169,201 83,837 308,401 57,731 978,436 Non-owner occupied Pass 80,277 439,956 126,299 157,806 257,327 568,790 55,375 1,685,830 Special Mention — — — 3,687 249 985 — 4,921 Classified — — — — 3,460 12,335 — 15,795 Total 80,277 439,956 126,299 161,493 261,036 582,110 55,375 1,706,546 Total commercial loans Pass 376,986 1,393,262 550,618 621,459 405,017 1,049,463 827,558 5,224,363 Special Mention 27 50 40 6,120 4,065 7,383 12,780 30,465 Classified — 900 2,285 8,436 8,060 36,102 8,077 63,860 Total commercial loans $ 377,013 $ 1,394,212 $ 552,943 $ 636,015 $ 417,142 $ 1,092,948 $ 848,415 $ 5,318,688 As of December 31, 2021 Commercial Term Loans Amortized Cost Basis by Origination Year 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total Commercial and industrial Pass $ 273,232 $ 95,279 $ 140,938 $ 52,162 $ 33,997 $ 57,020 $ 596,667 $ 1,249,295 Special Mention 79 9 949 632 3 1,519 12,367 15,558 Classified 918 2,391 2,376 3,089 3,370 6,425 7,143 25,712 Total 274,229 97,679 144,263 55,883 37,370 64,964 616,177 1,290,565 Construction - Commercial Pass 335,758 164,428 112,985 18,374 14,965 64,516 43,748 754,774 Special Mention — 11 — — 1,208 1,384 — 2,603 Classified — — 2,922 2,882 3 737 200 6,744 Total 335,758 164,439 115,907 21,256 16,176 66,637 43,948 764,121 Residential real estate: Multi-family mortgage Pass 166,576 32,242 64,345 7,124 5,602 38,526 10,891 325,306 Special Mention — — — — — — — — Classified — — — — — 1,245 — 1,245 Total 166,576 32,242 64,345 7,124 5,602 39,771 10,891 326,551 Commercial real estate: Owner occupied Pass 170,773 131,471 174,257 83,698 69,939 236,998 57,123 924,259 Special Mention — — 1,502 3,541 885 2,555 213 8,696 Classified — — 3,102 768 3,295 9,616 1,846 18,627 Total 170,773 131,471 178,861 88,007 74,119 249,169 59,182 951,582 Non-owner occupied Pass 462,478 154,048 165,917 264,855 170,602 414,859 46,541 1,679,300 Special Mention — — 3,747 3,388 — 969 — 8,104 Classified — — 1,898 23,849 1,506 15,508 — 42,761 Total 462,478 154,048 171,562 292,092 172,108 431,336 46,541 1,730,165 Total commercial loans Pass 1,408,817 577,468 658,442 426,213 295,105 811,919 754,970 4,932,934 Special Mention 79 20 6,198 7,561 2,096 6,427 12,580 34,961 Classified 918 2,391 10,298 30,588 8,174 33,531 9,189 95,089 Total commercial loans $ 1,409,814 $ 579,879 $ 674,938 $ 464,362 $ 305,375 $ 851,877 $ 776,739 $ 5,062,984 Credit Quality - Consumer Loans For consumer and residential loan classes, the company primarily evaluates credit quality based on delinquency and accrual status of the loan, credit documentation and by payment activity. The performing or nonperforming status is updated on an on-going basis dependent upon improvement and deterioration in credit quality. The following tables present the credit quality by classification (performing or nonperforming) of our consumer loan portfolio by year of origination as of March 31, 2022 and December 31, 2021. Revolving loans are presented separately. Management considers the guidance in ASC 310-20 when determining whether a modification, extension, or renewal constitutes a current period origination. Generally, current period renewals of credit are reunderwritten at the point of renewal and considered current period originations for the purposes of the tables below. As of March 31, 2022 Consumer Term Loans Amortized Cost Basis by Origination Year 2022 2021 2020 2019 2018 Prior Revolving Loans Amortized Cost Basis Total Construction - Consumer Performing $ 63,687 $ 345,094 $ 87,761 $ 18,312 $ 5,815 $ 4,328 $ 91,209 $ 616,206 Nonperforming — — — — — — — — Total 63,687 345,094 87,761 18,312 5,815 4,328 91,209 616,206 Residential real estate: 1-to-4 family mortgage Performing 161,778 500,544 184,028 113,736 89,201 282,039 — 1,331,326 Nonperforming — 3,240 2,970 1,144 2,577 5,092 — 15,023 Total 161,778 503,784 186,998 114,880 91,778 287,131 — 1,346,349 Residential line of credit Performing — — — — — — 391,163 391,163 Nonperforming — — — — — — 1,577 1,577 Total — — — — — — 392,740 392,740 Consumer and other Performing 33,831 72,033 51,086 36,589 31,037 92,155 9,004 325,735 Nonperforming — 330 442 518 1,541 2,427 — 5,258 Total 33,831 72,363 51,528 37,107 32,578 94,582 9,004 330,993 Total consumer loans Performing 259,296 917,671 322,875 168,637 126,053 378,522 491,376 2,664,430 Nonperforming — 3,570 3,412 1,662 4,118 7,519 1,577 21,858 Total consumer loans $ 259,296 $ 921,241 $ 326,287 $ 170,299 $ 130,171 $ 386,041 $ 492,953 $ 2,686,288 As of December 31, 2021 Consumer Term Loans Amortized Cost Basis by Origination Year 2021 2020 2019 2018 2017 Prior Revolving Loans Amortized Cost Basis Total Construction - Consumer Performing $ 341,562 $ 116,352 $ 22,783 $ 5,542 $ 348 $ 3,302 $ 73,428 $ 563,317 Nonperforming — 221 — — — — — 221 Total 341,562 116,573 22,783 5,542 348 3,302 73,428 563,538 Residential real estate: 1-to-4 family mortgage Performing 521,533 204,690 121,775 100,164 109,087 199,262 — 1,256,511 Nonperforming 1,232 3,734 977 2,429 1,765 3,819 — 13,956 Total 522,765 208,424 122,752 102,593 110,852 203,081 — 1,270,467 Residential line of credit Performing — — — — — — 381,303 381,303 Nonperforming — — — — — — 1,736 1,736 Total — — — — — — 383,039 383,039 Consumer and other Performing 82,910 55,123 38,281 32,893 21,856 74,248 14,478 319,789 Nonperforming 199 345 545 1,352 861 1,496 47 4,845 Total 83,109 55,468 38,826 34,245 22,717 75,744 14,525 324,634 Total consumer loans Performing 946,005 376,165 182,839 138,599 131,291 276,812 469,209 2,520,920 Nonperforming 1,431 4,300 1,522 3,781 2,626 5,315 1,783 20,758 Total consumer loans $ 947,436 $ 380,465 $ 184,361 $ 142,380 $ 133,917 $ 282,127 $ 470,992 $ 2,541,678 Nonaccrual and Past Due Loans Nonperforming loans include loans that are no longer accruing interest (nonaccrual loans) and loans past due ninety or more days and still accruing interest. The following tables represent an analysis of the aging by class of financing receivable as of March 31, 2022 and December 31, 2021: March 31, 2022 30-89 days 90 days or Non-accrual Loans current Total Commercial and industrial $ 1,543 $ 58 $ 3,882 $ 1,375,117 $ 1,380,600 Construction 2,622 — 679 1,465,510 1,468,811 Residential real estate: 1-to-4 family mortgage 13,508 11,724 3,299 1,317,818 1,346,349 Residential line of credit 536 — 1,577 390,627 392,740 Multi-family mortgage — — 48 400,453 400,501 Commercial real estate: Owner occupied 415 — 6,989 971,032 978,436 Non-owner occupied 986 — 7,185 1,698,375 1,706,546 Consumer and other 4,305 1,091 4,167 321,430 330,993 Total $ 23,915 $ 12,873 $ 27,826 $ 7,940,362 $ 8,004,976 December 31, 2021 30-89 days 90 days or Non-accrual Loans current on payments and accruing interest Total Commercial and industrial $ 1,030 $ 63 $ 1,520 $ 1,287,952 $ 1,290,565 Construction 4,852 718 3,622 1,318,467 1,327,659 Residential real estate: 1-to-4 family mortgage 11,007 9,363 4,593 1,245,504 1,270,467 Residential line of credit 319 — 1,736 380,984 383,039 Multi-family mortgage — — 49 326,502 326,551 Commercial real estate: Owner occupied 1,417 — 6,710 943,455 951,582 Non-owner occupied 427 — 14,084 1,715,654 1,730,165 Consumer and other 7,398 1,591 3,254 312,391 324,634 Total $ 26,450 $ 11,735 $ 35,568 $ 7,530,909 $ 7,604,662 The following tables provide the amortized cost basis of loans on non-accrual status, as well as any related allowance as of March 31, 2022 and December 31, 2021 by class of financing receivable. March 31, 2022 Non-accrual Non-accrual Related Commercial and industrial $ 1,420 $ 2,462 $ 1,781 Construction — 679 85 Residential real estate: 1-to-4 family mortgage 130 3,169 49 Residential line of credit 1,051 526 7 Multi-family mortgage — 48 2 Commercial real estate: Owner occupied 4,346 2,643 84 Non-owner occupied 7,006 179 22 Consumer and other — 4,167 211 Total $ 13,953 $ 13,873 $ 2,241 December 31, 2021 Non-accrual Non-accrual Related Commercial and industrial $ 1,085 $ 435 $ 6 Construction 2,882 740 99 Residential real estate: 1-to-4 family mortgage 378 4,215 60 Residential line of credit 797 939 11 Multi-family mortgage — 49 2 Commercial real estate: Owner occupied 5,346 1,364 206 Non-owner occupied 13,898 186 7 Consumer and other — 3,254 164 Total $ 24,386 $ 11,182 $ 555 The following presents interest income recognized on nonaccrual loans for the three months ended March 31, 2022 and 2021: Three Months Ended March 31, 2022 2021 Commercial and industrial $ 54 $ 114 Construction 19 14 Residential real estate: 1-to-4 family mortgage 52 18 Residential line of credit 40 18 Multi-family mortgage — 1 Commercial real estate: Owner occupied 25 131 Non-owner occupied 70 89 Consumer and other 15 — Total $ 275 $ 385 Accrued interest receivable written off as an adjustment to interest income amounted to $184 and $465 for the three months ended March 31, 2022 and 2021, respectively. Troubled debt restructurings As of March 31, 2022 and December 31, 2021, the Company had a recorded investment in TDRs of $20,601 and $32,435, respectively. The modifications included extensions of the maturity date and/or a stated rate of interest to one lower than the current market rate to borrowers experiencing financial difficulty. Of these loans, $13,722 and $11,084 were classified as non-accrual loans as of March 31, 2022 and December 31, 2021, respectively. The Company has calculated $1,994 and $1,245 in allowances for credit losses on TDRs as of March 31, 2022 and December 31, 2021, respectively. There were no significant unfunded loan commitments to extend additional funds on troubled debt restructurings as of March 31, 2022 or December 31, 2021. The following tables present the financial effect of TDRs recorded during the periods indicated: Three Months Ended March 31, 2022 Number of loans Pre-modification outstanding recorded investment Post-modification outstanding recorded investment Charge offs and specific reserves Residential real estate: 1-to-4 family mortgage 1 $ 80 $ 80 $ — Consumer and other 1 22 22 — Total 2 $ 102 $ 102 $ — Three Months Ended March 31, 2021 Number of loans Pre-modification outstanding recorded investment Post-modification outstanding recorded investment Charge offs and specific reserves Commercial and industrial 1 $ 107 $ 107 $ — Commercial real estate: Non-owner occupied 1 11,997 11,997 — Total 2 $ 12,104 $ 12,104 $ — Troubled debt restructurings for which there was a payment default within twelve months following the modification totaled $304 during the three months ended March 31, 2022. There were no loans modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the three months ended March 31, 2021. A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Company’s internal underwriting policy. The terms of certain other loans were modified during the three months ended March 31, 2022 and 2021 that did not meet the definition of a TDR. The modification of these loans usually involve either a modification of the terms of a loan to borrowers who are not experiencing financial difficulties or an insignificant delay in payments. Collateral Dependent Loans For loans for which the repayment (based on the Company's assessment) is expected to be provided substantially through the operation or sale of collateral and the borrower is experiencing financial difficulty, the following tables present the loans and the corresponding individually assessed allowance for credit losses by class of financing receivable. Significant changes in individually assessed reserves are due to changes in the valuation of the underlying collateral in addition to changes in accrual and past due status. March 31, 2022 Type of Collateral Real Estate Financial Assets and Equipment Total Individually assessed allowance for credit loss Commercial and industrial $ 689 $ 3,324 $ 4,013 $ 1,776 Construction 685 — 685 84 Residential real estate: 1-to-4 family mortgage 344 — 344 — Residential line of credit 1,367 — 1,367 5 Commercial real estate: Owner occupied 8,470 — 8,470 80 Non-owner occupied 7,006 — 7,006 — Consumer and other 25 — 25 1 Total $ 18,586 $ 3,324 $ 21,910 $ 1,946 December 31, 2021 Type of Collateral Real Estate Financial Assets and Equipment Total Individually assessed allowance for credit loss Commercial and industrial $ 799 $ 1,090 $ 1,889 $ — Construction 3,580 — 3,580 92 Residential real estate: 1-to-4 family mortgage 338 — 338 — Residential line of credit 1,400 — 1,400 10 Commercial real estate: Owner occupied 8,117 71 8,188 200 Non-owner occupied 13,899 — 13,899 — Consumer and other 25 — 25 1 Total $ 28,158 $ 1,161 $ 29,319 $ 303 |
