| Allowance for Credit Losses | ALLOWANCE FOR CREDIT LOSSES The Company maintains an ACL at a level determined to be adequate to absorb current expected credit losses over the life of loans inherent in the loan portfolio as of the balance sheet date. Refer to Note 1, Basis of Presentation for details of reclassification of our portfolio segments related to the adoption of ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instrument. The Company develops and documents a systematic ACL methodology based on the following portfolio segments: 1) CRE, 2) C&I, 3) Residential Mortgages, 4) Other Consumer, 5) Construction and 6) Other. The Company’s loan portfolio is segmented by homogeneous loan types that behave similarly to economic cycles. The segmentation in the CECL model is different from the segmentation in the Incurred Loss model. The following is a discussion of the key risks by portfolio segment that management assesses in preparing the ACL. CRE loans are secured by commercial purpose real estate, including both owner occupied properties and investment properties, for various purposes such as hotels, strip malls and apartments. Operations of the individual projects as well as global cash flows of the debtors are the primary sources of repayment for these loans. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the collateral type as well as the business. C&I loans are made to operating companies or manufacturers for the purpose of production, operating capacity, accounts receivable, inventory or equipment financing. Cash flow from the operations of the borrower is the primary source of repayment for these loans. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the industry of the borrower. Collateral for these types of loans often do not have sufficient value in a distressed or liquidation scenario to satisfy the outstanding debt. These loans are also made to local and state municipalities for various purposes including refinancing existing obligations, infrastructure up-fit and expansion, or to purchase new equipment. These loans may be secured by general obligations from the municipal authority or revenues generated by infrastructure and equipment financed by the Company. The primary repayment source for these loans include the tax base of the municipality, specific revenue streams related to the infrastructure financed, and other business operations of the municipal authority. The health and stability of state and local economies directly impacts each municipality’s tax basis and are important indicators of risk for this segment. The ability of each municipality to increase taxes and fees to offset debt service requirements give this type of loan a very low risk profile in the continuum of the Company’s loan portfolio. Residential Mortgages are loans secured by first and second liens such as home equity loans, home equity lines of credit and 1-4 family residential mortgages, including purchase money mortgages. The primary source of repayment for these loans is the income of the borrower. The condition of the local economy, in particular the unemployment rate, is an important indicator of risk for this segment. The state of the local housing market can also have a significant impact on this segment because low demand and/or declining home values can limit the ability of borrowers to sell a property and satisfy the debt. Other Consumer loans are made to individuals and may be either secured by assets other than 1-4 family residences or unsecured. This segment includes auto loans and unsecured loans and lines. The primary source of repayment for these loans is the income and assets of the borrower. The condition of the local economy, in particular the unemployment rate, is an important indicator of risk for this segment. The value of the collateral, if there is any, is less likely to be a source of repayment due to less certain collateral values. Construction loans include both commercial and consumer. Commercial loans are made to finance construction of buildings or other structures, as well as to finance the acquisition and development of raw land for various purposes. While the risk of these loans is generally confined to the construction period, if there are problems, the project may not be completed, and as such, may not provide sufficient cash flow on its own to service the debt or have sufficient value in a liquidation to cover the outstanding principal. The condition of the local economy is an important indicator of risk, but there are also more specific risks depending on the type of project and the experience and resources of the developer. Consumer loans are made for the construction of residential homes for which a binding sales contract exists and generally are for a period of time sufficient to complete construction. Residential construction loans to individuals generally provide for the payment of interest only during the construction phase. Credit risk for residential real estate construction loans can arise from construction delays, cost overruns, failure of the contractor to complete the project to specifications and economic conditions that could impact demand for or supply of the property being constructed. Other loans include unique risk attributes considered inconsistent with our current underwriting standards. The ACL reserve for the Other segment is based on a discounted cash flow methodology and reserves will fluctuate based on expected cash flow changes in the future. These inconsistencies may include, but are not limited to i) transaction and/or relationship sizes that exceed limits established in 2018, ii) overreliance on secondary, tertiary or guarantor cash flow, iii) land acquisition loans without a defined source of amortization, and iv) loan structures on operating lines of credit dependent on the value of real estate rather than trading assets. Management continuously assesses underwriting standards, but significantly enhanced these standards in 2018. Our model is based on our best estimate of facts known with the most current information. Certain portions of the CECL model are inherently subjective and include, but are not limited to estimates with respect to: prepayment speeds, the timing of prepayments, potential losses given default, discount rates and the timing of future cash flows. Management utilizes widely published economic forecasts as the basis for the regression analysis used to estimate the probability of default in the baseline model. The peaks and troughs of these forecasts serve as guardrails for potential subjective adjustments. In addition to considering the outcomes based on the range of forecasts, management recognizes that the assumptions used in economic forecasts may not perfectly align with our market area, risk profile or unique attributes of our portfolio along with other important considerations. Severe changes in forecasts can also create significant variability and management must assess not only the absolute balance of reserves but also consider the appropriateness of the velocity of change. Therefore, management developed a framework to assess the tolerance and reasonableness of the CECL modeling process by challenging certain elements of the forecasts, when appropriate. These outcomes, known as “challenger models” provide opportunities to examine and subjectively adjust the CECL model output and are designed to be counter cyclical, thereby reducing variability. Credit Quality Indicators: The Company’s portfolio grading analysis estimates the capability of the borrower to repay the contractual obligations of the loan agreements as scheduled or at all. The Company’s internal credit risk grading system is based on debt service coverage, collateral values and other subjective factors. Mortgage and consumer loans are defaulted to a pass grade until a loan migrates to past due status. The Company has a loan review policy and annual scope report that details the level of loan review for commercial loans in a given year. Primary objectives of loan reviews include the identification of emerging risks and patterns that might influence potential future losses. In concert with significant enhancements to the underwriting process, the scope of loan review has been broadened since 2019 to include assurance testing with respect to the accuracy of the underwriting function. Since 2020 and continuing into 2021, the Company used a four step approach for loan review in the following categories: • A review of the largest twenty pass-rated loan relationships, which represents approximately a quarter of total loans; • A sampling of new loans originated to include an examination of the evidence of appropriate approval, adherence to loan policy and the completeness and accuracy of the analysis contained in the approval document; • A sampling of Large Loan Relationships (“LLRs”) which are defined as loan relationships with aggregate exposure of at least $2.0 million that are not part of the top twenty review; and • Concentration focus reviews of identified segments that represent concentration risk, represented by collateral types including but not limited to hospitality, multifamily and retail with the goal of examining patterns of loss history, document exceptions, policy exceptions and emerging trends in risk characteristics. The Company’s internally assigned grades are as follows: Pass – The Company uses six grades of pass. Generally, a pass rating indicates that the loan is currently performing and is of high quality. Special Mention – Assets with potential weaknesses that warrant management’s close attention and if left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the asset or in the institutions credit position at some future date. Special mention assets are not adversely classified and do not expose an institution to sufficient risk to warrant classified classification. Substandard – Assets that are inadequately protected by the current sound worth and paying capacity of the obligor or by the collateral pledged, if any. Assets so classified have a well-defined weakness, or weaknesses that jeopardize the liquidation of the debt. Such assets are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Doubtful – Assets with all the weaknesses inherent in one classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable. Loss – Assets considered of such little value that its continuance on the books is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value, but rather it is not practical or desirable to defer writing off this basically worthless asset even though partial recovery may be affected in the future. The following table presents loan balances by year of origination and internally assigned risk rating for our portfolio segments as of June 30, 2021: Risk Rating (Dollars in Thousands) 2021 2020 2019 2018 2017 2016 and Prior Revolving Total Commercial Real Estate Pass $ 58,201 $ 161,432 $ 196,469 $ 330,423 $ 118,980 $ 354,304 $ 52,651 $ 1,272,460 Special Mention — — 5,852 8,143 3,046 931 — 17,972 Substandard 230 — 471 4,553 34,889 7,217 — 47,360 Total Commercial Real Estate $ 58,431 $ 161,432 $ 202,792 $ 343,119 $ 156,915 $ 362,452 $ 52,651 $ 1,337,792 Commercial and Industrial Pass $ 25,615 $ 58,536 $ 14,819 $ 37,315 $ 23,016 $ 241,028 $ 12,815 $ 413,144 Special Mention — 10 — 13 — — — 23 Substandard — — 455 220 — — — 675 Total Commercial and Industrial $ 25,615 $ 58,546 $ 15,274 $ 37,548 $ 23,016 $ 241,028 $ 12,815 $ 413,842 Residential Mortgages Pass $ 74,684 $ 98,690 $ 79,166 $ 95,260 $ 8,937 $ 53,540 $ 10,896 $ 421,173 Special Mention — — — — — 570 — 570 Substandard — — 1,193 822 225 1,659 — 3,899 Total Residential Mortgages $ 74,684 $ 98,690 $ 80,359 $ 96,082 $ 9,162 $ 55,769 $ 10,896 $ 425,642 Other Consumer Pass $ 4,314 $ 13,420 $ 1,803 $ 794 $ 272 $ 22,268 $ 341 $ 43,212 Special Mention — — — — — — — — Substandard — 19 1 68 36 — — 124 Total Other Consumer $ 4,314 $ 13,439 $ 1,804 $ 862 $ 308 $ 22,268 $ 341 $ 43,336 Construction Pass $ 75,794 $ 104,595 $ 85,487 $ 10,913 $ 16,658 $ 4,337 $ 17,172 $ 314,956 Special Mention — — 179 — — 442 — 621 Substandard — 107 3,223 97 1,741 140 — 5,308 Total Construction $ 75,794 $ 104,702 $ 88,889 $ 11,010 $ 18,399 $ 4,919 $ 17,172 $ 320,885 Other Pass $ — $ — $ — $ — $ — $ 4,659 $ 219 $ 4,878 Special Mention — — — — 122,895 61,651 — 184,546 Substandard — — — 88,345 48,524 48,864 — 185,733 Total Other Loans $ — $ — $ — $ 88,345 $ 171,419 $ 115,174 $ 219 $ 375,157 Total Portfolio Loans Pass $ 238,608 $ 436,673 $ 377,744 $ 474,705 $ 167,863 $ 680,136 $ 94,094 $ 2,469,823 Special Mention — 10 6,031 8,156 125,941 63,594 — 203,732 Substandard 230 126 5,343 94,105 85,415 57,880 — 243,099 Total Portfolio Loans $ 238,838 $ 436,809 $ 389,118 $ 576,966 $ 379,219 $ 801,610 $ 94,094 $ 2,916,654 The following table presents loan balances by year of origination and performing and nonperforming status for our portfolio segments as of June 30, 2021. (Dollars in Thousands) 2021 2020 2019 2018 2017 2016 and Prior Revolving Total Commercial Real Estate Performing $ 58,201 $ 161,432 $ 202,321 $ 343,119 $ 156,915 $ 362,375 $ 52,651 $ 1,337,014 Nonperforming 230 — 471 — — 77 — 778 Total Commercial Real Estate $ 58,431 $ 161,432 $ 202,792 $ 343,119 $ 156,915 $ 362,452 $ 52,651 $ 1,337,792 Commercial and Industrial Performing $ 25,615 $ 58,546 $ 14,820 $ 37,328 $ 23,016 $ 241,028 $ 12,815 $ 413,168 Nonperforming — — 454 220 — — — 674 Total Commercial and Industrial $ 25,615 $ 58,546 $ 15,274 $ 37,548 $ 23,016 $ 241,028 $ 12,815 $ 413,842 Residential Mortgages Performing $ 74,684 $ 98,690 $ 79,165 $ 95,727 $ 8,937 $ 54,702 $ 10,896 $ 422,801 Nonperforming — — 1,194 355 225 1,067 — 2,841 Total Residential Mortgages $ 74,684 $ 98,690 $ 80,359 $ 96,082 $ 9,162 $ 55,769 $ 10,896 $ 425,642 Other Consumer Performing $ 4,314 $ 13,427 $ 1,804 $ 794 $ 298 $ 22,268 $ 341 $ 43,246 Nonperforming — 12 — 68 10 — — 90 Total Other Consumer $ 4,314 $ 13,439 $ 1,804 $ 862 $ 308 $ 22,268 $ 341 $ 43,336 Construction Performing $ 75,794 $ 104,595 $ 85,666 $ 11,010 $ 16,658 $ 4,805 $ 17,172 $ 315,700 Nonperforming — 107 3,223 — 1,741 114 — 5,185 Total Construction $ 75,794 $ 104,702 $ 88,889 $ 11,010 $ 18,399 $ 4,919 $ 17,172 $ 320,885 Other Performing $ — $ — $ — $ 88,345 $ 171,419 $ 115,174 $ 219 $ 375,157 Nonperforming — — — — — — — — Total Other Loans $ — $ — $ — $ 88,345 $ 171,419 $ 115,174 $ 219 $ 375,157 Total Portfolio Loans Performing $ 238,608 $ 436,690 $ 383,776 $ 576,323 $ 377,243 $ 800,352 $ 94,094 $ 2,907,086 Nonperforming 230 119 5,342 643 1,976 1,258 — 9,568 Total Portfolio Loans $ 238,838 $ 436,809 $ 389,118 $ 576,966 $ 379,219 $ 801,610 $ 94,094 $ 2,916,654 June 30, 2021 (Dollars in Thousands) Current Loans Loans Total Nonaccrual Total Portfolio Commercial Real Estate $ 1,331,082 $ 80 $ 5,852 $ 5,932 $ 778 $ 1,337,792 Commercial and Industrial 413,044 31 93 124 674 413,842 Residential Mortgages 422,296 505 — 505 2,841 425,642 Other Consumer 42,919 207 120 327 90 43,336 Construction 315,684 16 — 16 5,185 320,885 Other 375,157 — — — — 375,157 Total (1) $ 2,900,182 $ 839 $ 6,065 $ 6,904 $ 9,568 $ 2,916,654 (1) Refer to Note 1, Basis of Presentation for details of reclassification of our portfolio segments related to the adoption of ASU 2016-13 Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. December 31, 2020 (Dollars in Thousands) Current Loans Loans Total Nonaccrual Total Portfolio Commercial Real Estate $ 1,428,092 $ 3,487 $ 329 $ 3,816 $ 21,891 $ 1,453,799 Commercial and Industrial 556,324 194 190 384 456 557,164 Construction 400,775 193 91 284 5,331 406,390 Residential Mortgages 466,688 1,347 — 1,347 4,135 472,170 Other Consumer 56,890 278 295 573 184 57,647 Total $ 2,908,769 $ 5,499 $ 905 $ 6,404 $ 31,997 $ 2,947,170 The following table presents loans on nonaccrual status and loans past due 90 days or more and still accruing by class of loan as of June 30, 2021. For the three and six months ended June 30, 2021, the amount of interest income on nonaccrual loans was immaterial. There were no loans at June 30, 2021 that were past due more than 90 days and still accruing. June 30, 2021 (Dollars in Thousands) Beginning of End of Nonaccrual Past Due Commercial Real Estate $ 21,891 $ 778 $ 146 $ — Commercial and Industrial 456 674 — — Residential Mortgages 4,135 2,841 — — Other Consumer 184 90 — — Construction 5,331 5,185 3,073 — Other — — — — Total Portfolio Loans $ 31,997 $ 9,568 $ 3,219 $ — A loan is considered impaired when it is transferred to nonaccrual status, or remains on accrual status but is considered a TDR. Impaired loans with a commitment of $1.0 million or more are individually evaluated. During the three and six months ended June 30, 2021, no material amount of interest income was recognized on individually evaluated loans subsequent to their classification as individually evaluated loans. The following table presents the amortized cost basis of individually evaluated loans as of June 30, 2021. Changes in the fair value of the collateral for individually evaluated loans are reported as credit loss expense or a reversal of credit loss expense in the period of change. June 30, 2021 Type of Collateral (Dollars in Thousands) Real Estate Commercial Real Estate $ 3,208 Commercial and Industrial — Residential Mortgages — Other Consumer — Construction 4,811 Other — Total $ 8,019 The following table presents activity in the ACL and ALL for the three and six months ended June 30, 2021 and June 30, 2020, respectively: Three Months Ended June 30, 2021 (Dollars in Thousands) Commercial Commercial Residential Other Construction Other (1) Total Allowance for Credit Losses on Loans: Balance at Beginning of Period $ 42,342 $ 4,905 $ 5,171 $ 1,347 $ 7,106 $ 56,001 $ 116,872 Provision for Credit Losses on Loans (6,103) (185) 217 269 1,039 5,730 967 Charge-offs (8,238) (7) (22) (539) — — (8,806) Recoveries 140 1 1 144 — — 286 Net (Charge-offs) / Recoveries (8,098) (6) (21) (395) — — (8,520) Balance at End of Period $ 28,141 $ 4,714 $ 5,367 $ 1,221 $ 8,145 $ 61,731 $ 109,319 (1) In connection with our adoption of Topic 326, we made changes to our loan portfolio segments to align with the methodology applied in determining the allowance under CECL. Our new segmentation breaks out Other loans from our original loan segments: CRE, C&I , residential mortgages and construction. The allowance balance at the beginning of period was reclassified to Other from their original loan segments: CRE, C&I, residential mortgages and construction to conform to current presentation. Six Months Ended June 30, 2021 (Dollars in Thousands) Commercial Commercial Residential Other Construction Other (1) Total Allowance for Credit Losses on Loans: Balance at Beginning of Period $ 34,871 $ 3,643 $ 2,000 $ 2,479 $ 6,357 $ 4,724 $ 54,074 Impact of CECL Adoption 6,587 1,379 3,356 (877) (80) 51,277 61,642 Provision for Credit Losses on Loans (5,219) (302) 61 747 1,807 5,730 2,824 Charge-offs (8,238) (8) (217) (1,409) — — (9,872) Recoveries 140 2 167 281 61 — 651 Net (Charge-offs) / Recoveries (8,098) (6) (50) (1,128) 61 — (9,221) Balance at End of Period $ 28,141 $ 4,714 $ 5,367 $ 1,221 $ 8,145 $ 61,731 $ 109,319 (1) In connection with our adoption of Topic 326, we made changes to our loan portfolio segments to align with the methodology applied in determining the allowance under CECL. Our new segmentation breaks out Other loans from our original loan segments: CRE, C&I , residential mortgages and construction. The allowance balance at the beginning of period was reclassified to Other from their original loan segments: CRE, C&I, residential mortgages and construction to conform to current presentation. Three Months Ended June 30, 2020 (Dollars in Thousands) Commercial Commercial Construction Residential Other Total Allowance for Loan Losses on Loans: Balance at Beginning of Period $ 26,073 $ 3,990 $ 7,334 $ 1,811 $ 3,734 $ 42,942 Provision for Loan Losses on Loans 2,513 848 1,043 390 679 5,473 Charge-offs (40) (8) — (15) (1,094) (1,157) Recoveries — 1 — — 146 147 Net (Charge-offs) / Recoveries (40) (7) — (15) (948) (1,010) Balance at End of Period $ 28,546 $ 4,831 $ 8,377 $ 2,186 $ 3,465 $ 47,405 Six Months Ended June 30, 2020 (Dollars in Thousands) Commercial Commercial Construction Residential Other Total Allowance for Loan Losses on Loans: Balance at Beginning of Period $ 24,706 $ 3,601 $ 5,420 $ 1,736 $ 3,299 $ 38,762 Provision for Loan Losses on Loans 3,173 1,274 2,957 470 2,397 10,271 Charge-offs (40) (46) — (20) (2,621) (2,727) Recoveries 707 2 — — 390 1,099 Net Recoveries / (Charge-offs) 667 (44) — (20) (2,231) (1,628) Balance at End of Period $ 28,546 $ 4,831 $ 8,377 $ 2,186 $ 3,465 $ 47,405 The adoption of Topic 326 resulted in an increase to our ACL of $61.6 million on January 1, 2021. The Day 1 model introduced a segmented pool of loans for discrete analysis. This segmented pool had an aggregate principal balance of $373.4 million at March 31, 2021, the initial break-out, and included unique risk attributes considered inconsistent with current underwriting standards. The analysis applied to this pool resulted in an increase in expected credit losses of $51.3 million, at adoption, and is disclosed in the Other segment in the 2021 tables below. At December 31, 2020, the aforementioned Other segment within the probable incurred loss model included $102.5 million of impaired loans and the remaining $270.9 million were not impaired and remained in their respective segments. Based on the fair value of collateral, the specific reserves on the impaired loans totaled zero and the general reserves for the remainder of these loans totaled $4.7 million at December 31, 2020. Our CECL methodology introduced a modified discounted cash flow methodology based on expected cash flow changes in the future for the Other segment. A significant population of the Other segment was not impaired under the probable incurred loss model and therefore not subject to a collateral dependent specific reserve analysis. For the population of the Other segment that was impaired under the incurred loss model, based on collateral values, the specific reserves totaled zero. Certain portions of the CECL model are inherently subjective and include, but are not limited to, estimates with respect to: prepayment speeds, the timing of prepayments, potential losses given default, discount rates and the timing of future cash flows. Management utilizes widely published economic forecasts as the basis for the regression analysis used to estimate the probability of default in the baseline model. The peaks and troughs of these forecasts serve as guardrails for potential subjective adjustments. In addition to considering the outcomes based on the range of forecasts, management recognizes that the assumptions used in economic forecasts may not perfectly align with our market area, risk profile or unique attributes of our portfolio along with other important considerations. Severe changes in forecasts can also create significant variability and management must assess not only the absolute balance of reserves but also consider the appropriateness of the velocity of change. Therefore, management developed a framework to assess the tolerance and reasonableness of the CECL modeling process by challenging certain elements of the forecasts, when appropriate. These outcomes, known as “challenger models,” provide opportunities to examine and subjectively adjust the CECL model output and are designed to be counter cyclical, thereby reducing variability. An expected credit loss of $56.0 million upon adoption, which is an increase from the $4.7 million under the probable incurred loss model, was established based on the discounted cash flow method with a discount rate, which was quantitatively adjusted. The ACL increased $55.2 million to $109.3 million at June 30, 2021 compared to $54.1 million at December 31, 2020 primarily due to the Day 1 adoption of CECL of $61.6 million. In the first six months of 2021, adjustments to the CECL model were made to account for additional potential deterioration in credit quality with respect to certain hospitality loans on deferral. Management reviews and analyzes the monthly operating statements of commercial clients in the deferral program. The recovery has not been as sharp as management had anticipated as observed in other hospitality credits. Hospitality loans on deferral at the end of Phase III of the deferral program, which expired on June 30, 2021, had an aggregate principal balances of $50.9 million, which resulted in a current expected credit loss of $11.7 million. The Day 1 model recognized the deterioration of loans with an aggregate principal balance of $42.8 million which resulted in current expected losses of $10.2 million as of January 1, 2021. Between the Day 1 model and the model ended June 30, 2021 a loan with a principal balance of $8.1 million experienced additional deterioration resulting in additional current expected losses of $1.5 million in the first quarter of 2021. Included in the provision for unfunded commitments for the three and six months ended June 30, 2021 was a release of $0.6 million and $0.9 million for the life-of-loss reserve for unfunded commitments. The following table presents the recorded investment in commercial loan classes by internally assigned risk ratings and loan classes by performing and nonperforming status as of June 30, 2021: June 30, 2021 (Dollars in Thousands) Commercial Commercial Residential Mortgage Other Consumer Construction Other Total Portfolio Pass $ 1,272,460 $ 413,144 $ 421,173 $ 43,212 $ 314,956 $ 4,878 $ 2,469,823 Special Mention 17,972 23 570 — 621 184,546 203,732 Substandard 47,360 675 3,899 124 5,308 185,733 243,099 Doubtful — — — — — — — Loss — — — — — — — Total Portfolio Loans $ 1,337,792 $ 413,842 $ 425,642 $ 43,336 $ 320,885 $ 375,157 $ 2,916,654 Performing $ 1,337,014 $ 413,168 $ 422,801 $ 43,246 $ 315,700 $ 375,157 $ 2,907,086 Nonperforming 778 674 2,841 90 5,185 — 9,568 Total Portfolio Loans $ 1,337,792 $ 413,842 $ 425,642 $ 43,336 $ 320,885 $ 375,157 $ 2,916,654 Prior to the adoption of Topic 326 on January 1, 2021, we calculated our allowance for loan losses using an incurred loan loss methodology. The following tables are disclosures related to the allowance for loan losses in prior periods. The following table presents the recorded investment in commercial loan classes by internally assigned risk ratings and loan classes by performing and nonperforming status as of December 31, 2020: December 31, 2020 (Dollars in Thousands) Commercial Commercial Construction Residential Other Total Pass $ 1,281,106 $ 478,536 $ 289,781 $ 415,773 $ 57,418 $ 2,522,614 Special Mention 126,535 48 58,899 723 6 186,211 Substandard 46,158 78,580 57,710 55,674 223 238,345 Doubtful — — — — — — Loss — — — — — — Total Portfolio Loans $ 1,453,799 $ 557,164 $ 406,390 $ 472,170 $ 57,647 $ 2,947,170 Performing $ 1,431,908 $ 556,708 $ 401,059 $ 468,035 $ 57,463 $ 2,915,173 Nonperforming 21,891 456 5,331 4,135 184 31,997 Total Portfolio Loans $ 1,453,799 $ 557,164 $ 406,390 $ 472,170 $ 57,647 $ 2,947,170 The following tables present the balances in the ALL and the recorded investment in the loan balances based on impairment method as of December 31, 2020: December 31, 2020 (Dollars in Thousands) Commercial Commercial Construction Residential Other Total Allowance for Loan Losses: Individually Evaluated for Impairment $ 13,773 $ — $ 1,477 $ — $ — $ 15,250 Collectively Evaluated for Impairment 22,655 5,064 6,527 2,099 2,479 38,824 Total Allowance for Loan Losses $ 36,428 $ 5,064 $ 8,004 $ 2,099 $ 2,479 $ 54,074 Total Portfolio Loans: Individually Evaluated for Impairment $ 27,666 $ — $ 56,987 $ 50,618 $ — $ 135,271 Collectively Evaluated for Impairment 1,426,133 557,164 349,403 421,552 57,647 2,811,899 Total Portfolio Loans $ 1,453,799 $ 557,164 $ 406,390 $ 472,170 $ 57,647 $ 2,947,170 The recorded investment in loans excludes accrued interest receivable. Individually evaluated loans do not include certain TDR loans which are less than $1.0 million. The following table includes the recorded investment and unpaid principal balance for impaired loans with the associated allowance, if applicable, at December 31, 2020. (Dollars in Thousands) Unpaid Recorded Specific Loans without a Specific Valuation Allowance Commercial Real Estate $ 3,236 $ 3,236 $ — Construction 55,248 55,248 — Residential Mortgages 50,618 50,618 — Loans with a Specific Valuation Allowance Commercial Real Estate 24,430 24,430 13,773 Commercial & Industrial — — — Construction 1,739 1,739 1,477 Total by Category Commercial Real Estate 27,666 27,666 13,773 Commercial & Industrial — — — Construction 56,987 56,987 1,477 Residential Mortgages 50,618 50,618 — Total Impaired Loans $ 135,271 $ 135,271 $ 15,250 The following table presents the year-to-date average recorded investment and interest income recognized on individually evaluated loans for the three and six months ended June 30, 2020: June 30, 2020 Three Months Ended June 30, 2020 Six Months Ended June 30, 2020 (Dollars in Thousands) Average Investment on Impaired Loans Interest Income Recognized Interest Income Recognized Loans without a Specific Valuation Allowance Commercial Real Estate $ 3,816 $ 32 $ 64 Construction 5,247 — — Residential Mortgages — — — Loans with a Specific Valuation Allowance Commercial Real Estate 28,727 — — Commercial & Industrial 307 — — Construction 53,752 595 1,008 Residential Mortgages 52,099 428 1,048 Total by Category Commercial Real Estate 32,543 32 64 Commercial & Industrial 307 — — Construction 58,999 595 1,008 Residential Mortgages 52,099 428 1,048 Total Impaired Loans $ 143,948 $ 1,055 $ 2,120 |
