Loans | Loans Loans held for investment are categorized into the following segments: • Construction and land development: Loans are extended to both commercial and consumer customers which are collateralized by and for the purpose of funding land development and construction projects, including 1-4 family residential construction, multi-family property and non-farm residential property where the primary source of repayment is from proceeds of the sale, refinancing or permanent financing of the property. • Commercial real estate - owner-occupied: Loans are extended to commercial customers for the purpose of acquiring real estate to be occupied by the borrower's business. These loans are collateralized by the subject property and the repayment of these loans is largely dependent on the performance of the company occupying the property. • Commercial real estate - non owner-occupied: Loans are extended to commercial customers for the purpose of acquiring commercial property where occupancy by the borrower is not their primary intent. These loans are viewed primarily as cash flow loans, collateralized by the subject property, and the repayment of these loans is largely dependent on rental income from the successful operation of the property. • Residential real estate: Loans are extended to consumer customers and collateralized primarily by 1-4 family residential properties and include fixed and variable rate mortgages, home equity mortgages, and home equity lines of credit. Loans are primarily written based on conventional loan agency guidelines, including loans that exceed agency value limitations. Sources of repayment may be from the occupant of the residential property or from cash flows on rental income from the successful operation of the property. • Commercial and financial: Loans are extended to commercial customers. The purpose of the loans can be working capital, physical asset expansion, asset acquisition or other business purposes. Loans may be collateralized by assets owned by the borrower or the borrower's business. Commercial loans are based primarily on the historical and projected cash flow of the borrower's business and secondarily on the capacity of credit enhancements, guarantees and underlying collateral provided by the borrower. • Consumer: Loans are extended to consumer customers. The segment includes both installment loans and lines of credit which may be collateralized or non-collateralized. • Paycheck Protection Program (“PPP”): Loans originated under a temporary program established by the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”), and extended by the Economic Aid Act. Under the terms of the program, balances may be forgiven if the borrower uses the funds in a manner consistent with the program guidelines, and repayment is guaranteed by the U.S. government. The following tables present net loan balances by segment as of: March 31, 2022 (In thousands) Portfolio Loans Acquired Non-PCD Loans PCD Loans Total Construction and land development $ 226,149 $ 33,231 $ 41 $ 259,421 Commercial real estate - owner-occupied 990,929 273,498 20,088 1,284,515 Commercial real estate - non owner-occupied 1,400,270 488,400 77,480 1,966,150 Residential real estate 1,379,911 214,401 5,333 1,599,645 Commercial and financial 1,007,064 110,161 15,281 1,132,506 Consumer 165,650 4,074 — 169,724 Paycheck Protection Program 29,137 10,119 — 39,256 Totals $ 5,199,110 $ 1,133,884 $ 118,223 $ 6,451,217 December 31, 2021 (In thousands) Portfolio Loans Acquired Non-PCD Loans PCD Loans Total Construction and land development $ 199,341 $ 31,438 $ 45 $ 230,824 Commercial real estate - owner occupied 983,517 186,812 27,445 1,197,774 Commercial real estate - non-owner occupied 1,278,180 382,554 75,705 1,736,439 Residential real estate 1,261,306 156,957 7,091 1,425,354 Commercial and financial 968,318 84,395 16,643 1,069,356 Consumer 169,507 4,658 10 174,175 Paycheck Protection Program 69,503 21,604 — 91,107 Totals $ 4,929,672 $ 868,418 $ 126,939 $ 5,925,029 The amortized cost basis of loans at March 31, 2022 included net deferred costs of $27.6 million on non-PPP portfolio loans and net deferred fees of $1.0 million on PPP loans. At December 31, 2021, the amortized cost basis included net deferred costs of $31.0 million on non-PPP portfolio loans and net deferred fees of $2.4 million on PPP loans. At March 31, 2022, the remaining fair value adjustments on acquired loans were $24.1 million, or 1.9% of the outstanding acquired loan balances, compared to $23.1 million, or 2.3% of the acquired loan balances at December 31, 2021. These amounts are accreted into interest income over the remaining lives of the related loans on a level yield basis. Accrued interest receivable is included within Other Assets and was $15.5 million and $14.7 million at March 31, 2022 and December 31, 2021, respectively. The following tables present the status of net loan balances as of March 31, 2022 and December 31, 2021. March 31, 2022 (In thousands) Current Accruing Accruing Accruing Nonaccrual Total Portfolio Loans Construction and land development $ 225,921 $ — $ — $ — $ 228 $ 226,149 Commercial real estate - owner-occupied 990,260 — — — 669 990,929 Commercial real estate - non owner-occupied 1,399,902 35 — — 333 1,400,270 Residential real estate 1,372,141 155 275 — 7,340 1,379,911 Commercial and financial 1,000,983 2,738 — 40 3,303 1,007,064 Consumer 164,430 638 458 — 124 165,650 Paycheck Protection Program 1 29,109 28 — — — 29,137 Total Portfolio Loans $ 5,182,746 $ 3,594 $ 733 $ 40 $ 11,997 $ 5,199,110 Acquired Non-PCD Loans Construction and land development $ 33,231 $ — $ — $ — $ — $ 33,231 Commercial real estate - owner-occupied 273,498 — — — — 273,498 Commercial real estate - non owner-occupied 487,175 — — — 1,225 488,400 Residential real estate 213,208 — — — 1,193 214,401 Commercial and financial 109,805 282 — — 74 110,161 Consumer 3,837 — — — 237 4,074 Paycheck Protection Program 1 10,119 — — — — 10,119 Total Acquired Non-PCD Loans $ 1,130,873 $ 282 $ — $ — $ 2,729 $ 1,133,884 PCD Loans Construction and land development $ 37 $ — $ — $ — $ 4 $ 41 Commercial real estate - owner-occupied 16,915 — — — 3,173 20,088 Commercial real estate - non owner-occupied 74,256 — — — 3,224 77,480 Residential real estate 4,624 — — — 709 5,333 Commercial and financial 10,908 — — — 4,373 15,281 Consumer — — — — — — Total PCD Loans $ 106,740 $ — $ — $ — $ 11,483 $ 118,223 Total Loans $ 6,420,359 $ 3,876 $ 733 $ 40 $ 26,209 $ 6,451,217 1 Paycheck Protection Program loans are not reflected as past due when forgiveness applications are being processed by the SBA. Repayment of principal and interest is fully guaranteed by the U.S. government. December 31, 2021 (In thousands) Current Accruing Accruing Accruing Nonaccrual Total Portfolio Loans Construction and land development $ 199,087 $ — $ — $ — $ 254 $ 199,341 Commercial real estate - owner occupied 982,804 — — — 713 983,517 Commercial real estate - non-owner occupied 1,276,582 — — — 1,598 1,278,180 Residential real estate 1,248,160 3,457 143 — 9,546 1,261,306 Commercial and financial 963,828 851 41 — 3,598 968,318 Consumer 168,791 565 23 15 113 169,507 Paycheck Protection Program 1 69,434 — — 69 — 69,503 Total Portfolio Loans $ 4,908,686 $ 4,873 $ 207 $ 84 $ 15,822 $ 4,929,672 Acquired Non-PCD Loans Construction and land development $ 31,438 $ — $ — $ — $ — $ 31,438 Commercial real estate - owner occupied 186,652 — 160 — — 186,812 Commercial real estate - non-owner occupied 381,510 — — — 1,044 382,554 Residential real estate 154,981 182 — — 1,794 156,957 Commercial and financial 84,180 — 40 — 175 84,395 Consumer 4,082 135 — — 441 4,658 Paycheck Protection Program 1 21,567 — — 37 — 21,604 Total Acquired Non-PCD Loans $ 864,410 $ 317 $ 200 $ 37 $ 3,454 $ 868,418 PCD Loans Construction and land development $ 40 $ — $ — $ — $ 5 $ 45 Commercial real estate - owner occupied 24,192 — — — 3,253 27,445 Commercial real estate - non-owner occupied 72,442 — — — 3,263 75,705 Residential real estate 5,386 — — — 1,705 7,091 Commercial and financial 13,547 — — — 3,096 16,643 Consumer 10 — — — — 10 Total PCD Loans $ 115,617 $ — $ — $ — $ 11,322 $ 126,939 Total Loans $ 5,888,713 $ 5,190 $ 407 $ 121 $ 30,598 $ 5,925,029 1 Paycheck Protection Program loans are not reflected as past due when forgiveness applications are being processed by the SBA. Repayment of principal and interest is fully guaranteed by the U.S. government. All interest accrued but not received for loans placed on nonaccrual is reversed against interest income. Interest subsequently received on such loans is accounted for under the cost-recovery method, whereby interest income is not recognized until the loan balance is reduced to zero. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current, and future payments are reasonably assured. The Company recognized $0.8 million and $0.2 million in interest income on nonaccrual loans during the three months ended March 31, 2022 and 2021, respectively. The following tables present net balances of loans on nonaccrual status and the related allowance for credit losses, if any, as of: March 31, 2022 (In thousands) Nonaccrual Loans With No Related Allowance Nonaccrual Loans With an Allowance Total Nonaccrual Loans Allowance for Credit Losses Construction and land development $ 12 $ 220 $ 232 $ 89 Commercial real estate - owner-occupied 2,871 971 3,842 380 Commercial real estate - non owner-occupied 3,406 1,376 4,782 18 Residential real estate 9,145 97 9,242 35 Commercial and financial 4,084 3,666 7,750 1,945 Consumer 23 338 361 329 Totals $ 19,541 $ 6,668 $ 26,209 $ 2,796 December 31, 2021 (In thousands) Nonaccrual Loans With No Related Allowance Nonaccrual Loans With an Allowance Total Nonaccrual Loans Allowance for Credit Losses Construction and land development $ 37 $ 222 $ 259 $ 92 Commercial real estate - owner-occupied 2,976 990 3,966 419 Commercial real estate - non owner-occupied 4,490 1,415 5,905 27 Residential real estate 12,358 687 13,045 357 Commercial and financial 2,676 4,193 6,869 2,384 Consumer 29 525 554 525 Totals $ 22,566 $ 8,032 $ 30,598 $ 3,804 Collateral-Dependent Loans Loans are considered collateral-dependent when the repayment, based on the Company's assessment as of the reporting date, is expected to be provided substantially through the operation or sale of the underlying collateral and there are no other available and reliable sources of repayment. The following table presents collateral-dependent loans as of: (In thousands) March 31, 2022 December 31, 2021 Construction and land development $ 248 $ 271 Commercial real estate - owner-occupied 4,581 4,706 Commercial real estate - non owner-occupied 3,619 4,923 Residential real estate 12,482 16,334 Commercial and financial 8,033 8,741 Consumer 478 741 Totals $ 29,441 $ 35,716 Loans by Risk Rating The Company utilizes an internal asset classification system as a means of identifying problem and potential problem loans. The following classifications are used to categorize loans under the internal classification system: • Pass: Loans that are not problem loans or potential problem loans are considered to be pass-rated. • Special Mention: Loans that do not currently expose the Company to sufficient risk to warrant classification in the Substandard or Doubtful categories, but possess weaknesses that deserve management's close attention are deemed to be Special Mention. • Substandard: Loans with the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected. • Substandard Impaired: Loans typically placed on nonaccrual and considered to be collateral-dependent or accruing TDRs. • Doubtful: Loans that have all the weaknesses inherent in those classified Substandard with the added characteristic that the weakness present makes collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable. The principal balance of loans classified as doubtful are likely to be charged off. The following tables present the risk rating of loans by year of origination as of: March 31, 2022 (In thousands) 2022 2021 2020 2019 2018 Prior Revolving Total Construction and Land Development Risk Ratings: Pass $ 15,252 $ 118,289 $ 22,227 $ 30,059 $ 16,221 $ 16,738 $ 40,387 $ 259,173 Special Mention — — — — — — — — Substandard — — — — — 7 — 7 Substandard Impaired — — — — 220 21 — 241 Doubtful — — — — — — — — Total $ 15,252 $ 118,289 $ 22,227 $ 30,059 $ 16,441 $ 16,766 $ 40,387 $ 259,421 Commercial real estate - owner-occupied Risk Ratings: Pass $ 57,482 $ 216,122 $ 161,838 $ 192,208 $ 128,139 $ 492,637 $ 11,429 $ 1,259,855 Special Mention — — 6,464 5,322 641 1,528 — 13,955 Substandard — — — — — 5,359 350 5,709 Substandard Impaired — — — 2,672 310 2,014 — 4,996 Doubtful — — — — — — — — Total $ 57,482 $ 216,122 $ 168,302 $ 200,202 $ 129,090 $ 501,538 $ 11,779 $ 1,284,515 Commercial real estate - non owner-occupied Risk Ratings: Pass $ 174,966 $ 415,704 $ 227,927 $ 305,852 $ 186,363 $ 578,279 $ 7,563 $ 1,896,654 Special Mention — — — 837 — 10,640 — 11,477 Substandard — — 4,753 5,351 23,146 19,242 — 52,492 Substandard Impaired — — 1,044 1,849 — 2,634 — 5,527 Doubtful — — — — — — — — Total $ 174,966 $ 415,704 $ 233,724 $ 313,889 $ 209,509 $ 610,795 $ 7,563 $ 1,966,150 Residential real estate Risk Ratings: Pass $ 14,211 $ 564,750 $ 120,963 $ 90,420 $ 110,413 $ 311,573 $ 370,928 $ 1,583,258 Special Mention — — — — 13 1,120 75 1,208 Substandard — — 338 — 55 1,480 201 2,074 Substandard Impaired — — 144 134 38 9,777 3,012 13,105 Doubtful — — — — — — — — Total $ 14,211 $ 564,750 $ 121,445 $ 90,554 $ 110,519 $ 323,950 $ 374,216 $ 1,599,645 March 31, 2022 (In thousands) 2022 2021 2020 2019 2018 Prior Revolving Total Commercial and financial Risk Ratings: Pass $ 51,836 $ 351,023 $ 176,311 $ 90,587 $ 63,294 $ 89,736 $ 271,721 $ 1,094,508 Special Mention — 504 14,956 449 235 637 385 17,166 Substandard — — 212 2,466 2,104 3,365 273 8,420 Substandard Impaired — — 219 4,534 4,615 2,945 99 12,412 Doubtful — — — — — — — — Total $ 51,836 $ 351,527 $ 191,698 $ 98,036 $ 70,248 $ 96,683 $ 272,478 $ 1,132,506 Consumer Risk Ratings: Pass $ 9,049 $ 46,934 $ 28,939 $ 23,469 $ 15,271 $ 20,920 $ 21,607 $ 166,189 Special Mention — 7 43 100 38 437 1,748 2,373 Substandard — 437 — 8 — — 191 636 Substandard Impaired — 7 21 89 34 153 222 526 Doubtful — — — — — — — — Total $ 9,049 $ 47,385 $ 29,003 $ 23,666 $ 15,343 $ 21,510 $ 23,768 $ 169,724 Paycheck Protection Program Risk Ratings: Pass $ — $ 37,304 $ 1,952 $ — $ — $ — $ — $ 39,256 Total $ — $ 37,304 $ 1,952 $ — $ — $ — $ — $ 39,256 Consolidated Risk Ratings: Pass $ 322,796 $ 1,750,126 $ 740,157 $ 732,595 $ 519,701 $ 1,509,883 $ 723,635 $ 6,298,893 Special Mention — 511 21,463 6,708 927 14,362 2,208 46,179 Substandard — 437 5,303 7,825 25,305 29,453 1,015 69,338 Substandard Impaired — 7 1,428 9,278 5,217 17,544 3,333 36,807 Doubtful — — — — — — — — Total $ 322,796 $ 1,751,081 $ 768,351 $ 756,406 $ 551,150 $ 1,571,242 $ 730,191 $ 6,451,217 December 31, 2021 (In thousands) 2021 2020 2019 2018 2017 Prior Revolving Total Construction and Land Development Risk Ratings: Pass $ 94,318 $ 23,860 $ 38,058 $ 25,507 $ 3,995 $ 15,466 $ 29,349 $ 230,553 Special Mention — — — — — — — — Substandard — — — — — — — — Substandard Impaired — — — 222 — 49 — 271 Doubtful — — — — — — — — Total $ 94,318 $ 23,860 $ 38,058 $ 25,729 $ 3,995 $ 15,515 $ 29,349 $ 230,824 Commercial real estate - owner-occupied Risk Ratings: Pass $ 205,404 $ 154,432 $ 179,786 $ 132,353 $ 125,763 $ 363,986 $ 10,005 $ 1,171,729 Special Mention — 6,527 5,370 649 218 3,250 — 16,014 Substandard — — — — 3,290 1,610 — 4,900 Substandard Impaired — — 2,742 310 596 1,483 — 5,131 Doubtful — — — — — — — — Total $ 205,404 $ 160,959 $ 187,898 $ 133,312 $ 129,867 $ 370,329 $ 10,005 $ 1,197,774 December 31, 2021 (In thousands) 2021 2020 2019 2018 2017 Prior Revolving Total Commercial real estate - non owner-occupied Risk Ratings: Pass $ 395,308 $ 207,824 $ 298,021 $ 186,339 $ 110,990 $ 460,435 $ 6,477 $ 1,665,394 Special Mention — — 844 — 289 13,850 — 14,983 Substandard — 4,776 3,009 23,206 1,900 17,266 — 50,157 Substandard Impaired — 1,044 1,849 — 326 2,686 — 5,905 Doubtful — — — — — — — — Total $ 395,308 $ 213,644 $ 303,723 $ 209,545 $ 113,505 $ 494,237 $ 6,477 $ 1,736,439 Residential real estate Risk Ratings: Pass $ 394,547 $ 114,364 $ 90,566 $ 119,836 $ 118,556 $ 213,950 $ 354,439 $ 1,406,258 Special Mention — — — 70 — 1,243 532 1,845 Substandard — 340 — — 58 422 86 906 Substandard Impaired — 149 724 39 4,415 8,507 2,511 16,345 Doubtful — — — — — — — — Total $ 394,547 $ 114,853 $ 91,290 $ 119,945 $ 123,029 $ 224,122 $ 357,568 $ 1,425,354 Commercial and financial Risk Ratings: Pass $ 340,826 $ 180,677 $ 97,072 $ 68,232 $ 39,331 $ 56,053 $ 246,568 $ 1,028,759 Special Mention 530 15,587 — 237 251 84 876 17,565 Substandard — 371 2,605 3,594 1,436 3,217 339 11,562 Substandard Impaired — 196 4,561 3,694 1,371 1,520 128 11,470 Doubtful — — — — — — — — Total $ 341,356 $ 196,831 $ 104,238 $ 75,757 $ 42,389 $ 60,874 $ 247,911 $ 1,069,356 Consumer Risk Ratings: Pass $ 45,063 $ 31,342 $ 26,194 $ 17,300 $ 9,979 $ 16,019 $ 25,418 $ 171,315 Special Mention — 24 431 37 167 3 1,199 1,861 Substandard — — 18 — 17 — 223 258 Substandard Impaired — — 92 23 74 118 434 741 Doubtful — — — — — — — — Total $ 45,063 $ 31,366 $ 26,735 $ 17,360 $ 10,237 $ 16,140 $ 27,274 $ 174,175 Paycheck Protection Program Risk Ratings: Pass $ 87,036 $ 4,071 $ — $ — $ — $ — $ — $ 91,107 Total $ 87,036 $ 4,071 $ — $ — $ — $ — $ — $ 91,107 Consolidated Risk Ratings: Pass $ 1,562,502 $ 716,570 $ 729,697 $ 549,567 $ 408,614 $ 1,125,909 $ 672,256 $ 5,765,115 Special Mention 530 22,138 6,645 993 925 18,430 2,607 52,268 Substandard — 5,487 5,632 26,800 6,701 22,515 648 67,783 Substandard Impaired — 1,389 9,968 4,288 6,782 14,363 3,073 39,863 Doubtful — — — — — — — — Total $ 1,563,032 $ 745,584 $ 751,942 $ 581,648 $ 423,022 $ 1,181,217 $ 678,584 $ 5,925,029 Troubled Debt Restructured Loans The Company’s TDR concessions granted to certain borrowers generally do not include forgiveness of principal balances, but may include interest rate reductions, an extension of the amortization period and/or converting the loan to interest only for a limited period of time. Loan modifications are not reported in calendar years after modification if the loans were modified at an interest rate equal to the yields of new loan originations with comparable risk and the loans are performing based on the terms of the restructuring agreements. The following table presents loans that were modified in a troubled debt restructuring during the three months ended March 31, 2022 and March 31, 2021: Three Months Ended March 31, 2022 2021 (In thousands) Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Number of Contracts Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment Construction and land development — $ — $ — — $ — $ — Commercial real estate - owner-occupied — — — — — — Commercial real estate - non owner-occupied — — — — — — Residential real estate 3 785 785 1 27 27 Commercial and financial 1 33 33 — — — Consumer 4 22 22 — — — Totals 8 $ 840 $ 840 1 $ 27 $ 27 The TDRs described above resulted in a specific allowance for credit losses of $0.2 million as of March 31, 2022 and March 31, 2021. During the three months ended March 31, 2022, there was one default totaling $33 thousand on a loan that had been modified to a TDR within the preceding twelve months. During the three months ended March 31, 2021, there were no defaults on loans that had been modified to a TDR within the preceding twelve months. The Company considers a loan to have defaulted when it becomes 90 days or more delinquent under the modified terms, has been transferred to nonaccrual status, is charged off or has been transferred to other real estate owned. For loans measured based on the present value of expected future cash flows, $5,000 for each of the three months ended March 31, 2022, and 2021 was included in interest income and represents the change in present value attributable to the passage of time. |