Loans | Note 5 Loans The loan portfolio is comprised of loans originated by the Company and loans that were acquired in connection with the Company’s acquisitions. The tables below show the loan portfolio composition including carrying value by segment as of the dates shown. The carrying value of loans is net of discounts, fees, costs and fair value marks of $8.2 million and $9.4 million as of June 30, 2022 and December 31, 2021, respectively. June 30, 2022 Total loans % of total Commercial $ 3,410,711 70.8% Commercial real estate non-owner occupied 662,904 13.8% Residential real estate 725,758 15.0% Consumer 17,697 0.4% Total $ 4,817,070 100.0% December 31, 2021 Total loans % of total Commercial $ 3,162,417 70.1% Commercial real estate non-owner occupied 664,729 14.7% Residential real estate 668,656 14.8% Consumer 17,581 0.4% Total $ 4,513,383 100.0% Information about delinquent and non-accrual loans is shown in the following tables at June 30, 2022 and December 31, 2021: June 30, 2022 Greater 30-89 days than 90 days Total past past due and past due and Non-accrual due and accruing accruing loans non-accrual Current Total loans Commercial: Commercial and industrial $ 544 $ — $ 1,021 $ 1,565 $ 1,601,732 $ 1,603,297 Municipal and non-profit — — — — 996,553 996,553 Owner occupied commercial real estate — — 2,487 2,487 608,696 611,183 Food and agribusiness 84 — 56 140 199,538 199,678 Total commercial 628 — 3,564 4,192 3,406,519 3,410,711 Commercial real estate non-owner occupied: Construction — — — — 146,569 146,569 Acquisition/development — — — — 11,162 11,162 Multifamily — — — — 69,913 69,913 Non-owner occupied 652 191 754 1,597 433,663 435,260 Total commercial real estate 652 191 754 1,597 661,307 662,904 Residential real estate: Senior lien 228 — 5,160 5,388 667,731 673,119 Junior lien 126 — 372 498 52,141 52,639 Total residential real estate 354 — 5,532 5,886 719,872 725,758 Consumer 147 3 12 162 17,535 17,697 Total loans $ 1,781 $ 194 $ 9,862 $ 11,837 $ 4,805,233 $ 4,817,070 June 30, 2022 Non-accrual loans Non-accrual loans with a related with no related allowance for allowance for Non-accrual credit loss credit loss loans Commercial: Commercial and industrial $ 224 $ 797 $ 1,021 Municipal and non-profit — — — Owner occupied commercial real estate 2,317 170 2,487 Food and agribusiness 56 — 56 Total commercial 2,597 967 3,564 Commercial real estate non-owner occupied: Construction — — — Acquisition/development — — — Multifamily — — — Non-owner occupied 754 — 754 Total commercial real estate 754 — 754 Residential real estate: Senior lien 3,609 1,551 5,160 Junior lien 372 — 372 Total residential real estate 3,981 1,551 5,532 Consumer 12 — 12 Total loans $ 7,344 $ 2,518 $ 9,862 December 31, 2021 Greater 30-89 days than 90 days Total past past due and past due and Non-accrual due and accruing accruing loans non-accrual Current Total loans Commercial: Commercial and industrial $ 481 $ — $ 1,490 $ 1,971 $ 1,494,176 $ 1,496,147 Municipal and non-profit 202 — — 202 928,843 929,045 Owner occupied commercial real estate 207 — 4,525 4,732 528,904 533,636 Food and agribusiness 89 — 64 153 203,436 203,589 Total commercial 979 — 6,079 7,058 3,155,359 3,162,417 Commercial real estate non-owner occupied: Construction — — — — 86,126 86,126 Acquisition/development — — — — 9,609 9,609 Multifamily — — — — 92,174 92,174 Non-owner occupied 94 217 121 432 476,388 476,820 Total commercial real estate 94 217 121 432 664,297 664,729 Residential real estate: Senior lien 399 198 4,251 4,848 609,780 614,628 Junior lien 179 — 374 553 53,475 54,028 Total residential real estate 578 198 4,625 5,401 663,255 668,656 Consumer 36 5 7 48 17,533 17,581 Total loans $ 1,687 $ 420 $ 10,832 $ 12,939 $ 4,500,444 $ 4,513,383 December 31, 2021 Non-accrual loans Non-accrual loans with a related with no related allowance for allowance for Non-accrual credit loss credit loss loans Commercial: Commercial and industrial $ 1,490 $ — $ 1,490 Municipal and non-profit — — — Owner occupied commercial real estate 4,525 — 4,525 Food and agribusiness 64 — 64 Total commercial 6,079 — 6,079 Commercial real estate non-owner occupied: Construction — — — Acquisition/development — — — Multifamily — — — Non-owner occupied 121 — 121 Total commercial real estate 121 — 121 Residential real estate: Senior lien 3,274 977 4,251 Junior lien 374 — 374 Total residential real estate 3,648 977 4,625 Consumer 7 — 7 Total loans $ 9,855 $ 977 $ 10,832 Loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement remains unpaid after the due date of the scheduled payment. Non-accrual loans include non-accrual loans and troubled debt restructurings (“TDRs”) on non-accrual status. There was no interest income recognized from non-accrual loans during the three or six months ended June 30, 2022 or 2021. The Company’s internal risk rating system uses a series of grades, which reflect our assessment of the credit quality of loans based on an analysis of the borrower's financial condition, liquidity and ability to meet contractual debt service requirements and are categorized as “Pass”, “Special mention”, “Substandard” and “Doubtful”. For a description of the general characteristics of the risk grades, refer to note 2 Summary of Significant Accounting Policies in our audited consolidated financial statements in our 2021 Annual Report on Form 10-K The amortized cost basis for all loans as determined by the Company’s internal risk rating system and year of origination is shown in the following tables as of June 30, 2022 and December 31, 2021: June 30, 2022 Revolving Revolving loans loans Origination year amortized converted 2022 2021 2020 2019 2018 Prior cost basis to term Total Commercial: Commercial and industrial: Pass $ 242,060 $ 345,996 $ 120,916 $ 116,400 $ 116,898 $ 65,106 $ 543,613 $ 18,173 $ 1,569,162 Special mention — — 2,528 1,818 646 16,562 1,173 — 22,727 Substandard 38 — — 104 209 10,883 150 24 11,408 Total commercial and industrial 242,098 345,996 123,444 118,322 117,753 92,551 544,936 18,197 1,603,297 Municipal and non-profit: Pass 85,811 238,344 94,037 63,194 77,055 436,512 1,600 — 996,553 Total municipal and non-profit 85,811 238,344 94,037 63,194 77,055 436,512 1,600 — 996,553 Owner occupied commercial real estate: Pass 122,872 118,103 63,379 78,870 68,105 110,319 15,979 14 577,641 Special mention — — — 10,651 4,350 14,694 — — 29,695 Substandard — — 1,192 263 — 1,992 — — 3,447 Doubtful — — 385 15 — — — — 400 Total owner occupied commercial real estate 122,872 118,103 64,956 89,799 72,455 127,005 15,979 14 611,183 Food and agribusiness: Pass 10,309 11,940 15,103 6,758 14,405 22,858 103,854 13 185,240 Special mention — — 4,669 1,233 — 199 7,388 — 13,489 Substandard — — — — — 949 — — 949 Total food and agribusiness 10,309 11,940 19,772 7,991 14,405 24,006 111,242 13 199,678 Total commercial 461,090 714,383 302,209 279,306 281,668 680,074 673,757 18,224 3,410,711 Commercial real estate non-owner occupied: Construction: Pass 16,737 69,351 19,069 32,366 — 217 8,829 — 146,569 Total construction 16,737 69,351 19,069 32,366 — 217 8,829 — 146,569 Acquisition/development: Pass 2,975 867 375 711 1,830 4,404 — — 11,162 Total acquisition/development 2,975 867 375 711 1,830 4,404 — — 11,162 Multifamily: Pass 23,684 2,999 25,851 — 15,820 1,559 — — 69,913 Total multifamily 23,684 2,999 25,851 — 15,820 1,559 — — 69,913 Non-owner occupied Pass 29,537 61,499 58,341 76,444 17,522 158,061 300 — 401,704 Special mention — — — 9,840 5,484 13,050 — — 28,374 Substandard — — — — 653 4,425 — — 5,078 Doubtful — — — — — 104 — — 104 Total non-owner occupied 29,537 61,499 58,341 86,284 23,659 175,640 300 — 435,260 Total commercial real estate non-owner occupied 72,933 134,716 103,636 119,361 41,309 181,820 9,129 — 662,904 Residential real estate: Senior lien Pass 112,424 221,697 86,468 31,290 19,223 177,110 18,148 471 666,831 Special mention — — — — — 320 — — 320 Substandard — 235 477 1,175 111 3,970 — — 5,968 Total senior lien 112,424 221,932 86,945 32,465 19,334 181,400 18,148 471 673,119 Junior lien Pass 1,444 1,149 1,748 2,236 1,486 3,319 40,190 290 51,862 Special mention — — — — — 322 — 27 349 Substandard — — 112 — 58 258 — — 428 Total junior lien 1,444 1,149 1,860 2,236 1,544 3,899 40,190 317 52,639 Total residential real estate 113,868 223,081 88,805 34,701 20,878 185,299 58,338 788 725,758 Consumer Pass 4,522 6,059 2,288 891 388 528 2,973 35 17,684 Substandard — — — 4 — 6 3 — 13 Total consumer 4,522 6,059 2,288 895 388 534 2,976 35 17,697 Total loans $ 652,413 $ 1,078,239 $ 496,938 $ 434,263 $ 344,243 $ 1,047,727 $ 744,200 $ 19,047 $ 4,817,070 December 31, 2021 Revolving Revolving loans loans Origination year amortized converted 2021 2020 2019 2018 2017 Prior cost basis to term Total Commercial: Commercial and industrial: Pass $ 424,813 $ 155,268 $ 146,420 $ 128,002 $ 49,408 $ 18,529 $ 519,678 $ 5,975 $ 1,448,093 Special mention — 1,122 2,000 3,446 22,654 4,440 1,824 250 35,736 Substandard — 99 89 744 10,399 303 105 — 11,739 Doubtful — 375 — 54 49 101 — — 579 Total commercial and industrial 424,813 156,864 148,509 132,246 82,510 23,373 521,607 6,225 1,496,147 Municipal and non-profit: Pass 234,827 93,310 69,509 81,175 147,115 302,574 535 — 929,045 Total municipal and non-profit 234,827 93,310 69,509 81,175 147,115 302,574 535 — 929,045 Owner occupied commercial real estate: Pass 122,641 81,072 84,359 71,183 48,086 77,100 13,666 1,688 499,795 Special mention — — 9,155 3,864 1,429 13,443 — — 27,891 Substandard — 1,192 1,527 — 220 2,028 — — 4,967 Doubtful — 389 550 — — 44 — — 983 Total owner occupied commercial real estate 122,641 82,653 95,591 75,047 49,735 92,615 13,666 1,688 533,636 Food and agribusiness: Pass 11,245 20,606 6,966 21,427 2,443 24,047 107,978 24 194,736 Special mention — 4,670 1,234 — — 215 1,897 — 8,016 Substandard — — — — 259 578 — — 837 Total food and agribusiness 11,245 25,276 8,200 21,427 2,702 24,840 109,875 24 203,589 Total commercial 793,526 358,103 321,809 309,895 282,062 443,402 645,683 7,937 3,162,417 Commercial real estate non-owner occupied: Construction: Pass 39,584 10,047 29,496 — 222 — 6,777 — 86,126 Total construction 39,584 10,047 29,496 — 222 — 6,777 — 86,126 Acquisition/development: Pass 1,691 385 766 1,830 30 4,907 — — 9,609 Total acquisition/development 1,691 385 766 1,830 30 4,907 — — 9,609 Multifamily: Pass 3,101 32,619 2,184 15,977 193 37,713 — — 91,787 Special mention — — — — — 387 — — 387 Total multifamily 3,101 32,619 2,184 15,977 193 38,100 — — 92,174 Non-owner occupied Pass 59,060 58,964 122,452 18,425 92,349 95,265 557 — 447,072 Special mention — — 5,747 5,584 9,745 3,898 — — 24,974 Substandard — — — 729 — 4,045 — — 4,774 Total non-owner occupied 59,060 58,964 128,199 24,738 102,094 103,208 557 — 476,820 Total commercial real estate non-owner occupied 103,436 102,015 160,645 42,545 102,539 146,215 7,334 — 664,729 Residential real estate: Senior lien Pass 223,120 100,476 38,696 21,889 29,554 177,051 18,278 188 609,252 Special mention — — — — — 290 — — 290 Substandard 44 325 684 318 299 3,416 — — 5,086 Total senior lien 223,164 100,801 39,380 22,207 29,853 180,757 18,278 188 614,628 Junior lien Pass 1,320 2,150 2,731 1,639 951 3,209 40,921 328 53,249 Special mention — — — — — — 24 322 346 Substandard — 19 — 62 131 221 — — 433 Total junior lien 1,320 2,169 2,731 1,701 1,082 3,430 40,945 650 54,028 Total residential real estate 224,484 102,970 42,111 23,908 30,935 184,187 59,223 838 668,656 Consumer: Pass 8,815 3,528 1,241 631 131 557 2,653 19 17,575 Substandard — — — — — 6 — — 6 Total consumer 8,815 3,528 1,241 631 131 563 2,653 19 17,581 Total loans $ 1,130,261 $ 566,616 $ 525,806 $ 376,979 $ 415,667 $ 774,367 $ 714,893 $ 8,794 $ 4,513,383 Loans evaluated individually We evaluate loans individually when they no longer share risk characteristics with pooled loans. These loans include loans on non-accrual status, loans in bankruptcy, and TDRs as described below. If a specific allowance is warranted based on the borrower’s overall financial condition, the specific allowance is calculated based on discounted expected cash flows using the loan’s initial contractual effective interest rate or the fair value of the collateral less selling costs for collateral-dependent loans. A loan is considered collateral-dependent when the borrower is experiencing financial difficulty and repayment is expected to be provided substantially through the operation or sale of the collateral. Management individually evaluates collateral-dependent loans with an amortized cost basis of $250 thousand or more and includes collateral-dependent loans less than $250 thousand within the general allowance population. The amortized cost basis of collateral-dependent loans over $250 thousand was as follows at June 30, 2022 and December 31, 2021: June 30, 2022 Total amortized Real property Business assets cost basis Commercial Commercial and industrial $ 241 $ 1,490 $ 1,731 Owner-occupied commercial real estate 2,431 — 2,431 Total Commercial 2,672 1,490 4,162 Commercial real estate non owner-occupied Non-owner occupied 574 — 574 Total commercial real estate 574 — 574 Residential real estate Senior lien 3,476 1,606 5,082 Total residential real estate 3,476 1,606 5,082 Total loans $ 6,722 $ 3,096 $ 9,818 December 31, 2021 Total amortized Real property Business assets cost basis Commercial Commercial and industrial $ 3,270 $ 1,261 $ 4,531 Owner-occupied commercial real estate 4,012 255 4,267 Total Commercial 7,282 1,516 8,798 Residential real estate Senior lien 2,212 — 2,212 Total residential real estate 2,212 — 2,212 Total loans $ 9,494 $ 1,516 $ 11,010 Loan modifications and troubled debt restructurings The Company’s policy is to review each prospective credit to determine the appropriateness and the adequacy of security or collateral prior to making a loan. In the event of borrower default, the Company seeks recovery in compliance with lending laws, the respective loan agreements, and credit monitoring and remediation procedures that may include restructuring a loan to provide a concession by the Company to the borrower from their original terms due to borrower financial difficulties in order to facilitate repayment. Additionally, if a borrower’s repayment obligation has been discharged by a court, and that debt has not been reaffirmed by the borrower, regardless of past due status, the loan is considered to be a TDR. During the three months ended June 30, 2022, the Company restructured two loans with an amortized cost basis of $2.4 million to facilitate repayment that are considered TDRs. During the six months ended June 30, 2022, the Company restructured six loans with an amortized cost basis of $3.0 million to facilitate repayment that are considered TDRs. Loan modifications were a reduction of the principal payment, a reduction in interest rate, or an extension of term. The tables below provide additional information related to accruing TDRs at June 30, 2022 and December 31, 2021: June 30, 2022 Amortized Average year-to-date Unpaid Unfunded commitments cost basis amortized cost basis principal balance to fund TDRs Commercial $ 4,621 $ 4,655 $ 4,729 $ 317 Commercial real estate non-owner occupied 739 761 913 — Residential real estate 1,848 1,876 2,242 — Consumer — — — — Total $ 7,208 $ 7,292 $ 7,884 $ 317 December 31, 2021 Amortized Average year-to-date Unpaid Unfunded commitments cost basis amortized cost basis principal balance to fund TDRs Commercial $ 4,066 $ 4,472 $ 4,417 $ — Commercial real estate non-owner occupied 725 767 892 — Residential real estate 2,395 2,468 2,781 — Consumer — — — — Total $ 7,186 $ 7,707 $ 8,090 $ — The following table summarizes the Company’s carrying value of non-accrual TDRs as of June 30, 2022 and December 31, 2021: June 30, 2022 December 31, 2021 Commercial $ 439 $ 644 Commercial real estate non-owner occupied 94 117 Residential real estate 1,378 1,605 Consumer — — Total non-accruing TDRs $ 1,911 $ 2,366 Accrual of interest is resumed on loans that were previously on non-accrual only after the loan has performed sufficiently for a period of time. The Company had no TDRs that were modified within the past 12 months and had defaulted on their restructured terms during the six months ended June 30, 2022. During the six months ended June 30, 2021, the Company had two TDRs totaling $49 thousand that were modified within the past 12 months and had defaulted on their restructured terms. For purposes of this disclosure, the Company considers “default” to mean 90 days or more past due on principal or interest. The allowance for credit losses related to TDRs on non-accrual status is determined by individual evaluation, including collateral adequacy, using the same process as loans on non-accrual status, which are not classified as TDRs. |