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 $12.9 million and $16.2 million as of September 30, 2021 and December 31, 2020, respectively. Included in commercial loans are fully-guaranteed loans originated as part of the Small Business Administration’s (“SBA”) Paycheck Protection Program (“PPP”) of which $76.8 million and $176.1 million, net of fees and costs, were outstanding at September 30, 2021 and December 31, 2020, respectively. September 30, 2021 Total loans % of total Commercial $ 3,067,300 69.3% Commercial real estate non-owner occupied 670,927 15.2% Residential real estate 665,502 15.1% Consumer 18,031 0.4% Total $ 4,421,760 100.0% December 31, 2020 Total loans % of total Commercial $ 3,044,065 70.0% Commercial real estate non-owner occupied 631,996 14.5% Residential real estate 658,659 15.1% Consumer 19,006 0.4% Total $ 4,353,726 100.0% Information about delinquent and non-accrual loans is shown in the following tables at September 30, 2021 and December 31, 2020: September 30, 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 $ 249 $ 99 $ 1,405 $ 1,753 $ 1,445,043 $ 1,446,796 Municipal and non-profit — — — — 879,335 879,335 Owner occupied commercial real estate 419 — 6,451 6,870 534,880 541,750 Food and agribusiness 92 — 72 164 199,255 199,419 Total commercial 760 99 7,928 8,787 3,058,513 3,067,300 Commercial real estate non-owner occupied: Construction — — — — 61,976 61,976 Acquisition/development — — — — 20,339 20,339 Multifamily — — — — 90,427 90,427 Non-owner occupied — 235 128 363 497,822 498,185 Total commercial real estate — 235 128 363 670,564 670,927 Residential real estate: Senior lien 478 161 4,394 5,033 603,426 608,459 Junior lien 28 — 391 419 56,624 57,043 Total residential real estate 506 161 4,785 5,452 660,050 665,502 Consumer 36 — 7 43 17,988 18,031 Total loans $ 1,302 $ 495 $ 12,848 $ 14,645 $ 4,407,115 $ 4,421,760 December 31, 2020 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 $ 170 $ — $ 6,312 $ 6,482 $ 1,440,256 $ 1,446,738 Municipal and non-profit — — — — 870,791 870,791 Owner occupied commercial real estate — — 5,450 5,450 510,789 516,239 Food and agribusiness 146 — 422 568 209,729 210,297 Total commercial 316 — 12,184 12,500 3,031,565 3,044,065 Commercial real estate non-owner occupied: Construction — — — — 91,125 91,125 Acquisition/development — — 6 6 24,665 24,671 Multifamily — — 1,523 1,523 67,233 68,756 Non-owner occupied — — 135 135 447,309 447,444 Total commercial real estate — — 1,664 1,664 630,332 631,996 Residential real estate: Senior lien 527 160 5,820 6,507 577,764 584,271 Junior lien 95 — 709 804 73,584 74,388 Total residential real estate 622 160 6,529 7,311 651,348 658,659 Consumer 30 2 10 42 18,964 19,006 Total loans $ 968 $ 162 $ 20,387 $ 21,517 $ 4,332,209 $ 4,353,726 September 30, 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 $ 1,405 $ — $ 1,405 Municipal and non-profit — — — Owner occupied commercial real estate 4,604 1,847 6,451 Food and agribusiness 72 — 72 Total commercial 6,081 1,847 7,928 Commercial real estate non-owner occupied: Construction — — — Acquisition/development — — — Multifamily — — — Non-owner occupied 128 — 128 Total commercial real estate 128 — 128 Residential real estate: Senior lien 3,393 1,001 4,394 Junior lien 391 — 391 Total residential real estate 3,784 1,001 4,785 Consumer 7 — 7 Total loans $ 10,000 $ 2,848 $ 12,848 December 31, 2020 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 $ 6,080 $ 232 $ 6,312 Municipal and non-profit — — — Owner occupied commercial real estate 2,698 2,752 5,450 Food and agribusiness 88 334 422 Total commercial 8,866 3,318 12,184 Commercial real estate non-owner occupied: Construction — — — Acquisition/development 6 — 6 Multifamily — 1,523 1,523 Non-owner occupied 135 — 135 Total commercial real estate 141 1,523 1,664 Residential real estate: Senior lien 4,158 1,662 5,820 Junior lien 709 — 709 Total residential real estate 4,867 1,662 6,529 Consumer 10 — 10 Total loans $ 13,884 $ 6,503 $ 20,387 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 nine months ended September 30, 2021 or 2020. 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 2020 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 September 30, 2021 and December 31, 2020: September 30, 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 $ 391,229 $ 172,714 $ 162,299 $ 151,647 $ 52,024 $ 23,606 $ 436,119 $ 5,967 $ 1,395,605 Special mention — 1,066 2,102 4,250 12,823 5,693 2,045 100 28,079 Substandard — 20 328 744 21,040 286 440 41 22,899 Doubtful — — — 43 39 131 — — 213 Total commercial and industrial 391,229 173,800 164,729 156,684 85,926 29,716 438,604 6,108 1,446,796 Municipal and non-profit: Pass 96,149 92,184 85,619 119,619 150,074 334,757 933 — 879,335 Total municipal and non-profit 96,149 92,184 85,619 119,619 150,074 334,757 933 — 879,335 Owner occupied commercial real estate: Pass 100,608 84,772 87,893 71,987 44,003 97,376 12,654 — 499,293 Special mention — — 7,415 8,248 1,449 16,205 — — 33,317 Substandard — 1,192 1,567 1,847 228 3,320 — — 8,154 Doubtful — 389 562 — — 35 — — 986 Total owner occupied commercial real estate 100,608 86,353 97,437 82,082 45,680 116,936 12,654 — 541,750 Food and agribusiness: Pass 9,515 23,190 7,106 16,375 2,558 26,808 99,645 — 185,197 Special mention — 4,669 1,083 — — 216 7,388 — 13,356 Substandard — — — — 267 599 — — 866 Total food and agribusiness 9,515 27,859 8,189 16,375 2,825 27,623 107,033 — 199,419 Total commercial 597,501 380,196 355,974 374,760 284,505 509,032 559,224 6,108 3,067,300 Commercial real estate non-owner occupied: Construction: Pass 17,307 11,782 28,181 — 224 — 4,482 — 61,976 Total construction 17,307 11,782 28,181 — 224 — 4,482 — 61,976 Acquisition/development: Pass 2,557 385 1,892 1,830 6,045 7,567 63 — 20,339 Total acquisition/development 2,557 385 1,892 1,830 6,045 7,567 63 — 20,339 Multifamily: Pass 3,115 29,612 2,964 16,189 201 37,946 — — 90,027 Special mention — — — — — 400 — — 400 Total multifamily 3,115 29,612 2,964 16,189 201 38,346 — — 90,427 Non-owner occupied Pass 49,707 59,726 122,389 18,324 97,332 117,331 3,400 1 468,210 Special mention — — 5,746 5,667 9,805 3,933 — — 25,151 Substandard — — — 744 — 4,080 — — 4,824 Total non-owner occupied 49,707 59,726 128,135 24,735 107,137 125,344 3,400 1 498,185 Total commercial real estate non-owner occupied 72,686 101,505 161,172 42,754 113,607 171,257 7,945 1 670,927 Residential real estate: Senior lien Pass 175,920 110,891 46,818 23,384 32,345 193,777 19,728 52 602,915 Special mention — — — — — 278 — — 278 Substandard — 402 686 322 302 3,554 — — 5,266 Total senior lien 175,920 111,293 47,504 23,706 32,647 197,609 19,728 52 608,459 Junior lien Pass 748 2,494 2,967 1,847 1,076 3,849 43,108 137 56,226 Special mention — — — — — 21 345 — 366 Substandard — 19 — 64 99 233 — 36 451 Total junior lien 748 2,513 2,967 1,911 1,175 4,103 43,453 173 57,043 Total residential real estate 176,668 113,806 50,471 25,617 33,822 201,712 63,181 225 665,502 Consumer Pass 6,628 5,292 1,762 803 188 630 2,696 25 18,024 Substandard — — — — — 7 — — 7 Total consumer 6,628 5,292 1,762 803 188 637 2,696 25 18,031 Total loans $ 853,483 $ 600,799 $ 569,379 $ 443,934 $ 432,122 $ 882,638 $ 633,046 $ 6,359 $ 4,421,760 December 31, 2020 Revolving Revolving loans loans Origination year amortized converted 2020 2019 2018 2017 2016 Prior cost basis to term Total Commercial: Commercial and industrial: Pass $ 372,041 $ 212,388 $ 189,753 $ 93,822 $ 15,145 $ 17,662 $ 499,283 $ 991 $ 1,401,085 Special mention — 1,445 7,381 4,845 5,810 729 2,329 1,478 24,017 Substandard 23 1,238 925 11,885 56 4,840 1,341 — 20,308 Doubtful — — 34 456 — 809 29 — 1,328 Total commercial and industrial 372,064 215,071 198,093 111,008 21,011 24,040 502,982 2,469 1,446,738 Municipal and non-profit: Pass 131,961 91,911 125,247 156,275 124,269 238,453 2,675 — 870,791 Total municipal and non-profit 131,961 91,911 125,247 156,275 124,269 238,453 2,675 — 870,791 Owner occupied commercial real estate: Pass 100,791 107,558 90,398 53,131 32,648 87,758 1,401 — 473,685 Special mention 1,581 2,236 2,714 544 3,254 19,341 — — 29,670 Substandard — 1,988 6,211 251 93 3,802 — — 12,345 Doubtful — 511 — — — 28 — — 539 Total owner occupied commercial real estate 102,372 112,293 99,323 53,926 35,995 110,929 1,401 — 516,239 Food and agribusiness: Pass 28,139 9,198 20,242 7,198 9,556 28,330 106,007 126 208,796 Special mention — — — — — 222 — — 222 Substandard — — — 302 — 977 — — 1,279 Total food and agribusiness 28,139 9,198 20,242 7,500 9,556 29,529 106,007 126 210,297 Total commercial 634,536 428,473 442,905 328,709 190,831 402,951 613,065 2,595 3,044,065 Commercial real estate non-owner occupied: Construction: Pass 15,841 49,658 17,349 4,072 — — 2,006 1,807 90,733 Special mention 392 — — — — — — — 392 Total construction 16,233 49,658 17,349 4,072 — — 2,006 1,807 91,125 Acquisition/development: Pass 3,762 1,997 1,947 8,373 4,559 3,694 11 — 24,343 Special mention — — — 34 — 253 — — 287 Substandard — — — — — 41 — — 41 Total acquisition/development 3,762 1,997 1,947 8,407 4,559 3,988 11 — 24,671 Multifamily: Pass 29,738 13,670 137 212 18,050 4,990 — — 66,797 Special mention — — — — — 436 — — 436 Substandard — — — — — 1,523 — — 1,523 Total multifamily 29,738 13,670 137 212 18,050 6,949 — — 68,756 Non-owner occupied Pass 51,445 92,225 25,362 86,975 26,613 118,144 3,083 643 404,490 Special mention 70 5,458 5,841 22,737 — 3,662 100 — 37,868 Substandard — — 779 — 3,937 370 — — 5,086 Total non-owner occupied 51,515 97,683 31,982 109,712 30,550 122,176 3,183 643 447,444 Total commercial real estate non-owner occupied 101,248 163,008 51,415 122,403 53,159 133,113 5,200 2,450 631,996 Residential real estate: Senior lien Pass 129,551 76,504 36,493 47,887 88,358 173,091 24,884 218 576,986 Special mention — — — — — 463 — — 463 Substandard 95 818 20 1,232 550 4,107 — — 6,822 Total senior lien 129,646 77,322 36,513 49,119 88,908 177,661 24,884 218 584,271 Junior lien Pass 3,479 4,217 2,553 1,775 1,226 3,760 55,860 365 73,235 Special mention — — — — — 21 341 — 362 Substandard — 112 101 177 55 287 — 59 791 Total junior lien 3,479 4,329 2,654 1,952 1,281 4,068 56,201 424 74,388 Total residential real estate 133,125 81,651 39,167 51,071 90,189 181,729 81,085 642 658,659 Consumer Pass 9,777 3,348 1,674 489 329 623 2,700 19 18,959 Substandard — — 37 — 2 8 — — 47 Total consumer 9,777 3,348 1,711 489 331 631 2,700 19 19,006 Total loans $ 878,686 $ 676,480 $ 535,198 $ 502,672 $ 334,510 $ 718,424 $ 702,050 $ 5,706 $ 4,353,726 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 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 September 30, 2021 and December 31, 2020: September 30, 2021 Total amortized Real property Business assets cost basis Commercial Commercial and industrial $ 3,604 $ 1,858 $ 5,462 Owner-occupied commercial real estate 4,493 261 4,754 Total Commercial 8,097 2,119 10,216 Commercial real estate non owner-occupied Acquisition/development 1,297 — 1,297 Total commercial real estate 1,297 — 1,297 Residential real estate Senior lien 2,247 — 2,247 Total residential real estate 2,247 — 2,247 Total loans $ 11,641 $ 2,119 $ 13,760 December 31, 2020 Total amortized Real property Business assets cost basis Commercial Commercial and industrial $ 7,579 $ 3,005 $ 10,584 Owner-occupied commercial real estate 3,701 284 3,985 Food and agribusiness 334 — 334 Total Commercial 11,614 3,289 14,903 Commercial real estate non owner-occupied Acquisition/development 1,573 — 1,573 Multifamily 1,523 — 1,523 Total commercial real estate 3,096 — 3,096 Residential real estate Senior lien 2,021 — 2,021 Total residential real estate 2,021 — 2,021 Total loans $ 16,731 $ 3,289 $ 20,020 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. The CARES Act afforded financial institutions the option to modify loans within certain parameters in response to the COVID-19 pandemic without requiring the modifications to be classified as TDRs under ASC Topic 310 if the borrower has been adversely impacted by COVID-19 and was current on their loan payments. The Company modified 14 loans totaling $4.8 million during the nine months ended September 30, 2021 and 483 loans totaling $499.5 million during the nine months ended September 30, 2020, due to the effects of the COVID-19 pandemic, that were not classified as TDRs. Modified loans that remained on a payment deferral plan at September 30, 2021 totaled $0.9 million. Of those loans, principal payment deferrals totaled $0.3 million and full payment deferrals totaled $0.6 million. At September 30, 2021, $45 thousand of loan modifications related to COVID-19 were a subsequent modification. All COVID-19 modified loans were classified as performing as of September 30, 2021. At December 31, 2020, modified loans that remained on a payment deferral plan totaled $173.6 million, or 4.0% of the total loan portfolio, of which 26.2% were a subsequent modification. During the three months ended September 30, 2021, the Company added no new TDRs. During the nine months ended September 30, 2021, the Company restructured three loans with an amortized cost basis of $1.4 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 September 30, 2021 and December 31, 2020: September 30, 2021 Amortized Average year-to-date Unpaid Unfunded commitments cost basis amortized cost basis principal balance to fund TDRs Commercial $ 6,380 $ 7,054 $ 6,734 $ 315 Commercial real estate non-owner occupied 2,049 2,074 2,880 — Residential real estate 2,706 2,760 3,181 35 Consumer — — — — Total $ 11,135 $ 11,888 $ 12,795 $ 350 December 31, 2020 Amortized Average year-to-date Unpaid Unfunded commitments cost basis amortized cost basis principal balance to fund TDRs Commercial $ 9,387 $ 9,544 $ 9,978 $ 150 Commercial real estate non-owner occupied 2,400 2,351 4,105 — Residential real estate 2,121 2,185 2,922 12 Consumer 37 37 37 — Total $ 13,945 $ 14,117 $ 17,042 $ 162 The following table summarizes the Company’s carrying value of non-accrual TDRs as of September 30, 2021 and December 31, 2020: September 30, 2021 December 31, 2020 Commercial $ 2,505 $ 3,397 Commercial real estate non-owner occupied 121 1,644 Residential real estate 1,733 3,156 Consumer — — Total non-accruing TDRs $ 4,359 $ 8,197 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 one TDR totaling $36 thousand that was modified within the past 12 months and had defaulted on its restructured terms during the nine months ended September 30, 2021. During the nine months ended September 30, 2020, the Company had no TDRs 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. |