Loans, Allowance for Credit Losses - Loans, and Credit Quality (Tables)

6 Months Ended

Jun. 30, 2020

Schedule of loan composition by portfolio segment

The loan composition is summarized as follows.


	June 30, 2020								December 31, 2019
(in thousands)	Amount			% of Total		Amount			% of Total
Commercial & industrial	$	729,264		26	%	$	806,189		31	%
Paycheck Protection Program (“PPP”) loans	329,157			12		—			—
Owner-occupied commercial real estate (“CRE”)	495,722			17		496,372			19
Agricultural	99,020			3		95,450			4
CRE investment	447,900			16		443,218			17
Construction & land development	107,277			4		92,970			4
Residential construction	51,332			2		54,403			2
Residential first mortgage	417,694			15		432,167			17
Residential junior mortgage	114,323			4		122,771			5
Retail & other	29,812			1		30,211			1
Loans	2,821,501			100	%	2,573,751			100	%
Less allowance for credit losses - Loans (“ACL-Loans”)	29,130					13,972
Loans, net	$	2,792,371				$	2,559,779
Allowance for credit losses - Loans to loans	1.03		%			0.54		%

Schedule of changes in allowance for credit losses by portfolio segment

A roll forward of the allowance for credit losses is summarized as follows.


	Six Months Ended						Year Ended
(in thousands)	June 30, 2020		June 30, 2019		December 31, 2019
Beginning balance	$	13,972	$	13,153	$	13,153
Adoption of CECL	8,488		—		—
Initial PCD ACL	797		—		—
Total impact for adoption of CECL	9,285		—		—
Provision for credit losses	6,000		500		1,200
Charge-offs	(216)		(232)		(927)
Recoveries	89		150		546
Net (charge-offs) recoveries	(127)		(82)		(381)
Ending balance	$	29,130	$	13,571	$	13,972

The following table presents the balance and activity in the ACL-Loans by portfolio segment.


	Six Months Ended June 30, 2020
(in thousands)	Commercial & industrial			Owner- occupied CRE			Agricultural			CRE investment			Construction & land development			Residential construction			Residential first mortgage			Residential junior mortgage			Retail & other			Total
ACL-Loans *
Beginning balance	$	5,471		$	3,010		$	579		$	1,600		$	414		$	368		$	1,669		$	517		$	344		$	13,972
Adoption of CECL	2,962			1,249			361			1,970			51			124			1,286			351			134			8,488
Initial PCD ACL	797			—			—			—			—			—			—			—			—			797
Provision	1,010			919			399			1,542			325			21			1,348			294			142			6,000
Charge-offs	(97)			—			—			(20)			—			—			—			—			(99)			(216)
Recoveries	60			—			—			—			—			—			4			15			10			89
Net (charge-offs) recoveries	(37)			—			—			(20)			—			—			4			15			(89)			(127)
Ending balance	$	10,203		$	5,178		$	1,339		$	5,092		$	790		$	513		$	4,307		$	1,177		$	531		$	29,130
As % of ACL-Loans	35		%	18		%	4		%	17		%	3		%	2		%	15		%	4		%	2		%	100		%

*The PPP loans are fully guaranteed by the SBA; thus, no ACL-Loans has been allocated to these loans.

For comparison purposes, the following table presents the balance and activity in the ACL-Loans by portfolio segment for the prior year-end period.


	Year Ended December 31, 2019
(in thousands)	Commercial & industrial			Owner- occupied CRE			Agricultural			CRE investment			Construction & land development			Residential construction			Residential first mortgage			Residential junior mortgage			Retail & other			Total
ACL-Loans
Beginning balance	$	5,271		$	2,847		$	422		$	1,470		$	510		$	211		$	1,646		$	472		$	304		$	13,153
Provision	(61)			254			157			130			(96)			383			9			86			338			1,200
Charge-offs	(159)			(93)			—			—			—			(226)			(22)			(80)			(347)			(927)
Recoveries	420			2			—			—			—			—			36			39			49			546
Net (charge-offs) recoveries	261			(91)			—			—			—			(226)			14			(41)			(298)			(381)
Ending balance	$	5,471		$	3,010		$	579		$	1,600		$	414		$	368		$	1,669		$	517		$	344		$	13,972
As % of ACL-Loans	39		%	22		%	4		%	11		%	3		%	3		%	12		%	4		%	2		%	100		%

Schedule of collateral dependent loans by portfolio segment

The following table presents collateral dependent loans by portfolio segment and collateral type, including those loans with and without a related allowance allocation as of June 30, 2020.


June 30, 2020	Collateral Type
(in thousands)	Real Estate		Other Business Assets		Total		Without an Allowance		With an Allowance		Allowance Allocation
Commercial & industrial	$	—	$	3,688	$	3,688	$	—	$	3,688	$	1,231
PPP loans	—		—		—		—		—		—
Owner-occupied CRE	2,524		—		2,524		339		2,185		148
Agricultural	600		835		1,435		1,435		—		—
CRE investment	975		—		975		975		—		—
Construction & land development	533		—		533		533		—		—
Residential construction	—		—		—		—		—		—
Residential first mortgage	—		—		—		—		—		—
Residential junior mortgage	—		—		—		—		—		—
Retail & other	—		—		—		—		—		—
Total loans	$	4,632	$	4,523	$	9,155	$	3,282	$	5,873	$	1,379

Schedule of impaired loans by portfolio segment

The following table presents impaired loans and their respective allowance for credit loss allocations at December 31, 2019, as determined in accordance with historical accounting guidance.


	Total Impaired Loans – December 31, 2019
(in thousands)	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Investment		Interest Income Recognized
Commercial & industrial	$	5,932	$	7,950	$	625	$	5,405	$	1,170
Owner-occupied CRE	3,430		4,016		—		3,677		256
Agricultural	2,134		2,172		116		2,311		37
CRE investment	2,426		2,790		—		2,497		364
Construction & land development	382		382		—		460		—
Residential construction	—		—		—		—		—
Residential first mortgage	2,357		2,629		—		2,412		178
Residential junior mortgage	218		349		—		224		58
Retail & other	12		12		—		12		—
Total	$	16,891	$	20,300	$	741	$	16,998	$	2,063

Schedule of past due loans by portfolio segment

The following tables present past due loans by portfolio segment.


	June 30, 2020
(in thousands)	30-89 Days Past Due (accruing)			90 Days & Over or nonaccrual			Current			Total
Commercial & industrial	$	162		$	4,142		$	724,960		$	729,264
PPP loans	—			—			329,157			329,157
Owner-occupied CRE	71			3,005			492,646			495,722
Agricultural	35			1,711			97,274			99,020
CRE investment	—			975			446,925			447,900
Construction & land development	196			533			106,548			107,277
Residential construction	549			—			50,783			51,332
Residential first mortgage	354			1,067			416,273			417,694
Residential junior mortgage	—			565			113,758			114,323
Retail & other	85			—			29,727			29,812
Total loans	$	1,452		$	11,998		$	2,808,051		$	2,821,501
Percent of total loans	0.1		%	0.4		%	99.5		%	100.0		%


	December 31, 2019
(in thousands)	30-89 Days Past Due (accruing)			90 Days & Over or nonaccrual			Current			Total
Commercial & industrial	$	1,729		$	6,249		$	798,211		$	806,189
Owner-occupied CRE	112			3,311			492,949			496,372
Agricultural	—			1,898			93,552			95,450
CRE investment	—			1,073			442,145			443,218
Construction & land development	2,063			20			90,887			92,970
Residential construction	302			—			54,101			54,403
Residential first mortgage	2,736			1,090			428,341			432,167
Residential junior mortgage	217			480			122,074			122,771
Retail & other	110			1			30,100			30,211
Total loans	$	7,269		$	14,122		$	2,552,360		$	2,573,751
Percent of total loans	0.3		%	0.5		%	99.2		%	100.0		%

Schedule of nonaccrual loans by portfolio segment

The following table presents nonaccrual loans by portfolio segment. The nonaccrual loans without a related allowance for credit losses have been reflected in the collateral dependent loans table above.


	June 30, 2020								December 31, 2019
(in thousands)	Nonaccrual Loans			% of Total		Nonaccrual Loans			% of Total
Commercial & industrial	$	4,142		35	%	$	6,249		44	%
PPP loans	—			—		—			—
Owner-occupied CRE	3,005			25		3,311			23
Agricultural	1,711			14		1,898			14
CRE investment	975			8		1,073			8
Construction & land development	533			4		20			—
Residential construction	—			—		—			—
Residential first mortgage	1,067			9		1,090			8
Residential junior mortgage	565			5		480			3
Retail & other	—			—		1			—
Nonaccrual loans	$	11,998		100	%	$	14,122		100	%
Percent of total loans	0.4		%			0.5		%

Schedule of loans by loan risk categories by portfolio segment

The following table presents total loans by risk categories and year of origination.


June 30, 2020	Amortized Cost Basis by Origination Year
(in thousands)	2020		2019		2018		2017		2016		Prior		Revolving		Revolving to Term		TOTAL
Commercial & industrial ^(a)
Grades 1-4	$	397,577	$	150,186	$	109,524	$	68,689	$	28,748	$	58,379	$	183,671	$	—	$	996,774
Grade 5	229		5,398		7,778		625		1,524		2,777		16,707		—		35,038
Grade 6	51		23		796		5,698		1		35		4,136		—		10,740
Grade 7	1,732		1,215		1,112		1,382		545		6,057		3,826		—		15,869
Total	$	399,589	$	156,822	$	119,210	$	76,394	$	30,818	$	67,248	$	208,340	$	—	$	1,058,421
Owner-occupied CRE
Grades 1-4	$	36,065	$	67,425	$	82,360	$	62,980	$	49,060	$	164,982	$	1,499	$	—	$	464,371
Grade 5	—		574		1,646		6,572		379		7,086		488		—		16,745
Grade 6	—		—		—		1,736		—		734		—		—		2,470
Grade 7	—		337		281		2,189		1,776		7,553		—		—		12,136
Total	$	36,065	$	68,336	$	84,287	$	73,477	$	51,215	$	180,355	$	1,987	$	—	$	495,722
Agricultural
Grades 1-4	$	8,766	$	5,484	$	7,266	$	9,697	$	2,240	$	29,722	$	20,775	$	—	$	83,950
Grade 5	20		375		36		573		689		4,772		633		—		7,098
Grade 6	—		—		—		328		392		—		—		—		720
Grade 7	—		—		34		115		1,200		5,824		79		—		7,252
Total	$	8,786	$	5,859	$	7,336	$	10,713	$	4,521	$	40,318	$	21,487	$	—	$	99,020
CRE investment
Grades 1-4	$	42,819	$	76,688	$	41,581	$	69,179	$	39,866	$	158,663	$	6,303	$	—	$	435,099
Grade 5	—		—		106		1,307		388		6,396		45		—		8,242
Grade 6	—		104		—		913		654		—		—		—		1,671
Grade 7	—		—		—		—		144		2,744		—		—		2,888
Total	$	42,819	$	76,792	$	41,687	$	71,399	$	41,052	$	167,803	$	6,348	$	—	$	447,900
Construction & land development
Grades 1-4	$	25,720	$	40,447	$	19,330	$	3,442	$	2,261	$	9,282	$	1,799	$	—	$	102,281
Grade 5	—		219		2,699		45		—		26		—		—		2,989
Grade 6	—		1,100		—		—		—		—		—		—		1,100
Grade 7	—		—		—		—		—		907		—		—		907
Total	$	25,720	$	41,766	$	22,029	$	3,487	$	2,261	$	10,215	$	1,799	$	—	$	107,277
Residential construction
Grades 1-4	$	14,455	$	34,545	$	1,459	$	351	$	19	$	133	$	—	$	—	$	50,962
Grade 5	—		314		—		56		—		—		—		—		370
Grade 6	—		—		—		—		—		—		—		—		—
Grade 7	—		—		—		—		—		—		—		—		—
Total	$	14,455	$	34,859	$	1,459	$	407	$	19	$	133	$	—	$	—	$	51,332
Residential first mortgage
Grades 1-4	$	54,206	$	71,663	$	49,497	$	53,126	$	52,588	$	128,667	$	919	$	—	$	410,666
Grade 5	—		825		1,331		258		760		1,689		—		—		4,863
Grade 6	—		—		—		—		—		—		—		—		—
Grade 7	—		656		197		19		65		1,228		—		—		2,165
Total	$	54,206	$	73,144	$	51,025	$	53,403	$	53,413	$	131,584	$	919	$	—	$	417,694
Residential junior mortgage
Grades 1-4	$	2,470	$	5,261	$	4,799	$	1,642	$	1,753	$	3,203	$	92,924	$	1,669	$	113,721
Grade 5	—		—		—		—		—		33		—		—		33
Grade 6	—		—		—		—		—		—		—		—		—
Grade 7	—		—		—		28		—		339		202		—		569
Total	$	2,470	$	5,261	$	4,799	$	1,670	$	1,753	$	3,575	$	93,126	$	1,669	$	114,323
Retail & other
Grades 1-4	$	5,090	$	6,205	$	2,403	$	1,869	$	941	$	1,522	$	11,782	$	—	$	29,812
Grade 5	—		—		—		—		—		—		—		—		—
Grade 6	—		—		—		—		—		—		—		—		—
Grade 7	—		—		—		—		—		—		—		—		—
Total	$	5,090	$	6,205	$	2,403	$	1,869	$	941	$	1,522	$	11,782	$	—	$	29,812

Total loans	$	589,200	$	469,044	$	334,235	$	292,819	$	185,993	$	602,753	$	345,788	$	1,669	$	2,821,501

(a) For purposes of this table, the $329 million net carrying value of PPP loans were originated in 2020, have a Pass risk grade (Grades 1-4) and have been included with the Commercial & industrial loan category.

The following tables present total loans by risk categories.


	June 30, 2020
(in thousands)	Grades 1- 4			Grade 5			Grade 6			Grade 7			Total
Commercial & industrial	$	667,617		$	35,038		$	10,740		$	15,869		$	729,264
PPP loans	329,157			—			—			—			329,157
Owner-occupied CRE	464,371			16,745			2,470			12,136			495,722
Agricultural	83,950			7,098			720			7,252			99,020
CRE investment	435,099			8,242			1,671			2,888			447,900
Construction & land development	102,281			2,989			1,100			907			107,277
Residential construction	50,962			370			—			—			51,332
Residential first mortgage	410,666			4,863			—			2,165			417,694
Residential junior mortgage	113,721			33			—			569			114,323
Retail & other	29,812			—			—			—			29,812
Total loans	$	2,687,636		$	75,378		$	16,701		$	41,786		$	2,821,501
Percent of total	95.2		%	2.7		%	0.6		%	1.5		%	100.0		%


	December 31, 2019
(in thousands)	Grades 1- 4			Grade 5			Grade 6			Grade 7			Total
Commercial & industrial	$	765,073		$	20,199		$	7,663		$	13,254		$	806,189
Owner-occupied CRE	464,661			20,855			953			9,903			496,372
Agricultural	77,082			6,785			3,275			8,308			95,450
CRE investment	430,794			8,085			2,578			1,761			443,218
Construction & land development	90,523			2,213			15			219			92,970
Residential construction	53,286			1,117			—			—			54,403
Residential first mortgage	424,044			4,677			668			2,778			432,167
Residential junior mortgage	122,249			35			—			487			122,771
Retail & other	30,210			—			—			1			30,211
Total loans	$	2,457,922		$	63,966		$	15,152		$	36,711		$	2,573,751
Percent of total	95.5		%	2.5		%	0.6		%	1.4		%	100.0		%