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Loans
 12 Months Ended
Dec. 31, 2020
Receivables [Abstract]  
Loans Loans
The table below identifies the Company's loan portfolio segments and classes.
Portfolio SegmentClass of Financing Receivable
CommercialOwner occupied real estate
Non–owner occupied real estate
Residential spec homes
Development & spec land
Commercial & industrial
Real estateResidential mortgage
Residential construction
Mortgage warehouseMortgage warehouse
ConsumerDirect installment
Indirect installment
Home equity

Portfolio segment is defined as a level at which an entity develops and documents a systematic methodology to determine its allowance for credit losses. Class of financing receivable is defined as a group of financing receivables determined on the basis of both of the following, 1) risk characteristics of the financing receivable, and 2) an entity’s method for monitoring and assessing credit risk. Generally, the Bank does not move loans from a revolving loan to a term loan other than construction loans. Construction loans are reviewed and rewritten prior to being originated as a term loan.
The following table presents total loans outstanding by portfolio class, as of December 31, 2020.
December 31,
2020
Commercial
Owner occupied real estate$496,306 
Non–owner occupied real estate999,636 
Residential spec homes10,070 
Development & spec land26,372 
Commercial and industrial659,887 
Total commercial2,192,271 
Real estate
Residential mortgage598,700 
Residential construction25,586 
Mortgage warehouse395,626 
Total real estate1,019,912 
Consumer
Direct installment38,046 
Indirect installment357,511 
Home equity259,643 
Total consumer655,200 
Total loans3,867,383 
Allowance for credit losses(57,027)
Net loans$3,810,356 
As of December 31, 2020, loans originated under the Federal Paycheck Protection Program (“PPP”) totaled approximately $208.9 million. Total loans include net deferred loan fees of $1.7 million at December 31, 2020.
The following table presents total loans outstanding, as of December 31, 2019.
December 31,
2019
Commercial
Working capital and equipment$938,317 
Real estate, including agriculture978,891 
Tax exempt63,571 
Other65,872 
Total commercial2,046,651 
Real estate
1-4 family762,571 
Other8,146 
Total real estate770,717 
Consumer
Auto362,729 
Recreation16,262 
Real estate/home improvement43,585 
Home equity237,979 
Unsecured7,286 
Other1,339 
Total consumer669,180 
Mortgage warehouse150,293 
Total loans3,636,841 
Allowance for loan losses(17,667)
Loans, net$3,619,174 
The risk characteristics of each loan portfolio segment are as follows:
Commercial
Commercial loans are primarily based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected, and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.
Commercial real estate loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves larger loan principal amounts and the repayment of these loans is generally dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be more adversely affected by conditions in the real estate markets, the general economy or fluctuations in interest rates. The properties securing the Company’s commercial real estate portfolio are diverse in terms of property type, and are monitored for concentrations of credit. Management monitors and evaluates commercial real estate loans based on collateral, cash flow and risk grade criteria. As a general rule, the Company avoids financing single purpose projects unless other underwriting factors are present to help mitigate risk. In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loans.
Real Estate and Consumer
With respect to residential loans that are secured by 1-4 family residences and are generally owner occupied, the Company generally establishes a maximum loan-to-value ratio and requires private mortgage insurance if that ratio is exceeded. Home equity loans are typically secured by a subordinate interest in 1-4 family residences, and consumer loans are secured by consumer assets such as automobiles or recreational vehicles. Some consumer loans are unsecured such as small installment loans and certain lines of credit. Repayment of these loans is primarily dependent on the personal income of the borrowers, which can be impacted by economic conditions in their market areas such as unemployment levels. Repayment can also be impacted by changes in property values on residential properties. Risk is mitigated by the fact that the loans are of smaller individual amounts and spread over a large number of borrowers.
Mortgage Warehousing
Horizon’s mortgage warehouse lending has specific mortgage companies as customers of Horizon Bank. Individual mortgage loans originated by these mortgage companies are funded as a secured borrowing with a pledge of collateral under Horizon’s agreement with the mortgage company. Each mortgage loan funded by Horizon undergoes an underwriting review by Horizon to the end investor guidelines and is assigned to Horizon until the loan is sold to the secondary market by the mortgage company. In addition, Horizon takes possession of each original note and forwards such note to the end investor once the mortgage company has sold the loan. At the time a loan is transferred to the secondary market, the mortgage company reacquires the loan under its option within the agreement. Due to the reacquire feature contained in the agreement, the transaction does not qualify as a sale and therefore is accounted for as a secured borrowing with a pledge of collateral pursuant to the agreement with the mortgage company. When the individual loan is sold to the end investor by the mortgage company, the proceeds from the sale of the loan are received by Horizon and used to pay off the loan balance with Horizon along with any accrued interest and any related fees. The remaining balance from the sale is forwarded to the mortgage company. These individual loans typically are sold by the mortgage company within 30 days and are seldom held more than 90 days. Interest income is accrued during this period and collected at the time each loan is sold. Fee income for each loan sold is collected when the loan is sold, and no costs are deferred due to the term between each loan funding and related payoff, which is typically less than 30 days.
Based on the agreements with each mortgage company, at any time a mortgage company can reacquire from Horizon its outstanding loan balance on an individual mortgage and regain possession of the original note. Horizon also has the option to request that the mortgage company reacquire an individual mortgage. Should this occur, Horizon would return the original note and reassign the assignment of the mortgage to the mortgage company. Also, in the event that the end investor would not be able to honor the purchase commitment and the mortgage company would not be able to reacquire its loan on an individual mortgage, Horizon would be able to exercise its rights under the agreement.
Non–performing Loans
The following table presents non–accrual loans, loans past due over 90 days still on accrual, and troubled debt restructured loans by class of loans:

December 31, 2020
Non–accrualLoans Past
Due Over 90
Days Still
Accruing		Non–performing
TDRs		Performing
TDRs		Total
Non–performing
Loans		Non–performing Loans with no Allowance for Credit Losses
Commercial
Owner occupied real estate$10,581 $— $630 $168 $11,379 $6,305 
Non–owner occupied real estate237 — 330 — 567 567 
Residential spec homes— — — — — — 
Development & spec land70 — — — 70 70 
Commercial and industrial1,826 — 506 — 2,332 1,847 
Total commercial12,714 — 1,466 168 14,348 8,789 
Real estate
Residential mortgage5,674 17 922 1,381 7,994 7,097 
Residential construction— — — — — — 
Mortgage warehouse— — — — — — 
Total real estate5,674 17 922 1,381 7,994 7,097 
Consumer
Direct installment12 1 — — 13 13 
Indirect installment1,174 120 — — 1,294 1,294 
Home equity2,568 124 222 244 3,158 2,628 
Total consumer3,754 245 222 244 4,465 3,935 
Total$22,142 $262 $2,610 $1,793 $26,807 $19,821 
December 31, 2019
Non–accrualLoans Past
Due Over 90
Days Still
Accruing		Non–performing
TDRs		Performing
TDRs		Total
Non–performing
Loans		Non–performing Loans with no Allowance for Credit Losses
Commercial
Owner occupied real estate$2,424 $— $629 $139 3,192 $2,563 
Non–owner occupied real estate682 — 374 — 1,056 937 
Residential spec homes— — — — — — 
Development & spec land73 — — — 73 73 
Commercial and industrial1,603 — 78 1,345 3,026 514 
Total commercial4,782 — 1,081 1,484 7,347 4,087 
Real estate
Residential mortgage7,614 1 708 1,561 9,884 8,322 
Residential construction— — — — — — 
Mortgage warehouse— — — — — — 
Total real estate7,614 1 708 1,561 9,884 8,322 
Consumer
Direct installment30 5 — — 35 30 
Indirect installment1,234 135 — — 1,369 1,234 
Home equity2,019 5 217 309 2,550 2,236 
Total consumer3,283 145 217 309 3,954 3,500 
Total$15,679 $146 $2,006 $3,354 $21,185 $15,909 

There was no interest income recognized on non–accrual loans during the twelve months ended December 31, 2020 and 2019 while the loans were in non–accrual status. Included in the $22.1 million of non–accrual loans and the $2.6 million of non–performing TDRs at December 31, 2020 were $2.6 million and $991,000, respectively, of loans acquired for which there were accretable yields recognized.
The following table presents the payment status by class of loan, excluding non–accrual loans of $22.1 million and non–performing TDRs of $2.6 million at December 31, 2020:
December 31, 2020
Current30–59 Days
Past Due		60–89 Days
Past Due		90 Days or
Greater
Past Due		Total Past DueTotal Loans
Commercial
Owner occupied real estate$484,282 $683 130 — $813 $485,095 
Non–owner occupied real estate997,816 599 654 — 1,253 999,069 
Residential spec homes10,070 — — — — 10,070 
Development & spec land25,552 — 750 — 750 26,302 
Commercial and industrial657,027 249 279 — 528 657,555 
Total commercial2,174,747 1,531 1,813 — 3,344 2,178,091 
Real estate
Residential mortgage590,944 905 238 17 1,160 592,104 
Residential construction25,586 — — — — 25,586 
Mortgage warehouse395,626 — — — — 395,626 
Total real estate1,012,156 905 238 17 1,160 1,013,316 
Consumer
Direct installment37,965 69 — — 69 38,034 
Indirect installment354,655 1,356 206 120 1,682 356,337 
Home equity255,908 554 266 125 945 256,853 
Total consumer648,528 1,979 472 245 2,696 651,224 
Total$3,835,431 $4,415 $2,523 $262 $7,200 $3,842,631 
Percentage of total loans99.81 %0.11 %0.07 %0.01 %0.19 %100.00 %
The following table presents the payment status by class of loans at December 31, 2019:
December 31, 2019
Current30–59 Days
Past Due		60–89 Days
Past Due		90 Days or
Greater
Past Due		Non–accrual
&
Non–performing
TDRs		Total Past Due
&
Non–accrual
Loans		Total
Commercial
Owner occupied real estate$515,604 $920 $— $— $3,053 $3,973 $519,577 
Non–owner occupied real estate972,195 80 — — 1,056 1,136 973,331 
Residential spec homes12,925 — — — — — 12,925 
Development & spec land35,881 — — — 73 73 35,954 
Commercial and industrial503,348 819 11 — 1,681 2,511 505,859 
Total commercial2,039,953 1,819 11 — 5,863 7,693 2,047,646 
Real estate
Residential mortgage740,712 1,984 — 1 8,322 10,307 751,019 
Residential construction19,686 — — — — — 19,686 
Mortgage warehouse150,293 — — — — — 150,293 
Total real estate910,691 1,984 — 1 8,322 10,307 920,998 
Consumer
Direct installment40,864 175 5 5 30 215 41,079 
Indirect installment344,478 2,407 404 135 1,234 4,180 348,658 
Home equity273,050 904 20 5 2,236 3,165 276,215 
Total consumer658,392 3,486 429 145 3,500 7,560 665,952 
Total$3,609,036 $7,289 $440 $146 $17,685 $25,560 $3,634,596 
Percentage of total loans99.30 %0.20 %0.01 %— %0.49 %0.70 %100.00 %
The entire balance of a loan is considered delinquent if the minimum payment contractually required to be made is not received by the specified due date.
Troubled Debt Restructurings
Loans modified as troubled debt restructurings (“TDRs”) generally consist of allowing borrowers to defer scheduled principal payments and make interest only payments for a specified period of time at the stated interest rate of the original loan agreement or lower payments due to a modification of the loans' contractual terms. TDRs that continue to accrue interest are individually monitored on a monthly basis and evaluated for impairment annually and transferred to non–accrual status when it is probable that any remaining principal and interest payments due on the loan will not be collected in accordance with the contractual terms of the loan. TDRs that subsequently default are individually evaluated for impairment at the time of default.
At December 31, 2020, the type of concessions the Company has made on restructured loans has been temporary rate reductions and/or reductions in monthly payments, and there have been no restructured loans with modified recorded balances. Any modification to a loan that is a concession and is not in the normal course of lending is considered a restructured loan. A restructured loan is returned to accruing status after six consecutive payments but is still reported as a TDR unless the loan bears interest at a market rate. As of December 31, 2020, the Company had $4.4 million in TDRs and $1.8 million were performing according to the restructured terms and one TDR was returned to accrual status during 2020. There were no specific reserves allocated to TDRs at December 31, 2020
based on the discounted cash flows or, when appropriate, the fair value of the collateral. These TDRs are exclusive of loans modified under the CARES Act during 2020.
The following table presents TDRs by loan portfolio:

December 31, 2020December 31, 2019
Non–accrualAccruingTotalNon-accrualAccruingTotal
Commercial
Owner occupied real estate$630 $168 $798 $629 $139 $768 
Non–owner occupied real estate330 — 330 374 — 374 
Residential spec homes— — — — — — 
Development & spec land— — — — — — 
Commercial and industrial506 — 506 78 1,345 1,423 
Total commercial1,466 168 1,634 1,081 1,484 2,565 
Real estate
Residential mortgage922 1,381 2,303 708 1,561 2,269 
Residential construction— — — — — — 
Mortgage warehouse— — — — — — 
Total real estate922 1,381 2,303 708 1,561 2,269 
Consumer
Direct installment— — — — — — 
Indirect installment— — — — — — 
Home equity222 244 466 217 309 526 
Total consumer222 244 466 217 309 526 
Total$2,610 $1,793 $4,403 $2,006 $3,354 $5,360 

Loans Modified under the CARES Act
The Bank has elected (i) to suspend the requirements under GAAP for loan modifications related to the COVID–19 pandemic that would otherwise be categorized as a TDR; and (ii) to suspend any determination of a loan modified as a result of the effects of COVID–19 pandemic as being a TDR, including impairment for accounting purposes. At December 31, 2020, the Bank modified loans totaling $126.7 million which qualify for treatment under the CARES Act.
Collateral Dependent Financial Assets
A collateral dependent financial loan relies solely on the operation or sale of the collateral for repayment. In evaluating the overall risk associated with the loan, the Company considers character, overall financial condition and resources, and payment record of the borrower; the prospects for support from any financially responsible guarantors; and the nature and degree of protection provided by the cash flow and value of any underlying collateral. However, as other sources of repayment become inadequate over time, the significance of the collateral's value increases and the loan may become collateral dependent.
The table below presents the amortized cost basis and ACL allocated for collateral dependent loans in accordance with ASC326, which are individually evaluated to determine expected credit losses as of December 31, 2020.

Real EstateAccounts Receivable/EquipmentOtherTotalACL Allocation
Commercial
Owner occupied real estate$11,309 $114 $— $11,423 $1,605 
Non–owner occupied real estate1,032 — — 1,032 — 
Development & spec land70 — — 70 — 
Commercial and industrial2,245 210 — 2,455 252 
Total commercial14,656 324 — 14,980 1,857 
Total collateral dependent loans$14,656 $324 $— $14,980 $1,857 

Credit Quality Indicators
Horizon Bank’s processes for determining credit quality differ slightly depending on whether a new loan or a renewed loan is being underwritten, or whether an existing loan is being re-evaluated for credit quality. The latter usually occurs upon receipt of current financial information or other pertinent data that would trigger a change in the loan grade.
•    For new and renewed commercial loans, the Bank’s Credit Department, which acts independently of the loan officer, assigns the credit quality grade to the loan. Loan grades for loans with an aggregate credit exposure that exceeds the authorities in the respective regions (ranging from $1,000,000 to $3,500,000) are validated by the Loan Committee, which is chaired by the Chief Commercial Banking Officer (“CCBO”).
•    Commercial loan officers are responsible for reviewing their loan portfolios and reporting any adverse material change to the CCBO or Loan Committee. When circumstances warrant a change in the credit quality grade, loan officers are required to notify the CCBO and the Credit Department of the change in the loan grade. Downgrades are accepted immediately by the CCBO, however, lenders must present their factual information to either the Loan Committee or the CCBO when recommending an upgrade.
•    The CCBO, or a designee, meets periodically with loan officers to discuss the status of past–due loans and classified loans. These meetings are also designed to give the loan officers an opportunity to identify an existing loan that should be downgraded to a classified grade.
•    Monthly, senior management meets as members of the Watch Committee, which reviews all of the past due, classified, and impaired loans and the relative trends of these assets. This committee also reviews the actions taken by management regarding foreclosure mitigation, loan extensions, troubled debt restructures, other real estate owned and personal property repossessions. The information reviewed in this meeting acts as a precursor for developing management’s analysis of the adequacy of the Allowance for Loan and Lease Losses.
For residential real estate and consumer loans, Horizon uses a grading system based on delinquency. Loans that are 90 days or more past due, on non–accrual, or are classified as a TDR are graded “Substandard.” After being 90 to 120 days delinquent a loan is charged–off unless it is well secured and in the process of collection. If the latter case exists, the loan is placed on non–accrual. Occasionally a mortgage loan may be graded as “Special Mention.” When this situation arises, it is because the characteristics of the loan and the borrower fit the definition of a Risk Grade 5 described below, which is normally used for grading commercial loans. Loans not graded Substandard are considered Pass.
Horizon Bank employs a nine–grade rating system to determine the credit quality of commercial loans. The first five grades represent acceptable quality, and the last four grades mirror the criticized and classified grades used by the bank regulatory agencies (special mention, substandard, doubtful, and loss). The most recent review and approval of the loan policy was in October 2020. The loan grade definitions are detailed below.
Risk Grade 1: Excellent (Pass)
Loans secured by liquid collateral, such as certificates of deposit, reputable bank letters of credit, or other cash equivalents or loans to any publicly held company with a current long–term debt rating of A or better and meeting defined key financial metric ranges.
Risk Grade 2: Good (Pass)
Loans to businesses that have strong financial statements containing an unqualified opinion from a CPA firm and at least three years consecutive years of profits; loans supported by unaudited financial statements containing strong balance sheets, five years consecutive years of profits, a five year satisfactory relationship with the Bank, and key balance sheet and income statement trends that are either stable or positive; loans secured by publicly traded marketable securities with required margins where there is no impediment to liquidation; loans to individuals backed by liquid personal assets and unblemished credit histories; or loans to publicly held companies with current long–term debt ratings of Baa or better and meeting defined key financial metric ranges.
Risk Grade 3: Satisfactory (Pass)
Loans supported by financial statements (audited or unaudited) that indicate average or slightly below average risk and having some deficiency or vulnerability to changing economic conditions; loans with some weakness but offsetting features of other support are readily available; loans that are meeting the terms of repayment, but which may be susceptible to deterioration if adverse factors are encountered and meeting defined key financial metric ranges. Loans may be graded Satisfactory when there is no recent information on which to base a current risk evaluation and the following conditions apply:
•    At inception, the loan was properly underwritten, did not possess an unwarranted level of credit risk, and the loan met the above criteria for a risk grade of Excellent, Good, or Satisfactory;
•    At inception, the loan was secured with collateral possessing a loan value adequate to protect the Bank from loss.
•    The loan has exhibited two or more years of satisfactory repayment with a reasonable reduction of the principal balance.
•    During the period that the loan has been outstanding, there has been no evidence of any credit weakness. Some examples of weakness include slow payment, lack of cooperation by the borrower, breach of loan covenants, or the borrower is in an industry known to be experiencing problems. If any of these credit weaknesses is observed, a lower risk grade may be warranted.
Risk Grade 4 Satisfactory/Monitored:
Loans in this category are considered to be of acceptable credit quality, but contain greater credit risk than Satisfactory rated loans and meet defined key financial metric ranges. Borrower displays acceptable liquidity, leverage, and earnings performance within the Bank’s minimum underwriting guidelines. The level of risk is acceptable but conditioned on the proper level of loan officer supervision. Loans that normally fall into this grade include acquisition, construction and development loans and income producing properties that have not reached stabilization.
Risk Grade 4W Management Watch:
Loans in this category are considered to be of acceptable quality and meet defined key financial metric ranges, but with above normal risk. Borrower displays potential indicators of weakness in the primary source of repayment resulting in a higher reliance on secondary sources of repayment. Balance sheet may exhibit weak liquidity and/or high leverage. There is inconsistent earnings performance without the ability to sustain adverse economic conditions. Borrower may be operating in a declining industry or the property type, as for a commercial real estate loan, may be high risk or in decline. These loans require an increased level of loan officer supervision and monitoring to assure that any deterioration is addressed in a timely fashion.
Commercial construction loans are graded as 4W Management Watch until the projects are completed and stabilized.
Risk Grade 5: Special Mention
Loans which possess some temporary (normally less than one year) credit deficiency or potential weakness which deserves close attention. Such loans pose an unwarranted financial risk that, if not corrected, could weaken the loan by adversely impacting the future repayment ability of the borrower. The key distinctions of a Special Mention classification are that (1) it is indicative of an unwarranted level of risk and (2) weaknesses are considered “potential,” not “defined,” impairments to the primary source of repayment. These loans may be to borrowers with adverse trends in financial performance, collateral value and/or marketability, or balance sheet strength and must meet defined key financial metric ranges.
Risk Grade 6: Substandard
One or more of the following characteristics may be exhibited in loans classified Substandard:
•    Loans which possess a defined credit weakness. The likelihood that a loan will be paid from the primary source of repayment is uncertain. Financial deterioration is under way and very close attention is warranted to ensure that the loan is collected without loss.
•    Loans are inadequately protected by the current net worth and paying capacity of the obligor.
•    The primary source of repayment is gone, and the Bank is forced to rely on a secondary source of repayment, such as collateral liquidation or guarantees.
•    Loans have a distinct possibility that the Bank will sustain some loss if deficiencies are not corrected.
•    Unusual courses of action are needed to maintain a high probability of repayment.
•    The borrower is not generating enough cash flow to repay loan principal; however, it continues to make interest payments.
•    The lender is forced into a subordinated or unsecured position due to flaws in documentation.
•    Loans have been restructured so that payment schedules, terms, and collateral represent concessions to the borrower when compared to the normal loan terms.
•    The lender is seriously contemplating foreclosure or legal action due to the apparent deterioration in the loan.
•    There is a significant deterioration in market conditions to which the borrower is highly vulnerable.
•    The borrower meets defined key financial metric ranges.
Risk Grade 7: Doubtful
One or more of the following characteristics may be present in loans classified Doubtful:
•    Loans have all of the weaknesses of those classified as Substandard. However, based on existing conditions, these weaknesses make full collection of principal highly improbable.
•    The primary source of repayment is gone, and there is considerable doubt as to the quality of the secondary source of repayment.
•    The possibility of loss is high but because of certain important pending factors which may strengthen the loan, loss classification is deferred until the exact status of repayment is known.
•    The borrower meets defined key financial metric ranges.
Risk Grade 8: Loss
Loans are considered uncollectible and of such little value that continuing to carry them as assets is not feasible. Loans will be classified Loss when it is neither practical nor desirable to defer writing off or reserving all or a portion of a basically worthless asset, even though partial recovery may be possible at some time in the future.
Commercial loans modified due to the impact of the COVID–19 pandemic were immediately downgraded one level resulting in the increase of Special Mention commercial loans from December 31, 2019 to December 31, 2020.
The following tables present loans by credit grades and origination year at December 31, 2020.
December 31, 202020202019201820172016PriorRevolving
Loans		Total
Commercial
Owner occupied real estate
Pass$57,726 $65,558 $49,455 $49,032 $47,480 $127,373 $40,027 $436,651 
Special Mention— 1,081 5,928 10,205 4,207 12,787 325 34,533 
Substandard1,021 1,231 4,012 2,504 2,839 9,673 3,842 25,122 
Doubtful— — — — — — — — 
Total owner occupied real estate$58,747 $67,870 $59,395 $61,741 $54,526 $149,833 $44,194 $496,306 
Non–owner occupied real estate
Pass$115,667 $120,023 $73,669 $133,396 $99,674 $208,649 $166,986 $918,064 
Special Mention862 1,236 28,723 1,298 2,548 13,182 4,072 51,921 
Substandard— 15,552 1,477 107 6,422 4,521 1,572 29,651 
Doubtful— — — — — — — — 
Total non–owner occupied real estate$116,529 $136,811 $103,869 $134,801 $108,644 $226,352 $172,630 $999,636 
Residential spec homes
Pass$737 $237 $— $298 $368 $1,177 $7,253 $10,070 
Special Mention— — — — — — — — 
Substandard— — — — — — — — 
Doubtful— — — — — — — — 
Total residential spec homes$737 $237 $— $298 $368 $1,177 $7,253 $10,070 
Development & spec land
Pass$573 $736 $1,522 $2,461 $672 $11,971 $6,907 $24,842 
Special Mention— — — — — 274 — 274 
Substandard— — — — — 506 750 1,256 
Doubtful— — — — — — — — 
Total development & spec land$573 $736 $1,522 $2,461 $672 $12,751 $7,657 $26,372 
Commercial & industrial
Pass$253,953 $63,772 $58,978 $88,121 $26,044 $70,706 $30,845 $592,419 
Special Mention8,779 1,164 1,088 9,306 1,835 11,870 3,040 37,082 
Substandard4,233 7,079 11,072 1,660 636 3,322 2,384 30,386 
Doubtful— — — — — — — — 
Total commercial & industrial266,965 72,015 71,138 99,087 28,515 85,898 36,269 659,887 
Total commercial$443,551 $277,669 $235,924 $298,388 $192,725 $476,011 $268,003 $2,192,271 
December 31, 202020202019201820172016PriorRevolving
Loans		Total
Real estate
Residential mortgage
Performing$109,487 $68,556 $86,572 $89,051 $65,718 $171,322 $— $590,706 
Non–performing— 296 636 39 300 6,723 — 7,994 
Total residential mortgage$109,487 $68,852 $87,208 $89,090 $66,018 $178,045 $— $598,700 
Residential construction
Performing$— $— $— $— $— $— $25,586 $25,586 
Non–performing— — — — — — — — 
Total residential construction$— $— $— $— $— $— $25,586 $25,586 
Mortgage warehouse
Performing$— $— $— $— $— $— $395,626 $395,626 
Non–performing— — — — — — — — 
Total mortgage warehouse— — — — — — 395,626 395,626 
Total real estate$109,487 $68,852 $87,208 $89,090 $66,018 $178,045 $421,212 $1,019,912 

December 31, 202020202019201820172016PriorRevolving
Loans		Total
Consumer
Direct installment
Performing$12,552 $9,552 $5,828 $5,946 $2,124 $2,019 $12 $38,033 
Non–performing— — — 5 3 5 — 13 
Total direct installment$12,552 $9,552 $5,828 $5,951 $2,127 $2,024 $12 $38,046 
Indirect installment
Performing$134,394 $97,408 $74,215 $36,763 $8,636 $4,801 $— $356,217 
Non–performing84 223 392 361 80 154 — 1,294 
Total indirect installment$134,478 $97,631 $74,607 $37,124 $8,716 $4,955 $— $357,511 
Home equity
Performing$63,946 $42,762 $34,807 $27,553 $22,450 $59,503 $5,464 $256,485 
Non–performing— 9 111 74 121 1,237 1,606 3,158 
Total home equity63,946 42,771 34,918 27,627 22,571 60,740 7,070 259,643 
Total consumer$210,976 $149,954 $115,353 $70,702 $33,414 $67,719 $7,082 $655,200 
The following table presents loans by credit grades at December 31, 2019.
December 31, 2019
PassSpecial
Mention		SubstandardDoubtfulTotal
Commercial
Owner occupied real estate$492,386 $8,328 $18,863 $— $519,577 
Non–owner occupied real estate957,990 7,824 7,517 — 973,331 
Residential spec homes12,925 — — — 12,925 
Development & spec land35,815 — 139 — 35,954 
Commercial and industrial468,893 18,652 18,314 — 505,859 
Total commercial1,968,009 34,804 44,833 — 2,047,646 
Real estate
Residential mortgage741,136 — 9,883 — 751,019 
Residential construction19,686 — — — 19,686 
Mortgage warehouse150,293 — — — 150,293 
Total real estate911,115 — 9,883 — 920,998 
Consumer
Direct installment41,044 — 35 — 41,079 
Indirect installment347,289 — 1,369 — 348,658 
Home equity273,665 — 2,550 — 276,215 
Total consumer661,998 — 3,954 — 665,952 
Total$3,541,122 $34,804 $58,670 $— $3,634,596 
Percentage of total loans97.43 %0.96 %1.61 %0.00 %100.00 %
Accounting for Certain Loans Acquired in a Transfer (Prior to January 1, 2020)
As indicated in Note 1, the Company adopted ASC 326 using the prospective transition approach for PCD loans previously classified as PCI and accounted for under ASC 310–30. Accordingly, upon reassessment at January 1, 2020, the disclosures as previously required under ASC 310–30 are no longer applicable for the year ended December 31, 2020.
The Company acquired loans in acquisitions with evidence of deterioration of credit quality since origination and it was probable, at acquisition, that all contractually required payments would not be collected.
Prior to January 1, 2020, the Company purchased loans with evidence of credit deterioration since origination and for which it was probable that all contractually required payments will not be collected were considered to be credit impaired. Evidence of credit quality deterioration as of the purchase date may include information such as past–due and non–accrual status, borrower credit scores and recent loan–to–value percentages. Purchase credit–impaired loans are accounted for under the accounting guidance for loans and debt securities acquired with deteriorated credit quality (ASC 310–30) and initially measured at fair value, which includes estimated future credit losses expected to be incurred over the life of the loan. Accordingly, an allowance for credit losses related to these loans is not carried over and recorded at the acquisition date. Management estimated the cash flows expected to be collected at acquisition using our internal risk models, which incorporate the estimate of current key assumptions, such as default rates, severity and prepayment speeds. Interest marks are accreted to income over the remaining life of the loan. Credit marks are evaluated using the practical expedient method.
The carrying amounts of those loans included in the balance sheet amounts of loans receivable as of December 31, 2019 are as follows:
December 31, 2019
CommercialReal
Estate		ConsumerOutstanding
Balance		Allowance
for Loan
Losses		Carrying
Amount
Heartland$197 $99 $— $296 $— $296 
Summit88 473 — 561 — 561 
Peoples229 35 — 264 — 264 
Kosciusko244 131 — 375 — 375 
LaPorte353 793 20 1,166 — 1,166 
Lafayette1,867 — — 1,867 — 1,867 
Wolverine2,289 — — $2,289 — 2,289 
Salin4,938 1,912 962 7,812 133 7,679 
Total$10,205 $3,443 $982 $14,630 $133 $14,497 
Accretable yield, or income expected to be collected for the year ended December 31, 2019 are as follows:
Twelve Months Ended December 31, 2019
Beginning
balance		AdditionsAccretionReclassification
from
nonaccretable
difference		DisposalsEnding
balance
Heartland$174 — $(32)— $— $142 
Summit42 — (9)— (11)22 
Kosciusko300 — (63)— (2)235 
LaPorte829 — (111)— 4 722 
Lafayette609 — (126)— (193)290 
Wolverine698 — (272)— (306)120 
Salin— 2,002 (590)— (37)1,375 
Total$2,652 $2,002 $(1,203)$— $(545)$2,906 
During the year ended December 31, 2019, the Company increased the allowance for loan losses by a charge to the income statement of $133,000, respectively. No allowance for loan losses were reversed for the year ended December 31, 2019.
Impaired Loans (Prior to January 1, 2020)
The following table presents the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment, and based on impairment analysis as of December 31, 2019 :
December 31, 2019
CommercialReal
Estate		Mortgage
Warehousing		ConsumerTotal
Allowance For Loan Losses
Ending allowance balance attributable to loans:
Individually evaluated for impairment$541 $— $— $— $541 
Collectively evaluated for impairment11,455 923 1,077 3,671 17,126 
Loans acquired with deteriorated credit quality— — — — — 
Total ending allowance balance$11,996 $923 $1,077 $3,671 $17,667 
Loans:
Individually evaluated for impairment$7,347 $— $— $— $7,347 
Collectively evaluated for impairment2,040,299 770,705 150,293 665,952 3,627,249 
Loans acquired with deteriorated credit quality— — — — — 
Total ending loans balance$2,047,646 $770,705 $150,293 $665,952 $3,634,596 
The following table presents commercial loans individually evaluated for impairment by class of loans:
December 31, 2019
Twelve Months Ended
Unpaid
Principal
Balance		Recorded
Investment		Allowance for
Loan Loss
Allocated		Average
Balance in
Impaired
Loans		Cash/Accrual
Interest
Income
Recognized
With no recorded allowance
Commercial
Owner occupied real estate$3,192 $3,193 $— $3,608 $246 
Non-owner occupied real estate937 937 — 2,810 98 
Residential spec homes— — — — — 
Development & spec land73 73 — 158 — 
Commercial and industrial1,859 1,861 — 2,464 100 
Total commercial6,061 6,064 — 9,040 444 
With an allowance recorded
Commercial
Owner occupied real estate— — — — — 
Non-owner occupied real estate119 119 25 130 — 
Residential spec homes— — — — — 
Development & spec land— — — — — 
Commercial and industrial1,167 1,168 516 1,225 46 
Total commercial1,286 1,287 541 1,355 46 
Total$7,347 $7,351 $541 $10,395 $490 
December 31, 2018
Twelve Months Ended
Average
Balance in
Impaired
Loans		Cash/Accrual
Interest
Income
Recognized
With no recorded allowance
Commercial
Owner occupied real estate$3,168 $77 
Non–owner occupied real estate1,096 12 
Residential spec homes— — 
Development & spec land71 — 
Commercial and industrial1,119 21 
Total commercial5,454 110 
With an allowance recorded
Commercial
Owner occupied real estate864 — 
Non–owner occupied real estate180 4 
Residential spec homes— — 
Development & spec land— — 
Commercial and industrial870 14 
Total commercial1,914 18 
Total$7,368 $128