Note 4 - Loans and Allowance for Credit Losses on Loans

9 Months Ended

Sep. 30, 2021

Notes to Financial Statements

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

(4) Loans and Allowance for Credit Losses on Loans

Composition of loans by class follows:

(in thousands)	September 30, 2021		December 31, 2020
Commercial real estate - non-owner occupied	$	1,142,647	$	833,470
Commercial real estate - owner occupied		652,631		508,672
Total commercial real estate		1,795,278		1,342,142
Commercial and industrial - term		581,804		525,776
Commercial and industrial - term - PPP		231,335		550,186
Commercial and industrial - lines of credit		329,119		249,378
Total commercial and industrial		1,142,258		1,325,340
Residential real estate - owner occupied		398,069		239,191
Residential real estate - non-owner occupied		277,045		140,930
Total residential real estate		675,114		380,121
Construction and land development		303,642		291,764
Home equity lines of credit		140,027		95,366
Consumer		104,629		71,874
Leases		12,348		14,786
Credits cards		15,821		10,203
Total loans (1)	$	4,189,117	$	3,531,596

(1) Total loans are presented inclusive of premiums, discounts and net loan origination fees and costs.

Loans totaling $755 million were acquired on May 31, 2021 as a result of the KB acquisition, including $33 million in PPP loans.

Accrued interest on loans, which is excluded from the amortized cost of loans, totaled $11 million and $12 million at September 30, 2021 and December 31, 2020, respectively, and was included in the consolidated balance sheets.

Loans with carrying amounts of $2.5 billion and $2.0 billion were pledged to secure FHLB borrowing capacity at September 30, 2021 and December 31, 2020, respectively.

Loans to directors and their related interests, including loans to companies for which directors are principal owners and executive officers, totaled $53 million and $43 million as of September 30, 2021 and December 31, 2020, respectively.

PCD Loans

In connection with the acquisition of KB, Bancorp acquired loans both with and without evidence of credit quality deterioration since origination. Acquired loans are recorded at their fair value at the time of acquisition with no carryover from the acquired institution’s previously recorded allowance for loan and lease losses. Acquired loans are accounted for under ASC 326, Financial Instruments – Credit Losses.

The fair value of acquired loans recorded at the time of acquisition is based upon several factors, including the timing and payment of expected cash flows, as adjusted for estimated credit losses and prepayments, and then discounting these cash flows using comparable market rates. The resulting fair value adjustment is recorded in the form of a premium or discount to the unpaid principal balance of the respective loans. As it relates to acquired loans that, as of the date of acquisition, have experienced a more-than-insignificant deterioration in credit quality since origination (“PCD”), the net premium or net discount is adjusted to reflect Bancorp’s allowance for credit losses recorded for PCD loans at the time of acquisition, and the remaining fair value adjustment is accreted or amortized into interest income over the remaining life of the respective loans. As it relates to loans not classified as PCD (“non-PCD”) loans, the credit loss and yield components of their fair value adjustment are aggregated, and the resulting net premium or net discount is accreted or amortized into interest income over the remaining life of the respective loans. Bancorp records an ACL for non-PCD loans at the time of acquisition through provision expense, and therefore, no further adjustments are made to the net premium or net discount for non-PCD loans.

Bancorp purchased loans through the acquisition of KB for which there was, at the time of acquisition, more-than-insignificant deterioration of credit quality since origination. The carrying amount of loans acquired and classified as PCD was as follows at acquisition:

(in thousands)	May 31, 2021
Purchase price of PCD loans at acquisition	$	32,765
Allowance for credit losses at acquisition		(6,757	)
Non-credit discount (premium) at acquisition		(735	)
Fair value of PCD loans at acquisition	$	25,273

Interest income recognized on loans classified as PCD totaled $341,000 and $450,000 for the three and nine-month periods ended September 30, 2021, respectively.

Allowance for Credit Losses on Loans

The table below reflects activity in the ACL related to loans:

(in thousands) Three Months Ended September 30, 2021	Beginning Balance		Initial Allowance on PCD Loans		Provision for Credit Losses on Loans			Charge-offs			Recoveries		Ending Balance
Commercial real estate - non-owner occupied	$	19,747	$	-	$	(3,582	)	$	-		$	6	$	16,171
Commercial real estate - owner occupied		9,548		-		2,131			(1,361	)		-		10,318
Total commercial real estate		29,295		-		(1,451	)		(1,361	)		6		26,489
Commercial and industrial - term (1)		9,748		-		253			(240	)		5		9,766
Commercial and industrial - lines of credit		5,240		-		(328	)		-			-		4,912
Total commercial and industrial		14,988		-		(75	)		(240	)		5		14,678
Residential real estate - owner occupied		4,350		-		420			(340	)		27		4,457
Residential real estate - non-owner occupied		3,422		-		106			-			2		3,530
Total residential real estate		7,772		-		526			(340	)		29		7,987
Construction and land development		5,193		-		45			-			-		5,238
Home equity lines of credit		1,230		-		(173	)		-			-		1,057
Consumer		572		-		145			(274	)		284		727
Leases		232		-		(38	)		-			-		194
Credit cards		142		-		21			-			-		163
Total	$	59,424	$	-	$	(1,000	)	$	(2,215	)	$	324	$	56,533

(in thousands) Nine Months Ended September 30, 2021	Beginning Balance		Initial Allowance on PCD Loans		Provision for Credit Losses on Loans			Charge-offs			Recoveries		Ending Balance
Commercial real estate - non-owner occupied	$	19,396	$	1,491	$	(1,692	)	$	(3,065	)	$	41	$	16,171
Commercial real estate - owner occupied		6,983		2,112		2,029			(1,361	)		555		10,318
Total commercial real estate		26,379		3,603		337			(4,426	)		596		26,489
Commercial and industrial - term (1)		8,970		1,022		156			(409	)		27		9,766
Commercial and industrial - lines of credit		3,614		1,755		(457	)		-			-		4,912
Total commercial and industrial		12,584		2,777		(301	)		(409	)		27		14,678
Residential real estate - owner occupied		3,389		142		1,279			(383	)		30		4,457
Residential real estate - non-owner occupied		1,818		88		1,620			-			4		3,530
Total residential real estate		5,207		230		2,899			(383	)		34		7,987
Construction and land development		6,119		-		(884	)		-			3		5,238
Home equity lines of credit		895		147		14			-			1		1,057
Consumer		340		-		471			(561	)		477		727
Leases		261		-		(67	)		-			-		194
Credit cards		135		-		28			-			-		163
Total	$	51,920	$	6,757	$	2,497		$	(5,779	)	$	1,138	$	56,533

(1) The allowance allocated for the commercial & industrial –term segment includes $813,000 related to PCD PPP loans.

(in thousands) Three Months Ended September 30, 2020	Beginning Balance		Impact of Adopting ASC 326		Initial ACL on Loans Purchased with Credit Deterioration		Provision for Credit Losses on Loans			Charge-offs			Recoveries		Ending Balance
Commercial real estate - non-owner occupied	$	18,839	$	-	$	-	$	(558	)	$	(143	)	$	2	$	18,140
Commercial real estate - owner occupied		6,706		-		-		1,674			(1,351	)		-		7,029
Total commercial real estate		25,545		-		-		1,116			(1,494	)		2		25,169
Commercial and industrial - term		7,339		-		-		1,605			(1	)		1		8,944
Commercial and industrial - lines of credit		3,242		-		-		179			-			-		3,421
Total commercial and industrial		10,581		-		-		1,784			(1	)		1		12,365
Residential real estate - owner occupied		2,848		-		-		464			(61	)		13		3,264
Residential real estate - non-owner occupied		1,594		-		-		418			(2	)		-		2,010
Total residential real estate		4,442		-		-		882			(63	)		13		5,274
Construction and land development		5,608		-		-		420			-			-		6,028
Home equity lines of credit		832		-		-		106			-			-		938
Consumer		362		-		-		57			(140	)		57		336
Leases		223		-		-		34			-			-		257
Credit cards		115		-		-		19			-			-		134
Total	$	47,708	$	-	$	-	$	4,418		$	(1,698	)	$	73	$	50,501

(in thousands) Nine Months Ended September 30, 2020	Beginning Balance		Impact of Adopting ASC 326			Initial ACL on Loans Purchased with Credit Deterioration		Provision for Credit Losses on Loans			Charge-offs			Recoveries		Ending Balance
Commercial real estate - non-owner occupied	$	5,235	$	2,946		$	152	$	9,945		$	(143	)	$	5	$	18,140
Commercial real estate - owner occupied		3,327		1,542			1,350		2,161			(1,351	)		-		7,029
Total commercial real estate		8,562		4,488			1,502		12,106			(1,494	)		5		25,169
Commercial and industrial - term		6,782		365			-		1,790			(1	)		8		8,944
Commercial and industrial - lines of credit		5,657		(1,528	)		-		(708	)		-			-		3,421
Total commercial and industrial		12,439		(1,163	)		-		1,082			(1	)		8		12,365
Residential real estate - owner occupied		1,527		1,087			99		615			(79	)		15		3,264
Residential real estate - non-owner occupied		947		429			-		636			(2	)		-		2,010
Total residential real estate		2,474		1,516			99		1,251			(81	)		15		5,274
Construction and land development		2,105		3,056			-		867			-			-		6,028
Home equity lines of credit		728		114			-		96			-			-		938
Consumer		100		264			34		54			(394	)		278		336
Leases		237		(4	)		-		24			-			-		257
Credit cards		146		(50	)		-		38			-			-		134
Total	$	26,791	$	8,221		$	1,635	$	15,518		$	(1,970	)	$	306	$	50,501

The following table presents the amortized cost basis of non-performing loans and the amortized cost basis of loans on non-accrual status for which there was no related ACL losses:

	Non-accrual Loans						Past Due 90-Days-
(in thousands)	With No		Total		Troubled Debt		or-More and Still
September 30, 2021	Recorded ACL		Non-accrual Loans		Restructurings		Accruing Interest
Commercial real estate - non-owner occupied	$	29	$	771	$	—	$	—
Commercial real estate - owner occupied		155		669		—		—
Total commercial real estate		184		1,440		—		—
Commercial and industrial - term		94		1,000		13		—
Commercial and industrial - lines of credit		—		79		—		—
Total commercial and industrial		94		1,079		13		—
Residential real estate - owner occupied		805		1,912		—		—
Residential real estate - non-owner occupied		—		300		—		—
Total residential real estate		805		2,212		—		—
Construction and land development		—		—		—		—
Home equity lines of credit		—		181		—		—
Consumer		—		124		—		—
Leases		—		—		—		—
Credit cards		—		—		—		—
Total	$	1,083	$	5,036	$	13	$	-

	Non-accrual Loans						Past Due 90-Days-
(in thousands)	With No		Total		Troubled Debt		or-More and Still
December 31, 2020	Recorded ACL		Non-accrual Loans		Restructurings		Accruing Interest
Commercial real estate - non-owner occupied	$	186	$	10,278	$	—	$	—
Commercial real estate - owner occupied		1,048		1,403		—		156
Total commercial real estate		1,234		11,681		—		156
Commercial and industrial - term		6		6		16		—
Commercial and industrial - lines of credit		88		88		—		—
Total commercial and industrial		94		94		16		—
Residential real estate - owner occupied		413		413		—		178
Residential real estate - non-owner occupied		101		101		—		301
Total residential real estate		514		514		—		479
Construction and land development		—		—		—		—
Home equity lines of credit		221		221		—		14
Consumer		4		4		—		—
Leases		—		—		—		—
Credit cards		—		—		—		—
Total	$	2,067	$	12,514	$	16	$	649

For the three and nine month periods ended September 30, 2021 and 2020, the amount of accrued interest income previously recorded as revenue and subsequently reversed due to the change in accrual status was immaterial.

For the three and nine month periods ended September 30, 2021 and 2020, no interest income was recognized on loans on non-accrual status.

The following table presents the amortized cost basis and ACL allocated for collateral dependent loans, which are individually evaluated to determine expected credit losses:

(in thousands) September 30, 2021	Real Estate		Accounts Receivable / Equipment		Other		Total		ACL Allocation
Commercial real estate - non-owner occupied	$	771	$	-	$	-	$	771	$	35
Commercial real estate - owner occupied		8,116		-		-		8,116		2,213
Total commercial real estate		8,887		-		-		8,887		2,248
Commercial and industrial - term		-		926		-		926		217
Commercial and industrial - lines of credit		-		-		-		-		-
Total commercial and industrial		-		926		-		926		217
Residential real estate - owner occupied		1,912		-		-		1,912		-
Residential real estate - non-owner occupied		511		-		-		511		116
Total residential real estate		2,423		-		-		2,423		116
Construction and land development		-		-		-		-		-
Home equity lines of credit		181		-		-		181		-
Consumer		-		-		34		34		-
Leases		-		-		-		-		-
Credit cards		-		-		-		-		-
Total collateral dependent loans	$	11,491	$	926	$	34	$	12,451	$	2,581

(in thousands) December 31, 2020	Real Estate		Accounts Receivable / Equipment		Other		Total		ACL Allocation
Commercial real estate - non-owner occupied	$	10,278	$	-	$	-	$	10,278	$	3,037
Commercial real estate - owner occupied		1,403		-		-		1,403		13
Total commercial real estate		11,681		-		-		11,681		3,050
Commercial and industrial - term		16		7		-		23		16
Commercial and industrial - lines of credit		-		88		-		88		-
Total commercial and industrial		16		95		-		111		16
Residential real estate - owner occupied		413		-		-		413		-
Residential real estate - non-owner occupied		101		-		-		101		-
Total residential real estate		514		-		-		514		-
Construction and land development		-		-		-		-		-
Home equity lines of credit		221		-		-		221		-
Consumer		-		-		4		4		-
Leases		-		-		-		-		-
Credit cards		-		-		-		-		-
Total collateral dependent loans	$	12,432	$	95	$	4	$	12,531	$	3,066

There have been no significant changes to the types of collateral securing Bancorp’s collateral dependent loans.

The following tables present the aging of contractually past due loans by portfolio class:

(in thousands)			30-59 days		60-89 days		90 or more		Total		Total
September 30, 2021*	Current		Past Due		Past Due		Days Past Due		Past Due		Loans
Commercial real estate - non-owner occupied	$	1,141,630	$	5	$	241	$	771	$	1,017	$	1,142,647
Commercial real estate - owner occupied		651,023		949		—		659		1,608		652,631
Total commercial real estate		1,792,653		954		241		1,430		2,625		1,795,278
Commercial and industrial - term		579,865		1,000		18		921		1,939		581,804
Commercial and industrial - term - PPP		231,165		170		—		—		170		231,335
Commercial and industrial - lines of credit		326,859		1,918		263		79		2,260		329,119
Total commercial and industrial		1,137,889		3,088		281		1,000		4,369		1,142,258
Residential real estate - owner occupied		394,026		2,148		464		1,431		4,043		398,069
Residential real estate - non-owner occupied		276,132		708		—		205		913		277,045
Total residential real estate		670,158		2,856		464		1,636		4,956		675,114
Construction and land development		303,642		—		—		—		—		303,642
Home equity lines of credit		139,632		121		221		53		395		140,027
Consumer		104,089		320		97		123		540		104,629
Leases		12,348		—		—		—		—		12,348
Credit cards		15,820		1		—		—		1		15,821
Total	$	4,176,231	$	7,340	$	1,304	$	4,242	$	12,886	$	4,189,117

(in thousands)			30-59 days		60-89 days		90 or more		Total		Total
December 31, 2020*	Current		Past Due		Past Due		Days Past Due		Past Due		Loans
Commercial real estate - non-owner occupied	$	822,199	$	-	$	10,600	$	671	$	11,271	$	833,470
Commercial real estate - owner occupied		507,265		278		—		1,129		1,407		508,672
Total commercial real estate		1,329,464		278		10,600		1,800		12,678		1,342,142
Commercial and industrial - term		523,936		1,404		430		6		1,840		525,776
Commercial and industrial - term - PPP		550,186		—		—		—		—		550,186
Commercial and industrial - lines of credit		249,204		86		—		88		174		249,378
Total commercial and industrial		1,323,326		1,490		430		94		2,014		1,325,340
Residential real estate - owner occupied		237,902		585		247		457		1,289		239,191
Residential real estate - non-owner occupied		140,234		294		—		402		696		140,930
Total residential real estate		378,136		879		247		859		1,985		380,121
Construction and land development		291,764		—		—		—		—		291,764
Home equity lines of credit		95,206		7		139		14		160		95,366
Consumer		71,778		90		4		2		96		71,874
Leases		14,786		—		—		—		—		14,786
Credit cards		10,197		5		—		1		6		10,203
Total	$	3,514,657	$	2,749	$	11,420	$	2,770	$	16,939	$	3,531,596

* - Pursuant to the CARES Act, loan deferrals granted to borrowers experiencing business interruptions related to the pandemic were not classified as TDRs and not included in past due and/or non-performing loan statistics. As of September 30, 2021 and December 31, 2020, outstanding CARES Act loan deferrals of $355,000 and $37 million are reflected as current, respectively. 

Loan Risk Ratings

Consistent with regulatory guidance, Bancorp categorizes loans into credit risk rating categories based on relevant information about the ability of borrowers to service their debt such as current financial information, historical payment experience, credit documentation, public information and current economic trends. Pass-rated loans include all risk-rated loans other than those classified as OAEM, substandard, and doubtful, which are defined below:

OAEM – Loans classified as OAEM have potential weaknesses requiring management's heightened attention. These potential weaknesses may result in deterioration of repayment prospects for the loan or of Bancorp's credit position at some future date.

Substandard – Loans classified as substandard are inadequately protected by the paying capacity of the obligor or of collateral pledged, if any. Loans so classified have well-defined weaknesses that jeopardize ultimate repayment of the debt. Default is a distinct possibility if the deficiencies are not corrected.

Substandard non-performing – Loans classified as substandard non-performing have all the characteristics of substandard loans and have been placed on non-accrual status or have been accounted for as TDRs. Loans are placed on non-accrual status when prospects for recovering both principal and accrued interest are considered doubtful or when a default of principal or interest has existed for 90 days or more.

Doubtful – Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or repayment in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

Management considers the guidance in ASC 310-20 when determining whether a modification, extension, or renewal of loan constitutes a current period origination. Current period renewals of credit are re-underwritten at the point of renewal and considered current period originations for purposes of the table below. Beginning in 2021, Bancorp has elected not to disclose revolving loans that have converted to term loans, as activity relating to this disclosure, which is included in the tables presented below as of December 31, 2020, is currently immaterial to Bancorp’s loan portfolio and is expected to be in the future. As of September 30, 2021, the risk rating of loans based on year of origination was as follows:

													Revolving loans
(in thousands)	Term Loans Amortized Cost Basis by Origination Year												amortized
September 30, 2021	2021		2020		2019		2018		2017		Prior		cost basis		Total
Commercial real estate - non-owner occupied:
Risk rating
Pass	$	329,439	$	324,280	$	129,003	$	92,202	$	91,478	$	104,421	$	23,570	$	1,094,393
OAEM		3,199		4,842		19,741		-		356		1,658		426		30,222
Substandard		6,667		2,374		-		-		-		7,721		499		17,261
Substandard non-performing		-		38		103		-		601		-		29		771
Doubtful		-		-		-		-		-		-		-		-
Total Commercial real estate non-owner occupied	$	339,305	$	331,534	$	148,847	$	92,202	$	92,435	$	113,800	$	24,524	$	1,142,647
Commercial real estate - owner occupied:
Risk rating
Pass	$	142,157	$	204,692	$	101,865	$	86,396	$	38,327	$	49,337	$	5,560	$	628,334
OAEM		2,866		183		1,613		102		1,537		163		581		7,045
Substandard		2,476		5,089		5,993		1,292		634		102		997		16,583
Substandard non-performing		-		165		-		13		32		459		-		669
Doubtful		-		-		-		-		-		-		-		-
Total Commercial real estate owner occupied	$	147,499	$	210,129	$	109,471	$	87,803	$	40,530	$	50,061	$	7,138	$	652,631
Commercial and industrial - term:
Risk rating
Pass	$	228,560	$	155,460	$	64,637	$	59,001	$	30,463	$	33,773	$	-	$	571,894
OAEM		313		191		283		4,121		10		-		-		4,918
Substandard		374		45		3,174		187		114		98		-		3,992
Substandard non-performing		-		760		168		55		-		17		-		1,000
Doubtful		-		-		-		-		-		-		-		-
Total Commercial and industrial - term	$	229,247	$	156,456	$	68,262	$	63,364	$	30,587	$	33,888	$	-	$	581,804
Commercial and industrial - PPP
Risk rating
Pass	$	198,965	$	31,557	$	-	$	-	$	-	$	-	$	-	$	230,522
OAEM		-		-		-		-		-		-		-		-
Substandard		-		813		-		-		-		-		-		813
Substandard non-performing		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total Commercial and industrial - PPP	$	198,965	$	32,370	$	-	$	-	$	-	$	-	$	-	$	231,335

(continued)

(continued)
													Revolving
													loans
(in thousands)	Term Loans Amortized Cost Basis by Origination Year												amortized
September 30, 2021	2021		2020		2019		2018		2017		Prior		cost basis		Total
Commercial and industrial - lines of credit
Risk rating
Pass	$	26,429	$	9,353	$	11,567	$	1,712	$	245	$	224	$	268,293	$	317,823
OAEM		-		-		-		-		-		-		5,497		5,497
Substandard		-		-		1,986		-		1,549		-		2,185		5,720
Substandard non-performing		-		-		-		-		-		-		79		79
Doubtful		-		-		-		-		-		-		-		-
Total Commercial and industrial - lines of credit	$	26,429	$	9,353	$	13,553	$	1,712	$	1,794	$	224	$	276,054	$	329,119
Residential real estate - owner occupied
Risk rating
Pass	$	164,516	$	101,383	$	32,074	$	18,058	$	15,198	$	64,221	$	-	$	395,450
OAEM		102		-		175		-		87		-		-		364
Substandard		59		-		-		-		110		174		-		343
Substandard non-performing		202		201		134		232		837		306		-		1,912
Doubtful		-		-		-		-		-		-		-		-
Total Residential real estate - owner occupied	$	164,879	$	101,584	$	32,383	$	18,290	$	16,232	$	64,701	$	-	$	398,069
Residential real estate - non-owner occupied
Risk rating
Pass	$	59,125	$	89,408	$	49,918	$	36,231	$	18,711	$	19,511	$	-	$	272,904
OAEM		476		217		2,099		223		-		468		-		3,483
Substandard		-		-		-		-		-		358		-		358
Substandard non-performing		-		-		45		28		-		227		-		300
Doubtful		-		-		-		-		-		-		-		-
Total Residential real estate - non-owner occupied	$	59,601	$	89,625	$	52,062	$	36,482	$	18,711	$	20,564	$	-	$	277,045
Construction and land development
Risk rating
Pass	$	115,823	$	107,233	$	42,286	$	18,451	$	3,253	$	1,196	$	15,151	$	303,393
OAEM		-		-		-		-		-		-		249		249
Substandard		-		-		-		-		-		-		-		-
Substandard non-performing		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total Construction and land development	$	115,823	$	107,233	$	42,286	$	18,451	$	3,253	$	1,196	$	15,400	$	303,642
Home equity lines of credit
Risk rating
Pass	$	-	$	-	$	-	$	-	$	-	$	-	$	139,754	$	139,754
OAEM		-		-		-		-		-		-		92		92
Substandard		-		-		-		-		-		-		-		-
Substandard non-performing		-		-		-		-		-		-		181		181
Doubtful		-		-		-		-		-		-		-		-
Total Home equity lines of credit	$	-	$	-	$	-	$	-	$	-	$	-	$	140,027	$	140,027

(continued)

(continued)
													Revolving
													loans
(in thousands)	Term Loans Amortized Cost Basis by Origination Year												amortized
September 30, 2021	2021		2020		2019		2018		2017		Prior		cost basis		Total
Consumer
Risk rating
Pass*	$	21,473	$	11,035	$	5,384	$	1,587	$	707	$	781	$	63,537	$	104,504
OAEM		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		1		1
Substandard non-performing		-		124		-		-		-		-		-		124
Doubtful		-		-		-		-		-		-		-		-
Total Consumer	$	21,473	$	11,159	$	5,384	$	1,587	$	707	$	781	$	63,538	$	104,629
Leases
Risk rating
Pass	$	2,939	$	3,964	$	1,502	$	1,527	$	551	$	1,852	$	-	$	12,335
OAEM		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		13		-		13
Substandard non-performing		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total Leases	$	2,939	$	3,964	$	1,502	$	1,527	$	551	$	1,865	$	-	$	12,348
Credit cards
Risk rating
Pass	$	-	$	-	$	-	$	-	$	-	$	-	$	15,821	$	15,821
OAEM		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Substandard non-performing		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total Credit cards	$	-	$	-	$	-	$	-	$	-	$	-	$	15,821	$	15,821
Total loans
Risk rating
Pass	$	1,289,426	$	1,038,365	$	438,236	$	315,165	$	198,933	$	275,316	$	531,686	$	4,087,127
OAEM		6,956		5,433		23,911		4,446		1,990		2,289		6,845		51,870
Substandard		9,576		8,321		11,153		1,479		2,407		8,466		3,682		45,084
Substandard non-performing		202		1,288		450		328		1,470		1,009		289		5,036
Doubtful		-		-		-		-		-		-		-		-
Total Loans	$	1,306,160	$	1,053,407	$	473,750	$	321,418	$	204,800	$	287,080	$	542,502	$	4,189,117

*Pass-rated, revolving consumer loans include $881,000 in overdrawn demand deposit balances.

As of December 31, 2020, the risk rating of loans based on year of origination was as follows:

													Revolving		Revolving
													loans		loans
(in thousands)	Term Loans Amortized Cost Basis by Origination Year												amortized		converted
December 31, 2020	2020		2019		2018		2017		2016		Prior		cost basis		to term		Total
Commercial real estate - non-owner occupied:
Risk rating
Pass	$	303,246	$	114,731	$	102,147	$	105,981	$	77,925	$	57,221	$	12,439	$	11,717	$	785,407
OAEM		3,867		16,587		-		-		7,707		615		-		-		28,776
Substandard		4,174		1,901		-		-		1,513		991		430		-		9,009
Substandard non-performing		9,644		-		-		609		-		-		-		25		10,278
Doubtful		-		-		-		-		-		-		-		-		-
Total Commercial real estate non-owner occupied	$	320,931	$	133,219	$	102,147	$	106,590	$	87,145	$	58,827	$	12,869	$	11,742	$	833,470
Commercial real estate - owner occupied:
Risk rating
Pass	$	183,666	$	94,462	$	83,592	$	47,506	$	39,638	$	30,533	$	7,693	$	2,418	$	489,508
OAEM		74		6,534		1,575		796		115		-		200		-		9,294
Substandard		1,408		5,360		1,335		247		117		-		-		-		8,467
Substandard non-performing		91		-		15		500		-		471		-		326		1,403
Doubtful		-		-		-		-		-		-		-		-		-
Total Commercial real estate owner occupied	$	185,239	$	106,356	$	86,517	$	49,049	$	39,870	$	31,004	$	7,893	$	2,744	$	508,672
Commercial and industrial - term:
Risk rating
Pass	$	215,629	$	94,563	$	104,871	$	42,929	$	36,016	$	8,412	$	-	$	7,690	$	510,110
OAEM		60		2,969		7,878		-		283		8		-		-		11,198
Substandard		1,229		2,521		-		91		163		74		-		384		4,462
Substandard non-performing		-		-		-		-		-		6		-		-		6
Doubtful		-		-		-		-		-		-		-		-		-
Total Commercial and industrial - term	$	216,918	$	100,053	$	112,749	$	43,020	$	36,462	$	8,500	$	-	$	8,074	$	525,776
Commercial and industrial - PPP
Risk rating
Pass	$	550,186	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	550,186
OAEM		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Substandard non-performing		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total Commercial and industrial - PPP	$	550,186	$	-	$	-	$	-	$	-	$	-	$	-	$	-	$	550,186

(continued)

(continued)
													Revolving		Revolving
													loans		loans
(in thousands)	Term Loans Amortized Cost Basis by Origination Year												amortized		converted
December 31, 2020	2020		2019		2018		2017		2016		Prior		cost basis		to term		Total
Commercial and industrial - lines of credit
Risk rating
Pass	$	26,351	$	14,405	$	2,229	$	1,990	$	290	$	85	$	195,904	$	-	$	241,254
OAEM		-		2,222		-		-		-		-		1,596		-		3,818
Substandard		-		-		-		-		-		-		4,218		-		4,218
Substandard non-performing		-		-		-		-		-		-		88		-		88
Doubtful		-		-		-		-		-		-		-		-		-
Total Commercial and industrial - lines of credit	$	26,351	$	16,627	$	2,229	$	1,990	$	290	$	85	$	201,806	$	-	$	249,378
Residential real estate - owner occupied
Risk rating
Pass	$	94,023	$	34,631	$	23,748	$	19,567	$	27,791	$	37,362	$	-	$	1,528	$	238,650
OAEM		-		-		-		-		-		-		-		-		-
Substandard		13		-		-		115		-		-		-		-		128
Substandard non-performing		49		58		-		100		38		73		-		95		413
Doubtful		-		-		-		-		-		-		-		-		-
Total Residential real estate - owner occupied	$	94,085	$	34,689	$	23,748	$	19,782	$	27,829	$	37,435	$	-	$	1,623	$	239,191
Residential real estate - non-owner occupied
Risk rating
Pass	$	63,537	$	22,422	$	25,466	$	10,587	$	9,609	$	6,451	$	-	$	788	$	138,860
OAEM		137		1,600		140		-		-		92		-		-		1,969
Substandard		-		-		-		-		-		-		-		-		-
Substandard non-performing		-		-		29		-		-		72		-		-		101
Doubtful		-		-		-		-		-		-		-		-		-
Total Residential real estate - non-owner occupied	$	63,674	$	24,022	$	25,635	$	10,587	$	9,609	$	6,615	$	-	$	788	$	140,930
Construction and land development
Risk rating
Pass	$	139,611	$	94,066	$	32,539	$	15,384	$	1,175	$	553	$	6,304	$	1,883	$	291,515
OAEM		-		-		-		-		-		-		249		-		249
Substandard		-		-		-		-		-		-		-		-		-
Substandard non-performing		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total Construction and land development	$	139,611	$	94,066	$	32,539	$	15,384	$	1,175	$	553	$	6,553	$	1,883	$	291,764
Home equity lines of credit
Risk rating
Pass	$	-	$	-	$	-	$	-	$	-	$	-	$	95,145	$	-	$	95,145
OAEM		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Substandard non-performing		-		-		-		-		-		-		221		-		221
Doubtful		-		-		-		-		-		-		-		-		-
Total Home equity lines of credit	$	-	$	-	$	-	$	-	$	-	$	-	$	95,366	$	-	$	95,366

(continued)

(continued)
													Revolving		Revolving
													loans		loans
(in thousands)	Term Loans Amortized Cost Basis by Origination Year												amortized		converted
December 31, 2020	2020		2019		2018		2017		2016		Prior		cost basis		to term		Total
Consumer
Risk rating
Pass*	$	10,334	$	2,897	$	1,687	$	243	$	420	$	466	$	55,631	$	192	$	71,870
OAEM		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Substandard non-performing		-		-		-		-		2		-		2		-		4
Doubtful		-		-		-		-		-		-		-		-		-
Total Consumer	$	10,334	$	2,897	$	1,687	$	243	$	422	$	466	$	55,633	$	192	$	71,874
Leases
Risk rating
Pass	$	4,674	$	1,875	$	2,144	$	1,300	$	2,550	$	2,168	$	-	$	-	$	14,711
OAEM		-		-		-		-		69		-		-		-		69
Substandard		-		-		6		-		-		-		-		-		6
Substandard non-performing		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total Leases	$	4,674	$	1,875	$	2,150	$	1,300	$	2,619	$	2,168	$	-	$	-	$	14,786
Credit cards
Risk rating
Pass	$	-	$	-	$	-	$	-	$	-	$	-	$	10,203	$	-	$	10,203
OAEM		-		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-		-
Substandard non-performing		-		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-		-
Total Credit cards	$	-	$	-	$	-	$	-	$	-	$	-	$	10,203	$	-	$	10,203
Total loans
Risk rating
Pass	$	1,591,257	$	474,052	$	378,423	$	245,487	$	195,414	$	143,251	$	383,319	$	26,216	$	3,437,419
OAEM		4,138		29,912		9,593		796		8,174		715		2,045		-		55,373
Substandard		6,824		9,782		1,341		453		1,793		1,065		4,648		384		26,290
Substandard non-performing		9,784		58		44		1,209		40		622		311		446		12,514
Doubtful		-		-		-		-		-		-		-		-		-
Total Loans	$	1,612,003	$	513,804	$	389,401	$	247,945	$	205,421	$	145,653	$	390,323	$	27,046	$	3,531,596

* - Pass-rated, revolving consumer loans include $536,000 in overdrawn demand deposit balances.

For certain loan classes, such as credit cards, credit quality is evaluated based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment in credit cards based on payment activity:

	September 30,		December 31,
(in thousands)	2021		2020
Credit cards
Performing	$	15,821	$	10,203
Non-performing		—		—
Total credit cards	$	15,821	$	10,203

In accordance with Section 4013 of the CARES Act and in response to requests from borrowers who experienced business or personal cash flow interruptions related to the pandemic, Bancorp extended payment deferrals for those affected borrowers. Depending on the demonstrated need of the customer, Bancorp deferred either the full loan payment or the principal-only portion of respective loan payments, typically for 90 or 180 days, for some borrowers directly impacted by the pandemic. Pursuant to the CARES Act, these loan deferrals were not classified as TDRs and not included in past due and/or non-performing loan statistics. As of September 30, 2021, outstanding loan deferrals totaled $355,000, representing 0.01% of the total loan portfolio (excluding PPP loans) compared to $37 million, or 1.24% of the total loan portfolio (excluding PPP loans) at December 31, 2020.

Troubled Debt Restructurings

Detail of outstanding TDRs included in total non-performing loans follows:

	September 30, 2021						December 31, 2020
			Specific		Additional				Specific		Additional
			reserve		commitment				reserve		commitment
(in thousands)	Balance		allocation		to lend		Balance		allocation		to lend
Commercial and industrial - term	$	13	$	13	$	—	$	16	$	16	$	—
Residential real estate		—		—		—		—		—		—
Total TDRs	$	13	$	13	$	—	$	16	$	16	$	—

During the three and nine month periods ended September 30, 2021 and 2020, there were no loans modified as TDRs and there were no payment defaults of existing TDRs within 12 months following the modification. Default is determined at 90 or more days past due, charge-off, or foreclosure.

Bancorp had $862,000 and $147,000, respectively, in residential real estate loans for which formal foreclosure proceedings were in process at September 30, 2021 and December 31, 2020.