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Note 4 - Loans and Allowance for Credit Losses on Loans

9 Months Ended

Sep. 30, 2022

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, 2022		December 31, 2021

Commercial real estate - non-owner occupied	$	1,415,180	$	1,128,244
Commercial real estate - owner occupied		819,727		678,405
Total commercial real estate		2,234,907		1,806,649

Commercial and industrial - term		751,193		596,710
Commercial and industrial - term - PPP		19,469		140,734
Commercial and industrial - lines of credit		419,048		370,312
Total commercial and industrial		1,189,710		1,107,756

Residential real estate - owner occupied		557,638		400,695
Residential real estate - non-owner occupied		302,936		281,018
Total residential real estate		860,574		681,713

Construction and land development		414,632		299,206
Home equity lines of credit		199,485		138,976
Consumer		138,843		104,294
Leases		13,959		13,622
Credits cards		20,767		17,087
Total loans (1)	$	5,072,877	$	4,169,303

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

As a result of the CB acquisition on March 7, 2022, $632 million in loans (net of purchase accounting adjustments) were added to the portfolio.

Accrued interest on loans, which is excluded from the amortized cost of loans, totaled $13 million and $11 million at September 30, 2022 and December 31, 2021, respectively, and was included in the consolidated balance sheets.

Loans with carrying amounts of $2.72 billion and $2.20 billion were pledged to secure FHLB borrowing capacity at September 30, 2022 and December 31, 2021, respectively.

Loans to directors and their related interests, including loans to companies for which directors are principal owners and executive officers, totaled $73 million and $54 million as of September 30, 2022 and December 31, 2021, respectively.

PCD Loans

In connection with the acquisitions of CB on March 7, 2022, and KB on May 31, 2021, 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 acquisitions of CB and 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 the respective acquisition dates:

	CB			KB
(in thousands)	March 7, 2022			May 31, 2021

Purchase price of PCD loans at acquisition	$	88,549		$	32,765
Allowance for credit losses at acquisition		(9,950	)		(6,757	)
Non-credit discount at acquisition		(4,094	)		(735	)
Fair value of PCD loans at acquisition	$	74,505		$	25,273

At September 30, 2022, the book balance of PCD loans acquired as a result of the CB and KB acquisitions totaled $66 million and $13 million, respectively. Interest income recognized on loans classified as PCD totaled $1.1 million and $341,000 for the three month periods ended September 30, 2022 and 2021, respectively. For the nine month periods ended September 30, 2022 and 2021, interest income recognized on loans classified as PCD totaled $4.0 million and $450,000, respectively.

Allowance for Credit Losses on Loans

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

(in thousands)	Beginning		Initial Allowance on PCD		Provision for Credit Losses								Ending
Three Months Ended September 30, 2022	Balance		Loans		on Loans			Charge-offs			Recoveries		Balance

Commercial real estate - non-owner occupied	$	20,723	$	-	$	502		$	(37	)	$	-	$	21,188
Commercial real estate - owner occupied		9,842		-		(227	)		-			153		9,768
Total commercial real estate		30,565		-		275			(37	)		153		30,956

Commercial and industrial - term		12,342		-		2,055			(466	)		232		14,163
Commercial and industrial - lines of credit		5,000		-		203			(99	)		-		5,104
Total commercial and industrial		17,342		-		2,258			(565	)		232		19,267

Residential real estate - owner occupied		5,988		-		423			(17	)		2		6,396
Residential real estate - non-owner occupied		3,190		-		146			-			9		3,345
Total residential real estate		9,178		-		569			(17	)		11		9,741

Construction and land development		6,214		-		731			-			-		6,945
Home equity lines of credit		1,521		-		105			-			-		1,626
Consumer		1,113		-		162			(307	)		148		1,116
Leases		221		-		(10	)		-			-		211
Credit cards		208		-		13			-			-		221
Total	$	66,362	$	-	$	4,103		$	(926	)	$	544	$	70,083

(in thousands)	Beginning		Initial Allowance on PCD		Provision for Credit Losses								Ending
Nine Months Ended September 30, 2022	Balance		Loans		on Loans			Charge-offs			Recoveries		Balance

Commercial real estate - non-owner occupied	$	15,960	$	3,508	$	1,744		$	(37	)	$	13	$	21,188
Commercial real estate - owner occupied		9,595		2,121		(2,103	)		(41	)		196		9,768
Total commercial real estate		25,555		5,629		(359	)		(78	)		209		30,956

Commercial and industrial - term		8,577		1,358		3,796			(594	)		1,026		14,163
Commercial and industrial - lines of credit		4,802		1,874		(1,437	)		(135	)		-		5,104
Total commercial and industrial		13,379		3,232		2,359			(729	)		1,026		19,267

Residential real estate - owner occupied		4,316		590		1,458			(30	)		62		6,396
Residential real estate - non-owner occupied		3,677		-		(349	)		-			17		3,345
Total residential real estate		7,993		590		1,109			(30	)		79		9,741

Construction and land development		4,789		419		1,809			(72	)		-		6,945
Home equity lines of credit		1,044		2		580			-			-		1,626
Consumer		772		78		565			(796	)		497		1,116
Leases		204		-		7			-			-		211
Credit cards		162		-		12			-			47		221
Total	$	53,898	$	9,950	$	6,082		$	(1,705	)	$	1,858	$	70,083

(in thousands)	Beginning		Initial Allowance		Provision for Credit Losses								Ending
Three Months Ended September 30, 2021	Balance		on PCD Loans		on Loans			Charge-offs			Recoveries		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		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)	Beginning		Initial ACL on Loans Purchased with Credit		Provision for Credit Losses								Ending
Nine Months Ended September 30, 2021	Balance		Deterioration		on Loans			Charge-offs			Recoveries		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		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

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, 2022	*Recorded ACL*		*Non-accrual Loans*		*Restructurings (1)*		*Accruing Interest*

Commercial real estate - non-owner occupied	$	—	$	620	$	—	$	—
Commercial real estate - owner occupied		2,021		3,227		—		—
Total commercial real estate		2,021		3,847		—		—

Commercial and industrial - term		403		1,474		—		—
Commercial and industrial - PPP		42		42		—		—
Commercial and industrial - lines of credit		1,479		1,620		—		—
Total commercial and industrial		1,924		3,136		—		—

Residential real estate - owner occupied		511		2,468		—		—
Residential real estate - non-owner occupied		—		227		—		—
Total residential real estate		511		2,695		—		—

Construction and land development		—		—		—		—
Home equity lines of credit		—		524		—		—
Consumer		—		366		—		—
Leases		—		—		—		—
Credit cards		—		12		—		32
Total	$	4,456	$	10,580	$	—	$	32

(1) Does not include TDRs captured in the non-accrual column.

	Non-accrual Loans						Past Due 90-Days-
(in thousands)	*With No*		*Total*		*Troubled Debt*		*or-More and Still*
December 31, 2021	*Recorded ACL*		*Non-accrual Loans*		*Restructurings (1)*		*Accruing Interest*

Commercial real estate - non-owner occupied	$	486	$	720	$	—	$	—
Commercial real estate - owner occupied		665		1,748		—		—
Total commercial real estate		1,151		2,468		—		—

Commercial and industrial - term		419		670		12		—
Commercial and industrial - PPP		—		—		—		592
Commercial and industrial - lines of credit		—		228		—		56
Total commercial and industrial		419		898		12		648

Residential real estate - owner occupied		805		1,997		—		36
Residential real estate - non-owner occupied		—		293		—		—
Total residential real estate		805		2,290		—		36

Construction and land development		—		—		—		—
Home equity lines of credit		—		646		—		—
Consumer		—		410		—		—
Leases		—		—		—		—
Credit cards		—		—		—		—
Total	$	2,375	$	6,712	$	12	$	684

(1) Does not include TDRs captured in the non-accrual column.

For the three and nine month periods ended September 30, 2022 and 2021, 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, 2022 and 2021, 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:

			Accounts
(in thousands)			*Receivable /*						*ACL*
September 30, 2022	*Real Estate*		*Equipment*		*Other*		*Total*		*Allocation*

Commercial real estate - non-owner occupied	$	6,734	$	-	$	-	$	6,734	$	998
Commercial real estate - owner occupied		5,148		-		-		5,148		849
Total commercial real estate		11,882		-		-		11,882		1,847

Commercial and industrial - term		342		819		536		1,697		390
Commercial and industrial - lines of credit		1,933		1,673		929		4,535		888
Total commercial and industrial		2,275		2,492		1,465		6,232		1,278

Residential real estate - owner occupied		3,029		-		-		3,029		363
Residential real estate - non-owner occupied		424		-		-		424		116
Total residential real estate		3,453		-		-		3,453		479

Construction and land development		613		-		-		613		9
Home equity lines of credit		524		-		-		524		-
Consumer		-		-		266		266		19
Leases		-		-		-		-		-
Credit cards		-		-		-		-		-
Total collateral dependent loans	$	18,747	$	2,492	$	1,731	$	22,970	$	3,632

			Accounts
(in thousands)			*Receivable /*						*ACL*
December 31, 2021	*Real Estate*		*Equipment*		*Other*		*Total*		*Allocation*

Commercial real estate - non-owner occupied	$	720	$	-	$	-	$	720	$	-
Commercial real estate - owner occupied		7,652		-		-		7,652		1,652
Total commercial real estate		8,372		-		-		8,372		1,652

Commercial and industrial - term		-		598		-		598		-
Commercial and industrial - lines of credit		-		200		-		200		-
Total commercial and industrial		-		798		-		798		-

Residential real estate - owner occupied		1,997		-		-		1,997		-
Residential real estate - non-owner occupied		502		-		-		502		116
Total residential real estate		2,499		-		-		2,499		116

Construction and land development		-		-		-		-		-
Home equity lines of credit		646		-		-		646		-
Consumer		-		-		247		247		-
Leases		-		-		-		-		-
Credit cards		-		-		-		-		-
Total collateral dependent loans	$	11,517	$	798	$	247	$	12,562	$	1,768

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, 2022	Current		Past Due		Past Due		Days Past Due		Past Due		Loans

Commercial real estate - non-owner occupied	$	1,413,186	$	133	$	1,653	$	208	$	1,994	$	1,415,180
Commercial real estate - owner occupied		819,078		415		117		117		649		819,727
Total commercial real estate		2,232,264		548		1,770		325		2,643		2,234,907

Commercial and industrial - term		749,897		204		409		683		1,296		751,193
Commercial and industrial - term - PPP		17,042		2,343		42		42		2,427		19,469
Commercial and industrial - lines of credit		417,285		1,639		2		122		1,763		419,048
Total commercial and industrial		1,184,224		4,186		453		847		5,486		1,189,710

Residential real estate - owner occupied		554,406		1,264		436		1,532		3,232		557,638
Residential real estate - non-owner occupied		302,408		430		-		98		528		302,936
Total residential real estate		856,814		1,694		436		1,630		3,760		860,574

Construction and land development		414,589		43		—		—		43		414,632
Home equity lines of credit		198,993		271		67		154		492		199,485
Consumer		138,220		302		75		246		623		138,843
Leases		13,959		—		—		—		—		13,959
Credit cards		20,731		2		2		32		36		20,767
Total	$	5,059,794	$	7,046	$	2,803	$	3,234	$	13,083	$	5,072,877

(in thousands)			30-59 days		60-89 days		90 or more		Total		Total
December 31, 2021	Current		Past Due		Past Due		Days Past Due		Past Due		Loans

Commercial real estate - non-owner occupied	$	1,127,448	$	-	$	81	$	715	$	796	$	1,128,244
Commercial real estate - owner occupied		677,231		360		327		487		1,174		678,405
Total commercial real estate		1,804,679		360		408		1,202		1,970		1,806,649

Commercial and industrial - term		595,070		1,032		44		564		1,640		596,710
Commercial and industrial - term - PPP		139,718		128		296		592		1,016		140,734
Commercial and industrial - lines of credit		369,963		271		22		56		349		370,312
Total commercial and industrial		1,104,751		1,431		362		1,212		3,005		1,107,756

Residential real estate - owner occupied		397,415		1,399		137		1,744		3,280		400,695
Residential real estate - non-owner occupied		280,257		403		258		100		761		281,018
Total residential real estate		677,672		1,802		395		1,844		4,041		681,713

Construction and land development		299,206		—		—		—		—		299,206
Home equity lines of credit		138,141		279		47		509		835		138,976
Consumer		103,109		724		102		359		1,185		104,294
Leases		13,622		—		—		—		—		13,622
Credit cards		17,087		—		—		—		—		17,087
Total	$	4,158,267	$	4,596	$	1,314	$	5,126	$	11,036	$	4,169,303

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. 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 is currently immaterial to Bancorp’s loan portfolio and is expected to be in the future. As of September 30, 2022, 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, 2022	2022		2021		2020		2019		2018		Prior			cost basis	Total

Commercial real estate - non-owner occupied:
Risk rating
Pass	$	293,231	$	384,606	$	285,261	$	114,927	$	77,978	$	166,586	$	21,887	$	1,344,476
OAEM		-		5,290		2,317		18,793		-		5,464		5,850		37,714
Substandard		-		298		4,926		19,789		-		7,257		100		32,370
Substandard non-performing		-		-		-		-		-		620		-		620
Doubtful		-		-		-		-		-		-		-		-
Total Commercial real estate non-owner occupied	$	293,231	$	390,194	$	292,504	$	153,509	$	77,978	$	179,927	$	27,837	$	1,415,180

Commercial real estate - owner occupied:
Risk rating
Pass	$	118,302	$	209,793	$	199,078	$	103,352	$	70,931	$	82,084	$	11,496	$	795,036
OAEM		2,896		1,797		4,571		735		717		101		510		11,327
Substandard		-		1,160		-		6,948		1,958		71		-		10,137
Substandard non-performing		1,538		1,213		-		359		-		117		-		3,227
Doubtful		-		-		-		-		-		-		-		-
Total Commercial real estate owner occupied	$	122,736	$	213,963	$	203,649	$	111,394	$	73,606	$	82,373	$	12,006	$	819,727

Commercial and industrial - term:
Risk rating
Pass	$	272,982	$	252,324	$	101,275	$	41,359	$	38,690	$	31,500	$	-	$	738,130
OAEM		3,968		3,166		-		345		1,809		-		-		9,288
Substandard		185		-		-		1,615		136		365		-		2,301
Substandard non-performing		464		167		581		101		30		131		-		1,474
Doubtful		-		-		-		-		-		-		-		-
Total Commercial and industrial - term	$	277,599	$	255,657	$	101,856	$	43,420	$	40,665	$	31,996	$	-	$	751,193

Commercial and industrial - PPP
Risk rating
Pass	$	-	$	14,836	$	4,591	$	-	$	-	$	-	$	-	$	19,427
OAEM		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Substandard non-performing		-		14		28		-		-		-		-		42
Doubtful		-		-		-		-		-		-		-		-
Total Commercial and industrial - PPP	$	-	$	14,850	$	4,619	$	-	$	-	$	-	$	-	$	19,469

(continued)

														Revolving
														loans
(in thousands)	Term Loans Amortized Cost Basis by Origination Year													amortized
September 30, 2022	2022		2021		2020		2019		2018		Prior			cost basis	Total

Commercial and industrial - lines of credit
Risk rating
Pass	$	43,413	$	13,746	$	1,118	$	9,941	$	1,268	$	1,159	$	336,534	$	407,179
OAEM		-		-		-		-		-		391		6,601		6,992
Substandard		-		-		929		1,933		-		-		395		3,257
Substandard non-performing		-		-		-		964		-		-		656		1,620
Doubtful		-		-		-		-		-		-		-		-
Total Commercial and industrial - lines of credit	$	43,413	$	13,746	$	2,047	$	12,838	$	1,268	$	1,550	$	344,186	$	419,048

Residential real estate - owner occupied
Risk rating
Pass	$	144,412	$	191,838	$	99,108	$	29,820	$	15,527	$	73,156	$	-	$	553,861
OAEM		365		96		-		76		-		-		-		537
Substandard		19		-		10		-		142		601		-		772
Substandard non-performing		63		220		73		692		123		1,297		-		2,468
Doubtful		-		-		-		-		-		-		-		-
Total Residential real estate - owner occupied	$	144,859	$	192,154	$	99,191	$	30,588	$	15,792	$	75,054	$	-	$	557,638

Residential real estate - non-owner occupied
Risk rating
Pass	$	78,318	$	85,299	$	59,138	$	34,834	$	20,226	$	23,728	$	-	$	301,543
OAEM		-		-		118		271		126		309		-		824
Substandard		-		-		-		-		-		342		-		342
Substandard non-performing		90		23		-		-		-		114		-		227
Doubtful		-		-		-		-		-		-		-		-
Total Residential real estate - non-owner occupied	$	78,408	$	85,322	$	59,256	$	35,105	$	20,352	$	24,493	$	-	$	302,936

Construction and land development
Risk rating
Pass	$	187,688	$	107,932	$	68,481	$	15,387	$	6,028	$	1,705	$	21,342	$	408,563
OAEM		-		-		-		-		-		-		999		999
Substandard		4,457		613		-		-		-		-		-		5,070
Substandard non-performing		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total Construction and land development	$	192,145	$	108,545	$	68,481	$	15,387	$	6,028	$	1,705	$	22,341	$	414,632

Home equity lines of credit
Risk rating
Pass	$	-	$	-	$	-	$	-	$	-	$	-	$	198,922	$	198,922
OAEM		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		39		39
Substandard non-performing		-		-		-		-		-		-		524		524
Doubtful		-		-		-		-		-		-		-		-
Total Home equity lines of credit	$	-	$	-	$	-	$	-	$	-	$	-	$	199,485	$	199,485

(continued)

														Revolving
														loans
(in thousands)	Term Loans Amortized Cost Basis by Origination Year													amortized
September 30, 2022	2022		2021		2020		2019		2018		Prior			cost basis	Total

Consumer
Risk rating
Pass	$	23,526	$	19,826	$	6,547	$	6,195	$	2,909	$	2,355	$	77,080	$	138,438
OAEM		39		-		-		-		-		-		-		39
Substandard		-		-		-		-		-		-		-		-
Substandard non-performing		-		36		76		78		25		53		98		366
Doubtful		-		-		-		-		-		-		-		-
Total Consumer	$	23,565	$	19,862	$	6,623	$	6,273	$	2,934	$	2,408	$	77,178	$	138,843

Leases
Risk rating
Pass	$	3,901	$	4,592	$	2,816	$	966	$	812	$	872	$	-	$	13,959
OAEM		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Substandard non-performing		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total Leases	$	3,901	$	4,592	$	2,816	$	966	$	812	$	872	$	-	$	13,959

Credit cards
Risk rating
Pass	$	-	$	-	$	-	$	-	$	-	$	-	$	20,755	$	20,755
OAEM		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Substandard non-performing		-		-		-		-		-		-		12		12
Doubtful		-		-		-		-		-		-		-		-
Total Credit cards	$	-	$	-	$	-	$	-	$	-	$	-	$	20,767	$	20,767

Total loans
Risk rating
Pass	$	1,165,772	$	1,284,792	$	827,414	$	356,781	$	234,370	$	383,146	$	688,015	$	4,940,290
OAEM		7,269		10,347		7,005		20,220		2,651		6,265		13,960		67,717
Substandard		4,661		2,071		5,866		30,285		2,236		8,637		534		54,290
Substandard non-performing		2,155		1,673		758		2,194		178		2,332		1,290		10,580
Doubtful		-		-		-		-		-		-		-		-
Total Loans	$	1,179,857	$	1,298,883	$	841,043	$	409,480	$	239,435	$	400,380	$	703,799	$	5,072,877

As of December 31, 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
December 31, 2021	2021		2020		2019		2018		2017		Prior			cost basis	Total

Commercial real estate - non-owner occupied:
Risk rating
Pass	$	381,014	$	298,177	$	134,286	$	86,638	$	85,110	$	81,635	$	19,465	$	1,086,325
OAEM		3,186		2,666		19,784		-		353		1,619		248		27,856
Substandard		4,174		1,440		-		-		-		7,629		100		13,343
Substandard non-performing		-		39		78		-		592		11		-		720
Doubtful		-		-		-		-		-		-		-		-
Total Commercial real estatenon-owner occupied	$	388,374	$	302,322	$	154,148	$	86,638	$	86,055	$	90,894	$	19,813	$	1,128,244

Commercial real estate - owner occupied:
Risk rating
Pass	$	203,545	$	192,322	$	91,078	$	75,062	$	33,713	$	44,364	$	9,236	$	649,320
OAEM		1,681		1,480		3,568		469		1,506		124		570		9,398
Substandard		5,051		3,605		5,985		1,275		627		-		1,396		17,939
Substandard non-performing		1,259		-		-		-		32		457		-		1,748
Doubtful		-		-		-		-		-		-		-		-
Total Commercial real estate owner occupied	$	211,536	$	197,407	$	100,631	$	76,806	$	35,878	$	44,945	$	11,202	$	678,405

Commercial and industrial - term:
Risk rating
Pass	$	283,150	$	143,211	$	58,988	$	52,388	$	26,081	$	24,421	$	-	$	588,239
OAEM		738		86		254		3,382		8		-		-		4,468
Substandard		170		42		2,667		176		111		167		-		3,333
Substandard non-performing		-		543		72		55		-		-		-		670
Doubtful		-		-		-		-		-		-		-		-
Total Commercial and industrial - term	$	284,058	$	143,882	$	61,981	$	56,001	$	26,200	$	24,588	$	-	$	596,710

Commercial and industrial - PPP
Risk rating
Pass	$	128,409	$	12,325	$	-	$	-	$	-	$	-	$	-	$	140,734
OAEM		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Substandard non-performing		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total Commercial and industrial - PPP	$	128,409	$	12,325	$	-	$	-	$	-	$	-	$	-	$	140,734

(continued)

														Revolving
														loans
(in thousands)	Term Loans Amortized Cost Basis by Origination Year													amortized
December 31, 2021	2021		2020		2019		2018		2017		Prior			cost basis	Total

Commercial and industrial - lines of credit
Risk rating
Pass	$	33,875	$	8,352	$	11,103	$	1,039	$	207	$	193	$	303,682	$	358,451
OAEM		-		-		-		-		-		-		6,355		6,355
Substandard		-		-		1,916		-		1,549		-		1,813		5,278
Substandard non-performing		-		-		-		-		-		-		228		228
Doubtful		-		-		-		-		-		-		-		-
Total Commercial and industrial - lines of credit	$	33,875	$	8,352	$	13,019	$	1,039	$	1,756	$	193	$	312,078	$	370,312

Residential real estate - owner occupied
Risk rating
Pass	$	176,487	$	99,936	$	31,327	$	17,259	$	16,599	$	56,639	$	-	$	398,247
OAEM		101		-		174		-		-		-		-		275
Substandard		-		-		-		-		108		68		-		176
Substandard non-performing		164		103		136		230		714		650		-		1,997
Doubtful		-		-		-		-		-		-		-		-
Total Residential real estate - owner occupied	$	176,752	$	100,039	$	31,637	$	17,489	$	17,421	$	57,357	$	-	$	400,695

Residential real estate - non-owner occupied
Risk rating
Pass	$	94,482	$	78,785	$	46,177	$	27,494	$	16,171	$	15,909	$	-	$	279,018
OAEM		352		126		281		132		-		462		-		1,353
Substandard		-		-		-		-		-		354		-		354
Substandard non-performing		103		-		45		28		-		117		-		293
Doubtful		-		-		-		-		-		-		-		-
Total Residential real estate - non-owner occupied	$	94,937	$	78,911	$	46,503	$	27,654	$	16,171	$	16,842	$	-	$	281,018

Construction and land development
Risk rating
Pass	$	160,696	$	99,699	$	16,665	$	6,262	$	1,890	$	1,156	$	12,736	$	299,104
OAEM		-		-		-		-		102		-		-		102
Substandard		-		-		-		-		-		-		-		-
Substandard non-performing		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total Construction and land development	$	160,696	$	99,699	$	16,665	$	6,262	$	1,992	$	1,156	$	12,736	$	299,206

Home equity lines of credit
Risk rating
Pass	$	-	$	-	$	-	$	-	$	-	$	-	$	138,239	$	138,239
OAEM		-		-		-		-		-		-		91		91
Substandard		-		-		-		-		-		-		-		-
Substandard non-performing		-		-		-		-		-		-		646		646
Doubtful		-		-		-		-		-		-		-		-
Total Home equity lines of credit	$	-	$	-	$	-	$	-	$	-	$	-	$	138,976	$	138,976

(continued)

													Revolving
													loans
(in thousands)	Term Loans Amortized Cost Basis by Origination Year												amortized
December 31, 2021	2021		2020		2019		2018		2017		Prior		cost basis		Total

Consumer
Risk rating
Pass	$	23,866	$	9,316	$	5,014	$	1,260	$	555	$	646	$	63,227	$	103,884
OAEM		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Substandard non-performing		55		304		30		11		-		4		6		410
Doubtful		-		-		-		-		-		-		-		-
Total Consumer	$	23,921	$	9,620	$	5,044	$	1,271	$	555	$	650	$	63,233	$	104,294

Leases
Risk rating
Pass	$	5,375	$	3,596	$	1,375	$	1,331	$	406	$	1,539	$	-	$	13,622
OAEM		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Substandard non-performing		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total Leases	$	5,375	$	3,596	$	1,375	$	1,331	$	406	$	1,539	$	-	$	13,622

Credit cards
Risk rating
Pass	$	-	$	-	$	-	$	-	$	-	$	-	$	17,087	$	17,087
OAEM		-		-		-		-		-		-		-		-
Substandard		-		-		-		-		-		-		-		-
Substandard non-performing		-		-		-		-		-		-		-		-
Doubtful		-		-		-		-		-		-		-		-
Total Credit cards	$	-	$	-	$	-	$	-	$	-	$	-	$	17,087	$	17,087

Total loans
Risk rating
Pass	$	1,490,899	$	945,719	$	396,013	$	268,733	$	180,732	$	226,502	$	563,672	$	4,072,270
OAEM		6,058		4,358		24,061		3,983		1,969		2,205		7,264		49,898
Substandard		9,395		5,087		10,568		1,451		2,395		8,218		3,309		40,423
Substandard non-performing		1,581		989		361		324		1,338		1,239		880		6,712
Doubtful		-		-		-		-		-		-		-		-
Total Loans	$	1,507,933	$	956,153	$	431,003	$	274,491	$	186,434	$	238,164	$	575,125	$	4,169,303

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)	2022		2021

Credit cards
Performing	$	20,723	$	17,087
Non-performing		44		—
Total credit cards	$	20,767	$	17,087

Troubled Debt Restructurings

Detail of outstanding TDRs classified as non-performing loans follows:

	September 30, 2022						December 31, 2021
			Specific		Additional				Specific		Additional
			reserve		commitment				reserve		commitment
(in thousands)	Balance		allocation		to lend		Balance		allocation		to lend

Commercial real estate - owner occupied	$	902	$	202	$	—	$	950	$	202	$	—
Commercial & industrial - term		—		—		—		12		12		—
Total TDRs	$	902	$	202	$	—	$	962	$	214	$	—

During the three and nine month periods ended September 30, 2022 and 2021, 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 $786,000 and $917,000, respectively, in residential real estate loans for which formal foreclosure proceedings were in process at September 30, 2022 and December 31, 2021.