Loans

12 Months Ended

Dec. 31, 2021

Loans and Leases Receivable, Net Amount [Abstract]

Loans

7.Loans

Loans receivable consist of the following:

	December 31, 2021			December 31, 2020
	(In Thousands)
Real Estate:
Residential	$	1,167,466		$	1,201,051
Commercial		2,450,349			2,383,001
Construction		862,815			667,649
		4,480,630			4,251,701
Other Loans:
Commercial		895,638			1,202,353
Home equity and improvement		264,354			272,701
Consumer Finance		126,417			120,729
		1,286,409			1,595,783
Total loans		5,767,039			5,847,484
Deduct:
Undisbursed loan funds		(477,890	)		(355,065	)
Net deferred loan origination fees and costs		7,019			(1,179	)
Allowance for credit loss		(66,468	)		(82,079	)
Totals	$	5,229,700		$	5,409,161

Loan segments have been identified by evaluating the portfolio based on collateral and credit risk characteristics. The Company has responded to the COVID-19 pandemic in numerous ways, including by actively participating in the PPP and distributing over $450

million to small businesses in our markets. As of December 31, 2021 and 2020, the Company had $58.9 million and $386.9 million in PPP loans, respectively. PPP loans are included in other commercial loans in the loan tables.

The following tables disclose the annual activity in the allowance for credit losses for the periods indicated by portfolio segment (in thousands):

Year ended December 31, 2021	Residential Real Estate			Commercial Real Estate			Construction		Commercial			Home Equity and Improvement			Consumer Finance			Total
Beginning Allowance	$	17,534		$	43,417		$	2,741	$	11,665		$	4,739		$	1,983		$	82,079
Charge-Offs		(110	)		(3,776	)		—		(6,960	)		(63	)		(476	)		(11,385	)
Recoveries		261			438			—		1,321		248			239				2,507
Provision expense (recovery)		(5,656	)		(7,680	)		263		7,384			(703	)		(341	)		(6,733	)
Ending Allowance	$	12,029		$	32,399		$	3,004	$	13,410		$	4,221		$	1,405		$	66,468

Year ended December 31, 2020	Residential Real Estate			Commercial Real Estate			Construction			Commercial			Home Equity and Improvement			Consumer Finance			Total
Beginning Allowance	$	2,867		$	16,302		$	996		$	9,003		$	1,700		$	375		$	31,243
Impact of ASC 326 Adoption		1,765			3,682			(223	)		(2,263	)		(521	)		(86	)		2,354
Acquisition related allowance for credit loss (PCD)		1,077			4,053			—			2,272			248			48			7,698
Charge-Offs		(307	)		(4,237	)		(1	)		(1,350	)		(164	)		(293	)		(6,352	)
Recoveries		342			1,352			—			1,850		262			176				3,982
Provision expense (recovery) (1)		11,790			22,265			1,969			2,153			3,214			1,763			43,154
Ending Allowance	$	17,534		$	43,417		$	2,741		$	11,665		$	4,739		$	1,983		$	82,079

(1)Provision for the twelve months ended December 31, 2020, includes $25.9 million as a result of the Merger with UCFC in the first quarter.

Year ended December 31, 2019	Residential Real Estate			Commercial Real Estate			Construction		Commercial			Home Equity and Improvement			Consumer Finance			Total
Beginning Allowance	$	2,881		$	15,142		$	682	$	7,281		$	2,026		$	319		$	28,331
Charge-Offs		(515	)		(148	)		—		(528	)		(245	)		(289	)		(1,725	)
Recoveries		193			645			—		642			184			68			1,732
Provision expense (recovery)		308			663			314		1,608			(265	)		277			2,905
Ending Allowance	$	2,867		$	16,302		$	996	$	9,003		$	1,700		$	375		$	31,243

The following table presents the amortized cost basis of collateral-dependent loans by class of loans and collateral type as of December 31, 2021 and 2020 (in thousands):

	December 31, 2021
	Real Estate		Equipment and Machinery		Inventory and Receivables		Vehicles		Total
Real Estate:
Residential	$	226	$	—	$	—	$	—	$	226
Commercial		18,399		—		—		—		18,399
Construction		—		—		—		—		—
Other Loans:
Commercial		1,574		160		14,023		25		15,782
Home equity and improvement		—		—		—		—		—
Consumer finance		—		—		—		—		—
Total	$	20,199	$	160	$	14,023	$	25	$	34,407

	December 31, 2020
	Real Estate		Equipment and Machinery		Inventory and Receivables		Vehicles		Total
Real Estate:
Residential	$	1,024	$	—	$	—	$	—	$	1,024
Commercial		33,999		—		—		—		33,999
Construction		—		—		—		—		—
Other Loans:
Commercial		1,426		5,317		4,943		125		11,811
Home equity and improvement		—		—		—		—		—
Consumer finance		—		—		—		—		—
Total	$	36,449	$	5,317	$	4,943	$	125	$	46,834

The following tables presents the average balance, interest income recognized and cash basis income recognized on individually analyzed loans by class of loans for the year ended December 31, 2019 (in thousands):

	Twelve Months Ended December 31, 2019
	Average Balance		Interest Income Recognized		Cash Basis Income Recognized
Real Estate:
Residential	$	7,040	$	341	$	335
Commercial		23,080		1,382		1,301
Construction		—		—		—
Other Loans:
Commercial		8,397		446		345
Home equity and improvement		862		38		35
Consumer finance		27		1		1
Total	$	39,406	$	2,208	$	2,017

Non-performing loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified loans. All loans greater than 90 days past due are placed on non-accrual status. Effective January 1, 2020 with the adoption of ASC Topic 326, the Company began including non-accrual PCD loans in its non-performing loans. As such, the non-performing loans as of December 31, 2021 include PCD loans accounted for pursuant to ASC Topic 326 as these loans are individually evaluated.

The following table presents the current balance of the aggregate amounts of non-performing assets, comprised of non-performing loans and real estate owned as of the dates indicated:

	December 31, 2021		December 31, 2020
	(In Thousands)
Non-accrual loans with reserve	$	35,480	$	34,939
Non-accrual loans without reserve	$	12,534	$	16,743
Loans over 90 days past due and still accruing		—		—
Total non-performing loans		48,014		51,682
Real estate and other assets held for sale		171		343
Total non-performing assets	$	48,185	$	52,025
Troubled debt restructuring, still accruing	$	7,768	$	7,173

The following table presents the aging of the recorded investment in past due and non-accrual loans as of December 31, 2021, by class of loans (in thousands):

	Current		30-59 days		60-89 days		90+ days		Total Past Due		Total Non Accrual
Real Estate:
Residential		1,144,533		234		5,340		7,487		13,061		9,034
Commercial		2,439,552		96		847		7,168		8,111		14,621
Construction		383,136		43		1,746		—		1,789		—
Other Loans:
Commercial		884,025		42		35		867		944		11,531
Home equity and improvement		257,055		1,851		408		1,634		3,893		2,051
Consumer finance		124,073		1,112		819		1,728		3,659		1,873
PCD		25,111		225		1,005		5,996		7,226		8,904
Total Loans	$	5,257,485	$	3,603	$	10,200	$	24,880	$	38,683	$	48,014

The following table presents the aging of the recorded investment in past due and non-accrual loans as of December 31, 2020, by class of loans (in thousands):

	Current		30-59 days		60-89 days		90+ days		Total Past Due		Total Non Accrual
Real Estate:
Residential		1,173,979		433		7,669		9,000		17,102		10,178
Commercial		2,357,909		1,033		369		844		2,246		11,980
Construction		310,152		—		1,626		806		2,432		806
Other Loans:
Commercial		1,172,636		9		4		394		407		1,365
Home equity and improvement		262,373		3,440		839		1,137		5,416		1,537
Consumer finance		117,088		1,687		491		1,521		3,699		1,624
PCD		50,218		402		1,882		13,299		15,583		24,192
Total Loans	$	5,444,355	$	7,004	$	12,880	$	27,001	$	46,885	$	51,682

Troubled Debt Restructurings

As of December 31, 2021 and 2020, the Company had a recorded investment in TDRs of $11.9 million and $16.6 million, respectively. The Company allocated $378,000 and $883,000 of specific reserves to those loans at December 31, 2021 and 2020, respectively, and committed to lend additional amounts totaling up to $348,000 and $303,000 at December 31, 2021 and 2020, respectively.

The Company worked with borrowers impacted by the COVID-19 pandemic by providing modifications to include either interest only deferral or principal and interest deferral. As of December 31, 2021, the Company had no more modifications from the pandemic compared to December 31, 2020 there were approximately $53.5 million in deferrals. These modifications are excluded from TDR classification under Section 4013 of the CARES Act or under applicable interagency guidance of the federal banking regulators. Modified loans will be considered current and will continue to accrue interest during the deferral period unless repayment of the loan under contractual terms is not expected and thereby loans will be placed on non-accrual.

A breakout of active deferrals by loan category as of December 31, 2020, is as follows (in thousands):

	Balance deferred		Balance deferred
	As of December 31,		As of December 31,
	2021		2020
Residential real estate	$	-	$	7,016
Commercial real estate		-		34,831
Construction		-		9,579
Commercial		-		1,628
Home equity and improvement		-		114
Consumer finance		-		282
Total	$	-	$	53,450

The Company offers various types of concessions when modifying a loan, however, forgiveness of principal is rarely granted. Each TDR is uniquely designed to meet the specific needs of the borrower. Commercial loans modified in a TDR often involve temporary interest-only payments, term extensions, and converting revolving credit lines to term loans. Additional collateral or an additional guarantor is often requested when granting a concession. Commercial real estate loans modified in a TDR often involve temporary interest-only payments, re-amortization of remaining debt in order to lower payments, and sometimes reducing the interest rate lower than the current market rate. Residential mortgage loans modified in a TDR are comprised of loans where monthly payments are lowered, either through interest rate reductions or principal only payments for a period of time, to accommodate the borrowers’ financial needs, interest is capitalized into principal, or the term and amortization are extended. Home equity modifications are made infrequently and usually involve providing an interest rate that is lower than the borrower would be able to obtain due to credit issues. All retail loans where the borrower is in bankruptcy are classified as TDRs regardless of whether or not a concession is made.

Of the loans modified in a TDR, $4.2 million are on non-accrual status and partial charge-offs have in some cases been taken against the outstanding balance. Loans modified as a TDR may have the financial effect of increasing the allowance associated with the loan. If the loan is determined to be collateral dependent, the estimated fair value of the collateral, less any selling costs is used to determine if there is a need for a specific allowance or charge-off. If the loan is determined to be cash flow dependent, the allowance is measured based on the present value of expected future cash flows discounted at the loan’s pre-modification effective interest rate.

The following table presents loans by class modified as TDRs that occurred during the years indicated (Dollars in Thousands):

	Loans Modified as a TDR for the Twelve Months Ended December 31, 2021				Loans Modified as a TDR for the Twelve Months Ended December 31, 2020				Loans Modified as a TDR for the Twelve Months Ended December 31, 2019
	($ in thousands)				($ in thousands)				($ in thousands)
Troubled Debt Restructurings:	Number of Loans		Recorded Investment (as of period end)		Number of Loans		Recorded Investment (as of period end)		Number of Loans		Recorded Investment (as of period end)
Real Estate:
Residential		6	$	685		7	$	892		12	$	1,332
Commercial		—		—		6		7,760		2		621
Construction		—		—		—		—		—		—
Other Loans:
Commercial		8		2,888		9		7,546		5		317
Home equity and improvement		—		—		4		92		1		25
Consumer finance		2		7		—		—		—		—
Total		16	$	3,580		26	$	16,290		20	$	2,295

The loans described above increased the allowance by $21,000 and $660,000 and $34,000 for the years ended December 31, 2021, and 2020 and 2019, respectively.

The following table presents loans by class modified as TDRs for which there was a payment default within twelve months following the modification during the indicated:

	Loans Modified as a TDR for the Twelve Months Ended December 31, 2021				Loans Modified as a TDR for the Twelve Months Ended December 31, 2020				Loans Modified as a TDR for the Twelve Months Ended December 31, 2019
	($ in thousands)				($ in thousands)				($ in thousands)
TDRs That Subsequently Defaulted:	Number of Loans		Recorded Investment (as of period end)		Number of Loans		Recorded Investment (as of period end)		Number of Loans		Recorded Investment (as of period end)
Real Estate:
Residential		1	$	32		2	$	229		—	$	—
Commercial		—		—		—		—		1		81
Construction		—		—		—		—		—		—
Other Loans:
Commercial		—		—		—		—		3		2,248
Home equity and improvement		—		—		—		—		—		—
Consumer finance		1		5		—		—		—		—
Total		2	$	37		2	$	229		4	$	2,329

The TDRs that subsequently defaulted described above increased the allowance by $1,000, $5,000 and $4,000 for the years ended December 31, 2021, 2020 and 2019, respectively. A default for purposes of this disclosure is a TDR loan in which the borrower is 90 days contractually past due under the modified terms. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed regarding the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification.

Credit Quality Indicators

Loans are categorized into risk 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, among other factors. Loans are analyzed individually by classifying the loans as to credit risk. This analysis includes all non-homogeneous loans, such as commercial and commercial real estate loans and certain homogenous mortgage, home equity and consumer loans. This analysis is performed on a quarterly basis. Premier uses the following definitions for risk ratings with loans not meeting such classifications being considered “unclassified”:

Special Mention. Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

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 liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Not Graded. Loans classified as not graded are generally smaller balance residential real estate, home equity and consumer installment loans which are originated primarily by using an automated underwriting system. These loans are monitored based on their delinquency status and are evaluated individually only if they are seriously delinquent.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans.

As of December 31, 2021, and based on the most recent analysis performed, the risk category and recorded investment in loans is as follows (in thousands):

Class	Unclassified		Special Mention		Substandard		Doubtful		Total classified		Total
Real Estate:
Residential		1,146,212		1,316		10,066		—		10,066		1,157,594
Commercial		2,324,846		93,676		29,141		—		29,141		2,447,663
Construction		365,403		19,522		—		—		—		384,925
Other Loans:
Commercial		856,402		14,815		13,752		—		13,752		884,969
Home equity and improvement		258,914		—		2,034		—		2,034		260,948
Consumer finance		125,879		—		1,853		—		1,853		127,732
PCD		19,547		101		12,689		—		12,689		32,337
Total Loans	$	5,097,203	$	129,430	$	69,535	$	—	$	69,535	$	5,296,168

As of December 31, 2020, and based on the most recent analysis performed, the risk category of loans by class of loans is as follows (in thousands):

Class	Unclassified		Special Mention		Substandard		Doubtful		Total classified		Total
Real Estate:
Residential		1,187,923		795		2,363		—		2,363		1,191,081
Commercial		2,203,652		111,039		45,464		—		45,464		2,360,155
Construction		299,866		12,718		—		—		—		312,584
Other Loans:
Commercial		1,142,289		23,907		6,847		—		6,847		1,173,043
Home equity and improvement		267,350		—		439		—		439		267,789
Consumer finance		120,682		—		105		—		105		120,787
PCD		26,829		3,813		35,159		—		35,159		65,801
Total Loans	$	5,248,591	$	152,272	$	90,377	$	—	$	90,377	$	5,491,240

The table below presents the amortized cost basis of loans by vintage, credit quality indicator and class of loans as of December 31, 2021 and 2020 (in thousands):

	Term of loans by origination
	2021		2020		2019		2018		2017		Prior		Revolving Loans		Total
As of December 31, 2021
Real Estate
Residential:
Risk Rating
Pass	$	219,006	$	373,439	$	112,781	$	65,544	$	71,794	$	301,735	$	1,913	$	1,146,212
Special Mention		—		190		—		—		59		109		958		1,316
Substandard		465		780		1,198		1,006		2,095		4,522		—		10,066
Doubtful		—		—		—		—		—		—		—		—
Total	$	219,471	$	374,409	$	113,979	$	66,550	$	73,948	$	306,366	$	2,871	$	1,157,594
Commercial:
Risk Rating
Pass	$	514,333	$	493,575	$	388,117	$	230,734	$	237,712	$	451,113	$	9,262	$	2,324,846
Special Mention		294		5,349		5,533		11,055		49,993		20,662		790		93,676
Substandard		172		570		4,920		5,525		62		17,665		227		29,141
Doubtful		—		—		—		—		—		—		—		—
Total	$	514,799	$	499,494	$	398,570	$	247,314	$	287,767	$	489,440	$	10,279	$	2,447,663
Construction:
Risk Rating
Pass	$	198,221	$	100,606	$	55,707	$	10,039	$	685	$	145	$	-	$	365,403
Special Mention		—		12,500		—		5,996		1,026		—		—		19,522
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total	$	198,221	$	113,106	$	55,707	$	16,035	$	1,711	$	145	$	-	$	384,925
Other Loans
Commercial:
Risk Rating
Pass	$	293,644	$	132,703	$	84,668	$	47,421	$	24,269	$	17,038	$	256,659	$	856,402
Special Mention		—		2,180		4,094		272		1,264		4,663		2,342		14,815
Substandard		136		11,550		23		288		388		131		1,236		13,752
Doubtful		—		—		—		—		—		—		—		—
Total	$	293,780	$	146,433	$	88,785	$	47,981	$	25,921	$	21,832	$	260,237	$	884,969
Home equity and Improvement:
Risk Rating
Pass	$	24,707	$	6,870	$	4,867	$	2,879	$	5,534	$	31,317	$	182,740	$	258,914
Special Mention		—		—		—		—		—		—		—		—
Substandard		15		—		28		48		27		690		1,226		2,034
Doubtful		—		—		—		—		—		—		—		—
Total	$	24,722	$	6,870	$	4,895	$	2,927	$	5,561	$	32,007	$	183,966	$	260,948
Consumer Finance:
Risk Rating
Pass	$	50,202	$	25,866	$	23,000	$	9,643	$	4,313	$	2,769	$	10,086	$	125,879
Special Mention		—		—		—		—		—		—		—		—
Substandard		196		707		619		129		67		131		4		1,853
Doubtful		—		—		—		—		—		—		—		—
Total	$	50,398	$	26,573	$	23,619	$	9,772	$	4,380	$	2,900	$	10,090	$	127,732
PCD:
Risk Rating
Pass	$	-	$	-	$	170	$	1,753	$	1,860	$	12,496	$	3,268	$	19,547
Special Mention		—		—		—		—		—		101		—		101
Substandard		—		—		67		28		3,242		6,490		2,862		12,689
Doubtful		—		—		—		—		—		—		—		—
Total	$	-	$	-	$	237	$	1,781	$	5,102	$	19,087	$	6,130	$	32,337

	Term of loans by origination
	2020		2019		2018		2017		2016		Prior		Revolving Loans		Total
As of December 31, 2020
Real Estate
Residential:
Risk Rating
Pass	$	250,979	$	196,158	$	136,247	$	130,759	$	137,581	$	333,572	$	2,627	$	1,187,923
Special Mention		199		—		—		62		116		211		207		795
Substandard		—		74		289		252		136		1,612				2,363
Doubtful		—		—		—		—		—		—		—		—
Total	$	251,178	$	196,232	$	136,536	$	131,073	$	137,833	$	335,395	$	2,834	$	1,191,081
Commercial:
Risk Rating
Pass	$	517,691	$	457,905	$	299,072	$	300,573	$	198,247	$	414,082	$	16,082	$	2,203,652
Special Mention		6,014		7,239		10,452		60,712		7,977		17,723		922		111,039
Substandard		—		279		18,851		1,937		3,143		19,107		2,147		45,464
Doubtful		—		—		—		—		—		—		—		—
Total	$	523,705	$	465,423	$	328,375	$	363,222	$	209,367	$	450,912	$	19,151	$	2,360,155
Construction:
Risk Rating
Pass	$	101,616	$	100,553	$	82,972	$	11,666	$	2,911	$	148	$	-	$	299,866
Special Mention		5,587		—		7,131		—		—		—		—		12,718
Substandard		—		—		—		—		—		—		—		—
Doubtful		—		—		—		—		—		—		—		—
Total	$	107,203	$	100,553	$	90,103	$	11,666	$	2,911	$	148	$	-	$	312,584
Other Loans
Commercial:
Risk Rating
Pass	$	568,678	$	144,977	$	82,492	$	42,421	$	21,262	$	21,969	$	260,490	$	1,142,289
Special Mention		1,180		2,026		2,514		2,109		37		5,121		10,920		23,907
Substandard		148		201		497		543		257		269		4,932		6,847
Doubtful		—		—		—		—		—		—		—		—
Total	$	570,006	$	147,204	$	85,503	$	45,073	$	21,556	$	27,359	$	276,342	$	1,173,043
Home equity and Improvement:
Risk Rating
Pass	$	8,736	$	7,483	$	4,508	$	7,963	$	7,748	$	31,382	$	199,530	$	267,350
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		—		—		—		—		86		353		439
Doubtful		—		—		—		—		—		—		—		—
Total	$	8,736	$	7,483	$	4,508	$	7,963	$	7,748	$	31,468	$	199,883	$	267,789
Consumer Finance:
Risk Rating
Pass	$	38,665	$	37,601	$	19,401	$	10,607	$	4,393	$	3,272	$	6,743	$	120,682
Special Mention		—		—		—		—		—		—		—		—
Substandard		—		98		3		—		4		—		—		105
Doubtful		—		—		—		—		—		—		—		—
Total	$	38,665	$	37,699	$	19,404	$	10,607	$	4,397	$	3,272	$	6,743	$	120,787
PCD:
Risk Rating
Pass	$	-	$	45	$	2,378	$	2,547	$	1,524	$	18,998	$	1,337	$	26,829
Special Mention		—		—		—		1,160		509		1,758		386		3,813
Substandard		—		—		—		14,371		2,502		7,207		11,079		35,159
Doubtful		—		—		—		—		—		—		—		—
Total	$	-	$	45	$	2,378	$	18,078	$	4,535	$	27,963	$	12,802	$	65,801

Allowance for Credit Losses (“ACL”)

The Company has adopted ASU 2016-13 (Topic 326 – Credit Losses) to calculate the ACL, which requires a projection of credit loss over the contract lifetime of the credit adjusted for prepayment tendencies. This valuation account is deducted from the loans

amortized cost basis to present the net amount expected to be collected on the loan. The ACL is adjusted through the provision for credit losses and reduced by net charge offs of loans.

The credit loss estimation process involves procedures that consider the unique characteristics of the Company’s portfolio segments. These segments are further disaggregated into the loan pools for monitoring. When computing allowance levels, a model of risk characteristics, such as loss history and delinquency status, along with current conditions and a supportable forecast is used to determine credit loss assumptions.

The Company is generally utilizing two methodologies to analyze loan pools: discounted cash flows (“DCF”) and probability of default/loss given default (“PD/LGD”).

A default can be triggered by one of several different asset quality factors including past due status, non-accrual status or if the loan has had a charge-off. The PD/LGD utilizes charge off data from the Federal Financial Institutions Examination Council to construct a default rate. The Company estimates losses over an approximate one-year forecast period using Moody’s baseline economic forecasts, and then reverts to longer term historical loss experience over a three-year period. This default rate is further segmented based on the risk of the credit assigning a higher default rate to riskier credits.

The DCF methodology was selected as the most appropriate for loan segments with longer average lives and regular payment structures. The DCF model has two key components, the loss driver analysis combined with a cash flow analysis. The contractual cash flow is adjusted for PD/LGD and prepayment speed to establish a reserve level. The prepayment studies are updated quarterly by a third-party for each applicable pool.

The remaining life method was selected for the consumer loan segment since the pool contains loans with many different structures and payment streams and collateral. The weighted average remaining life uses an average annual charge-off rate applied to the contractual term, further adjusted for estimated prepayments to determine the unadjusted historical charge-off rate for the remaining balance of assets.

Portfolio Segments	Loan Pool	Methodology	Loss Drivers
Residential real estate	1-4 Family nonowner occupied	DCF	National unemployment
	1-4 Family owner occupied	DCF	National unemployment
Commercial real estate	Commercial real estate nonowner occupied	DCF	National unemployment
	Commercial real estate owner occupied	DCF	National unemployment
	Multi Family	DCF	National unemployment
	Agriculture Land	DCF	National unemployment
	Other commercial real estate	DCF	National unemployment
Construction secured by real estate	Construction	PD/LGD	Call report loss history
Commercial	Commercial working capital	PD/LGD	Call report loss history
	Agriculture production	PD/LGD	Call report loss history
	Other commercial	PD/LGD	Call report loss history
Home equity and improvement	Home equity and improvement	PD/LGD	Call report loss history
Consumer finance	Consumer finance	Remaining life	Call report loss history

According to the accounting standard an entity may make an accounting policy election not to measure an allowance for credit losses for accrued interest receivable if the entity writes off the applicable accrued interest receivable balance in a timely manner. The Company has made the accounting policy election not to measure an allowance for credit losses for accrued interest receivables for all loan segments. Current policy dictates that a loan will be placed on nonaccrual status, with the current accrued interest receivable

balance being written off, upon the loan being 90 days delinquent or when the loan is deemed to be collateral dependent and the collateral analysis shows less than 1.2 times discounted collateral coverage based on a current assessment of the value of the collateral.

In addition, ASC Topic 326 requires the Company to establish a liability for anticipated credit losses for unfunded commitments. To accomplish this, the company must first establish a loss expectation for extended (funded) commitments. This loss expectation, expressed as a ratio to the amortized cost basis, is then applied to the portion of unfunded commitments not considered unilaterally cancelable, and considered by the company’s management as likely to fund over the life of the instrument. At December 31, 2021, the Company had $1.4 billion in unfunded commitments and set aside $5.0 million in anticipated credit losses. This reserve is recorded in other liabilities as opposed to the ACL.

The determination of ACL is complex and the Company makes decisions on the effects of factors that are inherently uncertain. Evaluations of the loan portfolio and individual credits require certain estimates, assumptions and judgements as to the facts and circumstances related to particular situations or credits. There may be significant changes in the ACL in future periods determined by prevailing factors at that point in time along with future forecasts.

Certain loans acquired had evidence that the credit quality of the loan had deteriorated since its origination and in management’s assessment at the acquisition date it was probable that Premier would be unable to collect all contractually required payments due. In accordance with FASB ASC Topic 310 Subtopic 30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, these loans have been recorded based on management’s estimate of the fair value of the loans.

Purchased Loans

As a result of the Merger, the Company acquired $2.2 billion in loans. Par value of purchased loans was as follows (in thousands):

	Year ended December 31, 2020
Par value of acquired loans at acquisition	$	2,247,317
Credit discount		(34,610	)
Non-credit (discount)/premium at acquisition		8,497
Purchase price of loans at acquisition	$	2,221,204

Under ASU Topic 326, when loans are purchased with evidence of more than insignificant deterioration of credit, they are accounted for as PCD. PCD loans acquired in a transaction are marked to fair value and a mark on yield is recorded. In addition, an adjustment is made to the ACL for the expected loss on the acquisition date. These loans are assessed on a regular basis and subsequent adjustments to the ACL are recorded on the income statement. On January 31, 2020, the Company acquired PCD loans with a fair value of $79.1 million, credit discount $7.7 million and a noncredit discount of $4.1 million. The outstanding balance at December 31, 2021 and related allowance on these loans is as follows (in thousands):

	As of December 31, 2021				As of December 31, 2020
	Loan Balance		ACL Balance		Loan Balance		ACL Balance
	(Dollars In Thousands)
Real Estate:
Residential	$	13,396	$	197	$	14,895	$	201
Commercial		5,878		151		24,334		2,286
Construction		—		—		—		—
		19,274		348		39,229		2,487
Other Loans:
Commercial		9,167		1,531		20,990		1,896
Home equity and improvement		3,405		154		4,912		214
Consumer finance		491		7		670		20
		13,063		1,692		26,572		2,130
Total	$	32,337	$	2,040	$	65,801	$	4,617

At December 31, 2021 the Company had $615,000 that had previously been accounted for as purchase credit impaired.

Loans to executive officers, directors, and their affiliates are as follows:

	Years Ended December 31,
	2021			2020
	(Dollars In Thousands)
Beginning balance	$	23,384		$	21,849
New loans		11,603			14,913
Effect of changes in composition of related parties		(100	)		883
Repayments		(16,461	)		(14,261	)
Ending Balance	$	18,426		$	23,384

Foreclosure Proceedings

Consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure totaled $3.3 million as of December 31, 2021 and $784,000 as of December 31, 2020.