Note 7

Loans Receivable and Allowance for Loan Losses

The loan portfolio at March 31, 2015 and December 31, 2014 consist of the following:

	March 31, 2015
(In thousands)	Originated			Acquired		Total
Commercial and industrial	$	302,871		$	21,019	$	323,890
Real estate - commercial	1,171,692			96,975		1,268,667
Real estate - construction	486,656			4,129		490,785
Real estate - residential	399,238			7,129		406,367
Home equity lines	131,796			3,480		135,276
Consumer	4,065			704		4,769
	2,496,318			133,436		2,629,754
Net deferred fees	(4,324		)	—		(4,324		)
Loans receivable, net of fees	2,491,994			133,436		2,625,430
Allowance for loan losses	(28,884		)	—		(28,884		)
Loans receivable, net	$	2,463,110		$	133,436	$	2,596,546

	December 31, 2014
(In thousands)	Originated			Acquired		Total
Commercial and industrial	$	328,711		$	25,210	$	353,921
Real estate - commercial	1,154,093			103,761		1,257,854
Real estate - construction	424,745			10,163		434,908
Real estate - residential	393,894			8,784		402,678
Home equity lines	127,004			3,881		130,885
Consumer	4,341			742		5,083
	2,432,788			152,541		2,585,329
Net deferred fees	(4,215		)	—		(4,215		)
Loans receivable, net of fees	2,428,573			152,541		2,581,114
Allowance for loan losses	(28,275		)	—		(28,275		)
Loans receivable, net	$	2,400,298		$	152,541	$	2,552,839

During 2014, as a result of the Company’s acquisition of UFBC, the loan portfolio was segregated between loans initially accounted for under the amortized cost method (referred to as “originated” loans) and loans acquired (referred to as “acquired” loans).

The loans segregated to the acquired loan portfolio were initially measured at fair value and subsequently accounted for under either Accounting Standards Codification (“ASC”) Topic 310-30 or ASC 310-20. The outstanding principal balance and related carrying amount of acquired loans included in the consolidated statements of condition at March 31, 2015 and December 31, 2014 are as follows:

(in thousands)	March 31, 2015
Credit impaired acquired loans evaluated individually for future credit losses
Outstanding principal balance	$	15,750
Carrying amount	12,080

Other acquired loans
Outstanding principal balance	122,271
Carrying amount	121,356

Total acquired loans
Outstanding principal balance	138,021
Carrying amount	133,436

(in thousands)	December 31, 2014
Credit impaired acquired loans evaluated individually for future credit losses
Outstanding principal balance	$	19,176
Carrying amount	14,960

Other acquired loans
Outstanding principal balance	138,419
Carrying amount	137,581

Total acquired loans
Outstanding principal balance	157,595
Carrying amount	152,541

The following table presents changes in the accretable discount, which includes income recognized from contractual interest cash flows.

(in thousands)
Balance at January 1, 2015	$	(5,053	)
Charge-offs	$	504
Accretion	(36		)
Balance at March 31, 2015	$	(4,585	)

(in thousands)
Balance at January 1, 2014	$	—
Recorded discount at acquisition date	(3,872		)
Accretion	(1,181		)
Balance at December 31, 2014	$	(5,053	)

The Company’s allowance for loan losses is based first on a segmentation of its loan portfolio by general loan type, or portfolio segments, as presented in the preceding table. For originated loans, certain portfolio segments are further disaggregated and evaluated collectively for impairment based on class segments, which are largely based on the type of collateral underlying each loan. The Company also maintains an allowance for loan losses for acquired loans when: (i) for loans accounted for under ASC 310-30, there is deterioration in credit quality subsequent to acquisition, and (ii) for loans accounted for under ASC 310-20, the inherent losses in the loans exceed the remaining credit discount recorded at the time of acquisition.

Activity in the Company’s allowance for loan losses for the three months ended March 31, 2015 and 2014 is shown below.

	2015			2014
Beginning balance, January 1	$	28,275		$	27,864

Provision for loan losses	130			1,926

Loans charged off:
Commercial and industrial	(3		)	(783		)
Residential	—			—
Consumer	(16		)	(2		)
Total loans charged off	(19		)	(785		)

Recoveries:
Commercial and industrial	485			7
Residential	10			81
Consumer	3			—
Total recoveries	498			88

Net recoveries (charge offs)	479			(697		)

Ending balance, March 31,	$	28,884		$	29,093

For the three months ended March 31, 2015 and 2014, the Company recorded an allowance for loan losses for the acquired loan portfolio of $0 and $169,000, respectively. There were no impairments recorded in the purchase credit impaired portfolio as of March 31, 2015 and 2014.

An analysis of the allowance for loan losses based on loan type, or segment, and the Company’s loan portfolio, which identifies certain loans that are evaluated for individual or collective impairment, as of March 31, 2015 and 2014, are below:

Allowance for Loan Losses

At and for the Three Months Ended March 31, 2015

(In thousands)

	Commercial and Industrial			Real Estate - Commercial			Real Estate - Construction		Real Estate - Residential			Home Equity Lines		Consumer			Total
Allowance for loan losses:
Beginning Balance, January 1	$	2,061		$	17,820		$	6,105	$	1,954		$	301	$	34		$	28,275
Charge-offs	(3		)	—			—		—			—		(16		)	(19		)
Recoveries	187			293			5		10			3		—			498
Provision for loan losses	(120		)	(398		)	613		(3		)	22		16			130
Ending Balance, March 31, 2015	$	2,125		$	17,715		$	6,723	$	1,961		$	326	$	34		$	28,884

Ending Balance, March 31, 2015
Individually evaluated for impairment	$	—		$	—		$	—	$	—		$	—	$	—		$	—
Collectively evaluated for impairment	2,125			17,715			6,723		1,961			326		34			28,884

Loans Receivable

At March 31, 2015

(In thousands)

	Commercial and Industrial		Real Estate - Commercial		Real Estate - Construction		Real Estate - Residential		Home Equity Lines		Consumer		Total
Loans Receivable:
Ending Balance, March 31, 2015	$	323,890	$	1,268,667	$	490,785	$	406,367	$	135,276	$	4,769	$	2,629,754

Ending Balance, March 31, 2015
Individually evaluated for impairment	$	1,171	$	273	$	250	$	—	$	51	$	—	$	1,745
Purchased Credit Impaired Loans	2,878		6,736		1,641		326		496		3		12,080
Collectively evaluated for impairment	319,841		1,261,658		488,894		406,041		134,729		4,766		2,615,929

Allowance for Loan Losses

At and for the Three Months Ended March 31, 2014

(In thousands)

	Commercial and Industrial			Real Estate - Commercial			Real Estate - Construction		Real Estate - Residential		Home Equity Lines		Consumer			Total
Allowance for loan losses:
Beginning Balance, January 1	$	3,329		$	16,076		$	5,336	$	2,421	$	609	$	93		$	27,864
Charge-offs	(262		)	(521		)	—		—		—		(2		)	(785		)
Recoveries	2			—			5		81		—		—			88
Provision for loan losses	893			449			380		205		—		(1		)	1,926
Ending Balance, March 31, 2014	$	3,962		$	16,004		$	5,721	$	2,707	$	609	$	90		$	29,093

Ending Balance, March 31, 2014
Individually evaluated for impairment	$	38		$	—		$	—	$	131	$	—	$	—		$	169
Collectively evaluated for impairment	3,924			16,004			5,721		2,576		609		90			28,924

Loans Receivable

At March 31, 2014

(In thousands)

	Commercial and Industrial		Real Estate - Commercial		Real Estate - Construction		Real Estate - Residential		Home Equity Lines		Consumer		Total
Loans Receivable:
Ending Balance, March 31, 2014	$	291,208	$	1,191,953	$	414,711	$	332,288	$	115,045	$	5,045	$	2,350,250

Ending Balance, March 31, 2014
Individually evaluated for impairment	$	299	$	1,738	$	496	$	346	$	51	$	—	$	2,930
Purchased Credit Impaired Loans	4,990		8,379		1,688		448		467		8		15,980
Collectively evaluated for impairment	285,919		1,181,836		412,527		331,494		114,527		5,037		2,331,340

The accounting policy related to the allowance for loan losses is considered a critical accounting policy given the level of estimation, judgment and uncertainty in evaluating the levels of the allowance required for the inherent probable losses in the loan portfolio and the material effect such estimation, judgment and uncertainty can be on the consolidated financial results.

The Company’s ongoing credit quality management process relies on a system of activities to assess and evaluate various factors that impact the estimation of the allowance for loan losses. These factors include, but are not limited to; current economic conditions; loan concentrations, collateral adequacy and value; past loss experience for particular types of loans, size, composition and nature of loans; migration of loans through our loan rating methodology; trends in charge-offs and recoveries. This process also contemplates a disciplined approach to managing and monitoring credit exposures to ensure that the structure and pricing of credit remains consistent with the Company’s assessment of risk. The loan officer has frequent contact with the borrower and is a key player in the credit management process and must develop and diligently practice sound credit management skills and habits to ensure effectiveness. Under the direction of the Company’s loan committee and the chief credit officer, the credit risk management function works with the loan officers and other groups within the Company to monitor the loan portfolio, maintain the watch list, and compile the analysis necessary to determine the allowance for loan losses.

Loans are added to the watch list when circumstances appear to warrant the inclusion of the relationship. As a general rule, loans are added to the watch list when they are deemed to be problem assets. Problem assets are defined as those that have been risk rated substandard or lower. Successful problem asset management requires early recognition of deteriorating credits and timely corrective or risk management actions. Generally, risk ratings are either approved or amended by the loan committee accordingly. Problem loans are maintained on the watch list until the loan is either paid off or circumstances around the borrower’s situation improve to the point that the risk rating on the loan is adjusted upward.

In addition to internal activities, the Company also engages an external consultant on a quarterly basis to review the Company’s loan portfolio. This external loan review function helps to ensure the soundness of the loan portfolio through a third party review of existing exposures in the portfolio, supporting the commercial loan officers in the execution of its credit management responsibilities, and monitoring the adherence to the Company’s credit risk management standards.

The following tables report the Company’s nonaccrual and past due loans at March 31, 2015 and December 31, 2014. In addition, the credit quality of the loan portfolio is provided as of March 31, 2015 and December 31, 2014.

Nonaccrual and Past Due Loans - Originated Loan Portfolio

At March 31, 2015

(In thousands)

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due (includes nonaccrual)		Total Past Due		Current		Total Loans		90 Days Past Due and Still Accruing		Nonaccrual Loans
Commercial and industrial	$	—	$	15	$	976	$	991	$	301,880	302,871		$	—	$	976

Real estate - commercial
Owner occupied	—		—		—		—		295,416		295,416		—		—
Non-owner occupied	—		—		273		273		876,003		876,276		—		273

Real estate - construction
Residential	—		—		—		—		172,391		172,391		—		—
Commercial	—		—		—		—		314,265		314,265		—		—

Real estate - residential
Single family	15		—		—		15		293,696		293,711		—		—
Multi-family	—		—		—		—		105,527		105,527		—		—

Home equity lines	243		—		51		294		131,502		131,796		—		51

Consumer
Installment	—		—		—		—		3,760		3,760		—		—
Credit cards	6		47		—		53		252		305		—		—
	$	264	$	62	$	1,300	$	1,626	$	2,494,692	$	2,496,318	$	—	$	1,300

Nonaccrual and Past Due Loans - Acquired Loan Portfolio

At March 31, 2015

(In thousands)

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due (includes nonaccrual)		Total Past Due		Current		Total Loans		90 Days Past Due and Still Accruing		Nonaccrual Loans
Commercial and industrial	$	—	$	—	$	572	$	572	$	20,447	21,019		$	—	$	572

Real estate - commercial
Owner occupied	—		—		—		—		44,241		44,241		—		—
Non-owner occupied	1,028		—				1,028		51,706		52,734		—		—

Real estate - construction
Residential	—		—		—		—		3,292		3,292		—		—
Commercial	—		—		—		—		837		837		—		—

Real estate - residential
Single family	—		—				—		7,129		7,129		—		—
Multi-family	—		—		—		—		—		—		—		—

Home equity lines	—		—		—		—		3,480		3,480		—		—

Consumer
Installment	—		—		—		—		704		704		—		—
Credit cards	—		—		—		—		—		—		—		—
	$	1,028	$	—	$	572	$	1,600	$	131,836	$	133,436	$	—	$	572

Nonaccrual and Past Due Loans - Originated Loan Portfolio

At December 31, 2014

(In thousands)

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due (includes nonaccrual)		Total Past Due		Current		Total Loans		90 Days Past Due and Still Accruing		Nonaccrual Loans
Commercial and industrial	$	88	$	30	$	938	$	1,056	$	327,655	328,711		$	—	$	938

Real estate - commercial
Owner occupied	—		—		—		—		304,303		304,303		—		—
Non-owner occupied	—		—		289		289		849,501		849,790		—		289

Real estate - construction
Residential	—		—		—		—		158,915		158,915		—		—
Commercial	—		—		—		—		265,830		265,830		—		—

Real estate - residential
Single family	359		—		—		359		297,530		297,889		—		—
Multi-family	—		—		—		—		96,005		96,005		—		—

Home equity lines	—		—		180		180		126,824		127,004		—		180

Consumer
Installment	—		—		—		—		3,920		3,920		—		—
Credit cards	53		—		—		53		368		421		—		—
	$	500	$	30	$	1,407	$	1,937	$	2,430,851	$	2,432,788	$	—	$	1,407

Nonaccrual and Past Due Loans - Acquired Loan Portfolio

At December 31, 2014

(In thousands)

	30-59 Days Past Due		60-89 Days Past Due		90 Days or More Past Due (includes nonaccrual)		Total Past Due		Current		Total Loans		90 Days Past Due and Still Accruing		Nonaccrual Loans
Commercial and industrial	$	—	$	—	$	576	$	576	$	24,634	25,210		$	—	$	576

Real estate - commercial
Owner occupied	—		—		—		—		49,173		49,173		—		—
Non-owner occupied	—		—		1,072		1,072		53,516		54,588		—		1,072

Real estate - construction
Residential	—		—		—		—		6,156		6,156		—		—
Commercial	—		—		—		—		4,007		4,007		—		—

Real estate - residential
Single family	24		—		306		330		8,454		8,784		—		306
Multi-family	—		—		—		—		—		—		—		—

Home equity lines	—		—		—		—		3,881		3,881		—		—

Consumer
Installment	—		—		—		—		742		742		—		—
Credit cards	—		—		—		—		—		—		—		—
	$	24	$	—	$	1,954	$	1,978	$	150,563	$	152,541	$	—	$	1,954

Additional information on the Company’s impaired loans that were evaluated for specific reserves as of March 31, 2015 and December 31, 2014, including the recorded investment on the statement of condition and the unpaid principal balance, is shown below:

Impaired Loans — Originated Loan Portfolio

At March 31, 2015

(In thousands)

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Interest Income Recognized
With no related allowance:
Commercial and industrial	$	1,171	$	1,488	$	—	$	—
Real estate - commercial
Owner occupied	—		—		—		—
Non-owner occupied	273		2,364		—		—
Real estate - construction
Residential	—		—		—		—
Commercial	250		250		—		—
Real estate - residential
Single family	—		—		—		—
Multi-family	—		—		—		—
Home equity lines	51		51		—		—
Consumer	—		—		—		—

With related allowance:
Commercial and industrial	$	—	$	—	$	—	$	—
Real estate - commercial							—
Owner occupied	—		—		—		—
Non-owner occupied	—		—		—		—
Real estate - construction							—
Residential	—		—		—		—
Commercial	—		—		—		—
Real estate - residential							—
Single family	—		—		—		—
Multi-family	—		—		—		—
Home equity lines	—		—		—		—
Consumer	—		—		—		—

By segment total:
Commercial and industrial	$	1,171	$	1,488	$	—	$	—
Real estate - commercial	273		2,364		—		—
Real estate - construction	250		250		—		—
Real estate - residential	—		—		—		—
Home equity lines	51		51		—		—
Consumer	—		—		—		—
Total	$	1,745	$	4,153	$	—	$	—

Impaired Loans — Acquired Loan Portfolio

At March 31, 2015

(In thousands)

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Interest Income Recognized
With no related allowance:
Commercial and industrial	$	649	$	758	$	—	$	—
Real estate - commercial
Owner occupied	—		—		—		—
Non-owner occupied	3,478		3,449		—		12
Real estate - construction
Residential	—		—		—		—
Commercial	837		942		—		—
Real estate - residential
Single family	—		—		—		—
Multi-family	—		—		—		—
Home equity lines	—		—		—		—
Consumer	—		—		—		—

With related allowance:
Commercial and industrial	$	—	$	—	$	—	$	—
Real estate - commercial							—
Owner occupied	—		—		—		—
Non-owner occupied	—		—		—		—
Real estate - construction							—
Residential	—		—		—		—
Commercial	—		—		—		—
Real estate - residential							—
Single family	—		—		—		—
Multi-family	—		—		—		—
Home equity lines	—		—		—		—
Consumer	—		—		—		—

By segment total:
Commercial and industrial	$	649	$	758	$	—	$	—
Real estate - commercial	3,478		3,449		—		12
Real estate - construction	837		942		—		—
Real estate - residential	—		—		—		—
Home equity lines	—		—		—		—
Consumer	—		—		—		—
Total	$	4,964	$	5,149	$	—	$	12

Impaired Loans — Originated Loan Portfolio

At December 31, 2014

(In thousands)

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Interest Income Recognized
With no related allowance:
Commercial and industrial	$	1,159	$	1,472	$	—	$	64
Real estate - commercial
Owner occupied	—		—		—		—
Non-owner occupied	289		2,364		—		—
Real estate - construction
Residential	—		—		—		—
Commercial	250		250		—		—
Real estate - residential
Single family	—		—		—		—
Multi-family	—		—		—		—
Home equity lines	180		180		—		4
Consumer	—		—		—		—

With related allowance:
Commercial and industrial	$	—	$	—	$	—	$	—
Real estate - commercial							—
Owner occupied	—		—		—		—
Non-owner occupied	—		—		—		—
Real estate - construction							—
Residential	—		—		—		—
Commercial	—		—		—		—
Real estate - residential							—
Single family	—		—		—		—
Multi-family	—		—		—		—
Home equity lines	—		—		—		—
Consumer	—		—		—		—

By segment total:
Commercial and industrial	$	1,159	$	1,472	$	—	$	64
Real estate - commercial	289		2,364		—		—
Real estate - construction	250		250		—		—
Real estate - residential	—		—		—		—
Home equity lines	180		180		—		4
Consumer	—		—		—		—
Total	$	1,878	$	4,266	$	—	$	68

Impaired Loans — Acquired Loan Portfolio

At December 31, 2014

(In thousands)

	Recorded Investment		Unpaid Principal Balance		Related Allowance		Interest Income Recognized
With no related allowance:
Commercial and industrial	$	576	$	1,227	$	—	$	12
Real estate - commercial
Owner occupied	—		—		—		—
Non-owner occupied	1,266		1,729		—		39
Real estate - construction
Residential	—		—		—		—
Commercial	839		942		—		5
Real estate - residential
Single family	306		446		—		2
Multi-family	—		—		—		—
Home equity lines	—		—		—		—
Consumer	—		—		—		—

With related allowance:
Commercial and industrial	$	—	$	—	$	—	$	—
Real estate - commercial							—
Owner occupied	—		—		—		—
Non-owner occupied	—		—		—		—
Real estate - construction							—
Residential	—		—		—		—
Commercial	—		—		—		—
Real estate - residential							—
Single family	—		—		—		—
Multi-family	—		—		—		—
Home equity lines	—		—		—		—
Consumer	—		—		—		—

By segment total:
Commercial and industrial	$	576	$	1,227	$	—	$	12
Real estate - commercial	1,266		1,729		—		39
Real estate - construction	839		942		—		5
Real estate - residential	306		446		—		2
Home equity lines	—		—		—		—
Consumer	—		—		—		—
Total	$	2,987	$	4,344	$	—	$	58

In order to maximize the collection of certain loans, the Company will attempt to work with borrowers when necessary to extend or modify loan terms to better align with the borrower’s ability to repay. Extensions and modifications to loans are made in accordance with the Company’s policy and conform to regulatory guidance. Each occurrence is unique to the borrower and is evaluated separately. The Company considers regulatory guidelines when restructuring a loan to ensure that prudent lending practices are followed. As such, qualification criteria and payment terms consider the borrower’s current and prospective ability to comply with the modified terms of the loan.

A modification is classified as a troubled debt restructuring (“TDR”) if both of the following exist: (1) the borrower is experiencing financial difficulty and (2) the Company has granted a concession to the borrower. The Company determines that a borrower may be experiencing financial difficulty if the borrower is currently in default on any of its debt, or if the Company is concerned that the borrower may not be able to perform in accordance with the current terms of the loan agreement in the foreseeable future. Many aspects of the borrower’s financial situation are assessed when determining whether they are experiencing financial difficulty, particularly as it relates to commercial borrowers due to the complex nature of the loan structure, business/industry risk, and borrower/guarantor structures. Concessions may include the reduction of an interest rate at a rate lower than current market rate for a new loan with similar risk, extension of the maturity date, reduction of accrued interest, or principal forgiveness. When evaluating whether a concession has been granted, the Company also considers whether the borrower has provided additional collateral or guarantors and whether such additions adequately compensate the Company for the restructured terms, or if the revised terms are consistent with those currently being offered to new loan customers. The assessments of whether a borrower is experiencing (or is likely to experience) financial difficulty and whether a concession has been granted is subjective in nature and management’s judgment is required when determining whether a modification is a TDR.

Although each occurrence is unique to the borrower and is evaluated separately, for all portfolio segments, TDRs are typically modified through reductions in interest rates, reductions in payments, changing the payment terms from principal and interest to interest only, and/or extensions in term maturity.

Nonaccruing loans that are modified can be placed back on accrual status when both the principal and interest are current and it is probable that the Company will be able to collect all amounts due (both principal and interest) according to the terms of the loan agreement.

At March 31, 2015 and December 31, 2014, the Company had TDRs totaling $273,000 and $289,000, respectively, all of which were on nonaccrual. Nonaccrual TDRs that are reasonably assured of repayment according to their modified terms may be returned to accrual status by the Company upon a detailed credit evaluation of the borrower’s financial condition and prospects for repayment under the revised terms. Consistent with regulatory guidance, upon sustained performance and classification as a TDR over the Company’s year-end, the loan will be removed from TDR status as long as the modified terms were market-based at the time of the modification. The following table reconciles the beginning and ending balances on TDRs as of March 31, 2015 and 2014, respectively:

Troubled Debt Restructurings

At and For the Three Months Ended March 31, 2015

(In thousands)

	Commercial and Industrial		Real Estate - Commercial			Real Estate - Construction		Real Estate - Residential		Home Equity Lines		Consumer		Total

Beginning Balance, January 1, 2015	$	—	$	289		$	—	$	—	$	—	$	—	$	289
New TDRs	—		—			—		—		—		—		—
Increases to existing TDRs	—		—			—		—		—		—		—
Charge-Offs Post Modification	—		—			—		—		—		—		—
Sales, paydowns, or other decreases	—		(16		)	—		—		—		—		(16		)
Ending Balance, March 31, 2015	$	—	$	273		$	—	$	—	$	—	$	—	$	273

Troubled Debt Restructurings

At and For the Three Months Ended March 31, 2014

(In thousands)

	Commercial and Industrial		Real Estate - Commercial		Real Estate - Construction			Real Estate - Residential		Home Equity Lines		Consumer		Total

Beginning Balance, January 1, 2014	$	—	$	1,738	$	525		$	—	$	—	$	—	$	2,263
New TDRs	—		—		—			—		—		—		—
Increases to existing TDRs	—		—		—			—		—		—		—
Charge-Offs Post Modification	—		—		—			—		—		—		—
Sales, paydowns, or other decreases	—		—		(279		)	—		—		—		(279		)
Ending Balance, March 31, 2014	$	—	$	1,738	$	246		$	—	$	—	$	—	$	1,984

At March 31, 2015, TDRs make up one relationship with the Bank. These loans are performing as expected post-modification. There are no acquired loans classified as TDRs. For restructured loans in the portfolio, the Company had no loan loss reserves as of March 31, 2015 and December 31, 2014, respectively.

Loans modified as TDRs within the previous 12 months and for which there was a payment default during the period are calculated by first identifying TDRs that defaulted during the period and then determining whether they were modified within the 12 months prior to the default. For the period ended March 31, 2015, no loans identified as TDRs had a payment default within the last twelve months. For the period ended March 31, 2014, one loan identified as a TDR had a payment default within the last twelve months.

One of the most significant factors in assessing the credit quality of the Company’s loan portfolio is the risk rating. The Company uses the following risk ratings to manage the credit quality of its loan portfolio: pass, other loans especially mentioned (OLEM), substandard, doubtful and loss. OLEM are those loans in which the borrower exhibits potential weakness that may, if not corrected or reversed, weaken the bank’s credit position at some future date. These loans may not show problems as yet due to the borrower’s apparent ability to service the debt, but special circumstances surround the loans of which the Bank’s management should be aware. Substandard risk rated loans are those loans whose full final collectability may not appear to be a matter for serious doubt, but which nevertheless have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt and require close supervision by management. Loans that have a risk rating of doubtful have all the weakness inherent in one graded substandard with the added provision that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and value, highly questionable. A loss loan is one that is considered uncollectible and will be charged-off immediately. All other loans not rated OLEM, substandard, doubtful or loss are considered to have a pass risk rating. Substandard and doubtful risk rated loans are evaluated for impairment. The following table presents a summary of the risk ratings by portfolio segment and class segment at March 31, 2015 and December 31, 2014.

Internal Risk Rating Grades - Originated Loan Portfolio

At March 31, 2015

(In thousands)

	Pass		OLEM		Substandard		Doubtful		Loss
Commercial and industrial	$	300,007	$	1,376	$	1,488	$	—	$	—

Real estate - commercial
Owner occupied	295,416		—		—		—		—
Non-owner occupied	867,215		6,697		2,364		—		—

Real estate - construction
Residential	172,391		—		—		—		—
Commercial	314,015		—		250		—		—

Real estate - residential
Single family	293,696		15		—		—		—
Multi-family	105,527		—		—		—		—

Home equity lines	131,502		243		51		—		—

Consumer
Installment	3,760		—		—		—		—
Credit cards	299		6		—		—		—
	$	2,483,828	$	8,337	$	4,153	$	—	$	—

Internal Risk Rating Grades - Acquired Loan Portfolio

At March 31, 2015

(In thousands)

	Pass		OLEM		Substandard		Doubtful		Loss
Commercial and industrial	$	18,906	$	1,464	$	649	$	—	$	—

Real estate - commercial
Owner occupied	44,241		—		—		—		—
Non-owner occupied	47,116		2,140		3,478		—		—

Real estate - construction
Residential	3,292		—		—		—		—
Commercial	—		—		837		—		—

Real estate - residential
Single family	7,129		—		—		—		—
Multi-family	—		—		—		—		—

Home equity lines	3,480		—		—		—		—

Consumer
Installment	704		—		—		—		—
Credit cards	—		—		—		—		—
	$	124,868	$	3,604	$	4,964	$	—	$	—

Internal Risk Rating Grades - Originated Loan Portfolio

At December 31, 2014

(In thousands)

	Pass		OLEM		Substandard		Doubtful		Loss
Commercial and industrial	$	326,543	$	1,009	$	1,159	$	—	$	—

Real estate - commercial
Owner occupied	304,303		—		—		—		—
Non-owner occupied	846,280		3,221		289		—		—

Real estate - construction
Residential	158,915		—		—		—		—
Commercial	265,580		—		250		—		—

Real estate - residential
Single family	297,530		359		—		—		—
Multi-family	96,005		—		—		—		—

Home equity lines	126,824		—		180		—		—

Consumer
Installment	3,920		—		—		—		—
Credit cards	421		—		—		—		—
	$	2,426,321	$	4,589	$	1,878	$	—	$	—

Internal Risk Rating Grades - Acquired Loan Portfolio

At December 31, 2014

(In thousands)

	Pass		OLEM		Substandard		Doubtful		Loss
Commercial and industrial	$	22,277	$	2,357	$	576	$	—	$	—

Real estate - commercial
Owner occupied	49,173		—		—		—		—
Non-owner occupied	51,184		2,138		1,266		—		—

Real estate - construction
Residential	6,156		—		—		—		—
Commercial	3,168		—		839		—		—

Real estate - residential
Single family	8,454		24		306		—		—
Multi-family	—		—		—		—		—

Home equity lines	3,881		—		—		—		—

Consumer
Installment	742		—		—		—		—
Credit cards	—		—		—		—		—
	$	145,035	$	4,519	$	2,987	$	—	$	—