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Allowance for Loan Losses
 6 Months Ended
Jun. 30, 2020
Receivables [Abstract]  
Allowance for Loan Losses ALLOWANCE FOR LOAN LOSSES
An allowance for loan losses is maintained to absorb probable incurred losses from the loan portfolio. The allowance for loan losses is based on management's continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience, and the amount of nonaccrual loans.
The Company established an allowance for loan losses associated with PCI loans (accounted for under ASC 310-30) based on credit deterioration subsequent to the acquisition date. As of June 30, 2020, the Company had six PCI loan pools and 13 non-pooled PCI loans. The Company re-estimates cash flows expected to be collected for PCI loans on a semi-annual basis, with any decline in expected cash flows recorded as provision for loan losses on a discounted basis during the period. For any increases in cash flows expected to be collected, the Company adjusts the amount of accretable yield to be recognized on a prospective basis over the loan's remaining life.
For loans not accounted for under ASC 310-30, the Company individually evaluates certain impaired loans on a quarterly basis and establishes specific allowances for such loans, if required. A loan is considered impaired when it is probable that interest or principal payments will not be made in accordance with the contractual terms of the loan agreement. Consistent with this definition, all loans for which the accrual of interest has been discontinued (nonaccrual loans) and all TDRs are considered impaired. The Company individually evaluates nonaccrual loans with book balances of $250 thousand or more, all loans whose terms have been modified in a TDR, and certain other loans. The threshold for individual evaluation is revised on an infrequent basis, generally when economic circumstances significantly change. Specific allowances for impaired loans are estimated using one of several methods, including the estimated fair value of underlying collateral, observable market value of similar debt or discounted expected future cash flows. All other impaired loans are individually evaluated by identifying its risk characteristics and applying the standard reserve factor for the corresponding loan pool.
Loans which do not meet the criteria to be individually evaluated are evaluated in pools of loans with similar risk characteristics. Business loans are assigned to pools based on the Company's internal risk rating system. Internal risk ratings are assigned to each business loan at the time of approval and are subjected to subsequent periodic reviews by the Company's senior management, generally at least annually or more frequently upon the occurrence of a circumstance that affects the credit risk of the loan. For business loans not individually evaluated, losses inherent to the pool are estimated by applying standard reserve factors to outstanding principal balances.
The allowance for loans not individually evaluated is determined by applying estimated loss rates to various pools of loans within the portfolios with similar risk characteristics. Estimated loss rates for all pools are updated quarterly, incorporating quantitative and qualitative factors such as recent charge-off experience, current economic conditions and trends, changes in collateral values of properties securing loans (using index-based estimates), and trends with respect to past due and nonaccrual amounts.
Loans acquired in business combinations are initially recorded at fair value, which includes an estimate of credit losses expected to be realized over the remaining lives of the loans, and therefore no corresponding allowance for loan losses is recorded for these loans at acquisition. Methods utilized to estimate any subsequently required allowance for loan losses for acquired loans not deemed credit-impaired at acquisition are similar to originated loans; however, the estimate of loss is based on the unpaid principal balance less any remaining purchase discount.
Loans individually evaluated for impairment are presented below.
(Dollars in thousands)Recorded investment with
no related
allowance		Recorded investment
with related
allowance		Total
recorded
investment		Contractual
principal
balance		Related
allowance
June 30, 2020     
Individually evaluated impaired loans:     
Commercial real estate$3,649  $—  $3,649  $4,007  $—  
Commercial and industrial2,327  596  2,923  3,604  310  
Residential real estate413  1,044  1,457  1,601  29  
Total$6,389  $1,640  $8,029  $9,212  $339  
December 31, 2019     
Individually evaluated impaired loans:     
Commercial real estate$4,832  $—  $4,832  $5,156  $—  
Commercial and industrial10,739  913  11,652  12,521  363  
Residential real estate1,197  189  1,386  1,570  22  
Total$16,768  $1,102  $17,870  $19,247  $385  
(Dollars in thousands)Average
Recorded
Investment		Interest
Income
Recognized		Cash Basis
Interest
Recognized
For the three months ended June 30, 2020   
Individually evaluated impaired loans:   
Commercial real estate$3,680  $—  $—  
Commercial and industrial6,809  11  66  
Residential real estate1,456  10  —  
Total$11,945  $21  $66  
For the six months ended June 30, 2020
Individually evaluated impaired loans:  
Commercial real estate$3,866  $—  $—  
Commercial and industrial8,761  22  84  
Residential real estate1,457  19  —  
Total$14,084  $41  $84  
For the three months ended June 30, 2019   
Individually evaluated impaired loans:   
Commercial real estate$2,927  $—  $1  
Commercial and industrial10,220  10  —  
Residential real estate2,111  7  10  
Total$15,258  $17  $11  
For the six months ended June 30, 2019
Individually evaluated impaired loans:
Commercial real estate$4,675  $—  $174  
Commercial and industrial10,535  19  224  
Residential real estate2,476  14  10  
Total$17,686  $33  $408  
Activity in the allowance for loan losses and the allocation of the allowance for loans was as follows:
(Dollars in thousands)Commercial
Real Estate		Commercial
and Industrial		Residential
Real Estate		ConsumerTotal
For the three months ended June 30, 2020     
Allowance for loan losses:     
Beginning balance$6,123  $5,423  $1,441  $2  $12,989  
Provision for loan losses1,864  2,581  1,117  13  5,575  
Gross chargeoffs—  (1,532) —  (12) (1,544) 
Recoveries—  24  7  12  43  
Net (chargeoffs) recoveries—  (1,508) 7  —  (1,501) 
Ending allowance for loan losses$7,987  $6,496  $2,565  $15  $17,063  
For the six months ended June 30, 2020
Allowance for loan losses:
Beginning balance$5,773  $5,515  $1,384  $2  $12,674  
Provision for loan losses2,214  2,668  1,140  42  6,064  
Gross chargeoffs—  (1,719) —  (43) (1,762) 
Recoveries—  32  41  14  87  
Net (chargeoffs) recoveries—  (1,687) 41  (29) (1,675) 
Ending allowance for loan losses$7,987  $6,496  $2,565  $15  $17,063  
For the three months ended June 30, 2019
Allowance for loan losses:     
Beginning balance$5,181  $5,606  $1,170  $3  $11,960  
Provision (benefit) for loan losses111  363  (50) 5  429  
Gross chargeoffs(74) (20) —  (8) (102) 
Recoveries1  41  22  2  66  
Net (chargeoffs) recoveries(73) 21  22  (6) (36) 
Ending allowance for loan losses$5,219  $5,990  $1,142  $2  $12,353  
For the six months ended June 30, 2019
Allowance for loan losses:
Beginning balance$5,227  $5,174  $1,164  $1  $11,566  
Provision (benefit) for loan losses65  840  (65) 11  851  
Gross chargeoffs(74) (115) —  (14) (203) 
Recoveries1  91  43  4  139  
Net (chargeoffs) recoveries (73) (24) 43  (10) (64) 
Ending allowance for loan losses$5,219  $5,990  $1,142  $2  $12,353  
(Dollars in thousands)Commercial
Real Estate		Commercial
and Industrial		Residential
Real Estate		ConsumerTotal
June 30, 2020     
Allowance for loan losses:     
Individually evaluated for impairment$—  $310  $29  $—  $339  
Collectively evaluated for impairment7,277  6,156  2,339  15  15,787  
Acquired with deteriorated credit quality710  30  197  —  937  
Ending allowance for loan losses$7,987  $6,496  $2,565  $15  $17,063  
Balance of loans:
Individually evaluated for impairment$3,649  $2,923  $1,457  $—  $8,029  
Collectively evaluated for impairment718,951  787,139  289,662  5,476  1,801,228  
Acquired with deteriorated credit quality2,883  291  2,922  —  6,096  
Total loans$725,483  $790,353  $294,041  $5,476  $1,815,353  
December 31, 2019
Allowance for loan losses:
Individually evaluated for impairment$—  $363  $22  $—  $385  
Collectively evaluated for impairment5,062  5,124  1,339  2  11,527  
Acquired with deteriorated credit quality711  28  23  —  762  
Ending allowance for loan losses$5,773  $5,515  $1,384  $2  $12,674  
Balance of loans:
Individually evaluated for impairment$4,832  $11,652  $1,386  $—  $17,870  
Collectively evaluated for impairment596,930  398,441  207,499  896  1,203,766  
Acquired with deteriorated credit quality2,884  135  2,954  —  5,973  
Total loans$604,646  $410,228  $211,839  $896  $1,227,609