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Allowance for Loan Losses
 9 Months Ended
Sep. 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 September 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
September 30, 2020     
Individually evaluated impaired loans:     
Commercial real estate$7,022 $— $7,022 $7,355 $— 
Commercial and industrial4,465 4,717 9,182 10,031 798 
Residential real estate2,942 266 3,208 3,459 26 
Total$14,429 $4,983 $19,412 $20,845 $824 
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 September 30, 2020   
Individually evaluated impaired loans:   
Commercial real estate$7,139 $— $— 
Commercial and industrial8,960 12 — 
Residential real estate3,265 7 — 
Total$19,364 $19 $— 
For the nine months ended September 30, 2020
Individually evaluated impaired loans:  
Commercial real estate$7,433 $— $— 
Commercial and industrial13,086 34 84 
Residential real estate3,266 26 — 
Total$23,785 $60 $84 
For the three months ended September 30, 2019   
Individually evaluated impaired loans:   
Commercial real estate$3,111 $2 $35 
Commercial and industrial6,752 14 349 
Residential real estate1,428 7 — 
Total$11,291 $23 $384 
For the nine months ended September 30, 2019
Individually evaluated impaired loans:
Commercial real estate$4,034 $2 $209 
Commercial and industrial9,080 33 573 
Residential real estate2,059 21 10 
Total$15,173 $56 $792 
Activity in the allowance for loan losses is presented below:
(Dollars in thousands)Commercial
Real Estate		Commercial
and Industrial		Residential
Real Estate		ConsumerTotal
For the three months ended September 30, 2020     
Allowance for loan losses:     
Beginning balance$7,987 $6,496 $2,565 $15 $17,063 
Provision (benefit) for loan losses1,820 1,679 781 (10)4,270 
Gross chargeoffs— (10)(110)(4)(124)
Recoveries12 15 10 8 45 
Net (chargeoffs) recoveries12 5 (100)4 (79)
Ending allowance for loan losses$9,819 $8,180 $3,246 $9 $21,254 
For the nine months ended September 30, 2020
Allowance for loan losses:
Beginning balance$5,773 $5,515 $1,384 $2 $12,674 
Provision for loan losses4,034 4,347 1,921 32 10,334 
Gross chargeoffs— (1,729)(110)(47)(1,886)
Recoveries12 47 51 22 132 
Net (chargeoffs) recoveries12 (1,682)(59)(25)(1,754)
Ending allowance for loan losses$9,819 $8,180 $3,246 $9 $21,254 
For the three months ended September 30, 2019
Allowance for loan losses:     
Beginning balance$5,219 $5,990 $1,142 $2 $12,353 
Provision (benefit) for loan losses184 (280)72 8 (16)
Gross chargeoffs— (49)— (34)(83)
Recoveries5 10 12 26 53 
Net (chargeoffs) recoveries5 (39)12 (8)(30)
Ending allowance for loan losses$5,408 $5,671 $1,226 $2 $12,307 
For the nine months ended September 30, 2019
Allowance for loan losses:
Beginning balance$5,227 $5,174 $1,164 $1 $11,566 
Provision for loan losses249 560 7 19 835 
Gross chargeoffs(74)(164)— (48)(286)
Recoveries6 101 55 30 192 
Net (chargeoffs) recoveries (68)(63)55 (18)(94)
Ending allowance for loan losses$5,408 $5,671 $1,226 $2 $12,307 
Allocation of the allowance for loan losses is presented below:
(Dollars in thousands)Commercial
Real Estate		Commercial
and Industrial		Residential
Real Estate		ConsumerTotal
September 30, 2020     
Allowance for loan losses:     
Individually evaluated for impairment$— $798 $26 $— $824 
Collectively evaluated for impairment9,109 7,352 3,023 9 19,493 
Acquired with deteriorated credit quality710 30 197 — 937 
Ending allowance for loan losses$9,819 $8,180 $3,246 $9 $21,254 
Balance of loans:
Individually evaluated for impairment$7,022 $9,182 $3,208 $— $19,412 
Collectively evaluated for impairment720,326 798,460 297,935 1,688 1,818,409 
Acquired with deteriorated credit quality2,841 281 2,945 — 6,067 
Total loans$730,189 $807,923 $304,088 $1,688 $1,843,888 
December 31, 2019
Allowance for loan losses:
Individually evaluated for impairment$— $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