Note (5)—Loans and allowance for loan losses:

Loans outstanding at December 31, 2017 and 2016, by major lending classification are as follows:

	December 31,
	2017			2016
Commercial and industrial	$	715,075		$	386,233
Construction		448,326			245,905
Residential real estate:
1-to-4 family mortgage		480,989			294,924
Residential line of credit		194,986			177,190
Multi-family mortgage		62,374			44,977
Commercial real estate:
Owner occupied		495,872			357,346
Non-owner occupied		551,588			267,902
Consumer and other		217,701			74,307
Gross loans		3,166,911			1,848,784
Less: Allowance for loan losses		(24,041	)		(21,747	)
Net loans	$	3,142,870		$	1,827,037

As of December 31, 2017 and 2016, $968,567 and $565,717, respectively, of 1-to-4 family and multifamily mortgage loans and loans held for sale were pledged to the Federal Home Loan Bank of Cincinnati securing advances against the Bank’s line. As of December 31, 2017 and 2016, $724,312 and $1,072,118, respectively, of commercial and industrial , construction, residential, real estate, commercial real estate, and consumer and other loans were pledged to the Federal Reserve under the Borrower-in-Custody program.

As of December 31, 2017 and 2016, the carrying value of purchased credit impaired loans (“PCI”) loans accounted for under ASC 310-30 Loans and Debt Securities Acquired with Deteriorated Credit Quality, were $88,835 and $16,058, respectively. The following table presents changes in the value of the accretable yield for PCI loans for the periods indicated.

	Year Ended
	December 31,
	2017			2016			2015
Balance at December 31, 2016	$	(2,444	)	$	(1,637	)	$	—
Additions through the acquisition of the Clayton Banks		(18,868	)		—			(1,991	)
Principal reductions and other reclassifications from nonaccretable difference		(1,841	)		(3,438	)		(100	)
Recoveries		(23	)		—			—
Accretion		5,299			2,631			454
Other changes		195			—			—
Balance at December 31, 2017	$	(17,682	)	$	(2,444	)	$	(1,637	)

The following provides the allowance for loan losses by portfolio segment and the related investment in loans net of unearned interest for the years December 31, 2017, 2016 and 2015:

	Commercial and industrial			Construction			1-to-4 family residential mortgage			Residential line of credit			Multi- family residential mortgage			Commercial real estate owner occupied			Commercial real estate non-owner occupied			Consumer and other			Total
Year Ended December 31, 2017
Beginning balance - December 31, 2016	$	5,309		$	4,940		$	3,197		$	1,613		$	504		$	3,302		$	2,019		$	863		$	21,747
Provision for loan losses		(2,158	)		1,138			41			(788	)		(70	)		483			(848	)		1,252			(950	)
Recoveries of loans previously charged-off		1,894			1,084			159			395			—			61			1,646			532			5,771
Loans charged off		(584	)		(27	)		(200	)		(276	)		—			(288	)		—			(1,152	)		(2,527	)
Ending balance - December 31, 2017	$	4,461		$	7,135		$	3,197		$	944		$	434		$	3,558		$	2,817		$	1,495		$	24,041

	Commercial and industrial			Construction			1-to-4 family residential mortgage			Residential line of credit			Multi- family residential mortgage		Commercial real estate owner occupied			Commercial real estate non-owner occupied			Consumer and other			Total
Year Ended December 31, 2016
Beginning balance - December 31, 2015	$	5,135		$	5,143		$	4,176		$	2,201		$	311	$	3,682		$	2,622		$	1,190		$	24,460
Provision for loan losses		212			(417	)		(882	)		(630	)		193		(271	)		(271	)		587			(1,479	)
Recoveries of loans previously charged-off		524			216			127			174			—		140			195			240			1,616
Loans charged off		(562	)		(2	)		(224	)		(132	)		—		(249	)		(527	)		(1,154	)		(2,850	)
Ending balance - December 31, 2016	$	5,309		$	4,940		$	3,197		$	1,613		$	504	$	3,302		$	2,019		$	863		$	21,747

	Commercial and industrial			Construction			1-to-4 family residential mortgage			Residential line of credit			Multi- family residential mortgage		Commercial real estate owner occupied			Commercial real estate non-owner occupied			Consumer and other			Total
Year Ended December 31, 2015
Beginning balance - December 31, 2014	$	6,600		$	3,721		$	6,364		$	2,790		$	184	$	6,075		$	2,641		$	655		$	29,030
Provision for loan losses		(624	)		149			(1,521	)		(645	)		127		(1,366	)		(307	)		1,123			(3,064	)
Recoveries of loans previously charged-off		112			1,354			161			286			—		35			342			548			2,838
Loans charged off		(953	)		(81	)		(828	)		(230	)		—		(1,062	)		(54	)		(1,136	)		(4,344	)
Ending balance - December 31, 2015	$	5,135		$	5,143		$	4,176		$	2,201		$	311	$	3,682		$	2,622		$	1,190		$	24,460

The following table provides the allocation of the allowance for loan losses by loan category broken out between loans individually evaluated for impairment and loans collectively evaluated for impairment as of December 31, 2017, 2016 and 2015:

													December 31, 2017
	Commercial and industrial		Construction		1-to-4 family residential mortgage		Residential line of credit		Multi- family residential mortgage		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Consumer and other		Total
Amount of allowance allocated to:
Individually evaluated for impairment	$	20	$	—	$	18	$	—	$	—	$	120	$	33	$	—	$	191
Collectively evaluated for impairment		4,441		7,135		3,179		944		434		3,438		2,784		1,495		23,850
Acquired with deteriorated credit quality		—		—		—		—		—		—		—		—		—
Ending balance - December 31, 2017	$	4,461	$	7,135	$	3,197	$	944	$	434	$	3,558	$	2,817	$	1,495	$	24,041

													December 31, 2016
	Commercial and industrial		Construction		1-to-4 family residential mortgage		Residential line of credit		Multi- family residential mortgage		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Consumer and other		Total
Amount of allowance allocated to:
Individually evaluated for impairment	$	135	$	—	$	23	$	—	$	—	$	113	$	242	$	—	$	513
Collectively evaluated for impairment		5,174		4,940		3,174		1,613		504		3,189		1,777		863		21,234
Acquired with deteriorated credit quality		—		—		—		—		—		—		—		—		—
Ending balance - December 31, 2016	$	5,309	$	4,940	$	3,197	$	1,613	$	504	$	3,302	$	2,019	$	863	$	21,747

													December 31, 2015
	Commercial and industrial		Construction		1-to-4 family residential mortgage		Residential line of credit		Multi- family residential mortgage		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Consumer and other		Total
Amount of allowance allocated to:
Individually evaluated for impairment	$	89	$	5	$	66	$	—	$	—	$	74	$	739	$	—	$	973
Collectively evaluated for impairment		5,046		5,138		4,110		2,201		311		3,608		1,883		1,190		23,487
Acquired with deteriorated credit quality		—		—		—		—		—		—		—		—		—
Ending balance- December 31, 2015	$	5,135	$	5,143	$	4,176	$	2,201	$	311	$	3,682	$	2,622	$	1,190	$	24,460

The following table provides the amount of loans by loan category broken between loans individually evaluated for impairment and loans collectively evaluated for impairment as of December 31, 2017, 2016 and 2015:

													December 31, 2017
	Commercial and industrial		Construction		1-to-4 family residential mortgage		Residential line of credit		Multi- family residential mortgage		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Consumer and other		Total
Loans, net of unearned income
Individually evaluated for impairment	$	1,579	$	1,289	$	1,262	$	-	$	978	$	2,520	$	1,720	$	25	$	9,373
Collectively evaluated for impairment		711,352		439,309		456,229		194,986		61,376		481,390		531,704		192,357		3,068,703
Acquired with deteriorated credit quality		2,144		7,728		23,498		—		20		11,962		18,164		25,319		88,835
Ending balance - December 31, 2017	$	715,075	$	448,326	$	480,989	$	194,986	$	62,374	$	495,872	$	551,588	$	217,701	$	3,166,911

													December 31, 2016
	Commercial and industrial		Construction		1-to-4 family residential mortgage		Residential line of credit		Multi- family residential mortgage		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Consumer and other		Total
Loans, net of unearned income
Individually evaluated for impairment	$	1,476	$	2,686	$	2,471	$	311	$	1,027	$	2,752	$	2,201	$	27	$	12,951
Collectively evaluated for impairment		384,279		238,900		290,346		176,879		43,922		350,812		260,361		74,276		1,819,775
Acquired with deteriorated credit quality		478		4,319		2,107		—		28		3,782		5,340		4		16,058
Ending balance - December 31, 2016	$	386,233	$	245,905	$	294,924	$	177,190	$	44,977	$	357,346	$	267,902	$	74,307	$	1,848,784

													December 31, 2015
	Commercial and industrial		Construction		1-to-4 family residential mortgage		Residential line of credit		Multi- family residential mortgage		Commercial real estate owner occupied		Commercial real estate non-owner occupied		Consumer and other		Total
Loans, net of unearned income
Individually evaluated for impairment	$	1,499	$	2,866	$	3,686	$	—	$	1,074	$	3,000	$	3,451	$	—	$	15,576
Collectively evaluated for impairment		316,418		228,445		284,190		171,526		58,400		329,569		198,741		77,623		1,664,912
Acquired with deteriorated credit quality		874		6,859		2,828		—		36		5,095		5,679		4		21,375
Ending balance- December 31, 2015	$	318,791	$	238,170	$	290,704	$	171,526	$	59,510	$	337,664	$	207,871	$	77,627	$	1,701,863

The Company categorizes loans 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. The Company analyzes loans individually by classifying the loans as to credit risk. The Company uses the following definitions for risk ratings:

Watch. Loans rated as watch includes loans in which management believes conditions have occurred, or may occur, which could result in the loan being downgraded to a worse rated category. Also included in watch are loans rated as special mention, which 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 rated as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, in any. Loans so rated 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. Also included in this category are loans considered doubtful, which have all the weaknesses previously described and management believes those weaknesses may make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above are considered to be pass rated loans.

The following table shows credit quality indicators by portfolio class at December 31, 2017 and 2016:

December 31, 2017	Pass		Watch		Substandard		Total
Loans, excluding purchased credit impaired loans
Commercial and industrial	$	657,595	$	50,946	$	4,390	$	712,931
Construction		431,242		7,388		1,968		440,598
Residential real estate:
1-to-4 family mortgage		440,202		9,522		7,767		457,491
Residential line of credit		192,427		1,184		1,375		194,986
Multi-family mortgage		61,234		142		978		62,354
Commercial real estate:
Owner occupied		451,140		28,308		4,462		483,910
Non-owner occupied		517,253		14,199		1,972		533,424
Consumer and other		189,081		2,712		589		192,382
Total loans, excluding purchased credit impaired loans	$	2,940,174	$	114,401	$	23,501	$	3,078,076

Purchased credit impaired loans
Commercial and industrial	$	—	$	1,499	$	645	$	2,144
Construction		—		3,324		4,404		7,728
Residential real estate:
1-to-4 family mortgage		—		20,284		3,214		23,498
Residential line of credit		—		—		—		—
Multi-family mortgage		—		—		20		20
Commercial real estate:
Owner occupied		—		4,631		7,331		11,962
Non-owner occupied		—		7,359		10,805		18,164
Consumer and other		—		19,751		5,568		25,319
Total purchased credit impaired loans	$	—	$	56,848	$	31,987	$	88,835
Total loans	$	2,940,174	$	171,249	$	55,488	$	3,166,911

December 31, 2016	Pass		Watch		Substandard		Total
Loans, excluding purchased credit impaired loans
Commercial and industrial	$	351,046	$	31,074	$	3,635	$	385,755
Construction		236,588		4,612		386		241,586
Residential real estate:
1-to-4 family mortgage		277,948		6,945		7,924		292,817
Residential line of credit		173,011		1,875		2,304		177,190
Multi-family mortgage		43,770		152		1,027		44,949
Commercial real estate:
Owner occupied		338,698		10,459		4,407		353,564
Non-owner occupied		249,877		10,273		2,412		262,562
Consumer and other		73,454		417		432		74,303
Total loans, excluding purchased credit impaired loans	$	1,744,392	$	65,807	$	22,527	$	1,832,726

Purchased credit impaired loans
Commercial and industrial	$	—	$	—	$	478	$	478
Construction		—		—		4,319		4,319
Residential real estate:
1-to-4 family mortgage		—		—		2,107		2,107
Residential line of credit		—		—		—		—
Multi-family mortgage		—		—		28		28
Commercial real estate:
Owner occupied		—		—		3,782		3,782
Non-owner occupied		—		—		5,340		5,340
Consumer and other		—		—		4		4
Total purchased credit impaired loans	$	—	$	—	$	16,058	$	16,058
Total loans	$	1,744,392	$	65,807	$	38,585	$	1,848,784

Nonperforming loans include loans that are no longer accruing interest (nonaccrual loans) and loans past due ninety or more days and still accruing interest. Nonperforming loans and impaired loans are defined differently. Some loans may be included in both categories, whereas other loans may only be included in one category.

PCI loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement remains unpaid after the due date of the scheduled payment. However, these loans are considered to be performing, even though they may be contractually past due, as any non-payment of contractual principal or interest is considered in the periodic re-estimation of expected cash flows and is included in the resulting recognition of current period covered loan loss provision or future period yield adjustments. The accrual of interest is discontinued on PCI loans if management can no longer reliably estimate future cash flows on the loan. No PCI loans were classified as nonaccrual at December 31, 2017 or December 31, 2016 as the carrying value of the respective loan or pool of loans cash flows were considered estimable and probable of collection. Therefore, interest revenue, through accretion of the difference between the carrying value of the loans and the expected cash flows, is being recognized on all PCI loans. Accretion of interest income amounting to $5,299, $2,631 and $454 was recognized on purchased credit impaired loans during the years ended December 31, 2017, 2016 and 2015, respectively. This includes both the contractual interest income and the purchase accounting contribution through accretion of the liquidity discount and credit mark for changes in estimated cash flows. The total purchase accounting contribution through accretion excluding contractual interest collected for all purchased loans was $5,419, 3,538 and $493 for the years ended December 31, 2017, 2016 and 2015, respectively.

The following table provides the period-end amounts of loans that are past due thirty to eighty-nine days, past due ninety or more days and still accruing interest, loans not accruing interest and loans current on payments accruing interest by category at December 31, 2017 and 2016:

December 31, 2017	30-89 days past due		90 days or more and accruing interest		Non-accrual loans		Loans current on payments and accruing interest		Purchased Credit Impaired loans		Total
Commercial and industrial	$	5,859	$	90	$	533	$	706,449	$	2,144	$	715,075
Construction		1,412		241		300		438,645		7,728		448,326
Residential real estate:
1-to-4 family mortgage		4,678		956		2,548		449,309		23,498		480,989
Residential line of credit		527		134		699		193,626		—		194,986
Multi-family mortgage		—		—		—		62,354		20		62,374
Commercial real estate:
Owner occupied		521		358		2,582		480,449		11,962		495,872
Non-owner occupied		121		—		1,371		531,932		18,164		551,588
Consumer and other		1,945		217		68		190,152		25,319		217,701
Total	$	15,063	$	1,996	$	8,101	$	3,052,916	$	88,835	$	3,166,911

December 31, 2016	30-89 days past due		90 days or more and accruing interest		Non-accrual loans		Loans current on payments and accruing interest		Purchased Credit Impaired loans		Total
Commercial and industrial	$	262	$	127	$	1,297	$	384,069	$	478	$	386,233
Construction		441		17		254		240,874		4,319		245,905
Residential real estate:
1-to-4 family mortgage		3,130		697		2,289		286,701		2,107		294,924
Residential line of credit		1,139		433		601		175,017		—		177,190
Multi-family mortgage		—		—		—		44,949		28		44,977
Commercial real estate:
Owner occupied		186		—		2,007		351,371		3,782		357,346
Non-owner occupied		158		—		2,251		260,153		5,340		267,902
Consumer and other		433		55		30		73,785		4		74,307
Total	$	5,749	$	1,329	$	8,729	$	1,816,919	$	16,058	$	1,848,784

Impaired loans recognized in conformity with ASC 310 at December 31, 2017 and 2016, segregated by class, were as follows:

December 31, 2017	Recorded investment		Unpaid principal		Related allowance
With a related allowance recorded:
Commercial and industrial	$	53	$	53	$	20
Construction		—		—		—
Residential real estate:
1-to-4 family mortgage		194		495		18
Residential line of credit		—		—		—
Multi-family mortgage		—		—		—
Commercial real estate:
Owner occupied		844		1,123		120
Non-owner occupied		144		150		33
Total	$	1,235	$	1,821	$	191
With no related allowance recorded
Commercial and industrial	$	1,526	$	1,570	$	—
Construction		1,289		1,313		—
Residential real estate:
1-to-4 family mortgage		1,068		1,072		—
Residential line of credit		—		—		—
Multi-family mortgage		978		978		—
Commercial real estate:
Owner occupied		1,676		2,168		—
Non-owner occupied		1,576		2,325		—
Consumer and other		25		25		—
Total	$	8,138	$	9,451	$	—
Total impaired loans	$	9,373	$	11,272	$	191

December 31, 2016	Recorded investment		Unpaid principal		Related allowance
With a related allowance recorded:
Commercial and industrial	$	854	$	854	$	135
Construction		—		—		—
Residential real estate:
1-to-4 family mortgage		103		369		23
Residential line of credit		—		—		—
Multi-family mortgage		—		—		—
Commercial real estate:
Owner occupied		635		654		113
Non-owner occupied		1,151		1,678		242
Consumer and other		1		1		—
Total	$	2,744	$	3,556	$	513
With no related allowance recorded:
Commercial and industrial	$	622	$	746	$	—
Construction		2,686		2,694		—
Residential real estate:
1-to-4 family mortgage		2,368		2,370		—
Residential line of credit		311		321		—
Multi-family mortgage		1,027		1,027		—
Commercial real estate:
Owner occupied		2,117		3,205		—
Non-owner occupied		1,050		1,781		—
Consumer and other		26		26		—
Total	$	10,207	$	12,170	$	—
Total impaired loans	$	12,951	$	15,726	$	513

	December 31,
	2017				2016				2015
	Average recorded investment		Interest income recognized (cash basis)		Average recorded investment		Interest income recognized (cash basis)		Average recorded investment		Interest income recognized (cash basis)
With a related allowance recorded:
Commercial and industrial	$	454	$	2	$	994	$	17	$	1,269	$	22
Construction		—		—		154		—		517		3
Residential real estate:
1-to-4 family mortgage		149		9		1,750		1		2,345		199
Residential line of credit		—		—		—		—		—		—
Multi-family mortgage		—		—		—		—		468		—
Commercial real estate:
Owner occupied		740		48		1,756		25		1,938		95
Non-owner occupied		648		5		1,777		—		3,039		—
Consumer and other		1		—		1		—		—		—
Total	$	1,992	$	64	$	6,432	$	43	$	9,576	$	319
With no related allowance recorded
Commercial and industrial	$	1,074	$	38	$	494	$	20	$	660	$	—
Construction		1,988		46		2,622		132		4,337		127
Residential real estate:
1-to-4 family mortgage		1,718		63		1,329		137		2,815		7
Residential line of credit		156		—		156		10		—		—
Multi-family mortgage		1,003		46		1,051		37		652		25
Commercial real estate:
Owner occupied		1,897		122		1,120		119		788		—
Non-owner occupied		1,313		19		1,050		—		855		—
Consumer and other		26		1		13		—		—		—
Total	$	9,173	$	335	$	7,835	$	455	$	10,107	$	159
Total impaired loans	$	11,164	$	399	$	14,267	$	498	$	19,683	$	478

As of December 31, 2017 and 2016, the Company has a recorded investment in troubled debt restructurings of $8,604 and $8,802, respectively. The modifications included extensions of the maturity date and/or a stated rate of interest to one lower than the current market rate. The Company has allocated $172 and $402 of specific reserves for those loans at December 31, 2017 and 2016, respectively, and has committed to lend additional amounts totaling up to $2 and $1, respectively to these customers. Of these loans, $3,205 and $4,265 were classified as non-accrual loans as of December 31, 2017 and 2016.

The following table presents the financial effect of TDRs recorded during the periods indicated:

Year Ended December 31, 2017	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Charge offs and specific reserves
Commercial and industrial	2	$	627	$	627	$	—
Commercial real estate:
Owner occupied	1		377		377		—
Non-owner occupied	2		711		711		68
Residential real estate:
1-to-4 family mortgage	1		143		143		8
Consumer and other	1		25		25		—
Total	7	$	1,883	$	1,883	$	76

Year Ended December 31, 2016	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Charge offs and specific reserves
Commercial real estate:
Owner occupied	1	$	118	$	118	$	—
Residential real estate:
1-4 family mortgage	5		1,819		1,819		—
Consumer and other	3		29		29		—
Total	9	$	1,966	$	1,966	$	—

Year ended December 31, 2015	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Charge offs and specific reserves
Commercial and industrial	6	$	2,301	$	2,301	$	86
Commercial real estate:
Owner occupied	4		786		786		—
Non-owner occupied	1		133		133		1
Residential real estate:
1-4 family mortgage	5		326		326		45
Total	16	$	3,546	$	3,546	$	132

There were no loans modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the year ended December 31, 2017 or 2016. The following presents loans modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the year ended December 31, 2015:

	Defaulted		Charge-offs and specific reserves
Residential real estate:
1-to-4 family mortgage	$	145	$	45
Total	$	145	$	45

A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms.

The terms of certain other loans were modified during the years ended December 31, 2017, 2016 and 2015 that did not meet the definition of a troubled debt restructuring. The modification of these loans involved either a modification of the terms of a loan to borrowers who were not experiencing financial difficulties or a delay in a payment that was considered to be insignificant.

In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the company’s internal underwriting policy.