Loans and Allowance for Loan Losses (Tables)

3 Months Ended

Mar. 31, 2018

Loans Outstanding by Major Lending Classification

Loans outstanding at March 31, 2018 and December 31, 2017, by major lending classification are as follows:

	March 31,			December 31,
	2018			2017
Commercial and industrial	$	765,115		$	715,075
Construction		466,495			448,326
Residential real estate:
1-to-4 family mortgage		491,725			480,989
Residential line of credit		197,740			194,986
Multi-family mortgage		63,295			62,374
Commercial real estate:
Owner occupied		499,331			495,872
Non-owner occupied		562,128			551,588
Consumer and other		198,834			217,701
Gross loans		3,244,663			3,166,911
Less: Allowance for loan losses		(24,406	)		(24,041	)
Net loans	$	3,220,257		$	3,142,870

Changes in Accretable Yield on Purchase Credit Impaired Loans

The following table presents changes in the value of the accretable yield for PCI loans for the periods indicated.

	Purchased Credit Impaired Accretable yield
Balance at December 31, 2017	$	(17,682	)
Principal reductions/ pay-offs		(1,294	)
Recoveries		—
Accretion		2,201
Other changes		(180	)
Balance at March 31, 2018	$	(16,955	)

Balance at December 31, 2016	$	(2,444	)
Principal reductions/ pay-offs		(698	)
Recoveries		(23	)
Accretion		1,023
Balance at March 31, 2017	$	(2,142	)

Allowance for Loan Losses by Portfolio Segment and Related Investment in Loans Net of Unearned Interest

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 $2,201 and $1,023 was recognized on purchased credit impaired loans during the three months ended March 31, 2018 and 2017, 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 for all purchased loans was $1,687 and $1,160 for three months ended March 31, 2018 and 2017, respectively.

The following provides the allowance for loan losses by portfolio segment and the related investment in loans net of unearned interest for the three months ended March 31, 2018 and 2017 (in thousands):

	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
Three Months Ended March 31, 2018
Beginning balance - December 31, 2017	$	4,461		$	7,135	$	3,197		$	944		$	434	$	3,558		$	2,817		$	1,495		$	24,041
Provision for loan losses		202			479		(30	)		214			15		(567	)		(115	)		119			317
Recoveries of loans previously charged-off		135			252		15			27			—		23			51			206			709
Loans charged off		(220	)		—		(60	)		(20	)		—		—			—			(361	)		(661	)
Ending balance - March 31, 2018	$	4,578		$	7,866	$	3,122		$	1,165		$	449	$	3,014		$	2,753		$	1,459		$	24,406

	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
Three Months Ended March 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		179			635			(239	)		(155	)		4		81		(998	)		236			(257	)
Recoveries of loans previously charged-off		83			29			26			56			—		4		1,639			13			1,850
Loans charged off		(169	)		(6	)		(88	)		—			—		—		—			(179	)		(442	)
Ending balance - March 31, 2017	$	5,402		$	5,598		$	2,896		$	1,514		$	508	$	3,387	$	2,660		$	933		$	22,898

Allocation of Allowance for Loan Losses by Loan Category Broken Out Between Loans Individually and Collectively Evaluated for Impairment

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 March 31, 2018 and December 31, 2017:

													March 31, 2018
	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	$	19	$	—	$	16	$	—	$	—	$	95	$	29	$	—	$	159
Collectively evaluated for impairment		4,559		7,866		3,106		1,165		449		2,919		2,724		1,459		24,247
Acquired with deteriorated credit quality		—		—		—		—		—		—		—		—		—
Ending balance - March 31, 2018	$	4,578	$	7,866	$	3,122	$	1,165	$	449	$	3,014	$	2,753	$	1,459	$	24,406

													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

Amount of Loans by Loan Category Broken Between Loans Individually and Collectively Evaluated for Impairment

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 March 31, 2018 and December 31, 2017:

													March 31, 2018
	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	$	1,385	$	1,285	$	1,492	$	—	$	964	$	2,150	$	1,713	$	29	$	9,018
Collectively evaluated for impairment		761,779		457,785		467,329		197,740		62,313		485,411		542,351		175,185		3,149,893
Acquired with deteriorated credit quality		1,951		7,425		22,904		—		18		11,770		18,064		23,620		85,752
Ending balance - March 31, 2018	$	765,115	$	466,495	$	491,725	$	197,740	$	63,295	$	499,331	$	562,128	$	198,834	$	3,244,663

													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

Credit Quality Indicators by Portfolio Class

The following table shows credit quality indicators by portfolio class at March 31, 2018 and December 31, 2017:

March 31, 2018	Pass		Watch		Substandard		Total
Loans, excluding purchased credit impaired loans
Commercial and industrial	$	704,689	$	54,124	$	4,351	$	763,164
Construction		441,718		15,468		1,884		459,070
Residential real estate:
1-to-4 family mortgage		452,858		9,027		6,936		468,821
Residential line of credit		194,887		1,677		1,176		197,740
Multi-family mortgage		62,175		138		964		63,277
Commercial real estate:
Owner occupied		457,347		25,962		4,252		487,561
Non-owner occupied		527,134		14,972		1,958		544,064
Consumer and other		172,260		2,379		575		175,214
Total loans, excluding purchased credit impaired loans	$	3,013,068	$	123,747	$	22,096	$	3,158,911

Purchased credit impaired loans
Commercial and industrial	$	—	$	1,351	$	600	$	1,951
Construction		—		3,422		4,003		7,425
Residential real estate:
1-to-4 family mortgage		—		19,454		3,450		22,904
Residential line of credit		—		—		—		—
Multi-family mortgage		—		—		18		18
Commercial real estate:
Owner occupied		—		4,565		7,205		11,770
Non-owner occupied		—		7,517		10,547		18,064
Consumer and other		—		18,704		4,916		23,620
Total purchased credit impaired loans	$	—	$	55,013	$	30,739	$	85,752
Total loans	$	3,013,068	$	178,760	$	52,835	$	3,244,663

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

Past Due Loans

Nonperforming loans include loans that are no longer accruing interest (non-accrual 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.

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, loans current on payments accruing interest and purchased credit impaired loans by category at March 31, 2018 and December 31, 2017:

March 31, 2018	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	$	1,385	$	619	$	910	$	760,250	$	1,951	$	765,115
Construction		250		329		460		458,031		7,425		466,495
Residential real estate:
1-to-4 family mortgage		3,666		1,067		2,009		462,079		22,904		491,725
Residential line of credit		1,013		356		370		196,001		—		197,740
Multi-family mortgage		—		—		—		63,277		18		63,295
Commercial real estate:
Owner occupied		202		—		1,903		485,456		11,770		499,331
Non-owner occupied		393		—		1,219		542,452		18,064		562,128
Consumer and other		1,640		318		83		173,173		23,620		198,834
Total	$	8,549	$	2,689	$	6,954	$	3,140,719	$	85,752	$	3,244,663

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

Impaired Loans Recognized, Segregated by Class

Impaired loans recognized in conformity with ASC 310 at March 31, 2018 and December 31, 2017, segregated by class, were as follows:

March 31, 2018	Recorded investment		Unpaid principal		Related allowance
With a related allowance recorded:
Commercial and industrial	$	52	$	52	$	19
Residential real estate:
1-to-4 family mortgage		191		492		16
Commercial real estate:
Owner occupied		585		646		95
Non-owner occupied		142		149		29
Total	$	970	$	1,339	$	159
With no related allowance recorded
Commercial and industrial	$	1,333	$	1,539	$	—
Construction		1,285		1,313		—
Residential real estate:
1-to-4 family mortgage		1,301		1,306		—
Multi-family mortgage		964		964		—
Commercial real estate:
Owner occupied		1,565		2,077		—
Non-owner occupied		1,571		2,320		—
Consumer and other		29		29		—
Total	$	8,048	$	9,548	$	—
Total impaired loans	$	9,018	$	10,887	$	159

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
Commercial real estate:
Owner occupied		844		1,123		120
Non-owner occupied		144		150		33
Consumer and other		—		—		—
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		—
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

Average recorded investment and interest income on a cash basis recognized during the three months ended March 31, 2018 and 2017 on impaired loans, segregated by class, were as follows:

	Three Months Ended
March 31, 2018	Average recorded investment		Interest income recognized (cash basis)
With a related allowance recorded:
Commercial and industrial	$	53	$	1
Construction		—		—
Residential real estate:
1-to-4 family mortgage		193		2
Residential line of credit		—		—
Multi-family mortgage		—		—
Commercial real estate:
Owner occupied		715		6
Non-owner occupied		143		2
Consumer and other		—		—
Total	$	1,104	$	11
With no related allowance recorded:
Commercial and industrial	$	1,430	$	16
Construction		1,287		30
Residential real estate:
1-to-4 family mortgage		1,185		13
Residential line of credit		—		—
Multi-family mortgage		971		12
Commercial real estate:
Owner occupied		1,621		32
Non-owner occupied		1,574		7
Consumer and other		27		—
Total	$	8,095	$	110
Total impaired loans	$	9,199	$	121
March 31, 2017
With a related allowance recorded:
Commercial and industrial	$	791	$	5
Construction		—		—
Residential real estate:
1-to-4 family mortgage		101		—
Residential line of credit		—		—
Multi-family mortgage		—		—
Commercial real estate:
Owner occupied		629		12
Non-owner occupied		835		—
Consumer and other		1		—
Total	$	2,357	$	17
With no related allowance recorded:
Commercial and industrial	$	584	$	9
Construction		1,496		5
Residential real estate:
1-to-4 family mortgage		2,243		17
Residential line of credit		156		—
Multi-family mortgage		1,021		11
Commercial real estate:
Owner occupied		1,977		38
Non-owner occupied		1,325		—
Consumer and other		26		1
Total	$	8,828	$	81
Total impaired loans	$	11,185	$	98

Financial Effect of TDRs

The following tables present the financial effect of TDRs recorded during the three months ended March 31, 2018 and 2017:

Three Months Ended March 31, 2018	Number of loans		Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Charge offs and specific reserves
Residential real estate:
1-to-4 family mortgage		1	$	249	$	249	$	—
Consumer and other		1		5		5		—
Total		2	$	254	$	254	$	—


Three Months Ended March 31, 2017	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Charge offs and specific reserves
Residential real estate:
1-to-4 family mortgage	1	$	5	$	5	$	—
Commercial real estate:
Owner occupied	1		377		377		—
Non-owner occupied	2		711		711		—
Total	4	$	1,093	$	1,093	$	—