Loans and allowance for loan losses:

Loans outstanding at December 31, 2019 and 2018, by major lending classification are as follows:



	December 31,
	2019			2018
Commercial and industrial	$	1,034,036		$	867,083
Construction	551,101			556,051
Residential real estate:
1-to-4 family mortgage	710,454			555,815
Residential line of credit	221,530			190,480
Multi-family mortgage	69,429			75,457
Commercial real estate:
Owner occupied	630,270			493,524
Non-owner occupied	920,744			700,248
Consumer and other	272,078			228,853
Gross loans	4,409,642			3,667,511
Less: Allowance for loan losses	(31,139		)	(28,932		)
Net loans	$	4,378,503		$	3,638,579

As of December 31, 2019 and 2018, $412,966 and $618,976, respectively, of qualifying residential mortgage loans (including loans held for sale) and $545,540 and $608,735, respectively, of qualifying commercial mortgage loans were pledged to the Federal Home Loan Bank of Cincinnati securing advances against the Bank’s line of credit. As of December 31, 2019 and 2018, $1,407,662 and $1,336,092, respectively, of qualifying loans were pledged to the Federal Reserve Bank under the Borrower-in-Custody program.

As of December 31, 2019 and 2018, the carrying value of PCI loans accounted for under ASC 310-30 "Loans and Debt Securities Acquired with Deteriorated Credit Quality", were $57,152 and $68,999, respectively. The following table presents changes in the value of the accretable yield for PCI loans for the periods indicated.



	Year Ended December 31,
	2019			2018			2017
Balance at the beginning of period	$	(16,587	)	$	(17,682	)	$	(2,444	)
Additions through business combinations	(1,167		)	—			(18,868		)
Principal reductions and other reclassifications from nonaccretable difference	61			(4,047		)	(1,841		)
Recoveries	—			—			(23		)
Accretion	7,003			9,010			5,299
Changes in expected cash flows	(360		)	(3,868		)	195
Balance at end of period	$	(11,050	)	$	(16,587	)	$	(17,682	)

Included in the ending balance of the accretable yield on PCI loans at December 31, 2019 and 2018, is a purchase accounting liquidity discount of $292 and $2,436, respectively. There is also a purchase accounting nonaccretable credit discount of $3,537 and $4,355 related to the PCI loan portfolio at December 31, 2019 and 2018, respectively, and an accretable credit and liquidity discount on non-PCI loans of $8,964 and $3,924 as of December 31, 2019 and $7,527 and $2,197, respectively, as of December 31, 2018.

Interest revenue, through accretion of the difference between the recorded investment of the loans and the expected cash flows, is being recognized on all PCI loans. Accretion of interest income amounting to $7,003, $9,010, and $5,299 was recognized on PCI loans during the years ended December 31, 2019, 2018, and 2017, respectively. This includes both the contractual interest income recognized and the purchase accounting contribution through accretion of the liquidity discount for changes in estimated cash flows. The total purchase accounting contribution through accretion excluding contractual interest collected for all purchased loans was $8,556, $7,608, and $5,419 for the years ended December 31, 2019, 2018, and 2017, respectively.

The following provides the changes in the allowance for loan losses by portfolio segment for the years December 31, 2019, 2018, and 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
Year Ended December 31, 2019
Beginning balance - December 31, 2018	$	5,348		$	9,729	$	3,428		$	811		$	566		$	3,132	$	4,149		$	1,769		$	28,932
Provision for loan losses	2,251			454		(175		)	112			(22		)	869		484			3,080			7,053
Recoveries of loans previously charged-off	136			11		79			138			—			108		—			634			1,106
Loans charged off	(2,930		)	—		(220		)	(309		)	—			—		(12		)	(2,481		)	(5,952		)
Ending balance - December 31, 2019	$	4,805		$	10,194	$	3,112		$	752		$	544		$	4,109	$	4,621		$	3,002		$	31,139



	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, 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	1,395			1,459			547			(275		)	132		(478		)	1,281		1,337			5,398
Recoveries of loans previously charged-off	390			1,164			171			178			—		143			51		550			2,647
Loans charged off	(898		)	(29		)	(138		)	(36		)	—		(91		)	—		(1,613		)	(2,805		)
Adjustments for transfers to loans HFS	—			—			(349		)	—			—		—			—		—			(349		)
Ending balance - December 31, 2018	$	5,348		$	9,729		$	3,428		$	811		$	566	$	3,132		$	4,149	$	1,769		$	28,932



	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

The following tables provides the allocation of the allowance for loan losses by loan category broken out between loans individually evaluated for impairment, loans collectively evaluated for impairment and loans acquired with deteriorated credit quality as of December 31, 2019, 2018, and 2017:



	December 31, 2019
	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	$	241	$	—	$	8	$	9	$	—	$	238	$	399	$	—	$	895
Collectively evaluated for impairment	4,457		10,192		2,940		743		544		3,853		3,909		1,933		28,571
Acquired with deteriorated credit quality	107		2		164		—		—		18		313		1,069		1,673
Ending balance - December 31, 2019	$	4,805	$	10,194	$	3,112	$	752	$	544	$	4,109	$	4,621	$	3,002	$	31,139



	December 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	$	3	$	—	$	7	$	—	$	—	$	53	$	205	$	—	$	268
Collectively evaluated for impairment	5,247		9,677		3,205		811		566		3,066		3,628		1,583		27,783
Acquired with deteriorated credit quality	98		52		216		—		—		13		316		186		881
Ending balance - December 31, 2018	$	5,348	$	9,729	$	3,428	$	811	$	566	$	3,132	$	4,149	$	1,769	$	28,932



	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

The following tables provides the amount of loans by loan category broken between loans individually evaluated for impairment, loans collectively evaluated for impairment and loans acquired with deteriorated credit quality as of December 31, 2019, 2018, and 2017:



	December 31, 2019
	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	$	9,026	$	2,061	$	1,347	$	579	$	—	$	2,993	$	7,755	$	49	$	23,810
Collectively evaluated for impairment	1,023,326		546,156		689,769		220,878		69,429		621,386		902,792		254,944		4,328,680
Acquired with deteriorated credit quality	1,684		2,884		19,338		73		—		5,891		10,197		17,085		57,152
Ending balance - December 31, 2019	$	1,034,036	$	551,101	$	710,454	$	221,530	$	69,429	$	630,270	$	920,744	$	272,078	$	4,409,642



	December 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	$	1,847	$	1,221	$	987	$	245	$	—	$	2,608	$	6,735	$	73	$	13,716
Collectively evaluated for impairment	863,788		549,075		535,451		190,235		75,457		484,900		677,247		208,643		3,584,796
Acquired with deteriorated credit quality	1,448		5,755		19,377		—		—		6,016		16,266		20,137		68,999
Ending balance - December 31, 2018	$	867,083	$	556,051	$	555,815	$	190,480	$	75,457	$	493,524	$	700,248	$	228,853	$	3,667,511



	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

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, if 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 tables show credit quality indicators by portfolio class at December 31, 2019 and 2018:



December 31, 2019	Pass		Watch		Substandard		Total
Loans, excluding purchased credit impaired loans
Commercial and industrial	$	946,247	$	66,910	$	19,195	$	1,032,352
Construction	541,201		4,790		2,226		548,217
Residential real estate:
1-to-4 family mortgage	666,177		11,380		13,559		691,116
Residential line of credit	218,086		1,343		2,028		221,457
Multi-family mortgage	69,366		63		—		69,429
Commercial real estate:
Owner occupied	576,737		30,379		17,263		624,379
Non-owner occupied	876,670		24,342		9,535		910,547
Consumer and other	248,632		3,304		3,057		254,993
Total loans, excluding purchased credit impaired loans	$	4,143,116	$	142,511	$	66,863	$	4,352,490
Purchased credit impaired loans
Commercial and industrial	$	—	$	1,224	$	460	$	1,684
Construction	—		2,681		203		2,884
Residential real estate:
1-to-4 family mortgage	—		15,091		4,247		19,338
Residential line of credit	—		—		73		73
Multi-family mortgage	—		—		—		—
Commercial real estate:
Owner occupied	—		4,535		1,356		5,891
Non-owner occupied	—		6,617		3,580		10,197
Consumer and other	—		13,521		3,564		17,085
Total purchased credit impaired loans	$	—	$	43,669	$	13,483	$	57,152
Total loans	$	4,143,116	$	186,180	$	80,346	$	4,409,642



December 31, 2018	Pass		Watch		Substandard		Total
Loans, excluding purchased credit impaired loans
Commercial and industrial	$	804,447	$	52,624	$	8,564	$	865,635
Construction	543,953		5,012		1,331		550,296
Residential real estate:
1-to-4 family mortgage	519,541		8,697		8,200		536,438
Residential line of credit	186,753		1,039		2,688		190,480
Multi-family mortgage	75,381		76		—		75,457
Commercial real estate:
Owner occupied	456,694		16,765		14,049		487,508
Non-owner occupied	667,447		8,881		7,654		683,982
Consumer and other	204,279		2,763		1,674		208,716
Total loans, excluding purchased credit impaired loans	$	3,458,495	$	95,857	$	44,160	$	3,598,512
Purchased credit impaired loans
Commercial and industrial	$	—	$	964	$	484	$	1,448
Construction	—		3,229		2,526		5,755
Residential real estate:
1-to-4 family mortgage	—		14,681		4,696		19,377
Residential line of credit	—		—		—		—
Multi-family mortgage	—		—		—		—
Commercial real estate:
Owner occupied	—		4,110		1,906		6,016
Non-owner occupied	—		8,266		8,000		16,266
Consumer and other	—		15,422		4,715		20,137
Total purchased credit impaired loans	$	—	$	46,672	$	22,327	$	68,999
Total loans	$	3,458,495	$	142,529	$	66,487	$	3,667,511

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. As such, PCI loans are excluded from past due disclosures presented below. The accrual and/or accretion 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, 2019 or December 31, 2018 as the present value of the respective loan or pool of loans cash flows were considered estimable and probable of collection. Therefore, interest income, through accretion of the difference between the carrying value of the loans and the expected cash flows, is being recognized on all PCI loans. PCI loans contractually past due 30-89 days amounted to $2,951 and $3,605 as of December 31, 2019 and 2018, respectively, and an additional $751 and $4,076 were contractually past due 90 days or more as of December 31, 2019 and 2018, respectively.

The following tables provide 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, 2019 and 2018:



December 31, 2019	30-89 days past due		90 days or more and accruing interest		Non-accrual loans		Purchased Credit Impaired loans		Loans current on payments and accruing interest		Total
Commercial and industrial	$	1,918	$	291	$	5,587	$	1,684	$	1,024,556	$	1,034,036
Construction	1,021		42		1,087		2,884		546,067		551,101
Residential real estate:
1-to-4 family mortgage	10,738		3,965		3,332		19,338		673,081		710,454
Residential line of credit	658		412		416		73		219,971		221,530
Multi-family mortgage	63		—		—		—		69,366		69,429
Commercial real estate:
Owner occupied	1,375		—		1,793		5,891		621,211		630,270
Non-owner occupied	327		—		7,880		10,197		902,340		920,744
Consumer and other	2,377		833		967		17,085		250,816		272,078
Total	$	18,477	$	5,543	$	21,062	$	57,152	$	4,307,408	$	4,409,642



December 31, 2018	30-89 days past due		90 days or more and accruing interest		Non-accrual loans		Purchased Credit Impaired loans		Loans current on payments and accruing interest		Total
Commercial and industrial	$	999	$	65	$	438	$	1,448	$	864,133	$	867,083
Construction	109		—		283		5,755		549,904		556,051
Residential real estate:
1-to-4 family mortgage	4,919		737		2,704		19,377		528,078		555,815
Residential line of credit	726		957		804		—		187,993		190,480
Multi-family mortgage	—		—		—		—		75,457		75,457
Commercial real estate:
Owner occupied	407		197		2,423		6,016		484,481		493,524
Non-owner occupied	61		77		6,885		16,266		676,959		700,248
Consumer and other	1,987		1,008		148		20,137		205,573		228,853
Total	$	9,208	$	3,041	$	13,685	$	68,999	$	3,572,578	$	3,667,511

Impaired loans recognized in conformity with ASC 310 at December 31, 2019 and 2018, segregated by class, were as follows:



December 31, 2019	Recorded investment		Unpaid principal		Related allowance
With a related allowance recorded:
Commercial and industrial	$	6,080	$	8,350	$	241
Residential real estate:
1-to-4 family mortgage	264		324		8
Residential line of credit	320		320		9
Commercial real estate:
Owner occupied	756		1,140		238
Non-owner occupied	6,706		6,747		399
Total	$	14,126	$	16,881	$	895
With no related allowance recorded
Commercial and industrial	$	2,946	$	3,074	$	—
Construction	2,061		2,499		—
Residential real estate:
1-to-4 family mortgage	1,083		1,449		—
Residential line of credit	259		280		—
Commercial real estate:
Owner occupied	2,237		2,627		—
Non-owner occupied	1,049		1,781		—
Consumer and other	49		49		—
Total	$	9,684	$	11,759	$	—
Total impaired loans	$	23,810	$	28,640	$	895



December 31, 2018	Recorded investment		Unpaid principal		Related allowance
With a related allowance recorded:
Commercial and industrial	$	618	$	732	$	3
Residential real estate:
1-to-4 family mortgage	145		145		7
Commercial real estate:
Owner occupied	560		641		53
Non-owner occupied	5,686		5,686		205
Total	$	7,009	$	7,204	$	268
With no related allowance recorded:
Commercial and industrial	$	1,229	$	1,281	$	—
Construction	1,221		1,262		—
Residential real estate:
1-to-4 family mortgage	842		1,151		—
Residential line of credit	245		249		—
Commercial real estate:
Owner occupied	2,048		2,780		—
Non-owner occupied	1,049		1,781		—
Consumer and other	73		73		—
Total	$	6,707	$	8,577	$	—
Total impaired loans	$	13,716	$	15,781	$	268

Average recorded investment and interest income on a cash basis recognized during the years ended December 31, 2019 2018, and 2017 on impaired loans, segregated by class, were as follows:



	December 31,
	2019				2018				2017
	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	$	3,349	$	474	$	335	$	121	$	454	$	2
Construction	—		—		—		—		—		—
Residential real estate:
1-to-4 family mortgage	205		13		170		9		149		9
Residential line of credit	160		1		—		—		—		—
Multi-family mortgage	—		—		—		—		—		—
Commercial real estate:
Owner occupied	658		27		702		43		740		48
Non-owner occupied	6,196		109		2,915		2		648		5
Consumer and other	—		—		—		—		1		—
Total	$	10,568	$	624	$	4,122	$	175	$	1,992	$	64
With no related allowance recorded:
Commercial and industrial	$	2,088	$	201	$	1,377	$	70	$	1,074	$	38
Construction	1,641		167		1,255		74		1,988		46
Residential real estate:
1-to-4 family mortgage	963		68		955		74		1,718		63
Residential line of credit	252		1		123		15		156		—
Multi-family mortgage	—		—		489		26		1,003		46
Commercial real estate:
Owner occupied	2,143		133		1,862		148		1,897		122
Non-owner occupied	1,049		—		1,313		7		1,313		19
Consumer and other	61		5		49		4		26		1
Total	$	8,197	$	575	$	7,423	$	418	$	9,175	$	335
Total impaired loans	$	18,765	$	1,199	$	11,545	$	593	$	11,167	$	399

As of December 31, 2019 and 2018, the Company has a recorded investment in troubled debt restructurings of $12,206 and $6,794, 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 $360 and $63 of specific reserves for those loans at December 31, 2019 and 2018, respectively. There were no commitments to lend any additional amounts to these customers for either period end. Of these loans, $5,201 and $2,703 were classified as non-accrual loans as of December 31, 2019 and 2018, respectively.

The following tables present the financial effect of TDRs recorded during the periods indicated.



Year Ended December 31, 2019	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Charge offs and specific reserves
Commercial and industrial	3	$	3,204	$	3,204	$	—
Construction	2	1,085		1,085		—
Commercial real estate:
Owner occupied	2	1,494		1,495		—
Non-owner occupied	1	1,366		1,366		$	106
Residential real estate:
1-to-4 family mortgage	2	175		175		—
Residential line of credit	2	333		333		9
Total	12	$	7,657	$	7,658	$	115



Year Ended December 31, 2018	Number of loans	Pre-modification outstanding recorded investment		Post-modification outstanding recorded investment		Charge offs and specific reserves
Commercial and industrial	2	$	887	$	887	$	—
Commercial real estate:
Owner occupied	1	143		143		—
Residential real estate:
1-4 family mortgage	1	249		249		—
Consumer and other	5	61		61		—
Total	9	$	1,340	$	1,340	$	—



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:
1-4 family mortgage	1	143		143		8
Consumer and other	1	25		25		—
Total	7	$	1,883	$	1,883	$	76

There were no loans modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the years ended December 31, 2019 and 2018, and 2017. 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, 2019 and 2018, and 2017 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.