Loans (Tables)

9 Months Ended

Sep. 30, 2018

Loans consist of the following:


	September 30, 2018				December 31, 2017
(dollars in thousands)	PCI	All other loans**	Total	% of Gross Loans	Total	% of Gross Loans

Commercial real estate	$ 1,463	$ 846,482	$ 847,945	64.84%	$ 727,314	63.25%
Residential first mortgages	468	156,097	156,565	11.97%	170,374	14.81%
Residential rentals	1,261	124,122	125,383	9.59%	110,228	9.58%
Construction and land development	-	28,788	28,788	2.20%	27,871	2.42%
Home equity and second mortgages	319	36,041	36,360	2.78%	21,351	1.86%
Commercial loans	-	62,083	62,083	4.75%	56,417	4.91%
Consumer loans	-	730	730	0.06%	573	0.05%
Commercial equipment	-	49,883	49,883	3.81%	35,916	3.12%
Gross loans	3,511	1,304,226	1,307,737	100.00%	1,150,044	100.00%
Net deferred costs (fees)	-	917	917	0.07%	1,086	0.09%
Total loans, net of deferred costs	$ 3,511	$ 1,305,143	$ 1,308,654		$ 1,151,130
Less: allowance for loan losses	-	(10,739)	(10,739)	-0.82%	(10,515)	-0.91%
Net loans	$ 3,511	$ 1,294,404	$ 1,297,915		$ 1,140,615

**All other loans include acquired Non-PCI pools at fair value.

Non-accrual loans

Non-accrual loans as of September 30, 2018 and December 31, 2017 were as follows:


	September 30, 2018
(dollars in thousands)	Non- accrual Delinquent Loans	Number of Loans	Non-accrual Current Loans	Number of Loans	Total Non-accrual Loans	Total Number of Loans

Commercial real estate	$ 11,148	11	$ 655	3	$ 11,803	14
Residential first mortgages	850	4	357	1	1,207	5
Residential rentals	756	4	14	1	770	5
Construction and land development	-	-	-	-	-	-
Home equity and second mortgages	150	2	-	-	150	2
Commercial loans	887	3	-	-	887	3
Consumer loans	-	-	-	-	-	-
Commercial equipment	1,521	7	12	1	1,533	8
	$ 15,312	31	$ 1,038	6	$ 16,350	37


	December 31, 2017
(dollars in thousands)	Non- accrual Delinquent Loans	Number of Loans	Non-accrual Current Loans	Number of Loans	Total Non-accrual Loans	Total Number of Loans

Commercial real estate	$ 1,148	4	$ 839	3	$ 1,987	7
Residential first mortgages	478	3	507	1	985	4
Residential rentals	84	1	741	3	825	4
Construction and land development	-	-	-	-	-	-
Home equity and second mortgages	134	3	123	1	257	4
Commercial loans	172	2	-	-	172	2
Consumer loans	-	-	-	-	-	-
Commercial equipment	467	3	-	-	467	3
	$ 2,483	16	$ 2,210	8	$ 4,693	24

Past Due Financing Receivables

Past due and PCI loans as of September 30, 2018 and December 31, 2017 were as follows:


	September 30, 2018
(dollars in thousands)	31-60 Days	61-89 Days	90 or Greater Days	Total Past Due	PCI Loans	Current	Total Loan Receivables
Commercial real estate	$ -	$ 4,399	$ 6,918	$ 11,317	$ 1,463	$ 835,165	$ 847,945
Residential first mortgages	-	794	203	997	468	155,100	156,565
Residential rentals	-	976	30	1,006	1,261	123,116	125,383
Construction and land dev.	-	-	-	-	-	28,788	28,788
Home equity and second mtg.	256	11	150	417	319	35,624	36,360
Commercial loans	-	8	879	887	-	61,196	62,083
Consumer loans	-	-	-	-	-	730	730
Commercial equipment	55	-	1,486	1,541	-	48,342	49,883
Total	$ 311	$ 6,188	$ 9,666	$ 16,165	$ 3,511	$ 1,288,061	$ 1,307,737


	December 31, 2017
(dollars in thousands)	31-60 Days	61-89 Days	90 or Greater Days	Total Past Due	PCI Loans	Current	Total Loan Receivables
Commercial real estate	$ -	$ 6,711	$ 1,148	$ 7,859	$ -	$ 719,455	$ 727,314
Residential first mortgages	-	68	478	546	-	169,828	170,374
Residential rentals	-	207	84	291	-	109,937	110,228
Construction and land dev.	-	-	-	-	-	27,871	27,871
Home equity and second mtg.	19	18	134	171	-	21,180	21,351
Commercial loans	892	299	172	1,363	-	55,054	56,417
Consumer loans	-	1	-	1	-	572	573
Commercial equipment	1,012	-	467	1,479	-	34,437	35,916
Total	$ 1,923	$ 7,304	$ 2,483	$ 11,710	$ -	$ 1,138,334	$ 1,150,044

Impaired Loans, Including TDRs

Impaired Loans and Troubled Debt Restructures (“TDRs”)

Impaired loans, including TDRs, at September 30, 2018 and 2017 and at December 31, 2017 were as follows:



	September 30, 2018
(dollars in thousands)	Unpaid Contractual Principal Balance	Recorded Investment With No Allowance	Recorded Investment With Allowance	Total Recorded Investment	Related Allowance	Quarter Average Recorded Investment	Quarter Interest Income Recognized	YTD Average Recorded Investment	YTD Interest Income Recognized

Commercial real estate	$ 26,588	$ 24,664	$ 1,561	$ 26,225	$ 174	$ 26,297	$ 340	$ 26,499	$ 763
Residential first mortgages	2,655	2,616	-	2,616	-	2,627	31	2,651	90
Residential rentals	1,431	1,377	-	1,377	-	1,382	11	1,400	47
Construction and land dev.	729	729	-	729	-	729	11	729	30
Home equity and second mtg.	298	293	-	293	-	300	4	304	10
Commercial loans	2,784	1,890	883	2,773	458	2,775	38	2,779	89
Consumer loans	1	-	1	1	1	1	-	1	-
Commercial equipment	1,577	1,132	402	1,534	377	1,546	3	1,588	33
Total	$ 36,063	$ 32,701	$ 2,847	$ 35,548	$ 1,010	$ 35,657	$ 438	$ 35,951	$ 1,062


	December 31, 2017
(dollars in thousands)	Unpaid Contractual Principal Balance	Recorded Investment With No Allowance	Recorded Investment With Allowance	Total Recorded Investment	Related Allowance	YTD Average Recorded Investment	YTD Interest Income Recognized

Commercial real estate	$ 33,180	$ 30,921	$ 2,008	$ 32,929	$ 370	$ 33,575	$ 1,379
Residential first mortgages	2,455	1,978	459	2,437	2	2,479	91
Residential rentals	2,389	1,981	395	2,376	18	2,432	111
Construction and land dev.	729	-	729	729	163	729	26
Home equity and second mtg.	317	317	-	317	-	318	12
Commercial loans	3,010	2,783	168	2,951	168	3,048	137
Commercial equipment	1,538	1,048	467	1,515	303	1,578	73
Total	$ 43,618	$ 39,028	$ 4,226	$ 43,254	$ 1,024	$ 44,159	$ 1,829


	September 30, 2017
(dollars in thousands)	Unpaid Contractual Principal Balance	Recorded Investment With No Allowance	Recorded Investment With Allowance	Total Recorded Investment	Related Allowance	Quarter Average Recorded Investment	Quarter Interest Income Recognized	YTD Average Recorded Investment	YTD Interest Income Recognized

Commercial real estate	$ 24,233	$ 19,824	$ 4,211	$ 24,035	$ 155	$ 24,153	$ 319	$ 24,399	$ 799
Residential first mortgages	2,277	1,808	463	2,271	7	2,284	18	2,302	67
Residential rentals	2,669	2,271	397	2,668	21	2,673	22	2,711	77
Construction and land dev.	729	-	729	729	163	729	9	729	16
Home equity and second mtg.	225	225	-	225	-	225	2	226	5
Commercial loans	2,324	2,096	169	2,265	169	2,298	24	2,317	71
Commercial equipment	530	40	467	507	303	522	1	530	10
Total	$ 32,987	$ 26,264	$ 6,436	$ 32,700	$ 818	$ 32,884	$ 395	$ 33,214	$ 1,045

TDRs, Included in Impaired Loans Schedule

TDRs, included in the impaired loan schedules above, as of September 30, 2018 and December 31, 2017 were as follows:


	September 30, 2018		December 31, 2017
(dollars in thousands)	Dollars	Number of Loans	Dollars	Number of Loans

Commercial real estate	$ 8,345	8	$ 9,273	9
Residential first mortgages	512	2	527	2
Residential rentals	218	1	221	1
Construction and land development	729	2	729	2
Commercial loans	3	1	4	1
Commercial equipment	32	1	36	1
Total TDRs	$ 9,839	15	$ 10,790	16
Less: TDRs included in non-accrual loans	-	-	(769)	(1)
Total accrual TDR loans	$ 9,839	15	$ 10,021	15

Allowance for Credit Losses on Financing Receivables

The following tables detail activity in the allowance for loan losses at and for the three and nine months ended September 30, 2018 and 2017, respectively. An allocation of the allowance to one category of loans does not prevent the Company from using that allowance to absorb losses in a different category.


	September 30, 2018
(dollars in thousands)	Beginning Balance	Charge-offs	Recoveries	Provisions	Ending Balance
Three Months Ended
Commercial real estate	$ 6,563	$ (32)	$ 2	$ 179	$ 6,712
Residential first mortgages	737	(2)	-	(44)	691
Residential rentals	469	(54)	-	170	585
Construction and land development	498	-	-	(203)	295
Home equity and second mortgages	104	-	2	71	177
Commercial loans	1,203	2	176	(167)	1,214
Consumer loans	7	(1)	-	(1)	5
Commercial equipment	1,144	(132)	13	35	1,060
	$ 10,725	$ (219)	$ 193	$ 40	$ 10,739

Purchase Credit Impaired**	$ -	$ -	$ -	$ -	$ -


Nine Months Ended
Commercial real estate	$ 6,451	$ (268)	$ 8	$ 521	$ 6,712
Residential first mortgages	1,144	(115)	-	(338)	691
Residential rentals	512	(54)	-	127	585
Construction and land development	462	-	-	(167)	295
Home equity and second mortgages	162	(7)	16	6	177
Commercial loans	1,013	(86)	176	111	1,214
Consumer loans	7	(2)	-	-	5
Commercial equipment	764	(431)	47	680	1,060
	$ 10,515	$ (963)	$ 247	$ 940	$ 10,739

Purchase Credit Impaired**	$ -	$ -	$ -	$ -	$ -

** There is no allowance for loan loss on the PCI portfolios. A more detailed rollforward schedule will be presented if an allowance is required.


	September 30, 2017
(dollars in thousands)	Beginning Balance	Charge-offs	Recoveries	Provisions	Ending Balance
Three Months Ended
Commercial real estate	$ 6,085	$ (217)	$ 4	$ 436	$ 6,308
Residential first mortgages	1,300	-	-	(43)	1,257
Residential rentals	335	-	-	289	624
Construction and land development	720	(1)	-	(73)	646
Home equity and second mortgages	112	(13)	1	28	128
Commercial loans	814	-	-	(23)	791
Consumer loans	5	-	-	2	7
Commercial equipment	1,063	(22)	25	(392)	674
	$ 10,434	$ (253)	$ 30	$ 224	$ 10,435

Nine Months Ended
Commercial real estate	$ 5,212	$ (217)	$ 13	$ 1,300	$ 6,308
Residential first mortgages	1,406	-	-	(149)	1,257
Residential rentals	362	(42)	-	304	624
Construction and land development	941	(26)	-	(269)	646
Home equity and second mortgages	138	(14)	1	3	128
Commercial loans	794	-	1	(4)	791
Consumer loans	3	(2)	-	6	7
Commercial equipment	1,004	(168)	49	(211)	674
	$ 9,860	$ (469)	$ 64	$ 980	$ 10,435

The following tables detail loan receivable and allowance balances disaggregated on the basis of the Company’s impairment methodology at September 30, 2018 and 2017 and December 31, 2017.


	September 30, 2018				December 31, 2017			September 30, 2017
(dollars in thousands)	Ending balance: individually evaluated for impairment	Ending balance: collectively evaluated for impairment	Purchase Credit Impaired	Total	Ending balance: individually evaluated for impairment	Ending balance: collectively evaluated for impairment	Total	Ending balance: individually evaluated for impairment	Ending balance: collectively evaluated for impairment	Total
Loan Receivables:
Commercial real estate	$ 26,225	$ 820,257	$ 1,463	$ 847,945	$ 32,929	$ 694,385	$ 727,314	$ 24,035	$ 688,805	$ 712,840
Residential first mortgages	2,616	153,481	468	156,565	2,437	167,937	170,374	2,271	173,545	175,816
Residential rentals	1,377	122,745	1,261	125,383	2,376	107,852	110,228	2,668	108,237	110,905
Construction and land development	729	28,059	-	28,788	729	27,142	27,871	729	30,365	31,094
Home equity and second mortgages	293	35,748	319	36,360	317	21,034	21,351	225	22,109	22,334
Commercial loans	2,773	59,310	-	62,083	2,951	53,466	56,417	2,265	54,111	56,376
Consumer loans	1	729	-	730	-	573	573	-	541	541
Commercial equipment	1,534	48,349	-	49,883	1,515	34,401	35,916	507	34,993	35,500
	$ 35,548	$ 1,268,678	$ 3,511	$ 1,307,737	$ 43,254	$ 1,106,790	$ 1,150,044	$ 32,700	$ 1,112,706	$ 1,145,406

Allowance for loan losses:
Commercial real estate	$ 174	$ 6,538	$ -	$ 6,712	$ 370	$ 6,081	$ 6,451	$ 155	$ 6,153	$ 6,308
Residential first mortgages	-	691	-	691	2	1,142	1,144	7	1,250	1,257
Residential rentals	-	585	-	585	18	494	512	21	603	624
Construction and land development	-	295	-	295	163	299	462	163	483	646
Home equity and second mortgages	-	177	-	177	-	162	162	-	128	128
Commercial loans	458	756	-	1,214	168	845	1,013	169	622	791
Consumer loans	1	4	-	5	-	7	7	-	7	7
Commercial equipment	377	683	-	1,060	303	461	764	303	371	674
	$ 1,010	$ 9,729	$ -	$ 10,739	$ 1,024	$ 9,491	$ 10,515	$ 818	$ 9,617	$ 10,435

Credit Quality Indicators

Credit quality indicators as of September 30, 2018 and December 31, 2017 were as follows:


Credit Risk Profile by Internally Assigned Grade

	Commercial Real Estate		Construction and Land Dev.		Residential Rentals
(dollars in thousands)	9/30/2018	12/31/2017	9/30/2018	12/31/2017	9/30/2018	12/31/2017

Unrated	$ 111,356	$ 75,581	$ 2,320	$ 1,775	$ 36,332	$ 28,428
Pass	715,844	619,604	25,739	25,367	87,905	80,279
Special mention	-	-	-	-	-	-
Substandard	20,745	32,129	729	729	1,146	1,521
Doubtful	-	-	-	-	-	-
Loss	-	-	-	-	-	-
Total	$ 847,945	$ 727,314	$ 28,788	$ 27,871	$ 125,383	$ 110,228

	Commercial Loans		Commercial Equipment		Total Commercial Portfolios
(dollars in thousands)	9/30/2018	12/31/2017	9/30/2018	12/31/2017	9/30/2018	12/31/2017

Unrated	$ 19,507	$ 14,356	$ 14,495	$ 10,856	$ 184,010	$ 130,996
Pass	39,811	39,118	33,934	23,581	903,233	787,949
Special mention	-	-	-	-	-	-
Substandard	2,765	2,943	1,454	1,479	26,839	38,801
Doubtful	-	-	-	-	-	-
Loss	-	-	-	-	-	-
Total	$ 62,083	$ 56,417	$ 49,883	$ 35,916	$ 1,114,082	$ 957,746

	Non-Commercial Portfolios **		Total All Portfolios
(dollars in thousands)	9/30/2018	12/31/2017	9/30/2018	12/31/2017

Unrated	$ 144,803	$ 152,616	$ 328,813	$ 283,612
Pass	47,051	38,081	950,284	826,030
Special mention	-	96	-	96
Substandard	1,801	1,505	28,640	40,306
Doubtful	-	-	-	-
Loss	-	-	-	-
Total	$ 193,655	$ 192,298	$ 1,307,737	$ 1,150,044

** Non-commercial portfolios are generally evaluated based on payment activity, but may be risk graded if part of a larger commercial relationship or are credit impaired (e,g. non-accrual loans, TDRs).


Credit Risk Profile Based on Payment Activity

	Residential First Mortgages		Home Equity and Second Mtg.		Consumer Loans
(dollars in thousands)	9/30/2018	12/31/2017	9/30/2018	12/31/2017	9/30/2018	12/31/2017

Performing	$ 156,362	$ 169,896	$ 36,210	$ 21,217	$ 730	$ 573
Nonperforming	203	478	150	134	-	-
Total	$ 156,565	$ 170,374	$ 36,360	$ 21,351	$ 730	$ 573

Accounting for Certain Loans and Debt Securities Acquired In Transfer Table

In conjunction with the acquisition of County First, the PCI loan portfolio was accounted for at fair value as follows:


(dollars in thousands)		January 1, 2018

Contractual principal and interest at acquisition		$ 6,126
Nonaccretable difference		(1,093)
Expected cash flows at acquisition		5,033
Accretable yield		(517)
Basis in PCI loans at acquisition - estimated fair value		$ 4,516

Certain Loans Acquired In Transfer Not Accounted for as Debt Securities, Accretable Yield Movement Table

A summary of changes in the accretable yield for PCI loans for the three and nine months ended September 30, 2018 follows:


	Three Months Ended	Nine Months Ended
(dollars in thousands)	September 30, 2018	September 30, 2018
Accretable yield, beginning of period	$ 401	$ -
Additions	-	517
Accretion	(54)	(170)
Reclassification from (to) nonaccretable difference	-	-
Other changes, net	-	-
Accretable yield, end of period	$ 347	$ 347

Summary Of Acquired And Non Acquired Loans Table

The following is a summary of acquired and non-acquired loans as of September 30, 2018 and December 31, 2017:



BY ACQUIRED AND NON-ACQUIRED	September 30, 2018	%	December 31, 2017	%

Acquired loans - performing	$ 107,142	8.19%	$ -	0.00%
Acquired loans - purchase credit impaired ("PCI")	3,511	0.27%	-	0.00%
Total acquired loans	110,653	8.46%	-	0.00%
Non-acquired loans**	1,197,084	91.54%	1,150,044	100.00%
Gross loans	1,307,737		1,150,044
Net deferred costs (fees)	917	0.07%	1,086	0.09%
Total loans, net of deferred costs	$ 1,308,654		$ 1,151,130


** Non-acquired loans include loans transferred from acquired pools following release of acquisition accounting FMV adjustments.