Loans and reserve for credit losses (Tables)

6 Months Ended

Jun. 30, 2014

Schedule of Accounts, Notes, Loans and Financing Receivable

The composition of the loan portfolio at June 30, 2014 and December 31, 2013 was as follows (dollars in thousands):



	June 30, 2014					December 31, 2013
	Amount			Percent		Amount			Percent
Originated loans (a):
Commercial real estate:
Owner occupied	$	190,712		18.8	%	$	204,998		20.6	%
Non-owner occupied	365,827			36.0	%	347,014			34.8	%
Total commercial real estate loans	556,539			54.8	%	552,012			55.4	%
Construction	54,320			5.3	%	52,503			5.3	%
Residential real estate	101,975			10.0	%	101,557			10.2	%
Commercial and industrial	269,019			26.5	%	254,170			25.5	%
Consumer	34,805			3.4	%	35,990			3.6	%
Total loans	1,016,658			100.0	%	996,232			100.0	%

Less:
Deferred loan fees	(1,548		)			(1,757		)
Reserve for loan losses	(20,471		)			(20,857		)
Loans, net	$	994,639				$	973,618

Acquired loans (b):
Commercial real estate:
Owner occupied	$	52,267		16.2	%
Non-owner occupied	110,650			34.1	%
Total commercial real estate loans	162,917			50.3	%
Construction	48,127			14.8	%
Residential real estate	83,776			25.8	%
Commercial and industrial	27,093			8.3	%
Consumer	2,757			0.8	%
Total loans	324,670			100.0	%

Less:
Reserve for loan losses	—
Loans, net	$	324,670

Acquired covered loans (c):
Commercial real estate:
Owner occupied	$	13,083		24.4	%
Non-owner occupied	19,644			36.7	%
Total commercial real estate loans	32,727			61.1	%
Construction	2,564			4.8	%
Residential real estate	13,128			24.5	%
Commercial and industrial	4,621			8.6	%
Consumer	560			1.0	%
Total loans	53,600			100.0	%

Less:
Reserve for loan losses	—
Loans, net	$	53,600



Total loans:
Commercial real estate:
Owner occupied	$	256,062		18.3	%
Non-owner occupied	496,121			35.6	%
Total commercial real estate loans	752,183			53.9	%
Construction	105,011			7.5	%
Residential real estate	198,879			14.3	%
Commercial and industrial	300,733			21.6	%
Consumer	38,122			2.7	%
Total loans	1,394,928			100.0	%

Less:
Deferred loan fees	(1,548		)
Reserve for loan losses	(20,471		)
Loans, net	$	1,372,909

(a) Originated loans are loans organically made through the Company's normal and customary origination process
(b) Acquired loans are loans acquired in the acquisition of Home, discussed elsewhere in this report, less acquired covered loans
(c) Acquired covered loans acquired in the acquisition of Home that are covered under FDIC loss share agreements

Schedule of Loans Receivable, Covered

Changes in the loss share payable associated with covered loans for the 45-day period from the Home acquisition to June 30, 2014 were as follows:



	45 Days Ended
	June 30, 2014
Balance at May 16, 2014	$	1,035
Charge-off receivable	(2		)
Recovery payable	250
Balance at end of period	$	1,283

Allowance for Credit Losses on Financing Receivables

Transactions and allocations in the reserve for loan losses and unfunded loan commitments, by portfolio segment, for the three and six months ended June 30, 2014 and 2013 were as follows (dollars in thousands):



	Commercial real estate			Construction			Residential real estate			Commercial and industrial			Consumer			Unallocated			Total
Three months ended June 30, 2014
Reserve for loan losses
Balance at March 31, 2014	$	8,803		$	602		$	2,227		$	6,840		$	1,243		$	2,007		$	21,722
Loan loss provision (credit)	82			(163		)	(215		)	255			129			(88		)	—
Recoveries	60			289			157			546			67			—			1,119
Loans charged off	(985		)	—			(101		)	(1,026		)	(258		)	—			(2,370		)
Balance at end of period	$	7,960		$	728		$	2,068		$	6,615		$	1,181		$	1,919		$	20,471

Reserve for unfunded lending commitments
Balance at March 31, 2014	$	48		$	268		$	25		$	75		$	24		$	—		$	440
Provision for unfunded loan commitments	—			—			—			—			—			—			—
Balance at end of period	$	48		$	268		$	25		$	75		$	24		$	—		$	440

Reserve for credit losses
Reserve for loan losses	$	7,960		$	728		$	2,068		$	6,615		$	1,181		$	1,919		$	20,471
Reserve for unfunded lending commitments	48			268			25			75			24			—			440
Total reserve for credit losses	$	8,008		$	996		$	2,093		$	6,690		$	1,205		$	1,919		$	20,911



	Commercial real estate			Construction			Residential real estate			Commercial and industrial			Consumer			Unallocated		Total
For the six months ended June 30, 2014
Reserve for loan losses
Balance at December 31, 2013	$	9,565		$	535		$	2,381		$	6,261		$	1,401		$	714	$	20,857
Loan loss provision (credit)	(1,478		)	115			(270		)	237			191			1,205		—
Recoveries	1,001			374			281			1,457			154			—		3,267
Loans charged off	(1,128		)	(296		)	(324		)	(1,340		)	(565		)	—		(3,653		)
Balance at end of period	$	7,960		$	728		$	2,068		$	6,615		$	1,181		$	1,919	$	20,471

Reserve for unfunded lending commitments
Balance at December 31, 2013	$	48		$	268		$	25		$	75		$	24		$	—	$	440
Provision for unfunded loan commitments	—			—			—			—			—			—		—
Balance at end of period	$	48		$	268		$	25		$	75		$	24		$	—	$	440

Reserve for credit losses
Reserve for loan losses	$	7,960		$	728		$	2,068		$	6,615		$	1,181		$	1,919	$	20,471
Reserve for unfunded lending commitments	48			268			25			75			24			—		440
Total reserve for credit losses	$	8,008		$	996		$	2,093		$	6,690		$	1,205		$	1,919	$	20,911



	Commercial real estate			Construction			Residential real estate			Commercial and industrial			Consumer			Unallocated		Total
Three months ended June 30, 2013
Reserve for loan losses
Balance at March 31, 2013	$	11,225		$	1,236		$	3,714		$	5,676		$	2,039		$	658	$	24,548
Loan loss provision (credit)	261			226			(570		)	887			(276		)	472		1,000
Recoveries	37			39			71			834			59			—		1,040
Loans charged off	(811		)	(659		)	(243		)	(2,049		)	(132		)	—		(3,894		)
Balance at end of period	$	10,712		$	842		$	2,972		$	5,348		$	1,690		$	1,130	$	22,694

Reserve for unfunded lending commitments
Balance at March 31, 2013	$	48		$	268		$	25		$	75		$	24		$	—	$	440
Provision for unfunded loan commitments	—			—			—			—			—			—		—
Balance at end of period	$	48		$	268		$	25		$	75		$	24		$	—	$	440

Reserve for credit losses
Reserve for loan losses	$	10,712		$	842		$	2,972		$	5,348		$	1,690		$	1,130	$	22,694
Reserve for unfunded lending commitments	48			268			25			75			24			—		440
Total reserve for credit losses	$	10,760		$	1,110		$	2,997		$	5,423		$	1,714		$	1,130	$	23,134



	Commercial real estate			Construction			Residential real estate			Commercial and industrial			Consumer			Unallocated		Total
For the six months ended June 30, 2013
Reserve for loan losses
Balance at December 31, 2012	$	11,596		$	1,583		$	3,551		$	7,267		$	2,177		$	1,087	$	27,261
Loan loss provision (credit)	(19		)	542			(388		)	1,012			(190		)	43		1,000
Recoveries	215			163			188			1,346			118			—		2,030
Loans charged off	(1,080		)	(1,446		)	(379		)	(4,277		)	(415		)	—		(7,597		)
Balance at end of period	$	10,712		$	842		$	2,972		$	5,348		$	1,690		$	1,130	$	22,694

Reserve for unfunded lending commitments
Balance at December 31, 2012	$	48		$	268		$	25		$	75		$	24		$	—	$	440
Provision for unfunded loan commitments	—			—			—			—			—			—		—
Balance at end of period	$	48		$	268		$	25		$	75		$	24		$	—	$	440

Reserve for credit losses
Reserve for loan losses	$	10,712		$	842		$	2,972		$	5,348		$	1,690		$	1,130	$	22,694
Reserve for unfunded lending commitments	48			268			25			75			24			—		440
Total reserve for credit losses	$	10,760		$	1,110		$	2,997		$	5,423		$	1,714		$	1,130	$	23,134

An individual loan is impaired when, based on current information and events, management believes that it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement. The following table presents the reserve for loan losses and the recorded investment in loans by portfolio segment and impairment evaluation method at June 30, 2014 and December 31, 2013 (dollars in thousands):



	Reserve for loan losses						Recorded investment in loans
	Individually evaluated for impairment		Collectively evaluated for impairment		Total		Individually evaluated for impairment		Collectively evaluated for impairment		Total
June 30, 2014
Commercial real estate	$	172	$	7,788	$	7,960	$	28,644	$	723,539	$	752,183
Construction	—		728		728		963		104,048		105,011
Residential real estate	—		2,067		2,067		461		198,418		198,879
Commercial and industrial	29		6,587		6,616		3,793		296,940		300,733
Consumer	—		1,181		1,181		—		38,122		38,122
	$	201	$	18,351	18,552		$	33,861	$	1,361,067	$	1,394,928
Unallocated					1,919
					$	20,471

December 31, 2013
Commercial real estate	$	665	$	8,900	$	9,565	$	32,227	$	519,785	$	552,012
Construction	—		535		535		1,987		50,516		52,503
Residential real estate	62		2,319		2,381		430		101,127		101,557
Commercial and industrial	56		6,205		6,261		5,823		248,347		254,170
Consumer	—		1,401		1,401		—		35,990		35,990
	$	783	$	19,360	20,143		$	40,467	$	955,765	$	996,232
Unallocated					714
					$	20,857

Financing Receivable Credit Quality Indicators

The following table presents, by portfolio class, the recorded investment in loans by internally assigned grades at June 30, 2014 and December 31, 2013 (dollars in thousands):



	Loan grades
	Acceptable		Pass-Watch		Special Mention		Substandard		Total
June 30, 2014
Originated loans (a):
Commercial real estate:
Owner occupied	$	152,819	$	9,904	$	5,267	$	22,722	$	190,712
Non-owner occupied	330,458		12,670		15,377		7,322		365,827
Total commercial real estate loans	483,277		22,574		20,644		30,044		556,539
Construction	48,397		2,865		2,655		403		54,320
Residential real estate	99,486		1,504		22		963		101,975
Commercial and industrial	243,323		9,931		11,697		4,068		269,019
Consumer	34,786		—		—		19		34,805



	$	909,269	$	36,874	$	35,018	$	35,497	$	1,016,658

Acquired loans (b):
Commercial real estate:
Owner occupied	$	47,566	$	—	$	4,417	$	284	$	52,267
Non-owner occupied	87,529		9,298		7,286		6,537		110,650
Total commercial real estate loans	135,095		9,298		11,703		6,821		162,917
Construction	46,916		792		—		419		48,127
Residential real estate	81,849		—		—		1,927		83,776
Commercial and industrial	25,885		20		1,091		97		27,093
Consumer	2,676		—		—		81		2,757
	$	292,421	$	10,110	$	12,794	$	9,345	$	324,670

Acquired covered loans (c):
Commercial real estate:
Owner occupied	$	11,295	$	—	$	1,069	$	719	$	13,083
Non-owner occupied	13,778		366		563		4,937		19,644
Total commercial real estate loans	25,073		366		1,632		5,656		32,727
Construction	—		2,512		—		52		2,564
Residential real estate	10,529		546		—		2,053		13,128
Commercial and industrial	4,064		—		—		557		4,621
Consumer	560		—		—		—		560
	$	40,226	$	3,424	$	1,632	$	8,318	$	53,600

Total loans:
Commercial real estate:
Owner occupied	$	211,680	$	9,904	$	10,753	$	23,725	$	256,062
Non-owner occupied	431,765		22,334		23,226		18,796		496,121
Total commercial real estate loans	643,445		32,238		33,979		42,521		752,183
Construction	95,313		6,169		2,655		874		105,011
Residential real estate	191,864		2,050		22		4,943		198,879
Commercial and industrial	273,272		9,951		12,788		4,722		300,733
Consumer	38,022		—		—		100		38,122
	$	1,241,916	$	50,408	$	49,444	$	53,160	$	1,394,928

(a) Originated loans are loans organically made through the Company's normal and customary origination process
(b) Acquired loans are loans acquired in the acquisition of Home, discussed elsewhere in this report, less acquired covered loans
(c) Acquired covered loans acquired in the acquisition of Home that are covered under FDIC loss share agreements

December 31, 2013
Commercial real estate:
Owner occupied	$	147,865	$	19,798	$	14,730	$	22,605	$	204,998
Non-owner occupied	278,854		33,827		24,188		10,145		347,014
Total commercial real estate loans	426,719		53,625		38,918		32,750		552,012
Construction	46,274		2,772		2,131		1,326		52,503



Residential real estate	98,633		1,570		147		1,207		101,557
Commercial and industrial	242,053		3,518		2,694		5,905		254,170
Consumer	35,984		—		—		6		35,990
	$	849,663	$	61,485	$	43,890	$	41,194	$	996,232

Past Due Financing Receivables

The following table presents, by portfolio class, an age analysis of past due loans, including loans placed on non-accrual at June 30, 2014 and December 31, 2013 (dollars in thousands):



	30-89 days past due		90 days or more past due		Total past due		Current		Total loans
June 30, 2014
Originated loans (a):
Commercial real estate:
Owner occupied	$	250	$	2,612	$	2,862	$	187,850	$	190,712
Non-owner occupied	222		332		554		365,273		365,827
Total commercial real estate loans	472		2,944		3,416		553,123		556,539
Construction	—		746		746		53,574		54,320
Residential real estate	326		220		546		101,429		101,975
Commercial and industrial	805		665		1,470		267,549		269,019
Consumer	157		19		176		34,629		34,805
	$	1,760	$	4,594	$	6,354	$	1,010,304	$	1,016,658

Acquired loans (b):
Commercial real estate:
Owner occupied	$	—	$	—	$	—	$	52,267	$	52,267
Non-owner occupied	—		—		—		110,650		110,650
Total commercial real estate loans	—		—		—		162,917		162,917
Construction	—		—		—		48,127		48,127
Residential real estate	1,285		527		1,812		81,964		83,776
Commercial and industrial	4		—		4		27,089		27,093
Consumer	49		—		49		2,708		2,757
	$	1,338	$	527	$	1,865	$	322,805	$	324,670

Acquired covered loans (c):
Commercial real estate:
Owner occupied	$	—	$	84	$	84	$	12,999	$	13,083
Non-owner occupied	—		27		27		19,617		19,644
Total commercial real estate loans	—		111		111		32,616		32,727
Construction	—		—		—		2,564		2,564
Residential real estate	278		—		278		12,850		13,128
Commercial and industrial	—		50		50		4,571		4,621
Consumer	22		—		22		538		560
	$	300	$	161	$	461	$	53,139	$	53,600

Total loans:
Commercial real estate:
Owner occupied	$	250	$	2,696	$	2,946	$	253,116	$	256,062
Non-owner occupied	222		359		581		495,540		496,121



Total commercial real estate loans	472		3,055		3,527		748,656		752,183
Construction	—		746		746		104,265		105,011
Residential real estate	1,889		747		2,636		196,243		198,879
Commercial and industrial	809		715		1,524		299,209		300,733
Consumer	228		19		247		37,875		38,122
	$	3,398	$	5,282	$	8,680	$	1,386,248	$	1,394,928

(a) Originated loans are loans organically made through the Company's normal and customary origination process
(b) Acquired loans are loans acquired in the acquisition of Home, discussed elsewhere in this report, less acquired covered loans
(c) Acquired covered loans acquired in the acquisition of Home that are covered under FDIC loss share agreements

December 31, 2013
Commercial real estate:
Owner occupied	$	959	$	2,905	$	3,864	$	201,134	$	204,998
Non-owner occupied	—		—		—		347,014		347,014
Total commercial real estate loans	959		2,905		3,864		548,148		552,012
Construction	215		119		334		52,169		52,503
Residential real estate	436		163		599		100,958		101,557
Commercial and industrial	597		2,077		2,674		251,496		254,170
Consumer	53		6		59		35,931		35,990
	$	2,260	$	5,270	$	7,530	$	988,702	$	996,232

Impaired Financing Receivables

The following table presents information related to impaired loans, by portfolio class, at June 30, 2014 and December 31, 2013 (dollars in thousands):



	Impaired loans
	With a related allowance		Without a related allowance		Total recorded balance		Unpaid principal balance		Related allowance
June 30, 2014
Commercial real estate:
Owner occupied	$	1,620	$	4,238	$	5,858	$	8,463	$	153
Non-owner occupied	1,104		21,682		22,786		22,864		19
Total commercial real estate loans	2,724		25,920		28,644		31,327		172
Construction	—		963		963		963		—
Residential real estate	—		461		461		582		—
Commercial and industrial	2,766		1,027		3,793		4,424		29
Consumer	—		—		—		—		—
	$	5,490	$	28,371	$	33,861	$	37,296	$	201

December 31, 2013
Commercial real estate:
Owner occupied	$	2,772	$	6,582	$	9,354	$	12,707	$	652
Non-owner occupied	1,116		21,757		22,873		22,904		13
Total commercial real estate loans	3,888		28,339		32,227		35,611		665
Construction	751		1,236		1,987		2,029		—
Residential real estate	174		256		430		515		62
Commercial and industrial	4,074		1,749		5,823		6,701		56
Consumer	—		—		—		—		—
	$	8,887	$	31,580	$	40,467	$	44,856	$	783

At June 30, 2014 and December 31, 2013, the total recorded balance of impaired loans in the above table included $23.0 million and $33.2 million, respectively, of Troubled Debt Restructuring (“TDR”) loans which were not on non-accrual status.

The following table presents, by portfolio class, the average recorded investment in impaired loans for the three and six months ended June 30, 2014 and 2013 (dollars in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2014		2013		2014		2013
Commercial real estate:
Owner occupied	$	6,120	$	15,179	$	7,198	$	15,447
Non-owner occupied	22,762		28,089		22,799		27,685
Total commercial real estate loans	28,882		43,268		29,997		43,132
Construction	1,351		2,479		1,563		4,897
Residential real estate	443		2,751		439		3,447
Commercial and industrial	4,515		8,043		4,951		8,563
Consumer	—		969		—		1,192
	$	35,191	$	57,510	$	36,950	$	61,231

Schedule of Financing Receivables, Non Accrual Status

Information with respect to the Company’s non-accrual loans, by portfolio class, at June 30, 2014 and December 31, 2013 is as follows (dollars in thousands):



	June 30, 2014		December 31, 2013
Commercial real estate:
Owner occupied	$	4,222	$	4,443
Non-owner occupied	1,431		280
Total commercial real estate loans	5,653		4,723
Construction	495		236
Residential real estate	4,222		399
Commercial and industrial	1,229		1,868
Consumer	81		—
Total non-accrual loans	$	11,680	$	7,226

Accruing loans which are contractually past due 90 days or more:
Commercial real estate:
Owner occupied	$	—	$	—
Non-owner occupied	—		—
Total commercial real estate loans	—		—
Construction	746		—
Residential real estate	—		—
Commercial and industrial	25		1,077
Consumer	19		6
Total accruing loans which are contractually past due 90 days or more	$	790	$	1,083

Troubled Debt Restructurings on Financing Receivables

The following table presents, by portfolio segment, information with respect to the Company’s loans that were modified and recorded as TDRs during the three and six months ended June 30, 2014 and 2013 (dollars in thousands):



	Three months ended June 30,
	2014			2013
	Number of loans	TDR outstanding recorded investment		Number of loans	TDR outstanding recorded investment
Commercial real estate	—	$	—	—	$	—
Construction	—	—		—	—
Residential real estate	—	—		—	—
Commercial and industrial	—	—		1	3
Consumer	—	—		—	—
	—	$	—	1	$	3



	Six months ended June 30,
	2014			2013
	Number of loans	TDR outstanding recorded investment		Number of loans	TDR outstanding recorded investment
Commercial real estate	—	$	—	5	$	27,677
Construction	—	—		—	—
Residential real estate	—	—		—	—
Commercial and industrial	—	—		4	277
Consumer	—	—		—	—
	—	$	—	9	$	27,954



	Three months ended June 30,
	2014			2013
	Number of loans	TDR outstanding recorded investment		Number of loans	TDR outstanding recorded investment
Commercial real estate	—	$	—	—	$	—
Construction	—	—		—	—
Residential real estate	—	—		—	—
Commercial and industrial	—	—		1	3
Consumer	—	—		—	—
	—	$	—	1	$	3



	Six months ended June 30,
	2014			2013
	Number of loans	TDR outstanding recorded investment		Number of loans	TDR outstanding recorded investment
Commercial real estate	—	$	—	5	$	27,677
Construction	—	—		—	—
Residential real estate	—	—		—	—
Commercial and industrial	—	—		4	277
Consumer	—	—		—	—
	—	$	—	9	$	27,954

There were no loans modified and recorded as TDRs during the three and six months ended June 30, 2014. During the same period in 2013, TDR activity was primarily the result of remediation to bolster cash flow of stressed loans, and included the restructuring of a large CRE credit in the Bank’s loan portfolio.

At both June 30, 2014 and 2013, the Company had remaining commitments to lend on loans accounted for as TDRs of $0.

The following table presents, by portfolio segment, the post modification recorded investment for TDRs restructured during the three and six months ended June 30, 2013 by the primary type of concession granted. There were no TDRs restructured during the three and six months ended June 30, 2014.



Three Months Ended June 30, 2013	Rate reduction		Term extension		Rate reduction and term extension		Total
Commercial real estate	$	—	$	—	$	—	$	—
Construction	—		—		—		—
Residential real estate	—		—		—		—
Commercial and industrial	—		3		—		3
Consumer	—		—		—		—
	$	—	$	3	$	—	$	3



Six Months Ended June 30, 2013	Rate reduction		Term extension		Rate reduction and term extension		Total
Commercial real estate	$	3,809	$	2,368	$	21,500	$	27,677
Construction	—		—		—		—
Residential real estate	—		—		—		—
Commercial and industrial	174		103		—		277
Consumer	—		—		—		—
	$	3,983	$	2,471	$	21,500	$	27,954

The following table presents, by portfolio segment, the TDRs which had payment defaults during the six months ended June 30, 2014 and 2013 that had been previously restructured within the last twelve months prior to June 30, 2014 and 2013 (dollars in thousands):



	Six months ended June 30,
	2014			2013
	Number of loans	TDRs restructured in the period with a payment default		Number of loans	TDRs restructured in the period with a payment default
Commercial real estate	—	$	—	2	$	3,500
Construction	—	—		—	—
Residential real estate	—	—		—	—
Commercial and industrial loans	—	—		—	—
Consumer loans	—	—		—	—
	—	$	—	2	$	3,500