Loans and reserve for credit losses (Tables)

9 Months Ended

Sep. 30, 2016

Schedule of Accounts, Notes, Loans and Financing Receivable

The composition of the loan portfolio at September 30, 2016 and December 31, 2015 was as follows (dollars in thousands):



	September 30, 2016					December 31, 2015
	Amount			Percent		Amount			Percent
Originated loans (a):
Commercial real estate:
Owner occupied	$	280,901		15.8	%	$	263,095		18.1	%
Non-owner occupied	486,689			27.6	%	431,379			29.7	%
Total commercial real estate loans	767,590			43.4	%	694,474			47.8	%
Construction	168,558			9.6	%	119,723			8.2	%
Residential real estate	406,374			23.1	%	237,084			16.3	%
Commercial and industrial	378,700			21.5	%	363,335			25.0	%
Consumer	41,502			2.4	%	38,362			2.7	%
Total loans	1,762,724			100.0	%	1,452,978			100.0	%

Less:
Deferred loan fees	(1,917		)			(1,419		)
Reserve for loan losses	(25,238		)			(24,415		)
Loans, net	$	1,735,569				$	1,427,144

Acquired loans (b):
Commercial real estate:
Owner occupied	$	95,102		31.8	%	$	45,236		19.3	%
Non-owner occupied	102,088			34.2	%	95,183			40.5	%
Total commercial real estate loans	197,190			66.0	%	140,419			59.8	%
Construction	14,423			4.8	%	10,629			4.5	%
Residential real estate	59,092			19.8	%	61,306			26.1	%
Commercial and industrial	26,569			8.9	%	21,109			9.0	%
Consumer	1,510			0.5	%	1,488			0.6	%
Total loans	$	298,784		100.0	%	$	234,951		100.0	%

Total loans:
Commercial real estate:
Owner occupied	$	376,003		18.1	%	$	308,331		18.3	%
Non-owner occupied	588,777			28.6	%	526,562			31.2	%



Total commercial real estate loans	964,780			46.7	%	834,893			49.5	%
Construction	182,981			8.9	%	130,352			7.7	%
Residential real estate	465,466			22.6	%	298,390			17.7	%
Commercial and industrial	405,269			19.7	%	384,444			22.8	%
Consumer	43,012			2.1	%	39,850			2.3	%
Total loans	2,061,508			100.0	%	1,687,929			100.0	%

Less:
Deferred loan fees	(1,917		)			(1,419		)
Reserve for loan losses	(25,238		)			(24,415		)
Loans, net	$	2,034,353				$	1,662,095

(a) Loans organically made through the Company’s normal and customary origination process, including adjustable rate mortgage (“ARM”) purchases.
(b) Loans acquired in the acquisition of Home and PPFS.

Changes in Loss Share Payable Associated with Covered Loans

Changes in the loss share payable associated with covered loans for the three and nine months ended September 30, 2016 were as follows (dollars in thousands):



	Three months ended			Nine months ended
	September 30, 2016
Balance at beginning of period	$	201		$	289
Paid to FDIC	(201		)	(857		)
Increase due to impairment	—			(53		)
FDIC reimbursement	396			1,077
Shared loss expenses	(28		)	(92		)
Adjustments from prior periods	—			4
Balance at end of period	$	368		$	368

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 nine months ended September 30, 2016 and 2015 were as follows (dollars in thousands):



	Commercial real estate		Construction		Residential real estate		Commercial and industrial			Consumer			Unallocated			Total
For the three months ended September 30, 2016
Allowance for Loan Losses
Balance at June 30, 2016	$	4,391	$	1,259	$	2,674	$	11,982		$	978		$	3,382		$	24,666
Loan loss provision (credit)	1,554		271		1,044		(1,766		)	441			(1,544		)	—
Recoveries	74		327		45		428			208			—			1,082
Loans charged off	—		—		—		(95		)	(415		)	—			(510		)
Balance at end of period	$	6,019	$	1,857	$	3,763	$	10,549		$	1,212		$	1,838		$	25,238

Reserve for unfunded lending commitments
Balance at June 30, 2016	$	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	$	6,019	$	1,857	$	3,763	$	10,549		$	1,212		$	1,838		$	25,238
Reserve for unfunded lending commitments	48		268		25		75			24			—			440
Total reserve for credit losses	$	6,067	$	2,125	$	3,788	$	10,624		$	1,236		$	1,838		$	25,678



	Commercial real estate			Construction		Residential real estate			Commercial and industrial			Consumer			Unallocated			Total
For the nine months ended September 30, 2016
Allowance for Loan Losses
Balance at December 31, 2015	$	3,934		$	1,044	$	2,075		$	13,969		$	917		$	2,476		$	24,415
Loan loss provision (credit)	(667		)	407		1,530			(1,554		)	922			(638		)	—
Recoveries	2,792			406		222			1,190			715			—			5,325
Loans charged off	(40		)	—		(64		)	(3,056		)	(1,342		)	—			(4,502		)
Balance at end of period	$	6,019		$	1,857	$	3,763		$	10,549		$	1,212		$	1,838		$	25,238

Reserve for unfunded lending commitments
Balance at December 31, 2015	$	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	$	6,019		$	1,857	$	3,763		$	10,549		$	1,212		$	1,838		$	25,238
Reserve for unfunded lending commitments	48			268		25			75			24			—			440
Total reserve for credit losses	$	6,067		$	2,125	$	3,788		$	10,624		$	1,236		$	1,838		$	25,678



	Commercial real estate			Construction			Residential real estate			Commercial and industrial			Consumer			Unallocated		Total
For the three months ended September 30, 2015
Allowance for Loan Losses
Balance at June 30, 2015	$	5,032		$	1,356		$	2,463		$	11,355		$	1,001		$	2,294	$	23,501
Loan loss provision (credit)	(490		)	(293		)	(162		)	(2,245		)	99			3,091		—
Recoveries	408			155			162			2,885			179			—		3,789
Loans charged off	—			—			(50		)	(293		)	(324		)	—		(667		)
Balance at end of period	$	4,950		$	1,218		$	2,413		$	11,702		$	955		$	5,385	$	26,623

Reserve for unfunded lending commitments
Balance at June 30, 2015	$	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	$	4,950		$	1,218		$	2,413		$	11,702		$	955		$	5,385	$	26,623
Reserve for unfunded lending commitments	48			268			25			75			24			—		440
Total reserve for credit losses	$	4,998		$	1,486		$	2,438		$	11,777		$	979		$	5,385	$	27,063



	Commercial real estate			Construction			Residential real estate			Commercial and industrial			Consumer			Unallocated		Total
For the nine months ended September 30, 2015
Allowance for Loan Losses
Balance at December 31, 2014	$	5,614		$	1,133		$	2,121		$	6,844		$	1,047		$	5,294	$	22,053
Loan loss provision (credit)	(4,397		)	(193		)	(60		)	2,024			535			91		(2,000		)
Recoveries	4,011			278			746			3,440			457			—		8,932
Loans charged off	(278		)	—			(394		)	(606		)	(1,084		)	—		(2,362		)
Balance at end of period	$	4,950		$	1,218		$	2,413		$	11,702		$	955		$	5,385	$	26,623

Reserve for unfunded lending commitments
Balance at December 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	$	4,950		$	1,218		$	2,413		$	11,702		$	955		$	5,385	$	26,623
Reserve for unfunded lending commitments	48			268			25			75			24			—		440
Total reserve for credit losses	$	4,998		$	1,486		$	2,438		$	11,777		$	979		$	5,385	$	27,063

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 September 30, 2016 and December 31, 2015 (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
September 30, 2016
Commercial real estate	$	74	$	5,945	$	6,019	$	4,329	$	960,451	$	964,780
Construction	—		1,857		1,857		—		182,981		182,981
Residential real estate	—		3,763		3,763		—		465,466		465,466
Commercial and industrial	25		10,524		10,549		7,471		397,798		405,269
Consumer	—		1,212		1,212		—		43,012		43,012
	$	99	$	23,301	23,400		$	11,800	$	2,049,708	$	2,061,508
Unallocated					1,838
					$	25,238

December 31, 2015
Commercial real estate	$	78	$	3,856	$	3,934	$	3,835	$	831,058	$	834,893
Construction	—		1,044		1,044		365		129,987		130,352
Residential real estate	—		2,075		2,075		18		298,372		298,390
Commercial and industrial	164		13,805		13,969		2,724		381,720		384,444
Consumer	—		917		917		—		39,850		39,850
	$	242	$	21,697	21,939		$	6,942	$	1,680,987	$	1,687,929
Unallocated					2,476
					$	24,415

Financing Receivable Credit Quality Indicators

The following table presents, by portfolio class, the recorded investment in loans by internally assigned grades at September 30, 2016 and December 31, 2015 (dollars in thousands):



	Loan grades
	Acceptable		Pass-Watch		Special Mention		Substandard		Total
September 30, 2016
Originated loans (a):
Commercial real estate:
Owner occupied	$	266,610	$	6,811	$	1,091	$	6,389	$	280,901
Non-owner occupied	479,207		1,589		4,520		1,373		486,689
Total commercial real estate loans	745,817		8,400		5,611		7,762		767,590
Construction	168,558		—		—		—		168,558
Residential real estate	405,923		—		—		451		406,374
Commercial and industrial	340,082		10,274		5,173		23,171		378,700
Consumer	41,476		—		—		26		41,502
	$	1,701,856	$	18,674	$	10,784	$	31,410	$	1,762,724

Acquired loans (b):
Commercial real estate:
Owner occupied	$	89,484	$	2,441	$	1,563	$	1,614	$	95,102
Non-owner occupied	82,873		3,851		8,995		6,369		102,088
Total commercial real estate loans	172,357		6,292		10,558		7,983		197,190
Construction	14,363		—		—		60		14,423
Residential real estate	56,461		1,550		—		1,081		59,092
Commercial and industrial	24,750		557		588		674		26,569
Consumer	1,510		—		—		—		1,510
	$	269,441	$	8,399	$	11,146	$	9,798	$	298,784

Total loans:
Commercial real estate:
Owner occupied	$	356,094	$	9,252	$	2,654	$	8,003	$	376,003
Non-owner occupied	562,080		5,440		13,515		7,742		588,777
Total commercial real estate loans	918,174		14,692		16,169		15,745		964,780
Construction	182,921		—		—		60		182,981
Residential real estate	462,384		1,550		—		1,532		465,466
Commercial and industrial	364,832		10,831		5,761		23,845		405,269
Consumer	42,986		—		—		26		43,012
	$	1,971,297	$	27,073	$	21,930	$	41,208	$	2,061,508

(a) Loans organically made through the Company’s normal and customary origination process, including ARM purchases.
(b) Loans acquired in the acquisition of Home and PPFS.



	Loan grades
	Acceptable		Pass-Watch		Special Mention		Substandard		Total
December 31, 2015
Originated loans (a):
Commercial real estate:
Owner occupied	$	243,113	$	8,623	$	1,426	$	9,933	$	263,095
Non-owner occupied	411,137		9,825		4,522		5,895		431,379
Total commercial real estate loans	654,250		18,448		5,948		15,828		694,474
Construction	118,752		—		971		—		119,723
Residential real estate	236,574		—		—		510		237,084
Commercial and industrial	328,934		11,220		13,729		9,452		363,335
Consumer	38,350		—		—		12		38,362
	$	1,376,860	$	29,668	$	20,648	$	25,802	$	1,452,978

Acquired loans (b):
Commercial real estate:
Owner occupied	$	34,081	$	3,480	$	7,341	$	334	$	45,236
Non-owner occupied	71,334		2,751		9,386		11,712		95,183
Total commercial real estate loans	105,415		6,231		16,727		12,046		140,419
Construction	10,597		—		—		32		10,629
Residential real estate	60,151		—		—		1,155		61,306
Commercial and industrial	17,034		153		3,461		461		21,109
Consumer	1,485		—		—		3		1,488
	$	194,682	$	6,384	$	20,188	$	13,697	$	234,951

Total loans:
Commercial real estate:
Owner occupied	$	277,194	$	12,103	$	8,767	$	10,267	$	308,331
Non-owner occupied	482,471		12,576		13,908		17,607		526,562
Total commercial real estate loans	759,665		24,679		22,675		27,874		834,893
Construction	129,349		—		971		32		130,352
Residential real estate	296,725		—		—		1,665		298,390
Commercial and industrial	345,968		11,373		17,190		9,913		384,444
Consumer	39,835		—		—		15		39,850
	$	1,571,542	$	36,052	$	40,836	$	39,499	$	1,687,929

(a) Loans organically made through the Company’s normal and customary origination process, including ARM purchases.
(b) Loans acquired in the acquisition of Home and PPFS.

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 September 30, 2016 and December 31, 2015 (dollars in thousands):

30-89 days

past due

90 days

or more

past due

Total

past due

Current

Total

loans



September 30, 2016
Originated loans (a):
Commercial real estate:
Owner occupied	$	207	$	490	$	697	$	280,204	$	280,901
Non-owner occupied	—		—		—		486,689		486,689
Total commercial real estate loans	207		490		697		766,893		767,590
Construction	—		—		—		168,558		168,558
Residential real estate	2,625		—		2,625		403,749		406,374
Commercial and industrial	156		171		327		378,373		378,700
Consumer	203		26		229		41,273		41,502
	$	3,191	$	687	$	3,878	$	1,758,846	$	1,762,724

Acquired loans (b):
Commercial real estate:
Owner occupied	$	11	$	—	$	11	$	95,091	$	95,102
Non-owner occupied	—		—		—		102,088		102,088
Total commercial real estate loans	11		—		11		197,179		197,190
Construction	—		21		21		14,402		14,423
Residential real estate	1,172		586		1,758		57,334		59,092
Commercial and industrial	225		8		233		26,336		26,569
Consumer	28		—		28		1,482		1,510
	$	1,436	$	615	$	2,051	$	296,733	$	298,784

Total loans:
Commercial real estate:
Owner occupied	$	218	$	490	$	708	$	375,295	$	376,003
Non-owner occupied	—		—		—		588,777		588,777
Total commercial real estate loans	218		490		708		964,072		964,780
Construction	—		21		21		182,960		182,981
Residential real estate	3,797		586		4,383		461,083		465,466
Commercial and industrial	381		179		560		404,709		405,269
Consumer	231		26		257		42,755		43,012
	$	4,627	$	1,302	$	5,929	$	2,055,579	$	2,061,508

December 31, 2015
Originated loans (a):
Commercial real estate:
Owner occupied	$	1,020	$	719	$	1,739	$	261,356	$	263,095
Non-owner occupied	593		—		593		430,786		431,379
Total commercial real estate loans	1,613		719		2,332		692,142		694,474
Construction	—		—		—		119,723		119,723
Residential real estate	196		—		196		236,888		237,084
Commercial and industrial	346		239		585		362,750		363,335
Consumer	209		12		221		38,141		38,362
	$	2,364	$	970	$	3,334	$	1,449,644	$	1,452,978

Acquired loans (b):
Commercial real estate:



Owner occupied	$	—	$	—	$	—	$	45,236	$	45,236
Non-owner occupied	2,049		—		2,049		93,134		95,183
Total commercial real estate loans	2,049		—		2,049		138,370		140,419
Construction	46		—		46		10,583		10,629
Residential real estate	748		534		1,282		60,024		61,306
Commercial and industrial	6		5		11		21,098		21,109
Consumer	53		—		53		1,435		1,488
	$	2,902	$	539	$	3,441	$	231,510	$	234,951

Total loans:
Commercial real estate:
Owner occupied	$	1,020	$	719	$	1,739	$	306,592	$	308,331
Non-owner occupied	2,642		—		2,642		523,920		526,562
Total commercial real estate loans	3,662		719		4,381		830,512		834,893
Construction	46		—		46		130,306		130,352
Residential real estate	944		534		1,478		296,912		298,390
Commercial and industrial	352		244		596		383,848		384,444
Consumer	262		12		274		39,576		39,850
	$	5,266	$	1,509	$	6,775	$	1,681,154	$	1,687,929

(a) Loans organically made through the Company’s normal and customary origination process, including ARM purchases.
(b) Loans acquired in the acquisition of Home and PPFS.

Impaired Financing Receivables, By Portfolio Class

The following table presents, by portfolio class, the average recorded investment in impaired loans for the three and nine months ended September 30, 2016 and 2015 (dollars in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Commercial real estate:
Owner occupied	$	1,912	$	3,063	$	2,129	$	3,225
Non-owner occupied	2,525		1,072		2,540		8,297
Total commercial real estate loans	4,437		4,135		4,669		11,522
Construction	—		443		—		543
Residential real estate	—		28		—		66
Commercial and industrial	7,462		2,712		7,534		2,815
Consumer	—		—		—		—
	$	11,899	$	7,318	$	12,203	$	14,946

The following table presents information related to impaired loans, by portfolio class, at September 30, 2016 and December 31, 2015 (dollars in thousands):



	Impaired loans
	With a related allowance		Without a related allowance		Total recorded balance		Unpaid principal balance		Related allowance
September 30, 2016
Commercial real estate:
Owner occupied	$	815	$	1,004	$	1,819	$	2,437	$	54
Non-owner occupied	632		1,878		2,510		2,511		20
Total commercial real estate loans	1,447		2,882		4,329		4,948		74
Construction	—		—		—		—		—
Residential real estate	—		—		—		—		—
Commercial and industrial	76		7,395		7,471		11,119		25
Consumer	—		—		—		—		—
	$	1,523	$	10,277	$	11,800	$	16,067	$	99

December 31, 2015
Commercial real estate:
Owner occupied	$	1,032	$	2,157	$	3,189	$	4,285	$	73
Non-owner occupied	646		—		646		646		5
Total commercial real estate loans	1,678		2,157		3,835		4,931		78
Construction	—		365		365		365		—
Residential real estate	—		18		18		18		—
Commercial and industrial	2,539		185		2,724		3,366		164
Consumer	—		—		—		—		—
	$	4,217	$	2,725	$	6,942	$	8,680	$	242

Average Recorded Investment In Impaired Loans

The following table presents, by portfolio class, the average recorded investment in impaired loans for the three and nine months ended September 30, 2016 and 2015 (dollars in thousands):



	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Commercial real estate:
Owner occupied	$	1,912	$	3,063	$	2,129	$	3,225
Non-owner occupied	2,525		1,072		2,540		8,297
Total commercial real estate loans	4,437		4,135		4,669		11,522
Construction	—		443		—		543
Residential real estate	—		28		—		66
Commercial and industrial	7,462		2,712		7,534		2,815
Consumer	—		—		—		—
	$	11,899	$	7,318	$	12,203	$	14,946

The following table presents information related to impaired loans, by portfolio class, at September 30, 2016 and December 31, 2015 (dollars in thousands):



	Impaired loans
	With a related allowance		Without a related allowance		Total recorded balance		Unpaid principal balance		Related allowance
September 30, 2016
Commercial real estate:
Owner occupied	$	815	$	1,004	$	1,819	$	2,437	$	54
Non-owner occupied	632		1,878		2,510		2,511		20
Total commercial real estate loans	1,447		2,882		4,329		4,948		74
Construction	—		—		—		—		—
Residential real estate	—		—		—		—		—
Commercial and industrial	76		7,395		7,471		11,119		25
Consumer	—		—		—		—		—
	$	1,523	$	10,277	$	11,800	$	16,067	$	99

December 31, 2015
Commercial real estate:
Owner occupied	$	1,032	$	2,157	$	3,189	$	4,285	$	73
Non-owner occupied	646		—		646		646		5
Total commercial real estate loans	1,678		2,157		3,835		4,931		78
Construction	—		365		365		365		—
Residential real estate	—		18		18		18		—
Commercial and industrial	2,539		185		2,724		3,366		164
Consumer	—		—		—		—		—
	$	4,217	$	2,725	$	6,942	$	8,680	$	242

Schedule of Financing Receivables, Non Accrual Status

Information with respect to the Company’s non-performing loans, by portfolio class, at September 30, 2016 and December 31, 2015 is as follows (dollars in thousands):



	September 30, 2016		December 31, 2015
Commercial real estate:
Owner occupied	$	1,353	$	2,742
Non-owner occupied	2,711		434
Total commercial real estate loans	4,064		3,176
Construction	39		—
Residential real estate	1,443		1,427
Commercial and industrial	6,937		447
Consumer	—		3
Total non-accrual loans	$	12,483	$	5,053

Accruing loans which are contractually past due 90 days or more:
Construction	21		—
Commercial and industrial	12		56
Consumer	26		12
Total accruing loans which are contractually past due 90 days or more	$	59	$	68

Troubled Debt Restructurings on Financing Receivables

The following table presents, by portfolio segment, the information with respect to the Company’s loans that were modified and recorded as TDRs during the nine months ended September 30, 2016 and 2015 (dollars in thousands).



	Nine months ended September 30,
	2016			2015
	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	22		—	—
Consumer	—	—		—	—
	1	$	22	—	$	—

The following table presents, by portfolio segment, the post modification recorded investment for TDRs restructured during the nine months ended September 30, 2016.



Nine months ended September 30, 2016	Rate reduction		Term extension		Rate reduction and term extension		Total
Commercial real estate	$	—	$	—	$	—	$	—
Construction	—		—		—		—
Residential real estate	—		—		—		—
Commercial and industrial	—		22		—		22
Consumer	—		—		—		—
	$	—	$	22	$	—	$	22

Post Modification Troubled Debt Restructurings on Financing Receivables



	Nine months ended September 30,
	2016			2015
	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	22		—	—
Consumer	—	—		—	—
	1	$	22	—	$	—

The following table presents, by portfolio segment, the post modification recorded investment for TDRs restructured during the nine months ended September 30, 2016.



Nine months ended September 30, 2016	Rate reduction		Term extension		Rate reduction and term extension		Total
Commercial real estate	$	—	$	—	$	—	$	—
Construction	—		—		—		—
Residential real estate	—		—		—		—
Commercial and industrial	—		22		—		22
Consumer	—		—		—		—
	$	—	$	22	$	—	$	22