

	At or for the three months ended June 30, 2019
Business Activities Loans (In thousands)	Commercial real estate		Commercial and industrial loans		Residential mortgages			Consumer			Total
Balance at beginning of period	$	22,521	$	18,247	$	9,209		$	6,235		$	56,212
Charged-off loans	702		1,180		206			857			2,945
Recoveries on charged-off loans	67		119		43			79			308
Provision/(releases) for loan losses	522		1,663		(212		)	(116		)	1,857
Balance at end of period	$	22,408	$	18,849	$	8,834		$	5,341		$	55,432



	At or for the six months ended June 30, 2019
Business Activities Loans (In thousands)	Commercial real estate		Commercial and industrial loans		Residential mortgages			Consumer			Total
Balance at beginning of period	$	21,732	$	16,504	$	10,535		$	7,368		$	56,139
Charged-off loans	1,958		2,856		248			1,776			6,838
Recoveries on charged-off loans	275		426		58			133			892
Provision/(releases) for loan losses	2,359		4,775		(1,511		)	(384		)	5,239
Balance at end of period	$	22,408	$	18,849	$	8,834		$	5,341		$	55,432



	At or for the three months ended June 30, 2018
Business Activities Loans (In thousands)	Commercial real estate		Commercial and industrial loans		Residential mortgages		Consumer		Total
Balance at beginning of period	$	17,841	$	13,229	$	8,598	$	7,609	$	47,277
Charged-off loans	1,392		1,706		27		837		3,962
Recoveries on charged-off loans	26		447		6		135		614
Provision/(releases) for loan losses	2,676		2,685		853		171		6,385
Balance at end of period	$	19,151	$	14,655	$	9,430	$	7,078	$	50,314



	At or for the six months ended June 30, 2018
Business Activities Loans (In thousands)	Commercial real estate		Commercial and industrial loans		Residential mortgages		Consumer		Total
Balance at beginning of period	$	16,843	$	13,850	$	9,420	$	5,807	$	45,920
Charged-off loans	1,498		2,596		27		1,777		5,898
Recoveries on charged-off loans	49		491		6		209		755
Provision/(releases) for loan losses	3,757		2,910		31		2,839		9,537
Balance at end of period	$	19,151	$	14,655	$	9,430	$	7,078	$	50,314



	At or for the three months ended June 30, 2019
Acquired Loans (In thousands)	Commercial real estate		Commercial and industrial loans			Residential mortgages		Consumer		Total
Balance at beginning of period	$	3,910	$	879		$	622	$	415	$	5,826
Charged-off loans	624		109			31		257		1,021
Recoveries on charged-off loans	24		175			55		55		309
Provision/(releases) for loan losses	1,252		(75		)	236		197		1,610
Balance at end of period	$	4,562	$	870		$	882	$	410	$	6,724



	At or for the six months ended June 30, 2019
Acquired Loans (In thousands)	Commercial real estate		Commercial and industrial loans			Residential mortgages		Consumer		Total
Balance at beginning of period	$	3,153	$	1,064		$	630	$	483	$	5,330
Charged-off loans	804		371			104		428		1,707
Recoveries on charged-off loans	500		226			60		86		872
Provision/(releases) for loan losses	1,713		(49		)	296		269		2,229
Balance at end of period	$	4,562	$	870		$	882	$	410	$	6,724



	At or for the three months ended June 30, 2018
Acquired Loans (In thousands)	Commercial real estate		Commercial and industrial loans			Residential mortgages		Consumer		Total
Balance at beginning of period	$	3,995	$	1,243		$	1,046	$	298	$	6,582
Charged-off loans	972		—			622		164		1,758
Recoveries on charged-off loans	259		66			11		304		640
Provision/(releases) for loan losses	100		(182		)	183		46		147
Balance at end of period	$	3,382	$	1,127		$	618	$	484	$	5,611



	At or for the six months ended June 30, 2018
Acquired Loans (In thousands)	Commercial real estate		Commercial and industrial loans		Residential mortgages		Consumer		Total
Balance at beginning of period	$	3,856	$	1,125	$	598	$	335	$	5,914
Charged-off loans	1,712		155		1,053		693		3,613
Recoveries on charged-off loans	265		95		36		344		740
Provision/(releases) for loan losses	973		62		1,037		498		2,570
Balance at end of period	$	3,382	$	1,127	$	618	$	484	$	5,611



	At June 30, 2019
Business Activities Loans (In thousands)	Commercial real estate		Commercial and industrial loans		Residential mortgages		Consumer		Total
Individually evaluated for impairment	7		42		78		7		134
Collectively evaluated for impairment	22,401		18,807		8,756		5,334		55,298
Total	$	22,408	$	18,849	$	8,834	$	5,341	$	55,432



	At December 31, 2018
Business Activities Loans (In thousands)	Commercial real estate	Commercial and industrial loans	Residential mortgages	Consumer	Total
Individually evaluated for impairment	9	49	128	11	197
Collectively evaluated for impairment	21,723	16,455	10,407	7,357	55,942
Total	21,732	16,504	10,535	7,368	56,139



	At June 30, 2019
Acquired Loans (In thousands)	Commercial real estate		Commercial and industrial loans		Residential mortgages		Consumer		Total
Individually evaluated for impairment	84		—		8		7		99
Collectively evaluated for impairment	4,478		870		874		403		6,625
Total	$	4,562	$	870	$	882	$	410	$	6,724



	At December 31, 2018
Acquired Loans (In thousands)	Commercial real estate	Commercial and industrial loans	Residential mortgages	Consumer	Total
Individually evaluated for impairment	9	4	36	48	97
Collectively evaluated for impairment	3,144	1,060	594	435	5,233
Total	3,153	1,064	630	483	5,330

The Company monitors the credit quality of its portfolio by using internal risk ratings that are based on regulatory guidance. Loans that are given a Pass rating are not considered a problem credit. Loans that are classified as Special Mention loans are considered to have potential weaknesses and are evaluated closely by management. Substandard and non-accruing loans are loans for which a definitive weakness has been identified and which may make full collection of contractual cash flows questionable. Doubtful loans are those with identified weaknesses that make full collection of contractual cash flows, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

For commercial credits, the Company assigns an internal risk rating at origination and reviews the rating annually, semiannually or quarterly depending on the risk rating. The rating is also reassessed at any point in time when management becomes aware of information that may affect the borrower’s ability to fulfill their obligations.

The Company risk rates its residential mortgages, including 1-4 family and residential construction loans, based on a three rating system: Pass, Special Mention, and Substandard. Loans that are current within 59 days are rated Pass. Residential mortgages that are 60-89 days delinquent are rated Special Mention. Loans delinquent for 90 days or greater are rated Substandard and generally placed on non-accrual status. Home equity loans are risk rated based on the same rating system as the Company’s residential mortgages.

Ratings for other consumer loans, including auto loans, are based on a two rating system. Loans that are current within 119 days are rated Performing while loans delinquent for 120 days or more are rated Non-performing. Other consumer loans are placed on non-accrual at such time as they become Non-performing.

Upon acquiring a loan portfolio, the Company's internal loan review function assigns risk ratings to the acquired loans, utilizing the same methodology as it does with business activities loans. This may differ from the risk rating policy of the predecessor bank. Loans which are rated Substandard or worse according to the rating process outlined below are deemed to be credit impaired loans accounted for under ASC 310-30, regardless of whether they are classified as performing or non-performing.

The Bank utilizes an eleven grade internal loan rating system for each of its acquired commercial real estate, construction and commercial loans as outlined in the Credit Quality Information section of this Note. The ratings system is similar to loans originated through business activities.

The Company subjects loans that do not meet the ASC 310-30 criteria to ASC 450-20 (Loss Contingencies) by collectively evaluating these loans for an allowance for loan loss. The Company applies a methodology similar to the methodology prescribed for business activities loans, which includes the application of environmental factors to each category of loans. The methodology to collectively evaluate the acquired loans outside the scope of ASC 310-30 includes the application of a number of environmental factors that reflect management’s best estimate of the level of incremental credit losses that might be recognized given current conditions. This is reviewed as part of the allowance for loan loss adequacy analysis. As the loan portfolio matures and environmental factors change, the loan portfolio will be reassessed each quarter to determine an appropriate reserve allowance.

Additionally, the Company considers the need for a reserve for acquired loans accounted for outside of the scope of ASC 310-30 under ASC 310-20. At acquisition date, the Bank determined a fair value mark with credit and interest rate components. Under the Company’s model, the impairment evaluation process involves comparing the carrying value of acquired loans, including the entire unamortized premium or discount, to the calculated reserve allowance. If necessary, the Company books a reserve to account for shortfalls identified through this calculation. Fair value marks are not bifurcated when evaluating for impairment.

A decrease in the expected cash flows in subsequent periods requires the establishment of an allowance for loan losses at that time for ASC 310-30 loans. At June 30, 2019, the allowance for loan losses related to acquired loans under ASC 310-30 and ASC 310-20 was $6.7 million using the above mentioned criteria.



	Construction				Real Estate				Total commercial real estate
(In thousands)	June 30, 2019		December 31, 2018		June 30, 2019		December 31, 2018		June 30, 2019		December 31, 2018
Grade:
Pass	$	300,996	$	327,792	$	2,283,244	$	2,198,129	$	2,584,240	$	2,525,921
Special mention	—		—		24,154		9,805		24,154		9,805
Substandard	—		—		51,104		52,985		51,104		52,985
Total	$	300,996	$	327,792	$	2,358,502	$	2,260,919	$	2,659,498	$	2,588,711



	Total comm. and industrial loans
(In thousands)	June 30, 2019		December 31, 2018
Grade:
Pass	$	1,385,702	$	1,469,139
Special mention	53,543		14,279
Substandard	31,617		29,176
Doubtful	904		944
Total	$	1,471,766	$	1,513,538



	1-4 family				Construction				Total residential mortgages
(In thousands)	June 30, 2019		December 31, 2018		June 30, 2019		December 31, 2018		June 30, 2019		December 31, 2018
Grade:
Pass	$	2,264,398	$	2,314,657	$	9,170	$	9,582	$	2,273,568	$	2,324,239
Special mention	543		1,619		—		—		543		1,619
Substandard	3,504		1,440		—		—		3,504		1,440
Total	$	2,268,445	$	2,317,716	$	9,170	$	9,582	$	2,277,615	$	2,327,298



	Home equity				Auto and other				Total consumer loans
(In thousands)	June 30, 2019		December 31, 2018		June 30, 2019		December 31, 2018		June 30, 2019		December 31, 2018
Performing	$	280,440	$	289,028	$	602,469	$	645,537	$	882,909	$	934,565
Nonperforming	814		933		1,803		1,699		2,617		2,632
Total	$	281,254	$	289,961	$	604,272	$	647,236	$	885,526	$	937,197



	Construction				Real Estate				Total commercial real estate
(In thousands)	June 30, 2019		December 31, 2018		June 30, 2019		December 31, 2018		June 30, 2019		December 31, 2018
Grade:
Pass	$	56,384	$	24,519	$	1,231,162	$	743,684	$	1,287,546	$	768,203
Special mention	1,411		—		14,147		9,086		15,558		9,086
Substandard	702		701		42,043		33,520		42,745		34,221
Total	$	58,497	$	25,220	$	1,287,352	$	786,290	$	1,345,849	$	811,510



	Total comm. and industrial loans
(In thousands)	June 30, 2019		December 31, 2018
Grade:
Pass	$	483,151	$	439,602
Special mention	12,893		11,374
Substandard	19,487		15,532
Total	$	515,531	$	466,508



	1-4 family				Construction				Total residential mortgages
(In thousands)	June 30, 2019		December 31, 2018		June 30, 2019		December 31, 2018		June 30, 2019		December 31, 2018
Grade:
Pass	$	590,578	$	235,173	$	8,158	$	174	$	598,736	$	235,347
Special mention	696		144		—		—		696		144
Substandard	5,333		3,635		—		—		5,333		3,635
Total	$	596,607	$	238,952	$	8,158	$	174	$	604,765	$	239,126



	Home equity				Auto and other				Total consumer loans
(In thousands)	June 30, 2019		December 31, 2018		June 30, 2019		December 31, 2018		June 30, 2019		December 31, 2018
Performing	$	121,931	$	85,968	$	58,393	$	72,195	$	180,324	$	158,163
Nonperforming	645		751		309		451		954		1,202
Total	$	122,576	$	86,719	$	58,702	$	72,646	$	181,278	$	159,365

The following table summarizes information about total loans rated Special Mention or lower as of June 30, 2019 and December 31, 2018. The table below includes consumer loans that are special mention and substandard accruing that are classified in the above table as performing based on payment activity.



	June 30, 2019						December 31, 2018
(In thousands)	Business Activities Loans		Acquired Loans		Total		Business Activities Loans		Acquired Loans		Total
Non-Accrual	$	30,704	$	5,067	$	35,771	$	26,478	$	5,947	$	32,425
Substandard Accruing	59,206		63,606		122,812		60,698		48,792		109,490
Total Classified	89,910		68,673		158,583		87,176		54,739		141,915
Special Mention	79,484		29,187		108,671		26,333		20,833		47,166
Total Criticized	$	169,394	$	97,860	$	267,254	$	113,509	$	75,572	$	189,081