Loans and Allowance for Loan Losses (Tables)

3 Months Ended

Mar. 31, 2018

The following table shows outstanding loans by class and payment aging as of March 31, 2018 and December 31, 2017.



Loan Aging Analysis by Loan Class
(in thousands)	Commercial and industrial		Commercial real estate, owner-occupied		Commercial real estate, investor		Construction		Home equity		Other residential ¹		Installment and other consumer		Total
March 31, 2018
30-59 days past due	$	—	$	—	$	—	$	—	$	385	$	—	$	—	$	385
60-89 days past due	4		—		—		—		—		—		—		4
90 days or more past due	—		—		—		—		—		—		—		—
Total past due	4		—		—		—		385		—		—		389
Current	231,676		300,377		828,945		64,978		124,314		95,621		25,440		1,671,351
Total loans ³	$	231,680	$	300,377	$	828,945	$	64,978	$	124,699	$	95,621	$	25,440	$	1,671,740
Non-accrual loans ²	$	—	$	—	$	—	$	—	$	392	$	—	$	—	$	392
December 31, 2017
30-59 days past due	$	—	$	—	$	—	$	—	$	99	$	255	$	330	$	684
60-89 days past due	1,340		—		—		—		—		—		—		1,340
90 days or more past due	—		—		—		—		307		—		—		307
Total past due	1,340		—		—		—		406		255		330		2,331
Current	234,495		300,963		822,984		63,828		132,061		95,271		27,080		1,676,682
Total loans ³	$	235,835	$	300,963	$	822,984	$	63,828	$	132,467	$	95,526	$	27,410	$	1,679,013
Non-accrual loans ²	$	—	$	—	$	—	$	—	$	406	$	—	$	—	$	406

¹ Our residential loan portfolio does not include sub-prime loans, nor is it our practice to underwrite loans commonly referred to as "Alt-A mortgages", the characteristics of which are loans lacking full documentation, borrowers having low FICO scores or higher loan-to-value ratios.

² One purchased credit impaired ("PCI") loan with an unpaid balance of $11 thousand and no carrying value was not accreting interest at March 31, 2018. Three PCI loans with unpaid balances totaling $131 thousand and no carrying values were not accreting interest at December 31, 2017. Amounts exclude accreting PCI loans totaling $2.1 million at both March 31, 2018 and December 31, 2017 as we have a reasonable expectation about future cash flows to be collected and we continue to recognize accretable yield on these loans in interest income. There were no accruing loans past due more than ninety days at March 31, 2018 or December 31, 2017.

³ Amounts include net deferred loan origination costs of $928 thousand and $818 thousand at March 31, 2018 and December 31, 2017, respectively. Amounts are also net of unaccreted purchase discounts on non-PCI loans of $1.1 million and $1.2 million at March 31, 2018 and December 31, 2017, respectively.

Financing Receivable Credit Quality Indicators

The following table represents an analysis of the carrying amount in loans, net of deferred fees and costs and purchase premiums or discounts, by internally assigned risk grades, including PCI loans, at March 31, 2018 and December 31, 2017.



Credit Risk Profile by Internally Assigned Risk Grade
(in thousands)	Commercial and industrial		Commercial real estate, owner-occupied		Commercial real estate, investor		Construction		Home equity		Other residential		Installment and other consumer		Purchased credit-impaired		Total
March 31, 2018
Pass	$	213,676	$	279,899	$	824,867	$	62,003	$	122,760	$	95,621	$	25,339	$	1,338	$	1,625,503
Special Mention	4,761		9,918		2,954		—		—		—		—		797		18,430
Substandard	13,191		9,366		327		2,975		1,847		—		101		—		27,807
Total loans	$	231,628	$	299,183	$	828,148	$	64,978	$	124,607	$	95,621	$	25,440	$	2,135	$	1,671,740
December 31, 2017
Pass	$	214,636	$	281,104	$	818,570	$	60,859	$	130,558	$	95,526	$	27,287	$	1,325	$	1,629,865
Special Mention	9,318		9,284		1,850		—		—		—		—		790		21,242
Substandard	11,816		9,409		1,774		2,969		1,815		—		123		—		27,906
Total loans	$	235,770	$	299,797	$	822,194	$	63,828	$	132,373	$	95,526	$	27,410	$	2,115	$	1,679,013

Troubled Debt Restructurings on Financing Receivables

The following table summarizes the carrying amount of TDR loans by loan class as of March 31, 2018 and December 31, 2017.



(in thousands)
Recorded investment in Troubled Debt Restructurings ¹	March 31, 2018		December 31, 2017
Commercial and industrial	$	2,267	$	2,165
Commercial real estate, owner-occupied	7,007		6,999
Commercial real estate, investor	1,854		2,171
Construction	2,976		2,969
Home equity	347		347
Other residential	992		1,148
Installment and other consumer	712		721
Total	$	16,155	$	16,520

¹There were no TDR loans on non-accrual status at March 31, 2018 and December 31, 2017.

The following table presents information for loans modified in a TDR during the presented periods, including the number of modified contracts, the recorded investment in the loans prior to modification, and the recorded investment in the loans at period end after being restructured. The following table excludes fully charged-off TDR loans and loans modified in a TDR and subsequently paid-off during the years presented.



(dollars in thousands)	Number of Contracts Modified	Pre-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment		Post-Modification Outstanding Recorded Investment at Period End
Troubled Debt Restructurings during the three months ended March 31, 2018:
None	—	$	—	$	—	$	—
Troubled Debt Restructurings during the three months ended March 31, 2017:
Installment and other consumer	1	$	50	$	50	$	50

Impaired Financing Receivables

The following tables summarize information by class on impaired loans and their related allowances. Total impaired loans include non-accrual loans, accruing TDR loans and accreting PCI loans that have experienced post-acquisition declines in cash flows expected to be collected.



(in thousands)	Commercial and industrial		Commercial real estate, owner-occupied		Commercial real estate, investor		Construction		Home equity		Other residential		Installment and other consumer		Total
March 31, 2018
Recorded investment in impaired loans:
With no specific allowance recorded	$	307	$	—	$	—	$	2,692	$	392	$	992	$	46	$	4,429
With a specific allowance recorded	1,960		7,007		1,854		284		347		—		666		12,118
Total recorded investment in impaired loans	$	2,267	$	7,007	$	1,854	$	2,976	$	739	$	992	$	712	$	16,547
Unpaid principal balance of impaired loans	$	2,260	$	6,993	$	1,847	$	2,962	$	736	$	991	$	711	$	16,500
Specific allowance	35		162		48		11		6		—		92		354
Average recorded investment in impaired loans during the quarter ended March 31, 2018	2,216		7,003		2,012		2,972		746		1,070		717		16,736
Interest income recognized on impaired loans during the quarter ended March 31, 2018¹	155		66		22		38		5		13		7		306
Average recorded investment in impaired loans during the quarter ended March 31, 2017	2,138		6,997		2,783		3,243		713		1,571		939		18,384
Interest income recognized on impaired loans during the quarter ended March 31, 2017¹	23		66		23		34		8		19		10		183

¹Interest income recognized on a cash basis totaled $128 thousand in the first quarter of 2018 and was related to the pay-off of two non-accrual commercial PCI loans. No interest income on impaired loans was recognized on a cash basis during the three months ended March 31, 2017.



(in thousands)	Commercial and industrial		Commercial real estate, owner-occupied		Commercial real estate, investor		Construction		Home equity		Other residential		Installment and other consumer		Total
December 31, 2017
Recorded investment in impaired loans:
With no specific allowance recorded	$	309	$	—	$	—	$	2,689	$	406	$	995	$	46	$	4,445
With a specific allowance recorded	1,856		6,999		2,171		280		347		153		675		12,481
Total recorded investment in impaired loans	$	2,165	$	6,999	$	2,171	$	2,969	$	753	$	1,148	$	721	$	16,926
Unpaid principal balance of impaired loans	$	2,278	$	6,993	$	2,168	$	2,963	$	750	$	1,147	$	720	$	17,019
Specific allowance	$	50	$	188	$	159	$	7	$	6	$	1	$	102	$	513

Allowance for Credit Losses on Financing Receivables

The following tables disclose activity in the allowance for loan losses ("ALLL") and the recorded investment in loans by class, as well as the related ALLL disaggregated by impairment evaluation method.



Allowance for Loan Losses Rollforward for the Period
(in thousands)	Commercial and industrial			Commercial real estate, owner-occupied			Commercial real estate, investor			Construction			Home equity			Other residential			Installment and other consumer			Unallocated			Total
Three months ended March 31, 2018
Beginning balance	$	3,654		$	2,294		$	6,475		$	681		$	1,031		$	536		$	378		$	718		$	15,767
Provision (reversal)	35			(214		)	(20		)	16			(52		)	7			(27		)	255			—
Charge-offs	—			—			—			—			—			—			—			—			—
Recoveries	4			—			—			—			—			—			—			—			4
Ending balance	$	3,693		$	2,080		$	6,455		$	697		$	979		$	543		$	351		$	973		$	15,771
Three months ended March 31, 2017
Beginning balance	$	3,248		$	1,753		$	6,320		$	781		$	973		$	454		$	372		$	1,541		$	15,442
Provision (reversal)	1,386			239			(187		)	(235		)	17			(10		)	(11		)	(1,199		)	—
Charge-offs	(284		)	—			—			—			—			—			(3		)	—			(287		)
Recoveries	63			—			—			—			—			—			1			—			64
Ending balance	$	4,413		$	1,992		$	6,133		$	546		$	990		$	444		$	359		$	342		$	15,219



Allowance for Loan Losses and Recorded Investment in Loans
(dollars in thousands)	Commercial and industrial			Commercial real estate, owner-occupied			Commercial real estate, investor			Construction			Home equity			Other residential			Installment and other consumer			Unallocated		Total
March 31, 2018
Ending ALLL related to loans collectively evaluated for impairment	$	3,658		$	1,918		$	6,407		$	686		$	973		$	543		$	259		$	973	$	15,417
Ending ALLL related to loans individually evaluated for impairment	35			162			48			11			6			—			92			—		354
Ending ALLL related to purchased credit-impaired loans	—			—			—			—			—			—			—			—		—
Ending balance	$	3,693		$	2,080		$	6,455		$	697		$	979		$	543		$	351		$	973	$	15,771
Recorded Investment:
Collectively evaluated for impairment	$	229,361		$	292,176		$	826,294		$	62,002		$	123,868		$	94,629		$	24,728		$	—	$	1,653,058
Individually evaluated for impairment	2,267			7,007			1,854			2,976			739			992			712			—		16,547
Purchased credit-impaired	52			1,194			797			—			92			—			—			—		2,135
Total	$	231,680		$	300,377		$	828,945		$	64,978		$	124,699		$	95,621		$	25,440		$	—	$	1,671,740
Ratio of allowance for loan losses to total loans	1.59		%	0.69		%	0.78		%	1.07		%	0.79		%	0.57		%	1.38		%	NM		0.94		%
Allowance for loan losses to non-accrual loans	NM			NM			NM			NM			250		%	NM			NM			NM		4,023		%

NM - Not Meaningful



Allowance for Loan Losses and Recorded Investment in Loans
(dollars in thousands)	Commercial and industrial			Commercial real estate, owner-occupied			Commercial real estate, investor			Construction			Home equity			Other residential			Installment and other consumer			Unallocated		Total
December 31, 2017
Ending ALLL related to loans collectively evaluated for impairment	$	3,604		$	2,106		$	6,316		$	674		$	1,025		$	535		$	276		$	718	$	15,254
Ending ALLL related to loans individually evaluated for impairment	50			188			159			7			6			1			102			—		513
Ending ALLL related to purchased credit-impaired loans	—			—			—			—			—			—			—			—		—
Ending balance	$	3,654		$	2,294		$	6,475		$	681		$	1,031		$	536		$	378		$	718	$	15,767
Recorded Investment:
Collectively evaluated for impairment	$	233,605		$	292,798		$	820,023		$	60,859		$	131,620		$	94,378		$	26,689		$	—	$	1,659,972
Individually evaluated for impairment	2,165			6,999			2,171			2,969			753			1,148			721			—		16,926
Purchased credit-impaired	65			1,166			790			—			94			—			—			—		2,115
Total	$	235,835		$	300,963		$	822,984		$	63,828		$	132,467		$	95,526		$	27,410		$	—	$	1,679,013
Ratio of allowance for loan losses to total loans	1.55		%	0.76		%	0.79		%	1.07		%	0.78		%	0.56		%	1.38		%	NM		0.94		%
Allowance for loan losses to non-accrual loans	NM			NM			NM			NM			254		%	NM			NM			NM		3,883		%

NM - Not Meaningful

Certain Loans Acquired in Transfer Not Accounted for as Debt Securities Acquired During Period

The following table reflects the unpaid principal balance and related carrying value of PCI loans.



PCI Loans	March 31, 2018				December 31, 2017
(in thousands)	Unpaid Principal Balance		Carrying Value		Unpaid Principal Balance		Carrying Value
Commercial and industrial	$	141	$	52	$	276	$	65
Commercial real estate, owner occupied	1,284		1,194		1,297		1,166
Commercial real estate, investor	1,056		797		1,064		790
Home equity	226		92		231		94
Total purchased credit-impaired loans	$	2,707	$	2,135	$	2,868	$	2,115

Accretable Yield Activity

The activities in the accretable yield, or income expected to be earned over the remaining lives of the PCI loans were as follows:



Accretable Yield	Three months ended
(in thousands)	March 31, 2018			March 31, 2017
Balance at beginning of period	$	1,254		$	1,476
Accretion	(112		)	(90		)
Balance at end of period	$	1,142		$	1,386