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Loans and Allowance for Loan Losses - (Tables)

6 Months Ended

Jun. 30, 2019

The following table shows outstanding loans by class and payment aging as of June 30, 2019 and December 31, 2018.



Loan Aging Analysis by Class
(in thousands)	Commercial and industrial		Commercial real estate, owner-occupied		Commercial real estate, investor		Construction		Home equity		Other residential		Installment and other consumer		Total
June 30, 2019
30-59 days past due	$	—	$	—	$	—	$	—	$	272	$	—	$	144	$	416
60-89 days past due	—		—		—		—		—		—		20		20
90 days or more past due	—		—		—		—		84		—		—		84
Total past due	—		—		—		—		356		—		164		520
Current	234,832		306,327		878,969		63,563		125,612		124,120		30,936		1,764,359
Total loans ²	$	234,832	$	306,327	$	878,969	$	63,563	$	125,968	$	124,120	$	31,100	$	1,764,879
Non-accrual loans ¹	$	354	$	—	$	—	$	—	$	157	$	—	$	63	$	574
December 31, 2018
30-59 days past due	$	5	$	—	$	1,004	$	—	$	—	$	—	$	112	$	1,121
60-89 days past due	—		—		—		—		—		—		—		—
90 days or more past due	—		—		—		—		—		—		—		—
Total past due	5		—		1,004		—		—		—		112		1,121
Current	230,734		313,277		872,406		76,423		124,696		117,847		27,360		1,762,743
Total loans ²	$	230,739	$	313,277	$	873,410	$	76,423	$	124,696	$	117,847	$	27,472	$	1,763,864
Non-accrual loans ¹	$	319	$	—	$	—	$	—	$	313	$	—	$	65	$	697

¹ Includes no purchased credit impaired ("PCI") loans at June 30, 2019 and December 31, 2018. Amounts exclude accreting PCI loans with carrying values totaling $2.1 million at June 30, 2019 and December 31, 2018, 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 June 30, 2019 or December 31, 2018.

² Amounts include net deferred loan origination costs of $781 thousand and $635 thousand at June 30, 2019 and December 31, 2018, respectively. Amounts are also net of unaccreted purchase discounts on non-PCI loans of $669 thousand and $708 thousand at June 30, 2019 and December 31, 2018, 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 June 30, 2019 and December 31, 2018.



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
June 30, 2019
Pass	$	208,201	$	285,221	$	875,504	$	63,563	$	123,440	$	124,120	$	30,947	$	2,081	$	1,713,077
Special Mention	25,926		10,861		2,643		—		2,121		—		—		—		41,551
Substandard	688		9,080		—		—		330		—		153		—		10,251
Total loans	$	234,815	$	305,162	$	878,147	$	63,563	$	125,891	$	124,120	$	31,100	$	2,081	$	1,764,879
December 31, 2018
Pass	$	219,625	$	299,998	$	870,443	$	73,735	$	122,844	$	117,847	$	27,312	$	2,112	$	1,733,916
Special Mention	9,957		4,106		2,156		—		1,121		—		—		—		17,340
Substandard	1,126		7,986		—		2,688		648		—		160		—		12,608
Total loans	$	230,708	$	312,090	$	872,599	$	76,423	$	124,613	$	117,847	$	27,472	$	2,112	$	1,763,864

Troubled Debt Restructurings on Financing Receivables

The following table summarizes the carrying amount of TDR loans by loan class as of June 30, 2019 and December 31, 2018.



(in thousands)
Recorded Investment in Troubled Debt Restructurings ¹	June 30, 2019		December 31, 2018
Commercial and industrial	$	1,433	$	1,506
Commercial real estate, owner-occupied	7,000		6,993
Commercial real estate, investor	1,796		1,821
Construction	488		2,688
Home equity	251		251
Other residential	457		462
Installment and other consumer	665		685
Total	$	12,090	$	14,406

¹There were no acquired TDR loans as of June 30, 2019 or December 31, 2018. TDR loans on non-accrual status totaled $361 thousand and $65 thousand at June 30, 2019 and December 31, 2018, respectively.

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 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
TDRs during the three months ended June 30, 2019:
Commercial and industrial	1	$	298	$	298	$	298
TDRs during the three months ended June 30, 2018:
Commercial and industrial	2	$	254	$	245	$	235



TDRs during the six months ended June 30, 2019:
Commercial and industrial	1	$	298	$	298	$	298
TDRs during the six months ended June 30, 2018:
Commercial and industrial	2	$	254	$	245	$	235

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
June 30, 2019
Recorded investment in impaired loans:
With no specific allowance recorded	$	320	$	—	$	—	$	488	$	157	$	457	$	105	$	1,527
With a specific allowance recorded	1,169		7,000		1,796		—		251		—		560		10,776
Total recorded investment in impaired loans	$	1,489	$	7,000	$	1,796	$	488	$	408	$	457	$	665	$	12,303
Unpaid principal balance of impaired loans	$	1,472	$	6,993	$	1,789	$	486	$	407	$	456	$	664	$	12,267
Specific allowance	342		123		42		—		5		—		64		576
Average recorded investment in impaired loans during the quarter ended June 30, 2019	1,498		7,000		1,804		1,590		503		458		670		13,523
Interest income recognized on impaired loans during the quarter ended June 30, 2019¹	19		66		20		13		29		5		6		158
Average recorded investment in impaired loans during the six months ended June 30, 2019	1,607		6,998		1,809		1,956		523		460		675		14,028
Interest income recognized on impaired loans during the six months ended June 30, 2019¹	41		132		39		56		33		9		13		323
Average recorded investment in impaired loans during the quarter ended June 30, 2018	2,092		7,005		1,849		2,833		736		990		708		16,213
Interest income recognized on impaired loans during the quarter ended June 30, 2018¹	28		66		20		37		5		13		8		177
Average recorded investment in impaired loans during the six months ended June 30, 2018	2,104		7,003		1,956		2,878		742		1,043		712		16,438
Interest income recognized on impaired loans during the six months ended June 30, 2018¹	183		132		42		75		10		26		15		483

¹Interest income recognized on a cash basis during the three and six months ended June 30, 2019 totaled $24 thousand related to the pay-off of a non-accrual home equity loan. No interest income on impaired loans was recognized on a cash basis during the three months ended June 30, 2018. Interest income recognized on a cash basis totaled $128 thousand during the six months ended June 30, 2018 related to the pay-off of two non-accrual commercial PCI loans.



(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, 2018
Recorded investment in impaired loans:
With no specific allowance recorded	$	303	$	—	$	—	$	2,688	$	313	$	462	$	111	$	3,877
With a specific allowance recorded	1,522		6,993		1,821		—		251		—		574		11,161
Total recorded investment in impaired loans	$	1,825	$	6,993	$	1,821	$	2,688	$	564	$	462	$	685	$	15,038
Unpaid principal balance of impaired loans	$	1,813	$	6,993	$	1,812	$	2,688	$	562	$	461	$	684	$	15,013
Specific allowance	$	466	$	189	$	45	$	—	$	5	$	—	$	73	$	778

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 June 30, 2019
Beginning balance	$	2,612		$	2,358		$	7,766		$	704		$	923		$	800	$	340		$	314		$	15,817
Provision (reversal)	(250		)	(37		)	(57		)	(85		)	(16		)	49		(17		)	413			—
Charge-offs	—			—			—			—			—			—		—			—			—
Recoveries	6			—			12			—			—			—		—			—			18
Ending balance	$	2,368		$	2,321		$	7,721		$	619		$	907		$	849	$	323		$	727		$	15,835
Three months ended June 30, 2018
Beginning balance	$	3,693		$	2,080		$	6,455		$	697		$	979		$	543	$	351		$	973		$	15,771
Provision (reversal)	(1,098		)	259			935			(189		)	(27		)	203		(66		)	(17		)	—
Charge-offs	(3		)	—			—			—			—			—		(2		)	—			(5		)
Recoveries	5			—			—			—			—			—		42			—			47
Ending balance	$	2,597		$	2,339		$	7,390		$	508		$	952		$	746	$	325		$	956		$	15,813



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
Six months ended June 30, 2019
Allowance for loan losses:
Beginning balance	$	2,436		$	2,407		$	7,703	$	756		$	915		$	800	$	310		$	494	$	15,821
Provision (reversal)	(70		)	(86		)	6		(137		)	(8		)	49		13			233		—
Charge-offs	(9		)	—			—		—			—			—		—			—		(9		)
Recoveries	11			—			12		—			—			—		—			—		23
Ending balance	$	2,368		$	2,321		$	7,721	$	619		$	907		$	849	$	323		$	727	$	15,835
Six months ended June 30, 2018
Allowance for loan losses:
Beginning balance	$	3,654		$	2,294		$	6,475	$	681		$	1,031		$	536	$	378		$	718	$	15,767
Provision (reversal)	(1,063		)	45			915		(173		)	(79		)	210		(93		)	238		—
Charge-offs	(3		)	—			—		—			—			—		(2		)	—		(5		)
Recoveries	9			—			—		—			—			—		42			—		51
Ending balance	$	2,597		$	2,339		$	7,390	$	508		$	952		$	746	$	325		$	956	$	15,813



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
June 30, 2019
Ending ALLL related to loans collectively evaluated for impairment	$	2,026		$	2,198		$	7,679		$	619		$	902		$	849		$	259		$	727	$	15,259
Ending ALLL related to loans individually evaluated for impairment	342			123			42			—			5			—			64			—		576
Ending ALLL related to PCI loans	—			—			—			—			—			—			—			—		—
Ending balance	$	2,368		$	2,321		$	7,721		$	619		$	907		$	849		$	323		$	727	$	15,835
Recorded Investment:
Collectively evaluated for impairment	$	233,326		$	298,162		$	876,351		$	63,075		$	125,483		$	123,663		$	30,435		$	—	$	1,750,495
Individually evaluated for impairment	1,489			7,000			1,796			488			408			457			665			—		12,303
PCI loans	17			1,165			822			—			77			—			—			—		2,081
Total	$	234,832		$	306,327		$	878,969		$	63,563		$	125,968		$	124,120		$	31,100		$	—	$	1,764,879
Ratio of allowance for loan losses to total loans	1.01		%	0.76		%	0.88		%	0.97		%	0.72		%	0.68		%	1.04		%	NM		0.90		%
Allowance for loan losses to non-accrual loans	669		%	NM			NM			NM			578		%	NM			513		%	NM		2,759		%

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, 2018
Ending ALLL related to loans collectively evaluated for impairment	$	1,970		$	2,218		$	7,658		$	756		$	910		$	800		$	237		$	494	$	15,043
Ending ALLL related to loans individually evaluated for impairment	466			189			45			—			5			—			73			—		778
Ending ALLL related to purchased credit-impaired loans	—			—			—			—			—			—			—			—		—
Ending balance	$	2,436		$	2,407		$	7,703		$	756		$	915		$	800		$	310		$	494	$	15,821
Recorded Investment:
Collectively evaluated for impairment	$	228,883		$	305,097		$	870,778		$	73,735		$	124,049		$	117,385		$	26,787		$	—	$	1,746,714
Individually evaluated for impairment	1,825			6,993			1,821			2,688			564			462			685			—		15,038
Purchased credit-impaired	31			1,187			811			—			83			—			—			—		2,112
Total	$	230,739		$	313,277		$	873,410		$	76,423		$	124,696		$	117,847		$	27,472		$	—	$	1,763,864
Ratio of allowance for loan losses to total loans	1.06		%	0.77		%	0.88		%	0.99		%	0.73		%	0.68		%	1.13		%	NM		0.90		%
Allowance for loan losses to non-accrual loans	764		%	NM			NM			NM			292		%	NM			NM			NM		2,270		%

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	June 30, 2019				December 31, 2018
(in thousands)	Unpaid Principal Balance		Carrying Value		Unpaid Principal Balance		Carrying Value
Commercial and industrial	$	64	$	17	$	89	$	31
Commercial real estate, owner occupied	1,221		1,165		1,247		1,187
Commercial real estate, investor	1,017		822		1,033		811
Home equity	200		77		210		83
Total purchased credit-impaired loans	$	2,502	$	2,081	$	2,579	$	2,112

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						Six months ended
(in thousands)	June 30, 2019			June 30, 2018			June 30, 2019			June 30, 2018
Balance at beginning of period	$	875		$	1,142		$	934		$	1,254
Accretion	(56		)	(83		)	(115		)	(195		)
Balance at end of period	$	819		$	1,059		$	819		$	1,059