Note 3 - Loans and Allowance for Loan Losses

9 Months Ended

Sep. 30, 2015

Receivables [Abstract]

Loans, Notes, Trade and Other Receivables Disclosure [Text Block]

3.     LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans originated for investment are stated at their principal amount outstanding adjusted for partial charge-offs, the allowance, and net deferred loan fees and costs. Interest income on loans is accrued over the term of the loans primarily using the simple interest method based on the principal balance outstanding. Interest is not accrued on loans where collectability is uncertain. Accrued interest is presented separately in the consolidated balance sheet. Loan origination fees and certain direct costs incurred to extend credit are deferred and amortized over the term of the loan or loan commitment period as an adjustment to the related loan yield.

Acquired loans are those purchased in the Firstbank merger. These loans were recorded at estimated fair value at the Merger Date with no carryover of the related allowance. The acquired loans were segregated between those considered to be performing (“acquired non-impaired loans”) and those with evidence of credit deterioration (“acquired impaired loans”). Acquired loans are considered impaired if there is evidence of credit deterioration and if it is probable, at acquisition, all contractually required payments will not be collected. Acquired loans restructured after acquisition are not considered or reported as troubled debt restructurings if the loans evidenced credit deterioration as of the Merger Date and are accounted for in pools.

The fair value estimates for acquired loans are based on expected prepayments and the amount and timing of discounted expected principal, interest and other cash flows. Credit discounts representing the principal losses expected over the life of the loan are also a component of the initial fair value. In determining the Merger Date fair value of acquired impaired loans, and in subsequent accounting, we have generally aggregated acquired commercial and consumer loans into pools of loans with common risk characteristics.

The difference between the fair value of an acquired non-impaired loan and contractual amounts due at the Merger Date is accreted into income over the estimated life of the loan. Contractually required payments represent the total undiscounted amount of all uncollected principal and interest payments. Acquired non-impaired loans are placed on nonaccrual status and reported as nonperforming or past due using the same criteria applied to the originated loan portfolio.

The excess of an acquired impaired loan’s undiscounted contractually required payments over the amount of its undiscounted cash flows expected to be collected is referred to as the non-accretable difference. The non-accretable difference, which is neither accreted into income nor recorded on the consolidated balance sheet, reflects estimated future credit losses and uncollectible contractual interest expected to be incurred over the life of the acquired impaired loan. The excess cash flows expected to be collected over the carrying amount of the acquired loan is referred to as the accretable yield.

This amount is accreted into interest income over the remaining life of the acquired loans or pools using the level yield method. The accretable yield is affected by changes in interest rate indices for variable rate loans, changes in prepayment speed assumptions and changes in expected principal and interest payments over the estimated lives of the acquired impaired loans.

We evaluate quarterly the remaining contractual required payments receivable and estimate cash flows expected to be collected over the lives of the impaired loans. Contractually required payments receivable may increase or decrease for a variety of reasons, for example, when the contractual terms of the loan agreement are modified, when interest rates on variable rate loans change, or when principal and/or interest payments are received. Cash flows expected to be collected on acquired impaired loans are estimated by incorporating several key assumptions similar to the initial estimate of fair value. These key assumptions include probability of default, loss given default, and the amount of actual prepayments after the Merger Date. Prepayments affect the estimated lives of loans and could change the amount of interest income, and possibly principal, expected to be collected. In re-forecasting future estimated cash flows, credit loss expectations are adjusted as necessary. The adjustments are based, in part, on actual loss severities recognized for each loan type, as well as changes in the probability of default. For periods in which estimated cash flows are not re-forecasted, the prior reporting period’s estimated cash flows are adjusted to reflect the actual cash received and credit events that transpired during the current reporting period.

Increases in expected cash flows of acquired impaired loans subsequent to the Merger Date are recognized prospectively through adjustments of the yield on the loans or pools over their remaining lives, while decreases in expected cash flows are recognized as impairment through a provision for loan losses and an increase in the allowance.

Our total loans at September 30, 2015 were $2.22 billion compared to $2.09 billion at December 31, 2014, an increase of $128 million, or 6.1%. The components of our loan portfolio disaggregated by class of loan within the loan portfolio segments at September 30, 2015 and December 31, 2014, and the percentage change in loans from the end of 2014 to the end of the third quarter of 2015, are as follows:

											Percent
	September 30, 2015					December 31, 2014					Increase
	Balance		%			Balance		%			(Decrease)
Originated loans
Commercial:
Commercial and industrial	$	522,346,000		34.4	%	$	384,570,000		30.8	%		35.8	%
Vacant land, land development, and residential construction		30,958,000		2.0			29,826,000		2.4			3.8
Real estate – owner occupied		306,539,000		20.2			291,758,000		23.4			5.1
Real estate – non-owner occupied		505,715,000		33.3			410,977,000		33.0			23.1
Real estate – multi-family and residential rental		36,762,000		2.4			36,058,000		2.9			2.0
Total commercial		1,402,320,000		92.3			1,153,189,000		92.5			21.6
Retail:
Home equity and other		65,671,000		4.3			50,059,000		4.0			31.2
1-4 family mortgages		51,719,000		3.4			42,868,000		3.5			20.6
Total retail		117,390,000		7.7			92,927,000		7.5			26.3
Total originated loans	$	1,519,710,000		100.0	%	$	1,246,116,000		100.0	%		22.0	%

											Percent
	September 30, 2015					December 31, 2014					Increase
	Balance		%			Balance		%			(Decrease)
Acquired loans
Commercial:
Commercial and industrial	$	120,772,000		17.3	%	$	166,037,000		19.7			(27.3%	)
Vacant land, land development, and residential construction		16,776,000		2.4			22,148,000		2.6			(24.3	)
Real estate – owner occupied		120,477,000		17.3			138,630,000		16.4			(13.1	)
Real estate – non-owner occupied		130,512,000		18.7			148,597,000		17.6			(12.2	)
Real estate – multi-family and residential rental		86,763,000		12.4			86,702,000		10.3			0.1
Total commercial		475,300,000		68.1			562,114,000		66.6			(15.4	)
Retail:
Home equity and other		81,094,000		11.6			109,219,000		13.0			(25.8	)
1-4 family mortgages		141,284,000		20.3			171,828,000		20.4			(17.8	)
Total retail		222,378,000		31.9			281,047,000		33.4			(20.9	)
Total acquired loans	$	697,678,000		100.0	%	$	843,161,000		100.0	%		(17.3%	)

											Percent
	September 30, 2015					December 31, 2014					Increase
	Balance		%			Balance		%			(Decrease)
Total loans
Commercial:
Commercial and industrial	$	643,118,000		29.0	%	$	550,607,000		26.4	%		16.8	%
Vacant land, land development, and residential construction		47,734,000		2.2			51,974,000		2.5			(8.2	)
Real estate – owner occupied		427,016,000		19.3			430,388,000		20.5			(0.8	)
Real estate – non-owner occupied		636,227,000		28.6			559,574,000		26.8			13.7
Real estate – multi-family and residential rental		123,525,000		5.6			122,760,000		5.9			0.6
Total commercial		1,877,620,000		84.7			1,715,303,000		82.1			9.5
Retail:
Home equity and other		146,765,000		6.6			159,278,000		7.6			(7.9	)
1-4 family mortgages		193,003,000		8.7			214,696,000		10.3			(10.1	)
Total retail		339,768,000		15.3			373,974,000		17.9			(9.1	)
Total loans	$	2,217,388,000		100.0	%	$	2,089,277,000		100.0	%		6.1	%

The total outstanding balance and carrying value of acquired impaired loans was $25.9 million and $14.1 million, respectively, as of September 30, 2015. Changes in the accretable yield for acquired impaired loans for the three and nine months ended September 30, 2015 were as follows:

Balance at June 30, 2015	$	5,115,000
Additions		16,000
Accretion income		(653,000	)
Net reclassification from nonaccretable to accretable		1,520,000
Reductions (1)		(548,000	)
Ending balance	$	5,450,000
Balance at December 31, 2014	$	4,998,000
Additions		16,000
Accretion income		(1,980,000	)
Net reclassification from nonaccretable to accretable		3,166,000
Reductions (1)		(750,000	)
Ending balance	$	5,450,000

(1) Reductions primarily reflect the result of exit events, including loan payoffs and charge-offs.

Nonperforming originated loans as of September 30, 2015 and December 31, 2014 were as follows:

	September 30,		December 31,
	2015		2014
Loans past due 90 days or more still accruing interest	$	0	$	0
Nonaccrual loans		2,590,000		26,048,000
Total nonperforming originated loans	$	2,590,000	$	26,048,000

Nonperforming acquired loans as of September 30, 2015 and December 31, 2014 were as follows:

	September 30,		December 31,
	2015		2014
Loans past due 90 days or more still accruing interest	$	43,000	$	26,000
Nonaccrual loans		5,581,000		3,358,000
Total nonperforming acquired loans	$	5,624,000	$	3,384,000

The recorded principal balance of nonperforming loans was as follows:

	September 30,		December 31,
	2015		2014
Commercial:
Commercial and industrial	$	671,000	$	6,478,000
Vacant land, land development, and residential construction		170,000		209,000
Real estate – owner occupied		2,262,000		18,062,000
Real estate – non-owner occupied		79,000		378,000
Real estate – multi-family and residential rental		2,465,000		106,000
Total commercial		5,647,000		25,233,000
Retail:
Home equity and other		749,000		800,000
1-4 family mortgages		1,818,000		3,399,000
Total retail		2,567,000		4,199,000
Total nonperforming loans	$	8,214,000	$	29,432,000

Acquired impaired loans are not reported as nonperforming loans based on acquired impaired loan accounting. Acquired non-impaired loans are placed on nonaccrual status and reported as nonperforming or past due using the same criteria applied to the originated loan portfolio.

An age analysis of past due loans is as follows as of September 30, 2015:

	30 – 59		60 – 89		Greater Than 89								Recorded Balance > 89
	Days		Days		Days		Total				Total		Days and
	Past Due		Past Due		Past Due		Past Due		Current		Loans		Accruing
Originated loans
Commercial:
Commercial and industrial	$	28,000	$	0	$	0	$	28,000	$	522,318,000	$	522,346,000	$	0
Vacant land, land development, and residential construction		0		0		0		0		30,958,000		30,958,000		0
Real estate – owner occupied		0		0		13,000		13,000		306,526,000		306,539,000		0
Real estate – non-owner occupied		0		0		0		0		505,715,000		505,715,000		0
Real estate – multi-family and residential rental		0		0		0		0		36,762,000		36,762,000		0
Total commercial		28,000		0		13,000		41,000		1,402,279,000		1,402,320,000		0
Retail:
Home equity and other		33,000		21,000		4,000		58,000		65,613,000		65,671,000		0
1-4 family mortgages		115,000		67,000		296,000		478,000		51,241,000		51,719,000		0
Total retail		148,000		88,000		300,000		536,000		116,854,000		117,390,000		0
Total past due loans	$	176,000	$	88,000	$	313,000	$	577,000	$	1,519,133,000	$	1,519,710,000	$	0

	30 – 59		60 – 89		Greater Than 89								Recorded Balance > 89
	Days		Days		Days		Total				Total		Days and
	Past Due		Past Due		Past Due		Past Due		Current		Loans		Accruing
Acquired loans
Commercial:
Commercial and industrial	$	385,000	$	0	$	574,000	$	959,000	$	119,813,000	$	120,772,000	$	0
Vacant land, land development, and residential construction		257,000		0		0		257,000		16,519,000		16,776,000		0
Real estate – owner occupied		1,078,000		93,000		802,000		1,973,000		118,504,000		120,477,000		0
Real estate – non-owner occupied		0		0		80,000		80,000		130,432,000		130,512,000		0
Real estate – multi-family and residential rental		173,000		0		2,447,000		2,620,000		84,143,000		86,763,000		0
Total commercial		1,893,000		93,000		3,903,000		5,889,000		469,411,000		475,300,000		0
Retail:
Home equity and other		340,000		68,000		135,000		543,000		80,551,000		81,094,000		0
1-4 family mortgages		548,000		323,000		494,000		1,365,000		139,919,000		141,284,000		0
Total retail		888,000		391,000		629,000		1,908,000		220,470,000		222,378,000		0
Total past due loans	$	2,781,000	$	484,000	$	4,532,000	$	7,797,000	$	689,881,000	$	697,678,000	$	0

An age analysis of past due loans is as follows as of December 31, 2014:

	30 – 59		60 – 89		Greater Than 89								Recorded Balance > 89
	Days		Days		Days		Total				Total		Days and
	Past Due		Past Due		Past Due		Past Due		Current		Loans		Accruing
Originated loans
Commercial:
Commercial and industrial	$	0	$	0	$	0	$	0	$	384,570,000	$	384,570,000	$	0
Vacant land, land development, and residential construction		0		0		0		0		29,826,000		29,826,000		0
Real estate – owner occupied		0		0		120,000		120,000		291,638,000		291,758,000		0
Real estate – non-owner occupied		0		0		116,000		116,000		410,861,000		410,977,000		0
Real estate – multi-family and residential rental		0		0		0		0		36,058,000		36,058,000		0
Total commercial		0		0		236,000		236,000		1,152,953,000		1,153,189,000		0
Retail:
Home equity and other		38,000		3,000		0		41,000		50,018,000		50,059,000		0
1-4 family mortgages		0		0		366,000		366,000		42,502,000		42,868,000		0
Total retail		38,000		3,000		366,000		407,000		92,520,000		92,927,000		0
Total past due loans	$	38,000	$	3,000	$	602,000	$	643,000	$	1,245,473,000	$	1,246,116,000	$	0

	30 – 59		60 – 89		Greater Than 89								Recorded Balance > 89
	Days		Days		Days		Total				Total		Days and
	Past Due		Past Due		Past Due		Past Due		Current		Loans		Accruing
Acquired Loans
Commercial:
Commercial and industrial	$	29,000	$	32,000	$	76,000	$	137,000	$	165,900,000	$	166,037,000	$	0
Vacant land, land development, and residential construction		0		38,000		0		38,000		22,110,000		22,148,000		0
Real estate – owner occupied		51,000		425,000		1,625,000		2,101,000		136,529,000		138,630,000		0
Real estate – non-owner occupied		68,000		598,000		395,000		1,061,000		147,536,000		148,597,000		0
Real estate – multi-family and residential rental		37,000		0		105,000		142,000		86,560,000		86,702,000		0
Total commercial		185,000		1,093,000		2,201,000		3,479,000		558,635,000		562,114,000		0
Retail:
Home equity and other		445,000		419,000		155,000		1,019,000		108,200,000		109,219,000		26,000
1-4 family mortgages		1,087,000		408,000		750,000		2,245,000		169,583,000		171,828,000		0
Total retail		1,532,000		827,000		905,000		3,264,000		277,783,000		281,047,000		26,000
Total past due loans	$	1,717,000	$	1,920,000	$	3,106,000	$	6,743,000	$	836,418,000	$	843,161,000	$	26,000

Impaired originated loans as of September 30, 2015, and average originated impaired loans for the three and nine months ended September 30, 2015, were as follows:

						Third Quarter		Year-To-Date
	Unpaid					Average		Average
	Contractual		Recorded			Recorded		Recorded
	Principal		Principal		Related	Principal		Principal
	Balance		Balance		Allowance	Balance		Balance
With no related allowance recorded
Commercial:
Commercial and industrial	$	1,893,000	$	1,893,000		$	1,908,000	$	1,729,000
Vacant land, land development and residential construction		0		0			0		101,000
Real estate – owner occupied		302,000		103,000			113,000		1,032,000
Real estate – non-owner occupied		5,733,000		5,733,000			5,747,000		3,204,000
Real estate – multi-family and residential rental		0		0			151,000		232,000
Total commercial		7,928,000		7,729,000			7,919,000		6,298,000
Retail:
Home equity and other		214,000		190,000			189,000		190,000
1-4 family mortgages		1,399,000		735,000			716,000		631,000
Total retail		1,613,000		925,000			905,000		821,000
Total with no related allowance recorded	$	9,541,000	$	8,654,000		$	8,824,000	$	7,119,000

							Third Quarter		Year-To-Date
	Unpaid						Average		Average
	Contractual		Recorded				Recorded		Recorded
	Principal		Principal		Related		Principal		Principal
	Balance		Balance		Allowance		Balance		Balance
With an allowance recorded
Commercial:
Commercial and industrial	$	470,000	$	413,000	$	271,000	$	436,000	$	2,816,000
Vacant land, land development and residential construction		2,275,000		1,920,000		308,000		2,052,000		2,026,000
Real estate – owner occupied		6,377,000		1,824,000		494,000		1,959,000		8,778,000
Real estate – non-owner occupied		4,897,000		4,897,000		194,000		4,926,000		10,371,000
Real estate – multi-family and residential rental		1,052,000		1,052,000		390,000		1,179,000		1,266,000
Total commercial		15,071,000		10,106,000		1,657,000		10,552,000		25,257,000
Retail:
Home equity and other		195,000		157,000		121,000		160,000		143,000
1-4 family mortgages		165,000		130,000		49,000		131,000		641,000
Total retail		360,000		287,000		170,000		291,000		784,000
Total with an allowance recorded	$	15,431,000	$	10,393,000	$	1,827,000	$	10,843,000	$	26,041,000
Total impaired loans:
Commercial	$	22,999,000	$	17,835,000	$	1,657,000	$	18,471,000	$	31,555,000
Retail		1,973,000		1,212,000		170,000		1,196,000		1,605,000
Total impaired loans	$	24,972,000	$	19,047,000	$	1,827,000	$	19,667,000	$	33,160,000

Impaired acquired loans as of September 30, 2015, and average impaired acquired loans for the three and nine months ended September 30, 2015, were as follows:

						Third Quarter		Year-To-Date
	Unpaid					Average		Average
	Contractual		Recorded			Recorded		Recorded
	Principal		Principal		Related	Principal		Principal
	Balance		Balance		Allowance	Balance		Balance
With no related allowance recorded
Commercial:
Commercial and industrial	$	1,697,000	$	1,661,000		$	1,596,000	$	1,432,000
Vacant land, land development and residential construction		0		0			0		0
Real estate – owner occupied		1,593,000		1,391,000			910,000		535,000
Real estate – non-owner occupied		768,000		768,000			656,000		487,000
Real estate – multi-family and residential rental		2,680,000		2,637,000			2,885,000		1,799,000
Total commercial		6,738,000		6,457,000			6,047,000		4,253,000
Retail:
Home equity and other		449,000		322,000			342,000		423,000
1-4 family mortgages		1,030,000		953,000			816,000		855,000
Total retail		1,479,000		1,275,000			1,158,000		1,278,000
Total with no related allowance recorded	$	8,217,000	$	7,732,000		$	7,205,000	$	5,531,000

							Third Quarter		Year-To-Date
	Unpaid						Average		Average
	Contractual		Recorded				Recorded		Recorded
	Principal		Principal		Related		Principal		Principal
	Balance		Balance		Allowance		Balance		Balance
With an allowance recorded
Commercial:
Commercial and industrial	$	66,000	$	66,000	$	5,000	$	73,000	$	65,000
Vacant land, land development and residential construction		0		0		0		0		0
Real estate – owner occupied		51,000		51,000		4,000		568,000		1,016,000
Real estate – non-owner occupied		0		0		0		0		0
Real estate – multi-family and residential rental		25,000		25,000		0		26,000		20,000
Total commercial		142,000		142,000		9,000		667,000		1,101,000
Retail:
Home equity and other		0		0		0		0		0
1-4 family mortgages		176,000		176,000		6,000		229,000		185,000
Total retail		176,000		176,000		6,000		229,000		185,000
Total with an allowance recorded	$	318,000	$	318,000	$	15,000	$	896,000	$	1,286,000
Total impaired loans:
Commercial	$	6,880,000	$	6,599,000	$	9,000	$	6,714,000	$	5,354,000
Retail		1,655,000		1,451,000		6,000		1,387,000		1,463,000
Total impaired loans	$	8,535,000	$	8,050,000	$	15,000	$	8,101,000	$	6,817,000

Impaired originated loans as of December 31, 2014, and average impaired originated loans for the three and nine months ended September 30, 2014, were as follows:

						Third Quarter		Year-To-Date
	Unpaid					Average		Average
	Contractual		Recorded			Recorded		Recorded
	Principal		Principal		Related	Principal		Principal
	Balance		Balance		Allowance	Balance		Balance
With no related allowance recorded
Commercial:
Commercial and industrial	$	1,170,000	$	1,164,000		$	691,000	$	525,000
Vacant land, land development and residential construction		540,000		209,000			111,000		232,000
Real estate – owner occupied		3,609,000		1,901,000			9,227,000		4,981,000
Real estate – non-owner occupied		1,210,000		1,210,000			576,000		911,000
Real estate – multi-family and residential rental		375,000		317,000			0		0
Total commercial		6,904,000		4,801,000			10,605,000		6,649,000
Retail:
Home equity and other		207,000		191,000			642,000		598,000
1-4 family mortgages		1,144,000		560,000			553,000		591,000
Total retail		1,351,000		751,000			1,195,000		1,189,000
Total with no related allowance recorded	$	8,255,000	$	5,552,000		$	11,800,000	$	7,838,000

							Third Quarter		Year-To-Date
	Unpaid						Average		Average
	Contractual		Recorded				Recorded		Recorded
	Principal		Principal		Related		Principal		Principal
	Balance		Balance		Allowance		Balance		Balance
With an allowance recorded
Commercial:
Commercial and industrial	$	5,299,000	$	5,226,000	$	1,578,000	$	3,087,000	$	2,142,000
Vacant land, land development and residential construction		2,000,000		2,000,000		151,000		3,049,000		3,536,000
Real estate – owner occupied		15,745,000		15,674,000		2,200,000		2,238,000		1,869,000
Real estate – non-owner occupied		16,033,000		15,949,000		4,779,000		17,377,000		18,819,000
Real estate – multi-family and residential rental		1,371,000		1,371,000		666,000		1,679,000		1,783,000
Total commercial		40,448,000		40,220,000		9,374,000		27,430,000		28,149,000
Retail:
Home equity and other		115,000		84,000		84,000		88,000		139,000
1-4 family mortgages		2,194,000		2,000,000		694,000		2,093,000		2,144,000
Total retail		2,309,000		2,084,000		778,000		2,181,000		2,283,000
Total with an allowance recorded	$	42,757,000	$	42,304,000	$	10,152,000	$	29,611,000	$	30,432,000
Total impaired loans:
Commercial	$	47,352,000	$	45,021,000	$	9,374,000	$	38,035,000	$	34,798,000
Retail		3,660,000		2,835,000		778,000		3,376,000		3,472,000
Total impaired loans	$	51,012,000	$	47,856,000	$	10,152,000	$	41,411,000	$	38,270,000

Impaired acquired loans as of December 31, 2014, and average impaired acquired loans for the three and nine months ended September 30, 2014, were as follows:

						Third Quarter		Year-To-Date
	Unpaid					Average		Average
	Contractual		Recorded			Recorded		Recorded
	Principal		Principal		Related	Principal		Principal
	Balance		Balance		Allowance	Balance		Balance
With no related allowance recorded
Commercial:
Commercial and industrial	$	1,586,000	$	1,579,000		$	0	$	0
Vacant land, land development and residential construction		0		0			0		0
Real estate – owner occupied		113,000		113,000			0		0
Real estate – non-owner occupied		326,000		326,000			0		0
Real estate – multi-family and residential rental		487,000		487,000			0		0
Total commercial		2,512,000		2,505,000			0		0
Retail:
Home equity and other		641,000		639,000			0		0
1-4 family mortgages		866,000		866,000			0		0
Total retail		1,507,000		1,505,000			0		0
Total with no related allowance recorded	$	4,019,000	$	4,010,000		$	0	$	0

							Third Quarter		Year-To-Date
	Unpaid						Average		Average
	Contractual		Recorded				Recorded		Recorded
	Principal		Principal		Related		Principal		Principal
	Balance		Balance		Allowance		Balance		Balance
With an allowance recorded
Commercial:
Commercial and industrial	$	0	$	0	$	0	$	0	$	0
Vacant land, land development and residential construction		0		0		0		0		0
Real estate – owner occupied		1,516,000		1,502,000		605,000		0		0
Real estate – non-owner occupied		0		0		0		0		0
Real estate – multi-family and residential rental		0		0		0		0		0
Total commercial		1,516,000		1,502,000		605,000		0		0
Retail:
Home equity and other		0		0		0		0		0
1-4 family mortgages		0		0		0		0		0
Total retail		0		0		0		0		0
Total with an allowance recorded	$	1,516,000	$	1,502,000	$	605,000	$	0	$	0
Total impaired loans:
Commercial	$	4,028,000	$	4,007,000	$	605,000	$	0	$	0
Retail		1,507,000		1,505,000		0		0		0
Total impaired loans	$	5,535,000	$	5,512,000	$	605,000	$	0	$	0

Impaired loans for which no allocation of the allowance for loan losses has been made generally reflect situations whereby the loans have been charged-down to estimated collateral value. Interest income recognized on accruing troubled debt restructurings totaled $0.3 million and $0.6 million during the third quarter of 2015 and 2014, respectively, while interest income recognized on accruing troubled debt restructurings totaled $1.0 million and $1.3 million during the first nine months of 2015 and 2014, respectively. No interest income was recognized on nonaccrual loans during the third quarter and first nine months of 2015 or during the respective 2014 periods.

Credit Quality Indicators. We utilize a comprehensive grading system for our commercial loans. All commercial loans are graded on a ten grade rating system. The rating system utilizes standardized grade paradigms that analyze several critical factors such as cash flow, operating performance, financial condition, collateral, industry condition and management. All commercial loans are graded at inception and reviewed and, if appropriate, re-graded at various intervals thereafter. The risk assessment for retail loans is primarily based on the type of collateral and payment activity.

Credit quality indicators were as follows as of September 30, 2015:

Originated loans

Commercial credit exposure – credit risk profiled by internal credit risk grades:

	Commercial and Industrial		Commercial Vacant Land, Land Development, and Residential Construction		Commercial Real Estate - Owner Occupied		Commercial Real Estate - Non-Owner Occupied		Commercial Real Estate - Multi-Family and Residential Rental
Internal credit risk grade groupings:
Grades 1 – 4	$	363,211,000	$	17,906,000	$	211,563,000	$	378,741,000	$	18,842,000
Grades 5 – 7		158,699,000		11,132,000		92,583,000		121,241,000		16,868,000
Grades 8 – 9		436,000		1,920,000		2,393,000		5,733,000		1,052,000
Total commercial	$	522,346,000	$	30,958,000	$	306,539,000	$	505,715,000	$	36,762,000

Retail credit exposure – credit risk profiled by collateral type:

	Retail		Retail
	Home Equity		1-4 Family
	and Other		Mortgages
Total retail	$	65,671,000	$	51,719,000

Acquired loans

Commercial credit exposure – credit risk profiled by internal credit risk grades:

	Commercial and Industrial		Commercial Vacant Land, Land Development, and Residential Construction		Commercial Real Estate - Owner Occupied		Commercial Real Estate - Non-Owner Occupied		Commercial Real Estate - Multi-Family and Residential Rental
Internal credit risk grade groupings:
Grades 1 – 4	$	67,167,000	$	4,918,000	$	46,693,000	$	70,884,000	$	46,299,000
Grades 5 – 7		50,573,000		11,028,000		68,194,000		57,262,000		37,162,000
Grades 8 – 9		3,032,000		830,000		5,590,000		2,366,000		3,302,000
Total commercial	$	120,772,000	$	16,776,000	$	120,477,000	$	130,512,000	$	86,763,000

Retail credit exposure – credit risk profiled by collateral type:

	Retail		Retail
	Home Equity		1-4 Family
	and Other		Mortgages
Total retail	$	81,094,000	$	141,284,000

Credit quality indicators were as follows as of December 31, 2014:

Originated loans

Commercial credit exposure – credit risk profiled by internal credit risk grades:

	Commercial and Industrial		Commercial Vacant Land, Land Development, and Residential Construction		Commercial Real Estate - Owner Occupied		Commercial Real Estate - Non-OwnerOccupied		Commercial Real Estate - Multi-Family and Residential Rental
Internal credit risk grade groupings:
Grades 1 – 4	$	266,631,000	$	11,242,000	$	190,656,000	$	285,035,000	$	12,394,000
Grades 5 – 7		109,639,000		16,375,000		83,123,000		113,982,000		22,282,000
Grades 8 – 9		8,300,000		2,209,000		17,979,000		11,960,000		1,382,000
Total commercial	$	384,570,000	$	29,826,000	$	291,758,000	$	410,977,000	$	36,058,000

Retail credit exposure – credit risk profiled by collateral type:

	Retail		Retail
	Home Equity		1-4 Family
	and Other		Mortgages
Total retail	$	50,059,000	$	42,868,000

Acquired loans

Commercial credit exposure – credit risk profiled by internal credit risk grades:

	Commercial and Industrial		Commercial Vacant Land, Land Development, and Residential Construction		Commercial Real Estate - Owner Occupied		Commercial Real Estate - Non-Owner Occupied		Commercial Real Estate - Multi-Family and Residential Rental
Internal credit risk grade groupings:
Grades 1 – 4	$	72,411,000	$	5,875,000	$	39,496,000	$	65,886,000	$	35,858,000
Grades 5 – 7		90,320,000		14,472,000		92,212,000		78,103,000		49,781,000
Grades 8 – 9		3,306,000		1,801,000		6,922,000		4,608,000		1,063,000
Total commercial	$	166,037,000	$	22,148,000	$	138,630,000	$	148,597,000	$	86,702,000

Retail credit exposure – credit risk profiled by collateral type:

	Retail		Retail
	Home Equity		1-4 Family
	and Other		Mortgages
Total retail	$	109,219,000	$	171,828,000

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

All commercial loans are graded using the following criteria:

Grade 1.	Excellent credit rating that contain very little, if any, risk of loss.
Grade 2.	Strong sources of repayment and have low repayment risk.
Grade 3.	Good sources of repayment and have limited repayment risk.
Grade 4.	Adequate sources of repayment and acceptable repayment risk; however, characteristics are present that render the credit more vulnerable to a negative event.
Grade 5.	Marginally acceptable sources of repayment and exhibit defined weaknesses and negative characteristics.
Grade 6.	Well defined weaknesses which may include negative current cash flow, high leverage, or operating losses. Generally, if the credit does not stabilize or if further deterioration is observed in the near term, the loan will likely be downgraded and placed on the Watch List (i.e., list of lending relationships that receive increased scrutiny and review by the Board of Directors and senior management).
Grade 7.	Defined weaknesses or negative trends that merit close monitoring through Watch List status.
Grade 8.	Inadequately protected by current sound net worth, paying capacity of the obligor, or pledged collateral, resulting in a distinct possibility of loss requiring close monitoring through Watch List status.
Grade 9.	Vital weaknesses exist where collection of principal is highly questionable.
Grade 10.	Considered uncollectable and of such little value that continuance as an asset is not warranted.

The primary risk elements with respect to commercial loans are the financial condition of the borrower, the sufficiency of collateral, and timeliness of scheduled payments. We have a policy of requesting and reviewing periodic financial statements from commercial loan customers and employ a disciplined and formalized review of the existence of collateral and its value. The primary risk element with respect to each residential real estate loan and consumer loan is the timeliness of scheduled payments. We have a reporting system that monitors past due loans and have adopted policies to pursue creditor’s rights in order to preserve our collateral position.

Activity in the allowance for loan losses and the recorded investments in originated loans as of and during the three and nine months ended September 30, 2015 are as follows:

	Commercial			Retail
	Loans			Loans			Unallocated			Total
Allowance for loan losses:
Balance at June 30, 2015	$	13,992,000		$	1,714,000		$	34,000		$	15,740,000
Provision for loan losses		9,000			(13,000	)		(89,000	)		(93,000	)
Charge-offs		0			(46,000	)		0			(46,000	)
Recoveries		200,000			36,000			0			236,000
Ending balance	$	14,201,000		$	1,691,000		$	(55,000	)	$	15,837,000
Allowance for loan losses:
Balance at December 31, 2014	$	17,736,000		$	1,487,000		$	76,000		$	19,299,000
Provision for loan losses		(1,641,000	)		578,000			(131,000	)		(1,194,000	)
Charge-offs		(4,276,000	)		(563,000	)		0			(4,839,000	)
Recoveries		2,382,000			189,000			0			2,571,000
Ending balance	$	14,201,000		$	1,691,000		$	(55,000	)	$	15,837,000
Ending balance: individually evaluated for impairment	$	1,657,000		$	170,000		$	0		$	1,827,000
Ending balance: collectively evaluated for impairment	$	12,544,000		$	1,521,000		$	(55,000	)	$	14,010,000
Total loans:
Ending balance	$	1,402,320,000		$	117,390,000					$	1,519,710,000
Ending balance: individually evaluated for impairment	$	17,835,000		$	1,212,000					$	19,047,000
Ending balance: collectively evaluated for impairment	$	1,384,485,000		$	116,178,000					$	1,500,663,000

Activity in the allowance for loan losses for acquired loans during the three and nine months ended September 30, 2015 is as follows:

	Commercial			Retail
	Loans			Loans			Unallocated		Total
Allowance for loan losses:
Balance at June 30, 2015	$	561,000		$	260,000		$	0	$	821,000
Provision for loan losses		(389,000	)		(18,000	)		0		(407,000	)
Charge-offs		(87,000	)		(49,000	)		0		(136,000	)
Recoveries		0			4,000			0		4,000
Ending balance	$	85,000		$	197,000		$	0	$	282,000
Allowance for loan losses:
Balance at December 31, 2014	$	681,000		$	61,000		$	0	$	742,000
Provision for loan losses		(479,000	)		173,000			0		(306,000	)
Charge-offs		(118,000	)		(56,000	)		0		(174,000	)
Recoveries		1,000			19,000			0		20,000
Ending balance	$	85,000		$	197,000		$	0	$	282,000

In accordance with acquisition accounting rules, acquired loans were recorded at fair value at the Merger Date and the prior allowance was eliminated.

Activity in the allowance for loan losses and the recorded investments in originated loans as of and during the three and nine months ended September 30, 2014 are as follows:

	Commercial			Retail
	Loans			Loans			Unallocated			Total
Allowance for loan losses:
Balance at June 30, 2014	$	19,107,000		$	1,774,000		$	(25,000	)	$	20,856,000
Provision for loan losses		(473,000	)		63,000			10,000			(400,000	)
Charge-offs		(24,000	)		(321,000	)		0			(345,000	)
Recoveries		102,000			161,000			0			263,000
Ending balance	$	18,712,000		$	1,677,000		$	(15,000	)	$	20,374,000
Allowance for loan losses:
Balance at December 31, 2013	$	20,455,000		$	2,358,000		$	8,000		$	22,821,000
Provision for loan losses		(2,251,000	)		(726,000	)		(23,000	)		(3,000,000	)
Charge-offs		(708,000	)		(328,000	)		0			(1,036,000	)
Recoveries		1,216,000			373,000			0			1,589,000
Ending balance	$	18,712,000		$	1,677,000		$	(15,000	)	$	20,374,000
Ending balance: individually evaluated for impairment	$	10,485,000		$	879,000		$	0		$	11,364,000
Ending balance: collectively evaluated for impairment	$	8,227,000		$	798,000		$	(15,000	)	$	9,010,000
Total loans:
Ending balance	$	1,103,802,000		$	82,911,000					$	1,186,713,000
Ending balance: individually evaluated for impairment	$	48,870,000		$	3,346,000					$	52,216,000
Ending balance: collectively evaluated for impairment	$	1,054,932,000		$	79,565,000					$	1,134,497,000

No allowance was established for acquired loans as of September 30, 2014.

Loans modified as troubled debt restructurings during the three months ended September 30, 2015 were as follows:

			Pre-		Post-
			Modification		Modification
			Recorded		Recorded
	Number of		Principal		Principal
	Contracts		Balance		Balance
Originated loans
Commercial:
Commercial and industrial		0	$	0	$	0
Vacant land, land development and residential construction		0		0		0
Real estate – owner occupied		0		0		0
Real estate – non-owner occupied		0		0		0
Real estate – multi-family and residential rental		0		0		0
Total originated commercial		0		0		0
Retail:
Home equity and other		0		0		0
1-4 family mortgages		0		0		0
Total originated retail		0		0		0
Total originated loans		0	$	0	$	0
Acquired loans
Commercial:
Commercial and industrial		0	$	0	$	0
Vacant land, land development and residential construction		0		0		0
Real estate – owner occupied		0		0		0
Real estate – non-owner occupied		1		237,000		237,000
Real estate – multi-family and residential rental		0		0		0
Total acquired commercial		1		237,000		237,000
Retail:
Home equity and other		0		0		0
1-4 family mortgages		0		0		0
Total acquired retail		0		0		0
Total acquired loans		1	$	237,000	$	237,000

Loans modified as troubled debt restructurings during the nine months ended September 30, 2015 were as follows:

			Pre-		Post-
			Modification		Modification
			Recorded		Recorded
	Number of		Principal		Principal
	Contracts		Balance		Balance
Originated loans
Commercial:
Commercial and industrial		9	$	1,876,000	$	1,901,000
Vacant land, land development and residential construction		0		0		0
Real estate – owner occupied		0		0		0
Real estate – non-owner occupied		0		0		0
Real estate – multi-family and residential rental		0		0		0
Total originated commercial		9		1,876,000		1,901,000
Retail:
Home equity and other		0		0		0
1-4 family mortgages		0		0		0
Total originated retail		0		0		0
Total originated loans		9	$	1,876,000	$	1,901,000
Acquired loans
Commercial:
Commercial and industrial		2	$	286,000	$	286,000
Vacant land, land development and residential construction		0		0		0
Real estate – owner occupied		3		66,000		66,000
Real estate – non-owner occupied		4		655,000		655,000
Real estate – multi-family and residential rental		2		202,000		202,000
Total acquired commercial		11		1,209,000		1,209,000
Retail:
Home equity and other		0		0		0
1-4 family mortgages		0		0		0
Total acquired retail		0		0		0
Total acquired loans		11	$	1,209,000	$	1,209,000

Loans modified as troubled debt restructurings during the three months ended September 30, 2014 were as follows:

			Pre-		Post-
			Modification		Modification
			Recorded		Recorded
	Number of		Principal		Principal
	Contracts		Balance		Balance
Originated loans
Commercial:
Commercial and industrial		2	$	5,994,000	$	6,094,000
Vacant land, land development and residential construction		0		0		0
Real estate – owner occupied		2		16,787,000		16,787,000
Real estate – non-owner occupied		0		0		0
Real estate – multi-family and residential rental		0		0		0
Total originated commercial		4		22,781,000		22,881,000
Retail:
Home equity and other		0		0		0
1-4 family mortgages		0		0		0
Total originated retail		0		0		0
Total originated loans		4	$	22,781,000	$	22,881,000
Acquired loans
Commercial:
Commercial and industrial		0	$	0	$	0
Vacant land, land development and residential construction		0		0		0
Real estate – owner occupied		0		0		0
Real estate – non-owner occupied		0		0		0
Real estate – multi-family and residential rental		0		0		0
Total acquired commercial		0		0		0
Retail:
Home equity and other		0		0		0
1-4 family mortgages		0		0		0
Total acquired retail		0		0		0
Total acquired loans		0	$	0	$	0

Loans modified as troubled debt restructurings during the nine months ended September 30, 2014 were as follows:

			Pre-		Post-
			Modification		Modification
			Recorded		Recorded
	Number of		Principal		Principal
	Contracts		Balance		Balance
Originated loans
Commercial:
Commercial and industrial		2	$	5,994,000	$	6,094,000
Vacant land, land development and residential construction		0		0		0
Real estate – owner occupied		3		17,783,000		17,783,000
Real estate – non-owner occupied		1		146,000		146,000
Real estate – multi-family and residential rental		0		0		0
Total originated commercial		6		23,923,000		24,023,000
Retail:
Home equity and other		0		0		0
1-4 family mortgages		0		0		0
Total originated retail		0		0		0
Total originated loans		6	$	23,923,000	$	24,023,000
Acquired loans
Commercial:
Commercial and industrial		0	$	0	$	0
Vacant land, land development and residential construction		0		0		0
Real estate – owner occupied		0		0		0
Real estate – non-owner occupied		0		0		0
Real estate – multi-family and residential rental		0		0		0
Total acquired commercial		0		0		0
Retail:
Home equity and other		0		0		0
1-4 family mortgages		0		0		0
Total acquired retail		0		0		0
Total acquired loans		0	$	0	$	0

The following originated loans, modified as troubled debt restructurings within the previous twelve months, became over 30 days past due within the three months ended September 30, 2015 (amounts as of period end):

			Recorded
	Number of		Principal
	Contracts		Balance
Commercial:
Commercial and industrial		0	$	0
Vacant land, land development and residential construction		0		0
Real estate – owner occupied		0		0
Real estate – non-owner occupied		0		0
Real estate – multi-family and residential rental		0		0
Total commercial		0		0
Retail:
Home equity and other		0		0
1-4 family mortgages		0		0
Total retail		0		0
Total		0	$	0

The following originated loans, modified as troubled debt restructurings within the previous twelve months, became over 30 days past due within the nine months ended September 30, 2015 (amounts as of period end):

			Recorded
	Number of		Principal
	Contracts		Balance
Commercial:
Commercial and industrial		0	$	0
Vacant land, land development and residential construction		0		0
Real estate – owner occupied		0		0
Real estate – non-owner occupied		0		0
Real estate – multi-family and residential rental		0		0
Total commercial		0		0
Retail:
Home equity and other		0		0
1-4 family mortgages		0		0
Total retail		0		0
Total		0	$	0

The following acquired loans, modified as troubled debt restructurings within the previous twelve months, became over 30 days past due within the three months ended September 30, 2015 (amounts as of period end):

			Recorded
	Number of		Principal
	Contracts		Balance
Commercial:
Commercial and industrial		0	$	0
Vacant land, land development and residential construction		0		0
Real estate – owner occupied		1		18,000
Real estate – non-owner occupied		0		0
Real estate – multi-family and residential rental		0		0
Total commercial		1		18,000
Retail:
Home equity and other		0		0
1-4 family mortgages		0		0
Total retail		0		0
Total		1	$	18,000

The following acquired loans, modified as troubled debt restructurings within the previous twelve months, became over 30 days past due within the nine months ended September 30, 2015 (amounts as of period end):

			Recorded
	Number of		Principal
	Contracts		Balance
Commercial:
Commercial and industrial		0	$	0
Vacant land, land development and residential construction		0		0
Real estate – owner occupied		1		18,000
Real estate – non-owner occupied		0		0
Real estate – multi-family and residential rental		0		0
Total commercial		1		18,000
Retail:
Home equity and other		0		0
1-4 family mortgages		0		0
Total retail		0		0
Total		1	$	18,000

The following originated loans, modified as troubled debt restructurings within the previous twelve months, became over 30 days past due within the three months ended September 30, 2014 (amounts as of period end):

			Recorded
	Number of		Principal
	Contracts		Balance
Commercial:
Commercial and industrial		0	$	0
Vacant land, land development and residential construction		0		0
Real estate – owner occupied		0		0
Real estate – non-owner occupied		0		0
Real estate – multi-family and residential rental		0		0
Total commercial		0		0
Retail:
Home equity and other		0		0
1-4 family mortgages		0		0
Total retail		0		0
Total		0	$	0

The following originated loans, modified as troubled debt restructurings within the previous twelve months, became over 30 days past due within the nine months ended September 30, 2014 (amounts as of period end):

			Recorded
	Number of		Principal
	Contracts		Balance
Commercial:
Commercial and industrial		0	$	0
Vacant land, land development and residential construction		0		0
Real estate – owner occupied		0		0
Real estate – non-owner occupied		0		0
Real estate – multi-family and residential rental		0		0
Total commercial		0		0
Retail:
Home equity and other		0		0
1-4 family mortgages		0		0
Total retail		0		0
Total		0	$	0

Activity for originated loans categorized as troubled debt restructurings during the three months ended September 30, 2015 is as follows:

	Commercial and Industrial			Commercial Vacant Land, Land Development, and Residential Construction			Commercial Real Estate - Owner Occupied			Commercial Real Estate - Non-Owner Occupied			Commercial Real Estate - Multi-Family and Residential Rental
Commercial Loan Portfolio:
Beginning Balance	$	2,442,000		$	2,632,000		$	2,218,000		$	11,082,000		$	491,000
Charge-Offs		0			0			0			0			0
Payments		(56,000	)		(272,000	)		(291,000	)		(324,000	)		(7,000	)
Transfers to ORE		0			0			0			0			0
Net Additions/Deletions		(302,000	)		0			0			0			0
Ending Balance	$	2,084,000		$	2,360,000		$	1,927,000		$	10,758,000		$	484,000

	Retail		Retail
	Home Equity		1-4 Family
	and Other		Mortgages
Retail Loan Portfolio:
Beginning Balance	$	0	$	270,000
Charge-Offs		0		0
Payments		0		(3,000	)
Transfers to ORE		0		0
Net Additions/Deletions		0		0
Ending Balance	$	0	$	267,000

Activity for acquired loans categorized as troubled debt restructurings during the three months ended September 30, 2015 is as follows:

	Commercial and Industrial			Commercial Vacant Land, Land Development, and Residential Construction		Commercial Real Estate - Owner Occupied			Commercial Real Estate - Non-Owner Occupied			Commercial Real Estate - Multi-Family and Residential Rental
Commercial Loan Portfolio:
Beginning Balance	$	1,521,000		$	0	$	1,350,000		$	361,000		$	580,000
Charge-Offs		0			0		0			0			(42,000	)
Payments		(324,000	)		0		(77,000	)		(5,000	)		(274,000	)
Transfers to ORE		0			0		0			0			0
Net Additions/Deletions		0			0		0			236,000			0
Ending Balance	$	1,197,000		$	0	$	1,273,000		$	592,000		$	264,000

	Retail			Retail
	Home Equity			1-4 Family
	and Other			Mortgages
Retail Loan Portfolio:
Beginning Balance	$	152,000		$	177,000
Charge-Offs		0			0
Payments		(5,000	)		(1,000	)
Transfers to ORE		0			0
Net Additions/Deletions		0			0
Ending Balance	$	147,000		$	176,000

Activity for originated loans categorized as troubled debt restructurings during the nine months ended September 30, 2015 is as follows:

	Commercial and Industrial			Commercial Vacant Land, Land Development, and Residential Construction			Commercial Real Estate - Owner Occupied			Commercial Real Estate - Non-Owner Occupied			Commercial Real Estate - Multi-Family and Residential Rental
Commercial Loan Portfolio:
Beginning Balance	$	7,026,000		$	2,680,000		$	17,160,000		$	17,439,000		$	505,000
Charge-Offs		0			0			(4,198,000	)		0			0
Payments		(6,591,000	)		(320,000	)		(11,035,000	)		(6,681,000	)		(21,000	)
Transfers to ORE		0			0			0			0			0
Net Additions/Deletions		1,649,000			0			0			0			0
Ending Balance	$	2,084,000		$	2,360,000		$	1,927,000		$	10,758,000		$	484,000

	Retail		Retail
	Home Equity		1-4 Family
	and Other		Mortgages
Retail Loan Portfolio:
Beginning Balance	$	0	$	1,967,000
Charge-Offs		0		(148,000	)
Payments		0		(1,552,000	)
Transfers to ORE		0		0
Net Additions/Deletions		0		0
Ending Balance	$	0	$	267,000

Activity for acquired loans categorized as troubled debt restructurings during the nine months ended September 30, 2015 is as follows:

	Commercial and Industrial			Commercial Vacant Land, Land Development, and Residential Construction		Commercial Real Estate - Owner Occupied			Commercial Real Estate - Non-Owner Occupied			Commercial Real Estate - Multi-Family and Residential Rental
Commercial Loan Portfolio:
Beginning Balance	$	1,439,000		$	0	$	1,569,000		$	64,000		$	381,000
Charge-Offs		0			0		0			0			(42,000	)
Payments		(597,000	)		0		(296,000	)		(6,000	)		(329,000	)
Transfers to ORE		0			0		0			0			0
Net Additions/Deletions		355,000			0		0			534,000			254,000
Ending Balance	$	1,197,000		$	0	$	1,273,000		$	592,000		$	264,000

	Retail			Retail
	Home Equity			1-4 Family
	and Other			Mortgages
Retail Loan Portfolio:
Beginning Balance	$	26,000		$	178,000
Charge-Offs		0			0
Payments		(32,000	)		(2,000	)
Transfers to ORE		0			0
Net Additions/Deletions		153,000			0
Ending Balance	$	147,000		$	176,000

Activity for originated loans categorized as troubled debt restructurings during the three months ended September 30, 2014 is as follows:

	Commercial and Industrial			Commercial Vacant Land, Land Development, and Residential Construction			Commercial Real Estate - Owner Occupied			Commercial Real Estate - Non-Owner Occupied			Commercial Real Estate - Multi-Family and Residential Rental
Commercial Loan Portfolio:
Beginning Balance	$	1,176,000		$	3,786,000		$	2,711,000		$	18,664,000		$	719,000
Charge-Offs		0			0			0			0			0
Payments		(205,000	)		(287,000	)		(91,000	)		(655,000	)		(130,000	)
Transfers to ORE		(21,000	)		0			0			0			0
Net Additions/Deletions		6,315,000			0			16,748,000			0			0
Ending Balance	$	7,265,000		$	3,499,000		$	19,368,000		$	18,009,000		$	589,000

	Retail		Retail
	Home Equity		1-4 Family
	and Other		Mortgages
Retail Loan Portfolio:
Beginning Balance	$	0	$	2,077,000
Charge-Offs		0		0
Payments		0		(51,000	)
Transfers to ORE		0		0
Net Additions/Deletions		0		0
Ending Balance	$	0	$	2,026,000

Activity for originated loans categorized as troubled debt restructurings during the nine months ended September 30, 2014 is as follows:

	Commercial and Industrial			Commercial Vacant Land, Land Development, and Residential Construction			Commercial Real Estate - Owner Occupied			Commercial Real Estate - Non-Owner Occupied			Commercial Real Estate - Multi-Family and Residential Rental
Commercial Loan Portfolio:
Beginning Balance	$	1,656,000		$	4,501,000		$	1,816,000		$	22,311,000		$	2,620,000
Charge-Offs		(67,000	)		0			(11,000	)		0			(420,000	)
Payments		(632,000	)		(3,901,000	)		(181,000	)		(4,621,000	)		(1,611,000	)
Transfers to ORE		(21,000	)		0			0			0			0
Net Additions/Deletions		6,329,000			2,899,000			17,744,000			319,000			0
Ending Balance	$	7,265,000		$	3,499,000		$	19,368,000		$	18,009,000		$	589,000

	Retail		Retail
	Home Equity		1-4 Family
	and Other		Mortgages
Retail Loan Portfolio:
Beginning Balance	$	0	$	2,191,000
Charge-Offs		0		0
Payments		0		(165,000	)
Transfers to ORE		0		0
Net Additions/Deletions		0		0
Ending Balance	$	0	$	2,026,000

The allowance related to originated loans categorized as troubled debt restructurings was as follows: 

	September 30,		December 31,
	2015		2014
Commercial:
Commercial and industrial	$	132,000	$	16,000
Vacant land, land development, and residential construction		234,000		151,000
Real estate – owner occupied		114,000		182,000
Real estate – non-owner occupied		194,000		4,778,000
Real estate – multi-family and residential rental		390,000		666,000
Total commercial		1,064,000		5,793,000
Retail:
Home equity and other		0		0
1-4 family mortgages		0		0
Total retail		0		0
Total related allowance	$	1,064,000	$	5,793,000

In general, our policy dictates that a renewal or modification of an 8- or 9-rated commercial loan meets the criteria of a troubled debt restructuring, although we review and consider all renewed and modified loans as part of our troubled debt restructuring assessment procedures. Loan relationships rated 8 contain significant financial weaknesses, resulting in a distinct possibility of loss, while relationships rated 9 reflect vital financial weaknesses, resulting in a highly questionable ability on our part to collect principal; we believe borrowers warranting such ratings would have difficulty obtaining financing from other market participants. Thus, due to the lack of comparable market rates for loans with similar risk characteristics, we believe 8- or 9-rated loans renewed or modified were done so at below market rates. Loans that are identified as troubled debt restructurings are considered impaired and are individually evaluated for impairment when assessing these credits in our allowance for loan losses calculation.