Loans Held for Investment and Allowance for Loan Losses (Tables)

3 Months Ended

Mar. 31, 2016

Loans consist of the following:



	March 31, 2016			December 31, 2015
Commercial & Industrial
Agriculture	$	23		$	30
Death Care Management	5,084			4,832
Healthcare	17,365			15,240
Independent Pharmacies	43,185			41,588
Registered Investment Advisors	21,649			18,358
Veterinary Industry	22,385			21,579
Other Industries	7,251			3,230
Total	116,942			104,857
Construction & Development
Agriculture	12,420			11,351
Death Care Management	726			769
Healthcare	8,051			7,231
Independent Pharmacies	279			101
Registered Investment Advisors	286			378
Veterinary Industry	3,646			3,834
Other Industries	1,966			658
Total	27,374			24,322
Owner Occupied Commercial Real Estate
Agriculture	1,929			1,863
Death Care Management	22,318			20,327
Healthcare	44,286			37,684
Independent Pharmacies	7,285			7,298
Registered Investment Advisors	3,035			2,808
Veterinary Industry	61,744			59,999
Other Industries	5,338			4,752
Total	145,935			134,731
Commercial Land
Agriculture	23,081			16,036
Total	23,081			16,036
Total Loans¹	313,332			279,946
Net Deferred Costs	3,330			3,056
Discount on SBA 7(a) Unguaranteed²	(3,029		)	(3,033		)
Loans, Net of Unearned	$	313,633		$	279,969


1	Total loans include $24.6 million and $17.2 million of U.S. government guaranteed loans as of March 31, 2016 and December 31, 2015, respectively.


2	The Company measures the carrying value of the retained portion of loans sold at fair value under ASC Subtopic 825-10. The value of these retained loan balances is discounted based on the estimates derived from comparable unguaranteed loan sales.

Summary of Risk Grades of Each Category of Loans

The following tables summarize the risk grades of each category:



	Risk Grades 1 - 4		Risk Grade 5		Risk Grades 6 - 8		Total
March 31, 2016
Commercial & Industrial
Agriculture	$	23	$	—	$	—	$	23
Death Care Management	4,971		104		9		5,084
Healthcare	8,187		3,480		5,698		17,365
Independent Pharmacies	38,239		3,328		1,618		43,185
Registered Investment Advisors	20,545		721		383		21,649
Veterinary Industry	17,839		2,066		2,480		22,385
Other Industries	7,251		—		—		7,251
Total	97,055		9,699		10,188		116,942
Construction & Development
Agriculture	11,515		905		—		12,420
Death Care Management	726		—		—		726
Healthcare	8,051		—		—		8,051
Independent Pharmacies	279		—		—		279
Registered Investment Advisors	286		—		—		286
Veterinary Industry	2,453		1,193		—		3,646
Other Industries	1,966		—		—		1,966
Total	25,276		2,098		—		27,374
Owner Occupied Commercial Real Estate
Agriculture	1,929		—		—		1,929
Death Care Management	18,639		2,094		1,585		22,318
Healthcare	40,527		3,032		727		44,286
Independent Pharmacies	6,206		1,079		—		7,285
Registered Investment Advisors	3,035		—		—		3,035
Veterinary Industry	46,570		4,304		10,870		61,744
Other Industries	5,338		—		—		5,338
Total	122,244		10,509		13,182		145,935
Commercial Land
Agriculture	22,362		—		719		23,081
Total	22,362		—		719		23,081
Total¹	$	266,937	$	22,306	$	24,089	$	313,332



	Risk Grades 1 - 4		Risk Grade 5		Risk Grades 6 - 8		Total
December 31, 2015
Commercial & Industrial
Agriculture	$	30	$	—	$	—	$	30
Death Care Management	4,728		104		—		4,832
Healthcare	8,334		2,160		4,746		15,240
Independent Pharmacies	36,704		3,430		1,454		41,588
Registered Investment Advisors	17,508		850		—		18,358
Veterinary Industry	16,800		1,817		2,962		21,579
Other Industries	3,089		141		—		3,230
Total	87,193		8,502		9,162		104,857
Construction & Development
Agriculture	11,194		157		—		11,351
Death Care Management	769		—		—		769
Healthcare	7,231		—		—		7,231
Independent Pharmacies	101		—		—		101
Registered Investment Advisors	378		—		—		378
Veterinary Industry	2,581		1,253		—		3,834
Other Industries	658		—		—		658
Total	22,912		1,410		—		24,322
Owner Occupied Commercial Real Estate
Agriculture	1,863		—		—		1,863
Death Care Management	18,223		425		1,679		20,327
Healthcare	33,529		2,930		1,225		37,684
Independent Pharmacies	6,210		1,088		—		7,298
Registered Investment Advisors	2,808		—		—		2,808
Veterinary Industry	45,453		3,171		11,375		59,999
Other Industries	4,752		—		—		4,752
Total	112,838		7,614		14,279		134,731
Commercial Land
Agriculture	16,036		—		—		16,036
Total	16,036		—		—		16,036
Total¹	$	238,979	$	17,526	$	23,441	$	279,946

Total loans include $24.6 million of U.S. government guaranteed loans as of March 31, 2016, segregated by risk grade as follows: Risk Grades 1 – 4 = $5.9 million, Risk Grade 5 = $3.7 million, Risk Grades 6 – 8 = $15.0 million. As of December 31, 2015, total loans include $17.2 million of U.S. government guaranteed loans, segregated by risk grade as follows: Risk Grades 1 – 4 = $0, Risk Grade 5 = $2.6 million, Risk Grades 6 – 8 = $14.6 million.

Summary of Age Analysis of Past Due Loans

The following tables show an age analysis of past due loans as of the dates presented.



	Less Than 30 Days Past Due & Not Accruing		30-89 Days Past Due & Accruing		30-89 Days Past Due & Not Accruing		Greater Than 90 Days Past Due		Total Not Accruing & Past Due Loans		Current Loans		Total Loans		Loans 90 Days or More Past Due & Still Accruing
March 31, 2016
Commercial & Industrial
Agriculture	$	—	$	—	$	—	$	—	$	—	$	23	$	23	$	—
Death Care Management	—		—		—		—		—		5,084		5,084		—
Healthcare	78		188		911		3,222		4,399		12,966		17,365		—
Independent Pharmacies	302		589		270		—		1,161		42,024		43,185		—
Registered Investment Advisors	—		—		—		—		—		21,649		21,649		—
Veterinary Industry	201		—		607		885		1,693		20,692		22,385		—
Other Industries	—		—		—		—		—		7,251		7,251		—
Total	581		777		1,788		4,107		7,253		109,689		116,942		—
Construction & Development
Agriculture	—		—		—		—		—		12,420		12,420		—
Death Care Management	—		—		—		—		—		726		726		—
Healthcare	—		—		—		—		—		8,051		8,051		—
Independent Pharmacies	—		—		—		—		—		279		279		—
Registered Investment Advisors	—		—		—		—		—		286		286		—
Veterinary Industry	—		—		—		—		—		3,646		3,646		—
Other Industries	—		—		—		—		—		1,966		1,966		—
Total	—		—		—		—		—		27,374		27,374		—
Owner Occupied Commercial Real Estate
Agriculture	—		—		—		—		—		1,929		1,929		—
Death Care Management	1,423		222		—		—		1,645		20,673		22,318		—
Healthcare	357		258		133		93		841		43,445		44,286		—
Independent Pharmacies	—		—		—		—		—		7,285		7,285		—
Registered Investment Advisors	—		—		—		—		—		3,035		3,035		—
Veterinary Industry	1,363		5,038		908		3,357		10,666		51,078		61,744		—
Other Industries	—		—		—		—		—		5,338		5,338		—
Total	3,143		5,518		1,041		3,450		13,152		132,783		145,935		—
Commercial Land
Agriculture	719		—		—		—		719		22,362		23,081		—
Total	719		—		—		—		719		22,362		23,081		—
Total¹	$	4,443	$	6,295	$	2,829	$	7,557	$	21,124	$	292,208	$	313,332	$	—



	Less Than 30 Days Past Due & Not Accruing		30-89 Days Past Due & Accruing		30-89 Days Past Due & Not Accruing		Greater Than 90 Days Past Due		Total Not Accruing & Past Due Loans		Current Loans		Total Loans		Loans 90 Days or More Past Due & Still Accruing
December 31, 2015
Commercial & Industrial
Agriculture	$	—	$	—	$	—	$	—	$	—	$	30	$	30	$	—
Death Care Management	—		—		—		—		—		4,832		4,832		—
Healthcare	—		1,854		30		2,337		4,221		11,019		15,240		—
Independent Pharmacies	314		603		—		—		917		40,671		41,588		—
Registered Investment Advisors	—		—		—		—		—		18,358		18,358		—
Veterinary Industry	208		466		1,131		394		2,199		19,380		21,579		—
Other Industries	—		—		—		—		—		3,230		3,230		—
Total	522		2,923		1,161		2,731		7,337		97,520		104,857		—
Construction & Development
Agriculture	—		—		—		—		—		11,351		11,351		—
Death Care Management	—		—		—		—		—		769		769		—
Healthcare	—		—		—		—		—		7,231		7,231		—
Independent Pharmacies	—		—		—		—		—		101		101		—
Registered Investment Advisors	—		—		—		—		—		378		378		—
Veterinary Industry	—		—		—		—		—		3,834		3,834		—
Other Industries	—		—		—		—		—		658		658		—
Total	—		—		—		—		—		24,322		24,322		—
Owner Occupied Commercial Real Estate
Agriculture	—		—		—		—		—		1,863		1,863		—
Death Care Management	1,456		223		—		—		1,679		18,648		20,327		—
Healthcare	—		240		135		831		1,206		36,478		37,684		—
Independent Pharmacies	—		—		—		—		—		7,298		7,298		—
Registered Investment Advisors	—		—		—		—		—		2,808		2,808		—
Veterinary Industry	311		5,079		2,048		3,172		10,610		49,389		59,999		—
Other Industries	—		—		—		—		—		4,752		4,752		—
Total	1,767		5,542		2,183		4,003		13,495		121,236		134,731		—
Commercial Land
Agriculture	—		—		—		—		—		16,036		16,036		—
Total	—		—		—		—		—		16,036		16,036		—
Total¹	$	2,289	$	8,465	$	3,344	$	6,734	$	20,832	$	259,114	$	279,946	$	—

Total loans include $24.6 million of U.S. government guaranteed loans as of March 31, 2016, of which $6.6 million is greater than 90 days past due, $5.0 million is 30-89 days past due and $13.0 million is included in current loans as presented above. As of December 31, 2015, total loans include $17.2 million of U.S. government guaranteed loans, of which $5.9 million is greater than 90 days past due, $6.7 million is 30-89 days past due and $4.6 million is included in current loans as presented above.

Schedule of Nonaccrual Loans

Nonaccrual loans as of March 31, 2016 and December 31, 2015 are as follows:



March 31, 2016	Loan Balance		Guaranteed Balance		Unguaranteed Exposure
Commercial & Industrial
Healthcare	$	4,211	$	3,788	$	423
Independent Pharmacies	572		565		7
Veterinary Industry	1,693		1,542		151
Total	6,476		5,895		581
Owner Occupied Commercial Real Estate
Death Care Management	1,423		1,264		159
Healthcare	583		321		262
Veterinary Industry	5,628		4,388		1,240
Total	7,634		5,973		1,661
Commercial Land
Agriculture	719		540		179
Total	719		540		179
Total	$	14,829	$	12,408	$	2,421



December 31, 2015	Loan Balance		Guaranteed Balance		Unguaranteed Exposure
Commercial & Industrial
Healthcare	$	2,367	$	2,188	$	179
Independent Pharmacies	314		308		6
Veterinary Industry	1,733		1,572		161
Total	4,414		4,068		346
Owner Occupied Commercial Real Estate
Death Care Management	1,456		1,290		166
Healthcare	966		798		168
Veterinary Industry	5,531		4,174		1,357
Total	7,953		6,262		1,691
Total	$	12,367	$	10,330	$	2,037

Schedule of Allowance for Loan Losses by Portfolio Segment Allowance

The following table details activity in the allowance for loan losses by portfolio segment allowance for the periods presented:



Three months ended:	Construction & Development		Owner Occupied Commercial Real Estate			Commercial & Industrial			Commercial Land		Total
March 31, 2016
Beginning Balance	$	1,064	$	2,486		$	2,766		$	1,099	$	7,415
Charge offs	—		(7		)	(268		)	—		(275		)
Recoveries	—		—			43			—		43
Provision	99		96			804			434		1,433
Ending Balance	$	1,163	$	2,575		$	3,345		$	1,533	$	8,616
March 31, 2015
Beginning Balance	$	586	$	2,291		$	1,369		$	161	$	4,407
Charge offs	—		(79		)	(172		)	—		(251		)
Recoveries	—		1			—			—		1
Provision	169		(151		)	866			193		1,077
Ending Balance	$	755	$	2,062		$	2,063		$	354	$	5,234

The following tables detail the recorded allowance for loan losses and the investment in loans related to each portfolio segment, disaggregated on the basis of impairment evaluation methodology:



March 31, 2016	Construction & Development		Owner Occupied Commercial Real Estate		Commercial & Industrial		Commercial Land		Total
Allowance for Loan Losses:
Loans individually evaluated for impairment	$	—	$	1,104	$	961	$	82	$	2,147
Loans collectively evaluated for impairment²	1,163		1,471		2,384		1,451		6,469
Total allowance for loan losses	$	1,163	$	2,575	$	3,345	$	1,533	$	8,616
Loans receivable¹:
Loans individually evaluated for impairment	$	—	$	11,655	$	4,843	$	713	$	17,211
Loans collectively evaluated for impairment²	27,374		134,280		112,099		22,368		296,121
Total loans receivable	$	27,374	$	145,935	$	116,942	$	23,081	$	313,332



December 31, 2015	Construction & Development		Owner Occupied Commercial Real Estate		Commercial & Industrial		Commercial Land		Total
Allowance for Loan Losses:
Loans individually evaluated for impairment	$	—	$	1,090	$	672	$	—	$	1,762
Loans collectively evaluated for impairment²	1,064		1,396		2,094		1,099		5,653
Total allowance for loan losses	$	1,064	$	2,486	$	2,766	$	1,099	$	7,415
Loans Receivable¹:
Loans individually evaluated for impairment	$	—	$	9,821	$	3,226	$	—	$	13,047
Loans collectively evaluated for impairment²	24,322		124,910		101,631		16,036		266,899
Total loans receivable	$	24,322	$	134,731	$	104,857	$	16,036	$	279,946


1	Loans receivable includes $24.6 million of U.S. government guaranteed loans as of March 31, 2016, of which $15.4 million are impaired. As of December 31, 2015, loans receivable includes $17.2 million of U.S. government guaranteed loans, of which $14.1 million are considered impaired.

Summary of Loans Individually Evaluated for Impairment

Loans classified as impaired as of the dates presented are summarized in the following tables.



March 31, 2016	Recorded Investment		Guaranteed Balance		Unguaranteed Exposure
Commercial & Industrial
Death Care Management	$	9	$	—	$	9
Healthcare	5,697		3,788		1,909
Independent Pharmacies	1,960		886		1,074
Registered Investment Advisors	385		—		385
Veterinary Industry	2,793		2,002		791
Total	10,844		6,676		4,168
Owner Occupied Commercial Real Estate
Death Care Management	1,583		1,264		319
Healthcare	1,062		321		741
Veterinary Industry	12,273		6,551		5,722
Total	14,918		8,136		6,782
Commercial Land
Agriculture	713		539		174
Total	713		539		174
Total	$	26,475	$	15,351	$	11,124



December 31, 2015	Recorded Investment		Guaranteed Balance		Unguaranteed Exposure
Commercial & Industrial
Healthcare	$	4,442	$	3,341	$	1,101
Independent Pharmacies	1,546		637		909
Veterinary Industry	2,256		1,731		525
Total	8,244		5,709		2,535
Owner Occupied Commercial Real Estate
Death Care Management	1,454		1,290		164
Healthcare	965		799		166
Veterinary Industry	11,003		6,349		4,654
Total	13,422		8,438		4,984
Total	$	21,666	$	14,147	$	7,519

Schedule of Evaluated Balances of Loans Classified as Impaired

The following table presents evaluated balances of loans classified as impaired at the dates presented that carried an associated reserve as compared to those with no reserve. The recorded investment includes accrued interest and net deferred loan fees or costs.



	March 31, 2016
	Recorded Investment
	With a Recorded Allowance		With No Recorded Allowance		Total		Unpaid Principal Balance		Related Allowance Recorded
Commercial & Industrial
Death Care Management	$	9	$	—	$	9	$	9	$	3
Healthcare	5,501		196		5,697		6,160		635
Independent Pharmacies	1,616		344		1,960		2,057		311
Registered Investment Advisors	—		385		385		383		—
Veterinary Industry	2,793		—		2,793		3,207		365
Total	9,919		925		10,844		11,816		1,314
Owner Occupied Commercial Real Estate
Death Care Management	1,583		—		1,583		1,720		55
Healthcare	931		131		1,062		1,062		111
Veterinary Industry	10,009		2,264		12,273		12,995		1,187
Total	12,523		2,395		14,918		15,777		1,353
Commercial Land
Agriculture	713		—		713		719		82
Total	713		—		713		719		82
Total Impaired Loans	$	23,155	$	3,320	$	26,475	$	28,312	$	2,749



	December 31, 2015
	Recorded Investment
	With a Recorded Allowance		With No Recorded Allowance		Total		Unpaid Principal Balance		Related Allowance Recorded
Commercial & Industrial
Healthcare	$	4,242	$	200	$	4,442	$	4,742	$	478
Independent Pharmacies	1,199		347		1,546		2,041		287
Veterinary Industry	2,051		205		2,256		3,270		138
Total	7,492		752		8,244		10,053		903
Owner Occupied Commercial Real Estate
Death Care Management	1,454		—		1,454		1,591		9
Healthcare	965		—		965		1,096		96
Veterinary Industry	9,265		1,738		11,003		11,856		1,106
Total	11,684		1,738		13,422		14,543		1,211
Total Impaired Loans	$	19,176	$	2,490	$	21,666	$	24,596	$	2,114



	Three months ended March 31, 2016				Three months ended March 31, 2015
	Average Balance		Interest Income Recognized		Average Balance		Interest Income Recognized
Commercial & Industrial
Death Care Management	$	9	$	—	$	—	$	—
Healthcare	5,802		79		3,748		23
Independent Pharmacies	1,881		73		1,817		12
Registered Investment Advisors	385		7		—		—
Veterinary Industry	2,814		29		3,804		3
Total	10,891		188		9,369		38
Owner Occupied Commercial Real Estate
Death Care Management	1,594		7		1,532		—
Healthcare	987		19		2,136		—
Veterinary Industry	12,287		211		11,806		39
Other Industries	—		—		283		—
Total	14,868		237		15,757		39
Commercial Land
Agriculture	1,120		—		—		—
Total	1,120		—		—		—
Total	$	26,879	$	425	$	25,126	$	77

Summary of Types of Troubled Debt Restructurings

The following table represent the types of TDRs that were made during the periods presented:



	Three months ended March 31, 2016					Three months ended March 31, 2015
	All Restructurings					All Restructurings
	Number of Loans	Pre- modification Recorded Investment		Post- modification Recorded Investment		Number of Loans	Pre- modification Recorded Investment		Post- modification Recorded Investment
Interest Only
Commercial & Industrial
Healthcare	—	$	—	$	—	3	$	229	$	225
Owner Occupied Commercial Real Estate
Healthcare	—	—		—		1	41		40
Total Interest Only	—	—		—		4	270		265
Payment Deferral
Commercial & Industrial
Veterinary Industry	1	420		420		—	—		—
Total Payment Deferral	1	420		420		—	—		—
Total	1	$	420	$	420	4	$	270	$	265

The following table presents loans that were modified as TDRs within the previous twelve months ending March 31, 2015 for which there was a payment default:



	March 31, 2015
	TDR Defaults
	Number of Restructurings	Recorded Investment
Interest Only
Commercial and Industrial:
Healthcare	3	$	223
Owner Occupied Commercial Real Estate:
Healthcare	1	40
Veterinary Industry	1	74
Total Interest Only	5	337
Payment Deferral
Owner Occupied Commercial Real Estate:
Deathcare Management	1	1,697
Total Payment Deferral	1	1,697
Total	6	$	2,034