Loan and Lease Receivables, Impaired Loans and Leases and Allowance for Loan and Lease Losses (Tables)

3 Months Ended

Mar. 31, 2019

Loan and lease receivables consist of the following:



	March 31, 2019		December 31, 2018
	(In Thousands)
Commercial real estate:
Commercial real estate — owner occupied	$	212,698	$	203,476
Commercial real estate — non-owner occupied	479,061		484,427
Land development	47,503		42,666
Construction	169,894		161,562
Multi-family	184,490		167,868
1-4 family	33,255		34,340
Total commercial real estate	1,126,901		1,094,339
Commercial and industrial	466,277		462,321
Direct financing leases, net	32,724		33,170
Consumer and other:
Home equity and second mortgages	8,377		8,438
Other	23,367		20,789
Total consumer and other	31,744		29,227
Total gross loans and leases receivable	1,657,646		1,619,057
Less:
Allowance for loan and lease losses	20,449		20,425
Deferred loan fees	1,000		1,402
Loans and leases receivable, net	$	1,636,197	$	1,597,230

Ownership of SBA Loans

The total amount of the Corporation’s ownership of SBA loans comprised of the following:



	March 31, 2019		December 31, 2018
	(In Thousands)
Retained, unguaranteed portions of sold SBA loans	$	23,403	$	23,898
Other SBA loans⁽¹⁾	22,880		22,024
Total SBA loans	$	46,283	$	45,922


(1)	Primarily consisted of SBA CAPLine, Express, and impaired loans that were repurchased from the secondary market, all of which are not saleable.

Financing Receivable by Credit Quality Indicators

The following tables illustrate ending balances of the Corporation’s loan and lease portfolio, including impaired loans by class of receivable, and considering certain credit quality indicators:



	March 31, 2019
	Category
	I			II			III			IV			Total
	(Dollars in Thousands)
Commercial real estate:
Commercial real estate — owner occupied	$	182,067		$	17,097		$	8,368		$	5,166		$	212,698
Commercial real estate — non-owner occupied	442,930			35,142			958			31			479,061
Land development	44,393			960			—			2,150			47,503
Construction	169,720			—			174			—			169,894
Multi-family	184,490			—			—			—			184,490
1-4 family	31,151			1,238			698			168			33,255
Total commercial real estate	1,054,751			54,437			10,198			7,515			1,126,901
Commercial and industrial	385,166			19,228			45,991			15,892			466,277
Direct financing leases, net	25,251			3,943			3,530			—			32,724
Consumer and other:
Home equity and second mortgages	8,253			75			49			—			8,377
Other	23,065			—			—			302			23,367
Total consumer and other	31,318			75			49			302			31,744
Total gross loans and leases receivable	$	1,496,486		$	77,683		$	59,768		$	23,709		$	1,657,646
Category as a % of total portfolio	90.28		%	4.69		%	3.60		%	1.43		%	100.00		%



	December 31, 2018
	Category
	I			II			III			IV			Total
	(Dollars in Thousands)
Commercial real estate:
Commercial real estate — owner occupied	$	177,222		$	15,085		$	5,506		$	5,663		$	203,476
Commercial real estate — non-owner occupied	458,185			24,873			1,338			31			484,427
Land development	39,472			981			—			2,213			42,666
Construction	161,360			—			202			—			161,562
Multi-family	167,868			—			—			—			167,868
1-4 family	32,004			1,451			707			178			34,340
Total commercial real estate	1,036,111			42,390			7,753			8,085			1,094,339
Commercial and industrial	374,371			19,370			51,474			17,106			462,321
Direct financing leases, net	26,013			6,090			1,067			—			33,170
Consumer and other:
Home equity and second mortgages	8,385			3			50			—			8,438
Other	20,499			—			—			290			20,789
Total consumer and other	28,884			3			50			290			29,227
Total gross loans and leases receivable	$	1,465,379		$	67,853		$	60,344		$	25,481		$	1,619,057
Category as a % of total portfolio	90.51		%	4.19		%	3.73		%	1.57		%	100.00		%

Past Due Financing Receivables

The delinquency aging of the loan and lease portfolio by class of receivable was as follows:



	March 31, 2019
	30-59 Days Past Due			60-89 Days Past Due			Greater Than 90 Days Past Due			Total Past Due			Current				Total Loans and Leases
	(Dollars in Thousands)
Accruing loans and leases
Commercial real estate:
Owner occupied	$	—		$	—		$	—		$	—		$	207,532			$	207,532
Non-owner occupied	—			—			—			—			479,030				479,030
Land development	—			—			—			—			45,353				45,353
Construction	—			—			—			—			169,894				169,894
Multi-family	—			—			—			—			184,490				184,490
1-4 family	—			—			—			—			33,255				33,255
Commercial and industrial	757			—			—			757			449,628				450,385
Direct financing leases, net	—			—			—			—			32,724				32,724
Consumer and other:
Home equity and second mortgages	2			—			—			2			8,375				8,377
Other	—			—			—			—			23,066				23,066
Total	759			—			—			759			1,633,347				1,634,106
Non-accruing loans and leases
Commercial real estate:
Owner occupied	—			—			4,809			4,809			357				5,166
Non-owner occupied	—			—			31			31			—				31
Land development	—			—			119			119			2,031				2,150
Construction	—			—			—			—			—				—
Multi-family	—			—			—			—			—				—
1-4 family	—			—			—			—			—				—
Commercial and industrial	933			3,035			11,581			15,549			343				15,892
Direct financing leases, net	—			—			—			—			—				—
Consumer and other:
Home equity and second mortgages	—			—			—			—			—				—
Other	—			—			265			265			36				301
Total	933			3,035			16,805			20,773			2,767			—	23,540
Total loans and leases
Commercial real estate:
Owner occupied	—			—			4,809			4,809			207,889				212,698
Non-owner occupied	—			—			31			31			479,030				479,061
Land development	—			—			119			119			47,384				47,503
Construction	—			—			—			—			169,894				169,894
Multi-family	—			—			—			—			184,490				184,490
1-4 family	—			—			—			—			33,255				33,255
Commercial and industrial	1,690			3,035			11,581			16,306			449,971				466,277
Direct financing leases, net	—			—			—			—			32,724				32,724
Consumer and other:
Home equity and second mortgages	2			—			—			2			8,375				8,377
Other	—			—			265			265			23,102				23,367
Total	$	1,692		$	3,035		$	16,805		$	21,532		$	1,636,114			$	1,657,646
Percent of portfolio	0.10		%	0.18		%	1.02		%	1.30		%	98.70		%		100.00		%



	December 31, 2018
	30-59 Days Past Due			60-89 Days Past Due			Greater Than 90 Days Past Due			Total Past Due			Current			Total Loans and Leases
	(Dollars in Thousands)
Accruing loans and leases
Commercial real estate:
Owner occupied	$	157		$	—		$	—		$	157		$	197,656		$	197,813
Non-owner occupied	—			2,272			—			2,272			482,124			484,396
Land development	—			—			—			—			40,453			40,453
Construction	14,824			—			—			14,824			146,738			161,562
Multi-family	—			—			—			—			167,868			167,868
1-4 family	363			60			—			423			33,917			34,340
Commercial and industrial	826			247			—			1,073			444,144			445,217
Direct financing leases, net	—			—			—			—			33,170			33,170
Consumer and other:
Home equity and second mortgages	—			—			—			—			8,438			8,438
Other	—			—			—			—			20,499			20,499
Total	16,170			2,579			—			18,749			1,575,007			1,593,756
Non-accruing loans and leases
Commercial real estate:
Owner occupied	483			—			5,180			5,663			—			5,663
Non-owner occupied	—			—			31			31			—			31
Land development	—			—			119			119			2,094			2,213
Construction	—			—			—			—			—			—
Multi-family	—			—			—			—			—			—
1-4 family	—			—			—			—			—			—
Commercial and industrial	2,322			—			12,108			14,430			2,674			17,104
Direct financing leases, net	—			—			—			—			—			—
Consumer and other:
Home equity and second mortgages	—			—			—			—			—			—
Other	—			—			279			279			11			290
Total	2,805			—			17,717			20,522			4,779			25,301
Total loans and leases
Commercial real estate:
Owner occupied	640			—			5,180			5,820			197,656			203,476
Non-owner occupied	—			2,272			31			2,303			482,124			484,427
Land development	—			—			119			119			42,547			42,666
Construction	14,824			—			—			14,824			146,738			161,562
Multi-family	—			—			—			—			167,868			167,868
1-4 family	363			60			—			423			33,917			34,340
Commercial and industrial	3,148			247			12,108			15,503			446,818			462,321
Direct financing leases, net	—			—			—			—			33,170			33,170
Consumer and other:
Home equity and second mortgages	—			—			—			—			8,438			8,438
Other	—			—			279			279			20,510			20,789
Total	$	18,975		$	2,579		$	17,717		$	39,271		$	1,579,786		$	1,619,057
Percent of portfolio	1.17		%	0.16		%	1.09		%	2.42		%	97.58		%	100.00		%

Schedule of Financing Receivables, Non Accrual Status

The Corporation’s total impaired assets consisted of the following:



	March 31, 2019		December 31, 2018
	(In Thousands)
Non-accrual loans and leases
Commercial real estate:
Commercial real estate — owner occupied	$	5,166	$	5,663
Commercial real estate — non-owner occupied	31		31
Land development	2,150		2,213
Construction	—		—
Multi-family	—		—
1-4 family	—		—
Total non-accrual commercial real estate	7,347		7,907
Commercial and industrial	15,892		17,104
Direct financing leases, net	—		—
Consumer and other:
Home equity and second mortgages	—		—
Other	301		290
Total non-accrual consumer and other loans	301		290
Total non-accrual loans and leases	23,540		25,301
Foreclosed properties, net	2,547		2,547
Total non-performing assets	26,087		27,848
Performing troubled debt restructurings	169		180
Total impaired assets	$	26,256	$	28,028



	March 31, 2019		December 31, 2018
Total non-accrual loans and leases to gross loans and leases	1.42	%	1.56	%
Total non-performing assets to total gross loans and leases plus foreclosed properties, net	1.57		1.72
Total non-performing assets to total assets	1.30		1.42
Allowance for loan and lease losses to gross loans and leases	1.23		1.26
Allowance for loan and lease losses to non-accrual loans and leases	86.87		80.73

Troubled Debt Restructurings on Financing Receivables

The following table provides the number of loans modified in a troubled debt restructuring and the pre- and post-modification recorded investment by class of receivable:



	For the Three Months Ended March 31, 2019
	Number of Loans	Pre-Modification Recorded Investment		Post-Modification Recorded Investment
	(Dollars in Thousands)
Commercial and industrial	4	$	2,077	$	2,077

Impaired Financing Receivables

The following represents additional information regarding the Corporation’s impaired loans and leases, including performing troubled debt restructurings, by class:



	As of and for the Three Months Ended March 31, 2019
	Recorded Investment⁽¹⁾		Unpaid Principal Balance			Impairment Reserve		Average Recorded Investment⁽²⁾			Foregone Interest Income			Interest Income Recognized		Net Foregone Interest Income
	(In Thousands)
With no impairment reserve recorded:
Commercial real estate:
Owner occupied	$	776	$	776		$	—	$	4,725		$	21		$	355	$	(334	)
Non-owner occupied	31		71			—		229			1			—		1
Land development	2,150		6,447			—		2,198			16			—		16
Construction	—		—			—		—			—			—		—
Multi-family	—		—			—		—			—			—		—
1-4 family	168		173			—		171			—			6		(6		)
Commercial and industrial	3,794		4,337			—		12,172			140			307		(167		)
Direct financing leases, net	—		—			—		—			—			—		—
Consumer and other:
Home equity and second mortgages	—		—			—		—			—			—		—
Other	265		931			—		252			13			—		13
Total	7,184		12,735			—		19,747			191			668		(477		)
With impairment reserve recorded:
Commercial real estate:
Owner occupied	4,390		5,749			690		680			107			—		107
Non-owner occupied	—		—			—		—			—			—		—
Land development	—		—		—	—		—		—	—		—	—		—
Construction	—		—		—	—		—		—	—		—	—		—
Multi-family	—		—			—		—			—			—		—
1-4 family	—		—			—		—			—			—		—
Commercial and industrial	12,098		12,211			3,984		3,805			420			—		420
Direct financing leases, net	—		—			—		—			—			—		—
Consumer and other:
Home equity and second mortgages	—		—			—		—			—			—		—
Other	37		37			37		20			—			—		—
Total	16,525		17,997			4,711		4,505			527			—		527
Total:
Commercial real estate:
Owner occupied	5,166		6,525			690		5,405			128			355		(227		)
Non-owner occupied	31		71			—		229			1			—		1
Land development	2,150		6,447			—		2,198			16			—		16
Construction	—		—			—		—			—			—		—
Multi-family	—		—			—		—			—			—		—
1-4 family	168		173			—		171			—			6		(6		)
Commercial and industrial	15,892		16,548			3,984		15,977			560			307		253
Direct financing leases, net	—		—			—		—			—			—		—
Consumer and other:
Home equity and second mortgages	—		—			—		—			—			—		—
Other	302		968			37		272			13			—		13
Grand total	$	23,709	$	30,732		$	4,711	$	24,252		$	718		$	668	$	50


(1)	The recorded investment represents the unpaid principal balance net of any partial charge-offs.


(2)	Average recorded investment is calculated primarily using daily average balances.



	As of and for the Year Ended December 31, 2018
	Recorded Investment⁽¹⁾		Unpaid Principal Balance		Impairment Reserve		Average Recorded Investment⁽²⁾		Foregone Interest Income		Interest Income Recognized		Net Foregone Interest Income
	(In Thousands)
With no impairment reserve recorded:
Commercial real estate:
Owner occupied	$	1,273	$	1,273	$	—	$	6,638	$	756	$	197	$	559
Non-owner occupied	31		72		—		33		2		—		2
Land development	2,213		6,510		—		2,366		68		—		68
Construction	—		—		—		2,148		219		—		219
Multi-family	—		—		—		—		—		—		—
1-4 family	178		183		—		808		42		81		(39		)
Commercial and industrial	6,828		7,527		—		8,809		1,058		980		78
Direct financing leases, net	—		—		—		—		—		—		—
Consumer and other:
Home equity and second mortgages	—		—		—		1		—		46		(46		)
Other	279		945		—		305		55		—		55
Total	10,802		16,510		—		21,108		2,200		1,304		896
With impairment reserve recorded:
Commercial real estate:
Owner occupied	4,390		5,749		675		635		182		—		182
Non-owner occupied	—		—		—		—		—		—		—
Land development	—		—		—		—		—		—		—
Construction	—		—		—		—		—		—		—
Multi-family	—		—		—		—		—		—		—
1-4 family	—		—		—		—		—		—		—
Commercial and industrial	10,278		10,278		3,710		4,687		1,096		—		1,096
Direct financing leases, net	—		—		—		—		—		—		—
Consumer and other:
Home equity and second mortgages	—		—		—		—		—		—		—
Other	11		11		11		1		—		—		—
Total	14,679		16,038		4,396		5,323		1,278		—		1,278
Total:
Commercial real estate:
Owner occupied	5,663		7,022		675		7,273		938		197		741
Non-owner occupied	31		72		—		33		2		—		2
Land development	2,213		6,510		—		2,366		68		—		68
Construction	—		—		—		2,148		219		—		219
Multi-family	—		—		—		—		—		—		—
1-4 family	178		183		—		808		42		81		(39		)
Commercial and industrial	17,106		17,805		3,710		13,496		2,154		980		1,174
Direct financing leases, net	—		—		—		—		—		—		—
Consumer and other:
Home equity and second mortgages	—		—		—		1		—		46		(46		)
Other	290		956		11		306		55		—		55
Grand total	$	25,481	$	32,548	$	4,396	$	26,431	$	3,478	$	1,304	$	2,174


(1)	The recorded investment represents the unpaid principal balance net of any partial charge-offs.


(2)	Average recorded investment is calculated primarily using daily average balances.

Allowance for Loan and Lease Losses by Portfolio Segment

A summary of the activity in the allowance for loan and lease losses by portfolio segment is as follows:



	As of and for the Three Months Ended March 31, 2019
	Commercial Real Estate			Commercial and Industrial			Consumer and Other		Total
	(In Thousands)
Beginning balance	$	11,662		$	8,079		$	684	$	20,425
Charge-offs	—			(48		)	—		(48		)
Recoveries	1			19			3		23
Net recoveries (charge-offs)	1			(29		)	3		(25		)
Provision for loan and lease losses	(458		)	435			72		49
Ending balance	$	11,205		$	8,485		$	759	$	20,449



	As of and for the Three Months Ended March 31, 2018
	Commercial Real Estate			Commercial and Industrial			Consumer and Other			Total
	(In Thousands)
Beginning balance	$	10,131		$	8,225		$	407		$	18,763
Charge-offs	(2,175		)	(490		)	(20		)	(2,685		)
Recoveries	13			2			69			84
Net (charge-offs) recoveries	(2,162		)	(488		)	49			(2,601		)
Provision for loan and lease losses	2,021			414			41			2,476
Ending balance	$	9,990		$	8,151		$	497		$	18,638

Allowance for Loan and Lease Losses and Balances by Type of Allowance Methodology

The following tables provide information regarding the allowance for loan and lease losses and balances by type of allowance methodology.



	As of March 31, 2019
	Commercial Real Estate		Commercial and Industrial		Consumer and Other		Total
	(In Thousands)
Allowance for loan and lease losses:
Collectively evaluated for impairment	$	10,515	$	4,501	$	722	$	15,738
Individually evaluated for impairment	690		3,984		37		4,711
Loans acquired with deteriorated credit quality	—		—		—		—
Total	$	11,205	$	8,485	$	759	$	20,449
Loans and lease receivables:
Collectively evaluated for impairment	$	1,119,386	$	483,109	$	31,442	$	1,633,937
Individually evaluated for impairment	7,368		15,890		302		23,560
Loans acquired with deteriorated credit quality	147		2		—		149
Total	$	1,126,901	$	499,001	$	31,744	$	1,657,646



	As of December 31, 2018
	Commercial Real Estate		Commercial and Industrial		Consumer and Other		Total
	(In Thousands)
Allowance for loan and lease losses:
Collectively evaluated for impairment	$	10,987	$	4,369	$	673	$	16,029
Individually evaluated for impairment	675		3,710		11		4,396
Loans acquired with deteriorated credit quality	—		—		—		—
Total	$	11,662	$	8,079	$	684	$	20,425
Loans and lease receivables:
Collectively evaluated for impairment	$	1,086,254	$	478,385	$	28,937	$	1,593,576
Individually evaluated for impairment	7,914		17,104		290		25,308
Loans acquired with deteriorated credit quality	171		2		—		173
Total	$	1,094,339	$	495,491	$	29,227	$	1,619,057