LOANS

Loans are summarized as follows:



Dollars in thousands	March 31, 2017		December 31, 2016		March 31, 2016
Commercial	$	134,808	$	119,088	$	101,742
Commercial real estate
Owner-occupied	217,733		203,047		202,680
Non-owner occupied	401,795		381,921		353,351
Construction and development
Land and land development	68,079		72,042		66,483
Construction	16,511		16,584		7,997
Residential real estate
Non-jumbo	266,140		265,641		221,368
Jumbo	60,780		65,628		50,057
Home equity	75,299		74,596		74,097
Mortgage warehouse lines	30,217		85,966		—
Consumer	24,440		25,534		19,095
Other	8,831		9,489		11,235
Total loans, net of unearned fees	1,304,633		1,319,536		1,108,105
Less allowance for loan losses	11,718		11,674		11,315
Loans, net	$	1,292,915	$	1,307,862	$	1,096,790

The outstanding balance and the recorded investment of acquired loans included in the consolidated balance sheet at March 31, 2017 are as follows:



	Acquired Loans
Dollars in thousands	Purchased Credit Impaired		Purchased Performing		Total
Outstanding balance	$	2,456	$	49,173	$	51,629

Recorded investment
Commercial	$	—	$	3,095	$	3,095
Commercial real estate
Owner-occupied	—		3,054		3,054
Non-owner occupied	—		1,118		1,118
Construction and development
Land and land development	—		3,608		3,608
Residential real estate
Non-jumbo	998		31,037		32,035
Jumbo	1,014		3,247		4,261
Consumer	—		3,708		3,708
Total recorded investment	$	2,012	$	48,867	$	50,879

The following table presents a summary of the change in the accretable yield of the PCI loan portfolio for the period from January 1, 2017 to March 31, 2017:



Dollars in thousands
Accretable yield, January 1, 2017	$	290
Accretion	(31		)
Reclassification of nonaccretable difference due to improvement in expected cash flows	—
Other changes, net	(14		)
Accretable yield, March 31, 2017	$	245

The following table presents the contractual aging of the recorded investment in past due loans by class as of March 31, 2017 and 2016 and December 31, 2016.



	At March 31, 2017
	Past Due										> 90 days and Accruing
Dollars in thousands	30-59 days		60-89 days		> 90 days		Total		Current		> 90 days and Accruing
Commercial	$	5	$	157	$	55	$	217	$	134,591	$	—
Commercial real estate
Owner-occupied	162		2,298		577		3,037		214,696		—
Non-owner occupied	298		—		—		298		401,497		—
Construction and development
Land and land development	252		38		3,741		4,031		64,048		—
Construction	—		—		—		—		16,511		—
Residential mortgage
Non-jumbo	2,554		926		3,140		6,620		259,520		—
Jumbo	—		—		—		—		60,780		—
Home equity	108		—		379		487		74,812		—
Mortgage warehouse lines	—		—		—		—		30,217		—
Consumer	158		14		161		333		24,107		68
Other	—		—		—		—		8,831		—
Total	$	3,537	$	3,433	$	8,053	$	15,023	$	1,289,610	$	68



	At December 31, 2016
	Past Due										> 90 days and Accruing
Dollars in thousands	30-59 days		60-89 days		> 90 days		Total		Current		> 90 days and Accruing
Commercial	$	90	$	86	$	165	$	341	$	118,747	$	—
Commercial real estate
Owner-occupied	93		—		509		602		202,445		—
Non-owner occupied	340		—		65		405		381,516		—
Construction and development
Land and land development	423		129		3,852		4,404		67,638		—
Construction	—		—		—		—		16,584		—
Residential mortgage
Non-jumbo	4,297		1,889		3,287		9,473		256,168		—
Jumbo	—		—		—		—		65,628		—
Home equity	—		302		57		359		74,237		—
Mortgage warehouse lines	—		—		—		—		85,966		—
Consumer	308		84		150		542		24,992		—
Other	—		—		—		—		9,489		—
Total	$	5,551	$	2,490	$	8,085	$	16,126	$	1,303,410	$	—



	At March 31, 2016
	Past Due										> 90 days and Accruing
Dollars in thousands	30-59 days		60-89 days		> 90 days		Total		Current		> 90 days and Accruing
Commercial	$	39	$	468	$	179	$	686	$	101,056	$	—
Commercial real estate
Owner-occupied	272		497		822		1,591		201,089		—
Non-owner occupied	153		—		749		902		352,449		—
Construction and development
Land and land development	178		41		4,739		4,958		61,525		—
Construction	—		—		—		—		7,997		—
Residential mortgage
Non-jumbo	2,555		832		1,906		5,293		216,075		—
Jumbo	—		—		—		—		50,057		—
Home equity	—		453		71		524		73,573		—
Consumer	70		21		117		208		18,887		—
Other	—		—		—		—		11,235		—
Total	$	3,267	$	2,312	$	8,583	$	14,162	$	1,093,943	$	—

Nonaccrual loans: The following table presents the nonaccrual loans included in the net balance of loans at March 31, 2017, December 31, 2016 and March 31, 2016.



	March 31,				December 31,
Dollars in thousands	2017		2016		2016
Commercial	$	226	$	430	$	298
Commercial real estate
Owner-occupied	577		822		509
Non-owner occupied	4,157		5,318		4,336
Construction and development
Land & land development	3,936		5,467		4,465
Construction	—		—		—
Residential mortgage
Non-jumbo	5,343		3,023		4,621
Jumbo	—		—		—
Home equity	542		225		194
Mortgage warehouse lines	—		—		—
Consumer	94		121		151
Total	$	14,875	$	15,406	$	14,574

Impaired loans: Impaired loans include the following:

▪

Loans which we risk-rate (consisting of loan relationships having aggregate balances in excess of $2.5 million, or loans exceeding $500,000 and exhibiting credit weakness) through our normal loan review procedures and which, based on current information and events, it is probable that we will be unable to collect all amounts due in accordance with the original contractual terms of the loan agreement. Risk-rated loans with insignificant delays or insignificant short falls in the amount of payments expected to be collected are not considered to be impaired.


▪	Loans that have been modified in a troubled debt restructuring.

Both commercial and consumer loans are deemed impaired upon being contractually modified in a troubled debt restructuring. Troubled debt restructurings typically result from our loss mitigation activities and occur when we grant a concession to a borrower who is experiencing financial difficulty in order to minimize our economic loss and to avoid foreclosure or repossession of collateral. Once restructured, a loan is generally considered impaired until its maturity, regardless of whether the borrower performs under the modified terms. Although such a loan may be returned to accrual status if the criteria set forth in our accounting policy are met, the loan would continue to be evaluated for an asset-specific allowance for loan losses and we would continue to report the loan in the impaired loan table below.

The following tables present loans individually evaluated for impairment at March 31, 2017, December 31, 2016 and March 31, 2016.



	March 31, 2017
Dollars in thousands	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Impaired Balance		Interest Income Recognized while impaired

Without a related allowance
Commercial	$	275	$	275	$	—	$	275	$	9
Commercial real estate
Owner-occupied	806		806		—		806		44
Non-owner occupied	9,678		9,679		—		9,679		271
Construction and development
Land & land development	4,884		4,885		—		4,885		81
Construction	—		—		—		—		—
Residential real estate
Non-jumbo	4,173		4,183		—		4,049		157
Jumbo	3,626		3,625		—		3,625		172
Home equity	524		523		—		523		24
Mortgage warehouse lines	—		—		—		—		—
Consumer	39		39		—		39		4
Total without a related allowance	$	24,005	$	24,015	$	—	$	23,881	$	762

With a related allowance
Commercial	$	—	$	—	$	—	$	—	$	—
Commercial real estate
Owner-occupied	6,847		6,847		375		6,847		268
Non-owner occupied	1,300		1,300		200		1,300		42
Construction and development
Land & land development	2,065		2,066		589		2,066		79
Construction	—		—		—		—		—
Residential real estate
Non-jumbo	2,298		2,300		337		2,041		96
Jumbo	852		852		25		852		43
Home equity	—		—		—		—		—
Mortgage warehouse lines	—		—		—		—		—
Consumer	—		—		—		—		—
Total with a related allowance	$	13,362	$	13,365	$	1,526	$	13,106	$	528

Total
Commercial	$	25,855	$	25,858	$	1,164	$	25,858	$	794
Residential real estate	11,473		11,483		362		11,090		492
Consumer	39		39		—		39		4
Total	$	37,367	$	37,380	$	1,526	$	36,987	$	1,290



	December 31, 2016
Dollars in thousands	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Impaired Balance		Interest Income Recognized while impaired

Without a related allowance
Commercial	$	285	$	285	$	—	$	247	$	10
Commercial real estate
Owner-occupied	520		520		—		534		31
Non-owner occupied	10,203		10,205		—		10,675		294
Construction and development
Land & land development	5,227		5,227		—		5,270		80
Construction	—		—		—		—		—
Residential real estate
Non-jumbo	4,055		4,065		—		3,910		193
Jumbo	3,640		3,639		—		3,693		175
Home equity	524		523		—		523		22
Mortgage warehouse lines	—		—		—		—		—
Consumer	44		44		—		50		5
Total without a related allowance	$	24,498	$	24,508	$	—	$	24,902	$	810

With a related allowance
Commercial	$	—	$	—	$	—	$	—	$	—
Commercial real estate
Owner-occupied	6,864		6,864		347		6,879		269
Non-owner occupied	1,311		1,311		197		1,327		43
Construction and development
Land & land development	2,066		2,066		585		2,074		80
Construction	—		—		—		—		—
Residential real estate
Non-jumbo	2,055		2,057		251		1,851		78
Jumbo	853		853		24		862		44
Home equity	—		—		—		—		—
Mortgage warehouse lines	—		—		—		—		—
Consumer	—		—		—		—		—
Total with a related allowance	$	13,149	$	13,151	$	1,404	$	12,993	$	514

Total
Commercial	$	26,476	$	26,478	$	1,129	$	27,006	$	807
Residential real estate	11,127		11,137		275		10,839		512
Consumer	44		44		—		50		5
Total	$	37,647	$	37,659	$	1,404	$	37,895	$	1,324



	March 31, 2016
Dollars in thousands	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Impaired Balance		Interest Income Recognized while impaired

Without a related allowance
Commercial	$	200	$	200	$	—	$	200	$	9
Commercial real estate
Owner-occupied	5,446		5,446		—		5,446		211
Non-owner occupied	11,352		11,353		—		11,353		299
Construction and development
Land & land development	7,451		7,452		—		7,452		163
Construction	—		—		—		—		—
Residential real estate
Non-jumbo	4,060		4,071		—		3,824		169
Jumbo	3,740		3,739		—		3,739		178
Home equity	710		709		—		709		32
Consumer	62		62		—		62		5
Total without a related allowance	$	33,021	$	33,032	$	—	$	32,785	$	1,066

With a related allowance
Commercial	$	—	$	—	$	—	$	—	$	—
Commercial real estate
Owner-occupied	2,929		2,929		89		2,929		112
Non-owner occupied	1,841		1,841		151		1,841		71
Construction and development
Land & land development	1,152		1,152		139		1,152		—
Construction	—		—		—		—		—
Residential real estate
Non-jumbo	2,337		2,337		187		2,337		112
Jumbo	867		868		31		868		43
Home equity	—		—		—		—		—
Consumer	—		—		—		—		—
Total with a related allowance	$	9,126	$	9,127	$	597	$	9,127	$	338

Total
Commercial	$	30,371	$	30,373	$	379	$	30,373	$	865
Residential real estate	11,714		11,724		218		11,477		534
Consumer	62		62		—		62		5
Total	$	42,147	$	42,159	$	597	$	41,912	$	1,404

Included in impaired loans are TDRs of $28.9 million, of which $28.2 million were current with respect to restructured contractual payments at March 31, 2017, and $28.6 million, of which $28.1 million were current with respect to restructured contractual payments at December 31, 2016. There were no commitments to lend additional funds under these restructurings at either balance sheet date.

The following table presents by class the TDRs that were restructured during the three months ended March 31, 2017 and March 31, 2016 . Generally, the modifications were extensions of term, modifying the payment terms from principal and interest to interest only for an extended period, or reduction in interest rate. All TDRs are evaluated individually for allowance for loan loss purposes.



	For the Three Months Ended March 31, 2017					For the Three Months Ended March 31, 2016
Dollars in thousands	Number of Modifications	Pre-modification Recorded Investment		Post-modification Recorded Investment		Number of Modifications	Pre-modification Recorded Investment		Post-modification Recorded Investment
Commercial	—	$	—	$	—	—	$	—	$	—
Commercial real estate
Owner-occupied	—	—		—		—	—		—
Non-owner occupied	—	—		—		—	—		—
Construction and development
Land & land development	—	—		—		—	—		—
Construction	—	—		—		—	—		—
Residential real estate
Non-jumbo	4	880		880		1	250		250
Jumbo	—	—		—		—	—		—
Home equity	—	—		—		—	—		—
Mortgage warehouse lines	—	—		—		—	—		—
Consumer	—	—		—		—	—		—
Total	4	$	880	$	880	1	$	250	$	250

The following table presents defaults during the stated period of TDRs that were restructured during the past twelve months. For purposes of these tables, a default is considered as either the loan was past due 30 days or more at any time during the period, or the loan was fully or partially charged off during the period.



	For the Three Months Ended March 31, 2017
Dollars in thousands	Number of Defaults	Recorded Investment at Default Date
Commercial	—	$	—
Commercial real estate
Owner-occupied	—	—
Non-owner occupied	—	—
Construction and development
Land & land development	—	—
Construction	—	—
Residential real estate
Non-jumbo	1	319
Jumbo	—	—
Home equity	—	—
Mortgage warehouse lines	—	—
Consumer	—	—
Total	1	$	319

The following table details the activity regarding TDRs by loan type for the three months and three months ended March 31, 2017, and the related allowance on TDRs.



For the Three Months Ended March 31, 2017
	Construction & Land Development								Commercial Real Estate						Residential Real Estate
Dollars in thousands	Land & Land Develop- ment			Construc- tion		Commer- cial			Owner Occupied			Non- Owner Occupied			Non- jumbo			Jumbo			Home Equity		Mortgage Warehouse Lines		Con- sumer			Other		Total
Troubled debt restructurings
Balance January 1, 2017	$	3,866		$	—	$	183		$	7,383		$	6,714		$	5,417		$	4,493		$	523	$	—	$	44		$	—	$	28,623
Additions	—			—		—			—			—			880			—			—		—		—			—		880
Charge-offs	—			—		—			—			(65		)	—			—			—		—		—			—		(65		)
Net (paydowns) advances	(352		)	—		(5		)	(28		)	(58		)	(83		)	(15		)	—		—		(4		)	—		(545		)
Transfer into foreclosed properties	—			—		—			—			—			—			—			—		—		—			—		—
Refinance out of TDR status	—			—		—			—			—			—			—			—		—		—			—		—
Balance, March 31, 2017	$	3,514		$	—	$	178		$	7,355		$	6,591		$	6,214		$	4,478		$	523	$	—	$	40		$	—	$	28,893

Allowance related to troubled debt restructurings	$	526		$	—	$	—		$	375		$	200		$	337		$	25		$	—	$	—	$	—		$	—	$	1,463

The following table presents the recorded investment in construction and development, commercial, and commercial real estate loans which are generally evaluated based upon our internal risk ratings.



Loan Risk Profile by Internal Risk Rating
	Construction and Development												Commercial Real Estate
	Land and Land Development				Construction				Commercial				Owner Occupied				Non-Owner Occupied				Mortgage Warehouse Lines
Dollars in thousands	3/31/2017		12/31/2016		3/31/2017		12/31/2016		3/31/2017		12/31/2016		3/31/2017		12/31/2016		3/31/2017		12/31/2016		3/31/2017		12/31/2016
Pass	$	60,870	$	64,144	$	16,511	$	16,584	$	133,106	$	117,214	$	212,724	$	201,113	$	396,073	$	375,181	$	30,217	$	85,966
OLEM (Special Mention)	2,002		2,097		—		—		1,341		1,471		3,152		567		1,199		1,381		—		—
Substandard	5,207		5,801		—		—		361		403		1,857		1,367		4,523		5,359		—		—
Doubtful	—		—		—		—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—		—		—		—
Total	$	68,079	$	72,042	$	16,511	$	16,584	$	134,808	$	119,088	$	217,733	$	203,047	$	401,795	$	381,921	$	30,217	$	85,966

The following table presents the recorded investment in consumer, residential real estate, and home equity loans, which are generally evaluated based on the aging status of the loans, which was previously presented, and payment activity.



	Performing						Nonperforming
Dollars in thousands	3/31/2017		12/31/2016		3/31/2016		3/31/2017		12/31/2016		3/31/2016
Residential real estate
Non-jumbo	$	260,690	$	261,020	$	218,345	$	5,450	$	4,621	$	3,023
Jumbo	60,780		65,628		50,057		—		—		—
Home Equity	74,757		74,402		73,872		542		194		225
Consumer	24,262		25,368		18,960		178		166		135
Other	8,831		9,489		11,235		—		—		—
Total	$	429,320	$	435,907	$	372,469	$	6,170	$	4,981	$	3,383

Loan commitments: ASC Topic 815, Derivatives and Hedging, requires that commitments to make mortgage loans should be accounted for as derivatives if the loans are to be held for sale, because the commitment represents a written option and accordingly is recorded at the fair value of the option liability.