LOANS

Loans are summarized as follows:



Dollars in thousands	September 30, 2017		December 31, 2016		September 30, 2016
Commercial	$	187,193	$	119,088	$	110,466
Commercial real estate
Owner-occupied	239,840		203,047		192,254
Non-owner occupied	464,543		381,921		367,196
Construction and development
Land and land development	71,412		72,042		65,430
Construction	28,756		16,584		11,276
Residential real estate
Non-jumbo	355,642		265,641		228,777
Jumbo	61,253		65,628		57,276
Home equity	82,720		74,596		75,161
Mortgage warehouse lines	33,525		85,966		108,983
Consumer	36,915		25,534		19,756
Other	9,994		9,489		9,649
Total loans, net of unearned fees	1,571,793		1,319,536		1,246,224
Less allowance for loan losses	12,465		11,674		11,619
Loans, net	$	1,559,328	$	1,307,862	$	1,234,605

The outstanding balance and the recorded investment of acquired loans included in the consolidated balance sheet at September 30, 2017 are as follows:



	Acquired Loans
Dollars in thousands	Purchased Credit Impaired		Purchased Performing		Total
Outstanding balance	$	6,393	$	238,314	$	244,707

Recorded investment
Commercial	$	11	$	31,430	$	31,441
Commercial real estate
Owner-occupied	695		23,084		23,779
Non-owner occupied	1,846		35,704		37,550
Construction and development
Land and land development	—		9,080		9,080
Construction	—		2,226		2,226
Residential real estate
Non-jumbo	1,861		114,756		116,617
Jumbo	1,005		3,443		4,448
Home equity	—		3,431		3,431
Consumer	—		13,050		13,050
Other	—		236		236
Total recorded investment	$	5,418	$	236,440	$	241,858

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 September 30, 2017:



Dollars in thousands
Accretable yield, January 1, 2017	$	290
Accretion	(135		)
Additions for First Century Bankshares, Inc. acquisition	661
Reclassification of nonaccretable difference due to improvement in expected cash flows	—
Other changes, net	(13		)
Accretable yield, September 30, 2017	$	803

The following table presents the contractual aging of the recorded investment in past due loans by class as of September 30, 2017 and 2016 and December 31, 2016.



	At September 30, 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	$	204	$	175	$	65	$	444	$	186,749	$	—
Commercial real estate
Owner-occupied	469		45		740		1,254		238,586		—
Non-owner occupied	177		252		1,969		2,398		462,145		—
Construction and development
Land and land development	268		21		3,880		4,169		67,243		—
Construction	—		—		—		—		28,756		—
Residential mortgage
Non-jumbo	4,860		2,062		4,837		11,759		343,883		—
Jumbo	—		—		—		—		61,253		—
Home equity	50		290		657		997		81,723		—
Mortgage warehouse lines	—		—		—		—		33,525		—
Consumer	387		173		405		965		35,950		35
Other	56		—		—		56		9,938		—
Total	$	6,471	$	3,018	$	12,553	$	22,042	$	1,549,751	$	35



	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 September 30, 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	$	301	$	138	$	602	$	1,041	$	109,425	$	—
Commercial real estate
Owner-occupied	251		—		505		756		191,498		—
Non-owner occupied	311		78		—		389		366,807		—
Construction and development
Land and land development	238		—		3,731		3,969		61,461		—
Construction	—		—		—		—		11,276		—
Residential mortgage
Non-jumbo	1,932		1,488		2,762		6,182		222,595		—
Jumbo	—		—		—		—		57,276		—
Home equity	—		136		318		454		74,707		—
Mortgage warehouse lines	—		—		—		—		108,983		—
Consumer	135		44		148		327		19,429		21
Other	—		—		—		—		9,649		—
Total	$	3,168	$	1,884	$	8,066	$	13,118	$	1,233,106	$	21

Nonaccrual loans: The following table presents the nonaccrual loans included in the net balance of loans at September 30, 2017, December 31, 2016 and September 30, 2016.



	September 30,				December 31,
Dollars in thousands	2017		2016		2016
Commercial	$	757	$	846	$	298
Commercial real estate
Owner-occupied	740		505		509
Non-owner occupied	2,033		4,362		4,336
Construction and development
Land & land development	3,931		4,360		4,465
Construction	—		—		—
Residential mortgage
Non-jumbo	7,309		3,680		4,621
Jumbo	—		—		—
Home equity	773		494		194
Mortgage warehouse lines	—		—		—
Consumer	494		148		151
Total	$	16,037	$	14,395	$	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 September 30, 2017, December 31, 2016 and September 30, 2016.



	September 30, 2017
Dollars in thousands	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Impaired Balance		Interest Income Recognized while impaired

Without a related allowance
Commercial	$	254	$	254	$	—	$	264	$	10
Commercial real estate
Owner-occupied	7,138		7,141		—		4,869		185
Non-owner occupied	9,884		9,886		—		10,142		511
Construction and development
Land & land development	5,029		5,029		—		4,729		87
Construction	—		—		—		—		—
Residential real estate
Non-jumbo	4,200		4,210		—		4,294		209
Jumbo	3,581		3,580		—		3,605		171
Home equity	524		523		—		523		25
Mortgage warehouse lines	—		—		—		—		—
Consumer	29		29		—		34		3
Total without a related allowance	$	30,639	$	30,652	$	—	$	28,460	$	1,201

With a related allowance
Commercial	$	259	$	259	$	259	$	266	$	—
Commercial real estate
Owner-occupied	2,448		2,448		127		2,456		121
Non-owner occupied	1,014		1,018		501		2		—
Construction and development
Land & land development	1,470		1,470		525		1,482		56
Construction	—		—		—		—		—
Residential real estate
Non-jumbo	1,728		1,729		217		1,681		82
Jumbo	841		842		15		847		42
Home equity	—		—		—		—		—
Mortgage warehouse lines	—		—		—		—		—
Consumer	—		—		—		—		—
Total with a related allowance	$	7,760	$	7,766	$	1,644	$	6,734	$	301

Total
Commercial	$	27,496	$	27,505	$	1,412	$	24,210	$	970
Residential real estate	10,874		10,884		232		10,950		529
Consumer	29		29		—		34		3
Total	$	38,399	$	38,418	$	1,644	$	35,194	$	1,502



	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



	September 30, 2016
Dollars in thousands	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Impaired Balance		Interest Income Recognized while impaired

Without a related allowance
Commercial	$	791	$	790	$	—	$	400	$	9
Commercial real estate
Owner-occupied	4,914		4,914		—		4,932		188
Non-owner occupied	10,394		10,396		—		10,831		456
Construction and development
Land & land development	6,181		6,181		—		6,207		104
Construction	—		—		—		—		—
Residential real estate
Non-jumbo	3,852		3,861		—		3,732		170
Jumbo	3,683		3,682		—		3,711		176
Home equity	713		713		—		710		21
Mortgage warehouse lines	—		—		—		—		—
Consumer	48		48		—		52		5
Total without a related allowance	$	30,576	$	30,585	$	—	$	30,575	$	1,129

With a related allowance
Commercial	$	19	$	19	$	19	$	6	$	—
Commercial real estate
Owner-occupied	2,499		2,499		12		2,491		112
Non-owner occupied	1,321		1,321		132		1,332		43
Construction and development
Land & land development	1,140		1,141		492		1,155		58
Construction	—		—		—		—		—
Residential real estate
Non-jumbo	2,617		2,619		216		2,329		103
Jumbo	859		859		25		864		43
Home equity	—		—		—		—		—
Mortgage warehouse lines	—		—		—		—		—
Consumer	—		—		—		—		—
Total with a related allowance	$	8,455	$	8,458	$	896	$	8,177	$	359

Total
Commercial	$	27,259	$	27,261	$	655	$	27,354	$	970
Residential real estate	11,724		11,734		241		11,346		513
Consumer	48		48		—		52		5
Total	$	39,031	$	39,043	$	896	$	38,752	$	1,488

Included in impaired loans are TDRs of $29.1 million, of which $28.3 million were current with respect to restructured contractual payments at September 30, 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 and nine months ended September 30, 2017 and September 30, 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 September 30, 2017					For the Three Months Ended September 30, 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 real estate
Owner-occupied	1	$	2,302	$	2,302	—	$	—	$	—
Non-owner occupied	1	148		148		—	—		—
Construction and development
Land & land development	1	438		438		—	—		—
Residential real estate
Non-jumbo	—	—		—		1	307		307
Total	3	$	2,888	$	2,888	1	$	307	$	307



	For the Nine Months Ended September 30, 2017					For the Nine Months Ended September 30, 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 real estate
Owner-occupied	1	$	2,302	$	2,302	—	$	—	$	—
Non-owner occupied	1	148		148		—	—		—
Construction and development
Land & land development	1	438		438		—	—		—
Residential real estate
Non-jumbo	5	1,086		1,086		4	702		702
Consumer	—	—		—		1	2		2
Total	8	$	3,974	$	3,974	5	$	704	$	704

During the three months and nine months ended September 30, 2017, four non-jumbo residential real estate loans and one land & land development loan that had been restructured within the past twelve months defaulted. 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.

The following tables detail the activity regarding TDRs by loan type, net of fees, for the three months and nine months ended September 30, 2017, and the related allowance on TDRs.



For the Three Months Ended September 30, 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 July 1, 2017	$	2,639		$	—	$	438		$	7,315		$	5,245		$	6,200		$	4,456		$	523	$	—	$	34		$	—	$	26,850
Additions	438			—		—			2,302			148			—			—			—		—		—			—		2,888
Charge-offs	—			—		—			—			—			—			—			—		—		—			—		—
Net (paydowns) advances	(15		)	—		(12		)	(31		)	(45		)	(621		)	(33		)	—		—		(5		)	—		(762		)
Transfer into foreclosed properties	—			—		—			—			—			—			—			—		—		—			—		—
Refinance out of TDR status	—			—		—			—			—			—			—			—		—		—			—		—
Balance, September 30, 2017	$	3,062		$	—	$	426		$	9,586		$	5,348		$	5,579		$	4,423		$	523	$	—	$	29		$	—	$	28,976

Allowance related to troubled debt restructurings	$	461		$	—	$	259		$	127		$	—		$	217		$	15		$	—	$	—	$	—		$	—	$	1,079



For the Nine Months Ended September 30, 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	$	3,337		$	—	$	711		$	7,383		$	6,714		$	5,417		$	4,493		$	523	$	—	$	44		$	—	$	28,622
Additions	438			—		—			2,302			148			1,086			—			—		—		—			—		3,974
Charge-offs	—			—		—			—			(65		)	—			—			—		—		—			—		(65		)
Net (paydowns) advances	(713		)	—		(285		)	(99		)	(1,449		)	(924		)	(70		)	—		—		(15		)	—		(3,555		)
Transfer into foreclosed properties	—			—		—			—			—			—			—			—		—		—			—		—
Refinance out of TDR status	—			—		—			—			—			—			—			—		—		—			—		—
Balance, September 30, 2017	$	3,062		$	—	$	426		$	9,586		$	5,348		$	5,579		$	4,423		$	523	$	—	$	29		$	—	$	28,976

Allowance related to troubled debt restructurings	$	461		$	—	$	259		$	127		$	—		$	217		$	15		$	—	$	—	$	—		$	—	$	1,079

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	9/30/2017		12/31/2016		9/30/2017		12/31/2016		9/30/2017		12/31/2016		9/30/2017		12/31/2016		9/30/2017		12/31/2016		9/30/2017		12/31/2016
Pass	$	64,744	$	64,144	$	28,756	$	16,584	$	183,966	$	117,214	$	232,329	$	201,113	$	454,433	$	375,181	$	33,525	$	85,966
OLEM (Special Mention)	1,593		2,097		—		—		2,468		1,471		3,578		567		1,722		1,381		—		—
Substandard	5,075		5,801		—		—		759		403		3,933		1,367		8,388		5,359		—		—
Doubtful	—		—		—		—		—		—		—		—		—		—		—		—
Loss	—		—		—		—		—		—		—		—		—		—		—		—
Total	$	71,412	$	72,042	$	28,756	$	16,584	$	187,193	$	119,088	$	239,840	$	203,047	$	464,543	$	381,921	$	33,525	$	85,966

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



	Performing						Nonperforming
Dollars in thousands	9/30/2017		12/31/2016		9/30/2016		9/30/2017		12/31/2016		9/30/2016
Residential real estate
Non-jumbo	$	348,333	$	261,020	$	225,097	$	7,309	$	4,621	$	3,680
Jumbo	61,253		65,628		57,276		—		—		—
Home Equity	81,947		74,402		74,667		773		194		494
Consumer	36,349		25,368		19,574		566		166		182
Other	9,994		9,489		9,649		—		—		—
Total	$	537,876	$	435,907	$	386,263	$	8,648	$	4,981	$	4,356