Loans and reserve for credit losses

The composition of the loan portfolio at March 31, 2015 and December 31, 2014 was as follows (dollars in thousands):



	March 31, 2015					December 31, 2014
	Amount			Percent		Amount			Percent
Originated loans (a):
Commercial real estate:
Owner occupied	$	236,233		18.4	%	$	198,845		16.8	%
Non-owner occupied	379,517			29.5	%	383,287			32.4	%
Total commercial real estate loans	615,750			47.9	%	582,132			49.2	%
Construction	117,684			9.2	%	100,437			8.5	%
Residential real estate	174,191			13.6	%	122,478			10.4	%
Commercial and industrial	343,403			26.7	%	342,746			29.0	%
Consumer	34,485			2.6	%	34,897			2.9	%
Total loans	1,285,513			100.0	%	1,182,690			100.0	%

Less:
Deferred loan fees	(1,902		)			(1,703		)
Reserve for loan losses	(23,244		)			(22,053		)
Loans, net	$	1,260,367				$	1,158,934

Acquired loans (b):
Commercial real estate:
Owner occupied	$	46,656		18.7	%	$	48,413		18.0	%
Non-owner occupied	95,219			38.1	%	102,890			38.2	%
Total commercial real estate loans	141,875			56.8	%	151,303			56.2	%
Construction	18,558			7.4	%	22,564			8.4	%
Residential real estate	66,484			26.6	%	71,385			26.5	%
Commercial and industrial	21,226			8.5	%	22,444			8.3	%
Consumer	1,780			0.7	%	1,963			0.6	%
Total loans	$	249,923		100.0	%	$	269,659		100.0	%


Acquired covered loans (c):
Commercial real estate:
Owner occupied	$	11,462		30.8	%	$	11,851		29.5	%
Non-owner occupied	10,985			29.5	%	11,366			28.3	%
Total commercial real estate loans	22,447			60.3	%	23,217			57.8	%
Construction	2,328			6.3	%	2,427			6.0	%
Residential real estate	9,478			25.5	%	10,824			26.9	%
Commercial and industrial	2,600			7.0	%	3,285			8.2	%
Consumer	388			0.9	%	438			1.1	%
Total loans	$	37,241		100.0	%	$	40,191		100.0	%



Total loans:
Commercial real estate:
Owner occupied	$	294,351		18.7	%	$	259,109		17.4	%
Non-owner occupied	485,721			30.9	%	497,543			33.3	%
Total commercial real estate loans	780,072			49.6	%	756,652			50.7	%
Construction	138,570			8.8	%	125,428			8.4	%
Residential real estate	250,153			15.9	%	204,687			13.7	%
Commercial and industrial	367,229			23.4	%	368,475			24.7	%
Consumer	36,653			2.3	%	37,298			2.5	%
Total loans	1,572,677			100.0	%	1,492,540			100.0	%

Less:
Deferred loan fees	(1,902		)			(1,703		)
Reserve for loan losses	(23,244		)			(22,053		)
Loans, net	$	1,547,531				$	1,468,784

(a) Originated loans are loans organically made through the Company’s normal and customary origination process.
(b) Acquired loans are loans acquired in the acquisition of Home Federal Bancorp, Inc. ("Home"), discussed elsewhere in this Quarterly Report on Form 10-Q (the "Form 10-Q"), less acquired covered loans.
(c) Acquired covered loans are loans acquired in the acquisition of Home that are covered under FDIC loss share agreements.

The following describes the distinction between originated, acquired and acquired covered loan portfolios and certain significant accounting policies relevant to each of these portfolios.

Originated loans

Loans originated for investment are stated at their principal amount outstanding adjusted for partial charge-offs, the reserve for loan losses and net deferred loan fees and costs. Interest income on loans is accrued over the term of the loans. Interest is not accrued on loans where collectability is uncertain. Accrued interest on loans is presented in “Other assets” on the condensed consolidated balance sheet. Loan origination fees and certain direct costs incurred to extend credit are deferred and amortized over the term of the loan as an adjustment to the related loan yield.

Approximately 70.7% of the Bank’s originated loan portfolio at March 31, 2015 consisted of real estate-related loans, including construction and development loans, residential mortgage loans, and commercial loans secured by commercial real estate. At March 31, 2015, approximately 74.3% of the Bank’s total portfolio (inclusive of acquired and acquired covered loans) consisted of real estate-related loans as described above. The Bank’s results of operations and financial condition are affected by general economic trends and in particular, the strength of the local residential and commercial real estate markets in Central, Southern and Northwest Oregon and the greater Boise/Treasure Valley, Idaho area. Real estate values could be affected by, among other things, a worsening of national and local economic conditions, an increase in foreclosures, a decline in home sale volumes, and an increase in interest rates. Furthermore, the Bank may experience an increase in the number of borrowers who become delinquent, file for protection under bankruptcy laws, or default on their loans or other obligations to the Bank in the event of a sustained downturn in business and economic conditions generally or specifically in the principal markets in which the Bank does business. An increase in the number of delinquencies, bankruptcies, or defaults could result in a higher level of non-performing assets, net charge-offs, and loan loss provision. Management expects to diversify its commercial real estate ("CRE") concentration over time, but real estate-related loans will remain a significant portfolio component due to the nature of the economies, businesses, and markets the Bank serves.

In the normal course of business, the Bank may participate portions of loans to third parties in order to extend the Bank’s lending capability or to mitigate risk. At March 31, 2015 and December 31, 2014, the portion of loans participated to third parties (which are not included in the accompanying condensed consolidated financial statements) totaled $40.0 million and $34.5 million, respectively.

Acquired and acquired covered loans

Acquired loans and acquired covered loans are those purchased in the Company's acquisition of Home, which was completed on May 16, 2014 (the "Acquisition Date"). See the 2014 Annual Report for further information on the Home acquisition. These loans were recorded at estimated fair value at the Acquisition Date. The fair value estimates for acquired and acquired covered loans is based on expected prepayments, charge-offs and the amount and timing of undiscounted expected principal, interest and other cash flows. The net fair value adjustment to the acquired and acquired covered loans at acquisition was a reduction of $6.0 million, representing a valuation adjustment for interest rate and credit which will be accreted over the life of the loans (approximately 10 years).

Of the loans acquired on the Acquisition Date and still held at March 31, 2015, $10.0 million, or 3.5%, were graded substandard. Of that amount $1.8 million or 18.0% of the substandard loans were covered under a loss sharing agreement with the FDIC. With the amount of classified loans acquired being nominal, all loans acquired are treated in a manner consistent with originated loans for credit risk management and accounting purposes.

As of March 31, 2015, $37.2 million, or 13.0%, of the $287.2 million in acquired and acquired covered loans were covered under loss sharing agreements with the FDIC. The agreements were entered into in September 2009 and September 2010 between the FDIC and Home. The loss sharing agreements have limited terms (10 years for net losses on single-family residential real estate loans, as defined by the FDIC, five years for losses on non-residential real estate loans, as defined by the FDIC, and an additional three years with respect to recoveries on non-residential real estate loans). After the expiration of the loss sharing agreements, the Company will not be indemnified for losses and related expenses on covered assets. When the loss sharing agreements expire, the Company’s and the Bank’s risk-based capital ratios will be reduced. While the agreements are in place, the covered assets receive a 20% risk-weighting. When the agreements expire, the risk-weighting for previously covered assets will most likely increase to 100%, based on current regulatory capital definitions. Nearly all of the assets remaining in the covered asset portfolios are non-single family covered assets. Therefore, most of the covered assets were no longer indemnified after September 2014 or will no longer be indemnified after September 2015. Only $1.8 million of the acquired covered loans were graded substandard. With the amount of classified loans covered under these agreements being nominal, amounts that may be due to or due from the FDIC under loss sharing agreements will be accounted for on a cash basis.

A net loss share payable was recorded at the Acquisition Date which represents the estimated value of reimbursement the Company expects to pay to the FDIC for recoveries net of incurred losses on covered loans. These expected reimbursements are recorded as part of covered loans in the accompanying consolidated balance sheets. Upon the determination of an incurred loss or recovery the loss share receivable/payable will be changed by the amount due to or due from the FDIC.

Changes in the loss share payable (receivable) associated with acquired covered loans for the three months ended March 31, 2015 were as follows (dollars in thousands):



	Three months ended
	March 31, 2015
Balance at beginning of period	$	(449	)
Paid to FDIC	449
Increase due to impairment	73
FDIC reimbursement	(446		)
Shared loss expenses	36
Shared income	—
Adjustments from prior periods	5
Balance at end of period	$	(332	)

Reserve for loan losses

The reserve for loan losses represents management’s estimate of known and inherent losses in the loan portfolio as of the condensed consolidated balance sheet date and is recorded as a reduction to loans. The reserve for loan losses is increased by charges to operating expense through the loan loss provision, and decreased by loans charged-off, net of recoveries. The reserve for loan losses requires complex subjective judgments as a result of the need to make estimates about matters that are uncertain. The reserve for loan losses is maintained at a level currently considered adequate to provide for potential loan losses based on management’s assessment of various factors affecting the loan portfolio.

However the reserve for loan losses is based on estimates and actual losses may vary from the current estimates. These estimates are reviewed periodically, and, as adjustments become necessary, they are reported in earnings in the periods in which they become known. Therefore, management cannot provide assurance that, in any particular period, the Company will not have significant losses in relation to the amount reserved. The level of the reserve for loan losses is also determined after consideration of bank regulatory guidance and recommendations and is subject to review by such regulatory authorities who may require increases or decreases to the reserve based on their evaluation of the information available to them at the time of their examinations of the Bank.

For purposes of assessing the appropriate level of the reserve for loan losses, the Company analyzes loans and commitments to loan, and the amount of reserves allocated to loans and commitments to loan in each of the following reserve categories: pooled reserves, specifically identified reserves for impaired loans, and the unallocated reserve. Also, for purposes of analyzing loan portfolio credit quality and determining the appropriate level of reserve for loan losses, the Company identifies loan portfolio segments and classes based on the nature of the underlying loan collateral.

As of March 31, 2015, the reserve for loan loss methodology was enhanced within the Company's commercial and industrial ("C&I") loan portfolio with respect to its holdings of shared national credits ("SNCs"). Risk rating for individual SNCs are estimated using analysis of both public debt ratings and internal ratings. Expected loss rates are determined based upon historical published specific loss data for similar loans based on average losses and losses stratified by public debt ratings. Public ratings combined with internal risk rates are used to determine a minimum historical loss factor for each SNC loan. This amount may be increased for qualitative conditions including macroeconomic environment and observations by the Company’s SNC management group. The SNC lending strategy is intended to diversify the Company’s credit risk profile geographically and by industry. Additionally, such loans enhance the Company’s interest rate risk profile as they float with LIBOR rates.

The increase in the reserve for loan losses from December 31, 2014 to March 31, 2015 was related to net recoveries during the period. The unallocated reserve for loan losses at March 31, 2015 has decreased $2.9 million from the balance at December 31, 2014, mainly related to implementation of its reserve methodology enhancement described above. Management believes that the amount of unallocated reserve for loan losses is appropriate and will continue to evaluate the amount going forward.

Acquired reserve for loan losses

The fair value estimates for acquired and acquired covered loans is based on expected prepayments, charge-offs, and the amount and timing of undiscounted expected principal, interest and other cash flows. The net fair value adjustment to the acquired and acquired covered loans was $6.0 million, representing a valuation adjustment for interest rate and credit quality. The credit portion of the fair value adjustment not accreted at any point in time represents the estimated reserve for loan losses for acquired loans. If the Company determines that this amount is insufficient, a provision to the reserve for loan losses will be made.

Covered reserve for loan losses

The reserve for loan losses on covered loans is estimated similarly to acquired loans as described above except any increase to the reserve from a recovery or a decrease in the reserve from a charge-off is partially offset by an increase in the loss share payable (or receivable) for the portion of the losses recoverable and recoveries payable to the FDIC under the loss sharing agreements. No allowance was recorded at quarter-end given management’s judgment that purchase discounts adequately address the estimated losses in the acquired loans.

Transactions and allocations in the reserve for loan losses and unfunded loan commitments, by portfolio segment, for the three months ended March 31, 2015 and 2014 were as follows (dollars in thousands):



	Commercial real estate			Construction		Residential real estate			Commercial and industrial			Consumer			Unallocated			Total
Three months ended March 31, 2015
Reserve for loan losses
Balance at December 31, 2014	$	5,614		$	1,133	$	2,121		$	6,844		$	1,047		$	5,294		$	22,053
Loan loss provision (credit)	(3,947		)	23		276			4,436			147			(2,935		)	(2,000		)
Recoveries	3,390			99		325			211			115			—			4,140
Loans charged off	(276		)	—		(210		)	(132		)	(331		)	—			(949		)
Balance at end of period	$	4,781		$	1,255	$	2,512		$	11,359		$	978		$	2,359		$	23,244

Reserve for unfunded lending commitments
Balance at December 31, 2014	$	48		$	268	$	25		$	75		$	24		$	—		$	440
Provision for unfunded loan commitments	—			—		—			—			—			—			—
Balance at end of period	$	48		$	268	$	25		$	75		$	24		$	—		$	440

Reserve for credit losses
Reserve for loan losses	$	4,781		$	1,255	$	2,512		$	11,359		$	978		$	2,359		$	23,244
Reserve for unfunded lending commitments	48			268		25			75			24			—			440
Total reserve for credit losses	$	4,829		$	1,523	$	2,537		$	11,434		$	1,002		$	2,359		$	23,684



	Commercial real estate			Construction			Residential real estate			Commercial and industrial			Consumer			Unallocated		Total
Three months ended March 31, 2014
Reserve for loan losses
Balance at December 31, 2013	$	9,565		$	535		$	2,381		$	6,261		$	1,401		$	714	$	20,857
Loan loss provision (credit)	(1,560		)	278			(55		)	(18		)	62			1,293		—
Recoveries	941			85			124			911			87			—		2,148
Loans charged off	(143		)	(296		)	(223		)	(314		)	(307		)	—		(1,283		)
Balance at end of period	$	8,803		$	602		$	2,227		$	6,840		$	1,243		$	2,007	$	21,722

Reserve for unfunded lending commitments
Balance at December 31, 2013	$	48		$	268		$	25		$	75		$	24		$	—	$	440
Provision for unfunded loan commitments	—			—			—			—			—			—		—
Balance at end of period	$	48		$	268		$	25		$	75		$	24		$	—	$	440

Reserve for credit losses
Reserve for loan losses	$	8,803		$	602		$	2,227		$	6,840		$	1,243		$	2,007	$	21,722
Reserve for unfunded lending commitments	48			268			25			75			24			—		440
Total reserve for credit losses	$	8,851		$	870		$	2,252		$	6,915		$	1,267		$	2,007	$	22,162

An individual loan is impaired when, based on current information and events, management believes that it is probable that the Bank will be unable to collect all amounts due according to the contractual terms of the loan agreement. The following table presents the reserve for loan losses and the recorded investment in loans by portfolio segment and impairment evaluation method at March 31, 2015 and December 31, 2014 (dollars in thousands):



	Reserve for loan losses						Recorded investment in loans
	Individually evaluated for impairment		Collectively evaluated for impairment		Total		Individually evaluated for impairment		Collectively evaluated for impairment		Total
March 31, 2015
Commercial real estate	$	60	$	4,721	$	4,781	$	26,295	$	753,777	$	780,072
Construction	—		1,255		1,255		743		137,827		138,570
Residential real estate	—		2,512		2,512		142		250,011		250,153
Commercial and industrial	21		11,338		11,359		3,023		364,206		367,229
Consumer	—		978		978		—		36,653		36,653
	$	81	$	20,804	20,885		$	30,203	$	1,542,474	$	1,572,677
Unallocated					2,359
					$	23,244

December 31, 2014
Commercial real estate	$	60	$	5,554	$	5,614	$	28,947	$	727,705	$	756,652
Construction	—		1,133		1,133		963		124,465		125,428
Residential real estate	—		2,121		2,121		317		204,370		204,687
Commercial and industrial	25		6,819		6,844		3,495		364,980		368,475
Consumer	—		1,047		1,047		—		37,298		37,298
	$	85	$	16,674	16,759		$	33,722	$	1,458,818	$	1,492,540
Unallocated					5,294
					$	22,053

The above reserve for loan losses includes an unallocated allowance of $2.4 million at March 31, 2015 and $5.3 million at December 31, 2014. The change in the unallocated allowance is mainly a result of an enhanced reserve methodology for the C&I loans, specifically related to SNC loans as described above.

The Company uses credit risk ratings, which reflect the Bank’s assessment of a loan’s risk or loss potential, for purposes of assessing the appropriate level of reserve for loan losses. The Bank’s credit risk rating definitions along with applicable borrower characteristics for each credit risk rating are as follows:

Acceptable

The borrower is a reasonable credit risk and demonstrates the ability to repay the loan from normal business operations. Loans are generally made to companies operating in an economy and/or industry that is generally sound. The borrower tends to operate in regional or local markets and has achieved sufficient revenues for the business to be financially viable. The borrowers financial performance has been consistent in normal economic times and has been average or better than average for its industry.

A loan can also be considered Acceptable even though the borrower may have some vulnerability to downturns in the economy due to marginally satisfactory working capital and debt service cushion. Availability of alternate financing sources may be limited or nonexistent. In some cases, the borrower’s management may have limited depth or continuity but is still considered capable. An adequate primary source of repayment is identified while secondary sources may be illiquid, more speculative, less readily identified, or reliant upon collateral liquidation. Loan agreements will be well defined, including several financial performance covenants and detailed operating covenants. This category also includes commercial loans to individuals with average or better than average capacity to repay.

Pass-Watch

Loans are graded Pass-Watch when temporary situations increase the level of the Bank’s risk associated with the loan, and remain graded Pass-Watch until the situation has been corrected. These situations may involve one or more weaknesses in cash flow, collateral value or indebtedness that could, if not corrected within a reasonable period of time, jeopardize the full repayment of the debt. In general, loans in this category remain adequately protected by the borrower’s net worth and paying capacity, or pledged collateral.

Special Mention

A Special Mention credit has potential weaknesses that may, if not checked or corrected, weaken the loan or leave the Bank inadequately protected at some future date. Loans in this category are deemed by management of the Bank to be currently protected but reflect potential problems that warrant more than the usual management attention but do not justify a Substandard classification.

Substandard

Substandard loans are those inadequately protected by the net worth and paying capacity of the obligor and/or by the value of the pledged collateral, if any. Substandard loans have a high probability of payment default or they have other well-defined weaknesses. They require more intensive supervision and borrowers are generally characterized by current or expected unprofitable operations, inadequate debt service coverage, inadequate liquidity, or marginal capitalization. Repayment may depend on collateral or other credit risk mitigants.

CRE and construction loans are classified Substandard when well-defined weaknesses are present which jeopardize the orderly liquidation of the loan. Well-defined weaknesses include a project’s lack of marketability, inadequate cash flow or collateral support, failure to complete construction on time, and/or the project’s failure to fulfill economic expectations. These loans are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Substandard loans also include impaired loans. Impaired loans bear the characteristics of Substandard loans as described above, and the Company has determined it does not expect timely payment of all contractually due interest and principal. Impaired loans may be adequately secured by collateral.

During the three months ended March 31, 2015, the Bank reduced loans classified as Special Mention and Substandard in the originated loan portfolio by $10.2 million, while total loans classified as Special Mention and Substandard decreased $17.5 million. Remediation on the originated portfolio was accomplished through credit upgrades mainly owing to improved obligor cash flows as well as payoffs/paydowns, and/or sales. Work began on the acquired and acquired covered portfolio at Acquisition Date.

The following table presents, by portfolio class, the recorded investment in loans by internally assigned grades at March 31, 2015 and December 31, 2014 (dollars in thousands):



	Loan grades
	Acceptable		Pass-Watch		Special Mention		Substandard		Total
March 31, 2015
Originated loans (a):
Commercial real estate:
Owner occupied	$	207,846	$	10,907	$	1,084	$	16,396	$	236,233
Non-owner occupied	346,677		10,832		16,469		5,539		379,517
Total commercial real estate loans	554,523		21,739		17,553		21,935		615,750
Construction	113,769		2,236		1,620		59		117,684
Residential real estate	171,546		1,373		607		665		174,191
Commercial and industrial	302,680		26,593		10,629		3,501		343,403
Consumer	34,463		—		—		22		34,485
	$	1,176,981	$	51,941	$	30,409	$	26,182	$	1,285,513

Acquired loans (b):



Commercial real estate:
Owner occupied	$	34,848	$	7,936	$	3,612	$	260	$	46,656
Non-owner occupied	70,938		11,925		5,814		6,542		95,219
Total commercial real estate loans	105,786		19,861		9,426		6,802		141,875
Construction	18,446		—		—		112		18,558
Residential real estate	65,192		—		—		1,292		66,484
Commercial and industrial	17,530		3,663		—		33		21,226
Consumer	1,775		—		—		5		1,780
	$	208,729	$	23,524	$	9,426	$	8,244	$	249,923

Acquired covered loans (c):
Commercial real estate:
Owner occupied	$	11,207	$	—	$	—	$	255	$	11,462
Non-owner occupied	5,726		—		4,615		644		10,985
Total commercial real estate loans	16,933		—		4,615		899		22,447
Construction	46		2,238		—		44		2,328
Residential real estate	9,120		—		—		358		9,478
Commercial and industrial	2,096		—		—		504		2,600
Consumer	388		—		—		—		388
	$	28,583	$	2,238	$	4,615	$	1,805	$	37,241

Total loans:
Commercial real estate:
Owner occupied	$	253,901	$	18,843	$	4,696	$	16,911	$	294,351
Non-owner occupied	423,341		22,757		26,898		12,725		485,721
Total commercial real estate loans	677,242		41,600		31,594		29,636		780,072
Construction	132,261		4,474		1,620		215		138,570
Residential real estate	245,858		1,373		607		2,315		250,153
Commercial and industrial	322,306		30,256		10,629		4,038		367,229
Consumer	36,626		—		—		27		36,653
	$	1,414,293	$	77,703	$	44,450	$	36,231	$	1,572,677

(a) Originated loans are loans organically made through the Company’s normal and customary origination process.
(b) Acquired loans are loans acquired in the acquisition of Home less acquired covered loans.
(c) Acquired covered loans are loans acquired in the acquisition of Home that are covered under FDIC loss share agreements.



	Loan grades
	Acceptable		Pass-Watch		Special Mention		Substandard		Total
December 31, 2014
Originated loans (a):
Commercial real estate:
Owner occupied	$	167,509	$	8,749	$	4,035	$	18,552	$	198,845



Non-owner occupied	350,420		10,383		16,145		6,339		383,287
Total commercial real estate loans	517,929		19,132		20,180		24,891		582,132
Construction	95,440		3,086		1,850		61		100,437
Residential real estate	119,280		1,380		552		1,266		122,478
Commercial and industrial	306,030		18,721		14,676		3,319		342,746
Consumer	34,852		—		—		45		34,897
	$	1,073,531	$	42,319	$	37,258	$	29,582	$	1,182,690

Acquired loans (b):
Commercial real estate:
Owner occupied	$	42,673	$	1,125	$	4,352	$	263	$	48,413
Non-owner occupied	75,340		11,019		12,265		4,266		102,890
Total commercial real estate loans	118,013		12,144		16,617		4,529		151,303
Construction	22,448		—		—		116		22,564
Residential real estate	70,002		—		—		1,383		71,385
Commercial and industrial	22,236		151		—		57		22,444
Consumer	1,907		—		—		56		1,963
	$	234,606	$	12,295	$	16,617	$	6,141	$	269,659

Acquired covered loans (c):
Commercial real estate:
Owner occupied	$	10,363	$	—	$	1,048	$	440	$	11,851
Non-owner occupied	5,668		361		4,641		696		11,366
Total commercial real estate loans	16,031		361		5,689		1,136		23,217
Construction	48		2,332		—		47		2,427
Residential real estate	9,601		—		—		1,223		10,824
Commercial and industrial	2,779		—		—		506		3,285
Consumer	438		—		—		—		438
	$	28,897	$	2,693	$	5,689	$	2,912	$	40,191

Total loans:
Commercial real estate:
Owner occupied	$	220,545	$	9,874	$	9,435	$	19,255	$	259,109
Non-owner occupied	431,428		21,763		33,051		11,301		497,543
Total commercial real estate loans	651,973		31,637		42,486		30,556		756,652
Construction	117,936		5,418		1,850		224		125,428
Residential real estate	198,883		1,380		552		3,872		204,687
Commercial and industrial	331,045		18,872		14,676		3,882		368,475
Consumer	37,197		—		—		101		37,298
	$	1,337,034	$	57,307	$	59,564	$	38,635	$	1,492,540

(a) Originated loans are loans organically made through the Company’s normal and customary origination process.
(b) Acquired loans are loans acquired in the acquisition of Home less acquired covered loans.
(c) Acquired covered loans are loans acquired in the acquisition of Home that are covered under FDIC loss share agreements.

The following table presents, by portfolio class, an age analysis of past due loans, including loans placed on non-accrual at March 31, 2015 and December 31, 2014 (dollars in thousands):



	30-89 days past due		90 days or more past due		Total past due		Current		Total loans
March 31, 2015
Originated loans (a):
Commercial real estate:
Owner occupied	$	—	$	1,870	$	1,870	$	234,363	$	236,233
Non-owner occupied	301		646		947		378,570		379,517
Total commercial real estate loans	301		2,516		2,817		612,933		615,750
Construction	59		—		59		117,625		117,684
Residential real estate	2,078		—		2,078		172,113		174,191
Commercial and industrial	164		425		589		342,814		343,403
Consumer	98		22		120		34,365		34,485
	$	2,700	$	2,963	$	5,663	$	1,279,850	$	1,285,513

Acquired loans (b):
Commercial real estate:
Owner occupied	$	—	$	—	$	—	$	46,656	$	46,656
Non-owner occupied	—		—		—		95,219		95,219
Total commercial real estate loans	—		—		—		141,875		141,875
Construction	—		—		—		18,558		18,558
Residential real estate	695		333		1,028		65,456		66,484
Commercial and industrial	—		—		—		21,226		21,226
Consumer	11		—		11		1,769		1,780
	$	706	$	333	$	1,039	$	248,884	$	249,923

Acquired covered loans (c):
Commercial real estate:
Owner occupied	$	—	$	—	$	—	$	11,462	$	11,462
Non-owner occupied	—		—		—		10,985		10,985
Total commercial real estate loans	—		—		—		22,447		22,447
Construction	—		—		—		2,328		2,328
Residential real estate	257		—		257		9,221		9,478
Commercial and industrial	6		5		11		2,589		2,600
Consumer	2		—		2		386		388
	$	265	$	5	$	270	$	36,971	$	37,241

Total loans:
Commercial real estate:
Owner occupied	$	—	$	1,870	$	1,870	$	292,481	$	294,351
Non-owner occupied	301		646		947		484,774		485,721
Total commercial real estate loans	301		2,516		2,817		777,255		780,072
Construction	59		—		59		138,511		138,570
Residential real estate	3,030		333		3,363		246,790		250,153
Commercial and industrial	170		430		600		366,629		367,229



Consumer	111		22		133		36,520		36,653
	$	3,671	$	3,301	$	6,972	$	1,565,705	$	1,572,677

December 31, 2014
Originated loans (a):
Commercial real estate:
Owner occupied	$	732	$	3,716	$	4,448	$	194,397	$	198,845
Non-owner occupied	1,718		971		2,689		380,598		383,287
Total commercial real estate loans	2,450		4,687		7,137		574,995		582,132
Construction	—		100		100		100,337		100,437
Residential real estate	662		110		772		121,706		122,478
Commercial and industrial	288		334		622		342,124		342,746
Consumer	139		45		184		34,713		34,897
	$	3,539	$	5,276	$	8,815	$	1,173,875	$	1,182,690

Acquired loans (b):
Commercial real estate:
Owner occupied	$	24	$	—	$	24	$	48,389	$	48,413
Non-owner occupied	—		120		120		102,770		102,890
Total commercial real estate loans	24		120		144		151,159		151,303
Construction	—		—		—		22,564		22,564
Residential real estate	1,361		288		1,649		69,736		71,385
Commercial and industrial	—		—		—		22,444		22,444
Consumer	55		—		55		1,908		1,963
	$	1,440	$	408	$	1,848	$	267,811	$	269,659

Acquired covered loans (c):
Commercial real estate:
Owner occupied	$	—	$	—	$	—	$	11,851	$	11,851
Non-owner occupied	—		27		27		11,339		11,366
Total commercial real estate loans	—		27		27		23,190		23,217
Construction	—		—		—		2,427		2,427
Residential real estate	375		—		375		10,449		10,824
Commercial and industrial	—		—		—		3,285		3,285
Consumer	11		—		11		427		438
	$	386	$	27	$	413	$	39,778	$	40,191

Total loans:
Commercial real estate:
Owner occupied	$	756	$	3,716	$	4,472	$	254,637	$	259,109
Non-owner occupied	1,718		1,118		2,836		494,707		497,543
Total commercial real estate loans	2,474		4,834		7,308		749,344		756,652
Construction	—		100		100		125,328		125,428
Residential real estate	2,398		398		2,796		201,891		204,687
Commercial and industrial	288		334		622		367,853		368,475
Consumer	205		45		250		37,048		37,298
	$	5,365	$	5,711	$	11,076	$	1,481,464	$	1,492,540

(a) Originated loans are loans organically made through the Company's normal and customary origination process.

(b) Acquired loans are loans acquired in the acquisition of Home less acquired covered loans.

Loans contractually past due 90 days or more on which the Company continued to accrue interest were $0.03 million and $0.05 million at March 31, 2015 and December 31, 2014, respectively.

The following table presents information related to impaired loans, by portfolio class, at March 31, 2015 and December 31, 2014 (dollars in thousands):



	Impaired loans
	With a related allowance		Without a related allowance		Total recorded balance		Unpaid principal balance		Related allowance
March 31, 2015
Commercial real estate:
Owner occupied	$	432	$	3,116	$	3,548	$	5,087	$	41
Non-owner occupied	1,080		21,667		22,747		22,806		19
Total commercial real estate loans	1,512		24,783		26,295		27,893		60
Construction	—		743		743		743		—
Residential real estate	—		142		142		181		—
Commercial and industrial	2,339		684		3,023		3,574		21
Consumer	—		—		—		—		—
	$	3,851	$	26,352	$	30,203	$	32,391	$	81

December 31, 2014
Commercial real estate:
Owner occupied	$	436	$	5,624	$	6,060	$	8,699	$	41
Non-owner occupied	1,087		21,800		22,887		22,943		19
Total commercial real estate loans	1,523		27,424		28,947		31,642		60
Construction	—		963		963		963		—
Residential real estate	—		317		317		353		—
Commercial and industrial	2,702		793		3,495		3,962		25
Consumer	—		—		—		—		—
	$	4,225	$	29,497	$	33,722	$	36,920	$	85

At March 31, 2015 and December 31, 2014, the total recorded balance of impaired loans in the above table included $22.1 million and $22.8 million, respectively, of troubled debt restructuring (“TDR”) loans which were not on non-accrual status.

The following table presents, by portfolio class, the average recorded investment in impaired loans for the three months ended March 31, 2015 and 2014 (dollars in thousands):



	Three Months Ended March 31,
	2015		2014
Commercial real estate:
Owner occupied	$	4,804	$	7,868
Non-owner occupied	22,817		22,806
Total commercial real estate loans	27,621		30,674
Construction	853		1,863
Residential real estate	229		428
Commercial and industrial	3,259		5,530
Consumer	—		—
	$	31,962	$	38,495

Interest income recognized for cash payments received on impaired loans for the three months ended March 31, 2015 was insignificant.

Information with respect to the Company’s non-accrual loans, by portfolio class, at March 31, 2015 and December 31, 2014 is as follows (dollars in thousands):



	March 31, 2015		December 31, 2014
Commercial real estate:
Owner occupied	$	3,323	$	5,564
Non-owner occupied	1,433		1,940
Total commercial real estate loans	4,756		7,504
Construction	171		216
Residential real estate	2,134		3,165
Commercial and industrial	802		744
Consumer	5		56
Total non-accrual loans	$	7,868	$	11,685

Accruing loans which are contractually past due 90 days or more:
Commercial real estate:
Owner occupied	$	—	$	—
Non-owner occupied	—		—
Total commercial real estate loans	—		—
Construction	—		—
Residential real estate	—		—
Commercial and industrial	12		9
Consumer	22		45
Total accruing loans which are contractually past due 90 days or more	$	34	$	54

TDRs

The Company allocated $0.1 million and $0.1 million of specific reserves to customers whose loan terms have been modified in TDRs as of March 31, 2015 and December 31, 2014, respectively. TDRs involve the restructuring of terms to allow customers to mitigate the risk of foreclosure by meeting a lower loan payment requirement based upon their current cash flow. As indicated above, TDRs may also include loans to borrowers experiencing financial distress that renewed at existing contractual rates, but below market rates for comparable credit quality. The Company has been actively utilizing these programs and working with its customers to improve obligor cash flow and related prospect for repayment. Concessions may include, but are not limited to, interest rate reductions, principal forgiveness, deferral of interest payments, extension of the maturity date, and other actions intended to minimize potential losses to the Company. For each commercial loan restructuring, a comprehensive credit underwriting analysis of the borrower’s financial condition and prospects of repayment under the revised terms is performed to assess whether the new structure can be successful and whether cash flows will be sufficient to support the restructured debt. Generally, if the loan is on accrual status at the time of restructuring, it will remain on accrual status after the restructuring. After six consecutive payments under the restructured terms, a non-accrual restructured loan is reviewed for possible upgrade to accruing status.

Typically, once a loan is identified as a TDR it will retain that designation until it is paid off, because restructured loans generally are not at market rates following restructuring. Under certain circumstances, a TDR may be removed from TDR status if it is determined to no longer be impaired and the loan is at a competitive interest rate. Under such circumstances, allowance allocations for loans removed from TDR status would be based on the historical allocation for the applicable loan grade and loan class.

There were no loans modified and recorded as TDRs during the three months ended March 31, 2015 or 2014. At both March 31, 2015 and 2014, the Company had no remaining commitments to lend on loans accounted for as TDRs.

The following table presents, by portfolio segment, the TDRs which had payment defaults during the three months ended March 31, 2014 that had been previously restructured within the last twelve months prior to March 31, 2014 (dollars in thousands). There were no TDRs which had payment defaults during the three months ended March 31, 2015 that had been previously restructured within the last twelve months prior to March 31, 2015.



	2014
	Number of loans	TDRs restructured in the period with a payment default
Commercial real estate	—	$	—
Construction	—	—
Residential real estate	—	—
Commercial and industrial loans	1	963
Consumer loans	—	—
	1	$	963