Loans and reserve for credit losses (Tables)

6 Months Ended

Jun. 30, 2016

Schedule of Accounts, Notes, Loans and Financing Receivable

The composition of the loan portfolio at June 30, 2016 and December 31, 2015 was as follows (dollars in thousands):



	June 30, 2016					December 31, 2015
	Amount			Percent		Amount			Percent
Originated loans (a):
Commercial real estate:
Owner occupied	$	280,421		16.5	%	$	263,095		18.1	%
Non-owner occupied	462,163			27.3	%	431,379			29.7	%
Total commercial real estate loans	742,584			43.8	%	694,474			47.8	%
Construction	151,914			9.0	%	119,723			8.2	%
Residential real estate	369,802			21.8	%	237,084			16.3	%
Commercial and industrial	389,319			23.0	%	363,335			25.0	%
Consumer	40,231			2.4	%	38,362			2.7	%
Total loans	1,693,850			100.0	%	1,452,978			100.0	%

Less:
Deferred loan fees	(1,808		)			(1,419		)
Reserve for loan losses	(24,666		)			(24,415		)
Loans, net	$	1,667,376				$	1,427,144

Acquired loans (b):
Commercial real estate:
Owner occupied	$	40,354		19.2	%	$	45,236		19.3	%
Non-owner occupied	85,144			40.8	%	95,183			40.5	%
Total commercial real estate loans	125,498			60.0	%	140,419			59.8	%
Construction	9,967			4.8	%	10,629			4.5	%
Residential real estate	51,532			24.7	%	61,306			26.1	%
Commercial and industrial	20,713			9.9	%	21,109			9.0	%
Consumer	1,151			0.6	%	1,488			0.6	%
Total loans	$	208,861		100.0	%	$	234,951		100.0	%

Total loans:
Commercial real estate:
Owner occupied	$	320,775		16.9	%	$	308,331		18.3	%
Non-owner occupied	547,307			28.8	%	526,562			31.2	%
Total commercial real estate loans	868,082			45.7	%	834,893			49.5	%
Construction	161,881			8.5	%	130,352			7.7	%
Residential real estate	421,334			22.1	%	298,390			17.7	%
Commercial and industrial	410,032			21.5	%	384,444			22.8	%
Consumer	41,382			2.2	%	39,850			2.3	%
Total loans	1,902,711			100.0	%	1,687,929			100.0	%

Less:
Deferred loan fees	(1,808		)			(1,419		)
Reserve for loan losses	(24,666		)			(24,415		)
Loans, net	$	1,876,237				$	1,662,095

(a) Originated loans are loans organically made through the Company’s normal and customary origination process, including adjustable rate mortgage ("ARM") purchases.
(b) Acquired loans are loans acquired in the acquisition of Home Federal Bancorp, Inc.

Changes in Loss Share Payable Associated with Covered Loans

Changes in the loss share payable associated with covered loans for the three and six months ended June 30, 2016 were as follows (dollars in thousands):



	Three months ended			Six months ended
	June 30, 2016
Balance at beginning of period	$	367		$	289
Paid to FDIC	(367		)	(656		)
Increase due to impairment	(53		)	(53		)
FDIC reimbursement	252			680
Shared loss expenses	(2		)	(63		)
Adjustments from prior periods	4			4
Balance at end of period	$	201		$	201

Allowance for Credit Losses on Financing Receivables

Transactions and allocations in the reserve for loan losses and unfunded loan commitments, by portfolio segment, for the three and six months ended June 30, 2016 and 2015 were as follows (dollars in thousands):



	Commercial real estate			Construction		Residential real estate			Commercial and industrial			Consumer			Unallocated			Total
For the three months ended June 30, 2016
Allowance for Loan Losses
Balance at March 31, 2016	$	3,846		$	1,098	$	2,392		$	12,497		$	959		$	3,638		$	24,430
Loan loss provision (credit)	556			120		281			(917		)	216			(256		)	—
Recoveries	(11		)	41		47			603			243			—			923
Loans charged off	—			—		(46		)	(201		)	(440		)	—			(687		)
Balance at end of period	$	4,391		$	1,259	$	2,674		$	11,982		$	978		$	3,382		$	24,666

Reserve for unfunded lending commitments
Balance at March 31, 2016	$	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	$	4,391		$	1,259	$	2,674		$	11,982		$	978		$	3,382		$	24,666
Reserve for unfunded lending commitments	48			268		25			75			24			—			440
Total reserve for credit losses	$	4,439		$	1,527	$	2,699		$	12,057		$	1,002		$	3,382		$	25,106



	Commercial real estate			Construction		Residential real estate			Commercial and industrial			Consumer			Unallocated		Total
For the six months ended June 30, 2016
Allowance for Loan Losses
Balance at December 31, 2015	$	3,934		$	1,044	$	2,075		$	13,969		$	917		$	2,476	$	24,415
Loan loss provision (credit)	(2,221		)	136		486			212			481			906		—
Recoveries	2,718			79		177			762			507			—		4,243
Loans charged off	(40		)	—		(64		)	(2,961		)	(927		)	—		(3,992		)
Balance at end of period	$	4,391		$	1,259	$	2,674		$	11,982		$	978		$	3,382	$	24,666

Reserve for unfunded lending commitments
Balance at December 31, 2015	$	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	$	4,391		$	1,259	$	2,674		$	11,982		$	978		$	3,382	$	24,666
Reserve for unfunded lending commitments	48			268		25			75			24			—		440
Total reserve for credit losses	$	4,439		$	1,527	$	2,699		$	12,057		$	1,002		$	3,382	$	25,106



	Commercial real estate			Construction		Residential real estate			Commercial and industrial			Consumer			Unallocated			Total
For the three months ended June 30, 2015
Allowance for Loan Losses
Balance at March 31, 2015	$	4,781		$	1,255	$	2,512		$	11,359		$	978		$	2,359		$	23,244
Loan loss provision (credit)	38			78		(175		)	(166		)	290			(65		)	—
Recoveries	216			23		260			344			162			—			1,005
Loans charged off	(3		)	—		(134		)	(182		)	(429		)	—			(748		)
Balance at end of period	$	5,032		$	1,356	$	2,463		$	11,355		$	1,001		$	2,294		$	23,501

Reserve for unfunded lending commitments
Balance at March 31, 2015	$	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	$	5,032		$	1,356	$	2,463		$	11,355		$	1,001		$	2,294		$	23,501
Reserve for unfunded lending commitments	48			268		25			75			24			—			440
Total reserve for credit losses	$	5,080		$	1,624	$	2,488		$	11,430		$	1,025		$	2,294		$	23,941



	Commercial real estate			Construction		Residential real estate			Commercial and industrial			Consumer			Unallocated			Total
For the six months ended June 30, 2015
Allowance 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)	(3,909		)	101		101			4,270			437			(3,000		)	(2,000		)
Recoveries	3,606			122		585			555			277			—			5,145
Loans charged off	(279		)	—		(344		)	(314		)	(760		)	—			(1,697		)
Balance at end of period	$	5,032		$	1,356	$	2,463		$	11,355		$	1,001		$	2,294		$	23,501

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	$	5,032		$	1,356	$	2,463		$	11,355		$	1,001		$	2,294		$	23,501
Reserve for unfunded lending commitments	48			268		25			75			24			—			440
Total reserve for credit losses	$	5,080		$	1,624	$	2,488		$	11,430		$	1,025		$	2,294		$	23,941

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 June 30, 2016 and December 31, 2015 (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
June 30, 2016
Commercial real estate	$	74	$	4,317	$	4,391	$	4,547	$	863,535	$	868,082
Construction	—		1,259		1,259		—		161,881		161,881
Residential real estate	—		2,674		2,674		—		421,334		421,334
Commercial and industrial	78		11,904		11,982		7,453		402,579		410,032
Consumer	—		978		978		—		41,382		41,382
	$	152	$	21,132	21,284		$	12,000	$	1,890,711	$	1,902,711
Unallocated					3,382
					$	24,666

December 31, 2015
Commercial real estate	$	78	$	3,856	$	3,934	$	3,835	$	831,058	$	834,893
Construction	—		1,044		1,044		365		129,987		130,352
Residential real estate	—		2,075		2,075		18		298,372		298,390
Commercial and industrial	164		13,805		13,969		2,724		381,720		384,444
Consumer	—		917		917		—		39,850		39,850
	$	242	$	21,697	21,939		$	6,942	$	1,680,987	$	1,687,929
Unallocated					2,476
					$	24,415

Financing Receivable Credit Quality Indicators

The following table presents, by portfolio class, the recorded investment in loans by internally assigned grades at June 30, 2016 and December 31, 2015 (dollars in thousands):



	Loan grades
	Acceptable		Pass-Watch		Special Mention		Substandard		Total
June 30, 2016
Originated loans (a):
Commercial real estate:
Owner occupied	$	266,099	$	6,884	$	975	$	6,463	$	280,421
Non-owner occupied	449,614		3,745		4,863		3,941		462,163
Total commercial real estate loans	715,713		10,629		5,838		10,404		742,584
Construction	151,914		—		—		—		151,914
Residential real estate	369,300		—		—		502		369,802
Commercial and industrial	347,274		13,338		5,422		23,285		389,319
Consumer	40,229		—		—		2		40,231
	$	1,624,430	$	23,967	$	11,260	$	34,193	$	1,693,850

Acquired loans (b):
Commercial real estate:
Owner occupied	$	34,862	$	3,445	$	1,213	$	834	$	40,354
Non-owner occupied	71,307		881		8,351		4,605		85,144
Total commercial real estate loans	106,169		4,326		9,564		5,439		125,498
Construction	9,899		—		—		68		9,967
Residential real estate	50,690		—		—		842		51,532
Commercial and industrial	19,958		92		—		663		20,713
Consumer	1,151		—		—		—		1,151
	$	187,867	$	4,418	$	9,564	$	7,012	$	208,861

Total loans:
Commercial real estate:
Owner occupied	$	300,961	$	10,329	$	2,188	$	7,297	$	320,775
Non-owner occupied	520,921		4,626		13,214		8,546		547,307
Total commercial real estate loans	821,882		14,955		15,402		15,843		868,082
Construction	161,813		—		—		68		161,881
Residential real estate	419,990		—		—		1,344		421,334
Commercial and industrial	367,232		13,430		5,422		23,948		410,032
Consumer	41,380		—		—		2		41,382
	$	1,812,297	$	28,385	$	20,824	$	41,205	$	1,902,711

(a) Originated loans are loans organically made through the Company’s normal and customary origination process, including ARM purchases.
(b) Acquired loans are loans acquired in the acquisition of Home.



	Loan grades
	Acceptable		Pass-Watch		Special Mention		Substandard		Total
December 31, 2015
Originated loans (a):
Commercial real estate:
Owner occupied	$	243,113	$	8,623	$	1,426	$	9,933	$	263,095
Non-owner occupied	411,137		9,825		4,522		5,895		431,379
Total commercial real estate loans	654,250		18,448		5,948		15,828		694,474
Construction	118,752		—		971		—		119,723
Residential real estate	236,574		—		—		510		237,084
Commercial and industrial	328,934		11,220		13,729		9,452		363,335
Consumer	38,350		—		—		12		38,362
	$	1,376,860	$	29,668	$	20,648	$	25,802	$	1,452,978

Acquired loans (b):
Commercial real estate:
Owner occupied	$	34,081	$	3,480	$	7,341	$	334	$	45,236
Non-owner occupied	71,334		2,751		9,386		11,712		95,183
Total commercial real estate loans	105,415		6,231		16,727		12,046		140,419
Construction	10,597		—		—		32		10,629
Residential real estate	60,151		—		—		1,155		61,306
Commercial and industrial	17,034		153		3,461		461		21,109
Consumer	1,485		—		—		3		1,488
	$	194,682	$	6,384	$	20,188	$	13,697	$	234,951

Total loans:
Commercial real estate:
Owner occupied	$	277,194	$	12,103	$	8,767	$	10,267	$	308,331
Non-owner occupied	482,471		12,576		13,908		17,607		526,562
Total commercial real estate loans	759,665		24,679		22,675		27,874		834,893
Construction	129,349		—		971		32		130,352
Residential real estate	296,725		—		—		1,665		298,390
Commercial and industrial	345,968		11,373		17,190		9,913		384,444
Consumer	39,835		—		—		15		39,850
	$	1,571,542	$	36,052	$	40,836	$	39,499	$	1,687,929

(a) Originated loans are loans organically made through the Company’s normal and customary origination process, including ARM purchases.
(b) Acquired loans are loans acquired in the acquisition of Home.

Past Due Financing Receivables

The following table presents, by portfolio class, an age analysis of past due loans, including loans placed on non-accrual at June 30, 2016 and December 31, 2015 (dollars in thousands):



	30-89 days past due		90 days or more past due		Total past due		Current		Total loans
June 30, 2016
Originated loans (a):
Commercial real estate:
Owner occupied	$	211	$	719	$	930	$	279,491	$	280,421
Non-owner occupied	—		—		—		462,163		462,163
Total commercial real estate loans	211		719		930		741,654		742,584
Construction	72		—		72		151,842		151,914
Residential real estate	1,494		—		1,494		368,308		369,802
Commercial and industrial	396		170		566		388,753		389,319
Consumer	145		2		147		40,084		40,231
	$	2,318	$	891	$	3,209	$	1,690,641	$	1,693,850

Acquired loans (b):
Commercial real estate:
Owner occupied	$	13	$	—	$	13	$	40,341	$	40,354
Non-owner occupied	—		—		—		85,144		85,144
Total commercial real estate loans	13		—		13		125,485		125,498
Construction	—		26		26		9,941		9,967
Residential real estate	1,275		280		1,555		49,977		51,532
Commercial and industrial	228		9		237		20,476		20,713
Consumer	64		—		64		1,087		1,151
	$	1,580	$	315	$	1,895	$	206,966	$	208,861

Total loans:
Commercial real estate:
Owner occupied	$	224	$	719	$	943	$	319,832	$	320,775
Non-owner occupied	—		—		—		547,307		547,307
Total commercial real estate loans	224		719		943		867,139		868,082
Construction	72		26		98		161,783		161,881
Residential real estate	2,769		280		3,049		418,285		421,334
Commercial and industrial	624		179		803		409,229		410,032
Consumer	209		2		211		41,171		41,382
	$	3,898	$	1,206	$	5,104	$	1,897,607	$	1,902,711

December 31, 2015
Originated loans (a):
Commercial real estate:
Owner occupied	$	1,020	$	719	$	1,739	$	261,356	$	263,095
Non-owner occupied	593		—		593		430,786		431,379
Total commercial real estate loans	1,613		719		2,332		692,142		694,474
Construction	—		—		—		119,723		119,723
Residential real estate	196		—		196		236,888		237,084
Commercial and industrial	346		239		585		362,750		363,335
Consumer	209		12		221		38,141		38,362
	$	2,364	$	970	$	3,334	$	1,449,644	$	1,452,978




Acquired loans (b):
Commercial real estate:
Owner occupied	$	—	$	—	$	—	$	45,236	$	45,236
Non-owner occupied	2,049		—		2,049		93,134		95,183
Total commercial real estate loans	2,049		—		2,049		138,370		140,419
Construction	46		—		46		10,583		10,629
Residential real estate	748		534		1,282		60,024		61,306
Commercial and industrial	6		5		11		21,098		21,109
Consumer	53		—		53		1,435		1,488
	$	2,902	$	539	$	3,441	$	231,510	$	234,951

Total loans:
Commercial real estate:
Owner occupied	$	1,020	$	719	$	1,739	$	306,592	$	308,331
Non-owner occupied	2,642		—		2,642		523,920		526,562
Total commercial real estate loans	3,662		719		4,381		830,512		834,893
Construction	46		—		46		130,306		130,352
Residential real estate	944		534		1,478		296,912		298,390
Commercial and industrial	352		244		596		383,848		384,444
Consumer	262		12		274		39,576		39,850
	$	5,266	$	1,509	$	6,775	$	1,681,154	$	1,687,929

(a) Originated loans are loans organically made through the Company’s normal and customary origination process, including ARM purchases.
(b) Acquired loans are loans acquired in the acquisition of Home.

Impaired Financing Receivables, By Portfolio Class

The following table presents information related to impaired loans, by portfolio class, at June 30, 2016 and December 31, 2015 (dollars in thousands):



	Impaired loans
	With a related allowance		Without a related allowance		Total recorded balance		Unpaid principal balance		Related allowance
June 30, 2016
Commercial real estate:
Owner occupied	$	848	$	1,159	$	2,007	$	3,067	$	54
Non-owner occupied	636		1,904		2,540		2,540		20
Total commercial real estate loans	1,484		3,063		4,547		5,607		74
Construction	—		—		—		—		—
Residential real estate	—		—		—		—		—
Commercial and industrial	246		7,207		7,453		10,893		78
Consumer	—		—		—		—		—
	$	1,730	$	10,270	$	12,000	$	16,500	$	152

December 31, 2015
Commercial real estate:
Owner occupied	$	1,032	$	2,157	$	3,189	$	4,285	$	73
Non-owner occupied	646		—		646		646		5
Total commercial real estate loans	1,678		2,157		3,835		4,931		78
Construction	—		365		365		365		—
Residential real estate	—		18		18		18		—
Commercial and industrial	2,539		185		2,724		3,366		164
Consumer	—		—		—		—		—
	$	4,217	$	2,725	$	6,942	$	8,680	$	242

The following table presents, by portfolio class, the average recorded investment in impaired loans for the three and six months ended June 30, 2016 and 2015 (dollars in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Commercial real estate:
Owner occupied	$	2,285	$	3,323	$	2,586	$	4,235
Non-owner occupied	2,554		12,121		1,918		15,709
Total commercial real estate loans	4,839		15,444		4,504		19,944
Construction	—		632		122		742
Residential real estate	—		99		6		171
Commercial and industrial	7,565		2,942		5,952		3,127
Consumer	—		—		—		—
	$	12,404	$	19,117	$	10,584	$	23,984

Average Recorded Investment In Impaired Loans

The following table presents information related to impaired loans, by portfolio class, at June 30, 2016 and December 31, 2015 (dollars in thousands):



	Impaired loans
	With a related allowance		Without a related allowance		Total recorded balance		Unpaid principal balance		Related allowance
June 30, 2016
Commercial real estate:
Owner occupied	$	848	$	1,159	$	2,007	$	3,067	$	54
Non-owner occupied	636		1,904		2,540		2,540		20
Total commercial real estate loans	1,484		3,063		4,547		5,607		74
Construction	—		—		—		—		—
Residential real estate	—		—		—		—		—
Commercial and industrial	246		7,207		7,453		10,893		78
Consumer	—		—		—		—		—
	$	1,730	$	10,270	$	12,000	$	16,500	$	152

December 31, 2015
Commercial real estate:
Owner occupied	$	1,032	$	2,157	$	3,189	$	4,285	$	73
Non-owner occupied	646		—		646		646		5
Total commercial real estate loans	1,678		2,157		3,835		4,931		78
Construction	—		365		365		365		—
Residential real estate	—		18		18		18		—
Commercial and industrial	2,539		185		2,724		3,366		164
Consumer	—		—		—		—		—
	$	4,217	$	2,725	$	6,942	$	8,680	$	242

The following table presents, by portfolio class, the average recorded investment in impaired loans for the three and six months ended June 30, 2016 and 2015 (dollars in thousands):



	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Commercial real estate:
Owner occupied	$	2,285	$	3,323	$	2,586	$	4,235
Non-owner occupied	2,554		12,121		1,918		15,709
Total commercial real estate loans	4,839		15,444		4,504		19,944
Construction	—		632		122		742
Residential real estate	—		99		6		171
Commercial and industrial	7,565		2,942		5,952		3,127
Consumer	—		—		—		—
	$	12,404	$	19,117	$	10,584	$	23,984

Schedule of Financing Receivables, Non Accrual Status

Information with respect to the Company’s non-performing loans, by portfolio class, at June 30, 2016 and December 31, 2015 is as follows (dollars in thousands):



	June 30, 2016		December 31, 2015
Commercial real estate:
Owner occupied	$	892	$	2,742
Non-owner occupied	2,763		434
Total commercial real estate loans	3,655		3,176
Construction	42		—
Residential real estate	1,254		1,427
Commercial and industrial	7,224		447
Consumer	—		3
Total non-accrual loans	$	12,175	$	5,053

Accruing loans which are contractually past due 90 days or more:
Construction	26		—
Commercial and industrial	24		56
Consumer	2		12
Total accruing loans which are contractually past due 90 days or more	$	52	$	68

Troubled Debt Restructurings on Financing Receivables

The following table presents, by portfolio segment, the information with respect to the Company’s loans that were modified and recorded as TDRs during the six months ended June 30, 2016 and 2015 (dollars in thousands).



	Six months ended June 30,
	2016			2015
	Number of loans	TDR outstanding recorded investment		Number of loans	TDR outstanding recorded investment
Commercial real estate	—	$	—	—	$	—
Construction	—	—		—	—
Residential real estate	—	—		—	—
Commercial and industrial	1	22		—	—
Consumer	—	—		—	—
	1	$	22	—	$	—

The following table presents, by portfolio segment, the post modification recorded investment for TDRs restructured during the six months ended June 30, 2016.



Six Months Ended June 30, 2016	Rate reduction		Term extension		Rate reduction and term extension		Total
Commercial real estate	$	—	$	—	$	—	$	—
Construction	—		—		—		—
Residential real estate	—		—		—		—
Commercial and industrial	—		22		—		22
Consumer	—		—		—		—
	$	—	$	22	$	—	$	22

Post Modification Troubled Debt Restructurings on Financing Receivables



	Six months ended June 30,
	2016			2015
	Number of loans	TDR outstanding recorded investment		Number of loans	TDR outstanding recorded investment
Commercial real estate	—	$	—	—	$	—
Construction	—	—		—	—
Residential real estate	—	—		—	—
Commercial and industrial	1	22		—	—
Consumer	—	—		—	—
	1	$	22	—	$	—

The following table presents, by portfolio segment, the post modification recorded investment for TDRs restructured during the six months ended June 30, 2016.



Six Months Ended June 30, 2016	Rate reduction		Term extension		Rate reduction and term extension		Total
Commercial real estate	$	—	$	—	$	—	$	—
Construction	—		—		—		—
Residential real estate	—		—		—		—
Commercial and industrial	—		22		—		22
Consumer	—		—		—		—
	$	—	$	22	$	—	$	22