Off-Balance Sheet Activities | LOANS The following table presents the recorded investment in loans at June 30, 2018 and December 31, 2017 . The recorded investment in loans excludes accrued interest receivable. (Dollars in thousands) Originated Acquired Total June 30, 2018 Commercial real estate $ 463,350 $ 70,606 $ 533,956 Commercial and industrial 352,718 10,521 363,239 Residential real estate 129,908 17,855 147,763 Consumer 748 83 831 Total $ 946,724 $ 99,065 $ 1,045,789 December 31, 2017 Commercial real estate $ 431,872 $ 79,890 $ 511,762 Commercial and industrial 365,679 12,007 377,686 Residential real estate 122,551 21,888 144,439 Consumer 793 243 1,036 Total $ 920,895 $ 114,028 $ 1,034,923 Information as to nonperforming assets was as follows: (Dollars in thousands) June 30, 2018 December 31, 2017 Nonaccrual loans: Commercial real estate $ 2,557 $ 2,257 Commercial and industrial 5,983 9,024 Residential real estate 2,737 2,767 Total nonaccrual loans 11,277 14,048 Other real estate owned — 652 Total nonperforming assets $ 11,277 $ 14,700 Loans 90 days or more past due and still accruing $ 259 $ 440 At June 30, 2018 and December 31, 2017 , all of the loans 90 days or more past due and still accruing were PCI loans. Loan delinquency as of the dates presented below was as follows: (Dollars in thousands) Current 30 - 59 Days 60 - 89 Days 90+ Days Total June 30, 2018 Commercial real estate $ 532,658 $ 1,298 $ — $ — $ 533,956 Commercial and industrial 362,573 498 1 167 363,239 Residential real estate 143,942 2,239 203 1,379 147,763 Consumer 788 43 — — 831 Total $ 1,039,961 $ 4,078 $ 204 $ 1,546 $ 1,045,789 December 31, 2017 Commercial real estate $ 507,250 $ 3,066 $ 1,412 $ 34 $ 511,762 Commercial and industrial 373,829 1,397 2,455 5 377,686 Residential real estate 138,613 3,808 1,258 760 144,439 Consumer 985 51 — — 1,036 Total $ 1,020,677 $ 8,322 $ 5,125 $ 799 $ 1,034,923 Impaired Loans Information as to impaired loans, excluding purchased credit impaired loans, is as follows: (Dollars in thousands) June 30, 2018 December 31, 2017 Nonaccrual loans $ 11,277 $ 14,048 Performing troubled debt restructurings: Commercial real estate 1,517 — Commercial and industrial 578 961 Residential real estate 364 261 Total performing troubled debt restructurings 2,459 1,222 Total impaired loans, excluding purchase credit impaired loans $ 13,736 $ 15,270 Troubled Debt Restructurings The Company assesses loan modifications to determine whether a modification constitutes a troubled debt restructuring ("TDR"). This applies to all loan modifications except for modifications to loans accounted for in pools under ASC 310-30, which are not subject to TDR accounting/classification. For loans excluded from ASC 310-30 accounting, a modification is considered a TDR when a borrower is experiencing financial difficulties and the Company grants a concession to the borrower. For loans accounted for individually under ASC 310-30, a modification is considered a TDR when a borrower is experiencing financial difficulties and the effective yield after the modification is less than the effective yield at the time the loan was acquired or less than the effective yield of any re-estimation of cash flows subsequent to acquisition in association with consideration of qualitative factors included within ASC 310-40. All TDRs are considered impaired loans. The nature and extent of impairment of TDRs, including those which have experienced a subsequent default, is considered in the determination of an appropriate level of allowance for loan losses. As of June 30, 2018 and December 31, 2017 , the Company had a recorded investment in troubled debt restructurings of $10.8 million and $7.6 million, respectively. The Company has allocated a specific reserve of $988 thousand for those loans at June 30, 2018 and a specific reserve of $975 thousand for those loans at December 31, 2017 . The Company has not committed to lend additional amounts to borrowers whose loans have been modified. As of June 30, 2018 , there were $8.3 million of nonperforming TDRs and $2.5 million of performing TDRs included in impaired loans. As of December 31, 2017 , there were $6.4 million of nonperforming TDRs and $1.2 million of performing TDRs included in impaired loans. All TDRs are considered impaired loans in the calendar year of their restructuring. A loan that has been modified will return to performing status if it satisfies a six-month performance requirement; however, it will continue to be reported as a TDR and considered impaired. The following table presents the recorded investment of loans modified as TDRs during the three and six months ended June 30, 2018 and six months ended June 30, 2017 , by type of concession granted. There were no loans modified as TDRs during the three months ended June 30, 2017. In cases where more than one type of concession was granted, the loans were categorized based on the most significant concession. Concession type Financial effects of (Dollars in thousands) Principal Interest Forbearance Total Total Net Provision For the three months ended June 30, 2018 Commercial real estate $ — $ — $ 691 1 $ 691 $ 101 $ — Commercial and industrial 138 — 93 2 231 — — Residential real estate — — 110 2 110 — 5 Total $ 138 $ — $ 894 5 $ 1,032 $ 101 $ 5 For the six months ended June 30, 2018 Commercial real estate $ — $ — $ 2,793 4 $ 2,793 $ 101 $ — Commercial and industrial 138 — 1,004 3 1,142 — — Residential real estate — — 110 2 110 — 5 Total $ 138 $ — $ 3,907 9 $ 4,045 $ 101 $ 5 For the six months ended June 30, 2017 Residential real estate $ — $ 366 $ — 2 $ 366 $ — $ — Total $ — $ 366 $ — 2 $ 366 $ — $ — On an ongoing basis, the Company monitors the performance of TDRs to their modified terms. The following tables present the number of loans modified in TDRs during the previous 12 months for which there was payment default during the three and six months ended June 30, 2018 and June 30, 2017, including the recorded investment as of each period end. A payment on a TDR is considered to be in default once it is greater than 30 days past due. Three months ended June 30, 2018 Six months ended June 30, 2018 (Dollars in thousands) Total number of Total recorded Charged off following a Total number of Total recorded Charged off following a Commercial real estate — $ — $ — 1 $ 1,149 $ 11 Total — $ — $ — 1 $ 1,149 $ 11 Three months ended June 30, 2017 Six months ended June 30, 2017 (Dollars in thousands) Total number of Total recorded Charged off following a Total number of Total recorded Charged off following a Commercial real estate 2 $ 287 $ 2 2 $ 287 $ 2 Commercial and industrial — — — 1 882 — Residential real estate — — — 1 301 — Total 2 $ 287 $ 2 4 $ 1,470 $ 2 Credit Quality Indicators: The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes non-homogeneous loans, such as commercial and industrial and commercial real estate loans. This analysis is performed on an annual basis. The Company uses the following definitions for risk ratings: Pass. Higher quality loans that do not fit any of the other categories described below. This category includes loans risk rated with the following ratings: cash/stock secured, excellent credit risk, superior credit risk, good credit risk, satisfactory credit risk, and marginal credit risk. Special Mention. Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date. Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Based on the most recent analysis performed, the risk category of loans by class of loans was as follows: (Dollars in thousands) Pass Special Mention Substandard Doubtful Total June 30, 2018 Commercial real estate $ 519,536 $ 6,223 $ 7,455 $ 742 $ 533,956 Commercial and industrial 346,989 7,332 8,918 — 363,239 Total $ 866,525 $ 13,555 $ 16,373 $ 742 $ 897,195 December 31, 2017 Commercial real estate $ 492,731 $ 10,664 $ 8,323 $ 44 $ 511,762 Commercial and industrial 361,740 5,945 9,963 38 377,686 Total $ 854,471 $ 16,609 $ 18,286 $ 82 $ 889,448 For residential real estate loans and consumer loans, the Company evaluates credit quality based on the aging status of the loan and by payment activity. Residential real estate loans and consumer loans are considered nonperforming if 90 days or more past due. Consumer loan types are continuously monitored for changes in delinquency trends and other asset quality indicators. The following presents residential real estate and consumer loans by credit quality: (Dollars in thousands) Performing Nonperforming Total June 30, 2018 Residential real estate $ 145,026 $ 2,737 $ 147,763 Consumer 831 — 831 Total $ 145,857 $ 2,737 $ 148,594 December 31, 2017 Residential real estate $ 141,672 $ 2,767 $ 144,439 Consumer 1,036 — 1,036 Total $ 142,708 $ 2,767 $ 145,475 Purchased Credit Impaired Loans: As part of the Company's previous four acquisitions, the Company acquired purchase credit impaired ("PCI") loans for which there was evidence of credit quality deterioration since origination and we determined that it was probable that the Company would be unable to collect all contractually required principal and interest payments. The total balance of all PCI loans from these acquisitions was as follows: (Dollars in thousand) Unpaid Principal Balance Recorded Investment June 30, 2018 Commercial real estate $ 10,038 $ 5,863 Commercial and industrial 617 119 Residential real estate 5,208 3,530 Total PCI loans $ 15,863 $ 9,512 December 31, 2017 Commercial real estate $ 10,084 $ 5,771 Commercial and industrial 808 417 Residential real estate 4,068 3,558 Total PCI loans $ 14,960 $ 9,746 The following table reflects the activity in the accretable yield of PCI loans from past acquisitions, which includes total expected cash flows, including interest, in excess of the recorded investment. Three months ended June 30, Six months ended June 30, (Dollars in thousands) 2018 2017 2018 2017 Balance at beginning of period $ 13,534 $ 18,237 $ 14,452 $ 19,893 Accretion of income (991 ) (1,510 ) (1,909 ) (3,177 ) Adjustments to accretable yield (159 ) 123 (159 ) 134 Other activity, net 6 — 6 — Balance at end of period $ 12,390 $ 16,850 $ 12,390 $ 16,850 "Accretion of income" represents the income earned on these loans for the year. "Adjustments to accretable yield" represents the net amount of accretable yield added or removed as a result of the semi-annual re-estimation of expected cash flows. For the six months ended June 30, 2018 and year ended December 31, 2017 , respectively, allowance for loans losses on PCI loans decreased by $96 thousand and increased by $234 thousand. OFF-BALANCE SHEET ACTIVITIES In the normal course of business, the Company offers a variety of financial instruments with off-balance sheet risk to meet the financing needs of its customers. These financial instruments include outstanding commitments to extend credit, credit lines, commercial letters of credit and standby letters of credit. These are agreements to provide credit, as long as conditions established in the contract are met, and usually have expiration dates. Commitments may expire without being used. Off-balance sheet risk to credit loss exists up to the face amount of these instruments, although material losses are not anticipated. The same credit policies used for loans are used to make such commitments, including obtaining collateral at exercise of the commitment. A summary of the contractual amounts of the Company's exposure to off-balance sheet risk is as follows: June 30, 2018 December 31, 2017 (Dollars in thousands) Fixed Variable Fixed Variable Commitments to make loans $ 19,411 $ 775 $ 5,041 $ 8,837 Unused lines of credit 9,418 221,743 12,407 189,787 Unused standby letters of credit 4,374 182 3,584 1,411 Commitments to make loans are generally made for periods of 90 days or less. The fixed rate loan commitments have interest rates ranging from 4.75% to 6.15% and maturities ranging from 1 to 10 years. |