| Loans and Leases Held for Investment and Allowance for Loan and Lease Losses | Loans and Leases Held for Investment and Allowance for Loan and Lease Losses Loan Portfolio Segments The following describes the risk characteristics relevant to each of the portfolio segments. Each loan and lease category is assigned a risk grade during the origination and closing process based on criteria described later in this section. Commercial and Industrial Commercial and industrial loans (C&I) receive similar underwriting treatment as commercial real estate loans in that the repayment source is analyzed to determine its ability to meet cash flow coverage requirements as set forth by Bank policies. Repayment of the Bank’s C&I loans generally comes from the generation of cash flow as the result of the borrower’s business operations. This business cycle itself brings a certain level of risk to the portfolio. In some instances, these loans may carry a higher degree of risk due to a variety of reasons – illiquid collateral, specialized equipment, highly depreciable assets, uncollectable accounts receivable, revolving balances, or simply being unsecured. As a result of these characteristics, the SBA guarantee on these loans is an important factor in mitigating risk. Construction and Development Construction and development loans are for the purpose of acquisition and development of land to be improved through the construction of commercial buildings. Such loans are usually paid off through the conversion to permanent financing for the long-term benefit of the borrower’s ongoing operations. At the completion of the project, if the loan is converted to permanent financing or if scheduled loan amortization begins, it is then reclassified to the “Commercial Real Estate” segment. Underwriting of construction and development loans typically includes analysis of not only the borrower’s financial condition and ability to meet the required debt obligations, but also the general market conditions associated with the area and type of project being funded. Commercial Real Estate Commercial real estate loans are extensions of credit secured by owner occupied and non-owner occupied collateral. Underwriting generally involves intensive analysis of the financial strength of the borrower and guarantor, liquidation value of the subject collateral, the associated unguaranteed exposure, and any available secondary sources of repayment, with the greatest emphasis given to a borrower’s capacity to meet cash flow coverage requirements as set forth by Bank policies. Such repayment of commercial real estate loans is commonly derived from the successful ongoing operations of the business occupying the property. These typically include small businesses and professional practices. Commercial Land Commercial land loans are extensions of credit secured by farmland. Such loans are often for land improvements related to agricultural endeavors that may include construction of new specialized facilities. These loans are usually repaid through the conversion to permanent financing, or if scheduled loans amortization begins, for the long-term benefit of the borrower’s ongoing operations. Underwriting generally involves intensive analysis of the financial strength of the borrower and guarantor, liquidation value of the subject collateral, the associated unguaranteed exposure, and any available secondary sources of repayment, with the greatest emphasis given to a borrower’s capacity to meet cash flow coverage requirements as set forth by Bank policies. Each of the loan types referenced in the sections above is further segmented into verticals in which the Bank chooses to operate. The Bank chooses to finance businesses operating in specific industries because of certain similarities. The similarities range from historical default and loss characteristics to business operations. However, there are differences that create the necessity to underwrite these loans according to varying criteria and guidelines. When underwriting a loan, the Bank considers numerous factors such as cash flow coverage, the credit scores of the guarantors, revenue growth, practice ownership experience and debt service capacity. Minimum guidelines have been set with regard to these various factors and deviations from those guidelines require compensating strengths when considering a proposed loan. Loans and leases consist of the following: March 31, December 31, Commercial & Industrial Agriculture $ 1,328 $ 1,714 Death Care Management 9,989 9,684 Healthcare 38,545 37,270 Independent Pharmacies 92,043 83,677 Registered Investment Advisors 73,169 68,335 Veterinary Industry 41,117 38,930 Other Industries 117,237 94,836 Total 373,428 334,446 Construction & Development Agriculture 37,700 32,372 Death Care Management 4,433 3,956 Healthcare 33,849 30,467 Independent Pharmacies 1,034 2,013 Registered Investment Advisors 319 294 Veterinary Industry 14,810 11,514 Other Industries 40,231 31,715 Total 132,376 112,331 Commercial Real Estate Agriculture 5,948 5,591 Death Care Management 56,533 52,510 Healthcare 112,691 114,281 Independent Pharmacies 18,375 15,151 Registered Investment Advisors 14,325 11,462 Veterinary Industry 103,175 102,906 Other Industries 57,765 46,245 Total 368,812 348,146 Commercial Land Agriculture 126,706 113,569 Total 126,706 113,569 Total Loans and Leases 1 1,001,322 908,492 Net Deferred Costs 7,677 7,648 Discount on SBA 7(a) and USDA Unguaranteed 2 (9,729 ) (8,574 ) Loans and Leases, Net of Unearned $ 999,270 $ 907,566 1 Total loans and leases include $ 40.8 million and $ 37.7 million of U.S. government guaranteed loans as of March 31, 2017 and December 31, 2016 , respectively. 2 The Company measures the carrying value of the retained portion of loans sold at fair value under ASC Subtopic 825-10. The value of these retained loan balances is discounted based on the estimates derived from comparable unguaranteed loan sales. Credit Risk Profile The Bank uses internal loan and lease reviews to assess the performance of individual loans and leases by industry segment. An independent review of the loan and lease portfolio is performed annually by an external firm. The goal of the Bank’s annual review of select borrowers' financial performance is to validate the adequacy of the risk grade assigned. The Bank uses a grading system to rank the quality of each loan and lease. The grade is periodically evaluated and adjusted as performance dictates. Loan and lease grades 1 through 4 are passing grades and grade 5 is special mention. Collectively, grades 6 through 8 represent classified loans and leases in the Bank’s portfolio. The following guidelines govern the assignment of these risk grades: Exceptional (1 Rated): These loans and leases are of the highest quality, with strong, well-documented sources of repayment. Debt service coverage (“DSC”) is over 1.75 X based on historical results. Secondary source of repayment is strong, with a loan to value (“LTV”) of 65% or less if secured solely by commercial real estate (“CRE”). Discounted collateral coverage from all sources should exceed 125% . Guarantors have credit scores above 740 . Quality (2 Rated): These loans and leases are of good quality, with good, well-documented sources of repayment. DSC is over 1.25 X based on historical or pro-forma results. Secondary source of repayment is good, with a LTV of 75% or less if secured solely by CRE. Discounted collateral coverage should exceed 100% . Guarantors have credit scores above 700 . Acceptable (3 rated): These loans and leases are of acceptable quality, with acceptable sources of repayment. DSC of over 1.00 X based on historical or pro-forma results. Companies that do not meet these credit metrics must be evaluated to determine if they should be graded below this level. Acceptable (4 rated): These loans and leases are considered very weak pass. These loans and leases are riskier than a 3-rated credit, but due to various mitigating factors are not considered a Special mention or worse. The mitigating factors must clearly be identified to offset further downgrade. Examples of loans and leases that may be put in this category include start-up loans and leases and loans and leases with less than 1 :1 cash flow coverage with other sources of repayment. Special mention (5 rated): These loans and leases are considered as emerging problems, with potentially unsatisfactory characteristics. These loans and leases require greater management attention. A loan or lease may be put into this category if the Bank is unable to obtain financial reporting from a company to fully evaluate its position. Substandard (6 rated): Loans and leases graded Substandard are inadequately protected by current sound net worth, paying capacity of the borrower, or pledged collateral. They typically have unsatisfactory characteristics causing more than acceptable levels of risk, and have one or more well-defined weaknesses that could jeopardize the repayment of the debt. Doubtful (7 rated): Loans and leases graded Doubtful have inherent weaknesses that make collection or liquidation in full questionable. Loans and leases graded Doubtful must be placed on non-accrual status. Loss (8 rated): Loss rated loans and leases are considered uncollectible and of such little value that their continuance as an active Bank asset is not warranted. The asset should be charged off, even though partial recovery may be possible in the future. The following tables summarize the risk grades of each category: Risk Grades 1 - 4 Risk Grade 5 Risk Grades 6 - 8 Total March 31, 2017 Commercial & Industrial Agriculture $ 1,270 $ 58 $ — $ 1,328 Death Care Management 9,759 120 110 9,989 Healthcare 30,128 1,484 6,933 38,545 Independent Pharmacies 81,042 5,721 5,280 92,043 Registered Investment Advisors 70,357 2,038 774 73,169 Veterinary Industry 36,558 2,502 2,057 41,117 Other Industries 117,082 155 — 117,237 Total 346,196 12,078 15,154 373,428 Construction & Development Agriculture 37,700 — — 37,700 Death Care Management 4,433 — — 4,433 Healthcare 33,849 — — 33,849 Independent Pharmacies 1,034 — — 1,034 Registered Investment Advisors 319 — — 319 Veterinary Industry 12,875 — 1,935 14,810 Other Industries 40,231 — — 40,231 Total 130,441 — 1,935 132,376 Commercial Real Estate Agriculture 5,948 — — 5,948 Death Care Management 50,234 3,766 2,533 56,533 Healthcare 105,110 6,610 971 112,691 Independent Pharmacies 14,380 1,827 2,168 18,375 Registered Investment Advisors 14,173 152 — 14,325 Veterinary Industry 88,282 2,505 12,388 103,175 Other Industries 57,765 — — 57,765 Total 335,892 14,860 18,060 368,812 Commercial Land Agriculture 125,382 1,128 196 126,706 Total 125,382 1,128 196 126,706 Total 1 $ 937,911 $ 28,066 $ 35,345 $ 1,001,322 Risk Grades 1 - 4 Risk Grade 5 Risk Grades 6 - 8 Total December 31, 2016 Commercial & Industrial Agriculture $ 1,656 $ 58 $ — $ 1,714 Death Care Management 9,452 121 111 9,684 Healthcare 28,723 681 7,866 37,270 Independent Pharmacies 73,948 6,542 3,187 83,677 Registered Investment Advisors 65,297 2,246 792 68,335 Veterinary Industry 34,407 1,967 2,556 38,930 Other Industries 94,736 100 — 94,836 Total 308,219 11,715 14,512 334,446 Construction & Development Agriculture 32,061 — 311 32,372 Death Care Management 3,956 — — 3,956 Healthcare 30,467 — — 30,467 Independent Pharmacies 2,013 — — 2,013 Registered Investment Advisors 294 — — 294 Veterinary Industry 9,725 1,789 — 11,514 Other Industries 31,715 — — 31,715 Total 110,231 1,789 311 112,331 Commercial Real Estate Agriculture 5,591 — — 5,591 Death Care Management 46,427 4,314 1,769 52,510 Healthcare 103,097 7,142 4,042 114,281 Independent Pharmacies 12,654 1,968 529 15,151 Registered Investment Advisors 11,462 — — 11,462 Veterinary Industry 88,168 3,995 10,743 102,906 Other Industries 46,245 — — 46,245 Total 313,644 17,419 17,083 348,146 Commercial Land Agriculture 112,333 1,138 98 113,569 Total 112,333 1,138 98 113,569 Total 1 $ 844,427 $ 32,061 $ 32,004 $ 908,492 1 Total loans and leases include $ 40.8 million of U.S. government guaranteed loans as of March 31, 2017 , segregated by risk grade as follows: Risk Grades 1 – 4 = $ 12.5 million, Risk Grade 5 = $ 4.7 million , Risk Grades 6 – 8 = $ 23.6 million . As of December 31, 2016 , total loans and leases include $ 37.7 million of U.S. government guaranteed loans, segregated by risk grade as follows: Risk Grades 1 – 4 = $ 8.7 million, Risk Grade 5 = $ 7.7 million , Risk Grades 6 – 8 = $ 21.3 million . Past Due Loans and Leases Loans and leases are considered past due if the required principal and interest payments have not been received as of the date such payments were due. Loans and leases less than 30 days past due and accruing are included within current loans and leases shown below. The following tables show an age analysis of past due loans and leases as of the dates presented. Less Than 30 Days Past Due & Not Accruing 30-89 Days Past Due & Accruing 30-89 Days Past Due & Not Accruing Greater Than 90 Days Past Due Total Not Current Total Loans and Leases 90 March 31, 2017 Commercial & Industrial Agriculture $ — $ — $ — $ — $ — $ 1,328 $ 1,328 $ — Death Care Management — — — — — 9,989 9,989 — Healthcare 575 82 401 4,739 5,797 32,748 38,545 — Independent Pharmacies — — 133 4,012 4,145 87,898 92,043 — Registered Investment Advisors — — — — — 73,169 73,169 — Veterinary Industry 31 659 580 1,055 2,325 38,792 41,117 — Other Industries — — — — — 117,237 117,237 — Total 606 741 1,114 9,806 12,267 361,161 373,428 — Construction & Development Agriculture — 448 — — 448 37,252 37,700 — Death Care Management — — — — — 4,433 4,433 — Healthcare — — — — — 33,849 33,849 — Independent Pharmacies — — — — — 1,034 1,034 — Registered Investment Advisors — — — — — 319 319 — Veterinary Industry — 1,935 — — 1,935 12,875 14,810 — Other Industries — — — — — 40,231 40,231 — Total — 2,383 — — 2,383 129,993 132,376 — Commercial Real Estate Agriculture — — — — — 5,948 5,948 — Death Care Management — — 184 1,423 1,607 54,926 56,533 — Healthcare 43 100 121 — 264 112,427 112,691 — Independent Pharmacies — — — 2,168 2,168 16,207 18,375 — Registered Investment Advisors — — — — — 14,325 14,325 — Veterinary Industry 1,011 4,886 1,205 4,592 11,694 91,481 103,175 — Other Industries — — — — — 57,765 57,765 — Total 1,054 4,986 1,510 8,183 15,733 353,079 368,812 — Commercial Land Agriculture 196 — — — 196 126,510 126,706 — Total 196 — — — 196 126,510 126,706 — Total 1 $ 1,856 $ 8,110 $ 2,624 $ 17,989 $ 30,579 $ 970,743 $ 1,001,322 $ — Less Than 30 Days Past Due & Not Accruing 30-89 Days Past Due & Accruing 30-89 Days Past Due & Not Accruing Greater Than 90 Days Past Due Total Not Current Total Loans and Leases 90 December 31, 2016 Commercial & Industrial Agriculture $ — $ — $ — $ — $ — $ 1,714 $ 1,714 $ — Death Care Management — — — — — 9,684 9,684 — Healthcare — 272 496 5,920 6,688 30,582 37,270 — Independent Pharmacies 42 293 408 2,349 3,092 80,585 83,677 — Registered Investment Advisors — — — — — 68,335 68,335 — Veterinary Industry 32 151 646 1,441 2,270 36,660 38,930 — Other Industries — — — — — 94,836 94,836 — Total 74 716 1,550 9,710 12,050 322,396 334,446 — Construction & Development Agriculture 231 80 — — 311 32,061 32,372 — Death Care Management — — — — — 3,956 3,956 — Healthcare — — — — — 30,467 30,467 — Independent Pharmacies — — — — — 2,013 2,013 — Registered Investment Advisors — — — — — 294 294 — Veterinary Industry — — — — — 11,514 11,514 — Other Industries — — — — — 31,715 31,715 — Total 231 80 — — 311 112,020 112,331 — Commercial Real Estate Agriculture — — — — — 5,591 5,591 — Death Care Management — — 188 1,423 1,611 50,899 52,510 — Healthcare — — 3,180 45 3,225 111,056 114,281 — Independent Pharmacies — — — 529 529 14,622 15,151 — Registered Investment Advisors — — — — — 11,462 11,462 — Veterinary Industry 898 3,981 737 5,158 10,774 92,132 102,906 — Other Industries — — — — — 46,245 46,245 — Total 898 3,981 4,105 7,155 16,139 332,007 348,146 — Commercial Land Agriculture 58 40 — — 98 113,471 113,569 — Total 58 40 — — 98 113,471 113,569 — Total 1 $ 1,261 $ 4,817 $ 5,655 $ 16,865 $ 28,598 $ 879,894 $ 908,492 $ — 1 Total loans and leases include $ 40.8 million of U.S. government guaranteed loans as of March 31, 2017 , of which $ 15.8 million is greater than 90 days past due, $ 5.8 million is 30-89 days past due and $ 19.2 million is included in current loans and leases as presented above. As of December 31, 2016 , total loans and leases include $ 37.7 million of U.S. government guaranteed loans, of which $ 13.7 million is greater than 90 days past due, $ 6.8 million is 30-89 days past due and $ 17.2 million is included in current loans and leases as presented above. Nonaccrual Loans and Leases Loans and leases that become 90 days delinquent, or in cases where there is evidence that the borrower’s ability to make the required payments is impaired, are placed in nonaccrual status and interest accrual is discontinued. If interest on nonaccrual loans and leases had been accrued in accordance with the original terms, interest income would have increased by approximately $ 280 thousand and $ 199 thousand for the three months ended March 31, 2017 and 2016 , respectively. All nonaccrual loans and leases are included in the held for investment portfolio. Nonaccrual loans and leases as of March 31, 2017 and December 31, 2016 are as follows: March 31, 2017 Loan and Lease Balance Guaranteed Balance Unguaranteed Exposure Commercial & Industrial Healthcare $ 5,715 $ 4,831 $ 884 Independent Pharmacies 4,145 3,613 532 Veterinary Industry 1,666 1,626 40 Total 11,526 10,070 1,456 Commercial Real Estate Death Care Management 1,607 1,263 344 Healthcare 164 32 132 Independent Pharmacies 2,168 1,626 542 Veterinary Industry 6,808 5,660 1,148 Total 10,747 8,581 2,166 Commercial Land Agriculture 196 173 23 Total 196 173 23 Total $ 22,469 $ 18,824 $ 3,645 December 31, 2016 Loan and Lease Balance Guaranteed Balance Unguaranteed Exposure Commercial & Industrial Healthcare $ 6,416 $ 5,152 $ 1,264 Independent Pharmacies 2,799 2,204 595 Veterinary Industry 2,119 2,079 40 Total 11,334 9,435 1,899 Construction & Development Agriculture 231 173 58 Total 231 173 58 Commercial Real Estate Death Care Management 1,611 1,263 348 Healthcare 3,225 2,731 494 Independent Pharmacies 529 — 529 Veterinary Industry 6,793 5,395 1,398 Total 12,158 9,389 2,769 Commercial Land Agriculture 58 — 58 Total 58 — 58 Total $ 23,781 $ 18,997 $ 4,784 Allowance for Loan and Lease Loss Methodology The methodology and the estimation process for calculating the Allowance for Loan and Lease Losses (“ALLL”) is described below: Estimated credit losses should meet the criteria for accrual of a loss contingency, i.e., a provision to the ALLL, set forth in GAAP. The Company’s methodology for determining the ALLL is based on the requirements of GAAP, the Interagency Policy Statement on the Allowance for Loan and Lease Losses and other regulatory and accounting pronouncements. The ALLL is determined by the sum of three separate components: (i) the impaired loan and lease component, which addresses specific reserves for impaired loans and leases; (ii) the general reserve component, which addresses reserves for pools of homogeneous loans and leases; and (iii) an unallocated reserve component (if any) based on management’s judgment and experience. The loan and lease pools and impaired loans and leases are mutually exclusive; any loan or lease that is impaired is excluded from its homogenous pool for purposes of that pool’s reserve calculation, regardless of the level of impairment. The ALLL policy for pooled loans and leases is governed in accordance with banking regulatory guidance for homogenous pools of non-impaired loans and leases that have similar risk characteristics. The Company follows a consistent and structured approach for assessing the need for reserves within each individual loan and lease pool. Loans and leases are considered impaired when, based on current information and events, it is probable that the creditor will be unable to collect all interest and principal payments due according to the originally contracted, or reasonably modified, terms of the loan or lease agreement. The Company has determined that loans and leases that meet the criteria defined below must be reviewed quarterly to determine if they are impaired. • All commercial loans and leases classified substandard or worse. • Any other delinquent loan or lease that is in a nonaccrual status, or any loan or lease that is delinquent more than 89 days and still accruing interest. • Any loan or lease which has been modified such that it meets the definition of a Troubled Debt Restructuring (TDR). Effective December 31, 2015, the Company’s policy for impaired loan and lease accounting subjects all loans and leases to impairment recognition; however, loan and lease relationships with unguaranteed credit exposure of less than $100,000 are generally not evaluated on an individual basis for impairment and instead are evaluated collectively using a methodology based on historical specific reserves on similar sized loans and leases. Any loan or lease not meeting the above criteria and determined to be impaired is subjected to an impairment analysis, which is a calculation of the probable loss on the loan or lease. This portion is the loan's or lease’s “impairment,” and is established as a specific reserve against the loan or lease, or charged against the ALLL. Individual specific reserve amounts imply probability of loss and may not be carried in the reserve indefinitely. When the amount of the actual loss becomes reasonably quantifiable, the amount of the loss is charged off against the ALLL, whether or not all liquidation and recovery efforts have been completed. If the total amount of the individual specific reserve that will eventually be charged off cannot yet be sufficiently quantified but some portion of the impairment can be viewed as a confirmed loss, then the confirmed loss portion should be charged off against the ALLL and the individual specific reserve reduced by a corresponding amount. For impaired loans or leases, the reserve amount is calculated on a loan or lease-specific basis. The Company utilizes two methods of analyzing impaired loans and leases not guaranteed by the SBA: • The Fair Market Value of Collateral method utilizes the value at which the collateral could be sold considering the appraised value, appraisal discount rate, prior liens and selling costs. The amount of the reserve is the deficit of the estimated collateral value compared to the loan or lease balance. • The Present Value of Future Cash Flows method takes into account the amount and timing of cash flows and the effective interest rate used to discount the cash flows. The following table details activity in the allowance for loan and lease losses by portfolio segment allowance for the periods presented: Three months ended: Construction & Development Commercial Real Estate Commercial & Industrial Commercial Land Total March 31, 2017 Beginning Balance $ 1,693 $ 5,897 $ 8,413 $ 2,206 $ 18,209 Charge offs — (268 ) (1,233 ) (35 ) (1,536 ) Recoveries — 9 14 — 23 Provision 191 588 652 68 1,499 Ending Balance $ 1,884 $ 6,226 $ 7,846 $ 2,239 $ 18,195 March 31, 2016 Beginning Balance $ 1,064 $ 2,486 $ 2,766 $ 1,099 $ 7,415 Charge offs — (7 ) (268 ) — (275 ) Recoveries — — 43 — 43 Provision 99 96 804 434 1,433 Ending Balance $ 1,163 $ 2,575 $ 3,345 $ 1,533 $ 8,616 The following tables detail the recorded allowance for loan and lease losses and the investment in loans and leases related to each portfolio segment, disaggregated on the basis of impairment evaluation methodology: March 31, 2017 Construction & Development Commercial Real Estate Commercial & Industrial Commercial Land Total Allowance for Loan and Lease Losses: Loans and leases individually evaluated for impairment $ 165 $ 1,513 $ 917 $ — $ 2,595 Loans and leases collectively evaluated for impairment 2 1,719 4,713 6,929 2,239 15,600 Total allowance for loan and lease losses $ 1,884 $ 6,226 $ 7,846 $ 2,239 $ 18,195 Loans and leases receivable 1 : Loans and leases individually evaluated for impairment $ 1,933 $ 15,299 $ 6,002 $ — $ 23,234 Loans and leases collectively evaluated for impairment 2 130,443 353,513 367,426 126,706 978,088 Total loans and leases receivable $ 132,376 $ 368,812 $ 373,428 $ 126,706 $ 1,001,322 December 31, 2016 Construction & Development Commercial Real Estate Commercial & Industrial Commercial Land Total Allowance for Loan and Lease Losses: Loans and leases individually evaluated for impairment $ — $ 1,496 $ 1,458 $ — $ 2,954 Loans and leases collectively evaluated for impairment 2 1,693 4,401 6,955 2,206 15,255 Total allowance for loan and lease losses $ 1,693 $ 5,897 $ 8,413 $ 2,206 $ 18,209 Loans and leases receivable 1 : Loans and leases individually evaluated for impairment $ — $ 16,359 $ 6,884 $ — $ 23,243 Loans and leases collectively evaluated for impairment 2 112,331 331,787 327,562 113,569 885,249 Total loans and leases receivable $ 112,331 $ 348,146 $ 334,446 $ 113,569 $ 908,492 1 Loans and leases receivable includes $ 40.8 million of U.S. government guaranteed loans as of March 31, 2017 , of which $ 23.7 million are impaired. As of December 31, 2016 , loans and leases receivable includes $ 37.7 million of U.S. government guaranteed loans, of which $ 22.1 million are considered impaired. 2 Included in loans and leases collectively evaluated for impairment are impaired loans and leases with individual unguaranteed exposure of less than $100 thousand. As of March 31, 2017 , these balances totaled $ 14.2 million , of which $ 12.4 million are guaranteed by the U.S. government and $ 1.8 million are unguaranteed. As of December 31, 2016 , these balances totaled $ 12.3 million , of which $ 10.0 million are guaranteed by the U.S. government and $ 2.3 million are unguaranteed. The allowance for loan and lease losses associated with these loans and leases totaled $ 365 thousand and $ 438 thousand as of March 31, 2017 and December 31, 2016 , respectively. Loans and leases classified as impaired as of the dates presented are summarized in the following tables. March 31, 2017 Recorded Investment Guaranteed Balance Unguaranteed Exposure Commercial & Industrial Death Care Management $ 110 $ — $ 110 Healthcare 6,932 5,113 1,819 Independent Pharmacies 5,603 3,891 1,712 Registered Investment Advisors 778 — 778 Veterinary Industry 2,367 1,737 630 Total 15,790 10,741 5,049 Construction & Development Veterinary Industry 1,933 1,451 482 Total 1,933 1,451 482 Commercial Real Estate Death Care Management 2,530 1,264 1,266 Healthcare 973 285 688 Independent Pharmacies 2,167 1,626 541 Veterinary Industry 13,860 8,192 5,668 Total 19,530 11,367 8,163 Commercial Land Agriculture 190 173 17 Total 190 173 17 Total $ 37,443 $ 23,732 $ 13,711 December 31, 2016 Recorded Investment Guaranteed Balance Unguaranteed Exposure Commercial & Industrial Death Care Management $ 111 $ — $ 111 Healthcare 7,923 5,453 2,470 Independent Pharmacies 3,514 2,495 1,019 Registered Investment Advisors 796 — 796 Veterinary Industry 2,882 2,199 683 Total 15,226 10,147 5,079 Construction & Development Agriculture 300 233 67 Total 300 233 67 Commercial Real Estate Death Care Management 1,768 1,264 504 Healthcare 4,044 2,985 1,059 Independent Pharmacies 528 — 528 Veterinary Industry 13,561 7,518 6,043 Total 19,901 11,767 8,134 Commercial Land Agriculture 91 — 91 Total 91 — 91 Total $ 35,518 $ 22,147 $ 13,371 The following table presents evaluated balances of loans and leases classified as impaired at the dates presented that carried an associated reserve as compared to those with no reserve. The recorded investment includes accrued interest and net deferred loan and lease fees or costs. March 31, 2017 Recorded Investment With a Recorded Allowance With No Recorded Allowance Total Unpaid Principal Balance Related Allowance Recorded Commercial & Industrial Death Care Management $ 8 $ 102 $ 110 $ 110 $ 1 Healthcare 6,284 648 6,932 7,701 373 Independent Pharmacies 4,784 819 5,603 6,092 177 Registered Investment Advisors 778 — 778 1,009 495 Veterinary Industry 2,239 128 2,367 2,703 93 Total 14,093 1,697 15,790 17,615 1,139 Construction & Development Veterinary Industry 1,933 — 1,933 1,935 165 Total 1,933 — 1,933 1,935 165 Commercial Real Estate Death Care Management 2,051 479 2,530 2,667 219 Healthcare 454 519 973 971 30 Independent Pharmacies 2,167 — 2,167 2,168 431 Veterinary Industry 12,978 882 13,860 14,840 972 Total 17,650 1,880 19,530 20,646 1,652 Commercial Land Agriculture 190 — 190 231 4 Total 190 — 190 231 4 Total Impaired Loans and Leases $ 33,866 $ 3,577 $ 37,443 $ 40,427 $ 2,960 December 31, 2016 Recorded Investment With a Recorded Allowance With No Recorded Allowance Total Unpaid Principal Balance Related Allowance Recorded Commercial & Industrial Death Care Management $ 8 $ 103 $ 111 $ 111 $ 1 Healthcare 7,259 664 7,923 8,120 778 Independent Pharmacies 3,184 330 3,514 3,610 327 Registered Investment Advisors 796 — 796 792 514 Veterinary Industry 2,754 128 2,882 3,369 106 Total 14,001 1,225 15,226 16,002 1,726 Construction & Development Agriculture 300 — 300 311 13 Total 300 — 300 311 13 Commercial Real Estate Death Care Management 1,580 188 1,768 1,904 34 Healthcare 3,514 530 4,044 4,042 47 Independent Pharmacies 528 — 528 529 284 Veterinary Industry 11,193 2,368 13,561 14,283 1,273 Total 16,815 3,086 19,901 20,758 1,638 Commercial Land Agriculture 91 — 91 161 15 Total 91 — 91 161 15 Total Impaired Loans and Leases $ 31,207 $ 4,311 $ 35,518 $ 37,232 $ 3,392 The following table presents the average recorded investment of impaired loans and leases for each period presented and interest income recognized during the period in which the loans and leases were considered impaired. Three months ended Three months ended Average Interest Average Interest Commercial & Industrial Death Care Management $ 112 $ 2 $ 9 $ — Healthcare 7,583 20 5,802 79 Independent Pharmacies 5,690 13 1,881 73 Registered Investment Advisors 790 12 385 7 Veterinary Industry 2,394 9 2,814 29 Total 16,569 56 10,891 188 Construction & Development Veterinary Industry 1,961 9 — — Total 1,961 9 — — Commercial Real Estate Death Care Management 2,544 6 1,594 7 Healthcare 987 12 987 19 Independent Pharmacies 1,076 — — — Veterinary Industry 14,171 88 12,287 211 Total 18,778 106 14,868 237 Commercial Land Agriculture 219 — 1,120 — Total 219 — 1,120 — Total $ 37,527 $ 171 $ 26,879 $ 425 There were no TDRs made during the three months ended March 31, 2017 . During the three months ended March 31, 2016 , there was one commercial and industrial veterinary loan modified for payment deferral. This TDR had a pre-modification and post-modification recorded investment of $ 420 thousand . Concessions made to improve a loan and lease’s performance have varying degrees of success. During the three months ended March 31, 2017 , one TDR that was modified within the twelve months ended March 31, 2017 subsequently defaulted.This TDR was a commercial and industrial healthcare loan that was previously modified for payment deferral. The recorded investment for this TDR at March 31, 2017 was $ 107 thousand . No TDRs that were modified within the twelve months ended March 31, 2016 subsequently defaulted during the three months ended March 31, 2016 . |
