| 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 and Lease 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: June 30, December 31, Commercial & Industrial Agriculture $ 5,813 $ 3,274 Death Care Management 15,720 13,495 Healthcare 44,524 43,301 Independent Pharmacies 102,995 99,920 Registered Investment Advisors 96,473 93,770 Veterinary Industry 49,156 46,387 Other Industries 217,551 184,903 Total 532,232 485,050 Construction & Development Agriculture 34,971 34,188 Death Care Management 7,542 6,119 Healthcare 61,114 49,770 Independent Pharmacies 2,186 1,496 Registered Investment Advisors 1,286 376 Veterinary Industry 18,198 13,184 Other Industries 74,450 58,120 Total 199,747 163,253 Commercial Real Estate Agriculture 49,009 46,717 Death Care Management 66,671 67,381 Healthcare 152,025 126,631 Independent Pharmacies 19,368 19,028 Registered Investment Advisors 11,040 11,789 Veterinary Industry 122,593 113,932 Other Industries 194,266 134,172 Total 614,972 519,650 Commercial Land Agriculture 193,613 178,897 Total 193,613 178,897 Total Loans and Leases 1 1,540,564 1,346,850 Net Deferred Costs 8,470 8,545 Discount on SBA 7(a) and USDA Unguaranteed 2 (14,666 ) (11,422 ) Loans and Leases, Net of Unearned $ 1,534,368 $ 1,343,973 1 Total loans and leases include $ 141.5 million and $ 99.7 million of U.S. government guaranteed loans as of June 30, 2018 and December 31, 2017 , 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 June 30, 2018 Commercial & Industrial Agriculture $ 5,596 $ 217 $ — $ 5,813 Death Care Management 15,517 197 6 15,720 Healthcare 36,461 3,256 4,807 44,524 Independent Pharmacies 88,684 6,554 7,757 102,995 Registered Investment Advisors 92,254 1,420 2,799 96,473 Veterinary Industry 44,754 1,649 2,753 49,156 Other Industries 203,813 12,366 1,372 217,551 Total 487,079 25,659 19,494 532,232 Construction & Development Agriculture 32,431 — 2,540 34,971 Death Care Management 7,542 — — 7,542 Healthcare 56,542 2,534 2,038 61,114 Independent Pharmacies 2,186 — — 2,186 Registered Investment Advisors 1,286 — — 1,286 Veterinary Industry 17,012 1,186 — 18,198 Other Industries 72,558 1,892 — 74,450 Total 189,557 5,612 4,578 199,747 Commercial Real Estate Agriculture 49,009 — — 49,009 Death Care Management 59,696 3,862 3,113 66,671 Healthcare 129,714 9,378 12,933 152,025 Independent Pharmacies 13,603 2,930 2,835 19,368 Registered Investment Advisors 10,908 132 — 11,040 Veterinary Industry 103,055 3,655 15,883 122,593 Other Industries 192,441 1,825 — 194,266 Total 558,426 21,782 34,764 614,972 Commercial Land Agriculture 183,117 5,371 5,125 193,613 Total 183,117 5,371 5,125 193,613 Total 1 $ 1,418,179 $ 58,424 $ 63,961 $ 1,540,564 Risk Grades 1 - 4 Risk Grade 5 Risk Grades 6 - 8 Total December 31, 2017 Commercial & Industrial Agriculture $ 3,052 $ 222 $ — $ 3,274 Death Care Management 13,371 117 7 13,495 Healthcare 36,530 2,246 4,525 43,301 Independent Pharmacies 86,152 5,541 8,227 99,920 Registered Investment Advisors 90,911 2,134 725 93,770 Veterinary Industry 42,313 1,704 2,370 46,387 Other Industries 184,540 363 — 184,903 Total 456,869 12,327 15,854 485,050 Construction & Development Agriculture 31,738 2,450 — 34,188 Death Care Management 6,119 — — 6,119 Healthcare 47,813 699 1,258 49,770 Independent Pharmacies 1,496 — — 1,496 Registered Investment Advisors 376 — — 376 Veterinary Industry 13,184 — — 13,184 Other Industries 58,120 — — 58,120 Total 158,846 3,149 1,258 163,253 Commercial Real Estate Agriculture 46,717 — — 46,717 Death Care Management 60,671 3,881 2,829 67,381 Healthcare 112,321 9,992 4,318 126,631 Independent Pharmacies 15,641 1,825 1,562 19,028 Registered Investment Advisors 11,649 140 — 11,789 Veterinary Industry 97,065 2,948 13,919 113,932 Other Industries 133,493 679 — 134,172 Total 477,557 19,465 22,628 519,650 Commercial Land Agriculture 176,811 2,086 — 178,897 Total 176,811 2,086 — 178,897 Total 1 $ 1,270,083 $ 37,027 $ 39,740 $ 1,346,850 1 Total loans and leases include $ 141.5 million of U.S. government guaranteed loans as of June 30, 2018 , segregated by risk grade as follows: Risk Grades 1 – 4 = $ 84.8 million , Risk Grade 5 = $ 12.0 million , Risk Grades 6 – 8 = $ 44.7 million . As of December 31, 2017 , total loans and leases include $ 99.7 million of U.S. government guaranteed loans, segregated by risk grade as follows: Risk Grades 1 – 4 = $ 65.0 million , Risk Grade 5 = $ 6.7 million , Risk Grades 6 – 8 = $ 28.0 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 June 30, 2018 Commercial & Industrial Agriculture $ — $ — $ — $ — $ — $ 5,813 $ 5,813 $ — Death Care Management — — — — — 15,720 15,720 — Healthcare — 49 757 2,287 3,093 41,431 44,524 — Independent Pharmacies 338 — — 7,308 7,646 95,349 102,995 — Registered Investment Advisors — 577 2,102 — 2,679 93,794 96,473 — Veterinary Industry 170 126 620 1,072 1,988 47,168 49,156 — Other Industries 596 615 — — 1,211 216,340 217,551 — Total 1,104 1,367 3,479 10,667 16,617 515,615 532,232 — Construction & Development Agriculture — — — 2,539 2,539 32,432 34,971 — Death Care Management — — — — — 7,542 7,542 — Healthcare — — — — — 61,114 61,114 — Independent Pharmacies — — — — — 2,186 2,186 — Registered Investment Advisors — — — — — 1,286 1,286 — Veterinary Industry — 1,186 — — 1,186 17,012 18,198 — Other Industries — 37 — — 37 74,413 74,450 — Total — 1,223 — 2,539 3,762 195,985 199,747 — Commercial Real Estate Agriculture — — — — — 49,009 49,009 — Death Care Management 158 1,447 — 1,358 2,963 63,708 66,671 — Healthcare 2,334 — 37 6,596 8,967 143,058 152,025 — Independent Pharmacies 2,835 — — — 2,835 16,533 19,368 — Registered Investment Advisors — — — — — 11,040 11,040 — Veterinary Industry 1,867 3,185 2,506 5,500 13,058 109,535 122,593 — Other Industries — — — — — 194,266 194,266 — Total 7,194 4,632 2,543 13,454 27,823 587,149 614,972 — Commercial Land Agriculture 5,125 — — — 5,125 188,488 193,613 — Total 5,125 — — — 5,125 188,488 193,613 — Total 1 $ 13,423 $ 7,222 $ 6,022 $ 26,660 $ 53,327 $ 1,487,237 $ 1,540,564 $ — 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, 2017 Commercial & Industrial Agriculture $ — $ — $ — $ — $ — $ 3,274 $ 3,274 $ — Death Care Management — — — — — 13,495 13,495 — Healthcare 788 131 14 3,004 3,937 39,364 43,301 — Independent Pharmacies 236 2,930 1,349 3,376 7,891 92,029 99,920 — Registered Investment Advisors — 321 — — 321 93,449 93,770 — Veterinary Industry 212 594 508 797 2,111 44,276 46,387 — Other Industries — — — — — 184,903 184,903 — Total 1,236 3,976 1,871 7,177 14,260 470,790 485,050 — Construction & Development Agriculture — — — — — 34,188 34,188 — Death Care Management — — — — — 6,119 6,119 — Healthcare — — — — — 49,770 49,770 — Independent Pharmacies — — — — — 1,496 1,496 — Registered Investment Advisors — — — — — 376 376 — Veterinary Industry — — — — — 13,184 13,184 — Other Industries — — — — — 58,120 58,120 — Total — — — — — 163,253 163,253 — Commercial Real Estate Agriculture — — — — — 46,717 46,717 — Death Care Management — — 168 1,391 1,559 65,822 67,381 — Healthcare 40 54 1,916 1,550 3,560 123,071 126,631 — Independent Pharmacies — — — 1,562 1,562 17,466 19,028 — Registered Investment Advisors — — — — — 11,789 11,789 — Veterinary Industry 1,804 3,226 — 4,765 9,795 104,137 113,932 — Other Industries — — — — — 134,172 134,172 — Total 1,844 3,280 2,084 9,268 16,476 503,174 519,650 — Commercial Land Agriculture — — — — — 178,897 178,897 — Total — — — — — 178,897 178,897 — Total 1 $ 3,080 $ 7,256 $ 3,955 $ 16,445 $ 30,736 $ 1,316,114 $ 1,346,850 $ — 1 Total loans and leases include $ 141.5 million of U.S. government guaranteed loans as of June 30, 2018 , of which $ 21.7 million is greater than 90 days past due, $ 9.2 million is 30-89 days past due and $ 110.6 million is included in current loans and leases as presented above. As of December 31, 2017 , total loans and leases include $ 99.7 million of U.S. government guaranteed loans, of which $ 15.0 million is greater than 90 days past due, $ 7.4 million is 30-89 days past due and $ 77.3 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 $ 588 thousand and $ 306 thousand for the three months ended June 30, 2018 and 2017 , respectively, and for the six months ended June 30, 2018 and 2017 interest income would have increased approximately $ 1.0 million and $ 582 thousand , respectively. All nonaccrual loans and leases are included in the held for investment portfolio. Nonaccrual loans and leases as of June 30, 2018 and December 31, 2017 are as follows: June 30, 2018 Loan and Lease Balance Guaranteed Balance Unguaranteed Exposure Commercial & Industrial Healthcare $ 3,044 $ 2,735 $ 309 Independent Pharmacies 7,646 6,919 727 Registered Investment Advisors 2,102 1,577 525 Veterinary Industry 1,862 1,827 35 Other Industries 596 — 596 Total 15,250 13,058 2,192 Construction & Development Agriculture 2,539 1,904 635 Total 2,539 1,904 635 Commercial Real Estate Death Care Management 1,516 1,210 306 Healthcare 8,967 6,080 2,887 Independent Pharmacies 2,835 2,126 709 Veterinary Industry 9,873 8,531 1,342 Total 23,191 17,947 5,244 Commercial Land Agriculture 5,125 1,730 3,395 Total 5,125 1,730 3,395 Total $ 46,105 $ 34,639 $ 11,466 December 31, 2017 Loan and Lease Balance Guaranteed Balance Unguaranteed Exposure Commercial & Industrial Healthcare $ 3,806 $ 3,235 $ 571 Independent Pharmacies 4,961 3,906 1,055 Veterinary Industry 1,517 1,478 39 Total 10,284 8,619 1,665 Commercial Real Estate Death Care Management 1,559 1,237 322 Healthcare 3,506 2,719 787 Independent Pharmacies 1,562 1,562 — Veterinary Industry 6,569 5,733 836 Total 13,196 11,251 1,945 Total $ 23,480 $ 19,870 $ 3,610 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). 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 June 30, 2018 Beginning Balance $ 2,428 $ 11,244 $ 12,201 $ 2,177 $ 28,050 Charge offs — (419 ) (549 ) — (968 ) Recoveries — 29 152 — 181 Provision (201 ) 554 1,573 161 2,087 Ending Balance $ 2,227 $ 11,408 $ 13,377 $ 2,338 $ 29,350 June 30, 2017 Beginning Balance $ 1,884 $ 6,226 $ 7,846 $ 2,239 $ 18,195 Charge offs — (19 ) (178 ) — (197 ) Recoveries — 4 2 — 6 Provision (281 ) 1,283 681 (127 ) 1,556 Ending Balance $ 1,603 $ 7,494 $ 8,351 $ 2,112 $ 19,560 Six months ended Construction & Commercial Commercial Commercial Total June 30, 2018 Beginning Balance $ 2,030 $ 9,180 $ 10,751 $ 2,229 $ 24,190 Charge offs — (419 ) (1,221 ) — (1,640 ) Recoveries — 33 288 — 321 Provision 197 2,614 3,559 109 6,479 Ending Balance $ 2,227 $ 11,408 $ 13,377 $ 2,338 $ 29,350 June 30, 2017 Beginning Balance $ 1,693 $ 5,897 $ 8,413 $ 2,206 $ 18,209 Charge offs — (287 ) (1,411 ) (35 ) (1,733 ) Recoveries — 13 16 — 29 Provision (90 ) 1,871 1,333 (59 ) 3,055 Ending Balance $ 1,603 $ 7,494 $ 8,351 $ 2,112 $ 19,560 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: June 30, 2018 Construction & Development Commercial Real Estate Commercial & Industrial Commercial Land Total Allowance for Loan and Lease Losses: Loans and leases individually evaluated for impairment $ 365 $ 2,601 $ 2,597 $ 1,355 $ 6,918 Loans and leases collectively evaluated for impairment 2 1,862 8,807 10,780 983 22,432 Total allowance for loan and lease losses $ 2,227 $ 11,408 $ 13,377 $ 2,338 $ 29,350 Loans and leases receivable 1 : Loans and leases individually evaluated for impairment $ 4,557 $ 28,966 $ 10,836 $ 5,116 $ 49,475 Loans and leases collectively evaluated for impairment 2 195,190 586,006 521,396 188,497 1,491,089 Total loans and leases receivable $ 199,747 $ 614,972 $ 532,232 $ 193,613 $ 1,540,564 December 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 $ 157 $ 1,502 $ 1,126 $ — $ 2,785 Loans and leases collectively evaluated for impairment 2 1,873 7,678 9,625 2,229 21,405 Total allowance for loan and lease losses $ 2,030 $ 9,180 $ 10,751 $ 2,229 $ 24,190 Loans and leases receivable 1 : Loans and leases individually evaluated for impairment $ 1,237 $ 17,105 $ 8,672 $ — $ 27,014 Loans and leases collectively evaluated for impairment 2 162,016 502,545 476,378 178,897 1,319,836 Total loans and leases receivable $ 163,253 $ 519,650 $ 485,050 $ 178,897 $ 1,346,850 1 Loans and leases receivable includes $ 141.5 million of U.S. government guaranteed loans as of June 30, 2018 , of which $ 45.2 million are impaired. As of December 31, 2017 , loans and leases receivable includes $ 99.7 million of U.S. government guaranteed loans, of which $ 28.1 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 June 30, 2018 , these balances totaled $ 15.7 million , of which $ 14.4 million are guaranteed by the U.S. government and $ 1.3 million are unguaranteed. As of December 31, 2017 , these balances totaled $ 14.8 million , of which $ 13.2 million are guaranteed by the U.S. government and $ 1.6 million are unguaranteed. The allowance for loan and lease losses associated with these loans and leases totaled $ 510 thousand and $ 279 thousand as of June 30, 2018 and December 31, 2017 , respectively. Loans and leases classified as impaired as of the dates presented are summarized in the following tables. June 30, 2018 Recorded Investment Guaranteed Balance Unguaranteed Exposure Commercial & Industrial Death Care Management $ 6 $ — $ 6 Healthcare 4,836 3,468 1,368 Independent Pharmacies 8,054 6,918 1,136 Registered Investment Advisors 2,807 1,577 1,230 Veterinary Industry 2,900 2,328 572 Other Industries 1,371 163 1,208 Total 19,974 14,454 5,520 Construction & Development Agriculture 2,534 1,905 629 Healthcare 2,023 1,528 495 Total 4,557 3,433 1,124 Commercial Real Estate Death Care Management 3,137 2,296 841 Healthcare 13,573 9,241 4,332 Independent Pharmacies 2,834 2,126 708 Veterinary Industry 15,947 11,916 4,031 Total 35,491 25,579 9,912 Commercial Land Agriculture 5,116 1,730 3,386 Total 5,116 1,730 3,386 Total $ 65,138 $ 45,196 $ 19,942 December 31, 2017 Recorded Investment Guaranteed Balance Unguaranteed Exposure Commercial & Industrial Death Care Management $ 7 $ — $ 7 Healthcare 4,551 3,235 1,316 Independent Pharmacies 8,571 6,356 2,215 Registered Investment Advisors 733 — 733 Veterinary Industry 2,762 2,001 761 Total 16,624 11,592 5,032 Construction & Development Healthcare 1,237 944 293 Total 1,237 944 293 Commercial Real Estate Death Care Management 2,831 1,237 1,594 Healthcare 4,315 2,967 1,348 Independent Pharmacies 1,562 1,562 — Veterinary Industry 15,266 9,768 5,498 Total 23,974 15,534 8,440 Commercial Land Agriculture — — — Total — — — Total $ 41,835 $ 28,070 $ 13,765 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. June 30, 2018 Recorded Investment With a Recorded Allowance With No Recorded Allowance Total Unpaid Principal Balance Related Allowance Recorded Commercial & Industrial Death Care Management $ 6 $ — $ 6 $ 6 $ 1 Healthcare 4,081 755 4,836 5,221 378 Independent Pharmacies 7,639 415 8,054 9,183 400 Registered Investment Advisors 2,807 — 2,807 2,799 1,012 Veterinary Industry 2,900 — 2,900 3,279 194 Other Industries 1,371 — 1,371 1,372 757 Total 18,804 1,170 19,974 21,860 2,742 Construction & Development Agriculture 2,534 — 2,534 2,539 17 Healthcare 2,023 — 2,023 2,038 348 Total 4,557 — 4,557 4,577 365 Commercial Real Estate Death Care Management 2,980 157 3,137 3,248 160 Healthcare 13,202 371 13,573 13,566 1,242 Independent Pharmacies 2,834 — 2,834 2,835 288 Veterinary Industry 15,947 — 15,947 16,956 1,276 Total 34,963 528 35,491 36,605 2,966 Commercial Land Agriculture 5,116 — 5,116 5,125 1,355 Total 5,116 — 5,116 5,125 1,355 Total Impaired Loans and Leases $ 63,440 $ 1,698 $ 65,138 $ 68,167 $ 7,428 December 31, 2017 Recorded Investment With a Recorded Allowance With No Recorded Allowance Total Unpaid Principal Balance Related Allowance Recorded Commercial & Industrial Death Care Management $ — $ 7 $ 7 $ 7 $ — Healthcare 3,521 1,030 4,551 5,643 165 Independent Pharmacies 8,154 417 8,571 9,078 521 Registered Investment Advisors 662 71 733 725 504 Veterinary Industry 2,505 257 2,762 3,113 182 Total 14,842 1,782 16,624 18,566 1,372 Construction & Development Healthcare 1,237 — 1,237 1,258 157 Total 1,237 — 1,237 1,258 157 Commercial Real Estate Death Care Management 2,221 610 2,831 2,964 260 Healthcare 3,717 598 4,315 4,332 192 Independent Pharmacies 1,562 — 1,562 1,933 8 Veterinary Industry 13,711 1,555 15,266 16,584 1,075 Total 21,211 2,763 23,974 25,813 1,535 Commercial Land Agriculture — — — 58 — Total — — — 58 — Total Impaired Loans and Leases $ 37,290 $ 4,545 $ 41,835 $ 45,695 $ 3,064 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 $ 7 $ — $ 111 $ 2 Healthcare 5,094 19 6,708 19 Independent Pharmacies 7,978 7 5,647 23 Registered Investment Advisors 2,818 12 2,100 15 Veterinary Industry 2,930 18 2,448 10 Other Industries 1,373 5 — — Total 20,200 61 17,014 69 Construction & Development Agriculture 2,526 — — — Healthcare 1,799 28 — — Total 4,325 28 — — Commercial Real Estate Death Care Management 3,122 27 2,536 14 Healthcare 12,852 64 1,808 12 Independent Pharmacies 2,836 1 2,169 — Veterinary Industry 16,135 98 14,777 133 Total 34,945 190 21,290 159 Commercial Land Agriculture 5,138 25 196 — Total 5,138 25 196 — Total $ 64,608 $ 304 $ 38,500 $ 228 Six months ended Six months ended Average Interest Average Interest Commercial & Industrial Death Care Management $ 7 $ — $ 1,776 $ 3 Healthcare 5,188 31 5,054 41 Independent Pharmacies 8,038 27 5,050 37 Registered Investment Advisors 2,825 24 1,740 30 Veterinary Industry 2,917 38 8,663 21 Other Industries 1,373 5 — — Total 20,348 125 22,283 132 Construction & Development Agriculture 2,509 5 — — Healthcare 1,579 51 — — Total 4,088 56 — — Commercial Real Estate Death Care Management 3,133 64 6,637 19 Healthcare 12,486 80 1,642 24 Independent Pharmacies 2,836 1 1,176 — Veterinary Industry 16,159 235 6,663 238 Total 34,614 380 16,118 281 Commercial Land Agriculture 5,138 25 466 — Total 5,138 25 466 — Total $ 64,188 $ 586 $ 38,867 $ 413 During the six months ended June 30, 2018 , there was one construction and development healthcare loan modified to extend the interest only period. The TDR had a pre-modification and post-modification recorded investment of $ 612 thousand . There were no TDRs modified during the three months en |
