Loans and allowance for loan losses | Note (5)—Loans and allowance for loan losses: Loans outstanding at December 31, 2017 and 2016, by major lending classification are as follows: December 31, 2017 2016 Commercial and industrial $ 715,075 $ 386,233 Construction 448,326 245,905 Residential real estate: 1-to-4 family mortgage 480,989 294,924 Residential line of credit 194,986 177,190 Multi-family mortgage 62,374 44,977 Commercial real estate: Owner occupied 495,872 357,346 Non-owner occupied 551,588 267,902 Consumer and other 217,701 74,307 Gross loans 3,166,911 1,848,784 Less: Allowance for loan losses (24,041 ) (21,747 ) Net loans $ 3,142,870 $ 1,827,037 As of December 31, 2017 and 2016, $968,567 and $565,717, respectively, of 1-to-4 family and multifamily mortgage loans and loans held for sale were pledged to the Federal Home Loan Bank of Cincinnati securing advances against the Bank’s line. As of December 31, 2017 and 2016, $724,312 and $1,072,118, respectively, of commercial and industrial , construction, residential, real estate, commercial real estate, and consumer and other loans were pledged to the Federal Reserve under the Borrower-in-Custody program. As of December 31, 2017 and 2016, the carrying value of purchased credit impaired loans (“PCI”) loans accounted for under ASC 310-30 Loans and Debt Securities Acquired with Deteriorated Credit Quality Year Ended December 31, 2017 2016 2015 Balance at December 31, 2016 $ (2,444 ) $ (1,637 ) $ — Additions through the acquisition of the Clayton Banks (18,868 ) — (1,991 ) Principal reductions and other reclassifications from nonaccretable difference (1,841 ) (3,438 ) (100 ) Recoveries (23 ) — — Accretion 5,299 2,631 454 Other changes 195 — — Balance at December 31, 2017 $ (17,682 ) $ (2,444 ) $ (1,637 ) The following provides the allowance for loan losses by portfolio segment and the related investment in loans net of unearned interest for the years December 31, 2017, 2016 and 2015: Commercial and industrial Construction 1-to-4 family residential mortgage Residential line of credit Multi- family residential mortgage Commercial real estate owner occupied Commercial real estate non-owner occupied Consumer and other Total Year Ended December 31, 2017 Beginning balance - December 31, 2016 $ 5,309 $ 4,940 $ 3,197 $ 1,613 $ 504 $ 3,302 $ 2,019 $ 863 $ 21,747 Provision for loan losses (2,158 ) 1,138 41 (788 ) (70 ) 483 (848 ) 1,252 (950 ) Recoveries of loans previously charged-off 1,894 1,084 159 395 — 61 1,646 532 5,771 Loans charged off (584 ) (27 ) (200 ) (276 ) — (288 ) — (1,152 ) (2,527 ) Ending balance - December 31, 2017 $ 4,461 $ 7,135 $ 3,197 $ 944 $ 434 $ 3,558 $ 2,817 $ 1,495 $ 24,041 Commercial and industrial Construction 1-to-4 family residential mortgage Residential line of credit Multi- family residential mortgage Commercial real estate owner occupied Commercial real estate non-owner occupied Consumer and other Total Year Ended December 31, 2016 Beginning balance - December 31, 2015 $ 5,135 $ 5,143 $ 4,176 $ 2,201 $ 311 $ 3,682 $ 2,622 $ 1,190 $ 24,460 Provision for loan losses 212 (417 ) (882 ) (630 ) 193 (271 ) (271 ) 587 (1,479 ) Recoveries of loans previously charged-off 524 216 127 174 — 140 195 240 1,616 Loans charged off (562 ) (2 ) (224 ) (132 ) — (249 ) (527 ) (1,154 ) (2,850 ) Ending balance - December 31, 2016 $ 5,309 $ 4,940 $ 3,197 $ 1,613 $ 504 $ 3,302 $ 2,019 $ 863 $ 21,747 Commercial and industrial Construction 1-to-4 family residential mortgage Residential line of credit Multi- family residential mortgage Commercial real estate owner occupied Commercial real estate non-owner occupied Consumer and other Total Year Ended December 31, 2015 Beginning balance - December 31, 2014 $ 6,600 $ 3,721 $ 6,364 $ 2,790 $ 184 $ 6,075 $ 2,641 $ 655 $ 29,030 Provision for loan losses (624 ) 149 (1,521 ) (645 ) 127 (1,366 ) (307 ) 1,123 (3,064 ) Recoveries of loans previously charged-off 112 1,354 161 286 — 35 342 548 2,838 Loans charged off (953 ) (81 ) (828 ) (230 ) — (1,062 ) (54 ) (1,136 ) (4,344 ) Ending balance - December 31, 2015 $ 5,135 $ 5,143 $ 4,176 $ 2,201 $ 311 $ 3,682 $ 2,622 $ 1,190 $ 24,460 The following table provides the allocation of the allowance for loan losses by loan category broken out between loans individually evaluated for impairment and loans collectively evaluated for impairment as of December 31, 2017, 2016 and 2015: December 31, 2017 Commercial and industrial Construction 1-to-4 family residential mortgage Residential line of credit Multi- family residential mortgage Commercial real estate owner occupied Commercial real estate non-owner occupied Consumer and other Total Amount of allowance allocated to: Individually evaluated for impairment $ 20 $ — $ 18 $ — $ — $ 120 $ 33 $ — $ 191 Collectively evaluated for impairment 4,441 7,135 3,179 944 434 3,438 2,784 1,495 23,850 Acquired with deteriorated credit quality — — — — — — — — — Ending balance - December 31, 2017 $ 4,461 $ 7,135 $ 3,197 $ 944 $ 434 $ 3,558 $ 2,817 $ 1,495 $ 24,041 December 31, 2016 Commercial and industrial Construction 1-to-4 family residential mortgage Residential line of credit Multi- family residential mortgage Commercial real estate owner occupied Commercial real estate non-owner occupied Consumer and other Total Amount of allowance allocated to: Individually evaluated for impairment $ 135 $ — $ 23 $ — $ — $ 113 $ 242 $ — $ 513 Collectively evaluated for impairment 5,174 4,940 3,174 1,613 504 3,189 1,777 863 21,234 Acquired with deteriorated credit quality — — — — — — — — — Ending balance - December 31, 2016 $ 5,309 $ 4,940 $ 3,197 $ 1,613 $ 504 $ 3,302 $ 2,019 $ 863 $ 21,747 December 31, 2015 Commercial and industrial Construction 1-to-4 family residential mortgage Residential line of credit Multi- family residential mortgage Commercial real estate owner occupied Commercial real estate non-owner occupied Consumer and other Total Amount of allowance allocated to: Individually evaluated for impairment $ 89 $ 5 $ 66 $ — $ — $ 74 $ 739 $ — $ 973 Collectively evaluated for impairment 5,046 5,138 4,110 2,201 311 3,608 1,883 1,190 23,487 Acquired with deteriorated credit quality — — — — — — — — — Ending balance- December 31, 2015 $ 5,135 $ 5,143 $ 4,176 $ 2,201 $ 311 $ 3,682 $ 2,622 $ 1,190 $ 24,460 The following table provides the amount of loans by loan category broken between loans individually evaluated for impairment and loans collectively evaluated for impairment as of December 31, 2017, 2016 and 2015: December 31, 2017 Commercial and industrial Construction 1-to-4 family residential mortgage Residential line of credit Multi- family residential mortgage Commercial real estate owner occupied Commercial real estate non-owner occupied Consumer and other Total Loans, net of unearned income Individually evaluated for impairment $ 1,579 $ 1,289 $ 1,262 $ - $ 978 $ 2,520 $ 1,720 $ 25 $ 9,373 Collectively evaluated for impairment 711,352 439,309 456,229 194,986 61,376 481,390 531,704 192,357 3,068,703 Acquired with deteriorated credit quality 2,144 7,728 23,498 — 20 11,962 18,164 25,319 88,835 Ending balance - December 31, 2017 $ 715,075 $ 448,326 $ 480,989 $ 194,986 $ 62,374 $ 495,872 $ 551,588 $ 217,701 $ 3,166,911 December 31, 2016 Commercial and industrial Construction 1-to-4 family residential mortgage Residential line of credit Multi- family residential mortgage Commercial real estate owner occupied Commercial real estate non-owner occupied Consumer and other Total Loans, net of unearned income Individually evaluated for impairment $ 1,476 $ 2,686 $ 2,471 $ 311 $ 1,027 $ 2,752 $ 2,201 $ 27 $ 12,951 Collectively evaluated for impairment 384,279 238,900 290,346 176,879 43,922 350,812 260,361 74,276 1,819,775 Acquired with deteriorated credit quality 478 4,319 2,107 — 28 3,782 5,340 4 16,058 Ending balance - December 31, 2016 $ 386,233 $ 245,905 $ 294,924 $ 177,190 $ 44,977 $ 357,346 $ 267,902 $ 74,307 $ 1,848,784 December 31, 2015 Commercial and industrial Construction 1-to-4 family residential mortgage Residential line of credit Multi- family residential mortgage Commercial real estate owner occupied Commercial real estate non-owner occupied Consumer and other Total Loans, net of unearned income Individually evaluated for impairment $ 1,499 $ 2,866 $ 3,686 $ — $ 1,074 $ 3,000 $ 3,451 $ — $ 15,576 Collectively evaluated for impairment 316,418 228,445 284,190 171,526 58,400 329,569 198,741 77,623 1,664,912 Acquired with deteriorated credit quality 874 6,859 2,828 — 36 5,095 5,679 4 21,375 Ending balance- December 31, 2015 $ 318,791 $ 238,170 $ 290,704 $ 171,526 $ 59,510 $ 337,664 $ 207,871 $ 77,627 $ 1,701,863 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. The Company uses the following definitions for risk ratings: Watch. Loans rated as watch includes loans in which management believes conditions have occurred, or may occur, which could result in the loan being downgraded to a worse rated category. Also included in watch are loans rated as special mention, which 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 rated as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, in any. Loans so rated 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. Also included in this category are loans considered doubtful, which have all the weaknesses previously described and management believes those weaknesses may make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Loans not meeting the criteria above are considered to be pass rated loans. The following table shows credit quality indicators by portfolio class at December 31, 2017 and 2016: December 31, 2017 Pass Watch Substandard Total Loans, excluding purchased credit impaired loans Commercial and industrial $ 657,595 $ 50,946 $ 4,390 $ 712,931 Construction 431,242 7,388 1,968 440,598 Residential real estate: 1-to-4 family mortgage 440,202 9,522 7,767 457,491 Residential line of credit 192,427 1,184 1,375 194,986 Multi-family mortgage 61,234 142 978 62,354 Commercial real estate: Owner occupied 451,140 28,308 4,462 483,910 Non-owner occupied 517,253 14,199 1,972 533,424 Consumer and other 189,081 2,712 589 192,382 Total loans, excluding purchased credit impaired loans $ 2,940,174 $ 114,401 $ 23,501 $ 3,078,076 Purchased credit impaired loans Commercial and industrial $ — $ 1,499 $ 645 $ 2,144 Construction — 3,324 4,404 7,728 Residential real estate: 1-to-4 family mortgage — 20,284 3,214 23,498 Residential line of credit — — — — Multi-family mortgage — — 20 20 Commercial real estate: Owner occupied — 4,631 7,331 11,962 Non-owner occupied — 7,359 10,805 18,164 Consumer and other — 19,751 5,568 25,319 Total purchased credit impaired loans $ — $ 56,848 $ 31,987 $ 88,835 Total loans $ 2,940,174 $ 171,249 $ 55,488 $ 3,166,911 December 31, 2016 Pass Watch Substandard Total Loans, excluding purchased credit impaired loans Commercial and industrial $ 351,046 $ 31,074 $ 3,635 $ 385,755 Construction 236,588 4,612 386 241,586 Residential real estate: 1-to-4 family mortgage 277,948 6,945 7,924 292,817 Residential line of credit 173,011 1,875 2,304 177,190 Multi-family mortgage 43,770 152 1,027 44,949 Commercial real estate: Owner occupied 338,698 10,459 4,407 353,564 Non-owner occupied 249,877 10,273 2,412 262,562 Consumer and other 73,454 417 432 74,303 Total loans, excluding purchased credit impaired loans $ 1,744,392 $ 65,807 $ 22,527 $ 1,832,726 Purchased credit impaired loans Commercial and industrial $ — $ — $ 478 $ 478 Construction — — 4,319 4,319 Residential real estate: 1-to-4 family mortgage — — 2,107 2,107 Residential line of credit — — — — Multi-family mortgage — — 28 28 Commercial real estate: Owner occupied — — 3,782 3,782 Non-owner occupied — — 5,340 5,340 Consumer and other — — 4 4 Total purchased credit impaired loans $ — $ — $ 16,058 $ 16,058 Total loans $ 1,744,392 $ 65,807 $ 38,585 $ 1,848,784 Nonperforming loans include loans that are no longer accruing interest (nonaccrual loans) and loans past due ninety or more days and still accruing interest. Nonperforming loans and impaired loans are defined differently. Some loans may be included in both categories, whereas other loans may only be included in one category. PCI loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement remains unpaid after the due date of the scheduled payment. However, these loans are considered to be performing, even though they may be contractually past due, as any non-payment of contractual principal or interest is considered in the periodic re-estimation of expected cash flows and is included in the resulting recognition of current period covered loan loss provision or future period yield adjustments. The accrual of interest is discontinued on PCI loans if management can no longer reliably estimate future cash flows on the loan. No PCI loans were classified as nonaccrual at December 31, 2017 or December 31, 2016 as the carrying value of the respective loan or pool of loans cash flows were considered estimable and probable of collection. Therefore, interest revenue, through accretion of the difference between the carrying value of the loans and the expected cash flows, is being recognized on all PCI loans. Accretion of interest income amounting to $5,299, $2,631 and $454 was recognized on purchased credit impaired loans during the years ended December 31, 2017, 2016 and 2015, respectively. This includes both the contractual interest income and the purchase accounting contribution through accretion of the liquidity discount and credit mark for changes in estimated cash flows. The total purchase accounting contribution through accretion excluding contractual interest collected for all purchased loans was $5,419, 3,538 and $493 for the years ended December 31, 2017, 2016 and 2015, respectively. The following table provides the period-end amounts of loans that are past due thirty to eighty-nine days, past due ninety or more days and still accruing interest, loans not accruing interest and loans current on payments accruing interest by category at December 31, 2017 and 2016: December 31, 2017 30-89 days past due 90 days or more and accruing interest Non-accrual loans Loans current on payments and accruing interest Purchased Credit Impaired loans Total Commercial and industrial $ 5,859 $ 90 $ 533 $ 706,449 $ 2,144 $ 715,075 Construction 1,412 241 300 438,645 7,728 448,326 Residential real estate: 1-to-4 family mortgage 4,678 956 2,548 449,309 23,498 480,989 Residential line of credit 527 134 699 193,626 — 194,986 Multi-family mortgage — — — 62,354 20 62,374 Commercial real estate: Owner occupied 521 358 2,582 480,449 11,962 495,872 Non-owner occupied 121 — 1,371 531,932 18,164 551,588 Consumer and other 1,945 217 68 190,152 25,319 217,701 Total $ 15,063 $ 1,996 $ 8,101 $ 3,052,916 $ 88,835 $ 3,166,911 December 31, 2016 30-89 days past due 90 days or more and accruing interest Non-accrual loans Loans current on payments and accruing interest Purchased Credit Impaired loans Total Commercial and industrial $ 262 $ 127 $ 1,297 $ 384,069 $ 478 $ 386,233 Construction 441 17 254 240,874 4,319 245,905 Residential real estate: 1-to-4 family mortgage 3,130 697 2,289 286,701 2,107 294,924 Residential line of credit 1,139 433 601 175,017 — 177,190 Multi-family mortgage — — — 44,949 28 44,977 Commercial real estate: Owner occupied 186 — 2,007 351,371 3,782 357,346 Non-owner occupied 158 — 2,251 260,153 5,340 267,902 Consumer and other 433 55 30 73,785 4 74,307 Total $ 5,749 $ 1,329 $ 8,729 $ 1,816,919 $ 16,058 $ 1,848,784 Impaired loans recognized in conformity with ASC 310 at December 31, 2017 and 2016, segregated by class, were as follows: December 31, 2017 Recorded investment Unpaid principal Related allowance With a related allowance recorded: Commercial and industrial $ 53 $ 53 $ 20 Construction — — — Residential real estate: 1-to-4 family mortgage 194 495 18 Residential line of credit — — — Multi-family mortgage — — — Commercial real estate: Owner occupied 844 1,123 120 Non-owner occupied 144 150 33 Total $ 1,235 $ 1,821 $ 191 With no related allowance recorded Commercial and industrial $ 1,526 $ 1,570 $ — Construction 1,289 1,313 — Residential real estate: 1-to-4 family mortgage 1,068 1,072 — Residential line of credit — — — Multi-family mortgage 978 978 — Commercial real estate: Owner occupied 1,676 2,168 — Non-owner occupied 1,576 2,325 — Consumer and other 25 25 — Total $ 8,138 $ 9,451 $ — Total impaired loans $ 9,373 $ 11,272 $ 191 December 31, 2016 Recorded investment Unpaid principal Related allowance With a related allowance recorded: Commercial and industrial $ 854 $ 854 $ 135 Construction — — — Residential real estate: 1-to-4 family mortgage 103 369 23 Residential line of credit — — — Multi-family mortgage — — — Commercial real estate: Owner occupied 635 654 113 Non-owner occupied 1,151 1,678 242 Consumer and other 1 1 — Total $ 2,744 $ 3,556 $ 513 With no related allowance recorded: Commercial and industrial $ 622 $ 746 $ — Construction 2,686 2,694 — Residential real estate: 1-to-4 family mortgage 2,368 2,370 — Residential line of credit 311 321 — Multi-family mortgage 1,027 1,027 — Commercial real estate: Owner occupied 2,117 3,205 — Non-owner occupied 1,050 1,781 — Consumer and other 26 26 — Total $ 10,207 $ 12,170 $ — Total impaired loans $ 12,951 $ 15,726 $ 513 December 31, 2017 2016 2015 Average recorded investment Interest income recognized (cash basis) Average recorded investment Interest income recognized (cash basis) Average recorded investment Interest income recognized (cash basis) With a related allowance recorded: Commercial and industrial $ 454 $ 2 $ 994 $ 17 $ 1,269 $ 22 Construction — — 154 — 517 3 Residential real estate: 1-to-4 family mortgage 149 9 1,750 1 2,345 199 Residential line of credit — — — — — — Multi-family mortgage — — — — 468 — Commercial real estate: Owner occupied 740 48 1,756 25 1,938 95 Non-owner occupied 648 5 1,777 — 3,039 — Consumer and other 1 — 1 — — — Total $ 1,992 $ 64 $ 6,432 $ 43 $ 9,576 $ 319 With no related allowance recorded Commercial and industrial $ 1,074 $ 38 $ 494 $ 20 $ 660 $ — Construction 1,988 46 2,622 132 4,337 127 Residential real estate: 1-to-4 family mortgage 1,718 63 1,329 137 2,815 7 Residential line of credit 156 — 156 10 — — Multi-family mortgage 1,003 46 1,051 37 652 25 Commercial real estate: Owner occupied 1,897 122 1,120 119 788 — Non-owner occupied 1,313 19 1,050 — 855 — Consumer and other 26 1 13 — — — Total $ 9,173 $ 335 $ 7,835 $ 455 $ 10,107 $ 159 Total impaired loans $ 11,164 $ 399 $ 14,267 $ 498 $ 19,683 $ 478 As of December 31, 2017 and 2016, the Company has a recorded investment in troubled debt restructurings of $8,604 and $8,802, respectively. The modifications included extensions of the maturity date and/or a stated rate of interest to one lower than the current market rate. The Company has allocated $172 and $402 of specific reserves for those loans at December 31, 2017 and 2016, respectively, and has committed to lend additional amounts totaling up to $2 and $1, respectively to these customers. Of these loans, $3,205 and $4,265 were classified as non-accrual loans as of December 31, 2017 and 2016. The following table presents the financial effect of TDRs recorded during the periods indicated: Year Ended December 31, 2017 Number of loans Pre-modification outstanding recorded investment Post-modification outstanding recorded investment Charge offs and specific reserves Commercial and industrial 2 $ 627 $ 627 $ — Commercial real estate: Owner occupied 1 377 377 — Non-owner occupied 2 711 711 68 Residential real estate: 1-to-4 family mortgage 1 143 143 8 Consumer and other 1 25 25 — Total 7 $ 1,883 $ 1,883 $ 76 Year Ended December 31, 2016 Number of loans Pre-modification outstanding recorded investment Post-modification outstanding recorded investment Charge offs and specific reserves Commercial real estate: Owner occupied 1 $ 118 $ 118 $ — Residential real estate: 1-4 family mortgage 5 1,819 1,819 — Consumer and other 3 29 29 — Total 9 $ 1,966 $ 1,966 $ — Year ended December 31, 2015 Number of loans Pre-modification outstanding recorded investment Post-modification outstanding recorded investment Charge offs and specific reserves Commercial and industrial 6 $ 2,301 $ 2,301 $ 86 Commercial real estate: Owner occupied 4 786 786 — Non-owner occupied 1 133 133 1 Residential real estate: 1-4 family mortgage 5 326 326 45 Total 16 $ 3,546 $ 3,546 $ 132 There were no loans modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the year ended December 31, 2017 or 2016. The following presents loans modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the year ended December 31, 2015: Defaulted Charge-offs and specific reserves Residential real estate: 1-to-4 family mortgage $ 145 $ 45 Total $ 145 $ 45 A loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. The terms of certain other loans were modified during the years ended December 31, 2017, 2016 and 2015 that did not meet the definition of a troubled debt restructuring. The modification of these loans involved either a modification of the terms of a loan to borrowers who were not experiencing financial difficulties or a delay in a payment that was considered to be insignificant. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the company’s internal underwriting policy. |