Loans and allowance for loan losses | Note (4)—Loans and allowance for loan losses: Loans outstanding at March 31, 2018 and December 31, 2017, by major lending classification are as follows: March 31, December 31, 2018 2017 Commercial and industrial $ 765,115 $ 715,075 Construction 466,495 448,326 Residential real estate: 1-to-4 family mortgage 491,725 480,989 Residential line of credit 197,740 194,986 Multi-family mortgage 63,295 62,374 Commercial real estate: Owner occupied 499,331 495,872 Non-owner occupied 562,128 551,588 Consumer and other 198,834 217,701 Gross loans 3,244,663 3,166,911 Less: Allowance for loan losses (24,406 ) (24,041 ) Net loans $ 3,220,257 $ 3,142,870 As of March 31, 2018 and December 31, 2017, $1,245,847 and $968,567, respectively, of 1-to-4 family mortgage loans, loans held for sale and multi-family mortgage loans were pledged to the Federal Home Loan Bank of Cincinnati securing advances against the Bank’s line. As of March 31, 2018 and December 31, 2017, $1,215,509 and $724,312, respectively, of commercial and industrial , construction, residential real estate, commercial real estate, and consumer and other loans were pledged to the Federal Reserve Bank under the Borrower-in-Custody program. As of March 31, 2018 and December 31, 2017, 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, Purchased Credit Impaired Accretable yield Balance at December 31, 2017 $ (17,682 ) Principal reductions/ pay-offs (1,294 ) Recoveries — Accretion 2,201 Other changes (180 ) Balance at March 31, 2018 $ (16,955 ) Balance at December 31, 2016 $ (2,444 ) Principal reductions/ pay-offs (698 ) Recoveries (23 ) Accretion 1,023 Balance at March 31, 2017 $ (2,142 ) 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 $2,201 and $1,023 was recognized on purchased credit impaired loans during the three months ended March 31, 2018 and 2017, 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 for all purchased loans was $1,687 and $1,160 for three months ended March 31, 2018 and 2017, respectively. The following provides the allowance for loan losses by portfolio segment and the related investment in loans net of unearned interest for the three months ended March 31, 2018 and 2017 (in thousands): 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 Three Months Ended March 31, 2018 Beginning balance - December 31, 2017 $ 4,461 $ 7,135 $ 3,197 $ 944 $ 434 $ 3,558 $ 2,817 $ 1,495 $ 24,041 Provision for loan losses 202 479 (30 ) 214 15 (567 ) (115 ) 119 317 Recoveries of loans previously charged-off 135 252 15 27 — 23 51 206 709 Loans charged off (220 ) — (60 ) (20 ) — — — (361 ) (661 ) Ending balance - March 31, 2018 $ 4,578 $ 7,866 $ 3,122 $ 1,165 $ 449 $ 3,014 $ 2,753 $ 1,459 $ 24,406 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 Three Months Ended March 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 179 635 (239 ) (155 ) 4 81 (998 ) 236 (257 ) Recoveries of loans previously charged-off 83 29 26 56 — 4 1,639 13 1,850 Loans charged off (169 ) (6 ) (88 ) — — — — (179 ) (442 ) Ending balance - March 31, 2017 $ 5,402 $ 5,598 $ 2,896 $ 1,514 $ 508 $ 3,387 $ 2,660 $ 933 $ 22,898 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 March 31, 2018 and December 31, 2017: March 31, 2018 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 $ 19 $ — $ 16 $ — $ — $ 95 $ 29 $ — $ 159 Collectively evaluated for impairment 4,559 7,866 3,106 1,165 449 2,919 2,724 1,459 24,247 Acquired with deteriorated credit quality — — — — — — — — — Ending balance - March 31, 2018 $ 4,578 $ 7,866 $ 3,122 $ 1,165 $ 449 $ 3,014 $ 2,753 $ 1,459 $ 24,406 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 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 March 31, 2018 and December 31, 2017: March 31, 2018 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 $ 1,385 $ 1,285 $ 1,492 $ — $ 964 $ 2,150 $ 1,713 $ 29 $ 9,018 Collectively evaluated for impairment 761,779 457,785 467,329 197,740 62,313 485,411 542,351 175,185 3,149,893 Acquired with deteriorated credit quality 1,951 7,425 22,904 — 18 11,770 18,064 23,620 85,752 Ending balance - March 31, 2018 $ 765,115 $ 466,495 $ 491,725 $ 197,740 $ 63,295 $ 499,331 $ 562,128 $ 198,834 $ 3,244,663 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 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’s risk rating definitions include: 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, if 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 March 31, 2018 and December 31, 2017: March 31, 2018 Pass Watch Substandard Total Loans, excluding purchased credit impaired loans Commercial and industrial $ 704,689 $ 54,124 $ 4,351 $ 763,164 Construction 441,718 15,468 1,884 459,070 Residential real estate: 1-to-4 family mortgage 452,858 9,027 6,936 468,821 Residential line of credit 194,887 1,677 1,176 197,740 Multi-family mortgage 62,175 138 964 63,277 Commercial real estate: Owner occupied 457,347 25,962 4,252 487,561 Non-owner occupied 527,134 14,972 1,958 544,064 Consumer and other 172,260 2,379 575 175,214 Total loans, excluding purchased credit impaired loans $ 3,013,068 $ 123,747 $ 22,096 $ 3,158,911 Purchased credit impaired loans Commercial and industrial $ — $ 1,351 $ 600 $ 1,951 Construction — 3,422 4,003 7,425 Residential real estate: 1-to-4 family mortgage — 19,454 3,450 22,904 Residential line of credit — — — — Multi-family mortgage — — 18 18 Commercial real estate: Owner occupied — 4,565 7,205 11,770 Non-owner occupied — 7,517 10,547 18,064 Consumer and other — 18,704 4,916 23,620 Total purchased credit impaired loans $ — $ 55,013 $ 30,739 $ 85,752 Total loans $ 3,013,068 $ 178,760 $ 52,835 $ 3,244,663 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 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 March 31, 2018 or December 31, 2017 as the carrying value of the respective loan or pool of loans cash flows were considered estimable and probable of collection. Nonperforming loans include loans that are no longer accruing interest (non-accrual 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. 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, loans current on payments accruing interest and purchased credit impaired loans by category at March 31, 2018 and December 31, 2017: March 31, 2018 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 $ 1,385 $ 619 $ 910 $ 760,250 $ 1,951 $ 765,115 Construction 250 329 460 458,031 7,425 466,495 Residential real estate: 1-to-4 family mortgage 3,666 1,067 2,009 462,079 22,904 491,725 Residential line of credit 1,013 356 370 196,001 — 197,740 Multi-family mortgage — — — 63,277 18 63,295 Commercial real estate: Owner occupied 202 — 1,903 485,456 11,770 499,331 Non-owner occupied 393 — 1,219 542,452 18,064 562,128 Consumer and other 1,640 318 83 173,173 23,620 198,834 Total $ 8,549 $ 2,689 $ 6,954 $ 3,140,719 $ 85,752 $ 3,244,663 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 Impaired loans recognized in conformity with ASC 310 at March 31, 2018 and December 31, 2017, segregated by class, were as follows: March 31, 2018 Recorded investment Unpaid principal Related allowance With a related allowance recorded: Commercial and industrial $ 52 $ 52 $ 19 Residential real estate: 1-to-4 family mortgage 191 492 16 Commercial real estate: Owner occupied 585 646 95 Non-owner occupied 142 149 29 Total $ 970 $ 1,339 $ 159 With no related allowance recorded Commercial and industrial $ 1,333 $ 1,539 $ — Construction 1,285 1,313 — Residential real estate: 1-to-4 family mortgage 1,301 1,306 — Multi-family mortgage 964 964 — Commercial real estate: Owner occupied 1,565 2,077 — Non-owner occupied 1,571 2,320 — Consumer and other 29 29 — Total $ 8,048 $ 9,548 $ — Total impaired loans $ 9,018 $ 10,887 $ 159 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 Commercial real estate: Owner occupied 844 1,123 120 Non-owner occupied 144 150 33 Consumer and other — — — 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 — 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 Average recorded investment and interest income on a cash basis recognized during the three months ended March 31, 2018 and 2017 on impaired loans, segregated by class, were as follows: Three Months Ended March 31, 2018 Average recorded investment Interest income recognized (cash basis) With a related allowance recorded: Commercial and industrial $ 53 $ 1 Construction — — Residential real estate: 1-to-4 family mortgage 193 2 Residential line of credit — — Multi-family mortgage — — Commercial real estate: Owner occupied 715 6 Non-owner occupied 143 2 Consumer and other — — Total $ 1,104 $ 11 With no related allowance recorded: Commercial and industrial $ 1,430 $ 16 Construction 1,287 30 Residential real estate: 1-to-4 family mortgage 1,185 13 Residential line of credit — — Multi-family mortgage 971 12 Commercial real estate: Owner occupied 1,621 32 Non-owner occupied 1,574 7 Consumer and other 27 — Total $ 8,095 $ 110 Total impaired loans $ 9,199 $ 121 March 31, 2017 With a related allowance recorded: Commercial and industrial $ 791 $ 5 Construction — — Residential real estate: 1-to-4 family mortgage 101 — Residential line of credit — — Multi-family mortgage — — Commercial real estate: Owner occupied 629 12 Non-owner occupied 835 — Consumer and other 1 — Total $ 2,357 $ 17 With no related allowance recorded: Commercial and industrial $ 584 $ 9 Construction 1,496 5 Residential real estate: 1-to-4 family mortgage 2,243 17 Residential line of credit 156 — Multi-family mortgage 1,021 11 Commercial real estate: Owner occupied 1,977 38 Non-owner occupied 1,325 — Consumer and other 26 1 Total $ 8,828 $ 81 Total impaired loans $ 11,185 $ 98 As of March 31, 2018 and December 31, 2017, the Company has a recorded investment in troubled debt restructurings of $8,675 and $8,604, 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 $159 and $172 of specific reserves for those loans at March 31, 2018 and December 31, 2017, respectively, and has committed to lend additional amounts totaling up to $3 and $2, respectively to these customers. Of these loans, $3,233 and $3,205 were classified as non-accrual loans as of March 31, 2018 and December 31, 2017. The following tables present the financial effect of TDRs recorded during the three months ended March 31, 2018 and 2017: Three Months Ended March 31, 2018 Number of loans Pre-modification outstanding recorded investment Post-modification outstanding recorded investment Charge offs and specific reserves Residential real estate: 1-to-4 family mortgage 1 $ 249 $ 249 $ — Consumer and other 1 5 5 — Total 2 $ 254 $ 254 $ — Three Months Ended March 31, 2017 Number of loans Pre-modification outstanding recorded investment Post-modification outstanding recorded investment Charge offs and specific reserves Residential real estate: 1-to-4 family mortgage 1 $ 5 $ 5 $ — Commercial real estate: Owner occupied 1 377 377 — Non-owner occupied 2 711 711 — Total 4 $ 1,093 $ 1,093 $ — There were no loans modified as troubled debt restructurings for which there was a payment default within twelve months following the modification during the three months ended March 31, 2018 or 2017. 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 three months ended March 31, 2018 and 2017 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. |