Loans and allowance for loan losses | Loans and allowance for loan losses: Loans outstanding at September 30, 2019 and December 31, 2018 , by major lending classification are as follows: September 30, December 31, 2019 2018 Commercial and industrial $ 997,921 $ 867,083 Construction 537,784 556,051 Residential real estate: 1-to-4 family mortgage 710,077 555,815 Residential line of credit 215,493 190,480 Multi-family mortgage 80,352 75,457 Commercial real estate: Owner occupied 620,635 493,524 Non-owner occupied 914,502 700,248 Consumer and other 268,580 228,853 Gross loans 4,345,344 3,667,511 Less: Allowance for loan losses (31,464 ) (28,932 ) Net loans $ 4,313,880 $ 3,638,579 As of September 30, 2019 and December 31, 2018 , $ 527,351 and $ 618,976 , respectively, of qualifying residential mortgage loans (including loans held for sale) and $ 521,754 and $ 608,735 , respectively, of qualifying commercial mortgage loans were pledged to the Federal Home Loan Bank of Cincinnati securing advances against the Bank’s line of credit. As of September 30, 2019 and December 31, 2018 , $ 1,403,511 and $ 1,336,092 , respectively, of qualifying loans were pledged to the Federal Reserve Bank under the Borrower-in-Custody program. As of September 30, 2019 and December 31, 2018 , 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", were $ 63,069 and $ 68,999 , respectively. The following table presents changes in the value of the accretable yield for PCI loans for the periods indicated. Three Months Ended September 30, Nine Months Ended September 30, 2019 2018 2019 2018 Balance at the beginning of period $ (14,862 ) $ (20,169 ) $ (16,587 ) $ (17,682 ) Additions through the branch acquisition of Atlantic Capital Bank — — (1,167 ) — Principal reductions and other reclassifications from nonaccretable difference (150 ) (84 ) 100 (3,536 ) Accretion 1,583 2,103 5,471 6,943 Changes in expected cash flows 110 6 (1,136 ) (3,869 ) Balance at end of period $ (13,319 ) $ (18,144 ) $ (13,319 ) $ (18,144 ) Included in the ending balance of the accretable yield on PCI loans at September 30, 2019 and December 31, 2018 , is a purchase accounting liquidity discount of $ 781 and $2,436 , respectively. There is also a purchase accounting nonaccretable credit discount of $4,331 and $4,355 related to the PCI loan portfolio at September 30, 2019 and December 31, 2018 , respectively, and an accretable credit and liquidity discount on non-PCI loans of $ 10,075 and $ 4,483 as of September 30, 2019 and $7,527 and $2,197 , respectively, as of December 31, 2018 . Interest revenue, through accretion of the difference between the recorded investment of the loans and the expected cash flows, is being recognized on all PCI loans. Accretion of interest income on PCI loans amounted to $ 1,583 and $ 5,471 during the three and nine months ended September 30, 2019 , respectively, and $ 2,103 and $ 6,943 during the three and nine months ended September 30, 2018 , respectively. This includes both the contractual interest income recognized and the purchase accounting contribution through accretion of the liquidity discount for changes in estimated cash flows. The total purchase accounting contribution through accretion excluding contractual interest collected for all purchased loans was $ 2,102 and $ 6,030 for the three and nine months ended September 30, 2019 , respectively, and $ 2,130 and $5,745 for the three and nine months ended September 30, 2018 , respectively. The following provides the changes in the allowance for loan losses by portfolio segment for the three and nine months ended September 30, 2019 and 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 Three Months Ended September 30, 2019 Beginning balance - $ 4,923 $ 9,655 $ 3,288 $ 755 $ 617 $ 3,512 $ 4,478 $ 2,910 $ 30,138 Provision for loan losses 234 186 18 67 (43 ) 194 461 714 1,831 Recoveries of loans 16 1 25 75 — 3 — 92 212 Loans charged off (3 ) — — (170 ) — — (12 ) (532 ) (717 ) Ending balance - $ 5,170 $ 9,842 $ 3,331 $ 727 $ 574 $ 3,709 $ 4,927 $ 3,184 $ 31,464 Nine Months Ended September 30, 2019 Beginning balance - December 31, 2018 $ 5,348 $ 9,729 $ 3,428 $ 811 $ 566 $ 3,132 $ 4,149 $ 1,769 $ 28,932 Provision for loan losses 17 105 (77 ) 100 8 482 790 2,678 4,103 Recoveries of loans previously charged-off 66 8 62 121 — 95 — 435 787 Loans charged off (261 ) — (82 ) (305 ) — — (12 ) (1,698 ) (2,358 ) Ending balance - September 30, 2019 $ 5,170 $ 9,842 $ 3,331 $ 727 $ 574 $ 3,709 $ 4,927 $ 3,184 $ 31,464 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 September 30, 2018 Beginning balance - $ 4,747 $ 9,023 $ 3,378 $ 795 $ 391 $ 3,290 $ 3,272 $ 1,451 $ 26,347 Provision for loan losses 847 (754 ) 47 25 292 236 639 486 1,818 Recoveries of loans 104 13 99 31 — 10 — 103 360 Loans charged off (333 ) (14 ) (4 ) (13 ) — (55 ) — (498 ) (917 ) Ending balance - $ 5,365 $ 8,268 $ 3,520 $ 838 $ 683 $ 3,481 $ 3,911 $ 1,542 $ 27,608 Nine Months Ended September 30, 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 1,088 35 235 (175 ) 249 (163 ) 1,043 886 3,198 Recoveries of loans previously charged-off 374 1,127 157 102 — 141 51 416 2,368 Loans charged off (558 ) (29 ) (69 ) (33 ) — (55 ) — (1,255 ) (1,999 ) Ending balance - $ 5,365 $ 8,268 $ 3,520 $ 838 $ 683 $ 3,481 $ 3,911 $ 1,542 $ 27,608 The following tables provides the allocation of the allowance for loan losses by loan category broken out between loans individually evaluated for impairment, loans collectively evaluated for impairment and loans acquired with deteriorated credit quality as of September 30, 2019 and December 31, 2018 : September 30, 2019 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 $ 13 $ — $ 11 $ — $ — $ 52 $ 405 $ 254 $ 735 Collectively evaluated for impairment 5,064 9,796 3,173 727 574 3,641 4,225 1,967 29,167 Acquired with deteriorated credit quality 93 46 147 — — 16 297 963 1,562 Ending balance - September 30, 2019 $ 5,170 $ 9,842 $ 3,331 $ 727 $ 574 $ 3,709 $ 4,927 $ 3,184 $ 31,464 December 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 $ 3 $ — $ 7 $ — $ — $ 53 $ 205 $ — $ 268 Collectively evaluated for impairment 5,247 9,677 3,205 811 566 3,066 3,628 1,583 27,783 Acquired with deteriorated credit quality 98 52 216 — — 13 316 186 881 Ending balance - December 31, 2018 $ 5,348 $ 9,729 $ 3,428 $ 811 $ 566 $ 3,132 $ 4,149 $ 1,769 $ 28,932 The following tables provides the amount of loans by loan category broken between loans individually evaluated for impairment, loans collectively evaluated for impairment and loans acquired with deteriorated credit quality as of September 30, 2019 and December 31, 2018 : September 30, 2019 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 $ 3,834 $ 2,061 $ 1,346 $ 245 $ — $ 2,476 $ 7,846 $ 459 $ 18,267 Collectively evaluated for impairment 992,463 532,521 687,748 215,175 80,352 612,112 894,468 249,169 4,264,008 Acquired with deteriorated credit quality 1,624 3,202 20,983 73 — 6,047 12,188 18,952 63,069 Ending balance - September 30, 2019 $ 997,921 $ 537,784 $ 710,077 $ 215,493 $ 80,352 $ 620,635 $ 914,502 $ 268,580 $ 4,345,344 December 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 $ 1,847 $ 1,221 $ 987 $ 245 $ — $ 2,608 $ 6,735 $ 73 $ 13,716 Collectively evaluated for impairment 863,788 549,075 535,451 190,235 75,457 484,900 677,247 208,643 3,584,796 Acquired with deteriorated credit quality 1,448 5,755 19,377 — — 6,016 16,266 20,137 68,999 Ending balance - December 31, 2018 $ 867,083 $ 556,051 $ 555,815 $ 190,480 $ 75,457 $ 493,524 $ 700,248 $ 228,853 $ 3,667,511 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, 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 tables show credit quality indicators by portfolio class at September 30, 2019 and December 31, 2018 : September 30, 2019 Pass Watch Substandard Total Loans, excluding purchased credit impaired loans Commercial and industrial $ 930,094 $ 49,209 $ 16,994 $ 996,297 Construction 528,358 4,074 2,150 534,582 Residential real estate: 1-to-4 family mortgage 666,942 8,254 13,898 689,094 Residential line of credit 212,556 1,171 1,693 215,420 Multi-family mortgage 80,285 67 — 80,352 Commercial real estate: Owner occupied 574,582 25,962 14,044 614,588 Non-owner occupied 868,007 25,597 8,710 902,314 Consumer and other 243,495 3,315 2,818 249,628 Total loans, excluding purchased credit impaired loans $ 4,104,319 $ 117,649 $ 60,307 $ 4,282,275 Purchased credit impaired loans Commercial and industrial $ — $ 1,023 $ 601 $ 1,624 Construction — 2,994 208 3,202 Residential real estate: 1-to-4 family mortgage — 16,540 4,443 20,983 Residential line of credit — — 73 73 Multi-family mortgage — — — — Commercial real estate: Owner occupied — 4,244 1,803 6,047 Non-owner occupied — 5,620 6,568 12,188 Consumer and other — 14,074 4,878 18,952 Total purchased credit impaired loans $ — $ 44,495 $ 18,574 $ 63,069 Total loans $ 4,104,319 $ 162,144 $ 78,881 $ 4,345,344 December 31, 2018 Pass Watch Substandard Total Loans, excluding purchased credit impaired loans Commercial and industrial $ 804,447 $ 52,624 $ 8,564 $ 865,635 Construction 543,953 5,012 1,331 550,296 Residential real estate: 1-to-4 family mortgage 519,541 8,697 8,200 536,438 Residential line of credit 186,753 1,039 2,688 190,480 Multi-family mortgage 75,381 76 — 75,457 Commercial real estate: Owner occupied 456,694 16,765 14,049 487,508 Non-owner occupied 667,447 8,881 7,654 683,982 Consumer and other 204,279 2,763 1,674 208,716 Total loans, excluding purchased credit impaired loans $ 3,458,495 $ 95,857 $ 44,160 $ 3,598,512 Purchased credit impaired loans Commercial and industrial $ — $ 964 $ 484 $ 1,448 Construction — 3,229 2,526 5,755 Residential real estate: 1-to-4 family mortgage — 14,681 4,696 19,377 Residential line of credit — — — — Multi-family mortgage — — — — Commercial real estate: Owner occupied — 4,110 1,906 6,016 Non-owner occupied — 8,266 8,000 16,266 Consumer and other — 15,422 4,715 20,137 Total purchased credit impaired loans $ — $ 46,672 $ 22,327 $ 68,999 Total loans $ 3,458,495 $ 142,529 $ 66,487 $ 3,667,511 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. As such, PCI loans are excluded from past due disclosures presented below. The accrual and/or accretion 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 September 30, 2019 or December 31, 2018 as the present value of the respective loan or pool of loans cash flows were considered estimable and probable of collection. Therefore, interest income, through accretion of the difference between the carrying value of the loans and the expected cash flows, is being recognized on all PCI loans. PCI contractually past due 30-89 days amounted to $3,598 and $3,605 as of September 30, 2019 and December 31, 2018 , respectively, and an additional $754 and $4,076 were contractually past due 90 days or more as of September 30, 2019 and December 31, 2018 , respectively. The following tables provide 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 September 30, 2019 and December 31, 2018 : September 30, 2019 30-89 days past due 90 days or more and accruing interest Non-accrual loans Purchased Credit Impaired loans Loans current on payments and accruing interest Total Commercial and industrial $ 3,892 $ 4 $ 383 $ 1,624 $ 992,018 $ 997,921 Construction 327 — 1,107 3,202 533,148 537,784 Residential real estate: 1-to-4 family mortgage 5,552 1,316 7,260 20,983 674,966 710,077 Residential line of credit 475 298 421 73 214,226 215,493 Multi-family mortgage — — — — 80,352 80,352 Commercial real estate: Owner occupied 153 — 1,274 6,047 613,161 620,635 Non-owner occupied 2,605 5 6,596 12,188 893,108 914,502 Consumer and other 2,446 829 870 18,952 245,483 268,580 Total $ 15,450 $ 2,452 $ 17,911 $ 63,069 $ 4,246,462 $ 4,345,344 December 31, 2018 30-89 days past due 90 days or more and accruing interest Non-accrual loans Purchased Credit Impaired loans Loans current on payments and accruing interest Total Commercial and industrial $ 999 $ 65 $ 438 $ 1,448 $ 864,133 $ 867,083 Construction 109 — 283 5,755 549,904 556,051 Residential real estate: 1-to-4 family mortgage 4,919 737 2,704 19,377 528,078 555,815 Residential line of credit 726 957 804 — 187,993 190,480 Multi-family mortgage — — — — 75,457 75,457 Commercial real estate: Owner occupied 407 197 2,423 6,016 484,481 493,524 Non-owner occupied 61 77 6,885 16,266 676,959 700,248 Consumer and other 1,987 1,008 148 20,137 205,573 228,853 Total $ 9,208 $ 3,041 $ 13,685 $ 68,999 $ 3,572,578 $ 3,667,511 Impaired loans recognized in conformity with ASC 310 at September 30, 2019 and December 31, 2018 , segregated by class, were as follows: September 30, 2019 Recorded investment Unpaid principal Related allowance With a related allowance recorded: Commercial and industrial $ 3,081 $ 3,081 $ 13 Residential real estate: 1-to-4 family mortgage 264 324 11 Commercial real estate: Owner occupied 182 220 52 Non-owner occupied 6,796 6,831 405 Consumer and other 395 395 254 Total $ 10,718 $ 10,851 $ 735 With no related allowance recorded Commercial and industrial $ 753 $ 898 $ — Construction 2,061 2,484 — Residential real estate: 1-to-4 family mortgage 1,082 1,400 — Residential line of credit 245 262 — Commercial real estate: Owner occupied 2,294 3,437 — Non-owner occupied 1,050 1,781 — Consumer and other 64 64 — Total $ 7,549 $ 10,326 $ — Total impaired loans $ 18,267 $ 21,177 $ 735 December 31, 2018 Recorded investment Unpaid principal Related allowance With a related allowance recorded: Commercial and industrial $ 618 $ 732 $ 3 Residential real estate: 1-to-4 family mortgage 145 145 7 Commercial real estate: Owner occupied 560 641 53 Non-owner occupied 5,686 5,686 205 Total $ 7,009 $ 7,204 $ 268 With no related allowance recorded: Commercial and industrial $ 1,229 $ 1,281 $ — Construction 1,221 1,262 — Residential real estate: 1-to-4 family mortgage 842 1,151 — Residential line of credit 245 249 — Commercial real estate: Owner occupied 2,048 2,780 — Non-owner occupied 1,049 1,781 — Consumer and other 73 73 — Total $ 6,707 $ 8,577 $ — Total impaired loans $ 13,716 $ 15,781 $ 268 Average recorded investment and interest income on a cash basis recognized during the three and nine months ended September 30, 2019 and 2018 on impaired loans, segregated by class, were as follows: Three Months Ended Nine Months Ended September 30, 2019 Average recorded investment Interest income recognized (cash basis) Average recorded investment Interest income recognized (cash basis) With a related allowance recorded: Commercial and industrial $ 3,109 $ 51 $ 1,850 $ 156 Construction — — — — Residential real estate: 1-to-4 family mortgage 265 2 205 13 Residential line of credit — — — — Multi-family mortgage — — — — Commercial real estate: Owner occupied 184 4 371 10 Non-owner occupied 6,143 56 6,241 90 Consumer and other 447 — 198 19 Total $ 10,148 $ 113 $ 8,865 $ 288 With no related allowance recorded: Commercial and industrial $ 766 $ 11 $ 991 $ 36 Construction 1,639 90 1,641 142 Residential real estate: 1-to-4 family mortgage 835 24 962 50 Residential line of credit 427 — 245 2 Multi-family mortgage — — — — Commercial real estate: Owner occupied 2,045 41 2,171 103 Non-owner occupied 1,050 — 1,050 — Consumer and other 66 2 69 5 Total $ 6,828 $ 168 $ 7,129 $ 338 Total impaired loans $ 16,976 $ 281 $ 15,994 $ 626 September 30, 2018 With a related allowance recorded: Commercial and industrial $ 922 $ 81 $ 872 $ 84 Residential real estate: 1-to-4 family mortgage 186 2 189 7 Commercial real estate: Owner occupied 661 7 706 34 Non-owner occupied — — 72 2 Total $ 1,769 $ 90 $ 1,839 $ 127 With no related allowance recorded: Commercial and industrial $ 1,983 $ 21 $ 1,729 $ 80 Construction 1,279 35 1,283 70 Residential real estate: 1-to-4 family mortgage 1,313 15 1,189 60 Residential line of credit 127 8 127 8 Multi-family mortgage 569 2 583 26 Commercial real estate: Owner occupied 1,490 27 1,572 87 Non-owner occupied 1,049 — 1,313 7 Consumer and other 54 1 53 2 Total $ 7,864 $ 109 $ 7,849 $ 340 Total impaired loans $ 9,633 $ 199 $ 9,688 $ 467 As of September 30, 2019 and December 31, 2018 , the Company has a recorded investment in troubled debt restructurings of $11,460 and $ 6,794 , 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 $171 and $ 63 of specific reserves for those loans at September 30, 2019 and December 31, 2018 , respectively. There were no commitments to lend any additional amounts to these customers for either period end. Of these loans, $3,211 and $ 2,703 were classified as non-accrual loans as of September 30, 2019 and December 31, 2018 , respectively. The following tables present the financial effect of TDRs recorded during the periods indicated. Three Months Ended September 30, 2019 Number of loans Pre-modification outstanding recorded investment Post-modification outstanding recorded investment Charge offs and specific reserves Commercial and industrial 1 $ 16 $ 16 $ — Construction 1 1,070 1,070 — Commercial real estate: Owner occupied 1 927 927 — Non-owner occupied 1 1,366 1,366 106 Residential real estate: 1-to-4 family mortgage 1 128 128 — Total 5 $ 3,507 $ 3,507 $ 106 Three Months Ended September 30, 2018 Number of loans Pre-modification outstanding recorded investment Post-modification outstanding recorded investment Charge offs and specific reserves Commercial real estate: Owner occupied 1 $ 143 $ 143 $ — Consumer and other 4 55 55 — Total 5 $ 198 $ 198 $ — Nine Months Ended September 30, 2019 Number of loans Pre-modification outstanding recorded investment Post-modification outstanding recorded investment Charge offs and specific reserves Commercial and industrial 3 $ 3,204 $ 3,204 $ — Construction 1 1,070 1,070 — Commercial real estate: Owner occupied 1 927 927 — Non-owner occupied 1 1,366 1,366 106 Residential real estate: 1-to-4 family mortgage 1 128 128 — Total 7 $ 6,695 $ 6,695 $ 106 Nine Months Ended September 30, 2018 Number of loans Pre-modification outstanding recorded investment Post-modification outstanding recorded investment Charge offs and specific reserves Commercial and industrial 2 $ 887 $ 887 $ — Commercial real estate: Owner occupied 1 143 143 — Residential real estate: 1-4 family mortgage 1 249 249 — Consumer and other 5 61 61 — Total 9 $ 1,340 $ 1,340 $ — 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 or nine months ended September 30, 2019 and 2018 . 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 and nine months ended September 30, 2019 and 2018 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. |