Document
Table of Contents

 
Section 1: 10-Q (10-Q)
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
    
 þ    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 2019
 o    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from ________ to ____________

Commission File Number: 001-38458
LEVEL ONE BANCORP, INC.
(Exact name of registrant as specified in its charter)
Michigan
(State or other jurisdiction of
incorporation or organization)
 
71-1015624
(I.R.S. Employer
Identification No.)
32991 Hamilton Court
Farmington Hills, MI
(Address of principal executive offices)
 
48334
(Zip code)
(248) 737-0300
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Common Stock, no par value
Trading symbol(s)
LEVL

Name of each exchange on which registered
Nasdaq Global Select Market
Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or such shorter period that the registrant was required to submit such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer     o                             Accelerated filer         o

Non-accelerated filer    þ                            Smaller reporting company þ

Emerging growth company    þ

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes o No þ

As of May 3, 2019, the number of shares outstanding of the registrant’s Common Stock, no par value, was 7,751,231 shares.



Table of Contents

Level One Bancorp, Inc.
Table of Contents
 
 
 
Page
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


Table of Contents

PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
LEVEL ONE BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
 
 
March 31, 2019
 
December 31, 2018
(Dollars in thousands)
 
(Unaudited)
 
 
Assets
 
 

 
 

Cash and cash equivalents
 
$
35,982

 
$
33,296

Securities available-for-sale
 
226,874

 
204,258

Federal Home Loan Bank stock
 
8,325

 
8,325

Mortgage loans held for sale, at fair value
 
14,043

 
5,595

Loans:
 
 

 
 

Originated loans
 
1,051,169

 
1,041,898

Acquired loans
 
79,928

 
84,667

Total loans
 
1,131,097

 
1,126,565

Less: Allowance for loan losses
 
(11,960
)
 
(11,566
)
Net loans
 
1,119,137

 
1,114,999

Premises and equipment
 
13,172

 
13,242

Goodwill
 
9,387

 
9,387

Other intangible assets, net
 
395

 
447

Bank-owned life insurance
 
11,945

 
11,866

Income tax benefit
 
1,589

 
2,467

Other assets
 
15,703

 
12,333

Total assets
 
$
1,456,552

 
$
1,416,215

Liabilities
 
 

 
 

Deposits:
 
 

 
 

Noninterest-bearing demand deposits
 
$
293,217

 
$
309,384

Interest-bearing demand deposits
 
53,538

 
52,804

Money market and savings deposits
 
319,028

 
287,575

Time deposits
 
485,680

 
484,872

Total deposits
 
1,151,463

 
1,134,635

Borrowings
 
117,907

 
99,574

Subordinated notes
 
14,905

 
14,891

Other liabilities
 
16,158

 
15,355

Total liabilities
 
1,300,433

 
1,264,455

Shareholders' equity
 
 

 
 

Common stock, no par value per share:
 
 

 
 

Authorized—20,000,000 shares
 
 

 
 

Issued and outstanding—7,749,331 shares at March 31, 2019 and 7,750,216 shares at December 31, 2018
 
89,753

 
90,621

Retained earnings
 
66,049

 
62,891

Accumulated other comprehensive income (loss), net of tax
 
317

 
(1,752
)
Total shareholders' equity
 
156,119

 
151,760

Total liabilities and shareholders' equity
 
$
1,456,552

 
$
1,416,215

   
See accompanying notes to the consolidated financial statements.


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LEVEL ONE BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME — (UNAUDITED)
 
 
For the three months ended March 31,
(In thousands, except per share data)
 
2019
 
2018
Interest income
 
 

 
 

Originated loans, including fees
 
$
13,894

 
$
11,178

Acquired loans, including fees
 
1,757

 
2,426

Securities:
 
 

 
 

Taxable
 
936

 
574

Tax-exempt
 
545

 
351

Federal funds sold and other
 
310

 
245

Total interest income
 
17,442

 
14,774

Interest Expense
 
 

 
 

Deposits
 
4,121

 
2,178

Borrowed funds
 
353

 
219

Subordinated notes
 
250

 
250

Total interest expense
 
4,724

 
2,647

Net interest income
 
12,718

 
12,127

Provision expense for loan losses
 
422

 
554

Net interest income after provision for loan losses
 
12,296

 
11,573

Noninterest income
 
 

 
 

Service charges on deposits
 
625

 
642

Net loss on sales of securities
 
(7
)
 

Mortgage banking activities
 
1,120

 
236

Other charges and fees
 
548

 
494

Total noninterest income
 
2,286

 
1,372

Noninterest expense
 
 

 
 

Salary and employee benefits
 
6,913

 
5,956

Occupancy and equipment expense
 
1,204

 
1,046

Professional service fees
 
362

 
266

Marketing expense
 
176

 
142

Printing and supplies expense
 
68

 
104

Data processing expense
 
595

 
436

Other expense
 
1,050

 
1,185

Total noninterest expense
 
10,368

 
9,135

Income before income taxes
 
4,214

 
3,810

Income tax provision
 
747

 
642

Net income
 
$
3,467

 
$
3,168

Per common share data:
 
 

 
 

Basic earnings per common share
 
$
0.45

 
$
0.48

Diluted earnings per common share
 
$
0.44

 
$
0.47

Cash dividends declared per common share
 
$
0.04

 
$
0.03

Weighted average common shares outstanding—basic
 
7,752

 
6,539

Weighted average common shares outstanding—diluted
 
7,869

 
6,699

See accompanying notes to the consolidated financial statements.

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LEVEL ONE BANCORP, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(UNAUDITED)
 
 
For the three months ended March 31,
(Dollars in thousands)
 
2019
 
2018
Net income
 
$
3,467

 
$
3,168

Other comprehensive income:
 
 
 
 

Unrealized holding gains (losses) on securities available-for-sale arising during the period
 
2,612

 
(2,505
)
Reclassification adjustment for losses included in income
 
7

 

Tax effect(1)
 
(550
)
 
525

Net unrealized gains (losses) on securities available-for-sale, net of tax
 
2,069

 
(1,980
)
Total comprehensive income, net of tax
 
$
5,536

 
$
1,188

__________________________________________________________________________ 
(1) Includes $(1) thousand of tax benefit related to reclassification for the three months ended March 31, 2019. There was no tax expense (benefit) related to reclassification for the three months ended March 31, 2018.

See accompanying notes to the consolidated financial statements.

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LEVEL ONE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY — (UNAUDITED)
(Dollar in thousands)
 
Common Stock
 
Retained Earnings
 
Accumulated Other Comprehensive (Loss) Income
 
Total Shareholders' Equity
Balance at December 31, 2017
 
$
59,511

 
$
49,232

 
$
(783
)
 
$
107,960

Net Income
 

 
3,168

 

 
3,168

Other comprehensive loss
 

 

 
(1,980
)
 
(1,980
)
Reclass of tax reform adjustments due to early adoption of ASU 2018-02
 

 
$
168

 
$
(168
)
 

Exercise of stock options (118,944 shares)
 
1,192

 

 

 
1,192

Stock-based compensation expense
 
183

 

 

 
183

Balance at March 31, 2018
 
$
60,886

 
$
52,568

 
$
(2,931
)
 
$
110,523

 
 
 
 
 
 
 
 
 
Balance at December 31, 2018
 
$
90,621

 
$
62,891

 
$
(1,752
)
 
$
151,760

Net income
 

 
3,467

 

 
3,467

Other comprehensive income
 

 

 
2,069

 
2,069

Share buyback (46,626 shares)
 
(1,104
)
 

 

 
(1,104
)
Common stock dividends declared ($0.04 per share)
 

 
(309
)
 

 
(309
)
Exercise of stock options (12,300 shares)
 
125

 

 

 
125

Stock-based compensation expense, net of tax impact
 
111

 

 

 
111

Balance at March 31, 2019
 
$
89,753

 
$
66,049

 
$
317

 
$
156,119

See accompanying notes to the consolidated financial statements.


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LEVEL ONE BANCORP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS — (UNAUDITED)
 
 
For the three months ended March 31,
(Dollars in thousands)
 
2019
 
2018
Cash flows from operating activities
 
 

 
 

Net income
 
$
3,467

 
$
3,168

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation of fixed assets
 
327

 
332

Amortization of core deposit intangibles
 
52

 
55

Stock-based compensation expense
 
154

 
183

Provision expense for loan losses
 
422

 
554

Net securities premium amortization
 
397

 
306

Net loss on sales of securities
 
7

 

Originations of loans held for sale
 
(36,793
)
 
(11,114
)
Proceeds from sales of loans originated for sale
 
29,137

 
14,027

Net gain on sales of loans
 
(1,200
)
 
(236
)
Accretion on acquired purchase credit impaired loans
 
(584
)
 
(918
)
Increase in cash surrender value of life insurance
 
(79
)
 
(80
)
Amortization of debt issuance costs
 
14

 
9

Net (increase) decrease in accrued interest receivable and other assets
 
(2,457
)
 
641

Net increase (decrease) in accrued interest payable and other liabilities
 
629

 
(446
)
Net cash (used in) provided by operating activities
 
(6,507
)
 
6,481

Cash flows from investing activities
 
 

 
 

Net increase in loans
 
(4,022
)
 
(16,274
)
Principal payments on securities available-for-sale
 
5,752

 
1,949

Purchases of securities available-for-sale
 
(32,153
)
 
(14,140
)
Additions to premises and equipment
 
(290
)
 
(199
)
Proceeds from:
 
 
 
 
Sale of securities available-for-sale
 
6,000

 

Net cash used in investing activities
 
(24,713
)
 
(28,664
)
Cash flows from financing activities
 
 

 
 

Net increase (decrease) in deposits
 
16,828

 
(7,738
)
Change in short-term borrowings
 
(1,649
)
 
4,968

Issuances of long term FHLB advances
 
20,000

 

Repayment of long-term FHLB advances
 

 
(18
)
Change in secured borrowing
 
(18
)
 

Share buyback - redeemed stock
 
(1,104
)
 

Proceeds from exercised stock options
 
125

 
1,192

Payments related to tax-withholding for share based compensation awards
 
(43
)
 

Common stock dividends paid
 
(233
)
 

Net cash (used in) provided by financing activities
 
33,906

 
(1,596
)
Net change in cash and cash equivalents
 
2,686

 
(23,779
)
Beginning cash and cash equivalents
 
33,296

 
63,661

Ending cash and cash equivalents
 
$
35,982

 
$
39,882

 
 
 
 
 
Supplemental disclosure of cash flow information:
 
 

 
 

Interest paid
 
$
4,397

 
$
2,291

Income taxes paid
 
360

 

Transfer from loans held for sale to loans held for investment
 
239

 

Transfer from loans to other real estate owned
 
373

 

Transfer from premises and equipment to other assets
 

 
20

See accompanying notes to the consolidated financial statements.

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Table of Contents

LEVEL ONE BANCORP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS - (UNAUDITED)
MARCH 31, 2019
NOTE 1—BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Nature of Operations:
Level One Bancorp, Inc. (the "Company" “we,” “our,” or “us”) is a financial holding company headquartered in Farmington Hills, Michigan. Its wholly owned bank subsidiary, Level One Bank (the "Bank"), has 14 offices, including 9 banking centers (our full service branches) in Oakland County, one banking center in each of Detroit and Grand Rapids, Michigan’s two largest cities, one banking center in Sterling Heights, and two mortgage loan production offices in Ann Arbor.
The Bank is a Michigan banking corporation with depository accounts insured by the Deposit Insurance Fund of the Federal Deposit Insurance Corporation (the "FDIC"). The Bank provides a wide range of business and consumer financial services in the greater Farmington Hills, Novi, Northville, Birmingham, Ferndale, Sterling Heights, Bloomfield Township, Ann Arbor, Detroit and Grand Rapids areas. Its primary deposit products are checking, interest-bearing demand, money market and savings, and term certificate accounts, and its primary lending products are commercial real estate, commercial and industrial, residential real estate, and consumer loans. Substantially all loans are secured by specific items of collateral including business assets, consumer assets, and commercial and residential real estate. Commercial loans are expected to be repaid from cash flow from operations of businesses. Other financial instruments, which potentially represent concentrations of credit risk, include federal funds sold.
On July 9, 2017, the Company formed a new subsidiary, Hamilton Court Insurance Company ("Hamilton Court"), which is a wholly owned insurance subsidiary of the Company that provides property and casualty insurance coverage to the Company and the Bank, and reinsurance to ten other third party insurance captives for which insurance may not be currently available or economically feasible in the insurance marketplace. Hamilton Court was designed to insure the risks of the Company and the Bank by providing additional insurance coverage for deductibles, excess limits and uninsured exposures. Hamilton Court is domiciled in Nevada.
Initial Public Offering:
On April 24, 2018, the Company sold 1,150,765 shares of common stock in its initial public offering, including 180,000 shares of common stock pursuant to the exercise in full by the underwriters of their option to purchase additional shares. The aggregate offering price for the shares sold by the Company was $32.2 million, and after deducting $2.1 million of underwriting discounts and $1.1 million of offering expenses paid to third parties, the Company received total net proceeds of $29.0 million from the initial public offering. In addition, certain selling shareholders participated in the offering and sold an aggregate of 229,235 shares of our common stock at an aggregate offering price of $6.4 million. The Company did not receive any proceeds from the sales of shares by the selling shareholders.
Basis of Presentation and Principles of Consolidation:
The accompanying unaudited consolidated financial statements and notes thereto of the Company have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and conform to practices within the banking industry and include all of the information and disclosures required by generally accepted accounting principles in the United States of America (“GAAP”) for interim financial reporting. The accompanying unaudited consolidated financial statements reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair presentation of financial results for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results for the full year or any other period. These interim unaudited financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto as of and for the year ended December 31, 2018, included in our Annual Form 10-K, filed with the SEC on March 22, 2019.
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, the Bank and Hamilton Court, after elimination of significant intercompany transactions and accounts.
Use of Estimates:
To prepare financial statements in conformity with GAAP, management makes estimates and assumptions based on available information. These estimates and assumptions affect the amounts reported in the financial statements and the disclosures provided; therefore future results could differ.

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Change in Accounting Policy:
For fiscal years beginning after December 31, 2018, the Company has elected to evaluate goodwill for impairment as of October 1st as opposed to September 30th in the preceding years. The change will have no impact on the current year or prior years financial statements.
Emerging Growth Company Status:
The Company is an "emerging growth company," as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act). Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period when complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of this extended transition period, which means these financial statements, as well as financial statements we file in the future for as long as we remain an emerging growth company, will be subject to all new or revised accounting standards generally applicable to private companies
Impact of Recently Issued Accounting Standards:
Revenue Recognition
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-09 "Revenue from Contracts with Customers (Topic 606)," which provides a framework for revenue recognition that replaces the existing industry and transaction specific requirements under the existing standards. ASU 2014-09 requires an entity to apply a five-step model to determine when to recognize revenue and at what amount. The model specifies that revenue should be recognized when (or as) an entity transfers control of goods or services to a customer at the amount in which the entity expects to be entitled. Depending on whether certain criteria are met, revenue should be recognized either over time, in a manner that depicts the entity's performance, or at a point in time, when control of the goods or services are transferred to the customer.
The amendments of ASU 2014-09 may be applied either retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying ASU 2014-09 recognized at the date of initial application. The guidance will be effective for the Company for the fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. The Company plans to adopt these amendments within the time frames stated above.
The Company is continuing to evaluate the impact ASU 2014-09 will have on our consolidated financial statements. Based on this evaluation to date, management has determined that the majority of the revenues earned by the Company are not within the scope of ASU 2014-09, and that a few of the revenue streams that have been identified as being in scope would include service charges and interchange fees. Management will continue to evaluate the impact the adoption of ASU 2014-09 will have on our consolidated financial statements, focusing on noninterest income sources within the scope of ASU 2014-09 as well as new disclosures required by these amendments; however, the adoption of ASU 2014-09 is not expected to have a material impact on the Company's consolidated financial statements but is expected to result in additional disclosures.
Financial Instruments
In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments—Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities," to improve the accounting for financial instruments. This ASU requires equity investments with readily determinable fair values to be measured at fair value with changes recognized in net income regardless of classification. For equity investments without a readily determinable fair value, the value of the investment would be measured at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer instead of fair value, unless a qualitative assessment indicates impairment. Additionally, this ASU requires the separate presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the accompanying notes to the financial statements, as well as the required use of exit pricing when measuring the fair value of financial instruments for disclosure purposes. The guidance will be effective for the Company for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019, and is to be applied prospectively with a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. Management is currently developing processes and procedures to comply with the disclosures requirements of this ASU, which will impact the disclosures the Company makes related to fair value of its financial instruments. This standard is not expected to have a material impact to the Company's consolidated financial statements. The Company is planning to adopt this new guidance within the time frames stated above.


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Leases
In February 2016, the FASB issued ASU No. 2016-02, "Leases (Topic 842)," to improve transparency and comparability across entities regarding leasing arrangements. This ASU requires the recognition of a separate lease liability representing the required discounted lease payments over the lease term and a separate lease asset representing the right to use the underlying asset during the same lease term. Additionally, this ASU provides clarification regarding the identification of certain components of contracts that would represent a lease as well as requires additional disclosures to the notes of the financial statements.
The guidance will be effective for the Company for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020, and is to be applied under an optional transition method. The Company is currently evaluating the impact of adopting this new guidance on the consolidated financial statements. Additionally, the Company does not expect to significantly change operating lease agreements prior to adoption. The Company is planning to adopt this new guidance within the time frames stated above.
Allowance for Credit Losses
In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments," to replace the current incurred loss methodology for recognizing credit losses, which delays recognition until it is probable a loss has been incurred, with a methodology that reflects an estimate of all expected credit losses and considers additional reasonable and supportable forecasted information when determining credit loss estimates. This impacts the calculation of the allowance for credit losses for all financial assets measured under the amortized cost basis, including PCI loans at the time of and subsequent to acquisition. Additionally, credit losses related to available-for-sale debt securities would be recorded through the allowance for credit losses and not as a direct adjustment to the amortized cost of the securities. Based on the ASU No. 2018-19, "Codification Improvements to Topic 326, Financial Instruments—Credit Losses," the guidance will be effective for the Company for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years, and is to be applied under a modified retrospective approach. The Company is currently evaluating the impact of adopting this new guidance on the consolidated financial statements as well as the impact on current systems and processes. At this time, the Company is reviewing potential methodologies for estimating expected credit losses using reasonable and supportable forecast information and has identified certain data and system requirements. Once adopted, we expect our allowance for loan losses to increase through a one-time adjustment to retained earnings; however, until our evaluation is complete, the estimated increase in allowance will be unknown. The Company is planning to adopt this new guidance within the time frames stated above.
Income Taxes - Tax Cuts and Jobs Act
In February 2018, the FASB issued ASU No. 2018-02, "Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (Topic 220)," which allows an entity to elect a reclassification from accumulated other comprehensive income (AOCI) to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act ("TCJA"). The amount of that reclassification should include the effect of changes of tax rate on the deferred tax amount, any related valuation allowance and other income tax effects on the items in AOCI. In addition, the ASU requires that an entity state if an election to reclassify the tax effects to retained earnings is made, along with a description of other income tax effects that are reclassified from AOCI. This guidance is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, with early adoption permitted. The Company early adopted the ASU and reclassified $168 thousand from retained earnings to AOCI during the first quarter of 2018.
In May 2018, the FASB issued an update to ASU No. 2018-05, "Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118," regarding the accounting implications of the recently issued TCJA. The update clarifies that in a company's financial statements that include the reporting period in which the TCJA was enacted, a company must first reflect the income tax effects of the TCJA in which the accounting under GAAP is complete. These amounts would not be provisional amounts. The Company would also report provisional amounts for those specific income tax effects for which the accounting under GAAP will be incomplete but for which a reasonable estimate can be determined. This accounting update is effective immediately. The Company believes its accounting for the income tax effects of the TCJA is complete. Technical corrections or other forthcoming guidance could change how we interpret provisions of the TCJA, which may impact our effective tax rate and could affect our deferred tax assets, tax positions and/or our tax liabilities.

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NOTE 2—SECURITIES
The following table summarizes the amortized cost and fair value of the available-for-sale securities portfolio at March 31, 2019 and December 31, 2018 and the corresponding amounts of gross unrealized gains and losses recognized in accumulated other comprehensive income (loss).
(Dollars in thousands)
 
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Fair
Value
March 31, 2019
 
 

 
 

 
 

 
 

 U.S. government sponsored entities & agencies
 
$
1,417

 
$
29

 
$

 
$
1,446

State and political subdivision
 
87,890

 
1,700

 
(173
)
 
89,417

Mortgage-backed securities: residential
 
9,912

 
30

 
(288
)
 
9,654

Mortgage-backed securities: commercial
 
16,481

 
128

 
(114
)
 
16,495

Collateralized mortgage obligations: residential              
 
17,933

 
32

 
(256
)
 
17,709

Collateralized mortgage obligations: commercial              
 
35,598

 
192

 
(301
)
 
35,489

U.S. Treasury
 
18,184

 

 
(526
)
 
17,658

SBA
 
20,684

 
26

 
(135
)
 
20,575

Asset backed securities
 
5,811

 
2

 
(6
)
 
5,807

Corporate bonds
 
12,564

 
96

 
(36
)
 
12,624

Total available-for-sale
 
$
226,474

 
$
2,235

 
$
(1,835
)
 
$
226,874

December 31, 2018
 
 

 
 

 
 

 
 

  U.S. government sponsored entities & agencies
 
$
2,404

 
$
4

 
$
(11
)
 
$
2,397

State and political subdivision
 
75,093

 
657

 
(604
)
 
75,146

Mortgage-backed securities: residential
 
10,114

 
4

 
(379
)
 
9,739

Mortgage-backed securities: commercial
 
12,594

 
17

 
(229
)
 
12,382

Collateralized mortgage obligations: residential              
 
18,916

 
51

 
(296
)
 
18,671

Collateralized mortgage obligations: commercial              
 
32,390

 
98

 
(500
)
 
31,988

U.S. Treasury
 
21,232

 

 
(751
)
 
20,481

SBA
 
15,856

 

 
(168
)
 
15,688

Asset backed securities
 
3,872

 

 
(30
)
 
3,842

Corporate bonds
 
14,006

 
18

 
(100
)
 
13,924

Total available-for-sale
 
$
206,477

 
$
849

 
$
(3,068
)
 
$
204,258

The proceeds from sales of securities and the associated gains and losses for the three months ended March 31, 2019 are summarized below. There were no sales of securities during the three months ended March 31, 2018.
(Dollars in thousands)
Three Months Ended
March 31, 2019
Proceeds
$
6,000

Gross gains
64

Gross losses
(71
)



    



11

Table of Contents

The amortized cost and fair value of securities are shown in the table below by contractual maturity. Actual timing may differ from contractual maturities if borrowers have the right to call or prepay obligations with or without call or prepayment penalties. Additionally, residential mortgage-backed securities and collateralized mortgage obligations receive monthly principal payments, which are not reflected below.
 
 
March 31, 2019
(Dollars in thousands)
 
Amortized
Cost
 
Fair
Value
Within one year
 
$
681

 
$
677

One to five years
 
49,144

 
48,627

Five to ten years
 
46,389

 
46,822

Beyond ten years
 
130,260

 
130,748

Total
 
$
226,474

 
$
226,874

Securities pledged at March 31, 2019 and December 31, 2018 had a carrying amount of $26.0 million and $22.7 million, respectively, and were pledged to secure Federal Home Loan Bank ("FHLB") advances, a Federal Reserve Bank line of credit, repurchase agreements and deposits.
As of March 31, 2019, the Bank held 56 tax-exempt state and local municipal securities totaling $41.9 million backed by the Michigan School Bond Loan Fund. Other than the aforementioned investments, at March 31, 2019 and December 31, 2018, there were no holdings of securities of any one issuer, other than the U.S. government and its agencies, in an amount greater than 10% of shareholders' equity.

12

Table of Contents

The following table summarizes securities with unrealized losses at March 31, 2019 and December 31, 2018 aggregated by security type and length of time in a continuous unrealized loss position:
 
 
Less than 12 Months
 
12 Months or Longer
 
Total
(Dollars in thousands)
 
Fair
value
 
Unrealized
Losses
 
Fair
value
 
Unrealized
Losses
 
Fair
value
 
Unrealized
Losses
March 31, 2019
 
 

 
 

 
 

 
 

 
 

 
 

Available-for-sale
 
 

 
 

 
 

 
 

 
 

 
 

State and political subdivision
 
$
705

 
$
(9
)
 
$
14,271

 
$
(164
)
 
$
14,976

 
$
(173
)
Mortgage-backed securities: residential
 

 

 
6,595

 
(288
)
 
6,595

 
(288
)
Mortgage-backed securities: commercial
 

 

 
7,528

 
(114
)
 
7,528

 
(114
)
Collateralized mortgage obligations: residential
 
5,280

 
(32
)
 
9,275

 
(224
)
 
14,555

 
(256
)
Collateralized mortgage obligations: commercial
 

 

 
17,630

 
(301
)
 
17,630

 
(301
)
U.S. Treasury
 

 

 
17,658

 
(526
)
 
17,658

 
(526
)
SBA
 
5,066

 
(16
)
 
11,736

 
(119
)
 
16,802

 
(135
)
Asset backed securities
 
1,927

 
(6
)
 

 

 
1,927

 
(6
)
Corporate bonds
 
493

 
(8
)
 
2,992

 
(28
)
 
3,485

 
(36
)
Total available-for-sale
 
$
13,471

 
$
(71
)
 
$
87,685

 
$
(1,764
)
 
$
101,156

 
$
(1,835
)
December 31, 2018
 
 

 
 

 
 

 
 

 
 

 
 

Available-for-sale
 
 

 
 

 
 

 
 

 
 

 
 

U.S. government sponsored entities & agencies
 
$
978

 
$
(11
)
 
$

 
$

 
$
978

 
$
(11
)
State and political subdivision
 
5,121

 
(25
)
 
27,667

 
(579
)
 
32,788

 
(604
)
Mortgage-backed securities: residential
 
2,595

 
(4
)
 
6,393

 
(375
)
 
8,988

 
(379
)
Mortgage-backed securities: commercial
 
1,967

 
(8
)
 
8,944

 
(221
)
 
10,911

 
(229
)
Collateralized mortgage obligations: residential
 
3,814

 
(27
)
 
8,958

 
(269
)
 
12,772

 
(296
)
Collateralized mortgage obligations: commercial
 

 

 
17,939

 
(500
)
 
17,939

 
(500
)
U.S. Treasury
 

 

 
20,481

 
(751
)
 
20,481

 
(751
)
SBA
 
12,420

 
(91
)
 
3,268

 
(77
)
 
15,688

 
(168
)
Asset backed securities
 
3,842

 
(30
)
 

 

 
3,842

 
(30
)
Corporate bonds
 
7,526

 
(28
)
 
2,950

 
(72
)
 
10,476

 
(100
)
Total available-for-sale
 
$
38,263

 
$
(224
)
 
$
96,600

 
$
(2,844
)
 
$
134,863

 
$
(3,068
)
As of March 31, 2019, the Company's investment portfolio consisted of 281 securities, 121 of which were in an unrealized loss position. The unrealized losses for these securities resulted primarily from changes in interest rates. The Company expects full recovery of the carrying amount of these securities and does not intend to sell the securities in an unrealized loss position nor does it believe it will be required to sell securities in an unrealized loss position before the value is recovered. The Company does not consider these securities to be other-than-temporarily impaired at March 31, 2019.

13

Table of Contents

NOTE 3—LOANS
The following table presents the recorded investment in loans at March 31, 2019 and December 31, 2018. The recorded investment in loans excludes accrued interest receivable.
(Dollars in thousands)
 
Originated
 
Acquired
 
Total
March 31, 2019
 
 

 
 

 
 

Commercial real estate
 
$
489,856

 
$
58,211

 
$
548,067

Commercial and industrial
 
392,891

 
8,697

 
401,588

Residential real estate
 
167,413

 
12,973

 
180,386

Consumer
 
1,009

 
47

 
1,056

Total
 
$
1,051,169

 
$
79,928

 
$
1,131,097

December 31, 2018
 
 

 
 

 
 

Commercial real estate
 
$
500,809

 
$
61,284

 
$
562,093

Commercial and industrial
 
375,130

 
8,325

 
383,455

Residential real estate
 
165,015

 
15,003

 
180,018

Consumer
 
944

 
55

 
999

Total
 
$
1,041,898

 
$
84,667

 
$
1,126,565

At March 31, 2019 and December 31, 2018, the Company had residential loans held for sale, which were originated with the intent to sell, totaling $14.0 million and $5.6 million, respectively. During the three months ended March 31, 2019 and 2018, the Company sold residential real estate loans with proceeds totaling $29.1 million and $14.0 million, respectively.
Information as to nonperforming assets was as follows:
(Dollars in thousands)
 
March 31, 2019
 
December 31, 2018
Nonaccrual loans:
 
 

 
 

Commercial real estate
 
$
2,694

 
$
5,927

Commercial and industrial
 
10,495

 
9,605

Residential real estate
 
3,456

 
2,915

Total nonperforming loans
 
16,645

 
18,447

Other real estate owned
 
373

 

Total nonperforming assets
 
$
17,018

 
$
18,447

Loans 90 days or more past due and still accruing
 
$
453

 
$
243

At March 31, 2019 and December 31, 2018, all of the loans 90 days or more past due and still accruing were PCI loans.

14

Table of Contents

Loan delinquency as of the dates presented below was as follows:
(Dollars in thousands)
 
Current
 
30 - 59 Days
Past Due
 
60 - 89 Days
Past Due
 
90+ Days
Past Due
 
Total
March 31, 2019
 
 

 
 

 
 

 
 

 
 

Commercial real estate
 
$
545,055

 
$
939

 
$

 
$
2,073

 
$
548,067

Commercial and industrial
 
400,002

 
72

 
240

 
1,274

 
401,588

Residential real estate
 
176,571

 
2,808

 

 
1,007

 
180,386

Consumer
 
1,056

 

 

 

 
1,056

Total
 
$
1,122,684

 
$
3,819

 
$
240

 
$
4,354

 
$
1,131,097

December 31, 2018
 
 

 
 

 
 

 
 

 
 

Commercial real estate
 
$
559,523

 
$
497

 
$

 
$
2,073

 
$
562,093

Commercial and industrial
 
381,424

 
664

 
82

 
1,285

 
383,455

Residential real estate
 
174,831

 
2,499

 
1,314

 
1,374

 
180,018

Consumer
 
998

 

 
1

 

 
999

Total
 
$
1,116,776

 
$
3,660

 
$
1,397

 
$
4,732

 
$
1,126,565

Impaired Loans:
Information as to impaired loans, excluding purchased credit impaired loans, was as follows:
(Dollars in thousands)
 
March 31, 2019
 
December 31, 2018
Nonaccrual loans
 
$
16,645

 
$
18,447

Performing troubled debt restructurings:
 
 

 
 
Commercial and industrial
 
562

 
568

Residential real estate
 
363

 
363

Total performing troubled debt restructurings
 
925

 
931

Total impaired loans, excluding purchase credit impaired loans
 
$
17,570

 
$
19,378

Troubled Debt Restructurings:
The Company assesses loan modifications to determine whether a modification constitutes a troubled debt restructuring ("TDR"). This applies to all loan modifications except for modifications to loans accounted for in pools under ASC 310-30, which are not subject to TDR accounting/classification. For loans excluded from ASC 310-30 accounting, a modification is considered a TDR when a borrower is experiencing financial difficulties and the Company grants a concession to the borrower. For loans accounted for individually under ASC 310-30, a modification is considered a TDR when a borrower is experiencing financial difficulties and the effective yield after the modification is less than the effective yield at the time the loan was acquired or less than the effective yield of any re-estimation of cash flows subsequent to acquisition in association with consideration of qualitative factors included within ASC 310-40. All TDRs are considered impaired loans. The nature and extent of impairment of TDRs, including those which have experienced a subsequent default, are considered in the determination of an appropriate level of allowance for loan losses.
As of March 31, 2019 and December 31, 2018, the Company had a recorded investment in troubled debt restructurings of $5.7 million and $5.9 million, respectively. The Company has allocated a specific reserve of $400 thousand for those loans at March 31, 2019 and a specific reserve of $258 thousand for those loans at December 31, 2018. The Company has not committed to lend additional amounts to borrowers whose loans have been modified. As of March 31, 2019, there were $4.8 million of nonperforming TDRs and $925 thousand of performing TDRs included in impaired loans. As of December 31, 2018, there were $5.0 million of nonperforming TDRs and $931 million of performing TDRs included in impaired loans.
All TDRs are considered impaired loans in the calendar year of their restructuring. A loan that has been modified can return to performing status if it satisfies a six-month performance requirement; however, it will continue to be reported as a TDR and considered impaired.

15

Table of Contents

The following table presents the recorded investment of loans modified as TDRs during the three months ended March 31, 2019 and 2018, by type of concession granted. In cases where more than one type of concession was granted, the loans were categorized based on the most significant concession.
 
 
Concession type
 
 
 
 
 
Financial effects of
modification
(Dollars in thousands)
 
Principal
deferral
 
Interest
rate
 
Forbearance
agreement
 
Total
number of
loans
 
Total
recorded
investment
 
Net
charge-offs
 
Provision
for loan
losses
For the three months ended March 31, 2019
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Commercial and industrial
 
$

 
$

 
$
335

 
1

 
$
335

 
$

 
$
158

Total
 
$

 
$

 
$
335

 
1

 
$
335

 
$

 
$
158

For the three months ended March 31, 2018
 
 

 
 

 
 

 
 

 
 

 
 

 
 

Commercial real estate
 
$
2,119

 
$

 
$

 
3

 
$
2,119

 
$

 
$

Commercial and industrial
 
930

 

 

 
1

 
930

 

 

Total
 
$
3,049

 
$

 
$

 
4

 
$
3,049

 
$

 
$

On an ongoing basis, the Company monitors the performance of TDRs to their modified terms. The following tables present the number of loans modified as TDRs during the twelve months ending March 31, 2019 and 2018 for which there was a subsequent payment default, including the recorded investment as of each period end. A payment on a TDR is considered to be in default once it is greater than 30 days past due.
 
 
For the three months ended March 31, 2019
(Dollars in thousands)
 
Total number of
loans
 
Total recorded
investment
 
Provision for loan losses following a
subsequent default
Residential real estate
 
1

 
$
115

 
$
5

Total
 
1

 
$
115

 
$
5

 
 
For the three months ended March 31, 2018
(Dollars in thousands)
 
Total number of
loans
 
Total recorded
investment
 
Provision for loan losses following a
subsequent default
Commercial real estate
 
2

 
$
1,499

 
$

Total
 
2

 
$
1,499

 
$

Credit Quality Indicators:
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. This analysis includes commercial and industrial and commercial real estate loans and is performed on an annual basis. The Company uses the following definitions for risk ratings:
Pass.    Loans classified as pass are higher quality loans that do not fit any of the other categories described below. This category includes loans risk rated with the following ratings: cash/stock secured, excellent credit risk, superior credit risk, good credit risk, satisfactory credit risk, and marginal credit risk.
Special Mention.    Loans classified as special mention 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 Company's credit position at some future date.
Substandard.    Loans classified 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 classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Company will sustain some loss if the deficiencies are not corrected.

16

Table of Contents

Doubtful.    Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.
Based on the most recent analysis performed, the risk category of loans by class of loans was as follows:
(Dollars in thousands)
 
Pass
 
Special
Mention
 
Substandard
 
Doubtful
 
Total
March 31, 2019
 
 

 
 

 
 

 
 

 
 

Commercial real estate
 
$
537,666

 
$
7,625

 
$
2,733

 
$
43

 
$
548,067

Commercial and industrial
 
386,625

 
1,987

 
12,936

 
40

 
401,588

Total
 
$
924,291

 
$
9,612

 
$
15,669

 
$
83

 
$
949,655

December 31, 2018
 
 

 
 

 
 

 
 

 
 

Commercial real estate
 
$
545,843

 
$
10,240

 
$
5,966

 
$
44

 
$
562,093

Commercial and industrial
 
368,189

 
2,841

 
12,425

 

 
383,455

Total
 
$
914,032

 
$
13,081

 
$
18,391

 
$
44

 
$
945,548

For residential real estate loans and consumer loans, the Company evaluates credit quality based on the aging status of the loan and by payment activity. Residential real estate loans and consumer loans are considered nonperforming if they are 90 days or more past due. Consumer loan types are continuously monitored for changes in delinquency trends and other asset quality indicators.
The following presents residential real estate and consumer loans by credit quality:
(Dollars in thousands)
 
Performing
 
Nonperforming
 
Total
March 31, 2019
 
 

 
 

 
 

Residential real estate
 
$
176,930

 
$
3,456

 
$
180,386

Consumer
 
1,056

 

 
1,056

Total
 
$
177,986

 
$
3,456

 
$
181,442

December 31, 2018
 
 

 
 

 
 

Residential real estate
 
$
177,103

 
$
2,915

 
$
180,018

Consumer
 
999

 

 
999

Total
 
$
178,102

 
$
2,915

 
$
181,017

Purchased Credit Impaired Loans:
As part of the Company's previous four acquisitions, the Company acquired purchase credit impaired ("PCI") loans for which there was evidence of credit quality deterioration since origination, and we determined that it was probable that the Company would be unable to collect all contractually required principal and interest payments. The total balance of all PCI loans from these acquisitions was as follows:
(Dollars in thousand)
 
Unpaid Principal Balance
 
Recorded Investment
March 31, 2019
 
 

 
 

Commercial real estate
 
$
7,081

 
$
4,235

Commercial and industrial
 
321

 
175

Residential real estate
 
4,746

 
3,321

Total PCI loans
 
$
12,148

 
$
7,731

December 31, 2018
 
 
 
 
Commercial real estate
 
$
7,406

 
$
4,344

Commercial and industrial
 
177

 
122

Residential real estate
 
4,974

 
3,409

Total PCI loans
 
$
12,557

 
$
7,875


17

Table of Contents

The following table reflects the activity in the accretable yield of PCI loans from past acquisitions, which includes total expected cash flows, including interest, in excess of the recorded investment.
 
 
For the three months ended March 31,
(Dollars in thousands)
 
2019
 
2018
Accretable yield at beginning of period
 
$
10,947

 
$
14,452

Accretion of income
 
(584
)
 
(918
)
Adjustments to accretable yield
 

 

Accretable yield at end of period
 
$
10,363

 
$
13,534

"Accretion of income" represents the income earned on these loans for the year. "Adjustments to accretable yield" represents the net amount of accretable yield added or removed as a result of the semi-annual re-estimation of expected cash flows.
NOTE 4—ALLOWANCE
An allowance for loan losses is maintained to absorb probable incurred losses from the loan portfolio. The allowance for loan losses is based on management's continuing evaluation of the risk characteristics and credit quality of the loan portfolio, assessment of current economic conditions, diversification and size of the portfolio, adequacy of collateral, past and anticipated loss experience, and the amount of nonperforming loans.
The Company established an allowance for loan losses associated with PCI loans (accounted for under ASC 310-30) based on credit deterioration subsequent to the acquisition date. As of March 31, 2019, the Company had six PCI loan pools and 12 non-pooled PCI loans. The Company re-estimates cash flows expected to be collected for PCI loans on a semi-annual basis, with any decline in expected cash flows recorded as provision for loan losses on a discounted basis during the period. For any increases in cash flows expected to be collected, the Company adjusts the amount of accretable yield to be recognized on a prospective basis over the loan's remaining life.
For loans not accounted for under ASC 310-30, the Company individually evaluates certain impaired loans on a quarterly basis and establishes specific allowances for such loans, if required. A loan is considered impaired when it is probable that interest or principal payments will not be made in accordance with the contractual terms of the loan agreement. Consistent with this definition, all loans for which the accrual of interest has been discontinued (nonaccrual loans) and all TDRs are considered impaired. The Company individually evaluates nonaccrual loans with book balances of $250 thousand or more, all loans whose terms have been modified in a TDR, and certain other loans. The threshold for individual evaluation is revised on an infrequent basis, generally when economic circumstances change significantly. Specific allowances for impaired loans are estimated using one of several methods, including the estimated fair value of underlying collateral, observable market value of similar debt or discounted expected future cash flows. All other impaired loans are individually evaluated by identifying its risk characteristics and applying the standard reserve factor for the corresponding loan pool.
Loans which do not meet the criteria to be individually evaluated are evaluated in pools of loans with similar risk characteristics. Business loans are assigned to pools based on the Company's internal risk rating system. Internal risk ratings are assigned to each business loan at the time of approval and are subjected to subsequent periodic reviews by the Company's senior management, generally at least annually or more frequently upon the occurrence of a circumstance that affects the credit risk of the loan. For business loans not individually evaluated, losses inherent to the pool are estimated by applying standard reserve factors to outstanding principal balances.
The allowance for loans not individually evaluated is determined by applying estimated loss rates to various pools of loans within the portfolios with similar risk characteristics. Estimated loss rates for all pools are updated quarterly, incorporating quantitative and qualitative factors such as recent charge-off experience, current economic conditions and trends, changes in collateral values of properties securing loans (using index-based estimates), and trends with respect to past due and nonaccrual amounts.
Loans acquired in business combinations are initially recorded at fair value, which includes an estimate of credit losses expected to be realized over the remaining lives of the loans, and therefore no corresponding allowance for loan losses is recorded for these loans at acquisition. Methods utilized to estimate any subsequently required allowance for loan losses for acquired loans not deemed credit-impaired at acquisition are similar to originated loans; however, the estimate of loss is based on the unpaid principal balance less any remaining purchase discount.


18

Table of Contents

Loans individually evaluated for impairment are presented below.
(Dollars in thousands)
 
Recorded investment with
no related
allowance
 
Recorded investment
with related
allowance (1)
 
Total
recorded
investment
 
Contractual
principal
balance
 
Related
allowance (1)
March 31, 2019
 
 

 
 

 
 

 
 

 
 

Individually evaluated impaired loans:
 
 

 
 

 
 

 
 

 
 

Commercial real estate
 
$
2,694

 
$

 
$
2,694

 
$
2,765

 
$

Commercial and industrial
 
6,518

 
4,221

 
10,739

 
11,110

 
735

Residential real estate
 
2,259

 
190

 
2,449

 
2,584

 
16

Total
 
$
11,471

 
$
4,411

 
$
15,882

 
$
16,459

 
$
751

December 31, 2018
 
 

 
 

 
 

 
 

 
 

Individually evaluated impaired loans:
 
 

 
 

 
 

 
 

 
 

Commercial real estate
 
$
5,898

 
$
3,991

 
$
9,889

 
$
13,076

 
$
815

Commercial and industrial
 
5,892

 
4,059

 
9,951

 
10,411

 
526

Residential real estate
 
1,666

 
3,255

 
4,921

 
6,604

 
101

Total
 
$
13,456

 
$
11,305

 
$
24,761

 
$
30,091

 
$
1,442

(1) December 31, 2018 individually evaluated impaired loans included $7.2 million of PCI loans with a related allowance of $920 thousand. March 31, 2019 individually evaluated impaired loans do not include PCI loans with a related allowance.  
(Dollars in thousands)
 
Average
Recorded
Investment
 
Interest
Income
Recognized
 
Cash Basis
Interest
Recognized
For the three months ended March 31, 2019
 
 

 
 

 
 

Individually evaluated impaired loans (1):
 
 

 
 

 
 

Commercial real estate
 
$
5,467

 
$

 
$
173

Commercial and industrial
 
10,868

 
9

 
224

Residential real estate
 
2,746

 
7

 

Total
 
$
19,081

 
$
16

 
$
397

For the three months ended March 31, 2018
 
 

 
 

 
 

Individually evaluated impaired loans (1):
 
 

 
 

 
 

Commercial real estate
 
$
9,014

 
$
412

 
$
12

Commercial and industrial
 
10,144

 
28

 
7

Residential real estate
 
5,230

 
87

 

Total
 
$
24,388

 
$
527

 
$
19

(1) March 31, 2018 individually evaluated impaired loans included PCI, whereas March 31, 2019 individually evaluated impaired loans are excluding PCI loans.









19

Table of Contents


Activity in the allowance for loan losses and the allocation of the allowance for loans was as follows:
(Dollars in thousands)
 
Commercial
Real Estate
 
Commercial
and Industrial
 
Residential
Real Estate
 
Consumer
 
Total
For the three months ended March 31, 2019
 
 

 
 

 
 

 
 

 
 

Allowance for loan losses:
 
 

 
 

 
 

 
 

 
 

Beginning balance
 
$
5,227

 
$
5,174

 
$
1,164

 
$
1

 
$
11,566

Provision (benefit) for loan losses
 
(46
)
 
477

 
(15
)
 
6

 
422

Gross chargeoffs
 

 
(95
)
 

 
(6
)
 
(101
)
Recoveries
 

 
50

 
21

 
2

 
73

Net (chargeoffs) recoveries
 

 
(45
)
 
21

 
(4
)
 
(28
)
Ending allowance for loan losses
 
$
5,181

 
$
5,606

 
$
1,170

 
$
3

 
$
11,960

For the three months ended March 31, 2018
 
 
 
 
 
 
 
 
 
 
Allowance for loan losses:
 
 
 
 
 
 
 
 
 
 
Beginning balance
 
$
4,852

 
$
5,903

 
$
950

 
$
8

 
$
11,713

Provision for loan losses
 
233

 
268

 
49

 
4

 
554

Gross chargeoffs
 
(11
)
 
(750
)
 
(50
)
 
(7
)
 
(818
)
Recoveries
 
2

 
37

 
18

 

 
57

Net chargeoffs
 
(9
)
 
(713
)
 
(32
)
 
(7
)
 
(761
)
Ending allowance for loan losses
 
$
5,076

 
$
5,458

 
$
967

 
$
5

 
$
11,506


(Dollars in thousands)
 
Commercial
Real Estate
 
Commercial
and Industrial
 
Residential
Real Estate
 
Consumer
 
Total
March 31, 2019
 
 

 
 

 
 

 
 

 
 

Allowance for loan losses:
 
 

 
 

 
 

 
 

 
 

Individually evaluated for impairment