PORTFOLIO LOANS NOT COVERED BY LOSS SHARE ("Non-covered")

Below is a summary of Non-covered loans by category at September 30, 2013, and December 31, 2012:



(in thousands)	September 30, 2013		December 31, 2012
Real Estate Loans:
Construction and Land Development	$	114,608	$	160,911
Commercial real estate - Investor Owned	451,102		486,467
Commercial real estate - Owner Occupied	350,653		333,242
Residential real estate	150,320		145,558
Total real estate loans	$	1,066,683	$	1,126,178
Commercial and industrial	1,007,398		962,884
Consumer & other	35,862		16,966
Portfolio Loans	$	2,109,943	$	2,106,028
Unearned loan costs, net	882		11
Portfolio loans, including unearned loan costs	$	2,110,825	$	2,106,039

The Company grants commercial, residential, and consumer loans primarily in the St. Louis, Kansas City and Phoenix metropolitan areas. The Company has a diversified loan portfolio, with no particular concentration of credit in any one economic sector; however, a substantial portion of the portfolio is concentrated in and secured by real estate. The ability of the Company’s borrowers to honor their contractual obligations is partially dependent upon the local economy and its effect on the real estate market.

A summary of the year-to-date activity in the allowance for loan losses and the recorded investment in Non-covered loans by portfolio class and category based on impairment method through September 30, 2013, and at December 31, 2012, is as follows:



(in thousands)	Commercial & Industrial			Commercial Real Estate Owner Occupied			Commercial Real Estate Investor Owned			Construction and Land Development			Residential Real Estate			Consumer & Other			Qualitative Adjustment			Total
Allowance for Loan Losses:
Balance at December 31, 2012	$	10,064		$	4,192		$	10,403		$	5,239		$	2,026		$	31		$	2,375		$	34,330
Provision charged to expense	120			179			953			(127		)	675			46			7			1,853
Losses charged off	(206		)	(312		)	(3,052		)	(190		)	(986		)	(34		)	—			(4,780		)
Recoveries	298			5			336			14			396			—			—			1,049
Balance at March 31, 2013	$	10,276		$	4,064		$	8,640		$	4,936		$	2,111		$	43		$	2,382		$	32,452
Provision charged to expense	(320		)	(139		)	(2,273		)	(998		)	(299		)	1			(267		)	(4,295		)
Losses charged off	(400		)	(32		)	(176		)	(144		)	—			—			—			(752		)
Recoveries	118			17			24			21			34			—			—			214
Balance at June 30, 2013	$	9,674		$	3,910		$	6,215		$	3,815		$	1,846		$	44		$	2,115		$	27,619
Provision charged to expense	117			(233		)	(276		)	(1,291		)	(612		)	19			1,624			(652		)
Losses charged off	(1,817		)	(56		)	(504		)	(85		)	(52		)	—			—			(2,514		)
Recoveries	906			14			360			385			481			—			—			2,146
Balance at September 30, 2013	$	8,880		$	3,635		$	5,795		$	2,824		$	1,663		$	63		$	3,739		$	26,599



(in thousands)	Commercial & Industrial		Commercial Real Estate Owner Occupied		Commercial Real Estate Investor Owned		Construction and Land Development		Residential Real Estate		Consumer & Other		Qualitative Adjustment		Total
Balance September 30, 2013
Allowance for Loan Losses - Ending Balance:
Individually evaluated for impairment	$	2,610	$	—	$	973	$	712	$	11	$	—	$	—	$	4,306
Collectively evaluated for impairment	6,270		3,635		4,822		2,112		1,652		63		3,739		22,293
Total	$	8,880	$	3,635	$	5,795	$	2,824	$	1,663	$	63	$	3,739	$	26,599
Loans - Ending Balance:
Individually evaluated for impairment	$	5,974	$	191	$	10,830	$	6,499	$	675	$	—	$	—	$	24,169
Collectively evaluated for impairment	1,001,424		350,462		440,272		108,109		149,645		36,744		—		2,086,656
Total	$	1,007,398	$	350,653	$	451,102	$	114,608	$	150,320	$	36,744	$	—	$	2,110,825

Balance at December 31, 2012
Allowance for Loan Losses - Ending Balance:
Individually evaluated for impairment	$	3,446	$	339	$	3,400	$	732	$	259	$	—	$	—	$	8,176
Collectively evaluated for impairment	6,618		3,853		7,003		4,507		1,767		31		2,375		26,154
Total	$	10,064	$	4,192	$	10,403	$	5,239	$	2,026	$	31	$	2,375	$	34,330
Loans - Ending Balance:
Individually evaluated for impairment	$	8,934	$	5,772	$	16,762	$	4,695	$	2,564	$	—	$	—	$	38,727
Collectively evaluated for impairment	953,950		327,470		469,705		156,216		142,994		16,977		—		2,067,312
Total	$	962,884	$	333,242	$	486,467	$	160,911	$	145,558	$	16,977	$	—	$	2,106,039

A summary of Non-covered loans individually evaluated for impairment by category at September 30, 2013, and December 31, 2012, is as follows:



	September 30, 2013
(in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
Commercial & Industrial	$	6,333	$	1,441	$	4,642	$	6,083	$	2,610	$	7,379
Real Estate:
Commercial - Owner Occupied	191		195		—		195		—		2,381
Commercial - Investor Owned	11,969		4,960		6,158		11,118		973		12,346
Construction and Land Development	7,206		4,278		2,389		6,667		712		5,165
Residential	700		460		227		687		11		2,361
Consumer & Other	—		—		—		—		—		—
Total	$	26,399	$	11,334	$	13,416	$	24,750	$	4,306	$	29,632



	December 31, 2012
(in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
Commercial & Industrial	$	9,005	$	96	$	8,838	$	8,934	$	3,446	$	6,379
Real Estate:
Commercial - Owner Occupied	6,726		2,178		3,594		5,772		339		7,985
Commercial - Investor Owned	19,864		185		16,577		16,762		3,400		10,500
Construction and Land Development	6,491		1,560		3,135		4,695		732		10,259
Residential	3,132		1,626		938		2,564		259		4,368
Consumer & Other	—		—		—		—		—		—
Total	$	45,218	$	5,645	$	33,082	$	38,727	$	8,176	$	39,491

There were no loans over 90 days past due and still accruing interest at September 30, 2013. If interest on impaired loans would have been accrued based upon the original contractual terms, such income would have been $410,000 and $1.5 million for the three and nine months ended September 30, 2013, respectively. The cash amount collected and recognized as interest income on impaired loans was $4,000 and $28,000 for the three and nine months ended September 30, 2013, respectively. There was no interest income recognized on impaired loans continuing to accrue interest for the three and nine months ended September 30, 2013, respectively. At September 30, 2013, there were $1.7 million of unadvanced commitments on impaired loans. Other liabilities include approximately $241,000 for estimated losses attributable to the unadvanced commitments on impaired loans.

The recorded investment in non-accrual, restructured, and 90 days past due and still accruing interest Non-covered loans by category at September 30, 2013, and December 31, 2012, is as follows:



	September 30, 2013
(in thousands)	Non-accrual		Restructured		Loans over 90 days past due and still accruing interest		Total
Commercial & Industrial	$	6,083	$	—	$	—	$	6,083
Real Estate:
Commercial - Investor Owned	11,118		—		—		11,118
Commercial - Owner Occupied	195		—		—		195
Construction and Land Development	6,667		—		—		6,667
Residential	687		—		—		687
Consumer & Other	—		—		—		—
Total	$	24,750	$	—	$	—	$	24,750



	December 31, 2012
(in thousands)	Non-accrual		Restructured		Loans over 90 days past due and still accruing interest		Total
Commercial & Industrial	$	8,929	$	5	$	—	$	8,934
Real Estate:
Commercial - Investor Owned	16,762		—		—		16,762
Commercial - Owner Occupied	5,772		—		—		5,772
Construction and Land Development	3,260		1,435		—		4,695
Residential	2,564		—		—		2,564
Consumer & Other	—		—		—		—
Total	$	37,287	$	1,440	$	—	$	38,727

There were no Non-covered loans that have been restructured and subsequently defaulted in the nine months ended September 30, 2013.

The aging of the recorded investment in past due Non-covered loans by portfolio class and category at September 30, 2013, and December 31, 2012, is shown below.



	September 30, 2013
(in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Commercial & Industrial	$	445	$	1,337	$	1,782	$	1,005,616	$	1,007,398
Real Estate:
Commercial - Owner Occupied	442		190		632		350,021		350,653
Commercial - Investor Owned	1,025		6,842		7,867		443,235		451,102
Construction and Land Development	—		2,210		2,210		112,398		114,608
Residential	—		320		320		150,000		150,320
Consumer & Other	3		—		3		36,741		36,744
Total	$	1,915	$	10,899	$	12,814	$	2,098,011	$	2,110,825



	December 31, 2012
(in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Commercial & Industrial	$	14	$	—	$	14	$	962,870	$	962,884
Real Estate:
Commercial - Owner Occupied	1,352		2,081		3,433		329,809		333,242
Commercial - Investor Owned	—		4,045		4,045		482,422		486,467
Construction and Land Development	1,201		1,559		2,760		158,151		160,911
Residential	616		593		1,209		144,349		145,558
Consumer & Other	34		—		34		16,943		16,977
Total	$	3,217	$	8,278	$	11,495	$	2,094,544	$	2,106,039

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, and current economic factors, among other factors. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:


•	Grades 1, 2, and 3- These grades include loans to borrowers with a continuous record of strong earnings, sound balance sheet condition and capitalization, ample liquidity with solid cash flow, and whose management team has experience and depth within their industry.


•	Grade 4- This grade includes loans to borrowers with positive trends in profitability, satisfactory capitalization and balance sheet condition, and sufficient liquidity and cash flow.


•	Grade 5- This grade includes loans to borrowers that may display fluctuating trends in sales, profitability, capitalization, liquidity, and cash flow.


•	Grade 6- This grade includes loans to borrowers where an adverse change or perceived weakness has occurred, but may be correctable in the near future. Alternatively, this rating category may also include circumstances where the borrower is starting to reverse a negative trend or condition, or has recently been upgraded from a 7, 8, or 9 rating.


•	Grade 7 - Watch credits are borrowers that have experienced financial setback of a nature that is not determined to be severe or influence ‘ongoing concern’ expectations. Borrowers within this category are expected to turnaround within a 12-month period of time. Although possible, no loss is anticipated, due to strong collateral and/or guarantor support.


•	Grade 8- Substandard credits will include those borrowers that are characterized by significant losses and sustained downward trends in balance sheet condition, liquidity, and cash flow. Repayment reliance may have shifted to secondary sources. Collateral exposure may exist and additional reserves may be warranted.


•	Grade 9- Doubtful credits include borrowers that may show deteriorating trends that are unlikely to be corrected. Collateral values may appear insufficient for full recovery, therefore requiring a partial charge-off, or debt renegotiation with the borrower. The borrower may have declared bankruptcy or bankruptcy is likely in the near term. All doubtful rated credits will be on non-accrual.

The recorded investment by risk category of the Non-covered loans by portfolio class and category at September 30, 2013, which is based upon the most recent analysis performed, and December 31, 2012 is as follows:



	September 30, 2013
(in thousands)	Pass (1-6)		Watch (7)		Substandard (8)		Doubtful (9)		Total
Commercial & Industrial	$	948,844	$	35,321	$	22,858	$	375	$	1,007,398
Real Estate:
Commercial - Owner Occupied	315,715		20,862		14,076		—		350,653
Commercial - Investor Owned	381,553		43,654		25,895		—		451,102
Construction and Land Development	81,799		17,385		14,951		473		114,608
Residential	135,455		7,282		7,583		—		150,320
Consumer & Other	36,740		4		—		—		36,744
Total	$	1,900,106	$	124,508	$	85,363	$	848	$	2,110,825



	December 31, 2012
(in thousands)	Pass (1-6)		Watch (7)		Substandard (8)		Doubtful (9)		Total
Commercial & Industrial	$	912,766	$	29,524	$	18,546	$	2,048	$	962,884
Real Estate:
Commercial - Owner Occupied	290,850		26,336		15,898		158		333,242
Commercial - Investor Owned	389,886		64,707		31,874		—		486,467
Construction and Land Development	124,857		9,543		26,012		499		160,911
Residential	130,159		5,921		9,478		—		145,558
Consumer & Other	16,972		5		—		—		16,977
Total	$	1,865,490	$	136,036	$	101,808	$	2,705	$	2,106,039