PORTFOLIO LOANS

Below is a summary of Portfolio loans by category at June 30, 2015 and December 31, 2014:



(in thousands)	June 30, 2015		December 31, 2014
Commercial and industrial	$	1,335,008	$	1,270,259
Real estate loans:
Commercial - investor owned	418,111		413,026
Commercial - owner occupied	371,030		357,503
Construction and land development	150,740		144,773
Residential	185,587		185,252
Total real estate loans	1,125,468		1,100,554
Consumer and other	81,051		62,208
Portfolio loans	2,541,527		2,433,021
Unearned loan costs, net	1,028		895
Portfolio loans, including unearned loan costs	$	2,542,555	$	2,433,916

A summary of the year-to-date activity in the allowance for loan losses and the recorded investment in Portfolio loans by class and category based on impairment method through June 30, 2015, and at December 31, 2014, is as follows:



(in thousands)	Commercial and industrial			CRE - investor owned			CRE - owner occupied			Construction and land development			Residential real estate			Consumer and other			Total
Allowance for loan losses:
Balance at December 31, 2014	$	17,004		$	4,598		$	3,625		$	1,720		$	2,830		$	408		$	30,185
Provision charged to expense	823			(12		)	(175		)	914			74			(44		)	1,580
Losses charged off	(1,484		)	—			—			—			(1,073		)	(11		)	(2,568		)
Recoveries	769			29			127			60			26			80			1,091
Balance at March 31, 2015	$	17,112		$	4,615		$	3,577		$	2,694		$	1,857		$	433		$	30,288
Provision charged to expense	2,927			(519		)	(347		)	(91		)	100			80			2,150
Losses charged off	(1,578		)	(664		)	—			(350		)	—			(4		)	(2,596		)
Recoveries	420			13			1,287			115			87			1			1,923
Balance at June 30, 2015	$	18,881		$	3,445		$	4,517		$	2,368		$	2,044		$	510		$	31,765



(in thousands)	Commercial and industrial		CRE - investor owned		CRE - owner occupied		Construction and land development		Residential real estate		Consumer and other		Total
Balance June 30, 2015
Allowance for loan losses - Ending balance:
Individually evaluated for impairment	$	1,933	$	—	$	287	$	958	$	—	$	—	$	3,178
Collectively evaluated for impairment	16,948		3,445		4,230		1,410		2,044		510		28,587
Total	$	18,881	$	3,445	$	4,517	$	2,368	$	2,044	$	510	$	31,765
Loans - Ending balance:
Individually evaluated for impairment	$	5,998	$	2,261	$	3,395	$	5,968	$	2,507	$	—	$	20,129
Collectively evaluated for impairment	1,329,010		415,850		367,635		144,772		183,080		82,079		2,522,426
Total	$	1,335,008	$	418,111	$	371,030	$	150,740	$	185,587	$	82,079	$	2,542,555

Balance December 31, 2014
Allowance for Loan Losses - Ending Balance:
Individually evaluated for impairment	$	704	$	—	$	286	$	352	$	1,052	$	—	$	2,394
Collectively evaluated for impairment	16,300		4,598		3,339		1,368		1,778		408		27,791
Total	$	17,004	$	4,598	$	3,625	$	1,720	$	2,830	$	408	$	30,185
Loans - Ending balance:
Individually evaluated for impairment	$	5,998	$	5,036	$	3,384	$	6,866	$	3,082	$	—	$	24,366
Collectively evaluated for impairment	1,264,261		407,990		354,119		137,907		182,170		63,103		2,409,550
Total	$	1,270,259	$	413,026	$	357,503	$	144,773	$	185,252	$	63,103	$	2,433,916

A summary of Portfolio loans individually evaluated for impairment by category at June 30, 2015 and December 31, 2014, is as follows:



	June 30, 2015
(in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
Commercial and industrial	$	7,746	$	452	$	5,638	$	6,090	$	1,933	$	6,728
Real estate loans:
Commercial - investor owned	2,350		1,705		—		1,705		—		863
Commercial - owner occupied	1,433		615		747		1,362		287		1,213
Construction and land development	7,223		3,039		3,499		6,538		958		6,449
Residential	3,558		2,576		—		2,576		—		2,773
Consumer and other	—		—		—		—		—		—
Total	$	22,310	$	8,387	$	9,884	$	18,271	$	3,178	$	18,026



	December 31, 2014
(in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
Commercial and industrial	$	8,042	$	2,609	$	3,464	$	6,073	$	704	$	4,136
Real estate loans:
Commercial - investor owned	5,036		—		5,187		5,187		—		4,375
Commercial - owner occupied	1,376		770		519		1,289		286		1,281
Construction and land development	7,961		419		6,929		7,348		352		7,280
Residential	3,082		2,943		150		3,093		1,052		954
Consumer and other	—		—		—		—		—		581
Total	$	25,497	$	6,741	$	16,249	$	22,990	$	2,394	$	18,607

The following table presents details for past due and impaired loans:



	Three months ended June 30,				Six months ended June 30,
(in thousands)	2015		2014		2015		2014
Total interest income that would have been recognized under original terms	$	229	$	362	$	544	$	682
Total cash received and recognized as interest income on non-accrual loans	98		19		125		28
Total interest income recognized on impaired loans	14		10		27		16

There were no loans over 90 days past due and still accruing interest at June 30, 2015 or December 31, 2014. At June 30, 2015, there were $1.6 million unadvanced commitments on impaired loans. Other liabilities include approximately $0.2 million for estimated losses attributable to the unadvanced commitments.

The recorded investment in impaired Portfolio loans by category at June 30, 2015 and December 31, 2014, is as follows:



	June 30, 2015
(in thousands)	Non-accrual		Restructured		Loans over 90 days past due and still accruing interest		Total
Commercial and industrial	$	6,090	$	—	$	—	$	6,090
Real estate loans:
Commercial - investor owned	1,705		—		—		1,705
Commercial - owner occupied	615		747		—		1,362
Construction and land development	6,538		—		—		6,538
Residential	2,576		—		—		2,576
Consumer and other	—		—		—		—
Total	$	17,524	$	747	$	—	$	18,271



	December 31, 2014
(in thousands)	Non-accrual		Restructured		Loans over 90 days past due and still accruing interest		Total
Commercial and industrial	$	6,073	$	—	$	—	$	6,073
Real estate loans:
Commercial - investor owned	4,597		590		—		5,187
Commercial - owner occupied	519		770		—		1,289
Construction and land development	7,348		—		—		7,348
Residential	3,093		—		—		3,093
Consumer and other	—		—		—		—
Total	$	21,630	$	1,360	$	—	$	22,990

The recorded investment by category for the Portfolio loans that have been restructured during the three and six months ended June 30, 2015 and 2014, is as follows:



	Three months ended June 30, 2015					Three months ended June 30, 2014
(in thousands, except for number of loans)	Number of Loans	Pre-Modification Outstanding Recorded Balance		Post-Modification Outstanding Recorded Balance		Number of Loans	Pre-Modification Outstanding Recorded Balance		Post-Modification Outstanding Recorded Balance
Commercial and industrial	—	$	—	$	—	—	$	—	$	—
Real estate loans:
Commercial - investor owned	—	—		—		1	603		603
Commercial - owner occupied	—	—		—		—	—		—
Construction and land development	—	—		—		—	—		—
Residential	—	—		—		1	125		125
Consumer and other	—	—		—		—	—		—
Total	—	$	—	$	—	2	$	728	$	728



	Six months ended June 30, 2015					Six months ended June 30, 2014
(in thousands, except for number of loans)	Number of Loans	Pre-Modification Outstanding Recorded Balance		Post-Modification Outstanding Recorded Balance		Number of Loans	Pre-Modification Outstanding Recorded Balance		Post-Modification Outstanding Recorded Balance
Commercial and industrial	—	$	—	$	—	—	$	—	$	—
Real estate loans:
Commercial - investor owned	—	—		—		1	603		603
Commercial - owner occupied	—	—		—		2	1,292		1,042
Construction and land development	—	—		—		—	—		—
Residential	—	—		—		1	125		125
Consumer and other	—	—		—		—	—		—
Total	—	$	—	$	—	4	$	2,020	$	1,770

The restructured Portfolio loans primarily resulted from interest rate concessions and changing the terms of the loans. As of June 30, 2015, the Company allocated $0.3 million of specific reserves to the loans that have been restructured.

There were no Portfolio loans that were restructured and subsequently defaulted during the six months ended June 30, 2015 or 2014.

The aging of the recorded investment in past due Portfolio loans by portfolio class and category at June 30, 2015 and December 31, 2014 is shown below.



	June 30, 2015
(in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Commercial and industrial	$	1,643	$	2,864	$	4,507	$	1,330,501	$	1,335,008
Real estate loans:
Commercial - investor owned	1,685		—		1,685		416,426		418,111
Commercial - owner occupied	—		594		594		370,436		371,030
Construction and land development	—		3,226		3,226		147,514		150,740
Residential	133		2,506		2,639		182,948		185,587
Consumer and other	4		—		4		82,075		82,079
Total	$	3,465	$	9,190	$	12,655	$	2,529,900	$	2,542,555



	December 31, 2014
(in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Commercial and industrial	$	3,059	$	232	$	3,291	$	1,266,968	$	1,270,259
Real estate loans:
Commercial - investor owned	261		4,450		4,711		408,315		413,026
Commercial - owner occupied	766		496		1,262		356,241		357,503
Construction and land development	702		2,524		3,226		141,547		144,773
Residential	168		—		168		185,084		185,252
Consumer and other	8		—		8		63,095		63,103
Total	$	4,964	$	7,702	$	12,666	$	2,421,250	$	2,433,916

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 – Includes 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 – Includes loans to borrowers with positive trends in profitability, satisfactory capitalization and balance sheet condition, and sufficient liquidity and cash flow.


•	Grade 5 – Includes loans to borrowers that may display fluctuating trends in sales, profitability, capitalization, liquidity, and cash flow.


•	Grade 6 – 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. Although possible, no loss is anticipated, due to strong collateral and/or guarantor support.


•	Grade 8 – Substandard credits will include those borrowers 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 Portfolio loans by portfolio class and category at June 30, 2015, which is based upon the most recent analysis performed, and December 31, 2014 is as follows:



	June 30, 2015
(in thousands)	Pass (1-6)		Watch (7)		Substandard (8)		Doubtful (9)		Total
Commercial and industrial	$	1,223,114	$	81,660	$	30,234	$	—	$	1,335,008
Real estate loans:
Commercial - investor owned	383,373		23,703		11,035		—		418,111
Commercial - owner occupied	349,481		17,062		4,487		—		371,030
Construction and land development	130,879		12,300		6,859		702		150,740
Residential	168,995		10,610		5,982		—		185,587
Consumer and other	81,545		44		490		—		82,079
Total	$	2,337,387	$	145,379	$	59,087	$	702	$	2,542,555



	December 31, 2014
(in thousands)	Pass (1-6)		Watch (7)		Substandard (8)		Doubtful (9)		Total
Commercial and industrial	$	1,167,751	$	62,315	$	40,193	$	—	$	1,270,259
Real estate loans:
Commercial - investor owned	372,818		24,088		16,120		—		413,026
Commercial - owner occupied	334,347		18,025		5,131		—		357,503
Construction and land development	123,260		12,993		8,520		—		144,773
Residential	168,543		11,012		5,697		—		185,252
Consumer and other	62,711		51		341		—		63,103
Total	$	2,229,430	$	128,484	$	76,002	$	—	$	2,433,916