PORTFOLIO LOANS

Below is a summary of Portfolio loans by category at June 30, 2016 and December 31, 2015:



(in thousands)	June 30, 2016			December 31, 2015
Commercial and industrial	$	1,540,457		$	1,484,327
Real estate:
Commercial - investor owned	466,713			428,064
Commercial - owner occupied	332,639			342,959
Construction and land development	171,778			161,061
Residential	211,155			196,498
Total real estate loans	1,182,285			1,128,582
Consumer and other	161,417			137,537
Portfolio loans	2,884,159			2,750,446
Unearned loan fees, net	(250		)	291
Portfolio loans, including unearned loan fees	$	2,883,909		$	2,750,737

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, 2016, and at December 31, 2015, 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, 2015	$	22,056		$	3,484		$	2,969		$	1,704		$	1,796		$	1,432		$	33,441
Provision (provision reversal) charged to expense	1,120			(116		)	80			(65		)	11			(197		)	833
Losses charged off	(68		)	—			—			—			—			(5		)	(73		)
Recoveries	53			7			68			6			34			4			172
Balance at March 31, 2016	$	23,161		$	3,375		$	3,117		$	1,645		$	1,841		$	1,234		$	34,373
Provision (provision reversal) charged to expense	302			(27		)	(541		)	(434		)	(80		)	1,496			716
Losses charged off	(157		)	—			—			—			—			(6		)	(163		)
Recoveries	502			8			15			8			36			3			572
Balance at June 30, 2016	$	23,808		$	3,356		$	2,591		$	1,219		$	1,797		$	2,727		$	35,498



(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, 2016
Allowance for loan losses - Ending balance:
Individually evaluated for impairment	$	2,716	$	—	$	—	$	31	$	3	$	1,927	$	4,677
Collectively evaluated for impairment	21,092		3,356		2,591		1,188		1,794		800		30,821
Total	$	23,808	$	3,356	$	2,591	$	1,219	$	1,797	$	2,727	$	35,498
Loans - Ending balance:
Individually evaluated for impairment	$	5,019	$	248	$	1,704	$	2,576	$	670	$	4,571	$	14,788
Collectively evaluated for impairment	1,535,438		466,465		330,935		169,202		210,485		156,596		2,869,121
Total	$	1,540,457	$	466,713	$	332,639	$	171,778	$	211,155	$	161,167	$	2,883,909

Balance December 31, 2015
Allowance for Loan Losses - Ending Balance:
Individually evaluated for impairment	$	1,953	$	—	$	6	$	369	$	7	$	—	$	2,335
Collectively evaluated for impairment	20,103		3,484		2,963		1,335		1,789		1,432		31,106
Total	$	22,056	$	3,484	$	2,969	$	1,704	$	1,796	$	1,432	$	33,441
Loans - Ending balance:
Individually evaluated for impairment	$	4,514	$	921	$	1,962	$	2,800	$	681	$	—	$	10,878
Collectively evaluated for impairment	1,479,813		427,143		340,997		158,261		195,817		137,828		2,739,859
Total	$	1,484,327	$	428,064	$	342,959	$	161,061	$	196,498	$	137,828	$	2,750,737

A summary of Portfolio loans individually evaluated for impairment by category at June 30, 2016 and December 31, 2015, is as follows:



	June 30, 2016
(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	$	4,840	$	134	$	4,700	$	4,834	$	2,716	$	4,873
Real estate loans:
Commercial - investor owned	—		249		—		249		—		250
Commercial - owner occupied	—		—		—		—		—		—
Construction and land development	3,481		2,970		367		3,337		31		2,646
Residential	670		642		65		707		3		679
Consumer and other	4,571		—		4,580		4,580		1,927		4,628
Total	$	13,562	$	3,995	$	9,712	$	13,707	$	4,677	$	13,076



	December 31, 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	$	5,554	$	509	$	4,204	$	4,713	$	1,953	$	6,970
Real estate loans:
Commercial - investor owned	927		927		—		927		—		970
Commercial - owner occupied	329		85		113		198		6		301
Construction and land development	4,349		2,914		530		3,444		369		3,001
Residential	705		637		68		705		7		682
Consumer and other	—		—		—		—		—		—
Total	$	11,864	$	5,072	$	4,915	$	9,987	$	2,335	$	11,924

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



	Three months ended June 30,				Six months ended June 30,
(in thousands)	2016		2015		2016		2015
Total interest income that would have been recognized under original terms	$	329	$	229	$	477	$	544
Total cash received and recognized as interest income on non-accrual loans	44		98		50		125
Total interest income recognized on impaired loans	25		14		31		27

There were no loans over 90 days past due and still accruing interest at June 30, 2016 or December 31, 2015.

The recorded investment in impaired Portfolio loans by category at June 30, 2016 and December 31, 2015, is as follows:



	June 30, 2016
(in thousands)	Non-accrual		Restructured		Loans over 90 days past due and still accruing interest		Total
Commercial and industrial	$	2,524	$	2,310	$	—	$	4,834
Real estate:
Commercial - investor owned	249		—		—		249
Commercial - owner occupied	—		—		—		—
Construction and land development	3,317		20		—		3,337
Residential	707		—		—		707
Consumer and other	4,580		—		—		4,580
Total	$	11,377	$	2,330	$	—	$	13,707



	December 31, 2015
(in thousands)	Non-accrual		Restructured		Loans over 90 days past due and still accruing interest		Total
Commercial and industrial	$	4,406	$	307	$	—	$	4,713
Real estate:
Commercial - investor owned	927		—		—		927
Commercial - owner occupied	198		—		—		198
Construction and land development	3,444		—		—		3,444
Residential	705		—		—		705
Consumer and other	—		—		—		—
Total	$	9,680	$	307	$	—	$	9,987

The recorded investment by category for the Portfolio loans that have been restructured during the three and six months ended June 30, 2016 and 2015, is as follows:



	Three months ended June 30, 2016					Three months ended June 30, 2015
(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	1	$	2,300	$	2,300	—	$	—	$	—
Real estate:
Commercial - investor owned	—	—		—		—	—		—
Commercial - owner occupied	—	—		—		—	—		—
Construction and land development	1	20		20		—	—		—
Residential	—	—		—		—	—		—
Consumer and other	—	—		—		—	—		—
Total	2	$	2,320	$	2,320	—	$	—	$	—



	Six months ended June 30, 2016					Six months ended June 30, 2015
(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	2	$	2,341	$	2,341	—	$	—	$	—
Real estate:
Commercial - investor owned	1	248		248		—	—		—
Commercial - owner occupied	—	—		—		—	—		—
Construction and land development	1	20		20		—	—		—
Residential	—	—		—		—	—		—
Consumer and other	—	—		—		—	—		—
Total	4	$	2,609	$	2,609	—	$	—	$	—

The restructured loans resulted from deferral of principal and extending the term to maturity. As of June 30, 2016, the Company had $1.2 million specific reserves allocated to loans that have been restructured. There were no Portfolio loans restructured that subsequently defaulted during the six months ended June 30, 2016 or 2015.

The aging of the recorded investment in past due Portfolio loans by portfolio class and category at June 30, 2016 and December 31, 2015 is shown below.



	June 30, 2016
(in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Commercial and industrial	$	83	$	2,407	$	2,490	$	1,537,967	$	1,540,457
Real estate:
Commercial - investor owned	—		—		—		466,713		466,713
Commercial - owner occupied	—		—		—		332,639		332,639
Construction and land development	367		2,189		2,556		169,222		171,778
Residential	10		605		615		210,540		211,155
Consumer and other	4		—		4		161,163		161,167
Total	$	464	$	5,201	$	5,665	$	2,878,244	$	2,883,909



	December 31, 2015
(in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Commercial and industrial	$	505	$	888	$	1,393	$	1,482,934	$	1,484,327
Real estate:
Commercial - investor owned	464		—		464		427,600		428,064
Commercial - owner occupied	94		184		278		342,681		342,959
Construction and land development	384		2,273		2,657		158,404		161,061
Residential	70		681		751		195,747		196,498
Consumer and other	20		—		20		137,808		137,828
Total	$	1,537	$	4,026	$	5,563	$	2,745,174	$	2,750,737

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, 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, 2016, which is based upon the most recent analysis performed, and December 31, 2015 is as follows:



	June 30, 2016
(in thousands)	Pass (1-6)		Watch (7)		Substandard (8)		Doubtful (9)		Total
Commercial and industrial	$	1,396,684	$	82,775	$	60,998	$	—	$	1,540,457
Real estate:
Commercial - investor owned	448,321		13,223		5,169		—		466,713
Commercial - owner occupied	302,411		27,144		3,084		—		332,639
Construction and land development	161,528		6,258		3,992		—		171,778
Residential	202,880		4,840		3,435		—		211,155
Consumer and other	154,500		714		5,953		—		161,167
Total	$	2,666,324	$	134,954	$	82,631	$	—	$	2,883,909



	December 31, 2015
(in thousands)	Pass (1-6)		Watch (7)		Substandard (8)		Doubtful (9)		Total
Commercial and industrial	$	1,356,864	$	90,370	$	37,093	$	—	$	1,484,327
Real estate:
Commercial - investor owned	403,820		18,868		5,376		—		428,064
Commercial - owner occupied	314,791		24,727		3,441		—		342,959
Construction and land development	146,601		10,114		4,346		—		161,061
Residential	188,269		5,138		3,091		—		196,498
Consumer and other	131,060		721		6,047		—		137,828
Total	$	2,541,405	$	149,938	$	59,394	$	—	$	2,750,737