LOANS

The loan portfolio is comprised of loans originated by the Company and loans that were acquired in connection with the Company’s acquisitions. These loans are accounted for using the guidance in the Accounting Standards Codification (ASC) section 310-30 and 310-20. Loans accounted for using ASC 310-30 are sometimes referred to as purchased credit impaired, or PCI, loans.

The table below shows the loan portfolio composition including carrying value by segment of loans accounted for under ASC 310-30 (PCI loans) and loans not accounted for under this guidance, which includes our originated loans.



(in thousands)	June 30, 2017		December 31, 2016
Loans not accounted for as ASC 310-30	$	3,810,470	$	3,118,392
Loans accounted for as ASC 310-30	84,300		39,769
Total loans	$	3,894,770	$	3,158,161

The following tables refer to loans not accounted for as ASC 310-30 loans.

Below is a summary of loans by category at June 30, 2017 and December 31, 2016:



(in thousands)	June 30, 2017			December 31, 2016
Commercial and industrial	$	1,795,667		$	1,632,714
Real estate:
Commercial - investor owned	711,702			544,808
Commercial - owner occupied	523,185			350,148
Construction and land development	283,226			194,542
Residential	345,895			240,760
Total real estate loans	1,864,008			1,330,258
Consumer and other	151,670			156,182
Loans, before unearned loan fees	3,811,345			3,119,154
Unearned loan fees, net	(875		)	(762		)
Loans, including unearned loan fees	$	3,810,470		$	3,118,392

A summary of the activity in the allowance for loan losses and the recorded investment in loans by class and category based on impairment method through June 30, 2017, and at December 31, 2016, 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, 2016	$	26,996		$	3,420		$	2,890		$	1,304		$	2,023		$	932		$	37,565
Provision (provision reversal) for loan losses	1,835			(105		)	(249		)	(11		)	(3		)	66			1,533
Losses charged off	(133		)	—			—			—			(9		)	(29		)	(171		)
Recoveries	80			9			89			9			25			9			221
Balance at March 31, 2017	$	28,778		$	3,324		$	2,730		$	1,302		$	2,036		$	978		$	39,148
Provision (provision reversal) for loan losses	2,955			(39		)	354			(51		)	451			(47		)	3,623
Losses charged off	(6,035		)	—			(45		)	(5		)	(265		)	(39		)	(6,389		)
Recoveries	57			102			1			49			62			20			291
Balance at June 30, 2017	$	25,755		$	3,387		$	3,040		$	1,295		$	2,284		$	912		$	36,673



(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, 2017
Allowance for loan losses - Ending balance:
Individually evaluated for impairment	$	1,616	$	—	$	—	$	131	$	52	$	—	$	1,799
Collectively evaluated for impairment	24,139		3,387		3,040		1,164		2,232		912		34,874
Total	$	25,755	$	3,387	$	3,040	$	1,295	$	2,284	$	912	$	36,673
Loans - Ending balance:
Individually evaluated for impairment	$	10,209	$	287	$	1,552	$	1,489	$	1,293	$	9	$	14,839
Collectively evaluated for impairment	1,785,458		711,415		521,633		281,737		344,602		150,786		3,795,631
Total	$	1,795,667	$	711,702	$	523,185	$	283,226	$	345,895	$	150,795	$	3,810,470

Balance December 31, 2016
Allowance for loan losses - Ending balance:
Individually evaluated for impairment	$	2,909	$	—	$	—	$	155	$	—	$	—	$	3,064
Collectively evaluated for impairment	24,087		3,420		2,890		1,149		2,023		932		34,501
Total	$	26,996	$	3,420	$	2,890	$	1,304	$	2,023	$	932	$	37,565
Loans - Ending balance:
Individually evaluated for impairment	$	12,523	$	430	$	1,854	$	1,903	$	62	$	—	$	16,772
Collectively evaluated for impairment	1,620,191		544,378		348,294		192,639		240,698		155,420		3,101,620
Total	$	1,632,714	$	544,808	$	350,148	$	194,542	$	240,760	$	155,420	$	3,118,392

A summary of non-performing loans individually evaluated for impairment by category at June 30, 2017 and December 31, 2016, is as follows:



	June 30, 2017
(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	$	15,548	$	3,751	$	6,534	$	10,285	$	1,572	$	15,283
Real estate:
Commercial - investor owned	288		288		—		288		—		288
Commercial - owner occupied	—		—		—		—		—		—
Construction and land development	1,935		1,603		332		1,935		131		1,550
Residential	1,540		632		678		1,310		52		1,514
Consumer and other	9		9		—		9		—		9
Total	$	19,320	$	6,283	$	7,544	$	13,827	$	1,755	$	18,644



	December 31, 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	$	12,341	$	566	$	11,791	$	12,357	$	2,909	$	4,489
Real estate:
Commercial - investor owned	525		435		—		435		—		668
Commercial - owner occupied	225		231		—		231		—		227
Construction and land development	1,904		1,947		359		2,306		155		1,918
Residential	62		62		—		62		—		64
Consumer and other	—		—		—		—		—		—
Total	$	15,057	$	3,241	$	12,150	$	15,391	$	3,064	$	7,366

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



	Three months ended June 30,				Six months ended June 30,
(in thousands)	2017		2016		2017		2016
Total interest income that would have been recognized under original terms	$	340	$	329	$	655	$	477
Total cash received and recognized as interest income on non-accrual loans	16		44		39		50
Total interest income recognized on impaired loans	14		25		47		31

There were no loans over 90 days past due and still accruing interest at June 30, 2017 or December 31, 2016.

The recorded investment in impaired loans by category at June 30, 2017 and December 31, 2016, is as follows:



	June 30, 2017
(in thousands)	Non-accrual		Restructured		Total
Commercial and industrial	$	9,608	$	677	$	10,285
Real estate:
Commercial - investor owned	288		—		288
Commercial - owner occupied	—		—		—
Construction and land development	1,935		—		1,935
Residential	1,310		—		1,310
Consumer and other	9		—		9
Total	$	13,150	$	677	$	13,827



	December 31, 2016
(in thousands)	Non-accrual		Restructured		Total
Commercial and industrial	$	10,046	$	2,311	$	12,357
Real estate:
Commercial - investor owned	435		—		435
Commercial - owner occupied	231		—		231
Construction and land development	2,286		20		2,306
Residential	62		—		62
Consumer and other	—		—		—
Total	$	13,060	$	2,331	$	15,391

The recorded investment by category for the Portfolio loans that have been restructured during the three and six months ended June 30, 2017 and 2016, is as follows:



	Three months ended June 30, 2017					Three months ended June 30, 2016
(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	$	676	$	676	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	1	$	676	$	676	2	$	2,320	$	2,320



	Six months ended June 30, 2017					Six months ended June 30, 2016
(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	$	676	$	676	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	1	$	676	$	676	4	$	2,609	$	2,609

As of June 30, 2017, the Company had $0.7 million specific reserves allocated to loans that have been restructured. During the three and six months ended June 30, 2016, there were no portfolio loans that subsequently defaulted. Portfolio loans restructured that subsequently defaulted during the three and six months ended June 30, 2017, are as follows:



	Three months ended June 30, 2017			Six months ended June 30, 2017
(in thousands, except for number of loans)	Number of loans	Recorded Balance		Number of loans	Recorded Balance
Commercial and industrial	2	$	343	2	$	343
Real estate:
Commercial - investor owned	—	—		—	—
Commercial - owner occupied	—	—		—	—
Construction and land development	—	—		—	—
Residential	1	5		1	5
Consumer and other	—	—		—	—
Total	3	$	348	3	$	348

The aging of the recorded investment in past due loans by portfolio class and category at June 30, 2017 and December 31, 2016 is shown below.



	June 30, 2017
(in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Commercial and industrial	$	936	$	—	$	936	$	1,794,731	$	1,795,667
Real estate:
Commercial - investor owned	205		—		205		711,497		711,702
Commercial - owner occupied	—		—		—		523,185		523,185
Construction and land development	47		1,489		1,536		281,690		283,226
Residential	836		621		1,457		344,438		345,895
Consumer and other	11		9		20		150,775		150,795
Total	$	2,035	$	2,119	$	4,154	$	3,806,316	$	3,810,470



	December 31, 2016
(in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Commercial and industrial	$	334	$	171	$	505	$	1,632,209	$	1,632,714
Real estate:
Commercial - investor owned	—		175		175		544,633		544,808
Commercial - owner occupied	212		225		437		349,711		350,148
Construction and land development	355		1,528		1,883		192,659		194,542
Residential	91		—		91		240,669		240,760
Consumer and other	7		—		7		155,413		155,420
Total	$	999	$	2,099	$	3,098	$	3,115,294	$	3,118,392

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 loans by portfolio class and category at June 30, 2017, which is based upon the most recent analysis performed, and December 31, 2016 is as follows:



	June 30, 2017
(in thousands)	Pass (1-6)		Watch (7)		Substandard (8)		Doubtful (9)		Total
Commercial and industrial	$	1,656,173	$	67,262	$	72,232	$	—	$	1,795,667
Real estate:
Commercial - investor owned	692,743		14,955		4,004		—		711,702
Commercial - owner occupied	483,183		32,800		7,202		—		523,185
Construction and land development	278,365		2,730		2,131		—		283,226
Residential	335,818		2,743		7,334		—		345,895
Consumer and other	149,060		375		1,360		—		150,795
Total	$	3,595,342	$	120,865	$	94,263	$	—	$	3,810,470



	December 31, 2016
(in thousands)	Pass (1-6)		Watch (7)		Substandard (8)		Doubtful (9)		Total
Commercial and industrial	$	1,499,114	$	57,416	$	76,184	$	—	$	1,632,714
Real estate:
Commercial - investor owned	530,494		10,449		3,865		—		544,808
Commercial - owner occupied	306,658		39,249		4,241		—		350,148
Construction and land development	185,505		6,575		2,462		—		194,542
Residential	233,479		2,997		4,284		—		240,760
Consumer and other	153,984		—		1,436		—		155,420
Total	$	2,909,234	$	116,686	$	92,472	$	—	$	3,118,392