Loans

The loan portfolio is comprised of loans originated by the Company and loans that were acquired in connection with the Company’s acquisitions of Bank of Choice and Community Banks of Colorado in 2011, and Hillcrest Bank and Bank Midwest in 2010. The majority of the loans acquired in the Hillcrest Bank and Community Banks of Colorado transactions are covered by loss sharing agreements with the FDIC, and covered loans are presented separately from non-covered loans due to the FDIC loss sharing agreements associated with these loans. Covered loans comprised 16.7% of the total loan portfolio at December 31, 2013, compared to 33.2% of the total loan portfolio at December 31, 2012.

The table below shows the loan portfolio composition including carrying value by segment of loans accounted for under ASC Topic 310-30 Receivables—Loans and Debt Securities Acquired with Deteriorated Credit Quality and loans not accounted for under this guidance, which includes our originated loans. The table also shows the amounts covered by the FDIC loss sharing agreements as of December 31, 2013 and December 31, 2012. The carrying value of loans are net of discounts on loans excluded from Accounting Standards Codification (“ASC”) Topic 310-30, and fees and costs of $13.3 million and $20.4 million as of December 31, 2013 and December 31, 2012, respectively (in thousands):



	December 31, 2013
	ASC 310-30 Loans		Non 310-30 Loans		Total Loans		% of Total
Commercial	$	61,511	$	421,984	$	483,495	26.1	%
Commercial real estate	291,198		283,022		574,220		31.0	%
Agriculture	27,000		132,952		159,952		8.6	%
Residential real estate	63,011		536,913		599,924		32.3	%
Consumer	8,160		28,343		36,503		2.0	%
Total	$	450,880	$	1,403,214	$	1,854,094	100.0	%
Covered	$	259,364	$	50,033	$	309,397	16.7	%
Non-covered	191,516		1,353,181		1,544,697		83.3	%
Total	$	450,880	$	1,403,214	$	1,854,094	100.0	%



	December 31, 2012
	ASC 310-30 Loans		Non 310-30 Loans		Total Loans		% of Total
Commercial	$	83,169	$	187,419	$	270,588	14.8	%
Commercial real estate	566,035		238,964		804,999		43.9	%
Agriculture	47,733		125,674		173,407		9.5	%
Residential real estate	106,100		427,277		533,377		29.1	%
Consumer	18,984		31,347		50,331		2.7	%
Total	$	822,021	$	1,010,681	$	1,832,702	100.0	%
Covered	$	527,948	$	80,274	$	608,222	33.2	%
Non-covered	294,073		930,407		1,224,480		66.8	%
Total	$	822,021	$	1,010,681	$	1,832,702	100.0	%

Loans are considered past due or delinquent when the contractual principal or interest due in accordance with the terms of the loan agreement remains unpaid after the due date of the scheduled payment. During the year ended 2013, the Company determined that the cash flows of one covered commercial and industrial loan pool, with a balance of $14.8 million at December 31, 2013, were no longer reasonably estimable, and in accordance with the guidance in ASC 310-30, this pool was put on non-accrual status. All loans accounted for under ASC 310-30 were classified as performing assets at December 31, 2012, regardless of past due status, as the carrying value of all of the respective pools’ cash flows were considered estimable. Interest income was recognized on all accruing loans accounted for under ASC 310-30 through accretion of the difference between the carrying value of the loans and the expected cash flows.

Pooled loans accounted for under ASC 310-30 that are 90 days or more past due and still accreting are generally considered to be performing and are included in loans 90 days or more past due and still accruing. At December 31, 2013 and December 31, 2012, $9.5 million and $23.1 million, respectively, of loans excluded from the scope of ASC 310-30 were on non-accrual and $14.8 million of loans accounted for under ASC 310-30 were on non-accrual status at December 31, 2013. Loan delinquency for all loans is shown in the following tables at December 31, 2013 and December 31, 2012, respectively (in thousands):



	Total Loans December 31, 2013
	30-59 days past due		60-89 days past due		Greater than 90 days past due		Total past due		Current		Total loans		Loans > 90 days past due and still accruing		Non- accrual
Non 310-30 loans
Commercial	$	897	$	156	$	555	$	1,608	$	420,376	$	421,984	$	115	$	1,280
Commercial real estate
Construction	316		—		—		316		5,023		5,339		—		—
Acquisition/development	45		—		—		45		7,975		8,020		—		1
Multifamily	1,003		—		—		1,003		9,681		10,684		—		1,096
Owner-occupied	52		7		21		80		93,367		93,447		—		692
Non owner-occupied	329		—		203		532		165,000		165,532		—		203
Total commercial real estate	1,745		7		224		1,976		281,046		283,022		—		1,992
Agriculture	188		7		—		195		132,757		132,952		—		153
Residential real estate
Senior lien	733		415		1,062		2,210		482,381		484,591		—		5,326
Junior lien	204		—		80		284		52,038		52,322		—		519
Total residential real estate	937		415		1,142		2,494		534,419		536,913		—		5,845
Consumer	191		21		23		235		28,108		28,343		14		247
Total non 310-30 loans	3,958		606		1,944		6,508		1,396,706		1,403,214		129		9,517
Covered non 310-30 loans	194		60		155		409		49,624		50,033		115		1,944
Non-covered non 310-30 loans	3,764		546		1,789		6,099		1,347,082		1,353,181		14		7,573
Total non 310-30 loans	3,958		606		1,944		6,508		1,396,706		1,403,214		129		9,517
Loans accounted for under ASC 310-30
Commercial	582		322		4,505		5,409		56,102		61,511		4,505		14,827
Commercial real estate	1,902		5,179		49,228		56,309		234,889		291,198		49,227		—
Agriculture	714		—		296		1,010		25,990		27,000		296		—
Residential real estate	977		977		1,817		3,771		59,240		63,011		1,817		—
Consumer	327		265		19		611		7,549		8,160		19		—
Total loans accounted for under ASC 310-30	4,502		6,743		55,865		67,110		383,770		450,880		55,864		14,827
Covered loans accounted for under ASC 310-30	1,471		4,949		42,356		48,776		210,588		259,364		42,355		14,827
Non-covered loans accounted for under ASC 310-30	3,031		1,794		13,509		18,334		173,182		191,516		13,509		—
Total loans accounted for under ASC 310-30	4,502		6,743		55,865		67,110		383,770		450,880		55,864		14,827
Total loans	$	8,460	$	7,349	$	57,809	$	73,618	$	1,780,476	$	1,854,094	$	55,993	$	24,344
Covered loans	$	1,665	$	5,009	$	42,511	$	49,185	$	260,212	$	309,397	$	42,470	$	16,771
Non-covered loans	6,795		2,340		15,298		24,433		1,520,264		1,544,697		13,523		7,573
Total loans	$	8,460	$	7,349	$	57,809	$	73,618	$	1,780,476	$	1,854,094	$	55,993	$	24,344



	Total Loans December 31, 2012
	30-59 days past due		60-89 days past due		Greater than 90 days past due		Total past due		Current		Total loans		Loans > 90 days past due and still accruing		Non- accrual
Non 310-30 loans
Commercial	$	846	$	148	$	1,122	$	2,116	$	185,303	$	187,419	$	—	$	4,500
Commercial real estate
Construction	—		—		—		—		3,915		3,915		—		—
Acquisition/development	1,948		—		—		1,948		8,485		10,433		—		75
Multifamily	—		—		34		34		13,387		13,421		—		237
Owner-occupied	97		106		1,074		1,277		56,490		57,767		—		3,365
Non owner-occupied	—		122		5,123		5,245		148,183		153,428		—		7,992
Total commercial real estate	2,045		228		6,231		8,504		230,460		238,964		—		11,669
Agriculture	33		40		11		84		125,590		125,674		—		251
Residential real estate
Senior lien	1,261		119		1,825		3,205		373,243		376,448		22		5,815
Junior lien	181		—		110		291		50,538		50,829		—		593
Total residential real estate	1,442		119		1,935		3,496		423,781		427,277		22		6,408
Consumer	447		48		3		498		30,849		31,347		3		291
Total non 310-30 loans	4,813		583		9,302		14,698		995,983		1,010,681		25		23,119
Covered non 310-30 loans	75		51		2,062		2,188		78,086		80,274		—		6,045
Non-covered non 310-30 loans	4,738		532		7,240		12,510		917,897		930,407		25		17,074
Total non 310-30 loans	4,813		583		9,302		14,698		995,983		1,010,681		25		23,119
Loans accounted for under ASC 310-30
Commercial	521		563		5,621		6,705		76,464		83,169		5,621		—
Commercial real estate	10,060		3,928		129,656		143,644		422,391		566,035		129,656		—
Agriculture	1,247		16		2,768		4,031		43,702		47,733		2,768		—
Residential real estate	1,247		207		5,463		6,917		99,183		106,100		5,463		—
Consumer	297		327		3,253		3,877		15,107		18,984		3,253		—
Total loans accounted for under ASC 310-30	13,372		5,041		146,761		165,174		656,847		822,021		146,761		—
Covered loans accounted for under ASC 310-30	9,855		3,613		116,883		130,351		397,597		527,948		116,883		—
Non-covered loans accounted for under ASC 310-30	3,517		1,428		29,878		34,823		259,250		294,073		29,878		—
Total loans accounted for under ASC 310-30	13,372		5,041		146,761		165,174		656,847		822,021		146,761		—
Total loans	$	18,185	$	5,624	$	156,063	$	179,872	$	1,652,830	$	1,832,702	$	146,786	$	23,119
Covered loans	$	9,930	$	3,664	$	118,945	$	132,539	$	475,683	$	608,222	$	116,883	$	6,045
Non-covered loans	8,255		1,960		37,118		47,333		1,177,147		1,224,480		29,903		17,074
Total loans	$	18,185	$	5,624	$	156,063	$	179,872	$	1,652,830	$	1,832,702	$	146,786	$	23,119

Credit exposure for all loans as determined by the Company’s internal risk rating system was as follows as of December 31, 2013 and December 31, 2012, respectively (in thousands):



	Total Loans December 31, 2013
	Pass		Special Mention		Substandard		Doubtful		Total
Non 310-30 loans
Commercial	$	374,281	$	9,882	$	37,414	$	407	$	421,984
Commercial real estate
Construction	5,339		—		—		—		5,339
Acquisition/development	1,366		2,247		4,407		—		8,020
Multifamily	9,588		—		1,068		28		10,684
Owner-occupied	87,984		169		5,294		—		93,447
Non owner-occupied	142,159		18,536		4,837		—		165,532
Total commercial real estate	246,436		20,952		15,606		28		283,022
Agriculture	123,216		9,049		687		—		132,952
Residential real estate
Senior lien	475,041		1,495		7,620		435		484,591
Junior lien	49,874		200		2,248		—		52,322
Total residential real estate	524,915		1,695		9,868		435		536,913
Consumer	28,092		—		251		—		28,343
Total non 310-30 loans	1,296,940		41,578		63,826		870		1,403,214
Covered non 310-30 loans	22,175		3,439		24,005		414		50,033
Non-covered non 310-30 loans	1,274,765		38,139		39,821		456		1,353,181
Total non 310-30 loans	1,296,940		41,578		63,826		870		1,403,214
Loans accounted for under ASC 310-30
Commercial	23,129		3,221		34,440		721		61,511
Commercial real estate	115,903		12,493		157,748		5,054		291,198
Agriculture	21,900		1,117		3,983		—		27,000
Residential real estate	43,904		1,098		18,009		—		63,011
Consumer	6,921		244		995		—		8,160
Total loans accounted for under ASC 310-30	211,757		18,173		215,175		5,775		450,880
Covered loans accounted for under ASC 310-30	100,050		8,498		145,041		5,775		259,364
Non-covered loans accounted for under ASC 310-30	111,707		9,675		70,134		—		191,516
Total loans accounted for under ASC 310-30	211,757		18,173		215,175		5,775		450,880
Total loans	$	1,508,697	$	59,751	$	279,001	$	6,645	$	1,854,094
Total covered	$	122,225	$	11,937	$	169,046	$	6,189	$	309,397
Total non-covered	1,386,472		47,814		109,955		456		1,544,697
Total loans	$	1,508,697	$	59,751	$	279,001	$	6,645	$	1,854,094



	Total Loans December 31, 2012
	Pass		Special Mention		Substandard		Doubtful		Total
Non 310-30 loans
Commercial	$	137,537	$	9,776	$	38,696	$	1,410	$	187,419
Commercial real estate
Construction	3,915		—		—		—		3,915
Acquisition/development	6,727		—		3,706		—		10,433
Multifamily	8,409		3,798		1,201		13		13,421
Owner-occupied	44,129		4,006		9,632		—		57,767
Non owner-occupied	104,307		29,394		19,411		316		153,428
Total commercial real estate	167,487		37,198		33,950		329		238,964
Agriculture	120,471		1,359		3,844		—		125,674
Residential real estate
Senior lien	365,571		2,240		8,106		531		376,448
Junior lien	48,359		251		2,214		5		50,829
Total residential real estate	413,930		2,491		10,320		536		427,277
Consumer	31,050		—		276		21		31,347
Total non 310-30 loans	870,475		50,824		87,086		2,296		1,010,681
Covered non 310-30 loans	32,117		9,974		36,427		1,756		80,274
Non-covered non 310-30 loans	838,358		40,850		50,659		540		930,407
Total non 310-30 loans	870,475		50,824		87,086		2,296		1,010,681
Loans accounted for under ASC 310-30
Commercial	29,719		3,628		42,101		7,721		83,169
Commercial real estate	162,122		60,787		329,869		13,257		566,035
Agriculture	34,599		1,242		11,892		—		47,733
Residential real estate	57,697		6,614		41,789		—		106,100
Consumer	14,489		723		3,772		—		18,984
Total loans accounted for under ASC 310-30	298,626		72,994		429,423		20,978		822,021
Covered loans accounted for under ASC 310-30	159,430		57,056		292,174		19,288		527,948
Non-covered loans accounted for under ASC 310-30	139,196		15,938		137,249		1,690		294,073
Total loans accounted for under ASC 310-30	298,626		72,994		429,423		20,978		822,021
Total loans	$	1,169,101	$	123,818	$	516,509	$	23,274	$	1,832,702
Total covered	$	191,547	$	67,030	$	328,601	$	21,044	$	608,222
Total non-covered	977,554		56,788		187,908		2,230		1,224,480
Total loans	$	1,169,101	$	123,818	$	516,509	$	23,274	$	1,832,702

Impaired Loans

Loans are considered to be impaired when it is probable that the Company will not be able to collect all amounts due in accordance with the contractual terms of the loan agreement. Included in impaired loans are loans excluded from ASC 310-30 on non-accrual status and troubled debt restructurings (“TDRs”) described below. If a specific allowance is warranted based on the borrower’s overall financial condition, the specific allowance is calculated based on discounted cash flows using the loan’s initial contractual effective interest rate or the fair value of the collateral less selling costs for collateral dependent loans. At December 31, 2013, the Company measured $8.4 million of impaired loans using discounted cash flows and the loan’s initial contractual effective interest rate and $3.8 million of impaired loans based on the fair value of the collateral less selling costs. $9.5 million of impaired loans that individually are less than $250 thousand each, are measured through our general ALL reserves due to their relatively small size.

At December 31, 2013, the Company’s recorded investment in impaired loans was $21.6 million, $7.7 million of which was covered by loss sharing agreements. Impaired loans had a collective related allowance for loan losses allocated to them of $0.9 million at December 31, 2013. Additional information regarding impaired loans at December 31, 2013 is set forth in the table below (in thousands):



	Impaired Loans December 31, 2013
	Unpaid principal balance		Recorded investment		Allowance for loan losses allocated		Average recorded investment		Interest income recognized
With no related allowance recorded:
Commercial	$	4,981	$	4,981	$	—	$	5,722	$	355
Commercial real estate
Construction	—		—		—		—		—
Acquisition/development	—		—		—		—		—
Multifamily	987		929		—		947		—
Owner-occupied	1,872		1,655		—		1,914		136
Non-owner occupied	561		488		—		513		33
Total commercial real estate	3,420		3,072		—		3,374		169
Agriculture	—		—		—		—		—
Residential real estate
Senior lien	506		494		—		497		5
Junior lien	—		—		—		—		—
Total residential real estate	506		494		—		497		5
Consumer	—		—		—		—		—
Total impaired loans with no related allowance recorded	8,907		8,547		—		9,593		529
With a related allowance recorded:
Commercial	2,529		2,379		416		2,830		90
Commercial real estate
Construction	—		—		—		—		—
Acquisition/development	—		1		—		1		—
Multifamily	178		168		28		182		—
Owner-occupied	825		607		4		651		14
Non-owner occupied	640		628		4		634		28
Total commercial real estate	1,643		1,404		36		1,468		42
Agriculture	191		173		1		210		—
Residential real estate
Senior lien	8,147		7,266		474		7,455		110
Junior lien	1,815		1,605		16		1,649		54
Total residential real estate	9,962		8,871		490		9,104		164
Consumer	290		273		3		297		2
Total impaired loans with a related allowance recorded	14,615		13,100		946		13,909		298
Total impaired loans	$	23,522	$	21,647	$	946	$	23,502	$	827

At December 31, 2012, the Company’s recorded investment in impaired loans was $40.9 million, $11.1 million of which was covered by loss sharing agreements. The impaired loans had a collective related allowance for loan losses allocated to them of $2.0 million at December 31, 2012. The table below shows additional information regarding impaired loans at December 31, 2012 (in thousands):



	Impaired Loans December 31, 2012
	Unpaid principal balance		Recorded investment		Allowance for loan losses allocated		Average recorded investment		Interest income recognized
With no related allowance recorded:
Commercial	$	21,188	$	13,519	$	—	$	16,703	$	283
Commercial real estate
Construction	—		—		—		—		—
Acquisition/development	—		—		—		—		—
Multifamily	—		—		—		—		—
Owner-occupied	6,010		5,757		—		5,831		146
Non owner-occupied	3,239		2,965		—		3,116		17
Total commercial real estate	9,249		8,722		—		8,947		163
Agriculture	—		—		—		—		—
Residential real estate
Senior lien	373		365		—		367		4
Junior lien	119		—		—		—		—
Total residential real estate	492		365		—		367		4
Consumer	—		—		—		—		—
Total impaired loans with no related allowance recorded	30,929		22,606		—		26,017		450
With a related allowance recorded:
Commercial	2,581		2,470		1,060		2,686		19
Commercial real estate
Construction	—		—		—		—		—
Acquisition/development	96		75		1		78		—
Multifamily	198		34		—		139		—
Owner-occupied	924		737		9		767		17
Non owner-occupied	6,412		5,699		335		5,908		24
Total commercial real estate	7,630		6,545		345		6,892		41
Agriculture	265		251		1		264		—
Residential real estate
Senior lien	8,180		7,128		578		7,273		82
Junior lien	1,387		1,372		14		1,386		6
Total residential real estate	9,567		8,500		592		8,659		88
Consumer	493		482		23		486		4
Total impaired loans with a related allowance recorded	20,536		18,248		2,021		18,987		152
Total impaired loans	$	51,465	$	40,854	$	2,021	$	45,004	$	602

Troubled debt restructurings

It is the Company’s policy to review each prospective credit in order to determine the appropriateness and the adequacy of security or collateral prior to making a loan. In the event of borrower default, the Company seeks recovery in compliance with state lending laws, the respective loan agreements, and credit monitoring and remediation procedures that may include restructuring a loan to provide a concession by the Company to the borrower from their original terms due to borrower financial difficulties in order to facilitate repayment. Additionally, if a borrower’s repayment obligation has been discharged by a court, and that debt has not been reaffirmed by the borrower, regardless of past due status, the loan is considered to be a troubled debt restructuring (“TDR”). At December 31, 2013 and December 31, 2012, the Company had $11.6 million and $17.7 million, respectively, of accruing TDR’s that had been restructured from the original terms in order to facilitate repayment. Of these, $5.7 million and $5.0 million, respectively, were covered by FDIC loss sharing agreements.

Non-accruing TDR’s at December 31, 2013 and December 31, 2012 totaled $3.6 million and $12.9 million, respectively. Of these, $1.7 million were covered by the FDIC loss sharing agreements as of December 31, 2013 and $3.6 million were covered by the FDIC loss sharing agreements as of December 31, 2012.

During 2013, the Company restructured 51 loans with a recorded investment of $5.5 million to facilitate repayment. Substantially all of the loan modifications were an extension of term and rate modifications. Loan modifications to loans accounted for under ASC 310-30 are not considered troubled debt restructurings. During 2012 and 2011, the Company restructured 85 loans with a recorded investment of $27.2 million and 21 loans with a recorded investment of $28.6 million, respectively, to facilitate repayment. At December 31, 2013 the Company had four TDRs with loan commitments totaling $0.3 million, compared to ten TDRs with loan commitments totaling $7.0 million at December 31, 2012. The table below provides additional information related to accruing TDR’s at December 31, 2013 and December 31, 2012 (in thousands):



	Accruing TDR’s
	December 31, 2013
	Recorded investment		Average year-to- date recorded investment		Unpaid principal balance		Unfunded commitments to fund TDR’s
Commercial	$	6,079	$	7,113	$	6,084	$	144
Commercial real estate	2,484		2,759		2,743		—
Agriculture	20		20		20		—
Residential real estate	2,995		3,055		3,023		12
Consumer	27		30		27		12
Total	$	11,605	$	12,977	$	11,897	$	168



	Accruing TDR’s
	December 31, 2012
	Recorded investment		Average year-to- date recorded investment		Unpaid principal balance		Unfunded commitments to fund TDR’s
Commercial	$	11,474	$	13,171	$	11,794	$	6,908
Commercial real estate	3,597		3,708		3,734		—
Agriculture	—		—		—		—
Residential real estate	2,458		2,469		2,460		35
Consumer	191		195		191		—
Total	$	17,720	$	19,543	$	18,179	$	6,943

The following table summarizes the Company’s carrying value of non-accrual TDR’s as of December 31, 2013 and December 31, 2012 (in thousands):



	Non - Accruing TDR’s
	December 31, 2013				December 31, 2012
	Covered		Non-covered		Covered		Non-covered
Commercial	$	—	$	535	$	1,736	$	1,215
Commercial real estate	296		98		313		6,823
Agriculture	—		—		—		21
Residential real estate	1,377		1,031		1,514		958
Consumer	—		237		—		291
Total	$	1,673	$	1,901	$	3,563	$	9,308

Accrual of interest is resumed on loans that were on non-accrual at the time of restructuring, only after the loan has performed sufficiently. During 2013, the Company had two TDRs that had been modified within the past 12 months that defaulted on their restructured terms. For purposes of this disclosure, the Company considers “default” to mean 90 days or more past due on principal or interest. The defaulted TDRs were a consumer loan and a residential real estate loan totaling $51 thousand. During 2012 the the Company has three TDRs that had been modified within a 12 month period that defaulted on the restructured terms. These TDRs were comprised of commercial and industrial loans with a balance of less than $0.5 million. During 2011, there were no loans that had been modified within the past 12 months that defaulted on their restructured terms.

Loans accounted for under ASC Topic 310-30

Loan pools accounted for under ASC Topic 310-30 are periodically remeasured to determine expected future cash flows. In determining the expected cash flows, the timing of cash flows and prepayment assumptions for smaller, homogeneous loans are based on statistical models that take into account factors such as the loan interest rate, credit profile of the borrowers, the years in which the loans were originated, and whether the loans are fixed or variable rate loans. Prepayments may be assumed on large loans if circumstances specific to that loan warrant a prepayment assumption. No prepayments were presumed for small homogeneous commercial loans; however, prepayment assumptions are made that consider similar prepayment factors listed above for smaller homogeneous loans. The re-measurement of loans accounted for under ASC 310-30 resulted in the following changes in the carrying amount of accretable yield during 2013 and 2012 (in thousands):



	December 31, 2013			December 31, 2012
Accretable yield beginning balance	$	133,585		$	186,494
Reclassification from non-accretable difference	80,694			60,119
Reclassification to non-accretable difference	(6,994		)	(12,621		)
Accretion	(76,661		)	(100,407		)
Accretable yield ending balance	$	130,624		$	133,585

The accretable yield of $130.6 million at December 31, 2013 includes $1.6 million of accretable yield related to the loan pool that was put on non-accrual status during 2013. This accretable yield is not being accreted to income and its recognition will be deferred until full recovery of the carrying value of this pool is realized.

Below is the composition of the net book value for loans accounted for under ASC 310-30 at December 31, 2013 and December 31, 2012 (in thousands):



	December 31, 2013			December 31, 2012
Contractual cash flows	$	996,477		$	1,444,279
Non-accretable difference	(411,994		)	(488,673		)
Non-accretable difference on retired pools	(2,979		)	—
Accretable yield	(130,624		)	(133,585		)
Loans accounted for under ASC 310-30	$	450,880		$	822,021