PORTFOLIO LOANS

Below is a summary of Portfolio loans by category at September 30, 2014, and December 31, 2013:



(in thousands)	September 30, 2014		December 31, 2013
Real Estate Loans:
Construction and land development	$	123,888	$	117,032
Commercial real estate - Investor owned	391,791		437,688
Commercial real estate - Owner occupied	366,724		341,631
Residential real estate	187,594		158,527
Total real estate loans	$	1,069,997	$	1,054,878
Commercial and industrial	1,172,015		1,041,576
Consumer and other	51,816		39,838
Portfolio loans	$	2,293,828	$	2,136,292
Unearned loan costs, net	1,077		1,021
Portfolio loans, including unearned loan costs	$	2,294,905	$	2,137,313

The Company grants commercial, real estate, 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 Portfolio loans by class and category based on impairment method through September 30, 2014, and at December 31, 2013, 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			Total
Allowance for Loan Losses:
Balance at December 31, 2013	$	12,246		$	4,096		$	6,600		$	2,136		$	2,019		$	192		$	27,289
Provision charged to expense	899			589			(9		)	(532		)	16			64			1,027
Losses charged off	(474		)	(336		)	(250		)	(305		)	—			(4		)	(1,369		)
Recoveries	187			8			34			688			41			—			958
Balance at March 31, 2014	$	12,858		$	4,357		$	6,375		$	1,987		$	2,076		$	252		$	27,905
Provision charged to expense	3,068			(262		)	(2,064		)	132			412			62			1,348
Losses charged off	(1,005		)	(88		)	—			—			—			—			(1,093		)
Recoveries	154			14			19			36			39			—			262
Balance at June 30, 2014	$	15,075		$	4,021		$	4,330		$	2,155		$	2,527		$	314		$	28,422
Provision charged to expense	169			(245		)	(101		)	321			(110		)	32			66
Losses charged off	(215		)	(50		)	—			(600		)	—			—			(865		)
Recoveries	880			8			23			35			230			1			1,177
Balance at September 30, 2014	$	15,909		$	3,734		$	4,252		$	1,911		$	2,647		$	347		$	28,800



(in thousands)	Commercial & Industrial		Commercial Real Estate Owner Occupied		Commercial Real Estate Investor Owned		Construction and Land Development		Residential Real Estate		Consumer & Other		Total
Balance September 30, 2014
Allowance for Loan Losses - Ending Balance:
Individually evaluated for impairment	$	404	$	293	$	—	$	364	$	17	$	—	$	1,078
Collectively evaluated for impairment	15,505		3,441		4,252		1,547		2,630		347		27,722
Total	$	15,909	$	3,734	$	4,252	$	1,911	$	2,647	$	347	$	28,800
Loans - Ending Balance:
Individually evaluated for impairment	$	3,198	$	4,820	$	5,164	$	6,455	$	386	$	—	$	20,023
Collectively evaluated for impairment	1,168,817		361,904		386,627		117,433		187,208		52,893		2,274,882
Total	$	1,172,015	$	366,724	$	391,791	$	123,888	$	187,594	$	52,893	$	2,294,905

Balance at December 31, 2013
Allowance for Loan Losses - Ending Balance:
Individually evaluated for impairment	$	736	$	107	$	—	$	703	$	4	$	—	$	1,550
Collectively evaluated for impairment	11,510		3,989		6,600		1,433		2,015		192		25,739
Total	$	12,246	$	4,096	$	6,600	$	2,136	$	2,019	$	192	$	27,289
Loans - Ending Balance:
Individually evaluated for impairment	$	3,380	$	606	$	6,811	$	9,484	$	559	$	—	$	20,840
Collectively evaluated for impairment	1,038,196		341,025		430,877		107,548		157,968		40,859		2,116,473
Total	$	1,041,576	$	341,631	$	437,688	$	117,032	$	158,527	$	40,859	$	2,137,313

A summary of Portfolio loans individually evaluated for impairment by category at September 30, 2014, and December 31, 2013, is as follows:



	September 30, 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 & Industrial	$	4,512	$	3,198	$	—	$	3,198	$	404	$	4,037
Real Estate:
Commercial - Owner Occupied	4,876		773		1,891		2,664		293		1,388
Commercial - Investor Owned	5,164		—		5,164		5,164		—		4,138
Construction and Land Development	7,550		430		6,026		6,456		364		7,565
Residential	386		200		185		385		17		495
Consumer & Other	—		—		—		—		—		519
Total	$	22,488	$	4,601	$	13,266	$	17,867	$	1,078	$	18,142



	December 31, 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	$	4,377	$	—	$	3,384	$	3,384	$	736	$	6,574
Real Estate:
Commercial - Owner Occupied	606		201		421		622		107		1,868
Commercial - Investor Owned	8,033		7,190		—		7,190		—		11,348
Construction and Land Development	10,668		7,383		2,419		9,802		703		5,770
Residential	559		348		221		569		4		1,930
Consumer & Other	—		—		—		—		—		—
Total	$	24,243	$	15,122	$	6,445	$	21,567	$	1,550	$	27,490

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



	September 30, 2014				September 30, 2013
(in thousands)	Three months ended		Nine months ended		Three months ended		Nine months ended
Total interest income that would have been recognized under original terms	$	246	$	927	$	410	$	1,454
Total cash received and recognized as interest income on non-accrual loans	51		83		4		28
Total interest income recognized on impaired loans	11		27		4		33

There was one loan for $0.3 million over 90 days past due and still accruing interest at September 30, 2014. At September 30, 2014, there were no unadvanced commitments on impaired loans.

The recorded investment in impaired Portfolio loans by category at September 30, 2014, and December 31, 2013, is as follows:



	September 30, 2014
(in thousands)	Non-accrual		Restructured		Loans over 90 days past due and still accruing interest		Total
Commercial & Industrial	$	3,221	$	—	$	340	$	3,561
Real Estate:
Commercial - Investor Owned	4,755		587		—		5,342
Commercial - Owner Occupied	2,192		777		—		2,969
Construction and Land Development	6,849		—		—		6,849
Residential	401		—		—		401
Consumer & Other	—		—		—		—
Total	$	17,418	$	1,364	$	340	$	19,122



	December 31, 2013
(in thousands)	Non-accrual		Restructured		Loans over 90 days past due and still accruing interest		Total
Commercial & Industrial	$	3,384	$	—	$	—	$	3,384
Real Estate:
Commercial - Investor Owned	6,511		678		—		7,189
Commercial - Owner Occupied	622		—		—		622
Construction and Land Development	9,802		—		—		9,802
Residential	569		—		—		569
Consumer & Other	—		—		—		—
Total	$	20,888	$	678	$	—	$	21,566

The recorded investment by category for the Portfolio loans that have been restructured during the three and nine months ended September 30, 2014 and 2013, is as follows:



	Three months ended September 30, 2014					Three months ended September 30, 2013
(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 & Industrial	2	$	658	$	658	—	$	—	$	—
Real Estate:
Commercial - Owner Occupied	1	357		357		—	—		—
Commercial - Investor Owned	—	—		—		—	—		—
Construction and Land Development	1	2,827		2,827		—	—		—
Residential	—	—		—		—	—		—
Consumer & Other	—	—		—		—	—		—
Total	4	$	3,842	$	3,842	—	$	—	$	—



	Nine months ended September 30, 2014					Nine months ended September 30, 2013
(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 & Industrial	2	$	658	$	658	1	$	5	$	5
Real Estate:
Commercial - Owner Occupied	3	1,649		1,399		—	—		—
Commercial - Investor Owned	1	603		603		—	—		—
Construction and Land Development	1	2,827		2,827		—	—		—
Residential	1	125		125		—	—		—
Consumer & Other	—	—		—		—	—		—
Total	8	$	5,862	$	5,612	1	$	5	$	5

The restructured Portfolio loans resulted from interest rate concessions and changing the terms of the loans. As of September 30, 2014, the Company allocated $0.3 million of specific reserves to the loans that have been restructured.

There were no Portfolio loans that have been restructured and subsequently defaulted in the nine months ended September 30, 2014 and 2013.

The aging of the recorded investment in past due Portfolio loans by portfolio class and category at September 30, 2014, and December 31, 2013, is shown below.



	September 30, 2014
(in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Commercial & Industrial	$	785	$	706	$	1,491	$	1,170,524	$	1,172,015
Real Estate:
Commercial - Owner Occupied	712		1,156		1,868		364,856		366,724
Commercial - Investor Owned	451		4,577		5,028		386,763		391,791
Construction and Land Development	—		2,528		2,528		121,360		123,888
Residential	—		385		385		187,209		187,594
Consumer & Other	15		—		15		52,878		52,893
Total	$	1,963	$	9,352	$	11,315	$	2,283,590	$	2,294,905



	December 31, 2013
(in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Commercial & Industrial	$	229	$	—	$	229	$	1,041,347	$	1,041,576
Real Estate:
Commercial - Owner Occupied	—		428		428		341,203		341,631
Commercial - Investor Owned	—		6,132		6,132		431,556		437,688
Construction and Land Development	464		7,344		7,808		109,224		117,032
Residential	237		213		450		158,077		158,527
Consumer & Other	—		—		—		40,859		40,859
Total	$	930	$	14,117	$	15,047	$	2,122,266	$	2,137,313

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. 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 September 30, 2014, which is based upon the most recent analysis performed, and December 31, 2013 is as follows:



	September 30, 2014
(in thousands)	Pass (1-6)		Watch (7)		Substandard (8)		Doubtful (9)		Total
Commercial & Industrial	$	1,066,001	$	66,098	$	39,545	$	371	$	1,172,015
Real Estate:
Commercial - Owner Occupied	337,763		20,241		8,720		—		366,724
Commercial - Investor Owned	353,824		24,295		13,672		—		391,791
Construction and Land Development	99,832		13,547		10,509		—		123,888
Residential	165,300		13,730		8,564		—		187,594
Consumer & Other	52,425		54		414		—		52,893
Total	$	2,075,145	$	137,965	$	81,424	$	371	$	2,294,905



	December 31, 2013
(in thousands)	Pass (1-6)		Watch (7)		Substandard (8)		Doubtful (9)		Total
Commercial & Industrial	$	977,199	$	40,265	$	23,934	$	178	$	1,041,576
Real Estate:
Commercial - Owner Occupied	306,321		26,500		8,810		—		341,631
Commercial - Investor Owned	368,433		42,227		27,028		—		437,688
Construction and Land Development	87,812		17,175		11,582		463		117,032
Residential	143,613		8,240		6,674		—		158,527
Consumer & Other	40,852		3		4		—		40,859
Total	$	1,924,230	$	134,410	$	78,032	$	641	$	2,137,313