LOANS (Tables)

12 Months Ended

Dec. 31, 2016

The following table presents total loans outstanding by portfolio, which includes PCI loans, as of December 31, 2016 and 2015 (in thousands):


	2016		2015
Loans:
Commercial	$	457,827	$	499,573
Commercial real estate		969,615		876,784
Construction and land development		177,325		150,266
Total commercial loans		1,604,767		1,526,623
Residential real estate		253,713		163,224
Consumer		270,017		161,512
Lease financing		191,479		144,230
Total loans	$	2,319,976	$	1,995,589

Summary of recorded investment (excluding PCI loans) by risk category

The following table presents the recorded investment of commercial loans (excluding PCI loans) by risk category as of December 31, 2016 (in thousands):


			Commercial		Construction and
	Commercial		Real Estate		Land Development		Total
Acceptable credit quality	$	426,560	$	925,244	$	159,702	$	1,511,506
Special mention		10,930		8,735		—		19,665
Substandard		12,649		21,178		450		34,277
Substandard – nonaccrual		3,559		7,145		21		10,725
Doubtful		—		—		—		—
Not graded		612		1,593		5,002		7,207
Total (excluding PCI)	$	454,310	$	963,895	$	165,175	$	1,583,380

The Company evaluates the credit quality of its other loans based primarily on the aging status of the loan and payment activity. Accordingly, loans on nonaccrual status, any loan past due 90 days or more and still accruing interest, and loans modified under troubled debt restructurings are considered to be impaired for purposes of credit quality evaluation. The following table presents the recorded investment of our other loans (excluding PCI loans) based on the credit risk profile of loans that are performing and loans that are impaired as of December 31, 2016 (in thousands):


	Residential				Lease
	Real Estate		Consumer		Financing		Total
Performing	$	242,127	$	269,492	$	190,148	$	701,767
Impaired		5,029		213		1,331		6,573
Total (excluding PCI)	$	247,156	$	269,705	$	191,479	$	708,340

The following table presents the recorded investment of commercial loans (excluding PCI loans) by risk category as of December 31, 2015 (in thousands):


			Commercial		Construction and
	Commercial		Real Estate		Land Development		Total
Acceptable credit quality	$	467,355	$	821,314	$	136,288	$	1,424,957
Special mention		16,589		23,737		540		40,866
Substandard		3,448		8,103		—		11,551
Substandard-nonaccrual		5,702		8,844		—		14,546
Doubtful		—		—		—		—
Not graded		351		746		3,379		4,476
Total (excluding PCI)	$	493,445	$	862,744	$	140,207	$	1,496,396

The following table presents the recorded investment of our other loans (excluding PCI loans) based on the credit risk profile of loans that are performing and loans that are impaired as of December 31, 2015 (in thousands):


	Residential				Lease
	Real Estate		Consumer		Financing		Total
Performing	$	151,111	$	161,169	$	143,832	$	456,112
Impaired		4,155		51		398		4,604
Total (excluding PCI)	$	155,266	$	161,220	$	144,230	$	460,716

Summary of impaired loans (excluding PCI loans)

A summary of impaired loans (excluding PCI loans) as of December 31, 2016 and 2015 is as follows (in thousands):


	2016		2015
Nonaccrual loans:
Commercial	$	3,559	$	5,702
Commercial real estate		7,145		8,844
Construction and land development		21		—
Residential real estate		4,629		3,516
Consumer		187		2
Lease financing		1,330		398
Total nonaccrual loans		16,871		18,462
Accruing loans contractually past due 90 days or more as to interest or principal payments:
Commercial		2,378		865
Commercial real estate		—		—
Construction and land development		—		—
Residential real estate		—		228
Consumer		26		49
Lease financing		1		—
Total accruing loans contractually past due 90 days or more as to interest or principal payments		2,405		1,142
Loans modified under troubled debt restructurings:
Commercial		611		3
Commercial real estate		11,253		4,873
Construction and land development		63		—
Residential real estate		400		411
Consumer		—		—
Lease financing		—		—
Total loans modified under troubled debt restructurings		12,327		5,287
Total impaired loans (excluding PCI)	$	31,603	$	24,891

Summary of impaired loans (excluding PCI loans) by portfolio

The following table presents impaired loans (excluding PCI loans) by portfolio, which are individually evaluated, as of December 31, 2016 (in thousands):


							Average		Interest Income
			Unpaid		Related		Annual		Recognized
	Recorded		Principal		Valuation		Recorded		While on
	Investment		Balance		Allowance		Investment		Impaired Status
Impaired loans with a valuation allowance:
Commercial	$	3,877	$	3,888	$	882	$	3,974	$	15
Commercial real estate		2,142		2,331		309		2,379		306
Construction and land development		84		84		8		87		7
Residential real estate		3,735		4,404		604		3,782		30
Consumer		213		190		23		221		—
Lease financing		1,331		1,331		356		1,331		—
Total impaired loans with a valuation allowance		11,382		12,228		2,182		11,774		358
Impaired loans with no related valuation allowance:
Commercial		2,671		7,567		—		5,604		1
Commercial real estate		16,256		17,058		—		16,847		17
Construction and land development		—		—		—		—		—
Residential real estate		1,294		1,462		—		1,179		2
Consumer		—		26		—		26		—
Lease financing		—		—		—		—		—
Total impaired loans with no related valuation allowance		20,221		26,113		—		23,656		20
Total impaired loans:
Commercial		6,548		11,455		882		9,578		16
Commercial real estate		18,398		19,389		309		19,226		323
Construction and land development		84		84		8		87		7
Residential real estate		5,029		5,866		604		4,961		32
Consumer		213		216		23		247		—
Lease financing		1,331		1,331		356		1,331		—
Total impaired loans (excluding PCI)	$	31,603	$	38,341	$	2,182	$	35,430	$	378

The following table presents impaired loans (excluding PCI loans) by portfolio, which are individually evaluated, as of December 31, 2015 (in thousands):


							Average		Interest Income
			Unpaid		Related		Annual		Recognized
	Recorded		Principal		Valuation		Recorded		While on
	Investment		Balance		Allowance		Investment		Impaired Status
Impaired loans with a valuation allowance:
Commercial	$	5,789	$	8,760	$	1,797	$	7,088	$	—
Commercial real estate		9,197		9,489		514		9,225		267
Construction and land development		—		26		—		—		—
Residential real estate		3,206		3,798		626		3,231		16
Consumer		51		52		7		52		—
Lease financing		398		398		50		398		—
Total impaired loans with a valuation allowance		18,641		22,523		2,994		19,994		283
Impaired loans with no related valuation allowance:
Commercial		781		781		—		781		—
Commercial real estate		4,520		5,840		—		4,599		—
Construction and land development		—		—		—		—		—
Residential real estate		949		989		—		954		2
Consumer		—		—		—		—		—
Lease financing		—		—		—		—		—
Total impaired loans with no related valuation allowance		6,250		7,610		—		6,334		2
Total impaired loans:
Commercial		6,570		9,541		1,797		7,869		—
Commercial real estate		13,717		15,329		514		13,824		267
Construction and land development		—		26		—		—		—
Residential real estate		4,155		4,787		626		4,185		18
Consumer		51		52		7		52		—
Lease financing		398		398		50		398		—
Total impaired loans (excluding PCI)	$	24,891	$	30,133	$	2,994	$	26,328	$	285

Summary of aging status of recorded investments in loans by portfolio (excluding PCI loans)

The following table presents the aging status of the recorded investment in loans by portfolio (excluding PCI loans) as of December 31, 2016 (in thousands):


					Accruing
					Loans
	30-59		60-89		Past Due
	Days		Days		90 Days		Nonaccrual		Total				Total
	Past Due		Past Due		or More		Loans		Past Due		Current		Loans
Commercial	$	3,326	$	138	$	2,378	$	3,559	$	9,401	$	444,909	$	454,310
Commercial real estate		648		787		—		7,145		8,580		955,315		963,895
Construction and land development		—		—		—		21		21		165,154		165,175
Residential real estate		3,472		13		—		4,629		8,114		239,042		247,156
Consumer		1,701		588		26		187		2,502		267,203		269,705
Lease financing		94		—		1		1,330		1,425		190,054		191,479
Total (excluding PCI)	$	9,241	$	1,526	$	2,405	$	16,871	$	30,043	$	2,261,677	$	2,291,720

The following table presents the aging status of the recorded investment in loans by portfolio (excluding PCI loans) as of December 31, 2015 (in thousands):


					Accruing
					Loans
	30-59		60-89		Past Due
	Days		Days		90 Days		Nonaccrual		Total				Total
	Past Due		Past Due		or More		Loans		Past Due		Current		Loans
Commercial	$	1,911	$	2,296	$	865	$	5,702	$	10,774	$	482,671	$	493,445
Commercial real estate		288		1,989		—		8,844		11,121		851,623		862,744
Construction and land development		340		—		—		—		340		139,867		140,207
Residential real estate		1,983		438		228		3,516		6,165		149,101		155,266
Consumer		565		273		49		2		889		160,331		161,220
Lease financing		37		—		—		398		435		143,795		144,230
Total (excluding PCI)	$	5,124	$	4,996	$	1,142	$	18,462	$	29,724	$	1,927,388	$	1,957,112

Summary of TDRs by loan portfolio (excluding PCI loans)

The Company’s TDRs are identified on a case-by-case basis in connection with the ongoing loan collection processes. The following table presents TDRs by loan portfolio (excluding PCI loans) as of December 31, 2016 and 2015 (in thousands):


	2016						2015
	Accruing (1)		Non-accrual (2)		Total		Accruing (1)		Non-accrual (2)		Total
Commercial	$	611	$	—	$	611	$	3	$	40	$	43
Commercial real estate		11,253		5,098		16,351		4,873		5,332		10,205
Construction and land development		63		—		63		—		—		—
Residential real estate		400		527		927		411		383		794
Consumer		—		—		—		—		—		—
Lease financing		—		—		—		—		—		—
Total loans (excluding PCI)	$	12,327	$	5,625	$	17,952	$	5,287	$	5,755	$	11,042

(1)

These loans are still accruing interest.

(2)

These loans are included in non-accrual loans in the preceding tables.

Summary of TDRs loans by portfolio restructured and occurred within previous twelve months that subsequently defaulted

The following table presents a summary of loans by portfolio that were restructured during the year ended December 31, 2016 and the loans by portfolio that were modified as TDRs within the previous twelve months that subsequently defaulted during the year ended December 31, 2016 (dollars in thousands):


	Commercial Loan Portfolio						Other Loan Portfolio
			Commercial		Construction		Residential
			Real		and Land		Real				Lease
	Commercial		Estate		Development		Estate		Consumer		Financing		Total
Troubled debt restructurings:
Number of loans		3		2		—		3		—		—		8
Pre-modification outstanding balance	$	685	$	10,207	$	—	$	206	$	—	$	—	$	11,098
Post-modification outstanding balance		611		10,139		—		206		—		—		10,956

Troubled debt restructurings that subsequently defaulted
Number of loans		—		1		—		—		—		—		1
Recorded balance	$	—	$	28	$	—	$	—	$	—	$	—	$	28

The following table presents a summary of loans by portfolio that were restructured during the year ended December 31, 2015 and the loans by portfolio that were modified as TDRs within the previous twelve months that subsequently defaulted during the year ended December 31, 2015 (dollars in thousands):


	Commercial Loan Portfolio						Other Loan Portfolio
			Commercial		Construction		Residential
			Real		and Land		Real				Lease
	Commercial		Estate		Development		Estate		Consumer		Financing		Total
Troubled debt restructurings:
Number of loans		—		1		—		—		—		—		1
Pre-modification outstanding balance	$	—	$	58	$	—	$	—	$	—	$	—	$	58
Post-modification outstanding balance		—		58		—		—		—		—		58

Troubled debt restructurings that subsequently defaulted
Number of loans		—		1		—		—		—		—		1
Recorded balance	$	—	$	54	$	—	$	—	$	—	$	—	$	54

Summary of changes in allowance for loan losses

Changes in the allowance for loan losses for the years ended December 31, 2016, 2015 and 2014 are as follows (in thousands):


	2016						2015						2014
	Non-PCI		PCI				Non-PCI		PCI				Non-PCI		PCI
	Loans		Loans		Total		Loans		Loans		Total		Loans		Loans		Total
Balance at beginning of period	$	14,093	$	1,895	$	15,988	$	10,503	$	1,797	$	12,300	$	11,985	$	11,687	$	23,672
Provision for loan losses		6,425		(834)		5,591		11,061		66		11,127		300		(208)		92
Loan charge-offs		(7,668)		(68)		(7,736)		(9,565)		(92)		(9,657)		(2,271)		(9,825)		(12,096)
Loan recoveries		894		125		1,019		2,094		124		2,218		489		143		632
Net loan charge-offs		(6,774)		57		(6,717)		(7,471)		32		(7,439)		(1,782)		(9,682)		(11,464)
Balance at end of period	$	13,744	$	1,118	$	14,862	$	14,093	$	1,895	$	15,988	$	10,503	$	1,797	$	12,300

Summary of changes in allowance for loan losses, by loan portfolio

The following table represents, by loan portfolio, a summary of changes in the allowance for loan losses for the year ended December 31, 2016 and provides details regarding the balance in the allowance for loan losses and the recorded investment in loans as of December 31, 2016 by impairment evaluation method (in thousands):


	Commercial Loan Portfolio						Other Loan Portfolio
			Commercial		Construction		Residential
			Real		and Land		Real				Lease
	Commercial		Estate		Development		Estate		Consumer		Financing		Total
Changes in allowance for loan losses in 2016:
Beginning balance	$	6,917	$	5,179	$	435	$	2,120	$	749	$	588	$	15,988
Provision for loan losses		2,992		(1,041)		(183)		1,601		382		1,840		5,591
Charge-offs		(4,252)		(1,177)		(1)		(966)		(301)		(1,039)		(7,736)
Recoveries		263		264		94		174		100		124		1,019
Ending balance	$	5,920	$	3,225	$	345	$	2,929	$	930	$	1,513	$	14,862
Allowance for loan losses at December 31, 2016 attributable to:
Loans individually evaluated for impairment		878		296		6		379		—		285		1,844
Loans collectively evaluated for impairment		4		13		2		225		23		71		338
Non-impaired loans collectively evaluated for impairment		4,539		2,684		337		1,968		877		1,157		11,562
Loans acquired with deteriorated credit quality (1)		499		232		—		357		30		—		1,118
Total allowance for loan losses	$	5,920	$	3,225	$	345	$	2,929	$	930	$	1,513	$	14,862
Recorded investment (loan balance) at December 31, 2016:
Impaired loans individually evaluated for impairment		6,504		18,275		63		2,920		—		670		28,432
Impaired loans collectively evaluated for impairment		44		123		21		2,109		213		661		3,171
Non-impaired loans collectively evaluated for impairment		447,762		945,497		165,091		242,127		269,492		190,148		2,260,117
Loans acquired with deteriorated credit quality (1)		3,517		5,720		12,150		6,557		312		—		28,256
Total recorded investment (loan balance)	$	457,827	$	969,615	$	177,325	$	253,713	$	270,017	$	191,479	$	2,319,976

(1)

Loans acquired with deteriorated credit quality were originally recorded at fair value at the acquisition date and the risk of credit loss was recognized at that date based on estimates of expected cash flows.

The following table represents, by loan portfolio, a summary of changes in the allowance for loan losses for the year ended December 31, 2015 and provides details regarding the balance in the allowance for loan losses and the recorded investment in loans as of December 31, 2015 by impairment evaluation method (in thousands):


	Commercial Loan Portfolio						Other Loan Portfolio
			Commercial		Construction		Residential
			Real		and Land		Real				Lease
	Commercial		Estate		Development		Estate		Consumer		Financing		Total
Changes in allowance for loan losses in 2015:
Beginning balance	$	2,284	$	6,925	$	486	$	2,038	$	567	$	—	$	12,300
Provision for loan losses		11,154		(2,001)		86		663		405		820		11,127
Charge-offs		(7,742)		(379)		(171)		(742)		(334)		(289)		(9,657)
Recoveries		1,221		634		34		161		111		57		2,218
Ending balance	$	6,917	$	5,179	$	435	$	2,120	$	749	$	588	$	15,988
Allowance for loan losses at December 31, 2015 attributable to:
Loans individually evaluated for impairment		1,765		479		—		452		—		—		2,696
Loans collectively evaluated for impairment		32		35		—		174		7		50		298
Non-impaired loans collectively evaluated for impairment		4,745		3,662		419		1,000		735		538		11,099
Loans acquired with deteriorated credit quality (1)		375		1,003		16		494		7		—		1,895
Total allowance for loan losses	$	6,917	$	5,179	$	435	$	2,120	$	749	$	588	$	15,988
Recorded investment (loan balance) at December 31, 2015:
Impaired loans individually evaluated for impairment		6,316		13,434		—		2,778		—		—		22,528
Impaired loans collectively evaluated for impairment		254		283		—		1,377		51		398		2,363
Non-impaired loans collectively evaluated for impairment		486,875		849,027		140,207		151,111		161,169		143,832		1,932,221
Loans acquired with deteriorated credit quality (1)		6,128		14,040		10,059		7,958		292		—		38,477
Total recorded investment (loan balance)	$	499,573	$	876,784	$	150,266	$	163,224	$	161,512	$	144,230	$	1,995,589

Summary of changes in accretable yield for PCI loans

Changes in the accretable yield for PCI loans were as follows for the years ended December 31, 2016, 2015 and 2014 (in thousands):


	2016		2015		2014
Balance at beginning of period	$	10,526	$	16,198	$	5,480
New loans purchased – Heartland acquisition		—		—		11,242
Accretion		(8,579)		(5,676)		(1,393)
Disposals related to foreclosures		—		—		(3)
Other adjustments (including maturities, charge-offs and impact of changes in timing of expected cash flows)		915		—		608
Reclassification from non-accretable		6,173		4		264
Balance at end of period	$	9,035	$	10,526	$	16,198

Summary of carrying amount of covered loans and non-covered loans consisted of purchased credit-impaired loans and non-purchased credit-impaired loans

The carrying amount of covered loans and non-covered loans as of December 31, 2016 and 2015 consisted of PCI loans and non-PCI loans as shown in the following table (in thousands):


	2016						2015
	Non-PCI		PCI				Non-PCI		PCI
	Loans		Loans		Total		Loans		Loans		Total
Covered loans: (1)
Commercial	$	—	$	—	$	—	$	378	$	1,067	$	1,445
Commercial real estate		—		—		—		876		318		1,194
Construction and land development		—		—		—		—		—		—
Residential real estate		—		—		—		715		275		990
Consumer		—		—		—		—		—		—
Lease financing		—		—		—		—		—		—
Total covered loans		—		—		—		1,969		1,660		3,629

Non-covered loans:
Commercial		454,310		3,517		457,827		493,067		5,061		498,128
Commercial real estate		963,895		5,720		969,615		861,868		13,722		875,590
Construction and land development		165,175		12,150		177,325		140,207		10,059		150,266
Residential real estate		247,156		6,557		253,713		154,551		7,683		162,234
Consumer		269,705		312		270,017		161,220		292		161,512
Lease financing		191,479		—		191,479		144,230		—		144,230
Total non-covered loans		2,291,720		28,256		2,319,976		1,955,143		36,817		1,991,960
Total loans	$	2,291,720	$	28,256	$	2,319,976	$	1,957,112	$	38,477	$	1,995,589

(1)

Covered loans include loans from our 2010 acquisition. On October 3, 2016, the Company entered into an agreement with the FDIC to terminate its existing loss share agreements as more fully described in Note 1 to the consolidated financial statements.