LOANS (Tables)

6 Months Ended

Jun. 30, 2017

The following table presents total loans outstanding by portfolio, which includes non-purchased credit impaired (“Non-PCI”) loans and purchased credit impaired (“PCI”) loans, as of June 30, 2017 and December 31, 2016 (in thousands):


	June 30, 2017						December 31, 2016
	Non-PCI		PCI				Non-PCI		PCI
	Loans		Loans (1)		Total		Loans		Loans (1)		Total
Loans:
Commercial	$	568,855	$	2,256	$	571,111	$	454,310	$	3,517	$	457,827
Commercial real estate		1,456,072		14,415		1,470,487		963,895		5,720		969,615
Construction and land development		171,529		4,569		176,098		165,175		12,150		177,325
Total commercial loans		2,196,456		21,240		2,217,696		1,583,380		21,387		1,604,767
Residential real estate		419,905		8,559		428,464		247,156		6,557		253,713
Consumer		335,693		209		335,902		269,705		312		270,017
Lease financing		202,001		—		202,001		191,479		—		191,479
Total loans	$	3,154,055	$	30,008	$	3,184,063	$	2,291,720	$	28,256	$	2,319,976

(1)

The unpaid principal balance for PCI loans totaled $45.4 million and $34.6 million as of June 30, 2017 and December 31, 2016, respectively.

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

The following table presents the recorded investment of the commercial loan portfolio (excluding PCI loans) by risk category as of June 30, 2017 and December 31, 2016 (in thousands):


	June 30, 2017								December 31, 2016
			Commercial		Construction						Commercial		Construction
			Real		and Land						Real		and Land
	Commercial		Estate		Development		Total		Commercial		Estate		Development		Total
Acceptable credit quality	$	540,150	$	1,415,774	$	164,247	$	2,120,171	$	426,560	$	925,244	$	159,702	$	1,511,506
Special mention		15,702		8,243		—		23,945		10,930		8,735		—		19,665
Substandard		9,777		14,473		210		24,460		12,649		21,178		450		34,277
Substandard – nonaccrual		2,989		16,277		—		19,266		3,559		7,145		21		10,725
Doubtful		—		—		—		—		—		—		—		—
Not graded		237		1,305		7,072		8,614		612		1,593		5,002		7,207
Total (excluding PCI)	$	568,855	$	1,456,072	$	171,529	$	2,196,456	$	454,310	$	963,895	$	165,175	$	1,583,380

The Company evaluates the credit quality of its other loan portfolio 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 loan portfolio (excluding PCI loans) based on the credit risk profile of loans that are performing and loans that are impaired as of June 30, 2017 and December 31, 2016 (in thousands):


	June 30, 2017								December 31, 2016
	Residential				Lease				Residential				Lease
	Real Estate		Consumer		Financing		Total		Real Estate		Consumer		Financing		Total
Performing	$	414,409	$	335,439	$	201,149	$	950,997	$	242,127	$	269,492	$	190,148	$	701,767
Impaired		5,496		254		852		6,602		5,029		213		1,331		6,573
Total (excluding PCI)	$	419,905	$	335,693	$	202,001	$	957,599	$	247,156	$	269,705	$	191,479	$	708,340

Summary of impaired loans (excluding PCI loans)

A summary of impaired loans (excluding PCI loans) as of June 30, 2017 and December 31, 2016 is as follows (in thousands):


	June 30,		December 31,
	2017		2016
Nonaccrual loans:
Commercial	$	2,989	$	3,559
Commercial real estate		16,277		7,145
Construction and land development		—		21
Residential real estate		4,621		4,629
Consumer		252		187
Lease financing		852		1,330
Total nonaccrual loans		24,991		16,871
Accruing loans contractually past due 90 days or more as to interest or principal payments:
Commercial		113		2,378
Commercial real estate		—		—
Construction and land development		—		—
Residential real estate		97		—
Consumer		2		26
Lease financing		—		1
Total accruing loans contractually past due 90 days or more as to interest or principal payments		212		2,405
Loans modified under troubled debt restructurings and still accruing:
Commercial		340		611
Commercial real estate		1,234		11,253
Construction and land development		60		63
Residential real estate		778		400
Consumer		—		—
Lease financing		—		—
Total loans modified under troubled debt restructurings and still accruing		2,412		12,327
Total impaired loans (excluding PCI)	$	27,615	$	31,603

Summary of impaired loans (excluding PCI loans) by portfolio

The following table presents impaired loans (excluding PCI loans) by portfolio and related valuation allowance as of June 30, 2017 and December 31, 2016 (in thousands):


	June 30, 2017						December 31, 2016
			Unpaid		Related				Unpaid		Related
	Recorded		Principal		Valuation		Recorded		Principal		Valuation
	Investment		Balance		Allowance		Investment		Balance		Allowance
Impaired loans with a valuation allowance:
Commercial	$	2,781	$	4,391	$	199	$	3,877	$	3,888	$	882
Commercial real estate		1,014		1,647		53		2,142		2,331		309
Construction and land development		60		60		5		84		84		8
Residential real estate		3,999		4,731		688		3,735		4,404		604
Consumer		254		262		27		213		190		23
Lease financing		680		680		220		1,331		1,331		356
Total impaired loans with a valuation allowance		8,788		11,771		1,192		11,382		12,228		2,182
Impaired loans with no related valuation allowance:
Commercial		661		4,033		—		2,671		7,567		—
Commercial real estate		16,497		17,091		—		16,256		17,058		—
Construction and land development		—		—		—		—		—		—
Residential real estate		1,497		1,686		—		1,294		1,462		—
Consumer		—		—		—		—		26		—
Lease financing		172		172		—		—		—		—
Total impaired loans with no related valuation allowance		18,827		22,982		—		20,221		26,113		—
Total impaired loans:
Commercial		3,442		8,424		199		6,548		11,455		882
Commercial real estate		17,511		18,738		53		18,398		19,389		309
Construction and land development		60		60		5		84		84		8
Residential real estate		5,496		6,417		688		5,029		5,866		604
Consumer		254		262		27		213		216		23
Lease financing		852		852		220		1,331		1,331		356
Total impaired loans (excluding PCI)	$	27,615	$	34,753	$	1,192	$	31,603	$	38,341	$	2,182

The difference between a loan’s recorded investment and the unpaid principal balance represents: (1) a partial charge-off resulting from a confirmed loss due to the value of the collateral securing the loan being below the loan’s principal balance and management’s assessment that the full collection of the loan balance is not likely and/or (2) payments received on nonaccrual loans that are fully applied to principal on the loan’s recorded investment as compared to being applied to principal and interest on the unpaid customer principal and interest balance. The difference between the recorded investment and the unpaid principal balance on loans was $7.1 million and $6.7 million at June 30, 2017 and December 31, 2016, respectively.

The average balance of impaired loans (excluding PCI loans) and interest income recognized on impaired loans during the three months ended June 30, 2017 and 2016 are included in the table below (in thousands):


	Three Months Ended June 30,
	2017				2016
			Interest Income				Interest Income
	Average		Recognized		Average		Recognized
	Recorded		While on		Recorded		While on
	Investment		Impaired Status		Investment		Impaired Status
Impaired loans with a valuation allowance:
Commercial	$	2,789	$	2	$	1,921	$	—
Commercial real estate		1,018		17		1,675		61
Construction and land development		61		1		67		2
Residential real estate		3,975		4		3,704		8
Consumer		263		—		45		—
Lease financing		680		—		980		—
Total impaired loans with a valuation allowance		8,786		24		8,392		71
Impaired loans with no related valuation allowance:
Commercial		779		—		—		—
Commercial real estate		16,836		—		9,645		—
Construction and land development		—		—		—		—
Residential real estate		1,359		—		674		1
Consumer		—		—		—		—
Lease financing		172		—		—		—
Total impaired loans with no related valuation allowance		19,146		—		10,319		1
Total impaired loans:
Commercial		3,568		2		1,921		—
Commercial real estate		17,854		17		11,320		61
Construction and land development		61		1		67		2
Residential real estate		5,334		4		4,378		9
Consumer		263		—		45		—
Lease financing		852		—		980		—
Total impaired loans (excluding PCI)	$	27,932	$	24	$	18,711	$	72

The average balance of impaired loans (excluding PCI loans) and interest income recognized on impaired loans during the six months ended June 30, 2017 and 2016 are included in the table below (in thousands):


	Six Months Ended June 30,
	2017				2016
			Interest Income				Interest Income
	Average		Recognized		Average		Recognized
	Recorded		While on		Recorded		While on
	Investment		Impaired Status		Investment		Impaired Status
Impaired loans with a valuation allowance:
Commercial	$	2,782	$	2	$	4,315	$	—
Commercial real estate		1,038		34		1,696		106
Construction and land development		62		2		67		3
Residential real estate		4,003		8		3,768		12
Consumer		272		—		45		—
Lease financing		680		—		980		—
Total impaired loans with a valuation allowance		8,837		46		10,871		121
Impaired loans with no related valuation allowance:
Commercial		853		—		—		—
Commercial real estate		16,954		—		9,716		—
Construction and land development		—		—		—		—
Residential real estate		1,373		1		679		1
Consumer		—		—		—		—
Lease financing		172		—		—		—
Total impaired loans with no related valuation allowance		19,352		1		10,395		1
Total impaired loans:
Commercial		3,635		2		4,315		—
Commercial real estate		17,992		34		11,412		106
Construction and land development		62		2		67		3
Residential real estate		5,376		9		4,447		13
Consumer		272		—		45		—
Lease financing		852		—		980		—
Total impaired loans (excluding PCI)	$	28,189	$	47	$	21,266	$	122

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 June 30, 2017 (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	$	3,114	$	2,709	$	113	$	2,989	$	8,925	$	559,930	$	568,855
Commercial real estate		823		1,690		—		16,277		18,790		1,437,282		1,456,072
Construction and land development		1,012		—		—		—		1,012		170,517		171,529
Residential real estate		408		416		97		4,621		5,542		414,363		419,905
Consumer		1,972		1,085		2		252		3,311		332,382		335,693
Lease financing		337		—		—		852		1,189		200,812		202,001
Total (excluding PCI)	$	7,666	$	5,900	$	212	$	24,991	$	38,769	$	3,115,286	$	3,154,055

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

Summary of TDRs by loan portfolio (excluding PCI loans)


	June 30, 2017						December 31, 2016
	Accruing (1)		Non-accrual (2)		Total		Accruing (1)		Non-accrual (2)		Total
Commercial	$	340	$	—	$	340	$	611	$	—	$	611
Commercial real estate		1,234		14,589		15,823		11,253		5,098		16,351
Construction and land development		60		—		60		63		—		63
Residential real estate		778		539		1,317		400		527		927
Consumer		—		—		—		—		—		—
Lease financing		—		—		—		—		—		—
Total loans (excluding PCI)	$	2,412	$	15,128	$	17,540	$	12,327	$	5,625	$	17,952

(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 three and six months ended June 30, 2017 and the loans by portfolio that were modified as TDRs within the previous twelve months that subsequently defaulted during the three and six months ended June 30, 2017 (dollars in thousands):


	Commercial Loan Portfolio						Other Loan Portfolio
			Commercial		Construction		Residential
			Real		and Land		Real				Lease
	Commercial		Estate		Development		Estate		Consumer		Financing		Total
For the three months ended June 30, 2017:
Troubled debt restructurings:
Number of loans		—		—		—		2		—		—		2
Pre-modification outstanding balance	$	—	$	—	$	—	$	384	$	—	$	—	$	384
Post-modification outstanding balance		—		—		—		384		—		—		384

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

For the six months ended June 30, 2017:
Troubled debt restructurings:
Number of loans		1		—		—		2		—		—		3
Pre-modification outstanding balance	$	362	$	—	$	—	$	384	$	—	$	—	$	746
Post-modification outstanding balance		339		—		—		384		—		—		723

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

The following table presents a summary of loans by portfolio that were restructured during the three and six months ended June 30, 2016 and the loans by portfolio that were modified as TDRs within the previous twelve months that subsequently defaulted during the three and six months ended June 30, 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
For the three months ended June 30, 2016:
Troubled debt restructurings:
Number of loans		3		1		—		—		—		—		4
Pre-modification outstanding balance	$	685	$	5	$	—	$	—	$	—	$	—	$	690
Post-modification outstanding balance		685		5		—		—		—		—		690

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

For the six months ended June 30, 2016:
Troubled debt restructurings:
Number of loans		3		1		—		—		—		—		4
Pre-modification outstanding balance	$	685	$	5	$	—	$	—	$	—	$	—	$	690
Post-modification outstanding balance		685		5		—		—		—		—		690

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

Summary of changes in allowance for loan losses

Changes in the allowance for loan losses for the three months ended June 30, 2017 and 2016 are as follows (in thousands):


	Three Months Ended June 30,
	2017						2016
	Non-PCI		PCI				Non-PCI		PCI
	Loans		Loans		Total		Loans		Loans		Total
Balance, beginning of period	$	14,501	$	1,304	$	15,805	$	12,608	$	1,963	$	14,571
Provision for loan losses		420		38		458		1,513		(884)		629
Loan charge-offs		(1,354)		—		(1,354)		(726)		—		(726)
Loan recoveries		470		45		515		234		44		278
Net loan (charge-offs) recoveries		(884)		45		(839)		(492)		44		(448)
Balance, end of period	$	14,037	$	1,387	$	15,424	$	13,629	$	1,123	$	14,752

Changes in the allowance for loan losses for the six months ended June 30, 2017 and 2016 are as follows (in thousands):


	Six Months Ended June 30,
	2017						2016
	Non-PCI		PCI				Non-PCI		PCI
	Loans		Loans		Total		Loans		Loans		Total
Balance, beginning of period	$	13,744	$	1,118	$	14,862	$	14,093	$	1,895	$	15,988
Provision for loan losses		1,825		166		1,991		2,596		(842)		1,754
Loan charge-offs		(2,521)		—		(2,521)		(3,422)		—		(3,422)
Loan recoveries		989		103		1,092		362		70		432
Net loan (charge-offs) recoveries		(1,532)		103		(1,429)		(3,060)		70		(2,990)
Balance, end of period	$	14,037	$	1,387	$	15,424	$	13,629	$	1,123	$	14,752

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 three and six months ended June 30, 2017 and 2016 (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 for the three months ended June 30, 2017:
Beginning balance	$	6,034	$	3,930	$	460	$	2,842	$	1,284	$	1,255	$	15,805
Provision for loan losses		45		41		(325)		516		288		(107)		458
Charge-offs		(728)		(174)		—		(155)		(255)		(42)		(1,354)
Recoveries		30		199		12		174		68		32		515
Ending balance	$	5,381	$	3,996	$	147	$	3,377	$	1,385	$	1,138	$	15,424

Changes in allowance for loan losses for the three months ended June 30, 2016:
Beginning balance	$	5,353	$	4,883	$	345	$	2,325	$	742	$	923	$	14,571
Provision for loan losses		746		(1,313)		216		404		118		458		629
Charge-offs		(2)		(108)		—		(201)		(69)		(346)		(726)
Recoveries		89		49		8		56		36		40		278
Ending balance	$	6,186	$	3,511	$	569	$	2,584	$	827	$	1,075	$	14,752

Changes in allowance for loan losses for the six months ended June 30, 2017:
Beginning balance	$	5,920	$	3,225	$	345	$	2,929	$	930	$	1,513	$	14,862
Provision for loan losses		115		862		(233)		546		770		(69)		1,991
Charge-offs		(737)		(470)		—		(327)		(431)		(556)		(2,521)
Recoveries		83		379		35		229		116		250		1,092
Ending balance	$	5,381	$	3,996	$	147	$	3,377	$	1,385	$	1,138	$	15,424

Changes in allowance for loan losses for the six months ended June 30, 2016:
Beginning balance	$	6,917	$	5,179	$	435	$	2,120	$	749	$	588	$	15,988
Provision for loan losses		1,403		(1,509)		117		666		153		924		1,754
Charge-offs		(2,262)		(247)		—		(301)		(134)		(478)		(3,422)
Recoveries		128		88		17		99		59		41		432
Ending balance	$	6,186	$	3,511	$	569	$	2,584	$	827	$	1,075	$	14,752

The following table represents, by loan portfolio, details regarding the balance in the allowance for loan losses and the recorded investment in loans as of June 30, 2017 and 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
June 30, 2017:

Allowance for loan losses:
Loans individually evaluated for impairment	$	181	$	39	$	5	$	472	$	—	$	169	$	866
Loans collectively evaluated for impairment		18		14		—		216		27		51		326
Non-impaired loans collectively evaluated for impairment		4,692		3,592		141		2,297		1,205		918		12,845
Loans acquired with deteriorated credit quality (1)		490		351		1		392		153		—		1,387
Total allowance for loan losses	$	5,381	$	3,996	$	147	$	3,377	$	1,385	$	1,138	$	15,424
Recorded investment (loan balance):
Impaired loans individually evaluated for impairment	$	3,274	$	17,379	$	60	$	3,474	$	—	$	369	$	24,556
Impaired loans collectively evaluated for impairment		168		132		—		2,022		254		483		3,059
Non-impaired loans collectively evaluated for impairment		565,413		1,438,561		171,469		414,409		335,439		201,149		3,126,440
Loans acquired with deteriorated credit quality (1)		2,256		14,415		4,569		8,559		209		—		30,008
Total recorded investment (loan balance)	$	571,111	$	1,470,487	$	176,098	$	428,464	$	335,902	$	202,001	$	3,184,063

December 31, 2016:

Allowance for loan losses:
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):
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.

Summary of changes in accretable yield for PCI loans

Changes in the accretable yield for PCI loans were as follows for the three and six months ended June 30, 2017 and 2016 (in thousands):


	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2017		2016		2017		2016
Balance, beginning of period	$	8,833	$	9,767	$	9,035	$	10,526
New loans purchased – Centrue acquisition		9,849		—		9,849		—
Accretion		(950)		(4,216)		(3,193)		(5,257)
Other adjustments (including maturities, charge-offs and impact of changes in timing of expected cash flows)		(1,554)		—		(1,545)		—
Reclassification from non-accretable		(513)		1,178		1,519		1,460
Balance, end of period	$	15,665	$	6,729	$	15,665	$	6,729