Loans

3 Months Ended

Mar. 31, 2017

Receivables [Abstract]

Loans

Note 4 Loans

The loan portfolio is comprised of loans originated by the Company and loans that were acquired in connection with the Company’s acquisitions.

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 the Company’s originated loans. The carrying value of loans is net of discounts on loans excluded from ASC 310-30, and fees and costs of $5.4 million and $6.3 million as of March 31, 2017 and December 31, 2016, respectively. At March 31, 2017 and December 31, 2016, $13.9 million and $14.4 million, respectively, of non 310-30 loans were held-for-sale, most of which were in the residential real estate segment.

	March 31, 2017
	ASC 310-30 loans		Non 310-30 loans		Total loans		% of total
Commercial	$	36,935	$	1,604,661	$	1,641,596	55.6%
Commercial real estate non-owner occupied		86,842		451,151		537,993	18.2%
Residential real estate		15,470		730,985		746,455	25.3%
Consumer		817		26,794		27,611	0.9%
Total	$	140,064	$	2,813,591	$	2,953,655	100.0%

	December 31, 2016
	ASC 310-30 loans		Non 310-30 loans		Total loans		% of total
Commercial	$	39,280	$	1,521,150	$	1,560,430	54.6%
Commercial real estate non-owner occupied		89,150		437,642		526,792	18.4%
Residential real estate		16,524		728,361		744,885	26.0%
Consumer		898		27,916		28,814	1.0%
Total	$	145,852	$	2,715,069	$	2,860,921	100.0%

Delinquency for loans excluded from ASC 310-30 is shown in the following tables at March 31, 2017 and December 31, 2016:

	March 31, 2017
					Greater						Total		Loans > 90
	30-59		60-89		than 90						non		days past
	days  past		days past		days past		Total  past				310-30		due and		Non-
	due		due		due		due		Current		loans		still accruing		accrual
Loans excluded from ASC 310-30:
Commercial:
Commercial and industrial	$	216	$	666	$	7,932	$	8,814	$	1,141,874	$	1,150,688	$	—	$	9,710
Owner occupied commercial real estate		1,441		720		1,772		3,933		232,402		236,335		—		2,786
Agriculture		491		—		2,043		2,534		125,613		128,147		—		2,659
Energy		—		—		6,621		6,621		82,870		89,491		—		12,697
Total commercial		2,148		1,386		18,368		21,902		1,582,759		1,604,661		—		27,852
Commercial real estate non-owner occupied:
Construction		—		215		—		215		115,288		115,503		—		—
Acquisition/development		—		—		—		—		15,577		15,577		—		—
Multifamily		—		—		—		—		25,278		25,278		—		—
Non-owner occupied		68		26		—		94		294,699		294,793		—		36
Total commercial real estate		68		241		—		309		450,842		451,151		—		36
Residential real estate:
Senior lien		1,543		410		1,006		2,959		676,724		679,683		—		4,951
Junior lien		86		17		167		270		51,032		51,302		99		702
Total residential real estate		1,629		427		1,173		3,229		727,756		730,985		99		5,653
Consumer		119		11		6		136		26,658		26,794		6		175
Total loans excluded from ASC 310-30	$	3,964	$	2,065	$	19,547	$	25,576	$	2,788,015	$	2,813,591	$	105	$	33,716

	December 31, 2016
					Greater						Total		Loans > 90
	30-59		60-89		than 90						non		days past
	days past		days past		days past		Total  past				310-30		due and		Non-
	due		due		due		due		Current		loans		still accruing		accrual
Loans excluded from ASC 310-30:
Commercial:
Commercial and industrial	$	3,134	$	4,009	$	1,078	$	8,221	$	1,066,475	$	1,074,696	$	—	$	8,688
Owner occupied commercial real estate		583		216		56		855		220,689		221,544		—		2,056
Agriculture		501		—		—		501		134,136		134,637		—		1,905
Energy		2		—		6,548		6,550		83,723		90,273		—		12,645
Total commercial		4,220		4,225		7,682		16,127		1,505,023		1,521,150		—		25,294
Commercial real estate non-owner occupied:
Construction		—		—		—		—		90,314		90,314		—		—
Acquisition/development		—		—		—		—		13,306		13,306		—		—
Multifamily		—		—		—		—		24,954		24,954		—		—
Non-owner occupied		—		—		28		28		309,040		309,068		—		66
Total commercial real estate		—		—		28		28		437,614		437,642		—		66
Residential real estate:
Senior lien		888		645		1,458		2,991		672,699		675,690		—		4,522
Junior lien		115		61		22		198		52,473		52,671		—		654
Total residential real estate		1,003		706		1,480		3,189		725,172		728,361		—		5,176
Consumer		83		8		—		91		27,825		27,916		—		181
Total loans excluded from ASC 310-30	$	5,306	$	4,939	$	9,190	$	19,435	$	2,695,634	$	2,715,069	$	—	$	30,717

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. 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. Non-accrual loans include troubled debt restructurings on non-accrual status.

Non-accrual loans excluded from the scope of ASC 310-30 totaled $33.7 million at March 31, 2017, increasing $3.0 million, or 9.8% from December 31, 2016. The increase was driven primarily by two loan relationships totaling a combined $1.5 million at March 31, 2017 within the owner occupied commercial real estate and agriculture segments, and one existing non-accrual commercial and industrial loan which increased $1.3 million during the quarter.

Credit exposure for all loans as determined by the Company’s internal risk rating system was as follows at March 31, 2017 and December 31, 2016:

	March 31, 2017
			Special
	Pass		mention		Substandard		Doubtful		Total
Loans excluded from ASC 310-30:
Commercial:
Commercial and industrial	$	1,120,420	$	5,009	$	24,768	$	491	$	1,150,688
Owner occupied commercial real estate		217,628		14,308		4,399		—		236,335
Agriculture		92,000		32,456		3,691		—		128,147
Energy		76,785		—		7,357		5,349		89,491
Total commercial		1,506,833		51,773		40,215		5,840		1,604,661
Commercial real estate non-owner occupied:
Construction		115,288		—		215		—		115,503
Acquisition/development		13,064		2,513		—		—		15,577
Multifamily		23,081		—		2,197		—		25,278
Non-owner occupied		291,608		1,577		1,608		—		294,793
Total commercial real estate		443,041		4,090		4,020		—		451,151
Residential real estate:
Senior lien		673,769		253		5,650		11		679,683
Junior lien		50,023		—		1,279		—		51,302
Total residential real estate		723,792		253		6,929		11		730,985
Consumer		26,557		57		180		—		26,794
Total loans excluded from ASC 310-30	$	2,700,223	$	56,173	$	51,344	$	5,851	$	2,813,591
Loans accounted for under ASC 310-30:
Commercial	$	27,573	$	1,132	$	8,230	$	—	$	36,935
Commercial real estate non-owner occupied		53,228		954		32,660		—		86,842
Residential real estate		12,424		1,315		1,731		—		15,470
Consumer		629		16		172		—		817
Total loans accounted for under ASC 310-30	$	93,854	$	3,417	$	42,793	$	—	$	140,064
Total loans	$	2,794,077	$	59,590	$	94,137	$	5,851	$	2,953,655

	December 31, 2016
			Special
	Pass		mention		Substandard		Doubtful		Total
Loans excluded from ASC 310-30:
Commercial:
Commercial and industrial	$	1,041,326	$	7,243	$	25,636	$	491	$	1,074,696
Owner occupied commercial real estate		202,036		9,371		10,137		—		221,544
Agriculture		123,809		8,922		1,906		—		134,637
Energy		77,619		—		7,811		4,843		90,273
Total commercial		1,444,790		25,536		45,490		5,334		1,521,150
Commercial real estate non-owner occupied:
Construction		90,099		—		215		—		90,314
Acquisition/development		10,758		2,548		—		—		13,306
Multifamily		22,495		238		2,221		—		24,954
Non-owner occupied		300,922		5,895		2,251		—		309,068
Total commercial real estate		424,274		8,681		4,687		—		437,642
Residential real estate:
Senior lien		669,148		1,215		5,316		11		675,690
Junior lien		51,250		178		1,243		—		52,671
Total residential real estate		720,398		1,393		6,559		11		728,361
Consumer		27,669		59		188		—		27,916
Total loans excluded from ASC 310-30	$	2,617,131	$	35,669	$	56,924	$	5,345	$	2,715,069
Loans accounted for under ASC 310-30:
Commercial	$	27,436	$	610	$	11,234	$	—	$	39,280
Commercial real estate non-owner occupied		38,895		967		45,520		3,768		89,150
Residential real estate		12,477		1,327		2,720		—		16,524
Consumer		721		17		160		—		898
Total loans accounted for under ASC 310-30	$	79,529	$	2,921	$	59,634	$	3,768	$	145,852
Total loans	$	2,696,660	$	38,590	$	116,558	$	9,113	$	2,860,921

Non 310-30 special mention loans within the owner occupied commercial real estate sector increased from December 31, 2016, largely due to two loan relationship upgrades totaling $5.4 million from substandard to special mention in the first quarter of 2017. Non 310-30 special mention loans within the agriculture sector increased from December 31, 2016, due to two loan relationship downgrades to special mention totaling $23.5 million at March 31, 2017. Both relationships are current with respect to principal and interest payments.

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. Impaired loans are comprised of loans excluded from ASC 310-30 on non-accrual status, loans in bankruptcy, 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 March 31, 2017, the Company measured $30.6 million of impaired loans based on the fair value of the collateral less selling costs and $2.6 million of impaired loans using discounted cash flows and the loan’s initial contractual effective interest rate. Impaired loans totaling $7.9 million that individually were less than $250 thousand each, were measured through the general ALL reserves due to their relatively small size.

At March 31, 2017 and December 31, 2016, the Company’s recorded investments in impaired loans was $41.1 million and $38.3 million, respectively. Impaired loans at March 31, 2017 were primarily comprised of seven relationships totaling $25.5 million. Three of the relationships were in the commercial and industrial sector, three of the relationships were in the energy sector and one relationship was in the agricultural sector. Impaired loans had a collective related allowance for loan losses allocated to them of $2.9 million and $2.4 million at March 31, 2017 and December 31, 2016, respectively.

Additional information regarding impaired loans at March 31, 2017 and December 31, 2016 is set forth in the table below:

	March 31, 2017						December 31, 2016
					Allowance						Allowance
	Unpaid				for loan		Unpaid				for loan
	principal		Recorded		losses		principal		Recorded		losses
	balance		investment		allocated		balance		investment		allocated
With no related allowance recorded:
Commercial:
Commercial and industrial	$	9,676	$	8,507	$	—	$	8,671	$	7,495	$	—
Owner occupied commercial real estate		4,027		3,877		—		3,350		3,197		—
Agriculture		2,798		2,740		—		2,044		1,987		—
Energy		17,157		6,085		—		17,142		6,105		—
Total commercial		33,658		21,209		—		31,207		18,784		—
Commercial real estate non-owner occupied:
Construction		—		—		—		—		—		—
Acquisition/development		—		—		—		—		—		—
Multifamily		32		32		—		33		33		—
Non-owner occupied		373		322		—		394		343		—
Total commercial real estate		405		354		—		427		376		—
Residential real estate:
Senior lien		1,100		1,042		—		1,551		1,426		—
Junior lien		—		—		—		54		51		—
Total residential real estate		1,100		1,042		—		1,605		1,477		—
Consumer		4		4		—		4		4		—
Total impaired loans with no related allowance recorded	$	35,167	$	22,609	$	—	$	33,243	$	20,641	$	—
With a related allowance recorded:
Commercial:
Commercial and industrial	$	3,476	$	3,443	$	491	$	3,495	$	3,464	$	492
Owner occupied commercial real estate		932		673		3		957		642		2
Agriculture		—		—		—		—		—		—
Energy		11,288		6,621		2,372		11,216		6,548		1,866
Total commercial		15,696		10,737		2,866		15,668		10,654		2,360
Commercial real estate non-owner occupied:
Construction		—		—		—		—		—		—
Acquisition/development		—		—		—		—		—		—
Multifamily		—		—		—		—		—		—
Non-owner occupied		226		220		1		261		255		1
Total commercial real estate		226		220		1		261		255		1
Residential real estate:
Senior lien		6,418		5,748		33		5,646		5,016		31
Junior lien		1,854		1,613		14		1,781		1,532		14
Total residential real estate		8,272		7,361		47		7,427		6,548		45
Consumer		180		176		2		188		184		2
Total impaired loans with a related allowance recorded	$	24,374	$	18,494	$	2,916	$	23,544	$	17,641	$	2,408
Total impaired loans	$	59,541	$	41,103	$	2,916	$	56,787	$	38,282	$	2,408

The table below shows additional information regarding the average recorded investment and interest income recognized on impaired loans for the periods presented:

	For the three months ended
	March 31, 2017				March 31, 2016
	Average recorded investment		Interest income recognized		Average recorded investment		Interest income recognized
With no related allowance recorded:
Commercial:
Commercial and industrial	$	8,095	$	48	$	4,919	$	68
Owner occupied commercial real estate		3,885		18		1,912		29
Agriculture		2,588		—		1,758		—
Energy		6,098		—		—		—
Total commercial		20,666		66		8,589		97
Commercial real estate non-owner occupied:
Construction		—		—		189		—
Acquisition/development		—		—		—		—
Multifamily		—		—		—		—
Non-owner occupied		329		7		719		—
Total commercial real estate		329		7		908		—
Residential real estate:
Senior lien		1,047		3		1,376		4
Junior lien		—		—		289		—
Total residential real estate		1,047		3		1,665		4
Consumer		4		—		—		—
Total impaired loans with no related allowance recorded	$	22,046	$	76	$	11,162	$	101
With a related allowance recorded:
Commercial:
Commercial and industrial	$	3,445	$	—	$	4,479	$	—
Owner occupied commercial real estate		678		5		889		4
Agriculture		156		1		180		1
Energy		6,589		—		32,068		—
Total commercial		10,868		6		37,616		5
Commercial real estate non-owner occupied:
Construction		—		—		—		—
Acquisition/development		—		—		—		—
Multifamily		32		—		36		—
Non-owner occupied		223		3		833		15
Total commercial real estate		255		3		869		15
Residential real estate:
Senior lien		5,791		21		4,799		19
Junior lien		1,625		13		1,937		13
Total residential real estate		7,416		34		6,736		32
Consumer		181		—		64		—
Total impaired loans with a related allowance recorded	$	18,720	$	43	$	45,285	$	52
Total impaired loans	$	40,766	$	119	$	56,447	$	153

Interest income recognized on impaired loans noted in the table above primarily represents interest earned on accruing troubled debt restructurings. Interest income recognized on impaired loans using the cash-basis method of accounting during the three months ended March 31, 2017 and 2016 was $0.1 million.

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 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 TDR. At March 31, 2017 and December 31, 2016, the Company had $5.6 million and $5.8 million, respectively, of accruing TDRs that had been restructured from the original terms in order to facilitate repayment.

Non-accruing TDRs at March 31, 2017 and December 31, 2016 totaled $25.1 million and $16.7 million, respectively.

During the three months ended March 31, 2017, the Company restructured five loans with a recorded investment of $6.9 million to facilitate repayment. Substantially all of the loan modifications were a reduction of the principal payment, a reduction in interest rate, or an extension of term. Loan modifications to loans accounted for under ASC 310-30 are not considered TDRs. The table below provides additional information related to accruing TDRs at March 31, 2017 and December 31, 2016:

	March 31, 2017
	Recorded		Average year-to-date		Unpaid		Unfunded commitments
	investment		recorded investments		principal balance		to fund TDRs
Commercial	$	3,273	$	3,284	$	3,430	$	100
Commercial real estate non-owner occupied		512		521		564		—
Residential real estate		1,799		1,814		1,848		2
Consumer		5		6		5		—
Total	$	5,589	$	5,625	$	5,847	$	102

	December 31, 2016
	Recorded		Average year-to-date		Unpaid		Unfunded commitments
	investment		recorded investments		principal balance		to fund TDRs
Commercial	$	3,302	$	3,440	$	3,464	$	100
Commercial real estate non-owner occupied		538		572		590		—
Residential real estate		1,920		1,996		1,969		2
Consumer		7		9		7		—
Total	$	5,767	$	6,017	$	6,030	$	102

The following table summarizes the Company’s carrying value of non-accrual TDRs as of March 31, 2017 and December 31, 2016:

	March 31, 2017		December 31, 2016
Commercial	$	23,577	$	15,265
Commercial real estate non-owner occupied		—		—
Residential real estate		1,368		1,301
Consumer		134		142
Total non-accruing TDRs	$	25,079	$	16,708

Accrual of interest is resumed on loans that were on non-accrual only after the loan has performed sufficiently. The Company had one TDRthat was modified within the past twelve months and had defaulted on its restructured terms during the three months ended March 31, 2017. The defaulted TDR consisted of one agriculture sector loan totaling $1.6 million. The allowance for loan losses related to troubled debt restructurings on non-accrual status is determined by individual evaluation, including collateral adequacy, using the same process as loans on non-accrual status which are not classified as troubled debt restructurings.

During the three months ended March 31, 2016, the Company had five 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.

Loans accounted for under ASC 310-30

Loan pools accounted for under ASC Topic 310-30 are periodically re-measured 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 loans if circumstances specific to that loan warrant a prepayment assumption. The re-measurement of loans accounted for under ASC 310-30 resulted in the following changes in the carrying amount of accretable yield during the three months ended March 31, 2017 and 2016:

	March 31, 2017		March 31, 2016
Accretable yield beginning balance	$	60,476	$	84,194
Reclassification from non-accretable difference		5,385		3,184
Reclassification to non-accretable difference		(399)		(2,077)
Accretion		(5,871)		(10,294)
Accretable yield ending balance	$	59,591	$	75,007

Below is the composition of the net book value for loans accounted for under ASC 310-30 at March 31, 2017 and December 31, 2016:

	March 31, 2017		December 31, 2016
Contractual cash flows	$	525,952	$	537,611
Non-accretable difference		(326,297)		(331,283)
Accretable yield		(59,591)		(60,476)
Loans accounted for under ASC 310-30	$	140,064	$	145,852