10-Q 1 ubsh-20170630x10q.htm 10-Q Document
UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 10-Q
ý
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2017
OR
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 0-20293
UNION BANKSHARES CORPORATION
(Exact name of registrant as specified in its charter)
VIRGINIA
54-1598552
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
 1051 East Cary Street
Suite 1200
Richmond, Virginia 23219
(Address of principal executive offices) (Zip Code)
 
(804) 633-5031
(Registrant’s telephone number, including area code)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
 
Large accelerated filer
x
Accelerated filer
¨
Non-accelerated filer
¨
(Do not check if a smaller reporting company)
 
 
Smaller reporting company
¨
 
 
Emerging growth company
¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange
Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
 
Yes ¨ No x

The number of shares of common stock outstanding as of August 2, 2017 was 43,707,506.



UNION BANKSHARES CORPORATION
FORM 10-Q
INDEX
 
ITEM
 
 
PAGE
 
 
 
 
 
 
 
 
 
 
 
Item 1.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Item 2.
 
 
 
 
 
Item 3.
 
 
 
 
 
Item 4.
 
 
 
 
 
 
 
 
 
 
 
 
Item 1.
 
 
 
 
 
Item 1A.
 
 
 
 
 
Item 2.
 
 
 
 
 
Item 6.
 
 
 
 
 
 
 







Glossary of Acronyms and Defined Terms
 
AFS
Available for sale
ALCO
Asset Liability Committee
ALL
Allowance for loan losses
ASC
Accounting Standards Codification
ASU
Accounting Standards Update
ATM
Automated teller machine
the Bank
Union Bank & Trust
BOLI
Bank-owned life insurance
bps
Basis points
the Company
Union Bankshares Corporation
Dodd-Frank Act
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
EPS
Earnings per share
Exchange Act
Securities Exchange Act of 1934
FASB
Financial Accounting Standards Board
FDIC
Federal Deposit Insurance Corporation
Federal Reserve
Board of Governors of the Federal Reserve System
Federal Reserve Bank
Federal Reserve Bank of Richmond
FHLB
Federal Home Loan Bank of Atlanta
U.S. GAAP or GAAP
Accounting principles generally accepted in the United States
HELOC
Home equity line of credit
HTM
Held to maturity
LIBOR
London Interbank Offered Rate
NPA
Nonperforming assets
ODCM
Old Dominion Capital Management, Inc.
OREO
Other real estate owned
OTTI
Other than temporary impairment
PCI
Purchased credit impaired
ROA
Return on average assets
ROE
Return on average common equity
ROTCE
Return on average tangible common equity
SEC
Securities and Exchange Commission
StellarOne
StellarOne Corporation
TDR
Troubled debt restructuring
UMG
Union Mortgage Group, Inc.
Xenith
Xenith Bankshares, Inc.




PART I – FINANCIAL INFORMATION
 
ITEM 1 – FINANCIAL STATEMENTS
 
UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
 
June 30,
2017
 
December 31,
2016
 
(Unaudited)
 
(Audited)
ASSETS
 

 
 

Cash and cash equivalents:
 

 
 

Cash and due from banks
$
135,759

 
$
120,758

Interest-bearing deposits in other banks
45,473

 
58,030

Federal funds sold
678

 
449

Total cash and cash equivalents
181,910

 
179,237

Securities available for sale, at fair value
960,537

 
946,764

Securities held to maturity, at carrying value
205,630

 
201,526

Restricted stock, at cost
69,631

 
60,782

Loans held for sale, at fair value
41,135

 
36,487

Loans held for investment, net of deferred fees and costs
6,771,490

 
6,307,060

Less allowance for loan losses
38,214

 
37,192

Net loans held for investment
6,733,276

 
6,269,868

Premises and equipment, net
121,842

 
122,027

Other real estate owned, net of valuation allowance
9,482

 
10,084

Goodwill
298,191

 
298,191

Amortizable intangibles, net
17,422

 
20,602

Bank owned life insurance
180,110

 
179,318

Other assets
96,021

 
101,907

Total assets
$
8,915,187

 
$
8,426,793

LIABILITIES
 

 
 

Noninterest-bearing demand deposits
$
1,501,570

 
$
1,393,625

Interest-bearing deposits
5,262,864

 
4,985,864

Total deposits
6,764,434

 
6,379,489

Securities sold under agreements to repurchase
34,543

 
59,281

Other short-term borrowings
602,000

 
517,500

Long-term borrowings
434,260

 
413,308

Other liabilities
49,081

 
56,183

Total liabilities
7,884,318

 
7,425,761

Commitments and contingencies (Note 6)


 


STOCKHOLDERS' EQUITY
 

 
 

Common stock, $1.33 par value, shares authorized 100,000,000; issued and outstanding, 43,706,000 shares and 43,609,317 shares, respectively.
57,643

 
57,506

Additional paid-in capital
607,666

 
605,397

Retained earnings
361,552

 
341,938

Accumulated other comprehensive income
4,008

 
(3,809
)
Total stockholders' equity
1,030,869

 
1,001,032

Total liabilities and stockholders' equity
$
8,915,187

 
$
8,426,793

See accompanying notes to consolidated financial statements.

-2-


UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands, except share and per share data)
 
Three Months Ended
 
Six Months Ended
 
June 30,
2017
 
June 30,
2016
 
June 30,
2017
 
June 30,
2016
Interest and dividend income:
 
 
 
 
 
 
 
Interest and fees on loans
$
72,612

 
$
64,747

 
$
140,696

 
$
127,694

Interest on deposits in other banks
115

 
65

 
186

 
112

Interest and dividends on securities:
 
 
 
 
 
 
 
Taxable
4,982

 
4,510

 
9,905

 
8,826

Nontaxable
3,512

 
3,459

 
7,074

 
6,898

Total interest and dividend income
81,221

 
72,781

 
157,861

 
143,530

 
 
 
 
 
 
 
 
Interest expense:
 
 
 
 
 
 
 
Interest on deposits
6,100

 
4,197

 
11,176

 
8,393

Interest on short-term borrowings
1,400

 
710

 
2,350

 
1,332

Interest on long-term borrowings
4,722

 
2,098

 
8,768

 
4,298

Total interest expense
12,222

 
7,005

 
22,294

 
14,023

 
 
 
 
 
 
 
 
Net interest income
68,999

 
65,776

 
135,567

 
129,507

Provision for credit losses
2,173

 
2,300

 
4,295

 
4,904

Net interest income after provision for credit losses
66,826

 
63,476

 
131,272

 
124,603

 
 
 
 
 
 
 
 
Noninterest income:
 
 
 
 
 

 
 

Service charges on deposit accounts
4,963

 
4,754

 
9,792

 
9,488

Other service charges and fees
4,637

 
4,418

 
9,045

 
8,574

Fiduciary and asset management fees
2,725

 
2,333

 
5,519

 
4,471

Mortgage banking income, net
2,793

 
2,972

 
4,818

 
5,117

Gains on securities transactions, net
117

 
3

 
598

 
146

Bank owned life insurance income
1,335

 
1,361

 
3,460

 
2,734

Loan-related interest rate swap fees
1,031

 
1,091

 
2,211

 
1,753

Other operating income
455

 
1,061

 
1,451

 
1,624

Total noninterest income
18,056

 
17,993

 
36,894

 
33,907

 
 
 
 
 
 
 
 
Noninterest expenses:
 
 
 
 
 

 
 

Salaries and benefits
30,561

 
28,519

 
62,730

 
56,567

Occupancy expenses
4,718

 
4,809

 
9,621

 
9,785

Furniture and equipment expenses
2,720

 
2,595

 
5,323

 
5,232

Printing, postage, and supplies
1,406

 
1,280

 
2,556

 
2,419

Communications expense
872

 
927

 
1,782

 
2,016

Technology and data processing
3,927

 
3,608

 
7,827

 
7,422

Professional services
2,092

 
2,548

 
3,750

 
4,537

Marketing and advertising expense
2,279

 
1,924

 
4,019

 
3,863

FDIC assessment premiums and other insurance
947

 
1,379

 
1,652

 
2,741

Other taxes
2,022

 
1,607

 
4,043

 
3,225

Loan-related expenses
1,281

 
1,229

 
2,610

 
2,107

OREO and credit-related expenses
342

 
894

 
884

 
1,463

Amortization of intangible assets
1,544

 
1,745

 
3,180

 
3,625

Training and other personnel costs
1,043

 
905

 
2,012

 
1,649

Acquisition and conversion costs
2,744

 

 
2,744

 

Other expenses
1,432

 
1,282

 
2,592

 
2,872

Total noninterest expenses
59,930

 
55,251

 
117,325

 
109,523

 
 
 
 
 
 
 
 
Income before income taxes
24,952

 
26,218

 
50,841

 
48,987

Income tax expense
6,996

 
6,881

 
13,761

 
12,689

Net income
$
17,956

 
$
19,337

 
$
37,080

 
$
36,298

Basic earnings per common share
$
0.41

 
$
0.44

 
$
0.85

 
$
0.82

Diluted earnings per common share
$
0.41

 
$
0.44

 
$
0.85

 
$
0.82

Dividends declared per common share
$
0.20

 
$
0.19

 
$
0.40

 
$
0.38

Basic weighted average number of common shares outstanding
43,693,427

 
43,746,583

 
43,674,070

 
43,998,929

Diluted weighted average number of common shares outstanding
43,783,952

 
43,824,183

 
43,755,045

 
44,075,706

See accompanying notes to consolidated financial statements.

-3-


UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(Dollars in thousands)
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
Net income
$
17,956

 
$
19,337

 
$
37,080

 
$
36,298

Other comprehensive income (loss):
 

 
 

 
 

 
 

Cash flow hedges:
 

 
 

 
 

 
 

Change in fair value of cash flow hedges
(775
)
 
(1,007
)
 
(807
)
 
(3,688
)
Reclassification adjustment for losses (gains) included in net income (net of tax, $171 and $74 for the three months and $269 and $150 for the six months ended June 30, 2017 and 2016, respectively)
318

 
138

 
499

 
279

AFS securities:
 

 
 

 
 

 
 

Unrealized holding gains (losses) arising during period (net of tax, $2,707 and $1,991 for the three months and $4,665 and $3,624 for the six months ended June 30, 2017 and 2016, respectively)
5,027

 
3,698

 
8,664

 
6,730

Reclassification adjustment for losses (gains) included in net income (net of tax, $41 and $1 for the three months and $209 and $51 for the six months ended June 30, 2017 and 2016, respectively)
(76
)
 
(2
)
 
(389
)
 
(95
)
HTM securities:
 

 
 

 
 

 
 

Reclassification adjustment for accretion of unrealized gain on AFS securities transferred to HTM (net of tax, $86 and $155 for the three months and $185 and $312 for the six months ended June 30, 2017 and 2016, respectively)
(160
)
 
(287
)
 
(344
)
 
(579
)
Bank owned life insurance:
 
 
 
 
 
 
 
  Reclassification adjustment for losses included in net income
85

 

 
194

 

Other comprehensive income
4,419

 
2,540

 
7,817

 
2,647

Comprehensive income
$
22,375

 
$
21,877

 
$
44,897

 
$
38,945

See accompanying notes to consolidated financial statements.

-4-


UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2017 AND 2016
(Dollars in thousands, except share and per share amounts)
 
 
Common
Stock
 
Additional
Paid-In
Capital
 
Retained
Earnings
 
Accumulated
Other
Comprehensive
Income (Loss)
 
Total
 
 
 
 
 
 
 
 
 
 
Balance - December 31, 2015
$
59,159

 
$
631,822

 
$
298,134

 
$
6,252

 
$
995,367

Net income - 2016
 

 
 

 
36,298

 
 

 
36,298

Other comprehensive income (net of taxes of $3,411)
 

 
 

 
 

 
2,647

 
2,647

Issuance of common stock in regard to acquisition (17,232 shares)
23

 
430

 
 
 
 
 
453

Dividends on common stock ($0.38 per share)
 

 
 

 
(16,685
)
 
 

 
(16,685
)
Stock purchased under stock repurchase plan (1,312,556 shares)
(1,747
)
 
(28,943
)
 
 

 
 

 
(30,690
)
Issuance of common stock under Equity Compensation Plans (34,227 shares)
46

 
436

 
 

 
 

 
482

Issuance of common stock for services rendered (9,552 shares)
13

 
227

 
 

 
 

 
240

Vesting of restricted stock, net of shares held for taxes, under Equity Compensation Plans (31,993 shares)
43

 
(441
)
 
 

 
 

 
(398
)
Stock-based compensation expense
 

 
1,487

 
 

 
 

 
1,487

Balance - June 30, 2016
$
57,537

 
$
605,018

 
$
317,747

 
$
8,899

 
$
989,201

 
 
 
 
 
 
 
 
 
 
Balance - December 31, 2016
$
57,506

 
$
605,397

 
$
341,938

 
$
(3,809
)
 
$
1,001,032

Net income - 2017
 

 
 

 
37,080

 
 

 
37,080

Other comprehensive income (net of taxes of $4,540)
 

 
 

 
 

 
7,817

 
7,817

Dividends on common stock ($0.40 per share)
 

 
 

 
(17,466
)
 
 

 
(17,466
)
Issuance of common stock under Equity Compensation Plans (31,818 shares)
43

 
529

 
 

 
 

 
572

Issuance of common stock for services rendered (11,320 shares)
15

 
383

 
 

 
 

 
398

Vesting of restricted stock, net of shares held for taxes, under Equity Compensation Plans (59,426 shares)
79

 
(1,145
)
 
 

 
 

 
(1,066
)
Stock-based compensation expense
 

 
2,502

 
 

 
 

 
2,502

Balance - June 30, 2017
$
57,643

 
$
607,666

 
$
361,552

 
$
4,008

 
$
1,030,869

See accompanying notes to consolidated financial statements.

-5-


UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2017 AND 2016
(Dollars in thousands)
 
2017
 
2016
Operating activities:
 

 
 

Net income
$
37,080

 
$
36,298

Adjustments to reconcile net income to net cash and cash equivalents provided by (used in) operating activities:
 

 
 

Depreciation of premises and equipment
5,431

 
4,983

Writedown of OREO
257

 
400

Amortization, net
6,977

 
6,845

Amortization related to acquisition, net
70

 
1,077

Provision for credit losses
4,295

 
4,904

Gains on securities transactions, net
(598
)
 
(146
)
Bank owned life insurance income
(3,460
)
 
(2,734
)
Increase in loans held for sale, net
(4,648
)
 
(2,084
)
Gains on sales of other real estate owned, net
(72
)
 
(1
)
Losses on sales of premises, net
27

 
72

Stock-based compensation expenses
2,502

 
1,487

Issuance of common stock for services
398

 
240

Net decrease (increase) in other assets
3,991

 
(8,549
)
Net (decrease) increase in other liabilities
(4,392
)
 
1,920

Net cash and cash equivalents provided by (used in) operating activities
47,858

 
44,712

Investing activities:
 

 
 

Purchases of securities available for sale and restricted stock
(124,411
)
 
(122,690
)
Purchases of securities held to maturity
(7,836
)
 

Proceeds from sales of securities available for sale and restricted stock
52,626

 
15,424

Proceeds from maturities, calls and paydowns of securities available for sale
59,342

 
56,414

Proceeds from maturities, calls and paydowns of securities held to maturity
909

 
610

Net increase in loans held for investment
(464,667
)
 
(271,689
)
Net increase in premises and equipment
(5,273
)
 
(3,059
)
Proceeds from sales of other real estate owned
381

 
2,138

Cash paid in acquisition

 
(4,077
)
Cash acquired in acquisitions

 
207

Net cash and cash equivalents provided by (used in) investing activities
(488,929
)
 
(326,722
)
Financing activities:
 

 
 

Net increase in noninterest-bearing deposits
107,945

 
19,797

Net increase in interest-bearing deposits
277,000

 
112,093

Net increase in short-term borrowings
59,762

 
289,285

Cash paid for contingent consideration
(3,003
)
 

Proceeds from issuance of long-term debt
20,000

 

Repayments of long-term debt

 
(17,500
)
Cash dividends paid - common stock
(17,466
)
 
(16,685
)
Repurchase of common stock

 
(30,690
)
Issuance of common stock
572

 
482

Vesting of restricted stock, net of shares held for taxes
(1,066
)
 
(398
)
Net cash and cash equivalents provided by (used in) financing activities
443,744

 
356,384

Increase in cash and cash equivalents
2,673

 
74,374

Cash and cash equivalents at beginning of the period
179,237

 
142,660

Cash and cash equivalents at end of the period
$
181,910

 
$
217,034

Supplemental Disclosure of Cash Flow Information
 

 
 

Cash payments for:
 

 
 

Interest
$
22,424

 
$
14,212

Income taxes
16,400

 
15,800

Supplemental schedule of noncash investing and financing activities
 

 
 

Transfers between loans and other real estate owned
$
(36
)
 
$
619

Issuance of common stock in exchange for net assets in acquisition

 
453

See accompanying notes to consolidated financial statements.

-6-


UNION BANKSHARES CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Unaudited)
1. ACCOUNTING POLICIES

The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. Significant inter-company accounts and transactions have been eliminated in consolidation.
 
The unaudited consolidated financial statements have been prepared in accordance with U.S. GAAP for interim financial information and follow general practice within the banking industry. Accordingly, the unaudited consolidated financial statements do not include all the information and footnotes required by U.S. GAAP for complete financial statements; however, in the opinion of management, all adjustments (consisting only of normal recurring accruals) necessary for a fair presentation of the results of the interim periods presented have been made. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the full year.
 
These financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2016 Annual Report on Form 10-K. Certain prior period amounts have been reclassified to conform to current period presentation.

Loans
The Company originates commercial and consumer loans to customers. A substantial portion of the loan portfolio is represented by commercial and residential real estate loans (including acquisition and development loans and residential construction loans) throughout its market area. The ability of the Company’s debtors to honor their contracts on such loans is dependent upon the real estate and general economic conditions in those markets, as well as other factors.
 
Loans that management has the intent and ability to hold for the foreseeable future or until maturity or pay-off generally are reported at their outstanding unpaid principal balances adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized as an adjustment of the related loan yield using the interest method.

Below is a summary of the Company's loan segments:
 
Construction and Land Development – construction loans generally made to commercial and residential builders for specific construction projects. The successful repayment of these types of loans is generally dependent upon (a) a commitment for permanent financing from the Company, or (b) from the sale of the constructed property. These loans carry more risk than both types of commercial real estate term loans due to the dynamics of construction projects, changes in interest rates, the long-term financing market, and state and local government regulations. As in commercial real estate term lending, the Company manages risk by using specific underwriting policies and procedures for these types of loans and by avoiding excessive concentrations to any one business or industry.
 
Also, included in this category are loans generally made to residential home builders to support their lot and home inventory needs. Repayment relies upon the successful performance of the underlying residential real estate project. This type of lending carries a higher level of risk as compared to other commercial lending. This class of lending manages risks related to residential real estate market conditions, a functioning first and secondary market in which to sell residential properties, and the borrower’s ability to manage inventory and run projects. The Company manages this risk by lending to experienced builders and developers by using specific underwriting policies and procedures for these types of loans and by avoiding excessive concentrations with any particular customer or geographic region.
 
Commercial Real Estate – Owner Occupied – term loans made to support owner occupied real estate properties that rely upon the successful operation of the business occupying the property for repayment. General market conditions and economic activity may affect these types of loans. In addition to using specific underwriting policies and procedures for these types of loans, the Company manages risk by avoiding concentrations to any one business or industry.
 
Commercial Real Estate – Non-Owner Occupied – term loans typically made to borrowers to support income producing properties that rely upon the successful operation of the property for repayment. General market conditions and economic activity may impact the performance of these types of loans. In addition to using specific underwriting policies and procedures for these types of loans, the Company manages risk by diversifying the lending to various lines of businesses, such as retail, office, office warehouse, and hotel as well as avoiding concentrations to any one business or industry.

-7-


 
Residential 1-4 Family – loans generally made to both commercial and residential borrowers. Residential 1-4 Family loan portfolios carry risks associated with the creditworthiness of the borrower or the tenant and changes in loan-to-value ratios. The Company manages these risks through policies and procedures such as limiting loan-to-value ratios at origination, experienced underwriting, requiring standards for appraisers, and not making subprime loans.
 
Multifamily Real Estate – loans made to real estate investors to support permanent financing for multifamily residential income producing properties that rely on the successful operation of the property for repayment. This management mainly involves property maintenance and collection of rents due from tenants. This type of lending carries a lower level of risk as compared to other commercial lending. In addition, underwriting requirements for multifamily properties are stricter than for other non-owner-occupied property types. The Company manages this risk by avoiding concentrations with any particular customer.
 
Commercial & Industrial – loans generally made to support the Company’s borrowers’ need for equipment/vehicle purchases and short-term or seasonal cash flow needs. Repayment relies upon the successful operation of the business. This type of lending carries a lower level of commercial credit risk as compared to other commercial lending. The Company manages this risk by using general underwriting policies and procedures for these types of loans and by avoiding concentrations to any one business or industry.
 
HELOC – the consumer HELOC portfolio carries risks associated with the creditworthiness of the borrower and changes in loan-to-value ratios. The Company manages these risks through policies and procedures such as limiting loan-to-value ratios at origination, using experienced underwriting, requiring standards for appraisers, and not making subprime loans.
 
Auto – the consumer indirect auto lending portfolio generally carries certain risks associated with the values of the collateral that management must mitigate. The Company focuses its indirect auto lending on one to two year old used vehicles where substantial depreciation has already occurred thereby minimizing the risk of significant loss of collateral values in the future. This type of lending places reliance on computer-based loan approval systems to supplement other underwriting standards.
 
Consumer and all other – portfolios carry risks associated with the creditworthiness of the borrower and changes in the economic environment. The Company manages these risks through policies and procedures such as experienced underwriting, maximum debt to income ratios, and minimum borrower credit scores. Also included in this category are loans that generally support small business lines of credit and agricultural lending, neither of which are a material source of business for the Company.
 
Affordable Housing Entities
The Company invests in private investment funds that make equity investments in multifamily affordable housing properties that provide affordable housing tax credits for these investments. The activities of these entities are financed with a combination of invested equity capital and debt. For the three and six months ended June 30, 2017, the Company recognized amortization of $190,000 and $414,000, respectively, and tax credits of $174,000 and $484,000, respectively, associated with these investments within “Income tax expense” on the Company’s Consolidated Statements of Income. For the three and six months ended June 30, 2016, the Company recognized amortization of $130,000 and $260,000, respectively, and tax credits of $210,000 and $420,000, respectively. The carrying value of the Company’s investments in these qualified affordable housing projects was $9.4 million and $9.9 million as of June 30, 2017 and December 31, 2016, respectively. At June 30, 2017 and December 31, 2016, the Company's recorded liability totaled $4.6 million and $7.1 million, respectively, for the related unfunded commitments, which are expected to be paid from the second half of 2017 through 2019.
 
Adoption of New Accounting Standards
In March 2016, the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to
Employee Share-Based Payment Accounting.” This ASU simplifies several aspects of the accounting for employee share based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The Company adopted this standard in the first quarter of 2017. The adoption of ASU 2016-09 did not have a material impact on the Company’s consolidated financial statements.

Recent Accounting Pronouncements
In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers: Topic 606.” This ASU revised guidance for the recognition, measurement, and disclosure of revenue from contracts with customers. The original guidance has been amended through subsequent accounting standard updates that resulted in technical corrections, improvements, and a one-year deferral of the effective date to January 1, 2018. The guidance, as amended, is applicable to all entities and, once effective, will replace significant portions of existing industry and transaction-specific revenue recognition rules with a more principles-

-8-


based recognition model. Most revenue associated with financial instruments, including interest income, loan origination fees, and credit card fees, is outside the scope of the guidance. Gains and losses on investment securities, derivatives, and sales of financial instruments are similarly excluded from the scope. Entities can elect to adopt the guidance either on a full or modified retrospective basis. Full retrospective adoption will require a cumulative effect adjustment to retained earnings as of the beginning of the earliest comparative period presented. Modified retrospective adoption will require a cumulative effect adjustment to retained earnings as of the beginning of the reporting period in which the entity first applies the new guidance. The Company plans to adopt this guidance on the effective date, January 1, 2018. The Company is finalizing its assessment of the adoption of this ASU and the related subsequent technical corrections issued; however, based on the work performed, the Company does not anticipate that there will be a material impact on its consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” This ASU requires lessees to put most leases on their balance sheets, but recognize expenses in the income statement in a manner similar to today’s accounting. The guidance also eliminates the real estate-specific provisions and changes the guidance on sale-leaseback transactions, initial direct costs, and lease executory costs for all entities. For lessors, the standard modifies the classification criteria and the accounting for sales-type and direct financing leases. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. Upon adoption, the Company will record a right of use asset and a lease payment obligation associated with arrangements previously accounted for as operating leases. The Company is currently assessing the impact ASU No. 2016-02 will have on its consolidated financial statements.

In June 2016, the FASB issued ASU No. 2016-13, “Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This ASU updates the existing guidance to provide financial statement users with more decision-useful information about the expected credit losses on financial instruments and other commitments to extend credit held by a reporting entity at each reporting date. The amendment replaces the incurred loss impairment methodology in current GAAP with a methodology that reflects expected credit losses and required consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The amendment is effective for fiscal years beginning after December 15, 2019. The Company is currently assessing the impact ASU No. 2016-13 will have on its consolidated financial statements.

In January 2017, the FASB issued ASU No. 2017-01, “Business Combinations (Topic 805): Clarifying the Definition of a Business.” This ASU clarifies the definition of a business that appears in ASC 805, Business Combinations. Amendments narrow the definition and provide a framework for making judgments whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. The amendment to the Business Combinations Topic is intended to address concerns that the existing definition of a business has been applied too broadly and has resulted in many transactions being recorded as business acquisitions that in substance are more akin to asset acquisitions. ASU 2017-01 is effective for annual periods beginning after December 15, 2017, including interim periods within those annual periods. The Company has concluded the adoption of ASU 2017-01 will not have a material impact on its consolidated financial statements.
 
In January 2017, the FASB issued ASU No. 2017-03, “Accounting Changes and Error Corrections (Topic 250) and Investments—Equity Method and Joint Ventures (Topic 323): Amendments to SEC Paragraphs Pursuant to Staff Announcements at the September 22, 2016 and November 17, 2016 EITF Meetings (SEC Update).” This ASU incorporates into the Accounting Standards Codification recent SEC guidance about disclosing, under SEC SAB Topic 11.M, the effect on financial statements of adopting the revenue, leases, and credit losses standards. ASU 2017-03 is effective upon issuance. The Company has concluded the adoption of ASU 2017-03 will not have a material impact on its consolidated financial statements.
 
In January 2017, the FASB issued ASU No. 2017-04, “Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” This ASU simplifies accounting for goodwill impairments by eliminating step two (the implied fair value to carrying value of goodwill) from the existing goodwill impairment test. A goodwill impairment will now be the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of the goodwill. The effective date and transition requirements for the technical corrections will be effective for the Company for reporting periods beginning after December 15, 2019. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. The Company has concluded the adoption of ASU 2017-04 will not have a material impact on its consolidated financial statements.
 
In February 2017, the FASB issued ASU No. 2017-05, “Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets.” This ASU conforms the derecognition guidance on nonfinancial assets with the model for transactions in the new revenue standard. The amendments will be effective for the Company for reporting periods beginning after December 15, 2018. The Company is currently assessing the impact ASU 2017-05 will have on its consolidated financial statements.

-9-


 
In March 2017, the FASB issued ASU No. 2017-08, “Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. This ASU focuses on the amortization period for certain purchased callable debt securities held at a premium. The amendments shorten the amortization period for the premium to the earliest call date. The amendments will be effective for the Company for interim and annual periods beginning after December 15, 2018. The Company has concluded the adoption of ASU 2017-08 will not have a material impact on its consolidated financial statements.
 
In May 2017, the FASB issued ASU No. 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. This ASU relates to changes in the terms or conditions of a share-based payment award. The amendments provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The amendments will be effective for the Company for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company has concluded the adoption of ASU 2017-09 will not have a material impact on its consolidated financial statements.




-10-


2. SECURITIES 

Available for Sale
The amortized cost, gross unrealized gains and losses, and estimated fair values of securities available for sale as of June 30, 2017 and December 31, 2016 are summarized as follows (dollars in thousands):
 
 
Amortized
 
Gross Unrealized
 
Estimated
 
Cost
 
Gains
 
(Losses)
 
Fair Value
June 30, 2017
 

 
 

 
 

 
 

Obligations of states and political subdivisions
$
270,206

 
$
9,087

 
$
(753
)
 
$
278,540

Corporate bonds
116,318

 
1,009

 
(909
)
 
116,418

Mortgage-backed securities
548,229

 
5,417

 
(1,895
)
 
551,751

Other securities
13,886

 

 
(58
)
 
13,828

Total available for sale securities
$
948,639

 
$
15,513

 
$
(3,615
)
 
$
960,537

 
 
 
 
 
 
 
 
December 31, 2016
 

 
 

 
 

 
 

Obligations of states and political subdivisions
$
274,007

 
$
4,962

 
$
(3,079
)
 
$
275,890

Corporate bonds
123,674

 
892

 
(2,786
)
 
121,780

Mortgage-backed securities
536,031

 
4,626

 
(5,371
)
 
535,286

Other securities
13,885

 

 
(77
)
 
13,808

Total available for sale securities
$
947,597

 
$
10,480

 
$
(11,313
)
 
$
946,764

 
The following table shows the gross unrealized losses and fair value (in thousands) of the Company’s available for sale securities with unrealized losses that are not deemed to be other-than-temporarily impaired as of June 30, 2017 and December 31, 2016. These are aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.
 
 
Less than 12 months
 
More than 12 months
 
Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
June 30, 2017
 

 
 

 
 

 
 

 
 

 
 

Obligations of states and political subdivisions
$
27,804

 
$
(717
)
 
$
624

 
$
(36
)
 
$
28,428

 
$
(753
)
Mortgage-backed securities
197,560

 
(1,436
)
 
41,582

 
(459
)
 
239,142

 
(1,895
)
Corporate bonds and other securities
20,230

 
(367
)
 
38,872

 
(600
)
 
59,102

 
(967
)
Total available for sale securities
$
245,594

 
$
(2,520
)
 
$
81,078

 
$
(1,095
)
 
$
326,672

 
$
(3,615
)
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
 

 
 

 
 

 
 

 
 

 
 

Obligations of states and political subdivisions
$
108,440

 
$
(3,007
)
 
$
588

 
$
(72
)
 
$
109,028

 
$
(3,079
)
Mortgage-backed securities
316,469

 
(4,979
)
 
42,096

 
(392
)
 
358,565

 
(5,371
)
Corporate bonds and other securities
47,388

 
(1,537
)
 
40,468

 
(1,326
)
 
87,856

 
(2,863
)
Total available for sale securities
$
472,297

 
$
(9,523
)
 
$
83,152

 
$
(1,790
)
 
$
555,449

 
$
(11,313
)
 
As of June 30, 2017, there were $81.1 million, or 30 issues, of individual available for sale securities that had been in a continuous loss position for more than 12 months. These securities had an unrealized loss of $1.1 million and consisted of municipal obligations, mortgage-backed securities, and corporate bonds. As of December 31, 2016, there were $83.2 million, or 30 issues, of individual securities that had been in a continuous loss position for more than 12 months. These securities had an unrealized loss of $1.8 million and consisted of municipal obligations, mortgage-backed securities, and corporate bonds. The Company has determined that these securities are temporarily impaired as of June 30, 2017 and December 31, 2016 for the reasons set out below:
 

-11-


Mortgage-backed securities. This category’s unrealized losses are primarily the result of interest rate fluctuations. Because the decline in market value is attributable to changes in interest rates and not credit quality, the Company does not intend to sell the investments, and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired. Also, the majority of the Company’s mortgage-backed securities are agency-backed securities, which have a government guarantee.
 
Obligations of state and political subdivisions. This category’s unrealized losses are primarily the result of interest rate fluctuations and also a certain few ratings downgrades brought about by the impact of the credit crisis on states and political subdivisions. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the cost basis of each investment. Because the Company does not intend to sell any of the investments and the accounting standard of “more likely than not” has not been met for the Company to be required to sell any of the investments before recovery of its amortized cost basis, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired.
 
Corporate bonds. The Company’s unrealized losses in corporate debt securities are related to both interest rate fluctuations and ratings downgrades for a limited number of securities. The majority of the securities remain investment grade and the Company’s analysis did not indicate the existence of a credit loss. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the cost basis of each investment. Because the Company does not intend to sell any of the investments and the accounting standard of “more likely than not” has not been met for the Company to be required to sell any of the investments before recovery of its amortized cost basis, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired.
 
The following table presents the amortized cost and estimated fair value of available for sale securities as of June 30, 2017 and December 31, 2016, by contractual maturity (dollars in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
 
June 30, 2017
 
December 31, 2016
 
Amortized
Cost
 
Estimated
Fair Value
 
Amortized
Cost
 
Estimated
Fair Value
Due in one year or less
$
23,527

 
$
23,610

 
$
21,403

 
$
21,517

Due after one year through five years
120,077

 
122,479

 
108,198

 
109,778

Due after five years through ten years
276,269

 
281,588

 
300,552

 
301,888

Due after ten years
528,766

 
532,860

 
517,444

 
513,581

Total securities available for sale
$
948,639

 
$
960,537

 
$
947,597

 
$
946,764

 

For information regarding the estimated fair value of available for sale securities which were pledged to secure public deposits, repurchase agreements, and for other purposes as permitted or required by law as of June 30, 2017 and December 31, 2016, see Note 6 “Commitments and Contingencies.”

Held to Maturity
The Company reports securities held to maturity on the Consolidated Balance Sheets at carrying value. Carrying value is amortized cost which includes any unamortized unrealized gains and losses recognized in accumulated other comprehensive income prior to reclassifying the securities from securities available for sale to securities held to maturity. Investment securities transferred into the held to maturity category from the available for sale category are recorded at fair value at the date of transfer. The unrealized holding gain or loss at the date of transfer is retained in accumulated other comprehensive income and in the carrying value of the securities held to maturity. Such unrealized gains or losses are accreted over the remaining life of the security with no impact on future net income.
 

-12-


The carrying value, gross unrealized gains and losses, and estimated fair values of securities held to maturity as of June 30, 2017 and December 31, 2016 are summarized as follows (dollars in thousands):
 
 
Carrying
 
Gross Unrealized
 
Estimated
 
Value (1)
 
Gains
 
(Losses)
 
Fair Value
June 30, 2017
 

 
 

 
 

 
 

Obligations of states and political subdivisions
$
205,630

 
$
5,909

 
$
(93
)
 
$
211,446

 
 
 
 
 
 
 
 
December 31, 2016
 

 
 

 
 

 
 

Obligations of states and political subdivisions
$
201,526

 
$
1,617

 
$
(828
)
 
$
202,315

 
(1) The carrying value includes $4.4 million as of June 30, 2017 and $5.2 million as of December 31, 2016 of net unrealized gains present at the time of transfer from available for sale securities, net of any accretion.
 
The following table shows the gross unrealized losses and fair value (dollars in thousands) of the Company’s held to maturity securities with unrealized losses that are not deemed to be other-than-temporarily impaired as of June 30, 2017 and December 31, 2016. These are aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.
 
 
Less than 12 months
 
More than 12 months
 
Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
June 30, 2017
 

 
 

 
 

 
 

 
 

 
 

Obligations of states and political subdivisions
$
3,088

 
$
(67
)
 
$
644

 
$
(26
)
 
$
3,732

 
$
(93
)
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and political subdivisions
$
92,841

 
$
(747
)
 
$
648

 
$
(81
)
 
$
93,489

 
$
(828
)
 
As of June 30, 2017, there was $644,000, or one issue, of an individual held to maturity security that had been in a continuous loss position for more than 12 months. This security had an unrealized loss of $26,000. As of December 31, 2016, there was $648,000, or one issue, of an individual held to maturity security that had been in a continuous loss position for more than 12 months. This security had an unrealized loss of $81,000. The Company has determined that these securities in a loss position are temporarily impaired as of June 30, 2017 and December 31, 2016 for the reasons set out below:

Obligations of states and political subdivisions. This category’s unrealized losses are primarily the result of interest rate fluctuations and also a certain few ratings downgrades brought about by the impact of the credit crisis on states and political subdivisions. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the cost basis of each investment. Because the Company does not intend to sell any of the investments and the accounting standard of “more likely than not” has not been met for the Company to be required to sell any of the investments before recovery of its amortized cost basis, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired.


-13-


The following table presents the amortized cost and estimated fair value of held to maturity securities as of June 30, 2017 and December 31, 2016, by contractual maturity (dollars in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
 
June 30, 2017
 
December 31, 2016
 
Carrying
Value (1)
 
Estimated
Fair Value
 
Carrying
Value
(1)
 
Estimated
Fair Value
Due in one year or less
$
4,797

 
$
4,826

 
$
4,403

 
$
4,440

Due after one year through five years
34,383

 
35,020

 
28,383

 
28,763

Due after five years through ten years
63,538

 
65,281

 
51,730

 
51,522

Due after ten years
102,912

 
106,319

 
117,010

 
117,590

Total securities held to maturity
$
205,630

 
$
211,446

 
$
201,526

 
$
202,315

 
(1) The carrying value includes $4.4 million as of June 30, 2017 and $5.2 million as of December 31, 2016 of net unrealized gains present at the time of transfer from available for sale securities, net of any accretion.
 
For information regarding the estimated fair value of held to maturity securities which were pledged to secure public deposits as permitted or required by law as of June 30, 2017 and December 31, 2016, see Note 6 “Commitments and Contingencies.”
 
Restricted Stock, at cost
Due to restrictions placed upon the Bank’s common stock investment in the Federal Reserve Bank and FHLB, these securities have been classified as restricted equity securities and carried at cost. These restricted securities are not subject to the investment security classifications and are included as a separate line item on the Company’s Consolidated Balance Sheets. At June 30, 2017 and December 31, 2016, the FHLB required the Bank to maintain stock in an amount equal to 4.25% of outstanding borrowings and a specific percentage of the Bank’s total assets. The Federal Reserve Bank required the Bank to maintain stock with a par value equal to 6% of its outstanding capital at both June 30, 2017 and December 31, 2016. Restricted equity securities consist of Federal Reserve Bank stock in the amount of $27.6 million and $23.8 million for June 30, 2017 and December 31, 2016 and FHLB stock in the amount of $42.1 million and $37.0 million as of June 30, 2017 and December 31, 2016, respectively.
 
Other-Than-Temporary-Impairment
During each quarter, the Company conducts an assessment of the securities portfolio for OTTI consideration. The assessment considers factors such as external credit ratings, delinquency coverage ratios, market price, management’s judgment, expectations of future performance, and relevant industry research and analysis. An impairment is other-than-temporary if any of the following conditions exist: the entity intends to sell the security; it is more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis; or the entity does not expect to recover the security’s entire amortized cost basis (even if the entity does not intend to sell). If a credit loss exists, but an entity does not intend to sell the impaired debt security and is not more likely than not to be required to sell before recovery, the impairment is other-than-temporary and should be separated into a credit portion to be recognized in earnings and the remaining amount relating to all other factors recognized as other comprehensive loss. Based on the assessment for the three and six months ended June 30, 2017, and in accordance with the guidance, no OTTI was recognized.

For the year ended December 31, 2015, the Company determined that a municipal security in the available for sale portfolio incurred credit-related OTTI of $300,000.  During the quarter ended March 31, 2016, the municipal security was sold.  As a result, the Company recognized an additional loss on sale of the previously written down security.
 

-14-


Realized Gains and Losses
The following table presents the gross realized gains and losses on and the proceeds from the sale of securities during the three and six months ended June 30, 2017 and 2016 (dollars in thousands).
 
 
Three Months Ended
June 30, 2017
 
Six Months Ended June 30, 2017
Realized gains (losses):
 

 
 

Gross realized gains
$
180

 
$
661

Gross realized losses
(63
)
 
(63
)
Net realized gains
$
117

 
$
598

 
 
 
 
Proceeds from sales of securities
$
31,320

 
$
52,626

 
Three Months Ended
June 30, 2016
 
Six Months Ended
June 30, 2016
Realized gains (losses):
 

 
 

Gross realized gains
$
3

 
$
242

Gross realized losses

 
(96
)
Net realized gains
$
3

 
$
146

 
 
 
 
Proceeds from sales of securities
$
892

 
$
15,424


 
3. LOANS AND ALLOWANCE FOR LOAN LOSSES

Loans are stated at their face amount, net of deferred fees and costs, and consist of the following at June 30, 2017 and December 31, 2016 (dollars in thousands):

 
June 30, 2017
 
December 31, 2016
Construction and Land Development
$
799,938

 
$
751,131

Commercial Real Estate - Owner Occupied
888,285

 
857,805

Commercial Real Estate - Non-Owner Occupied
1,698,329

 
1,564,295

Multifamily Real Estate
367,257

 
334,276

Commercial & Industrial
568,602

 
551,526

Residential 1-4 Family
1,066,519

 
1,029,547

Auto
274,162

 
262,071

HELOC
535,088

 
526,884

Consumer and all other
573,310

 
429,525

Total loans held for investment, net (1)
$
6,771,490

 
$
6,307,060

 
(1) Loans, as presented, are net of deferred fees and costs totaling $898,000 and $1.8 million as of June 30, 2017 and December 31, 2016, respectively.
 

-15-


The following table shows the aging of the Company’s loan portfolio, by segment, at June 30, 2017 (dollars in thousands):
 
 
30-59 Days
Past Due
 
60-89 Days
Past Due
 
Greater than 90
Days and still
Accruing
 
PCI
 
Nonaccrual
 
Current
 
Total Loans
Construction and Land Development
$
602

 
$
26

 
$
83

 
$
2,694

 
$
5,659

 
$
790,874

 
$
799,938

Commercial Real Estate - Owner Occupied
3,148

 
194

 
56

 
17,906

 
1,279

 
865,702

 
888,285

Commercial Real Estate - Non-Owner Occupied
1,530

 
571

 
298

 
16,308

 
4,765

 
1,674,857

 
1,698,329

Multifamily Real Estate
500

 

 

 
2,047

 

 
364,710

 
367,257

Commercial & Industrial
1,652

 
113

 
55

 
751

 
4,281

 
561,750

 
568,602

Residential 1-4 Family
2,477

 
5,663

 
2,369

 
15,087

 
6,128

 
1,034,795

 
1,066,519

Auto
1,562

 
240

 
35

 

 
270

 
272,055

 
274,162

HELOC
1,405

 
964

 
544

 
1,156

 
2,059

 
528,960

 
535,088

Consumer and all other
1,891

 
1,242

 
185

 
218

 
133

 
569,641

 
573,310

Total loans held for investment
$
14,767

 
$
9,013

 
$
3,625

 
$
56,167

 
$
24,574

 
$
6,663,344

 
$
6,771,490

 
The following table shows the aging of the Company’s loan portfolio, by segment, at December 31, 2016 (dollars in thousands):

 
30-59 Days
Past Due
 
60-89 Days
Past Due
 
Greater than 90
Days and still
Accruing
 
PCI
 
Nonaccrual
 
Current
 
Total Loans
Construction and Land Development
$
1,162

 
$
232

 
$
76

 
$
2,922

 
$
2,037

 
$
744,702

 
$
751,131

Commercial Real Estate - Owner Occupied
1,842

 
109

 
35

 
18,343

 
794

 
836,682

 
857,805

Commercial Real Estate - Non-Owner Occupied
2,369

 

 

 
17,303

 

 
1,544,623

 
1,564,295

Multifamily Real Estate
147

 

 

 
2,066

 

 
332,063

 
334,276

Commercial & Industrial
759

 
858

 
9

 
1,074

 
124

 
548,702

 
551,526

Residential 1-4 Family
7,038

 
534

 
2,048

 
16,200

 
5,279

 
998,448

 
1,029,547

Auto
2,570

 
317

 
111

 

 
169

 
258,904

 
262,071

HELOC
1,836

 
1,140

 
635

 
1,161

 
1,279

 
520,833

 
526,884

Consumer and all other
2,522

 
1,431

 
91

 
223

 
291

 
424,967

 
429,525

Total loans held for investment
$
20,245

 
$
4,621

 
$
3,005

 
$
59,292

 
$
9,973

 
$
6,209,924

 
$
6,307,060

 

-16-


The following table shows the PCI loan portfolios, by segment and their delinquency status, at June 30, 2017 (dollars in thousands):
 
 
30-89 Days Past
Due
 
Greater than 90
Days
 
Current
 
Total
Construction and Land Development
$
67

 
$

 
$
2,627

 
$
2,694

Commercial Real Estate - Owner Occupied
339

 
650

 
16,917

 
17,906

Commercial Real Estate - Non-Owner Occupied
1,195

 
76

 
15,037

 
16,308

Multifamily Real Estate

 

 
2,047

 
2,047

Commercial & Industrial
109

 

 
642

 
751

Residential 1-4 Family
1,138

 
903

 
13,046

 
15,087

HELOC
221

 
127

 
808

 
1,156

Consumer and all other
35

 

 
183

 
218

Total
$
3,104

 
$
1,756

 
$
51,307

 
$
56,167

 
The following table shows the PCI loan portfolios, by segment and their delinquency status, at December 31, 2016 (dollars in thousands):
 
 
30-89 Days Past
Due
 
Greater than 90
Days
 
Current
 
Total
Construction and Land Development
$

 
$
84

 
$
2,838

 
$
2,922

Commercial Real Estate - Owner Occupied
271

 
519

 
17,553

 
18,343

Commercial Real Estate - Non-Owner Occupied
409

 
126

 
16,768

 
17,303

Multifamily Real Estate

 

 
2,066

 
2,066

Commercial & Industrial
44

 
56

 
974

 
1,074

Residential 1-4 Family
1,298

 
945

 
13,957

 
16,200

HELOC
175

 
121

 
865

 
1,161

Consumer and all other

 

 
223

 
223

Total
$
2,197

 
$
1,851

 
$
55,244

 
$
59,292

 

-17-


The Company measures the amount of impairment by evaluating loans either in their collective homogeneous pools or individually. The following table shows the Company’s impaired loans, excluding PCI loans, by segment at June 30, 2017 and December 31, 2016 (dollars in thousands):
 
June 30, 2017
 
December 31, 2016
 
Recorded
Investment
 
Unpaid
Principal
Balance
 
Related
Allowance
 
Recorded
Investment
 
Unpaid
Principal
Balance
 
Related
Allowance
Loans without a specific allowance
 

 
 

 
 

 
 

 
 

 
 

Construction and Land Development
$
10,097

 
$
10,109

 
$

 
$
13,877

 
$
14,353

 
$

Commercial Real Estate - Owner Occupied
5,810

 
5,981

 

 
5,886

 
6,042

 

Commercial Real Estate - Non-Owner Occupied
1,671

 
1,671

 

 
1,399

 
1,399

 

Commercial & Industrial
1,040

 
1,285

 

 
648

 
890

 

Residential 1-4 Family
9,144

 
10,208

 

 
8,496

 
9,518

 

HELOC
1,174

 
1,351

 

 
1,017

 
1,094

 

Consumer and all other
605

 
716

 

 
230

 
427

 

Total impaired loans without a specific allowance
$
29,541

 
$
31,321

 
$

 
$
31,553

 
$
33,723

 
$

 
 
 
 
 
 
 
 
 
 
 
 
Loans with a specific allowance
 

 
 

 
 

 
 

 
 

 
 

Construction and Land Development
$
5,136

 
$
5,331

 
$
720

 
$
1,395

 
$
1,404

 
$
107

Commercial Real Estate - Owner Occupied
631

 
631

 
3

 
646

 
646

 
4

Commercial Real Estate - Non-Owner Occupied
7,991

 
8,040

 
640

 
2,809

 
2,809

 
474

Commercial & Industrial
5,836

 
5,945

 
1,034

 
857

 
880

 
14

Residential 1-4 Family
3,834

 
4,071

 
424

 
3,335

 
3,535

 
200

Auto
270

 
393

 
1

 
169

 
235

 
1

HELOC
937

 
962

 
70

 
323

 
433

 
15

Consumer and all other
24

 
88

 
1

 
62

 
298

 
1

Total impaired loans with a specific allowance
$
24,659

 
$
25,461

 
$
2,893

 
$
9,596

 
$
10,240

 
$
816

Total impaired loans
$
54,200

 
$
56,782

 
$
2,893

 
$
41,149

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