3. LOANS AND ALLOWANCE FOR LOAN LOSSES

The Bank’s financing receivables consist primarily of loans and a minimal amount of lease financing receivables (together referred to as “loans”). Loans that management has the intent and ability to hold for the foreseeable future or until maturity or payoff are reported at the principal balance outstanding, net of purchase premiums or discounts, deferred loan fees and costs and the allowance for loan losses. Interest income is accrued on the unpaid principal balance. Loan origination fees, net of certain direct origination costs, are deferred and recognized in interest income using the level-yield method without anticipating prepayments.

Lease financing receivables, all of which are direct financing leases, are reported at their principal balance outstanding net of any unearned income, deferred fees and costs and applicable allowance for losses. Leasing income is recognized on a basis that achieves a constant periodic rate of return on the outstanding lease financing balances over the lease terms.

The composition of loans follows:

(in thousands)	June 30, 2014		December 31, 2013

Residential real estate:
Owner occupied - bank originated	$	1,127,519	$	1,097,795
Owner occupied - correspondent*	11,785		—
Non owner occupied - bank originated	98,644		110,809
Commercial real estate	758,676		773,173
Commercial real estate - purchased whole loans	34,534		34,186
Construction & land development	41,109		44,351
Commercial & industrial	146,334		127,763
Lease financing receivables	310		—
Warehouse lines of credit	244,131		149,576
Home equity	235,919		226,782
Consumer:
RPG loans	3,022		1,827
Credit cards	9,321		9,030
Overdrafts	1,105		944
Other consumer	12,608		13,556

Total loans**	2,725,017		2,589,792
Less: Allowance for loan losses	22,772		23,026

Total loans, net	$	2,702,245	$	2,566,766

* - Loans acquired through the Bank’s Correspondent Lending channel are generally outside of the Bank’s historical market footprint.

** - Total loans are presented net of premiums, discounts and net loan origination fees and costs.

Purchased Credit Impaired (“PCI”) Loans

The contractual amount of PCI loans accounted for under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality, decreased from $58 million as of December 31, 2013 to $39 million as of June 30, 2014. The carrying value of these loans was $41 million as of December 31, 2013 compared to $27 million as of June 30, 2014.

The table below reconciles the contractually required and carrying amounts of PCI loans at June 30, 2014 and December 31, 2013:

(in thousands)	June 30, 2014			December 31, 2013

Contractually-required principal	$	38,934		$	57,992
Non-accretable amount	(9,292		)	(13,582		)
Accretable amount	(2,487		)	(3,457		)
Carrying value of loans	$	27,155		$	40,953

The following table presents a rollforward of the accretable amount on PCI loans for the three and six months ended June 30, 2014 and 2013:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands)	2014			2013			2014			2013

Balance, beginning of period	$	(2,765	)	$	(2,300	)	$	(3,457	)	$	(3,231	)
Transfers between non-accretable and accretable	(1,029		)	(712		)	(2,340		)	(1,696		)
Net accretion into interest income on loans, including loan fees	1,307			1,631			3,310			3,263
Other changes	—			—			—			283
Balance, end of period	$	(2,487	)	$	(1,381	)	$	(2,487	)	$	(1,381	)

Credit Quality Indicators

Based on the Bank’s internal analysis performed, the risk category of loans by class as defined in Republic’s Form 10-K for the year ended December 31, 2013 follows:

									Purchased		Purchased
									Credit		Credit
									Impaired		Impaired		Total
June 30, 2014			Special				Doubtful /		Loans -		Loans -		Rated
(in thousands)	Pass		Mention *		Substandard *		Loss		Group 1		Substandard		Loans**

Residential real estate:
Owner occupied - bank originated	$	—	$	28,233	$	13,182	$	—	$	1,779	$	—	$	43,194
Owner occupied - correspondent	—		—		—		—		—		—		—
Non owner occupied - bank originated	—		1,678		2,048		—		4,600		—		8,326
Commercial real estate	713,947		9,589		16,736		—		18,361		43		758,676
Commercial real estate -
Purchased whole loans	34,534		—		—		—		—		—		34,534
Construction & land development	37,725		124		2,388		—		872		—		41,109
Commercial & industrial	142,056		901		1,899		—		1,263		215		146,334
Lease financing receivables	310		—		—		—		—		—		310
Warehouse lines of credit	244,131		—		—		—		—		—		244,131
Home equity	—		—		2,246		—		—		—		2,246
Consumer:
RPG loans	—		—		—		—		—		—		—
Credit cards	—		—		—		—		—		—		—
Overdrafts	—		—		—		—		—		—		—
Other consumer	—		16		40		—		22		—		78

Total	$	1,172,703	$	40,541	$	38,539	$	—	$	26,897	$	258	$	1,278,938

									Purchased		Purchased
									Credit		Credit
									Impaired		Impaired		Total
December 31, 2013			Special				Doubtful /		Loans -		Loans -		Rated
(in thousands)	Pass		Mention *		Substandard *		Loss		Group 1		Substandard		Loans**

Residential real estate:
Owner occupied - bank originated	$	—	$	27,431	$	10,994	$	—	$	2,810	$	—	$	41,235
Owner occupied - correspondent	—		—		—		—		—		—		—
Non owner occupied - bank originated	—		919		1,292		—		7,936		—		10,147
Commercial real estate	709,610		11,125		25,296		—		27,142		—		773,173
Commercial real estate -
Purchased whole loans	34,186		—		—		—		—		—		34,186
Construction & land development	40,591		128		2,386		—		1,246		—		44,351
Commercial & industrial	123,646		296		2,035		—		1,564		222		127,763
Lease financing receivables	—		—		—		—		—		—		—
Warehouse lines of credit	149,576		—		—		—		—		—		149,576
Home equity	—		250		2,014		—		—		—		2,264
Consumer:
RPG loans	—		—		—		—		—		—		—
Credit cards	—		—		—		—		—		—		—
Overdrafts	—		—		—		—		—		—		—
Other consumer	—		18		66		—		33		—		117

Total	$	1,057,609	$	40,167	$	44,083	$	—	$	40,731	$	222	$	1,182,812

* - Special Mention and Substandard loans include $1 million and $5 million at June 30, 2014 and $1 million and $6 million at December 31, 2013, respectively, which were removed from the PCI population due to a post-acquisition troubled debt restructuring.

** - The above tables exclude all non-classified residential real estate and consumer loans at the respective period ends. The tables also exclude most non-classified small commercial & industrial and commercial real estate relationships totaling $100,000 or less. These loans are not rated by the Company since they are accruing interest and are not past due 80-days-or-more.

Allowance for Loan Losses

Activity in the allowance for loan losses (“Allowance”) follows:

	Three Months Ended						Six Months Ended
	June 30,						June 30,
(in thousands)	2014			2013			2014			2013

Allowance, beginning of period	$	22,367		$	23,563		$	23,026		$	23,729

Charge offs - Traditional Banking	(715		)	(2,562		)	(1,627		)	(3,117		)
Charge offs - RPG	—			—			—			—
Total charge offs	(715		)	(2,562		)	(1,627		)	(3,117		)

Recoveries - Traditional Banking	364			445			857			860
Recoveries - RPG	63			140			526			739
Total recoveries	427			585			1,383			1,599

Net (charge offs) recoveries - Traditional Banking	(351		)	(2,117		)	(770		)	(2,257		)
Net (charge offs) recoveries - RPG	63			140			526			739
Net (charge offs) recoveries	(288		)	(1,977		)	(244		)	(1,518		)

Provision for losses - Traditional Banking	710			1,045			470			1,019
Provision for losses - RPG	(17		)	(140		)	(480		)	(739		)
Total provision for losses	693			905			(10		)	280

Allowance, end of period	$	22,772		$	22,491		$	22,772		$	22,491

The Allowance calculation includes the following qualitative factors, which are considered in combination with the Bank’s historical loss rates in determining the general loss reserve within the Allowance:

· Changes in nature, volume and seasoning of the portfolio;

· Changes in experience, ability and depth of lending management and other relevant staff;

· Changes in the quality of the Bank’s credit review system;

· Changes in financing policies and procedures, including changes in underwriting standards and collection, charge-off, and recovery practices not considered elsewhere in estimating credit losses;

· Changes in the volume and severity of past due, non-accrual and classified loans;

· Changes in the value of underlying collateral for collateral-dependent loans;

· Changes in international, national, regional, and local economic and business conditions and developments that affect the collectibility of portfolios, including the condition of various market segments;

· The existence and effect of any concentrations of credit, and changes in the level of such concentrations; and

· The effect of other external factors such as competition and legal and regulatory requirements on the level of estimated credit losses in the institution’s existing portfolio.

The following tables present the activity in the Allowance by portfolio class for the three months ended June 30, 2014 and 2013:

												Commercial
	Residential Real Estate											Real Estate -								Lease
Three Months Ended	Owner Occupied			Owner Occupied		Non Owner Occupied			Commercial			Purchased		Construction &			Commercial &			Financing
June 30, 2014 (in thousands)	Bank Originated			Correspondent		Bank Originated			Real Estate			Whole Loans		Land Development			Industrial			Receivables

Beginning balance	$	7,751		$	—	$	984		$	7,901		$	34	$	1,192		$	1,080		$	—
Provision for losses	460			60		(141		)	(206		)	—		(185		)	70			3
Charge offs	(202		)	—		(7		)	(2		)	—		(1		)	(20		)	—
Recoveries	46			—		3			3			—		84			22			—

Ending balance	$	8,055		$	60	$	839		$	7,696		$	34	$	1,090		$	1,152		$	3

(continued)

	Warehouse					Consumer
	Lines of		Home			RPG			Credit						Other
	Credit		Equity			Loans			Cards			Overdrafts			Consumer			Total

Beginning balance	$	477	$	2,371		$	—		$	276		$	212		$	89		$	22,367
Provision for losses	133		235			(17		)	40			113			128			693
Charge offs	—		(217		)	—			(37		)	(142		)	(87		)	(715		)
Recoveries	—		14			63			7			97			88			427

Ending balance	$	610	$	2,403		$	46		$	286		$	280		$	218		$	22,772

												Commercial
	Residential Real Estate											Real Estate -								Lease
Three Months Ended	Owner Occupied			Owner Occupied		Non Owner Occupied			Commercial			Purchased		Construction &			Commercial &			Finance
June 30, 2013 (in thousands)	Bank Originated			Correspondent		Bank Originated			Real Estate			Whole Loans		Land Development			Industrial			Receivables

Beginning balance	$	6,984		$	—	$	924		$	8,781		$	34	$	3,101		$	727		$	—
Provision for losses	991			—		(173		)	572			—		(916		)	244			—
Charge offs	(512		)	—		(115		)	(651		)	—		(600		)	(310		)	—
Recoveries	100			—		6			61			—		2			49			—

Ending balance	$	7,563		$	—	$	642		$	8,763		$	34	$	1,587		$	710		$	—

(continued)

	Warehouse					Consumer
	Lines of		Home			RPG			Credit						Other
	Credit		Equity			Loans			Cards			Overdrafts			Consumer			Total

Beginning balance	$	433	$	1,909		$	—		$	326		$	209		$	135		$	23,563
Provision for losses	29		83			(140		)	63			71			81			905
Charge offs	—		(93		)	—			(50		)	(130		)	(101		)	(2,562		)
Recoveries	—		33			140			5			99			90			585

Ending balance	$	462	$	1,932		$	—		$	344		$	249		$	205		$	22,491

The following tables present the activity in the Allowance by portfolio class for the six months ended June 30, 2014 and 2013:

												Commercial
	Residential Real Estate											Real Estate -								Lease
Six Months Ended	Owner Occupied			Owner Occupied		Non Owner Occupied			Commercial			Purchased		Construction &			Commercial &			Financing
June 30, 2014 (in thousands)	Bank Originated			Correspondent		Bank Originated			Real Estate			Whole Loans		Land Development			Industrial			Receivables

Beginning balance	$	7,816		$	—	$	1,023		$	8,309		$	34	$	1,296		$	1,089		$	—
Provision for losses	578			60		(171		)	(384		)	—		(273		)	13			3
Charge offs	(419		)	—		(22		)	(374		)	—		(18		)	(20		)	—
Recoveries	80			—		9			145			—		85			70			—

Ending balance	$	8,055		$	60	$	839		$	7,696		$	34	$	1,090		$	1,152		$	3

(continued)

	Warehouse					Consumer
	Lines of		Home			RPG			Credit						Other
	Credit		Equity			Loans			Cards			Overdrafts			Consumer			Total

Beginning balance	$	449	$	2,396		$	—		$	289		$	199		$	126		$	23,026
Provision for losses	161		235			(480		)	22			160			66			(10		)
Charge offs	—		(283		)	—			(42		)	(293		)	(156		)	(1,627		)
Recoveries	—		55			526			17			214			182			1,383

Ending balance	$	610	$	2,403		$	46		$	286		$	280		$	218		$	22,772

												Commercial
	Residential Real Estate											Real Estate -								Lease
Six Months Ended	Owner Occupied			Owner Occupied		Non Owner Occupied			Commercial			Purchased		Construction &			Commercial &			Financing
June 30, 2013 (in thousands)	Bank Originated			Correspondent		Bank Originated			Real Estate			Whole Loans		Land Development			Industrial			Receivables

Beginning balance	$	7,006		$	—	$	1,049		$	8,843		$	34	$	2,769		$	580		$	—
Provision for losses	1,071			—		(263		)	506			—		(620		)	386			—
Charge offs	(713		)	—		(158		)	(665		)	—		(600		)	(310		)	—
Recoveries	199			—		14			79			—		38			54			—

Ending balance	$	7,563		$	—	$	642		$	8,763		$	34	$	1,587		$	710		$	—

(continued)

	Warehouse						Consumer
	Lines of			Home			RPG			Credit						Other
	Credit			Equity			Loans			Cards			Overdrafts			Consumer			Total

Beginning balance	$	541		$	2,348		$	—		$	210		$	198		$	151		$	23,729
Provision for losses	(79		)	(352		)	(739		)	184			127			59			280
Charge offs	—			(136		)	—			(60		)	(305		)	(170		)	(3,117		)
Recoveries	—			72			739			10			229			165			1,599

Ending balance	$	462		$	1,932		$	—		$	344		$	249		$	205		$	22,491

Non-performing Loans and Other Assets

Detail of non-performing loans and other assets follows:

(dollars in thousands)	June 30, 2014		December 31, 2013

Loans on non-accrual status(1)	$	19,606	$	19,104
Loans past due 90-days-or-more and still on accrual(2)	734		1,974

Total non-performing loans	20,340		21,078
Other real estate owned	11,613		17,102
Total non-performing assets	$	31,953	$	38,180

Credit Quality Ratios

Non-performing loans to total loans	0.75	%	0.81	%
Non-performing assets to total loans (including OREO)	1.17	%	1.46	%
Non-performing assets to total assets	0.92	%	1.13	%

(1) Loans on non-accrual status include impaired loans, which are discussed subsequently in Footnote 3 in this section of the filing.

(2) All loans past due 90-days-or-more and still accruing were PCI loans accounted for under ASC 310-30.

The following table presents the recorded investment in non-accrual loans and loans past due 90-days-or-more and still on accrual by class:

					Past Due 90-Days-or-More
	Non-Accrual				and Still Accruing Interest*
(in thousands)	June 30, 2014		December 31, 2013		June 30, 2014		December 31, 2013

Residential real estate:
Owner occupied - bank originated	$	9,702	$	8,538	$	173	$	673
Owner occupied - correspondent	—		—		—		—
Non owner occupied - bank originated	1,250		1,279		—		—
Commercial real estate	5,008		7,643		561		—
Commercial real estate - purchased whole loans	—		—		—		—
Construction & land dev.	1,990		97		—		70
Commercial & industrial	131		327		—		1,231
Lease financing receivables	—		—		—		—
Warehouse lines of credit	—		—		—		—
Home equity	1,444		1,128		—		—
Consumer:
RPG loans	—		—		—		—
Credit cards	—		—		—		—
Overdrafts	—		—		—		—
Other consumer	81		92		—		—

Total	$	19,606	$	19,104	$	734	$	1,974

* - For all periods presented, loans past due 90-days-or-more and still on accrual consist entirely of PCI loans.

Non-accrual loans and loans past due 90-days-or-more and still on accrual include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. Non-accrual loans are typically returned to accrual status when all the principal and interest amounts contractually due are brought current and held current for six consecutive months and future contractual payments are reasonably assured. Troubled debt restructurings (“TDR”s) on non-accrual status are reviewed for return to accrual status on an individual basis, with additional consideration given to performance under the modified terms.

Delinquent Loans

The following tables present the aging of the recorded investment in loans by class:

	30 - 59			60 - 89			90 or More
June 30, 2014	Days			Days			Days			Total			Total Not
(dollars in thousands)	Delinquent			Delinquent			Delinquent*			Delinquent			Delinquent		Total

Residential real estate:
Owner occupied - bank originated	$	1,462		$	1,768		$	3,114		6,344			$	1,121,175	$	1,127,519
Owner occupied - correspondent	—			—			—			—			11,785		11,785
Non owner occupied - bank originated	223			60			131			414			98,230		98,644
Commercial real estate	638			117			1,385			2,140			756,536		758,676
Commercial real estate - purchased whole loans	—			—			—			—			34,534		34,534
Construction & land development	—			—			1,990			1,990			39,119		41,109
Commercial & industrial	—			—			131			131			146,203		146,334
Lease financing receivables	—			—			—			—			310		310
Warehouse lines of credit	—			—			—			—			244,131		244,131
Home equity	284			25			344			653			235,266		235,919
Consumer:
RPG loans	3			93			—			96			2,926		3,022
Credit cards	59			12			4			75			9,246		9,321
Overdrafts	124			2			—			126			979		1,105
Other consumer	75			18			—			93			12,515		12,608

Total	$	2,868		$	2,095		$	7,099		$	12,062		$	2,712,955	$	2,725,017
Delinquency ratio**	0.11		%	0.08		%	0.26		%	0.44		%

	30 - 59			60 - 89			90 or More
December 31, 2013	Days			Days			Days			Total			Total Not
(dollars in thousands)	Delinquent			Delinquent			Delinquent*			Delinquent			Delinquent		Total

Residential real estate:
Owner occupied - bank originated	$	1,956		$	733		$	3,668		$	6,357		$	1,091,438	$	1,097,795
Owner occupied - correspondent	—			—			—			—			—		—
Non owner occupied - bank originated	195			967			131			1,293			109,516		110,809
Commercial real estate	874			384			3,940			5,198			767,975		773,173
Commercial real estate - purchased whole loans	—			—			—			—			34,186		34,186
Construction & land development	332			—			167			499			43,852		44,351
Commercial & industrial	—			—			1,415			1,415			126,348		127,763
Lease financing receivables	—			—			—			—			—		—
Warehouse lines of credit	—			—			—			—			149,576		149,576
Home equity	665			48			397			1,110			225,672		226,782
Consumer:
RPG loans	—			—			—			—			1,827		1,827
Credit cards	87			6			5			98			8,932		9,030
Overdrafts	159			—			—			159			785		944
Other consumer	67			27			—			94			13,462		13,556

Total	$	4,335		$	2,165		$	9,723		$	16,223		$	2,573,569	$	2,589,792
Delinquency ratio**	0.17		%	0.08		%	0.38		%	0.63		%

* - Except for PCI loans, all loans 90-days-or-more past due as of June 30, 2014 and December 31, 2013 were on non-accrual status.

** - Delinquency ratio equals delinquent loans divided by total loans.

Impaired Loans

The Bank defines impaired loans as follows:

· All loans internally rated as “Substandard,” “Doubtful” or “Loss;”

· All loans internally rated in a PCI category with cash flows that have deteriorated from management’s initial estimate;

· All loans on non-accrual status and non-PCI loans past due 90 days-or-more still on accrual;

· All retail and commercial TDRs; and

· Any other situation where the full collection of the total amount due for a loan is improbable or otherwise meets the definition of impaired.

See the section titled “Credit Quality Indicators” in this section of the filing for additional discussion regarding the Bank’s loan classification structure.

Information regarding the Bank’s impaired loans follows:

(in thousands)	June 30, 2014		December 31, 2013

Loans with no allocated Allowance	$	31,397	$	36,721
Loans with allocated Allowance	61,605		71,273

Total impaired loans	$	93,002	$	107,994

Amount of the Allowance allocated	$	5,866	$	6,674

Approximately $15 million and $24 million of impaired loans at June 30, 2014 and December 31, 2013 were PCI loans. Approximately $6 million of impaired loans at both June 30, 2014 and December 31, 2013 were formerly PCI loans which became classified as “impaired” through a troubled debt restructuring.

The following tables present the balance in the Allowance and the recorded investment in loans by portfolio class based on impairment method as of June 30, 2014 and December 31, 2013:


									Commercial
	Residential Real Estate								Real Estate -						Lease
	Owner Occupied		Owner Occupied		Non Owner Occupied		Commercial		Purchased		Construction &		Commercial &		Financing
June 30, 2014 (in thousands)	Bank Originated		Correspondent		Bank Originated		Real Estate		Whole Loans		Land Development		Industrial		Receivables

Allowance:
Ending Allowance balance:
Individually evaluated for impairment, excluding PCI loans	$	3,459	$	—	$	87	$	853	$	—	$	256	$	—	$	—
Collectively evaluated for impairment	4,553		60		625		6,340		34		834		835		3
PCI loans with post acquisition impairment	43		—		127		503		—		—		317		—
PCI loans without post acquisition impairment	—		—		—		—		—		—		—		—

Total ending Allowance:	$	8,055	$	60	$	839	$	7,696	$	34	$	1,090	$	1,152	$	3

Loans:
Impaired loans individually evaluated, excluding PCI loans	$	41,191	$	—	$	3,038	$	25,072	$	—	$	2,584	$	4,153	$	—
Loans collectively evaluated for impairment	1,084,549		11,785		91,006		715,200		34,534		37,653		140,703		310
PCI loans with post acquisition impairment	909		—		3,745		8,615		—		—		1,383		—
PCI loans without post acquisition impairment	870		—		855		9,789		—		872		95		—

	$	1,127,519	$	11,785	$	98,644	$	758,676	$	34,534	$	41,109	$	146,334	$	310

(continued)

	Warehouse				Consumer
	Lines of		Home		RPG		Credit				Other
	Credit		Equity		Loans		Cards		Overdrafts		Consumer		Total

Allowance:
Ending Allowance balance:
Individually evaluated for impairment, excluding PCI loans	$	—	$	180	$	—	$	—	$	—	$	40	$	4,875
Collectively evaluated for impairment	610		2,223		46		286		280		177		16,906
PCI loans with post acquisition impairment	—		—		—		—		—		1		991
PCI loans without post acquisition impairment	—		—		—		—		—		—		—

Total ending Allowance:	$	610	$	2,403	$	46	$	286	$	280	$	218	$	22,772

Loans:
Impaired loans individually evaluated, excluding PCI loans	$	—	$	2,246	$	—	$	—	$	—	$	55	$	78,339
Loans collectively evaluated for impairment	244,131		233,673		3,022		9,321		1,105		12,531		2,619,523
PCI loans with post acquisition impairment	—		—		—		—		—		11		14,663
PCI loans without post acquisition impairment	—		—		—		—		—		11		12,492

Total ending loan balance	$	244,131	$	235,919	$	3,022	$	9,321	$	1,105	$	12,608	$	2,725,017

							Commercial
	Residential Real Estate						Real Estate -								Lease
	Owner Occupied		Owner Occupied		Non Owner Occupied		Commercial		Purchased		Construction &		Commercial &		Financing
December 31, 2013 (in thousands)	Bank Originated		Correspondent		Bank Originated		Real Estate		Whole Loans		Land Development		Industrial		Receivables

Allowance:
Ending Allowance balance:
Individually evaluated for impairment, excluding PCI loans	$	3,606	$	—	$	61	$	1,232	$	—	$	146	$	111	$	—
Collectively evaluated for impairment	4,159		—		672		6,474		34		1,140		661		—
PCI loans with post acquisition impairment	51		—		290		603		—		10		317		—
PCI loans without post acquisition impairment	—		—		—		—		—		—		—		—

Total ending Allowance:	$	7,816	$	—	$	1,023	$	8,309	$	34	$	1,296	$	1,089	$	—

Loans:
Impaired loans individually evaluated, excluding PCI loans	$	39,211	$	—	$	2,061	$	33,519	$	—	$	2,494	$	4,521	$	—
Loans collectively evaluated for impairment	1,055,774		—		100,812		712,512		34,186		40,611		121,456		—
PCI loans with post acquisition impairment	1,455		—		5,984		14,512		—		267		1,609		—
PCI loans without post acquisition impairment	1,355		—		1,952		12,630		—		979		177		—

Total ending loan balance	$	1,097,795	$	—	$	110,809	$	773,173	$	34,186	$	44,351	$	127,763	$	—

(continued)

	Warehouse				Consumer
	Lines of		Home		RPG		Credit				Other
	Credit		Equity		Loans		Cards		Overdrafts		Consumer		Total

Allowance:
Ending Allowance balance:
Individually evaluated for impairment, excluding PCI loans	$	—	$	203	$	—	$	—	$	—	$	43	$	5,402
Collectively evaluated for impairment	449		2,193		2		289		199		80		16,352
PCI loans with post acquisition impairment	—		—		—		—		—		1		1,272
PCI loans without post acquisition impairment	—		—		—		—		—		—		—

Total ending Allowance:	$	449	$	2,396	$	2	$	289	$	199	$	124	$	23,026

Loans:
Impaired loans individually evaluated, excluding PCI loans	$	—	$	2,264	$	—	$	—	$	—	$	85	$	84,155
Loans collectively evaluated for impairment	149,576		224,518		1,827		9,030		944		13,438		2,464,684
PCI loans with post acquisition impairment	—		—		—		—		—		12		23,839
PCI loans without post acquisition impairment	—		—		—		—		—		21		17,114

Total ending loan balance	$	149,576	$	226,782	$	1,827	$	9,030	$	944	$	13,556	$	2,589,792

The following tables present loans individually evaluated for impairment by class as of June 30, 2014 and December 31, 2013 and for the three and six months ended June 30, 2014 and 2013. The difference between the “Unpaid Principal Balance” and “Recorded Investment” columns represents life-to-date partial write downs/charge offs taken on individual impaired credits.

	As of						Three Months Ended						Six Months Ended
	June 30, 2014						June 30, 2014						June 30, 2014
											Cash Basis						Cash Basis
	Unpaid						Average		Interest		Interest		Average		Interest		Interest
	Principal		Recorded		Allowance		Recorded		Income		Income		Recorded		Income		Income
(in thousands)	Balance		Investment		Allocated		Investment		Recognized		Recognized		Investment		Recognized		Recognized

Impaired loans with no related allowance recorded:
Residential real estate:
Owner occupied - bank originated	$	7,276	$	6,857	$	—	$	7,104	$	78	$	—	$	6,925	$	125	$	—
Owner occupied - correspondent	—		—		—		—		—		—		—		—		—
Non Owner occupied - bank originated	1,767		1,591		—		1,474		15		—		1,401		25		—
Commercial real estate	15,825		14,848		—		17,236		150		—		18,475		290		—
Commercial real estate - purchased whole loans	—		—		—		—		—		—		—		—		—
Construction & land development	2,081		2,081		—		2,081		1		—		2,083		2		—
Commercial & industrial	4,201		4,153		—		4,181		61		—		4,206		121		—
Lease financing receivables	—		—		—		—		—		—		—		—		—
Warehouse lines of credit	—		—		—		—		—		—		—		—		—
Home equity	2,008		1,867		—		1,903		11		—		1,794		21		—
Consumer:
RPG loans	—		—		—		—		—		—		—		—		—
Credit cards	—		—		—		—		—		—		—		—		—
Overdrafts	—		—		—		—		—		—		—		—		—
Other consumer	—		—		—		—		—		—		6		—		—

Impaired loans with an allowance recorded:
Residential real estate:
Owner occupied - retail	35,583		35,243		3,502		35,048		253		—		34,731		493		—
Owner occupied - correspondent	—		—		—		—		—		—		—		—		—
Non Owner occupied - bank originated	5,192		5,192		214		5,791		122		—		6,123		175		—
Commercial real estate	18,877		18,839		1,356		19,078		207		—		21,744		374		—
Commercial real estate - purchased whole loans	—		—		—		—		—		—		—		—		—
Construction & land development	503		503		256		508		6		—		563		11		—
Commercial & industrial	1,383		1,383		317		1,540		58		—		1,651		60		—
Lease financing receivables	—		—		—		—		—		—		—		—		—
Warehouse lines of credit	—		—		—		—		—		—		—		—		—
Home equity	382		379		180		586		—		—		620		—		—
Consumer:
RPG loans	—		—		—		—		—		—		—		—		—
Credit cards	—		—		—		—		—		—		—		—		—
Overdrafts	—		—		—		—		—		—		—		—		—
Other consumer	66		66		41		79		—		—		79		1		—
Total impaired loans	$	95,144	$	93,002	$	5,866	$	96,609	$	962	$	—	$	100,401	$	1,698	$	—

	As of						Three Months Ended						Six Months Ended
	December 31, 2013						June 30, 2013						June 30, 2013
											Cash Basis						Cash Basis
	Unpaid						Average		Interest		Interest		Average		Interest		Interest
	Principal		Recorded		Allowance		Recorded		Income		Income		Recorded		Income		Income
(in thousands)	Balance		Investment		Allocated		Investment		Recognized		Recognized		Investment		Recognized		Recognized

Impaired loans with no related allowance recorded:
Residential real estate:
Owner occupied - bank originated	$	7,136	$	6,569	$	—	$	11,625	$	109	$	—	$	12,119	$	205	$	—
Owner occupied - correspondent	—		—		—		—		—		—		—		—		—
Non Owner occupied - bank originated	1,498		1,256		—		1,778		5		—		1,450		7		—
Commercial real estate	21,886		20,953		—		22,676		561		—		19,881		827		—
Commercial real estate - purchased whole loans	—		—		—		—		—		—		—		—		—
Construction & land development	2,087		2,087		—		2,292		67		—		2,223		90		—
Commercial & industrial	4,367		4,258		—		3,295		62		—		3,568		94		—
Lease financing receivables	—		—		—		—		—		—		—		—		—
Warehouse lines of credit	—		—		—		—		—		—		—		—		—
Home equity	1,695		1,577		—		2,313		35		—		2,057		51		—
Consumer:
RPG loans	—		—		—		—		—		—		—		—		—
Credit cards	—		—		—		—		—		—		—		—		—
Overdrafts	—		—		—		—		—		—		—		—		—
Other consumer	18		18		—		248		2		—		294		2		—

Impaired loans with an allowance recorded:
Residential real estate:
Owner occupied - bank originated	34,393		34,097		3,657		33,254		261		—		32,656		481		—
Owner occupied - correspondent	—		—		—		—		—		—		—		—		—
Non Owner occupied - bank originated	6,789		6,789		351		3,968		47		—		3,854		77		—
Commercial real estate	27,080		27,078		1,835		24,655		497		—		25,204		768		—
Commercial real estate - purchased whole loans	—		—		—		—		—		—		—		—		—
Construction & land development	674		674		156		2,759		49		—		2,900		73		—
Commercial & industrial	1,872		1,872		428		2,931		81		—		2,906		124		—
Lease financing receivables	—		—		—		—		—		—		—		—		—
Warehouse lines of credit	—		—		—		—		—		—		—		—		—
Home equity	688		687		203		1,141		7		—		1,385		11		—
Consumer:
RPG loans	—		—		—		—		—		—		—		—		—
Credit cards	—		—		—		—		—		—		—		—		—
Overdrafts	—		—		—		—		—		—		—		—		—
Other consumer	79		79		44		78		1		—		80		1		—
Total impaired loans	$	110,262	$	107,994	$	6,674	$	113,013	$	1,784	$	—	$	110,577	$	2,811	$	—

Troubled Debt Restructurings

A TDR is the situation where, due to a borrower’s financial difficulties, the Bank grants a concession to the borrower that the Bank would not otherwise have considered. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without the modification. This evaluation is performed under the Bank’s internal underwriting policy.

All TDRs are considered “Impaired,” including PCI loans subsequently restructured. The majority of the Bank’s commercial related and construction TDRs involve a restructuring of financing terms such as a reduction in the payment amount to require only interest and escrow (if required) and/or extending the maturity date of the debt. The substantial majority of the Bank’s residential real estate TDR concessions involve reducing the client’s loan payment through a rate reduction for a set period of time based on the borrower’s ability to service the modified loan payment. Retail loans may also be classified as TDRs due to legal modifications, which include: a) customers that declare bankruptcy under Chapter 7 of the Bankruptcy Code and fail to reaffirm their debt with the Bank or b) upon death of the customer before full repayment of their loan.

Management determines whether to classify a TDR as non-performing based on its accrual status prior to modification. Non-accrual loans modified as TDRs typically remain on non-accrual status and continue to be reported as non-performing loans for a minimum of six months. Accruing loans modified as TDRs are evaluated for non-accrual status based on a current evaluation of the borrower’s financial condition and ability and willingness to service the modified debt. At both June 30, 2014 and December 31, 2013, $13 million of TDRs were on non-accrual status.

Detail of TDRs differentiated by loan class and accrual status follows:

	Troubled Debt		Troubled Debt		Total
	Restructurings on		Restructurings on		Troubled Debt
June 30, 2014 (in thousands)	Non-Accrual Status		Accrual Status		Restructurings

Residential real estate	$	6,205	$	33,872	$	40,077
Commercial real estate	4,807		17,865		22,672
Construction & land development	1,990		700		2,690
Commercial & industrial	131		4,022		4,153

Total troubled debt restructurings	$	13,133	$	56,459	$	69,592

	Troubled Debt		Troubled Debt		Total
	Restructurings on		Restructurings on		Troubled Debt
December 31, 2013 (in thousands)	Non-Accrual Status		Accrual Status		Restructurings

Residential real estate	$	5,514	$	31,705	$	37,219
Commercial real estate	7,486		22,041		29,527
Construction & land development	97		2,608		2,705
Commercial & industrial	143		4,378		4,521

Total troubled debt restructurings	$	13,240	$	60,732	$	73,972

The Bank considers a TDR to be performing to its modified terms if the loan is in accrual status and not past due 30 days or more as of the reporting date. A summary of TDRs outstanding by modification and performance under modified terms at June 30, 2014 and December 31, 2013 follows:

	Troubled Debt		Troubled Debt
	Restructurings		Restructurings		Total
	Performing to		Not Performing to		Troubled Debt
June 30, 2014 (in thousands)	Modified Terms		Modified Terms		Restructurings

Residential real estate loans (including home equity loans):
Interest only payments	$	697	$	165	$	862
Rate reduction	28,287		4,299		32,586
Principal deferral	1,327		412		1,739
Bankrupt customer	995		1,336		2,331
Deceased customer	2,166		393		2,559
Total residential TDRs	33,472		6,605		40,077

Commercial related and construction/land development loans:
Interest only payments	3,750		1,146		4,896
Rate reduction	12,216		1,582		13,798
Principal deferral	6,179		4,427		10,606
Bankrupt customer	—		215		215
Total commercial TDRs	22,145		7,370		29,515
Total troubled debt restructurings	$	55,617	$	13,975	$	69,592

	Troubled Debt		Troubled Debt
	Restructurings		Restructurings		Total
	Performing to		Not Performing to		Troubled Debt
December 31, 2013 (in thousands)	Modified Terms		Modified Terms		Restructurings

Residential real estate loans (including home equity loans):
Interest only payments	$	430	$	671	$	1,101
Rate reduction	26,004		4,993		30,997
Principal deferral	1,840		632		2,472
Bankrupt customer	1,247		1,402		2,649
Total residential TDRs	29,521		7,698		37,219

Commercial related and construction/land development loans:
Interest only payments	6,086		1,321		7,407
Rate reduction	13,958		663		14,621
Principal deferral	8,983		5,351		14,334
Bankrupt customer	—		391		391
Total commercial TDRs	29,027		7,726		36,753
Total troubled debt restructurings	$	58,548	$	15,424	$	73,972

As of June 30, 2014 and December 31, 2013, 80% and 79% of the Bank’s TDRs were performing according to their modified terms. The Bank had provided $4 million and $5 million of specific reserve allocations to customers whose debt terms have been modified in TDRs as of June 30, 2014 and December 31, 2013. Specific reserve allocations are generally assessed for commercial loans prior to loans being modified as a TDR, as most migrate from the Bank’s internal “watch list” and have been specifically provided for or reserved for as part of the Bank’s normal loss provisioning methodology. The Bank has not committed to finance any additional material amounts to its existing TDR relationships at June 30, 2014.

A summary of the categories of TDR loan modifications that occurred during the three months ended June 30, 2014 and 2013 follows:

	Troubled Debt		Troubled Debt
	Restructurings		Restructurings		Total
Three Months Ended	Performing to		Not Performing to		Troubled Debt
June 30, 2014 (in thousands)	Modified Terms		Modified Terms		Restructurings

Residential real estate loans (including home equity loans):
Rate reduction	$	194	$	351	$	545
Principal deferral	360		30		390
Bankrupt customer	26		—		26
Deceased customer	134		95		229
Total residential TDRs	714		476		1,190

Commercial related and construction/land development loans:
Interest only payments	—		443		443
Total commercial TDRs	—		443		443
Total troubled debt restructurings	$	714	$	919	$	1,633

	Troubled Debt		Troubled Debt
	Restructurings		Restructurings		Total
Three Months Ended	Performing to		Not Performing to		Troubled Debt
June 30, 2013 (in thousands)	Modified Terms		Modified Terms		Restructurings

Residential real estate loans (including home equity loans):
Rate reduction	$	741	$	118	$	859
Principal deferral	165		27		192
Bankrupt customer	148		1,006		1,154
Total residential TDRs	1,054		1,151		2,205

Commercial related and construction/land development loans:
Interest only payments	94		—		94
Principal deferral	409		—		409
Total commercial TDRs	503		—		503
Total troubled debt restructurings	$	1,557	$	1,151	$	2,708

As of June 30, 2014 and 2013, 44% and 57% of the Bank’s TDRs that occurred during the second quarters of 2014 and 2013 were performing according to their modified terms. The Bank provided $54,000 and $506,000 in specific reserve allocations to customers whose loan terms were modified in TDRs during the second quarters of 2014 and 2013. As stated above, specific reserves for commercial loans are generally assessed prior to loans being modified as a TDR, as most of these loans migrate from the Bank’s internal watch list and have been specifically reserved for as part of the Bank’s normal reserving methodology.

A summary of the categories of TDR loan modifications that occurred during the six months ended June 30, 2014 and 2013 follows:

	Troubled Debt		Troubled Debt
	Restructurings		Restructurings		Total
Six Months Ended	Performing to		Not Performing to		Troubled Debt
June 30, 2014 (in thousands)	Modified Terms		Modified Terms		Restructurings

Residential real estate loans (including home equity loans):
Rate reduction	$	1,042	$	1,470	$	2,512
Principal deferral	360		30		390
Bankrupt customer	26		284		310
Deceased customer	2,166		393		2,559
Total residential TDRs	3,594		2,177		5,771

Commercial related and construction/land development loans:
Interest only payments	—		443		443
Rate reduction	—		1,103		1,103
Principal deferral	—		1,990		1,990
Total commercial TDRs	—		3,536		3,536
Total troubled debt restructurings	$	3,594	$	5,713	$	9,307

	Troubled Debt		Troubled Debt
	Restructurings		Restructurings		Total
Six Months Ended	Performing to		Not Performing to		Troubled Debt
June 30, 2013 (in thousands)	Modified Terms		Modified Terms		Restructurings

Residential real estate loans (including home equity loans):
Interest only payments	$	64	$	—	$	64
Rate reduction	1,758		641		2,399
Principal deferral	460		293		753
Bankrupt customer	2,885		1,243		4,128
Total residential TDRs	5,167		2,177		7,344

Commercial related and construction/land development loans:
Interest only payments	141		—		141
Principal deferral	8,339		—		8,339
Total commercial TDRs	8,480		—		8,480
Total troubled debt restructurings	$	13,647	$	2,177	$	15,824

As of June 30, 2014 and 2013, 39% and 86% of the Bank’s TDRs that occurred during the first six months of 2014 and 2013 were performing according to their modified terms. The Bank provided $142,000 and $869,000 in specific reserve allocations to customers whose loan terms were modified in TDRs during the first six months of 2014 and 2013. As stated above, specific reserves are generally assessed prior to loans being modified as a TDR, as most of these loans migrate from the Bank’s internal watch list and have been specifically reserved for as part of the Bank’s normal reserving methodology.

There were no significant changes between the pre and post modification loan balances at June 30, 2014 and December 31, 2013.

The following tables present loans by class modified as troubled debt restructurings within the previous twelve months of June 30, 2014 and 2013 and for which there was a payment default during the three months ended June 30, 2014 and 2013:

Three Months Ended	Number of	Recorded
June 30, 2014 (dollars in thousands)	Loans	Investment

Residential real estate:
Owner occupied - bank originated	3	$	149
Owner occupied - correspondent	—	—
Non owner occupied - bank originated	—	—
Commercial real estate	1	443
Commercial real estate - purchased whole loans	—	—
Construction & land development	—	—
Commercial & industrial	—	—
Lease financing receivables	—	—
Warehouse lines of credit	—	—
Home equity	—	—
Consumer:
RPG loans	—	—
Credit cards	—	—
Overdrafts	—	—
Other consumer	—	—

Total	4	$	592

Three Months Ended	Number of	Recorded
June 30, 2013 (dollars in thousands)	Loans	Investment

Residential real estate:
Owner occupied - bank originated	20	$	2,712
Owner occupied - correspondent	—	—
Non owner occupied - bank originated	—	—
Commercial real estate	1	302
Commercial real estate - purchased whole loans	—	—
Construction & land development	—	—
Commercial & industrial	—	—
Lease financing receivables	—	—
Warehouse lines of credit	—	—
Home equity	2	358
Consumer:
RPG loans	—	—
Credit cards	—	—
Overdrafts	—	—
Other consumer	2	328

Total	25	$	3,700

Six Months Ended	Number of	Recorded
June 30, 2014 (dollars in thousands)	Loans	Investment

Residential real estate:
Owner occupied - bank originated	6	$	1,219
Owner occupied - correspondent	—	—
Non owner occupied - bank originated	—	—
Commercial real estate	2	1,546
Commercial real estate - purchased whole loans	—	—
Construction & land development	1	1,500
Commercial & industrial	—	—
Lease financing receivables	—	—
Warehouse lines of credit	—	—
Home equity	—	—
Consumer:
RPG loans	—	—
Credit cards	—	—
Overdrafts	—	—
Other consumer	—	—

Total	9	$	4,265

Six Months Ended	Number of	Recorded
June 30, 2013 (dollars in thousands)	Loans	Investment

Residential real estate:
Owner occupied - bank originated	30	$	3,367
Owner occupied - correspondent	—	—
Non owner occupied - bank originated	—	—
Commercial real estate	1	302
Commercial real estate - purchased whole loans	—	—
Construction & land development	—	—
Commercial & industrial	—	—
Lease financing receivables	—	—
Warehouse lines of credit	—	—
Home equity	3	365
Consumer:
RPG loans	—	—
Credit cards	—	—
Overdrafts	—	—
Other consumer	2	328

Total	36	$	4,362