5. LOANS AND ALLOWANCE FOR LOAN AND LEASE LOSSES

The composition of the loan portfolio at period end follows:


(in thousands)	March 31, 2017		December 31, 2016

Core Bank:
Residential real estate:
Owner occupied	$	969,705	$	1,000,148
Owner occupied - correspondent*		141,375		149,028
Nonowner occupied		164,742		156,605
Commercial real estate		1,049,193		1,060,496
Construction & land development		130,766		119,650
Commercial & industrial		270,652		259,026
Lease financing receivables		13,853		13,614
Warehouse lines of credit*		495,165		585,439
Home equity		341,611		341,285
Consumer:
Credit cards		14,644		13,414
Overdrafts		786		803
Automobile loans		55,962		52,579
Other consumer		19,215		19,744
Total Core Bank		3,667,669		3,771,831

Republic Processing Group*:
Commercial & industrial		14		6,695
Consumer:
Easy Advances		10,672		—
Republic Credit Solutions		32,021		32,252
Total Republic Processing Group		42,707		38,947

Total loans**		3,710,376		3,810,778
Allowance for loan and lease losses		(42,362)		(32,920)

Total loans, net	$	3,668,014	$	3,777,858

*Identifies loans to borrowers located primarily outside of the Bank’s market footprint.

**Total loans are presented inclusive of premiums, discounts and net loan origination fees and costs. See table directly below for expanded detail.

The following table reconciles the contractually receivable and carrying amounts of loans at March 31, 2017 and December 31, 2016:


(in thousands)	March 31, 2017		December 31, 2016

Contractual receivable	$	3,715,075	$	3,816,086
Unearned income(1)		(1,098)		(1,050)
Unamortized premiums(2)		1,654		1,838
Unaccreted discounts(3)		(8,842)		(9,397)
Net unamortized deferred origination fees and costs		3,587		3,301
Carrying value of loans	$	3,710,376	$	3,810,778

(1)

Unearned income relates to lease financing receivables.

(2)

Premiums predominately relate to loans acquired through the Bank’s Correspondent Lending channel.

(3)

Unaccreted discounts include accretable and non-accretable discounts and predominately relate to loans acquired in the Bank’s 2016 Cornerstone acquisition and its 2012 FDIC-assisted transactions.

Loan Purchases

The Core Bank acquires for investment single family, first lien mortgage loans that meet the Core Bank’s specifications through its Correspondent Lending channel. In addition, the Bank has acquired in the past unsecured consumer installment loans for investment from a third-party originator. Such consumer loans were purchased at par and were selected by the Bank based on certain underwriting specifications.

The following table reflects the purchased activity of single family, first lien mortgage loans and unsecured consumer loans, by class, during the three months ended March 31, 2017 and 2016.


	Three Months Ended
	March 31,
(in thousands)	2017		2016
Residential real estate:
Owner occupied - correspondent*	$	1,224	$	20,521
Consumer:
Other consumer*		—		2,667
Total purchased loans**	$	1,224	$	23,188

* Represents origination amount, inclusive of applicable purchase premiums.

**Purchases are all part of Core Bank operations.

Loans Acquired in Cornerstone Acquisition

The following table summarizes loans acquired in the Company’s May 17, 2016 Cornerstone acquisition, finalized as of October 1, 2016:


	May 17, 2016
(in thousands)	Contractual Receivable		Non-accretable Discount		Accretable Discount		Acquisition-Day Fair Value

Residential real estate:
Owner occupied	$	15,487	$	—	$	(393)	$	15,094
Nonowner occupied		11,196		—		(101)		11,095
Commercial real estate		106,089		—		(1,498)		104,591
Construction & land development		18,277		—		(502)		17,775
Commercial & industrial		11,462		—		(191)		11,271
Home equity		20,652		—		(350)		20,302
Consumer and other		2,347		—		(147)		2,200

Total loans - ASC 310-20		185,510		—		(3,182)		182,328

Residential real estate:
Owner occupied		2,963		(822)		(15)		2,126
Nonowner occupied		1,721		(320)		(167)		1,234
Commercial real estate		4,315		(617)		(197)		3,501
Construction & land development		175		—		—		175
Commercial & industrial		66		(1)		1		66
Home equity		382		(178)		(11)		193
Consumer and other		4		(3)		—		1

Total loans - ASC 310-30 - PCI loans		9,626		(1,941)		(389)		7,296

Total loans acquired	$	195,136	$	(1,941)	$	(3,571)	$	189,624

Purchased-Credit-Impaired (“PCI”) Loans

The Bank acquired PCI loans on May 17, 2016 in its Cornerstone acquisition and during the year ended December 31, 2012 in two FDIC-assisted transactions. PCI loans are accounted for under ASC 310-30, Loans and Debt Securities Acquired with Deteriorated Credit Quality.

Management utilized the following criteria in determining which loans were classified as PCI loans for its May 17, 2016 Cornerstone acquisition:

Loans for which the Bank assigned a non-accretable discount

Loans classified as nonaccrual when acquired

Loans past due 90-days-or-more when acquired

The following table reconciles the contractually required and carrying amounts of all PCI loans at March 31, 2017 and December 31, 2016:


(in thousands)	March 31, 2017		December 31, 2016

Contractually-required principal	$	14,926	$	15,587
Non-accretable amount		(1,806)		(1,713)
Accretable amount		(3,409)		(3,600)
Carrying value of loans	$	9,711	$	10,274

The following table presents a rollforward of the accretable amount on all PCI loans for the three months ended March 31, 2017 and 2016:


	Three Months Ended
	March 31,
(in thousands)	2017		2016

Balance, beginning of period	$	(3,600)	$	(4,125)
Transfers between non-accretable and accretable		90		(455)
Net accretion into interest income on loans, including loan fees		101		727
Balance, end of period	$	(3,409)	$	(3,853)

Credit Quality Indicators

Based on the Bank’s internal analyses performed as of March 31, 2017 and December 31, 2016, the following tables reflect loans by risk category. Risk categories are defined in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016:


March 31, 2017			Special				Doubtful /		PCI Loans -		PCI Loans -		Total Rated
(in thousands)	Pass		Mention*		Substandard*		Loss		Group 1		Substandard		Loans**

Core Bank:
Residential real estate:
Owner occupied	$	—	$	20,549	$	12,972	$	—	$	186	$	1,799	$	35,506
Owner occupied - correspondent		—		—		—		—		—		—		—
Nonowner occupied		—		649		1,079		—		518		—		2,246
Commercial real estate		1,031,746		6,345		4,107		—		6,995		—		1,049,193
Construction & land development		129,894		89		783		—		—		—		130,766
Commercial & industrial		269,756		722		151		—		23		—		270,652
Lease financing receivables		13,853						—		—		—		13,853
Warehouse lines of credit		495,165		—		—		—		—		—		495,165
Home equity		—		232		2,035		—		92		97		2,456
Consumer:
Credit cards		—		—		—		—		—		—		—
Overdrafts		—		—		—		—		—		—		—
Automobile loans		—		—		—		—		—		—		—
Other consumer		—		—		211		—		1		—		212
Total Core Bank		1,940,414		28,586		21,338		—		7,815		1,896		2,000,049

Republic Processing Group:
Commercial & industrial		14		—		—		—		—		—		14
Consumer:
Easy Advances		—		—		—		—		—		—		—
Republic Credit Solutions		—		—		122		—		—		—		122
Total Republic Processing Group:		14		—		122		—		—		—		136

Total rated loans	$	1,940,428	$	28,586	$	21,460	$	—	$	7,815	$	1,896	$	2,000,185


December 31, 2016			Special				Doubtful /		PCI Loans -		PCI Loans -		Total Rated
(in thousands)	Pass		Mention*		Substandard*		Loss		Group 1		Substandard		Loans**

Core Bank:
Residential real estate:
Owner occupied	$	—	$	21,344	$	13,117	$	—	$	218	$	2,267	$	36,946
Owner occupied - correspondent		—		—		—		—		—		—		—
Nonowner occupied		—		656		1,115		—		523		—		2,294
Commercial real estate		1,042,137		7,086		4,224		—		7,049		—		1,060,496
Construction & land development		118,769		90		791		—		—		—		119,650
Commercial & industrial		257,579		1,270		154		—		23		—		259,026
Lease financing receivables		13,614						—		—		—		13,614
Warehouse lines of credit		585,439		—		—		—		—		—		585,439
Home equity		—		256		1,763		—		94		99		2,212
Consumer:
Credit cards		—		—		—		—		—		—		—
Overdrafts		—		—		—		—		—		—		—
Automobile loans		—		—		—		—		—		—		—
Other consumer		—		—		166		—		1		—		167
Total Core Bank		2,017,538		30,702		21,330		—		7,908		2,366		2,079,844

Republic Processing Group:
Commercial & industrial		6,695		—		—		—		—		—		6,695
Consumer:
Easy Advances		—		—		—		—		—		—		—
Republic Credit Solutions		—		—		82		—		—		—		82
Total Republic Processing Group:		6,695		—		82		—		—		—		6,777

Total rated loans	$	2,024,233	$	30,702	$	21,412	$	—	$	7,908	$	2,366	$	2,086,621

*At March 31, 2017 and December 31, 2016, Special Mention included $2 million and $2 million and Substandard included $1 million and $1 million that were removed from PCI accounting in accordance with ASC 310-30-35-13 due to a post-acquisition troubled debt restructuring.

** The above tables exclude all non-classified residential real estate, home equity and consumer loans at the respective period ends.

Allowance for Loan and Lease Losses

Activity in the allowance for loan and lease losses (“Allowance”) by loan class follows:


	Allowance Rollforward
	Three Months Ended
	March 31, 2017										March 31, 2016
	Beginning				Charge-				Ending		Beginning				Charge-				Ending
(in thousands)	Balance		Provision		offs		Recoveries		Balance		Balance		Provision		offs		Recoveries		Balance

Core Bank:
Residential real estate:
Owner occupied	$	7,158	$	(143)	$	(3)	$	59	$	7,071	$	8,301	$	(182)	$	(144)	$	74	$	8,049
Owner occupied - correspondent		373		(9)		(11)		—		353		623		(16)		—		—		607
Nonowner occupied		1,139		59		—		—		1,198		1,052		87		(44)		—		1,095
Commercial real estate		8,078		(197)		—		17		7,898		7,672		20		(41)		27		7,678
Construction & land development		1,850		383		—		—		2,233		1,303		69		(44)		20		1,348
Commercial & industrial		1,511		(44)		—		21		1,488		1,455		(75)		—		4		1,384
Lease financing receivables		136		9		—		—		145		89		8		—		—		97
Warehouse lines of credit		1,464		(226)		—		—		1,238		967		18		—		—		985
Home equity		3,757		69		(4)		9		3,831		2,996		67		(35)		26		3,054
Consumer:
Credit cards		490		38		(27)		5		506		448		21		(12)		9		466
Overdrafts		675		83		(184)		67		641		351		184		(161)		76		450
Automobile loans		526		36		—		1		563		56		89		—		—		145
Other consumer		771		183		(230)		101		825		479		208		(131)		92		648
Total Core Bank		27,928		241		(459)		280		27,990		25,792		498		(612)		328		26,006

Republic Processing Group:
Commercial & industrial		25		(25)		—		—		—		—		—		—		—		—
Consumer:
Easy Advances		—		8,601		(860)		—		7,741		—		3,574		(405)		—		3,169
Refund Anticipation Loans		—		(235)		—		235		—		—		(247)		—		247		—
Republic Credit Solutions		4,967		3,769		(2,285)		180		6,631		1,699		1,361		(846)		86		2,300
Total Republic Processing Group		4,992		12,110		(3,145)		415		14,372		1,699		4,688		(1,251)		333		5,469

Total	$	32,920	$	12,351	$	(3,604)	$	695	$	42,362	$	27,491	$	5,186	$	(1,863)	$	661	$	31,475

Nonperforming Loans and Nonperforming Assets

Detail of nonperforming loans and nonperforming assets follows:


(dollars in thousands)	March 31, 2017			December 31, 2016

Loans on nonaccrual status*	$	16,793		$	15,892
Loans past due 90-days-or-more and still on accrual**		203			167

Total nonperforming loans		16,996			16,059
Other real estate owned		1,362			1,391
Total nonperforming assets	$	18,358		$	17,450

Credit Quality Ratios - Total Company:

Nonperforming loans to total loans		0.46	%		0.42	%
Nonperforming assets to total loans (including OREO)		0.49			0.46
Nonperforming assets to total assets		0.39			0.36

Credit Quality Ratios - Core Bank:

Nonperforming loans to total loans		0.46	%		0.42	%
Nonperforming assets to total loans (including OREO)		0.50			0.46
Nonperforming assets to total assets		0.40			0.36

*Loans on nonaccrual status include impaired loans.

**Loans past due 90-days-or-more and still accruing consist of PCI loans or smaller balance consumer loans.

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


					Past Due 90-Days-or-More
	Nonaccrual				and Still Accruing Interest*
(in thousands)	March 31, 2017		December 31, 2016		March 31, 2017		December 31, 2016

Core Bank:
Residential real estate:
Owner occupied	$	11,731	$	10,955	$	—	$	—
Owner occupied - correspondent		—		—		—		—
Nonowner occupied		818		852		—		—
Commercial real estate		2,674		2,725		—		—
Construction & land development		74		77		—		—
Commercial & industrial		151		154		—		—
Lease financing receivables		—		—		—		—
Warehouse lines of credit		—		—		—		—
Home equity		1,268		1,069		—		—
Consumer:
Credit cards		—		—		—		—
Overdrafts		—		—		—		—
Automobile loans		24		—		—		—
Other consumer		53		60		81		85
Total Core Bank		16,793		15,892		81		85

Republic Processing Group:
Commercial & industrial		—		—		—		—
Consumer:
Easy Advances		—		—		—		—
Republic Credit Solutions		—		—		122		82
Total Republic Processing Group		—		—		122		82

Total	$	16,793	$	15,892	$	203	$	167

* Loans past due 90-days-or-more and still accruing consist of PCI loans or smaller balance consumer loans.

Nonaccrual loans and loans past due 90-days-or-more and still on accrual include both smaller balance, primarily retail, homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans. Nonaccrual 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 (“TDRs”) on nonaccrual 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 of loans:


	30 - 59			60 - 89			90 or More
March 31, 2017	Days			Days			Days			Total			Total
(dollars in thousands)	Delinquent			Delinquent			Delinquent*			Delinquent**			Current		Total

Core Bank:
Residential real estate:
Owner occupied	$	2,205		$	420		$	1,263		$	3,888		$	965,817	$	969,705
Owner occupied - correspondent		—			—			—			—			141,375		141,375
Nonowner occupied		5			—			35			40			164,702		164,742
Commercial real estate		140			85			416			641			1,048,552		1,049,193
Construction & land development		—			—			—			—			130,766		130,766
Commercial & industrial		—			—			—			—			270,652		270,652
Lease financing receivables		—			—			—			—			13,853		13,853
Warehouse lines of credit		—			—			—			—			495,165		495,165
Home equity		440			25			442			907			340,704		341,611
Consumer:
Credit cards		16			14			—			30			14,614		14,644
Overdrafts		142			3			—			145			641		786
Automobile loans		22			—			—			22			55,940		55,962
Other consumer		86			110			83			279			18,936		19,215
Total Core Bank		3,056			657			2,239			5,952			3,661,717		3,667,669

Republic Processing Group:
Commercial & industrial		—			—			—			—			14		14
Consumer:
Easy Advances		8,350			—			—			8,350			2,322		10,672
Republic Credit Solutions		1,508			231			122			1,861			30,160		32,021
Total Republic Processing Group		9,858			231			122			10,211			32,496		42,707

Total	$	12,914		$	888		$	2,361		$	16,163		$	3,694,213	$	3,710,376
Delinquency ratio***		0.35	%		0.02	%		0.06	%		0.44	%

*All loans past due 90-days-or-more, excluding PCI loans and small balance consumer loans, were on nonaccrual status.

**Delinquent status may be determined by either the number of days past due or number of payments past due. Easy Advances do not have a contractual due date but are eligible for delinquency consideration three weeks after the taxpayer customer’s tax return is submitted to the applicable tax authority.

***Represents total loans 30-days-or-more past due by aging category divided by total loans.


	30 - 59			60 - 89			90 or More
December 31, 2016	Days			Days			Days			Total			Total
(dollars in thousands)	Delinquent			Delinquent			Delinquent*			Delinquent**			Current		Total

Core Bank:
Residential real estate:
Owner occupied	$	1,696		$	337		$	2,521		$	4,554		$	995,594	$	1,000,148
Owner occupied - correspondent		—			—			—			—			149,028		149,028
Nonowner occupied		—			—			46			46			156,559		156,605
Commercial real estate		8			—			417			425			1,060,071		1,060,496
Construction & land development		—			—			—			—			119,650		119,650
Commercial & industrial		342			—			—			342			258,684		259,026
Lease financing receivables		—			—			—			—			13,614		13,614
Warehouse lines of credit		—			—			—			—			585,439		585,439
Home equity		316			160			494			970			340,315		341,285
Consumer:
Credit cards		14			4			—			18			13,396		13,414
Overdrafts		159			1			1			161			642		803
Automobile loans		—			—			—			—			52,579		52,579
Other consumer		114			106			85			305			19,439		19,744
Total Core Bank		2,649			608			3,564			6,821			3,765,010		3,771,831

Republic Processing Group:
Commercial & industrial		—			—			—			—			6,695		6,695
Consumer:
Easy Advances		—			—			—			—			—		—
Republic Credit Solutions		1,751			304			82			2,137			30,115		32,252
Total Republic Processing Group		1,751			304			82			2,137			36,810		38,947

Total	$	4,400		$	912		$	3,646		$	8,958		$	3,801,820	$	3,810,778
Delinquency ratio***		0.12	%		0.02	%		0.10	%		0.24	%

*All loans past due 90-days-or-more, excluding PCI loans and small balance consumer loans, were on nonaccrual status.

**Delinquent status may be determined by either the number of days past due or number of payments past due.

***Represents total loans 30-days-or-more past due by aging category divided by total loans.

Impaired Loans

Information regarding the Bank’s impaired loans follows:


(in thousands)	March 31, 2017		December 31, 2016

Loans with no allocated Allowance	$	20,056	$	21,416
Loans with allocated Allowance		28,914		31,268

Total impaired loans	$	48,970	$	52,684

Amount of the Allowance	$	4,901	$	4,925

Approximately $2 million and $4 million of impaired loans at March 31, 2017 and December 31, 2016 were PCI loans. Approximately $3 million and $3 million of impaired loans at March 31, 2017 and December 31, 2016 were formerly PCI loans that became classified as “Impaired” through a post-acquisition 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 March 31, 2017 and December 31, 2016:


	Allowance for Loan and Lease Losses										Loans
	Individually				PCI with		PCI without				Individually				PCI with		PCI without
March 31, 2017	Evaluated		Collectively		Post Acquisition		Post Acquisition		Total		Evaluated		Collectively		Post Acquisition		Post Acquisition		Total
(dollars in thousands)	Excluding PCI		Evaluated		Impairment		Impairment		Allowance		Excluding PCI		Evaluated		Impairment		Impairment		Loans

Core Bank:
Residential real estate:
Owner occupied	$	3,250	$	3,671	$	150	$	—	$	7,071	$	30,924	$	936,796	$	1,799	$	186	$	969,705
Owner occupied - correspondent		—		353		—		—		353		—		141,375		—		—		141,375
Nonowner occupied		62		1,129		7		—		1,198		1,632		162,592		265		253		164,742
Commercial real estate		447		7,414		37		—		7,898		10,711		1,031,487		148		6,847		1,049,193
Construction & land development		110		2,123		—		—		2,233		872		129,894		—		—		130,766
Commercial & industrial		152		1,336		—		—		1,488		207		270,422		—		23		270,652
Lease financing receivables		—		145		—		—		145		—		13,853		—		—		13,853
Warehouse lines of credit		—		1,238		—		—		1,238		—		495,165		—		—		495,165
Home equity		529		3,204		98		—		3,831		2,185		339,237		98		91		341,611
Consumer:
Credit cards		—		506		—		—		506		—		14,644		—		—		14,644
Overdrafts		—		641		—		—		641		—		786		—		—		786
Automobile loans		—		563		—		—		563		—		55,962		—		—		55,962
Other consumer		59		766		—		—		825		129		19,085		—		1		19,215
Total Core Bank		4,609		23,089		292		—		27,990		46,660		3,611,298		2,310		7,401		3,667,669

Republic Processing Group:
Commercial & industrial		—		—		—		—		—		—		14		—		—		14
Consumer:
Easy Advances		—		7,741		—		—		7,741		—		10,672		—		—		10,672
Republic Credit Solutions		—		6,631		—		—		6,631		—		32,021		—		—		32,021
Total Republic Processing Group		—		14,372		—		—		14,372		—		42,707		—		—		42,707

Total	$	4,609	$	37,461	$	292	$	—	$	42,362	$	46,660	$	3,654,005	$	2,310	$	7,401	$	3,710,376


	Allowance for Loan and Lease Losses										Loans
	Individually				PCI with		PCI without				Individually				PCI with		PCI without
December 31, 2016	Evaluated		Collectively		Post Acquisition		Post Acquisition		Total		Evaluated		Collectively		Post Acquisition		Post Acquisition		Total
(dollars in thousands)	Excluding PCI		Evaluated		Impairment		Impairment		Allowance		Excluding PCI		Evaluated		Impairment		Impairment		Loans

Core Bank:
Residential real estate:
Owner occupied	$	3,203	$	3,797	$	158	$	—	$	7,158	$	31,908	$	965,755	$	2,297	$	188	$	1,000,148
Owner occupied - correspondent		—		373		—		—		373		—		149,028		—		—		149,028
Nonowner occupied		65		1,067		7		—		1,139		1,601		154,481		268		255		156,605
Commercial real estate		532		7,501		45		—		8,078		11,769		1,041,678		1,164		5,885		1,060,496
Construction & land development		120		1,730		—		—		1,850		882		118,768		—		—		119,650
Commercial & industrial		227		1,284		—		—		1,511		686		258,317		—		23		259,026
Lease financing receivables		—		136		—		—		136		—		13,614		—		—		13,614
Warehouse lines of credit		—		1,464		—		—		1,464		—		585,439		—		—		585,439
Home equity		433		3,225		99		—		3,757		1,929		339,163		99		94		341,285
Consumer:
Credit cards		—		490		—		—		490		—		13,414		—		—		13,414
Overdrafts		—		675		—		—		675		—		803		—		—		803
Automobile loans		—		526		—		—		526		—		52,579		—		—		52,579
Other consumer		36		735		—		—		771		81		19,662		—		1		19,744
Total Core Bank		4,616		23,003		309		—		27,928		48,856		3,712,701		3,828		6,446		3,771,831

Republic Processing Group:
Commercial & industrial		—		25		—		—		25		—		6,695		—		—		6,695
Consumer:
Easy Advances		—		—		—		—		—		—		—		—		—		—
Republic Credit Solutions		—		4,967		—		—		4,967		—		32,252		—		—		32,252
Total Republic Processing Group		—		4,992		—		—		4,992		—		38,947		—		—		38,947

Total	$	4,616	$	27,995	$	309	$	—	$	32,920	$	48,856	$	3,751,648	$	3,828	$	6,446	$	3,810,778

The following tables present loans individually evaluated for impairment by class of loans as of March 31, 2017 and December 31, 2016 and for the three months ended March 31, 2017 and 2016. 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
	March 31, 2017						March 31, 2017
											Cash Basis
	Unpaid						Average		Interest		Interest
	Principal		Recorded		Allowance		Recorded		Income		Income
(in thousands)	Balance		Investment		Allocated		Investment		Recognized		Recognized

Impaired loans with no related allowance recorded:
Residential real estate:
Owner occupied	$	12,874	$	11,892	$	—	$	12,261	$	29	$	—
Owner occupied - correspondent		—		—		—		—		—		—
Nonowner occupied		1,445		1,411		—		1,394		8		—
Commercial real estate		5,946		4,769		—		5,153		21		—
Construction & land development		476		476		—		476		5		—
Commercial & industrial		55		55		—		61		1		—
Lease financing receivables		—		—		—		—		—		—
Warehouse lines of credit		—		—		—		—		—		—
Home equity		1,488		1,413		—		1,350		4		—
Consumer		40		40		—		43		—		—
Impaired loans with an allowance recorded:
Residential real estate:
Owner occupied		20,848		20,831		3,400		21,204		181		—
Owner occupied - correspondent		—		—		—		—		—		—
Nonowner occupied		486		486		69		490		6		—
Commercial real estate		6,090		6,090		484		6,744		67		—
Construction & land development		396		396		110		401		5		—
Commercial & industrial		152		152		152		386		—		—
Lease financing receivables		—		—		—		—		—		—
Warehouse lines of credit		—		—		—		—		—		—
Home equity		871		870		627		806		10		—
Consumer		90		89		59		63		—		—
Total impaired loans	$	51,257	$	48,970	$	4,901	$	50,832	$	337	$	—


	As of						Three Months Ended
	December 31, 2016						March 31, 2016
											Cash Basis
	Unpaid						Average		Interest		Interest
	Principal		Recorded		Allowance		Recorded		Income		Income
(in thousands)	Balance		Investment		Allocated		Investment		Recognized		Recognized

Impaired loans with no related allowance recorded:
Residential real estate:
Owner occupied	$	13,727	$	12,629	$	—	$	13,050	$	23	$	—
Owner occupied - correspondent		—		—		—		—		—		—
Non owner occupied		1,399		1,376		—		1,971		7		—
Commercial real estate		6,610		5,536		—		7,180		54		—
Construction & land development		476		476		—		1,272		5		—
Commercial & industrial		67		67		—		14		—		—
Lease financing receivables		—		—		—		—		—		—
Warehouse lines of credit		—		—		—		—		—		—
Home equity		1,358		1,287		—		2,139		7		—
Consumer		45		45		—		92		—		—
Impaired loans with an allowance recorded:
Residential real estate:
Owner occupied		21,595		21,576		3,361		25,069		214		—
Owner occupied - correspondent		—		—		—		1,124		—		—
Non owner occupied		491		493		73		9,546		13		—
Commercial real estate		7,397		7,397		577		543		96		—
Construction & land development		405		406		120		1,502		5		—
Commercial & industrial		619		619		227		—		20		—
Lease financing receivables		—		—		—		—		—		—
Warehouse lines of credit		—		—		—		—		—		—
Home equity		742		741		532		171		—		—
Consumer		37		36		35		45		—		—
Total impaired loans	$	54,968	$	52,684	$	4,925	$	63,718	$	444	$	—

Troubled Debt Restructurings

A TDR is a 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 their debt in the foreseeable future without the modification. This evaluation is performed in accordance with 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 based on the borrower’s ability to service the modified loan payment. Retail loans may also be classified as TDRs due to legal modifications, such as bankruptcies.

Nonaccrual loans modified as TDRs typically remain on nonaccrual status and continue to be reported as nonperforming loans for a minimum of six consecutive months. Accruing loans modified as TDRs are evaluated for nonaccrual status based on a current evaluation of the borrower’s financial condition and ability and willingness to service the modified debt. At March 31, 2017 and December 31, 2016, $9 million and $10 million of TDRs were on nonaccrual status.

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


	Troubled Debt			Troubled Debt			Total
	Restructurings on			Restructurings on			Troubled Debt
	Nonaccrual Status			Accrual Status			Restructurings
	Number of	Recorded		Number of	Recorded		Number of	Recorded
March 31, 2017 (dollars in thousands)	Loans	Investment		Loans	Investment		Loans	Investment
Residential real estate	77	$	6,725	193	$	20,748	270	$	27,473
Commercial real estate	6		2,382	15		7,830	21		10,212
Construction & land development	1		74	4		797	5		871
Commercial & industrial	1		151	2		55	3		206
Total troubled debt restructurings	85	$	9,332	214	$	29,430	299	$	38,762


	Troubled Debt			Troubled Debt			Total
	Restructurings on			Restructurings on			Troubled Debt
	Nonaccrual Status			Accrual Status			Restructurings
	Number of	Recorded		Number of	Recorded		Number of	Recorded
December 31, 2016 (dollars in thousands)	Loans	Investment		Loans	Investment		Loans	Investment
Residential real estate	79	$	7,199	198	$	21,554	277	$	28,753
Commercial real estate	6		2,430	17		8,835	23		11,265
Construction & land development	1		77	4		804	5		881
Commercial & industrial	1		154	2		533	3		687
Total troubled debt restructurings	87	$	9,860	221	$	31,726	308	$	41,586

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 the categories of TDR loan modifications outstanding and respective performance under modified terms at March 31, 2017 and December 31, 2016 follows:


	Troubled Debt			Troubled Debt
	Restructurings			Restructurings			Total
	Performing to			Not Performing to			Troubled Debt
	Modified Terms			Modified Terms			Restructurings
	Number of	Recorded		Number of	Recorded		Number of	Recorded
March 31, 2017 (dollars in thousands)	Loans	Investment		Loans	Investment		Loans	Investment
Residential real estate loans (including home equity loans):
Interest only payments	2	$	158	1	$	485	3	$	643
Rate reduction	148		17,961	55		5,924	203		23,885
Principal deferral	6		314	7		271	13		585
Legal modification	20		895	31		1,465	51		2,360
Total residential TDRs	176		19,328	94		8,145	270		27,473

Commercial related and construction/land development loans:
Interest only payments	5		2,626	1		403	6		3,029
Rate reduction	7		4,051	2		225	9		4,276
Principal deferral	9		2,006	5		1,978	14		3,984
Total commercial TDRs	21		8,683	8		2,606	29		11,289
Total troubled debt restructurings	197	$	28,011	102	$	10,751	299	$	38,762


	Troubled Debt			Troubled Debt
	Restructurings			Restructurings			Total
	Performing to			Not Performing to			Troubled Debt
	Modified Terms			Modified Terms			Restructurings
	Number of	Recorded		Number of	Recorded		Number of	Recorded
December 31, 2016 (dollars in thousands)	Loans	Investment		Loans	Investment		Loans	Investment
Residential real estate loans (including home equity loans):
Interest only payments	2	$	155	1	$	493	3	$	648
Rate reduction	148		18,125	57		6,213	205		24,338
Principal deferral	7		616	7		306	14		922
Legal modification	17		806	38		2,039	55		2,845
Total residential TDRs	174		19,702	103		9,051	277		28,753

Commercial related and construction/land development loans:
Interest only payments	5		2,666	1		413	6		3,079
Rate reduction	8		4,769	2		228	10		4,997
Principal deferral	10		2,737	5		2,020	15		4,757
Total commercial TDRs	23		10,172	8		2,661	31		12,833
Total troubled debt restructurings	197	$	29,874	111	$	11,712	308	$	41,586

As of March 31, 2017 and December 31, 2016, 72% and 72% of the Bank’s TDRs were performing according to their modified terms. The Bank had provided $4 million and $4 million of specific reserve allocations to clients whose loan terms have been modified in TDRs as of March 31, 2017 and December 31, 2016. The Bank had no commitments to lend any additional material amounts to its existing TDR relationships at March 31, 2017 or December 31, 2016.

A summary of the categories of TDR loan modifications by respective performance as of March 31, 2017 and 2016 that were modified during the three months ended March 31, 2017 and 2016 follows:


	Troubled Debt			Troubled Debt
	Restructurings			Restructurings			Total
	Performing to			Not Performing to			Troubled Debt
	Modified Terms			Modified Terms			Restructurings
	Number of	Recorded		Number of	Recorded		Number of	Recorded
March 31, 2017 (dollars in thousands)	Loans	Investment		Loans	Investment		Loans	Investment
Residential real estate loans (including home equity loans):
Interest only payments	—	$	—	—	$	—	—	$	—
Rate reduction	1		159	—		—	1		159
Principal deferral	—		—	—		—	—		—
Legal modification	2		38	—		—	2		38
Total residential TDRs	3		197	—		—	3		197

Commercial related and construction/land development loans:
Interest only payments	—		—	—		—	—		—
Rate reduction	—		—	—		—	—		—
Principal deferral	—		—	—		—	—		—
Total commercial TDRs	—		—	—		—	—		—
Total troubled debt restructurings	3	$	197	—	$	—	3	$	197


	Troubled Debt			Troubled Debt
	Restructurings			Restructurings			Total
	Performing to			Not Performing to			Troubled Debt
	Modified Terms			Modified Terms			Restructurings
	Number of	Recorded		Number of	Recorded		Number of	Recorded
March 31, 2016 (dollars in thousands)	Loans	Investment		Loans	Investment		Loans	Investment
Residential real estate loans (including home equity loans):
Interest only payments	—	$	—	—	$	—	—	$	—
Rate reduction	2		57	1		55	3		112
Principal deferral	—		—	—		—	—		—
Legal modification	2		88	2		80	4		168
Total residential TDRs	4		145	3		135	7		280

Commercial related and construction/land development loans:
Interest only payments	—		—	1		433	1		433
Rate reduction	—		—	—		—	—		—
Principal deferral	—		—	—		—	—		—
Total commercial TDRs	—		—	1		433	1		433
Total troubled debt restructurings	4	$	145	4	$	568	8	$	713

The tables above are inclusive of loans that were TDRs at the end of previous periods and were re-modified, e.g., a maturity date extension during the current period.

As of March 31, 2017 and 2016, 100% and 20% of the Bank’s TDRs that occurred during the first quarters of 2017 and 2016 were performing according to their modified terms. The Bank provided approximately $29,000 and $17,000 in specific reserve allocations to clients whose loan terms were modified in TDRs during the first quarters of 2017 and 2016.

There was no significant change between the pre and post modification loan balances for the three months ending March 31, 2017 and 2016.

The following table presents loans by class modified as troubled debt restructurings within the previous 12 months of March 31, 2017 and 2016 and for which there was a payment default during the three months ended March 31, 2017 and 2016.


	Three Months Ended
	March 31,
	2017			2016
	Number of	Recorded		Number of	Recorded
(dollars in thousands)	Loans	Investment		Loans	Investment

Residential real estate:
Owner occupied	—	$	—	2	$	513
Owner occupied - correspondent	—		—	—		—
Nonowner occupied	—		—	—		—
Commercial real estate	—		—	4		2,306
Construction & land development	—		—	—		—
Commercial & industrial	—		—	—		—
Lease financing receivables	—		—	—		—
Warehouse lines of credit	—		—	—		—
Home equity	—		—	—		—
Consumer	—		—	—		—

Total	—	$	—	6	$	2,819

Foreclosures

The following table presents the carrying amount of foreclosed properties held at March 31, 2017 and December 31, 2016 as a result of the Bank obtaining physical possession of such properties:


(in thousands)	March 31, 2017		December 31, 2016

Residential real estate	$	1,362	$	1,391

Total other real estate owned	$	1,362	$	1,391

The following table presents the recorded investment in consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process according to local requirements of the applicable jurisdiction as of March 31, 2017 and December 31, 2016:


(in thousands)	March 31, 2017		December 31, 2016

Recorded investment in consumer residential real estate mortgage loans in the process of foreclosure	$	1,152	$	1,677

Easy Advances

The Company’s RPG segment offered its EA product through the TRS division during the first quarters of 2017 and 2016. The Company based its provision for loss for EAs primarily on prior year IRS funding patterns.

Additional information regarding EAs follows:


	Three Months Ended
	March 31,
(dollars in thousands)	2017			2016

Easy Advances originated	$	328,523		$	123,230
Provision for Easy Advances		8,601			3,574
Provision to total Easy Advances originated		2.62	%		2.90	%
Easy Advances net charge-offs	$	860		$	405
Easy Advances net charge-offs to total Easy Advances originated		0.26	%		0.33	%