4. LOANS AND ALLOWANCE FOR LOAN AND LEASE LOSSES

The following table presents ending loan balances at September 30, 2018 and December 31, 2017:


(in thousands)	September 30, 2018		December 31, 2017

Traditional Banking:
Residential real estate:
Owner occupied	$	913,228	$	921,565
Owner occupied - correspondent*		99,096		116,792
Nonowner occupied		232,306		205,081
Commercial real estate		1,214,804		1,207,293
Construction & land development		174,043		150,065
Commercial & industrial		387,766		341,692
Lease financing receivables		15,229		16,580
Home equity		332,690		347,655
Consumer:
Credit cards		19,151		16,078
Overdrafts		983		974
Automobile loans		62,179		65,650
Other consumer		38,940		20,501
Total Traditional Banking		3,490,415		3,409,926
Warehouse lines of credit*		560,814		525,572
Total Core Banking		4,051,229		3,935,498

Republic Processing Group*:
Tax Refund Solutions:
Easy Advances		—		—
Other TRS loans		292		11,648
Republic Credit Solutions		84,674		66,888
Total Republic Processing Group		84,966		78,536

Total loans**		4,136,195		4,014,034
Allowance for loan and lease losses		(43,824)		(42,769)

Total loans, net	$	4,092,371	$	3,971,265

*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 September 30, 2018 and December 31, 2017:


(in thousands)	September 30, 2018		December 31, 2017

Contractually receivable	$	4,135,623	$	4,014,673
Unearned income(1)		(1,164)		(1,157)
Unamortized premiums(2)		674		1,069
Unaccreted discounts(3)		(3,469)		(4,643)
Net unamortized deferred origination fees and costs(4)		4,531		4,092
Carrying value of loans	$	4,136,195	$	4,014,034

(1)

Unearned income relates to lease financing receivables.

(2)

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

(3)

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

(4)

Primarily attributable to the Traditional Banking segment.

Purchased-Credit-Impaired (“PCI”) Loans

The following table reconciles the contractually required and carrying amounts of all PCI loans at September 30, 2018 and December 31, 2017:


(in thousands)	September 30, 2018		December 31, 2017

Contractually required principal	$	4,653	$	5,435
Non-accretable amount		(1,593)		(1,691)
Accretable amount		(100)		(140)
Carrying value of loans	$	2,960	$	3,604

The following table presents a rollforward of the accretable amount on all PCI loans for the three and nine months ended September 30, 2018 and 2017:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2018		2017		2018		2017

Balance, beginning of period	$	(100)	$	(3,333)	$	(140)	$	(3,600)
Transfers between non-accretable and accretable*		(168)		(44)		(409)		31
Net accretion into interest income on loans, including loan fees		168		1,684		449		1,876
Balance, end of period	$	(100)	$	(1,693)	$	(100)	$	(1,693)

*Transfers are primarily attributable to changes in estimated cash flows of the underlying loans.

Credit Quality Indicators

The following tables present loans by risk category based on the Bank’s internal analyses performed as of September 30, 2018 and December 31, 2017. Risk categories are defined in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017:


September 30, 2018			Special				Doubtful /		PCI Loans -		PCI Loans -		Total Rated
(in thousands)	Pass		Mention		Substandard		Loss		Group 1		Substandard		Loans*

Traditional Banking:
Residential real estate:
Owner occupied	$	—	$	15,067	$	13,307	$	—	$	173	$	1,518	$	30,065
Owner occupied - correspondent		—		—		386		—		—		—		386
Nonowner occupied		—		582		2,068		—		—		—		2,650
Commercial real estate		1,203,903		5,911		3,851		—		1,139		—		1,214,804
Construction & land development		173,920		—		123		—		—		—		174,043
Commercial & industrial		386,010		1,088		648		—		20		—		387,766
Lease financing receivables		15,229		—		—		—		—		—		15,229
Home equity		—		—		1,482		—		5		103		1,590
Consumer:
Credit cards		—		—		—		—		—		—		—
Overdrafts		—		—		—		—		—		—		—
Automobile loans		—		—		156		—		—		—		156
Other consumer		—		—		490		—		—		2		492
Total Traditional Banking		1,779,062		22,648		22,511		—		1,337		1,623		1,827,181
Warehouse lines of credit		560,814		—		—		—		—		—		560,814
Total Core Banking		2,339,876		22,648		22,511		—		1,337		1,623		2,387,995

Republic Processing Group:
Tax Refund Solutions:
Easy Advances		—		—		—		—		—		—		—
Other TRS loans		—		—		—		—		—		—		—
Republic Credit Solutions		—		—		298		—		—		—		298
Total Republic Processing Group		—		—		298		—		—		—		298

Total rated loans	$	2,339,876	$	22,648	$	22,809	$	—	$	1,337	$	1,623	$	2,388,293


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

Traditional Banking:
Residential real estate:
Owner occupied	$	—	$	18,054	$	12,056	$	—	$	180	$	1,658	$	31,948
Owner occupied - correspondent		—		—		—		—		—		—		—
Nonowner occupied		—		635		1,240		—		248		—		2,123
Commercial real estate		1,197,299		4,824		3,798		—		1,372		—		1,207,293
Construction & land development		149,332		—		733		—		—		—		150,065
Commercial & industrial		341,377		267		21		—		27		—		341,692
Lease financing receivables		16,580		—		—		—		—		—		16,580
Home equity		—		33		1,609		—		6		110		1,758
Consumer:
Credit cards		—		—		—		—		—		—		—
Overdrafts		—		—		—		—		—		—		—
Automobile loans		—		—		108		—		—		—		108
Other consumer		—		—		571		—		—		3		574
Total Traditional Banking		1,704,588		23,813		20,136		—		1,833		1,771		1,752,141
Warehouse lines of credit		525,572		—		—		—		—		—		525,572
Total Core Banking		2,230,160		23,813		20,136		—		1,833		1,771		2,277,713

Republic Processing Group:
Tax Refund Solutions:
Easy Advances		—		—		—		—		—		—		—
Other TRS loans		11,648		—		—		—		—		—		11,648
Republic Credit Solutions		—		—		1,066		—		—		—		1,066
Total Republic Processing Group		11,648		—		1,066		—		—		—		12,714

Total rated loans	$	2,241,808	$	23,813	$	21,202	$	—	$	1,833	$	1,771	$	2,290,427

*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

The following table presents the activity in the Allowance by portfolio class:


	Allowance Rollforward
	Three Months Ended September 30,
	2018										2017
	Beginning				Charge-				Ending		Beginning				Charge-				Ending
(in thousands)	Balance		Provision		offs		Recoveries		Balance		Balance		Provision		offs		Recoveries		Balance

Traditional Banking:
Residential real estate:
Owner occupied	$	6,035	$	(136)	$	(46)	$	18	$	5,871	$	6,740	$	(222)	$	(52)	$	107	$	6,573
Owner occupied - correspondent		263		(15)		—		—		248		324		(10)		—		—		314
Nonowner occupied		1,552		42		(1)		—		1,593		1,237		100		—		—		1,337
Commercial real estate		9,815		187		—		1		10,003		8,368		325		—		77		8,770
Construction & land development		2,825		(160)		—		3		2,668		2,508		(435)		—		3		2,076
Commercial & industrial		2,318		281		(75)		4		2,528		1,682		388		(152)		12		1,930
Lease financing receivables		160		—		—		—		160		151		11		—		—		162
Home equity		3,658		(81)		(14)		59		3,622		3,787		14		(4)		51		3,848
Consumer:
Credit cards		805		148		(94)		9		868		588		50		(38)		6		606
Overdrafts		878		372		(332)		65		983		806		311		(276)		51		892
Automobile loans		664		110		(7)		2		769		640		40		(12)		1		669
Other consumer		776		(52)		(102)		70		692		918		111		(155)		67		941
Total Traditional Banking		29,749		696		(671)		231		30,005		27,749		683		(689)		375		28,118
Warehouse lines of credit		1,585		(183)		—		—		1,402		1,502		(74)		—		—		1,428
Total Core Banking		31,334		513		(671)		231		31,407		29,251		609		(689)		375		29,546

Republic Processing Group:
Tax Refund Solutions:
Easy Advances		—		(1,036)		—		1,036		—		—		(840)		—		840		—
Other TRS loans		67		8		—		—		75		—		—		—		—		—
Republic Credit Solutions		13,646		4,592		(6,204)		308		12,342		8,647		4,452		(2,680)		226		10,645
Total Republic Processing Group		13,713		3,564		(6,204)		1,344		12,417		8,647		3,612		(2,680)		1,066		10,645

Total	$	45,047	$	4,077	$	(6,875)	$	1,575	$	43,824	$	37,898	$	4,221	$	(3,369)	$	1,441	$	40,191


	Allowance Rollforward
	Nine Months Ended September 30,
	2018										2017
	Beginning				Charge-				Ending		Beginning				Charge-				Ending
(in thousands)	Balance		Provision		offs		Recoveries		Balance		Balance		Provision		offs		Recoveries		Balance

Traditional Banking:
Residential real estate:
Owner occupied	$	6,182	$	(443)	$	(85)	$	217	$	5,871	$	7,158	$	(653)	$	(163)	$	231	$	6,573
Owner occupied - correspondent		292		(44)		—		—		248		373		(59)		—		—		314
Nonowner occupied		1,396		491		(320)		26		1,593		1,139		212		(14)		—		1,337
Commercial real estate		9,043		831		—		129		10,003		8,078		577		—		115		8,770
Construction & land development		2,364		274		—		30		2,668		1,850		222		—		4		2,076
Commercial & industrial		2,198		491		(200)		39		2,528		1,511		537		(152)		34		1,930
Lease financing receivables		174		(14)		—		—		160		136		26		—		—		162
Home equity		3,754		(372)		(48)		288		3,622		3,757		62		(99)		128		3,848
Consumer:
Credit cards		607		507		(282)		36		868		490		181		(86)		21		606
Overdrafts		974		685		(891)		215		983		675		731		(687)		173		892
Automobile loans		687		90		(11)		3		769		526		160		(19)		2		669
Other consumer		1,162		(338)		(358)		226		692		771		615		(691)		246		941
Total Traditional Banking		28,833		2,158		(2,195)		1,209		30,005		26,464		2,611		(1,911)		954		28,118
Warehouse lines of credit		1,314		88		—		—		1,402		1,464		(36)		—		—		1,428
Total Core Banking		30,147		2,246		(2,195)		1,209		31,407		27,928		2,575		(1,911)		954		29,546

Republic Processing Group:
Tax Refund Solutions:
Easy Advances		—		11,360		(12,478)		1,118		—		—		7,041		(8,123)		1,082		—
Other TRS loans		12		113		(55)		5		75		25		(278)		—		253		—
Republic Credit Solutions		12,610		12,545		(13,669)		856		12,342		4,967		12,295		(7,216)		599		10,645
Total Republic Processing Group		12,622		24,018		(26,202)		1,979		12,417		4,992		19,058		(15,339)		1,934		10,645

Total	$	42,769	$	26,264	$	(28,397)	$	3,188	$	43,824	$	32,920	$	21,633	$	(17,250)	$	2,888	$	40,191

Nonperforming Loans and Nonperforming Assets

Detail of nonperforming loans, nonperforming assets and select credit quality ratios follows:


(dollars in thousands)	September 30, 2018			December 31, 2017

Loans on nonaccrual status*	$	17,015		$	14,118
Loans past due 90-days-or-more and still on accrual**		254			956
Total nonperforming loans		17,269			15,074
Other real estate owned		70			115
Total nonperforming assets	$	17,339		$	15,189

Credit Quality Ratios - Total Company:

Nonperforming loans to total loans		0.42	%		0.38	%
Nonperforming assets to total loans (including OREO)		0.42			0.38
Nonperforming assets to total assets		0.33			0.30

Credit Quality Ratios - Core Bank:

Nonperforming loans to total loans		0.42	%		0.36	%
Nonperforming assets to total loans (including OREO)		0.42			0.36
Nonperforming assets to total assets		0.33			0.28

*Loans on nonaccrual status include impaired loans.

**Loans past due 90-days-or-more and still accruing consist of 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)	September 30, 2018		December 31, 2017		September 30, 2018		December 31, 2017

Traditional Banking:
Residential real estate:
Owner occupied	$	11,208	$	9,230	$	—	$	—
Owner occupied - correspondent		386		—		—		—
Nonowner occupied		681		257		—		—
Commercial real estate		3,165		3,247		—		—
Construction & land development		55		67		—		—
Commercial & industrial		629		—		—		—
Lease financing receivables		—		—		—		—
Home equity		769		1,217		—		—
Consumer:
Credit cards		—		—		—		—
Overdrafts		—		—		—		—
Automobile loans		98		68		—		—
Other consumer		24		32		5		19
Total Traditional Banking		17,015		14,118		5		19
Warehouse lines of credit		—		—		—		—
Total Core Banking		17,015		14,118		5		19

Republic Processing Group:
Tax Refund Solutions:
Easy Advances		—		—		—		—
Other TRS loans		—		—		—		—
Republic Credit Solutions		—		—		249		937
Total Republic Processing Group		—		—		249		937

Total	$	17,015	$	14,118	$	254	$	956

* Loans past due 90-days-or-more and still accruing consist of 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
September 30, 2018	Days			Days			Days			Total			Total
(dollars in thousands)	Delinquent			Delinquent			Delinquent*			Delinquent**			Current		Total

Traditional Banking:
Residential real estate:
Owner occupied	$	2,182		$	2,161		$	3,121		$	7,464		$	905,764	$	913,228
Owner occupied - correspondent		—			—			—			—			99,096		99,096
Nonowner occupied		29			501			73			603			231,703		232,306
Commercial real estate		225			—			1,217			1,442			1,213,362		1,214,804
Construction & land development		332			—			—			332			173,711		174,043
Commercial & industrial		28			—			—			28			387,738		387,766
Lease financing receivables											—			15,229		15,229
Home equity		1,010			229			180			1,419			331,271		332,690
Consumer:
Credit cards		62			81			—			143			19,008		19,151
Overdrafts		251			7			1			259			724		983
Automobile loans		31			—			61			92			62,087		62,179
Other consumer		44			8			6			58			38,882		38,940
Total Traditional Banking		4,194			2,987			4,659			11,840			3,478,575		3,490,415
Warehouse lines of credit		—			—			—			—			560,814		560,814
Total Core Banking		4,194			2,987			4,659			11,840			4,039,389		4,051,229

Republic Processing Group:
Tax Refund Solutions:
Easy Advances		—			—			—			—			—		—
Other TRS loans		—			—			—			—			292		292
Republic Credit Solutions		4,703			1,034			249			5,986			78,688		84,674
Total Republic Processing Group		4,703			1,034			249			5,986			78,980		84,966

Total	$	8,897		$	4,021		$	4,908		$	17,826		$	4,118,369	$	4,136,195
Delinquency ratio***		0.22	%		0.10	%		0.12	%		0.43	%

*All loans past due 90-days-or-more, excluding smaller-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.


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

Traditional Banking:
Residential real estate:
Owner occupied	$	2,559		$	1,166		$	1,057		$	4,782		$	916,783	$	921,565
Owner occupied - correspondent		—			—			—			—			116,792		116,792
Nonowner occupied		47			—			99			146			204,935		205,081
Commercial real estate		398			—			1,329			1,727			1,205,566		1,207,293
Construction & land development		67			—			—			67			149,998		150,065
Commercial & industrial		15			—			—			15			341,677		341,692
Lease financing receivables		—			—			—			—			16,580		16,580
Home equity		723			50			448			1,221			346,434		347,655
Consumer:
Credit cards		34			40			—			74			16,004		16,078
Overdrafts		230			3			—			233			741		974
Automobile loans		36			—			24			60			65,590		65,650
Other consumer		93			21			21			135			20,366		20,501
Total Traditional Banking		4,202			1,280			2,978			8,460			3,401,466		3,409,926
Warehouse lines of credit		—			—			—			—			525,572		525,572
Total Core Banking		4,202			1,280			2,978			8,460			3,927,038		3,935,498

Republic Processing Group:
Tax Refund Solutions:
Easy Advances		—			—			—			—			—		—
Other TRS loans		—			—			—			—			11,648		11,648
Republic Credit Solutions		3,631			1,073			937			5,641			61,247		66,888
Total Republic Processing Group		3,631			1,073			937			5,641			72,895		78,536

Total	$	7,833		$	2,353		$	3,915		$	14,101		$	3,999,933	$	4,014,034
Delinquency ratio***		0.20	%		0.06	%		0.10	%		0.35	%

*All loans past due 90-days-or-more, excluding smaller-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)	September 30, 2018		December 31, 2017

Loans with no allocated Allowance	$	20,134	$	18,540
Loans with allocated Allowance		25,104		27,076
Total recorded investment in impaired loans	$	45,238	$	45,616

Amount of the allocated Allowance	$	4,049	$	4,685

Approximately $3 million and $4 million of impaired loans at September 30, 2018 and December 31, 2017 were PCI loans. Approximately $2 million and $2 million of impaired loans at September 30, 2018 and December 31, 2017 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 September 30, 2018 and December 31, 2017:


	Allowance for Loan and Lease Losses								Loans
	Individually				PCI with				Individually				PCI with		PCI without
September 30, 2018	Evaluated		Collectively		Post-Acquisition		Total		Evaluated		Collectively		Post-Acquisition		Post-Acquisition		Total		Allowance to
(dollars in thousands)	Excluding PCI		Evaluated		Impairment		Allowance		Excluding PCI		Evaluated		Impairment		Impairment		Loans		Total Loans

Traditional Banking:
Residential real estate:
Owner occupied	$	2,277	$	3,411	$	183	$	5,871	$	26,991	$	884,547	$	1,690	$	—	$	913,228		0.64	%
Owner occupied - correspondent		—		248		—		248		386		98,710		—		—		99,096		0.25
Nonowner occupied		8		1,585		—		1,593		2,592		229,714		—		—		232,306		0.69
Commercial real estate		374		9,618		11		10,003		9,006		1,204,659		1,137		2		1,214,804		0.82
Construction & land development		62		2,606		—		2,668		123		173,920		—		—		174,043		1.53
Commercial & industrial		20		2,508		—		2,528		1,048		386,698		—		20		387,766		0.65
Lease financing receivables		—		160		—		160		—		15,229		—		—		15,229		1.05
Home equity		402		3,116		104		3,622		1,482		331,100		108		—		332,690		1.09
Consumer:
Credit cards		—		868		—		868		—		19,151		—		—		19,151		4.53
Overdrafts		—		983		—		983		—		983		—		—		983		100.00
Automobile loans		156		613		—		769		156		62,023		—		—		62,179		1.24
Other consumer		431		258		3		692		468		38,469		3		—		38,940		1.78
Total Traditional Banking		3,730		25,974		301		30,005		42,252		3,445,203		2,938		22		3,490,415		0.86
Warehouse lines of credit		—		1,402		—		1,402		—		560,814		—		—		560,814		0.25
Total Core Banking		3,730		27,376		301		31,407		42,252		4,006,017		2,938		22		4,051,229		0.78

Republic Processing Group:
Tax Refund Solutions:
Easy Advances		—		—		—		—		—		—		—		—		—		—
Other TRS loans		—		75		—		75		—		292		—		—		292		25.68
Republic Credit Solutions		18		12,324		—		12,342		48		84,626		—		—		84,674		14.58
Total Republic Processing Group		18		12,399		—		12,417		48		84,918		—		—		84,966		14.61
Total	$	3,748	$	39,775	$	301	$	43,824	$	42,300	$	4,090,935	$	2,938	$	22	$	4,136,195		1.06	%


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

Traditional Banking:
Residential real estate:
Owner occupied	$	2,361	$	3,501	$	320	$	6,182	$	27,605	$	892,122	$	1,838	$	—	$	921,565		0.67	%
Owner occupied - correspondent		—		292		—		292		—		116,792		—		—		116,792		0.25
Nonowner occupied		4		1,390		2		1,396		1,814		203,019		248		—		205,081		0.68
Commercial real estate		407		8,588		48		9,043		9,185		1,196,736		1,369		3		1,207,293		0.75
Construction & land development		107		2,257		—		2,364		733		149,332		—		—		150,065		1.58
Commercial & industrial		288		1,910		—		2,198		308		341,357		—		27		341,692		0.64
Lease financing receivables		—		174		—		174		—		16,580		—		—		16,580		1.05
Home equity		425		3,218		111		3,754		1,609		345,930		115		1		347,655		1.08
Consumer:
Credit cards		—		607		—		607		—		16,078		—		—		16,078		3.78
Overdrafts		—		974		—		974		—		974		—		—		974		100.00
Automobile loans		32		655		—		687		108		65,542		—		—		65,650		1.05
Other consumer		528		631		3		1,162		552		19,946		3		—		20,501		5.67
Total Traditional Banking		4,152		24,197		484		28,833		41,914		3,364,408		3,573		31		3,409,926		0.85
Warehouse lines of credit		—		1,314		—		1,314		—		525,572		—		—		525,572		0.25
Total Core Banking		4,152		25,511		484		30,147		41,914		3,889,980		3,573		31		3,935,498		0.77

Republic Processing Group:
Tax Refund Solutions:
Easy Advances		—		—		—		—		—		—		—		—		—		—
Other TRS loans		—		12		—		12		—		11,648		—		—		11,648		0.10
Republic Credit Solutions		49		12,561		—		12,610		129		66,759		—		—		66,888		18.85
Total Republic Processing Group		49		12,573		—		12,622		129		78,407		—		—		78,536		16.07
Total	$	4,201	$	38,084	$	484	$	42,769	$	42,043	$	3,968,387	$	3,573	$	31	$	4,014,034		1.07	%

The following tables present loans individually evaluated for impairment by class of loans as of September 30, 2018 and December 31, 2017 and for the three and nine months ended September 30, 2018 and 2017. 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						Nine Months Ended
	September 30, 2018						September 30, 2018						September 30, 2018
											Cash Basis						Cash Basis
	Unpaid						Average		Interest		Interest		Average		Interest		Interest
	Principal		Recorded		Allocated		Recorded		Income		Income		Recorded		Income		Income
(in thousands)	Balance		Investment		Allowance		Investment		Recognized		Recognized		Investment		Recognized		Recognized

Impaired loans with no allocated Allowance:
Residential real estate:
Owner occupied	$	11,013	$	10,428	$	—	$	11,098	$	55	$	—	$	10,839	$	165	$	—
Owner occupied - correspondent		386		386		—		388		—		—		290		—		—
Nonowner occupied		2,874		2,495		—		2,572		22		—		2,399		65		—
Commercial real estate		6,388		5,314		—		5,489		31		—		4,996		88		—
Construction & land development		—		—		—		—		—		—		267		—		—
Commercial & industrial		1,136		1,028		—		852		7		—		609		23		—
Lease financing receivables		—		—		—		—		—		—		—		—		—
Home equity		461		444		—		589		2		—		708		6		—
Consumer		39		39		—		55		1		—		47		2		—
Impaired loans with allocated Allowance:
Residential real estate:
Owner occupied		18,315		18,253		2,460		18,094		152		—		18,467		448		—
Owner occupied - correspondent		—		—		—		—		—		—		—		—		—
Nonowner occupied		108		97		8		83		1		—		211		3		—
Commercial real estate		4,829		4,829		385		5,368		53		—		5,922		160		—
Construction & land development		123		123		62		126		1		—		132		2		—
Commercial & industrial		20		20		20		64		—		—		126		1		—
Lease financing receivables		—		—		—		—		—		—		—		—		—
Home equity		1,147		1,146		506		1,134		10		—		968		29		—
Consumer		636		636		608		648		6		—		684		18		—
Total impaired loans	$	47,475	$	45,238	$	4,049	$	46,560	$	341	$	—	$	46,665	$	1,010	$	—


	As of						Three Months Ended						Nine Months Ended
	December 31, 2017						September 30, 2017						September 30, 2017
											Cash Basis						Cash Basis
	Unpaid						Average		Interest		Interest		Average		Interest		Interest
	Principal		Recorded		Allocated		Recorded		Income		Income		Recorded		Income		Income
(in thousands)	Balance		Investment		Allowance		Investment		Recognized		Recognized		Investment		Recognized		Recognized

Impaired loans with no allocated Allowance:
Residential real estate:
Owner occupied	$	11,664	$	10,789	$	—	$	11,166	$	39	$	—	$	11,713	$	117	$	—
Owner occupied - correspondent		—		—		—		—		—		—		—		—		—
Nonowner occupied		1,784		1,704		—		1,494		23		—		1,444		62		—
Commercial real estate		5,504		4,430		—		5,127		19		—		5,140		58		—
Construction & land development		591		591		—		597		7		—		537		22		—
Commercial & industrial		20		20		—		195		—		—		128		1		—
Lease financing receivables		—		—		—		—		—		—		—		—		—
Home equity		1,071		981		—		1,213		2		—		1,281		10		—
Consumer		25		25		—		92		2		—		67		5		—
Impaired loans with allocated Allowance:
Residential real estate:
Owner occupied		18,676		18,654		2,681		20,682		177		—		20,943		529		—
Owner occupied - correspondent		—		—		—		—		—		—		—		—		—
Nonowner occupied		361		358		6		410		5		—		450		15		—
Commercial real estate		6,124		6,124		455		4,895		66		—		5,819		196		—
Construction & land development		142		142		107		149		1		—		275		3		—
Commercial & industrial		288		288		288		230		2		—		308		7		—
Lease financing receivables		—		—		—		—		—		—		—		—		—
Home equity		743		743		536		834		—		—		820		11		—
Consumer		767		767		612		349		2		—		206		8		—
Total impaired loans	$	47,760	$	45,616	$	4,685	$	47,433	$	345	$	—	$	49,131	$	1,044	$	—

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 September 30, 2018 and December 31, 2017, $10 million and $6 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
September 30, 2018 (dollars in thousands)	Loans	Investment		Loans	Investment		Loans	Investment
Residential real estate	64	$	7,538	163	$	17,848	227	$	25,386
Commercial real estate	3		1,262	14		6,392	17		7,654
Construction & land development	1		54	1		68	2		122
Commercial & industrial	2		629	3		410	5		1,039
Consumer	1		41	281		471	282		512
Total troubled debt restructurings	71	$	9,524	462	$	25,189	533	$	34,713


	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, 2017 (dollars in thousands)	Loans	Investment		Loans	Investment		Loans	Investment
Residential real estate	62	$	4,926	183	$	20,189	245	$	25,115
Commercial real estate	2		1,366	14		6,499	16		7,865
Construction & land development	1		67	3		666	4		733
Commercial & industrial	—		—	2		287	2		287
Consumer	—		—	830		637	830		637
Total troubled debt restructurings	65	$	6,359	1,032	$	28,278	1,097	$	34,637

The Bank considers a TDR to be performing to its modified terms if the loan is 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 September 30, 2018 and December 31, 2017 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
September 30, 2018 (dollars in thousands)	Loans	Investment		Loans	Investment		Loans	Investment
Residential real estate loans (including home equity loans):
Interest only payments	—	$	—	1	$	1,200	1	$	1,200
Rate reduction	148		16,594	16		2,188	164		18,782
Principal deferral	10		1,248	5		2,181	15		3,429
Legal modification	38		1,651	9		324	47		1,975
Total residential TDRs	196		19,493	31		5,893	227		25,386

Commercial related and construction/land development loans:
Interest only payments	2		768	—		—	2		768
Rate reduction	8		3,076	—		—	8		3,076
Principal deferral	14		4,971	—		—	14		4,971
Total commercial TDRs	24		8,815	—		—	24		8,815

Consumer loans:
Rate reduction	1		16	—		—	1		16
Principal deferral	279		436	—		—	279		436
Legal modification	—		—	2		60	2		60
Total consumer TDRs	280		452	2		60	282		512

Total troubled debt restructurings	500	$	28,760	33	$	5,953	533	$	34,713


	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, 2017 (dollars in thousands)	Loans	Investment		Loans	Investment		Loans	Investment
Residential real estate loans (including home equity loans):
Interest only payments	2	$	463	—	$	—	2	$	463
Rate reduction	161		18,777	17		1,902	178		20,679
Principal deferral	14		1,455	2		121	16		1,576
Legal modification	42		1,997	7		400	49		2,397
Total residential TDRs	219		22,692	26		2,423	245		25,115

Commercial related and construction/land development loans:
Interest only payments	3		837	—		—	3		837
Rate reduction	7		3,185	1		79	8		3,264
Principal deferral	9		3,430	2		1,354	11		4,784
Total commercial TDRs	19		7,452	3		1,433	22		8,885

Consumer loans:
Principal deferral	830		637	—		—	830		637
Total troubled debt restructurings	1,068	$	30,781	29	$	3,856	1,097	$	34,637

As of September 30, 2018 and December 31, 2017, 83% and 89% of the Bank’s TDRs were performing according to their modified terms. The Bank provided $3 million and $4 million of specific reserve allocations to clients whose loan terms have been modified in TDRs as of September 30, 2018 and December 31, 2017. The Bank had no commitments to lend any additional material amounts to its existing TDR relationships at September 30, 2018 or December 31, 2017.

A summary of the categories of TDR loan modifications by respective performance as of September 30, 2018 and 2017 that were modified during the three months ended September 30, 2018 and 2017 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
September 30, 2018 (dollars in thousands)	Loans	Investment		Loans	Investment		Loans	Investment
Residential real estate loans (including home equity loans):
Legal modification	—	$	—	1	$	18	1	$	18
Total residential TDRs	—		—	1		18	1		18

Commercial related and construction/land development loans:
Principal deferral	2		433	—		1	2		434
Total commercial TDRs	2		433	—		1	2		434

Consumer loans:
Legal modification	—		—	2		60	2		60
Total consumer TDRs	—		—	2		60	2		60

Total troubled debt restructurings	2	$	433	3	$	79	5	$	512


	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
September 30, 2017 (dollars in thousands)	Loans	Investment		Loans	Investment		Loans	Investment
Residential real estate loans (including home equity loans):
Principal deferral	7	$	701	—	$	—	7	$	701
Legal modification	6		337	1		131	7		468
Total residential TDRs	13		1,038	1		131	14		1,169

Commercial related and construction/land development loans:
Principal deferral	1		242	—		—	1		242
Total commercial TDRs	1		242	—		—	1		242

Total troubled debt restructurings	14	$	1,280	1	$	131	15	$	1,411

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 September 30, 2018 and 2017, 85% and 91% of the Bank’s TDRs that occurred during the third quarters of 2018 and 2017 were performing according to their modified terms. The Bank provided approximately $78,000 and $155,000 in specific reserve allocations to clients whose loan terms were modified in TDRs during the third quarters of 2018 and 2017.

There was no significant change between the pre and post modification loan balances for the three months ending September 30, 2018 and 2017.

A summary of the categories of TDR loan modifications by respective performance as of September 30, 2018 and 2017 that were modified during the nine months ended September 30, 2018 and 2017 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
September 30, 2018 (dollars in thousands)	Loans	Investment		Loans	Investment		Loans	Investment
Residential real estate loans (including home equity loans):
Interest only payments	—	$	—	1	$	1,200	1	$	1,200
Rate reduction	1		386	1		85	2		471
Principal deferral	1		15	3		2,151	4		2,166
Legal modification	6		90	3		190	9		280
Total residential TDRs	8		491	8		3,626	16		4,117

Commercial related and construction/land development loans:
Principal deferral	5		1,071	—		—	5		1,071
Total commercial TDRs	5		1,071	—		—	5		1,071

Consumer loans:
Principal deferral	1		54	—		—	1		54
Legal modification	—		—	2		60	2		60
Total consumer TDRs	1		54	2		60	3		114

Total troubled debt restructurings	14	$	1,616	10	$	3,686	24	$	5,302


	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
September 30, 2017 (dollars in thousands)	Loans	Investment		Loans	Investment		Loans	Investment
Residential real estate loans (including home equity loans):
Rate reduction	1	$	220	—	$	—	1	$	220
Principal deferral	9		1,506	—		—	9		1,506
Legal modification	6		337	1		131	7		468
Total residential TDRs	16		2,063	1		131	17		2,194
Commercial related and construction/land development loans:
Principal deferral	1		242	—		—	1		242
Total commercial TDRs	1		242	—		—	1		242

Total troubled debt restructurings	17	$	2,305	1	$	131	18	$	2,436

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 September 30, 2018 and 2017, 30% and 95% of the Bank’s TDRs that occurred during the first nine months of 2018 and 2017 were performing according to their modified terms. The Bank provided approximately $577,000 and $186,000 in specific reserve allocations to clients whose loan terms were modified in TDRs during the first nine months of 2018 and 2017.

There was no significant change between the pre and post modification loan balances for the nine months ending September 30, 2018 and 2017.

The following table presents loans by class modified as troubled debt restructurings within the previous 12 months of September 30, 2018 and 2017 and for which there was a payment default during the three and/or nine months ended September 30, 2018 and 2017.


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2018			2017			2018			2017
		Recorded		Number of	Recorded		Number of	Recorded		Number of	Recorded
(dollars in thousands)	Loans	Investment		Loans	Investment		Loans	Investment		Loans	Investment

Residential real estate:
Owner occupied	6	$	3,386	1	$	131	7	$	3,552	1	$	131
Home equity	1		74	—		—	1		74	—		—
Consumer	2		60	—		—	2		60	—		—

Total	9	$	3,520	1	$	131	10	$	3,686	1	$	131

Foreclosures

The following table presents the carrying amount of foreclosed properties held at September 30, 2018 and December 31, 2017 as a result of the Bank obtaining physical possession of such properties:


(in thousands)	September 30, 2018		December 31, 2017

Residential real estate	$	70	$	115

Total other real estate owned	$	70	$	115

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 September 30, 2018 and December 31, 2017:


(in thousands)	September 30, 2018		December 31, 2017

Recorded investment in consumer residential real estate mortgage loans in the process of foreclosure	$	4,561	$	1,392

Easy Advances

The Company’s TRS segment offered its EA product during the first two months of 2018 and 2017. The Company based its estimated provision for EA losses on current year EA delinquency information and prior year IRS funding patterns. Each year, all unpaid EAs are charged-off by the end of the second quarter.

Information regarding EAs follows:


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands)	2018		2017		2018			2017

Easy Advances originated	$	—	$	—	$	430,210		$	328,523
Net Charge (Credit) to the Provision for Easy Advances		(1,036)		(840)		11,360			7,041
Provision to total Easy Advances originated		NA		NA		2.64	%		2.14	%
Easy Advances net charge-offs	$	(1,036)	$	(840)	$	11,360		$	7,041
Easy Advances net charge-offs to total Easy Advances originated		NA		NA		2.64	%		2.14	%