PORTFOLIO LOANS

Below is a summary of Portfolio loans by category at September 30, 2016 and December 31, 2015:



(in thousands)	September 30, 2016			December 31, 2015
Commercial and industrial	$	1,598,815		$	1,484,327
Real estate:
Commercial - investor owned	515,055			428,064
Commercial - owner occupied	340,916			342,959
Construction and land development	188,856			161,061
Residential	233,960			196,498
Total real estate loans	1,278,787			1,128,582
Consumer and other	160,535			137,537
Portfolio loans	3,038,137			2,750,446
Unearned loan fees, net	(432		)	291
Portfolio loans, including unearned loan fees	$	3,037,705		$	2,750,737

A summary of the activity in the allowance for loan losses and the recorded investment in Portfolio loans by class and category based on impairment method through September 30, 2016, and at December 31, 2015, is as follows:



(in thousands)	Commercial and industrial			CRE - investor owned			CRE - owner occupied			Construction and land development			Residential real estate			Consumer and other			Total
Allowance for loan losses:
Balance at December 31, 2015	$	22,056		$	3,484		$	2,969		$	1,704		$	1,796		$	1,432		$	33,441
Provision (provision reversal) for loan losses	1,120			(116		)	80			(65		)	11			(197		)	833
Losses charged off	(68		)	—			—			—			—			(5		)	(73		)
Recoveries	53			7			68			6			34			4			172
Balance at March 31, 2016	$	23,161		$	3,375		$	3,117		$	1,645		$	1,841		$	1,234		$	34,373
Provision (provision reversal) for loan losses	302			(27		)	(541		)	(434		)	(80		)	1,496			716
Losses charged off	(157		)	—			—			—			—			(6		)	(163		)
Recoveries	502			8			15			8			36			3			572
Balance at June 30, 2016	$	23,808		$	3,356		$	2,591		$	1,219		$	1,797		$	2,727		$	35,498
Provision (provision reversal) for loan losses	3,575			10			94			(730		)	168			(79		)	3,038
Losses charged off	(2,044		)	—			—			—			(25		)	(4		)	(2,073		)
Recoveries	69			8			17			913			26			2			1,035
Balance at September 30, 2016	$	25,408		$	3,374		$	2,702		$	1,402		$	1,966		$	2,646		$	37,498



(in thousands)	Commercial and industrial		CRE - investor owned		CRE - owner occupied		Construction and land development		Residential real estate		Consumer and other		Total
Balance September 30, 2016
Allowance for loan losses - Ending balance:
Individually evaluated for impairment	$	3,785	$	—	$	—	$	158	$	3	$	1,855	$	5,801
Collectively evaluated for impairment	21,623		3,374		2,702		1,244		1,963		791		31,697
Total	$	25,408	$	3,374	$	2,702	$	1,402	$	1,966	$	2,646	$	37,498
Loans - Ending balance:
Individually evaluated for impairment	$	13,414	$	252	$	1,666	$	1,907	$	124	$	4,499	$	21,862
Collectively evaluated for impairment	1,585,401		514,803		339,250		186,949		233,836		155,604		3,015,843
Total	$	1,598,815	$	515,055	$	340,916	$	188,856	$	233,960	$	160,103	$	3,037,705

Balance December 31, 2015
Allowance for loan losses - Ending balance:
Individually evaluated for impairment	$	1,953	$	—	$	6	$	369	$	7	$	—	$	2,335
Collectively evaluated for impairment	20,103		3,484		2,963		1,335		1,789		1,432		31,106
Total	$	22,056	$	3,484	$	2,969	$	1,704	$	1,796	$	1,432	$	33,441
Loans - Ending balance:
Individually evaluated for impairment	$	4,514	$	921	$	1,962	$	2,800	$	681	$	—	$	10,878
Collectively evaluated for impairment	1,479,813		427,143		340,997		158,261		195,817		137,828		2,739,859
Total	$	1,484,327	$	428,064	$	342,959	$	161,061	$	196,498	$	137,828	$	2,750,737

A summary of Portfolio loans individually evaluated for impairment by category at September 30, 2016 and December 31, 2015, is as follows:



	September 30, 2016
(in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
Commercial and industrial	$	14,895	$	136	$	13,134	$	13,270	$	3,785	$	15,666
Real estate loans:
Commercial - investor owned	252		253		—		253		—		250
Commercial - owner occupied	—		—		—		—		—		—
Construction and land development	1,907		1,920		358		2,278		158		2,403
Residential	149		65		64		129		3		652
Consumer and other	4,499		—		4,508		4,508		1,855		4,598
Total	$	21,702	$	2,374	$	18,064	$	20,438	$	5,801	$	23,569



	December 31, 2015
(in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
Commercial and industrial	$	5,554	$	509	$	4,204	$	4,713	$	1,953	$	6,970
Real estate loans:
Commercial - investor owned	927		927		—		927		—		970
Commercial - owner occupied	329		85		113		198		6		301
Construction and land development	4,349		2,914		530		3,444		369		3,001
Residential	705		637		68		705		7		682
Consumer and other	—		—		—		—		—		—
Total	$	11,864	$	5,072	$	4,915	$	9,987	$	2,335	$	11,924

The following table presents details for past due and impaired loans:



	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2016		2015		2016		2015
Total interest income that would have been recognized under original terms	$	226	$	369	$	703	$	913
Total cash received and recognized as interest income on non-accrual loans	203		81		253		206
Total interest income recognized on impaired loans	32		4		63		31

There were no loans over 90 days past due and still accruing interest at September 30, 2016 or December 31, 2015.

The recorded investment in impaired Portfolio loans by category at September 30, 2016 and December 31, 2015, is as follows:



	September 30, 2016
(in thousands)	Non-accrual		Restructured		Loans over 90 days past due and still accruing interest		Total
Commercial and industrial	$	10,959	$	2,311	$	—	$	13,270
Real estate:
Commercial - investor owned	253		—		—		253
Commercial - owner occupied	—		—		—		—
Construction and land development	2,258		20		—		2,278
Residential	129		—		—		129
Consumer and other	4,508		—		—		4,508
Total	$	18,107	$	2,331	$	—	$	20,438



	December 31, 2015
(in thousands)	Non-accrual		Restructured		Loans over 90 days past due and still accruing interest		Total
Commercial and industrial	$	4,406	$	307	$	—	$	4,713
Real estate:
Commercial - investor owned	927		—		—		927
Commercial - owner occupied	198		—		—		198
Construction and land development	3,444		—		—		3,444
Residential	705		—		—		705
Consumer and other	—		—		—		—
Total	$	9,680	$	307	$	—	$	9,987

The recorded investment by category for the Portfolio loans that have been restructured during the three and nine months ended September 30, 2016 and 2015, is as follows:

Three months ended September 30, 2016

Three months ended September 30, 2015

(in thousands, except for number of loans)

Number of Loans

Pre-Modification Outstanding Recorded Balance

Post-Modification Outstanding Recorded Balance

Number of Loans

Pre-Modification Outstanding Recorded Balance

Post-Modification Outstanding Recorded Balance

Commercial and industrial

—

Real estate:

Commercial - investor owned

—

Commercial - owner occupied

—

Construction and land development

—

Residential

—

Consumer and other

—

Total

—



	Nine months ended September 30, 2016					Nine months ended September 30, 2015
(in thousands, except for number of loans)	Number of Loans	Pre-Modification Outstanding Recorded Balance		Post-Modification Outstanding Recorded Balance		Number of Loans	Pre-Modification Outstanding Recorded Balance		Post-Modification Outstanding Recorded Balance
Commercial and industrial	2	$	2,341	$	2,341	—	$	—	$	—
Real estate:
Commercial - investor owned	1	248		248		—	—		—
Commercial - owner occupied	—	—		—		—	—		—
Construction and land development	1	20		20		—	—		—
Residential	—	—		—		—	—		—
Consumer and other	—	—		—		—	—		—
Total	4	$	2,609	$	2,609	—	$	—	$	—

The restructured loans resulted from deferral of principal and extending the term to maturity. As of September 30, 2016, the Company had $1.2 million specific reserves allocated to loans that have been restructured. There were no Portfolio loans restructured that subsequently defaulted during the three and nine months ended September 30, 2016 or 2015.

The aging of the recorded investment in past due Portfolio loans by portfolio class and category at September 30, 2016 and December 31, 2015 is shown below.



	September 30, 2016
(in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Commercial and industrial	$	—	$	364	$	364	$	1,598,451	$	1,598,815
Real estate:
Commercial - investor owned	136		—		136		514,919		515,055
Commercial - owner occupied	225		—		225		340,691		340,916
Construction and land development	—		1,529		1,529		187,327		188,856
Residential	73		60		133		233,827		233,960
Consumer and other	—		—		—		160,103		160,103
Total	$	434	$	1,953	$	2,387	$	3,035,318	$	3,037,705



	December 31, 2015
(in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Commercial and industrial	$	505	$	888	$	1,393	$	1,482,934	$	1,484,327
Real estate:
Commercial - investor owned	464		—		464		427,600		428,064
Commercial - owner occupied	94		184		278		342,681		342,959
Construction and land development	384		2,273		2,657		158,404		161,061
Residential	70		681		751		195,747		196,498
Consumer and other	20		—		20		137,808		137,828
Total	$	1,537	$	4,026	$	5,563	$	2,745,174	$	2,750,737

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt, such as current financial information, payment experience, credit documentation, and current economic factors among other factors. This analysis is performed on a quarterly basis. The Company uses the following definitions for risk ratings:


•	Grades 1, 2, and 3 – Includes loans to borrowers with a continuous record of strong earnings, sound balance sheet condition and capitalization, ample liquidity with solid cash flow, and whose management team has experience and depth within their industry.


•	Grade 4 – Includes loans to borrowers with positive trends in profitability, satisfactory capitalization and balance sheet condition, and sufficient liquidity and cash flow.


•	Grade 5 – Includes loans to borrowers that may display fluctuating trends in sales, profitability, capitalization, liquidity, and cash flow.


•	Grade 6 – Includes loans to borrowers where an adverse change or perceived weakness has occurred, but may be correctable in the near future. Alternatively, this rating category may also include circumstances where the borrower is starting to reverse a negative trend or condition, or has recently been upgraded from a 7, 8, or 9 rating.


•	Grade 7 – Watch credits are borrowers that have experienced financial setback of a nature that is not determined to be severe or influence ‘ongoing concern’ expectations. Although possible, no loss is anticipated, due to strong collateral and/or guarantor support.


•	Grade 8 – Substandard credits will include those borrowers characterized by significant losses and sustained downward trends in balance sheet condition, liquidity, and cash flow. Repayment reliance may have shifted to secondary sources. Collateral exposure may exist and additional reserves may be warranted.


•	Grade 9 – Doubtful credits include borrowers that may show deteriorating trends that are unlikely to be corrected. Collateral values may appear insufficient for full recovery, therefore requiring a partial charge-off, or debt renegotiation with the borrower. The borrower may have declared bankruptcy or bankruptcy is likely in the near term. All doubtful rated credits will be on non-accrual.

The recorded investment by risk category of the Portfolio loans by portfolio class and category at September 30, 2016, which is based upon the most recent analysis performed, and December 31, 2015 is as follows:



	September 30, 2016
(in thousands)	Pass (1-6)		Watch (7)		Substandard (8)		Doubtful (9)		Total
Commercial and industrial	$	1,457,729	$	63,572	$	77,514	$	—	$	1,598,815
Real estate:
Commercial - investor owned	501,228		9,549		4,278		—		515,055
Commercial - owner occupied	311,427		25,369		4,120		—		340,916
Construction and land development	179,515		6,050		3,291		—		188,856
Residential	226,287		4,224		3,449		—		233,960
Consumer and other	153,458		711		5,934		—		160,103
Total	$	2,829,644	$	109,475	$	98,586	$	—	$	3,037,705



	December 31, 2015
(in thousands)	Pass (1-6)		Watch (7)		Substandard (8)		Doubtful (9)		Total
Commercial and industrial	$	1,356,864	$	90,370	$	37,093	$	—	$	1,484,327
Real estate:
Commercial - investor owned	403,820		18,868		5,376		—		428,064
Commercial - owner occupied	314,791		24,727		3,441		—		342,959
Construction and land development	146,601		10,114		4,346		—		161,061
Residential	188,269		5,138		3,091		—		196,498
Consumer and other	131,060		721		6,047		—		137,828
Total	$	2,541,405	$	149,938	$	59,394	$	—	$	2,750,737