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

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

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

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

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

The number of shares of common stock outstanding as of November 1, 2017 was 43,732,082.


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






Glossary of Acronyms and Defined Terms
 
2016 Form 10-K
–
Annual Report on Form 10-K for the year ended December 31, 2016
AFS
–
Available for sale
ALCO
–
Asset Liability Committee
ALL
–
Allowance for loan losses
ASC
–
Accounting Standards Codification
ASU
–
Accounting Standards Update
ATM
–
Automated teller machine
the Bank
–
Union Bank & Trust
BOLI
–
Bank-owned life insurance
bps
–
Basis points
the Company
–
Union Bankshares Corporation and its subsidiaries
Dodd-Frank Act
–
Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010
EPS
–
Earnings per share
Exchange Act
–
Securities Exchange Act of 1934
FASB
–
Financial Accounting Standards Board
FDIC
–
Federal Deposit Insurance Corporation
Federal Reserve
–
Board of Governors of the Federal Reserve System
Federal Reserve Bank
–
Federal Reserve Bank of Richmond
FHLB
–
Federal Home Loan Bank of Atlanta
U.S. GAAP or GAAP
–
Accounting principles generally accepted in the United States
HELOC
–
Home equity line of credit
HTM
–
Held to maturity
IDC
–
Interactive Data Corporation
LIBOR
–
London Interbank Offered Rate
NPA
–
Nonperforming assets
ODCM
–
Old Dominion Capital Management, Inc.
OREO
–
Other real estate owned
OTTI
–
Other than temporary impairment
PCI
–
Purchased credit impaired
ROA
–
Return on average assets
ROE
–
Return on average common equity
ROTCE
–
Return on average tangible common equity
SEC
–
Securities and Exchange Commission
StellarOne
–
StellarOne Corporation
TDR
–
Troubled debt restructuring
UMG
–
Union Mortgage Group, Inc.
Xenith
–
Xenith Bankshares, Inc.



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

 
 

Cash and cash equivalents:
 

 
 

Cash and due from banks
$
115,776

 
$
120,758

Interest-bearing deposits in other banks
60,294

 
58,030

Federal funds sold
891

 
449

Total cash and cash equivalents
176,961

 
179,237

Securities available for sale, at fair value
968,361

 
946,764

Securities held to maturity, at carrying value
204,801

 
201,526

Restricted stock, at cost
68,441

 
60,782

Loans held for sale, at fair value
30,896

 
36,487

Loans held for investment, net of deferred fees and costs
6,898,729

 
6,307,060

Less allowance for loan losses
37,162

 
37,192

Net loans held for investment
6,861,567

 
6,269,868

Premises and equipment, net
120,808

 
122,027

Other real estate owned, net of valuation allowance
8,764

 
10,084

Goodwill
298,191

 
298,191

Amortizable intangibles, net
16,017

 
20,602

Bank owned life insurance
181,451

 
179,318

Other assets
93,178

 
101,907

Total assets
$
9,029,436

 
$
8,426,793

LIABILITIES
 

 
 

Noninterest-bearing demand deposits
$
1,535,149

 
$
1,393,625

Interest-bearing deposits
5,346,677

 
4,985,864

Total deposits
6,881,826

 
6,379,489

Securities sold under agreements to repurchase
43,337

 
59,281

Other short-term borrowings
574,000

 
517,500

Long-term borrowings
434,750

 
413,308

Other liabilities
54,152

 
56,183

Total liabilities
7,988,065

 
7,425,761

Commitments and contingencies (Note 6)


 


STOCKHOLDERS' EQUITY
 

 
 

Common stock, $1.33 par value, shares authorized 100,000,000; issued and outstanding, 43,729,229 shares and 43,609,317 shares, respectively.
57,708

 
57,506

Additional paid-in capital
608,884

 
605,397

Retained earnings
373,468

 
341,938

Accumulated other comprehensive income
1,311

 
(3,809
)
Total stockholders' equity
1,041,371

 
1,001,032

Total liabilities and stockholders' equity
$
9,029,436

 
$
8,426,793

See accompanying notes to consolidated financial statements.

-2-

UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
(Dollars in thousands, except share and per share data)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
2017
 
September 30,
2016
 
September 30,
2017
 
September 30,
2016
Interest and dividend income:
 
 
 
 
 
 
 
Interest and fees on loans
$
75,948

 
$
66,190

 
$
216,644

 
$
193,884

Interest on deposits in other banks
181

 
65

 
367

 
178

Interest and dividends on securities:
 
 
 
 
 
 
 
Taxable
5,175

 
4,732

 
15,081

 
13,558

Nontaxable
3,546

 
3,446

 
10,620

 
10,344

Total interest and dividend income
84,850

 
74,433

 
242,712

 
217,964

 
 
 
 
 
 
 
 
Interest expense:
 
 
 
 
 
 
 
Interest on deposits
7,234

 
4,552

 
18,410

 
12,945

Interest on short-term borrowings
1,871

 
765

 
4,221

 
2,098

Interest on long-term borrowings
4,547

 
2,088

 
13,316

 
6,386

Total interest expense
13,652

 
7,405

 
35,947

 
21,429

 
 
 
 
 
 
 
 
Net interest income
71,198

 
67,028

 
206,765

 
196,535

Provision for credit losses
3,050

 
2,472

 
7,345

 
7,376

Net interest income after provision for credit losses
68,148

 
64,556

 
199,420

 
189,159

 
 
 
 
 
 
 
 
Noninterest income:
 
 
 
 
 

 
 

Service charges on deposit accounts
5,153

 
4,965

 
14,945

 
14,454

Other service charges and fees
4,529

 
4,397

 
13,575

 
12,971

Fiduciary and asset management fees
2,794

 
2,844

 
8,313

 
7,315

Mortgage banking income, net
2,305

 
3,207

 
7,123

 
8,324

Gains on securities transactions, net
184

 
—

 
782

 
145

Bank owned life insurance income
1,377

 
1,389

 
4,837

 
4,122

Loan-related interest rate swap fees
416

 
1,303

 
2,627

 
3,056

Other operating income
778

 
845

 
2,228

 
2,470

Total noninterest income
17,536

 
18,950

 
54,430

 
52,857

 
 
 
 
 
 
 
 
Noninterest expenses:
 
 
 
 
 

 
 

Salaries and benefits
29,769

 
30,493

 
92,499

 
87,061

Occupancy expenses
4,939

 
4,841

 
14,560

 
14,627

Furniture and equipment expenses
2,559

 
2,635

 
7,882

 
7,867

Printing, postage, and supplies
1,154

 
1,147

 
3,710

 
3,566

Communications expense
798

 
948

 
2,580

 
2,964

Technology and data processing
4,232

 
3,917

 
12,059

 
11,340

Professional services
1,985

 
1,895

 
5,734

 
6,432

Marketing and advertising expense
1,944

 
1,975

 
5,963

 
5,838

FDIC assessment premiums and other insurance
1,141

 
1,262

 
2,793

 
4,003

Other taxes
2,022

 
639

 
6,065

 
3,864

Loan-related expenses
1,349

 
1,531

 
3,959

 
3,638

OREO and credit-related expenses
1,139

 
503

 
2,023

 
1,965

Amortization of intangible assets
1,480

 
1,843

 
4,661

 
5,468

Training and other personnel costs
887

 
863

 
2,900

 
2,512

Merger-related costs
732

 
—

 
3,476

 
—

Other expenses
1,366

 
2,421

 
3,957

 
5,291

Total noninterest expenses
57,496

 
56,913

 
174,821

 
166,436

 
 
 
 
 
 
 
 
Income before income taxes
28,188

 
26,593

 
79,029

 
75,580

Income tax expense
7,530

 
6,192

 
21,292

 
18,881

Net income
$
20,658

 
$
20,401

 
$
57,737

 
$
56,699

Basic earnings per common share
$
0.47

 
$
0.47

 
$
1.32

 
$
1.29

Diluted earnings per common share
$
0.47

 
$
0.47

 
$
1.32

 
$
1.29

Dividends declared per common share
$
0.20

 
$
0.19

 
$
0.60

 
$
0.57

Basic weighted average number of common shares outstanding
43,706,635

 
43,565,937

 
43,685,045

 
43,853,548

Diluted weighted average number of common shares outstanding
43,792,058

 
43,754,915

 
43,767,502

 
43,967,725

See accompanying notes to consolidated financial statements.

-3-

UNION BANKSHARES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (UNAUDITED)
(Dollars in thousands)
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2017
 
2016
 
2017
 
2016
 
 
 
 
 
 
 
 
Net income
$
20,658

 
$
20,401

 
$
57,737

 
$
56,699

Other comprehensive income (loss):
 

 
 

 
 

 
 

Cash flow hedges:
 

 
 

 
 

 
 

Change in fair value of cash flow hedges
41

 
(78
)
 
(766
)
 
(3,766
)
Reclassification adjustment for losses (gains) included in net income (net of tax, $102 and $83 for the three months and $370 and $233 for the nine months ended September 30, 2017 and 2016, respectively)
189

 
154

 
688

 
433

AFS securities:
 

 
 

 
 

 
 

Unrealized holding gains (losses) arising during period (net of tax, $1,470 and $604 for the three months and $3,195 and $4,227 for the nine months ended September 30, 2017 and 2016, respectively)
(2,729
)
 
1,121

 
5,935

 
7,851

Reclassification adjustment for losses (gains) included in net income (net of tax, $64 and $0 for the three months and $274 and $51 for the nine months ended September 30, 2017 and 2016, respectively)
(119
)
 
—

 
(508
)
 
(95
)
HTM securities:
 

 
 

 
 

 
 

Reclassification adjustment for accretion of unrealized gain on AFS securities transferred to HTM (net of tax, $88 and $128 for the three months and $273 and $439 for the nine months ended September 30, 2017 and 2016, respectively)
(163
)
 
(237
)
 
(507
)
 
(816
)
Bank owned life insurance:
 
 
 
 
 
 
 
  Reclassification adjustment for losses included in net income
84

 
—

 
278

 
—

Other comprehensive income (loss)
(2,697
)
 
960

 
5,120

 
3,607

Comprehensive income
$
17,961

 
$
21,361

 
$
62,857

 
$
60,306

See accompanying notes to consolidated financial statements.

-4-

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

 
$
631,822

 
$
298,134

 
$
6,252

 
$
995,367

Net income - 2016
 

 
 

 
56,699

 
 

 
56,699

Other comprehensive income (net of taxes of $3,970)
 

 
 

 
 

 
3,607

 
3,607

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

 
430

 
 
 
 
 
453

Dividends on common stock ($0.57 per share)
 

 
 

 
(24,957
)
 
 

 
(24,957
)
Stock purchased under stock repurchase plan (1,411,131 shares)
(1,876
)
 
(31,300
)
 
 

 
 

 
(33,176
)
Issuance of common stock under Equity Compensation Plans (54,044 shares)
72

 
681

 
 

 
 

 
753

Issuance of common stock for services rendered (14,576 shares)
19

 
360

 
 

 
 

 
379

Vesting of restricted stock, net of shares held for taxes, under Equity Compensation Plans (35,515 shares)
47

 
(492
)
 
 

 
 

 
(445
)
Stock-based compensation expense
 

 
2,284

 
 

 
 

 
2,284

Balance - September 30, 2016
$
57,444

 
$
603,785

 
$
329,876

 
$
9,859

 
$
1,000,964

 
 
 
 
 
 
 
 
 
 
Balance - December 31, 2016
$
57,506

 
$
605,397

 
$
341,938

 
$
(3,809
)
 
$
1,001,032

Net income - 2017
 

 
 

 
57,737

 
 

 
57,737

Other comprehensive income (net of taxes of $3,018)
 

 
 

 
 

 
5,120

 
5,120

Dividends on common stock ($0.60 per share)
 

 
 

 
(26,207
)
 
 

 
(26,207
)
Issuance of common stock under Equity Compensation Plans (58,421 shares)
78

 
891

 
 

 
 

 
969

Issuance of common stock for services rendered (16,529 shares)
22

 
539

 
 

 
 

 
561

Vesting of restricted stock, net of shares held for taxes, under Equity Compensation Plans (76,505 shares)
102

 
(1,415
)
 
 

 
 

 
(1,313
)
Stock-based compensation expense
 

 
3,472

 
 

 
 

 
3,472

Balance - September 30, 2017
$
57,708

 
$
608,884

 
$
373,468

 
$
1,311

 
$
1,041,371

See accompanying notes to consolidated financial statements.

-5-

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

 
 

Net income
$
57,737

 
$
56,699

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

 
 

Depreciation of premises and equipment
8,307

 
7,617

Writedown of OREO
845

 
879

Amortization, net
10,500

 
10,241

Amortization (accretion) related to acquisition, net
(158
)
 
1,400

Provision for credit losses
7,345

 
7,376

Gains on securities transactions, net
(782
)
 
(145
)
BOLI income
(3,999
)
 
(4,122
)
Decrease (increase) in loans held for sale, net
5,591

 
(10,784
)
Losses (gains) on sales of other real estate owned, net
32

 
(278
)
Losses on sales of premises, net
51

 
97

Stock-based compensation expenses
3,472

 
2,284

Issuance of common stock for services
561

 
379

Net decrease (increase) in other assets
4,952

 
(11,169
)
Net increase in other liabilities
909

 
11,192

Net cash and cash equivalents provided by (used in) operating activities
95,363

 
71,666

Investing activities:
 

 
 

Purchases of securities available for sale and restricted stock
(205,965
)
 
(159,863
)
Purchases of securities held to maturity
(7,836
)
 
—

Proceeds from sales of securities available for sale and restricted stock
91,911

 
18,272

Proceeds from maturities, calls and paydowns of securities available for sale
88,675

 
83,942

Proceeds from maturities, calls and paydowns of securities held to maturity
818

 
1,841

Net increase in loans held for investment
(594,967
)
 
(479,346
)
Net increase in premises and equipment
(7,139
)
 
(5,102
)
Proceeds from BOLI settlements
2,497

 
—

Proceeds from sales of other real estate owned
1,028

 
4,982

Cash paid in acquisition
—

 
(4,077
)
Cash acquired in acquisitions
—

 
207

Net cash and cash equivalents provided by (used in) investing activities
(630,978
)
 
(539,144
)
Financing activities:
 

 
 

Net increase in noninterest-bearing deposits
141,524

 
69,331

Net increase in interest-bearing deposits
360,813

 
225,239

Net increase in short-term borrowings
40,556

 
276,748

Cash paid for contingent consideration
(3,003
)
 
—

Proceeds from issuance of long-term debt
20,000

 
—

Repayments of long-term debt
—

 
(32,500
)
Cash dividends paid - common stock
(26,207
)
 
(24,957
)
Repurchase of common stock
—

 
(33,176
)
Issuance of common stock
969

 
753

Vesting of restricted stock, net of shares held for taxes
(1,313
)
 
(445
)
Net cash and cash equivalents provided by (used in) financing activities
533,339

 
480,993

Increase (decrease) in cash and cash equivalents
(2,276
)
 
13,515

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

 
142,660

Cash and cash equivalents at end of the period
$
176,961

 
$
156,175

Supplemental Disclosure of Cash Flow Information
 

 
 

Cash payments for:
 

 
 

Interest
$
33,947

 
$
21,812

Income taxes
19,600

 
19,800

Supplemental schedule of noncash investing and financing activities
 

 
 

Transfers between loans and other real estate owned
$
585

 
$
865

Issuance of common stock in exchange for net assets in acquisition
—

 
453

See accompanying notes to consolidated financial statements.

-6-

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

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

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

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

-7-

 
Residential 1-4 Family – loans generally made to both commercial and residential borrowers. Residential 1-4 Family loan portfolios carry risks associated with the creditworthiness of the borrower or the tenant and changes in loan-to-value ratios. The Company manages these risks through policies and procedures such as limiting loan-to-value ratios at origination, experienced underwriting, requiring standards for appraisers, and not making subprime loans.
 
Multifamily Real Estate – loans made to real estate investors to support permanent financing for multifamily residential income producing properties that rely on the successful operation of the property for repayment. This management mainly involves property maintenance and collection of rents due from tenants. This type of lending carries a lower level of risk as compared to other commercial lending. In addition, underwriting requirements for multifamily properties are stricter than for other non-owner-occupied property types. The Company manages this risk by avoiding concentrations with any particular customer.
 
Commercial & Industrial – loans generally made to support the Company’s borrowers’ need for equipment/vehicle purchases and short-term or seasonal cash flow needs. Repayment relies upon the successful operation of the business. This type of lending carries a lower level of commercial credit risk as compared to other commercial lending. The Company manages this risk by using general underwriting policies and procedures for these types of loans and by avoiding concentrations to any one business or industry.
 
HELOC – the consumer HELOC portfolio carries risks associated with the creditworthiness of the borrower and changes in loan-to-value ratios. The Company manages these risks through policies and procedures such as limiting loan-to-value ratios at origination, using experienced underwriting, requiring standards for appraisers, and not making subprime loans.
 
Auto – the consumer indirect auto lending portfolio generally carries certain risks associated with the values of the collateral that management must mitigate. The Company focuses its indirect auto lending on one to two year old used vehicles where substantial depreciation has already occurred thereby minimizing the risk of significant loss of collateral values in the future. This type of lending places reliance on computer-based loan approval systems to supplement other underwriting standards.
 
Consumer and all other – portfolios carry risks associated with the creditworthiness of the borrower and changes in the economic environment. The Company manages these risks through policies and procedures such as experienced underwriting, maximum debt to income ratios, and minimum borrower credit scores. Also included in this category are loans that generally support small business lines of credit and agricultural lending, neither of which are a material source of business for the Company.
 
Affordable Housing Entities
The Company invests in private investment funds that make equity investments in multifamily affordable housing properties that provide affordable housing tax credits for these investments. The activities of these entities are financed with a combination of invested equity capital and debt. For the three and nine months ended September 30, 2017, the Company recognized amortization of $229,000 and $643,000, respectively, and tax credits of $240,000 and $724,000, respectively, associated with these investments within “Income tax expense” on the Company’s Consolidated Statements of Income. For the three and nine months ended September 30, 2016, the Company recognized amortization of $185,000 and $445,000, respectively, and tax credits of $265,000 and $685,000, respectively. The carrying value of the Company’s investments in these qualified affordable housing projects was $9.1 million and $9.9 million as of September 30, 2017 and December 31, 2016, respectively. At September 30, 2017 and December 31, 2016, the Company's recorded liability totaled $4.0 million and $7.1 million, respectively, for the related unfunded commitments, which are expected to be paid from the second half of 2017 through 2019.
 
Adoption of New Accounting Standards
In March 2016, the FASB issued ASU No. 2016-09, “Compensation - Stock Compensation (Topic 718): Improvements to
Employee Share-Based Payment Accounting.” This ASU simplifies several aspects of the accounting for employee share based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. The Company adopted this standard in the first quarter of 2017. The adoption of ASU 2016-09 did not have a material impact on the Company’s consolidated financial statements.

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

-8-

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

In February 2016, the FASB issued ASU No. 2016-02, “Leases (Topic 842).” This ASU requires lessees to put most leases on their balance sheets, but recognize expenses in the income statement in a manner similar to today’s accounting. The guidance also eliminates the real estate-specific provisions and changes the guidance on sale-leaseback transactions, initial direct costs, and lease executory costs for all entities. For lessors, the standard modifies the classification criteria and the accounting for sales-type and direct financing leases. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently working to identify the complete lease population, including potential embedded leases. The adoption of this standard is expected to result in additional assets and liabilities, as the Company will be required to recognize operating leases on the Consolidated Balance Sheet. Other implementation matters to be addressed include, but are not limited to, the determination of effects on the financial and capital ratios and the quantification of the impacts that this accounting guidance will have on the Company's consolidated financial statements.

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

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

-9-

of Nonfinancial Assets.” This ASU conforms the derecognition guidance on nonfinancial assets with the model for transactions in the new revenue standard. The amendments will be effective for the Company for reporting periods beginning after December 15, 2018. The Company concluded that ASU 2017-05 will not have a material impact on its consolidated financial statements.
 
In March 2017, the FASB issued ASU No. 2017-08, “Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities.” This ASU focuses on the amortization period for certain purchased callable debt securities held at a premium. The amendments shorten the amortization period for the premium to the earliest call date. The amendments will be effective for the Company for interim and annual periods beginning after December 15, 2018. The Company has concluded the adoption of ASU 2017-08 will not have a material impact on its consolidated financial statements.
 
In May 2017, the FASB issued ASU No. 2017-09, “Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting.” This ASU relates to changes in the terms or conditions of a share-based payment award. The amendments provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting. The amendments will be effective for the Company for annual periods, and interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted. The Company has concluded the adoption of ASU 2017-09 will not have a material impact on its consolidated financial statements.

In August 2017, the FASB issued ASU No. 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities.” This ASU relates to any entity that elects to apply hedge accounting in accordance with current GAAP. The amendment simplifies the application of the hedge accounting guidance and improves the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. The amendments will be effective for the Company for annual periods, and interim periods within those annual periods, beginning after December 15, 2018. Early adoption is permitted. The Company is currently assessing the impact ASU 2017-12 will have on its consolidated financial statements.


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2. SECURITIES 

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

 
 

 
 

 
 

Obligations of states and political subdivisions
$
285,921

 
$
7,582

 
$
(1,304
)
 
$
292,199

Corporate bonds
114,997

 
1,241

 
(816
)
 
115,422

Mortgage-backed securities
546,038

 
4,119

 
(3,253
)
 
546,904

Other securities
13,890

 
—

 
(54
)
 
13,836

Total available for sale securities
$
960,846

 
$
12,942

 
$
(5,427
)
 
$
968,361

 
 
 
 
 
 
 
 
December 31, 2016
 

 
 

 
 

 
 

Obligations of states and political subdivisions
$
274,007

 
$
4,962

 
$
(3,079
)
 
$
275,890

Corporate bonds
123,674

 
892

 
(2,786
)
 
121,780

Mortgage-backed securities
536,031

 
4,626

 
(5,371
)
 
535,286

Other securities
13,885

 
—

 
(77
)
 
13,808

Total available for sale securities
$
947,597

 
$
10,480

 
$
(11,313
)
 
$
946,764

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

 
 

 
 

 
 

 
 

 
 

Obligations of states and political subdivisions
$
55,319

 
$
(700
)
 
$
9,338

 
$
(604
)
 
$
64,657

 
$
(1,304
)
Mortgage-backed securities
283,466

 
(2,708
)
 
42,481

 
(545
)
 
325,947

 
(3,253
)
Corporate bonds and other securities
21,128

 
(353
)
 
32,674

 
(517
)
 
53,802

 
(870
)
Total available for sale securities
$
359,913

 
$
(3,761
)
 
$
84,493

 
$
(1,666
)
 
$
444,406

 
$
(5,427
)
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
 

 
 

 
 

 
 

 
 

 
 

Obligations of states and political subdivisions
$
108,440

 
$
(3,007
)
 
$
588

 
$
(72
)
 
$
109,028

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

 
(4,979
)
 
42,096

 
(392
)
 
358,565

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

 
(1,537
)
 
40,468

 
(1,326
)
 
87,856

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

 
$
(9,523
)
 
$
83,152

 
$
(1,790
)
 
$
555,449

 
$
(11,313
)
 
As of September 30, 2017, there were $84.5 million, or 36 issues, of individual available for sale securities that had been in a continuous loss position for more than 12 months. These securities had an unrealized loss of $1.7 million and consisted of municipal obligations, mortgage-backed securities, and corporate bonds. As of December 31, 2016, there were $83.2 million, or 30 issues, of individual securities that had been in a continuous loss position for more than 12 months. These securities had an unrealized loss of $1.8 million and consisted of municipal obligations, mortgage-backed securities, and corporate bonds. The Company has determined that these securities are temporarily impaired as of September 30, 2017 and December 31, 2016 for the reasons set out below:
 

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Mortgage-backed securities. This category’s unrealized losses are primarily the result of interest rate fluctuations. Because the decline in market value is attributable to changes in interest rates and not credit quality, the Company does not intend to sell the investments, and it is not likely that the Company will be required to sell the investments before recovery of their amortized cost basis, which may be maturity, the Company does not consider those investments to be other-than-temporarily impaired. Also, the majority of the Company’s mortgage-backed securities are agency-backed securities, which have a government guarantee.
 
Obligations of state and political subdivisions. This category’s unrealized losses are primarily the result of interest rate fluctuations and also a certain few ratings downgrades brought about by the impact of the credit crisis on states and political subdivisions. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the cost basis of each investment. Because the Company does not intend to sell any of the investments and the accounting standard of “more likely than not” has not been met for the Company to be required to sell any of the investments before recovery of its amortized cost basis, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired.
 
Corporate bonds. The Company’s unrealized losses in corporate debt securities are related to both interest rate fluctuations and ratings downgrades for a limited number of securities. The majority of the securities remain investment grade and the Company’s analysis did not indicate the existence of a credit loss. The contractual terms of the investments do not permit the issuer to settle the securities at a price less than the cost basis of each investment. Because the Company does not intend to sell any of the investments and the accounting standard of “more likely than not” has not been met for the Company to be required to sell any of the investments before recovery of its amortized cost basis, which may be maturity, the Company does not consider these investments to be other-than-temporarily impaired.
 
The following table presents the amortized cost and estimated fair value of available for sale securities as of September 30, 2017 and December 31, 2016, by contractual maturity (dollars in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
 
September 30, 2017
 
December 31, 2016
 
Amortized
Cost
 
Estimated
Fair Value
 
Amortized
Cost
 
Estimated
Fair Value
Due in one year or less
$
23,387

 
$
23,510

 
$
21,403

 
$
21,517

Due after one year through five years
128,261

 
130,107

 
108,198

 
109,778

Due after five years through ten years
267,492

 
271,830

 
300,552

 
301,888

Due after ten years
541,706

 
542,914

 
517,444

 
513,581

Total securities available for sale
$
960,846

 
$
968,361

 
$
947,597

 
$
946,764

 

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

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

-12-

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

 
 

 
 

 
 

Obligations of states and political subdivisions
$
204,801

 
$
5,111

 
$
(77
)
 
$
209,835

 
 
 
 
 
 
 
 
December 31, 2016
 

 
 

 
 

 
 

Obligations of states and political subdivisions
$
201,526

 
$
1,617

 
$
(828
)
 
$
202,315

 
(1) The carrying value includes $4.0 million as of September 30, 2017 and $5.2 million as of December 31, 2016 of net unrealized gains present at the time of transfer from available for sale securities, net of any accretion.
 
The following table shows the gross unrealized losses and fair value (dollars in thousands) of the Company’s held to maturity securities with unrealized losses that are not deemed to be other-than-temporarily impaired as of September 30, 2017 and December 31, 2016. These are aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position.
 
 
Less than 12 months
 
More than 12 months
 
Total
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
 
Fair
Value
 
Unrealized
Losses
September 30, 2017
 

 
 

 
 

 
 

 
 

 
 

Obligations of states and political subdivisions
$
5,130

 
$
(53
)
 
$
638

 
$
(24
)
 
$
5,768

 
$
(77
)
 
 
 
 
 
 
 
 
 
 
 
 
December 31, 2016
 
 
 
 
 
 
 
 
 
 
 
Obligations of states and political subdivisions
$
92,841

 
$
(747
)
 
$
648

 
$
(81
)
 
$
93,489

 
$
(828
)
 
As of September 30, 2017, there was $638,000, or one issue, of an individual held to maturity security that had been in a continuous loss position for more than 12 months and had an unrealized loss of $24,000. As of December 31, 2016, there was $648,000, or one issue, of an individual held to maturity security that had been in a continuous loss position for more than 12 months and had an unrealized loss of $81,000. This security is a municipal bond with minimal credit exposure and is credit enhanced with a guarantee from the local school board. For this reason, the Company has determined that this security in a loss position is temporarily impaired as of September 30, 2017 and December 31, 2016. Because the Company does not intend to sell this investment and the accounting standard of “more likely than not” has not been met for the Company to be required to sell the investment before recovery of its amortized cost basis, which may be maturity, the Company does not consider this investment to be other-than-temporarily impaired.

The following table presents the amortized cost and estimated fair value of held to maturity securities as of September 30, 2017 and December 31, 2016, by contractual maturity (dollars in thousands). Expected maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
 
September 30, 2017
 
December 31, 2016
 
Carrying
Value (1)
 
Estimated
Fair Value
 
Carrying
Value (1)
 
Estimated
Fair Value
Due in one year or less
$
5,879

 
$
5,902

 
$
4,403

 
$
4,440

Due after one year through five years
41,196

 
41,959

 
28,383

 
28,763

Due after five years through ten years
65,893

 
67,444

 
51,730

 
51,522

Due after ten years
91,833

 
94,530

 
117,010

 
117,590

Total securities held to maturity
$
204,801

 
$
209,835

 
$
201,526

 
$
202,315

 
(1) The carrying value includes $4.0 million as of September 30, 2017 and $5.2 million as of December 31, 2016 of net unrealized gains present at the time of transfer from available for sale securities, net of any accretion.

-13-

 
For information regarding the estimated fair value of held to maturity securities which were pledged to secure public deposits as permitted or required by law as of September 30, 2017 and December 31, 2016, see Note 6 “Commitments and Contingencies.”
 
Restricted Stock, at cost
Due to restrictions placed upon the Bank’s common stock investment in the Federal Reserve Bank and FHLB, these securities have been classified as restricted equity securities and carried at cost. These restricted securities are not subject to the investment security classifications and are included as a separate line item on the Company’s Consolidated Balance Sheets. At September 30, 2017 and December 31, 2016, the FHLB required the Bank to maintain stock in an amount equal to 4.25% of outstanding borrowings and a specific percentage of the Bank’s total assets. The Federal Reserve Bank required the Bank to maintain stock with a par value equal to 6% of its outstanding capital at both September 30, 2017 and December 31, 2016. Restricted equity securities consist of Federal Reserve Bank stock in the amount of $27.6 million and $23.8 million for September 30, 2017 and December 31, 2016 and FHLB stock in the amount of $40.9 million and $37.0 million as of September 30, 2017 and December 31, 2016, respectively.
 
Other-Than-Temporary-Impairment
During each quarter, the Company conducts an assessment of the securities portfolio for OTTI consideration. The assessment considers factors such as external credit ratings, delinquency coverage ratios, market price, management’s judgment, expectations of future performance, and relevant industry research and analysis. An impairment is other-than-temporary if any of the following conditions exist: the entity intends to sell the security; it is more likely than not that the entity will be required to sell the security before recovery of its amortized cost basis; or the entity does not expect to recover the security’s entire amortized cost basis (even if the entity does not intend to sell). If a credit loss exists, but an entity does not intend to sell the impaired debt security and is not more likely than not to be required to sell before recovery, the impairment is other-than-temporary and should be separated into a credit portion to be recognized in earnings and the remaining amount relating to all other factors recognized as other comprehensive loss. Based on the assessment for the three and nine months ended September 30, 2017, and in accordance with the guidance, no OTTI was recognized.

For the year ended December 31, 2015, the Company determined that a municipal security in the available for sale portfolio incurred credit-related OTTI of $300,000.  During the quarter ended March 31, 2016, the municipal security was sold.  As a result, the Company recognized an additional loss on sale of the previously written down security.
 
Realized Gains and Losses
The following table presents the gross realized gains and losses on and the proceeds from the sale of securities during the three and nine months ended September 30, 2017 and 2016 (dollars in thousands).
 
 
Three Months Ended
September 30, 2017
 
Nine Months Ended September 30, 2017
Realized gains (losses):
 

 
 

Gross realized gains
$
296

 
$
958

Gross realized losses
(112
)
 
(176
)
Net realized gains
$
184

 
$
782

 
 
 
 
Proceeds from sales of securities
$
39,284

 
$
91,911

 
Three Months Ended
September 30, 2016
 
Nine Months Ended
September 30, 2016
Realized gains (losses):
 

 
 

Gross realized gains
$
—

 
$
242

Gross realized losses
—

 
(97
)
Net realized gains
$
—

 
$
145

 
 
 
 
Proceeds from sales of securities
$
2,848

 
$
18,272


 


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3. LOANS AND ALLOWANCE FOR LOAN LOSSES

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

 
September 30, 2017
 
December 31, 2016
Construction and Land Development
$
841,738

 
$
751,131

Commercial Real Estate - Owner Occupied
903,523

 
857,805

Commercial Real Estate - Non-Owner Occupied
1,748,039

 
1,564,295

Multifamily Real Estate
368,686

 
334,276

Commercial & Industrial
554,522

 
551,526

Residential 1-4 Family
1,083,112

 
1,029,547

Auto
276,572

 
262,071

HELOC
535,446

 
526,884

Consumer and all other
587,091

 
429,525

Total loans held for investment, net (1)
$
6,898,729

 
$
6,307,060

 
(1) Loans, as presented, are net of deferred fees and costs totaling $335,000 and $1.8 million as of September 30, 2017 and December 31, 2016, respectively.
 
The following table shows the aging of the Company’s loan portfolio, by segment, at September 30, 2017 (dollars in thousands):
 
 
30-59 Days
Past Due
 
60-89 Days
Past Due
 
Greater than 90
Days and still
Accruing
 
PCI
 
Nonaccrual
 
Current
 
Total Loans
Construction and Land Development
$
7,221

 
$
100

 
$
54

 
$
3,026

 
$
5,671

 
$
825,666

 
$
841,738

Commercial Real Estate - Owner Occupied
1,707

 
689

 
679

 
17,668

 
2,205

 
880,575

 
903,523

Commercial Real Estate - Non-Owner Occupied
909

 
571

 
298

 
14,376

 
2,701

 
1,729,184

 
1,748,039

Multifamily Real Estate
—

 
—

 
—

 
77

 
—

 
368,609

 
368,686

Commercial & Industrial
1,558

 
255

 
101

 
625

 
1,252

 
550,731

 
554,522

Residential 1-4 Family
5,633

 
1,439

 
2,360

 
14,077

 
6,163

 
1,053,440

 
1,083,112

Auto
2,415

 
293

 
143

 
—

 
174

 
273,547

 
276,572

HELOC
1,400

 
628

 
709

 
982

 
1,791

 
529,936

 
535,446

Consumer and all other
3,469

 
1,445

 
188

 
210

 
165

 
581,614

 
587,091

Total loans held for investment
$
24,312

 
$
5,420

 
$
4,532

 
$
51,041

 
$
20,122

 
$
6,793,302

 
$
6,898,729

 

-15-

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

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

 
$
232

 
$
76

 
$
2,922

 
$
2,037

 
$
744,702

 
$
751,131

Commercial Real Estate - Owner Occupied
1,842

 
109

 
35

 
18,343

 
794

 
836,682

 
857,805

Commercial Real Estate - Non-Owner Occupied
2,369

 
—

 
—

 
17,303

 
—

 
1,544,623

 
1,564,295

Multifamily Real Estate
147

 
—

 
—

 
2,066

 
—

 
332,063

 
334,276

Commercial & Industrial
759

 
858

 
9

 
1,074

 
124

 
548,702

 
551,526

Residential 1-4 Family
7,038

 
534

 
2,048

 
16,200

 
5,279

 
998,448

 
1,029,547

Auto
2,570

 
317

 
111

 
—

 
169

 
258,904

 
262,071

HELOC
1,836

 
1,140

 
635

 
1,161

 
1,279

 
520,833

 
526,884

Consumer and all other
2,522

 
1,431

 
91

 
223

 
291

 
424,967

 
429,525

Total loans held for investment
$
20,245

 
$
4,621

 
$
3,005

 
$
59,292

 
$
9,973

 
$
6,209,924

 
$
6,307,060

 
The following table shows the PCI loan portfolios, by segment and their delinquency status, at September 30, 2017 (dollars in thousands):
 
 
30-89 Days Past
Due
 
Greater than 90
Days
 
Current
 
Total
Construction and Land Development
$
62

 
$
—

 
$
2,964

 
$
3,026

Commercial Real Estate - Owner Occupied
463

 
643

 
16,562

 
17,668

Commercial Real Estate - Non-Owner Occupied
318

 
1,032

 
13,026

 
14,376

Multifamily Real Estate
—

 
—

 
77

 
77

Commercial & Industrial
—

 
—

 
625

 
625

Residential 1-4 Family
949

 
1,125

 
12,003

 
14,077

HELOC
132

 
128

 
722

 
982

Consumer and all other
34

 
—

 
176

 
210

Total
$
1,958

 
$
2,928

 
$
46,155

 
$
51,041

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

 
$
84

 
$
2,838

 
$
2,922

Commercial Real Estate - Owner Occupied
271

 
519

 
17,553

 
18,343

Commercial Real Estate - Non-Owner Occupied
409

 
126

 
16,768

 
17,303

Multifamily Real Estate
—

 
—

 
2,066

 
2,066

Commercial & Industrial
44

 
56

 
974

 
1,074

Residential 1-4 Family
1,298

 
945

 
13,957

 
16,200

HELOC
175

 
121

 
865

 
1,161

Consumer and all other
—

 
—

 
223

 
223

Total
$
2,197

 
$
1,851

 
$
55,244

 
$
59,292


-16-

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

 
 

 
 

 
 

 
 

 
 

Construction and Land Development
$
13,889

 
$
13,981

 
$
—

 
$
13,877

 
$
14,353

 
$
—

Commercial Real Estate - Owner Occupied
5,238

 
5,378

 
—

 
5,886

 
6,042

 
—

Commercial Real Estate - Non-Owner Occupied
5,548

 
5,636

 
—

 
1,399

 
1,399

 
—

Commercial & Industrial
1,632

 
1,880

 
—

 
648

 
890

 
—

Residential 1-4 Family
9,510

 
10,523

 
—

 
8,496

 
9,518

 
—

HELOC
1,651

 
1,741

 
—

 
1,017

 
1,094

 
—

Consumer and all other
521

 
631

 
—

 
230

 
427

 
—

Total impaired loans without a specific allowance
$
37,989

 
$
39,770

 
$
—

 
$
31,553

 
$
33,723

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
Loans with a specific allowance
 

 
 

 
 

 
 

 
 

 
 

Construction and Land Development
$
1,347

 
$
1,444

 
$
113

 
$
1,395

 
$
1,404

 
$
107

Commercial Real Estate - Owner Occupied
2,118

 
2,132

 
157

 
646

 
646

 
4

Commercial Real Estate - Non-Owner Occupied
2,032

 
2,032

 
42

 
2,809

 
2,809

 
474

Commercial & Industrial
2,511

 
2,562

 
909

 
857

 
880

 
14

Residential 1-4 Family
4,421

 
4,543

 
249

 
3,335

 
3,535

 
200

Auto
174

 
235

 
1

 
169

 
235

 
1

HELOC
766

 
800

 
56

 
323

 
433

 
15

Consumer and all other
242

 
310

 
43

 
62

 
298

 
1

Total impaired loans with a specific allowance
$
13,611

 
$
14,058

 
$
1,570

 
$
9,596

 
$
10,240

 
$
816

Total impaired loans
$