LOANS AND ALLOWANCE FOR LOAN LOSSES

The following table summarizes the Company's loans by type.



	June 30, 2016			December 31, 2015
Commercial:
Commercial real estate	$	2,490,724		$	1,451,176
Commercial and industrial	775,484			553,121
Construction and development	419,339			345,304
Consumer:
Residential real estate	686,124			343,648
Construction and development	299,895			46,263
Home equity	530,979			277,900
Other consumer	67,408			60,244
Gross loans	5,269,953			3,077,656
Less:
Deferred loan fees	(1,185		)	(1,112		)
Allowance for loan losses	(11,633		)	(9,769		)
Net loans	$	5,257,135		$	3,066,775

As of June 30, 2016 and December 31, 2015, loans with a recorded investment of $1,844,105 and $948,433, respectively, were pledged to secure borrowings or available lines of credit with correspondent banks.

Purchased Credit-Impaired Loans

Loans for which it is probable at acquisition that all contractually required payments will not be collected are considered purchased credit-impaired ("PCI") loans. The following table relates to NewBridge PCI loans and summarizes the contractually required payments, which includes principal and interest, expected cash flows to be collected, and the fair value of acquired PCI loans at the merger date.



	NewBridge Merger on March 1, 2016

Contractually required payments	$	124,808
Nonaccretable difference	(14,878		)
Cash flows expected to be collected at acquisition	109,930
Accretable yield	(13,995		)
Fair value of PCI loans at acquisition	$	95,935

The following table summarizes changes in accretable yield, or income expected to be collected, related to all of the Company's PCI loans for the periods presented.



	Three months ended June 30,						Six months ended June 30,
	2016			2015			2016			2015

Balance, beginning of period	$	34,566		$	26,364		$	22,309		$	25,181
Additions resulting from acquisitions	—			—			13,995			—
Accretion of income	(3,933		)	(3,290		)	(7,228		)	(6,918		)
Reclassifications from nonaccretable difference	4,197			2,501			4,910			4,055
Other, net	1,926			(1,475		)	2,770			1,782
Balance, end of period	$	36,756		$	24,100		$	36,756		$	24,100

The outstanding balance of PCI loans consists of the undiscounted sum of all amounts, including amounts deemed principal, interest, fees, penalties, and other under the loan, owed by the borrower at the reporting date, whether or not currently due and whether or not any such amounts have been written or charged off. The unpaid principal balance of PCI loans was $228,829 and $160,500 as of June 30, 2016 and December 31, 2015, respectively.

Purchased Non-impaired Loans

Purchased non-impaired loans are also recorded at fair value at acquisition, and the related fair value discount or premium is recognized as an adjustment to yield over the remaining life of each loan. The following table relates to acquired NewBridge purchased non-impaired loans and provides the contractually required payments, fair value, and estimate of contractual cash flows not expected to be collected at the merger date.



	NewBridge Merger on March 1, 2016

Contractually required payments	$	2,257,195
Fair value of acquired loans at acquisition	1,965,201
Contractual cash flows not expected to be collected	26,370

Allowance for Loan Losses

The following tables summarize the activity in the allowance for loan losses for the periods presented.



	Commercial Real Estate			Commercial and Industrial			Commercial Construction			Residential Real Estate			Consumer Construction		Home Equity			Other Consumer			Total
Three months ended June 30, 2016
Beginning balance	$	3,457		$	3,272		$	793		$	991		$	256	$	1,019		$	443		$	10,231
Charge-offs	(10		)	(474		)	(98		)	(57		)	—		(145		)	(228		)	(1,012		)
Recoveries	2			73			17			11			—		2			11			116
Provision for loan losses	1,076			186			570			40			33		243			150			2,298
Ending balance	$	4,525		$	3,057		$	1,282		$	985		$	289	$	1,119		$	376		$	11,633

Six months ended June 30, 2016
Beginning balance	$	3,682		$	2,431		$	866		$	1,257		$	237	$	883		$	413		$	9,769
Charge-offs	(91		)	(1,435		)	(115		)	(217		)	—		(342		)	(445		)	(2,645		)
Recoveries	6			77			28			193			—		2			30			336
Provision for loan losses	928			1,984			503			(248		)	52		576			378			4,173
Ending balance	$	4,525		$	3,057		$	1,282		$	985		$	289	$	1,119		$	376		$	11,633

Three months ended June 30, 2015
Beginning balance	$	2,954		$	1,336		$	1,732		$	1,251		$	213	$	706		$	92		$	8,284
Charge-offs	(157		)	(602		)	(51		)	(120		)	—		(183		)	(112		)	(1,225		)
Recoveries	7			114			5			28			—		113			38			305
Provision for loan losses	333			1,112			(1,021		)	168			56		139			207			994
Ending balance	$	3,137		$	1,960		$	665		$	1,327		$	269	$	775		$	225		$	8,358

Six months ended June 30, 2015
Beginning balance	$	2,796		$	1,274		$	1,691		$	1,237		$	194	$	546		$	79		$	7,817
Charge-offs	(256		)	(971		)	(67		)	(130		)	—		(318		)	(248		)	(1,990		)
Recoveries	12			250			10			52			27		154			71			576
Provision for loan losses	585			1,407			(969		)	168			48		393			323			1,955
Ending balance	$	3,137		$	1,960		$	665		$	1,327		$	269	$	775		$	225		$	8,358

The following tables summarize the ending allowance for loans losses and the recorded investment in loans by portfolio segment and impairment method.



	June 30, 2016
	Commercial Real Estate		Commercial and Industrial		Commercial Construction		Residential Real Estate		Consumer Construction		Home Equity		Other Consumer		Total
Allowance for loan losses:
Ending balance:
Individually evaluated for impairment	$	390	$	—	$	—	$	60	$	—	$	—	$	—	$	450
Collectively evaluated for impairment	3,766		2,857		1,280		854		289		997		371		10,414
Purchased credit-impaired	369		200		2		71		—		122		5		769
Total	$	4,525	$	3,057	$	1,282	$	985	$	289	$	1,119	$	376	$	11,633

Loans:
Ending balance:
Individually evaluated for impairment	$	14,847	$	3,253	$	886	$	993	$	—	$	—	$	—	$	19,979
Collectively evaluated for impairment	2,387,256		758,840		400,257		623,382		297,663		513,195		66,809		5,047,402
Purchased credit-impaired	88,621		13,391		18,196		61,749		2,232		17,784		599		202,572
Total	$	2,490,724	$	775,484	$	419,339	$	686,124	$	299,895	$	530,979	$	67,408	$	5,269,953



	December 31, 2015
	Commercial Real Estate		Commercial and Industrial		Commercial Construction		Residential Real Estate		Consumer Construction		Home Equity		Other Consumer		Total
Allowance for loan losses:
Ending balance:
Individually evaluated for impairment	$	314	$	106	$	—	$	—	$	—	$	67	$	—	$	487
Collectively evaluated for impairment	2,976		2,309		704		837		233		542		359		7,960
Purchased credit-impaired	392		16		162		420		4		274		54		1,322
Total	$	3,682	$	2,431	$	866	$	1,257	$	237	$	883	$	413	$	9,769

Loans:
Ending balance:
Individually evaluated for impairment	$	8,449	$	2,623	$	177	$	3,550	$	417	$	337	$	—	$	15,553
Collectively evaluated for impairment	1,354,977		540,685		330,714		315,030		44,630		274,042		59,983		2,920,061
Purchased credit-impaired	87,750		9,813		14,413		25,068		1,216		3,521		261		142,042
Total	$	1,451,176	$	553,121	$	345,304	$	343,648	$	46,263	$	277,900	$	60,244	$	3,077,656

For non-PCI loans, the evaluation of the adequacy of the allowance for loan losses ("ALLL") includes both loans evaluated collectively for impairment and loans evaluated individually for impairment. For loans evaluated collectively for impairment, loans are grouped based on common risk characteristics which include loan type and risk grade. Historical loss rates are calculated based on the historical probability of default ("PD") and loss given default ("LGD") for each loan grouping. PDs represent the likelihood that a loan will default within a one year period of time, and LGDs represent the estimated magnitude of loss the Company will incur if a loan defaults. A loan is considered to be in default if it becomes 90 days or more past due, meets the criteria for nonaccrual status, or incurs a charge-off. Historical loss rates are developed with four years of trailing default and loss data. These historical loss rates are then combined with certain qualitative factors to determine ALLL reserve rates for each loan grouping. Qualitative factors include consideration of certain internal and external factors, such as loan delinquency levels and trends, loan growth, loan portfolio composition and concentrations, local and national economic conditions, the loan review function, and other factors management deems relevant to the ALLL calculation.

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, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans according to credit risk. The Company uses the following general definitions for risk ratings:


•	Pass. These loans range from superior quality with minimal credit risk to loans requiring heightened management attention but that are still an acceptable risk and continue to perform as contracted.

•

Special Mention. Loans classified as special mention have a potential weakness that deserves management's close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution's credit position at some future date. Loans where adverse economic conditions have developed that do not jeopardize liquidation of the debt, but substantially increase the level of risk may also warrant this rating.

•

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.


•	Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

The following tables summarize the risk category of loans by class of loans.



	Pass		Special Mention		Substandard		Doubtful		Total
June 30, 2016
Non-PCI Loans
Commercial:
Real estate	$	2,339,723	$	28,579	$	33,801	$	—	$	2,402,103
Commercial and industrial	724,422		24,033		13,638		—		762,093
Construction and development	394,604		4,776		1,763		—		401,143
Consumer:
Residential real estate	609,044		7,915		7,416		—		624,375
Construction and development	292,749		4,914		—		—		297,663
Home equity	503,281		3,948		5,966		—		513,195
Other consumer	66,086		305		410		8		66,809
Total	$	4,929,909	$	74,470	$	62,994	$	8	$	5,067,381

PCI Loans
Commercial:
Real estate	$	29,410	$	41,967	$	17,244	$	—	$	88,621
Commercial and industrial	1,681		1,719		9,986		5		13,391
Construction and development	10,864		2,754		4,578		—		18,196
Consumer:
Residential real estate	43,047		9,470		9,232		—		61,749
Construction and development	548		356		1,328		—		2,232
Home equity	13,728		2,355		1,620		81		17,784
Other consumer	466		114		19		—		599
Total	$	99,744	$	58,735	$	44,007	$	86	$	202,572



	Pass		Special Mention		Substandard		Doubtful		Total
December 31, 2015
Non-PCI Loans
Commercial:
Real estate	$	1,308,789	$	32,525	$	22,112	$	—	$	1,363,426
Commercial and industrial	523,643		5,436		14,229		—		543,308
Construction and development	326,979		3,298		560		54		330,891
Consumer:
Residential real estate	305,046		5,682		7,852		—		318,580
Construction and development	43,274		666		1,107		—		45,047
Home equity	265,128		4,442		4,809		—		274,379
Other consumer	59,273		233		477		—		59,983
Total	$	2,832,132	$	52,282	$	51,146	$	54	$	2,935,614

PCI Loans
Commercial:
Real estate	$	40,805	$	29,889	$	17,056	$	—	$	87,750
Commercial and industrial	7,913		630		1,270		—		9,813
Construction and development	5,975		3,022		5,416		—		14,413
Consumer:
Residential real estate	11,158		7,134		6,776		—		25,068
Construction and development	314		328		574		—		1,216
Home equity	264		2,016		1,059		182		3,521
Other consumer	8		200		53		—		261
Total	$	66,437	$	43,219	$	32,204	$	182	$	142,042

The following tables summarize the past due status of non-PCI loans based on contractual terms.



	30-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total
June 30, 2016
Non-PCI Loans
Commercial:
Real estate	$	7,497	$	12,639	$	20,136	$	2,381,967	$	2,402,103
Commercial and industrial	5,042		10,238		15,280		746,813		762,093
Construction and development	287		1,464		1,751		399,392		401,143
Consumer:
Residential real estate	5,395		3,721		9,116		615,259		624,375
Construction and development	431		—		431		297,232		297,663
Home equity	5,848		2,413		8,261		504,934		513,195
Other consumer	694		224		918		65,891		66,809
Total	$	25,194	$	30,699	$	55,893	$	5,011,488	$	5,067,381



	30-89 Days Past Due		90 Days or Greater Past Due		Total Past Due		Current		Total
December 31, 2015
Non-PCI Loans
Commercial:
Real estate	$	3,205	$	4,503	$	7,708	$	1,355,718	$	1,363,426
Commercial and industrial	6,004		2,599		8,603		534,705		543,308
Construction and development	68		414		482		330,409		330,891
Consumer:
Residential real estate	7,625		2,876		10,501		308,079		318,580
Construction and development	1,495		946		2,441		42,606		45,047
Home equity	3,857		1,877		5,734		268,645		274,379
Other Consumer	1,015		208		1,223		58,760		59,983
Total	$	23,269	$	13,423	$	36,692	$	2,898,922	$	2,935,614

The following table summarizes the recorded investment of non-PCI loans on nonaccrual status and loans greater than 90 days past due and accruing by class.



	June 30, 2016				December 31, 2015
	Nonaccrual		Loans greater than 90 days past due and accruing		Nonaccrual		Loans greater than 90 days past due and accruing
Non-PCI Loans
Commercial:
Commercial real estate	$	15,387	$	—	$	6,130	$	—
Commercial and industrial	11,851		234		4,126		552
Construction and development	1,644		—		468		—
Consumer:
Residential real estate	5,862		—		5,353		—
Construction and development	—		—		1,324		—
Home equity	4,028		—		3,245		—
Other consumer	267		110		548		—
Total	$	39,039	$	344	$	21,194	$	552

The following table provides information on impaired loans. This table excludes PCI loans and loans evaluated collectively as a homogeneous group.



	Recorded Investment With a Recorded Allowance		Recorded Investment With no Recorded Allowance		Total		Related Allowance		Unpaid Principal Balance
June 30, 2016
Non-PCI Loans
Commercial:
Commercial real estate	$	3,680	$	11,167	$	14,847	$	390	$	16,417
Commercial and industrial	380		2,873		3,253		—		7,434
Construction and development	—		886		886		—		886
Consumer:
Residential real estate	993		—		993		60		993
Total	$	5,053	$	14,926	$	19,979	$	450	$	25,730

December 31, 2015
Non-PCI Loans
Commercial:
Commercial real estate	$	1,262	$	7,187	$	8,449	$	314	$	8,515
Commercial and industrial	531		2,092		2,623		106		2,695
Construction and development	—		177		177		—		180
Consumer:
Residential real estate	1,465		2,085		3,550		—		3,568
Construction and development	—		417		417		—		417
Home equity	20		317		337		67		359
Total	$	3,278	$	12,275	$	15,553	$	487	$	15,734

The following table provides the average balance of impaired loans for each period presented and interest income recognized during the period in which the loans were considered impaired.



	Three months ended June 30,								Six months ended June 30,
	2016				2015				2016				2015
	Average Balance		Interest Income		Average Balance		Interest Income		Average Balance		Interest Income		Average Balance		Interest Income
Non-PCI Loans
Commercial:
Commercial real estate	$	11,679	$	43	$	11,253	$	5	$	10,602	$	85	$	8,579	$	25
Commercial and industrial	2,778		4		2,994		1		2,726		8		2,724		2
Construction and development	560		—		523		—		432		—		545		—
Consumer:
Residential real estate	1,337		12		2,224		22		2,075		28		2,020		44
Construction and development	—		—		—		—		139		—		—		—
Home equity	—		—		197		—		112		—		213		—
Total	$	16,354	$	59	$	17,191	$	28	$	16,086	$	121	$	14,081	$	71

The Company may modify certain loans under terms that are below market in order to maximize the amount collected from a borrower that is experiencing financial difficulties. These modifications are considered to be troubled debt restructurings ("TDRs"). TDRs are evaluated individually for impairment based on the collateral value, if the loan is determined to be collateral dependent, or discounted expected cash flows, if the loan is not determined to be collateral dependent. The Company has no commitments to lend additional funds to any borrowers that have had a loan modified in a TDR. The following table provides the number and recorded investment of TDRs outstanding.



	June 30, 2016			December 31, 2015
	Recorded Investment		Number	Recorded Investment		Number
TDRs:
Commercial real estate	$	4,638	6	$	4,684	7
Commercial and industrial	1,166		9	795		11
Commercial construction	174		2	177		2
Residential real estate	989		2	1,594		4
Home equity	—		—	20		1
Total	$	6,967	19	$	7,270	25

The following tables provide the number and recorded investment of TDRs modified during the periods presented.



	Three months ended June 30,
	2016			2015
	Recorded Investment		Number	Recorded Investment		Number
TDRs:
Below market interest rate modifications:
Commercial real estate	$	597	1	$	647	2
Total	$	597	1	$	647	$	2



	Six months ended June 30,
	2016			2015
	Recorded Investment		Number	Recorded Investment		Number
TDRs:
Below market interest rate modifications:
Commercial real estate	$	721	2	$	647	2
Residential real estate	—		—	398		1
Total	$	721	2	$	1,045	$	3

One TDR totaling $353 thousand was modified in the twelve months ended June 30, 2016 and subsequently defaulted during the six months ended June 30, 2016. No TDRs that were modified in the twelve months ended June 30, 2015 subsequently defaulted during the six months ended June 30, 2015. The Company does not generally forgive principal or unpaid interest when restructuring loans. Therefore, the recorded investment in TDRs during 2016 and 2015 did not change following the modifications.