LOANS AND ALLOWANCE FOR LOAN LOSSES

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



	December 31, 2016			December 31, 2015
Commercial:
Commercial real estate	$	2,475,144		$	1,451,176
Commercial and industrial	723,257			553,121
Construction and development	463,594			345,304
Consumer:
Residential real estate	642,661			343,648
Construction and development	271,176			46,263
Home equity	523,501			277,900
Other consumer	61,464			60,244
Gross loans	5,160,797			3,077,656
Less:
Deferred loan fees	(1,387		)	(1,112		)
Allowance for loan losses	(13,990		)	(9,769		)
Net loans	$	5,145,420		$	3,066,775

As of December 31, 2016 and 2015, loans with a recorded investment of $1,770,040 and $948,433, respectively, were pledged to secure borrowings or available lines of credit with correspondent banks.

The Company has deposit relationships and has granted loans to certain directors and executive officers of the Company and their related interests. Such loans are made on the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other borrowers and, in management’s opinion, do not involve more than the normal risk of collectability. All loans to directors and executive officers or their related interests are submitted to the Board of Directors for approval. A summary of contractual obligations due from directors and executive officers, and their related interests, follows.



	Year ended December 31,
	2016			2015			2014

Loans to directors and officers at beginning of period	$	4,256		$	7,399		$	26,437
Additions for new directors	5,356			—			5,850
Reductions for retirement of directors	—			—			(24,835		)
New advances to directors and officers	—			—			1,092
Payoffs and principal reductions	(1,032		)	(3,143		)	(1,145		)
Loans to directors and officers at end of period	$	8,580		$	4,256		$	7,399
Commitments to directors and officers at December 31	$	8,580		$	1,027		$	2,024

The Company completed various sales of loans held for investment to investors during 2016, 2015 and 2014. The proceeds from these loan sales totaled $7,308, $5,294 and $2,076 in 2016, 2015 and 2014, respectively. There was no gain or loss recorded on these loan sales.

Purchased Credit-Impaired Loans

Loans for which it is probable at acquisition that all contractually required payments will not be collected are considered PCI loans. The following table relates to acquired 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.



	Year ended December 31,
	2016			2015			2014

Balance, beginning of period	$	22,309		$	25,181		$	25,349
Loans purchased	13,995			—			8,604
Accretion of income	(14,783		)	(13,333		)	(13,764		)
Reclassifications from nonaccretable difference	7,584			5,749			4,091
Other, net	4,862			4,712			901
Balance, end of period	$	33,967		$	22,309		$	25,181

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 $194,439 and $160,500 as of December 31, 2016 and 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 Yadkin 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
Year ended December 31, 2016
Beginning balance	$	3,682		$	2,431		$	866		$	1,257		$	237	$	883		$	413		$	9,769
Charge-offs	(416		)	(4,313		)	(178		)	(517		)	—		(894		)	(874		)	(7,192		)
Recoveries	108			245			42			280			1		33			62			771
Provision for loan losses	2,316			5,598			840			28			102		961			797			10,642
Ending balance	$	5,690		$	3,961		$	1,570		$	1,048		$	340	$	983		$	398		$	13,990

Year ended December 31, 2015
Beginning balance	$	2,796		$	1,274		$	1,691		$	1,237		$	194	$	546		$	79		$	7,817
Charge-offs	(1,096		)	(2,337		)	(331		)	(509		)	—		(943		)	(407		)	(5,623		)
Recoveries	58			746			—			161			27		187			151			1,330
Provision for loan losses	1,924			2,748			(494		)	368			16		1,093			590			6,245
Ending balance	$	3,682		$	2,431		$	866		$	1,257		$	237	$	883		$	413		$	9,769

Year ended December 31, 2014
Beginning balance	$	2,419		$	805		$	1,400		$	1,673		$	187	$	476		$	83		$	7,043
Charge-offs	(366		)	(1,034		)	(367		)	(591		)	—		(429		)	(354		)	(3,141		)
Recoveries	46			88			69			131			—		123			45			502
Provision for loan losses	697			1,415			589			24			7		376			305			3,413
Ending balance	$	2,796		$	1,274		$	1,691		$	1,237		$	194	$	546		$	79		$	7,817

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



	December 31, 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	$	651	$	65	$	—	$	52	$	—	$	—	$	—	$	768
Collectively evaluated for impairment	4,264		3,685		1,568		930		340		959		398		12,144
Purchased credit-impaired	775		211		2		66		—		24		—		1,078
Total	$	5,690	$	3,961	$	1,570	$	1,048	$	340	$	983	$	398	$	13,990

Loans:
Ending balance:
Individually evaluated for impairment	$	18,221	$	7,982	$	174	$	884	$	—	$	—	$	—	$	27,261
Collectively evaluated for impairment	2,379,162		708,373		449,264		587,163		269,330		507,025		61,028		4,961,345
Purchased credit-impaired	77,761		6,902		14,156		54,614		1,846		16,476		436		172,191
Total	$	2,475,144	$	723,257	$	463,594	$	642,661	$	271,176	$	523,501	$	61,464	$	5,160,797



	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

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt including 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.

•

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
December 31, 2016
Non-PCI Loans
Commercial:
Real estate	$	2,310,540	$	46,263	$	40,580	$	—	$	2,397,383
Commercial and industrial	656,351		33,055		26,949		—		716,355
Construction and development	444,594		3,905		939		—		449,438
Consumer:
Residential real estate	570,061		9,912		8,074		—		588,047
Construction and development	264,730		4,486		114		—		269,330
Home equity	494,444		5,296		7,285		—		507,025
Other consumer	60,252		310		459		7		61,028
Total	$	4,800,972	$	103,227	$	84,400	$	7	$	4,988,606

PCI Loans
Commercial:
Real estate	$	28,579	$	35,076	$	14,106	$	—	$	77,761
Commercial and industrial	1,915		416		4,568		3		6,902
Construction and development	10,289		1,376		2,491		—		14,156
Consumer:
Residential real estate	37,352		9,016		8,246		—		54,614
Construction and development	490		258		1,098		—		1,846
Home equity	11,607		2,921		1,948		—		16,476
Other consumer	325		102		9		—		436
Total	$	90,557	$	49,165	$	32,466	$	3	$	172,191



	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
December 31, 2016
Non-PCI Loans
Commercial:
Real estate	$	12,088	$	7,056	$	19,144	$	2,378,239	$	2,397,383
Commercial and industrial	4,869		11,723		16,592		699,763		716,355
Construction and development	1,284		442		1,726		447,712		449,438
Consumer:
Residential real estate	8,752		2,810		11,562		576,485		588,047
Construction and development	2,693		114		2,807		266,523		269,330
Home equity	6,743		2,281		9,024		498,001		507,025
Other consumer	707		180		887		60,141		61,028
Total	$	37,136	$	24,606	$	61,742	$	4,926,864	$	4,988,606



	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.



	December 31, 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	$	15,326	$	—	$	6,130	$	—
Commercial and industrial	12,648		618		4,126		552
Construction and development	831		—		468		—
Consumer:
Residential real estate	5,587		—		5,353		—
Construction and development	114		—		1,324		—
Home equity	4,977		—		3,245		—
Other consumer	304		45		548		—
Total	$	39,787	$	663	$	21,194	$	552

The following table provides information on impaired loans, which 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
December 31, 2016
Non-PCI Loans
Commercial:
Commercial real estate	$	8,866	$	9,355	$	18,221	$	651	$	18,221
Commercial and industrial	920		7,062		7,982		65		8,008
Construction and development	—		174		174		—		431
Consumer:
Residential real estate	884		—		884		52		884
Total	$	10,670	$	16,591	$	27,261	$	768	$	27,544

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.



	2016				2015				2014
	Average Balance		Interest Income		Average Balance		Interest Income		Average Balance		Interest Income
Non-PCI Loans
Commercial:
Commercial real estate	$	11,409	$	176	$	7,153	$	28	$	7,399	$	75
Commercial and industrial	2,619		14		2,287		5		2,599		1
Construction and development	416		—		545		—		2,509		—
Consumer:
Residential real estate	1,112		47		2,249		83		2,616		27
Construction and development	—		—		209		—		214		—
Home equity	146		—		383		—		998		—
Other consumer	—		—		—		—		99		—
Total	$	15,702	$	237	$	12,826	$	116	$	16,434	$	103

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.



	December 31, 2016			December 31, 2015
	Recorded Investment		Number	Recorded Investment		Number
TDRs:
Commercial real estate	$	9,950	11	$	4,684	7
Commercial and industrial	1,673		13	795		11
Commercial construction	503		3	177		2
Residential real estate	1,415		6	1,594		4
Home equity	—		—	20		1
Total	$	13,541	33	$	7,270	25

The following tables provide the number and recorded investment of TDRs modified and defaulted during the years ended December 31, 2016 and 2015.



	TDRs Modified
	2016			2015
	Recorded Investment		Number	Recorded Investment		Number
TDRs:
Below market interest rate modifications:
Commercial real estate	$	1,406	5	$	1,626	$	4
Commercial and industrial	—		—	283		6
Commercial construction	—		—	56		1
Home equity	—		—	20		1
Total	$	1,406	5	$	1,985	$	12



	TDRs Defaulted
	2016			2015
	Recorded Investment		Number	Recorded Investment		Number
TDRs:
Below market interest rate modifications:
Commercial real estate	$	—	—	$	1,441	$	2
Commercial and industrial	353		1	—		—
Residential real estate	—		—	114		1
Total	$	353	1	$	1,555	$	3

The Company does not generally forgive principal or unpaid interest as part of when restructuring loans. Therefore, the recorded investment in TDRs during 2016 and 2015 did not change following the modifications.