PORTFOLIO LOANS

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



(in thousands)	December 31, 2016			December 31, 2015
Commercial and industrial	$	1,632,714		$	1,484,327
Real estate loans:
Commercial - investor owned	544,808			428,064
Commercial - owner occupied	350,148			342,959
Construction and land development	194,542			161,061
Residential	240,760			196,498
Total real estate loans	1,330,258			1,128,582
Consumer and other	156,182			137,537
Portfolio loans, before unearned loan (fees) costs	3,119,154			2,750,446
Unearned loan (fees) costs, net	(762		)	291
Portfolio loans	$	3,118,392		$	2,750,737

Following is a summary of activity for the years ended December 31, 2016, 2015, and 2014 of loans to executive officers and directors, or to entities in which such individuals had beneficial interests as a shareholder, officer, or director. Such loans were made in the normal course of business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other customers and did not involve more than the normal risk of collectibility.



(in thousands)	December 31, 2016			December 31, 2015			December 31, 2014
Balance at beginning of year	$	4,394		$	13,513		$	11,752
New loans and advances	11,539			641			11,796
Payments and other reductions	(527		)	(9,760		)	(10,035		)
Balance at end of year	$	15,406		$	4,394		$	13,513

A summary of activity in the allowance for portfolio loan losses and the recorded investment in portfolio loans by class and category based on impairment method for the years ended indicated below is as follows:



(in thousands)	Commercial and industrial			CRE - investor owned			CRE - owner occupied			Construction and land development			Residential real estate			Consumer and other			Total
Balance at December 31, 2016
Allowance for loan losses:
Balance, beginning of year	$	22,056		$	3,484		$	2,969		$	1,704		$	1,796		$	1,432		$	33,441
Provision (provision reversal)	6,569			(11		)	(1,202		)	(1,334		)	129			1,400			5,551
Losses charged off	(2,303		)	(95		)	—			—			(25		)	(1,912		)	(4,335		)
Recoveries	674			42			1,123			934			123			12			2,908
Balance, end of year	$	26,996		$	3,420		$	2,890		$	1,304		$	2,023		$	932		$	37,565

Balance at December 31, 2015
Allowance for loan losses:
Balance, beginning of year	$	16,983		$	4,382		$	3,135		$	1,715		$	2,830		$	1,140		$	30,185
Provision (provision reversal)	6,976			(303		)	(1,626		)	(335		)	(58		)	218			4,872
Losses charged off	(3,699		)	(664		)	(38		)	(350		)	(1,313		)	(27		)	(6,091		)
Recoveries	1,796			69			1,498			674			337			101			4,475
Balance, end of year	$	22,056		$	3,484		$	2,969		$	1,704		$	1,796		$	1,432		$	33,441

Balance at December 31, 2014
Allowance for loan losses:
Balance, beginning of year	$	12,246		$	6,600		$	4,096		$	2,136		$	2,019		$	192		$	27,289
Provision (provision reversal)	6,707			(2,063		)	(1,517		)	(322		)	525			1,079			4,409
Losses charged off	(3,738		)	(250		)	(450		)	(905		)	(48		)	(165		)	(5,556		)
Recoveries	1,768			95			1,006			806			334			34			4,043
Balance, end of year	$	16,983		$	4,382		$	3,135		$	1,715		$	2,830		$	1,140		$	30,185



(in thousands)	Commercial and industrial		CRE - investor owned		CRE - owner occupied		Construction and land development		Residential real estate		Consumer and other		Total
Balance December 31, 2016
Allowance for loan losses - Ending balance:
Individually evaluated for impairment	$	2,909	$	—	$	—	$	155	$	—	$	—	$	3,064
Collectively evaluated for impairment	24,087		3,420		2,890		1,149		2,023		932		34,501
Total	$	26,996	$	3,420	$	2,890	$	1,304	$	2,023	$	932	$	37,565
Loans - Ending balance:
Individually evaluated for impairment	$	12,523	$	430	$	1,854	$	1,903	$	62	$	—	$	16,772
Collectively evaluated for impairment	1,620,191		544,378		348,294		192,639		240,698		155,420		3,101,620
Total	$	1,632,714	$	544,808	$	350,148	$	194,542	$	240,760	$	155,420	$	3,118,392

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

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



	December 31, 2016
(in thousands)	Unpaid Contractual Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment
Commercial and industrial	$	12,341	$	566	$	11,791	$	12,357	$	2,909	$	4,489
Real estate:
Commercial - investor owned	525		435		—		435		—		668
Commercial - owner occupied	225		231		—		231		—		227
Construction and land development	1,904		1,947		359		2,306		155		1,918
Residential	62		62		—		62		—		64
Consumer and other	—		—		—		—		—		—
Total	$	15,057	$	3,241	$	12,150	$	15,391	$	3,064	$	7,366



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

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



	December 31,
(in thousands)	2016		2015		2014
Total interest income that would have been recognized under original terms on impaired loans	$	1,079	$	1,038	$	1,013
Total cash received and recognized as interest income on impaired loans	251		226		118
Total interest income recognized on impaired loans still accruing	155		36		39

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

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



	December 31, 2016
(in thousands)	Non-accrual		Restructured		Total
Commercial and industrial	$	10,046	$	2,311	$	12,357
Real estate:
Commercial - investor owned	435		—		435
Commercial - owner occupied	231		—		231
Construction and land development	2,286		20		2,306
Residential	62		—		62
Consumer and other	—		—		—
Total	$	13,060	$	2,331	$	15,391



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

The recorded investment by category for the portfolio loans that have been restructured during the years ended December 31, 2016 and 2015, is as follows:



	Year ended December 31, 2016					Year ended December 31, 2015
(in thousands, except for number of loans)	Number of Loans	Pre-Modification Outstanding Recorded Balance		Post-Modification Outstanding Recorded Balance		Number of Loans	Pre-Modification Outstanding Recorded Balance		Post-Modification Outstanding Recorded Balance
Commercial and industrial	4	$	12,114	$	12,114	1	$	303	$	303
Real estate:
Commercial - investor owned	1	248		248		—	—		—
Commercial - owner occupied	1	13		13		—	—		—
Construction and land development	1	20		20		—	—		—
Residential	—	—		—		—	—		—
Consumer and other	—	—		—		—	—		—
Total	7	$	12,395	$	12,395	1	$	303	$	303

The restructured portfolio loans primarily resulted from interest rate concessions and changing the terms of the loans. As of December 31, 2016, the Company allocated $0.7 million of specific reserves to loans that have been restructured. No loans that were previously restructured subsequently defaulted during the years ended December 31, 2016 and 2015.

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



	December 31, 2016
(in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Commercial and industrial	$	334	$	171	$	505	$	1,632,209	$	1,632,714
Real estate:
Commercial - investor owned	—		175		175		544,633		544,808
Commercial - owner occupied	212		225		437		349,711		350,148
Construction and land development	355		1,528		1,883		192,659		194,542
Residential	91		—		91		240,669		240,760
Consumer and other	7		—		7		155,413		155,420
Total	$	999	$	2,099	$	3,098	$	3,115,294	$	3,118,392



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

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


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


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


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


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


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


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


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

The recorded investment by risk category of the portfolio loans by portfolio class and category at December 31, 2016 and December 31, 2015 is as follows:



	December 31, 2016
(in thousands)	Pass (1-6)		Watch (7)		Substandard (8)		Total
Commercial and industrial	$	1,499,114	$	57,416	$	76,184	$	1,632,714
Real estate:
Commercial - investor owned	530,494		10,449		3,865		544,808
Commercial - owner occupied	306,658		39,249		4,241		350,148
Construction and land development	185,505		6,575		2,462		194,542
Residential	233,479		2,997		4,284		240,760
Consumer and other	153,984		—		1,436		155,420
Total	$	2,909,234	$	116,686	$	92,472	$	3,118,392



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