Loans and Credit Quality

12 Months Ended

Dec. 31, 2017

Receivables [Abstract]

Loans and Leases

NOTE 6.  LOANS AND LEASES

Our loan and lease portfolio includes originated and purchased loans and leases. Originated and purchased loans and leases for which there was no evidence of credit deterioration at their acquisition date and for which it was probable that we would collect all contractually due payments, are referred to collectively as Non-PCI loans. Generally, PCI loans are purchased loans for which there was, at the acquisition date, evidence of credit deterioration since their origination and for which it was probable that collection of all contractually due payments was unlikely.

Non-PCI loans are carried at the principal amount outstanding, net of deferred fees and costs, and net of purchase discounts and premiums for acquired loans. Deferred fees and costs and purchase discounts and premiums on acquired non-impaired loans are recognized as an adjustment to interest income over the contractual life of the loans primarily using the effective interest method or recognized as income when the related loans are paid off or sold.

PCI loans are accounted for in accordance with ASC Subtopic 310‑30, “Loans and Debt Securities Acquired with Deteriorated Credit Quality.” For PCI loans, at the time of acquisition, we estimate the amount and timing of undiscounted expected principal and interest payments (the "undiscounted expected cash flows"). The difference between the undiscounted expected cash flows and the estimated fair value of the acquired loans is the accretable yield. The carrying value of PCI loans is reduced by payments received, both principal and interest, and increased by the portion of the accretable yield recognized as interest income.

Loans Held for Sale

In the fourth quarter of 2017, we sold $1.5 billion of cash flow loans and exited our CapitalSource Division origination operations related to general, technology, and healthcare cash flow loans. As of December 31, 2017, $1.0 billion of the loans sold had settled, while $481.1 million were classified as held for sale. The loans held for sale at December 31, 2017 settled in the first quarter of 2018. In connection with the loan sale and transfer of loans to held for sale, we recognized $2.2 million in charge-offs during the fourth quarter of 2017 to record the loans at the lower of cost or fair value.

Loans and Leases Held for Investment

The following table summarizes the composition of our loans and leases held for investment as of the dates indicated:

	December 31, 2017									December 31, 2016
	Non-PCI									Non-PCI
	Loans			PCI						Loans			PCI
	and Leases			Loans			Total			and Leases			Loans			Total
	(In thousands)
Real estate mortgage	$	7,815,355		$	53,658		$	7,869,013		$	5,635,675		$	92,793		$	5,728,468
Real estate construction and land	1,611,287			—			1,611,287			975,032			2,409			977,441
Commercial	7,137,978			4,158			7,142,136			8,426,236			12,994			8,439,230
Consumer	409,551			234			409,785			375,149			249			375,398
Total gross loans and leases held for
investment	16,974,171			58,050			17,032,221			15,412,092			108,445			15,520,537
Deferred fees, net	(59,464		)	(14		)	(59,478		)	(64,562		)	(21		)	(64,583		)
Total loans and leases held for investment,
net of deferred fees	16,914,707			58,036			16,972,743			15,347,530			108,424			15,455,954
Allowance for loan and lease losses	(133,012		)	(6,444		)	(139,456		)	(143,755		)	(13,483		)	(157,238		)
Total loans and leases held for
investment, net	$	16,781,695		$	51,592		$	16,833,287		$	15,203,775		$	94,941		$	15,298,716

Non‑PCI Loans and Leases Held for Investment

The following tables present an aging analysis of our Non‑PCI loans and leases held for investment, net of deferred fees, by portfolio segment and class as of the dates indicated:

	December 31, 2017
	30 - 89		90 or More
	Days		Days		Total
	Past Due		Past Due		Past Due		Current		Total
	(In thousands)
Real estate mortgage:
Commercial	$	29,070	$	9,107	$	38,177	$	5,323,310	$	5,361,487
Residential	6,999		2,022		9,021		2,428,483		2,437,504
Total real estate mortgage	36,069		11,129		47,198		7,751,793		7,798,991
Real estate construction and land:
Commercial	—		—		—		769,075		769,075
Residential	2,081		—		2,081		820,073		822,154
Total real estate construction and land	2,081		—		2,081		1,589,148		1,591,229
Commercial:
Asset-based	1,512		—		1,512		3,010,188		3,011,700
Venture capital	6,533		760		7,293		2,115,418		2,122,711
Cash flow	1,334		1,586		2,920		1,320,594		1,323,514
Equipment finance	344		690		1,034		655,961		656,995
Total commercial	9,723		3,036		12,759		7,102,161		7,114,920
Consumer	562		—		562		409,005		409,567
Total (1)	$	48,435	$	14,165	$	62,600	$	16,852,107	$	16,914,707

________________________

(1)    Excludes loans held for sale carried at lower of cost or fair value.

	December 31, 2016
	30 - 89		90 or More
	Days		Days		Total
	Past Due		Past Due		Past Due		Current		Total
	(In thousands)
Real estate mortgage:
Commercial	$	8,590	$	3,303	$	11,893	$	4,341,740	$	4,353,633
Residential	5,694		1,999		7,693		1,256,630		1,264,323
Total real estate mortgage	14,284		5,302		19,586		5,598,370		5,617,956
Real estate construction and land:
Commercial	—		—		—		578,838		578,838
Residential	364		—		364		383,637		384,001
Total real estate construction and land	364		—		364		962,475		962,839
Commercial:
Asset-based	1,500		2		1,502		2,607,543		2,609,045
Venture capital	13,589		5,769		19,358		1,963,798		1,983,156
Cash flow	191		1,821		2,012		3,105,380		3,107,392
Equipment finance	1,417		3,051		4,468		687,499		691,967
Total commercial	16,697		10,643		27,340		8,364,220		8,391,560
Consumer	224		—		224		374,951		375,175
Total	$	31,569	$	15,945	$	47,514	$	15,300,016	$	15,347,530

It is our policy to discontinue accruing interest when principal or interest payments are past due 90 days or more unless the loan is both well secured and in the process of collection or when, in the opinion of management, there is a reasonable doubt as to the collectability of a loan or lease in the normal course of business. Interest income on nonaccrual loans is recognized only to the extent cash is received and the principal balance of the loan is deemed collectable. The amount of interest income that would have been recorded on nonaccrual loans and leases at December 31, 2017 and 2016 had such loans and leases been current in accordance with their original terms was $10.8 million and $8.0 million for 2017 and 2016.

The following table presents our nonaccrual and performing Non‑PCI loans and leases held for investment, net of deferred fees, by portfolio segment and class as of the dates indicated:

	December 31, 2017 (1)						December 31, 2016
	Nonaccrual		Performing		Total		Nonaccrual		Performing		Total
	(In thousands)
Real estate mortgage:
Commercial	$	65,563	$	5,295,924	$	5,361,487	$	62,454	$	4,291,179	$	4,353,633
Residential	3,350		2,434,154		2,437,504		6,881		1,257,442		1,264,323
Total real estate mortgage	68,913		7,730,078		7,798,991		69,335		5,548,621		5,617,956
Real estate construction and land:
Commercial	—		769,075		769,075		—		578,838		578,838
Residential	—		822,154		822,154		364		383,637		384,001
Total real estate construction and land	—		1,591,229		1,591,229		364		962,475		962,839
Commercial:
Asset-based	3,174		3,008,526		3,011,700		2,118		2,606,927		2,609,045
Venture capital	29,424		2,093,287		2,122,711		11,687		1,971,469		1,983,156
Cash flow	23,315		1,300,199		1,323,514		53,908		3,053,484		3,107,392
Equipment finance	30,938		626,057		656,995		32,848		659,119		691,967
Total commercial	86,851		7,028,069		7,114,920		100,561		8,290,999		8,391,560
Consumer	20		409,547		409,567		339		374,836		375,175
Total	$	155,784	$	16,758,923	$	16,914,707	$	170,599	$	15,176,931	$	15,347,530

________________________

(1) Excludes loans held for sale carried at lower of cost or fair value.

At December 31, 2017, nonaccrual loans and leases totaled $155.8 million. Nonaccrual loans and leases included $14.2 million of loans and leases 90 or more days past due, $3.2 million of loans 30 to 89 days past due and $138.4 million of current loans that were placed on nonaccrual status based on management’s judgment regarding their collectability. Nonaccrual loans and leases totaled $170.6 million at December 31, 2016, including $15.9 million of loans and leases 90 or more days past due, $3.0 million of loans 30 to 89 days past due and $151.7 million of current loans that were placed on nonaccrual status based on management’s judgment regarding their collectability.

As of December 31, 2017, our ten largest Non-PCI loan relationships on nonaccrual status had an aggregate carrying value of $120.0 million and represented 77.0% of total Non-PCI nonaccrual loans and leases.

The following table presents the credit risk rating categories for Non‑PCI loans and leases held for investment by portfolio segment and class as of the dates indicated. Nonclassified loans and leases are those with a credit risk rating of either pass or special mention, while classified loans and leases are those with a credit risk rating of either substandard or doubtful.

	December 31, 2017 (1)						December 31, 2016
	Classified		Nonclassified		Total		Classified		Nonclassified		Total
	(In thousands)
Real estate mortgage:
Commercial	$	93,795	$	5,267,692	$	5,361,487	$	99,641	$	4,253,992	$	4,353,633
Residential	8,425		2,429,079		2,437,504		17,540		1,246,783		1,264,323
Total real estate mortgage	102,220		7,696,771		7,798,991		117,181		5,500,775		5,617,956
Real estate construction and land:
Commercial	—		769,075		769,075		409		578,429		578,838
Residential	—		822,154		822,154		364		383,637		384,001
Total real estate construction and land	—		1,591,229		1,591,229		773		962,066		962,839
Commercial:
Asset-based	35,305		2,976,395		3,011,700		28,112		2,580,933		2,609,045
Venture capital	49,671		2,073,040		2,122,711		52,646		1,930,510		1,983,156
Cash flow	60,008		1,263,506		1,323,514		177,661		2,929,731		3,107,392
Equipment finance	30,938		626,057		656,995		32,848		659,119		691,967
Total commercial	175,922		6,938,998		7,114,920		291,267		8,100,293		8,391,560
Consumer	263		409,304		409,567		424		374,751		375,175
Total	$	278,405	$	16,636,302	$	16,914,707	$	409,645	$	14,937,885	$	15,347,530

________________________

(1) Excludes loans held for sale carried at lower of cost or fair value.

In addition to our internal risk rating process, our federal and state banking regulators, as an integral part of their examination process, periodically review the Company’s loan risk rating classifications. Our regulators may require the Company to recognize rating downgrades based on their judgments related to information available to them at the time of their examinations. Risk rating downgrades generally result in increases in the provisions for credit losses and the allowance for credit losses.

Non‑PCI nonaccrual loans and leases and performing troubled debt restructured loans are considered impaired for reporting purposes. Troubled debt restructurings are a result of rate reductions, term extensions, fee concessions and debt forgiveness or a combination thereof. At December 31, 2017 and 2016, we had unfunded commitments related to Non-PCI troubled debt restructured loans of $4.5 million and $4.6 million.

The following table presents the composition of our impaired loans and leases held for investment, net of deferred fees, by portfolio segment as of the dates indicated:

	December 31, 2017 (1)						December 31, 2016
			Performing		Total				Performing		Total
	Nonaccrual		Troubled		Impaired		Nonaccrual		Troubled		Impaired
	Loans		Debt		Loans		Loans		Debt		Loans
	and		Restructured		and		and		Restructured		and
	Leases		Loans		Leases		Leases		Loans		Leases
	(In thousands)
Real estate mortgage	$	68,913	$	47,560	$	116,473	$	69,335	$	54,750	$	124,085
Real estate construction and land	—		5,690		5,690		364		6,893		7,257
Commercial	86,851		3,488		90,339		100,561		3,157		103,718
Consumer	20		100		120		339		152		491
Total	$	155,784	$	56,838	$	212,622	$	170,599	$	64,952	$	235,551

________________________

(1) Excludes loans held for sale carried at lower of cost or fair value.

The following tables present information regarding our Non‑PCI impaired loans and leases held for investment, net of deferred fees, by portfolio segment and class as of and for the years indicated:

	December 31, 2017 (1)						December 31, 2016
			Unpaid						Unpaid
	Recorded		Principal		Related		Recorded		Principal		Related
Impaired Loans and Leases	Investment		Balance		Allowance		Investment		Balance		Allowance
	(In thousands)
With An Allowance Recorded:
Real estate mortgage:
Commercial	$	15,750	$	16,548	$	628	$	63,325	$	65,031	$	6,266
Residential	2,787		2,957		342		8,424		8,612		585
Real estate construction and land:
Residential	—		—		—		213		213		—
Commercial:
Asset-based	1,311		1,337		51		4,395		4,861		2,144
Venture capital	16,565		17,203		4,267		5,821		5,880		3,294
Cash flow	19,093		28,614		8,317		51,272		52,910		12,474
Equipment finance	—		—		—		1,524		4,636		—
Consumer	100		100		16		270		280		170
With No Related Allowance Recorded:
Real estate mortgage:
Commercial	$	93,827	$	105,923	$	—	$	44,557	$	51,402	$	—
Residential	4,109		4,481		—		7,779		8,940		—
Real estate construction and land:
Commercial	5,690		5,689		—		6,680		6,680		—
Residential	—		—		—		364		366		—
Commercial:
Asset-based	3,519		5,559		—		664		1,652		—
Venture capital	14,534		40,029		—		5,866		8,939		—
Cash flow	4,378		8,270		—		2,852		5,939		—
Equipment finance	30,939		50,433		—		31,324		53,319		—
Consumer	20		93		—		221		292		—
Total Non-PCI Loans and Leases With
and Without an Allowance Recorded:
Real estate mortgage	$	116,473	$	129,909	$	970	$	124,085	$	133,985	$	6,851
Real estate construction and land	5,690		5,689		—		7,257		7,259		—
Commercial	90,339		151,445		12,635		103,718		138,136		17,912
Consumer	120		193		16		491		572		170
Total	$	212,622	$	287,236	$	13,621	$	235,551	$	279,952	$	24,933

________________________

(1) Excludes loans held for sale carried at lower of cost or fair value.

	Year Ended December 31,
	2017 (1)				2016				2015
	Weighted		Interest		Weighted		Interest		Weighted		Interest
	Average		Income		Average		Income		Average		Income
Impaired Loans and Leases	Balance(1)		Recognized		Balance(1)		Recognized		Balance(1)		Recognized
	(In thousands)
With An Allowance Recorded:
Real estate mortgage:
Commercial	$	15,538	$	881	$	26,870	$	898	$	17,833	$	1,130
Residential	2,787		55		6,521		255		2,143		33
Real estate construction and land:
Residential	—		—		213		14		747		15
Commercial:
Asset-based	1,236		53		3,842		134		3,204		56
Venture capital	10,228		—		1,227		—		—		—
Cash flow	19,093		7		22,736		10		12,590		32
Equipment finance	—		—		508		—		8,475		—
Consumer	100		8		233		—		355		15
With No Related Allowance Recorded:
Real estate mortgage:
Commercial	$	89,554	$	2,648	$	41,917	$	1,506	$	28,366	$	345
Residential	3,842		59		7,254		144		4,643		41
Real estate construction and land:
Commercial	5,690		306		6,680		224		7,053		240
Residential	—		—		364		—		—		—
Commercial:
Asset-based	1,640		49		528		18		1,746		130
Venture capital	2,860		—		2,446		—		124		—
Cash flow	2,499		35		2,455		4		2,752		89
Equipment finance	30,653		—		30,767		—		30,363		—
Consumer	20		—		166		9		1,363		—
Total Non-PCI Loans and Leases With
and Without an Allowance Recorded:
Real estate mortgage	$	111,721	$	3,643	$	82,562	$	2,803	$	52,985	$	1,549
Real estate construction and land	5,690		306		7,257		238		7,800		255
Commercial	68,209		144		64,509		166		59,254		307
Consumer	120		8		399		9		1,718		15
Total	$	185,740	$	4,101	$	154,727	$	3,216	$	121,757	$	2,126

_________________________

(1) For the loans and leases (excluding PCI loans) reported as impaired at December 31, 2017, 2016 and 2015, amounts were calculated based on the period of time such loans and leases were impaired during the reported period.

(2) Excludes loans held for sale carried at lower of cost or fair value.

The following table presents our troubled debt restructurings of Non-PCI loans held for investment and defaulted troubled debt restructurings of Non-PCI loans held for investment by portfolio segment and class for the years indicated:

						Troubled Debt Restructurings
	Troubled Debt Restructurings					That Subsequently Defaulted(1)
		Pre-Modification		Post-Modification
		Outstanding		Outstanding
	Number	Recorded		Recorded		Number	Recorded
	of Loans	Investment		Investment		of Loans	Investment(1)
	(Dollars In thousands)
Year Ended December 31, 2017
Real estate mortgage:
Commercial	5	$	2,527	$	2,463	—	$	—
Residential	8	1,328		489		—	—
Real estate construction and land:
Residential	1	362		—		—	—
Commercial:
Asset-based	10	7,987		7,987		—	—
Venture capital	11	29,733		29,733		—	—
Cash flow	14	27,703		18,468		1	1
Consumer	1	97		97		—	—
Total	50	$	69,737	$	59,237	1	$	1	(2)
Year Ended December 31, 2016
Real estate mortgage:
Commercial	12	$	13,833	$	6,099	—	$	—
Residential	10	7,091		6,439		2	5,000
Real estate construction and land:
Commercial	1	1,245		1,245		—	—
Commercial:
Asset-based	5	2,158		2,158		2	1,502
Cash flow	14	30,788		30,788		—	—
Equipment finance	7	44,196		42,572		—	—
Consumer	5	850		142		—	—
Total	54	$	100,161	$	89,443	4	$	6,502	(3)
Year Ended December 31, 2015
Real estate mortgage:
Commercial	21	$	43,536	$	43,012	2	$	2,670
Residential	18	3,128		2,961		1	155
Real estate construction and land:
Commercial	8	23,881		23,881		—	—
Commercial:
Asset-based	13	8,400		8,400		—	—
Cash flow	25	2,718		2,539		—	—
Equipment finance	10	93,868		93,868		—	—
Consumer	2	197		197		—	—
Total	97	$	175,728	$	174,858	3	$	2,825	(4)

_________________________

(1) The population of defaulted restructured loans for the period indicated includes only those loans restructured during the preceding 12-month period. For example, for the year ended December 31, 2017, the population of defaulted restructured loans includes only those loans restructured after December 31, 2016. The table excludes defaulted troubled restructurings in those classes for which the recorded investment was zero at the end of the period.

(2) Represents the balance at December 31, 2017, and is net of charge-offs of $68,000.

(3) Represents the balance at December 31, 2016, and there were no charge-offs.

(4) Represents the balance at December 31, 2015, and is net of charge-offs of $96,900.

Allowance for Loan and Lease Losses

The following tables present a summary of the activity in the allowance for loan and lease losses on Non‑PCI loans and leases held for investment by portfolio segment and PCI loans held for investment for the years indicated:

	Year Ended December 31, 2017
				Real Estate
	Real Estate			Construction								Total			Total
	Mortgage			and Land		Commercial			Consumer			Non-PCI			PCI			Total
	(In thousands)
Allowance for Loan
and Lease Losses:
Balance, beginning of year	$	37,765		$	10,045	$	93,853		$	2,092		$	143,755		$	13,483		$	157,238
Charge-offs	(2,410		)	—		(70,709		)	(1,023		)	(74,142		)	(6,154		)	(80,296		)
Recoveries	1,209			429		9,415			132			11,185			363			11,548
Provision (negative provision)	(1,583		)	2,581		50,167			1,049			52,214			(1,248		)	50,966
Balance, end of year	$	34,981		$	13,055	$	82,726		$	2,250		$	133,012		$	6,444		$	139,456
Ending Allowance by
Impairment Methodology:
Individually evaluated for
impairment	$	970		$	—	$	12,635		$	16		$	13,621
Collectively evaluated for
impairment	$	34,011		$	13,055	$	70,091		$	2,234		$	119,391
Acquired loans with
deteriorated credit quality															$	6,444
Ending Loans and Leases by
Impairment Methodology:
Individually evaluated for
impairment	$	115,319		$	5,690	$	89,626		$	100		$	210,735
Collectively evaluated for
impairment	$	7,683,672		$	1,585,539	$	7,025,294		$	409,467		$	16,703,972
Acquired loans with
deteriorated credit quality															$	58,036
Ending balance	$	7,798,991		$	1,591,229	$	7,114,920		$	409,567		$	16,914,707		$	58,036		$	16,972,743

	Year Ended December 31, 2016
				Real Estate
	Real Estate			Construction								Total			Total
	Mortgage			and Land		Commercial			Consumer			Non-PCI			PCI			Total
	(In thousands)
Allowance for Loan
and Lease Losses:
Balance, beginning of year	$	36,654		$	7,137	$	61,082		$	661		$	105,534		$	9,577		$	115,111
Charge-offs	(2,059		)	—		(32,210		)	(823		)	(35,092		)	(862		)	(35,954		)
Recoveries	4,519			673		7,794			116			13,102			39			13,141
Provision (negative provision)	(1,349		)	2,235		57,187			2,138			60,211			4,729			64,940
Balance, end of year	$	37,765		$	10,045	$	93,853		$	2,092		$	143,755		$	13,483		$	157,238
Ending Allowance by
Impairment Methodology:
Individually evaluated for
impairment	$	6,851		$	—	$	17,912		$	170		$	24,933
Collectively evaluated for
impairment	$	30,914		$	10,045	$	75,941		$	1,922		$	118,822
Acquired loans with
deteriorated credit quality															$	13,483
Ending Loans and Leases by
Impairment Methodology:
Individually evaluated for
impairment	$	123,348		$	7,257	$	103,431		$	394		$	234,430
Collectively evaluated for
impairment	$	5,494,608		$	955,582	$	8,288,129		$	374,781		$	15,113,100
Acquired loans with
deteriorated credit quality															$	108,424
Ending balance	$	5,617,956		$	962,839	$	8,391,560		$	375,175		$	15,347,530		$	108,424		$	15,455,954

Allowance for Credit Losses

The Non-PCI allowance for credit losses is the combination of the Non-PCI allowance for loan and lease losses and the Non-PCI reserve for unfunded loan commitments. The Non-PCI reserve for unfunded loan commitments is included within "Accrued interest payable and other liabilities" on the consolidated balance sheets. The following tables present a summary of the activity in the Non-PCI allowance for loan and lease losses, Non-PCI reserve for unfunded loan commitments, and PCI allowance for loan losses for the years indicated:

	Year Ended December 31, 2017
	Non-PCI
	Allowance for			Reserve for					PCI			Total
	Loan and			Unfunded Loan		Allowance for			Allowance for			Allowance for
	Lease Losses			Commitments		Credit Losses			Loan Losses			Credit Losses
	(In thousands)
Balance, beginning of period	$	143,755		$	17,523	$	161,278		$	13,483		$	174,761
Charge-offs	(74,142		)	—		(74,142		)	(6,154		)	(80,296		)
Recoveries	11,185			—		11,185			363			11,548
Net charge-offs	(62,957		)	—		(62,957		)	(5,791		)	(68,748		)
Provision (negative provision)	52,214			6,786		59,000			(1,248		)	57,752
Fair value of acquired reserve for
unfunded loan commitments	—			4,326		4,326			—			4,326
Balance, end of period	$	133,012		$	28,635	$	161,647		$	6,444		$	168,091

	Year Ended December 31, 2016
	Non-PCI
	Allowance for			Reserve for					PCI			Total
	Loan and			Unfunded Loan		Allowance for			Allowance for			Allowance for
	Lease Losses			Commitments		Credit Losses			Loan Losses			Credit Losses
	(In thousands)
Balance, beginning of period	$	105,534		$	16,734	$	122,268		$	9,577		$	131,845
Charge-offs	(35,092		)	—		(35,092		)	(862		)	(35,954		)
Recoveries	13,102			—		13,102			39			13,141
Net charge-offs	(21,990		)	—		(21,990		)	(823		)	(22,813		)
Provision	60,211			789		61,000			4,729			65,729
Balance, end of period	$	143,755		$	17,523	$	161,278		$	13,483		$	174,761

PCI Loans Held for Investment

The following table reflects the PCI loans held for investment by portfolio segment as of the dates indicated:

	December 31,
	2017			2016
	(In thousands)
Real estate mortgage	$	72,399		$	112,982
Real estate construction and land	—			1,901
Commercial	7,568			19,109
Consumer	262			281
Total gross PCI loans held for investment	80,229			134,273
Discount	(22,193		)	(25,849		)
Total PCI loans held for investment, net of discount	58,036			108,424
Allowance for loan losses	(6,444		)	(13,483		)
Total PCI loans held for investment, net	$	51,592		$	94,941

The following table summarizes the changes in the carrying amount of PCI loans held for investment and accretable yield on those loans for the years indicated:

	Carrying			Accretable
	Amount			Yield
	(In thousands)
Balance, December 31, 2014	$	276,792		$	(106,856	)
Addition from the Square 1 acquisition	16,455			(2,852		)
Accretion	31,857			31,857
Payments received	(148,436		)	—
Increase in expected cash flows, net	—			(7,785		)
Negative provision for credit losses	2,800			—
Balance, December 31, 2015	179,468			(85,636		)
Accretion	51,907			51,907
Payments received	(131,705		)	—
Increase in expected cash flows, net	—			(22,215		)
Provision for credit losses	(4,729		)	—
Balance, December 31, 2016	94,941			(55,944		)
Accretion	14,739			14,739
Payments received	(59,336		)	—
Increase in expected cash flows, net	—			(4,375		)
Negative provision for credit losses	1,248			—
Balance, December 31, 2017	$	51,592		$	(45,580	)

The following table presents the credit risk rating categories for PCI loans held for investment, net of discount, by portfolio segment as of the dates indicated. Nonclassified loans are those with a credit risk rating of either pass or special mention, while classified loans are those with a credit risk rating of either substandard or doubtful.

	December 31, 2017						December 31, 2016
	Classified		Nonclassified		Total		Classified		Nonclassified		Total
	(In thousands)
Real estate mortgage	$	11,063	$	42,581	$	53,644	$	19,445	$	73,330	$	92,775
Real estate construction and land	—		—		—		1,023		1,385		2,408
Commercial	4,158		—		4,158		10,943		2,049		12,992
Consumer	234		—		234		249		—		249
Total PCI loans held for investment,
net of discount	$	15,455	$	42,581	$	58,036	$	31,660	$	76,764	$	108,424

In addition to our internal risk rating process, our federal and state banking regulators, as an integral part of their examination process, periodically review the Company’s loan risk rating classifications. Our regulators may require the Company to recognize rating downgrades based on their judgments related to information available to them at the time of their examinations.