PORTFOLIO LOANS

Below is a summary of Portfolio loans by category at December 31, 2015 and 2014:



(in thousands)	December 31, 2015		December 31, 2014
Commercial and industrial	$	1,484,327	$	1,264,487
Real estate loans:
Commercial - investor owned	428,064		396,751
Commercial - owner occupied	342,959		344,003
Construction and land development	161,061		143,878
Residential	196,498		185,252
Total real estate loans	1,128,582		1,069,884
Consumer and other	137,537		98,650
Portfolio loans	2,750,446		2,433,021
Unearned loan fees, net	291		895
Portfolio loans, including unearned loan fees	$	2,750,737	$	2,433,916

Note: In 2015, the Company redefined certain loan categories by borrower type and purpose of the loan. To conform to the current year classification, the Company reclassified $36.4 million into Consumer and other loans as of December 31, 2014. This includes $5.8 million from C&I, $16.2 million from CRE-investor owned, $13.5 million from CRE-owner occupied, and $0.9 million from Construction and land development.

Following is a summary of activity for the years ended December 31, 2015, 2014, and 2013 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, 2015			December 31, 2014			December 31, 2013
Balance at beginning of year	$	13,513		$	11,752		$	16,875
New loans and advances	641			11,796			6,519
Payments and other reductions	(9,760		)	(10,035		)	(11,642		)
Balance at end of year	$	4,394		$	13,513		$	11,752

A summary of activity in the allowance for 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			Unallocated			Total
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

Balance at December 31, 2013
Allowance for Loan Losses:
Balance, beginning of year	$	10,064		$	10,403		$	4,192		$	5,239		$	2,026		$	31		$	2,375		$	34,330
Provision (provision reversal)	3,810			(94		)	410			(2,695		)	107			195			(2,375		)	(642		)
Losses charged off	(3,404		)	(4,441		)	(550		)	(896		)	(1,053		)	(34		)	—			(10,378		)
Recoveries	1,776			732			44			488			939			—			—			3,979
Balance, end of year	$	12,246		$	6,600		$	4,096		$	2,136		$	2,019		$	192		$	—		$	27,289



(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, 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

Balance December 31, 2014
Allowance for Loan Losses - Ending Balance:
Individually evaluated for impairment	$	704	$	—	$	—	$	352	$	1,052	$	286	$	2,394
Collectively evaluated for impairment	16,279		4,382		3,135		1,363		1,778		854		27,791
Total	$	16,983	$	4,382	$	3,135	$	1,715	$	2,830	$	1,140	$	30,185
Loans - Ending Balance:
Individually evaluated for impairment	$	5,998	$	5,036	$	2,618	$	6,866	$	3,082	$	766	$	24,366
Collectively evaluated for impairment	1,258,489		391,715		341,385		137,012		182,170		98,779		2,409,550
Total	$	1,264,487	$	396,751	$	344,003	$	143,878	$	185,252	$	99,545	$	2,433,916

A summary of Portfolio loans individually evaluated for impairment by category at December 31, 2015 and 2014, is as follows:



	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



	December 31, 2014
(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	$	8,042	$	2,609	$	3,464	$	6,073	$	704	$	4,136
Real estate:
Commercial - investor owned	5,036		—		5,187		5,187		—		4,375
Commercial - owner occupied	610		—		519		519		—		1,281
Construction and land development	7,961		419		6,929		7,348		352		7,280
Residential	3,082		2,943		150		3,093		1,052		954
Consumer and other	766		770		—		770		286		581
Total	$	25,497	$	6,741	$	16,249	$	22,990	$	2,394	$	18,607

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



	December 31,
(in thousands)	2015		2014		2013
Total interest income that would have been recognized under original terms on impaired loans	$	1,038	$	1,013	$	1,538
Total cash received and recognized as interest income on impaired loans	226		118		257
Total interest income recognized on impaired loans still accruing	36		39		16

There were no loans over 90 days past due and still accruing interest at December 31, 2015 or 2014. At December 31, 2015, there were $0.01 million of unadvanced commitments on impaired loans.

The recorded investment in impaired Portfolio loans by category at December 31, 2015 and 2014, is as follows:



	December 31, 2015
(in thousands)	Non-accrual		Restructured		Loans over 90 days past due and still accruing interest		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



	December 31, 2014
(in thousands)	Non-accrual		Restructured		Loans over 90 days past due and still accruing interest		Total
Commercial and industrial	$	6,073	$	—	$	—	$	6,073
Real estate:
Commercial - investor owned	4,597		590		—		5,187
Commercial - owner occupied	519		—		—		519
Construction and land development	7,348		—		—		7,348
Residential	3,093		—		—		3,093
Consumer and other	—		770		—		770
Total	$	21,630	$	1,360	$	—	$	22,990

The recorded investment by category for the Portfolio loans that have been restructured during the years ended December 31, 2015 and 2014, is as follows:



	Year ended December 31, 2015					Year ended December 31, 2014
(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	1	$	303	$	303	2	$	658	$	658
Real estate:
Commercial - investor owned	—	—		—		1	603		603
Commercial - owner occupied	—	—		—		2	606		606
Construction and land development	—	—		—		1	2,827		2,827
Residential	—	—		—		1	125		125
Consumer and other	—	—		—		1	1,043		793
Total	1	$	303	$	303	8	$	5,862	$	5,612

The restructured Portfolio loans primarily resulted from interest rate concessions and changing the terms of the loans. As of December 31, 2015, the Company allocated $0.2 million of specific reserves to the loans that have been restructured.

The recorded investment by category for Portfolio loans that have been restructured and subsequently defaulted during 2015 and 2014 is as follows:



	Year ended December 31, 2015			Year ended December 31, 2014
(in thousands, except for number of loans)	Number of Loans	Recorded Balance		Number of Loans	Recorded Balance
Commercial and industrial	—	$	—	—	$	—
Real estate:
Commercial - investor owned	—	—		—	—
Commercial - owner occupied	—	—		—	—
Construction and land development	—	—		1	241
Residential	—	—		—	—
Consumer and other	—	—		—	—
Total	—	$	—	1	$	241

The aging of the recorded investment in past due Portfolio loans by portfolio class and category at December 31, 2015 and 2014 is shown below.



	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



	December 31, 2014
(in thousands)	30-89 Days Past Due		90 or More Days Past Due		Total Past Due		Current		Total
Commercial and industrial	$	3,059	$	232	$	3,291	$	1,261,196	$	1,264,487
Real estate:
Commercial - investor owned	261		4,450		4,711		392,040		396,751
Commercial - owner occupied	—		496		496		343,507		344,003
Construction and land development	702		2,524		3,226		140,652		143,878
Residential	168		—		168		185,084		185,252
Consumer and other	774		—		774		98,771		99,545
Total	$	4,964	$	7,702	$	12,666	$	2,421,250	$	2,433,916

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, 2015 and December 31, 2014 is as follows:



	December 31, 2015
(in thousands)	Pass (1-6)		Watch (7)		Substandard (8)		Doubtful (9)		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



	December 31, 2014
(in thousands)	Pass (1-6)		Watch (7)		Substandard (8)		Doubtful (9)		Total
Commercial and industrial	$	1,161,979	$	62,315	$	40,193	$	—	$	1,264,487
Real estate:
Commercial - investor owned	361,991		18,640		16,120		—		396,751
Commercial - owner occupied	322,725		18,025		3,253		—		344,003
Construction and land development	122,365		12,993		8,520		—		143,878
Residential	168,543		11,012		5,697		—		185,252
Consumer and other	91,827		5,499		2,219		—		99,545
Total	$	2,229,430	$	128,484	$	76,002	$	—	$	2,433,916