Paragon Commercial 10-K 21 Mar 17 2016 FY Annual report Financial data

Document and Entity Information

Document and Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2016	Mar. 20, 2017	Jun. 30, 2016
Document And Entity Information
Entity Registrant Name	Paragon Commercial CORP
Entity Central Index Key	1,414,374
Document Type	10-K
Document Period End Date	Dec. 31, 2016
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Is Entity a Well-known Seasoned Issuer?	No
Is Entity a Voluntary Filer?	No
Is Entity's Reporting Status Current?	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		5,450,700
Entity Public Float			$ 146,161,000
Document Fiscal Period Focus	FY
Document Fiscal Year Focus	2,016

CONSOLIDATED BALANCE SHEETS (Un

CONSOLIDATED BALANCE SHEETS (Unaudited) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Cash and due from banks:
Interest-earning	$ 38,384	$ 30,993
Noninterest-earning	4,621	24,537
Investment securities - available-for-sale, at fair value	197,441	168,896
Federal Home Loan Bank stock, at cost	8,400	8,061
Loans - net of unearned income and deferred fees	1,191,280	1,016,156
Allowance for loan losses	(7,909)	(7,641)
Net loans	1,183,371	1,008,515
Accrued interest receivable	4,368	3,795
Bank premises and equipment, net	15,642	16,433
Bank owned life insurance	34,190	28,274
Other real estate	4,740	5,453
Deferred tax assets	4,841	4,118
Other assets	7,769	6,836
Total assets	1,503,767	1,305,911
Deposits:
Noninterest-bearing demand	211,202	158,974
Interest-bearing checking and money market	742,046	504,092
Time deposits	219,007	319,781
Total deposits	1,172,255	982,847
Repurchase agreements and federal funds purchased	20,174	30,580
Federal Home Loan Bank advances	150,000	165,000
Other borrowings	0	4,800
Subordinated debentures	18,558	18,558
Other liabilities	6,679	6,468
Total liabilities	1,367,666	1,208,253
Stockholders' equity:
Common stock, $0.008 par value; 20,000,000 shares authorized; 5,450,713 and 4,581,334 issued and outstanding as of December 31, 2016 and 2015	44	37
Additional paid-in-capital	80,147	53,147
Accumulated other comprehensive loss	(2,840)	(886)
Retained earnings	58,750	45,360
Total stockholders' equity	136,101	97,658
Total liabilities and stockholders' equity	$ 1,503,767	$ 1,305,911

CONSOLIDATED BALANCE SHEETS (U3

CONSOLIDATED BALANCE SHEETS (Unaudited) (Parenthetical) - $ / shares	Dec. 31, 2016	Dec. 31, 2015
Stockholders' equity:
Common stock, par value (in dollars per share)	$ .008	$ .008
Common stock, shares authorized (in shares)	20,000,000	20,000,000
Common stock, shares issued (in shares)	5,450,713	4,581,334
Common stock, shares outstanding (in shares)	5,450,713	4,581,334

CONSOLIDATED STATEMENTS OF INCO

CONSOLIDATED STATEMENTS OF INCOME (Unaudited) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Interest income:
Loans and fees on loans	$ 48,835	$ 43,500	$ 37,999
Investment securities and FHLB stock	5,066	4,786	4,698
Federal funds and other	266	149	86
Total Interest income	54,167	48,435	42,783
Interest expense:
Interest-bearing checking and money market	3,723	2,756	2,144
Time deposits	2,271	3,313	5,371
Borrowings and repurchase agreements	2,135	1,315	1,163
Total interest expense	8,129	7,384	8,678
Net interest income	46,038	41,051	34,105
Provision for loan losses	591	750	538
Net interest income after provision for loan losses	45,447	40,301	33,567
Non-interest income:
Increase in cash surrender value of bank owned life insurance	916	853	799
Net gain on sale of securities	106	542	87
Service charges and fees	243	219	207
Mortgage origination fees and gains on sale of loans	172	197	112
Net loss on sale or impairment of foreclosed assets	(700)	(759)	(903)
Other fees and income	557	402	402
Total non-interest income	1,294	1,454	704
Non-interest expense:
Salaries and employee benefits	15,604	13,331	11,826
Furniture, equipment and software costs	2,010	1,878	1,340
Occupancy	1,441	1,547	999
Data processing	1,115	1,103	1,229
Professional fees	1,056	737	1,119
Director related fees and expenses	883	921	978
Advertising and public relations	871	934	876
FDIC and other supervisory assessments	703	939	932
Unreimbursed loan costs and foreclosure related expenses	528	874	496
Other	2,663	2,496	2,114
Total non-interest expense	26,874	24,760	21,909
Income before income taxes	19,867	16,995	12,362
Income tax expense	6,477	5,761	4,403
Net income	$ 13,390	$ 11,234	$ 7,959
Net income per common share
Basic	$ 2.69	$ 2.49	$ 1.79
Diluted	$ 2.68	$ 2.47	$ 1.77

CONSOLIDATED STATEMENTS OF COMP

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Consolidated Statements Of Comprehensive Income
Net income	$ 13,390	$ 11,234	$ 7,959
Securities available for sale:
Unrealized gains (losses)	(3,047)	(743)	5,965
Reclassification of gains recognized in net income	(106)	(542)	(87)
Other comprehensive income (loss)	(3,153)	(1,285)	5,878
Deferred tax expense (benefit)	(1,208)	(488)	2,288
Other comprehensive income (loss), net of tax	(1,945)	(797)	3,590
Cash flow hedges:
Unrealized losses	(13)	(1,965)	(3,099)
Other comprehensive loss	(4)	(734)	(1,213)
Deferred tax benefit	(4)	(734)	(1,213)
Other comprehensive loss, net of tax	(9)	(1,231)	(1,886)
Total other comprehensive income (loss), net of tax	(1,954)	(2,028)	1,704
Comprehensive income	$ 11,436	$ 9,206	$ 9,663

CONSOLIDATED STATEMENTS OF CHAN

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (Unaudited) - USD ($) $ in Thousands	Common Stock Class A	Common Stock Class B	Common Stock	Additional Paid-in Capital	Accumulated Other Comprehensive Income (Loss)	Retained Earnings	Total
Beginning Balance, Shares at Dec. 31, 2013	34,608	884	0
Beginning Balance, Amount at Dec. 31, 2013	$ 34	$ 1	$ 0	$ 51,963	$ (562)	$ 26,167	$ 77,603
Net income						7,959	7,959
Unrealized gain (loss) on securities, net of tax expense/benefit					3,590		3,590
Unrealized loss on cash flow hedges, net of tax benefit					(1,886)		(1,886)
Compensation expense recognized					23		23
Exercise of stock options, Shares			6,000
Exercise of stock options, Amount					59		59
Issuance of shares for employee stock purchase plan, Amount							0
Issuance of restricted stock awards, Shares	550		18,750
Issuance of restricted stock awards, Amount	$ 1			313			314
Reclassification of shares, Shares	(35,158)	(884)	36,042
Reclassification of shares, Amount	$ (35)	$ (1)	$ 36				0
125 for 1 stock split			4,469,208
Ending Balance, Shares at Dec. 31, 2014	0	0	4,530,000
Ending Balance, Amount at Dec. 31, 2014	$ 0	$ 0	$ 36	52,358	1,142	34,126	87,662
Net income						11,234	11,234
Unrealized gain (loss) on securities, net of tax expense/benefit					(797)		(797)
Unrealized loss on cash flow hedges, net of tax benefit					(1,231)		(1,231)
Exercise of stock options, Shares			10,000
Exercise of stock options, Amount				176			176
Issuance of shares for employee stock purchase plan, Shares			10,678
Issuance of shares for employee stock purchase plan, Amount			$ 1	202			203
Issuance of restricted stock awards, Shares			30,656
Issuance of restricted stock awards, Amount				411			411
Ending Balance, Shares at Dec. 31, 2015	0	0	4,581,334
Ending Balance, Amount at Dec. 31, 2015	$ 0	$ 0	$ 37	53,147	(886)	45,360	97,658
Net income						13,390	13,390
Unrealized gain (loss) on securities, net of tax expense/benefit					(1,945)		(1,945)
Unrealized loss on cash flow hedges, net of tax benefit					(9)		(9)
Exercise of stock options, Amount							0
Issuance of stock for public offering, Shares			845,588
Issuance of stock for public offering, Amount			$ 7	26,392			26,399
Issuance of shares for employee stock purchase plan, Shares			5,998
Issuance of shares for employee stock purchase plan, Amount				181			181
Issuance of restricted stock awards, Shares			17,793
Issuance of restricted stock awards, Amount				427			427
Ending Balance, Shares at Dec. 31, 2016	0	0	5,450,713
Ending Balance, Amount at Dec. 31, 2016	$ 0	$ 0	$ 44	$ 80,147	$ (2,840)	$ 58,750	$ 136,101

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Cash flows from operating activities:
Net income	$ 13,390	$ 11,234	$ 7,959
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,432	1,408	1,087
Provision for loan losses	591	750	538
Net loss on sale or impairment of foreclosed assets	700	759	903
Increase in cash surrender value of life insurance	(916)	(853)	(799)
Accretion of premiums/discounts on securities, net	(1,232)	(964)	(833)
Net gain on sale of securities	(106)	(542)	(87)
Net gain on disposition of premises and equipment	(5)	(4)	0
Deferred tax expense	490	2,030	2,477
Stock based compensation	427	411	336
Changes in assets and liabilities:
Accrued interest receivable and other assets	(1,518)	(363)	(7,212)
Accrued interest payable and other liabilities	211	811	608
Net cash provided by operating activities	13,464	14,677	4,977
Cash flows from investing activities:
Net decrease in Federal Home Loan Bank stock	(339)	(1,055)	(683)
Purchase of securities available for sale	(75,412)	(60,282)	(75,536)
Proceeds from maturities and paydowns of securities available for sale	24,655	20,264	17,389
Proceeds from sales of securities available for sale	20,396	55,019	28,466
Net increase in loans	(175,447)	(151,213)	(102,725)
Proceeds from sale of foreclosed real estate	13	12,336	3,383
Purchase of bank owned life insurance	(5,000)	0	0
Proceeds from sale of property and equipment	5	24	0
Additions to bank premises and equipment	(641)	(790)	(2,890)
Other investing activites, net	0	(73)	0
Net cash used in investing activities	(211,770)	(125,770)	(132,596)
Cash flows from financing activities:
Net increase in demand and money market deposit accounts	290,182	168,338	133,626
Net decrease in time deposits	(100,774)	(69,131)	(20,138)
Net increase (decrease) in repurchase agreements	(10,406)	3,098	(530)
Net increase (decrease) in FHLB and other borrowings	(19,800)	27,544	17,640
Net proceeds from sale of common stock	26,398	0	(11,780)
Exercise of stock options	0	176	59
Issuance of common stock for employee stock purchase plan	181	203	0
Net cash provided by financing activities	185,781	130,228	118,877
Net change in cash and cash equivalents	(12,525)	19,135	(8,742)
Cash and cash equivalents at beginning of year	55,530	36,395	45,137
Cash and cash equivalents at end of year	$ 43,005	$ 55,530	$ 36,395

1. ORGANIZATION AND OPERATIONS

1. ORGANIZATION AND OPERATIONS	12 Months Ended
	Dec. 31, 2016
Organization And Operations
ORGANIZATION AND OPERATIONS	On June 29, 2001, Paragon Commercial Corporation (the “Company”) became the holding company for Paragon Commercial Bank (the “Bank”). The Company currently has no operations and conducts no business on its own other than owning the Bank and two Trusts, Paragon Commercial Capital Trust I and II. The Bank was incorporated on May 4, 1999 and began banking operations on May 10, 1999. The Bank is engaged in general commercial banking in Wake and Mecklenburg Counties, NC, operating under the banking laws of North Carolina and the rules and regulations of the Federal Deposit Insurance Corporation and the North Carolina Commissioner of Banks. The Bank undergoes periodic examinations by those regulatory authorities. The Company formed Paragon Commercial Capital Trust I (“Trust I”) during 2004 in order to facilitate the issuance of trust preferred securities. Trust I is a statutory business trust formed under the laws of the state of Delaware, of which all common securities are owned by the Company. The Company formed Paragon Commercial Capital Trust II (“Trust II”) during 2006 to serve the same purpose. The junior subordinated debentures issued by the Company to the trusts are classified as debt and the Company’s equity interest in the trusts are included in other assets. The trust preferred securities presently qualify as Tier 1 regulatory capital and are reported in Federal Reserve regulatory reports as minority interests in unconsolidated subsidiaries. The junior subordinated debentures do not qualify as Tier 1 regulatory capital. In June 2016, the Company completed its initial public offering in which it issued and sold 845,588 shares of common stock at a public offering price of $34.00 per share. The Company received net proceeds of $26.4 million after deducting underwriting discounts and commissions of approximately $1.7 million and other offering expenses of approximately $615,000. In addition to its headquarters in Raleigh, North Carolina, the Bank has locations in Charlotte and Cary, North Carolina.

2. SUMMARY OF SIGNIFICANT ACCOU

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	12 Months Ended
	Dec. 31, 2016
Summary Of Significant Accounting Policies
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	Basis of Presentation The accompanying consolidated financial statements include the accounts and transactions of Paragon Commercial Corporation and Paragon Commercial Bank. All significant intercompany transactions and balances are eliminated in consolidation. Paragon Commercial Capital Trusts I and II are not consolidated subsidiaries of the Company. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, other than temporary impairment on investment securities, fair value of other real estate owned, realization of deferred tax assets and the fair value of financial instruments. Cash and Cash Equivalents Cash and cash equivalents include demand and time deposits (with original maturities of 90 days or less) at other institutions, federal funds sold and other short-term investments. Generally, federal funds are purchased and sold for one-day periods. At times, the Company places deposits with high credit quality financial institutions in amounts which may be in excess of federally insured limits. Depository institutions are required to maintain reserve and clearing balances with the Federal Reserve Bank (“FRB”). Accordingly, the Company has amounts restricted for this purpose of $25,000 and $19.4 million included in cash and due from banks on the consolidated balance sheets as of December 31, 2016 and 2015, respectively. Investment Securities Debt securities that the Company has the positive intent and ability to hold to maturity are classified as “held-to-maturity” securities and reported at amortized cost. Debt and equity securities that are bought and held principally for the purpose of selling in the near term are classified as “trading” securities and reported at fair value with unrealized gains and losses included in earnings. Available-for-sale securities are reported at fair value and consist of debt or equity securities not classified as trading securities nor as held-to-maturity securities. Unrealized holding gains and losses on available-for-sale securities are reported as a net amount in other comprehensive income net of income taxes. Gains and losses on the sale of available-for-sale securities are determined using the specific-identification method. Premiums and discounts are recognized in interest income using the effective interest method over the period to maturity. At each reporting date, the Company evaluates each investment security in a loss position for other-than-temporary impairment. The review includes an analysis of the facts and circumstances of each individual investment such as (1) the length of time and the extent to which the fair value has been below cost, (2) changes in the earnings performance, credit rating, asset quality, or business prospects of the issuer, (3) the ability of the issuer to make principal and interest payments, (4) changes in the regulatory, economic, or technological environment of the issuer, and (5) changes in the general market condition of either the geographic area or industry in which the issuer operates. Regardless of these factors, if the Company has developed a plan to sell the security or it is likely that the Company will be forced to sell the security in the near future, then the impairment is considered other-than-temporary and the carrying value of the security is permanently written down to the current fair value with the difference between the new carrying value and the amortized cost charged to earnings. If the Company does not intend to sell the security and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis less any current period credit loss, the other-than-temporary impairment is separated into the following: (1) the amount representing the credit loss and (2) the amount related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings, and the amount of the total other-than-temporary impairment related to other factors is recognized in other comprehensive income, net of applicable taxes. Loans Loans that management has the intent and ability to hold for the foreseeable future or until maturity are reported at their outstanding principal adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans. Loan origination fees and certain direct origination costs are capitalized and recognized as an adjustment of the yield of the related loan. The accrual of interest on impaired loans is discontinued when, in management’s opinion, the borrower may be unable to meet payments as they become due. When interest accrual is discontinued, all unpaid accrued interest is reversed and any subsequent payments received are applied only to the outstanding principal balance. Allowance for Loan Losses The allowance for loan losses (“ALL”) is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. The provision for loan losses is based upon management’s best estimate of the amount needed to provide for losses that are inherent in the portfolio. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the ALL. The Company conducts an analysis of the loan portfolio on a regular basis. This analysis is used in assessing the sufficiency of the allowance for loan losses and in the determination of the necessary provision for loan losses. The review process generally begins with the identification of problem loans to be reviewed on an individual basis for impairment. When a loan has been identified as impaired, a specific reserve may be established based on the Company’s calculation of the loss embedded in the individual loan. In addition to specific reserves on impaired loans, the Company has a nine-point grading system for each non-homogeneous loan in the portfolio to reflect the risk characteristic of the loan. The loans identified and measured for impairment are segregated from risk-rated loans within the portfolio. Loans are then grouped by loan type and by risk rating. Each loan type is assigned an allowance factor based on historical loss experience, economic conditions and overall portfolio quality including delinquency rates and concentrations. The ALL is an accounting estimate and as such there is uncertainty associated with the estimate due to the level of subjectivity and judgment inherent in performing the calculation. Management’s evaluation of the ALL also includes considerations of existing general economic and business conditions affecting the key lending areas of the Company, credit quality trends, collateral values, loan volumes and concentrations, seasoning of the loan portfolio, specific industry conditions within portfolio segments, recent loss experience in particular segments of the portfolio, duration of the current business cycle, regulatory examination results and findings of the Company's outsourced loan review consultants. The total of specific reserves required for impaired classified loans and the calculated reserves comprise the allowance for loan losses. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining whether a loan is impaired include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Additionally, management’s policy is generally to evaluate only those loans greater than $500,000 for impairment. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. While management utilizes its best judgment and information available, the ultimate adequacy of the allowance is dependent upon a variety of factors beyond the Company’s control, including the performance of the Company’s loan portfolio, the economy, changes in interest rates and the view of the regulatory authorities toward loan classifications. Other Real Estate Owned Other real estate owned acquired through, or in lieu of, loan foreclosure is initially recorded at fair value less selling costs, establishing a new cost basis. After foreclosure, valuations are periodically performed by management and the real estate is carried at the lower of cost or net realizable value. Net realizable value is equivalent to fair market value less costs to sell the assets. Revenue and expenses from holding the properties and adjustments to the cost basis are included in earnings. Bank Premises and Equipment Bank premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is calculated on the straight-line method over the estimated useful lives of the assets which are 3 - 10 years for furniture and equipment and 40 years for buildings. Leasehold improvements are amortized over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter. Repairs and maintenance costs are charged to earnings as incurred, and additions and improvements to premises and equipment are capitalized. Upon sale or retirement, the cost and related accumulated depreciation are removed from the accounts and any gains or losses are reflected in current earnings. Federal Home Loan Bank Stock As a requirement for membership, the Company invests in stock of the Federal Home Loan Bank of Atlanta (“FHLB”). This investment is carried at cost. Due to the redemption provisions of the FHLB stock, the Company estimated that fair value approximates cost. Bank Owned Life Insurance The Company has purchased life insurance policies on certain key employees. These policies are recorded at their cash surrender value, or the amount that can be realized. Income from these policies and changes in the net cash surrender value are recorded in noninterest income. Derivative Instruments and Hedging Activities The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in other comprehensive income (outside of earnings) and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of the change in the fair value of the derivative is recognized directly in earnings. The Company engages a third party expert to assess the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged transactions. The Company’s objective in using derivatives is to add stability to net interest income and to manage its exposure to adverse changes in interest rates. To accomplish this objective, the Company uses interest rate caps and swaps as part of its cash flow hedging strategy. Income Taxes Deferred tax assets and liabilities are recognized for the estimated future tax benefits or consequences attributable to differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets are also recognized for operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that the tax benefits will not be realized. At December 31, 2016, the Company had $4.8 million in net deferred tax assets. A valuation allowance is provided when it is more-likely-than-not that some portion of the deferred tax asset will not be realized. All available evidence, both positive and negative, was considered to determine whether, based on the weight of that evidence, impairment should be recognized. Our forecast process includes qualitative and quantitative elements that may be subject to significant change. If our forecast of taxable income within the carryforward periods available under applicable law and prudent tax planning strategies are not sufficient to cover the amount of net deferred tax assets, such assets may be impaired. Based on the Company’s analysis of both positive and negative evidence, management concluded there were no valuation allowances required with respect to the deferred tax assets at December 31, 2016 and 2015. Stock Compensation Plans The Company has historically maintained a stock-based compensation plan. The plan provides for the grant of stock options for a fixed number of shares with an exercise price equal to the fair value of the shares on the date of grant. The plan also provides for the grant of a fixed number of restricted shares with a grant price equal to the fair value of the shares on the date of grant. Earnings Per Common Share In May 2014, the Company’s stockholders approved and the Company executed a reclassification of its then-outstanding Class A common stock and Class B common stock into a single class of common stock on the basis of one share of common stock for each share of Class A common stock and Class B common stock so reclassified. In June 2014, the Company amended its articles of incorporation to effect a 125-for-1 forward split of each share of common stock then issued and outstanding. Basic and diluted net income per common share have been computed based upon net income as presented in the accompanying consolidated statements of income divided by the weighted average number of common shares outstanding or assumed to be outstanding as summarized below. Diluted net income per common share reflects the potential dilution that could occur if outstanding stock options were exercised. 2016 2015 2014 Shares used in the computation of earnings per share: Weighted average number of shares outstanding - basic 4,968,970 4,509,884 4,456,002 Dilutive effect of restricted shares 35,781 38,022 39,011 Weighted average number of shares outstanding - diluted 5,004,751 4,547,906 4,495,013 As of December 31, 2016, 2015 and 2014, because the exercise price was in excess of the average current trading price, none of the Company’s outstanding stock options were used in the calculation of diluted earnings per share (“EPS”). The dilutive effect of stock options and unvested restricted shares are the only common stock equivalents for purposes of calculating diluted earnings per common share. Weighted average anti-dilutive stock options and unvested restricted shares excluded from the computation of diluted earnings per share are as follows: For the Year Ended December 31, 2016 2015 2014 Anti-dilutive stock options 61,125 81,500 101,000 Unvested restricted shares 60,324 40,936 48,958 Comprehensive Income The Company reports as comprehensive income all changes in stockholders' equity during the year from sources other than stockholders. Other comprehensive income refers to all components (revenues, expenses, gains, and losses) of comprehensive income that are excluded from net income. The Company’s only two components of other comprehensive income are unrealized gains and losses on investment securities available-for-sale, net of income taxes and unrealized gains and losses on cash flow hedges, net of income taxes. Information concerning the Company’s accumulated other comprehensive income (loss) for the years ended December 31, 2016, 2015 and 2014 are as follows: (in thousands) 2016 2015 2014 Unrealized gains (losses) on securities available-for-sale $ (1,775 ) $ 1,378 $ 2,663 Deferred tax (expense) benefit 678 (530 ) (1,018 ) Other comprehensive income (loss), net of tax $ (1,097 ) $ 848 $ 1,645 Unrealized losses on cash flow hedges (2,792 ) (2,779 ) (814 ) Deferred tax benefit 1,049 1,045 311 Other comprehensive loss, net of tax (1,743 ) (1,734 ) (503 ) Total other accumulated comprehensive income (loss) $ (2,840 ) $ (886 ) $ 1,142 The accumulated balances related to each component of other accumulated comprehensive income (loss), net of tax are as follows: Unpaid Unrealized Unrealized Gains and Gains and Losses on Losses on Available-for Cash Flow (in thousands) Sale Securities Hedges Total Balance as of December 31, 2015 $ 848 $ (1,734 ) $ (886 ) Other comprehensive loss before reclassification (1,839 ) (9 ) (1,848 ) Amounts reclassified from accumulated other comprehensive income (106 ) — (106 ) Net current-period other comprehensive loss (1,945 ) (9 ) (1,954 ) Balance as of December 31, 2016 $ (1,097 ) $ (1,743 ) $ (2,840 ) Balance as of December 31, 2014 $ 1,645 $ (503 ) $ 1,142 Other comprehensive loss before reclassification (255 ) (1,231 ) (1,486 ) Amounts reclassified from accumulated other comprehensive income (542 ) — (542 ) Net current-period other comprehensive loss (797 ) (1,231 ) (2,028 ) Balance as of December 31, 2015 $ 848 $ (1,734 ) $ (886 ) Recent Accounting Pronouncements In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance to change the recognition of revenue from contracts with customers. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. The guidance will be effective for the Company for reporting periods beginning after December 15, 2017. The Company will apply the guidance using a full retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements. In August 2015, the FASB deferred the effective date of Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers. As a result of the deferral, the guidance in ASU 2014-09 will be effective for the Company for reporting periods beginning after December 15, 2017. The Company will apply the guidance using a full retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements. In January 2016, the FASB amended the Financial Instruments topic of the Accounting Standards Codification (“ASC”) to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company will apply the guidance by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values will be applied prospectively to equity investments that exist as of the date of adoption of the amendments. While the Company does own equity securities, management does not expect these amendments to have a material effect on its financial statements. In February 2016, the FASB amended the Leases topic of the ASC to revise certain aspects of recognition, measurement, presentation, and disclosure of leasing transactions. The amendments will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the effect that implementation of the new standard will have on its financial statements. In March 2016, the FASB amended the Derivatives and Hedging topic of the ASC to clarify that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. The amendments will be effective for financial statements issued for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company will apply the guidance prospectively to each period presented. The Company does not expect these amendments to have a material effect on its financial statements. In March 2016, the FASB amended the Revenue from Contracts with Customers topic of the ASC to clarify the implementation guidance on principal versus agent considerations and address how an entity should assess whether it is the principal or the agent in contracts that include three or more parties. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements. In March 2016, the FASB issued guidance to simplify several aspects of the accounting for share-based payment award transactions including the income tax consequences, the classification of awards as either equity or liabilities, and the classification on the statement of cash flows. The amendments will be effective for the Company for annual periods beginning after December 15, 2016 and interim periods within those annual periods. The Company does not expect these amendments to have a material effect on its financial statements. In June 2016, the FASB issued guidance to change the accounting for credit losses and modify the impairment model for certain debt securities. The amendments will be effective for the Company for reporting periods beginning after December 15, 2019. The Company is currently evaluating the effect that implementation of the new standard will have on its financial position, results of operations, and cash flows. In October 2016, the FASB amended the Income Taxes topic of the ASC to modify the accounting for intra-entity transfers of assets other than inventory. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not expect these amendments to have a material effect on its financial statements. In October 2016, the FASB amended the Consolidation topic of the ASC to revise the consolidation guidance on how a reporting entity that is the single decision maker of a variable interest entity (VIE) should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. The amendments will be effective for the Company for fiscal years beginning after December 15, 2016 including interim periods within those fiscal years. The Company does not expect these amendments to have a material effect on its financial statements. In December 2016, the FASB issued amendments to clarify the ASC, correct unintended application of guidance, and make minor improvements to the ASC that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The amendments were effective upon issuance (December 14, 2016) for amendments that do not have transition guidance. Amendments that are subject to transition guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements In December 2016, the FASB issued technical corrections and improvements to the Revenue from Contracts with Customers Topic. These corrections make a limited number of revisions to several pieces of the revenue recognition standard issued in 2014. The effective date and transition requirements for the technical corrections will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements. Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows. Reclassifications Certain amounts in the 2015 financial statements have been reclassified to conform to the 2016 presentation. The reclassifications had no effect on total assets, net income or stockholders' equity as previously reported.

3. INVESTMENT SECURITIES

3. INVESTMENT SECURITIES	12 Months Ended
	Dec. 31, 2016
Investments, Debt and Equity Securities [Abstract]
INVESTMENT SECURITIES	The following is a summary of the securities portfolio by major classification at December 31, 2016 and December 31, 2015. Gross Gross Estimated Amortized Unrealized Unrealized Fair (in thousands) Cost Gains Losses Value December 31, 2016 Available-for-sale: U.S. Agency obligations $ 17,062 $ 44 $ 163 $ 16,943 Collateralized mortgage obligations 42,439 300 242 42,497 Mortgage-backed securities 75,138 213 1,478 73,873 Municipal bonds 60,901 474 698 60,677 Other 3,676 29 254 3,451 $ 199,216 $ 1,060 $ 2,835 $ 197,441 December 31, 2015 Available-for-sale: U.S. Agency obligations $ 19,778 $ 196 $ 73 $ 19,901 Collateralized mortgage obligations 60,826 321 206 60,941 Mortgage-backed securities 31,074 326 90 31,310 Municipal bonds 53,163 1,346 75 54,434 Other 2,677 10 377 2,310 $ 167,518 $ 2,199 $ 821 $ 168,896 The fair values of securities available-for-sale at December 31, 2016 by contractual maturity are shown below. Actual expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations. After One After Five No Stated Within Within Within After Maturity (in thousands) 1 Year Five Years Ten Years Ten Years Date Total U.S. Agency obligations $ — $ — $ — $ 16,943 $ — $ 16,943 Collateralized mortgage obligations — — — 42,497 — 42,497 Mortgage-backed securities — 7,581 5,341 60,951 — 73,873 Municipal bonds — 1,771 6,087 52,819 — 60,677 Other — — 1,500 — 1,951 3,451 $ — $ 9,352 $ 12,928 $ 173,210 $ 1,951 $ 197,441 The following tables show gross unrealized losses and fair values of investment securities, aggregated by investment category and length of time that the individual securities have been in a continuous unrealized loss position on December 31, 2016 and 2015. Less Than 12 Months 12 Months or Greater Total (in thousands) Unrealized Unrealized Unrealized December 31, 2016 Fair Value Losses Fair Value Losses Fair Value Losses Securities available-for-sale: U.S. Agency obligations $ 10,334 $ 163 $ — $ — $ 10,334 $ 163 Collateralized mortgage obligations 18,124 242 — — 18,124 242 Mortgage-backed securities 58,825 1,478 — — 58,825 1,478 Municipal bonds 33,110 698 — — 33,110 698 Other 1,897 254 — — 1,897 254 Total temporarily impaired securities $ 122,290 $ 2,835 $ — $ — $ 122,290 $ 2,835 Less Than 12 Months 12 Months or Greater Total (in thousands) Unrealized Unrealized Unrealized December 31, 2015 Fair Value Losses Fair Value Losses Fair Value Losses Securities available-for-sale: U.S. Agency obligations $ 3,007 $ — $ 3,178 $ 73 $ 6,185 $ 73 Collateralized mortgage obligations 26,086 159 2,983 47 29,069 206 Mortgage-backed securities 18,575 90 — — 18,575 90 Municipal bonds 3,896 6 7,990 69 11,886 75 Other 1,774 377 — — 1,774 377 Total temporarily impaired securities $ 53,338 $ 632 $ 14,151 $ 189 $ 67,489 $ 821 The table below summarizes the number of investment securities in an unrealized loss position: Available-for-sale: December 31, (in thousands) 2016 2015 U.S. Agency obligations 5 3 Collateralized mortgage obligations 6 7 Mortgage-backed securities 13 6 Municipal bonds 53 22 Other 1 1 78 39 The unrealized losses primarily relate to debt securities that have incurred fair value reductions due to higher market interest rates since the securities were purchased. The unrealized losses are not likely to reverse unless and until market interest rates decline to the levels that existed when the securities were purchased. Since none of the unrealized losses on the debt securities in 2016 or 2015 relate to the marketability of the securities or the issuer’s ability to honor redemption obligations and since management has the intent to hold these securities until maturity and believes it is more likely than not that the Company will not have to sell any such securities before a recovery of cost given the current liquidity position, none of those debt securities are deemed to be other than temporarily impaired. The following table summarizes securities gains and losses for the periods presented: Year ended December 31, (in thousands) 2016 2015 2014 Gross gains on sales of securities available for sale $ 193 $ 590 $ 208 Gross losses on sales of securities available for sale (299 ) (48 ) (121 ) Total securities gains $ (106 ) $ 542 $ 87 Securities with a fair value of $75.8 million and $78.4 million were pledged as of December 31, 2016 and 2015, respectively, to secure repurchase agreements, lines of credit and other borrowings.

4. LOANS AND ALLOWANCE FOR LOAN

4. LOANS AND ALLOWANCE FOR LOAN LOSSES	12 Months Ended
	Dec. 31, 2016
Receivables [Abstract]
LOANS AND ALLOWANCE FOR LOAN LOSSES	Following is a summary of loans at December 31, 2016 and 2015: December 31, (in thousands) 2016 2015 Construction and land development $ 79,738 $ 64,702 Commercial real estate: Non-farm, non-residential 365,569 307,722 Owner occupied 186,892 147,017 Multifamily, nonresidential and junior liens 89,191 79,170 Total commercial real estate 641,652 533,909 Consumer real estate: Home equity lines 87,489 78,943 Secured by 1-4 family residential, secured by first deeds of trust 195,343 167,053 Secured by 1-4 family residential, secured by second deeds of trust 4,289 3,711 Total consumer real estate 287,121 249,707 Commercial and industrial loans (except those secured by real estate) 170,709 153,669 Consumer and other 11,542 13,539 Total loans 1,190,762 1,015,526 Deferred loan (fees) costs 518 630 Allowance for loan losses (7,909 ) (7,641 ) Net loans $ 1,183,371 $ 1,008,515 A further breakdown of the make-up of the construction and development and commercial real estate portfolios at December 31, 2016 and 2015 is as follows: December 31, (in thousands) 2016 2015 Construction and land development: Land $ 12,595 $ 16,026 Residential 36,253 29,864 Commercial 30,890 18,812 Total construction and land development $ 79,738 $ 64,702 Commercial real estate: Non-farm, non-residential: Office $ 108,228 $ 92,991 Industrial 36,264 38,518 Hotel/motel 28,453 18,935 Retail 165,434 135,200 Special purpose/Other 27,190 22,078 365,569 307,722 Owner occupied : Office 60,500 51,775 Industrial 46,876 40,337 Retail 31,085 12,157 Special purpose/Other 48,431 42,748 186,892 147,017 Multifamily, nonresidential and junior liens 89,191 79,170 Total commercial real estate $ 641,652 $ 533,909 Loans are primarily made in the Research Triangle and Charlotte areas of North Carolina. Real estate loans can be affected by the condition of the local real estate market. Commercial and installment loans can be affected by the local economic conditions. Changes in the allowance for loan losses for the years ended December 31, 2016, 2015 and 2014 were as follows: Commercial & Industrial Construction Consumer Loans Not and Land Commercial Real Secured By Consumer Total (In thousands) Development Real Estate Estate Real Estate & Other Loans 2016 Balance at beginning of the year $ 509 $ 3,156 $ 2,046 $ 1,786 $ 144 $ 7,641 Provision for loan losses (326 ) 492 (153 ) 656 (78 ) 591 Loans charged off — (27 ) — (927 ) — (954 ) Recoveries 303 98 7 213 10 631 Net (chargeoffs) recoveries 303 71 7 (714 ) 10 (323 ) Balance at end of the year $ 486 $ 3,719 $ 1,900 $ 1,728 $ 76 $ 7,909 2015 Balance at beginning of the year $ 960 $ 2,510 $ 1,594 $ 1,662 $ 143 $ 6,869 Provision for loan losses (510 ) 902 408 (51 ) 1 750 Loans charged off (14 ) (275 ) — — — (289 ) Recoveries 73 19 44 175 — 311 Net (chargeoffs) recoveries 59 (256 ) 44 175 — 22 Balance at end of the year $ 509 $ 3,156 $ 2,046 $ 1,786 $ 144 $ 7,641 2014 Balance at beginning of the year $ 2,021 $ 1,184 $ 1,540 $ 2,150 $ 44 $ 6,939 Provision for loan losses (317 ) 1,287 104 (635 ) 99 538 Loans charged off (898 ) (1 ) (64 ) (99 ) — (1,062 ) Recoveries 154 40 14 246 — 454 Net (chargeoffs) recoveries (744 ) 39 (50 ) 147 — (608 ) Balance at end of the year $ 960 $ 2,510 $ 1,594 $ 1,662 $ 143 $ 6,869 The balance in the allowance for loan losses and the recorded investment in loans by portfolio segment are based on the impairment method as of December 31, 2016 and 2015 and were as follows: Commercial & Industrial Construction Consumer Loans Not and Land Commercial Real Secured By Consumer Total (in thousands) Development Real Estate Estate Real Estate & Other Loans December 31, 2016 Allowance for Loan Losses: Individually evaluated for impairment $ — $ — $ 223 $ 286 $ — $ 509 Collectively evaluated for impairment 486 3,719 1,677 1,442 76 7,400 Total ending allowance $ 486 $ 3,719 $ 1,900 $ 1,728 $ 76 $ 7,909 Loans: Individually evaluated for impairment $ 125 $ 836 $ 1,121 $ 1,139 $ — $ 3,221 Collectively evaluated for impairment 79,613 640,816 286,000 169,570 11,542 1,187,541 Total ending loans $ 79,738 $ 641,652 $ 287,121 $ 170,709 $ 11,542 $ 1,190,762 December 31, 2015 Allowance for Loan Losses: Individually evaluated for impairment $ 4 $ 72 $ 115 $ 297 $ 21 $ 509 Collectively evaluated for impairment 505 3,084 1,931 1,489 123 7,132 Total ending allowance $ 509 $ 3,156 $ 2,046 $ 1,786 $ 144 $ 7,641 Loans: Individually evaluated for impairment $ 238 $ 2,619 $ 411 $ 602 $ 21 $ 3,891 Collectively evaluated for impairment 64,464 531,290 249,296 153,067 13,518 1,011,635 Total ending loans $ 64,702 $ 533,909 $ 249,707 $ 153,669 $ 13,539 $ 1,015,526 Loans are charged down or off as soon as the Company determines that the full principal balance due under any loan becomes uncollectible. The amount of the charge is determined as follows: ● If unsecured, the loan must be charged off in full. ● If secured, the outstanding principal balance of the loan should be charged down to the net realizable value of the collateral. Loans are considered uncollectible when: ● No regularly scheduled payment has been made within four months unless fully secured and in the process of collection. ● The collateral value is insufficient to cover the outstanding indebtedness and it is unlikely the borrower will have the ability to pay the debt in a timely manner. ● The loan is unsecured, the borrower files for bankruptcy protection and there is no other (guarantor, etc.) support from an entity outside of the bankruptcy proceedings. Impaired loans totaled $3.2 million and $3.9 million at December 31, 2016 and 2015, respectively. Included in the $3.2 million at December 31, 2016 is $1.3 million of loans classified as troubled debt restructurings (“TDRs”). Included in the $3.9 million at December 31, 2015 is $2.8 million of loans classified as TDRs. A modification of a loan’s terms constitutes a TDR if the creditor grants a concession to the borrower for economic or legal reasons related to the borrower’s financial difficulties that it would not otherwise consider. All TDRs are considered impaired. The following table provides information on performing and nonperforming TDRs as of December 31, 2016 and 2015: December 31, (in thousands) 2016 2015 Performing TDRs: Commercial real estate $ 520 $ 2,220 Consumer real estate 338 346 Commercial and industrial loans 297 47 Total performing TDRs 1,155 2,613 Nonperforming TDRs: Construction and land development 125 104 Consumer real estate 58 65 Consumer and other — 21 Total nonperformingTDRs 183 190 Total TDRs $ 1,338 $ 2,803 As of December 31, 2016 there were six loans totaling $1.3 million identified as TDRs, including two loans totaling $422,000 which were added during 2016. Three loans totaling $1.4 million considered TDRs as of December 31, 2015 were subsequently paid in full, and one loan for $46,000 went into default and was subsequently charged off in 2016. Of the two new loans considered TDRs during 2016, the largest was a $297,000 C&I loan due to changes in payment terms in response to the borrower’s short term cash flow shortage. The other loan for $125,000 is a real estate development loan that was modified to extend the term of the loan in response to slow sales. Payments are current on both loans that were classified as TDRs in 2016. Interest is not typically accrued on loans where impairment exists. For loans classified as TDRs, the Company further evaluates the loans as performing or non-performing. If, at the time of restructure, it is determined that no impairment exists, the loan will be classified as performing. Interest income recognized on performing TDRs was $71,000 and $161,000 for the years ended December 31, 2016 and 2015, respectively. In order to quantify the value of any impairment, the Company evaluates loans individually. At December 31, 2016, the Company had $3.2 million of impaired loans. The detail of loans evaluated for impairment as of December 31, 2016 is presented below: Unpaid Contractual (in thousands) Recorded Principal Allocated December 31, 2016 Investment Balance Allowance Loans without a specific valuation allowance: Construction and land development $ 125 $ 195 $- Commercial real estate 836 836 - Loans with a specific valuation allowance: Consumer real estate 1,121 1,152 223 Commercial and industrial loans (except those secured by real estate) 1,139 1,382 286 Total $ 3,221 $ 3,565 $509 At December 31, 2015, the Company had $3.9 million of impaired loans. The detail of loans evaluated for impairment as of December 31, 2015 is presented below: Unpaid Contractual (in thousands) Recorded Principal Allocated December 31, 2015 Investment Balance Allowance Loans without a specific valuation allowance: Construction and land development $ 234 $ 397 $ — Commercial real estate 2,220 2,319 — Loans with a specific valuation allowance: Construction and land development 4 29 4 Commercial real estate 399 480 72 Consumer real estate 411 474 115 Commercial and industrial loans (except those secured by real estate) 602 895 297 Consumer and other 21 26 21 Total $ 3,891 $ 4,620 $ 509 The average recorded investment balance of impaired loans during 2016 and 2015 is as follows: 2016 2015 Average Interest Average Interest (in thousands) Balance Income Balance Income Construction and land development $ 156 $ — $ 285 $ 1 Commercial real estate 1,244 46 5,241 181 Consumer real estate 629 26 728 26 Commercial and industrial loans 1,594 62 642 24 Consumer and other 9 — 23 — $ 3,632 $ 134 $ 6,919 $ 232 When the Company cannot reasonably expect full and timely repayment of a loan, the loan is placed on nonaccrual status. The Company will continue to track the contractual interest for purposes of customer reporting and any potential litigation or later collection of the loan but accrual of interest for financial statement purposes is to be discontinued. Subsequent payments of interest can be recognized as income on a cash basis provided that full collection of principal is expected. Otherwise, all payments received are to be applied to principal only. At the time of nonaccrual, past due or accrued interest is reversed from income. Loans over 90 days past due will automatically be placed on nonaccrual status. Loans that are less delinquent may also be placed on nonaccrual status if full collection of principal and interest is unlikely. The following table presents the recorded investment in nonaccrual loans by portfolio segment as of December 31, 2016 and 2015: Nonaccrual (in thousands) 2016 2015 Construction and land development $ 125 $ 238 Consumer real estate 783 65 Commercial and industrial loans 60 189 Consumer and other — 21 Total $ 968 $ 513 There were no loans 90 days or more past due and accruing interest at December 31, 2016 and 2015. If interest had been earned on non-accrual loans, such income would have approximated $46,000 and $28,000 for the years ended December 31, 2016 and 2015, respectively. The following table presents the aging of the recorded investment in past due loans as of December 31, 2016 and 2015 by portfolio segment: Greater 30 - 59 60 - 89 than 90 Days Days Days Total (in thousands) Past Past Past Non- Past Total December 31, 2016 Due Due Due Accrual Due Current Loans Construction and land development $ $ $ $ 125 $ 125 $ 79,613 $ 79,738 Commercial real estate - - - - - 641,652 641,652 Consumer real estate - - - 783 783 286,338 287,121 Commercial and industrial loans - - - 60 60 170,649 170,709 Consumer and other - - - - - 11,542 11,542 Total $ - $ - $ - $ 968 $ 968 $ 1,189,794 $ 1,190,762 Greater 30 - 59 60 - 89 than 90 Days Days Days Total (in thousands) Past Past Past Non- Past Total December 31, 2015 Due Due Due Accrual Due Current Loans Construction and land development $ $ $ $ 238 $ 238 $ 64,464 $ 64,702 Commercial real estate - - - - - 533,909 533,909 Consumer real estate - - - 65 65 249,642 249,707 Commercial and industrial loans - - - 189 189 153,480 153,669 Consumer and other - - - 21 21 13,518 13,539 Total $ - $ - $ - $ 5 13 $ 513 $ 1,015,013 $ 1,015,526 Credit Quality Indicators The Company utilizes a nine point grading system in order to evaluate the level of inherent risk in the loan portfolio as part of its allowance for loan losses methodology. Loans collectively evaluated for impairment are grouped by loan type and by risk rating. Each loan type is assigned an allowance factor based on risk grade, historical loss experience, economic conditions, overall portfolio quality including delinquency rates and commercial real estate loan concentrations (as applicable). As risk grades increase, additional reserves are applied in order to account for the added inherent risk. The Company categorizes all business and commercial purpose 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 setting the risk grade at the inception of a loan through the approval process. A certain percentage of loan dollars is reviewed each year by a third party loan review function. The risk rating process is inherently subjective and based upon management’s evaluation of the specific facts and circumstances for individual borrowers. As such, the assigned risk ratings are subject to change based upon changes in borrower status and changes in the external environment affecting the borrower. The Company uses the following definitions for risk ratings: ● Risk Grade 1 – Minimal ● Risk Grade 2 – Modest ● Risk Grade 3 – Average ● Risk Grade 4 – Acceptable - ● Risk Grade 5 - Acceptable with Care ● Risk Grade 6 - Special Mention or Critical - o Repayment performance has not been demonstrated to prudent standards; o Repayment performance is inconsistent and highly sensitive to business and operating cycle swings; o Fatal documentation errors and; o Performing as agreed without documented capacity or collateral protection. ● Risk Grade 7 – Substandard - ● Risk Grade 8 – Doubtful - o Injection of capital; o Alternative financing; o Liquidation of assets or the pledging of additional collateral. The ability of the borrower to service the debt is extremely weak, overdue status is constant, the debt has been placed on nonaccrual status and no definite repayment schedule exists. Doubtful is a temporary grade where a loss is expected but is presently not quantified with any degree of accuracy. Once the loss position is determined, the amount is charged off. There were no loans rated as doubtful as of December 31, 2016 or December 31, 2015. ● Risk Grade 9 – Loss Loans classified Loss are considered uncollectable and of such little value that their continuance as bankable assets is not warranted. This classification does not mean that the asset has absolutely no recovery or salvage value but rather that it is not practical or desirable to defer writing off the worthless loan even though partial recovery may be affected in the future. As of December 31, 2016 and 2015 and based on the most recent analysis performed, the risk category of unimpaired loans by class of loans is as follows: Risk Grade (in thousands) 1 2 3 4 5 6 7 Total December 31, 2016 Construction and land development $ $ 1,005 $ 911 $ 22,901 $ 54,601 $ 195 $ 125 $ 79,738 Commercial real estate - 539 223,459 311,711 87,443 18,500 - 641,652 Consumer real estate 50 19,247 130,748 102,137 33,013 1,143 783 287,121 Commercial and industrial loans 2,133 1,525 32,304 104,019 29,035 556 1,137 170,709 Consumer and other 1,160 730 1,086 7,392 1,174 - - 11,542 Total $ 3,343 $ 23,046 $ 388,508 $ 548,160 $ 205,266 $ 20,394 $ 2,045 $ 1,190,762 Risk Grade (in thousands) 1 2 3 4 5 6 7 Total December 31, 2015 Construction and land development $ 26 $ 200 $ 2,545 $ 14,318 $ 47,133 $ 242 $ $ 64,464 Commercial real estate - 619 195,935 243,771 87,492 3,473 - 531,290 Consumer real estate 53 10,933 111,123 92,127 34,346 714 - 249,296 Commercial and industrial loans 2,168 1,909 24,675 96,900 26,802 612 - 153,066 Consumer and other 980 1,069 960 8,392 1,936 182 - 13,519 Total $ 3,227 $ 14,730 $ 335,238 $ 455,508 $ 197,709 $ 5,223 $ - $ 1,011,635 Loans with a carrying value of $997.6 million and $689.0 million were pledged as of December 31, 2016 and 2015, respectively, to secure lines of credit with the Federal Reserve and the Federal Home Loan Bank.

5. BANK PREMISES AND EQUIPMENT

5. BANK PREMISES AND EQUIPMENT	12 Months Ended
	Dec. 31, 2016
Bank Premises And Equipment
BANK PREMISES AND EQUIPMENT	Following is a summary of bank premises and equipment at December 31, 2016 and 2015: (In thousands) 2016 2015 Building $ 16,226 $ 16,181 Furniture and equipment 7,113 6,532 Leasehold improvements 352 350 Less accumulated depreciation and amortization (8,049 ) (6,630 ) $ 15,642 $ 16,433 Depreciation and amortization expense amounting to $1.4 million, $1.4 million and $1.1 million, respectively for the years ended December 31, 2016, 2015 and 2014 are included in occupancy and equipment expenses.

6. DEPOSITS

6. DEPOSITS	12 Months Ended
	Dec. 31, 2016
Deposits:
DEPOSITS	At December 31, 2016, the scheduled maturities of time deposits are as follows: (In thousands) 2017 $ 145,223 2018 40,170 2019 27,698 2020 1,802 2021 and after 4,114 $ 219,007 At December 31, 2016 and 2015, time deposits in denominations of $250,000 or more were $53.3 million and $34.1 million, respectively. Interest expense on time deposits of $250,000 or more aggregated to $584,000 in 2016 and $400,000 in 2015.

7. BORROWINGS

7. BORROWINGS	12 Months Ended
	Dec. 31, 2016
Borrowings
BORROWINGS	Repurchase Agreements and Federal Funds Purchased Securities sold under agreements to repurchase, which are classified as secured borrowings, generally mature within one to four days from the transaction date. Securities sold under agreements to repurchase are reflected at the amount of cash received in connection with the transaction. The Company may be required to provide additional collateral based on the fair value of the underlying securities. Following is an analysis of short-term borrowed funds at December 31, 2016 and 2015: Maximum End of Period Daily Average Balance Outstanding (Dollars in thousands) Weighted Interest At Any December 31, 2016 Balance Avg Rate Balance Rate Month End Repurchase agreements $ 20,174 0.19 % $ 27,068 0.21 % $ 51,750 $ 20,174 0.19 % $ 27,068 0.21 % Maximum End of Period Daily Average Balance Outstanding (Dollars in thousands) Weighted Interest At Any December 31, 2015 Balance Avg Rate Balance Rate Month End Fed funds purchased $ — 0.00 % $ 99 0.54 % $ — Repurchase agreements 30,580 0.19 % 33,080 0.19 % 48,080 $ 30,580 0.19 % $ 33,179 0.19 % Interest expense on securities sold under agreements to repurchase totaled $56,000 in 2016 and $64,000 in 2015. Interest on federal funds purchased was $1,500 in 2015. There were no federal funds outstanding at any point during 2016. Repurchase agreements are collateralized by mortgage-backed securities with carrying values and fair values of $25.8 million at December 31, 2016. At December 31, 2016, the Company had available lines of credit of approximately $152.5 million at various financial institutions for borrowing on a short-term basis (“fed funds lines”). The Company had $102.5 million of fed funds lines with the Bank’s correspondent banks that were unsecured. However, since the Company had no outstanding balances during the year on the secured portion, it had no collateral pledged at December 31, 2016 for these lines. Federal Home Loan Bank Advances At December 31, 2016, the Company had an available credit line at the FHLB of up to % 25% of assets contingent upon adequate collateralization. These lines are subject to annual renewal and are at varying interest rates. Advances from the FHLB had a weighted average rate of 0.66% and 0.41% and total outstanding balances averaged $161.3 million and $166.9 million for the years ended December 31, 2016 and 2015, respectively. Included in amounts due to the FHLB as of December 31, 2016 were five term borrowings totaling $150.0 million. The term borrowings were all short-term notes maturing by March 2017 with rates varying from 0.49% to 0.80%. The line of credit and all other advances were collateralized by certain 1 – 4 family mortgages, multifamily first mortgage loans, home equity lines and qualifying commercial loans totaling $646.7 million at December 31, 2016. The line offers a borrowing capacity of $369.8 million at December 31, 2016. Holding Company Line of Credit In the third quarter of 2016, the Company entered into a $20.0 million secured holding company line of credit with an unaffiliated institution. The terms of the note include interest at prime plus 0.50% and will expire in September 2017. The line is secured by 100% of the stock of the Bank owned by the Company. The Company has not drawn on the note and has no outstanding balance at December 31, 2016. In 2015, the Company had a $10.0 million holding company loan with an unaffiliated institution secured by the stock of the Bank. The loan had an outstanding balance of $4.8 million at December 31, 2015. During 2016, the loan was repaid in full using some of the proceeds from the Company’s Initial Public Offering. The balance is included in other borrowings as of December 31, 2015 on the Consolidated Balance Sheets. The loan accrued interest at prime plus 0.75% and would have matured in November 2017. Subordinated Debentures In 2004, the Company issued $10.3 million of junior subordinated debentures to Paragon Commercial Capital Trust I in exchange for the proceeds of trust preferred securities issued by the Trust. The junior subordinated debentures accrue interest quarterly at an annual rate, reset quarterly, equal to LIBOR plus 2.65%. The debentures are redeemable in whole or in part, on any October 23, January 23, April 23, or July 23. Redemption is mandatory at July 23, 2034. In 2006, the Company issued $8.2 million of junior subordinated debentures to Paragon Commercial Capital Trust II in exchange for the proceeds of trust preferred securities issued by the Trust. The junior subordinated debentures accrue interest quarterly at an annual rate, reset quarterly, equal to LIBOR plus 1.70%. The debentures are redeemable on June 20, 2011 or afterwards, in whole or in part, on any March 30, June 30, September 30, or December 30. Redemption is mandatory at June 30, 2036. The junior subordinated debentures are included in debt and the Company’s equity interest in the trusts are included in other assets. The Company guarantees the trust preferred securities through the combined operation of the junior subordinated debentures and other related documents. The Company’s obligation under the guarantee is unsecured and subordinate to senior and subordinated indebtedness of the Company. The trust preferred securities presently qualify as Tier 1 regulatory capital and are reported in Federal Reserve regulatory reports as a minority interest in a consolidated subsidiary. The junior subordinated debentures do not qualify as Tier 1 regulatory capital. On March 1, 2005, the Board of Governors of the Federal Reserve issued a final rule stating that trust preferred securities will continue to be included in Tier 1 capital, subject to stricter quantitative and qualitative standards. For Bank Holding Companies, trust preferred securities will continue to be included in Tier 1 capital up to 25% of core capital elements (including trust preferred securities) net of goodwill less any associated deferred tax liability.

8. LEASES

8. LEASES	12 Months Ended
	Dec. 31, 2016
Leases [Abstract]
LEASES	The Company purchased a building in Raleigh in 2005 and relocated its headquarters in March 2007. The acquired building resides on land subject to a land lease which renews every five years with the next renewal in 2018. The assumed life of the lease for the land is the expected life of the building. In addition the Bank has entered into non-cancelable operating leases for its Charlotte office expiring in February 2019, its Cary office expiring in June 2019 and its operations center expiring in November 2019. Future minimum lease payments under these leases for the years ending December 31 are as follows: (In thousands) 2017 $ 733 2018 760 2019 434 2020 158 2021 158 Thereafter 3,997 Total $ 6,240 Total rent expense for the years ended December 31, 2016 and 2015 amounted to $344,000 and $534,000 respectively.

9. RELATED PARTY TRANSACTIONS

9. RELATED PARTY TRANSACTIONS	12 Months Ended
	Dec. 31, 2016
Related Party Transactions [Abstract]
RELATED PARTY TRANSACTIONS	Principal stockholders, directors, and executive officers of the Company, together with the companies they control, are considered to be related parties. In the ordinary course of business, the Company has engaged in various related party transactions during the year, ranging from extending credit, accepting deposits as well as exchanges of service transactions. Federal banking regulations require that any such extensions of credit not be offered on terms more favorable than would be offered to non-related party borrowers of similar creditworthiness. The Company has granted loans to certain directors and executive officers of the Company and their related interests. Such loans are made on substantially 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 interests are submitted to the Board of Directors for approval. The following table summarizes the aggregate activity in such loans for the periods indicated: (In thousands) Loans to directors and officers as a group at December 31, 2015 $ 5,543 Disbursements during 2016 1,847 Amounts collected during 2016 (1,948 ) Loans to directors and officers as a group at December 31, 2016 $ 5,442 As of December 31, 2016, none of these loans are past due, on non-accrual status or have been restructured to provide a reduction or deferral of interest or principal because of deterioration in the financial position of the borrower. As of December 31, 2016, there were no loans to a related party that were considered classified loans. In the normal course of business, certain directors and executive officers of the Company, including their immediate families and companies in which they have an interest, may be deposit customers. In addition, the Company engages in certain activities with related parties for sponsorships, donations, and other services during the normal course of business. The Company entered into an agreement for accounting, data processing, and administrative services with a stockholder corporation that owned approximately 18% of the Company’s common stock at December 31, 2016 and 2015. The agreement expired in 2015 and was not renewed but from time to time, the stockholder provides additional services. Expenses related to this agreement totaled $9,300 and $378,000 during the years ended December 31, 2016 and 2015, respectively. In addition, a member of the Bank’s Board of Directors has controlling interest of a company which provides property management services for the Company for its Wake County locations. Expenses related to this agreement totaled $57,000 and $47,000 during the years ended December 31, 2016 and 2015, respectively.

10. EMPLOYEE BENEFIT PLANS

10. EMPLOYEE BENEFIT PLANS	12 Months Ended
	Dec. 31, 2016
Employee Benefit Plans
EMPLOYEE BENEFIT PLANS	401(k) Retirement Plan The Company has adopted a 401(k) retirement plan that covers all eligible employees. The Company’s contribution is limited to 6% of each employee’s salary. Matching contributions are funded when accrued. The Company matches the first 6% of employee contributions. Matching expenses totaled $641,000 and $589,000 for the years ended December 31, 2016 and 2015, respectively. Employee Stock Purchase Plan On September 23, 2003, the Board of Directors adopted, subject to stockholder approval, the 2003 Employee Stock Purchase Plan (the “2003 ESPP”). A split adjusted aggregate of 200,000 shares of common stock of the Company has been reserved for issuance by the Company upon exercise of options to be granted from time to time under the 2003 ESPP. On November 18, 2014, the Plan was amended to comply with Section 423 of the Internal Revenue Code of 1986. Under this plan, eligible employees have the option to withhold post-tax dollars from their payroll to be placed in an account for purchases of the Company’s shares or to buy their allotted shares outright. In order for employees to be eligible to participate, they must have been employed by the Company for three consecutive months prior to the annual share allocation date. The Plan allows for employees to purchase shares at 95% of fair market value. The number of shares that could be purchased in any calendar year by any individual was limited to shares with a fair market value of $25,000. During 2016, 5,998 shares were issued for an aggregate amount for $181,000. During 2015, 10,678 shares were issued for an aggregate amount for $202,000. Supplemental Retirement Plan In May 2004, the Company established a non-qualifying supplemental retirement plan for the benefit of certain key executives (the “2004 Plan”). Under the 2004 Plan, the participants will receive a fixed retirement benefit over a 20 year period following that participant’s retirement. The 2004 Plan also provides for payment of death or disability benefits in the event a participating officer becomes permanently disabled or dies prior to attainment of retirement age. Benefits vested over a ten year period beginning at 2004 Plan inception and are now fully vested. The discount rate used to compute the liability for the expected benefits was 6%. In July 2007, the Company established another non-qualifying supplemental retirement plan for the benefit of certain other key employees (the “2007 Plan”). The terms of the plan were the same as those for the 2004 Plan. In addition, at the same time, the Company established a deferred compensation plan for certain key executives (the “Deferred Compensation Plan”). Terms of the Deferred Compensation Plan were the same as those of the 2004 Plan and the 2007 Plan except that in addition to a service requirement, certain financial objectives had to be met. In 2012, the Company amended the Deferred Compensation Plan to remove the financial objectives for the remaining participants. In 2014, the Deferred Compensation Plan was merged into the 2007 Plan and all benefits became fully vested. For the year ended December 31, 2016 and 2015, the Company recognized an expense of $258,000 and $397,000, respectively, related to each of these plans. The accrued liability related to these plans was approximately $3.0 million and $2.7 million as of December 31, 2016 and 2015, respectively, and is included in Other liabilities on the Consolidated Balance Sheet. At December 31, 2016, the Company had $34.2 million in cash surrender value invested in bank-owned life insurance policies (“BOLI”). Income earned on these policies may be used, at the Company’s sole discretion, to fund the benefits payable under the Plans. Stock-Based Compensation Plans Under the 2006 Omnibus Stock Ownership and Long Term Incentive Plan (the "Omnibus Plan"), as amended, an aggregate of 312,500 split adjusted shares of the common stock of the Company, subject to adjustment, were reserved for issuance under the terms of the Omnibus Plan pursuant to the grant of incentive stock options, non-qualified stock options, restricted stock grants, long-term incentive compensation units and stock appreciation rights. The Omnibus Plan expired in 2016 pursuant to its terms. Options granted under the Omnibus Plan become exercisable in accordance with the vesting schedule specified in the stock option agreements. All unexercised options expire ten years after the date of grant. During 2016, the Company expensed $427,000 for restricted stock for directors and employees. For 2015, $411,000 was expensed for the same purpose. There was no expense associated with the unexercised stock options in 2016 or 2015. As of December 31, 2016, there was no unrecognized compensation expense related to the Omnibus Plan. Unrecognized stock-based compensation expense associated with restricted stock at December 31, 2016 is as follows: (In thousands) 2017 $ 425 2018 278 2019 40 Total $ 743 Stock Options A split adjusted summary of the transactions for the Company’s stock-based compensation plans as of and for the years ended December 31, 2016 and 2015, including the weighted average exercise price (“WAEP”) is as follows: 2016 2015 Shares WAEP Shares WAEP Outstanding at beginning of year 81,500 $ 46.46 101,000 $ 43.00 Granted — — — — Exercised — — (10,000 ) 17.60 Expired and forfeited (20,375 ) 48.96 (9,500 ) 40.00 Outstanding at end of year 61,125 $ 45.63 81,500 $ 46.46 Options exercisable at year-end 61,125 $ 45.63 81,500 $ 46.46 There were no unvested shares as of December 31, 2016 or 2015. The following table summarizes information about the Company’s stock options at December 31, 2016: Weighted Weighted Average Average Remaining Number Exercise Contractual Number Exercise Price Outstanding Price Life in Years Exercisable $42.00 - $44.00 29,250 $ 43.11 1.24 29,250 $44.01 - $46.00 — — 0.00 — $46.01 - $48.00 31,875 47.95 0.22 31,875 61,125 $ 45.63 0.71 61,125 There were no options granted during 2016 or 2015. At December 31, 2016 the aggregate intrinsic value of options outstanding and exercisable was $18,000. At December 31, 2015, there was no aggregate intrinsic value of options outstanding and exercisable. The aggregate intrinsic value of options exercised during 2015 was $49,000. There was no aggregate intrinsic value of options exercised during 2016. Restricted Stock Restricted stock is issued to the grantee but provides no voting or dividend rights and is restricted from transfer until vested, at which time all restrictions are removed. The terms of the restricted stock awards granted to employees during 2016 and 2015 are 100% cliff vesting for a period of three years from the date of the grant. The terms of the restricted stock awards granted to directors during 2015 are a vesting period three years from the date of the grant with immediate vesting upon retirement of the director. There were no restricted stock awards to the directors in 2016. The following table lists the various restricted stock awards under the Omnibus Plan for the years ended December 31, 2016 and 2015: Number of Shares Fair Granted Value 2016 April 1, 2016 - Employees 19,145 $ 26.95 2015 April 1, 2015 - Employees 14,156 $ 20.00 September 15, 2015 - Directors 16,500 23.75 The fair value of the restricted stock awards granted to employees and directors for the years ended December 31, 2016 and 2015 was estimated to be equal to the closing stock price on the grant date. The value of the restricted stock is being amortized on a straight-line basis over the implied service periods. The following table summarizes restricted stock award activity for the years ended December 31, 2016 and 2015: 2016 2015 Weighted Weighted Average Average Grant-Date Grant-Date Fair Value Fair Value Shares Per Share Shares Per Share Outstanding at beginning of year 77,531 $ 8.50 75,000 $ 8.50 Granted 19,145 26.95 30,656 22.02 Vested (33,625 ) 10.58 (28,125 ) 8.00 Expired or forfeited (1,352 ) 25.16 — — Outstanding at end of year 61,699 $ 19.67 77,531 $ 8.50 The following table summarizes the shares available for future grants under the Omnibus Plan for the years ended December 31, 2016 and 2015: 2016 2015 Available Available Stock Restricted for Future Stock Restricted for Future Options Stock Grants Options Stock Grants Outstanding at beginning of year 178,344 199,500 Granted — (19,145 ) (19,145 ) — (30,656 ) (30,656 ) Expired and forfeited 20,375 1,352 21,727 9,500 — 9,500 Expiration of plan (180,926 ) — Outstanding at end of year — 178,344

11. INCOME TAXES

11. INCOME TAXES	12 Months Ended
	Dec. 31, 2016
Income Taxes
INCOME TAXES	Allocation of federal and state income tax expense between current and deferred portions for the years ended December 31, 2016 and 2015 are as follows: (In thousands) 2016 2015 Federal $ 5,178 $ 2,845 State 812 886 Total current 5,990 3,731 Deferred Federal 451 1,925 State 36 105 Total deferred 487 2,030 $ 6,477 $ 5,761 A reconciliation of income tax benefit computed at the statutory federal income tax rate to income tax expense included in the Consolidated Statements of Income is as follows: (In thousands) 2016 2015 Expense computed at statutory rate of 35% $ 6,953 $ 5,768 Effect of state income taxes, net of federal benefit 536 654 Tax exempt income (867 ) (712 ) Other (145 ) 51 $ 6,477 $ 5,761 The components of the net deferred tax assets as of December 31, 2016 and 2015 are as follows: (In thousands) 2016 2015 Deferred tax assets: Allowance for loan losses $ 2,922 $ 2,873 Recorded impairment of assets 1,119 982 Deferred compensation 1,291 1,015 Net unrealized loss on cash flow hedges 1,050 1,045 Net unrealized loss on available for sale securities 679 — Other 579 1,600 Total deferred tax assets 7,640 7,515 Deferred tax liabilities: Premises and equipment (908 ) (1,050 ) Deferred loan costs (1,525 ) (1,396 ) Prepaid expenses (166 ) (203 ) Net unrealized gain on available for sale securities — (526 ) Other (200 ) (222 ) Total deferred tax liabilities (2,799 ) (3,397 ) Net deferred tax assets $ 4,841 $ 4,118 No valuation allowances were required relating to deferred tax assets at December 31, 2016 or 2015 as the Company believes that realization of the net deferred tax asset is more likely than not. As of December 31, 2016 and 2015, there were no uncertain tax positions. The amount of uncertain tax positions may increase or decrease in the future for various reasons including adding amounts for current tax positions, expiration of open tax returns due to statutes of limitations, changes in management’s judgment about the level of uncertainty, status of regulatory examinations, litigation and legislative activity and the addition or elimination of uncertain tax positions. The Company’s policy is to report interest and penalties, if any, related to uncertain tax positions in income tax expense in the Consolidated Statements of Income. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2013.

12. OTHER NON-INTEREST EXPENSE

12. OTHER NON-INTEREST EXPENSE	12 Months Ended
	Dec. 31, 2016
Other Non-interest Expense
OTHER NON-INTEREST EXPENSE	The major components of other non-interest expense for the years ended December 31, 2016 and 2015 are as follows: (In thousands) 2016 2015 Telephone and data lines $ 553 $ 431 Postage, printing and office supplies 325 307 Franchise and other taxes 276 286 Insurance 168 214 Travel-related expenses 187 210 Correspondent bank fees 125 168 Charitable contributions 88 130 Other 941 750 Total $ 2,663 $ 2,496

13. REGULATORY MATTERS

13. REGULATORY MATTERS	12 Months Ended
	Dec. 31, 2016
Regulatory Matters
REGULATORY MATTERS	Banks and bank holding companies are subject to various regulatory capital requirements administered by state and federal banking agencies. Capital adequacy guidelines and, additionally for banks, prompt corrective action regulations, involve quantitative measures of assets, liabilities, and certain off-balance-sheet items calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by regulators about components, risk weighting and other factors. The Basel III Capital Rules, a comprehensive capital framework for U.S. banking organizations, became effective for the Company and the Bank on January 1, 2015 (subject to a phase-in period for certain provisions). Quantitative measures established by the Basel III Capital Rules to ensure capital adequacy require the maintenance of minimum amounts and ratios (set forth in the table below) of Common Equity Tier 1 capital, Tier 1 capital and Total capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital to adjusted quarterly average assets (as defined). The Company and the Bank’s Common Equity Tier 1 capital includes common stock and related paid-in capital and retained earnings. In connection with the adoption of the Basel III Capital Rules, the Company elected to opt-out of the requirement to include most components of accumulated other comprehensive income in Common Equity Tier 1. Common Equity Tier 1 for both the Company and the Bank is reduced by deferred tax assets that are subject to transition provisions. Tier 1 capital includes Common Equity Tier 1 capital and additional Tier 1 capital. For the Company, additional Tier 1 capital at December 31, 2016 includes $18.0 million of trust preferred securities issued by our unconsolidated subsidiary trusts. Under the Basel III Capital Rules, trust preferred securities only qualify as Tier 1 capital instruments for banks under $15 billion in total assets. Total capital includes Tier 1 capital and Tier 2 capital. Tier 2 capital for both the Company and the Bank includes the permissible portion of the allowance for loan losses. Prior to January 1, 2015, under the capital rules then in effect, the Company’s and the Bank’s Tier 1 capital included total stockholders’ equity excluding accumulated other comprehensive income, net of associated deferred tax liabilities. Tier 1 capital for the Company included $18.0 million of trust preferred securities issued by our unconsolidated subsidiary trusts. The Common Equity Tier 1, Tier 1 and Total capital ratios are calculated by dividing the respective capital amounts by risk-weighted assets. Risk-weighted assets are calculated based on regulatory requirements and include total assets, with certain exclusions, allocated by risk weight category, and certain off-balance-sheet items, among other things. The leverage ratio is calculated by dividing Tier 1 capital by adjusted quarterly average total assets, which exclude goodwill and other intangible assets, among other things. When fully phased in on January 1, 2019, the Basel III Capital Rules will require the Company and the Bank to maintain (i) a minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of at least 4.5%, plus a 2.5% “capital conservation buffer” (which is added to the 4.5% Common Equity Tier 1 capital ratio as that buffer is phased in, effectively resulting in a minimum ratio of Common Equity Tier 1 capital to risk-weighted assets of at least 7.0% upon full implementation), (ii) a minimum ratio of Tier 1 capital to risk-weighted assets of at least 6.0%, plus the capital conservation buffer (which is added to the 6.0% Tier 1 capital ratio as that buffer is phased in, effectively resulting in a minimum Tier 1 capital ratio of 8.5% upon full implementation), (iii) a minimum ratio of Total capital (that is, Tier 1 plus Tier 2) to risk-weighted assets of at least 8.0%, plus the capital conservation buffer (which is added to the 8.0% total capital ratio as that buffer is phased in, effectively resulting in a minimum total capital ratio of 10.5% upon full implementation) and (iv) a minimum leverage ratio of 4.0%, calculated as the ratio of Tier 1 capital to average quarterly assets. The implementation of the capital conservation buffer began on January 1, 2016 at the 0.625% level and is phased in over a three-year period (increasing by that amount on each subsequent January 1, until it reaches 2.5% on January 1, 2019). The Basel III Capital Rules also provide for a “countercyclical capital buffer” that is applicable to only certain covered institutions and does not have any current applicability to the Company or the Bank. The capital conservation buffer is designed to absorb losses during periods of economic stress and, as detailed above, effectively increases the minimum required risk-weighted capital ratios. Banking institutions with a ratio of Common Equity Tier 1 capital to risk-weighted assets below the effective minimum (4.5% plus the capital conservation buffer and, if applicable, the countercyclical capital buffer) will face constraints on dividends, equity repurchases and compensation based on the amount of the shortfall. The following table presents actual and required capital ratios as of December 31, 2016 and 2015 for the Company and the Bank under the Basel III Capital Rules. The minimum required capital amounts presented include the minimum required capital levels as of December 31, 2016 and 2015 based on the phase-in provisions of the Basel III Capital. Capital levels required to be considered well capitalized are based upon prompt corrective action regulations, as amended to reflect the changes under the Basel III Capital Rules. Minimum Requirements To Be: Actual Adequately Capitalized Well Capitalized (2) (Dollars in thousands) Amount Ratio (1) Amount Ratio (1) Amount Ratio (1) The Company Total Capital $ 164,740 13.21 % $ 99,778 8.00 % N/A N/A Tier I Capital 156,831 12.57 % 74,833 6.00 % N/A N/A Common equity Tier I Capital 138,831 11.13 % 56,125 4.50 % N/A N/A Leverage 156,831 10.05 % 62,434 4.00 % N/A N/A The Bank Total Capital $ 161,925 12.99 % $ 99,713 8.00 % $ 124,641 10.00 % Tier I Capital 154,016 12.36 % 74,785 6.00 % 99,713 8.00 % Common equity Tier I Capital 154,016 12.36 % 56,089 4.50 % 81,017 6.50 % Leverage 154,016 10.37 % 59,405 4.00 % 74,256 5.00 % Minimum Requirements To Be: Actual Adequately Capitalized Well Capitalized (2) (Dollars in thousands) Amount Ratio (1) Amount Ratio (1) Amount Ratio (1) The Company Total Capital $ 123,028 11.21 % $ 87,794 8.00 % N/A N/A Tier I Capital 115,387 10.51 % 65,845 6.00 % N/A N/A Common equity Tier I Capital 97,853 8.92 % 49,384 4.50 % N/A N/A Leverage 115,387 8.66 % 53,274 4.00 % N/A N/A The Bank Total Capital $ 127,095 11.59 % $ 87,696 8.00 % $ 109,621 10.00 % Tier I Capital 119,454 10.90 % 65,772 6.00 % 87,696 8.00 % Common equity Tier I Capital 119,454 10.90 % 50,425 4.50 % 71,253 6.50 % Leverage 119,454 9.15 % 52,193 4.00 % 65,241 5.00 % 1) Total capital ratio is defined as Tier 1 capital plus Tier 2 capital divided by total risk-weighted assets. The Tier 1 Capital ratio is defined as Tier 1 capital divided by total risk-weighted assets. Common equity Tier 1 is defined as Tier 1 capital excluding qualifying trust preferred securities divided by total risk weighted assets. The leverage ratio is defined as Tier 1 capital divided by the most recent quarter’s average total assets. 2) Prompt corrective action provisions are not applicable at the bank holding company level. Management believes that, as of December 31, 2016, the Bank was “well capitalized” based on the ratios presented above. The Company and the Bank are subject to the regulatory capital requirements administered by the Federal Reserve Board and, for the Bank, the Federal Deposit Insurance Corporation (“FDIC”) and the North Carolina Commissioner of Banks. Regulatory authorities can initiate certain mandatory actions if the Company or the Bank fails to meet the minimum capital requirements, which could have a direct material effect on our financial statements. Management believes, as of December 31, 2016, that the Company and the Bank meet all capital adequacy requirements to which they are subject. In the ordinary course of business, the Company is dependent upon dividends from the Bank to provide funds for the payment of dividends to trust preferred stockholders and to provide for other cash requirements. Banking regulations may limit the amount of dividends that may be paid. Approval by regulatory authorities is required if the effect of dividends declared would cause the regulatory capital of the Bank to fall below specified minimum levels. Approval is also required if dividends declared exceed the net profits for that year combined with the retained net profits for the preceding two years. Under the foregoing dividend restrictions and while maintaining its “well capitalized” status, at December 31, 2016, the Bank could pay aggregate dividends of up to $32.5 million to the Company without prior regulatory approval.

14. OFF-BALANCE SHEET RISK

14. OFF-BALANCE SHEET RISK	12 Months Ended
	Dec. 31, 2016
Off-balance Sheet Risk
OFF-BALANCE SHEET RISK	The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and standby letters of credit. Those instruments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the balance sheet. The contract or notional amounts of those instruments reflect the extent of involvement the Company has in particular classes of financial instruments. The Company uses the same credit policies in making commitments and conditional obligations as it does for on-balance sheet instruments. Commitments to extend credit are agreements to lend to a customer as long as there is no violation of conditions established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. The Company evaluates each customer’s creditworthiness on a case-by-case basis. The amount of collateral obtained, if deemed necessary by the Company, upon extension of credit is based on management’s credit evaluation of the borrower. Collateral obtained varies but may include real estate, stocks, bonds, and certificates of deposit. A summary of the contract amounts of the Company’s exposure to off-balance sheet credit risk as of December 31, 2016 and 2015 is as follows: (in thousands) 2016 2015 Financial instruments whose contract amounts represent credit risk: Undisbursed lines of credit $ 216,769 $ 163,572 Standby letters of credit 3,904 3,188 Total $ 220,673 $ 166,760

15. DERIVATIVES AND FINANCIAL I

15. DERIVATIVES AND FINANCIAL INSTRUMENTS	12 Months Ended
	Dec. 31, 2016
Derivatives And Financial Instruments
DERIVATIVES AND FINANCIAL INSTRUMENTS	To mitigate exposure to variability in expected future cash flows resulting from changes in interest rates, in May 2013 the Company entered into two forward swap arrangements (the “Swaps”) whereby the Company would pay fixed rates on two short-term borrowings at some point in the future for a determined period of time. In September 2014, as a result of continued increasing fixed rate exposure, the Company determined that an additional strategy was needed and, as a result, exited from the Swaps for a deferred gain of $372,000. In their place, the Company purchased three interest rate caps with a strike price of 3-month LIBOR at 0.50% and a five-year term. The instruments hedged were $100 million of FHLB borrowings maturing quarterly on the same reset dates. The Company executed three separate interest rate cap agreements, each between $30 million and $35 million maturing between August 2019 and October 2019. The following table reflects the cash flow hedges included in the Consolidated Balance Sheets as of December 31, 2016 and 2015: 2016 2015 Notational Fair Notational Fair (in thousands) Amount Value Amount Value Included in other assets: Cap 1 - maturing August 2019 $ 35,000 $ 1,011 $ 35,000 $ 1,334 Cap 2 - maturing September 2019 35,000 1,045 35,000 1,360 Cap 3 - maturing October 2019 30,000 929 30,000 1,216 $ 100,000 $ 2,985 $ 100,000 $ 3,910 Remaining amortization of the premium on the interest rate caps is as follows: (in thousands) 2017 $ 1,779 2018 2,247 2019 1,751 $ 5,777 The Company recorded $912,000 and $154,000 for the year ended December 31, 2016 and 2015, respectively, in amortization associated with the interest rate caps. Those expenses are reflected in the Consolidated Statements of Income as a component of borrowings and repurchase agreements interest expense. The Company anticipates little to no ineffectiveness in this hedging relationship as long as the terms are matched at each forecasted debt issuance. The Company notes that the actual interest cost incurred at each rollover will be a function of market rates at that time. However the Company is only hedging the benchmark interest rate risk in each rollover. The remaining amortization of the deferred gain associated with the exit of the Swaps is as follows: (in thousands) 2017 $ 74 2018 74 Thereafter 148 $ 296 The Company does not use derivatives for trading or speculative purposes.

16. FAIR VALUE OF FINANCIAL INS

16. FAIR VALUE OF FINANCIAL INSTRUMENTS	12 Months Ended
	Dec. 31, 2016
Fair Value Of Financial Instruments
FAIR VALUE OF FINANCIAL INSTRUMENTS	Fair value is a market-based measurement and is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. The transaction to sell the asset or transfer the liability is a hypothetical transaction at the measurement date, considered from the perspective of a market participant that holds the asset or owes the liability. In general, the transaction price will equal the exit price and, therefore, represent the fair value of the asset or liability at initial recognition. In determining whether a transaction price represents the fair value of the asset or liability at initial recognition, each reporting entity is required to consider factors specific to the transaction and the asset or liability, the principal or most advantageous market for the asset or liability, and market participants with whom the entity would transact in the market. Outlined below is the application of the fair value hierarchy applied to the Company’s financial assets that are carried at fair value. Level 1 Level 2 Level 3 The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Fair Value on a Recurring Basis The Company measures certain assets at fair value on a recurring basis, as described below. Investment Securities Available-for-Sale Investment securities available-for-sale are recorded at fair value on a recurring basis. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security’s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Level 1 securities include those traded on an active exchange, such as the New York Stock Exchange, U.S. Treasury securities that are traded by dealers or brokers in active over-the-counter markets and money market funds. Level 2 securities include U.S. agency securities, mortgage-backed securities issued by government sponsored entities, municipal bonds and corporate debt securities. Securities classified as Level 3 include asset-backed securities in less liquid markets. Derivative Assets and Liabilities Derivative instruments held or issued by the Company for risk management purposes are traded in over-the-counter markets where quoted market prices are not readily available. For those derivatives, the Company measures fair value using models that use primarily market observable inputs, such as yield curves and option volatilities, and include the value associated with counterparty credit risk. The Company classifies derivative instruments held or issued for risk management purposes as Level 2. As of December 31, 2016 and 2015, the Company’s derivative instruments consist solely of interest rate caps. Below is a table that presents information about assets measured at fair value on a recurring basis at December 31, 2016 and 2015: Fair Value Measurements Using Quoted Prices Significant in Active Other Significant Markets for Observable Unobservable (in thousands) Total Identical Assets Inputs Inputs Description Fair Value (Level 1) (Level 2) (Level 3) December 31, 2016 Securities available-for-sale: U.S. Agency obligations $ 16,943 $ — $ 16,943 $ — Collateralized mortgage obligations 42,497 — 42,497 — Mortgage-backed securities 73,873 — 73,873 — Municipal bonds 60,677 — 60,677 Other 3,451 1,951 — 1,500 197,441 1,951 193,990 1,500 Interest rate caps 2,985 — 2,985 — Total assets at fair value $ 200,426 $ 1,951 $ 196,975 $ 1,500 December 31, 2015 Securities available-for-sale: U.S. Agency obligations $ 19,901 $ — $ 19,901 $ — Collateralized mortgage obligations 60,941 — 60,941 — Mortgage-backed securities 31,310 — 31,310 — Municipal bonds 54,434 — 54,434 Other 2,310 1,810 — 500 168,896 1,810 166,586 500 Interest rate caps 3,910 — 3,910 — Total assets at fair value $ 172,806 $ 1,810 $ 170,496 $ 500 The table below summarizes the Company’s activity in investment securities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the year ended December 31, 2016. Level 3 Investment (in thousands) Securities Balance at December 31, 2015 $ 500 Purchases 1,000 Balance at December 31, 2016 $ 1,500 There are no liabilities measured at fair value on a recurring basis as of December 31, 2016 or 2015. Fair Value on a Nonrecurring Basis The Company measures certain assets at fair value on a nonrecurring basis, as described below. Impaired Loans The Company does not record loans at fair value on a recurring basis. However, from time to time, a loan is considered impaired and an allowance for loan losses is established. Loans for which it is probable that payment of interest and principal will not be made in accordance with the contractual terms of the loan agreement are considered impaired. Once a loan is identified as individually impaired, management measures the impairment. The fair value of impaired loans is estimated using one of several methods, including collateral value, market value of similar debt, enterprise value, liquidation value and discounted cash flows. Those impaired loans not requiring an allowance represent loans for which the fair value of the expected repayments or collateral exceed the recorded investments in such loans. Impaired loans require classification in the fair value hierarchy. When the fair value of the collateral is based on an observable market price or a current appraised value, the Company records the impaired loan as nonrecurring Level 2. When current appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the Company records the impaired loan as nonrecurring Level 3. Impaired loans totaled $3.2 million and $3.9 million at December 31, 2016 and 2015, respectively. Other Real Estate Owned Other real estate owned, which includes foreclosed assets, is adjusted to fair value upon transfer of loans and premises to other real estate. Subsequently, other real estate owned is carried at the lower of carrying value or fair value. At the date of transfer, losses are charged to the allowance for credit losses. Subsequent write-downs are charged to expense in the period they are incurred. Below is a table that presents information about assets measured at fair value on a nonrecurring basis at December 31, 2016 and 2015: Fair Value Measurements Using Quoted Prices Significant in Active Other Significant Markets for Observable Unobservable Total Identical Assets Inputs Inputs (in thousands) Fair Value (Level 1) (Level 2) (Level 3) December 31, 2016 Impaired loans $ 2,712 $ — $ — $ 2,712 Other real estate owned 4,740 — — 4,740 Total $ 7,452 $ — $ — $ 7,452 December 31, 2015 Impaired loans $ 3,382 $ — $ — $ 3,382 Other real estate owned 5,453 — — 5,453 Total $ 8,835 $ — $ — $ 8,835 For Level 3 assets and liabilities measured at fair value on a recurring or nonrecurring basis as of December 31, 2016 and 2015, the significant unobservable inputs used in the fair value measurements were as follows: December 31, 2016 and 2015 Valuation Significant Significant Technique Observable Inputs unobservable Inputs Impaired loans Appraisal value Appraisals and/or sales of Appraisals discounted 5% to 10% for comparable properties sales commissions and other holding costs Other real estate owned Appraisal value/ Appraisals and/or sales of Appraisals discounted 5% to 10% for Comparison sale/ comparable properties sales commissions and other holding costs The Company provides certain disclosure of fair value information about financial instruments, whether or not recognized in the balance sheet, for which it is practicable to estimate that value. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques. Those techniques are significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. In that regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument. Accordingly, certain financial instruments and all nonfinancial instruments are excluded from disclosure. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The following methods and assumptions were used by the Company in estimating its fair value disclosures for financial instruments: Cash and Due from Banks The carrying amounts for cash and due from banks approximate fair value because of the short maturities of those instruments. Federal Home Loan Bank Stock The carrying value of Federal Home Loan Bank stock approximates fair value based on the redemption provisions of such Federal Home Loan Bank stock. Bank-owned life insurance The carrying value of bank-owned life insurance approximates fair value because this investment is carried at cash surrender value, as determined by the insurer. Loans The fair value of loans is estimated by discounting the future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities. Deposits The fair value of demand deposits is the amount payable on demand at the reporting date. The fair value of time deposits is estimated by discounting expected cash flows using the rates currently offered for instruments of similar remaining maturities. Accrued Interest The carrying amount is a reasonable estimate of fair value. Short-Term Borrowings and Long-Term Debt The fair values are based on discounting expected cash flows using the current interest rates for debt with the same or similar remaining maturities and collateral requirements. Financial Instruments with Off-Balance Sheet Risk With regard to financial instruments with off-balance sheet risk, it is not practicable to estimate the fair value of future financing commitments. The following table presents the estimated fair values and carrying amounts of the Company’s financial instruments, none of which are held for trading purposes, at December 31, 2016 and 2015: December 31, 2016 Carrying Fair Value (in thousands) Amount Total Level 1 Level 2 Level 3 Financial assets: Cash and due from banks $ 43,005 $ 43,005 $ 43,005 $ — $ — Investment securities available-for-sale 197,441 197,441 1,951 193,990 1,500 Loans, net 1,183,371 1,184,621 — 1,181,909 2,712 Accrued interest receivable 4,368 4,368 4,368 — — Federal Home Loan Bank stock 8,400 8,400 — — 8,400 Bank-owned life insurance 34,190 34,190 — 34,190 — Interest rate caps 2,985 2,985 — 2,985 — Financial liabilities: Non-maturing deposits 953,248 953,248 — 953,248 — Time deposits 219,007 219,038 — 219,038 — Accrued interest payable 294 294 294 — — Repurchase agreements and federal funds purchased 20,174 20,174 — 20,174 — FHLB Advances and other borrowings 150,000 149,997 — 149,997 — Subordinated debt 18,558 14,197 — 14,197 — December 31, 2015 Carrying Fair Value (in thousands) Amount Total Level 1 Level 2 Level 3 Financial assets: Cash and due from banks $ 55,530 $ 55,530 $ 55,530 $ — Investment securities available-for-sale 168,896 168,896 1,810 166,586 500 Loans, net 1,008,515 1,013,415 — 1,010,033 3,382 Accrued interest receivable 3,795 3,795 3,795 — — Federal Home Loan Bank stock 8,061 8,061 — — 8,061 Bank-owned life insurance 28,274 28,274 — 28,274 — Interest rate caps 3,910 3,910 — 3,910 — Financial liabilities: Non-maturing deposits 663,066 663,066 — 663,066 — Time deposits 319,781 320,246 — 320,246 — Accrued interest payable 356 356 356 — — Repurchase agreements and federal funds purchased 30,580 30,580 — 30,580 — FHLB Advances and other borrowings 169,800 169,800 — 169,800 — Subordinated debt 18,558 15,591 — 15,591 —

17. PARENT COMPANY FINANCIAL DA

17. PARENT COMPANY FINANCIAL DATA	12 Months Ended
	Dec. 31, 2016
Parent Company Financial Data
PARENT COMPANY FINANCIAL DATA	Following are the condensed financial statements of Paragon Commercial Corporation as of and for the years ended December 31, 2016 and 2015: Condensed Balance Sheets (In thousands) 2016 2015 Assets Cash and due from banks $ 2,161 $ 224 Investment in Paragon Commercial Bank 151,316 119,716 Investment in unconsolidated subsidiaries 558 558 Other assets 697 584 Total Assets $ 154,732 $ 121,082 Liabilities and Stockholders' Equity Subordinated debentures $ 18,558 $ 18,558 Other borrowings — 4,800 Accrued interest payable and other liabilities 73 66 Total Liabilities 18,631 23,424 Stockholders' Equity: Common stock 44 37 Additional paid-in-capital 80,147 53,147 Accumulated other comprehensive loss (2,840 ) (886 ) Retained earnings 58,750 45,360 Total Stockholders' Equity 136,101 97,658 Total Liabilities and Stockholders' Equity $ 154,732 $ 121,082 Condensed Statements of Income (In thousands) 2016 2015 Equity in undistributed earnings of subsidiary $ 14,166 $ 11,958 Interest expense (629 ) (715 ) Other operating income 34 24 Other operating expenses (580 ) (402 ) Income tax benefit 399 369 Net income $ 13,390 $ 11,234 Condensed Statements of Cash Flows (In thousands) 2016 2015 Cash flows from operating activities: Net income $ 13,390 $ 11,234 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Equity in earnings of subsidiary (14,166 ) (11,958 ) Stock based compensation 427 411 Net gain on sale of securities — (1 ) Deferred tax expense (3 ) 9 Changes in assets and liabilities: Increase in other assets (97 ) (6 ) Increase (decrease) in other liabilities 7 (6 ) Net cash used in operating activities (442 ) (317 ) Cash flows from investing activities: Investment in subsidiaries and trusts (20,500 ) — Proceeds from sale of securities available for sale — 5 Dividends received from subsidiary 1,100 2,200 Net cash provided by investing activities (19,400 ) 2,205 Cash flows from financing activities: Repayment of long term debt (4,800 ) (2,456 ) Net proceeds from sale of common stock 26,398 Proceeds from employee stock purchase plan 181 203 Proceeds from exercise of stock options — 176 Net cash used in financing activities 21,779 (2,077 ) Net decrease in cash and cash equivalents 1,937 (189 ) Cash and cash equivalents, beginning of year 224 413 Cash and cash equivalents, end of year $ 2,161 $ 224

18. SUPPLEMENTAL CASH FLOW DISC

18. SUPPLEMENTAL CASH FLOW DISCLOSURE	12 Months Ended
	Dec. 31, 2016
Supplemental Cash Flow Disclosure
SUPPLEMENTAL CASH FLOW DISCLOSURE	(in thousands) 2016 2015 Supplemental Disclosures of Cash Flow Information: Interest paid $ 8,191 $ 7,433 Income taxes paid $ 6,035 $ 4,320 Supplemental Schedule of Noncash Investing and Financing Activites: Change in fair value of securities available-for-sale, net of taxes $ (3,153 ) $ (797 ) Change in fair value of cash flow hedges, net of taxes $ (13 ) $ (1,231 ) Transfer from loans to foreclosed real estate $ — $ 3,484

19. ISSUANCE OF COMMON STOCK

19. ISSUANCE OF COMMON STOCK	12 Months Ended
	Dec. 31, 2016
Issuance Of Common Stock
ISSUANCE OF COMMON STOCK	During 2016, the Company issued 19,145 shares of common stock to certain employees under its long-term stock-based incentive compensation plan. During the third quarter of 2016, there were 1,352 shares of common stock previously issued to certain employees under its long-term stock-based incentive compensation plan which were forfeited. In addition, during 2016, the Company issued 5,998 shares to employees under its employee stock purchase plan. On June 21, 2016, the Company sold a total of 845,588 shares of common stock in our initial public offering at an initial public offering price of $34.00 per share. The Company received net proceeds as a result of the offering of $26.4 million. Of the net proceeds, $3.8 million was deployed to repay the remaining balance on corporate borrowings with the remainder deposited into the Bank for utilization in strategic growth and initiatives.

20. SUBSEQUENT EVENTS

20. SUBSEQUENT EVENTS	12 Months Ended
	Dec. 31, 2016
Subsequent Events [Abstract]
SUBSEQUENT EVENTS	Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued. Recognized subsequent events are events or transactions that provide additional evidence about conditions that existed at the date of the balance sheet, including the estimates inherent in the process of preparing financial statements. Nonrecognized subsequent events are events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date. Management has reviewed events occurring through the date the financial statements were available to be issued and no subsequent events occurred requiring accrual or disclosure.

21. QUARTERLY FINANCIAL DATA (U

21. QUARTERLY FINANCIAL DATA (UNAUDITED)	12 Months Ended
	Dec. 31, 2016
Quarterly Financial Data
QUARTERLY FINANCIAL DATA (UNAUDITED)	The following table provides selected quarterly financial data for 2016 and 2015: Fourth Third Second First (in thousands, except per share amounts) Quarter Quarter Quarter Quarter 2016 Interest income $ 14,573 $ 13,855 $ 13,272 $ 12,467 Net interest income 12,419 11,767 11,301 10,551 Provision for loan losses 200 391 — — Noninterest income 209 438 381 266 Noninterest expense 7,008 6,778 6,488 6,600 Income before income taxes 5,420 5,036 5,194 4,217 Net income $ 3,622 $ 3,455 $ 3,475 $ 2,838 Net income per share, diluted $ 0.67 $ 0.64 $ 0.76 $ 0.62 Net income per share, basic 0.67 0.64 0.75 0.62 2015 Interest income $ 12,594 $ 12,510 $ 12,011 $ 11,320 Net interest income 10,730 10,656 10,213 9,452 Provision for loan losses — — 179 571 Noninterest income 102 544 324 484 Noninterest expense 6,300 6,180 6,400 5,880 Income before income taxes 4,532 5,020 3,958 3,485 Net income $ 2,963 $ 3,313 $ 2,650 $ 2,308 Net income per share, diluted $ 0.65 $ 0.73 $ 0.59 $ 0.52 Net income per share, basic 0.65 0.73 0.59 0.51 Market Information for Common Stock The Company’s common stock is listed on the NASDAQ Capital Market, under the symbol “PBNC.” The closing market price for the Company's common stock was $53.85 on March 20, 2017. The following table presents certain market information for the last two fiscal years. Over-the-counter quotations reflect inter-dealer prices, without retail mark-up, mark down or commission and may not necessarily represent actual transactions. Low High Fiscal Year Ending December 31, 2016 Fourth Quarter $ 35.99 $ 44.30 Third Quarter 34.50 39.99 Second Quarter 26.97 * 36.00 First Quarter 26.25 * 27.39 * Fiscal Year Ending December 31, 2015 Fourth Quarter $ 24.20 * $ 28.50 * Third Quarter 21.00 * 25.00 * Second Quarter beginning April 16, 2015 22.50 * 25.00 * * Based on high and low reported sales prices for our common stock from April 16, 2015 (the date our common stock began trading on the OTCQX Marketplace) through the listing on Nasdaq on June 16, 2016. These reported sales prices represent trades that were either quoted on the OTCQX Marketplace or reported to the Company’s stock transfer agent, and do not include retail markups, markdowns or commissions, and do not necessarily reflect actual transactions. Dividend Policy The Company anticipates that future earnings, if any, will be retained to finance the Company’s growth and that we will not pay cash dividends for the foreseeable future. The Company is organized under the North Carolina Business Corporation Act, which prohibits the payment of a dividend if, after giving it effect, the Company would not be able to pay its debts as they become due in the usual course of business or its total assets would be less than the sum of its total liabilities plus the amount that would be needed, if the Company were to be dissolved, to satisfy the preferential rights upon dissolution of any preferred stock holders. In addition, because the Company is a bank holding company, the Federal Reserve may impose restrictions on cash dividends paid by it. The Federal Reserve has issued a policy statement on the payment of cash dividends by bank holding companies, which expresses the Federal Reserve’s view that a bank holding company should pay cash dividends only to the extent that the holding company’s net income for the past four quarters, net of any dividends previously paid during that period, is sufficient to cover both the cash dividends and a rate of earnings retention that is consistent with the bank holding company’s capital needs, asset quality and overall financial condition. The Federal Reserve also indicated that it would be inappropriate for a bank holding company experiencing serious financial problems to borrow funds to pay dividends. Furthermore, under the prompt corrective action regulations adopted by the Federal Reserve, the Federal Reserve may prohibit a bank holding company from paying any dividends if any of the holding company’s bank subsidiaries are classified as undercapitalized. The Company’s ability to pay dividends is largely dependent upon the amount of cash dividends that the Bank pays to the Company, which distributions are restricted under North Carolina banking laws and regulations. The Bank may make distributions only to the extent that the Bank remains adequately capitalized. In addition, regulatory authorities may limit payment of dividends by any bank when it is determined that such a limitation is in the public interest and is necessary to ensure financial soundness of the bank. The Office of the North Carolina Commissioner of Banks and the FDIC also are authorized to prohibit the payment of dividends by a bank under certain circumstances. Such requirements and policies may limit the Company’s ability to obtain dividends from the Bank for its cash needs, including payment of dividends to stockholders and the payment of operating expenses. For additional information on these limitations, please see “Supervision and Regulation” under Item 1. Business. Any determination to pay future dividends to stockholders will be dependent upon the Company’s operational results, financial condition, capital requirements, business projections, general business conditions, statutory and regulatory restrictions and other factors deemed appropriate by the Company’s board of directors. Holders of Record As of March 20, 2017, the Company had 281 stockholders of record, not including the number of persons or entities whose stock is held in nominee or street name through various brokerage firms or banks. Stock Performance Graph The following shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference into any of our other filings under the Exchange Act or the Securities Act of 1933, as amended, except to the extent we specifically incorporate it by reference into such filing. The following table and graph compare the cumulative total shareholder return on our common stock for the period beginning at the close of trading on June 16, 2016 (the end of the first day of trading of our common stock on the NASDAQ Global Market) through the close of trading on each of June 30, 2016, September 30, 2016, and December 30, 2016, with the cumulative total return of the S&P 500 Total Return Index and the NASDAQ Bank Index, and assumes the reinvestment of dividends, if any. The historical stock price performance for our common stock shown on the graph below is not necessarily indicative of future stock performance. June 16, 2016 June 30, 2016 September 30, 2016 December 30, 2016 Paragon Commercial Corporation $ 100.00 $ 101.16 $ 104.86 $ 126.36 S&P 500 100.00 101.05 104.94 108.96 NASDAQ Bank 100.00 100.22 109.97 141.22 [Image Omitted]

2. SUMMARY OF SIGNIFICANT ACC29

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	12 Months Ended
	Dec. 31, 2016
Summary Of Significant Accounting Policies Policies
Basis of Presentation	The accompanying consolidated financial statements include the accounts and transactions of Paragon Commercial Corporation and Paragon Commercial Bank. All significant intercompany transactions and balances are eliminated in consolidation. Paragon Commercial Capital Trusts I and II are not consolidated subsidiaries of the Company.
Use of Estimates	The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Material estimates that are particularly susceptible to significant change relate to the determination of the allowance for loan losses, other than temporary impairment on investment securities, fair value of other real estate owned, realization of deferred tax assets and the fair value of financial instruments.
Cash and Cash Equivalents	Cash and cash equivalents include demand and time deposits (with original maturities of 90 days or less) at other institutions, federal funds sold and other short-term investments. Generally, federal funds are purchased and sold for one-day periods. At times, the Company places deposits with high credit quality financial institutions in amounts which may be in excess of federally insured limits. Depository institutions are required to maintain reserve and clearing balances with the Federal Reserve Bank (“FRB”). Accordingly, the Company has amounts restricted for this purpose of $25,000 and $19.4 million included in cash and due from banks on the consolidated balance sheets as of December 31, 2016 and 2015, respectively.
Investment Securities	Debt securities that the Company has the positive intent and ability to hold to maturity are classified as “held-to-maturity” securities and reported at amortized cost. Debt and equity securities that are bought and held principally for the purpose of selling in the near term are classified as “trading” securities and reported at fair value with unrealized gains and losses included in earnings. Available-for-sale securities are reported at fair value and consist of debt or equity securities not classified as trading securities nor as held-to-maturity securities. Unrealized holding gains and losses on available-for-sale securities are reported as a net amount in other comprehensive income net of income taxes. Gains and losses on the sale of available-for-sale securities are determined using the specific-identification method. Premiums and discounts are recognized in interest income using the effective interest method over the period to maturity. At each reporting date, the Company evaluates each investment security in a loss position for other-than-temporary impairment. The review includes an analysis of the facts and circumstances of each individual investment such as (1) the length of time and the extent to which the fair value has been below cost, (2) changes in the earnings performance, credit rating, asset quality, or business prospects of the issuer, (3) the ability of the issuer to make principal and interest payments, (4) changes in the regulatory, economic, or technological environment of the issuer, and (5) changes in the general market condition of either the geographic area or industry in which the issuer operates. Regardless of these factors, if the Company has developed a plan to sell the security or it is likely that the Company will be forced to sell the security in the near future, then the impairment is considered other-than-temporary and the carrying value of the security is permanently written down to the current fair value with the difference between the new carrying value and the amortized cost charged to earnings. If the Company does not intend to sell the security and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis less any current period credit loss, the other-than-temporary impairment is separated into the following: (1) the amount representing the credit loss and (2) the amount related to all other factors. The amount of the total other-than-temporary impairment related to the credit loss is recognized in earnings, and the amount of the total other-than-temporary impairment related to other factors is recognized in other comprehensive income, net of applicable taxes.
Loans	Loans that management has the intent and ability to hold for the foreseeable future or until maturity are reported at their outstanding principal adjusted for any charge-offs, the allowance for loan losses, and any deferred fees or costs on originated loans and unamortized premiums or discounts on purchased loans. Loan origination fees and certain direct origination costs are capitalized and recognized as an adjustment of the yield of the related loan. The accrual of interest on impaired loans is discontinued when, in management’s opinion, the borrower may be unable to meet payments as they become due. When interest accrual is discontinued, all unpaid accrued interest is reversed and any subsequent payments received are applied only to the outstanding principal balance.
Allowance for Loan Losses	The allowance for loan losses (“ALL”) is established as losses are estimated to have occurred through a provision for loan losses charged to earnings. The provision for loan losses is based upon management’s best estimate of the amount needed to provide for losses that are inherent in the portfolio. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the ALL. The Company conducts an analysis of the loan portfolio on a regular basis. This analysis is used in assessing the sufficiency of the allowance for loan losses and in the determination of the necessary provision for loan losses. The review process generally begins with the identification of problem loans to be reviewed on an individual basis for impairment. When a loan has been identified as impaired, a specific reserve may be established based on the Company’s calculation of the loss embedded in the individual loan. In addition to specific reserves on impaired loans, the Company has a nine-point grading system for each non-homogeneous loan in the portfolio to reflect the risk characteristic of the loan. The loans identified and measured for impairment are segregated from risk-rated loans within the portfolio. Loans are then grouped by loan type and by risk rating. Each loan type is assigned an allowance factor based on historical loss experience, economic conditions and overall portfolio quality including delinquency rates and concentrations. The ALL is an accounting estimate and as such there is uncertainty associated with the estimate due to the level of subjectivity and judgment inherent in performing the calculation. Management’s evaluation of the ALL also includes considerations of existing general economic and business conditions affecting the key lending areas of the Company, credit quality trends, collateral values, loan volumes and concentrations, seasoning of the loan portfolio, specific industry conditions within portfolio segments, recent loss experience in particular segments of the portfolio, duration of the current business cycle, regulatory examination results and findings of the Company's outsourced loan review consultants. The total of specific reserves required for impaired classified loans and the calculated reserves comprise the allowance for loan losses. A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal and interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining whether a loan is impaired include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Additionally, management’s policy is generally to evaluate only those loans greater than $500,000 for impairment. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record, and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent. While management utilizes its best judgment and information available, the ultimate adequacy of the allowance is dependent upon a variety of factors beyond the Company’s control, including the performance of the Company’s loan portfolio, the economy, changes in interest rates and the view of the regulatory authorities toward loan classifications.
Other Real Estate Owned	Other real estate owned acquired through, or in lieu of, loan foreclosure is initially recorded at fair value less selling costs, establishing a new cost basis. After foreclosure, valuations are periodically performed by management and the real estate is carried at the lower of cost or net realizable value. Net realizable value is equivalent to fair market value less costs to sell the assets. Revenue and expenses from holding the properties and adjustments to the cost basis are included in earnings.
Bank Premises and Equipment	Bank premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is calculated on the straight-line method over the estimated useful lives of the assets which are 3 - 10 years for furniture and equipment and 40 years for buildings. Leasehold improvements are amortized over the terms of the respective leases or the estimated useful lives of the improvements, whichever is shorter. Repairs and maintenance costs are charged to earnings as incurred, and additions and improvements to premises and equipment are capitalized. Upon sale or retirement, the cost and related accumulated depreciation are removed from the accounts and any gains or losses are reflected in current earnings.
Federal Home Loan Bank Stock	As a requirement for membership, the Company invests in stock of the Federal Home Loan Bank of Atlanta (“FHLB”). This investment is carried at cost. Due to the redemption provisions of the FHLB stock, the Company estimated that fair value approximates cost.
Bank Owned Life Insurance	The Company has purchased life insurance policies on certain key employees. These policies are recorded at their cash surrender value, or the amount that can be realized. Income from these policies and changes in the net cash surrender value are recorded in noninterest income.
Derivative Instruments and Hedging Activities	The Company records all derivatives on the balance sheet at fair value. The accounting for changes in the fair value of derivatives depends on the intended use of the derivative and the resulting designation. Derivatives used to hedge the exposure to changes in the fair value of an asset, liability, or firm commitment attributable to a particular risk, such as interest rate risk, are considered fair value hedges. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. For derivatives designated as cash flow hedges, the effective portion of changes in the fair value of the derivative is initially reported in other comprehensive income (outside of earnings) and subsequently reclassified to earnings when the hedged transaction affects earnings, and the ineffective portion of the change in the fair value of the derivative is recognized directly in earnings. The Company engages a third party expert to assess the effectiveness of each hedging relationship by comparing the changes in cash flows of the derivative hedging instrument with the changes in cash flows of the designated hedged transactions. The Company’s objective in using derivatives is to add stability to net interest income and to manage its exposure to adverse changes in interest rates. To accomplish this objective, the Company uses interest rate caps and swaps as part of its cash flow hedging strategy.
Income Taxes	Deferred tax assets and liabilities are recognized for the estimated future tax benefits or consequences attributable to differences between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. Deferred tax assets are also recognized for operating loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the temporary differences are expected to be recovered or settled. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that the tax benefits will not be realized. At December 31, 2016, the Company had $4.8 million in net deferred tax assets. A valuation allowance is provided when it is more-likely-than-not that some portion of the deferred tax asset will not be realized. All available evidence, both positive and negative, was considered to determine whether, based on the weight of that evidence, impairment should be recognized. Our forecast process includes qualitative and quantitative elements that may be subject to significant change. If our forecast of taxable income within the carryforward periods available under applicable law and prudent tax planning strategies are not sufficient to cover the amount of net deferred tax assets, such assets may be impaired. Based on the Company’s analysis of both positive and negative evidence, management concluded there were no valuation allowances required with respect to the deferred tax assets at December 31, 2016 and 2015.
Stock Compensation Plans	The Company has historically maintained a stock-based compensation plan. The plan provides for the grant of stock options for a fixed number of shares with an exercise price equal to the fair value of the shares on the date of grant. The plan also provides for the grant of a fixed number of restricted shares with a grant price equal to the fair value of the shares on the date of grant.
Earnings Per Common Share	In May 2014, the Company’s stockholders approved and the Company executed a reclassification of its then-outstanding Class A common stock and Class B common stock into a single class of common stock on the basis of one share of common stock for each share of Class A common stock and Class B common stock so reclassified. In June 2014, the Company amended its articles of incorporation to effect a 125-for-1 forward split of each share of common stock then issued and outstanding. Basic and diluted net income per common share have been computed based upon net income as presented in the accompanying consolidated statements of income divided by the weighted average number of common shares outstanding or assumed to be outstanding as summarized below. Diluted net income per common share reflects the potential dilution that could occur if outstanding stock options were exercised. 2016 2015 2014 Shares used in the computation of earnings per share: Weighted average number of shares outstanding - basic 4,968,970 4,509,884 4,456,002 Dilutive effect of restricted shares 35,781 38,022 39,011 Weighted average number of shares outstanding - diluted 5,004,751 4,547,906 4,495,013 As of December 31, 2016, 2015 and 2014, because the exercise price was in excess of the average current trading price, none of the Company’s outstanding stock options were used in the calculation of diluted earnings per share (“EPS”). The dilutive effect of stock options and unvested restricted shares are the only common stock equivalents for purposes of calculating diluted earnings per common share. Weighted average anti-dilutive stock options and unvested restricted shares excluded from the computation of diluted earnings per share are as follows: For the Year Ended December 31, 2016 2015 2014 Anti-dilutive stock options 61,125 81,500 101,000 Unvested restricted shares 60,324 40,936 48,958
Comprehensive Income	The Company reports as comprehensive income all changes in stockholders' equity during the year from sources other than stockholders. Other comprehensive income refers to all components (revenues, expenses, gains, and losses) of comprehensive income that are excluded from net income. The Company’s only two components of other comprehensive income are unrealized gains and losses on investment securities available-for-sale, net of income taxes and unrealized gains and losses on cash flow hedges, net of income taxes. Information concerning the Company’s accumulated other comprehensive income (loss) for the years ended December 31, 2016, 2015 and 2014 are as follows: (in thousands) 2016 2015 2014 Unrealized gains (losses) on securities available-for-sale $ (1,775 ) $ 1,378 $ 2,663 Deferred tax (expense) benefit 678 (530 ) (1,018 ) Other comprehensive income (loss), net of tax $ (1,097 ) $ 848 $ 1,645 Unrealized losses on cash flow hedges (2,792 ) (2,779 ) (814 ) Deferred tax benefit 1,049 1,045 311 Other comprehensive loss, net of tax (1,743 ) (1,734 ) (503 ) Total other accumulated comprehensive income (loss) $ (2,840 ) $ (886 ) $ 1,142 The accumulated balances related to each component of other accumulated comprehensive income (loss), net of tax are as follows: Unpaid Unrealized Unrealized Gains and Gains and Losses on Losses on Available-for Cash Flow (in thousands) Sale Securities Hedges Total Balance as of December 31, 2015 $ 848 $ (1,734 ) $ (886 ) Other comprehensive loss before reclassification (1,839 ) (9 ) (1,848 ) Amounts reclassified from accumulated other comprehensive income (106 ) — (106 ) Net current-period other comprehensive loss (1,945 ) (9 ) (1,954 ) Balance as of December 31, 2016 $ (1,097 ) $ (1,743 ) $ (2,840 ) Balance as of December 31, 2014 $ 1,645 $ (503 ) $ 1,142 Other comprehensive loss before reclassification (255 ) (1,231 ) (1,486 ) Amounts reclassified from accumulated other comprehensive income (542 ) — (542 ) Net current-period other comprehensive loss (797 ) (1,231 ) (2,028 ) Balance as of December 31, 2015 $ 848 $ (1,734 ) $ (886 )
Recent Accounting Pronouncements	In May 2014, the Financial Accounting Standards Board (“FASB”) issued guidance to change the recognition of revenue from contracts with customers. The core principle of the new guidance is that an entity should recognize revenue to reflect the transfer of goods and services to customers in an amount equal to the consideration the entity receives or expects to receive. The guidance will be effective for the Company for reporting periods beginning after December 15, 2017. The Company will apply the guidance using a full retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements. In August 2015, the FASB deferred the effective date of Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers. As a result of the deferral, the guidance in ASU 2014-09 will be effective for the Company for reporting periods beginning after December 15, 2017. The Company will apply the guidance using a full retrospective approach. The Company does not expect these amendments to have a material effect on its financial statements. In January 2016, the FASB amended the Financial Instruments topic of the Accounting Standards Codification (“ASC”) to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. The amendments will be effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company will apply the guidance by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption. The amendments related to equity securities without readily determinable fair values will be applied prospectively to equity investments that exist as of the date of adoption of the amendments. While the Company does own equity securities, management does not expect these amendments to have a material effect on its financial statements. In February 2016, the FASB amended the Leases topic of the ASC to revise certain aspects of recognition, measurement, presentation, and disclosure of leasing transactions. The amendments will be effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the effect that implementation of the new standard will have on its financial statements. In March 2016, the FASB amended the Derivatives and Hedging topic of the ASC to clarify that a change in the counterparty to a derivative instrument that has been designated as the hedging instrument does not, in and of itself, require dedesignation of that hedging relationship provided that all other hedge accounting criteria continue to be met. The amendments will be effective for financial statements issued for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. The Company will apply the guidance prospectively to each period presented. The Company does not expect these amendments to have a material effect on its financial statements. In March 2016, the FASB amended the Revenue from Contracts with Customers topic of the ASC to clarify the implementation guidance on principal versus agent considerations and address how an entity should assess whether it is the principal or the agent in contracts that include three or more parties. The amendments will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements. In March 2016, the FASB issued guidance to simplify several aspects of the accounting for share-based payment award transactions including the income tax consequences, the classification of awards as either equity or liabilities, and the classification on the statement of cash flows. The amendments will be effective for the Company for annual periods beginning after December 15, 2016 and interim periods within those annual periods. The Company does not expect these amendments to have a material effect on its financial statements. In June 2016, the FASB issued guidance to change the accounting for credit losses and modify the impairment model for certain debt securities. The amendments will be effective for the Company for reporting periods beginning after December 15, 2019. The Company is currently evaluating the effect that implementation of the new standard will have on its financial position, results of operations, and cash flows. In October 2016, the FASB amended the Income Taxes topic of the ASC to modify the accounting for intra-entity transfers of assets other than inventory. The amendments will be effective for the Company for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. The Company does not expect these amendments to have a material effect on its financial statements. In October 2016, the FASB amended the Consolidation topic of the ASC to revise the consolidation guidance on how a reporting entity that is the single decision maker of a variable interest entity (VIE) should treat indirect interests in the entity held through related parties that are under common control with the reporting entity when determining whether it is the primary beneficiary of that VIE. The amendments will be effective for the Company for fiscal years beginning after December 15, 2016 including interim periods within those fiscal years. The Company does not expect these amendments to have a material effect on its financial statements. In December 2016, the FASB issued amendments to clarify the ASC, correct unintended application of guidance, and make minor improvements to the ASC that are not expected to have a significant effect on current accounting practice or create a significant administrative cost to most entities. The amendments were effective upon issuance (December 14, 2016) for amendments that do not have transition guidance. Amendments that are subject to transition guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2016. Early adoption is permitted. The Company does not expect these amendments to have a material effect on its financial statements In December 2016, the FASB issued technical corrections and improvements to the Revenue from Contracts with Customers Topic. These corrections make a limited number of revisions to several pieces of the revenue recognition standard issued in 2014. The effective date and transition requirements for the technical corrections will be effective for the Company for reporting periods beginning after December 15, 2017. The Company does not expect these amendments to have a material effect on its financial statements. Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies are not expected to have a material impact on the Company’s financial position, results of operations or cash flows.
Reclassifications	Certain amounts in the 2015 financial statements have been reclassified to conform to the 2016 presentation. The reclassifications had no effect on total assets, net income or stockholders' equity as previously reported.

2. SUMMARY OF SIGNIFICANT ACC30

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)	12 Months Ended
	Dec. 31, 2016
Summary Of Significant Accounting Policies Tables
Shares used in the computation of earnings per share	2016 2015 2014 Shares used in the computation of earnings per share: Weighted average number of shares outstanding - basic 4,968,970 4,509,884 4,456,002 Dilutive effect of restricted shares 35,781 38,022 39,011 Weighted average number of shares outstanding - diluted 5,004,751 4,547,906 4,495,013
Anti-dilutive shares	For the Year Ended December 31, 2016 2015 2014 Anti-dilutive stock options 61,125 81,500 101,000 Unvested restricted shares 60,324 40,936 48,958
Accumulated other comprehensive income	(in thousands) 2016 2015 2014 Unrealized gains (losses) on securities available-for-sale $ (1,775 ) $ 1,378 $ 2,663 Deferred tax (expense) benefit 678 (530 ) (1,018 ) Other comprehensive income (loss), net of tax $ (1,097 ) $ 848 $ 1,645 Unrealized losses on cash flow hedges (2,792 ) (2,779 ) (814 ) Deferred tax benefit 1,049 1,045 311 Other comprehensive loss, net of tax (1,743 ) (1,734 ) (503 ) Total other accumulated comprehensive income (loss) $ (2,840 ) $ (886 ) $ 1,142
Balances related to each component of other comprehensive income (loss)	Unpaid Unrealized Unrealized Gains and Gains and Losses on Losses on Available-for Cash Flow (in thousands) Sale Securities Hedges Total Balance as of December 31, 2015 $ 848 $ (1,734 ) $ (886 ) Other comprehensive loss before reclassification (1,839 ) (9 ) (1,848 ) Amounts reclassified from accumulated other comprehensive income (106 ) — (106 ) Net current-period other comprehensive loss (1,945 ) (9 ) (1,954 ) Balance as of December 31, 2016 $ (1,097 ) $ (1,743 ) $ (2,840 ) Balance as of December 31, 2014 $ 1,645 $ (503 ) $ 1,142 Other comprehensive loss before reclassification (255 ) (1,231 ) (1,486 ) Amounts reclassified from accumulated other comprehensive income (542 ) — (542 ) Net current-period other comprehensive loss (797 ) (1,231 ) (2,028 ) Balance as of December 31, 2015 $ 848 $ (1,734 ) $ (886 )

3. INVESTMENT SECURITIES (Table

3. INVESTMENT SECURITIES (Tables)	12 Months Ended
	Dec. 31, 2016
Investment Securities Tables
Summary of available-for-sale securities	Gross Gross Estimated Amortized Unrealized Unrealized Fair (in thousands) Cost Gains Losses Value December 31, 2016 Available-for-sale: U.S. Agency obligations $ 17,062 $ 44 $ 163 $ 16,943 Collateralized mortgage obligations 42,439 300 242 42,497 Mortgage-backed securities 75,138 213 1,478 73,873 Municipal bonds 60,901 474 698 60,677 Other 3,676 29 254 3,451 $ 199,216 $ 1,060 $ 2,835 $ 197,441 December 31, 2015 Available-for-sale: U.S. Agency obligations $ 19,778 $ 196 $ 73 $ 19,901 Collateralized mortgage obligations 60,826 321 206 60,941 Mortgage-backed securities 31,074 326 90 31,310 Municipal bonds 53,163 1,346 75 54,434 Other 2,677 10 377 2,310 $ 167,518 $ 2,199 $ 821 $ 168,896
Fair value of investment securities available for sale by contractual maturity	After One After Five No Stated Within Within Within After Maturity (in thousands) 1 Year Five Years Ten Years Ten Years Date Total U.S. Agency obligations $ — $ — $ — $ 16,943 $ — $ 16,943 Collateralized mortgage obligations — — — 42,497 — 42,497 Mortgage-backed securities — 7,581 5,341 60,951 — 73,873 Municipal bonds — 1,771 6,087 52,819 — 60,677 Other — — 1,500 — 1,951 3,451 $ — $ 9,352 $ 12,928 $ 173,210 $ 1,951 $ 197,441
Current fair value and associated unrealized losses on investments in securities with unrealized losses	Less Than 12 Months 12 Months or Greater Total (in thousands) Unrealized Unrealized Unrealized December 31, 2016 Fair Value Losses Fair Value Losses Fair Value Losses Securities available-for-sale: U.S. Agency obligations $ 10,334 $ 163 $ — $ — $ 10,334 $ 163 Collateralized mortgage obligations 18,124 242 — — 18,124 242 Mortgage-backed securities 58,825 1,478 — — 58,825 1,478 Municipal bonds 33,110 698 — — 33,110 698 Other 1,897 254 — — 1,897 254 Total temporarily impaired securities $ 122,290 $ 2,835 $ — $ — $ 122,290 $ 2,835 Less Than 12 Months 12 Months or Greater Total (in thousands) Unrealized Unrealized Unrealized December 31, 2015 Fair Value Losses Fair Value Losses Fair Value Losses Securities available-for-sale: U.S. Agency obligations $ 3,007 $ — $ 3,178 $ 73 $ 6,185 $ 73 Collateralized mortgage obligations 26,086 159 2,983 47 29,069 206 Mortgage-backed securities 18,575 90 — — 18,575 90 Municipal bonds 3,896 6 7,990 69 11,886 75 Other 1,774 377 — — 1,774 377 Total temporarily impaired securities $ 53,338 $ 632 $ 14,151 $ 189 $ 67,489 $ 821
Investment securities in an unrealized loss position	Available-for-sale: December 31, (in thousands) 2016 2015 U.S. Agency obligations 5 3 Collateralized mortgage obligations 6 7 Mortgage-backed securities 13 6 Municipal bonds 53 22 Other 1 1 78 39
Securities gains for the periods	Year ended December 31, (in thousands) 2016 2015 2014 Gross gains on sales of securities available for sale $ 193 $ 590 $ 208 Gross losses on sales of securities available for sale (299 ) (48 ) (121 ) Total securities gains $ (106 ) $ 542 $ 87

4. LOANS AND ALLOWANCE FOR LO32

4. LOANS AND ALLOWANCE FOR LOAN LOSSES (Tables)	12 Months Ended
	Dec. 31, 2016
Loans And Allowance For Loan Losses Tables
Summary of loans	December 31, (in thousands) 2016 2015 Construction and land development $ 79,738 $ 64,702 Commercial real estate: Non-farm, non-residential 365,569 307,722 Owner occupied 186,892 147,017 Multifamily, nonresidential and junior liens 89,191 79,170 Total commercial real estate 641,652 533,909 Consumer real estate: Home equity lines 87,489 78,943 Secured by 1-4 family residential, secured by first deeds of trust 195,343 167,053 Secured by 1-4 family residential, secured by second deeds of trust 4,289 3,711 Total consumer real estate 287,121 249,707 Commercial and industrial loans (except those secured by real estate) 170,709 153,669 Consumer and other 11,542 13,539 Total loans 1,190,762 1,015,526 Deferred loan (fees) costs 518 630 Allowance for loan losses (7,909 ) (7,641 ) Net loans $ 1,183,371 $ 1,008,515 December 31, (in thousands) 2016 2015 Construction and land development: Land $ 12,595 $ 16,026 Residential 36,253 29,864 Commercial 30,890 18,812 Total construction and land development $ 79,738 $ 64,702 Commercial real estate: Non-farm, non-residential: Office $ 108,228 $ 92,991 Industrial 36,264 38,518 Hotel/motel 28,453 18,935 Retail 165,434 135,200 Special purpose/Other 27,190 22,078 365,569 307,722 Owner occupied : Office 60,500 51,775 Industrial 46,876 40,337 Retail 31,085 12,157 Special purpose/Other 48,431 42,748 186,892 147,017 Multifamily, nonresidential and junior liens 89,191 79,170 Total commercial real estate $ 641,652 $ 533,909
Changes in the allowance for loan losses	Commercial & Industrial Construction Consumer Loans Not and Land Commercial Real Secured By Consumer Total (In thousands) Development Real Estate Estate Real Estate & Other Loans 2016 Balance at beginning of the year $ 509 $ 3,156 $ 2,046 $ 1,786 $ 144 $ 7,641 Provision for loan losses (326 ) 492 (153 ) 656 (78 ) 591 Loans charged off — (27 ) — (927 ) — (954 ) Recoveries 303 98 7 213 10 631 Net (chargeoffs) recoveries 303 71 7 (714 ) 10 (323 ) Balance at end of the year $ 486 $ 3,719 $ 1,900 $ 1,728 $ 76 $ 7,909 2015 Balance at beginning of the year $ 960 $ 2,510 $ 1,594 $ 1,662 $ 143 $ 6,869 Provision for loan losses (510 ) 902 408 (51 ) 1 750 Loans charged off (14 ) (275 ) — — — (289 ) Recoveries 73 19 44 175 — 311 Net (chargeoffs) recoveries 59 (256 ) 44 175 — 22 Balance at end of the year $ 509 $ 3,156 $ 2,046 $ 1,786 $ 144 $ 7,641 2014 Balance at beginning of the year $ 2,021 $ 1,184 $ 1,540 $ 2,150 $ 44 $ 6,939 Provision for loan losses (317 ) 1,287 104 (635 ) 99 538 Loans charged off (898 ) (1 ) (64 ) (99 ) — (1,062 ) Recoveries 154 40 14 246 — 454 Net (chargeoffs) recoveries (744 ) 39 (50 ) 147 — (608 ) Balance at end of the year $ 960 $ 2,510 $ 1,594 $ 1,662 $ 143 $ 6,869
Allowance for loan losses	Commercial & Industrial Construction Consumer Loans Not and Land Commercial Real Secured By Consumer Total (in thousands) Development Real Estate Estate Real Estate & Other Loans December 31, 2016 Allowance for Loan Losses: Individually evaluated for impairment $ — $ — $ 223 $ 286 $ — $ 509 Collectively evaluated for impairment 486 3,719 1,677 1,442 76 7,400 Total ending allowance $ 486 $ 3,719 $ 1,900 $ 1,728 $ 76 $ 7,909 Loans: Individually evaluated for impairment $ 125 $ 836 $ 1,121 $ 1,139 $ — $ 3,221 Collectively evaluated for impairment 79,613 640,816 286,000 169,570 11,542 1,187,541 Total ending loans $ 79,738 $ 641,652 $ 287,121 $ 170,709 $ 11,542 $ 1,190,762 December 31, 2015 Allowance for Loan Losses: Individually evaluated for impairment $ 4 $ 72 $ 115 $ 297 $ 21 $ 509 Collectively evaluated for impairment 505 3,084 1,931 1,489 123 7,132 Total ending allowance $ 509 $ 3,156 $ 2,046 $ 1,786 $ 144 $ 7,641 Loans: Individually evaluated for impairment $ 238 $ 2,619 $ 411 $ 602 $ 21 $ 3,891 Collectively evaluated for impairment 64,464 531,290 249,296 153,067 13,518 1,011,635 Total ending loans $ 64,702 $ 533,909 $ 249,707 $ 153,669 $ 13,539 $ 1,015,526
Performing and nonperforming TDRs	December 31, (in thousands) 2016 2015 Performing TDRs: Commercial real estate $ 520 $ 2,220 Consumer real estate 338 346 Commercial and industrial loans 297 47 Total performing TDRs 1,155 2,613 Nonperforming TDRs: Construction and land development 125 104 Consumer real estate 58 65 Consumer and other — 21 Total nonperformingTDRs 183 190 Total TDRs $ 1,338 $ 2,803
Impaired loans	Unpaid Contractual (in thousands) Recorded Principal Allocated December 31, 2016 Investment Balance Allowance Loans without a specific valuation allowance: Construction and land development $ 125 $ 195 $- Commercial real estate 836 836 - Loans with a specific valuation allowance: Consumer real estate 1,121 1,152 223 Commercial and industrial loans (except those secured by real estate) 1,139 1,382 286 Total $ 3,221 $ 3,565 $509 Unpaid Contractual (in thousands) Recorded Principal Allocated December 31, 2015 Investment Balance Allowance Loans without a specific valuation allowance: Construction and land development $ 234 $ 397 $ — Commercial real estate 2,220 2,319 — Loans with a specific valuation allowance: Construction and land development 4 29 4 Commercial real estate 399 480 72 Consumer real estate 411 474 115 Commercial and industrial loans (except those secured by real estate) 602 895 297 Consumer and other 21 26 21 Total $ 3,891 $ 4,620 $ 509
Average recorded investment balance of impaired loans	2016 2015 Average Interest Average Interest (in thousands) Balance Income Balance Income Construction and land development $ 156 $ — $ 285 $ 1 Commercial real estate 1,244 46 5,241 181 Consumer real estate 629 26 728 26 Commercial and industrial loans 1,594 62 642 24 Consumer and other 9 — 23 — $ 3,632 $ 134 $ 6,919 $ 232
Non-accrual loans	Nonaccrual (in thousands) 2016 2015 Construction and land development $ 125 $ 238 Consumer real estate 783 65 Commercial and industrial loans 60 189 Consumer and other — 21 Total $ 968 $ 513
Age analysis of past due loans, by loan type	Greater 30 - 59 60 - 89 than 90 Days Days Days Total (in thousands) Past Past Past Non- Past Total December 31, 2016 Due Due Due Accrual Due Current Loans Construction and land development $ $ $ $ 125 $ 125 $ 79,613 $ 79,738 Commercial real estate - - - - - 641,652 641,652 Consumer real estate - - - 783 783 286,338 287,121 Commercial and industrial loans - - - 60 60 170,649 170,709 Consumer and other - - - - - 11,542 11,542 Total $ - $ - $ - $ 968 $ 968 $ 1,189,794 $ 1,190,762 Greater 30 - 59 60 - 89 than 90 Days Days Days Total (in thousands) Past Past Past Non- Past Total December 31, 2015 Due Due Due Accrual Due Current Loans Construction and land development $ $ $ $ 238 $ 238 $ 64,464 $ 64,702 Commercial real estate - - - - - 533,909 533,909 Consumer real estate - - - 65 65 249,642 249,707 Commercial and industrial loans - - - 189 189 153,480 153,669 Consumer and other - - - 21 21 13,518 13,539 Total $ - $ - $ - $ 5 13 $ 513 $ 1,015,013 $ 1,015,526
Credit risk profile of each loan type based on internally assigned risk grade	Risk Grade (in thousands) 1 2 3 4 5 6 7 Total December 31, 2016 Construction and land development $ $ 1,005 $ 911 $ 22,901 $ 54,601 $ 195 $ 125 $ 79,738 Commercial real estate - 539 223,459 311,711 87,443 18,500 - 641,652 Consumer real estate 50 19,247 130,748 102,137 33,013 1,143 783 287,121 Commercial and industrial loans 2,133 1,525 32,304 104,019 29,035 556 1,137 170,709 Consumer and other 1,160 730 1,086 7,392 1,174 - - 11,542 Total $ 3,343 $ 23,046 $ 388,508 $ 548,160 $ 205,266 $ 20,394 $ 2,045 $ 1,190,762 Risk Grade (in thousands) 1 2 3 4 5 6 7 Total December 31, 2015 Construction and land development $ 26 $ 200 $ 2,545 $ 14,318 $ 47,133 $ 242 $ $ 64,464 Commercial real estate - 619 195,935 243,771 87,492 3,473 - 531,290 Consumer real estate 53 10,933 111,123 92,127 34,346 714 - 249,296 Commercial and industrial loans 2,168 1,909 24,675 96,900 26,802 612 - 153,066 Consumer and other 980 1,069 960 8,392 1,936 182 - 13,519 Total $ 3,227 $ 14,730 $ 335,238 $ 455,508 $ 197,709 $ 5,223 $ - $ 1,011,635

5. BANK PREMISES AND EQUIPMENT

5. BANK PREMISES AND EQUIPMENT (Tables)	12 Months Ended
	Dec. 31, 2016
Bank Premises And Equipment Tables
Bank premises and equipment	(In thousands) 2016 2015 Building $ 16,226 $ 16,181 Furniture and equipment 7,113 6,532 Leasehold improvements 352 350 Less accumulated depreciation and amortization (8,049 ) (6,630 ) $ 15,642 $ 16,433

6. DEPOSITS (Tables)

6. DEPOSITS (Tables)	12 Months Ended
	Dec. 31, 2016
Deposits Tables
Scheduled maturities of time deposits	(In thousands) 2017 $ 145,223 2018 40,170 2019 27,698 2020 1,802 2021 and after 4,114 $ 219,007

7. BORROWINGS (Tables)

7. BORROWINGS (Tables)	12 Months Ended
	Dec. 31, 2016
Borrowings Tables
Short-term borrowed funds	Maximum End of Period Daily Average Balance Outstanding (Dollars in thousands) Weighted Interest At Any December 31, 2016 Balance Avg Rate Balance Rate Month End Repurchase agreements $ 20,174 0.19 % $ 27,068 0.21 % $ 51,750 $ 20,174 0.19 % $ 27,068 0.21 % Maximum End of Period Daily Average Balance Outstanding (Dollars in thousands) Weighted Interest At Any December 31, 2015 Balance Avg Rate Balance Rate Month End Fed funds purchased $ — 0.00 % $ 99 0.54 % $ — Repurchase agreements 30,580 0.19 % 33,080 0.19 % 48,080 $ 30,580 0.19 % $ 33,179 0.19 %

8. LEASES (Tables)

8. LEASES (Tables)	12 Months Ended
	Dec. 31, 2016
Leases Tables
Future minimum lease payments	(In thousands) 2017 $ 733 2018 760 2019 434 2020 158 2021 158 Thereafter 3,997 Total $ 6,240

9. RELATED PARTY TRANSACTIONS (

9. RELATED PARTY TRANSACTIONS (Tables)	12 Months Ended
	Dec. 31, 2016
Related Party Transactions Tables
Related party transactions	(In thousands) Loans to directors and officers as a group at December 31, 2015 $ 5,543 Disbursements during 2016 1,847 Amounts collected during 2016 (1,948 ) Loans to directors and officers as a group at December 31, 2016 $ 5,442

10. EMPLOYEE BENEFIT PLANS (Tab

10. EMPLOYEE BENEFIT PLANS (Tables)	12 Months Ended
	Dec. 31, 2016
Employee Benefit Plans Tables
Unrecognized stock-based compensation expense	(In thousands) 2017 $ 425 2018 278 2019 40 Total $ 743
Stock option activity	2016 2015 Shares WAEP Shares WAEP Outstanding at beginning of year 81,500 $ 46.46 101,000 $ 43.00 Granted — — — — Exercised — — (10,000 ) 17.60 Expired and forfeited (20,375 ) 48.96 (9,500 ) 40.00 Outstanding at end of year 61,125 $ 45.63 81,500 $ 46.46 Options exercisable at year-end 61,125 $ 45.63 81,500 $ 46.46
Stock option activity by exercise price	Weighted Weighted Average Average Remaining Number Exercise Contractual Number Exercise Price Outstanding Price Life in Years Exercisable $42.00 - $44.00 29,250 $ 43.11 1.24 29,250 $44.01 - $46.00 — — 0.00 — $46.01 - $48.00 31,875 47.95 0.22 31,875 61,125 $ 45.63 0.71 61,125
Restricted stock awards	Number of Shares Fair Granted Value 2016 April 1, 2016 - Employees 19,145 $ 26.95 2015 April 1, 2015 - Employees 14,156 $ 20.00 September 15, 2015 - Directors 16,500 23.75
Restricted stock award activity	2016 2015 Weighted Weighted Average Average Grant-Date Grant-Date Fair Value Fair Value Shares Per Share Shares Per Share Outstanding at beginning of year 77,531 $ 8.50 75,000 $ 8.50 Granted 19,145 26.95 30,656 22.02 Vested (33,625 ) 10.58 (28,125 ) 8.00 Expired or forfeited (1,352 ) 25.16 — — Outstanding at end of year 61,699 $ 19.67 77,531 $ 8.50
Shares available for future grant	2016 2015 Available Available Stock Restricted for Future Stock Restricted for Future Options Stock Grants Options Stock Grants Outstanding at beginning of year 178,344 199,500 Granted — (19,145 ) (19,145 ) — (30,656 ) (30,656 ) Expired and forfeited 20,375 1,352 21,727 9,500 — 9,500 Expiration of plan (180,926 ) — Outstanding at end of year — 178,344

11. INCOME TAXES (Tables)

11. INCOME TAXES (Tables)	12 Months Ended
	Dec. 31, 2016
Income Taxes Tables
Federal and state income tax expense	(In thousands) 2016 2015 Federal $ 5,178 $ 2,845 State 812 886 Total current 5,990 3,731 Deferred Federal 451 1,925 State 36 105 Total deferred 487 2,030 $ 6,477 $ 5,761
Reconciliation of income tax benefit	(In thousands) 2016 2015 Expense computed at statutory rate of 35% $ 6,953 $ 5,768 Effect of state income taxes, net of federal benefit 536 654 Tax exempt income (867 ) (712 ) Other (145 ) 51 $ 6,477 $ 5,761
Components of net deferred tax assets/liabilities	(In thousands) 2016 2015 Deferred tax assets: Allowance for loan losses $ 2,922 $ 2,873 Recorded impairment of assets 1,119 982 Deferred compensation 1,291 1,015 Net unrealized loss on cash flow hedges 1,050 1,045 Net unrealized loss on available for sale securities 679 — Other 579 1,600 Total deferred tax assets 7,640 7,515 Deferred tax liabilities: Premises and equipment (908 ) (1,050 ) Deferred loan costs (1,525 ) (1,396 ) Prepaid expenses (166 ) (203 ) Net unrealized gain on available for sale securities — (526 ) Other (200 ) (222 ) Total deferred tax liabilities (2,799 ) (3,397 ) Net deferred tax assets $ 4,841 $ 4,118

12. OTHER NON-INTEREST EXPENSE

12. OTHER NON-INTEREST EXPENSE (Tables)	12 Months Ended
	Dec. 31, 2016
Other Non-interest Expense Tables
Major components of other non-interest expense	(In thousands) 2016 2015 Telephone and data lines $ 553 $ 431 Postage, printing and office supplies 325 307 Franchise and other taxes 276 286 Insurance 168 214 Travel-related expenses 187 210 Correspondent bank fees 125 168 Charitable contributions 88 130 Other 941 750 Total $ 2,663 $ 2,496

13. REGULATORY MATTERS (Tables)

13. REGULATORY MATTERS (Tables)	12 Months Ended
	Dec. 31, 2016
Regulatory Matters Tables
Capital requirements	Minimum Requirements To Be: Actual Adequately Capitalized Well Capitalized (2) (Dollars in thousands) Amount Ratio (1) Amount Ratio (1) Amount Ratio (1) The Company Total Capital $ 164,740 13.21 % $ 99,778 8.00 % N/A N/A Tier I Capital 156,831 12.57 % 74,833 6.00 % N/A N/A Common equity Tier I Capital 138,831 11.13 % 56,125 4.50 % N/A N/A Leverage 156,831 10.05 % 62,434 4.00 % N/A N/A The Bank Total Capital $ 161,925 12.99 % $ 99,713 8.00 % $ 124,641 10.00 % Tier I Capital 154,016 12.36 % 74,785 6.00 % 99,713 8.00 % Common equity Tier I Capital 154,016 12.36 % 56,089 4.50 % 81,017 6.50 % Leverage 154,016 10.37 % 59,405 4.00 % 74,256 5.00 % Minimum Requirements To Be: Actual Adequately Capitalized Well Capitalized (2) (Dollars in thousands) Amount Ratio (1) Amount Ratio (1) Amount Ratio (1) The Company Total Capital $ 123,028 11.21 % $ 87,794 8.00 % N/A N/A Tier I Capital 115,387 10.51 % 65,845 6.00 % N/A N/A Common equity Tier I Capital 97,853 8.92 % 49,384 4.50 % N/A N/A Leverage 115,387 8.66 % 53,274 4.00 % N/A N/A The Bank Total Capital $ 127,095 11.59 % $ 87,696 8.00 % $ 109,621 10.00 % Tier I Capital 119,454 10.90 % 65,772 6.00 % 87,696 8.00 % Common equity Tier I Capital 119,454 10.90 % 50,425 4.50 % 71,253 6.50 % Leverage 119,454 9.15 % 52,193 4.00 % 65,241 5.00 % 1) Total capital ratio is defined as Tier 1 capital plus Tier 2 capital divided by total risk-weighted assets. The Tier 1 Capital ratio is defined as Tier 1 capital divided by total risk-weighted assets. Common equity Tier 1 is defined as Tier 1 capital excluding qualifying trust preferred securities divided by total risk weighted assets. The leverage ratio is defined as Tier 1 capital divided by the most recent quarter’s average total assets. 2) Prompt corrective action provisions are not applicable at the bank holding company level.

14. OFF-BALANCE SHEET RISK (Tab

14. OFF-BALANCE SHEET RISK (Tables)	12 Months Ended
	Dec. 31, 2016
Off-balance Sheet Risk Tables
Summary of the contract amounts exposed to off-balance sheet credit risk	(in thousands) 2016 2015 Financial instruments whose contract amounts represent credit risk: Undisbursed lines of credit $ 216,769 $ 163,572 Standby letters of credit 3,904 3,188 Total $ 220,673 $ 166,760

15. DERIVATIVES AND FINANCIAL43

15. DERIVATIVES AND FINANCIAL INSTRUMENTS (Tables)	12 Months Ended
	Dec. 31, 2016
Derivatives And Financial Instruments Tables
Summary of cash flow hedges	2016 2015 Notational Fair Notational Fair (in thousands) Amount Value Amount Value Included in other assets: Cap 1 - maturing August 2019 $ 35,000 $ 1,011 $ 35,000 $ 1,334 Cap 2 - maturing September 2019 35,000 1,045 35,000 1,360 Cap 3 - maturing October 2019 30,000 929 30,000 1,216 $ 100,000 $ 2,985 $ 100,000 $ 3,910
Amortization of the premium on the interest rate caps	(in thousands) 2017 $ 1,779 2018 2,247 2019 1,751 $ 5,777
Remaining amortization of the gain associated with the exit of the swaps	(in thousands) 2017 $ 74 2018 74 Thereafter 148 $ 296

16. FAIR VALUE OF FINANCIAL I44

16. FAIR VALUE OF FINANCIAL INSTRUMENTS (Tables)	12 Months Ended
	Dec. 31, 2016
Fair Value Of Financial Instruments Tables
Available for sale securities measured at fair value on a recurring basis	Fair Value Measurements Using Quoted Prices Significant in Active Other Significant Markets for Observable Unobservable (in thousands) Total Identical Assets Inputs Inputs Description Fair Value (Level 1) (Level 2) (Level 3) December 31, 2016 Securities available-for-sale: U.S. Agency obligations $ 16,943 $ — $ 16,943 $ — Collateralized mortgage obligations 42,497 — 42,497 — Mortgage-backed securities 73,873 — 73,873 — Municipal bonds 60,677 — 60,677 Other 3,451 1,951 — 1,500 197,441 1,951 193,990 1,500 Interest rate caps 2,985 — 2,985 — Total assets at fair value $ 200,426 $ 1,951 $ 196,975 $ 1,500 December 31, 2015 Securities available-for-sale: U.S. Agency obligations $ 19,901 $ — $ 19,901 $ — Collateralized mortgage obligations 60,941 — 60,941 — Mortgage-backed securities 31,310 — 31,310 — Municipal bonds 54,434 — 54,434 Other 2,310 1,810 — 500 168,896 1,810 166,586 500 Interest rate caps 3,910 — 3,910 — Total assets at fair value $ 172,806 $ 1,810 $ 170,496 $ 500
Fair value measurements of investment securities available for sale using Level 3 significant unobservable inputs	Level 3 Investment (in thousands) Securities Balance at December 31, 2015 $ 500 Purchases 1,000 Balance at December 31, 2016 $ 1,500
Fair value measurements for impaired loans and other real estate on a non-recurring basis	Fair Value Measurements Using Quoted Prices Significant in Active Other Significant Markets for Observable Unobservable Total Identical Assets Inputs Inputs (in thousands) Fair Value (Level 1) (Level 2) (Level 3) December 31, 2016 Impaired loans $ 2,712 $ — $ — $ 2,712 Other real estate owned 4,740 — — 4,740 Total $ 7,452 $ — $ — $ 7,452 December 31, 2015 Impaired loans $ 3,382 $ — $ — $ 3,382 Other real estate owned 5,453 — — 5,453 Total $ 8,835 $ — $ — $ 8,835
Significant unobservable inputs used in the fair value measurements	December 31, 2016 and 2015 Valuation Significant Significant Technique Observable Inputs unobservable Inputs Impaired loans Appraisal value Appraisals and/or sales of Appraisals discounted 5% to 10% for comparable properties sales commissions and other holding costs Other real estate owned Appraisal value/ Appraisals and/or sales of Appraisals discounted 5% to 10% for Comparison sale/ comparable properties sales commissions and other holding costs
Carrying amount fair value of the Company's financial instruments	December 31, 2016 Carrying Fair Value (in thousands) Amount Total Level 1 Level 2 Level 3 Financial assets: Cash and due from banks $ 43,005 $ 43,005 $ 43,005 $ — $ — Investment securities available-for-sale 197,441 197,441 1,951 193,990 1,500 Loans, net 1,183,371 1,184,621 — 1,181,909 2,712 Accrued interest receivable 4,368 4,368 4,368 — — Federal Home Loan Bank stock 8,400 8,400 — — 8,400 Bank-owned life insurance 34,190 34,190 — 34,190 — Interest rate caps 2,985 2,985 — 2,985 — Financial liabilities: Non-maturing deposits 953,248 953,248 — 953,248 — Time deposits 219,007 219,038 — 219,038 — Accrued interest payable 294 294 294 — — Repurchase agreements and federal funds purchased 20,174 20,174 — 20,174 — FHLB Advances and other borrowings 150,000 149,997 — 149,997 — Subordinated debt 18,558 14,197 — 14,197 — December 31, 2015 Carrying Fair Value (in thousands) Amount Total Level 1 Level 2 Level 3 Financial assets: Cash and due from banks $ 55,530 $ 55,530 $ 55,530 $ — Investment securities available-for-sale 168,896 168,896 1,810 166,586 500 Loans, net 1,008,515 1,013,415 — 1,010,033 3,382 Accrued interest receivable 3,795 3,795 3,795 — — Federal Home Loan Bank stock 8,061 8,061 — — 8,061 Bank-owned life insurance 28,274 28,274 — 28,274 — Interest rate caps 3,910 3,910 — 3,910 — Financial liabilities: Non-maturing deposits 663,066 663,066 — 663,066 — Time deposits 319,781 320,246 — 320,246 — Accrued interest payable 356 356 356 — — Repurchase agreements and federal funds purchased 30,580 30,580 — 30,580 — FHLB Advances and other borrowings 169,800 169,800 — 169,800 — Subordinated debt 18,558 15,591 — 15,591 —

17. PARENT COMPANY FINANCIAL 45

17. PARENT COMPANY FINANCIAL DATA (Tables)	12 Months Ended
	Dec. 31, 2016
Parent Company Financial Data Tables
Parent company financial data	Condensed Balance Sheets (In thousands) 2016 2015 Assets Cash and due from banks $ 2,161 $ 224 Investment in Paragon Commercial Bank 151,316 119,716 Investment in unconsolidated subsidiaries 558 558 Other assets 697 584 Total Assets $ 154,732 $ 121,082 Liabilities and Stockholders' Equity Subordinated debentures $ 18,558 $ 18,558 Other borrowings — 4,800 Accrued interest payable and other liabilities 73 66 Total Liabilities 18,631 23,424 Stockholders' Equity: Common stock 44 37 Additional paid-in-capital 80,147 53,147 Accumulated other comprehensive loss (2,840 ) (886 ) Retained earnings 58,750 45,360 Total Stockholders' Equity 136,101 97,658 Total Liabilities and Stockholders' Equity $ 154,732 $ 121,082 Condensed Statements of Income (In thousands) 2016 2015 Equity in undistributed earnings of subsidiary $ 14,166 $ 11,958 Interest expense (629 ) (715 ) Other operating income 34 24 Other operating expenses (580 ) (402 ) Income tax benefit 399 369 Net income $ 13,390 $ 11,234 Condensed Statements of Cash Flows (In thousands) 2016 2015 Cash flows from operating activities: Net income $ 13,390 $ 11,234 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Equity in earnings of subsidiary (14,166 ) (11,958 ) Stock based compensation 427 411 Net gain on sale of securities — (1 ) Deferred tax expense (3 ) 9 Changes in assets and liabilities: Increase in other assets (97 ) (6 ) Increase (decrease) in other liabilities 7 (6 ) Net cash used in operating activities (442 ) (317 ) Cash flows from investing activities: Investment in subsidiaries and trusts (20,500 ) — Proceeds from sale of securities available for sale — 5 Dividends received from subsidiary 1,100 2,200 Net cash provided by investing activities (19,400 ) 2,205 Cash flows from financing activities: Repayment of long term debt (4,800 ) (2,456 ) Net proceeds from sale of common stock 26,398 Proceeds from employee stock purchase plan 181 203 Proceeds from exercise of stock options — 176 Net cash used in financing activities 21,779 (2,077 ) Net decrease in cash and cash equivalents 1,937 (189 ) Cash and cash equivalents, beginning of year 224 413 Cash and cash equivalents, end of year $ 2,161 $ 224

18. SUPPLEMENTAL CASH FLOW DI46

18. SUPPLEMENTAL CASH FLOW DISCLOSURE (Tables)	12 Months Ended
	Dec. 31, 2016
Supplemental Cash Flow Disclosure Tables
Supplemental cash flow disclosure	(in thousands) 2016 2015 Supplemental Disclosures of Cash Flow Information: Interest paid $ 8,191 $ 7,433 Income taxes paid $ 6,035 $ 4,320 Supplemental Schedule of Noncash Investing and Financing Activites: Change in fair value of securities available-for-sale, net of taxes $ (3,153 ) $ (797 ) Change in fair value of cash flow hedges, net of taxes $ (13 ) $ (1,231 ) Transfer from loans to foreclosed real estate $ — $ 3,484

21. QUARTERLY FINANCIAL DATA 47

21. QUARTERLY FINANCIAL DATA (UNAUDITED) (Tables)	12 Months Ended
	Dec. 31, 2016
Quarterly Financial Data Tables
Selected quarterly financial data	Fourth Third Second First (in thousands, except per share amounts) Quarter Quarter Quarter Quarter 2016 Interest income $ 14,573 $ 13,855 $ 13,272 $ 12,467 Net interest income 12,419 11,767 11,301 10,551 Provision for loan losses 200 391 — — Noninterest income 209 438 381 266 Noninterest expense 7,008 6,778 6,488 6,600 Income before income taxes 5,420 5,036 5,194 4,217 Net income $ 3,622 $ 3,455 $ 3,475 $ 2,838 Net income per share, diluted $ 0.67 $ 0.64 $ 0.76 $ 0.62 Net income per share, basic 0.67 0.64 0.75 0.62 2015 Interest income $ 12,594 $ 12,510 $ 12,011 $ 11,320 Net interest income 10,730 10,656 10,213 9,452 Provision for loan losses — — 179 571 Noninterest income 102 544 324 484 Noninterest expense 6,300 6,180 6,400 5,880 Income before income taxes 4,532 5,020 3,958 3,485 Net income $ 2,963 $ 3,313 $ 2,650 $ 2,308 Net income per share, diluted $ 0.65 $ 0.73 $ 0.59 $ 0.52 Net income per share, basic 0.65 0.73 0.59 0.51
Over-the-counter quotations	Low High Fiscal Year Ending December 31, 2016 Fourth Quarter $ 35.99 $ 44.30 Third Quarter 34.50 39.99 Second Quarter 26.97 * 36.00 First Quarter 26.25 * 27.39 * Fiscal Year Ending December 31, 2015 Fourth Quarter $ 24.20 * $ 28.50 * Third Quarter 21.00 * 25.00 * Second Quarter beginning April 16, 2015 22.50 * 25.00 * * Based on high and low reported sales prices for our common stock from April 16, 2015 (the date our common stock began trading on the OTCQX Marketplace) through the listing on Nasdaq on June 16, 2016. These reported sales prices represent trades that were either quoted on the OTCQX Marketplace or reported to the Company’s stock transfer agent, and do not include retail markups, markdowns or commissions, and do not necessarily reflect actual transactions.
Shareholder return on common stock	June 16, 2016 June 30, 2016 September 30, 2016 December 30, 2016 Paragon Commercial Corporation $ 100.00 $ 101.16 $ 104.86 $ 126.36 S&P 500 100.00 101.05 104.94 108.96 NASDAQ Bank 100.00 100.22 109.97 141.22

2. SUMMARY OF SIGNIFICANT ACC48

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details) - shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Shares used in the computation of earnings per share:
Weighted average number of shares outstanding - basic	4,968,970	4,509,884	4,456,002
Dilutive effect of restricted shares	35,781	38,022	39,011
Weighted average number of shares outstanding - diluted	5,004,751	4,547,906	4,495,013

2. SUMMARY OF SIGNIFICANT ACC49

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 1) - shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Stock Options
Anti-dilutive shares excluded from the computation of earnings per share	61,125	81,500	101,000
Unvested Restricted Shares
Anti-dilutive shares excluded from the computation of earnings per share	60,324	40,936	48,958

2. SUMMARY OF SIGNIFICANT ACC50

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 2) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Summary Of Significant Accounting Policies Details 2
Unrealized gains (losses) on securities available-for-sale	$ (1,775)	$ 1,378	$ 2,663
Deferred tax expense	678	(530)	(1,018)
Other comprehensive income, net of tax	(1,097)	848	1,645
Unrealized losses on cash flow hedges	(2,792)	(2,779)	(814)
Deferred tax benefit	1,049	1,045	311
Other comprehensive loss, net of tax	(1,743)	(1,734)	(503)
Total other comprehensive income (loss)	$ (2,840)	$ (886)	$ 1,142

2. SUMMARY OF SIGNIFICANT ACC51

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details 3) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Other comprehensive income (loss), beginning	$ (886)	$ 1,142
Other comprehensive income (loss) before reclassification	(1,848)	(1,486)
Amounts reclassified from accumulated other comprehensive income	(106)	(542)
Net current-period other comprehensive income (loss)	(1,954)	(2,028)
Other comprehensive income (loss), ending	(2,840)	(886)
Unrealized Gains and Losses on Available-for-Sale Securities
Other comprehensive income (loss), beginning	848	1,645
Other comprehensive income (loss) before reclassification	(1,839)	(255)
Amounts reclassified from accumulated other comprehensive income	(106)	(542)
Net current-period other comprehensive income (loss)	(1,945)	(797)
Other comprehensive income (loss), ending	(1,097)	848
Unrealized Gains and Losses on Cash Flow Hedges
Other comprehensive income (loss), beginning	(1,734)	(503)
Other comprehensive income (loss) before reclassification	(9)	(1,231)
Amounts reclassified from accumulated other comprehensive income	0	0
Net current-period other comprehensive income (loss)	(9)	(1,231)
Other comprehensive income (loss), ending	$ (1,743)	$ (1,734)

2. SUMMARY OF SIGNIFICANT ACC52

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Deferred tax asset	$ 4,841	$ 4,118
Furniture and Equipment | Minimum
Estimated useful life	3 years
Furniture and Equipment | Maximum
Estimated useful life	10 years
Buildings
Estimated useful life	40 years

3. INVESTMENT SECURITIES (Detai

3. INVESTMENT SECURITIES (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Investment securities available for sale
Gross Unrealized Gains	$ 193	$ 590	$ 208
Gross Unrealized Losses	(299)	(48)	$ (121)
Estimated Fair Value	197,441	168,896
U.S. Agency obligations
Investment securities available for sale
Amortized Cost	17,062	19,778
Gross Unrealized Gains	44	196
Gross Unrealized Losses	163	73
Estimated Fair Value	16,943	19,901
Collateralized mortgage obligations
Investment securities available for sale
Amortized Cost	42,439	60,826
Gross Unrealized Gains	300	321
Gross Unrealized Losses	242	206
Estimated Fair Value	42,497	60,941
Mortgage-backed securities
Investment securities available for sale
Amortized Cost	75,138	31,074
Gross Unrealized Gains	213	326
Gross Unrealized Losses	1,478	90
Estimated Fair Value	73,873	31,310
Municipal Bonds
Investment securities available for sale
Amortized Cost	60,901	53,163
Gross Unrealized Gains	474	1,346
Gross Unrealized Losses	698	75
Estimated Fair Value	60,677	54,434
Other
Investment securities available for sale
Amortized Cost	3,676	2,677
Gross Unrealized Gains	29	10
Gross Unrealized Losses	254	377
Estimated Fair Value	3,451	2,310
Total
Investment securities available for sale
Amortized Cost	199,216	167,518
Gross Unrealized Gains	1,060	2,199
Gross Unrealized Losses	2,835	821
Estimated Fair Value	$ 197,441	$ 168,896

3. INVESTMENT SECURITIES (Det54

3. INVESTMENT SECURITIES (Details 1) $ in Thousands	Dec. 31, 2016USD ($)
Estimated Fair Value
Due within one year	$ 0
Due after one within five years	9,352
Due after five within ten years	12,928
Due after ten years	173,210
No stated maturity date	1,951
Total	197,441
U.S. Agency obligations
Estimated Fair Value
Due within one year	0
Due after one within five years	0
Due after five within ten years	0
Due after ten years	16,943
No stated maturity date	0
Total	16,943
Collateralized mortgage obligations
Estimated Fair Value
Due within one year	0
Due after one within five years	0
Due after five within ten years	0
Due after ten years	42,497
No stated maturity date	0
Total	42,497
Mortgage-backed securities
Estimated Fair Value
Due within one year	0
Due after one within five years	7,581
Due after five within ten years	5,341
Due after ten years	60,951
No stated maturity date	0
Total	73,873
Municipal Bonds
Estimated Fair Value
Due within one year	0
Due after one within five years	1,771
Due after five within ten years	6,087
Due after ten years	52,819
No stated maturity date	0
Total	60,677
Other
Estimated Fair Value
Due within one year	0
Due after one within five years	0
Due after five within ten years	1,500
Due after ten years	0
No stated maturity date	1,951
Total	$ 3,451

3. INVESTMENT SECURITIES (Det55

3. INVESTMENT SECURITIES (Details 2) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Securities available-for-sale:
Less than 12 Months, Fair Value	$ 122,290	$ 53,338
Less than 12 Months, Unrealized Losses	2,835	632
12 Months or More, Fair Value	0	14,151
12 Months or More, Unrealized Losses	0	189
Total, Fair Value	122,290	67,489
Total, Unrealized Losses	2,835	821
U.S. Agency obligations
Securities available-for-sale:
Less than 12 Months, Fair Value	10,334	3,007
Less than 12 Months, Unrealized Losses	163	0
12 Months or More, Fair Value	0	3,178
12 Months or More, Unrealized Losses	0	73
Total, Fair Value	10,334	6,185
Total, Unrealized Losses	163	73
Collateralized mortgage obligations
Securities available-for-sale:
Less than 12 Months, Fair Value	18,124	26,086
Less than 12 Months, Unrealized Losses	242	159
12 Months or More, Fair Value	0	2,983
12 Months or More, Unrealized Losses	0	47
Total, Fair Value	18,124	29,069
Total, Unrealized Losses	242	206
Mortgage-backed securities
Securities available-for-sale:
Less than 12 Months, Fair Value	58,825	18,575
Less than 12 Months, Unrealized Losses	1,478	90
12 Months or More, Fair Value	0	0
12 Months or More, Unrealized Losses	0	0
Total, Fair Value	58,825	18,575
Total, Unrealized Losses	1,478	90
Municipal Bonds
Securities available-for-sale:
Less than 12 Months, Fair Value	33,110	3,896
Less than 12 Months, Unrealized Losses	698	6
12 Months or More, Fair Value	0	7,990
12 Months or More, Unrealized Losses	0	69
Total, Fair Value	33,110	11,886
Total, Unrealized Losses	698	75
Other
Securities available-for-sale:
Less than 12 Months, Fair Value	1,897	1,774
Less than 12 Months, Unrealized Losses	254	377
12 Months or More, Fair Value	0	0
12 Months or More, Unrealized Losses	0	0
Total, Fair Value	1,897	1,774
Total, Unrealized Losses	$ 254	$ 377

3. INVESTMENT SECURITIES (Det56

3. INVESTMENT SECURITIES (Details 3) - Integer	Dec. 31, 2016	Dec. 31, 2015
Number of investment securities in an unrealized loss position	78	39
U.S. Agency obligations
Number of investment securities in an unrealized loss position	5	3
Collateralized mortgage obligations
Number of investment securities in an unrealized loss position	6	7
Mortgage-backed securities
Number of investment securities in an unrealized loss position	13	6
Municipal Bonds
Number of investment securities in an unrealized loss position	53	22
Other
Number of investment securities in an unrealized loss position	1	1

3. INVESTMENT SECURITIES (Det57

3. INVESTMENT SECURITIES (Details 4) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Investment Securities Details 4
Gross gains on sales of securities available for sale	$ 193	$ 590	$ 208
Gross losses on sales of securities available for sale	(299)	(48)	(121)
Total securities gains	$ 106	$ 542	$ 87

3. INVESTMENT SECURITIES (Det58

3. INVESTMENT SECURITIES (Details Narrative) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Investments, Debt and Equity Securities [Abstract]
Pledged to secure repurchase agreements, lines of credit and other borrowings	$ 75,800	$ 78,400

4. LOANS AND ALLOWANCE FOR LO59

4. LOANS AND ALLOWANCE FOR LOAN LOSSES (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Total loans	$ 1,190,762	$ 1,015,526
Deferred loan (fees) costs	518	630
Less allowance for loan losses	(7,909)	(7,641)	$ (6,869)	$ (6,939)
Total net loans	1,183,371	1,008,515
Commercial Real Estate
Less allowance for loan losses	(3,719)	(3,156)	$ (2,510)	$ (1,184)
Construction and land development
Total loans	79,738	64,702
Less allowance for loan losses		(509)
Construction and land development | Land
Total loans	12,595	16,026
Construction and land development | Residential
Total loans	36,253	29,864
Construction and land development | Commercial
Total loans	30,890	18,812
Non-farm, non-residential | Commercial Real Estate
Total loans	365,569
Commercial Real Estate
Total loans	641,652	533,909
Less allowance for loan losses		(3,156)
Commercial Real Estate | Owner occupied
Total loans	186,892	147,017
Commercial Real Estate | Owner occupied | Office
Total loans	60,500	51,775
Commercial Real Estate | Owner occupied | Industrial
Total loans	46,876	40,337
Commercial Real Estate | Owner occupied | Retail
Total loans	31,085	12,157
Commercial Real Estate | Owner occupied | SpecialPurposeOther
Total loans	48,431	42,748
Commercial Real Estate | Multifamily, nonresidential and junior liens
Total loans	89,191	79,170
Commercial Real Estate | Non-farm, non-residential
Total loans		307,722
Commercial Real Estate | Non-farm, non-residential | Office
Total loans	108,228	92,991
Commercial Real Estate | Non-farm, non-residential | Industrial
Total loans	36,264	38,518
Commercial Real Estate | Non-farm, non-residential | Hotel/Motel
Total loans	28,453	18,935
Commercial Real Estate | Non-farm, non-residential | Retail
Total loans	165,434	135,200
Commercial Real Estate | Non-farm, non-residential | SpecialPurposeOther
Total loans	27,190	22,078
Commercial Real Estate | Multifamily, Nonresidential and Junior Liens
Total loans	89,191	79,170
Consumer Real Estate
Total loans	287,121	249,707
Less allowance for loan losses		(2,046)
Consumer Real Estate | Home equity lines
Total loans	87,489	78,943
Consumer Real Estate | Secured by 1-4 family residential, secured by first deeds of trust
Total loans	195,343	167,053
Consumer Real Estate | Secured by 1-4 family residential, secured by second deeds of trust
Total loans	4,289	3,711
Commercial and industrial loans (except those secured by real estate)
Total loans	170,709	153,669
Less allowance for loan losses		(1,786)
Consumer and other
Total loans	$ 11,542	13,539
Less allowance for loan losses		$ (144)

4. LOANS AND ALLOWANCE FOR LO60

4. LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 1) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Allowance for loan losses
Beginning balance	$ 7,641	$ 6,869	$ 6,939
Provision for loan losses	591	750	538
Loans charged off	(954)	(289)	(1,062)
Recoveries	631	311	454
Net (chargeoffs) recoveries	(323)	22	(608)
Ending balance	7,909	7,641	6,869
Construction and land development
Allowance for loan losses
Beginning balance	509	960	2,021
Provision for loan losses	(326)	(510)	(317)
Loans charged off	0	(14)	(898)
Recoveries	303	73	154
Net (chargeoffs) recoveries	303	59	(744)
Ending balance	486	509	960
Commercial Real Estate
Allowance for loan losses
Beginning balance	3,156	2,510	1,184
Provision for loan losses	492	902	1,287
Loans charged off	(27)	(275)	(1)
Recoveries	98	19	40
Net (chargeoffs) recoveries	71	(256)	39
Ending balance	3,719	3,156	2,510
Consumer Real Estate
Allowance for loan losses
Beginning balance	2,046	1,594	1,540
Provision for loan losses	(153)	408	104
Loans charged off	0	0	(64)
Recoveries	7	44	14
Net (chargeoffs) recoveries	7	44	(50)
Ending balance	1,900	2,046	1,594
Commercial and industrial loans (except those secured by real estate)
Allowance for loan losses
Beginning balance	1,786	1,662	2,150
Provision for loan losses	656	(51)	(635)
Loans charged off	(927)	0	(99)
Recoveries	213	175	246
Net (chargeoffs) recoveries	(714)	175	147
Ending balance	1,728	1,786	1,662
Consumer and other
Allowance for loan losses
Beginning balance	144	143	44
Provision for loan losses	(78)	1	99
Loans charged off	0	0	0
Recoveries	10	0	0
Net (chargeoffs) recoveries	10	0	0
Ending balance	$ 76	$ 144	$ 143

4. LOANS AND ALLOWANCE FOR LO61

4. LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 2) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Allowance for loan losses
Individually evaluated for impairment	$ 509	$ 509
Collectively evaluated for impairment	7,400	7,132
Total ending allowance	7,909	7,641
Loans
Individually evaluated for impairment	3,221	3,891
Collectively evaluated for impairment	1,187,541	1,011,635
Total ending loans	1,190,762	1,015,526
Construction and land development
Allowance for loan losses
Individually evaluated for impairment	0	4
Collectively evaluated for impairment	486	505
Total ending allowance	486	509
Loans
Individually evaluated for impairment	125	238
Collectively evaluated for impairment	79,613	64,464
Total ending loans	79,738	64,702
Commercial Real Estate
Allowance for loan losses
Individually evaluated for impairment	0	72
Collectively evaluated for impairment	3,719	3,084
Total ending allowance	3,719	3,156
Loans
Individually evaluated for impairment	836	2,619
Collectively evaluated for impairment	640,816	531,290
Total ending loans	641,652	533,909
Consumer Real Estate
Allowance for loan losses
Individually evaluated for impairment	223	115
Collectively evaluated for impairment	1,677	1,931
Total ending allowance	1,900	2,046
Loans
Individually evaluated for impairment	1,121	411
Collectively evaluated for impairment	286,000	249,296
Total ending loans	287,121	249,707
Commercial and industrial loans (except those secured by real estate)
Allowance for loan losses
Individually evaluated for impairment	286	297
Collectively evaluated for impairment	1,442	1,489
Total ending allowance	1,728	1,786
Loans
Individually evaluated for impairment	1,139	602
Collectively evaluated for impairment	169,570	153,067
Total ending loans	170,709	153,669
Consumer and other
Allowance for loan losses
Individually evaluated for impairment	0	21
Collectively evaluated for impairment	76	123
Total ending allowance	76	144
Loans
Individually evaluated for impairment	0	21
Collectively evaluated for impairment	11,542	13,518
Total ending loans	$ 11,542	$ 13,539

4. LOANS AND ALLOWANCE FOR LO62

4. LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 3) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Performing TDRs	$ 1,155	$ 2,613
Nonperforming TDRs	183	190
Total TDRs	1,338	2,803
Consumer Real Estate
Performing TDRs	338	346
Nonperforming TDRs	58	65
Commercial and industrial loans (except those secured by real estate)
Performing TDRs	297	47
Nonperforming TDRs		0
Consumer and other
Nonperforming TDRs	0	21
Construction and land development
Nonperforming TDRs	125	104
Commercial Real Estate
Performing TDRs	$ 520	$ 2,220

4. LOANS AND ALLOWANCE FOR LO63

4. LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 4) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Impaired loans
Recorded Investment in Impaired Loans	$ 3,221	$ 3,891
Unpaid Contractual Principal Balance	3,565	4,620
Allocated Allowance	509	509
Commercial and industrial loans (except those secured by real estate)
Impaired loans
Recorded Investment With Allowance	1,139	602
Unpaid Contractual Principal Balance With Allowance	1,382	895
Allocated Allowance	286	297
Consumer and other
Impaired loans
Recorded Investment With Allowance		21
Unpaid Contractual Principal Balance With Allowance		26
Allocated Allowance		21
Construction and land development
Impaired loans
Recorded Investment With No Allowance	125	234
Recorded Investment With Allowance		4
Unpaid Contractual Principal Balance With No Allowance	195	397
Unpaid Contractual Principal Balance With Allowance		29
Allocated Allowance	0	4
Commercial Real Estate
Impaired loans
Recorded Investment With No Allowance	836	2,220
Recorded Investment With Allowance		399
Unpaid Contractual Principal Balance With No Allowance	836	2,319
Unpaid Contractual Principal Balance With Allowance		480
Allocated Allowance	0	72
Consumer Real Estate
Impaired loans
Recorded Investment With Allowance	1,121	411
Unpaid Contractual Principal Balance With Allowance	1,152	474
Allocated Allowance	$ 223	$ 115

4. LOANS AND ALLOWANCE FOR LO64

4. LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 5) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015
Average balance									$ 3,632	$ 6,919
Interest income	$ 14,573	$ 13,855	$ 13,272	$ 12,467	$ 12,594	$ 12,510	$ 12,011	$ 11,320	134	232
Construction and land development
Average balance									156	285
Interest income									0	1
Commercial Real Estate
Average balance									1,244	5,241
Interest income									46	181
Consumer Real Estate
Average balance									629	728
Interest income									26	26
Commercial and industrial loans (except those secured by real estate)
Average balance									1,594	642
Interest income									62	24
Consumer and other
Average balance									9	23
Interest income									$ 0	$ 0

4. LOANS AND ALLOWANCE FOR LO65

4. LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 6) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Non-accrual loans
Non-accrual loans	$ 968	$ 513
Consumer Real Estate
Non-accrual loans
Non-accrual loans	783	65
Commercial and industrial loans (except those secured by real estate)
Non-accrual loans
Non-accrual loans	60	189
Construction and land development
Non-accrual loans
Non-accrual loans	125	238
Consumer and other
Non-accrual loans
Non-accrual loans	$ 0	$ 21

4. LOANS AND ALLOWANCE FOR LO66

4. LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 7) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Past due loans
Loans 30-59 Days Past Due	$ 0	$ 0
Loans 60-89 Days Past Due	0	0
Loans 90 or More Days Past Due	0	0
Non-accrual	968	513
Total Past Due Loans	968	513
Total Current Loans	1,189,794	1,015,013
Total loans	1,190,762	1,015,526
Commercial Real Estate
Past due loans
Loans 30-59 Days Past Due	0	0
Loans 60-89 Days Past Due	0	0
Loans 90 or More Days Past Due	0	0
Non-accrual	0	0
Total Past Due Loans	0	0
Total Current Loans	641,652	533,909
Total loans	641,652	533,909
Consumer Real Estate
Past due loans
Loans 30-59 Days Past Due	0	0
Loans 60-89 Days Past Due	0	0
Loans 90 or More Days Past Due	0	0
Non-accrual	783	65
Total Past Due Loans	783	65
Total Current Loans	286,338	249,642
Total loans	287,121	249,707
Commercial and industrial loans (except those secured by real estate)
Past due loans
Loans 30-59 Days Past Due	0	0
Loans 60-89 Days Past Due	0	0
Loans 90 or More Days Past Due	0	0
Non-accrual	60	189
Total Past Due Loans	60	189
Total Current Loans	170,649	153,480
Total loans	170,709	153,669
Consumer and other
Past due loans
Loans 30-59 Days Past Due	0	0
Loans 60-89 Days Past Due	0	0
Loans 90 or More Days Past Due	0	0
Non-accrual	0	21
Total Past Due Loans	0	21
Total Current Loans	11,542	13,518
Total loans	11,542	13,539
Construction and land development
Past due loans
Loans 30-59 Days Past Due		0
Loans 60-89 Days Past Due		0
Loans 90 or More Days Past Due		0
Non-accrual		238
Total Past Due Loans		238
Total Current Loans		64,464
Total loans	79,738	$ 64,702
Construction and land development
Past due loans
Loans 30-59 Days Past Due	0
Loans 60-89 Days Past Due	0
Loans 90 or More Days Past Due	0
Non-accrual	125
Total Past Due Loans	125
Total Current Loans	79,613
Total loans	$ 79,738

4. LOANS AND ALLOWANCE FOR LO67

4. LOANS AND ALLOWANCE FOR LOAN LOSSES (Details 8) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Total Loans	$ 1,190,762	$ 1,011,635
Risk Grade 1
Total Loans	3,343	3,227
Risk Grade 2
Total Loans	23,046	14,730
Risk Grade 3
Total Loans	388,508	335,238
Risk Grade 4
Total Loans	548,160	455,508
Risk Grade 5
Total Loans	205,266	197,709
Risk Grade 6
Total Loans	20,394	5,223
Risk Grade 7
Total Loans	2,045	0
Construction and land development
Total Loans	79,738	64,464
Construction and land development | Risk Grade 1
Total Loans	0	26
Construction and land development | Risk Grade 2
Total Loans	1,005	200
Construction and land development | Risk Grade 3
Total Loans	911	2,545
Construction and land development | Risk Grade 4
Total Loans	22,901	14,318
Construction and land development | Risk Grade 5
Total Loans	54,601	47,133
Construction and land development | Risk Grade 6
Total Loans	195	242
Construction and land development | Risk Grade 7
Total Loans	125	0
Commercial Real Estate
Total Loans	641,652	531,290
Commercial Real Estate | Risk Grade 1
Total Loans	0	0
Commercial Real Estate | Risk Grade 2
Total Loans	539	619
Commercial Real Estate | Risk Grade 3
Total Loans	223,459	195,935
Commercial Real Estate | Risk Grade 4
Total Loans	311,711	243,771
Commercial Real Estate | Risk Grade 5
Total Loans	87,443	87,492
Commercial Real Estate | Risk Grade 6
Total Loans	18,500	3,473
Commercial Real Estate | Risk Grade 7
Total Loans	0	0
Consumer Real Estate
Total Loans	287,121	249,296
Consumer Real Estate | Risk Grade 1
Total Loans	50	53
Consumer Real Estate | Risk Grade 2
Total Loans	19,247	10,933
Consumer Real Estate | Risk Grade 3
Total Loans	130,748	111,123
Consumer Real Estate | Risk Grade 4
Total Loans	102,137	92,127
Consumer Real Estate | Risk Grade 5
Total Loans	33,013	34,346
Consumer Real Estate | Risk Grade 6
Total Loans	1,143	714
Consumer Real Estate | Risk Grade 7
Total Loans	783	0
Commercial and industrial loans (except those secured by real estate)
Total Loans	170,709	153,066
Commercial and industrial loans (except those secured by real estate) | Risk Grade 1
Total Loans	2,133	2,168
Commercial and industrial loans (except those secured by real estate) | Risk Grade 2
Total Loans	1,525	1,909
Commercial and industrial loans (except those secured by real estate) | Risk Grade 3
Total Loans	32,304	24,675
Commercial and industrial loans (except those secured by real estate) | Risk Grade 4
Total Loans	104,019	96,900
Commercial and industrial loans (except those secured by real estate) | Risk Grade 5
Total Loans	29,035	26,802
Commercial and industrial loans (except those secured by real estate) | Risk Grade 6
Total Loans	556	612
Commercial and industrial loans (except those secured by real estate) | Risk Grade 7
Total Loans	1,137	0
Consumer and other
Total Loans	11,542	13,519
Consumer and other | Risk Grade 1
Total Loans	1,160	980
Consumer and other | Risk Grade 2
Total Loans	730	1,069
Consumer and other | Risk Grade 3
Total Loans	1,086	960
Consumer and other | Risk Grade 4
Total Loans	7,392	8,392
Consumer and other | Risk Grade 5
Total Loans	1,174	1,936
Consumer and other | Risk Grade 6
Total Loans	0	182
Consumer and other | Risk Grade 7
Total Loans	$ 0	$ 0

4. LOANS AND ALLOWANCE FOR LO68

4. LOANS AND ALLOWANCE FOR LOAN LOSSES (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Loans And Allowance For Loan Losses Details Narrative
Recorded Investment in Impaired Loans	$ 3,221	$ 3,891
Total TDRs	1,338	2,803
Interest income recognized on performing TDRs	$ 71	$ 161

5. BANK PREMISES AND EQUIPMEN69

5. BANK PREMISES AND EQUIPMENT (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Less accumulated depreciation and amortization	$ (8,049)	$ (6,630)
Bank premises and equipment, net	15,642	16,433
Buildings
Bank premises and equipment, gross	16,226	16,181
Furniture and Equipment
Bank premises and equipment, gross	7,113	6,532
Leasehold Improvements
Bank premises and equipment, gross	$ 352	$ 350

5. BANK PREMISES AND EQUIPMEN70

5. BANK PREMISES AND EQUIPMENT (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Bank Premises And Equipment Details Narrative
Depreciation and amortization expense	$ 1,400	$ 1,400	$ 1,100

6. DEPOSITS (Details)

6. DEPOSITS (Details) $ in Thousands	Dec. 31, 2016USD ($)
Deposits Details
2,017	$ 145,223
2,018	40,170
2,019	27,698
2,020	1,802
2021 and after	4,114
Total	$ 219,007

6. DEPOSITS (Details Narrative)

6. DEPOSITS (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Deposits Details Narrative
Time deposits in denominations of $250,000 or more	$ 53,300	$ 34,100
Interest expense on time deposits of $250,000 or more	$ 584	$ 400

7. BORROWINGS (Details)

7. BORROWINGS (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Short-term borrowed funds	$ 20,174	$ 30,580
Weighted average rate	0.19%	0.19%
Daily average balance	$ 27,068	$ 33,179
Daily average balance, interest rate	0.21%	0.19%
Repurchase Agreements
Short-term borrowed funds	$ 20,174	$ 30,580
Weighted average rate	0.19%	0.19%
Daily average balance	$ 27,068	$ 33,080
Daily average balance, interest rate	0.21%	0.19%
Maximum outstanding at any month end	$ 51,750	$ 48,080
Federal Funds Purchased
Short-term borrowed funds		$ 0
Weighted average rate		0.00%
Daily average balance		$ 99
Daily average balance, interest rate		0.54%
Maximum outstanding at any month end		$ 0

7. BORROWINGS (Details Narrativ

7. BORROWINGS (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Borrowings Details Narrative
Interest expense on securities sold under agreements to repurchase	$ 56	$ 64
Available lines of credit	152,500
Federal home loan bank advances	$ 161,300	$ 166,900

8. LEASES (Details)

8. LEASES (Details) $ in Thousands	Dec. 31, 2016USD ($)
Leases Details
2,017	$ 733
2,018	760
2,019	434
2,020	158
2,021	158
Thereafter	3,997
Total	$ 6,240

8. LEASES (Details Narrative)

8. LEASES (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Leases Details
Rent expense	$ 344	$ 534

9. RELATED PARTY TRANSACTIONS77

9. RELATED PARTY TRANSACTIONS (Details) $ in Thousands	12 Months Ended
	Dec. 31, 2016USD ($)
Related Party Transactions Details
Loans to directors and officers as a group, beginning	$ 5,543
Disbursements	1,847
Amounts collected	(1,948)
Loans to directors and officers as a group, ending	$ 5,442

9. RELATED PARTY TRANSACTIONS78

9. RELATED PARTY TRANSACTIONS (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Related Party Transactions Details Narrative
Related party expense	$ 57	$ 47

10. EMPLOYEE BENEFIT PLANS (Det

10. EMPLOYEE BENEFIT PLANS (Details) - Omnibus Plan $ in Thousands	Dec. 31, 2016USD ($)
2,017	$ 425
2,018	278
2,019	40
Total	$ 743

10. EMPLOYEE BENEFIT PLANS (D80

10. EMPLOYEE BENEFIT PLANS (Details 1) - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Employee Benefit Plans Details 1
Number of options outstanding, beginning	81,500	101,000
Number of options granted	0	0
Number of options exercised	0	(1,000)
Number of options expired and forfeited	(20,375)	(9,500)
Number of options outstanding, ending	61,125	81,500
Number of options exercisable, ending	61,125	81,500
Weighted average exercise price outstanding, beginning	$ 46.46	$ 43
Weighted average exercise price granted	0	0
Weighted average exercise price exercised	0	17.60
Weighted average exercise price expired and forfeited	48.96	40
Weighted average exercise price outstanding, ending	45.63	46.46
Weighted average exercise price exercisable, ending	$ 45.63	$ 46.46

10. EMPLOYEE BENEFIT PLANS (D81

10. EMPLOYEE BENEFIT PLANS (Details 2) - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Number of options outstanding	61,125	81,500	101,000
Weighted average exercise price	$ 45.63	$ 46.46
Number of options exercisable	61,125	81,500
Option 1
Exercise price range	$42.00 - $44.00
Number of options outstanding	29,250
Weighted average exercise price	$ 43.11
Weighted average remaining contractual life (in years)	1 year 2 months 26 days
Number of options exercisable	29,250
Option 2
Exercise price range	$44.01 - $46.00
Number of options outstanding	0
Weighted average exercise price	$ 0
Weighted average remaining contractual life (in years)	0 years
Number of options exercisable	0
Option 3
Exercise price range	$46.01 - $48.00
Number of options outstanding	31,875
Weighted average exercise price	$ 47.95
Weighted average remaining contractual life (in years)	2 months 19 days
Number of options exercisable	31,875
Total
Number of options outstanding	61,125
Weighted average exercise price	$ 45.63
Weighted average remaining contractual life (in years)	8 months 16 days
Number of options exercisable	61,125

10. EMPLOYEE BENEFIT PLANS (D82

10. EMPLOYEE BENEFIT PLANS (Details 3) - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Restricted awards granted	19,145	30,656
Omnibus Plan | Employees
Restricted awards granted	19,145	14,156
Restricted awards fair value	$ 26.95	$ 20
Omnibus Plan | Directors
Restricted awards granted		16,500
Restricted awards fair value		$ 23.75

10. EMPLOYEE BENEFIT PLANS (D83

10. EMPLOYEE BENEFIT PLANS (Details 4) - $ / shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Employee Benefit Plans Details 1
Number of restricted stock awards outstanding, beginning	77,531	75,000
Number of restricted stock awards granted	19,145	30,656
Number of restricted stock awards vested	(33,625)	(28,125)
Number of restricted stock awards expired or forfeited	(1,352)	0
Number of restricted stock awards outstanding, ending	61,699	77,531
Weighted average exercise price outstanding, beginning	$ 8.50	$ 8.50
Weighted average exercise price granted	26.95	22.02
Weighted average exercise price vested	10.58	8
Weighted average exercise price expired or forfeited	25.16	0
Weighted average exercise price outstanding, ending	$ 19.67	$ 8.50

10. EMPLOYEE BENEFIT PLANS (D84

10. EMPLOYEE BENEFIT PLANS (Details 5) - shares	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Employee Benefit Plans Details 1
Shares available for future grants, beginning	178,344	199,500
Number of options granted	0	0
Number of restricted stock awards granted	(19,145)	(30,656)
Number of options expired and forfeited	20,375	9,500
Number of restricted stock awards expired or forfeited	1,352	0
Expiration of plan	(180,926)	0
Shares available for future grants, ending	0	178,344

10. EMPLOYEE BENEFIT PLANS (D85

10. EMPLOYEE BENEFIT PLANS (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Employee Benefit Plans Details 1
401(k) matching contributions	$ 641	$ 589
Issuance of shares for employee stock purchase plan, Shares	5,998	10,678
Issuance of shares for employee stock purchase plan, Amount	$ 181	$ 203	$ 0
Retirement plan expense	258	397
Accrued liability related to retirement plan	3,000	2,700
Bank owned life insurance	34,190	28,274
Restricted stock expense	427	411
Aggregate intrinsic value of options outstanding and exercisable	$ 18	$ 49

11. INCOME TAXES (Details)

11. INCOME TAXES (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Current:
Federal	$ 5,178	$ 2,845
State	812	886
Total Current	5,990	3,731
Deferred:
Federal	451	1,925
State	36	105
Total Deferred	490	2,030	$ 2,477
Income tax expense	$ 6,477	$ 5,761	$ 4,403

11. INCOME TAXES (Details 1)

11. INCOME TAXES (Details 1) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Income Taxes Details
Expense computed at statutory rate of 35%	$ 6,953	$ 5,768
Effect of state income taxes, net of federal benefit	536	654
Tax exempt income	(867)	(712)
Other	(145)	51
Total	$ 6,477	$ 5,761	$ 4,403

11. INCOME TAXES (Details 2)

11. INCOME TAXES (Details 2) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Assets:
Allowance for loan losses	$ 2,922	$ 2,873
Recorded impairment of assets	1,119	982
Deferred compensation	1,291	1,015
Net unrealized loss on cash flow hedges	1,050	1,045
Net unrealized loss on available for sale securities	679	0
Other	579	1,600
Total net deferred tax asset	7,640	7,515
Liabilities:
Premises and equipment	(908)	(1,050)
Deferred loan costs	(1,525)	(1,396)
Prepaid expenses	(166)	(203)
Net unrealized gain on available for sale securities	0	(526)
Other	(200)	(222)
Total deferred tax liability	(2,799)	(3,397)
Net deferred tax asset	$ 4,841	$ 4,118

12. OTHER NON-INTEREST EXPENS89

12. OTHER NON-INTEREST EXPENSE (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Other Non-interest Expense Details
Telephone and data lines	$ 553	$ 431
Postage, printing and office supplies	325	307
Franchise and other taxes	276	286
Insurance	168	214
Travel-related expenses	187	210
Correspondent bank fees	125	168
Charitable contributions	88	130
Other	941	750
Total	$ 2,663	$ 2,496	$ 2,114

13. REGULATORY MATTERS (Details

13. REGULATORY MATTERS (Details) - USD ($) $ in Thousands		Dec. 31, 2016	Dec. 31, 2015
The Company
Total capital to risk-weighted assets amount		$ 164,740	$ 123,028
Total capital to risk-weighted assets ratio	[1]	13.21%	11.21%
Total capital to risk-weighted assets Minimum for capital adequacy purposes amount		$ 99,778	$ 87,794
Total capital to risk-weighted assets Minimum for capital adequacy purposes ratio	[1]	8.00%	8.00%
Total capital to risk-weighted assets minimum to be well capitalized amount	[2]
Total capital to risk-weighted assets minimum to be well capitalized ratio	[2]
Tier I capital to risk-weighted assets amount		$ 156,831	$ 115,387
Tier I capital to risk-weighted assets ratio	[1]	12.57%	10.51%
Tier I capital to risk-weighted assets Minimum for capital adequacy purposes amount		$ 74,833	$ 65,845
Tier I capital to risk-weighted assets minimum for capital adequacy purposes ratio	[1]	6.00%	6.00%
Tier I capital to risk-weighted assets minimum to be well capitalized amount	[2]
Tier I capital to risk-weighted assets minimum to be well capitalized ratio	[2]
Common equity tier 1 capital to risk-weighted assets amount		$ 138,831	$ 97,853
Common equity tier 1 capital to risk-weighted assets ratio	[1]	11.13%	8.92%
Common equity tier 1 capital to risk-weighted assets Minimum for capital adequacy purposes amount		$ 56,125	$ 49,384
Common equity tier 1 capital to risk-weighted assets Minimum for capital adequacy purposes ratio	[1]	4.50%	4.50%
Common equity tier 1 capital to risk-weighted assets minimum to be well capitalized amount	[2]
Common equity tier 1 capital to risk-weighted assets minimum to be well capitalized ratio	[2]
Tier I leverage capital amount		$ 161,925	$ 115,387
Tier I leverage capital assets ratio	[1]	10.05%	8.66%
Tier I leverage capital Minimum for capital adequacy purposes amount		$ 62,434	$ 53,274
Tier I leverage capital minimum for capital adequacy purposes ratio	[1]	4.00%	4.00%
Tier I leverage capital minimum to be well capitalized amount	[2]
Tier I capital leverage capital minimum to be well capitalized ratio	[2]
The Bank
Total capital to risk-weighted assets amount		$ 161,925	$ 127,095
Total capital to risk-weighted assets ratio	[1]	12.99%	11.59%
Total capital to risk-weighted assets Minimum for capital adequacy purposes amount		$ 99,713	$ 87,696
Total capital to risk-weighted assets Minimum for capital adequacy purposes ratio	[1]	8.00%	8.00%
Total capital to risk-weighted assets minimum to be well capitalized amount	[2]	$ 124,641	$ 109,621
Total capital to risk-weighted assets minimum to be well capitalized ratio	[1],[2]	10.00%	10.00%
Tier I capital to risk-weighted assets amount		$ 154,016	$ 119,454
Tier I capital to risk-weighted assets ratio	[1]	12.36%	10.90%
Tier I capital to risk-weighted assets Minimum for capital adequacy purposes amount		$ 74,785	$ 65,772
Tier I capital to risk-weighted assets minimum for capital adequacy purposes ratio	[1]	6.00%	6.00%
Tier I capital to risk-weighted assets minimum to be well capitalized amount	[2]	$ 99,713	$ 87,696
Tier I capital to risk-weighted assets minimum to be well capitalized ratio	[1],[2]	8.00%	8.00%
Common equity tier 1 capital to risk-weighted assets amount		$ 154,016	$ 119,454
Common equity tier 1 capital to risk-weighted assets ratio	[1]	12.36%	10.90%
Common equity tier 1 capital to risk-weighted assets Minimum for capital adequacy purposes amount		$ 56,089	$ 50,425
Common equity tier 1 capital to risk-weighted assets Minimum for capital adequacy purposes ratio	[1]	4.50%	4.50%
Common equity tier 1 capital to risk-weighted assets minimum to be well capitalized amount	[2]	$ 81,017	$ 71,253
Common equity tier 1 capital to risk-weighted assets minimum to be well capitalized ratio	[1],[2]	6.50%	6.50%
Tier I leverage capital amount		$ 154,016	$ 119,454
Tier I leverage capital assets ratio	[1]	10.37%	9.15%
Tier I leverage capital Minimum for capital adequacy purposes amount		$ 59,405	$ 52,193
Tier I leverage capital minimum for capital adequacy purposes ratio	[1]	4.00%	4.00%
Tier I leverage capital minimum to be well capitalized amount	[2]	$ 74,256	$ 65,241
Tier I capital leverage capital minimum to be well capitalized ratio	[1],[2]	5.00%	5.00%
[1]	Total capital ratio is defined as Tier 1 capital plus Tier 2 capital divided by total risk-weighted assets. The Tier 1 Capital ratio is defined as Tier 1 capital divided by total risk-weighted assets. Common equity Tier 1 is defined as Tier 1 capital excluding qualifying trust preferred securities divided by total risk weighted assets. The leverage ratio is defined as Tier 1 capital divided by the most recent quarter's average total assets.
[2]	Prompt corrective action provisions are not applicable at the bank holding company level.

14. OFF-BALANCE SHEET RISK (Det

14. OFF-BALANCE SHEET RISK (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Line of credit	$ 220,673	$ 166,760
Standby Letters of Credit
Line of credit	216,769	163,572
Undisbursed Lines of Credit
Line of credit	$ 3,904	$ 3,188

15. DERIVATIVES AND FINANCIAL92

15. DERIVATIVES AND FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Notational amount	$ 100,000	$ 100,000
Fair value	2,985	3,910
Cap 1 - maturing August 2019
Notational amount	35,000	35,000
Fair value	1,011	1,334
Cap 2 - maturing September 2019
Notational amount	35,000	35,000
Fair value	1,045	1,360
Cap 3 - maturing October 2019
Notational amount	30,000	30,000
Fair value	$ 929	$ 1,216

15. DERIVATIVES AND FINANCIAL93

15. DERIVATIVES AND FINANCIAL INSTRUMENTS (Details 1) $ in Thousands	Dec. 31, 2016USD ($)
Derivatives And Financial Instruments Details 1
2,017	$ 1,779
2,018	2,247
2,019	1,751
Total	$ 5,777

15. DERIVATIVES AND FINANCIAL94

15. DERIVATIVES AND FINANCIAL INSTRUMENTS (Details 2) $ in Thousands	Dec. 31, 2016USD ($)
Derivatives And Financial Instruments Details 2
2,017	$ 74
2,018	74
Thereafter	148
Total	$ 296

15. DERIVATIVES AND FINANCIAL95

15. DERIVATIVES AND FINANCIAL INSTRUMENTS (Details Narrative) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Derivatives And Financial Instruments Details Narrative
Amortization associated with the interest rate caps	$ 912	$ 154

16. FAIR VALUE OF FINANCIAL I96

16. FAIR VALUE OF FINANCIAL INSTRUMENTS (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Estimated Fair Value	$ 197,441	$ 168,896
Quoted Prices in Active Markets for Identical Assets (Level 1)
Estimated Fair Value	1,951	1,810
Significant Other Observable (Level 2)
Estimated Fair Value	193,990	166,586
Significant Unobservable (Level 3)
Estimated Fair Value	1,500	500
U.S. Agency obligations
Estimated Fair Value	16,943	19,901
U.S. Agency obligations | Quoted Prices in Active Markets for Identical Assets (Level 1)
Estimated Fair Value	0	0
U.S. Agency obligations | Significant Other Observable (Level 2)
Estimated Fair Value	16,943	19,901
U.S. Agency obligations | Significant Unobservable (Level 3)
Estimated Fair Value	0	0
Collateralized mortgage obligations
Estimated Fair Value	42,497	60,941
Collateralized mortgage obligations | Quoted Prices in Active Markets for Identical Assets (Level 1)
Estimated Fair Value	0	0
Collateralized mortgage obligations | Significant Other Observable (Level 2)
Estimated Fair Value	42,497	60,941
Collateralized mortgage obligations | Significant Unobservable (Level 3)
Estimated Fair Value	0	0
Mortgage-backed securities
Estimated Fair Value	73,873	31,310
Mortgage-backed securities | Quoted Prices in Active Markets for Identical Assets (Level 1)
Estimated Fair Value	0	0
Mortgage-backed securities | Significant Other Observable (Level 2)
Estimated Fair Value	73,873	31,310
Mortgage-backed securities | Significant Unobservable (Level 3)
Estimated Fair Value	0	0
Municipal Bonds
Estimated Fair Value	60,677	54,434
Municipal Bonds | Quoted Prices in Active Markets for Identical Assets (Level 1)
Estimated Fair Value	0	0
Municipal Bonds | Significant Other Observable (Level 2)
Estimated Fair Value	60,677	54,434
Municipal Bonds | Significant Unobservable (Level 3)
Estimated Fair Value	0	0
Other
Estimated Fair Value	3,451	2,310
Other | Quoted Prices in Active Markets for Identical Assets (Level 1)
Estimated Fair Value	1,951	1,810
Other | Significant Other Observable (Level 2)
Estimated Fair Value	0	0
Other | Significant Unobservable (Level 3)
Estimated Fair Value	1,500	500
Interest Rate Caps
Estimated Fair Value	2,985	3,910
Interest Rate Caps | Quoted Prices in Active Markets for Identical Assets (Level 1)
Estimated Fair Value	0	0
Interest Rate Caps | Significant Other Observable (Level 2)
Estimated Fair Value	2,985	3,910
Interest Rate Caps | Significant Unobservable (Level 3)
Estimated Fair Value	0	0
Total
Estimated Fair Value	200,426	172,806
Total | Quoted Prices in Active Markets for Identical Assets (Level 1)
Estimated Fair Value	1,951	1,810
Total | Significant Other Observable (Level 2)
Estimated Fair Value	196,975	170,496
Total | Significant Unobservable (Level 3)
Estimated Fair Value	$ 1,500	$ 500

16. FAIR VALUE OF FINANCIAL I97

16. FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 1) - Significant Unobservable (Level 3) $ in Thousands	12 Months Ended
	Dec. 31, 2016USD ($)
Investment Securities Level 3 Valuation
Balance, beginning of period	$ 500
Purchases	1,000
Balance, end of period	$ 1,500

16. FAIR VALUE OF FINANCIAL I98

16. FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 2) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015
Impaired loans	$ 2,712	$ 3,382
Other real estate	4,740	5,453
Total	$ 7,452	8,835
Impaired loans [Member]
Valuation Technique	Appraisal value
Significant Unobservable Inputs	Appraisals and/or sales of comparable properties
Significant Unobservable Inputs	Appraisals discounted 5% to 10% for sales commissions and other holding costs
Other real estate [Member]
Valuation Technique	Appraisal value/Comparison sale
Significant Unobservable Inputs	Appraisals and/or sales of comparable properties
Significant Unobservable Inputs	Appraisals discounted 5% to 10% for sales commissions and other holding costs
Level 1
Impaired loans	$ 0	0
Other real estate	0	0
Total	0	0
Level 2
Impaired loans	0	0
Other real estate	0	0
Total	0	0
Level 3
Impaired loans	2,712	3,382
Other real estate	4,740	5,453
Total	$ 7,452	$ 8,835

16. FAIR VALUE OF FINANCIAL I99

16. FAIR VALUE OF FINANCIAL INSTRUMENTS (Details 3) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015
Financial Assets:
Cash and due from banks	$ 43,005	$ 55,530
Investment securities available-for-sale	197,441	168,896
Loans, net	1,183,371	1,008,515
Accrued interest receivable	4,368	3,795
Federal Home Loan Bank stock	8,400	8,061
Bank owned life insurance	34,190	28,274
Interest rate caps	2,985	3,910
Financial Liabilities:
Non-maturing deposits	953,248	663,066
Time deposits	219,007	319,781
Accrued interest payable	294	356
Repurchase agreements and federal funds purchased	20,174	30,580
FHLB Advances and other borrowings	150,000	169,800
Subordinated debentures	18,558	18,558
Estimated Fair Value
Financial Assets:
Cash and due from banks	43,005	55,530
Investment securities available-for-sale	197,441	168,896
Loans, net	1,184,621	1,013,415
Accrued interest receivable	4,368	3,795
Federal Home Loan Bank stock	8,400	8,061
Bank owned life insurance	34,190	28,274
Interest rate caps	2,985	3,910
Financial Liabilities:
Non-maturing deposits	953,248	663,066
Time deposits	219,038	320,246
Accrued interest payable	294	356
Repurchase agreements and federal funds purchased	20,174	30,580
FHLB Advances and other borrowings	149,997	169,800
Subordinated debentures	14,197	15,591
Quoted Prices in Active Markets for Identical Assets (Level 1)
Financial Assets:
Cash and due from banks	43,005	55,530
Investment securities available-for-sale	1,951	1,810
Loans, net	0	0
Accrued interest receivable	4,368	3,795
Federal Home Loan Bank stock	0	0
Bank owned life insurance	0	0
Interest rate caps	0	0
Financial Liabilities:
Non-maturing deposits	0	0
Time deposits	0	0
Accrued interest payable	294	356
Repurchase agreements and federal funds purchased	0	0
FHLB Advances and other borrowings	0	0
Subordinated debentures	0	0
Significant Other Observable (Level 2)
Financial Assets:
Cash and due from banks	0	0
Investment securities available-for-sale	193,990	166,586
Loans, net	1,181,909	1,010,033
Accrued interest receivable	0	0
Federal Home Loan Bank stock	0	0
Bank owned life insurance	34,190	28,274
Interest rate caps	2,985	3,910
Financial Liabilities:
Non-maturing deposits	953,248	663,066
Time deposits	219,038	320,246
Accrued interest payable	0	0
Repurchase agreements and federal funds purchased	20,174	30,580
FHLB Advances and other borrowings	149,997	169,800
Subordinated debentures	14,197	15,591
Significant Unobservable (Level 3)
Financial Assets:
Cash and due from banks	0	0
Investment securities available-for-sale	1,500	500
Loans, net	2,712	3,382
Accrued interest receivable	0	0
Federal Home Loan Bank stock	8,400	8,061
Bank owned life insurance	0	0
Interest rate caps	0	0
Financial Liabilities:
Non-maturing deposits	0	0
Time deposits	0	0
Accrued interest payable	0	0
Repurchase agreements and federal funds purchased	0	0
FHLB Advances and other borrowings	0	0
Subordinated debentures	$ 0	$ 0

17. PARENT COMPANY FINANCIAL100

17. PARENT COMPANY FINANCIAL DATA (Details) - USD ($) $ in Thousands	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Assets
Other assets	$ 7,769	$ 6,836
Total assets	1,503,767	1,305,911
Liabilities and stockholders' equity
Subordinated debentures	18,558	18,558
Other borrowings	0	4,800
Total liabilities	1,367,666	1,208,253
Stockholders' equity:
Common stock	44	37
Additional paid-in-capital	80,147	53,147
Accumulated other comprehensive loss	(2,840)	(886)	$ 1,142
Retained earnings	58,750	45,360
Total stockholders' equity	136,101	97,658
Total liabilities and stockholders' equity	1,503,767	1,305,911
Parent Company
Assets
Cash and due from banks	2,161	224
Investment in Paragon Commercial Bank	151,316	119,716
Investment in unconsolidated subsidiaries	558	558
Other assets	697	584
Total assets	154,732	121,082
Liabilities and stockholders' equity
Subordinated debentures	18,558	18,558
Other borrowings	0	4,800
Accrued interest payable and other liabilities	73	66
Total liabilities	18,631	23,424
Stockholders' equity:
Common stock	44	37
Additional paid-in-capital	80,147	53,147
Accumulated other comprehensive loss	(2,840)	(886)
Retained earnings	58,750	45,360
Total stockholders' equity	136,101	97,658
Total liabilities and stockholders' equity	$ 154,732	$ 121,082

17. PARENT COMPANY FINANCIAL101

17. PARENT COMPANY FINANCIAL DATA (Details 1) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Interest expense									$ (8,129)	$ (7,384)	$ (8,678)
Income tax benefit									6,477	5,761	4,403
Net income	$ 3,622	$ 3,455	$ 3,475	$ 2,838	$ 2,963	$ 3,313	$ 2,650	$ 2,308	13,390	11,234	$ 7,959
Parent Company
Equity in undistributed earnings of subsidiary									14,166	11,958
Interest expense									(629)	(715)
Other operating income									34	24
Other operating expenses									(580)	(402)
Income tax benefit									399	369
Net income									$ 13,390	$ 11,234

17. PARENT COMPANY FINANCIAL102

17. PARENT COMPANY FINANCIAL DATA (Details 2) - USD ($) $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Cash flows from operating activities:
Net income	$ 3,622	$ 3,455	$ 3,475	$ 2,838	$ 2,963	$ 3,313	$ 2,650	$ 2,308	$ 13,390	$ 11,234	$ 7,959
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Stock based compensation									427	411	336
Net gain on sale of securities									(106)	(542)	(87)
Deferred tax expense									490	2,030	2,477
Changes in assets and liabilities:
Increase in other assets									1,518	363	7,212
Increase (decrease) in other liabilities									211	811	608
Net cash used in operating activities									13,464	14,677	4,977
Cash flows from investing activities:
Proceeds from sales of securities available for sale									20,396	55,019	28,466
Net cash provided by investing activities									(211,770)	(125,770)	(132,596)
Cash flows from financing activities:
Net proceeds from sale of common stock									26,398	0	(11,780)
Proceeds from employee stock purchase plan									(181)	(203)	0
Proceeds from exercise of stock options									0	176	59
Net cash used in financing activities									185,781	130,228	118,877
Net decrease in cash and cash equivalents									(12,525)	19,135	(8,742)
Cash and cash equivalents at beginning of year				55,530				36,395	55,530	36,395	45,137
Cash and cash equivalents at end of year	43,005				55,530				43,005	55,530	36,395
Parent Company
Cash flows from operating activities:
Net income									13,390	11,234
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Equity in earnings of subsidiary									(14,166)	(11,958)
Stock based compensation									427	411
Net gain on sale of securities									0	(1)
Deferred tax expense									(3)	9
Changes in assets and liabilities:
Increase in other assets									(97)	(6)
Increase (decrease) in other liabilities									7	(6)
Net cash used in operating activities									(442)	(317)
Cash flows from investing activities:
Investment in subsidiaries and trusts									(20,500)	0
Proceeds from sales of securities available for sale									0	5
Dividends received from subsidiary									1,100	2,200
Net cash provided by investing activities									(19,400)	2,205
Cash flows from financing activities:
Repayment of long term debt									(4,800)	(2,456)
Net proceeds from sale of common stock									26,398	0
Proceeds from employee stock purchase plan									181	203
Proceeds from exercise of stock options									0	176
Net cash used in financing activities									21,779	(2,077)
Net decrease in cash and cash equivalents									1,937	(189)
Cash and cash equivalents at beginning of year				$ 224				$ 413	224	413
Cash and cash equivalents at end of year	$ 2,161				$ 224				$ 2,161	$ 224	$ 413

18. SUPPLEMENTAL CASH FLOW D103

18. SUPPLEMENTAL CASH FLOW DISCLOSURE (Details) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Supplemental Disclosures of Cash Flow Information:
Interest paid	$ 8,191	$ 7,433
Income taxes paid	6,035	4,320
Supplemental Schedule of Noncash Investing and Financing Activites:
Change in fair value of securities available-for-sale, net of taxes	(3,153)	(797)
Change in fair value of cash flow hedges, net of taxes	(9)	(1,231)	$ (1,886)
Transfer from loans to foreclosed real estate	$ 0	$ 3,484

19. ISSUANCE OF COMMON STOCK (D

19. ISSUANCE OF COMMON STOCK (Details Narrative) - shares	Dec. 31, 2016	Dec. 31, 2015
Common stock issued	5,450,713	4,581,334
Long-Term Stock Based Compensation Plan
Common stock issued	19,145
Employee Stock Purchase Plan
Common stock issued	5,998

21. QUARTERLY FINANCIAL DATA105

21. QUARTERLY FINANCIAL DATA (UNAUDITED) (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended								12 Months Ended
	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2015	Sep. 30, 2015	Jun. 30, 2015	Mar. 31, 2015	Dec. 31, 2016	Dec. 31, 2015	Dec. 31, 2014
Quarterly Financial Data Details
Interest income	$ 14,573	$ 13,855	$ 13,272	$ 12,467	$ 12,594	$ 12,510	$ 12,011	$ 11,320	$ 134	$ 232
Net interest income	12,419	11,767	11,301	10,551	10,730	10,656	10,213	9,452	46,038	41,051	$ 34,105
Provision for loan losses	200	391	0	0	0	0	179	571	591	750	538
Noninterest income	209	438	381	266	102	544	324	484	1,294	1,454	704
Noninterest expense	7,008	6,778	6,488	6,600	6,300	6,180	6,400	5,880	26,874	24,760	21,909
Income before income taxes	5,420	5,036	5,194	4,217	4,532	5,020	3,958	3,485
Net income	$ 3,622	$ 3,455	$ 3,475	$ 2,838	$ 2,963	$ 3,313	$ 2,650	$ 2,308	$ 13,390	$ 11,234	$ 7,959
Net income per share, diluted	$ 0.67	$ 0.64	$ 0.76	$ 0.62	$ 0.65	$ 0.73	$ 0.59	$ 0.52	$ 2.68	$ 2.47	$ 1.77
Net income per share, basic	$ 0.67	$ 0.64	$ 0.75	$ 0.62	$ 0.65	$ 0.73	$ 0.59	$ 0.51	$ 2.69	$ 2.49	$ 1.79

21. QUARTERLY FINANCIAL DATA106

21. QUARTERLY FINANCIAL DATA (UNAUDITED) (Details 1) - $ / shares	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016		Mar. 31, 2016	[1]	Dec. 31, 2015	[1]	Sep. 30, 2015	[1]	Jun. 30, 2015	[1]
Low
Sales price of common stock	$ 35.99	$ 34.50	$ 26.97	[1]	$ 26.25		$ 24.20		$ 21		$ 22.50
High
Sales price of common stock	$ 44.30	$ 39.99	$ 36		$ 27.39		$ 28.50		$ 25		$ 25
[1]	Based on high and low reported sales prices for our common stock from April 16, 2015 (the date our common stock began trading on the OTCQX Marketplace) through the listing on Nasdaq on June 16, 2016. These reported sales prices represent trades that were either quoted on the OTCQX Marketplace or reported to the Company's stock transfer agent, and do not include retail markups, markdowns or commissions, and do not necessarily reflect actual transactions.

21. QUARTERLY FINANCIAL DATA107

21. QUARTERLY FINANCIAL DATA (UNAUDITED) (Details 2) - $ / shares	Dec. 30, 2016	Sep. 30, 2016	Jun. 30, 2016	Jun. 16, 2016
Paragon Commercial Corporation
Total shareholder return on common stock	$ 126.36	$ 104.86	$ 101.16	$ 100
S&P 500
Total shareholder return on common stock	108.96	104.94	101.05	100
NASDAQ Bank
Total shareholder return on common stock	$ 141.22	$ 109.97	$ 100.22	$ 100