LOANS AND ALLOWANCE FOR LOAN LOSSES | LOANS AND ALLOWANCE FOR LOAN LOSSES Loans are stated at their face amount, net of deferred fees and costs, and consist of the following at June 30, 2016 and December 31, 2015 (dollars in thousands): June 30, 2016 December 31, 2015 Construction and Land Development $ 765,997 $ 749,720 Commercial Real Estate - Owner Occupied 831,880 860,086 Commercial Real Estate - Non-Owner Occupied 1,370,745 1,270,480 Multifamily Real Estate 337,723 322,528 Commercial & Industrial 469,054 435,365 Residential 1-4 Family 992,457 978,469 Auto 244,575 234,061 HELOC 519,196 516,726 Consumer and all other 409,471 304,027 Total loans held for investment, net (1) $ 5,941,098 $ 5,671,462 (1) Loans, as presented, are net of deferred fees and costs totaling $1.9 million and $3.0 million as of June 30, 2016 and December 31, 2015 , respectively. The following table shows the aging of the Company’s loan portfolio, by segment, at June 30, 2016 (dollars in thousands): 30-59 Days Past Due 60-89 Days Past Due Greater than 90 Days and still Accruing PCI Nonaccrual Current Total Loans Construction and Land Development $ 402 $ 1,177 $ 116 $ 5,013 $ 1,604 $ 757,685 $ 765,997 Commercial Real Estate - Owner Occupied 912 — 439 20,692 1,661 808,176 831,880 Commercial Real Estate - Non-Owner Occupied 267 — 723 18,297 — 1,351,458 1,370,745 Multifamily Real Estate — — — 2,092 — 335,631 337,723 Commercial & Industrial 2,464 62 117 1,354 263 464,794 469,054 Residential 1-4 Family 5,476 5,033 1,302 17,805 5,448 957,393 992,457 Auto 1,282 377 144 — 140 242,632 244,575 HELOC 1,347 1,228 642 1,517 1,495 512,967 519,196 Consumer and all other 1,364 412 50 400 250 406,995 409,471 Total Loans Held For Investment $ 13,514 $ 8,289 $ 3,533 $ 67,170 $ 10,861 $ 5,837,731 $ 5,941,098 The following table shows the aging of the Company’s loan portfolio, by segment, at December 31, 2015 (dollars in thousands): 30-59 Days Past Due 60-89 Days Past Due Greater than 90 Days and still Accruing PCI Nonaccrual Current Total Loans Construction and Land Development $ 3,155 $ 380 $ 128 $ 5,986 $ 2,113 $ 737,958 $ 749,720 Commercial Real Estate - Owner Occupied 1,714 118 103 27,388 3,904 826,859 860,086 Commercial Real Estate - Non-Owner Occupied 771 — 723 13,519 100 1,255,367 1,270,480 Multifamily Real Estate — — 272 1,555 — 320,701 322,528 Commercial & Industrial 1,056 27 124 1,813 429 431,916 435,365 Residential 1-4 Family 15,023 6,774 3,638 21,159 3,563 928,312 978,469 Auto 2,312 233 60 — 192 231,264 234,061 HELOC 2,589 1,112 762 1,791 1,348 509,124 516,726 Consumer and all other 1,167 689 19 526 287 301,339 304,027 Total Loans Held For Investment $ 27,787 $ 9,333 $ 5,829 $ 73,737 $ 11,936 $ 5,542,840 $ 5,671,462 The following table shows the PCI loan portfolios, by segment and their delinquency status, at June 30, 2016 (dollars in thousands): 30-89 Days Past Due Greater than 90 Days Current Total Construction and Land Development $ 3 $ 361 $ 4,649 $ 5,013 Commercial Real Estate - Owner Occupied 1,098 1,495 18,099 20,692 Commercial Real Estate - Non-Owner Occupied 795 171 17,331 18,297 Multifamily Real Estate — — 2,092 2,092 Commercial & Industrial 149 — 1,205 1,354 Residential 1-4 Family 1,014 1,213 15,578 17,805 HELOC 137 510 870 1,517 Consumer and all other — — 400 400 Total $ 3,196 $ 3,750 $ 60,224 $ 67,170 The following table shows the PCI loan portfolios, by segment and their delinquency status, at December 31, 2015 (dollars in thousands): 30-89 Days Past Due Greater than 90 Days Current Total Construction and Land Development $ 369 $ 241 $ 5,376 $ 5,986 Commercial Real Estate - Owner Occupied 1,139 1,412 24,837 27,388 Commercial Real Estate - Non-Owner Occupied 755 202 12,562 13,519 Multifamily Real Estate — — 1,555 1,555 Commercial & Industrial 209 21 1,583 1,813 Residential 1-4 Family 2,143 1,923 17,093 21,159 HELOC 410 458 923 1,791 Consumer and all other — — 526 526 Total $ 5,025 $ 4,257 $ 64,455 $ 73,737 The Company measures the amount of impairment by evaluating loans either in their collective homogeneous pools or individually. The following table shows the Company’s impaired loans, excluding PCI loans related to the StellarOne acquisition, by segment at June 30, 2016 and December 31, 2015 (dollars in thousands): June 30, 2016 December 31, 2015 Recorded Investment Unpaid Principal Balance Related Allowance Recorded Investment Unpaid Principal Balance Related Allowance Loans without a specific allowance Construction and Land Development $ 29,877 $ 30,354 $ — $ 33,250 $ 33,731 $ — Commercial Real Estate - Owner Occupied 11,201 11,317 — 7,781 8,983 — Commercial Real Estate - Non-Owner Occupied 3,993 3,993 — 5,328 5,325 — Multifamily Real Estate 3,777 3,777 — 3,828 3,828 — Commercial & Industrial 1,154 1,572 — 711 951 — Residential 1-4 Family 10,065 11,024 — 7,564 8,829 — Auto — — — 7 7 — HELOC 1,900 2,046 — 1,786 2,028 — Consumer and all other 247 297 — 211 211 — Total impaired loans without a specific allowance $ 62,214 $ 64,380 $ — $ 60,466 $ 63,893 $ — Loans with a specific allowance Construction and Land Development $ 1,833 $ 2,234 $ 64 $ 3,167 $ 3,218 $ 538 Commercial Real Estate - Owner Occupied 2,291 2,320 49 3,237 3,239 358 Commercial Real Estate - Non-Owner Occupied 267 267 1 907 907 75 Commercial & Industrial 1,334 1,456 47 1,952 1,949 441 Residential 1-4 Family 3,880 3,978 345 6,065 6,153 418 Auto 140 188 1 192 199 1 HELOC 437 491 81 769 925 76 Consumer and all other 79 446 1 363 512 95 Total impaired loans with a specific allowance $ 10,261 $ 11,380 $ 589 $ 16,652 $ 17,102 $ 2,002 Total impaired loans $ 72,475 $ 75,760 $ 589 $ 77,118 $ 80,995 $ 2,002 The following tables show the average recorded investment and interest income recognized for the Company’s impaired loans, excluding PCI loans related to the StellarOne acquisition, by segment for the three and six months ended June 30, 2016 and 2015 (dollars in thousands): Three Months Ended Six Months Ended Average Investment Interest Income Recognized Average Investment Interest Income Recognized Construction and Land Development $ 30,524 $ 495 $ 30,174 $ 962 Commercial Real Estate - Owner Occupied 13,567 148 13,719 292 Commercial Real Estate - Non-Owner Occupied 4,215 43 4,216 79 Multifamily Real Estate 3,791 60 3,804 120 Commercial & Industrial 2,622 31 2,861 61 Residential 1-4 Family 14,189 90 14,365 183 Auto 162 — 183 — HELOC 2,492 11 2,519 29 Consumer and all other 374 1 572 4 Total impaired loans without a specific allowance $ 71,936 $ 879 $ 72,413 $ 1,730 Three Months Ended Six Months Ended Average Investment Interest Income Recognized Average Investment Interest Income Recognized Construction and Land Development $ 40,026 $ 838 $ 48,772 $ 1,366 Commercial Real Estate - Owner Occupied 17,871 169 18,007 341 Commercial Real Estate - Non-Owner Occupied 8,736 125 8,750 181 Multifamily Real Estate 4,597 85 4,600 147 Commercial & Industrial 4,525 60 4,659 102 Residential 1-4 Family 10,924 105 10,989 202 Auto 1 — 1 — HELOC 1,240 6 1,244 11 Consumer and all other 460 4 518 9 Total impaired loans without a specific allowance $ 88,380 $ 1,392 $ 97,540 $ 2,359 The Company considers TDRs to be impaired loans. A modification of a loan’s terms constitutes a TDR if the creditor grants a concession that it would not otherwise consider to the borrower for economic or legal reasons related to the borrower’s financial difficulties. All loans that are considered to be TDRs are evaluated for impairment in accordance with the Company’s allowance for loan loss methodology and are included in the preceding impaired loan tables. For the quarter ended June 30, 2016 , the recorded investment in restructured loans prior to modifications was not materially impacted by the modification. The following table provides a summary, by segment, of modified loans that continue to accrue interest under the terms of the restructuring agreement, which are considered to be performing, and modified loans that have been placed on nonaccrual status, which are considered to be nonperforming, as of June 30, 2016 and December 31, 2015 (dollars in thousands): June 30, 2016 December 31, 2015 No. of Loans Recorded Investment Outstanding Commitment No. of Loans Recorded Investment Outstanding Commitment Performing Construction and Land Development 5 $ 3,788 $ — 6 $ 3,349 $ — Commercial Real Estate - Owner Occupied 5 2,091 — 5 1,530 — Commercial Real Estate - Non-Owner Occupied 2 2,390 — 2 2,390 — Commercial & Industrial 4 218 — 5 261 — Residential 1-4 Family 27 3,323 — 27 3,173 — Consumer and all other 1 75 — 1 77 — Total performing 44 $ 11,885 $ — 46 $ 10,780 $ — Nonperforming Construction and Land Development 2 $ 215 $ — 2 $ 321 $ — Commercial Real Estate - Owner Occupied 2 167 — 1 137 — Commercial & Industrial 1 135 — 1 2 — Residential 1-4 Family 7 1,141 — 6 1,142 — HELOC — — — 1 319 — Total nonperforming 12 $ 1,658 $ — 11 $ 1,921 $ — Total performing and nonperforming 56 $ 13,543 $ — 57 $ 12,701 $ — The Company considers a default of a restructured loan to occur when the borrower is 90 days past due following the restructure or a foreclosure and repossession of the applicable collateral occurs. During the three and six months ended June 30, 2016 and 2015 , the Company did not identify any restructured loans that went into default that had been restructured in the twelve-month period prior to default. The following table shows, by segment and modification type, TDRs that occurred during the three and six months ended June 30, 2016 (dollars in thousands): Three Months Ended Six Months Ended No. of Loans Recorded Investment at Period End No. of Loans Recorded Investment at Period End Term modification, at a market rate Construction and Land Development 1 $ 1,193 1 $ 1,193 Commercial Real Estate - Owner Occupied 1 38 2 743 Residential 1-4 Family 1 100 2 476 Total loan term extended at a market rate 3 $ 1,331 5 $ 2,412 Term modification, below market rate Residential 1-4 Family 1 $ 37 1 $ 37 Total loan term extended at a below market rate 1 $ 37 1 $ 37 Interest rate modification, below market rate Commercial & Industrial 1 $ 135 1 $ 135 Total interest only at below market rate of interest 1 $ 135 1 $ 135 Total 5 $ 1,503 7 $ 2,584 The following table shows, by segment and modification type, TDRs that occurred during the three and six months ended June 30, 2015 (dollars in thousands): Three Months Ended Six Months Ended No. of Recorded No. of Recorded Term modification, at a market rate Commercial Real Estate - Owner Occupied 1 $ 120 1 $ 120 Commercial & Industrial — — 1 18 Total loan term extended at a market rate 1 120 2 138 Term modification, below market rate Commercial Real Estate - Owner Occupied 1 $ 873 1 $ 873 Total loan term extended at a below market rate 1 $ 873 1 $ 873 Total 2 $ 993 3 $ 1,011 The following table shows the allowance for loan loss activity, balances for allowance for loan losses, and loan balances based on impairment methodology by segment for the six months ended and as of June 30, 2016 . The table below includes the provision for loan losses. As discussed in Note 1 “Accounting Policies,” the Company enhanced its loan segmentation for purposes of the allowance calculation as well as its disclosures. The impact of this enhancement is reflected in the provision amounts in the table below. In addition, a $100,000 provision was recognized during the six months ended June 30, 2016 for unfunded loan commitments for which the reserves are recorded as a component of “Other Liabilities” on the Company’s Consolidated Balance Sheets. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories (dollars in thousands): Allowance for loan losses Balance, beginning of the year Recoveries credited to allowance Loans charged off Provision charged to operations Balance, end of period Construction and Land Development $ 6,040 $ 97 $ (859 ) $ 5,030 $ 10,308 Commercial Real Estate - Owner Occupied 4,614 62 (772 ) 129 4,033 Commercial Real Estate - Non-Owner Occupied 6,929 — — (1,536 ) 5,393 Multifamily Real Estate 1,606 — — (697 ) 909 Commercial & Industrial 3,163 355 (1,285 ) 1,793 4,026 Residential 1-4 Family 5,414 381 (295 ) 600 6,100 Auto 1,703 131 (525 ) (470 ) 839 HELOC 2,934 132 (800 ) (948 ) 1,318 Consumer and all other 1,644 330 (729 ) 903 2,148 Total $ 34,047 $ 1,488 $ (5,265 ) $ 4,804 $ 35,074 Loans individually evaluated for impairment Loans collectively evaluated for impairment Loans acquired with deteriorated credit quality Total Loans ALL Loans ALL Loans ALL Loans ALL Construction and Land Development $ 31,710 $ 64 $ 729,274 $ 10,244 $ 5,013 $ — $ 765,997 $ 10,308 Commercial Real Estate - Owner Occupied 13,492 49 797,696 3,984 20,692 — 831,880 4,033 Commercial Real Estate - Non-Owner Occupied 4,260 1 1,348,188 5,392 18,297 — 1,370,745 5,393 Multifamily Real Estate 3,777 — 331,854 909 2,092 — 337,723 909 Commercial & Industrial 2,488 47 465,212 3,979 1,354 — 469,054 4,026 Residential 1-4 Family 13,945 345 960,707 5,755 17,805 — 992,457 6,100 Auto 140 1 244,435 838 — — 244,575 839 HELOC 2,337 81 515,342 1,237 1,517 — 519,196 1,318 Consumer and all other 326 1 408,745 2,147 400 — 409,471 2,148 Total loans held for investment, net $ 72,475 $ 589 $ 5,801,453 $ 34,485 $ 67,170 $ — $ 5,941,098 $ 35,074 The following table shows the allowance for loan loss activity, balances for allowance for loan losses, and loan balances based on impairment methodology by segment for the six months ended and as of June 30, 2015 . In addition, a $ 200,000 provision was recognized during the six months ended June 30, 2015 for unfunded loan commitments. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories (dollars in thousands): Allowance for loan losses Balance, beginning of the year Recoveries credited to allowance Loans charged off Provision charged to operations Balance, end of period Construction and Land Development $ 4,856 $ 345 $ (68 ) $ (205 ) $ 4,928 Commercial Real Estate - Owner Occupied 4,640 8 (481 ) 697 4,864 Commercial Real Estate - Non-Owner Occupied 7,256 55 (2,765 ) 1,760 6,306 Multifamily Real Estate 1,374 — — 261 1,635 Commercial & Industrial 2,610 217 (1,693 ) 1,958 3,092 Residential 1-4 Family 5,607 469 (715 ) (75 ) 5,286 Auto 1,297 162 (382 ) 318 1,395 HELOC 2,675 146 (288 ) 179 2,712 Consumer and all other 2,069 294 (643 ) 406 2,126 Total $ 32,384 $ 1,696 $ (7,035 ) $ 5,299 $ 32,344 Loans individually evaluated for impairment Loans collectively evaluated for impairment Loans acquired with deteriorated credit quality Total Loans ALL Loans ALL Loans ALL Loans ALL Construction and Land Development $ 48,184 $ 145 $ 614,653 $ 4,783 $ 8,397 $ — $ 671,234 $ 4,928 Commercial Real Estate - Owner Occupied 18,079 657 826,665 4,207 29,838 — 874,582 4,864 Commercial Real Estate - Non-Owner Occupied 8,438 81 1,192,226 6,225 16,982 — 1,217,646 6,306 Multifamily Real Estate 4,621 — 308,849 1,635 3,004 — 316,474 1,635 Commercial & Industrial 4,427 460 418,826 2,632 2,940 — 426,193 3,092 Residential 1-4 Family 10,024 256 957,411 5,030 24,157 — 991,592 5,286 Auto — — 216,420 1,395 — — 216,420 1,395 HELOC 1,058 4 509,225 2,708 1,840 — 512,123 2,712 Consumer and all other 384 7 283,054 2,119 683 — 284,121 2,126 Total loans held for investment, net $ 95,215 $ 1,610 $ 5,327,329 $ 30,734 $ 87,841 $ — $ 5,510,385 $ 32,344 The Company uses a risk rating system and past due status as the primary credit quality indicators for the loan categories. The risk rating system on a scale of 0 through 9 is used to determine risk level as used in the calculation of the allowance for loan losses; on those loans without a risk rating, the Company uses past due status to determine risk level. The risk levels, as described below, do not necessarily follow the regulatory definitions of risk levels with the same name. A general description of the characteristics of the risk levels follows: Pass is determined by the following criteria: • Risk rated 0 loans have little or no risk and are generally secured by General Obligation Municipal Credits; • Risk rated 1 loans have little or no risk and are generally secured by cash or cash equivalents; • Risk rated 2 loans have minimal risk to well qualified borrowers and no significant questions as to safety; • Risk rated 3 loans are satisfactory loans with strong borrowers and secondary sources of repayment; • Risk rated 4 loans are satisfactory loans with borrowers not as strong as risk rated 3 loans and may exhibit a greater degree of financial risk based on the type of business supporting the loan; or • Loans that are not risk rated but that are 0 to 29 days past due. Special Mention is determined by the following criteria: • Risk rated 5 loans are watch loans that warrant more than the normal level of supervision and have the possibility of an event occurring that may weaken the borrower’s ability to repay; • Risk rated 6 loans have increasing potential weaknesses beyond those at which the loan originally was granted and if not addressed could lead to inadequately protecting the Company’s credit position; or • Loans that are not risk rated but that are 30 to 89 days past due. Substandard is determined by the following criteria: • Risk rated 7 loans are substandard loans and are inadequately protected by the current sound worth or paying capacity of the obligor or the collateral pledged; these have well defined weaknesses that jeopardize the liquidation of the debt with the distinct possibility the Company will sustain some loss if the deficiencies are not corrected; or • Loans that are not risk rated but that are 90 to 149 days past due. Doubtful is determined by the following criteria: • Risk rated 8 loans are doubtful of collection and the possibility of loss is high but pending specific borrower plans for recovery, its classification as a loss is deferred until its more exact status is determined; • Risk rated 9 loans are loss loans which are considered uncollectable and of such little value that their continuance as bankable assets is not warranted; or • Loans that are not risk rated but that are over 149 days past due. The following table shows the recorded investment in all loans, excluding PCI loans, by segment with their related risk level as of June 30, 2016 (dollars in thousands): Pass Special Mention Substandard Doubtful Total Construction and Land Development $ 684,002 $ 47,592 $ 29,274 $ 116 $ 760,984 Commercial Real Estate - Owner Occupied 779,574 25,352 6,262 — 811,188 Commercial Real Estate - Non-Owner Occupied 1,317,192 30,997 4,259 — 1,352,448 Multifamily Real Estate 324,718 7,136 3,777 — 335,631 Commercial & Industrial 449,708 15,953 2,039 — 467,700 Residential 1-4 Family 943,154 22,467 6,876 2,155 974,652 Auto 242,596 1,698 103 178 244,575 HELOC 511,936 3,718 1,438 587 517,679 Consumer and all other 405,742 3,083 37 209 409,071 Total $ 5,658,622 $ 157,996 $ 54,065 $ 3,245 $ 5,873,928 The following table shows the recorded investment in all loans, excluding PCI loans, by segment with their related risk level as of December 31, 2015 (dollars in thousands): Pass Special Mention Substandard Doubtful Total Construction and Land Development $ 663,067 $ 52,650 $ 27,980 $ 37 $ 743,734 Commercial Real Estate - Owner Occupied 800,979 20,856 8,931 1,932 832,698 Commercial Real Estate - Non-Owner Occupied 1,228,956 22,341 5,664 — 1,256,961 Multifamily Real Estate 315,128 2,017 3,828 — 320,973 Commercial & Industrial 414,333 16,724 2,396 99 433,552 Residential 1-4 Family 912,839 34,728 8,037 1,706 957,310 Auto 230,670 3,109 194 88 234,061 HELOC 507,514 4,801 1,611 1,009 514,935 Consumer and all other 299,014 3,996 231 260 303,501 Total $ 5,372,500 $ 161,222 $ 58,872 $ 5,131 $ 5,597,725 The following table shows the recorded investment in only PCI loans by segment with their related risk level as of June 30, 2016 (dollars in thousands): Pass Special Mention Substandard Doubtful Total Construction and Land Development $ 1,071 $ 2,432 $ 1,269 $ 241 $ 5,013 Commercial Real Estate - Owner Occupied 5,407 9,813 5,472 — 20,692 Commercial Real Estate - Non-Owner Occupied 5,335 12,400 562 — 18,297 Multifamily Real Estate 350 1,742 — — 2,092 Commercial & Industrial 104 434 816 — 1,354 Residential 1-4 Family 8,677 5,224 3,285 619 17,805 HELOC 861 146 79 431 1,517 Consumer and all other 181 195 24 — 400 Total $ 21,986 $ 32,386 $ 11,507 $ 1,291 $ 67,170 The following table shows the recorded investment in only PCI loans by segment with their related risk level as of December 31, 2015 (dollars in thousands): Pass Special Mention Substandard Doubtful Total Construction and Land Development $ 2,059 $ 1,778 $ 1,908 $ 241 $ 5,986 Commercial Real Estate - Owner Occupied 5,260 15,530 6,598 — 27,388 Commercial Real Estate - Non-Owner Occupied 4,442 7,827 1,250 — 13,519 Multifamily Real Estate 356 1,199 — — 1,555 Commercial & Industrial 144 359 1,289 21 1,813 Residential 1-4 Family 9,098 6,380 4,605 1,076 21,159 HELOC 923 410 20 438 1,791 Consumer and all other 57 379 90 — 526 Total $ 22,339 $ 33,862 $ 15,760 $ 1,776 $ 73,737 Loans acquired are originally recorded at fair value, with certain loans being identified as impaired at the date of purchase. The fair values were determined based on the credit quality of the portfolio, expected future cash flows, and timing of those expected future cash flows. The following shows changes in the accretable yield for loans accounted for under ASC 310-30, Receivables – Loans and Debt Securities Acquired with Deteriorated Credit Quality, for the periods presented (dollars in thousands): For the Six Months Ended 2016 2015 Balance at beginning of period $ 22,139 $ 28,956 Additions — — Accretion (2,792 ) (3,106 ) Reclass of nonaccretable difference due to improvement in expected cash flows 3,450 2,976 Other, net (1) (2,139 ) (4,784 ) Balance at end of period $ 20,658 $ 24,042 (1) This line item represents changes in the cash flows expected to be collected due to the impact of non-credit changes such as prepayment assumptions, changes in interest rates on variable rate PCI loans, and discounted payoffs that occurred in the quarter. The carrying value of the Company’s PCI loan portfolio, accounted for under ASC 310-30, totaled $67.2 million at June 30, 2016 and $73.7 million at December 31, 2015 . The outstanding balance of the Company’s PCI loan portfolio totaled $83.1 million at June 30, 2016 and $90.3 million at December 31, 2015 . The carrying value of the Company’s acquired performing loan portfolio, accounted for under ASC 310-20, Receivables – Nonrefundable Fees and Other Costs , totaled $1.2 billion at June 30, 2016 and $1.4 billion at December 31, 2015 ; the remaining discount on these loans totaled $19.1 million at June 30, 2016 and $20.8 million at December 31, 2015 . |