Loans | NOTE 6: Loans The following table sets forth information concerning the loan portfolio by collateral types as of the dates indicated. March 31, 2017 December 31, 2016 Loans excluding PCI loans Real estate loans Residential $ 818,537 $ 816,304 Commercial 1,824,100 1,755,922 Land, development and construction 148,585 142,044 Total real estate 2,791,222 2,714,270 Commercial 462,925 439,540 Consumer and other loans 88,941 89,538 Loans before unearned fees and deferred cost 3,343,088 3,243,348 Net unearned fees and costs 858 475 Total loans excluding PCI loans 3,343,946 3,243,823 PCI loans (note 1) Real estate loans Residential 67,234 72,179 Commercial 94,751 99,566 Land, development and construction 9,522 9,944 Total real estate 171,507 181,689 Commercial 4,177 3,825 Consumer and other loans 374 410 Total PCI loans 176,058 185,924 Total loans 3,520,004 3,429,747 Allowance for loan losses for loans that are not PCI loans (27,521 ) (26,569 ) Allowance for loan losses for PCI loans (298 ) (472 ) Total loans, net of allowance for loan losses $ 3,492,185 $ 3,402,706 note 1: Purchased credit impaired (“PCI”) loans are being accounted for pursuant to ASC Topic 310-30. The table below set forth the activity in the allowance for loan losses for the periods presented. Allowance for loan losses for loans that are not PCI loans Allowance for loan losses on PCI loans Total Three months ended March 31, 2017 Balance at beginning of period $ 26,569 $ 472 $ 27,041 Loans charged-off (902 ) — (902 ) Recoveries of loans previously charged-off 685 — 685 Net charge-offs (217 ) — (217 ) Provision for loan losses 1,169 (174 ) 995 Balance at end of period $ 27,521 $ 298 $ 27,819 Three months ended March 31, 2016 Balance at beginning of period $ 22,143 $ 121 $ 22,264 Loans charged-off (495 ) — (495 ) Recoveries of loans previously charged-off 843 — 843 Net recoveries 348 — 348 Provision for loan losses 511 (1 ) 510 Balance at end of period $ 23,002 $ 120 $ 23,122 The following tables present the activity in the allowance for loan losses by portfolio segment for the periods presented. Real Estate Loans Residential Commercial Land, develop., constr. Comm. & industrial Consumer & other Total Allowance for loan losses for loans that are not PCI loans: Three months ended March 31, 2017 Beginning of the period $ 5,640 $ 14,713 $ 883 $ 3,785 $ 1,548 $ 26,569 Charge-offs (86 ) (14 ) — (528 ) (274 ) (902 ) Recoveries 216 279 37 53 100 685 Provision for loan losses (7 ) 635 143 234 164 1,169 Balance at end of period $ 5,763 $ 15,613 $ 1,063 $ 3,544 $ 1,538 $ 27,521 Three months ended March 31, 2016 Beginning of the period $ 6,015 $ 10,559 $ 936 $ 3,212 $ 1,421 $ 22,143 Charge-offs (81 ) (225 ) (34 ) — (155 ) (495 ) Recoveries 318 204 205 58 58 843 Provision for loan losses (428 ) 871 (211 ) 163 116 511 Balance at end of period $ 5,824 $ 11,409 $ 896 $ 3,433 $ 1,440 $ 23,002 Real Estate Loans Residential Commercial Land, develop., constr. Comm. & industrial Consumer & other Total Allowance for loan losses for loans that are PCI loans: Three months ended March 31, 2017 Beginning of the period $ 54 $ 92 $ 312 $ — $ 14 $ 472 Charge-offs — — — — — — Recoveries — — — — — — Provision for loan losses (4 ) (34 ) (136 ) — — (174 ) Balance at end of period $ 50 $ 58 $ 176 $ — $ 14 $ 298 Three months ended March 31, 2016 Beginning of the period $ — $ 103 $ 1 $ 3 $ 14 $ 121 Charge-offs — — — — — — Recoveries — — — — — — Provision for loan losses — — — (1 ) — (1 ) Balance at end of period $ — $ 103 $ 1 $ 2 $ 14 $ 120 The following tables present the balance in the allowance for loan losses and the recorded investment in loans by portfolio segment and based on impairment method as of March 31, 2017 and December 31, 2016. Accrued interest receivable and unearned loan fees and costs are not included in the recorded investment because they are not material. Real Estate Loans As of March 31, 2017 Residential Commercial Land, develop., constr. Comm. & industrial Consumer & other Total Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ 585 $ 2 $ 9 $ 5 $ 22 $ 623 Collectively evaluated for impairment 5,178 15,611 1,054 3,539 1,516 26,898 Purchased credit impaired 50 58 176 — 14 298 Total ending allowance balance $ 5,813 $ 15,671 $ 1,239 $ 3,544 $ 1,552 $ 27,819 Loans: Individually evaluated for impairment $ 7,687 $ 8,804 $ 354 $ 1,538 $ 223 $ 18,606 Collectively evaluated for impairment 810,850 1,815,296 148,231 461,387 88,718 3,324,482 Purchased credit impaired 67,234 94,751 9,522 4,177 374 176,058 Total ending loan balances $ 885,771 $ 1,918,851 $ 158,107 $ 467,102 $ 89,315 $ 3,519,146 Real Estate Loans As of December 31, 2016 Residential Commercial Land, develop., constr. Comm. & industrial Consumer & other Total Allowance for loan losses: Ending allowance balance attributable to loans: Individually evaluated for impairment $ 653 $ — $ 10 $ 7 $ 25 $ 695 Collectively evaluated for impairment 4,987 14,713 873 3,778 1,523 25,874 Purchased credit impaired 54 92 312 — 14 472 Total ending allowance balance $ 5,694 $ 14,805 $ 1,195 $ 3,785 $ 1,562 $ 27,041 Loans: Individually evaluated for impairment $ 8,237 $ 9,017 $ 1,059 $ 1,710 $ 230 $ 20,253 Collectively evaluated for impairment 808,067 1,746,905 140,985 437,830 89,308 3,223,095 Purchased credit impaired 72,179 99,566 9,944 3,825 410 185,924 Total ending loan balance $ 888,483 $ 1,855,488 $ 151,988 $ 443,365 $ 89,948 $ 3,429,272 Loans collectively evaluated for impairment reported at March 31, 2017 include loans acquired from Gulfstream Business Bank (“GSB”) on January 17, 2014 and from First Southern Bank (“FSB”) on June 1, 2014 and that are not PCI loans. These loans were performing loans recorded at estimated fair value at the acquisition date. The aggregate fair value adjustment for these loans at their respective acquisition dates was approximately $17,761, or approximately 2.10% of the aggregate acquisition date balances. The amount is accreted into interest income over the remaining lives of the related loans on a level yield basis. The aggregate unamortized acquisition date fair value adjustment was approximately $5,683 and $6,473, which represents approximately 1.19% and 1.29% of the remaining outstanding balance of these acquired loans at , respectively. Management has also estimated probable incurred losses based on performance since the respective acquisition dates, and based on these estimates, has included $2,089 and $2,230 in the Company’s general loan allowance with respect to these acquired loans at March 31, 2017 and December 31, 2016, respectively. Loans collectively evaluated for impairment reported at March 31, 2017 also include loans acquired from Community and Hometown on March 1, 2016. Management evaluated the performance of these groups of loans over the period subsequent to the acquisition date and considered the accretion of the credit discount, levels of and trends in non-performing loans, past-due loans, adverse loan grade classification changes, net charge-offs and impaired loans. The loans acquired from Community and Hometown are performing as expected and therefore no allowance for loan losses was recorded for these loans at March 31, 2017. The table below summarizes impaired loan data for the periods presented. Mar. 31, 2017 Dec. 31, 2016 Performing TDRs (these are not included in nonperforming loans ("NPLs")) $ 10,976 $ 11,030 Nonperforming TDRs (these are included in NPLs) 1,295 2,075 Total TDRs (these are included in impaired loans) 12,271 13,105 Impaired loans that are not TDRs 6,335 7,148 Total impaired loans $ 18,606 $ 20,253 In certain situations it is more common to restructure or modify the terms of troubled loans (i.e. troubled debt restructure or “TDRs”). In those circumstances it may be beneficial to restructure the terms of a loan and work with the borrower for the benefit of both parties, versus forcing the property into foreclosure and having to dispose of it in a distressed sale. When the terms of a loan have been modified, usually the monthly payment and/or interest rate is reduced for generally twelve to twenty-four months. Material principal amounts on any loan modifications have not been forgiven to date. TDRs as of March 31, 2017 and December 31, 2016 quantified by loan type classified separately as accrual (performing loans) and non-accrual (non performing loans) are presented in the tables below. As of March 31, 2017 Accruing Non Accrual Total Real estate loans: Residential $ 7,098 $ 588 $ 7,686 Commercial 2,821 597 3,418 Land, development, construction 272 82 354 Total real estate loans 10,191 1,267 11,458 Commercial 590 — 590 Consumer and other 195 28 223 Total TDRs $ 10,976 $ 1,295 $ 12,271 As of December 31, 2016 Accruing Non-Accrual Total Real estate loans: Residential $ 7,358 $ 879 $ 8,237 Commercial 2,442 1,082 3,524 Land, development, construction 281 84 365 Total real estate loans 10,081 2,045 12,126 Commercial 749 — 749 Consumer and other 200 30 230 Total TDRs $ 11,030 $ 2,075 $ 13,105 Our policy is to return non accrual TDR loans to accrual status when all the principal and interest amounts contractually due, pursuant to its modified terms, are brought current and future payments are reasonably assured. Our policy also considers the payment history of the borrower, but is not dependent upon a specific number of payments. The Company recorded a provision for loan loss expense of $22 and partial charge offs of $23 on the TDR loans described above during the three month period ending March 31, 2017. The Company recorded a provision Loans are modified to minimize loan losses when we believe the modification will improve the borrower’s financial condition and ability to repay the loan. We typically do not forgive principal. We generally either reduce interest rates or decrease monthly payments for a temporary period of time and those reductions of cash flows are capitalized into the loan balance. We may also extend maturities, convert balloon loans to longer term amortizing loans, or vice versa, or change interest rates between variable and fixed rate . Each borrower and situation is unique and we try to accommodate the borrower and minimize the Company’s potential losses. Approximately 89% of our TDRs are current pursuant to their modified terms, and $1,295, or approximately 11% of Loans modified as TDRs during the three month period ending March 31, 2017 were $70. The provision of $2 for loans modified The following table presents loans by class modified and for which there was a payment default within twelve months following the modification during the periods ending March 31, 2017 and 2016. Period ending Period ending March 31, 2017 March 31, 2016 Number Recorded Number Recorded of loans investment of loans investment Residential — $ — — $ — Commercial real estate 1 456 2 1,004 Land, development, construction — — — — Commercial and Industrial — — 1 63 Consumer and other — — — — Total 1 $ 456 3 $ 1,067 The Company recorded a provision for loan loss expense of $5 and $7 and partial charge offs of $5 and $19, on TDR loans that subsequently defaulted as described above during the three month periods ending The following tables present loans individually evaluated for impairment by class of loans as of March 31, 2017 and December 31, 2016, excluding purchased credit impaired loans accounted for pursuant to ASC Topic 310-30. The recorded investment is less than the unpaid principal balance due to partial charge-offs. As of March 31, 2017 Unpaid principal balance Recorded investment Allowance for loan losses allocated With no related allowance recorded: Residential real estate $ 4,324 $ 4,218 $ — Commercial real estate 10,043 8,735 — Land, development, construction 213 172 — Commercial and industrial 1,389 1,335 — Consumer, other 126 109 — With an allowance recorded: Residential real estate 3,626 3,469 585 Commercial real estate 70 69 2 Land, development, construction 209 182 9 Commercial and industrial 204 203 5 Consumer, other 119 114 22 Total $ 20,323 $ 18,606 $ 623 As of December 31, 2016 Unpaid principal balance Recorded investment Allowance for loan losses allocated With no related allowance recorded: Residential real estate $ 3,950 $ 3,847 $ — Commercial real estate 10,288 9,017 — Land, development, construction 1,064 874 — Commercial and industrial 1,493 1,448 — Consumer, other 87 83 — With an allowance recorded: Residential real estate 4,592 4,390 653 Commercial real estate — — — Land, development, construction 212 185 10 Commercial and industrial 263 262 7 Consumer, other 165 147 25 Total $ 22,114 $ 20,253 $ 695 Three months ended March 31, 2017 Average of impaired loans Interest income recognized during impairment Cash basis interest income recognized Real estate loans: Residential $ 7,962 $ 61 $ — Commercial 8,910 35 — Land, development, construction 706 4 — Total real estate loans 17,578 100 — Commercial and industrial 1,625 8 — Consumer and other loans 227 2 — Total $ 19,430 $ 110 $ — Three months ended March 31, 2016 Average of impaired loans Interest income recognized during impairment Cash basis interest income recognized Real estate loans: Residential $ 8,278 $ 57 $ — Commercial 13,326 55 — Land, development, construction 2,146 12 — Total real estate loans 23,750 124 — Commercial and industrial 1,525 12 — Consumer and other loans 270 3 — Total $ 25,545 $ 139 $ — Nonperforming loans include both smaller balance homogeneous loans that are collectively evaluated for impairment and individually classified impaired loans, excluding purchased credit impaired loans accounted for pursuant to ASC Topic 310-30. Nonperforming loans were as follows: Mar. 31, 2017 Dec. 31, 2016 Non accrual loans $ 17,569 $ 19,003 Loans past due over 90 days and still accruing interest — — Total non performing loans $ 17,569 $ 19,003 The following table presents the recorded investment in nonaccrual loans and loans past due over 90 days still on accrual by class of loans as of March 31, 2017 and December 31, 2016, excluding purchased credit impaired loans: As of March 31, 2017 Nonaccrual Loans past due over 90 days still accruing Residential real estate $ 7,964 $ — Commercial real estate 7,499 — Land, development, construction 372 — Commercial 1,453 — Consumer, other 281 — Total $ 17,569 $ — As of December 31, 2016 Nonaccrual Loans past due over 90 days still accruing Residential real estate $ 7,068 $ — Commercial real estate 9,116 — Land, development, construction 1,060 — Commercial 1,421 — Consumer, other 338 — Total $ 19,003 $ — The following table presents the aging of the recorded investment in past due loans as of March 31, 2017 and December 31, 2016, excluding purchased credit impaired loans: Accruing Loans Total 30 - 59 days past due 60 - 89 days past due Greater than 90 days past due Total Past Due Loans Not Past Due Nonaccrual Loans As of March 31, 2017 Residential real estate $ 818,537 $ 2,120 $ 4,655 $ — $ 6,775 $ 803,798 $ 7,964 Commercial real estate 1,824,100 3,965 2 — 3,967 1,812,634 7,499 Land/dev/construction 148,585 765 — — 765 147,448 372 Commercial 462,925 2,508 1,050 — 3,558 457,914 1,453 Consumer 88,941 499 151 — 650 88,010 281 $ 3,343,088 $ 9,857 $ 5,858 $ — $ 15,715 $ 3,309,804 $ 17,569 Accruing Loans Total 30 - 59 days past due 60 - 89 days past due Greater than 90 days past due Total Past Due Loans Not Past Due Nonaccrual Loans As of December 31, 2016 Residential real estate $ 816,304 $ 3,739 $ 4,561 $ — $ 8,300 $ 800,936 $ 7,068 Commercial real estate 1,755,922 3,580 1,179 — 4,759 1,742,047 9,116 Land/dev/construction 142,044 2,111 71 — 2,182 138,802 1,060 Commercial 439,540 2,584 322 — 2,906 435,213 1,421 Consumer 89,538 501 178 — 679 88,521 338 $ 3,243,348 $ 12,515 $ 6,311 $ — $ 18,826 $ 3,205,519 $ 19,003 Credit Quality Indicators: The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis is performed on at least an annual basis. The Company uses the following definitions for risk ratings: Special Mention: Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected, these potential weaknesses may result in deterioration of the repayment prospects for the loan or of the institution’s credit position at some future date. Substandard: Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Doubtful: Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable. Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. The following table presents the risk category of loans by class of loans based on the most recent analysis performed, excluding purchased credit impaired loans accounted for pursuant to ASC Topic 310-30, as of March 31, 2017 and December 31, 2016. As of March 31, 2017 Loan Category Pass Special Mention Substandard Doubtful Residential real estate $ 786,646 $ 13,270 $ 18,621 $ — Commercial real estate 1,705,877 92,195 26,028 — Land/dev/construction 138,354 8,998 1,233 — Commercial 449,928 10,204 2,793 — Consumer 88,204 265 472 — Total $ 3,169,009 $ 124,932 $ 49,147 $ — As of December 31, 2016 Loan Category Pass Special Mention Substandard Doubtful Residential real estate $ 784,491 $ 13,820 $ 17,993 $ — Commercial real estate 1,636,473 94,897 24,552 — Land/dev/construction 129,781 10,278 1,985 — Commercial 426,894 9,570 3,076 — Consumer 88,714 270 554 — Total $ 3,066,353 $ 128,835 $ 48,160 $ — The Company considers the performance of the loan portfolio and its impact on the allowance for loan losses. For residential and consumer loan classes, the Company also evaluates credit quality based on the aging status of the loan, which was previously presented, and by payment activity. The following table presents the recorded investment in residential and consumer loans, excluding purchased credit impaired loans, based on payment activity as of March 31, 2017 and December 31, 2016: As of March 31, 2017 Residential Consumer Performing $ 810,573 $ 88,660 Nonperforming 7,964 281 Total $ 818,537 $ 88,941 As of December 31, 2016 Residential Consumer Performing $ 809,236 $ 89,200 Nonperforming 7,068 338 Total $ 816,304 $ 89,538 Purchased Credit Impaired (“PCI”) loans: Income is recognized on PCI loans pursuant to ASC Topic 310-30. A portion of the fair value discount has been ascribed as an accretable yield that is accreted into interest income over the estimated remaining life of the loans. The remaining non-accretable difference represents cash flows not expected to be collected. The table below summarizes the total contractually required principal and interest cash payments, management’s estimate of expected total cash payments and carrying value of the loans as of March 31, 2017 and December 31, 2016. Contractually required principal and interest payments have been adjusted for estimated prepayments. Mar. 31, 2017 Dec. 31, 2016 Contractually required principal and interest $ 275,938 $ 297,821 Non-accretable difference (10,426 ) (18,372 ) Cash flows expected to be collected 265,512 279,449 Accretable yield (89,454 ) (93,525 ) Carrying value of acquired loans 176,058 185,924 Allowance for loan losses (298 ) (472 ) Carrying value less allowance for loan losses $ 175,760 $ 185,452 We adjusted our estimates of future expected losses, cash flows and renewal assumptions during the current quarter. These adjustments resulted in an increase in expected cash flows and accretable yield, and a decrease in the non-accretable difference. We reclassified approximately $3,804 and $3,364 from non-accretable Activity during the Effect of income all other three month period ending March 31, 2017 Dec. 31, 2016 acquisitions accretion adjustments Mar. 31, 2017 Contractually required principal and interest $ 297,821 $ — $ — $ (21,883 ) $ 275,938 Non-accretable difference (18,372 ) — — 7,946 (10,426 ) Cash flows expected to be collected 279,449 — — (13,937 ) 265,512 Accretable yield (93,525 ) — 8,525 (4,454 ) (89,454 ) Carry value of acquired loans $ 185,924 $ — $ 8,525 $ (18,391 ) $ 176,058 Activity during the Effect of income all other three month period ending March 31, 2016 Dec. 31, 2015 acquisitions accretion adjustments Mar. 31, 2016 Contractually required principal and interest $ 332,570 $ 73,005 $ — $ (31,689 ) $ 373,886 Non-accretable difference (19,452 ) (9,295 ) — 6,520 (22,227 ) Cash flows expected to be collected 313,118 63,710 — (25,169 ) 351,659 Accretable yield (102,590 ) (18,585 ) 8,908 (2,876 ) (115,143 ) Carry value of acquired loans $ 210,528 $ 45,125 $ 8,908 $ (28,045 ) $ 236,516 |