Loans | (6) Loans A summary of loans held for investment by loan type is included in the following table: December 31, December 31, 2016 2015 (In thousands) Commercial and residential real estate $ 1,768,424 $ 1,281,701 Construction 88,451 107,170 Commercial 432,083 323,552 Agricultural 16,690 9,294 Consumer 125,264 66,288 SBA 52,380 25,645 Other 31,778 631 Total gross loans 2,515,070 1,814,281 Deferred (fees) and costs (61) 255 Loans, held for investment, net 2,515,009 1,814,536 Less allowance for loan losses (23,250) (23,000) Net loans, held for investment $ 2,491,759 $ 1,791,536 During 2016 , excluding the Home State transaction, the Company purchased $109,519,000 in performing loans, included in our Real Estate and Consumer portfolios. In comparison, during 2015 the Company purchased $50,111,000 in performing loans included in our Real Estate portfolio segment. Activity in the allowance for loan losses for the periods indicated is as follows: Year Ended December 31, 2016 2015 2014 Balance, beginning of period $ 23,000 $ 22,490 $ 21,005 Provision for loan losses 143 96 14 Loans charged-off (721) (238) (623) Recoveries on loans previously charged-off 828 652 2,094 Balance, end of period $ 23,250 $ 23,000 $ 22,490 The Company’s additional disclosures relating to loans and the allowance for loan losses are broken out into two subsets, portfolio segment and class. The portfolio segment level is defined as the level where financing receivables are aggregated in developing the Company’s systematic method for calculating its allowance for loan losses. The class level is the second level at which credit information is presented and represents the categorization of financing related receivables at a slightly less aggregated level than the portfolio segment level. Because data presented according to class is dependent upon the underlying purpose of the loan, whereas loan data organized by portfolio segment is determined by the loan’s underlying collateral, disclosures broken out by portfolio segment versus class may not be in agreement. The disclosures in this footnote include both Non-PC I and PCI loans. As of December 31, 2016 PCI loans acquired in the Home State transaction are not considered material and as a result separate PCI disclosures are not included. The following tables provide detail for the ending balances in the Company’s allowance for loan losses and loans held for investment, broken down by portfolio segment as of December 31, 2016 and December 31, 2015. In addition, the table also provides a rollforward by portfolio segment of the allowance for loan losses for the years ended December 31, 2016, December 31, 2015 and December 31, 2014. The detail provided for the amount of the allowance for loan losses and loans individually versus collectively evaluated for impairment (i.e., the specific component versus the general component of the allowance for loan losses) corresponds to the Company’s systematic methodology for estimating its allowance for loan losses. Real Estate Consumer and Installment Commercial and Other Total (In thousands) Allowance for Loan Losses Balance as of January 1, 2014 $ 18,475 $ 52 $ 2,478 $ 21,005 Charge-offs (23) (38) (562) (623) Recoveries 1,734 27 333 2,094 Provision (credit) (579) (2) 595 14 Balance as of December 31, 2014 $ 19,607 $ 39 $ 2,844 $ 22,490 Balance as of December 31, 2014 $ 19,607 $ 39 $ 2,844 $ 22,490 Charge-offs (21) (12) (205) (238) Recoveries 284 29 339 652 Provision (credit) 436 15 (355) 96 Balance as of December 31, 2015 $ 20,306 $ 71 $ 2,623 $ 23,000 Balance as of December 31, 2015 $ 20,306 $ 71 $ 2,623 $ 23,000 Charge-offs (217) (51) (453) (721) Recoveries 340 14 474 828 Provision (credit) (347) 71 419 143 Balance as of December 31, 2016 $ 20,082 $ 105 $ 3,063 $ 23,250 Balances at December 31, 2016: Allowance for Loan Losses Individually evaluated $ 29 $ - $ 193 $ 222 Collectively evaluated 20,053 105 2,870 23,028 Total $ 20,082 $ 105 $ 3,063 $ 23,250 Loans Individually evaluated $ 22,728 $ 2 $ 7,645 $ 30,375 Collectively evaluated 2,024,524 55,182 404,928 2,484,634 Total $ 2,047,252 $ 55,184 $ 412,573 $ 2,515,009 Balances at December 31, 2015: Allowance for Loan Losses Individually evaluated $ 282 $ - $ 11 $ 293 Collectively evaluated 20,024 71 2,612 22,707 Total $ 20,306 $ 71 $ 2,623 $ 23,000 Loans Individually evaluated $ 23,846 $ 2 $ 2,305 $ 26,153 Collectively evaluated 1,489,211 5,716 293,456 1,788,383 Total $ 1,513,057 $ 5,718 $ 295,761 $ 1,814,536 The following tables provide additional detail with respect to impaired loans broken out according to class as of the dates indicated. The recorded investment included in the following table represents customer balances net of any partial charge-offs recognized on the loans, net of any deferred fees and costs. The unpaid balance represents the recorded balance prior to any partial charge-offs. Interest income recognized may exclude an immaterial amount of interest income on matured loans that are 90 days or more past due, but that are in the process of being renewed and thus are still accruing. December 31, 2016 Recorded Investment Unpaid Balance Related Allowance Average Recorded Investment YTD Interest Income Recognized YTD (In thousands) Impaired loans with no related allowance: Commercial and residential real estate $ 20,477 $ 21,140 $ - $ 13,875 $ 1,911 Construction - - - 592 - Commercial 222 229 - 243 16 Consumer 18 19 - 117 2 Other 817 1,625 - 493 - Total $ 21,534 $ 23,013 $ - $ 15,320 $ 1,929 Impaired loans with a related allowance: Commercial and residential real estate $ 1,767 $ 1,890 $ 19 $ 8,590 $ 44 Construction - - - - - Commercial 6,371 6,423 155 2,937 309 Consumer 306 383 9 389 9 Other 397 444 39 348 - Total $ 8,841 $ 9,140 $ 222 $ 12,264 $ 362 Total impaired loans: Commercial and residential real estate $ 22,244 $ 23,030 $ 19 $ 22,465 $ 1,955 Construction - - - 592 - Commercial 6,593 6,652 155 3,180 325 Consumer 324 402 9 506 11 Other 1,214 2,069 39 841 - Total impaired loans $ 30,375 $ 32,153 $ 222 $ 27,584 $ 2,291 December 31, 2015 Recorded Investment Unpaid Balance Related Allowance Average Recorded Investment YTD Interest Income Recognized YTD (In thousands) Impaired loans with no related allowance: Commercial and residential real estate $ 12,756 $ 14,472 $ - $ 14,194 $ 242 Construction 986 986 - 789 - Commercial - - - 19 - Consumer 271 310 - 307 5 Other 250 588 - 171 - Total $ 14,263 $ 16,356 $ - $ 15,480 $ 247 Impaired loans with a related allowance: Commercial and residential real estate $ 10,232 $ 10,472 $ 268 $ 9,989 $ 388 Construction - - - - - Commercial 1,204 1,220 11 492 18 Consumer 454 529 14 493 13 Other - - - - - Total $ 11,890 $ 12,221 $ 293 $ 10,974 $ 419 Total impaired loans: Commercial and residential real estate $ 22,988 $ 24,944 $ 268 $ 24,183 $ 630 Construction 986 986 - 789 - Commercial 1,204 1,220 11 511 18 Consumer 725 839 14 800 18 Other 250 588 - 171 - Total impaired loans $ 26,153 $ 28,577 $ 293 $ 26,454 $ 666 The following tables summarize by class loans classified as past due in excess of 30 days or more in addition to those loans classified as nonaccrual: December 31, 2016 30-89 Days Past Due 90 Days + Past Due and Still Accruing Nonaccrual Total Nonaccrual and Past Due Total Loans, Held for Investment (In thousands) Commercial and residential real estate $ 1,258 $ - $ 2,835 $ 4,093 $ 1,768,381 Construction - - - - 88,449 Commercial 37 - 1,094 1,131 432,072 Consumer 42 - 201 243 125,261 Other - - 1,117 1,117 100,846 Total $ 1,337 $ - $ 5,247 $ 6,584 $ 2,515,009 December 31, 2015 30-89 Days Past Due 90 Days + Past Due and Still Accruing Nonaccrual Total Nonaccrual and Past Due Total Loans, Held for Investment (In thousands) Commercial and residential real estate $ 653 $ - $ 11,905 $ 12,558 $ 1,281,881 Construction - - 986 986 107,185 Commercial 1,147 - 874 2,021 323,598 Consumer 291 - 459 750 66,297 Other - - 250 250 35,575 Total $ 2,091 $ - $ 14,474 $ 16,565 $ 1,814,536 If nonaccrual loans outstanding during 2016, 2015 and 2014 had been current in accordance with their original terms, $257,000 , $586,000 and $657,000 would have been recorded in incremental gross interest income during 2016, 2015 and 2014, respectively. The income recognized on nonaccrual loans prior to impairment during 2016, 2015 and 2014 was $163,000 , $90,000 and $5,000 respectively. During 2016 and 2015 $332,000 and $118,000 of cash basis interest income was recognized on a nonaccrual loan that was moved to accruing status in the third quarter of 2016. With the exception of cash-basis interest income, the $2,291,000 and $666,000 in interest income recognized on impaired loans during 2016 and 2015 is primarily comprised of interest income recognized on performing TDRs. The Company categorizes loans into risk categories based on relevant information about the ability of a particular borrower to service its debt, such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company uses the following definitions for risk ratings, which are consistent with the definitions used in supervisory guidance: Substandard . Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral, if any, pledged to secure the loan. Loans so classified have a well-defined weakness or weaknesses that jeopardize the collection of the debt. They are characterized by the distinct possibility that the Company 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 are considered to be non-classified loans. The following tables provide detail for the risk categories of loans by class of loans based on the most recent credit analysis performed as of the dates indicated: December 31, 2016 Commercial & Residential Real Estate Construction Commercial Consumer Other Total (In thousands) Non-classified $ 1,742,974 $ 88,451 $ 427,278 $ 124,932 $ 98,561 $ 2,482,196 Substandard 25,450 - 4,805 332 2,287 32,874 Doubtful - - - - - - Subtotal 1,768,424 88,451 432,083 125,264 100,848 2,515,070 Deferred fees and costs (43) (2) (11) (3) (2) (61) Loans, held for investment, net $ 1,768,381 $ 88,449 $ 432,072 $ 125,261 $ 100,846 $ 2,515,009 December 31, 2015 Commercial & Residential Real Estate Construction Commercial Consumer Other Total (In thousands) Non-classified $ 1,260,134 $ 106,184 $ 322,650 $ 65,365 $ 34,194 $ 1,788,527 Substandard 21,567 986 902 923 1,376 25,754 Doubtful - - - - - - Subtotal 1,281,701 107,170 323,552 66,288 35,570 1,814,281 Deferred costs, net 180 15 46 9 5 255 Loans, held for investment, net $ 1,281,881 $ 107,185 $ 323,598 $ 66,297 $ 35,575 $ 1,814,536 The book balance of TDRs at December 31, 2016 and December 31, 2015 was $ 25,219,000 and $ 22,391,000 , respectively. Management established approximately $74,000 and $ 276,000 in specific reserves with respect to these loans as of December 31, 2016 and December 31, 2015. At December 31, 2016 the Company had an additional $ 2,238,000 committed on loans classified as troubled debt restructurings. At December 31, 2015, the Company had additional $953,000 committed on loans classified as troubled debt restructurings. During the year ended December 31, 2016, the terms of 19 loans were modified in troubled debt restructurings. The modification of the terms of such loans included one or a combination of the following: the renewal of a loan with a stated interest rate below market , an extension of maturity or a restructure of payment terms. As a result of these modifications, the Company did not recognize any additional charge-offs during 2016. During the year ended December 31, 2015, the terms of five loans were modified in troubled debt restructurings. The modification of the terms of such loans included one or a combination of the following: the renewal of a loan with a stated interest rate below market , an extension of maturity or a restructure of payment terms. As a result of these modifications, the Company did not recognize any additional charge-offs during 2015. The following tables present loans by class modified as troubled debt restructurings that occurred during the years indicated: Year Ended December 31, 2016: Troubled Debt Restructurings Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment (In thousands) Commercial and residential real estate 2 $ 1,018 $ 1,018 Construction - - - Commercial 16 6,650 6,650 Consumer - - - Other 1 97 97 Total 19 $ 7,765 $ 7,765 Year Ended December 31, 2015: Troubled Debt Restructurings Number of Loans Pre-Modification Outstanding Recorded Investment Post-Modification Outstanding Recorded Investment (In thousands) Commercial and residential real estate 1 $ 715 $ 715 Construction - - - Commercial 3 300 300 Consumer 1 2 2 Other - - - Total 5 $ 1,017 $ 1,017 A TDR loan is considered to be in payment default once it is 90 days contractually past due under the modified terms. No TDRs defaulted during the year ended December 31, 2016 . A single default occurred on a loan designated as a TDR during 2015 and no charge-offs were recognized as a result of the default. |