Allowance for Loan Losses | NOTE 4. ALLOWANCE FOR LOAN LOSSES The Company’s accounting method for loans and the corresponding allowance for loan losses (“ALL”) differs depending on whether the loans are New or Acquired. The Company assesses and monitors credit risk and portfolio performance using distinct methodologies for Acquired loans, both ASC 310-30 Loans and Non-ASC 310-30 Loans, and New loans. Within each of these portfolios, the Company further disaggregates the portfolios into the following segments: Commercial real estate, Owner-occupied commercial real estate, 1-4 single family residential, Construction, land and development, Home equity loans and lines of credit, Commercial and industrial and Consumer. The ALL reflects management’s estimate of probable credit losses inherent in each of the segments. Changes in the ALL by loan class and portfolio segment for the three and six months ended June 30, 2015 and 2014 are as follows: Commercial Owner- Estate 1- 4 Single Construction, Development Home Equity Loans and Lines of Credit Commercial Industrial Consumer Total (Dollars in thousands) Balance at April 1, 2015 $ 9,296 $ 1,252 $ 5,213 $ 2,312 $ 398 $ 5,705 $ 337 $ 24,513 Provision (credit) for ASC 310-30 loans (784 ) — (63 ) (178 ) — 143 115 (767 ) Provision for non-ASC 310-30 loans 848 (7 ) (7 ) (12 ) 143 (11 ) (1 ) 953 Provision for New loans 383 303 755 633 22 183 5 2,284 Total provision 447 296 685 443 165 315 119 2,470 Charge-offs for ASC 310-30 loans (109 ) — (121 ) — — (45 ) — (275 ) Charge-offs for non-ASC 310-30 loans — — (63 ) — — — — (63 ) Charge-offs for New loans — — — — — — — — Total charge-offs (109 ) — (184 ) — — (45 ) — (338 ) Recoveries for ASC 310-30 loans 18 — 30 269 — 82 — 399 Recoveries for non-ASC 310-30 loans — — — — — — — — Recoveries for New loans — — — — — 2 — 2 Total recoveries 18 — 30 269 — 84 — 401 Ending ALL balance ASC 310-30 loans 2,585 — 270 793 — 1,133 387 5,168 Non-ASC 310-30 loans 1,375 54 335 56 432 41 6 2,299 New loans 5,692 1,494 5,139 2,175 131 4,885 63 19,579 Balance at June 30, 2015 $ 9,652 $ 1,548 $ 5,744 $ 3,024 $ 563 $ 6,059 $ 456 $ 27,046 Commercial Owner- Estate 1- 4 Single Construction, Development Home Equity Loans and Lines of Credit Commercial Industrial Consumer Total (Dollars in thousands) Balance at April 1, 2014 $ 5,088 $ 435 $ 1,587 $ 1,900 $ 151 $ 5,977 $ 356 $ 15,494 Provision (credit) for ASC 310-30 loans 191 — 212 (31 ) — (539 ) (34 ) (201 ) Provision for non-ASC 310-30 loans 2 2 (45 ) — 89 16 32 96 Provision for New loans 982 369 702 499 (65 ) 849 5 3,341 Total provision 1,175 371 869 468 24 326 3 3,236 Charge-offs for ASC 310-30 loans — — (30 ) (444 ) — (32 ) (4 ) (510 ) Charge-offs for non-ASC 310-30 loans — — — — (62 ) — (29 ) (91 ) Charge-offs for New loans — — — — — (348 ) — (348 ) Total charge-offs — — (30 ) (444 ) (62 ) (380 ) (33 ) (949 ) Recoveries for ASC 310-30 loans 91 — — 11 — 1 — 103 Recoveries for non-ASC 310-30 loans — — — — — — — — Recoveries for New loans — — — — — — — — Total recoveries 91 — — 11 — 1 — 103 Ending ALL balance ASC 310-30 loans 2,883 — 207 660 — 1,359 298 5,407 Non-ASC 310-30 loans 8 7 7 — 32 6 3 63 New loans 3,463 799 2,212 1,275 81 4,559 25 12,414 Balance at June 30, 2014 $ 6,354 $ 806 $ 2,426 $ 1,935 $ 113 $ 5,924 $ 326 $ 17,884 Commercial Owner- 1- 4 Single Construction, Development Home Equity Loans and Lines of Credit Commercial Industrial Consumer Total (Dollars in thousands) Balance at January 1, 2015 $ 8,206 $ 1,020 $ 4,740 $ 2,456 $ 355 $ 5,745 $ 358 $ 22,880 Provision (credit) for ASC 310-30 loans (865 ) — 1 (198 ) — 119 157 (786 ) Provision (credit) for non-ASC 310-30 loans 880 (4 ) 49 (19 ) 147 (8 ) — 1,045 Provision (credit) for New loans 1,236 532 1,138 452 61 140 1 3,560 Total provision 1,251 528 1,188 235 208 251 158 3,819 Charge-offs for ASC 310-30 loans (205 ) — (207 ) (56 ) — (75 ) (60 ) (603 ) Charge-offs for non-ASC 310-30 loans — — (128 ) — — — — (128 ) Charge-offs for New loans — — — — — — — — Total charge-offs (205 ) — (335 ) (56 ) — (75 ) (60 ) (731 ) Recoveries for ASC 310-30 loans 400 — 151 389 — 131 — 1,071 Recoveries for non-ASC 310-30 loans — — — — — — — — Recoveries for New loans — — — — — 7 — 7 Total recoveries 400 — 151 389 — 138 — 1,078 Ending ALL balance ASC 310-30 loans 2,585 — 270 793 — 1,133 387 5,168 Non-ASC 310-30 loans 1,375 54 335 56 432 41 6 2,299 New loans 5,692 1,494 5,139 2,175 131 4,885 63 19,579 Balance at June 30, 2015 $ 9,652 $ 1,548 $ 5,744 $ 3,024 $ 563 $ 6,059 $ 456 $ 27,046 Commercial Owner- 1- 4 Single Construction, Development Home Equity Loans and Lines of Credit Commercial Industrial Consumer Total (Dollars in thousands) Balance at January 1, 2014 $ 4,458 $ 376 $ 1,443 $ 1,819 $ 265 $ 6,198 $ 174 $ 14,733 Provision (credit) for ASC 310-30 loans 191 — 152 133 — (871 ) 232 (163 ) Provision (credit) for non-ASC 310-30 loans 3 2 (45 ) — (4 ) 24 32 12 Provision (credit) for New loans 1,685 428 906 441 (45 ) 1,054 8 4,477 Total provision 1,879 430 1,013 574 (49 ) 207 272 4,326 Charge-offs for ASC 310-30 loans (74 ) — (30 ) (1,245 ) — (110 ) (91 ) (1,550 ) Charge-offs for non-ASC 310-30 loans — — — — (103 ) (24 ) (29 ) (156 ) Charge-offs for New loans — — — — — (348 ) — (348 ) Total charge-offs (74 ) — (30 ) (1,245 ) (103 ) (482 ) (120 ) (2,054 ) Recoveries for ASC 310-30 loans 91 — — 787 — 1 — 879 Recoveries for non-ASC 310-30 loans — — — — — — — — Recoveries for New loans — — — — — — — — Total recoveries 91 — — 787 — 1 — 879 Ending ALL balance ASC 310-30 loans 2,883 — 207 660 — 1,359 298 5,407 Non-ASC 310-30 loans 8 7 7 — 32 6 3 63 New loans 3,463 799 2,212 1,275 81 4,559 25 12,414 Balance at June 30, 2014 $ 6,354 $ 806 $ 2,426 $ 1,935 $ 113 $ 5,924 $ 326 $ 17,884 Credit Quality Indicators In evaluating credit risk, the Company looks at multiple factors; however, management considers delinquency status to be the most meaningful indicator of the credit quality of 1-4 single family residential, home equity loans and lines of credit and consumer loans. Delinquency statistics are updated at least monthly. The following tables present an aging analysis of the recorded investment for delinquent loans by portfolio and segment (excluding loans accounted for under ASC 310-30): Accruing June 30, 2015 30 to 59 60 to 89 90 Days Non- Accrual Total (Dollars in thousands) New loans: Real estate loans: Commercial real estate $ — $ — $ — $ — $ — Owner-occupied commercial real estate — — — — — 1-4 single family residential — — — — — Construction, land and development — — — — — Home equity loans and lines of credit — — — — — Total real estate loans — — — — — Other loans: Commercial and industrial — — — 14 14 Consumer — — — — — Total other loans — — — 14 14 Total new loans $ — $ — $ — $ 14 $ 14 Acquired loans: Real estate loans: Commercial real estate $ — $ — $ — $ 4,865 $ 4,865 Owner-occupied commercial real estate — — — 5 5 1-4 single family residential — — — 1,649 1,649 Construction, land and development — — — — — Home equity loans and lines of credit 153 288 — 2,806 3,247 Total real estate loans 153 288 — 9,325 9,766 Other loans: Commercial and industrial — — — 736 736 Consumer — — — — — Total other loans — — — 736 736 Total acquired loans $ 153 $ 288 $ — $ 10,061 $ 10,502 Accruing December 31, 2014 30 to 59 60 to 89 90 Days Non- Accrual Total (Dollars in thousands) New loans: Real estate loans: Commercial real estate $ — $ — $ — $ — $ — Owner-occupied commercial real estate — — — — — 1-4 single family residential 6,206 727 — 116 7,049 Construction, land and development — — — — — Home equity loans and lines of credit — — — — — Total real estate loans 6,206 727 — 116 7,049 Other loans: Commercial and industrial — — — — — Consumer — — — — — Total other loans — — — — — Total new loans $ 6,206 $ 727 $ — $ 116 $ 7,049 Acquired Loans: Real estate loans: Commercial real estate $ — $ — $ — $ 4,866 $ 4,866 Owner-occupied commercial real estate — — — 211 211 1-4 single family residential 1,877 86 — 1,766 3,729 Construction, land and development — — — — — Home equity loans and lines of credit 384 456 — 3,005 3,845 Total real estate loans 2,261 542 — 9,848 12,651 Other loans: Commercial and industrial — 192 — 1,222 1,414 Consumer 14 — — — 14 Total other loans 14 192 — 1,222 1,428 Total acquired loans $ 2,275 $ 734 $ — $ 11,070 $ 14,079 Internal risk ratings are considered the most meaningful indicator of credit quality for Non-ASC 310-30 and New commercial, construction, land and development and commercial real estate loans. Internal risk ratings are updated on a continuous basis. Loans exhibiting potential credit weaknesses that deserve management’s close attention and that if left uncorrected may result in deterioration of the repayment capacity of the borrower are categorized as special mention. Loans with well-defined credit weaknesses including payment defaults, declining collateral values, frequent overdrafts, operating losses, increasing balance sheet leverage, inadequate cash flow, project cost overruns, unreasonable construction delays, past due real estate taxes or exhausted interest reserves are assigned an internal risk rating of substandard. A loan with a weakness so severe that collection in full is highly questionable or improbable will be assigned an internal risk rating of doubtful. The following table summarizes the Company’s Non-ASC 310-30 and New loans by key indicators of credit quality. Loans accounted for under ASC 310-30 are excluded from the following analysis because their related allowance is determined by loan pool performance: June 30, 2015 Pass Special Substandard Doubtful (Dollars in thousands) New loans: Commercial real estate $ 942,394 $ — $ 30 $ — Owner-occupied commercial real estate 400,438 — — — Construction, land and development 349,659 — — — Commercial and industrial 837,256 — 14 — Total new loans $ 2,529,747 $ — $ 44 $ — Acquired loans: Commercial real estate $ 57,126 $ 102 $ 5,245 $ — Owner-occupied commercial real estate 19,662 96 102 — Construction, land and development 8,610 — — — Commercial and industrial 6,886 1,718 1,050 — Total acquired loans $ 92,284 $ 1,916 $ 6,397 $ — December 31, 2014 Pass Special Substandard Doubtful (Dollars in thousands) New loans: Commercial real estate $ 853,044 $ — $ 30 $ — Owner-occupied commercial real estate 281,703 — — — Construction, land and development 232,601 — — — Commercial and industrial 795,000 — — — Total new loans $ 2,162,348 $ — $ 30 $ — Acquired loans: Commercial real estate $ 65,173 $ 107 $ 4,866 $ — Owner-occupied commercial real estate 13,822 421 599 — Construction, land and development 9,729 — — — Commercial and industrial 9,184 2,147 2,217 — Total acquired loans $ 97,908 $ 2,675 $ 7,682 $ — Internal risk ratings are a key factor in identifying loans to be individually evaluated for impairment and impact management’s estimates of loss factors used in determining the amount of the ALL. The following table shows the Company’s investment in loans disaggregated based on the method of evaluating impairment: Loans - Recorded Investment Allowance for Credit Loss June 30, 2015 Individually Collectively ASC 310- Individually Collectively ASC 310- (Dollars in thousands) New loans: Real estate loans: Commercial real estate $ — $ 942,424 $ — $ — $ 5,692 $ — Owner-occupied commercial real estate — 400,438 — — 1,494 — 1-4 single family residential — 1,248,625 — — 5,139 — Construction, land and development — 349,659 — — 2,175 — Home equity loans and lines of credit — 22,798 — — 131 — Total real estate loans $ — $ 2,963,944 $ — $ — $ 14,631 $ — Other loans Commercial and industrial $ — $ 837,270 $ — $ — $ 4,885 $ — Consumer — 6,333 — — 63 — Total other loans $ — $ 843,603 $ — $ — $ 4,948 $ — Acquired loans: Real estate loans: Commercial real estate $ 4,755 $ 57,718 $ 286,337 $ 1,028 $ 347 $ 2,585 Owner-occupied commercial real estate — 19,860 — — 54 — 1-4 single family residential — 86,754 76,849 — 335 270 Construction, land and development — 8,610 55,453 — 56 793 Home equity loans and lines of credit 955 52,016 — 177 255 — Total real estate loans $ 5,710 $ 224,958 $ 418,639 $ 1,205 $ 1,047 $ 3,648 Other loans Commercial and industrial $ 552 $ 9,102 $ 58,045 $ — $ 41 $ 1,133 Consumer — 645 2,524 — 6 387 Total other loans $ 552 $ 9,747 $ 60,569 $ — $ 47 $ 1,520 Loans - Recorded Investment Allowance for Credit Loss December 31, 2014 Individually Evaluated for Impairment Collectively Evaluated for Impairment ASC 310- Individually Evaluated for Impairment Collectively Evaluated for Impairment ASC 310- (Dollars in thousands) New loans: Real estate loans: Commercial real estate $ — $ 853,074 $ — $ — $ 4,456 $ — Owner-occupied commercial real estate — 281,703 — — 962 — 1-4 single family residential — 922,657 — — 4,001 — Construction, land and development — 232,601 — — 1,723 — Home equity loans and lines of credit — 11,826 — — 70 — Total real estate loans $ — $ 2,301,861 $ — $ — $ 11,212 $ — Other loans Commercial and industrial $ — $ 795,000 $ — $ — $ 4,738 $ — Consumer — 6,556 — — 62 — Total other loans $ — $ 801,556 $ — $ — $ 4,800 $ — Acquired Loans: Real estate loans: Commercial real estate $ 4,754 $ 65,392 $ 336,935 $ 174 $ 321 $ 3,255 Owner-occupied commercial real estate — 14,842 — — 58 — 1-4 single family residential — 102,279 86,308 — 414 325 Construction, land and development — 9,729 66,700 — 75 658 Home equity loans and lines of credit — 54,704 — — 285 — Total real estate loans $ 4,754 $ 246,946 $ 489,943 $ 174 $ 1,153 $ 4,238 Other loans Commercial and industrial $ — $ 13,548 $ 67,498 $ — $ 49 $ 958 Consumer — 681 2,803 — 6 290 Total other loans $ — $ 14,229 $ 70,301 $ — $ 55 $ 1,248 The following tables set forth certain information regarding the Company’s impaired loans (excluding loans accounted for under ASC 310-30) that were evaluated for specific reserves: Impaired Loans - With Allowance Impaired Loans - With no Allowance June 30, 2015 Recorded Unpaid Related Recorded Unpaid (Dollars in thousands) New loans: Real estate loans: Commercial real estate $ — $ — $ — $ — $ — Owner-occupied commercial real estate — — — — — 1-4 single family residential — — — — — Construction, land and development — — — — — Home equity loans and lines of credit — — — — — Total real estate loans $ — $ — $ — $ — $ — Other loans Commercial and industrial $ — $ — $ — $ — $ — Consumer — — — — — Total other loans $ — $ — $ — $ — $ — Acquired loans: Real estate loans: Commercial real estate $ 4,755 $ 5,051 $ 1,028 $ — $ — Owner-occupied commercial real estate — — — — — 1-4 single family residential — — — — — Construction, land and development — — — — — Home equity loans and lines of credit 426 494 177 529 548 Total real estate loans $ 5,181 $ 5,545 $ 1,205 $ 529 $ 548 Other loans Commercial and industrial $ — $ — $ — $ 552 $ 748 Consumer — — — — — Total other loans $ — $ — $ — $ 552 $ 748 Impaired Loans - With Allowance Impaired Loans - With no Allowance December 31, 2014 Recorded Unpaid Related Recorded Unpaid (Dollars in thousands) New loans: Real estate loans: Commercial real estate $ — $ — $ — $ — $ — Owner-occupied commercial real estate — — — — — 1-4 single family residential — — — — — Construction, land and development — — — — — Home equity loans and lines of credit — — — — — Total real estate loans $ — $ — $ — $ — $ — Other loans Commercial and industrial $ — $ — $ — $ — $ — Consumer — — — — — Total other loans $ — $ — $ — $ — $ — Acquired loans: Real estate loans: Commercial real estate $ 354 $ 354 $ 174 $ 4,400 $ 4,595 Owner-occupied commercial real estate — — — — — 1-4 single family residential — — — — — Construction, land and development — — — — — Home equity loans and lines of credit — — — — — Total real estate loans $ 354 $ 354 $ 174 $ 4,400 $ 4,595 Other loans Commercial and industrial $ — $ — $ — $ — $ — Consumer — — — — — Total other loans $ — $ — $ — $ — $ — Three Months Ended June 30, 2015 2014 Average Interest Average Interest (Dollars in thousands) Impaired loans with no related allowance: Real estate loans: Commercial real estate $ — $ — $ 4,705 $ — Owner-occupied commercial real estate — — — — 1-4 single family residential — — — — Construction, land and development — — — — Home equity loans and lines of credit 529 — 184 — Total real estate loans $ 529 $ — $ 4,889 $ — Other loans: Commercial and industrial $ 556 $ — $ — $ — Consumer — — — — Total other loans $ 556 $ — $ — $ — Impaired loans with an allowance: Real estate loans: Commercial real estate $ 4,825 $ — $ — $ — Owner-occupied commercial real estate — — — — 1-4 single family residential — — — — Construction, land and development — — — — Home equity loans and lines of credit 438 — — — Total real estate loans $ 5,263 $ — $ — $ — Other loans: Commercial and industrial $ — $ — $ — $ — Consumer — — — — Total other loans $ — $ — $ — $ — Six Months Ended June 30, 2015 2014 Average Interest Average Interest (Dollars in thousands) Impaired loans with no related allowance: Real estate loans: Commercial real estate $ — $ — $ 4,718 $ — Owner-occupied commercial real estate — — — — 1-4 single family residential — — — — Construction, land and development — — — — Home equity loans and lines of credit 529 — 184 — Total real estate loans $ 529 $ — $ 4,902 $ — Other loans: Commercial and industrial $ 540 $ — $ — $ — Consumer — — — — Total other loans $ 540 $ — $ — $ — Impaired loans with an allowance: Real estate loans: Commercial real estate $ 4,899 $ — $ — $ — Owner-occupied commercial real estate — — — — 1-4 single family residential — — — — Construction, land and development — — — — Home equity loans and lines of credit 442 — — — Total real estate loans $ 5,341 $ — $ — $ — Other loans: Commercial and industrial $ — $ — $ — $ — Consumer — — — — Total other loans $ — $ — $ — $ — |