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 portfolio and segment for the three and nine months ended September 30, 2015 and 2014 are as follows: Commercial Owner- 1- 4 Single Construction, Development Home Equity Loans and Lines of Credit Commercial Industrial Consumer Total (Dollars in thousands) Balance at July 1, 2015 $ 9,652 $ 1,548 $ 5,744 $ 3,024 $ 563 $ 6,059 $ 456 $ 27,046 Provision (credit) for ASC 310-30 loans (791 ) — (38 ) (310 ) — (67 ) 30 (1,176 ) Provision (credit) for non-ASC 310-30 loans (110 ) 14 11 (20 ) 74 41 6 16 Provision (credit) for New loans (390 ) 45 203 251 41 1,712 (27 ) 1,835 Total provision (1,291 ) 59 176 (79 ) 115 1,686 9 675 Charge-offs for ASC 310-30 loans (65 ) — (224 ) — — (57 ) — (346 ) Charge-offs for non-ASC 310-30 loans — — — — (37 ) — (8 ) (45 ) Charge-offs for New loans — — — — — — — — Total charge-offs (65 ) — (224 ) — (37 ) (57 ) (8 ) (391 ) Recoveries for ASC 310-30 loans — — 18 18 — 23 — 59 Recoveries for non-ASC 310-30 loans — — — — — — — — Recoveries for New loans — — — — — 5 — 5 Total recoveries — — 18 18 — 28 — 64 Ending ALL balance ASC 310-30 loans 1,729 — 26 501 — 1,032 417 3,705 Non-ASC 310-30 loans 1,265 68 346 36 469 82 4 2,270 New loans 5,302 1,539 5,342 2,426 172 6,602 36 21,419 Balance at September 30, 2015 $ 8,296 $ 1,607 $ 5,714 $ 2,963 $ 641 $ 7,716 $ 457 $ 27,394 Commercial Owner- 1- 4 Single Construction, Development Home Equity Loans and Lines of Credit Commercial Industrial Consumer Total (Dollars in thousands) Balance at July 1, 2014 $ 6,354 $ 806 $ 2,426 $ 1,935 $ 113 $ 5,924 $ 326 $ 17,884 Provision (credit) for ASC 310-30 loans 785 — — (1 ) — (290 ) (9 ) 485 Provision (credit) for non-ASC 310-30 loans 109 16 144 29 264 15 1 578 Provision (credit) for New loans 221 90 1,015 137 7 273 (1 ) 1,742 Total provision 1,115 106 1,159 165 271 (2 ) (9 ) 2,805 Charge-offs for ASC 310-30 loans — — — 1 — (93 ) (10 ) (102 ) Charge-offs for non-ASC 310-30 loans — — — — (173 ) — — (173 ) Charge-offs for New loans — — — — — — — — Total charge-offs — — — 1 (173 ) (93 ) (10 ) (275 ) Recoveries for ASC 310-30 loans 24 — — — — — 1 25 Recoveries for non-ASC 310-30 loans — — — — — — — — Recoveries for New loans — — — — — 1 — 1 Total recoveries 24 — — — — 1 1 26 Ending ALL balance ASC 310-30 loans 3,692 — 207 660 — 976 280 5,815 Non-ASC 310-30 loans 117 23 151 29 123 21 4 468 New loans 3,684 889 3,227 1,412 88 4,833 24 14,157 Balance at September 30, 2014 $ 7,493 $ 912 $ 3,585 $ 2,101 $ 211 $ 5,830 $ 308 $ 20,440 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 (1,656 ) — (37 ) (508 ) — 52 187 (1,962 ) Provision (credit) for non-ASC 310-30 loans 770 10 60 (39 ) 221 33 6 1,061 Provision (credit) for New loans 846 577 1,341 703 102 1,852 (26 ) 5,395 Total provision (40 ) 587 1,364 156 323 1,937 167 4,494 Charge-offs for ASC 310-30 loans (270 ) — (431 ) (56 ) — (132 ) (60 ) (949 ) Charge-offs for non-ASC 310-30 loans — — (128 ) — (37 ) — (8 ) (173 ) Charge-offs for New loans — — — — — — — — Total charge-offs (270 ) — (559 ) (56 ) (37 ) (132 ) (68 ) (1,122 ) Recoveries for ASC 310-30 loans 400 — 169 407 — 154 — 1,130 Recoveries for non-ASC 310-30 loans — — — — — — — — Recoveries for New loans — — — — — 12 — 12 Total recoveries 400 — 169 407 — 166 — 1,142 Ending ALL balance ASC 310-30 loans 1,729 — 26 501 — 1,032 417 3,705 Non-ASC 310-30 loans 1,265 68 346 36 469 82 4 2,270 New loans 5,302 1,539 5,342 2,426 172 6,602 36 21,419 Balance at September 30, 2015 $ 8,296 $ 1,607 $ 5,714 $ 2,963 $ 641 $ 7,716 $ 457 $ 27,394 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 976 — 152 132 — (1,161 ) 223 322 Provision (credit) for non-ASC 310-30 loans 112 18 99 29 260 39 33 590 Provision (credit) for New loans 1,906 518 1,921 578 (38 ) 1,327 7 6,219 Total provision 2,994 536 2,172 739 222 205 263 7,131 Charge-offs for ASC 310-30 loans (74 ) — (30 ) (1,244 ) — (203 ) (101 ) (1,652 ) Charge-offs for non-ASC 310-30 loans — — — — (276 ) (24 ) (29 ) (329 ) Charge-offs for New loans — — — — — (348 ) — (348 ) Total charge-offs (74 ) — (30 ) (1,244 ) (276 ) (575 ) (130 ) (2,329 ) Recoveries for ASC 310-30 loans 115 — — 787 — 1 1 904 Recoveries for non-ASC 310-30 loans — — — — — — — — Recoveries for New loans — — — — — 1 — 1 Total recoveries 115 — — 787 — 2 1 905 Ending ALL balance ASC 310-30 loans 3,692 — 207 660 — 976 280 5,815 Non-ASC 310-30 loans 117 23 151 29 123 21 4 468 New loans 3,684 889 3,227 1,412 88 4,833 24 14,157 Balance at September 30, 2014 $ 7,493 $ 912 $ 3,585 $ 2,101 $ 211 $ 5,830 $ 308 $ 20,440 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. 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. The following tables present an aging analysis of the recorded investment of delinquent loans by portfolio and segment (excluding loans accounted for under ASC 310-30): Accruing September 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 — 2,354 — 455 2,809 Construction, land and development — — — — — Home equity loans and lines of credit — — — — — Total real estate loans — 2,354 — 455 2,809 Other loans: Commercial and industrial — — — 14 14 Consumer — — — — — Total other loans — — — 14 14 Total new loans $ — $ 2,354 $ — $ 469 $ 2,823 Acquired loans: Real estate loans: Commercial real estate $ — $ — $ — $ 5,456 $ 5,456 Owner-occupied commercial real estate — — — 4 4 1-4 single family residential — 99 — 2,900 2,999 Construction, land and development — — — — — Home equity loans and lines of credit 610 620 — 2,367 3,597 Total real estate loans 610 719 — 10,727 12,056 Other loans: Commercial and industrial 233 — — 2,799 3,032 Consumer 22 13 — — 35 Total other loans 255 13 — 2,799 3,067 Total acquired loans $ 865 $ 732 $ — $ 13,526 $ 15,123 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 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 commercial 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: September 30, 2015 Pass Special Substandard Doubtful (Dollars in thousands) New loans: Commercial real estate $ 991,451 $ — $ — $ — Owner-occupied commercial real estate 452,991 — — — Construction, land and development 430,690 — — — Commercial and industrial 925,271 — 14 — Total new loans $ 2,800,403 $ — $ 14 $ — Acquired loans: Commercial real estate $ 54,970 $ — $ 5,834 $ — Owner-occupied commercial real estate 19,695 — 4 — Construction, land and development 6,319 — — — Commercial and industrial 6,853 1,482 3,169 — Total aquired loans $ 87,837 $ 1,482 $ 9,007 $ — 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 and other credit metrics are key factors 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 September 30, 2015 Individually Collectively ASC 310- Individually Collectively ASC (Dollars in thousands) New loans: Real estate loans: Commercial real estate $ — $ 991,451 $ — $ — $ 5,302 $ — Owner-occupied commercial real estate — 452,991 — — 1,539 — 1-4 single family residential — 1,326,180 — — 5,342 — Construction, land and development — 430,690 — — 2,426 — Home equity loans and lines of credit — 28,185 — — 172 — Total real estate loans $ — $ 3,229,497 $ — $ — $ 14,781 $ — Other loans Commercial and industrial $ — $ 925,285 $ — $ — $ 6,602 $ — Consumer — 4,215 — — 36 — Total other loans $ — $ 929,500 $ — $ — $ 6,638 $ — Acquired loans: Real estate loans: Commercial real estate $ 4,991 $ 55,813 $ 259,411 $ 996 $ 269 $ 1,729 Owner-occupied commercial real estate — 19,699 — — 68 — 1-4 single family residential — 86,832 69,915 — 346 26 Construction, land and development — 6,319 32,996 — 36 501 Home equity loans and lines of credit 941 49,625 — 172 297 — Total real estate loans $ 5,932 $ 218,288 $ 362,322 $ 1,168 $ 1,016 $ 2,256 Other loans Commercial and industrial $ 535 $ 10,969 $ 46,233 $ — $ 82 $ 1,032 Consumer — 426 2,434 — 4 417 Total other loans $ 535 $ 11,395 $ 48,667 $ — $ 86 $ 1,449 Loans - Recorded Investment Allowance for Credit Loss December 31, 2014 Individually Collectively ASC 310- Individually Collectively ASC (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 - September 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 $ 4,722 $ 5,049 $ 996 $ 269 $ 288 Owner-occupied commercial real estate — — — — — 1-4 single family residential — — — — — Construction, land and development — — — — — Home equity loans and lines of credit 421 494 172 520 548 Total real estate loans $ 5,143 $ 5,543 $ 1,168 $ 789 $ 836 Other loans Commercial and industrial $ — $ — $ — $ 535 $ 750 Consumer — — — — — Total other loans $ — $ — $ — $ 535 $ 750 Impaired Loans - With Allowance Impaired Loans - 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 September 30, 2015 2014 Average Interest Average Interest (Dollars in thousands) Impaired loans with no related allowance: Real estate loans: Commercial real estate $ 231 $ — $ — $ — Owner-occupied commercial real estate — — — — 1-4 single family residential — — — — Construction, land and development — — — — Home equity loans and lines of credit 523 — 184 — Total real estate loans $ 754 $ — $ 184 $ — Other loans: Commercial and industrial $ 547 $ — $ — $ — Consumer — — — — Total other loans $ 547 $ — $ — $ — Impaired loans with an allowance: Real estate loans: Commercial real estate $ 4,734 $ — $ 4,624 $ — Owner-occupied commercial real estate — — — — 1-4 single family residential — — — — Construction, land and development — — — — Home equity loans and lines of credit 424 — — — Total real estate loans $ 5,158 $ — $ 4,624 $ — Other loans: Commercial and industrial $ — $ — $ — $ — Consumer — — — — Total other loans $ — $ — $ — $ — Nine Months Ended September 30, 2015 2014 Average Interest Average Interest (Dollars in thousands) Impaired loans with no related allowance: Real estate loans: Commercial real estate $ 151 $ — $ — $ — Owner-occupied commercial real estate — — — — 1-4 single family residential — — — — Construction, land and development — — — — Home equity loans and lines of credit 527 — 184 — Total real estate loans $ 678 $ — $ 184 $ — Other loans: Commercial and industrial $ 542 $ — $ — $ — Consumer — — — — Total other loans $ 542 $ — $ — $ — Impaired loans with an allowance: Real estate loans: Commercial real estate $ 4,843 $ — $ 4,687 $ — Owner-occupied commercial real estate — — — — 1-4 single family residential — — — — Construction, land and development — — — — Home equity loans and lines of credit 436 — — — Total real estate loans $ 5,279 $ — $ 4,687 $ — Other loans: Commercial and industrial $ — $ — $ — $ — Consumer — — — — Total other loans $ — $ — $ — $ — |