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 months ended March 31, 2016 and 2015 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 January 1, 2016 $ 8,450 $ 2,243 $ 6,425 $ 3,404 $ 483 $ 7,665 $ 456 $ 29,126 Provision (credit) for ASC 310-30 loans (198 ) — 1 (10 ) — (2 ) (4 ) (213 ) Provision (credit) for non-ASC 310-30 loans (855 ) (58 ) (24 ) — 23 (3 ) 6 (911 ) Provision (credit) for New loans 492 97 907 51 28 984 5 2,564 Total provision (561 ) 39 884 41 51 979 7 1,440 Charge-offs for ASC 310-30 loans — — — (30 ) — (75 ) — (105 ) Charge-offs for non-ASC 310-30 loans — (1 ) — — (35 ) — (6 ) (42 ) Charge-offs for New loans — — — — — — — — Total charge-offs — (1 ) — (30 ) (35 ) (75 ) (6 ) (147 ) Recoveries for ASC 310-30 loans 761 — — — — 11 — 772 Recoveries for non-ASC 310-30 loans 804 — — — — — — 804 Recoveries for New loans — — — — — — — — Total recoveries 1,565 — — — — 11 — 1,576 Ending ALL balance ASC 310-30 loans 2,461 — 27 288 — 387 402 3,565 Non-ASC 310-30 loans 1,033 404 308 36 279 57 4 2,121 New loans 5,960 1,877 6,974 3,091 220 8,136 51 26,309 Balance at March 31, 2016 $ 9,454 $ 2,281 $ 7,309 $ 3,415 $ 499 $ 8,580 $ 457 $ 31,995 Commercial Owner- 1-4 Single Construction, Development Home Commercial 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 (81 ) — 64 (20 ) — (24 ) 42 (19 ) Provision (credit) for non-ASC 310-30 loans 32 3 56 (7 ) 4 3 1 92 Provision (credit) for New loans 853 229 383 (181 ) 39 (43 ) (4 ) 1,276 Total provision 804 232 503 (208 ) 43 (64 ) 39 1,349 Charge-offs for ASC 310-30 loans (96 ) — (86 ) (56 ) — (30 ) (60 ) (328 ) Charge-offs for non-ASC 310-30 loans — — (65 ) — — — — (65 ) Charge-offs for New loans — — — — — — — — Total charge-offs (96 ) — (151 ) (56 ) — (30 ) (60 ) (393 ) Recoveries for ASC 310-30 loans 382 — 121 120 — 49 — 672 Recoveries for non-ASC 310-30 loans — — — — — — — — Recoveries for New loans — — — — — 5 — 5 Total recoveries 382 — 121 120 — 54 — 677 Ending ALL balance ASC 310-30 loans 3,460 — 424 702 — 953 272 5,811 Non-ASC 310-30 loans 527 61 405 68 289 52 7 1,409 New loans 5,309 1,191 4,384 1,542 109 4,700 58 17,293 Balance at March 31, 2015 $ 9,296 $ 1,252 $ 5,213 $ 2,312 $ 398 $ 5,705 $ 337 $ 24,513 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 for delinquent loans by portfolio and segment (excluding loans accounted for under ASC 310-30): Accruing March 31, 2016 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 14,623 — — 815 15,438 Construction, land and development — — — — — Home equity loans and lines of credit 63 — — — 63 Total real estate loans 14,686 — — 815 15,501 Other loans: Commercial and industrial — — — — — Consumer — — — — — Total other loans — — — — — Total new loans $ 14,686 $ — $ — $ 815 $ 15,501 Acquired loans: Real estate loans: Commercial real estate $ — $ — $ — $ 5,220 $ 5,220 Owner-occupied commercial real estate — — — 2,280 2,280 1-4 single family residential 1,279 — — 3,397 4,676 Construction, land and development — — — — — Home equity loans and lines of credit 689 93 — 2,501 3,283 Total real estate loans 1,968 93 — 13,398 15,459 Other loans: Commercial and industrial 192 — — 877 1,069 Consumer — — — — — Total other loans 192 — — 877 1,069 Total acquired loans $ 2,160 $ 93 $ — $ 14,275 $ 16,528 Accruing December 31, 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 — 113 — — 113 1-4 single family residential 9,439 869 — 1,454 11,762 Construction, land and development 467 — — — 467 Home equity loans and lines of credit 64 — — — 64 Total real estate loans 9,970 982 — 1,454 12,406 Other loans: Commercial and industrial — — — — — Consumer — — — — — Total other loans — — — — — Total new loans $ 9,970 $ 982 $ — $ 1,454 $ 12,406 Acquired Loans: Real estate loans: Commercial real estate $ 63 $ — $ — $ 5,282 $ 5,345 Owner-occupied commercial real estate — 95 — 2,247 2,342 1-4 single family residential 1,393 697 — 3,016 5,106 Construction, land and development — — — — — Home equity loans and lines of credit 490 97 — 2,295 2,882 Total real estate loans 1,946 889 — 12,840 15,675 Other loans: Commercial and industrial 90 — — 877 967 Consumer — — — 23 23 Total other loans 90 — — 900 990 Total acquired loans $ 2,036 $ 889 $ — $ 13,740 $ 16,665 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: March 31, 2016 Pass Special Substandard Doubtful (Dollars in thousands) New loans: Commercial real estate $ 1,067,594 $ — $ — $ — Owner-occupied commercial real estate 558,659 — — — Construction, land and development 543,540 — — — Commercial and industrial 1,064,873 — — — Total new loans $ 3,234,666 $ — $ — $ — Acquired loans: Commercial real estate $ 50,139 $ — $ 5,592 $ — Owner-occupied commercial real estate 18,534 — 2,280 — Construction, land and development 6,338 — — — Commercial and industrial 7,236 — 1,242 — Total aquired loans $ 82,247 $ — $ 9,114 $ — December 31, 2015 Pass Special Substandard Doubtful (Dollars in thousands) New loans: Commercial real estate $ 998,141 $ — $ — $ — Owner-occupied commercial real estate 524,728 — — — Construction, land and development 537,494 — — — Commercial and industrial 972,803 — — — Total new loans $ 3,033,166 $ — $ — $ — Acquired loans: Commercial real estate $ 50,328 $ — $ 5,657 $ — Owner-occupied commercial real estate 18,854 — 2,247 — Construction, land and development 6,338 — — — Commercial and industrial 6,715 1,352 1,245 — Total acquired loans $ 82,235 $ 1,352 $ 9,149 $ — 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 March 31, 2016 Individually Collectively ASC 310- Individually Collectively ASC 310- (Dollars in thousands) New loans: Real estate loans: Commercial real estate $ — $ 1,067,594 $ — $ — $ 5,960 $ — Owner-occupied commercial real estate — 558,659 — — 1,877 — 1-4 single family residential — 1,833,190 — — 6,974 — Construction, land and development — 543,540 — — 3,091 — Home equity loans and lines of credit — 34,973 — — 220 — Total real estate loans $ — $ 4,037,956 $ — $ — $ 18,122 $ — Other loans Commercial and industrial $ — $ 1,064,873 $ — $ — $ 8,136 $ — Consumer — 5,709 — — 51 — Total other loans $ — $ 1,070,582 $ — $ — $ 8,187 $ — Acquired loans: Real estate loans: Commercial real estate $ 5,220 $ 50,511 $ 212,041 $ 774 $ 259 $ 2,461 Owner-occupied commercial real estate 2,185 18,629 — 340 64 — 1-4 single family residential 267 79,932 40,061 — 308 27 Construction, land and development — 6,338 27,973 — 36 288 Home equity loans and lines of credit 907 46,455 — — 279 — Total real estate loans $ 8,579 $ 201,865 $ 280,075 $ 1,114 $ 946 $ 2,776 Other loans Commercial and industrial $ 877 $ 7,601 $ 33,413 $ — $ 57 $ 387 Consumer — 432 2,287 — 4 402 Total other loans $ 877 $ 8,033 $ 35,700 $ — $ 61 $ 789 Loans - Recorded Investment Allowance for Credit Loss December 31, 2015 Individually Collectively ASC 310- Individually Collectively ASC 310- (Dollars in thousands) New loans: Real estate loans: Commercial real estate $ — $ 998,141 $ — $ — $ 5,468 $ — Owner-occupied commercial real estate — 524,728 — — 1,780 — 1-4 single family residential — 1,541,255 — — 6,067 — Construction, land and development — 537,494 — — 3,040 — Home equity loans and lines of credit — 30,945 — — 192 — Total real estate loans $ — $ 3,632,563 $ — $ — $ 16,547 $ — Other loans Commercial and industrial $ — $ 972,803 $ — $ — $ 7,152 $ — Consumer — 5,397 — — 46 — Total other loans $ — $ 978,200 $ — $ — $ 7,198 $ — Acquired Loans: Real estate loans: Commercial real estate $ 5,282 $ 50,703 $ 247,628 $ 829 $ 255 $ 1,898 Owner-occupied commercial real estate 2,244 18,857 — 399 64 — 1-4 single family residential 263 83,848 40,922 — 332 26 Construction, land and development — 6,338 28,017 — 36 328 Home equity loans and lines of credit 916 48,491 — — 291 — Total real estate loans $ 8,705 $ 208,237 $ 316,567 $ 1,228 $ 978 $ 2,252 Other loans Commercial and industrial $ 877 $ 8,435 $ 36,783 $ — $ 60 $ 453 Consumer — 430 2,390 — 4 406 Total other loans $ 877 $ 8,865 $ 39,173 $ — $ 64 $ 859 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 March 31, 2016 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 $ 4,500 $ 4,923 $ 774 $ 720 $ 747 Owner-occupied commercial real estate 2,185 2,289 340 — — 1-4 single family residential — — — 267 267 Construction, land and development — — — — — Home equity loans and lines of credit — — — 907 1,048 Total real estate loans $ 6,685 $ 7,212 $ 1,114 $ 1,894 $ 2,062 Other loans Commercial and industrial $ — $ — $ — $ 877 $ 1,825 Consumer — — — — — Total other loans $ — $ — $ — $ 877 $ 1,825 Impaired Loans - With Allowance Impaired Loans - With no December 31, 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 $ 4,555 $ 4,924 $ 829 $ 727 $ 750 Owner-occupied commercial real estate 2,244 2,310 399 — — 1-4 single family residential — — — 263 264 Construction, land and development — — — — — Home equity loans and lines of credit — — — 916 1,048 Total real estate loans $ 6,799 $ 7,234 $ 1,228 $ 1,906 $ 2,062 Other loans Commercial and industrial $ — $ — $ — $ 877 $ 1,825 Consumer — — — — — Total other loans $ — $ — $ — $ 877 $ 1,825 Three Months Ended March 31, 2016 2015 Average Interest Average Interest (Dollars in thousands) Impaired loans with no related allowance: Real estate loans: Commercial real estate $ 723 $ — $ 4,321 $ — Owner-occupied commercial real estate — — — — 1-4 single family residential 266 — — — Construction, land and development — — — — Home equity loans and lines of credit 912 — 975 — Total real estate loans $ 1,901 $ — $ 5,296 $ — Other loans: Commercial and industrial $ 877 $ — $ — $ — Consumer — — — — Total other loans $ 877 $ — $ — $ — Impaired loans with an allowance: Real estate loans: Commercial real estate $ 4,524 $ — $ 340 $ — Owner-occupied commercial real estate 2,215 — — — 1-4 single family residential — — — — Construction, land and development — — — — Home equity loans and lines of credit — — — — Total real estate loans $ 6,739 $ — $ 340 $ — Other loans: Commercial and industrial $ — $ — $ — $ — Consumer — — — — Total other loans $ — $ — $ — $ — |