LOANS AND ALLOWANCE FOR LOAN LOSSES | NOTE 4 LOANS The Bank engages in a full complement of lending activities, including real estate-related loans, agriculture-related loans, commercial and financial loans and consumer installment loans within select markets in Georgia, Alabama, Florida and South Carolina. The Bank also purchased loan pools during 2015 and 2016 collateralized by properties located outside our Southeast markets, specifically in California, Washington and Illinois. The Bank concentrates the majority of its lending activities in real estate loans. While risk of loss in the Company’s portfolio is primarily tied to the credit quality of the various borrowers, risk of loss may increase due to factors beyond the Company’s control, such as local, regional and/or national economic downturns. General conditions in the real estate market may also impact the relative risk in the real estate portfolio. A substantial portion of the Bank’s loans are secured by real estate in the Bank’s primary market area. In addition, a substantial portion of the OREO is located in those same markets. Accordingly, the ultimate collectability of a substantial portion of the Bank’s loan portfolio and the recovery of a substantial portion of the carrying amount of OREO are susceptible to changes in real estate conditions in the Bank’s primary market area. Commercial, financial and agricultural loans include both secured and unsecured loans for working capital, expansion, crop production, and other business purposes, including SBA guaranteed loans. Short-term working capital loans are secured by non-real estate collateral such as accounts receivable, crops, inventory and equipment. The Bank evaluates the financial strength, cash flow, management, credit history of the borrower and the quality of the collateral securing the loan. The Bank often requires personal guarantees and secondary sources of repayment on commercial, financial and agricultural loans. Real estate loans include construction and development loans, commercial and farmland loans and residential loans. Construction and development loans include loans for the development of residential neighborhoods, one-to-four family home residential construction loans to builders and consumers, and commercial real estate construction loans, primarily for owner-occupied properties. The Company limits its construction lending risk through adherence to established underwriting procedures. Commercial real estate loans include loans secured by owner-occupied commercial buildings for office, storage, retail, farmland and warehouse space. They also include non-owner occupied commercial buildings such as leased retail and office space. Commercial real estate loans may be larger in size and may involve a greater degree of risk than one-to-four family residential mortgage loans. Payments on such loans are often dependent on successful operation or management of the properties. Residential loans represent permanent mortgage financing and are secured by residential properties located within the Bank's market areas, along with warehouse lines of credit secured by residential mortgages. Consumer installment loans and other loans include automobile loans, boat and recreational vehicle financing, and secured and unsecured personal loans. Consumer loans carry greater risks than other loans, as the collateral can consist of rapidly depreciating assets such as automobiles and equipment that may not provide an adequate source of repayment of the loan in the case of default. Loans are stated at unpaid balances, net of unearned income and deferred loan fees. (Dollars in Thousands) June 30, December 31, June 30, Commercial, financial and agricultural $ 564,343 $ 449,623 $ 373,202 Real estate construction and development 274,717 244,693 205,019 Real estate commercial and farmland 1,248,580 1,104,991 1,010,195 Real estate residential 680,233 570,430 537,201 Consumer installment 33,245 31,125 30,080 Other 17,953 6,015 15,903 $ 2,819,071 $ 2,406,877 $ 2,171,600 Purchased non-covered loans are defined as loans that were acquired in bank acquisitions that are not covered by a loss-sharing agreement with the Federal Deposit Insurance Corporation (the “FDIC”). Purchased non-covered loans totaling $ 1.1 771.6 808.3 (Dollars in Thousands) June 30, December 31, June 30, Commercial, financial and agricultural $ 101,803 $ 45,462 $ 45,337 Real estate construction and development 89,096 72,080 75,302 Real estate commercial and farmland 574,830 390,755 404,588 Real estate residential 300,898 258,153 276,798 Consumer installment 5,590 5,104 6,288 $ 1,072,217 $ 771,554 $ 808,313 Purchased loan pools are defined as groups of loans that were not acquired in bank acquisitions or FDIC-assisted transactions. As of June 30, 2016, purchased loan pools totaled $ 610.4 599.9 10.5 593.0 580.7 12.3 269.0 263.8 5.2 864,000 1.2 581,000 Covered loans are defined as loans that were acquired in FDIC-assisted transactions that are covered by a loss-sharing agreement with the FDIC. Covered loans totaling $ 121.4 137.5 209.6 Covered loans are shown below according to loan type as of the end of the periods shown: (Dollars in Thousands) June 30, December 31, June 30, Commercial, financial and agricultural $ 1,604 $ 5,546 $ 17,666 Real estate construction and development 7,168 7,612 15,002 Real estate commercial and farmland 65,091 71,226 111,772 Real estate residential 47,455 53,038 64,982 Consumer installment 100 107 176 $ 121,418 $ 137,529 $ 209,598 Nonaccrual and Past-Due Loans A loan is placed on nonaccrual status when, in management’s judgment, the collection of the interest income appears doubtful. Interest receivable that has been accrued and is subsequently determined to have doubtful collectability is charged against interest income. Interest on loans that are classified as nonaccrual is subsequently applied to principal until the loans are returned to accrual status. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured. Past-due loans are loans whose principal or interest is past due 30 days or more. In some cases, where borrowers are experiencing financial difficulties, loans may be restructured to provide terms significantly different from the original contractual terms. (Dollars in Thousands) June 30, December 31, June 30, Commercial, financial and agricultural $ 1,829 $ 1,302 $ 4,067 Real estate construction and development 1,588 1,812 1,594 Real estate commercial and farmland 6,732 7,019 8,938 Real estate residential 5,434 6,278 5,650 Consumer installment 420 449 491 $ 16,003 $ 16,860 $ 20,740 (Dollars in Thousands) June 30, December 31, June 30, Commercial, financial and agricultural $ 673 $ 1,064 $ 309 Real estate construction and development 1,160 1,106 1,483 Real estate commercial and farmland 7,065 4,920 9,634 Real estate residential 6,830 6,168 5,930 Consumer installment 39 72 88 $ 15,767 $ 13,330 $ 17,444 (Dollars in Thousands) June 30, December 31, June 30, Commercial, financial and agricultural $ 127 $ 2,803 $ 7,948 Real estate construction and development 1,600 1,701 3,120 Real estate commercial and farmland 5,110 5,034 13,997 Real estate residential 4,100 3,663 3,712 Consumer installment 32 37 94 $ 10,969 $ 13,238 $ 28,871 The following table presents an analysis of past-due loans, excluding purchased non-covered and covered past-due loans as of June 30, 2016, December 31, 2015 and June 30, 2015: Loans Loans Loans 90 Total Current Total Loans 90 (Dollars in Thousands) As of June 30, 2016: Commercial, financial & agricultural $ 845 $ 297 $ 1,700 $ 2,842 $ 561,501 $ 564,343 $ - Real estate construction & development 355 153 1,527 2,035 272,682 274,717 - Real estate commercial & farmland 2,675 724 5,257 8,656 1,239,924 1,248,580 - Real estate residential 3,430 1,776 4,243 9,449 670,784 680,233 - Consumer installment loans 325 123 246 694 32,551 33,245 - Other - - - - 17,953 17,953 - Total $ 7,630 $ 3,073 $ 12,973 $ 23,676 $ 2,795,395 $ 2,819,071 $ - Loans Loans Loans 90 Total Current Total Loans 90 (Dollars in Thousands) As of December 30, 2015: Commercial, financial & agricultural $ 568 $ 271 $ 835 $ 1,674 $ 447,949 $ 449,623 $ - Real estate construction & development 1,413 261 1,739 3,413 241,280 244,693 - Real estate commercial & farmland 1,781 641 6,912 9,334 1,095,657 1,104,991 - Real estate residential 3,806 2,120 5,121 11,047 559,383 570,430 - Consumer installment loans 374 188 238 800 30,325 31,125 - Other - - - - 6,015 6,015 - Total $ 7,942 $ 3,481 $ 14,845 $ 26,268 $ 2,380,609 $ 2,406,877 $ - Loans Loans Loans 90 Total Current Total Loans 90 (Dollars in Thousands) As of June 30, 2015: Commercial, financial & agricultural $ 840 $ 888 $ 3,891 $ 5,619 $ 367,583 $ 373,202 $ - Real estate construction & development 1,201 374 1,536 3,111 201,908 205,019 - Real estate commercial & farmland 1,958 2,823 7,014 11,795 998,400 1,010,195 - Real estate residential 5,135 1,949 4,727 11,811 525,390 537,201 - Consumer installment loans 293 77 315 685 29,395 30,080 - Other - - - - 15,903 15,903 - Total $ 9,427 $ 6,111 $ 17,483 $ 33,021 $ 2,138,579 $ 2,171,600 $ - Loans Loans Loans 90 Total Current Total Loans 90 (Dollars in Thousands) As of June 30, 2016: Commercial, financial & agricultural $ 106 $ 134 $ 501 $ 741 $ 101,062 $ 101,803 $ - Real estate construction & development 764 41 789 1,594 87,502 89,096 - Real estate commercial & farmland 2,177 1,799 6,929 10,905 563,925 574,830 - Real estate residential 4,307 1,487 5,433 11,227 289,671 300,898 - Consumer installment loans 9 - 38 47 5,543 5,590 - Total $ 7,363 $ 3,461 $ 13,690 $ 24,514 $ 1,047,703 $ 1,072,217 $ - Loans Loans Loans 90 Total Current Total Loans 90 (Dollars in Thousands) As of December 30, 2015: Commercial, financial & agricultural $ 248 $ 13 $ 846 $ 1,107 $ 44,355 $ 45,462 $ - Real estate construction & development 416 687 420 1,523 70,557 72,080 - Real estate commercial & farmland 2,479 1,629 3,347 7,455 383,300 390,755 - Real estate residential 4,965 2,176 4,928 12,069 246,084 258,153 - Consumer installment loans 31 9 70 110 4,994 5,104 - Total $ 8,139 $ 4,514 $ 9,611 $ 22,264 $ 749,290 $ 771,554 $ - Loans Loans Loans 90 Total Current Total Loans 90 (Dollars in Thousands) As of June 30, 2015: Commercial, financial & agricultural $ - $ 1,101 $ 202 $ 1,303 $ 44,034 $ 45,337 $ - Real estate construction & development 245 - 1,026 1,271 74,031 75,302 - Real estate commercial & farmland 2,115 724 9,062 11,901 392,687 404,588 - Real estate residential 3,848 1,400 5,369 10,617 266,181 276,798 - Consumer installment loans 6 - 84 90 6,198 6,288 - Total $ 6,214 $ 3,225 $ 15,743 $ 25,182 $ 783,131 $ 808,313 $ - Loans Loans Loans 90 Total Current Total Loans 90 (Dollars in Thousands) As of June 30, 2016: Commercial, financial & agricultural $ 1 $ 76 $ 51 $ 128 $ 1,476 $ 1,604 $ - Real estate construction & development 108 3 1,537 1,648 5,520 7,168 - Real estate commercial & farmland 157 - 2,066 2,223 62,868 65,091 - Real estate residential 1,773 836 2,672 5,281 42,174 47,455 - Consumer installment loans - - 32 32 68 100 - Total $ 2,039 $ 915 $ 6,358 $ 9,312 $ 112,106 $ 121,418 $ - Loans Loans Loans 90 Total Current Total Loans 90 (Dollars in Thousands) As of December 30, 2015: Commercial, financial & agricultural $ - $ - $ 2,802 $ 2,802 $ 2,744 $ 5,546 $ - Real estate construction & development 96 - 1,633 1,729 5,883 7,612 - Real estate commercial & farmland 170 205 3,064 3,439 67,787 71,226 - Real estate residential 2,155 1,001 2,658 5,814 47,224 53,038 - Consumer installment loans - - 37 37 70 107 - Total $ 2,421 $ 1,206 $ 10,194 $ 13,821 $ 123,708 $ 137,529 $ - Loans Loans Loans 90 Total Current Total Loans 90 (Dollars in Thousands) As of June 30, 2015: Commercial, financial & agricultural $ 237 $ 240 $ 1,670 $ 2,147 $ 15,519 $ 17,666 $ - Real estate construction & development 292 31 3,045 3,368 11,634 15,002 143 Real estate commercial & farmland 699 81 9,396 10,176 101,596 111,772 - Real estate residential 2,690 927 2,122 5,739 59,243 64,982 - Consumer installment loans - - 50 50 126 176 - Total $ 3,918 $ 1,279 $ 16,283 $ 21,480 $ 188,118 $ 209,598 $ 143 Impaired Loans 100,000 100,000 As of and For the Period Ended June 30, December 31, June 30, (Dollars in Thousands) Nonaccrual loans $ 16,003 $ 16,860 $ 20,740 Troubled debt restructurings not included above 14,795 14,418 12,467 Total impaired loans $ 30,798 $ 31,278 $ 33,207 Quarter-to-date interest income recognized on impaired loans $ 238 $ 274 $ 192 Year-to-date interest income recognized on impaired loans $ 556 $ 909 $ 344 Quarter-to-date foregone interest income on impaired loans $ 230 $ 265 $ 311 Year-to-date foregone interest income on impaired loans $ 471 $ 1,204 $ 629 The following table presents an analysis of information pertaining to impaired loans, excluding purchased non-covered and covered loans as of June 30, 2016, December 31, 2015 and June 30, 2015: Unpaid Recorded Recorded Total Related Three Six Month (Dollars in Thousands) As of June 30, 2016: Commercial, financial & agricultural $ 3,786 $ 652 $ 1,453 $ 2,105 $ 150 $ 1,825 $ 1,731 Real estate construction & development 3,141 230 1,826 2,056 697 2,154 2,304 Real estate commercial & farmland 13,592 5,312 7,221 12,533 1,000 12,772 12,777 Real estate residential 14,460 1,329 12,331 13,660 2,369 13,249 13,450 Consumer installment loans 531 - 444 444 8 441 458 Total $ 35,510 $ 7,523 $ 23,275 $ 30,798 $ 4,224 $ 30,441 $ 30,720 Unpaid Recorded Recorded Total Related Three Twelve (Dollars in Thousands) As of December 31, 2015: Commercial, financial & agricultural $ 3,062 $ 158 $ 1,385 $ 1,543 $ 135 $ 1,887 $ 2,275 Real estate construction & development 3,581 230 2,374 2,604 774 2,598 3,228 Real estate commercial & farmland 14,385 6,702 6,083 12,785 1,067 15,074 15,105 Real estate residential 15,809 1,621 12,230 13,851 2,224 11,935 11,977 Consumer installment loans 592 - 495 495 9 461 488 Total $ 37,429 $ 8,711 $ 22,567 $ 31,278 $ 4,209 $ 31,955 $ 33,073 Unpaid Recorded Recorded Total Related Three Six Month (Dollars in Thousands) As of June 30, 2015: Commercial, financial & agricultural $ 6,004 $ 442 $ 3,903 $ 4,345 $ 458 $ 2,819 $ 2,533 Real estate construction & development 3,765 - 2,416 2,416 445 3,245 3,648 Real estate commercial & farmland 18,117 5,960 9,595 15,555 1,243 15,378 15,125 Real estate residential 11,743 1,153 9,199 10,352 1,825 11,555 12,006 Consumer installment loans 633 - 539 539 8 494 507 Total $ 40,262 $ 7,555 $ 25,652 $ 33,207 $ 3,979 $ 33,491 $ 33,819 The following is a summary of information pertaining to purchased non-covered impaired loans: As of and For the Period Ended June 30, December 31, June 30, (Dollars in Thousands) Nonaccrual loans $ 15,767 $ 13,330 $ 17,444 Troubled debt restructurings not included above 9,053 9,373 6,792 Total impaired loans $ 24,820 $ 22,703 $ 24,236 Quarter-to-date interest income recognized on impaired loans $ 189 $ 442 $ 143 Year-to-date interest income recognized on impaired loans $ 546 $ 785 $ 161 Quarter-to-date foregone interest income on impaired loans $ 264 $ 245 $ 451 Year-to-date foregone interest income on impaired loans $ 620 $ 1,365 $ 923 The following table presents an analysis of information pertaining to purchased non-covered impaired loans as of June 30, 2016, December 31, 2015 and June 30, 2015: Unpaid Recorded Recorded Total Related Three Six Month (Dollars in Thousands) As of June 30, 2016: Commercial, financial & agricultural $ 2,662 $ 675 $ - $ 675 $ - $ 669 $ 801 Real estate construction & development 3,241 340 1,340 1,680 142 1,905 1,759 Real estate commercial & farmland 16,678 2,075 10,908 12,983 492 15,078 13,764 Real estate residential 11,891 7,269 2,170 9,439 223 8,880 8,906 Consumer installment loans 56 43 - 43 - 68 71 Total $ 34,528 $ 10,402 $ 14,418 $ 24,820 $ 857 $ 26,600 $ 25,301 Unpaid Recorded Recorded Total Related Three Twelve (Dollars in Thousands) As of December 31, 2015: Commercial, financial & agricultural $ 3,103 $ 1,066 $ - $ 1,066 $ - $ 640 $ 392 Real estate construction & development 8,987 1,469 - 1,469 - 1,369 1,429 Real estate commercial & farmland 14,999 11,134 - 11,134 - 9,966 10,806 Real estate residential 14,946 8,957 - 8,957 - 8,591 8,067 Consumer installment loans 94 77 - 77 - 67 65 Total $ 42,129 $ 22,703 $ - $ 22,703 $ - $ 20,633 $ 20,759 Unpaid Recorded Recorded Total Related Three Six Month (Dollars in Thousands) As of June 30, 2015: Commercial, financial & agricultural $ 1,476 $ 309 $ - $ 309 $ - $ 254 $ 227 Real estate construction & development 9,656 1,857 - 1,857 - 1,485 1,469 Real estate commercial & farmland 17,043 13,691 - 13,691 - 11,753 11,366 Real estate residential 12,992 8,285 - 8,285 - 7,982 7,718 Consumer installment loans 111 94 - 94 - 61 64 Total $ 41,278 $ 24,236 $ - $ 24,236 $ - $ 21,535 $ 20,844 The following is a summary of information pertaining to covered impaired loans: As of and For the Period Ended June 30, December 31, June 30, (Dollars in Thousands) Nonaccrual loans $ 10,969 $ 13,238 $ 28,871 Troubled debt restructurings not included above 11,589 13,283 17,500 Total impaired loans $ 22,558 $ 26,521 $ 46,371 Quarter-to-date interest income recognized on impaired loans $ 154 $ 154 $ 219 Year-to-date interest income recognized on impaired loans $ 339 $ 886 $ 431 Quarter-to-date foregone interest income on impaired loans $ 148 $ 181 $ 409 Year-to-date foregone interest income on impaired loans $ 318 $ 1,596 $ 947 The following table presents an analysis of information pertaining to covered impaired loans as of June 30, 2016, December 31, 2015 and June 30, 2015: Unpaid Recorded Recorded Total Related Three Six Month (Dollars in Thousands) As of June 30, 2016: Commercial, financial & agricultural $ 314 $ 127 $ - $ 127 $ - $ 1,463 $ 1,909 Real estate construction & development 6,841 1,198 1,210 2,408 81 2,368 2,405 Real estate commercial & farmland 10,556 2,127 4,303 6,430 198 6,503 6,669 Real estate residential 14,890 4,830 8,724 13,554 251 13,724 13,880 Consumer installment loans 47 39 - 39 - 41 43 Total $ 32,648 $ 8,321 $ 14,237 $ 22,558 $ 530 $ 24,099 $ 24,906 Unpaid Recorded Recorded Total Related Three Twelve (Dollars in Thousands) As of December 31, 2015: Commercial, financial & agricultural $ 5,188 $ 2,802 $ - $ 2,802 $ - $ 5,360 $ 7,408 Real estate construction & development 15,119 2,480 - 2,480 - 4,130 6,906 Real estate commercial & farmland 20,508 7,001 - 7,001 - 14,133 18,504 Real estate residential 15,830 14,192 - 14,192 - 14,399 16,010 Consumer installment loans 60 46 - 46 - 69 86 Total $ 56,705 $ 26,521 $ - $ 26,521 $ - $ 38,091 $ 48,914 Unpaid Recorded Recorded Total Related Three Six Month (Dollars in Thousands) As of June 30, 2015: Commercial, financial & agricultural $ 14,260 $ 7,951 $ - $ 7,951 $ - $ 8,869 $ 8,773 Real estate construction & development 29,895 5,953 - 5,953 - 7,819 8,757 Real estate commercial & farmland 37,426 17,970 - 17,970 - 21,795 21,418 Real estate residential 18,226 14,402 - 14,402 - 16,600 17,084 Consumer installment loans 125 95 - 95 - 99 97 Total $ 99,932 $ 46,371 $ - $ 46,371 $ - $ 55,179 $ 56,129 Credit Quality Indicators The Company uses a nine category risk grading system to assign a risk grade to each loan in the portfolio. The following is a description of the general characteristics of the grades: Grade 10 Prime Credit Grade 15 Good Credit Satisfactory Credit Grade 20 Satisfactory Credit Grade 23 Performing, Under-Collateralized Credit This grade is assigned to loans that are currently performing and supported by adequate financial information that reflects repayment capacity but exhibits a loan-to-value ratio greater than 110 Grade 25 Minimum Acceptable Credit Satisfactory Credit Grade 30 Other Asset Especially Mentioned Grade 40 Substandard Grade 50 Doubtful Grade 60 Loss Risk Commercial, Real estate - Real estate - Real estate - Consumer Other Total (Dollars in Thousands) 10 $ 339,903 $ - $ 2,313 $ 99 $ 7,410 $ - $ 349,725 15 22,049 3,741 106,801 58,283 700 - 191,574 20 100,406 46,224 804,685 501,795 22,498 17,953 1,493,561 23 484 7,245 9,084 6,664 188 - 23,665 25 94,022 211,322 290,528 90,191 1,754 - 687,817 30 2,545 3,297 20,775 5,689 162 - 32,468 40 4,934 2,888 14,394 17,512 533 - 40,261 50 - - - - - - - 60 - - - - - - - Total $ 564,343 $ 274,717 $ 1,248,580 $ 680,233 $ 33,245 $ 17,953 $ 2,819,071 The following table presents the loan portfolio, excluding purchased non-covered and covered loans, by risk grade as of December 31, 2015: Risk Commercial, Real estate - Real estate - Real estate - Consumer Other Total (Dollars in Thousands) 10 $ 241,721 $ 294 $ 116 $ 1,606 $ 6,872 $ - $ 250,609 15 28,420 2,074 117,880 78,165 1,191 - 227,730 20 97,142 46,221 685,538 369,624 19,780 6,015 1,224,320 23 559 7,827 13,073 6,112 36 - 27,607 25 77,829 183,512 254,012 91,465 2,595 - 609,413 30 1,492 1,620 13,821 7,347 143 - 24,423 40 2,460 3,145 20,551 16,111 506 - 42,773 50 - - - - - - - 60 - - - - 2 - 2 Total $ 449,623 $ 244,693 $ 1,104,991 $ 570,430 $ 31,125 $ 6,015 $ 2,406,877 The following table presents the loan portfolio, excluding purchased non-covered and covered loans, by risk grade as of June 30, 2015: Risk Commercial, Real estate - Real estate - Real estate - Consumer Other Total (Dollars in Thousands) 10 $ 173,795 $ 268 $ 150 $ 1,606 $ 6,114 $ - $ 181,933 15 25,447 3,402 127,090 85,812 1,319 - 243,070 20 96,169 47,207 592,636 334,999 17,833 15,903 1,104,747 23 635 8,071 11,984 6,655 55 - 27,400 25 69,304 140,119 248,227 83,207 3,807 - 544,664 30 2,566 2,510 11,088 8,612 244 - 25,020 40 5,286 3,442 19,020 16,310 708 - 44,766 50 - - - - - - - 60 - - - - - - - Total $ 373,202 $ 205,019 $ 1,010,195 $ 537,201 $ 30,080 $ 15,903 $ 2,171,600 The following table presents the purchased non-covered loan portfolio by risk grade as of June 30, 2016: Risk Commercial, Real estate - Real estate - Real estate - Consumer Other Total (Dollars in Thousands) 10 $ 5,818 $ - $ - $ - $ 1,081 $ - $ 6,899 15 1,085 - 8,637 34,848 675 - 45,245 20 16,503 10,427 202,853 113,691 2,006 - 345,480 23 - 4,072 10,627 12,688 - - 27,387 25 71,603 64,200 305,654 114,097 1,667 - 557,221 30 4,779 7,910 28,761 11,054 32 - 52,536 40 1,983 2,487 18,298 14,520 129 - 37,417 50 30 - - - - - 30 60 2 - - - - - 2 Total $ 101,803 $ 89,096 $ 574,830 $ 300,898 $ 5,590 $ - $ 1,072,217 The following table presents the purchased non-covered loan portfolio by risk grade as of December 31, 2015: Risk Commercial, Real estate - Real estate - Real estate - Consumer Other Total (Dollars in Thousands) 10 $ 8,592 $ - $ - $ - $ 1,010 $ - $ 9,602 15 1,186 1,143 10,490 37,808 541 - 51,168 20 10,057 13,678 183,219 128,005 2,031 - 336,990 23 - 438 5,177 6,414 - - 12,029 25 17,565 47,517 162,253 66,166 1,328 - 294,829 30 6,657 4,185 14,297 5,503 51 - 30,693 40 1,373 5,119 15,319 14,257 143 - 36,211 50 30 - - - - - 30 60 2 - - - - - 2 Total $ 45,462 $ 72,080 $ 390,755 $ 258,153 $ 5,104 $ - $ 771,554 The following table presents the purchased non-covered loan portfolio by risk grade as of June 30, 2015: Risk Commercial, Real estate - Real estate - Real estate - Consumer Other Total (Dollars in Thousands) 10 $ 9,091 $ - $ 80 $ - $ 952 $ - $ 10,123 15 1,377 866 8,710 41,641 626 - 53,220 20 12,545 16,979 190,219 139,792 2,769 - 362,304 23 - 240 3,792 6,505 - - 10,537 25 18,556 49,070 165,267 65,818 1,700 - 300,411 30 2,462 3,409 19,042 9,803 63 - 34,779 40 1,276 4,738 17,478 13,217 178 - 36,887 50 30 - - 22 - - 52 60 - - - - - - - Total $ 45,337 $ 75,302 $ 404,588 $ 276,798 $ 6,288 $ - $ 808,313 The following table presents the covered loan portfolio by risk grade as of June 30, 2016: Risk Commercial, Real estate - Real estate - Real estate - Consumer Other Total (Dollars in Thousands) 10 $ - $ - $ - $ - $ - $ - $ - 15 - - - - - - - 20 32 738 10,278 8,096 - - 19,144 23 24 - 1,769 4,637 - - 6,430 25 1,417 4,436 35,031 22,371 13 - 63,268 30 3 418 4,659 3,564 47 - 8,691 40 128 1,576 13,354 8,787 40 - 23,885 50 - - - - - - - 60 - - - - - - - Total $ 1,604 $ 7,168 $ 65,091 $ 47,455 $ 100 $ - $ 121,418 The following table presents the covered loan portfolio by risk grade as of December 31, 2015: Risk Commercial, Real estate - Real estate - Real estate - Consumer Other Total (Dollars in Thousands) 10 $ - $ - $ - $ - $ - $ - $ - 15 - - - - - - - 20 93 800 11,698 10,040 - - 22,631 23 52 - 2,957 5,723 - - 8,732 25 2,594 3,907 38,741 24,345 11 - 69,598 30 5 828 2,857 4,552 - - 8,242 40 2,802 2,077 14,973 8,378 96 - 28,326 50 - - - - - - - 60 - - - - - - - Total $ 5,546 $ 7,612 $ 71,226 $ 53,038 $ 107 $ - $ 137,529 The following table presents the covered loan portfolio by risk grade as of June 30, 2015: Risk Commercial, Real estate - Real estate - Real estate - Consumer Other Total (Dollars in Thousands) 10 $ - $ - $ - $ - $ - $ - $ - 15 - - 488 125 - - 613 20 580 1,218 17,382 12,571 43 - 31,794 23 68 - 5,255 6,083 - - 11,406 25 4,089 8,142 60,682 30,870 37 - 103,820 30 4,923 2,409 4,165 5,730 - - 17,227 40 8,006 3,233 23,800 9,603 96 - 44,738 50 - - - - - - - 60 - - - - - - - Total $ 17,666 $ 15,002 $ 111,772 $ 64,982 $ 176 $ - $ 209,598 Troubled Debt Restructurings The restructuring of a loan is considered a “troubled debt restructuring” if both (i) the borrower is experiencing financial difficulties and (ii) the Company has granted a concession. Concessions may include interest rate reductions to below market interest rates, principal forgiveness, restructuring amortization schedules and other actions intended to minimize potential losses. The Company has exhibited the greatest success for rehabilitation of the loan by a reduction in the rate alone (maintaining the amortization of the debt) or a combination of a rate reduction and the forbearance of previously past due interest or principal. This has most typically been evidenced in certain commercial real estate loans whereby a disruption in the borrower’s cash flow resulted in an extended past due status, of which the borrower was unable to catch up completely as the cash flow of the property ultimately stabilized at a level lower than its original level. A reduction in rate, coupled with a forbearance of unpaid principal and/or interest, allowed the net cash flows to service the debt under the modified terms. The Company’s policy requires a restructure request to be supported by a current, well-documented credit evaluation of the borrower’s financial condition and a collateral evaluation that is no older than six months from the date of the restructure. Key factors of that evaluation include the documentation of current, recurring cash flows, support provided by the guarantor(s) and the current valuation of the collateral. If the appraisal in the file is older than six months, an evaluation must be made as to the continued reasonableness of the valuation. For certain income-producing properties, current rent rolls and/or other income information can be utilized to support the appraisal valuation, when coupled with documented cap rates within our markets and a physical inspection of the collateral to validate the current condition. The Company’s policy states that in the event a loan has been identified as a troubled debt restructuring, it should be assigned a grade of substandard and placed on nonaccrual status until such time the borrower has demonstrated the ability to service the loan payments based on the restructured terms generally defined as six months of satisfactory payment history. Missed payments under the original loan terms are not considered under the new structure; however, subsequent missed payments are considered non-performance and are not considered toward the six month required term of satisfactory payment history. The Company’s loan policy states that a nonaccrual loan may be returned to accrual status when (i) none of its principal and interest is due and unpaid, and the Company expects repayment of the remaining contractual principal and interest or (ii) it otherwise becomes well secured and in the process of collection. Restoration to accrual status on any given loan must be supported by a well-documented credit evaluation of the borrower’s financial condition and the prospects for full repayment, approved by the Company’s Chief Credit Officer. In the normal course of business, the Company renews loans with a modification of the interest rate or terms that are not deemed as troubled debt restructurings because the borrower is not experiencing financial difficulty. The Company modified loans in the first six months of 2016 and 2015 totaling $ 9.7 54.8 As of June 30, 2016, December 31, 2015 and June 30, 2015, the Company had a balance of $ 17.8 16.4 14.0 1.4 1.3 1.6 2.8 2.7 210,000 During the six months ending June 30, 2016 and 2015, the Company modified loans as troubled debt restructurings, excluding purchased non-covered and covered loans, with principal balances of $ 2.5 782,000 June 30, 2016 June 30, 2015 Balance Balance Loan class: # (in thousands) # (in thousands) Commercial, financial & agricultural 2 $ 28 3 $ 18 Real estate construction & development 1 6 2 16 Real estate commercial & farmland 4 1,666 - - Real estate residential 6 739 15 729 Consumer installment 6 26 5 19 Total 19 $ 2,465 25 $ 782 Troubled debt restructurings, excluding purchased non-covered and covered loans, with an outstanding balance of $ 494,000 2.2 June 30, 2016 June 30, 2015 Balance Balance Loan class: # (in thousands) # (in thousands) Commercial, financial & agricultural 2 $ 7 2 $ 35 Real estate construction & development - - - - Real estate commercial & farmland 2 191 5 1,274 Real estate residential 6 292 10 884 Consumer installment 1 4 6 32 Total 11 $ 494 23 $ 2,225 As of June 30, 2016 Accruing Loans Non-Accruing Loans Balance Balance Loan class: # (in thousands) # (in thousands) Commercial, financial & agricultural 5 $ 275 11 $ 86 Real estate construction & development 9 468 3 36 Real estate commercial & farmland 19 5,802 3 1,832 Real estate residential 54 8,226 20 899 Consumer installment 7 24 27 113 Total 94 $ 14,795 64 $ 2,966 As of December 31, 2015 Accruing Loans Non-Accruing Loans Balance Balance Loan class: # (in thousands) # (in thousands) Commercial, financial & agricultural 4 $ 240 10 $ 110 Real estate construction & development 11 792 3 63 Real estate commercial & farmland 16 5,766 3 596 Real estate residential 51 7,574 20 1,123 Consumer installment 12 46 23 94 Total 94 $ 14,418 59 $ 1,986 As of June 30, 2015 Accruing Loans Non-Accruing Loans Balance Balance Loan class: # (in thousands) # (in thousands) Commercial, financial & agricultural 6 $ 278 5 $ 29 Real estate construction & development 11 821 3 57 Real estate commercial & farmland 17 6,617 3 598 Real estate residential 49 4,702 15 783 Consumer installment 11 49 17 82 Total 94 $ 12,467 43 $ 1,549 As of June 30, 2016, December 31, 2015 and June 30, 2015, the Company had a balance of $ 10.0 10.0 7.0 347,000 377,000 632,000 During the six months ending June 30, 2016 and 2015, the Company modified purchased non-covered loans as troubled debt restructurings, with principal balances of $ 668,000 1.0 4.8 June 30, 2016 June 30, 2015 Balance Balance Loan class: # (in thousands) # (in thousands) Commercial, financial & agricultural - $ - - $ - Real estate construction & development - - - - Real estate commercial & farmland 1 28 - - Real estate residential 2 640 5 1,017 Consumer installment - - 1 5 Total 3 $ 668 6 $ 1,022 Troubled debt restructurings included in purchased non-covered loans with an outstanding balance of $ 402,000 65,000 June 30, 2016 June 30, 2015 Balance Balance Loan class: # (in thousands) # (in thousands) Commercial, financial & agricultural - $ - - $ - Real estate construction & development 2 402 - - Real estate commercial & farmland - - - - Real estate residential - - 1 65 Consumer installment - - - - Total 2 $ 402 1 $ 65 As of June 30, 2016 Accruing Loans Non-Accruing Loans Balance Balance Loan class: # (in thousands) # (in thousands) Commercial, financial & agricultural 1 $ 1 1 $ 17 Real estate construction & development 2 521 3 36 Real estate commercial & farmland 12 5,918 3 398 Real estate residential 14 2,609 4 448 Consumer installment 1 4 2 2 Total 30 $ 9,053 13 $ 901 As of December 31, 2015 Accruing Loans Non-Accruing Loans Balance Balance Loan class: # (in thousands) # (in thousands) Commercial, financial & agricultural 1 $ 2 2 $ 21 Real estate construction & development 1 363 3 42 Real estate commercial & farmland 14 |